Kays Creek Irrigation Board Meeting 11/29/16

Kays Creek Irrigation Board Meeting

11/29/16

Layton City Building

 

Attending: Scott Green, Jon Green, Woody Woodruff, Gary Crane

Board Meeting held to consider the purchase proposal from Davis Weber Canal Corporation.

Scott: Questions for Davis Weber Canal: Davis Weber didn’t install any of the lines except for the one down Flint Street (which cost $70,000).  The lines were put in by the developers and also Layton City.  The newest lines are Roberts Farms, but overall the lines are over 20 years old.  Maintenance and replacement become an issue with older lines.  They are losing revenue which should be addressed.  They are getting $1.5 million in water and that can then go to new developments in Kaysville which goes to revenue.

Woody: The shares of water for those residents are in Layton City’s name.  The water cannot be transferred out of the city’s name but they can buy Kays Creek shares in exchange.

Gary: Davis and Weber is asking for 1.2 million ($93,000 a year) for a depreciating asset.  The water used there would be Kays Creek water.  There has to be water rights and water delivery.  They contributed a very small amount to the actual infrastructure.  This is a losing asset for their company.  The offer is not feasible.  We need a counter offer that includes an escape clause.  If we find problems with the infrastructure, we have a way out or a monetary offer.  Irrigation companies are more of a liability than not.  The only assets are land that may be owned or water.  The pipes and the delivery system are a money drain (which is why Weber Basin wants out).  The real problem behind this is that there is not enough water in Kaysville City for what they have and how they want to expand.  They need the water.  Time is on our side.  There is also the fact that there is no competitor; they need to work with Kays Creek or no one.  If the developers heard that Davis Weber was receiving money for infrastructure they did not install, they would want a cut.  We already have a pattern in place with Layton City and Davis and Weber; we can easily follow the template in place.

DWR has grants and has agreed to do all the paperwork for a grant for the Andy Adams Pond aeration.  TRT (transit room tax) or RAMP could possibly be used.  Scott is meeting with Rocky Mountain Power on how to get electricity to the pond for the generator.

*Davis and Weber Canal Company Executives arrived for the meeting.*

We have some concerns with the proposal sent by Rick.

Was the loan just for Kaysville City? A. The original loan was taken out by Kaysville City and was eventually taken on by Davis and Weber.

The contractors paid for some of the lines correct? A. True. Layton City paid for the line on Flint Street and was compensated 100%. Developers pay for the lines and then the lines become the property of the irrigation company.  Davis and Weber would not compensate the developers.  They turn over a depreciating asset.

Are there any shares in Layton City’s name that are in development? A. The older areas predate the water exaction program. The newer ones would have shares

Water would be going back to Kaysville.  At $17,00 to $20,000 a share, that is $1.5 million back to you.  A.The water can’t be sold, it was an allocation from the company’s water rights that would go back to the shareholders.  It would be a benefit to the company.

When Cainesville water was taken over by Weber Basin, was there money exchanged? A. We assumed their debt and continued to deliver water to their customers. Not sure about the water shares.

Scott: Kays Creek proposes that a type of deal be struck like they have between Layton City and Weber Basin, which is more of a swap.  It doesn’t seem beneficial to Kays Creek to take this on, we would have to raise rates, and we could take the money and put it into our own system expansion.  D&W: You could give Davis and Weber the overage if the customers fees in the new area stay the same.  Scott: But Kays Creek would have to hire more help to take on 600 customers.

D&W: This is more of a starting point.  It is optimal for Davis &Weber.  We are looking for a counter proposal.

Woody: what is the amount of debt within Layton City?

D&W has a lot of debt.  It is difficult to pull out what amount goes to Layton City because it is a line that serviced both cities.  The original loan amount was 35 years and there are 12-13 years left.  D&W is involved in a balloon payment and haven’t begun to pay on the principle.  The next 12 to 13 years are critical.

Woody: would it be in Kays Creek’s best interest to wait until the system is clear of debt?

Scott: Let us put our head’s together and come up with a proposal.  Right now it seems like too much for this little company to take on.

Gary: So your issues are the loan and freeing up water.  I am looking for alternatives that free up assets and help both companies.  Assets are water and land, the pipes are a liability.  Irrigation systems are not a money maker, companies are breaking even on a regular basis.  We are looking into maintenance and covering costs.  The purchase does not make a profit, especially if the money goes to D&W.

Woody: What percentage of your customers does Davis & Weber collect on?  Of 14,000 customers, 1100 are billed by D&W.  Haight’s Creek bills its own.  Benchland is paid through taxes.

Scott: Let us think of options and ideas.  Let’s see if we can make this work for everybody, but my first concern is Kays Creek Irrigation.  We appreciate what you do and if we work together we can make this a better place for everyone.

*End of meeting with Davis and Weber.*

Scott: Water test results: Iron is down (through running fresh water in and out) from 278 iron 267 manganese to 249 iron and 31.4 manganese

Filtered: iron 107 mag 3.8

Unfiltered : Iron 182 mag 7.9

No staining happened on the vinyl fencing we were running the water on.

Aeration is supposed to help.

Scott: Pressurized system for non farmers is 150 for first af and 30 for each additional.  Farmers pay 150 for first share and 40 for each additional share.  Adams Love’s bill would go from $1385 to $3000 and Scott’s would go from 345 to 600+.  The pressurized customers pay for the dams and the maintenance, the farmers would not be able to cover the cost.  This would bring in about $20,000 in revenue.  Woody: This is less than Davis and Weber shares cost, which is $264 per share.  Scott: Would we hold a shareholder’s meeting?  Woody: Other companies send out a letter that identifies the areas of cost coverage (Haight’s Creek, Weber Basin do this).

Scott: Do we raise rates?  Jon is in favor.  Scott: we need to hold a meeting with the full board in January to make a decision.

Water will go to the new school on Jon’s old property.

Meeting closed at 11:13

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