The Annual Shareholders’ Meeting
Cache Highline Water Association

April 1, 2024

The Annual Shareholders’ Meeting of the Cache Highline Water Association was held on April 1, 2024, at the North Logan City Library, 475 East 2500 North, North Logan, Utah, at 7 p.m. Approximately 113 people were present including company officers and employees.

President Jon Wells welcomed the attendees and led the group in the Pledge of Allegiance.

Christie Hansen read the April 3, 2023, minutes from last year’s annual meeting, and a motion to approve those minutes was proposed by Phil Rasmussen, seconded by Clay Bodily, and carried unanimously.

Elections

The three-year terms of three Board of Directors expire this year: Fred Duersch, Marv Halling, and Deon Hunsaker (Deon no longer works for Smithfield City and therefore is ineligible for reelection). Also, when Jim Huppi retired from USU, the Board selected Christie Hansen to complete his term of office. Christie received the highest number of votes, other than those elected, in the Annual Meeting election last year.

Lyle Thornley conducted the elections and explained the duties of Board Members. The role of the Board Members is to make executive decisions and direct the Water Manager in making decisions. The Board meets monthly to discuss problems as well as listen to and evaluate proposals from outside entities.

Marv Halling was nominated by Lyman Stevens, seconded by Mitch Shiffman. Dave Erickson nominated Fred Duersch, seconded by Alan Grunig. Clay Bodily was nominated by Jon Wells, seconded by Christie Hansen. Ron Bowman moved that nominations cease, seconded by Jack Evans, and carried unanimously. Those nominated were elected by acclamation.

Financial Report (see attachments)

Lyle Thornley reported that annual revenues were very similar to last year. He explained the meaning of the cities’ share of canal maintenance (used for storm water for the four cities). Last year $28,000 in interest income was earned on the newly opened Money Market account. Maintenance expense was a little higher than the prior year. The wells were turned on just to make sure they were maintained properly, incurring the well expense item. Increased utilities expenditures were also caused by the diversion structure (Logan Canyon), which needed major work. Interest expenses for loans were also explained; this amount decreases as debts are paid off. In late 2023, a John Deer mini excavator was purchased for $157,000 with cash, as outsourced services and rental expenses made this a good investment. Lyle also explained the Company assets and liabilities.

A motion to accept the finances as presented was proposed by Clay Bodily and seconded by JoAnn Nyman; the motion carried unanimously.

Water Manager Report

Jason Morgado reported that with plenty of rain, last year was a successful water year; this year appears to be following the same pattern. Our current water snow-water equivalent is 124 percent; with spring rains, that may be increasing. The website is being revamped and updated.

Jason requested that individual systems’ managers spread their system use of water more evenly throughout the week. Although it sounds counter intuitive according to the State, as we have no water-storage capabilities, we need to be watering 24 hours a day. Dredging at Second Dam is nearly completed and should help mitigate the issue of sediment in the line. There are still a few meters that need replacing, and this should be completed by startup. Because of supply-chain issues in obtaining cell-based meter-reading equipment resulted in seeking out other more viable systems with other companies.

The easement will be cleared with new equipment to help improve the water flow and increase safety, including tree removal.

Seepage study. Water will be turned in a couple of weeks earlier than usual this year (around the 13th of April) to provide for a seepage loss study. All headgates need to be closed during this time so seepage can be accurately measured. The information obtained will be used to qualify the Company for grants for improvement projects and help prioritize projects.

Audience Discussion

Purchase of NL City building. The following concerns were expressed by Shareholders in the audience and addressed by the Board of Directors. Of particular concern was the purchase of the North Logan City Office Building and the planned addition of a workshop/storage area at the east end of the building. Bulleted audience comments follow with Board responses in parentheses.

