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"'t&N.THE NORTH POUDRE IRRIGATION COMPANY
1998
DIRECTORS
Duane Aranci ... Fort Collins, Colorado Dorothy Schild ... Fort Collins, Colorado Manuel Pineda ... Windsor, Colorado Dennis Bode ... Fort Collins, Colorado Gary Simpson ... Ault, Colorado
OFFICERS
Duane Aranci ... ... President Dorothy Schild ... Vice President Dale Henry ... Operations Manager Sharon Seaworth ... Secretary
ORDER OF BUSINESS
According to the By-Laws, the order of business of the stockholders meeting shall be as follows:
1. Meeting called to order by the chairman at 10:00 a.m.
2. Appointment of three stockholders of the Company as a credentials committee.
3. Registration of proxies with credentials committee 4. Report of credentials committee
5. Annual report
6. Nomination of directors
7. Opening of polls for election of directors 8. Old business
9. New business
(A) Vote on assessment for the year
North Poudre Irrigation Company delivered basically all the water that was appropriated to the stockholders that was in position to deliver.
The restructuring of the assets has gone well with only a few minor problems. The objective is to manage the asset in a fair and equitable way for the benefit of the stockholders.
The #6 outlet project is in progress. The #5 and #6 spillway I cut-off wall will start next summer or fall. Indian Creek spillway and possible re- sloping of the lower side of the dam is tentatively scheduled to start in 2000. #4 dam could possibly be built in the next three to four years if the Board can justify it.
With the constant changes in our communities and environment, new issues are continually arising and the Board of Directors has and will continue to make a diligent effort to aggressively address them.
We look forward to seeing you at the annual meeting.
Respectfully submitted, Duane Aranci, President Board of Directors
The North Poudre Irrigation Company
2
Water Computer Program- With the recognition of the CBT units (or Multiple Use water), the computer program continues to be updated and changed to meet the new requirements. Several shareholders have expressed concern and confusion about their water reports. The water reports are currently being modified to be less confusing and easier to read.
Weed Control Program -There have been significant reductions in the amount of noxious weeds on sections of the irrigation system. But, we will continue to attempt to gain better control of them. One area of high concern is the Sago Pond Weed and moss that is inundating our entire system. There are very few methods which can be utilized to control or limit the spread of this aquatic plant. The methods which can be used or have any effect on it are very expensive. We are working with several chemical companies in an attempt to find the best and least expensive methods for treating it.
Maintenance -Work on the structures and ditches continues on the entire system with urgency taking top priority. An attempt to convert our efforts from reactionary to prevention continues.
NPIC purchased rock from the City of Fort Collins water tank project at Laporte. This rock will be used as rip-rap along the ditches and dams to prevent erosion. The rock is currently stockpiled at several locations.
The equipment continues to be upgraded or repaired. A tractor mounted hydraulic brush chopper on a boom was purchased and has been used on sections of the system.
Projects -A section of the Buckeye main ditch was to have pipe installed. This has been placed on hold pending further discussions with Platte River Power Authority on water usage.
At the start of the 1998 water season we had several problems with water users failing to place orders in advance. By placing your order in advance, it allows us to plan when we can "bring down the ditch" and get it on line. So, in order to eliminate confusion and
misunderstandings, we are drafting the following pre-season schedule for getting the system on line.
1999 Proposed Pre-Season Schedule (Weather Permitting) 1.) All maintenance operations will cease on April 5, 1999.
2.) On April 5, 1999 ditch burning will begin.
3.) On April 19, 1999 the "flushing" of the system will begin on the following schedule;
a. The Livermore section will be brought on line to Park Creek Res.
& south to #15 Res.
b. The Buckeye section to Boxelder Res. 1 & 2
c. The Main ditch to Clark, the Cheyenne to Indian Creek Res., including #4E, #3E, #3S
d. The Munroe Canal
3
e. The Cowan to Hinkley Res., Railroad to #9 Res., Upper 10 to
#10 Res.
f. The remaining canals and ditches when there are orders on ends enough to justify running.
4.) Every attempt will be made to have the entire system on line by May 1, 1999. Water deliveries will be made after that.
5.) NO WATER WILL BE DISTRIBUTED TO ANY USER NTIL THE ENTIRE SYSTEM - ITEMS "a" THROUGH "e" ARE COMPLETED.
6.) Water orders will be taken in advance. We must have 3/4 of the users on a single lateral place orders before we can justify bringing it on line. Please contact your neighbors for help to satisfy the minimum criteria for orders.
