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Home My WebLink AboutAgenda Packet - North Fork Water Company - 04/02/2019 (BOD)BOARD OF DIRECTORS ANNUAL MEETING 31111 Greenspot Road Highland, CA 92346 April 2, 2019 - 2:00 PM AGENDA CALL TO ORDER ROLL CALL OF BOARD MEMBERS APPROVAL OF AGENDA PUBLIC COMMENTS 1.Board Re-Organization a) Election of Officers: -President -Vice President -Secretary -Chief Financial Officer -General Manager DISCUSSION AND POSSIBLE ACTION ITEMS: 1.Approve April 3, 2018 Board of Directors Organizational Meeting Minutes 2.Report regarding status of shares 3.Report regarding updated valuation of North Fork Water Company shares prepared by Brian J. Brady & Associates 4.Financial Statements for FY 2018-19 5.Proposed FY 2019-20 Water Deliveries and Operational Update 6.Budget and Assessments for FY 2019-20 GENERAL MANAGER COMMENTS DIRECTORS' COMMENTS LEGAL COUNSEL COMMENTS ADJOURN 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 (Immediately after the conclusion of the April 2, 2019 Annual Meeting of the Shareholders) public meeting should be directed to the North Fork B oard Sec retary (909)885-4900 at least 72 hours prior to said meeting. NF Minutes 4/3/2018 smg Draft pending approval NORTH FORK WATER COMPANY 31111 GREENSPOT RD. HIGHLAND, CA 92346 BOARD OF DIRECTORS ORGANIZATIONAL MEETING April 3, 2018 MINUTES President Coats called the Annual Board of Directors meeting to order at 2:15 p.m. PRESENT: Ron Coats Chris Carrillo Charles Kiel James Morales Jr. Phillip Goodrich David Smith Margaret Wright ABSENT: None EVWD Staff: John Mura Brian Tompkins Jeff Noelte Shayla Gerber Patrick Milroy Allen Williams Kathy Burke Brenda VanMeter Ed King Martha Duran Eileen Bateman LEGAL COUNSEL: Michele Staples STOCKHOLDERS: Ron Arnott Michael Raley Christina Moreno Lisa McComber (Representing Wright Family Trust) Caroline Kiel Ray (Representing Elizabeth Maclean Kiel Trust) Fred McNeal Kenneth Meddock (Representing First American Title) GUEST(S): Members of the public NF Minutes 4/3/2018 smg APPROVAL OF AGENDA M/S/C (Morales-Carrillo) that the April 3, 2018 agenda be approved as submitted. PUBLIC COMMENTS President Coats declared the public participation of the meeting open at 2:16 p.m. There being no written or verbal comments the public participation section was closed. BOARD RE-ORGANIZATION ELECTION OF OFFICERS M/S/C (Morales-Wright) that Chris Carrillo be appointed Board President. M/S/C (Morales -Wright) that David E. Smith be appointed Vice President. M/S/C (Morales -Wright) that Justine Hendricksen be appointed Secretary. M/S/C (Morales -Wright) that Brian Tompkins be appointed Treasurer. M/S/C (Morales -Wright) that John Mura be appointed General Manager. DISCUSSION AND POSSIBLE ACTION REGARDING APPRAISAL REPORT OF THE NORTH FORK WATER COMPANY PREPARED BY BRIAN J. BRADY & ASSOCIATES Dr. Brian Brady, North Fork Water Company consultant, summarized the Appraisal Report that was presented at a Special Meeting of the Shareholders on January 18, 2018; he stated that there were no additions or corrections to the report presented in January; and it was determined the value per-share stock valuation of $546 per share. M/S/C (Morales-Carrillo) that the Board accept the Appraisal Report as submitted and approve the North Fork Water Company valuation of $4,524,000 and the per-share stock valuation of $546 per share. FINANCIAL STATEMENTS FOR FY 2017-18 Mr. Brian Tompkins 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 (Wright-Goodrich) that the Board accept and file the Financial Report as submitted. NF Minutes 4/3/2018 smg PROPOSED FY 2018-19 WATER DELIVERIES AND OPERATIONAL UPDATE The Chief Financial Officer provided an operational update to the Board; he reviewed repair and maintenance activities that had been performed on the North Fork Canal; he stated that vandalism is a continued point of concern near Plunge Creek. He discussed the pipeline replacement project for the Santa Ana River Crossing and repair options for the Plunge Creek Pipeline. Information only. BUDGET AND ASSESSMENTS FOR 2018-19 The Chief Financial Officer reviewed the proposed operating budget, capital improvement programs, and the proposed fiscal year 2018-19 assessments. He stated that the proposed budget continues to fund administrative efforts to define the rights and value associated with shares held by shareholders and to continue to search for the most cost-effective method for repairing two sections of pipe that span river/creek beds. He also stated the proposed assessment to be $20 per share. M/S/C (Wright-Smith) that the Board approve the proposed 2018-19 operating budget and $20 assessment per share. DIRECTORS’ COMMENTS Chairman Carrillo thanked Dr. Brady for his work on the Valuation Report. Director Coats thanked Dr. Brady and staff for their hard work. ADJOURN The meeting was adjourned at 2:53 p.m. ________________________ Chris Carrillo, President ____________________________ Justine Hendricksen, Secretary BRIAN J. BRADY & ASSOCIATES 37850 De Portola Road Temecula, California 92592 Telephone: 951.551.8933 Email: bjbassociates@aol.com March 18, 2019 Mr. John