MINUTES OF THE MEETING OF THE BOARD OF DIRECTORS OF WELLS BRANCH MUNICIPAL UTILITY DISTRICT. January 20, 2009

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1 MINUTES OF THE MEETING OF THE BOARD OF DIRECTORS OF WELLS BRANCH MUNICIPAL UTILITY DISTRICT January, 0 The Board of Directors held a regular meeting January, 0 at the Wells Branch Community Center, 0 Klattenhoff, Austin, Texas. The meeting was open to the public and notice was given as required by the Texas Open Meetings Act. A copy of the Certificate of Posting of the Notice is attached as Exhibit A. Members of the Board as it was called to order are: Charles R. Walters -President Donna Howe -Vice President Janet Maxey - Secretary Joy Smith - Treasurer Tom Cheshire - Assistant Secretary-Treasurer and all of the Directors were present, thus constituting a quorum. Also present during the course of the meeting were Don H. Williams, District Manager; Jesse L. Kennis II, Assistant District Manager; John Bartram of Armbrust & Brown, LLP, the District s law firm; Robert Ferguson, P.E., of Murfee Engineering, the District s engineering firm; Margret Wingrove of SWWC Services, Inc., the District s utility management firm; Emily Berver of the Wells Branch Elementary School Parent-Teachers Association; Scott Krchnak and Jimmy Rommell of Maxwell, Locke & Ritter, LLP; Charles Alexander, Harold Huth, William Saul, and Teri Salahi of the Ashton Woods subdivision; Todd Wortham of the Wells Branch Church; and Clay Avery of Gilleland Creek Press. Director Walters called the meeting to order at : p.m. and announced that the Board would receive citizens communications. Director Walters recognized Ms. Berver, who informed the Board that she was representing the Wells Branch Elementary School PTA. Ms. Berver announced that the school would be holding its annual Spring Festival fundraiser and noted that proceeds from the event are used to fund trips, equipment and other education opportunities for the students. Ms. Berver reminded the Board that the school was allowed in previous years to use District equipment in hosting the event and stated that her purpose for attending the meeting was to secure similar support for this year. Director Walters stated that the Board would require a proposal to consider and that the matter would be referred to the Recreation Committee for further review. Director Smith suggested that Ms. Berver prepare a list of items that the school was requesting. Mr. Williams suggested that Ms. Berver come to the District office and meet with the recreation manager to discuss a proposed list of items. Director Williams then recognized Mr. Alexander. Mr. Alexander stated that he was a resident of the Ashton Woods subdivision. He stated that the good news is that much of the damaged area had been cleaned up and was looking better. Mr. Alexander stated that equipment was moved to a safer place and many hazards had been removed from the site completely. Mr. Alexander said that the bad news was that the large pile of

2 brush was still large due to the continued accumulation of Christmas trees. Mr. Alexander stated that he was concerned about this pile catching fire. Mr. Alexander concluded by saying that he wished the District would ultimately move the site to a different location but that he understood that cannot happen for some time. Director Walters then recognized Ms. Salahi. Ms. Salahi distributed a packet of photos to the Board, attached as Exhibit B. Ms. Salahi stated that none of the photos in the packet that Mr. Kennis distributed at the previous Board meeting depicted the fire in progress and that her photos did. Ms. Salahi then described some of the photos for the Board. Ms. Salahi stated that her head hurt from smoke the morning after the fire started. Director Walters mentioned that the incident was still under investigation by the Board as well as the District s insurance provider. Director Walters stated that once the insurance provider supplies the Board with an official report, the Board would make a decision on what steps need to be taken next. Director Walters also suggested that the residents of Ashton Woods contact their homeowner s insurance carrier to investigate their personal level of coverage. Director Walters stated that the Board was still in an information gathering state. Ms. Salahi asked if the Board had received any communication from the District s insurance provider, and Director Walters stated that the Board received an initial report from the agent assigned to investigate the scene. Ms. Salahi then asked about the future of the brush pile at the site, to which Director Walters responded that the District was taking many measures to make it safer while still continuing the composting operation. Director Walters added that changes were still forthcoming. Ms. Salahi asked if anything could be done to move the brush as she felt it presented a significant fire danger. Director Walters stated that the matter would be referred to the Facilities Committee, which would be asked to evaluate the pile and review any possible changes. Director Walters recognized Mr. Saul. Mr. Saul stated that in order to reach and fight the fire, the fire department removed some fences that lined back yards in Ashton Woods and those fences had not been repaired. Mr. Saul noted that the area at the north end of the site was still open and that deer were making their way into the neighborhood. Mr. Saul also noted that a portion of the fencing at the south end of the site was dismantled and set to the side during the fire. Mr. Saul stated that the fence was set back into place but needed to be re-welded. Director Walters stated that the District s plan was to repair any damage done by the fire department in combating the fire and that the matter would be assigned to the Facilities Committee. Director Walters stated that the committee would meet with the District s operations staff to discuss how to repair the damage. Director Walters reiterated that the Board was waiting for the insurance provider s report and suggested again that the residents meet with their respective carriers so everyone will have complete information when the time comes. Director Walters then stated that the Board would entertain a report from the representatives of Maxwell, Locke & Ritter, LLP, which conducted an independent audit of the District s financial statements. Director Walters recognized Mr. Krchnak and Mr. Rommell. Mr. Bartram stated that before the representatives from the Auditor gave their report, the Board consider Agenda Item 1 the Finance Committee s recommendation to approve the Management Discussion and Analysis for the fiscal year ending September, 0, attached as Exhibit C. Mr. Krchnak stated that the Management Discussion and Analysis was prepared by the District s management as a summary of the audit findings from management s perspective. Mr. Krchnak stated that --

