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THE WOODLANDS TOWNSHIP

Board of Directors Meeting

SPECIAL BOARD MEETING

August 13, 2021

MINUTES

THE STATE OF TEXAS   §

COUNTIES OF HARRIS & MONTGOMERY   §

             The Board of Directors of The Woodlands Township met in regular session, open to the public, on August 13, 2021, posted to begin at 3:30 p.m. The meeting was held in the Board Chambers at the office of The Woodlands Township, 2801 Technology Forest Boulevard, The Woodlands, Texas, within the boundaries of The Woodlands Township.

             
STANDARD ITEMS
             
   1. Invocation / Pledge of Allegiance;

Chairman Gordy Bunch provided the invocation. He then led the Pledge of Allegiance to the United States flag and the Texas State flag.
             
   2. Call meeting to order;

Chairman Gordy Bunch called the meeting to order at 3:32 p.m. and declared that notice of this meeting was posted 72 hours in advance inside the boundaries of The Woodlands Township at the office building located at 2801 Technology Forest Boulevard, The Woodlands, Texas, and posted online at www.thewoodlandstownship-tx.gov. The roll was then called of the duly elected members with all members being present.
Present: Chairman Gordy Bunch; Vice Chairman Bruce Rieser; Secretary Shelley Sekula-Gibbs; Treasurer John Anthony Brown; Director Bob Milner; Director Jason J. Nelson; Director Ann Snyder
Staff Present: Jeff Jones, Monique Sharp, John Powers, Karen Dempsey, Robin Cross, Todd Stephens, Nick Wolda, Palmer Buck
             
   3. Receive, consider and act upon adoption of the meeting agenda;
             
  Motion by: Director Jason J. Nelson moved to adopt the agenda.
  Second by: Secretary Shelley Sekula-Gibbs 



Passed: Chairman Gordy Bunch YES
Vice Chairman Bruce Rieser YES
Secretary Shelley Sekula-Gibbs YES
Treasurer John Anthony Brown YES
Director Bob Milner YES
Director Jason J. Nelson YES
Director Ann Snyder YES
 
             
   4. Recognize public officials;

There were no public officials in attendance.
             
   5. Public comment;

The following individuals provided public comment:
  • Eric Yollick - Sterling Ridge resident; Expressed views regarding incorporation and the COVID-19 pandemic, and requested a delay in placing incorporation on the ballot.
  • Joe Sclafani - Indian Springs resident; Expressed views regarding incorporation and requested a delay in placing incorporation on the ballot.
  • Paul Duey Jones - Grogan's Mill resident; Expressed views regarding incorporation.
  • Ted Stanley - Woodlands resident; Expressed views regarding incorporation and requested a delay in placing incorporation on the ballot.
  • Matt Wadsworth - Panther Creek resident; Expressed views regarding incorporation and requested transparent, detailed and non-biased information regarding incorporation be provided to residents.
  • Nathan Alman - Grogan's Mill resident; Expressed concerns regarding the Grogan's Mill shopping center.
  • Mark Unland - Expressed views regarding incorporation.
  • Matthew Hoffman - 122 Chorale Grove Court; Expressed views regarding incorporation and requested a delay in placing incorporation on the ballot.
  • Charlie Adams - Expressed his views regarding incorporation and requested a delay in placing incorporation on the ballot.
             
REGULAR AGENDA
             
   6. Receive, consider and act upon an update on EMS services in The Woodlands (as requested by Director Milner);

Palmer Buck, Fire Chief for The Woodlands Fire Department (TWFD), provided an update regarding the transition of Emergency Medical Services (EMS) in Creekside Park. He provided a map showing all Emergency Service Districts (ESDs), including The Woodlands Township and the City of Conroe, that provide fire services within Montgomery County; a map showing the fire ESDs surrounding The Woodlands; maps of Fire ESDs and EMS ESDs in Harris County; and a map of the EMS ESDs along Creekside Forest Drive.  Chief Buck then shared information regarding the current Montgomery County Hospital District (MCHD), Harris County ESD 11, and Harris County ESD 8 tax rates. 

