Meeting Minutes 2020-08-12

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

AUGUST 12, 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, August 12, 2020, at 9:00 a.m., via telephone and video 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 (the “Governor”) 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 (“COVID-19”) 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 and Conner Murphy of Jones|Carter (“Engineer” or “Jones|Carter”); Philip Wright of Hays Utility North Corporation (“Operator” or “Hays North”); Corey Howell of The GMS Group, LLC (“Financial Advisor” or “GMS”); Charles Barron, Director of Montgomery County Municipal Utility District No. 9 (“MUD 9”); 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. There being no public comments, the President directed the Board to proceed with the agenda.

APPROVAL OF MINUTES OF MAY 22, 2020 SPECIAL MEETING AND JULY 8, 2020 REGULAR MEETING

The President next directed the Board to the approval of the May 22, 2020 special meeting minutes. Director Moravec requested that the item in such minutes related to the Board’s approval of Radarview’s proposal be revised to include the costs for work to be performed by Radarview. Director Moravec then requested that such minutes be further revised to reflect that the Board approved Radarview’s proposal for such work in an amount not to exceed $5,000. Upon a motion by Director Moravec, seconded by Director Leasure, after full discussion and with all Directors present voting aye, the Board approved the May 22, 2020 special meeting minutes, subject to certain changes.

The President next directed the Board to the approval of the July 8, 2020 regular meeting minutes. Upon a motion by Director Leasure, seconded by Director Barlow, after full discussion and with all Directors present voting aye, the Board approved the July 8, 2020 regular meeting minutes as presented.

FINANCIAL ADVISOR’S REPORT

Mr. Howell then presented copies of his tax rate study for the proposed 2020 tax rates (the “Tax Rate Study”), a copy of which is attached hereto. Mr. Howell noted that there was a 4.51% increase in the District’s assessed valuation from 2019 to 2020. Mr. Howell then recommended a proposed total ad valorem tax rate of $0.2968 per $100 assessed valuation, comprised of $0.0511 per $l00 assessed valuation for debt service purposes and $0.2457 per $l00 assessed valuation for operation and maintenance purposes. Mr. Howell added that, based on a total tax of $0.2968, the average homeowner’s tax bill would increase approximately $29.00. Mr. Howell then reminded the Board that in light of the implementation of new statutory requirements under Senate Bill 2 (“SB 2”), he has recommended what is now known as the “Voter Approved” tax rate and that such rate does not exceed the 2019 tax rate by 3.5%. Mr. Howell then recommended that the Board authorize a transfer of $435,000 to the District’s debt service fund and budget for transfers in the next fiscal year into such fund in the approximate amount of $980,000. An extensive discussion ensued regarding Mr. Howell’s recommendations in the Tax Rate Study, including: 1) the components of the 2020 tax rate; 2) legal requirements and any restrictions on the amount of such components; 3) the amount of revenue the District should maintain in reserve annually; 4) the effect of SB 2 on the District’s tax rate; and 5) publication requirements for notice of the 2020 tax rate. In response to a question by Director Patton regarding the difference in costs related to operation and maintenance of the District’s new Wastewater Treatment Plant (“WWTP”) as compared to the existing WWTP, Mr. Abshire stated his opinion that such costs will be similar, but noted that a formal analysis has not been conducted. Director Patton requested that the Engineer and Operator coordinate to determine the difference in such costs between the new and existing WWTPs for the purpose of preparing the District’s budget for the Fiscal Year Ending (“FYE”) 2021. Upon a motion by Director Patton, seconded by Director Tryon, after full discussion and with all Directors present voting aye, the Board authorized: 1) publication of the proposed 2020 tax rate at $0.2968 per $100 of assessed value in the Conroe Courier; and 2) setting the public hearing regarding setting such rate at the regular meeting of Wednesday, September 9, 2020, at 9:00 a.m.

Ms. Bonds stated that she will coordinate with Mr. Howell to provide the requisite tax rate information to the Montgomery County (the “County”) Tax Assessor-Collector for publication of the notice of public hearing regarding setting the 2020 tax rate.

