September 27, 2023 Board Meeting Open Session Q&A

RESPONSES TO QUESTIONS PRESENTED AT SEPTEMBER MONTHLY BOARD MEETING:

John K: I’ve been a member since 2007 and I live on CR 4962. I bring a concern tonight that in late August I received a notice from KWSC stating that this letter was a reminder that we are currently under stage 4 water conservation, and that my usage was, essentially, astronomical. My concern is that before receiving this notice which was mailed on the 21^st of August (and I probably got it a few days later) is that I had no prior notice that we have moved into stage 4 water conservation. If I had known that I could have taken appropriate action.  I know I receive a bill every month and that’s public notice but nothing indicating that we had moved to stage 4. That is seemingly unjust and unfair because of the rates that exist under stage 4 water conservation procedures. As outlined in your emergency response plan there is a duty, which we know is an obligation, to do something and that is to formally notify the public and members, seemingly, that we have changed into drought levels. Of course, at that time drought stage 4.  Now I went into the office, I spoke to Susan, and I asked why I didn’t get the notice.  She stated to me that earlier that year members were notified that we had moved to stage 3. I did not get that notice. She told me that was an expensive undertaking and it cost over $7000.00 but again, sometimes we have certain things that are required for doing business.  But she stated that “no notice was mailed out for stage 4 response.”  Without that notice, again, I was put under a hardship because of the change, the sudden change, of the rates and by receiving no notice as provided by your own emergency response plan dated 2024 maybe we’ll be there soon, were not there yet, it does state formal notification is required, I received none, so I’m asking for a response.

KWSC sent notices and numerous reminders that we were in stage 4 drought conditions through our alert system. In addition, the announcement was in both of the local papers, on the news, posted at every business in Kempner and on a marquis sign on Highway 190. If you are not already, please make sure to sign up for alerts at www.kempnerwsc.com. 

Ricky L: When I was here, I asked about the longevity plan that we have. I guess now what I’m asking, what dialogue have we had with the Brazos River Authority or the government? Who controls giving us adequate water that’s going to be here for the long term? 

The Texas legislature created the Texas Water Development Board (TWDB) in 1950 to develop and maintain the State Water Plan. The State Water Plan is a 50-year plan developed to meet the State’s future water needs. TWDB split the planning and research activities into 16 planning groups, which is where Brazos River Authority (BRA) comes into the picture. BRA is one of those planning groups and is responsible for Region G planning. KWSC participates in all of the planning efforts pertaining to our local area and has a member of its staff at all BRA meetings. For more information regarding the State Water Plan, please visit the following website: https://www.twdb.texas.gov/waterplanning/swp/

In addition, The TWDB’s Region G Planning Group (Brazos Regional Water Planning Arear) prior and on-going regional plan can be viewed at <Region G Planning Group | Texas Water Development Board>.

My next question is, who determines what our base rate is going to be and then how are they determined if it’s going to go up or not?  Because we have the highest base rate and I know we’ve talked about this several times, but we haven’t talked about who makes that determination, in this organization. 

KWSC Board determines when/if to increase the rates to ensure the Corporations’ ability to maintain compliance and provide continuous water to our members. Management uses a State recognized worksheet to determine what our rates must be based on our operational costs and number of meters. The base rate is based on KWSC’s fixed costs to maintain operations. According to fixed cost calculations, KWSC base rate should be $129.09 per month. In order to remain compliant with Public Utility Commission of Texas (PUCT) and the Texas Commission on Environmental Quality(TCEQ) rules and not generate excess profits, the recommended rate can be adjusted down but the cost per thousand has to cover the difference in expenses in order to fund the operational costs. The Board does not want to see a base rate that high, therefore, they have kept the base rate lower than the recommended rate. This is the reason the base rate for the upcoming fiscal year will remain at the current $75.00.

Bryan T: Hey, how’s everybody tonight? My question pertains to the cost of y’all producing water?  I apologize my numbers are from 2021 but that was the most up to date information I could get from the website. But in 2021, the plant alone cost over a million dollars to produce water that year, when y’all bought water from Central Texas water Supply Corporation, it only cost y’all 740,000 to buy the equivalent of what the customers use.  And then, after reading this I’m sure the plant probably costs more than a million dollars this year to run, plus y’all are adding another 2 million dollars’ worth of repairs.  I feel like we could buy water from CTWSC for way less than 2 million dollars a year.  So, my question is, why are we operating a plant? Can we just shut it down, and sell it, and pay off all of the debt y’all have incurred from upkeep, maintenance, and building it?  And then just go straight to buying water from one of the water suppliers?  I know y’all are about to tap in with WCID and now you’re with Central Texas Water Supply, I’m hoping maybe that could be a way we could save a couple bucks and cut everybody’s bill. 

