2017 11 29 BAWA Minutes, Special MINUTES OF THE SPECIAL MEETING OF THE BOARD OF DIRECTORS
OF THE BAYTOWN AREA WATER AUTHORITY
November 29, 2017
The Board of Directors of the Baytown Area Water Authority(BAWA) met in a Special Meeting
on Wednesday, November 29, 2017, at 9:06 A.M., in the Council Chamber of the Baytown City
Hall, 2401 Market Street, Baytown, Texas with the following in attendance:
Brenda Bradley Smith President
Mike Wilson Vice President
Frank McKay Director
Rick Davis General Manager
Ignacio Ramirez, Sr. General Counsel
Alisha Segovia Deputy Assistant Secretary
President Bradley Smith convened the November 29, 2017, BAWA Board Special Meeting with
a quorum present at 9:06 A.M., all members were present with the exception of Directors Forrest
and Benoit who were absent.
1. MINUTES
a. Consider approving the minutes of the Baytown Area Water Authority, Regular
Board Meeting held on September 20, 2017.
A motion was made by Vice President Mike Wilson and seconded by Director Frank McKay III
approving the September 20, 2017, BAWA Board Regular Meeting minutes. The vote was as
follows:
Ayes: President Brenda Bradley Smith, Director Frank McKay III, Vice
President Mike Wilson
Nays: None
Other: Director Harland Forrest, Jr. (Absent), Director Brandon Benoit (Absent)
Approved
b. Consider approving the minutes of the Baytown Area Water Authority Regular
Board Meeting held on October 18, 2017.
A motion was made by Director Frank McKay III and seconded by Vice President Mike Wilson
approving the October 18, 2017, BAWA Board Regular Meeting minutes. The vote was as
follows:
BAWA Board Special Meeting Minutes
November 29,2017
Page 2 of 9
Ayes: President Brenda Bradley Smith, Director Frank McKay III, Vice
President Mike Wilson
Nays: None
Other: Director Harland Forrest, Jr. (Absent), Director Brandon Benoit (Absent)
Approved
President Bradley Smith stated that the agenda would be taken out of order and moved to item
2.b.
2. PROPOSED RESOLUTIONS
b. Consider a resolution authorizing a Grant Agreement for FEMA funding through
the Department of Public Safety and the Texas Division of Emergency Management.
Finance Director, Wade Nickerson presented the agenda item and stated that Resolution No.
2017-19 authorizes a Grant Agreement for FEMA funding through the Department of Public
Safety and the Texas Division of Emergency Management for FEMA-4332-DR-TX, in order to
recover Hurricane Harvey related expenditures for BAWA. He stated that there were some
personnel costs for emergency preparation, as well as, damage to the BAWA Administration
Building. He further stated that the hope is to recover an estimated $25,000 in costs through this
grant, in which, $11,000 of the estimated $25,000, is related to personnel costs while the
remaining amount is for miscellaneous repairs to the BAWA Administration Building; i.e., roof
leaks.
A motion was made by Vice President Mike Wilson and seconded by Director Frank McKay III
approving Resolution No. 2017-19, regarding agenda item 2.b. The vote was as follows:
Ayes: President Brenda Bradley Smith, Director Frank McKay III, Vice
President Mike Wilson
Nays: None
Other: Director Harland Forrest, Jr. (Absent), Director Brandon Benoit (Absent)
Approved
RESOLUTION NO. 2017-19
A RESOLUTION OF THE BOARD OF DIRECTORS OF THE BAYTOWN
AREA WATER AUTHORITY AUTHORIZING THE GENERAL MANAGER
TO EXECUTE AND THE ASSISTANT SECRETARY TO ATTEST TO A
GRANT AGREEMENT FOR FEMA FUNDING THROUGH THE
DEPARTMENT OF PUBLIC SAFETY AND THE TEXAS DIVISION OF
BAWA Board Special Meeting Minutes
November 29,2017
Page 3 of 9
EMERGENCY MANAGEMENT; MAKING OTHER PROVISIONS RELATED
THERETO; AND PROVIDING FOR THE EFFECTIVE DATE THEREOF.
3. BUSINESS ITEMS
a. Consider the election of officers: President, Vice President, and Secretary; and the
appointment of an Assistant Secretary.
