2023 08 03 MDD Minutes MINUTES OF THE REGULAR MEETING OF THE BOARD OF DIRECTORS
OF THE BAYTOWN MUNICIPAL DEVELOPMENT DISTRICT
August 3, 2023
The Board of Directors of the Baytown Municipal Development District (MDD) met in a
Regular Meeting on Thursday, August 3, 2023, at 4:31 P.M., in the Council Chamber of
the Baytown City Hall, 2401 Market Street, Baytown, Texas, with the following in attendance:
Bandon Capetillo President
Laura Alvarado Vice President
David P. Jirrels Secretary
Suhey Rios-Alvarez Director
Sarah Graham Director
Kenrick Griffith Director
Donna Winfrey Director
Jason Reynolds General Manager
Scott Lamond General Counsel
Brant Gary Interim Assistant General Manager
Angela Jackson Assistant Secretary
President Capetillo convened the August 3, 2023, MDD Board Regular Meeting with a quorum
present at 4:31 P.M. All members were present with the exception of the absences of Directors
Heather Betancourth, Jacob Powell, Mike Lester, Gary Englert, and Shaunna Bernshausen.
1. MINUTES
President Brandon Capetillo called for Agenda Items l.a. and l.b. to be considered together.
a. Consider approving the minutes of the Municipal Development District Regular
Meeting held on June 1, 2023.
b. Consider approving the minutes of the Municipal Development District Regular
Meeting held on July 6, 2023.
A motion was made by Director Sarah Graham, and seconded by Secretary David P. Jirrels to
approve the meeting minutes of the Municipal Development District Regular Meetings held on
June 1, 2023, and July 6, 2023, as submitted. The vote was as follows:
Ayes: President Brandon Capetillo, Vice President Laura Alvarado, Secretary David P.
Jirrels, Director Suhey Rios-Alvarez, Director Sarah Graham, Director Kenrick
Griffith, and Director Donna Winfrey
Nays: None
MDD Board Regular Meeting Minutes
August 3,2023
Page 2 of 6
Other: Director Heather Betancourth (Absent), Director Jacob Powell (Absent), Director
Mike Lester (Absent), Director Gary Englert (Absent), and Director Shaunna
Bernshausen(Absent)
Approved
2. PROPOSED RESOLUTIONS
a. Consider a resolution authorizing a budget amendment to reallocate funds from
Capital Improvement Projects (CIP) to cover the unforeseen increase in insurance costs for
the Hyatt Hotel/Convention Center.
Chief Financial Officer Teresa McKenzie opened Agenda Item 2.a. and noted that the details of
the item were included in their agenda packet. The budget amendment included moving several
Parks projects as well as debt services for the Interstate 10 (I-10) Lift Station project. The
amendment also included the $1,782,361 insurance cost for the Hyatt Hotel and Convention
Center for a total adjustment of$736,639. She relayed that Staff recommended approval.
President Capetillo called for a motion to discuss Item 2.a. A motion was made by Vice
President Laura Alvarado and second by Director Kenrick Griffith. No vote was taken.
President Capetillo opened the discussion by stating that the majority, if not all, of the MDD
Members were shocked like many individuals and businesses with increases in insurance
coverage. The City of Baytown was no different. Director Griffith asked for clarification if
Capital Improvement Projects (CIP) funds came from sales tax, property tax, or both. Ms.
McKenzie responded that CIP was sometimes funded by the General Fund property tax transfer,
debit services, bond issuance, or also MDD sales tax. Further discussion ensured over the matter
as there was an ambiguous answer, but Staff ultimately generalized the answer as sales tax.
Vice President Alvarado questioned what their future looked like in terms of this insurance bill.
Finance Director Victor Brownlees responded that Staff had productive conversations with Hyatt
about their expectations in terms of insurance. He noted there were opportunities to reduce
insurance costs, but not in this year. Mr. Brownless stressed that, over the long term, the costs for
insurance will be covered by the revenues generated from the hotel. Further discussion took
place on that note of costs and also revenues eventually flowing back to the MDD.
Vice President Alvarado asked if there would be an opportunity, once sales taxes funds start to
come back in, to put funds back in to this fund. Mr. Brownlees assured there would be a
requirement for that to happen. Profits that accrue over time from the operations of the hotel
would come back to the MDD as the hotel owner. General Manager Jason Reynolds added they
had a built-in model to pay any kind of deficit there may be. President Capetillo requested Staff
to provide them the updated model. Mr. Brownlees noted the MDD would receive a revised hotel
budget for the next year. Thus, in that context, it would be brought back to the MDD.
Director Graham recalled that she was told the hotel was projected to bring revenue long-term.
