03-17-2011 SSLGCMINUTES OF THE
SCHERTZ/SEGUIN LOCAL GOVERNMENT CORPORATION
THE STATE OF TEXAS §
COUNTY OF GUADALUPE §
SCHERTZ/SEGUIN LOCAL §
GOVERNMENT CORPORATION §
On this the 17ti' day of March 2011, the Schertz/Seguin Local Government Corporation (SSLGC)
convened at 1:36 p.m. in the City of Schertz Council Chambers located at 1400 Schertz Parkway,
Building #4, Schertz, Texas. The following directors being present and in attendance:
Ken Greenwald President
Robin Dwyer Vice-President
Jim Wolverton Secretary
Andrew Koenig Treasurer
Kerry Koehler Director
and the following directors being absent:
Betty Ann Matthies Ex-Officio
Hal Baldwin Ex-Officio
constituting a majority of the persons appointed to the Board and a quorum for the transaction of
business, and notice of such meeting having been duly given in accordance with the provisions of
Texas law. Also in attendance were:
Alan Cockerell General Manager
Doug Faseler City Manager of Seguin
Don Taylor City Manager of Schertz
Johnny Bierschwale Schertz Assistant City Manager
Susan Caddell Finance Director Seguin
Andy Quittner City Attorney Seguin
Sam Willoughby Schertz Public Works Director
Patrick Lindner COlll1Se1 (Davidson & Troilo)
Bill Klemt Hydrologist Consultant
John Winkler COriSUltant (Walker Partners)
Jack Fickessen Legislative Consultant
Nancy Vaughan CPA (Armstrong, Vaughan & Associates)
Roberto Anguiano San Antonio Water System
Regina Franke Administrative Assistant
The first order of business was the Calling of the Meeting to Order.
President Ken Greenwald called the meeting to order at 1:36 p.m.
The second order of business was Public Comment.
Mr. Cockerell introduced his new Administrative Assistant, Regina Franke. Her employment
began on Monday, March 14, 2011.
President Greenwald presented Ms. Patricia Ramirez with a certificate and plaque
commemorating her time served on the SSLGC Board (2007-2011). She served as Vice-
President and Secretary.
Mr. Cockerell recognized Mrs. Georgia Hanks with a presentation of a plaque in appreciation for
her services as Administrative Assistant.
Mr. Roberto Anguiano (SAWS Board) presented President Greenwald with a picture of Mr.
Greenwald and himself at the signing of the SAWS contract.
President Greenwald stated that the board would take a 5 minute break to allow for pictures.
The third order of business was Approval of the Minutes for the Board Meeting held on
February 10, 2011.
Secretary Jim Wolverton made a motion to approve the February 10, 2011 minutes as
written. Treasurer Andrew Koenig seconded the motion. Upon a vote being called, the
motion carried by unanimous decision.
The fourth order of business was Presentation of the General Manager's Report -
Alan Cockerell, General Manager.
General Manager Cockerell's written report was included in the board agenda packets. He added
the following items to his written report:
o Name Tags. Mr. Cockerell stated that he distributed name tags for each of the SSLGC
Board members. The name tags will remain with the Board Members and may be worn
when in public representing SSLGC.
o Water Production. Water production for the month of February was 55.8% of Gonzales
County Underground Water Conservation District's (GCUWCD) monthly allowable.
Mr. Cockerell referred to Seasonal Pumping and Monthly Water Sales charts which were
included in the agenda packets. He stated that seasonal pumping was lower in the month
of February. Mr. Cockerell stated that it was typical for this time of year, due to cold
weather. Referencing the seasonal trend, Mr. Cockerell stated that February reading was
at the low end of what has been reported this time of year. He expects seasonal warming
and lack of rainfall will impact the production amounts. Mr. Cockerell stated that there
were incorrect readings for Schertz in the months of December 2010 and January 2011.
Those readings have since been corrected. This chart reflects those corrected readings for
the months of December and January.
o GCUWCD. The Underground District met March 8, 2011. A copy of the agenda was
included in the board agenda packets. Mr. Cockerell stated that he sent out a newspaper
article from the Gonzales Enquirer that highlighted the activities of the meeting. He
stated that GCUWCD delayed hiring a hearing examiner for the contested case hearings
for the additional permits that have been applied. Mr. Cockerell stated that GCUWCD
Board is exploring all their options and is expected to have a proposal at their next
meeting.
o GCGCD. The Guadalupe County Groundwater Conservation District met March 10,
2011. SHWSC's permit application for water rights on the Tiemann Ranch was
approved.
o Region L. The public hearing is scheduled in May 2011. SSLGC will participate. Mr.
