Nye County Water District board members, who have more expertise in water and sewer systems than county commissioners, had a number of questions about the acquisition of Pahrump Utilities Company Inc. on Monday.
Board member Lee White was interested in commitments for future service.
“It’s important to know the growth of the utility, whether there’s an obligation at this time or not,” he said.
The Public Utilities Commission report said Pahrump Utilities provided water service to 445 meter customers, including 439 residential customers, two commercial customers, two public entities and two irrigation customers. It provided sewer service to 626 customers, including 622 residential customers. But the utility has 6,747 standby customers for water service and 3,088 for sewer service, according to the Farr West Engineering report.
Vicki Hafen-Scott said Adaven’s 1,159-acre Mountain Falls South subdivision has a development agreement for 4,422 lots, but at this time no parcel maps; she added Adaven has only paid capacity fees for 1,188 dwelling units, a dispute recently heard by the Public Utilities Commission. Pleasant Valley subdivision, which was planned by Concordia Homes, has 97 will-serve commitments but over 800 parceled lots, she said. The Bowman 230-acre property and a 120-acre Indian Road subdivision could add another 248 properties.
“We’ve had approximately $29 million paid into the utility company to build the facilities that Brent Farr is reviewing and we have provided an intent to serve,” she said.
The U.S. Department of Agriculture won’t count standby fees as revenue, accountant Dan McArthur said in his financial analysis last summer.
A statement near the end of the Farr Engineering report notes: “Farr West suggests that the county consider the potential risks associated with the debt that would result from purchasing PUCI, especially in this period of time when foreclosures and declining customer counts are a very real possibility.”
The PUC found the system met pressure requirements, not falling below 40 pounds per square inch and not above 100 psi. Engineer Brent Farr said the Public Utilities Commission concluded the system met maximum day demand and a required fire flow of 1.23 million gallons per day, with 6.82 million gallons of excess capacity available.
When it came to water quality, 85 percent of customers in a Nevada Department of Environmental Protection survey, said the water didn’t taste unusual. Of the 149 customers who commented on the taste, 76 said it tasted good to excellent and 22 said it tasted bad or had a mineral taste.
Seventy-one percent said their water bills were reasonable, 29 percent said they weren’t. Twenty-two percent said their water pressure was too low. Almost all the customers, 97 percent, said they didn’t have to call the company to report a problem in the previous year.
Water board member Tim McCall said he’d suggest the county continue to lease utility office space at 5250 Hafen Ranch Road, which currently has $1,800 monthly payments. The county should look at purchasing 40.7 acres next to the Jane Avenue sewer plant which is leased by HHH Investments, or at least the area around the rapid infiltration basin, he said.
But Weeks said, “my concern is the debt that the utility is going to incur in its entirety is bad enough without any additional debt down the road.”
Hafen-Scott told board member James Eason, the Tonopah town manager, she didn’t think the 2.6 million gallon Jane Avenue equalization basin could handle 1,448 additional will-serve agreements and was designed to push sewage to a larger, 2 million-gallon per day plant planned for Turner Road.
Pahrump Utilities doesn’t have to plan for sewage treatment facilities until they reach 85 percent of capacity, Hafen-Scott said. Farr’s report said current flows to the Jane Avenue sewer plant are only 95,000 gallons per day, two plants at that site have a capacity of 800,000 gpd. A septic company processes the sludge at the landfill.
“There’s an IRS ruling we have to spend any funds developers give us within two years or we have to pay taxes,” she said. “We’re going to pay 35 percent of that $1 million to the federal government in income taxes. That’s a real onerous issue in planning and one of the reasons we have more facilities than we really need, We couldn’t build it with 65 percent of the money if we pay income taxes.”
“There are some issues like that in the private sector that are not experienced in the public sector.”
Eason said the system would take many years to hit capacity. But he said the utility can’t go to the bank with the numbers.
“The thing that’s good about our model is the developers have paid for our facilities. We have not looked for loans to build that,” Hafen-Scott said.
Pahrump Utilities owns 19 parcels, 14 for water facilities totaling 4.5 acres and five parcels for sewer facilities totaling 43.95 acres, Farr’s report states.
Pahrump Utility Company has 1,673 acre feet of water rights with 12 potable wells. Historic water demand is 159 acre feet.
Brent Farr’s report said Pahrump Utilities Company returns an average of 95,000 gallons per day of treated effluent to the ground water through rapid infiltration basins, an amount that could increase to as much as 800,000 gallons per day as customers connect. The opportunity exists to apply to the state engineer’s office for return flow credit water rights, he said.
“The opportunity to receive water rights for effluent water returned to the basin could be an important asset for the county and could be used for water for parks and other civic or development uses in the southern portion of Pahrump,” he wrote.
The county would have to renegotiate contracts with third parties to repair breaks or have their own maintenance crew, Eason said. He was also concerned employees with institutional knowledge could leave after Pahrump Utilities turns over operation to the county in three to five years.
Hafen-Scott said, “We don’t have a plan to just leave in five years and not have anybody trained and good people in place, good structures and be able to transition what we have, which we feel is a good system. We have been cost-effective and we want to continue to establish that in the county so it would continue to be a break-even organization in the county and not cost the county money and actually improve on what we have and provide economic development in the county.”
Farr suggested Nye County or the water district board govern the utility, though Eason thought a General Improvement District made more sense. Eason didn’t feel the county commission had the resources to maintain what he called a model system.
Combined 2011 water and sewer operating revenue for Pahrump Utilities Company was $862,045 with a net income of $71,655. Total assets in accountant Dan McArthur’s report were $31,019,396, developer contributions of plant and cash total $29,793,917.
A customer using 12,000 gallons of water per month pays $26.65 per month, residential sewer charges are $40.57.
Weeks had concerns over the capital reserve account Farr suggested.
“Somebody’s going to have to pay the rates to establish this capital reserve account and it’s going to have to come from the users of the utility,” Weeks said. “The book value of this utility is $31 million, the asking price for the utility is $5 million. That’s all debt that’s going to have to be amortized over time with this capital reserve account. You’re going to be starting with this zero balance so someone’s going to have to come up with some money somewhere.”
Weeks noted the excess capacity could result in water stagnation in the tanks. Greg Hafen II said they keep the water level in the tanks low, enough to maintain fire flow and capacity. There’s also some flushing.
Farr told Weeks he imagined the utility would have a good ISO fire rating, with correct fire hydrant quantities and spacing, there are 234 hydrants in the system.
Eason inquired about a GIS system.
“This is going to help from a maintenance standpoint when you have a call out at 3:00 in the morning and the guy’s running around trying to figure out how to shut a valve off,” Eason said.