July Meeting Minutes

Vista del Rey Mutual Domestic Water Consumers’ Association

Minutes of the Special Meeting of the Board of Directors

6 p.m., July 26, 2018

The Lord’s Ranch

The meeting was opened at 6:10 p.m.by President Wade Cornelius with introductions for the benefit of visitors. Beth Morgan, secretary; David Lucero, treasurer; and Patrick Stafford, board-member-at-large; were present. Another board-member-at-large, Rob Campion, did not attend. Also present were Alfredo Holguin of Souder, Miller, and Associates; and Attorney Josh Smith, of Watson-Smith, LLC; and water association members Bob Melvin; Shane Wohlfert; Skip and Martha Trego; Mary Lucero; Beth and Bill Rittenhouse; Henry Torres, water operator; Andrea Cecur; and Randy Mellor.

Minutes came up for approval.Morgan noted that she did not plan to read them, as the ones from April were more than eight pages long and she also had minutes from our meeting in June, for the purpose of closing out our local government planning grant, which were more than three pages long. The president asked whether anyone wanted us to give highlights from the two sets of minutes. David Lucero questioned whether everyone had received a copy, to which Morgan replied that they were posted on Facebook and on our website. The president called for a motion to approve. Morgan noted that she did not think it proper to make the motion herself, so Lucero made the motion. Stafford was out of the room at the time, but seconded the motion upon being requested to do so. The motion to approve the minutes passed unanimously.

Cornelius asked for the Treasurer’s report. Lucero passed out copies of it. He stated that the association began the year with $5, 983.19 in the bank. It had collected approximately $8,250 by the end of June, spent $71.50 on road maintenance, and $1,967.35 on utilities. Well house maintenance was $576.46, largely water-operator charges. The association donated $250 for meeting space utilities. Report fees of $50 were paid to the Secretary of State, and $78.60 was paid to the Taxation and Revenue Department. Total expenses were $2,743.91, net income was $5,406.09. Total cash on hand is $11,489.28. Lucero said he called Tom Dixon, who said we no longer have to report annually or quarterly. A court case said that an earlier requirement to report budget information was determined to be unconstitutional. Whether we have to recertify as a Tier II company was thought to still be required. Lucero agreed to verify these matters when he has a chance. Morgan made a motion to approve the Treasurer’s report. Stafford seconded the motion, which passed unanimously.

Henry Torres, water operator, was called upon for his report. He reported that everything is good. He noted he had done the Consumer Confidence Report back in June. Bac-T reports are also good. He said that he has identified a leak. He noted that he has begun working full-time for Lower Rio Grande Public Water Works Authority. He has feared that he might have to resign his position with VDRMDWCA, as they do not want him working for us while he is on the clock for them. Morgan had written to Rio Grande, hoping to get them to soften their position, in the event that we had an emergency here and he was in the area. He currently has to drive to Mesquite to clock out. He noted that he is on probation in his position with Lower Rio Grande. He said that he had seen Morgan’s emails to Rio Grande and asked how that was going. She noted they had not softened their position. Torres also noted that they are also short-handed right now. When he worked for the City of Las Cruces, he’d just take annual leave when he needed to work for VDRMDWCA.

David Lucero noted that he was not clear what Morgan and Torres were referring to, and asked to be filled in. Torres obliged, stating that he had spoken to Morgan recently, indicating that he might have to resign. She then contacted Karen Nichols at Lower Rio Grande, and received the water authority’s position of no tolerance for co-use of Mr. Torres’ services, unless he had clocked out or worked for us before or after his Rio Grande hours. Lucero asked if Torres could recommend someone to take his place. Torres said that the environment department probably has a list of people who are certified to operate water systems. Cornelius asked Torres if he would stay on until we can find someone or work something out with Lower Rio Grande.

Shane Wohlfert asked whether we had executed a contract for a specific period of time with Torres when we hired him, or whether we had simply hired him because we knew him and knew that he was certified. Morgan said that we did not sign a contract, but we could have. The environment department has a template one can use when hiring a water operator, so that individual systems do not have to reinvent the wheel. Someone else noted it would be good if we were not left high and dry.

The president asked whether there was anything else about the system we should be aware of. There was a power outage, Torres noted. The electric company had a power outage which blew a transmitter, for which a replacement was found online. There is a backup now. The system now has a low-voltage breaker that protects the pump and anything hooked up to it. Apparently, Bill Rittenhouse is knowledgeable about electrical systems and was familiar with these. Patrick Stafford said that in the future, if he had a question, he would check in with Bill.

Cornelius then moved on to new business,introducing Attorney Josh Smith, who has practiced law in Las Cruces for 11 years. He began with Hubert Hernandez, practicing primarily water law; he worked for Miller-Stratford, an insurance firm; and he has practiced with Matt Smith for approximately four years now. He works for other mutual domestics, including Lower Rio Grande Public Water Works Authority, etc., and he now does primarily water law.

Smith, who was hired to represent our interests as a requirement of the Colonias Infrastructure Board grant, had been invited to clarify matter on several topics. Water rights was first on Morgan’s list of questions. Smith noted that the association has 242 “declared” acre feet of water rights, of which he said he thought we had put to beneficial use 40—Morgan had heard 18, and Lucero 16 or 17. Anyone can file a declaration and state that they plan to use “X” feet of water rights. Then there are vested rights—what has been put to beneficial use. There are permitted rights, licensed rights, and adjudicated rights. The adjudication is in progress, but Smith said this would probably not be completed within his lifetime. There are a couple of other types of rights: we have two-hundred-twenty something inchoate or “Mendenhall” water rights, or those we have not put to beneficial use.

