In the upcoming weeks, the Carefree Water Company will distribute information on important topics related to the 530 new accounts to be incorporated into the company’s water system. As a Carefree resident, knowing more about each of these topics will be important to you.
The topics to be addressed will include:
Where does the water to supply these new accounts come from? How will this impact my water rates? How will this project be financed? What is the anticipated construction timing and how will it be handled? Why does it make sense for the Carefree Water Company to begin servicing these new accounts in Carefree?
The Carefree Water Company will make available Historical Background Information, including: The water history of the Carefree Service Area Issues related to the acquisition. The decision of the Arbitration Panel.
Water Supply Summary Details:
The Intergovernmental Agreement signed in 2005 by both Carefree and Cave Creek was very clear and concise from a water supply/water rights perspective: when Carefree acquires the CSA, the water supply/water rights to serve these properties transfers with them. The IGA included a detailed calculation based on metered water usage, to establish how much water is to be transferred. The calculation accounts for both developed and undeveloped properties within the CSA. Annually, 378 acre-feet (AF) of Central Arizona Project (CAP) water will become available to the Carefree Water Company to deliver to the CSA.
The current annual water demand of the CSA is approximately 299 AF, leaving 79 AF for future development. An acre-foot of water is 325,851 gallons, or enough to cover 1 acre of property (or approximately one football field) with 1 foot of water.
A typical residence uses anywhere from 0.25 to 0.75 AF of water in a year. CAP water is water from the Colorado River that is delivered to central and southern Arizona through the CAP canal. Both Carefree Water Company and Cave Creek have long-term contracts with the CAP for delivery of the irrespective allocations of CAP water. Currently, Carefree Water has an annual CAP allocation of 1300 AF and Cave Creek has an annual allocation of 2606 AF. Once the transfer is completed, Carefree’s CAP allocation will be 1678 AF and Cave Creek’s will be 2228 AF. Neighborhoods A, B, & C (the “Carefree service area” or “CSA”) bring water rights with them to Carefree.
How was the water supply/water rights transfer established? How much water is being transferred to Carefree? What is CAP water?
What are those allocations of CAP water? How does CAP water get from the canal to Carefree and to my tap? The Carefree Water Company has “Treat and Transport” agreements with both Scottsdale and Cave Creek. Both neighboring communities have the ability to treat CAP water to potable standards and deliver it to Carefree. Currently, all of Carefree’s treated CAP water comes from Scottsdale, but deliveries from Cave Creek are being reassessed based on recent improvements to their water treatment plant.
Over the next five years, national utility rate consultant Willdan Financial Services states that the average water utility rate increase will be in the 5% to 6% range annually. The City of Phoenix, for example, has approved annual rate increases of 6% – 6 ½% per year for the last two years, and expects these same rate increases per year for the next five years.
In the last two years, the Carefree Water Company has experienced a 4.4% annual increase in its rates. Willdan reviewed the financials of the Carefree Water Company and the financing options available to the company. In their calculations, they factored in that the 550 new accounts being added to the Carefree Water Company will pay a base rate comparable to what they pay now under Cave Creek Water.
This base rate is $20 per month more than existing Carefree Water Company accounts, and will offset the additional costs of the new accounts being added to the Carefree Water Company system. Willdan then incorporated the cost of the acquisition and construction costs related to the new accounts and the improvements to the existing system in their calculations.
Willdan determined that continuing a nominal annual increase of 4.4% per year for five to six years will satisfy the Carefree Water Company’s financial obligations, including servicing the new accounts. This equates to an increase of approximately $4 per month to the typical monthly water bill for each existing and new Carefree Water Company residential account.
Willdan further calculated that after the initial 4.4% rate increases, annual rate increases could be reduced to be in the 2% – 2.5% range. Low interest rates, an extended bond repayment schedule and the retirement of current debt also dramatically work in our favor to hold any required rate increases to a minimum.The addition of these new accounts will be rate neutral to existing Carefree Water Company accounts.
