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Home My WebLink About14.a FYI Response to CCUA Rate Study CDM • EST.1963 nu .Iiiara BOTTLING, LLC December 19, 2024 Mr.Jeremy Johnston, Executive Director Clay County Utility Authority 3176 Old Jennings Road Middleburg, FL 32068 Dear Mr.Johnston: This letter is offered in the strongest possible opposition to the rate study completed by CDM Smith and the extreme and unjustified proposed policy changes which will result in increased utility rates. The cost implications resulting from these changes are severe and will unfairly impact our company and other large commercial/industrial users in Clay County. Additionally, the proposed changes also undermine Clay County's economic development mission, of which Niagara Bottling is a contributing partner. In 2021, Niagara Bottling selected Clay County for a new manufacturing facility largely because of the Authority's competitive and stable utility rates. Were it not for the Clay County Utility Authority's (CCUA) strong support and reassurances, Niagara likely would have selected a location inside an improved industrial park unlike the site on Atlantis Drive. The Authority's competitive and stable utility rates offset the risks posed by an unimproved site, the lack of development restrictions and incomplete road infrastructure. Since locating in Clay County, Niagara has made significant capital investments to expand operations based principally on the stability and reliability of utility costs. In the process, we have exceeded every performance-oriented promise made to the community: • Original Niagara estimates put our capital investment at approximately$90 million. o As of February 2024, our total capital investment is over double that estimate at $191,550,915. This investment has resulted in significant new revenue streams benefitting Clay County. • Niagara's original building was planned at 554,000 square feet. o Shortly after opening, the facility was expanded to 798,200 total square feet. The investment was made optimistically in anticipation of future growth. • Niagara pledged to create 50 new jobs in the first year, expanding up to 125 employees at maximum production capacity by 2026 at the earliest or 2028 at the latest. o The most recent headcount survey in 2024 is 187 employees with an annual payroll of $21,256,945, and incomes for team members are largely above the county median individual income. Skill levels have increased as a result, and more local jobs mean fewer residents having to travel outside Clay County for gainful employment. Tel 909.230.5000 Fax 909.354.3475 11440 Bridgegate Dr. Diamond Bar, CA 91765 I www.niagarawater.com The Niagara manufacturing facility has five established bottling lines, with a sixth line planned for 2025. We also just recently signed a lease for warehouse space (in September) to accommodate this additional growth, relocating the storage of finished products out of our building to make room for new manufacturing line expansions. These important capital investment decisions were predicated on the confidence inspired by competitive,stable utility costs. CDM Smith's proposal runs contrary to the assurances given to Niagara. Alarmingly, their recommended policy change results in a rate increase of over 100%to Niagara in the first year.The net effect is a 299% increase between this year's rate and the five-year phase-in milestone in 2029. Water Rates 2024 2025 2026 2027 2028 2029 Water Rate/1,000 g $2.71 $5.47 $7.40 $9.92 $10.36 $10.83 YOY Increase% 101.8% 35.3% 34.1% 4.4% 4.5% Considered in the context of additional water purchases to support our projected increase in production levels, Niagara is confronted with a 576% increase in overall water cost. Flawed Assumption CDM Smith asserts the cost of a gallon of water should be the same regardless of how much is purchased. This is a fundamentally flawed and objectionable assumption, especially for high-volume users who are purchasing water as an essential primary resource for products. Tiered volume discounts and threshold discounts are commonplace in business, whether purchasing gallons of water for food/beverage production,tons of aggregate for construction, or any other products consumed in bulk quantities. These types of tiered discounts are not precedent setting, and several utilities serving Niagara across our portfolio of 52 North American plants offer volume discounts. Lack of Justification We find no justification for an extreme policy change or radical increase in the cost of water. CCUA is not confronted with a financial crisis, nor does the utility appear to be managing a critical infrastructure deficit or capital improvement emergency. Additionally, CCUA does not indicate that they are under pressure to raise revenues by state agencies or the water management district. In fact,the utility is in very good stead with state and regional regulatory bodies and is even anticipating approval of its consumptive use permit earlier than originally scheduled. Most importantly, the Authority's broad array of