“… Basically, for anyone but you, those are worthless.” On appraisals, Smith said, Mendenhall water rights are given no value. If a water system has applied for extensions of time to put their permit to beneficial use, and it has a 40-year-plan, the system can continue to develop how much water it puts to beneficial use within the number of declared acre feet. “So, you know, if more houses were built out here,” Smith said, “or use goes up, you can continue to develop that water right. But, you can’t sell, you can’t lease a Mendenhall water right, and you can’t lease them to develop them …. Unfortunately, they have to have been put to beneficial use in order for you to lease them … The remaining 220-some acre feet can be put to beneficial use, but only by this water association” in accordance with your permit and 40-year plan, he said.

Smith asked when our plan was written, and Mary Lucero, the primary author of same, noted that she had worked with Bobby Creel, a former NMSU professor. Stafford asked Smith about the extensions, and the lawyer noted that typically, a permit is for three years, but if an association has not applied for the extensions, the State Engineer has been pretty relaxed about that and will allow associations to go ahead and extend their permits. He said the atmosphere is changing because of “Texas vs. New Mexico.” If we haven’t applied for extensions to PBUs, we should probably check on this, he said. Morgan stated that when the water rights were filed, she had been told the wrong form had been used, which might have something to do with Smith not having been able to look them up online.

Mary Lucero wanted to know whether a 40-year plan would stand as a development step. Smith noted that the State Engineers Office doesn’t really even look at them, but they do consider them a kind of stay against water rights being immediately taken away. She then asked what options water association members then have to continue to develop the declared water rights. Someone said “Use more water.” Morgan said, “Build a swimming pool.” Originally, Lucero said that members were expected to have home gardens, but feared that selling any of the produce they got from them might be illegal because it would be a non-residential use.

Smith said there are water associations that sell water commercially. If someone wanted to put in an acre of pecan trees, or if we had a commercial enterprise that needed water, we could sell water to them. Even produce from a home orchard being sold is not an issue for the association. David Lucero noted that Professor Creel had encouraged them to prove up on the water rights. Water can be sold to contractors building houses in the area, Smith said. Even if the beneficial use is only raised for that one year, you have a bit of a cushion above and beyond what the association normally uses.

Smith then asked whether members had any more questions about water rights. He noted that he helps water associations with applications to the Colonias Infrastructure Board all the time. Whenever we are ready for his assistance with that, he said, he is available.

Morgan said she also wanted him to discuss whether small water associations—public or private—are financially sustainable. This has been one of her reasons for pursuing grants to upgrade the infrastructure: the expense of doing it properly is something a public water association with only 17 members can ill afford. “You all are really small. That’s tough. I mean economies of scale operate against you. Colonias Infrastructure Funding is designed to help maintain these small systems, but if you look—I represent the Lower Rio Grande and I represent Doña Ana, and the state is—they’re not mandating but they’re really supporting this regionalization. So, in my best guess, I would say that you’re probably looking at the merger of almost all of the associations in the valley within the next 10 years or so.” He noted that LRG began as five associations, and with our neighbors to the south (High Valley), they’ve now acquired nine or 10. Smith said that is the direction that water associations are going. Doña Ana is now the largest mutual domestic in the state, having acquired Picacho Hills and others recently, at 5,500 connections.

David Lucero noted that our system is debt-free and our expenses are low, so he wanted to know why an association like ours would consider merging. Smith’s first question was the age of the system and what it would cost to rehabilitate it. It was built in 1979, making it 38 years old. The day-to-day maintenance is never the issue. Smith said it’s always when that 30-year-old system has to be replaced, you’re looking at hundreds of thousands of dollars. He said there is no reason we could not continue to operate, if we can afford it. He asked about our current grant, which is a 90 percent grant, 10 percent loan. Morgan noted that that is only for design, not construction. Holguin explained that because the association had recently rehabilitated its well and replaced its pump, it was next looking at replacing the distribution system. Smith said that it is with grants like these with large grant and small loan components, that “that’s how small water systems continue to operate, because you cannot legimately fund the actual improvements and rehab yourself.”

Lucero noted that, if Lower Rio Grande is buying people out, what’s a system like ours worth? LRG is not buying anyone, Smith said. “They just merge.” These associations are non-profit, technically. “As a quasi-governmental entity, you don’t get sold.” He said if we decided we no longer wanted the responsibility of running the association, the Environment Department would probably come in and take it over and have either LRG or Anthony Water and Sanitation District—the two largest operations in the vicinity—to operate it. Doña Ana bought Picacho Hills and Fort Selden water systems—they were private. As we are a mutual domestic, we can’t sell it. Randy Mellor asked whether people were merging because they didn‘t want to operate their systems anymore, or because it was a financial problem.

Smith noted that the main problem for small mutual domestics is the economies of scale. For example, he said, if we were part of Doña Ana, they would make improvements to our system as part of a $10-million-dollar project, they would borrow the funds, and it would be a huge project, with ours just a part of it. He said we could continue to operate as we have. He wanted to know whether we were already interconnected with HVF. Morgan told him, no, that was part of the proposed project, which also includes refreshing the lines and booster station. She noted that not all of our members are excited about interconnecting and in addition, there’s concern about using a government loan, albeit that it is only 10 percent of the total project cost and interest free. She asked if Smith could speak to the benefit of using government funds, versus paying for all of it one’s self.

“Well, the obvious benefit of it is you’re getting 90 percent of it for free,” he said. “I would take that deal any day; twice on Sunday.” Trying to pay for it yourself—you can fix minor things, but “these systems have to be upgraded or they will fail. And when they fail, they are going to cost you a lot of money. And that is what the Colonias Infrastructure Fund is designed for, is exactly this type of association—and that’s exactly why it is such a large grant component—you’re essentially getting a lot of free money to help you continue to provide water to your customers, your consumers.”

