The price is wrong (January 20, 2019)
The Town Council has the authorization to spend $150 million to purchase our water system. Current owner Liberty Utilities will probably argue that the value of the water system is somewhere between $400 and $500 million, with good reason.
But neither of these numbers tells the full story. If you have ever bought a new car, you know how costs and fees are added on to the purchase price the moment you say yes.
“Costs and fees” will include the millions the Town has spent so far, plus the attorney fees and court costs of the litigation yet to come, plus reimbursing Liberty Utilities for its legal expenses, plus making whole the Yermo water system, plus early payment penalties on existing bonds, plus transaction costs, plus transition costs, plus printing costs, plus costs of issuance, plus the underwriting discount, plus money for a reserve fund, plus other costs yet unknown.
In addition, the Town will have to pay bond counsel, disclosure counsel, a financial advisor, a rating expert, a trustee, a special tax consultant, and an assessment engineer.
By themselves, these extra costs come to millions of dollars.
Even at a low interest rate, we’re talking about a huge monthly payment. Despite the Town having to use borrowed money and credit cards to pay their bills, some lender may risk it because we ratepayers are the ones on the hook, although we should anticipate a higher-than-normal interest rate — and monthly payment.
We won’t even have “local control” because the piper who loaned us those millions will then be calling the tune.
To look at it another way, even if the Town got the water system for free, they are too broke to run it. How are they going to manage when it comes with hundreds of millions of dollars of debt attached?
— Greg Raven is Co-Chair of Apple Valley Citizens for Government Accountability, and is concerned about quality of life issues.
Published: Daily Press, January 22, 2019