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�■ OFT'. J f err'. TR MI.KEG DONNER �t.�SLI l}� �.ITI� ��'�T��C.T. Al S ?L„ ITlC N 0� AC:KNOWL�'DGMENT AND APPR��1�4T1Q WHEREAS, Bruce N. Grow has been an employee of the Truckee Donner Public Utility District since September 6, 1966 and, during the past 27 years, Bruce has represented the District in a most exemplary fashion; and WHEREAS, Bruce, in his varying capacities, has produced only the highest quality work and performed his many duties meticulously; and WHEREAS, Bruce has not only been a loyal employee, but has set an example for and been a leader of other PUD employees; and WHEREAS, Bruce is known by all as a kind, generous and thoughtful person; and WHEREAS, all those who have worked with Bruce over the years have the highest respect for him, not only as a fellow employee but as an individual; and WHEREAS, Bruce is retiring from the Truckee Donner Public Utility District in September of 1993 and will be impossible to replace and greatly missed; NOW, THEREFORE, BE IT RESOLVED that the Board of Directors and employees of the Truckee Donner Public Utility District wish to acknowledge Bruce N. Grow for his dedicated, faithful service to the District over the past 27 years, and to express appreciation for all he has contributed not only to the District, but to the other employees, customers and community, as well. THANK YOU, BRUCEI PASSED AND ADOPTED by a unanimous vote of the Board of Directors at a meeting duly called and held within the District on the sixteenth day of August, 1993- p A Joseph R. uera, President 9 James A. Maass, Vice President John L. Corbett, Treasurer Robert A. Jones, Director Patricia S. Sutton, Director RE U` ION 0. 33� O 1�) R C1 EE D N'�ER F �1 L C UTI D'l fiR T APPR II�N PLANS', SPECIF CATIQNS AN© CONTRACT C]OCUIUIE TS AND 1SSU NCi A CALL FO BIDS: FOR AN .. AU ILI+4RY POWER GENERATOR WHEREAS, the Board of Directors of the Truckee Donner Public Utility District has made the determination to purchase an auxiliary power generator for use in water pump stations during electrical outages; and WHEREAS, funds for purchasing this auxiliary power generator have been included in the Proposition 55 funding; and WHEREAS, plans, specifications and bidding documents for the project have been prepared by the Consulting Engineer; NOW, THEREFORE, BE IT RESOL VED by the Board of Directors of the Truckee Donner Public Utility District as follows: 1. That, subject to approval by District Counsel, the plans, specifications and bidding documents be approved and advertised in an appropriate manner. 2. That the date and time of the bid opening be scheduled for 2:00 PM on PASSED AND ADOPTED by the Board of Directors at a meeting duly called and held within the District on the 16th day of August 1993 by the following roll call vote: AYES: Corbett, Jones, Sutton and Maass. NOES: None. ABSENT.• Aguera. TR KEE DONNER UBLIC UTILITY DISTRICT By } as ph . Aguera, resident i AT i" Susan M. Craig, Deputy Distr" t Clerk i smc 9 AUglsSt 1 , 9993 Tp; oardDfB o FROM: ,fl d ., Chapman, Acimtnistrative Services Manager SUBJECT. .Bills for Board consideration . GEWD Attached is a copy of the bills for Board consideration. Among the bills are invoices for work performed on the SCADA project. The funding for this project is scheduled to come from the COP financing. RECOMMENDATION 1. Authorize payment of the bills in the usual manner. 2. if SCADA related bills are approved, transfer out of the Certificates of Participation funds on deposit with the Local Agency Investment Fund $24,947.21 to reimburse the general fund for the following: Sandel/Avery $24,422,2? Sauers Engineering 525.00 Total $24,947.21 JPlsmc Attachment TRUCKEE DONNER PUBLIC UTILITY DISTRICT BILLS FOR BOARD APPROVAL - AUGUST 16, 1993 TOTAL ELECTRIC WATER DESCRIPTION ------ -- ---- 34.32- DE CUIR & SOMACH 34.32 LEGAL SERVICES. TELEPHONE CALL REGARDING GROUNDWATER DIVERSIONS/RIGHTS. HARKER & HARKER INC 19,902.80 19,902.80 FOUR MAN LINE CREW AND EQUIPMENT 7/19-30/93. MBNA AMERICA BUSINESSCARD HOLZMEISTER 34.00 34.00 MANAGEMENT BOOK (13.94) LUNCH - AGUERA/ZINETTI (20.06) MBNA AMERICA BUSINESSCARD CORBETT 12.82 8.97 3.85 FUEL PURCHASE AT RANCHO MIRAGE ON SEMINAR. THE OKONITE COMPANY 60,799.60 60,799.60 CABLE, PRIMARY, 350MCM JKTD CONCENTRIC AS PER BID SPECIFICATIONS, SCHEDULE I RFNO SALVAGE COMPANY 3,823.76 3,823.76 CONTAINMENT BINS FOR TRANSFORMERS. SANDEL-AVERY ENGINEERING 24,422.21 24,422.21 SCADA PROJECT AUGUST 10, 1993 INVOICE. SAUERS ENGINEERING INC. 25,82$.10 25,828.10 PROP S5 GROUNDWATER SMANAGEME2�T ((500.00)E NT ACQ 25 00}ELECTRIC SYSTEM WALL MAP (165.60) SCADA (525.00) MISC REQSTS AFTER ANDY (325.00) HWY 267 RIVER CROSSING (1260.00) ANNEXATION STUDY (150.00) STANDBY CHARGE ENGINEER'S REPORT (50.00) STOVER PROJEC`I` - DONNER LAKE (25.00) TAHOE DONNER PIPELINE REPLACEMENT (275.00) . 134,857.61-- µ 94,569.13 50,288.48 VAF ' EORT TO; $o rd of Directors FROM Peter L. l)olimeister, GeneralIlanager USJECT: ' Staff Report I G `# 5 A. Water Quality .Report Attached for your review is the bacteriological report for the month of July 1993. We still see positive samples taken from Northside Well. However, due to our chlorination treatment, our distribution system remains pure. B. Financial Report Attached are financial reports for the first six months of 1993. The reports include a Statement of General Fund, an Investment Report, Water and Electric Fund Balance Sheets, Water and Electric Fund Income Statements and a Budget Report. C) California PUD decision relating to sale of Donner Lake Utility Company to Del Oro Water Company Attached is the decision of the CPUC in denying the above-referenced sale. PLH/smc Attachments Truckee Donner Public Utility District Board o;Directors Joseph R.Aguera Johns L. Corbett Business Office Engineering Services Robert A.Jones (916) 5 7-3 96 (916)587-3944 FAX(916)567-5056 ,lames A. Maass Patricia S. Sutton General tanager Peter L. Hoizmeister MEMORANDUM Date: August 9 , 1993 From.: David Rullyk To: Peter Holzmeister Subject : Monthly Bacteriological Report - July, 1993 Attached is the "Summary of Bacteriological Water Quality" report for the month of July, 1993 . The July portion of the report shows that all 32 distribution . system samples were free of coliform bacteria. The report also shows that 26 source samples were free of coliform bacteria . The district has met the State ' s drinking water standards for the month of July. Post Office Box 309 11570 Donner Pass Road Truckee,e, liforni 96160 TRUCKER DONNER PUBLIC UTILITY DISTRICT System Source Samples Portions Percent Samples Portions Percent Yr . Month Collected Positive Positive Collected Positive Positive 1993 May 0 0 8 4 50 26 (Truckee) 0 0 6 0 0 (Prosser) 0 0 (Hirschdale) 1 0 0 1 1993 June (Truckee) 32 0 0 19 21 0 10 0 0 10 0 0 (Prosser) 0 0 1 0 0 (Hirschdale) 1 1993 July 24 0 0 20 3 15 (Truckee) 0 0 g 0 0 (Prosser) 7 1 0 0 (Hirschdale) 1 0 0 TRUCKEE DONNER PUBLIC UTILITY DISTRICT STATEMENT OF GENERAL FUND DUNE 30, 1993 HISTORY OF ACTIVITY FOR MONTH: BALANCE IN GENERAL, FUND 05/31/93 1,223,927.19 --------------- RECEIPTS ELECTRIC REVENUE 579,700.37 0670 WATER REVENUE 205,937..47 STANDBY ELECTRIC 69921 3 STANDBY WATER , . MISC. BILLING REVENUE ELECTRIC '38888'14 MISC. BILLING REVENUE WATER 1,603.99 CONSUMER DEPOSITS, ELECTRIC 7,742.80 CONSUMER DEPOSITS, WATER 1,155.00 CUSTOMER ADVANCES-CONNECTION FEE ELECTRIC 38,750.00 CUSTOMER ADVANCES-FACILITIES FEES-ELECTRIC 9,768.00 CUSTOMER ADVANCES-OTHER ELECTRIC 29,674.00 CUSTOMER ADVANCES-CONNECTION FEE WATER 20,900.00 CUSTOMER ADVANCES--FACILITIES FEES-WATER 3,032.00 WORKORDER LINE EXTENSION 1,320.50 MISC. REVENUE ELECTRIC 1,353.44 MISC. REVENUE