The request of staff for Council is to review and consider for approval the attached notice of intent to purchase the Lakewood Villas, Barbara Ann Acres, and Silver Oaks Utilities for a do not exceed amount of $600,000.00. 

As Council is aware, staff began preliminary discussions with the owners of Lakewood Villas, Barbara Ann Acres, and Silver Oaks Utilities and the possible acquisition of the systems. Subsequent to the completion of valuation reports on the utilities, negotiations for the purchases took place.  The reports were determined by an average of the asset valuation of the existing facilities, income valuation, and the comparable sales valuations of similar size utilities.  The valuation of the Lakewood Villas system was determined to be $512,999, the Barbara Ann Acres system $40,910, and the Silver Oaks system $53,578.  The sum of the three systems totaled $607,487.  The report summary memo from McKim & Creed identified a reasonable purchase price for the three utility systems to be between $560,000 and $610,000. Negotiations between staff and the current owners concluded on January 14, 2016 with an agreed purchase price of $600,000 contingent on Council's approval and issuance of a notice of intent to purchase the utility systems.  The notice of intent's purpose is to identify all items specifically called out by each party as assigned responsibilities required for the purchase conclusion.  A January 1, 2017 has been agreed on by all parties as a fair and reasonable time frame to complete the purchase process.

Subsequent to the City's Finance Director and the City's Financial Advisor's review of the proposed utility purchases, it has been recommended that competitive loan submissions from financial institutions should be used to complete the transaction.  In addition to the $600,000.00 purchase price, the valuation reports included the cost estimates for the City to replace the existing meters with the City's Automated Meter Infrastructure System.  The cost for the meter conversions is $261,000.00 and is expected to be included in the loan as a Capital element.  Staff has reviewed the operating and maintenance responsibilities of the utilities and have concluded that it will not require a request to Council for additional utility maintenance personnel and equipment to incorporate the utility systems into the City's existing system.