Lucero said some of the members feel that “if it ain’t broke, why should we fix it?” “Uh, because it will (break),” Smith said. Stating that he’s a lawyer not an engineer, he noted that a system in Radium Springs that is costing $6 million is being rehabilitated. These systems, from what he has seen, have to be maintained—“you can’t just sit back and say, ‘we’re fine.’” He noted that the well having been rehabbed (Morgan supplied the year as 2014) was a good thing, but added that our transmission lines may be another story. Bill Rittenhouse said that appears to be our “Achilles heel.” Cornelius said there was a time individual members needed to shell out $500-800 each at once to get it running again and explained that we are trying to eliminate or minimize that going forward. “Do we assume everything is fine or if we have an emergency, are we going to be scrambling, trying to get grant money to make repairs on very short notice?” he asked. That’s just it, Smith replied. “You have one source.” He asked whether we had a tank, which we do, but it is only a 17,000-gallon tank. “If your well goes down, you’re hauling water.” Smith asked whether we had any reserves. Morgan noted that we had never had a budget until we began applying for grants and that she had tried to encourage the board to set aside a certain amount of reserve funds for repairs. She thought that the treasurer had done so, but that it was a very small amount.

Smith suggested we contact Karl Pennock of RCAC to have him undertake a rate study to find out what our rates should be based on the prospect of taking on debt. Mary Lucero asked about the down side of taking on debt and the setting aside of a reserve and what allows us to tap into that reserve. Smith said “those are the down side.” We have to set rates that cover the debt service and put aside reserves—however, he said these are not thousands of dollars. She said she understood that accessing the reserve could be difficult, if for example, a pump broke. Smith noted that that is usually because the reserve is specifically for debt-service.

David Lucero warned that the “nasty” part of debt comes when it is time to seek funding for construction. Morgan noted that that depends on one’s funding source, and what portion is a grant and what is a loan. Cornelius asked the attorney if he had ever witnessed a water system going as far as the design phase, getting an idea what major improvements would cost, and then dropping pursuit of additional funding. Smith said no. “This, this is a business of system improvements.” All the associations he has worked for the past 10-11 years have done from four to six system improvements, and when they finish one project, they are applying for a grant for the next one. The point of mutual domestics is to provide water to the rural community. In many cases, improvement projects may be simply line extensions. Smith said that we don’t have that issue, because very little development is anticipated that would need to tie into our system.

He noted that he cannot tell us what to do: do we want to update and upgrade what we have or do we want to wait for something to happen? Mary Lucero said the issue is not that black and white—we could attempt to build private funding or fund it through other means. However, Smith said, “90/10 grant to loan component—if you can beat that deal anywhere privately or anywhere else, let me know; you just can’t.” Bill Rittenhouse questioned what was being paid for. Smith clarified that this $87,400 is for the design component of our project. The first phase was a PER to aid us in understanding the current status of our system.

Lucero said he was just throwing out thoughts, but what if we just used our system until it was falling apart and then turned it over to the state. Morgan said the reason we should not do that would be to avoid having to do without water for 10 days at a time. Smith said there was one system that apparently did just that, board members had quit, and they notified the association that they were going to shut them down. They showed up at a meeting, and by the time it was over, they had agreed to serve and continue operating the system. He said it was bad, and something that should not be allowed to happen.

David Lucero said that he was not convinced that the PER had proved that this is the time for us to be replacing lines. He said that he has some savings, but just because he has it doesn’t mean he should be spending it now. Smith noted that he is not advocating that we merge with Lower Rio Grande, however, if we were to do so, they would take over our problems. Bill Rittenhouse wanted to know whether we would have any say-so over what portion of the budget was spent on infrastructure. We would just pay the same fees as all LRGPWWA’s other customers—anywhere from $23 to $27, plus charges for how much water one uses. David Lucero said that early on, we decided on a flat fee so that we all, in essence, shared the expense of maintaining the water system equally—it was not based on whether one individual used more than another. Morgan noted that she believed the goal of the flat fee was to simplify the bookkeeping, but asked the rancher who created the system to explain.

Bob Melvin, who built the water system and who gifted it to the water association when people had moved in, stated that he had set the flat rate of $75 per month because it does away with the need for a meter, as well as an employee to read the meter, then someone to do the billing that can adjust for the higher amount of water used by some individuals. He also noted that he put in a three-phase electrical system, because two-phase would cost us twice as much. He noted he didn’t need the government to make his life more convenient, but he also said that he didn’t want to rehash everything he had said at a previous meeting.

The president brought up an occasion when David Lucero had noted that a water system on the east side of the state had had their construction loan, which was from USDA, called. They are now only able to get a loan from institutions requiring a higher interest rate. Cornelius asked Smith if he had heard of that happening before, and he noted that the La Luz water association had been told by USDA that they would be evaluated for “graduation” in a few years. What that means is that if an association is financially able, they must seek a loan through a traditional lender, which will generally carry a higher interest rate. Smith said that that is occurring and eleven loans had been evaluated this year, but ten did not graduate. Lucero said that is exactly what happened to the association he was describing and that they had sought the USDA loan because they liked the terms, and they were seemingly being punished for being financially prudent.

