Carefree Truth

              Issue #442, November 23, 2015

 

 

A collaborative Agreement involving the Arizona Corporation Commission (ACC), Liberty Utilities (the private company providing sewer service to much of Carefree), the Boulders Resort, the Boulders HOA, and the Town of Carefree has been proposed that makes changes to the Liberty wastewater and treatment system which will enable the system to operate effectively and efficiently over the long term.  Scott Wakefield, the attorney for  the Boulders HOA and more recently for the Town of Carefree, has worked closely with Matt Garlic, the president of the Arizona division of Liberty Water, and with a Committee representing the interests of Carefree residents and businesses (the "rate payers").  The Committee consisted of Mayor Les Peterson, Vice Mayor John Crane, Town Administrator Gary Neiss, Tony Geiger, David Ohshel, and Phil Clement. 

 

 

 

According to the Mayor, "This has been a multi party, multi attorney writing fest/discussion fest for some time.  Now, we are there."  There are no huge winners or losers; the agreement represents the collective good.  All the parties have signed the Agreement except the Town of Carefree.  The Agreement was now before the Council for a decision.  If approved by Carefree, it must go before the ACC, and the Arizona Court of Appeals will be requested to stay all proceedings in the pending legal case between the ACC and the Boulders Resort. 

 

 

 

Mayor Peterson explained that the request by Liberty for a rate case hearing and the decommission of the wastewater plant in the Boulders dovetail.  This has been in court since 2009.  Certain negotiated costs related to this matter will be incorporated into the upcoming rate case.  The Mayor noted that the Town has no financial liability by participating as an intervener.  The Town and the Committee represent the interests of all classifications of Carefree rate payers on the Liberty system.  2 options exist.  Sign the agreement or don't sign it.

 

 

 

Utilities can accrue costs not covered within the rate.  At the next rate case hearing, they bring those costs before the ACC and present them for acceptance.  If accepted, they are built into the user rates.  Liberty is presenting $1,133,000 in accumulated expenses.  The Committee challenged a number of these, and filed as an intervener, which gave Carefree a seat at the table.  

 

 

 

The plant in question is the only wastewater plant in Carefree, and treats 15-20%, depending on the time of year, of the wastewater produced here.  The nearest home is owned by the Marshall family.  The plant was there when they purchased the home, and the plant operates within the guidelines, however, any plant has associated odors and noises.  The Marshalls filed suit and won, and the ACC ruled that the plant must close.  $287,000 in legal fees were incurred with the legal fees and settlement to the Marshalls.  But Liberty was prohibited from closing the plant by the Boulders Resort's subsequent court action.  $216,000 in legal fees were incurred pertaining to that court action challenging the plant closure. Effluent from the plant provides 15% of the water for 2 golf courses.  It was cheaper and easier for the Resort to pay lawyers than to find an alternative water source.  Liberty filed additional briefs supporting the ACC decision and tried to close the plant.  The Committee argued that the legal fees should not be borne by the Carefree rate payers on a proportionate basis, and challenged that before the ACC.

 

 

 

The plant processes 120,000 gallons per day.  The proposition is to close the plant, re-pipe it, and send the wastewater to the Scottsdale system, where 85% of it already goes.  Scottsdale has a new processing plant south of the Grayhawk area, and they have offered to process the additional quantities for a one time capacity fee of $10 a gallon, giving Liberty the ability to buy from someone with excess capacity.  The fair market value of this capacity fee averages $30 per gallon.  The difference between $1.2 million and $3.6 million makes a huge difference for Carefree's 1230 rate payers.  If the Agreement is not finalized before the end of 2015, the rate from Scottsdale Water Resources will revert to fair market.  

 

 

 

Liberty planned to close the plant within the next few years anyway, as it is almost 50 years old, and is expensive to repair and maintain.  Under the proposed agreement, the plant would close in 3 years, giving all the parties time to plan and implement the necessary measures, including engineering studies and trenching.  The new owners of the Boulders Resort are willing to install an in-ground water sensing irrigation system on the 2 golf courses.  This system would deliver the correct amount of water to each location, as opposed to the present system which waters everything equally, creating dry places and mud patches.  While it is an expensive up-front cost, it will provide a significant savings in the future.  The system uses approximately 15% less water than the current one, replacing the 15% that will be lost to the Resort upon the closure of the plant.