Deputy Assistant Secretary, Alisha Segovia presented the agenda item and stated that the current
BAWA officers were: Brenda Bradley Smith, President; Mike Wilson, Vice President; City
Clerk, Assistant Secretary; and noted that the position of Secretary was currently vacant due to
the resignation of Mr. Wayne Baldwin.
A motion was made by Vice President Mike Wilson and seconded by Director Frank McKay III
approving to re-elect Brenda Bradley Smith as President, Mike Wilson as Vice President, and
elect Frank McKay for the position of Secretary, as well as, appoint the City Clerk as the
Assistant Secretary. The vote was as follows:
Ayes: President Brenda Bradley Smith, Director Frank McKay III, Vice
President Mike Wilson
Nays: None
Other: Director Harland Forrest, Jr. (Absent), Director Brandon Benoit(Absent)
Approved
4. DISCUSSIONS
a. Discuss the Baytown Area Water Authority(BAWA) East Plant Project.
City Engineer, Jose Pastrana stated that staff felt it important to update the Board regarding the
process for awarding construction contract for the BAWA East Plant or the Beast.
Mr. Pastrana stated that his presentation would help answer the question of why they need to
build the plant now. He noted that the answer has two main parts; one dealing with the plant
before it was re-rated and the other after it was re-rated. He stated that before the plant was re-
rated, its capacity was at 21 MGD and its contractual obligation was 21.6 MGD; therefore, it was
already above the legally allowed production capacity. He stated that while the plant could
produce more, it was limited in what capacity it could claim by the TCEQ rating of 21 MGD.
After 2011, staff decided to go through the re-rating process with TCEQ, by re-rating the filters,
the sedimentation basins and capacity, which resulted in a re-rating of up to 26 MGD. Mr.
Pastrana stated that as this re-rate gave BAWA additional capacity, the contractual obligations
also grew, and there were still a few pending increases. He noted that these were only a few
factors that help identify the need for another plant.
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November 29,2017
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Mr. Pastrana stated that there's a TCEQ rule that if your plant's obligations exceed 80% of its
capacity, the design for new expansion should be started and if the plant is at 90% of capacity,
the construction of plant expansion or next plant should begin. He noted that BAWA has been at
this point for five (5) years now. He noted that with the 2011 drought, the plant functioned at or
above the allowed capacity on a regular basis, which is another reason to build the plant as soon
as possible.
Mr. Pastrana noted that the plant's projected consumption would continue to grow with the
estimated continued residential, commercial and industrial expansions in the next few years,
which will increase water consumptions from the current 21.6 MGD to about 30 MGD.
On September 26, 2017, BAWA received three (3) bids on this project with Pepper Lawson
being the low bidder at $52,186,000, but due to a math error that was corrected, resulted in the
amount being $52,755,000. Mr. Pastrana stated that staff engaged the contractor and the
consultant in value engineering the project for a reduction of$6.1 million for a new net total of
$46.4 million.
Mr. Pastrana noted that the three(3)options for the Council's consideration were as follows:
• to reject all bids and re-bid the project, which would delay the project another 6 months;
• to accept the value engineering from the low bidder, the Board awards the total amount of
the bid, followed by a deductive work order for the$6.1 million,or
• to engage a third party consultant to give staff other ideas.
Mr. Pastrana stated that if all bids were rejected and the project is re-bid, there would be a delay
of another six (6)months. He noted that there was no guarantee that the new bids would come in
any lower than they are now and advised that the pricing on some materials have continued to
increase, e.g. PVC. He further noted that PVC has gone up 25% plus from the time of the
original bid, which could be due in part to the Harvey effect, as materials and resources became
limited due to the many storm damage re-builds and construction in the area. He also noted that
the re-bid could also result in costs increases due to the needed redesign of the project in order to
re-bid the project.
The second option of accepting the value engineering options as developed with the low bidder
would result in getting less than what was originally designed and may not get a fair one-for-one
dollar exchange.
Mr. Pastrana stated that the third option of having a third party review to the value engineering
would add approximately one(1) month to the process in order to obtain the report from the third
party engineer. He stated that this option may also result in extending the project schedule if
additional reviews and approvals are required from third parties; such as TCEQ or the Army
Corps of Engineers. He stated that this option would also result in getting something less than
planned and has the potential of excessive design changes based on professional preferences or
nit picking.
