Cave Creek terminates $1.25 million Harkahala Valley groundwater deal, cites infrastructure cost uncertainties

Welcome to the special town council meeting for Cave Creek uh for January 13, 2026. Mr. Bob Voris, would you lead us in the pledge of allegiance, my neighbor across the street, it's my honor to speak of allegiance to the of the United States of America and to the republic for which it stands. One nation under God, indivisible, with liberty and justice for all. Location, location, location.

Um, we're going to skip through the u the town manager report and the public announcements and head straight to the action items since this is a special meeting. Uh the agenda item is council discussion possible consideration of proceeding or not proceeding in the purchase of a 1acre lot from Puhalo Valley staff take it. Thank you Mr. Mayor. Um our utilities director will be giving a presentation soon as he can get it up presentation. Hey mayor and council.

Um, uh, so big decision for the town to make tonight, uh, to go through. So, I'd like to give you some background and what we're going to do. And I just want to point out that, uh, Brad Hill and Michelle Finqua are online to answer the more technical questions and things that I can't provide. Uh, before we get started, everybody should know that we have two non-disclosure agreements in place. So, there are definite guard rails on what we can and cannot say or what we cannot say actually.

Appreciate that, mayor. And then, yeah, I think we'll go through it and if uh I I say anything I'm not, Michelle will probably jump on real quick and buzz me or something. So, so uh what's the town dealing with? Uh just to frame the the issue is we've got uh pending cuts to the Colorado River supply to Arizona, which will then come down to the town through cuts to our central Arizona projects that uh contracts that we have.

The best knowledge we have is next year there'll be a 20% cut to the uh the Colorado River water to the states coming down to also the municipal industrial supplies. It's impacting the town because it uh 90% of our water supplies are tied up in our Colorado River supplies. So it's something we've been talking about for a long time and uh we're at the point where at 20% cuts were about equal with what our demands are. So it says less up there.

Um it really comes down we're talking percentage points at this point. So, we've been really working in earnest to try and figure out the solution to this problem for the town. Um, we had the water form last week, talked about a lot of the details. Um, so the quick uh summary notes, you know, we talked about conservation, uh, customer outreach and education. Um, the new smart meters, uh, great resource for people to actually see what they're doing. Hopefully that changed usage patterns.

It helps us find leaks quicker, helps us reduce our losses in the system. We're looking for get uh exchange agreements in place to give us access to the town has long-term storage credits that we put in the ground over the last few years as well as there's actually Arizona water banking authority water that uh they've been recharging on behalf of the municipal industrial users uh since 1996. So we're looking to get those put in place that would help us uh bridge.

We're part of the Bartlett Dam project and we're also uh we've been thinking about Hada Valley groundwater and I'll see a date later. It's actually been about a year. It was actually January 18th that we first came to you and talked about the project and move forward with the NDA. Um, we were thinking about before that staff, but that's when the first council action on it.

Um, we're also looking for any other law uh water exchanges or anything else related to Colorado River rights that can help the town out. So those this isn't this isn't a complete list. It's not an exhaustive list, but it's actually a list of everything we're looking at. So tonight's action is dealing specifically with the Harkah Hala Valley groundwater. Where this um project could benefit the town is in two ways.

is that it actually um um allows us to increase our water resources at a time when we're uh losing water resources from the Colorado River that central Arizona project is providing to us allows us to diversify our water portfolio as you know as we've been doing our planning through the master planning before that having so much of our water tied up in the central Arizona product specifically in Colorado River water means we don't have a diverse water supply so being have we need to have some reliability into the system and diversity gets you that um uh harkah Hala Valley is a valley and I got some slides I'll show uh to the um the west of Maricopa County west side and it's was actually designated in 1990s uh by the state as an irrigation non uh expansion area.

They set these and four other basins aside well total of four basins aside to be import basins for groundwater into Maropa County. So after the Groundwater Management Act went in place in 1980, uh the the legislature had the foresight to say, "Hey, we actually need to think about this as Maroba County specifically and the uh actually the other AMAs grow. How are they going to uh uh have long-term water supply?" So these areas were set aside for importing of water.

So because it's an INA uh irrigation non-expansion area, the groundwater Harkin Hala Valley can be uh withdrawn and exported into the Phoenix metro area ANA. So the benefit to the town is we're in the Phoenix metro. um active management area. So this is a way we can get water new water supplies into the town. So so far what's been completed out in the in the project.

So and I'm talking specifically about the project and a few slides will show that um Harka Valley itself has more than 8 80,000 acre feet of water for 100 years um that the modeling has shown.

the project that we are looking to purchase into and have the purchase agreement with actually has defined it and they've got Arizona Department of Water Resources ADWR for uh short has approved the groundwater modeling there's been some other agencies leading the charge but that has been approved that they have 80,000 acre feet of water available underneath the pro project boundaries for 100 years of assured water supply so it meets all the criteria for a reliable long-term water supply it could help the town replace the loss in the Colorado River water in the central Arizona project.

