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03-21-2019 AgendaAGENDA March 21, 2019 The Schertz/Seguin Local Government Corporation (SSLGC) will meet on Thursday, March 21, 2019 at 1:30 PM in SSLGC Administrative Building located at 108 W. Mountain Street, Seguin, Texas. All agenda items listed below will be considered for discussion and/or action at said meeting. 1.Call to Order 2.Public Comment 3.Approval of Minutes for the meeting held February 21, 2019 4.General Manager’s Report – Amber Beard, General Manager a.Water Production b.Gonzales County c.Guadalupe County d.Region L/GMA 13 e.CVLGC 5.SSLGC Operations Report – Trino Pedraza, Operations Manager 6.Presentation of FY2017-2018 Audit Report – Kim Roach, Armstrong, Vaughan & Associates 7.Authorize the General Manager to Accept the Texas Municipal League Intergovernmental Risk Pool Liability and Property Proposals – Susan Caddell, City of Seguin Finance Director & Amber Beard, General Manager 8.SSLGC Construction Update – John Winkler, Walker Partners & Trino Pedraza, Operations Manager 9.Legislative Update – Billy Phenix, Legislative Consultant & Amber Beard, General Manager 10.Parallel Pipeline & Guadalupe Project Update – Amber Beard, General Manager & Brent Patterson, Stateside Right of Way Services Executive Session Recommended 11.Post Oak Clean Green, Inc. (Landfill) – Patrick Lindner, General Counsel & John Winkler, Walker Partners & Amber Beard, General Manager Executive Session Recommended SSLGC AGENDA 03-21-2019 12. Wholesale Water Contract(s) & Well Permit(s) – Patrick Lindner, General Counsel & Amber Beard, General Manager Executive Session Recommended 13. Gonzales County & Guadalupe County Carrizo and Wilcox Water Leases and Property Transactions– Amber Beard, General Manager Executive Session Recommended 14. Executive Session: Called under Chapter 551 Government Code, Section 551.071, to seek the advice of its attorney on legal matters, Section 551.072, for deliberations regarding real estate 15. Consider and Take Action as a Result of Agenda Item #14 16. Consideration and/or Action on questions and possible items to be placed on the next agenda 17. Adjournment The listing of an agenda item as a matter to be discussed in open session is not intended to limit or require discussion of that matter in open session if it is otherwise appropriate to discuss the matter in executive session, such as consultation with its attorneys (Tex. Gov’t Code, section 551.071), deliberations regarding real estate (Tex. Gov’t Code, section 551.072), deliberations regarding a specific officer or employee (Section 551.074), deliberations regarding security (Tex. Gov’t Code, section 551.076), and information relating to risk or vulnerability assessment (Tex. Gov’t Code, section 418.183(f)). If, during the discussion of any agenda item, a matter is raised that is appropriate for discussion in executive session the Board may, as permitted by law, adjourn into executive session to deliberate on the matter. The posting of an agenda item as a matter to be discussed in executive session is not intended to limit or require discussion of that matter in executive session. The Board may discuss in open session any matter for which notice has been given in this notice of open meeting, including an agenda item posted for executive session. In no event, however, will the Board take action on any agenda item in executive session, whether it be posted for open or executive session discussion. MINUTES OF THE SCHERTZ/SEGUIN LOCAL GOVERNMENT CORPORATION THE STATE OF TEXAS § COUNTY OF GUADALUPE § SCHERTZ/SEGUIN LOCAL § GOVERNMENT CORPORATION § 1 of 6 SSLGC MINUTES 02/21/2019 (6 Pages) SIGNED ORIGINAL(S): 1 Date/Time Printed: 3/11/2019 10:02 AM aek On this the 21st day of February, 2019 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: Robin Dwyer President Charles Kelm Vice-President David Reiley Secretary Ken Greenwald Treasurer Donna Dodgen Assistant Secretary David Scagliola Ex-Officio The following members were absent: 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: Doug Faseler City Manager (City of Seguin) Rick Cortes Assistant City Manager (City of Seguin) Tim Howe Director of Water/Wastewater Utilities (City of Seguin) Susan Caddell Director of Finance (City of Seguin) Mark Browne City Manager (City of Schertz) Jimmy Hooks Public Works (City of Schertz) Patrick Lindner General Counsel (Davidson, Troilo, Ream & Garza) Steven Siebert San Antonio Water System John Winkler Consultant (Walker Partners) Crockett Camp Consultant Bill Klemt Consultant Amber Briggs Beard General Manager (SSLGC) Angie Kleinschmidt Office Administrator (SSLGC) The first order of business was to Call the Meeting to Order President Dwyer called the meeting to order at 1:31 PM The second order of business was Public Comment Mrs. Beard introduced the new SSLGC Operations Manager, Trino Pedraza. The third order of business was the Approval of Minutes for the meeting held January 19, 2019 Treasurer Greenwald made a motion to approve the January 19, 2019 meeting minutes. President Dwyer seconded Upon a vote being called, the motion carried by unanimous decision. 3 DR A F T S S L G C B O A R D P A C K E T 3 - 2 1 - 2 0 1 9 2 of 6 SSLGC MINUTES 02/21/2019 (6 Pages) SIGNED ORIGINAL(S): 1 Date/Time Printed: 3/11/2019 10:02 AM aek The fourth order of business was Presentation of the General Manager’s Report – Amber Beard, General Manager  Water Production Seasonal pumping and monthly water sales charts were provided during the board meeting. Water production for the month of January was 51.7% of the Gonzales County Underground Water Conservation District’s (GCUWCD) monthly allowable.  GCUWCD Monthly Meeting The monthly meeting was held February 12, 2019. A copy of the agenda was included in the board packet. The next meeting is scheduled for March 12th  GCGCD Monthly Meeting The last monthly meeting was held February 14th. The board of directors removed the interim title from Kelley Vickers named her the new General Manager. The next month’s meeting will be March 14th.  Region L The last Region L meeting was January 31, 2019. The meeting agenda is included in your board packet. The identification and evaluation of potential water management strategies continues for the 2021 South Central Texas Regional Water Plan. The following SSLGC projects are in the draft plan: SSLGC Expanded Carrizo Project (Guadalupe): SSLGC owns and operates a Carrizo Aquifer well field in Gonzales county with approximately 17,000 acft/yr of supply. This strategy is the expansion of that Carrizo Aquifer supply by an additional 6,000 acft/yr of Carrizo-Wilcox Aquifer groundwater from Guadalupe County within the 2020 decade. The strategy will include documentation of SSLGC’s latest plans, evaluation of the groundwater supply available to the project in accordance with the MAG, assessment of the environmental impacts of the project, estimate of cost to develop the water supply, and documentation of the implementation issues. This information will be summarized in a Water Management Strategy evaluation. SSLGC Brackish Wilcox Project (Gonzales): SSLGC owns and operates a Carrizo Aquifer well field in Gonzales County with approximately 17,000 acft/yr of supply. This strategy is the expansion of that Carrizo Aquifer supply by adding 5,000 acft/yf of treated brackish groundwater from the Carrizo- Wilcox Aquifer in Gonzales County within the 2030 decade. The strategy will include documentation of SSLGC’s latest plans, evaluation of the groundwater supply available to the project in accordance with the MAG, assessment of the environmental impacts of the project, estimate of cost to develop the water supply, and documentation of the implementation issues. This information will be summarized in a Water Management Strategy evaluation. The next meeting will be held May 2, 2019.  GMA 13 The last GMA 13 meeting was February 1, 2019. The meeting agenda is included in your board packet. The next meeting is scheduled for May 3rd  CVLGC The next meeting is scheduled for February 28, 2019.  Operations Report Mrs. Beard went over the operations report. The fifth order of business was Presentation of Treasurer’s Report – Susan Caddell, Finance Director & Amber Beard, Assistant General Manager a. Financial statements for the quarter ending December 31, 2018 Included in the board packet were the financial reports for the end of the fourth quarter, December 31, 2018. The first two pages are the balance sheets for all the SSLGC funds. The two pages following the DR A F T SS L G C BO A R D PA C K E T 3-2 1 - 2 0 1 9 3 of 6 SSLGC MINUTES 02/21/2019 (6 Pages) SIGNED ORIGINAL(S): 1 Date/Time Printed: 3/11/2019 10:02 AM aek balance sheet are the income statements for all the SSLGC funds. Finally, following those statements are the balance sheet and income statement for the SAWS funds. Behind those, you will find the comparative statement for the SSLGC Operating Fund as well as the working capital chart. Mrs. Caddell first reviewed the balance sheet for the SSLGC funds. The first column is for the Operating Fund. This fund consists of cash and investments of $4,849,611.39 The second column was for the balance of the SWIFT funds. Mrs. Caddell noted that in October, additional escrow funds were released in the amount of $5,520,000. Once received those funds, the Future Development Fund was reimbursed in the amount of $1,153,000 and the remaining was placed into Texas Class Investment Pool. The cash and investment balance in this fund is $4,024,538.21. Also mentioned was notification that the amounts are still held in escrow for the SWIRFT Funds totaling $61,374,339.78. The third column is for the Interest and Sinking Fund. The cash and investment balance in this fund is $3,061,259.07 with receivables of $1,180,967.76. The first bond payment has been made at the beginning of February and will be reflected in the next quarterly report. The fourth column was for the Repair and Replacement Fund. The cash and investment balance is now $6,703,354.65. The fifth column was for the Future Development Fund. The cash and investment balance is $3,176,422.08. As explained by Mrs. Caddell, this fund now has been reimbursed fully from the SWIRFT funds. The sixth column was for the Impact Fund. The cash and investment balance in this fund is $5,942,210.61. The seventh column is for the Reserve Fund. The required amount to maintain in the Reserve Fund according to bond covenants is $1,275,621.10. The cash and investment balance in this fund is $1,324,399.59. The eighth column is the 2010 Bond Fund. The cash and investment balance in this fund is $240,205.23. The ninth column was for the Rate Stabilization Fund. The cash and investment balance in this fund is $833,121.03. This fund has been established to provide funds in order to prepare for volatile periods, which can greatly affect the rates the customers pay. Mrs. Caddell reviewed the income statement for the SSLGC funds. The first column was the Operating Fund. The net