SHADY COVE — Loans totaling $17,310 will not be repaid if the local water district's dissolution plan is approved by the Jackson County Board of Commissioners.

SHADY COVE — Loans totaling $17,310 will not be repaid if the local water district's dissolution plan is approved by the Jackson County Board of Commissioners.

The plan, approved unanimously by the newly elected Shady Cove Water District board Monday, concludes that the personal loans were not legally collected under Oregon law.

Six people, five of whom are former water district commissioners, used the loans to successfully overturn in court a 2005 election that would've dissolved the district.

The plan was reviewed by the district's attorney, Michael Franell.

"When the district was created it did not set a tax rate limit," board president Phillip Keith explained, "nor did it go to the residents of the district and ask them for approval of a tax rate."

The five new board members ran on a platform to dissolve the district in the May election after the district had failed to provide water for residents. The candidates were elected by an average of 87 percent of the vote.

Citing Oregon statutes, Keith said because the district could not legally tax and had no source of income to repay loans, the loans were invalid and should never have been collected.

The largest loan, $16,700, was claimed by Jim Collier, former president and general manager of the water district. He said the water district's decision did not surprise him.

"I expected them to take that route," Collier said. "We haven't made any plans yet. We were waiting to see what they would do."

The five other loan claims are for $40 by Wayne Barnes, $100 each by Joe Ward and Bob Hawkins, $150 by Dee Hawkins, and $220 by the estate of Joe Petko.

Keith said the district also has received more than $3,100 in claims from residents who paid the district's water service fee, before the courts ruled the fee was an illegal tax.

District treasurer Jeff Smith said the previous board had already spent most of that money.

"The PremierWest bank account is $597.69," said Smith, "and petty cash is $26.16 for a total of $623.85."

Keith said he regretted that refunds would have to be prorated and, based on the treasurer's report, he estimated that residents would receive only about 19 cents on the dollar.

The dissolution plan also calls for an election, probably in March 2010.

Writer Bill Miller lives in Shady Cove. Reach him at newsmiller@yahoo.com.