Water District Settles Suit And Adopts Budget

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In a special board meeting on May 15 the Virgin Valley Water District took several actions from adopting a budget to settling with the last defendants in the civil suit filed by the district in 2011.

The settlement agreement with Michael Johnson and Robert Coache ends the districts civil suit concerning two water rights transactions in 2005 and 2008.  The suit alleged that former district manager Michael Winters, water district chief hydrologist Michael Johnson, former deputy state water engineer Robert Coache and local businessman John Lonetti with improperly using their influence to have the district overpay for water rights.

Johnson and Coache also have pending criminal charges filed by the Clark County District Attorney that will not be affected by the settlement with the district.  Winters and Lonetti reached a settlement agreement with the district earlier this year when Winters paid the district $15,000 and Lonetti paid the district $4.74 million.  Neither Winters or Lonetti were criminally charged.

District manager Kevin Brown told the board “Staff believes that the settlement terms with Lonetti are extremely favorable to VVWD.”

Under the settlement agreements approved by the board the district expects to recover a total of $6,611,417 from the defendants.   Payments from Johnson and Coache will come from assets seized by police including two houses in Las Vegas and cash payments from Johnson.  The district also anticipates receiving $1,000,000 from the district’s insurer when Johnson and Coache are found guilty in court.

The criminal complaint against Johnson and Coache lists 18 counts of money laundering.

Mesquite resident John Williams asked the board “If it goes to court and (they) are found not guilty do they still lose those assets?”

Water district attorney Bo Bingham responded “With Mr. Johnson yes and with Mr. Coache no.”  Bingham explained that the assets of Coache were seized by police and if he is found not guilty they would be returned.  The assets of Johnson included real property and cash that has been assigned by Johnson to the district under the settlement.

“We met with the elected district attorney and they expressed a lot of confidence in the case,” said Bingham.

Williams also questioned the legal fees to bring the case, “Your total fees in this case is nearly a million dollars.”  Williams also said his review of the budget showed the district had spent about $1.7 million in other legal fees over the last three years.

Bingham responded that he didn’t have the exact numbers but “Yes, that is from other cases that the district has been involved in.  There have been a variety of matters over the last few years.”

Bingham also said the fees included expert fees, forensic accountants and appraisers all involved in proving the district’s civil case and other legal actions.  “One of the reasons to not go to trial and do a settlement was to avoid the additional costs of a trial,” said Bingham.

The board unanimously approved the settlement agreement.

The settlement agreements also had a positive impact on the budget for the district for the next two years, when the payments will be received.

Wes Smith, accountant for the district presented the budget for 2014-2015.  Smith reviewed the differences between the preliminary budget that was submitted to the state earlier in the year and the final budget for approval.

“You will note in the original budget we had proposed water use fees of $8.2 million, we have now proposed $6.9 million, which I believe is achievable in the coming year without a rate increase,” Smith told the board.

District manager Brown was asked if the additional funds from the legal settlements would mean a rate increase was not needed.  “On top of all the positive stuff we have heard, our capital facilities plan over the next six years identifies 23 million dollars of capital needs we still must address.  It’s nice to have this cash infusion from the settlements and it would be nice to have them every year but we don’t, said Brown.

Brown also said that “After the settlement money we will go back into a deficit mode and even compounded more by having that capital need every year.”  There will be more public budget meetings to address our rate structure according to Brown.

Board member Rich Bowler noted that “We can probably have a more gradual increase due to the settlement.”  Brown and board member Kraig Hafen agreed.

Smith also noted that the board had reduced legal fees “dramatically” in the new budget from last year.  “We have reduced legal fees further to $180,000 for the next fiscal year,” said Smith.

Health insurance costs were also capped in the budget at $326,000 by changing insurance companies to one that provided a guarantee that premiums would not exceed that amount.  “If the district staff claims are less than expected, the district will reap the benefit because we have partially self-insured,” Smith told the board.

A major change from previous years budgets was having a surplus of funds at the end of the fiscal year.  “The district will bring in $1.888 million than we expect to spend in cash in the next fiscal year,” said Smith.  In previous years the district had used savings to balance the budget.

Board chair Ted Miller noted that “A few million dollars from the settlement really makes a difference.”

The budget was approved unanimously.

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