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

December 14, 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, December 14, 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
Vacant – Director

All members of the Board were present, thus constituting a quorum. Also attending were Maria Felder of Municipal Accounts & Consulting L.P. (“Bookkeeper” or “MAC”); Justin Abshire and Conner Murphy of Quiddity Engineering (“Engineer” or “Quiddity”); Philip Wright of Hays Utility North Corporation (“Operator” or “Hays North”); Michael Others of McCall Gibson Swedlund Barfoot PLLC (“MGSB” or “Auditor”); Ray Geiselhart and David Allen, Directors 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, and Kathryn Cain, paralegal, of Radcliffe Bobbitt Adams Polley PLLC (“Attorney” or “RBAP”); and Michael White and R. J. Wetzel, members 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. Mr. Allen introduced himself to the Board as a recently appointed Director of MUD 9.

There being no further public comments, the President directed the Board to proceed with the agenda.

APPROVAL OF MINUTES OF NOVEMBER 9, 2022 REGULAR MEETING

Director Tryon next directed the Board to the approval of the November 9, 2022 regular meeting minutes. Upon a motion by Director Moravec, seconded by Director Patton, after full discussion and with all Directors present voting aye, the Board approved the November 9, 2022 regular meeting minutes, as presented.

TAX ASSESSOR-COLLECTOR’S REPORT

Ms. Felder then reviewed the Tax Assessor-Collector’s Report for the month of November 2022, a copy of which is attached hereto, including past monthly collections and credits as reported by the Tax Assessor-Collector for the District. Ms. Felder reported that 8.86% of the 2022 taxes have been collected as of November 30, 2022; however, the payment of such taxes is not due until January 31, 2023.

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.

BOOKKEEPER’S REPORT

Ms. Felder next reviewed the Bookkeeper’s Report, a copy of which is attached hereto, including the current fund balances, expenditures, and investments. Ms. Felder noted that the District has a 27-month reserve of funds available in its General Operating Fund.

In response to a comment from Director Moravec regarding the amount expended by the District on replacement of water meters being significantly over budget, Mr. Wright explained that the price per unit cost of electric water meters increased within the past year and is expected to increase again in January 2023. Director Moravec requested that Hays North provide the Board with the number of District water meters replaced within the last year as compared to the previous year.

Upon a motion by Director Moravec, seconded by Director Barlow, 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.

ENGAGE AUDITOR FOR PREPARATION OF AUDIT FOR FISCAL YEAR ENDING (“FYE”) DECEMBER 31, 2022

Mr. Others presented to the Board a proposal for auditing the financial statements for the fiscal years ending December 31, 2022 and December 31, 2023, a copy of which is attached hereto. Mr. Others then explained that the Auditor’s fee to complete the FYE August 31, 2022 audit will be between $17,000.00 and $19,000.00, which is a slight increase as compared to fee for the previous audit.

Upon a motion by Director Moravec, seconded by Director Patton, after full discussion and with all Directors present voting aye, the Board approved the engagement of the Auditor for the preparation of the Audit for the FYE December 31, 2022 and December 31, 2023.

WATER AND WASTEWATER RA TE ANALYSIS

Director Moravec then presented an analysis of the District’s water and wastewater rates. Director Moravec explained that the District’s debt service obligation increased approximately $300,000.00 within the past year and added that the operating costs for the District’s new wastewater treatment plant (“WWTP”) have significantly increased costs of operating the WWTP. Director Moravec further explained that based upon the District’s current water and wastewater rates, the District’s anticipated revenue for the FYE December 31, 2023 will be approximately $700,000.00 less than the District’s expenses. Director Moravec then presented to the Board a memorandum including a proposal for increasing the District’s water and wastewater rates for residential and commercial customers.

