TOAV hears appraiser’s valuation of AVRWC (March 25, 2015)

AVRWC: Estimate of $45.5 million ‘irrelevant’

APPLE VALLEY — The preliminary estimate of value for Apple Valley Ranchos Water Co. is pegged at $45.54 million for the town’s purpose of tendering a purchase offer, Assistant Town Manager Marc Puckett said in a public presentation. But water officials reiterated their position that the company is not available to the town.

Prepared by Hayward Consulting Group, the appraisal was presented during the Town Council meeting Tuesday by Puckett, who said the differences in public ownership over private ownership include the advantages of local input and control, and sustainability.

Ratepayers here have no input other than the (California Public Utilities Commission) hearing many months ago, Puckett said.

He said the rate base for AVR that is used by the CPUC for establishing its rate increases is $43.6 million. The town’s appraiser relied on the Income Approach with a discounted cash flow method, arriving at a value of $50.6 million that was discounted by a 10 percent liquidity factor to $45.54 million, Puckett said. He explained there would be few buyers for the water system. Owned ultimately by The Carlyle Group, AVR is among a string of assets including Western Water Holdings LLC and Park Water Co. being offered to Liberty Utilities.

The appraisal number falls on the low end of a range resulting from a comparison using three other valuation methods.

Municipalities almost always low-ball the value of the assets they are trying to seize to more easily garner public and political support, vice president and general manager of Apple Valley Ranchos, Tony Penna, read in remarks to the council.

That’s happening here and the public and customers shouldn’t be fooled, Penna said. The government’s appraisal is irrelevant and wasteful because the value of the water system is ultimately determined by a court-appointed jury.

Penna countered the claim the town could secure local control of rates and operations with the argument that AVR is publicly regulated and locally managed, but Town Attorney John Brown said buyer Liberty Utilities is seeking entry into the Californian water-vendor market in large part because of the state’s favorable regulatory climate for utilities.

Councilman Scott Nassif has served on town bodies long enough to remember a promise he said was made by The Carlyle Group in 2010: The group would allow the town right of first refusal when Apple Valley Ranchos was to be divested, or at least allow town officials to submit a competitive purchase offer.

This is absolutely false and one more example of the town’s fabrication and distortion campaign, Carlyle group spokesman Chris Ullman told the Daily Press on Wednesday.

According to Penna, Apple Valley Ranchos will summarily reject any offer from the Apple Valley town government, which means the town would have to resort to condemnation, also known as eminent domain.


Source: Gary Brodeur, Daily Press