PUBLIC NOTICE: RIESEL CITY COUNCIL MEETING

NOTICE IS HEREBY GIVEN that the City Council of the City of Riesel, McLennan County, Texas, will hold a SPECIAL called meeting on Tuesday OCTOBER 17th, 2017 at 6:30pm at Riesel City Hall, 104 N Hwy 6, to discuss the following matters:

1) Consent Items: Council Approval of

a. Minutes from Council Meetings on 9/12/17 b. Payment of Bills/Payroll & Financial Reports c. Approval of Qtrly Financial Report by Patillo, Brown, Hill

2) Visitor’s Comments: This is an opportunity for visitors to bring any item to the City Council’s attention. Comments limited to 3 minutes per

visitor. No deliberation may be held on the matter, except limited to a proposal to put the subject on the agenda for a subsequent meeting.

3) Discussion - updates and discussion with City Engineers at CP&Y regarding:

Arsenic Reduction Project – Joint water project with Waco, RMS, MS & H&H

Cooling Tower & Iron Removal

Charles Street & Hwy 6 Drainage Rehab Project

Mapping of Water/Sewer Lines

Wastewater Permit Renewal Application

4) Discussion/Presentation by Robert Mathis regarding a possible new water source for this area

5) Consider/Action regarding authorizing purchase of lawn mower in utility department

6) Consider/Action regarding street signs on S Jena

7) Discussion/Update regarding National Night Out

Adjourn Meeting

I hereby certify that this notice was placed at its present location at least 72 hours prior to the above meeting time. Posted on 10/13/2017

Alisha Lee Flanary ___________________________________ Alisha Flanary, City Secretary, City of Riesel

SEPTEMBER 12th, 2017 CITY OF RIESEL REGULAR MEETING MINUTES

BE IT REMEMBERED that on Tuesday, SEPTEMBER 12th, 2017, the Riesel City Council met in a REGULAR called meeting, at 6:30 p.m. in the Riesel City Hall Meeting Room, at 104 Hwy. 6 North in Riesel, Texas, with notice of said meeting having been posted at least 72 hours in advance in accordance with Section 551, Texas Government Code. Call to Order: Mayor Blasingame, called the meeting to order at 6:30 p.m. Council Members Present: Brandon Blasingame, Kevin Hogg, Jeff Tanner, Bobby Dieterich, Jeanne Lehrmann & Phyllis Koester Employees Present: Alisha Flanary & Pete Zuniga Visitors: Linda Hogg, LuAnn Borth, Bob Wallace, Sloan Kuehl Consent Items: Jeanne Lehrmann made a motion to approve minutes from 8/8/17 and 8/29/17. Bobby Dieterich seconded the motion, which carried unanimously. Phyllis Koester moved to approve payment of bills and financial reports. Kevin Hogg seconded the motion, which carried unanimously. Visitor’s Comments: City Prosecutor, Gary Cunha, spoke to Council to offer his legal services as a City Attorney and suggested that the city may save money by hiring him. LuAnn Borth wanted to know if the City had made any decisions to address speeding on S. Jena Street and again requested more signage on her street. She also had a complaint about the garbage truck backing down her street and mentioned a possible turnabout at the end of the street. Engineering: Bob Wallace stated that he and Sloan Kuehl were at a meeting of the Waco Water Resource Group with local House Representative, Doc Anderson, to discuss arsenic reduction and Swift Funding. He said that if the Riesel group waited until next year to file an application with TWDB, they would eligible for the Swift funding, which is a grant (loan forgiveness) for 25-50% of the project total and also offers much lower interest rates. He said that they were highly encouraged to drop back the current application and apply for the Swift Funding in the next cycle. EXECUTIVE SESSION: Session 1: At 7:02 PM Council convened into a closed meeting, pursuant to Section 551.074 of the Government Code (V.C.T.A.) for the City Council to deliberate the duties, evaluation, employment, and/or appointment of a public officer or employee: Police Officer, Ryan Dieterich, annual evaluation. At 7:16 PM Council reconvened into open session and stated that no action was taken during executive session. Kevin Hogg moved to authorize a 5% raise in Ryan Dieterich’s salary. Jeff Tanner seconded the motion. The motion carried with one abstention by Phyllis Koester. Session 2: Phyllis Koester moved to table an executive session regarding Randy Ehler’s annual evaluation until the Mayor could complete the written evaluation. Kevin Hogg seconded the motion. Motion carried unanimously. Adjourn: With no further business and with no objections, Mayor Blasingame adjourned the meeting at 7:16 PM. _____________________________________ ______________________________________ Mayor, Brandon Blasingame Attest: Alisha Flanary, City Secretary

Proposals for Meeting EPA Arsenic Standards

September 29, 2017

Thank You

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• Leaders of the impacted systems

• Judge Scott Felton

• Dale Fisseler

• Wiley Stem

• Tom Ray

Todays Discussion

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• Opening comments

• American Water overview and our experience with arsenic

• Assessment of the arsenic issue and potential solutions

• Feedback & Questions

Our Team

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• Susan Story – President and Chief Executive Officer

