City makes case for EPCOR takeover vote

July 31, 2018

BULLHEAD CITY — Before council members voted last week to put the question of purchasing EPCOR Water Arizona’s Bullhead City Assets before voters in November, Bullhead City Manager Toby Cotter said the city could afford to acquire EPCOR Water Arizona’s Bullhead City assets.

“Can the city afford the $130 million plus to purchase EPCOR — the answer is yes,” Cotter said. “The question is though, is it worth $130 million and ultimately what is it worth?”

In a nearly 40-minute presentation, Cotter spoke to council members and the public about the city’s case for putting the question before the voters.

City voters will consider Bullhead City Proposition 410 during the Nov. 6 general election. It proposes the question of authorizing, but not mandating, the purchase and acquisition of EPCOR Water Arizona in Bullhead City and the issuance and sale of bonds to purchase the property.

EPCOR has estimated the Bullhead City utility to be worth $130 million and has refused to discuss a price for a possible sale to the city, Cotter said. The city believes the utility is worth considerably less than $130 million, he said.

Cotter said that if the city moves forward with condemnation, the value of the utility would be determined by a court.

“The city wins that condemnation,” Cotter said. “The law in Arizona is very clear.”

The city manager also addressed questions presented by EPCOR in advertising, billboards and other marketing materials sent to its customers, including how much the city would lose in annual tax revenue, should the city purchase the utility.

“There’s about $400,000 in local property taxes that EPCOR pays to the school districts, the college (and) the fire district,” Cotter told council members. “The last time I checked, that money came from the ratepayers who pay taxes so, to think that we’re losing millions in the economy — it’s actually money that would potentially stay in the pockets of ratepayers and taxpayers.”

EPCOR’s Bullhead City system budget, which has been opened to the city due to EPCOR’s pending rate case with the Arizona Corporation Commission, includes about $1.5 million in labor costs, about $2 million in operating and maintenance expenses, $360,000 in corporate allocation — what EPCOR Water Arizona pays to EPCOR Canada — about $500,000 in fuel and power costs and other incidental expenses.

“We do know what we wouldn’t be paying through acquisition,” Cotter said. “Corporate allocation costs, property tax, other taxes that they may be paying. (We) certainly wouldn’t be paying $500K for their billing software, taxes, trip to Canada, outside sourcing and service charges (or the) significant consulting fees that have been identified in the rate case.”

Cotter said taxes would not increase, nor would municipal services be cut to pay for a takeover.

“The biggest issue is debt service,” Cotter said. “I cannot sit here right now and tell you what the debt service will be because I’d like to see a $38 million number and they’d like to see $130 million. You cannot determine the water rate until you know the debt service.”

Shawn Bradford, EPCOR Water Arizona vice president of operations, also addressed council members before the vote.

“The company was ordered (by the ACC) to file a rate case, that’s a fact,” Bradford said. “We were also ordered to propose a consolidation option. We choose the option of statewide consolidation because that was the decision that was rendered in the last rate case that the commission weighed in on EPCOR, where they ordered us to look at wastewater consolidation option.” The ACC is the state agency that regulates utility rates.

EPCOR Water Arizona also is asking to recoup $12 million in capital investment the company has said it made in Bullhead City since the last rate increase in 2015.

On the issue of profit, Bradford said, “We are a regulated utility and are allowed a return on the capital we invest in the ground. We cannot earn any profit on any of our expenses.”

Bradford pointed to three community meetings the company hosted in the fall and spring to educate consumers on the proposed rate case and noted the company supported the city as an intervenor in the rate case.

The Daily News asked Bradford when EPCOR would file another rate case to recover its planned $59 million investment over the next 10 years in city system. Bradford said the company would seek another increase at some point in that 10-year process.

“There will be future rate increases, we’re not saying there won’t be,” Bradford said. “It’s based on how much we invest and maintenance and operating expenses. We’d be asking to recoup whatever level of investment we make. We’re projecting $59 million, it could be more than $59 (million) it could be less than $59 (million), but we would be seeking recovery of whatever investment we make.”

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