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SSLGC 03-15-2007 MINUTES OF THE SCHERTZ SEGUIN LOCAL GOVERNMENT CORPORATION THE STATE OF TEXAS ~ COUNTY OF GUADALUPE ~ SCHERTZ SEGUIN LOCAL ~ GOVERNMENT CORPORATION ~ On this the 15th day of March, 2007, the Schertz Seguin Local Government Corporation convened at 1:30 p.m. in the City of Schertz Council Chambers located at 1400 Schertz Parkway, Building #4, Schertz, Texas. The following members being present and in attendance: Members Present Ramon Cook Jim Wolverton Sydney Bauer Ken Greenwald Betty Ann Matthies Hal Baldwin Members Absent Robin Dwyer Also in Attendance Alan Cockerell Doug Faseler John Bierschwale Patrick Linder Dalby Fleming Crockett Camp Bill Klemt John Winkler Vice-President Secretary Treasurer Director Ex -Officio Ex -Officio President General Manager Seguin City Manager Schertz Assistant City Manager Legal Counsel (Davidson & Troilo) Legal Counsel (Davidson & Troilo) Consultant Hydrologist Consultant Consultant (Bury&Partners) 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. The first order of business was the callin2: of the meetin2: to order. Vice-President Ramon Cook opened the meeting at 1 :30 p.m. The second order of business was public comment. No one addressed the Board during public comment. The third order of business was approval of the minutes for the meetin2: held on Februarv 22. 2007. Secretary Wolverton made a motion to approve the minutes of the February 22, 2007 meeting as written. Director Greenwald seconded the motion. Upon a vote being called, the motion carried by unanimous decision. The fourth order of business was presentation of the General Mana2:er's report and discussion and possible action in response to said report - Alan Cockerell. General Mana2:er. A copy of Mr. Cockerell's report was provided in the board agenda packet. A summary of the report includes the following: a. Water Production and Sales A table included in the report gives a breakdown of monthly sales and year to date figures of the amount of water the Corporation has sold. This table goes along with the colored monthly and seasonal water charts included in the board agenda packet. Presently, water sales are following the same pattern as last year at this time. Seguin did not blend the month of February. b. GMA 13 Meeting A GMA 13 meeting was held on March 2,2007, at Evergreen UWCD in Pleasanton. The lower Carrizo falls under this GMA. The focus of the meeting was to discuss the baseline run of the Southern Carrizo/Wilcox, Sparta and Queen City groundwater availability (GAM) by TWDB. The TWDB used a 1999 model for estimated annual pumpage over a 60-year predictive simulation. This model did not include SSLGC's project or SAWS' project in southern Bexar County. The next GAM run will include these projects and other projects in the Region L plan. The TWDB intends to process another GAM and availability run. Once the TWDB completes this process, the GMA 13 Board will meet again to discuss outputs and come up with desired future conditions. Their goal is to establish these conditions by December, 2007. If they are established within this time frame, the numbers will be used in the next round of regional planning. Mr. Cockerell displayed a map of the GMA 13 area which includes Guadalupe and Gonzales counties, and includes areas further down to the border. Another meeting will be scheduled in a couple of months. Mr. Cockerell will attend the meeting and keep board members informed. c. Regional Water Alliance A Conservation Group meeting was held. The Group is sending out surveys to identify and enhance conservation activities in the region. The next regular meeting of the RW A will be March 29,2007. d. Guadalupe County Groundwater Conservation District Meeting A meeting was held on March 8, 2007. The District is embarking on a public information campaign. It has created a website and is sending out newsletters in order to provide information regarding District activities and to encourage registration of wells in the district. At the March 8th meeting, Mr. Cockerell gave a presentation on the Corporation's Guadalupe County project. A copy of his presentation was included in the board agenda packet. The Guadalupe project will be covered in agenda item #8. e. Gonzales County President Robin Dwyer, Consultant Crockett Camp, Counsel Pat Linder and General Manager Alan Cockerell attended a second meeting with SAWS, March 23, 2007. The meeting was held to explore ideas which could be used as part of a mediation process for the 2 contested case hearing. The discussion included pumping restrictions, well mitigation, operational cost increases and encroachment of water leases. A GCUWCD meeting was held in Gonzales, March 13, 2007. Normal business was conducted. There was no new information to report. f. Well/Pipeline Repair Mr. Cockerell deferred part of this section of his report to agenda item #9, Operation Status Report, to be given by Water Utilities Manager John Schraub in the absence of Water Systems Manager Dan Drugan. Mr. Cockerell noted that a few complaints had been received concerning damages to property due to the Corporation's repair activities and its access to properties. The Corporation is working to resolve these issues. Mr. Cockerell received an update from Peerless regarding delivery of stainless steel pumps for well #1 and well #4. Both wells have been out of operation. The pumps were expected in mid to late April. Presently, Goulds is approximating a ship date of June 5, 2007. Mr. Cockerell added that summer pumpage is critical and June is not a good time to have only six wells running. Several options were discussed. A cast iron pump could be received in 10-14 days and be installed for