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May 18, 1993f: Board of County Commissioners May 18, 1993 Christopher W. Chinault County Administrator 304 NW 2nd Street Okeechobee, FL 34972 Dear Mr. Chinault: I have received four (4) original signed contracts from Deighan Appraisal Associates, Inc., to provide for the appraisal of the City Water System. By way of this letter I am transmitting a copy to the City and County staff for review before signature. I have transmitted the four (4) originals to SFWMD, Kim Love, for the District's signature. Upon their return, I will submit the originals to the City and then to the Commissioners. The purpose of the copies being sent now is to give time for review so when the originals do come back, there should be no delays in getting signatures locally. Si rely, avid R vera Finan Director cc: Charles Harvey John Cassels Jim Kirk John Drago John Cook Jack Crahan Skip Harvey Okeechobee County fSEAL 1917 304 N.W. 2nd Street, Room 106 OKEECHOBEE, FLORIDA 34972 (813) 763 -6441 Fax 763 -9529 Susan B. Hughes Tommy Close Clif Betts, Jr. Stephen Porter Charles W. Harvey Christopher W. Chinault District 1 District 2 District 3 District 4 District 5 County Administrator Board of County Commissioners Okeechobee County May 18, 1993 Kim Love South Florida Water Management District 3301 Gun Club Road West Palm Beach, FL 33416 -4680 Dear Ms. Love: Enclosed are four (4) originals of a contract between Deighan Appraisal Associates, Inc., and Okeechobee County for the appraisal of the City Water System. The District is not a party to the contract. However, as the District has an interest in the project and all of the parties involved will be asked to show concurrence and approval for the contract and the scope, you are asked to have these documents reviewed and signed by the appropriate individual. Please forward all four (4) originals to me as soon as possible so this process can be finalized and the work can begin. I will pick them up at your office when completed. If you have any questions, please contact me. Sincerely, vid J ivftra Finance irector cc: Charles Harvey Christopher W. Chinault John Drago James Kirk Jack Crahan Skip Harvey iiiiiiiiii iiii J y i y 1917 0 11 1 111 1 304 N.W. 2nd Street, Room 106 OKEECHOBEE, FLORIDA 34972 (813) 763 -6441 Fax 763 -9529 Susan B. Hughes Tommy Close Clif Betts, Jr. Stephen Porter Charles W. Harvey Christopher W. Chinault District 1 District 2 District 3 District 4 District 5 County Administrator ,:TAT ERT. CEN. JACK ERAHAN, MAI 500013:1 DANIEL K. DEIGHAN, MAI 54444244 LINDA HOTCHKISS, SRA 50440113 L BURL WILSON.JR. MAI 00044!13 P. L ROCKWELL, TREAS. May 14,1993 David J. Rivera, Finance Director Okeechobee County 304 N.W. 2nd Street, Room 106 Okeechobee, Florida 34972 RE: Appraisal Contract City of Okeechobee Water and Sewer Utility System Dear Dave: I am enclosing four (4) signed contracts for your review and execution. As you requested in your letter of May 10, 1993, the contract includes the scope of services and fee structure previously presented. The distribution list is also made a part of the contract. We are prepared to go forward with the assignment when you notify us to proceed. Thank you for the opportunity to offer our firm's services to Okeechobee County. Sincerely, DEIGHAN APPRAISAL ASSOCIATES, INC. ack Crahan, MAI Encl. JC/ tm/ agree.doc DEIGHAN APPRAISAL ASSOCIATES, INC cc: Chris Chinault John Drago Charles W. Harvey James Kirk Skip Harvey REAL ESTATE ANALYSTS AND CONSULTANTS 2000 S.E PORT ST. LUCIE BOULEVARD, SUITEA PORT ST LUCIE, FLORIDA 34952 (407) 335 -1405 FAX 0(407) 335 -1423 REPLY TO: PORT ST. LUCIE 544 EAST OCEAN BOULEVARD STUART, FLORIDA 34554 (407)335.1405 764 NORTH PEDERAL HIGHWAY THE HOYT CENTER SUITE 211 A NORTH PALM BEACH, PL 33400 (417) 427.3557 rn rn co Ili r n CD r_= IV CFI r AGREEMENT FOR APPRAISAL SERVICES THIS AGREEMENT is made on this day of 1993, by and between DEIGHAN APPRAISAL ASSOCIATES, INC., of Port St. Lucie, Florida (hereinafter referred to as "CONSULTANT and the Board of County Commissioners of Okeechobee County, Florida, hereinafter referred to as "COUNTY WHEREAS, the COUNTY desires to form a regional utility authority; and, WHEREAS, the COUNTY desires to retain appraisers who have special and unique experience in the appraisal of water and waste water utilities to be acquired from the City of Okeechobee for said regional system; and, WHEREAS, the CONSULTANT represents that it has experience in the preparation of property valuation in accordance with South Florida Water Management District appraisal guidelines, and the COUNTY, in reliance on such representation, finds it in the public interest to employ the CONSULTANT. NOW, THEREFORE, IN CONSIDERATION OF THE PREMISES AND THE MUTUAL COVENANTS AND AGREEMENTS CONTAINED HEREIN, IT IS AGREED AS FOLLOWS: A. General: The COUNTY and the CONSULTANT agree that the following provisions shall apply to the work to be performed under this AGREEMENT. 