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2025 06 25 BAWA MinutesMINUTES OF THE REGULAR MEETING OF THE BOARD OF DIRECTORS OF THE BAYTOWN AREA WATER AUTHORITY June 25, 2025 The Board of Directors of the Baytown Area Water Authority (BAWA) met in a Regular Meeting on June 25, 2025, at 4:30 P.M., in the Council Chamber of the Baytown City Hall, 2401 Market Street, Baytown, Texas with the following in attendance: Brenda Bradley Smith President Frank McKay III Vice President Jimmy Smith Secretary Alyssa Linares Director Brant Gary Assistant General Manager Scott Lemond General Counsel Gabriella Gonzales Acting Assistant Secretary President Brenda Bradley Smith convened the June 25, 2025, BAWA Board Regular Meeting with a quorum present at 4:33 P.M., all members were present with the exception of Director David Start, Jr. who was absent. 1. CITIZEN COMMENTS President Brenda Bradley Smith announced no one signed up to speak. 2. MINUTES a. Consider approving the minutes of the Baytown Area Water Authority Special Meeting held on May 7, 2025. A motion was made by Director Alyssa Linares, and seconded by Secretary Jimmy Smith to approve the Baytown Area Water Authority Special Meeting minutes held on May 7, 2025, as submitted. The vote was as follows: Ayes: President Brenda Bradley Smith, Vice President Frank McKay III, Secretary Jimmy Smith, Director Alyssa Linares Nays: None Other: Director David Start, Jr. (Absent) Approved 3. BAYTOWN AREA WATER AUTHORITY FISCAL YEAR 2025-26 PROPOSED BUDGET BAWA Board Regular Meeting Minutes June 25, 2025 Page 2 of 8 a. Receive and discuss the Baytown Area Water Authority Fiscal Year 2025-26 Proposed Budget. Director of Finance Teresa McKenzie presented the Baytown Area Water Authority's Fiscal Year 2025-26 Proposed Budget related to agenda Item 3.a., and provided the following overview for the proposed budget and offered any questions from the Board. • Beginning Working Capital Balance: $8.9 million • Total Proposed Revenues: $22.3 million which includes a 6.7% increase which will be discussed later in this agenda item • Total Operating Expenses: $13.9 million • Total Expenditures: $21.2 million which includes transfers to Debt Services, Capital Improvements and the General Fund • Ending Working Capital: $9.9 million, which is 260 days of Operating Expenditures Vice President Frank McKay III asked why the Sale of Water -Other Estimated amount of $1.6 million is less than budget at $1.9 million. Ms. McKenzie stated these numbers are based on actuals for the numbers that we have thus far, and estimated numbers through the end of September 2025; therefore, it can come in higher once all the final numbers come in. Assistant General Manager Brant Gary asked Ms. McKenzie if this is primarily due to decrease in demand/purchasing from wholesale customers and Ms. McKenzie stated that if the numbers continue to hold as per the estimate it would confirm that this was due to a decrease demand from wholesale customers. Director of Public Works and Engineering Frank Simoneaux introduced Ms. Jennifer Ivey, Vice President and Financial Management Group Lead with Carollo Engineers to the podium and Ms. Ivey presented the Rate Study (Exhibit "A") Vice President Frank McKay III voiced his concern with how the rate increase could potentially affect the public and asked why we don't issue bonds instead of a loan, and asked if this item will cover both capital improvements as well as the Expansion Project. Mr. Simoneaux stated financing options were presented to the Board and discussed in depth at a previous meeting. Ms. Ivey further explained that interest rates for bonds are higher, and payments are due immediately, as well as the coverage has the same requirements as this Texas Water Board loan. Further, she confirmed that this loan would cover the Capital Improvement Projects at $41 million as well as the Expansion Project at $69 million. Public Works and Engineering Assistant Director of Utilities, Sterling Beaver explained that these Capital Improvement Projects are necessary due to an aging infrastructure and in order to meet regulatory requirements. Assistant General Manager Brant Gary asked for a point of clarification if the 6% is what we think our finance charges will be for receiving this loan, or is it part