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Lots of Water, Lots of Debt, Part Two |
Glenn Walsh | 7/17/08
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The Pagosa Area Water and Sanitation District has been looking at constructing a 35,000 acre-foot reservoir one mile north of the Town of Pagosa Springs. Many local residents have been looking at these plans with dismay bordering on fear as the local economy has worsened.
Presently, the PAWSD district delivers 2,000 acre-feet of potable water to its 9500 customers. The 35,000 AF reservoir would deliver nearly twenty times as much water, and serve a population of 160,000.
PAWSD instituted a Reservoir Fee in 2006 which was intended to finance the $150 million price tag (2006 dollars) of the 35,000 AF Reservoir Project. That fee, presently $7210 for each tap (a business may be charged for multiple taps) was expected to generate $4.8 million in fiscal year 2008 according to growth forecast made by PAWSD professional water engineer (and amateur impact fee analyst and demographer) Steve Harris of Harris Water Engineering.
 The Reservoir Fee had generated less than 2% of that amount, less than $60,000, by mid-year. PAWSD has already assured the Colorado Water Conservation Board that the project can be financed by raising the monthly fees of existing users.
Which has generated a lot of concern at Town Hall and the County Courthouse.
Deep off-the-record misgivings about the size of the reservoir are widely held (I have not overheard one positive comment about the 35,000 AF plan this year at Town Hall). On-the-record misgivings have been limited to Councilor Mark Weiler’s repeated critiques of the project’s size and financial plan, which essentially aims to ascribe the entire cost of the 100-year project to the first 20% of the customers who might be served by the facility.
Weiler was joined, very publicly, by a unanimous BoCC Tuesday afternoon.
Commissioner Ronnie Zaday opened the discussion. “I would like the PAWSD Board to know that we as the commissioners have heard from our constituents that going beyond a 12,000 acre-foot reservoir is unnecessary at this time and I would like to send staff to tonight’s meeting to give the PAWS Board that input.”
Zaday then opened a potential Pandora’s Box of embarrassment for PAWSD, “I also have questions for the PAWSD Board regarding the position of Fred Schmidt.” Fred Schmidt has been the president of the San Juan Water Conservancy District since its formation in 1987, and has been the most unsinkable advocate of constructing a 35,000 AF Reservoir at Dry Gulch.
When Pagosa Springs SUN reporter James Robinson asked, “What is it about board member Schmidt that you have reservations about?”, Zaday made the first public airing of the growing private distaste for Schmidt’s borderline-at-best business dealings.
Zaday, with a look of somewhat angered disbelief, held up a court document and began to read some lowlights. She closed with Judge Gregory Lyman’s justification for imposing punitive damages against Schmidt in a 2007 fraud judgment. “The judge’s comment was ‘Defendant Schmidt engaged in willful and wanton conduct in these representations without regard to plaintiff’s rights and plaintiff presented evidence that Defendant Fred Schmidt has engaged in other acts which show his disposition to act fraudulently and with willful and wanton disregard for the rights of others.’”
Note that judges rarely, in a default judgment, go beyond the facts of the case and find a “disposition to act fraudulently.” You can go beyond the facts (and opinions) of this article and read a lengthy excerpt of Judge Lyman’s decision here.
There has been much public debate about many very large numbers relating to the Dry Gulch Reservoir Project over the past three months. One number — $1.3 million — had not been publicly discussed until Zaday spoke Tuesday. That $1.3 million was the size of the fraud judgment imposed upon Schmidt last year for selling an investor a non-existent interest in a fictitious corporation. In that judgment, Judge Lyman noted Schmidt’s twenty-year record of mishandling and misappropriating investor funds.
Both PAWSD and the SJWCD boards have been in possession of the fraud judgment against Schmidt and his permanent SEC injunction against further financial misdealing for over six weeks. Schmidt has represented the districts in closed-door negotiations for further multi-million land purchases after the receipt of these documents.
Schmidt is presently before Judge Lyman in the damages phase of yet another case where he has been judged guilty of financial misdealing. This case involves the condominium association funds at the Adobe Building, the largest commercial building in downtown Pagosa Springs. Schmidt has refused three demands from the court to show plaintiffs evidence that the building is covered by basic fire and liability insurance.
After the pregnant silence which any recounting of one of Schimdt’s frauds typically occasions, Commission Chair Bob Moomaw added, “I sit on the Water Conservation Board, which is not PAWS, I understand that Fred Schmidt submitted his resignation today to be Board President.”
Zaday did not appear satisfied with the partial resignation. “He is not resigning from the Board, he is just resigning as Board President?” Moomaw confirmed that was his understanding.
Moomaw then confirmed Zaday’s opinion about PAWSD’s 35,000 acre-foot ambitions. “Until I see very different numbers than I have seen to this point, I don’t want to talk about a 35,000 acre-foot reservoir. I think we need to work at the 12,000 acre-foot level.”
Moomaw then portrayed the threat to the local economy from the 35,000 acre-foot project (which may exceed $250 million when revised cost estimates are received next year) very vividly. “To be quite honest, we cannot afford a 35,000 acre-foot lake without sucking all of the capital out this County. That is basically what it gets down to. We need to do a project that is affordable.”
Commissioner Robin Schiro, who has attended nearly every recent meeting of the PAWSD board agreed. “I have spent time going over their financial statements. I agree we need to address this issue.” Schiro based her opposition to adopting County impact fees in 2006 largely on the charges already imposed on new development to fund the Reservoir Project.
Zaday was not content with a statement to the PAWSD Board but moved for a formal resolution opposing any reservoir larger than the 12,500 acre-foot model recommended by the Water Districts’ 2003 Appraisal Report. The motion was passed unanimously.
That resolution will be considered at a BoCC Special Meeting on July 29th.
Repercussions for the Dry Gulch project may be significant. The Water Districts assert in their present case (before Judge Lyman) seeking water rights for the 35,000 AF Dry Gulch Project that they enjoy the widespread support of the Town of Pagosa Springs and Archuleta County.
Yet, the Town has never formally endorsed the 35,000 acre-foot model. The County has refused to collect impact fees for the Reservoir Project and may now formally register opposition to it. The Town may formally oppose any reservoir greater than 12,500 acre-feet as well.
And, readers should note, that one month before the Water Districts submitted their water rights application for a 35,000 acre-foot reservoir in December 2004, Schmidt and his Water Conservancy asked the voters for $6 million dollars in reservoir funding and nearly 60% of County voters turned the project down.
During that campaign, Schmidt never informed voters of the impending application for the right to construct a 35,000 acre-foot reservoir. Of course, while selling condominiums at the Adobe Buildings, Schmidt apparently never informed purchasers that he would fail to provide fire insurance, pay utility bills and perform necessary repairs, or that he would misappropriate association fees, sell off common areas, and threaten to change covenants to permit him to sell their parking slips.
And, of course, no note of this overwhelming defeat of the reservoir proposal at the polls is mentioned in the Water Districts’ findings of fact before Judge Lyman.
If the County, and then the Town, formally oppose the Water Districts’ 35,000 acre-foot reservoir, would the Water Districts leave findings of fact before Judge Lyman which would then be a deliberate misrepresentation of local support for their 35,000 acre-foot project?
Hasn’t Judge Lyman had to confront enough deliberate misrepresentation from the former President of the San Juan Water Conservancy District already?
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