Carefree Truth
Issue #672, July 23, 2018

Mayor Les Peterson said there are 2 issues in the big picture.  The long term issue is the continuing drought.  The short term issue is the state of the Cave Creek Water Company (CCW) management and infrastructure.  But even if CCW were the best managed company ever, the long term problems with CCW water shortages requires Carefree to bring its citizens on CCW into the Carefree Water Company (CFW) system.  Carefree is moving ahead with that.    Carefree residents on CCW are facing an intolerable situation both long and short term.



CFW has 3 CAP connections and Carefree sits on top of a huge aquifer.  Desert Mountain has been successfully recharging the aquifer, and is obligated to do so for another 1-1/2 years.  They will probably continue to do so beyond that time.  A new recharge well is big drilled near Cave Creek and Pima Roads.  Studies have shown that 94% of recharged water is retained within the aquifers.  Carefree currently uses 900-1000 acre feet of water per year, and anticipates using 1400 acre feet at build-out.  CFW has a CAP allocation of 1300 acre feet and has applied for another 100 acre feet, as well as having 6 wells that draw from the aquifer.  CFW has enough water to supply its customers through build-out.


CFW is increasing their utilization of CAP water, even though it costs less to draw water from the aquifer, because Carefree wants to maintain the aquifer as a reservoir, "banking" the water for the future.  The water attorney who is associated with the engineering study said that CAP cutbacks have been based on allocations, but they are talking about pooling cities and towns by 2025.  Scottsdale is 80 times bigger than Carefree, and Phoenix is larger still.  When combined, Carefree would lose their unutilized CAP allocation, so CFW is increasing the CAP usage.  It doesn't cost that much more to use CAP than to use aquifer water.  70% of the water bill to customers is for infrastructure costs; only 30% is for water.

https://vimeo.com/279568065  



Carefree is in an advantageous position for the long term.  If Lake Mead drops to a critical point, we will have maintained a maximum cushion in the aquifer.  CCW has one "straw", the 12 mile long pipeline to CAP.  The land along that 12 miles has dropped 15' in some places due to the depletion of ground water, producing uneven terrain.  At some point, that pipe will break.  Cave Creek sits over the shallow end of the aquifer; Carefree sits over the deep end.  CCW use is almost to the limit of their CAP allocation; CFW still has considerable leeway. 



Mayor Peterson turned the floor over to Town Administrator Gary Neiss to explain the financial aspects.  Mr. Neiss said CFW has a positive cash flow.  It was set up as a separate entity called a Community Facility District (CFD).  CFDs are established through State Statutes and there are different types of CFDs.  In charter cities, CFDs are funded through bonds paid for with property taxes.  As statutory town,  Carefree purchased the water company through another type of CFD that is funded by the base rate associated with the bills, which goes to service the bonds.



The bonds were paid off the week before the Council meeting, so CFW is now owned outright.  The Town had advanced CFW $2.3 million to put in fire hydrants and emergency storage tanks.  The repayment schedule for that loan starts this year and will be paid off in 8 years.  Carefree is looking at re-leveraging some of those funds to help with the issue in front of us with CCW.


CFW has a reserve account of approximately $1 million, and it is growing each year.  CFW is cash flow positive, paying off debt, and not relying on a separate entity to help fund the operation.  Cave Creek's Enterprise funds are supposed to be independent within the Town's budget, but they instead rely on the General Fund, where the sales tax and State Shared Revenue go to support Town operations.


Approximately 56% of their General Fund money goes to service Cave Creek's Enterprise funds.  "That's an astonishing amount."  Approximately 50% of that goes to servicing the debt load, and there lies the problem.  With such a high debt load, it becomes a problem to perform Best Maintenance practices, and to invest in the system.  These are deferred because of insufficient funds to offset costs.  There are deficiencies in proscribed maintenance for pumps and water lines.  Fire hydrants are not "exercised" annually, per protocol.  Over time, this builds a reservoir of liability.



That was the concern Carefree had.  Carefree has been trying to work with Cave Creek in addressing these issues, but not getting anywhere.  On top of that, Cave Creek has had many changes in "the Captain of the Ship".  Lack of continuity in leadership is a set-up for failure, creating a rudderless ship with no focus on goals.  When information is not written down, new managers have to build up a reservoir of knowledge from scratch, spending time to discover what they have in their system, on top of all the deferred maintenance.  The liability builds and builds.  "So once again, that's a concern.  I see a lot of shock on peoples' faces, but we have some solutions here, and that's what the Mayor's going to get to."


https://vimeo.com/279576042


Lyn Hitchon


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