Chief Buck reported that beginning at 7:00 a.m. on September 1, 2021, ESD 11 Mobile Healthcare will replace Cypress Creek EMS.  ESD 11 will staff 28 ambulances; ten 24-hour units and 18 peak-time units. There will be a 24-hour ambulance station at TWFD Station 7 located at 26722 Kuykendahl. He shared that that, due to the COVID-19 pandemic, there has been a huge increase in EMS calls, which has stressed both EMS and hospital systems. These stressed systems have ultimately caused extended response times. There have also been issues with Cypress Creek's ability to retain employees to staff the needed ambulances. TWFD personnel are working with dispatchers and MCHD to try and find ways to improve the response times. 

Board discussion followed. 
             
  Motion by: Director Bob Milner moved to accept the report.
  Second by: Director Ann Snyder 


Passed: Chairman Gordy Bunch YES
Vice Chairman Bruce Rieser YES
Secretary Shelley Sekula-Gibbs YES
Treasurer John Anthony Brown YES
Director Bob Milner YES
Director Jason J. Nelson YES
Director Ann Snyder YES
 
             
   7. Receive, consider and act upon a review of the Incorporation Study Financial Model and determination of a proposed maximum initial tax rate related to the Incorporation Planning Study;

Monique Sharp, Assistant General Manager of Finance and Administration, provided information regarding the incorporation study financial model.  Ms. Sharp reported that the 2022 Base Budget was reviewed by the Board during the July 23 and 24 Board Planning Sessions, as well as the July 28 Regular Board of Directors Meeting.  She reported that the Budget Initiatives were reviewed by the Budget Task Force during their August 5 meeting and will be reviewed by the full Board during the August 16 through 18 Budget Workshops. She then reported that a preliminary review of the Incorporation Initiatives was conducted during the June 23 Regular Board of Directors Meeting.

Ms. Sharp shared that, based on the certified tax roll, the certified taxable property values for 2022 are $21.7 billion, an increase from $21.1 billion the previous year.  She reported that the increase in values is due to revaluation of properties of 2.3% and an increase due to new properties of 1.1%, for a total increase in values of 3.4%.

Ms. Sharp reported that the Montgomery County Tax Assessor calculated and certified the current tax rate as $0.2231 per $100 of valuation and the no-new-revenue rate at $0.2181, a half penny lower than the current rate. The voter approval rate was calculated and certified at $0.2325, which consists of $0.2253 (Maintenance and operations rate) and $0.0072 (unused increment of the previous tax year).

Board discussion followed.

Ms. Sharp provided a chart depicting the amounts of the components of the current tax rate. Ms. Sharp reported that each $0.01 of tax rate is equal to $2.183 million in revenue. Regarding the no-new-revenue tax rate, Ms. Sharp shared that, should the tax rate decrease by half a penny, the decrease would result in a $22.95 annual reduction in taxes on an average value home worth $459,000.  She reported that the Township's reduction in revenue, in relation to that half penny decrease, would be about $1.1 million.

Board discussion followed.

Ms. Sharp provided information regarding the Township's five-year plan assumptions, which looks out to year 2025, or year four of incorporation should the Board decide to place incorporation on the ballot. She reported that the annual growth in taxable property values this year includes 2.3% for property revaluation and 1.1% for new properties.  She reported that assumptions in the five-year plan includes 2% for revaluation and 1% for new properties, for a 3% growth total. The property tax rate in the five-year plan is maintained at $0.2231. Mrs. Sharp advised that sales tax growth is projected at 3% for 2022 and 2.75% for the remaining years.  Hotel tax growth, which does not impact the property tax rate and is used to fund Visit the Woodlands and debt service, is projected at 25% for 2022 and 2023 and 2.5% for 2024 through 2026.

Ms. Sharp reported that, when the Incorporation Study process began, The Novak Consulting Group provided a growth projection for property taxes of 2% annual growth and 3% annual growth for sales and use taxes.  Mrs. Sharp shared that the property revaluation assumption is at 2% in the current incorporation model, which matches the consultant's recommendations. She shared that the original incorporation financial model presented in 2020 included a 1% annual growth for revaluation based on economic conditions that prevailed at that time. She then shared a chart comparing the projected property tax values and revaluation in the original model and in the updated model.

