Loading...
July 20, 1993Board of County Commissioners July 20, 1993 Mr. John Drago City Hall 55 SE 3rd Avenue Okeechobee, Florida 34974 Dear John: Please find three original Contracts for the appraisal services as discussed and agreed to by the Council and Commission on May 6, 1993. The South Florida Water Management District has reviewed these documents. Please have these documents signed and returned to me for the Commission approval and execution. Si .K, ely, id J� /Ri Finance/D ector cc: Okeechobee County Christopher W. Chinault_ Charles W. Harvey James Kirk Skip Harvey Jack Crahan Susan B. Hughes Tommy Close Clif Betts, Jr. District 1 District 2 District 3 1917 '0 11111 304 N.W. 2nd Street, Room 106 OKEECHOBEE, FLORIDA 34972 (813) 763 -6441 Fax 763 -9529 Stephen Porter Charles W. Harvey District 4 District 5 County Administrator AL ESTATE APPRAISERS PROF. LIAR. INSURANCE 1/ INTERNATIONAL INSURANCE COMPANY (A STOCK INSURANCE COMPANY, HEREINAFTER CALLED THE "COMPANY REFERENCE N0: E338516- T37 -01 -01 POLICY NO: 524- 164728-6 RENEWAL OF: 524 147654 -7 D E C L A R A T I O N S *M +4,F FM MMm*k« FM4.******** h** +F *****k *+M* *irk NOTICE: THIS IS A CLAIMS MADE POLICY. EXCEPT AS MAY BE OTHERWISE PROVIDED HEREIN, THIS COVERAGE IS LIMITED TO LIABILITY FOR ONLY THOSE CLAIMS WHICH ARE FIRST MADE AGAINST THE INSURED AND REPORTED TO TIIE COMPANY WHILE THE POLICY IS IN FORCE. M *f+ *M *M *4.MM *4.44. *MM4.MMMMM4. 4.444* 4.M* 4.4.** 4.4.4. *M +4.4. *M* *4. A. NAMED INSURED DEIGIIAN APPRAISAL ASSOCIATES, INC. MAILING ADDRESS: 2000 S.E. PORT ST. LUCIE BOULEVARD PORT ST. LUCIE FL 34952 B. POLICY PERIOD: FROM OCTOBER 15,1992 TO OCTOBER 15,1993 12:01 A.M. STANDARD TIME AT THE ADDRESS STATED HEREIN C. LIMITS OF LIABILITY: $250,000 EACH CLAIM AND AGGREGATE FOR EACH POLICY PERIOD. D. DEDUCTIBLE: $10,000 EACH CLAIM CLAIMS EXPENSES ARE INCLUDED UNDER THE LIMIT OF LIABILITY AND DEDUCTIBLE E. PREMIUM: $8,132 THE DECLARATIONS PAGE AND THE FORMS LISTED BELOW AND ATTACHED HERETO, TOGETHER WITH TIIE COMPLETED AND SIGNED PROPOSAL SHALL CONSTITUTE THE CONTRACT BETWEEN THE INSURED(S) AND THE COMPANY. FORMS AND ENDORSEMENTS MADE A PART OF THIS POLICY ARE LISTED ON TIIE ATTACHED SCHEDULE IA. DATE 09/30/92 COUNTERSIGNED FM400.0.706 (6/861 ORIGINAL AUTHORIZED REPRESENTATIVE AGREEMENT FOR APPRAISAL SERVICES WHEREAS, the COUNTY desires to form a regional utility authority; and, THIS AGREEMENT is made on this day of 1993, by and between DEIGI-iAN 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 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 thereto. All fees shall be due and payable monthly. The amount due for services performed shall be determined pro rata based upon the extent of said services. 3. Right -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 1 shall become the property of the COUNTY after completion of the work to be performed under this CONTRACT and final payment therefor. 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 than those costs negotiated within the limits and terms of this AGREEMENT. Should the consultant desire to use 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, other than to 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 perform 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. Resvonsibilities 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 shall be made for work completed 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 1Y2% 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 CONSULTANT had been paid in full all amounts due. For any sales tax which 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 to 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 consistent within the utilities industry, 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 satisfactorily 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 and method of compensation for the revisions. B. Completion: Upon the satisfactory completion of the work performed hereunder, at the time of the final payment under this AGREEMENT, and as a condition precedent 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 are 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 3 CONSULTANT or the COUNTY shall violate, any of the covenants, 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 and upon delivery of the work completed for which compensation is being provided. 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 of 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 CONSULTANT'S obligations or duties under this AGREEMENT shall not constitute a waiver of any other obligations or duties of the CONSULTANT under this AGREEMENT. Any such waiver or modification must be in writing executed in a fomal manner similar to 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 Emv lovees 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 affects his personal interest or have any personal or pecuniary interest, direct or indirect, in this AGREEMENT or the subject property to be appraised. 4 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 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 bona fide employee; nor has the contractor paid or agreed to pay any person, company, corporation, individual or firm, other than a bona fide 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 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, the COUNTY shall pay reasonable attorney's fees and costs (including fees for appellate proceedings). 