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03-19-2015MINUTES OF THE SCHERTZ /SEGUIN LOCAL GOVERNMENT CORPORATION THE STATE OF TEXAS COUNTY OF GUADALUPE SCHERTZ /SEGUIN LOCAL GOVERNMENT CORPORATION On this the 19" day of March, 2015 the Schertz /Seguin Local Government Corporation (SSLGC) convened at 1:30 PM at SSLGC Administrative Building located at 108 W. Mountain Street, Seguin, Texas. The following board members being present and in attendance: Ken Greenwald President Robin Dwyer Vice - President T. "Jake" Jacobs Secretary Bob Pees Assistant Secretary Jim Fowler Ex- Officio Mayor Keil Ex -Officio and the following member(s) being absent: Kerry Koehler Treasurer 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: John Bierschwale Executive Director (City of Schcrtz) Susan Caddell Director of Finance (City of Seguin) Paul Gonzales General Counsel ( )avidson, Troilo, Ream & Garza) Nancy Vaughan Auditor (Armstrong, Vaughan & Associates) Steven Siebert San Antonio Water System (S,ms) Lisa Guardiola San Antonio Water System (SAWS) John Winkler Consultant (Walker Partners) Crockett Camp Consultant Bill Klemt Consultant/ Hydrologist Sam Willoughby Public Works Director (City oESchertz) Emery Gallagher Water Utility Manager (City of Seguin) Alan Cockerell General Manager (SSLGC) Regina Franke Administrative Assistant (SSLG(,) The first order of business was to Call the Meeting to Order. President Ken Greenwald called the meeting to order at 1:30 PM The second order of business was Public Comment. Mr. Cockerell advised that Counselor Paul Gonzales was attending the meeting today in Counselor Patrick Lindner's absence. There were no public comments. The third order of business was of the Minutes for the Board Meeting held February 19, 2015. Secretary Jacobs made a motion to approve the February 19, 2015 minutes as read. Vice - President Dwyer seconded the motion. Upon a vote being called, the motion carried by unanimous decision. The f u h order of Uusiness was Pres nta 'on of the General Mans er's Re ort — 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: ➢ Water Production Seasonal pumping and monthly water sales charts were included in the board agenda packets. Water production for the month of February was 61.4% of Gonzales County Underground Water Conservation District's (GCUWCD) monthly allowable. Mr. Cockerell advised that there was an error in his data (which is used to create the charts he used for the board packets) for the City of Schertz. He entered 11,744 versus the correct 111,744. He also noted that the sale of T -2 (excess water) to SAWS had decreased in the month of February. ➢ GCUWCD MagL-b u 1L(ec�t►t ; The monthly meeting was held March 10, 2015; Mr. Cockerell attended. A copy of the meeting agenda was included in the board packet. He noted that the renewal of SSLGC permits for wells # 9- 12 were on the agenda but were tabled until after the District adopted their new rules. There were several public comments made at the meeting questioning whether or not the SSLGC permits should be renewed or possibly renewed at a reduced rate. Mr. Cockerell advised that the Board did not appear to react to those requests and no action was taken. ➢ GCGCD .1 f awlG6 , l f elig -&. The District meeting was scheduled for March 26, 2015; Mr. Cockerell planned to attend. ➢ Region L /GMA- 13 /RWA Region L.• The next Region L meeting was scheduled for April 2, 2015. ➢ CVLGC The CVLGC Board meeting was held February 26, 2015 in Cibolo. Progress was being made with the planned water supply project to meet the future long term needs. The next board meeting was scheduled for March 26, 2015 in Schertz. Mr. Cockerell also called attention to the copy of the letter from TCEQ, which was included in the board packet. He noted that there was an inspection performed December 2014, which is due every three years, and there were no violations. The fifth order of business was,. Presentation of FY20134014 Audit Report — Nan Vaughan, Armstrong, Vaughan and Associates. Copies of the SSLGC FY2013 -2014 Audit Report were provided in the board packets. Ms. Vaughan with Armstrong, Vaughan & Associates, P.C., presented an overview of the report. Highlights of the FY2013- 2014 report are as follows: 2 of 9 Ms. Vaughan began by stating that there were no significant deficiencies in the internal controls. There was one audit difference that, with approval of management, was not corrected, as they agreed that it was immaterial (the accrued vacation for the SSLGC employees which are