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What the Devil won't tell you

Sahuarita to experience the business side of water

When the town of Sahuarita entered into an agreement with Phoenix-based Global Water Inc., to handle some of the delivery of humanity's most precious natural  resource, my first instinct was to say the council missed an opportunity.

Then I realized: It's water. The town may be on the leading edge.

This is a small deal that might offer a big lesson when it comes to water management. As much as it pains me to say, the business model may be the way to go.

I have a bit of a crush on the Town of Sahuarita because it's a young municipality not tied to the way things have always been done. It's kind of seizing its own future on issues like economic development and growth management.

Acquiring and starting up it's own water company would have allowed them to start up a service delivery system with a modern approach unhampered by "the way we've always done things around here."

The issue requires a quick synopsis of the daytime drama that lead to the town's 30-month deal with Global Water.

Sahuarita incorporated in 1994, well after developers built several large subdivisions. Those projects, obviously, provided water to homebuyers. So Sahuarita doesn't have a water system like Tucson Water or Marana Water.

Last year, it decided to get into the water business and buy Farmers Water Co., owned by pecan grower Farmer's Investment Co. Farmers Water only serves a small number of Sahuarita's customers, but the town saw an opportunity to use the water system to serve growth on its southeastern side. It can play a big role in the town's future.

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During negotiations with "FICO," as it's known locally, they learned that the ag business had agreed to terms with Global Water. 

So the town decided to give itself the ability to use eminent domain and condemn the water system. The council even scheduled an election in August to ask voters to give it the power to start a water utility.

But the council wasn't sure the proposition would pass popular muster and leave Sahuarita with nothing. So town staff started negotiating a deal as an option, just so the council could consider it. 

Well, the council liked the deal that was reached enough to approve it and cancel the election. The two-and-a-half year agreement was a Plan B in the hand, rather than the uncertainty of Plan A scurrying elusively in the creosote.

Sahuarita is turning over to a private for-profit company some management of the one resource civilization most depends, rather than retaining it for itself. Ack. In fact, it's worse than that. Global Water isn't just a private for-profit company, it's a publicly traded corporation.

The 21st Century has provided all evidence we need to understand that when Wall Street is at cross purposes with Main Street, then Main Street must suffer.

I should hate this deal. And part of me does. But it's water in a desert at a time of climate change and a friend of the devil may just be a friend of ours. With water Arizona is flying, if not blind, with blurry vision. 

We don't know

We don't know what the future holds for Arizona and water.

The state is in a decades' long drought.

Climate is variable and the Southwest's ecological history is full of wet periods, followed by dry periods, right before another wet period rolls around. The region's "average" rain fall is a mathematical midpoint rather than a typical reality.

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So the region could suddenly experience a deluge of rain that ends the drought. 

I've talked to a lot of climate modeling types at the University of Arizona (a leader in the field) and modeling works on global scale. Local conditions are incredibly difficult to project.

On the other hand, climate change appears to have it's thumb on the "drought" button. Arizona is in trouble if that continues.

In 2122, Arizona could be importing its water from desalinization plants along the Sea of Cortez in Mexico. Hey, Tucson could be a ghost town. The region may just be under a rationing regime. Arizona and California could be at war with Colorado and Wyoming because those two states decide the Colorado River water belongs to them.

The story of the early West is the story of water wars.

Arizona's growth was unleashed by the advent of indoor cooling after World War II. The availability of water wasn't exactly an afterthought but it wasn't front and center. Then in the 1970s, water started to be priced to consumption but not so much as to inconvenience users.

Who are we kidding, the biggest user of water remains the state's legacy industries of agriculture and mining (when it's here).

Individuals have been allowed to ignore water as an issue. Think about it. How many relocated Tucsonans, Phoenicians or Sahuaritans did exhaustive research on the certainty of water before calling U-Haul? Most people assume smart people have thought of it already.

The Arizona Department of Water Resources issues water supply permits if developers can prove a 100-year supply.

This is America. Our young country acts like a century is forever. In Europe, it's the blink of an eye. The archaeological record is chalk full of ruins of civilizations that rose, flourished for a few hundred years, broke down, got buried under centuries of soil and were forgotten. This is especially true of deserts.

So to get through whatever comes next, water policy will require flexibility, adaptability and urgency. Those are three words ending in "Y" that governments — frankly — suck at. Government's favorite "Y" word is "continuity." Things are done the way they are always done because they are established best practices.

Rapid response

The FICO water system operates a small part of the Sahuarita's water. Developments like Quail Creek and Rancho Sahuarita are private companies providing water service. The town is already flush with privately owned water companies. The difference is the developers are providing water as an amenity as part of a sale and not a municipal-style service. Trying to sell homes gets a lot harder in a community with a lousy track record of providing water. Operating a stand alone system that serves multiple communities and customers is different enough.

