Glendale City Council unanimously voted May 26 to put an EPCOR franchise agreement to serve the Loop 303 area on the fall ballots.
A water company founded in Canada over 100 years ago, EPCOR Utilities expanded over the last few decades, now operating in New Mexico and Texas as well as Arizona.
EPCOR operates in west Glendale near the Loop 303, providing water and sewer to companies that have built on recently annexed land. EPCOR is building sewer lines in that area, including one just outside Luke Air Force Base.
For Glendale to build its own system to serve that area, “It would be in the hundreds of millions of dollars,” Glendale Chief Capital Improvement Officer Donald Bessler said.
“That cost would typically be born by ratepayers. This provides an alternative. There would be no capital costs to do that,” Bessler said.
He said it would “formalize” the relationship between Glendale and EPCOR.
As Glendale does not provide water to the west part of the city, EPCOR has been serving customers near the Loop 303 for a decade. The area has become a hotbed for development, with Red Bull and White Claw building facilities that will use large volumes of water.
EPCOR projects water usage in the far west area of Glendale will increase by 10 times and wastewater will increase more than 70 times the current usage over the next seven years in this fast-developing area.
At the city council workshop earlier May 26, Bessler said the city of Scottsdale has a similar franchise agreement with EPCOR.
According to Bessler’s presentation, EPCOR Arizona would be required to pay the city of Glendale 2% of their annual sales to customers within the city. By the eighth year of the agreement, EPCOR would be paying the city about $124,016 annually, he said.
The proposed franchise agreement in Glendale would provide water services to the city and its citizens. Should the citizens vote to approve the franchise agreement, it would be in place for 25 years.
Bessler said the agreement would allow for more economic development along the 303 corridor west of 115th avenue.
“I don’t think formalizing this relationship has downfalls,” Bessler said.
The May 26 meeting was the first time the city council voted on the matter. Bessler said that by approving the resolution, city council is stating they believe the franchise agreement would be beneficial to the city and its citizens and that the citizens should have the opportunity to vote on the matter in the fall.
Bessler described the proposal as a “win/win partnership.” He said it would ensure a reliability of service for the community, ensure EPCOR pays its fair share of the infrastructure growth and provides the city with an ongoing revenue stream.
Franchise agreements typically ensure at least 2% of revenue is given back to the city’s general fund.
The percentage could possibly be more as the contract is still in negotiation, Bessler said. At the minimum percentage, it is projected that around $450,000 will go back to the city over the first seven years of the contract.
During the workshop, council members asked questions about the finances behind the agreement and the details of the utility company’s abilities derived from the agreement.
“The alternative to us providing the infrastructure would be astronomical,” Councilman Ray Malnar said. “We’re going to be getting this $450,000 into our budget. ... Where is it going to be utilized?”
City Manager Kevin Phelps said use of the franchise revenues “would be up to the discretion of the council.”
The city of Glendale is already in two franchise agreements with utility services Arizona Public Service Electric and Southwest Gas.
The EPCOR agreement, Bessler said, “Is very similar in construct to the APS and the Southwest Gas agreements. The compensation is similar, the length of time is 25 years and the duty for both sides to perform is similar.”
Bessler stressed EPCOR’s agreement with Scottsdale have worked well and an agreement would not be costly for Glendale.
“The costs to manage a franchise agreement are largely administrative,” Bessler said. “Inspection-related costs for construction in the right of way will occur regardless of the franchise instrument.”
EPCOR could also face costs and fees from the agreement. In the Scottsdale contract, EPCOR incurred the $90,000 cost of adding the resolution to the ballot in November 2013.
“The city council has forwarded this item to the voters with the belief that it will be beneficial for our community. Our responsibility is to ensure that the public can make an informed decision,” Bessler said.
This month, Glendale City Council is scheduled to further discuss and vote on the EPCOR franchise agreement and the language that will be on the ballot in November.