Small Tahoe water company forced to sell

Compliance costs cause small Tahoe water company to sell

By Susan Wood

April 25, 2006

Discovering that meeting water quality and fire-flow standards would prove costly, Lukins Brothers Water Co. may sell the last of Tahoe's small water systems to South Tahoe Public Utility District.

Both parties are in negotiations to agree on a fair market value for the company that serves 979 customers on the northwest side of town bordering the El Dorado County-city boundary off Highway 89.

The operation was started by Melvin Lukins in 1946. It's now run by brothers Danny and Larry Lukins, with the help of a five-member board of directors. Since 1966, the city and Lukins have held a 50-year franchise agreement that pays 2 percent on water sales. The city's three franchisees, Lukins, Tahoe Keys and STPUD, paid $22,138 in the fiscal year ending September 2005.

The average flat-ratepayer in the 650-acre area shells out $283.24 a year to Lukins.

City Manager Dave Jinkens said he wants to protect the ratepayer who may get saddled with paying for improvements to increase the water's fire-flow amounts in the lines.

"If they sell to STPUD, what will happen to the rates? I think we ought to know more," he said.

"The water pressure has been real strong," said water customer Hatch Logie, who lives on Lukins Way. Although Logie said he also likes the taste of the water, he's going on a well when he moves to another home in the Upper Truckee area.

City Fire Chief Lorenzo Gigliotti said the Lukins water system doesn't have enough fire hydrants to meet city codes and pumps out about a fifth of the water pressure needed to meet state's 1,500 gallons per minute fire-flow standards. Lukins cranks out 360 gallons per minute in its 4-inch lines. The state also requires 6-inch water lines. STPUD, which assists with Lukins' water supply for fire protection, has been undergoing its own upgrades. Spokesman Dennis Cocking said his company must replace 85,000 feet of line throughout the service area.

"We've been making these improvements since 1995. The challenge in Tahoe is doing them in five months," he said. This summer, it will focus on a water line project along Highway 50 in the Al Tahoe area. Cocking accompanied Board Member Jim Jones to Washington, D.C., to seek federal grant money for improvements.

Taking on another water company may be part of the package and history of STPUD, which has collectively consists of a number of water companies over the years.

"If the price is right, it might make sense," Cocking said. "But with the existing pipes, there's no way they'll meet the fire flow standards."

Fire flow is only part of the issue for Lukins, its representing attorney Dennis Crabb indicated Monday. Testing standards to monitor lead and mercury content have also required more capital expenses by the company.

"There's never been a problem of the water quality. The federal and state regulations have tremendous cost implications," Crabb said.

The Lahontan Water Board concurred.

Once the dueling appraisals have come in, Crabb hopes to wrap up talks in a few months. The city has valued the assets at $160,000 since 2005. But Crabb wouldn't agree with that amount, saying the worth is valued by more than the assets.

Danny Lukins said Monday he's unsure how much it would cost to make the necessary upgrades and what he would do if he decides to sell the business.

"I've been doing this all my life," he said.