WATER 736.49 URESTRICT ACQUISITION FUNDS 135,625.51 DWR PROP 55 LOAN 292,971.46 STATE COMPENSATION DIVIDEND ------1,151.47- TOTAL RECEIPTS 1,339,816.55 DISBURSEMENTS ACCOUNTS PAYABLE DISBURSEMENTS 1,451,754.93 LESS VOID CHECKS PREVIOUS PERIOD (2,119.40) TRANS. TO ELECTRIC RESTRICTED FUNDS-FACILITIES FEES 9,768.00 TRANS. TO WATER RESTRICTED FUNDS-FACILITIES FEES 3,032.00 --------------- TOTAL DISBURSEMENTS 1,462,435.53 --------------- BALANCE IN GENERAL FUND 06/30/93 1,101,308.21 DISTRIBUTION OF NON-RESTRICTED FUNDS AT MONTH-END: PETTY CASH/CUSTOMER SERVICES OPERATING FUNDS 600.00 TRUCKEE RIVER BANK GENERAL FUND (71,248.82) LAIF GENERAL FUND (NOT RESTRICTED) 1,171,957.03 ---------------- 1,101,308.21 Board o, Directors Truckee Donner Public Utility DiSt OctJoseph R.Aguera John L. Gcrbe}q Business Office Engineering Services Richard K. Curran (916) 587-3896 (916) 587-3944 FAX (916) 587-5056 Jaynes A. Maass Patric{a S.Sutton General Manager Peter L. Holzmeister August 9, 1993 MEMORANDUM TO: Peter L. Holzmeister, General Manager FROM: Lary Chapman, Office Manager SUBJECT: Investment Report As of June 30, 1993 the District had the following investment comprised of the funds as detailed. INVESTMENTS YIELD AMOUNT LOCAL AGENCY INVESTMENT FUND 4.554% 7,463,118.56 ELECTIC FUNDS REA RESERVE * 19,000.00 GENERAL FUND 1,171,957.03 FACILITIES FEES-PRE AB1600 * 620,060.56 FACILITIES FEES-POST AB1600 * 326,864.27 STORM DAMAGE FUND * 190,959.51 BUILDING FUND * 847,085.31 --------------- TOTAL ELECTRIC INVESTMENTS 3,175,926.68 WATER FUNDS FACILITIES FEES-PRE AB1600 * 595,143.51 FACILITIES FEES-POST AB1600 * 290,470.77 BUILDING FUND * 745,784.28 RESERVE FOR FUTURE METERS * 725,593.96 TAHOE DONNER WATER SYSTEM FUND* 231,943.14 WEST RIVER ST. ASSESSMENT DISTRICT BOND REDEMPTION FUND * 16,958.05 PREPAID CONNECTION FEES * 66,789.29 TELEMETRY RESERVE * 52,731.10 TSA (SAD II IMPROVEMENT) 38,131.00 ACQUISITION FUND * 1,523,646.78 --------------- TOTAL WATER INVESTMENTS 4,287,191.88 --------------- TOTAL DISTRICT INVESTMENTS -7,463,118.56 * RESTRTCTED FOR SPECIFIC USE PER BOARD RESOLUTIONS Post office Box 309 11570 Donner Pass load ® Truckee, California 96160 ELECT s C BALANCE SHEET 4URRENT LAST AYE X Y-T-Dr AMOUNT Y-z-D AROUNT T S , 77,62b,g3 S 21 ,939e� a xi'T i t.7 TY �'LA�� RESTRICTED. FUNDS B II. INN LEASE FUNDS 408,612,9 2A4,144.�` P.°K LoyEE" DEFERRED CQXI"ENSAT ON- 1C � U�, s. 14 RE& RESERVE FUND 946,924,83 QF5,006.99 FACILITIES FEES � STAg R}} FUND q7,085.31 {{ 3 ING T'OfiAT- RESTRICTED FUNDS ' CURRENT ASSETS GENERAL FUNDS i,i i,3i i 1,244,1844,9E . ACCOUNTS RECEIVABLE, ET DUE FROM WATER 3? ATE I LS AND SUPP Iks ,Sc3.45 3 3� ,798 INTEREST I.�W—ERECEIVABLEa�,2�9aa�2 Sp� {�00.,? PREPAID EXPANSES AND OTTER lSr,� ,?9 1004,3 0V2b TOTAL- CURRENT ASSETS NAMuRT a %Z 1 D ' SUF COSTS 141,293.00 149,1 6,0 DEBT DISC At.� a ` , .2fi PRELIMINARY SURVEY COSTS AND; GTFEP ------------ TOTAL ASSETS ELECTHC' BALANCE SHEET FOR PERIOD ENDING ;aU E 30, 1993 CUR—R _, LAST YEAR Y--11-" A UNI Y-T-D A CU�14T --------------------------------------- RETAINED EAR I %S DEBT A� ItiTSTI�A�IdE OEErrE FTLO NC LEASE }} ^ + EA .kJ 6.0334.?4 IDAHU "arks - � � �ITE� LEASE 153,882.13 INE TRUCK UNIT 110 ------------ ------------ it?SAL DEBT CURRENT LIABILITIES ACCOUNTS! PAYABLE, 1,096,204.33 CONSUMER DEPOSITS 1-47,33 ,66 b4,94 .z2 ACCRUED a, �ERFST- PAYABLE DEFERRED STANDBY FEES 1H,869,62 ACCRUED CO PE SA IU & RELATED COSTS 11,0 362.3 6 --- TOTAL CURRENT LIABILITIES if ,711.E I,36,2S7e33 m; PIONSnHUCT ION A iV aVS ES r'LO Y E DEFERRED COMPENSATION TC A ,632.9 TOTAL EQUITY AND LI ILMES f \ gq TRUICKEE FOR PERIOD ND cNC t NE 30, 1993 CURRENT LAST YEAR 1'—`„_[1 AMOUNT - —v AROUNT OPERATING REVENUE RESIDENTIAL ARSE C ERCI L 254,2 4.8" ALES ,O PUBLIC AUTHORITIES 4; 1, 45, e9, 2 FUG CHARGE 27, 'la'9 I TERDEPAET E TAL 15a4.�5 . 2 TOTAL. ENERGY : K, 1 ,119. 9 3,54 ,33?.26 MIST, OPERATING REVENUE 5�,433.t�1 S�,G I,7y MISCELLANEOUS RENTS STANDBY REVENUE E2;525.e c3,9I��.0:�t INTERDEPARTMENTAL RENT TOTAL OPER T NC RMNUE 177,;i �.�� 3,? S,7S ,8p, OPERATING EXPENSES PURCHASED POWER ,9SSa��1,S7 2,7IG,id3,5x DISTRIBUTION OPERATIONS 376,741.59 249,fia4�.35 DISTRIBUTION MAINTENANCE 60,345.96 CUSTOMER ACCOUNTING & INFORMATION 89,345,44 AU I TSTRATION & GENERAL 494,2<=3.83 DEPRECIATION 1�4P,Y3�f=61v bf4:pV,�i 'el 80,902,66 OTHER O ERATIN EXPENSES 10,924,39 TOTAL OPERATING EXPENSES 4,273,766,64 3,836,804,02 -------------- -------------- DIET GPHRATTI G REVENUE :�,?19.?CCR t 8,04?,14CR OTHER REVENUE "EXPENSE) LOSS ON DTSPOSTTION OF PROPERTY .00 26C i45, 12 1 2, nUR i1TERESi EXPENSE 121, -------------- NET RED (LOSS" i 'RUCK E DONNER P,U.D, WATER BALA CIE SHETI FOR PERIOD ENDING JUNNE 40a 93 CURRENT LAST YEAR Y-z_D AMOUNT Y-. _ , A CUNT A E T 5 ------------ UTILITY PLANT 5,214,85-5<6 ,IS�_2 ` zE R STED FUNDS WATER SYSTEM 1MOROVENENT PROJECT CERTIFICATE PAYYEHT FUN ACQUISITION FUND1,52a,64 a2 CAPITALIZED ! TEPES- FUND 22. 3 691,030,00 FAC?UIT1E5 FEES 68u,6i4,2a 909,385,74 TR 'AD 1 IMPROVEMENT ACCT 3�a a3 .E,� 30,824,17 WEST RIVER STREET SSESSRENT DI'T 15, 58.Q5 16,14�,43 LD Pa 9D 745,784.28 71 " 1 .9 BUIRESERVE EoR FUTUREETERS 25,a9"s.9� 72�,4�2„� TAHOE DON14ER ;CATER SYSTEM FUND 231 943,114 pREFAIDI CONINEC,TiON EF S 66,789,29 m,595.77 TELEHET RY TOTAL RESTRICTED FUNDS 5,362,266.004 ,t i,5 ' .2 -` .7- CURRENT ASSETS GENERAL FUNDS WEST RIVER :STREET AS E SXEHT DIS' .H , 9 ACCOUNTSRECEIVABLE, SET I6�,�1'.�� 1�6, �`�.79 DUE T� ELECTRICi�8,°E1.i��C`R 56v,33 .v �uR ATEFT-IL AND SUPPLIE 112,4DU. 1 9s,107.60 INTEREST INCOME RECEIVABLE PREPAID EXPENSES ------------ ------------ '_'OTAL CURRENT ASSETS 226,4i3.56 140 047,4;CR PRELIMINARY SURVEY COSTS AND OTHER ACTa2D DEBT DISC AND 155HE EAST 46, 0?,57 454, C'0,45 ------------ ------------ OTAD ASSETS 15,250,842,3015,22 a43r.3`� p� i4 TEE BALAN E S EE:° FOR PERIOD ENDIMG JUINE 30, 1993 CURE `' LAST YEAR Y-'T-D AMOUNT Y-T-I' AKOUNT Q L• z a A B s i« 3,514,092-34 3,671,334,06 RETAIN ED EARNINGS DEB r WATER SYSTE IM RC P O EC'T LEASE 4 'a34 ,3irp1 , DWR PROP 55 110A 45 '�:1a2� UTILITYR C� UNIT 3 ------------ -------- TOTAL DEBT U RENT LIAETLITIE ACCOUNTS PAYABLE 45?,C329, 5 571,630,03 Culls"'THEE IEGITS 3I,5 1.fr 33>S a.T ACCRUED INTEREST PAYABLE DEFERRED STANDBY FEES CC �� ACCRUED CO PEAS TIC � ,Er.rsED COSTS s9, 5-6.5: _& __ _ -__-_______ TOTAL CURRENT LIAILITIE �5 51LiW5 -� Ia2I 3 15<7' ':: CONSTRUCTION ADVANCES 415y414.66 ------------ TOTAL E UITY AND LIA;IL TTES i5®250 F 4Lm 35 I5 e 236,t3�:3M b+ ' TR;CKEE DONNER F-U,D. ER INCOME STATEMENT FOP PERIOD EN I C ju1E q-0, i9 3 CURRENT LAST YEAR Y-T-D AMOUNT Y-T-D P Gu T OPERATING REVENUE 877,5?4.49 RESIDENTIAL COMMERCIAL 112,G33.92 I�QT�R� RARTE fiTA a 355,68 74,44 TOTAL WATER SALES 989,964,09 a P � 27,586.82 25,275.48 t1 s32 11 I C 10PERATING REVENUE3;23S. S7 . ISCELLA IEGUS RENTS 4i ,46 54.43 STANDBY RE E 1.`�9,�4G,00 16q,482,50 TOTAL OPERATING REVENUE 1,190,894,24 `)PERATINC ExVENSES PumpiNG _ P;o ER PURCHASED 209,112,44 31S 8484. DISTRIBUTION OPERATIONS274,5 . -O 165,303,19 10DISTRIBUTION MAINTENANCE 123,24 ,13 -7 ER ACCOUNTING & INFORMATION Ss,E1S.E� AD INETRATION & GENERAL 233,2C .