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HomeMy WebLinkAbout2006-08-15 WUCFD MINUTESWATER UTILITIES COMMUNITY FACILITIES DISTRICT (APACHE JUNCTION WATER COMPANY) CITY OF APACHE JUNCTION, ARIZONA REGULAR MEETING AUGUST 15, 2006 The regular meeting of the District Board of the Water Utilities Community Facilities District (Apache Junction Water Company), City of Apache Junction, Arizona, was held on August 15, 2006, at the Apache Junction City Council Chambers pursuant to the notice required by law. CALL TO ORDER Chairperson Coleman called the meeting to order at 6:00 p.m. ROLL CALL Board Members Present:Chairperson Douglas Coleman Vice Chairperson R.E. Eck, Jr. Mr. Rick Dietz Mr. John Insalaco Mr. Joseph Severs Mr. Kris Sippel Mr. Dave Waldron Staff Present:George Hoffman, District Manager Kathleen Connelly, District Clerk Brian Hall, District Operations Manager John White, District Finance Manager Doug Dobson, Utility Director Kay Bigelow, District Counsel Others Present:Assistant City Manager Bryant Powell APPROVAL OF MINUTES OF JULY 17, 2006 ) Mr. Dietz MOVED THAT THE MINUTES OF JULY 17, 2006, BE APPROVED. Mr. Sippel SECONDED THE MOTION. Water Utilities Community Facilities District Meeting Minutes of August 15, 2006 Page 1 of 24 VOTE:Unanimous. The motion carried. PROFESSIONAL SERVICES AGREEMENT WITH DAMON S. WILLIAMS ASSOCIATES L.L.C. FOR COMPREHENSIVE STUDY OF WATER RESOURCE OPTIONS )District Operations Manager Brian Hall briefed the board on the item.He stated over the last couple months staff has worked on a scope of service to have a consulting firm look at additional opportunities for additional water resources and look at the additional water resources that have already been discussed in the past.Last evening he distributed a proposal from Damon S. Williams Associates.He has distributed an updated proposal this evening that is substantially the same as last evening that has been attached to the agreement.There is some verbiage change in the initial page to help define what the district does and what it has done in regards to the three-way agreement and the Mesa connection.Michelle Dejon and Ben Lee from Damon S. Williams Associates are here this evening to answer any questions the board may have. Mr. Dietz commented he was not sure if this was the right place to do this, but since they are doing the study for us, he had been looking at the water treatment plan as far as the Mesa interconnect and other things like that.He asked if Arizona Water might be interested in partnering with the district on a treatment facility.He did not know if it would be part of the study or if Arizona Water would be interested. Vice Chairperson Eck commented he is concerned after seeing the next agenda item that this enough.The amount is more than we anticipated but the scope is very large.He is not sure the scope is enough.We are trying to see about getting water but when they get to the next item, he is not sure if it is enough.He thinks they could use them for this. District Operations Manager Brian Hall stated this was something initiated by the board and Water Utilities Community Facilities District Meeting Minutes of August 15, 2006 Page 2 of 24 staff felt that if that is what the board wanted, that it was probably a good idea.It would make them more comfortable with decisions they would have to make.If they choose to approve the agreement, there are provisions in the agreement for written change orders, which includes that if required, additional compensation for changes for the scope of work will be administered through change orders.There are provisions for that with board approval.Usually in professional services contracts, they ask the board for a do not exceed amount, but they recognize the opportunity for change orders in the future if they should so choose. Vice Chairperson Eck asked if they could change the scope to head in another direction if the consultant starts doing the work and one of the first few things determines that the district should be building its own treatment plant and numbers show it is much better than anticipated or would they still have to do the original scope. District Operations Manager Brian Hall stated as long as the consultant gets paid for the work they have done to that point, they really do not care what direction they send the scope of work. Mr. Dietz commented he thought they were looking for the resources to see what is available, the best way to go and to see the different options available.He thought that was pretty well laid out in the scope. District Operations Manager Brian Hall stated they struggled with trying to get a consensus so that they would go the direction of the group. District Manager George Hoffman commented he would like to offer a perspective that is less adaptable and less flexible than Brian's.He believes they should have a well thought out scope of work and negotiate on that and enter into that, but not with anticipation that they are going to seek to meaningfully modify the scope of work.He thinks they should figure out beforehand what they are asking for and then negotiate for that. Water Utilities Community Facilities District Meeting Minutes of August 15, 2006 Page 3 of 24 Vice Chairperson Eck commented what is on here would be it, but he is waiting for the next agenda item to explode.He