Removes Some of the Regulatory Restrictions Illinois Legislation Removes Some of the Regulatory Restrictions (Allowing rate base to reach market levels benefiting local governments)

Equity Recapture at Market Pricing Historically smaller governments sold their utilities: To investor owned utilities at the ICC approved rate base plus a modest risk premium or; Merged their utilities into a regional governmental utility authority or other entity for a wide range of consideration or; To a neighboring larger utility for the book value.

Equity Recapture at Market Pricing All three approaches (non-trended original cost less depreciation) are at less than market pricing. In other words, the small governments: Lost the value due to the devaluation of the dollar; Lost any going concern and any other intangible value; Sold real property for historic acquisition prices---extremely below market Lost the value of renewals, replacements, and major maintenance extending facilities average service lives; Did not recover the value of property still in use, yet fully depreciated.

Equity Recapture at Market Pricing The ACT allows fair market value to be the basis of the purchase price and the ICC rate base. The smaller governments, under the ACT, can get paid the proper full and fair compensation for their utility and their customers can derive the benefits of the economy of scale of the large professionally managed utility company.

Equity Recapture at Market Pricing The small local government then can use the proceeds and the utility availability to benefit their community in a number of ways including: Economic development, Needed infrastructure financing, Community desired projects, Lower taxes, Improved financial position, and Other uses.

Risk Avoidance Local governments have the enterprise risk of operations, regulatory compliance, liability, health, safety and welfare of your customers. Capital funding risk is great. Rate control risk is great. Customer accommodation risk is great. Risk is transferred to a larger entity where Provisions dampen the impact of the event.

ICC Regulation The ICC is mandated to set fair and reasonable Rates and to ensure that customer service is Provided effectively and meeting the needs that Are present. They function as a rate and Customer service “watch dog”. The local entity Is always accepted as a party in any rate matter And other matters. The ICC staff is there to Provide information and assist the public in Utility matters. Proper use of the ICC is straight Forward and requires only a call or letter.

Your Text Here Make sure you have assembled the right team Decide what is right for you, then attain Support from the Village Manager Utilities, Public Works, Planning, Finance, Administrative staffing Support from Legal and Utility Transaction consultant Constant briefing to Trustees. Your Text Here

Is your utility a candidate for private professional ops? Are your customers satisfied with their service? Do you have capital needs; management needs; Budgetary needs; funding needs; do you want to Get out of debt; lower taxes; have a secure revenue Source for the general fund; do you need more Resources; do you need a trained professional And specialized staff; is there a potential of a major Rate increase which could be dampened; do you Need to optimize your services to be more effective?

If your answer’s are Not really Yes to any of the second paragraph Then it may be prudent to investigate the Option of privatization of your utility Enterprise (business) which is governmentally Operated. While the Act is in place is the Best time to do it. Remember the process Takes about a year.

Illinois Municipal League Annual Meeting Session IML Panel September 18, 2015 Briefing 3:30 PM Questions: Gerald Hartman Hartman Consultants, LLC. Phone: 407-341-0970 Fax: 407-909-9882 Email: gerry@hartmanconsultant.com