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The Verde Independent | Cottonwood, Arizona

home : opinions : opinions May 1, 2016


8/12/2014 1:46:00 PM
Editorial: Water, sewer rate hike a question of sooner or later

Nobody wants to pay more for anything whether it's gasoline, groceries or water.

But we always do, sooner or later.

And this week's discussion by the Cottonwood City Council about modest (about $1.50 to $2.50 a month for basic service) increases in water and sewer charges is not so much about paying more as it is about doing it sooner or later.

When we had this same discussion a year ago, the city had delayed the inevitable for three years and before that had held steady on rates for six years before an adjustment in October 2010.

Now, in what is a more reasonable approach, the city is reviewing its water and sewer rate schedule on an annual basis. That does not mean there will be rate increases every year, but it does give the council the option of making small, moderate increases once a year vs. a larger increase once every 3-6 years.

Take your pick. It's bound to happen sooner or later.

The increase in rates has been dictated by two bonding agencies that lowered the rating for the city water bonds originally used to buy four former private water companies. They lowered the bond rating because the ratio the city had between costs vs. revenue fell below 1.35 percent, which violates the bond covenants.

And as for the tiered rate structure for those customers in the city vs. those served by the former water companies, it too is an issue of paying more sooner or later. The city did not strong-arm any of those companies into selling, but, rather, the rates charged by the former private companies were highly deflated and the infrastructure was long overdue for upgrades. With a new EPA arsenic removal mandate hanging over their heads, the private utilities were thrilled to unload the companies on the city.

Related Stories:
• City prepares for annual water/wastewater rate adjustment


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Reader Comments

Posted: Friday, August 22, 2014
Article comment by: Oh, come on!

Cottonwood is in debt. Servicing that debt costs more than $3.4 million annually (when the city meets its payments), and most of the city's revenue comes from local residents.

As far as payers are concerned, it doesn't matter if you call it a fee or a tax. It's still levied on the same inflated rates, and it still all comes out of the same small pocket, along with general price inflation and county property tax levies for COCSD, Mingus, Yavapai College, fire, and county.

It doesn't matter if voters approved Cottonwood's risky financing back when they were feeling flush. We're tired of the assumption that civic financial woes take precedence over individuals' debts and obligations. It doesn't. If we're milked too dry, the city will be inundated with defaults, bankruptcies ,and homeless children wandering in the streets.

I could go into the hubris of hiring additional city personnel while examining means of raising everyone's cost of living. But I won't. That's chump change. It's the debt that has to be addressed. The city has to dump its cherished projects and use those funds to pay down the principal. It has to find savings in the Water Works operating expenses. Then we can talk about future water rate increases.

And if you can't recognize the reality of our position, then you're the one who has no reason.

Cas Scott


Posted: Wednesday, August 20, 2014
Article comment by: Point proven- can't reason with those that have no reason.

The utility tax is not a sales tax. Your statements are misleading and false. The budget does not say utility tax... you are making that up. Here is the actual text you are trying to skew,

"1.0% SALES TAX
This revenue source is derived from a 1.0% sales tax originally designated for the payment of debt service on the Wastewater Treatment Plant. This tax was to sunset on July 1, 2007, however, the City Council approved to implement a 1% Sales Tax effective July 1, 2007 to be used for capital improvement projects."

You are projecting your own version of this and it is false. One tax ended and another began.

People are not funding the Rec, Center on utility bills. That is just factually wrong and you are only hurting the credibility of your own and any others arguments on the subject by continuing to spread this falsehood.

As for the rates going up... You can thank many previous years of not raising the rates, plain and simple. As the old saying goes, you can pay now or you can pay later, but you are darn sure going to pay. The same holds true for all of us.

If we want the luxury of living in a beautiful desert we will have the pain of paying the price for a precious resource that isn't getting any cheaper. And if you don't want any extra arsenic in your water then that cost's money as well.

If you want the luxury of living in an unincorporated area with hills, aged infrastructure and 'lower taxes' then you will eventually have to pay the price. Maybe just be glad it took this long for reality to catch up to you.

Aside from that maybe consider buying the water system back if you are that concerned? No bonds allowed obviously.


