Tucson Electric Power Co. is asking the Oro Valley Town Council to put up the money it will take for the utility to conform to the town's ordinance requiring all new utility lines to be placed underground and right now the council is having no part of it.

In July, the town plans to begin the widening of Tangerine Road from two to four lanes from First Avenue to La Canada Drive at a cost of $10.5 million. New electricity service lines would be installed in conjunction with those improvements to serve Northwest Medical Center's planned 180-bed hospital, on which construction is scheduled to start in the first quarter of 2003, the proposed 105-acre Vistoso Towne Center at the southwest corner of Oracle and Tangerine, scheduled to open in the fall of 2004, and the $85 million, five-star Ritz Carlton Resort in Rancho Vistoso's Stone Canyon, now on hold.

TEP is willing to pay $330,644, or what it would cost to install overhead power lines along Tangerine from First to La Canada, but won't pay the full cost of putting those lines underground, which would add nearly $263,000.

The proposed cost sharing agreement between the town and TEP is an outgrowth of discussions dealing with putting underground major power lines to serve new and planned growth along Tangerine from First to Oracle.

An existing portion of a 13.8 kilovolt line from TEP's substation north of Tangerine and west of First Avenue will be buried on a cost-sharing basis between TEP and the town with the town paying $301,429, or 52 percent, and TEP paying $278,652, or 42 percent. The town is paying this cost as part of its Tangerine widening.

But TEP also is asking the town to share in the costs of the new service line being placed underground. The $263,000 TEP is asking the town to put up represents 44 percent of the new service line costs. The town's costs would be paid for by setting aside future sales tax revenues resulting from the new development.

Art Fregoso , TEP account manager, told the council at its May 1 meeting the utility's policy is to pay only for overhead line installation and to have either developers or the municipality where the improvements are taking place pay for the additional costs.

Fregoso said TEP regarded the Tangerine Road undergrounding a critical project, one that would strengthen ties between the utility and the town and provide improved service to residents. "We'd like you to allow us to be there when you need us," Fregoso said.

But councilmembers were concerned about setting a precedent by having the town pay a business to meet the requirements of Oro Valley's underground utility ordinance.

"Are you telling us that the only way you'll comply with our ordinance is if we pay you to do it?" Councilman Fran LaSala asked . Fregoso responded that the utility's policy is not to pay the full cost of every underground improvement it makes because it would go broke if it did.

LaSala said he didn't believe TEP could be in such financial straits that it wouldn't be able to pay, especially when it's the only utility in town furnishing all power services, and he and other councilmembers didn't like the idea of Oro Valley being put in a situation in which it would have to wait for development to occur to recoup its costs while TEP gets its money up front.

Fregoso said such a move would significantly impact the utility's operating budget, to which LaSala replied, "Don't you think paying you $263,000 will affect us?"

Mayor Paul Loomis pointed out that TEP had indicated as far back as 1997 that it would meet the requirements of the ordinance.

Councilmember Bart Rochman pointed out the council, if it approved taking the $263,000 from the contingency, wouldn't necessarily be accepting responsibility for the debt, but would only be advancing the funds until a determination is made as to who is responsible, at which time the council would collect that money.

The council directed staff to examine alternatives that would provide a short-term payback and to look at agreements TEP has signed with other towns, including any reimbursement options they might include, acknowledging that while the money it would be spending on the Tangerine power improvements would be a good investment for the town, it would be so only if the town gets something back for that investment.

In other action, the council set June 5 as the date for a public hearing on a proposal to raise water rates to a level that would bring in an additional 7 percent in revenues for the 2002-2003 fiscal year beginning July 1. Under the proposal, the base rate for residential customers using up to 10,000 gallons a month would rise by $1.90 a month.

Currently, the base rate for a residential customer is $12 a month for 1,000 gallons, $13.90 for up to 2,000 gallons, $15.80 for 3,000, $23.40 for 7,000, and $29.10 for 10,000 gallons.

Base rates for the typical residential customer using 15,000 gallons a month would climb from $40.85 to $44.05 a month; for 20,000 gallons a month the rate would rise from $52.60 to $57.10; and for 25,000 gallons, from $64.35 to $70.15.

The rate proposal is designed to have minimal impact on low water users and more significant impacts as the level of use rises, said Water Utility Administrator Shirley Seng. The 1,000 gallons included free in the utility's current base rate would be eliminated.

The utility is basing its revenue needs on the addition of 575 residential customers annually over the next five years and getting all of the town's golf courses off ground water over three years starting in the 2004-2005 fiscal year. The first off ground water would be Stone Canyon and Vistoso Highlands in April 2005, Sun City in the 2005-2006 fiscal year, and the Sheraton El Conquistador golf courses in the 2006-2007 fiscal year. The Sheraton's nine-hole course is not included.

The council also awarded a $38,983 contract to Urban Engineering for services related to major improvements at the Tangerine Road/La Cholla, Naranja Road/La Cholla and Lambert/La Cholla intersections.

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