Meeting Minutes 2020-04-08

MONTGOMERY COUNTY MUNICIPAL UTILITY DISTRICT NO. 8 MINUTES OF REGULAR MEETING

APRIL 8, 2020

The Board of Directors (the “Board” or “Directors”) of Montgomery County Municipal Utility District No. 8 (the “District” or “MUD 8”) met in regular session, open to the public, on Wednesday, April 8, 2020, at 9:00 a.m., via telephone conference call pursuant to Texas Government Code, Section 551.125, as amended, and as modified by the temporary suspension of various provisions thereof effective March 16, 2020, by the Governor of Texas in accordance with the Texas Disaster Act of 1975, all as related to the Governor’s proclamation on March 13, 2020, certifying that the COVID-19 pandemic poses an imminent threat of disaster and declaring a state of disaster for all counties in Texas, and the roll was called of the duly constituted officers and members of the Board, to-wit:

John Tryon – President
John L. Patton – Vice President
Margie Barlow – Secretary
Randolph C. Moravec – Treasurer / Investment Officer
Bob Leasure – Assistant Secretary

All members of the Board were present, thus constituting a quorum. Also attending via conference call were Dietra Bonds of Municipal Accounts & Consulting L.P. (“Bookkeeper” or “MAC”); Justin Abshire, Mason Mueller, and Erich Peterson of Jones|Carter (“Engineer” or “Jones|Carter”); Philip Wright of Hays Utility North Corporation (“Operator” or “Hays North”); Michael Others of McCall Gibson Swedlund Barfoot PLLC (“Auditor”); Charles Barron, Director of Montgomery County Municipal Utility District No. 9 (“MUD 9”); and Elliot M. Barner, attorney, and Kathryn Cain, paralegal, of Radcliffe Bobbitt Adams Polley PLLC (“Attorney” or “RBAP”).

The President, after finding that the notice of the meeting was posted as required by law and determining that a quorum of the Board was present, called the meeting to order and declared it open for such business as may come before it.

PUBLIC COMMENT

The President first opened the meeting to public comment. Mr. Barron introduced himself to the Board and stated that he would like to discuss the Phase II Drainage Improvements and the Buckingham Water Plant, but will reserve his comments until such items are discussed according to the order of agenda items.

There being no further public comments, the President directed the Board to proceed with the agenda.

APPROVAL OF MINUTES OF MARCH 11, 2020 MEETING

The President next directed the Board to the approval of the March 11, 2020 regular meeting minutes. Director Moravec noted that approval of prior meeting minutes is sometimes recorded in the following month’s minutes as being subject to certain corrections and suggestedthat the minutes should reflect what corrections were made to such prior minutes. Mr. Barner explained that typically meeting minutes only include substantive changes made to prior meeting minutes. Director Moravec recommended that any major changes to prior meeting minutes, particularly modifications to any motions made, should be recorded in the minutes when such prior month’s minutes are approved. Upon a motion by Director Moravec, seconded by Director Patton, after full discussion and with all Directors present voting aye, the Board approved the March 11, 2020 regular meeting minutes as presented.

APPROVE AUDIT REPORT FOR FISCAL YEAR ENDED (“FYE”) DECEMBER 31, 2019

Mr. Others presented the Audit Report for FYE December 31, 2019 (the “FYE 2019 Audit”). Mr. Others reported that after reviewing the FYE 2019 Audit with Director Moravec, the language on page eight (8) of such audit regarding assets due from participant will be changed to reflect that such assets are due from MUD 9. Mr. Moravac then stated that certain language in the FYE 2019 Audit regarding taxes levied by the District will be changed to reflect the language used in the Order authorizing the issuance of the District’s Series 2019 Refunding Bonds (the “2019 Refunding Bonds”).

Mr. Others next reported that the District’s financial statements show that the District has a four (4) year reserve of funds available.

