* This transcript was created by voice-to-text technology. The transcript has not been edited for errors or omissions, it is for reference only and is not the official minutes of the meeting. [00:00:18] YES. GOOD. GOOD AFTERNOON. UM, WE'D LIKE TO WELCOME EVERYONE TO THE BAYTOWN AREA WATER AUTHORITY REGULAR MEETING. [ BAYTOWN AREA WATER AUTHORITY NOTICE OF MEETING BAYTOWN AREA WATER AUTHORITY REGULAR MEETING WEDNESDAY, SEPTEMBER 30, 2020 4:30 P.M. COUNCIL CHAMBER, CITY HALL 2401 MARKET STREET, BAYTOWN, TEXAS 77520 Due to the COVID 19 Disaster and the CDC's recommendation regarding social distancing measures, the public may not be allowed to be physically present at this meeting, as there is a limited amount of space when maintaining the required 6-feet separation from others. For those members of the public that cannot or do not wish to be physically present at the meeting, they will be able to participate through two-way communications. For video conferencing, use the following website www.zoom.com, click on "join a meeting" on the top right hand corner, and input the following Meeting ID: 872 5034 9902. For telephone conferencing please use the following toll-free number: 1-888-788-0099, Meeting ID: 872 5034 9902. Any person, who is participating through video/teleconferencing and is interested in speaking on any item on the agenda, must submit his/her request via email to the Board Assistant Secretary at cityclerk@baytown.org. The request must include the speaker's name, address, and phone number that will be used if teleconferencing as well as the agenda item number. The request must be received prior to the posted time of the meeting. The agenda packet is accessible to the public in both HTML and PDF formats at the following link: https://www.baytown.org/city-hall/city-clerk/agendas-minutes. After the meeting, a video recording of this meeting will be made available to the public at https://www.baytown.org/city-hall/city-clerk/agendas-minutes. For more information or questions concerning the teleconference, please contact the Office of the City Clerk at 281-420-6504. AGENDA CALL TO ORDER AND ANNOUNCEMENT OF QUORUM ] UH, CALL THE MEETING TO ORDER AND ANNOUNCE THAT WE HAVE A QUORUM. OUR [1. MINUTES] FIRST ITEM OF BUSINESS THIS AFTERNOON WILL BE TO CONSIDER APPROVING THE MINUTES OF THE AUTHORITIES REGULAR MEETING HELD ON AUGUST 19TH, 2020. SO MOVED. HAVE A MOTION. SECOND. MOTION IS SECOND. ANY QUESTIONS OR DISCUSSION? HEARING NONE. ALL THOSE IN FAVOR? AYE. OPPOSED? LIKE SIGNED? AYE. THAT WAS AN AYE FOR. YES. YES. UM, UH, THE MOTION CARRIED UNANIMOUSLY. UH, NEXT [a. Consider a resolution to approve the First Amendment to the Consulting Services Agreement with Carollo Engineers, Inc., for the Baytown Area Water Authority East Surface Water Treatment Plant Project.] WE WILL CONSIDER A RESOLUTION TO APPROVE THE FIRST AMENDMENT TO THE CONSULTING SERVICES AGREEMENT WITH CARILLO ENGINEERS FOR THE BAYTOWN AREA WATER AUTHORITY EAST SURFACE WATER TREATMENT PLANT PROJECT. GOOD AFTERNOON. CAROL IS HERE WITH US. UH, THEY'RE PRESENTING ANOTHER ITEM, I THINK JUST WANT TO POINT OUT THAT, UM, OUR ENGINEER IS HERE WITH US TODAY. UM, EARLIER ON IN THE YEAR, WE HAD ENTERED INTO AN AGREEMENT WITH COROLLA FOR SOME TECHNICAL ASSISTANCE RELATED TO THE COMMISSIONING AND STARTUP, AND SOME INTERACTION WITH THE TCAQ THAT WE ANTICIPATED. AND AT THIS TIME, WE'D LIKE TO, UM, CONSIDER AN ENHANCEMENT TO THAT CONTRACT, A CONTRACT AMENDMENT. AND IN THAT CONTRACT AMENDMENT WE'D LIKE TO DO SOME ADDITIONAL, UM, INTERACTION WITH THE TCEQ. THEY PROVIDED SOME VERY GOOD ASSISTANCE IN THAT. YOU KNOW, IT'S KIND OF TRICKY TO BRING THE SURFACE WATER PLANT TO THE POINT OF REGULATORY APPROVAL. AND THERE'S A LOT OF DISCUSSIONS THAT GO ON, UH, BACK AND FORTH, AND IT'S BEEN VERY HELPFUL. ADDITIONAL TO THAT, WE'D LIKE TO DO SOME, UH, STAFF TRAINING, KIND OF A SOFTER HANDOFF IN TERMS OF THE OPERATIONAL NEW EQUIPMENT OPERATIONAL TRAINING. AND SO WE HAVE A WORKSHOP SERIES OF KIND OF WATER 1 0 1 WORKSHOP FOR STAFF TO ATTEND. SO THE AMOUNT OF THE CONTRACT AMENDMENT IS 71, UM, THOU, OR PARDON ME, $72,000. SO THE NEW CONTRACT AMOUNT WILL BE $121,000. ALL RIGHT. THANK YOU. DO I HAVE A MOTION ON THE MOTION? SECOND. SECOND. ALL RIGHT. QUESTIONS OR DISCUSSION? WHAT, WHAT ARE WE GETTING FOR THAT EXTRA EXTENSION OR, WELL, AND, AND THIS, THIS ENGINEERING, UH, COMPANY IS SEPARATE AND APART FROM THE DESIGN ENGINEERS THAT, THAT DESIGN THE WATER TREATMENT PLANT. SO HOPE EVERYONE RECOGNIZE THAT. SO, YEAH, JUST A LITTLE BIT OF HISTORY. UM, WHEN WE FIRST ENGAGED, UH, COROLLA IN, IN THE CONTRACT, WE WERE NOT ABLE TO HAVE THE OPERATIONAL SUPPORT, UH, FROM THE DESIGN ENGINEER. THEY CAME TO US AND SAID THAT THE PERSON THAT THEY HAD BEEN HOPING FOR WAS NOT AVAILABLE AND WE WERE JUST ENDING THE MAJOR CONSTRUCTION ITEMS AND JUST STARTING COMMISSIONING, WE'RE ABOUT HALFWAY THROUGH. AND SO WHAT WE WANTED TO DO IS PROVIDE THAT, UH, SUPPORT AND, YOU KNOW, BASICALLY IT WAS SOMETHING THAT WAS NOT AVAILABLE FROM THE DESIGN ENGINEER. SO THAT'S WHERE WE STARTED OFF. AND SO NOW THAT WE'RE ABOUT HALFWAY THROUGH, UH, THE COMMISSIONING, WE ENVISION THAT THERE'S SOME MORE DISCUSSION THAT'S GONNA GO ON WITH THE TCQ TO GET THE REGULATORY APPROVALS THAT WE NEED, KIND OF NAVIGATE SOME OF OUR CONDITIONAL APPROVALS. THEY NEED TO LOOK AT DATA, THEY NEED TO KIND OF VET AND GO FORTH BACK AND FORTH WITH US A LITTLE BIT. NOW THE DESIGN ENGINEER IS STILL IN THOSE DISCUSSIONS, BUT THE MAJOR PART OF, OF