The Board of Directors (the "Board") of the North Harris County Regional Water Authority (the "Authority") met in regular session, open to the public, on the 2nd day of May, 2000, at the Ponderosa Fire Station, 17061 Rolling Creek, Houston, Texas; whereupon, the roll was called of the duly constituted officers and members of the Board, to?wit:

Alan J. Rendl   - President
Jim Burke   - Vice President
Lenox A. Sigler  - Secretary
Jim Pulliam   - Treasurer
Dwight "Clint" Moore - Assistant Secretary

All members of the Board were present.  Also attending the meeting were  Ms. Mary Jarmon of Myrtle Cruz, Inc., temporary bookkeepers for the Authority; Mr. Joseph T. Wozny of WSBC Civil Engineers, Inc. ("WSBC"), temporary General Manager for the Authority; Mr. Alan Potok of Turner, Collie & Braden ("TCB"); Ms. Barbara Payne of Payne Communications; Ms. Robin S. Bobbitt, Mr. John R. Wallace and Ms. Jennifer M. Dinkins of Winstead Sechrest & Minick P.C.; and Messrs. Andy Johnson and Alan Petrov of Johnson Radcliffe & Petrov L.L.P., attorneys for the Authority; and numerous members of the public.

WHEREUPON, following a notation that notices of the meeting had been duly posted in accordance with law, copies of which are attached hereto as an exhibit, the meeting was called to order.

APPROVAL OF MINUTES

The Board deferred approval of the minutes of April 25, 2000 and April 27, 2000 and the executive session minutes of April 27, 2000 and April 29, 2000 until the next meeting.

PUBLIC COMMENT

There were no public comments presented at this time.

CONSIDERATION OF CONTRACTS WITH CONSULTANTS

President Rendl then explained that approximately fifty (50) applications were received for the General Manager position of the Authority and that two (2) personal interview sessions with various candidates were conducted by the Board.  President Rendl further explained that after three (3) candidates were called back for a second interview on April 27, 2000, the Board determined to engage Mr. Ed Shackelford as the General Manager of the Authority.  President Rendl then introduced Mr. Schackelford as the Authority's new General Manager.

President Rendl then explained that the Board had also conducted a workshop session to review the Requests for Qualifications ("RFQs") submitted for the General Engineering Consultant (the "GEC") for the Authority, and had reached some tentative conclusions on such matter.  It was further noted that revision of the scope of services in the RFQ for the GEC position may be needed.  President Rendl added that as a result of the possible RFQ revision, the Board does not anticipate selecting the GEC for approximately sixty (60) days.  Upon motion by Director Burke, seconded by Director Moore, after full discussion and the question being put to the Board, the Board voted unanimously to authorize the General Manager to revise the scope of services reflected in the RFQ for the GEC contract as may be needed and make recommendations to the Board regarding such revisions.  Director Burke noted that the RFQ will be available to all firms interested in providing GEC services to the Authority.

Upon motion by Director Burke, seconded by Director Moore, after full discussion and the question being put to the Board,  the Board voted unanimously to authorize the General Manager to negotiate an extension to the temporary General Manager/GEC contract with WSBC/TCB for a period of sixty (60) days and any additional temporary contract extensions as may be needed.

President Rendl next explained that during one of the recent workshop sessions, the Board had made the decision to utilize Alexander Engineering, Inc. ("Alexander Engineering") with assistance from Brown & Gay Engineers, Inc. ("Brown & Gay") for the Authority's water reuse reclamation project.  Upon motion by Director Burke, seconded by Director Sigler, after full discussion and the question being put to the Board, the Board voted unanimously to authorize the General Manager to negotiate a professional services agreement for the water reuse/reclamation project with the firms of Alexander Engineering and Brown & Gay.

President Rendl then explained that the Board had decided to have WSBC and TCB prepare the alternative source analysis, not including the water reuse/reclamation portion of such work.  Upon motion by Director Burke, seconded by Director Moore, after full discussion and the question being put to the Board, the Board voted unanimously to authorize the General Manager to negotiate a professional services agreement with WSBC and TCB to provide the alternative source analysis with the exception of water reuse and reclamation portion of such project.

President Rendl next explained that the Board has made the determination to hire an in?house bookkeeper, but will extend the existing agreement with Myrtle Cruz, Inc. ("MCI") until an in?house bookkeeper/office assistance can be hired by Mr. Shackelford.  Upon motion by Director Burke, seconded by Director Moore, after full discussion and the question being put to the Board, the Board voted unanimously to extend the temporary contract with MCI as the temporary bookkeepers for the Authority until such time as the General Manager can hire an in?house bookkeeper/office assistant.

President Rendl next explained that audits of the Authority's books prior to and after January 18, 2000 are necessary and that the firm of Null?Lairson, P.C. ("Null?Lairson") has been selected to perform such work.  Upon motion by Director Burke, seconded by Director Moore, after full discussion and the question being put to the Board, the Board voted unanimously to authorize the General Manager to negotiate an agreement with Null?Lairson to perform an initial audit of the Authority prior to January 18, 2000 and to prepare a partial audit of the Authority from January 18, 2000 to the present.

