A standing offer to buy shares of Kaysville Irrigation Co. water for $450 per share, about three times the current market trading price, was approved Tuesday night by the Kaysville City Council.
The council also approved an amendment to its subdivision ordinance requiring developers to provide three acre-feet of irrigation water for every acre of property being developed.The two measures are part of the city's plan to extend secondary irrigation water to all Kaysville residents, a proposal that could cost up to $10 million for reservoirs, pipelines, and water shares.
City Administrator John Thacker said the offer to buy the irrigation company shares is being made because as the city's new pressurized irrigation system is installed and the area served by the irrigation company in West Kaysville develops, the company will eventually cease to operate.
And, the city can use the shares of the flood irrigation company's water to supplement the irrigation water Kaysville will purchase from other suppliers, Thacker said.
As for the city's $450 per share offer, Thacker said an analysis of current water share prices shows the shares are undervalued. The $100 to $125 per share selling price hasn't changed since the mid 1950s, Thacker said, adding most of the shares that change hands are sold between family members and don't actually appear on the open market.
The city also doesn't want to be accused of taking advantage of share owners by paying only a fraction of what the shares are worth, he said.
Faced with last summer's drought, when the city was forced to put restrictions on water use to prevent residents from pouring treated drinking water on their lawns and gardens, the council last fall decided to move ahead with the irrigation water plan.
Only about half the city is served by the existing irrigation system and the council decided to solve the problem using a two-pronged approach.
Water rates for city-supplied drinking water were increased to the point the council now believes it is cheaper for residents to pay a hookup fee and connect to the secondary water supply for use outside.
The council in December formed a city water corporation to sell bonds to raise money to build a system to extend an irrigation water supply into the parts of the city not currently served.
And, the city is now requiring that all new construction and development be served by a secondary water system and that it have irrigation water shares, putting the burden of obtaining the water onto the developer.