�4 2;SBa?G. �e INTERDEPARTMENTAL RENT 54,074.00 59,41�.Cz PREC1 iC 155,2SC,48 149,893,98 OTHER OPERATING EXPENSE 30,953.7 12,1#1e48 DOTAL OPERATING EXPENSE 1,143,484,98 I,�3: ,Y15.4S NET OPERATING REVENUE 41,49.26 0-hER REVENUE (EXPENSE" iNTEREST iNCOME `µ3 P= 9,1 2I4, 0s 29 INTEREST EXPENSE 341X 8.06CR 34 ,E1 ,7ECR EYT AOR INAPY INCOa14E ,OC ,<G LOSS Ej DI SP SITION OF PRQPERTY � OG NET OVEN'UE (LOSS) 17i,279,02CRe 83,192-14CR TRUCKEE DONNER PUBLIC UTILITY DISTRICT: 1993 OPERATING BUDGET REPORT 1/93 - 6/93 50% ELECTRIC: WATER; TOTAL: REVENUES: Budget Actual Budget Bak % Budget Actual Budget Sal % Budget Actual -WY Tn Budget Bat % - - -------------- ------_. Residential sales 3,444 863 2,123 415 1,321 448 62% 1,828,200 958,710 869,490 52% 5,273,063 3,082,125 2,190,938 58% Commercial sales 2,670,736 1,416,152 1,254,584 53% 399,600 122,783 276,817 31% 3,070,336 1,538,936 1,531,400 50% Large commercial sales 613,721 269,074 344,647 44% 0 0 0 0% 613,721 269,074 344,647 44% Sakes to public authorities 82,865 44,561 38,304 54% 0 0 0 0% 82,865 44,561 38,304 54% Fuel charge 266,340 284,596 (18,256) 107% 0 0 0 0% 266,340 284,596 (18,256) 107% Interdepartmental sales 471,100 195,451 275,649 41% 810 356 454 44% 471,910 195,807 276,104 41% Misc operating revenue 107,215 58,433 48,782 55% 10,000 2,835 7,165 28% 117,215 61,268 55,947 52% Misc rents 46,199 21,896 24,303 47% 10,000 8,708 1,292 87% 56,199 30,604 25,595 54% Standby revenue 31,880 22,525 9,355 71% 338,000 159,720 178,280 47% 369,880 182,245 187,635 49% Interdepartmental rent 128,144 64,074 64,070 50% 0 0 q 0% 128,144 64,074 28,547 53% Fire protection fees 0 0 0 0% 61,000 32,453 28,547 53% 61,000 32,453 28---- ----- -------------------------------- ---------------5,785,------- -- f Total Operating Revenue 7,863,063 M 4,500,177 3,362,886 57% 2,647,610 1,285,565 1,362,045 49-A 10,510,673 S 785 742 4,724 931 55% Capitalized interest income 0 0 0 0% 413,015 404,675 8,340 98% 413,015 404,675 8,340 98% Interest income 96,341 33,608 62,733 357 2,500 0 2,500 0% 98,841 ---33,608--------65,233 34% --------------- Total Revenue 7,959,404=-----4,533,7853,425,619===57%--- =3,063,1251,690_240==---1,372,885--�55% 11,022,529__-- 6,224,025===_ 4,798_504_-r56% TRUCKEE DONNER PUBLIC UTILITY DISTRICT: 1993 OPERATING BUDGET SUMMARY 1/93 6/93 50% ELECTRIC: WATER: TOTAL: Budget Actual Budget Bat % Budget Actual Budget Bat % Budget Actual Budget Bat % -- ---- T ---------- ------------- --------- _. Revenues 7,959,404 --W- 4,533,785W _ - ___-n3,425,619 57% 3,063,125 1,690,240 1,372,885 55% 91,022,529 6,224,025 4,798,504 56% Less Expenses: Board of Directors 95,090 78,428 16,662 82% 31,460 32,714 21,254) 104% 126,550 131:666 05,945 56% General Manager 172,391 96,252 76,139 56% 64,220 35,414 28,806 55% 236,611 131,666 104,945 56% Administrative Services 545,895 279,017 266,878 S1% 299,701 144,031 155,670 48% 845,596 423,048 422,548 50% Planning Services 177,003 82,595 94,408 47% 75,857 37,984 37,873 50% 252,860 120,579 132,281 48% Technical Services 352,621 188252 164,369 53% 43,619 22,222 21,397 51% 396,240 210,474 185,766 53% Electric/Water Operations 798448 468:141 330,307 59% 1,448,296 638,820 809,470 40% 5,200,000 2,987,564 2,212,436 57% Purchased Power 5,200:000 2,987,564 2,212,436 57% 050% Interdepartmental rent 0 0 0 0% 128,144 30,607 56,503 37% 242,513 38,189 04,324 43% Debt service 355,403 207,582 147,821 58% 887,110 330---- ----------------- 1------ 3 -------------------------------- --- ------ - -i-___ Total Expenses 7,696,851 -----4,387,831 ----3,309,020 57% 2,978 407 1,305 868 1,672,539 44% 10,675,258 5,693,699 4,981,559 53% Net Revenue less Expenses =--262_553145,954_===---116_599__-56%====_ -=84_718 384_372=__--=(299,654)T454%_4==== 347_271=-_-== 530,326-==___(183,055)-153% i_ -sty--1-jq 15.2 FROM Pc€ ter' Simon Laua ��1f ices - maned I���. �,ir� 3 -476ya93 ,Tiaree 23, !993 IHE STATE OF CALIrORNTA Appl.icetioi a of Dal Oro Water � Company, Inc. , a California � CO peration,. (U 61 w) , to a ui_e ) all of the outstanding stack and � aasu ie Utility operations of Ap livation 2-05-041 nner Lako Utility Company and (Fii d May 20, 1 9 8 for John B. Williams, 111 to sell amended. Decem r 11, 1.99 ) all of the outstanding stock and � } reliOvOd of op�ratinq respon- sibilities for Donner Lake Utility � Company (U 84 W) . Statement tLf ractc art% ;ty C�v 'lho Donner i,ake Utility Company (Donner) , a California corporation, by Decision (0. ) 50545 issued Saplembor 14, 1954 in Application (A. ) 35585, was granted a certificate of public convenience and n aessity to operate a wat4pr systom it had installed at Donner Lake, Nevada County, adjacent to the City of Truckee, Cain fornia, With ea capital structure of 5o ,000 sbares and a par value per sharp of $1, Donner was authorized by Lhis decis lan to irsuc 114,000 shares to the Danner LakO DOVelopment Company in compensation for the i;r€stal,led facilities. Over the gears since 1948 the development Oompany had bcen furnishing water at no charade to area Users. Soon thereafter, by D.53159 issued May 28, 1956, D0= r ;was authorized a ystem extension to embrare the adjacent Weeks Tract also developed by the nonner Lake Developta&pt Company, and to issue up to 76,300 Zhares to the dev8ls pmont company In partial payment for seater facfiiiti+as tho development company had ,installed in the -tract, D,59860 ,issu"d Augqst 11, 1959 authOri20d an A65-09-1993 15:29 FROM Porter Simon Law O-Ffices TO 37505 P, A.92-05-041 1.T/,T.8w/3ft additional 6,318 sha'res to Pay for 'Qnd and facilitie$ acqujr�(j the Weeks Tract, AUthOrized issuancey notwi ..,,standing, .DOnnerrs common Stock Ultlr4atclY issUed Carne to a total Of 161,242.18 aharer,, Ian 1973, the development company was 1i W11lia" (JE Williams) , ma nager quidated ajid John Berna-rd Of the UtiUity and ali;o sacretary and general manager of thL- development ,,,,,P,,y just liquidated, became owner of all 161,242.18 shares .of Donner stock outztanding- By D-85077 issued October 28, 1975, JB wiliiama was autharized to take control of Donner. In 19821 C'tinqr advancing 49e and Llinggg, jB determined to transfer Donner to John BQxnard Willi Alas, 111 (Williams 111), and by V,82-U-070 i,;-gLjL-d Auguot IS, 1982 the transfer of 1 is Williams' 137,242 Meares arid rontrol of Donner was authorized. Today, willia= 1TT awns all 161,242. 18 cutstandii4g sharoe of Donner stock, TOdaY, beC=ae of increasing demands On hit; time requirgd to i dminister the opc%ration6 o� the system, and the complexity of Department Of Health Service or requireae.-Itt, as well as a dgsir� to dRvotQ more time to his family, KillidM* ITT desires to sell all hi S Donner stock, give up C011trol, and hC relieved of Dublic uti2lty fesPOnsibilitiOE, AccQrdinUly, in 1991 Will, -L&MN III ET-ntexad into an undated Agreement of Purcha-5w and S&je of Stock with Lhe rjP-1 Oro Water Company, Inc, (Doi Oro) fQT 2 trans for aiRd Conveyance of all Donner'c Outst4nding shares, r- �"10ro Del Oro, 0 Ca lifQlftia corporation, incurporated in july of 1963 and by D-69743 issued October 5, 1965, was author led to I The 14.9%, or 24,000 sha-rRS of Donnor COMmOn stock held in 1982 �y the then pxesiaent and qoperal MaUdger, Robert E. RUhberg, has since been acquired by Williams ill, 2 5-e75056 P.C14 P.125-09-19931 155.29 FROM Porter Simon Law -0 Offices I A.92-05-041 ALJ/,TBW/jft cOrStrUCt and operate a Public utility water oystem in an area to the north of Paradise i IL EutTle County, This initial Del Oro system was st7led as the paradise Pines DiStrict and today sorvos aPP=XiMately 4,500 connections,, A dozan miles to thR South another Del Oro district, Lime Saddle, adjacent to Lake oroville, serves approximatoly 350 resin dents.2 And 10 mIlQS north of Paradise, Del Oro's wholly ownod subsidiary, stexiijig Bluffs Corporation, servers 165 "atomers in Sterling City, pending b9forc tho Commiscian is Del OrWs A-91-06-037 filed to acquire the .150 connections of the Magalia County Wator District which 0Qj Oro curtentiy MdTlda es. magalia will he added as a separate Del ore di-strict.3 By D-93-03-014 issued march 10, 1993, 001 Oro was authorized to burz-ow up to $540,000 for the PUZp0se of constructing intertie and related facilitiao required tO connect Paradise Pines District faQilitiOg to an indep-e�ndont public ag@ney, the raradise irrigation District, in Order to whQQl surplus Sterling City water to Paradise Pines 1.0 alleviate an inadequate water supply condition. 