So the town has two subcontracts uh legally as defined with central Arizona project. One's our municipal and industrial water supply and then then the one that we purchased a few years ago completed the purchase on was our NIA non-Indian agricultural water. Sadly since we got the NIA uh project or secured um we actually have not ever been able to order the full allocation 386 acre feet. There's always been a 7 a 25% reduction on that water.

And this upcoming uh year we're actually in it right now the new calendar year we can't order any of that water. So that's a less uh it's less priority water on the Colorado River. It's less secure. And then we're facing again 20% cuts in our municipal industrial supplies. That's what's really driving the town into the situation we're facing. Um u and and the good thing about the Harka Valley um is that um it will allow us to utilize the existing capacity.

And we had these conversations with central Arizona on our project because we have the NIA allocation uh m that's uh we can't order and then we have the MINI being reduced. There's actually capacity in the canal that in effect we're we're under contract for the central Arizona project doesn't have a Colorado River to fill that obligation. So the Arca Valley water would actually help us us make up the difference in the water supplies for us.

We're not going alone with this and I just want to point that out. Um specifically in Harkahala Valley, there's two other uh municipal agencies that are involved. Uh uh Buckeye and Queen Creek last year completed purchases. Wow is a hair under 6,000 acre feet that they made the purchase for and Queen Creek did their first purchase of 5,000 acre feet and Queen Creek is wrapping up two subsequent purchases this year. Um the second one will occur in September.

First one's about to be completed um for another 12,000 acre feet. So uh Queen Creek will be in the project for 17,000 acre feet and in addition to Buckeye 6,000 acre feet. In addition to that, uh Scottdale has its own project. It's completely separate, physically separate from this project that they've been working on for multiple years, I believe a few decades. And there's some developers out there.

So, people have known uh when the designation came up uh was set aside that this was going to be a a groundwater recovery import area, people started uh thinking about projects. This isn't new thinking. So, graphically, Harka Valley is again it's it's a 450th Avenue. goes through the bisects the property itself. It's west of Palvery Nuclear Plant. So, it's quite a ways.

So, I think I did a map quest one day and it was 2 hours from us to drive to the property, the 1acre lot that we've got been identified. So, it's it's it's it's a it's a bit of a haul for us, but the benefit you can see is the central Arizona project runs through the valley. So, if we can get the water up to the valley, then that can help us supplement the loss in the Colorado River water that we're going to experiencing here.

we can utilize the existing town uh cap pipeline, bring it up to the treatment plant or we could actually utilize the IGA that we have in place with Phoenix and through the C city of Phoenix interconnect which will be completed this summer uh we could have Phoenix divert and deliver that to the town. So it helps utilize the existing infrastructure that we have which is a good thing a good positive for the project. Uh this is a little bit more closeup.

Uh and the black line just for reference is showing the boundaries of the Harkahella groundwater basin. the the green area is really the project boundary and specifically the shaded area within the green is the properties in question that make up the Harka Hala Valley land owners.

So that's the group that we're talking about and it seems a little odd but we buying one a oneacre parcel so they basically have created a subdivision but that 1acre parcel comes with water rights to the entire project boundary and you can see I highlighted the central Arizona project. You we have the I 10 runs through the the valley as well as the central Arizona project. So there is a gap up to the central Arizona project uh crosses under the I 10.

So they'd have to fill in that gap, but they're starting to do some of the plary engineering on that. So they they know how to get the water up there. Um um so it's a it's a good it's a project is maturing. So what has council done? Uh again, it's almost a year ago today, we approved the um uh non-de non-disclosure agreement with Harkah Valley land owners. that was allow us to now have to start conversations with that group and understand more about the project.

It took through most of last year until October that they actually issued us the purchase agreement and that's uh we brought that forth to council because then that gave us an actual number that we could work with that was the purchasing again it's sounds kind of confusing we're picking purchasing a 1acre lot is a purchase agreement that 1acre lot comes with 5,000 acre feet of water for 100 years um and that purchase price was $1.25 $25 million.

As part of that, we had to put down some um earnest money, escrow money, uh to allow us for so real estate purchase transaction that allowed us then to do our due diligence phase was what we've been working on. So, um we have until January 15th and the due diligence to complete our due diligence. After January 15th, the thought is that we've we've lost the the $50,000 in escrow money uh because the thought is then we're working towards doing the final uh purchase of the prop of the project.

So, that's February 15th. So, those are the two contractual dates. So, we wanted to meet with you this week because we think if if the town is to move forward, this is the week to do it. If we're going to withdraw from it, we should probably do it this week before we get into a situation where contractually we're looking like we're terminating the contract.

Um, we're in due diligence so we can terminate without cause, but the town has been working diligently, town staff and our consultant teams to try and figure out the due diligence of this. A month after we entered into the non the purchase contract, we actually entered a non-disclosure agreement with EPCOR. EPCOR is a um private utility in Arizona. They actually have uh they started in um Edmonton, Alberta, and they actually also have a big presence in Texas.

