Minutes of the Special Meeting Sept. 14, 2016

This special meeting for the purpose of reviewing and accepting a budget was convened at 6:07 p.m. by President Wade Cornelius. In addition to the president, also present were board members Jana Melvin, treasurer; Beth Morgan, secretary; Rob Campion; and Patrick Stafford. No one else attended.

The president began the meeting by inquiring whether we all knew each other; introductions were not necessary. No reports or minutes were presented, in order to concentrate on the budget. Copies of the proposed budget were distributed by the treasurer.

Prior to launching into discussion, Morgan read comments from an acquaintance experienced in preparing budgets for school districts, whom she had had review the proposed VDRMDWCA budget. This individual reported no “red flags” were present, but suggested that we set aside a reserve of $500-$1,000. Additionally, she questioned why our expenses for a well operator had gone up. Morgan noted that we know why this is the case: we let a previous well operator go and hired Henry Torres, who charges us more than the previous well operator, but who does more. The reviewer also questioned why we had not budgeted for business promotion and vehicle expense, already at $365. Morgan could not speak to that. The reviewer also requested that we explain why insurance costs are higher (in part because we added the board member honesty declaration), and why we had expenses for dues, fees, and permits, when there were none the previous year. The reviewer also wanted to point out that projected operating expenses will go over budget and suggested that we anticipate any additional expenses. Her final suggestion was to attach a cover sheet explaining any one-time revenues, expenses, or other anomalies.

Morgan then addressed the treasurer and asked her to “explain her process,” in preparing the budget. Ms. Melvin reported that she obtained our total income by multiplying $75.00 (our flat fee) by 12 (months in a year) to come up with total income; that figure being multiplied also by 17, the number of households using the water system, Campion later noted. The treasurer said that figure is pretty steadfast, unless we are required to have members “ante up” in the event of some emergency repair requiring additional funding.

Ms. Melvin noted that our new well operator was not paid for several months after we hired him (because, in part, his pay was in dispute, and in part, because he waited to submit his invoices), until such point as he submitted invoices, we agreed on an amount, and we paid him. To estimate the electricity, she averaged five years’ expenses to come up with her figure. She had not completed the third quarter’s figures because we have yet to finish the quarter. System repairs and maintenance she noted was for anyone besides the well operator, such as the electrician we hired to do what the well operator couldn’t. Office and administrative, she noted that Morgan had had some expenses preparing the grant application, although we have not had these expenses in the past. That was set at $400.

She questioned why we had no expenses for insurance in 2015 or whether we had any. Campion noted that we did not, because the policy expired. She speculated that we must have paid for it in December of 2014. Both she and Campion noted that the policy had expired late in the year. (Although we had begun negotiating with other firms to get a new policy, we did not pay for the new one during 2015.)

At this point, though we had initiated a quarterly payment plan for the insurance, Cornelius noted we will be going to a once a year payment, to avoid having to make the quarterly payments. He said he believed that previously, we had paid once a year. He suggested it would be less cumbersome for everyone concerned, if we pay it once a year.

The treasurer then noted that a charge had passed through our bank account that was a check to the Taxation and Revenue Department. Cornelius and Stafford noted that this was our annual conservation tax fee of $24. Campion asked whether that was something like a nickel per thousand gallons, to which Stafford replied in the affirmative.

Ms. Melvin asked whether we had determined whether we are required to pay gross receipts taxes. Morgan has made some inquiries regarding whether we are required to pay gross receipts tax—which we have not been doing but may need to be doing. The Department of Finance and Administration had told her to check with the Taxation and Revenue department. She has done some online research that resulted in conflicting answers. She said that we may be able to resolve the matter by calling our local Taxation and Revenue office, which Ms. Melvin noted is on El Paseo in Las Cruces.