Ms. Sharp shared that the original incorporation financial model included a conservative sales tax growth assumption of 1% due to the uncertainty regarding the impact of the Anadarko acquisition and because there was no historical data to project increased sales tax revenue resulting from the Supreme Court decision on South Dakota vs. Wayfair (Wayfair). She reported that the Wayfair decision, which provided for sales tax revenue generated by internet sales transactions, brought significant sales tax growth to The Woodlands.

Ms. Sharp provided a chart comparing the sales and use tax revenue in the original incorporation financial model with the updated model. She also provided a chart showing the growth in internet sales tax. She then reported that, effective October 2021, a new rule change from the State Comptroller related to retail sales in Texas will likely drive more sales tax revenue to the Township.

Board discussion followed.

Ms. Sharp presented a graph of the consolidated five-year plan depicting anticipated revenue growth from 2022 to 2026 and reported that inflation factors have been built into the model for operating expenses. She shared that the Township maintains a hotel tax reserve of $3 to $3.6 million for economic development projects and a capital replacement reserve to fund projects. 

Ms. Sharp reported that, in 2012, the Board commissioned a 30-year reserve study that evaluated the Township’s assets and determined a valued of over $350 million. Funds placed in reserve funding are utilized to repair or replace assets based on in-house analysis. Ms. Sharp presented information regarding the funding methodology of the capital replacement reserve should the Township incorporate as a city. She noted that, of the 15 reserves maintained, credit rating agencies focus primarily on the operating reserve and the capital replacement reserve.

Ms. Sharp presented the current and proposed funding methods for the capital replacement reserve. She noted that the current funding for the capital replacement reserve is set at 20% of the operating expenses of the general fund and that the Board prefunded the reserve with $2 million to prepare for potential incorporation. She advised that the current balance is $30 million. Ms. Sharp then shared a graph of the operating reserve, pre-incorporation and post-incorporation, and noted that the proposed funding method provides adequate reserves for the base budget and the incorporation model. Next, Ms. Sharp shared that the annual funding of the operating reserve and the capital replacement reserve is planned five years out and then forecasted beyond that to ensure the Township is able to sustain decisions made within the shorter time frame. The $4.25 million annual allocation to the capital replacement reserve would be available to fund both the operating reserve and the capital replacement reserve. 

Ms. Sharp shared that favorable variances of $15 million have been earmarked to the incorporation reserve to fund a potential incorporation. With the consolidation of funds, an additional $5 million that was set aside in a site plan reserve has been more appropriately reallocated to the Incorporation Reserve, bringing the balance to $20 million.

Ms. Sharp reported that the incorporation reserve would provide funding in the amount of $10.2 million for a public works facility and related equipment; and $5.3 million for police vehicles and equipment, leaving a balance of $17 million in the reserve. Ms. Sharp presented a chart with finance options for a police station/municipal court facility that included 20-year or 30-year terms, related interest rates, annual debt service requirements, and potential debt tax rates for each. She stated that, in the original model, it was assumed the cost would be financed over a 20-year period with just under a 2% interest rate and annual debt service of $1.8 million. In the updated model, a 30-year finance term, under the current interest rate of 1.25%, would require an annual debt service of $1.2 million. She further added that, instead of financing $30 million, the Board could utilize $16 million from the incorporation reserve, and finance the remaining balance of $14 million for a 30-year term at the current interest rate of $1.25%. The approximate $500,000 in annual debt service under this option would be offset by savings in the streetscape maintenance contract. Ms. Sharp also noted that issuing bonds would require voter approval. 

Ms. Sharp reported that incorporation would allow the Board to offer tax relief for residents who are over 65 and/or disabled in the form of a property tax ceiling (freeze). While State law allows school districts, cities, counties, and junior college districts to offer a tax freeze, special purpose districts, such as the Township, are not authorized to offer one. Ms. Sharp shared an example that qualifying individuals with property valued at $459,000, at a tax rate of $0.2231, could receive a tax freeze of $1,024 in year one of qualification. In year two, assuming a 2% revaluation and an increase in the property tax rate of $0.2300, property that would otherwise increase to $1,077, would be "frozen" at $1,024. If the tax rate instead decreased to $0.2131, the tax freeze would drop to $998. Ms. Sharp noted that this would have a cumulative effect and, over time, would be a great benefit for seniors and disabled citizens.