of our debt services coverage multiplier of 1.05. Ms. Ivey responded they are recommending a rate increase of 6.7% for BAWA, and the loan is possibly around 2.5 to 3%, which is much lower than if it were a bond. Vice President McKay III stated he wants to clarify as 6% was presented previously and now the amount is 6.7% and Ms. Ivey responded that previously they initially projected 6%; however, they wanted to look beyond this year so they do not come back the following year with BAWA Board Regular Meeting Minutes June 25, 2025 Page 3 of 8 a 10% rate increase. Therefore, the 6.7% for Fiscal Year 2025-26 and 6.7% in Fiscal Year 2026- 27 would smooth things out in the long run. Secretary Jimmy Smith asked when the proposed rate increases would be implemented and Staff stated at the beginning of the Fiscal Year (October 1, 2025 and October 1, 2026). Mr. Simoneaux presented background on the projects and stated a study was done by a consulting firm approximately ten years ago for a ten-year plan for projects at the plant to keep the plant in good operating condition, and they came to the end of this ten-year plan last year. Therefore, they commissioned Carollo Engineers to look at the plants this year to do a Condition Assessment and to produce a new ten-year plan for Capital Projects. Carollo Engineers have not fully completed the review at this time, but they did come up with a few projects that are initially needed, which will include the first few years of projects and these items were considered as a part of this rate increase. Vice President McKay III asked if this study has been presented before the Board and Mr. Simoneaux responded it has not been presented before the Board as it is not complete and noted that once the study is complete they will present it to the Board later this year, it just wasn't able to be completed within the compressed timeline of the budget. Mr. Simoneaux further reiterated the first few years of projects are coming out of the ten-year Condition Assessment once complete and because of these projects it bumped up the rate from 6% to 6.7% and this is because some of the first few years of data came in and it was recommend that some projects needed to be done in the next few years in order to maintain all of our minimum coverages that Jennifer just explained to the Board in her presentation. Director Alyssa Linares questioned if inflation was taken into consideration over the next five years for the project estimates to determine to the cost of a project and Mr. Simoneaux responded they do use a contingency factor and the further out it is the higher the contingency. President Brenda Bradley Smith asked about the potential of receiving grant money for PFAS and Mr. Simoneaux responded they did apply for the grant and they did not receive it for this year; however, the Environmental Protection Agency "EPA" has delayed the implementation of the requirements. Therefore, they have a few more years to prepare and they will re -apply for the grant next year to see if they get approved. Some of the cost presented are for the Engineering Study for the improvements that are required. The hope is they will receive the grant and that it might cover some of the cost for engineering and construction which would lower our cost, but they have some of the cost built in if this does not happen. President Brenda Bradley Smith asked what 6.7% would be to the average customer and Mr. Simoneaux responded that BAWA does not have retail customers and that the rate increase will only be for commercial customers and the City of Baytown. President Smith clarified that BAWA provides water to the City of Baytown and the City of Baytown purchases the water from BAWA, and in return the City charges the retail customers, as such the City could subsequently increase the rates for its customers, which might be higher since they include water and sewer rates as well. President Smith further asked if there is any concern that customers will go elsewhere to purchase water if these rates increase. Mr. Beaver stated that most of the current customer's contracts run through 2040, but that buying from BAWA would be their best option as it BAWA Board Regular Meeting Minutes June 25, 2025 Page 4 of 8 wouldn't be very cost effective for them to