MINUTES OF THE REGULAR MEETING OF THE BOARD OF DIRECTORS

OF THE

ARABIAN ACRES METROPOLITAN DISTRICT

Held: Friday, October 15, 2004 at 7:00 p.m. at 400 W. Midland Avenue, Suite 250, Woodland Park, Colorado.

Attendance	The regular meeting of the Board of Directors of the Arabian Acres Metropolitan District was called and held in accordance with the statutes of the State of Colorado. The following Directors were in attendance: Radford K. Walker Dennis S. Yoder David J. Biondo Alan L. Jordan Gene L. Billings was absent . Also present were Dave Stanford and Nancy Reeder with AquaTest, Inc.; Ken Rupp, private consultant to the District; and Joan Fritsche of Seter & Vander Wall, P.C. Homeowners Cliff Hatch and Julie Thompson of 312442 County Road 42 were also present.
Call to Order	Upon motion duly made, seconded and carried with Director Yoder abstaining, Director Billings was excused, and in his absence Director Yoder was appointed Acting President for the meeting. Upon motion duly made, seconded and carried with Director Biondo abstaining, Director Biondo was appointed Acting Secretary for the meeting. Director Yoder noted that a quorum was present and called the regular meeting of the Board of Directors of the Arabian Acres Metropolitan District to order.
Disclosure Matters	Director Yoder asked the Board to confirm that no changes have occurred to any of the Directors’ interests that warrant amending the written disclosures on file with the Secretary of State’s Office with regard to any potential conflicts of interest. Pursuant to Colorado law, certain disclosures may be required prior to taking official action at the meeting. The Board reviewed the agenda for the meeting, following which each Board member disclosed their conflicts of interest, stating the fact and summary nature of any matters, as required under Colorado law, to permit official action to be taken at the meeting.
Public Comment	Cliff Hatch and Julie Thompson of 312442 CR 42 were present to request reimbursement of the expenses they incurred while they were on a temporary water tank due to the water line break that services their home. They presented a breakdown of costs and expressed their concerns over the poor delivery service by Gold Rush Water. Director Yoder thanked them for their attendance at the meeting, and stated that their request would be taken under consideration by the Board at a later time after the Directors had time to review the information. In response to a question from Mr. Hatch and Ms. Thompson regarding their milky-colored water, Mr. Stanford explained that the problem will subside in 45 to 60 days. It is compressed air in the water, and will resolve itself with time.
Approval of Minutes	The minutes of the regular meeting of the Board of Directors held September 17, 2004 were read, and upon motion duly made, seconded and unanimously carried, were approved. A copy of the September 17, 2004 minutes was signed by Director Biondo.
Financial Matters	Director Jordan had emailed to everyone his report on the financial overview of the District as of September 30, 2004. Monthly expenses were reviewed. Ms. Reeder and the Directors reviewed the Cash Disbursement Journal. In addition to the checks listed on the report, two additional checks have been written, one each to ColoTrust and Zions Bank for transfer of funds from the District’s checking account, into one of either of the two accounts, depending on the choice of the Directors, of an $8,000 tap fee received. A discussion ensued as to whether or not tap fees had to be placed in the Zions Bond Fund account. Ms. Fritsche reviewed the Indenture of Trust during the meeting and stated that tap fees did not have to go into the Zions Bond Fund account, but could go into the ColoTrust account. A motion was made for the Board to pay the bills as originally presented, to void the $8,000 check (#1300) to Zions National Bank, and to approve the $8,000 check (#1301) to ColoTrust to transfer the tap fee into the ColoTrust account. The motion was seconded and unanimously carried. Ms. Reeder reported that she emailed Paul Goedecke regarding the account procedure changes/financial changes (items 5.c. and 5.d. on the agenda). His reply stated that he just wanted to verify that the 2003 year-end adjusting entries provided by the auditor were indeed done and incorporated into the District’s financial statements. Ms. Reeder confirmed that all adjusting entries from the auditor were done for 2003. A discussion ensued regarding the Budget Amendment for 2003 (agenda incorrectly shows 2004). Ms. Fritsche stated that no changes were necessary because actual expenses in 2003 did not exceed the 2003 budget. The 2004 budget can be amended, if necessary, at the end of 2004 after all expenses are in. Mr. Rupp recalled that at a past meeting, Mr. Goedecke stated that the District needed to amend its 2003 budget due to unappropriated expenditures. Ms. Reeder will contact Mr. Goedecke to clarify what exactly, if anything, needs to be done to the 2003 Budget at this point. It was noted that agenda items 5.f. “Breakdown of Estimated Costs for Services by Category” and 5.g. “Line Item Budget Calculations Update” should be deleted from the agenda, as they have been discussed and resolved at a previous meeting. A discussion ensued regarding the Zions Reserve Fund. Ms. Fritsche sated that the fund was set up to be used to make Bond payments, if necessary. No reserve fund was set up originally, but the Commissioner’s required it at the time of the District formation. The Trustee obviously would prefer that the District not spend the money in that account. The Indenture of Trust does state that the funds have to be repaid to the Reserve Fund as soon as practical by the District, but a time frame is not specified. Ms. Fritsche confirmed that using money from the Reserve Fund would not raise the interest rate of the bond. 2005 Budget: Director Jordan reviewed the proposed 2005 Budget, as prepared by the Budget Committee. He reviewed each line item, explaining the Committee’s reasoning behind each item. Ms. Fritsche recommended that Legal Fees be