Director Moravec further proposed that the higher water usage tiers be increased by a larger percentage than the lower usage tiers in order to encourage water conservation. Discussion then ensued regarding the District’s water and wastewater rates as compared to the rates implemented by other local districts. Director Barlow stated that she will coordinate with Director Moravec to prepare an article for publication in the community newsletter to notify customers regarding the impending increase in the District’s water and wastewater rates. Mr. Barner stated that RBAP will provide such article to Off Cinco for posting on the District’s website. Mr. Wright recommended that the District’s new water and wastewater rates be effective as of January 1, 2023, which will be reflected in customers’ February 2023 billing statements.

Upon a motion by Director Moravec, seconded by Director Tryon, after full discussion and with all Directors present voting aye, the Board approved the water and wastewater rates presented by Director Moravec.

Mr. Denner exited the meeting at this time.

APPROVE ORDER ADOPTING BUDGET (GENERAL FUND) FOR FYE DECEMBER 31, 2023

Director Moravec next presented to the Board a proposed budget for the FYE December 31, 2023, which includes the new water and wastewater rates adopted by the Board. Discussion then ensued regarding various line items contained in such proposed budget.

APPROVE ORDER ADOPTING BUDGET (WWTP) FOR FYE DECEMBER 31, 2023

Director Moravec next presented to the Board a proposed budget for the FYE December 31, 2023 for the District’s WWTP. Discussion then ensued regarding various line items contained in such proposed budget.

Upon a motion by Director Tryon, seconded by Director Patton, after full discussion and with all Directors present voting aye, the Board approved the Orders Adopting Budgets for the General Fund and the WWTP for the FYE December 31, 2023.

Mr. Others exited the meeting at this time.

ENGINEER’S REPORT

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

Mr. Murphy next updated the Board on Allco, LLC’s (“Allco”) progress over the past month regarding the WWTP Improvement Project (the “WWTP Project”). Mr. Murphy reported that demolition of the District’s existing WWTP is complete and Allco completed backfilling of the aeration basins and clarifiers. Mr. Abshire then reported that Allco is requesting that the Board permit Allco to use certain material for backfilling; however, the requested material does not comply with Quiddity’s specifications for soil condition standards. Mr. Abshire explained that Allco is requesting to use the soil excavated from the site of the old WWTP as backfill material. Mr. Abshire further explained that it will cost Allco approximately $50,000.00 to haul the excavated soil and obtain compliant backfill material. A discussion ensued, and it was the consensus of the Board to disallow Allco’s request to use non-compliant backfill material.

Ms. Felder exited the meeting at this time.

Next, Mr. Abshire presented a letter from Allco requesting the release of all retainage held by the District relating to Phase I of the WWTP Project. Messrs. Abshire and Barner explained that the retainage held by the District is not for a particular phase of such project, but for such project as a whole. Mr. Abshire then reminded the Board that pursuant to Section 49.276 of the Texas Water Code, once a construction project is over 50% complete, the District may reduce the retainage withheld from ten percent (10%) to five percent (5%); however, if the District declines to reduce the amount of such retainage, the District will also have to pay interest on the additional amount of withheld retainage. Mr. Abshire then went on to explain Allco’s request for the use of fill material at the WWTP site other than what was specified by the District’s Geotechnical Consultant, Aviles Engineering (“Aviles”). A discussion ensued and it was the consensus of the Board to take no action on Allco’s request for release of retainage.

Mr. Murphy then presented Allco’s Pay Estimate No. 46 in the amount of $97,632.77 for work performed on the WWTP Project.

Mr. Murphy then reminded the Board that Quiddity submitted the application for the renewal of the Texas Pollutant Discharge Elimination System Permit for the WWTP to the Texas Commission on Environmental Quality on behalf of the District. Mr. Murphy stated that he expects to receive the final permit within the next two (2) months.

Mr. Murphy next reminded the Board that it awarded the construction contract for the 2022 Sanitary Sewer Rehabilitation Project to Texas Pride Utilities, LLC (“Texas Pride”). Mr. Murphy reported that Quiddity will hold a pre-construction meeting with Texas Pride on December 141\ and the Notice to Proceed will be issued to Texas Pride in January 2023.