The treasurer stated that in the column farthest to the right on the budget, there are a few items in parentheses. The parentheses indicate a particular amount where we have gone over our budget. In the case of vehicle rental, for example, she noted this was when we had to rent a backhoe. Campion corrected that to the cherry picker (or lift that we had rented for work on the overflow valve ). Melvin said it seems inappropriate to put vehicle rental in the budget, because we seldom have to rent such an item.

The president asked if our goal in the current meeting was to project a budget for 2016. Morgan noted that we are supposed to submit a budget for each year (nearer to the beginning), to be approved by DFA. He noted that we can base the next year’s budget on this one, and the process should be easier for 2017. The president noted that we should have X amount going to reserves, as Morgan’s reviewer had suggested. He noted that he considers whatever is in our account as reserves. Ms. Melvin noted that if we had an emergency, we would have to spend everything in the account to pay for it.

There was discussion back and forth about whether reserves should be placed in a separate account or simply tracked separately. Campion was for the latter option, Cornelius for the former. Stafford mentioned that in the past, one might have been able to accrue some interest in a savings account. Morgan said we should try to set it up so that, when we reached a certain amount it could be automatically transferred. Melvin noted it would have to be done manually, either in person or on the computer.

Campion said “we expect the life of this system to be X,” and select an amount of reserve to cover. Stafford asked if we are set up as a non-profit, to which Morgan replied that we are nonprofit by virtue of the fact that we are a mutual domestic. He then suggested that our reserve goal should be $50,000 or $60,000 because it would probably to cover gross repairs, such as digging a new well, but added, “That’s a pretty high bar to set for an entity as small as ours.” The treasurer noted that that is impossible. Morgan noted that her reviewer had suggested $500-$1,000 a year be set aside. Then it’s there, and if in a savings account and if we need it, we can transfer it back to the checking account. Stafford asked whether we had been accruing $10,000 a year, over operating expenses. Initially, Melvin noted, that was close to accurate, except when we have large expenses all at once, such as was the case when our well operator submitted his invoices all at once, and once paid, held onto the checks for some time. The president joked that Torres had told him he “didn’t like money.” Stafford suggested that $50,000-$60,000 is not unrealistic, although Melvin was muttering that it was indeed unrealistic. He said this was reasonable, as we could not depend on getting another grant to take care of a potential need to drill a new well.

Morgan noted that traditional wisdom—from granting institutions, as well as others—is that if you get one, you are much more likely to get another. There’s also the legislature, she noted. “How long is it going to take us to save $50,000 or $60,000?” she asked.

Stafford said the company who had repaired the well in 2014 said to “expect this repair to be good for 10 years, and we’re accruing $10,000 a year . . .” At this point, Campion cut in to say that we are actually making more like $1,000 to $1,500 a year. “No way!” Stafford said. The treasurer noted that Stafford’s idea that we are accruing $10,000 year is erroneous. She noted that some months we spend more than twice what we took in. Morgan noted that while we have about $8,000 in the bank, that money is ”spoken for.” The treasurer objected to that terminology, but finally agreed that, on paper, yes, the majority of what is in our account will be spent on future expenses. She noted that, if we stay on budget in 2016, we will have made $1,329 this year. She also revealed that we have had to “ante up” several times to pay for unanticipated repairs.

The concensus seemed to be that raising rates would not significantly improve our reserves. We need to save as much as possible on monthly expenses, keep working on the grant, and hope the well holds up, the president said. The treasurer said she is the first one who wants money spent on the road, but she noted some people are still paying on the $1,000 assessment we had to charge to cover repairs in 2015.

Cornelius said “Can’t we just move over an amount right now and say that’s a reserve amount?” The treasurer asked whether he was willing to start a new account and transfer whatever he needed to cover expenses. If we simply do it “on paper,” that is, not create an actual account but have the reserve as a fund Ms. Melvin can track as an entry on the balance sheet it could be much simpler.

Upon being asked whether we could set aside a certain amount as a reserve, the treasurer said we had $8,700 to work with. Cornelius himself suggested $5,000. Morgan said that was too much, to which Melvin agreed. She noted that our actual monthly expenses are generally less than $3,000. Asked if Torres had given a reason for waiting so long to cash his checks, the president said he had said his bookkeeper had an issue with the program she was using, but added he needs to be encouraged to cash his checks sooner.

