COURTESY : OCALA STAR BANNER
Published September 12, 2003
BY CHRISTOPHER CURRY

THE VILLAGES - The price tag for the Village Center district to acquire a water and wastewater utility from the retirement community's developer is estimated at about $85 million, according to two financial consultants.

For months, the district board of supervisors, the governing body in charge of infrastructure purchases for the community, has been working to acquire Little Sumter Utility, which serves all areas of The Villages in Marion County and a significant amount of the homes currently built in Sumter County. According to Little Sumter's 2002 report to the state agency regulating utilities, the company has 10,500 residential customers and 130 commercial customers, $38.6 million in assets and $21.9 million in bond debt.

Thursday, in a public meeting attended by two people, supervisors received opinions of the company's value prepared by Fishkind & Associates of Orlando and Public Resources Management Group of Maitland, consultants with which the district regularly contracts when making purchases from the developer.

Analyzing future revenue projections prepared by Little Sumter and the sale price of 18 other water and wastewater utility companies in Florida, Fishkind put the company's projected acquisition value at $85 million with a projected build-out of 12,564 residential customers and 330 commercial customers. By comparison, Marco Island negotiated a cost of $82 million to purchase a Florida Water Services utility with 16,160 current water customers and 6,160 wastewater customers. The City of Palm Coast is in negotiations to purchase a Florida Water Services utility system in that municipality with a current total of 23,000 to 25,000 customers at a price of $80 million.

Assistant Palm Coast City Manager Oel Wingo said that purchase will bring the city a utility with facilities built in the 1970s and capable of serving some 100,000 customers at build-out. Wingo said that consultants hired by Palm Coast looked at the income and market value of the utility, as the Village Center's consultants did, but also took into account the cost approach, the amount of money it would take to replace existing facilities.

"We took all three approaches into account," Wingo said. "It was a tedious process. You have to look at the income to be sure you have the money . . . in the future to pay for it. You're not going to rely totally on one analysis when making these purchases."

But Maitland consulting firm Public Resources Management Group relied primarily relied on the income approach of projected future revenues, minus capital improvements in preparing its report on Little Sumter.

Asked if the Village Center district was paying the developer more money for a utility with less customer revenue, Hank Fishkind, of Fishkind & Associates, said the transaction under negotiation was standard for a utility purchase.

"Actually I think Little Sumter is comparable to Marco Island," Fishkind said. "The most basic approach is the market or the income approach. It's pretty standard. It's nothing exotic."

Fishkind's report stated that since construction on the Little Sumter system began less than six years ago, the system is well maintained and in "excellent operating condition." The report estimated the Village Center district would have to pay about $3 million to finish construction of the system. Fishkind said the district will not take on the responsibility of the company's current debt when the sale is finalized.

Joe Gorman, president of the Villages' Property Owners Association, a watchdog resident group in the retirement community, has often been critical of the district's use of the income approach when purchasing newly constructed recreation centers from the developer. While Gorman said he has not yet reviewed the consultants' analyses, he said the income approach was more appropriate for a utility company.

"With this particular business, there is a demonstrated revenue stream from customers," he said. "My concern is whether they have taken into account future expenditures for capital improvements."

The Village Center district board of supervisors are scheduled to meet with representatives of Fishkind & Associates and PRMG at a meeting scheduled for 9 a.m. Wednesday. The purchase of Little Sumter is expected to be completed by the end of September, with the district paying back bonds with revenues from water and wastewater customers.