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

August 10, 2022

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 10, 2022, at 9:00 a.m., at the Walden Yacht Club, 13101 Melville Drive, Montgomery, Texas 77356, a designated meeting place located inside the boundaries of the District, 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 were Justin Abshire, Conner Murphy and Sean McMillan of Quiddity Engineering (“Engineer” or “Quiddity”); Philip Wright of Hays Utility North Corporation (“Operator” or “Hays North”); Corey Howell of The GMS Group, LLC (“Financial Advisor” or “GMS”); Robert Ginandt, Director of Montgomery County Municipal Utility District No. 9 (“MUD 9”); Rusty Denner, General Manager for the Walden Community Improvement Association (“WCIA”); Elliot M. Barner, attorney, Kathryn Cain, paralegal, of Radcliffe Bobbitt Adams Polley PLLC (“Attorney” or “RBAP”); and Michael White, member of the public.

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.

Mr. Wright entered the meeting at this time.

FINANCIAL ADVISOR’S REPORT

Mr. Howell then presented to and reviewed with the Board his tax rate study for the proposed 2022 tax rate (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 from 2021 to 2022 in the amount of $5,100,000. Mr. Howell went on to discuss with the Board a proposed total ad valorem tax rate of $0.3150 per $100 assessed valuation, comprised of$0.0621 per $100 assessed valuation for debt service purposes and $0.2529 per $100 assessed valuation for operation and maintenance purposes.

Mr. Howell added that, based on a total tax rate of $0.3150, the average homeowner’s tax bill would increase by approximately $109.00.

Mr. Howell then explained to the Board that while the total tax rate presented exceeds what is defined in Texas Water Code Section 49.23602 as the “2022 Tax Election Rate” because it exceeds 1.08 times the amount of tax imposed by the District in the 2021 tax year, the “2022 Voter Approval Rate” is actually $0.4563.

Mr. Howell went on to explain that were the voters within the District to petition the Board to hold a roll-back election, due to the construction of the statutes passed into law through Senate Bill 2 during the 87th Texas Legislative Session, the District’s tax rate would actually increase to the above-mentioned approval rate. In response to a question from Director Moravec, Messrs. Barner and Howell explained the process by which voters could petition the District to hold a roll-back election related to such tax rate.

Mr. Denner entered the meeting at this time.

Mr. Howell then stated that if the District were to adopt a total ad valorem tax rate of $0.3150 per $100 assessed valuation, he would recommend that the Board transfer $600,000 from the General Operating Fund (“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 $975,000. Extensive discussion then ensued regarding the Tax Rate Study, including the proposed 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 Patton, seconded by Director Leasure, after full discussion and with all Directors present voting aye, the Board authorized: 1) publication of a proposed 2022 tax rate at $0.3150 per $100 of assessed value in the Conroe Courier; 2) setting the public hearing regarding setting such rate at the regular meeting of Wednesday, September 14, 2022, at 9:00 a.m.; and 3) the transfer of $600,000 from the District’s GOF to the District’s debt service fund.

In response to a question, Mr. Barner 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 2022 tax rate.

APPROVAL OF MINUTES OF JULY 13, 2022 REGULAR MEETING

Director Tryon next directed the Board to the approval of the July 13, 2022 regular meeting minutes. Upon a motion by Director Leasure, seconded by Director Barlow, after full discussion and with all Directors present voting aye, the Board approved the July 13, 2022 regular meeting minutes, as presented.

TAX ASSESSOR-COLLECTOR’S REPORT

Director Moravec then reviewed the Tax Assessor-Collector’s Report for the month of July 2022, a copy of which is attached hereto, including past monthly collections and credits as reported by the Tax Assessor-Collector for the District. Director Moravec reported that 98.83% of the 2021 taxes have been collected as of July 31, 2022. Upon a motion by Director Patton, seconded by Director Barlow, after full discussion and with all Directors present voting aye, the Board approved the Tax Assessor-Collector’s Report, as presented.

Mr. Denner exited the meeting at this time.

BOOKKEEPER’S REPORT

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

Mr. Howell exited the meeting at this time.

Director Moravec then reviewed with the Board certain line items contained in the budget comparison page of the Bookkeeper’s Report. Director Moravec went on to explain that Allco, LLC (“Allco”) had been paying for the electricity used by the expanded portions of the wastewater treatment plant (“WWTP”); however, payment for such service is now the responsibility of the District. In response to a question about the estimated costs of electricity for the fiscal year ending December 31, 2023 (“FYE 2023 “), Mr. Wright explained that certain portions of the original WWTP are still operating and require electricity. A discussion ensued. Director Patton stated that in his opinion, the District has not allocated sufficient funds in the District’s budget’s line item for operating costs of maintaining the original WWTP that are still in use while also operating the expanded portions of the WWTP.

