Queen Creek’s efforts to support a regional solution to provide safe and reliable water and wastewater services
The Town of Queen Creek was working with the Arizona Corporation Commission (ACC) and the interim manager for Johnson Utilities, EPCOR, to offer assistance for a potential water shortage this summer in the Johnson Utilities service area in San Tan Valley. Over the past several months, the Town worked with EPCOR on an interconnect solution after EPCOR identified deficiencies within the system.
Based on EPCOR’s report that they have enough water to meet summer demands and the ACC’s desire to move in another direction, an interconnection with EPCOR is no longer being negotiated. The Town continues to support a regional solution to the water and wastewater issues, but has a responsibility to protect Town residents.
Discussions regarding purchase of Johnson Utilities:
- In September 2017, Johnson Utilities approached the Town of Queen Creek and began discussions related to the Town acquiring the utility company. At that time, both parties signed a nondisclosure agreement related to information that was exchanged as part of the discussions.
- In December 2017, The Town determined it was in the Town’s best interest to stop pursuing the acquisition after it was determined Johnson Utilities’ infrastructure did not meet the Town's standards.
Johnson Utilities sues Queen Creek to prevent the release of documents related to the company:
- During the Arizona Corporation Commission process related to Johnson Utilities and the potential appointment of an interim manager, Commissioner Andy Tobin sent a letter to the Town of Queen Creek requesting any communications between the Town and Johnson Utilities.
- Johnson Utilities agreed that correspondence provided by the Town to the ACC were properly produced but objected to the release of other documents including engineering, financial and operational information.
- In April 2018, Johnson Utilities filed a lawsuit against the Town of Queen Creek to prevent the release of any additional information requested by the ACC. The Town argued the documents should be released under Arizona Public Records law.
- After a hearing, the trial court ruled that all the documents were public records but issued a temporary restraining order preventing the Town from releasing the documents until Johnson Utilities had a chance to file an appeal.
- Johnson Utilities appealed the ruling and in February 2019 the Arizona Court of Appeals affirmed the trial court’s decision, holding that all the documents are public records and should be produced. However, the temporary restraining order that prevents the Town from releasing the documents will remain in place until all appeals by Johnson Utilities have been exhausted.
- The Court of Appeals also awarded the Town and the ACC their costs and attorneys’ fees because they were the prevailing parties against Johnson Utilities.
- In December 2018 Johnson Utilities filed a different lawsuit against the Town claiming misrepresentation and improper action by the Town in participating in the ACC enforcement proceedings against Johnson Utilities.
ACC appoints interim manager:
- After a 13 day evidentiary hearing, the ACC found significant deficiencies and dangers to public health and safety in the Johnson Utilities systems, and appointed EPCOR as the Interim Manager in July 2018.
- Upon evaluating Johnson Utilities, EPCOR confirmed immediate action was necessary to deal with the deficiencies in both the water and wastewater systems, identifying substantial costs to address the deficiencies.
EPCOR and Queen Creek discuss interconnecting the systems
- When the ACC appointed EPCOR as the interim manager, they recommended an interconnection with the Town as a possible solution. In the fall of 2018, EPCOR approached the Town to discuss interconnecting both water and wastewater systems.
- The purpose of the water interconnect was to ensure current Johnson Utilities customers have access to adequate water and to avoid water shortages that were experienced during the summer of 2018. The purpose of the wastewater interconnect was to safely and legally treat and dispose of wastewater that exceeded the capacities of Johnson Utilities’ existing treatment plants.
- The Town has consistently expressed a willingness to help our neighbors and discuss the value of a regional solution to the water and wastewater challenges experienced in the Johnson Utilities service territory.
- The initial interconnect request from EPCOR to the Town identified nearly 4,200 gallons per minute (gpm) of water to serve the current customer deficit in regions 1, 2 and 4. Although EPCOR confirmed that a wastewater interconnection would be beneficial, EPCOR has no longer sought to interconnect the wastewater systems due to opposition from Johnson Utilities’ ownership.
