A group of St. George Islanders who had hoped to buy the island’s water utility have abandoned their plans, citing an inability to arrive at a suitable price.
In a letter issued Monday to island residents, Tom Slocum, president of St. George Island Water District, Inc. said the price being asked by Gene Brown, owner of Water Management Services, Inc. (WMSI) was too steep.
“Our valuation of WMSI and the owner’s valuation are too far apart to make it likely that the gap could be bridged,” wrote Slocum. “We came to different conclusions … about the company’s value and its ability to repay a large debt under the current rate structure.
“Paying too much would increase significantly the debt we would have to repay. That would weaken our financial foundation and limit the flexibility a new company needs to move forward effectively and to serve the residents of our island well.”
Representatives of the not-for-profit islander group had been in talks with Brown since autumn 2012, when a move by the city of Carrabelle to buy the water utility went nowhere.
“We found dealings with Mr. Brown to be cordial and professional. It didn’t work out, at least so far,” said Slocum.
Brown said the islanders “were very reasonable to deal with. They were acting in good faith and they acted responsibly. We came to different conclusions about the value.
“I’d rather find another buyer, or keep it, than sell it for less than it’s worth,” he said. “If I can’t get my price, I’ll keep it. That’s an owner prerogative I think.”
Slocum confirmed Brown had stuck to his $15 million minimum selling price. Brown said this was based on a 2005 appraisal by Orlando’s Gerald C. Hartman, who he termed the leading utility company appraiser in Florida.
“That was back before we added 200-300 more customers and got a rate increase,” said Brown. “It’s worth more now than it was then but we’re kind of stuck on that value. Since then, revenue has increased, and the system is in better shape now. There’s no reason to sell for less than the appraised value.”
In his letter, Slocum indicated the water system was in good working order. “It is good to know that the island’s water supply is abundant and of good quality. The system is in reasonable shape with no unexpected maintenance needs. WMSI already has plans to fix the major issue – replacing the water storage tank on the island,” he said.
Slocum said the residents’ intentions all along has been to secure ownership of the company, and then transfer it to an entity with the resources to operate a water utility. Our ultimate goal was not to take it over ourselves,” he said. “Our interest was to transfer it to a user-owned not-for-profit. We formed the company to give us a mechanism to get into research and analysis.”
Slocum said funding, all from private donations, was used to cover the cost of an attorney, engineering company survey, any costs associated with meetings with the Florida Department of Environmental Protection and Florida Rural Water Association and other expenses.
“We would be eager to re-engage the discussions if circumstances change for him (Brown) or for us,” Slocum said. “He was open to that possibility, but also said he will examine other options and will look for another buyer. In the event our talks do resume, we will keep SGI Water District a going concern.”
Once all their debts are paid, the islander group will have about $3,000 to $5,000 remaining, he said. In the events the talks with WMSI do not resume, the group plans to donate the money to the St. George Island Volunteer Fire Department.
Brown said he plans to put the company back on the market and see if there is interest. “I intend to start focusing on it this spring and summer,” he said.