Attorney says water deal at risk

By Ludmilla Lelis
Sentinel Staff Writer

November 23, 2002

DELAND -- An attorney for Florida Water Services argued in court Friday that forcing a separate sale of Deltona's water and sewer utility could risk a pending $507 million deal.

Attorney Michael Elsberry said the pending sale of Florida Water Services, the state's largest privately owned water and wastewater utility, depends on keeping the entire utility network intact. He told Circuit Judge Edwin P.B. Sanders that an order forcing the corporation to negotiate for the sale of Deltona's system alone could be disastrous.

"We can't sell any of the property," Elsberry argued. "Millions of dollars are at risk."

Volusia officials countered that if the sale of the entire system goes through, the risk would be to ratepayers in Deltona, who would have to cover the cost of the massive deal.

Sanders didn't rule on the case Friday, but said he would announce his decision next week.

Volusia's lawsuit against the private utility is one of at least nine cases trying to stop the controversial sale of Florida Water Services to a pair of Panhandle towns.

Florida Water Services serves roughly a quarter of a million homes in 26 counties, including about 28,000 homes in Deltona. Several communities served by Florida Water have protested the sale, worried that the towns of Gulf Breeze and Milton are buying the utility to reap a great profit, but the towns won't be accountable to its customers statewide.

Deltona's system is one of the largest within Florida Water Services' network, according to testimony. The city's system has been appraised at $104 million or $108 million, said Florida Water Services Chief Operating Officer Forrest Ludsen.

On Friday, attorney John A. DeVault III argued that Florida Water Services must abide by a 1991 contract that requires the county to have the chance to buy the Deltona system, if and when it comes up for sale, and that any other sale can only happen if Volusia refuses to buy it.

Florida Water Services provides water to customers in Lake, Seminole, Osceola and Brevard counties, but the right offirstrefusal applies only to the utilities in Deltona and Altamonte Springs.

Florida Water Services President Donnie Crandell testified that the Panhandle group is buying the system intact to keep the costs low for the many small utilities within the network.

"Our intention was never to sell this company in its pieces," Crandell said.

However, DeVault said past court decisions show that the right of first refusal must be upheld, even if the sale is part of a larger deal.

DeVault pointed to a Florida decision, in which a tenant won the right to buy an apartment being sold with the rest of the building, and a Pennsylvania case, in which a gas station lease was being sold as part of a massive network of gas stations.

"You can't evade a right of first refusal by packaging it with other properties," DeVault said.

If the sale to the Panhandle towns does go through, Deltona residents will be under the mercy of an authority hundreds of miles away, whose rates aren't regulated by anyone else.

Elsberry warned that any delay, beyond the scheduled Dec. 15 closing date, could cost millions. The purchase agreement depends on interest rates and if interest rates were to increase 1 percent, Florida Water Services would lose $60 million, he said.

DeVault didn't dispute that, but told Sanders that it would be too speculative for the judge to make any decision based on how interest rates might change.