2018 05 24 BAWA Minutes, SpecialMINUTES OF THE SPECIAL MEETING OF THE BOARD OF DIRECTORS
OF THE BAYTOWN AREA WATER AUTHORITY
May 24, 2018
The Board of Directors of the Baytown Area Water Authority (BAWA) met in a Special Meeting
on Thursday, May 24, 2018, at 10:30 A.M., in the Council Chamber of the Baytown City Hall,
2401 Market Street, Baytown, Texas with the following in attendance:
Mike Wilson
Vice President
Frank McKay III
Secretary
Harland Forrest Jr.
Director
Brandon Benoit
Director
Rick Davis General Manager
Ignacio Ramirez, Sr. General Counsel
Alisha Segovia Assistant Secretary
Vice President Mike Wilson convened the May 24, 2018, BAWA Board Special Meeting with a
quorum present at 10:30 A.M., all members were present with the exception of President Brenda
Bradley Smith.
1. TRAINING
a. Receive training regarding the Texas Open Meetings Act, the Texas Public
Information Act, Conflict Disclosures and Conflict of Interests.
First Assistant City Attorney Karen Horner gave the BAWA Board Members a training
regarding the Texas Open Meetings Act, the Texas Public Information Act, Conflict Disclosures
and Conflict of Interests.
2 PROPOSED RESOLUTION
a. Consider a resolution authorizing the issuance and awarding the sale of the
Baytown Area Water Authority Water Supply Contract Revenue Bonds, Series 2018, for
the BAWA East Plant Project.
Finance Director Wade Nickerson presented that item and stated that this proposed resolution
authorizes the issuance and awarding the sale of the Baytown Area Water Authority ("BAWA")
Water Supply Contract Revenue Bonds, Series 2018, for the purpose of making, purchasing,
constructing, leasing or otherwise acquiring, enlarging, expanding and modifying the BAWA
East 6 MGD Surface Water Treatment Plant. Mr. Nickerson introduced BAWA's financial
advisor, Mr. David Medanich, Vice President of Hilltop Securities to give an overview of the
sale of these bonds. Mr. Medanich presented the board members with a report regarding this
item and instructed them to turn to the first tab. Mr. Medanich noted that this was the official
statement used not only for the marketing of the bonds, but was also used for our ratings from
Moody's and Standard & Poor's (S&P). He noted that the information in this statement comes
directly from BAWA and the City and has been reviewed multiple times from attorneys and
BAWA Board Special Meeting Mmutes
May 24, 2018
Page 2 of 4
financial experts and they all felt very good about the accuracy of the information. Mr.
Medanich noted that BAWA has a double -A3 and an A+ which is a one notch difference
between ratings, he noted that the rating got lowered by S&P a couple of years ago due to some
coverage issues, but that issue has since been remedied He noted that they were hoping to get to
a rating of a double-A-, which is the same as a double -A3 from Moody's, but it got pretty close.
He noted that because of these ratings they were able to get an outlook change, which went from
a stable to a positive outlook, which means that if BAWA continues as it has been for the next
two years, it can be considered for a bond upgrade, which is a positive thing. Mr. Medanich
noted that the bonds sold this morning as if BAWA had a double-A category rating anyway, so
that is very positive news, but he did point out that the amount noted in the report of $23 million
690 is a preliminary number that may change a bit depending on the interest rates. He also noted
that in this instance, there was a significant amount of premium, which resulted in the issue size
being $22 million 40 thousand, with the rest being made up with premium. Mr. Medanich noted
that the only reason that a premium would be bid through the competitive bind process is
because someone can bid a lower interest rate; if you get more premium it is less principal, the
net is the best deal for BAWA.
Mr. Medanich moved onto tab number two and stated that interest rates in general have gone up
some; however, BAWA is still in a pretty favorable environment and are at an estimated average
of 4.4%. Mr. Medanich noted that there was a good market today. Mr. Medanich moved onto
tab three and pointed out the bid tabulation page, which listed the companies that bid on the
bonds. There were ten companies that showed interest with seven companies actually bidding
for these bonds with all seven bidders being pretty stout firms with a lot of capital. Mr.