hired through the City of Seguin). Ms. Vaughan also advised that SSLGC was in compliance regarding the Public Funds Investments Act (PFIA). Ms. Vaughan called attention to Page 8 of the Audit Report (Statement of Net Position). She listed Total Current Assets to be $11,752,482, which were approximately $3,700,000 more than FY2013. The Total Restricted Assets were $8,866,401 (compared to 22,114,478 from FY2013) which was primarily representative of bond funds that had not been spent as of September 30, 2014. The balance for Net Property, Plant & Equipment was noted to be $86,142,663 versus the FY2013 amount of $78,465,951. She called attention to the Lease Acquisition Costs, specifically the original water leases and noted that they were almost fully amortized. She moved to Page 9, Total Current Liabilities were $5,861,643 compared to those in FY2013 of $9,463,232. Total Liabilities $103,321,427 in FY2014 versus $108,949,749 in FY2013. Ms. Vaughan advised that there was a negative ($5,182,814) in Net Investment in Capital Assets. That number represents the total capital assets less the liabilities that were issued to fund those (infrastructure less the debt). The reason it was negative was because the depreciation charges on the capital assets were accelerating faster that the principal pay down of the debt; she expected that would reverse at some point. Ms. Vaughan stated that under The Restricted Net Position there were several items set aside by outside sources, for example bond covenants; amounts that are required to be spent on specific items. The Unrestricted Net Position of $7,004,815 increased from $3,411,854 in FY2013. The Total Net Position was $5,521,578, an increase over the FY2013 amount of $1,926,934. Ms. Vaughan moved on to Page 10. The Total Operating Revenues were $14,727,021 compared to the previous year's $10,292,854. The reason for such a large increase was due, in large part, to water sales to SAWS. The Total Operations & Maintenance of $3,256,985 which was up from $2,225,818 in FY2013. The Other Operating Expenses consisted of the Amortization of Lease Acquisition Costs $85,399, which were almost fully amortized, Annual Lease Payments — Water Rights $2,467,171 versus FY2013 $2,473,882 and Depreciation $1,547,003 as compared to FY2013 $1,506,043. Total Operating expenses were $7,356,558, an increase from FY2013, $6,291,142. The Operating Income (Loss) was $7,370,463 as compared to $4,001,712 in FY2013. President Greenwald asked Mr. Cockerell if the utilities were only those of SSLGC's or if SAWS was included in that amount. Mr. Cockerell responded that it was inclusive of only SSLGC's usage amount. The cost of producing more water (to sell to SAWS) was noted in previous discussions and rate models, but the revenue generated from sales would exceed the increase in utility costs. Vice - President Dwyer asked if SSLGC was $4,000,000 to the better, as compared to the previous FY2013 (in reference to Page 10 — Net Position — End of Year). Ms. Vaughan answered to the affirmative. Ms. Vaughan advised that a reserve fund is a good plan to have to avoid the need to borrow monies in the event of a necessary unexpected/ emergency repair, etc. Vice - President Dwyer made a motion to accept the FY2013 -2014 Audit Report as presented by Ms. Nancy Vaughan of Armstrong, Vaughan & Associates, P.C. Secretary Jacobs 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. 3of9 a. Financial Statements for the quarter ending December 31, 2014. Included in the board packet were the financial reports for the three months ended December 31, 2014. The reports looked a little different for the quarter due to the fact the City of Seguin had changed financial software. Rather than report on each fund individually, the balance sheet and income statement had all the SSLGC funds combined into one balance sheet and income statement, and the SAWS funds were combined into their own balance sheet and income statement. The first three pages were the balance sheet for all the SSLGC funds. The two pages following the balance sheet were the income statement for all the SSLGC funds. Finally, following those statements were the balance sheet and income statement for the SAWS funds. At the back, was the comparative statement for the SSLGC Operating Fund, as well as the working capital chart. First, Mrs. Caddell reviewed the balance sheet for the SSLGC funds. The second column was for the Interest and Sinking Fund. The cash and investment balance in that fund was $1,884,800.69 with