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

MARCH 10, 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, March 10, 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, thus constituting a quorum. Also attending via video conference were Dietra Bonds and Maria Felder of Municipal Accounts & Consulting L.P. (“Bookkeeper” or “MAC”); Justin Abshire and Conner Murphy of Jones|Carter (“Engineer” or “Jones|Carter”); Philip Wright and John Wright of Hays Utility North Corporation (“Operator” or “Hays North”); 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.

APPROVAL OF MINUTES OF FEBRUARY 10, 2021 REGULAR MEETING

The President next directed the Board to the approval of the February 10, 2021 regular meeting minutes. Upon a motion by Director Leasure, seconded by Director Patton, after full discussion and with all Directors present voting aye, the Board approved the February 10, 2021 regular meeting minutes, as presented.

TAX ASSESSOR-COLLECTOR’S REPORT

Ms. Bonds reviewed the Tax Assessor-Collector’s Report for the month of February 2021, 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 93.88% of the 2020 taxes have been collected as of February 28, 2021.

Upon a motion by Director Barlow, seconded by Director Patton, after full discussion and with all Directors present voting aye, the Board approved the Tax Assessor-Collector’s Report, as presented.

BOOKKEEPER’S REPORT

Ms. Bonds reported that today’s meeting is the last District meeting that she will attend and went on to explain that Ms. Felder will be taking over the role of the District’s Bookkeeper. Ms. Bonds added that Katherine Turner will attend the Board meetings with Ms. Felder until Ms. Felder is comfortable attending such meetings on her own.

Ms. Bonds next reviewed the Bookkeeper’s Report, a copy of which is attached hereto, including the current fund balances, expenditures and investments. Ms. Felder added that three (3) invoices for legal services that are being presented to the Board for signature are not included in the current Bookkeeper’s Report. Ms. Felder requested that the Board authorize payment of such invoices at this time and stated that such invoices will be noted in next month’s Bookkeeper’s Report.

Director Moravec noted that the interest rates earned on the District’s money market accounts held with various private banks are significantly lower that the interest rates earned on the funds held in Certificates of Deposit (“CD”). Director Moravec suggested that the District transfer funds into CDs from the District’s money market accounts held by Texas Class and TexPool in a ratio not to exceed two-thirds (2/3) to one-third (1/3), with the larger portion of such funds being transferred from the money market accounts held by the investment pool offering a lower interest rate.

Director Moravec then reported a balance of $227,305.51 in the District’s Series 2012 Bond Fund, which results in a surplus of $150,000.00 in such account. Mr. Abshire reported that funds from such account are still being utilized to fund the ground storage tank (“GST”) rehabilitation project at the Buckingham Water Plant. Mr. Barner explained that depending on the intended use of the surplus funds, the District may need to submit a resolution for the use of such funds with the Texas Commission on Environmental Quality (the “TCEQ”). Director Moravec recommended that any surplus funds remaining after such project is completed should be allocated for the Wastewater Treatment Plant Improvement Project (the “WWTP Project”).

Director Patton then noted that Ms. Bonds reported that only six percent (6%) of the 2020 taxes remain uncollected; however, the General Operating Fund budget in the Bookkeeper’s Report indicates that the operations and maintenance tax collected by the District is $638,516.00 less than the amount budgeted for such collection. Ms. Bonds stated that she will research how such item is calculated in the District’s budget.

In response to a question regarding approval and payment of the presented checks, Mr. Barner recommended that the Board approve all checks presented by the Bookkeeper, except for the check payable to Allco, LLC (“Allco”), until the Board and he have further discussion.

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 detailed therein, except for the check payable to Allco; 3) approved the three (3) invoices from RBAP for legal services; and 4) authorized the Bookkeeper to transfer funds from the District’s money market accounts held by Texas Class and TexPool into a one (1) year CD in a ratio not to exceed two-thirds (2/3) to one-third (1/3), with the larger portion of such funds being transferred from the money market accounts held by the investment pool offering a lower interest rate.

Ms. Bonds next presented the Quarterly Investment Inventory Report for the Period Ending December 31, 2020, a copy of which is attached hereto.