Director Moravec next stated that a payment will be made on September 30, 2022, for the principal and interest due on the District’s outstanding bonds.

Regarding the summary of funds from the District’s Series 2018 Bonds as contained in the Bookkeeper’s Report, Director Moravec noted that $1,799,029.08 is needed in order to complete the projects for which such bonds were issued. Director Moravec further noted that the amount of funds remaining in the Capital Projects Fund is only $1,082,259.18. Director Moravec reminded the Board that the remainder of such projects will be funded from the District’s General Operating Fund.

In response to a question, Mr. Barner stated that he understood that the Quarterly Investment Report for the period ending June 30, 2022 was not sent out by the Bookkeeper right before the meeting, so it will be presented to the Board next month.

Upon a motion by Director Barlow, 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.

In response to a question about the agenda item related to distribution of the draft WWTP budget for the FYE 2023 to MUD 9, Mr. Barner reminded the Board that such item is an annual agenda item in order to document that the Board has authorized the District’s Bookkeeper to distribute such budget. Director Moravec then reviewed such draft budget with the Board and responded to questions regarding certain budgeted items. Discussion then ensued regarding the amount of funds allocated in the draft WWTP budget for the operating expenses related to the old and new WWTPs.

Upon a motion by Director Moravec, seconded by Director Patton, after full discussion and with all Directors present voting aye, the Board authorized distribution of the draft WWTP budget for FYE December 31, 2023 to MUD 9.

ENGINEER’S REPORT

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

Mr. Abshire introduced Mr. McMillan as Quiddity’s electrical engineer who performed the inspection of the electrical systems at one (1) of the District’s water wells and three (3) water plants.

Mr. McMillan then reviewed with the Board a memoranda regarding such analysis and Quiddity’s recommendations regarding methods by which to increase the efficiency of such systems.

Mr. McMillan reported that the District’s electricity costs are not atypical and stated that it would not be cost effective for the District to modify the electrical systems at the District’s water wells and water plants. Director Moravec requested that Mr. McMillan review the utility tariffs that the District is operating under to determine if such tariffs are the most favorable available to the District.

Mr. McMillan exited the meeting at this time.

Mr. Abshire next updated the Board on Allco’s progress over the past month regarding the WWTP Project. Mr. Abshire reported that Allco continues to address the final punch-list items related to Phase I of such project. Mr. Abshire then reminded the Board that it previously declared Phase I of such project substantially complete. Mr. Abshire presented to the Board a Certificate of Partial Substantial Completion and stated that such certificate will be provided to Allco upon execution by the Board. Mr. Abshire further stated that a Notice to Proceed with Phase II of such project was issued to Allco on August 2nd. Mr. Abshire reported that demolition of the District’s existing WWTP began this week and is anticipated to take 30 days to complete.

Director Patton then reported that Allco submitted a new construction schedule for Phase II of the WWTP Project but noted that such schedule is not compliant with the schedule set forth in the contract for such project. Extensive discussion then ensued regarding Allco’s construction schedule for Phase II of such project.

Mr. Abshire then presented Allco Pay Estimate No. 42 in the amount of $13,035.60 for work performed for the WWTP Project.

Mr. Abshire then reminded the Board that Quiddity submitted the application for the renewal of the TPDES Permit for the WWTP to the Texas Commission on Environmental Quality (the “TCEQ”) on behalf of the District. Mr. Abshire reported that Quiddity is awaiting receipt of the draft of such permit from the TCEQ.

Mr. Abshire next stated that Quiddity is underway with the design of the Sanitary Sewer Rehabilitation Project. Mr. Abshire reported that Quiddity intends to advertise such project in September and will present bids and make a recommendation of award at the October 12th Board meeting.

Mr. Abshire then updated the Board on the Motor Control Center (“MCC”) Replacement Project for the Poe Drive Water Plant (Water Plant No. 1). Mr. Abshire reported that such project is approximately one ( 1) month behind schedule but is expected to be complete next month.

Mr. Abshire then presented McDonald Municipal & Industrial’s (“McDonald”) Pay Estimate No. 4 in the amount of $34,071.88 for work performed on the Poe Drive MCC Replacement Project.