approximately $10,000. Justification for a spare pump was discussed and board members agreed a spare pump would be beneficial to operations. Counsel advised the group that the agenda was broad enough for the Board to take action immediately in order to buy a cast iron pump for quick installation. The Board concluded that a cast iron pump should be ordered and installed immediately due to the pending summer's critical pumpage. When the stainless steel pump is received, it will be installed in place of the cast iron pump and the cast iron pump will be kept on hand as a spare. Secretary Wolverton made a motion to direct General Manager Alan Cockerell to buy a cast iron pump with costs not to exceed $10,000. The cast iron pump should be installed immediately and later be used as a spare when the stainless steel pump is received. Monies are to be taken out of the Emergency Repair/Replacement Fund. Director Greenwald seconded the motion. Upon a vote being called, the motion carried by unanimous decision. g. Public Relations A tour of SSLGC facilities was conducted February 28, 2007. Tours will be continued as needed. Mr. Cockerell attended the Nixon-Smiley Youth Show Auction. Two thousand five hundred dollars was budgeted for the event and Mr. Cockerell spent two thousand four hundred fifty dollars. Purchases included grand champion rabbits, grand champion cake and partnership purchase of a grand champion turkey. Four newspaper photographers attended the show and took pictures for good publicity exposure. Mr. Cockerell requested confIrmation of the budgeted item of two $500 scholarships for graduating seniors of Nixon-Smiley High School. Criteria for the scholarships were included 3 in the board agenda packet. No approval was needed from the Board as the scholarships were approved in the FY2006-2007 budget. h. Vickery Property A chart of market value proposals received from three realtors was included in Mr. Cockerell's report. Agenda item 4h involves legal rights and duties of the Corporation in determining how to proceed with the sale of the property. Mr. Cockerell referred agenda item 4h to Executive Session. The fifth order of business was presentation of the FY2006 Audit Report and discussion and possible action in response to same - Nancv Vau2:han. Armstron2:. Vau2:han & Associates. Nancy Vaughan with Armstrong, Vaughan & Associates, began her presentation by stating that the audit provided an unqualified opinion and all required elements were in place. The audit was in conformance with generally accepted accounting principles as applied to government or special government units. A copy of the 2006 audit was provided in the board agenda packets. Ms. Vaughan proceeded with the following overview of the FY2006 Audit Report. Ms. Vaughan referred to page nine of the audit. Total operating revenues for 2006 were $4,747,283 as compared to $4,531,443 in 2005 showing an increase of$215,840 in water sales. Total operations and maintenance were $1,511,679 along with other expenses of $1,787,441 for total operating expenses of$3,299,120. Operating income for the year was $1,448,163 compared to $1,315,029 last year showing an increase in income of$133,134. Total non-operating expenses totaled ($1,965,459) because of the debt service. Changes in net assets before capital contributions totaled ($517,296). Capital contributions from both cities totaled $791,911 because of water filter replacement. A change in net assets of $274,615 added to the prior year adjustment shows an increase in net assets at the end of the year of$3,599,152. Ms. Vaughan referred to page seven of the audit. Total current assets in 2006 decreased compared to 2005 because of investment in expansion of the water system. Ms. Vaughan referred to page eight. Liabilities were $50,279,263 in 2006 compared to $49,978,713 in 2005. Ms. Vaughan fmished her report by informing the group that a management letter was issued with the audit report as part of required communications given to SSLGC as part of the audit. It shows responsibilities in the audit for both parties. No significant changes were noted in accounting policies and no significant adjustments were made. All adjustments proposed to management were agreed with by management and no disagreements with management occurred. Management had complied in all material respects to the Public Funds Investment Act. No internal control deficiencies were found. Secretary Wolverton made a motion to accept the FY2006 Audit Report as presented by Nancy Vaughn, Armstrong, Vaughan & Associates. Treasurer Bauer seconded the motion. Upon a vote being called, the motion carried by unanimous decision. 4 The sixth order of business was discussion and possible action on accountin2: functions includin2: annual audit - Alan Cockerell. General Mana2:er. A handout showing accounting/fmance functions was provided to the Board. Presently the City of Seguin is providing the Corporation with accounting/finance services free of charge. Mr. Cockerell began the discussion by stating that from the beginning of the inception of the Corporation, the long-range plan has been to make the Corporation a separate entity from the Cities of Schertz and Seguin. In previous board meetings he had been directed to submit a plan for the transition. Mr. Cockerell solicited the help of Nancy Vaughn, Armstrong, Vaughan & Associates, and Susan Caddell, Director of Finance, City of Seguin, to compile a list of accounting and finance functions. The list shows frequency of the function, who is presently responsible, and who would be responsible after the effective change date. Mr. Cockerell suggested several changes could take place immediately. Billing customers on a monthly basis could be moved in March 2007. Corporation