2017 July – DUWA Board Meeting Minutes

DOWNRIVER UTILITY WASTEWATER AUTHORITY
JULY 13, 2017 MEETING MINUTES

Taylor City Hall City Council Chambers

1. Roll Call and Introductions
DUWA Chairman Rick Sollars called the meeting to order at 9:08 AM, and asked for the roll call to be taken. At the time of the Roll Call, voting representatives were in attendance from 11 communities: Allen Park, Belleville, Brownstown Township, Ecorse, Lincoln Park, Riverview, Romulus, Southgate, Taylor, Van Buren Township, and Wyandotte. Chairman Sollars announced that a quorum (at least 7 members) was present. The River Rouge Representative subsequently joined the meeting during the discussion of Agenda Item 5c. No Representative was in attendance from Dearborn Heights.

2. Approval of Agenda
Copies of the Agenda were made available prior to the meeting (Attachment 1). Motion by Bill Matakas (Allen Park) and seconded by Kerreen Conley (Belleville) to approve the Agenda as presented. Motion passed unanimously.

3. Approval of Minutes from June 8, 2017 Board Meeting
Copies of the meeting minutes from the June 8, 2017 Board Meeting were distributed by email prior to the meeting (Attachment 2). Motion by Kerreen Conley (Belleville) and seconded by Doug Drysdale (Riverview) to approve the June 8, 2017 Board meeting minutes. Motion passed unanimously.

4. Update re: Sinkhole near Wick Road and Middlebelt Road
DUWA Secretary Dick Hinshon reported that the County is preparing a Purchase Order which will cover all of the additional out-of-scope work performed by the Contractor to repair the Sinkhole near Wick Road and Middlebelt Road. The total cost of the work is expected to be slightly less than $500,00 including the soon to be installed CIPP liner in the downstream pipe sections, plus the Wayne County Force Account charges. Installation of the CIPP liner will proceed once the County issues the amendment to the Emergency Purchase Order to cover that work.

5. Status Report on System Transfer
DUWA Attorney Jim Fausone distributed a revised Transaction Calendar (Attachment 3) showing that some slippage on the dates for various action items. However, he noted that he has been in regular telephone contact with Wayne County representatives to discuss issues pertaining to the Definitive Agreement, and expressed optimism that a revised draft Agreement will be forthcoming in the near future.

Mr. Fausone distributed a table summarizing the status of DUWA Community approvals for the Stipulated Amendment (Attachment 4), and noted that it appears that all 13 Communities will have approved the document in early August. Once all 13 approvals are received, he will work with Wayne County to secure County approval and then file a motion seeking approval from U.S. Federal District Court Judge Sean Cox.

Mr. Fausone reported that the next meeting of the Legal Committee has been scheduled for August 4, and the agenda for that meeting includes discussion of proposed new Bylaws for DUWA, as well as a proposed Amendment to the Articles of Incorporation and the Master Bond Ordinance that is being prepared by Bond Counsel (Dykema Gossett). He noted that the individual Communities will eventually need to approve the Bylaws and the Amended Articles of Incorporation. The Master Bond Ordinance does not need Community approval, but it may be appropriate to provide the Ordinance to City Councils and Township Boards as an informational document. Most Community Representatives indicated a preference for bundling the DUWA-related items so they can be presented to Councils as a package rather than a series of sequential items over several months.

DUWA Bond Counsel Jim Kiefer (Dykema Gossett) summarized the Table of Contents for the proposed Master Bond Ordinance (Attachment 5) which was provided to the Board as part of the pre-meeting packet. Mr. Kiefer noted that a prelimininary draft of the full Master Bond Ordinance has been prepared and will be presented to the Legal Committee for review at the August 4 meeting, after which it will be scheduled for approval by the DUWA Board at the August 10 monthly Board Meeting.

DUWA Secretary Dick Hinshon indicated that he recently issued an authorization to S&P Global on behalf of the Authority in response to their letter dated June 20, 2017 (Attachment 6) to prepare a credit assessment for DUWA. That evaluation is now underway, and DUWA’s Financial Advisor (PFM Group) will be interfacing directly with S&P Global to ensure timely completion of that work.

