Joint Meeti ngCity of Conroe / SJRA

February 16, 2010

Our presentation today is in four parts:

Who is SJRA?

What is the GRP plan?

What is the GRP contract and why?

How did things get to this point?

SJRA Board Members

R. Gary Montgomery, President Joseph V. Turner, Vice-President Lloyd B. Tisdale, Secretary Mary L. Rummell, Treasurer David Kleimann, Member John H. Stibbs, Member Joseph Stunja, Member

SJRA Boundary

• Montgomery• Fort Bend• Waller• Grimes• Walker• San Jacinto• Liberty

The SJRA has been in business developing water supplies for 73 years.

SJRA HISTORY TIMELINE1945Authority acquired portions of a old WPA Canal System serving ship channel industries and water rights in the San Jacinto River.

Authority acquired additional water rights in Lake Houston over time.

1968Authority began construction of Lake Conroe with a 1/3-2/3 partnership with the City of Houston and the Texas Water Development Board.

1973Lake Conroe was completed and filled.

1975Authority undertook responsibility for owner and operating wholesale water and wastewater treatment operations for serving the Woodlands.

1995Authority began acquisition of water rights in the Trinity River at a cost of $18 million to substitute for San Jacinto River water in serving our ship channel customers and to free up water in Lake Conroe for local Montgomery County use.

Conroe Courier - 1942

SJRA HISTORY TIMELINE (CONT.)2001Authority purchased additional Trinity River water rights at a cost of nearly $8 million.

2005Authority began negotiations with the City of Houston to acquire the right to use Houston’s water in Lake Conroe. Negotiations were protracted and made difficult by competition for that water from interests in Harris County.

March, 2009Authority entered into a Memorandum of Understanding with the City of Houston to purchase water from Houston in Lake Conroe and to enable the Authority to timely complete the countywide Water Resources Assessment Plan on file with the LSGCD.

September, 2009At the urging and with support of elected leadership in Montgomery County, including this City Council, the Authority completed the Houston contract.

• 64,000 afpy pumpage goal• Groundwater reduction to no more

than 70% of 2009 permitted amountby January 1, 2016

• Applicable to all permittees > 10 mgy (LVGUs)

• Applies countywide• LVGUs must submit a Declaration of Intent (DOI) and a groundwater reduction plan (GRP) • DOI – June 1, 2010• GRP – January 1, 2011

Lone Star GCD Requirements

The SJRA’s plan is best because:

It makes provision for the whole County and it treats all LVGUs equally, without distinction, advantage or disadvantage based on size, type, financial ability, location or proximity to Lake Conroe or water pipelines

The SJRA’s plan is fastest because:

it is the only plan that can achieve timely compliance with the Lone Star rules without risking a water shortage in some or all of the County; without delaying the Lone Star rules further and risking further, permanent damage to the groundwater aquifers; and without incurring millions of dollars of additional costs as a result of delay.

The SJRA’s plan is cheapest because:

it is based on the lowest cost of water supply available and a non-profit operation, and it minimizes construction, operation and maintenance, administrative and financing costs.

The SJRA has studied numerous alternati ves:

Water sources Plant locations Implementation structures and

organizations Financing mechanisms Delivery points and pipeline routes Preliminary engineering and cost

estimates

Differences from Harris County:

City of Houston unwilling to deliver treated water to end users

Conversion driven by land subsidence

Conversion required in specific geographic areas at different times

SJRA Offers a Turnkey Solution:

Necessary organizational structure Proven record of performance and

impartiality Planning, technical and financial

resources Eligibility for state and federal financial

assistance Able to leverage over-conversion concept Able to minimize distribution lines Centrally-located raw water supply Centrally-located treatment

SJRA Offers a Turnkey Solution:

Eliminates geographical or political influences and unnecessary costs of additional bureaucracies

Maximizes advantage of location of Lake Conroe

Distributes surface water only where needed

Achieves lowest unit cost Coordinates compliance with LSGCD

rules

GRP HISTORY TIMELINEJune, 2001LSGCD was created by local legislation as the groundwater regulatory authority for all of Montgomery County.

November, 2001Montgomery County voters confirm and approve creation of LSGCD.

June, 2004LSGCD completes nearly 4 years of preliminary studies and begins preparation of its District Regulatory Plan and related rules.

December, 2006LSGCD adopts its Phase I rules establishing January 1, 2015 as the date for 30% reduction of groundwater usage countywide.

January-June, 2007LSGCD proposed legislation to acquire power to impose “disincentive” fees to implement and enforce compliance with its rules. SJRA supported the LSGCD legislation and proposed a uniform countywide groundwater reduction plan supported by “pumpage fees” to be collected and imposed by LSGCD. Legislation fails.

GRP HISTORY TIMELINE (CONT.)February, 2008LSGCD adopts Phase II-A rules requiring a Water Resources Assessment Plan (WRAP) by all LVGUs by March 2, 2009, to demonstrate how compliance will be achieve by January 1, 2015.

