HomeMy WebLinkAbout2004.0805.TCSM.Minutes TOWN OF FOUNTAIN HILLS
SPECIAL SESSION OF THE DISTRICT BOARD
OF THE EAGLE MOUNTAIN
COMMUNITY FACILITIES DISTRICT
AUGUST 5,2004
Chairman Nichols called the Special Session to order at 6:30 p.m.
ROLL CALL — Present for roll call were the following members of the District Board of the Cottonwoods
Maintenance District: Chairman Nichols and Directors Kehe, McMahan, Nicola, Schlum, Archambault and
Kavanagh. Town Attorney Andrew McGuire, the Town's Bonding Attorney Scott Ruby, Town Manager Tim
Pickering, and Accounting Supervisor Julie Ghetti were also present.
AGENDA ITEM#2-CALL TO THE PUBLIC
Burt Fischer, 9245 N. Sunset Ridge
Mr. Fischer, a member of the Eagle Mountain Community Association, stated that he wished to bring forward the
following items for consideration:
1. To further reduce the Community Facilities District (CFD) tax, please immediately begin the process to
explore refinancing the CFD bonds. He noted that the bonds were issued at rates between 5.5% and 7.25%
and said he believes better rates are now available but the window is closing rapidly.
2. Direct Staff to defer all future CFD cash distributions to the developer until certain apparent accounting
errors are resolved. He commented that he discussed this issue with each of the members and they are in
the process of being resolved. He noted that the items were brought up during the process of his review
and he does not yet know the final outcome. He stated the opinion that until the issues are resolved, it is
incumbent upon them not to distribute any more monies until they can determine whose money it is.
3. Engage the Town's independent auditor to also audit the CFD and issue a separate report. He stated that
the current auditor of the Town does not audit the CFD and, in fact, his audit report indicates that he is only
expressing an opinion on the overall financial statements. He added that the CFD is included as an un-
audited schedule. He stated the opinion that since the developer should be ready to leave shortly and
withdraw his $4.4 million dollar deposit, he believes it is incumbent upon them to have an audit of the CFD
before he leaves.
4. Determine the current status and closely monitor the significant construction defects dispute involving the
CFD, the Sanitary District and the CFD's developer and lift station/pump station subcontractor. He noted
that this is a fairly complicated matter that came to his attention during the process and is separate and apart
from the fee issue. He requested that they consider this issue as part of a future agenda.
Chairman Nichols thanked Mr. Fischer for his input and stated that the items would be placed on their list of items
to research.
AGENDA ITEM#3—CONSIDER APPROVING THE MEETING MINUTES OF JULY 1,2003.
Director Kavanagh MOVED and Vice Chair Archambault SECONDED a motion to approve the meeting minutes
of July 1, 2003 as presented. The motion CARRIED UNANIMOUSLY (7 to 0).
AGENDA ITEM #4 — PUBLIC HEARING ON THE EAGLE MOUNTAIN COMMUNITY FACILITIES
DISTRICT STATEMENTS AND ESTIMATES OF DISTRICT EXPENDITURES ON THE DISTRICT
BUDGET FOR FISCAL YEAR 2004-05 AND THE PROPOSED TAX LEVY.
Document in Agenda Packet 1-6-05.obd Page 2 of 10
Chairman Nichols declared the public hearing open at 6:45 p.m.
Town Manager Tim Pickering addressed the members of the Board and said that the action that would take place in
accordance with this agenda item occurred on an annual basis. He stated that in the past they had always had a Nair
$3.00 tax and this was the first year that they had actually been able to reduce the tax amount because of the amount
of homes and evaluations that were occurring in Eagle Mountain. He added that Accounting Supervisor Julie
Ghetti would present an overview of this agenda item. He further stated that the Town's Bond and CFD Attorney,
Scott Ruby, would also provide input.
Ms. Ghetti stated that the Eagle Mountain Community Facilities District was formed in 1996, bonds were sold to
pay for the cost of infrastructure that were to be paid back through a property tax levy of a maximum of$3.00 per
hundred. She noted that at the time the infrastructure was done there were no homes at Eagle Mountain and
therefore the developer was responsible to make the annual debt payments on the bonds. A developer agreement
was reached and required that an amount equal to the principle amount of the bonds be kept with a trustee in the
event there were insufficient funds to pay back the bonds. The trustee currently holds $4.4 million, which is the
principle amount of the bonds. The development agreement also allows for reimbursement to the Town of
Fountain Hills for administering the District.