Mr. Abshire then reported that Quiddity advertised the MCC Replacement Project for the Browning Street Water Plant (Water Plant No. 2) and received two (2) bids. Mr. Abshire further reported that the lowest base bid was submitted by McDonald in the amount of $414,469.00.

Mr. Abshire next discussed the anticipated timeline for such project and explained that construction on such project will not commence until October when the Poe Drive MCC Replacement Project is complete. Director Patton then explained that the alternative bid submitted by McDonald included the installation of a temporary electrical panel to supply electricity to the Browning Street Water Plant, which would allow the Catahoula Well to continue operating during construction of the MCC Replacement Project. Mr. Abshire stated that since such project will not be performed until after the summer, the District should be able to meet water demand by operating only the Jasper Wells. Mr. Abshire then cautioned the Board that if a power outage occurs, the Browning Street Water Plant will be offline and there is not a back-up generator installed at the Buckingham Water Plant. Director Patton requested that prior to issuance of the Notice of Award to McDonald, Mr. Abshire coordinate a meeting between Directors Patton and Tryon, Quiddity and McDonald to discuss the construction schedule for the Browning Street MCC Replacement Project.

The Board next discussed the previously approved lease of a temporary generator to operate the Catahoula Well at the Buckingham Water Plant in the event of an electric service interruption. In response to a question, Mr. Barner reminded the Board that it had previously approved the lease of such generator through the end of July.

Upon a motion by Director Patton, seconded by Director Tryon, after full discussion and with all Directors present voting aye, the Board: 1) approved the Engineer’s Report, as presented; 2) approved Allco’s Pay Estimate No. 42 in the amount of $13,035.60; 3) approved McDonald’s Pay Estimate No. 4 in the amount of $34,071.88; 4) accepted the bid submitted by McDonald in the amount of $414,469.00 for the Browning Street MCC Project; 5) approved issuance of the Notice of Award to McDonald, subject to a meeting between Directors Patton and Tryon, Quiddity and McDonald; 6) approved execution of the construction contract with McDonald, subject to Attorney’s review of bonds and insurance and receipt of a Form 1295 Certificate of Interested Parties; and 7) authorized issuance of the Notice to Proceed to McDonald, subject to execution of the construction contract.

OPERATOR’S REPORT

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

Mr. Wright then reported that 773 customers are receiving electronic billing statements which is an increase of 152 customers from last month. In response to a question from Director Patton, Mr. Wright stated that he will verify the accuracy of such increase.

Mr. Wright next reported that the combined water accountability for the District and MUD 9 was 94.65%. Mr. Wright further reported that there were no new taps last month and that the District has a total of 1,816 connections. Mr. Wright then stated that service to one ( 1) account was terminated due to delinquent payment; however, the outstanding balance owed for such account was subsequently paid and service was restored.

Mr. Wright then reported that the District exceeded certain permit limitations in some of the effluent samples taken from the WWTP due to reduced effectiveness of the treatment of wastewater with phosphorus during the warmer summer months. Mr. Wright further reported that phosphorous excursions are not required to be reported to the TCEQ. Mr. Wright explained that such excursions will be resolved once the expanded WWTP is fully operational.

Mr. Wright next reported that since the pump at the lift station on Twain Drive was replaced last month, such pump only had to be pulled once in order to remove non-dissolvable fibrous material, which are referred to in the wastewater utility industry as “Rags,” from such lift station.

Mr. Wright then reported that a District fire hydrant was damaged by a vehicle and was unable to be repaired. Mr. Wright further reported that the cost to replace such hydrant was $8,000.00. The Board then instructed Mr. Wright to file a claim for such damage with the driver’s msurance company.

The Board took a brief recess from 11 : 15 a.m. to 11 :20 a.m.

Next, further discussion ensued regarding the lease of a temporary generator to operate the Catahoula Well at the Buckingham Water Plant in the event of an electric service interruption.

Mr. Barner stated that he needed a moment to confer with Mr. Wright and review the lease agreement to verify whether the fees for such lease will be prorated upon the District’s return of such generator.

Upon a motion by Director Barlow, seconded by Director Moravec, after full discussion and with all Directors present voting aye, the Board: 1) approved the Operator’s Report, as presented; and 2) approved extending the lease for the temporary generator at the Buckingham Water Plant for one ( 1) additional month.

UPDATE ON STATUS OF LANDSCAPING IMPROVEMENTS AT THE WWTP

Director Moravec then stated that members of the public have requested to tour the new WWTP. A brief discussion ensued. Mr. Barner suggested that instead of holding an event to allow the general public to tour such plant, the Engineer and/or Operator can take inquiring persons on individual tours of such plant.

