No plan in place for permanent Desert Hills water supply
Desert Hills water rates could increase
by Kathleen Stinson

DESERT HILLS/CAVE CREEK – Town Manager Usama Abujbarah testified before the state Corporation Commission last week that town officials initially thought the purchase of Cave Creek Water Co. would solve Desert Hills Water Company’s supply problem, but have since found out that was not the case.

“We cannot rely on that connection (to Desert Hills) by itself,” Abujbarah said, noting CCWC is stressed and will require immediate capital  improvements in its storage system. Cave Creek purchased Desert Hills Water in September of last year, and formally acquired Cave Creek Water Co. on Monday of this week.

He also testified regarding future Desert Hills water rates, refunds to Desert Hills customers, a contract with Anthem provider Arizona American Water, and Cave Creek’s responsibility for operating the Sabrosa water system in New River.

Cave Creek went before the commission Feb. 27, seeking to transfer the assets of Desert Hills Water to the town. If approved, the effect would be to dissolve the company as a public service corporation, making it a municipal utility free from commission oversight. A decision is pending and will be made at an open meeting not yet scheduled.

According to Abujbarah, in order to augment the Desert Hills water supply this summer, the town is working on a 10‑year agreement to buy up to 2 million gallons a day from Arizona American Water.

“These arrangements don’t strike me as permanent solutions. Has any exploration for drilling wells been done?” asked Commissioner Kristin Mayes.

Abujbarah responded by talking about the town’s permanent connection between AAW and Desert Hills. 

“Now are you considering the Anthem connection your permanent solution to the water problem?” Mayes asked.

At first, Abujbarah said the connection to Anthem was the town’s permanent solution to increasing Desert Hill’s water supply. But after further questioning, he said it was only part of the solution. Drilling additional wells is a possibility in the future, depending on what is recommended in a new water master plan.

Finding a permanent water supply for Desert Hills is in issue after the commission held a hearing last summer looking into whether the water company had violated state regulations in its failure to supply adequate service to 189‑plus customers. Following that hearing, the administrative law judge recommended as much as $500,000 in fines, if DHW did not find a permanent source of additional water supply by April 1. That decision is also pending.

The town has hired engineering firm CH2M Hill  to produce a water plan encompassing both Desert Hills and Cave Creek water companies.

“I am concerned about the degree to which Anthem customers are being apprised of, and involved in, this agreement,” said Mayes.

Abujbarah responded Anthem customers will always have priority.

Arizona American Water employee Troy Day testified that should Anthem run short of water, it would be possible for AAW, operator of Desert Hills Water on behalf of Cave Creek, to revisit its contract with Phoenix to increase the amount of water it can buy from the city.

Abujbarah also testified that the town could only promise not to raise Desert Hills water rates over the next 12 months, but could not commit beyond the current council’s term.

“You said last summer (at the DHW hearing) the town was not going to raise the rates for five years or longer. Now we’re hearing you can’t commit longer than one year,” Mayes said. “What happens if the new council doesn’t think the same about the rates?” Who will DHW customers turn to politically, she asked.

 “I want to urge a strong “No” vote to dissolve DHW, unless there is a mechanism for some sort of checks and balance against the town of Cave Creek’s (authority) in place – I urge this not to go through,” said Mike Gilson, a Desert Hills Water customer.

Cave Creek resident Sara Vannucci also expressed opposition to the town’s application.

Vannucci said once the commission relinquishes jurisdiction over the water company, DHW customers will have no representation, should service issues arise. All Desert Hills customers reside outside the town’s boundaries, she pointed out, and are therefore not represented by Cave Creek Town Council.

“Many Cave Creek residents are concerned that this facility is being purchased with taxpayer funds for services which will not be provided to Cave Creek residents,” Vannucci added. “We do not support an increase in water rates to generate a profit on the Desert Hills water users to make this a good investment for Cave Creek.”

Commissioner Gary Pearce asked the town manager how Cave Creek planned to pay for capital improvements to the Desert Hills water system.