3 the auditor was not responsible for the Management Discussion and Analysis, although it is included in the overall audit report. Director Cheshire moved, seconded by Director Howe, that the Board approve the Management Discussion and Analysis of the Audit Report for the fiscal year ending September, 0. The motion passed unanimously. Mr. Krchnak stated that he and Mr. Rommell met the previous Friday with the Finance Committee as well as Mr. Williams and Mr. Kennis to discuss the company s full Audit Report, attached as Exhibit D. Mr. Krchnak stated that Mr. Rommell would present the full report to the Board. Mr. Rommell stated that the opinion of the auditors was that the financial statements were free from material misstatement and that this opinion was without qualification. Mr. Rommell noted that on page of the report a line item denoting a bank overdraft was under the liabilities section. Mr. Rommell stated that this was not cause for alarm and was simply a clerical result of having to end the audit precisely on the last day of the fiscal year. Mr. Rommell stated that the line item resulted from having checks outstanding on the thirtieth and not being able to account for the deposits that likely occurred after the first. Mr. Rommell stated that this was not unusual and that he was sure that the funds needed to pay for the checks were in the account after the first and that there was no true overdraft. Mr. Rommell stated that the General Fund balance was over $. million at the end of the year. Mr. Rommell reviewed pages and of the notes and stated that no new disclosures were necessary. Mr. Rommell then discussed page of the report that dealt with the supplemental schedules required by the Texas Commission on Environmental Quality. Mr. Rommell noted that the District s water accountability was percent. Director Maxey asked for an explanation of water accountability and Mr. Rommell stated that the figure reconciled the amount of water purchased by the District against the amount sold. Director Howe stated that the minimum accountability rate required by law was percent so the District was doing extremely well in that area. Mr. Rommell referenced a letter at the end of the audit package regarding internal control and noted that no internal control deficiencies were identified. Finally, Mr. Rommell stated that because the Board has always stated a preference for the audit process to be as unbiased as possible, the company ensured that at least one member of the audit team had no previous affiliation or relationship with the District whatsoever. Director Smith moved, seconded by Director Howe, that the Board approve the Audit Report for the fiscal year ending September, 0 and authorize the filing of the Audit Report with the Texas Commission on Environmental Quality and the City of Austin. The motion passed unanimously. Director Walters then recognized Ms. Wingrove for a report from the District s utility manager. Ms. Wingrove spoke to the Board on the District s monthly financial report, attached as Exhibit E. She noted that the format of the financial report had been changed by Municipal Accounts and Consulting, LP, and explained that there were incidents of duplication such as checks appearing in two places. Director Smith stated that the report was hard to follow, as there were no page numbers in the report. Ms. Wingrove referenced the general fund balance and reviewed budgeted versus actual revenues and expenditures. Ms. Wingrove then discussed her desire to obtain the best possible interest rate for the District s general fund and stated that she would meet with the Finance Committee to ensure that happened. Director Howe noted that she was also unsatisfied with the new financial report and did not feel that the District should be charged for the service. Ms. Wingrove explained that the firm that prepared the report --

