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Agency reaches deal to buy Mad Hatter Utilities in Pasco

A multicounty government agency that purchases private water companies has reached a tentative agreement to buy out Mad Hatter Utility, which has served portions of Land O'Lakes for more than 35 years.

The Florida Governmental Utility Authority had been in talks off and on with the company for nearly three years. But a request last fall for dramatically higher water rates sped up negotiations. Under the agreement, FGUA would pay Mad Hatter $9 million, along with another $5 million in 2024.

"We wanted to get the best deal we could up front for the customers," said Brian Armstrong, an FGUA lawyer who negotiates utility acquisitions.

The deal must still be approved by county commissioners and the FGUA's board of directors.

Mad Hatter owner Larry DeLuceany said he is selling his business in part because he is getting too old. DeLuceany, 64, is a hands-on owner who could be found helping out in a ditch if a water line broke. He offered to stay on for three to four months during the transition and expects to take several weeks to simply clean out the office.

DeLuceany said he isn't "overly overwhelmed" by the sale price, but he said customers should get a better deal under the new ownership. Public agencies with large economies of scale, he said, "can do it quicker, better and easier."

Mad Hatter serves about 3,500 water customers and 3,000 sewer customers in Lutz and Land O'Lakes. Affected subdivisions include: Twin Lake, Woodridge, Turtle Lakes, Carpenter's Run, Indian Lakes, Oak Grove, Foxwood, Linda Lakes and Paradise Lakes.

Last fall, the utility asked the Florida Public Service Commission for a $1.7 million increase in water bills, a jump of 233 percent. Wastewater bills would have gone up 42 percent, generating a total of $500,000. The PSC in December suspended the request, and the utility later asked for the agency to hold off on a ruling while it negotiated the sale.

Regulators had not granted an increase in Mad Hatter rates since 1993. Last year's request would have raised monthly bills for an average home using 6,000 gallons of water from $51 a month to $104.

Because of the $9 million sale price and $3.5 million worth of planned improvements, FGUA has proposed increasing rates for that average home to $89. Those would likely increase by a 2 percent inflation adjustment each year.

"The owner was looking for $45 million at first when he was selling this stuff," Armstrong said. "We walked away because that would mean big rate increases."

The PSC was likely to grant the utility's request for higher rates, Armstrong said. Plus, the company probably would've needed more upgrades in the future, prompting another request for higher rates.

Armstrong said FGUA can partner with Pasco County's water system to reduce necessary improvements. For example, the agency plans interconnections with the county system to ensure uninterrupted water flow if a Mad Hatter well fails.

FGUA considers itself a transitional agency that buys a private system, improves it and then turns it over to a local government. FGUA has made similar deals in several counties across Florida, including the 2009 purchase of Aloha Utilities and a new water plant for that system.

Lee Logan can be reached at llogan@tampabay.com or (727) 869-6236.

Agency reaches deal to buy Mad Hatter Utilities in Pasco 03/29/12 [Last modified: Thursday, March 29, 2012 5:50pm]
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