The Pine-Strawberry Water Improvement District board commissioned a report from economists.com on the rate impacts of the water company purchases. The report concluded that purchasing the water companies would be “free” for the rate payers for the first two years. To make that statement, the report uses a favorable purchase price and also uses creative financing by having the first two years be interest-only payments.
The report contains six major errors which result in the revenue being overstated by about 25 percent. The board was told about the errors in early November, but they went ahead and presented the report as being correct at the November PSWID meeting.
The board refuses to admit to and correct the errors. How can double counting 8,000,000 gallons of water not be an error? How can counting sales taxes as revenue not be an error?
Economists.com prepared a similar valuation report in 2003. That report was very clear as to the approach, numbers, and assumptions being used. Comparing the 2003 report with the 2008 report shows a significant change in approach. A significantly different depreciation schedule is used in the 2008 report. Costs which are accounted for in 2003 aren’t accounted for in 2008. The standard loan term used in 2003 turned into a creative financing loan in 2008. Add to that the six major errors in the 2008 report. Every single change in approach, plus the errors, between 2003 and 2008 makes the cost of purchasing the water companies look less expensive.
Correcting for the errors and using the board’s favorable assumptions shows that there will be an immediate increase of 16 percent for Pine and 27 percent to 74 percent for Strawberry. Then over the next five years the rates will increase 31 percent more. The increases are significantly larger when more realistic assumptions are made.
When comparing the two reports, it is not hard to come to the conclusion that the 2008 report has been crafted to produce the conclusion that purchasing the water companies will be “free.”
The PSWID board is showing the ultimate disrespect to the community by not providing honest information to the public. The public has a right to know what the rate impacts are likely to be, before the water companies are purchased.