Saratoga Springs to buy $62M of water for LDS Church

Daily Herald, Utah/September 19, 2009

Saratoga Springs - In an emergency meeting on Friday, Saratoga Springs council members voted unanimously to purchase $62 million-worth of federal water for The Church of Jesus Christ of Latter-day Saints.

As part of the agreement, the city also agreed to annex nearly 3,000 acres of church farmland and will compel some smaller landowners to join the annexation. The water will allow the business arm of the church to develop its land, plus as much as several thousand more acres in the area, building up to 20,000 homes, nearly quadrupling the city's population.

The deal, which gives the church 10,000 acre-feet of water, is unusual on several fronts.

For starters, the $62 million must be paid in a single lump on July 1, 2019. In addition, beginning in 2020, the city must pay $3 million a year, in perpetuity, and that payment will rise over time to an unknown amount, and must be paid whether the city uses the water or not. Initially, the church will pay the annual fee as well, and as homes are developed, owners will take over those payments in the form of their water bill.

Both the annual payments and the lump-sum will be paid to the Central Utah Water Conservancy District for water being piped through Spanish Fork Canyon.

The city does not have the money.

"Once the city signs [the deal], we cannot change it or back out of it or anything, and we don't have $62 million," said city manager Ken Leetham.

A representative of the LDS Church who spoke in the meeting declined to verify his name or who he was representing when asked by the Daily Herald. The city confirmed his name as Roger Childs, and his employer as the development arm of the Corporation of the Presiding Bishopric of the LDS Church.

"Our current plans are to continue farming," Childs said, noting the church's immediate goal is not development but to "provide for the physical and spiritual well-being of the members of the church, and this farm currently is involved in that process. We don't have plans, but we are thinking about the future. We live in Utah, which is a desert, and it is hard to come by big blocks of water, and having water is key to being able to use land in the future."

To get the money, the city is requiring the church to deposit $62 million in a Zions Bank account 12 months before the payment is due. In addition, in case for some reason the church does not come through with the money, the city required the church to put a $62 million trust deed on 2,800 acres the city will annex. The city would be able to sell that land to come up with the money, should the church fail to pay.

The city did not put out notices of the meeting until Thursday and never mentioned the $62 million on public notices. Rather, notices said only that the city would consider "the purchase of water rights." For what may be the largest financial deal in the city's history, not a single member of the public was present.

In what may be a technical point, the city's notice that it would consider the purchase of water rights contradicts a statement from the city attorney Todd Godfrey, who said to council members, "We are not buying a water right, but retail water."

As part of the deal, Saratoga Springs granted to the church the right to develop the equivalent of 20,000 residential units on land that has not even been zoned yet.

"What is the city going to get out of this?" Godfrey asked rhetorically. "I think we need to acknowledge candidly that we are committing to some significant density on this property even though it is not zoned. I think we need to enter into this contract with eyes wide open."

To make the issue more complex, city staff said that because the land has not been zoned, those "equivalent" residential units could actually be industrial, retail or high-density housing.

Until recently, the city has specifically turned down offers to purchase this water, saying that they wanted to work on their own system of culinary wells instead. But that all changed when the church approached the city about six months ago.

"They have several thousand acres they will develop in the future, and they wanted to take advantage of the discounted Central Utah Water product," said a staffer.

The problem is that the water district, by law, can only contract to sell the water to public agencies. So Saratoga Springs must purchase the water for the church, though the city said the transaction is not a "pass-through deal." Elected officials thanked the church for stepping up to the plate with $62 million, saying the city could never have afforded that, and this allows the landowner to lock in enough water for future development of its land. The water is necessary because anyone who wants to build a home in the city must give the city enough water to service that home in perpetuity.

The contract with the district has what staff called "a severe default clause," should the city fail to make the payments. The city attempted to "soften" the clause, but the district did not budge.

Friday's emergency meeting was necessary because the district set Friday as the deadline by which the city had to decide how much water to buy, or face a higher price, Leetham said.

City staff euphemistically said the deal is likely to eventually raise residential water rates.

"Over time, as these lands begin to develop, the annual fee is going to become part of the city's annual operations expense for the water system," Leetham said. "This will in all likelihood have an impact on the entire city, because this water will blend with city water, or could blend. We would have to adjust water rates because we don't have those charges today."

Elected officials said Friday's deal would help secure the city's future.

"I like the arrangement because as our city grows, one of the concerns is where will we get all this water?" said Councilman Bud Podeska.

"I just really appreciate the church coming in and taking the load of this and doing this," said Councilman Brent Call. "I don't think it is something the city could do now, or even make those kinds of commitments 10 years down the road. We appreciate the concessions you've given us. It's great. I think it is going to be a good working plan for all of us."

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