Willdan calculated that identical rate increases would be required if either: A) the Company acquired the new accounts and made the improvements to the existing system, and both existing and new water accounts paid for these through rate increases, or B) the Company did not acquire the new accounts, but made the improvements to the existing system only, and the existing accounts paid for these improvements through rate increases. The addition of the approximate 550 accounts currently serviced by the Cave Creek water distribution system would also create a more financially stable and sustainable Water Company by creating an improved economy of scale.
Underground Water Reservoir
The Town of Carefree filed in the Arizona Superior Court on Friday, April 23, to acquire through condemnation, the property required for the site of an additional water storage reservoir in Carefree. An additional underground water storage reservoir was determined as being necessary to supplement the three existing water reservoirs in Carefree by the Water Company’s engineers, Coe & Van Loo (CVL).
This additional reservoir is required to 1) provide adequate water service throughout the Carefree Water Company’s system when all of Carefree’s residential and commercial accounts are integrated into the system and 2) to store a portion of the total system’s water requirements for immediate use in the event of a structure fire or wildfire.
The site identified by CVL is immediately adjacent to Tom Darlington Road in a large open space tract owned by the Boulders Homeowners Association. This site was determined by CVL and the Water Company Management as the best location because it satisfied all of the system operating requirements. CVL evaluated 32 potential sites for the reservoir using established criteria relating to system operating requirements and the impact a reservoir would have upon adjacent residents. The site selected already had an existing high volume water line running through it. Beyond that, this site also permitted site access without the requirement of Water Company vehicles transiting through residential neighborhoods. The Town’s offer to purchase the property and construct the reservoir in concert with the Homeowners Association Guidelines was not accepted, thereby requiring a condemnation action. The Water Company will take all reasonable steps to minimize the visual impact of the reservoir. The reservoir will be placed underground as much as permitted by the sloping and irregular terrain in that area, and covered over with soil. It will be landscaped with native desert vegetation to minimize its visibility and to make the site, when construction is completed, in harmony with the surrounding desert vegetation and terrain.
Reasons to Consolidate
Water is a primary component of a quality lifestyle and economic prosperity for every community, particularly in the arid Southwest. Without an assured supply of quality water, life, as we know it in Carefree, would require dramatic changes. While most of the water accounts in Carefree are currently serviced by the Carefree Water Company system, the remaining 20-25 percent of residential properties plus a very important future commercial parcel, are serviced by Cave Creek.
There are differences in the water services provided to Carefree residents and businesses depending upon which water provider they have. And, while the Town of Carefree has supported those accounts on the Carefree Water Company system through such initiatives as making interest-free loans and co-signing on Water Company loans, Carefree residents currently receiving water service from Cave Creek have not received any such benefits. A number of reasons support integrating all Carefree residents and businesses into the Carefree Water Company system at this time.
Lack of Representation: Representation provides all residents with an avenue to raise concerns and problems, and have them addressed and rectified. The Town Councils elected by the citizens of Carefree and Cave Creek are each responsible for their respective town’s water system. Those Carefree residents receiving their water service from Cave Creek cannot vote in the selection of Cave Creek Town Council members and, therefore, have no such person or group in either Carefree or Cave Creek to whom they can express their grievances, have them addressed and hold those responsible accountable.
More Assured Quality Water Supply: The Colorado River, which supplies the water for use by the Central Arizona Project (CAP), is the source of the majority of the water used by both the Carefree and Cave Creek water systems. Our area is at the 20-year mark of what many weather experts predict could be a 50 year or longer drought. Cutbacks to CAP water in future years are likely. Carefree has a greater relative supply of CAP water, and additional water available from the large aquifer which lies beneath Carefree, to supply its current and future accounts than does neighboring Cave Creek. In times of water shortages and cutbacks, this could make a very meaningful difference in our quality of life.
Control of Water = Better Management of Development: Control of the water supply throughout Carefree will enable the town to better manage residential development and attract quality merchants which will add to sales tax revenues.
Without an assured water supply throughout Carefree, future development could be severely restricted.
Increased Economies of Scale: Adding an additional 550 or more accounts, an approximately 30% increase in the number of accounts serviced by Carefree Water Company, will yield better economies of scale given the relatively fixed overheads with which water systems operate.