income before transfers is $461,087.03. After the budgeted transfers to the Repair and Replacement Fund and the Future Development Fund, the net income is $123,587.03. The second column was income statement for the SWIFT funds. The only expenditures to date are for legal services in relation to the bond funds, right-of-way acquisition services and preliminary engineering. The third column was I&S Fund. The expenditures in this fund was an interest payment that was made in conjunction with the refunding of the 2010 Revenue Bond. The fourth column is for the Repair and Replacement Fund. The expenditures which have occurred in this fund are the Cathodic Protection – Phase II. The fifth column is the Future Development Fund. The sixth column is the Impact Fund. The eighth column is for the 2010 Bond Fund. Finally, the ninth column is interest earnings in the Rate Stabilization Fund. The total column indicates net income of $3,134,254.39 As indicated earlier, the reports following the SSLGC Fund reports are those for the SAWS I&S Fund. Also included in the board packet was the Comparative Income Statement for the Operating Fund towards the back of the report. Revenue has decreased by $401,506.98 with the largest being sales to SAWS of $283,945.32 Along with this decrease, consumption has decreased for the Cities of Schertz, Seguin and Selma. Expenditures have decreased by $75,106.75, with the largest decreased being in professional services in the amount of $61,192.68. The costs from the Landfill Opposition account lowered by $48,062.29 from this time last year. Our net income before transfers decreased from last year by $326,400.23. Finally, the working capital trend chart was enclosed. Working capital has increased since September 30, 2018, by $8,333,704. As mentioned earlier, $5,520,000 in SWIRFT funds were released. This factor, along with receiving the income from bond payments to be made in February, also caused the increase. DR A F T SS L G C BO A R D PA C K E T 3-2 1 - 2 0 1 9 4 of 6 SSLGC MINUTES 02/21/2019 (6 Pages) SIGNED ORIGINAL(S): 1 Date/Time Printed: 3/11/2019 10:02 AM aek Assistant Secretary Dodgen made a motion to approve SSLGC’S financial statements for the quarter ending December 31, 2018. Treasurer Greenwalkd seconded. Upon a vote being called the motion carried by unanimous decision. b. Investment report for the quarter ending September 30, 2018 Mrs. Caddell presented the Investment Report for October 1, 2018 through December 31, 2018. Interest earnings for the quarter ended December 31, 2018 were $100,611.00. Assistant Secretary Dodgen made a motion to approve SSLGC’S investment report for the quarter ending December 31, 2018. Vice- President Kelm seconded. Upon a vote being called the motion carried by unanimous decision. The sixth order of business was Water Level Measurements – Bill Klemt, Consultant Mr. Klemt provided a water level measurement report basted on the latest measurements. The seventh order of business was Approve Contract for Well #10 – Amber Beard, General Manager  Resolution # SSLGC R19-01 – Well #10 Mrs. Beard advised the board that 5 (five) proposals were received to repair Well #10. With engineer recommendation, contract will be awarded to Weisinger Incorporated in the amount of $86,720.00 Treasurer Ken Greenwald made a motion to approve Resolution # SSLGC R19-01 to Weisinger Incorporated in the amount of $86,720. Assistant Secretary Dodgen seconded. Upon a vote being called the motion carried by unanimous decision. The eighth order of business was approve annual contract renewal letter for Chlorine from Brenntag Southwest – Amber Beard, General Manager Annual increase of 3.75% was projected. President Dwyer made a motion to approve annual contract renewal for Chlorine with Brenntag Southwest. Secretary Reiley seconded. Upon a vote being called the motion carried by unanimous decision. The ninth order of business was Construction Update – John Winkler, Walker Partners and Amber Beard, General Manager.  BPS Storage Tank Leak: SSLGC staff noticed what appeared to be additional tears in the liner while cleaning the interior of the tank to bring it back into service. An update will be provided at the board meeting.  Venado Crossing Subdivision: A drainage feature over our existing pipeline is required for this development. Timing of this construction has not yet been established.  Cathodic Protection Phase II: The contractor is currently working near FM78 between Marion and Cibolo. The contractor hit our pipeline causing a leak on January 31st requiring an emergency repair. The leak has been repaired and the pipeline was put back into service within 24 hours. An update will be provided at the board meeting.  Potassium Permanganate Tanks- An update was provided at the board meeting.  Well 10- The bid opening for Well 10 was on February 12. DR A F T SS L G C BO A R D PA C K E T 3-2 1 - 2 0 1 9 5 of 6 SSLGC MINUTES 02/21/2019 (6 Pages) SIGNED ORIGINAL(S): 1 Date/Time Printed: 3/11/2019 10:02 AM aek  WTP Office Complex: An update was provided at the board meeting. The tenth order of business was Legislative Update – Billy Phenix, Legislative Consultant & Amber Beard, General Manager Mrs. Beard gave a brief update The eleventh order of business was Parallel Pipeline Project Update – Brent Patterson, Stateside ROW & Amber Beard, General Manager Action taken The twelfth order of business Post Oak Clean Green, Inc. (Landfill) – Patrick Lindner, General Counsel & John Winkler, Walker Partners & Amber Beard, General Manager No action requested/No action taken The thirteenth order of business was Wholesale Water Contract(s) & Well Permits – Patrick Lindner, General Counsel & Amber Beard, General Manager No action requested/No action taken The fourteenth order of business was Gonzales County & Guadalupe County Carrizo and Wilcox Water Leases and Property Purchases– Amber Beard, General Manager and Crockett Camp, Consultant No action requested/No action taken The fifteenth 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 Regarding Real Estate and 551.074 for Deliberations Regarding a Specific Officer or Employee President Dwyer closed General Session at 2:21 PM. Executive Session was held from 2:30 PM to 3:12 PM. The fourteenth order of business was Consider and Take Action as Result of Agenda Item Number Thirteen President Dwyer reopened General Session at 3:14 PM. Agenda Item #11 Assistant Secretary Dodgen made a motion to ratify GU(II) 36 & 38 as presented. Treasurer Greenwald seconded the motion. Upon a vote being called the motion carried by unanimous decision. Agenda Item #12 No action requested/No action taken Agenda Item #13 No action requested/No action taken Agenda Item #14 No action requested/No action taken DR A F T SS L G C BO A R D PA C K E T 3-2 1 - 2 0 1 9 6 of 6 SSLGC MINUTES 02/21/2019 (6 Pages) SIGNED ORIGINAL(S): 1 Date/Time Printed: 3/11/2019 10:02 AM aek The fifteenth order of business was Consideration and/or Action on Questions and Possible Items to be placed on the Next Agenda  The next board meeting was scheduled for Thursday, March 21st, in the SSLGC Administrative Building at 1:30PM.  Hal Baldwin Building Dedication  Audit Review The sixteenth order of business was Adjournment President Dwyer declared the meeting adjourned at 3:17 PM. MINUTES APPROVED THIS 21st DAY OF MARCH 2019 __________________________________ David Reiley, Secretary DR A F T SS L G C BO A R D PA C K E T 3-2 1 - 2 0 1 9 1 MEMORANDUM Date: March 15, 2019 To: SSLGC Board of Directors From: Amber Beard, General Manager Trino Pedraza, Operations Manager Re: Board of Directors Meeting Memorandum 4.General Manager’s Report – Amber Beard, General Manager a.Water Production: SSLGC’s water production for the month of February will be provided at the board meeting. b.Gonzales County Underground Water Conservation District: The last monthly meeting was held March 12, 2019. A copy of the agenda is included in the board packet. The next monthly meeting will be April 9, 2019. c.Guadalupe County Groundwater Conservation District: The last monthly meeting was March 14, 2019. A copy of the agenda is included in the board packet. The next monthly meeting will be April 11, 2019. d.Region L: The next meeting will be held May 2, 2019. GMA 13: The last GMA 13 meeting was February 1, 2019. The meeting agenda is included in your board packet. The next meeting is scheduled for May 3, 2019. e.CVLGC: The last monthly meeting was January 24, 2019. A copy of the agenda is included in your board packet. The next monthly meeting is scheduled for February 28, 2019. 5.Operations Report – Trino Pedraza, Operations Manager The monthly operations report will be provided at the board meeting. Briefing on issues identified o Current work in progress reports Future projects 6.Presentation of FY2017-2018 Audit Report – Kim Roach, Armstrong, Vaughan & Associates Staff recommends approval. 7.Authorize the General Manager to Accept the Texas Municipal League Intergovernmental Risk Pool Liability and Property Proposals A memo from the City of Seguin Finance Director is included in your board packet. An update will be provided at the board meeting. Staff recommends approval. 4 2 8. SSLGC Construction Update – John Winkler, Walker Partners & Trino Pedraza, Operations Manager BPS Storage Tank Leak: Preload completed the repairs on March 1st. The repairs require a 14 day cure time. SSLGC staff will prepare the tank and begin filling the tank on March 18th. An update will be provided at the board meeting. Venado Crossing Subdivision: A drainage feature over our existing pipeline is required for this development. Timing of this construction has not yet been established. Cathodic Protection Phase II: The contractor is currently working near FM78 and 3009 inside of the Lockaway Storage facility. The contractor has approximate 2 miles of pipeline remaining. An update will be provided at the board meeting. Potassium Permanganate Tanks- An update will be provided at the board meeting. Well 10- An update will be provided at the board meeting. WTP Office Complex: SSLGC advertised for RFPs in the Seguin Gazette in the Northeast Herald. The bid opening for the WTP Office Complex will be on April 2, 2019. 9. Legislative Update – Billy Phenix, Legislative Consultant & Amber Beard, General Manager An update will be provided at the board meeting. 10. Parallel Pipeline & Guadalupe Project Update – Amber Beard, General Manager & Brent Patterson, Stateside Right of Way Services An update will be provided at the board meeting. 11. Post Oak Clean Green, Inc. (Landfill) – Patrick Lindner, General Counsel & John Winkler, Walker Partners & Amber Beard, General Manager An update will be provided at the board meeting. 12. Wholesale Water Contract(s) & Well Permit(s) – Patrick Lindner, General Counsel & Amber Beard, General Manager An update will be provided at the board meeting. 13. Gonzales County & Guadalupe County Carrizo and Wilcox Water Leases and Property Transactions– Amber Beard, General Manager An update will be provided at the board meeting. 