What’s Ranchos worth now? (November 18, 2015)

Some might find it curious that the Apple Valley Town Council — which claims to be using the condemnation proceedings in Montana against Mountain Water Company (MWC) as a cat’s paw for its own actions against Apple Valley Ranchos Water Company — moved to pursue condemnation mere hours before learning what the city of Missoula is going to have to pay for MWC.

Well, now we know the ruling of the valuation panel in Missoula (Panel sets value of Mountain Water Co. at $88.6 million, The Missoulian, November 18, 2015). This valuation is open to challenge, but it is still useful for determining what a court might find is the valuation of Ranchos.

At first blush, $88.6 million might seem a pretty good deal, given the fact that Ranchos holds somewhere in the neighborhood of $68 million in water rights alone, and it’s well under the $100 million figure cited without context by Town assistant manager Marc Puckett.

But in the case of MWC, there are substantial ups and extras. During the trial phase, the city of Missoula argued that the MWC system was in such bad shape that it would require $95 million in upgrades alone to bring it into compliance with industry standards (Missoula plans next steps in Mountain Water takeover, The Missoulian, June 16, 2015). Thus, the city of Missoula is essentially arguing that the total price of MWC is $183.6 million, and that doesn’t include legal fees and other expenses on both sides.

The Ranchos system is is much better shape than the MWC system (Town attorneys have even argued to the CPUC that Ranchos is upgrading the system unnecessarily), and this is California, where everything is going to be more expensive than in Montana. So given this starting point, it appears we could be looking at a final purchase price of $200 million or more, not counting attorney fees, bond fees, separation fees, transition fees, etc., each of which can run in the millions.

That works out to more than $3,225 per customer (per the FEIR), or more than $11,165 per water user connection, including ups and extras. And because the Town will have to pay interest on the bond required to purchase Ranchos, the unpaid portions of these charges will themselves be accruing interest during the 30-year period of the bond.

Call me old fashioned, but it doesn’t seem wise to pay this kind of money to buy something we already have, especially considering almost certain increases in future interest rates, and utterly uncertain future water supplies.

Greg Raven is Co-Chair of Apple Valley Citizens for Government Accountability, and is concerned about quality of life issues.