While it does cost about $750,000 to treat the water to supply our members, it would cost a lot more to purchase it elsewhere. KWSC gave up their rights in the CTWSC plant capacity when our plant was built. The only reason we are able to purchase the Lampasas water from them now at a cheaper rate is because they have to honor that 99-year contract. All the rest of CTWSC’s wholesale customers pay a rate of $2.99 per thousand. The water we will receive from the emergency connect with Bell County WCID costs $2.00 per thousand.  It only costs us $1.24 per thousand to treat it with our plant. Of course, the $1.24 per thousand does not include the water rights from BRA or all the expense to pump it throughout the 400 miles of pipe in our system, but we would have to maintain those expenses whether we made or purchased our water. Long story short, it would cost the members even more money monthly to sell the plant and purchase water from either of the two entities on the lake.

Rita S: I want to know who does the longevity planning? I want to know if the long-range weather and drought forecast are taken into consideration with that longevity training? Who does the research on it?  Is somebody just giving you all a paper and you’re saying, “oh ok.” Are you really researching what you’re being given, I’m wondering?

See answer above regarding the State Water Plan. The government is responsible for the planning and development to meet the State’s future water needs. That is a MUCH bigger task and cost than KWSC could take on. We purchase water rights from the Government (BRA), and it is their job to ensure as conditions change, there are enough resources to provide that water. The water right contracts KWSC holds with BRA total three times more water than we use at this time to ensure we have water well into the future.

I think I have a meter problem, I was told no I have a leaky toilet, so I used your little blue tablets.  No, I don’t have a leaky toilet. We cut the water off at the meter, checked it, wrote down the reading, went back a few hours later and turned the meter back on and I had used 7 gallons of water. How is that possible?  If you guys turn off my water at the meter, I’m not going to have any water.  We’ve had leaks before where we shut it off at the meter so we would not use water, but here I’m using water. Where am I using it?  Because I shut it down it shuts down everything the house my two barns where we have lines running.  All lines have been checked, our faucets have been checked and I’ve checked the toilets, nothing is running so how am I using water?  And I understand that Austin is also having problems with their meters so this might be a problem if it’s not just this area. 

If you think your meter is registering incorrectly, please contact the office to have the meter checked.

I want to know; you say we can’t apply for grants because the median income is too high. When was the last time that study was done?  Because a lot of us, I’ve been on Kempner water for 36 years we have both retired we are both on fixed incomes because of disabilities, so I want to know the last time the median income, but you picked up a lot of these subdivisions which probably do have people that do have very high income but what about us that don’t, anymore? 

The study that determines the median household income is not something that KWSC does. The government bases it on census data.

It’s very difficult and then with your lawsuit with Lampasas you end up paying that that’s going to fall back on us because we are members and you’re a corporation and not a coop so corporations can be sued coops can’t be sued.  So that’s a major difference there and I’m wondering how high are we going to go with this base rate when we already have one of the highest in the state? 

The Lampasas lawsuit was complete in 2019 and they have already been paid everything they were due. This is not currently affecting KWSC rates.

You’ve got a lot of people here you said $3000 to hire somebody to write a grant.  You have people here that could probably write a grant, it takes research and writing skills, that’s about it.  So, I’ve written a few in my time but I’m too old to try it again.

If KWSC ever does end up qualifying for grants, we will do our best to minimize the cost of receiving one.

That’s about all I have except for when the pipe broke, I know y’all had to do it to fix the big break that you had the fire hydrants on FM 2313 dumped out thousands and thousands of gallons of water that somebody probably could have used. I don’t know how you would have caught it but maybe somebody could have used it some way, and I think that was a big waste when it could have been done something with. 

KWSC did not like the fact that we had to drain the lines and waste all that water to repair the leak, but it could not be repaired with water in the lines. Unfortunately, we do not have the money or resources to catch and hold that amount of water. On a positive note, we have been allowing the water we flush to maintain residuals to be captured by others for non-potable use, such as construction, tanks, etc.

