Review of Apple Valley Water Measure (April 12, 2017)

By John E. Husing, Ph.D.

Summary. A review of the issues underlying Measure F, the $150 million bond issue being placed on the ballot in June by the Town of Apple Valley, shows that the risks of a takeover and management of the Liberty Apple Valley are extremely high. The experience in other jurisdictions as researched by the national Analysis Group shows that rates have risen, not fallen in every recent case because the cost of acquiring water systems has been much higher than forecasted by municipalities. Meanwhile, each of the risks raised by the Town’s 2014 Urban Futures’ analysis of such a takeover appear to be, in fact, occurring. As they warned, the value of the property could well be much higher than forecasted; there is the need for a multimillion dollar capital investment fund as part of any bond based on the lack of a Town fund for year 1’s capital investment; the Town’s ability to undertake a major expansion in its staffing, operations and budgets and run a complex water system significantly more efficiently than an experienced water company appears improbable; and interest rates are due to rise.

A look at the possible water costs for each customer from a revenue bond given these circumstances shows a high probability for significant rate increases. Even if the $150 million Measure F bond level is sufficient, it could cost customers an extra $502 or $620 per year equal to $84 or $103 per bi-monthly bill. Voters should be hesitant to take such a risk.

See the Urban Futures analysis here.

See the report by the Daily Press about this review here.

“Even if the $150 million Measure F bond level is sufficient, it could cost customers an extra $502 or $620 per year equal to $84 or $103 per bi-monthly bill. Voters should be hesitant to take such a risk.”

— Economist John Husing, PhD

Executive summary

My proposal