18. Irrespective of any insurance carried by CONSULTANT pursuant to this AGREEMENT or otherwise, CONSULTANT shall indemnify the COUNTY against all liability or loss, and against all claims or actions based upon or rising out of damage or injury (including death) to persons or property caused by or sustained in connection with the operations and contracts of the CONSULTANT. CONSULTANT shall also indemnify COUNTY against all liability and loss in connection with, and shall assume full responsibility for, payment of all accounts and notes payable incurred by the CONSULTANT, as well as Federal, State and local taxes or contributions imposed or acquired under unemployment insurance, social security and income tax laws with respect to CONSULTANT, or its employees engaged in performance of their duties. In the event that any claim in writing is asserted by a third party which may entitle COUNTY to indemnification, COUNTY shall give notice thereof to the CONSULTANT which notice shall be accompanied by a copy of statement of the claim. Following the notice, CONSULTANT shall have the right, but not the obligation, to participate at its sole expense, in the defense, compromise or 5 settlement of such claim with counsel of its choice. If the CONSULTANT shall fail timely to defend, contest or otherwise protect against any suit, action or other proceeding arising from such claim, COUNTY shall have the right to defend, contest or otherwise protect itself against same and be reimbursed for expenses and reasonable attorney's fees and, upon not less than ten (10) days notice to the CONSULTANT, to make any reasonable compromise or settlement thereof. In connection with any claim as aforesaid, the parties hereto shall cooperate fully with each other and make available all pertinent information necessary or advisable for the defense, compromise or settlement of such claim. 19. That the CONSULTANT agrees to maintain such insurance as will fully protect both the CONSULTANT and the COUNTY from any and all claims under any Workman's Compensation Act or Employers' Liability Laws, and from any and all other claims of whatsoever kind or nature for damage to property, or for personal injury, including death, made by anyone whosoever, which may arise from operations carried on under this Agreement, either by CONSULTANT, any CONSULTANTS subcontractor, or by anyone directly or indirectly engaged or employed by either the CONSULTANT or the CONSULTANT'S subcontractor, if any. CONSULTANT shall further provide malpractice or Errors and Omissions coverage insurance. CONSULTANT agrees to provide the COUNTY with evidence of the required coverages before the CONSULTANT begins work hereunder. In no event shall the insurance coverages required by the terms of this AGREEMENT be in an amount of less than $250,000. 20. If either party brings any action or proceedings to enforce, protest, or establish any right or remedy under this AGREEMENT, the prevailing party shall be entitled to recover reasonable attorney's fees and other costs of litigation including appellate proceedings. 21. 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 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 6 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 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 22. Law Governine: This AGREEMENT shall be governed by and construed in accordance with the laws of the State of Florida. 23. The Severabilitv: If any portions of this AGREEMENT shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereof, and this AGREEMENT shall be construed and enforced as if such provisions had not been included. 24. 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. 7 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: JacJtrahan, MAI Deighan Appraisal Associates, Inc Attest: it ll Al. 1 1► LP FOR THE CITY APPROVED AS TO FORM AND CONTENT, AND TO ASSIST IN COMPLYING WITH THE PROCESSES SET FORTH By: By: John Cook, City Attorney agree.doc FOR THE COUNTY By: Charles Harvey Board of County Commissioners Okeechobee County, Florida Attest Clerk 8 James Kirk, Mayor Attest Clerk EXHTBI 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 Descrlation 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. 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 property 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 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 Collection 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] 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. 0.60 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 Sates 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 return 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 occuning 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 Biblioaraahv: 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 Altematives 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 retied 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" Engineer's fee to allow supplemental system inspections including selected representative samples of basic comp- onents for pump test, pressure /flow tests, etc. Engineer's fee for expanded draft appraisal review process, including two additional meetings. Appraiser's fee for expanded draft appraisal_ review process, including two meetings, and revised documentation. 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 $11,500 .2,000 2,400 Total $71,400