construct and run their own water district. Mr. Simoneaux stated that these customers only represent 10% of the water that BAWA sells, the other 90% is the City of Baytown. Lastly, President Smith asked if this increase only goes through 2028 and drops our debt service coverage to 1.05% which is barely over the legal minimum of 1.01%; therefore, does this mean that we should expect another increase in the future (2028 or beyond). Mr. Simoneaux stated they would like to finish the Condition Assessment they are doing and have all of that data go into the Revised Rate Study and present that to the Board before the end of this year. b. Set a public hearing for the Baytown Area Water Authority Fiscal Year 2025-2026 Proposed Budget. President Brenda Bradley Smith announced that the public hearing related to Item 3.b., will be set for Wednesday, July 16, 2025, at 4:30 P.M. Vice President McKay III questioned if the budget will be updated to reflect the 6.7% rate increase and Director of Finance Teresa McKenzie responded that the 6.7% rate was included in the projected budget but that there is an error on the Budget Executive Summary (page four) of the proposed budget that does not reflect the correct rate, and it will be corrected. A motion was made by Vice President Frank McKay III, and seconded by Director Alyssa Linares to approve Resolution No. 2025-5, related to Item 3.b. The vote was as follows: Ayes: President Brenda Bradley Smith, Vice President Frank McKay III, Secretary Jimmy Smith, Director Alyssa Linares Nays: None Other: Director David Start, Jr. (Absent) Approved 4. PROPOSED RESOLUTIONS a. Consider a resolution authorizing the First Amendment to the Treated Water Supply Contract with Harris County Fresh Water Supply District 1-B, to increase contract quantity. Public Works and Engineering Assistant Director of Utilities, Sterling Beaver presented Agenda Item 4.a. and stated that this proposed resolution authorizes the First Amendment to the Treated Water Supply Contract with Harris County Fresh Water Supply District 1-B, to increase contract quantity from a monthly average of 0.0500 million gallons of water per day to a daily average of 0.2160 million gallons of water per day. Further Mr. Sterling stated that as a part of this agreement they are requesting them to complete an Alternative Capacity Requirement ("ACR") Study and based on the outcome of the ACR Study they will assess if this agreement would need to be modified to lower or raise the amount requested. BAWA Board Regular Meeting Minutes June 25, 2025 Page 5 of 8 President Brenda Bradley Smith questioned if a new or future development is the driving factor for them to need more capacity and Mr. Beaver responded that additional capacity is needed in order for them to be in compliance with Texas Commission on Environmental Quality ("TCEQ") requirements. A motion was made by Director Alyssa Linares, and seconded by Secretary Jimmy Smith to approve Resolution No. 2025-6, related to Item 4.a. The vote was as follows: Ayes: President Brenda Bradley Smith, Vice President Frank McKay III, Secretary Jimmy Smith, Director Alyssa Linares Nays: None Other: Director David Start, Jr. (Absent) Approved RESOLUTION NO.2025-6 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE BAYTOWN AREA WATER AUTHORITY AUTHORIZING THE FIRST AMENDMENT TO THE TREATED WATER SUPPLY CONTRACT BETWEEN THE BAYTOWN AREA WATER AUTHORITY AND HARRIS COUNTY FRESH WATER SUPPLY DISTRICT NO. 1-B; AND PROVIDING FOR THE EFFECTIVE DATE THEREOF. b. Consider a resolution authorizing Change Order No. 1 to the Progressive Design - Build Agreement with Baytown Waterworks Partners, a McCarthy Building Companies, Inc., and Carollo Engineering, Inc., joint -venture, for the Baytown Area Water Authority (BAWA) East Surface Water Plant Phase 2 Expansion Project. Director of Public Works and Engineering Frank Simoneaux presented Agenda Item 4.b. and stated that this resolution authorizes Change Order No. 1 to the Progressive Design -Build Agreement with Baytown Waterworks Partners for the Baytown Area Water Authority (BAWA) East Surface Water Plant Phase 2 Expansion Project. The change order includes: Reallocation of Funds — To support continued progress on the project, funds from the Phase 2 portion of the project will be reallocated