Ms. Ghetti advised that as new homes were added, through the tax rolls less of the developer's interest earnings
were required to pay for the annual debt payment but the interest earnings have continued to accumulate with the
trustee. For Fiscal Year 2004-05 there was enough property tax on the rolls to make the annual debt payment and
no developer contribution was required. She added that for Fiscal Year 2004-05, the tax levy would be $2.59 per
hundred and that was for a budget of $513,000, which included the debt service payment in addition to the
administrative fee to the Town. She explained that the administrative fee was based on the Town's current CFD
policy, which permits the Town to levy 30 cents per hundred to recover the cost of the District. She noted that the
$51,000 that was included in the budget includes costs for administering the District's business, hiring a financial
advisor to analyze possible refunding and preparation of the refund to the developer if they should request their
$4.4 million back.
Ms. Ghetti pointed out that the CFD policy also allowed the District Board the flexibility in determining the basis
for reimbursing costs. She said that the Board had three options: (1) maintain the current policy of 30 cents per
hundred for administrative costs; (2) reduce the administrative costs from 30 cents to another number that was
acceptable to the Board; and (3) direct Staff to allocate the direct costs, based on documented billings, and this
would be best accomplished by an objective third party administrator who would deal specifically with Eagle
Mountain and the billings would specifically pertain to Eagle Mountain. She added that since the Town did not
have the resources to do an actual cost basis and track each one of the phone calls and all of the work that was done
for the District, it was difficult to determine what the actual true costs were. She stated that Staff felt that if the
District Board wanted a true reimbursement cost, then the best thing to do would be to have an objective third party
administrator handle that District.
Ms. Ghetti noted that included in the General Fund was the administrative fee, so if the administrative fee was
reduced from the District, there would have to be a corresponding reduction in the General Fund in the amount of
$51,000.
Director Kavanagh commented that during the Call to the Public, a representative of the District suggested that
some additional actions might be timely, either at this meeting or in the near future. He said that since they were
approving the budget this evening and some of the other actions, including an independent audit, or even possibly
an administrator, would require additional monies beyond what they were currently talking about in terms of
administering the way it was currently conducted, he wondered how they should proceed. He asked if they would
be able to amend the budget or they had to pretty much know what the total cost of everything would be this
evening.
Ms. Ghetti responded to Director Kavanagh's question and said that if the Board decided to hire an outside
administrator,then the Town would not collect on the$51,000. The levy would be there to allow the District to pay
the $51,000 or whatever the direct costs would be. She added that if the budget was adopted this evening, there
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would be sufficient funds to pay for an outside administrator in addition to an independent audit costs and the cost
of a financial advisor to look at refunding the bonds. She clarified that if they budgeted the amounts, they were
levying the tax at$2.59.
Director Kavanagh commented that he was not 100% sure that he knew what the residents wanted in terms of an
administrator and said he wanted to do what they wanted but at the same time he did not know what that will cost.
Scott Ruby addressed the Board and noted that the levy right now, if adopted, is $2.59 and would produce an
administrative fee of $51,000 to the Town and $5,000 to the trustee. He noted that the trustee's fee is a fixed
amount. The $51,000 is currently expected to be paid to the Town and the Town will then reimburse itself for its
expenses, time and effort and also for any third-party consultants who are engaged in order to carry out some of the
items brought up by Mr. Fischer. He said that all of the potential third parties that might offer services to the
District would have to be compensated out of the $51,000 and the Town's fee would be reduced accordingly. He
stated that once a budget was adopted and forwarded to the County, the tax rate was set and the funds would be
generated as people paid their taxes. He said they really could not go back, barring some emergency procedures
that the Town had, and "bump" the budget and try to sell warrants, which would only serve to complicate this
scenario.
Director Nicola noted that the CFD policy started out requiring an application for a Community Facilities District
and said this was what was approved in March of 2003. She added that it also specifically outlined the manner in
which a CFD was formed all the way through Article IV, which got into operations and financing. She said she
never considered that they as a Board would assess fees unbeknownst to the homeowners after the fact. She added
that she anticipated that the policy was forward looking based upon the manner in which it was written. She said in
order to provide for the CFD to be self-supporting for its administrative operations and maintenance expenses, the
policy called for the Town and the CFD, unless otherwise agreed, to require the imposition of a 30 cent per $100
dollars of assessed value ad valorem tax upon the CFD's taxable property. She added that failure to agree to
impose any necessary tax for the operation and maintenance of the CFD would relieve the Town and the CFD from
undertaking any obligations or operations.
