MINUTES OF THE REGULAR MEETING OF THE BOARD OF DIRECTORS

OF THE

ARABIAN ACRES METROPOLITAN DISTRICT

Held: Friday, February 17, 2006 at 7:00 p.m. at 4455 Fountain Avenue, Cascade, CO.

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 David J. Biondo Dennis S. Yoder Also present; Ken Rupp, private District consultant, Dave Barwick and Chris Strole, the Operators for the District, Terry Malcom, the Administrator for the District and Rick and Sandy Zuniga, District constituents. Director Jordan and Director Billings were excused due to conflicts in their schedules pursuant to 32-1-905(1)(g), C.R.S.
Call to Order	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 at 7:06pm.
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	Rick and Sandy Zuniga, District constituents, were in attendance at the meeting. Introductions were exchanged between all present. Sandy Zuniga stated that she was interested in a position for the Board of Directors for the District. Discussion ensued regarding the various vacancies of Board positions and strategies for ultimately filling them prior to and with the upcoming election. Further discussion was held until later in the meeting.
Approval of Minutes	The minutes of the regular meeting of the Board of Directors held January 20, 2006 were read, and upon motion duly made, seconded and unanimously carried, were approved with corrections. A copy of the corrected minutes is to be submitted for appropriate signatures at the March 17, 2006 meeting of the Board of Directors.
Financial Matters	Terry Malcom reviewed the monthly financial statements and expenses with the Board. Discussion ensued regarding various payments and/or classifications of various claims. It was also discussed as how to convert the present ‘Profit and Loss’ Statement and the ‘Monthly Recap’ into an ‘Income/Budget’ Statement. The Board discussed its interest in having the ‘monthly percentage completed’ included in the ‘Income/Budget’ Statement heading, as this percentage is helpful to the Board in reviewing the financial health of the District each month. Mr. Malcom suggested a different approach of comparing yearly expenses to date by categories of expense to those of the previous year in helping determine the financial health of the District. It was agreed that Mr. Malcom would develop such a statement and present it to the Board for consideration. Director Biondo noted that the Park State Bank checking account has a balance of approximately $36,512.94. Director Biondo noted that the bank statement from Colorado Trust has still not been received, but mentioned that he now has it set up whereby this account could be accessed and reviewed online, however no transactions can be completed online. A motion was made, seconded and unanimously carried to approve the financial statements and monthly claims as presented.
Administrator’s Report	Mr. Malcom presented his monthly Administrator’s report for the period January 1 to January 31, 2006. He pointed out to the Board that there is still some degree of confusion concerning customer’s deposits, rental property accountability, and other issues concerning the latest two taps, as paid for and initiated during the last administrative contractor’s tenure at the end of 2005. Two files were recently received by Mr. Malcom from AquaTest, one of which contained a check for a tap fee, which was written in September of 2005. Mr. Rupp volunteered to help alleviate some of the confusion regarding customer deposits by researching the District files further and passing pertinent information along to Mr. Malcom. It was determined to investigate further on the details of the two subject taps, so as to be assured that the taps are proceeding properly and that all details of the taps have been handled appropriately. The September tap fee has been deposited in the District’s checking account. Regarding the issue of the accountability of the monthly service charge and monthly water bill for landowners that are renting their properties, it was determined by the Board that the landowner is to be held accountable for their rental properties’ monthly water assessments by the District. A motion was made to this effect, was seconded, carried unanimously and was approved by the Board.
Operator’s Report	Mr. Barwick and Chris Strole, the District’s water system operations contractor, presented the Operator’s Report. They stated that the water system has been operating consistently with the following exceptions: 1). Well # 1 has been operating from the ‘Motor Minder’ safety shutoff device several times. 2). A chlorine dosage pump has failed and been replaced with a loaner pump. 3). Wells # 2 & 8 are demonstrating erratic production flows occasionally and will be further diagnosed. The operators advised the Board that the three-year complete battery of water tests is due this year, as required by the State. They also advised that the El Paso County Health Department would be performing the monthly bacteria sampling. All of the test results will be received by Terry Malcom’s office, but the operators will maintain these files and the results of the tests will be available to the public throughout the year and by means of the Consumer Confidence Report, to be distributed to District constituents in July. The operators also reported that the District’s service meters preventative maintenance program is ongoing at present and the overall preventative maintenance program is tentatively in place. The operators submitted a preventative maintenance list of weekly, quarterly, bi-yearly, and yearly maintenance items to the Board. This preventative maintenance list is coupled with a work order report, which will serve to verify that the contractor accomplishes all items in the prescribed schedule on a timely basis. A motion was made to accept the Work Order sheet as a template for the required preventative maintenance program, to be further developed. The motion was seconded, carried unanimously and was approved.
Attorney’s Report	Mr. Rupp reported that no further progress has been made with the Camp Iana/CSU Easement, the Trout Haven Resort Easement, or the Augmentation and Exchange Water Court Decree, but hopes to be able to resume progress on the above issues once the transition of District’s contractors has been satisfactorily completed. Further discussion ensued regarding the upcoming Election for Directors for the Board. It was noted that the ‘Self Nomination and Acceptance’ form must be completed by anyone wishing to run for a position on the Board of Directors and sent to the Designated Election Official, Sandy Thomas of Seter and Vander Wall, P.C., to arrive by February 24, 2006. Sandy Zuniga indicated that she would have her form in the hands of Sandy Thomas by the deadline date.