thinks this has a lot to do with it. District Operations Manager Brian Hall stated they are all looking forward to the next agenda item. Vice Chairperson Eck commented he definitely wants to do this but he is looking for a way out to try to get this resolved.He is looking for this and possibly more.They definitely need to find water.He added he still does not know the exact percent of water that the district produces on its own compared to what we purchase. District Operations Manager Brian Hall asked if he meant the last three -and -a -half months. Vice Chairperson Eck asked what it is annually. District Operations Manager Brian Hall stated it depends on what happened.This year was very unusual.In 2004 the district purchased .21 acre feet, which .is 80,000 gallons approximately for the entire calendar year.Last year the_district purchased millions of gallons of water because of:the situation we_are in.Each year varies. Vice Chairperson Eck asked if the situation they are in will affect growth. District Operations Manager Brian Hall stated as long as the current resources are operating correctly, such as not having a well out of service, we have enough to make our daily needs and handle a small amount of growth.It would only take one well to be out of service, coupled with the City of Mesa having their treatment plant down; that is when things got really tight.They would only have to purchase substantial amounts of water with a well down.There would have been more available if the Mesa plant had not gone out of service at the same time.We are not prepared for the future, though. Water Utilities Community Facilities District Meeting Minutes of August 15, 2006 Page 4 of 24 Vice Chairperson Eck commented he knows that and he has hollered the most for this. He is concerned that he might not have hollered for it as much as necessary. Chairperson Coleman closed the discussion with no further comments and called for a motion. Mr. Dietz MOVED THAT APPROVAL BE GIVEN TO THE PROFESSIONAL SERVICES AGREEMENT BETWEEN THE WATER UTILITIES COMMUNITY FACILITIES DISTRICT AND DAMON S. WILLIAMS ASSOCIATES L.L.C. FOR A COMPREHENSIVE STUDY OF WATER RESOURCE OPTIONS IN THE AMOUNT OF $66,406;AND THAT AUTHORIZATION BE GIVEN FOR THE CHAIR TO SIGN THE AGREEMENT PENDING FINAL APPROVAL AS TO FORM BY THE DISTRICT ATTORNEY. Vice Chairperson Eck SECONDED THE MOTION. VOTE:Unanimous. The motion carried. INITIAL FINDINGS OF RATE STUDY CONDUCTED THROUGH STANTEC ENGINEERING AND THE UTILITY STRATEGIES CONSULTING GROUP/ DIRECTION TO STAFF REGARDING INITIAL FINDINGS OF RATE STUDY )District Operations Manager Brian Hall briefed the board on the items.He introduced Trisha Cook from Stantec Engineering and Richard Darnell of Utility Strategies Consulting Group.He advised they would be making a short presentation to the board to explain what initiated the study and what they have come up with. Mr. Richard Darnell stated he would give a brief overview of the study and scope and then open it up for questions.They prepared a pro forma historical projected results of operations for the district.One of the critical items that occurred was that in the future years the revenues were not sufficient to provide the adequate debt service as required by both the revenue bonds and the Water Water Utilities Community Facilities District Meeting Minutes of August 15, 2006 Page 5 of 24 Infrastructure Finance Authority loan agreement, particularly for 2007, this fiscal year.They had suggested a rate study, which was approved, and they moved forward with it.The key element was the test year of 2006.They allocated the costs to 3 basic components:the demand component, primarily the demand costs that are related and fixed and do not vary with the amount of water produced; the commodity component, which is the chemicals, the power costs for pumping, and these costs will vary with the amount of water produced and the amount of water purchased; and the customer cost, relating to the customer accounting phase of the business such as reading the meters and providing the bills.They had one item in the direct costs that was related to the known potable water.They allocated the costs from the test year to those 4 components and developed a rate by dividing the sum of each of the costs by the billing units and came up with a rate of cost of service.They then looked at the actual rate design.When they tried to implement a rate based strictly on the allocated cost of service, they ran into problems.It has a significant impact on the low water users and those on low incomes.The 5/8" and 3 /4 " meter had the most impact because it had a very low rate of $9.95 per month. The actual cost of service indicated that the service charge had to be a monthly $29.00.They had to come up with another scheme.It is not the only answer but it is the one they developed for now.They are proposing that the first 2,000 gallons of water be provided with no charge.After that, they charge for the water.It reduced the impact of the water increase to those customers.The overall rate increase is approximately 21% and they tried to put it on those people who use more water.The sum shows on Table 3 in the middle.They have to take into account the impact on the people that are low water users and only use the water for basic purposes.They are trying to minimize it