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State Auditor: Concerns About Santolina Water Deal Negotiations

The State Auditor's office has launched in inquiry into concerns that the Albuquerque Bernalillo County Water Utility Authority might be about to give away the store when it comes to providing water to the massive Santolina development on the Westside.

Those concerns include the possibility that “the owners of Santolina, including Barclays Bank, may be attempting to illegally benefit from” previous improvement the ABCWUA has made to its water devilery system, including the $500 million San Juan-Chama project.

The State Auditor's office expressed it concerns about Santolina in a Sept. 15 letter to the ABCWUA's auditor, REDW, LLC. The letter directed the accounting firm to investigate the concerns and include the findings in its 2017 audit of the ABCWUA.

Specifically, the State Auditor is is looking at potential violation of the anti-donation clause of the New Mexico Constitution, and what the ABCWUA's requirement that new service to Santolina be provided at no net-new expense to existing rate payers actually means.

The auditor's office also said that it had “received information suggesting that the agency made infrastructure improvements in support of the proposed Sandolina development, benefiting a private party Westland [Western] Albuquerque Land Holdings, LLC, in possible violation of the anti-donation clause at at the expense of current taxpayers.”

Those infrastructure improvements include three trunk lines: Atrisco, Pajarito and College. The Atrisco and Pajarito trunks have existed since the 1990s, and the ABCWUA has determined that they shouldn't and won't be used to supply water to Santolina.

And the water utility hasn't even begun negotiations with Santolina's developers, Western Albuquerque Land Holdings, LLC, on an agreement to provide water to the 14,000-acre Santolina development.

“The Water Authority and its auditor are preparing a response to the State Auditor’s inquiry,” ABCWUA spokesman David Morris said in a statement to ABQReport. “Infrastructure constructed to serve existing WALH developments (the “College Trunk” referenced in the State Auditor’s inquiry) was constructed at no net expense to existing ratepayers and was built in accordance with utility ordinances governing provision of service; it is not our belief or position that this infrastructure could or should be used to serve Santolina. Any development agreement with Santolina, by law, must stipulate that water and infrastructure would be supplied at no net expense to existing rate payers.”

What does no net expense mean?

The State Auditor's inquiry into the ABCWUA was prompted by a July 12 letter it received from longtime New Mexico water expert Norm Gaume. In his letter, Gaume asked for a special audit of the ABCWUA's policies and controls in regards to its upcoming negotiations with WALH over water.

Gaume argued that Santolina must pay, not just for infrastructure to get water to its development, but for past improvements to ABCWUA's system that have made getting water to Santolina possible. That includes the $500 million San Juan-Chama project, which made it possible to move water around all parts of the metro area. The San Juan-Chama project was completed in 2008.

Gaume also argued that Santolina's land is basically useless right now because it has no water supply. The development is seeking 14,000 acre feet of water a year from the ABCWUA, more water than the city and county of Santa Fe combined use each year, Gaume said. The cost of buying those water rights and and building a water delivery system from scratch - something ABCWUA ratepayers have paid for over the years – would be enormous and should be included in any definition of “no net expense,” Gaume said.

The value of 14,000 acre feet of water is around $500 million, Gaume said.

“Without a water supply from ABCWUA, the Santolina properties are essentially without value,” Gaume's letter to the State Auditor said. “Thus, Barclays requires water from ABCWUA to profit from its speculative land purchase. The risk is ABCWUA approval of a water development agreement, negotiated without transparency and approved ministerially, that charges Santolina far less than water supply true cost or its economic value.”

Gaume's letter continued:

“ABCWUA claims their existing water supply is sufficient to serve Santolina. This mans Santolina will benefit from ABCWUA's water rights and water supply infrastructure that will provide the water to the new water distribution infrastructure serving Santolina. Will ABCWUA require Santolina pay their true fair share, or the fair economic value, or nothing, for these virtually-impossible-to-replicate resources that have been acquired with public funds?”

Before the ABCWUA can even begin negotiating a water deal with WALH, the developer must submit an application for a statement of water availability to the utility. The utility would then have to determine whether it has the water to serve the development. Only after the utility says it has enough water can negotiations on a water deal begin.

As of Nov. 6, WALH hadn't submitted an application for a statement of water availability, Morris said.

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