Melvin said the only thing our system needs is another well, which he estimated to cost less than $30,000. He said the lines are no problem, because they’ve been in there for 40 years, and they aren’t a problem because the sun can’t get to them—they might be good for another 100 years. However, Henry Torres said that we had had a problem with a line, and upon Melvin’s questioning, he noted that it was not near a coupling. It had split longitudinally. Member Bill Rittenhouse noted that PVC does degrade over time. Melvin disagreed, if the sun does not get to it. Melvin blamed problems at couplings on either the installer or bad glue. Rittenhouse also said the shock of starting up the system could be responsible for some leaks.

Questions arose as to how we became a mutual domestic and whether we could revert to a private entity. Karl Pennock, formerly of the Drinking Water Bureau of the NM Environment Department, had quoted the Safe Drinking Water Act, the federal law over mutual domestics, but Smith said the state Sanitary Projects Act did not put any limitations on how many hookups or individuals using a system were required to make it a public entity. Bob Melvin was among the first board members and the builder of the system, so Morgan referred Lucero’s questions to him. He said he couldn’t remember exactly how it came about, but he had had an offer to buy our system at one point, and he said he was not comfortable with that. He noted that he and the Henrie family were the only users at the time. He was getting ready to retire when he decided they should get rid of all the lots, and they decided to turn the system over to the lot owners. At the time, the concensus seemed to be that we should be a mutual domestic. Patrick Stafford said he thought the impetus for forming a mutual domestic had come directly from the Environment Department that once you hit 17 users [sic,should read 15]*, you had to start submitting samples monthly. Melvin said the state engineer would have gotten involved, as well. He built the system to service all the lots and other users who lie outside the subdivision. Smith said that we had been told by the Environment Department that once we hit the 15 connections (or 25 users as Morgan later clarified), then we became responsible for the monthly sampling and reporting.

Melvin asked Smith point blank: if you lived out here, would you want the government to get involved in your water system? Smith replied that it depended on whether the system needed work. If so, he said, government funding is hard to beat. Melvin said that it does need work, but he said, we did not need new water lines, we need a second well. He thought we could get it done for $30,000—about the same as he spent on a tank and pressure pump at his house so that if the well goes out, he doesn’t have a problem. He said you could spend another $20,000 and get our pump house spruced up.

David Lucero said that our bank balance has just about doubled since January. He seemed to think we are fairly flush. Cornelius noted that we probably have outstanding expenses of approximately $4,000, for which we have not yet received invoices. So, while things may look good on paper, some of the cash in the bank is already spoken for.

Neither Torres nor Bill Rittenhouse (who has been grading the road) had submitted invoices recently. Additionally, Alfredo Holguin noted that the $87,000 we applied for covers design, but also legal fees, easements (estimated at $17,000), and permits. The road that goes to Vista del Rey (Santana Road) is not a public right-of-way between Arapaho Road and Vista del Rey. Acquiring an easement for the interconnection of VDRMDWCA and HVF will be required.

Shane Wohlfert asked who is legally liable, if the association were to default on the loan. Smith said that members are not liable; the association is liable. However, the board members also are not personally liable. Smith said, “This is odd.” He said, most of the time, it is the board that shows up, not the members. The thing that normally happens is that the water association raises the rates to accommodate the repayment of the loan; it is to be paid back over 20 years, and there is no interest. When Melvin asked whether anyone could lose their home, Smith said no. Smith said it does not happen, but a lending agency could take over an association to ensure that the fees are adequate to pay off the loan.

In light of these concerns, Melvin said he thought that we as a community need to really consider whether we have problems worthy of spending $87,000, and if we do, we should identify the problem. New resident Bill Rittenhouse then stated we are dealing with old equipment, old material, PVC that has been there for 30 years—it is degrading, we do not have automatic purge valves—there are many things that Melvin is not taking into consideration—technology has changed in 30 years. Melvin said he agreed, “we really need to evaluate it and really identify if we do have a problem, how big of a problem it is and do we really want to go in debt to fix it or do we think that as these problems occur, we just take care of them as they occur—and then we make a good judgment on good data that we’ve talked about and discussed and then we can decide what we want to do.”

Morgan then stated she wanted to point out that we just spent $38,000 [sic, it was actually $43,705] to have Alfredo’s company identify what was still good, what wasn’t, to determine what the next steps should be to properly maintain our system. President Cornelius said if he were to drill his own well, at $10,000-$20,0000, how does that compare to what it would cost for us as an association to proceed with the proposed project involving design at $87,000. Morgan said if three individuals decided to drill their own well, then they would probably end up spending as much as we will for the design portion of our project.

Folks wanted to know if High Valley Farms was planning to pay for half the cost of building an interconnection between the two water systems. Morgan noted that she had spoken to Karen Nichols about that prospect recently, and she indicated that she and their executive director had discussed it in depth, and that if VDRMDWCA pays for the design, LRG would pay for the construction of the interconnection (and, as Morgan later indicated), thereby lowering the cost of our portion of the construction phase theoretically following on the heels of the design phase.

David Lucero indicated that our current problems boil down to a philosophical difference: the board has been working toward obtaining grants to 1. Determine the current status of the system, 2. To design improvements, and 3. To build any improvements the board determines to be necessary. He noted, however, that some people “don’t feel like they’re ready to move forward . . . there’s obviously some people that would rather wait until we’re more sure.” He said he respected Alfredo and the job he has done, but at this point, “I’m not convinced, myself.”

Melvin continued that we could build a well ourselves, or we could get the government involved. In his opinion, once a business has become successful, the government taxes it. Once it becomes even more successful, the government restricts what it can do until it is a broken system. Then, he says, “You’re bankrupt! Don’t worry about it, we’ll subsidize you!” He noted that he took care of that well for 20 years and didn’t need anyone to help him. He said we don’t need to belabor the issue, we don’t need to go in a direction that “the majority” doesn’t want. We need to put a stake in the ground and tie to it. Morgan stated that from the time she first approached applying for a grant for the association, it was because from her point of view, small mutual domestics are not sustainable without help.

