Meeting Minutes 2021-08-11

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

AUGUST 11, 2021

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 11, 2021, 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, except for Director Barlow, thus constituting a quorum. Also attending were Maria Felder of Municipal Accounts & Consulting L.P. (“Bookkeeper” or “MAC”); Justin Abshire, Conner Murphy, and Josh Lee of JoneslCarter (“Engineer” or “JoneslCarter”); Philip Wright and John Wright of Hays Utility North Corporation (“Operator” or “Hays North”); Corey Howell of The GMS Group, LLC (“Financial Advisor” or “GMS”); Charles Barron and Robert Ginandt, Directors 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. There being no public comments, the President directed the Board to proceed with the agenda.

FINANCIAL ADVISOR’S REPORT

Mr. Howell then presented to and reviewed with the Board his tax rate study for the proposed 2021 tax rates (the “Tax Rate Study”), a copy of which is attached hereto. Mr. Howell noted that according to Montgomery Central Appraisal District, the taxable value of property within the District increased by $17,000,000 from 2020 to 2021. Mr. Howell went on to discuss with the Board a proposed total ad valorem tax rate of $0.3030 per $100 assessed valuation, comprised of $0.0521 per $100 assessed valuation for debt service purposes and $0.2509 per $100 assessed valuation for operation and maintenance purposes. Mr. Howell added that, based on a total tax rate of $0.3030, the average homeowner’s tax bill would increase by approximately $29.00.

Mr. Howell then explained to the Board that the tax rate presented does not exceed what is defined in Texas Water Code Section 49.23602 as the “Mandatory Tax Election Rate”. Mr. Howell further explained that were the District to adopt such rate, he would recommend that the Board transfer $400,000 from the General Operating Funds (“GOF”) to the District’s debt service fund and budget for transfers in the next fiscal year into such fund in the approximate amount of $1,150,000. Extensive discussion ensued regarding the Tax Rate Study.

Director Moravec next explained that the District’s available bond funds are already dedicated to the Wastewater Treatment Plant (“WWTP”) Improvement Project (the “WWTP Project”), Drainage Project and Buckingham Catahoula Well Project; therefore, the projects identified in the District’s current Capital Improvement Plan (“CIP”) will need to be funded using funds from the GOF. Director Moravec further explained that the District’s debt service requirements will also be increasing over the next five (5) years and that based on the District’s past approach for financing such requirements, combined with funding the CIP, all through the GOF, the Board should consider an increase in the tax rate in order to avoid a decline in the District’s operating reserve.

Mr. Barner then reminded the Board that for the 2020 tax year, he and the District’s Financial Advisor advised the Board that in their opinion, the District was a “developed district” as defined in Texas Water Code Section 49.23602; therefore, the District calculated the 2020 tax rate according to such section and the Board adopted a tax rate that did not exceed the Mandatory Tax Election Rate. Mr. Barner went on to explain that after further discussion with Mr. Howell and with those at RBAP about the District’s development status and the definition of a developed district under Texas Water Code Section 49.23602, Mr. Barner believes that the District should not be considered such a district; and therefore, the Board should formally declare itself to not be such a district and instead authorize the proposed 2021 tax rate be calculated pursuant to Texas Water Code Section 49.23603, which permits the District to adopt a tax rate that does not exceed the “Voter Approval Rate” as defined under such section, which is an amount that exceeds 1.08 times the amount of tax imposed by the District in the 2020 tax year. Mr. Barner noted that adopting a tax rate above the Voter Approval Rate might subject the District to a possible petition by the District’s voters to hold an election to reduce such tax rate. Extensive discussion ensued.

Upon a motion by Director Moravec, seconded by Director Patton, after full discussion and with all Directors present voting aye, the Board declared that the District is not a developed district according to Texas Water Code Section 49.23602 and requested that the Tax AssessorCollector calculate the District’s proposed tax rate pursuant to the Texas Water Code Section 49.23603.