Mr. Murphy then updated the Board on the Motor Control Center (“MCC”) Replacement Project for the Browning Street Water Plant (“Water Plant No. 2”). Mr. Murphy reported that McDonald Municipal & Industrial (“McDonald”) completed the below-ground electrical work and poured the concrete slab for the new control building. Mr. Murphy further reported that McDonald completed re-coating of the cooling tower motors and frames. Director Patton requested that Quiddity coordinate with McDonald to determine the status of delivery of the equipment that was purchased in advance for such project. Mr. Murphy next presented McDonald’s Pay Estimate No. 1 in the amount of $80,775.00 for work performed on the Water Plant No. 2 MCC Replacement Project.

Next, Mr. Murphy reported that Quiddity and Hays North are underway with their on-site inspections of the District’s storm sewer outfalls. Mr. Murphy further reported that Quiddity will determine the storm sewer outfalls most in need of immediate repair and will prepare a bid package and solicit bids in January 2023 for the cleaning and televising of such outfalls.

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

Upon a motion by Director Patton, seconded by Director Tryon, after full discussion and with all Directors present voting aye, the Board: 1) approved Allco’s Pay Estimate No. 46 in the amount of $97,632.77; and 2) approved McDonald’s Pay Estimate No. 1 in the amount of $80,775.00 for the Water Plant No. 2 MCC Replacement Project.

STATUS OF LANDSCAPING IMPROVEMENTS AT THE WWTP

Discussion next ensued regarding potential landscaping improvements to the grounds of the WWTP. Director Barlow reminded the Board that an irrigation system is not installed within the perimeter fence at the WWTP. Director Moravec then stated that he is in favor of installing an irrigation system within the boundaries of such fence in order to plant vegetation within such area. Director Patton stated that trees should be planted outside such fence as a barrier around the WWTP, particularly along Walden Road, and recommended planting native trees that do not require regular watering.

The Board took a brief recess from 10:32 a.m. to 10:36 a.m.

OPERATOR’S REPORT

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

Mr. Wright then reported that 812 customers are receiving electronic billing statements which is an increase of five (5) customers from last month.

Mr. Wright next reported that the combined water accountability for the District and MUD 9 was 95.69%.

Mr. Wright then reported that there were no new taps last month and that the District has a total of 1,817 connections. Mr. Wright then stated that three (3) accounts were terminated last month due to delinquent payment; however, the outstanding balances owed for two (2) such accounts were subsequently paid and service was restored. In response to a question from Mr. Wright, the Board stated that it wished to defer termination of service to delinquent accounts during the month of December.

Next, Mr. Wright reported that the phosphorous levels at the WWTP are within normal limits.

Mr. Wright then reviewed the Notable Activity Report contained in the Operator’s Report and noted that such report includes repair of the bar screen at the old WWTP, which had to be repaired before it could be installed at the new WWTP.

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

AUTHORIZE DISTRIBUTION OF PUBLIC UTILITY COMMISSION (“PUC”) NOTICE REGARDING EXTREME WEATHER EVENTS

Mr. Barner then explained to the Board that the PUC is requiring that on or before January 31, 2023, all investor-owned utilities, water supply and sewer service organizations, districts and affected counties must provide a one-time, written notice to customers in English and Spanish to inform such customers of new requirements pertaining to customers affected by extreme weather events as defined by Texas Administrative Code§ 24.173(d). Mr. Barner stated that such notice must include specific information as outlined in such code. Mr. Barner explained that in order to comply with such requirements, the District must insert such notice in customers’ next billing statements notifying such customers of the PUC’s new requirements regarding extreme weather events. Mr. Barner stated that additionally, RBAP will provide such notice to Off Cinco for posting on the District’s website. Upon a motion by Director Moravec, seconded by Director Patton, after full discussion and with all Directors present voting aye, the Board authorized inclusion of an insert in customer’s billing statements regarding the PUC’s requirements during extreme weather events.