Director Nicola said she was having a problem with the entire thing because as she viewed this, the CFD was put
into place long before the policy and she did not understand how the policy now "retroactively" could be assessed.
She referred to the developer agreement and costs to administer the agreement and read specific language (Page 28,
Section 7.20a) into the record that appears to support her concerns, namely: "To provide for the payment of
expenses and costs of the District costs arising from the activities, such activities being the financing, etc.,
including particularly expenses and costs for agents and third parties required to administer bonds, the
administration of the bonds, levy and collection of ad valorem taxes for payment of the bonds, preparation of
annual audit and budget and any purposes otherwise related to such activities of the District, amounts shall be
budgeted by the District Board each year in the District Budget for such purposes and shall be paid first from the
tax amount for that purpose and second from an amount available as described in Section 3.4B(b)and deposited in
the tax account for such purpose before payment of such amounts to the owner, third from payments from the
owner for such purpose upon presentation of such evidence of the applicable expenses and costs and demand by the
District for the payment thereof from$40,000 of proceeds from the Series B bonds, etc."
Director Nicola said that in reading through the policy, she was not finding the language that allowed the Board to
retroactively come back and assess monies. She added that they did not follow the adopted policy and things were
being changed "mid-stream." She stated that when they adopted the budget on July 1, 2003, it did not include that
payment of $51,000 that was then assessed. She requested some clarification and justification for proceeding as
proposed.
Mr. Ruby said that with respect to Section 7.20a, the thought behind the District was that it would finance
infrastructure that was virtually already acquired and completed and thereafter its responsibilities would be limited
to duties and functions relative to those bonds and to the levying of a tax,just as Director Nicola read in Section 20.
He explained that it was thought then by the District Board that there was not a need for a 30-cent levy because the
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understanding was that the amount levied for debt service could, pursuant to the definition of debt service contained
in the Statutes, incorporate all of the costs and expenses that were detailed in Section 7.20. He said there wasn't an
independent 30-cent levy for operations and maintenance expense and a debt service levy for whatever amount was
needed to pay debt service and interest, it was all combined into one because the definition of debt service in the
Statutes was broad enough to include all of those costs.
Mr. Ruby further stated that with respect to the retroactivity of the 30-cent rule, that rule had been around for quite
some time, the 30 cents that was being referenced was being used by the District now as more or less a guide as to
what the administrative fee should be for the activities detailed in Section 7.20. He added that it was not meant to
be necessarily a 30-cent allocation specifically in the debt service levy, i.e. it takes $2.30 to pay principle and
interest on the bonds. He stated there was no "hard and fast rule" that they were immediately going to "bump" the
rate to $2.60 because of the 30 cent rule, rather they used it as a guide to determine the range of the fees and levy
accordingly. He expressed the opinion that no attempt was made to retroactively apply that as a rule but rather the
30 cents was a guide that they had looked to during the past year and a half as to how much they should charge as
an administrative fee.
Mr. Ruby commented that it would be the ultimate decision of the Board to determine the amount of the fee and
reiterated that the 30 cents was guidance and not retroactively being applied as the rule. He noted that the first flow
of funds was from taxes and the Town was obligated according to the development agreement to pay those
administrative fees to the extent monies were available from the levy of a tax, not to exceed $3.00 from those fees.
He said he believed they were obligated contractually to pay whatever the amount of administrative fees were from
the tax.
Vice Chair Archambault asked whether there was a reserve they could draw from, similar in nature to one a
homeowners' association (HOA) would build up, should the Board decide to follow through on the
recommendations or the requests of members of the CFD to investigate specific allegations. He added that if not,
did the CFD have the ability to levy a special assessment,just like a HOA could do.
Ms. Ghetti said that the District had been collecting excess revenues from the $4.4 million and those monies had
been put aside with the trustee for the District and were on the books right now. She stated that they were trying to
determine of that excess, how much was excess earnings from the $4.4 million versus how much was property tax
left over from a prior year. She added that they should know the answer to that question by the end of August and
said there could be some excess property tax in there that would allow for the expenditure, but that amount was
unknown at this time.
