Tumwater OKs brewery deal

The following article appeared in the April 25, 2006 edition of The Olympian.

It's another step along the road, although things are far from over.

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Tumwater OKs brewery deal
Agreement shares water rights between 3 cities, bottler

By Katherine Tam
The Olympian

TUMWATER — The first of three cities has signed onto a settlement agreement to buy water rights at the old Miller brewery, possibly for as much as $12.3 million.

The City Council approved the deal at a special meeting Monday night. Officials said they are hopeful that a part of the agreement providing half of the water to the owner, All American Bottled Water Corp., will be an incentive for it to launch its bottling operation as promised. The brewery supplied 400 jobs before it closed three years ago.

“I am looking forward to those 200 jobs, which will replace half the jobs that were there before,” said Ralph Osgood, Tumwater mayor.

Monday’s vote was unanimous, with councilmen Jerry Murphy and Pete Kmet absent.

The Olympia City Council will take up the proposal tonight. Lacey follows suit Thursday.

The three cities and All American reached a settlement agreement late last week. Lacey, Olympia and Tumwater would acquire all of the water rights and pay $1,750 per acre foot. Each city would deposit $500,000 into the Thurston County Superior Court registry as an initial payment.

There’s up to 7,000 acre feet of water, according to Ecology’s records, meaning the total price could be as high as $12.3 million. All American’s lawyers and city officials think there’s less water than what appears on paper, so they would pay less. No one knows how much water there is until the state Department of Ecology transfers the rights from industrial to municipal use.

All American would be supplied with half of the water — with a cap of 1.8 million gallons per day — for 99 years. The cities would not pay for the water rights allocated to All American. Instead, All American would pay the cities $10 a year, plus a fair share of the operations, maintenance, repair, testing and treatment costs to supply the water.

If All American doesn’t use the water for three years in a row, the cities would claim all of it and pay $1,750 an acre foot to the company.

During the three years All American doesn’t use the water, the cities can use it at a fee of $17.50 per acre foot a year, plus inflation.

If cutting the water supply in half for All American produces less than 1.8 million gallons a day, All American can buy up to 750,000 gallons a day from Tumwater at the city’s standard commercial rate.

The settlement proposal is the result of about two months of talks that began a week after Olympia moved to condemn brewery land for water. At one point, All American’s attorney said the owner would be forced to file for bankruptcy unless the cities withdrew. The cities refused.

All American has not filed for bankruptcy so far, according to the federal court’s online database.

Once the cities secure the title to the water, they will be protected and the water rights won’t be affected if All American files for bankruptcy, the city attorneys said. If the company files for bankruptcy before the title is transferred, the attorneys said they aren’t certain what will happen next.

How long it takes for the cities to secure the title depends largely on when Ecology transfers the water rights from industrial to municipal use.

Negotiations are not over. The cities want to buy the land and facilities that are necessary to draw the water, such as wells, pipes and pump houses. The settlement agreement grants officials access to the property so they can determine what they’ll need.

They will try to negotiate that sale out of court, to avoid going through trial to determine the market value, said Christy Todd, Tumwater city attorney.

The Thurston Public Utility District, which serves nearly 3,000 connections, is not a party to the settlement proposal. The commissioners will meet tonight to discuss their next steps.

“The PUD doesn’t count in the cities’ minds,” said Don Taylor, PUD attorney. “They have ignored us.”

The district filed an eminent domain petition of its own after the cities took action. No hearing date has been set.

Katherine Tam covers the city of Olympia for The Olympian. She can be reached at 360-704-6869 or ktam@theolympian.com.