March 21, 2023 – Special Called City Council Meeting Minutes

Apr 21, 2023

CITY OF SEYMOUR CITY COUNCIL

SPECIAL CALLED MEETING MINUTES

A special called joint meeting of City of Seymour City Council and the Board of Directors of the Baylor Special Utility District was held on Tuesday, March 21, 2023, at 9:00 a.m. in the conference rooms located on the second floor of Seymour City Hall, 301 N. Washington Street, Seymour, Texas 76380. All notices have been duly posted in accordance and conformance with the Government Code of the State of Texas, Section 551.002 (c). The City of Seymour attempts to make its meetings accessible to all its citizens. If you have need of auxiliary aids, please notify the ADA Coordinator at 889-3148, at least 48 hours in advance. The following agenda will be considered:

1. Call to Order/Roll Call/Prayer/Pledge of Allegiance by Mayor Jon Hrncirik.

Opened at 9:11am

In Attendance: Mayor Jon Hrncirik, MPT Les Hons, CM Mark McCord, CW Debbie Gillispie, City Administrator Dr. Jeff Brasher, Economic Development Lauren Bush, RO Plant Supervisor John Davis, & City Attorney Fritz Quast

Lan Winn arrived at 9:14am

Billy Henricks arrived at 9:46am

Guests: Kim Stevenson, Junior Livingston, Stacey Holub, N E Deweber, Tommy Holub, Krystal Butler, Kristin Fancher, Richard Latham, Stacey Schlegel, Charlie Hall, Chris Orsak

2. Public Comments

None

3. Discussion concerning the 1994 Agreement between the City of Seymour and Baylor Special Utility District f/k/a Baylor Water Supply Corporation. The agreement water supply and treatment, the discussion will include subsequent underpayments or overpayments under the Agreement. This discussion may include discussion of contemplated litigation between the City of Seymour and Baylor Special Utility District concerning payments and potential settlement to avoid litigation. This discussion may include negotiations about a supplement, amendment, or restatement of the 1994 agreement.

Regular Session reopens at 9:56am

Information was presented by Baylor Water legal counsel, Kristen Fancher. Stated that the Bill in question, from their perspective, is just not owed. Would rather discuss how to move forward from 2023 on and would like to discuss the membrane reserve.

General overview of the topic by City of Seymour legal counsel, Fritz Quast. Contractual agreements in Texas and dealing with tax payer money, there is no statute of limitations. The city of Seymour has been unknowingly subsidizing the Districts (BWSUD) water service (due to the under billing of services). We believe that we have adequate documentation to support the bill that was provided and is owed and the offset of raw water cost are still needing to be clarified so that it can be calculated correctly because we have averaged it at 40¢ and Baylor Water has stated 85¢ and we have still yet to see any documentation or agreements to uphold that claim. If you have that today, we would like to see it and take it into account. We will not give up on attaining some recompense for the under payments in the past. My client owes that to the citizens of Seymour and would find difficulty in waiving the cost.

Rebuttal from Kristen Fancher states there is documentation from a former city administrator and an employee that say there was an arrangement where the 25% was purposefully billed.

Rebuttal from Dr. Brasher that there is a contract, a legally binding contract, that was agreed upon by both parties’ board members and in that contract it states where no changes or modifications can be made without following specific protocols well laid out within the contract, specifically that all modifications are required to be in writing and signed by both parties. Modifications had been made in the past following these protocols before. However, an under-the table agreement, without the full knowledge of the City Council or the city’s citizens, is not legally binding and any party/person that did make an arrangement did so without any authority which would have required approval by the City Council and the board for Baylor Water.

Rebuttal from Kristen Fancher states we have presented the Operation of Waiver from the Texas State Law that says the parties essentially knew what was going on (therefore all verbal modifications are allowed). Also there are significant amounts of monies owed in offset and that is why it was billed like that, at the 25%, opposed to the monthly amount. States that during the drought and winter storm, Baylor Water provided water to the citizens of Seymour and they (citizens) would not of had water if not for them (BWSUD). Baylor Water also established 2 new wells primarily for the citizens of Seymour. Kristen Fancher claims offset makes the bill sent to them irrelevant. She states that this disagreement with billing stems from their client representative being made aware that billing was going to begin following the contractual format and then the representative told City of Seymour that the 36¢ per 1000 for wholesale water was not an efficient amount and after this disagreement a $1 Million bill was generated.

