SGCC and the Water Facilities Agreement

In the previous post, SU identified the Somersett Owners Association (SOA) and the Somersett Golf and Country Club (SGCC) responsibilities under the Water Facilities Agreement. The question now being – is the SGCC living up to its responsibilities under this Agreement? There is no question that the SOA is, as, aside from some cost sharing, the SGCC is primarily responsible for carrying out the operational and maintenance provisions contained within the Agreement. To address the current status, the following summary is in order:

1. This issue first arose in a strong SOA Attorney Letter to the SGCC on October 14, 2016, in which the SGCC was put on notice for certain violations of the Water Facilities Agreement pertaining to maintenance, training and utility cost allocations. A subsequent workshop apparently resolved the electrical cost sharing concerns. However, there remains open issues associated with training, maintenance, water distribution, improper pump replacement and well conditions. A copy of the October 14, 2016 Attorney Letter is available via the following Link:      2016 Attorney Letter to SGCC on Lease Violations

2. Subsequent to the above letter, in mid-2018, a “Golf Course Irrigation Water Source Workshop” was held and summarized in a report by the SOA’s Consulting Engineer Seth Padovan . The workshop summary contains comments on: 1) the Well 5 components providing irrigation water to the SGCC and its perceived deficiencies, 2) A summary of the underground and Truckee River water rights, and 3) A summary of water usage and sources for both the Canyon 9 and SGCC golf courses. No evaluation was included for the surface pump components. A copy of this summary is available via the following link:     Golf Course Irrigation Water Source Workshop

3. The preceding workshop was followed up by a more comprehensive assessment of the water supply system components by Seth Padovan, which included: 1) The Canyon 9 Pond Pump Station, 2) The Truckee River Pump Station, 3) The SGCC Hole 5 Pond Pump Station and 4) The Sierra Canyon Well 5. The resulting report issued in February 2019 contained recommendations for both short and long-term repairs or maintenance of water supply system components, along with associated cost estimates. The report did not address responsibilities for costs. However, per the Water Facilities Agreement, cost allocations would be as follows: 1) Canyon 9 Pump Station – shared between SOA and SGCC, 2) Truckee River Pump Station – shared between SOA and SGCC, 3) Hole 5 Pump Station – SGCC and, 4) Well 5 – SGCC. It should be noted that the shared costs for items 1) and 2) are based on specific pumps for Canyon 9 and water usage rates. A copy of this report is available via the following link:      Canyon9 & SGCC Water Supply Infrastructure Review

To help understand what is in question here, the following simplified Water Facilities System diagram may be of assistance

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4. In June 2019, the SOA Board announced the formation of a “ SGCC and SOA Water Management Advisory Committee”. This is an ad-hoc committee comprised of SGCC and SOA Board Members , plus others as appropriate, whose mission is “to assure both the short and long term ability to provide water to the Canyon9 and Championship course is managed in the best interest of both parties”. This committee is to meet at least quarterly, publish minutes and open to homeowners. The May and June meeting minutes indicate attendance and input from Seth Padovan – SOA Engineer, and Linda Rhodes – SOA Water Consultant. Pertinent items covered were as follows: 1) preparation of an equipment spreadsheet, 2) over pumping of Truckee River water rights by the SGCC, and 3) discussion on a possible new Well to replace Well 5. The subsequently generated equipment spreadsheet incorporates the following elements: 1) Component Condition, 2) Recommended Maintenance, 3) Estimated Costs (near and long term) and 4) Cost Responsibilities. A copy of this spreadsheet is available via the following link:     Golf Course Water Supply Infastructure – Maintenance Cost Summary

SU Comments/ Conclusions

1. The formation of an advisory committee to insure that the water facilities are being operated and maintained appropriately is all well and good. However, perhaps rather than appointment as an “Advisory Committee” it should be an “Oversight Committee”, whose charter is to assure that not only is the SGCC living up to its responsibilities under the Water Facilities Agreement, but all other provisions of the SGCC Purchase and Lease Agreement as well.

2. The equipment spreadsheet cost allocations are all in accordance with the Water Facilities Agreement. This is good. From the spreadsheet, the estimated short term/long term costs by party are as follows: 1) SOA – $7.5K/$30.0K, 2) SGCC – $$422.5K/$161.5K and, 3) Shared – $40K/62.5K. Given that the shared costs are primarily allocated on water usage rates, for which the SGCC uses approximately 8 times that of the SOA, this would equate to the following estimated short term/long term liabilities: the SOA – $12.5K/$37.8K and the SGCC – $457.5K/$216.2K.

3. The primary component of the SGCC’s short term costs ($400K) are attributable to the Well 5 deficiencies. This has prompted a discussion as to whether or not it would be more beneficial to just drill a new well. When questioned at a Board meeting as to who would pay for this, the SOA GM stated that this decision had not been discussed, but that any cost to the SOA would require Board approval. This was somewhat disconcerting, as the decision appears obvious. The water produced by Well 5 only supplies the SGCC, the maintaining of which, per the Water Facilities Agreement, solely rests with the SGCC. The SOA has no need for the water produced via Well 5.

4. As a result of the Well 5 deficiencies, the SGCC has been over-pumping water from the Truckee River, how this will play out with “The Water Master” and its impact on current water rights remains to be seen.

5. It is apparent that most of the work performed in the review and evaluation of the Water Facilities has been accomplished by SOA consultants. Is this cost being paid for or shared by the SGCC? Per the Water Facilities Agreement, this type of activity falls under the duties of the Water Facilities “Operating Manager”, the SGCC that is, so it appears we are doing their work for them.

6. Given the estimated near term maintenance costs for the SGCC of $457.5K, most likely higher if a new well is required, there is a concern as to whether or not the SGCC can come up with the required funding. This has resulted in the voiced opposition by many owners against the SOA providing any financial relief to the SGCC (loan or otherwise). The SOA Board and GM’s somewhat current cavalier attitude on cost decisions and statements that “we own the Golf Course” (i.e., the SGCC) and that “we are all in this together” does not inspire confidence that they will eventually hold the SGCC’s feet to the fire. This opposition is also fueled by SGCC’s estimated liability of $700K for the Hole 5 Rockery Wall repairs, which has already been paid for by the SOA, and was a contributor to the $1,200 assessment.

In conclusion, it is SU’s belief that the SGCC fully recognizes its responsibilities under the Water Facilities Agreement, it just has problems carrying them out, with perhaps some disagreements over the estimated costs and how costs will be allocated in the event a Well 5 replacement is required. With regard to the SGCC’s ability to fund its required maintenance, repairs, and/or replacements, perhaps the SOA Treasurer Joe Strout, who is also the SGCC Treasurer, can  spread some light here.

Comments, pro or con, are always welcome.