ADC Finally Starts Charging Fees to Galbraith Tenants for Well Water

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On May 20, the state Agribusiness Development Corporation’s board of directors approved a new water user agreement that will require anyone drawing from the agency’s Bott Well Pump Station to pay $0.89 per thousand gallons. The well, which has a 3 million gallons a day (mgd) capacity, currently serves 1,000 acres in the area. The ADC has a Commission on Water Resource Management permit to use up to 2 mgd.

Larry Jefts’ Kelena Farms, the largest tenant of the ADC’s lands acquired from the Galbraith Estate several years ago, has for years been paying to pump and distribute the water to his farm and those of his neighbors, according to an ADC staff report. 

The report explains that Jefts, a former ADC board member who the agency hired years ago to prep the Galbraith lands for farming, chose to provide the water himself because he thought it would be cheaper than what the ADC might charge. But as more farmers have received licenses to farm the former Galbraith lands, their well water needs are now too expensive for Jefts to shoulder anymore, the report states.

The ADC’s plans to divert water from nearby Lake Wilson to irrigate the 3,000-plus  acres it’s bought from Galbraith, Dole Foods, and others have not yet panned out. So the farmers continue to rely heavily on the well.

“[T]here is currently no additional assessment issued by ADC for water delivery largely in part due to the lack of water users, irrigation staff, and agreement or condition in the License Agreement that provides a structure for such an assessment,” the staff’s report states. 

Staff had initially proposed charging the farmers $1.50 to $1.80 per thousand gallons of well water, but later reduced it to $0.89.

Before the board unanimously approved the agreement, member Kaleo Manuel, who voted with reservations, questioned how staff had arrived at the rate it intended to charge.

The ADC’s Ken Nakamoto did not say exactly how it arrived at $0.89/thousand gallons. He said operating costs are unknown. “As it stands, the farmers are doing the operation themselves. We do the maintenance,” he said.

To Manuel, who is also the deputy director for the state Commission on Water Resource Management, the rate and expected revenue from it seemed random. “It would give me more confidence if there was something to base the numbers off of,” he said, adding that tenants would then have confidence and a good understanding of what they were paying for.

Most water systems are regulated in some way and usually have rules for how rates are set, he continued. “I want to make sure we, as a board, are protected if disgruntled tenants … refuse to pay the fee. … These numbers don’t seem to come with justification. I know we’re trying to keep rates low,” he said.

“That’s the challenge. How do we keep it low and be able to accomplish maintenance [and handle] unforeseen damages,” Nakamoto replied.

Manuel recommended that the ADC consider doing a cost of service study.

ADC executive director James Nakatani explained that the water user agreement is a way  to “stop the bleeding.” “We cannot subsidize the farms 100 percent. We followed the good advice from people like Kelena Farms. The board should just be patient with us. This is just a first step.”

The original proposal to charge $1.50 to $1.80/thousand gallons was based on another system’s pumping costs. “That’s pretty high,” Nakatani said. “We just need to get a handle on this cost. … The idea is not to make a whole lot of money on the system, but at least break even and make some money for CIP [capital improvement projects] and projections. We need to move forward. Without some type of water rate structure, we’re going to have a hard time with this project here,” he said.

To Manuel’s suggestion regarding a cost of service study, Nakatani agreed that it was a good idea. “The problem is, we’re just between hops. We don’t have all our farmers. We’re still building out a system. We’re taking our best guess from our biggest user. It’s probably on the low side. We want to make sure, because this is agribusiness development, we want our farms to succeed. … We’re not there yet. I think we’re on the right track,” he said.

— Teresa Dawson 

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