After more than an hour of discussion Tuesday night, most of Little Rock’s City Directors said they can support a plan from Central Arkansas Water to sell a portion of its water rights in DeGray Lake to Hot Springs.
Central Arkansas Water’s commissioners agreed earlier this month to enter into a contract with Hot Springs to sell the utility’s water rights for 20 million gallons per day from DeGray Lake.
The move drew the ire of several city directors who said during previous meetings that the move was shortsighted, the price was too low and the Board of Directors wanted more information. But the tone changed Tuesday.
“I can understand your judgment on that - securing a site, an easement and putting a straw in the lake,” At-large City Director Dean Kumpuris said Tuesday. “Given your alternatives … all the facts, you’ve made the right decision on balance. I will congratulate your decision, but there has to be better communication.”
Under the agreement, Hot Springs would pay about $1.08 million to Central Arkansas Water in return for a letter saying the utility does not want to use its right of first refusal to purchase the water before Hot Springs could. The letter would expedite the process for Hot Springs to get a permit from the Corps of Engineers to draw the water from the lake.
Central Arkansas Water holds the right of first refusal for an additional 100 million gallons per day, and staff members said the utility would use the money from the agreement to begin the process of purchasing that remaining water, which carries a total cost of about $4.6 million.
Graham Rich, Central Arkansas Water’s chief executive officer, gave the board more details about the benefits of selling the water rights during his presentation Tuesday night. He also explained how the utility came up with the price for the water rights and the other conditions included in the water agreement.
Rich said under the agreement, Hot Springs would build the intake to the lake where the water would be drawn out for both Hot Springs and Central Arkansas Water. Hot Springs would also obtain permits and easements to build about 5 miles of pipes and dedicate a 50-foot portion of the easements to Central Arkansas Water.
Without the agreement, Central Arkansas Water would have to wait to build an intake at the lake until the utility needed the water - an estimated 60 to 80 years in the future. Rich said that might mean the utility building its intake in the re-regulation pool of the lake, which is located below the dam, has lesser water quality and would require hundreds of thousands of dollars worth of extra infrastructure to pump the water out of the lake because of the area’s elevation.
“In order to build an intake site you have to show an immediate need, so it would have been decades before we were able to do that,” he said.
Rich said because of those added conditions, the utility decided to use a payment model for the water rights that would reimburse the utility for what it had paid to reserve the rights plus a small interest on that amount.
Several city directors asked questions about the agreement, including whether the utility had considered charging for the eventual value of the water. Several city directors also said they would have strongly considered approving a rate increase to purchase all 120 million gallons per day instead of selling a portion to Hot Springs.
Rich said the agreement made sense to staff and commissioners because it allowed the utility to purchase most of the water without seeking a rate increase and without delaying most of the other capital needs at the utility, including replacement of an almost-century-old underground pipe system in several areas of Little Rock and North Little Rock.
Although several city directors said they better understood the decision to sell the water rights after the presentation Tuesday, some said they still felt the utility should have had a better understanding of what they were selling and what the future cost of water would be.
“It’s important to know all of these things - how the withdrawals work, whether the amounts can be adjusted if the water level in the lake changes - before we give away that right of first refusal,” said Ward 5 City Director Lance Hines. “If you don’t know exactly what you have, how do you know what you’re selling?”
Kumpuris said he was disappointed by the lack of cooperation the water utility showed in moving forward with the agreement despite a request for more information from several city directors. He requested that the utility operate as if it were governed by a three-legged stool: the utility’s board of commissioners, the Little Rock Board of Directors and the North Little Rock City Council.
“In the spirit of moving forward and cooperation, that communication would be appreciated,” he said. “We may be the short leg of the stool, but we have some role in approving rate increases for the utility.”
Arkansas, Pages 7 on 10/30/2013