Loading...
HomeMy WebLinkAboutAgenda Packet - North Fork Water Company BOD - 05/09/2022BOARD OF DIRECTORS ANNUAL MEETING 31111 Greenspot Road, Highland, CA 92346  May 9, 2022 ­ 2:00 PM AGENDA CALL TO ORDER ROLL CALL OF BOARD MEMBERS AGENDA 1.Approval of Agenda PUBLIC COMMENTS DISCUSSION AND POSSIBLE ACTION ITEMS 2.Board Re­Organization Election of Officers: President Vice President Secretary Chief Financial Officer General Manager 3.Approve Minutes of April 6, 2021 Board of Directors Organizational Meeting 4.Consider Approval of Proposed FY 2022­23 Water Deliveries and Operational Update 5.Consider Approval of Financial Statements for FY 2021­22 6.Consider Approval of Budget and Assessments for FY 2022­23 DIRECTORS' COMMENTS RECESS INTO CLOSED SESSION 7.CONFERENCE WITH LEGAL COUNSEL – EXISTING LITIGATION [Government Code Section 54956.9(d)(1)] Name of Case: East Valley Water District v. Brucie Cagle, et al., CASE NO. CIVSB 2112619 [Cross­Complaint: Raley v. North Fork Water Company, et al.] ANNOUNCEMENT OF CLOSED SESSION ACTION ITEMS ADJOURN Pursuant to Government Code Section 54954.2(a), any request for a disability­related modification or accommodation, including auxiliary aids or services, that is sought in order to participate in the above­ agendized public meeting should be directed to the North Fork Board Secretary (909)885­4900 at least 72 hours prior to said meeting. BOARD OF DIRECTORS ANNUAL MEETING31111 Greenspot Road, Highland, CA 92346 May 9, 2022 ­ 2:00 PMAGENDACALL TO ORDERROLL CALL OF BOARD MEMBERSAGENDA1.Approval of AgendaPUBLIC COMMENTSDISCUSSION AND POSSIBLE ACTION ITEMS2.Board Re­OrganizationElection of Officers:PresidentVice PresidentSecretaryChief Financial OfficerGeneral Manager3.Approve Minutes of April 6, 2021 Board of Directors Organizational Meeting4.Consider Approval of Proposed FY 2022­23 Water Deliveries and Operational Update 5.Consider Approval of Financial Statements for FY 2021­22 6.Consider Approval of Budget and Assessments for FY 2022­23 DIRECTORS' COMMENTS RECESS INTO CLOSED SESSION 7.CONFERENCE WITH LEGAL COUNSEL – EXISTING LITIGATION [Government Code Section 54956.9(d)(1)] Name of Case: East Valley Water District v. Brucie Cagle, et al., CASE NO. CIVSB 2112619 [Cross­Complaint: Raley v. North Fork Water Company, et al.] ANNOUNCEMENT OF CLOSED SESSION ACTION ITEMS ADJOURN Pursuant to Government Code Section 54954.2(a), any request for a disability­related modification or accommodation, including auxiliary aids or services, that is sought in order to participate in the above­ agendized public meeting should be directed to the North Fork Board Secretary (909)885­4900 at least 72 hours prior to said meeting. Agenda Item #3 May 9, 20221 NORTH FORK WATER COMPANY AGENDA STAFF REPORT To:Governing Board Members From:General Manager Subject:Approve Minutes of April 6, 2021 Board of Directors Organizational Meeting RECOMMENDATION: Staff recommends that the Board of Directors approve the April 6, 2022 Board of Directors Organizational meeting minutes as submitted. REVIEW BY OTHERS: This agenda item has been reviewed by the Board Secretary. FISCAL IMPACT: There is no fiscal impact associated with this agenda item. Recommended by: ____________________________ John Mura General Manager Respectfully submitted: ____________________________ Justine Hendricksen Board Secretary ATTACHMENTS: April 6, 2021 Meeting Minutes Meeting Date: May 9, 2022 Agenda Item #3 Discussion Item NF Minutes 4/6/2021 sma Draft pending approval NORTH FORK WATER COMPANY 31111 GREENSPOT RD. HIGHLAND, CA 92346 BOARD OF DIRECTORS ORGANIZATIONAL MEETING April 6, 2021 VIA TELECONFERENCE MINUTES President Smith called the Annual Board of Directors meeting to order at 2:14 p.m. PRESENT: David Smith Phillip Goodrich Chris Carrillo Ronald Coats James Morales Jr. ABSENT: None EVWD Staff: John Mura Brian Tompkins Justine Hendricksen Jeff Noelte Patrick Milroy Shayla Antrim Kathy Burke Rudy Guerrero Ed King Brenda VanMeter Kerrie Bryan Nate Paredes LEGAL COUNSEL: Michele Staples (North Fork Water Company) STOCKHOLDERS: East Valley Water District GUEST(S): Members of the public Marty Cihigoyenetche (EVWD Legal Counsel) APPROVAL OF AGENDA M/S/C (Carrillo-Goodrich) by unanimous roll call vote that the April 6, 2021 agenda be approved as submitted. NF Minutes 4/6/2021 sma PUBLIC COMMENTS The Board Secretary declared the public participation of the meeting open at 2:15 p.m. There being no written or verbal comments the public participation section was closed. BOARD RE-ORGANIZATION ELECTION OF OFFICERS Director Morales moved that the current slate of officers retain their positions as follows: M/S/C (Morales-Goodrich) by unanimous roll call vote that David E. Smith be appointed Board President. M/S/C (Morales-Goodrich) by unanimous roll call vote that Phillip Goodrich be appointed Vice President. M/S/C (Morales-Goodrich) by unanimous roll call vote that Justine Hendricksen be appointed Secretary. M/S/C (Morales-Goodrich) by unanimous roll