Further discussion then ensued regarding the tax rate to be published in the Conroe Courier, as is required by Texas Water Code Section 49.236(b)(l). Upon a motion by Director Moravec, seconded by Director Patton, after full discussion and with all Directors present voting aye, the Board authorized: 1) the Tax Assessor-Collector to revise the District’s tax rate worksheet to reflect that the District is not a developed district; 2) publication of a proposed 2021 tax rate in the Conroe Courier at the Voter Approval Rate as calculated pursuant to Texas Water Code Section 49.23603, minus one-tenth (1/10) of one (1) penny; and 3) setting the public hearing regarding setting such rate at the regular meeting of Wednesday, September 8, 2021, at 9:00 a.m.

Mr. Howell stated that he will provide the requisite tax rate information to the Tax Assessor-Collector for publication of the notice of public hearing regarding setting the 2021 tax rate.

APPROVAL OF MINUTES OF JULY 14, 2021 REGULAR MEETING

The President next directed the Board to the approval of the July 14, 2021 regular meeting minutes. Upon a motion by Director Patton, seconded by Director Tryon, after full discussion and with all Directors present voting aye, the Board approved the July 14, 2021 regular meeting minutes, as presented.

TAX ASSESSOR-COLLECTOR’S REPORT

Ms. Felder then reviewed the Tax Assessor-Collector’s Report for the month of July 2021, a copy of which is attached hereto, including past monthly collections and credits as reported by the Tax Assessor-Collector for the District. Ms. Felder reported that 98. 76% of the 2020 taxes have been collected as of July 31, 2021.

Mr. Barner reminded the Board that annually, RBAP, on behalf of the District, sends letters to delinquent 2020 taxpayer account holders that are also water account holders in the District to inform them that the Board will conduct a hearing to terminate water service to such account holders unless taxes are paid or a payment arrangement is entered into with the District.

Mr. Wright stated that Hays North will coordinate with the Bookkeeper and Tax AssessorCollector to provide RBAP with an updated list of those 2020 taxpayer delinquent tax account holders that are also water account holders eligible for termination.

Upon a motion by Director Patton, seconded by Director Tryon, after full discussion and with all Directors present voting aye, the Board approved the Tax Assessor-Collector’s Report, as presented, including setting a public hearing at the September 8, 2021 Board meeting for termination of water service to eligible delinquent tax account holders.

BOOKKEEPER’S REPORT

Ms. Felder next reviewed the Bookkeeper’s Report, a copy of which is attached hereto, including the current fund balances, expenditures and investments. Ms. Felder reported that check nos. 9628-9631 and check no. 2055 are not included on such report but were submitted to the Directors for signature.

In response to a question from Mr. Barner, Ms. Felder stated that the District’s Quarterly Investment Report will be presented next month.

In response to a question from Mr. Barner, Ms. Felder reported that a draft of the District’s WWTP facilities’ budget for the Fiscal Year Ending December 31, 2022 was distributed to MUD 9.

Upon a motion by Director Leasure, seconded by Director Tryon, after full discussion and with all Directors present voting aye, the Board: 1) approved the Bookkeeper’s Report, as presented; and 2) authorized payment of checks detailed therein.

Director Moravec exited the meeting at this time.

ENGINEER’S REPORT

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

Mr. Abshire next update the Board on Allco, LLC’s (“Allco”) progress over the past month regarding the WWTP Project. Mr. Abshire reported that Sanitaire, the manufacturer for certain components of the Sequencing Batch Reactor (“SBR”), has reported, and JoneslCarter has observed, certain electrical deficiencies on such project. Mr. Abshire reminded the Board that Jones | Carter holds monthly progress meetings with Allco, at which such electrical deficiencies were discussed; however, he suggested that Mr. Barner send a letter to Allco demanding the need for immediate resolution of such electrical deficiencies.

Mr. Abshire next presented Allco’s Pay Estimate No. 30 in the amount of $321,596.97 for work performed on the WWTP Project. Mr. Abshire then presented Allco’s Change Order No. 12 in the amount of $12,625.00, which includes: a) installation of a rod mount for the lights on the SBR’s filter canopy; b) installation of a one-inch (1 “) conduit Ethernet cable; and c) removal and replacement of certain seals on certain terminal boxes. Mr. Abshire added that the WWTP’s lift station remains on bypass until the SBR is operational.

Mr. Abshire then reminded the Board that the District’s current Texas Pollution Discharge Elimination System (“TPDES”) permit for the WWTP expires on June 1, 2022, and that the renewal application is due to the State 180 days before expiration, or by December 3, 2021.

