What happens in the courthouse...

Unless explicitly noted otherwise, this blog represents my own opinions, not those of any organization (like the Kittitas County Democratic Party) that I might be involved with.

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Friday, May 30, 2014

Public hearing, county's reasoning for spending up to $51,000 per acre-foot of water

The Board of County Commissioners (BOCC) voted yesterday to spend about $2.5 million for about 105 acre-feet of water rights. Most of the money will apparently come from a line of credit, as announced at the meeting; no further details were given about the line of credit, which was mentioned for the first time at this meeting.

The county is spending $2.5 million that it does not have on 105 acre-feet of water.

Enough water is being purchased to support building between 900 and 1100 homes outside of urban areas in the county -- and estimated 20 years' worth of building, according to comments by Paul Jewell.

The Commissioners could have chosen several approaches to the situation: they could have decided to wait for lower prices, or purchased only water that cost less than $14,000 per acre foot (a total of 24 acre-feet, enough for 190-250 homes), or only water that cost less than $22,000 per acre-foot (a total of 91 acre-feet, enough for 700-950 homes), or chosen to buy even water that cost $51,000 per acre foot (a total 105 acre-feet). They chose to accept all of the agreements.

Any decision to buy water would have met the stated goals of the water bank. Most decisions would have cost less money; Commissioner O'Brien made the motions to accept and to fund the $51,000/acre-foot purchase -- setting a new record -- as far as I know, for water in Kittitas County. This deal is scheduled to close today; the other deals have now been funded and will be finalized at later dates.

In his comments, Commissioner Jewell stressed that this water would be used for basic human needs like cooking, cleaning, and personal hygiene. This was interesting reasoning, since he has in the past stressed the need for water to be used for home construction as an economic development function, and, of course, the basic human needs don't exist yet. It is interesting to re-read some of my 2010 posts about water. Here's my favorite.

I definitely appreciate and recognize the amount of time Commissioner Jewell has put into this project. Like everyone, I hope this arrangement works out for the best, even if I might have pursued at least a slightly different path.

Thursday, May 29, 2014

My comments for this afternoon's public hearing

Steve Verhey
Ellensburg, WA 98926

May 29, 2014

Kittitas County Commissioners
205 W 5th AVE Suite 108
Ellensburg WA 98926-2887

Comments regarding proposed water bank purchases, public hearing May 29, 2014.

At nearly $2.5 million, this proposal represents a major purchase, and it’s being done hastily and without an appropriate process, public notice, due diligence, or cost-benefits analysis. This is a bad deal for Kittitas County, it’s a bad deal for prospective homeowners, and it’s a really bad for farmers and for the future.

These water deals are bad deals for reasons any businessperson can understand and explain: risk, price, and timing.

First, risk: the agreements say, in essence, that the county, not the sellers of the water rights, are responsible for any problems with transfer of the water. In other words, if Ecology or anyone else finds that the rights are inappropriate, and if the rights lose value or even become worthless, the county loses all of its investment.

Now, price: if the deals are completed the county will pay up to $51,000 per acre foot for these water rights, for an average of over $23,000. Yet some of the other water rights cost $13,000 or less, and even that seems very high. At the highest prices, the county itself is responsible for grossly inflating the price of water in the county. Any normal businessperson would walk away from prices like these, and that’s what the county should do in this case.

Finally, timing: there is no crisis in access to water rights, and there is no reason to enter into any agreement hastily. A reasonable businessperson would take the long view and wait for the best deal. This is especially true for this program, since the county is essentially taking a problem that belongs to private businesses and individuals and turning it into a public problem.

The whole idea of purchasing something in volume and in advance is to save money and influence the market downward. These deals do the opposite. The county should put its money back in its pocket for now.

Sunday, May 25, 2014

Water bank sticker shock: $51,140 for an acre-foot of water?

According to documents posted last week on Kittitas County's website, the county agrees to pay remarkably high prices for deposits in the county's water bank. These agreements will be the subject of a public hearing on May 29.

The agreements, with three different sources of water rights, are signed by BOCC Chair Paul Jewell. The amounts of water, pricing information, and links to the documents are shown in the table below. All links can also be found at the county's Community Development Services webpage.