Mr. Ruby addressed the issue of a reserve and advised that there was an account under the indenture where all the
tax proceeds went and there was also a requirement that the excess earnings off of the depository investment be
applied in a certain prioritized manner, first and foremost to pay principle and interest on the bonds, second to pay
trustee fees and third expenses of the District. He noted that if there were no District expenses and the principle
and interest had been paid as well as the trustee fees, then the excess earnings from the depository investment were
supposed to be "kicked out" to the owner on July 2nd of every year. He said he didn't know if the trustee did that or
whether the owner requested that but technically it should occur without the owner's request after the trustee ran
through this gauntlet of expenses. He stated that there could be some earnings that technically should have gone
back to the developer each year, mingled with some tax proceeds, and added that they needed to determine that. He
noted that any tax proceeds levied were levied for debt service purposes and needed to be used for debt service
purposes. He said that unless they determined that the excess funds were tax proceeds, they could be used for those
administrative purposes or could be used to examine the refunding. He added that if they did not use them for that
purpose, they needed to be applied to next year's tax levy amount so that the Town levied less.
Mr. Ruby also addressed the assessment question and stated that there was no way they could levy assessments for
this purpose. He noted, however, that the CFD could issue assessment bonds and levy assessments but only for
capital projects and only after they engaged in a statutory process that included a number of hearings and notices.
Director Kavanagh commented that based upon what had been said, including Mr. Fischer's comments, the issue
had gone far beyond the fairly straight forward question which the Board initially thought they were to address,
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namely, what should they budget for the routine administrative costs. He said in the interest of avoiding confusion
and maintaining order, he would suggest that the Board first deal with the initial issue (what was a reasonable
amount for routine administrative costs) and after they decided that, they tackle the second issue, what additional
actions should be taken and how much should be budgeted for those actions.
Chairman Nichols concurred with Director Kavanagh's comments.
Director Kavanagh noted that the costs started out high, $51,000, and based upon a memo dated June 30th, they
decreased considerably to a current $25,000, which he still believed was unreasonably high. He added the opinion
that if they removed the rent charges, which he thought were inappropriate and inflated, it would decrease the
actual figure down to$6,598.92, which was extremely close to the figure that Mr.Fischer discussed.
Chairman Nichols stated that they were currently conducting a public hearing and therefore action could not be
taken at this time. Town Attorney Andrew McGuire concurred with the Chairman's statement.
Director Kavanagh clarified that it was his hope that if a sufficient number of members supported that basic
philosophy, that the public might understand that and rather than having large numbers of people come up to argue
about the $25,000, knowing that there was a consensus for the reasonable amount, they could skip to the next issue
and save a lot of time.
Chairman Nichols stated that he saw a lot of the members nodding in agreement and suggested that they move on to
the next item and said they could come back to this later on.
Director Kavanagh advised that the second item was the refinancing, which was pretty straight forward and
reasonable, and added that the other issue was the appointment of an administrator. He said this was a new issue
and he was not sure what that would cost and whether there was support from the people in the District for that to
occur. •
Ms. Ghetti informed the Board that the purpose for recommending the administrator was that the Town did not
have the resources to allocate the cost and keep track of the phone calls and time spent by various Staff members on
District affairs. She expressed the opinion that an administrator would be able to present a more accurate
representation of time spent since they would bill for their time spent on Eagle Mountain District.
Director Kavanagh also discussed audits and asked what that would cost. Ms. Ghetti responded that she believed a
single audit was approximately $1500.
Chairman Nichols noted that the lift stations were in disrepair and had never been accepted by the Sanitary District
and needed to be fixed. He said the question was who was responsible to fix them and said that if there were any
expenses for the repairs, that amount would be assessed back to the residents of the District. He stated that the CFD
needed legal advice regarding the liability of the lift stations and the associated costs. He added that the cost of that
legal work would have to be borne by the CFD and not by the Town.
Ms. Ghetti advised that Staff was currently looking into the issues raised by the Chairman and said that no
determination had been made regarding who was in control and who was not. She said Staff would continue to
research this and come back to the Board at a later date with additional information.
Chairman Nichols stated that either way there would have to be some monies built into the budget to pay for the
legal expenses.
Director Kehe said he believed he heard that that the monies could not be obtained from the CFD and therefore
something would have to go someplace along the lines. He added that the June 30th document referred to by
Director Kavanagh, the $25,419 was not a hard number since there was nothing to base it on other than estimates.