Dale Henry,
Operations Manager
Year Assmt. Ac.Ft/Share delivered
1985 100.00
1986 75.00
1987 75.00
1988 70.00
1989 75.00
1990 75.00
1991 75.00
1992 75.00
1993 75.00
1994 75.00
1995 75.00
1996 75.00
1997 85.00
$ 8.00 for Water Assessement 27.00 for CWCB loan retirement
2.00 for Weed control
4.31 5.65 4.03 4.80 4.25 4.48 4.12 4.11 4.97 5.16 3.90 5.20 4.78
2.00 for Right of way acquisition 46.00 for Operation and maintenance
$ 85.00
Cost per Ac.Ft.
23.20 13.27 18.61 14.58 17.65 16.74 18.20 18.20 15.09 14.53 19.23 14.42 17.78
$ 51.00 per share due and payable April 1, 1999, interest at 1-1/2°/o per month charged after May 1, 1999.
$ 34.00 per share due and payable October 1, 1999, interest at 1- 1 /2°/o per month charged after November 1, 1999.
No water will be delivered on delinquent accounts.
All pump permitees will be required to have 5 acre feet of water in their accounts at the start of the water season.
Total assessments of $85.00 per share are due April 1, 1999 on two shares or less.
5
Source
Storage - November 1 , 1997 Storage - November 1 , 1998 Storage used in 1998
Diversion from North Fork Diversion through Monroe Canal Municipal use out of Horsetooth Res.
Distribution
Ag Deliveries to Stockholders Municipal Deliveries to Stockholders Other: Delivered from #6 Res.
Delivered from Park Creek Res.
Acre Feet
40,909 30,178
Total for 1998
1300 304
10,731 26,506 22,358 8,886 68,481
37,373 8,886
Total Deliveries for 1998 47,863 Evaporation & Distribution System Loss- 35°/o 20,618
Fossil Creek Reservoir
Preferred Rights Exchanged for CBT Rental & Other Deliveries
CBT Project Information
Carryover Available from 1997 CBT Quota 1998 (50%) Potential Carryover 1 0/31 /98 Note: All figures shown are in Acre Feet
Dividends
Total
114,261
3,420 2,500 -0- 5,920
15,066 20,000 5,116
Acre Feet Per Share
Multiple Use Seasonal Early March 4, 1998
May 15, 1998 Total
2.5
2.5
2.5
2.5
1 0.5 1.5
HILL & HILL, P.C.
Attorneys at Law A Professional Corporation Fort Collins, Colorado 85022
December 18, 1998
I attend the monthly Board meetings, which provides an understanding for legal issues that either are or may be pending.
As the City of Fort Collins and the County of Larimer experience rapid and substantial growth in population, there are continuing problems as subdivisions are planned along ditches and reservoirs. The Board spends time and expense to protect the rights North Poudre as to access and any adverse effect on North Poudre's property.
From time to time, there are filings in the Water Court and North Poudre files a protest to be kept informed as to what is intended and avoid a decree which might harm the water rights of North Poudre.
From time to time, the various recreational leases on company reservoirs are reviewed. The insurance. industry is concerned about the use of any jet skis on reservoirs because of losses which have occurred.
The Board regularly attempts to improve the terms and the requirements of recreational leases to allow recreation to get as much insurance coverage as is reasonably available.
The numerous items of paperwork required by the Colorado Water Conservation Board were completed and sent in connection with the loan to be made to North Poudre for improvements which include the outlet to Reservoir 6.
The necessary documentation for the proper transfer of stock and requirements which must be met when stpck certificates are lost continue to take time and expense.
Alden T. Hill died on July 24, 1998. He helped give me the direction and assistance to acquire the site for Park Creek Reservoir for The North Poudre Irrigation Company. Part of the land had to be acquired through condemnation. He was always available to assist me in any questions regarding North Poudre. I will miss his expertise and love of a legal challenge.
Respectfully submitted, HILL and HILL, P.C.
Alden T. Hill Alden V. Hill Attorneys at Law
160 West Mountain Avenue P.O. Box 421
Fort Collins, Colorado 80522 Telephone: (970) 482-3683 Facsimile: (970) 482-7648
7
Board of Directors
North Poudre Irrigation Company Wellington, Colorado
December 1 , 1998
I have audited the accompanying balance sheets of the North Poudre Irrigation Company (a nonprofit organization) as of October 31, 1998 and 1997, and the related statements of income and retained earnings, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. My responsibility is to express an opinion on these financial statements based on the audits.
I conducted the audits in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that the audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the North Poudre Irrigation Company at October 31, 1998 and 1997, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles.
