Op-ed: AVRWC purchase good for TOAV November 12, 2014
Pretending there is no problem with rising rates and absentee ownership should cause residents and business people to question the accuracy of the rest of Mr. Penna’s article. This is not a case where the facts are hard to determine. Nor is the scare-tactic language about a government takeover likely to sway the common sense people of our community. The reality of the Town’s effort is quite simple. The community of Apple Valley should control its destiny through local control of the Town’s water resources, system and rates. The Town’s acquisition of Apple Valley Ranchos Water Company would provide that control.
Stable water rates will be a key benefit if the Town purchases the water company. The current private owner aggressively raised rates over past years. including a whopping 112 percent in the past 10 years. They now want to raise them another 35 percent in the next three years. For far too long, our residents have had little to no say in decisions about their water company; it’s time to gain local control so that a far-off corporation isn’t making decisions for our future.
Let’s be clear. Apple Valley Ranchos is not a local company. They sold their investment in this community in 2011 when they sold the company to The Carlyle Group. a multinational hedge fund driven only by maximizing profits to their investors.
Carlyle Infrastructure Partners has indicated that Park Water — which includes the Apple Valley Ranchos Water Company — is for sale. They even announced that they have a tentative buyer — a Canadian company. However. such a sale will take time and require significant regulatory approval in both California and Montana. In the meantime. Apple Valley will continue its efforts to acquire AVR.
One specific facet of current ownership is clear. In the year leading up to the most recent application to increase rates. Apple Valley Ranchos recorded an 11.97 percent rate of return on investment. This premium was paid directly by our ratepayers. With local ownership. that money stays local and is invested directly back into water infrastructure.
Additionally. it would be less expensive to operate because federal and state income taxes and property taxes would be eliminated. 11.97 percent rate of return would be eliminated, unnecessary administrative costs would be eliminated and capital costs would be reduced through the use of tax-exempt bonds for any new capital improvements.
As far as how we will fund the purchase. there are several methods for determining a fair price as well as financing options that would work well for the Town.
For instance, if the Town purchased the water system at a fair price with one of the identified methods in its recent feasibility study, the savings from eliminating the profit margin and other costs would be sufficient to cover the debt service without raising rates to do so.
With Town ownership of the Apple Valley water system, all records — including ratemaking details — are open to the public, bringing transparency and accountability. This is not the case with the current privately owned company.
A recent survey indicated strong support for the acquisition from Apple Valley residents. Sixty-seven percent of the registered voters surveyed said they would support or probably support the acquisition. Thirty-six percent of respondents professed dissatisfaction with water utilities. with 93 percent of those saying their opinion was based on rate increases and the cost of water.
Thanks to solid financial planning and fiscal responsibility, the Town of Apple Valley has the financial resources and the staff expertise to purchase the Apple Valley Ranchos Water Company and keep rates manageable in the future.
Source: Art Bishop, mayor of Apple Valley, Daily Press