2 Lime Saddle District was dcqulued in 1990 fQr $1 (Re Del Oro Nater Inc. (1990) 37 CPUC2d SI) o Del Dro assumed the debts and 1 abilitle5 totaling $338,090 of Lime Saddle Community Service District as well as the distri.uts assets (Orig!"al Cost $67B,347 less accumulated depreciatioa of $91,365 plus $120,OQO cash and receivables) . On asa=ptjon & rate bage was established deducting cash and receivablap froz debt t,u produce $218!T98. The differelice between not book and the adopted rate hasc- was booked a.3 an acquisition adJu5tklent tO be reduced annually over life of the plant. At ye -end 1991 the district had total debt ot $480,782 and currQnt asSots of $890,893 3 1rhe Magalia tiosa agr0--mant provides fog- Del aria to pay the county water'district $20,000:: for all assatl; with a stated booy, value of 168,030. Del Oro would assume no district lidbilitios or receivables f but would auqiiire $10,000. 3 Ll -15!ZO FROrl Porter Simon Law Of-F ices �0 A-92-05-041 AL,7/JBW/Jft Thp experience Of Del C>rO'E management and teohnical staff ggined in managing and operating these diverse facjjjt,e$' 85 well as utility plants under op crating (:rant 'acts, would indiCate that Del Oro has the technical ability to successfully operat*-- DOnnar. Th2ARRIA—ICA-"o On may 20, 1992, Del QX0 and williamz III filed the CaPtiOned application, which aPpIiCation includes as Attachment 'A" the Agreement of Purchase and Sale (if Stock. By the appjiC'at,Qn the parties seek an ex Parts order froAl the COMMizaion, pursuant Public Utilities fPu) code 4 Sn4, authorizing Del Oro to acquire and wilijams ',I tO 5011 all Outstanding Duiinar stock, 8PProval of the Agreement Of Purchase alld Sala Of Stock, and that Willialbs T11 bo relieved of thQ public utility operating responsibilities associated with Donner, By the application Del Oro agroes to adopt t-h,-- present Donner rates on file with the 4 commisslon: Donner's customers: Were' duly Wtifi,-d of the PrOPOCed Odle. No p--Qtcct lettP.rs mere received- HowQvc--, at a :duly nOticod public weeting held Octobpr. 7, 1992, and ai.-t ended by dpprQXiillitely 15 individuals, concerns were exVrQ924�d regarding certain sYstr--111 deflcicncioa and about a Possible rate increase, bUL nf) Opposition to the transfer wap volc--ed. nci Salmi—eGmetit This agreament, part of the aPPlic0tiull, Provides that Del OXQ 'will pay a purchase price of $667,000 for the Donner stock. This includos a $250,000 ca-ill down Payment. The $417,000 balance iS to be financed by the seller ulidpr R promig$ory nj:jte Years beating interest at 10% Por annum. The MOnthlY InBLaIlTnentS 4 Donner's present rates WOre authorized by Resolutj'oil W-3435 dated March 22, 1989. In 1591 Donner's net operating revenues, before service on pIL--existing long--term debt, Produced $12,097- 4 5875056 F CIE, FROM Forter Simon Laiii Offices TO V92-05-041 ArW/jaw/ift Would he $5,51o,69. DQnn"s Co on stock sh4res Would be pl�rIged an the secun'ty- The Mlica"Pa, SUPPOrted by the Schedule A Baia co Sheet of Donner's 1991 Annual Report, SM forth the ozigloal plant coot to be $984,091, with related daprnciation rMerve of $403,500, 40 of Decemher 31, 1991, This would in<iicate a net book value of $58o,$9j, and infer that w1iji,MS III wrUld chtatn a gait on tale of $86,409 trom the transaction ($667,000 On December 11, 1992, Del Oro filed an ameadment to the captioned applioation, making a supplemental request for Commiss,on authorizatign for the utLlity t, ohtain the $250,000 cash dow Wn payment by borrowing that sum jgom the Safor Cozporatjon, a California corporation. The president W principal shareholder oaf Be' Oro' Ro"t S. Fortino, is a'1SO Me MajOrity shareholder of Safor. The loan would be for a term of 15 y0aro and be repayable in equal SaMi-ann;,al insUallments with interpst at the Prevailiag annual prime rate plus 111 with a M Of 91 Pet aaaum- the intOXgst rate would be dotermi4ed applicable to each year on January 1 of Ouch year. The leap would be unsecured and Del Orr? would havR the right to prepay aRY Portion without penaity.6 :0 5 However' as the result Of MuStMOntS to current liabilitica derived from information furnish staff by data requosts responses, staff and Del Qro ZubsequRntly adopted a net book value of $456,100 as 01 Decambov 31, 091. Accordingly, M difference batween the sale pMica Of $567,000 anJ this $456,100 adopted :eat bank value indicates that We gain on sale far Williams would be $210,900 rather than than $86,409 iadicated by the application or the $231,000 stated in the staff report. in YOSPense to the requasL Of Our Advisory and Cam'Jjapce nivisiOn Staff, Del Oro unsuccesetully tried to obtain this financing elsewhere an more favorable rates. -gq-tqq:� 15=31L FROM Porter Simon Law Offices T. 58750576 FD systew Rae °raf nrr3 The Donner system serves 1,16V abtive conn&utions as of Doc ttbef 31, 1991, including 1,119 flat rate single-family residenciaz and44 meteredas com=. cial and ultiple hoxAsin. ae, its. There: are 24 fire hydranta. Six parcels of jdiid site the sources of supply and storago facilities, These include the Foltz Tract well constructed. in 1985, aZ artesian f 1 uw from Green point Springs, and. the Donner Lake p mpi4g plant, as Drell az six storage tanks (two 30,000-gailon cads of wood, two 50,000-gallon each 02, wood, a new (1985) 83,004-gallon welded steel tank, and a 210,000- gallon deteriorated ateei tank with plan t,ic liner) , The di8tr.r.ibut.$on system totals 83,682 fOet of mains ranging in size -up to 8-inch. diameter. While much of this pipe i3 also of small s=di=*ter, essertedly it still, provides genQrally an adequatf, floss and pressure for domestic needs of the larg .ty seazona,i residences. Donner holds water rights gr4nted i,n 1963 to divert 1,500 ejallon;3 daily from four 6prings, and also has reserved water j;jgjjtr, at D nrim)-T Lakc suf icient to servo 21 200-2,500 cntstomers, t Upon roco-lpt of the applicatinn, the Meter Titilit,ies Branch of the Commizslun Advizory and Compliance Division i investigated the proposed transfer, and can April 23, 1993, following a number of data requests made to the applicants, issuQd its rQport. The report r:uncludes that the transfer appears to .be in the bkast interOuts Of DORfier N,9 eustomors, a.nd t 1tat these customers Rio not opposo a transfer although they are conubFrn�d about noeded improvements. Staff notes that while Doi Ciro's financial st_.atl9mOnts indicate nF%Jati.VG preferred stock, that stock l.s actually treasury stock. In dd ditian, there is long-term debt of $567,800, but that this is offset by cash and spacial, accounts totaling $765,907, and that sahi.l�_-! Biel Circa incurred net losses frcm April. 1, 1991 thruiigh march 31, 1992, this was the result of rationinq and c:onservatiun programs necessitated by the drought P au � � -09-1993 15:31 FROM Porter Simor, Law Offices TO 5375056 02 A-92-15-041 ALO/JBW/jft conditions then prevailing. ' Uej Oro's last Uen=al rate case zasulted in an authorized aannal zavonuo increasR of $61fl7j or SAS (0.9100012) . Tho additional cost of acquiXing Danner will intrease Del Oro's long-tOrM debt, but Pxcept for the difference in pqrchaso pr1co and book value of oonner, the Del oro,s long-term debt will be offset by the acquirad assets of Donner. Staff further notea that there curronily are no competing utilities that wre Ant erested in serving the Dpnner territory - J-0roIg April 9. 