Humboldt County commissioners agreed Monday to move forward with a potential plan to buy Star City Water (SCW) by requesting a professional appraisal of the water system’s value. Should the county purchase SWC, the system would be put up for auction.
SCW’s board members, who have managed and operated the system since its beginning, want to hand the reigns to another party. However, SWC is saddled with substantial debt in the form of a loan and grants from the U.S. Department of Agriculture (USDA), making sale unreasonable. In order to remove the debt and facilitate sale of the system, the county is looking into a loan forgiveness plan.
The plan
Humboldt County would essentially purchase SCW for the price of paying off the USDA loan, approximately $600,000. With the USDA loan repaid, SCW’s two grants (USDA and Community Development Block Grant, or CDBG) totaling approximately $900,000 will be forgiven, freeing up the county to sell the water system at value. This option only applies if SWC is purchased by a government entity.
Gold Country Water has expressed interest in buying SCW, and the county has worked to legally facilitate that purchase.
Once the appraisal comes in, Gold Country owners will sit down with staff members of Nevada Department of Environmental Protection Office of Financial Assistance to see if they can make the numbers work.
If SWC’s appraised value comes in higher than Gold Country can afford, all parties can stop and reconsider next steps.
The commission has chosen to step in to facilitate the sale of the water system in order to take advantage of the loan forgiveness opportunity, Mendiola explained in an email to the Sun.
The county also hopes to prevent having to take on SWC in the future. Should SWC’s board dissolve, the county must step in. Humboldt County already manages water and/or sewer systems in Golconda, Paradise Valley and McDermitt.
“One of the concerns is, if we don’t do something with this, by statute, this is going to come back and it’s going to land in the county’s lap, anyway,” Mendiola said during Monday’s meeting. “We hope to avoid that; or at least that’s the impression I get from the commission.”
The potential risks
Legally, the county couldn’t sell SWC directly to Gold Country. Statute requires that the county put the water system up for bid, solicit interested parties and sell to the highest bidder, using the appraisal value as the minimum bid threshold. Gold Country would have the chance to bid, but another entity’s bid could put them out of the race.
If no bidders match the minimum bid threshold at the first auction, the county might be able to ask for a reappraisal, or set its own price in a subsequent sale, Mendiola said.
Commissioner Marlene Brissenden, attending Monday’s meeting via telephone, encouraged action. “I understand what you’re saying there, that Humboldt County will end up having to run a water system if it (the appraisal) comes in over $1 million. But here’s the thing: they’re ready to give up now. These guys are tired of this. So, I say let’s do this thing! Let’s do what we can that’s legal and see what happens.”
SCW will pay for the appraisal. Due to the difficulty in finding companies that specialize in appraising water systems, commissioners and Deputy District Attorney Wendy Maddox agreed that only one appraisal was necessary.
