The Pine Strawberry Water Improvement District board has officially voted to offer Brooke Utilities $2.55 million for the water company, borrow $5.2 million and cancel the K2 well agreement.
Board attorney John Gilege told members at the Oct. 16 board meeting that declaring the K2 agreement null and void will mean the district is no longer bound by the Joint Development Well Agreement (JDWA).
Board members said they took the action because Brooke president Robert Hardcastle has written he will proceed with the K2 well, has hired a driller and would be requesting a draw from the escrow account.
The board’s offer to purchase the Pine and Strawberry Water companies includes $1.98 million for the current assets, plus $500,000 for the value of the business as a going concern and $70,000 for land.
The balance of the $5.2 million loan would cover the cost of capital improvements in the two water systems, which have been described as decaying.
On the topic of the K2 agreement, Gilege predicted Brooke Utilities will probably counter the move with a lawsuit and that binding arbitration would be needed to solve the conflict.
Canceling the K-2 well agreement could result in huge legal fees, said Sam Schwalm, a candidate for a PSWID board seat in the upcoming election, and a member of the watchdog group Water For Pine Strawberry.
On the topic of the $5 million loan, board chairman Robert Haney said that the Phoenix firm of Stone and Youngberg is looking into financing options.
Also, Haney asked Dan Jackson of economists.com to begin preparing a cash flow analysis for the two water systems.
The consultant indicated the purchase and improvements could be made without raising water rates for two years.
Fred Krafczyk, a member of the Rim Country Water group that supports the takeover of the two systems, said Brooke Utilities has submitted paperwork