1993 Clarifluatlop Lettv Del Ono Indicated its zatisfaction with the thoroughness and accuracy of btaff's report, but wished to clarity that Danne_r unuld be acquired, n, as a DW Oro diStrict, but rather as a yj4olly 2WatLdJubs,idiary of Del Qrc, Del Oro further KLends to addrese Donner repaLrs and undersized mains which, although not posing an immediate threat to hyalth or safety, indicate teed for a long-range plan in a gennrql rate cdsp to be instituted after the transfor io co4iauffmLdted. The essence of PU Code SS 851, 852, and 854, as relevant to thic proceeding, is that no pablic utility Should tell its system, nor wha4ld any public wility purchase or acquire any part of the capital stock apt any other public utility, nor shnuld any corporation directly or indirectly acquire control of any California public utility without, in each KsLance, first securing authorization V do so from this Commission, 7 Del Oro states that from Ap;Q 1, IS91 through March 32 , 1992 it incurred not losses from a combination of "lost revenues, extZa costs, and rwduced PoWar coasts" totaling $115,667. At the same time it collactcd $101,754 in pepalty surchargas relatad to conservation programs- it at-ks that 01w full amount of the penalty surcharge balancing account he released to offset all but tho romaining $13,873 of thosa conservation ousts, and that thK unoffspt balancQ remain in the conservation Memorandum account. 7 4 CeS TO SS75056 P,019 Alulr�-09-199-3 '15:32 FROM Porter Simon Law AM-05-041 ALJ/JBW/Jft As Williams TTI, thQ B01c Owner of Donner, propose$ to sell all the stock of Donner (and thus the system) to Del ()ro, and Del Oro Proposes to purchaso and acquire all the oatatandirig caPital StOCk Of Donner, and that each 8aquibition will give Del OrO direct control Overt Danngt, Prior authorization of this Commianion is necessary pursudnL to the provisions of all three coda Zections. ThO tuncticA of the COMmIssion in deterffUning wtether or not to authorize such tranafinrs is to Protoct, and aafeVuard the interests of the pub.IJC, Our conCe'rrl JLS to prevent impal-nizent of the piabllc service by the transfer of uti] Lty property and functiOns intO the hands of partiL55 incapable of performing an adequate servicp at reasonable 'Tat-.es or upon terms 'Which would bring about the same undoeirabie result. (go. Cal (1919) 1 CRC 5201 , We wani. to be assured that. the p1jrChaser is financially capable of the acquit!-tton and of sat3.sfact,t3ry operation thereafter. LoOking to the auquisition proposed by thQ present aWicatiall, we do not see how fle1 Oro can, based all a Lonner c�njy CaSh. flow analysis, handle the debt service that will rast,lt from the acquisition as proposed. Even with aPfllication of depreciation funds to debt service, without a vary oubstdntlai rato increase, one far beyond the 14% inercame Del Orr indicated it will t,mmgdiauiiy seek after acquisition, there would not be sufficia,11. income to meet debt service. And COnsidering that Donner wiIi- roquire as entirely separate rate 11turGaso Or surcharge t-n cover improvement, needed LU alleviate pipe free-zing problcms' low pressure In the Weeks Tract, tindersized mains serving the west shore, and inthe-T deficiencies, it is unlikely that the Duriner ratepayers can be asked to Un4erwrite this acquisition. The Donner applicatiun, attar tho December 11, 1992 amendment to the application, effectively makes the acquisition a fully leveraged proposition, with 100% bor-uawt-d funds, The 7�0 57 9 7 5 0'5 6 P, 1`0 15;7-2 FROM Porter Simon Laiu Of ices, A-92-05-041 ALJ/JBW/Jft $250,000 cash down payment is to be borrowed by Del Oro from Safor at prime plus 1% (with a 9% cap On an unsecured 15-year note) . Application of the present 6% prime rate plus 1% to the loan indicates an approximate $27100P principal and interest payment the first year. The ,$417tOOO balance of the purchase price is to be seller-financed with monthly payments of $5,51U -069, or $66 , 000 annually for 10 years . Thaws, Del Oro would be facing a total debt service of $93,000 ($27,000 + $66, 000) the first year alone for the Donner acquisition. Analysis of Donner's financial data furnished for recent years and looking prospectively ahead indicates that funds to service this $667,000 acquisition debt cannot be generated from the Donner operation. LOOking to recent history, Donner's 1991 annual report income statement shows income from operations of $12, 092� But from this Donner had to meet the debt service on its already existing long-term debt which, after other minor interest adjustments resulted in a net income to the owners of only $893 unless one diverts the depreciation expense of $25,590. The 1992 results are not better. Del Oro submitted oa January 13, 1993, in response to a data request, an estimated 1992 income statement which showed opprating income of $16,400 before debt service on Donner' s long-term debt balance of $113,357 which reduced net inCOMe to $5,800 . Again, there is a depreciation reserve which could be diverted in the amount of $24 , 700 . Del Oro also submitted a pro forma income statement for Donner for year 1993 . Certain items in its statement cannot be used as indicated because they represent unauthorized deviations from the basis provided in Resolution W-3435. Even allowing for passage of time and varied circumstances , the variations are substantial and would require testing and justification before use. For example, the income statement folds in a $41,300 increase in revenue above that authorized in Resolution W-3435. This 9 . ..................... DtD P. ii .0 15: FRON Porter Simon Law Of A-92-05-041 ALJ/JBW/Jft represents a 14% rate increase for operational purposes . Some incr.ease may be merited, but until these expense projections are tested and adopted in a rate proceeding, we cannot Include such an increase as a "given" in an income statement.8 Therefore, we will adjust the revenues figure back to the last authorized amount. 8 We are concerned about this' inclusion. The staff report noted that Del Oro would adopt the current Donner rate schedule (authorized by Resolution W-3435 issued in mid-1989 ) but would file a general rate increase in the near future to handle anticipated system u2graftes. The report on the October 7, 1992 info=al public meeting in Truckee contains the following statements: "Concerning the question on rate increases it was pointed out that this application had nothing to do with rate increases . If Fortino bought the company, he also bought the existing rate structure. should he desire to increase the rates, it would require a separate application for a rate increase and another Commission investigation, complete with additional public meetings. it has been over four years since MUCIs last GRCf so the company is eligible to file again. Mr. Fortino stated that he had no immediate plans for a rate increase, but it might become necessary sometime in the future in order to make all of the system upgrades that were required. �All of the customers appeared to be satisfied with the explanations given and were even resigned to the fact that rates might have to go up at some future date, but were satisfied that this specific application would not include an immediate rate increase. There appeared to be no apparent objection to the proposed transfer of ownership. " But Fortino's April 9, 1993 letter to Administrative Law Judge Weiss states that "upon transfer a general rate case will be instituted. . . " and *in all probability the general rate case will Rgecede the improvements due to the research required of the system. " (Emphasis added. ) A general increase for income purposes of 14%# plus a separate increase for system upgrades is not what the customers were led to expect. 10 ..................... 