THIS NOW IS KIND OF COMPLETING THAT CYCLE, AND THEN ALSO THE OPERATIONAL, UH, TRAINING WORKSHOPS FOR STAFF. OKAY. SO INDEED, AS YOU SAY IN HERE, TRAINING, SUPPORT, COORDINATION, AND COMMISSIONING. YES, SIR. STUFF THAT WE NEED FROM A FIRM LIKE THIS, YES. PERILLO IS BASICALLY THEIR SPECIALTY IS IN WATER. JUST LET THEM KNOW WHERE WE REMOVE SCOPE FROM . OH, THAT'S TRUE. SO WHEN, WHEN THE ENGINEER OF RECORD BASICALLY TOLD US THEY WERE NOT ABLE TO PROVIDE THAT, THAT SCOPE WAS DEDUCTED ON THAT ONE CONTRACT AND THEN ADDED IN THIS FORM. SO SORRY FOR THAT. UM, KIND OF LEFT THAT KEY PART OF THAT OUT. I WAS GONNA VOTE FOR IT ANYWAY, BUT THAT, THAT HELPS. ALRIGHT, ANY OTHER QUESTIONS OR DISCUSSION? HEARING NONE. ALL THOSE IN FAVOR SAY AYE. AYE. AYE. OPPOSED? LIKE SIGN. MOTION CARRIED UNANIMOUSLY. THANK YOU. [a. Receive an update on the Baytown Area Water Authority rate study.] UM, NEXT WE [00:05:01] WILL RECEIVE AN UPDATE ON THE AUTHORITIES' RATE STUDY. GOOD AFTERNOON. UH, IF YOU RECALL, UH, BACK EARLIER IN THE SUMMER, WE, UH, CAME TO YOU WITH AN ITEM TO EXAMINE OUR CURRENT RATE STRUCTURE AND, UH, WE CONSULTED WITH COROLLO ENGINEERING FOR THAT WORK. UM, THEY HAVE RETURNED TO PROVIDE AN UPDATE TO YOU ALL. UM, YES, SIR. HEY, HEY, LLOYD. THE DOCUMENT IS FROM SEPTEMBER 30. OH, S**T. I GUESS THAT'S TODAY, ISN'T IT? THAT'S OKAY. I'M JUST, IT IS NOT MATCHING UP WITH THIS AGENDA. ONE SECOND. LOOK RIGHT HERE. THE PEPPER LOSS AND WATER WORKS. THOSE ARE THE MINUTES. GOTCHA. OKAY. OKAY. SO YOU ARE, I'M SORRY. UH, THAT'S OKAY. YOU'RE HERE. YOU'RE GOOD. HE'S GOOD. I'M A LITTLE RUSTY. I APOLOGIZE FOR INTERRUPTING. IT'S OKAY. UM, AS I WAS SAYING, THEY, UH, ARE RETURNING TO PRESENT THEIR FINDINGS FOR YOU GUYS TODAY. UM, SO, UM, JENNIFER IVY WILL COME UP AND GIVE YOU THE REPORT. THANK YOU. ALL RIGHT. LET ME JUST PULL UP OUR SLIDES HERE. OKAY. SO, UM, AS STERLING SAID, I'M HERE TO JUST GO THROUGH OUR FINDINGS FROM OUR STUDY AND PRESENT THE RECOMMENDATIONS. OKAY. SO WE'RE GONNA FIRST TALK ABOUT OUR ASSUMPTIONS AND THE GOALS OF THE STUDY, AND THEN WE WILL GO THROUGH THE FINANCIAL PLAN. UM, THEN WE'LL TALK ABOUT THE PROPOSED RATES AND THE BILL IMPACTS FOR YOUR CUSTOMERS. OKAY. SO JUST A QUICK EXPLANATION OF THE PROCESS THAT WE GO THROUGH FOR ONE OF THESE STUDIES. UM, WE START OFF LOOKING AT YOUR POLICIES, LOOKING AT YOUR EXISTING RATE STRUCTURE, AND JUST TRYING TO GET A FEEL FOR, YOU KNOW, WHAT WE NEED TO TRY TO ACCOMPLISH AS PART OF THE STUDY. THEN WE GO INTO WHAT WE CALL A REVENUE REQUIREMENT ANALYSIS. THIS IS BASICALLY A FINANCIAL PLAN. SO THIS IS WHERE WE'RE LOOKING AT ALL OF YOUR O AND M EXPENSES, LOOKING AT YOUR CAPITAL, UM, PROJECTING THAT OUT. AND THEN WE'RE ALSO LOOKING AT YOUR REVENUES AND PROJECTING OUT WHAT YOU SHOULD BE BRINGING IN WITH YOUR EXISTING RATES AND DOING A COMPARISON TO SEE ARE YOU GOING TO BE BRINGING IN SUFFICIENT REVENUE TO FUND THOSE EXPENSES, OR IS THERE GONNA BE A GAP THAT WE NEED TO TRY TO FILL? SO PART OF THAT, UM, PROCESS IS TO LOOK AT YOUR DEMANDS. UM, SO WE USUALLY DO A DEMAND ANALYSIS NOW FOR AN AGENCY, UM, LIKE YOURSELF WITH, YOU KNOW, JUST A, A FEW CUSTOMERS THAT DEMAND ANALYSIS IS, IS FAIRLY SIMPLE. UM, BUT IT'S STILL AN IMPORTANT PROCESS TO MAKE SURE THAT IF WE SEE ANY TRENDS LIKE, UM, YOU KNOW, SIGNIFICANT CONSERVATION, WE WANNA BE SURE THAT WE'RE ACCOUNTING FOR THAT IN OUR ANALYSIS AND THAT WE STILL, UH, COME UP WITH SUFFICIENT, UM, RATES THAT WOULD PROVIDE SUFFICIENT REVENUE. SO ONCE WE HAVE THAT FINANCIAL PLAN, UM, AND WE KNOW THOSE REVENUE REQUIREMENTS, THAT TELLS US WHAT PERCENTAGE INCREASE YOU MIGHT NEED, UM, IF YOU DO NEED AN INCREASE. AND SO WE CAN TAKE THAT AND GO THROUGH A COST OF SERVICE ANALYSIS. AND THIS IS WHERE WE ALLOCATE COSTS BASED ON, UM, IF THOSE COSTS ARE ASSOCIATED WITH PROVIDING AVERAGE DAY DEMAND VERSUS A PEAK DEMAND. UM, AND WE CAN USE THAT ALLOCATION TO, UH, THEN ALLOCATE THE COST TO YOUR DIFFERENT TYPES OF CUSTOMERS BASED ON THE DEMANDS THAT THEY'RE PUTTING ON YOUR SYSTEM. AND THEN ONCE WE HAVE THAT DONE, THEN WE CAN ACTUALLY DESIGN THE RATES IN ORDER TO RECOVER THAT AMOUNT OF REVENUE FROM EACH CUSTOMER GROUP. AND THEN THE FINAL PIECE IS THE PUBLIC OUTREACH AND MESSAGING, WHICH BRINGS ME HERE TODAY. SO THIS IS A LIST OF THE BIG ASSUMPTIONS THAT WE MADE AS PART OF THE STUDY. UH, WE ASSUMED THAT CUSTOMER GROWTH WOULD INCREASE AT ABOUT 1% PER YEAR. WE DID USE, UH, 3% FOR GENERAL INFLATION AND ALSO FOR LABOR FOR ESCALATING YOUR COSTS. AND FOR WATER, WE ASSUMED 2.8% ANNUAL ESCALATION FOR YOUR WATER PURCHASING COSTS. UH, FOR FINANCIAL TARGETS, UH, YOUR POLICY IS TO MAINTAIN AN OPERATING ER RESERVE OF AT LEAST 90 DAYS OF O AND M EXPENSES. AND THEN WE HAVE A CAPITAL RESERVE THAT IS TARGETED TO BE BETWEEN, UH, 0.5% [00:10:02] AND 1% OF ASSET VALUE. AND THEN FINALLY, THE DEBT SERVICE COVERAGE IS 1.25 TIMES. SO THIS MEANS THAT, UM, YOUR NET REVENUE SHOULD BE AT LEAST 1.25 TIMES YOUR ANNUAL DEBT SERVICE, UM, IN EACH YEAR. OKAY. OKAY. SO GIVEN THOSE ASSUMPTIONS, WE'LL TAKE A QUICK LOOK AT THE FINANCIAL PLAN. SO WHEN WE PUT TOGETHER THE FINANCIAL PLAN, WE PLUG IN ALL THE NUMBERS AND OUR PROJECTIONS, AND THEN WE RUN IT THROUGH THREE SEPARATE TESTS. THE FIRST IS A BASIC CASH FLOW TEST. ARE YOU BRINGING IN MORE REVENUE THAN YOUR EXPENSES? UM, AND THAT'S NOT ALWAYS REQUIRED. UM, THERE ARE SOME YEARS WHERE WE PLAN TO HAVE A DEFICIT IN THAT GIVEN YEAR IF WE KNOW THAT WE HAVE CAPITAL RESERVES OR, OR EVEN OPERATING RESERVES THAT WE WANNA DIP INTO. BUT GENERALLY WE WANNA MAKE SURE