as much as possible. Vice Chairperson Eck asked what the cost is for their actual supply of water that they produce each year.The first page, under plant expenditures, has the Central Arizona Project at $474,000 and the bonds from Water Infrastructure Finance Authority.He does not understand what the actual cost is for them to produce their annual water source. Water Utilities Community Facilities District Meeting Minutes of August 15, 2006 Page 6 of 24 Mr. Robert Darnell stated the primary costs are the cost of the salaries and fringe benefits associated with the plant.The plant is also their well structures and some of the facilities, the distribution main and the meters. Vice Chairperson Eck asked if they pay Central Arizona Project $474,000 a year. Mr. Robert Darnell stated that is the budgeted amount for 2006.The electric is basically what you pay to whoever the electric supplier is. Vice Chairperson Eck commented there is a total debt under the bonds.He asked if they break that down annually below. 'Mr. Robert Darnell stated the first column on the left is all annual costs. Vice Chairperson Eck asked if the Water Infrastructure Finance Authority amount of $743,000 is an annual cost. Mr. Robert Darnell stated it is.It is the annual debt, and that includes both principal and interest.That amount was brought over from the 2007 forecast because this fiscal year is the first year that the district does not meet debt service coverage based on the current rates and current estimated level of expenditures.The first real year of debt service is 2007. Mr. Sippel commented they might come back and say we need to sell our water company. Vice Chairperson Eck commented that is possible.He is concerned with the rates because if they do drop the 2,000 gallons proposal, they have 3,800 services and that would give away about $30,000 per month in revenues just off the 2,000 gallons across the board. Mr. Robert Darnell stated it amounts to about 80,000,000 gallons of water that they will not Water Utilities Community Facilities District Meeting Minutes of August 15, 2006 Page 7 of 24 collect revenue on.They would have to collect it on the water after 2,000 gallons to recover the loss.Most customers will use the first 2,000 gallons.That is why the commodity rate goes up to $4.95 in order to recover those dollars that are lost to the amount of water that they are not charging for. Vice Chairperson Eck commented they had been told about a rate increase or possibly a half rate increase.He thought that when they had a rate increase they would be talking about 3% or 5%.But they are being quoted 221 as an average, with it going up from there. Mr. Robert Darnell stated there are various strategies that they have talked about, including a phased approach where they might go 10% in 2007 and another 101 in 2008.However, if they do that, they will have to come up with some adjustments to expenses.They are pretty comfortable with the revenues.They know what the growths are and the average usage, so he believes their projections are in the ballpark.He would say they are plus or minus 5%.They are basically looking at if they can cut some costs and do the increases in two phases.That is something they would have to decide in the budget today.If they do, they can massage the rates a little to make it fit a 10% increase.He also looked at leaving the rate at $3.88.The volume rate would have to be pumped up above the $4.95 at about 7,000 or 8,000 gallons.They would have to bump the rate up to a $5.50 per thousand gallon range in the higher usages in order to get the total revenues of $3.2 million.It is a tough call on who to put the rate increase on.Their emphasis was to keep it off the low water users and the people who might be on the fixed incomes or have lower income. Mr. Waldron commented he is real concerned about the rate increase on the 5/8" and 3/4" meters.He understands the study and what they had to do to get to this point, but they are talking about money out of people's pockets.That is what they are going to see; how much are they going to spend and how much of an increase.They are talking about almost a 50% increase for the majority of the users. Mr. Robert Darnell stated the average usage is about 6,000 to 6,500 per month annually on Water Utilities Community Facilities District Meeting Minutes of August 15, 2006 Page 8 of 24 those meters.On. table 4 they have a rate comparison of the current district rates, some other rates, and the proposed rates.A person that only uses 2,000 gallons .a month would have their rates go up roughly $2..29 per month, or 1396.He designed the rates to keep it as minimal as possible.As you move up into the higher usages, you can see where it starts approaching the 20% increase.The design is to put the emphasis on the higher water users to recover those costs. Vice Chairperson Eck commented they have had that debate before and it is very tough because they have a lot of master meter parks, and because they have a large meter they are going to pay more but there are only individual units inside.It is challenging to increase it this much. Mr. Robert Darnell stated the problem was that nobody realized that the 5/8" and 3/4" rate was too low at the time.When you look at it on a cost basis, it becomes obvious that the $9.95 is just too low. Vice Chairperson