President Rendl then reported that financial advisors for the Authority have also been selected by the Board.  Upon motion by Director  Burke, seconded by Director Pulliam, after full discussion and the question being put to the Board, the Board voted unanimously to authorize the General Manager to negotiate a professional services agreement with Legg Mason Wood Walker, Inc. as the primary financial advisor for the Authority and with The GMS Group, Inc. for the provision of assistance on day?to?day financial advisory matters of the Authority.

President Rendl then expressed appreciation to Ms. Kathleen Ellison and Mr. Oliver Pennington of Fulbright & Jaworski L.L.P. ("Fulbright"), for their service as the temporary attorneys for the Authority.  President Rendl stated that Fulbright had done an outstanding job in the representation of the Authority.  President Rendl explained that Fulbright had to excuse themselves from representation of the Authority as a result of their disclosure that they are unable to participate in litigation or negotiations regarding the City of Houston.  The Board expressed appreciation for Fulbright's candor in such matter.  President Rendl went on to explain that the firms of Winstead Sechrest & Minick P.C. ("Winstead") and Johnson Radcliffe & Petrov L.L.P. ("Johnson Radcliffe") have been selected to serve as general counsel to the Authority.  Upon motion by Director Burke, seconded by Director Pulliam, after full discussion and the question being put to the Board, the Board voted unanimously to authorize the General Manager to negotiate professional services agreements for general counsel services with Winstead and Johnson Radcliffe.  President Rendl explained that both firms have been very active in annexation and groundwater issues, and the Board is confident that such firms will assist the Authority in achieving its goals.  Ms. Bobbitt was then asked to join the Board at the table.

Upon motion by Director Burke, seconded by Director Sigler, after full discussion and the question being put to the Board, the Board voted unanimously to invite Dames & Moore, Carter & Burgess Inc. and Cobourn Linseisen & Ratcliff Inc. to make presentations regarding the provision of services for the Authority's Geographic Information Systems ("GIS") data collection project at the May 16, 2000 meeting of the Authority.

Upon motion by Director Burke, seconded by Director Moore, after full discussion and the question being put to the Board, the Board voted unanimously to authorize Ms. Bobbitt to negotiate an interlocal agreement with Harris County regarding employee payroll and benefit services.

APPOINTMENT OF REPRESENTATIVES TO ATTEND MAY 8, 2000 GROUNDWATER MEETING IN AUSTIN

President Rendl stated that the Board needed to appoint representatives to attend the May 8, 2000 groundwater meeting in Austin.  President Rendl explained that Metropolitan Water is proposing to transport groundwater from other areas into areas of need as opposed to treating available surface water.  It was then determined that Director Sigler, Mr. Wozny, Mr. Steve Bresnen, and Mr. Shackelford would attend such meeting on behalf of the Authority.

 
PETITIONS FOR EXCLUSION FROM THE AUTHORITY

President Rendl then reported that the Authority had received several Petitions for Exclusion from the Authority, including Petitions from Windfern Forest Municipal Utility District, Harris County Municipal Utility District No. 6, and Harris County Municipal Utility District No. 261.  It was noted that no representatives from such districts were present at the meeting.  President Rendl explained that a typographical error had occurred in the drafting of House Bill No. 2965, the legislative act creating the Authority, regarding exclusion from the boundaries of the Authority.  President Rendl stated that Section 1.04 of House Bill 2965 currently states that a district located south of Beltway 8 or east of U.S. Highway 59 may petition for exclusion from the Authority, and that the sentence should have read that a district south of Beltway 8 and east of U.S. Highway 59 may petition for exclusion from the Authority.  President Rendl further stated that under House Bill 2965, the Board has sixty?one (61) days from the date of receipt of the Petition to consider and act on the Petition.  President Rendl added that the Board has requested that Directors Pulliam and Burke meet with the boards of the districts wishing to be excluded prior to the Authority's deadline for acting on the Petitions.

Upon motion by Director Burke, seconded by Director Moore, after full discussion and the question being put to the Board, the Board voted unanimously to defer action on the Petitions for Exclusion from the Authority.  Director Burke then stated that if it is more cost effective for the City of Houston to serve these districts with surface water, the Authority intends to cooperate in any manner to achieve that goal.