1. Employment of CONSULTANT: The COUNTY hereby agrees to engage the CONSULTANT, and the CONSULTANT hereby agrees to perform such professional services as are necessary to accomplish the work described in Exhibit "A which is attached hereto and made a part hereof. 2. Compensation: For basic services described in Exhibit "A" hereto, the CONSULTANTS compensation shall be computed on the basis set forth in Exhibit "B which is attached hereto and incorporated herein by reference. All fees shall be due and payable monthly. The amount due shall be determined as the costs are incurred for services performed in proportion to the work completed to the initial work for services to be performed. 3. Rieht -to -work Products: No reports or other material produced either in whole or in part under this AGREEMENT shall be subject to copyright by the CONSULTANT, in the United States or any other country. The COUNTY or its assignee shall have the unrestricted authority to publish, disclose, distribute, and otherwise use in whole or in part, any reports, data programs, or other materials prepared under this AGREEMENT. Any final writings, maps, charts, reports, computer programs, and drawings prepared under this AGREEMENT shall become the property of the COUNTY after completion and final payment. 4. Personnel: The CONSULTANT shall maintain an adequate and competent professional staff, within the State of Florida; and may consult a specialist, for the purpose of its services hereunder, without additional cost to the COUNTY, other then those costs negotiated within the limits and terms of this AGREEMENT. Should the consultant desire to utilize specialists, the consultant is fully responsible for satisfactory completion of all subcontract work. The CONSULTANT, however, shall not sublet, assign or transfer any work under this AGREEMENT to other than WILLIAMS, HATFIELD STONER, INC. without the written consent of the COUNTY. All personnel engaged in work under this AGREEMENT shall be qualified to perform such work and authorized under State and local law to perform such work. Personnel who performs the services under this AGREEMENT shall not be employees of or have contractual relationship with the COUNTY. Subconsultants employed under the above conditions will permit the COUNTY all the rights and privileges of this contract, including, but not limited to, the COUNTY'S right to secure materials or services from the subconsultant which might be a part of the subconsultant's work production. 5. Responsibilities of the COUNTY: A. The COUNTY hereby convenants and agrees to promptly pay the fees to the CONSULTANT in the amounts and at the time specified herein. B. The COUNTY hereby agrees that payment as provided herein shall be made for said work within 30 days from the date the invoice for same is mailed to the COUNTY at the address set forth in the AGREEMENT or as otherwise delivered to the COUNTY. The COUNTY hereby agrees that the amount represented by unpaid invoices shall accrue interest until paid at 1 per month beginning the 30th day after the invoice is mailed or otherwise delivered to the COUNTY. CONSULTANT may, after giving seven (7) days written notice to the COUNTY, suspend services until he had been paid in full all amounts due. C. For any sales tax that is applicable to any portion of services provided under this AGREEMENT, COUNTY agrees to pay such tax, in addition to the fees outlined herein. D. The COUNTY will appoint a single representative with respect to work to be performed under this AGREEMENT. This representative shall have the authority transmit instructions, receive information, interpret 2 10. Termination: and define the COUNTY'S policy and decisions pertinent to the work covered by this AGREEMENT. 6. Responsibilities of CONSULTANT: A. The CONSULTANT shall be responsible for the professional quality, technical accuracy, timely completion, and coordination of all reports and other services furnished by the CONSULTANT under this AGREEMENT. The CONSULTANT shall, without additional compensation, correct or revise any errors or deficiencies in its reports and other services. If the COUNTY requires the CONSULTANT to revise finished work which has been satisfactory completed, the CONSULTANT shall not commence work on the revisions until the COUNTY and the CONSULTANT enter into a written AGREEMENT which establishes the amount of compensation for the revisions. B. Completion: Upon the satisfactory completion of the work performed hereunder, at the time of the final payment of this AGREEMENT, and as a condition president thereto, the CONSULTANT shall examine and deliver to the COUNTY a release of all claims for compensation against the COUNTY arising under or by virtue of this AGREEMENT. 