Mr. Others then stated that the FYE 2019 Audit will be finalized next week and that the deadline for submitting such audit to the Texas Water Development Board (the “TWDB”) is April 30, 2020. Upon a motion by Director Patton, seconded by Director Leasure, after full discussion and with all Directors present voting aye, the Board approved the FYE 2019 Audit subject to a ten (10) day review period by the District’s consultants.

TAX ASSESSOR-COLLECTOR’S REPORT

Ms. Bonds reviewed the Tax Assessor-Collector’s Report for the month of March 2020, a copy of which is attached hereto, including past monthly collections and credits as reported by Tammy McRae, Tax Assessor-Collector for the District. Ms. Bonds reported that 95.15% of the 2019 taxes have been collected as of March 31, 2020. Upon a motion by Director Leasure, seconded by Director Patton, after full discussion and with all Directors present voting aye, the Board approved the Tax Assessor-Collector’s Report.

BOOKKEEPER’S REPORT

Ms. Bonds next reviewed the Bookkeeper’s Report, a copy of which is attached hereto, including the current fund balances, expenditures and investments.

Ms. Bonds then reported that a payment was made on March 31, 2020 for the principal and interest due on the District’s outstanding bond issues.

Director Moravec noted that the Bookkeeper’s Report includes a payment made to Bleyl Engineering (“Bleyl”) from the District’s Sewage Treatment Plant (the “STP”) fund, but stated that he had not reviewed any such invoice. Mr. Abshire reported that he had conversations with Bleyl regarding the STP but has not seen any invoices from Bleyl and is not aware of any substantial work that they have performed on the STP. Mr. Barner stated that if none of the Directors have seen an invoice from Bleyl for work performed on the STP, then any such invoice was not approved for payment. Mr. Barron then stated that he is unaware of any work that Bleyl is conducting on the STP. Ms. Bonds confirmed that the District has not made a payment to Bleyl from the STP fund since 2018. Ms. Bonds stated that such item in the Bookkeeper’s Report was likely miscoded and that she will research the matter further.

In response to a question by Director Moravec regarding the status of the Association of Water Board Directors’ (the “AWBD”) 2020 Annual Conference, Mr. Barner stated that the AWBD is monitoring the situation regarding the novel coronavirus (“COVID-19”) pandemic.

Mr. Barner reported that the AWBD has not cancelled the Annual Conference as of today’s date, but recommended that Directors refrain from registering for such Conference if they have not
already done so.

Mr. Barner then discussed adoption of a Resolution Temporarily Authorizing the Bookkeeper to Sign Disbursements, which would allow the Bookkeeper to sign checks on behalf of the District upon review and approval of such checks by the Board in the event that the Board is unable to meet in person due to COVID-19. Ms. Bonds stated that Woodforest Bank (“Woodforest”) requires the signature of only one (1) Director on deposited checks. Ms. Bonds further stated that it is the District’s policy to require three (3) Directors to sign each check, but that such policy is not a requirement of Woodforest. Ms. Bonds then stated that if the Board prefers to have a second signature on the District’s checks, it can authorize the owner of MAC to sign such checks following a signature by one (1) of the Directors. Mr. Tryon reported that the current checks have already been signed by three (3) Directors and that he will deliver them to MAC’s office in Conroe, Texas. It was the consensus of the Board to proceed with the District’s existing policy of signing checks.

Upon a motion by Director Patton, seconded by Director Barlow, after full discussion and with all Directors present voting aye, the Board: 1) approved the Bookkeeper’s Report, as presented; 2) authorized payment of checks numbered 9032 through 9061 from the General Operating Fund; 3) authorized payment of checks numbered 1939 through 1944 from the WWTP Fund; and 4) authorized payment of checks numbered 1283 through 1286 from the Capital Projects Fund.

ENGINEER’S REPORT

Mr. Abshire presented the Engineer’s Report, a copy of which is attached hereto.

