HomeMy WebLinkAboutAgenda Packet - North Fork Water Company - 03/14/2016 (meeting presentation)NORTH FORK WATER COMPANY
SPECIAL STOCKHOLDERS MEETING
31111 Greenspot Road
Highland, Ca 92346
March 14, 2016 – 3:00 pm
AGENDA
CALL TO ORDER
PLEDGE OF ALLEGIANCE
ROLL CALL OF BOARD MEMBERS
1.Approval of Agenda
2.Public Comments
3.Presentation from Ms. Michele Staples regarding historical analysis of the North Fork
Water Company.
4.Annual Shareholders meeting Tuesday, April 5, 2016 – 2:00 pm
ADJOURN
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Pursuant to Government Code Section 54954.2(a), any request for a disability-related 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)885-4900 at least 72 hours prior to said meeting.
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NORTH FORK WATER COMPANY:
Special Shareholders Meeting
March 14, 2016
Michele A. Staples, Esq.
Paige H. Gosney, Esq.
Eddy R. Beltran, Esq.
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Overview
1.Governance Summary
2.Water Rights Summary
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Mutual Water Company
v.
Public Water Agency (Retailer)
•Mutual Water Company
o Private corporation with articles and bylaws
o Water rights holders deed water rights and water facilities
to corporation in exchange for shares and water service
(pool resources)
o Delivers water to its shareholders at cost
•Public Water Agency
o Authorized by state legislation
o Generally, provides water for public and private customers
within its boundary
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1. Governance Summary
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North Fork Water Company
Governing Documents
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1.Articles of Incorporation
•First filed in 1885. Amendments in 1915, 1925 & 1931
2.Bylaws
•Current version adopted in 2013
3.North Fork Canal Rules of Operation (“Rules of the
Ditch”)
•2009
•Delivery schedules, delivery rates, repairs/maintenance,
restrictions
5
Board of Directors
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•7 Directors Required by Articles
o Not necessary to be a shareholder
•Current Board Composition
o 5 of 7 are East Valley Water District
Directors
o 4 Directors = quorum
6
Board of Directors
Election Procedures
•Under the Bylaws, each director seat is
elected by majority vote of the shares
•As of January 31, 2015, 7,156 shares
•East Valley Water District owns 5,904 shares
(82%)
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2. Water Rights Summary
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Water Rights Questions
(May 23, 2015 Letter to Shareholders)
1.Analyze and define the respective water rights of
individual shareholders and North Fork;
2.Summarize allowable uses for water delivered to
shareholders by North Fork;
3.Summarize rights of North Fork shareholders to
sell or lease shares to third parties; and
4.Analyze methods for reconciling inconsistencies
between the North Fork Articles of
Incorporation, By-laws, and Rules of the Ditch.
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1. Respective Water Rights of
Shareholders and North Fork
Water Company
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Landowners Ditch Rights 1885 Deed of Trust
(right to re-conveyance)
Cram & Van Leuven Ditch Rights
(not subject to 1885 DOT )
Rights to be re-conveyed in 1897,
1934
North Fork Water Company
North Fork
Water Company
Other Water Rights
(not subject to 1885 DOT)
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No Re -conveyance Recorded
•No Deed Recorded
•Third Amended Articles of Incorporation
(1931)
–“Perpetual” life
–Expanded corporate powers and purposes
including:
•Changes in allowable water supplies
•Beneficial uses water in addition to domestic and
irrigation
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Basis of Water Right
•North Fork holds pre-1914 water rights to
Santa Ana River in trust for its shareholders
•Shareholders have delivery rights based on
number of shares
•Based on pre-1914 appropriative rights held
by its shareholders before North Fork’s
incorporation
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Contracts for Coordinated
Deliveries
•1885 Agreement with Bear Valley Land and
Water Company (confirmed by January 17,
1977, Stipulated Judgment in Big Bear
Municipal Water District v. North Fork Water
Company, et al., re Big Bear Lake)
•1976 Santa Ana River –Mill Creek Cooperative
Project Agreement with San Bernardino Valley
MWD and other water users
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Contracts for Coordinated
Deliveries (cont’d)
•April 1, 1988 Agreement for the Transfer of the North
Fork Canal –Bear Valley transferred ownership interest in
the North Fork Canal to East Valley
o East Valley delivers agricultural water through canal to
Bear Valley shareholders on behalf of Bear Valley
o East Valley’s and Bear Valley’s rights in the North Fork
Canal are junior to the prior rights of North Fork
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Agreement for Spreading Program
•2004 Seven Oaks Accord set up program for
EVWD, North Fork and other water users to
spread and store a portion of the natural flow
of the Santa Ana River
•Spreading is operated on a ‘put and take’ basis
with extractions occurring within one year of
the date spread
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Water Rights Conclusion
•North Fork Water Company owns the water
rights in trust for its shareholders
•Shareholders delivery rights entitle
shareholders to receive a proportionate
