VIRGIN VALLEY WATER DISTRICT REGULAR BOARD MEETING
VIRGIN VALLEY WATER DISTRICT OFFICE
AUGUST 18, 2009

Minutes of a Regular Board Meeting of the Virgin Valley Water District Board held on August 18, 2009, at the Virgin Valley Water District Office at 3:00 p.m. Attending were President John Paul, Vice-President Kenyon Leavitt, Secretary-Treasurer Cecil Leavitt, and Board Members Ted Miller and Robert “Bubba” Smith arriving at 3:14 p.m. Also present were Michael “Boomer” Johnson, Eric Wilbanks and Bo Bingham District Administrative Legal Counsel, John Gleave District CFO and Mary Johnson taking minutes and other interested parties of agenda items.

President John Paul called the meeting to order at 3:01 p.m.
Kenyon Leavitt offered a Prayer and Ted Miller led the pledge.

Public Comment – There was no public comment at this time.Discussion: Board Comments - None

President of Board Comments – John wanted to offer his sincere heartfelt concern with Mr. Winters because his father had passed away over the weekend and that was the reason he was not present today. John Paul also stated that he would like to welcome one of our attorneys, George Benesch, to the meeting.

CONSENT AGENDA:

John Paul stated that he had a brief comment on item #4 and asked about “utilities” as coded to 6110 and he was informed that this was the monthly electricity charge for wells only. Ted Miller asked that item #3 be pulled and that he had some questions for John Gleave since he was present.

Kenyon Leavitt made a motion to approve the consent agenda as listed below with item #3 being pulled and heard before item #5 under the regular agenda. Cecil Leavitt seconded this motion and it was unanimously carried. 4-0

1. Discussion & Action - Approve Agenda

2. Discussion & Action – Approve Minutes from 8/4/09 Regular Board Meeting

4. Discussion & Action – Approve Bills Paid - $193,495.35

** End of Consent Agenda**

3. Discussion & Action – Approve Financial Statement for May 2009

Ted thought that we should note and wanted to know if John Gleave could furnish financial statements monthly since we have some critical issues and if John could show comparisons to the prior year. Ted further stated that our cash flows are down considerably and that our credit card clearing had over doubled. Ted further stated that all spending should be cut back as much as we can and that we should be aware and that this was going to be a lean year. John Gleave concurred that this was going to be an interesting and difficult year.

Ted Miller made a motion to approve the financial statement for May 2009. Kenyon Leavitt seconded this motion and it was carried unanimously. 4-0

5. Discussion & Possible Action – Consideration to Approve Professional Service Agreement with TerraSpectra Geomatics for Geographic Information Services in the Amount Not to Exceed $25,000

Michael Johnson began by stating that we have been utilizing TerraSpectra professional services since 2000 for various projects. Their services have been used to evaluate geospatial distribution of the water resources within the Lower Virgin River Basin. Numerous digital databases have been developed for the District to assist in making effective decisions regarding development of the water resource and address potential impact that increased development may have on the existing and future projects. The District budgeted $25,000 for the fiscal year 2009/2010 for GIS development, but this does not mean that we will automatically spend that amount. It is billed per project and not an open purchase order. Eric Wilbanks stated that they had found a few typos and suggested to the board that they approve subject to review and corrections.

Kenyon Leavitt made a motion to approve the professional service agreement with TerraSpectra Geomatics for geographic information services in the amount not to exceed $25,000 subject to review and corrections from legal counsel. Cecil Leavitt seconded this motion and it was passed by a vote of 4 to 1 with Ted Miller opposed.

