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2 Arizona towns are locked in dispute over who should provide water to residents

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By Lorraine Longhi, Arizona Republic

Tony Geiger has lived in Carefree for almost 20 years but gets his water from the neighboring town of Cave Creek.

When Geiger joined the Cave Creek Water Advisory Committee in 2013, he noticed problems. The system was small, unreliable and had not been maintained properly, he said.

So he told Carefree about his concerns.

The concerns prompted Carefree, on the northeastern edge of metro Phoenix, to make good on a 2005 agreement with Cave Creek. The deal allowed Cave Creek to provide water to about 20 percent of Carefree’s residents, but it also outlined how Carefree could take over that role.

Carefree sought to do just that in January, filing a condemnation notice in Maricopa County Superior Court to acquire the portion of Cave Creek’s water distribution system that serves its residents.

But Cave Creek is fighting back, saying Carefree went about its takeover in the wrong way.

“One thing is for sure, our customers in Carefree will face higher water rates to pay for the cost of the system, legal fees and the expense of separating a portion of Cave Creek’s service area from our fully integrated utility,” Cave Creek Mayor Ernie Bunch said in a released statement.

Cave Creek has pushed to dismiss the takeover and touted a survey they say shows Carefree water customers on their side. The survey told the customers their water rates would go up, something Carefree officials say isn’t yet known.

Why are they breaking up?

Geiger told The Arizona Republic that he knew Cave Creek’s water system was small but had never experienced major issues or water outages. It wasn’t until he joined the Water Advisory Committee that he said he became concerned the system wasn’t properly maintained, that Cave Creek relies on a small, unreliable pipeline of Central Arizona Project water and finances.

Carefree residents have voiced concerns to Cave Creek’s water committee over the years to make sure the town properly manages their water resources, but those complaints have gone unheard, according to Gary Neiss, Carefree’s town administrator.

Concerns have circled around fire hydrants that have not been properly maintained, Neiss told The Republic.

Carefree contracts with Rural Metro Fire to inspect its hydrants, including those managed by the Cave Creek water system. The fire company has reportedly been told by Cave Creek not to open certain fire hydrants for inspections, Neiss said.

Cave Creek officials say fire hydrants are in working order. Cave Creek has conducted 135 inspections on fire hydrants in Carefree so far this year. The only hydrant reported out of service was at Sunset Trail and Carefree Highway and it was repaired in five days, according to an inspections report.

But several hydrants cannot be serviced because of broken valves, and while the inspections do occur, corrective action has not been taken in several situations, Neiss said.

“Carefree is worried about liability to their citizens and community,” Neiss said. “This is the culmination of a lot of different factors, including a lack of representation and Cave Creek not living up to its obligation.”

Agreeing to break up

Cave Creek provides water to 2,795 customers in Cave Creek and Carefree based on the 2005 agreement. Of those, 536 are Carefree residents.

In the deal, the neighboring towns agreed that Carefree could one day acquire its portion of Cave Creek’s water system through a condemnation, followed by a 120-day negotiating period to determine the value of the system.

Carefree has now come to collect.

Cave Creek says Carefree violated Arizona law by not making a good faith offer and providing an appraisal before filing the condemnation action.

“While Carefree may have the right to buy a portion of our system, they still have to follow the law,” Cave Creek’s Mayor Bunch said in his released statement.

But Michael Wright, an attorney representing Carefree, said nothing in the agreement, or state law, requires Carefree to make an offer on the system before filing the condemnation.

“These guys in Cave Creek are totally off the mark,” Wright said.

Carefree filed the condemnation action on Jan. 29. Under the 120-day negotiation period laid out in the agreement, the towns have until May 29 to negotiate a purchase offer.

If the two towns cannot agree on compensation, Carefree will seek arbitration. If the matter is determined through arbitration, Carefree will be entitled to the system six months after their payment to Cave Creek, according to the agreement.

What will Carefree pay?

Carefree began requesting data from Cave Creek last winter to assess the value of the system, but Cave Creek has refused to provide it, according to Neiss.

Carefree looks to acquire approximately 20 percent of the current water system, minus some tanks and pumps. The town, earlier this month, offered Cave Creek just more than $2 million to acquire the system, according to Wright.

Cave Creek purchased the full system for $19.8 million in 2005. Bunch said the town has invested millions more to upgrade the system to provide quality service. “We didn’t buy it and sit on our hands,” he said.

But Cave Creek overpaid for its system at the time, Geiger said.

The agreement between the towns says that compensation must include the cost of physically separating the system, and be based on what Cave Creek paid for it.

Carefree has conveniently separated portions of the system which they are not acquiring and are only trying to attribute value to the distribution system, according to Joe Conner, an attorney representing Cave Creek.

“It is not a good faith offer and does not follow Arizona law on what just compensation should be in a condemnation case,” Conner told The Republic.

Neiss said Carefree does not need to buy into the CAP line or treatment facilities for the system, as they will rely on Scottsdale for delivery of their water.

Higher water costs for residents?

Cave Creek’s mayor has raised concerns that turning the water system over to Carefree will lead to higher water rates for Carefree water customers.

A survey commissioned by Cave Creek last month asked Carefree residents to weigh in on the most pressing issues in the town. Approximately 140 residents were surveyed, according to Conner.

The survey told residents that an acquisition of the system would cost more than $10 million, and increase water rates and taxes.

Carefree leaders say that’s ridiculous.

“The survey was misleading, dishonest and stated things that were not true at all,” Wright said. “Cave Creek is doing everything they can in the public arena, this survey for instance, to get out from underneath this agreement.”

Neiss said the town is still negotiating and it’s too soon to tell if rates will increase, but he said the town would work to mitigate that.

“Nobody wants to pay more for anything, but there’s no more important resource in the desert Southwest than water,” he said. “It’s an investment in our future, it’s an investment in our community, and it’s the most important thing we can provide to our residents.”

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