Campion suggested that we put aside $2,500 as a reserve, because it gives us a good base to begin with, for example, if an electrical component went out, we could cover it. An additional monthly amount should also be put aside, with 10 percent suggested. Melvin noted that not everyone who is a member of the water association pays on the same schedule. Some pay quarterly, some pay every two months, so, a percentage per month might not be a constant number. However, Campion noted that eventually, those who pay on a different schedule will catch up. He settled on $120 a month (approximately 10 percent/month if everyone DID pay monthly), not a percent. The board agreed to designate it as an emergency fund. Asked if he wanted to put that in the form of a motion, he agreed to do so.

Morgan requested that we create the itemized list of anamolies, which the treasurer disagreed with. She noted that all the amounts for 2015 are accurate. The budget relates back to the balance sheets. At this point, Stafford questioned whether DFA (the Department of Finance and Administration) is a separate entity from Taxation and Revenue were separate entities. Morgan believes that there may be a way to make the quarterly reports to DFA online.

Campion noted that his motion was “languishing on the table.” Cornelius asked whether, if we have money left over at the end of the year, whether we were required to put that aside. Morgan said she didn’t think we were required to do so, but that we could do so. Morgan seconded Campion’s motion. Cornelius then asked Morgan to read the motion back to him. Morgan restated Campion’s motion as follows: We will put $2,500 of our cash on hand into a reserve account to which we will add $120/mo. from our income from water, and if, at the end of the year, we have leftover operating revenue, we would consider moving some of that money into the reserve account. It passed unanimously.

The treasurer then asked whether we could approve the budget, with Cornelius noting that we would need to change it a bit to reflect the creation of the emergency reserve fund. She agreed to make those changes. Morgan then asked if Ms. Melvin had any problem providing a written explanation of anything that “looked unusual” to serve as a cover sheet for the budget, to which Ms. Melvin said she did not.

The treasurer asked whether Morgan had the name of the individual at DFA to send the budget to. She agreed to look it up and get it to Ms. Melvin. Campion noted that when we have the remaining data from the third quarter and the reserve fund is created, we have a budget.

Campion also made the motion to accept the budget, with the addition third quarter data and considering the motion creating the reserve fund. Patrick Stafford seconded the motion, which also passed unanimously. Upon passing the motion, we questioned whether we should even include the information on the third quarter, since we don’t have it yet. We decided to wait until the end of the third quarter to submit the budget to DFA.

During the meeting, the president signed a membership certificate for the new owner of the former Butkewich property. Morgan noted that the date was missing, and advised him to enter the date, which he did, and he signed it. Morgan then retrieved the seal and a gold sticker to put on the certificate. It was then handed over to Ms. Melvin to deliver to the new owner.

Ms. Melvin asked whether anyone had talked to the new neighbor, regarding her potential violation of the covenants. Campion said he spoke to her, and Cornelius said that she had agreed to take it down if there was any problem. The only access to the property behind her would be via the hypothetical extension of Bishop’s Cap Road, because there is a right of way for extension of that road. Stafford said it’s not a covenant issue, it’s a county road issue. Structures are supposed to be 75 ft from the right of way. Stafford said the setback is in the covenants. Melvin noted that that is the only access to the property south of the property in question.

The new resident had told Cornelius that if she gets a letter in the mail, she won’t bother with getting an attorney, she’ll just take it down. Stafford noted that if we continue to allow breaches of the covenants, we might as well not have any. He added that one needs to be in the right in a covenants dispute, because if you don’t win, you may have to pay your opponents’ legal fees. Cornelius noted that Kenneth Henrie had vowed to have a meeting on the covenants issues. Morgan suggested that Cornelius contact Henrie about the meeting, to which he agreed.

The meeting adjourned after a few minutes over an hour.