THAT WE DON'T SEE A TREND OF HAVING A DEFICIT EVERY YEAR. THE SECOND TEST IS THAT DEBT COVERAGE TEST. WE CALCULATE THE PROJECTED DEBT COVERAGE IN EACH YEAR TO MAKE SURE THAT WE STAY AT AT LEAST THAT 1.25 TIMES, UM, THAT YOU HAVE, THAT WE TALKED ABOUT ON THE ASSUMPTION SLIDE. AND THEN THE FINAL TEST IS THAT RESERVE FUND TEST. WE PROJECT OUT YOUR RESERVE FUNDS FOR BOTH OPERATING AND CAPITAL TO MAKE SURE THAT YOU'RE ALSO STAYING ABOVE YOUR TARGETS. SO THIS SLIDE SHOWS YOU, UM, THE FIRST OF TWO SCENARIOS THAT I'M GONNA PRESENT. OKAY. AND THERE'S A LOT OF INFORMATION ON THIS SLIDE. SO WE CALL THIS SCENARIO OUR DO NOTHING SCENARIO. SO IN THIS SCENARIO WE HAVE THE 3% INCREASE FOR FISCAL YEAR ENDING 2021. UM, BUT THEN AFTER THAT WE'RE SHOWING, UH, NO INCREASE. SO IF YOU DID NOT DO ANY TYPE OF RATE INCREASE AFTER THIS YEAR, UM, WHAT WOULD THAT LOOK LIKE? UM, FINANCIALLY, SO YOU CAN SEE IN THE TABLE AT THE TOP, WE PROJECT OUT THE DEBT SERVICE COVERAGE IN EACH OF THOSE YEARS. AND GENERALLY IT STAYS PRETTY HIGH, UM, UNTIL YOU GET TO, UH, THAT LAST YEAR, FISCAL YEAR ENDING 2027, UM, WE'RE PROPOSING A DEBT ISSUANCE IN THAT YEAR. AND THAT'S BECAUSE YOU'LL SEE, UM, YOU SEE THAT BIG SPIKE, THE YELLOW SPIKE IN THE BOTTOM LEFT GRAPH, THAT'S WHERE YOU START TO HAVE, UM, CAPITAL COSTS, INCREASED CAPITAL COSTS FOR THE EAST PLANT EXPANSION PROJECT. UM, SO YOU'RE IN PRETTY GOOD SHAPE UNTIL YOU GET TO THAT, THAT PROJECT. UM, IN FACT, YOU KNOW, IF IT WASN'T FOR THAT PROJECT, THIS DO NOTHING SCENARIO WOULD WORK FOR YOU, BUT THEN YOU WOULD GET TO THAT YEAR WHERE YOU NEEDED TO START CONSTRUCTION FOR THAT PROJECT AND YOU WOULD HAVE A PROBLEM. ARE YOU SAYING THAT WE'RE GONNA BE RUNNING SHORT OF WATER AND, AND, AND THAT'S WHY WE NEED TO DO THIS EXPANSION? THAT WOULD BE A QUESTION FOR YOUR ENGINEERING STAFF. WE LOOK AT JUST THE FINANCIALS RIGHT NOW, THERE'S A PROJECTION FOR BALL EAST EXPANSION DUE TO, UM, DEMANDS, UH, AND CONTRACT REQUIREMENTS AND OBLIGATIONS. SO WE HAVE TO BE ABLE TO PROVIDE AND SHOW A CERTAIN AMOUNT OF CAPACITY, UH, TO BE ABLE TO MEET AND ONCE WE GET TOWARDS THE END OF, UH, THE CURRENT DECADE, RIGHT, SO THE END OF 20, THE, THE TWENTIES GOING INTO THE THIRTIES, UH, IS SHOWING RIGHT NOW THAT WE SHOULD BE IN CONSTRUCTION, IN CONSTRUCTION FOR BALL EAST FOR THE EXPANSION. OKAY. DID THAT ANSWER YOUR QUESTION? YEAH, THAT'S, THAT'S KIND OF NEW TO US. OKAY. AT LEAST. BUT THERE'S A LOT OF, AND THERE'S A LOT OF MOVING PIECES WITH THAT QUESTION. SO STAFF'S NOT SITTING HERE TODAY SAYING, WE ARE GOING TO CONSTRUCT AN, AN EXPANSION IN 2026. THAT'S KIND OF WHERE THE PLAN SHOWS TODAY. SO WE WANTED TO GET IT IN THIS MODEL SO WE, WE COULD LOOK AT KIND OF, OKAY, WHAT WOULD THE WORST CASE FINANCIAL PICTURE BE IN TERMS OF THAT LARGE CAPITAL EXPENDITURE? BUT YOU KNOW, FRANK AND HIS TEAM ARE WORKING REALLY HARD TO MOVE THAT DATE AS FAR BACK AS WE CAN GET IT. SO, UM, YOU KNOW, IF WE CAN DO WHAT WE NEED TO DO. UH, NOW SOME OF THIS DOES DEPEND ON, ON GROWTH IN THE COMMUNITY, BUT IF WE CAN MAKE SOME CHANGES TO CONTRACTS AND IDEALLY GET ENOUGH CAPACITY, UH, BUILT UP THERE, WE'RE GONNA TRY AND PUSH BACK THAT DATE. SO I WOULD LOOK AT THIS AS KIND OF HOPEFULLY THE WORST CASE SCENARIO THAT WE WOULD HAVE. FRANK, YOU HAVE ANYTHING TO ADD ON THAT? I WAS JUST GONNA SAY, I, I THINK THIS COST HERE WOULD BE FOR THE DESIGN COST. SO THIS, THIS [00:15:01] IS NOT ASSUMING WE'RE GONNA CONSTRUCT IN FY 26 THAT WOULD BE GOING TO DESIGN. AND THEN, SO IF YOU LOOK THREE YEARS OUT, BUT FROM THAT TWO, THREE YEARS OUT, THEN THERE WOULD BE THE CONSTRUCTION COST. SO AS NICK SAID, WE'RE TRYING TO REWORK SOME OF OUR CONTRACTS SO WE DON'T, WE CAN DELAY THAT AS MUCH AS POSSIBLE AND, AND NOT HAVE EXCESS CAPACITY. SO YOU'RE SHOWING WELL OVER 12, 13 MILLION AND JUST FOR SOMEONE TO DESIGN THE NEXT MODULE ON THE PLANT WE JUST BUILT, IS THAT WHAT I, IS THAT WHAT I'M HEARING? UM, THAT, THAT SEEMS, THAT SEEMS RICH. I'D HAVE TO GO BACK AND LOOK AT THE ASSUMPTIONS, BUT I, WE WOULD NOT BE CONSTRUCTING IN 26. OKAY. THAT, THAT WOULD BE DESIGN. COULD, COULD YOU GIVE A A, A BRIEF AND, AND I ACTUALLY, I THINK THAT'S A COMBINATION OF DESIGN PLUS OUR, ALL OF OUR GRAND STORAGE TANKS. WE DELAYED THAT PROJECT FOR FIVE YEARS SO THAT WE COULD GET THROUGH, YOU KNOW, THE BA EAST. SO I THINK IT'S A COMBINATION OF REHABBING ALL THE GROUND STORAGE TANKS AND STARTING THE DESIGN ON BA EAST. OKAY. I'M SORRY, I DIDN'T MEAN TO NO, GO AHEAD. NO, BACK UP. THE WORKS IT TO, TO WRAP UP THE, OR FINALIZE THAT CONVERSATION. COULD YOU GIVE THE, THE BRIEF OVERVIEW OF THE COMMISSION'S REQUIREMENTS ON, UH, AT WHAT PERCENTAGE YOU HAVE TO BE IN DESIGN AND WHAT PERCENTAGE YOU HAVE TO BE IN CONSTRUCTION SO THAT THE BOARD CAN I'LL GET SOME HELP. I THINK IT'S, UH, 75%, I THINK YOU'RE 75. 75. 