CROUCH MESA — The New Mexico Environment Department is investigating the absence of as much as $1 million in public assets from the Morningstar Domestic Water and Waste Water Association as members of the community utility tonight consider a vote to disband the organization.
The Animas Valley Land and Water Co., which owns and manages a majority of land on Crouch Mesa, would take on ownership and operation of the community water system if a utility member vote passes during a public meeting tonight at 7 p.m. at the Farmington Civic Center.
Morningstar provides water and waste water services to nearly 6,000 residents on Crouch Mesa.
Although mutual domestic water systems face little public regulation, the utility if transferred to Animas Valley would be overseen by the New Mexico Public Regulation Commission.
Animas Valley Land and Water currently manages Morningstar and owns the utility's infrastructure, but the Morningstar board of directors is intended to act independently of the land company.
The state Environment Department investigating the community utility's operations have questioned why Morningstar owns none of its own pipelines or other related assets, yet pays more than $100,000 in annual interest fees, similar to those paid on a bank loan, said Carol Parker, an Environment Department attorney.
"People have paid money to build a water system that, at least for what we can tell, the mutual domestic ought to own parts of," Parker said. "If public assets are missing, that seems like that's a significant concern."
Parker estimated $1 million in assets could be unaccounted for based on end-of-year financial records that indicated the $100,000 interest payments in 2002, 2007 and 2008. No other financial documents for the community utility established in 1997 exist, Parker said.
The findings, however, are preliminary, she said. No formal legal action was yet taken.
"We're in the middle of our investigation, so I can't tell you if there's anything wrong with that (lack of assets)," she said. "I'd want to know where the assets went."
But the Environment Department by state law only is entitled to investigate mutual domestics or similar cooperative community utility organizations. If Morningstar votes to dissolve itself from a community group into a public, for-profit utility through Animas Valley, the investigation would be forced to cease, Parker said.
Animas Valley Land and Water Co. General Manager Evert Oldham said the decision to seek full control of the water system is to bring on increased regulation and better serve the Crouch Mesa community.
"I want to be more strictly and more heavily regulated," Oldham said. "It's as simple as that."
Oldham said the state was investigating the utility's member voting structure.
Under the mutual domestic water cooperative, owners of each of the Morningstar's 2,200 water meters is granted a single vote regarding operation of the community water system. But Animas Valley has maintained a majority vote because the company rents property to more than 1,100 water users, retaining the voting rights from each property, according to the Environment Department.
"On the basis of complaints from a couple of our members, they launched an investigation into our business structure," Oldham said. "They have told us that they don't believe that Animas Valley has done anything wrong, but they have some problems with the structure of our voting system."
Animas Valley expressed concern that a lack of legal precedent governing what constitutes a community utility voting member means any legal challenge would need to go to court to be resolved, a costly endeavor that would affect water service rates.
The company, instead, would prefer increased utility regulation than an expensive legal process surrounding voting procedure, Oldham said.
Transitioning from a community utility to a public utility regulated by the PRC means the water system's rates, customer service and system dependability will come under review, said Roy Stephenson, director of the PRC Utility Division.
Water quality, however, would continue to be regulated by the Environment Department.
"It sounds from everything I've heard that most of the people in the area believe that this is the way to go, and that the board of the mutual domestic is happy to let someone else take over," Stephenson said. "It looks like it's going to be our recommendation (to the PRC board) to do what we can."
Stephenson, however, said it was odd the mutual domestic utility owned no assets, making the transfer to private ownership unique.
Animas Valley likely would receive a temporary authority to manage the utility if Morningstar is dissolved tonight. A full PRC utility certification could take an additional four months, Stephenson said.
Although the decision to dissolve the Morningstar Water and Wastewater Users Association will be put to a vote by members tonight at the Farmington Civic Center, the decision could be moot. Animas Valley maintains its holding on more than 1,000 votes of the 2,200-member system. With community meetings previously drawing fewer than 50 community members, the land company's votes could make the decision.
Oldham declined to comment whether the management company would withhold its voting rights from the Wednesday decision, as it had in the most recent board of directors election.
"Having a quality water system is of paramount importance to us," Oldham said. "I guess what I would say is we don't want to be the deciding vote. The members need to decide this."
Environment Department staff said they received no notice of tonight's meeting that could end their authority to investigate Morningstar and its managers.
"Really, all we have right now are questions," Parker said.
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