A board that has received an offer usually has two numbers in front of it: the offer, and the net book value of the system from its own balance sheet. Net book value is an accounting figure and not a valuation, and neither number answers what the board has to decide.
The three approaches, and the comparison
The value, three ways. Reproduction cost new less depreciation, discounted cash flow, and comparable transactions, each run separately with its own assumptions stated, then reconciled. The spread between them is reported rather than averaged away, because a wide spread means the answer rests on an assumption somebody has to own.
The bill path under a sale. Where the state has a fair market value statute, the premium above depreciated original cost enters the acquirer’s rate base and is recovered from customers through the authorized return and depreciation for the rest of the assets’ lives. We model that forward, through the first base rate case after the acquisition, so the board can see the sale price and the bills side by side.
The alternatives, on the same basis. Remaining independent, funding the capital plan from rates and debt. Merging with a neighboring system, where one exists. Same forecast period, same assumptions, same bill comparison, so the three are actually comparable.
What is not financial. Service levels, staff, local control over capital decisions, and what happens to the obligations already outstanding on the utility’s own bonds. These are set out as questions with the facts attached rather than scored.
What arrives
The written review with all three approaches and all three options. The valuation and bill-path model, which is yours. A file supporting every figure. Slides for the board or council, structured so the board can present it to residents without translating it first, and us at that meeting and at the public one if you want us there.
| Method | Value | What it assumes |
|---|---|---|
| Net book value | $18.4M | Original cost less depreciation, as the books carry it |
| Replacement cost new less depreciation | $61.2M | Today’s construction cost, straight-line aged |
| Income approach | $24.9M | Current rates, held flat, discounted at 6.0% |
| Comparable transactions | $27–34M | Six regional sales, adjusted per connection |
City of Ellery water fund, valuation date 30 June 2028.
Illustrative — names, dates and figures invented.
Methods that disagree by a factor of three are reported as they come out. A buyer will lead with net book value and a seller with replacement cost; the range a council decides inside is the one in the middle, and averaging the four into one number would hide it.
Where this stops
We work for the utility. We do not represent buyers on the same system, and we take no fee contingent on a transaction happening or on the price it happens at.
No course of action is recommended here. A sale is a decision about a public asset, made by an elected body in public; what we supply are the numbers it decides on.
This is not an appraisal and nobody here is an appraiser. A transaction that proceeds needs a licensed appraiser and, in states with a fair market value statute, the specific form of appraisal that statute requires. What we produce is what a board needs before it decides whether to commission one.
We are not lawyers. Whether your board may sell, on what authority, and subject to what approvals is a question for your counsel.
Who this is for
Best fit: a board that has received an unsolicited offer, or one facing a capital or compliance obligation large enough that someone has raised the question. Also a fit for a state program office or a regional authority that wants an independent read before a transaction reaches it.
Poor fit: a utility that has decided to sell and needs a document supporting the price. That is a different engagement and a different kind of firm.
The fee
Flat, paid by the utility, and the same whether the board sells, merges or stays independent. It does not move with the transaction.