4 was a subcontractor for SouthWest Water Company and stated that the District could withhold the amount usually paid for the financial report from what it usually paid to SouthWest Water Company. Director Walters stated that it was his preference that once the District withholds payment from SouthWest Water Company, SouthWest should withhold that amount from its subcontractor. Finally, the Board considered a proposed transfer letter authorizing a wire transfer for two bond payments, attached as Exhibit F. Director Maxey moved, seconded by Director Smith, that the Board approve the letter authorization to wire transfer $1,0.0 as payment for interest on outstanding bonds. The motion passed unanimously. Ms. Wingrove then discussed the District s monthly utility report, attached as Exhibit G. Ms. Wingrove noted that she would be reporting on the activity from the previous two months. Ms. Wingrove noted that water usage was down for the month of November and then highlighted the water accountability chart. Director Maxey noted that she found a typo on the billing report on Page of the first report under November s Gross Arrears. Ms. Wingrove stated that the number should be $,.0. Ms. Wingrove noted that an issue existed with regards to credit card payments being made with cards that are about to expire. Ms. Wingrove stated that SouthWest sent letters to customers stating that their cards were about to expire and expressed a prompt need for the new number. Ms. Wingrove mentioned that the company had not received much feedback on that initiative and that she would personally try to make contact with the individuals. Ms. Wingrove then began to discuss the second month s report noting that usage was also down for the month of December. Ms. Wingrove referenced the delinquent accounts report and stated that the largest delinquency resulted from the Retreat at Wells Branch ownership change. Ms. Wingrove said this led to some confusion and that she was in the process of sorting things out. Ms. Wingrove then stated that she intended to remove the top two names from the December write-offs report. Director Maxey noted that an error had also been made on December s billing report and that October s information from the previous report had been used for the November column in the billing recap. Finally, Ms. Wingrove stated that she worked with Mr. Ferguson on the temporary pumping station that was now up and running. She noted that Mr. Ferguson was currently working on a permanent redesign of the station. Director Walters stated that the Board would then hear a report from the Facilities Committee. FACILITIES COMMITTEE: Director Smith stated that she would report on the progress at the Green Gold compost site since the fire, and referred to a drawing highlighting the proposed changes, attached as Exhibit H. Mr. Williams handed out a packet of photos detailing the proposed changes, attached as Exhibit I. Director Walters reviewed the packet and explained the changes that were being done. Director Walters made special mention of the raised road that was to circle the perimeter of the site. Mr. Williams stated that the fourth picture showed where exactly the materials for composting would be placed. Director Cheshire asked about water in the composting process, to which Director Walters responded that more water would help the process run faster. Mr. Williams noted that water was necessary to the composting process, and Director Walters stated that the added moistness would make the composting materials less combustible. Mr. Williams stated that no smoking and fire hazard signs would be placed throughout the site. --

5 Director Smith then referenced the Board Action Sheet regarding the acquisition and planting of new trees for the District, attached as Exhibit J. Director Walters stated that the committee had been looking at possible ways to replace trees that had either died or been pushed down due to storms, etc. Director Maxey asked about the different types of trees that were proposed. Mr. Williams explained the different types and stated that Richard Fadal from TexaScapes had recommended the proposed types specifically. Mr. Williams mentioned that any trees not immediately used would be placed in planters suitable for staying alive and then stored. Director Cheshire moved, seconded by Director Smith, that the Board approve the purchase of 0 trees as detailed on the Board Action Sheet, mixed between red oak, live oak and bur oak. The motion passed unanimously. Director Smith then directed the Board s attention to the item marked Supplemental Letter Agreement Regarding Cost Participation for Wells Branch Nature Park Buffer Fence and Brookside Subdivision Perimeter Fencing, attached as Exhibit K. Mr. Bartram stated that the supplemental agreement updated the cost calculations in the original agreement with the actual costs with the winning bid, but did not otherwise change the terms of the original agreement. Director Maxey moved, seconded by Director Howe, that the Board approve the Supplemental Letter Agreement Regarding Cost Participation for Wells Branch Nature Park Buffer Fence and Brookside Subdivision Perimeter Fencing. The motion passed unanimously. Director Walters then recognized Mr. Williams for a report from the District s manager, including reports on the Community Gardens; solid waste/recycling services; facilities; landscape; restrictive covenant enforcement; customer service; recreation; and aquatics; attached as Exhibits L through S. Mr. Williams gave a report on the Community Gardens project and said that February 1 was the deadline for renewing plots. Mr. Williams stated that trash and recycling pick-up through IESI was running well. Mr. Williams stated that he would have more information regarding the IESI fuel surcharge issue at the next meeting. Mr. Williams stated that the facilities staff was extremely busy due to the compost site fire. Mr. Williams then spoke further on the efforts to complete the perimeter road at the site. Mr. Williams stated that composting was still going well, although the lack of storms and resulting damage was having an impact on the amount of available materials for compost. Mr. Williams stated that he had hired a temporary worker to help prepare the corner of the composting site where materials would be stored and that this would be likely completed by Monday. Mr. Williams moved to a discussion of covenant enforcement and mentioned that there were not many lawn violations, which was likely the result of the drought. Mr. Williams then stated that the customer service department had been busy with water payments, but that this was a good thing. Mr. Williams continued with a report on recreation activities. Mr. Williams gave an update on the trout fishing event, and said that the event would be adult only through noon but would be open to all anglers after that. Mr. Williams also mentioned a Capital Area Suburban Exchange sock-hop would take place on February. Mr. Williams concluded by noting that he was in contact with the Aquatics Manager about a change in regulations, which necessitated --