Respectfully submitted,
James A. Brock
Certified Public Accountant
North Poudre Irrigation Company Wellington, Colorado
Balance Sheets October 31, 1998 and 1997
ASSETS Current Assets
Cash and Cash Equivalents (Note 1) Note Receivable (Note 2)
Assessments Receivable Accounts Receivable - Other Prepaid Expense
Total Current Assets Property Assets (Notes 1)
Land
Priorities, Water Rights, and Easements Ditches and Reservoirs (Note 3)
Buildings and Improvements Radio and Office Equipment Machinery and Equipment Transportation Equipment
Total
Less: Accumulated Depreciation Total Property Assets
Other Assets
1998 28,150
471 11 ,039 12,976 14,809 67,445
643,815 716,471 13,388,798
195,710 68,662 361,000 127,266 15,501,722 (3,554,971) 11,946,751
Certificate of Deposit -Restricted (Note 5) Note Receivable (Note 2)
145,000 55,123 17,941 Stock of Other Companies (Note 1)
Total Other Assets Total Assets
218,064 12,232,260
The accompanying notes are an integral part of these financial statements.
Exhibit 1
9
1997 19,094 21,019 20,476 21 '115 81,704
571,415 716,471 12,815,063 195,710 66,742 306,569 109,577 14,781,547 (3,373,480)
11,408,067
110,000 17,941 127,941 11,617,712
LIABILITIES
1998 1997
Current Liabilities Notes Payable (Note 3) Accounts Payable -Trade
Accounts Payable - Water Purchase (Note 4) Payroll Withholding Payable
257,963
17,076 60,000 583 87,838 7,040 Accrued Interest Payable
Accrued Compensated Absences Total Current Liabilities
Long-Term Liabilities Notes Payable (Note 3) Deferred Revenue (Note 5) Total Long-Term Liabilities Total Liabilities
430,500
4,393,516 145,000 4,538,516 4,969,016
STOCKHOLDERS' EQUITY Paid in Capital
Common Stock (1 0,000 Shares Authorized,
$50 Par Value, 10,000 Shares Issued, 9,999 Shares Outstanding 1998 and
9,998 Shares Outstanding 1997 500,000 Additional Paid in Capital (Note 7) 875,677 Total Paid in Capital
Retained Earnings Total Paid in Capital
and Retained Earnings Less: Treasury Shares (At Cost)
1997 -2 Shares 1998 - 1 Share
Total Stockholders' Equity Total Liabilities
and Stockholders' Equity
Exhibit 1
1,375,677 5,694,416
7,270,093
(6,849) 7,263,244
12,232,260
238,165 7,747 60,000 289 89,595 9,751 405,547
4,491,480 110,000 4,601,480 5,007,027
500,000
430,197
930,197
5,682,657
6,612,854
(2, 169)
6,610,685
11,617,712
North Poudre Irrigation Company Wellington, Colorado
Statements of Income and Retained Earnings For the Years Ended October 31, 1998 and 1997
1998 1997
Operating Revenues
Assessments 850,511 850,426
Recreational Leases 227,185 211,300
Other Operating Income 123,846 85,768
Reimbursements 6,623
Stock Transfer Fees 6,800 5,290
Total Operating Revenues 1,208,342 1 '159,407
Operating Expenses
Salaries and Wages 226,697 264,383
Repairs and Maintenance 202,772 137,575
Depreciation 181,491 171,306
Water Purchased and Assessments 87,934 75,387
Insurance 49,041 30,027
Legal Fees 38,400 55,284
Office and Other Expense 24,572 17,606
Employee Benefits 22,155 23,019
Payroll Taxes 19,324 21,415
Utilities and Telephone 18,588 17,259
Ditch Riders' Expense 16,484 20,976
Office and Other Expense 15,873 24,572
Weed Control 14,149 9,526
Engineering and Other Fees 12,234 17,049
Gas and Oil 11,754 11 ,919
Directors' Fees and Expense 10,992 16,115
Vehicle and Other Taxes 7,276 4,596
Accounting Fees 2,800 2,800
Total Operating Expenses 937,964 903,208
Income From Operations 270,378 256,199
Exhibit 2 (Continued)
11
North Poudre Irrigation Company Wellington, Colorado
Statements of Income and Retained Earnings For the Years Ended October 31, 1998 and 1997
1998 1997
Other Income (Expense)
Gain on Sale of Assets 108,307 3,500
Interest and Finance Charges 12,679 9,019
Oil and Gas Royalties 8,406 12,817
Interest Expense (188,011) (191 ,077)
Total Other Income (Expense) (58,619) (165,741)
Net Income (Loss) 211,759 (90,458)
Retained Earnings - Beginning of Year 5,682,657 5,592,199 Retained Earnings- End of Year 5,894,416 5,682,657
North Poudre Irrigation Company Wellington, Colorado Statements of Cash Flows
For the Years Ended October 31, 1998 and 1997
Cash Flows From Operating Activities Net Income
Adjustments to Reconcile Net Income
