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Tuesday, August 31, 2010

PSWID still pouring money down Milk Ranch hole

(Editor's note: The individual whose name normally appears above this update has been deleted because the Roundup won't run his letters to the editor if his name is associated with the Rim Country Gazette Blog or the Mogollon Connection.  Consequently, we can only say that this update is provided by Water for Pine Strawberry.)

August 21, 2010 PSWID Meeting
Next regular PSWID Meeting: Thursday September 16, 2010 at 7:30 p.m. at the Pine Cultural Center.
Appointment of Board Member
Mr. Mike Claxton was appointed to fill the open board member position. His email is: mclaxton@mtvgc.com.

Strawberry Hollow Well
The purchase of the Strawberry Hollow well, SH3, has hit rough water again. Mr. Loren Peterson read a statement where he complained that the terms of the contract were trying to be changed after the 8/10/2010 meeting where they were approved. The PSWID lawyer, Mr. David Davis, was the focus of the complaint.

There were two issues:
i. The amount of monetary risk that the district has if the sale does not go through. The crux of the issue is that the board approved a $10,000 non-refundable deposit at the 8/10/2010 meeting. Mr. Peterson says that he had a verbal agreement with the district (it was never identified who made that commitment) that he would be reimbursed for $91,000 in expenses if the district does not buy the well. Mr. Peterson wanted the contract to include that reimbursement. There is some disagreement over whether that was included in the contract that the board saw when they approved the purchase.

ii. Fourteen day limit on the approval by the Strawberry Hollow Domestic Water Improvement District of the deal. This was mentioned as the second issue, but there wasn’t much said about it.

Comment: How can the district make a verbal commitment to a well owner to reimburse him for $91,000 without a public discussion and vote? For that matter, how can the district spend $120,000 on the Milk Ranch well without public discussion and a vote? Kudos to Mr. Davis for trying to stem the tide. This district is being run for the benefit of local developers, first, last, and always. District tax payers and rate payers are supposed to just pick up the check.

Mr. Peterson said that the $450,000 is a substantial reduction in the price that he wanted for the well and that he reduced the price in order to get the deal done. He said that he is going to want to renegotiate the price if these other items are open to renegotiation.

Mr. Greer claimed that the spending of the money was at the direction of Mr. Haney and Mr. Jones. He also said that the money was wasted as none of it increased the amount of water put out by the well. The board members seemed sympathetic to providing Mr. Peterson with this money.

Comment: Mr. Greer seemed careful to say that the “amount” of water was unchanged by this money. There are two other aspects to consider, the quality of the water and the physical quality of the well. It was stated during the meeting that part of the money was used to remove a stuck pump from the well, which would have improved the quality of the well. Without an itemized list of what the spending went for, it is not possible to make judgments as to what may have been “wasted” from the district’s point of view. It is probably fair to say that Mr. Peterson would not have spent this money of his own accord, without the need to fix up his property in order to sell it.

Mr. Peterson said that the district is paying for the expenses of the Milk Ranch well, so it is only fair that they pay his as well. Mr. Dickinson tried to defend the spending on the Milk Ranch well. He said that the well had sat for a long time and that Mr. John Gliege, PSWID’s former attorney, had recommended that they spend the money in order to establish the value of the well. According to Mr. Gliege this could be called “due diligence” by the board.

Comment: The Milk Ranch well sat for a long time and plugged up with sand, so the potential buyer has to pay for the repairs to the well, along with upgrades to make it operational, so they can do their “due diligence.” What alternate reality does the board exist in? Mr. Pugel did not maintain his property and the well degraded to the point that it was essentially worthless. If that happened in the real world, the owner who neglected to keep his property up would have had to pay to restore the value.

Not in Pine. In Pine, things work differently for some people. For some people their neighbors have to pay to fix the property and then pay again for the increased value of that property. The most irritating aspect of all this is that you know that none of the board members would spend their own money this way.

Mr. Dickinson made the following statement with regard to why the board is spending so much more than the appraised value for SH3: “Never an amount extended to each asset that wasn’t in the appraisal. Assets that weren’t included added value to the deal. Included in those assets that were not mentioned in the appraisal were a filtering system, the filter system building, the land required, the cost of hookup, the cost of engineering to develop the filter system, the cost of ADWR/ADEQ testing that has been completed and satisfied, the length of pipe needed to hook that system into our system, the tank, and there were other issues as well. So collectively that adds a significant amount of value to the well.”