So they're one of the larger private utility companies in the United States, even let alone Canada. And uh they're looking to do a common infrastructure project. So again, I can only talk a little bit about that, but they were the agency that was looking to come up with the infrastructure in order to get the water withdrawn from the ground, delivered up to a a treatment facility, and then pumped into the central Arizona project. they looked as a business opportunity for them.

So, uh it was good that we were actually able to have the Cindy in place in place with them because that allowed us then to sit down with them and understand the project. And we actually had a fairly uh extensive briefing briefing on the engineering related to the project that they've been working on. So, we've been in due diligence since uh um since the 18th of October when we signed the the uh contract.

Um, so we've been at and uh staff and our outside consultants uh really been Michelle and Quaan and Brad Hill have really been looking at this for us. It's been a lot of time spent on this. So you're coming together. This is the tip of the iceberg me sitting here. There's been a lot of staff hours and time looking at this.

Uh some cliff notes are again during our research uh um we have not found any issues with lands, entitlements, titles or other potential issues that would cause us concern for for proceeding. We have identified some uh features of the project that still are unknown and that's causing us concern.

That's what we wanted to talk to you today about uh including the operational costs, land management costs, land management specifically because when we actually do the purchase, we'll actually be part of an HOA in effect uh and and how the operation of that mechanism has been put together. And there's some other information as we dive into it and gather information.

So, we wanted to give council an update on th those questions that we have raised ourselves and then provide a recommendation for count um for council. Uh and I'm I'm stealing from our mayor. Uh the town is at the maximum point of uncertainty about our water and I'll I'll I'll cite him. I should have cited him on the slide here. There's so many unknowns right now. It's it's kind of nerve-wracking sometimes. The final cuts to the um as you'd say central project are unknown.

We do believe uh initially when we went when when we did our master planning effort we thought it was 25%. It's now sort of stabilized on a 20% cut but in several conversations it always comes up that this might be the first of multiple cuts. So we have to be prepared for that. So that is an uncertainty of the town's water uh future. So that's why we're very much trying to figure out a water solution for the town.

Um, we've, as I mentioned earlier, we've got a lot of other initiatives that are moving forward with again conservation and education outreach. Having our customers uh participate will help us will it will uh make up the gap that we're looking for. I'm not sure, but just with everything else we're working on, especially the um water exchange agreements that give us access to the storage account, the checking account of water that we put in the ground, I think that's a benefit to us.

And really if we can get access to the water banking authority water has been put in uh in place for the town. I think that really helps us uh move forward. But we don't know um again we we just replaced the meters in Cave Creek this past uh um by I think it was June that we finished that project off and we're getting really great data. We're really working with our customers.

We haven't implemented the desert hills um but it's being very helpful but we don't know um how and the exchange agreements are not finalized. So we have a lot of unknowns there. And add uh a little more confusion to it. The town has an invitation for bids out to sell the Desert Hills Water Company. And that's really look the the factor of you know, again, we were looking to buy 500 acre feet of groundwater from um Harkahala Valley.

We actually have a price for that 11.2 million for the purchase price, but we're sending over 500 acre feet of of water annually of the town and cap supplies to to support the Desert Hills water customers. And that's just because of the uh the the reduced capacity of the groundwater wells out in Desert Hills. The towns had to do that. The towns had to augment the Desert Hills water system since we did completed the purchase at the end of 2006.

Um before that, they actually had an emergency connection in place uh to Anthem uh to provide them with water. So they have not had water resources since before the town bought it and we've been augmented for over 20 years now. So we've got that uncertainty out there um uh related to other issues around uh water resources for the town. So the cost of Harkahala is one of the ones that uh there's some unknowns. Um uh we know the cost of the purchase, the water rights, that's the paper water.

Um um Brad's taught me that terminology over my years. Um you know, but as I tell him, I can't put paper water into your pipes and deliver it to my customers. But we know that purchase price. 500 acre feet of groundwater from Harkahala Valley land owners for 100 years would cost the town 1.25 million. What we don't know is the full capital cost to access that water resource.

Again, um I can can't relate numbers, but we I think uh what we were given a briefing on there's some good engineering estimates, good construction estimates, but they're not finalized and they're looking out that they've got a complete design and then they have to uh complete construction. So, we're years out. So, how much do I trust the estimates that are given to us today?

Um uh for someone who s stood in front of this council and had to explain the cost increases on the Phoenix interconnect project a few years ago, I my trust factor is is is uh I'm very cautious about doing that. So there's unknowns on what the final cost will be. The other thing is the other participants in the project. I mentioned Queen Creek and Buckeye. Um part of the capital cost uh the thought would be that they'd be splitting with them.

Um, if you look at the the scheme of the water, the first phase of the project, they're looking to develop uh groundwater resources to get 20 thou 27,000 acre feet a year of supplies. Our 500 acre feet makes us under five under 2% of that. So, in the scheme of the larger project, we're not that big. But then what happens if other participants don't need that water right away and they want to participate in initial construction?