Discussion next ensued regarding potential landscaping improvements to the grounds of the WWTP and the timeline for the same. Director Barlow stated that she will coordinate with the Engineer to develop a plan for landscaping the grounds both inside and outside of the fence at the WWTP.

Next, further discussion ensued regarding the lease of a temporary generator at the Buckingham Water Plant. Mr. Barner explained that pursuant to the contract for the lease of such generator, the renewal term is a period of 28 days, and it does not provide for prorating of rental fees.

Upon a motion by Director Moravec, seconded by Director Tryon, after full discussion and with all Directors present voting aye, the Board amended the previous motion relating to the lease of such generator and approved extending the lease for the temporary generator at the Buckingham Water Plant for one (1) additional 28-day period.

UPDATE ON DISTRICT’S WEBSITE AND COMMUNICATIONS SERVICES

Director Patton reported that the joint website between the District and MUD 9 is now live.

Director Patton then reviewed with the Board the layout of such website.

REVIEW REPORTS PREPARED BY ARBITRAGE COMPLIANCE SPECIALISTS (“ACS”)

Director Moravec then discussed ACS’ Arbitrage Rebate and Yield Restriction Compliance Report. Director Moravec explained that based on the findings of such report, the District has not earned above the yield on any of its investments of unspent bond funds or debt service funds than is allowable by law; therefore, the District does not owe any arbitrage rebate to the Internal Revenue Service.

AUTHORIZE FEES OF OFFICE AND REIMBURSEMENT FOR EXPENSES FOR ATTENDANCE AT ASSOCIATION OF WATER BOARD DIRECTORS’ (“AWBD”) DIRECTORS 101 WORKSHOP

Director Moravec next reported that he attended the A WBD Directors 101 Workshop last week for the purpose of networking on behalf of the District. Director Moravec requested that the Board approve his fee of office and reimbursement of expenses incurred while attending such workshop. Upon a motion by Director Patton, seconded by Director Barlow, after full discussion and with all Directors present voting aye, the Board approved Director Moravec’s fee of office and reimbursement of expenses for attendance at the A WBD Directors 101 Workshop.

AUTHORIZE ATTENDANCE AT POST-ISSUANCE TAX-EXEMPT DEBT COMPLIANCE OFFICER TRAINING SEMINAR

Mr. Barner discussed with the Board the Post-Issuance Tax-Exempt Debt Compliance Officer Training Seminar hosted by RBAP on Saturday, September 24, 2022, and stated that such seminar is available to the District’s compliance officer and any other Directors who wish to increase their knowledge regarding arbitrage.

ANNUAL REVIEW OF DISTRICT’S CONSULTANTS’ CONTRACTS

Mr. Barner then reminded the Board that it is required to review each of the District’s consultants’ contracts at least once each year and that the Board has several options for performing such review, including reviewing one (1) consultant each month, having a special meeting to review all the District’s consultants, or, if everything is satisfactory, then the Board could state such a finding in the minutes and thereby satisfy the requirement. The Board briefly discussed the status of the consultants for the District and determined that all of the consultants are performing satisfactorily.

Mr. Wright then stated that Hays North intends to present to the Board within the next few months a proposed amendment to its Service Agreement to cover the increased operational costs incurred by Hays North. Mr. Wright explained that the cost of materials necessary to install taps has increased significantly. Mr. Barner requested that upon presenting a proposed amended Service Agreement to the Board, Hays North also provide recommendation regarding corresponding revisions to the District’s Rate Order.

Next, Mr. Abshire stated that Quiddity is revising its hourly rates and will present a proposal to the Board next month for an amendment to its Professional Services Agreement. In response to a question from Mr. Barner, Mr. Abshire explained that Quiddity’s new hourly rate will be effective through December 2023.

ATTORNEY’S REPORT

Mr. Barner then reported that he continues to draft the agreement between the District and the WCIA relating to solid waste collection services since the District is billing its customers for such services on behalf of the WCIA.

EXECUTIVE SESSION

Pursuant to Section 551.071 of the Texas Government Code, Subchapter D, of the Open Meetings Act, the President called the executive session to order at 12:00 p.m. to discuss matters of attorney-client privilege. Present for all or portions of the Executive Session were the Board of Directors, Mr. Barner and Ms. Cain.

RECONVENE IN OPEN SESSION

As of 12:27 p.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 12:28 p.m.

PASSED AND APPROVED this the 14th day of September, 2022.

Margie Barlow
Secretary, Board of Directors