In response to a question from Director Moravec regarding Public Funds Investment Act training, Ms. Bonds stated that she will verify that Director Moravec’s certification is due to be renewed and will provide dates for such training seminars.

Upon a motion by Director Patton, seconded by Director Barlow, after full discussion and with all Directors present voting aye, the Board approved the Quarterly Investment Inventory Report for the Period Ending December 31, 2020.

Regarding the transfer of the District’s funds held with Woodforest National Bank into accounts held by BBVA Compass Bank (“BBVA”), Ms. Bonds stated that she is confirming all fees assessed by BBVA before recommending that the District transfer such funds. Ms. Bonds requested that the Board table authorizing such transfer until the next regular Board meeting.

REVIEW POLICIES ON CAPITALIZATION AND DEPRECIATION OF DISTRICT’S ASSETS

Director Moravec explained that the District’s current policy regarding capitalization and depreciation of the District’s assets requires that any assets valued at over $5,000.00 and with a useful life of at least three (3) years be included on the District’s capitalization list. Director Moravec stated that the District has a large number of assets that meet such criteria and explained that the District must track the depreciation of all assets on such list. Director Moravec then reported that he has coordinated with the Auditor regarding the threshold for capital assets, and stated that they recommend increasing such threshold to assets valued at over $20,000.00 and with a useful life of at least five (5) years. Director Moravec stated that the Auditor and Engineer will coordinate to determine which of the District’s assets must be included on the capitalization list.

Discussion then ensued regarding whether the Wastewater Treatment Plant (“WWTP”) should be included as a single asset on the capitalization list or if the individual components of the WWTP should be valued separately. Director Moravec stated that he will coordinate with the Auditor to determine how to correctly include the WWTP on such list.

Mr. Barner then presented a proposed Resolution Adopting Policies for Capitalization and Depreciation of District Assets that would increase the threshold amount and useful life period according to the above-described terms.

Upon a motion by Director Moravec, seconded by Director Patton, after full discussion and with all Directors present voting aye, the Board approved the Resolution Adopting Policies for Capitalization and Depreciation of District Assets.

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 in the past month regarding the WWTP Project. Mr. Abshire reported that installation of the roofs of the blower control building and chlorine building are complete, which allowed Allco to begin electrical work on the interior of such buildings. Mr. Abshire reported that substantial completion of Phase I of such project was supposed to occur in September 2020; however, such phase is still two (2) months away from substantial completion. Mr. Abshire noted that while Allco continues to fall further behind schedule, their quality of work remains satisfactory. Mr. Abshire then presented Allco Pay Estimate No. 25 in the amount of $405,563.05 for work performed on the WWTP Project. Mr. Barner reported that there has been some disagreement between Allco and several of its subcontractors regarding the amounts owed by Allco to such subcontractors; however, no liens have been put in place. Mr. Barner recommended that the Board table approval of Allco Pay Estimate No. 25 until such matter is discussed further in closed session.

Regarding the Drainage Improvements, Phase II (Zones 7, 8 and 11), Mr. Abshire reported that AR Turnkee Construction Co. (“Turnkee”) is expected to complete work in Zone 11 in the next two (2) weeks, and added that work in Zone 8 will likely begin in late March. Mr. Abshire further reported that Jones|Carter met onsite with numerous residents of Zone 8 to discuss construction of the drainage improvements and the traffic control efforts in such area. Mr. Abshire stated that construction in Zone 8 will not require road closures.

Next, Mr. Abshire updated the Board regarding the status of the GST rehabilitation at the Buckingham Water Plant. Mr. Abshire reported that MK Painting, Inc. (“MK Painting”), the contractor on such project, began priming the interior walls and ceiling of the GST, but requested a contract extension of six (6) days due to inclement weather. Mr. Ginandt reported that MK Painting is scheduled to complete the interior coating of the GST today. Mr. Abshire then presented MK Painting Pay Estimate No. 1 in the amount of $40,162.50 for work performed on the GST Rehabilitation Project. Mr. Abshire noted that the District’s share of such pay estimate is fifty percent (50%) of the total, or $20,081.25. Mr. Abshire next presented MK Painting Change Order No. 1 in the amount of $20,000.00 for recoating of the interior floor of the GST. Mr. Abshire noted that the District’s share of such change order is fifty percent (50%) of the total, or $10,000.00. Mr. Abshire then presented MK Painting Change Order No. 2 in a net zero amount for additional recoating of certain portions of the GST and removal of items related to installation of a ladder on the GST. Mr. Abshire reported that Pay Estimate No. 1 and Change Order No. 1 were approved by MUD 9’s Board of Directors, and Change Order No. 2 will be presented to MUD 9’s Board at their regular April meeting.