15:3:3 FROM Porter Simon Law OFfices TO 55675056 P. 12 A,92-05-041 ALJ/JBW/jft The SeCond major exception jS Del Oro's inflation of the operations 9 salary (labor) fig-are of $25, 400 from Resolution W-3435 to $64,000 For the purposes of this application, we will adopt the resolution base of $25f400, adJ71stad UPward each four intervening years by 4% per year to approximate $30,000 in 1993, and use this amount. Del Oro also substituted a 'management fee of $48,000 to replace the $67, 400 currently allowed williams and his wife for their managerial and office service salaries . We use Del Oro,s figure, and a otherwise: use Del Oro I s pro forraa figures to arrive at the following adjusted pro forma income statement for year 1993: 9 In Resolution W-3435 issued March 22 , 1989 authorizing Donner's last rate increase, the Commission adopted as reasonable Donner's proposed labor costs of $25,400 and Office salaries of $14,000, but reduced Donner's management salaries from $49, 000 to $40,000, for a combined labor and salaries total of $79 ,400. in response to staff requests, Del Oro submitted Donner's estimated 1992 and pro forma 1993 income statements . Both indicate operatidns salaries (labor) costs at $64, 000. The eight-month 1992 statement of operations, general and administrative salaries, annualized, reflects management and office salaries to be $67 , 400, while an accompanying note states that $67,400 in salaries and benefits paid to the Williams is to be eliminated by the acquisition, and be replaced by a $48,000 annual !'management fee- to be paid to Del Oro for administrative services Del Oro will provide Donner. -09-1995 15. 4 FROM Porter Simon Lau. Officez� A.92-05-041 J/JB /Jft RQMW !AM_KtA1;UtY gmwm Pro Del Oro' fur � Esti ate Service Revenues $334, 300 $293,,000 Costs of Operations Utilities 42,400 42,40 Chemicals . 3, 100 3, 100 Salaries 64 ,400 30,0 0 Materials and supplies 11,200 11,200 Contract services 1,600 1,600 Lab fees 1,300 1,300 Vehicle expense 11, 100 11, 10 Repairs and maintenance 8, soo Regulatory expense 6 ,400 6 ,400 Other 7 0 �7 Total costs of operations � 151,000 1 _ �60 General and Administrative 183, 00 176,400 Benefits 700 700 Telephone 41400 4 ,400 sup lies 3, 900 3g900 Utilities 2 ,700 2,7 0 Professional services 61800 6,800 Miscellaneous 3,800 3,800 Depreciation 24 ,700 24, 7OO Taxes 19, 6OO 19,600 Insurance 11, 000 11,00 Management fee 49, ()00 8,000 Net profit before income taxes and debt service 57 , 700 50,800 Income tax expense 14,.40Q 12,70 NET PROFIT BEFORE DEBT SERVICE $ 43,300 38, 100 But there is still debt service an Dormer's pre-existing long-term debt which will reduce the projected 1993 net operating income b approximate. $100000 to produce a net income of $2 ,100, This could, be augmented for acquisition debt service purposes by taking -- ices '. a°3J 1 5'-74 FROM Porter 'Simon 11-aw L+t A. 9 - 5-04 J/JBW/ t the $24,700 depreciation, thin obtaining $52,800 . But the "consultant agreement" incorporated in the purchase contract further provides for a first year IMP sum consultant payment to Williams III of $ 0,000, plus Out-of-pocket travel, meals, and lodging expenses . This mandatory payment further reduces the funds available for acquisition debt service to $32, 00. Finally, Del Oro, in a cash flow analysis provided as part of a data request response, proposes to make the $4 ,000 management fee Del Ore will charge Donner, if the acquisition is authorized, available for meeting acquisition n debt payments. Theoretically, about two-thirds of this cold be used, but at least $1 ,000 still would be required to pay for office services that still would be needed to service Donner. As recently as Resolution W-3435 in 1989, Donner substantiated a need for $14,000 for office salaries. Certainly, this need will continue under ill Ciro, and their coats, presently included in the $67,000 administrative salaries to be eliminated in the acquisition, will thereafter have to be provided out of the $48,000 "management feel, to Del tiro, reducing the net from this management fee to an approximate $34 ,O00. Adding this $34,000 to the $32,800 previously determined produces an approximate $66,800 against the $93,000 needed, to service the Donner acquisition debt. We also question whether are such diversion would not seriously affect the Del Drys cash flow to meet contingencies. And should not the Paradise Pine's administrative salaries expense item be reduced by uncompensated diversion of managerial services to Danner if the management fee is diverted to the -Donner acquisition debt service rather than serve as additional income? The conclusion that we must reach is that Del ozo cannot from Donner alone expect to generate the approximate $93,000 that would be required the first year to finance the $667,000 acquisition debt, muQh less the monies that would be required in subsequent years. Nor should the Bonner ratepayers be expected to 13 ,15 AUEf'o9-1.99Z,i 15:325 FROM Porter Simon Law Offices TO 56i,.0', 6 P. �92- 5-041 J/JBW/ ft incur significantly higher rate, as would be necessary to bridge the deficiency, to provide rye . Pro with the monies A anal rate increase for Donner may be in order as the last increase was authorized by Resolution W-3435 in March of 1989, but there are cost items in Donner's August 31, 1992 statement of operations that require close testing. in particular, there are labor and salary items totaling $85,8 1 which accounted .for 43 of revenues , seemingly disproportionate for a water utility with only 1, 200 customers and little growth. And by year-end 1992 the estimated .income statement shoe; the operations (labor) component having grown from $42,961 in August to $64f4OO in December, plus a proposed $48rOOO management fee to replace the general and administrative year-end salaries of $670 400 up from $42, 900 in August) . Management and labor expense of $112,4 0 ($6 4 ,4 0 0 plus $ ,000) for a. utility with revenues of $293,000 is open to very serious questions . Del Oro proposes to acquire Donner as a separate wholly owned corporation; This raises the question whether any proprietary net income from Del :Oro's major utility districts could be used to bridge the gap between what might be derived, from Donner and the acquisition debt service, requirements? From the financial data furnished by the application on the Del Oro's Paradise Fines and. Lire Saddle Districts, this appears questionable, quite apart from the fact that it would leave Del Oro strapped for cash to meet even minor emergencies. For example, whale D- 91.--08-012 issued August 9, 1991 estimated. that with. the 8. 6% increase granted therein, the Paradise Pines District could develop net revenues of $80,950, the .income statement submitted with the application for 1991 sets forth very different results . The later shows a net lose of $25€ 152 instead of a net gain. And after adjustments including interest 14 15:35 FROM Porter Simon Law Of+ices TO 5IE7505G, , .16 92- 95-041. ALL/JBw ft expense can pre-existing net debt of $567,800, 10 the net lass increases to $58, 069 by 1991. While Del Oro states that between April 1 , 1991 and March 31., 1992 it .incurred net losses from a combination of "lost revenue, extra costs, and reduced power costs" totaling $115,000, and to partially offset this seeks release of $101, 793 held in a conservation penalties balancing account, we believe based on a cursory review of these expense items that any such offset must receive close scrutiny. we note that while 1991 revenues were indeed down. $67, 500, and "conservation casts" of $24,600 are asserted., :and purchased power was down by $35, 000, certa.iri operating costs are also asserted to exceed Da91.