1. Call to Order

The special meeting of the Board of Directors of Bartonville Water Supply Corporation was called to order by President Graves at 7:39 p.m. on Tuesday, July 27, 1999 at the corporation office.

Directors in Attendance

Joe Graves, President
Larry Kaufman, Secretary-Treasurer
Scott Kilpatrick
Michael Paulson

Directors Absent

Philip Block, Vice-President
Kevin Alberts

Consultants in Attendance

Wayne Ginn, PE, The Ginn Corporation
Ronnie Phillips, Esquire

Staff in Attendance

Jim Leggieri, General Manager
Darrin Ezell, Administrative Assistant

Public in Attendance

Frank Babb, Project Manager/Republic Property Group
Jeff Hurt, Esquire
Ocie Vest, P.E./Huitt-Zollars
John Wagner, Partner/Republic Property Group
Mark Wagner, Partner/Republic Property Group

3. Discussion and Action on Matters Related to Development of the Rayzor Ranch Property

Jeff Hurt, Esquire, started the meeting with his notes on the outline for the agreement on the Rayzor Ranch contract. He handed out copies of his outline. He then went on to say that Tom Taylor, Executive Director of the Upper Trinity Regional Water District, had called to check on the proceedings and let him know that they needed to get on the UTRWD agenda for their next meeting. Mr. Taylor stated that they need to at least have a phone call by Friday. Hurt stated that nothing would be signed, just debated.

Mr. Hurt then verbally went through the outline of his notes. The outline was broken down in 8 parts.

• Number One on the outline was the design for solving the problem with the 10% rule.
• Number Two was getting the land owners to grant easements to the UTRWD so the water lines could reach the project.
• Number Three dealt with having the Bartonville Water Supply Corporation engineer and Jim Leggieri, General Manager, to be involved with the review and the performance of the facilities. Hurt wanted to keep the guidelines that BWSC already has in use. He stated that the cost of outside consultants will be funded by the CDD.
• Number Four stated that the system would be a stand alone system but that there would be emergency interconnects with BWSC and when the bonds are repaid, BWSC can buy the system at a nominal charge.
• Number Five stated that CDD#4 would provide the connections and taps.
• Number Six stated that BWSC will operate and maintain the system as well as bill and collect fees from the residents of CDD#4.
• Number Seven stated that BWSC will retain $350.00 per connection from the equity fees for the taps.
• Number Eight said that CDD and BWSC will co-operate in requesting any order from the TCEQ. He stated that number eight was a "catch all" for the lawyers to deal with.

At this point, Ocie Vest, P.E. was asked to explain how he arrived at the $350 per connection. Scott Kilpatrick asked where he got the information for calculations. Mr. Vest replied that the numbers came from BWSC's Combined Statement of Income and Retained Earnings for 1997 and 1998. The meeting was then paused while copies were made for all in attendance. Vest stated that he had the opportunity to compare rates with the state and that he was pleased to inform BWSC that they compare very well with state information that was collected from the TCEQ. He stated BWSC operations were run very efficiently.

Vest said that looking at the figures for '97 and '98 and taking out the line items that were not applicable to a stand alone district, he arrived at the figure for the equity payment. Vest said that he took the total amount and divided it by the number of connections BWSC had in 1997. That gave him his figure. The figure was actually $335.00 but they rounded up to cover the fact that 1998 was a drought year and to show goodwill.

Discussion was then held on how many meters there would be for the first year. Vest said that the golf course may have anywhere from one to four meters. Graves questioned whether the fee was negotiable and whether if the equity cost should go up, would it be reflected in the fee as well.

Paulson mentioned that the per meter fee was not equitable in the beginning because the customer base was smaller. He said that if the system doesn't actually grow to build out in the time allotted then this could cause BWSC monetary growing pains in the early phases of the development. Kilpatrick suggested building a financial model of the system as projected, as a stand alone, and in slow growth. Paulson then said that BWSC was only trying to cover its cost and not make any profit.

Discussion then centered around the costs of inspections and time involved by BWSC staff. Graves mentioned that it should be covered in Number Three on the list. Leggieri then commented on the fact that all inspections are currently done by BWSC staff. Hurt commented that the CDD#4 was planning to hire an inspector to inspect the utilities and housing and that BWSC would be a supervisory inspector performing the final checks.

Kilpatrick stated that the Board wants the project to be successful and most of all for the members of BWSC not to experience any pressure drops or disruption in service and to experience the same rates they are used to. Ginn questioned whether the district would pay for any miscellaneous repairs to the system or the CDD would pay the costs of any repairs or upkeep. Hurt stated that some repairs would obviously be covered by insurance and others would be part of a capital replacement budget. Hurt said that they will treat their books the same as BWSC.

Kilpatrick questioned whether the CDD envisioned higher rates for their customers than BWSC has for its members. Kilpatrick said that he would think with time the rates would get closer together and even if they weren't they should get a schedule to bring them together. Ronnie Phillips, Esquire, said that since the CDD is an artificial stand alone system they could not legally do that.

Hurt stated that during the separation period both entities are nothing more than close, friendly neighbors. That is the way that the TCEQ needs to see it anyway, he said.

Graves asked why the office could not treat the CDD system as a separate system altogether. Phillips said they have to.

Hurt then stated at the end of the separation period BWSC could buy the CDD connections and pay a membership fee to keep it legal. He then suggested the term of the contract be forty years because that is not uncommon in this business. Kaufman replied that in twenty five to forty years this community would be totally different.

Discussion then moved to how the billing for the sewer was going to be performed. Hurt stated that since he didn't have the sewer part of the deal done yet he didn't know. Hurt stated that if someone did not pay their sewer bill they would need to be shut off. He envisioned with the CDD that once a month the CDC would get a bill from the UTRWD and the City of Denton for wholesale water and sewer and they would pay that. BWSC would then turn over the collected amount from customers and it would be the CDD's problem to make the ends meet.

Paulson questioned how the infrastructure of the system would be built and was cautious of not using the BWSC engineer, since he stated that he has experience designing the BWSC system. Vest said that Huitt-Zollars was planning on building the system to BWSC specs and keeping the designs in step with BWSC architecture.

At that time, statements were made as to when the next meeting time would be. The next meeting was previously set for Tuesday, August 3. Everyone agreed that it should be kept.

Motion by Paulson to direct Jim Leggieri to write a letter to the UTRWD authorizing the commencement of negotiations for buying water for the CDD#4 at the next UTRWD board meeting. Second by Kilpatrick. Motion approved unanimously.

2. Executive Session:

At 8:25 P.M., President Graves announced that the Board would convene the Executive Session concerning the following:

A. All Matters Related to Development of the Rayzor Ranch Pursuant to Government Code, Section 551.071.

The Board took no action and reconvened in Open Session at 9:16 p.m.

4. Adjournment

Motion by Kaufman and second by Kilpatrick that the meeting adjourn. Motion approved unanimously; the meeting adjourned at 9:17 p.m.

Recorded by Darrin C. Ezell, Administrative Assistant

Certified by Larry Kaufman, Secretary-Treasurer