call vote that Brian Tompkins be appointed Treasurer. M/S/C (Morales-Goodrich) by unanimous roll call vote that John Mura be appointed General Manager. APPROVAL OF BOARD OF DIRECTORS ANNUAL MEETING MINUTES FOR MAY 21, 2020 M/S/C (Carrillo-Goodrich) by unanimous roll call vote that the May 21, 2020 Board of Directors annual meeting minutes be approved as submitted. REPORT REGARDING ACQUISITION OF NORTH FORK COMPANY SHARES BY EAST VALLEY WATER DISTRICT East Valley Water District’s (EVWD) Legal Counsel provided an update regarding the status of remaining shares of North Fork Water Company (NFWC) not owned by EVWD and the efforts to acquire the remaining shares. He stated that EVWD has acquired over 99% of the remaining shares issued by NFWC. He provided a timeline of events and legal actions that EVWD’s Board of Directors has taken since the last meeting of the shareholders held in April 2020. He stated that the next step will be to file suit in San Bernardino County Superior Court to acquire the remaining shares in NFWC not owned by EVWD through the eminent domain process, which was authorized by the EVWD Board of Directors at a public hearing where they adopted a Resolution of Necessity authorizing the eminent domain proceedings. NF Minutes 4/6/2021 sma For information only. PROPOSED FY 2021-22 WATER DELIVERIES AND OPERATIONAL UPDATE The Operations Manager provided an update on water deliveries and operations to the Board. He discussed the recent and proposed abandonment of several weirs due to liability issues and no longer being utilized. He noted that the former NFWC shareholders that have converted to the new water delivery method through EVWD water meters are using less water. The Chief Financial Officer reviewed the Capital Improvement Program. He provided information regarding Plunge Creek Crossing project and the Facility Abandonment of weirs project. M/S/C (Coats-Goodrich) by unanimous roll call vote that the Board accept the FY 2021-22 Water Deliveries and Operational Update as submitted. FINANCIAL STATEMENTS FOR FY 2020-21 The Chief Financial Officer reviewed the Financial Report, executive summary and operating budget with the Board. He stated that there were no findings in the independent accountant’s review. M/S/C (Morales-Goodrich) by unanimous roll call vote that the Board accept and file the Financial Report as submitted. BUDGET AND ASSESSMENTS FOR 2021-22 The Chief Financial Officer reviewed the proposed operating budget and the proposed fiscal year 2021-22 assessments. He stated that operating labor and equipment charges remain steady. He noted that the budget for legal services has been adjusted upward as continued legal support will be needed for planning ongoing operations of the Company once it’s wholly owned by EVWD. He stated that staff is proposing the 2021- 22 Operating Budget be funded through a combination of assessments, at $13 per share, and Capital reserves. M/S/C (Carrillo-Goodrich) by unanimous roll call vote that the Board approve the proposed 2021-22 operating budget and $13 assessment per share. DIRECTORS’ COMMENTS Director Coats thanked staff for their presentations. ADJOURN The meeting was adjourned at 2:45 p.m. NF Minutes 4/6/2021 sma ________________________ David E. Smith, President ____________________________ Justine Hendricksen, Secretary Agenda Item #4 May 9, 20221 NORTH FORK WATER COMPANY AGENDA STAFF REPORT To:Governing Board Members From:General Manager Subject:Consider Approval of Proposed FY 2022-23 Water Deliveries and Operational Update RECOMMENDATION: Staff recommends that the Board of Directors (Board) review and approve the proposed FY 2022-23 Delivery Schedule and Operational Update. BACKGROUND / ANALYSIS: The 1885 contract terms established specific water delivery obligations to the North Fork Water Company shareholders during contract and non-contract periods. There are a total of 7,156 shares with 99.87% being owned by East Valley Water District. The contract months of June through November are assigned specific delivery obligations and non-contract months receive 25% of the Santa Ana River flow. Meeting Date: May 9, 2022 Agenda Item #4 Discussion Item Agenda Item #4 May 9, 20222 DISCUSSION The table below shows the proposed month by month water delivery schedule for FY 2022-23. Proposed FY 2022-23 Delivery Schedule Month Total Allocations Miner’s Inch Day (MID)River Flow CFS NF Share CFS NF Miner’s Inch Miner’s Inch per Share January 2022 ¼ of Santa Ana River 17 4.25 218 0.94 February 2022 ¼ of Santa Ana River 25 6.25 312 1.2 March 2022 ¼ of Santa Ana River 25 6.25 350 1.4 April 2022 ¼ of Santa Ana River 22 5.5 350 1.4 May 2022 ¼ of Santa Ana River 20 5.0 287 1.2 June 2022 500 500 2.0 July 2022 600 600 2.5 August 2022 600 600 2.5 September 2022 550 550 2.3 October 2022 450 450 1.9 November 2022 400 400 1.6 December 2022 (Estimate) ¼ of Santa Ana River 17 4.25 212 0.92 It has been observed that the North Fork customers that have converted to the new water