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Florida Water Services agrees to buyout
By JENNIFER FARRELL and BRIDGET HALL GRUMET SARASOTA -- The courtship is over. After spurning earlier offers, Florida Water Services announced this week it will accept a $528-million government buyout, pending a detailed prenuptial agreement. The buyout paves the way for bringing Florida Water's 150 systems statewide -- including 16 systems that serve more than 7,000 Citrus County customers -- under local governments' control. In September, the state's largest privately held utility gave exclusive negotiating rights to the Florida Governmental Utility Authority, a four-county consortium that buys willing utilities and keeps ownership until interested counties and cities are ready to take on the debt. But talks hit a snag in January when Florida Water rejected a $515-million offer from the FGUA, saying it was too low. Both parties have been involved in ongoing discussions since then, although Florida Water said it would entertain other suitors. The new agreement on Thursday made the relationship exclusive again and includes a purchase price of $520-million, plus $8-million to clear up Florida Water's contractual obligations to developers. May 14 is the deadline for approval by the board of directors from ALLETE, Florida Water's Minnesota-based parent company, and by the FGUA's board. The FGUA will hold a public hearing on the matter May 2 in Bartow. Searching for ways to bring willing local utilities under county ownership, Citrus County joined the FGUA in 2000. The consortium, which also includes Nassau, Polk and Sarasota counties, issues its own bonds to buy utility systems, but a member county can take ownership of a system at any time by assuming the debt. This arrangement could make for a cheaper Florida Water buyout than if Citrus County tried to purchase the systems itself, county Utilities Regulatory director Bob Knight wrote in a March 21 memo. Because the FGUA is negotiating to buy all of Florida Water's holdings in 27 counties, its cost for the Citrus systems is about $17-million. If Citrus County tried to buy these 11 water and five sewer systems on its own, Knight wrote, Florida Water's price would fall between $22-million and $26-million, depending on how future profits are projected. "In addition to that amount, we would incur significant costs for legal fees, engineering costs for due diligence investigations of the physical systems and other costs," Knight wrote. Florida Water brings central water to some of Citrus County's largest communities -- Sugarmill Woods, Citrus Springs and Pine Ridge -- as well as Apache Shores, Golden Terrace, Gospel Island, Lakeside, Oak Forest, Point O Woods, Rolling Green, and Spring Gardens. Florida Water also provides wastewater service in Citrus Springs, Sugarmill Woods, Apache Shores, Point O Woods and Spring Gardens. If those systems came into government hands, it would be easier for Citrus County to expand water and wastewater lines to other parts of the county. For example, running central water through Chassahowitzka would be cheaper if the community tied into the nearby Sugarmill Woods system instead of the Homosassa system several miles north. One of the conditions of the preliminary purchase agreement has caused some heartburn, however, for Hernando County, which has considered joining the FGUA as a way to take over Florida Water's Spring Hill system. Under the deal, individual governments in the 27-county utility network would have the chance to opt out of the deal and pursue a takeover on their own, either through purchase or the legal process of condemnation. The deadline to make that decision is June 1, according to terms disclosed Thursday during an FGUA meeting in Sarasota. According to the FGUA proposal, Spring Hill's share of the total deal would top $48.5-million. Last week, Hernando County selected Brooksville-based Coastal Engineering Inc. to give an independent assessment of the Spring Hill system's value. The target completion date was set for August. Now that timeline has been chopped in half. "That means it's pretty . . . close to get all of the due diligence in place by then," said Len Tria, Coastal vice president. "This substantially changes things." Contacted late Thursday, a majority of Hernando commissioners balked at being rushed. "The whole idea of the due diligence was to find out what its value is," Commissioner Chris Kingsley said. "Without the due diligence, it leaves us kind of in a corner." Over the next 60 days, FGUA negotiators will meet with interested counties and cities to help iron out details of the final deal. For the next four Wednesdays, they will hold meetings at 1:30 p.m. at the Polk County Administration Building in Bartow as a way to build consensus on how to proceed.
 © 2006 • All Rights Reserved • St. Petersburg Times
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