The nonprofit Lakeway MUD, established in 1972, provides water, wastewater and reuse services to the majority of homes and businesses that primarily are within the boundaries of the City of Lakeway and within a portion of the Village of the Hills. Lakeway MUD serves more than 4,000 water customers and nearly 3,000 wastewater customers.
This is not your typical flat land big city with utility taxes buried in city taxes. Lakeway Municipal Utility District (the District) serves over 10,000 people with water, wastewater and reuse water. We cannot and do not obtain wholesale water and wastewater service from a nearby city. We are a full service producer provider. We pay LCRA for our raw lake water. In order to assure we have enough water, we have to pay even more to reserve the water that we do not take. We then have to lift water 300 feet or more out of the lake, treat it and distribute it to our customers around the Lakeway hills. Then we collect and treat wastewater to very stringent standards. Because of the Highland Lakes Rule, we cannot discharge recycled water into the river, or in our case, Lake Travis. We must evaporate it. Being required to do so is an expensive proposition. Because of this we have huge reuse holding ponds, cedar tract irrigation areas and a very innovative landscape reuse irrigation water system. It is not appropriate to compare the District with other utilities that do not have these requirements.
In spite of these challenges, we have one of the lowest rates in the area.
In addition to low rates, relative to our local area, the District’s rates are stable. In 2009, the Board adopted a water rate structure that changed from two volume tiers of $2.50 and 3.50 to a five-tier system with a range of $2.50 to $5.00 to promote water conservation. The 2011 rates include the debt service for the new tank and other capital projects. The table shows the District’s rate history back to 1990.
In FY 2010, the District established a Rate Stabilization Reserve to minimize fluctuation in water rates that result from variable water volume sales during wet verses dry years. That concept and program is available in a separate document.
The District was formed in 1972 and operates under Chapter 49 and 54 of the Texas Water Code. It is governed by an elected five member Board of Directors who serve four year terms.
There are over 850 MUDs in Texas. MUDs enable development around cities. The enabling legislation was created, in part, when cities like Austin would not/could not provide services to develop outlying areas. MUDs usually get water and wastewater service from nearby cities. However, the City of Lakeway does not provide any water services. The Lakeway Municipal Utility District stands alone, specializing in water services. There are five other water utility districts within the City of Lakeway - Water Control Improvement District #17, Travis County MUDs #11, 12, & 13, and Hurst Creek MUD which services The Hills of Lakeway. Not having any water utility responsibility allows the City of Lakeway to focus on other civic issues such as police protection, orderly development, streets, parks, etc.
MUDs are a developer’s tool. Instead of putting in infrastructure and getting investment back through lot sales, which make lot prices much more expensive, MUDs provide developers a vehicle for getting their investment back through the sale of bonds, which are repaid with property taxes. Developers start MUDs by putting some employees in temporary housing within the proposed districts and holding an election. They then control the MUDs, until citizen/homeowners become the board of directors. Some MUDs provide other services in addition to water and wastewater. After a few years, once MUDs mature, the customers gain control of the board.
Most MUDs do not have a staff. They have a Board, and some have a General Manager, but unlike the District, they hire an engineering firm, a law firm and an operating company to manage all aspects of services. The District has always self-managed its services. The employee count has not changed since 2000.
Lakeway began as a real estate development about 48 years ago in 1962. The principals were John Crooker of what is now the Fulbright & Jaworski law firm, Lee Blocker and several other people who had been in the hotel business.
The Lakeway Inn opened in 1963. Soon there was the Lakeway Marina, the Texas Time Shares, an airport and, by 1965, there were 26 homes by the lake. Lakeway became a popular weekend resort for lawyers, judges, businessmen and industrialists from Houston and to a lesser extent from Dallas.
The developer put in a small private drinking water plant for the area. All of the residences were on septic tanks, but a small wastewater treatment plant was put in near the Inn to serve it, the marina, and the time shares. Lots for the first 17 sections around the Lakeway Inn were developed in the next five or six years.
In 1971, John Crooker sold the Lakeway development to Bob Alpert.
At the time Alpert wanted to continue the development of Lakeway as it was changing from a resort and retirement community to include more and more families with larger wastewater treatment requirements. Buyers weren’t too excited about septic tanks. Alpert was interested in using the then fairly new MUD legislation to reimburse himself for most of the infrastructure he would build in sections 18–28, so he created Lakeway MUD. Knowing the 410 residents of the first 17 sections would never vote themselves into the MUD, he left that area out, but obtained a certificate of convenience and necessity (CCN) for the new MUD to serve them with water. Thus, the seeds of discontent between In-District and Out-of-District customers were sown. (Sewer have and have-nots!)