75% YOU HAVE TO BE IN DESIGN AND 90 IN CONSTRUCTION. IN CONSTRUCTION. RIGHT, RIGHT. SO, SO THOSE ARE THRESHOLDS. YOU CAN'T WAIT UNTIL YOU ACTUALLY RUN OUT OF CAPACITY, YOU KNOW, OB TO, TO START. SO THOSE ARE CONSIDERATIONS. RIGHT. OKAY. AND ONE OF THE BEAUTIES OF WHAT WE'VE DONE WITH EAST IS MAKE IT EXPANDABLE, RIGHT? YES. AS OPPOSED TO CREATING A WHOLE NEW PLANT. THERE'S CERTAIN, CERTAIN THINGS THAT, YOU KNOW, WE DON'T HAVE TO BASICALLY DOUBLE THE PLANT. THERE ARE THINGS THAT WERE CONSTRUCTED THAT WOULD ALLOW A 12 MGD PLANT TO EXIST THERE, YOU KNOW, SO THERE, THERE ARE SOME, UH, SYNERGIES THAT WE HAVE IN PLACE. SO SUCH AS LIKE THE FOUR BAY, THERE'S, THERE'S ONLY ONE FOUR BAY FOR A 12 MGD PLANT. WE'VE ALREADY BUILT THAT, SO WE DON'T HAVE TO BUILD THAT, BUT, YOU KNOW, WE HAVE TO BUILD ANOTHER TREATMENT TRAIN. SO THE, THE GOING FROM SIX TO 12 WON'T BE AS EXPENSIVE AS BUILDING THE SIX MGD PLAN. OKAY, THANKS. OKAY. SO, SO THEN WHEN WE DO GET OUT TO FYE 26 AND WE HAVE TO START FUNDING THOSE DESIGN COSTS, ASSUMING THAT THIS PLAYS OUT THE WAY THAT IT'S NOW PROJECTED TO, UM, YOU CAN SEE THAT IN THAT YEAR, THAT'S WHEN WE EXHAUST OUR, UH, CAPITAL RESERVE AND WE HAVE, YOU KNOW, WE START TO DIP DOWN TO THAT 1.25 COVERAGE. SO WE WOULD HAVE TO USE RATE REVENUES TO HELP OFFSET THOSE CAPITAL COSTS. AND THAT'S WHY YOU SEE THAT YELLOW BLOCK THERE THAT'S SAYING THIS IS HOW MUCH OF THE RATE REVENUES WE WOULD NEED TO USE IN ORDER TO FUND ALL OF THE CAPITAL PROJECTS THERE. THAT THAT BLOCK ISN'T JUST FOR THIS EXPANSION THAT INCLUDES ALL OF THE CIP IN THAT YEAR. IT'S JUST THAT IT JUMPS UP PRETTY HIGH IN THAT YEAR BECAUSE THAT'S WHEN WE START THE PROCESS FOR THAT EXPANSION. SO THEN IN FYE 27, WE WOULD PROJECT THAT, UH, WE WOULD NEED TO BORROW ABOUT $25 MILLION TO CONTINUE WITH THAT PROJECT. AND SO THAT WITHOUT A RATE INCREASE, WOULD THEN BRING YOUR COVERAGE DOWN BELOW THAT 1.25 TARGET THAT WE HAVE. UM, AND ALSO YOU CAN SEE IN THE GRAPH ON THE RIGHT, UM, YOUR OPERATING RESERVES WOULD'VE DIPPED DOWN, UM, DOWN TO 0.5 MILLION. SO WAY BELOW YOUR TARGET, UM, IN 2026, IT WOULD COME BACK UP IN, UH, 2027, BUT YOUR CAPITAL RESERVE WOULD BE NEGATIVE. SO, UM, SO THAT'S THE DO NOTHING OPTION. UM, SO, YOU KNOW, WHILE AS I SAID, YOU KNOW, INITIALLY IT LOOKS LIKE THIS WOULD BE FEASIBLE, UM, WE DID EXTEND OUR FINANCIAL PLAN WINDOW BECAUSE IN OUR DISCUSSIONS WITH STAFF, WE UNDERSTOOD THAT THIS EXPANSION IS COMING, AND RIGHT NOW IT IS PROJECTED TO BE IMMEDIATELY AFTER THE FIVE YEAR WINDOW THAT WE MIGHT NORMALLY LOOK AT. AND SO WE, WE [00:20:01] WANTED TO EXTEND OUR WINDOW A BIT JUST SO THAT, YOU KNOW, YOU CAN, CAN SEE THE IMPACTS OF THAT AND THEREFORE MAKE SOME DECISIONS IN THESE FIRST FEW YEARS THAT MIGHT OFF OFFSET, OFFSET A LARGE INCREASE, A LARGE RATE SPIKE THAT YOU MIGHT NEED. IF THIS DOES HAPPEN AS IT SHOWS THAT IT MIGHT PLAY OUT, DO DO YOU HAVE A SCENARIO WHERE IT SHOWS A 3% INCREASE EVERY YEAR? BECAUSE THAT'S, THAT'S OUR CURRENT OPERATING MODE. OKAY. BECAUSE THIS IS NOT REALLY REALISTIC, RIGHT? YOU'RE RIGHT. IT'S NOT. SO WE, OUR NEXT OPTION IS NOT A 3%, UM, BUT WE DID SHOW, YOU KNOW, WHAT, BASED ON THESE PROJECTIONS, WHAT WE WOULD RECOMMEND, AND IT'S TO BUMP UP TO 6% IN EACH YEAR. AND SO YOU CAN SEE THAT THAT, YOU KNOW, GETS YOU, UM, PAST THAT INITIAL HUMP IN 2026 AND 2027 WHERE YOU START THAT PROJECT. IT ALLOWS YOU TO BUILD UP SOME RESERVES, UH, AND TO SLOWLY INCREASE THAT REVENUE FROM RATES SO THAT YOU CAN MEET YOUR TARGET COVERAGE AND YOUR TARGET RESERVES. AND ANY QUESTIONS ON THIS BEFORE WE MOVE ON? NO. OKAY. SO THEN WHAT WOULD THAT LOOK LIKE IF WE WERE TO DO THOSE INCREASES? UM, YOU CAN SEE HERE THIS IS THE 3% INCREASE IN THE FIRST YEAR. UH, AND YOU, THIS SHOWS OUR REVENUE REQUIREMENT, UH, FOR FISCAL YEAR 2021 AS COMPARED TO THE PROJECTED REVENUE THAT YOU WOULD BRING IN FOR FISCAL YEAR 20. UM, AND SO YOU CAN SEE THERE THE 3% AND WE WOULD BE GETTING ABOUT SEVEN AND A HALF PERCENT OF THAT FROM THE OTHER DISTRICTS AND 2.4% OF THAT FROM THE CITY OF BAYTOWN. AND THIS IS WHAT THOSE PROPOSED RATES WOULD BE. SO THIS IS 3%, BUT WE'VE GONE THROUGH THE ALLOCATION PROCESS TO FIGURE OUT, WELL, HOW SHOULD WE ALLOCATE THAT 3%? SO THAT'S 3% OVERALL REVENUE, BUT WE WANNA MAKE SURE THAT IT'S BEING RECOVERED FROM THE CUSTOMERS THAT ARE, UH, PUTTING MORE DEMAND, MORE PEAKING DEMAND ON THE SYSTEM. AND SO THAT'S WHY, UM, BASED ON THE ANALYSIS THAT WE DID, UM, THE CITY OF BAYTOWN HAS A LOW PEAKING FACTOR. AND SO THAT'S WHY THEY BENEFIT FROM A, A LOWER RATE. UM, THEY CURRENTLY ALREADY BENEFIT FROM A LOWER RATE. UM, AND SO BASED ON OUR ANALYSIS, THEY WOULD CONTINUE TO BENEFIT FROM A LOWER RATE, BUT THAT GAP BETWEEN THE TWO RATES WOULD INCREASE, UH, BECAUSE THE OTHER, UH, THE OTHER CUSTOMERS HAVE A MUCH HIGHER PEAKING FACTOR AS A GROUP. AND THEN THIS CHART SHOWS A PROJECTION OF THE RATES. IF WE GO OUT ALL THE WAY TO FISCAL YEAR 25, YOU CAN SEE HOW IF WE IMPLEMENT THE 6% AFTER THIS FIRST YEAR, HOW THOSE RATES WOULD GROW. AND SO NOW WE'LL LOOK AT THE IMPACTS OF THAT ON THE CUSTOMERS. SO THIS FIRST TABLE, AGAIN, JUST SHOWS THE FIRST YEAR AT 3% INCREASE. AND YOU CAN SEE FOR EACH OF THE CUSTOMERS, WE ARE USING THEIR AVERAGE AUGUST USAGE. SO WE WANTED TO PICK THAT MONTH THAT, YOU KNOW, WE WOULD EXPECT TO BE THE WORST AS FAR AS THEIR USAGE GOES. AND YOU CAN SEE THE, WHAT THEY WOULD PAY OR WHAT THEY ARE PAYING FOR FY 20 UNDER THE EXISTING RATES COMPARED TO WHAT THEY WOULD BE PAYING, UH, FOR AUGUST UNDER THE PROPOSED FY 21 RATES. AND THEN YOU SEE THE VARIANCE ON THE FAR RIGHT. AND THEN THIS WOULD SHOW THE PROJECTION, UH, OUT ALL THE WAY TO FY 25, ASSUMING 6% ANNUAL INCREASES. AND THIS SHOWS YOU THE IMPACT ON THE CITY OF BAYTOWN GRAPHICALLY. AND THEN THIS SHOWS YOU A GRAPH OF THE IMPACT FOR THE [00:25:01] OTHER DISTRICTS. OKAY. AND THEN WE HAVE CHARTS FOR EACH ONE OF THEM SO THAT YOU CAN SEE THEM A LITTLE MORE CLEAR. AND I CAN GO BACK TO ANY OF THESE IF YOU NEED TO LOOK AT ANY OF THEM IN MORE DETAIL. UM, BUT THAT'S, THAT'S BASICALLY THE BILL IMPACTS THAT WE HAVE. SO THAT'S WHAT WE WANTED TO BRING TO YOU TODAY FOR DISCUSSION. IS THAT THE END OF THE PRESENTATION? YES, THAT'S THE END OF OUR PRESENTATION. I, I HAVE A QUESTION. SURE. DO YOU HAVE, WELL, I, YOU DON'T, IF THIS IS THE END OF THE