The following Q & A was sent to all NSCUDD board members today by CDD District manager Richard Baier. I am posting what I received as a public record.
North Sumter County Dependent District (NSCUDD)
Questions and Answers in reference to the pending acquisition of Central Sumter Utility, LLC (CSU)
Q: How did the pending acquisition of CSU come to be?
A: The seller presented an offer to NSCUDD to purchase CSU in September of 2019.
Q: Did the NSCUDD Board approve the Purchase and Sale Agreement?
A: Yes, the NSCUDD Board approved the Purchase and Sale Agreement at their meeting on September 19 by a 6-1 vote.
Q: What were the parameters of the Purchase and Sale Agreement to determine a Purchase Price?
A: Each party was to engage a consultant to formulate a purchase price based on an income approach. Once the consultants concluded their purchase price, the two values would be compared to determine what the difference was. If the difference was less than 5% apart, the lesser of the two values would be the purchase price. If the values were between 5%- 10%, then an average of the two would be used. Over 10%, the Consultants would come together to reconcile their differences and come to a conclusion as to purchase price.
Q: Any other inspections?
A: Yes, the NSCUDD Board also engaged Jones Edmunds to perform a facilities condition assessment report. The seller has engaged a firm to conduct a Phase I environmental assessment.
Q: Have the valuations been completed, and if so, what are they?
A: Yes the valuations have been completed and presented to the NSCUDD Board at their meeting on October 17th.
Q: How far did the consultants forecast income in their income approach?
A: Both consultants forecasted out 30 years in their respective reports when establishing income and expenses.
Q: What were they?
A: The NSCUDD consultant valued CSU at $93,880,000 and the Seller’s consultant valued CSU at $103,056,159.
Q: How did these values fall within the parameters of the agreed upon and Board approved agreement?
A: The difference was 9.77% which was between the 5%-10% range which indicated a purchase price of the average of the two values.
Q: What is the agreed upon purchase price?
A: The average of the two valuations, which was $98,468,075.
Q: Did the valuation include a provision for Renewal and Replacements funds?
A: Yes, the income approach included an allocation for R&R funds annually. Initial R&R allocation is approximately $180,000, with the fund growing to approximately $1MM over the next 5 years.
Q: What happens now?
A: The District will start preparing for financing of the acquisition of CSU.
Q: How will the financing be done?
A: The District will work with the Financial Advisor, Underwriter, Bond, Tax and Issuer Counsel to start the process to issue debt to purchase.
Q: What type of debt will be issued?
A: Tax exempt financing will be issued for the purchase price plus cost of issuance and any other required funding.
Q: Who will determine the water and waste water rates?
A: The NSCUDD Board will determine the water and waste water rates in a public hearing. The request to advertise the Rate Rule adoption was approved by the NSCUDD Board on October 17th. This Rate Rule Adoption will have no impact on the current North Sumter Utility (NSU) rates.
Q: Why does NSCUDD want to purchase CSU?
A: As a local government, NSCUDD is a Utility Dependent District with a mission to manage, oversee utilities as a provider of public service. There is no focus on profit, only to serve the public as a transparent public utility.
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