--08-01.2 estimates by substantial amounts. These include contract labor, transportation, office supplies, and employee labor. These require justification before being accepted for offset. Accordingly, while offset right be acceptable for $92, 100 representing lower revenues and conservation coasts, this amount must also be reduced by $35, 000 for the lower power costs, 'thus, for 1991- only $57 , 100 should here be considered out of the balancing account. And this $57 , 100 would merely serve pro forma ,in our consideration to erase th6 $58,069 net loss reported on the 1991 net income statement included in the application. 0 The Paradise Pines balance sheet of December 31, 1991 shows long-term debt of $765,907 with ielation to Sterling Bluffs, Service Center, Meter Reading Hardware, and Well. #8 . Purportedly, this is offset by cash and current assets of $765, 907 . These assets are composed of "cash in bank" of $230,491 plays a Ocash reserve" of $535, .175, But this cash reserve is also reflected in other liabilities as a "contingency reserve for operating expenses, " 1n response to a. data request, the $535, 175 was identified as money - money Merely being held by Del Ciro but actually belonging to Safor Corposratioln� and as being money to be transferred back to Bafor at the end of the calendar year . 15 - ALU-4-03-19-97 15.'36 FROM Porter Simon Law Off iQes TO 5375,1056 P. I-? A. 92-05-041 AW/JBW/Jft Paradise Pines District is also completing construction of an intertie facility esti-mdted tO cost $540, 000 with first ear's interest and principal payments plus the incremental income tax involved to be an estimated: $78, 290 . The construction cos- money was obtained by a bank loan. D-93-03-014 issued March 10, 1993 authorized imposition of a $1. 45 per month surcharge on ail 4, 500 connections in the district to pay all the costs of the intertie facility; the surcharge to initiate through advice letter proceedings to be commenced upon completion of the intertie facility. While completion of this intertie, anticipated for 1993, would normally see the cost eligible to be added to rate base and qualify for possible rate adjustmerits to reflect the additional capital investment, under the unusual circumstance present were of the ratepayers being immediately surcharged directly to meet the monthly loan payments, there arises the question of the propriety of Del Oro receiving a return on what essentially is ratepayer- contributed property, property for which Del Oro makes no capital outlay. The Commission has held thatratepayers should not be made to pay a return upon plant for which they themselves are furnishing the capital (Ferman T11. Co. (1921) 20 CRRC 518) , Until this issue is examined and resolved in a Proceeding that will follow the advice letter filing upon intertie completion, we cannot see that Del Oro can rely upon additional net return to be derived from the intertie project. The Lime Saddle District of Del Oro was acquired as authorized by D.90-07-036 in 1990 , The Lime Saddle income statement. for - 1991 included in the Del tiro-Donner application shows that the district had a $4 ,414 loss . On October 6, 1992, Del Oro filed Advice Letter 60 seeking a 22% increase on Lime Saddle's rates. The filing shows that fox 1992 Lime Saddle incurred a $10,186 loss . The increase it seeks could provide a $BP960 net Income. . . ..................... . -0 -19SE IL�9 15:E FROM Porter Simon Law Ofti � TO 87505 it A- 92- 5= 3 /jBw/ ft Accordingly, it is clear that Paradise pines and Lime Saddle Districts do not produce sufficient net income .to pour over to bridge funding the $93,000 interest and principal payments that would be required for the Donner acquisition. There remains the depreciation that accrues on the Paradise Pines and Lime Saddle District operations. For regulated public utilities the annual depreciation expense represents the aunt of the owner's investment in plant currently in service that has been recovered from ratepayers. This annual depreciation expense amount is deducted from rate base so that, unless replaced by new investment or replacement of depreciated plant., the rate base declines by the amount of the depreciation expense, providing less return for the owners on their investment. Early on, the Commission noted that lack of provision for the replacement of depreciating utility plant is an unsound policy (Wine s TLI. Tel-, Co. ( 1921) 21 CRRC 59 ) ; and while PU Code S 795 provides that the Commission may require any or all public utilities to establish an adequate depreciation reserve account, the Commission as a general rule does not do so. Annual depreciation accruals are methods by which the utility recovers ,its investment, and they belong to the utility, not to the ratepayers (Gen. .._-Zpl4 Co., 1961 58 CPUC Sfl l) . Paradise Pines District accrued $73,421, and Lime Saddle District $7,797 in 1991r althoug4 both accruals were subject to the availability of net income to support them. Reliance on these last reservoirs would leave Del Oro utterly strapped for cash to meet replacement requirements as plant depreciates and for emergencies in Resolution W-3285 issued October 17, 1985, the Commission provided: "WHEREAS; The Commission finds that Class D water companies are often sold at prices substantially in excess of depreciated historical. cast due to investor speculation. When an owner cannot realize; a profit through rates on the investmen # this often results in M 1 15:757 FROM Porter Simon Offices TO F. 113 A- 2-05-Q ALJ/,TBW/ ft deteriorating manageme. nt of the system which affects ratepayers . For this reason, the Commission does not intend to approvewater company sales at pries substantially above depreciated historical cast unless reasonable evidence is provided to Justify the premium price. The affirmative burden of providing this evidence is on parties to the transaction. If the Commission is not assured of the financial soundness of the proposed sale, the sale will not be approved, without prejudice. "The Commission also no longer intends to approve a sale involving the buyer's issuance of debt which places the company in a highly leveraged position. " As proposed, the Danner acquisition by Del Oro clearly would be unacceptable under the provisions of Resolution W-3285 . While Danner techn.i.cally is a Class C company, in size and operations, it is very much like a Glass D company and the Commission policy underlying Resolution W-3285 should apply to the transfer. The disproportionate high price/book value ( 67 f 000/$456,l00) sale price, the completely leveraged purchase propoeitioa,, and the necessity for Del Oro to dredge every financial coffer to try to make acquisition debt payments cannot bode well for the ratepayers of Danner, Paradise pines, or Lime Saddle. As stated earlier, our function is to prevent impairment of the public service of the transfer of utility property and functions to the hands of a party incapable of performing an adequate service at reasonable rates or upon terms which would bring about the saute undesirable result (supra Q. Cal. �o to n 'Water Co. ) . We intend to avoid authorizing sales which would require buyers to plow a substantial, amount of net revenues into debt service rather than into maintenance and capital expenditures for the system. in proposed acquisitions where substantial premiums over book value are .included, the burden is upon the applicants to provide convincing evidence that there are good ono is .reasons for the premium, that adequate working capital �EJo=:•— �—i'�`�:; 5:,a r FROM Porter Simon tea.