Loan paves way for $10M acquisition of Diversified Water Utilities Inc.

By Richard Dyer
Twitter: @RHDyer

Queen Creek has received a $13.3 million loan that will allow it to buy Diversified Water Utilities Inc.

The town is to take possession of Diversified on Oct. 2 through the loan from the Water Infrastructure Finance Authority of Arizona. Diversified’s customers will receive their first Queen Creek water bill by the week of Oct. 26.

The Town Council recently approved a resolution regarding the loan in a unanimous vote. It was the last legislative step the town needed to finalize the acquisition of Diversified Water, town Finance Director Scott McCarty said at the Sept. 2 Council meeting.

“(W)e have a willing seller and a willing buyer — the town — and the transaction is moving along as planned,” he said.

The Diversified system is adjacent to the town’s current water system boundary on the east and encompasses more than 9 square miles, providing water to more than 1,600 current accounts. At buildout, it is to be 15,000 accounts, Mr. McCarty said.

“We have and are experiencing a lot of activity in that area through land ownership as well as developers — single-family home developers,” he said.

The WIFA loan is for $13.3 million, with $10.3 million for the acquisition and issuance costs of Diversified. The insurance costs include $100,000 each for legal/debt authorization, a financial adviser and for administration, according to a town document.

“That amount will be repaid over 30 years from monthly rates from that area that we are acquiring,” Mr. McCarty said, later adding the interest rate is to be less than 2%.

The remaining $3 million, to possibly be paid back with capacity fees, is the cost of interconnecting the town of Queen Creek’s water system with Diversified to operate as one system, he said,

Part of that amount will be forgivable principal from the loan, Mr. McCarty said.

“One unique component of this that we learned as we went through the WIFA approval process is because we are connecting two systems — consolidating two systems, if you will — we are eligible for about a little over $440,000 of forgivable principal. So although we’re borrowing $13.3 million, $442,500 of that we will not have to pay back,” he said.

On May 20, the Town Council adopted a resolution authorizing the application for a drinking water state revolving fund loan from WIFA in an amount not to exceed $15 million for the Diversified acquisition and interconnection.

“After evaluating various interconnection options as well as the costs associated with each, the loan’s total was revised down to $13.3 million based on the interconnection approach selected by town staff,” Mr. McCarty and Utilities Director Paul Gardner said in a memo to the council.

The town’s loan application was submitted to WIFA on June 26 and approved by WIFA’s Advisory Board on Aug. 20. The final resolution was approved by the Arizona Finance Authority’s Board of Directors Aug. 26, they said.

The loan has a closing date of Sept. 25, and the town expects to receive its initial disbursement of $10 million to fund the acquisition of Diversified on Sept. 28, according to the memo.

Council discussion

The Town Council on Sept. 2 voted unanimously to approve the resolution, with Mayor Gail Barney and Councilmember Robin Benning on the dais. Meeting by WebEx were Vice Mayor Julia Wheatley and Councilmembers Dawn Oliphant, Emilena Turley, Jeff Brown and Jake Hoffman.

Vice Mayor Wheatley thanked town staff and the WIFA board for their efforts, including the forgivable principal on the loan.

“Just very appreciative and impressed with the speed of this transaction,” she said prior to the vote.

“It was already a good, deal and obviously the half a million dollars in forgivable principal makes it that much better,” Councilmember Brown said.

Councilmember Benning also thanked town staff members.

“Continuing to serve the community by building a stronger and more resilient and sustainable water department — do keep up the great work,” he said.

Town staff continue to look for ways to obtain water, save money on water and have the financing to pay for the water, Mayor Barney said.

“Because if we don’t have the water, we are not going to grow. There is a lot of concern about the lack of water in Arizona now, and I have to tip my hat to our utilities staff — they have been working their tails off trying to find water and how to pay for it and to have it be economical where we do benefit as a town and can continue to grow,” he said.

Richard Dyer
Managing Editor | East Valley
@RHDyer

rdyer@iniusa.org

Meet Richard
Richard Dyer has worked at Independent Newsmedia Inc. USA since 1987, starting his career in Apache Junction as a copy editor and being promoted over the years to work as the editor of the Mesa Independent, news services editor for the East Valley office in Apache Junction, managing editor for the East Valley office, news services editor for the East Valley office and eventually also for the newspapers at INI’s then-Chandler office, managing editor again and as a news editor covering Apache Junction/Gold Canyon and Queen Creek. He helped start the Florence Independent while the news editor covering Apache Junction and Mesa news. In January 2023, he became associate managing editor for the East Valley newspapers and in August 2023 became managing editor for the East Valley newspapers of Chandler/Tempe, Gilbert, Queen Creek, Florence, Mesa and Apache Junction/Gold Canyon, while also reporting on Mesa and Apache Junction/Gold Canyon.  

Community: Since 2009, he has worked as a volunteer to design The Blue Guitar Magazine, Blue Guitar Jr. magazine and Unstrung magazine, which are projects of The Arizona Consortium for the Arts; and since 2014, has been overseeing the art submissions. 

Education: University of Arizona with a master of arts in journalism and a bachelor of science in agricultural communication. Also continuing education at Mesa Community College in welding in a metal art sculpture class.

Random fact: Saw his first tornado on May 31, 2010, which was classified as an EF-2, as part of a stormchasing tour group.

Hobbies: He is an artist of welded-steel sculptures, selling his artwork at juried and non-juried art shows.