To get a hard number on the worth of the Canton reservoir, Cobb County-Marietta Water Authority (CCMWA) officials have elected to hire a consultant, officials announced.
CCMWA has been considering buying out the Hickory Log Creek Reservoir from Canton, which has been struggling financially with its water and sewer department.
CCMWA General Manager Glenn Page confirmed the water authority hired Pennsylvania consultant Howard Woods of Howard J. Woods, Jr. & Associates Dec. 7, and his work began after the first of the year.
“We’ve been talking with Howard Woods for a couple of years, and I spoke with him initially and then Scott Wood, the (Canton) city manager, and I spoke with him together because we were looking at valuation potential of the reservoir and a contract with him,” Page said.
Woods will be paid $12,000 plus expenses, and Page said he expects the water authority will have some initial findings by the end of this month.
The city manager said he’s on board with the consultant, and said Woods is known in the field as a “dam expert.” He added his only cause for concern is Canton’s investment in construction costs to the reservoir and the time in which it was built.
Wood said there can’t be a conventional market appraisal comparison, which is done typically, because the city can’t sell its 25 percent share to CCMWA due to the agreement they share with them.
“There is no other prospective buyer,” Wood said. “So, the methods by which you would typically evaluate or value a piece of property don’t apply here. If it helps us to look at any dimension of the value in a different light, then that’s fine, but we know what we’ve got in it and when it’s all said and done, our costs are probably going to come back in the $25 million range and Cobb’s number is several million dollars less, so there is a gap. Whether or not this process can bridge that, I don’t know.”
Hobgood said he, too, is for the consultant’s assessment because it’s an indication the city is “moving forward slowly” toward a consolidation agreement with CCMWA. Last April, Canton officials discovered they would need to hike water and sewer rates 65 percent over the next four years to cover debt and expenses for the city’s water and sewer system. Under a proposal by Cherokee County Water & Sewerage Authority (CCWSA), CCMWA would assume the city’s reservoir debt of $28 million and take full ownership of the reservoir. As part of the agreement, CCMWA would allow CCWSA to retain 6 million gallons a day of capacity yield. While offloading the reservoir share, water and sewer plants, Canton would retain its collection and distribution systems and would have the control over water and sewer rates and revenue that it brings in.
When asked if there was a disagreement between parties over the worth of the reservoir, Hobgood said he didn’t think “either party has said at this point.”
“I think (the assessment) will give a number, but there is more than just the actual physical value of the plant itself,” he continued. “The value of that is the cost — in my opinion, what we have actually paid. There’s also the question of control. Let’s say the value is $2.5 million per million gallons of capacity per day. If that were the value of it and we only wanted to sell or transfer 5 million gallons per day of our 11 million gallon-per-day capacity, there’s also the value of whether or not to transfer control to Cobb-Marietta and if there’s a value to that control. If we were to sell them just a portion of it, we would basically almost have to maintain control or at least 50-50 control (in voting rights), which is what we have now. Otherwise we’d be in a situation where we wouldn’t have any control over our future expenses.”
Page agreed that the two agencies would have to reach a consensus. He said each party to the contract for the reservoir’s construction was responsible for financing their own portion of the project.
“We had long terms related to our financing of the project, very different from the three bond issues that the city has had to fund that project, some of which were used to pay for other things, not just the Hickory Log Creek project,” Page said. “Keeping the financing terms out of the mix is very important.”
