20250130VEO to Staff 141 Attachment 2 2024 Veolia Water Idaho Property Tax Assessment Valuation.pdf

IDAHO
State Tax Commission
2024
Appraisal Report
Veolia Water Idaho, Inc.
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Prepared by
Tim Hurst, Certified Appraiser
June 14, 2024
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VEO-W-24-01
IPUC DR 141 Attachment 2
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Veolia Water Idaho, Inc.
TABLE OF CONTENTS
2024
Page
Certification 1
Narrative 2
Property Identification & Conclusion of Value 4
Cost Approach 5
Income Approach 6
Market Approach 7
System Correlation 8
Leased Equipment 9
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Veolia Water Idaho, Inc.
APPRAISAL CERTIFICATION
2024
1 certify to the best of my knowledge:
• The statements of fact contained in this report are true and correct.
• This appraisal report is intended only for property tax assessment purposes within the state of Idaho's
exception (Idaho Code 54-4105.1); this report and its development do not, nor is it required to, comply with
USPAP.
• The reported analyses, opinions, and conclusions are limited by the extraordinary assumption that the
Operator Statement and other evidences relied upon are true and accurate.
• The conclusions in this report were derived in a manner consistent with Idaho State Tax Commission and
WSATA methodologies.
• I am an Idaho Certified Property Tax Appraiser and certified to appraise the subject for Idaho property tax
assessment purposes only. I am not a Certified General Appraiser in the State of Idaho, a designation that is
intended for fee appraisers to appraise properties for other purposes.This report is intended to be used for
property tax purposes only.
• The reported analyses, opinions and conclusions are derived from an unbiased position and viewpoint.
• I have no present or prospective interest in the property that is the subject of this report, and I have no
personal interest or bias with respect to the parties involved.
• My compensation is not contingent upon any value conclusions contained in this report.
• No person provided significant professional assistance to the person signing this report.
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Veolia Water Idaho, Inc.
APPRAISAL NARRATIVE
2024
Industry Overview
"The Water Utility Industry is made up of domestic companies responsible for the safe and timely
distribution of water and other related services, such as wastewater treatment. Since water is an
essential resource, it would be easy to assume that the stocks of these companies would be high
fliers. Demand from the industrial, agricultural and residential markets is expanding and the supply
of potable water is shrinking. Big earnings and share-price gains have not been the case, here,
however.The industry is subject to regulation, which can raise service costs, while limiting rates
and return on investment."
Source: Valuel-ine Investment Survey, Industry Overview, 2019
The Unit Method
In unitary appraisal,the subject property is appraised as a single economic unit. The assets function
collectively; they operate under one ownership and one management, are interdependent, and
would be expected to trade in the marketplace as a unit.The unit includes all property used or
useful to the operation of the system, property owned, used or leased by the business. The
assumptions here are that this unit will continue operations into the future, is functioning as an
assemblage of assets in an income-producing environment, and is at its highest and best use.
The cost, income, and market approaches to value were considered during the performance of the
appraisal. The three approaches are reconciled into a single estimate of market value. The market
value of the unit is referred to as the system value.
The Cost Approach
The cost approach used in this appraisal is historic book cost less accumulated book depreciation
(HCLD). We utilize the WSATA Manual with cost approach methodology'.This approach is an
important indicator of value for regulated public utilities because the PUC establishes the cost of
service at a revenue level that will provide an opportunity for a fair rate of return on investment.
The PUC is required by law to allow utilities the ability to recover prudent costs and earn a fair
return on prudently invested funds.The PUC is similarly required to protect ratepayers from excess
earnings.
Construction work in progress as well as material and supplies have been added to the depreciated
plant to arrive at the cost indicator value.
'WSATA Appraisal Handbook, Sec. II, pgs. 1-24
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The Income Approach
The income approach is based on the premise that value can be represented by the present worth
of future benefits derived from the ownership, use, or operation of the unit.
The forecasted income was capitalized to determine the income indicator of value. The
capitalization rate used here was previously detemined in a specific industry study.The income that
was capitalized is assumed to be a level annuity into the future with asset replacement equaling the
asset loss due to depreciation.
The Market Approach
The stock and debt approach (market approach)was not calculated due to the assumptions
required to determine the stock component of value.
Correlation
The analysis of the various approaches to value is called correlation. This process involves
examining and resolving differences among the valuation indicators. This is also a process that
involves consideration of the strengths and weakness of the approaches as well as the quality of the
data available.
The cost and income approaches were given equal weight in the correlation process. The quality of
the data from the companies balance sheet and income statement was considered to be
equivalent. Considerable historic data from previous operator's statements was also available.
The income approach is an important consideration of potential buyers and investors.The income
approach considers the present value of future income streams. The subjective nature of forcasting
future income streams somewhat diminishes this approaches reliability. However, we have used a
one-step no-growth yield captialization model to simplify the subjective nature of this approach as
much as possible.
The assumptions of the cost approach are that the investments are being made by capable and
prudent management and a return on and of the investment in utility plant will be realized.
Components of the cost approach are taken from booked assets in determining an HCLD indication
of value. Because of this, no adjustment for additional obsolescence was made to the cost
approachZ.