Regarding the Wastewater Treatment Plant (“WWTP”) Improvement Project (the “WWTP Project”), Mr. Abshire reported that Allco, LLC (“Allco”) continues to make significant progress including completing the grout on the exterior of the Sequencing Batch Reactor (“SBR”) basin walls, installing rebar in the concrete basin walls, and continuing with the concrete pours at such WWTP. Mr. Abshire reminded the Board that Jones|Carter sent a letter to Allco on February 26, 2020, stating that Allco is several months behind the schedule set forth in the contract for the WWTP Project.

Mr. Abshire reported that Allco responded with a request to transfer ninety (90) days from the Phase II schedule to the Phase I schedule for such project, claiming that some of the items that Allco completed are actually Phase II items. Director Patton stated his opinion that Allco’s request should be denied because the contract between the District and Allco clearly differentiates between the Phase 1 and Phase 2 items.

Mr. Abshire reported that the Montgomery County Emergency Services District No. 3’s Fire Chief (the “Fire Chief”) assisted Jones|Carter in communicating with theMontgomery County Fire Marshall (the “Fire Marshall”) regarding the Fire Marshall’s required revisions to the WWTP Project. Mr. Abshire further reported that the Fire Marshall has concurred with Jones|Carter’s determination that four (4) items previously required by the Fire Marshall will not be necessary.

Mr. Abshire then presented Allco Pay Estimate No. 14 in the amount of $1,484,597.01.

Mr. Abshire reminded the Board that such project is being funded by the Unlimited Tax Bonds, Series 2018 (the “Series 2018 Bonds”).

Regarding the proposed eight-inch (8″) potable water line under Walden Road, Mr. Abshire reported that, upon conducting the survey for such project, Jones|Carter found that a certain property owner’s fence encroaches upon the District’s property and is in conflict with the location of the proposed water line. Mr. Abshire further reported that he is coordinating with RBAP to prepare a letter to such property owner informing her of the encroachment and stating that such fence will need to be moved prior to construction of the water line. Mr. Abshire then stated that Allco will remove the existing fence at the commencement of construction of the water line and will reinstall such fence along the correct property line. Mr. Abshire further stated that he does not believe that the District will incur any additional charges from Allco for such work related to the fence. Director Leasure suggested that the cost of removing and reinstalling the fence should be paid by the property owner, as that has been the District’s policy in the past.

Director Patton disagreed, stating that the District should pay the costs associated with removal and reinstallation of such fence. In response to a question from Director Barlow regarding the incorrect placement of the existing fence, Mr. Barner explained that builders commonly do not consider public easements when installing a fence.

Regarding the Drainage Improvements, Phase II (Zones 7, 8 and 11), Mr. Abshire reported that Jones|Carter continues with the design of such improvements. Mr. Abshire further reported that such design is ready to be submitted to the necessary agencies for review, but that Jones|Carter is waiting for MUD 9’s decision regarding potential joint drainage improvements along the GSU easement located near Heatherglen. Mr. Abshire explained that if MUD 9 authorizes additional piping in order to tie-in to the District’s line, then Jones|Carter’s design will need to be modified slightly. Mr. Barron stated that MUD 9 believes such joint improvements will benefit both districts and he expects such project to be approved at the next MUD 9 board meeting. Mr. Abshire next reported that Jones|Carter has provided MUD 9’s engineer with the final cost to install the pipeline for such project and that such amount will be submitted to MUD 9’s board for consideration at their April 2020 meeting. Mr. Abshire stated that if MUD 9 approves the joint improvements, Jones|Carter will begin conducting additional surveying and design engineering in order to incorporate the additional scope into the District’s original Phase II improvements.

Mr. Barron suggested that the District and MUD 9 appoint a joint committee authorized to make decisions regarding the joint drainage improvements along the GSU easement. Mr. Barron stated that Robert Ginandt and he will be appointed to such committee on behalf of MUD 9.