Mura General Manager/CEO 3111 Greenspot Road Highland, CA 92346 Subject: North Fork Water Company Adjustment to Utility Valuation Dated January 18, 2018 Mr. Mura: On January 18, 2018, Brian J. Brady & Associates presented a Summary Appraisal Report (“Report”) for the North Fork Water Company (“NFWC”) water system (“Utility”) located in Highland, California. This opinion of value was prepared for use by the NFWC for, among other purposes, establishing an opinion of the mutual water company’s stock value. As a precedent for developing the opinion of value, the Utility was evaluated using approaches which are recognized throughout the industry as required for consideration by the Uniform Standards of Professional Appraisal Practice (“USPAP”), 2016-2017 edition, including: • Replacement Cost New Less Depreciation, • Income and • Comparable Sales As indicated in Section 1.5 of the Report, the valuation was effective January 31, 2018, and, was valid for six months. Thereafter, valuation calculations would need to reflect any significant changes in cost inputs, including: • Substitute water (presumably SWP) price per acre-foot • Changes in the rolling ten year average annual deliveries (in acre-feet) to shareholders from the North Fork Canal • Changes in interest and capitalized earnings rates assumptions • Engineering News Record (ENR) cost indices (Los Angeles region) • Most recent NFWC financials To arrive at an original opinion of value, the cost approach was weighted at approximately 40%, the income approach at approximately 30%, and the comparable sales approach at approximately 30%, for this special purpose property. The opinion of value presented my opinion of the amount of money a knowledgeable buyer would pay and a knowledgeable seller would accept, both willing to enter into a transaction with the Utility in its then condition and probable use. The results of the calculations and analyses, performed in accordance with each applicable approach, were detailed throughout the body of the Report. Those calculations have been updated based upon primarily substitute water pricing and ENR indices, and are summarized as follows: • Replacement Cost New Less Depreciation: $ 5,868,000 ($60,000 increase) • Income: $ 3,043,000 (no increase) • Comparable Sales: $ 4,314,000 ($34,000 increase) Considering the results provided above, in conjunction with my prior experience and professional judgment, my opinion of the value of the NFWC utility system as of January 31, 2019 is: $4,554,000 ($30,000 net increase) On the question of the market value of a share NFWC stock, my updated analysis has determined it to be $550, an increase of $4.00 per share, a less than one percent increase from January 31, 2018. Consistent with original Report, this updated valuation is valid for six months from January 31, 2019. I appreciate this opportunity to provide my services to you. Should you have any questions or need further assistance, please feel free to call. Very truly yours, Brian J. Brady, P.E. VALUATION CERTIFICATION I certify that, to the best of my knowledge and belief, the statements of fact contained in this Valuation Update (Update) are true and correct. I further certify that the reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are my personal, unbiased professional analyses, opinions and conclusions. I have no present or prospective interest in the property that are the subject of this Update, and I have no personal interest or bias with respect to the parties involved. My compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event. My analyses, opinions, and conclusions were developed, and this Update has been prepared, in conformity with the requirements of the Code of Professional Ethics and the Uniform Standards of Professional Appraisal Practice of The Appraisal Foundation. No other person provided significant professional assistance to me for this Update. Note that no land or easement appraisal has been conducted here and the results thereof may alter the opinions stated. Note that this Update was prepared for a specific use and no other use is authorized. Brian J. Brady, P.E. CA Professional Engineer No. C23749 S TAF F R E P ORT Agenda Item #4. Meeting Date: Ap ril 2, 2019 Dis c ussion Item To: No rth F o rk Water C ompany Meeting From: G eneral Manager/C E O S ubject: F inanc ial S tatements fo r F Y 2018-19 R E COMME N D AT IO N: S taff rec o mmend s that the financial statements for F Y 2018-19 be adopted and filed. B AC KG R O UN D / AN ALYS IS : S ec tion 5.05(c ) o f the North F ork Water C omp any (C ompany) Bylaws req uire that the Treas urer render to the Bo ard o f Directo rs (Bo ard ) an ac counting of the C ompany’s trans actions and financ ial conditio n at regular meetings of the Bo ard . In order to comply with this s ec tion o f the Bylaws , annual financial s tatements are p repared by staff, reviewed by an ind epend ent acc o unting firm, and p resented to the Board at eac h annual s harehold ers ' meeting. D IS C US S ION Attac hed are the C o mpany’s financ ial s tatements as o f, and for the twelve months ended , January 31, 2019. T he s