John H: My question is on the new rates that I think were approved at the last meeting?  Because I’ve seen both and I’m just wondering when those are going to be made available. When they are approved, I guess?

Final approval of the new rates was made during the September 27, 2023, Board meeting. As long as the Drought Contingency Plan is in effect, the new rates will not be taking effect and at this time we do not have an anticipated effective date.

David S: Why are KWSC and Lampasas City water conservation measures not aligned?

Water conservation measures are set forth by a utility’s Drought Contingency Plan. No two utilities are exactly the same because they all have their own unique water supply operations, such as production methods, system capacity, population and demand. Therefore, the Texas Commission of Environmental Quality (TCEQ), who regulates water providers, requires that each water utility develop and implement a Drought Contingency Plan that is specific to their personal needs and operations. The City of Lampasas and KWSC have each independently assessed their specific needs and determined their own unique conservation measures, which have been submitted to and reviewed by TCEQ and PUCT.

The other thing I would like to point out is two days ago at the city council meeting in Lampasas, the city council and the city manager said that there is a tiny increase in the levels of our water reservoir Stillhouse Hollow Lake.  In doing that, because the increase was only from 603.50 going up to 603.79 which is about 3.625” I believe that is very irresponsible, for him to say that.  And that possibly our manager needs to discuss it with him. 

KWSC understands and agrees with your position on this matter. Certainly, everyone was wondering if there was an increase from the rain, but it should have been stressed that it was not nearly enough of an increase to change anything.  

Rikki H: Where can we find our explicit rights as members?

Member’s rights can be found in the Corporation’s Bylaws and Tariff, both of which are located on our website under the Customer Service tab.

I understand the tiered rates were intended to promote conservation. What is the plan with those increased profits?

You are correct. The tiered rates were intended to promote conservation. In all reality, we lost revenue due to the lack of water sales. Any “profits” of KWSC are dedicated to enhancing the water supply for the benefit of our members. 

Was the past three months your highest profit to date?

At the rapid rate KWSC has grown over the past decade, every summer is our highest revenue to date… unless it is a rainy summer. While this summer’s revenue was minimally higher than last summer, had we not been forced to enact the drought restrictions, the revenue would have been higher. With normal summer water use and the additional 130 members, KWSC has lost $250,000 of potential revenue over the last five months.

What is the new proposed base rate?

There is not a new proposed base rate. Our current base rate is $75 and that was implemented in October 2022.

When will it be voted on?

There is no recommendation to increase the base rate at this time. Therefore, there will be no vote.

When is the proposed effective date of the new base rate?

There is currently no intention to increase the base rate. It will remain $75 for the fiscal year ending 2024.

I’d like to formally request to no longer use the company BGFN out of Temple, as the company that is used to perform the audit for Kempner Water. I would like to request the use of a firm that is not local, as to prevent a conflict of interest.

Thank you for voicing your concern regarding the auditor. According to policy, KWSC changes auditors every three years and there is a third-party verification process through another company in the Houston area.

And finally, how many members voted in the last Board election?

There were 540 votes in the last general election.

Norma R: My question to the board is I also would like to have an itemized copy of the budget because there are expenses listed on here, continuing education, I looked at something online $24,800. How many licensed people are employed with Kempner Water Supply that they need that many CEU’s?  What kind of licenses and how many CEU’s are required?

The continuing education budget includes all aspects of training, such as classes, mandated monthly safety meetings, conferences, testing, licenses, hotel, travel, and Board training. KWSC has 17 licensed individuals that have to take continuing education classes annually to maintain their licenses. These classes are a week long and can cost up to $500 for the class alone.

Also, what are other expenses? What does that entail? 

The category other expenses are pass through expenses and include the franchise fee, regulatory fees and volunteer fire department contributions. These are also accounted for separately in the income section.

I need clarification on the BRA payment, payment of $768,000.

The Brazos River Authority (BRA) is a government entity created by the Texas Legislature, specifically to develop and manage the water resources of the region on the State we are located in.

KWSC holds contracts with BRA, which gives us the right to receive up to a certain amount of water on an annual basis from BRA’s reservoirs. The cost of these contracts increases annually and currently costs KWSC almost a million dollars per year. This is not an optional expense for KWSC. If we do not maintain these contracts, we will not have the right to any water in the lake.

