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07-23-2015MINUTES OF THE SCHERTZ /SEGUIN LOCAL GOVERNMENT CORPORATION THE STATE OF TEXAS COUNTY OF GUADALUPE SCHERTZ /SEGUIN LOCAL GOVERNMENT CORPORATION On this the 23' day of July 2015 the Schertz /Seguin Local Government Corporation (SSLGC) convened for a Special Board Meeting at 2:30 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 Kerry Koehler Treasurer T. "Jake" Jacobs Secretary Bob Pees Assistant Secretary Jim Fowler Ex- Officio Mayor Keil 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: John Kessel City Manager (City of Schertz) Doug Faseler City Manager (City of Seguin) Dudley Wait Deputy City Manager (City of Schertz) Susan Caddell Director of Finance (City of Seguin) Sam Willoughby Public Works Director (City of Schertz) Richard Lindner General Counsel (Davidson, Troilo, Ream & Garza) Steven Siebert San Antonio Water System (SAWS) Dan Jackson Consultant (Wildan) Crockett Camp Consultant Felix Arambula Intergovernmental & External Relations (sAws) James Walters Sr. Budget Analyst (City of Schertz) Alan Cockerell General Manager (SSLGC) Emery Gallagher Water Utility Manager (City of Seguin) Resa Cunningham Intern (ssLGc) The first order of business was to Call the Meeting to Order. President Ken Greenwald called the meeting to order at 2:32 PM The second order of business was Public Comment. Mr. Cockerell introduced Mr. Richard Lindner, legal counsel, and Mrs. Resa Cunningham, intern. He explained that Mr. Patrick Lindner and Mrs. Regina Franke were both on vacation. There were not public comments. 1of6 ` SLGCAHNUTES 07 -23 -2015 `G Ilapcs) :s::- , N!;4? 0 0 R � G i NAg_, ,), I),i /!imp Prlwcd: S /M/:Ml' 2A6 "] r/ The third order of business was Approve Annual D & M Budget FY2015 -2016 — Alan Caekerell, General Manager ➢ Resolution # SSLGC R15 -06 — REVISED -- Annual 0 & M BM4W Mr. Cockerell advised that agenda items 3 and 4 were closely linked and they would be grouped as one item for discussion purposed. The 1\' 1,,V 1 �,; I 'I ) notation on each of the two resolutions and support documents was intended to indicate that the budget and water rates had been previously approved under the same resolution number. This was the best way to ensure that all of the supporting documents and resolutions were linked. The linking was to prevent references to the initially approved FY2015 -2016 Annual Budget and Water Rates, previously approved. FY 2016 Water Rate Plan Update Board Presentation u'WILLDAN Economists com July 232015 c.rmm aiii ai�i. FbtYr en.n.. 6 aM p.n.p lYN ..r,,r00N .11 n1. 064 S OBt . 087 1 PM 1 O0. a 01 r 10P Waerl...e 011 Oil Oil O11 PI] 011 Imfro.. u� Pl. 030 Pl6 OJ. 0. OlA C1w Mlrouion 019 019 P 19 019 019 019 *'WIND.- EoOrm - ac 6.r4 Seguin =U 6pn p. H01 c-:.. SAWS Tm 1 S.RTNM Tool hrrnl pa..r P.p. 3 Quantity impact on current year M.... Y01um05. revenims and Od01n.1 expenses of SAWS decision to not purchase Tier 2 water In 1.1141.I1i 2016�� 1,636170385 Forecast long tens impact on _ SSLGC it SAWS continues to - decline to purchase Tier 2 water 174 370 285 'W%ML M Ew —. P.0.2 SAWS TI., 2 . 3.60 om.n • 20dt e� T-1 +24.01 ' ~OnIN TNY Nyr YI.O� Srlu. Swu 4+.n Cme�. Ml \1llUnH Ea7wnm P." s 6.vc. W..NP- J.Aw. AJy.G J.a.n.. A.ISyNL. Tor' ""- M.... gll.nna Od01n.1 R.Mrd 1.1141.I1i ,670,170,385 1,636170385 cr<WS IN7 1 110 624,030 110 624 636 fn sn wxean.... wo-. 174 330,266 174 370 285 "" 277./29 541 277 420,541 th 117,306,630 ,17,300 a30 162,026,500 3.747,286.500 162025500 3.7472665W y...y.9. 7436072,677 7,436072577 rAN'a��u1 waR.I.p. 1.314 000,000 523084466 MNR.N r ea45.072,e77 7,559.e67.366 41.0% PnVnY M.... gll.nna f i s. 1m 9 � •. 1r 1.1141.I1i M 1'111111, 111 z(0 M}tN WHI.w us NN fn sn wxean.... wo-. W .l. W 111 w;.:po ,.lM 1a m.90 �•,iu iw O.l M1 1snna 15 +msal u, lint iv II,f2i,117 Ii,1G ?M 11.7N./N1 P.0. a S- -. '.—r— IWWILU)AN Eoaxrrvcls c:nr, P.S. 5 2of6 SSLGC _MINUTES 07- 23 -20 "15 (6 Pages) SIGNED ()RIGI NAL(S): I I)AW/TMIC P11111yd: 8/18 /2015 2:46 PV i-i P•11.11 y1w••e _.— I -,VIM I-p— Ni,a1.4.V w�an•nmo�.n... - "w- werl•er< nSm'iA Gvn: !•�rti. I.a�,arw s.nth rarcre00.144b. u n Nm•riT6Wwt• e.c e.aro n.mi�In n� ]�usam 1elryrrt• )0A 000 01m1A fml ]OAmO 10M J21 LYUn 11 m15eJI RwitM Orcet xu aol n1. rev i>• Mn wrn.r.o r u.W oD••.nr Naaaa I MI e10 soi fSa YI M4YAI w.,. ra l,...e w. wlrm �IO1» is lw �blur,W Cgnrar IaaaD ream Iw000 DaD eam n}lo eaoa e 5v 5r - 11,03i,Ili evu]s -- 11 }i0,•4 -jt,Nl %7e W`W11LDM Emma , pp• 1 J.4.wiJyr7r OMIIWe -MeYr Lne.e Aye rYn I,Ia JOe le1}IY .