14. Executive Session 15. Consider and Take Action as a Result of Agenda Item #14 16. Consideration and/or Action on Questions and Possible Items to be Placed on Next Agenda 17. Adjournment 4b AGENDA GCGCD REGULAR MEETING OF THE GUADALUPE COUNTY GROUNDWATER CONSERVATION DISTRICT Thursday, March 14, 2019 4:30 P.M. TAKE NOTICE that the Guadalupe County Groundwater Conservation District’s Board of Directors shall hold a meeting on Thursday, March 14, 2019 at 4:30 P.M @122 W. Ireland, Seguin, Texas. All agenda items listed below will be considered for discussion and/or action at said meeting. CALL TO ORDER PLEDGE OF ALLEGIANCE DETERMINE A QUORUM 1.Invitation of citizens or Directors to speak in advance of District’s regular business limited to 3 minutes each (items not on agenda) 2.Approve Minutes of regular meeting on February 14, 2019 3.Approve Financial Reports for February 2019 4.Review Palmer Drought Index, TWDB Drought Report and Rain Fall in GCGCD area 5.Review Production data 6.Adopt Resolution No. 03142019 re: new voting equipment for Guadalupe County 7.Discussion and Action regarding approving 2018 Managers Report 8.Discussion and Action regarding adopting Personnel Policy Manual 9.Designation of Local Government Records Management Officer in accordance with 13 TAC §7.125(a)(1) 10.REPORTS A.Kelley Vickers: GCGCD Report B.Hydrologist (William Klemt) C.CRWA Wells Ranch D.SSLGC & CVLGC E.SHWSC Mesa Trails Well Field F.CCSUD 11.Frederick, Perales, Allmon & Rockwell, P.C. - Update on POCG (Conference Call) 12.Discussion and Action regarding salary/benefits for the General Manager 13.ADJOURNMENT NOTE: The Board reserves the right to retire into executive session concerning any of the items listed on this Agenda whenever it is considered necessary and legally justified under the Opens Meeting Act (Chapter 551 of the Texas Government Code). POSTED ON WEB SITE www.gcgcd.org Date of Posting: March 11, 2019 12:00 PM By: Kelley Vickers 4c AGENDA February 28, 2019 The Cibolo Valley Local Government Corporation will meet on Thursday, February 28, 2019 at 9:00 AM in the Council Chambers of the City of Cibolo located at 200 South Main, Cibolo, Texas. All agenda items listed below will be considered for discussion and/or action at said meeting. 1.Call to Order 2.Pledge of Allegiance 3.Public Comment 4.Approval of Minutes for the meeting held January 24, 2019 5.Executive Director’s Report – Amber Beard, Executive Director a.SSLGC b.Guadalupe County c.Evergreen UWCD d.Region L/GMA-13/RWA e.Financial Reports 6.Cibolo Valley Local Government Corporation Investment Policy - Public Funds Investment Act, Texas Government Code, Chapter 2256 –Amber Beard, Executive Director Resolution # CVLGC2019-01 7.Cibolo Valley Local Government Corporation’s Brokers/Dealers list –Amber Beard, Executive Director Resolution # CVLGC2019-02 8.Approve Work Authorization #5 HRM Land Acquisition Solutions – Amber Beard, Executive Director 9.Consider and Possible Action on a Resolution Supporting Certain Legislative Initiatives Regarding Groundwater Production and Transportation – Amber Beard, Executive Director Resolution # CVLGC2019-03 10.Water Level Measurements – Bill Klemt, Consultant 4e Page 2 of 2 CVLGC AGENDA 02-28-2019 11. Legislative Update – Billy Phenix, Legislative Consultant & Amber Beard, Executive Director 12. Executive Session: Called under Chapter 551 Government Code, Section 551.071, to seek the advice of its attorney on legal matters, Section 551.072, for deliberations regarding real estate 13. Review and Discuss CVLGC Business Plan – Amber Beard, Executive Director Executive Session Recommended 14. Location/Update Acquisition of Potential Well Site - Amber Beard, Executive Director & Mr. Rene Moulinet, Jr., HRM Land Acquisitions Executive Session Recommended 15. Consider and Take Action as a Result of Agenda Item # 12 16. Consideration and/or Action on questions and possible items to be placed on the next agenda 17. Adjournment The listing of an agenda item as a matter to be discussed in open session is not intended to limit or require discussion of that matter in open session if it is otherwise appropriate to discuss the matter in executive session, such as consultation with its attorneys (Tex. Gov’t Code, section 551.071), deliberations regarding real estate (Tex. Gov’t Code, section 551.072), deliberations regarding a specific officer or employee (Section 551.074), deliberations regarding security (Tex. Gov’t Code, section 551.076), and information relating to risk or vulnerability assessment (Tex. Gov’t Code, section 418.183(f)). If, during the discussion of any agenda item, a matter is raised that is appropriate for discussion in executive session the Board may, as permitted by law, adjourn into executive session to deliberate on the matter. The posting of an agenda item as a matter to be discussed in executive session is not intended to limit or require discussion of that matter in executive session. The Board may discuss in open session any matter for which notice has been given in this notice of open meeting, including an agenda item posted for executive session. In no event, however, will the Board take action on any agenda item in executive session, whether it be posted for open or executive session discussion. Communication with Those Charged with Governance To the Chairman and Board of Directors Schertz/Seguin Local Government Corporation We have audited the basic financial statements of the Schertz/Seguin Local Government Corporation, as of and for the years ended September 30, 2018 and 2017, and have issued our report thereon dated February 26, 2019. Professional standards require that we advise you of the following matters relating to our audit. Our Responsibility under Generally Accepted Auditing Standards As communicated in our engagement letter dated August 9, 2018, our responsibility, as described by professional standards, is to plan and perform our audit to form and express an opinion about whether the financial statements that have been prepared by management with your oversight are presented fairly, in all material respects, in conformity with accounting principles generally accepted in the United States of America. Our audit of the financial statements does not relieve you or management of your respective responsibilities. Our responsibility, as prescribed by professional standards, is to plan and perform our audit to obtain reasonable, rather than absolute, assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, as part of our audit, we considered the internal control of Schertz/Seguin Local Government Corporation solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control. We are also responsible for communicating significant matters related to the audit that are, in our professional judgment, relevant to your responsibilities in overseeing the financial reporting process. However, we are not required to design procedures for the purpose of identifying other matters to communicate to you. Planned Scope and Timing of the Audit We conducted our audit consistent with the planned scope and timing we previously communicated to you. Compliance with All Ethical Requirements Regarding Independence The engagement team, others in our firm, as appropriate, and our firm have complied with all relevant ethical requirements regarding independence. 6 2 Qualitative Aspects of the Entity’s Significant Accounting Practices Significant Accounting Policies Management has the responsibility to select and use appropriate accounting policies. A summary of the significant accounting policies adopted by Schertz/Seguin Local Government Corporation is included in Note A to the financial statements. As described in Note A to the financial statements, No new accounting policies were adopted and the application of existing policies was not changed during 2018. No matters have come to our attention that would require us, under professional standards, to inform you about (1) the methods used to account for significant unusual transactions and (2) the effect of significant accounting policies in controversial or emerging areas for which there is a lack of authoritative guidance or consensus. Significant Accounting Estimates Accounting estimates are an integral part of the financial statements prepared by management and are based on management’s current judgments. Those judgments are normally based on knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ markedly from management’s current judgments. The most sensitive accounting estimate affecting the financial statements is the estimated useful life of the water utility system and its components. The useful lives of the depreciable assets are based on past history, engineering estimates, and industry standards. We evaluated the key factors and assumptions used to develop this estimate and determined that it is reasonable in relation to the financial statements taken as a whole. Significant Difficulties Encountered during the Audit We encountered no difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected Misstatements For purposes of this communication, professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that we believe are trivial, and communicate them to the appropriate level of management. Further, professional standards require us to also communicate the effect of uncorrected misstatements related to prior periods on the relevant classes of transactions, account balances or disclosures, and the financial statements as a whole and each applicable opinion unit. The effect of the following uncorrected financial statement misstatements in the current and prior periods, as determined by management, are immaterial, both individually and in the aggregate, to the financial statements taken as a whole and each applicable opinion unit: Expenses were understated by $31,284 as vacation accruals are not billed as part of the Management Services Agreement until paid. Construction in Progress was understated by $23,580 related to easement purchases that was not accrued as of year-end. Impact Fee Revenues were understated by $26,502 due to correction of a prior year accrual. 