6. Discussion – Presentation by Templar Energy on a Bio Fuels Energy Project in the Lower Virgin River Basin

Boomer introduced the item stating that Templar Energy had approached the District on a potential bio-fuels project. Historically Boomer and Mike have had some interaction with Gary Williams on some water resources, specifically in the Beaver Dam Wash area. This project could potentially bring business into the Valley and this is just the first step in this process. Gary Williams CEO of Chemtec Energy thanked the board for giving him the opportunity to discuss potential business here in the Virgin Valley, Arizona Strip and specifically the Mesquite area. This region is one of three regions that Chemtec Energy is considering for the algae field business. Gary introduced himself, Milton Page, President of Chemtec Energy and David Bennett, liaison. Gary reviewed the Chemtec Energy profile, their products and services and their customer list. Gary stated that there is a problem in the declining crude oil reserves and that vision and solution to the problem could be in algae oil production. Algae is the most productive plant for oil content, a renewable source and grows on non-traditional farm land. Gary gave his reasons why the Arizona Strip and Clark County, Nevada would make a good location for operations. Gary went over operational requirements and described algae farm operations. Dave Bennett, liaison for Chemtec, stated that he had met Gary last year and answered a lot of his questions regarding the area and he has researched the product and feels that this is a real commodity and worth looking into. Gary stated that presentation was to educate and inform the board and public and that they were not asking for anything at this time. Gary answered numerous questions from the board and public.

7. Discussion & Possible Action – Consideration of Revisions and Amendments to Sections IV and VI of the Virgin Valley Water District’s Operating Rules, Regulations & Rates to Amend and/or Revise Ordinance 2 and Ordinance 2 Fees. Potential Action Includes, but is not Limited to, Clarification of Existing Ordinance 2 Policies and Criteria, Revision or Changes to Ordinance 2 Policies and Criteria, Adjustment of Ordinance 2 Fees and Revision or Changes to Security Requirements for Payment of Ordinance 2 Fees

Eric Wilbanks stated that at the very least it would make sense for an amendment to bring everything together. Ordinance 2 was amended at one point and it is a little difficult to read the original Ordinance 2 and the amendment together. There has been previous discussions regarding Ordinance 2 and some board members have even gone as far and stated that there should be a complete overhaul of Ordinance 2. Bubba questioned if the attorneys had any suggestions for change. Eric stated that the portion of the ordinance that states “payment in lieu of” is pretty clear. In the original Ordinance 2 language you can make payment in lieu of dedicating the water to the District by entering into an agreement with the District where the developer or whoever is responsible for payment of Ordinance 2 Fees can enter into an agreement where they provide security that is acceptable to the board. This could be a performance bond or deed of trust. Eric further stated that he feels that it would be better to create a document that clearly states that this is the arrangement. There was discussion on the name of the new document. John Gleave questioned the section of “payment in lieu of dedication” and that the section states payment made at the fair market value and the District is currently not doing this. Cecil explained how the fair market value is established. Boomer stated that the fair market value has always been what the board authorized the District to purchase water for. Boomer informed the board that groundwater was only 7% of the water in the basin and the remainder of water in the basin was surface water. Boomer further explained the permitting process. Kraig Hafen commented that the board should continue to buy Virgin River water and should charge what they are purchasing the water for. Quincy Edwards, developer of Pulte Homes, stated that residents are not using surface water in their homes and doesn’t feel that they should have to pay that much for Ordinance 2 fees. Cecil stated that they could bring the water then. Kenyon Leavitt stated that the last ground water purchased from John Lonetti was purchased for $15,000 an acre-foot and the board could establish this as the fair market value, which is much higher than the current fair market value of surface water at $8,700 per acre-foot. He further stated that we always have the asset. There continued to be a very lengthy discussion regarding Ordinance 2; the rechargeable water in the basin and the permitted water rights the District holds; agreements made with SNWA; establishing a fair market; the responsibility of the District to the public; growth paying for growth; aquifer storage; the amount the District leases water for, etc.  Boomer stated that staff needs direction in order to proceed. Between the general manager, chief hydrologist and legal counsel, they can redraft and bring back at a later date without what the actual cost is and get a resolution to combine and simplify. It may take a couple drafts before finalized. Eric Wilbanks stated that the current ordinance does allow for the board to accept security for the payment of Ordinance 2 Fees so we do not need to make any changes to allow for that. The board would just need to agree upon what is allowable security for that. John Paul stated that staff had their direction for this item and closed item 7.