sustainability initiatives are proving to be an effective means of both conservation and resource replenishment. A multitude of successful partnerships demonstrates the creativity and expertise of the Authority. These efforts strike an important chord with Niagara Bottling, as our company utilizes the most water- efficient systems and processes in the beverage industry. Through various national and regional partnerships, such as the Arbor Day Foundation and the National Forest Foundation, Niagara is working to protect and replenish water resources. This includes the crucial work of planting trees to help filter 2 runoff and protect riverbanks. These initiatives safeguard our water resources and help ensure access to water for future generations. The debilitating double and triple-digit rate increases proposed by CDM Smith are unwarranted and an unnecessary disincentive considering how effectively the Authority has managed water resources throughout the region. Detrimental to Economic Development Radically increasing rates to the extent proposed by CDM Smith is an extreme detriment to Clay County's economic development mission and goals. The proposal moves CCUA from one of the most competitive utilities in Florida—and more broadly, in all of the Southern United States—to one of the most expensive and least competitive. The chart below illustrates seven locations in the Southern U.S. where Niagara Bottling has beverage manufacturing operations,as well as two nearby communities which provide favorable conditions for rate comparisons.These communities compete for the same job-creating,capital investment opportunities as Clay County. We do not anticipate rate increases at these competitor locations, nor are there any forecasted dramatic changes in policy like the ones being recommended by CDM Smith and contemplated by CCUA. Water Rate Location $/1,000g CLAY (2029) $ 10.83 CLAY (2028) $ 10.36 CLAY (2027) $ 9.92 CLAY (2026) $ 7.40 ATL $ 6.10 CLAY (2025) $ 5.47 MOR $ 4.10 MIS $ 3.80 MIA $ 3.60 WHV $ 3.46 NOR $ 3.30 CAR $ 2.80 CLAY(2024) $ 2.71 MCCLENNY/BAKER $ 1.91 JEA $ 1.86 Niagara's site selection process follows an objective, data-driven research methodology. When selecting a new location,dozens of criteria are evaluated and modeled comparatively to determine the best option. These factors are then considered in light of "surety of performance" or whether the community will honor their commitments. Niagara weighs and scores the cost of water heavily as a primary driver of operational expense. Virtually all manufacturers,food, beverage and intense technology companies do the same. Their trusted advisors 3 rely on a similar process of modeling cost parameters. Niagara would not select Clay County at the pricing reflected in CDM Smith's proposal. Prospective manufacturers and their trusted advisors can be expected to arrive at similar conclusions. The following is a quote from Patric Zimmer, President of Maxis Advisors, one of the preeminent site selection advisory firms in the U.S. and subsidiary of Foundry Commercial; a full-service Florida based commercial real estate company with integrated development and investments platforms. Maxis and Foundry Commercial have a unique perspective and understanding of utility costs as it relates to clients' location and investment decisions,with Foundry managing over 72 million square feet of space and having completed 30 million square feet of developed projects. Zimmer notes: "Utilities are a very key aspect in the technical and financial analysis of companies when making their location decisions. The ability to serve the client in a timely manner and in the volumes required, a competitive and stable cost structure, data on how the utilities have been managed and performed historically, etc., are all key factors in these decisions. As a primary component of these location and investment decisions, maintaining competitive utility costs is becoming increasingly more important for companies and are critical for communities to remain competitive for both their existing industrial tax base and employment and the ability to recruit new companies." Clay County can strengthen its position as a leader in the manufacturing sector and secure significant opportunity for future growth and prosperity by continuing to offer competitive and reliable costs while also judiciously planning community assets and infrastructure. These conditions were clear to Niagara Bottling during the site selection process and should remain as such to preserve the county's market- leading standing. Niagara's commitment to Clay County and testimony on its behalf should encourage increased awareness and greater community investment. However,adopting the CDM Smith policy recommendations and rate increases will destroy our confidence in the Authority and undermine the larger countywide economic development mission of Clay County. We urge you to reject CDM Smith's policy recommendations and proposed rate increases. espectfull rs, ohn F Krug Di r of Economic Development Cc: Dr. Anna Lebesch, Chairman 4