ISSUE:

Consideration and Approval of Agreement for Purchase and Sale of the Central Sumter Utility Company, LLC (CSU).

The North Sumter County Utility Dependent District (NSCUDD) Board previously entered into an agreement to purchase CSU and Sumter Water Conservation Area, LLC (SWCA) as approved on March 19, 2015.  As part of the process to purchase CSU and SWCA, the Board authorized staff to engage the appropriate consultants to begin the due diligence and financing process. 

In addition, Resolution 15-06 was approved by the Board authorizing the issuance of not to exceed $185,000,000 principal amount NSCUDD Utility Revenue Bonds in one or more series to finance the acquisition of NSU and SWCA.  As part of Resolution 15-06, Bond Counsel and District Counsel were authorized to proceed with the Bond Validation process.  In such, the validation process concluded with final judgement validating bonds in the amount of $185,000,000 on July 15, 2015.

As part of the due diligence and contract, a valuation of the asset must be completed from both the seller and purchaser with certain agreements as set forth in the contract as conditions for sale being utilized as determination of the actual selling price.  The price would be established at the lesser of two valuations.  However, if the lesser of the two valuations is greater than 5% lower, but not greater than 10% lower of the higher of the two valuations, then the District and Seller agree that the Purchase Price shall be established at the average of the two valuations.  If the lesser of the two valuations is greater than 10% lower than the higher of the two, then the District and Seller will have the two valuation firms meet in an attempt to reconcile and agreed determination of value.   Unfortunately, the valuations that were presented by both firms dictated the need to have the two valuation firms meet to reconcile.  This process concluded on July 10, 2015 with the two firms still remaining with a significant spread between the two appraisals with no means to reconcile the difference in order to come to an agreed upon valuation for the sale of CSU/SWCA utility systems.  To that end, the Seller exercised their option to terminate the agreement effective July 13, 2015. On July 16, 2015, District Manager Janet Tutt informed the Board that the Seller had exercised its option to terminate the agreement based on the significant spread in valuation and the reconciliation process not producing any outcome that would render the sale possible.  The Bond validation process was completed as this would give the Board the opportunity to proceed with a sale if the opportunity presented itself again.

Today, an agreement for Purchase and Sale has been reintroduced to the Board to purchase CSU only.  The seller owns and operates a potable water treatment and distribution system and wastewater collection, treatment and disposal system.  The Utility system was developed to provide services to a portion of the mixed-use development referred to as “The Villages” located in portions of unincorporated Sumter County, the City of Wildwood, and the City of Fruitland Park, all with Florida.

Some conditions of the Purchase and Sale Agreement:

1. Purchaser shall have a period of thirty (30) days from Effective Date to make its own investigations of the Purchased Assets.

2. Within five (5) business days after the Effective Date, both Purchaser and Seller shall retain at their respective expense a valuation firm and notify the other party of its selection. The preliminary valuation is to be completed by October 15, 2019.

3. The Seller and Purchaser agree that if the lesser of the two Preliminary Valuations is not greater than 5% less than the higher Preliminary Valuation, then the Purchase Price shall be established at the lesser of the two Preliminary Valuations.  If the lesser of the two Preliminary Valuations is greater than 5% lower, but not greater than 10% lower of the higher of the two Preliminary Valuations, the Purchaser and Seller agree that the Purchase Price shall be established at the average of the two Preliminary Valuations.  If the two of the Preliminary Valuations is greater than 10% lower than the higher of the two Preliminary Valuations, then the Seller and Purchaser shall promptly instruct their respective valuation firms to meet and reconcile and agreed upon determination of value.

Two (2) firms will need approval to perform due diligence and necessary valuation of the proposed sale, one firm for valuation of the utility and one for asset condition assessment.

PFM is the District’s current Financial Advisor and would perform the valuation of the Utility.

Jones Edmunds performed the previous asset condition assessment and would propose they conduct an update to the previous report as approved by the Board.

Once the conditions are satisfied, the process to issue bonds to finance the purchase will proceed.

Notwithstanding any other term or provision of the Agreement, Purchaser may terminate the Agreement by providing written notice to Seller prior to October 5, 2019.

Staff recommends the Board to approve the Agreement for Purchase and Sale of CSU to include the approval of PFM and Jones Edmunds to provide valuation of the utility and facility condition assessment of the utility.

Approve the Agreement for Purchase and Sale of CSU to include the approval of PFM and Jones Edmunds to provide valuation of the utility and facility condition assessment of the utility.