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Successful Close on the Sale of Dunnellon’s Water and Sewer Utility

Monday, October 29, 2018

Successful Close on the Sale of Dunnellon’s Water and Sewer Utility


October 26, 2018

Longwood, FL – October The City of Dunnellon and the Florida Governmental Utility Authority (FGUA) are pleased to announce the sale of the City’s Water and Sewer Utility System is complete, and closing was successfully finalized on Friday, October 26th at noon. Mayor Burns, City Administrator Dawn Bowne, along with City staff executed the pre-closing documents on October 23rd with the FGUA Board of Directors Chairperson Lea Ann Thomas and System Manager Stephen Spratt.

Following a six-month comprehensive evaluation of the utility system to determine its condition and value, in December of 2017, FGUA agreed to a purchase price of $12.2 million. The transaction is made possible due to financing with a first-of-its-kind U.S. Department
of Agriculture (USDA) 2.75% low interest rural development acquisition loan.

In a press release announcing the loan last May, Florida Rural Development State Director Sydney Gruters announced that the U.S.  Department of Agriculture (USDA) is investing over $12 million in water and wastewater infrastructure in Dunnellon, Florida to further its mission of strengthening rural communities. “No matter what zip code you live in, infrastructure is a foundation for quality of life and economic opportunity,” Gruters said. “Through strong partnerships, USDA is ensuring that rural communities have the modern, reliable infrastructure they need to prosper.”

The water and wastewater systems serve the City of Dunnellon and the surrounding unincorporated areas known as Rainbow Springs, Rio Vista and Juliette Falls. Because most of the customers lie outside of the City, Marion County government became an important supporting partner with the City and FGUA. Currently, the user rates for these systems are among the highest in the area, yet the systems are still financially and operationally stressed, facing infrastructure challenges and near-term regulatory burdens. With the USDA funding the
City’s higher cost outstanding loans will be eliminated and with the FGUA’s larger scale of resources, user rates will be stabilized, and service reliability improved. Dedicated state grant funding will allow the FGUA to complete system improvements which are vital to protect the
quality of valuable natural resources.

In recommending the transaction, City Administrator Dawn Bowne said, “If the City were to maintain ownership of the system (at a minimum) the rates for service would need to increase significantly to provide for the funding of increased capital needs of the water and wastewater system. If not for the acquisition plan by the FGUA, the City would need to debt finance the additional capital projects, which could be difficult recognizing the overall financial position of the system. The City would likely need to increase rates by approximately 17.45 percent above the estimated rates projected under FGUA ownership in order to meet the system needs.” The 2017/18 FY budget contained a 3 percent increase in the Water Fund and a 7.5 percent increase in the Sewer Fund in the event the City did not divest the Utility System.
In addition to the City placing their utility in the hands of experts, the City will strengthen its finances by eliminating high debt and improving its cash reserves.

As a governmental authority focused solely on delivering water and wastewater utility services, the FGUA owns and operates over 80 utility systems in 13 counties, including those at MacDill Air Force Base in Tampa. It currently owns 12 other systems in Marion County. It is in a
strong position to assume these important responsibilities from the City and provide high quality, cost- effective service to the utility customers. It also has the advantage afforded to other governments, such as access to low-cost public financing and grants.

Another important advantage of the City divesting the system is the FGUA will be an ongoing partner with both the City and Marion County in the long-term utility planning for this area. This effort will include actively and jointly seeking federal and state funding to expand and
improve the system and connect existing septic systems to the sewer system and protect the important nearby springsheds. Marion County is a member government of the FGUA and part of its Board of Directors.

“The FGUA’s mission is simply to assist governments in Florida solve utility challenges and this transaction is truly a groundbreaking example of how good government collaboration at all levels can produce enormous benefits to customers and taxpayers” said Steve Spratt, FGUA System Manager. “Here you have the Federal, State, County, City and a special Authority working hand in hand to bring funding, capability and cost saving efficiencies to help these communities.” The leadership of all these entities deserve a great deal of credit for
being part of this successful partnership.”

Shortly after being appointed to City Council, Vice-Mayor Rick Hancock played a significant leadership role in focusing attention on the financial, operational and infrastructure challenges facing the city and its utility and evaluating alternatives. On behalf of the Council, he led the negotiations leading to the purchase agreement and successful sale.

Upon hearing the sale had successfully closed on Friday after approximately two years of hard work by Council, staff and FGUA, Hancock said, “I appreciate all the efforts from so many good partners. Throughout this process, the City has worked closely with county, state, and federal agencies. From the beginning the City and FGUA made it clear that the emphasis would be on enhancing the entire utility system, taking care of current and future customers, and improve the springshed environment along the Rainbow River corridor. This sale agreement accomplishes all of these goals, due to the outstanding efforts from all the partners involved.”

Dawn M. Bowne, City Administrator
Stephen Spratt, System Manager, FGUA

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