staff already compiles monthly usage numbers and would use this data to bill customers on a monthly basis. Inventory of capital assets could also be moved in March. With training, calculation of annual lease payments could also be moved soon. Mr. Cockerell also recommended a change in investment policy to designate himself as investment officer. City Manager Doug Faseler is presently serving as investment officer for the Corporation. If the Board is in agreement with the change, it would be listed as an agenda item for approval at the next Board meeting. Requirements for becoming an investment officer include 10 hours of investment training. Mr. Cockerell would plan to attend training at the end of April 2007 in Austin. After an individual is appointed as investment officer, he/she has 12 months to complete training, however, Mr. Cockerell would like to receive training as soon as possible and not wait the 12-month time limit. He added that an outside accounting firm which had not been identified could be contracted with to assist in the process of moving accountinglfmance responsibilities to the Corporation. It would come in to set up the accounting system with appropriate software and set up accounts. The fIrm would assist on a monthly basis in preparing monthly statements and providing quarterly reports. The plan would be to have internal controls in place as functions are moved from the City of Seguin to SSLGC. Functions would be phased in over several months and be completed by the end of the fiscal year, September 2007. Discussion was held regarding why a change in responsibilities was needed. Overall, board members agreed, the system in place works efficiently and costs nothing. Also discussed was who would approve the change in responsibilities, the Cities or the Board? During the discussion, the Board asked Nancy Vaughn, auditor for the City of Seguin, her opinion. Ms. Vaughn expressed concern because of past history. In the past, two procedures have been tried. At fIrst the Cities of Schertz and Seguin changed out the provision of accounting/finance functions every year. This proved to be inefficient because the two Cities used different accounting software. Then an outside fIrm was used and this system also 5 proved to be inefficient because of timeliness of reporting. She went on to say that presently very good internal controls are in place for purchasing. The same internal controls may not be repeated when using an outside accounting firm. Finance Director Susan Caddell commented on the expense of using an outside firm and the inexperience of the potential investment officer in that position. However, she suggested that General Manager Cockerell could be designated investment officer in place of City Manager Doug Faseler, but that she would continue to perform the work as she does now. She also stated that the Corporation has in the past taken advantage of some of the benefits of the City in terms of purchasing, e.g., "piggy backing" chemical bids for lower prices. Better prices are gained by purchasing larger quantities which is an advantage for the Corporation. Ms. Caddell also noted that she performs accounting/finance responsibilities for the Corporation in conjunction with her same responsibilities for the City of Seguin, therefore, time and money are saved for the Corporation. After discussion, the Board concluded that the long range plan for the Corporation from the beginning of its inception has been to become an independent entity. The Cities of Schertz and/or Seguin should not have to maintain accountinglfmance functions for the Corporation permanently, however, now might not be a good time to make the change completely. These functions could be phased in slowly over time. Board members agreed that an outside accounting firm should not be hired at this time. The Cities do not have to approve the change, but should be kept informed. If a change is made, a draft of the change in responsibilities should be submitted for approval by the Board. City Manager Doug Faseler requested a meeting of the Cities of Schertz and Seguin to determine which functions could and would be moved. A transition schedule could be prepared and brought before the Board in 30-60 days. Mr. Cockerell added, for discussion at the meeting, the subject of "retention of the annual auditor." The Board agreed with Mr. Faseler's request and Mr. Cockerell's suggestion and directed Mr. Cockerell to proceed with scheduling the meeting. No action was taken on agenda item #6. The seventh order of business was discussion and possible action on water lease contracts for Guadalupe and Gonzales Counties - Alan Cockerell. General Mana2:er and Pat Linder. Le2:al Counsel. Davidson & Troilo. Agenda item #7 involves the Corporation's legal responsibilities with water lease contract activities and relates to the acquisition of property. Counsel Pat Linder deferred agenda item #7 to Executive Session. The ei2:hth order of business was status of the Guadalupe County project - Alan Cockerell. General Mana2:er and John Winkler. Burv+Associates. John Winkler with Bury+Associates displayed maps of Gonzales and Guadalupe Counties. Mr. Winkler located several items on the map which included: tracts of land SSLGC has already leased in Gonzales County; potential well site for well #10; existing transmission line running from existing plant to Schertz and Seguin; proposed site of the new water plant; 6 three existing wells currently being looked at on the Blumberg property; new water plant; and 11 potential new well sites. He noted that the new water plant will be located adjacent to the existing pipeline. If the three Blumberg wells do not test positively, new wells could be drilled adjacent to the