4/5/2013 AWA Special Board Meeting Minutes

At their April 5 special meeting, the AWA Board accepted the 2010/2011 audit prepared by Leaf and Cole, LLP. It has been more than a year since the same audit failed public scrutiny. The audit had to be reworked when the public pointed out enormous discrepancies and that AWA had commingled restricted funds with other funds.

The 2010/2011 audit that Leaf and Cole presented also had financial information for 2009/2010. 41 of those 2009/2010 numbers did not agree with the Leaf and Cole audit that was accepted for 2009/2010. AWA and Leaf and Cole did not explain why the numbers disagreed.

AWA staff brought no new information to the special board meeting. Instead of financial information, Lynn Takaichi made a presentation from a report that Glenn Reiter and Associates produced before Mr. Reiter passed away. Reiter was contracted to resolve massive accounting issues at AWA. Reiter’s report was only available for Takaichi’s review and was not made available to AWA or the public. Takaichi did not contract with AWA and was not paid. Takaichi gave Reiter’s opinion but Reiter’s report is not available for the public to review nor is Mr. Reiter available to comment.

Takaichi did not write a report. Instead, he made a presentation that did not include a single number. When questioned, Takaichi admitted that he did not check all the changes in the accounting for accuracy, but still concluded that the work that AWA had done to repair the errors was good enough to “call it good and move forward.”

After spending more than $100,000 on consultants and an undisclosed amount on staff and attorney time, AWA has abandoned their plan for a Community Facilities District to fund the Gravity Supply Line. The latest plan that AWA has concocted to fund the GSL uses local taxpayer funds to front new development’s share of the project cost. Up until now, the taxes have been used for other systems within AWA. The new plan will divert 70% of those taxes to the GSL loan payments, leaving a hole in the finances for the other systems.

With the GSL, costs to operate the CAWP system are expected to increase by more than $200,000 per year. AWA calculates the “future customer” share to be $165,000 per year. The money will be diverted from the property tax fund until it is repaid by participation fees collected from new connections to the system.

In the past and present, collecting participation fees to reimburse ratepayers for future customer costs has failed miserably at AWA. Funding for the Amador Transmission Line loan payments was to come from participation fees. None of the participation fees collected for the ATL have been used for the loan payments. Instead, ratepayers have paid all $8,000,000 of the payments through higher rates.

Bill Condrashoff spoke at the meeting, saying “The tax money should be divided proportionally to the size of each system. Using 70% of the taxes on a system that is only 25% of AWA effectively asks ratepayers on other systems to pay for the GSL. Ratepayers on other systems will need a rate increase to make up for the lost funds.”

Later in the meeting, the board approved spending an additional $20,000 on Bob Reed and Associates to revise the system wide rate study. That study is expected to show that CAWP ratepayers will not have a rate increase, while all other systems’ rates go up.

Because of changes in the GSL financing plan and newly approved inter-agency loans, AWA’s system wide rate study will need to be reworked by Reed and Associates to the tune of an additional $20,000. The original cost of the study started at $120,000. An additional $15,000 was added later. The latest increase brings Reed’s total cost to $155,000. There is no guarantee it ends there…

Changes to the GSL financing plan include using AWA tax funds that should be collected and used as common revenue. The rate study will treat those funds as if they can be used to pay developer fees. Doing so will burden ratepayers by reducing revenue to pay for maintenance and operations.

The interagency loans that the AWA board approved earlier in the meeting are based on cost allocations that are not available to the public. The public has exposed all of the big financial issues at AWA. Because the loans were approved without justification to the public, it is likely there are issues AWA has overlooked or ignored. Any changes to the loans will affect the rate study, and AWA General Manager Gene Mancebo may be back to ask for even more money to pay Reed for those changes.