7. Plans and Documents: All reports, studies and documents prepared by the CONSULTANT shall bear the endorsement and seal of a person and the employee of the CONSULTANT who is fully registered in the appropriate professional category. 8. Notices to Proceed: The CONSULTANT shall not commence work upon the appraisal until it receives a written notice to proceed. 9. Schedule: The CONSULTANT understands and agrees that after receipt of notice to proceed, the CONSULTANT will complete the work within 150 calendar days. The schedule includes a reasonable time required for COUNTY review. The schedule assumes timely provision of data by the COUNTY to the CONSULTANT and assumes that all data and information provided by the COUNTY and other public agencies is accurate and complete. A. If, through any cause, the CONSULTANT or COUNTY shall fail to fulfill in a timely manner their obligations under this AGREEMENT, or if the CONSULTANT or the COUNTY shall violate, any of the covenants, 3 agreements, or stipulations of this AGREEMENT, the COUNTY or the CONSULTANT shall have a right to terminate this AGREEMENT by written notice of such termination. In the event of termination by either party, the CONSULTANT shall be paid an amount which bears the same ratio to the total services of the CONSULTANT covered by this AGREEMENT, less payments of compensation previously made. B. The obligation to provide further services under this AGREEMENT may be terminated by either party upon 30 days' written notice by either party. In the event of any termination, CONSULTANT will be paid for all services rendered to the date of termination, all reimbursable expenses and termination expenses. 11. Modification: The COUNTY may from time to time require modification in the CONSULTANTS scope of services to be performed under this AGREEMENT. An increase in compensation for the CONSULTANT or modifications of scope of services in this AGREEMENT must receive written approval from the COUNTY prior to the time the additional work is undertaken, and shall be incorporated in written amendments to the AGREEMENT. 12. Waiver: The waiver by the COUNTY of any of the CONSULTANTS obligations or duties under this AGREEMENT shall not constitute a waiver of any other obligations or duties of the CONSULTANT under this AGREEMENT. The waiver by the CONSULTANT of any of the COUNTY'S obligations or duties under this AGREEMENT shall not constitute a waiver of any other obligations or duties of the CONSULTANT under this AGREEMENT. 13. Entirety: This AGREEMENT represents the understanding between the parties in its entirety and no other agreements, either oral or written, exist between the CONSULTANT and COUNTY. 14. Interest of Employees or Officers of COUNTY and Others: No officer or employee of the COUNTY and no members of its governing body shall participate in any decision relating to this AGREEMENT which effects his personal interest or have any personal or pecuniary interest, direct or indirect, in this AGREEMENT or the subject property to be appraised. 15. Interest of Consultant: The CONSULTANT covenants that it presently has no interest and shall not require any interest, direct or indirect which would conflict in any manner or degree with the performance of services required to be performed under this AGREEMENT. The CONSULTANT further 4 this paragraph. For the present, the parties designate the following as a respective place for giving of notice, to wit For COUNTY: Chris ,chinault, County Administrator, Board of County Commissioners Okeechobee County 304 NW 2nd Street Okeechobee, Florida 34972 For CONSULTANT: Jack Crahan, MAI Deighan Appraisal Associates, Inc. 2000 S.E. Port St. Lucie Boulevard Port St Lucie, Florida 34952 As part of this AGREEMENT copies of all correspondence are to be distributed as follows: Chris Chinault County Administrator 304 NW 2nd Street Okeechobee, FL 34972 FAX (813) 763 -6441 Charles W. Harvey, Chairman 304 NW 2nd Street Okeechobee, FL 34972 FAX (813) 763 -9529 Phone (813) 763 -6441 Jack Crahan, MAI Deighan Appraisal Associates, Inc. 2000 SE Port St Lucie Blvd. Port St Lucie, FL 34952 FAX (407) 335 -1423 Phone (407) 335 -1405 6 John Drago City Administrator 55 SE 3rd Avenue Okeechobee, FL 34974 FAX (813) 763 -3372 James Kirk, Mayor 55 SE 3rd Avenue Okeechobee, FL 34974 FAX (813) 763 -1686 Phone (813) 763 -3372 Skip Harvey Williams, Hatfield Stoner, Inc. 1948 SE Port St. Lucie Boulevard Port St. Lucie, Florida 34952 FAX (407) 335 -0301 Phone (407) 335 -0300 20. Law Governine: This AGREEMENT shall be governed by construed in accordance with the laws of the State of Florida. 