tatements are presented in c o mparative form, p rio r to current year, in ord er to id entify significant varianc es . Notab le items are: O perating C as h increas ed by 16% to $141,726, which is equal to ap p ro ximately 10 months o f o p erating expens es . T he increas e is fro m realized s avings in legal s ervices whic h was bud geted at $60,000 fo r the year b ut actual incurred was $38,441. As s es s ment rec eivables increas ed to $15,309 due to the owners hip c hanges res ulting in Eas t Valley Water Dis tric t p urchas ing 540.67 ad d itio nal shares , whic h increas ed Eas t Valley’s owners hip interes t b y 8% to 6,445.16 s hares . T he financ ial statements were reviewed by the acc o unting firm of C lifto nLars o nAllen LLC (C L A), who had no find ings as a result o f their review pro cedures. AGE N C Y GOALS AN D OB J E C T IVE S: R E VIE W B Y O T HE R S : R ec o mmend ed b y: John Mura G eneral Manager/C EO R espec tfully s ubmitted: Brian Tomp kins Treasurer R E VIE W B Y O T HE R S : T his agend a item has been reviewed b y the Administration and F inanc e d ep artments . F IS CAL IMPAC T T here is no fis cal imp ac t as s oc iated with this agend a item. ATTAC H M E NTS: Description Type P resentation P resentation FINANCIAL STATEMENTS FY 2018-19 APRIL 2, 2019 FINANCIAL STATEMENTS & REPORTS •Annual Financial Report •Review Company’s Financial Position and Results of Operations •Instrument of Financial Disclosure 2 INDEPENDENT ACCOUNTANT’S REVIEW NO FINDINGS EXECUTIVE SUMMARY OF FINANCIAL STATEMENTS Assets Cash $ 141,726 Cash –Restricted for Capital Projects 180,878 Fixed Assets/Water Rights 2,890,705 Other Assets 31,887 TOTAL ASSETS $ 3,245,196 Liabilities $ 17,000 Shareholder Equity 3,228,196 TOTAL LIABILITIES & EQUITY $ 3,245,196 2018-19 Expenses Repairs & Maintenance $ 24,366 Property Taxes 30,270 Professional Services 55,361 Insurance and Other 3,998 Depreciation 55,837 TOTAL EXPENSES $ 169,832 2018-19 Shareholder Assessments Shareholder Assessments –Operating $ 143,120 Change in Shareholder Equity $ (26,712) 3 OPERATING BUDGET TO ACTUAL BUDGET ACTUAL Operating Labor / Equipment -EVWD $ 24,000 $ 14,616 Contract Services 13,200 9,750 Legal Services 60,000 38,441 Other Professional Services 2,000 2,000 Administration 16,000 14,920 Materials & Supplies 1,000 92 Insurance 3,800 3,106 Property, Franchise Taxes 30,000 31,070 Operating Expenses Before Depreciation $ 150,000 $ 113,995 Depreciation 0 55,837 Total Operating Expenses $ 150,000 $ 169,832 2018-19 Assessments ($20)143,120 143,120 Increase in Operating Reserve $ (6,880)$ (26,712) 4 S TAF F R E P ORT Agenda Item #5. Meeting Date: Ap ril 2, 2019 Dis c ussion Item To: No rth F o rk Water C ompany Meeting From: G eneral Manager/C E O S ubject: P ro posed F Y 2019-20 Water Deliveries and O perational Upd ate R E COMME N D AT IO N: R eview the river flo w trends to date and the p ro p o sed F Y 2019-20 water deliveries. S taff rec o mmend s appro val of the P ro p o sed F Y 2019-20 Delivery S chedule that will c o ntinue provid ing water deliveries during no n- c ontrac t months at levels that reflect S anta Ana R iver flo ws . B AC KG R O UN D / AN ALYS IS : T he 1885 c o ntrac t terms es tablished specific water d elivery obligatio ns to the North F o rk Water C omp any (C ompany) s hareholders d uring c ontrac t and no n-c ontrac t perio d s . T he contract mo nths o f June through Novemb er are as s igned s pec ific delivery o bligations and no n-c o ntrac t months rec eive 25% of the river flow. During F Y 2018-19 monthly water d eliveries during no n-contract months were es timated for upcoming months b ased o n previous S an Bernardino Valley Water C ons ervation Dis tric t flow repo rts. D IS C US S ION In January S harehold ers rec eived 1.2 Miner’s Inch (MI) per s hare, F eb ruary, 1.2 MI, and March, 2.5 MI. Ap ril is es timated at 2.0 MI and May is estimated at 2.1 MI. Delivery amo unts for June thro ugh Novemb er will b e at the contracted amo unts , p er the No rth F o rk contract agreement. T he flo w amounts rep orted fo r this year ind icate that the S anta Ana R iver is flo wing above average d ue to the rec ent rains. In the event of a s ignific ant rain fall of more than o ne half inch, deliveries will auto matic ally b e halted. W hen water quality is c o mp romis ed, water is no t taken down the ditc h to p ro tect the d itc h from large quantities o f s edimentation. If a c usto mer wo uld like to c o ntinue their s ched uled d elivery following a rain fall, c usto mers may c o ntact Eas t Valley Water District O p eratio ns Divis io n to resume their regularly s ched uled delivery. In ad d itio n, d eliveries may be halted d ue to c ircumstanc e b eyond the C o mp any’s contro l becaus e o f S an Bernardino C o unty F lood C ontro l, S outhern C alifo rnia Edis on, or ano ther outside event. S taff will be sure to maintain c o mmunic ation with s hareholders that may be imp ac ted b y unexp ec ted delivery disrup tio ns. R ec o mmend ed b y: John Mura G eneral Manager/C EO R espec tfully s ubmitted: P atrick Milroy O p erations Manager T he chart below s hows the pro