8. Discussion & Possible Action – Consideration of Payment Arrangements and Alternatives for Payment of Ordinance 2 Fees by Barcelona Partner’s, LLC and the Security to be Provided to the Virgin Valley Water District for Payment of Such Ordinance 2 Fees by Barcelona Partner’s, LLC

George Rapson, representing Barcelona Partner’s, LLC had submitted a letter requesting the District to grant a variance in the payment schedule of the Ordinance 2 Fees. Ordinance 2 Fees total $165,750.00. They are asking that the maps be signed by the District upon receipt of an initial down payment of $50,000 and allowing construction to begin at that time. Monthly payments would begin 30 days after the down payment for six consecutive months at $19,291.67. Eric Wilbanks stated that he has had conversation with Mike Kennedy regarding what type of security they could offer the District in regards to payment of the Ordinance 2 fees. Eric mentioned a performance bond, but was informed that with the current economy, it was difficult to get bonds approved. They are willing to sign an agreement whereas the District would shut off their water if no payments received and they could put the District on the Deed of Trust, but the District would be in the third position. The bank is in the first position and the City of Mesquite is in the second position. John Paul inquired about having them submit predated checks to the District, if this was a non-recourse agreement and if Eric had verified that they have legal counsel. Erik stated that he had not verified if they had legal counsel, he had been speaking with George Rapson and Mike Kennedy directly; Eric’s understanding is that this would be a non recourse agreement and he had not spoken to them regarding pre-dated checks. Cecil Leavitt stated that he had a problem with loaning $115,750 interest free for six months. George Rapson stated that it was a fair request to include interest. George Rapson stated that his request is to have water on with approximately 80% of the Ordinance 2 fees paid and that they would pay all the impact and connection fees before water was turned on. Kenyon stated he still had concerns regarding security and being the 3rd party on the deed of trust. Bubba stated that he was also not comfortable with being the 3rd party on the deed of trust and are we really secure with that and we also need to be aware of the precedence we would be setting. John Paul asked counsel about Barcelona Partner’s, LLC and if they would claim bankruptcy or about a default scenario. Bo Bingham stated that this could be drafted into the contract and say that this is not going to be something that would be deemed a covenant or a promise running with the land. This would be separate from the land itself and keep it entirely separate. Bo further stated that there were different things the board could do. Bo informed the board that they could put into the contract that if they default on any one of the payments, that the District would not continue to finance and that the fee would have to be paid in its entirety at that point before water would be available. The ordinance currently reads that the general manager has discretion to determine what is considered to be appropriate security and this might be better if the board has that authority. Kenyon stated that he liked the idea that if they were late on any payment, that the water would not be turned on until the Ordinance 2 fees were paid in full.

Kenyon Leavitt made a motion to approve a payment arrangement with Barcelona Partner’s, LLC for Ordinance 2 Fees with a $50,000 down payment due by August 31, 2009 with monthly payments of $19,291, plus a 10% APR due thirty (30) days after the down payment for six consecutive months and as long as these monthly payments are made on time, the District will turn the water on when they have reached 80% or when ready for service; if a payment is missed, payment in full will be required before the water will be turned on; the District would go on their deed of trust for the land as #3; this would be a non recourse agreement and subject to approval between both parties after District counsel drafts the agreement. Cecil Leavitt seconded the motion and it was unanimously carried. 5-0

9. General Manager’s Report

Mike had not included a written report and was not present. The monthly arsenic treatment plant report was included within the packets and Boomer stated that the Hardy Way Site plant was coming along and that it was planned to have water running through the filters in within two weeks. The SNWA is entering into a big agreement with the state of Utah on Thursday on Snake Valley and our presence has been requested in support of the pipeline. Boomer feels that we should be supportive of the pipeline because it would be less stress on the District regarding water resources down the line and we have cooperatively worked with SNWA since 1994.

10. Hydrologist’s Report

Michael had not included a written report. He informed the board that there was a Virgin River Habitat Conservation (VRHC) joint basin field trip scheduled for October 4th and 5th in Mesquite. There is a meeting tomorrow in Las Vegas structuring the field trip that Boomer will attend and he will also be attending the SWAC meeting tomorrow. Boomer further stated that while on vacation in California the bowl assembly for well #30 was disassembled. It was decided to modify that bowl assembly. An insurance company rep was present at the facility and they are looking at our costs of pulling and reinstalling. Installation should be in two weeks. Boomer further stated that the District is conducting arsenic sampling weekly and all samples are coming back under 10 ppb.

11. Public Comment

There was no public comment at this time.

 12. Adjournment

President John Paul adjourned the meeting at 6:16 p.m.

The minutes of this meeting have been tape-recorded and will remain on file in the District office for a one-year period for public examination.

• Board Meeting Minutes: 2009-08-18 (.pdf 24K)