INTERLOCAL CONTRACT WITH NEIGHBORING MUNICIPAL UTILITY DISTRICTS

President Rendl next explained that the Board is currently in the process of drafting an Interlocal Contract to enter into with neighboring municipal utility districts who are either 1) districts with wells or users located outside the boundaries of the Authority; 2) districts with wells located both inside and outside of the boundaries of the Authority; or 3) districts that are currently located outside the boundaries of the Authority that wish to receive the services of the Authority, including participation in the Authority's Groundwater Reduction Plan (the "GRP").  President Rendl went on to explain that it is proposed that the Authority will provide groundwater reduction planning services to such districts in return for which the districts will pay the Authority's pumpage fees on a voluntary basis.  Ms. Bobbitt and Mr. Johnson then recommended that action on such matter be deferred until the May 16th meeting in order to allow them an opportunity to review and complete revisions to the proposed Contract as may be necessary.  The Board concurred with Ms. Bobbitt's recommendation.  Ms. Bobbitt stated that a revised blacklined draft of the proposed Contract will be provided to the Board prior to the May 16th meeting.

CONSIDERATION OF FEES/RULES FOR MUNICIPAL UTILITY DISTRICTS JOINING/REJOINING THE AUTHORITY

President Rendl then explained the need for the Authority to adopt and implement fees/rules for municipal utility districts joining or rejoining the Authority.  President Rendl explained the need to be fair to the present members of the Authority who are paying the Authority's pumpage fees and stated that new districts and well owners desiring to be part of the Authority will be required to pay pumpage fees equivalent to the fees paid by the existing entities since January 1, 2000.  President Rendl noted that such fees/rules would also apply to districts or well owners who withdraw from the boundaries of the Authority and later decide to rejoin the Authority and will include payment of fees from the date they ceased being a part of the Authority to the date of rejoining the Authority, plus late payment fees and interest.

President Rendl further explained that the proposed fees/rules would also apply to newly constructed wells that are located within the boundaries of the Authority or operated by entities wishing to participate in the Authority.  A revised draft of the proposed Fees/Rules for Municipal Utility Districts to Join/Rejoin the Authority is attached hereto as an exhibit.  President Rendl noted that the only entities not covered within the proposed fees/rules are owners of vacant land located within the Authority and stated that the Board intends to have their consultants investigate the Authority's alternatives as to how to account for these properties on a fair and equitable basis.  Ms. Bobbitt and Mr. Johnson then recommended that action on the proposed fees/rules be deferred until the May 16th meeting in order to give the Board and the attorneys additional time to review the matter.  The Board concurred with such recommendation.

CONTRACT WITH GENERAL MANAGER

Upon motion by Director Burke, seconded by Director Pulliam, after full discussion and the question being put to the Board, the Board voted unanimously to authorize the Authority's attorneys to prepare a contract with Ed Shackelford to serve as General Manager of the Authority.

PUBLIC COMMENT

President Rendl next recognized members of the public to present comments and questions to the Board.  Several members of the public suggested assessing the legal fees incurred by the Authority in considering petitions or requests for rejoining the Authority against the entities seeking to rejoin the Authority.

President Rendl next recognized Ms. Pam Allen, who discussed the proposed Chambers Energy Facility to be located near Houston Intercontinental Airport.  Ms. Allen stated that the facility to be constructed will have water demand requirements of approximately 20 million gallons per day.  Ms. Allen questioned the Board regarding their reactions to the construction of such facility and the potential impact on water supplies in the area.  President Rendl stated that he anticipates that the facility will be supplied with water by the City of Houston's Lake Houston Surface Water Plant and noted that the Authority has no regulatory authority over the water usage in this area.  President Rendl further explained that the City of Houston?Lake Houston Surface Water Plant is capable of providing approximately 150 to 200 million gallons of water per day and will be able to be an ample supplier of water to users in the area.

 
COMMITTEE REPORTS

The Board next recognized Ms. Jarmon, who presented the Bookkeeper's Report, a copy of which is attached hereto.  Ms. Jarmon reviewed the Report with the Board and explained that 190 entities within the Authority's boundaries have been billed for the first quarter, with 140 well of such entities paying early to receive the 25% discount.  Ms. Jarmon noted that 50 entities that have not yet paid, of which only 12 of such entities are municipal utility districts.  President Rendl then expressed the Authority's appreciation to those well owners who had paid the pumpage fees early.  Ms. Jarmon then reviewed the expenses and revenues of the Authority and the checks being presented for payment.  Director Moore requested that letters be sent to those entities who still have outstanding payments due from the 1999 billing of the Authority.  Upon motion by Director Burke, seconded by Director Moore, after full discussion and the question being put to the Board, the Board voted unanimously to approve the Bookkeeper's Report as presented and to authorize payment of the checks indicated therein.

The Board then recognized Mr. Wozny, who reported that he and Mr. Alan Potok are currently working on the Authority's grant application to the Texas Water Development Board.  Mr. Wozny also reported that he had recently met with Commissioner Eversole and that the Commissioner had expressed his willingness to be a spokesman on behalf of the Authority before Commissioners Court.

Upon motion by Director Burke, seconded by Director Rendl, after full discussion and the question being put to the Board, the Board voted unanimously to adjourn the meeting.

PASSED, APPROVED AND ADOPTED this the 16th day of May, 2000.
 

 
Secretary, Board of Directors

(SEAL)
 

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