They would not refill their pot in five years. Staff confirmed that was correct. It was a long-term
investment. She then questioned Staff why Hyatt's expectation of insurance was driving this. Mr.
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August 3,2023
Page 3 of 6
Brownlees discussed why they needed the insurance and ultimately responded that this was
driven by the market. Director Graham wondered how often were they able to re-negotiate their
contract with Hyatt. If something else came up, could they ask for a re-negotiation? Mr.
Brownlees confirmed they could. She then questioned matters concerning the $736,639 they
were moving. Ms. McKenzie responded the reason that number was not exactly $1.78 million
was because some was taken from the contingency to create a buffer for their fund balance.
Director Graham understood the situation as the City had to adhere to a contract and that Hyatt
was part of the reason they had to increase their coverage. Secretary Jirrels expressed his disgust
with the whole situation and having to make that $736,639 adjustment to pay the $1.8 million
insurance bill. He wanted to know what exactly happened. Before Staff answered his question,
Director Winfrey questioned matters concerning the $736,639 coming out of programs. Would
those programs have to wait until the seven (plus or minus) years repayments would be funded,
or was there another source to fund those? Ms. McKenzie responded those projects would be
moved to the General Fund and it would be on the August 10, 2023, City Council Meeting.
Mr. Reynolds then approached the podium to address Director Jirrels questions and to provide
further clarification. Mr. Reynolds first noted there was a misconception that the City budgeted
$139,000 and a bill came in at $1.8 million. He explained what was presented last month to the
MDD Board was a draft proposed budget. It was not an adopted budget of$139,000. Once the
insurance bill came in, Staff did not make any changes to the draft budget at that point because
they were still working to figure out what happened for that to come in at $1.8 million. Mr.
Reynolds shared that he, himself, made the call to bring this to the MDD.
Furthermore, Mr. Reynolds reiterated there was no adopted budget for $139,000. It was a place
maker in text. The only time the $1.8 million would be considered was at that moment when the
MDD would vote on the budget amendment. Mr. Brownlees further noted that the figure of
$139,000 was a figure that Hyatt included in a draft of the operating budget. It was not their final
operating budget. When the City did a financial model for the whole project, the assumption for
insurance was around $600,000. Thus, from that time until now, the cost went up three-fold
which showed how inflated the insurance market was at the moment.
Director Jirrels understood that Hyatt submitted a $139,000 estimate on insurance, the City took
it, and placed it in our numbers. Then, a bill came in at $1.8 million. Mr. Reynolds responded
that Staff thought this Hotel would be covered under Texas Municipal League (TML) Risk Pool
Insurance. Therefore, they thought it would not be astronomical. The entire insurance bill for all
the structures of the City of Baytown, including general liability, was around $l.7 million. Thus,
it was reasonable for Staff to budget $139,000 to $600,000. The bill coming back at $1.78
million was nothing anybody could have imagined. Director Graham understood why City Staff
made that assumption, but she still felt like there was a missing component about the price.
The Directors further expressed their dissatisfaction with the explanation given and the situation
as a whole. Staff continued to engage the Directors with their comments. Mr. Reynolds
ultimately relayed the broker that went out for this came back with the answer he just gave. This
was the same way they do all insurance for stuff that was not covered under the TML umbrella.
Director Graham clarified she did not feel this was a City mistake. It looked like they paid a
company to sell them an idea, they bought it, and it cost them. They were sold a "deadhorse."
MDD Board Regular Meeting Minutes
August 3,2023
Page 4 of 6
Director Jirrels added it was their first hotel and this learning curve cost them. He hoped they
would not fund anything else that would sting them. The people they were paying let them down.
On the rejection TML gave, Director Winfrey wondered if there was any way TML would re-
visit it. Mr. Reynolds did not think they were able to underwrite the assurances from the Hyatt
aspect. President Capetillo questioned if they could have multiple insurance policies for multiple
components. Mr. Reynolds responded it was laddered heavily now. Moving forward, Director
Griffith asked if they would open up the market for other insurance companies. Mr. Reynolds
answered yes; however, not until their first contract went through. Director Griffith also asked if
their Advisors notified Staff of any other cost that may come up. This question prompted further
discussions. President Capetillo called a Special Executive Session to further discuss this item.
At 5:10 P.M., President Capetillo recessed into and conducted a Special Executive Session
pursuant to 551.071 of the Texas Government Code to seek the advice of the District's General
Counsel in regards to Agenda Item 2.b.
At 5:36 P.M., President Capetillo reconvened the open meeting and announced that, in
accordance with Section 551.102 of the Texas Open Meetings Act, no action was taken in the
Special Executive Session.