Posted: Wednesday, August 20, 2014
Article comment by: HATER OF CITY DEBTS NOT THE CITY

Sorry you are not realist. Some of us like the city and hate the massive debt obligated to taxpayers. City leaders gambled with taxpayers money like a speculative trader to use millions of dollars of municipal revenue bonds that they obligated water utility ratepayers to pay to finance leveraged buyouts and acquisitions. Then they took out big loans to build 'big city style' capital improvements such as the $20+ million Cottonwood Recreation Center during the Deep Recession (in 2014 the city only recovered 54% of operating expenses).
2014: $1,539,875 financing commitment.

1% Utility Tax: http://cottonwoodaz.gov/finance/fy2012FinalBudget.pdf pg 35

1.0% SALES TAX LEVIED ON UTILITY BILLS
This revenue source is derived from a 1.0% sales tax originally designated for the payment of debt service on the Wastewater Treatment Plant. This tax was to sunset on July 1, 2007, however, the City Council approved to implement a 1% Sales Tax effective July 1, 2007 to be used for capital improvement projects. Commitment of funds: 50% Recreation Center Debt Service and 50% General Government M&O.

Why do you think your water and wastewater rates are going up?




Posted: Tuesday, August 19, 2014
Article comment by: Amazing that somebody that does not hate the city is assumed to be an employee.

There are those of us that like our city, the majority of us in fact.

Now for your other assumption- per your link to the 12th page of the budget, it lists a 1% sales tax as the source of the rec. center funding. This made us curious so to google! A sales tax is not the same as a utility tax. If you refer to the City tax code... for the definition of both-

http://cottonwoodaz.gov/finance/taxcode.pdf

Pages 5&6

"Sale" means any transfer of title or possession, or both, exchange, barter, conditional or otherwise, in
any manner or by any means whatsoever, including consignment transactions and auctions, of property
for a consideration. "Sale" includes any transaction whereby the possession of such property is
transferred but the seller retains the title as security for the payment of the price. "Sale" also includes the
fabrication of tangible personal property for consumers who, in whole or in part, furnish either directly or
indirectly the materials used in such fabrication work.

"Utility Service" means the producing, providing, or furnishing of electricity, electric lights, current, power,
gas (natural or artificial), or water to consumers or ratepayers.

One of these is not like the other, one of these is not the same. So please feel free to deduct $20,736,231 from your total and there you have your new number for the day.

You do recall what happens when you assume right? So your assumption that 1% utility is 1% sales was absolutely and clearly false. Can we agree on that basic fact of reality? If not then is there any reason to try and reason further?

And in closing, what else have you assumed that is incorrect?

Not an employee... just not a hater.


Posted: Tuesday, August 19, 2014
Article comment by: TO THE WHACK A MOLE CITY EMPLOYEE WHO CAN'T READ

Dear Whacked,
Sorry for your reading challenges and illiteracy. As you can clearly see posted on this reader comment board, you could take the time to read the city's FY 2015 Budget and the Cottonwood Muni Prop Corp's 2004 and 2006 Municipal Revenue Bond Issues that are public documents.* This will enable you to add all of the debts' principal and interest payments together:

1) COTTONWOOD ARIZ MUN PPTY CORP WTR SYS REV SR LIEN
10/20/2004 2006 to 2029
Total Debt Service $23,005,376:*
Source: Municipal Securities Rulemaking Board (EMMA - MSRB)

2) $23,965,000 SENIOR LIEN WATER SYSTEM REVENUE OBLIGATIONS, SERIES 2006:

*http://emma.msrb.org/MS243618-MS218926-MD425948.pdf

COTTONWOOD ARIZ MUN PPTY CORP WTR SYS REV
SR LIEN
10/20/2004

*http://emma.msrb.org/IssuerView/IssuerDetails.aspx?cusip=221820

Reference: Source: Arizona Report of Bonded Indebtedness - City of Cottonwood:
www.azdor.gov/ReportsResearch/ReportofBondedIndebtedness.aspx


Greater Arizona Development Authority (GADA) Recreation Center Loan: Principal
$14,860,000 GADA Recreation Ctr Maturity 08/01/2027 - 1% Utility (Sales) Tax
1% Utility Sales Tax Commitment: of funds:
50% Recreation Center Debt Service
50% General Government M&O
TOTAL RECREATION CENTER DEBT SERVICE $20,736,231 (incl. Principal & Interest)
Source: http://cottonwoodaz.gov/finance/fy2014FinalBudget.pdf Pg. 12

The Recreation. Center Debt Service will continue through August 2027.