Ms. Sharp reported that, in the original incorporation financial model, based on the assumptions and initiatives approved by the Board at that time, the total tax rate determined by the consultants was $0.0286. In 2020, the base budget was at $0.2240. An additional $0.0622 was needed in order to achieve a balanced budget in year four. The components of the $0.0622 tax rate consisted of $0.0439 to fund the incorporation initiatives and $0.0183 to fund a deficit in the base budget in order to achieve a balanced budget. 

Ms. Sharp presented the Incorporation Financial Model depicting how the $0.0622 was derived to balance the budget. She explained that the numbers being presented were from the 2020 budget and based on assumptions decided at that time. Ms. Sharp shared that about $960,000 in additional annual revenue was projected from a mixed beverage tax, which currently goes directly to the state since the Township, as a special purpose district, is not eligible to receive. Ms. Sharp reported that the consultants performed a study of peer cities to determine the amount of franchise fees they collect. It was estimated that the new city would collect $7.176 million on an annual basis. Ms. Sharp reported that solid waste expenses are currently covered in the property tax rate and the Board chose to maintain that method of funding; therefore, a separate solid waste fee was not included in the incorporation financial model. 

Ms. Sharp advised that fines and forfeitures collected by the new city would be used as an offset to pay for court costs. Building permit review expenses are being offset by permit fees, which are projected at $150,000. 

Ms. Sharp noted that the consultants identified three critical positions required for a new city: City Secretary, Risk Manager, and Paralegal. All three positions are already funded in the base budget. A review of public works departments in peer cities determined that responsibilities, such as bridge and shoulder maintenance, would transfer from the county to the new city. She reported that shoulder maintenance and improvements costs are incremental to tasks already performed by the Township. She advised that $6.8 million is currently in the base budget for public works expenses. 

Currently, law enforcement operating expenses of approximately $14 million are in the base budget for contracted, enhanced law enforcement services. 

Regarding consolidated budget revenues and operating expenditures post incorporation, Ms. Sharp presented a graph for years 2022 through 2025, which depicted the total revenues post incorporation, total revenues pre-incorporation, operating expense/EDZ/debt service post incorporation, and operating expense/EDZ/debt service pre-incorporation. 

Ms. Sharp presented the incorporation revenues and expenses for year 4 in the original financial model, which required a $0.0622 tax increase to support net expenses of $13 million. She then presented the update model, which does not impose additional tax rates and has a favorable base budget of $6.7 million, with a net revenue of $109,000. 
 
Ms. Sharp presented a chart comparing incorporation initiatives in the original incorporation financial model and the updated model for year 4 of incorporation. The original model indicated a funding deficit of $13 million, requiring a $0.0622 tax rate increase to balance the budget. In the updated incorporation financial model, a net funding surplus of $109,000 exists, and thus no tax increase from the current tax of $0.2231 is required for the total incorporation initiatives. 

Ms. Sharp presented a chart comparing the components of the undesignated fund balance in the original incorporation financial model and the updated model. The original model noted a $3.8 million deficit in the undesignated fund balance, while the updated model shows a $6.7 million favorable variance. Ms. Sharp noted that the largest contributors to the changes are additional revenues and a reduction in annual allocations to the capital replacement reserve and operating reserve due to a change in funding methodology based on the current funding levels in the reserves. She reported that there was an $8.7 million change in revenues between the two models, of which sales tax accounts for $6.4 million.

Ms. Sharp presented a graph depicting a comparison of the initial maximum tax rate in the original incorporation financial model and the updated model. The original model reported an initial maximum tax rate of $0.2862, while the updated model reports an initial maximum tax rate of $0.2231.

Board discussion followed. 
             
