A proposed 626 percent increase, up to about $42 a month, in water rates has stunned residents served by the Kohl’s Ranch Water Company.
The move comes as bankrupt water company owner ILX Resorts liquidates its assets.
After ILX declared bankruptcy in March 2009, it sold Kohl’s Ranch Lodge to a subsidiary of the Las Vegas-based Diamond Resorts. Diamond bought the lodge, but didn’t want the water company that serves the resort and 124 nearby homes, according to documents filed with the Arizona Corporation Commission.
Residents are preparing for the November public hearing, hoping to sway corporation commissioners to deny the rate increase.
“There are no other options,” said homeowners association President Shari Tucker-Gasser. “We could go out there and drill our own well, I guess.”
Now, the water company waits for a buyer and residents are left to wonder about the security of their future water supply.
ILX says that it used to subsidize the water company, whose water rates have not increased since 1972. However, since the company is liquidating its assets, the water company must become self-sufficient.
ILX President Nancy Stone confirmed this week that the water company is for sale. However, she couldn’t comment on how much it will sell for or if anyone has expressed interest. Legal counsel is handling the sale, she said. ILX now exists only to wrap-up its affairs.
Stone also declined to comment on the extent of the proposed hike.
Kohl’s Ranch area homeowner and Phoenix attorney Grady Gammage Jr. said the water company kept rates “artificially low” for years because it didn’t want to deal with the hassle of periodic increases.
Now, residents are subjected to a proposed “rate shock” that outpaces the competition, said Gammage.
ILX proposes a monthly residential rate increase from $5.75 to $41.75. To compare, a resident served by Tonto Village Water Company who uses 3,000 gallons of water each month would pay $13.15 excluding taxes, according to rates published online.
ILX also wants to increase rates for Kohl’s Ranch Lodge — the water company’s biggest user — from $65.52 to $2,226. ILX expects the hikes to generate an extra $79,000 annually. Nobody representing Kohl’s Ranch could be reached for comment by press time.
Gammage, also a real estate developer, called it “peculiar” that Diamond didn’t want to purchase the water company along with the resort. Gammage said he would want the long-term security of owning the company after making such a large investment in the resort.
“I don’t know whose going to end up with this water company,” said Gammage. He is drafting a letter to the ACC asking commissioners to deny the request.
Tucker-Gasser, the HOA president, says the proposed hike surprised residents.
“I can expect to pay more. That seems low to me,” Tucker-Gasser said about present rates. “When you look at the proposed rate — it seems excessively high.”
However, “to take on such a huge rate increase — it’s like a slap in the face,” said Tucker-Gasser. Many older residents live on fixed incomes, she added.
Also, Tucker-Gasser worries that if the ACC approves the water hike and makes the water company profitable, that Diamond Resorts would then buy it and get free water subsidized by the residents.
The water company has always been connected to the lodge, said Tucker-Gasser. Residents are wary of separating the two.
Complicating matters, residents are unclear which assets, including a fire system, on the ranch property belong to the ranch and which belong to the water company.
HOA members are discussing if they want to take on the water company, but the organization is more a club than a group prepared to take on such a large endeavor, residents say.
Gammage says the HOA doesn’t have the manpower or financial resources to buy the water company.