A motion was made by Vice President Laura Alvarado, and seconded by Director Donna
Winfrey to approve Resolution No. 464, related to Agenda Item 2.a. The vote was as follows:
Ayes: President Brandon Capetillo, Vice President Laura Alvarado, Secretary David P.
Jirrels, Director Suhey Rios-Alvarez, Director Sarah Graham, Director Kenrick
Griffith, and Director Donna Winfrey
Nays: None
Other: Director Heather Betancourth (Absent), Director Jacob Powell (Absent), Director
Mike Lester (Absent), Director Gary Englert (Absent), and Director Shaunna
Bernshausen(Absent)
Approved
RESOLUTION NO. 464
A RESOLUTION OF THE BOARD OF DIRECTORS OF THE BAYTOWN
MUNICIPAL DEVELOPMENT DISTRICT AUTHORIZING A BUDGET
AMENDMENT FOR FY23 TO REALLOCATE FUNDS FROM CAPITAL
IMPROVEMENT PROJECTS (CIP) TO COVER THE UNFORESEEN
INCREASE IN INSURANCE COSTS FOR THE HYATT
HOTEL CONVENTION CENTER; AND PROVIDING FOR THE EFFECTIVE
DATE THEREOF.
b. Consider a resolution adopting the Baytown Municipal Development District Fiscal
Year 2023-24 Budget.
MDD Board Regular Meeting Minutes
August 3,2023
Page 5 of 6
Chief Financial Officer Teresa McKenzie presented the third iteration of the Baytown Municipal
Development District's (MDD) Fiscal Year 2023-24 Budget. The changes included the budget
amendment that the Board just approved in Agenda Item 2.a. It also included the removal of the
parks projects that would be moved to the General Fund Capital Improvement Projects (CIP),
with the exception of Pirates Bay's debt service payments. Also included in the budget was
$1.88 million for insurance costs in case it was needed for 2024. Staff recommended approval.
General Manager Jason Reynolds prompted a discussion on specific budget items to hear the
MDD Director's direction. Before addressing those items, President Capetillo deliberated with
Staff on how they should move forward and suggested they wait to adopt the budget.
Nevertheless, Director Graham inquired over the items mentioned and a discussion followed.
At 5:43 P.M., Director Griffith left the meeting and later returned at 5:45 P.M.
With regard to his initial suggestion, President Capetillo requested a motion to propone or table
Agenda Item 2.b. to the next meeting to bring more information before the Board to discuss.
A motion was made by Director Sarah Graham, and seconded by Secretary David P. Jirrels to
table Agenda Item 2.b. until September 7, 2023. The vote was as follows:
Ayes: President Brandon Capetillo, Vice President Laura Alvarado, Secretary David P.
Jirrels, Director Suhey Rios-Alvarez, Director Sarah Graham, Director Kenrick
Griffith, Director Donna Winfrey
Nays: None
Other: Director Heather Betancourth (Absent), Director Jacob Powell (Absent), Director
Mike Lester (Absent), Director Gary Englert (Absent), Director Shaunna
Bernshausen (Absent)
Approved
3. REPORTS
a. Receive the Baytown Municipal Development District's Quarterly Financial and
Investment Reports for the Quarter Ending June 30, 2023.
Chief Financial Officer Teresa McKenzie presented the Baytown Municipal Development
District's Third Quarterly Financial and Investment Report, for the Quarter Ending June 30,
2023. The revenues received was $6.5 million, which was about 7806 for the year in regards to
the budget. Expenditures were at $5.7 million, which was about 550o of the budget spent. Ms.
Mckenzie noted that left them a Fund Balance of $3.2 million dollars. In addition, their
investment book value for TXPool was at $3.1 million dollars. As of that moment, they also
received Investment Earnings of$1,015.
MDD Board Regular Meeting Minutes
August 3,2023
Page 6 of 6
b. Receive the Monthly Construction Status Report for the Baytown Hotel and
Convention Center Project.
Finance Director Victor Brownlees stated he had nothing to provide for this item. President
Capetillo asked if this item was still needed for future agendas. Mr. Brownlees responded there
needed to be one or two more updates. However, he offered that these updates could be provided
to the Board Members by email.
4. MANAGER'S REPORT
a. The next Baytown Municipal Development District meeting is scheduled for
Thursday, September 7, 2023, at 4:30 p.m., in the Council Chamber located at City Hall,
2401 Market Street, Baytown,Texas, 77520.
General Manager Jason Reynolds recited their next meeting was scheduled for September 7,
2023, at 4:30 P.M.
5. ADJOURN
With there being no further business to discuss, President Brandon Capetillo adjourned the
August 3, 2023, MDD Board Regular Meeting at 5:56 P.M.
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Angela J• kson, A` ant S et
City of Baytown
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