Mary Lucero launched into a discussion about government policies that were supposed to serve us becoming the object of our downfall, because the chlorine in our water, the chemicals in our soil, and so on, have made us more vulnerable in the long run. Josh said “Don’t mistake yourself about that. You are a governmental entity … we’re not talking about the government taking over your system. They, in this instance, are the bank. There is money set aside that allows you to build projects, and that’s what it’s for.” He referred to the Colonias Infrastructure Fund. He said he did not think there were any additional regulations that come with that money, besides the requirement to set aside money for debt-service.

There ensued a period when several people were speaking at the same time. Melvin noted the association has an obligation to provide water to 40 acres that he had just sold. Also, while the lots within the subdivision can be divided once, they cannot have a second water connection. He asked Souder, Miller, and Associates representative Alfredo Holguin if these matters had been taken into consideration. Holguin noted that his study considered current water use as measured at the wellhead and projections in the VDRMDWCA 40-year plan. Melvin said that he was responsible for the provision that there could be only one water meter per lot.

Patrick Stafford asked whether we could pick and choose the recommendations that we want to move forward with: we want a second well, and we want second tank, and we’ll fix the distribution line as it breaks … there’s nothing to prevent us from doing any and all or none of what was looked at in that study. Morgan said that is correct, but in the Colonias Infrastructure Fund grant, we applied for funding for three things: the design of an interconnection, new lines, and a new pump house. There was some discussion about how much leeway we have to make changes. Certainly, it was agreed, we do not have to do everything we asked for money for. However, we would have to request a change of scope—Bill Rittenhouse said, “that could save us a ton of money.” Morgan also pointed out that we have a deadline looming, also, for providing Readiness to Proceed items. Lucero said, “Let’s look at what our immediate needs really are. If we can take care of those needs that the group agrees to, at 10 cents on the dollar, well then, that’s probably not a bad deal.”

If we are going to go ahead with the grant as proposed, we have to provide Readiness to Proceed (RTP) items right away, Morgan and Holguin noted. If we choose not to take the money this year, Holguin said, there is no guarantee that the money will be there in the future. The proportion of grant to loan is going down on the grant end, up on the loan end. Even this year, Holguin said, the Colonias grants were very close to being entirely taken off the table. “You just really never know.”

David Lucero asked whether we want to think about our priorities, talk about them, and use the “cafeteria plan.” The deadline for providing Readiness to Proceed (RTP) items is Sept. 10. Melvin wanted to know if we could ask for an extension. Holguin said he thought it was possible, but we would have to request that by August 10, as he believes we have 30 days from the date RTP items are due to request an extension. Melvin said we needed 90 days. Holguin said he didn’t think the association could get 90 days. We could ask for it, but that doesn’t mean we’ll get it. And, if we turn down the grant money this year, Holguin stated that the Colonias Infrastructure Board would just give it to the next association in line.

At this point, the President noted that this meeting was intended to provide information only, that we had no intention of making a decision at this meeting, but of having another as soon as possible to decide what we would do and take it from there. Holguin was to make an informational presentation on the alternatives considered, in order to explain why the decisions that had been made previously were the basis for our grant application. Upon being asked whether he was still willing to make that presentation after three hours, he said he was.

Cornelius reminded those present that we had obtained a 100 percent grant to fund the study from which Souder, Miller, and Associates had identified various alternatives we could pursue. Holguin projected some slides on the board. He noted that it was in essence a summary of what we had hired them to prepare: one was the preliminary engineering report, another was the “hydro-geo” investigation. The PER identifies underlying issues and makes recommendations for improving those issues and improving the system overall. The “Hydro-Geo” is a summary of the groundwater hydrology in the area, which engineers use to make recommendations for additional wells or improvements to an existing well. It also provides a basis for well design and it identifies the existing water quality.

He noted they identify issues, but they present alternatives for improvements. They evaluate those based on costs, capital costs, investments—it is used as a basis to apply for funding. The PER is required as part of the application for funding. It was completed in USDA format, and it is also accepted by the state of New Mexico, which reviews the application. A draft of the PER was presented to the association in December, as well as to the Construction Programs Bureau of the New Mexico Environment Department: they do a technical review to make sure the engineer has not overlooked any other potential alternatives. They received comments from NMED and from the association, and these were addressed in the final draft in April.

The well and pipeline were installed in 1979, covenants filed with county in 1981 and VDRMDWCA established in 2006. There are 17 residential connections. In 1979, there was a single supply well, a booster pump, and 3- and 4-inch supply lines. In 2009, the water storage tank was built. The well was rehabilitated in 2014, and that stemmed from a failure of the casing. The pump and the column pipe were replaced. In 2016, Holguin stated, the associationhad some electrical issues, and the pump was replaced at that time, using the same column pipe.

When they did an overall evaluation, they considered any improvements that had been done, time and costs for operation, maintenance, and repairs; worked with the system operator regarding everything that has happened to the system, based on what everyone can remember. Based on that, they broke down the issues and improvements into categories: system optimization and reliability; water source distribution and storage; and increasing the overall system pressures.

Primarily, the engineers looked at three possibilities. The first of these was system optimization and reliability improvements. When they sampled water in December, and he said that this has often happened here in the past, especially during low-use months, DMA discovered that our radionuclides exceeded the maximum allowed by the Environment Department. The best way to deal with this was considered a redundant water source: they recommended EITHER a new well or regionalization (interconnection). After evaluating both in terms of construction and operation and maintenance costs, they determined that regionalization was a better choice than a new well.