receivables of $1,287,912.14. The first bond payment was made on February 1 in the amount of $2,134,575. The third column was for the Repair and Replacement Fund. The cash and investment balance was now $2,461,662.53. The fourth column was for the Future Development Fund. The cash and investment balance was $314,404.23. The down payment and monthly payments for the Booth property in the amount of $1,054,328.74 have been taken out of that balance. That amount was reimbursed once the bonds were issued. The fifth column was for the Impact Fund. The cash and investment balance in that fund was $2,898,202.60. The sixth column was for the Reserve Fund. The required amount to maintain in the Reserve Fund according to bond covenants was $1,275,621.10. The cash and investment balance in that fund was $1,282,261.09. The seventh column was the 2010 Bond Fund. The cash and investment balance in that fund was $1,768,915.40. SSLGC still had $408,750 in outstanding purchase orders for that fund. Mrs. Caddell reviewed the income statement for the SSLGC funds. The first column was the Operating Fund. The net income before transfers was $1,224,275.91. After the budgeted transfers to the Repair and Replacement Fund and the Future Development Fund, the net income was $899,275.91. The third column was for the Repair and Replacement Fund. The expenditure for L &I Maint. -Dist. System was for repairs to pumps #1 and #4. The fourth column was the Future Development Fund. The expenditure for $285,000 was the amount needed for the contribution towards the refunding of old bonds in order to achieve the greatest savings over the life of the bonds. The expenditure for $1,054,328.74 was the down payment and monthly payments for the Booth property. The seventh column was for the 2010 Bond Fund. Mr. Caddell advised she would be providing a report with an accounting of the expenditures of the bond funds since SSLGC received the proceeds at the board meeting. The total column indicated net income of $1,842,807.55. As indicated earlier, the reports following the SSLGC Fund reports were those for the SAWS Funds. Mrs. Caddell advised she would also be providing a report with an accounting of the expenditures of the bond funds since SSLGC received the proceeds at the board meeting. Mrs. Caddell noted the Comparative Income Statement for the Operating Fund was towards the back of the report. Revenue had increased by $966,307.90. This was largely due to SAWS now purchasing our excess water. Not including SAWS and Springs Hill usage, consumption had increased by 127,654,000 gallons. Expenditures had increased by $264,966.98, with the largest being in utilities services of $226,630.94. Our net income before transfers increased from last year by $1,224,275.91, while net income after transfers also increased by $889,141.72. 4 of 9 Finally, Mrs. Caddell called attention to the working capital trend chart. Working capital had increased since September 30, 2014, by $2,216,450. While SSLGC had received revenue in the I &S Fund, a bond payment had not been made prior to December 31. Assistant Secretary Pees made a motion to approve SSLGC's financial statements for the quarter ended December 31, 2014. Secretary Jacobs seconded the motion. Upon a vote being called, the motion carried by unanimous decision. b. Investment Report for the quarter ending December 31, 2014. Mrs. Caddell presented the Investment Report for October 1, 2014 through December 31, 2014. Interest earnings for the quarter ended December 31, 2014 were $ 3,008. Vice - President Dwyer made a motion to accept SSLGC's Investment Report for quarter ended December 31, 2014. Secretary Jacobs 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 (MSA) for the quarter ending December 31, 2014. Included in the board packet was a list of expenditures from the Operations and Maintenance budget which was paid by the City of Seguin. The expenditures for October 1, 2014 through December 31, 2014, as indicated in the first column on the report, were $1,872,763.46. All items were currently under budget. In accordance with the MSA between SSLGC and the City of Seguin, The City requested reimbursement for the expenditures for the first quarter of FY2015 in the amount of $1,872,763.46. Vice - President Dwyer made a motion to approve the reimbursement to the City of Seguin in accordance with the Management Services Agreement of $1,872,763.46. Secretary Jacobs seconded the motion. Upon a vote being called, the motion carried by unanimous decision. The seventh order of