Surprise council approves transfer of Circle City water rights, increases city CAP allocation

The Surprise City Council on Jan. 21 unanimously approved resolutions to assign Circle City Water Company LLC’s Central Arizona Project municipal and industrial water entitlement to the City of Surprise and to amend the city’s CAP subcontract to absorb that volume.

City staff said the acquisition transfers 3,932 acre‑feet of Colorado River water to Surprise and will raise the city’s CAP allocation from 10,249 to 14,181 acre‑feet. The City Council approved resolution 2025‑12 (assignment of the Circle City entitlement) and resolution 2025‑11 (the subcontract amendment) by unanimous voice vote.

Why it matters: the purchase gives Surprise a significant near‑term increase in Colorado River supply at a time of long‑term water planning across the region. Staff said the transaction is the culmination of a process that began in 2009 and was supported by a 2018 voter measure to proceed with acquisition of Circle City Water Company.

City staff provided operational and financial context. The acquisition price was identified in voter materials as $15,000,000; staff said that the cost was budgeted through the city’s water resource impact fee program (project P71260) so the purchase would not be paid from general taxpayer or ratepayer revenue. Staff estimated ongoing operations and maintenance for the acquired system at about $72,000 per year and the carrying cost associated with the additional CAP water at roughly $1,400,000 per year.

“Although we would have liked to close on this much sooner, this time has allowed us to save up and have the cash necessary,” a city staff member working on the transaction said. He described an operational readiness plan that includes sanitary surveys, cybersecurity and physical‑security upgrades, backup generators, remote monitoring and distribution system improvements. The city budgeted approximately $900,000 in a capital project (P71530) for immediate enhancements to Circle City’s infrastructure.

Staff said Circle City currently uses about 23,000,000 gallons per year, and that the system serves roughly 292 active water customers with about 74 platted but undeveloped lots remaining. The city plans to shadow Circle City’s operator, complete upgrades and — if regulatory and closing timelines hold — to take ownership by July 1, 2025. Staff also said Circle City customers have not had a rate adjustment since 1988 and that bringing those customers immediately to Surprise rates would be about a 42% monthly increase; staff said the city will propose phased rate options and return to council in April with scenarios and, if needed, final rate setting by mid‑June.

Council members raised questions about the condition of Circle City’s infrastructure, likely timing of customer rate changes and the acquisition’s long‑term value to the city’s water portfolio. One council member noted that, compared with more recent purchases in the region, the 2018 price the city negotiated remains favorable; staff said comparable recent transactions have cost materially more per acre‑foot.

The council vote: both resolutions were approved by unanimous vote. Staff said the city will return to council with rate‑setting recommendations and additional operational updates in May and when details of the transition are finalized.

Looking ahead: staff said upgrades to the Circle City system would begin immediately after closing, and council members asked that staff provide a detailed timeline and impact analysis for Circle City customers when the rate scenarios return to the council docket.