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      • CAREFREE: Raftelis Rebuttal Report - 7/24/20
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  • LETTERS FROM READERS #2
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  • TOWN MEETING AGENDA
    • Workshop to discuss Fiscal Year 2023-2024 budget 5/25/23
    • Workshop to discuss Fiscal Year 2023-2024 budget
    • Carefree Meeting Agenda: 4/4/23
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    • Carefree Meeting Agenda: Council visioning workshop 2/3/23
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    • Carefree Meeting Agenda: 10/25/22 >
      • 10/4/22 Town Meeting Pics and Slides
      • Carefree Meeting Agenda: Council visioning workshop
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    • 2/9/21 CAREFREE UTILITIES COMMUNITY FACILITIES DISTRICT
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    • Carefree Meeting Agenda: 12/1/20
    • 11/18/20 Swearing In and Strategic Meeting
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    • 10/13/20 STRATEGIC PLANNING WORKSHOP
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"Thomas Jefferson said a democracy is dependent on an informed citizenry. I don't care whether it sounds corny or not.  It's the truth." -Jim Lehrer
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Carefree Truth
Issue #891, February 13, 2021

Greg Crossman, General Manager of the Carefree Water Company (CFWC) explained that under typical organizational structures, water departments are directly underneath the Town.  Carefree's is different.  When the water company was first acquired in the 1997/98 time frame, the Town was allowed under State Statute to form a Utilities Community Facility District (UCFD), which is a 100% stockholder in the CFWC.  The CFWC is an Arizona corporation, acknowledged by the Arizona Corporation Commission (ACC).   
 
 
There is a definite separation between the Town and the UCFD and the CFWC, but the Town Council acts as the Board of Directors (BOD) of the UCFD and the CFWC by design.  The Council has been the driving force behind the acquisition of the Carefree Service Area (CSA) of the Cave Creek Water Company's (CCW) customers because it impacts all of Carefree, whether they are customers of the CFWC or of CCW.  Now, as the Town gets into the implementation portion, the Council will be functioning solely as the BOD because it will be making the CSA part of the CFWC.
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The areas in red show the parts of Carefree that are serviced by CCW, and the rest of the areas are serviced by the CFWC.  Carefree is divided between two different water providers because water service was historically provided by two separate private water companies.  Private water companies are under the jurisdiction of the ACC, which doesn't care about municipal boundaries.  It determined the boundary areas.  Both Carefree and Cave Creek decided to acquire the private water companies, but the boundaries remained the same.
 
 
Carefree bought the CFWC in 1998.  Cave Creek condemned CCW in 2007.  But in order for Cave Creek to condemn the CCW system, it required approval from Carefree since it included customers within Carefree's boundaries.  Carefree and Cave Creek entered into an Intergovernmental Agreement (IGA) in 2005.  The parties involved were the Town of Cave Creek, the Town of Carefree, the CFWC and the UCFD.  The provisions were that Carefree would support Cave Creek's condemnation but it gave Carefree the option at any time to acquire the customers and assets within the CSA.  If there were a failure to negotiate the price, it would fall back to arbitration.
 
 
In January of 2019, Carefree invoked the IGA.  Cave Creek wanted Carefree to take the formal steps outlined in the IGA.
That led Carefree to file a condemnation action, which led to a 120 day negotiation period.  During that period, the parties  could not come to an agreement, so it proceeded to arbitration.


The reason for the acquisition did not involve one single event.  There was concern from Carefree residents in the CSA about the lack of representation since they couldn't vote for the Cave Creek Council, which makes the decisions about the water rates and about money spent on the water system.  There were concerns about the level of service, the system reliability and redundancy, the water quality, the system maintenance and how it affected fire protection, and the water supply into the future because Cave Creek supplies water to both CCW and to the Desert Hills Water Company.  There were also concerns about the development and economic destiny of the commercial parcel in Carefree at the northeast corner of Carefree Highway and Cave Creek Road.
 
 
There were other overreaching reasons that were paramount in making the decision.  The Council wanted to unify Carefree under one water provider, leading to a stronger Carefree and a stronger water system.  This acquisition leads to an increased customer base of about 25%, which gives the ability to spread the fixed Operation and Maintenance (O&M) and Capital costs over a larger customer base, and more opportunity to install infrastructure improvements to the overall system.
 
 
The arbitration process began in late 2019 and concluded in January of 2021.  The independent 3 member arbitration panel was appointed by the American Arbitration Association (AAA).  Arguments were presented to the panel with expert reports and rebuttals, along with testimony with "cross examination". 
 
 
The parties were very far apart in their valuations of the water system in the CSA.  Carefree's was $1.47 million and Cave Creek's was $17.4 million.  The arbitrators heard detailed and complex arguments from both parties.  After wading through massive volumes of information, the arbitrators valued the CSA at $1.47 million.  The Towns are now entering into the settlement negotiation points.  The only major points are legal and expert witness fees and future cooperation as the acquisition moves forward.  The real work is still ahead for the CFWC and the Acquisition Team.  There is no magic switch that takes the CSA off of the Cave Creek water system and puts it onto the Carefree water system.
 
https://vimeo.com/510807102
 
 
Lyn Hitchon
 
 
Prepared by Carefree Truth
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