DUWA Financial Advisor Nate Watson (PFM Group presented an analysis and recommendation regarding the selection of a Bond Underwriter for the issuance of the Revenue Bond which will finance the acquisition of the System by the Authority. These documents (Attachments 7 and 8) were included as part of the pre-meeting packet already provided to the Board. Mr. Watson indicated that PFM Group is recommending that Bank of America Merrill Lynch be retained by the Authority as Bond Underwriter based on various factors including the excellence of the firm’s proposal, the comparatively low cost and the overall experience and qualifications of the project team.

It was noted that Bank of America Merrill Lynch previously assisted the City of Allen Park on a bond underwriting activity, and a question was raised as to whether that posed a conflict of interest with respect to the upcoming work for DUWA. Mr. Fausone and Mr. Watson noted that it is often the case that a firm will have had prior work of this nature for one or more DUWA members, and that this does not create a conflict of interest or a reason for rejecting the firm’s Proposal. Motion by Bill Matakas (Allen Park) seconded by John Zech (Southgate) to accept the recommendation of the Financial Advisor and retain Bank of America Merrill Lynch to serve as the Bond Underwriter for DUWA’s revenue bond. Motion passed unanimously.

Attorney Fausone reported that he has had several discussions with representatives from Wyandotte and Riverview regarding the establishment of an escrow account with the Authority for their ongoing O & M costs to the Downriver System. Both Communities have for some time been withholding payment to the County due to ongoing disagreements on various issues relating to the County’s management of the System and disclosure of financial information. Mr. Fausone indicated that it will be important to demonstrate to the credit agencies and prospective bond buyers that the System is solvent and that the member Communities are paying their share of System costs. The intent of the proposed escrow account is to demonstrate that the “Receivable” currently being shown by Wayne County is not a material defect that would impede the issuance of a favorable credit rating.

Based on some preliminary discussions with Wayne County staff, it is understood that the County does not oppose the establishment of an escrow account as the repository for the Wyandotte and Riverview O & M charges. A proposed escrow account agreement is being drafted by the DUWA Attorney, and this will be discussed with the two Communities. DUWA Secretary Dick Hinshon summarized the analysis comparing current and future O & M costs from Wayne County to the projected DUWA/Veolia costs after the System is transferred. This document (Attachment 9) was included as part of the pre-meeting packet distributed to the Board. He pointed out that the Wayne County costs shown on the analysis include some expenses such as Pension and OPEB liabilities and Capital Improvements which will be incurred by the Communities if the System transfer does not go through, although the current rate being charged by the County does not include these expenses. The analysis shows substantial annual savings are achievable with the amount expected to be in the $4.5 million range. These savings are likely to be sufficient to maintain “rate neutrality” although that determination will be affected by the interest rate that is established for the upcoming bond sale.

Attorney Fausone pointed out that the O & M cost comparison does not address future capital improvements for the System, and it is inevitable that major capital expenditures will need to be undertaken in the near future. The pre-meeting packet included a document (Attachment 10) which clarifies the expectation that future capital improvements will need to be financed, including some major projects as described on the 20 Year CIP that was prepared in 2014 as part of the last SRF Loan Application.

6. Selection Committee Report re: New System Manager
DUWA Secretary Dick Hinshon presented the Selection Committee’s recommendation (Attachment 11) to issue a new Request For Proposals (“RFP”) (Attachment 12) as the proposed mechanism to retain a consulting firm to serve as the new DUWA System Manager. He explained that the Selection Committee was convened to discuss options after several DUWA Community Representatives contacted him after the June 8 Board Meeting and advised that they would not support entering into a new professional services contract with Kerreen Conley and Firooz Fath-Azam for various reasons. The DUWA Articles of Incorporation require at least 66% of the weighted vote to approve a new professional services contract, and it became clear that the Conley/Fath-Azam proposal would not be approved.

