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RELATED PARTY TRANSACTIONS | 12 Months Ended
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Aug. 31, 2023
RELATED PARTY TRANSACTIONS |
RELATED PARTY TRANSACTIONS | NOTE 15 – RELATED PARTY TRANSACTIONS The Rangeview District On December 16, 2009, the Company entered into a Participation Agreement with the Rangeview District, whereby the Company agreed to provide funding to the Rangeview District in connection with the Rangeview District joining the South Metro Water Supply Authority (SMWSA). During the years ended August 31, 2023 and 2022, the Company provided funding of less than $0.1 million to the Rangeview District related to this Participation Agreement. Through the WISE Financing Agreement, to date the Company has made payments totaling $6.4 million to purchase certain rights to use existing water transmission and related infrastructure acquired by the WISE project and to construct the connection to the WISE system. At August 31, 2023, the amounts are included in Investments in water and water systems on the Company’s balance sheet. During the year ended August 31, 2023, the Company, through the Rangeview District, purchased 199 acre-feet of WISE water for $0.4 million. The cost of the water to the members is based on the water rates charged by Aurora Water and can be adjusted each January 1. As of January 1, 2022, WISE water was $6.13 per thousand gallons and such rate remained in effect through calendar 2022. Effective, January 1, 2023, WISE water increased to $6.48 per thousand gallons which will remain in effect through the end of calendar 2023. In addition, the Company pays certain system operational and construction costs. If a WISE member, including the Rangeview District, does not need its WISE water each year or a member needs additional water, the members can trade and/or buy and sell water amongst themselves. In fiscal 2021, the Company agreed to fund the construction of the WISE Rangeview pipeline extension through the Rangeview District. Per the agreement, the Rangeview District constructed the pipeline extension in exchange for $0.6 million. Because the Company is funding the entire project costs, the revenue from the agreement was recognized 100% by the Company. As of August 31, 2022, the Company has recognized the full amount in revenue related to this construction project as it was completed prior to the end of fiscal 2022. During the years ended August 31, 2023 and 2022, the Company provided $0.6 million and $0.9 million of financing to the Rangeview District to fund the Rangeview District’s obligation to purchase WISE water rights and pay for operational and construction charges. Ongoing funding requirements are dependent on the WISE water subscription amount and the Rangeview District’s allocated share of the operational and overhead costs of SMWA and construction activities related to delivery of WISE water. The Company has outstanding notes receivable of $26.5 million in the aggregate from the Rangeview District and the Sky Ranch CAB, which are related parties, as discussed below: The Rangeview District is a quasi-municipal corporation and political subdivision of Colorado formed in 1986 for the purpose of providing water and wastewater service to the Lowry Ranch and other approved areas. The Rangeview District is governed by an elected board of directors. Eligible voters and persons eligible to serve as a director of the Rangeview District must own an interest in property within the boundaries of the Rangeview District. The Company owns certain rights and real property interests which encompass the current boundaries of the Rangeview District. In 1995, the Company extended a loan to the Rangeview District. The loan provided for borrowings of up to $0.25 million, is unsecured, and bears interest based on the prevailing prime rate plus 2% (10.50% at August 31, 2023). The maturity date of the loan is December 31, 2023. Beginning in January 2014, the Rangeview District and the Company entered into a funding agreement that allows the Company to continue to provide funding to the Rangeview District for day-to-day operations and accrue the funding into a note that bears interest at a rate of 8% per annum and remains in full force and effect for so long as the Lease remains in effect. The August 31, 2023, balance in notes receivable - related parties, other totaled $1.5 million, which included borrowings of $1.3 million and accrued interest of $0.1 million. During the year ended August 31, 2022, the Rangeview District made payments totaling $0.5 million on the notes payable to the Company. The August 31, 2022, balance in notes receivable - related parties, other totaled $1.1 million, which included borrowings of $1.1 million and accrued interest of less than $0.1 million. Sky Ranch CAB Pursuant to a certain Community Authority Board Establishment Agreement, as the same may be amended from time to time, Sky Ranch Metropolitan District No. 1 and Sky Ranch Metropolitan District No. 5 formed the Sky Ranch CAB to, among other things, design, construct, finance, operate and maintain certain public improvements for the benefit of the property within the boundaries and/or service area of the Sky Ranch Districts. In order for the public improvements to be constructed and/or acquired, it is necessary for each Sky Ranch District, directly or through the Sky Ranch CAB, to be able to fund the improvements and pay its ongoing operations and maintenance expenses related to the provision of services that benefit the property. In November 2017, but effective as of January 1, 2018, the Company entered into a Project Funding and Reimbursement Agreement (PF Agreement) with the CAB for the Sky Ranch property. The PF Agreement required the Company to fund an agreed upon list of public improvements for Sky Ranch with respect to earthwork, erosion control, streets, drainage, and landscaping at an estimated cost of $13.2 million for calendar years 2018 and 2019. Each advance or reimbursable expense accrues interest at a rate of six percent (6%) per annum. The Company and the Sky Ranch CAB entered into a Facilities Funding and Acquisition Agreement (FFAA) effective November 2017, obligating the company to advance funding to the Sky Ranch CAB for specified public improvements constructed from 2018 to 2023. All amounts owed under the FFAA bear interest at a rate of six percent (6%) per annum. Any advances not paid or reimbursed by the Sky Ranch CAB by December 31, 2058 for Phase 1 and December 31, 2060 for Phase 2, shall be deemed forever discharged and satisfied in full. As of August 31, 2023, the balance of the Company’s advances for improvements, including interest, net of reimbursements already received from the Sky Ranch CAB, totaled $25.0 million. The advances have been used by the Sky Ranch CAB to pay for construction of public improvements. The Company submits specific costs for reimbursement to the Sky Ranch CAB which have been certified by an independent third-party. ​ Sky Ranch Metropolitan District Nos. 1, 3, 4, 5, 6, 7 and 8 (Sky Ranch Districts) and the Sky Ranch CAB are quasi-municipal corporations and political subdivisions of Colorado formed for the purpose of providing service to the Company’s Sky Ranch property. The current members of the board of directors of the Rangeview District, each Sky Ranch District, and the Sky Ranch CAB consist of four employees of the Company (including the Company’s CEO and CFO) and one independent board member. Nelson Pipeline Constructors LLC Through a competitive bidding process, the Sky Ranch CAB awarded Nelson Pipeline Constructors, LLC (Nelson) a contract to construct the wet utility pipelines in Phase 2A of Sky Ranch. As the project progressed, change orders were approved by the Sky Ranch CAB board upon review by an independent engineer hired by the Sky Ranch CAB to certify costs are reasonable and appropriate for the scope of work contemplated. During the years ended August 31, 2023 and August 31, 2022, the Sky Ranch CAB paid Nelson $1.1 million and $8.2 million, respectively, related to this contract. Nelson is majority owned by the chair of the Company’s board of directors.

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