Forest View Acres Water District, March 23: Residents object to $25 per month fee increase
By John Heiser, Our Community News, April 1, 2006
At its regular monthly meeting March 23, the Forest View Acres Water District (FVAWD) board of directors heard from residents objecting to the $25 administrative fee approved by the board in December and ratified by the board in January.
Dan LaFontaine of Independent Water Services, the district’s contract water operations manager, reported that two leaks causing a combined loss of an estimated 65 gallons per minute were repaired in early March after a loss of 3.11 million gallons in February. The district has been losing large amounts of water since January.
The board consists of President Barbara Reed-Polatty, Brian Cross, Ketch Nowacki, and Eckehart Zimmermann. The vacancy created when John Anderson resigned in January has not been filled. All board members were present. Reed-Polatty presided.
Administrative, bookkeeping, and accounting services for the district are provided by Special District Management Services Inc. (SDMS). Deborah McCoy, president of SDMS, served as facilitator and secretary at the board meeting. She introduced Lisa Johnson, the SDMS district manager who will succeed Kammy Tinney. Tinney resigned due to personal health issues. District residents who have operational or management questions or comments are urged to contact SDMS at (800) 741-3254 or 488-2110.
Attorney Paul Rufien provided legal advice.
LaFontaine is responsible for maintaining equipment and infrastructure and for managing all aspects of water delivery.
Background
In December 2004, the board uncovered an apparent theft of funds from the district’s bank accounts. In February, a warrant was issued for the arrest of former contract office manager Patricia Unger on suspicion of embezzling more than $212,000 in district funds. That amount was later increased to $315,000. Unger surrendered to authorities Feb 16, 2005, and was released on $50,000 bond to await a preliminary hearing. Unger rejected a negotiated mediation agreement and waived a preliminary hearing. The criminal trial has been rescheduled to begin April 18, 2006. The felony charges Unger faces carry a potential sentence of four to 12 years.
The district has filed a civil suit against Unger and her husband, Dennis, to recover the missing funds and associated costs. The civil trial is scheduled to begin in August. The district’s attorneys hired Sheri Betzer, a forensic auditor. According to information released by the board, Betzer estimated the total financial loss to the district at not less than $625,000.
May election canceled
McCoy reported that the May election was canceled Feb. 28 because the district received only four applicants for the four open board positions. The new board of directors will consist of Rich Crocker, Nowacki, Reed-Polatty, Jeff Walker, and Zimmermann.
Nowacki expressed concern that the district is out of compliance with Colorado statutes that require board vacancies to be filled within 60 days. He proposed that the board make an appointment to fill the vacancy until the May meeting when the new board takes office.
Rufien noted that the only concern would be that the county could step in and appoint someone if the position were to remain vacant, but he said that would not happen. He added, "You are not out of compliance. It may be a spirit-of-the-law issue."
McCoy noted that there would be costs to prepare documentation for an appointment.
Nowacki’s motion to make an appointment failed, with the other three board members opposed.
Legal questions resulting from the missing funds
In response to questions from the audience about the liability of current and former board members for the missing funds, Rufien said, "For board members as individuals to be liable would require proof of intent to defraud the district." He later added that they would have to have gained financially.
As to suing the board as a whole for breach of fiduciary duty, Rufien said a high burden of proof is required. He added that district residents would wind up paying the substantial costs of defending the board. Further, Rufien said that since damage awards would be limited to each individual’s loss, to make financial sense "it would have to be a class-action lawsuit."
Rufien noted that based on the documentation he has seen, the criminal case points to "where the responsibility lies." He added that the case will produce an enormous amount of information for the district’s civil suit and that a not-guilty verdict would "point fingers elsewhere."
Responding to questions about the district’s insurance coverage, Reed-Polatty said the district did not have crime coverage.
Replying to a question as to whether the district could file for bankruptcy, Rufien said it would be difficult because it would have to be shown that adding 100 mills of property taxes would not be sufficient to cover the bills.
Referring to Rich Crocker and Jeff Walker rejoining the board in May, district resident Judy Michali said, "Having past board members on the board doesn’t give me a whole lot of confidence." She vowed to be more involved in district matters and encouraged others to do the same.
McCoy noted that the board now gets monthly copies of bank statements, lists of checks written, and financial statements. She said, "They didn’t get that before."
Comments on $25-per-month administrative fee increase
District resident Ted Hatzenbuhler objected to his monthly water bill of $90 for two people.