Eck commented it was actually dropped.The previous owner went to the commission when it was at $14.95 and asked for a decrease and had it dropped to $9.95 by the commission.That was 12 years ago. District Manager George Hoffman asked if they might share when the last rate increase was for purposes of the media.The board knows when that was but he is not sure the media knows. Mr. Dietz commented they have not had one since we have had it. District Operations Manager Brian Hall stated they talked about a rate study a little over 4 years ago.They decided not to do it then.At that time the 5/8" and 3/4" rates were actually $6.65.They came to the board stating they did not have anything to base it on other than to state they were way out of whack with those meters and the 1" meter.The board adjusted the rate at that time by $3.30. They left the consumption rate the same and they adjusted the Water Utilities Community Facilities District Meeting Minutes of August 15, 2006 Page 9 of 24 connection fees to reflect an average of the East Valley.Other than that, it is beyond the district's history of 11 years as to when there was a rate increase.He agrees that it is uncomfortable, but the fact is it has been a long time.We do not have the economy of cities like Phoenix, so it is a little different.In the future when Apache Junction is a city of 150,000, it may be adjusted differently.As we are in the growth area, that is why they are looking at it. District Manager George Hoffman stated this was a system that was bought out of bankruptcy.It was a private system by the name of Consolidated.Even though it was small, it was a collection of tiny systems that had very substandard infrastructure.This board has spent many years rebuilding that basic infrastructure. That rebuilding process has been very expensive.They have a small rate base and clearly they continue to struggle to reach the critical mass where that infrastructure will be built new, properly, and be of enduring value to the community.They will not have to go back into Palm Springs and rebuild; that was a substantial investment that the board made.State Land new development to the south and new developments going in now are being properly built and they will be of enduring value.They are at a critical hump in getting enough size to where they will see rates in the long run that are far more competitive.Right now they are struggling. Mr. Sippel asked if the information in table 4 for Arizona Water, Gilbert and others is the cost to the consumer if they were in one of those water companies. Mr. Robert Darnell stated that is correct.He got their rates from either the corporation commission or from their websites and calculated what their rates would be.They do not include sales tax or anything else. They are just the basic rates.He made a comparison of the current and proposed rates would be in relationship to the surrounding areas.He added Arizona Water is in front of the corporation commission for a big increase right now.They filed a massive filing with them to increase all of their service areas.They are having some problems with the new water treatment, just like this district is, and they are fighting Water Utilities Community Facilities District Meeting Minutes of August 15, 2006 Page 10 of 24 that and putting it all into the rates.There are a lot of water companies having trouble with water treatment.The district is not alone because of the arsenic laws that are coming out and the new water treatment that is being imposed on them.Tempe gets Salt River Project water.It is hard to compare rates to each other because they are so different from each other, how they operate, and their source of water.It is a nice guideline and it probably looks bad in the press, but there are circumstances surrounding all of these things.He sometimes hates to provide these types of documents but he knows it is important for people to know.The 1" rates are in good shape.Arizona Water Company has really high rates there and above.As you go up in size, the rates go up.Their 1" rate is $124 a month for 2,000 gallons.That is unbelievable. Vice Chairperson Eck commented the cost of their water does not change insofar as usage.It is still on a tier rate. Mr. Robert Darnell stated that is correct.He does not know what the basis is for the 1" meter rate, but their rate for 1" is just off the wall. Vice Chairperson Eck commented he does not think that is correct. Hoffman commented he assumes approximately 66,000 too low them to think about the debt They will have to keep their District Manager George his expense estimates are as of 10 minutes ago.He asked coverage that they have to provide. indebtedness in mind. Vice Chairperson Eck commented they may have to sell the property to pay for this increase rather than put it into infrastructure.He stated he would not go for a 22% increase in rates. District Manager George Hoffman stated he is not sure they would want to be saying that in the context that would suggest publicly to a seller that this is a fire sale. Water Utilities Community Facilities District Meeting Minutes of August 15, 2006 Page 11 of 24 Vice Chairperson Eck commented they have been led along that we have been able to afford this and we have not.They have not been able to afford bids or Water Infrastructure Finance