In 1972, with temporary housing in place on undeveloped, rocky, goat-farm hills and with employees as residents to vote, the developer formed Lakeway Municipal Utility District No. 1. The term “#1” was subsequently dropped. The District included about 3500 acres involving east Lakeway, Rough Hollow and Lakeway West (now The Highlands). The latter are no longer in the District and the de-annexation will be covered later. The developer’s employees also approved $28 million of bond authority. This also became a bone of contention with the District’s taxpayers in later years. There was not much public oversight involved in early MUD approvals. The District encircled the original 17 sections of Lakeway.
The first 17 sections were excluded because people clearly would not have voted to confirm the MUD and issue bonds. Nor were they interested in paying for retrofitting the existing 25 miles of roads with wastewater collection pipes and manholes. Nearly all of the homes subsequently built in the original 17 sections are on septic tanks. Currently there are 129 Out-of-District accounts with wastewater service provided by the District (about four percent of wastewater customers).
The District issued bonds to purchase the water system in the first 17 sections. A bond salesman called prominent tax collection attorney Jack McCreary and said that since he had a house in Lakeway, he might be interested in buying the bonds. Even though this was an arms-length transaction, the residents of the first 17 sections became annoyed, because they erroneously thought they had bought the water system when they purchased their lots, and they thought they were now going to have to pay for it a second time through rates.
Many of the early residences buying water from the District think they were made to pay for the water system twice; first when they bought the lot from the developer and again from the District when it included the bond proceeds paid to the developer. This cost was in the water rates. The In-District customers paid only operation and maintenance costs for water and wastewater service. Property taxes paid the debt service on the facility investment. In-District land and homes are collateral for bonds. All property in the District has a lien against it to assure the bond debt is paid. Out-of-District people do not pay taxes, their land is not in the District, and thus not taxable. So on the water bills, the Out-of District water rates were much higher than In-District by comparison.
Cocktail party/golf course discussions were lively when water bills were compared. Out-of-District residents were certain they were getting hosed, paying for the water plant again through the in-lieu-of-tax amount in their bill. This method is not only legitimate, it is required by the Water Code that Out-of-District residents pay their fair share of operating costs and debt, and, thus, to the extent In-District residents cover debt through taxes, Out-of-District bills should, according to the Water Code, be higher than In-District residents’ bills. But, in the minds of the Out-of-District residents, they were subsidizing the District, and probably the new wastewater treatment plant as well. This perception persists today, even though the rate design carefully and fairly apportions In- and Out-of-District costs.
The residents of the first 17 sections created the Village of Lakeway in an effort to curtail the District’s activities. In 1974, the first 17 sections became The Village of Lakeway. Construction on Alpert’s sections 18 to 28 was underway. Sections 18 – 28, sometimes referred to as East Lakeway, were not annexed by the Village until 1988.
In 1981, things got ugly. The Village of Lakeway contended that it had control over the District’s rates. The City Administrator, Sam Huser, former alderman, and retired colonel, aided and abetted by other command personnel and ex-generals, tried to have the Village of Lakeway exercise water rate control over the District. But, the District was not in the Village, it only served part of the residents Out-of-District. Some Out-of-District residents stopped paying bills, with encouragement from the then Mayor Newton Herndon. Eventually, unpaid water service accounts were shut off. The District General Manager, Eddie Harvil, was arrested by the Village police. Warrants were issued for all the District’s Directors. A lawsuit was filed by the Village and nine other parties.
The matter went all the way to the Supreme Court of Texas. The council members were hauled before Judge Mary Pearl Williams who lectured them severely but did not hold them in contempt. The District prevailed before the Texas Supreme Court.
Judge Mary Pearl Williams ruled that only the Texas Water Commission (forerunner of The Texas Natural Resource Conservation Commission, and now the Texas Commission on Environmental Quality, TCEQ) had rate jurisdiction, and the Village did not. The Village dropped out of the suit. But, Sam Huser stayed in the suit as a resident. More fuss followed.