p o s ed mo nth by month water d elivery s c hedule: P ro po sed FY 2019-20 Delivery S chedule M o nth M iner’s I nch D ay (M I D) Est. River Flo w C FS N F S hare C FS N F M iner’s I nch Miner’s Inch per S hare J anuary 2019 (A ctual) ¼ of S anta Ana River 24 6 300 1.2 February 2019 (A ctual) ¼ of S anta Ana River 26 6.5 325 1.2 M arch 2019 (A ctual) ¼ of S anta Ana River 48 12 600 2.5 A pril 2019 (Estimate) ¼ of S anta Ana River 40 10 500 2.0 M ay 2019 (Estimate) ¼ of S anta Ana River 40 10 500 2.1 J une 2019 500 500 2.0 J uly 2019 600 600 2.5 A ugust 2019 600 600 2.5 September 2019 550 550 2.3 Octo ber 2019 450 450 1.9 N o vember 2019 400 400 1.6 D ecember 2019 (Estimate) ¼ of S anta Ana River 14 3.5 175 1.0 AGE N C Y GOALS AN D OB J E C T IVE S: R E VIE W B Y O T HE R S : T his agend a item has been reviewed b y the Administration, F inance, and O perations dep artments . ATTAC H M E NTS: Description Type P resentation P resentation WATER DELIVERIES & OPERATIONAL UPDATE APRIL 2, 2019 WATER DELIVERIES •Rights Under the 1885 Contract Terms 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 2.5 October 450 2.3 November 400 1.9 December 25% of Santa Ana River Flow 6 2019-20 PROJECTED WATER DELIVERIES MONTH ALLOTMENTS (MID)ALLOTMENTS PER SHARE (MI) January (Actual)300 1.2 February (Actual)325 1.2 March (Actual)600 2.5 April (Estimate)500 2.0 May (Estimate)500 2.1 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 1.0 7 2018-19 NORTH FORK CANAL WORK •North Fork Maintenance •Cleaned and Removed Sand at North Fork Intake Box •Cleaned and Removed Sand at Plunge Creek Sandbox 9 10 ALL CAPITAL RESERVES HAVE BEEN ALLOCATED CAPITAL IMPROVEMENT PROGRAM CAPITAL IMPROVEMENT PROJECT PROJECT BUDGET ACTUAL EXPENDITURES PROJECT STATUS Plunge Creek Crossing $ 130,000 $ 5,281 Open Facility Abandonments 50,000 0 Proposed Total $ 180,000 $ 5,281 REPAIRED AND WELDED HINGES AT WEIR 18 11 S TAF F R E P ORT Agenda Item #6. Meeting Date: Ap ril 2, 2019 Dis c ussion Item To: No rth F o rk Water C ompany Meeting From: G eneral Manager/C E O S ubject: Budget and As s essments for F Y 2019-20 R E COMME N D AT IO N: R eview and ad opt the propos ed F Y 2019-20 Bud get. B AC KG R O UN D / AN ALYS IS : Eac h year at the No rth F ork Water C ompany (NF W C o r C omp any) annual shareho ld ers’ meeting, staff p resents pro p o s ed o perating and c apital b udgets that predict the cost o f s ervice delivery fo r the upc o ming year, includ ing rep airs to comp o nents of the C o mpany’s water distrib ution s ystem. D IS C US S ION O p erating Budget T he O perating Budget funds routine o p eratio ns , rep airs, and maintenanc e fo r the C ompany water delivery s ys tem. It als o p ays for ad minis trative s ervices s uc h as record-keeping and legal servic es , to keep sharehold ers info rmed ab o ut meetings , finances , and s hareholder rights and o b ligations . T he O perating Bud get p ro p o sed fo r fisc al year 2019-20 is s hown below with p rior year bud get and ac tual numb ers fo r c o mparison: T he O perating Budget funds routine o p eratio ns , rep airs, and maintenanc e fo r the C ompany water delivery s ys tem. It als o p ays for ad minis trative s ervices s uc h as record-keeping and legal servic es , to keep sharehold ers info rmed ab o ut meetings , finances , and s hareholder rights and o b ligations . T he O perating Bud get p ro p o sed fo r fisc al year 2019-20 is s hown below with p rior year bud get and ac tual numb ers fo r c o mparison: Item 2018-19 Adopted 2018-19 Actual 2019-20 P roposed O perations Lab o r $ 21,000 $ 8,499 $ 11,000 Eq uipment C harges 6,000 6,117 6,000 C o ntrac ted Maintenanc e 11,000 9,750 11,000 Ad minis trative Labor 14,000 14,920 14,000 Directo r's F ee 200 0 200 Legal S ervices 60,000 38,441 50,000 P ro fes sional S ervic es 2,200 2,000 4,700 Materials & S up p lies 1,000 92 100 P ro p erty / F ranchis e Taxes 30,000 30,270 32,500 G eneral Ins uranc e 4,600 3,106 3,500 TO TAL $ 150,000 $ 113,195 $ 133,000 T he bud get for O p erating Lab or has b een c ut by 48% as ac tual costs fo r 2018-19 were sub s tantially lower than last year ’s bud get o f $21,000. T he primary reason for this is F ield s taff s p ent les s time o p erating weirs as s harehold ers s old their shares to Eas t Valley Water Dis tric t. T he budget fo r legal s ervices has als o d ec reas ed as mo s t o f the research into the histo ry o f the C omp any and wo rk o n governing d oc uments has b een c o mp leted . P ro fes sional servic es s ho w an inc reas e of $2,500 to pay Brian Brad y & As s o c iates to up d ate the s hare valuation rep o rt c onducted in 2017. S taff prop o s es that the 2019-20 O perating Budget b e fund ed thro ugh a comb inatio n of o p erating as s es s ments, at $16 per share, and operating res erves. T hese two sourc es would provid e $114,496 and $18,504, respec tively. T he d raw on res erves will leave an o perating cash res erve of ap p roximately $100,000. C apital I mprovements T he NF W C C ap ital Imp ro vement P ro gram has two open capital p ro jec ts, des cribed below: P lunge Creek Crossing – T he purpos e o f this p ro jec