PRESENTATION, UH, I WOULD BE CURIOUS WHAT THE IMPACT WOULD BE ON THE INDIVIDUAL CUSTOMER. SO THIS, THIS IS, UH, ON THE, THE HOMEOWNER, THE, THE USER OF THE WATER. THIS IS SHOWING, YOU KNOW, HOW MUCH THOSE MUD DISTRICTS OR OTHER ENTITIES ARE PAYING US TO BUY THE WATER IN BULK, BUT THEN THEY HAVE TO IN TURN, UH, SELL IT. AND SIMILARLY WITH THE, THE CITY OF OF BAYTOWN, THERE'S A MINIMUM BILL TYPICALLY MM-HMM . UH, FOR THESE, UH, PEOPLE. AND, UH, I THINK THAT WOULD BE ILLUSTRATIVE FOR DISCUSSION. MM-HMM . AND, AND THAT IS WHERE IT GETS A, IT GETS A LITTLE MORE COMPLICATED. I GUESS THIS YEAR'S A GOOD EXAMPLE. SO AS YOU ALL DID APPROVE THE 3%, WHICH WAS SHOWN IN THE CHARTS THERE FOR THIS UPCOMING FISCAL YEAR, BUT THE CITY DID NOT INCREASE WATER AND SEWER RATES AT ALL. SO BOWEL RATE WENT UP, BUT WHAT'S PASSED ONTO THE CUSTOMERS ACTUALLY DIDN'T GO UP AT ALL THIS FISCAL YEAR AT LEAST. SO IT KIND OF DEPENDS BECAUSE THE DIFFERENT, WHETHER IT'S THE CITY OF BAYTOWN OR THE VARIOUS MUDS, THEY MAY NOT, DEPENDING ON THEIR FINANCIAL SITUATION, THEY MAY NOT ALWAYS PASS ALONG THAT SAME RATE INCREASE. THEY MAY PASS ALONG MORE, MORE OR LESS JUST DEPENDING ON WHAT OTHER IMPROVEMENTS THEY'RE MAKING TO THEIR SYSTEM. THAT'S A GOOD POINT. SO CAN I ASK A QUESTION PLEASE? SURE. UM, I UNDERSTAND THAT, HEY, WE'RE GONNA HAVE AN EXPANSION NEEDED, WE'RE GONNA NEED SOME MONEY, LET'S GO AHEAD AND START SLOWLY RAISING OUR RATES TO BE PREPARED FOR THAT. BUT I'VE BEEN HERE A FEW YEARS AND I DON'T REMEMBER GOING TO A 6% RATE IN ORDER TO BUILD A $50 MILLION BA EAST EITHER. I MEAN, WHY DID WE NOT HAVE TO DO THAT FOR THAT? YOU KNOW WHAT I'M SAYING? WERE WE JUST IN THAT GOOD A FINANCIAL POSITION THAT WE NEVER HAD TO ADD 6% FOR THE LAST SEVEN OR EIGHT YEARS TO BE ABLE TO PLAN FOR THAT? YOU KNOW, I'M, I'M NOT ABLE TO ANSWER THAT QUESTION BECAUSE I DON'T KNOW WHAT THE FINANCIALS LOOKED LIKE AT THAT TIME. UM, I, I DON'T KNOW IF STAFF HAS AN ANSWER TO THAT. UH, A COUPLE THINGS. UM, FOR PREVIOUS, AS IT RELATES TO NOW, UH, ONE OF THE THINGS WERE, UH, PREVIOUSLY WE HAD A RATE STUDY AND, AND WE WERE, TO YOUR POINT, INCREASING THE RATES. UM, OVER THE LAST FEW YEARS YOU'LL RECALL WE HAVE NOT INCREASED RATES. UM, SO THAT'S ONE COMPONENT. UH, NOT GOING INTO TWO DIFFERENT TOO MANY DETAILS 'CAUSE I'M NOT IN FINANCE, BUT, UM, I KNOW THAT THERE WAS ALSO SOME DEBT SERVICE THAT WE DID AS WELL, UM, TO HELP WITH SOME OF THOSE COSTS. SO YEAH, IT, IT JUST SEEMS TO ME 6%, YOU KNOW, IF YOU DID IT ONE YEAR, IT'S ONE THING, BUT FOUR OR FIVE YEARS IN A ROW. AND, AND THAT'S, IF, IF YOU'RE TALKING ABOUT INDIVIDUAL PEOPLE, UH, ESPECIALLY PEOPLE ON FIXED INCOME, THAT'S GONNA BE A HUGE BURDEN. I UNDERSTAND. RIGHT. BUT, BUT REMEMBER, THESE PERCENTAGES AREN'T JUST AS HE WAS SAYING, PERCENTAGES PASSED ON TO YOUR WATER BILL. WELL, WE DON'T KNOW THAT. WE DON'T KNOW WHAT THEY COULD BE. YEAH. WE, WE DON'T KNOW WHAT'S GOING TO HAPPEN IN HIGHLANDS OR MCNAIR OR, BECAUSE, I MEAN, LOOK AT THE, FROM THE FLIP SIDE, CITY OF HOUSTON INCREASES OUR RATES EVERY YEAR. BA HASN'T ENDED UP PASSING THAT ALONG EVERY YEAR. SO IT, THERE ARE SO MANY OTHER FACTORS INVOLVED. UM, AND LIKE I SAID, I THINK THIS IS THE WORST CASE AND, AND IT IS A MODEL. SO THERE'S THINGS THAT WE'RE GONNA WORK ON FROM NOW UNTIL THIS NEXT BUDGET YEAR TO WHERE WE MAY LOOK AT AND SAY, YOU KNOW WHAT, IT'S NOT THE RIGHT TIME TO START WITH 6%, OR WE'VE REVISED OUR ANALYSIS AND WE DON'T THINK THAT PLANT'S GONNA NEED TO BE DONE FOR TWO OR THREE MORE YEARS AFTER THAT. AND THAT CHANGES THE MODEL A LITTLE BIT. AND INDEED THIS IS A RATE STUDY, NOT A RATE REQUEST APPROVAL. CORRECT. OKAY. RIGHT. I I WAS GONNA ADD THAT THIS IS, YOU KNOW, FOR, FOR DISCUSSION AND PLANNING PURPOSES NOW, WE'RE NOT ASKING FOR ANY ACTION AND TO NICK'S POINT, [00:30:01] WE'RE GOING TO RE-LOOK AT THE ASSUMPTIONS BY THE TIME WE START DISCUSSING RATES FOR FY 22, SO WE HAVE SOME TIME TO, YOU KNOW, UPDATE THE PROJECTIONS AS YOU KNOW, BEFORE WE NEED TO ASK YOU TO TAKE ANY ACTION. OKAY. AND SO THAT, THAT LEADS STRAIGHT INTO MY QUESTION, WHICH IS WHEN WHEN WOULD YOU ANTICIPATE THAT WE WOULD BE NEEDING, UH, LET'S, LET'S JUST SAY THAT IT WAS A FOUR MAKE UP A NUMBER, A 4% INCREASE. WE DECIDED WHEN WILL WE BE VOTING ON THAT OR CONSIDERING THAT FOR A VOTE, UH, YOUR NEXT BUDGET. SO NEXT SUMMER. OKAY, SO APPROXIMATELY A YEAR AWAY, RIGHT? CORRECT. THANK YOU. AND I THINK IT IS A, IT IS A GOOD REMINDER THOUGH BECAUSE THE LAST RATE STUDY INDICATED DOING 3% EVERY YEAR. AND A LOT OF TIMES WHEN YOU GET INTO THE BUDGET PROCESS, YOU SAY, WELL, THIS YEAR WE DON'T NEED THAT 3%. AND A LOT OF TIMES YOU FORGET TO KIND OF LOOK FORWARD INTO THE FUTURE. AND I THINK IT PROBABLY THE COUPLE YEARS THAT WE DIDN'T DO THE THREE WE SHOULD HAVE, AND THIS MODEL WOULD, WOULD DEFINITELY LOOK DIFFERENT IF WE HAD DONE THOSE THREE PERCENTS. THAT'S MUCH BETTER THAN HAVING TO SAY, HEY, NOW WE NEED 6% EVERY YEAR. SO IT'S TOUGH WHEN YOU HAVE THESE MODELS AND THEN YOU SKIP A COUPLE YEARS. UM, SO WE WANT TO SMOOTH THAT AS MUCH AS WE CAN. THAT'S WHAT WE'RE GONNA WORK ON DOING FROM NOW UNTIL THE NEXT BUDGET PROCESS BECAUSE OUR, OUR RAW WATER COSTS ARE GOING UP EVERY YEAR. MM-HMM . YEAH. AND YOU KNOW, THE ANNUAL INCREASES, I MEAN, THEY'RE, THEY'RE COMPOUNDED. I MEAN, YEAH, GET 3% THIS YEAR, YOU STILL HAVE THAT 3% NEXT YEAR PLUS WHATEVER YOU IMPLEMENT. BUT I, I THINK FOR THE LAST NUMBER OF YEARS, WE'VE DONE 3% EVERY YEAR. SO IT'S NOT LIKE WE'VE, THERE WERE A COUPLE YEARS THAT WE, YEARS WHERE WE DIDN'T RAISE THE RATES. THERE WERE, THERE WERE, I DON'T REMEMBER THE EXACT YEARS, BUT THERE'VE BEEN A COUPLE YEARS HERE RECENTLY. THERE, THERE WHERE THERE WAS NO INCREASE. YEAH. IT, IT HADN'T BEEN SINCE WE'VE BEEN ON THIS PROJECT FOR THE LAST COUPLE. I KNOW, 'CAUSE YOU'RE TALKING ABOUT RATE INCREASES TO THE ULTIMATE CONSUMER. WELL, I'M SORRY, THE CITY OF BAYTOWN MAY NOT HAVE INCREASED. I CAN'T VOUCH FOR THAT. BUT AS A BOARD WE'VE APPROVED RATE INCREASES, I BELIEVE. YEAH. WE'LL, WE'LL GO BACK AND LOOK AT IT AND WE'LL, WE'LL SHOOT YOU AN EMAIL JUST AS A KIND OF A, AN UPDATE ON THAT AS A REMINDER. 