A recent bond issue and a pending federal grant are helping Central Arkansas Water tidy up land acquisition costs of two large tracts in the Lake Maumelle watershed.
Both properties provided unusual opportunity for CAW to expand its holdings as caretaker of the largest source of drinking water in central Arkansas. Representing a combined 1,403 acres and $15 million, the deals to buy the west Pulaski County tracts shared common ground.
Both transactions were preceded by financial reversals and criminal action visiting past ownerships. Both deals also involved the Trust for Public Land of San Francisco acting as an intermediary to help facilitate CAW’s purchase.
The two properties also were the subject of separate courthouse auctions prompted by Little Rock’s Metropolitan National Bank. Each of those foreclosure actions was against a lawyer-businessman sent to federal prison for financial misdealings: Gene Cauley and Frank B. Whitbeck.
While sharing similar paths en route to CAW ownership, the properties carried significantly different valuations.
Last year, Metropolitan National Bank sold the former Cauley property for $2.63 million, about $5,400 per acre.
Proceeds from a $17.5 million bond issue on Jan. 11 allowed CAW to complete its purchase of the wooded 488-acre tract about a mile north of Lake Maumelle. The Feb. 1 closing came five months after the Trust for Public Land bought the property at the behest of CAW and held it until the utility could raise the cash to pay for it.
Upstream from the 8,900-acre lake, the trust purchased the former Whitbeck property n a similar arrangement with CAW.
The December 2009 transaction with Canterbury Park Ltd. for 915 acres along the Big Maumelle River closed at $12.4 million, about $13,500 per acre.
The price for the land, dominated by floodplain acreage along the lake’s primary source of water, was an eyebrow raiser.
The seller, an investment group led by Jay DeHaven, had purchased the bulk of the land (about 815 acres) for only $4.55 million at a foreclosure sale of Whitbeck’s Winrock Grass Farm in July 2005.
"I really expected them to be my competition," DeHaven said of CAW in a 2007 interview with Arkansas Business. "Had it gotten above $7 million I don’t know if I would’ve bid."
CAW officials, who wanted to buy the property but didn’t press the matter, watched as DeHaven walked away from the Pulaski County Courthouse with what proved to be a bargain of bargains.
"It is what it is," Graham Rich, who joined CAW as CEO in 2007 after the retirement of his predecessor, Jim Harvey, said last week.
The property was expanded to more than 950 acres in December 2005 with an additional $1.3 million purchase led by DeHaven and became the focus of an extended tug of war.
Mixed in with the struggle between CAW and DeHaven for developmental control of the land was haggling over its value.
The Trust for Public Land helped break the gridlock and established the $12.4 million appraised value. It was more than double the investment by DeHaven’s group but less than the $19 million value he claimed.
"At the end of the day, whether that is the right price, I don’t know," Rich said. "But I believe we’ll look back 30 years from now and feel better about this. I think people will look back and say ‘I’m glad they did buy it.’"
CAW ratepayers were spared from shouldering the full purchase price thanks to state and federal sources.
A $4 million appropriation in state general improvement funds to the Arkansas Forestry Commission helped purchase the land and pay for habitat restoration.
Plans call for a significant portion of the property to be reforested and the land use shifted to low-impact recreational purposes: hiking, canoeing and kayaking and fishing.
"The long-term development plan for the property is probably 20 to 30 years, and we’re just in the front end of that," Rich said.
For now, the property continues to be operated as a sod farm in a leased arrangement between CAW and Arnold Jester, who oversaw the property with Winrock Grass Farm.
Augmenting the state funds is a $4 million conservation grant from the U.S. Forest Service. "We’re hoping to get that actual check in May," Rich said.
Once in hand, the money will be used to pay down the $8.4 million bond issue used to buy the property in conjunction with the state funds.
"That was a special property, with three miles of river frontage on the Big Maumelle," Rich said.
A 45-cent monthly surcharge on water bills of its 122,791 customers provides the cash flow to pay for CAW’s land acquisition.
Besides the 488-acre tract, the utility’s only other recent purchase activity was a condemnation transaction for a 1.3-acre site on Shinall Mountain in west Little Rock. The land is the future home of a water tower.
Using eminent domain, CAW bought the property along with an access easement from Elsie Pouzar for $219,000.
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