Then our percentage goes up, which then could be an impact on our capital cost that we have to front up to get access to this water. And the other unknown is ongoing operational maintenance cost. This is going to be a groundwater uh wells uh production system. So they're going to have to do things like treatment. They know about things like arsenic and um I forget hexacchrome. Uh I forget the actual full textual name. There's actually two two treatment arsenic.

There's a few wells that they know they need to do some work on and other treatments. But you know as they run the wells while other constituents come up uh that they need to treat for and then the cost of running the wells uh you know that's an unknown at this point.

And then operationally the as these wells age and you need to start replacing well casings you know we're starting to look at that over in a capital program in ourselves in Desert Hills and we're looking to you obviously trying to bring on the existing wells in Cape Creek online but you know a well casing is not infinite. You don't drill a well casing it stays here forever.

So you start to redrill these wells and and large production wells uh you know you can be talking millions of dollars over five 7 million dollars just to redrill a casing these days. It's it's shocking the prices of these things. So those are unknowns going into this. And another big one for us that gives us angx is multiple permits in the agencies involved. Um I think they've got a good project moving ahead.

They've identified a lot of things, but there's a lot of things that that they don't know. Um just one example is the water quality standards. To introduce new water into the Central Arizona project, you actually have to meet the water quality standards. Central Arizona Project has actually adopted standards, but they're not the only agency involved.

the Bureau of Reclamation has to sign off of that and actually at this point um they're holding off until a project moves forward that comes up with a viable solution and they're waiting that to go through a federal um national environmental pollution uh agency uh review and a NEPA study before they'll adopt it. So you're going into a project with some unknowns about what how what are you actually treating for and what standards are you trying to meet? That's one example.

There's multiple uh things. There's there's the gap between the project boundaries and the central Arizona project. You cross federal land, state land, uh Maricopa County land, um you know, the ADOT right away. There's there's a lot of a lot of things to go through. Again, I think the project team is very smart. They've they've done been doing work on this, but I just bring that forward. That's a that's an issue to consider for the town going into this.

You know, how certain and when would we get access to this water?

because um for the other agencies involved when we spoke to them, this is more of a of a of a future issue for them, you know, the the the city is really dealing with wet water issue and we do think we have things put in place and especially a lot of the work that um Brad's been working on with the water exchange agreements that help us bridge, but um you know, this is something that we need to go into this with eyes open and can we make this purchase now knowing that it's it's uh we may need it before anybody else.

So, what's the driving impetus for them to to move forward with the project? Could they delay it when and will that have an impact? So that drives us down to what's the staff recommendation? Uh we believe the Harkah Valley project and I'll start off is is a viable water solution for the town. It mean it checks a lot of the boxes for the town, but then we have to look at the lens of all the other issues that we have.

Um, after fully considering all the potential issues, um, and going through the due diligence, um, staff is recommending that council not proceed at this time with the purchase due to the list, uh, some following reasons. The uncertainties about the full project cost. Um, again, the unknowns in the capital and what the ongoing operational cost. Um, the, uh, firm schedule for water deliveries.

While the project was looking for certain dates, you know, I I I'm cautiously opicious whether they could meet those. And then again, are the other parties going to participate at the level that they're currently engaged in the project or do they can they wait? Um um and and overall uh while we got the contract in October and we had prior discussions with the Arahillo land valley land owners, we just haven't had time to fully evaluate all the potential impacts to the town.

So, it's hard to go into it without having all the answers and to make such a large purchase and uh you know uh I hate to say burden this town. you know, we're just a few years away from paying off the the the loans that the town took on to actually purchase the water companies in 2006 and 2007 and all the major improvements that we had to undergo at that time frame.

So, in, you know, a little bit longer, well, a little more breathing space, we'll have a better understanding of of, you know, financially better better financial situation. We do, again, I'll I'll lead off again, it's a viable water project, and staff believes the project um is worth considering. Um, let me just read it so I don't mess it up. The HS belie continues to be a worthwhile endeavor and recommends the town to continue monitoring the project and re-evaluating at a later date.

We're pulling out in phase one of a project that we've been told is a three-phase project. Will it get more expensive? Potentially. Um will the infrastructure costs get more expensive? Probably. Um but is it better for us to wait and fully understand what we're getting into before we make this decision on on behalf of the town and the town's customers?

So, with that, uh, we we had to obviously in the staff report, and we probably should have given you the options, the staff report, we wanted to present you with two suggested motions tonight. Again, it's still council's decision. Again, right now, the the action is to actually complete the purchase to get the legal access to the water resources, um, the contract for the 500 acre feet for 100 years. So, it doesn't give us access to physical wet water. It gives us the paper water, right?

For that, if you look at that 500 acre feet and the purchase price and you divide it over 100 years, it's not that expensive. but you need to make the purchase upfront and that's what's really one of the things that's really driving staff's real concern on the project. So, we suggested two motions for town council to consider.