Regarding distribution and service-line replacement: the association has increased system pressures and replaced the switches and gauges to allow it, however, the existing pipe can’t handle it. It was intended for 35-40 psi and fewer users than the system now has. Because the pressure has been increased to 65 psi, it is more than the system was intended to allow. With aging pipe, when the boosters resumed working, it created a pressure surge, which had caused a pipe to burst. Bill Rittenhouse noted that we have no pressure relief valves. If the fire department were to suck water from the pipes in the event of a fire, the pressure created (with no air relief valves) would crush the pipe. Asked whether we had put one in, Torres responded that we had planned to do so, but it was $400-$600 for one valve, so he had waited. Holguin noted that any such valve must be put where the high-point in the line is located or it won’t help us.

Holguin also noted that, while the tank the system is using looks to be in good condition, it has never been inspected. Someone actually has to go inside it and check the coating, he said. If we had a large tank, say 30,000-gallons, it would have to have two manways—and this size would probably be too big for us, because the water needs to be able to mix to stay fresh. Holguin noted that just to install a second manway is about $40,000. Minimally, he said, our tank needs to be inspected, but no one wants to inspect it if it doesn’t have two manways. There are ways to handle this. Some companies use drones, he said. It might have to be recoated.

Increasing system pressure in the past caused a rash of breaks. The president said that he understood that 60 psi was the high-end the pipes could bear, but Torres indicated that that was if the pipe was new. In the past, board members have expressed an interest in fire protection, but the system certainly does not have the pressure for that with one pressure pump. Holguin noted that if it goes out—it’s the same as with the pump. With the age of the pipe overall, its overall pressure rating, and so on—he didn’t think the lines would handle a fire-flow. It’s just like the well. Rittenhouse noted that the system does have gravity flow water when the well goes out. He said that the pressure is enough to take a shower at his house, but Morgan said with gravity flow at her house, with water comes out at a dribble. Holguin noted that the county fire marshal recommends a minimum of 500 gpm. That is using a minimum of a 6-inch pipe.

After going through the alternatives and trying to prioritize them, concerns included providing a redundant source of water; improving efficiency and performance; and increasing pressure. Souder-Miller selected “system optimization,” Holguin said, which means you don’t build anything—you’re just trying to improve your existing system, cleaning things up, doing additional and preventive maintenance. In terms of reliability, he recommended additional controls and maybe backup power (a generator). For one thing, an auto-dialer could call the operator when the system has an issue. Holguin noted that the Environment Department recommends inspecting the tank annually at least visually. It should be rehabilitated, if needed. If the steel is rusting, it may need recoating. Tanks are supposed to be vented, but the vent has to be screened. Sometimes tanks are shot at in remote areas. Shots can create pinhole leaks requiring expensive rehabilitation.

Regionalization was the method selected to address the need for a redundant water source. Holguin recommended replacing distribution lines with six-inch lines. Replacing them with four-inch lines really didn’t save much, he said. Rehabilitating the booster station was considered, as well as installing an elevated tank, which works great but costs a lot. Regarding booster station rehabilitation, he said, “It would be a duplex skid, so you would actually have two pumps there all manifolded together—if one went down, the other one could still handle the system. Not only that, but they alternate work, so you extend the service life overall.”

Optimizing our current operation and maintenance would not cost us, but the association would need to monitor for high radionuclides. If it is only seasonal, which it looks like, it is not a cause for concern. If it is constant, that is a problem because radio nuclides can cause cancer. Holguin said we have exceeded the allowable radionuclides levels three times in the past. Members noted that radionuclides have to exceed allowable levels two months in a row before the Environment Department will issue a warning.

Reliability improvements would include installing an auto-dialer and a backup power source: that any design, permits, bidding, construction, materials, construction administration, an operation and maintenance manual and everything provided and handed over in full working condition. David Lucero said that meant that a backup generator would cost $152,000. Holguin noted that the generator itself would cost about $40,000-45,000—you’d still have to have a licensed electrician to wire everything, a new panel and pad, and so on.

Source system regionalization refers to a connection to High Valley. That would include the water line and a two-way metering station, as well as design, legal fees, and utility easements. David Lucero wanted to know how this, at $254,000, is cheaper than a $50,000 well. Holguin said that would be a private well to your home, which could probably provide you with 10-15 gpm—not an eight- or 10-inch well that could push out 100-plus gpm to the system. Lucero said we have a system that is pulling out 35-37 gallons a minute. He thought we could cut back on our water a little bit till we get the system the way we want it. “To me, [paying $254,000] that’s crazy.”

Someone asked whether High Valley planned to pay for a portion of the cost of interconnection. Morgan stated that High Valley—through LRGPWWA—has pledged to pay for construction; VDRMDWCA is paying for the design.

Holguin posted a comparison of all the alternatives they evaluated. This includes the design, legal fees, obtaining the easements, permits from the state and county, materials for the construction, construction administration—you’d need someone to manage the contractor. “That sounds cheap at this point. All that? $254,000 for what he just listed?” Rittenhouse stated.

They estimated a new well at a cost of $368,00 as compared to $254,000, for regionalization. Plus, he said the association would probably be required to buy property to put a new well on, because of the “cone of influence”: if your wells are too close to each other, one is going to essentially starve the other for water. That can burn out the motor. You can only switch over when the other is not running. Morgan noted that we currently are only looking at the cost of the design phase on the interconnection. Rittenhouse asked if it were unusual for an association to seek a second opinion on costs. Holguin reported that that is to be expected, as he would anticipate the construction phase having to go to bid. These figures are intended to give the association numbers for seeking funding, Holguin said. It is probably good to remain a bit on the high side. Anything to do with steel right now is high because of new tariffs that have been passed. He also noted that contractors are not hungry right now: there is a lot of demand for their services and that drives up prices.

