Attacks Against Consulting Firm Baseless



On behalf of I urge the residents of the Pine Strawberry Water Improvement District to disregard the baseless, unsubstantiated and false allegations made by Sam Schwalm against our firm and the district’s board.

The project team currently advising the district is composed of professionals from the international consulting firm, the national engineering firm Coe and Van Loo, and the International Financial Advisory firm Stone and Youngberg. Our firms present decades of experience for thousands of water districts and municipal clients throughout Arizona and the world. The preliminary conclusion of our draft report is that the district could acquire Pine and Strawberry water companies without an increase in monthly ratepayer bills until 2011, after which, rate increases will be required.

I have reviewed Mr. Schwalm’s report purporting to identify “errors” in our analysis and have come to two conclusions. First, he has completely failed to prove that there are any errors in our analysis. Second, he has made at least 22 errors, misstatements of fact and erroneous assumptions of his own. He has added operating expenses that the board has specifically stated it will not incur, ignored expected district cost savings, double-counted contingency expenses, unilaterally lowered billed consumption, used unsupportable assumptions to depress forecast revenues, and significantly miscalculated the district’s proposed debt service. Unsurprisingly, after making all these unilateral and unsupportable changes to our numbers, he comes to a different conclusion than us regarding the timing and extent of future rate increases. He also fundamentally mischaracterizes the purpose and intention of our 2003 report.

Further, Mr. Schwalm provides no evidence to support his allegations that we “double counted” 8,000,000 gallons of water and improperly included sales taxes in revenues, and I have never seen any evidence of this in all the documentation I have reviewed from state and company records. Ironically, even if these claims were true, they would not materially impact our conclusions.

Finally, Mr. Schwalm attacks the professionalism and character of the board and by suggesting that both parties conspired to manipulate data to ensure that an agreed-upon report result would be achieved. His report states as follows: “The speculation … is that the PSWID board had a need to show that the purchase would be “free” to the ratepayers and asked to quickly produce such a report.” Any fair-minded reader should disregard in its entirety any “report” that contains such an unprofessional and blatantly false allegation.

Our detailed debunking of all Mr. Schwalm’s allegations has been posted at under the tab “Document Library.” It shows that Mr. Schwalm’s allegations are simply without merit and cannot survive a reasonable level of scrutiny. Again, I urge the ratepayers to disregard his claims in their entirety.

Dan V. Jackson,

managing director and chief executive LLC


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