CM-07-05-083May 7, 2007
Mr. Phil Ford
General Manager
Brazos River Authority
4600 Cobbs Drive
P.O. Box 7555
Waco, Texas 76714-7555
Re: Equity Payment associated with Williamson County Regional Raw Water
Line Project
Dear Mr. Ford:
The purpose of this letter is to formally notify the Brazos River Authority
("BRA") that the City of Round Rock, Chisholm Trail Special Utility District, and
Brushy Creek Municipal Utility District (collectively, the "Protestants") intend to initiate
arbitration as a result of BRA' s Equity Payment determination relating to the Williamson
County Regional Raw Water Line Project (the "Project"). The Protestants recently
received invoices for payment from BRA reflecting revised allocations of Project debt
service costs based on amended water supply agreements entered into by BRA with the
City of Georgetown and Chisholm Trail Special Utility District for Brazos River Basin
contract water rights. It is the Protestants' understanding that the invoices for payment
subject Chisholm Trail to an Equity Payment, for which the other participants receive
credit. However, BRA has apparently determined that the City of Georgetown should not
be subject to an Equity Payment notwithstanding that all participants have paid debt
service for the capacity now being made available to Georgetown.
It is our understanding that BRA has scheduled a customer meeting to be conducted
on May 23, 2007. We respectfully request that an authorized representative of BRA
address the following questions at the customer meeting :
1. What contractual provisions provide for any Equity Payment to be collected,
or not collected, when an existing participant increases its participation in the
Project?
2. What contractual provisions provide that Chisholm Trail SUD is subject to an
Equity Payment obligation other than its initial participation in the Project?
3. In the past, the participants and BRA entered into amendments to the relevant
contract documents reflecting changes in participation by the parties,
including Equity Payment obligations. Why has BRA chosen in this case not
to require a contract amendment?
4. Does each participant have an ownership interest in the Project capacity that it
has financed? Please be prepared to identify each participant's ownership
interest, if any.
Orl--L»DW6
1
5. Is there remaining capacity in the Project? If so, can any existing participant
request such capacity at any time without payment of an Equity Payment? If
only some participants have such a right, please identify the participant(s).
BRA's determination that Georgetown is not subject to an Equity Payment has
significant negative financial implications on all Protestants. This result could have been
avoided if BRA managed the Project in a way that treats all participants impartially. We
believe that the clear intent of the relevant contract documents is that any change in
Project participation triggers an Equity Payment obligation in order to compensate the
existing participants for debt services costs they previously paid but which will not be
made available to them. In the alternative, it could have been addressed through a
contract amendment. We are anxious to understand why BRA has acted otherwise.
Please let us know immediately whether BRA will address these issues at the May
23, 2007, meeting. Further, please advise us as to whom communications should be
directed regarding the initiation and conduct of the arbitration process.
Finally, please note that all payments to BRA by the Protestants are being made
under protest until this matter is resolved by mutual agreement or arbitration.
Thank you for your consideration. We look forward to your prompt response.
TRAIL SUD
auschuber, Genera anagen'
cc: Chisholm Trail SUD
Brushy Creek MUD
City of Round Rock
Jonah SUD
City of Georgetown
Tom Clark, General Manager
I7 OF ROUND ROCK:
2
use, City Manager