CEDAR CITY — Cedar City is dropping over $11 million on some of the valley’s oldest water rights.

On Sept. 13, the Cedar City Council voted 4-1 in favor of an agreement to purchase 942.75 acre-feet of water from LeBaron Ranch Holdings for just over $12,100 per acre-foot, totaling approximately $11,412,997.

Councilmember Terri Hartley was the lone nay vote.

During discussions, Mayor Garth Green took to his “bully pulpit” to speak in favor of the purchase, stating that one of his primary goals is stabilizing the city’s aquifers. And while it may appear that the city is in a good position, he said he’s concerned about its obligation to supply water to “wet” land.

Wet land is annexed property that has transferred its water rights to the city. City Engineer Jonathan Stathis said Cedar City is legally required to supply water to the entire acreage of any such parcel, which represents approximately 1,926 acres and about 7,704 homes.

Some of the Cedar Valley’s oldest water

The LeBaron Ranch water rights would not be subject to cuts under the Utah State Engineer’s water management plan for basin 73, in which Cedar City is located. The plan gradually reduces the amount of water allowed to be depleted to establish safe yield limits — the amount of groundwater that can be pumped sustainably.

Water rights from 1957 onward will be regulated and unavailable for use beginning in 2035, with priority dates getting older until 2080 when water rights from 1934 to the present will be regulated. Should the basin reach safe yield at any point, future reductions would not be implemented, according to the plan.

About 90% of the water purchased from LeBaron Ranch Holdings is dated 1860, with the most recent dated 1934.

“It’s some of the oldest water in our valley,” Hartley told Cedar City News.

Cedar City Manager Paul Bittmenn said the city is “always working to obtain water.”

“One thing we would hope that our citizens would recognize is, given the current groundwater management plan in place for our water basin — if all those cuts happen, we’re gonna have a deficit,” he said. “And we’re purchasing these water rights to close that deficit.”

Hartley said the largest water rights reductions in the basin’s management plan are expected in 2060.

“And I just think we need to proceed very carefully to not overburden our citizens all at once,” she said, adding, “It was kind of critical for us to buy old water. But I just couldn’t wrap my head around our citizens having to pay for it right now.”

This agreement comes on the heels of several other water purchases, the largest of which will cost the city over $12.8 million for 1,002 acre-feet of water from the Holt Family of the Escalante Farms Company in Enterprise.

Hartley said the total debt payments could be about $1.7 million annually.

“Right now, we have about $1.2 million excess revenue in the water enterprise fund, and that money is spent every year for maintaining our existing infrastructure,” she said. “Such as, we’ve got a regular schedule of replacing old water lines, maintaining our water tanks and our wells and our pumps.

“And these bond payments would deplete this revenue stream for the next 15 to 20 years, making it extremely difficult to maintain the water system that we have without either raising our base water rates or raising our sales tax.”

Jonathan Ward from Zions Public Finance said that the investors consider the city’s “net pledge revenue” — what’s left over from water revenue streams after operating expenses are paid.

“And with that net pledge revenue is a rate coverage covenant — a promise the city makes that if something happens in the future that’s unpredictable, you’ll raise rates to levels necessary to repay the obligation,” he said.

The city’s water revenues averaged about $1.3 million per year in recent years, and if that amount is projected to come in annually for the next five years, plus the growth trends for revenues and expenses, Ward said the city can expect to have sufficient funds to cover both water rights purchase. With this estimate, the city would have an estimated $900,000 to $1 million left over for capital projects.

However, if revenue is lower — about $400,000 per year — the city could bond for the entire Holt purchase but only $5 million for the LeBaron purchase, giving it less wiggle room to fund other projects.

Other bonds are in the works for the new Iron County jail and several projects for the Iron County School District. Both will be on the ballot in November. Hartley said she worries additional costs would risk “breaking the backs of our citizens.”

“They can’t afford it with the inflation where it’s at right now,” she said.

Additionally, the Central Iron County Water Conservancy District is in the planning stages of the Pine Valley Water Supply Project, which would supply 15,000 acre-feet of water to Cedar City, Enoch and other nearby communities, according to the conservancy’s website. And Hartley said this water would be delivered to the city’s infrastructure.

“When that project gets ready to move forward, Cedar City needs to be financially positioned to be able to participate in that project,” Hartley said. “And bringing that water will provide water for our valley for the next 50 years.”

Councilmember Tyler Melling said that while it is a large purchase, it’s “small enough” to give the city time to adjust its policies.

“Within five years, we would be better positioned as a city to participate in a project like that,” he said. “Because that is a $3-5 million-a-year project easy, but it’s much cheaper than what we’re doing now when you compute the acquisition and distribution costs.

“So I do think we need to be careful not to overextend ourselves. I don’t think this (purchase) quite takes us there because it forces us to make those adjustments now. I would be hesitant to do … another big purchase on top of that.”

The city is in the process of bonding to pay for both purchases, with an estimated $10 million for the Holt’s water rights.

To close the LeBaron transaction within 30 days, the city will issue payment with funds on hand and use money obtained through a bond to reimburse those accounts, Bittmenn said.

LeBaron Ranch will lease the water for five years, with the city requiring a lump sum payment of $100,000 upfront, Hartley said. Additionally, the original proposed agreement asked for a downpayment of $1 million, which the city rejected, opting to pay the entire purchase price upon closing with no downpayment.

At Wednesday’s meeting, the council voted unanimously to limit parity water revenue bonds for the purchase to $8.1 million over 31 years, with a maximum interest rate of 6%.

The motion was proposed by Hartley, with a second from Melling, who said he wanted to limit the debt acquired by the city to avoid giving outside parties control over rates.

“We’ll have the money to make the payments, but we won’t have control over water rates, and that’s my biggest concern,” he said. “Because I don’t want the bank dictating our water rates.”

Green said the city likely won’t need to make additional water rights purchases in the foreseeable future.

“I don’t care if we don’t buy any more water,” he said. “I’m very grateful we got what we were able to get.”

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