The major issue on the Virgin Valley Water District (VVWD) board agenda Tuesday was approval of over $1.5 million in bids for system repairs. However, the majority of the meeting was discussion on how to collect over $88,000 in interest payments from Mesquite businessman John Lonetti.
As part of an earlier settlement agreement, the district was paid over $4.7 million by Lonetti to resolve claims arising out of a 2008 purchase of water rights. The district claims that Lonetti was late in making the agreed payments, and that the district is owned interest penalties of $88,803.52 under state law.
The district has sent two letters to Lonetti requesting payment, and Lonetti’s attorney has been contacted by the district’s legal counsel. The district has received no written response to the letters.
When the issue arose on the agenda, board Chair Nephi Julien recused himself from participation in the discussion, saying his pest control company services properties owned by Lonetti. “I have not met him to the best of my knowledge, but in the best interests of the water district I recuse myself,” said Julien.
Board Vice-President Barbara Ellestad assumed the chair for the remainder of the discussion.
Board member Rich Bowler started the discussion by saying that at the direction of the board earlier, he and district manager Kevin Brown had contacted Lonetti, and that Lonetti was out of town until September. “He indicated he knew interest was owed, and when he comes back he will discuss it with the board,” said Bowler.
Director Robert “Bubba” Smith told the board that he would support meeting with Lonetti in September, and that he was “Not in a big rush” since Lonetti had paid the principal amount. Smith stressed that he wanted to pursue the issue, but didn’t think waiting until September was an issue.
Board member Sandra Ramaker agreed, saying she liked that Lonetti acknowledged he owed the interest and said that she would like to meet with him in September.
Strong opposition to waiting until September to meet with Lonetti was voiced by Vice President Ellestad. She told the board that Lonetti knows about the interest owed and that “He ignored the issue.” Ellestad said “My concern, my only concern, is to collect the money that is legally due to the rate payers of the Virgin Valley Water District.”
Ellestad asserted Lonetti and his attorneys know about the debt, and that “If this money was owed to them they would certainly want their money. They have not reached out to us to settle an issue they have known about for months.” Ellestad added “I’m not willing to wait on Mr. Lonetti’s personal vacation plans.”
Board members Smith and Bowler both argued that trying to settle the issue without lawyers was in the district’s best interest as using lawyers would increase litigation costs. Smith told the board that while Lonetti hadn’t fulfilled his responsibilities “As fast as everyone would like, he has still fulfilled them.”
Ellestad was supported by Mesquite businessman David Ballweg during public comments. “I think it was poor practice to try and have a sit down with Mr. Lonetti as he has shown no interest in paying without legal action.” Ballweg told the board that they should be dealing with Lonetti only through legal counsel. “I don’t think he has shown good faith, and the board has a fiduciary responsibility to collect this money,” said Ballweg.
Both Bowler and Smith stated that they were not against legal action, but they didn’t believe it was needed yet. “I don’t want to spend $100,000 to collect $80,000,” said Bowler.
Bowler moved to allow Lonetti to return in September and hold discussions on the interest owned with the board. The motion was approved 3 to 1 with Ellestad voting no.
In other business, district manager Brown reported on the bids the district received for replacing water lines on Mesa Boulevard. The project consists of replacing a failing 10-inch iron line that serves the Eureka Casino, Rock Springs 1 Condominiums, McDonald’s and the Rebel gas station.
Four bids were received, but three of the bids were not complete and under Nevada law cannot be accepted by the district. Brown said he had talked with the three losing bidders and explained why their bids could not be accepted. Brown recommended that the board approve granting the bid to Mesquite General Contracting, who was the sole qualifying bid at $432.578.62. The board approved the bid not to exceed $445,000.00.
Brown also told the board that the bid was for labor only and did not include materials. Separate bids for materials were submitted by four suppliers, with Scholzen Products providing the low bid for materials at $193,885.65. In response to board questions, Brown said that it was not normal to separate materials from the labor bid, but that the district determined that they could save up to 20 percent in materials cost by directly contracting with a supplier. “The district doesn’t have to pay sales tax or carrying costs if we buy the materials direct,” said Brown.
The board asked to be kept up to date on the process, over concern that there will be “finger-pointing” between the contractor and the material supplier if disputes arise. The board then approved the bid of Scholzen Products.
The board also approved a bid from Hydro Resources for $917,230 for the Well Number 1 Bunkerville Replacement project. The project will consist of two phases, the first drilling the well to 900 feet from the current 640 feet, and second, outfitting the well.
District accountant Wesley Smith reported to the board that the refinancing of a portion of the 2008 bonds had been accomplished, and that the district will save about $100,000 per year because of the reduced interest rate. Smith told the board they would continue to refinance bonds as allowed under the bond terms. The board thanked Smith for being aggressive on saving the district interest payments.