UPDATE ON STATUS OF ASSOCIATION OF WATER BOARD DIRECTORS (“AWBD”) WATER SMART APPLICATION

Mr. Wright reminded the Board that the District must hold one (1) public event to satisfy the A WBD’s requirements for participation in the Water Smart program. Mr. Wright further reminded the Board that the District satisfied such requirement last September. Mr. Wright stated that Hays North will submit the Water Smart application to the AWBD on behalf of the District prior to the deadline in March 2023.

MISCELLANEOUS REPORTS

Mr. Geiselhart next reported that at its last meeting, MUD 9 appointed new directors to fill the two (2) vacancies on MUD 9’s Board of Directors.

UPDATE ON STATUS OF AGREEMENTS WITH CITY OF HUNTSVILLE (THE “CITY”)

Next, Mr. Barner reminded the Board that the District’s option to purchase effluent from the City expires on January 31, 2023. Mr. Barner reported that he is coordinating with the City’s attorney regarding renewing such option for an additional two (2) years. Mr. Barner further reported that an item will be included on the City Council’s upcoming meeting agenda regarding renewal of the District’s option to purchase effluent from the City.

RENEW MEMBERSHIP IN A WBD

The Board next discussed renewing the District’s membership in the A WBD. Upon a motion by Director Patton, seconded by Director Tryon, after full discussion and with all Directors present voting aye, the Board authorized the renewal of the District’s membership in the AWBD and authorized payment of same.

AUTHORIZE EMINENT DOMAIN REPORTING COMPLIANCE PURSUANT TO TEXAS GOVERNMENT CODE, SECTION 2206.151-157, AS AMENDED

Mr. Barner then reported that RBAP will file the required annual eminent domain report on behalf of the District pursuant to Texas Government Code, Section 2206.151-157, as amended. Mr. Barner explained that the report includes information related to the District’s authority to exercise its power of eminent domain and must be filed by no later than February 1st of each year. Upon a motion by Director Moravec, seconded by Director Tryon, after full discussion and with all Directors present voting aye, the Board authorized RBAP to file the required annual eminent domain report pursuant to Texas Government Code, Section 2206.151-157, as amended.

ATTORNEY’S REPORT

Mr. Barner next reported that the WCIA’s attorney reviewed the agreement between the District and the WCIA relating to solid waste collection services and had no comments to the same. Mr. Barner stated that he will provide a copy of such agreement to the Board for review prior to the next regular Board meeting.
Mr. Barner then reminded the Board that Montgomery County Emergency Services District No. 2 (“MCESD 2”) previously paid $5,000.00 in earnest money pursuant to an Earnest Money Contract between the District and MCESD 2 for the purchase of the site where the Walden Volunteer Fire Station is located. Mr. Barner further reminded the Board that MCESD 2 decided to purchase another tract of land. Mr. Barner went on to remind the Board that he sent a letter to MCESD 2 cancelling such contract and requesting that the earnest money be released to the District. Mr. Barner reported that MCESD 2 agreed to release such earnest money to the District and provided him with a Release of Earnest Money agreement to be signed on behalf of the District.

2023 ANNUAL AGENDA

Mr. Barner next presented the 2023 Annual Agenda and requested that the Board and consultants provide him with their comments to the same.

OPERATOR’S REPORT, CONTINUED

In response to a question from Mr. Barner, Mr. Wright reported that Hays North will prepare and submit the District’s Annual Water Loss Audit to the Texas Water Development Board in advance of the May 1, 2023 deadline.

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 11: 15 a.m. to discuss matters of attorney-client privilege. Present for all or portions of the Executive Session were the Board of Directors, Messrs. Abshire, Murphy and Barner and Ms. Cain.

As of 11 :23 a.m., the President declared the Executive Session was ended and the public session was resumed.

Upon a motion by Director Patton, seconded by Director Barlow, after full discussion and with all Directors present voting aye, the Board authorized RBAP to send a letter to Allco pursuant to the terms discussed in executive session.

THERE BEING NO FURTHER BUSINESS BEFORE THE BOARD, the meeting was adjourned at 11 :24 a.m.

PASSED AND APPROVED this the 11th day of January, 2023.

Margie Barlow
Secretary, Board of Directors