Medanich noted that the winning bid came from Mesirow Financial at 3.42%, which is five basis
points below the cover bid of 3.47%. Mr. Medanich noted that tab number 4 had all of the rating
information and what can be done to improve the ratings in the near future. He further noted that
the raters took both BAWA and the City's bond ratings and financials when deciding on
BAWA's rating for these bonds. Mr. Medanich went on to the last tab, number five, which
includes information on the City of Garland's bond sale that took place last week with similar
ratings and the interest rates came out to 3.75% and 3.58%, compared to BAWA's 3.42%.
Overall, Mr. Medanich stated that he felt pretty good about the bond sale, the meetings with the
bond raters and obviously the results.
Director McKay asked if the bonds were tax free. Mr. Medanich noted that the BAWA bond
series in question is tax free as they are for a governmental purpose. He noted that these bonds
become taxable when there are contracts in place that give benefits to a private company, and
while BAWA sells a lot of water to private entities, the agreements in place are suitable for tax
exempt bonds. Mr. Medanich stated that he recommends the awarding of these bonds to Mesirow
Financial Incorporated at 3.1428819%.
A motion was made by Director Brandon Benoit and seconded by Secretary Frank McKay III
approving Resolution No, 2018-18, related to Item 2.a. The vote was as follows:
Ayes: Vice President Mike Wilson, Secretary Frank McKay III, Director
Harland Forrest Jr. and Director Brandon Benoit
Nays: None
Other. President Brenda Bradley Smith (Absent)
Approved
RESOLUTION NO. 2018-18
BAWA Board Special Meeting Minutes
May 24, 2018
Page 3 of 4
RESOLUTION OF THE BOARD OF DIRECTORS OF THE BAYTOWN
AREA WATER AUTHORITY AUTHORIZING THE ISSUANCE OF THE
BAYTOWN AREA WATER AUTHORITY WATER SUPPLY CONTRACT
REVENUE BONDS, SERIES 2018 (CITY OF BAYTOWN PROJECT); APPROVING
OTHER MATTERS RELATED THERETO; AND PROVIDING FOR THE
EFFECTIVE DATE THEREOF.
3. REPORTS
a. Receive an update regarding the Baytown Area Water Authority East Plant Project.
City Engineer Jose Pastrana presented the item and stated that on May 16, 2018, staff issued the
notice to proceed on the BAWA East Plant Project. The contractor is anxious to get started and
has stated that they will have boots on the ground moving dirt by June 16, 2018. Mr. Pastrana
further noted that while the contract allows for the 36 months to complete this project, the
contractor is aiming to complete the work in 30 months.
Mr. Pastrana also stated that staff had received an email from the Army Corps of Engineers (the
"Corps") that there was no longer a need for wetlands mitigation at the site, which is a savings of
$1.2 million. Mr. Pastrana noted that the wetlands mitigation land credits have already been
purchased, so staff will have to look at options to sell those credits to recover the $1.2 million.
However, staff is cautiously optimistic until such time as the formal letter from the Corps arrive
stating that the wetlands mitigation is no longer required.
Mr. Pastrana showed a bird's eye view of the construction of the access road to the plant and
noted that the road is almost 90% completed. He noted that barings are an unusual occurrence
and that everything will be in place to start work on the project on June 16th. Plant Supervisor
Sterling Beaver stated that there were some concerns voiced at the last meeting regarding the
emergency scrubber media. He noted that these have already been replaced with new equipment
and is working properly.
4. MANAGER'S REPORT
a. The next Baytown Area Water Authority meeting is scheduled for Wednesday, June
20, 2018, at 9:00 a.m., in the Council Chamber located at City Hall, 2401 Market Street,
Baytown, Texas 77520.
General Manager Rick Davis reminded the board members that their next meeting is scheduled
for June 20, 2018, at 9:00 a.m., in the Council Chamber.
5. ADJOURN
BAWA Board Special Meeting Minutes
May 24, 2018
Page 4 of 4
A motion was made by Director Brandon Benoit and seconded by Director Harland Forrest, Jr.
to adjourn the adjourning the March 21, 2018, BAWA Board Special Meeting. The vote was as
follows:
Ayes: Vice President Mike Wilson, Secretary Frank McKay III, Director
Harland Forrest Jr. and Director Brandon Benoit
Nays: None
Other: President Brenda Bradley Smith (Absent)
Approved
With there being no further business to discuss, Vice President Wilson adjourned the May 24,
2018, BAWA Board Special Meeting at 11:10 A.M.
Leticia Brysch, Assistant Secretary
City of Baytown