Mr. Abshire reported that JoneslCarter is coordinating with Hays North to prepare the TPDES permit renewal application on behalf of the District.

Regarding the Drainage Improvements, Phase II (Zones 7, 8 and 11 ), Mr. Abshire reported that such project is substantially complete and the final inspection was held on August 9th.

Mr. Abshire further reported that only minor items remain outstanding regarding repairs to a driveway on Heatherglen Road and repairs to certain irrigation systems. Mr. Abshire next presented AR Turnkee Construction Co.’s (“Turnkee”) Pay Estimate No. 2 in the amount of $451,950.93 and recommended payment of the same. Mr. Abshire noted that the District’s share of such pay estimate is $146,393.73.

Next, Mr. Abshire updated the Board regarding the cleaning and televising of a certain portion of the District’s wastewater collection lines. Mr. Abshire reported that Texas Pride Utilities, LLC will begin such project in the Estates of Walden once notice is provided to such residents.

Mr. Abshire then updated the Board on the Motor Control Center Replacement Projects for both the Poe Street Water Plant and the Browning Street Water Plant. Mr. Abshire reported that Jones | Carter held a meeting on August 9th with Directors Tryon and Patton to discuss the 30% design plans for such projects. Mr. Abshire further reported that the design plans for such projects are approximately 50% complete. Mr. Abshire then stated that JoneslCarter will provide aproposal for the pre-purchase of certain equipment required for such projects after first coordinating with RBAP regarding potential issues related to ownership of such equipment.

Upon a motion by Director Patton, seconded by Director Leasure, after full discussion and with all Directors present voting aye, the Board: 1) approved the Engineer’s Report, excluding Allco’s pay estimate and change order; and 2) approved Turnkee’s Pay Estimate No. 2 in the amount of$451,950.93.

OPERATOR’S REPORT

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

Mr. Philip Wright then reported that 501 customers are receiving electronic billing statements, which is an increase of 1 7 customers from last month.

Mr. Philip Wright next reported that the combined water accountability for the District and MUD 9 was 94.67%. Mr. Philip Wright further reported that there were three (3) new taps last month and that the District has a total of 1,792 connections.

Next, Mr. Philip Wright reported that five (5) accounts are 60 days delinquent and added that there are no accounts delinquent by 90 or more days.

Mr. John Wright then updated the Board regarding the status of the application that Hays North submitted on behalf of MUD 9 to the Lone Star Groundwater Conservation District (“LSGCD”) to increase the amount of water that MUD 9 and the District are permitted to pump from the Buckingham Catahoula Water Well. Mr. John Wright reported that the LSGCD board of directors approved such application at their meeting on August 10th . Mr. John Wright further reported that MUD 9 is now permitted to pump 225,000,000 gallons of water from such well annually.

Mr. Philip Wright then discussed the Notable Activity Report contained within the Operator’s Report, and noted that Hays North performed full load tests on the District’s generators, which is part of the regular maintenance of such generators.

Mr. Philip Wright next reminded the Board that two (2) sinkholes developed near the District’s stormwater drainage outfalls located in the Estates of Walden Subdivision. Mr. Philip Wright reported that the repair of one ( 1) outfall is underway, and repair of the second (2 nd) outfall will begin at the end of August.

Mr. Philip Wright then discussed certain townhomes located on Trail Hollow Drive that are individually metered, rather than served by one (1) master meter. Mr. Philip Wright explained that the private sewer line serving one ( 1) of the interior townhome units crosses beneath two (2) neighbors’ driveways before connecting to a manhole. Mr. Philip Wright further explained that the owner of such townhome unit televised such private sewer line and identified a blockage located underneath a neighbor’s driveway. Mr. Philip Wright requested clarification as to whether the private line is the sole responsibility of the owner of the property served by such line when such line passes through another individual’s property. Director Patton affirmed that the repair of such private sewer line is the responsibility of the owner of the property served by such line.

Director Patton then requested that Hays North provide such customer with contact information for a contractor who can excavate the driveway and repair such line.