 

 

 

In the Agreement before the Council, Liberty has conceded to reduce the accrued legal costs from the Marshall Settlement presented to the ACC for acceptance from $287,000 to $87,000.  The Resort has agreed to pay 1/2 of the legal fees incurred by their lawsuit, dropping that amount from $216,000 to $108,000.  Liberty's and the Resort's concessions are also dependent on a prompt acceptance of the Agreement by all parties so no further legal fees will be accrued.  Excavation and line costs are rising, as are the operational costs of the plant. 

 

 

 

The Committee unanimously recommended that the Agreement should be signed now.  Mayor Peterson believes it is in the best interests of all parties to move ahead with this Agreement.  While not ideal, it is the best available solution.  All other alternatives "go downhill real fast".

 

 

 

Scott Wakefield agreed.  He said the Town is seeking additional tariffs from the Utility in the pending rate case to facilitate economic development and create a more favorable framework for distilleries and restaurants.  An alternative rate structure was proposed for commercial customers.  The current structure is particularly problematic for restaurants. Mr. Wakefield will advocate for the ACC to accept the Agreement.

 

 

 

Mayor Peterson said that when utilities request a rate increase, the ACC investigates the claims with diligence similar to a forensic audit.  They question everything.  It is a one year process employing financial wizards.  It is intensive, and is there to support the people.

 

 

 

Arizona Liberty president Matt Garlic called the Mayor's presentation "a great summary", and the Agreement "a good opportunity for a resolution", providing a "very clear path".    Liberty's attorney said it had been a "long and bumpy path" but this was "finally a new path to closure, free of speed bumps".  He added that the new owners of the Resort were willing to participate in finding a solution.  The Mayor explained that the plant was built before the current Real Estate disclosure laws were enacted.  1000' is considered the "odor zone" of even the best modern processing and treatment plants.  There are 200-300 homes within that range of the old Boulders plant.

 

 

 

Vice Mayor John Crane felt that it was important for everyone to understand that the Town wasn't litigating.  Tax dollars were not being spent.  This was between the Resort, the Boulders HOA, Liberty, and the ACC.  Carefree was a bystander, only becoming involved recently, as the issue moved forward towards a rate case hearing, assuming the role of intervener to represent the interests of the rate payers.  The Town looked at some of the expenses claimed by Liberty, decided some were disputable, and is trying to mitigate those expenses. Each of the parties involved made concessions.  This is a good solution.  Mr. Wakefield is minding the interests of citizens and businesses as the rate case proceeds. 

 

 

 

Carefree Town Attorney Mike Wright made a correction, stating the Town was named as a defendant in the law suit as a nominal party to the proceedings.  There was a written agreement that Carefree could "stand on the sidelines and watch the parties duke it out".  So while not really involved per se, it was named as a defendant in the lawsuit now in the Court of Appeals.  He advised that it was "urgent to get the Agreement approved".  

 

 

 

Mr. Wakefield said the Town's testimony regarding it's opinion must be filed at the ACC meeting the following Wednesday.  By having the matter settled before then, the testimony looks very different, not adversarial.  If the Agreement is signed, the testimony will be in support of the Agreement, rather than continuing to argue over recoverable amounts in the Court of Appeals, a different forum, and that resolution also might not result in the plant closure.  The settlement resolves the closure and the litigation.  

 

 

 

Mr. Wright stated that the Town has a vested interest in a quick resolution.  Without that, legal fees will continue to be incurred.  This is the "11th hour", the Agreement is still being fine tuned, and may get even better.  He recommended a resolution be made authorizing the Mayor to execute the final Agreement on an emergency basis to avoid further litigation, per ARS 38-431.02J.  The Council unanimously approved the resolution.

 

https://vimeo.com/user18676056/review/145645612/453a0bedd2

 

 

 

Post meeting, Committee member Tony Geiger said this had been a "Gordian Knot" that the Mayor had managed to untie.  He was extremely impressed by Mayor Peterson's understanding and handling of this very difficult situation. 

 

 

Lyn Hitchon

 

 

 

Prepared by Carefree Truth

Visit our website at www.carefreetruth.com  If you know anyone who would like to be added to the Carefree Truth email list, please have them contact me.  Feel free to share Carefree Truth with others on your list. Visit www.carefreeazbusinesses.com to see more info about businesses in Carefree.  Please support our merchants.