3 In addition, professional standards require us to communicate to you all material, corrected misstatements that were brought to the attention of management as a result of our audit procedures. None of the misstatements detected as a result of audit procedures and corrected by management were material, either individually or in the aggregate, to the financial statements taken as a whole. Disagreements with Management For purposes of this letter, professional standards define a disagreement with management as a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. Representations Requested from Management We have requested certain representations from management that are included in the management representation letter dated February 26, 2019. Management’s Consultations with Other Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters. Management informed us that, and to our knowledge, there were no consultations with other accountants regarding auditing and accounting matters. Public Funds Investment Act In accordance with the Public Funds Investment Act, we have performed a review of the Corporation’s compliance with the requirements of the Act. We found that the Corporation was in compliance with all material respects with the provisions of the Act. Other Significant Findings or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the Corporation’s auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. With respect to the required supplementary information accompanying the financial statements, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. This information is intended solely for the use of Board of Directors and management and is not intended to be and should not be used by anyone other than these specified parties. It has been our pleasure to provide these services to the Schertz/Seguin Local Government Corporation. We urge you to contact us is we can be of further assistance. 4 Very truly yours, Armstrong, Vaughan & Associates, PC February 26, 2019 SCHERTZ/SEGUIN LOCAL GOVERNMENT CORPORATION ANNUAL FINANCIAL REPORT SEPTEMBER 30, 2018 and 2017 i SCHERTZ/SEGUIN LOCAL GOVERNMENT CORPORATION CORPORATE OFFICIALS SEPTEMBER 30, 2018 PRESIDENT.......................................................................................................................ROBIN DWYER VICE-PRESIDENT ........................................................................................TIMOTHY “JAKE” JACOBS SECRETARY .....................................................................................................................DAVID REILEY ASSISTANT SECRETARY.............................................................................................CHARLES KELM DIRECTOR...................................................................................................................KEN GREENWALD GENERAL MANAGER.....................................................................................AMBER BRIGGS BEARD ii SCHERTZ/SEGUIN LOCAL GOVERNMENT CORPORATION ANNUAL FINANCIAL REPORT SEPTEMBER 30, 2018 INTRODUCTORY SECTION PAGE Corporate Officials.........................................................................................................................................i Table of Contents ..........................................................................................................................................ii FINANCIAL SECTION Independent Auditor’s Report.......................................................................................................................1 Management’s Discussion and Analysis.......................................................................................................3 Basic Financial Statements ...........................................................................................................................8 Comparative Statements of Net Position ....................................................................................................9 Comparative Statements of Revenues, Expenses and Changes in Net Position .......................................11 Comparative Statements of Cash Flows ...................................................................................................12 Notes to Financial Statements...................................................................................................................14 1 INDEPENDENT AUDITOR’S REPORT Members of the Board of Directors Schertz/Seguin Local Government Corporation Report on the Financial Statements We have audited the accompanying financial statements of the Schertz/Seguin Local Government Corporation as of and for the years ended September 30, 2018 and 2017,and the related notes to the financial statements, which collectively comprise the Schertz/Seguin Local Government Corporation’s basic financial statements as listed in the Table of Contents. Management’s Responsibility for the Financial Statements Schertz/Seguin Local Government Corporation’s management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these basic financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Schertz/Seguin Local Government Corporation, as of September 30, 2018 and 2017, and the changes in its financial position and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. 2 Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that management’s discussion and analysis on pages 3 through 7 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management’s response to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Armstrong, Vaughan & Associates, P.C. February 26, 2019 3 MANAGEMENT’S DISCUSSION AND ANALYSIS Our discussion and analysis of the Schertz/Seguin Local Government Corporation’s financial performance provide an overview of the Corporation’s financial activities for the fiscal year ended September 30, 2018. Please read it in conjunction with the Corporation’s financial statements. HIGHLIGHTS Financial Highlights The Corporation’s net position was $21.0 million at September 30, 2018. Total operating revenues were $18.4 million, while total operating expenses were $9.7 million. Corporation Highlights The Corporation currently owns approximately 4,361 acres of land and leases water rights to another 15,147 acres in Gonzales County where the wells and treatment plant are located. SSLGC is permitted to produce 19,362 acre-feet of water per year from twelve wells. The Corporation currently owns approximately 1,494 acres of land and leases water rights to another 12,511 acres in Guadalupe County. SSLGC is permitted to produce for a total of 4,032.52 acre feet of water per year from the Carrizo aquifer and 1,290.4 acre feet from the Wilcox aquifer. USING THIS ANNUAL REPORT This annual report consists of two parts:Management’s Discussion and Analysis and Financial Statements. The financial statements also include notes that explain in more detail some of the information in the financial statements. Required financial statements The Financial Statements of the Corporation report information about the Corporation using accounting methods similar to those used by private sector companies. These statements offer short-and long-term financial information about its activities. The Statement of Net Position includes all of the Corporation’s assets, deferred outflows of resources, deferred inflows of resources, and liabilities and provides information about the nature and amounts of investments in resources (assets) and obligations to creditors (liabilities). It also provides the basis for computing rate of return, evaluating the capital structure of the Corporation and assessing the liquidity and financial flexibility of the Corporation. All of the current year’s revenues and expenses are accounted for in the Statement of Revenues, Expenses, and Changes in Net Position. This statement measures the success of the Corporation’s operations over the past year and can be used to determine whether the Corporation has successfully recovered all its costs through its user fees and other charges, profitability, and credit worthiness. The final required financial statement is the Statement of Cash Flows. The primary purpose of this statement is to provide information about the Corporation’s cash receipts and cash payments during the reporting period. The statement reports cash receipts, cash payments, and net changes in cash resulting from operations as “from where did the cash come? “for what was cash used?’ and “what was the change in cash balance during the reporting period?’ 4 FINANCIAL ANALYSIS OF THE CORPORATION AS A WHOLE One of the most important questions asked about the Corporation’s finances is “Is the Corporation, as a whole, better off or worse off as a result of the year’s activities?” The Statement of Net Position and the Statement of Revenues, Expenses and Changes in Net Position report information about the Corporation’s activities in a way that will help answer this question. These two statements report the net position of the Corporation and changes in them. You can think of the Corporation’s net position—the difference between assets, deferred outflows of resources, deferred inflows of resources,and liabilities—as one way to measure financial health or financial position. Over time, increases or decreases in the Corporation’s net position is one indicator of whether its financial health is improving or deteriorating. However, you will need to also consider other non-financial factors such as changes in economic conditions, population growth, and new or changed legislation. The Corporation’s total net position is $21.0 million. Our analysis below focuses on the Corporation’s net position (Table 1) and changes in net position (Table 2) during the year. 2018 2017 2016 Current Assets 17,184,732$ 15,279,192$ 13,527,427$ Restricted Assets 76,029,551 73,947,779 7,359,879 Net Property, Plant & Equipment 93,336,414 95,008,923 95,187,724 Other Assets 7,597 28,653 108,809 TOTAL ASSETS 186,558,294 184,264,547 116,183,839 Deferred Charge on Refunding 2,277,401 2,412,138 2,546,875 TOTAL DEFERRED OUTFLOWS 2,277,401 2,412,138 2,546,875 Current Liabilities 6,656,284 5,522,205 4,858,647 Revenue Bonds Payable 161,215,523 164,983,651 100,976,449 TOTAL LIABILITIES 167,871,807 170,505,856 105,835,096 Net Investment in Capital Assets (2,296,656) (1,956,872) (2,288,897) Restricted 7,559,142 6,255,257 5,364,082 Unrestricted 15,701,402 11,872,444 9,820,433 TOTAL NET POSITION 20,963,888$ 16,170,829$ 12,895,618$ Schertz-Seguin Local Government Corporation's Table 1 Net Position Net Income before contributions was $4.8 million. Changes in the Corporation’s net position can be determined by reviewing the following condensed Statement of Revenue, Expenses, and Changes in Net Position for the year. 5 2018 2017 2016 Total Operating Revenues 18,447,823$ 17,668,511$ 16,010,417$ Interest Income 1,190,130 772,494 85,829 TOTAL REVENUES 19,637,953 18,441,005 16,096,246 Total Operating Expenses 9,684,983 9,119,651 9,304,597 Interest Expense & Fiscal Agent Fees 5,201,020 5,131,266 4,313,689 Other Nonoperating Expenses (41,109) 914,877 - TOTAL EXPENSES 14,844,894 15,165,794 13,618,286 Net Income (Loss)4,793,059 3,275,211 2,477,960 Net Position at Beginning of Year 16,170,829 12,895,618 10,417,658 TOTAL NET POSITION 20,963,888$ 16,170,829$ 12,895,618$ Net Position Changes in Schertz-Se guin Local Governme nt Corporation's Table 2 CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets At the end of Fiscal year 2018, the Corporation had $93.3 million, net of depreciation, invested in capital assets, including water treatment plants, water transmission and distribution mains, water storage facilities, pump stations as well as land. This is a decrease of $1.7 million due to current depreciation in excess of current year additions. Several projects are still ongoing resulting in a balance of Projects in Progress of $6.3 million. Accumulated Depreciation increased by $2.4 million. 