Rebuttal from Dr. Brasher states that data shows there was only one time in 2011 where Seymour relied on majority water from Baylor Water and during the winter storm and the drought, City of Seymour also participated generously. However, this is why there is a contract and why it should be honored. Both parties have given and served, but the contract must be followed.

Rebuttal from Tommy Holub, Baylor Water representative, states that on the distribution side all parties contributed, but on the production side it was all Baylor Water (speaking of the winter storm). He believes that the City of Seymour produced no water during this time.

Kristen Fancher, lawyer for Baylor Water Supply, states again that they believe that this is a wash for both parties and nothing is owed.

Rebuttal from Dr. Brasher states that we do not agree with that. Costs include the Administration/Management at $727,660.00, the Selenium Agreement at $100,898.00, and the Bond Agreement at $268,927.00 and you add it all up and that’s where we get the $1,097,486.00. We have also figured the raw water costs that was not billed from Baylor Water and to do so we called Baylor Water office and inquired what the wholesale cost was and were told 40¢.

Rebuttal from Kristen Fancher states that if the City of Seymour wants to pursue this then Baylor Water will include all the costs of the drought & Winter Storm Uri as well as the 2 new wells that were brought online primarily for the use of the City of Seymour. Those are all costs that will be associated with this and the 40¢ wholesale cost, which is not an accurate number and did not come from us (BWSUD). We will also ask for adjustments to the billing that we should have never been billed, according to the contract. States she would like to discuss future arrangements and move from this topic.

Rebuttal from Dr. Brasher states that he would like to negotiate what is owed and from there we can discuss moving forward because of all these other side-bar things that are not contractual should be discussed after this and not comingled.

Rebuttal from Kristen Fancher states that of this “off-set” we would like to talk about the membrane reserve and where it is, what it’s about, and that we would like it back.

Rebuttal from Dr. Brasher states that the monies are held in a separate account for when the membrane replacements needed to happen because they are very expensive so the reserve account holds those funds until the project needs to be done. Right now however, we are asking for $914,315.00 invoice that is due.

Statements from N.E. Deweber and Tommy Holub, reiterated by Kristen Fancher that the City was paid through administration costs to bill us and bill accurately and Baylor Water paid what was billed, but the City was responsible for billing.

Rebuttal by Dr. Brasher states that whoever was responsible for the billing at that time, from what y’all allege, that there was a side-bar agreement made which was illegal and not agreed upon by the City of Seymour Council.

Tommy Holub states that during the drought Rick Garcia (deceased manager of the RO Plant) came to him and said that even if they lowered the blend to 700 it would not be enough to provided water and at the time I (BWSUD) was not providing my share of the water. We (BWSUD) reached out began purchasing water from local farmers. Then TCEQ granted us access because of the drought. At this point, Rick told me that he went to the Administrator and told him that the City of Seymour should be helping out Baylor Water on some of these costs and his response was “Well they don’t pay their share anyway so it doesn’t matter”. And that was what Rick (deceased) told me. In addition, Tommy Holub stated that he has heard rumor that council believes he knew about this miscalculation from the beginning, but that is not true. Baylor Water depended on you to bill correctly and you didn’t. Poor communication has gotten this to where it is.

Fritz Quast, City of Seymour legal counsel, states that we need to address the Waiver point (mentioned by Kristen Fancher). I have had this topic researched thoroughly and there is no broad authority that has been delegated to Administrator or manager in the contract and the only party that can waive any rights is a quorum of the City Council.