meter delivery method are using less water than the old weir delivery method. A total of eleven water meters have been installed to date. There are still two customers using weirs. One is located on the far east of town where no water distribution pipes are available to install a meter, and the other is renting shares from East Valley Water District In the event of a significant rainfall of more than one-half inch, deliveries will automatically be halted. When water quality is compromised, water is not taken down the ditch to protect the ditch from large quantities of sedimentation. If a customer would like to continue their scheduled delivery following a rainfall, customers may contact East Valley Water District Operations Division to resume their regularly scheduled delivery. In addition, deliveries may be halted due to circumstances beyond the Company’s control, like activities by San Bernardino County Flood Control, Southern California Edison, or another outside event. Staff will be sure to maintain communication with shareholders that may be impacted by unexpected delivery disruptions. Agenda Item #4 May 9, 20223 North Fork Weir removals and modifications: During the 2020 North Fork meeting staff committed to removing old weirs from the North Fork ditch that are no longer needed and are in areas more susceptible to vandalism. Weir 2 was located north of District Headquarters in the orange groves where the Mediterra Housing Project is in development. The developer completely removed the weir at the beginning of the project. Weir 3 is located west of Weir 2 on the northwest portion of the Mediterra project. This weir has been removed and a blind flange inspection access was installed. Staff worked with a contractor to complete this task in February of 2022. Weir 10, located on the Red Hill trail just south of Baseline; Weir 13, located on the Red Hill trail east of Aplin; and Weir 18, located on the southeast corner of Baseline and Weaver were no longer needed to make water deliveries. Staff determined these weirs are good locations along the ditch to be used as an access point for inspections, so modifications were made rather than removal. Weirs 10 and 13 were completed by staff and Weir 18 was completed by a contractor. The remaining weirs on the North Fork ditch are in not in need of repairs at this time and are in areas protected from public access. These weirs will be analyzed for removal or converted to access point in future budget years. REVIEW BY OTHERS: This agenda item has been reviewed by the Administration, Finance, and Operations Departments. FISCAL IMPACT: $82,440 has been spent on removing weirs or converting them to access inspection points. Agenda Item #4 May 9, 20224 Recommended by: ____________________________ John Mura General Manager Respectfully submitted: ____________________________ Patrick Milroy Operations Manager ATTACHMENTS: Presentation WATER DELIVERIES AND OPERATIONAL UPDATE May 9, 2022 FY 2021-22 WATER DELIVERIES MONTH ALLOTMENT (MINER’S INCHES PER DAY) ALLOTMENT PER SHARE (MINER’S INCHES) January -May 25% of Santa Ana River Flow June 500 2.0 July 600 2.5 August 600 2.5 September 550 2.3 October 450 1.9 November 400 1.6 December 25% of Santa Ana River Flow FY 2022-23 PROJECTED WATER DELIVERIES MONTH ALLOTMENT (MINER’S INCHES PER DAY) ALLOTMENT PER SHARE (MINER’S INCHES) January 218 0.94 February 312 1.2 March 350 1.4 April 350 1.4 May 287 1.2 June 500 2.0 July 600 2.5 August 600 2.5 September 550 2.3 October 450 1.9 November 400 1.6 December (Estimate)25%of River Flow 0.92 North Fork Operational Improvement Project Locations FY 2021-22 WEIR #3 REMOVAL •Location: West of Weir #2 on the Northwest Portion of the Mediterra Project •Condition: Weir Removed •Installed Blind Flange Inspection Access Weir #3 Before Removal Weir #3 After Removal and Blind Flange Installation WEIR #10 REPAIR •Location: Red Hill Trail, South of Baseline and West of Alta Vista •Condition: Used as an Access Point for Inspections Weir #10 Before Repairs Weir #10 After Repairs WEIR #13 MAINTENANCE •Location: Red Hill Trail East of Aplin •Condition: Used as an Access Point for Inspections WEIR #18 REPAIRS •Location: Southeast Corner of Baseline Street and Weaver Street •Condition: Used as an Access Point for Inspections Weir #18 Before Repairs Weir #18 After Repairs Agenda Item #5 May 9, 20221 3 8 9 NORTH FORK WATER COMPANY AGENDA STAFF REPORT To:Governing Board Members From:General Manager/CEO Subject:Consider Approval of Financial Statements for FY 2021-22 RECOMMENDATION: Staff recommends that the financial statements for FY 2021-22 be adopted and filed. BACKGROUND / ANALYSIS: Section 5.05(c) of the North Fork Water Company (Company) Bylaws require that the Treasurer render to the Board of Directors (Board) an accounting of the Company’s transactions and financial condition at regular meetings of the Board. In order to comply with this section of the Bylaws, annual financial statements are prepared by