I would like to know, what are the professional fees for $269,000?

The professional fees category consists of legal fees, accounting fees for tax filing, auditor fees, investment advisor fees, payroll processing, and engineering fees. The majority of which is Engineering fees.

What is the “other income” listed of $289,000?

Other income includes the sale of CCN, CoBank dividends, the proceeds from the sale of any equipment when it is replaced, and the contracts that KWSC holds with wireless and cell phone providers to have satellites on our tanks.

Then I would like to know of this capital reserve account worth $700,000 are they being invested?

This is the portion of KWSC’s depreciation that is currently being funded to replace items or infrastructure once it reaches the end of its life span. The funds are invested in accordance with KWSC’s adopted investment policy until it is necessary to use them.

Who is the investment officer?

In accordance with policy, the investment officers for KWSC are the Chief Financial Officer, the General Manager and the Secretary/Treasurer.

How were they being invested?

KWSC bases its investment parameters on and complies with the Public Funds Investment Act, Gov’t  Code, Chapter 2256, Texas Government Code, (the “PFIA”) which governs investments for all public entities in Texas. For any additional information, you may view our investment policy at www.kempnerwsc.com under KWSC policies.   

I would like to know Mr. Lindner, who is the attorney for KWSC, he is the attorney for this corporation right? And how is he being paid? Is he being paid by Kempner Water Corporation, by the members here?

Mr. Lindner is paid by KWSC as our general counsel attorney.

Ok so how does that work that the attorney that we pay for advises all of your guys and ladies not to answer questions directly.  In other words, why is our attorney working against us and only working for a specific group of Kempner Water Supply Corp.  Because at the last meeting you said you were advised not to answer questions directly so in other words, we are paying his fee and he works against us, and he works for you guys.  It’s a conflict of interest.  I looked it up, conflict of interest, if you have a group of clients who hire one attorney who works for all these clients and you’re all paying clients it’s a conflict of interest for that person to only work for you and to write advise you against us.  He didn’t advise us.  It may not be illegal but it’s unethical, we are paying for this attorney, what happened with the questions you didn’t want to put yourself out there.  We’re coming up here we have the guts to ask questions but you, for whatever reason, were so guarded you saw it necessary that you had to get the attorney to advise you not to answer questions.  If you have a good conscience, in my opinion, there should be no reason why you couldn’t answer. 

House Bill 2840 mandates that a governmental body must allow all persons to speak at the beginning of each meeting, subject to reasonable regulations.  The purpose of the public comment is to receive comments from the public, not deliberate an item that is not on the agenda, or answer questions that require more than a simple factual statement or recitation of policy.  Mr. Lindner has advised KWSC that the better policy is to receive the public comment and questions, but not deliberate regarding the comment or attempt to develop an answer during public comment. If the comment or question relates to an item on the agenda, the board may then deliberate on the item and answer questions or may invite additional comment.   KWSC goes above and beyond the requirements of the law and allows the public comments, concerns, or to ask questions that are not on the agenda. We take this approach because customer service is centric to uphold our mission and values.

The attorney was only trying to make the members present aware of the fact that according to TEXAS GOVERNMENT CODE § 551.042 and Texas Attorney General Opinion No. LO-96-111 KWSC may not deliberate on any item that is not on the agenda, even during the open session of the meeting. In addition, KWSC wants to ensure its members are responded to in a researched, factual, carefully crafted response, without emotions flaring.

I would like to know where the fees for this attorney are listed in the budget, and under what expenses that is. Is it payroll? Is it other expenses?  Is it Professional fees? Because if it’s under professional fees it’s quite a chunk of money that you pay him to work against us. 

Attorney fees are included in the professional fees category of the budget. Again, most of that category consists of Engineering fees.

I would like to have a copy of the budget. 

The budget can be viewed on our website under the “all forms and reports” tab.

Janet A: Not a question, suggestion, because I know that one of the complaints is not many members attend these meetings and I know for myself personally it’s very hard to do so.  Why aren’t you making better use of social media?  For example: Hamilton County Electric Coop they have a Facebook page I think there’s is public, but you can have a private group where you only allow members to be in that group.  I’m a former vpn non-profit and it worked really well for us for outreach for getting members involved for addressing questions they may have so that might be an idea for something to utilize for outreach. 