TAX ASSESSOR-COLLECTOR’S REPORT

Ms. Bonds reviewed the Tax Assessor-Collector’s Report for the month of June 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 98.21% of the 2019 taxes have been collected as of June 30, 2020.

Mr. Barner then informed the Board that the District’s Delinquent Tax Attorney, Linebarger Goggan Blair & Sampson, LLP (“Linebarger”), confirmed that lawsuits regarding the non payment of property taxes remain suspended during the COVID-19 crisis. Mr. Barner added that Linebarger will notify the District once the prosecution of such lawsuits resumes. Mr. Barner stated his recommendation that the Board table discussion regarding the termination of service to delinquent tax accounts until the September 9, 2020 Board meeting, if the prosecution of such lawsuits has resumed at that time.

Upon a motion by Director Tryon, seconded by Director Leasure, 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.

In response to a question from Director Moravec, Ms. Bonds explained that three (3) checks had been written on behalf of the District in 2019 that were never issued and were therefore voided.

Ms. Bonds next reported that she coordinated with Director Moravec to modify the Series 2018 Bonds Cost Comparison spreadsheet. Director Moravec explained that such modifications were made in order to provide the Board with a clearer understanding of the funds contained in the various project accounts and the amounts paid to date by the District for each project. A discussion ensued regarding the specific changes to such spreadsheet.

Director Moravec then explained the need for the District to transfer funds from the Drainage Fund and the General Operating Fund into the Bond Fund account in order to cover the expenses related to the District’s drainage improvement projects. Director Moravec stated that he is reviewing the District’s 5-Year Capital Improvement Plan (“CIP”) to determine whether or not the

District will need to issue bonds in order to fund such projects.

Next, Ms. Bonds discussed the Unclaimed Property Report and explained such report is required to be filed with the State Comptroller’s Office annually regarding customer funds that remain uncollected for three (3) years. Ms. Bonds stated that the Unclaimed Property Report and a check in the amount of $826.50 have been prepared and will be sent to the Comptroller’s Office following the Board’s approval of the same.

Ms. Bonds next presented the Quarterly Investment Inventory Report for the Period Ending June 30, 2020, a copy of which is attached hereto.

Upon a motion by Director Patton, seconded by Director Tryon, 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 8848 through 9205 from the General Operating Fund; 3) authorized payment of checks numbered 1968 through 1974 from the WWTP Fund; 4) authorized payment of checks numbered 1297 through 1300 from the Capital Projects Fund; 5) authorized filing of the Unclaimed Property Report; and 6) approved the Quarterly Investment Inventory Report for the Period Ending June 30, 2020.

ENGINEER’S REPORT

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

Mr. Abshire next discussed the progress made by Allco, LLC (“Allco”) in the past month regarding the WWTP Improvement Project (the “WWTP Project”). Mr. Abshire reported that installation of the underground electrical duct bank and pull boxes is complete. Mr. Abshire further reported that work has commenced on the demolition of the Motor Control Center/Blower Building foundation and the removal of debris.

Mr. Abshire then reported that an electrical easement is required between the District and Entergy Corporation (“Entergy”) in order to grant Entergy access to the transformer located at the WWTP. Mr. Abshire further reported that Jones|Carter is preparing the legal description for such easement and that Entergy will prepare the easement agreement and provide to the Attorney for review.

Mr. Abshire then presented Allco Pay Estimate No. 18 in the amount of $368,583.88 and recommended payment of same.

Mr. Abshire next presented Allco Change Order No. 8 in the amount of $24,987.00 and stated that such change order includes: 1) costs related to upsizing four (4) electrical pull boxes; and 2) a 60-day extension of the District’s contract with Allco. Mr. Abshire explained that once the pull boxes were delivered to the site of the WWTP Project, it was determined that they were too shallow. Mr. Abshire further explained that Allco requested that such pull boxes be upsized to allow for easier maintenance and stated that Jones|Carter agreed to such request. Mr. Abshire stated that the original pull boxes will be used in Phase II of the WWTP Project. Mr. Abshire went on to explain that Jones|Carter made a mistake in authorizing the installation of the original pull boxes and will therefore pay the $2,800.00 cost of labor related to the installation of the larger pull boxes. Extensive discussion then ensued regarding the 60-day contract extension included in Change Order No. 8.

