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Divided commissioners approve tax exemption for water pipeline

Thursday, November 12, 2009 by Austin Monitor

County commissioners voted 3-2 to grant their approval for tax-exempt bonds to fund a 52-mile water pipeline that will bring water from the Carrizo-Wilcox Aquifer in Burleson County to eastern portions of Travis County. It will be built by non-profit Cross County Water Supply Corporation, which needed the county’s approval to apply for up to $40 million in federal loans. The non-profit has a close relationship with Blue Water Systems, a for-profit water wholesaler. Blue Water has a permit to pump Carrizo-Wilcox groundwater and rights to at least 50 percent of the pipeline’s capacity. Commissioners Karen Huber (Pct. 3) and Sarah Eckhardt (Pct. 2) voted against the approval, both citing their concerns about monopolistic control of water.


Although Travis County is not responsible for the funding or bond, the approval of the county was necessary for CCWSC to apply for a tax-exempt, low-interest loan from the federal government. The pipeline is anticipated to be between 26 and 32 inches in diameter and will stretch from Western Burleson County to a point just east of Manor.


Pct. 1 Commissioner Ron Davis was unequivocally supportive of the project. “For many years we have struggled in this community with water situations,” he said, “and we have had many economic development meetings, and the concern that was brought up was, you can have infrastructure but you have to have water … and it’s very critical for an area growing by leaps and bounds.” He said this particular pipeline was “a shot in the arm” for a part of the county “where it is desperately needed.”


According to the Austin American-Statesman, Blue Water has a permit from the Post Oak Savannah Groundwater Conservation District to pump and export up to 71,000 acre-feet a year.  Blue Water would then sell its water to Southwest Water Company, which would further contract out to other entities. Patrick Reilly, president of CCWSC, told the court that Blue Water would own 50 percent of the capacity of the pipeline.


Huber honed in on the details of the arrangement. While saying she agreed with Davis that eastern Travis County needed more water, she said to Reilly, “You make the statement that fifty percent of the pipeline capacity is available to additional and existing participants. Can you more specifically define participants?”


At first, Reilly said the other 50 percent was available. “Any supply water source can utilize that pipeline,” he told Huber. The rookie commissioner didn’t take the bait. “Is that engraved in stone? Will that always be available to sources other than Blue Water, or is that likely to change?” Reilly began to backtrack. “If it’s available,” he conceded. Huber continued to press for answers. “So if Blue Water comes online first and ends up selling the entire capacity of the pipeline, then that would preclude other water sources from using the pipeline in the future?” she asked. Reilly admitted it could. “Once the capacity is used up, there’s nothing more we can do about it,” he replied.


Reilly said Blue Water was paying $1.8 million per year to the GCD for its pumping rights and had ponied up an estimated $16 million already toward their goal of transferring the water to Travis County. Commissioners learned that Blue Water has the capacity for 9 million gallons a day; currently they have a contract with Southwest Water for three million gallons a day.


“We are negotiating an agreement with Manville for up to five million gallons a day,” Reilly said. Southwest Water also sells water to Hornsby Bend, Kennedy Ridge, and the four Manor MUDs. The city of Pflugerville is also entitled to some of the pipe’s capacity.


Eckhardt didn’t want to extend any additional tax abatements to the pipeline project, surmising that it would essentially help a single entity. “I one hundred percent agree with Ron Davis in regard to public benefit that would result from this project,” she said. “The doubt is whether there’s a public purpose. Because of the way the pipeline is designed, to primarily serve Blue Water, and comparing capacity with Blue Water’s permitted pumping capacity … it seems that the project is primarily designed to serve a necessary business expense of Blue Water.”


Huber seemed to agree and told In Fact Daily, “I just did not have enough information presented that would convince me that there would be the opportunity for competitive pricing in the future, and I wanted to be sure that we would have pricing that was affordable.” She continued, “We don’t want to set up a scenario where, by virtue of allowing one company who happens to be there first, they end up with monopolistic control of a water source. And that may not be, I want to be sure to say that, but I don’t have enough information to be comfortable in the decision we made today. But that doesn’t mean the information isn’t available.”


For her part, Eckhardt told the court, “One issue that I’m keenly aware of is, it’s important to let the market operate so that there’s sufficient competition to keep the wholesale rates at a level that eastern county residents can afford.” She said she was “loathe to wade into this and provide a preferential tax treatment” in a scenario where “the market seems to be working optimally under the circumstances.”


Development of the eastern portion of the county won the day, however, and the county added its approval to the project. The pipeline still needs the approval of three other counties before it can move forward with the funding request.

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