Worried about paying the bill for the Blue Ridge pipeline without big water rate increases, the Payson council last week approved a deal worth as much as $100,000 to sell two private golf courses perhaps 50 acre-feet of water.
The owners of Chaparral Pines and The Rim Club golf courses sought the deal to keep the grass alive until the onset of the monsoons. Normally, the golf courses rely on reclaimed water from the Northern Gila County Sanitary District, but deliveries have run short in recent months due to the region’s population decline and thrifty water habits.
The golf courses would pay roughly $3,500 a day for enough water to keep acres of grass alive in the hottest, driest month of the year.
The decision to use drinkable water for the two golf courses bears witness to a dramatic shift in the water politics of Payson, which some six years ago imposed the state’s toughest growth restrictions for fear running out of water.
But Payson’s agreement to spend a total of some $50 million to secure delivery of 3,000 acre-feet annually from the Blue Ridge Reservoir transformed water politics here and formed the backdrop for Thursday’s council’s decision.
“Our challenge is that because of the lack of growth, many of the assumptions we had about how we would finance Blue Ridge have not come through,” said Mayor Kenny Evans.
Evans noted that unless the town can develop additional customers for the water from the Blue Ridge pipeline, the town may have to consider water rate increases of close to 50 percent to qualify for long-term financing for the money needed to complete the system.
The town is also investigating whether the golf courses could enter into a long-term agreement to acquire a share of the Blue Ridge water, perhaps 100 to 150 acre-feet. If the town did strike a deal with the golf courses, it could likely include wastewater from its filtration plant it would otherwise have to pay the Northern Gila County Sanitary District to run through its system.
The arrangement would help offset Payson’s costs for the pipeline and assure the long-term water supply for the golf courses. As a side benefit, heavier watering of the golf courses would put more water into the water table. However, the use of Blue Ridge water for golf courses could also prove controversial for advocates of water conservation.
Originally, Payson officials assumed that they could pay for the bulk of the pipeline costs by imposing a $7,500-per-unit water impact fee. The fee raised millions that has paid for much of the preliminary work on the pipeline, but then new construction collapsed and Payson’s population began to dwindle — down an estimated 11 percent from its peak.
Moreover, Payson had assumed other communities would buy into the pipeline in order to secure rights to more than 500 acre-feet reserved for other northern Gila County communities. However, only Mesa del Caballo so far has expressed strong interest in buying into the pipeline. The community will likely contract for about 70 acre-feet annually.
However, Star Valley recently opted out of buying into the pipeline after buying several deep-water wells from Payson and concluding that it doesn’t have to worry about water shortages after all. Star Valley lies in a low spot that pushes the water table close to the surface. Water put on the golf courses that soaked in beyond the root zones of the grass would actually end up in Star Valley’s water table.
Star Valley bought out the private water company in town in part to qualify as a water provider so it could contract for Blue Ridge water, but then concluded it has ample water supply for all its future needs.
In addition, communities on the river or along the pipeline like Whispering Pines, East Verde Estates, Flowing Springs and Beaver Valley have expressed interest but so far have taken no steps to securing a water right. Most of them get their water from Brooke Utilities, which has asserted a claim to the water right, but hasn’t moved forward on coming up with the money to pay a proportional share of the pipeline costs.
As a result of the lack of money from potential partners, Payson now expects to shoulder virtually all of the costs of the pipeline. However, it has nearly exhausted its accumulated water impact fees and the construction industry remains a shadow of its former 300-houses-a-year self.
However, the town expects to award about $7 million worth of contracts for pipeline construction in the next few weeks, exhausting almost all the money it has on hand.
The town expects to finance the balance of the pipeline with perhaps $25 million in low-cost federal loans, which have a 40-year repayment period. In order to qualify for the bonds, the town must demonstrate it has a market for the water the pipeline will deliver.
Right now, rainfall and runoff put about 2,500 acre-feet annually into the town’s water table. Currently, the town’s shrunken population has one of the lowest per-capita water use averages in the state and so uses only about 1,800 acre-feet annually. The 3,000 acre-feet from the Blue Ridge pipeline will more than double the town’s long-term water supply.
As a result, the town may have trouble qualifying for the bonds if it can’t demonstrate a sufficient market for all that new water.
If the town can’t find a market for the water, the bond issuers could insist on a water rate increase before issuing the bonds.
The Rim Country Educational Alliance will pay more than $7 million in water impact fees when it finally builds the university project. That $7 million would pay a large chunk of the outstanding cost of the pipeline, noted Evans.
The contract with the golf courses will also boost the town’s revenue stream, reducing the need for a residential water rate increase to secure the bond funding, said Evans.
“After awarding this next set of (construction contracts), we really hit the wall” in terms of funding the pipeline, said Evans. “We counted on population growth and development fees to demonstrate a revenue stream, but none of those pieces are falling into place.”
This year, the deal with the golf courses will be short term, with a minimum standby charge of about $15,000.
Once the monsoons start in earnest — probably in mid to late July — the golf courses probably won’t need additional water. In addition, once summer sets in people start watering their plants and a lot more out-of-town visitors and second-home owners flood into town, which dramatically increases the amount of water flowing through the water reclamation plant, which then becomes available for the golf courses.