Mr. Abshire discussed instances of trespassing recorded by the security trailer located at the WWTP. Mr. Abshire reminded that Board that it previously authorized rental of such security trailer for a two (2)-month period, which ends within the next few weeks, and recommended that the Board authorize extending such rental period for an additional two (2) months. Director Patton requested that Jones|Carter reach out to Allco regarding continued rental of the security trailer and sharing the cost of such rental. Upon a motion by Director Patton, seconded by Director Tryon, after full discussion and with all Directors present voting aye, the Board approved renewing the rental of the security trailer at the WWTP for two (2) more months and splitting the cost for such rental with Allco, with the District’s portion of such costs not to exceed fifty-percent (50%) of the total.

Upon a motion by Director Patton, seconded by Director Moravec, after full discussion and with all Directors present voting aye, the Board approved Allco Pay Estimate No. 18 in the amount of $368,583.88.

Regarding the Drainage Improvements, Phase II (Zones 7, 8 and 11), Mr. Abshire reported that the design plans submitted for such project were approved by the County. Mr. Abshire then requested the Board’s authorization to advertise and bid such project. Mr. Abshire next reminded the Board that a drainage easement is also required from the property owner at 3122 Heatherglen Road to allow for the enlargement of the storm sewer outfall pipe. Mr. Abshire reported that Jones|Carter is coordinating with such owner regarding the execution of such easement.

Mr. Abshire then reported that Jones|Carter has completed the design for the Joint Drainage Improvements with MUD 9 and presented an updated cost estimate for such work. Mr. Abshire explained that the portion of such costs that will be owed by MUD 9 has increased, while the portion owed by District remained the same. Upon a motion by Director Moravec, seconded by Director Patton, after full discussion and with all Directors present voting aye, the Board authorized Jones|Carter to advertise and bid Phase II of the Drainage Improvements Project.

Regarding hydropneumatic tank (the “HPT”) No. 1 at Water Treatment Plant (“WTP”) No. 1, Mr. Abshire reminded the Board that it authorized awarding the contract for such project to CFG Industries (“CFG”). Mr. Abshire explained that the HPT is expected to be delivered in late October, and Jones|Carter plans to issue the Notice to Proceed to CFG in September. Mr. Abshire then reminded the Board that it previously authorized execution of the contract with CFG following the Attorney’s review of same. Mr. Barner reported that he has reviewed such contract and provided comments to Jones|Carter. Mr. Abshire then stated that such comments were addressed by Jones|Carter and the contract was sent to CFG.

Mr. Abshire next updated the Board regarding the MUD 9 Buckingham WTP Project. Mr. Abshire reported that the Texas Commission on Environmental Quality (the “TCEQ”) denied MUD 9’s application to use the Buckingham Catahoula well, which will delay the Buckingham WTP Project by several months. Mr. Abshire explained that the TCEQ is requiring MUD 9 to flush the well and perform a full water quality analysis before such well is permitted to be placed into operation. Mr. Wright noted that such well is schedule to be flushed on August 21, 2020, and that samples will be taken from such well the following week. Mr. Abshire then presented Gemini Pay Estimate No. 6 in the amount of $327,781.98. Mr. Abshire noted that the District’s share of such pay estimate is fifty percent (50%) of the total, or $163,890.99. Mr. Abshire next presented Gemini Pay Estimate No. 7 in the amount of $733,503.76. Mr. Abshire noted that the District’s share of such pay estimate is fifty percent (50%) of the total, or $366,751.88. Upon a motion by Director Tryon, seconded by Director Patton, after full discussion and with all Directors present voting aye, the Board approved: 1) Gemini Pay Estimate No. 6 in the amount of $327,781.98; and 2) Gemini Pay Estimate No. 7 in the amount of $733,503.76.