The matter of rates did not go away, and eventually, reached the Texas Water Commission for a hearing. The District already had a detailed cost of service methodology to support its rate design for both In-District and Out-of-District customers. District Board President Mike Kuhn had developed Equivalent Water Rates for In-District and Out-of-District. These were implemented in October 1986. The debt cost for water facilities was put in the cost of service, and taxes for In-District water debt were dropped. This made water rates identical for In- and Out-of-District customers. In 1988, the Commission ruled in favor of the District, confirming that its rates were indeed appropriate. The cost of service rate design was approved with only two changes:
The second item is an important principle – the system is one homogeneous system – and applies to wastewater as well.
The District and the Village negotiated on a number of matters, including building the “golf ball” elevated storage tank. That golf ball water tower is now an icon and used by everyone to identify Lakeway. The water tower was opposed by many on the Village Council including General Kennedy, who thought all water tanks should be on nearby Round Mountain. (Interestingly, the controversy in 2009 also involved the contested location of a water tank, and resulted in a third City of Lakeway takeover attempt in 2010).
In 1985, the water plant expansion off Sailfish Drive was challenged by local residents and the City got involved. In 1987, the water plant was closed and a completely new one was constructed near the end of Lakeway Boulevard. The old water plant site was given to the City as dedicated park land, and is a very dramatic and beautiful location. It has been coveted by the local homeowners, but later attempts to have it privatized for the benefit of a few have been thwarted.
The Village and the District smoked the peace pipe in 1988. The Village retired to lick its wounds, but the resentment continued to simmer.
The Village of Lakeway became a home rule city in 1990.
The first edition of the District’s rate manual was edited to make the changes prescribed by the Commission. From then on, to maintain the integrity of the rate-making process, annual cost of service is calculated and rates are changed up or down accordingly to assure that the District recovers the cost of providing service, no more and no less. Few MUDs have such a sophisticated rate design, certainly nothing approaching the District’s. At other MUDs, if their revenue covers the costs, all is fine, there is no rate change. If not, they stick their finger in the air and guess at what the residents will put up with. If their rates are covering expenses, regardless of how much extra, rates remain stagnant. Many cities use excess water utility revenue to cover other municipal costs. The Lakeway Municipal Utility District uses a cost of service methodology with a Texas Commission on Environmental Quality (TCEQ) approved rate-making methodology.
And then some residents in the 17 sections wanted to be in the District. They wanted wastewater service! And, they wouldn’t mind if the taxpayers of the District who had been paying taxes for years for their wastewater service helped pay for these Out-of-District costs. In 1991, Mayor Sheppard formed a task force to consolidate the City and the District. This committee included Mike Kuhn and Don Iburg for the District and about half a dozen others for the City, including Glen Davis and Cole Rowland. In spite of the weighted membership, and thanks in part to the data generated by the District, but more importantly, to Mike Kuhn’s persuasive abilities, the study determined that it would not be in the best interest of the District residents for it to consolidate with the City.
This study did set forth a way to help some small pockets of the City get wastewater service and this enabled the Challenger 10 project. (This is a Sam Huser story for another time.) However, it wasn’t long before District customers were growing rapidly in numbers and requirements. A moratorium had to be declared on providing additional Out-of-District service. A District cannot serve out of district if it does not have the capacity to meet the needs within its territory.
Fast forward to the regime of Mayor Burton Barnes in the mid-90s. His house on Challenger had septic limitations. He renewed the City/District consolidation idea. Only this time, he asked the District to annex the City! Wrong! If it wasn’t prudent in 1991, it surely wasn’t prudent after District residents had paid taxes for several more years. Moreover, cities cannot petition for annexation by Districts; only property owning individuals can. Even then it requires an election.
In the past, the District did respond to a few petitions and annex Out-of-District customers. But, the District stopped this practice due to the complexities and costs. This is in part due to the Texas Attorney General’s opinion which came out due to voting rights. Texas is one of the Southern states whose elections are supervised by the Feds, and so elections would have to be held on both sides of the matter. The petitioner for a rental property might not live in Lakeway and, thus, would not be a registered voter here. Also, rental properties cannot be annexed without the renter’s permission. Elections are costly. Would District voters approve annexation of the Out-of-District petitioner? Few petitioners would be willing to pay the cost of the election and such cost is not a proper cost of the District.