1998
211,759
to Net Cash Provided by Operating Activities:
Depreciation 181,491
Gain on Sale of Assets (1 08,307) Decrease (Increase) in Assets:
Assessments Receivable Other Account Receivable Prepaid Expenses
Increase (Decrease) in Liabilities:
Accounts Payable Accrued Expenses Deferred Revenue
Net Cash Used by Operating Activities Cash Flows From Investing Activities
Net Proceeds From Sale of Assets Collection of Loans Receivable Additional Paid in Capital From
Buckeye Lateral
Net Proceeds From Sale of Treasury Shares
Purchase of Equipment and Property Assets
Increase in Restricted Investments Net Cash Used by Investing Activities Cash Flows From Financing Activities
Proceeds From Short-Term Debt Repayment of Short-Term Debt Repayment of Long-Term Debt Net Cash Used by Financing Activities Net Change in Cash and Cash Equivalents Cash and Cash Equivalents -
Beginning of Year
Cash and Cash Equivalents - End of Year
9,980 7,500 6,306 9,329 (4,174) 35,000 348,884
80,001 312 18,000
9,800 (397,775)
(35,000) (261 ,662) 550,000 (534,000)
(94, 166) (78, 166) 9,056 19,094 28,150
The accompanying notes are an integral part of these financial statements.
Exhibit 3 13
1997 90,458
171,306 (3,500)
67 (20,476)
(2,852) (16,580) (24, 156) 30,000 224,267 3,500 15,404
(116,750) (30,000) (127,846) 144,000 (200,000)
(90,531) (146,531) (50,110) 69,204 19,094
North Poudre Irrigation Company Wellington, Colorado Statements of Cash Flows
For the Years Ended October 31, 1998 and 1997
1
Supplemental Cash Flow Information II
Amounts paid in cash for interest expense during the periods were ~
$189,768 for 1998 and $196,536 for 1997.
The accompanying notes are an integral part of these financial statements.
Exhibit 3
14
1 I
North Poudre Irrigation Company Wellington, Colorado Notes to Financial Statements
October 31, 1998
Note 1 - Summary of Significant Accounting Policies
Operations- The Company provides irrigation water for agriculture uses to approximately 600 shareholders in the Northern Colorado Front Range. The Company business office and maintenance shop facilities are located in Wellington, Colorado.
Property Assets - Property assets are recorded at cost for assets purchased and fair market value for donated assets. Depreciation is being taken by the straight-line method over the following useful lives.
Item Life
Ditches and Reservoirs 50-1 00 years Buildings and Improvements 10-40 years Radio and Office Equipment 1 0 years
Machinery and Equipment 10 years
Transportation Equipment 5-1 0 years
Cash and Cash Equivalents - All highly liquid investments purchased with a maturity of three months or less are considered to be cash equivalents. The Company places its temporary cash investments with high credit quality financial institutions. At times, such cash balances and temporary investments may be in excess of the FDIC insurance limits.
Estimates-The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
Income Taxes - The Company is exempt from income taxes under IRC Section 501 (C) (12). The company retains this exemption during years that 85°/o of the companies gross income is received from shareholders. During the year ended October 31, 1998 the 85°/o test was not met and the company had a taxable net income of $211,759.
The company also had a net operating loss carry forward of $270,17 4 that was used to offset the current years taxable income. The remaining balance of the net operating loss will be available for carry forward through the year ended October 31, 2010.
Stock of Other Companies - Investments in the stock of other irrigation companies is stated at cost.
15
North Poudre Irrigation Company Wellington, Colorado Notes to Financial Statements
October 31,1998
Note 2 - Notes Receivable
Source Current Long-Term Total
Jill Rickards - Zeller, 8.2S0Io interest, due i monthly payments of
$420, due in full June 1, 2003, secured by Lot 1 at North Poudre
Irrigation Company Reservoir #2. 471 SS,123 SS,S94 Note 2 - Notes Payable
Source Current Long-Term Total
First National Bank, 8.2S0Io interest, due January 30, 1998, amount due represents advances on $SOO,OOO line of credit.