'CAUSE WE, WE'VE GOT IT LISTED IN THE BUDGET BOOK BECAUSE, BECAUSE BECAUSE EVERY YEAR H LMPS OR OR OUR WATER SUPPLIES IS BEING RAISED ON US EVERY YEAR, CORRECT. YEAH. BUT WE, WE HAVE SKIPPED A COUPLE YEARS THOUGH. I DON'T REMEMBER THE EXACT YEARS, BUT YEAH, WE'LL SHOOT THAT OUT TO YOU GUYS. ALRIGHT, ARE, ARE THERE FURTHER QUESTIONS OR DISCUSSION ON THE RIGHT STUDY? IT'S BEEN A LONG, IF HE'S GOT ANYTHING, UH, BRA. BRANDON, DID YOU HAVE ANY QUESTIONS OR DISCUSSION? NO, I'M, I'M ON BOARD WITH ALL THE QUESTIONS. I APPRECIATE ALL THE GOOD QUESTIONS THAT HAVE BEEN ASKED. ALRIGHT, THANK YOU. UH, IF THERE ARE NO FURTHER QUESTIONS, UH, THANK YOU VERY MUCH FOR THE PRESENTATION. UM, NEXT WE'LL [b. Receive an update regarding the Baytown Area Water Authority East Plant Project.] RECEIVE AN UPDATE REGARDING THE EAST PLANT PROJECT. ALL RIGHT. I HAVE SOME PHOTOS AND SOME STATISTICS FOR YOU ALL. SO AT OUR LAST MEETING, UH, WE DID NOT HAVE, UH, CONSIDERATION ON A CHANGE, UH, PARDON ME. WE DID, UM, THIS MEETING, WE DO NOT, BUT THIS IS ONE OF THE LAST ITEMS THAT WAS APPROVED AT THE LAST MEETING. THIS WAS SOME REROUTE OF SOME OF THE, UM, STORM WATER AND THE CHEMICAL CONTAINMENT AREA. UM, SO THIS IS JUST SOME CONSTRUCTION PHOTOS THAT JUST RECENT WORK AND IT'S FAIRLY, YOU KNOW, IT'S LATE IN THE PROJECT, BUT THIS IS VERY NEAT WORK. SO THIS IS SOME OF THE COMPLETION. I BELIEVE THIS CONCRETE MAY HAVE BEEN POURED, UH, YESTERDAY OR TODAY. SO THIS SHOULD ALL BE FINALIZED. AND THIS IS NOW REROUTING OF THE, THESE WERE INDUSTRIAL, CONSIDERED INDUSTRIAL WASTE AND ALSO STORM WATER. AND SO THIS HAD TO BE ROUTED TO THE SLUDGE LAGOON INSTEAD OF THE SANITARY SEWER LIFT STATION. JUST WANTED TO RECALL THAT. UM, SO THIS IS HEADED TOWARDS THAT. SO THE RAILINGS THAT YOU SEE IS, THAT'S THE KIND OF THE CORNER OF THE OPERATIONS BUILDING. SO IT'S COMING FROM THAT DIRECTION AND THEN ROUTING TO THE SLUDGE LAGOON. WHAT ELSE HAS BEEN HAPPENING AT THE PLANT? UH, WE'RE ALL BUILT OUT PRETTY MUCH, BUT WE'VE BEEN WORKING ON SOME EQUIPMENT, UM, BASICALLY AS YOU PUT THE PLANT THROUGH ITS PACES. SO LAST MONTH WE SAW THAT WE WERE MAKING PRETTY GOOD WATER IN TERMS OF LIKE THE CLARITY AND WE WERE TRYING TO FIGURE OUT THE DOSAGE AND DISINFECTION [00:35:01] RESIDUAL, THINGS LIKE THAT. SO THIS IS A PICTURE ON THE LEFT HERE, WE'RE STANDING ON, UH, BASICALLY ABOVE THE FILTER. AND SO WE HAD A PART WHICH IS THE GOLD PART IN THE PHOTO IN THE MIDDLE, THE SOLENOID THAT KIND OF WENT ON THE FRITZ, SEVERAL OF THEM. SO WE GOT THAT REPLACED. NOW WE'RE LOOKING AT, YOU KNOW, WHAT'S HAPPENING WITH THE WATER LEVELS. WE DON'T REALLY WANT THIS OVERFLOW. SO WE'VE BEEN TROUBLESHOOTING THAT. THOSE ARE NOW RESOLVED. BUT THIS IS WHAT HAPPENS IN COMMISSIONING THINGS. YOU PUT EVERYTHING TO THE TEST AND YOU KNOW, THINGS KIND OF GO THROUGH A LITTLE BIT OF A HICCUP HERE, A HICCUP THERE. BUT IT'S ALSO GOOD FOR STAFF BECAUSE THEY GET TO THE RESOLUTION STAGE. YOU KNOW, WHAT'S GOING ON IS EVERYTHING READING RIGHT INTO THE S SCADA. WE'RE NOT SENDING ANY WATER INTO THE DISTRIBUTION SYSTEM YET. SO THIS IS WHAT WE DO TO, TO KIND OF TEST OUT THE PLANT. ANOTHER ITEM THAT WE WERE LOOKING AT RECENTLY, UM, AND THIS IS A GROUP OF FOLKS THAT WE WERE JUST DISCUSSING WHAT TO DO ABOUT THIS, BUT WE SEE A PHOTO ON THE UPPER LEFT AND THERE IS A VERY, VERY TINY LITTLE LEAK THAT IS SPRUNG. UM, IT'S NEAR AN EXPANSION JOINT. AND SO WE'VE GOT SOME INVESTIGATIVE KIND OF PHOTOS HERE. WE'VE HAD A, A COUPLE OF MEETINGS IN RAPID SUCCESSION THAT LEAK HAS ALREADY BEEN REPAIRED OVER THE WEEKEND. SO NOW WE'RE TALKING ABOUT, YOU KNOW, WHAT'S THE PROTOCOL? WE'RE KIND OF IN THE MIDDLE OF COMMISSIONING, YOU KNOW, WHAT DO WE DO? YOU KNOW, IS IT SEALED? WHEN DO WE DOUBLE CHECK AND DOUBLE, YOU KNOW, JUST MAKE SURE THAT THE, THE BASINS ARE HOLDING AND WE'VE IDENTIFIED A TIMELINE AND SO WE'LL BE PREPARED TO TALK TO THE CONTRACTOR THIS WEEK ABOUT THAT. THESE ARE NOT HUGE, HUGE ITEMS, BUT WE DO WANNA PAUSE. YOU KNOW, I NEVER LIKE TO SEE A LITTLE, YOU KNOW, SPRINGING OF A LEAK LIKE THAT. AND THE CONTRACTOR WAS, YOU KNOW, JUST AS CONCERNED AS WE WERE. THE ENGINEER OF RECORD, UH, SPRUNG INTO ACTION. WE TOOK A LOOK AT EVERYTHING, STRUCTURAL ENGINEER TOOK A LOOK AT ALL THE DATA. UH, SO WE HAVE A VERY COMPREHENSIVE APPROACH TO THIS. JUST WANTED TO MAKE SURE THAT, YOU KNOW, WE SHARE WITH YOU, YOU KNOW, IT MIGHT SEEM LIKE ALL OF A SUDDEN WE GOT TO THE MIDDLE AND WE'RE NOT DOING ANYTHING, BUT THERE IS FITS AND STARTS LIKE THIS. AND WE CERTAINLY WORK THROUGH, UM, ALL THOSE ISSUES. SO JUST THOUGHT I'D COME AT THE END HERE. WE'RE NEAR THE END OF CONSTRUCTION. WE MIGHT THINK, OKAY, WELL NOT MANY MORE PHOTOS TO SHOW OF ACTUAL CONSTRUCTION WORK. UM, WE WERE LOOKING AT DRONE PHOTOS FOR A NUMBER OF OF MONTHS AND NOW WE'RE AT THE END. SO WE'RE IN COMMISSIONING AND WHERE DO WE STAND IN TERMS OF THE CONTRACT AND THE NUMBERS? SO BY THE NUMBERS, UH, WE HAD A CONTRACT VALUE. THIS IS THE