Originally Published: August 14, 2007 9:41 p.m.
PRESCOTT VALLEY - Town government officials plan to conduct an auction in October or November that would enable buyers of effluent (recycled water) credits to secure a 100-year water supply.
Assistant Town Attorney Colleen Auer tried to reassure Town Council members Tuesday that she had negotiated the terms for the new auction that would minimize risks to the town. However, three council members used the word "scary" to express their concerns.
Speaking to Auer, Councilwoman Lora Lee Nye said, "You have my trust. We are breaking ground here. That is what is remarkable and also scary."
Nye's comments came after a PowerPoint presentation in which Auer discussed the complexities of the upcoming auction.
The town attorney staff has worked for nine months to negotiate a price-floor agreement with a Nebraska-based limited partnership that was the only qualified bidder when the town conducted the initial auction this past November. The price floor establishes the minimum bid of $19,500 per acre-foot, and purchase terms.
Town Manager Larry Tarkowski opted to postpone the initial auction to sell 2,724 acre-feet of effluent credits, which drew the bid from Aqua Capital Management LP.
Aqua Capital may have the inside track when the town conducts the new auction for the same amount of acre-feet. However, Auer explained after the work/study meeting of the Town Council that other parties will be eligible to bid - and prevail over Aqua.
Bidders will vie for the credits with the intent of pledging to obtain a future assured water supply for 100 years, Auer explained.
The Arizona Department of Water Resources requires the assured supply because Prescott Valley is located in the Prescott Active Management Area. ADWR requires municipalities within the AMA boundaries to recharge as much water into the aquifer as they pump out by the year 2025.
The town's sewage treatment plant generates 2.3 million to 2.5 million gallons of effluent a day, Neil Wadsworth, utilities division manager, said after the meeting. He added that an acre-foot equal 327,000 gallons of water.
Hoping to capitalize on the value of the effluent, town officials scheduled the previous auction for this past Nov. 1 - 3.
"We are very close to finalizing negotiations," Auer said, adding that Aqua Capital's board needs to approve the agreement.
Among other things, the agreement sets the payment terms for buying the credits. The successful bidder may buy 1,103 acre-feet up front, and will have the option for the remaining 1,621 acre-feet.