HomeMy WebLinkAbout20111570.tiff M e mo
To: Stockholders, Rural Ditch Company
From: Dan Grant, Secretary/Treasurer
CC: Attorney Scott Holwick
Date: 6/21/11
Re: Proposed Bylaw Amendment
Dear Shareholders:
The Board of Directors of the Rural Ditch Company has again discussed the possibility of
incorporating"Catlin"provisions within the Company By-laws. The concept was discussed
briefly at the last Annual Stockholder's Meeting,and the Directors have requested attorney
Scott Holwick draft a Summary of the Catlin By-laws along with Pro and Con comments. Mr.
Holwick's comments are enclosed for your review.
The Board is requesting shareholders review the enclosed material and submit any questions
or comments regarding adopting the provision. The Directors will review your comments,
questions, concerns, and/or support at their next regularly scheduled meeting which will be
the third week of August. Their intention will then be to address any issues that may exist
from any shareholder and, if warranted, proceed with either a Special Stockholder's Meeting
for consideration to adopt the amendment or put the issue on the Agenda for the regular
Annual Stockholder's Meeting in 2012.
Your prompt consideration in reviewing and commenting on the proposed change to the By-
laws is sincerely appreciated. Please feel free to reply by mail or email to the contact
information below.
Sincerely,
Dan Grant ��At-
Dan
Secretary/Treasure
drgnlgna msn.com
(303)776-7207
(303)888-1125—cell
P.O. Box 1826
Longmont, Co. 80502-1826
Enc.
Csw�Yns s e U 'vovv5 CU.. CA
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2011-1570
Grant, Dan
From: Scott E. Holwick [SHolwick@Igkhlaw.com]
Sent: Friday, June 17, 2011 10:36 AM
To: Grant, Dan; drgnlg@msn.com
Cc: 'Jim Sittner; 'gcvarravci@aol.com'; 'Randy Ray'; Corey.Hansen@latarge-na.com; 'Lohmann
Linda'
Subject: Rural - proposed Bylaw amendment
Attachments: Draft Catlin Bylaw.docx
Dan,
Per the Board's direction yesterday, the proposed Bylaw amendment is summarized below, along with pro's and
con's. I have copied the Board in case any one or more of them wants to edit my narrative.You should probably wait
until next Tuesday (6/21) before sending it to the shareholders. I have also attached the draft proposed amendment
that was presented at the annual meeting for reference.
Summary:
The proposed Bylaw amendment is commonly known as a "Catlin Bylaw Provision" and it, or a version of it, has been
adopted by a large number of mutual ditch and reservoir companies in Colorado. It is included in the template
Bylaws published by DARCA (the Ditch and Reservoir Company Alliance)for its members. The water rights decreed
to the Rural Ditch may be legally used by the Company's shareholder for irrigation of lands lying under the Ditch. It
is lawful for a shareholder to file an application in Water Court to change the use of the water associated with the
shareholder's shares to a use other than irrigation. In fact, in Case No. 01CW255,the Central Colorado Water
Conservancy District did change the use of its 3.5 Rural shares so that they may be also used as a source of
substitute and replacement supply in Central's decreed plans for augmentation. Two other water court applications
are pending - Case Nos. 03CW306 (Varra et al.) and 07CW22 (the Larsons) - in which shareholders seek to change
the use of their shares (4 shares and 1 share respectively)for other purposes.
When such water court applications are filed, the Company participates in the adjudication in order to insure that
any decreed change of use does not injure the Company's ability to operate Rural's decreed water rights or its
shareholders' ability to continue to use their shares as they have historically done. The Company's participation
requires review of the proposed change by the Company's legal counsel and by the Company's consulting engineer.
The Company's participation may,from time to time, also require involvement in Water Court proceedings, including
trial. Depending on the nature of the change application, and the parties involved in the adjudication, the Company
may incur significant costs to protect itself and its shareholders - such costs have historically come from the
Company's Operating Budget, which is funded by the Company's assessments which are approved annually by the
shareholders.
The proposed Bylaw amendment would require that shareholders who wish to change their shares in the future
obtain approval of the planned change from the Company prior to filing the water court application. The proposed
Bylaw amendment would also require the shareholder seeking the change to reimburse the Company for expenses
incurred during the review process and the subsequent adjudication process. The reimbursement amounts to be
paid by the shareholder are capped at $5,000 (for the initial review) and $2,500 (for the adjudication process).
