20130729Comment.pdf

Jean Jewell
From:r.calvin cathcart [[e-mail]]
Sent:Monday,July 29,2013 10:49 AM
To:Jean Jewell
Subject:Case Number:FCW-W-13-01
July 28,2013
Commissioners Marsha Smith,Paul Kjallander,Mack Redford.
Idaho Public Utilities Commission
P.O.Box 83720 Boise,Idaho 83720-0074
Case number:FCW-W-13-01
Fox Creek Water and Sewer,L.L.C.
Dear Commissioners;
Re:Management of the Water System.
We have been at our home in the subdivision of Fox Creek Country Club Estates for approximately
twelve years.During and before this time frame,the developer of this subdivision has had several name
changes,some apparent changes of ownership and recently formed an LLC for operation of the water
system which is the subject of this case (as well as a sewer system).We believe that Mr.Robert Kincaid
is the sole beneficial owner of this Fox Creek Water and Sewer,LLC.The same entities active as the
developer,although starting much later than our subdivision,also platted and developed an adjoining,but
separate,subdivision of Fox Creek Village.The same water and sewer systems also serve Fox Creek
Village.
Our property owners’association has had a long and contentious struggle with the developer to
provide us with an adequate water system with sufficient water pressure,regular water testing and with a
reservoir for adequate water storage and fire suppression.This struggle started years before
development activity began with Fox Creek Village.The struggle required the extensive involvement of the
Idaho DEQ over a period of years because the system did not meet their requirements for a public water
system.Ultimately,after much administrative process and improvement of the system by the developer
the DEQ determined that the water system met their requirements.This milestone in the process marked
a new series of issues.
At about this time a water rights permit was acquired for the water system from the Idaho Dept.ofWaterResourcesbythedeveloper.The DWR permit allows a number of domestic water hookups to the
system equal to the total number of lots for single family residences in the 2 subdivisions.As the process
of meeting the DEQ requirements was coming to a close and the improvements to the water system weremovingtowardcompletion,Mr.Kincaid approached the Fox Creek Country Club Estates Property Owners’Association with a proposal for sharing use of the water system with the new Fox Creek Village which the
developer was bringing to a stage where they could sell lots.This proposed agreement also involved
sharing the expenses of operating the system.Mr.Kincaid’s attorneys drafted a “Shared Well Agreement”
for this purpose.The Property Owners’Association Board of Directors went along with the dubious andnaïvesuggestionthattheattorneyswererepresentingboththedeveloperandthePropertyOwners’Association and signed the proffered Shared Well Agreement.That document was signed by the 2 parties
to the agreement on October 10,2006,and we believe it continues in force.This document,which we
refer to as the Shared Well Agreement should be in you file for this case and we expect you have a copy,but if not please let us know and we will provide a copy.
Re:Terms of the Shared Well Agreement.
There are some rather unusual terms in the Shared Well Agreement.The process described forsharingthedirectcostsofoperationofthewatersystemconsistsof2parts.The first of these is for thecostofperiodicwatertesting.The Shared Well Agreement provides for an equal share of the cost of thisserviceforeachresidencehookeduptothewatersystem.For the other direct costs of operation theagreementprovidesthatsuchcostswillbesharedequallybetweenthe2partiestotheagreement.The 2partiesexpresslydescribedintheagreementarefirst,the Fox Creek Country Club Estates Property
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Owners’Association and second,Mr.Kincaid as a member of the LLC which was then the developer,
essentially standing in the shoes of the “to be formed”Property Owners’Association of the Fox Creek
Village subdivision until that association was formed.
At first impression,this 50/50 sharing of these expenses seemed favorable to the much larger,by
number of lots,Fox Creek Country Club Estates.However,as negotiations continued between Mr.Kincaid
and the Fox Creek Country Club Estates Property Owners’Association over the terms on which the water
system would be transferred to the property owners’associations,it became clear that Mr.Kincaid would
not agree to turn over the water system unless he retained the right to connect adjacent land which he
owned and intended to use for multi-family and commercial purposes.This was not acceptable to the
Board of Directors of the Fox Creek Country Club Estates Property Owners’Association and the impasse
occurred which resulted in the current IPUC case.This intention also was not compliant with the terms of
the DWR water permit.
In the meantime,nearly 7 years and continuing to the present,during the continued operation of
the water system by Mr.Kincaid and his several entities ostensibly under the terms of the Shared Well
Agreement the Fox Creek Country Club Estates Property Owners’Association was never able to acquire
from Mr.Kincaid the financial statements of the water system despite numerous requests.The effects of
this were that we were never able to tell several things about whether the operation and billing were in
accord with the Shared Well Agreement.The first thing was whether the billings consisted only of the
costs to be shared under the Shared Well Agreement.This problem was exacerbated about 2 years ago
when Mr.Kincaid started imposing a $5.00 per month,per user “management fee”which we don’t believe
was provided for in the Shared Well Agreement as a shared cost.The second thing was that we could not
tell whether the costs were being shared as provided by the formula in the Shared Well Agreement.
Re:Problems with the operation of the water system.
