Inside the City of San Angelo’s $43 Million Ranch Land Deal

White died in 1965 at the age of 89. Since then, the land was held in a trust of the G.R. White family.

Water management has a history with the ranch. According to the 1964 article, “When the Whites acquired the ranch, it had only one stock watering tank. Two years later, 600 head of cattle died from lack of water.”

It is under this ranch that the City of San Angelo purchased vast water rights in the Hickory Aquifer 45 years ago.

Background on The Hickory

The Hickory aquifer is the only ground water supply the City owns and has access. The City purchased rights to harvest that water in the early 1970s. The well field remained mostly dormant throughout the years. In 1982, the Hickory Underground Water Conservation District No. 1 was allowed to form in McCulloch County by the State of Texas.

Wary landowners in McCulloch County viewed the intentions of the City of San Angelo nefariously. The new water district created rules preventing water rights owners from transporting water outside the county, a prohibition aimed squarely at the City of San Angelo. It was no secret why the City bought water rights 60 miles away.

A 15-year legal battle ensued that was settled in 1997 that set forth the water allocations that the City of San Angelo enjoys today.

It wasn’t until 12 years later, in 2009, that the city commenced building the $120 million Hickory water supply project that included new water wells, pumps, a 60-mile pipeline, and a separate and modern water treatment plant next to the legacy water treatment plant. It was called the Hickory Aquifer Project, or “The Hickory” for short.

The project was completed in early 2015. Since then, the city has banked much of its allotment, about 40,000 acre-feet, and used the Hickory water only enough to keep the pipeline and water treatment facility lubricated while the plentiful flow of surface water from Lake Ivie remains the City’s primary source of water.

The Hickory groundwater is the City Water Department’s backup supply. Should surface water disappear due to a drought, the Hickory can easily supply 9 million gallons per day, or about three-fourths of the daily water demand of 12 mgpd.

Late Moves on the Ford Ranch

On April 19, real estate broker Chas. S. Middleton & Son of Lubbock listed the 31,788.87-acre ranch for sale for $60 million. Morrison is ecstatic that the City’s conditional offer of $43 million was accepted. He believes $1,350 per acre is a good deal.

The purchase will be financed with a loan using the cash flow from the City’s water enterprise fund to service it. City Manager Daniel Valenzuela stressed there will be no water fee hike or tax increase to finance the transaction.

In late 2015, the City of San Angelo inaugurated a higher water rate structure to finance a future large water project expected to cost as much as $136 million. Earlier this year, facing fierce public opposition, the City shelved a proposal to build a $150 million water treatment facility that could reclaim and treat sewer water.

Valenzuela and City Water Utilities Director Bill Riley said the land purchase is in line with a five-year water development plan recently finished. Instead of a large project, Riley anticipates multiple smaller initiatives. He said the City is moving forward with a previously proposed project to increase Hickory capacity. That project will cost just under $40 million and is in addition to the land purchase.

City Plans to Flip the Ranch Quickly

Morrison said the City isn’t interested in owning all of the Ford Ranch long term. He anticipates the City will sell all but a small portion of the acreage where the Hickory wells are located in the near future. In addition, City attorneys will finalize the land’s water rights, and convey that those rights will be clear to future owners, and in the best interest of the City.

“That way, before a new owner purchases the land, they will know exactly what the water rights situation is,” James said.

“The City intends to market the property to a new owner or owners using the attractive selling point of 25 percent ownership of minerals on the land to recoup much of the purchase price,” Morrison said. When pressed, Morrison and the City staff believe most of the cost of the land purchase can be recouped reselling it whole, or in smaller parcels.

Valenzuela likened the land deal as trading an asset for an asset with the benefits of avoiding future costly legal battles by allowing the City to refine the City’s water rights under its own terms.

Monday, the City Council voted 7-0 to instruct the City Manager to move forward with the purchase contract and obtaining financing. The certificates of obligation will not need approval of voters.

Anticipating Negative Reaction

Morrison expressed concern the land deal will be met with fierce opposition from some quarters in the city. So far, reaction has been supportive. Morrison’s former rival for mayor in the 2015 election David Nowlin responded Monday night via Facebook.

“Hats off to our mayor and city council members! Buying the ranch that covers our Hickory Aquifer lease is a brilliant move. Don't waste a minute! Get it done! Congratulations! You finally started earning the big bucks we pay you. LOL,” Nowlin stated.

Maura Ballard contributed to this report.