Next, Mr. Abshire discussed the America’s Water Infrastructure Act of 2018 (the “AWIA”), which requires water districts serving more than 3,300 customers to develop and/or update their Risk and Resilience Assessments (“RRA”) and Emergency Response Plans (“ERP”). Mr. Abshire explained that the District’s RRA must be submitted to the U.S. Environmental Protection Agency (the “EPA”) by June 30, 2021, and the ERP must be submitted by December 30, 2021. Mr. Abshire explained that preparation of a RRA will include a detailed review of the District’s facilities by Jones|Carter. Mr. Abshire then presented a proposal including the scope and cost of such work and the anticipated schedule. Director Moravec recommended that the Board appoint a committee to meet with Jones|Carter regarding such work. Director Moravec requested that such committee present recommendations regarding such work at the Board’s regular November meeting. Mr. Barron requested that MUD 9 be included in the meeting with such committee and Jones|Carter. It was the consensus of the Board that Directors Tryon and Moravec meet with Jones|Carter, MUD 9, and MUD 9’s engineer to discuss the RRA and ERP.

Upon a motion by Director Leasure, seconded by Director Patton, after full discussion and with all Directors present voting aye, the Board approved the Engineer’s Report, as presented.

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 98.24%. Mr. Wright next reported that the District had four (4) new taps last month and that the District has a total of 1,761 connections.

Mr. Wright then reported that 181 notices were mailed to customers with delinquent accounts. Mr. Wright further reported that Hays North did not terminate service to such accounts last month pursuant to the Board’s decision at the April 8, 2020 Board meeting to waive customers’ late fees and suspend termination of service to delinquent accounts.

Mr. Wright next reported that 273 customers are currently enrolled to receive electronic statements from the District.

Mr. Wright next reported that installation is complete of the automatic transfer switches at the Waterfront Lift Station and Lake Estates Lift Station. Discussion then ensued regarding the inclusion of maintenance of certain lift stations in the District’s CIP.

Mr. Wright next reported that Hays North re submitted invoices to Tachus for damage to the District’s water lines caused during the installation of Tachus’ fiber-optic cables.

Next, Mr. Wright requested direction from the Board regarding resumption of the assessment of late fees and termination of service to delinquent accounts. In response to a question by Director Moravec regarding the number of delinquent accounts within the District, Mr. Wright reported that four (4) accounts are 60 days delinquent, with a combined outstanding balance of less than $1,000, and added that there are no accounts delinquent by 90 or more days.

Mr. Wright then reported that the valve location project is complete and a map indicating such valve locations was provided to Jones|Carter. Mr. Barner requested that Hays North prepare a report for the Board’s review in advance of its September 9, 2020 meeting regarding the findings from the valve location project.

Mr. Wright next presented a quote from Gallaga Tree Service, a company that Hays North typically contracts with for tree removal services, in the amount of $450.00 for the removal of several large tree branches that are growing near the Poe WTP. Mr. Wright stated that he reached out to one (1) other individual to request a quote, but has not received a response.

Mr. Wright then reported that all items on the 2020 Water Plant Inspection Action Item Summary (the “Inspection Summary”) are complete except for painting, which is scheduled to be completed on September 5, 2020.

Upon a motion by Director Patton, seconded by Director Tryon, after full discussion and with all Directors present voting aye, the Board: 1) approved the Operator’s Report, as presented; and 2) authorized Hays North to contract with Gallaga Tree Service to remove tree branches at the Poe WTP at a cost not to exceed $450.00.

UPDATE ON IMPLEMENTATION OF SERVICE FEE FOR STATEMENT BILLING

Director Patton then discussed the proposed implementation of a one time credit to be issued to those customers who sign up to receive electronic billing statements in order to encourage such customers to receive electronic billing statements and make electronic payments. Director Patton explained that those customers who already receive electronic billing statements will also be issued a credit, and explained that such credit will be applied to such customers’ next utility bill. Director Moravec stated that the District needs to do a better job of publicizing to customers the availability of electronic billing statements and electronic payments. Director Moravec suggested that Hays North insert a flyer into customers’ utility bills promoting the availability of electronic billing statements and further suggested that the District send an email to customers providing such information. Mr. Wright explained that the District will save $0.75 on printing and mailing costs for each billing statement that is delivered to a customer electronically rather than by mail.

Upon a motion by Director Patton, seconded by Director Moravec, after full discussion and with all Directors present voting aye, the Board: 1) authorized the issuance of a one time credit of $10.00 to customers who receive electronic billing statements; and 2) authorized Hays North to insert a flyer into customers’ utility bills promoting the availability of electronic billing statements. Director Moravec requested that Hays North prepare such informational flyer and distribute it to the Board for review prior to inserting such flyer into customers’ bills.

