At a Special Council Meeting on Wednesday, March 26th, the Florence Town Council discussed the terms of the possible purchase of Johnson Utilities. The purchase price of $121M was discussed, as well as how the purchase price compares to the sale of other utility companies in Arizona, and the identification of revenue forecasts that will help to determine the rates for customers.
Dan Jackson from Economists.com was hired by the Town to analyze the utility company and identify the positive and negative impacts of a possible purchase. In Mr. Jackson presentation to the Town Council, he compared the purchase price of Johnson Utilities to other utility company purchases in Arizona based on the purchase price per connection. The purchase price for Johnson Utilities is $2,162 per connection. The average per connection purchase price for water companies sold in Arizona from 2004 to 2013 is $3,209.
The importance of the Town determining the price it can purchase the utility company so that ratepayers are charged a reasonable rate was discussed. Mr. Jackson then presented his forecast of future revenues and expenses if the Town acquired the utility company. He presented his conservative scenario where the utility company would grow modestly, or by 1,000 water accounts and 1,300 wastewater accounts per year. The forecast also assumes a 3% annual increase in rates, similar to other utility companies whose rates are adjusted annually based on rate studies conducted.
The Florence Town Council voted 7-0 to give direction to the Town Manager to move forward with the negotiations with Johnson Utilities and to discuss the possible purchase with the Arizona Corporate Commission (ACC). The Town Manager will bring final negotiated documents to the Town Council in the upcoming weeks for their consideration.
In order for the purchase to occur, the ACC must agree that the sale of the utility company is in the best interest of its customers. If the Town purchased Johnson Utilities, the ACC would no longer have the authority to regulate the rates of the system. The Florence Town Council would acquire the ability to determine the rates. The Arizona Department of Environmental Quality would continue to oversee the utility system in regards to public health and safety issues.
In order for the Town Council to make a decision on the purchase of the utility company, it must receive permission from the Florence voters. On Tuesday, May 20th, a Special Election will be held to allow the voters of Florence to make the decision on whether or not to allow the Florence Town Council to move forward with the possible purchase. A yes vote from the voters will give permission to the Florence Town Council to determine if the purchase of Johnson Utilities is in the best interest of the residents of Florence and the customers of Johnson Utilities. A no vote from the voters will effectively stop the process and nullify the ability for the Florence Town Council to consider the purchase of the utility company.
The polling place for the May 20th Special Election is Florence Town Hall, located at 775 North Main Street. The polls are open from 6:00 am until 7:00 pm on Election Day.
The PowerPoints presented in the meeting are available on the Town’s website, at www.florenceaz.gov.