MONTEREY — A public takeover of California American Water’s local water system valued at $513 million “appears to be economically feasible” and would probably save customers money, according to a 113-page report issued by the Monterey Peninsula Water Management District on Wednesday.

According to a preliminary valuation and cost of service analysis conducted by Raftelis Financial Consultants Inc. as part of a feasibility study, a public acquisition of the local water system would likely result in “significant annual reductions in revenue requirements and projected monthly water bills.”

And a review of the analysis by the water district’s investment banker Barclay’s concluded that given the Raftelis and district assumptions for capital and operating costs, revenues and rates, the district “is able to finance the proposed purchase of the system based on comparisons with financing structures and coverage margins for similar water systems.”

The water district released the report as part of its agenda for a special district board meeting to present the feasibility study’s findings at 6 p.m. on Tuesday at Embassy Suites in Seaside.

Voter-approved Measure J requires the district to secure and maintain public ownership of all water production, storage and delivery systems assets and infrastructure in its territory, if and when feasible, and it requires the district to pursue a public acquisition of Cal Am’s local system.

In its analysis, Raftelis completed a preliminary desktop valuation assessment of Cal Am’s local water system to estimate the cost of acquiring the system. It compared the cost of public ownership, operation and maintenance of the system using both water district staff and contract staff to a status quo scenario under continued Cal Am ownership by using local water system revenue requirements and typical residential customer bill impacts under various scenarios.

Raftelis employed three main valuation methods, including the income approach, the sales comparison approach and the cost approach, which resulted in a range of system values between $222 million and $464 million.

Combining the three methods, the consultant estimated the base value of the system at $245 million. Raftelis then adds $114 million for the value of asset additions, including the desalination project under development (although the cost of repaying the project financing costs are shifted to the cost of service), and $155 million approved by the state Public Utilities Commission for cost recovery, such as the San Clemente Dam removal, for which the water district may be required to compensate Cal Am. That results in the $513 million acquisition value for Cal Am.

That estimate does not include the potential value of other Cal Am assets not included in the company’s rate base, nor any prospective “severance” damages, arguing that Cal Am is “likely to suffer minimal if any, severance damages” and any such damages wouldn’t affect the district’s feasibility analysis.

Under its cost of service evaluation, Raftelis prepared a 20-year financial projection of Cal Am ownership, the incremental cost differences with the water district owning and operating the system, and annual cash flow projections and customer bill estimates under the three ownership scenarios. The analysis found that the district operation would cost about $13.6 million or 11.9 percent less per year than Cal Am’s operation, and a net present value of about $267 million between 2021 and 2040. Contract operations would cost about $10.2 million or 8.9 percent less per year, according to the analysis, and save about $213 million over the same 20-year period.

The main reasons for the lower public ownership costs, the analysis found, were lower corporate and administrative overhead costs, the district’s ability to use existing administrative staff and eliminate redundant positions, lower public financing costs, avoidance of property and income taxes, and the elimination of an estimated $330,000 per year in rate regulatory expenses.

“We had an all-star team of consultants working on this,” said Dave Stoldt, Monterey Peninsula Water Management District general manager.

Cal Am spokeswoman Catherine Stedman had different thoughts, saying “This is a hypothetical exercise since we are not for sale and do not think the District has a right to condemn us.

“Their number is off by a huge amount, but even at their estimate, the cost would equate to tens of thousands in expense per household with interest.”