Authority.They should have never done that if we were going to have to pay this kind of money.We are in serious trouble. Mr. Sippel commented he thinks it is time to think about if they want to be in the water business or not.They need to look at that as well. looking at table 3 which has the rate and the proposed rate.The and we are only charging $9.95. off. Mr. Severs commented he was present rate, cost of service cost of service rate is $29.95 He asked how they got that far Mr. Robert Darnell stated he did not know.Obviously the rate was set too low.Brian stated earlier it was at $6.95.He does not know the background or how or why the rate was originally set.The cost to read the meter is shown in table 2.The outlet cost is divided by the number of customers or bills and the result is $12.90 to start with. That does not include any of the fixed costs that have to be recovered through that same charge.That $12.90 is just to read the meters and do the bills.He cannot answer as to what happened before for the basis. District Manager George Hoffman asked if there were any other different ways they would like the consultant to assess the data.He has pointed out there are multiple ways of structuring an increase.Bryant, Brian, John and he can go back and look at cost cutting.There are some investments that have been made for water credits that they may want to forego for a year, for example.They could look at lowering the potential rate increase.The consultant has tried to minimize the impact on the lowest water users, believing that they might be the most likely to be on a fixed income.They could spread the rate increase equally across for everyone.They could put the highest increase on the lowest water users, though he is not saying that is a good idea.He asked if there is another way the board would like them to look at that and have them bring back some different models and data. Water Utilities Community Facilities District Meeting Minutes of August 15, 2006 Page 12 of 24 Mr. Sippel commented he understands that the 2,000 gallons or less are probably fixed incomes, but the 15,000 or more are families of 4 and 5.They may not have just as much money as the fixed income families, and they are getting the 26W increase.He could use himself as an example; he would be paying $200 more for the same amount of water he is getting this year with a rate increase like that. There are a lot of families like him out there, and there are probably some out there that are using even more water.He does not know if that is the right way to look at it, either. District Manager George Hoffman stated that was perfect; that is what they need to get their direction on if they would like it structured differently. Mr. Sippel asked who would absorb it. District Clerk Kathleen Connelly reminded them that the deadline for budget adoption is October 1, 2006.Time can go very quickly between now and then. The district is obligated to publish the notice of the final hearing on the budget at least 10 days in advance and that notice has got to include the details of any proposed rate increases. Mr. Sippel repeated that they need to look at whether or not they want to be in the water utility district.He is not sure since no one else is talking about it. Vice Chairperson Eck commented he has been saying that for years but he was the bad guy for saying it. Mr. Sippel stated he does not mind.He is one of those guys who does not mind sticking his neck out.He thinks the feasibility is something they need to look at. Mr. Severs asked what are they to do with it if they are not. Water Utilities Community Facilities District Meeting Minutes of August 15, 2006 Page 13 of 24 Mr. Sippel stated they would sell it.He does not know to whom, but it is something they need to look at.If they get another year like this year next year, they will be in a world of hurt.He does not know if there is a company out there that could absorb it or would want to buy it. Mr. Insalaco commented it hurts him to have to agree, but he agrees with Mr. Sippel.He could see this getting deeper year after year.He wishes there was a way out of it, but he is all for getting rid of the district if they have to. Vice Chairperson Eck commented he thinks they should look at every aspect possible to see how they can provide reasonable service.They know they are in competition.They have citizens on both sides when they will have to tell them that the price across the street is so much different.It is challenging.It has been that way, but now they are talking about going to the next level. Mr. Sippel agreed with the vice chair; it is for whoever can provide the best service to the community.They need to look at that. District Manager George Hoffman commented the discussion back from that will be what will be subsumed back in our community.He thinks some other entities are very interested in knowing which communities can provide infrastructure for undeveloped land.This could be a very important decision for defining what our community will be and where the limits of our community will be. Mr. Waldron commented he does not think they are going to settle this before the budget deadline.He would like to see some restructuring to reduce the impact to the people using the 5/8" and 3/4" in the short term. He could just see where it is going and it will show