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2007 07 18 BAWA Minutes• • MINUTES OF THE REGULAR SESSION MEETING OF THE BOARD OF DIRECTORS OF THE BAYTOWN AREA WATER AUTHORITY July 18, 2007 at 8:00 a.m. The Board of Directors of the Baytown Area Water Authority, Harris County, Texas, met in regular session on Wednesday, July 18, 2007 in the Conference Room, 7425 Thompson Road, Baytown, Texas, with the following in attendance: Robert L. Gillette, President Dan Mundinger, Vice President Dan Conejo, Board Member. Peter Buenz and Knox Beavers were absent. Robert L. Gillette, President, opened the meeting at 8:00 a.m. with a quorum present, and the following business was conducted: Consider approval of the minutes for the meeting held on May 16, 2007. Board Member Conejo moved to approve the minutes of the meeting held on May 16, 2007. Board Member Mundinger seconded the motion. The vote follows: Ayes: Board Members Mundinger and Conejo. President Gillette. Nays: None. The motion carried. Receive and discuss a draft of the proposed 2007-08 fiscal year budget. Mr. Robert D. Leiper, Interim General Manager, explained that he has developed the proposed budget for the Authority's 2007-08 fiscal year. The Board will have the opportunity to discuss the 2007-08 draft budget and make changes in order that it be ready to place on the August agenda for further discussion and approval. Mr. Leiper explained the Budget sets forth the revenues and appropriations for the fiscal year October 1, 2007 through September 30, 2008. The financial guidance provided by the Board has resulted in BAWA's strong financial position exhibited by a stable working capital balance. The use of non -recurring revenues to fund a portion of the capital improvement program will reduce the amount of future debt issues. The construction of a second water supply line serving the City of Baytown is funded partially from non -recurring revenues to reduce the amount of debt that is issued. This project will provide reliability to BAWA's largest customer, the City of Baytown, which currently constitutes approximately 89% of BAWA's water sales. Page 2 of 4 • • Minutes of the Regular Session Meeting BAWA — July 18, 2007 BAWA was approved for and has closed on a loan with the Texas Water Development Board (TWBD) for funding of the second water supply line and Phase II improvements. The City of Houston notified BAWA of a rate increase effective April 1, 2007 for untreated water purchased from the City of Houston. The rate increased 2.8% from $0.4123 to $0.4238 per 1,000 gallons. The previous rate increase was in 2006. Also, a 3.6% increase in the cost of raw water from the City of Houston is anticipated effective April 1, 2008 and is included in the proposed budget. The 2007-08 proposed budget estimates sales of $6,697,893 for 12.5 million gallons per day (MGD) based upon an average rainfall year. Fluctuations to average rainfall can significantly impact actual sales. A $0.07 rate increase is projected in the proposed 2007-08 budget. The current rate structure of $1.39 per 1,000 gallons for the City of Baytown and $1.42 per 1,000 gallons for customers outside the city are proposed to increase to $1.46 and $1.49; respectively, to cover the increased cost of operations, including the purchase of raw water. This increase in rates is expected to generate additional revenue in the amount of $320,251. Since the inception of the BAWA plant in April 1981, there have been rate increases in 1988, 1993, 1999 and 2007. Total operating expenditures for the proposed 2007-08 budget are $4,798,850 an increase of $226,301 from the 2006-07 budget. The depreciation expense increased to recognize one full year of depreciation on new improvements. The proposed 2007-08 budget includes a transfer to General Fund for an indirect cost allocation, which is to reimburse the City for administrative services such as Human Resources, Fiscal Operations, Legal and Information Technology Services. Highlights of major operating changes were as follows: • Increase in personnel services $ 55,525 • Increase in supplies (Primarily raw water rate increase) 52,099 • Increase in maintenance 80,200 • Increase in services 38,477 Mr. Leiper explained that in order to maintain