"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

Carefree Truth
Issue #894, February 16, 2021

In summary, Greg Crossman said this is a one-time opportunity, created by a "perfect storm", to unify Carefree under one water provider which provides future certainty in the acquisition area.  Providing the equivalent level of service includes maintenance of the water system, fire protection with fire hydrants inspected and properly maintained, more fire hydrants installed in the current Carefree Water Company (CFWC) service area, quality clean and reliable water, and representation with access to those for whom water customers vote.  The end result is a stronger Carefree and a stronger Carefree water system.  Mr. Crossman asked if there were any questions or comments from the CFWC Board of Directors.
 
 
Director Stephen Hatcher pointed out that the 4.4% monthly price increase in the cost of the water for current customers of the CFWC includes existing projects that were already scheduled and additional maintenance.  Instead of doing it over several years, it can be accelerated.  Mr. Crossman replied, "That is exactly correct.  It will give the funds to do it now, rather than over the next 10 years".  Mr. Hatcher noted that adding the Carefree Service Area (CSA) is not offset by the 4.4%.  It's lower than that because it includes existing projects covered by that embedded 4.4%, and the savings needs to be recognized.
 
 
Director John Crane noted that the interest rate is around 3% now.  He asked Dan Jackson, who had presented the financial information, what he anticipated happening to interest rates 6 months from now.  Mr. Jackson said he was very concerned about the magnitude of the stimulus package being discussed by Congress.  He was concerned about inflation.  He believed the rates are as low as they can be.  In addition, there is a strong demand now for high quality municipal bonds.  Carefree is "A" rated.
 
 
Director Tony Geiger noted that it was important to highlight  the benefits to the current CFWC customers.  The CSA customers will be paying an extra $20 per month over the CFWC base rate, which will fund projects.  This will bring an economy of scale and financial strength to the CFWC, as well as additional Central Arizona Project (CAP) water.  The economy of scale flows to projects planned for the existing system.  It will bring fire hydrants to neighborhoods that have never had them, partially paid for by customers in the CSA.  These are tangible benefits to existing customers.  The CFWC will be getting a no-interest loan from the Town, and the existing Water Infrastructure Finance Authority (WIFA) loan will be paid off in the 2026/27 Fiscal Year.  This will give the CFWC the financial strength to have limited rate increases going forward, and will accomplish a big part of the 10 year capital plan for the existing system.
 
 
There will be a new pipeline to Scottsdale that will open up the Northeast corner of Carefree Highway and Cave Creek Road that will generate sales tax revenue to fund the General Fund, which benefits every resident of the town.  Carefree has a history of managing infrastructure by pulling together, not doing it neighborhood by neighborhood, done for the greater good. 
 
 
The Town gave a $4.5 million 0% interest loan to the CFWC to buy and improve the water company.  The savings of hundreds of thousands of dollars in interest payments kept rates lower than they would have been otherwise.  This was a subsidy to the CFWC rate payers.  The Town paid significant money to attorneys to help get the sewer plant in the Boulders closed, and now everybody pays the same rates.  There was an 18% increase in sewer rates in 2018, and another one is expected at the end of this year. 
 
 
Some businesses are saying the are not happy about the acquisition project.  The Town looked out for the best interest of the businesses with utilities.  The sewer rates in 2017 were determined by chair count, and the restaurants were getting outrageous bills.  The Town spent significant money on attorneys to petition the Arizona Corporation Commission (ACC) for relief on that tariff structure.  While that attempt was unsuccessful, the Town did get the tariff rate changed the following year when Liberty Utilities re-did the rates after the closure of the Boulders plant.  The some of the great cost of sewer rates transferred from the businesses to the residents.  This water acquisition project falls in line with these other issues, done because it's the right thing to do.
 
 
Chairman Les Peterson asked Mr. Jackson to address the 30 year loan term.  Mr. Jackson explained that the biggest disadvantage to a longer term debt is that more interest is paid over the life of the note.  But from a rate standpoint, it becomes a question of not how much is being paid, but of who pays it.  When utilities build large capital projects, these have a life span of 50-60 years.  They are being put in the ground with money invested in these projects.  Longer term loans equate the debt with who is using the asset, so more customers in the future are paying rates to fund the debt.  If the debt is paid quickly, customers in the future are getting a "free ride".  It is more equitable to spread out the term of the debt.  Mr. Crossman agreed, adding that a short term loan puts undue burden on the near term customers.
 
 
Mr. Crane noted that the plan includes improvements to the existing water company of $3.5 million, to be done over the next 2 to 2-1/2 years.  "Could you please elaborate on that?"  Mr. Crossman explained that defective pipelines which are either too small in diameter or have had failures have been prioritized.  In order to have fire hydrants, lines of 6" or greater in diameter are required.  Many neighborhoods have pipelines that are 4" or less in diameter.  The water company has identified a corridor within areas that don't have this fire protection due to the smaller pipelines.  These include The Highlands, Velvet Shadows, Rolling Hills, neighborhoods along Stagecoach Pass, and neighborhoods along the base of Black Mountain.
 
 
In the interest of time, Chairman Peterson closed the question and answer period in order to move on to the next topic.
 
https://vimeo.com/510902427
 
 
Lyn Hitchon
 
 
Prepared by Carefree Truth
Copyrighted
Visit our website at www.carefreetruth2.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.