Ida Wants To Study Brooke Takeover

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Two local organizations have begun preliminary talks that could lead to an attempt to purchase the Pine and Strawberry water companies from Brooke Utilities.

The Industrial Development Authority of Gila County (IDA) approached the Pine-Strawberry Water Improvement District in January with an offer to co-fund a feasibility study on a possible purchase of the two companies. Local realtor Ray Pugel is on the five-member board of the IDA.

"What we did was offer $5,000 in matching funds to do a feasibility study to find out the costs of buying the water company -- to see if it's financially feasible," Pugel said.

Many communities have industrial development authorities sponsored by a government agency, according to Scott Flake, director of the Payson Regional Economic Development Corporation.

"They can approve tax-free bonds on projects they deem beneficial to the community," Flake said. "The Town of Payson also has an IDA."

County Administrator John Nelson elaborated.

"Basically, through federal and IRS law, IDAs are allowed to issue bonds for certain economic development ventures at a tax exempt interest rate," Nelson said. "They are allowed to charge a fee for doing that, which our IDA did. The money they earned can now be used for what they consider to be economic development activities. Normally they request some kind of match from somebody."

The Pine-Strawberry Water Improvement District is different from the four domestic water improvement districts in the Pine-Strawberry area which sell water to individual subdivisions.

"We are not a purveyor of water," board member John Breninger said. "Our charter is that we're basically responsible for supplying a long-term, reliable water supply for the communities. If we were to ever sell water, it would be as a wholesaler."

According to Breninger, the IDA's proposal to co-fund a feasibility study was short on details.

"The (Pine-Strawberry Water Improvement District) board has been approached and a verbal presentation was made," Breninger said. "We told them we want a specific request in writing about what they want. What they presented was totally inadequate in that it didn't have any specifics or any description of the limitations and constraints."

The IDA was asked to make a more detailed presentation at the March meeting of the Pine-Strawberry Water Improvement District. That meeting, which is open to the public, will be held at 1:30 p.m., Saturday, March 8, at the Pine Senior Center.

Pugel, who said the IDA will comply with the district's request for more information, believes the time is right to look into a possible acquisition. But to do so, the district must re-order its priorities.

"(The Pine-Strawberry Water Improvement District's) vision statement says their first priority is to find water," Pugel said. "That's a great vision, but if we find water and turn it over to Brooke, that increases the value of the system with no improvements (by Brooke). The time to buy something is when it's at its lowest point, which we definitely are. The time to buy is now, and then if we hit water that's fantastic."

Pugel accuses Brooke of not maintaining the Pine and Strawberry systems.

"Even good systems lose as much as 50 percent of their water through leakage, and we don't have a good system," he said.

Pugel also believes the travel and other expenses Brooke incurs because it is not a local company is money that could be saved if the two water companies were locally owned.

Yet another advantage, according to Pugel, is that the Arizona Corporation Commission would no longer have control over rates.

Corporation Commission Public Information Officer Heather Murphy disagrees with Pugel about Pine and Strawberry customers bearing the cost of Brooke being an out-of-state company.

"Some of those expenses could be allowed in a rate case, but all of that is audited by the commission," Murphy said. "If those expenses are outside the range of what is normal and acceptable in general accounting terms, they're not going to be allowed."

Murphy also questioned whether an entity whose rate structure is not governed by the commission is really in the best interests of Pine and Strawberry customers.

"That's just great," she said sarcastically. "The customers ought to be lining up for that one. That argument is in favor of regulation, not against it."

Myndi Brogdon, a spokesperson for Brooke Utilities, attended the January meeting of the water improvement district. She said Brooke is opposed to the study.

"We haven't been asked to have a position, but our position is that we don't want to sell," Brogdon said. "It would have to be a hostile takeover, but they're a long ways from doing that."

Brogdon also questioned whether the expertise is available locally to run a water system of the size and complexity of the Brooke operation.

"Look at the hard time a company with all the resources, abilities and knowledge is having," she said. "Imagine taking it on and not knowing anything."

The corporation commission has also not been included in the talks and Murphy thinks that's a mistake.

"It would be nice if we were invited to the table for these discussions, and it would be nice if we could communicate better to the customers in the district who are getting water through the Pine and Strawberry divisions of Brooke or any other regulated company," Murphy said.

But Pugel insists the IDA is acting purely in the best interests of the two communities.

"People think we have some underhanded motive and we do," he said. "The underhanded motive is that we want a quality water system. I live here, and I want my faucet to work when I turn it on."

A big part of the problem, Pugel believes, is fear of the unknown.

"People are so averse to change, but my God if we don't fix this water system, we're going to be in a (world) of hurt," he said.

Nelson, who attended the January board meeting as a Pine resident and not a county official, agrees there's a problem, but he also believes the solution has to be broad-based.

"There's definitely a water problem up there, and with our weather it's only going to get worse," Nelson said. "Somehow we're going to have to get together -- everybody -- and find a way to alleviate this."

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