staff, reviewed by an independent accounting firm, and presented to the Board at each annual shareholders’ meeting. DISCUSSION Attached are the Company’s financial statements as of, and for the twelve months ended, January 31, 2022. The statements are presented in comparative form, prior to current year, in order to identify significant variances. Notable items are: Statement of Financial Position Operating Cash increased by 41% from $109,307 to $154,374 due to a significant reduction in legal and other consulting costs. Cash – Restricted for Capital Projects decreased from $160,135 to $77,694 because of significant work to abandon weirs and improve access points along the pipeline. Assessment receivables decreased from $1,974 to $1,458 because East Valley Water District continued to acquire shares and resolve associated outstanding balances due. The entire outstanding balance as of January 31, 2022 will be paid by EVWD. Meeting Date: May 9, 2022 Agenda Item #5 Discussion Item Agenda Item #5 May 9, 20222 3 8 9 Statement of Activities Weir Abandonments – work was performed on weirs 10, and 12 as discussed in detail in the operations report. Administration – significant work by EVWD office staff in the past, coordinating and gathering information for consultants, did not occur in FY 2021-22. The financial statements were reviewed by the accounting firm of Rogers, Anderson, Malody & Scott (RAMS), who had no findings as a result of their review procedures. REVIEW BY OTHERS: This agenda item has been reviewed by the Administration and Finance Departments. FISCAL IMPACT: There is no fiscal impact associated with this agenda item. Recommended by: ____________________________ John Mura General Manager Respectfully submitted: ____________________________ Brian Tompkins Chief Financial Officer ATTACHMENTS: Description 1. Presentation 2. North Fork Financial Statements FY 2021-22 FINANCIAL STATEMENTS FY 2021-22 May 9, 2022 FINANCIAL STATEMENTS AND REPORTS •Annual Financial Report •Review Company’s Financial Position and Results of Operations •Instrument of Financial Disclosure INDEPENDENT ACCOUNTANT’S REVIEW NO FINDINGS STATEMENT OF FINANCIAL POSITION Assets Cash $ 154,373 Cash –Restricted for Capital Projects 77,695 Fixed Assets / Water Rights 3,515,862 Less: Accumulated Depreciation (797,949) Construction In Progress 0 Other Assets 14,190 TOTAL ASSETS $ 2,964,172 Liabilities $ 40,146 Shareholder Equity 2,924,026 TOTAL LIABILITIES & EQUITY $ 2,964,172 STATEMENT OF ACTIVITIES BUDGET ACTUAL Operating Labor / Equipment -EVWD $ 11,000 $ 12,745 Weir Repairs / Abandonments 0 82,440 Contract Maintenance 8,500 7,800 Legal Services 31,000 20,905 Other Professional Services 2,500 2,600 Administration 12,000 2,212 Materials & Supplies 100 25 Insurance 6,400 7,314 Property, Franchise Taxes 28,500 29,759 Depreciation 0 55,837 Total Operating Expenses $ 100,000 $ 221,637 Shareholder Assessment –Operating ($13)93,028 92,995 Change In Equity -Decrease $ 128,642 i Table of Contents Schedule Page Organization Data 1 Independent Accountants’ Review Report 2 - 3 Statements of Financial Position 4 Statements of Activities 5 Statements of Changes in Shareholders' Equity 6 Statements of Cash Flows 7 Notes to Financial Statements 8 - 11 Supplementary Information Schedule of Property, Plant and Equipment, and Accumulated Depreciation One 12 - 13 Schedule of Shareholders Two 14 Statement of Financial Position Comments Three 15 North Fork Water Company (A California Corporation) Organization Data January 31, 2022 and 2021 1 DATE AND STATE OF INCORPORATION 1885 - California DURATION OF CHARTER Perpetual Existence NATURE OF BUSINESS Water Company Located in Highland, California DATE OF EXEMPTION LETTER September 13, 1964 OFFICERS David Smith President Phillip Goodrich Vice President Brian Tompkins Treasurer Justine Hendricksen Secretary DIRECTORS David Smith Ronald Coats James Morales, Jr. Phillip Goodrich Chris Carrillo MANAGER Under Agreement with East Valley Water District 2 3 2022 2021 Current Assets Cash 154,373$ 109,307$ Cash - Restricted for Capital Projects 77,695 160,135 Prepaid Expenses 12,732 18,448 Assessments Receivable 1,458 1,974 Total Current Assets 246,258 289,864 Property, Plant, and Equipment Improvements - Fencing 2,840 2,840 Pipelines and Valves 2,857,411 2,857,411 Construction In Progress - - Less: Accumulated Depreciation (797,949) (742,112) Total Property, Plant, and Equipment 2,062,303 2,118,139 Other Assets Water Rights - January 31, 1952 655,611 655,611 Total Assets 2,964,172$ 3,063,614$ Current Liabilities Accounts Payable 40,146$ 10,946$ Total Current Liabilities 40,146 10,946 Balance, January 31, 2020 Capital Stock Authorized 7,200 Shares - 7,156 Issued and Outstanding at $100 Stated Value 715,600 715,600 Additional Paid-In Capital 454,470 466,496 Contributed Capital 1,419,232 1,457,078 Retained Earnings 334,724 413,494 Total Shareholders' Equity 2,924,026 3,052,668 Total Liabilities and Shareholders' Equity 2,964,172$ 3,063,614$ See accompanying notes and Independent Accountants' Review Report. LIABILITIES AND SHAREHOLDERS' EQUITY North Fork Water Company (A California Corporation) Statements of Financial Position January 31, 2022 and 2021 ASSETS 4 2022 2021 Revenues Water Sales -$ -$ Expenses Repairs and Maintenance Labor and Equipment 12,745 11,743 Contracted 7,800 13,081 Weir Repairs / Abandonments 82,440 - Administration 2,212 13,350 Accounting Fees 2,600 2,400 Other Professional Services - 2,250 Legal 20,905 43,374 Materials and Supplies 25 - Property Taxes 28,959 27,812 Insurance 7,314 6,284 Depreciation 55,837 55,837 Total Expenses 220,837 176,131 Loss from Operations (220,837) (176,131) Provision for Income Taxes State Income Taxes 800 800 Excess of Expenses over Revenues before Contributions (221,637) (176,931) Contributions Shareholder Assessments - Operating 92,995 92,560 Change in Equity (128,642)$ (84,371)$ See accompanying notes and Independent Accountants' Review Report. North Fork Water Company (A California Corporation) Statements of Activities For the years ended January 31, 2022 and 2021 5 Cumulative Common Stock Additional Contributed Excess of Total Issued and Paid-in Capital Revenue Over Shareholders' Outstanding Capital (Grant)Expenses Equity Balance, January 31, 2021 715,600$ 466,496$ 1,457,078$ 413,494$ 3,052,668$ Shareholder Assessments 92,995 92,995 Excess of Expenses Over Revenues (221,637) (221,637) Allocate Depreciation (12,026) (37,846) 49,872 - Balance, January 31, 2022 715,600$ 454,470$ 1,419,232$ 334,724$ 2,924,026$ Cumulative Common Stock Additional Contributed Excess of Total Issued and Paid-in Capital Revenue Over Shareholders' Outstanding Capital (Grant)Expenses Equity Balance, January 31, 2019 715,600$ 478,522$ 1,494,924$ 447,993$ 3,137,039$ Shareholder Assessments 92,560 92,560 Excess of Expenses Over Revenues (176,931) (176,931) Allocate Depreciation (12,026) (37,846) 49,872 - Balance, January 31, 2020 715,600$ 466,496$ 1,457,078$ 413,494$ 3,052,668$ See accompanying notes and Independent Accountants' Review Report. January 31, 2021 January 31, 2022 North Fork Water Company (A California Corporation) Statements of Changes in Shareholders' Equity For the years ended January 31, 2022 and 2021 6 2022 2021 Cash Flows from Operating Activities Cash Paid for Services and Materials (130,884)$ (115,761)$ Income Taxes Paid - (800) Net Cash used by Operating Activities (130,884) (116,561) Cash Flows from Financing Activities Contributions from Shareholders to Pay Suppliers 93,510 99,777 Net Cash Provided by Financing Activities 93,510 99,777 Cash Flows from Investing Activities Acquisition and Construction of Assets - - Net Cash used for Investing Activities - - Net Increase (Decrease) in Cash (37,374) (16,784) Cash, Beginning of Year 269,442 286,226 Cash, End of Year 232,068$ 269,442$ Reconciliation of Excess of Expenses over Revenues to Net Cash Used By Operating Activities Excess of Revenue over (under) Expenses (221,637)$ (176,931)$ Adjustments: Depreciation 55,837 55,837 Expense CIP Project - 5,281 (Increase) Decrease in: Prepaid Expenses 5,716 (1,337) Increase (Decrease) in: Accounts Payable and Accrued Liabilities 28,400 589 Income Taxes Payable 800 - Net Cash used by Operating Activities (130,884)$ (116,561)$ See accompanying notes and Independent Accountants' Review Report. North Fork Water Company (A California Corporation) Statements of Cash Flows For the years ended January 31, 2022 and 2021 7 North Fork Water Company (A California Corporation) Notes to Financial Statements January 31, 2022 and 2021 8 NOTE 1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations North Fork Water Company (the Company) is a mutual water company. The Company's primary purpose is to secure surface water from the Santa Ana River and other available sources for delivery to its shareholders in accordance with its delivery schedules and rules and regulations. Basis of Accounting The financial statements are presented in accordance with Financial Accounting Standards Board (FASB) using the accrual basis of accounting. Capitalization Policy The Company’s capitalization basis is cost if assets are purchased or constructed and acquisition value if assets are contributed. Depreciation of Plant and Equipment The carrying values of plant and equipment are depreciated over the estimated useful lives of the assets using the straight-line method. Provision for Income Taxes The Company is exempt from federal income taxes under Section 501(c)(12) of the Internal Revenue Code. Therefore, no provision for federal income taxes is reflected in the financial statements. State franchise tax is computed at the current corporate rate. For the fiscal years ended January 31, 2022 and 2021 state franchise taxes were $800. Use of Estimates The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, the actual results could differ from those estimates. North Fork Water Company (A California Corporation) Notes to Financial Statements January 