BAWA Board Special Meeting Minutes
November 29,2017
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Deputy General Manager Bottoms presented an overview of the history of this project. He stated
that the dollar amounts that came in for this project shocked staff. He stated that the plan's for the
new plant began back in 2011 after the drought and started a dual track to (1) re-rate the existing
plant to buy some time and (2) begin the design of the new plant. He noted that a consultant was
hired to complete a feasibility study, which in April 2016, resulted in about an estimated costs of
$26 million for the construction of the plant. Deputy General Manager Bottoms stated that at that
time, staff told the Board that the new plant would cost about $30 million to construct; that
number then increases to $35 million to $44 million to today's valued engineered number of
$46.4 million. He noted that all of the bids received were pretty close in costs, so staff does not
feel that the pricing is abnormal. He stated that back in 2012, staff was aware that the plant was
functioning at capacity and recognized that the City continues to grow along with the need for
more water. Additionally, he stated that while the amount of the project is difficult to assimilate,
he does not believe that the construction costs for this project would be reduced in the future and
absent a significant redesign of the project, it makes sense to move forward with the project with
the value engineering.
Mr. Nickerson stated that based on the value engineering amount of$46.4 million, staff believes
that the amount could be issued in two (2) types of bond issues with the first being a little earlier
in order to get the project up and running and the second, would be based on the project's
schedule, possibly in the second year or a little after. He stated that BAWA's capacity would
increase as some debt would be coming off the books in the near future, some capital projects
would be coming to an end and there would be increases in revenue through potential rate
increases. He stated that the bottom line was that financially, BAWA has the ability to build this
project, but noted that it would have to keep up with its operational costs, in which there were
funding mechanisms available, as well as, opportunities for rate increases to help offset some of
the costs.
In response to a question from Director McKay regarding the financial difference between
funding $46.4 million versus the full $52 million, Mr. Nickerson stated that he has not done an
analysis of such numbers; however, staff has looked at projected operational costs versus
projected revenues, as well as, the costs of other capital projects, in order to assess whether or
not BAWA could undertake such a large project.
General Manager Davis noted that in moving forward, there were a number of things happening;
the first was that there's value in amortizing this project out further so that future users actually
help pay for the debt/project, which is often called generational equity. Secondly, he stated that
BAWA's base would continue to grow; therefore the number of payers would grow, but by how
many could not be determined. He stated that this is something that staff would have to continue
to watch to consider whether or not rates have to be increased to help cover the costs of BAWA's
debt and operations.
Deputy General Manager Bottoms noted that financially BAWA is doing well and while rates
have not been increased in a couple of years, revenues continue to go up. Additionally, Mr.
Nickerson noted that the BAWA fund is very strong, although costs keep increasing and while
those increases have been managed very well, in order to not have any rate increases, the balance
need to be monitored in case rates do have to be revisited.
BAWA Board Special Meeting Minutes
November 29,2017
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Deputy General Manager Bottoms clarified to the Board that should they move forward and re-
bid the project, they could not go back and award the project to the first set of bids as those must
be rejected in order to move forward with the re-bidding process. He further noted that if there's
a significant re-design of the project, the regulating authorities; such as: TCEQ and the EPA
would have to review and approve the project all over again, which could take a lot of time.
Director McKay stated that he has a concern with the Harvey effect, as there's currently a
shortage in labor and materials due to everyone trying to fix their homes, which is driving up the
costs for these items. He stated that these costs could go down six (6) months from now when
everything settles down and costs stabilize. General Manager Davis stated that there's a chance
that after a period of time the costs would go down; however, as noted earlier, staff is working
from a deficit, as the construction of the plant based on the capacity should've already started.
Deputy General Manager Bottoms clarified that the regulatory agencies would only have to
review and re-approve the project should the changes or redesign be significant and would not
include items; such as: asphalt versus concrete roads or the removal of a warehouse from the site
plan.
Mr. Pastrana stated, in response to a question from Director Wilson regarding the timeline to
take action on the existing bids, that the bids were received in September and staff has requested
a 90 day extension, so staff have until the end of January to make a final decision. He further
noted that the value engineering of the project has not removed any item that would have a
significant negative impact on the design and operations of the plant.