Posted: Monday, August 18, 2014
Article comment by: It's like playing whack-a-mole, another day and another new number!

Really? So now the new number of the day is $87,542,383? You all need to pick one and be done... the more you make up the more your credibility decreases.

And really? A utility tax is paying for the Rec. Center? Please provide the magical source of that info.

What will the number be tomorrow? Do you all just tack on a random amount each day? Maybe reach into a sack of numbered tiles and see what you get?

Can't you all just get along even with each other? How is a city ever supposed to keep you all happy if you can't even pick a single number that you all agree on among yourselves?

Any estimates on the numbers you all will have by the next city meeting? Will we be into the trillions by then? How high can you all get?



Posted: Monday, August 18, 2014
Article comment by: Mary Heartman

WHAT DEBTS ARE SECURED BY YOUR WATER BILL:

City Bond Debts:

1) 2004 Rev Bond (to 2029) - 3 Water Company Purchases paid only by water utility customers: TOTAL DEBT SERVICE $23,005,376* = $2,556.15 debt PER WATER CUSTOMER OVER NEXT 15 YRS. SECURED & PAID ONLY BY WATER BILLS.

2) 2006 Rev Bond (to 2029) - Cottonwood Waterwork Co. Purchase - SECURED & PAID ONLY BY WATER UTILITY CUSTOMERS ON WATER BILLS: TOTAL DEBT SERVICE $43,800,782*

3) GADA Recreation Center Bond (to 2027) - Paid by 1% Tax on Utility Bills - TOTAL DEBT SERVICE $20,736,231*
*INCLUDES PRINCIPAL & INTEREST.

$23,005,376 2004 Rev Bond
$43,800,782 2006 Rev Bond
$20,736,231 GADA Recreation Center

TOTAL = $87,542,383 principal & interest included.



Posted: Monday, August 18, 2014
Article comment by: Mary Heartman

@ Margaret Paddock
I'm on your side, but that quantum leap threw me, too. Continued Budget was explaining the difference between projected income and actual income.

I believe you're listing the due dates of Cottonwood's current bonded indebtedness.

If so, yes, that's much more to the point. If you add their share of the current Mingus and Yavapai College bonds, the good people of Cottonwood are on the hook for around $40 million right now.

@ It seems to me
Sorry. Too much revenue is going right back out the door in debt servicing.


Posted: Monday, August 18, 2014
Article comment by: Paying for Cottonwood's overkill

Piggybacking on the comment from "it seems to me": You hit the nail on the head.

You talk about frills we don't want or need (like militarizing our cops?) but perhaps the most egregious example of overkill in Cottonwood is this nearly $8 million satellite wastewater plant planned for Riverfront Park.

A simple treatment plant could be built for no doubt less than half that.

But in this case, Cottonwood wants to build a solar-powered showcase of a plant, one that supposedly will filter out the nasty pharmaceuticals that tertiary treatment cannot.

It will apparently be such a marvelous showcase that reportedly (this newspaper) your tax dollars have already been used to send Dan Leuder jetting around the country so he can brag about it at conferences.

This project could be described as a cadillac of a plant in a chevy-driving community. That would be overkill enough.

But it's way more than that. This is more of a custom-built Ferrari of a plant, so its way out of whack with the demographics of our significantly impoverished community. And nobody will be surprised if it's actual cost comes in at more like $12-15 million.

But the council is for it because they want to prove direct reuse of treated effluent is possible, thereby enabling more development and more population growth.

This despite the people, when asked, constantly telling them things like "live within your means" and "we like Cottonwood as a small town". It appears staff and at least some on the council still want to turn little Cottonwood into a big city.

It's decisions like these that keep your water and wastewater bills high, and will continue to do so going forward.


Posted: Monday, August 18, 2014
Article comment by: @ It seems to me:

Has it occurred to you that Cottonwood would like to drive the low-income riffraff out of its territory so it can become a tourist mecca like Sedona and have lots of real estate for internationally acclaimed celebrities with lots of cash? That way, it could have its cake and water, too.


Posted: Monday, August 18, 2014
Article comment by: @ M. Paddock- that is not what what 'budget misunderstanding' was saying.