The loan is unsecured. 160,000 160,000
Colorado Department of Natural Resources (Colorado Water Conservation Board), S0lo interest, payable in 11 annual installments of $19,782 beginning June 1S, 1989. Collateralized by the Park Creek Reservoir and water
rights. 18,840 18,840
Colorado Department of Natural Resources (Colorado Water Conservation Board), S0lo interest, payable in 40 annual installments of $19,847 beginning June 1S, 1992. Collateralized by an undivided one half interest in
the No. 2 dam structure. 3,967 313,631 317,631
Colorado Department of Natural Resources (Colorado Water Conservation Board), S0lo interest, payable in 40 annual installments of $77,612 beginning May 1, 198S.
Collateralized by an undivided one half interest in the Fossil
Creek dam structure. 21,832 1,093,768 1, 11S,600 Note 2 -Notes Payable (continued)
Source Current Long- Term Total
Colorado Department of Natural Resources (Colorado Water Conservation Board), S0lo interest, payable in 40 annual installments of $67,192 beginning May 1, 1987.
Collateralized by an undivided one half interest in the No. 1S
Reservoir dam structure. 17,139 983,864 1,001,003 Colorado Department of Natural
Resources (Colorado Water Conservation Board), S0lo interest, payable in 40 annual installments of $23,S74 beginning May 1, 1990.
Collateralized by an undivided one half interest in the Clark
Lake dam structure. S,24S 361,327 366,S72 Colorado Department of Natural
Resources (Colorado Water Conservation Board), 2°lo interest, payable in 40 annual installments of $64,378 beginning May 1, 1996, collateralized by the #S and #6
dam structure. 30,940 1,640,926 1,671,866
Total 2S7,963 4,393,S16 4,6S1 ,479
17
North Poudre Irrigation Company Wellington, Colorado Notes to Financial Statements
October 31, 1998
The following is a summary of the annual debt service requirements:
Year Principal Interest Total
1999 257,963 174,420 432,383
2000 82,151 170,451 252,602
2001 85,312 167,290 252,602
2002 88,612 163,990 252,602
2003 92,058 160,544 252,602
2004 95,656 156,946 252,602
2005-2035 3,949,727 2,134,716 6,084,443
Totals 4,651,479 3,128,357 7,779,836
Note 4 - Water Allotment Agreement
The Company entered into an agreement December 5, 1945, with the Northern Colorado Water Conservancy District for the annual purchase of 40,000 acre feet of water, or any such portion that may be delivered, at $1.50 per unit. Payment is due May 1 of every year and is secured by an irrevocable levy of assessment on the capital stock of the Company. Payments shall continue until the delivery system is paid for and thereafter for operating and maintenance charges.
Note 5 - Option Agreement - Halligan Reservoir
The Company has entered into an agreement with the City of Fort Collins (the City) that may result in the sale of the Halligan Reservoir site to the City for $5,363,675. Based on the agreement, the Company retains the current storage capacity of the reservoir. During the next 7 years, the City will make option payments to the Company totaling
$460,000, as the City considers and works toward possible completion of the sale. If the sale is not completed, one-half of the option payments or all of the option payments under limited circumstances could be refundable to the City. The Company has purchased a certificate of deposit representing one-half of the option payments and deferred the potential income resulting from the payments. Should the sale be completed, the full amount of the option payments will be applied toward the purchase price.
North Poudre Irrigation Company Wellington, Colorado Notes to Financial Statements
October 31, 1998
Note 6 - Pension Plan
The Company sponsors a deferred compensation plan for all full time employees. The Company matches employee deferrals up to a maximum of 3% of compensation. The Company's contribution to the plan was $4,929 for the year ended October 31, 1998.
Note 7 -Additional Paid in Capital
During the fiscal year the Company reached an agreement with the Buckeye Lateral Shareholders to acquire the Buckeye Lateral System.
The Buckeye Lateral Shareholders transferred ownership of the assets of the system along with a cash payment of $81,000 to the Company.
The estimated fair market value of the assets $350,000 and the cash payment have been recorded as additional paid in capital.
Gain from the sale of treasury stock of the Company in the amount of
$14,480 has been recorded as additional paid in capital.
19
Vandals painted graffiti on the spillway at Park Creek Dam.
Damage caused by a "Hit & Run" auto accident at the Munroe Diversion.
The outlet at #3 Reservoir was reshaped and rocked.
A water check structure was installed on the Railroad ditch.
21
The "flushing" of the ditches always brings enormous amounts of weeds.
A load of 54 inch pipe being delivered for the #6 outlet pipeline project.
The remote brush chopper being installed.
23
A tail water return pipeline being installed below #6 Reservoir.
24
