1. Call to Order
2. Executive Session
President Graves announced that the Board would convene in Executive Session at 7:07 P.M. concerning the following:
A. All Matters Related to the Lantana Development Including Approval of a Water Service Agreement Between BWSC and DCDD#4 Pursuant to Government Code, Section 551.071.
The Board took no action and reconvened in Open Session at 7:24 P.M. President Graves announced that the next item for consideration would be Item 7.
7. Discussion and Action on All Matters Related to the Lantana Development Including Approval of a Water Service Agreement Between BWSC and DCDD#4.
Review and discussion was held on the proposal submitted by DCCD#4 at 4:08 P.M. As the Directors had copies that were submitted prior to that time, copies with the latest changes made by the UTRWD were distributed.
Notation was made that Collins was present to represent the UTRWD. It was noted that Tom Taylor and Steve Girdis, UTRWD’s attorney in Houston were available by telephone. Tom Leonard, DCDD#4’s attorney, and his secretary were also available by telephone to make changes to the proposed agreement on the computer in their office.
Phillips stated that he wished to express BWSC’s concerns regarding the current proposed agreement. He noted that the first concern regarded the transmission of 1 MGPD of water purchased from the UTRWD through BWSC’s lines by utilizing BWSC’s storage capacity. He noted that BWSC had limited that option to the first 400 homes during the initial phase for a 2 year period because during peak demand times, BWSC would not be able to provide adequate service to its existing members and to keep inventory levels where they need to be.
Discussion followed on the concerns of the developers and their engineer regarding their inability to have their facilities on line in time to deliver lots to builders and to close on the first thousand homes. Ginn stated that BWSC had said all along that its system is designed to serve about 2500 connections. He noted that BWSC currently has approximately 1800 connections and a commitment to provide service to 300 lots in approved subdivisions. He noted that with the additional 400 homes in the Lantana development, the system would be stretched to the limit. Ginn said that had been BWSC’s position from day one.
Discussion ensued on UTRWD’s delivery of water to Lantana/DCDD#4. Vest said that BWSC’s capacity should not be affected as they would be using the UTRWD lines and only BWSC’s 18 inch lines on FM 407. Ginn noted that the UTRWD line runs down Copper Canyon Road to the Copper Hill Station. He stated that any water taken before UTRWD’s delivery point to BWSC would be fine.
Phillips inquired if they planned to use any of BWSC’s storage capacity. Vest replied they did not intend to use any of BWSC’s storage capacity. Phillips asked if they planned to have their own storage, and Vest said that eventually they planned to build storage. Phillips asked what they planned to do during the interim. Vest replied they planned to float the first 1 MGPD off BWSC’s existing system as they would only be using an isolated part. He remarked that they had been through the analysis with UTRWD. Ginn noted that it had not been done with BWSC since BWSC stated from the beginning that its system could only handle 2500 customers based on the demands this past summer. Ginn said that it was not that BWSC did not want to provide the water for the additional homes, but that it cannot, and still protect the integrity of its system.
Phillips initiated discussion on a possible conflict between BWSC taking 3 MGPD and Lantana/DCDD#4 taking 1 MGPD at the same time during peak demands. Ginn stated that he did not know what UTRWD’s pumping capacity is in the 18 inch line. Vest noted there is plenty of capacity. Ginn said anything they take before BWSC’s delivery point is fine as long as the UTRWD can supply the amount that for which BWSC has contracted. Vest noted that the line is capable of transmitting about 7 MGPD. Leggieri stated that be believed the rate of flow controller on the meter supplying water to BWSC’s tank will only handle a maximum of 2500 GPM and that will not equate to enough gallons since BWSC is entitled to 2 MGPD and peaked at 3 MGPD last summer. He said he knew that the line capacity is 5 to 7 MGPD but that the rate of flow controller will not let that much pass through the meter according to UTRWD. Kaufman noted that the meter might be changed out; however, he asked if the problem is not inventory capability as an additional 1000 customers would stretch the system too far.
