Group Wants To Force Sale Of Water Companies

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The petition drive to authorize the purchase of the Pine and Strawberry water companies is gaining momentum.

The petition directs the Pine-Strawberry Water Improvement District to incur expenses not to exceed $12.1 million to purchase the two water companies and Project Magnolia, the 10,800-foot pipeline that connects the two systems; to make appropriate capital improvements to the systems once acquired; and to develop new ground and surface water resources.

The goal of the group circulating the petition is to demonstrate community support for the acquisition by securing the signatures of a majority of the property owners within the PSWID.

Local Realtor Ray Pugel, a member of the group, believes the time has come.

"Our livelihoods, our property values -- everything -- is dependent on it, and we're at a point where we're going to go one way or another," Pugel said. "If we do nothing, what happens? It doesn't stay the same. It gets worse."

Pugel's group alleges mismanagement by Brooke Utilities, the California company that owns the Pine and Strawberry companies and several others in the Rim country.

"In their report to the Arizona Corporation Commission, Brooke said they've been getting a water loss of about seven percent," Pugel said. "I can tell you that the best of water companies will lose seven percent, the ones with good infrastructure.

"When (Brooke) figured that up, they didn't take into account the water they are buying from (privately owned) wells, so they're actually losing 30 to 40 percent of what's pumped out of the ground."

Pugel cited an incident where a Brooke water main broke under the porch of the Pine office of his business, Coldwell Banker Bishop Realty, and produced sections of the original four-inch pipe and the two-inch pipe that was used to repair the break.

"This is the water pipe, the main that feeds the subdivision behind me," he said. "It's schedule 20 ABS. They don't even put schedule 20 ABS in your house anymore for sewer pipe, so that's what we have for infrastructure."

Pugel was even more amazed by the way the break was repaired.

"They cut this pipe 30 or 40 feet apart ... and they shoved this (two-inch PVC pipe) in," he said. "The subdivision went from a four-inch flow to a two-inch flow."

Pugel also pointed out that Brooke recently amended the 41-percent-rate-increase request it currently has before the ACC to include an additional charge for water delivered via Project Magnolia. Brooke currently charges $15 per 1,000 gallons, but wants to add a $10 per 1,000 gallons surcharge.

In making the request, Brooke pointed out that the cost of trucking water to Pine averages $38 to $45 per 1,000 gallons. If the tariff surcharge on Project Magnolia is not approved, Brooke plans to truck water between the two communities at the higher rate.

"Brooke Utilities will no longer continue to transport water through Project Magnolia without timely payment of such costs," according to the amended tariff filed with the ACC on Jan. 15 by Brooke Utilities.

Pugel is incensed by the request.

"In my opinion, what's happening with that water line is criminal," he said.

In an intervention filed with the ACC, the PSWID called the request part of a "scam," a "scheme," and a "shell game," and accused Brooke Utilities of "attempting to profit on the water shortage issues in Pine."

"Clearly this entire scam constitutes a breach of fiduciary responsibility on the part of ... Brooke Utilities, Strawberry Water Company and Pine Water Company, where through this scheme Brooke Utilities, the unregulated entity, is placing a stranglehold on Pine Water Company and also starving Strawberry Water Company of revenues for the sale of its water," PSWID lawyer John Gliege wrote in the intervention.

By authorizing the PSWID to purchase the two water companies and Project Magnolia, Pugel believes the water shortage in Pine can be rectified.

"We can improve the infrastructure and do a well-drilling project to bring new sources of water," he said. "We also intend to put in fire hydrants so property owners will benefit from a lower insurance industry rating.

Pugel said he also believes there are plenty of incentives to Strawberry water customers to sign the petition, even though most of the water shortages occur in Pine.

Pugel noted that well levels in Strawberry have been dropping for a number of years, and that Strawberry has the same infrastructure as Pine.

According to Loren Peterson, Strawberry Hollow Water Improvement District chairman and a member of Pugel's group, the $12.1 million would be used to:

  • Purchase water systems -- The district can buy the assets of Pine and Strawberry water companies and Project Magnolia at a fair market value.
  • Obtain new water resources -- The district can move forward in many areas not currently available to Brooke.
  • Fix failing infrastructure -- The district can improve the broken and faulty substandard systems with a reliable system.
  • Increase water storage capacity -- The district can construct storage capacity to handle the peak demand for weekends and holidays.
  • Improve quality of life -- The lack of a competent water supplier has caused Strawberry and Pine to suffer much more than just the obvious lack of water. The district can improve the quality of life by making water a positive issue in our community.

Dan Jackson of economists. com, a company hired by PSWID to evaluate purchasing the companies, estimates that it would cost customers an additional $8.60 per month on their water bills in 2005, with additional increases of $3.71 in 2006 and $2.07 in 2011. Other financing options include impact fees, whereby new customers pay a higher share of expansion costs, and assessments allocated to each property based on benefits received.

The PSWID board was dissolved by the Gila County Board of Supervisors in August after a series of resignations reduced the number of board members from seven to two. Gila County Manager John Nelson was named interim administrator.

Nelson appointed a 12-person citizens committee representing a cross-section of the community to provide input until a new board can be elected next year.

If the petition drive is successful, the PSWID will attempt to negotiate the purchase with Brooke Utilities, but if Brooke refuses, the companies can be acquired through condemnation.

"Hopefully, (Brooke Utilities President Robert Hardcastle) will be willing, but if not we'll have the power of condemnation," Pugel said. "There's no choice. It's eminent domain."

Myndi Brogdon, a spokesperson for Brooke Utilities, said the company is working on a response to the petition but has no comment at this time.

An informational brochure will be distributed to affected residents of Pine and Strawberry beginning next week. Petitions are available at Coldwell Banker Bishop Realty, ERA Young Realty and Prudential Arrowhead Realty, all in Pine.

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