Star Valley tonight will take the first step towards the forced sale of a water company owned by Brooke Utilities, after the company rejected the town's latest, $475,000 offer.
The town had earlier hired a certified appraiser who estimated that the 304 meters in Star Valley owned by the Payson Water Company were worth about $400,000, although the estimate was hampered by the refusal of the water company to give the appraiser full access.
The town then offered the company $400,000. When that offer was rejected, the town countered with a new offer of $475,000 -- the original appraisal plus the estimated $75,000 cost of going to court to have the company's Star Valley operation condemned preparatory to a forced sale.
On March 22, Brooke Utilities President Robert Hardcastle wrote a letter to the town in which he said that some water companies in the Valley have sold for $4,000 to $5,000 per water meter and that he wouldn't consider even investigating an offer of less than $3,000 per meter. That suggested that Hardcastle wouldn't consider an offer of less than $916,000 for his Star Valley operations, said Town Manager Vito Tedeschi.
After initially denying that Hardcastle had set a minimum price, Brooke Utilities spokesperson Myndi Brogdon said the $916,000 was a reasonable inference from the March 22 letter.
However, she said the company will do its own appraisal and called Star Valley's move to condemnation "premature."
"It's maybe premature, but if that's the direction the town has headed, then they've made their statement," she said. "We will be developing our own appraisal. We're receptive to more reasonable evaluation offers."
However, Tedeschi said the town had to go to California to find a certified appraiser who could provide an evaluation that would stand up in court.
He said the town couldn't legally pay more than the value placed on the company by a certified appraiser -- and that the court might well adopt the appraisal the town had already paid for -- or perhaps order another, independent appraisal.
In any case, he said that the courts have yet to bar a city or town takeover of a private water company within the town limits based on a certified appraisal.
Tedeschi said that the town's $475,000 offer was also in line with previously published statements by Hardcastle about the per-meter value of one of his Rim Country water systems. In that case, Hardcastle had suggested in a published newspaper account that the 3,000-meter Pine-Strawberry Water Company was worth about $4.5 million -- which works out to roughly $1,500 per meter. That's roughly the price Star Valley has offered for the facilities in that town.
However, other factors come into play in assessing the value of a water company -- including the condition of the existing infrastructure. In addition, the Pine-Strawberry water company suffers from chronic water shortages. In fact, last summer when wells in Pine ran dry -- Brooke Utilities pumped water from its wells in Star Valley and trucked the water to Pine -- where the hauling charges doubled or quadrupled the cost for most homeowners.
Pine water district wants to buy a water company from Brooke too
As it happens, the Pine Strawberry Water Improvement District also wants to buy out Hardcastle, in the wake of a bitter recall election.
In that community, the district spurred controversy when it offered to give Hardcastle some $300,000 to drill a test well to a deep water table, to be repaid to the tax-supported district only if the drilling produced a profitable new well. After the recall against the board members supporting that arrangement succeeded, the majority on the newly elected board wrote a letter to Hardcastle asking for a meeting on buying out Brooke's facilities in Pine and Strawberry.
"They have drafted a letter to the company," said Brogdon. "We offered a meeting. They were unable to get there that quickly. We've said, let's sit down and talk. We just haven't got there yet."
In the meantime, the efforts by both the Pine Strawberry District and Star Valley to buy out the privately held water company could also play a role in the future distribution of water from the Blue Ridge Reservoir.
Timing could prove critical, since Payson is already working on its plans to build a $30-million pipeline -- which would have to be larger if it were to carry an extra 500 acre feet that agencies like the water district or Star Valley might get from the Salt River Project.
However, SRP can only negotiate for water rights with a company or town that delivers water.
"Unfortunately, Star Valley is not a water provider. Until they become a water provider, they really can't put together an arrangement with SRP," said Greg Kornrumph, SRP's principle analyst in the water rights and contracts group. "Should there be an opportunity in the future for one of those entities to get access, we're willing to sit down and work with them on that. Only problem is that there is a limited window of opportunity. It really needs to be done in coordination with Payson's construction of their pipeline."
That same issue could complicate the picture for Pine and Strawberry, if the new water district board moves to buy out Brooke Utilities.
However, Payson officials have said they will initiate talks with all of the agencies that might claim a share of the additional 500 acre feet from the reservoir, which probably won't be delivered before about 2015.
That could include an agreement on the size of the pipe even if both Star Valley or the Pine Strawberry Water Improvement District were still in court trying to force Hardcastle to sell the two water companies to the public entities.