• Smaller spaces may be available at a fraction of the cost, including personal homes.
• This purchase may be opening the Company up unnecessary costs including liability, costs for repairs, and definitely additional debt. (The building was remodeled to include four offices; CH will be in one office, and the others will be rented out to cover the mortgage payment; furthermore, the addition will provide storage for equipment currently stored on Shareholder property.)
(CH is no longer a “folksy” company with a canal that runs through farmland. It is a company with massive liabilities in several cities. Issues that the Canal presents can no longer be taken care of by the cities; i.e., obstructions in the Canal and water in basements. As the communities are developed and residences are built in place of farms, that liability becomes enormous, thus the excavator was purchased to be ready on a moment’s notice to clear damming in the channels, and that equipment and others need a storage/repair area. Currently staff are storing records for the Company in their personal residences. Also, a permanent mailing address is necessary for grant applications, etc.)
• Shouldn’t the Shareholders be consulted before such a purchase? Exact costs have not been disclosed to the Shareholders or voted on by the Shareholders. (The Board offered $551,000 for the structure and property. Although North Logan was hoping for over $600,000, the CH offer was accepted. According to the CH Bylaws, Article III.2, Shareholder approval is required only for a purchase that incurs a debt of $250,000 or more. It is very possible that no debt will be incurred with this purchase; sufficient funds are available in a Money Market account. In addition, there will be no increase in assessments this year.)
• What are the benefits of having this building? (A physical location to meet with developers, Shareholders, etc. In addition, several entities have expressed interest in renting one of the offices.)
• What is the appraised value of the building? (North Logan chose not to have it appraised, and CH chose not to pay for an appraisal. The building is on one third of an acre; the building itself is 3,800 square feet—$145 per square/foot. It is zoned as commercial property, so the value would be higher than a residential structure.)
• What is the timeline for building the workshop? (Probably sometime in the next couple of years)
• (Monthly Board meetings will be held in the NL building. In addition, the Water Managers now have year-around jobs, and their main job in the winter is blue staking for construction. Records can be stored together with access to all members of the Board.)
• An asset is being purchased; if it doesn’t work out, it can be sold.
• Purchasing an office for storing records and equipment is valid and should be done, but before that, Shareholders should be notified. (The timeline for the purchase bids did not allow time for Shareholder notification. No legal document has been entered into at this time.)
• The Board Members represent the Shareholders who have empowered the Board to make decisions based on the Bylaws and the elections. This decision does not need approval by the Shareholders. There are lot of feelings on both sides; nevertheless, the Board can move forward based on a decision made in the best interest of the Shareholders. (As representatives of the Shareholders, the Board has discussed the subject at length, discussing and arguing the same concerns voiced tonight and have come to this decision as the best alternative overall.)
• Has anyone run the financial numbers, the accounting due diligence, to find the break-even numbers on the long-term over ten or twenty years or so? Why is there suddenly enough money in the coffers to make this purchase? (The rent received for the open offices will cover loan payments, if incurred, as well as maintenance on the building.)
• The next bid was $250,000, so was the CH bid too high? That bid included requesting a change in zoning to multi-family housing on the property, removing the building altogether. The City Council may not have wanted that change.
Jon Wells made a request of those present: Those in favor of the Company’s purchasing the NL City Office building and using it for the CH permanent office, leasing out three quarters of it to other entities, indicate that approval by a raise of hands. Those opposed to the purchasing were then asked to raise their hands; only five hands were raised in opposition.

Other questions/discussion. Concern was expressed about using the east (or in some cases south) bank in cleaning out the Canal. The Canal easement for maintenance is the dominant estate on the property. Dead trees in the Canal are removed from the storm water channel, often using the new excavator. Maintenance is paid for by the four cities, according to how much time/work is necessary to clean the channel.
Other informational comments: There is no water storage within Logan Canyon: dredging the dams will not improve the flow of CH.
The requirement for meters on pressurized systems: the State of Utah requires that irrigational water that is pressurized be metered; CH was exempted because its water is taken out of a stream or river rather than a storage reservoir. Individual systems using a strategic meter (i.e. a meter installed at the headgate) may apply for an exemption. HOAs, on the other hand, may decide to require meters on their organization’s system.

A motion to adjourn this meeting was presented by Bruce Randall, seconded by Eric Hansen, and carried unanimously. This meeting adjourned at 8:20 p.m.