AFTER THE MAJOR DEDUCTIVE CHANGE ORDER. SO THIS IS THE CURRENT STATUS OF OUR CONTRACT VALUE, 49 MILLION JUST OVER THAT. AND WE HAVE CURRENTLY THE PERCENTAGE OF WORK IS AT 99.16%. SO WE DON'T HAVE VERY MUCH MORE THAT WE CAN PAY EXCEPT FOR RETAINAGE IN THE FINAL COMPLETION. AND THEN THE CONTRACT TIME, WHERE DO WE START WHEN WE FIRST, YOU KNOW, KIND OF EMBARKED ON THIS AND WE ISSUED THE NOTICE TO PROCEED. SO 1095 DAYS AND WHERE DO WE SIT TODAY HAVING FINISHED MOST OF THE CONSTRUCTION AND WE'RE IN COMMISSIONING SO 76% OF THE TIME USED. SO I THINK THAT'S A VERY GOOD, YOU KNOW, BEEN VERY PRODUCTIVE IN TERMS OF THE CONTRACTOR BUILDING EVERYTHING AND PUTTING US IN THE POSITION THAT WE'RE AT TODAY TO BEGIN COMMISSIONING AHEAD OF THE ORIGINAL CONSTRUCTION SCHEDULE. QUICK QUESTION. WHAT, WHAT WAS THE NUMBER BEFORE THE DEDUCTS? LIKE 55, 60, 50 6 MILLION. IT WAS A, I BELIEVE 52. 52. OKAY. SO WE HAVE HAD A MAJOR DEDUCTIVE CHANGE ORDER IN ABOUT 6 MILLION. YEAH. AND SLOWLY THROUGH ABOUT CHANGE ORDER ONE THROUGH 11, WE'VE KIND OF MADE UP ABOUT HALF OF THAT GOT. SO WE'RE JUST RIGHT AROUND THE 3 MILLION IN THE TOTAL D DIVE. OKAY. SO I'VE KIND OF SHOWED THE SLIDES TO YOU ALL. UM, LAST MONTH. WE ARE IN THE RIGHT HAND SIDE. SO IF THE SLIDE WERE TO BE DIVIDED IN HALF WHERE THE DIAMOND IS, WE'VE COMPLETED OUR STARTUP AND TRAINING AND NOW WE'RE IN THE COMMISSIONING SIDE OF THE SLIDE AND WE'RE ABOUT A THIRD OF THE WAY THROUGH, UH, IN TERMS OF TIME AND WE ARE JUST NOW PAUSED RIGHT BEFORE THE HEAVY DUTY, UH, TESTING. SO THERE'S A SERIES OF TESTING THAT GOES ON KIND OF AN OVERLAPPING, UM, TESTING SCHEDULE. WHEREAS AT THE END OF THAT, YOU KNOW, WE WANNA MAKE SURE THAT WE HAVE ALL THE SYSTEMS GO ALL DISINFECTION, UH, RESIDUAL, KIND OF WITH A THUMBS UP. AND SO WE JUST WANTED TO KIND OF SHOW THIS TO YOU. UH, THIS IS A WORK PRODUCT OF OUR ADDITIONAL ENGINEERING TEAM THAT HAS BEEN BROUGHT TO BEAR TOGETHER WITH THE ENGINEER OF RECORD. SO THIS IS SOMETHING THAT WE CREATED AT THE TIME THAT WE FINISHED, UH, MAJOR CONSTRUCTION ITEMS TO KIND OF GUIDE US THROUGH. SO WHEN WE'RE TALKING ABOUT, WELL, WHEN IS THIS SUPPOSED TO HAPPEN OR WHEN IS THAT SUPPOSED TO HAPPEN OR WHAT IF THIS HAPPENS AND THEN THAT HAPPENS, IT KIND OF GIVES YOU A FEEL FOR WHERE WILL WE END UP AND WHAT NEEDS TO HAPPEN TO GET TO THE FINAL COMMISSIONING. SO JUST WANTED TO SHOW YOU THAT. UM, IT'S, IT'S JUST A GUIDEPOST FOR US AND WE STAND PAUSED BEGINNING THE SECOND PHASE OF CONSTRUCTION. SO I'LL TAKE IT, OR PARDON ME, COMMISSIONING. SO I'LL TAKE IT TO THE LAST SLIDE. SO WHAT ARE WE DOING AT THE MOMENT? SO WE FINISHED PHASE ONE OF COMMISSIONING AND THEN WE HAD [00:40:01] A LITTLE BIT OF EQUIPMENT TROUBLESHOOTING TO DO, WE PAUSED. THEN ALSO WE HAD HURRICANE LAURA AND THEN WE HAD TROPICAL STORM BETA. SO NOW WE'RE BACK TO JUST RESTARTING INTO PHASE TWO. SO WHAT WE DO IS WE ARE RAMPING UP FROM ZERO TO 3M GD AND THEN WE TOOK A PAUSE, WE SAID, WELL LET'S STAY HERE. LET'S NOT CONTINUE TO RAMP UP AND PERHAPS WASTE CHEMICAL OR OVERLY, YOU KNOW, KIND OF TAKE ON THE WATER. BUT WE NEED TO KEEP THE SYSTEM ALIVE. THIS IS A TYPE OF TREATMENT TRAIN THAT YOU ARE NEEDING TO KIND OF KEEP IT FROM GOING, UM, KIND OF THE OTHER DIRECTION. YOU WANNA KEEP ALL THE SYSTEMS KIND OF HUMMING ALONG EVEN IF YOU'RE JUST IN IDLE. SO WE ARE NOW ABOUT TO HAVE A PHONE CALL ON THURSDAY. WE WILL KIND OF START THAT OCTOBER ONE THROUGH 20TH WOULD BE THE START OF THE PHASE TWO OF COMMISSIONING. THIS IS THE HEAVY DUTY EQUIPMENT PERFORMANCE TESTING. SHOULD THAT BECOME SUCCESSFUL, WE'LL BE ABLE TO GO INTO PHASE THREE. AND THE KEY THERE IS BEING ABLE TO SEND OFF TO THE TCQ THE SAMPLE FOR THEIR APPROVAL. SO THERE'S A SERIES OF REGULATORY APPROVALS CALLED STEP ONE AND STEP TWO. THOSE ARE THINGS THAT WE ARE KIND OF FACING, YOU KNOW, HEAD ON AND WE'RE READY FOR THAT CHALLENGE. AND THEN WE HOPE TO BRING US TO FINAL ACCEPTANCE. AND I SAY THAT WITH THE ASTERISK, WHICH IS THE LAST LINE IN THE SLIDE. THIS IS ALL AN ESTIMATE BARRING ANY, YOU KNOW, WEATHER OR, YOU KNOW, EQUIPMENT FAILURES OR ANY PROCESS ISSUES THAT WE MIGHT IN IN INCUR. BUT WE'LL BE BACK TO, YOU KNOW, REPORT ON ANYTHING THAT OCCURS. BUT THIS IS TO BE EXPECTED. THERE IS NEVER A COMMISSIONING OF A MAJOR PLANT LIKE THIS THAT GOES WITHOUT A HITCH. RIGHT. AND THE, NONE OF THESE PROBLEMS THAT WE'VE ENCOUNTERED HAVE BEEN INSURMOUNTABLE. WE HAVE A GREAT TEAM, WE'RE WORKING THROUGH THEM. THE STAFF IS GETTING VERY USED TO OPERATING, THEY'RE LOOKING FOR LOTS OF DIFFERENT THINGS. THEY'RE READING SCADA, WE'RE REPORTING OUT INCIDENTS. EVERYBODY'S COMMUNICATING VERY WELL AS THEY SHOULD. SO OVERALL I HOPE TO BE ABLE TO BE ON THE HOME STRETCH HERE, WHICH WE FEEL LIKE WE ARE. AND THAT'S WHERE WE STAND FOR THE BOW EAST PLANT. WHEN YOU'RE, WHEN THE PLANT'S RUNNING IDLE, YOU GOT DIRTY WATER COMING IN AND CLEAN WATER GOING OUT, WHERE'S THAT WATER GOING? ARE WE ACTUALLY DELIVERING IT NOW OR THOSE NO, WE'RE NOT DELIVERING IT YET. BASICALLY IT CYCLES THROUGH THE WHOLE PLANT JUST GOES BACK AROUND AND WE GO TO THE STORM WATER DETENTION POND AND THEN THAT EXITS INTO BASICALLY RECEIVING STREAMS. SO UNTIL TCQ SIGNS OFF AND EVERYTHING. AND THEN, SO BASICALLY WHEN WE'RE IN THE COMMISSIONING LIKE THIS, WE SHOULDN'T BE PUTTING IT INTO THE DISTRIBUTION SYSTEM BECAUSE WE DON'T HAVE THE SIGN OFF YET. SO WE MUST BASICALLY THERE'S NOWHERE ELSE TO GO EXCEPT FOR INTO THE, YEAH. INTO THE CREEK. UNDERSTOOD. THAT'S WHY YOU'RE IDLING. THAT'S CORRECT. ONCE WE RAMP UP, WE'LL BE SOON GOING TO THE SIX MGD AND