business was Approve Task Order ## 16 — SSLGC Chlorine Dioxide System — ohn Winkler Walker Partners. ➢ Task Order # 16 Mr. Winkler reminded the Board that the Chlorine Dioxide System was to address the issues with bacteria damaging the stainless steel headers of the new pressure filters at NWTP. It would be done in two phases. The first phase would be the 90 day pilot (to see if this process was effective) and the second phase would be a permanent facility to treat the issue long term. Mr. Cockerell noted that the task order would cover both phases. President Greenwald asked that if that treatment failed, what would SSLGC expect to do to remedy the continued damage of the bacteria. Mr. Winkler advise that he believed that the process would work, but in the event that it did not he would have to research other options. Ex- officio Fowler asked if the process had been started yet. Mr. Winkler advised that it had not, he was awaiting Board approval. Mr. Cockerell noted, to make it clear, the funding of $43,000, for this task order would be from the 2010 Bond Fund. He advised that SAWS had agreed to split the cost equally on this system to be paid from their 5 of 9 2012 Bond Fund, however there was no monies left in that fund. Mr. Cockerell advised the Board he was working with SAWS to determine how that issue would be resolved. He would continue to update the Board. Vice - President Dwyer made a motion to approve Task Order # 16. Assistant Secretary Pees seconded the motion. Upon a vote being called, the motion carried by unanimous decision. The eighth order of business was Approve Task Order_ # 17 — Cathodic Protection John Winkler, Walker Partners Mr. Cockerell reminded the Board that there was a discussion at the February 19, 2015 board meeting regarding the Cathodic Protections project and board direction was given to Mr. Winkler to present a task order for the engineering services at the March 2015 board meeting for approval. Mr. Winkler advised that he was working to determine the construction cost; he was in discussions with a contractor regarding those excavation fees. He noted that he was finding that the costs associated with the excavation were far greater that what he felt was reasonable. There were approximately 8,500 sections /holes to dig. Vice - President Dwyer asked if it would make more sense for SSLGC to purchase the equipment necessary and perform the excavation ourselves. Mr. Winkler and Mr. Cockerell both noted that it was a consideration, as well. Mr. Winkler noted that he was also due to consult with another company and discuss cost for the installation of the Cathodic Protection system next week. The company he was meeting with does 70 -80% of the Cathodic Protection systems in the country. He advised that there were only about six companies the he knew that did this type of system and most of those were in the oilfield business. Mr. Cockerell stated that with the slowing of the Eagleford activity, he was hoping there would be more of those companies available to consider this project. Ex- officio Fowler asked if SSLGC would need to gather more ROW access for this project. Mr. Winkler answered to the negative; SSLGC has the necessary ROW to accommodate the installation of the Cathodic Protection system. The funding for this task order was to be paid from the O & M Capital Project budget in the amount of $185,000. Secretary Jacobs made a motion to approve Task Order # 17. Vice - President Dwyer seconded the motion. Upon a vote being called, the motion carried by unanimous decision. The ninth order of business was SSLGC Construction Update — John Winkler, Walker Partners & Alan Cockerell. BPS Pipeline Upgrade: Mr. Cockerell advised that Wauters Engineering had ordered the parts and expected the delivery of those parts would take 12 -14 weeks from order date. Once the parts were received, the construction was expected to take 2 -3 week. Mr. Winkler anticipated the project would be completed April 2015. Mr. Cockerell would continue to update the Board. The tenth order of business was SAWS Expansion Project Update =John Winkler, Walker Partners & Alan Cockerell, General Manager. SAWS Expansion Project: Mr. Cockerell noted that it was basically complete and Pepper- Lawson had submitted the final pay estimate paperwork. 