Loading...
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. MDD Board Regular Meeting Minutes 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. �i Angela J• kson, A` ant S et City of Baytown — y— �II1111