t, o riginally b ud geted at $79,000, is to rep air leaks in the No rth F o rk p ip eline as it c rosses P lunge C reek. T he recommended method fo r repair is to make minor repairs to the pipe as needed, and then reinforc e conc rete armo ring aro und the pipe. S taff is req uesting that an ad d itio nal $51,000 of C apital R es erves b e allo cated fo r the p ro jec t to c o ver F ed eral and/o r S tate permitting if required. T hro ugh January 2018, design wo rk for $5,281 has been c ompleted. F acility Abandonments – T his p ro jec t will effectively and s afely aband on weirs, pip es and other open facilities that are no lo nger need ed for C ompany operations. T hough all have perimeter fencing, the highest level o f hazard and liab ility mitigation c an only be ac comp lis hed by filling expos ed op enings with earth o r c oncrete. S taff is requesting that $50,000 o f the balanc e of C ap ital R eserves be allo c ated fo r fac ility abandonments . No wo rk was c o mpleted o n the P lunge C reek C ro s s ing during this fisc al year as the C ity of Highland has exp res s ed an interest in a joint effort that would help them c ro s s P lunge C reek fo r their Trails P rojec t. R ec o mmend ed b y: John Mura G eneral Manager/C EO R espec tfully s ubmitted: Brian Tomp kins Treasurer Capital Improvement P roject Project Budget Actual Expenditures P roject S tatus P ip eline - P lunge C reek C ro ssing $ 130,000 $ 5,281 O pen F acility Ab ando nments 50,000 0 P ro p o s ed Total $ 180,000 $ 5,281 C apital as s essments collec ted in prior years, and c urrently inc luded in C apital R es erve b alances, are s ufficient to p ay fo r wo rk yet to be completed. Acc o rd ingly, staff is no t recommending a c ap ital as s essment fo r fisc al year 2019-20. AGE N C Y GOALS AN D OB J E C T IVE S: R E VIE W B Y O T HE R S : T his agend a item has been reviewed b y the Administration, F inance, and O perations dep artments . F IS CAL IMPAC T Ad o p tions of the O perating Bud get as pres ented autho rizes op erating expenses of $133,000 for fis cal year 2019-20 and increases autho rized exp enditures from c ap ital res erves b y $101,000. ATTAC H M E NTS: Description Type P resentation P resentation BUDGET & ASSESSMENTS APRIL 2, 2019 PROPOSED 2019-20 BUDGET 13 DESCRIPTION ADOPTED 2018-19 BUDGET PROPOSED 2019-20 BUDGET OPERATING EXPENSES Operating Labor/Equipment -EVWD $ 24,000 $ 17,000 Contract Services 13,200 15,700 Legal Services 60,000 50,000 Materials & Supplies 1,000 100 Administration 17,000 14,000 Director Fees 200 200 Insurance 4,600 3,500 Property/Franchise Taxes 30,000 32,500 Total Operating Expenses $ 150,000 $ 133,000 CAPITAL EXPENDITURES $ 0 $ 0 PROPOSED 2019-20 ASSESMENTS 14 DESCRIPTION PROPOSED 2019-20 BUDGET Proposed Expenses Operating Expenses $ 133,000 Capital Expenditures 0 TOTA L PROPOSED EXPENSES $ 133,000 Proposed Funding -7,156 Shares Operating Assessment -$16 per share $ 114,496 Operating Reserves 18,504 Capital Assessment 0 TOTAL FUNDING $ 133,000 $16 2019-20 ASSESSMENTS $0 CAPITAL ASSESSMENTS 15 HIGHLAND, CALIFORNIA for years ending January 31, 2019 and January 31, 2018 FINANCIAL STATEMENTS North Fork Water Company A CALIFORNIA CORPORATION Table of Contents Schedule Page Organization Data 1 Independent Accountants’ Review Report 2 - 3 Statements of Financial Position 4 Statements of Activities 5 Statements of Changes in Shareholders' Equity 6 Statements of Cash Flows 7 Notes to Financial Statements 8 – 11 Supplementary Information Schedule of Property, Plant and Equipment, and Accumulated Depreciation One 12 – 13 Schedule of Shareholders Two 14 Statement of Financial Position Comments Three 15 - 16 DR A F T North Fork Water Company (A California Corporation) Organization Data January 31, 2019 and 2018 1 DATE AND STATE OF INCORPORATION 1885 - California DURATION OF CHARTER Perpetual Existence NATURE OF BUSINESS Water Company Located in Highland, California DATE OF EXEMPTION LETTER September 13, 1964 OFFICERS Chris Carrillo President David Smith Vice President Brian Tompkins Treasurer Justine Hendricksen Secretary DIRECTORS Charles Kiel Phillip Goodrich Ronald Coats Chris Carrillo James Morales, Jr. David Smith Margaret Wright MANAGER Under Agreement with East Valley Water District DR A F T 2 DR A F T 3 DR A F T 2019 2018 Current Assets Cash 141,726$ 121,853$ Cash - Restricted for Capital Projects 180,878 180,878 Prepaid Expenses 16,578 15,911 Receivables Assessments 15,309 2,064 Total Current Assets 354,491 320,706 Property, Plant, and Equipment Improvements - Fencing 2,840 2,840 Pipelines and Valves 2,857,411 2,857,411 Construction In Progress 5,281 5,281 Less: Accumulated Depreciation (630,438) (574,601) Total Property, Plant, and Equipment 2,235,094 2,290,931 Other Assets Water Rights - January 31, 1952 655,611 655,611 Total Other Assets 655,611 655,611 Total Assets 3,245,196$ 3,267,248$ Current Liabilities Accounts Payable 17,000$ 12,340$ Total Current Liabilities 17,000 12,340 Shareholders' Equity Capital Stock Authorized 7,200 Shares - 7,156 Issued and Outstanding at $100 Stated Value 715,600 715,600 Additional Paid-In Capital 490,548 502,574 