6 new drain covers. Director Walters then recognized Mr. Bartram for a report from the District s attorney. Mr. Bartram stated he did not have any outstanding directives but would need to speak with the Board about operational issues during an executive session. Director Walters then recognized Mr. Ferguson for a report from the District s engineer, attached as Exhibit T. Mr. Ferguson noted that the first directive regarding the detention pond adjacent to the Verde Apartments was completed. Mr. Ferguson supplemented his report on the wastewater line rehab project, saying that the matter had become complicated due to the toll road construction and the extension of MoPac. Mr. Ferguson noted that the District s facilities were relocated and that he would meet with the Facilities Committee to discuss the next step. Mr. Ferguson also noted that he would discuss water supply issues to the Green Gold compost site at the next Facilities Committee meeting. Director Walters then announced that the Board would consider items on its consent agenda: Agenda Item No. Approve minutes of December, 0 regular meeting (corrected); and January, 0 regular meeting; Agenda Item No. Approve the Finance Committee s recommendation regarding: payment of bills and invoices and write-offs, attached as Exhibits U and V, respectively; and Agenda Item No. Resolution Confirming Annual Review of Code of Ethics, Travel and Professional Services Policy and Investment Policy and Investment Strategies and Designating Qualified Brokers and investment Officers, attached as Exhibit W. Director Cheshire moved, seconded by Director Howe, approval of the Consent Agenda, and the motion passed unanimously. Director Walters then announced that the Board would receive reports from the Committees: AD HOC COMMITTEE ON UTILITY OPERATIONS: Director Walters stated that the committee met with SouthWest Water Company and reviewed the type of report information that the committee felt was necessary. Mr. Kennis passed out a two-page packet to the Board, attached as Exhibit X. Director Walters stated that the front page was a list of customer survey standards and criteria that the District expects from its utility provider, and the back page was a template of what a report on customer service data might look like. Director Walters stated that the committee would provide the --

7 packet to SouthWest and the company would in turn respond to the committee. Director Walters stated that the expectation was better reporting capability on the part of SouthWest Water Company. Director Walters said that the committee wanted to see the total volume of calls the company received and what percentage of those calls was from Wells Branch customers. Director Walters stated that the committee would like to see the data trends over a six-month period. Director Walters stated that the committee s intent was to see a report at each regular business meeting, thus providing a month-over-month snapshot, with each calendar month serving as the cut-off. Mr. Kennis stated that the packet was a rough draft produced by the committee, and Director Walters solicited the Board for any suggestions on the materials. Director Walters stated that the goal of the current ad hoc committee was to notify the company of the information that the Board would like to see and that the company would take that information and develop some type of reporting mechanism. Director Cheshire asked who the committee s recommendations would be presented to, and Ms. Wingrove responded that the information would go to the company s Vice President responsible for all Texas municipal utility districts. Director Walters then stated that he would like the Board to explore options for those residents suffering from the distressed economy, and assigned the matter to the Finance Committee for further exploration. ADMINISTRATIVE COMMITTEE: Director Howe stated that the committee was still negotiating with IESI regarding the requested fuel surcharge and CPI increase. Director Howe stated that the committee would not recommend the fuel charge but would support a CPI increase. Mr. Williams stated that the committee had not met regarding the proposed December CPI increase, but that the topic would be discussed in executive session. Director Howe then referred the Board to a handout detailing the different health insurance plans offered by Blue Cross/Blue Shield, attached as Exhibit Y, which the committee reviewed. Mr. Williams stated that the committee s recommendation was to offer the Multiple Options plan (coded SH1 and S). Mr. Williams stated that the plan saves the District money while offering the employee the flexibility to choose between a Medical Savings Account type option and regular insurance coverage. Director Smith moved, seconded by Director Howe, that the Board approve the offering of Blue Cross/Blue Shield SH1 and S health insurance plans to the District s employees. The motion passed unanimously. FINANCE COMMITTEE: Director Smith directed the Board s attention to a Board Action Sheet regarding moving check writing responsibilities to the District office, attached as Exhibit Z. Director Smith stated that this was an option the committee had been exploring for some time. Mr. Williams mentioned that the committee was exploring options for new CPA firms, but would like to bring check writing in-house immediately. Director Smith moved, seconded by Director Howe, that the Board approve the transfer of the duties of writing any checks and processing any invoices from Municipal Accounts to District staff. The motion passed unanimously. PUBLIC SAFETY COMMITTEE: Director Cheshire stated that the Travis County --

