Directors offer views on mediation settlement
By Hank Lohmeyer
Published Thursday, August 18, 2016 7:50 am
Directors of the member-owned Upper Surface Creek Domestic Water User's Association (USC) last week asked the Delta County Independent to attend an Aug. 8 board meeting and sit in on a discussion of the association's position in the water utility ownership mediation with the Town of Cedaredge.
Present for the session were directors Jerry Figueroa, Dennis Grunkemeyer, Bryan Klaseen, Lynn Oliver and Herman Kline. Also present were USC staff Dan Hawkins and Helen Hawkins. Two other USC board directors were not present.
Last month, when results of the court ordered mediation came up for official action by the Cedaredge Town Board, USC director Figueroa had declined a request by the DCI for comment on the issue. He explained that the association's attorney had advised against making public comment.
Since then, the Cedaredge Town Board has voted to accept the mediated settlement for buyout of USC's ownership portion of the town's water utility, as reported previously in the DCI. Figueroa last week confirmed that the USC attorney's previous advice against public comment has now been rescinded.
The mediated agreement provides the Town of Cedaredge with two options for compensating USC for its investment over time in the Cedaredge water utility: a direct payout of $175,000 by the end of 2016; or, regular monthly payments over the next two decades.
The directors' views were not presented as official board policy; but there was general agreement among the directors who were present. During the USC director's Aug. 8 board meeting, the following points were raised and discussed:
• USC was formed in 1955 and began delivering water to customers in 1959.
• The 2000 working agreement between USC and the Town of Cedaredge, which is the basis of the mediation proposal, is a compilation of various understandings and agreements between the two water providers dating back to at least 1960.
• Over time, USC found that the working relationship between the two water providers based on the 2000 working agreement was not operating as hoped.
• In the 2002 to 2003 time frame, USC's licensed water treatment plant operators were "locked out" of the Cedaredge treatment plant, the directors said.
• In 2004, low chlorine levels and excess turbidity in Cedaredge's treated water led to a state health department boil order being imposed. At that time, Cedaredge's treated water was USC's only source of supply, and USC was in the process of building its own water treatment plant. USC's treatment plant began operations in 2005.
• USC subsequently won a majority of points in an arbitration settlement with the town following the boil order incident. The arbitration did not effect change in the unsatisfactory relationship that had existed under the 2000 working agreement, USC director's said.
• Finally, USC in 2015 filed a petition for partition in district court to end the working agreement. The action had support from the association's members, the directors said.
• The USC directors believe they have a fiduciary relationship with the association's members that requires them to seek reimbursement for investment in the Cedaredge utility. It is estimated that USC has paid $375,000 to $400,000 for improvements to the Cedaredge water utility over time.
• A final mediated agreement between the town and USC will need approval by the district court.
• Some points of a final agreement are still under discussion and the agreement could yet "fall apart," in which case the dispute would go to court for resolution by judgment.
• Possible elimination of the emergency service supply cross connection between the two systems is an issue in current discussions. Directors noted that water USC has used on occasion from the Town of Cedaredge's plant via the emergency cross connection has always been fully paid for. USC has used treated water from Cedaredge via the cross connection only on occasion since 2005 when USC's own treatment plant began operation.
• When asked specifically if the USC board is "happy with" or "satisfied with" the mediated settlement offer, the response was in the negative and indicated that the board felt it was the best agreement USC could get from the mediation.
According to draft minutes of the Cedaredge Town Board's July meeting, the town accepted the mediation agreement. Trustees are set to decide which option for payment it will choose at its Dec. 8 meeting.