Done Deal!

Pine/Strawberry board OKs handshake deal to buy water company for $3.5 million

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William Haney

After years of tumult and struggle, the Pine/Strawberry Water Improvement District Board on Thursday night approved a tentative agreement to buy the community’s privately owned water company for $3.5 million.

About 100 people cheered, clapped and shouted as Board Chairman William Haney announced that officials from Brooke Utilities had agreed to all the major points in a sale that would hand over the 3,000-customer company to the district by Sept. 22.

Haney predicted the district would sign final papers “within weeks.”

“The fat lady hasn’t sung yet,” said Haney, “but she’s warming up.”

The water district takeover could result in lifting the current building moratorium on vacant lots in the district sometime early next year, said Haney.

Officials from Brooke Utilities were not available for comment prior to press time and did not speak at the jubilant, half-hour meeting.

The district has arranged a two-year, $6.4-million loan from Compass Bank, with a roughly 4.75 percent interest rate. The district will draw about $5.4 million in the first year to buy the company, cover additional acquisition costs and boost the water supply. The district will have to pay only interest in that initial period.

In the second year, the district would draw another $900,000 to boost water supplies, perhaps by drilling a deep well.

The community has suffered under the terms of a building moratorium imposed by the Arizona Corporation Commission on the assumption that the area’s shallow wells couldn’t produce anymore water. However, several years ago several private landowners gambled on drilling deep wells, which apparently tapped into a new water table.

Within the initial two years of the loan, Haney said the district hopes it can arrange for low-cost, long-term federal water infrastructure loans at a rate closer to 3.5 percent.

The loan from Compass Bank requires the district to secure additional water, but doesn’t specify the source – unlike an earlier agreement with the bank.

Haney said the district will probably buy the existing Milk Ranch Well from businessman and realtor Ray Pugel if it can work out some problems with the well sucking in too much sand at full power. The district might also buy excess water from several other deep wells in the area to boost supplies quickly, said Haney.

Haney promised the cheering crowd that the sale will not boost water rates for the first two years, since the roughly $1.3 million in annual revenue from water sales would cover the cost of the initial, $250,000 annual, interest-only payments on the loan plus the costs of hiring a contractor with three or four employees to actually run the company.

Water rates might rise after that initial phase if residents support a $6-$10 million capital improvement plan to increase capacity and storage, said Haney.

Currently, the district relies on money from a property tax assessment. In the current year, that assessment will raise $300,000, which was supposed to help finance the purchase of the water company. Once both sides sign the paperwork, the district will move to drop that assessment this year to $90,000 and then eliminate it altogether next year, said Haney.

The battle to force the sale of the water company to the district has divided and embittered the small community, spurring a mass recall of former board members, a condemnation lawsuit and counter suits.

All sides would drop their legal action as a result of the agreement, said Haney, who thanked a long list of people. That included Robert Hardcastle and other top officials of Brooke Utilities, who he said had negotiated intensely and cordially for weeks.

The water company will have to relinquish rights to about 161 acre feet of water in the Central Arizona Project, which will then eventually sell that water right back to the district, noted Haney. The district could potentially sell that water right or strike a deal with Salt River Project for water in the Blue Ridge Reservoir.

The district lies uphill from pipeline Payson plans to build for 3,000 acre-feet of water from the reservoir, which would make it much to expensive to take water from the Payson pipeline. However, one proposal has suggested Pine could build a much cheaper pipe to release Blue Ridge water into Pine Creek, which would bring the creek back to life and recharge wells in Pine and Strawberry.

The beaming board members who each spoke before the supportive crowd said they hope the agreement will usher in a new era for the community.

“Nothing good come easy and this has not been easy,” one resident said. “Sometimes we’d like to pull our hair out – if we had any. Now we’ll have a system that will have fire protection and will support our needs – it may not be cheap, but it’ll be there.”

Vice Chair Terry Schleizer said “if you’d told me three years ago we’d be here tonight, I’d have said you’re crazy.”

Contract District Manager Harry Jones credited the board members with bringing the deal to pass. He noted that Haney has 25 years experience running much larger water companies and predicted that taking over the day-to-day operations of the system won’t pose a problem for the district.

“I think we have a team that’ll make it happen,” said Jones, who also serves as a consultant to Gila County and on contract runs three or four other small water companies in the area. Jones recently became a lightning rod for criticism when Gila County Supervisor Shirley Dawson complained that a consultant paid by the county shouldn’t be embroiled in disputes that involved lawsuits and recall efforts.

However, Gila County Supervisor Tommi Martin sat happily in the audience on Thursday and afterwards congratulated Jones on the sale.

“This has all been extremely frustrating at times,” concluded Haney, “with all the setbacks and misinformation, but this will represent a complete and final settlement.”

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