21. The Severability: If any portions of this AGREEMENT shall be held invalid or unenforceable, such invalidity or unenforceability shall not effect any other provision hereof, and this AGREEMENT shall be construed and enforced as if such provisions had not been included. convenants that in the performance of this AGREEMENT, no person having any such interest shall be employed. 16. Contingent Fees: The CONSULTANT warrants that no person or company was employed or retained to solicit or secure this contract upon an AGREEMENT or understanding for a commission, percentage, brokerage, or contingency, excepting bonafide employee; nor has the contractor paid or agreed to pay any person, company, corporation, individual or firm other then a bonafide employee, any fee, commission, contribution, donation, percentage, gift, or any other consideration, contingent upon, or resulting from award of this contract. For any breech or violation of this provision, the COUNTY shall have the right of termination under paragraph 10. 17. Warranties and Attorney's Fees: The CONSULTANT warrants that its services are to be performed, within the limits prescribed by the COUNTY and the Uniform Standards of Professional Appraisal Practice. No other warranty or representation, either expressed or implied, is in included or intended in our proposals, contracts, reports, or services. Should it become necessary for the CONSULTANT to employ an attorney to enforce the terms of this AGREEMENT, it shall receive reasonable attorney's fees and costs (including fees for appellate proceedings). 18. Insurance and Liability: The CONSULTANT shall provide appropriate insurance coverages. The CONSULANT's liability to the COUNTY for any and all damages arising in any way out of the performance of this contract is limited to the dollar amount of fees earned by the CONSULTANT under this contract. In no event shall the CONSULTANT be liable for any indirect, special or consequential loss or damage arising out of the performance of services hereunder. In the event the COUNTY makes a claim against the CONSULTANT at law or otherwise for any alleged error, omission or other act arising out of the performance of the professional services contracted for herein and the COUNTY fails to provide such claim, then the COUNTY shall pay all costs, including attorneys' fees, which shall include fees for appellate proceedings, if any, incurred by the CONSULTANT in defending itself against said claim. 19. Notices: Whenever either party desires to give notice unto the other, it must be given by written notice, sent by registered United States mail, with return receipt requested, addressed to the party for whom it is intended, at the place last specified and the place for giving of notice shall remain such until it shall have been changed by written notice in compliance with the provisions of 5 This AGREEMENT, including all exhibits and work authorizations which are referred to herein, is the entire understanding of the parties hereto with respect to this AGREEMENT and subsequent work authorizations. Said AGREEMENT may not be modified, amended or terminated by either party except by written instrument executed by both parties or their lawful representatives, successors or assigns. IN WITNESS WHEREOF, the parties hereto have caused these presents to be executed by their duly authorized officers, and their official seals hereto affixed, the day and year first above written. FOR THE CONSULTANT By: Deiglii'an Appraisal Associates, Inc. Att.,4Akixr FOR THE CITY FOR THE COUNTY By: Charles Harvey Board of County Commissionerse Okeechobee County, Florida Attest Clerk APPROVED AS TO FORM AND CONTENT, AND TO ASSIST IN COMPLYING WITH THE PROCESSES SET FORTH By: John Cook, City Attorney Attorney agree.doc By: James Kirk, Major Attest Clerk FOR SOUTH FLORIDA WATER MANAGEMENT DISTRICT APPROVED AS TO FORM AND CONTENT, AND TO PROVIDE FUNDING VIA THE COOPERATIVE AGREEMENT 3 -233 AS AMENDED, TASK 2.1. By: Attest EXHIBIT "A" VALUATION OF CITY OF OKEECHOBEE UTILITY SYSTEM SCOPE OF THE ASSIGNMENT PROCEDURAL OUTLINE SUBMITTED BY: JACK CRAHAN, MAI STATE -CERT. GEN APPR. #0000383 DEIGHAN APPRAISAL ASSOCIATES, INC. 2000 SE PORT ST. LUCIE BOULEVARD PORT ST. LUCIE, FLORIDA 34952 SCOPE OF THE APPRAISAL The scope of the appraisal is to estimate the Market Value of the Fee Simple Estate interest in the City of Okeechobee utility system, as of a given date. After concluding the market value of the fee simple estate, the appraiser allocates this to other specific ownership interests which are identified and discussed later in