Contributed Capital 1,532,770 1,570,616 Retained Earnings 489,278 466,118 Total Shareholders' Equity 3,228,196 3,254,908 Total Liabilities and Shareholders' Equity 3,245,196$ 3,267,248$ 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, 2019 and 2018 ASSETS 4 DR A F T 2019 2018 Revenues Water Sales -$ -$ Expenses Repairs and Maintenance Labor and Equipment 14,616 14,584 Contracted 9,750 7,800 Administration 14,920 16,467 Accounting Fees 2,000 2,200 Other Professional Services - 51,489 Legal 38,441 53,000 Materials and Supplies 92 844 Property Taxes 30,270 27,977 Insurance 3,106 4,471 Depreciation 55,837 55,837 Total Expenses 169,032 234,669 Loss from Operations (169,032) (234,669) Other Income Interest - - Total Other Income - - Excess of Expenses over Revenues before Provision for Income Taxes (169,032) (234,669) Provision for Income Taxes State Income Taxes 800 800 Excess of Expenses over Revenues before Contributions (169,832) (235,469) Contributions Shareholder Assessments - Operating 143,120 164,588 Shareholder Assessments - Capital - - Change in Equity (26,712)$ (70,881)$ See accompanying notes and Independent Accountants' Review Report. North Fork Water Company (A California Corporation) Statements of Activities January 31, 2019 and 2018 5 DR A F T Cumulative Common Stock Additional Excess of Total Issued and Paid-in Contributed Revenue Over Shareholders' Outstanding Capital Capital Expenses Equity Balance, January 31, 2018 715,600$ 502,574$ 1,570,616$ 466,118$ 3,254,908$ Shareholder Assessments 143,120 143,120 Excess of Expenses Over Revenues (169,832) (169,832) Allocate Depreciation (12,026) (37,846) 49,872 - Balance, January 31, 2019 715,600$ 490,548$ 1,532,770$ 489,278$ 3,228,196$ Cumulative Common Stock Additional Excess of Total Issued and Paid-in Contributed Revenue Over Shareholders' Outstanding Capital Capital Expenses Equity Balance, January 31, 2017 715,600$ 514,600$ 1,608,462$ 487,127$ 3,325,789$ Shareholder Assessments 164,588 164,588 Excess of Expenses Over Revenues (235,469) (235,469) Allocate Depreciation (12,026) (37,846) 49,872 - Balance, January 31, 2018 715,600$ 502,574$ 1,570,616$ 466,118$ 3,254,908$ See accompanying notes and Independent Accountants' Review Report. January 31, 2018 January 31, 2019 North Fork Water Company (A California Corporation) Statements of Changes in Shareholders' Equity January 31, 2019 and 2018 6 DR A F T 2019 2018 Cash Flows from Operating Activities Cash Paid for Services and Materials (109,202)$ (216,466)$ Income Taxes Paid (800)(800) Net Cash used by Operating Activities (110,002) (217,266) Cash Flows from Financing Activities Contributions from Shareholders to Pay Suppliers 129,875 164,435 Net Cash Provided by Financing Activities 129,875 164,435 Cash Flows from Investing Activities Acquisition and Construction of Assets - (23,388) Net Cash used for Investing Activities - (23,388) Net Increase in Cash 19,873 (76,219) Cash, Beginning of Year 302,731 378,950 Cash, End of Year 322,604$ 302,731$ Reconciliation of Excess of Expenses over Revenues to Net Cash Used By Operating Activities Excess of Revenue over (under) Expenses (169,832)$ (235,469)$ Adjustments: Depreciation 55,837 55,837 (Increase) Decrease in: Prepaid Expenses (667)(164) Increase (Decrease) in: Accounts Payable and Accrued Liabiities 4,660 (37,470) Net Cash used by Operating Activities (110,002)$ (217,266)$ See accompanying notes and Independent Accountants' Review Report. North Fork Water Company (A California Corporation) Statements of Cash Flows January 31, 2019 and 2018 7 DR A F T North Fork Water Company (A California Corporation) Notes to Financial Statements January 31, 2019 and 2018 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. 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, 2019 and 2018 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. DR A F T North Fork Water Company (A California Corporation) Notes to Financial Statements January 31, 2019 and 2018 9 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, 2019, the Company had $76,616 deposited with financial institutions that were in excess of federal depository insurance limits. The federal deposit insurance limit is $250,000. NOTE 2 - RELATED PARTY TRANSACTIONS As of January 31, 2019, East Valley Water District owned 90% of the outstanding shares of the Company. The Company and East Valley Water District have certain officers and directors in common. The following related party transactions occurred for the years ending January 31, 2019 and January 31, 2018:  East Valley Water District paid the Company operating and capital assessments of $118,130 and $135,803  The Company paid East Valley Water District for labor and administration of $29,536 and $31,051 NOTE 3 – DEPARTURE FROM US GAAP As noted in Note 2, East Valley Water District owns 90% of the Company and may appoint (or approve) a controlling majority of the members of the Company’s governing board. Under the AICPA’s Audit and Accounting Guide for State and Local Governments, this characterizes the Company as a governmental entity and therefore subject to the financial reporting standards required