| Metropolitan Board
members present Jim Davis Will Potter Tom Stephens John Woods POA Board members present Ed Hockett Rick Johnson Monica Leche Bob Santoro Mike Shelton Harriet Vaugeois Jerry Withington |
Guests Ben Heath Michael Hughes Dan Jondron Patty Kinder Rick Kinder Michelle Minion Elizabeth Polasek Tony Riley Betty Ruward Don Ruward June Stephens Fred Vaugeois Bill Wenstrom Betty Withington Joyce Wolff Walt Wolff |
POA President, Rick Johnson called the gathering to order at 6:03 P. M. He explained that the purpose of this meeting would be to deal with a loan offer presented by International Bank. The Metropolitan Board would meet first to deal with the offer. Subsequently, the POA Board would meet to deal with issues resulting from the loan agreement that would affect the POA. He then turned the floor over to Jim Davis, President of the Metropolitan Board, to begin the meetings.
He then recalled when the Metro District filed its notice of intent to sue both the contractor, OPEC, and the bonding company. At that time the bonding company asked the contractor, OPEC, and the Metro District to respond to questions. The District responded that OPEC had failed to complete the contract and deliver a system that met the agreed upon conditions: that met AWWA leak standards, had been sanitized, and had Health Department approval. OPEC had been in the process of leak testing the system when they stopped work. They contended in their response that the system was incorrectly designed, had been sanitized (they had dropped chlorine tablets in the main tanks even though lines were still open), and they felt work had been completed.
Last year the Metro District asked the POA for a transfer of funds. These funds allowed the District to hire an independent engineer to evaluate the system, and a new contractor to complete OPEC's work. The consultant found that the system was appropriately designed. The contractor's work produced evidence of faulty work, and also, allowed the Board to develop a per foot cost to complete the system.
Meanwhile, the District did proceed with filing the law suit. Shortly after filing the District found that that OPEC had filed for Chapter 11 Bankruptcy. The District then filed a claim with the Bankruptcy Court within the established deadline. We have asked that a trial date be set in District 3 court on Monday July 28. The Court has received our initial Disclosure. At all points, though, the bonding company has failed to step in to resolve the issue.
The budget for the loan is as follows:
| $347,000 | Construction (Based on $1.00/foot) | |
| $21,000 | Water (Testing/sanitizing) | |
| $17,000 | Equipment (To bury above ground pumps) | |
| $12,000 | Engineering (To reincorporate J-lots) | |
| $33,000 | Contingency (10% of construction cost) | |
| $70,000 | Legal Fees | |
| $50,000 | Debt service reserve (To offset any delinquent loan payments) | |
| $550,000 | TOTAL |
The interest for this loan is 5.5% compared to 5.75% for the original bond financing that started the project. So, the terms are good.
The District will assess each property $1,250 principal to be paid either as a lump sum up front or on an annual installment plan for seven years. The money collected as a lump sum from this assessment will help reduce the amount borrowed on time. Mr. Davis noted that this would be different from the coupon system currently in effect. The original debt financing has now been in place for over four years, and next September the remaining principal may be paid off in full by any property owners who wish to save on further interest charge.
In case of a shortfall of funds to make the new loan payments because of non-payment by property holders, the district can first apply funds from the debt service reserve fund. If this is not sufficient, the loan agreement asks the POA to supply funds from any reserves available. The POA should be able to replenish these funds in a years time when the delinquent payments are placed on County property tax bills. International Bank accepts that the District is in litigation, but wants to keep the account current at all times. In the event of successful litigation the recovered funds would first pay the loan balance with the remainder then distributed ratably to property holders. The law suit asked for $430,000 in view of the fact that, at the time of filing, legal fees could not be included. The Court after reviewing testimony may determine otherwise.
At the the meeting of the POA Board to follow they will be asked to accept the condition that POA reserve funds may be used to keep the repayment account current if necessary. They must also reaffirm the responsibility for collecting unpaid assessments as agreed in the March 19, 1999 agreement. In addition, the Bank asks the POA to strongly consider moving POA accounts to International Bank.
Mr. Davis admitted that the District does have to reimburse $7,500 legal fees for the Bank. He explained that this was a contentious point, but it would be capped at that amount. He also noted the Bank was creating specific loan packages to offer property owners for financing water hook-up charges.
Mr. Davis concluded his review at this point and entertained questions. Ms. Vaugeois asked if the loan was a loan or a line of credit. Mr. Davis responded that it would work as a line of credit for the first six months. It may well be that the District will not borrow the full amount requested.
Mr. Shelton wondered how much delinquency in payment would end up going to the County. Mr. Davis estimated 10%. He added that property owners are not required to be system customers, but they are all required to pay the assessment. They may still drill a well, if they wish. This comment was followed, however, by testimony of unsuccessful wells, and no reports of any recent success drilling.
The guests wished Mr. Davis to review the current water service agreement with the city of Trinidad. He noted the City has guaranteed 440 taps for 10 years. The agreement began in September of 1998. The agreement is now half-way through its term.
In response to pricing, Mr. Woods noted that the system is financially viable with 50 users using 2,500 gallons/month. Diane Rader's occupancy survey conducted last spring shows 58 full-time residencies with a similar number of part-time residencies. Mr. Woods' investigations indicate 2,500 is a rough average figure of usage by current residents. Michelle Minion observed that the construction of the new Fire District sub-station on the Ranch could also create increased usage. Mr. Woods agreed. He noted that currently the Metro District expects a monthly bill to contain standard fees of $27.50 for maintenance and $2.00 for San Isabel to read meters. The remainder of the charge would depend on usage. He gave for examples 1,000 gallons of usage would produce a bill of $38.02, 2,500 gallons - $50.80, and 5,000 gallons - $82.00. There would be a significant price structure increase after 5,000 gallons to encourage conservation.
Discussion had now ceased, so Mr. Potter moved that Metro District accept International Bank's loan proposal. Tom Stephens seconded. The motion passed unanimously. Mr. Potter then moved to establish the Santa Fe Trail Ranch Metropolitan District Water Enterprise [making this action and the tax exempt loan possible]. John Woods seconded. This motion also passed unanimously.
The Santa Fe Trail Ranch Property Owners' Association reaffirms the agreement of March 19, 1999 and further agrees for the benefit of International Bank - Trinidad and Santa Fe Trail Metropolitan District to collect such delinquent water completion assessment fees imposed by the District "for payment of $550,000 credit obtained to repair water line and any related fees on legal expense". The Association also agrees to the extent that the (District's) cash flow and special reserve is not sufficient to service the semi-annual note payments with International Bank - Trinidad, (the Association) will use its reserves to make up any shortfall on the semi-annual payment.
The motion passed unanimously.
Mr. Shelton then moved that the Board investigate moving its accounts to International Bank. The motion passed.
Ms. Vaugeois then moved that the meeting be adjourned. The motion passed, and the Board adjourned at 7:20 P.M.
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Submitted by Ed Hockett, Secretary Santa Fe Trail Ranch POA, July 22, 2003.