this text. Property Description The subject property consists of a water and sewer utility owned by the City of Okeechobee. The utility has about 4,100 water customers, 1,350 of whom are also served by sewage treatment facilities. The system supplies water to the Okeechobee Beach Water Association. However, the contract for this purpose expires in 1994. Water for the system is supplied by a 3.2 -MGD capacity, surface water plant. The City of Okeechobee is in the process of developing, in two- phases, a groundwater, two-MGD plant. A 0.6 -MGD plant also provides sewage treatment. Plans are underway to expand the wastewater treatment plant to 1.3 -MGD. 1 Components of the system vary in age, ranging from about 65 years to new. Thus some of the system's structures are reaching the end of their life expectancy. Some of the system's components are new, under construction, or were recently rehabilitated. Definitions In valuing the utility, the appraiser must first identify and define the type of value most appropriate to the subject system, then base his valuation upon its stipulations. In this regard, based on the subject utility and its characteristics, the appraiser seeks its MARKET VALUE, which is defined as follows: 'The most probable price which a properly should bring in a competitive and open market, under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer, under conditions whereby: a) buyer and seller are typically motivated; b) each party is well informed or well advised, and acting in what he considers his own best interests; c) a reasonable time is allowed for exposure in the open market; d) payment is made in terms of cash in United States dollars, or in terms of financial arrangements comparable thereto; and 2 e) the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale." (Source: Uniform Standards of Professional Appraisal Practice, 1990, The Appraisal Foundation.) Note: This definition of "Market Value" reflects terminology currently in use by leading professional appraisal organizations and, consistent with the collateral requirements of the lending industry, the need to obtain the most probable selling price should the property be placed on the market under the conditions herein specified. Likewise, the interest appraised must also be defined. For this assignment the interest appraised is the FEE SIMPLE ESTATE: "which is absolute ownership unencumbered by any other interest or estate; subject only to the limitations of eminent domain, escheat, police power and taxation." (Source: The Dictionary of Real Estate Appraisal (1984) Once the fee simple estate value is concluded, it will be allocated among specified ownership interests. The Date of Appraised Value is identified as the last date upon which the subject utility will have been physically inspected by the appraiser valuing the system. 3 PROCEDURAL OUTLINE Data CoI!ectIon This includes a general study of the Okeechobee environs as a whole, identification of the specific area which the system now serves, and would likely serve, and forecasts of population growth and analysis of trends impacting the utility system. Projected utility connections to the subject would also be based on establishment of existing capacity, volumetric usage and other evidence from the existing reports on the system, and input from experts familiar with utilities. Data specific to the subject utility will also be analyzed, including City Atlas drawings, construction diagrams, operation and maintenance reports, inspection reports on system conditions, repair and rehabilitation studies, agency permit applications /approvals, expansion /improvement plans and historical cost summaries. From these data, the engineer will develop quantity estimates of existing facilities, including current and proposed projects. City and County officials are to agree to a listing of assets, compiled from the foregoing analysis, which are contained in or are part of the subject system. The appraiser and engineer will physically inspect the subject property, assessing the general overall condition of the components, identifying needed repairs or deficiencies, reviewing current treatment qualities and evaluating the system for compliance with current municipal /agency standards. 4 The Valuation The appraiser is required to consider all available and accepted appraisal methodologies, which include the Cost, Sales Comparison and Income Approaches to Value. 