• A.J. Olson – Manager General, Fort Hood, TX

• Aldie Warnock – SVP External Affairs & Business Development

• Jim Chelius – Director Engineering Asset Planning

• Mark Strauss – Executive Officer Business Development

• Mike Hoffman – Director Acquisitions and Investments

• Nick Furia – Manager Treasury Corporate Finance

• Peter Keenan – Director Engineering Technical Services

• Eric Beaumont – VP Strategic Business Development

Who We Are• American Water is the largest and most geographically diverse water

utility in the United States

• Serving15 million people served; over 3.3M regulated customer connections

• Own and/or operate 50,000 miles of water main and pipeline

• 6,800 American Water professionals focused on only one thing –operating water infrastructure

• Operations in 16 states / 1,600 communities

• Vast experience working with regulatory agencies and environmental organizations

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Texas Presence – Fort Hood

• Water and wastewater services provided to Fort Hood, Texas -- the largest active duty armored post in the United States Armed Services

• Approximately 18,000 connections, serving an average daily population of approximately 55,000people

• Average daily water flow of 4.5 MGD

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We Have Experience with Arsenic

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• Arizona• Seven plants

58,000 customers

• California• Six plants, 78,000 customers

• New Jersey• Two plants, 325,000 customers

• Arsenic Solutions used• Blending• Coagulation/Filtration• Adsorption• Ion Exchange

The Arsenic Situation in McLennan County

Project Overview Map

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Option 1

• 9 systems Three separate transmission systems: North, Central,

and South North line includes 1 system - LTG (537customers) Central line includes 5 systems - Axtell, Birome, EOL, Moore,

Prairie Hill (2,058 customers) South line includes 3 systems - Riesel, MS, RMS (1,351

customers)

Total of 3,946 customers Each line includes tanks, booster stations, Cl and

Ammonia feed facilities, standby generators, SCADA, metering, & hydro pneumatic pressure control

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Option 2

• 9 systems + Tri-County and H&H (11 total)

Same model as option 1 but includes H&H (541 customers) and Tri-County SUD (1,671 customers)

Total 6,158 customers

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Financial Overview• $22M or $30M in capital investment -- depending on which systems are

included.

• Monthly rate increase: $80-$145 per month depending on which systems are included – economics can change significantly based on which systems participate

• The construction and financing costs account for 75% of the monthly bill increase.

• Purchased water accounts for 15% of monthly bill increase.

• Operating and maintenance costs account for 10% of the monthly bill increase.

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Potential Project StructuresRegulated Project Finance Muni-Debt

Initial Customer Ratesdepending on line

$80-$125/month $85-$145/month $80-$140/month

Rate Changes generally flat to declining increase 1-2% annually increase 3% annually

Key Financing Measure

ROE equity IRR 1.2X debt service coverage

Ongoing Investmentslifetime average per year

≈$500K ≈$500K ≈$500K

Additional Margin Charged in O&M

none none actual cost plus 15%

Key Debt Assumptions (contingent on market rate)

bullet long term debt4% interest rate

20 year amortizing debt4% interest rate

20 year revenue bond5% interest rate

Texas PUC Approval Yes none none

Method forDetermining Future Rates

Texas PUC contractual FHLM (or successor) board

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Our Proposal• American Water, with City of Waco water, can achieve

arsenic concentrations within the EPA standards using a blending solution.

• American Water can finance, deliver, own and operate a wholesale water delivery system BUT will need support and engagement from the County, FHLM, PUC, TCEQ and TWDB.

• The preferred structure for American Water which provides the lowest monthly bill impact to the FHLM systems is to be PUC rate regulated.

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Appendix

Key Facts / Assumptions

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2017 9 systemsNo H&H/Tri-County

2017 11 systemsH&H/Tri-County

Number of Systems 9 11

Number of Delivery Points 14 19

Length of Water Mains 36.6 mi 48.6 mi

Average Daily Demand 0.595 mgd 0.883 mgd

Maximum Daily Demand 1.442 mgd 2.331 mgd

Purchased Water Cost / Year $1,124,870 $1,755,605

Capital Investment $21,925,000 $30,277,000

Key Engineering Assumptions

1. Blend to 85% of Arsenic MCL (0.0085 mg/L)A. Lake Waco water purchased from City of WacoB. Arsenic concentrations & blend amounts as per McLennan County Arsenic

Mitigation Breakout Plan (“LAN”)

2. Customers and DemandsA. Minor adjustments are made for missing/updated dataB. Adjustments are made for declining usage over time and non-revenue waterC. H&H demands are purely drought driven

3. Infrastructure ImprovementsA. No infrastructure improvements included within City of Waco systemB. No infrastructure improvements assumed at well sites beyond meter pit

(Water Districts assumed to make their own modifications as needed to achieve optimal blending and meet MCL.)