Public governments and private businesses have different priorities. Government sees revenue as an opportunity to provide a needed service. Business sees a needed service as an opportunity to get dirty, filthy rich. 

When business gets into providing basic public services, the temptation is to favor the markets over the needs of the many. However, water delivery may be entering a crisis and market forces may be required.

It kills me to say this: Democracy is not always great at managing crises because crisis management is rarely a popularity contest. "Vote for Me: I jacked your water rates and imposed rationing."

If drastic change is needed, nothing moves faster or adapts quicker than the market and nothing is more sustainable. Stay with me, my fellow libtards. The market is us. 

Sure, government can issue mandates, but they only work for short periods of time if the people aren't into them. Coronavirus shows us that people can grow so tired of a crisis that elected leaders can just declare victory and remove tough rules.

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Imagine if the government were in a position to say, no one has to wear a mask but anyone without one will have to pay a $20 cover to walk into a grocery store. And the unvaccinated will pay twice the income tax. People are free to perpetuate a pandemic but they have to pay for the costs to society. 

Privately, the market can make radical change quickly. I'll call you on your landline and tell you what movie you should pick up at Blockbuster.

The market is ruthlessly simple. Water supply tightens and prices rise. It's a signal to rate payers to use less. Water gets too expensive, people move away so folks can afford showers. That's fine. Go to where the resources are plentiful.

Yeah ... brutal.

The Dow Cha-Ching

I had the same reaction anyone would have upon learning a company called Global Water was swooping in and buying Arizona water systems, This is straight up super villain stuff, right?

 Somewhere, someone is stroking a bald cat.

Wall Street has been brutalizing Main Street since the mid-1980s when daily share price overtook dividend returns as the driver of market activity.

The Dow Jones Industrial Average has grown geometrically from 800ish in 1980 to 30,000 plus today. The cash position of typical Americans has barely budged.

Global Water might be a great company with the best of intentions and killer practices. Awesome. But their shareholders may sell to Megacorp International or some private equity firm that will see a water shortage as a price-gouging opportunity to extract wealth from Sahuaritans and hand it to the point-zero-one percent in The Hamptons.

The deal they worked out requires consultation with the town council prior to rate hikes but no veto. There are a lot of references in the Memorandum of Understanding to "reasonable efforts" but that's a vague concept. 

The soothing tones of Mayor Tom Murphy

Sahuarita Mayor Tom Murphy told me not to worry. And there's something about his affable nature and circumspect approach to governing that makes me feel a little better.

First, the town understands a publicly traded company is first responsible to its shareholders — or at least they often operate that way.

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"That we (the town) would be in the water business is that we are accountable to our residents," Murphy said. "It is a dual loyalty that they have."

So they thought about that when they made the deal.

Condemnation is still on the table. The agreement expires in two and a half years and if Global Water proves unresponsive, a poor service provider or starts to cackle in a volcanic lair, then the town can refuse to extend the agreement and start the process of eminent domain. The town has a hammer if the company gets uppity.

Also, the city of Maricopa has a similar deal with Global Water and Murphy says they are happy with it.

"They said it was a really good partnership," Murphy said. "It’s helped them stay out ahead of growth."

Both communities are growing like a virus outbreak in a mosh pit.

For a company like Global Water to grow, it will need a good track record.  It now operates a number of small water systems but at some point will have to create a larger scale to improve its ability to invest.

Plus Murphy said the company has some nifty water management technology. That could be fun.

Finally, it's not like the condemnation election was in the bag. Success required convincing a 19 out of 20 Sahuarita voters not served by FICO's water system to approve buying the system to largely serve future growth. That's a dicey proposition.

"Part of the difficulty was to figure out what is the motivating message that you would convey to 95 percent of the town that this is in their best interest," Murphy said.

So why not plow forth with a deal and at least give it a try?

A gambler's share

Meh. The liberal in me still hates it but ...

The Global Water deal is a risk worth taking. A lot of the stereotypes about government that make people hate it, stem from risk aversion. That CYA quality that creates labrynthian bureaucracy always looking to avoid blame. Risk will only get people in trouble when failure happens.

Risk is a great teacher because it involves failure.

For government to work better, government must learn and learn through failure, even if it means people like me get to smack them around for sport. 

Business can adapt because the markets are always changing and business can change to give people what they want. This is especially true of an up and coming business like Global Water.

So going with Global Water or market driven approaches to water may prove to be a gamble worth taking. When it comes to water, the desert and climate change, everyone is gambling just by moving here.

Blake Morlock is an award-winning columnist, who worked in daily journalism for nearly 20 years and is the former communications director for the Pima County Democratic Party.

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Sahuarita's deal with Global Water could prove to be the way of the future, if both parties can balance Wall Street greed with local needs.


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