6of9 BPS Pipeline Upgrade: Mr. Cockerell advised that SAWS had previously committed to funding the Wauters Engineering contract for this upgrade from the 2012 Bond Fund, however there are no monies available in the fund. Mr. Cockerell stated that he was in discussion with SAWS and hoped to have an answer from them soon; he anticipated being able to provide a recommendation for resolving this issue at the April 2015 board meeting. The eleventh order of business was Legislative Update — Billy Phenix, Legislative Consultant & Alan Cockerell, General Manager Mr. Cockerell noted that he distributed a bill tracking sheet, which was provided by Mr. Phenix, to advise the Board what activity was taking place in this Legislative Session. The twelfth order of business was G neral Mana er' Evaluation— ohn Bierschwale D u i Manager— Schertz Executive Session Recommended President Greenwald deferred item twelve to Executive Session The thirteenth order of Business was Post Oak Clean Green, Inc. (Landfill) — Patrick Lindner,, General Counsel Executive Session Recommended President Greenwald deferred item thirteen to Executive Session The fourteenth order of business was GCUWCD Proposed Rule Changes — Patrick Lindner, General Counsel Executive Session Recommended President Greenwald deferred item fourteen to Executive Session. The fifteenth order of business was Status Update SAWS Expansion /Pepper- Lawson Action in Response to Same — Patrick Lindner, General Counsel $t John Winkler,, Walker Partners & Alan Cockerell, General Manager Executive Session Recommended President Greenwald deferred item fifteen to Executive Session. The sixteenth order of business was Status Update BPS Ground Storage Tanis /Preload and Action in Response to Same -- Patrick Lindner, General Counsel & John Winkler, Walker Partners & Alan ( ockerellf, General Manager. Executive Session Recommended President Greenwald deferred item sixteen to Executive Session. The seventeenth order of business was Guadalupe Project Wholesale Water Contract{) & Well Permit(s) -- Patrick Lindner, General Counsel & Alan Cockerell, General Manager Executive Session Recommended President Greenwald deferred item seventeen to Executive Session. The eighteenth order of business was Gonzales County & Guadalupe County Carrizo and Wilcox Water Leases and Property Purchases — Alan Cockerell, General Manager. Executive Session Recommended President Greenwald deferred item eighteen to Executive Session. The nineteenth 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 7 of 9 deliberations regaLdi= real estate_ and Section 551.074 for deliberation regarding a specific officer or employee. President Greenwald closed General Session at 2:15 PM Executive Session was held from 2:27 PM to 3:07 PM The twentieth carder of business was Consider and Take, Action as Result of Agenda Item Number nineteen. President Greenwald reopened General Session at 3:07 PM Agenda Item # 12: President Greenwald deferred to the April 2015 board meeting -not all Board members were present Agenda Item # 13: No action requested /No action taken Agenda Item # 14: No action requested /No action taken Agenda Item # 15: Vice - President Dwyer made a motion to approve the $100,000 reduction of the original $22,037,004.32 Pepper- Lawson Contract amount (including Change Orders #1 -3) resulting in a final total contract amount of $21,937,004.32, which is agreed to by all parties, understanding the full and final Pay Estimate # 24 (including Change Order # 4) and nothing more is due and all warranties are intact. Secretary Jacobs seconded the motion. Upon a vote being called, the motion carried by unanimous decision. Agenda Item # 16: No action requested /No action taken Agenda Item # 17: Vice - President Dwyer made a motion to approve submission of well permits to GCGCD, for the Wilcox wells on the recently purchased Booth property. Secretary Jacobs seconded the motion. Upon a vote being called, the motion carried by unanimous decision. Agenda Item # 18: Secretary Jacobs made a motion to authorize the General Manager to execute the water leases with Norman Coleman and Brenda Moore. Vice - President Dwyer seconded the motion. Upon a vote being called, the motion carried by unanimous decision. The twen -first order of business was Consider and or Action on ques tions and possible items to be placed on the next agenda. ❖ The next board meeting was scheduled for Thursday, April 16, 2015 in the SSLGC Administrative Building at 1:30 PM ❖ General Manager Evaluation — deferred to April 2015 Board Meeting 8of9 The twenty- second order of business was Adjournment. President Greenwald declared the meeting adjourned at 3:11 PM MINUTES APPROVED THIS 16'' DAY OF APRIL, 2015. OR 9of9 Bob Pees, Assistant Secretary