Kristen Fancher states that the bill of $1 Million is incorrect, although we argue it is not due at all, but the bill itself is incorrect. Per the contract language we are to pay our portion of the debt, and labor costs, cost of repairs, and the costs of any maintenance. There are line items here that we have been billed that do not align with the contract language. Included in these discrepancies is lawyer fees, employee fees, dues & memberships. 10% of the administrative costs and the other topics are at 25% or greater. Office supplies should be billed at 10%, not at 44%.

Tommy Holub states that there is a lot of leniency being taken with the RO Plant. Not all duties of the RO Plant manager pertain to Baylor Water and the City of Seymour. Many times your employees came to me to purchase supplies and it was more of a trade out deal and I can’t be certain that we billed you for these supplies or not. I agree that you sat down with me to discuss this situation of the under billing and the production of water and you told me that you were going to pay us for the water at the (current wholesale cost) cost and I stated that the calculations was wrong because there were other factors in play there and your response was “well that‘s what the contract says.” And you (Dr. Brasher) said this a couple of times. When I walked out of there I decided that we (BWSUD) would only supply the contractual amount of water that we had to. I did the calculations that night. You all (City Council) are lead to believe that I cut off the water, but I did not. I merely reduced the amount of water to the plant per my calculation of what we (BWSUD) were contractually obligated. I then noticed that my distribution pumps at the RO Plant had been shut down about 12 noon. So I called Jeff Brasher, and he said he had tried to call me which I knew, and I told him what the situation was and I just wanted to make it clear … I understand everything you are telling me but you cannot tell me that for half a billion gallons of water you are only going to pay me (BWSUD) for the cost of the water and not the cost of the electricity, pumping, and the testing, and the man power.

Rebuttal from Dr. Brasher states that we tried to have this conversation and the reason why we are here now is because we couldn’t have that conversation then. Requests we move into executive session.

Kristen Fancher states that she would like for us to discuss 2 things separately. The $1 Million bill along with the current improper billing that is happening now and the membrane reserve. We are aware of how much has been put in the membrane reserve however, we would like to move that money into a money market account or something that is making money not just sitting in your (City of Seymour’s) general fund to be spent on other things.

Krystal Butler, secretary representative for Baylor Water, stated that Baylor Water asked for the Membrane account information and she did receive a report dating back to October of 2011 from the City. She pulled 20 years of audits and did that because an invoice is an invoice, but when we are dealing with money then we need to go back to the beginning. I have a report dating back to March of 2002 and there are discrepancies on both parts. Our (BWSUD) calculations are showing that we have contributed $198,895.19 from March 2002 to April 2022. When we asked to see the activity from the membrane account, we received very little information so I would prefer invoices and checks that correlate to those invoices just so we will have copies of them as well. We would like to have all the documentation concerning the membranes.

Kristen Fancher stated that Baylor Water wants to have a process for how large projects will be planned. Case in point would be the tank rehab that recently passed. We need to know what to expect prior because we have a budget too and we need to know before it happens. That should be labeled Capital Improvements shared by both parties in the contract moving forward and we will argue that our expenditures need to be very specific.

Adjourned into Closed Session at 10:54am

4. Executive Session. The City Council reserves the right to adjourn into Executive Session (closed to the public) to discuss any posted agenda item, including item 3, above, under Section 551.071 of the Texas Government Code. Under that section, the council may conduct a closed executive session to consult with the city attorney when the council seeks advice about pending or contemplated litigation, a settlement offer, or advice on a matter in which the duty of the city attorney to the council under the Texas Disciplinary Rules of Professional Conduct of the State Bar of Texas clearly conflicts with the Texas Open Meetings Act.

Moved into a Closed Session at 9:15am

Out of Executive Session at 9:56am

Moved into 2^nd Closed Session at 10:54am

Out of 2^nd Executive Session at 11:39am

5. Adjournment of meeting.

Motion to adjourn by MPT Les Hons

2^nd by CW Debbie Gillispie

Motion Carries 5-0

Meeting adjpourns at 11:40am.

Passed and Approved on this the _______ day of April 2023.

_________________________________

Mayor Jon Hrncirik

Attest:

_________________________________

Recording Secretary, Lauren Bush