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Lake Creek Surface Water Resource

Executive Summary:

Purchase approximately 1800 acres of land described as Lake Creek located in Riesel Texas and develop the 550-

acre body of water into and above average source of public drinking water to service and support local

communities such as Prairie Hill, Elk, Axtell and L.T.G.

Highlights:

Allowing WSC’s to participate in developing a surface water source, while maintaining their independence, all

while accommodating their current usage demand and support the prospect for future growth in their service

area. Lake Creek Reservoir can provide an abundance treated surface water to our local area with an excess

available.

Objectives:

Establish a Plan of Action, engineer and develop Lake Creek Reservoir as a Local Surface Water Resource within 3

calendar years to comply with all state and local requirements regulated by TCEQ.

Keys to Success:

Organizing and allowing only the most positive and conscientious individuals interested in the integrity of local

WCS’s participating by deriving the right approach to see this project through from purchasing the source to

providing an economical final product.

Description:

Developing Lake Creek Reservoir into a local surface water source providing public drinking water to approximately

4 WSC’s within 20 miles. Lake Creek Reservoir (550-acre body of water) is equivalent to 8500-ac/ft. supported by

an additional 8900-ac/ft. located south in the Brazos River. There is a pump and pipeline for transmitting water

from the Brazos River to Lake Creek to maintain the reservoir level annually. An Engineering study has been

ordered to investigate the condition of transmission pump and pipeline with an estimated cost of repair to working

condition. There are also 2 artesian wells located on the offered property to which the degree of development is

currently unknown. Permitting processes have begun to develop the Reservoir into public drinking water source

through TCEQ and should be filed by the end of September.

Ownership & Legal Entity:

The goal is for each WSC involved to own an equal share of the purchased property and operation. Approximately

2 board members from each group would form an entity to govern property and interest owned by the

conglomerate of WCS’s.

Location:

Lake Creek Reservoir located SW of Hwy 6.

Services:

Provide approximately 1MGD of treated surface water to local WCS’s interested in participation. 1 MGD computes

to approximately 365,000,000 MG/annually. Lake Creek Reservoir appears to have an annual operating compacity

of nearly 3 Billion gallons per year.

Financial Management:

There would be an initial increase for each WSC to pass onto each membership account incurred on monthly water

bills on a per meter basis. The rate increase would pay back loans for purchased property, infrastructure, annual

water treatment and transmission cost. Overtime, each system would experience the ability to 100% pay back all

debt and eventually only have the expenditure of annual water treatment cost/routine maintenance.

Startup / Acquisition Cost:

Gross estimated cost to purchase Lake Creek Reservoir and develop to surface water to the extent of public

drinking water - $26 million divided by number of interested WSC’s

Projected negotiated cost to purchase Lake Creek Reservoir and develop surface water to the extent of public

drinking water – $14-$16 million

Alternatives:

Connection to Waco Surface water resource. Estimated cost of $14 million. There is no formal ownership of water

rights with this prospect and no resource to recover infrastructure cost. Monthly purchased water rates are slightly

higher which are passed onto your customers. The Waco connection does not allow for anywhere near the same

amount of growth as Lake Creek Reservoir.

Pricing:

Surface water treatment - $1 per 1000/gal with a total gross sale of $3 per 1000/gal passed onto each customer

increasing each monthly bill by approximately $30/month. Monthly increase is based on treatment 1MGD and 365

MG/annually.

Strategy:

As an organization of WSC’s, we want to deliver a failsafe plan to provide a suitable surface water source to our

current and future customer base which equates fairness to everyone involved from owner down our valued

customers. In the pursuit to complete this project, we will establish a board of directors that will agree on a

purchase price and manage this project to completion.

Income Projections:

$1.1 million in gross annual revenue. Values based on prospective WSC interested and metered water sales.

P&L:

Income: Expenses:

• Sales - $1.1 Million Payroll/Wages - $280,000 Accounting - $5,000

• Other - $50,000 Taxes - $50,000 Utilities - $60,000

• Misc. Loan Repayment - $50,000 Misc. - $100,000

Total Income: $1,150,000 Total Expenses: $545,000

Net Profit: $605,000

Balance Sheet:

Assets: Liabilities:

• Property/Holdings - $16 million Loans - $16 million Taxes - $40k

• Accounts Receivable - $1.1 million Interest - $50k Payroll - $280k

• Other Income - $50,000

Total Assets – $17,145,000 Total Liabilities - $16,370,000

Net Worth: $775,000

All information included in this document is an exclusive projection intended for the sole benefit of

Prairie Hill WSC, EOL WSC, Axtell WSC and LTG WSC. Anyone in attempt to undermined the integrity of

this document or project no matter the stage will consequentially be held accountable to due process.

The information above is a first draft of projections that are to be revised upon specific planning of the

named project Lake Creek Surface Water Resource. All information obtained was provided free of

charge to any group named in this document.

Please direct any questions to

Robert Mathis - PHWSC - Manager

254-344-2261