BULLHEAD CITY — Raftelis Financial Consultants, Inc., on Tuesday reported to the Bullhead City Council that if the city acquires EPCOR Water Arizona’s local system for no more than about $71 million, it wouldn’t have to raise rates charged to an average customer through at least 2024.
Voters are being asked to decide whether the city should acquire the local EPCOR system through an all-mail ballot going out in October. It has to be returned by Nov. 5. The referendum is named Proposition 415.
An average customer is one who uses about 7,000 gallons a month and that rate is $40.61 in the Mohave district, including taxes as well as other EPCOR surcharges.
Rick Giardina, executive vice-president of Raftelis, the city’s contractor for the acquisition, explained that if the acquisition cost to the city is only about $42 million, the rate could potentially be reduced slightly each month. That estimated amount would be $39.72.
It was noted during the meeting that the $42 million is local system valuation amount used by EPCOR in documents it filed with the Arizona Corporation Commission and was used by Raftelis to help determine the acquisition cost to the city. Giardina cited it and the $71 million amount when he provided the city with a valuation of EPCOR’s local system of $55 million.
The lower amount comes from a fair value rate approach while the higher value was ascertained with an income rate approach. The $55 million is mostly based on a sales approach to assigning value — more than $52 million with a couple of million dollars more added because the goal is to negotiate a price with the utility, Giardina told the council in July.
Now if the EPCOR purchase cost reaches $130 million, rates would rise. Depending on the terms of the financing arrangements, the average customer would pay somewhere between $46.86 and $53.76 each month for water service.
The estimated amounts include all aspects of running the system, including capital projects, maintenance and repairs, Giardina stressed.
Proposition 415 establishes a ceiling on the bond amount of $130 million, which is the amount EPCOR has stated that the system is worth in public. The financing terms aren’t to exceed 8% interest, the proposition also states.
Those ceilings are established and required by law, said City Manager Toby Cotter.
Giardina and Cotter said the likely interest amount would be about 3.5%, based on the city’s strong bond rating. Raftelis also provided figures for loan terms of 5%.
And, “there’s no reason to borrow beyond the purchase amount,” Cotter said.
Giardina also said Tuesday that some of EPCOR’s operating costs won’t exist if the city runs the system instead, specifically income taxes, property taxes, depreciation, interest on EPCOR loans and a shareholder return. Those expenses total $3.8 million annually and that money could be used to pay off the loan taken out for the acquisition.
That amount excludes any other cost-savings the city could find, such as combining water and wastewater billing operations into one office space, Giardina noted.
He also pointed out that monthly bills for the average EPCOR customer have doubled since 2012 — rising from $21 to $40.61 a month.
People expressed views for and against acquiring the EPCOR system. A good portion of time was spent explaining details, such as whether the city plans to purchase Bermuda Water, which also serves some city residents.
Cotter said the city hasn’t looked at such a purchase but when the city decided to provide wastewater service that there were various purchases over time. That referendum presented it as a single question.
Mayor Tom Brady and Cotter also explained that the city had no interest in annexing land in the Fort Mohave or Mohave Valley area or anywhere outside city limits. This information has been posted on social media.
One of the speakers explained why this issue is so important to her:
“Water is a life-and-death issue here,” said Charlotte Costello.
She also said that many residents can’t afford continued increases in their monthly water bills because they live on Social Security.
The EPCOR-funded political action committee No on 415 issued a statement by email after the council meeting:
“To date, the city’s consultants, who have been paid $400,000 of taxpayer money, did not follow their own scope of work in establishing a valuation of the water system. The city has ignored a public records request to provide the underlying data on how the consultants established their low-ball price for weeks.”
Cotter said during the meeting that the opposite was true because EPCOR wasn’t releasing certain documents that could better fine-tune estimates of the system’s worth.