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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 Document in Agenda Packet 1-6-05.obd Page 3 of 10 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 Document in Agenda Packet 1-6-05.obd Page 4 of 10 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, Document in Agenda Packet 1-6-05.obd Page 5 of 10 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 Document in Agenda Packet 1-6-05.obd Page 8 of 10 $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 J J