The first is to continue motion that the count uh town of K Creek waves its rights to terminate and move forward with the um uh toward the closing of the agreement for the purchase and sale of a lot with groundwater rights and escrow instructions dated October 23rd, 2025. That's effectively we're terminating our right to close it. We're closing the agreement.

And then second motion is to terminate uh move that the town manager on behalf of the town of Cave Creek uh promptly notify the seller that the town is terminating the agreement to purchase the sale of a lot with groundwater rights and escro instructions dated October 23rd, 2025 and allow but allow for future considerations of the project. We're cautious. We do not want to burn a bridge with Arcella Valley. Again, we do think it's a good viable project.

It's just we don't have all the answers and it's hard for staff to recommend such a large purchase at this this juncture for the town. And with that, I can answer any questions, go back and forth and do any provide any more information the council may need to make this decision. Questions from council to the left. Cynthia. Thank you, mayor.

Uh Sean, just to illustrate again the bridge time period that we're talking about where you anticipate there's adequate water supplies for ongoing operations as is and a timeline for the need for supplemental water. Yes, mayor, council member. Um so in last week's workshop, we went into a lot of detail on this. So the town as of the end of this uh year will have about just over 3,000 acre feet of of stored groundwater uh storage credits.

We're currently working with two other agencies that can actually uh physically withdraw that and give us access to those storage credits. So that 3,000 acre feet should get us out. That's probably three or four years. But the real uh gist of those agreements are is actually getting us access to Arizona Water Banking Authority waters in the two cap facilities. We think that could be uh that could get us uh 7 to 10 plus years of bridge to meet the town's uh future needs.

current projections um with a 20% cut is by 2030 we'll be in a a situation where we have a 500 acre foot gap in our water supplies to our demands that's still allowing for growth to occur in the system so we're projecting status quo we're moving forward we're still issuing water meters to customers the system doesn't grow that much but there is a linear projection um I think we projected like a two two and a half% growth I know it got brought up during the rate study that you know is that conservative or not you know what it'll actually be using that projection and uh the the the current 20% cut, you know, by 2033, we would need about 500 acre feet annually.

So, if we bridge that together with what we have, we I think we've got good solutions to get us out five to seven years realistically and potentially longer, especially if we get access to Arizona Watermaking Authority uh credits that we're hoping to get access to. Thank you. Yeah. Questions here. Okay, there is public We'll take public comment on this. We're going to limit it strictly to three minutes. So Kathleen Bape, good evening, mayor, vice mayor, and council members. Um, thank you.

That was a great presentation. I appreciate it. I appreciated the information at the presentation last week also. So, it's very helpful. I know there's a lot of things that are unknown to the public. So, I may say something that is redundant, but I don't know the answer to it. So, I am in agreement. And I think we should pause. It's a lot of money and there are a lot of unknowns. We don't know what the long range costs are going to be to construct to purify the water to move it up here.

I know we have an issue with water and we have to do something to address those issues. Um but I don't think that we should rush into this cuz it is a lot of money. Um I also wondered in my mind why we don't take this to a vote because we have to take other large purchases to a vote like the open space. I don't know the answer to that. It could be a legal answer. I really don't know, but I wanted to bring that up. Um, so far only two towns have gone into this.

So, it makes me wonder why aren't other towns jumping in on this? What What is it about it that prevents the other municipalities in the valley that they're not jumping in this so quickly right now? Um, and if we sell off Desert Hills, you'll have less customers than right now. And if the water customers are paying for this, that's my assumption.

Um, that's less customers to take on this debt or is I mean, how is how is it going to be managed going forward for all these years with all the costs and waiting is is a good idea, but yes, you're right. Cost go up on the purchase price, but you also mentioned the capital improvement costs. They're going to go up anyways. I don't know how much more they're going to go up. Nobody knows, but they are still going to go up.

So, I don't know if that's really a considerable equation in making a decision. Um, and I I was curious, I haven't heard anything or read anything as to what the water advisory board, how how are they weighing in on this? Um, you assigned that that committee, that board, I I don't know if it's ad hoc or not, months ago, and I know they've been meeting, but they didn't speak at the presentation.

So, I'm not aware of what their stance is on this or they think it's a good idea because they're all members customers, I'm sorry, of the water companies. So, I don't know. Those are my thoughts. I'm in agreement that you should pause. Um, that's my humble opinion as a person who lives here. But, um, thank you very much. Thank you, Abraham Ab. Good afternoon.

Uh I think if we bring this to simple basis, if each individual person sitting on the council was responsible for taking on a huge debt and asking themselves, well, if I take on this debt and not knowing what the future of things are and how much more would it cost me to do something, thing I would say that each one for your own personal basis you would say I'm not moving forth because I cannot see down the road and I cannot see what this will do to my own financial basis.

So I bet you if you took it down to individual basis you would say I'm not doing this. So based on that I would say please don't put any more debt on the town. Right now you have an asset. The water company is an asset. You put the debt on it. The asset is no more an asset. So my suggestion would be sell the asset, get the burden off the back of the town. And the amount of time and energy that has taken two years of contemplation and notion.

