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1981 01 21 BAWA Minutes 10121-1 MINUTES OF THE REGULAR MEETING OF THE BOARD OF DIRECTORS OF THE BAYTOWN AREA WATER AUTHORITY January 21 , 1981 The Board of Directors of the Baytown Area Water Author- ity , Harris County, Texas, met in regular session on Wednesday, January 21 , 1981 in the Administration Building at 7425 Thompson Road with the following members in attendance : Robert L. Gillette, President I . J. Butrick, Vice President Peter R. Buenz, Secretary • Harry F. Hartman, Board Member Dr. Robert E. Hill , Board Member The meeting was called to order and the following business was transacted: Minutes Board member Butrick moved for the approval of the minutes for the meeting held January 6, 1981 ; Board member Hill seconded the motion. The vote follows : Ayes : Board members Gillette, Butrick, Buenz, Hartman and Hill Nays : None Receive Audit Report Dave Start , with the firm of Gerace, Hullum, Start and Company, was present to review the audit report for 1979-80 with the Board. Mr. Start indicated that there was nothing unusual about the audit . The balance sheet reflects that as of September 30, 1980, approximately $15, 600, 000 was invested in the plant . The construction fund had approximately $2, 800, 000 in assets with corresponding liabilities of $1 , 700, 000 which results in approximately $1 , 000, 000 in equity and $567, 000 encumbrance which applies to the three primary contracts . The Income Statement and Statement of Revenue and Expenditures merely shows the $500, 000 in the debt service fund received from the City of Baytown, interest income earned, and the funds expended on capital improvements , interest and principal . The debt service fund shows that BAWA spent approximately $9, 500, 000 more this year than what was taken in. Fortunately, there was a surplus . There are no unusual items in the footnotes to the financial statements . Footnote No. 4 dealing with commitments merely indicates the amount of the construction contracts and what has been expended to date. Exhibit I shows the makeup of the capital outlay which is merely a recap of the $15, 600, 000. Exhibit II shows the debt service requirements . The finance department of the • City of Baytown prepares financial statements on a full accrual basis while the auditors have accrued certain items that have been incurred but not paid for as of September 30, 1980. Those items will not be reflected on the statements that will be prepared by the finance department . That is primarily the $1 ,400, 000 contract retainage. Board member Buenz moved for acceptance of the audit report ; Board member Butrick seconded the motion . The vote follows : Ayes : Board members Gillette, Butrick, Buenz, Hartman and Hill Nays : None 10121-2 Minutes of the BAWA Board - January 21 , 1981 Hear Report from Lockwood, Andrews and Newnam Bob Parker with the firm of Lockwood, Andrews and Newnam was present to review the progress of the water transmission line. Mr . Parker reported that the engineers had attempted on four occasions to pressure up the line to the working pres- sure required by the contract document . On the first pressure test , four leaks appeared in the line. Since that time, on three other occasions, a separate leak in a different location appeared. Last Saturday, the contractor pressured the line, and a leak had developed in the casing under Thompson Road at Lynchburg Cedar Bayou Road. To repair that leak, that section of line is going to have to be dewatered and pumped down to allow someone to go into the pipe to locate which of the joints is leaking. The heavy rains have hindered progress . • In response to a question from the Board, Mr. Parker stated that since the leak occurred in the casing, the con- tractor will have to do the welding from inside the pipe line rather than from outside. He also mentioned that the contract specifications call for the pipe to be pressure tested to 160 pounds and held for two hours without any leaks . The operating pressure is to be 95 to 100 pounds . In response to a question from the Board regarding liability, Mr. Lanham, General Manager, stated that the Board might consider writing another letter regarding liability. Mr. Lanham felt that the contract has a clear understanding that the liabilities began on January 1 , 1981 . Randy Strong, City Attorney, explained that liquidated damages are $1 , 000 per day but it would be very easy for BAWA to show that the actual damages exceed that amount . The liquidated damage clause was figured basically on the cost of buying raw water from the City of Houston; however, when the overhead costs are added, BAWA can prove greater damages. The Administration will also inquire whether BAWA can include in those damages principal or interest on the bonds . In response to a question from Board member Hill , Mr. Parker explained that there are methods of testing lines with air. However, this primarily occurs when testing steel lines . The normal test for concrete lines is to go ahead and pressure test hydraulically. One of the reasons for doing this is that the line inside is made of concrete and needs to soak and absorb water so that it can be tested for leak allowance. Mr . Lanham inquired if there is any reasons why the con- tractor cannot go ahead and attempt to try to get the pressure up and find all of the leaks at one time rather than doing it on separate occasions. Mr. Parker explained that what has happened in these past cases is that the magnitude of the leak was such that the pressure would not hold. In other words , the pressure testing equipment is set up with a small displacement pump which is intended to dishold the pressure in the lines . If there is a bad leak, it will not hold enough pressure to IIIpressure up the rest of the line at 150 pounds . Board member Buenz moved to direct the Administration to write a follow-up letter to the contractor outlining the Board' s concerns, reiterating the liability; Board member Hill seconded the motion. The vote follows : Ayes : Board members Gillette, Butrick, Buenz, Hartman and Hill Nays : None 10121-3 Minutes of the BAWA Board - January 21 , 1981 Consider Reduction of Retainage on Chisholm Trail Construction Company Richard Llewelyn briefed the Board on the problems that are occurring with the check valves and the minor problems that need to be completed. He recommended that the retainage on the contract with Chisholm Trail Construction Company be reduced from 10% to 4% or from $1 , 000, 000 retainage to $400, 000 which is more representative of the work remaining. The punch list items are in the range of $85, 000; therefore, he felt that the 4% would be ample retainage . Mr. Lanham explained that the contractor had asked that • BAWA pay all but 1%, but the Administration felt that 4% would be more realistic until the plant is in full operation. Board member Hill moved that the Board reduce the retainage to 4%; Board member Butrick seconded the motion. The vote follows : Ayes : Board members Gillette, Butrick, Buenz, Hartman and Hill Nays : None Adjourn With no further business to be transacted, the meeting was adjourned. Peter R. Buen , Secretary •