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January 7, 1994R L OR10 t► 1 1 January 7, 1994 City of Okeechobee 55 S.E. Third Avenue Okeechobee, Florida 34974 2932.813/763 -3372 Okeechobee Beach Water Association 8840 Highway 78 West Okeechobee, Florida 34972 ATTN: Mr. L. C. Fortner RE: Okeechobee WTP Electrical Upgrades Dear Mr. Fortner: As you are aware, the City is undertaking certain electrical upgrades at the water treatment plant to improve system reliability. The bulk of this activity is oriented toward moving the FP &L service drop and starters for critical components out of the old building. The concept is to reduce the system down -time should a major structural failure occur. We have no knowledge that such a failure is imminent, but feel this action is prudent. There will be no changes to the OBWA equipment as part of this project. Certain service outages will be necessary to accommodate switchovers. In general they will be scheduled for off -peak times and we will advise you of specifics. If OBWA wishes to relocate any electrical equipment outside the old building, please advise. We will be pleased to put you in touch with the electrical contractor performing the work. Sincerely, STATE -CERT. GEN. REAs JACK CRAHAN, MAI 00000303 January 7,1994 John Drago, City Administrator City of Okeechobee 55 S.E. Third Avenue Okeechobee, Florida 34974 -2932 Re: Utility Appraisal Procedures Dear John: DEIGHANAPPRAISAL ASSOCIATES, INC. REAL ESTATE ANALYSTS AND CONSULTANTS DANIEL K. DEIGHAN, MAI 00000244 2000 S.E PORT ST. LUCIE BOULEVARD, SUITEA L. BURL WILSON, JR, MAI PORT ST. LUCIE, FLORIDA 34952 00000913 (407) 335 -1405 FAX 0(407) 335 -1423 P. E. ROCKWELL, TREAS. REPLY TO: PORT ST. LUCIE MO EAST OCEAN BOULEVARD STUART, FLORIDA 34994 (407) 335-1405 740 NORTH FEDERAL HIGHWAY THE HOYT CENTER SUITE 201 A NORTH PALM BEACH, FL 33400 (407) 427-5957 As a follow -up to your 12/17/93 letter (copy enclosed), I need to clarify a couple of points. The fee for the additional engineering services is $11,500. You are correct when you state in your letter that this portion of the appraisal assignment was increased to "cover (the) cost related to securing more field data and, thereby, lending more reliability to the final product." This concurs with my answer sent to you in late January 1993 in response to a question raised by Bill Reese. It is restated as follows: The Scope of the Assignment currently includes a determination by the engineer of "remaining economic life" that is based primarily upon a review and evaluation of the City's existing maintenance and repair records. Historical evidence of continuing maintenance for prolonging the life of system components 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. If City records cannot be relied upon the contain the required detail and completeness, or if a more quantitative evaluation is desired, we suggest some supplemental field investigations. In conjunction with City maintenance staff, selected representative samples of basic system components could be checked or tested (pump tests, pressure /flow tests, etc.). To accomplish this objective, we could provide a full time, experienced engineer to conduct/ observe the investigations. Assuming two 50 -hour work weeks, plus per diem, we estimate a fee of $11,500 for this work. However, your letter indicates that you are now of the understanding "that no scientifically supportable method will be used in establishing remaining usable life." This conclusion that this is not an acceptable method is incorrect. In an appraisal, remaining economic life is the period during which improvements contribute to property value. To estimate economic life, an appraiser follows the same step as participants in the market. These are: gather factual data obtain technical input from knowledgeable sources analyze both come to a conclusion Based on all evidence from my education and experience, an engineer's estimate of remaining usable life, after sampling and comparing with existing factual data, is the accepted method of estimating remaining economic life. This is summarized in the discussion of Average Service Life Estimates from the National Association of Regulatory Utility Commissions when they state: "Determination of service lives basically involves an analysis of the past and engineering estimates of the future effect of wear and tear, decay, action of the elements, inadequacy, obsolescence and public requirements. In some cases, other factors such as anticipated changeover to new or improved kinds of plant, or specific plans of management must be given consideration. To arrive at a satisfactory estimate of future conditions, past experience generally gives an indication which can be used was at least one element in the estimate. The weight to be given to past experience depends upon the extent to which the conditions affecting service life in the future are expected to be similar or difference from those in the past." The economic life of a utility's components is based on technical study and historic fact. I have presented you with the conclusions of one such technical study for water and sewer utilities developed by the State of Florida. As part of the contract, I have employed Skip Harvey P.E. of William Hatfield Stoner to give me a technical evaluation of your system's components and how they compare to average service lives. How this is to be done has been explained in previous correspondence. As indicated above it is what is normally or typically done in valuing utility systems such as Okeechobee's. Again, as detailed in the assignment's scope, acceptable appraisal procedures are to adhered to throughout the appraisal. By Florida law, I must present appraising as an art, not as a science. Appraising relies on professional judgement. Their is no test that we are aware of that will tell us what the future will be. However, as an appraiser I am required to do forecasts of what the future is expected to be as of the date of valuation. These 2 forecasts are based on many different items, one of which is technical expertise. In other words, the more I know about the City of Okeechobee s utility, the more reliable is my judgement. If there is a specific test or procedure which you feel is being omitted and would substantially increase the reliability of our work, please advise me. Sincerely, DEIGHAN APPRAISAL ASSOCIATES, INC. Jack Crahan, MAI cc: Chris Chinault County Administrator 304 NW 2nd Street Okeechobee, FL 34972 Charles W. Harvey, Chairman 304 NW 2nd Street Okeechobee, FL 34972 David J. Rivera, Finance Director Board of County Commissioners 304 NW 2nd Street Okeechobee, Florida 34972 Daniel K. Deighan, MAI L. Burl Wilson, Jr., MAI JC /TMDRAGO.DOC Skip Harvey Williams, Hatfield Stoner, Inc 1948 SE Port St. Lucie Boulevard Port St. Lucie, Florida 34952 James Kirk, Mayor 55 SE 3rd Avenue Okeechobee, Florida 34974 3