Moving on to the distribution line replacement: This includes the main line, new service lines, isolation valves, hydrant installations with the new six-inch line. This was estimated at $424,000. The existing water storage tank, inspection inside and out, recoating, a level-gauge were also considered. Regarding booster station rehabilitation, Holguin said the building looks okay structurally, but upgrading it would include new paint, a security door, new lighting, a new booster skid (that’s dual pumps to provide a backup), and a new chlorine-room. He said efforts are made to isolate the chlorine because, in addition to being harmful to breathe, chlorine causes everything to corrode. The estimated cost for building a new pump house was $180,000. Someone remarked that you could build a new house for that.

The Hydro-Geo report—that provided recommendations for the well design and spacing. It should be at least 400 feet away, maximum pumping rate recommended was for 100 gpm, based on the acquifer that we are using. The original well, when new, was listed as having the capacity to pump at 200 gpm. Melvin said originally they pumped about 800 gpm for about four days straight. Holguin noted that when a new well is drilled, the driller is going to try to flush out the sand. They use the biggest possible pump in attempting to clean out the screen. The drillers’ log originally listed the well at 200 gpm maximum. They do not recommend pulling out more than 100 gpm now. The drillers also projected about .15 feet per year draw-down in the acquifer. Eventually 20 or 40 years down the line, the association may have to lower the pump setting or deepen the well, Holguin said.

Lucero stated that the level of radionuclides measured is misleading because it is not always over the level allowed by the Environment Department. Holguin agreed that over the last year and a half, December was the only time it was over, however, since the association has been keeping records, Holguin said, it has gone over the allowable level three times.

Holguin said that what can be pumped at one time is specific to the given well. Melvin noted that a former neighbor had three (or four) irrigation wells next door to him that he used to run for eight days straight. Melvin said he tried to save money by raising the level of his pump, but what he found out was that it sucked the sand in under it. They probably pumped some sand, but he didn’t think he had sucked in any pea gravel.

Holguin warned that the gross alpha needs to be monitored. If the levels remain high all the time, that is a problem. If it is seasonal, it is something that is pretty easy to remedy. You can flush the system and that should take care of it. Holguin said the sampling port that Torres put in could be used to flush the system. It may take some time, but it is still a viable solution.

He noted that he assisted VDRMDWCA in requesting $87,240 from the Colonias Infrastructure Board, and it was awarded as a 90 percent grant, 10 percent loan at 0 percent interest over 20 years, with Readiness to Proceed items due Sept. 10. He noted that while we are not required to take the funding, there is no guarantee that the funding will again be available the following year. He said that he has not found a better configuration than a 10/90 split—state, federal, or otherwise. And it’s getting worse—the loan amount is coming up. USDA is still a good funding source, but the loan portion is getting greater.

Melvin asked Holguin what was the least expensive route we could go, in terms of the construction of improvements. The cheapest option available is the reliability and efficiency improvements. As Stafford had pointed out, Holguin noted that there are alternatives that have been recommended. Melvin was asking Holguin for a number on the construction of replacing of the lines, a new well, etc. The problem is that he was asking the wrong question: several alternatives have to be added together to arrive at a figure for building the improvements that we deem most desirable. Members speculated that we will have to go to bid to select someone to build the system. Six-inch water line per linear foot is about $28/foot. Melvin said if we fix the pump house, put in new lines, and drill a new well, “what’s the number? Holguin estimated about $611,000.

Lucero said, “They know what our budget is, right?” Holguin said “no.” When we get public bids, they are sealed bids, no one knows what anyone else is bidding, and we don’t have to tell them anything. The association does not have to accept the bids, even if we have accepted the grant. If necessary, the association could go to bid a second time. Provision was made to include a 10 percent contingency. Rittenhouse noted that 20 is more standard. However, Holguin said it would likely be knocked back down to 10.

Both Lucero and Melvin wanted reassurance that, given that we have an idea what construction will cost, if we do not get bids that we find acceptable, will we be able to stop any forward progress. Holguin assured them that that is accurate. Melvin asked whether Souder-Miller’s costs included project management. Construction administration is included in the costs for the construction phase of improvements. Melvin asked whether they prepare the bids for publication, which they do, Holguin said, they receive them, and they require a bid bond of 5 percent.

Will they help us evaluate their monthly bills and their payment schedule prior to beginning work? Melvin asked. They are paid based on work completed. Holguin said that Souder Miller also does construction inspection. They pay per bid-line item, per linear foot of pipe, per fitting. We pay for video documentation. “We will videotape it before they touch anything . . . and then, they need to put it all back the way it all was or better.” They would probably do the work within 90 days—from us awarding it. Souder-Miller would inspect it upon completion, and then, a year later, if there are any Souder, Miller would come back a year later and inspect it again. And if there were any deficiencies over that year, they would have to repair them or replace them.

Melvin noted that initially, he did not agree with Souder, Miller, and Associates’ numbers. However, if they are doing construction administration and are going to handle all this for the association, “then I understand that.” He said, “I made my living doing that.”

Holguin pointed out that we are currently dealing with the design phase of the work, which includes permits, easements, any legal fees—the difference between design and the non-construction piece—that covers the design, project management, construction management, and so on. The $611,000 does not include the tie-in—it was the new lines and the new booster station. He estimated that a new well is estimated at $368,000. That includes the cost of property acquisition to the north of our well. “We don’t need to worry about the cost of tying in, because they’re gonna do it,” Melvin said.