Assignor acre-feet total price $/acre-ft
Mitch and Julie Williams dba Aqua Mitigation LLC 67.203  $1,440,000.00  $21,427.61
Barton and Sheila Clennon 14.490  $200,000.00  $13,802.62
Mitch and Julie Williams dba Aqua Mitigation LLC 14.375  $735,000.00  $51,130.43
Thomas and Kathleen Roth 9.482  $122,000.00  $12,866.48
Totals and average $/ac-ft 105.55  $2,497,000.00  $23,657.03

Prices per acre-foot vary from $12,866.48 (The Roth Water Trust) to $51,130.43 (Mitch and Julie Williams, Aqua Mitigation LLC) -- a four-fold range. The average price offered to Aqua Mitigation LLC is $26,660 per acre-foot, twice the price offered to the other two parties. The average price for all the water is over $23,000.

How much is water worth, anyway?  Below is recent offer to buy water rights, from an April 2014 issue of the Yakima Herald.
The offer is to pay $1,750 per acre-foot, with the understanding that the water rights would leave -- not just Kittitas County -- but the entire Yakima River Basin. The stakes are very high in the arena of water rights.

It might seem odd that the county should move to socialize access to water, but there may be some reasonable arguments for it. Stabilizing access to water at as low a price as possible is one of them. These agreements do almost the exact opposite: they essentially codify an absurdly high price for water. Among other things, this constitutes a serious threat to agriculture in Kittitas County.

Just as bad, the current water bank process bypasses the normal bid system that the county is required to use to protect taxpayers from sweetheart deals between politicians and supporters. Like Walmart, as a volume buyer the county should be driving a much harder bargain.

On the other hand, I own a water right that I would jump at the chance to sell for $51,000, or even considerably less. I am sure that I am not alone.

Tuesday, May 20, 2014

MJ location concerns were avoidable

This morning I -- and a whole roomful of other citizens -- went to a Board of County Commissioners (BOCC) meeting. Most of us were there to talk and listen about proposed marijuana operations in the county.

As I have explained in earlier posts and in my comments at the meeting, I am surprised that the BOCC messed this one up so badly. Commissioner O'Brien (my opponent in this year's election for County Commissioner) is supposed to have been the one paying most attention to this issue, and he has my sympathy for the fix he's gotten the county into.1,2

1Note added after reading the article in the May 21 Daily Record: I was slightly misquoted in the article. In a FAQ issued on October 31, 2013 (very early in the process), people interested in getting into the marijuana business were reassured that if local officials did not like their proposed location, they could change their location without having to reapply. In other words, there would be a little or no cost to entrepreneurs as they search for an acceptable site, and entrepreneurs were clearly warned that such a search might be necessary.

2I hate to literally put my views on marijuana in a footnote, but here goes: I support the experiment the voters of the State of Washington have chosen to carry out, and I support Kittitas County's involvement it it. This involvement, if done correctly, can bring at least three benefits to the county: jobs; tax revenue from marijuana production, processing, and sales; and an increased property tax base. There are many citizens in this county who oppose marijuana on moral grounds, but I am not one of them.

Marijuana operations in Kittitas County

Yesterday's Daily Record contains an article in which our county commissioners appear to blame the state legislature for their own failure to lead on this issue. One must be careful about Monday morning quarterbacking, but in this case it's like blaming a safety in the first play of the game on a slippery ball. That kind of blaming isn't what winners -- or leaders -- do.1

Reading past newspaper articles on this issue, I don't see many previous complaints about the state's process, and in some cases the process has been praised. I do see a Board of County Commissioners that seems to have been blind-sided by this issue, possibly because they were so focused on getting the county into the water rights business.

An early report, published in the Daily Record on Dec. 5, 2013, noted that Commissioner O'Brien was the point man for the county's response to Initiative 502, which was approved in the 2012 election. In that same article, Commissioner Jewell notes that the county can't "outright recommend denial" of a permit to grow, process, or sell marijuana. That may or may not be true, but the county certainly had, at least at the time, plenty of tools to ensure a more orderly response to I-502.

1I haven't had a chance to write formally about it, but I'm running against Commissioner O'Brien for County Commissioner; from time to time I may post fair, but understated, criticism, of his performance for the past 3.5 years.