amount of North Fork’s water supplies at cost
–Shareholders’ delivery rights are a real property
interest that may be individually enforced against
North Fork and its officers
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Acknowledgment of North Fork’s
Prior Rights
•Bear Valley –1885 Agreement, 1977
Judgment re Big Bear Lake
•Big Bear Municipal Water District –1988
Stipulation with SWRCB
•SBVMWD –2004 Seven Oaks Accord
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North Fork Water Rights Issue
•Pre-1914 Appropriative Water Rights
–“Common law” right
–Continuous reasonable and beneficial use
required
–Public records accounting for North Fork water
use are maintained by Bear Valley Mutual (annual
reports to Big Bear Watermaster) and East Valley
Water District (internal recordkeeping)
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Protection of North Fork Water Rights
•By-Laws allow “agricultural use” (Section 7.16)
Recommendation: Update to reference “all sub-potable
uses” to maximize continuous beneficial use of pre-1914
appropriative rights
•Municipal irrigation, spreading program under the Seven Oaks
Accord
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Protection of North Fork Water Rights
(Cont’d)
•Shareholders not taking allotted water
o Under Bylaws Section 7.14, shareholder loses right
to the delivery of that water
Recommendation:
-Amend Bylaws to clarify that transfers of unused water
are allowed among shareholders to prevent against
argument that pre-1914 water right is being reduced by
non-use
-Establish standards and procedure for approving and
reporting transfers
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2. Allowable Uses of Water
Delivered to Shareholders
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Uses Allowed by Governing
Documents
•Third Amended Articles of Incorporation
–Domestic, irrigation and all other useful purposes
•2013 By-laws
–Irrigation
–Domestic if treated and approved by Board of
Directors
Recommendation: clarify all sub-potable uses are
allowed
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3. Shareholders’ Rights to
Sell/Lease Shares
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Governing Documents
•1885 Agreement (confirmed by 1977
Stipulated Judgment)
–Reservation of rights to “sell, convey, transfer, mortgage,
pledge, or otherwise dispose of” water and water rights
•Third Amended Articles (1931)
–No gain or profit to shareholders
–No public utility business
•Bylaws (2013)
–Board consent required for turnout (section 7.13), but not
place of use
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North Fork Weirs
•Weir 36 EVWD •Weir 46•Valencia •Lea
•Weir 40 Beverly Rich
•Weir 53 Nigel Smith
•Weir 35 LaTourette •Weir 47 •Tom Hooker
•Weir 34 LaTourett
•Highline over Bledsoe
•Weir 26 Linda Spitzer/ Riddle
•Weir 20 Jose •Weir 22 Christianson
•Plunge
Creek Sand
Box and
Siphon
•Gutierrez •Weir 18 •Pavli •ch •Weir 17
•Ciriel •Wright Pellow •Moreno
•Weir 13 Kiel Trust •Weir 19 Pellow •Weir 14 •Aplin Grates Wright
•Weir 10 Kiel Trust
•Weir 3 Out of Service
•Approx. Location
•Edwards Highline •Weir 1 Arnott
•Highline
•Weir 2 •Calvary/Raley
•Intake Weir
•Sand Box
•Data Path: T:\Leida\Evwd_Default.gdb\NFWeir•Document Path: T:\Leida\North Fork Modified by Mike H.mxd
Additional Legal Restrictions on
Sale/Lease of Shares
•Public Utilities Code section 2705
–Profit restrictions on North Fork MWC, not
shareholders
•Corporations / Tax Laws
–No restrictions on price paid to shareholders
•Water Code sections 1725, 1735, 1736, 1737
–“No Injury Rule” –transfer must not injure other
water rights holders or environmental resources
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Recommendations re Sale/Lease of
Shares
•Recommendations:
Adopt standards and procedures for approving and
reporting lease of shares
Adopt standards and procedures for offsets related to sale
of shares in order to protect EVWD customers and North
Fork shareholders
Document private shareholders are successors to original
shareholders
•Helps show fairness of extending service at cost in exchange for
water rights conveyed to North Fork
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Reconciling Inconsistencies in
Corporate Docs
•Articles of Incorporation
•By-Laws
•Rules of the Ditch
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Amending Corporate Docs
•Articles –amendments approved by majority of the
Board and majority of outstanding shares
•By-Laws –amendments approved by majority of
outstanding shares
•Rules & Regs (Rules of the Ditch) –amendments
approved by majority of the Board
Recommendation: Consider appointing a Working
Group to prepare amendments for April 2017 annual
meeting
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Summary
•Update Bylaws:
–Allowable uses include “all sub-potable uses”
–Transfers of unused water are allowed among shareholders
–Establish standards and procedure for approving and
reporting transfers
–Adopt standards and procedures for offsets related to sale
of shares in order to protect EVWD customers and North
Fork shareholders
–Document private shareholders are successors to original
shareholders
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Summary (Continued)
•Review and reconcile inconsistencies and
outdated information
–Articles of Incorporation
–By-Laws
–Rules of the Ditch
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Summary (Continued)
•Appoint a Working Group to prepare
recommendations for amendments for
consideration at April 2017 annual meeting
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