up and say that the present rate is $9.95 and the proposed rate is $20, and that is what they are going to see. Water Utilities Community Facilities District Meeting Minutes of August 15, 2006 Page 14 of 24 Vice Chairperson Eck commented they have a lot of winter visitors, too.They are going to leave but they have to pay that $20 every month. Mr. Waldron stated he would like in the short term to look at the low end water user and reduce the impact on them.He sees that as a huge problem. Mr. Sippel added that they do not just look at that.The whole thing is too high. Mr. Robert Darnell stated they can provide them with numerous selections; rate designs that will do whatever the board wants.Rate design is more of an art than a science.If they lower one rate, they will have to increase some other ones.If the target is $3.2 million, they have to recover it in some way, either through proposed service charges or through the rate per thousand gallons.Those are the only 2 ways to collect the money other than some other facility charges for meters and so forth. ' He had also said earlier that they could also reduce their expenses to try to get the rates down. Mr. Severs asked what their options are for reducing the expenses. Vice Chairperson Eck commented he thinks the Central Arizona Project water is one of them.He asked if that whole $474,000 is something they have to do every year. District Manager George Hoffman asked how much it is for the recharge. District Finance Manager John White stated it is in the table up there. District Manager George Hoffman asked him if he had some handouts. District Finance Manager John White stated he has some worksheets that he could distribute if they wish. Water Utilities Community Facilities District Meeting Minutes of August 15, 2006 Page 15 of 24 District Manager George Hoffman stated he had not seen them, so if he was going to be referring to something, he would like the board to see them. District Finance Manager John White stated the package covers a variety of subjects in anticipation of the questions that could come up tonight.The very last page has the potential savings from Central Arizona Project reductions.The present rate structure and the budget have $427,000 paid to the Central Arizona Project this year.A big part of that is for incentive recharge.The first item listed involves the incentive recharge.We were to purchase water from the Central Arizona Project for $175,000 and then sell it for about $60,000.There is a potential $115,000 savings there.There is also a tax levied by the Central Arizona Groundwater Replenishment District and that will be increasing every year as well.In the upcoming year, if they opt not to build up the storage credits there and let the Central Arizona Groundwater Replenishment District have the credits in lieu of part of the payment, there is another $78,000 that they can save.They could, in this budget year, eliminate $193,000. Mr. Sippel asked for how many years could they do this. District Finance Manager John White stated they could permanently go ahead and do these.The dollar amounts might change, but that is an expenditure for the district. Mr. Sippel asked if they are buying it at $61 and selling it at $21. White stated that is correct. to buy it any at all. White stated they do not. District Finance Manager John Mr. Sippel asked if we have District Finance Manager John Water Utilities Community Facilities District Meeting Minutes of August 15, 2006 Page 16 of 24 Mr. Sippel asked why they are buying it. District Finance Manager John White stated to build up recharge credits because the replenishment district tax is increasing every year.The district is buying that with the idea that it will offset those taxes in the future. Mr. Sippel asked if there was an amount banked already and have they looked at projections on how long that banking will last. District Operations Manager Brian Hall stated they buy incentive recharge, which is extra water that the Central Arizona Project has.Districts like us do not use their full allotment and it is sold at a reduced rate.It is given as an incentive so that the district recharges water.In the future, any gallon of water that is taken out of the ground will have to be put back in the ground. The district is getting a head start on that and we have been doing that for several years now.He does not have the figures in front of him; they are usually a couple of years behind. Right now they have around 26,000 or 27,000 acre feet of storage credits, which is like a bank account.The reason the water is sold at a loss is because there is another little component of it.Instead of the district having to physically recharge the water into the ground through some type of program, whether it be recharge basins or injection wells, there is another component called in lieu.Currently our contract is with the New Magma Drainage District and because the district delivers its excess Central Arizona Project purchased to them, they do not pump their wells for that amount of water.The district then gets credit in the district bank account for water they do not pump.It is easier than recharging the water; the district gets the credit because they did not take it out of the ground to start with.The district has done that looking to the future and he looks at it where