What would that time do to the presentation of this town and the future of this town if we were to allocate our energies, our time and our money into actual town itself rather than worrying about the water? Giving the water company, selling the water company to someone who has great resources that the town doesn't have, it would be a great thing for the town because now that asset is actually an income rather than a burden. Thank you for your time.

Thank you, Bob Morris, Morris, Vice Mayor Royer, members of council, thanks for the opportunity to speak. After listening to Sean's uh excellent report, I'm very impressed. Um, I've had to rethink what my comments are, but I think essentially there the basis of them is the same.

There's no way to manage our way out of the current forecasted Colorado River allocation problem resulting in I just learned tonight rather than a 25 projected cut, a 20% projected cut starting in 2017 or 2027, excuse me. and we simply can't conserve our way out of a growing Colorado River supply deficit. In my mind, it takes it will take a systems approach using as many options as can realistically be identified to manage the cap reduction.

Augmenting our current uh Colorado River allocation with a water supply from a separate source is a logical option. Although somewhat late in the game, in my mind, it certainly merits consideration. And with the limited mallet uh knowledge that I have, I guess I would not I can't I was going to say I support the step under cons under under consideration, but I'd have to change that to um consider I support the concept.

I've read the October 21st, 2025 staff report suggesting consideration of the subject of this meeting. I've also read newspaper articles in the on the subject and the most chilling to me is the statement by the utility director that the projected 20 now 20% cap cut would quote put the town under the 2,000 acre feet per year to meet current customer demands. The other comments that I had were m were mainly uh questions about how do we protect uh an asset that we don't fully control.

It's a 100red-year prepaid contract with a seller for water rights to 500 acre feet per year. What's the annual certified hyd hydraological reporting requirement of the status of the asset? Can the seller sell up to the modeled 80,000 acre feet? Uh what prevents the seller from selling water rights exceeding the 80,000 acre feet? Is there a requirement for reporting on an annual basis regarding how many of the 80,000 acre feet remain unallocated as the water right metered?

Who's responsible for metering and reporting? Is there an automatic shut off valve on attaining the contract allocation? Who maintains the meter? And is the meter temper alarm? and does the irrigation non-expansion area that INA prelude development in proximity that could draw from the 80,000 acre feet? Um, but I do I there's not enough there's not enough answers I guess to the questions and but I certainly support the concept. I think it's a logical step forward.

Thank you for your consideration. Thank you, David Phelps. Thank you uh mayor and council for the workshop and the information. It's always good to talk a little more about big big ideas. Um I am of a mind to suggest that we look for somebody to uh help us with our groundwater shortage and that would means somebody that already owns the groundwater. The question would be is can we get their groundwater owned by somebody else and within our AMA allow it to be used here.

I'm looking beyond uh the river's allocation because while I think we got an optimistic number today, I keep watching the uh Lake Pleasant or excuse me, Lake Powell go down every day, every three days. And um I wouldn't recommend it for people because it really makes you wonder what are you doing here. Um I think we're about 169 ft to Deadpool. Um and I don't think the the lake on a on a hole gets bigger as it as you go down in the lake. I think it gets smaller.

So, I have a feeling we're going to get to this point where if we don't have substantial moisture that hits way up north above us and our partners in u the water in the lake being uh more than fair with the water that they let go past their farms and past their economies and past their livelihoods that um you know the cuts are going to be a lot more drastic than the optimistic view we've been given.

I I just don't see if the drought continues and it we don't have forecasts that say we've got uh big moisture coming. We have such a drought that we're living and existing in. We have to deal with the reality of that and that is that we need somebody to be brought in here that can take over operations and provide groundwater as the basis of why we would select them.

That would be the trade we would make because water rights that we just learned that we're going to have to wait on another council to give us their approval to get to our water rights that are upon the cap system.

Uh my wife and I were somewhat in shock when we got home and realized that basically the water rights that we have banked, the water that we have banked in the system um are contingent on somebody else agreeing to let us draw them out so that we can draw them out of the cap on our end and they can use them on their end. It's just so complex. Don't know why we ever wanted to do it, but I get it.

Uh, appreciate you guys spending all your nights, weekends, and holidays wondering if there is an answer to this problem that was locally that we could solve it with. I do actually feel like conservation is part of our uh interm solution. I think we've got a hundred identified customers, possibly more, that we could start communicating the um 13,500 uh gallon uh right to water to and start enforcing it. Thanks. Thank you. Thank you, Lisa Arland. Good evening. Hi. Thank you, Sean.

That was well done. and I've been to the other meetings about this issue. Um I like everybody else behind me, a lot of people have said there's just too many unknowns. But I think an unknown that also hasn't been talked about is the whole um basin, the California basin and the Colorado allocations which are being looked at at a federal level as well. And what's going to happen between who's going to divide up that water?

we're basically functioning on a what is it 1942 California gets more than everybody else and you know there's a lot of issues on the whole basin itself. So, that's another unknown to throw into the pot. And I think the amount of money that we're being asked to spend for a lot of unanswered questions is not a good move for the town of Cave Creek, particularly when we're also looking at selling the water companies um and first with the desert foothills hills and um also then with the cave creek.