8 Sheriff s Office had requested the Board to commit formally to the District s involvement in the 0 Sheriff s Office Extravaganza. Director Smith moved, seconded by Director Maxey, that the Board authorize the District to host and support the Travis County Sheriff s Office Extravaganza on October, 0. The motion passed unanimously. Director Cheshire then passed out a packet of photos that he took during the aftermath of the Green Gold compost site fire, attached as Exhibit AA, and explained each photo to the Board. Director Cheshire stated that he recently went to that area near the wrought iron fence and could not smell any smoke at all. Director Cheshire stated that the only remnant of the fire was a minor amount of gray ash deposited on some trees. Director Cheshire stated that it was the committee s recommendation to follow the current plan for changes. Director Smith stated that the Board should start looking at extending the lease to the site or locating another site relatively soon. Mr. Bartram stated that now might be the time to pursue land opportunities due to the sluggish economy. Director Cheshire stated that the committee met with Securitas, which admitted to damaging a District vehicle. Director Cheshire stated that the vehicle had been repaired and the matter resolved. Director Cheshire stated that he would like to request Board approval to work with the Sheriff s Office in offering personal safety programs for individual District employees. Mr. Williams stated he would like to see the program offered to the entire community, and Director Cheshire agreed with this sentiment. Director Walters asked Director Cheshire to have the committee prepare a proposal for a future meeting s agenda so the Board may review the matter. RECREATION COMMITTEE: Director Maxey presented the Board with copies of the initial schematic concept drawing of the proposed nature park, attached as Exhibit BB. Director Maxey discussed some additional ideas that the committee was considering adding to the sketch. Director Maxey solicited input and suggestions from the Board. Director Walters mentioned that the entire park would be fenced in for safety. Director Maxey noted that the committee was considering a type of wrought iron fencing so parents can see into the park, but noted that the fencing adjacent to Wells Branch Parkway would be solid concrete. Director Waters mentioned that a possible idea was to extend the walking track so parents could get more exercise while still being able to supervise their children. Director Maxey stated a preference for the park to be pet-free but that the matter would ultimately be a Board decision. Director Maxey then stated that the committee had asked Murfee Engineering to design a driveway and turnaround for the park. Director Maxey referenced a proposed agreement for services, attached as Exhibit CC. Mr. Ferguson stated that a significant amount of cost and time was necessary to go through the City of Austin s arduous permit process. Mr. Ferguson stated that the process could take up to six months. Director Howe wondered about the possibility of creating something other than a cement driveway. Mr. Williams stated that anything else would still likely require permit approval from the City. Director Walters asked Mr. Bartram if his office had reviewed the document, to which Mr. Bartram replied that he had not seen the agreement before the meeting. Director Smith moved, seconded by Director Cheshire, that the Board authorize the Administrative Committee to negotiate and execute the --

9 proposed agreement with Murfee Engineering to design driving areas for the Wells Branch Nature Park, subject to legal review. The motion passed unanimously. Director Walters then asked for any announcements from Board members and Director Maxey reminded the Board to make arrangements for the Capital Area Suburban Exchange s meeting on June 1-. At : p.m., Director Walters announced that the Board would convene in executive session to receive legal advice from the District s attorney regarding operational and personnel matters, as permitted by Sections 1.01 and 1.0 of the Texas Government Code. At : p.m., the Board reconvened in open session, and Director Walters stated that no action had been taken during executive session. The Board then directed that, in connection with the transition of District management, a hiring and firing freeze for District personnel would be implemented immediately and that all decisions regarding hiring and firing would need to be approved by the Administrative Committee. The Board then discussed establishing a plan and timeline for the transition of District management and determined that a meeting would be scheduled for :00 p.m. on Tuesday, January, 0 at the District's office for this purpose. There being no further business to come before the Board, the meeting adjourned. Respectfully submitted: March, 0 Date Janet Maxey, Secretary Board of Directors Wells Branch Municipal Utility District (SEAL) --