Document in Agenda Packet 1-6-05.obd Page 6 of 10
Ms. Ghetti confirmed that the figure was an estimate and said Staff did not have the resources to keep track of each
hour spent on each entity.
In response to a question from Director Kehe, Ms. Ghetti responded that the tax levy had to be adopted before the
third Monday in August and the Board would not meet again. She said that therefore the tax levy had to be
established this evening for 2004. She added that Staff could not provide cost estimates this evening upon which to
base the budget and said that unless the Board called a special emergency meeting, tonight was the night that the
levy had to be adopted.
Chairman Nichols stated the opinion that an alternative suggestion existed. He added that they knew there were
going to be expenses that had to be borne by the CFD but they did not know the exact hard cost amounts for the
refinancing of the bonds, the audit and legal fees at this time. He said that the amount that would flow through this
year to Fountain Hills for their administrative work was $6,598.92 and if they said of the $51,000. the only portion
that would come through to the Town would be the $6,598.94 (rounded to $6600), the balance of that $51,000
would be used as a pool to pay for the hard costs and at the end of the year, if there was any money left out of that
pool,the money would be used to reduce next year's levy.
In response to a question from Director Kavanagh, Mr. Ruby advised that excess unexpended funds would be
available to pay the subsequent year's costs and would not go to the developer.
Vice Chair Archambault noted that the Town went through a series on trying to refinance some mountain bonds
that they had and said if he remembered correctly, the bonds were not "callable" for ten years and earlier
refinancing involved a penalty. He asked whether the bonds for the CFD "callable" now to the point where they
could be refinanced at a cheaper rate.
Mr. Ruby responded that the bonds were "callable"with a 1% premium beginning July 1, 2006, but added that even
that date did not preclude the Board from refinancing at this time and establishing a irrevocable escrow that had in
it government securities that matured and came due July 1, 2006, paid the premium amount and paid the bonds. He
said they were refundable at any time but whether it made financial sense or there were savings there would have to
be determined by a financial advisor. He added that the entire financing scenario would have to be presented to the
Board and they would have to decide what was in the best interest of the District. He noted that a lot of the
refinancing costs could be "folded into" the bond issue itself and said that was why it was difficult to determine the
actual amount since various options were available.
Vice Chair Archambault said he was concerned that they might be one year premature at looking at refinancing the
bonds and perhaps they should address this matter next year.
Mr. Ruby stated that a financial advisor would say that a bird in the hand was better than two in the bush and
therefore if there would be a savings in an amount that the Board believed appropriate (industry standard is 3 to 4%
of the savings amount equals 3 or 4% of the bonds to be refunded) then maybe they would proceed. He added that
the Board might have a different policy with regarding the savings they were looking to achieve. He said that the
call date was just another dynamic in the entire formula that had to be gone through in order to determine savings.
Chairman Nichols commented that the analysis had to be done now so that they did not miss the window of
opportunity.
Director Kavanagh said he sensed that consensus exists for a $6600 cap on what the Town would receive for its
services and added that his only concern was that $51,000 was the number that came out of nowhere. He stated that
he was not sure than an independent administrator, should they decide to go down that road, was going to come
about this year. He added that if it did, the Town would not be collecting money. He questioned whether the
administrator's fee should be considered something that was needed this year. He asked whether the Sanitary
District issue was too much or an appropriate amount for that type of thing. Ned
Document in Agenda Packet 1-6-05.obd Page 7 of 10
Ms. Ghetti responded that she did not know the answer to that question and said they did not have a basis at this
point upon which to determine an amount. She noted that the alleged damages had not been evaluated and Staff
Ly would have to research this and come back at a later date with their findings.
Councilwoman Nicola asked whether it was the responsibility of the CFD to stand behind the lift station problem
and whether it was within the realm of this Board. Ms. Ghetti reiterated that insufficient information was available
at this time and Staff would have to investigate further.
Discussion ensued relative to the matters of dispute that existed and the fact that the CFD would be defending its
interests or trying to explore the answer to the problems, which would involve lawyers; the fact that they hoped
they would come to the conclusion that it was a Sanitary District problem versus the contractor; the fact that the
three lift stations would cost approximately $100,000 to $150,000 per lift station and as high as $200,000 each;
health issues that could arise if the lift stations gave way; and the fact that whatever amount the Board agreed to this
evening would be"locked in"and could not be amended.