Comment: I have spent a good deal of time going through the details of the SH3 appraisal. There will be another update to discuss that in more detail. To respond briefly to what Mr. Dickinson said about what isn’t in the appraisal:

i. Filtering system: Included in appraisal.
ii. Building: Included in the appraisal.
iii. Land: Included in the appraisal.
iv. Cost of Hookup: This is separate PSWID cost, so not in apprasial
v. Cost of Engineering: Included in the appraisal.
vi. Cost of ADWR/ADEQ testing: Included in the appraisal.
vii. Tank: Not purchasing, so not in appraisal

Mr. Greer made the following statement about the SH3 appraisal: “I just want to add one thing that you aren’t aware of. You seem to be, Sam, holding a lot of value to this appraisal. The appraisal was put together with one purpose in mind, to kill the purchase of SH3. Okay, that’s what they did. They did that on purpose and [there are some words here that I can’t make out on the tape, think it says “so they could drill”]. The fact of the matter is that it is not a true and honest appraisal. That is the problem with it.”

Comment: Mr. Greer seems to see conspiracies wherever he looks. Mr. Greer has never offered any proof or explanation as to why he thinks the appraisal is dishonest, or even incorrect. This type of appraisal is done thousands of times a year by hundreds of different companies using a standard approach. This approach is recognized by the court system as representing a valid way of determining the price for these types of assets. This is the same approach that was used by PSWID to value the Brooke water companies before they purchased them.

Clearly Mr. Peterson may not have liked the appraised value since it is nowhere near what he wants to sell SH3 for. In the same vein, Mr. Pugel was afraid of what the appraisal price would be so he had it killed. Just because you don’t like the appraisal value, it doesn’t automatically follow that there had to be a conspiracy going on. I suspect that neither Mr. Greer or the other board members asked Tetra Tech to explain how the appraisal was done and where the values came from.

Milk Ranch Well
The pump has been pulled from the Milk Ranch well and is being analyzed. A game plan is being put together on how to proceed with the Milk Ranch well.

Comment: The board continues to pour more money down the Milk Ranch hole.
July Financials (Start of 2010-2011 Fiscal Year)

The financial data can be found at: http://www.pswid.org/ , then click on the Financial Data link that can be found under the PSWID logo.

Cash Flow Position for July:
i. Total Operations Cash In: $133,252.43
ii. Total Borrowed Cash In: $65,000
iii. Total Operation Cash Out: $94,376.83
iv. Total Interest Expense Cash Out: $18,714.38
v. Total Capital Project Expense Cash Out: $70,190.50
vi. Net Cash Flow: $14,970.72
Compass Bank report for the month of July:
i. Revenue: $133,252.43 (includes $1256.60 in property taxes)
ii. Expenses: $128,325.00 (includes $19,626.88 in depreciation)
iii. Interest Expense: $18,714.38
iv. Net Income: -$13,656.90
Cash Flow Position for year to date:
i. Total Operations Cash In: $133,252.43
ii. Total Borrowed Cash In: $65,000
iii. Total Operation Cash Out: $94,376.83
iv. Total Interest Expense Cash Out: $18,714.38
v. Total Capital Project Expense Cash Out: $70,190.50
vi. Net Cash Flow: $14,970.72
Compass Bank report for the year to date:
i. Revenue: $133,252.43 (includes $1256.60 in property taxes)
ii. Expenses: $128,325.00 (includes $19,626.88 in depreciation)
iii. Interest Expense: $18,714.38
iv. Net Income: -$13,656.90

There were several capital expenditures in July”
i. Purchase assets from Schaffer – vehicles and equipment: $50,000
ii. Meter Reading Vehicle – New: $14,897.72
iii. Improvements to existing facilities: $5292.78

Comment: How can the district spend $50,000 and $14,897.72 without a vote of the board? What did the district get for $50,000? Why was a new vehicle needed? These are the types of things that the board needs to be responsible for discussing and making a decision on, in a public meeting.

Board asked the audience whether meetings on Thursday would be better than Saturday. The general consensus was to move them back to Thursday. The board committed to have the executive sessions prior to starting the meetings, so that people wouldn’t have to wait for those any more.

This update is from the group Water For Pine Strawberry.  Updates on earlier meetings are available on our website: www.WaterForPineStrawberry.com .

Water For Pine Strawberry is a group of residents who are concerned about the communities water issues and how they can best be resolved. Visit our web site, www.WaterForPineStrawberry.com, for more information. The website for PSWID is www.pswid.org .

Clarifications can be submitted by anyone who is explicitly named, implicitly identifiable, or a board member to items in this email. Clarifications will be posted on our website. We reserve the right to post a response. Clarifications must deal with the topics discussed in the email that relate to the individual or the board. They must be in family friendly language and be non-abusive. When the clarification is accepted, it will be posted to the website and notice of that posting will be added to the next update.

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