Recently there have been communications (letter, conversation, and SFTR website) expressing interest both in the Water System Update letter from the SFTR Metropolitan District (MD) and also in the collection letter sent to those few who are in arrears on their monthly $31/lot bond retirement payments. The Metro District Board has the following observations and information.
The MD is legally obligated to make semi-annual payments to the bondholders of our indebtedness. It is critically important that all SFTR property owners and MD members make their payments on a timely basis so the MD can faithfully repay our bondholders and retire our debt. It is as simple as that. Once OPEC walked off the project, it was clear our completion date was going to be delayed. Your MD Board, the POA Board and interested property owners have worked long and diligently to finish the project so that we can provide water to all. Those who are withholding their payments with the hopes of influencing the above Boards and individuals to work longer and more diligently, misunderstand both the problem and the complexity of the task we are facing.
The primary delay in completing the water system is OPEC's failure to complete its contractual obligation. Inferences or direct accusations that the Boards and groups trying to rectify this unfortunate situation have been sitting on their hands doing nothing, just don't hold water (pardon the pun.) In response to OPEC’s action, the MD sought legal and engineering advice, and then developed, completed and implemented a remedy plan. Necessarily, the remedy plan was complex, with very precise steps aimed not only at providing water to District members but also avoiding any action which would void our legal remedies against the contractor and its bonding company.
Among the complicating factors in executing the remedy plan have been: the complete unresponsiveness of both OPEC and its bonding company thereby causing delays in activating the MD managed repair phase; the failing health and subsequent death of the designer of the pumps in the system; the time and the actions necessary to develop a supplemental funding plan to complete the system while simultaneously advancing the legal action against OPEC and its bonding company; the filing of bankruptcy by OPEC; the unknown condition of the installed pipeage (since OPEC walked off prior to completing the proper tests and leak repairs); pump damage due to sand and gravel infiltration through a few large leaks; the need to find funds to commence analysis and repairs until a supplemental loan could be negotiated; and, if you can believe it, the weather.
The preceding "short list" is not an enumeration of excuses for the protracted completion of the system but only a partial list of real world challenges in an imperfect world. To those in the bleachers who would indict those in the trenches who have continued to work the issues on a weekly and sometimes daily basis, we only ask you to objectively look at the reality of the situation. The easiest and expedient answers would likely have been wrong and expensive in the long run. While the MD Board spearheaded the task, there is extensive and active participation by POA Board members, POA water committee members, and several interested and concerned POA/MD members.
In June 2002, following predictable and unresponsive actions by OPEC and the bonding company, the MD/POA initiated a supplemental funding study to: determine the dollar amount range needed to complete the system; determine viable government and commercial sources of funds; create an Action Plan; establish a timetable and responsibilities; and, make contacts, obtain forms/documents/advice/assistance to accomplish the goals of the Action Plan.
In the summer and fall this group met both alone and with several Council of Governments COG) and CO Dept of Local Affairs (DOLA) officials, identified possible grant and funding assistance sources, and gave briefings about and tours of the Ranch and water system components. During the fall, in concert with COG, we developed and submitted a package to DOLA. Five months later we defended the package in Denver to the CO State Advisory Committee of the DOLA Funding Panel. We learned in mid-March 2003 that our package was not competitive in a year when funds are short. Also, priority in our category went to packages that could demonstrate a severe gas well drilling impact. Our package could not demonstrate such an impact. (On the success side and completely off the subject, congratulations go the Fisher's Peak Fire Protection District on winning grant assistance for construction of a FPFPD sub-station on the Ranch.)
Last fall, when we became aware that our case might have marginal support in the DOLA channel, we initiated a parallel effort to identify commercial fund sources. Three were identified. One subsequently dropped out and two are now in consideration. Next came the sizing of the repair estimate. Nearly a dozen individuals were involved in: identifying cost items; performing sensitivity analysis to determine realistic high side and low side estimates of each item; comparing our numbers to OPEC estimates and costs; determining the appropriateness of system enhancements/changes, etc. The result is what we considered to be a realistic but high side estimate on funds needed. These numbers were then used in grant and loan discussions/applications. We also presented these numbers at the town hall meeting in Oct 2002 and put them on the website for those who could not attend the meeting in person.
