Henson
read into the record pages from the report relating
to water and stated, “I would like to know how the
Department of Real Estate was able to approve this
report.”
Department
spokeswoman Mary Utley spoke in general about disclosure
obligations in an
interview with The Desert Advocate last week.
Before
breaking ground, a developer must file an application
for a public report, she explained. The developer
is asked various questions and gives assurances
related to utilities and any ground fissures, for
example.
“A
developer is responsible for disclosing any sort
of negative impact on the buyer in that application,”
she said.
These
disclosures are then included in the body of the
public report. Home buyers are responsible for reading
the report and signing that they have read it. Disclosures
can also appear elsewhere in sales documents.
A
number of homeowners have said at public meetings
related to the proposed rate hike that the
developer did not disclose to them the costly infrastructure
Anthem residents would someday be asked to repay
through water and wastewater rates.
Pulte
spokeswoman Jacque Petroulakis has said the developer
disclosed everything required by
law, but would not speak specifically about the
Anthem water infrastructure.
“This
is an important failure to disclose, Henson told
the commissioners last Wednesday. “Was this an accident
or on purpose? I don’t know, because I can’t read
the mind of the developer.”
According
to Marylee Diaz Cortez, chief of accounting and
rates for the Residential Utilities Consumer Office,
when the developer realized in 1999 the cost of
Anthem water/wastewater infrastructure would be
five to six times that of any other private system
in the state, Del Webb/ Pulte, RUCO and the prior
commission reached an agreement to make the bulk
of infrastructure repayment due near build‑out
so those costs could be split between as many customers
as possible.
RUCO,
a state agency charged with representing the interests
of utility customers, has intervened
in the Arizona American Water case on behalf of
Anthem residents.
Although
some developers pay hookup fees which defray the
cost of infrastructure, no such fees were paid by
Del Webb/Pulte.
However,
neither the state nor the county can require the
payment of hookup fees, Utley noted, and developers
can pass infrastructure costs on to customers.
Ray
Jones, former president of AAW, testified at the
hearing.
Commissioner
Kristin Mayes asked Jones if Del Webb/Pulte considered
paying hookup fees. Jones responded that he did
not recall the developer considering such a fee.
He said the developer thought it was “ok” to invest
in the infrastructure and then have customers pay
the cost in utility rates.
Henson
told the commissioners she is not responsible for
AAW’s financial problems. The company has stated
in its rate application that it is in “critical
financial condition” and has under‑earned
in Anthem for several years.
“Del
Webb will soon be finished with Anthem, its advances
will be refunded, and its role will be over,” as
stated in the current rate application. “Arizona
American wishes to remain and serve its Anthem customers
over the decades to come, but to do so it must get
recovery of its infrastructure investment. Regrettably,
this will require several significant rate increases.”
A
substantial portion of the infrastructure advances
paid by Del Webb/Pulte has not been refunded, the
application states. “The total amount of the refund
advances anticipated from 2006‑2008 for Anthem
Water and Anthem/Agua Fria wastewater is $39 million.
This will require at least one more large rate increase
for Anthem Water and Anthem/Agua Fria Waste‑water
customers.”
Although
the bulk of repayment is due as the community reaches
build‑out, the current rate hike is based
on Test Year 2005 and does not reflect the largest
refund payment, commonly referred to as the “balloon
payment,” that will subsequently come due. However,
it does reflect substantial repayments already made.
Henson
asked the commissioners to amortize the infrastructure
costs over 100 years, rather than
the six‑ to10‑year period currently
planned.
“Rather
than take it (the high cost of infrastructure) out
on the taxpayers of Anthem... I suggest
AAW eat their loss,” Henson said.
Property
owners in Arizona may file a complaint with the
Department of Real Estate based on material omissions
from a public report and the department will investigate,
Utley said.
The
department is responsible for protecting the rights
of real estate consumers.
