Something doesn't add up

By Geoff Lee

May 3, 2016 6:00 AM

Rod Sellers past president of Sellers RV Centre wants the city to get fair market value for its existing water and wastewater assets that would be sold to form a Lloydminster Utility Corporation. Sellers says his research of city documents tells him the city is sacrificing those assets way below their value.

Will city taxpayers be short-changed by the creation of a Lloydminster Utility Corporation in partnership with Epcor to fund an upgraded wastewater treatment facility?
That’s the belief of Lloydminster businessman and community leader Rod Sellers, past president of Sellers RV Centre Ltd.
Sellers said he fears the city is sacrificing the value of its existing water and wastewater asset to form an LUC with a potential partner like Epcor.
“The big glaring issue for me is that we sell the existing infrastructure utility that’s valued at $113   million to this new corporation, this LUC for $26 million,” said Sellers.
“That means we’re selling that utility for about 25 cents on the dollar or less to this new entity.”
While councillor Linnea Goodhand questions his figures she doesn’t refute Sellers’ premise.
“I certainly understand there’s a gap between what they are valued on our books and what they would be valued as our contribution to the LUC,” said Goodhand.
“His concerns are our concerns—that’s why we haven’t pulled the trigger yet.”
According to data mined by Sellers from the city’s website on the proposed LUC, indications are the city is taking away at least $87 million in value from taxpayers to form the corporation.
That’s the difference between the $113 million book value of the existing asset and the $26 million selling price to the LUC.
“The new partner in this company, whoever it might be, is getting a bargain,” said Sellers.
The vending of the existing assets for $26 million to the LUC would be shared, meaning the actual cost to a partner like Epcor is just $13 million.
In an e-mail Sellers sent to city officials on April 14, he said: “Since the share structure and controlling interests of the LUC have not been presented, this can only be seen as a giveaway of the citizens of Lloydminster’s assets at this point.”
“That’s a possibility,” said city Coun. Jason Whiting.
“That’s something we need to be aware of and continue to watch for if this goes forward,” he said.
“If this goes forward, we need to be very cautious and leery of the value of assets and all that.”
Whiting cautions that nothing has been agreed to yet with the LUC.
“It’s an investigation at this point.”
Sellers said he also takes issue with the revenue a partner like Epcor might get from LUC.
The city’s own budget data for 2016 shows the existing waster and sewer utility will generate about $6.3 million for the city from water and sewer bills.
“From Epcor’s point of view they can get half of that cash flow for $13 million,” said Sellers.
“So for $13 million they have access to about $3.15 million in cash flow a year—try to get that kind of return anywhere else in the world.”
Sellers noted the value of the city’s water and sewer infrastructure is 25 per cent of the city’s total assets and selling that at a sacrificial price doesn’t make sense.
“I’m not saying $113 million is the right price but $26 million isn’t,” he said.
He believes it would be impossible to replace that asset today for under $500 million.
Goodhand said she believes Sellers has legitimate concerns that council and administration need to address.
“I think the point of this project is not to put the city in a weakened position as far as our asset base, our revenue production or control over a core services like water and wastewater,” she said.
Sellers believes the new utility corporation should have to pay the full value for that asset.
“That value may be the book value which is $113 million or it may be more, but at least they have to pay the book value for that asset otherwise the whole deal is flawed,” he said.
Sellers knows a lot of establishing fair market value having recently bought and sold several businesses including the recent sale of Sellers RV to his daughter.
Sellers said in his email to the city the deal does not appear to be good business, nor does it appear to be thought through to a desirable conclusion.
Sellers has since met with several city officials about getting full value for the assets, but said he queries went unanswered.
“Nobody has been able to satisfy my question about the sacrifice of our asset,” he said.
“I can only come away thinking that perhaps they didn’t fully understand the implications of this cost to the citizens.”
Goodhand said it’s critical that people like Sellers question council and question management to have a really informed groups of citizens who are participating in the decision making.
“That’s what’s we’re hoping Your Voice is going to be,” she said.
The city is holding a Your Voice Forum on the LUC and other issues Thursday night from 5 to 8 p.m. at College Park School.
Project leaders will be on hand to answer questions about the proposed LUC.
Sellers said he plans to attend.

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