Director Wilson stated that it would perhaps be good idea to take a month and have a third party
review the value engineering and help staff make a decision on how to move forward. Mr.
Pastrana stated that this possibility has been included in the 90 day extension and could be
undertaken should the Board decide to move in that direction.
General Manager Davis clarified that the value engineering process was only undertaken with
the low bidder. General Counsel, Ignacio Ramirez, Sr. noted that he would recommend to start
with the lowest bid and that staff is not renegotiating the price, but looking at removing certain
items from the project to lower the price up to 25% of the bid; if the price change exceeds the
25%, it has to be re-bid.
President Bradley Smith stated that from the attorney perspective she noted that the growth curb
is very conservative and it may in fact have a steeper slope because the east side seems to be
gaining a lot of momentum, so the necessity for this water seems to be growing. She asked
whether the items that were value engineered in the current bid would be permanently removed
or constructed at a later date or phase. In response to President Bradley Smith's inquiry, Mr.
Pastrana stated that they would be both depending on the circumstances; i.e. the removal of the
backup generator and its additional feed would not return, but the rock road replacing the
concrete road would eventually be upgraded to a concrete road as funding becomes available.
President Bradley Smith stated that this is a phase project, in which, begins with the construction
of a 6 MGD plant that would grow into a 26 MGD plant, and it's her assumption that a lot of the
infrastructure that's being built in the first phase would actually accommodate future phases;
BAWA Board Special Meeting Minutes
November 29,2017
Page 7 of 9
therefore, although this first phase is expensive, subsequent phases would be much less
expensive. Mr. Pastrana stated that President Bradley Smith's comments were correct as the main
components being put into the plant in phase one; such as, the electrical panels, plumbing, etc.,
are designed to accommodate the plant at full capacity.
President Bradley Smith stated that she does have some grave concerns with the hiring of a third
party engineer, particularly as it relates to the timing. She noted that the bidder has graciously
extended their offer for 90 days and she did not realistically believe that they would extend that
time frame again because their bid and pricing relied on information from their subcontractors,
equipment providers and other second tier parties gave them, which is not going to remain
stagnant and could change. President Bradley Smith further noted that the third party engineer
could take longer than 30 days to complete their review of the value engineering as it is the
Christmas and New Year holiday season. She further stated that the nit-picking is also a concern
as professionals tend to want to put a stamp on any product.
General Manager Davis stated that he could not tell the Board concisely on the timing, but noted
that it would be a tight time frame. He also noted that he did not think a third party would bring
anything substantially different as the bids were absent of any abnormalities and were very close
in price.
Mr. Pastrana stated that staff had requested a longer extension period to which the bidder stated
they could not accommodate, so timing is a concern. He further noted that the punch list of items
removed has all been reviewed by staff along with the contractors and are in agreement that they
do not negatively impact the operations of the plant.
Director McKay noted that he did not like being pushed into a corner in having to make a
decision on something so critical quickly. He stated that the capacity issue can be circumvented
in other ways; such as the addition of another water tower, water rationing, etc. Mr. Pastrana
noted that staff has already used the elevated and ground storage options as a part of the total
number of items used for capacity ratings and while BAWA could survive another drought well,
it would not be in compliance with TCEQ requirements for capacity.
General Manger Davis stated that given BAWA's financial situation and the need that has been
articulated, he would not recommend chancing a situation where the Board would have to make
a drastic decision in order to meet the water needs of its customers. He further noted that based
on all of the information available to him, he would recommend moving forward with awarding
the construction contract to Pepper Lawson with the value engineering options for the first phase
and then phasing out subsequent debt and construction for future years.
Deputy General Manager Bottoms recommended holding a special meeting next week or the
following week to allow the Board to take action on any of the three(3)options provided today.
Mr. Ramirez stated that the decision at hand is whether to move forward with the value
engineered bid or if the bids are rejected and the project is re-bid, which could be decided at the
next meeting. He further noted that something to consider is that the existing bidder has gone
BAWA Board Special Meeting Minutes
November 29,2017
Page 8 of 9
through numerous meetings and discussions to value engineer the project and may not want to go
through the additional time and effort with a third party.