1. The Cost Approach is based on the premise that the value of a property can be derived by adding the estimated value of the land to the current cost of constructing a replacement for the improvements and then subtracting the amount of depreciation (Le. deterioration and obsolescence) due to all causes. a) Vacant Land: The appraiser uses the Direct Sales Comparison Approach to value the land pertinent to the physical components (plants, etc.) of the utility. With this method, sales of similar or comparable parcels are analyzed, compared, and adjusted to provide a value indication for the land being appraised. This approach best reflects market behavior and is the most common technique for valuing land. b) Improvements: A replacement cost of the system's components. including the proposed water treatment facility and proposed wastewater treatment plant expansion, will be developed. The replacement cost estimate will include "soft costs such as engineering, management and overhead. To conclude depreciation, the engineer will estimate the remaining operating life of the components. The remaining operating life of the system's major components will be based primarily upon a review and 5 evaluation of the City's existing maintenance and repair records. Historical evidence of continuing maintenance efforts to prolong system life will be identified. Professional judgements and experience will be used for comparisons against accepted municipal standards and practices for similar systems of age and type. Overall system inspections will be conducted, along with city staff, of the systems' major components. Efforts will be focused on determining representative conditions which are typical of the system. A small amount of pipeline samples or coupons would be taken by city staff for evaluation and review. This would supplement any existing data from previous sampling or repair work. For example, if a 20- year -old pump has a typical life of 25 years and the engineer estimates a remaining operating life of 10 years, then the pump is estimated to have an effective age of 15 years. It would thus be considered to have depreciated 60 15 years effective age 25 years operating life] 0.60 In the above procedure, a component may be considered to be at the end of its operating life, but is not penalized for outlasting its typical life expectancy. The engineer will also develop cost estimates for repairs /rehabilitation work of identified components of the system. These cost estimates will account for any restoration work required due to deterioration from deferred maintenance. 6 The replacement cost estimate, less depreciation, will be added to the value of the land as vacant, to value the system by the Cost Approach. Note: To properly complete the analysis by this approach, the appraiser and engineer will need additional information on the following: [a] detailed, itemized accounting of funds spent for the proposed water treatment facility, as well as budgets reflecting unfinished and incomplete work; [b] time line of costs for any other ongoing projects relative to or within the system [c approximate land area and location of the new water treatment site; further, if any new well sites are to be located on -site, where fee simple title is to be retained by the City, then language reflecting the leasehold interest or easement must be furnished [d] decision about the consideration of the abandoned sewer treatment plant in the valuation; either to include the pumping station and required supporting land (size agreed upon) only, or existing land site plus salvage value of the abandoned plant components [e] determination of the location and dimensions of the site area included with the water towers [f] decision regarding the inclusion of the operations center, also known as the water maintenance barn, in this valuation, with identification of the specific dimensions of the site to be included 2. The Sales Comparison Approach will be considered; however, due to dissimilarities from the subject among the utilities which have sold, the transactions are not considered reliable indicators of value. We will review our records and update our research on a state -wide basis in an attempt to locate transactions involving any utilities similar to the subject. If found, they will be considered in the final report; however, without the additional data now in -hand, we state here that the 'final report will likely express the conclusion that this method of valuation was not applicable to this assignment. 