Ginn stated that he would be happy to go over the numbers with Vest who said he was surprised to hear these comments this late in the game. Ginn replied that he was surprised as it was discussed at the first meeting. Vest said they needed to meet separately as he did not think there is a supply or delivery problem. Phillips said there seemed to be an engineering problem and if there is no engineering problem, then the concerns go away if they take the water from the UTRWD before BWSC’s delivery point so that it does not affect BWSC’s ability to take all the water it needs or its storage capacity.
Vest said that is not the intent; he said the intent is to make use of BWSC’s system for a two year period for up to 1000 units. Vest said that they cannot take the water before it goes into BWSC’s system because they need the ground storage and the pressure producing pump stations. He noted that basically they will be tying into BWSC’s system for two years. Phillips stated that had been his understanding. He noted that if another developer had come in to the north and said that he planned to build a 1000 homes tomorrow, the response would have been that we are sorry, but we cannot supply 1000 homes. Vest replied that there was just some confusion; he said that he, Ginn, and Leggieri would get together and work things out. He said they had done the analysis and he knows that it will work. Phillips stated if it works, there is no problem.
Phillips stated that their draft provides that DCDD#4 will get 1 MGPD for two years without restrictions, without costs, without reimbursement of expenses, and with no separate agreement. He noted that DCDD#4 would have use of all facilities and if excessive usage caused break downs, BWSC would be responsible for repairs at its expense. He said that basically BWSC would be giving them the use of its system for whatever extent they need it for the first two years for up to 1 MGPD.
Discussion followed on reimbursement and Lantana/DCDD#4 representatives noted that they had agreed to cover all costs and requested that the agreement be approved for the 400 homes pending the engineers working on the numbers and making an amendment to include more homes.
Phillips noted the next problem is the actual reimbursement. He noted that BWSC took the budget and projected budget to determine the actual expenses that had been budgeted for this year and the coming years. He said that BWSC looked at the past three years and the level of accuracy in those budgeted expenses to actual expenses and determined what it would actually cost to service the system based on the developers projected growth rates. He noted that Vest talked to Ginn and Leggieri a couple of times which changed the numbers. He noted that the numbers are the actual expenses that were determined. Phillips stated that BWSC’s concern is that if it goes to an actual expense reimbursement, it will be subject to litigation and varying opinions as to which items are an actual expense and which items are not an actual expense. Phillips said he would have a hard time drafting language that would appropriately identify each expense and not allow for disagreements.
Lantana/DCDD#4 representatives noted the numbers are higher than what will be delivered as the projections on the number of homes built per year are too high. They stated that they had to be on an actual expense basis since the tax exempt bond rating of UTRWD and DCDD#4 would be jeopardized if DCDD#4 pays more than cost because the projections were too high.
Phillips explained that the problem is that BWSC has to base its projected growth, employees, and system on what Lantana/DCDD#4’s plans are. He noted that the usual situation is for a developer to make a request for service for a specified number of homes and pays the impact fees so that BWSC can upgrade the system sufficiently to provide service. He noted that if he does not build all the homes the capacity is still there for future homes. He noted that BWSC buys new trucks and equipment and hires new employees to service the new area. He stated that BWSC will be doing the same thing for Lantana. He stated that if BWSC does all these things for Lantana to meet their projections, then BWSC has to pay for them. Phillips noted that it does not matter whether Lantana builds the homes or not; BWSC is not going to hire someone and then let them go because Lantana did not build the number of houses that it projected. He stated that is why the numbers are based on the projected build out and the expenses that BWSC will incur.
The developers of Lantana responded that their situation is different and BWSC will not incur the expenses associated with other developments since Lantana will install all the infrastructure and facilities. They stated that all BWSC will have to do is prepare to read more meters, and they will give at least six months advance notice. Phillips replied that BWSC will still have to increase field and office staff to handle additional customers, and BWSC will not wait until the day before employees are needed to hire them to read meters.
The developers stated that they would like to agree that they give a specified advance notice that they will build a certain number of homes so that BWSC can hire the employees that will be needed; they would agree that once the notice is given, it is an included expense.