Director Wilson stated that he was in favor of contracting with the third party review, unless staff
feels that this process has no value. Mr. Pastrana noted that the value would be the validation of
what has already been done.
The Board agreed to meet in a special meeting on Wednesday, December 06, 2017 to allow for
action on the three(3) options discussed earlier.
President Bradley Smith stated that the Board would now move to consider item 2. a.
2. PROPOSED RESOLUTIONS
a. Consider a resolution authorizing the Cost-Share Agreement with TGS Cedar Port
Partners,L.P.,for the 6 MGD Surface Water Treatment Plant Project.
Deputy General Manager Bottoms presented the agenda item and stated that Resolution No.
2017-20 is related to the plant and is a Cost-Share Agreement (the "Agreement") with TGS
Cedar Port Partners, L.P. ("TGS") to build a road off of Highway 99 to the plant. TGS has had a
good working relationship with staff and this agreement is mutually beneficial. He stated that the
length of the road is an estimated 7600 feet at an estimated cost of$1.7 million. He noted that
TGS would be responsible for bidding the project and probably oversee the building of the road.
He stated that TGS would pay 30% of the total project costs up to an amount not to exceed
$510,000, and BAWA would pay 70% of the total project costs up to an amount not to exceed
$1,190,000, on a reimbursable basis after receipt of an invoice. He stated that if the costs for the
road exceed $1,700,000, the parties may provide additional funding or terminate the Agreement
and the costs incurred would be split evenly between the parties. Deputy General Manager
Bottoms clarified that the monies for the road would be paid out of the Capital Improvement
Project Fund (CIPF) and is not part of the new plant project costs. He stated that this would be a
rock road of a limestone base from Highway 99 all the way up to the plant; however, staff would
in the future come back and construct a concrete road for the portions belonging to BAWA. He
further noted that BAWA would be responsible for the maintenance of the road during
construction,but once completed, said responsibility would transfer to TGS or CCID #1.
A motion was made by Director Frank McKay III and seconded by Vice President Mike Wilson
approving Resolution No. 2017-20,regarding agenda item 2.a. The vote was as follows:
Ayes: President Brenda Bradley Smith, Director Frank McKay III, Vice
President Mike Wilson
Nays: None
Other: Director Harland Forrest, Jr. (Absent), Director Brandon Benoit(Absent)
Approved
BAWA Board Special Meeting Minutes
November 29,2017
Page 9 of 9
RESOLUTION NO. 2017-20
A RESOLUTION OF THE BOARD OF DIRECTORS OF THE BAYTOWN
AREA WATER AUTHORITY AUTHORIZING THE COST -SHARE
AGREEMENT WITH TGS CEDAR PORT PARTNERS, L.P., FOR THE 6
MGD SURFACE WATER TREATMENT PLANT PROJECT, SUBJECT TO
THE APPROVAL BY THE CITY COUNCIL OF THE CITY OF BAYTOWN,
TEXAS; AUTHORIZING PAYMENT IN AN AMOUNT NOT TO EXCEED
ONE MILLION ONE HUNDRED NINETY THOUSAND AND NO.100
DOLLARS ($1,190,000.00); MAKING OTHER PROVISIONS RELATED
THERETO; AND PROVIDING FOR THE EFFECTIVE DATE THEREOF.
President Bradley Smith stated that the next item on the agenda is item 3.a., the manager's report.
5. MANAGER'S REPORT
a. Reminder that the next Baytown Area Water Authority meeting is scheduled for
Wednesday, January 17, 2018, at 9:00 A.M. in the City Council Chamber, 2401 Market
Street, Baytown, Texas 77520.
General Manager Davis stated that the Board would meet the following Wednesday, December
06, 2017, for a special meeting to take action on some of the items discussed today.
6. ADJOURN
A motion was made by Vice President Mike Wilson and seconded by Director Frank McKay III
adjourning the November 29, 2017, BAWA Board Special Meeting. The vote was as follows:
Ayes: President Brenda Bradley Smith, Director Frank McKay III, Vice
President Mike Wilson
Nays: None
Other: Director Harland Forrest, Jr. (Absent), Director Brandon Benoit (Absent)
Approved
With there being no further business to discuss, President Bradley Smith adjourned the
November 29, 2017, BAWA Board Special Meeting at 10:02 A.M.
a 41
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