9,000 water utility ratepayers on hook for more than $31 million in bond debt & millions of dollars in interest
Cottonwood routinely used municipal revenue bonds secured by water bill revenues to finance its water utility expansion. Future generations will pay a staggering price.
By Sherry Twamley
Cottonwood AZ (July 21, 2014) – From 2004 to 2009, city officials in Cottonwood, AZ started a water utility and recklessly borrowed millions of dollars regardless of future needs, without asking voters’ permission or knowing if they could sustain the debt and interest payments over the next 25 years and beyond. Between 2004-2009, Cottonwood, a central Arizona city with 10,500 population in 2004, racked up $38 million in municipal revenue bond proceeds with no restrictions and virtually no oversight to take over private water companies. The city water utility’s ratepayers are indebted for these bonds until the year 2035 without regulatory supervision to safeguard them against double digit rate increases.
In 2010, the city racked up $20 million more in municipal revenue bonds to build a recreation center, and the debt is being paid by a city utility 1% tax until the year 2027. In other words, no one was watching. For decades to come, taxpayers will be paying off these bonds. For the city’s 9,000 Cottonwood Municipal water utility (Cottonwood Municipal Water & Wastewater Utility CMWWU) ratepayers, that is equivalent to taking out a 30-year mortgage to buy a car and making your children — or grandchildren — pay it off, adding on millions of dollars of interest.
In October 2004, city officials led by mayor Ruben Juaregui, Vice-Mayor Randy Lowe; city council members Diane Joens, KaRen Pfeifer, Bob Rothrock, Clarice Shamrell, Joan Cerny and Steve Dockray; and city manager, Brian Mickelson, started a water utility company and issued a $14 million revenue bond, secured by future water bill revenues, to seize three private water companies by condemnation (eminent domain) including Clemenceau Water Company, Cordes Lakes Water Company (Cottonwood Systems), and Verde Santa Fe Water Company in Cornville, AZ in Yavapai County suburbs with no previous utility experience. Rudy Rodriguez was the city’s finance director.
The city’s purchases for water companies in 2004 and 2006 came from borrowed money in the total amount of $37,545,000 ($13,580,000 for Cordes Lakes, Verde Santa Fe, and Clemenceau Water Systems; $16,580,000 for the Cottonwood portion of the Cottonwood Water Works System; and $7,385,000 was loaned to the city of Clarkdale to purchase their portion of the Cottonwood Water Works System). The city also borrowed a significant sum of money to repair, maintain and upgrade the purchased water companies’ infrastructure, fueling the city’s debt.
In 2014, $31,750,000 in water company purchase municipal revenue bond debt was outstanding; and $975,000 in principal payments has been made since 2004. A whopping $12,264,000 in interest payments have been made as of June 30, 2014.
Debt and Water Rates, Part 2: Water Under the Bridge
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7 Comments
Thirty seven million works out to be approximately $4100 debt for every man, women and child that must use the Cottonwood Municipal Water Utility. Users have no other source of water except well water if available. I call this a monopoly since users have no other recourse. More like a water cartel. Further they have absolutely no representation with the Utility. The cost to out-of-Cottonwood users is nearly twice that of Cottonwood residents. Would those users have agreed to those onerous rates? I think not! The bonds used to float the purchase of Cordes Lakes, Verde Santa Fe, and Clemenceau Water Systems; Cottonwood Water Works System were not put before taxpayers for a vote. It is time for Cornville to start thinking about drilling a well to service residents.
Somehow it isn’t comforting to know that all we need to do is drive a couple miles into Cottonwood to find the same government incompetence that is alive and thriving in Washington, DC. And they even have the same DC entitlement attitude that our kids and grandkids will gladly pay off the debt. Don’t worry, be happy!
Where and who did these high school civics drop outs borrow this money from, one of Tony Soprano’s fugidaboudit loan sharks? Do the math, its obvious they are paying usury rates. Rates that are supposed to be illegal!
So the city’s bucket is empty and their solution is to fleece the people that need the product. More government arrogance! And lest they not forget this is the West and water rights and water use has historically been an issue that the term “reasonable and customary” weighs in heavily.
What’s the matter with these people in Cottonwood’s city government? Are they so ignorant they are clueless as to what constitutes the city’s business base? This city runs predominantly on service industries supported primarily by retirees and Seniors. People who live almost entirely on fixed incomes that have no cost of living adjustments or merit increases! How many of our Seniors are living on a $200K per year salary like Cottonwood’s city manager? Come on, Cottonwood is considered a rural area? The population is only 12,500 plus/minus. Does that justify such a salary? This is Main not Wall Street!
Who sets these outrageous salaries? And when I say outrageous I’m amplifying the fact that the entire city government has to be incompetent if they believe the terms outlined for these water bonds represent “best value” business deals!
Capricious, punitive and arbitrary rate increases hurt more than just our retirees and Seniors, they hurt our already struggling businesses. The extra money in the form of water rate increases now going to pay off the city’s irresponsible business loans is revenue that won’t be spent at Fry’s, Safeway, Wal-mart, Home Depot, Subway, Carl’s, Walgreens, The VVMC, the dentist, the optometrist, and on and on. Or worse, is extra money that may not be able to be paid at all and result in discontinued service. The water company with a heart. Or is it some form of vendetta or discrimination being taken out on our elderly?
Wake up you Cottonwood wanna be rural politicians who call yourselves the city council and quit biting the hands that feed this city. As a former Lockheed Customer once told me, “DON’T MAKE YOUR PROBLEMS OUR PROBLEMS!” So, I’m telling you, don’t you make your business ineptitude and poor decision making our problems.