UPDATE ON DISTRICT’S WEBSITE AND COMMUNICATIONS SERVICES

Director Patton reported that he will coordinate with Ms. Shannon Waugh of Off Cinco regarding new website posting requirements as established by SB 2. Mr. Barner explained that the District is in compliance with the website requirements of SB 2 as they relate to elections and the issuance of bonds. Mr. Barner stated that he will coordinate with the Bookkeeper and Ms. Waugh to ensure that the District is compliant with the website posting requirements of SB 2 as they relate to the District’s budget and tax rate.

MISCELLANEOUS REPORTS

Director Leasure reported that he attended MUD 9’s board meeting, at which a new director was appointed to MUD 9’s board of directors. Director Leasure further reported that MUD 9 received a service request from Harbor Shores for Phase II of their construction project.

UPDATE ON RESOLUTION DELEGATING AUTHORITY TO CERTAIN DIRECTORS

Mr. Barner next discussed the Resolution Authorizing the Delegation of Certain Authority to the President and Vice President for Approval of Certain District Actions (the “Resolution”).

Director Patton requested that the Resolution be modified to delegate authority to either the Board President or Vice President plus one (1) other Director in order to approve decisions within a certain dollar value limit when a time-sensitive issue arises between Board meetings. Upon a motion by Director Patton, seconded by Director Moravec, after full discussion and with all Directors present voting aye, the Board approved the Resolution, subject to certain changes.

ATTORNEY’S REPORT

Mr. Barner next reported that he had previously provided the Board and MUD 9’s attorney, Clark Lord, a draft of the proposed interlocal agreement between the District and MUD 9 to set forth each district’s obligations related to the funding, construction, and operation of the Joint Drainage Improvements Project. Mr. Barner went on to explain that he also discussed such agreement with Mr. Barron, Board President for MUD 9 and that Mr. Barron had proposed certain changes related to the process for MUD 9’s payment for such project. Mr. Barner added that Mr. Barron had suggested certain other changes related to how the various components of the project are mentioned in the agreement. A discussion ensued. Upon a motion by Director Patton, seconded by Director Moravec, after full discussion and with all Directors present voting aye, the Board approved the Interlocal Agreement for Drainage Improvements with MUD 9 subject to the certain changes related to the process for payment of such improvements as requested by Mr. Barron.

Regarding the District’s agreement with the City of Huntsville (the “City”) for the purchase of its effluent, Mr. Barner reminded the Board that the City’s attorney informed him that the City is agreeable to granting the District and MUD 9 an extension to its option for such purchase and that he had send such option extension to the City’s attorney for review; however, the City has not yet approved such extension.

Mr. Barner reported that David Hartman, the General Manager of the Walden Community Improvement Association (the “WCIA”), informed him that the WCIA approved the deed for the conveyance of certain property from the District to the WCIA for use as a pocket park. Mr. Barner further reported that the executed deed has not yet been received from the WCIA.

Director Barlow exited the meeting at this time.

EXECUTIVE SESSION

Pursuant to Chapter 551 of the Texas Government Code, Subchapter D, of the Open Meetings Act, the President called the executive session to order at 12:46 p.m. to discuss matters within the attorney/client privilege. Present for all or portions of the Executive Session were the Board of Directors, except for Director Barlow; Mr. Abshire; Mr. Murphy; Mr. Barner; and Ms. Cain. The Board declared the Executive Session was ended at 1:18 p.m.

RECONVENE IN OPEN SESSION

As of 1:18 p.m., the President declared the Executive Session was ended and the public session was resumed.

Upon a motion by Director Moravec, seconded by Director Tryon, after full discussion and with all Directors present voting aye, the Board: 1) approved Allco Change Order No. 8 in the amount of $24,987.00; and 2) authorized Directors Tryon and Patton to coordinate with Jones|Carter to negotiate the amount of the contract extension requested by Allco in Change Order No. 8.

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

PASSED AND APPROVED this the 9th day of September, 2020.

Secretary, Board of Directors