Mr. Barner stated that an interlocal agreement between the two (2) districts will need to be prepared in order to clearly set forth each district’s obligations and duties pertaining to such joint improvements. It was the consensus of the Board to appoint Directors Tryon and Moravec to such committee on behalf of the District. Mr. Barron then stated that the joint improvements will require an easement from one (1) of two (2) property owners and that such matter can be considered by the joint committee.

Mr. Abshire next reported that MUD 9’s engineer is currently designing drainage improvements along the GSU easement at Lake Estates Drive. Mr. Abshire explained that such improvements are solely a MUD 9 project, but that three (3) easements are required from residents located within the District; therefore, MUD 9 has requested the District’s assistance in obtaining such easements. Mr. Barner stated that he needs to coordinate with Jones|Carter further regarding such project and proposed easements prior to the Board’s authorization of the same.

Regarding Hydrotank No. 1 at Water Plant No. 1, Mr. Abshire reminded the Board that thickness measurements taken from the top of Hydrotank No. 1 during the additional inspection performed by Jones|Carter found that the thickness of the tank is below the minimum acceptable level of thickness in multiple locations; therefore, it is Jones|Carter’s recommendation that such tank be replaced. Mr. Abshire reported that Holloway America, LLC (“Holloway”), the manufacturer of Hydrotank No. 1, has agreed to provide a new hydrotank to the District at cost, which would be one-half (1/2) the cost included in Jones|Carter’s original estimate. Mr. Abshire further reported that Jones|Carter has agreed to waive the design engineering fees associated with the replacement of such tank. Mr. Abshire stated that Jones|Carter will only charge the District for costs associated with construction, administration, and inspection services related to the replacement of such tank, which will be one-half (1/2) the cost included in Jones|Carter’s original estimate for engineering fees. In response to a question by Director Patton, Mr. Abshire confirmed that Hydrotank No. 1 was originally coated by a subcontractor because such method was faster than coating such tank in the factory. Director Patton stated that a District engineer should be present for the coating of the replacement tank.

In response to a question regarding Hydrotank No. 2, Mr. Abshire stated that such tank was last drained and inspected in 2017. Mr. Abshire further stated that following the replacement of Hydrotank No. 1, once such replacement tank is operational, Hydrotank No. 2 will then be drained and inspected again.

Upon a motion by Director Tryon, seconded by Director Barlow, after full discussion and with all Directors present voting aye, the Board approved the replacement of Hydrotank No. 1.

Regarding the annual water plant inspection of Water Plant Nos. 1 and 2 as required by the Texas Commission on Environmental Quality (the “TCEQ”), Mr. Abshire reminded the Board that such inspections took place in January 2020. Mr. Abshire further reported that the inspection reports were prepared by Jones|Carter and sent to the Board for review. Mr. Abshire stated that the motor control centers and the buildings housing them are beyond their life expectancy at both of the District’s water plants. Mr. Abshire clarified that such motor control centers are not yet failing but need to be replaced. Mr. Abshire recommended that the District revise its capital improvement plan budget for the following year to include the replacement of such items.

Mr. Abshire stated that the District’s ground storage tank (the “GST”) is currently scheduled to be replaced next year but that the replacement of such tank is not as critical as the replacement of the motor control centers. Mr. Abshire recommended postponing the replacement of the GST until 2021. Mr. Abshire then stated that instead of replacing the buildings housing the motor control
centers, Jones|Carter may be able to relocate such centers into other existing buildings at the water plants.

Mr. Abshire then stated that the remaining repairs identified in the water plant inspection reports can be addressed by Hays, although some repairs will require the District to hire a subcontractor. Mr. Wright reported that he has prepared proposals for the Board’s review regarding such repairs. Director Moravec stated that the water plant inspection reports prepared in 2018 include several of the same recommendations that were made in the 2020 water plant inspection reports, particularly the recommendation that pumps be pulled and tested. Mr. Wright explained that pump motors are pulled and tested on an as-needed basis, and that whenever such testing is performed, it is included in the Operator’s Report. Mr. Wright agreed to notify the Engineer when such testing is performed by Hays. Director Moravec requested that the Engineer and Operator coordinate to verify that items noted in both the 2018 and 2020 water plant inspection reports are being addressed and resolved.