Mr. Abshire then reminded the Board that during the annual inspection of the District’s water plants, it was determined that Hydropneumatic Tank (“HPT”) No. 2 at Water Plant No. 2 showed signs of interior corrosion and needed to be recoated. Mr. Abshire reported that the contractor completed such work and the HPT is back in service.

Next, Mr. Abshire reminded the Board that the America’s Water Infrastructure Act of 2018 (“AWIA”) requires water districts serving more than 3,300 customers to develop a Risk and Resilience Assessment (“RRA”) and Emergency Response Plan. Mr. Abshire further reminded the Board that the deadline to complete the RRA is June 30, 2021. Mr. Abshire reported that Jones|Carter is incorporating matters that arose during Winter Storm Uri (the “Storm”) into their draft of the RRA and anticipates meeting with the District’s appointed AWIA Committee to discuss such RRA in April.

Next, Mr. Abshire reported that the District’s Capital Improvement Plan (“CIP”) for the Fiscal Year Ending (“FYE”) 2021 includes cleaning and televising of certain portions of the District’s sanitary sewer lines and inspection of 190 manholes. Mr. Abshire further reported that such lines were last televised approximately ten (10) years ago and noted that such televising focused on the concrete pipes. Mr. Abshire explained that the current televising project will focus on areas in which truss pipes are located. Mr. Abshire reported that he expects the proposed cleaning and televising project to cost approximately $105,000.00, including $35,000.00 of engineering costs. Mr. Abshire then requested that the Board authorize Jones|Carter to prepare a bid package for the cleaning and televising of a certain portion of the District’s sanitary sewer lines.

Mr. Abshire then stated that the District and MUD 9’s Joint CIP for FYE 2021 includes replacement of the motor control centers at Water Plant Nos. 1 and 2. Mr. Abshire further stated that he will request authorization from the Board next month to proceed with such work; however, construction will not begin until the fall.

Upon a motion by Director Tryon, seconded by Director Leasure, after full discussion and with all Directors present voting aye, the Board: 1) approved the Engineer’s Report, as presented, 2) approved Allco Pay Estimate No. 25 in the amount of $405,563.05, subject to further discussion of such pay estimate in closed session; 3) approved MK Painting Pay Estimate No. 1 in the amount of $40,162.50; 4) approved MK Painting Change Order No. 1 in the amount of $20,000.00; 5) approved MK Painting Change Order No. 2 in a net zero amount; and 6) authorized Jones|Carter to prepare a bid package for the cleaning and televising of a certain portion of the District’s sanitary sewer lines.

REVIEW MATTERS AFFECTED BY THE STORM

Mr. Wright reported that Hays North responded to 27 service calls from residents of the District during the Storm. Mr. Wright further reported that Hays North was able to continuously provide water to residents by alternating pumping from the Catahoula and Jasper water wells and by using generators at various District facilities. Mr. Wright went on to report that none of the District’s facilities experienced damage significant enough to file a claim with the District’s insurance provider. Director Moravec noted that only $10,000.00 of Hays North’s invoice was attributable to the Storm, which totaled only a fraction of such invoice. Director Moravec then stated that he wanted to recognize Hays North for their efforts during the Storm.

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 94.32%. Mr. Wright next reported that there was one (1) new tap last month and that the District has a total of 1,775 connections.

Mr. Wright then reported that 415 customers are receiving electronic billing statements, which is an increase of 17 customers from last month. Mr. Wright reported that First Billing, the vendor responsible for processing credit card payments to the District’s, included a pop up message on its website notifying District customers of the availability of electronic billing.

