Question-and-Answer Session
Operator
Thank you. (Operator instructions). And we will take our first question from Michael Roomberg with Boenning & Scattergood.
Michael Roomberg – Boenning & Scattergood
Good morning, Nick. How are you?
Nicholas DeBenedictis
Fine. Hi, Mike.
Michael Roomberg – Boenning & Scattergood
We’ve had lost of statistics and evidence in recent weeks that state and local budgets are tightening and pressure is being placed upon the government to find cash quickly, surely an asset sale of municipally owned water utility would seem to provide a pretty sizeable plug, a lot of the holes in these budgets, it would seem that this might be a catalyst for an acquisition strategy going forward, I just curious in getting your thoughts on whether or not that thesis would be correct, and if so have you seen that thus far and do you anticipate seeing it going forward?
Nicholas DeBenedictis
Yes, I think it's more prevalent now than it has been for years. I think one validation on that is the Trenton proposal to sell their system to American in the sense that part of the rationale being used by the mayors to avoid a tax increase, to plug a budget gap. I think you are going to see that more and more. You are seeing it more now in the larger cities where there is a lot of politics involvement doing something like that and a lot more opposition; I guess there has been some opposition to anything. So but we are starting to see it and are sweet spot is going to be in what I would call small town USA, which takes a little more time because the problems aren't as acute, but they are there. And I'm optimistic that it is going to open up an aspect of the business which has been heretofore looked upon only as a chance to run a system like that versus buy it. So I think you're absolutely right.
Michael Roomberg – Boenning & Scattergood
In terms of budgets insofar as they are kind of done at 12 months basis, do you see it as more of an issue or more of a catalyst in the next six months or 18 months?
Nicholas DeBenedictis
No. I think it is more a ten issue than a nine issue just because it takes you’re the time to negotiate it, you have to go through a very long public hearing process, and then – at the state – I am sorry at the local level because the council is just not going to approve it, and then you go through the state regulatory process and there is a lot of trips and falls along the way, but you eventually get there, but it is not a three-month or a six-month process. What I'm optimistic on – it is Michael, am I right, what I'm optimistic on is that it is starting to put – I mean when you look at our pipeline, it’s got to be a couple years long. You just can't do it week to week or even quarter to quarter, so I'm optimistic that is a whole new aspect of the pipeline is going to be out there. And I don't think it is going away because of the real crucial part and I think accounting has addressed the FASB or whatever is they're starting to now recognize that there are liabilities to the pension given the way at municipal levels. And when you start adding those in, it becomes very clear that anything that is labor-intensive like a water or a sewer plant is adding to that long-term structural deficit in some of these municipalities have.
- To read the full transcript on Seeking Alpha, click here »