Cockerell referenced the map indicating the TWA project. He stated that they have
changed the initial proposed pipeline route; a more direct route has been proposed.
o Nixon-Smiley Youth Show. Mr. Cockerell advised SSLGC spent approximately
$2000.00 on various youth projects.
o Tour of Facilities. Mr. Cockerell stated that he gave a tour to the City of Converse, a
councilman and his staff participated.
Mr. Cockerell advised he will be on vacation March 18, 21, and 22, 2011
Mr. Koenig raised a question regarding all mitigation funds being located in one bank. Mr.
Cockerell explained that SSLGC does not have much control regarding what financial
institution(s) is chosen for mitigation funds. It is based upon interest rates and Sage Capital
currently offers the best interest rate. It was explained that the Groundwater District is a political
subdivision of the state and is subject to a Public Funds Investment Act.
The fifth order of business was Presentation of FY2009-2010 Audit Report -- Nancy
Vaughan, Armstrong, Vaughan & Associates.
Copies of SSLGC's FY2009-2010 Audit Report were provided in the board agenda packets.
Nancy Vaughan with Armstrong, Vaughan & Associates, P.C., presented an overview of the
report. Highlights of the FY2009-2010 report are as follows:
Ms. Vaughan called attention to Page 7 of the Audit Report- Comparative Balance Sheets years
ended September 30, 2010 and 2009.
• Restricted Assets were $26,773,001 in 2010 compared to $4,554,952 in 2009 which is an
increase of $22,218,049. This increase is due to the Bond Issue which had not been spent
by September 30, 2010.
• Capital Assets (Net Property, Plant & Equipment) were listed at $49,656,555 in 2010
compared to $49,631,688 in 2009 which was an increase of $24,867.
• Other Assets- Lease Acquisition Costs are amortized over minimum ten year lease period
(Net of Amortization of $1,489,728 and $1,274,787).
• Total Assets at years end are $82,471,945 compared to $60,306,998. Total Assets
increased by $22,164,947.
Ms. Vaughan continued with Page 8 of the Audit Report-Comparative balance sheets (continued)
September 30, 2010 and 2009 (statement of liabilities and net assets):
• Total liabilities were $77,561,293 in 2010 compared to $55,674,569 in 2009 which is an
increase of $21,886,724. This is the amount of the Bond Issue.
• Net assets were $4,910,652 in 2010 compared to $4,632,429 in 2009 which was an
increase of $278,223.
Ms. Vaughan called attention to the negative number ($2,784,130) -Invested in Capital
Assets, Net of Related Debt. She stated that under perfect circumstances SSLGC would issue
debt and invest all of that money in capital assets and in turn this would be offset. Ms. Vaughan
stated this is exactly what SSLGC did. However, in the early years SSLGC's debt schedule
provided for a principal reduction, but depreciation continued. She stated that at this point the
depreciation has exceeded the principal buy down of the debt. Ms. Vaughan stated that this
process should reverse itself as SSLGC continues to reduce the debt.
Ms. Vaughan continued with Page 9 of the Audit Report-Comparative statements of revenues,
expenses, and changes in net assets years ended September 30, 2010 and 2009 (statement of
operations for year):
• Operating Revenue was $8,225,897 in 2010 compared to $8,444,456 in 2009
which is a decrease of $218,559.
• Operating Expense was $2,102,956 in 2010 compared to $2,307,456 in 2009
which is a decrease of $204,500. The most significant decrease was in utilities.
Other operating expense was $2,933,126 in 2010 compared to $2,550,882 in
2009. The largest increase is due to annual lease payments. Total operating
expense increased by $177,744.
• Operating Income for the fiscal year ended September 30 2010, was $3,189,815, a
decrease of $396,303 from the previous year.
• The Change in Net Assets was $4,632,429 at the beginning of the year and
$4,910,652 at the end of the year which is a $278,223 increase.
• Page 20 of the Audit Report--SSLGC's most significant disclosure is water lease
commitment. The water leases have a minimum lease period of 10 years although
each lease will continue as long as SSLGC continues to make the lease payment.
The lease payments do escalate over the years, but may go up or down depending
on GCUWCD rules pertaining to maximum allowable production.
