In general, the employees and systems of the Corporation were found to be operating satisfactorily. The following steps have been/are underway to improve the operation:

The Board concluded that it was more involved in day to day operations than necessary. The Board feels that the membership should be further encouraged to take an active interest in the operation of our Corporation. It was concluded that Board meetings should be changed to one meeting per month, and the time moved to 7 pm on the second Tuesday of each month. The Board felt that this would allow more people to attend.

The Board members were scheduled to receive training in the requirements of the “Open Meeting Act” and “Open Records Act” on April 27, conducted by the Corporation Management, but the training DVD failed. This training will be rescheduled as soon as a new DVD can be obtained

The shop building has been cleaned and reorganized, and a safety audit performed. Weekly safety meetings have been resumed, as part of the staff meetings to help eliminate accidents and clarify the accident reporting process, if an accident should occur. While work related accidents have not been a serious problem, it is important for any Corporation and its staff to remain cognizant of potential safety risk to prevent accidents becoming critical.

The plant operation has been reviewed and steps have been taken to return capacity to the rated 1.4 million gallons per day. The clarifiers have been inspected, cleaned and one has been painted. The filters are being cleaned to restore their efficiency. The capacity of the pump in the water well near the pump station on the Llano River is being evaluated to determine its maximum capacity. A flow control valve has been added to the front of the plant to allow operation of the lake pump within its rated range. A bentonite feed system has been added at the clarifiers to reduce required residence time. The copper sulfate feed has been moved to the front of the process to improve mixing. In 2006, on July 4, the Corporation delivered over 1.4 million gallons of water per day. Without the additional well capacity, the Corporation would not have met the demand. It is anticipated that demand will be at least that high this year. We want to be prepared.

The Corporation has a contract with LCRA to deliver up to 750 acre-feet of water per year from the lake. Under the contract, the Corporation must pay for the water we take at $126 per acre foot, and pay a “reserve charge” of 50% of that amount for any water less than the contracted amount or 200% for any water above the reserve amount. We must manage water production from wells to assure that the Corporation takes delivery of just the reserved volume of water. Water from wells that require less treatment than lake water is not “associated” water. Therefore, water from the wells is not regulated by LCRA.

Lake water requires more treatment and more chemicals, especially during the recent rains. Therefore it causes more operational cost than well water. However, the well water contains more dissolved solids. We continue to manage use of well water to blend with lake water to keep turbidity and dissolved solids within acceptable levels, and to minimize the cost of lake water. We are evaluating the possibility of increasing well water capacity by adding larger pumps. Recently the Kingsland Ranch well capacity was increased to 50 gallons per minute by installing new well pumps.

The training status of each employee of the Corporation and the skills needed for the operation have been reviewed. Steps have been taken to have employees attend classes as needed for today’s operations, and tomorrow’s succession needs. Employees have recently attended customer service and operations classes to increase their knowledge and certifications required by TCEQ and the Corporation.

The Corporation is cooperating with KMUD to share the cost of updating the maps of our systems. The routing and sizes of all lines is being charted. The location, type and size of all valves, lines and fire hydrants is being noted. Easements are also being reviewed. The intent is to use results of this work to know what we have, to identify any easement problems to be corrected, to evaluate the capacity of each part of the system, and to identify any locations where capacity improvements are needed, and what is required for increasing capacity.

Records of use and maintenance of the Corporation vehicles have been reviewed, and are being computerized to allow better tracking and management. A policy for purchase of new equipment will be established in the near future.

Projects are being reviewed. The Lookout Mountain West project to meet the Corporation’s contractual obligation to supply water to the new development is the first priority. In October 2006, the Corporation entered into an agreement with the developer to install an extension of an existing line and install a pressure tank and pump station to serve the development. This project is behind the agreed schedule. The existing 4-inch line, which runs parallel to highway 1431, will be extended under the cove of the lake, along the railroad right of way, east along our easement to 1431, and under the road to the new development. The route of the line has been surveyed, the piping is being designed, a study is underway to determine the incremental cost of a 4-in extension versus a 12-inch extension, and the cost estimate is being updated. The plan was to move equipment from an unused pump station on 1431 to the new development. Capacity and serviceability of that equipment is being checked and the cost effectiveness of moving the equipment is being determined.

The Grant to install the two miles of six inch line along Indian Trails to service 26 first time services is being pursued. Duane Stueven, Llano County Commissioner, Bill Fry, General Manager and Gandolf Burris, Grants Development Inc. attended a meeting April 13 with the Council of Government, the State’s department that administers grants, to present the need for the approval of the grant. Out of 33 grant applications, our grant application was ranked 10th. Only 16 grants will be awarded and it looks like that we will be awarded this grant.

Required plan approvals for the new water plant are being aggressively pursued with the TCEQ. The Board is moving to review the design, capacity, schedule and cost of the new plant. Projected capacity needs of the system are also being reviewed in light of the new plant schedule of completion. We will consider phase construction or come up with alternatives to modify the existing water plant, if needed to meet capacity needs.

Review of the financial processes showed that the requirement of Board Approval for expenditures over $1000 was too restrictive and did not allow the General Manager to effectively conduct day to day operations and handle emergencies. The Board approved increasing the limit on the General Manager’s approval to $10,000 and with Infrastructure Committee approval from $10,000 to $25,000. Higher expenditures will continue to require Board Approval. Three estimates will continue to be obtained for all non-routine expenditures, and expenditures over $25,000 will continue to require public bidding.

The “approval for payment” process has been modified so that the person receiving goods or service signs the invoice indicating receipt, the General Manager approves for payment, and Mona Wilson and Preston Mason sign the checks. Tying receipt and payment together avoids the possibility of paying for goods not received or double payment. Further, arrangements have been made for Linda Raschke and Bob Bender to be signatories on the working bank accounts in case either Mona Wilson or Preston Mason was unavailable for any reason.

The budget for 2007 is being amended to better reflect the changes in expenses that have occurred in the first six months.

Credentials of Mike Center, the CPA who has performed our annual audit, and the process used for the audit were reviewed. Mr. Center was found to be well qualified to perform the audit, and the process to conduct the audit is fully compliant with General Accepted Accounting Principles. Further, it was concluded that the financial status of the Corporation at the start of the new Board’s term was appropriate. A review of the books effective March 30 will be considered by the Board.. The cost to conduct the review should reduce the cost of the required annual audit and is therefore considered a reasonable business expense.

The Public Funds Investment Act, Chapter 2256 of the Texas Government Code, which controls how local governments and non-profit corporations may invest idle money, was reviewed. The Corporation’s investment policy was also reviewed. The differences were noted and our lawyer, Gwen Webb, was asked to compare the requirements of the two documents. An investment advisor will be consulted to allow the Board to assess the relative risks of investments allowed by law. To comply with the law, the Corporation’s investment policy is to be reviewed annually, and the Treasurer and Investment Officer are to attend a 10-hour training course every two years, as required by the Act. An updated investment policy for the Corporation will be proposed to the Board. The objectives are to keep the principle funds secure, having the needed liquidity and obtaining the best interest rate available to produce the highest possible yield on the Corporation’s investments. Local banks will be given opportunity to continue serving the Corporation, within these objectives. Preston Mason, your Treasurer, and Mona Wilson, our Investment Officer, will attend the 10-hour training course.

J. Preston Mason
Secretary-Treasurer