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

UPDATE ON CLAIMS FILED FOR DAMAGES AGAINST TACHUS’ SUBCONTRACTORS

Regarding the status of claims filed for damages to various District water lines during the installation of Tachus’ fiber optic cables, Mr. Barner reminded the Board that the insurance provider for Structured Communications (“Structured”), one of Tachus’ subcontractors, has agreed to reimburse the District $10,146.27 for such damages. Mr. Barner further reported that RBAP is reviewing a release of claims provided by Structured and will coordinate with Director Tryon regarding the execution of such release.

UPDATE ON DISTRICT’S WEBSITE AND COMMUNICATIONS SERVICES

Director Patton reported that customer traffic on such website remains steady. Director Patton next reported that MUD 9’s board is considering launching a district website and authorized a request in MUD 9’s last board meeting for a quote from Off Cinco for the development and maintenance of the same, but had also discussed the possibility of having a joint website with the District. Director Patton then recommended that the District consider such proposal from Off Cinco for a single, comprehensive website containing information related to both districts. Upon a motion by Director Patton, seconded by Director Leasure, after full discussion and with all Directors present voting aye, the Board determined to consider such proposal for a joint website at its September 8, 2021 Board meeting.

MISCELLANEOUS REPORTS

Director Patton reported that he attended MUD 9’s board meeting last week and the board discussed depreciation of assets relating to the portions of the existing WWTP. Director Patton reminded the Board that portions of such WWTP will be demolished once the new WWTP is operational.

Director Patton then reported that MUD 9 asked Hays North to review the basis by which it calculates the District and MUD 9’s pumpage from the Jasper Water Well. Mr. Philip Wright explained that Hays North compares the percentage difference in the districts’ billed consumption and the percentage difference in the districts’ pumpage from such well. Mr. Barron noted that such calculation has not been updated in years.

Director Patton next reported that MUD 9 voted to resume assessing late fees and terminating service to delinquent accounts and recommended that the Board consider doing the same.

Director Patton then reported that MUD 9 discussed developing a chain of communication among the board and consultants for use during emergencies such as when a boil water notice must be issued, and recommended that the District consider discussion of the same.

In response to a question from Director Tryon regarding a lawsuit involving the San Jacinto River Authority (“SJRA”), Mr. Barner clarified that an appellate court ruled against the SJRA in its motion to dismiss such lawsuit. Mr. Barner stated that such litigation is still pending and that such dismissal was not the dismissal of the lawsuit itself.

AUTHORIZE ATTENDANCE AT ASSOCIATION OF WATER BOARD DIRECTORS’ (“A WBD”) FALL SEMINAR AND MID-WINTER CONFERENCE

The Board discussed the Directors’ attendance at the A WBD’s Fall Seminar and the Mid-Winter Conference to be held in Galveston, Texas, on January 28-29, 2022. Upon a motion by Director Leasure, seconded by Director Patton, after full discussion and with all Directors present voting aye, the Board authorized the Directors’ attendance at the A WBD Fall Seminar and Mid-Winter Conference.

Mr. Lee entered 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 11: 14 a.m. to discuss matters of attorney-client privilege. Present for all or portions of the Executive Session were the Board of Directors, except for Directors Moravec and Barlow; Mr. Abshire; Mr. Murphy; Mr. Lee; Mr. Barner; and Ms. Cain. The Board declared the Executive Session was ended at 11 :49 a.m.

Upon a motion by Director Patton, seconded by Director Leasure, after full discussion and with all Directors present voting aye, the Board: 1) authorized Mr. Barner to send a letter to Allco pursuant to the terms discussed in executive session; 2) approved Allco’s Pay Estimate No. 30 in the amount of $321,596.97, subject to receiving a response from Allco to RBAP’s letter; and 3) approved Allco’s Change Order No. 12 in the amount of$12,625.00.

Upon a motion by Director Patton, seconded by Director Leasure, after full discussion and with all Directors present voting aye, the Board authorized RBAP to send a letter and proposed agreement to the Walden Community Improvement Association pursuant to the terms discussed in executive session.

RECONVENE IN OPEN SESSION

As of 11 :49 a.m., the President declared the Executive Session was ended and the public session was resumed.

THERE BEING NO FURTHER BUSINESS BEFORE THE BOARD, the meeting was adjourned at 11 :52 a.m.

PASSED AND APPROVED this the 8th day of September, 2021.

Secretary, Board of Directors