Utility’s opening bid to Tega Cay is $7.86 million

jmarks@fortmilltimes.comFebruary 7, 2014 

— If Tega Cay wants it, there is a price Tega Cay Water Service is willing to take.

In a letter dated Jan. 4 obtained by the Fort Mill Times, an attorney for Tega Cay Water Service wrote to city attorney Jim Sheedy that the utility is willing to sell its assets to the Tega Cay for $7.86 million.

A purchase agreement would need to be filed with the South Carolina Public Service Commission by Feb. 28 with closing by June 30, per the company’s offer.

City Manager Charlie Funderburk said Thursday a decision hasn’t been made on the initial offer, but he expects to have a “reasonable number” to propose in a counteroffer in coming weeks. City engineers continue to evaluate the system and should have a “hard and true number” in a couple of weeks.

“We were surprised to have to have gotten the offer as soon as we did,” Funderburk said.

Tom Oakley from Tega Cay Water Service’s parent company, Utilities Inc., said evaluating the system already is complete.

“The valuation of the system, which was jointly commissioned by the city and Tega Cay Water Service, is complete, and it was on that basis that we made our offer to the city,” he said.

According to the letter, the company’s offer remains open for a limited, but unstated, period of time.

The possibility of the city acquiring the utility has been discussed for several years in response to customers’ and officials’ frustration over repeated sewage spills into Lake Wylie . The company blames the incidents on aging infrastructure. It was a prime topic discussed by candidates in last fall’s city council races. Discussion on the issue ramped up following six spills on Dec. 23 estimated at more than 178,000 gallons and three more on Dec. 29 that added another 10,000 gallons.

The utility received a report on the valuation Jan. 29 after months of work by city and outside engineers. The company, according to the letter, takes issue with some parts of the report but “cannot conceptually disagree” with its conclusion. The letter notes conversations of a possible city purchase held “periodically” during the last five years.

Any decision to purchase the system will involve its “bankability,” Funderburk said. Appraisals of the existing system and the work needed to repair it will factor against what customers would have to pay.

The $7.86 million asking price exceeds the city’s $6.5 million general budget for the current year. Funderburk wouldn’t say specifically how the city would plan to finance the purchase.

“We’re not going to jeopardize the city’s financial position,” he said.

The company states depreciation rates of 55 percent for water and 58 percent for wastewater facilities. That depreciation reduces the replacement cost of $21.59 million by $12.36 million, according to the letter. The company deducted another $950,000 for construction of manhole restraints and flow equalization tanks at its plants.

“Although the system is in need of significant capital improvements,” the letter reads, “its appraised valuation has been discounted to reflect such conditions.”

The letter also notes a consent order between the company and South Carolina Department of Health and Environmental Control containing “an aggressive capital spending program.” That order came down Feb. 3 and included a $136,000 civil penalty for environmental infractions by the company.

The company “fully intends to comply with the aggressive timetable” for system repairs contained in the order, stating the current appraised value of $7.86 million “will be adjusted on a dollar-for-dollar basis” so the company will recover the “full value of all monies invested” between now and closing.

Funderburk said the order is a factor in what the city offers and when it does so.

“Obviously if we were to buy the system today, those improvements called for aren’t specific just to (Tega Cay Water Service),” he said. “It’s specific to the system.”

The city isn’t philosophically tied to owning the system or the current setup, Funderburk said. The city just wants the wastewater spills plaguing the system in recent months stopped.

“Our goal isn’t necessarily to own the system as much as it is to stop the sanitary sewer overflows,” Funderburk said.

Oakley said if the city wants to make the deal happen, they’re in position now to do so.

“It is increasingly clear that the community wants the city to be responsible for all of the sewer system in Tega Cay and for Tega Cay Water Service to be out of the picture,” he said. “With the appraisal now in hand along with our offer letter, city leaders are in a position to make that happen.”

John Marks •  803-831-8166

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