The Board of Director Guidelines and Employee handbook forbid the use of social media. This is something that we will be visiting about with the new Board of Directors. The dynamics of the Board have changed drastically since this rule was put into place (years ago), so it could be the new Board is willing to take that suggestion.

Barbara B:

As far as the attorneys’ fees goes is he on retainer?  I would imagine so rather than hourly.  That would probably be the smartest way to keep an attorney handy.

KWSC’s attorney is not on retainer, as he does not require a retainer since we are a non-profit.

When we moved into Kempner area in 1988 in order to receive water service from Kempner water, we were told that we had to pay a fee which was ok wed never had to do that before, but we were retired military too.  So, and the fee we were charged they were saying it was for a membership fee because they’re a co-op. Now I understand that it’s no longer stated that Kempner water is a co-op, so I’d like to know when that was changed.  We were told by the water department that it was a co-op, I know it’s on the website, but anyone running the website can go in and edit it and put whatever dates but when we moved here in 1988 it was a co-op.  We didn’t buy a meter we paid a co-op membership fee, and we were told at that time since it is a co-op, we were supposed to receive a share of the profits which never happened.  So, now I understand it’s on the website that it’s not profit sharing because it’s now non-profit after it, it wasn’t at the time. 

KWSC was originally incorporated in 1973 as a non-profit corporation.

A Co-op and non-profit organization differ in organizational structure and are incorporated by different state statutes. Both entities exist for the primary purpose of benefiting their members rather than shareholders, however they have different rules and legal requirements. The primary law applicable law to KWSC is codified as Texas Water Code, chapter 67.  That law allows KWSC to distribute profit to its members but prohibits such distributions if the corporation has unpaid debts (TWC §67.008(c).  KWSC has been indebted since it was created, remains indebted, and will remain indebted for the foreseeable future, so KWSC has never paid dividends and probably never will.

Synetta P: Two things.  First I want to know when we are going to see a relief in our bill yeah I didn’t tone down my water went down and my bill was a little less but it’s still close to my electric bill and I have a big issue with that and secondly I understand that Kempner started with two people and a well and all this other history but time has changed and I believe that when you get over your head, I don’t know everything, that sometimes you need to step aside and let something bigger or someone bigger take over. This is crazy I shouldn’t be paying $200 for water and it’s just me and my spouse I shouldn’t.  I don’t have no leaks you guys already came out there and checked I don’t have no leaks, so it’s like Killeen cove two different cities but we are right beside them and there not in the same stages and all I’m reading is we still in stage 4 and we going to stay in stage 4 and then soon after we get out of stage 4 y’all going to increase the water y’all going to increase the amount of what we paying in water when we already paying a lot.  So, when are we going to get relief? Have y’all even thought about maybe it’s time for y’all to turn it over to maybe connect with Killeen or Cove so we can get some relief because I find this to be ridiculous, I don’t know everything I don’t know how it works behind the scenes I don’t know what y’all do I’m not downplaying what y’all do but sometimes you got to throw the towel in and let somebody else come in so the people can get some relief.  Because I know I’m feeling it in my pocket and I’m retired military I know y’all probably feel it, I don’t know y’all’s pockets, but I know my pocket and my pocket is not happy when I have to pay that water bill, going from $70 to $200 that’s a big jump and I’m on a fixed income too.  So, I want to know have y’all thought about having somebody else to take over and connect with cove or connect with Killeen so you can relieve my pocket and I guess y’all’s pocket too.  I don’t mean to be disrespectful, but my grandmother and grandpa taught me that when you’re in over your head you either sink or you swim and right now y’all causing me to sink and I want to swim, and I can’t swim but I’ll wear a life vest.  I just want to know. 

KWSC is a member owned non-profit utility and all operational costs, loan payments, compliance upgrades, and repairs to aging infrastructure are funded by our members through the base rate and cost of water. Our rates must be high enough to maintain operations and deliver water to all our members.

KWSC’s goal has always been to keep rates as low as possible, while still maintaining our infrastructure, remaining in compliance, and providing continuous, quality water to our members. The costs associated with transmitting millions of gallons of water through over 400 miles of aging pipe is not cheap. No one else could do it any cheaper.

A little bit of history…Years ago, KWSC was approached by another entity who was interested in purchasing the entire system. After months of discussion, presentations, and informational meetings, the KWSC Board voted against selling. The main reason for declining the offer was because members rates would have doubled under the new management/owner.