2018 2017 2016 Land 15,349,657$ 15,471,540$ 15,471,540$ Water Distribution System 92,511,668 91,067,482 91,067,482 Buildings and Improvements 943,377 943,377 935,492 Equipment and Vehic les 608,891 608,891 549,266 Accumulated Depreciation (22,414,736) (19,969,980) (17,555,328) 86,998,857 88,121,310 90,468,452 Projects in Progress 6,337,557 6,887,613 4,719,272 Net Property, Plant & Equipment 93,336,414$ 95,008,923$ 95,187,724$ Schertz-Seguin Local Government Corporation's Assets Table 3 6 Bond Ratings The Corporation’s bonds presently carry “AAA” ratings with underlying ratings as follows: Fitch “AA-” and Standard & Poors “A-“. Long Term Debt At year-end, the Corporation had a total of $163.0 million bonds outstanding as compared to $165.4 million the previous year. No new bonds were issued during the current year. 2018 2017 2016 Bonds Payable 163,030,000$ 165,440,000$ 101,245,000$ Total Bonds Payable 163,030,000$ 165,440,000$ 101,245,000$ Table 4 Schertz-Se guin Local Government Corporation's Long-Term Debt ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES The Corporation has secured SWIFT funding in the amount of $66,500,000 for its current expansion project that includes the Guadalupe project and a parallel pipeline from the booster pump station in Seguin to the terminus in Schertz. The Corporation owns property in Guadalupe County that includes well sites, a treatment plant site and one existing Carrizo well. Permits for production of groundwater from the Carrizo-Wilcox aquifer have been issued by the local groundwater conservation district. The Corporation is currently acquiring the additional easements for the parallel pipeline. The design phase is scheduled to be completed in 2020. Construction of this project is projected to begin in 2020 with completion in 2022. Phase one of the cathodic protection project is complete providing adequate coverage for the 42 inch and 30 inch pipeline segments from the water treatment plant to the City of Seguin. The second stage for the 36 inch pipeline from Seguin to Schertz is under construction. Removal of obsolete chemical tanks at water treatment plant one has been completed along with the installation of additional doors to provide improved access to the original building. Evaluation is under way to determine the best utilization of that space. The Corporation plans to construct a Water Treatment Plant Office beginning with a request for bids in April 2019. CONTACTING THE CORPORATION’S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, customers, and creditors with a general overview of the Corporation’s finances and to demonstrate the Corporation’s accountability for the money it receives. If you have questions about this report or need additional financial information, contact the Schertz-Seguin Local Government Corporation, General Manager, P. O. Box 833, Seguin, Texas 78156-0833. 7 BASIC FINANCIAL STATEMENTS The accompanying notes are an integral part of these statements. 8 SCHERTZ/SEGUIN LOCAL GOVERNMENT CORPORATION COMPARATIVE STATEMENTS OF NET POSITION SEPTEMBER 30, 2018 AND 2017 2018 2017 ASSETS Current Assets: Cash and Cash Equivalents 15,434,928$ 13,198,159$ Accounts Receivable 1,638,090 1,859,907 Other Receivables 48,699 158,111 Inventory 63,015 63,015 Total Current Assets 17,184,732 15,279,192 Restricted Assets: Cash and Cash Equivalents 76,029,551 73,947,779 Total Restricted Assets 76,029,551 73,947,779 Property, Plant & Equipment: Land 15,349,657 15,471,540 Water Distribution System 92,511,668 91,067,482 Buildings & Improvements 943,377 943,377 Equipment & Vehicles 608,891 608,891 Projects in Progress 6,337,557 6,887,613 Accumulated Depreciation (22,414,736) (19,969,980) Net Property, Plant & Equipment 93,336,414 95,008,923 Other Assets: Lease Acquisition Costs (Net of Amortization of $846,397 and $825,341)7,597 28,653 Total Other Assets 7,597 28,653 Total Assets 186,558,294 184,264,547 DEFERRED OUTFLOWS OF RESOURCES Deferred Charge on Refunding 2,277,401 2,412,138 Total Defe rre d Outflows of Resources 2,277,401$ 2,412,138$ The accompanying notes are an integral part of these statements. 9 SCHERTZ/SEGUIN LOCAL GOVERNMENT CORPORATION COMPARATIVE STATEMENTS OF NET POSITION (CONTINUED) SEPTEMBER 30, 2018 AND 2017 LIABILITIES 2018 2017 Current Liabilities: Accounts Payable - Trade 2,048,151$ 1,969,279$ Accounts Payable - Construction Projects - 91,235 Accrued Interest Payable 856,981 861,197 Unearned Revenue 66,152 190,494 Current Portion of Revenue Bonds 3,685,000 2,410,000 Total Current Liabilities 6,656,284 5,522,205 Revenue Bonds Payable (Less Current Maturities and Net of Unamortized Discounts and Premiums)161,215,523 164,983,651 Total Liabilities 167,871,807 170,505,856 NET POSITION Net Investment in Capital Assets (2,296,656) (1,956,872) Restricted: Debt Servic e 1,240,116 882,168 Repairs and Replacement 500,000 500,000 Impact Fees 5,819,026 4,873,089 Unrestricted 15,701,402 11,872,444 Total Net Position 20,963,888$ 16,170,829$ The accompanying notes are an integral part of these statements. 10 SCHERTZ/SEGUIN LOCAL GOVERNMENT CORPORATION COMPARATIVE STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET POSITION YEARS ENDED SEPTEMBER 30, 2018 AND 2017 2018 2017 Operating Revenue Water Usage Fees 17,168,285$ 16,415,653$ Rents, Royalties & Leases 133,668 76,975 Impact Fees 883,005 849,289 Management Services Provided 120,456 121,823 Miscellaneous Fees 142,409 204,771 Total Operating Revenue s 18,447,823 17,668,511 Operating Expenses Operations & Maintenance: Personnel Costs 1,127,255 981,171 Professional Services 379,430 267,438 Technical Services 371,865 368,381 Utilities 1,805,388 1,668,305 Repairs and Maintenance 408,379 295,016 General Supplies 513,840 505,013 Insurance 63,912 46,000 Other Operating Costs 69,213 56,949 Total Operations & Maintenance 4,739,282 4,188,273 Other Operating Expenses: Amortization of Lease Acquisition Costs 21,056 80,156 Annual Lease Payments - Water Rights 2,479,889 2,414,771 Depreciation 2,444,756 2,436,451 Total Other Operating Expenses 4,945,701 4,931,378 Total Operating Expenses 9,684,983 9,119,651 Operating Income (Loss)8,762,840 8,548,860 Nonoperating Revenues (Expe nses): Interest Income 1,190,130 772,494 Gain on Sale of Assets 41,109 1,414 Interest Expense and Fiscal Fees (5,201,020) (5,131,266) Bond Issuance Costs - (916,291) Total Nonoperating Revenues (Expenses)(3,969,781) (5,273,649) Change in Net Position 4,793,059 3,275,211 Net Position - Beginning of Year 16,170,829 12,895,618 Net Position - End of Year 20,963,888$ 16,170,829$ The accompanying notes are an integral part of these statements. 11 SCHERTZ/SEGUIN LOCAL GOVERNMENT CORPORATION COMPARATIVE STATEMENTS OF CASH FLOWS YEARS ENDED SEPTEMBER 30, 2018 AND 2017 2018 2017 Cash Flows From Operating Activities Cash Received From Customers 18,654,710$ 17,230,873$ Cash Paid to Suppliers (7,140,299) (6,405,704) Net Cash Provide d (Used) by Operating Activities 11,514,411 10,825,169 Cash Flows From Capital and Relate d Financing Activities Payments Toward Projects in Progress (952,182) (2,137,607) Purchase of Building & Improvements (33,183) (7,885) Purchase of Equipment and Vehic les - (81,424) Proceeds from Sale of Assets 162,992 1,414 Proceeds from Contract Revenue Bonds - 65,583,709 Bond Interest and Fiscal Fees Paid (5,153,627) (4,925,047) Bond Principal Payment (2,410,000) (2,305,000) Net Cash Provide d (Used) by Capital and Relate d Financing Activities (8,386,000) 56,128,160 Cash Flows From Investing Activities Interest Received 1,190,130 772,494 Net Cash Provide d (Used) by Investing Activities 1,190,130 772,494 Net Increase (Decrease) In Cash and Cash Equivalents 4,318,541 67,725,823 Cash and Cash Equivalents at Beginning of Period 87,145,938 19,420,115 Cash and Cash Equivalents at End of Period 91,464,479$ 87,145,938$ Cash and Cash Equivalents as Reported on Balance Sheet: Cash and Cash Equivalents 15,434,928$ 13,198,159$ Restricted Cash and Cash Equivalents 76,029,551 73,947,779 91,464,479$ 87,145,938$ The accompanying notes are an integral part of these statements. 12 SCHERTZ/SEGUIN LOCAL GOVERNMENT CORPORATION COMPARATIVE STATEMENTS OF CASH FLOWS (CONTINUED) YEARS ENDED SEPTEMBER 30, 2018 AND 2017 2018 2017 Reconciliation of Operating Income to Net Cash Provided by Operating Activities Operating Income (Loss)8,762,840$ 8,548,860$ Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided by Operating Activitie s: Amortization of Lease Acquisition Costs 21,056 80,156 Depreciation 2,444,756 2,436,451 (Increase) Decrease in Accounts Receivable 221,817 (495,572) (Increase) Decrease in Other Receivables 109,412 (131,960) (Increase) Decrease in Inventory - 13,690 Increase (Decrease) in Accounts Payable 78,872 183,650 Increase (Decrease) in Unearned Revenue (124,342) 189,894 Net Cash Provide d (Used) by Operating Activities 11,514,411$ 10,825,169$ SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES: Historical Cost of Equipment Disposed -$ 21,799$ Accumulated Depreciation - (21,799) Net Book Value -$ -$ 13 SCHERTZ/SEGUIN LOCAL GOVERNMENT CORPORATION NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2018 AND 2017 NOTE A --SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1.Financial Reporting Entity The Schertz/Seguin Local Government Corporation was incorporated December 23,1998 pursuant to the provisions of the Texas Transportation Corporation Act and the Texas Local Government Code. The Corporation was organized to aid, assist, and act on behalf of the Cities of Schertz and Seguin, collectively, in acquiring, constructing, improving or extending, and maintaining and operating a water utility system for public use. The Corporation meets the criteria of a joint venture between the cities of Schertz and Seguin with an ongoing financial responsibility. The Cities have pledged revenues from existing water utility systems to finance the operations and long-term debt of the Corporation, either through purchasing water from the Corporation or subsidizing through direct payments (reflected as “Contributions from Participating Governments”). The Corporation continues to actively pursue the development of alternate water sources. The financial statements of the Corporation have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to government units. The Government Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. 2.Enterprise Fund The Corporation is an enterprise fund. Enterprise funds are proprietary funds used to account for business-type activities provided to the general public. The activities are financed primarily by user charges and the measurement of financial activity focuses on net income measurement similar to the private sector. 