If you are an Anthem resident and get your water from Arizona American water, no doubt you have seen a significant increase in your water bill since the Corporation Commission approved one of the largest rate hikes in history. I know that my water bill has nearly doubled. Whereas I was paying on average about $120 a month (which is already extremely high) I am now paying in excess of $200 per month.

This makes me very angry especially because of the reasoning behind the rate hike – the fact that Arizona American Water is trying to pay off a huge debt they owe to the major developer of Anthem, Pulte Homes.

Rather then go into all the reasons why we have arrived at this point, I thought I’d republish here a newsletter I received a few weeks ago which wa sent out to all Anthem residents. It relates to the fact that there is now a class-action suit filed against Arizona American Water and Pulte, one of which I am glad to see come about.

With no further ado, here is the newsletter in its entirety.

Four homeowners have recently filed a class action lawsuit on behalf of all homeowners of Anthem against Del Webb/Pulte and Arizona American Water Company under Arizona’s Consumer Fraud statutes. The law firm of Kasdan Simonds Riley & Vaughan LLP of Phoenix is representing the homeowners. The lawsuit claims that the defendants failed to disclose that the cost of the water and wastewater infrastructure developed to serve the community was excluded from each home’s purchase price in order to keep prices artificially low.

The class action complaint alleges that the developer and the water company entered into an agreement on September 29, 1997, under which they would construct water and wastewater infrastructure for the Anthem project. Del Webb/Pulte advanced the costs of the infrastructure to the water company, with the monies to be repaid after the completion of Anthem through increased water rates. The complaint further alleges that none of this was ever disclosed to the Anthem home buyers. Once the water systems were built, Del Webb/Pulte and the water company agreed to artificially set the initial water rates at Anthem at approximately $70 per home, so as not to shock potential buyers with the true cost of supplying water to the homes. The lawsuit also alleges that Arizona American is now requesting substantial rate hikes to repay the hidden infrastructure obligation to Del Webb/Pulte, and the homeowners seek damages equal to the repayment costs, or approximately $100 million of the approximately $150 million this water project cost to build.

Under Arizona law, the developer is required to disclose to potential homebuyers whether the cost of water infrastructure needed to provide water to the home is included in the price of the home. The Plaintiffs allege that Del Webb/Pulte’s Public Reports falsely disclosed to some early buyers at Anthem that the cost of the water infrastructure was included in the purchase price of the home. For later buyers, Del Webb/Pulte made no disclosure at all.

Arizona American recently applied for an $18 Million rate increase for 2007-08 — the first of several anticipated rate increases. Much of the increase was granted. The rate increase primarily impacts the “base rate” and not the “usage rate.” Even Arizona American Water Company cited the cost of the infrastructure and the repayment obligation to Del Webb/Pulte in its rate increase application. The application also reports that Del Webb/ Pulte and the water company “developed a methodology that provided for reasonable, but high initial rates, followed by a series of rate increases as the number of homes sold increased.”

If you think all of this sounds “underhanded” you are not alone. At the June 4, 2008 Special Open Meeting before the Arizona Corporation Commission regarding the requested rate increase, Commissioner Kristin Mayes stated:

“This rate increase is patently unfair. It asks current customers to pay a bill they didn’t know was coming, didn’t have a chance to protest and didn’t have an opportunity to prepare for. . . . .

I would add that there is no evidence that any utility in the State of Arizona has ever been financed in such a patently unfair way to consumers.

This is an extraordinary case. Never before has this commission approved such a large rate increase on such flawed circumstances.”

The bottom line – plaintiffs contend that Del Webb/Pulte concealed the true cost of the homes from you and now expects you to bear the cost. Simply stated, if there was full disclosure of this repayment scheme at the time of sale, you could have made an informed decision because you would have known the true cost of the home.

We are committed to keeping you informed throughout the lifecycle of this lawsuit. If the court grants class certification, you may benefit from this litigation. If you would like to receive email updates, provide your email address to us at anthemwater@ksrv-az.com. We have also set up a website, www.anthemwater.com, where you can view the complaint and other pertinent documents as they become available.

Now, a few observations:

• Why would a water company (Citizen’s Water at the time) agree to pay for the infrastructure of delivering water to homes when Pulte (Del Webb at the time) could not build and sell homes without having some sort of water delivery system? In other words, for Del Webb/Pulte to build Anthem, they had to provide a way for water to get to homes, unless of course they are going to sell homes and make buyers put in water tanks and have water delivered or allow them to tap into some kind of well system (not a likely scenario for a tract home). So why should the company who is going to deliver the water have to pay for that?In my opinion, Citizen Water which was later acquired by Arizona American water made a very stupid decision in agreeing to pay the costs to provide the infrastructure.

• Why was this eventual rate hike that we are now experiencing not disclosed to buyers? It seems pretty obvious that Del Webb/Pulte knew it would hinder home sales. I know I would not have bought here if I knew I was going to go from paying around $50 in Phoenix (that includes trash) to over $200 in Anthem.

• Who at the Arizona Corporation Commission approved the rate hike anyway? If the statement above by Commissioner Kristin Mayes is valid, it seems like the Commission went against its own opinion. Somebody enlighten me on this?

I hope Arizona American Water and Pulte lose the class-action lawsuit. The only problem is no matter whether they win or lose, I’m sure they will be able to drag this out for a long time to come. In the meantime Anthem residents suffer not only due to the fact that they are paying a higher price for water but also because it is harder to sell a home to those who are aware of our water dilemma.