They were simply pointing out that people love to use the numbers that seem to make their point even if they are false. Your list of bonds are not the same as projected and final budget numbers.

And now we have a new number in the mix as well? First you all are talking about a 16 million dollar bond that did not seem to exist? then complain about the 60+ million budget When in fact that is false as shown by previous comment, then Twamley is spouting about a 72 million dollar number? It seems that those in dissent can't even decide on the actual number they are upset about?

As far as the comment on arsenic- regardles of how much there is the feds decided on a new amount and any water company has to meet that number or face fines etc... so that really does not matter either way.


Posted: Sunday, August 17, 2014
Article comment by: Can You Drill?

An honest question---if you don't want to pay for cottonwood water, can you just drill your own well and put in a septic? I don't know, but that seems to be the solution for those who can't pay the City fees.

If you can't drill, dump the lawn, and just use water very sparingly. Think about how you can keep your monthly use to 1000 gals or less per month. That's about 31 gallons per day. That can be done. I lived in a terrible yucky SW city for a decade with incredibly high water rates. I think twice I used more than 1000 gals (tier 1).

As to those bringing up arsenic, the EPA now measures in parts per Billion, a teeny tiny amount. Another topic entirely, but declaring any substance hazardous in that small amount -- ppb---is ludicrous and just a case of government heavy handedness with the other hand stealing your money. Water is not and never has been 100% pure of any and all chemicals or bio material. In fact if it were, it would probably hurt us because we wouldn't get trace minerals in our diet.


Posted: Saturday, August 16, 2014
Article comment by: It seems to me:

$63,260,685 is still a good deal higher than Tehachapi's...or Jerome's, or Clarkdale's, or for that matter, Cottonwood's in 2004.

Citizens of Cottonwood are paying for Big City frills that most residents don't want.

You could argue that much of that comes from sales taxes, but since a lot of sales tax revenue comes from Verde Village and Clarkdale, that argument doesn't hold water. Those Verde Valley citizens don't want to live next to a Prescott Valley look-alike.

Given an option, local residents would probably prefer lower sales and rental taxes to a new city hall, a showpiece sewage reclamation plant, and ever-expanding city services. Or possibly just an exclusion of groceries to help families living from paycheck to paycheck. Or maybe just pay off those bonds early and cap the water & sewer rates before they exceed single mothers and seniors' fixed incomes.


Posted: Saturday, August 16, 2014
Article comment by: BOOS TO THE VI EDITORIAL STAFF

Numbers don't lie. The city is seriously in arrears in bond debt service payments. and underwater on water revenues. Bond debt serv. payments in 2014 = $2,018,391.
See:

COTTONWOOD ARIZ MUN PPTY CORP WTR SYS REV SR LIEN
10/20/2004 2006 to 2029
Total Debt Service $23,005,376
Municipal Securities Rulemaking Board:

$23,965,000 SENIOR LIEN WATER SYSTEM REVENUE OBLIGATIONS, SERIES 2006
http://emma.msrb.org/MS243618-MS218926-MD425948.pdf

COTTONWOOD ARIZ MUN PPTY CORP WTR SYS REV
SR LIEN
10/20/2004

http://emma.msrb.org/IssuerView/IssuerDetails.aspx?cusip=221820

Pg 26 - Forecasted 2015 connections: 10,357
Actual Connections: 9,000 (the utility has lost customers, not gained customers since 2004)

The water utility been in the red for years. S&P warned about their inability to meet debt service requirements using net available revenues, which has led to the system using cash reserves to sufficiently cover debt service payments. For several years they have been in violation of the 2004 and 2006 bond covenants (1.35 of debt serv. plus .10 reserve covenant):
http://cottonwoodaz.gov/council/m/2009/m07-14-09ws.pdf

With a Baa2 (Moody's rating) and BBB+ (S&P rating), the city can't afford to slip any further.


Posted: Saturday, August 16, 2014
Article comment by: Water Billy

It's one thing to have tiered rates and get charged for what you use, but when you use very little and your bill is still nearly $60 per month it is another. Why do we pay a high fee just for the honor of having water connected to our home, whether or not we use water or not? It would be more fair to pay for what we use, instead of paying for what we don't want. (paying for someones bond)


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