Mayor Barnes asked the Board to respond officially, and the District did so. Don Iburg addressed the City Council saying “no thanks” to their offer to be annexed. He explained why and proposed a solution which was that the City could develop a taxing district for the 17 sections to pay for the infrastructure required and the holding ponds and irrigation to evaporate the reclaimed wastewater. He was rebuffed by the Mayor.
Still, the desire for wastewater service for the 17 sections did not go away and the LCRA was called in. In 2002, when HDR Engineers certified that the District had sufficient capacity to provide the reclamation and disposal of the wastewater after it was collected, the District worked with the City and the LCRA for two years to make it happen. With a plan and costs identified, the property owners of the 17 sections were surveyed. Only about 140 of the ~1200 property owners were willing to proceed. There was insufficient interest to continue and a great deal of hard work went down the drain.
In 1998, another significant event was de-annexation, or exclusion, of Rough Hollow and Lakeway West (now The Highlands). This was about 40% of the District’s territory. When the Developers, Lakeway Partners, determined it was not in their best interest to have the District provide water and wastewater service, they decided to ask if the District would exclude them so they could form their own MUD and make their own deal with themselves. Yes, it is still possible to do that. They took a bill to the legislature to assure the legality of the matter. Usually, MUDs want to grow, so de-annexation is unusual.
The District determined it would be to its advantage to get rid of all the undeveloped acreage in Rough Hollow and Lakeway West, so that the District’s taxpayers would not have to be concerned about when or if they were developed, nor would it appear that the District’s customers were subsidizing the developer. Paul Phy, the District’s bond counsel, negotiated on behalf of the District. Lakeway Partners paid the District about $4,000,000 in consideration which included providing some cash, a new 400,000 gallon per day wastewater treatment plant, and paying for the District’s 41% share of the LCRA’s Lakeway raw water barge, pumps and pipelines. The cash was added to the $11 million bond authority granted by the voters in 1998 which was used to fund a 10-year Capital Improvements Program. One other significant benefit of getting rid of the burden of all the undeveloped land was that the District’s bond rating improved. This leads to lower financing costs.
In about 1992, Don Iburg became President of the District. General Manager Richard Eason was hired in early 1993. Later that year, Mike Willatt became General Counsel. In the next 18 years, the District made enormous strides in permitting and building a state-of-the-art water and wastewater system and developing a highly efficient administration. The District is widely admired in the industry for its innovation and efficiency. When people go to the TCEQ to ask questions about how to run a District, the TCEQ sends them to look at Lakeway Municipal Utility District. Similarly, the TCEQ sends its staff to tour and observe the District’s operations.
The District has received a number of awards for drinking water quality from the Texas Commission on Environmental Quality, and the Palos Verdes Water Recycling Plant won Plant of the Year award from the Water Environment Association of Texas in 2003. The submittal for that contest makes interesting reading. In 2006 & 07, we were in the top three for best tasting water in Texas in the Texas American Water Works contest at the Texas Water Conference. In 2009, we won first place for Texas, which enabled us to enter the North American contest at the ACE Conference by the American Water Works Association. In that contest, we won second runner up in North America as the Best of the Best Water Taste Test. In March of 2010, the Texas Comptroller bestowed upon us the Gold Leadership Circle award for financial transparency.
In the years since 1992, the District developed a collegial and cooperative relationship with the City. The District has provided many things for the City, and vice versa. In 2009, things changed quickly.
In 2006, the District determined a need to build a large ground storage tank. In 2007, it held a bond authority election to fund it, which was passed by an overwhelming 68 to 32% margin. This large margin was also considered to be a vote of confidence by the District’s customers in the leadership and management of the District.
The 2007 Capital Improvements Plan includes other projects in three phases. Phase One is nearly complete.
The District proposed to locate this new tank on District-owned land adjacent to Lohmans Crossing Road. Even though the District had had worked with City staff for a year, and spent over $200,000 in design fees for this site, just before the bid opening, Lakeway Mayor Steve Swan very much wanted to move the tank further back from the road to enable a strip center to be placed between the road and the tank. This would have involved between $300,000 to $700,000 worth of additional excavation in solid rock to put much of the tank underground, and cause project delay which would prevent the tank being ready for use during the summer of 2009. The District’s land had been properly zoned Government, Utility and Institutional (GUI). Through a developer’s glitch, part of the tank site had been zoned Commercial. The District had to apply to the City for re-zoning. There were several meetings between the City’s and the District’s leadership. The City Council reluctantly approved the zoning, 5-2. At the same Council meeting, a long-time Out-of-District resident, Elsa Hopkins, stood up and said that she was on Lohmans Crossing Road when the trailers were hauled in for the voters to confirm the District in 1972. She advocated that the City take over the District so that the City could run the water and wastewater department any way it wanted. After years of complaining that she could not get wastewater service, Hopkins’s street now has wastewater services. In 2006, developer David Jarvie installed the pipelines in an agreement with the District. Hopkins declined to hook up. Never the less, the City took up Hopkins plan to take over the mud.
