Economist [John Husing]: ‘Risks of a (water system) takeover are extremely high’

By Matthew Cabe, Daily Press

APPLE VALLEY — A new analysis of the town’s ongoing water-system acquisition effort shows that water rates could be significantly higher under municipal ownership, a conclusion that contradicts assertions made by public officials.

Conducted by economist John Husing, the analysis focuses on Measure F, which Apple Valley residents will vote on in a June 6 special election. Utilizing data from previously published research, Husing analyzed the potential impact incurring 30 years of revenue-bond debt might have on the town and its residents.

According to the analysis, which looked at multiple possible cost scenarios, a $150 million bond paid back over 30 years at a maximum 12 percent interest rate – figures associated with Measure F – would result in much higher rates for customers.

“This bond’s annual payments would be $9.2 million at 4.5 (percent) to $18.6 million at 12.0 (percent),” the analysis shows. “More likely payments would range from $10 million at 5.25 (percent) to $12.4 million at 7.25 (percent) as (interest) rates rise over the next two or three years during which any condemnation proceeding would be occurring.”

Husing concludes the average increase in cost to customers would be “$502 or $620 per year equal to $84 or $103 per bi-monthly bill.” Additionally, for “the 92 (percent) of customers whose average bi-monthly bill is $129 … this would increase their average bi-monthly water bill to $212 or $232.”

That amounts to increases of 65.1 or 80.4 percent, according to the analysis, which said the “full average water cost increase per customer for 30 years at those rates would be $15,056 to $18,589.”

Read the entire article here.

Read Husing’s full report here (PDF).

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