County officials set to approve Marco's water utility purchase Monday

Sunday, September 21, 2003

By I.M. STACKEL, imstackel@naplesnews.com

Marco Island officials dove into the deep end of the municipal bond market last week to secure financing for the $85.3 million purchase of Marco's water utility from Florida Water Services.

Now, while Marco leaders await a credit rating from Wall Street mavens, Collier County officials are set to approve the purchase.

Both should happen Monday.

Marco officials returned Sept. 12 from an intensive, three-day hunt for a bond and insurance designation, which they need before securing $100 million in municipal bonding power.

The Florida team included City Manager Bill Moss, Council Chairman Mike Minozzi, Finance Director Bill Harrison, acquisition lawyer John Jenkins, plus representatives from Palm Coast and Hernando County.

They had seven long sessions, meeting with Standard & Poor's, Moody's Investors Service and Fitch Ratings, three top ratings agencies, as well as insurers MBIA Insurance Corp., Ambac Assurance Corp., Financial Guaranty Insurance Co. (FGIC,) and Financial Security Assurance (FSA.)

"They were in-depth meetings, lasting from morning to night," Minozzi said. Holding up a bound copy of the city's briefing document, he said that in making presentations, he, Moss and Harrison had to cover information and data in "this whole book each time."

The book contains an overview of Florida Water's utility in Marco and Marco Shores, their income and expense statements for 2002, their balance and rate sheets, physical conditions of the facilities, and Marco's financial data and economy.

The goal of the sessions was to "try to convince rating companies to give us the highest possible ratings, and (get) insurers to (give us) the lowest possible insurance" rates, Minozzi said.

"When you're insuring $100 million worth of bonds, even a 1 percent differential means $2.5 million a year," he said.

"The better insurers feel about the risk they are taking, the lower the (insurance) premium will be." Being viewed favorably could produce "potentially, millions of dollars' saving over the next 30 years," Minozzi said.

It is unlikely that Marco will receive a triple-A rating, the best a city can hope for.

"We just don't have enough experience," Minozzi said of the city, which celebrated its sixth anniversary in August.

Once the rating is released, it will take another week to find out what kind of insurance premiums Marco can obtain.

"Once we know the insurance premiums, the underwriters will go full steam ahead, selling the (bond) issue," Minozzi said.

Moss said the New Yorkers seemed to be fairly impressed with the council's cumulative range of real-world experience.

"What was most impressive to them was your backgrounds," Moss said. They were reassured that the council was comprised of those with executive experience, spanning utilities, education, law, engineering and financial management.

"They felt very comfortable. I could see that by the number of notes they took and their nods," Moss said.

Moss and Minozzi also dragged Marco's engineering and finance advisers up to New York: Robert Ori, John Darmody and Kevin Mulshine.

Ori is an accountant, and president of Public Resources Management Group, the city's water rate and financial analyst. Ori's firm prepared the city's January 2001 report on water, wastewater and reuse.

Darmody is an engineer with Montgomery, Watson, Harza, and is preparing the city's due diligence report. He's also working with Ori to develop a bond feasibility report.

Mulshine is an investment banker with Prager Sealy & Co., the firm hired in May by Marco and its government partners to help select underwriters, along with Bank of America Securities and Raymond James & Association. Prager Sealy principal John Marino has been behind the scenes but actively involved in negotiating Marco's latest deal with Florida Water.

A rating is a credit risk evaluation for a government or company. While the process involves numerous factors, the bond rating controls the bond's insurance interest costs. Major rating agencies are evaluating the city's debt structure, financial condition, demographic factors, management practices of city officials and Marco's economy.

On Monday, the Collier County Water & Wastewater Authority are scheduled to sign off on the deal before it goes to county commissioners. Water & Wastewater Authority Executive Director Bleu Wallace said he doesn't expect any curveballs, and the five-person committee should have no problem approving the acquisition, but there are a few disgruntled Marco Shores and Capri customers who felt island leaders should have sent them letters telling them Marco planned to buy the utility.

Marco Shores residents get water and sewer services from Florida Water; Capri residents get sewer services.

Marco officials adequately advertised the acquisition; that's not the problem, Wallace said Friday. The problem is, people didn't read the public notices, and didn't read newspaper stories.

Covering all his bases, Wallace sought them out, contacting homeowner and condo associations in the two neighborhoods to let them know the Monday session had been scheduled.

Wallace said he met with James Williams, a director of the Mainsail IV Condominium Association, and Harry Rogers, a community activist who maintains a Capri-oriented Web site.

Williams was a bit put out, Wallace acknowledged Friday.

"He was concerned," Wallace said.

"Keep in mind that these are folks outside the city limits. If they're not happy, who do they go to ... they're not represented in the city," Wallace said. "My staff has contacted homeowner associations out there. I expect them to come to the meeting."

The session starts at 2 p.m. Monday in the third floor meeting room of the administration building at Collier County Government Center.