It’s very interesting that the water rate increases levied on our 9,000 stuckees in VSF comes on the heels of our voting to remain outside the Cottonwood city limits. If this is true it would certainly make the rate increase seem retaliatory and punitive in nature. Our people on fixed incomes didn’t vote to quit shopping in Cottonwood or to quit using services based in Cottonwood. Cottonwood seems to have a city council acting like a bunch of bratty children. In my opinion the possibility of a retaliation being behind such a rate increase should be enough incentive to, as a minimum, drive an inquiry by Yavapai County officials and as a maximum drive an inquiry by both Yavapai County and Arizona State Government officials into this unilateral abuse of city government power.
Elections are coming up folks and I would submit that Cottonwood’s city council has proven itself unfit to govern on any level, so vote them all out and start over. Probabilities dictate that you have a 50/50 chance of finding more capable Public SERVANTS and considering the issue at stake the odds are better than maintaining the status quo.
I’m with you 100% Paul. I think you have hit the nail on the head in every way. If I were a Cottonwood resident, I’d vote that gang of thieves out of office.
Opinion: R you mad about the water rates?
I was very angry to read in the Journal Extra about the problems with the Cottonwood Airpark. The questionable use and dealings of the land around it regardless of legality. This is really no surprise to anyone living in the Cottonwood area for any length of time. As is the water rate hike planned for their benefit to come. Cottonwood wants to force the surrounding areas to be annexed into their city limits by thirst. My question is, is this just another cover up? Are we in the Old West again? When even Cottonwood residents are held up to water rates higher than reasonable by the Land Baron of the area? I understand the people who make the rates have no problem with them as they most likely have the money to cover the hike. People in the any government do not care about the taxes or laws passed, how it does effects the poor person on the street. People who can’t get a good paying job or are unable to better themselves, Yes! we are out here some are even retired on fixed income. I read in the paper a while back that Cottonwood was saying people are using less water and they were having trouble in collection. Well Flagstaff had the same problem several years back when they had a water shortage and ask people to cut back. Guess what? Not much later when there was water people had adopted a let’s use less water life style. Revenue fell surprise and Flag wanted to do repairs on the lines but could not. Few people in government can see the individual tree’s because of the forest. Take out to many trees and you have no forest. This is only because they have their own agenda and it does not include our well being.
Respectfully:
Frank Craig
V V, Cottonwood, AZ 86326
Cottonwood city council members and the city manager know EXACTLY what they’ve been doing to the taxpayers for the past 10 years — obligating the Citizens of Cottonwood and surrounding suburbs to excessive and irresponsible indebtedness to the tune of $38 million in revenue bonds. So, council members, bite the bullet and start legislating solutions to control your flagrant spending. Shame on you…
It appears a voting majority of the City Council consistently opted for multi-million dollar projects which were unaffordable to a city with less than 12,000 population, at the time of passage and for generations to come. Granting big employee salary increases and benefits and awarding a $50,000 merit increase to the city manager while hiking city water rates by 67% to your outside suburbs is just plain wrong. City staff are elected to serve the CITIZENS, not the other way around, and should receive a reasonable salary commensurate with the actual services rendered to the community within a “budget” responsibly formulated for the size of the community.
This arrogant behavior smacks of the rampant, narcissistic behavior of so many of those who ascended into higher corporate positions of power and authority – the 1% in Washington D.C. You all know that your proper function in office is to serve the needs of ALL of the people — for the common good of ALL you serve, not to serve for your own personal aggrandizement .
If this is the common practice of the City Council, then petitions should be circulated to oust the irresponsible city council members, and replace them immediately with council members who respectfully serve the citizens who pay their salaries and use fiscal restraint.
The original and continued lies from the Cottonwood Mayors and board are beyond comprehension. Why did they do this? They have indebted the citizens for years to come with no thought to those on fixed incomes and who are in the unregulated unincorporated areas.
Recently we were faced with a 47% raise – the excuse given that we lived farther away and the water had to be pumped farther was outrageously silly and found to be yet another lie. Truth of the matter: the bonds are a high risk now due to the low return of receipts – our payments – due to the housing market collapse that has left many homes sitting vacant – no water bills being paid. Very poor decision to have put the payments up for “collateral”. No one can foresee the future and should not depend on situations remaining the same.
Now we are faced with the probability of another 67% increase. This is outrageous!
Why should we in the unincorporated areas and that is 4,000 + residents be faced with this huge increase because of inept decisions by a city we don’t live in that condemned water companies without knowing what it would cost for upgrades and then proceeds to indebt us further but lie about it? We in this area shop in Cottonwood thereby supporting it with the taxes we pay on food and services yet we are not given one thought of consideration when Cottonwood needs money to support their bad decisions. I am also appalled by the fact that 1% of the tax we pay for water goes to support the recreation center. I haven’t checked but I wonder if we “outsiders” would have to pay more to use it.
The mayor, city counsel and all on the water board need to seriously think about the actions they have taken. I don’t know about anyone else but if I lived there I sure would never consider voting for any of these individuals as I would feel they could not be trusted.
Yavapai County needs to change the law to see that ALL citizens fall under regulated water rates. As it is it is extremely unfair and as we have seen it gives free rein to those who would deceive the public.
The conduct of this city council needs to be placed under a full microchip
and WE need to see what comes up?
This really looks like and smells like the 1% process of thinking which is the hell with you and ALL for me I have mine.This needs to go and we with NO voice needs to see it through and get new leadership now.
Everyone please continue to pay attention to this and sound off.
Thanks roger d.