the storage credits are like real estate; they will do nothing more than go up.In The future they will be worth more.It is a pretty easy way to cut expenses pretty substantially by not buying the excess credits for the next year or two.In so doing, we forego storing any additional credits in the years that we cut that. Water Utilities Community Facilities District Meeting Minutes of August 15, 2006 Page 17 of 24 Mr. Sippel asked if that is a lot of recharge credits that the district has. District Operations Manager Brian Hall stated the total amount of water that the district pumped last year, including what was bought and pumped and what was taken from Mesa and the Central Arizona Project water, was just under 1,800 acre feet for the total demand for the year. Mr. Sippel asked how much they have. District Operations Manager Brian Hall stated the district has around 27,000 acre feet.If we had no other water and no growth, and we used the same amount they could project it out to about 15 or 16 years. Mr. Sippel asked if they could sell what is in there for money back. District Operations Manager Brian Hall commented he would not recommend they do that. Mr. Sippel commented that they could forego buying recharge credits for a few years and it would not kill us. District Operations Manager Brian Hall stated that would be a doable thing.That is one thing that he has suggested in his cover memo for revenue reduction.It will not be an immediate effect on the district. It is a good thing to do, but if you cannot afford it right now, that is one thing that could be cut fairly easily for a year or two and not affect the operation of the district and not affect the delivery of water. Mr. Sippel commented it almost feels like robbing Peter to pay Paul.We are just putting a band aid on it. Mr. Severs commented in the last five minutes they described to them how to save approximately $193,000 per year.He asked if there were other Water Utilities Community Facilities District Meeting Minutes of August 15, 2006 Page 18 of 24 ways they could combine with this one for maybe the next couple of years and then go back to normal. Mr. Sippel commented he believes they might be able to save $250,000 if they do not buy anything.He asked if he understood that right. District Operations Manager Brian Hall stated the $177,000 is not a net savings because we receive some revenue back from New Magma for a portion of that. He is certain there will be some other ways, but without really digging through the budget with his fellow staff members, from his experience there will not be any other places that will be as painless on the short term for a fix than these. Vice Chairperson Eck stated they do not want to go through staffing.He wants to assure them of that.Anytime there is something like this and they are trying to cut back due to a rate increase, staff is going to be concerned.We obviously need the staff to run it.They will be looking at all other options. Mr. Sippel commented he could see a4% or 5% increase and this, but not 20%. District Operations Manager Brian Hall stated that is up to the board.It is the responsibility of staff to come to them and they made that attempt a few years ago but were told it was not the time.They have now come back to them. It has been 11 years.If a cable bill, telephone bill or grocery bill goes up every year, and they tried to hold the line on them for 10 or 11 years, then tried to absorb it all at once, there would be a substantial increase at once rather then if it had been done a little at a time. Mr. Sippel commented that on the other hand an apple at Bashas' and an apple at Fry's cost the same.Water with us and water with them do not. District Operations Manager Brian Hall stated that is correct. Water Utilities Community Facilities District Meeting Minutes of August 15, 2006 Page 19 of 24 Chairperson Coleman asked if they needed a motion on item 6 or does staff know what it is looking for. District Manager George Hoffman commented the policy direction he is hearing is make it to year twelve. at all options. Hoffman repeated to not have any choice frame. Mr. Sippel commented to look District Manager George look at all options. Mr. Severs commented they do at this point in time because of the time District Clerk Kathleen Connelly stated originally when they looked at budget adoption a few weeks back, they were leaning towards doing it on September 5.If they wanted to stick with their regular meeting schedule, they could do it on September 19; if they wanted to do it in a special meeting they could do it at some other time.If they put if off until September 19, they could have another work session of some sort. DIRECTION TO STAFF REGARDING DATE, TIME AND LOCATION OF PUBLIC HEARINGS ON FINAL BUDGET ADOPTION TO INCLUDE ANY AND ALL RATE SCHEDULES, FEES AND CHANGES Chairperson Coleman called for a motion. Mr. Dietz MOVED THAT THE FOLLOWING DIRECTION BE GIVEN TO STAFF REGARDING DATE, TIME AND LOCATION OF PUBLIC HEARING ON FINAL BUDGET ADOPTION TO INCLUDE ANY AND ALL RATE SCHEDULES, FEES AND CHARGES:THAT WE BE BACK SEPTEMBER 19, 2006, IN THE CITY COUNCIL CHAMBERS AT 6:00 P.M. Water Utilities Community Facilities District Meeting Minutes of August 15, 2006 Page 20 of 24 District Clerk Kathleen Connelly asked if they wanted a work session on a date prior