Ms. Vaughan called attention to Page 21 of the Audit Report Note I-Subsequent Event. The
Corporation entered into a Mutual Regional Water Supply Contact with San Antonio Water
System (SAWS) subsequent to September 30, 2010. The agreement calls SAWS to deliver to
the Corporation, and the Corporation to treat and transport 12,688 acre-feet of water (less
production filtering losses) annually to SAWS. The agreement requires both the Corporation and
SAWS to make upgrades to the existing systems. In addition, the Corporation has granted
SAWS an option to purchase treatment services from the Corporation in exchange for capacity
reservation fee of $538,000 annually commencing March 1, 2011, and continues for 48 months.
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A letter from the Auditor dated March 4, 2011, to provide the Corporation with information
related to the audit was included in the board agenda packets. It detailed responsibilities of the
Corporation and the Auditor. Ms. Vaughan noted the following:
• No significant deficiencies were discovered
No significant adjustments were made with the exception of the following:
-A minor misstatement occurred because retainage accrual was not recorded
($31,917)
-A minor misstatement occurred because vacation accrual was not billed until
paid ($9889). A tolerable misstatement could amount to $420,000. The vacation
accrual was less than $10,000 and acceptable.
Secretary Wolverton made a motion to approve the FY2009-2010 Audit Report as
presented by Ms. Nancy Vaughan of Armstrong, Vaughan & Associates, P.C. Vice-
President Dwyer seconded the motion. Upon a vote being called, the motion carried by
unanimous decision.
The sixth order of business was Presentation of Treasurer's Report -Susan Caddell,
Finance Director & Alan Cockerell, General Manager.
A copy of the Treasurer's report was included in the board agenda packets. The report was
prepared by Director of Finance Susan Caddell and review by General Manager Alan Cockerell.
Mr. Cockerell recommended approval of the following report:
a. Financial Statements for the year ended December 31, 2010.
• Revenues, Expenses and Changes in Net Assets -Combined Statements
^ $ (1,037,371.51) Net Income (Loss) Before Transfers
Ms. Caddell stated that this loss was due to spending some of the 2007 and 2010 Bond Funds.
• Revenues, Expenses and Changes in Net Assets -Operating Fund
^ $ 137,649.82 Net Income (Loss) Before Transfers
^ $ (37,185.54) Net Income (Loss)
Ms. Caddell stated that our rate consultant, Dan Jackson of Economist.com recommended rather
than having different rates for revenue for the Operation Fund, Repair and Replacement Fund
and the Future Development Fund, we put all the revenue in the Operation Fund and make
transfers to the other funds. Ms. Caddell stated that the dollar amount, $87,417.68 each, for
transfers to Repair/Replacement Fund and Future Development Fund are equal to the amount if
the same rate had been charged as 2009 of $0.14 per thousand gallons.
• Construction Fund - 2007 Balance Sheet -Cash on Hand
^ $1,453,737.38
Ms. Caddell stated that the Construction funds have now been encumbered; the remainder of the
2007 bond fund will be spent down before the 2010 will be spent.
• Revenues, Expenses and Changes in Net Assets -Interest & Sinking Fund
^ $1,312,543.68 Net Income
Includes I&S rates paid by participating entities for the first quarter, but does
not include any bond payments. The first bond payment was made February
1, 2011 in the amount. of $2,774,912; this includes a portion of the
capitalized interest from the 2010 bond issue.
• Repair & Replacement Fund Balance Sheet -Cash Balance
^ $1,169,047.83
• Revenues, Expenses and Changes in Net Assets -Future Development Fund
^ $(318,214.30) Net Income (Loss) Before Transfers
^ $(230,796.62) Net Income (Loss)
• Revenues, Expenses and Changes in Net Assets -Impact Fund
^ $53,004 Net Income
• Revenues, Expenses and Changes in Net Assets -Reserve Fund -Cash on
Hand
^ $1,276,843.13
• The required amount to maintain in the Reserve Fund according to bond
covenants is $1,275,621.10
• Revenues, Expenses and Changes in Net Assets -Construction Fund 2010
(New Wells Project) -Cash on Hand
^ $16,839,465.95
• Revenues, Expenses and Changes in Net Assets - Operating Fund
(comparative statement)
^ $40,000.05 (decrease in net income)
Revenue has increased by $219,825.28 due to the fact that all the revenue has
been put into this account with the transfers. Actual consumption by both
Cities of Schertz and Seguin has decreased from this time last year by
Expenditures have increased by $84,989.97 with the largest increase in
Professional Services. This was largely due to the cell refurbishing on the
high surface pump and increased legal fees.