31, 2022 and 2021 9 NOTE 1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued Cash and Cash Equivalents For purposes of the statement of cash flows, the North Fork Water Company considers cash and cash equivalents as short term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Cash equivalents have an original maturity date of three months or less from the date of purchase. As of January 31, 2022, the Company’s balance of funds on deposit with financial institutions did not exceed the federal depository insurance limit of $250,000. NOTE 2 - RELATED PARTY TRANSACTIONS As of January 31, 2022, East Valley Water District owned 99.87% of the outstanding shares of the Company. The Company and East Valley Water District have certain officers and all Board directors in common. The following related party transactions occurred for the years ending January 31, 2022 and January 31, 2021: • East Valley Water District paid the Company operating and capital assessments of $119,899 and $91,433, respectively. • The Company paid East Valley Water District for labor, administration, and use of vehicles in the amounts of $14,956 and $25,093 NOTE 3 - DEPARTURE FROM US GAAP As noted in Note 2, East Valley Water District owns 99.87% of the Company and appoints (or approve) a controlling majority of the members of the Company’s governing board. Under the AICPA’s Audit and Accounting Guide for State and Local Governments, this characterizes the Company as a governmental entity and therefore subject to the financial reporting standards required by the Governmental Accounting Standards Board (GASB). The accompanying financial statements were prepared in accordance with the reporting requirements of the Financial Accounting Standards Board (FASB) which represents a known departure from US GAAP. North Fork Water Company (A California Corporation) Notes to Financial Statements January 31, 2022 and 2021 10 NOTE 4 - PROPERTY, PLANT, AND EQUIPMENT A summary of changes in property, plant and equipment follows: Fixed Assets Balance Balance January 31, 2021 Additions Deletions January 31, 2022 Distribution System Pipelines 2,851,372$ -$ -$ 2,851,372$ Ditch Diversion Boxes 4,729 - - 4,729 Valves 1,310 - - 1,310 2,857,411 - - 2,857,411 Improvements Fencing - North Fork Intake 2,840 - - 2,840 Total Fixed Assets 2,860,251$ -$ -$ 2,860,251$ Accumulated Depreciation Balance Balance January 31, 2021 Additions Deletions January 31, 2022 Distribution System Pipelines (735,438)$ (55,676)$ -$ (791,114)$ Ditch Diversion Boxes (3,372) (95) - (3,467) Valves (462) (66) - (528) (739,272) (55,837) - (795,109) Improvements Fencing - North Fork Intake (2,840) - - (2,840) Total Accumulated Depreciation (742,112)$ (55,837)$ -$ (797,949)$ Total Fixed Assets, Net 2,118,139$ (55,837)$ -$ 2,062,302$ North Fork Water Company (A California Corporation) Notes to Financial Statements January 31, 2022 and 2021 11 NOTE 5 - WATER RIGHTS There is an agreement dated May 23, 1895, between North Fork Water Company and Bear Valley Land and Water Company (now Bear Valley Mutual Water Company) that provides for delivery of water to North Fork Water Company as follows: Month Day Inches June 500 July 600 August 600 September 550 October 450 November 400 December through May ¼ Flow of Santa Ana River at a point known a s "The Divide" The water deliveries in the period June through November may be reallocated between months, but no more than 600 day inches are to be delivered in any one month. Water rights, as summarized above, have been valued at $655,611, which is the difference between the par value of the capital stock outstanding and the value of the remaining assets at January 31, 1952. NOTE 6 - ANNUAL SHAREHOLDER ASSESSMENTS Annual shareholder operating assessments were set at $13 per share for the year ended January 31, 2022. No capital assessments were levied during the year. NOTE 7 - SUBSEQUENT EVENTS In the preparation of these financial statements, the Company considered subsequent events through March 22, 2022, which is the date these financial statements were issued. THIS PAGE IS LEFT BLANK INTENTIONALLY SUPPLEMENTARY INFORMATION Schedule One Page 1 of 2 January 31, 2022 Date Beginning Ending Remaining Beginning Ending Acquired Balance Balance Life Years Balance Provision Balance Canal Replacements 1995 41,862$ 41,862$ 23 21,349$ 837$ 22,186$ Canals - 1/2 interest Various 67,610 67,610 67,610 - 67,610 Ditch Diversion Boxes 1985 4,729 4,729 14 3,372 95 3,467 Canals - 36" Pipeline 1995 8,958 8,958 22 4,744 179 4,923 Canal Replacement (La Tourette)1997 37,511 37,511 25 17,999 750 18,749 Canal Replacement (Plunge Creek Syphon to Cram School)1999 68,937 68,937 27 30,347 1,380 31,727 Pipeline Replacement 90' of 26" Pipeline (behind Walmart)2002 9,941 9,941 29 3,980 199 4,179 Pipeline Replacement 16" Pipeline (Highland Avenue)2004 3,010 3,010 31 1,080 60 1,140 Canal Replacement 36" Pipeline - SAR to Plunge Creek Sandbox)2009 2,493,592 2,493,592 37.5 573,528 49,872 623,400 Pipeline