“All these costs is nothing of you guys’. We would manage everything, and that is full construction, everything is working, I mean, it is done.” Lucero said, it would be $61,000 to us, based on these estimates. Holguin said he did not know where the breakdown was, and tried to ask Josh Smith, but for funding this great, we would probably be looking at a 40-year-loan. Someone wanted to know the interest rate. There will be interest on this loan, which Holguin said might be around 3 percent.

“Well, I tell you guys—this is interesting,” Melvin said. He expressed incredulity that a loan was spread over 40 years, noting that he hoped to live that long. Also, that there was no interest. Holguin was quick to note that a loan of this size—much larger than the grant we got for design work, would indeed carry interest—probably of from 2.3 to 3 percent. Colonias generally doesn’t make loans of more than $1 million, he said. Often, Holguin said, there will be a 10 percent loan, 10 percent match, and a 90 percent grant. He pointed out that the current phase we are working on, design, the loan portion of the funding is interest free. For construction, that is unlikely. We used our PER as the 10 percent match for this second phase of work. It is a way of saying this money has already has gone toward our improvements, and we can tie that together as one big project. Stafford estimated we will be paying $7.35 per month between 17 households over 40 years.

It is hard to come up with that cash up front, Holguin said, and do it privately. Colonias, Water Trust Board, Rural Development, USDA, Drinking Water, SRF—that’s more of a loan than a grant—are other potential funding sources Holguin mentioned. Lucero asked whether it is possible we could be required to go out and get a commercial loan, like his friends on the east side of the state. Morgan stated that she believed we would have to be a much larger association to face the need to “graduate,” as Smith was explaining earlier. Holguin said they will give us the terms and then we can decide whether we want it or not. You can apply and not be penalized for applying if you choose not to accept it.

Melvin said he had come in with the opinion that “I didn’t want the government messing with our water system.” However, he said “If everything you’re saying holds true, and we can do all this, and you’re the project manager and you’ll take care of it, there is such a thing then, as I mentioned before, putting a value on a convenience. Now, whatever that value is, that’s up to each individual. But I can tell you, that for the convenience that I can see …… $60,000 for 40 years?” “If all this data is the way it is—and we got no reason to believe it’s not—especially, if they’re going to be the project manager—I’m telling you that’s a load. It’s not a problem for them, because they do that . . . . To prepare those bid documents and manage all this—that $80,000 looked bad to me, but it don’t look that bad anymore.” He said we didn’t need to ask for a time extension . . . He said, “We need to make up our minds what we want to do and get on with it. That’s my thoughts.”

Secretary Morgan said, “Thank you!”

Rittenhouse asked what the state would do if they took over our system and found that the radionuclides were consistently high—What happens then? In that case, we would probably be required to find a new source, Holguin said. However, it would have to be regular occurrences above the allowable levels before they would shut the well down. Stafford said we are “not in the danger zone right here,” for high radionuclides. He said there was a much more serious problem 40 miles to the west. This is something that needs to be monitored. However, Holguin said flushing should take care of the problem.

Martha Trego said we are talking about $600,000. Holguin noted that that figure is hypothetical. She questioned whether we are still planning to tie in with High Valley Farms. She noted they are already tying in with LRGPWWA. Are we going to be sharing water with them and everybody else? Holguin explained that, while High Valley Farms is merging with Lower Rio Grande, they are not linking any water pipes. Lower Rio Grande will merely be taking over the financial administration of the HVF system. They will remain a discrete water system. It is our intention to establish a line linking our system with theirs. We will not be sharing any water on a regular basis. The valves will be opened only in the event of an emergency on our end or theirs.

There will be a specific legal agreement governing how water will be shared and what it will cost, which will be written by an attorney—possibly Josh Smith—specifying all the details about what it will cost and how it is paid back. It was never intended that the systems would be linked and would share water on a daily basis. However, if either system experiences a crisis, the system NOT experiencing a crisis will supply the one that is with water under specific conditions. Smith noted it will be a bulk water agreement. Stafford referred to Karen Nichols’ statement back in April: typically, they trade water for water. Trego wanted to know if we could expect our rates to go up as a result of the interconnection. Stafford said that was never part of the plan. The only reason we may pay more, in the foreseeable future, is to pay for the design and construction of the improvements we have specified.

Stafford asked whether there is a minimum storage capacity for fire hydrants. Holguin said that if you can provide 500 gpm for two hours, you can provide some fire protection. Most fire departments will bring their own water and their own pumps. However, they do need a water source to tap into. If we had fire hydrants, that provides the ability to flush for maintenance purposes, also. Holguin noted that, if we are able to provide fire protection in even a limited fashion, our homeowners’ insurance costs may go down.

The president asked for any other questions. Potential meeting dates were discussed for a future meeting to prepare readiness to proceed items. Ms. Trego asked whether setting a meeting in August would give us time to get the extension they had mentioned earlier, but Smith noted that we no longer need an extension. August the second was mentioned for a potential future meeting. Morgan said, “I assume we are adjourned.” Cornelius said that we were. However, Morgan was mistaken in that the association does not have to provide a resolution to proceed with the Colonias grant. Therefore, the need for a meeting in August was moot.

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Note 1: Recently, Pennock stated that once a water system had 15 connections or 25-plus users for 60 days per year, it constitutes a public entity. VDRMDWCA has 17 households using the system.

Note 2: When VDRMDWCA went to bid for the PER, NMED said suggested that we write our grant in such a way that we would not have to bid out each phase, but would use Souder, Miller, and Associates for the PER, the design phase, and for construction administration.