  Motion by: Director Bob Milner moved to approve the updates to the Incorporation Planning Study and the proposed initial maximum tax rate of $0.2231.
  Second by: Secretary Shelley Sekula-Gibbs 



Passed: Chairman Gordy Bunch YES
Vice Chairman Bruce Rieser YES
Secretary Shelley Sekula-Gibbs YES
Treasurer John Anthony Brown YES
Director Bob Milner YES
Director Jason J. Nelson YES
Director Ann Snyder NO
 
             
CLOSED MEETING (if applicable)
             
   8. Recessed to Executive Session at 5:54 p.m. to discuss matters relating to real property pursuant to §551.072, Texas Government Code; deliberation of economic development negotiations pursuant to §551.087, Texas Government Code; discuss personnel matters pursuant to §551.074, Texas Government Code; discuss IT network or critical infrastructure security pursuant to §551.089, Texas Government Code; and to consult with The Woodlands Township’s attorney pursuant to §551.071, Texas Government Code;
             
   9. Reconvened in public session at 6:28 p.m.;
             
   10. Receive, consider and act upon the adoption of an Order to Amend Order No. 018-21 (calling the Directors Election; authorizing contracts for services to conduct the election; and determination of procedure for giving notice of and conducting same) to include a special election on November 2, 2021 for the incorporation of The Woodlands Township district into the City of The Woodlands, as a Type-A general-law city, adopting the maximum initial city property tax rate for the City of The Woodlands, and authorizing the transfer of The Woodlands Township district’s rights, powers, privileges, duties, purposes, functions, responsibilities, the authority to issue bonds,  and the authority to impose taxes from The Woodlands Township district to the City of The Woodlands (with Supplemental Agenda for Adoption of Order Calling Elections);

Note: A record vote was taken on this agenda item.

Township Secretary/Assistant to the President Karen Dempsey reported that the deadline to call a special election for the November 2, 2021 election is on Monday, August 16, 2021. Ms. Dempsey reported that the amended order presented to the Board would amend the order calling directors election that was approved by the Board in July.  She advised that the amended order, through a series of preambles, advises that the Board is authorized to call the election; that the election would be held on a uniform election day; and that the election would be held in the same manner that the Board of Directors election is held. Ms. Dempsey advised that, should the Board choose to proceed with calling an incorporation election, two propositions would be placed on the ballot for residents to consider. Ms. Dempsey then read the ballot language for both Proposition A and Proposition B. 

Director Ann Snyder read a statement regarding incorporation. 
             
  Motion by: Secretary Shelley Sekula-Gibbs moved to adopt an Order to Amend Order No. 018-21 (calling the Directors Election; and authorizing contracts for services to conduct the election; and determination of procedure for giving notice of and conducting the same) to include a special election on November 2, 2021 for the incorporation of The Woodlands Township district into the City of The Woodlands, as a Type-A general law city, adopting  the maximum initial tax rate for the City of The Woodlands, and authorizing the transfer of The Woodlands Township district's rights, powers, privileges, duties, purposes, functions, responsibilities, the authority to issue bonds, and the authority to impose taxes from The Woodlands Township District to The City of The Woodlands.
  Second by: Director Bob Milner 


Passed: Chairman Gordy Bunch YES
Vice Chairman Bruce Rieser YES
Secretary Shelley Sekula-Gibbs YES
Treasurer John Anthony Brown NO
Director Bob Milner YES
Director Jason J. Nelson YES
Director Ann Snyder NO
 
             
DISCUSS FUTURE AGENDA /ANNOUNCEMENTS
             
   11. Consideration of items to be placed on the agenda for next month's meeting;

Director Ann Snyder requested an agenda item to discuss law enforcement options regarding e-bikes.

Secretary Shelley Sekula-Gibbs requested an update from The Woodlands Water regarding Wastewater Treatment Plant No. 1.
             
   12. Board announcements; and;

There were no Board announcements.
             
   13. Adjournment.
             
  Motion by: Director Ann Snyder moved to adjourn the meeting at 6:44 p.m. 
  Second by: Director Bob Milner 

Passed: Chairman Gordy Bunch YES
Vice Chairman Bruce Rieser YES
Secretary Shelley Sekula-Gibbs YES
Treasurer John Anthony Brown YES
Director Bob Milner YES
Director Jason J. Nelson YES
Director Ann Snyder YES
 
_____________________________________
Shelley Sekula-Gibbs
Secretary, Board of Directors

    

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