to advance Phase 1 design from 60% to 90%, and pre - construction activities from 60% to 70%. This shift is in response to an unanticipated 100-day review period required by the Texas Commission on Environmental Quality (TCEQ). Reallocating funds would allow the project to maintain momentum and mitigate schedule impacts by continuing work during the TCEQ review period. The current Phase 1 contract amount is $5,023,131.00. An additional $1,473,578.00 will be reallocated from the Phase 2 portion of the project, increasing the total Phase 1 contract to $6,496,709.00. The Design - Builder's proposal supporting this reallocation is attached to the change order. Staff does not anticipate any issues with getting approval of the variance request and that Staff is scheduled to visit with TCEQ in Austin next week to discuss further. BAWA Board Regular Meeting Minutes June 25, 2025 Page 6 of 8 President Brenda Bradley Smith questioned if Staff anticipates requesting additional funding once in Phase Two of the Project and Mr. Simoneaux stated that this item is to shift the phase timeline and associated funding and they do not foresee needing additional funding. A motion was made by Secretary Jimmy Smith, and seconded by Vice President Frank McKay III to approve Resolution No. 2025-7, related to Item 4.b. The vote was as follows: Ayes: President Brenda Bradley Smith, Vice President Frank McKay III, Secretary Jimmy Smith, Director Alyssa Linares Nays: None Other: Director David Start, Jr. (Absent) Approved RESOLUTION NO.2025-7 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE BAYTOWN AREA WATER AUTHORITY AUTHORIZING CHANGE ORDER NO. I TO THE PROGRESSIVE DESIGN BUILD AGREEMENT WITH BAYTOWN WATERWORKS PARTNERS, MCCARTHY BUILDING COMPANIES, INC., AND CAROLLO ENGINEERS, INC., JOINT -VENTURE, FOR THE BAYTOWN AREA WATER AUTHORITY EAST SURFACE WATER TREATMENT PLANT PHASE 2 EXPANSION; AUTHORIZING PAYMENT BY THE BAYTOWN AREA WATER AUTHORITY IN AN AMOUNT NOT TO EXCEED ONE MILLION FOUR HUNDRED SEVENTY-THREE THOUSAND FIVE HUNDRED SEVENTY-EIGHT AND NO/100 DOLLARS ($1,473,578.00); MAKING OTHER PROVISIONS RELATED THERETO; AND PROVIDING FOR THE EFFECTIVE DATE THEREOF. 5. REPORTS a. Receive the Baytown Area Water Authority Quarterly Financial and Investment Reports for the Quarter Ending December 31, 2024. Assistant Finance Director Fatima Uwakwe presented the Baytown Area Water Authority's Quarterly Financial and Investment Reports for the First Quarter that ended December 31, 2024, as follows: • Total Revenues are at $5.2 million which is approximately 25% of projected for the year, which is right on target and comparable to the numbers for Fiscal Year 24. • Investment Earnings ended the quarter at around 4.5%. • Total Expenditures of $5.5 million which is at approximately 28% over what was budgeted, and this is a significant different from current year to prior year which is due to the beginning of 2024 Debit Services payments under Interfund Transfer. BAWA Board Regular Meeting Minutes June 25, 2025 Page 7 of 8 • Capital Improvements are supported by transfers from the Operating Fund and Revenues are at $1.1 million offset by Expenditures $72,000, leaving an Ending Working Capital balance at $3.5 million b. Receive the Baytown Area Water Authority Quarterly Financial and Investment Reports for the Quarter Ending March 31, 2025. Assistant Finance Director Fatima Uwakwe presented the Baytown Area Water Authority's Quarterly Financial and Investment Reports for the Second Quarter that ended March 31, 2025, as follows: • Revenues were at $10.6 million which was offset by Expenditures of $11.4 million which is a negative year to date change but the ending Working Capital is $10.1 million positive. • Correction to graphic to the left the numbers that have a dollar sign should be 57% • Capital Improvements Program, Current Revenues came in at $2.2 million, Expenditures at $983,000, leaving a positive Working Capital Fund of $3.7 million • Investments earing at 4.396 % return on its investments C. Receive a report on the status of the Baytown Area Water Authority East Expansion Project. Senior Project Manager Ms. Lindsay Kovar, with BGE, Inc. presented the status report for the Baytown Area Water Authority East Plant Expansion Project. (Exhibit `B") Vice President Frank McKay III asked if the current plans allow room for the 12 Million Gallons a Day ("MGD") Expansion that is planned for in the future and Ms. Kovar confirmed. 