These numbers are continually readdressed and recently they were detailed in the letter to all MD members. All along they have been labeled as "estimates," realistic but high side "estimates." Yes, the current contractor estimate is not firm and rigid. It is a time and materials estimate based on its experience in repairing the pipeage in the northern part of the Ranch. The contractor provided a range and we elected to use a high side, worst case "estimate." Clearly the amount of water needed for testing, repairing, retesting, purging, sanitizing, etc, a system that has never been properly tested, has some soil and gravel infiltration and has been dormant for a couple years, is very uncertain. So we have again used high side estimates. It would be foolish, naïve, and demonstrate a lack of diligence to use low side estimates in communicating to MD members, in developing a litigation argument, in developing grant and funding packages, and in negotiating with bankers. Finally, additional engineering assistance should not be extensive, but engineering testimony and advice during the litigation phase needs to be acknowledged as a real cost item. Again, is it any surprise, we have used a liberal estimate?
Payback of funds used to repair the water system
The first expectation is that the MD will prevail in the
lawsuit. And, we may partially prevail. And, we may not
prevail. So we should be prepared mentally and fiscally for any
outcome. We anticipate structuring the loan and its payback in a
financially responsible method. We will not get a front loaded loan
infusion based on the worst case estimates, but are negotiating a "line of
credit" type demand loan. As the final cost is known, a payback scheme
will be developed. Members will not pay for "estimates"; they will pay
only for the net costs actually incurred (over and above anything we are able
to recover through our law suit). In all likelihood, the outcome of the
suit, or possibly even a negotiated settlement, will occur after payments must
begin. If we then prevail in the suit or settlement, coupon payments will
be adjusted, eliminated, and if a surplus is available, we anticipate that it
will be ratably distributed among members.
Legal fees
Unfortunately, we are involved in a legal action. All along we have
consulted attorneys who are expert in water systems and this sort of
litigation. We have not consulted folks in the bleachers. The
proper attorneys have to advise us, make filings, represent us, interpret court
and litigant responses, etc. And, not so hard to understand, the ongoing
and future legal services we require are not free. It is not a Legal Aid
or pro bono environment. Again, our "estimate" for legal fees is a
necessary part of the package. In CO legal fees may or may not be
recoverable, but we have to pay them as incurred, so they are included.
This is a Metro expense and the POA is not covering it.
Hook-up costs
On several occasions we have passed out and published "hook-up" costs and
details, but it would be good to review. The property owner is totally
responsible for all hook-up costs beyond the water system "stub-out" at the
edge of the POA road.
The first cost is for the water tap -- $5150. Broken down, $3150 is a plant investment fee and $2000 is a water rights acquisition fee. The MD will provide a simplified application for the water tap installation as we get closer to the delivery of water from the system. A check to the "City of Trinidad" for $5150 and a copy of the building permit or occupancy certificate must accompany the application, and this must be done before installation work can begin. Owners will provide the completed application with attachments to Century Small Business who will process it through the City Utilities Department. When it is time to do this, we will advise you.
The second cost is for the installation of the MD water meter package -- the meter, meter casing, associated pipeage, valves and labor. The fee is approximately $1050 for parts and labor. The MD is your agent for the installation of the water meter package. A check to the MD must be received prior to installation. No checks up front, no installation. Again, as we get closer to delivery of water, we will provide you with updated detail and a firm cost.
The third cost is for connection beyond the meter pit package, through the cistern, to the home. You cannot bypass the cistern. You are responsible to arrange for and pay for installation of these connections with your choice of contractor. There is no water surcharge associated with installing the tap. A consumer water cost fee will be part of each MD water bill, as will a fixed operations and maintenance fee (to cover a proportionate share of the costs of operating the system.) The variable water cost fee will be graduated and proportionate to water usage.
Miscellaneous
There are no plans for dividends to be produced by the MD. If operation
and maintenance reserves become excessive, the MD will analyze the situation to
determine the size and timing of an appropriate distribution.
There are no offsets to the "Tap Cost." MD members bear the entire cost of the water tap fee, meter pit installation, and further connections beyond the meter pit, through the cistern, to the home.
Funds provided to the MD from the POA Power Account to fund the MD expenses for start-up of the repair project will not be, nor was there ever any intent for them to be, returned to the POA accounts. The POA is currently paying the monthly electric utility expense for the original installation of the power poles to the pumps out of its remaining Power Account. A "business decision" was made to pay for the poles on a short-term note, rather than have the POA Power Account "expense" the lump sum cost of the poles. A feature of the note provides a monthly amount of power for operation of the pumps for the monthly cost of the pole. As soon as the POA Power Account is depleted, the MD will assume payment for the entire electric bill attributable to operations of the MD.