In a letter to the board, George Gaertner said, "I think the service charge on this bill is outrageous!"
Kelvin Delaney’s letter to the board said that adding $25 to the service charges is unfair to the consumer. He said that instead the fee for water should have been increased so the consumer could control their cost by controlling the amount of water used.
McCoy reported that some residents are withholding the $25 additional service fee. Reed-Polatty said those who do not pay their bill in full could have their service disconnected in accordance with the district’s rules and regulations.
Cross said, "We understand your frustration. We are members of the district and have to pay the fee." He later added, "You have a right to be angry. I agree that it is outrageous but we are trying to balance the budget."
Zimmermann said the $25 fee increase is needed to cover operational expenses, including the costs for SDMS and Rufien. He added, "We are hoping to collect something from the Unger case."
Nowacki added, "We were robbed. We’re hurting badly. Nobody else is going to pay for it."
Hatzenbuhler asked why the district is not using a mill levy to raise the additional money so residents could have an income tax deduction.
McCoy replied that, unlike the administrative fee, a property tax mill levy must be approved by a vote of district residents. She said an election could be held in November 2006, the new property taxes would apply in 2007, and the district would receive the funds in 2008. She estimated that holding an election would cost the district $8,000 to $9,000. McCoy added that she had recommended that the district seek a mill levy but that the present board is split on that recommendation.
Zimmermann said one of the objections to a mill levy is that it would likely be applied indefinitely.
Financial matters
McCoy presented a list of claims paid through March 23 totaling $14,571 that included $4,369 for LaFontaine’s services, $2,796 paid to the Palmer Lake Sanitation District, $2,670 for electricity, and $2,255 as final payment to Betzer.
The net cash balance for all funds as of Feb. 28 was $23,587.
The total for accounts payable as of March 8 was $124,046. That included $59,957 due attorneys Petrock and Fendel, $51,950 due SDMS, and $9,216 due Rufien.
Wilde billing dispute
District resident Leigh Wilde contends that due to an agreement with the Nevins family when he purchased his property, he has a right to free water service for up to 15,000 gallons per month.
Rufien said that based on his research the agreement was with the Nevins family and does not apply to Wilde.
As of March 17, the outstanding balance for water to the Wilde property from January 2005 was $827.
McCoy reported that SDMS is following the district’s procedure, which could result in disconnecting service if the bill is not paid.
Availability of service (AOS) fees
Johnson reported that AOS fees are being billed at $20 per month and that past due AOS accounts are being billed $20 per month for current charges and $20 per month to recover the past-due amounts.
Leaks fixed
LaFontaine reported that a leak surfaced in early March. Water was running out of the culvert at the intersection of Sandstone Drive and Red Rocks Drive. American Leak Detection Inc. located the leak, and it was repaired March 6. LaFontaine added that a leaking valve was located and repaired March 8. He estimated the two leaks totaled perhaps 65 gallons per minute.
During February, the district’s surface plant produced 2.97 million gallons, averaging 73.9 gallons per minute over 27.9 days. The district’s well in the Arapahoe aquifer produced 1.72 million gallons, averaging 107.5 gallons per minute over 11.1 days. The net monthly production was 4.35 million gallons.
Water sales for February totaled 1.23 million gallons.
LaFontaine calculated the net loss from the system during February was 3.11 million gallons or 253 percent of sales.
He added that since the leaks were repaired, the Arapahoe well has not been needed to meet the district’s needs.
LaFontaine’s contract approved
The board unanimously approved LaFontaine’s new contract.
The board considered a proposal enabling SDMS to authorize LaFontaine to spend up to $5,000 for unanticipated repair or maintenance expenses.
Zimmermann noted that LaFontaine is already authorized to make expenditures to respond to emergencies.
Nowacki said, "An emergency failure is not the issue, rather this would be for an unplanned replacement part."
The proposal failed, with Nowacki and Reed-Polatty voting in favor, Cross and Zimmermann opposed.
Executive session held on legal matters
Rufien requested an executive session to advise the board on legal matters.
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The next meeting will be held at 5:30 p.m. April 27 at Tri-Lakes district Station 1, 18650 Highway 105 (near the bowling alley). Board meetings are usually held on the fourth Thursday of each month. Those wishing to attend should check the date, time, and location by calling the SDMS at (800) 741-3254 or 488-2110.
