Ex‑Cave Creek Councilman files suit over utility purchase
by Kathleen Stinson

CAVE CREEK – A former Cave Creek councilman is challenging in court the town council’s authority to buy Desert Hills Water Co.

The lawsuit, filed by David Phelps in Maricopa County Superior Court, asks that the town’s purchase agreement with Desert Hills Water be declared illegal and void. The suit claims the town violated the state Constitution that forbids a town from owning a business.

Until the Desert Hills Water assets are transferred to the town and the company becomes a municipal utility, the town holds the stock as a business owner.

“What we have seen in Cave Creek is a blind rush to acquire water companies–at any cost. Our town leaders have acquired one water company and are condemning a second (Cave Creek Water Co.) without knowing the most basic elements,” Phelps said.

“We don’t know all the costs, or whether assets come with water rights, and we don’t know how much state oversight of the town we engender through this mad rush,” he continued.

Cave Creek’s council voted to purchase Desert Hills Water Co. for $2.5 million. At the time of the purchase in September, the water company was under investigation by the Arizona Corporation Commission which was looking into whether the company had violated state regulations in connection with the company’s failure to provide adequate water service to a number of its customers.

Phelps, a Cave Creek resident and town councilman from 1996‑1999, is seeking to enjoin the town from transferring DHW’s assets. In November, Cave Creek filed an application with the corporation commission asking permission to transfer those assets to the town. A hearing has yet to be scheduled on the matter.

The suit alleges the town has failed to follow explicit guidance from the community’s voters, who voted only to acquire Cave Creek Water Co., Phelps said in a press release.

He also stated the town “spent millions of dollars to acquire a water company that lies outside the town’s boundary and does not have water for its own customers.”

The Phelps lawsuit will be funded by Global Water Resources, the parent company of Cave Creek Water Co. Global Water was contacted for comment but did not return the call.

A separate lawsuit the former councilman filed against the town is currently pending before  the state Supreme Court.

In that suit Phelps claims the town’s condemnation lawsuit against Cave Creek Water Co. should not have been filed without approval of the town’s voters. In 2005, Phelps circulated a petition in which several residents asked town council to hold a public vote on whether to condemn the utility. According to Phelps, the council maintains their vote to file the condemnation suit was an administrative act and did not require a vote of the people. 

“Phelps believes the town has lost sight of its mission – Cave Creek exists to serve the town, not to buy water companies with inadequate water production outside of the town,” the release states.

A call placed by The Desert Advocate to Cave Creek Town Manager Usama Abujbarah and an e‑mail to the town’s mayor, Vincent Francia, for comment were not returned.

Reach the reporter at kathleen@thedesertadvocate.com.