The town is planning to construct an underground connection from Anthem to Desert Hills.

“I’m more concerned about people paying for improvements that are not going to be served by these improvements. How the town recovers that is important,” Pearce said.

“The town is committed to making the capital improvements because they will serve the future needs of the entire community. Cave Creek will benefit and Desert Hills will benefit,” Abujbarah responded.

Administrative Law Judge Lyn Farmer asked the town’s attorney, Marvin Cohen, if  proper legal notice of the hearing had been sent to all DHW customers.

Desert Hills resident Barry Sprink said he would not have known about the commission hearing if  not for a story reported by The Desert Advocate. Gilson stated he spoke with several DHW customers who also did not receive notice of the hearing in the mail.

Cohen said a paralegal working for an attorney he recently replaced did the research of names and addresses of DHW customers and the previous law firm, Fennemore & Craig P.C., sent out 3,300 mailings. He then offered to get an affidavit from the paralegal to that effect. The judge asked him to submit the affidavit as a late filing.

Abujbarah told the commissioners –  sporadically present with the exception of Commissioner Mayes – that Cave Creek plans to establish a citizens advisory water committee to be appointed by town council. The committee, to be composed of four Desert Hills residents, five from Cave Creek and one from Carefree, would help keep customers advised of water company issues and could make recommendations to the council.

“If the advisory council is a rubber stamp, I see it as a waste of time; but if the town is looking for input, it could be useful,” Sprink said during an interview at the hearing.

When Commissioner Mayes inquired as to whether there is a precedent for a town to own a water company completely outside its boundaries, Cohen cited a City of Phoenix case in which the issue was whether the city could charge customers outside its boundaries a different water rate than those living within the city. The court held the city could charge different rates, as long as the rates are cost‑based, according to the town attorney.

Mayes then said, what is to stop the town from charging DHW customers for all these improvements?

Asked why the town bought Desert Hills Water Co., Abujbarah testified the strategy was to provide water services in the best interests of the entire community and to integrate the system from Anthem to Phoenix to Carefree. Last summer at the DHW investigation hearing, however, he testified the town’s long‑term strategy for buying the company was to sell it to Phoenix sometime in the future.

As part of the settlement between Cave Creek and Global Water Resources in the town’s condemnation suit against Cave Creek Water Co., Global insisted the town take over Sabrosa Water Co. in New River.

“We have to take Sabrosa and commit to maintaining the Sabrosa Water Co.,” Abujbarah said at the hearing. “We envision owning the Sabrosa company and to make capital improvements.”

He added, “We were reluctant to take Sabrosa. Arizona American advised against it. But, as a condition of settling the case, we agreed.”

The all‑day hearing on the town’s application to transfer assets started out looking promising for the town, as the commission’s own counsel, Maureen Scott, stated her support for Cave Creek’s request in her opening statement, before hearing the day’s testimony and before her lengthy cross‑examination of witnesses.

Mayes asked if Desert Hills Water/Cave Creek plans to refund customers who experienced daily outages last summer. The town manager said within 30 days of transfer of the company assets, 189 of the most severely affected customers would be refunded the basic service charge for the number of months involved.

In response to a question from Judge Farmer, Desert Hills customer Gilson said communication with DHW is poor, at best. He said during a recent outage, he called the 1‑800‑number provided by the town and the person who answered the phone was not able to identify him as a customer.

Cindy Sprinkle, another customer attending the hearing, said in an interview with The Desert Advocate that if she has a complaint, she can leave a message on the old DHW phone line and someone gets back to her in a few days. However, if she has an outage over the weekend, no one will respond at that time. Sprinkle stated she has experienced some brief water outages since Cave Creek acquired the company.

Abujbarah testified the 800‑number problem occurred some time ago and has been rectified.

However, Arizona American spokesman Todd Walker said in an interview that the two companies’ computer systems are different and have not yet been fully integrated.