MINUTES OF THE BOARD OF TRUSTEES SPECIAL MEETING held March 13, 2010 at the Horton Community Center, Grapeview. The meeting was opened at 9:00 AM by President Gary Longmire and attended by Mike Croke, Linda Pryor, Daryl Axelson, Roger Hansen, Dan Poole, and Larry Grumme; guest members Jack McLauchlan and Jackie Longmire; and guest Kim Wallingford.
BRIDGE
MOTION to approve payment of a $7,332.44 progress billing on the contract with Exeltech Consulting, Inc. for Phase 1, Preliminary Engineering Services for the Bridge Replacement project, was made by Roger Hansen, seconded by Mike Croke and carried.
Future progress billings within the parameters of this contract can be reviewed and approved for payment by the Bridge Commissioner, Roger Hansen.
LEGAL CONSULTATION
The Trustees noted three topics that have been previously discussed and deferred pending legal advice: 1) Clarification regarding the ability to amend proposals submitted by the Board of Trustees for a vote at membership meetings and the ability to take action on business items that were not included in the Notice of the Member Meeting. 2) The legitimacy of proposing that the members revote an issue that they had previously approved (replacing the gangway at the dock facility to improve safety) and the ramifications regarding liability exposure if the project is not completed. 3) Consequences related to consideration for an amendment to the Club’s Bylaw provision for superior lien rights that would permit subordination to a primary lender.
Following discussion regarding attorney selection, the Trustees agreed to retain Attorney Robert Houle for consultation regarding these issues. MOTION to make an appointment with Attorney Robert Houle for legal consultation regarding the three topics noted was made by Roger Hansen, seconded by Larry Grumme and carried.
FINANCIAL PLANNING
Water Commissioner, Daryl Axelson, noted a recent report on small water systems submitted by the Department of Health (DOH) to the State Legislature that included recommendations for changes to help small water systems be more successful with technical, financial, and managerial issues. The DOH will be making some changes on its own while other changes will require legislative approval. The DOH intends to increase oversight with the creation of a new financial capacity assessment tool to evaluate water system’s technical, managerial, and financial capacity.
The Trustees reviewed and discussed a Financial Viability Report prepared by Daryl that followed guidelines provided by the DOH using a five step process.
1) Develop an Operating Budget: The Club has an adequate Operating Budget in place; the membership authorizes Dues increases based on all the Operations and Maintenance needs of the Island, water system included. The 2010 proposed Operations and Maintenance Budget is approximately $90 of the $255 per lot assessment.
2) Evaluate Water Rates: Evaluation of water rates is a part of the State’s Water Use Efficiency Rule. The requirement for privately owned water systems to be subject to the Municipal Water Use Efficiency Rule was challenged and recently heard by the Supreme Court; the outcome has not yet been published. The Club’s Water Use Efficiency (WUE) Committee did review the development of a separate water rate and drafted a proposal that has been deferred pending the outcome of the Supreme Court’s ruling. (The WUE Committee also discontinued regular meetings pending the outcome of the ruling.)
3) Create and Fund an Operating Cash Reserve: Additional Operating funds required for water system expenses come out of the reserves in the General Fund with the Board’s approval. Monies needed for unexpected necessary expenses that would exceed reserves in the General Fund could be included in an Emergency Reserve Fund.
4) Create and Fund an Emergency Reserve: The Trustees discussed a recommendation to create a new category in the annual Budget for an Emergency Reserve designated specifically for the water system. The funding would come from the Operations and Maintenance Dues each year and be carried from year to year once it reaches a target amount. Daryl recommended a fund of at least $40,000 to provide capital for emergency expenses that could arise. MOTION to present (to the membership) the concept of establishing an Emergency Reserve Fund for the water system with the targeted amount to be determined, was seconded by Mike Croke and carried.
5) Create and Fund Reserves for Capital Improvements and Equipment Replacement: The report summarized recent expenses for bridge repairs and preliminary engineering for the bridge replacement project which will have significantly reduced the balance in the Asset Replacement Fund by the end of this year. Daryl noted that the approval process through which money can be withdrawn from the Fund for any one asset does not promote Financial Viability for the water system. He recommended the remaining balance in the ARF (following completion of the preliminary engineering on the bridge) should be designated for the water system and that at least half of the annual ARF assessment should be allocated for this asset. The report also indicated Federal incentives concerning taxes on income earned were in place. Currently all ARF funds are being taxed on the interest earned. Water System Reserve Money set aside in the ARF would not be taxed on the interest earned. The Trustees agreed that the ARF should not be depleted for any one asset however no action was taken to designate monies in the Fund specifically for the water system.
Daryl noted a Water System Renovation Plan that was prepared by Whiteley Engineering in 2005 that called for upgrades and replacements to be performed as a single phase project. Daryl’s proposal to pursue revisions to this plan to address the project in phases over a twenty year period was received with favor. Additional engineering services would be needed to develop a phased approach to the renovation plan; Daryl will contact Whiteley Engineering for an estimate to provide this service.
The Trustees reviewed a report prepared by Daryl regarding statements made in a 2007 Loan Application (through the Drinking Water State Revolving Fund) regarding the condition of the water system and the lack of facts to substantiate the information that was provided. The application implied that the system was falling apart and in need of immediate replacement. This report, including the assumptions made and the current condition of the system will be posted on the Club’s web site.
The Trustees reviewed a spread sheet prepared by Treasurer, Linda Pryor, projecting the balance in the Asset Replacement Fund at different income levels. To establish a goal for comparison with income, the sheet included projected (estimated) costs to replace the water system and the dock facility, and included a contingency fund for the roads and beach facility and/or emergency repairs. This spread sheet did not include funding for a bridge replacement project. Factoring in both interest earned on savings and inflation on costs, the estimated goal would be reached in twenty years if the assessment per lot for the ARF was $250 per year beginning in 2011. It was noted that more data on systematic replacement of the water system will be needed to project costs and evaluate the Fund with more accuracy.
The Trustees agreed to schedule a Board Meeting for the month of May.
President Longmire adjourned the meeting at 11:16 AM.
Linda Pryor, Secretary