• Working Capital Trend Chart
^ $1,139,799 (decrease in working capital)
Working capital decrease is largely due to spending additional bond funds.
Mr. Dwyer asked Ms. Caddell what the requirement is regarding the Reserve Fund; in relation to
the percentage of the bond balance. Ms. Caddell stated that it is the average annual debt
requirement over the life of the debt. She advised that it is stated in our bond covenants. Ms.
Caddell stated that it is calculated by the average of the annual payments of each year, over the
life of the bond. She also stated that this applies to only the 2010 bonds.
Vice-President Dwyer made a motion to approve SSLGC's financial statements for the
quarter ending December 31, 2010. Treasurer Koenig seconded the motion. Upon a vote
being called, the motion carried by unanimous decision.
b. Investment Report for the quarter ending December 31, 2010.
Ms. Caddell presented the Investment Report for October 1, 2010 through December 31, 2010.
Interest earning for the quarter ending December 31, 2010 were $15,940. Ms. Caddell stated that
interest is down approximately $1,100 from last quarter due in part to a decrease in SSLGC's
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portfolio of approximately $1,100,000 from last quarter. She stated that a decrease in interest '
rates is also a contributing factor.
Secretary Wolverton made a motion to approve SSLGC's investment report for the
quarter ending December 31, 2010. Treasurer Koenig seconded the motion. Upon a vote
being called, the motion carried by unanimous decision.
c. Reimbursement to the City of Seguin in accordance with the Management
Services Agreement for the quarter ending December 31, 2010.
Ms. Caddell presented the expenditure information for the quarter October 1, 2010 through
December 31, 2010. The City of Seguin has requested reimbursement for the expenditures of
$871,313 from SSLGC for the first quarter of FY2010-2011. Ms. Caddell added that SSLGC
was under budget by $3,321,568.
Secretary Wolverton made a motion to approve SSLGC to reimburse the City of Seguin in
the amount of $871,313 for the quarter ending December 31, 2010 in accordance with the
Management Services Agreement. Treasurer Koenig seconded the motion. Upon a vote
being called, the motion carried by unanimous decision.
The seventh order of business was Legislative Update -Jack Fickessen, Consultant.
Mr. Fickessen stated that there are forty-three bills regarding groundwater; eleven of which are
noted as companion bills (House bills paired with Senate bills). Mr. Fickessen stated that
Senator Fraser, Chairman Senate Natural Resources, introduced SB332 which is paired with
Representative Ritter's, Chairman House Natural Resources, HB1730 relating to the vested
ownership interest in groundwater beneath the surface and the right to produce that groundwater.
He stated that discussions began two weeks earlier. Senator Duncan introduced SB667, which is
paired with Representative Ritter's HB1731, relating to the management of groundwater
resources in this state and the rights of land owners in groundwater. Mr. Fickessen stated that
this resulted in a two hour discussion and both bills were left pending in the Senate. He stated
that Chairman Ritter has filed the companion bills in The House; this gives him control to
determine which bills to sponsor in The House. Mr. Fickessen stated that he believes it will be
SB332. He stated that much of the discussion favors water being compared to oil in terms of a
liquid asset and belongs to the landowner.
Mr. Fickessen stated that Congress does not want include everything in one bill. He advised
there are five bills. Mr. Fickessen stated he believes this will make it more difficult to amend.
He stated he believes these bills will pass in both The House and Senate.
Mr. Fickessen stated that he believes HB1733, relating to the appraisal for ad valorem tax
purposes of open-space land devoted to water stewardship purposes on the basis of its
productivity capacity, will pass.
Mr. Fickessen referenced HB 1482/SB727 and stated that he does not see any significant changes
with the exception of wording in Chapter 36; how districts operate internally. He stated that he
does not see any issues with these bills.
Mr. Fickessen stated that he expects HB1825, relating to permit application and amendment
hearings conducted by groundwater conservation district and the State Office of Administrative
Hearings, and HB3184, relating to the nonsubstantive revision of certain local laws concerning
special districts, including conforming amendments, each will pass.
Regarding SB692/HB2311, relating to exemptions from groundwater conservation district permit
requirements, Mr. Fickessen stated that the greatest issue is in relation to permit exemptions. He
explained that there are some people that have wells on 1/4 acre lots and use the water for
domestic/livestock use as compared to usage by others for agriculture in a greater capacity. Mr.
