Agenda Date:   May 24, 2000
Item Number:                  
Docket:   UW-991921
Company Names:  Kayak Point Water Co., Inc., and Kayak Estates Water, LLC
Staff:    Jim Ward, Revenue Requirements 
Specialist                                    Penny Hansen, Public Involvement 
Coordinator
Recommendation: 
Set For Hearing the joint application by Kayak Point Water Co., Inc., and Kayak 
Estates Water, LLC, for a sale and transfer of assets of Kayak Point water 
system, in Docket UW-991921.
Discussion: 
On December 8, 1999, Kayak Point Water Co., Inc., (Kayak Point) and Kayak 
Estates Water, LLC, (Kayak Estates) filed a joint application pursuant to the 
provisions of chapter 80.12 RCW for a sale and transfer of assets from Kayak 
Point Water Co., Inc., to Kayak Estates Water, LLC. Kayak Point water system 
serves approximately 318 customers and is located south of Stanwood in 
Snohomish County. 
Kayak Estates is a Washington corporation formed to act as a utility company. 
The joint application states the company is owned and managed by people with 
experience in the water business. Iliad, Inc., who originally engineered and 
constructed phases I and II, would continue to perform expansion, repairs and 
maintenance of the water system.
The customers of Kayak Point were notified of this proposed sale and transfer 
of assets of Kayak Point water system. No comments were received on this filing 
from customers. Currently, there is an outstanding lawsuit over the prior 
partial ownership of the corporation. This case is still pending in Snohomish 
County Superior Court.
Current rate base of this water system is calculated to be approximately 
$264,095. Kayak Estates will acquire all operations and property of Kayak Point 
for $457,000, by a note payable to the seller of $207,000, a note payable to 
its investors/members of $243,000 and company held cash of $7,000. 
The new company states that the benefits of this sale include expanded 
financial resources and water staff experienced in water system repairs and 
operations. Kayak Point water system rates will not change as a result of this 
sale and any future rate changes will be reviewed by this Commission 
Staff has reviewed the application and accompanying exhibits and finds that 
this sale and transfer is not consistent with the public interest. If allowed 
to proceed, an acquisition adjustment in the amount of approximately $192,905 
will need to be recorded for future references. Based on the current rate base, 
flat rates of $25.00 per month and 318 customers, staff believes the proposed 
capital structure of the new owner would be highly leveraged (90% debt, 10% 
equity) and that Kayak Estates could not make debt payments without diverting 
funds from operations or a rate increase. 
Therefore, Staff recommends that the Commission Set For Hearing the joint 
application by Kayak Point Water Co., Inc., and Kayak Estates Water, LLC, for a 
sale and transfer of assets of Kayak Point water system, in Docket UW-991921.