March-June, 2008SJRA contracts with 201 of 203 LVGUs in the County, including the City of Conroe, to prepare and file a countywide WRAP.

June 2008-March 2009SJRA prepares countywide WRAP using both SJRA and Houston water in Lake Conroe as a source and including uniform pumpage fees and overconversion of densely populated areas of the County.

January-March, 2009SJRA prepares legislation in consultation with local leaders, including Judge Sadler and Mayor Melder, to acquire legal authority to impose pumpage fees in support of a countywide GRP.

GRP HISTORY TIMELINE (CONT.)March, 2009SJRA concludes Memorandum of Understanding with the City of Houston to purchase all of Houston’s water in Lake Conroe for use by WRAP and GRP participants.

SJRA timely files completed WRAP with LSGCD

SJRA gains public support of City of Conroe and Mayor Melder for proposed legislation and plan.

June, 2009SJRA legislation fails to pass. SJRA announces it will go forward with GRP contracts to implement the GRP plan.

July, 2009LSGCD proposes its Phase II-B (final) groundwater reduction rules with the same deadlines and reduction requirements as Phase II-A.

August 17, 2009Mayor expresses support for Judge Sadler’s Water Summit.

September 28, 2009SJRA plan is presented at the Water Summit and is broadly supported.

(“GRP CONTRACT”)

Contract for Groundwater Reduction Planning, Alternative Water Supply, and Related Goods and Services

Key elements of GRP Contract: Provides all essential tools to implement a

countywide compliance solution Reserves Lake Conroe for GRP participants Commits SJRA to uniform raw water rate Commits SJRA to make Houston water

available at actual cost Commits SJRA to non-profit operation of GRP Commits SJRA to lowest rates consistent

with good management practices

Key elements of GRP Contract: Commits SJRA to additional open

meetings, open records, and audit requirements

Commits SJRA to additional budget and rate reviews

Commits SJRA to periodic expert review of raw water rates

Establishes an Advisory Committee Commits SJRA Woodlands Division to

same costs and same requirements as other LVGUs

GRP HISTORY TIMELINE (CONT.)October 16, 2009SJRA water purchase contract with the City of Houston is finally executed and delivered.

November 2, 2009SJRA delivers confidential draft of GRP contract to Conroe

November 10, 2009LSGCD finalizes Phase II-B rules and extends compliance deadline to January 1, 2016, with a required Declaration of Intent (DOI) on how each LVGU will achieve compliance by June 1, 2010.

November 12, 2009SJRA schedules and announces GRP meeting with all interested parties at the Lone Star Convention Center on January 14, 2010, to present and discuss the GRP contract.

GRP HISTORY TIMELINE (CONT.)November 23, 2009First meeting of Conroe and SJRA representatives on the GRP contract. Mayor Melder expresses his concern about “representation” of Conroe in the decision-making process and asks the Authority whether it will sell raw water to the City of Conroe if it does not participate in the GRP plan.

SJRA answers that it cannot do so and remain consistent with its commitment to all other GRP participants to reserve all available water in Lake Conroe for their use and advises the City that is has similarly declined to do so with both The Woodlands and Walden MUDs.

December 11, 2009SJRA receives 7 pages of detailed comments on the GRP contract from the City’s counsel.

December 15-17, 2009Conroe counsel and SJRA counsel discuss GRP contract and Conroe comments for three full days.

December 21, 2009SJRA counsel delivers revised GRP contract to Conroe, together with a detailed explanation of each revision and each response to Conroe’s initial comments and a request for suggested language for compromise on issues not completely accepted by SJRA.

GRP HISTORY TIMELINE (CONT.)December 23, 2009GRP contract and summaries distributed to all LVGUs in same form as revised Conroe draft.

December 23-February 5, 2010No further comments, suggested language changes or communications from Conroe’s representatives.

January 14, 2010SRJA holds GRP meeting to present and discuss GRP contract and announces comments will be received on the contract until March 1, 2010. Conroe representatives offer no proposed changes but make public statements that Conroe feels “threatened” by SJRA’s response to his direct question, that the SJRA Board of Directors is not sufficiently “representative” or “accountable” and that a regional water authority is needed.

January 26, 2010SJRA request a joint meeting between its Board of Directors and the City Council of Conroe to reopen communications on the GRP Contract.

GRP HISTORY TIMELINE (CONT.)January 28, 2010Conroe City Council agrees to a 30-day postponement of its delay request to the LSGCD.

February 4, 2010SJRA receives a letter of inquiry from Senator Robert Nichols.

February 5, 2010SJRA receives Conroe counsel’s letter repeating Conroe’s concerns and making an Open Records Act request for documents from SJRA , but making no suggested changes.

February 9, 2010SJRA delivers response to Senator Nichols and all LVGUs.

February 10, 2010SJRA receives Mayor Melder’s letter asking responses to a series of questions answered in SJRA’s response to Senator Nichols and proposing an “administrative agency.”

(“GRP CONTRACT”)

Contract for Groundwater Reduction Planning, Alternative Water Supply, and Related Goods and Services

Questi ons and Answers