Mr. Burt Fischer
Mr. Fischer again addressed the Board and said that the residents had paid $150,000 so far in fees to the Town for
all of the administration. He stated the opinion that the issues could be easily addressed and noted that the lift issue
went back to 1996 from the same developer that developed the rest of Eagle Mountain. He noted that there was a
$4.4 million deposit and said it went back to the developer's responsibility as an expense of the CFD back then. He
added that the Board needed to understand that the CFD was prosecuting this case right now and had an agreement
against the lift subcontractor but he did not know what they had against the prime contractor who was the developer
who made the $4.4 million deposit. He said that not only were the prior fees allocable to the developer against the
deposit or the interest earned on the deposit, but also any legal fees connected with this information that went back
to 1996 (the period of time the developer agreed to fund all expenses and costs) then it seemed to him that there
was a fund to get that money from. He added that his concern was that no one knew what the Sanitary District was
(hose doing but said he had found out that they had an agreement against the lift subcontractor and they obviously had
attorneys working on this issue. He expressed the opinion that this was being "blown" way beyond reasonable
proportions.
Mr. Fischer expressed the opinion that the enabling documents required that any surplus be considered in setting
the tax rate and said that this had never once been considered. He noted that the Town's own financial statements
showed a surplus of some $780,000 reduced from a million something because the developer requested his money
and because the original income was not recorded as a liability to the developer, it was recorded as income. He
pointed out that there was still $750,000 and at least the interest earned on all the taxes collected until they paid
everything out was theirs and belonged to the CFD, not the developer. He added that the problem was segregating
it out and determining how much that amount actually was. He said there is at least $50,000 with respect to the
other expenditures that were brought up aside from the legal issue that was being pursued by the Sanitary District.
Mr. Fischer also discussed the administrative fee and said he recommended $5,000 but would not argue with a
$6500 fixed fee. He expressed the opinion that a fiscal administrator was not necessary and said that the HOA's
property manager would take that over and it would not cost much money at all. He encouraged each member of
the Board to fulfill his/her fiduciary responsibility for the landowners of the Eagle Mountain Facilities District and
to the 578 property owners of Eagle Mountain. He said that there were four reasons why they believed the fees
were inappropriate: (1) The fees needed to be reduced to $5,000 (they would accept $6500) and if there was not
enough surplus generated, he would recommend to the Board of the Eagle Mountain HOA that they advance the
money out of their reserves until they collected it from next year's tax; (2) the agreement provided for the CFD to
provide costs and expenses and there was no provision for the Town to allocate fixed overhead; (3) at the Town
level, CFD operations were infrequent in nature, primarily mundane bookkeeping and the trustee did all the formal
work for an objective $5,000 fee and (4) Town Staff publicly stated that there were no hard costs. He added that
the 578 owners at Eagle Mountain did not cause the Town's fiscal crisis and expressed the opinion that they should
not be asked to pay the proposed fee. He requested that a$5,000 or$6500 fixed fee be approved with a tax rate of
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$2.50. He said that if there was any deficiency in having the refinancing or other items looked at, the HOA would
advance it from their Association and would wait until next year's assessment to get it back.
Chairman Nichols thanked Mr. Fischer for his remarks.
In response to a question from Director Kavanagh, Mr. Fischer stated that the governing document (development
agreement) stated that in determining the rate, a 5% deficiency factor be considered. He said that the computation
provided to the Board did not include the 5% deficiency factor.
Ms. Ghetti, responding to a question from Director Nicola, advised that the General Fund budget included the
$51,000 and said that last year and the year prior the CFD Board's budget included payments to the Town. She
added that she would be happy to go back and check and provide Director Nicola with copies of prior years'
budgets.
Board member Kavanagh commented that Mr. Fischer was recommending that they move forward with the
proposed figures except that the $51,000 administrative costs be reduced to $6600 and that if a need existed for
additional monies, the Association would pay the costs. He asked what Staffs opinion was regarding this
suggestion.
Mr. Ruby said that the District could always accept gifts and said he heard that they would "recommend to the
Board" but they did not know whether the Board would approve the request. He added that they would be in a
position of asking for money implying that it was needed for a legitimate purpose and they would not know if they
were going to get the money. He pointed out that they could not borrow the money because that would be a loan
and they had certain procedures that had to be followed. He said they could accept the monies as a gift and deal
with it in that respect. He agreed that they could end up not having money to cover legal fees should the
Association's board not agree to the request.