POA members are MD members and all are beneficiaries of operating utilities on the Ranch - water, power and telephone. While in the distant past the disposition of the Power Account was contentious, upon the departure of OPEC, the most critical financial need for both the POA and the MD was funding the diagnostic and early repair efforts on the water system. Again a "business decision" was made to use a large share of the Power Account balance to fund this most critical need. To portray the motives and actions of the POA and MD as somehow illegal, inappropriate, or as some kind of Three Shell Monte Game, is absolutely off base. Those making accusations simply do not appreciate the nature of the problem and the fact that decisions were openly arrived at with the best benefit to SFTR property owners in mind. The Power Account was established for the purpose of collecting funds for the installation of telephone, electrical and water services on the SFTR, and that is exactly what it is being used for.
Despite the insistence of a few misinformed individuals, no one, we repeat, no one on the MD Board, is "on the take" either under the table, over the table, or around the table. No one is getting rich off their SFTR neighbors on MD activities. Wrongful inferences, innuendo, and direct accusations that MD Board members are "making money" off MD activities or bond activities are unfounded, irresponsible, and their only purpose is self-serving to those who "peddle" them. It is clear accusers are acting on rumor, not on any due diligent research. Rather than engage in purely self-serving defamations, these individuals are better advised to directly approach MD Board members to clear the air. These defamation mongers should read and evaluate conflict of interest declarations submitted at each annual MD Board meeting. Annual MD Board meeting minutes are available on the SFTR web site. These same accusations have surfaced in the past and proven to be unfounded. It is a pity Ranch property owners have to endure the instant replay defamation efforts by those who are in the bleachers, and who have not made a mature effort to responsibly separate anonymous allegations and rumor from fact.
We want to thank those who have provided help and support through what has been an extraordinarily difficult. Thanks to those: who spent many hours researching options, identifying the best alternatives, and following through on the action plans; who have donated lots of miles on their cars and not thought of reimbursement; who paid for refreshments and lunches for visitors out of pocket; who have provided insightful input by posing the hard and tough questions; who are technically knowledgeable and worked long hours with the engineers and contractors; who burned the midnight oil writing proposals and proofing others work; who dogged the bankers and the lawyers; who….etc., etc., etc. It has been our pleasure to work with you who have been so unselfish and collaborative.
Finally, we observe that in the late 90's the MD set out to install a "utilities" system...with a water subsystem and a telephone subsystem. While we all tend to focus on the water system, understandably so, we tend to overlook the presence of an available and functioning telephone system. To those who would use the absence of a functioning water system as a reason to withhold on their bond payment obligations, we would observe that 47% of the $1.8 million utilities bond expense was for the working and operational telephone subsystem. Since each of us is a current beneficiary of nearly half of the utilities project, and since we are only approximately 20 percent of the way toward retiring the bond obligation, we owe it to each other and to the bondholders to keep current on our bond coupon payments.
Those who choose to protest by defaulting on their payments also choose to incur late payment fees, 18% annual interest charges, and legal/administrative related collection fees. In the end you will subject yourself to the taxing authority of the MD. And, if in the end you fail to pay your taxes, you will subject your property to a tax sale to settle your indebtedness. The hidden but real cost of collection administration falls on each and every MD member. And, it will likely drive up the eventual cost of your water.
Failure to pay or delay in paying is the expensive option for everyone. Please consider the information in this water system update, evaluate the pros and cons of withholding bond payments in protest, and express your concerns to a MD Board member. The MD Board meets weekly, in a public place, with the contractor, and in private session without the contractor, in an effort to provide WATER to MD members, at the lowest cost, at the earliest date. If you want to participate in the process, please fulfill your obligation to make bond payments; please review the combined actions of your MD Board and the POA Board with an open mind; please communicate with us face to face or by correspondence in a constructive mature manner; please don't lower yourself to making invalidated defamations; don’t create conflict to serve you own selfish interests and, please get out of the bleachers and participate with responsible input and diligent research.
If we have been optimistic in our forecasts, we plead guilty. But, things change and stuff happens. Again, thanks to the vast majority who have collaborated with us, trusted us, and supported us through what has been and will continue to be a difficult period.
THE METROPOLITAN DISTRICT BOARD
Jim Davis – 719 845 9060
Will Potter – 719 846 9508
Tom Stephens – 719 845 8111
John Woods – 719 845 0765
Dennis Scott – 719 845 8660