6. MANAGER'S REPORT a. The next Baytown Area Water Authority meeting is scheduled for Wednesday, July 16, 2025, at 4:30 p.m., in the Council Chamber located at City Hall, 2401 Market Street, Baytown, Texas 77520. Assistant General Manager Brant Gary encouraged the Board Members to reach out to Staff if they have any questions concerning the Budget and that their next meeting will be held on Wednesday, July 16, 2025, at 4:30 P.M., in the Council Chamber at City Hall. 7. ADJOURN A motion was made by Director Alyssa Linares, and seconded by Secretary Jimmy Smith to adjourn the June 25, 2025 Baytown Area Water Authority Board Regular Meeting at 5:21 P.M. The vote was as follows: Ayes: President Brenda Bradley Smith, Vice President Frank McKay III, Secretary Jimmy Smith, Director Alyssa Linares Nays: None BAWA Board Regular Meeting Minutes June 25, 2025 Page 8 of 8 Other: Director David Start, Jr. (Absent) Approved City of Baytown a w N I n O 3 3 CD fD Ul Q D 3 O� Ln D CD na Q cr O fD 11 O U'l X fD CQ 3 D. 3� 3 O O X 3� 3 Ln CD m O 1< Ln 0) 0 I M N O IIR 0 w T D La C v r+ fD n O 3 O rD 3 rD rt N v^ U 1 O CL TI N cn T N UwA T N 0o G � m LA ov r+ r � O C: c r+ V) lQ (D �• N X N -n O. N T N �1 n 0- It CD CD 0 C CD 7 V) e. CD cr 3 m O N 'a I G cD (D n' rn o o rD a� (DLiM O O lJl Q X � r � O v P-0 3 3 5' 3 o 3 x O O x O In x A ' (D< (D L :3 PO m N :3M Ln < m W Oo CZL n uj , ti k �464. O N v o v t x, O1 {y4 o N O n 00 W x t�i� o I 0 a o W N O 0 '24 C', i ) o x I,= `J m pI < rD O N Q (D a) rD it 0 O v X O v cn x W O 0o 00 w O U V i 70 v 4L^ A fD d y fD uu 0) Uj {64 w O �64 O W xcan Q J • O P O C) OR O O O O O O 'EO% a CD S o S S S� a oo �• n �Zo _ o0 � 0 d � a D O a n a G V T 3 Y T J n a � 0 O O 0 0 0 T N • v OC » QJ r N ( rp CD v 2 t .o � � ^ N I Q n c N CD K . QJ W V (D D ' . O �O V/) G p pO O 0 m n (D n 0 v 00 m 4" o w 0 CD 0 O O N N N w N S 8 S 8 a 2 O a S a u u o � �II o ti 9 D � G1 O 0 N O O O 8O Yl S O O O pO S O ill 2 O� < - N iCL m O o O N OO u yi � S f1 G _I W N O N O O g g $ $ o g 7T I n QJ I CD r=r r-r �C7 CD n O CD Q CD Q CD n �D U) CD V �;u I .� CD v O / 1 , ` O, CD CD o o (D n o w 3 w CO rD CO cn 0 0 � w � r-+ _0 CD 0 0 -� 0 CD 0 CD 0 0 un Ln Ln op EXHIBIT "B" PROGRESS•• Project: BAWA East Surface Water Treatment Plant Phase 2 Expansion Owner's Advisor Date: June Progress Report 1. Previous Months Activities since May 7, 2025 A. Submitted TWDB Full Application B. 30% Design Submittal Received, and comments returned 1) 30% Design Drawings 2) Preliminary Design Report 3) Base Cost Model C. Submitted DWSRF Emerging Contaminants application 2. Upcoming Progress Items and Discussion Items. A. 60% Design Package — June 2025 B. Guaranteed Maximum Price Proposal — November 2025 C. Texas Water Development Board Funding 1) SWIFT 1. Regional Water Plan Amendment approved at TWDB's Board meeting on January 16, 2025 2. Abridged Application due February 3, 2025 (Submitted 01/31/2025) 3. Full Abridged Application due May 12, 2025 (Submitted 5/12/2025) 2) DWSRF Emerging Contaminants application due April 4, 2025 (Submitted 04/01 /2025) 1. Draft DWSRF Prioritization Report indicated that BAWA would not be invited to reply. Entities with multiple exceedances were prioritized higher than BAWA. D. Change Order No. 1 1) TCEQ has indicated that the SuperPulsators will require a variance and require additional 100-day review that was not anticipated. 2) To maintain the schedule as much as possible and keep momentum on the project, it is requested to move $1,473,578 of fees from Phase 2 to the PROGRESS MEETING AGENDA City of Baytown BAWA East STP Phase 2 Expansion June 25, 2025 Page 2 current Phase 1 contract. Note: This reallocation will not affect the overall budget but will optimize resource distribution to meet the project's current priorities. We believe this change will enhance the efficiency and effectiveness of our project execution. 3) Phase 2 of this project is expected to be funded by a low -interest loan from the Texas Water Development Board (TWDB). The TWDB will require all parties to agree on additional contractual language. 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