3.Basis of Accounting The statements are presented on a flow of economic resources measurement focus. With this measurement focus, all assets and all liabilities associated with the operation of these funds are included on the balance sheet. Operating statements present increases (e.g., revenues) and decreases (e.g., expenses) in net total assets. The accrual basis of accounting is used whereby revenues are recorded when earned and expenses are recorded at the time liabilities are incurred. 4.Cash and Cash Equivalents Cash and cash equivalents include cash deposits and investments with a maturity date within three (3) months of the date acquired by the Corporation. Cash and cash equivalents also include investments in local government pools because the pools seek to maintain a $1 per share value and average dollar weighted maturity of not more than 90 days (see also Note A-5). 14 SCHERTZ/SEGUIN LOCAL GOVERNMENT CORPORATION NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2018 AND 2017 NOTE A --SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 5.Investments Investments consist of certificates of deposit; investments in TexPool and MBIA Asset Management Group (public funds investment pools); and obligations of the U.S. government and its agencies. Investments are recorded at fair value, except for short-term (one year or less to maturity at time of purchase) participating interest-earning investment contracts which are reported at amortized cost. In addition, non-participating contracts (such as nonnegotiable certificates of deposit) are reported at amortized cost. Following Statement No. 72, “Fair Value Measurement and Application,” the Corporation categorizes its fair value measurements within the hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; and Level 3 inputs are significant unobservable inputs. Public funds investment pools in Texas are established under the authority of the Interlocal Cooperation Act, Chapter 791 of the Texas Government Code, and are subject to the provisions of the Public Funds Investment Act, Chapter 2256 of the Texas Government Code. In addition to the other provisions of the Act designed to promote liquidity and safety of principal, the Act requires pools to: 1) have an advisory board composed of participants in the pool and other persons who do not have a business relationship with the pool and are qualified to advise the pool; 2) maintain a continuous rating of no lower than AAA or AAA-m or an equivalent rating by at least one nationally recognized rating service; and 3) maintain the market value of its underlying investment portfolio within one half of one percent of the value of its shares. 6.Accounts Receivable Accounts receivable consists of amounts due from member entities and customers. Management considers all outstanding amounts to be collectible and has not recorded an allowance for doubtful accounts. 7.Inventory Inventory of replacement parts for the water distribution system are valued at cost on a first-in, first-out basis. 8.Restricted Assets Certain proceeds of bonds, as well as certain resources set aside for their repayment, are classified as restricted assets on the balance sheet because their use is limited by applicable bond covenants. Funds are segregated to report those proceeds of revenue bond issuances that are restricted for construction. Funds are also segregated to provide for debt service as provided under bond indenture agreements. Part of the agreement for bond proceeds from the Texas Water Development Board required reserve funds to be kept in a restricted bank account to serve as collateral. These funds are shown as Investments Held in Escrow and included as Cash and Cash Equivalents under the Restricted Assets on the Statement of Net Position. 15 SCHERTZ/SEGUIN LOCAL GOVERNMENT CORPORATION NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2018 AND 2017 NOTE A --SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 9.Property, Plant & Equipment All purchased property, plant and equipment is valued at cost if purchased, and donated property is valued at the estimated fair market value on the date received. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. Depreciation of exhaustible plant and equipment is charged as an expense against operations when the asset is placed in service and accumulated depreciation is reported on the balance sheet. Depreciation is provided in amounts sufficient to relate the cost of fixed assets to operations over their estimated service lives using the straight-line method. Estimated useful lives are as follows: Useful Life Fixed Asset (Years) Utility Water System 10 - 50 Building and Improvements 40 Equipment and Vehicles 5 - 20 For the years ended September 30, 2018 and 2017, depreciation in the amount of $2,444,756 and $2,436,451, respectively, was recognized. 10.Lease Acquisition and Lease Costs Costs incurred to purchase or lease property for its water rights are capitalized. Those costs include amounts paid to landowners to enter into the leases, and legal costs. The costs are being amortized over the 10 year minimum lease term. 11.Deferred Outflows of Resources In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The Corporation only has one item that qualifies for reporting in this category: deferred charge on refunding reported in the statement of position. A deferred charge on refunding results from the difference in the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. 12.Unearned Revenue Unearned revenues arise when assets are recognized before revenue recognition criteria have been satisfied. The Corporation does not recognize revenues for Impact Fees until a work order has been approved. Therefore, fees received in advance of approved work orders are reflected as unearned revenue. 13.Long-Term Obligations Long-term obligations are reported as liabilities in the Corporation’s balance sheet. Bond premiums and discounts are amortized over the life of the bonds. Bonds payable are reported net of the applicable bond premium or discount. 16 SCHERTZ/SEGUIN LOCAL GOVERNMENT CORPORATION NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2018 AND 2017 NOTE A --SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 14.Equity Classifications Equity is classified as net position and displayed in three components: a.Net Investment in Capital Assets –Consists of capital assets (net of accumulated depreciation) and lease acquisition costs (net of accumulated amortization) and reduced by the outstanding balances of bonds (net of premiums and discounts) and short-term notes that are attributable to the acquisition, construction or improvement of those assets. As of September 30, 2018, total outstanding debt exceeded investment in capital assets due to annual depreciation and amortization charges exceeding principal repayments on bonded debt in early years of debt issuance schedules. b.Restricted net position –Consists of net position with constraints placed on the use either by (1) external groups such as creditors, grantors, contributors, or laws or regulations of other governments; or (2) law through constitutional provisions or enabling legislation. Bond covenants require a Repairs and Replacement fund be maintained and funds restricted for that purpose. Additionally, the Impact Fee Resolution requires that fees be separated and restricted (along with investment earnings) to finance water facilities generated by new development. c.Unrestricted net position –All other net position that does not meet the definition of “restricted” or “net investment in capital assets”. 15.Operating Revenues and Expenses Operating revenues are those revenues that are generated directly from the primary activity of the enterprise. For the Corporation, those revenues are charges for water provided to customers, and charges for use of property. Operating expenses are the necessary costs incurred to provide the service that is the primary activity. Revenues and expenses not meeting these definitions are reported as nonoperating. 16.Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE B --DEPOSITS AND INVESTMENTS Various restrictions on deposits and investments are imposed by statutes. These restrictions are summarized in the following paragraphs. Deposits –All deposits with financial institutions must be fully collateralized. The collateral must be held by the pledging financial institution’s trust department or equivalent. As of September 30, 2018, the carrying amount of the Corporation’s deposits was $20,590 and the bank balance was $46,709. The bank balance was fully collateralized. 17 SCHERTZ/SEGUIN LOCAL GOVERNMENT CORPORATION NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2018 AND 2017 NOTE B --DEPOSITS AND INVESTMENTS (Continued) Investments –The Corporation is required by Government Code Chapter 2256, the Public Funds Investment Act, to adopt, implement, and publicize an investment policy. That policy must address the following areas: (1) safety of principal and liquidity, (2) portfolio diversification, (3) allowable investments, (4) acceptable risk levels, (5) expected rates of return, (6) maximum allowable stated maturity of portfolio investments, (7) maximum average dollar-weighted maturity allowed based on the stated maturity date for the portfolio, (8) investment staff quality and capabilities, and (9) bid solicitation preferences for certificates of deposit. The Public Funds Investment Act (“Act”) requires an annual audit of investment practices. Audit procedures in this area conducted as a part of the audit of the basic financial statements disclosed that in the areas of investment practices, management reports and establishment of appropriate policies, the Corporation adhered to the requirements of the Act. Additionally, investment practices of the Corporation were in accordance with local policies. The Act determines the types of investments which are allowable for the Corporation. These include, with certain restrictions, 1) obligations of the U.S. Treasury, U.S. agencies, and the State of Texas, 2) certificates of deposit, 3) certain municipal securities, 4) securities lending program, 5) repurchase agreements, 6) bankers acceptances, 7) mutual funds, 8) investment pools, 9) guaranteed investment contracts, and 10) commercial paper. As of the end of the year (respectively), the Corporation had the following investments: 2018 2017 Investment Type Carrying Value Carrying Value Local Government Investment Pools 15,340,654$ 19,745,833$ Federal Bonds 9,500,000 - FIMM Govt. Portfolio - Held in Escrow 66,603,235 65,810,203 Certificates of Deposit - 1,496,000 91,443,889$ 87,052,036$ All of the Corporation’s investments are valued using prices quoted in active markets (Level 1 inputs) except for Certificates of Deposit which are recorded at amortized cost. Credit Risk. The Corporation’s investment policy limits investments to obligations of the United States or its agencies and instrumentalities (maximum 95% of funds); direct obligations of the State of Texas; obligations of states, agencies, contracts, cities, and other political subdivisions rated as to investment quality of not less than AAA by a nationally recognized investment firm. The Corporation may also invest up to 100% of its funds in government investment pools provided the pool maintains a AAA rating, the pool maintains a stable asset value, and the average dollar weighted maturity does not exceed 90 days. As of September 30, 2018, the Corporation had investments in TexPool and MBIA Texas Class Portfolio Holdings. The escrowed funds are invested in Fidelity Investments Money Market Government Portfolio –Class II, which also maintains a stable asset value ($1 per share) and has an average dollar weighted maturity of less than 90 days. TexPool,MBIA Texas Class Portfolio Holdings, and FIMM Govt. Portfolio –Class II are rated AAAm by Standard and Poors. 