3. The Income Approach analyzes a property's capacity to generate benefits and converts these benefits into an indication of value. The appraiser will develop an estimate of the utility's revenues and expenses to arrive at a net operating income. Input for this pro forma will come from analysis of all available and pertinent data, including City of Okeechobee budgets for operation and maintenance, repair /rehabilitation cost estimates from the engineer, and the documents listed in the Addenda. The analysis, plus interviews with 8 City officials, will assist in evaluating the impact on the pro forma of the utility not being part of the City. To test the reasonableness of the resulting rates, income, and expense forecasts, the appraiser will verify them through a review of the same items in surrounding and like -size utility systems, making modifications, if necessary. The appraiser will convert the ensuing cash flow stream to derive a value of the subject system's debt and equity components. Discount rates will be estimated from market analysis of current rates of retum for both municipal debt and equity. This procedure will yield a value of the utility by the Income Approach. Reconciliation The appraiser will examine the strengths and weaknesses of each approach and conclude a value which is unbiased and representative of the defined value sought. In this process both the quality and quantity of information will be considered in concluding the final value of the fee simple interest of the subject. In any appraisal, reconciliation involves the "analysis of alternative conclusions to arrive a final value estimate." In this regard, the appraiser reviews the entire appraisal, examines differences occurring among diverse analytical approaches and their conclusions, then makes an effort to resolve the inconsistencies to generate a final, reasonable conclusion of value. Allocation The fee simple interest value represents the value of all the interests, which include rate payers [or customers of the utility], bond 9 holders [debt], and the City per se. In the Allocation process, the debt interest of the subject is derived by discounting the expected cash flow stream to the bond holders. The equity interest of the city is measured by discounting the difference between the system's cash flow and the distribution to the bond holders. The rate payers' interest is measured as the difference between the depreciated cost approach value, less the bond holders' and city's equity interests. The following is a preliminary indication of the sources considered in the appraisal of the Okeechobee utility system. Preliminary Bibliociraphy: To minimize duplication of expenses, the appraisal process considers the following documents: "Resolution #89 5 (updated listing) Listing of Utility Rates" "Comparison Analysis Water and Sewer Options Okeechobee area Water and Sewer Task Force Final Report, 8/1991," PMG Associates, inc. "City of Okeechobee Utility Rate Study," dated 12/91, PMG Associates, inc. Proposed $5,000,000 bond for the City of Okeechobee, "Water and Sewer Refunding Revenue" Bond Series 1992A. Reese Macon Associates Utility Atlas Drawings and Maps "Hydraulic Analysis of the Water System" "Proposed Water Treatment Plant Construction Plans" 10 Knepper Willard, Inc. "PMG Financial Pre -1981 Financial Record Study' 1987, 1989, and 1992 Bond Documents "Capital Improvement Needs" [identified in Master Plan and City Budget] "Upgrading the Existing Water Treatment Plant" report Wastewater System Master Plan Capital Improvement Needs [identified in Master Plan and City Budget] Preliminary Engineering Report "Expansion of Wastewater Treatment Plant" Various Plans for Wastewater System Extensions Independent Auditors' Report Hill, Barth King, dated 2/10/92, "City of Okeechobee Utility System Financial Analysis" prepared by PMG Assocs. "Governance Alternatives to Provide Regional Water and Wastewater Services and Facilities to the Urbanized Areas of Southern Okeechobee County' Nabors, Giblin, et al, report dated July 8, 1992 Miscellaneous inspection reports on the system conditions of the City of Okeechobee Water and Sewer Utility Updated Comprehensive Plan [Water and Wastewater Elements] NOTE: Data from the identified documents will be relied upon. However, the information will be checked for reasonableness. Any independent conclusions used will be based upon the appraiser's Judgement and expertise. 11 Original Fee Additional Services of Consultants EXHIBIT "B" Summary Outline of Okeechobee's Utility Appraisal Fee Plus Additional Services of Consultants Appraisal of System (Including Report Preparation) $36,000 Engineering Support For System Appraisal A) Replacement Cost Estimate B) Repairs /Rehab. Cost Estimate C) Capacity Analysis D) 0 M Cost Review $19,500 Sub Total $55,500 Engineer's fee to allow for supplemental system inspections including selected representative samples of basic components for pump test, pressure /flow tests, etc. $11,500 Engineer's fee for expanded draft appraisal review process including two additional meetings. 2,000 Appraiser's fee for expanded draft appraisal review process including two meetings, and revised documentation. 2,400 Total $71,400