by the Governmental Accounting Standards Board (GASB). The accompanying financial statements were prepared in accordance with the reporting requirements of the Financial Accounting Standards Board (FASB) which represents a known departure from US GAAP. DR A F T North Fork Water Company (A California Corporation) Notes to Financial Statements January 31, 2019 and 2018 10 NOTE 4 - PROPERTY, PLANT, AND EQUIPMENT A summary of changes in property, plant and equipment follows: Balance Balance January 31, 2018 Additions Deletions January 31, 2019 Distribution System Pipelines 2,851,372$ -$ -$ 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 Construction In Progress Pipeline Replacement 5,281 - - 5,281 Tota l 2,865,532$ -$ -$ 2,865,532$ Balance Balance January 31, 2017 Additions Deletions January 31, 2018 Distribution System Pipelines 2,791,959$ 59,413$ -$ 2,851,372$ Ditch Diversion Boxes 4,729 - - 4,729 Valves 1,310 - - 1,310 2,797,998 59,413 - 2,857,411 Improvements Fencing – North Fork Intake 2,840 - - 2,840 Construction In Progress Pipeline Replacement 41,306 37,988 (74,013) 5,281 Tota l 2,842,144$ 97,401$ (74,013)$ 2,865,532$ DR A F T North Fork Water Company (A California Corporation) Notes to Financial Statements January 31, 2019 and 2018 11 NOTE 5 - ANNUAL SHAREHOLDER ASSESSMENTS Annual shareholder operating assessments were set at $20 per share for the year ended January 31, 2019. No capital assessments were levied during the year. NOTE 6 - SUBSEQUENT EVENTS In the preparation of these financial statements, the Company considered subsequent events through March 22, 2019, which is the date these financial statements were issued. DR A F T THIS PAGE IS LEFT BLANK INTENTIONALLY DR A F T SUPPLEMENTARY INFORMATION DR A F T Schedule One Page 1 of 2 January 31, 2019 Date Beginning Ending Remaining Beginning Ending Acquired Balance Balance Life Years Balance Provision Balance Canal Replacements 1995 41,862$ 41,862$ 26 18,838$ 837$ 19,675$ Canals - 1/2 interest Various 67,610 67,610 67,610 -67,610 Ditch Diversion Boxes 1985 4,729 4,729 17 3,087 95 3,182 Canals - 36" Pipeline 1995 8,958 8,958 25 4,207 179 4,386 Canal Replacement (La Tourette) 1997 37,511 37,511 28 15,749 750 16,499 Canal Replacement (Plunge Creek Syphon to Cram School)1999 68,937 68,937 30 26,207 1,380 27,587 Pipeline Replacement 90' of 26" Pipeline (behind Walmart)2002 9,941 9,941 32 3,383 199 3,582 Pipeline Replacement 16" Pipeline (Highland Avenue) 2004 3,010 3,010 34 900 60 960 Canal Replacement 36" Pipeline - SAR to Plunge Creek Sandbox)2009 2,493,592 2,493,592 40.5 423,912 49,872 473,784 Pipeline Replacement 50' of 30" DIP - Highland at VFW Hall 2011 26,205 26,205 42 3,668 524 4,192 Pipeline Replacement 220' of 24" - SAR Xing to Turnout 2014 34,333 34,333 45 2,748 687 3,435 6" Gate Valve (Wier 17)2014 1,310 1,310 17 264 66 330 Pipeline Replacement 80' of 30" - SAR Xing at 7 Oaks Dam 2017 59,413 59,413 49 1,188 1,188 2,376 2,857,411 2,857,411 571,761 55,837 627,598 Improvements: Security Fencing - NF Intake 2003 2,840 2,840 0 2,840 2,840 Totals 2,860,251$ 2,860,251$ 574,601$ 55,837$ 630,438$ Construction in Progress Various 5,281 5,281 0 --- See accompanying notes and Independent Accountants' Review Report. Property, Plant and Equipment Accumulated Depreciation North Fork Water Company (A California Corporation) Schedule of Property, Plant and Equipment, and Accumulated Depreciation January 31, 2019 12 DR A F T Schedule One Page 2 of 2 January 31, 2018 Date Beginning Ending Remaining Beginning Ending Acquired Balance Balance Life Years Balance Provision Balance Canal Replacements 1995 41,862$ 41,862$ 27 18,001$ 837$ 18,838$ Canals - 1/2 interest Various 67,610 67,610 67,610 - 67,610 Ditch Diversion Boxes 1985 4,729 4,729 18 2,992 95 3,087 Canals - 36" Pipeline 1995 8,958 8,958 26 4,028 179 4,207 Canal Replacement (La Tourette) 1997 37,511 37,511 29 14,999 750 15,749 Canal Replacement (Plunge Creek Syphon to Cram School)1999 68,937 68,937 31 24,827 1,380 26,207 Pipeline Replacement 90' of 26" Pipeline (behind Walmart)2002 9,941 9,941 33 3,184 199 3,383 Pipeline Replacement 16" Pipeline (Highland Avenue) 2004 3,010 3,010 35 840 60 900 Canal Replacement 36" Pipeline - SAR to Plunge Creek Sandbox)2009 2,493,592 2,493,592 41.5 374,040 49,872 423,912 Pipeline Replacement 50' of 30" DIP - Highland at VFW Hall 2011 26,205 26,205 43 3,144 524 3,668 Pipeline Replacement 220' of 24" - SAR Xing to Turnout 2014 34,333 34,333 46 2,061 687 2,748 6" Gate Valve (Wier 17)2014 1,310 1,310 17 198 66 264 Pipeline Replacement 80' of 30" - SAR Xing at 7 Oaks Dam 2017 59,413 49 - 1,188 1,188 2,797,998 2,857,411 515,924 55,837 571,761 Improvements: Security Fencing - NF Intake 2003 2,840 2,840 0 2,840 2,840 Totals 2,800,838$ 2,860,251$ 518,764$ 55,837$ 574,601$ Construction in Progress Various 41,306 5,281 0 - - - See accompanying notes and Independent Accountants' Review Report. North Fork Water Company (A California Corporation) Schedule of Property, Plant and Equipment, and Accumulated Depreciation January 31, 2018 Property, Plant and Equipment Accumulated Depreciation 13 DR A F T Schedule Two Number of Shareholder