18 SCHERTZ/SEGUIN LOCAL GOVERNMENT CORPORATION NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2018 AND 2017 NOTE B --DEPOSITS AND INVESTMENTS (Continued) Custodial Credit Risk –Investments. For an investment, this is the risk that, in the event of the failure of the counterparty, the government will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. As of September 30, 2018, the Corporation was not subject to custodial credit risk. NOTE C--PROPERTY, PLANT & EQUIPMENT, AND LEASE ACQUISITION COSTS The Corporation has acquired land and land leases for the purpose of establishing well sites and water treatment facilities. The Corporation has acquired over 4,000 acres to date for this purpose. Changes in Land, Equipment & Vehicles, Projects in Progress, and Lease Acquisition costs are as follows: Balance Balance 10/1/2017 Additions (Retirements)9/30/2018 Land and Rights of Way 15,471,540$ -$ (121,883)$ 15,349,657$ Water Distribution System 91,067,482 1,444,186 - 92,511,668 Buildings & Improvements 943,377 - - 943,377 Equipment and Vehicles 608,891 - - 608,891 Projects in Progress 6,887,613 860,947 (1,411,003) 6,337,557 Accumulated Depreciation (19,969,980) (2,444,756) - (22,414,736) 95,008,923 (139,623) (1,532,886) 93,336,414 Water Lease Acquisition Costs 853,994 - - 853,994 Less Accumulated Amortization (825,341) (21,056) - (846,397) Total Property, Plant & Equipment and Lease Acquisition Costs (Net)95,037,576$ (160,679)$ (1,532,886)$ 93,344,011$ Land and Rights of Way as well as Projects in Progress are not depreciated. 19 SCHERTZ/SEGUIN LOCAL GOVERNMENT CORPORATION NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2018 AND 2017 NOTE D --BONDS PAYABLE Following is a summary of the Corporation’s long-term debt transactions for the year ended September 30, 2018: Balance (Payments)/Balance 10/1/2017 Additions Amortization 9/30/2018 Revenue Bonds, Series 2001 Original Issue $41,040,000 3.70% to 5.375%10,000,000$ -$ -$ 10,000,000$ Less Unamortized Discount (41,206) - - (41,206) Revenue Bonds, Series 2010 Original Issue $22,140,000 3.00% to 4.75%20,275,000 - (505,000) 19,770,000 Less Unamortized Discount (180,667) - 12,988 (167,679) Contract Revenue Bonds, Series 2012 Original Issue $25,425,000 2.00% to 4.00%23,660,000 - (620,000) 23,040,000 Plus Unamortized Premium 187,613 - (7,817) 179,796 Revenue Refunding Bonds, Series 2014 Original Issue $6,275,000 2.00% to 3.5%4,680,000 - (530,000) 4,150,000 Plus Unamortized Premium 166,804 - (20,851) 145,953 Revenue Refunding Bonds, Series 2015 Original Issue $41,720,000 2.00% to 5.00%40,325,000 - (730,000) 39,595,000 Plus Unamortized Premium 1,821,107 - (67,448) 1,753,659 Contract Revenue Bonds, Series 2016, TWDB SWIRFT Original Issue $43,670,000 0.66% to 3.11%43,670,000 - (25,000) 43,645,000 Board Participation Program Series 2016 Original Issue $22,830,000 3.19% to 3.88%22,830,000 - - 22,830,000 167,393,651$ -$ (2,493,128)$ 164,900,523 Less Current Maturities (3,685,000) Net Long-Term Bonds Payable 161,215,523$ 20 SCHERTZ/SEGUIN LOCAL GOVERNMENT CORPORATION NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2018 AND 2017 NOTE D --BONDS PAYABLE (Continued) The Corporation has issued bonds to provide funds to build, improve, extend, enlarge, and repair the Corporation’s utility system, fund a reserve, and pay the costs of bond issuance. The bond resolution pledges intergovernmental contract revenues from the cities of Schertz and Seguin to bondholders. Under the intergovernmental water supply contract, the participating governments are unconditionally obligated to pay their respective shares of annual contract revenue bond debt service as operating expenses from their respective utility systems. The reserve fund requirement, which is average annual debt service, has been met with the purchase of a surety bond. As additional security for the bonds, the Corporation has established a reserve fund. The cash balance held in the reserve fund as of September 30, 2018 was $1,316,646. The total unamortized deferred loss on debt refunding is $2,277,401 as of September 30, 2018 and is shown on the Statement of Net Position as a deferred outflow of resources. The Corporation issued revenue bonds through the Board Participation Program with Texas Water Development Board in the amount of $22,830,000 on November 1, 2016. The Corporation also issued revenue bonds through the Texas Water Development Board SWIRFT Project Financing in the amount of $43,670,000 on November 1, 2016. The bonds were issued to fund development of a well field and water treatment plant known as the “Guadalupe Project” as well as develop a parallel pipeline. As of September 30, 2018, the Corporation has drawn $350,000 of the total available. The remaining funds after issuance costs are held in escrow by the Texas Water Development Board in the Corporation’s name (see Note B). Annual Requirements to amortize all long-term debt outstanding as of September 30, 2018, including interest payments, are as follows: Year Ending September 30 Principal Interest Total 2019 3,685,000$ 5,071,164$ 8,756,164$ 2020 3,780,000 5,145,783 8,925,783 2021 3,865,000 5,042,869 8,907,869 2022 3,985,000 5,013,058 8,998,058 2023 4,105,000 4,976,295 9,081,295 2024 - 2028 23,030,000 24,451,704 47,481,704 2029 - 2033 28,055,000 23,870,231 51,925,231 2034 - 2038 37,635,000 15,925,020 53,560,020 2039 - 2043 35,155,000 6,355,651 41,510,651 2044 - 2048 14,410,000 2,232,578 16,642,578 2049 - 2051 5,325,000 385,566 5,710,566 163,030,000$98,469,919$ 261,499,919$ Average Annual Requirements 7,924,240$ 21 SCHERTZ/SEGUIN LOCAL GOVERNMENT CORPORATION NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2018 AND 2017 NOTE D --BONDS PAYABLE (Continued) The Corporation also entered into a Cost Allocation Agreement, along with the Cities of Schertz and Seguin, whereby the City of Schertz has agreed to fund 100% of the debt service for the bonds issued to fund the Guadalupe Project in exchange for delivery of sufficient water to Schertz. The agreement contains provisions for an annual review (with modifications as necessary), the possibility of other third- party users, and separate rates established for water produced by the project. NOTE E --COMMITMENTS Leases –Water Rights The Corporation has entered into lease agreements with various land owners for rights of development, production, transportation, and use of ground water on the properties. In addition to incentive and acquisition costs (see Note A-10), the leases call for annual royalty payments based upon, at a minimum, the surface acres of the property times a royalty rate base amount ($105 -$125) adjusted for increases in the consumer price index. The minimum term of the leases is ten years, but if the Corporation continues the royalty payments, the leases remain in effect. Changes in maximum allowable production by the Gonzales County Underground Conservation District may decrease the future commitment for some leases. Future minimum payments under the initial lease terms of the leases are as follows: Year Ending September 30 2019 270,679$ 2020 23,519 294,198$ As of September 30, 2018, the Corporation has leased a total of 18,414 acre feet. Total estimated annual costs of $2,318,550 are expected for the year ended September 30, 2019, assuming the leases remain in effect beyond the initial minimum term. Contract Commitments The Corporation had the following outstanding contract commitments as of September 30, 2018: Original Incurred Outstanding Commitment to Date Commitment Consulting 528,400$ 238,644$ 289,756$ Engineering 1,477,000 664,325 812,675 Improvements & Repairs 2,843,174 56,849 2,786,325 Totals 4,848,574$ 959,818$ 3,888,756$ 22 SCHERTZ/SEGUIN LOCAL GOVERNMENT CORPORATION NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2018 AND 2017 NOTE E --COMMITMENTS (Continued) Gonzales County Underground Water Conservation District Mitigation Fund The Corporation has entered into an agreement with Gonzales County Underground Water Conservation District (GCUWCD) effective March 16, 2010 to fund a Mitigation Fund (the “Fund”) for the purpose of investigating and evaluating mitigation claims and implementing mitigation measures for qualifying wells in Western Gonzales County. Contributions to the Fund are in lieu of the Corporation’s obligation to perform its own mitigation under GCUWCD’s rules. The Corporation’s initial fund principal is $30 per acre foot of water authorized to be produced and transported. The initial contribution was $530,860 and was recognized in prior financial statements as operating expenses of the system. In addition, the Corporation will pay a negotiated export fee surcharge of $0.0175 per 1,000 gallons of water exported each calendar year, except the export fee surcharge shall not be imposed during the initial 3-year period of the agreement while the Fund balance remains at or above $250,000 as of each July 1st. As of July 1, 2017, the Fund balance fell below $250,000 and the Corporation was responsible for making an additional payment in the amount of $52,098. Monitoring Well System Construction, Operations, and Maintenance Agreement The Corporation has entered into an agreement with Gonzales County Underground Water Conservation District (GCUWCD) effective December 30, 2016 to fund the Corporation’s percentage of a project (the “Project”) for the construction of new monitoring wells in Gonzales County. Contributions to the Project are based on the number of monitoring wells that each contributing party is responsible for as determined in the agreement. The Corporation’s required contribution represents 21.05% of the total cost of the project and is equal to $192,608. The total contribution will be paid in three installments related to the completion of each phase of the Project. The second contribution related to Phase II was $60,823 and was recognized during the year ended September 30, 2018. San Antonio Water System Contract The Corporation has entered into a Mutual Regional Water Supply Contract with San Antonio Water System (SAWS) whereby SAWS intends to deliver untreated groundwater to the Corporation, and the Corporation will deliver treated water to SAWS. The Corporation and SAWS have determined that significant efficiencies can be achieved through the agreement. Pursuant to the agreement, SAWS has unconditionally agreed, on a take-or-pay basis, to pay the Corporation an amount equal to the debt service payments on the Contract Revenue Bonds, Series 2012. The water supply contract specifies that the agreement does not create any legal or equitable interest in the land or equipment to be purchased by the Corporation with the proceeds of the bonds. Under the take-or-pay agreement, SAWS will make monthly payments toward the debt service regardless of whether SAWS takes any water from the Corporation. For the year ended September 30, 2018, total payments received from SAWS for water treatment, water purchases and debt service were $6,458,524. 