Kaufman stated that he is confused about the methodology that must be used; he stated that he did not want BWSC employees to have to carry time cards with them and allocate all their time to either BWSC or Lantana. He requested some rules to go by. Alberts stated that the actual expenses are based on the exact projections that the developers gave BWSC. Alberts stated that he felt that there would not be a problem with re-evaluating the numbers at given intervals. Graves said he believed the problem now is that BWSC cannot charge a per unit cost; therefore, it must charge a fee up front. Graves said it would be simpler if BWSC could say that it would charge a certain amount for so many units.
One of the developers proposed an option for payment of fees. The option was based on an annual basis with projected cost paid at the beginning of the year. At the end of the year, BWSC would submit a certified statement of expenses and adjustments and credits would be made accordingly. Kaufman stated that an option like this would be based on the number of houses, and he said understood that would be a problem.
Another developer stated that he believed the document says that there are some estimated numbers laid out for each year with revisions to be made the first of each year, with payments to be made six months in advance, with calculations for actual expenses to be made at the end of each six months, and with additional payment or credits made to either BWSC or DCDD#4. He noted that each six months will be balanced at the end of that period.
Kaufman noted that there is a problem defining actual expenses as BWSC does not keep records of actual cost per different parts of its service area. Collins noted that as long as expenses pass a reasonable test there will not be a problem with the IRS with reference to the tax free bond exemption. Anderson questioned the term reasonable and how it will be determined. Kaufman stated that the hope had been to get to the point where the budget can be calculated on an annual per customer basis rather than by different parts of the service area. Kilpatrick stated that it seemed that the fee could not be on a per unit basis in the beginning; however, at the end it could if the Lantana development is a certain percent of the service area. Paulson inquired if there could be language that addressed the per cent basis. It was noted that the fee cannot be a fixed dollar amount. Collins explained the ruling regarding t the actual and direct costs and the fixed periodic payment and the reasonable over- head.
All parties noted that they wanted an agreement with language that would not result in future misunderstanding. Phillips noted that at some time in the future BWSC will be dealing with the DCDD#4 Board and not with the developers. Phillips stated that UTRWD would not be a party to the agreement.
The Lantana developers, Collins, Vest, and Phillips left the meeting for a telephone conference.
Kilpatrick suggested that this item be tabled so that the Board could proceed with the other agenda items.
8. Discussion and Approval of the Draft of the 1999 Audit Report.
Vickie Brouse, CPA, with Hughes & Associates reviewed the Draft of the 1999 Audit Report and answered questions posed by the Directors. Motion by Kaufman and second by Paulson to accept the 1999 Audit Report with the removal of the sentence on Number 8 on page 7. Motion approved unanimously.
Kilpatrick expressed thanks to Brouse and the Staff for a task well done. Next President Graves moved to the Consent Agenda.
Motion by Kaufman and second by Alberts to approve Items 4 and 6 of the Consent Agenda and to table Item 5 and to reschedule it.
Motion approved unanimously.
The items approved were:
4. Approve the Minutes of the February 17, 2000 Board Meeting.
6. Approve the Revised Emergency Water Demand Plan.
The item tabled was:
5. Accept the Audited December 1999, the January 2000 and the February 2000 Disbursements and Financial Reports.
9. Discussion and Approval of the Procedures for an Annual Meeting.
Leggieri explained that Senate Bill 533 requires water supply corporations to have a written procedure for holding the annual meetings. He explained that this document is the procedure that BWSC follows. Motion by Kilpatrick and second by Paulson to approve the Procedures for Conducting an Annual or Special Stockholders Meeting.
Motion approved unanimously.
10. Discussion and Action on Lori Heer's Request for Exemption From BWSCs Policy Regarding Discontinuance, Cancellation, and Reactivation of Memberships.
Since the meeting was lasting longer than anticipated, the Heers requested that this item be rescheduled.
12. Discussion and Action on All Matters Associated with the Following:
A. Carruth Estates/Final Acceptance
Leggieri recommended final acceptance of the Carruth Estates since all lines are installed, the maintenance bond has been received, and a release of liens has been secured. Motion by Kilpatrick and second by Kaufman that Carruth Estates be accepted. Motion approved unanimously.