In addition to the basic issues of whether the regular bilTings by the water system are in accord
with the Shared Well Agreement set out above,Mr.Kincaid also requires us to pay all repair expenses to
the well,pump,and reservoir,his personal draws and his attorney fees.This has been a hardship to
many,since his billings are net 30,or you are threatened that your water service will be turned off.These
billing practices are reflected in a letter that has been sent to Beverly Barker,Idaho PUC supervisor and
Chris Hecht,investigator,copies of which are hopefully available to you.
Re:Financial Statements.
We have asked for financial statements from the water system for six years now with no success.
A few days ago,the certified well operator sent the board members of our property owners’association a
copy of the water system’s last five years expense report only.Apparently this was furnished to the PUC
at the same time.No revenue numbers were provided,nor was the method of sharing the expenses
provided.Given this critical omission we don’t know what expenses were actually passed on to and paid
by the POA.We do know a few of these items because they were reported to us individually,such as the
Lightning Strike expense in 2010,but other than these few items we are in the dark about the actual
charge backs.
Issues with the expense report:
Some of the expenses seem to be inflated or misrepresented.
In the 2013 projected expenses,Robert Kincaid states that management fees charged to us will be
$2,640.00.In the Shared Well Agreement there is no provision for a management fee.Neither does the
Shared Well Agreement provide for sharing the operator’s finance charges,and attorneys’fees that he has
projected at $1,643.25.I have a problem with his projected stamp expenses of $250.00,as most all
billings are done electronically.
At this juncture I would like to repeat for you what it says on cost sharing in our Shared Well Agreement
dated Oct.10,2006.(page 3):
The list of Items that will require cost sharing:
1.System maintenance,including repairs,testing,inspection and disinfection.
2.System component replacement,due to wear,obsolescence,corrosion,and
3.System improvements to increase the service life of any well component.
Stated 2012 expenses:$22,332.88
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Well repairs are listed at $3,807.53.This has not been billed to the P.O.A.yet.Nowhere is there an
accounting for what this is for.Robert Kincaid wrote checks to himself in this year,one for $1,920.00 and
one for $2,880.00.Nowhere in the Shared Well Agreement does it state that we have to supply him with
an income for owning the well.The Shared Well Agreement stipulates that we share only in the above
aforementioned items.By taking these non-shared deductions,totaling $4800.00,he has overstated his
expenses by this much.Net expenses should read $17,532.86,instead of $22,332.88.
Stated 2011 expenses:$17,047.70
Robert Kincaid wrote a check to himself for $1,200.00 and called this a business expense.Therefore if
you deduct this non-shared expenses from his expense report,his actual expenses were $15,847.70
instead of $17,047.70.
Stated 2010 expenses:$31,916.58
Lighting Strike Expenses of $11,224.90 were billed to the P.O.A.and paid by us.Total legal fees he
passed on to us were $5,203.00.This non-shared expenses that was passed on to us should reduce his
expenses charged to us to $26,713.58
Stated 2009 expenses:$15,536.88.I have no issues with this year’s reported expenses.
Stated 2008 expenses:$14,934.41.
In this year we were charged a finance charge of $95.92.I believe that our Shared
Well Agreement does not stipulate that we should have to “share”in his finance charges.Postage of
$298.00.How can this be possible when everyone except a few is on e-billing?
Moulton Law Firm Legal Fees were passed on to the H.O.A.in our monthly fees.($4,378.60).Again,I
don’t believe it is stipulated in our Shared Well Agreement that we have to share in his legal fees.This
would reduce the expenses chargeable to us to $10,161.89.
My calculation for the accurate expense totals for Fox Creek Water during this 5 year period is the
following:
2008:$10,161.89
2009:$15,536.88
2010:$26,713.58
2011 $15,847.70
2012:$17,532.86
We expect that these issues are also representative of the years prior to 2008 after the Shared Well
Agreement was signed,but have no data.
2013:(projected expenses $26,401.72)This includes a dubious postage expense,a draw for himself
and I don’t know what else to make this so high.
We were not provided an revenue statement for the last 6 years so I would estimate his income to be 51
water users X 12 months X $39.75 =$24,327.00 .This amount is in excess of his actual reimbursable
expenses of $17,532.86 in 2012.Total profit for 2012 would be estimated at $6794.14.The certified
system operator has just informed us that the well pump is operating 24/7 and will wear out shortly.
This cost of $12,000.00 will be passed on to us in one lump sum if regulate Fox Creek Water and Sewer is
not regulated.We are also informed that we have leaks in our reservoir and pump house.Robert Kincaid
has also mentioned that he too,will raise his monthly water rates since the city of Victor raised theirs to
$53.00/month.This change by the City of Victor is intended to deal with that system’s specific expenses
and is not relevant to our situation.Our neighboring H.O.A.s are paying on average $20.00 per month
based on a phone survey I did.I believe that our water rates should be lowered to approximately $26.00
a month,since this is not supposed to be a profit-making regime (according to our shared well agreement
and my analysis).
I hope this analysis has been informative.My husband and I hope that you will hasten the process of
regulation of Fox Creek Water.
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Very Truly Yours,
Myra and Cal Cathcart
5135 Country Club Drive
Victor,Idaho 83455
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