Certificate Number(s)Shares Linda Spitzer 1391 4.00 Arnott Poulty Ranch 1316 138.00 Arnott Brothers Enterprises 1341 55.00 Gailen & Helen Arnott 1129 66.67 William Buster 1057 8.00 Brucie Cagle 1373 4.00 Calvary Chapel 1375 72.50 Richard Christianson 1148 3.00 East Valley Water District 6,445.16 Christina Moreno 1379 8.50 Nigel C. Smith 1378 3.00 Jose Gutierrez 1308 9.00 First American Title 1381 36.00 Kiel Family Trust 1126, 1165, 1258, 1328 143.00 Fred McNeal 1156, 1246, 1248 43.20 McNeal, Duckworth McNeal, Inc.1360, 1406, 1413 40.80 Michelle Beresford 1402 5.00 Luis E. & Jacqueline R. Curiel 1382 3.50 Michael & Patricia Raley 1414 5.00 Wright Family Trust 1419 25.00 Yucaipa Valley W. D.1362 37.67 Total 7,156.00 See accompanying notes and Independent Accountants' Review Report. North Fork Water Company (A California Corporation) Schedule of Shareholders January 31, 2019 and 2018 14 DR A F T Schedule Three Page 1 of 2 See accompanying notes and Independent Accountants’ Review Report. 15 North Fork Water Company (A California Corporation) Statement of Financial Position Comments January 31, 2019 and 2018 CURRENT ASSETS Current assets consisted of the following: 2019 2018 Cash in Checking 322,604$ 302,731$ Prepaid Insurance 2,219 1,974 Prepaid Taxes 14,359 13,937 Assessments Receivable 15,309 2,064 Totals 354,491$ 320,706$ 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 as "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. DR A F T Schedule Three Page 2 of 2 See accompanying notes and Independent Accountants’ Review Report. 16 North Fork Water Company (A California Corporation) Statement of Financial Position Comments January 31, 2019 and 2018 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 $55,837 computed at established rates using the straight-line method. CURRENT LIABILITIES Current liabilities consisted of the following: 2019 2018 Accrued Liabilities Accounts Payable Labor and Burden 2,027$ 2,809$ Legal - January 8,998 1,771 Landscaping 650 650 EVWD Insurance Reimbursement 5,325 - Stock Valuation Services - Brian Brady - 7,110 Total Accounts Payable 17,000 12,340 DR A F T 2 INDEPENDENT ACCOUNTANTS’ REVIEW REPORT To the Board of Directors North Fork Water Company Highland, California We have reviewed the accompanying financial statements of North Fork Water Company (a California corporation), which comprise the statement of financial position as of January 31, 2019, and the related statements of activities, changes in shareholders’ equity, and cash flows for the year then ended, and the related notes to the financial statements. A review includes primarily applying analytical procedures to management’s financial data and making inquiries of company management. A review is substantially less in scope than an audit, the objective of which is the expression of an opinion regarding the financial statements as a whole. Accordingly, we do not express such an opinion. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement whether due to fraud or error. Accountants’ Responsibility Our responsibility is to conduct the review engagement in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA. Those standards require us to perform procedures to obtain limited assurance as a basis for reporting whether we are aware of any material modifications that should be made to the financial statements for them to be in accordance with accounting principles generally accepted in the United States of America. We believe that the results of our procedures provide a reasonable basis for our conclusion. INDEPENDENT ACCOUNTANTS’ REVIEW REPORT 3 Accountants’ Conclusion Based on our review, except for the issue noted in the Known Departure from Accounting Principles Generally Accepted in the United States of America, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in accordance with accounting principles generally accepted in the United States of America. Known Departure from Accounting Principles Generally Accepted in the United States of America As disclosed in Note 3 to the financial statements, accounting principles generally accepted in the United States of America require that governmental entities follow the reporting requirements of the Governmental Accounting Standards Board (GASB). The accompanying financial statements have been prepared in accordance with the reporting requirements of the Financial Accounting Standards Board (FASB). The effects of this departure from accounting principles generally accepted in the United States of America on financial position, results of operations, and cash flows have not been determined. Supplementary Information The Supplementary Information included in Schedules I, II and III is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The supplementary information has been subjected to the review procedures applied in our review of the basic financial statements. We are not aware of any material modifications that should be made to the supplementary information. We have not audited the supplementary information and do not express an opinion on such information. CliftonLarsonAllen LLP Glendora, California March 22, 2019