€.0 Offices TO remains, and that ratepayers will not be looked to underwrite the acquisition by higher rate We find that the applicants have not met their burden, and conclude that the proposed sale of Donner stock to Del Cro involving the proposed premium is not in the best Interests of either utility's ratepayers. Accordingly, we will deny the application, but without prejudice should applicants decide to reconsider the premium or demonstrate clearly that they have the financial ability to serve the acquisition debt used to purchase the company's stock, indings of Fact 14 Both, Del Oro and Donner are California water public utilities within the jurisdiction of this Commission. 2. All outstanding shares of Donner,s common stock are presently owned by Williams III who desires to sell his stock, give cep control over Donner, and be relieved of all public utility obligations associated with Donner. 3. Del Oro and Williams III have made a stock purchase and sale agreement whereby for a purchase price of $667,000 Del Oro would acquire all Williams III stuck in Donner and take over control and operation of Donner. 4, The $667 ,000 purchase is based upon a $25 ,000 cash down payment with the $417,000 balance to be seller-financed on a 1 -year_ promissory note with the Donner stock as security, at. 10% annual. interest. . A December 11., 1992 amendment to the application provides that Del Oro mould borrow the $250,000 cash down payment funds from Sa or Coizporation, a California corporate entity principally owned by Fortino, who is also president and principal shareholder of Del Oro,? on an unsecured 15-year mote at variable interest but not to exceed 9 per year. 6. The $667,000 purchase price is $210,900 in excess of the net book value of $456, 100 of Donner. 7. While the Commission may lack jurisdiction to determine the sale price of a utility, to prevent impairment of service or - 1 - FROM Porter SIrRon Law 0�,Pices TO 375 A,92-05-041 ALJ/,LBW/Jft skyrocketing rates which could result from speculative or marginal purchase financing, it does look carefully at amounts over net book value proposed to be paid before the Commission aPPrOves sales which are heavily leveraged. B. At an October 7 , 1992 public meeting, ratepayers were told that Del Oro after acquisition would initially continue Donner,s rates, but that a rate increase would subsequently be necessary to pay for necessary repairs to the system. 9 . The first year cost to Del Oro on the 10-year $250,000 note to Safer would be an approximate $27,000, while the annual cost of 15 years of the $417 ,000 note on the balance of the purchase price would be $66 , 000 , for an initial year total cost of $93oOOG . 10 . Data submitted In the application and responses to data requests, after adjustments Including debt service on the pre- existing Donner's long-term debt, show net income of only $893 and $5,800 for 1991 and 1992; respectively, which could possibly imprudently be augmented by $25 ,590 and $24,700 if depreciation accruals are addedr to produce $25,483 and $30,500 net returns, respectively, for these years for Donner. 11. Don ner's last rate increaseo authorized in mid-1989 by Resolution W-3435, provides benchmark departure points for revenues and cost projections. 12. The pro forma 1993 Donner income statement provided by Del Oro, adjusted to delete an assumed 14% or $41,300 rate increase, and to reflect more realistic projection of operations labor salaries from those in Resolution W-3435, as well as other adjustuients including service on the pre-existing long-term debt, indicates net ,income of $28,100 which again could be augmented by the depreciation accrual to produce net return of $a52,800. After deduction of the first year's $20,000 "consultant's fee" due Williams 111, this could leave an approximate $32,800 attributable to Donner available. 20 a _ � 1 ,73 FROM Porter 'S)'mon Law Of-ices TO 56.5 .2 _,�� 13. were $33,000 of the $48,000 '"management fee" Del Ora proposes to charge to Donner (tie $15,000 balance being needed for office salaries) also to be diverted, a total of approximately 6 :800 could be available from Donner sources to Del Oro to meet the initaal. year $93,000 acquisition debt. 4 . Certain 1991 Paradise Pines income statement expense items, including contract and employee labor, transportation, and office supplies, appear very disproportionate and require testing and justification before they could be accepted to offset and release the conservation penalties balancing account, so that the amount that could be released without issue merely would offset the net income loss incurred after ,interest on pre-existing debt 15. Pending resolution of the status of the ratepayer- financed intertie project in rate base in subsequent proceedings, Del Oro can anticipate no additional net return from, that source to be made available for use in the Donner acquisition funding. 1.6 . Lime Saddle District's 1991 income statement, as well as its contemporary October 6, 1992 advice letter filing ;date for 1992, bath indicate net losses, 17 . Lime Saddle's 22% rate relief requested by the October 1992 advice letter filing projects approximate $9,000 net income, 18. While recourse by Del. Oro to the annual depreciation expense accruals for its Paradise Pines and Lime Saddle Districts, subject to the production of sufficient net income to produce cash, could provide sufficient funds to enable Del. Oro to .bridge the Donner acquisition funding gap, such, recourse would leave Del Oro without cash reserves to meet depreciating plant or emergencies, and would put ratepayers at risk for higher rates or surcharges to meet these requirements or developments, 19 . The income generated by Downer and Del Oro's Paradise Panes and Lime Saddle Districts combined is not sufficient to pay off the $667 ,000 Donner acquisition oasts, maintain operations and vlabil.i.ty of Donner and Del Oro's two districts, and provide 15:39 FROM Porter Simon Lau. O-ff ices TO 7505 A. 2— — 41^ J , EW jft 1 Oro with a return on investment and compensation for services rendered. 20. The transfer of Danner stock to D01 Ciro at the proposed sale price is adverse to the public interest only because the excess over book value proposed to be paid cannot be absorbed by Del Oro without exposing the ratepayers of both utilities to the strong prospect of unreasonable financial, impacts. 21. The applicants have failed to meet their burden of providing convincing evidence that there are; goad economic reasons for any premiumt that adequate working capital would remain after an acquisition, and that the ratepayers would not be at risk to underwrite the acquisition through higher rates. 1 . The Donner operation alone cannot generate sufficient funds, even by recourse to depreciation accruals, to meet the annual acquisition debt service required under the proposed sale without recourse to substantial rate increases . 2. At least at present, Gael Arta cannot rely upon its Paradise Pines and Lime Saddle Districts to provide not returns which could be used to supplement DDonner returns to ena.bLe Del Oro to meet.. the Donner acquisition debt service required under the proposed ' sa e, without .recourse to rate increases . 3 . The proposed sale of Ponner stock to Dsl egos is adverse to the public interest as a result of the premium proposed over net book value. 4 . The proposed sale and transfer of Donner stock should be denied without prejudice. 22 '15:39 FROM Porter Simon Law Officer To A- 92-05-041 ALJ/JBW/ift P—R D-9 R IT IS ORDBRED that; Application 92-05-041 is denied without prejudice. This order is effective today. Dated June 23, 1993, at San Francisco, California. DAVIEL Wm. FESSUR President PATRICIA X. ECKERT NORMAN D. SHAY P. GREGORY COLON Commissioners 23