LIHUE >> Kauai County officials have kept secret a 2-year-old appraisal of Kauai Electric Co. that agrees with the $215 million price that is being offered by a locally formed cooperative to buy the utility. Secret appraisal
revealed regarding
Kauai Electric Co.Co-op officials say that some
restrictions could break the dealBy Anthony Sommer
tsommer@starbulletin.comThe existence of the appraisal came to light yesterday as Mayor Maryanne Kusaka, who had been opposed to the sale, and the Kauai County Council, which has been in support of the co-op purchase, came to terms on a joint county position to present to the state Public Utilities Commission.
The county was expected to file its position paper today, saying it endorses the sale but only if some major restrictions are placed on the co-op. Co-op officials said the restrictions, if adopted by the PUC, would be enough to break the deal.
The PUC is scheduled to decide next Tuesday whether to approve the sale of Kauai Electric from Citizens Communications Corp. to the Kauai Island Utility Co-op.
Since last year the Kusaka administration has used an appraisal from consultant R.W. Beck that set the value of Kauai Electric at $190 million, or $25 million less than the co-op agreed to pay for it.
In recent County Council sessions, the co-op's opponents repeatedly have cited the Beck appraisal as evidence that the co-op is paying far too much.
Yesterday, Councilman Kaipo Asing revealed that the Council was told in a Feb. 8, 2001, executive session of a different appraisal conducted by Snavely King Majoros O'Connor & Lee that set the value of Kauai Electric at $214.5 million, almost identical to the price the co-op is offering to pay.
"This is what was hidden from you, general public," Asing said to the audience. "This is the most important decision that Kauai has ever had. It means owning our own destiny."
Fellow councilmen said they did not make it public because it was revealed in an executive session by Bill Milks, a former consumer advocate hired as a special counsel by Kusaka.
Milks told the Council the appraisal, which he ordered and paid for with funds he received from the county, was "attorney-client work product" and not to be made public, several councilmen said.
Gregg Gardiner, head of the co-op, said his attorneys learned of the separate appraisal only two weeks ago, and Milks refused repeated requests for a copy.
"It appears that the county was shopping for a specific result," Gardiner said yesterday. "It is withholding information from the public and the regulators."
Wally Rezentes Sr., the mayor's chief aide, said the appraisal was not revealed because it was quickly done after the PUC rejected the co-op's first attempt to buy Kauai Electric in 2000. He said it was solely to determine a ballpark figure if the county decided to acquire the electric company by condemnation.
"I even forgot the report existed. It has no significance for the proceeding before the PUC," he said yesterday.
The agreement between the mayor and Council was reached yesterday after the last of three weekly executive sessions. Despite protests that it was an apparent violation of the state's open-meeting law, Kusaka attended two meetings and addressed the Council behind closed doors.
The Council voted 5-2 for the compromise.
The recommendation from Kauai County to the PUC will be that the sale be approved. But it also recommends that an unspecified amount of the $215 million -- between $15 million and $35 million, according to Milks -- be placed in an escrow account.
Under the Kauai County proposal, Citizens Communications, the seller, would receive the money being held in escrow only if the co-op performs according to its business plan through 2007.
Gardiner warned that an escrow requirement, if adopted by the PUC, would not be acceptable to Citizens, and they would withdraw their offer to sell the company.
"Citizens has been absolutely unwilling to negotiate anything other than that agreed-on price," Gardiner said.
David Proudfoot, one of the co-op's attorneys, said if the PUC adopts the escrow requirement, "it will be a deal-breaker."
County of Kauai