Through a quirk of fate, most of the District is located within the City of Lakeway, but a small part is within the ETJ of The Village of The Hills. There may also be some overlap underwater in Lake Travis with the ETJ of Point Venture and the ETJ of the City of Austin. Under these circumstances, the District can only be dissolved by mutual agreement of the District and all the cities.
Shortly after the zoning meeting, the Lakeway City Manager asked The Village of The Hills Administrator if The Village would be willing to release its ETJ where it overlapped the District and the Village’s offices which are within the Lakeway MUD. The City Manager got a negative reply.
On about February 13, the District learned that the City had held a special meeting on February 4th where the sole agenda item (very obscurely drafted) was to authorize the City Attorney to pursue legislation amending state law to allow the City to unilaterally dissolve the District.
This was a similar agenda item again on the regular council meeting on February 16, 2009. The District’s General Manager, President, and two Directors, as well as the District’s legal counsel attended. The City voted unanimously to authorize the City’s attorney to pursue legislation that would allow the City to unilaterally take over and dissolve the District.
When the District received the City Council meeting agenda for February, 2010, the legislation had already been drafted, and City had already directed a memo to Senator Kirk Watson asking that he sponsor it.
The City takeover plan proved to be difficult to justify and was very unpopular with most District customers for a variety of reasons. During the spring of 2009, the City’s legislation evolved into the issue of the citizens of the original 17 sections not having the right to vote or be on the Board. The City and the District agreed to resolve that with legislation, but that effort was not successful.
In 2006, the District entered into a wholesale agreement to provide both water and wastewater service to TCMUD # 11, aka Rough Hollow. This agreement is for finite amounts of water and wastewater capacity equivalent to 375 residential units.
For water service, the District receives a minimum of $7,500 per month ($90,000 per year) which is equivalent to $20 per month for each of the 375 units, if they use no water. The $7,500 includes all the water they use at the current year’s calculated rate, up to $7,500 worth. Currently the volume rate is $5.97 per thousand gallons. When the volume charge exceeds $7,500, then the charge is for the water only at the consumed volume times the volume rate.
For wastewater service, the District receives a minimum of $15,000 per month ($180,000 per year). This is a Debt Service Component (DSC) cost. The DSC will rise above $180,000 per year when the total taxable value of Rough Hollow times the District’s tax rate exceeds $180,000. The Rough Hollow wholesale DSC funds are directed in the District’s Rate Design to pay wastewater debt service.
In addition to the DSC, there is a wastewater volume calculated charge, currently $5.55 per thousand gallons. Because of difficulty in measuring low volume wastewater flows, this fee agreement has been temporarily amended to include the ‘winter averaging’ method to determine wastewater flow.
The District also has a wholesale agreement with Water Control and Improvement District No. 17, for wastewater service only. This agreement is for up to 600 units. The agreement provides for a reservation fee of $15 per month per unit plus a purchase price of $7,300 per unit. To date (May-2010), District #17 has purchased 296 units at a value of $2,160,800. The District #17 wholesale wastewater capacity sale money has been placed into the District’s General Fund and is reserved for wastewater construction projects. This defers the timing for the sale of the next series of bonds (Phase Two). District #11 also pays a volume rate for wastewater.
All other wholesale revenues are integrated into the District’s rate design.
The District is a mature water service provider, with 38 years of experience focusing only on water, wastewater, and water reuse. The District has 4000 water customers, 3000 wastewater customers and hundreds of reuse water recycling customers (round figures).
The District has 21 full time employees, and usually employs two employees as summer help.
The District is in very strong financial condition to support its $6.3M annual budget.
The District currently collects property taxes for wastewater debt service and for wastewater collection system maintenance (the Infiltration and Inflow Program). This is a progressive tax, similar to those of the City, County, EMS and schools.
The district collects property taxes on real estate to generate payments of $1,900,000 for wastewater debt service this year. These property taxes are federal income tax deductible.