Mr. Abshire next updated the Board regarding the MUD 9 Buckingham Water Plant Project. Mr. Barron reported that the scheduled delivery of pumps was delayed, but such delay should not affect the project’s date of completion.

Next, Mr. Abshire reported on the District’s water well performance test. Mr. Abshire explained that G-M Services conducts performance testing on all the District’s water wells twice a year, once in autumn after the summer water demands have taken their toll on the aquifer, and once in the Spring, after the winter months have allowed the aquifers an opportunity to rebound again. Mr. Abshire reported that all three (3) of the District’s water wells are performing satisfactorily.

Upon a motion by Director Patton, seconded by Director Barlow, after full discussion and with all Directors present voting aye, the Board approved: 1) the Engineer’s Report, as presented; 2) Allco Pay Estimate No. 14 in the amount of $1,484,597.01; and 3) the water plant inspection reports.

OPERATOR’S REPORT

Mr. Wright presented the Operator’s Report, a copy of which is attached hereto.

Mr. Wright reported that the combined water accountability for the District and MUD 9 was 95.10%. Mr. Wright next reported that the District had one (1) new tap last month and that the District has a total of 1,755 connections.

In response to a question by Director Moravec regarding the District’s policy relating to terminating service to delinquent accounts during a natural disaster, Mr. Barner explained that the District does not have a policy in place and the Board makes such decisions as emergency situations arise. Mr. Barner then stated that in times of crisis, districts will typically suspend terminations of service. Mr. Wright reported that two (2) customers’ accounts were scheduled to have service disconnected last month due to late payment, but the AWBD and Montgomery County (the “County”) have requested that districts suspend termination of service during the ongoing COVID-19 crisis. Mr. Wright further reported that Hays did not terminate service to any accounts last month due to such request. Mr. Wright stated that standard letters were sent to such customers notifying them that their accounts are delinquent. Director Barlow suggested that the District suspend termination of service at this time and offer payment plans to delinquent customers. Mr. Barner suggested that the Board formally authorize temporarily waiving customers’ late fees and suspending termination of service to delinquent accounts. Director Moravec stated that if customers are alerted to the fact that the District is suspending termination of service, customers may be disinclined to make any further payments on their water bills.

Mr. Wright reported that members of the AWBD’s Emergency Operations Group are filing claims with the Federal Emergency Management Agency (“FEMA”) for lost revenue. Mr. Wright further reported that Hay is keeping track of the number of accounts within the District that become delinquent during the COVID-19 crisis so that the District may possibly recover such losses from FEMA. Mr. Barner stated that RBAP is also reviewing the District’s eligibility to obtain relief from FEMA, as well as researching potential relief offered through the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).

Next, Mr. Wright reported that H&H Utilities (“H&H”), Tachus’ general contractor, responded to Hays regarding requests for payment from H&H for damages to the District’s water lines caused during the installation of Tachus’ fiber-optic cables. Mr. Wright further reported that H&H reviewed the invoices sent to them by Hays and offered to pay for one (1) of the repairs thus far. Mr. Wright reminded the Board that the Operator’s Report includes a page dedicated to Tachus-related expenses, which is titled Reimbursables, and noted that three (3) new repairs were added to such page last month.

Mr. Wright then updated the Board regarding Hays’ response to the COVID-19 health crisis. Mr. Wright reported that Hays has closed its office to the public, but noted that customers can still make payments online or place payments in the drop-box located outside Hays’ office.

Mr. Wright stated that Hays has updated its website with information regarding such payment methods. Mr. Wright further reported that operators continue to work in the field on day-to-day operations of the District. Director Barlow stated that she will include an item in the community newsletter regarding customers’ ability to submit online payments. Mr. Wright then reported that
due to the toilet paper shortage caused by the COVID-19 crisis, operators have seen an increase in flushing of alternative materials, which can cause damage to the District’s wastewater facilities.