So I think we have so many variables that are floating around in the constellation of water that this is a a big commitment for something that I'm not sure the payoff is there and if we get to a point where we say oh you know what this isn't going to work for us we're in a bind in that from my understanding we can't sell it we're stuck with it. So, I I really think a step back is the right way to look at this.

And I'm sorry that there's a sense of pressure of like if you don't do this, it's going to go up. I mean, it's like being with the car salesman that says buy it today and it's cheaper. Um, that's usually when you should know to walk out the door. So, that's my final comment. Thank you. Thank you. No additional speakers. Okay. I'm going to make a motion then.

Um, I move the town manager on behalf of the town of Cave Creek promptly notify the seller that the town is terminating the agreement for purchase and sale of a lot with groundwater rights and escrow instructions dated October 23rd, 2025 and reassess this for phase two. Second, I had it there is one known in this. We've talked about all the we have over 800 acre feet of obligations that we that there are signed certificates etc.

And there's another thousand acre feet of potential if our aquifer goes dry. So this is not the end of water purchase. Um it will be back. It's smart to come back. The town depends on it coming back. We don't know what the obligation is if we lose court cases if we can't perform those those water certificates. So that is unknown. All the unknowns are on the are on the other side.

Um we are in the final stages of the interimm water as Sean said and I just want to point out that that the town that uh the vice mayor Royer got us uh uh serving wa saving water uh five seven years ago.

21 we started 21 and uh that's 3,000 ft that's out there and that the Arizona Water Banking Authority has a ton of water that they don't know how to get out of the ground and we're just got a phone call about that as the meeting started and um so uh there is other sources out there other than the five to seven years we have so we're in no danger running out of water. Um, conservation is going to be important, especially shaving the summertime peak.

We use 75% more water in July than we do in January when there's more people here and we're and that restaurants are doing more business. So, that's that's a thing that uh that we've got to get to work on. Um, and the other thing is financial that uh beginning uh I think it's next year we start to pay off some of the loans and we we're paying $4.5 million uh per year cash flow uh for our um the loans that that originally started all the utilities that will phase out by 2030.

And so uh this is uh um we'll be in a lot better financial shape as things go on. So, that is another positive to this. So, I will be voting to terminate and u Tom, you had the second. Uh I don't have anything to add, mayor. Um I just wanted to you've already done it, but I'll just do it one more time to acknowledge the policy triage of Bill Sims and Michelle and Shawn. Um it's nice when you are in an environment of people who are protective uh and then work tirelessly uh and fairly.

uh diversity of of opinions with the deliberative body, but um we we have good uh beneficent protection. I was going to make a joke and then I wasn't, but I will. Michelle, you're on the line, aren't you? I was going to compare Michelle to Taylor Swift in terms of all the travel and all the work she's done to promote this project. I think she is kind of superhuman status. So that's all I have, Mr. Mayor, was Thank you. the destruction. Thank you. Um let's just start down here. Other comments?

Sure. Thank you, mayor. Um I had supported the October motion uh to enter into the purchase agreement with Carl Laala uh with the intent of learning more about this option. Uh we were excited because it had potential to be a good option and still does. Again, it should stay on our radar. uh it was well worth the investment of staff and consultant time and resources from the town to look at the detail of this opportunity. This is how we learn.

So even if it doesn't work out to our benefit at this time, we learn and move on and evaluate, analyze, investigate what our other options are going to be. We're looking for clarity. And I'm not sure in uh the wide world of water that there is going to be a lot of clarity for a very small player uh like us. But we keep turning over rocks and digging holes and looking for more information and opportunity as we go. So it's a disappointment for this not to work out.

But again, we keep working at a steady pace to find the answers. I just don't want Cave Creek to become a cautionary tale of what happens when a small town waits too long or too late to make a decision. Um, I think that's uh we keep thinking maybe the state or the feds uh or our friends and neighbors are going to bail us out and I don't think that's going to happen. We're going to have to find our own way and we're going to have to do a lot of hard work to get there.

So, this is a first step out of probably many first steps uh to find answers to our problem. So, I would support uh again putting the pause on and passing on this opportunity but keeping our options open. termination seems like a good idea. Sean, you've done a wonderful job. Uh our consultants have done a great job. There's been a lot of thought that went in on this uh also by my fellow council members. There are a number of books that I've written uh read written some books too.

Number of books that I've read about water in the west. Cadillac Desert was great back 25 years ago. There's one called Dividing the Western Waters by Jack August, and it goes into the legal issues that came up in the 20-year lawsuit between California and Arizona. And it really does a nice job of understanding what's happening to the river, how water law works. So, if you want to know what's happening in the West, dividing the western waters is a good way to find out.

