Cave Creek may seek additional $5 million  loan
by Nick Hall

CAVE CREEK – At the final town council meeting for the year on Dec. 3, water was again the focal point of discussion. One issue facing the town regarding water is weather related, while another is a man‑made problem.

Mayor Vincent Francia opened the meeting, stating the town received about 3.5 inches of rain this past weekend. The downpour, coupled with runoff which flowed from surrounding areas, proved to be damaging to town roadways, including Continental Mountain Road, Rockaway Hills Road and several other areas.

Francia commended Town Marshal Adam Stein and Deputy Town Marshal Bobby Hernandez for helping organize community efforts to deal with flooded washes. He also urged people to stay out of the washes during storms for obvious safety reasons.

The mayor is also asking owners of backhoes to help with potential storm damage in the future. Those interested in helping can contact Deputy Hernandez or Mayor Francia.

The other major water issue dealt with approval of an application for a Drinking Water State Revolving Fund loan from the Water Infrastructure Finance Authority of Arizona. The proposed $5.5 million loan would be for infrastructure improvements to the Desert Hills and Cave Creek water systems.

“This 5.5 million loan will go towards the current infrastructure improvement project that’s adding storage and capacity to the Cave Creek system in order to also improve the Desert Hills water system,” Jessica Marlow, utilities manager, said.

The current capacity of the town’s water plant is 3 million gallons per day, and water is routed over three treatment “trains” which run continuously during the summer. Some of this equipment is more than 15 years old, according to Marlow.

 “The expansion will increase the capacity to meet peak demands and will provide redundancy if anything were to happen to the equipment,” she added.

Jay Spector, of RBC Capital Markets, is serving as Cave Creek’s financial advisor on the matter. Spector said the loan is structured similar to the $6.6 million WIFA loan the town received in May. While repayment of the loan would be spread out over 20 years, the interest rate will not be determined until loan closing takes place, sometime in the second quarter of 2008, according to Spector.

“It’s hard to anticipate where the capital markets will be in six months,” he said. “The interest rate on the May 2007 loan is 3.519 percent, which is a pretty good below‑market interest rate. I would suspect (the rate) would be somewhere in that neighborhood, depending on where the market is.”

Councilwoman Kim Brennan voiced concerns regarding repayment of the May ’07 borrowing, plus an additional loan, and asked if revenues are sufficient to repay both loans.

“Revenues are more than sufficient at this time to cover both loans,” Spector replied. He also stated that WIFA has a pretty stringent service requirement and wouldn’t grant the loan if revenues from the water system could not support repayment.

Cave Creek resident Charles Spitzer questioned when the town’s spending will stop.

“Maybe the money is needed to prop up this decrepit water system we have purchased,” Spitzer said. “However, somewhere there has to be a limit and you have to figure out where it is before you mortgage everybody’s money in town.”

The motion to approve authorization of the WIFA loan application was passed unanimously, although application approval does not necessarily mean the council will go forward with executing the loan in the future.

“We knew the system was decrepit when we bought it,” Councilwoman Grace Meethsaid. “But I looked at it from Day 1 as water is our most precious resource. There is no life in Cave Creek without it. We do not want to get ourselves in so deep that we’re all sorry we did this. We do need to do some soul searching when this application comes to fruition and make sure this is something we need and want to do.”

“This council and town staff is committed to building and maintaining water service for the town of Cave Creek. We are not interested in making a profit. However, this water system must pay for itself and it must be done in an efficient way.” Councilman Thomas McGuire said,

In other matters, council unanimously approved the reappointment of Bob Williams and Steve LaMar to the Planning Commission for three‑year terms. Council members applauded the work of Williams and LaMar and said they were happy to have them on the commission. Their terms will expire Dec. 31, 2010.

Also unanimously approved by council was a town agreement with Anthony and Mary Venetucci and Diane and Leonard Lai for a sewer line on Hidden Valley Drive, Egret Street and Skyline Drive. There are currently septic systems in place at homes along those roadways.

The Venetuccis and Lais desire a sewer hookup to their homes, while the town wants to put lines in the area. Of the estimated $90,000 cost for the sewer infrastructure, the town will pay approximately $28,000 for its portion of the pipe, the manhole, and will share in the cost of the sewer line. In exchange, the Venetuccis and Lais will provide easements for both the sewer line and its maintenance.

The deal is a win‑win situation, said Councilwoman Brennan.

In light of the approaching Christmas and New Year’s holidays, there will be no town council meeting Dec. 17.

Reach the reporter at Nick@thedesertadvocate.com