•M]M Ie4 ]]] I}fO W� IMr 16] ra gnws r.r i nA]i• _ rwr 111111 m 1M11e 1.1]M nMM1 *"WIIEDAN EOwk.mlec •1• P• p w J • "" 1Jr.µL. Combination of good management and difficult budget cuts will enable SSLGC to maintain existing rate plan in FY 2016 Key longterm question .- are lower Tier 2 sales: • saM -lwlrr arw+.M.. a • IM'rww lMldYO? • Recommend reviewing rate plan next year with intention to make adjustments if necessary In w1ur M1 �c p•a• 11 . r >.MU 1.Yile.1P. Due to combination of proposed budget reductions and use of impact fees to pay additional ScherWSeguin debt service no change in rats plan is recommended at this time However, should SAWS continue to decline to purchase Tier 2 water in years beyond FY 2016, then significant revisions to rate plan will be required Following page shows preliminary impact of assumption for continued non-purchase of SAWSTier2waler 1l%6"LWM Eowrrw.c V" u1.4•• enww Ewaw EAe•w FIF1aw em1•.• alu asu oan on.n area alx Inws n•r1 -r•W ..1r••Ir ­1 Ylm i53A.19e 15 >i9 RS5 6 +5.e WV IM1a1G 1)1 11Teg0J 101tl111. 1105 1.1 111A101 5a0'.Y•1 1-15 nab 051854. 01eJ IntnrMMf•WI 4r,01f Y•AY •M,r10 Mi }y 14.14 *'%1U1)- Eawvm]ac Pp 10 As Mr. Jackson offered his presentation he advised that any water utility, like SSLGC, benefits when more volume is sold. For a non -profit corporation like SSLGC, the benefit to selling more volume is that SSLGC does not have to charge as much to each of the customers. That has been one of the cornerstones of the long term rate /financial plan that Mr. Jackson has been working with SSLGC, as a utility supplier. He has considered what the volumes were predicted to be for each of the customer cities and SAWS. The SAWS purchases have been a major contributor to the long term benefit to the financial planning for SSLGC. The sale of excess water to SAWS has helped generate revenue to offset a large part of fixed costs and, as a result, SSLGC has lower costs to all other customers. The impact of SAWS recent decision not to take any excess water beginning January 2016 affects this concept and ultimately the costs. Mr. Jackson's presentation focused mostly on the short term effect on the water rates and revenue. In the long term financial plan Mr. Jackson had been working with under, it was projected to be no need to adjust rates in FY2016 and 2017. The next rate adjustment forecasted to be necessary was in the FY2018 and that was minimal at a $0.06 increase in the O & M rate with no change in the 3of6 SSLGC AUNUTES 07 -23 -2015 (6 Pages) SIGNED ORIGANF L(S)e i 1 ). [c / "1'imc Pri nted: 8/18/2015 2:46 11.11 ii/ other rates and nominal increases in FY2019 and FY2020. There has not been a rate increase in a couple of years and the original plan was forecasted to hold the rates at a constant for about five years. However, with the recent change in SAWS expectation of Tier 2 water request /purchase, that plan is in jeopardy. Billing units will go down by approximately ten percent (10 %). The revenue impact is predicted to be approximately - ($1,700,000). The original calculation of revenue generated by SAWS Tier 2 purchase was $3,100,000 in income which will been reduced to approximately $1,300,000. When SAWS buys Tier 2 water they pay an O & M rate and a Debt Service rate. SAWS has about $1,000,000 in debt service they would pay under the Tier 2 rate structure. Since they will be purchasing only about forty percent of the Tier 2 water in FY2015 -2016, they would be responsible for the appropriate debt service. This would leave approximately $540,000 in debt service ($270,000 per each city- Schertz and Seguin) to pay for FY2016. SSLGC plans to use the Impact Fee Fund to pay for the approximate $540,000 in debt service as a result of SAWS's decision. The reductions in the revised budget account for about $1,607,879. The bottom line is that the revenue reduction will be offset by the budget cuts and the use of the impact fees, therefore there would be no need to change the rate plan for FY2016. Mr. Jackson questions if this is a one -time deal with SAWS regarding Tier 2 water sales or will this be the "new standard ". If this is an ongoing situation with SAWS, Mr. Jackson anticipates that the FY2017 O & M rate should be raised from $0.82 to $0.95 ($0.13 increase) and in FY2018 up to $1.00 with approximately $0.05 increases each year following. Mr. Jackson advised that using the Impact Fee Fund for FY2016, but this was not a long term solution. Mr. Jackson