23 SCHERTZ/SEGUIN LOCAL GOVERNMENT CORPORATION NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2018 AND 2017 NOTE F –CONTINGENCIES Contractual Contingencies The Corporation has entered into contracts with the cities of Selma and Universal City (referred to as “Customers”) to provide supplemental water to those cities’ existing systems. The contracts call for connection fees in the amount of $2,270,171 from each customer. The Corporation has agreed to provide a conditional right to each customer of 400 acres of land with water rights in the Carrizo aquifer well field in Gonzales County, owned by the Corporation. At the election of the Corporation, or in the event the Corporation dissolves, the title to 400 acres will be transferred to the customer. The Corporation’s contingent commitment does not restrict the Corporation’s right to buy and sell real estate as long as the Corporation’s holdings in Gonzales County do not fall below the amount necessary to fulfill this obligation. Litigation The Corporation filed a lawsuit against the Post Oak Clean Green, Inc. (POCG) to prevent them from getting a permit and building a landfill in the aquifer recharge zone. As of the date of this report, the litigation is still ongoing as the Corporation is appealing the permit approved by Texas Commission on Environmental Quality. Management is of the opinion that any proceedings known to exist as of September 30, 2018 are not likely to have a material adverse effect on the Corporation’s financial position. NOTE G --RISK MANAGEMENT The Corporation is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; business interruption; errors and omissions; and other claims of various natures. The Corporation contracts with the Texas Municipal League (TML), through the City of Seguin, to provide insurance coverage for property and casualty. The provider is a multi-employer group that provides a combination of risk sharing among pool participants and stop loss coverage. Contributions are set annually by TML. Liability for the Corporation is generally limited to the contributed amounts. NOTE H --MANAGEMENT SERVICES AGREEMENT The Corporation operates under a Management Services Agreement with the City of Seguin whereby the City provides all financial administrative duties (including bookkeeping and record retention, purchasing, and monitoring contracts approved by the Board or General Manager) on a cost reimbursement basis. In addition, all personnel of the Corporation are employees of the City of Seguin and participate in and are subject to City policies and benefits, with the exception of the General Manager, who is an employee of the City of Schertz. The Corporation also provides financial and administrative duties (including bookkeeping and record retention,purchasing, and monitoring contracts approved by the Board or General Manager) on a cost reimbursement basis under a Management Services Agreement with the Cibolo Valley Local Government Corporation. Funds received from the Cibolo Valley Local Government Corporation for Management Services have been shown as operating revenue on the Statement of Revenues, Expenses, and Changes in Net Position. 24 SCHERTZ/SEGUIN LOCAL GOVERNMENT CORPORATION NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2018 AND 2017 NOTE I --SUBSEQUENT EVENTS The Corporation issued Contract Revenue and Refunding Bonds, Series 2018, in the amount of $19,045,000 on December 7, 2018. The bonds are payable over 23 years at initial rates of 3.0 –5.0%. The refunding bonds were issued to refund a portion of the 2010 revenue bonds for a savings of $1,424,506 (net present value benefit of $913,545). Bid / Proposal Summary Date: 3/8/19 Entþ Name: Entity ID: Proposed Effective Date Proposed Anniversary DateSchertz-Seguin Local Government Corporation 7868 4nn9 t0nng Tvne ofCoveraqe Limit Deductible Annual Contribution General Liability Cyber Liability (see Sample Declarations of Coverage for LimÍls) Enors & Omissions Liabilþ' (Public OfÍ¡cløls) Automobile Liability (Includes Híred & Non-Ûwned) Automobile Medical Payments 3 Automobile Physical Damage Real & Personal Properly' Wind and Hail Occurrence Deductible Reinstatement Flood u Earthquake' Mobile Equipment Boiler & Machinery' $ $ $ $ $ s 2,000,000 4,0oo,oo0 1,0oo,oo0 1,000,000 2,00o,ooo 1,000,000 25,000 56,318,125 5,ooo,ooo 10,000,000 106,547 52,798,r25 Each occurrencet Aggregate Aggregate Each wrongful act Aggregate Each occurrence Each person Actual Cash Value Actual Cash Value Replacement Cost Actual Cash Value Replacement Cost Actual Cash Value Replacement Cost Actual Cash Value Replacement Cost Per accident r$ $ $ $ s $ s nN TxTXnX 5,000 0 10,000 5,000 5,000 1,000/10,000 1,000 t% 25,000 1,000 $ $ $ $ $ s $ $ $ $ $I $ $ 3,409.00 Included 5,674.00 1242.00 Included 1,479.00 34,666.00 Included 12,074.00 Included 21s.00 Included $ $ $ $ $ $ $ $ $ s TOTAL ANNUAL: $ 58,756 SEE PROPOSAL FOR OPTIONAL COVERAGES, LIMITS, DEDUCTIBLES, EtC. I Sudden events involving pollution provided at the occurrence limit shown or $2,000,000, whichever is less. 2 E&O retroactive date available for 5 years prior to the effective date of coverage at no additional contribution' 3 Automobile Medical Payments Coverage is included automatically for all automobiles with a design capacþ of eight passengers or less. For larger capacity vehiclei, coverage is ávailable subject to an additional contribution. The deductible for Automobile Medical Payments Coverage is the same as the deductible elected for Automobile Liabilþ' a Deductible applies per vehicle, subject to a $10,000 maximum deductible for any occlurence involving two or more vehicles. The occurrence deductible does not apply to loss caused by hail. 5 Real & personal fropìrty deductible is on a per occurïence basis except for Wind and Hail that carries a 1% per building deductible and there is no coinsurance penaþ.6 Flood & Earthquaie coverage is provided as an option under Real & Personal Property Coverage and may not be purchased separately. Flood & Earthquake íimit is the aggregate limit for all losses occurring during the fund year. Limitations apply to properties in Flood Zones A and V located in the first tier of counties and in Harris, Orange and Jackson counties. 7 Flood & Earthquake coverage is provided as an option under Real & Personal Property Coverage and may not be purchased separately' Flood Texas Municipal League Intergovernmental Risk Pool Page I of2 xl04 05ll4l18 7 Bid / Proposal Summary & Earthquake limit is the aggregate limit for all losses occurring during the fund year. Limitations apply to properties in Flood Zones A and V located in the first tier of counties and in Harris, Orange and Jackson counties. 8 Boiler & Machinery Coverage is included at no additional charge (except for electric generating facilities) under Real & Personal Propefy Coverage and may not be purchased separately. Texas Municipal League Intergovernmental Risk Pool Page2 ofZ xt04 0s/141t8 l,iabi1ity Proposat Àcceptance Forn Directioûs: This forn a:¡d Èhe Interlocal Agreement must be completed, sigaed ¿urd returned. If tine is of Èhe essence, you maywish to use ¿¡n express rnail service or a facsimile copier. In tbe eveût you submit these documenÈs by facsinile, tbe origiDals nusÈ still be sent by reglrlar mai1. (lfote: Rural Fire Èeveûti@ Districts anô tneúgeûcy Seryice Districts ErEt provide otberdoclreDta before clyerage is effective-l Please iûdicate ïiÈh (x) Èhe coverages and meÈhod of pelment. Èhat you are accepting. IBfMlS IrO: Texas Municipal ¡Jeague Iatergovemeatal Risk Pool, Itûdersritiûg Departroett P.O. Box L49L94, Àustifr, Texas 78714-9194Phone: (512) 49l.-2300 or L-800-537-6655 FÀX: (512) 49L-24O4 Cæerage LiniÈs Iþårcti¡r1e C@Èribut'i@ r+rBffectir€ DaÈe âEDiversa.rlrItate ceneral Liability Errors & onissions Liability **5)rr Prio:¡ Àcts Coverage (B&O) Cyber LiabiliÈy and Data Breach Àutonobile litedical Payments Àutomobile r,iâbility Àutonobile Pbysical Damage s s ss s $ $s s Same as B&o Same as E&O Included $ I s $ *Àcv / Àv s $ üeÈbod of Payneût: ( ) O¡a¡Èer1y ( ) ànnuffy (2* Discou¡t) I, the u:rdersigiaed, as aa authorized representatíve of: 786fô Scüertr-Se$rin Lcal Gsy Corfroraticú do hereby accept on behalf of the above named political subdj.vj.sion, the portion Õf the proposal as indicated ãbove. Sig¡îature of Authorized official : Tirle: Dete: Itse Ihe signed lDterloca]. Àgre@Ðt n¡.sÈ accqlary thie forn.contributior¡:verified by:( )l¡er ( )Re-awarding ( )Addiag Coverage * ÀCV=AcÈual Casb Value, ÀV=Àgreed Value** This form must be accompanied by the ¡tarna:lt of IncidenÈ Report. if Prior Acts coverage is elected.*r* Effective date caüot precede signaÈure date. LgTÀl{KO 3-08-19 15:29:18 Texas Muicipal Ireague lfrtergover¡.mentaL Risk PooI LI.AB / 2 4-OL-t9 ro 10-0r.-19 ty ID: 78Bnt L23a4-20-L2 Property Proposal Acceptance Form Member: Schertz-Seguin Local Gov Corporation Member lD:7868 Directions: This form must be completed, signed and returned. The lnterlocal Agreement must also be completed and returned if you are not a current Liability or Property Fund participant. lf time is of the essence, you may wish to use an express mail service or facsimile copier. ln the event you submit these documents by facsimile, the originals must still be returned. lndicate with I X ] the coverages and method of payment that you are accepting. Forward all documents to: COVERAGE [ ] Real and Personal Property Limit [ ] Actual Cash Value OR [ ] Replacement Value Flood and Earthquake [ ] lncluded OR [ ] Excluded [ ] Mobile Equipment TotalValue [ ] Actual Cash Value OR [ ] Replacement Value t1 Texas MunicÍpol League lntergovernmental Rîsk pool U n d e rw rití n g De pø rtm e nt P.O. Box 749794 Austin, Texas 78774-9794 Phone: 7-800-537-6655 or FAX: 572-49I-2404 DEDUCTIBLE CONTRIBUTION s [ ] Special Form OR [ ] Named Perils s EFFECTIVE DATE ANNIVERSARY DATE s s ss ss Method of Payment: I I Quarterly I I Annuaily (2% Discount) l, the undersigned, as an authorized representative, do hereby accept on behalf of the above named political subdivision the portions of the proposal as indicated above. Signature of Authorized Official: Title: Date: The Signed lnterlocal Agreement Must Accompany Th¡s Form (Exceptíon: Cunent Liobility/Property Fund port¡c¡ponts ore not required to submit o new lnterlocal OFFICE USE ONIY Member lD # ( ) New( )Re-awarding( )AddingCoverage Verified by: Contribution PP7868-2018-2 03/08/zOLs P307 Rev.06/01/08 Page I