Replacement 50' of 30" DIP - Highland at VFW Hall 2011 26,205 26,205 39 5,240 524 5,764 Pipeline Replacement 220' of 24" - SAR Xing to Turnout 2014 34,333 34,333 42 4,809 687 5,496 6" Gate Valve (Wier 17)2014 1,310 1,310 12 462 66 528 Pipeline Replacement 80' of 30" - SAR Xing at 7 Oaks Dam 2017 59,413 59,413 45 4,752 1,188 5,940 2,857,411 2,857,411 739,272 55,837 795,109 Improvements: Security Fencing - NF Intake 2003 2,840 2,840 0 2,840 2,840 Totals 2,860,251$ 2,860,251$ 742,112$ 55,837$ 797,949$ Construction in Progress Various -$ -$ 0 - - - North Fork Water Company (A California Corporation) Schedule of Property, Plant and Equipment, and Accumulated Depreciation January 31, 2022 Property, Plant and Equipment Accumulated Depreciation 12 Schedule One Page 2 of 2 January 31, 2021 Date Beginning Ending Remaining Beginning Ending Acquired Balance Balance Life Years Balance Provision Balance Canal Replacements 1995 41,862$ 41,862$ 24 20,512$ 837$ 21,349$ Canals - 1/2 interest Various 67,610 67,610 67,610 - 67,610 Ditch Diversion Boxes 1985 4,729 4,729 15 3,277 95 3,372 Canals - 36" Pipeline 1995 8,958 8,958 23 4,565 179 4,744 Canal Replacement (La Tourette)1997 37,511 37,511 26 17,249 750 17,999 Canal Replacement (Plunge Creek Syphon to Cram School)1999 68,937 68,937 28 28,967 1,380 30,347 Pipeline Replacement 90' of 26" Pipeline (behind Walmart)2002 9,941 9,941 30 3,781 199 3,980 Pipeline Replacement 16" Pipeline (Highland Avenue)2004 3,010 3,010 32 1,020 60 1,080 Canal Replacement 36" Pipeline - SAR to Plunge Creek Sandbox)2009 2,493,592 2,493,592 38.5 523,656 49,872 573,528 Pipeline Replacement 50' of 30" DIP - Highland at VFW Hall 2011 26,205 26,205 40 4,716 524 5,240 Pipeline Replacement 220' of 24" - SAR Xing to Turnout 2014 34,333 34,333 43 4,122 687 4,809 6" Gate Valve (Wier 17)2014 1,310 1,310 13 396 66 462 Pipeline Replacement 80' of 30" - SAR Xing at 7 Oaks Dam 2017 59,413 59,413 46 3,564 1,188 4,752 2,857,411 2,857,411 683,435 55,837 739,272 Improvements: Security Fencing - NF Intake 2003 2,840 2,840 0 2,840 2,840 Totals 2,860,251$ 2,860,251$ 686,275$ 55,837$ 742,112$ Construction in Progress Various 5,281$ -$ 0 - - - North Fork Water Company (A California Corporation) Schedule of Property, Plant and Equipment, and Accumulated Depreciation January 31, 2021 Property, Plant and Equipment Accumulated Depreciation 13 Schedule Two Number of Shareholder Certificate Number(s)Shares Brucie Cagle 1373 4.00 East Valley Water District 7,147.00 Michael & Patricia Raley 1414 5.00 Total 7,156.00 North Fork Water Company (A California Corporation) Schedule of Shareholders January 31, 2022 14 North Fork Water Company Schedule Three (A California Corporation) Statement of Financial Position Comments January 31, 2022 and 2021 See accompanying notes and Independent Accountants’ Review Report. 15 CURRENT ASSETS Current assets consisted of the following: 2022 2021 Cash in Checking 232,068$ 269,442$ Prepaid Insurance 1,564 5,124 Prepaid Taxes 11,168 13,324 Assessments Receivable 1,458 1,974 Totals 246,258$ 289,864$ PROPERTY, PLANT AND EQUIPMENT A summary of property, plant and equipment, and accumulated depreciation is shown in Schedule One. The value of the one-half interest in canals was the appraised value in 1940, with subsequent additions being valued at cost. The provision for depreciation amounted to $55,837 computed at established rates using the straight-line method. CURRENT LIABILITIES Current liabilities consisted of the following: 2022 2021 Accounts Payable Contract Services 34,283$ -$ Labor and Burden 659 1,362 Legal - January - 150 Landscaping 650 650 State Income Tax 800 - EVWD Insurance Reimbursement 3,754 8,784 Total Accounts Payable 40,146$ 10,946$ Agenda Item #6 May 9, 20221 3 9 2 NORTH FORK WATER COMPANY AGENDA STAFF REPORT To:Governing Board Members From:General Manager/CEO Subject:Consider Approval of Budget and Assessments for FY 2022-23 RECOMMENDATION: Staff recommends that the Board of Directors (Board) review and adopt the proposed FY 2022- 23 Operating Budget, Proposed Capital Budget Transfer, and Operating Assessments. BACKGROUND / ANALYSIS: Each year at the North Fork Water Company (NFWC or Company) annual shareholders’ meeting, staff presents proposed operating and capital budgets that predict the cost of service delivery for the upcoming year, including repairs to components of the Company’s water distribution system. DISCUSSION Operating Budget The Operating Budget funds routine operations and maintenance for the Company water delivery system. It also pays for administrative services such as record-keeping, legal services, and property taxes. The Operating Budget proposed for fiscal year 2022-23 is shown below with prior year budget and actual numbers for comparison: Item 2021-22 Adopted 2021-22 Actual 2022-23 Proposed Operations Labor $ 7,000 $ 10,675 $ 11,000 Equipment Charges 4,000 2,070 3,000 Contracted Maintenance 8,500 7,800 8,000 Administrative Labor 12,000 2,212 3,000 Professional