Sunday, February 22, 2015

Carlyle Group's 34.8% Water Hike for California Customers

Carlyle Group's Park Water owns two other public utilities, Montana's Mountain Water and California's Apple Valley Ranchos Water.  While Missoula, Montana actively pursues Mountain Water via eminent domain, Apple Valley is pondering a similar action, in part due to a requested 34.8% rate increase over a three year period.

Apple Valley Ranchos requested rate increases of $3.12 million or 14.88 percent in 2015, $2 million or 8.48 percent in 2016, and $2.16 million or 8.19 percent in 2017. 

Compounding turns a 31.5% rate increase into 34.8%.  Rest assured the numbers folks at Carlyle understand how to profit handsomely from public infrastructure.  The Desert News Post reported:

... the company already has shown a profit of 12% in recent years, and that stockholders are guaranteed an 8.75% return on their investment as a minimum. It was also announced that $2.5 million has been spent on water system improvements, much of it as speculative major infrastrustructure improvements in outlying areas that don’t have any homes being built. 

Water users are supplying the capital for this company to make huge profits, all the while telling them to conserve water. It’s a case of, the less water you use, the more the company needs to charge per unit to make a profit.

Private equity underwriters are infamous for bleeding cash from affiliates via deal fees, special dividends and annual management fees.  How much has Carlyle pulled from Park Water and its three public utilities?

Fun fact:  How many citizens know the average annual rate increase requested by Carlyle's Apple Valley of 11.6% is over 10 times greater than The Carlyle Group's annual federal tax burden of 1%? 

Update 3-18-15:  Apple Valley residents turned out for a public meeting on the sale of their water supplier.