Consultant’s Report	The District’s private consultant, Ken Rupp, reported that he has continued to monitor and help with the contractor transition for the District and the transition is proceeding satisfactorily to this point. The District files are still an item of concern due to the unusable form of some of the files and/or the inability to open other files, as transferred from the previous contractor.
Other Business	Director Yoder presented Director Jordan’s resignation to the Board, which he received by email in January of 2006. A motion was made to accept Director Jordan’s resignation. The motion was seconded, carried unanimously, and was approved. The Board wished to express their appreciation and gratitude to Director Jordan for all of his hard work during his tenure as a Board member with the District. Discussion ensued concerning the recent Board approved water rate increase and the 2006 Budget numbers, as filed. The District’s private consultant, Ken Rupp, presented the results of his in-depth analysis and subsequent changes of the numbers in the 2006 Budget, including, but not limited to; Actual updated year-end income and expenses for 2004, actual updated year-end income and expenses for 2005, tap revenue amounts for 2005, actual Advance and Reimbursement payments for 2005 and projected 2006 payments, as confirmed by the District’s legal counsel, and suggestions for more reasonable projections in the 2006 Budget considering past circumstances and present circumstances. Mr. Rupp felt that no monthly service rate increase should be necessary with the newly confirmed numbers as per his changes. Primarily, changes made in the tap fee revenues and the Advance and Reimbursement categories for 2004 and 2005, along with numerous other modifications, as depicted in Mr. Rupp’s worksheets, resulted in the District’s ‘Total Net Operating Income/Excess Revenue Over (Under) Expenditures’ decreasing from a negative $59,813.00 to a negative $3,358.00 in the ‘Projected Actual 2005’ column, with the same category for the ‘Proposed Budget 2006’ column changing from a negative $32,640.00 to a positive $43,933.00, with 7 taps being projected in 2006. Director Yoder expressed concern regarding the projected 7 taps for 2006 and requested that the spreadsheet be modified to reflect 5 taps for 2006 and that the spreadsheet be sent to all Board members, once the requested modifications were completed, for the Boards further review. Further discussion ensued regarding the Advance and Reimbursement Agreement numbers reflected in the 2006 Budget. Director Yoder felt uncomfortable reflecting less than the actual total amount due to the Rupp Family Partnership, RLLLP in the 2006 Budget. Mr. Rupp pointed out that the actual amount due by the Advance and Reimbursement Agreement must be included in the District’s Audit and Balance Statement, but, as confirmed by the District’s legal counsel, does not have to be fully reflected in the yearly Budget, but rather only a reasonable amount that the District feels it will be able to afford to pay to the RLLLP, need be shown in the Budget for the year. Mr. Rupp further pointed out that these funds were left in the District’s finances by the RLLLP upon the District’s formation specifically to give the District a buffer of capital with which to operate. Mr. Rupp also stated that the Rupp Family Partnership, RLLLP does not have a problem with the District paying little or no payments towards the Advance and Reimbursement Agreement each year. Mr. Rupp also pointed out that by reflecting the full amount due in the yearly Budget, as per the Advance and Reimbursement Agreement, it creates an unrealistic and unreasonable deficit in the Budget each year, which goes away when the District pays less than the full amount at the end of the year, but reoccurs when this full amount is again included in the next years Budget numbers. This condition of creating a misperceived deficit may have other detrimental consequences to the District by causing rate increases or tap fee increases when they may not be necessary. Mr. Rupp presented several alternative measures that the Board may look into to increase District revenue without activating any rate increases, should the District need additional funds to operate. Mr. Rupp also suggested that the District repay, whenever possible, the Reserve Fund withdrawals that have been made in the past for the District to make its Bond payments. Repaying the Reserve Fund anytime the District’s checking account balance shows an unnecessary excess of funds for day-to-day operations can have many positive effects on the District’s finances, financial institutions, and the Bondholders. It was also acknowledged that the District may want to look into restructuring its Bond payments in the next year or two, as suggested by Joan Fritsche, the District’s legal counsel, at the January Board meeting. The Board plans to give further consideration to the approved monthly service rate increase at the March Board meeting, as well as considering further the strategy of repaying the Reserve Fund and/or what amount to repay to the Reserve Fund, if any. A motion was made, seconded and unanimously carried to reverse the Boards action on a motion approved at the December Board meeting approving a water rate increase. It was agreed that this matter would be further reviewed by the Board this Spring after receiving Ken Rupp’s updated proposed budget for 2006 and current issues regarding projected water usage rates were resolved. Director Yoder placed a phone call to Director Billings and placed Director Billings on the speakerphone. Director Yoder then read Joan Fritsche’s latest E-mail to the Board, whereby Ms. Fritsche suggested not appointing anyone to a Board position until after the May election, in an attempt to conserve funds. A discussion ensued regarding the issue. A motion was made to appoint Sandy Zuniga to fill Director Jordan’s vacancy. The motion was seconded, unanimously carried, and was approved.
Adjournment	There being no further business to come before the Board, and upon motion duly made, seconded and unanimously carried, the meeting was adjourned at 10:15 PM.
	_________________________________________ Secretary for the Meeting