Services 2,500 2,600 2,900 Legal Services 31,000 20,905 25,000 Materials & Supplies 100 25 100 Property / Franchise Taxes 28,500 28,959 30,000 General Insurance 6,400 7,314 8,000 TOTAL $ 100,000 $ 82,560 $ 91,000 Meeting Date: May 9, 2022 Agenda Item #6 Discussion Item Agenda Item #6 May 9, 20222 3 9 2 The line item budget for Operating Labor and Equipment Charges has been adjusted upward to $14,000 in order to accommodate increasing labor and vehicle costs. Although the need to operate facilities has almost completely been eliminated by transferring shareholder deliveries to the EVWD distribution system, Production staff continues to routinely inspect facilities along the North Fork pipeline for problems as it is still an important, secondary intake for water to the District’s Plant 134. The budget for legal services has been adjusted down to $25,000 (from $31,000) to recognize the fact that the major work to set a value for shares, and to address minority shareholder concerns is now completed, and also to recognize that there is still work to do to determine how the North Fork Water Company will operate with just a single shareholder. Staff proposes that the 2022-23 Operating Budget be funded through a combination of operating assessments, at $10 per share, and operating cash on hand. These two sources would provide $71,560 and $19,440, respectively. The draw on operating cash will leave a balance of approximately $135,000 at the end of the fiscal year. Capital Improvements The NFWC Capital Improvement Program (CIP) has two open capital projects, described below: Plunge Creek Crossing – $44,719 remains in Restricted Cash to address this project, with no current plans to conduct any work on this exposed section of pipe, and the likelihood of work being conducted in the future growing more remote as most irrigators are being served by the Districts distribution system, and Plant 134 taking as much State Project Water as possible. Staff proposes to transfer these funds to the Facilities Abandonment project where they can be utilized in the 2022-23 fiscal year. Facility Abandonments – The purpose of this project is to effectively and safely abandon weirs, pipes, and other open facilities that are no longer needed for Company operations. There was work performed on three facilities in FY 2021-22, as explained in the operations report, and work on three more facilities could be completed in 2022-23 if sufficient funds are available – i.e., transferred from the Plunge Creek Crossing project. There is $32,976 remaining in this project budget prior to any proposed transfers. The table below presents a summary of the Capital Improvement Program at 1/31/2022: Staff recommends that the Board approve a Fiscal Year 2022-23 Operating Budget of $91,000, operating assessments of $10 per share, and a $44,719 transfer of restricted funds from the Plunge Creek Crossing project to the Facility Abandonments project. Capital Improvement Project Project Budget Cost Incurred To Date Remaining Budget Plunge Creek Crossing $ 50,000 $ 5,281 $ 44,719 Facility Abandonments 130,000 97,024 32,976 TOTAL $ 180,000 $ 102,305 $ 77,695 Agenda Item #6 May 9, 20223 3 9 2 REVIEW BY OTHERS: This agenda item has been reviewed by the Administration, Finance, and Operations Departments. FISCAL IMPACT: Adoption of the Operating Budget as presented authorizes operating expenses of $91,000, shareholder assessments of $71,560, and a drawdown of $19,440 on unrestricted cash. Recommended by: ____________________________ John Mura General Manager Respectfully submitted: ____________________________ Brian Tompkins Chief Financial Officer ATTACHMENTS: Presentation BUDGET AND ASSESSMENTS May 9, 2022 PROPOSED FY 2021-22 BUDGET DESCRIPTION ADOPTED 2021-22 BUDGET PROPOSED 2022-23 BUDGET OPERATING EXPENSES Operating Labor/Equipment -EVWD $ 11,000 $ 14,000 Contract Services 8,500 8,000 Legal Services 31,000 25,000 Materials & Supplies 100 100 Administration 12,000 3,000 Other Professional Services 2,500 2,900 Insurance 6,400 8,000 Property/Franchise Taxes 28,500 30,000 Total Operating Expenses $ 100,000 $ 91,000 PROPOSED FY 2021-22 ASSESSMENTS $10 2022-23 ASSESSMENTS $0 CAPITAL ASSESSMENTS DESCRIPTION PROPOSED 2022-23 BUDGET Proposed Expenses Operating Expenses $ 91,000 Capital Expenditures 0 Total Proposed Expenses $ 91,000 Proposed Funding -7,156 Shares Operating Assessment -$10 per share $ 71,560 Operating Cash -Current Balance $ 154,373 19,440 Capital Assessment 0 Total Funding $ 91,000 CAPITAL IMPROVEMENT PROGRAM CAPITAL IMPROVEMENT PROJECT PROJECT BUDGETS PROPOSED REVISIONS REVISED BUDGETS Plunge Creek Crossing $ 50,000 $ (44,719)$ 5,281 Facility Abandonments 130,000 44,719 174,719 Total $ 180,000 $ 0 $ 180,000 RECOMMENDED REVISIONS TO CAPITAL RESERVE (RESTRICTED CASH) CAPITAL IMPROVEMENT PROJECT REVISED BUDGETS EXPENDITURES TO DATE BUDGET REMAINING Plunge Creek Crossing $ 5,281 $ 5,281 $ 0 Facility Abandonments 174,719 97,024 77,695 Total $ 180,000 $ 102,305 $ 77,695