- As EPCOR developed internal resources, the requested amount of water requested changed to 2,100 gpm, with the ability to receive additional capacity in an emergency. Based on the previously drafted agreements and conversations with EPCOR, the Town docketed an updated interconnect agreement on April 19. The Town docketed its statement of position related to the interconnection on March 5 and the original draft agreement on April 5.
- On April 22, ACC Staff filed its second objection to the proposed interconnection, after filing its first opposition on April 16.
- Providing the interconnect would not have transfered any customers to the Town’s services, but would supplement the water in the Johnson Utilities system on an interim basis until EPCOR was able to make the extensive repairs necessary to the system. Johnson Utilities customers would have remained Johnson Utility customers.
April 23 ACC Meeting:
- At the April 23 ACC meeting, EPCOR reported significant progress related to expanding water sources, without reference to the proposed interconnection with the Town. EPCOR reported having enough water to meet the water demands of existing customers, but not to lift the restriction on adding new meters imposed by the ACC. The ACC Staff is still conducting its own assessment and could not confirm that EPCOR could meet the demands of its existing customers this summer.
- During the ACC meeting, there was a discussion concerning the Town’s request, as part of its commitment to provide the water requested by EPCOR, to receive the same indemnification from the ACC that was provided to EPCOR.
- ACC Staff stated the indemnification would make the ACC responsible to defend the ACC, EPCOR and the Town when Johnson sued the parties for the interconnection.
- The Town is unable to compromise on the indemnification – while the Town is interested in assisting with a regional solution, it cannot be at the expense of Town residents. Johnson Utilities has already filed lawsuits against the Town and has threatened another concerning any proposed interconnection agreement.
- The Commissioners thanked the Town for its willingness to assist and suggested a different manner of moving forward.
- While the Town appreciates that the ACC is seeking to protect itself with regards to a likely lawsuit, the Town has a responsibility to do the same and protect our residents.
Queen Creek’s interest in the area:
- Approximately 3,000 customers live in the Town of Queen Creek, but have Johnson Utilities providing sewer services.
- An additional 8,000 customers who live outside the Town boundaries are Queen Creek Water customers, but receive sewer services from Johnson Utilities. A large portion of the Town’s planning area is currently served by Johnson Utilities for sewer.
Certificate of Convenience & Necessity (CCN) Request:
- At the request of several landowners serviced by Johnson Utilities, the Town submitted requests to the ACC to amend the CCNs granted to Johnson Utilities for water and wastewater services for those landowners’ properties. The applications request the removal of eight square miles (out of a total of 60) of undeveloped land where no infrastructure has been installed, and Johnson Utilities does not have the capacity to provide utility services.
- The request will go to a decision by an Administrative Law Judge.
- The Town has a process in place for considering annexations, and has no intention of annexing San Tan Valley. Over the years, the Town has been approached by several residents/neighborhoods within San Tan Valley regarding annexation. Of those requests, the Town has only received a couple completed applications for annexation, including Ironwood Crossing which was annexed in April 2018 after a majority of property owners signed petitions in favor of the annexation.
- In June 2018, a resident from Encanterra submitted an application annexation. The applicant is currently collecting signatures. If enough signatures are collected, Town Council will consider adopting the annexation ordinance at a future Town Council meeting.
- Historically, the Town of Queen Creek’s philosophy for residential and commercial annexations has been for the property owners to initiate discussions.
- Legally, a majority of the property owners in the defined area must be in favor of annexation, in addition to a majority of property value, for an area to be annexed by the Town. Once the necessary number of supporters have been submitted to the Town, the Town Council considers six criteria when voting to bring the property into the Town, keeping in mind annexation is making a commitment to provide services, which come at a cost:
- Financial: Analysis of fiscal impact to the Town including one-time and recurring revenues and expenses.
- Economic Development: Potential for desired growth; job creation in targeted clusters and opportunities identified in the Town’s Economic Development Strategic Plan.
- Civic: Growth of our political subdivision, civic pride, and sense of community.
- Planning and Building: Impacts to the Town land use program; parks, trails and open space program; surrounding properties; extent of compliant/non-compliant structures.
- Public Safety: Impacts to existing program; demand for new services.
- Legal: Considerations for successful annexation; identification of required process and procedures.