fiscal stability, governmental entities maintain a working capital balance to meet daily liquidity needs. Appropriate levels of working capital vary from entity to entity based on the relative impact of particular circumstances or financial conditions. The goal for working capital is 60 to 90 days. Working capital is defined as current assets (e.g., cash, investments and accounts receivable) less current liabilities (e.g., accounts payable). The working capital in the proposed budget is estimated to be 65 days as of September 2008. Working capital in excess of the targeted goal provides contingency funding for current projects and unforeseen expenses. Discussion was had by the Board about the last time the rates for water were increased. Mr. Pack informed the Board that it was last year. Receive and discuss the investment report for the calendar quarter ended June 30, 2007. Ms. Rhonda Young, Finance Director, gave the investment report for the calendar quarter ended June 30, 2007. She reported that the average monthly interest rate is 5.2884% and that Year to Date Interest earnings are $218,141. Page 3 of 4 • • Minutes of the Regular Session Meeting BAWA — July 18, 2007 Consider Proposed Resolution rejecting the bids for the BAWA Raw waterline Project received on May 22, 2007; and awarding a construction contract to Alvin Contracting for the BAWA Raw Waterline Project based on the bid received on June 28, 2007. Mr. Fred Pack, Director of Public Works, explained that the Proposed Resolution rejects the bids for the BAWA Raw Waterline Project received on May 22, 2007, and awards a construction contract to Alvin Contracting in the amount of $76,460 based upon the bid received on June 28, 2007. The bid in the amount of $96,000 (including alternate) received on May 22, 2007 was the only bid received and was higher than the Engineer's cost estimate of $57,970. A recommendation was given to the City Engineering Staff by the project engineer to re -bid this project in order to have a more competitive bidding environment. The re -bid was held on June 28, 2007 and five bids were received. The low bid including alternate 1 was $76,460. This was a savings of $19,540 from the original bid. The scope of work includes the removal of an existing 24" water line and installing 50 linear feet of new steel water supply line including fittings, pipe supports, and a 24" cast iron venture meter. The construction duration for this project is 90 calendar days. Funds are available in the BAWA CIPF for this project. After a brief discussion on the type of material bid, Board Member Conejo moved to approve the Resolution as submitted. Board Member Mundinger seconded the motion. The vote follows: Ayes: Board Members Mundinger and Conejo. President Gillette. Nays: None. The motion carried. RESOLUTION NO. 2007-0009 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE BAYTOWN AREA WATER AUTHORITY REJECTING THE BID RECEIVED ON MAY 22,2007, FOR THE BAWA RAW WATERLINE PROJECT; ACCEPTING THE BID OF ALVIN CONTRACTING FOR THE BAWA RAW WATERLINE PROJECT SUBJECT TO THE APPROVAL OF THE CITY COUNCIL OF THE CITY OF BAYTOWN, TEXAS, AND AUTHORIZING PAYMENT BY THE BAYTOWN AREA WATER AUTHORITY IN THE AMOUNT OF SEVENTY SIX THOUSAND FOUR HUNDRED SIXTY AND NO/100 DOLLARS ($76,460.00); MAKING OTHER PROVISIONS RELATED THERETO; AND PROVIDING FOR THE EFFECTIVE DATE THEREOF. Manager's Report Receive the Baytown Area Water Authority (BAWA) 2006 Consumer Confidence Report. Board President Gillette declared the report received. Mr. Tony Brown reported average sales during the month of June at 10.3 million gallons per day. This is down from the estimated amount of 12.5 million gallons per day. Mr. Brown told the Board, while sales (revenues) are down, so are expenditures. The reason sales are down is because of the significant amount of rain the Baytown area has been receiving. He reported that he does not expect July to be much better as the average sales to date are about 10.1 million gallons per day. Mr. Brown produced statistics for the area that show this area has already received 6 inches above normal for the year. Page4of4 Minutes of the Regular Session Meeting BAWA — July 18, 2007 Adjourn: With no further business the meeting was called to