noted that if SAWS continues to refrain from purchasing Tier 2 water, the increased rates will also affect SAWS Tier 1 water. This could potentially cost SAWS $500,000 /year beginning FY2017. Mr. Jackson advised that if this will be the new standard for SAWS, then he would suggest to begin to adjust the rate structure. President Greenwald advised that Dan's words are significant. He suggest that SSLGC should begin to look for more customers (the sooner the better). Mr. Cockerell noted that there were 3 resolutions to discuss /approve. He distributed a Comparison of Approved Budget to Proposed Revised Budget. The reductions were as follows: Category A roved Revised Difference Utilities $3,100,285 $2,028,722 - $1,071,563 Salaries $805,411 $770,918 - $34,493 General Su lies - Chemicals $1,041,800 $558,841 - $482,959 Benefits $304,436 $319539 $15,103 Technical Services $283,118 $249,151 - $33,967 TOTALS $5,535,050 $3,927,171 - $1,607,879 Mr. Cockerell was able to reduce the utilities because the initial estimate included the consideration that SAWS would be purchasing Tier 2 water and also the amount was based on last fiscal year being the first year that SSLGC was producing that water there were unknown variables. The salaries were lowered as 1 maintenance operator was taken out of the proposed budget. General Supplies and Chemicals reduced due to a more accurate forecast as well as the absence of Tier 2 water sales. 4of6 Wc MPNUTFS 07-23 210B (6 ,Ff ) 0 �P. I GI [°texas „S)n . I `,iI, T! Inic 1'nnrcd: S/18/2015 2:461 IN i rtj Benefits were increased, even though there would be one less employee; this was due to the increase in health insurance premiums. Technical Services which was attributed to a decrease in transport fees and testing fees. Transfers were able to remain the same based on the revised budget Vice - President Dwyer asked about the cost of electricity. Mr. Cockerell advised that Staff calculated this amount based on the current fiscal year's usage and were able to derive a more accurate estimate. Ex- officio Fowler asked if the budget had taken into account growth of the cities. Mr. Cockerell advised that Mr. Winkler had created a projection based on information obtained from the cities and that was considered in the budgeting process. In the event of a weather event that would cause an increase in costs, would require Staff to request a budget adjustment. Mr. Cockerell advised that he suggest that later in the year, the Board, Mr. Jackson and Staff hold a workshop to begin working on a long range plan. Assistant Secretary Pees made a motion to approve Resolution # SSLGC R15 -06 — REVISED (Annual O & M Budget FY2015- 2016). Vice - President Dwyer seconded the motion. Upon a vote being called, the motion carried by unanimous decision. The f urth rd r of business wa5 Approve Water Rates FY2015 -2 16 — Dan Jacks9n, Wildan Financial Services & Alan Cockerell, General Manager. ➢ Resolution # SSLGC R15 -07 — REVISED — Annual Water Rates Mr. Cockerell advised of two changes. The debt service increased for each city and the effective rate was set at $2.70 and added to the Water Rates sheet. Vice - President Dwyer made a motion to approve Resolution # SSLGC R15 -07 — REVISED (Water Rates FY2015- 2016). Secretary Jacobs seconded the motion. Upon a vote being called, the motion carried by unanimous decision. Mr. Cockerell advised there was a resolution to transfer the money from the Impact Fee Fund to the I & S Fund in the total amount of $543,120 as projected to be the shortfall in the debt service collections. Counselor Richard Lindner advised that this was not a specific agenda item. He suggested to postpone to the next meeting. The fifth order of business was Executive Session called under Chapter $51 Government Code, Section 551.071, to seek the advice of its attorney on legal matters. and Section 551.072, for deliberations regarding real estate. There was no Executive Session. The sixth order of business was to Consider and Take Action as Result of Agenda Item Number five. There was no Executive Session. The seventh order of business was Adjournment. President Greenwald declared the meeting adjourned at 3:16 P11%1 MINUTES APPROVED THIS 20`h DAY OF AUGUST, 2015. 5 of 6 5S1_ -GC MINUTFS 07 -23 -2015 (G PaQc =s) i nmud: 8 /I8/21? S 2:-46 1'Nl it'/ OR T. "Jaffe" cob ecretary Bob Pees, Assistant Secretary 6 of 6 SSLGC ;AliNU "TES 07 -23 -2015 (G Pages) SIGNED ORIGINAL(S) I D.iw, /Twni Prnn Ld' 8/1S/2015 2:46 P%J !zj