Of the shareholders who have already obtained a change decree (Central Colorado Water Conservancy District) or
have a change application pending(Varra et al. and the Larsons), both Central and Varra have agreed to the
retroactive imposition of the reimbursement provision if the proposed Bylaw amendment is approved by the
shareholders. The Larsons have not yet been asked to make such a commitment, but will be asked if the proposed
Bylaw amendment is approved.
Pro's:
1
If passed, the Company would gain additional flexibility in initially reviewing and either approving or denying a
proposed change prior to the shareholder filing for such a change in water court. This will allow the Company to
seek common protective terms and conditions from each changing shareholder which will allow the Company to
better manage its water delivery operations and its obligations to the shareholders. If passed, the Company would
also recoup some of the expenses (up to the capped amounts) from the changing shareholder who will benefit from
the change decree without having to allocated those costs among those shareholders who are not seeking to
change their shares. This will also free up funds in the Operating Budget to be used for other purposes that will be
beneficial to all shareholders and will allow the Company to minimize or freeze any future assessment increases that
would otherwise be required to fully fund the Company's operating expenses.
Con's:
If passed, shareholders who seek to change their shares have an additional internal approval process to navigate.
Those changing shareholders will also be subject to the reimbursement caps set in the provision, which costs would
otherwise be fully borne by the Company through its Operating Budget. The reimbursement caps will likely not fully
cover the Company's costs incurred in such a proceeding.
Please let me know if additional modifications need to be made before Dan sends this to the shareholders.
Best regards,
Scott
Scott E. Holwick
LYONS GADDIS KAHN & HALL, PC
P.O. Box 978
Longmont, CO 80502-0978
303-776-9900; Facsimile 303-776-9100
Email:sholwick@Igkhlaw.com; Website: www.Igkhlaw.com
Lyons Caddis Kahn S. Hall
A,'Profc:5ib^a. Corpora r,, Attorneys enc CoLOae Crs
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2
01/17/11 - DRAFT
ARTICLE XIII
Changes of River Water Rights
13.1 Any stockholder desiring a change of water right ("Applicant"), including, but not
limited to, a change in point of diversion or place of use of any water that Applicant is entitled
to receive as a result of stock ownership, must first submit a written application for such
change to the board of trustees ("Submission"). A change of water right shall include the use
of water the stockholder is entitled to as a result of stock ownership as augmentation water
in a plan for augmentation or exchange. The Submission should detail the requested change
and include adequate terms and conditions to prevent injury to the Company and its
stockholders. If, in the reasonable opinion of the board of trustees, the requested change
may be approved without injury to the Company and all of its stockholders, the board of
trustees shall approve the change subject to necessary terms and conditions. In evaluating
whether the requested change can be made without injury to the Company and its
stockholders, the Company may obtain engineering and legal analyses of the requested
change and the terms and conditions offered by Applicant.
13.2 The Company shall approve or disapprove the Submission within 120 days of receipt.
13.3 No application for approval of a change of water right or plan for augmentation as
described above may be filed in the District Court for Water Division No. 1, State of Colorado
(the "Water Court"), unless the same has first been approved by the Company. If an
application has been approved by the Company, Applicant must include in its application to
Water Court terms and conditions at least as stringent as those approved by the Company.
13.4 If the board of trustees requires legal and/or engineering services to evaluate the
Submission, such expense shall be paid by the stockholder making such request upon
presentation of estimated expenses by the board of trustees. The board of trustees may
require that all or part of the estimated costs be paid to the Company prior to engaging such
services. Payment of expenses for legal and/or engineering services for any such review
shall be limited to actual expenses not to exceed a total of $5,000.00, adjusted annually
beginning on January 1, 2011, in accordance with the "U.S. Bureau of Labor Statistics
Consumer Price Index for Denver-Boulder, All Items, All Urban Consumers" or its successor
index for the previous year. The board of trustees may, without penalty or liability, defer any
determination until such condition has been met. The determination by the board of trustees
shall be final, and shall not be subject to revision unless it is proven in a court of law having
jurisdiction over water matters that such determination was made arbitrarily or capriciously.
In the event the Company approves the request, the Company may elect to file a statement
of opposition to the water court application filed by the stockholder to insure that the board's
decision is complied with in any final decree. If the Company files a statement of opposition
to the application, the stockholder shall pay the Company's actual legal and engineering
fees, to insure such compliance, in an amount not to exceed $2,500.00, adjusted annually
beginning on January 1, 2011, in accordance with the "U.S. Bureau of Labor Statistics
Consumer Price Index for Denver-Boulder, All Items, All Urban Consumers" or its successor
index for the previous year.
13.5 If any portion of this Article XIII is declared void by a court of law, the remaining
portions of this by-law shall remain in full force and unaffected.
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