In response to a question from Director Patton regarding customers requesting leak adjustments following the Storm, Mr. Wright reported that the District experienced a significant increase in pumpage immediately following such weather event. Mr. Wright reminded the Board that the District’s standard procedure when a customer requests an adjustment to their water bill is to bill such customer at their current rate tier for their historical average amount of water use, and then the additional amount of water used by such customer is billed at the lowest rate tier. Mr. Barner stated that he does not recommend that the Board make any changes to such procedure since there have been few customers who have requested leak adjustments following the Storm. In response to a comment made by Mr. Wright, Mr. Barner clarified that in response to the Storm, the Public Utility Commission adopted an order on February 20, 2021, to prohibit water and electric utilities from termination of service and implementation of penalties and interest due to non-payment on delinquent accounts. Mr. Barner explained that while such order does not actually apply to water districts, RBAP, as well as other attorneys and operators that work with water districts, recommend that the District suspend termination of service to delinquent accounts and the accrual of late fees and penalties on such account during the next billing cycle. In response to a question, Mr. John Wright reported that the requests received by District customers for leak adjustments following the Storm totals only $375.00.

Director Moravec then reminded the Board that he and Director Patton had requested to review all messages included in the water bills prior to such bills being sent to customers. Director Moravec stated that the message included on the paper statements was correct, but the message included on the electronic statements was incorrect. Mr. Wright reported that Hays North adjusted its office procedures following the distribution of such statements to ensure that erroneous messages are not included in the District’s water bills again.

Mr. John Wright next reported that Hays North continues to have issues related to frequent electrical shortages at the Buckingham Water Plant that are caused by fluctuating power levels provided by Entergy. Mr. Wright further reported that Entergy recommended that Hays North re tap the transformer at such water plant in order to lower the voltage level so as not to continue tripping the protective equipment at such water plant. Mr. Wright explained that when the electrical system for such water plant was tested prior to such water plant being put into operation, the electrical design engineer said that the incoming energy level was within a range that could be tolerated by the protective equipment at such water plant. Mr. Wright stated that Entergy claims that such water plant’s electrical system cannot tolerate the incoming energy level. Mr. Ginandt reported that MUD 9’s engineer has been coordinating with Entergy regarding such matter, but that Entergy is not responsive to their requests for information. Mr. Barron stated that MUD 9’s electrical engineer is trying to adjust the protection limits on the protective equipment at such water plant in order to prevent such equipment from continually tripping; however, such efforts have not resolved the problem. The Board instructed Hays North to coordinate with MUD 9’s engineer and Entergy regarding the continued electrical shortages at the Buckingham Water Plant.

Mr. Wright then reported that two (2) sinkholes developed on top of storm drains located around Lake Conroe and added that he would like Director Tryon and Jones|Carter to accompany him to inspect such sinkholes so that he could explain the best method to repair them.

Next, Mr. Wright reported that 17 accounts are 60 days delinquent and added that there are no accounts delinquent by 90 or more days. Mr. Wright then reminded the Board that the District has not terminated service to any delinquent accounts since the beginning of COVID 19, approximately one (1) year ago. Mr. Wright went on to report that the total outstanding balance for all 17 delinquent accounts is $1,956.00 after deposits are applied. Director Patton requested that Hays North research the costs associated with reporting such delinquent accounts to the (3) major credit bureaus. In response to a question regarding the District’s options for collecting revenue owed by delinquent and former customers, Mr. Barner explained that the Board should consider increasing the amount of deposit required by customers who are renting property within the District. The Board requested that the Attorney add such item to the agenda for the regular April 14, 2021 Board meeting.

Upon a motion by Director Patton, seconded by Director Barlow, after full discussion and with all Directors present voting aye, the Board authorized write-offs of the total outstanding balance for the 17 delinquent accounts.

Next, Mr. Wright updated the Board regarding the claim that Hays North filed with the District’s insurance provider related to a backflow of sewage that damaged three (3) customers’ homes.

Mr. Wright reported that he provided the insurance adjuster with the requested information.

Mr. John Wright then reported that Hays North’s liability insurance provider agreed to pay certain claims filed for damages to various District water lines resulting from Hay North’s mismarking of water lines where Tachus was installing fiber optic cable.

Regarding the status of the valve location project, Mr. Wright stated that he provided Jones|Carter with drawings for such project, but noted that Hays North still needs to clarify certain field notes that were included on such drawings.