THEN WE WILL HAVE MEETING OUR, OUR MILESTONES FOR BASICALLY DELIVERING TO THE SYSTEM. BELIEVE ME, THERE WILL BE A HURRAH WHEN THAT HAPPENS. GOOD. ALL RIGHT. YES MA'AM. DOES ANYONE ELSE HAVE A QUESTION? ALRIGHT, THANK YOU VERY MUCH. UM, NEXT WE'LL [c. Receive an update regarding the Baytown Area Water Authority Chemical Feed Project.] HAVE A UPDATE REGARDING THE AUTHORITIES CHEMICAL FEED PROJECT. ALRIGHT, AT THE MAIN PLANT WE ALSO HAVE CONSTRUCTION GOING ON. THAT WORK IS GOING VERY WELL. UM, THE CONTRACTOR FOR THAT WORK IS LEM AND THIS IS JUST SOME KEY CONSTRUCTION PHOTOS OF THE LAST MONTH. WE HAD RAW WATER PIPE THAT WAS CALLED FOR TO BE INSTALLED AS PART OF THE CHEMICAL FEED IMPROVEMENTS. HERE'S SOME WORK THAT THEY'VE JUST A NICE CLOSEUP HERE, YOU GET A GOOD FEEL FOR THE SIZE OF THE PIPE. AND THEN HERE WE HAVE THE NEW LINE INSTALLED EXTENDING FROM THE RAW WATER PUMPS. THEY'RE DOING VERY GOOD WORK, VERY NICE AND NEAT. THIS IS SOME DRAIN, UH, WORK THAT IS DONE OUTSIDE OF THE, UH, CONTAINMENT AREA FOR THE CHEMICAL. THIS IS LIQUID AMMONIUM SULFATE LOCATION. THESE TANKS ARE VERY LARGE AND YOU'RE GONNA SEE THAT HERE IN THE NEXT COUPLE OF PHOTOS. BUT AS WITH ANY CHEMICAL PROJECT, WE MUST HAVE SAFETY. AND SO THIS IS AN EYE WASH THAT WAS INSTALLED. IT'S ALWAYS GOOD TO HAVE SAFETY FRONT AND CENTER. THIS IS SOME ELECTRICAL WORK THAT WAS DONE. THE CONTROL BOXES NICE AND NEAT. AND AGAIN, THE EYEWASH, SOME PIPING FOR THE CHEMICAL BULK TANKS. YOU CAN SEE THAT THERE'S, UH, THE GRAY PVC IS WHAT THEY'RE FOCUSING ON. AND THEN THIS IS A GREAT PICTURE HERE. THESE ARE THE NEW, UH, BULK STORAGE TANKS THAT HAVE BEEN INSTALLED. IT WAS PROBABLY NICE TO HAVE A GOOD DAY, HOPEFULLY NO WIND. AND THEN ANOTHER GREAT PHOTO HERE OF THE CHEMICAL BULK TANK INSTALLATION ON THE OTHER SIDE. SO THIS IS A GREAT MILESTONE FORWARD. I DON'T THINK THAT WE WOULD BE HERE IF IT HAD BEEN, YOU KNOW, VERY, VERY RAINY, [00:45:01] BUT DESPITE THE, THE WEATHER WE WERE ABLE TO GET A LOT OF OUR MAJOR ITEMS DELIVERED. SO THE WORK PROGRESS IS GOING VERY, VERY WELL. AND THAT'S ALL I HAVE FOR YOU ON THAT PROJECT. ALRIGHT. QUESTIONS, DISCUSSION? NO MA'AM. ALRIGHT, THANK YOU. THANK YOU VERY MUCH. UM, NEXT WE'LL HAVE THE [4. MANAGER'S REPORT] MANAGER'S REPORT. I HAVE NOTHING TO ADD TODAY. ANYTHING TO ADD? I GOT, I GOT A QUESTION FOR YOU. HAVE ARE, HAVE YOU BEEN, HAVE YOU GUYS HAVE BEEN FOLLOWING THAT EVENT THAT'S HAPPENING OVER THERE NORTH OF GALVESTON WITH THE, THE BRAIN EATING AMOEBA OR WHATEVER IT IS? AND DO, DO Y'ALL KNOW WHAT COULD HAVE HAPPENED OR WHAT, YOU KNOW, WHAT FAILED OR TO MAKE SURE THAT, HEAVEN FORBID THAT DOESN'T HAPPEN HERE? UM, SO I'VE RECENTLY BEEN RESEARCHING THIS, UH, PRETTY EXTENSIVELY. UM, FROM EVERYTHING THAT I'VE READ, I HAVE NOT BEEN ABLE TO SEE WHERE IT WAS A, A TREATMENT ISSUE. UM, THIS IS SOMETHING THAT'S BEEN AROUND FOR A LONG TIME. IT'S JUST NOT ALL THAT COMMON. SO BASICALLY, UM, THIS ORGANISM FEEDS IN, UH, ON BACTERIA AND WARM WATER, UM, CLIMATE'S TYPICALLY LIKE RIVERS, LAKE STREAMS, UH, THINGS OF THAT SORT. AND, UM, SINCE IN THE LAST 10 YEARS THERE'S BEEN, UM, 34, UM, DEATHS, UH, RELATED TO THIS. UM, OF THOSE 30 OF THOSE ARE ATTRIBUTED TO FRESH WATER. SO YOUR RIVERS, LAKES, AND STREAMS. NOT ANYTHING TO DO WITH THE PUBLIC WATER SYSTEM. UM, AND THEN FOUR OF THEM HAVE BEEN, UM, I GUESS SOMEWHAT RELATED TO A PUBLIC WATER SYSTEM AND THEN ONE, UM, WHERE A KID, YOU KNOW, GOT THE WATER UP THEIR NOSE, UM, THROUGH LIKE A SLIP AND SLIDE AND, UM, CONTAMINATE IT THAT WAY. UM, IT'S NOT SOMETHING THAT IS GONNA HARM YOU FROM DRINKING, FROM EVERYTHING THAT I'VE READ, UM, HOW IT, UH, ACTUALLY ATTACKS YOU IS GETTING UP YOUR NOSE. SO THAT'S WHY, UM, THEY, YOU KNOW, CAUTION YOU AGAINST, UH, WATER GOING, UH, UP YOUR NOSE VIA, YOU KNOW, TAKING A BATH OR A SPLASH PAD OR SWIM POOL, YOU KNOW, SOMETHING LIKE THAT WHERE IT'D BE MORE COMMON THAT YOU WOULD HAVE WATER, UH, ACTUALLY GO INTO YOUR SINUSES. SO, UM, FROM A A TREATMENT PERSPECTIVE, UH, THERE'S A LOT OF RAW WATER CONTAMINANTS THAT CAN, YOU KNOW, CAUSE DEATH. AND, UM, FROM A A PLANT PERSPECTIVE, UH, WHAT WE DO IS TRY TO CONTINUOUSLY MONITOR THOSE, UM, YOU KNOW, WE AS YOU KNOW, TEST FOR IDEOLOGICAL SAMPLING THROUGHOUT THE SYSTEM, UM, AND AT THE PLANT TO, YOU KNOW, ENSURE THAT WE'RE, UH, FOLLOWING TCQ REGS AND, UH, YOU KNOW, MONITORING THAT WATER QUALITY, UH, TO ENSURE THE SAFETY OF THE PUBLIC. SO THAT, ANSWER YOUR QUESTION SOMEWHAT , THEY'RE DOING EVERYTHING THEY CAN. LIFE IS NOT, UH, VOID OF RISK. YEAH. ALL RIGHT. SO THAT'S ALL FOR THE MANAGER'S REPORT, CORRECT. ALL RIGHT. ALL RIGHT. UH, OUR NEXT ITEM IS EXECUTIVE [5. EXECUTIVE SESSION] SESSION. WE WILL NOW RECESS INTO AND CONVENE AN EXECUTIVE SESSION PURSUANT TO SECTIONS 5 51 0.07, ONE OF THE TEXAS GOVERNMENT CODE TO SEEK THE ADVICE OF THE AUTHOR'S, ATTORNEYS ON LEGAL MATTERS RELATED TO THE BAYTOWN AREA WATER AUTHORITY, EAST DISTRICT WATER TREATMENT PLANT MEETING OF THE BAYTOWN AREA WATER AUTHORITY REGULAR MEETING, AND ANNOUNCED THAT IN ACCORDANCE WITH SECTION 5 51 0.102 OF THE TEXAS GOVERNMENT CODE, NO ACTION WAS TAKEN IN EXECUTIVE SESSION. UM, AS NO FURTHER BUSINESS TO COME BEFORE THIS BOARD, I'D ENTERTAIN A MOTION TO ADJOURN. SO MOVED. MOTION, BRANDON. OKAY, I'LL SECOND THEN I HAVE A MOTION TO SECOND. ALL THOSE IN FAVOR? AYE. AYE. AYE. SEE YOU NEXT TIME. * This transcript was created by voice-to-text technology. The transcript has not been edited for errors or omissions, it is for reference only and is not the official minutes of the meeting.