old ones. Mr. Winkler advised the group that the Corporation will have to meet well spacing requirements of Guadalupe County which are different from Gonzales County. Guadalupe County has an elliptical type pattern to its well spacing requirements. He added that although 11 potential well sites have been located, the plan is to drill eight. Availability and other issues will dictate which well sites are actually drilled. Other elements of the plan included how wide easements should be, and a possible road along the easement line so that operators could drive directly from well to well. The map showed the overall triangle of the site, existing pipe line, buildings, location for future expansion, parking space, ground storage tanks, storage buildings, and various treatment options. Mr. Cockerell noted that the plan is to purchase wells and permanent easements around wells instead of purchasing property in order to eliminate expenses (e.g., expenses for platting property). Mr. Klemt added that an environmental search fIrm had been contacted to evaluate all data records. A protection study will be done a quarter of a mile around each well site. All information will have to be submitted to TCEQ for approval in order to drill wells and discharge water in backwash lagoons. Backwash lagoons are currently being discussed with property owners. All sources of pollution, e.g., oil wells, septic tanks, pits, etc., will be documented. Mr. Klemt's certification will be needed to obtain approval for the well plans from TCEQ. Mr. Winkler advised the Board that the Corporation and consultants are working closely with GVEC in order to address GVEC's concerns, some of which include load calculations and horsepower of pumps. In the future, pumps should have a softer start, bigger motors and controls (to keep all pumps from starting at the same time). Mr. Winkler ended his presentation with a brief summary of issues regarding the project which included various treatment options, minimal chemical handling, lower chemical costs, elimination of C02 (before it gets to the plant), and long life of media. Mr. Winkler emphasized that Bury+Associates staff has been working closely with General Manager Cockerell and his staff and Water Utilities Manager John Schraub and his staff to meet necessary requirements of the facility, both internally and externally. The new plant will be as redundant to the plant in Gonzales County as possible. It could be used as emergency backup and also cover when maintenance is performed on the Nixon water treatment plant. Mr. Cockerell noted that weather has been a factor in testing of the Blumberg wells. Plans are to get the equipment in place and to begin pumping tests on well #1, as soon as possible. Results of the test on well # 1 will dictate action taken on the other two wells. 7 The ninth order of business was presentation of the Operation Status Report and discussion and possible action in response to same - Dan Dru2:an. Water Systems Mana2:er. Mr. Drugan was on site for repair of well #8, therefore, Water Utilities Manager John Schraub presented the Operations Status Report. Mr. Schraub reported that SSLGC operators are presently working on the 36" line from the Booster Pump Station to the City of Schertz. Four sections of valve repair have been completed. Valves, pipes and flanges look good, but bolts are deteriorating. Eleven valves remain to be repaired and all are located on creek bottom. Mr. Schraub noted that safety is a factor when working in inclement weather and has slowed the process considerably. Well #8 had been put back in service, but operators found water leaking out of the well head. Peerless Equipment, Ltd., was called back for repair. No action was taken on agenda item #9. The tenth order of business was presentation of Consultant reports and discussion and possible action in response to same - Crockett Camp. Consultant and Bill Klemt. Hvdrolo2:ist Consultant. Crockett Camp had nothing new to report. Bill Klemt reported he has worked the past month in support of Water Utilities Manager John Schraub and General Manager Alan Cockerell on the Guadalupe Project. Pumping tests will be necessary to proceed with the project. Well #9 will be addressed when lease contract documents for Guadalupe and Gonzales Counties are finished by Counsel Patrick Linder. The Corporation is presently working with Ardaga & Associates to locate potential lessees for water leases in the area. No action was taken on agenda item #10. Vice-President Cook closed the open session of the meeting at 2:42 p.m. and went into Executive Session at 2:47 pm. The eleventh order of business was Executive Session called under Chapter 551 Government Code. Subsection 551.071. to seek the advice of its attorney on le2:al matters relatin2: to the Board of Directors' ri2:hts and liabilities under certain contracts. Section 551.072 to deliberate the purchase of and/or sale of certain real estate. Executive Session was held from 2:47 p.m. to 3:25 p.m. Mayor Hal Baldwin, Ex-Officio, arrived at 3: 15 p.m. The twelfth order of business was to consider and take action as a result of A2:enda Item #11. No action was needed as a result of Executive Session. 8 The thirteenth order of business was additional Board of Directors discussion and/or comments. No new discussion and/or comments were discussed. The fourteenth order of business was adiournment. Vice-President Cook declared the meeting adjourn. The meeting was adjourned at 3:40 p.m. The next regular meeting was scheduled April 19, 2007, in Seguin. MINUTES APPROVED THIS DAY OF ,2007. SIGNATURE OF DIRECTORS -ABSENT- Robin V. Dwyer, President Ramon J. Cook, Vice-President Jim Wolverton, Secretary Sydney Bauer, Treasurer Ken Greenwald, Director 9