B. Copper Woods/Including Off Site Water Main Construction
Leggieri noted that the only thing is the request that was in the packet. He stated that this problem has been turned over to Murray Construction. No action was taken. Graves mentioned that he noticed that BWSC is still holding a retainer from Murray Construction.
13. Discussion and Action on Acceptance of a Bid for the 5000 Gallon Pressure Tank at the Jernigan Well Station.
Leggieri recommended acceptance of the bid for $3500 for the 5000 gallon storage tank at Jernigan. Motion by Paulson and second by Kaufman to accept the bid for $3500 for the 5000 gallon pressure tank.
Motion approved unanimously.
14. Staff and Consultant Reports.
Leggieri reported that a developer has submitted a proposed plan for Chinn Chapel Estates on the E Systems property. He noted that Ginn will review the proposed plan as the developer has requested a written statement from BWSC that it can provide service to the development since it is in Flower Mound. He said that Flower Mound will require the developer to extend sewer service to the subdivision. Leggieri noted that he had no contact with Flower Mound.
Leggieri stated that the Master Plan needs to be updated because he has had a number of inquiries about service for subdivisions. He said that there needs to be a time line for completion of the plan.
Robertson stated that she would like to express the Staff’s appreciation to Kilpatrick for setting up the meeting with the financial adviser who handles the Profit Sharing Plan.
Kaufman gave the Rate Study presentation using the overhead projector that he presented to the Town of Double Oak Council. He noted that the presentation is organized so that any director can give the presentation to any group. Kaufman will give the presentation at the annual meeting.
7. Discussion and Action on All Matters Related to the Lantana Development Including Approval of a Water Service Agreement Between BWSC and DCDD#4.
Phillips reported on the meeting with bond counsel regarding ways to structure the agreement within the confines of the IRS; he noted that there was a problem with all of the ways. He stated that the only way pro rata can be used is for all employees to carry log books and record every fraction of a minute that they spend in Lantana and in the BWSC area. He said that at the end of the year all time will have to be reconciled. He also noted that BWSC will have to accept two categories of expenses for actual and direct cost taking the specific budget items of expenses that only apply to Lantana and review them periodically. He stated that basically there would be a Lantana division within BWSC. It was noted that Lantana would pay for employees only used in Lantana; some items will be direct and some will be pro rata. Discussion followed on designation and allocation of employees and charges.
President Graves noted that this item would be put on hold and the Board would reconvene in Executive Session.
Collins, Straus, Vest, J. Wagner, and Mark Wagner left the meeting room.
2. Executive Session
At 9:50 P.M. President Graves announced that the Board would reconvene in Executive Session concerning:
A. All Matters Related to the Lantana Development Including Approval of a Water Service Agreement Between BWSC and DCDD#4 Pursuant to Government Code, Section 551.071.
The Board took no action and reconvened in Open Session at 10:30 P.M.
11. Disscussion and Action on Wayne Ginn’s Report on the Feasibility of Drilling An Additional Well.
Ginn distributed some information sheets that showed the location of the existing stations and discussed the need for another major pump station and ground storage facility. He mentioned that the system needs to be balanced by eliminating some of the smaller pump stations. He stated that there would be two major stations with supplementary water purchased from the UTRWD. He also noted that the master plan needs to be upgraded to provide a sense of direction. He said that he had contacted two well drillers who estimated the cost of drilling a major well to be $500,000 to $600,000.
Leggieri mentioned the possibility of contacting Denton for an additional water supply.
Discussion was held on securing another federal loan for future capital projects.
15. Review Future Agenda Items, Activities and Announcements, Set Date and Time of the April Regular Meeting.
The next meeting was set for Tuesday, March 28, 2000 and an item was requested for discussion and action on Equity Buy In Fees. A meeting was also set for Monday, April 10, 2000 immediately following the Annual Meeting for the election of officers.
16. Adjournment.
Motion by Kilpatrick and second by Anderson to adjourn the meeting. Motion approved unanimously. The meeting adjourned at 10:50 P.M.
Recorded by Betty Robertson, Deputy Secretary-Treasurer
Certified by Larry Kaufman, Secretary-Treasurer