increased from $10,000 to $15,000, to cover unforeseen issues. Paying Agent Fees were reduced to $0 because no expenses were allocated to that expense account. Ms. Reeder will call Zions National Bank and verify what the paying agent fee is. The Arabian Acres Water Company, LLC Advance and Reimbursement Agreement and how it impacted the 2005 Budget was discussed at length. Ms. Fritsche and Mr. Rupp will review the agreement. At this time, no payment is required, but the District could make a partial good-faith payment in 2004, depending on the financial position of the District at the close of 2004. There are several possible scenarios regarding partial payment to the Arabian Acres Water Company, LLC, but they will need to be discussed by the Board closer to the end of the year, once all the numbers are in for the District. Director Yoder recommended that the Proposed 2005 Budget be accepted with the following changes: Raise Legal Expense from $10,000 to $12,000 and raise Paying Agent Fees from $0 to $1,000. The Budget Committee concurred with Director Yoder’s recommendations. Ms. Reeder was directed to place the Public Notice of the Proposed 2005 Budget hearing in the local newspaper.
District Operations Discussion	Mr. Rupp reported that the ‘Pavilion’ property owner, Mr. Pete Kuyper, was agreeable to granting the easement for the District’s main that runs through the vacated abandoned road property on the ‘Pavilion’ property. Mr. Rupp will manipulate the previous Trout Haven Resort easement to create this easement, and send to Ms. Fritsche for her review. Once signed by Mr. Kuyper, the Board will have to accept the easement.
Manager’s Report Attorney’s Report Other Business Adjournment	Mr. Stanford reported that the system is working well. The repair to provide water to the District’s customers at 312442 CR 42 has been completed. Colorado Springs Utilities (CSU) did the excavation to find the leak, AquaTest provided the labor to make the repair at no charge to the District, and the District purchased the materials for the repair. Water service has been restored to the customer. He reminded the Board that there is still a problem with water hammer when the homeowners at 3142 3124 CR 42 turn off their water. Future problems are likely on the line, and the line will have to be eventually replaced in its entirety. At that time, CSU will require specific valve spacing and will want input on materials because the line is in their easement. They would probably also want to supervise the installation. The cost to replace the line is estimated to be $15,000 due to the design changes required by CSU. Mr. Stanford also confirmed that all proper tap fees for Kutsu Ridge Road have been paid by property owners utilizing District water on this road, in response to a concern that a tap fee may not have been paid by a property owner of a newly constructed home in this area. Regarding the Camp Iana easement, Mr. Rupp stated that he talked to CSU’s project manager during the leak repair. The project manager stated informally that CSU is doing everything in-house (wording, descriptions, etc.); therefore, the process may take a while to complete. Mr. Rupp will continue working on this project. David Lindholm is waiting for comments from Highland Lakes’ attorney regarding the new proposed Augmentation and Exchange Water Court Decree. If Mr. Lindholm doesn’t hear from the Highland Lakes attorney next week, Mr. Lindholm will call and follow up. Director Walker presented a list of brainstorming ideas that he compiled during the last meeting, when the Board was discussing ways to increase the number of taps along Kutsu Ridge Road and Tioga Trail. The Directors briefly reviewed the list with Ms. Fritsche, and eliminated the ones that were not legal or not viable ideas. She reminded the Board that the District must be able to justify different rates charged to customers. All District constituents must be treated equally. A tap application was received for 540 Pawutsy Road. The Directors reviewed possible ways to extend the water main to that lot, but the lot is quite a distance from any existing main. Upon motion duly made, seconded and carried, the Board disapproved the water tap application at 540 Pawutsy Road and directed the District Manager to return the applicants’ check with a letter offering the lot owners the option to pay the expenses to extend the District’s water main to their lot with a reimbursement agreement with the District, that would provide for reimbursement of those expenses to the lot owner, as other taps occur on that line. A tap application has also been received for 27 Kenwood Drive. That application was accepted by the District Manager. The Board reviewed the list of expenses provided by Mr. Hatch and Ms. Thompson. Mr. Stanford recommended that the District pay the expenses. Director Yoder expressed concern about reimbursing them for the water used at a friend’s house, when the friend has a well and there is really no out-of-pocket expense for the water. Upon motion duly made, seconded and carried with Director Yoder abstaining, the Board agreed to reimburse Mr. Hatch and Ms. Thompson for their expenses in the amount of $304.51. The Board briefly discussed the issue of UNCC locates and their subsequent increased costs to the District. Director Billings had written a letter regarding the UNCC locates issue, but his email did not go through to the other Directors. The issue will be discussed at the next Board meeting. Mr. Stanford did note that another District has found out that if they install permanent markers at each value box, the locates for road grading would not have to be performed. The District would just notify Teller County that it will not be responding to those locates. The markers cost approximately $22 each, plus installation. The Board will re-evaluate this option in the spring, when road grading begins again. There being no further business to come before the Board, and upon motion duly made, seconded and unanimously carried, the meeting was adjourned at 10:00 PM. _________________________________________ Secretary for the Meeting