Mr. Wright next reported that Hays North has prepared the District’s Annual Water Loss Audit and will submit such audit to the Texas Water Development Board in advance of the May 1, 2021 deadline.

Upon a motion by Director Barlow, 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 INCENTIVES TO INCREASE USE OF E-STATEMENTS BILLING

Director Patton recommended that the District notify customers that the one time credit of $12.00 that the District is offering as an incentive to customers who sign up to receive electronic statements will no longer be offered as of June 2021. In response to a question from Director Moravec regarding the District’s promotion of the availability of electronic statements to customers, Mr. Wright explained that Hays North provides a flyer to all new customers regarding the availability of electronic billing statements and electronic payments. Mr. Wright stated that approximately 200 customers submit payments online but are not enrolled to receive electronic statements. Mr. Wright further stated that First Billing included a pop-up message on its website notifying such customers of the availability of electronic billing. Director Moravec recommended that the District continue to offer the one time credit of $12.00 as an incentive to customers who sign up to receive electronic statements and to consider ways by which to further promote such incentive.

UPDATE ON DISTRICT’S WEBSITE AND COMMUNICATIONS SERVICES

Director Patton reported that usage of the District’s website is consistent and customer inquiries are received via such website each month. Director Moravec noted that the number of customer inquiries received through such website increased during the week of the Storm.

AUTHORIZE ATTENDANCE AT ASSOCIATION OF WATER BOARD DIRECTORS’ (“AWBD”) SPRING BREAKFAST AND SUMMER CONFERENCE AND REVIEW ATTENDANCE BY DIRECTORS AND REIMBURSEMENT OF EXPENSES

Mr. Barner reminded the Board that it needs to authorize the Directors’ attendance at the AWBD 2021 Spring Breakfast, which is being held in Houston, Texas on April 16, 2021, and the 2021 Summer Conference in San Antonio, Texas from June 17, 2021 through June 19, 2021. Upon a motion by Director Patton, seconded by Director Tryon, after full discussion and with all Directors present voting aye, the Board authorized the Directors’ attendance at the 2021 AWBD Spring Breakfast and Summer Conference on behalf of the District.

MISCELLANEOUS REPORTS

Director Patton reported that David Hartman is no longer the General Manager of the Walden Community Improvement Association (the “WCIA”) and that Scott Sustman, former WCIA General Manager, is serving as the interim until the WCIA hires a permanent General Manager. Mr. Barner stated that he will reach out to Mr. Sustman to discuss matters related to the ownership of certain property located within the WCIA, as well as the agreement between the District and the WCIA for the collection of solid waste and related service fees.

ATTORNEY’S REPORT

In response to recent questions about the District’s Board meetings, Mr. Barner next explained that while the Governor has lifted the State’s mask mandate and allowed businesses to resume operating at 100% capacity, the state of disaster declared for all counties in Texas remains in effect, which allows the Board to continue holding meetings via video and telephone conference. A discussion then ensued regarding when the Board should begin holding meetings in person again. Director Patton reported that he did not believe that the Board could resume holding its meetings at the Walden Yacht Club at this time as such club suffered water damage during the Storm and is not open to the public.

The Board took a brief recess at 11:10 a.m.

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 11:10 a.m. to discuss matters within the attorney/client privilege. Present for all or portions of the Executive Session were the Board of Directors, Mr. Abshire, Mr. Barner, and Ms. Cain. The Board declared the Executive Session was ended at 11:17 a.m.

Director Barlow exited the meeting at 12:36 p.m.

RECONVENE IN OPEN SESSION

As of 12:40 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 approved Allco Pay Estimate No. 25 in the amount of $405,563.05, subject to the discussion of such pay estimate in closed session.

Upon a motion by Director Moravec, seconded by Director Tryon, after full discussion and with all Directors present voting aye, the Board authorized formal recognition of certain Hays North employees for their efforts during the Storm and determined that it is a public benefit to do so.

THERE BEING NO FURTHER BUSINESS BEFORE THE BOARD, the meeting was adjourned at 12:43 p.m.

PASSED AND APPROVED this the 14th day of April, 2021.

Secretary, Board of Directors