Mr. Ruby cautioned that before the Board began to hold somebody's money back (the $4.4 million referred to by ,,
ii)
Mr. Fischer), they needed to really look at that issue from a legal standpoint. He added that to tie a construction
defect matter and hold back funds from another entity was a dangerous path unless they were absolutely sure they
are doing it legitimately. He warned them against offsetting someone else's money without further exploration
were the developer had requested the return of that money as they had a right to do under the contract.
There being no additional speakers wishing to present their input, the Chairman closed the public hearing.
AGENDA ITEM #5 — CONSIDERATION OF RESOLUTION EMCFD-2004-01, ADOPTING THE FINAL
BUDGET FOR THE FISCAL YEAR BEGINNING JULY 1, 2004 AND ENDING JUNE 30, 2005; AND
LEVYING UPON THE ASSESSED VALUATION OF THE PROPERTY WITHIN THE DISTRICT,
SUBJECT TO AD VALOREM TAXATION, A CERTAIN SUM UPON EACH ONE HUNDRED
DOLLARS ($100.00) OF VALUATION SUFFICIENT TO RAISE THE AMOUNTS ESTIMATED TO BE
REQUIRED IN THE ANNUAL BUDGET, SPECIFICALLY FOR THE PURPOSE OF PAYING
PRINCIPAL AND INTEREST UPON BONDED INDEBTEDNESS; ALL FOR THE FISCAL YEAR
ENDING ON JUNE 30,2005.
Director Kavanagh MOVED that the budget reflect revenues and expenditures of$513,000 with the stipulation that
of the $51,000 of administrative costs, that the Town would not charge any more than $6600, as agreed upon, and
the additional $44,400 would be set aside in case it was needed to explore the other additional needs and possible
legal challenge and that the amount not needed would be applied to paying next year's levy.
Vice Chair Archambault SECONDED the motion.
Director Kavanagh said he could understand the idea of keeping the amount at $6600 and getting the additional
money from the Board rather than doing the extra safety precaution but as a Director and in accordance with legal
advice, he believed they needed that money in reserves so that it was available for a legal challenge if needed. He
added that the money would go back to the District the following fiscal year if it were not expended. He added that
Document in Agenda Packet 1-6-05.obd Page 9 of 10
if in fact it was determined that there were additional surplus monies that could be used, those monies could be
"tapped"before they went above the $6600.
e Chairman Nichols asked what the tax rate would be in accordance with Director Kavanagh's motion and Ms. Ghetti
responded that the tax rate would remain the same ($2.59) if they kept the budget at $513,000 but the Town's
administrative costs would not exceed $6600. She advised that this figure did not contain a provision for the 5%
delinquency fee and said when determining the amount, she made the assumption that there would be an amount
left over from the prior year. She stated that she felt comfortable that the$2.59 was a sufficient amount.
Director Nicola commented that the only way she could support this motion was if they found that they did not, in
their District board meeting, budget such monies and then those monies should be returned to the CFD. She added
that the resolution that she voted on in March of 2003 had a 12-page application process and all kinds of rules and
requirements. She stated that she would not have supported that if she knew what was going to happen and she had
a problem with people being assessed without notice and without an opportunity to be heard.
Chairman Nichols called for the question.
The motion CARRIED UNANIMOUSLY (7-0).
AGENDA ITEM#6-ADJOURNMENT
Director Kehe MOVED and Director Schlum SECONDED a motion to adjourn the Special Session of the District
Board of the Eagle Mountain Community Facilities District. The motion CARRIE UNANIMOUSLY(7 to 0).
TO U AIN HILLS
cor
B
Y
Wally Nic , Chai
ATTEST AND
PREPARED BY:
Bevelyn J. B rider, oard Clerk
CERTIFICATION
I hereby certify that the foregoing minutes are a true and correct copy of the minutes of the Special Session held by
the Board of Directors for the Eagle Mountain Facilities District on the 5th day of August, 2004. I further certify
that the meeting was duly called and that a quorum was present.
DATED this l<i day o . 2005.
f )/
1� , \7LC2
Bevelyn J. Berier,Poiard Clerk
Document in Agenda Packet 1-6-05.obd Page 10 of 10
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