But again, I thank my fellow council members for their consideration. We put together a great team of counsel and of our consultants and it's not yet what we need. So I will support termination. Thank you. Um I also would like to thank all the staff and attorneys and consultants who were involved and working diligently over the last year um and doing an extraordinary job of due diligence um to help us make this decision.

uh because we knew going into it that it was going to be an extraordinary financial investment not only for the water resource but for the infrastructure required to transport the water. We knew we would need to be absolutely sure of all the details related to the project prior to making uh a final decision.

And we knew that we had some time after joining the partnership to retract the decision without losing any money if there was too much uncertainty to move forward after conducting our due diligence and that is what has happened. Um, we are, as everybody has mentioned, concurrently working on several other options to secure our water future, including recovering our banked water um to tide us over for the next decade.

And yes, it will cost us some money potentially to recover that water, but it is far less than what it would have cost us had we not saved our water. We can always generate revenue. We cannot go back and save our water resources. This was the only rational thing for us to do back in the early part of 2020 21 uh to bank our water and we got it done and it's going to save us in the end.

Losing a portion of our Colorado River aotment from CAP is a huge hit for Cave Creek because it's 90% of our water supply if not more. Uh, other cities don't need this harquala water like Cave Creek might have. Other cities have other water supplies. Other cities like Phoenix and Scottsdale and Tempe and Chandler have SRP along with cap. Uh, they have groundwater resources. Um, and we have Colorado River water for the most part. And so this is why it was imperative that we look into this option.

Um, I think that investigating this opportunity was an example of courage and foresight and leadership on behalf of this council and I'm proud to be a part of it. I'm proud and unfortunately to make this decision along with everybody else to terminate it right now, but we did what we had to do and we made an educated an educated decision and I will also concur with termination. Jill, wow. How do I follow up that? Um, so far so good.

I agree with everybody, but keep in mind that um when we made the decision to go for this on October 18th, and I know I was on record saying to a few naysayers, hey, we we're we're in the game. If we don't do this, we're not in the game. It put us in the game. We had till January 15th. I know I pointed that out and I asked Michelle for clarity so that people would hear it and that's exactly what happened. And I will vote to terminate it.

I don't think I need to get into a whole long speech here, but I will thank you guys. Thank the lawyers and everybody else. Um, it's our little town. Keep in mind, out of the 24 municipalities and towns that are in Maricopa County, this is the most difficult place to get water to. And we are definitely um in a different spot than everybody else. Thank you. istic. At the end of the day, we live in a desert and we're going to have to at some point re-evaluate Harkah and probably buy into it.

Uh we will probably also have to buy into Bartlo Lake Dam. We will probably also have to buy into any other water resource we can get our hands on. Right now, the issue really is 90% of our water comes from the Central Arizona project. um the wells that we have in town, the people who are not on town water, uh that can't sustain everybody that's living in town. So, the fact that we're living in a desert is going to require us to find more water resources.

So, I do agree that it was probably premature on this and I do agree that we should terminate, but I don't want to I don't want anybody to understand that we're abandoning Harku. We will need that water at some point in the future and we will be back in this project. Okay. Thank you. Before I uh call for a vote, I just want to say that uh the council's not the place to get individual questions answered. We had a workshop for that and that workshop had a a way that you could submit questions.

Is that still open though? Yeah. So those that had qu these very detailed questions on on what went on and and the sausage making uh I would urge you send you to the town website and you can see Bo after if you have any questions where that is to get those questions answered. Uh the second thing is I want to compliment staff on the the work that went into this particular item. I think it's one of the finest things I've seen staff do in my 13 years of helping out with the town.

And uh we had a a a wonderful team in in Brad and Michelle from the outside uh working with the uh both the legal and the uh nuts and bolts of finding water and evaluating it. So I want to thank Brad and Michelle for for their work and uh and and really compliment staff on on what was done here. With that, we'll take a vote. All those in favor of termination signify by saying I. I. All those opposed. Motion carries 70. We're on to number two.

And number two is a move question, but we're going uh we we had a lot of hard work done on that. So, we're going to uh I hope very briefly. Yes. Go through uh the acknowledgements. So, Sherry, take over. Um yes. So I I wanted to acknowledge so there was a lot of work put into this for looking at um how we would address this financially um and it was necessary to go through that process in case um we had decided to move forward.

So, I want to acknowledge our bond council um Tim Stratton for all the work that he has done and our financial advisor u municipal adviser um with Colombia Capital Jim Strickland and Kayn Dwire of all the work that they have put into this. Yes. So, thank you all very much. On behalf of the town, I want to thank all the bond and uh and loan people for what they've done. Jim, I can see you.

I I don't see the others, but we've we've seen you many times before, but thank you to all of you for the hard work on behalf of the town. Does that do it? That does it. Thank you. Okay. Uh with that, I move that uh that agenda item two be removed from council. Is there a second? Second. All those in favor? I opposed. Okay. And uh motion for adjournment. So moved. Second. All those in favor? I opposed. Meeting adjourned. Thank you very much. Way to