Several Board Members questioned whether it was premature for the Selection Committee to recommend a new RFP since the Board has not voted to reject the Selection Committee’s prior recommendation. In response, several Community Representatives explained their rationale for not supporting the Conley/Fath-Azam proposal, and it was pointed out that the new Selection Committee recommendation was developed with the intent of expediting the process so that the Authority can move quickly to secure a new System Manager.

Discussion regarding the RFP and the new Selection Committee recommendation focused whether the consulting firm who is eventually hired to serve as System Manager should be allowed to also undertake future design work on new capital improvements for the System. Mr. Hinshon agreed to revise the RFP to state that the Board may preclude the System Manager consultant from undertaking future design work for the System if it determines that this would constitute a conflict of interest. It was also noted that some firms who submit a Proposal to serve as System Manager may also be engaged in work for one or more DUWA Communities. The DUWA Attorney will assess this situation and provide input to the Board as to whether such a situation would or would not constitute a conflict of interest.

Motion by John Zech (Southgate) seconded by Roberto Scappiticci (Romulus) to authorize the Secretary to release the RFP to obtain proposals from consulting firms to provide System Manager services to the Authority. Motion passed by a vote of 11 – 1, with Ecorse voting No. Tim Sadowski (Ecorse) noted that he does not support the RFP as written because he perceives the System Manager function to be a full time effort.

7. Treasurer’s Report
DUWA Treasurer Doug Drysdale presented the Treasurer’s Report which was included in the pre-meeting packet. This included the status of Community payments (Attachment
13), the Authority’s Revenue and Expenditure report and the updated DUWA Balance Sheet Report (Attachment 14).

He noted that several invoices have been received including a bill from Hinshon Environmental Consulting in the amount of $8,830 for work performed in June, and a bill from Fausone Bohn in the amount of $10,371.66 for work performed in May (Attachments 15 and 16). Motion by Jim Taylor (Van Buren Township) and seconded by Bill Matakas (Allen Park) to pay these invoices. Motion passed unanimously.

8. Public Comment
No issues or concerns were raised as part of the Public Comment agenda item.

9. Other Business
Chairman Sollars pointed out that the pre-meeting packet included a June 23 letter from DUWA Secretary Dick Hinshon announcing his retirement as of September 30, 2017 (Attachment 17). Motion by Bill Matakas (Allen Park) seconded by John Zech (Southgate) to receive and file Mr. Hinshon’s letter. Motion passed unanimously. There were no additional items brought forth for consideration as “Other Business” items.

10. Next Meeting Date
Chairman Sollars reminded the Board that the next regularly scheduled DUWA Board meeting Is August 10, 2017 (9:00 a.m. Taylor City Hall).

There being no other business, Chairman Solars announced that a motion to adjourn would be in order. Motion by Doug Drysdale (Riverview), seconded by Jim Taylor (Van Buren Township) to adjourn the meeting. Motion passed unanimously at 10:50 AM.

Meeting Minutes Prepared by:
Richard Hinshon
DUWA Secretary
July 31, 2017

Attachments
1. Meeting Agenda
2. June 8, 2017 Board Meeting Minutes
3. Revised Transaction Calendar dated July 13, 2017
4. Table dated July 10, 2017 showing Community approvals of Stipulated Amendment
5. Master Bond Ordinance Table of Contents
6. June 20, 2017 letter from S&P Global requesting authorization to undertake credit
assessment for DUWA
7. PFM Group memo dated July 5, 2007 re: proposed Underwriter Recommendation
8. PFM Summary of Bond Underwriting Services Proposals
9. Analysis dated June 16 comparing Wayne Co/DUWA costs for System Operation
10. June 30 Memo from J Fausone & D Hinshon re: future capital improvement costs
11. Selection Committee recommendation dated June 29, 2017 re: process and
timetable for securing a Consultant firm to serve as the new System Manager
12. Draft Request For Proposals for the System Manager consultant
13. Status Report re: Payments from Communities dated July 6, 2017
14. DUWA Revenue/Expenditure Report and Updated DUWA Balance Sheet
15. Invoice for June 2017 work dated July 5, 2017 from HEC
16. Invoice for May 2017 work dated June 1, 2017 from Fausone Bohn
17. June 23, 2017 resignation letter from R. Hinshon