to that, like the night before. Mr. Dietz AMENDED HIS MOTION TO ADD A WORK SESSION ON SEPTEMBER 18, 2006, AT 6:00 P.M. There was general discussion about whether a motion was needed for the previous item. Mr. Sippel SECONDED THE MOTION. VOTE:Unanimous. The motion carried. There was general discussion again on whether a motion was needed for item 6. District Manager George Hoffman commented he thinks he hears them saying that the straight math is more than their comfort level, their desirous of doing a combination of expense cutting and a phase in over time of the rates but at a substantially lower rate proposal than this mathematical study would suggest. Mr. Sippel commented he thinks they need to look at the feasibility of the organization, too. District Clerk Kathleen Connelly stated she believes they also need to confirm that the information and statistics are correct. DISTRICT OPERATIONS MANAGER REPORT District Operations Manager Brian Hall stated the media has been replaced on well #6 for the arsenic treatment.They are still working on some controls for the reclaimed tank.They are still in a blend situation.They have not used the new media.All the pilot studies indicate that it will work very well.On well Water Utilities Community Facilities District Meeting Minutes of August 15, 2006 Page 21 of 24 #8 they are still waiting for Salt River Project.He has a call in to one of their major employees. Mr. Severs asked how long that has been. Mr. Dietz commented he could not believe they were still waiting for Salt River Project on that. District Operations Manager Brian Hall stated they did get the easement that they required; he signed it and sent it back the same day. Mr. Severs asked if it had been a couple of months that they had been waiting on this. District Operations Manager Brian Hall stated it has been more than a couple of months but they have had several steps that have progressed.He had hoped to visit with them for a little bit but they are running out of time.He added he appreciated the opportunity to work with them and he appreciates what they have accomplished in the last 6 years because there have been a multitude of things.There have been some things that have not been really smooth.He stated that when they have a colorful discussion, as they sometimes do in these meetings, and they direct staff to go forward and do good things, they sometimes leave them wondering in what direction they are supposed to go. Whether it is the manager, chairman or vice chair, at the end of the discussions and direction to staff items it is important to them that someone restate what they are supposed to do. Sometimes they have heard 4 different directions and they try to make the best of it.He commented he does not envy them for some of the decisions they will have to make in the future and that they be aware that some things are economic, others are strictly policy.Some of the decisions are really tough.He appreciated them taking that on themselves and encouraged them to make the tough decisions when they come along.He again stated he appreciated the opportunity to work for them and he would like to drop in and see them sometime. Vice Chairperson Eck commented he thought Brian had done a fabulous job for them and he hated to see him go.It is a very challenging company he has had to work with.He has done very good. Water Utilities Community Facilities District Meeting Minutes of August 15, 2006 Page 22 of 24 DISTRICT MANAGER REPORT District Manager George Hoffman thanked Brian for his fantastic work in rebuilding a very small company and getting it off to a good start.He wished him well. DISTRICT TREASURER REPORT District Finance Manager John White reiterated the district manager's comments and how he appreciates how he started out as water superintendent and is now the operations manager.He has been a tremendous asset and whoever his successor is will have big shoes to fill. DISTRICT COUNSEL REPORT None. MOTION FOR EXECUTIVE SESSION FOR PURPOSE OF CLAIM FOR EXTRA PAYMENT. BY US FILTER )There was general discussion on the need for the executive session since this meeting went so late.District Manager George Hoffman stated he could communicate with them on the one item through written correspondence and not have to meet tonight. ADJOURNMENT )Chairperson Coleman adjourned the meeting at 7:00 p.m. ACCEPTED THIS 5TH DAY OF SEPTEMBER , 2006, BY THE CHAIRPERSON AND DISTRICT BOARD OF THE WATER UTILITIES COMMUNITY FACILITIES DISTRICT (APACHE JUNCTION WATER COMPANY), CITY OF APACHE JUNCTION, ARIZONA. SIGNED AND ATTESTED TO THIS 5TH DAY OF SEPTEMBER , 2006. Douglas Coleman Chairperson Water Utilities Community Facilities District Meeting Minutes of August 15, 2006 Page 23 of 24 ATTEST:. Kathleen Connelly District Clerk WATER UTILITIES COMMUNITY FACILITIES DISTRICT MINUTES CERTIFICATION I hereby certify that the foregoing minutes are a true and correct copy of the minutes of the regular meeting of the Water Utilities Community Facilities District of the City of Apache Junction, Arizona, held on the 15th day of August, 2006.I further certify that the meeting was duly called and held and that a quorum was present. Dated this 30th day of August, 2006. Kathleen Connelly. District Clerk Water Utilities Community Facilities District Meeting Minutes of August 15, 2006 Page 24 of 24