The District has a contingency fund of $100,000 to cover loss of revenue and cover expenses during a disaster.
The District’s voters passed a $13.3M bond authority election in November of 2007 by a margin of 68 to 32%, indicating the confidence voters in the District’s Board and staff. The District’s current bond rating from Moody’s is “Aa2” and from S&P is AA-, both excellent ratings. The District has the highest bond rating of 730 rated MUDs in Texas.
The District has several capital projects underway using receipts from the $5.8M Series 2009 Bonds and from wastewater capacity sales to District #17. The effective interest rate on those bonds was 4.407%. The TCEQ approved the District’s sale of these bonds for Phase One CIP projects. The projects do not add additional system capacity, but improve water storage, improve systems reliability, improve safety, security, and reduce energy consumption. The projected effect of the programmed bond sales on rates is available in a separate document. Additional wastewater capacity sales to WCID #17, or the pending land sale will defer the need for bond sales.
The District has $7,430,000 of remaining bond capacity authorized by the voters, but not yet sold.
The water system is currently capable of providing all current obligations except for the raw water pumping capacity, which must be increased by 1.2 Million gallons per day. The LCRA owns the system and we share capital and O&M costs with HCMUD, TCMUD #11 and the LCRA. There is currently excess capacity in the system, but at least one additional lake water pump and controls will need to be designed and added. The lake barge has room for two more pumps.
In 2002, the LCRA in partnership with the District, estimated the costs associated with providing wastewater services to the original 17 sections of Lakeway, which are on septic systems and are served only water by the District.
At that time, the District had sufficient capacity to serve these areas, but there was no wastewater collection system. The LCRA polled these customers and determined that only 12% were interested. The project failed and the plan was abandoned.
The District subsequently sold most of this excess capacity to TCMUD #11 and WCID #17 through wholesale agreements.
More recently, the District entered into agreements with many customers along lakeshore streets including Mariner, Cutlass, Capri, Malabar, Challenger and part of Electra to provide them wastewater service, and it now has wastewater collection facilities in place for those customers.
The District’s wastewater treatment plants, storage ponds, and evaporative disposal system permits issued by the TCEQ are consumed by current customers and current obligations. The District has a moratorium on new Out-of-District connections in the west service area, and just a few units of capacity left in the east area.
In May of 2008, the District signed an Earnest Money Contract with Haythem Dawlett for the sale of ~19 acres of land near the new water tank on Lohmans Crossing. The contract is for $3,133,000 with $100,000 earnest money in escrow. There have been 14 amendments to the contract, mostly to extend the closing date, but some for other reasons. In addition to the purchase price, there is a monthly payment of $13,054 (5% of the contract) to escrow that does not apply to the purchase price at closing currently set for November 12, 2010. In the event of buyer default all escrow accrues to the District. The current (5/2010) value of the escrow account is $375,907, including the $100K.
The District has recently agreed to serve part of the Highlands with wastewater service for a period of three years. During that time, the developer for TCMUDs 12 &13, Haythem Dawlett, will need to construct its own wastewater treatment, storage and disposal capacity. Preliminary discussions indicate that Dawlett will expand the Trophy Drive Water Recycling Plant at his expense with the District continuing to operate it and share O&M costs. This agreement will be complex and will require amending both the District’s and the developer’s wastewater TCEQ permits.
In addition, Dawlett has proposed to relocate the District’s Cedar irrigation area off Lohmans Crossing to the Highlands irrigation area. This would free up about 60 acres of land for development. That tract will need wastewater service and it may swap capacity with Rough Hollow, which would get service from the (expanded) Trophy Drive plant. This will also be a complex agreement involving the District’s other TCEQ permit, construction of wastewater pumping stations, wastewater and reuse pipelines and a new irrigation system. Some have offered that this project has not been shown to be in the District’s interest.
The Capital Improvements Plan has a number of projects remaining, including collection system odor control and the maintenance building at the Palos Verdes site. These two projects are in design and should be bid for construction this summer. The remaining Phase One projects include W-3 sludge collector mechanism and S-5 fine bubble air diffusers. Other Phase projects include improvements for chlorine gas safety at two sites, lift station, reuse system, wastewater fine screen, water treatment plant, water pipeline replacement and back-up power supplies for the water treatment and distribution systems. The priorities and timing for these should be established soon.