Attorneys for Florida Water Services also said market conditions could change and a 1%increase in interest rates could have a $30 million impact on the sale price of thebonds.
"It is our intent at this point to proceed to closing," said Ken Hoffman with Rutledge,Ecenia, Purnell & Hoffman, an attorney representing Florida Water Services. He said thecompany has faced obstacles trying to complete the sale, including lawsuits and localgovernments who have abused their powers, and added, "We believe it is necessary for usto move forward."
The sale of the bonds is being held up pending the outcome of a court case in Santa RosaCounty that, in addition to other issues, raises the question of whether the FloridaWater Services Authority is a legal entity. That suit, filed by the Sugarmill WoodsCivic Association, Collier County, and the city of Palm Coast, claims that meetings heldto create the authority were not properly advertised to the public, as required by statelaw.
A judge could rule in that case any day.
PSC chairman Lila Jaber said the commission, which regulates private utilities, musthave a debate about the sale because it involves the largest privately held watercompany in the state and therefore the "breadth of services makes it unique."
Jaber also said the sale is unique because it would transfer utility systems in 27Florida counties to the control of Gulf Breeze and Milton, two cities that have noutilities owned by Florida Water Services in their jurisdictions. The two cities createdthe Florida Water Services Authority to run the utility system after the sale.
The PSC ordered Florida Water Services to file an application to transfer its utilitiesto the authority on Tuesday, a move that the company did not expect.
Company attorneys had argued unsuccessfully that the PSC did not have jurisdictionbecause the authority is a governmental entity that is exempt from the commission'sreview.
The PSC also ordered Florida Water Services not to proceed with the sale in order todetermine if a public hearing should be held or if the agency should approve thetransfer as a matter of right.
Opponents of the sale urged the commission to give the PSC's attorney permission to goto court in case Florida Water Services tried to close on the sale before theapplication could be considered.
But instead of authorizing the PSC attorney to take legal action if necessary,commissioners implored the company's attorneys to work with the PSC and file anapplication by Feb. 7 for an expedited review since Florida Water Services hopes toclose on the sale by Feb. 14.
The Santa Rosa suit is among many that have been filed in opposition to the sale, but itwould answer some basic issues about the legality of the authority, according to BrendaPollak, who is one of three authority board members.
At Tuesday's meeting, Florida Water Services' attorneys announced that papers had beenfiled that day to make the authority a nonprofit corporation. That move, they said,should eliminate all questions about whether the authority is a legal government entity.
That raised yet another question about the PSC's review, since incorporation and theaccompanying articles of incorporation had never been mentioned before.
Much of the discussion during Tuesday's meeting centered around the liability for thebonds if they were sold and the PSC decided not to approve the sale.
"I'm not a bond attorney, but I believe the risk is on the bondholder, not theconsumers," said Bruce Culpepper with Akerman, Senterfitt & Eidson PA, an attorneyrepresenting the authority.
Culpepper also said that not all the litigation that has been filed will have gonethrough the court system by the time the sale takes place and some lawsuits couldultimately be heard by the Florida Supreme Court.
"My understanding is there are methods for defeasing a bond issue," said Hoffman,responding to questions about how the bond deal could be "undone" if necessary.
However, John Jenkins, an attorney from Rose, Sundstrom and Bentley representing MarcoIsland and several other communities, said if the sale is completed and the bondproceeds are handed over to Florida Water Services' parent company, Allete Inc., therewould not be any money to call the bonds.
