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2003 02 19 BAWA Minutes• MINUTES OF THE REGULAR MEETING OF THE BOARD OF DIRECTORS OF THE BAYTOWN AREA WATER AUTHORITY February 19, 2003 The Board of Directors of the Baytown Area Water Authority, Harris County, Texas, met in regular session on Wednesday, February 19, 2003, in the Conference Room, 7425 Thompson Road, Baytown, Texas, with the following in attendance: Robert L. Gillette, President Dan Mundinger, Vice President Peter R. Buenz, Secretary Knox Beavers, Board Member Dan Conejo, Board Member. The meeting opened with a quorum present, and the following business was conducted. Consider approval of the minutes for the meeting held on December 18, 2002. Board Member Mundinger moved approval of the minutes of the meeting held on December 18, 2002. Board Member Conejo seconded the motion. The vote follows: Ayes: Board Members Beavers, Buenz, Conejo, and Mundinger President Gillette Nays: None The motion carried. Consider approval of the assignment of the Wholesale Water Supply Contract —Treated Water from Cedar Bayou Park Water Supply Corporation to C & R Water Supply. First Assistant City Attorney Karen Horner reported that Cedar Bayou Water Supply Corporation had been sold to C & R Water Supply. BAWA has a water supply contract with Cedar Bayou Water Supply Corporation and a request has been made to transfer the contract to the new owner. The purchaser has approved the assignment and it contains the same terms and obligations as the original contract and includes a provision for approval of the assignment by the City of Houston. The inclusion of this clause is consistent with other contracts. Therefore, upon approval by the Board, the contract will be forwarded to the City of Houston for its approval. Board Member Conejo moved approval of the assignment. Board Member Buenz seconded the motion. The vote follows: Page 2 of 3 • • Minutes of the Regular Meeting —February 19, 2003 Ayes: Board Members Beavers, Buenz, Conejo, and Mundinger President Gillette Nays: None The motion carried. Discuss letter forwarded to contractor and bonding company on the status of Phase 1 construction. Plant Manager Fred Pack reported that the letter to the bonding company for the contractor, Reliance National Indemnity Company, was sent on CDM letterhead. The letter demands that the work on Phase I be completed within 10 days. Kinsel Industries is the contractor on the project. Early in the project, the wastewater division was sold to EIG. EIG is owned by former employees of Kinsel Industries. The same personnel remained on the job. Staff has assumed that EIG was working as a subcontractor to Kinsel on the job. As the project progressed, it appeared that problems were developing between Kinsel and EIG. Staff reported the problems with the electronics installation within the last year. These were expected and it is reasonable that a few months would be required to solve the problems. A long punch list has been developed and many of the items are minor problems. Several of the items are major. There has been no work toward completion of the punch list in recent weeks. Significantly, there are problems with the flocculators. The shear pins are failing regularly and the system is shutting down regularly. It is time to take action. The project is not complete and appears to have been abandoned by the contractor. The bonding company was notified by a letter dated January 10, 2003 and by a letter dated February 18, 2003. The more recent letter demands a cure of the problems. If that is not provided, then notice is given that the Authority will hire contractors to complete the work and charge it against the retainage or the bonding company, if the retainage is not sufficient to cover the costs. More than $300,000 has been retained. Kinsel has failed to request additional time for rain delays, to which they would be entitled. Additionally, Kinsel has been sold to Insituform. Tony Brown explained that the delay in completing the repairs to the flocculators could impact the work on Phase III, currently underway. Phase III includes the replacement of all the other flocculators. The ones installed in Phase I are necessary to allow Phase III to continue on schedule. Receive and discuss quarterly investment report for period ending December 31, 2002. Chief Financial Officer Donna Sams reviewed the quarterly investment report for the quarter ending December 31, 2002. Interest income is reflective of the low interest rates currently being paid. President Gillette acknowledged receipt of the report. Page 3 of 3 Minutes of the Regular Meeting —February 19, 2003 Receive and discuss information on application submitted to Texas Water Development Board (TWDB) for funding Phase H (Ozone) and additional water supply line to City of Baytown. Mr. Pack reminded the Board that Phase II has been delayed until the State completes its study on ozone as a disinfectant. Ms. Sams reported that low interest loans were made available through the Texas Water Development Board. Applications for the loans were due on February 4, 2003. Staff filed applications for loans for Phase II and an additional supply line to Baytown. If the loans are approved, the Authority will not be required to accept them until the ozone regulations are approved by the State. The interest rate on the loan is 2.9%, which is very competitive. The Authority is paying 5.1% for its most recent certificates of obligation. The Authority will not be obligated on the loan if the loan is not needed for the Phase II project. Manager 's Report. Tony Brown reported the progress on Phase III improvements. The improvements are on schedule. The underground piping has been installed and all contractors and subcontractors have been mobilized. Mr. Brown reported that Country Terrace has connected to the system and is now receiving water from BAWA. He also reported that the 12-inch line outside the plant failed. BAWA employees and Public Works employees worked around the clock to make repairs. During the event, plant production was increased to maintain pressure in the line supplying Baytown. The repairs were made during the nighttime to prevent any adverse impact on the customers. Adjourn As there was no further business to be transacted, the meeting adjourned at 8:24 a.m.