Fickessen stated that these people are grandfathered. These bills are intended to address the
specifics for the requirements to obtain a permit, including those that are currently grandfathered.
The eighth order of business Task Order #5 /SAWS En~ineerin~ Report -John Winkler,
Walker Partners
Mr. Cockerell stated that included in the SAWS contract was the payment of $50,000 for
SSLGC to obtain a complete preliminary engineering study. He acknowledged that those funds
have been received. Mr. Cockerell stated that Mr. Winkler has provided SSLGC with the Task
Order (#5) to perform that engineering study.
Secretary Wolverton made a motion to approve Task Order #5 /SAWS Engineering
Report. Vice-President Dwyer seconded the motion. Upon a vote being called, the motion
carried by unanimous decision.
The ninth order of business was Gonzales County Expansion Proiect -Alan Cockerell,
General Manager.
Mr. Cockerell provided a summary of the activities below on the Gonzales County expansion
project:
o CAS continues work on collection lines.
o Harris Road Construction continues construction of access roads to the plant and wells.
o Weisenger Inc. has a delay on well # 11 due to needed repair of the reaming tool. Work
should continue next week (week of March 21, 2011)
o Pumps and wellheads have been ordered with a long lead time for stainless steel. We
anticipate arrival of material in the May time frame.
Mr. Cockerell stated that the Invitation to Bid for the ground storage tanks is being advertised.
The bid opening is set for April 8, 2011 and he anticipates award of this construction contract at
the April board meeting.
Treasurer Koenig inquired about the seismic study. Mr. Cockerell stated that it has been
completed. He stated that data is being processed. Mr. Cockerell stated that there was no
damage to SSLGC's equipment/system. He advised the Board that one tenant had crop damage
and was compensated.
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The tenth order of business was Acquisition of a 2.5 acre parcel (the "Property") out of a
459.98 tract of land in the George W. Davis Survey, A-115 and the James Alley Survey, A-
44, in Guadalupe County, Texas titled in the name of Walter E. Koepp.
President Greenwald deferred agenda item ten to Executive Session.
The eleventh order of business was Formation of Cibolo Valley Local Government
Corporation -Crockett Camp, Proiect Manager/Consultant.
President Greenwald deferred agenda item ten to Executive Session.
The twelfth order of business was Gonzales County Water Leases -Alan Cockerell,
General Manager.
President Greenwald deferred agenda item ten to Executive Session.
P~^esident G~^eenwald closed Genes^al Session at 2: 40 p.m.
The thirteenth order of business was Executive Session called under Chapter 551
Government Code, Section 551.071, to seek the advice of its attorney on legal matters, and
Section 551.072, for deliberations re~ardin~ real estate.
President Greenwald opened Executive Session at 2:53 p. m.
At 3:23 p. m. Vice-President Dwye~^ left Executive Session and did not ~ etu~^n.
Executive Session was held from 2:53 p. m. to 3: 46 p. m.
The fourteenth order of business was to Consider and Take Action as a result of Agenda
Item Thirteen.
P~^esident GJ^eenwald ~^eopened GeneT^al Session at 3: 47 p. m.
As a result of Executive Session:
Agenda Item Ten
No action was taken as a result of Executive Session.
Agenda Item Eleven
a. Secretary Wolverton made a motion to approve, as amended, Resolution SSLGC
Rll-03 -Memorandum of Understanding. Treasurer Koenig seconded the
motion. Upon a vote being called, the motion carried by unanimous decision.
b. Secretary Wolverton made a motion to approve Resolution SSLGC Rll-04 -
Management Services Agreement. Treasurer Koenig Seconded the motion.
Upon a vote being called, the motion carried by unanimous decision.
Agenda Item Twelve
No action was taken as a result of Executive Session.
No further action was taken as a result of Executive Session.
The fifteenth order of business was Consideration and/or Action on questions and possible
items to be placed on the next agenda.
Mr. Cockerell stated that the next SSLGC Board Meeting is scheduled for Thursday, April 21,
2011 in Seguin.
No additional discussion was held.
The sixteenth order of business was Adjournment.
President Greenwald declared the meeting adjourned at 3:50 p.m.
The next regular meeting was scheduled Thursday, Apri121, 2011 in Seguin.
MINUTES APPROVED THIS ~~~
DAY OF ~~~~ H , 2011.
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