Appraisal — County buyout equals pricey water on Lanai

WAILUKU – Earlier this year, the County Council demanded that the Lanai Co. “ask” for an appraisal of the value of its water company, with a view toward acquiring it to be part of the Department of Water Supply.

The appraisal by Brown & Caldwell is in. It estimates that if the county acquires the Lanai water system, rates would have to be raised nearly 900 percent, since costs of operation, new equipment and paying for the system would require nearly 10 times as much money as the $553,000 in revenue that the private company now enjoys.

On Tuesday, the Water Resources Committee, without comment, passed the agenda item on to the next council. If it had not done something, the Lanai proposal would have been filed.

Unresolved council projects expire automatically with the council that gave them birth, unless specific action is taken to pass the uncompleted work on to the next council. The next council will have five new members.

Mayor-elect Alan Arakawa has said since the beginning of his first term in 2003 that he wanted all water in the county to come under public control. That would include private water companies at Kapalua, Kaanapali, the Wailuku Water Co. and East Maui Irrigation.

However, during his first term, Arakawa did not acquire any private water for the county.

He was offered Wailuku Water – with its 13,000 acres of watershed – for an asking price of $20 million. He tried to offer $7 million for just the intakes, but Wailuku Water said it wasn’t interested.

Either figure – $7 million or $20 million for 50 million gallons of water per day – looks cheap compared to the estimated cost of buying the Lanai waterworks.

Brown & Caldwell figured the costs to the penny, although a footnote cautioned that the study was a preliminary estimate and would be subject to further investigation.

Today, the 1,500 customers of Lanai water pay more than $500,000 annually for water, but that does not mean the typical household pays $360 a year, since the hotels are the biggest customers.

Brown & Caldwell found that if the county took over the system, it would require nearly $5 million to run it.

If only Lanai customers paid for their water, bills would rise 829 percent from $26.32 per month to $244.56.

If the cost were spread out over all users of county water, the Lanai increase would still be more than 100 percent, to $55.96.

And Maui customers, now paying about $86 (every two months), would see their rates boosted by 13 percent to $96.37.

The committee also considered whether to preserve a proposal of Water Resources Committee Chairman Mike Victorino’s that could add more exceptions to the water availability ordinance, the “Show Me the Water” law.

Victorino is proposing to exempt in-fill projects of 20 units or fewer and affordable housing projects.

The proposal has not had extensive discussion, but some preliminary questions were raised Tuesday.

Council Member Joe Pontanilla wondered whether it would cover work force housing, affordable housing, or both.

There were also questions raised about exempting subsidized projects that were funded by nonprofits, or privately, or both.

Victorino said he would take those questions under advisement and revise his proposal next year. The committee voted to preserve the agenda item for the new council.

Appraisal
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