Hesperia seals water rights deal (November 24, 2012)

HESPERIA • The city’s water future is a bit more secure, after the four-member Hesperia City Council voted to purchase the permanent water rights held by Rancho Las Flores, LLC. for $30 million.

As soon as escrow closes in mid-December, the city will own 5,971 acre-feet of base annual production rights held by Rancho in Summit Valley, according to the 28-page agreement signed Oct. 3 between the city and R.E. Loans, a company serving as attorney-in-fact for Rancho.

The city, which has leased water from Ranchos since 1994, began moving on the water rights out of financial concern after Ranchos filed for bankruptcy in January, walking away from a giant master-planned community meant to transform that portion of Hesperia.

If we don’t own the rights, someone will buy them and we’ll be at their mercy, Mayor Russ Blewett said during Tuesday night’s meeting, where Councilman Paul Bosacki was absent.

The city opted to purchase the water rights because of its credit worthiness and substantial levels in the city’s general fund reserve account, rather than allowing the Hesperia Water District to be the buyer. The water district, which had been on shaky credit ground due to cash shortages, would not have been able swing the $5 million dollar down payment.

Because the city purchased the water rights over the district, there is a higher likelihood that there would be no rate increase for a good length of time, according to city staff.

Staff also clarified that the city’s direct action of purchasing the rights, instead of the district, would not raise waters rates.

But an increase in energy rates, a major catastrophe or an issue with water quality could potentially raise water rates in the future.

The city will finance the balance of the purchase with lease revenue bonds, with an interest rate not to exceed 5 percent over the next 30 years.

The Terra Verde Group, a Texas-based real estate investment firm, bought the 10,000-acre property from the bankrupt Rancho Las Flores for $10 million on Nov. 13, according to city staff.

The city that controls their water controls their future, Blewett said.

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Source: Rene De La Cruz, Daily Press