September 12, 2014 the City executed a “Asset Transfer and Utility System Consolidation Agreement” (original agreement) with the Chisolm Trail Special Utility District (CTSUD) to transfer assets and liabilities of the District to the City of Georgetown. That agreement was amended in January 15, 2015 to allow for the second phase of transfer of assets and duties of the District. A part of that amended agreement also called for the City of Georgetown to indemnify the CTSUD Board of Directors against suit as a result of their actions. The City of Georgetown has since conformed to the provisions of the Agreement and its Amendment since the execution of that agreement. The current status of legal action is that it was appealed to the Third Court of Appeals and remains pending. Another provision of that agreement allowed certain funds to remain in control of the District until which time the CTSUD dissolved operations. During the 2017 Texas Legislative Session a bill was passed, SB248, provided an avenue for the CTSUD to dissolve post August 31, 2019 even if legal actions were not completely resolved. We are now past this legislative date and the CTSUD Board has the authority to consider dissolution per the terms outlined in SB248. The CTSUD has indicated a desire to begin the legal designated process to dissolve. This process requires a third amendment to the “original agreement” to clarify the indemnification of the Board and final transfer and treatment of remaining assets.
The proposed Third Amendment to the agreement contains clarifying language on Indemnity, Insurance Coverage and Escrow Funds (remaining assets) for the purpose of defense of claims against the Board in their official duty of actions approving the “original agreement” and amendments. This agreement has been prepared by the Legal services for the District and reviewed and approved for execution by the Legal team representing the City of Georgetown.
Approval of this Third Amendment will conclude the process of asset transfer. Public Funds remaining will transfer to the City of Georgetown for the purpose of fulfilling the terms of the agreement related to defense of the Board in their official capacity. These funds will remain in “escrow” for a period of four years and thirty days from date of final CTSUD dissolution. Beyond that point, remaining funds will be available for use in the Water Fund to the benefit of the Water Utility rate payers from which the funds were derived. At the current time, there remains approximately $488,000.00 of which final bills of the District will be paid and an Insurance Policy of up to $10,000.00 will be secured by the District.
STAFF RECOMMENDATION:
Staff and Legal Team recommend approval of the Third Amendment to allow the District to proceed with Dissolution and appropriate transfer and treatment of public funds in the process.