09241986 Emergency Meeting - Laserfiche WebLink

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2 Emergency Meeting September 24, 1986 Page 2 Mr. Gonzalez pointed out the auditor's report failed to mention the $62,000 of debentures, which the City was aware of but it had been left out of the report. Mr. Coddington asked how we would collect undisclosed liabilities if there are any. Mr. Gonzalez stated through legal recourse. Mr. Coddington referred to the Reorganiza- tion Agreement on Page 3 and stated he did not see where there would be any balance remaining for improvements. He stated the City did not have an audit, and that no net worth and no listing of the assets was prepared. He pointed out there are hold harmless provisions against the Parkers or any noteholder if they feel their security is being threatened by this agreement, wherein S.E.M. or N.P.C. would defend Elim, and that we will also be protecting the shareholders against any actions by the Internal Revenue Service regarding capital gains. Mr. Coddington asked if we didn't have the expertise in-house with the legal department and engineer to handle this transaction, to which Mr. Gonzalez responded we did not. Mr. Coddington pointed out he did not think we would get anything for our $308,700 until sometime between 2001-2006. He felt there were probably undisclosed liabilities and a threat of litigation and does not feel the deal should be consummated. Ruth Ann Hoch advised the Council the history on this business began July, 1985 and that in her negotiations with the City, it was always her understanding the City would purchase all her shares of approximately 90+ percent and then step into her l'shoes". Mr. Farr pointed out the $308,700 loan with accrued inter- est is to be returned to the City. Mayor Younger stated the permit for this system is 22,000,000 gallons or approximately 70-acre feet with Edwards. He stated they are using about this much every month and that if the City purchases the system, we will have to go to the Aquifer for additional water transport. Mayor Younger advised they had 730 accounts and presently have 673. Mayor Younger stated he is not comfortable with the employees' retention clause, as the City should have the right to replace employees. He stated if an employee was caught stealing, we would have to continue paying them for six months as written. He s~ated he could not accept the six-vote clause as this ties the City's hands, which would not allow the City to increase the rates in the event we needed to. Mayor Younger asked Ms. Hoch if she had any problems with dual certifications. Ms. Eoch stated she would agree to change the wording regarding employees if caught doing anything of a criminal nature if a Court decided it was a criminal ac- tion. In regard to the six-vote clause, Ms. Hoch responded that the fact the City could not buy the system, the investors were not happy with a Board running the syste~ and there would be no control after the appointment of the Trustees and the fact the system may not be run well. She felt if the Elim customers had a greater say in the running of the Board, the system would be run better. Mr. Coddington pointed out the City's four Trustees would be the Mayor, Mayor Pro-Tern, City Manager and Finance Director. Ms. Hoch stated six votes could change the bylaws but she would not take this major a decision back to the Board for approval. The Elim Trustees may want the bylaws changed if it makes the system function in a good manner. Ms. Hoch stated she thought the Manager of the system should be present at all meetings whether or not he is a Trustee. She said it was acceptable the Manager be an ad hoch member and that he remove himself when the membership selects a second Trustee. Ms. Hoch reviewed a map with the Council regarding Mayor Younger's question of dual certification. She said there had never been a problem with Crystal Clear because of the location of the pipes. The Utility Commission engineer request- ed a clean-up as it appeared there were three in some areas. That has been done but the Water Commission has not officially approved that plan. Ms. Hoch reviewed the water district map of Maxwell, Crystal Clear and Elim. She stated the areas crossed around Centerpoint and Southridge. She said there was no dual area in the North area. Mr. Gonzalez stated the map would be a part of our documents when approved.