Bend assesses value of utility

City and private companies continue to negotiate sale or lease

By Hillary Borrud / The Bulletin

Juniper Utility Co. history

1972: Developer Jan Ward and his brother, Kim, create Juniper Utility Co. to provide services for developments on the family’s former dairy ranch in southeast Bend.

1998: The Oregon Public Utility Commission steps in and sets rates for the water and sewer company. Ward says the rates are too low to maintain service and decreases water pressure.

2001: Homeowners in Ward-developed neighborhoods turn to the Bend City Council for help because they do not have enough water for ordinary household uses like taking showers or doing laundry. Councilors pass a resolution to condemn the utility.

2002: The city offers Ward $580,000 for Juniper Utility Co., takes over operations and files a condemnation case in Deschutes County Circuit Court. Ward declines the offer.

2004: The city of Bend and Juniper Utility-area homeowners associations sign a settlement agreement.

2005: The city offers Ward $4 million for the utility, its final offer before trial. The city of Bend v. Juniper Utility Co. trial begins.

2007: Judge Stephen Tiktin orders the city to pay $6.9 million for Juniper Utility Co.

2011: City of Bend settles with the former owner of the utility, Ward, for $6.1 million, rather than appeal to the Oregon Supreme Court. The city also signs a new settlement agreement with homeowners associations, modifying the 2004 agreement.

Source: Bulletin archives

The city of Bend is working with a consultant to determine how much to charge two private water companies for a slice of the municipal water system in southeast Bend, which the city is in negotiations to sell.

Avion Water Company Inc. and Roats Water System Inc. approached the city earlier this year and expressed interest in buying the former Juniper Utility Co. water system, which the city condemned in 2002 after residents in the area filed a series of service complaints with the state Public Utility Commission.

Bend officials are interested in the potential deal because the deteriorating utility system is a drain on city resources, and a plan to improve the system recently ran into strong opposition from homeowners who would have to pay part of the improvement cost. Utility ratepayers across the city have also helped pay for repairs over the years, and would be on the hook for a portion of the future improvements if the city keeps the former Juniper Utility Co. system.

Following the condemnation, the city eventually settled with the former owner of the utility, Jan Ward, for $6.1 million.

Bend Engineering and Infrastructure Planning Director Tom Hickmann said on Tuesday that the city’s legal cost to take over the utility would not be included in the cost for any potential buyer.

People involved in the negotiations said this week that in addition to selling the water system, another option might be a long-term lease, because that could provide tax benefits for the private companies.

Hickmann said any potential lease agreement would not allow the private water companies to hand the Juniper Utility Co. system back to the city in the future, and the companies — not the city — would be responsible for maintenance.

“If we did some kind of long-term lease agreement, we would protect ourselves contractually to make sure this is something they don’t get to back out of,” Hickmann said. “If we do this … we have no desire to get the system back.”

Casey Roats, vice president and part owner of Roats Water System, said Tuesday that the company is open to an outright sale or a lease that would lead to the companies eventually purchasing the former Juniper Utility system for a nominal amount.

“There’s no exit plan for us,” Roats said. “If we take it on, we fully intend to bring it on (and) maintain it in perpetuity.”

Jason Wick, president of Avion Water Company, agreed.

“It’s not our intention to give this back to the city in any form, or leave it in their hands as a mess,” Wick said. “At the end of the long-term lease, we would have a purchase for like a dollar or something.”

However, Wick said the lease is just an idea and nothing is currently “set in stone.”

If the city and private companies cannot reach an agreement, residents in the former Juniper Utility will face a 2016 transition to full city water service, which would mean large increases in residents’ water bills. People who live in the area, which includes the neighborhoods of Timber Ridge, Tillicum Village, Nottingham Square and Mountain High, currently pay the same rates for drinking water as the rest of the city. However, they pay a flat rate for unlimited irrigation water, which they are set to lose in 2016 under agreements between their homeowners associations and the city.

The city plans to replace the deteriorating irrigation pipelines with one system to provide potable water for all residents’ needs. The cost-sharing agreements required each homeowner to make a one-time payment of $5,143 in 2015, or a monthly water bill surcharge of $26.06, for 30 years.

City Attorney Mary Winters said this will only raise $3.6 million toward a total city infrastructure cost that could reach $14 million. That does not include the city’s legal costs to condemn the utility. To provide time to negotiate a possible sale, the City Council voted July 16 to extend by one year the neighborhoods’ transition to city water and cost-sharing charges.

Hickmann, Roats and Wick all said it would be reasonable for the city and companies to determine by October whether they can reach an agreement. City employees expect to update the City Council on the discussions in August.

Roats announced in June he plans to run for election to the City Council seat being vacated by Mayor Pro Tem Jodie Barram. Although Roats said he does not believe it is currently a conflict of interest for him to negotiate with the city while running for a seat on the council, he said there would be a conflict if he wins the election and negotiations are ongoing.

“I’d like to have it worked out before I potentially get on council,” Roats said.

— Reporter: 541-617-7829, hborrud@bendbulletin.com