2WSATA Appraisal Handbook, Sec. II, pg 12
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PROPERTY IDENTIFICATION AND
CONCLUSION OF VALUE
Name of Company: Veolia Water Idaho, Inc.
Mailing Address: 8248 West Victory Road
Boise, ID 83719-4020
Date of Appraisal: January 1, 2024
Industry: Water Utilities Industry
Purpose of Appraisal: The appraisal was prepared to determine an estimate of
market value for assessment purposes of all operating
property.
Value to be Estimated: Operating property shall include all title and interest as
described in Section 63-201 (16), Idaho Code.
Apportionment Area: Ada County (1 County total)
Company Data: Veolia Water Idaho has approximately 93,530 residential,
10,278 commerical, and 2,604 other customers in the
Boise/Eagle/Meridian metro areas.
Cost Indicator: $ 314,257,340 (Page 5)
Income Indicator: $ 288,141,853 (Page 6)
Market Indicator: ---- (Page 7)
System Correlated Value: $ 294,670,725 (Page 8)
Idaho Taxable Value: $ 238,750,000 (Page 8)
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Veolia Water Idaho, Inc.
COST INDICATOR
2024
Utility Plant $ 617,024,581
Depreciation $ 198,478,426
Net Plant in Service $418,546,155
Add: Construction Work in Progress $ 18,717,382
Add: Property Held for Future Use $ 0
Add: Materials and Supplies $ 1 652 232
Add: Goodwill $ 10,602,792
Add: Operating Leases $ 0
Subtract: Contributions In Aid of Construction (CIAC) $ 120,868,288
Subtract: Advances for Construction $ 3,790,141
HCLD Cost Indicator of Value : $ 314,257,340
(HCLD:Historic Cost Less Depreciation)
Data Source: Company's 2024 Operator Statement
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Veolia Water Idaho, Inc.
INCOME INDICATOR
2024
GDP Percent
Year Deflator' GDP Index NOI Change Adjusted NOI
2018 102.288 1.195302 $ 13,716,699 - $ 16,395,591
2019 104.004 1.175580 $ 10,835,582 (21.00%) $ 12,738,091
2020 105.366 1.160384 $ 18,004,716 66.16% $ 20,892,381
2021 110.185 1.109634 $ 18,689,095 3.80% $ 20,738,051
2022 117.965 1.036451 $ 18,228,743 (2.46%) $ 18,893,208
2023 122.265 1.000000 $ 17,327,538 (4.94%) $ 17,327,538
Protected NOI
Income Estimate- Linear Regression NOI (6 year) with rate increz $ 20,832,656
Income Estimate- Linear Regression NOI (6 year) $ 20,128,170
Income Estimate- Exponential Regression NOI (6 year) $ 20,341,239
Yield Capitalization
Projected Net Operating Income (NOI) $ 20,832,656
Idaho Yield Rate 7.23%
Income Indicator of Value (Income divided by rate) $ 288,141,853
'Gross Domestic Product
Data Sources: Company's 2024 Operator Statem ent, IPUC filings
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Veolia Water Idaho, Inc.
STOCK & DEBT INDICATOR
2024
The market approach indicator of value relies on adjusting sales of comparable property to the
subject property. In the appraisal of regulated utilities,there are very few, if any, sales which
could be utilized as comparable sales. The Stock and Debt Approach is used to overcome
this obstacle by using an alternative to comparable sales.
The Stock and Debt Approach to value was considered for this company, but was not used due
to the assumptions and estimations that would have had to be made. The stock of this
company is not traded on a common exchange.
Stock& Debt Indicator of Value: N/A
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Veolia Water Idaho, Inc.
SYSTEM CORRELATION
2024
(t00%)
Indicators of Value Weighted Amount
Cost 25% $ 314,257,340
Income 75% $ 288,141,853
Stock& Debt ----
System Correlation $294,670,725
System Correlation/Cost Indicator= 93.77%
Deduct: Intangibles
Franchises 93.77% X 144,920 (135,888)
Custom Software 93.77% X 0 -
Goodwill 93.77% X 10,602,792 (9,941,955)
Add: Leased Equipment (page 9) 7,417
Deduct: Licensed Vehicles 93.77% X 1,343,343 (1,259,617)
Deduct: Pollution Control ($75738638/$626791404= 12.08%) (35,596,224)
(percentage applied to system correlation above)
Deduct: Owned Water Rights 93.77% X 9,325,624 (8,744,389)
Estimated Gross Idaho Value $ 239,000,069
PP exemption Ada County (250,000)
2024 Estimate of Value: $ 238,750,069
Data Source: Company's 2024 Operator Statement
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Veolia Water Idaho, Inc.
SCHEDULE OF LEASED EQUIPMENT
2024
County& Year Original Depreciated
Tax Code Leasing Company Type of Equpiment Built Cost' Value
Ada
120 Canon ImageRunner C5240A 2014 $ 13,020 $ 651
120 Lexmark CX942de 2023 $ 6,766 $ 6,766
Total $7,417
Data Sources:
1 Company's 2024 Operator Statement
2 January 2024 Idaho Property Valuation Schedules, 19
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