Director Barlow stated that she will include an item in the community newsletter regarding proper disposal of such alternative materials.

Upon a motion by Director Patton, seconded by Director Barlow, after full discussion and with all Directors present voting aye, the Board: 1) approved the Operator’s Report, as presented; and 2) authorized waiving customers’ late fees and suspending termination of service to delinquent accounts through the next sixty (60) days.

Regarding the District’s Emergency Preparedness Plan (the “EPP”), Mr. Wright reported that in preparation for hurricane season, Hays will inspect all of the District’s generators, check the power at the District’s water and wastewater facilities, and verify the District’s fuel supply. In response to a question from Director Moravec regarding whether the EPP has been updated since 2009, Mr. Wright stated that he will review the District’s current EPP and present to the Board for review any changes made from the 2009 EPP.

UPDATE ON DISTRICT’S WEBSITE AND COMMUNICATIONS SERVICES

Director Tryon reported that the San Jacinto River Authority (“SJRA”) published an article regarding performing chlorine treatment on drinking water. Mr. Barner noted that the District issues a statement regarding water quality in its Consumer Confidence Report. Mr. Wright stated that Hays has not received any calls from District customers questioning the District’s water quality. Director Barlow stated that she will include an article in the community newsletter stating that the District’s water is safe for customers to drink.

MISCELLANEOUS REPORTS

Director Patton reported that the Walden Community Improvement Association (“WCIA”) has been providing gloves and facemasks to residents.

Director Tryon next reported that he attended MUD 9’s March board meeting and sent a report regarding such meeting to the Directors.

Mr. Barron then reported that the Lone Star Groundwater Conservation District (“LSGCD”) recently issued proposed changes to their regulations. Mr. Barner stated that he is reviewing such proposed changes and will notify the District if there are any substantial changes that may affect the District. Mr. Barron further reported that the LSGCD will be voting on a new management plan next week.

ATTORNEY’S REPORT

Mr. Barner reported that in light of the COVID-19 emergency, the Governor of Texas has suspended certain provisions of the Open Meetings Act that relate to meetings held by telephone conference. Mr. Barner explained that suspension of such provisions allows the Board to conduct its meeting without having a quorum of the Board present in a physical location. Mr. Barner then suggested that the Board, as a precaution, may wish to establish a committee that is authorized to make decisions regarding routine business in the event that the Board is unable to hold a meeting by telephone conference call, but noted that it was not necessary to do so.

CONTINUING DISCLOSURE REPORT

Mr. Barner next explained that the District has an ongoing obligation to update, on an annual basis, certain financial information, as required by the District’s Bond Orders for all bond issues after 1995, which information will serve to keep bondholders and other interested parties apprised of the financial status of the District. Mr. Barner then requested the Board’s authorization to prepare and file such materials with the appropriate agencies, including the TCEQ, the TWDB, the Texas Comptroller of Public Accounts (the “Comptroller”) and the Electronic Municipal Markets Access website.

AUTHORIZE SUBMITTAL OF AUDIT REPORT FOR FYE DECEMBER 31, 2019 TO STATE COMPTROLLER

Mr. Barner next discussed submitting the FYE 2019 Audit to the Comptroller.

Upon a motion by Director Moravec, seconded by Director Patton after full discussion and with all Directors present voting aye, the Board: 1) authorized the Attorney to prepare and file the required continuing disclosure materials with the appropriate agencies, including the TCEQ, TWDB, and Comptroller; and 2) authorized the Attorney to file the Audit Report with the Comptroller.

THERE BEING NO FURTHER BUSINESS BEFORE THE BOARD, the meeting was adjourned.

PASSED AND APPROVED this the 13th day of May, 2020.

/s/ Margie Barlow
Secretary, Board of Directors