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[00:00:01]

WELL, GOOD MORNING.

[CALL TO ORDER]

MY NAME IS ALISON ALTER AND I'M CHAIR OF THE AUDIT AND FINANCE COMMITTEE.

IT IS 9:30 AM ON DAY 26, AND I WILL CONVENE THE AUDIT AUDIT AND FINANCE COMMITTEE, UH, VIRTUALLY THIS MORNING.

UM, WE ARE GOING TO BEGIN WITH CITIZENS COMMUNICATION.

WE HAVE ONE SPEAKER, UM, MR. PAUL ROBBINS COUNSEL, CAN YOU HEAR ME? GOOD MORNING.

GOOD MORNING CHAIR.

UH, COUNSEL, I'M HERE TO ASK YOU TO POSTPONE ITEM 55 ON NEXT WEEK'S AGENDA, WHICH IS A REVISION OF THE CITY'S ENERGY CODE.

I OFFER TWO COMPELLING REASONS.

FIRST, THE PEOPLE YOU HAVE APPOINTED TO REVIEW POLICY ISSUES LIKE THIS, THE ELECTRIC UTILITY COMMISSION AND THE RESOURCE MANAGEMENT COMMISSION HAVE LARGELY BEEN LEFT OUT OF THE PROCESS.

AS FAR AS I CAN TELL, THEY WERE NOT INVITED TO BE STAKEHOLDERS DURING THE PUBLIC COMMENT PERIOD, NOR HAS THE COUNCIL EVEN BEEN BRIEFED AHEAD OF NEXT WEEK'S MEETING THIS MARRIAGE, YOUR COMMITTEE'S ATTENTION BECAUSE OF THE WAY PUBLIC PROCESS WAS ABUSED.

THE ELECTRIC UTILITY COMMISSION WAS NOT ALLOWED TO MAKE RECOMMENDATIONS.

AND THE RESOURCE MANAGEMENT COMMISSION WAS ONLY ALLOWED A CURSORY REVIEW.

IT WAS SO CURSORY.

IN FACT, THAT TWO MEMBERS OF THIS COMMISSION WOULD NOT ENDORSE THE CODE BECAUSE THEY WERE LARGELY LEFT OUT OF THE PROCESS AND RMC COULD NOT SUSTAIN ENOUGH VOTES TO RECOMMEND IT TO COUNCIL.

THE OTHER REASON TO DELAY APPROVAL IS PROBLEMS WITH THE CODE ITSELF.

I AM PARTICULARLY CONCERNED ABOUT THE WAY THE REVISED CODE HANDLES ALL ELECTRIC WATER HEATING.

MY SUSPICION IS THAT THE NEW CODE, THE NEW ENERGY CODE COULD ACTUALLY INCREASE ENERGY USE IN SOME, ALL ELECTRIC HOMES COMPARED TO THE CURRENT CODE AND THE PEOPLE THAT WILL SUFFER THE MOST ARE APARTMENT DWELLERS WHO GENERALLY HAVE HALF THE INCOME OF HOMEOWNERS.

I AM TRYING TO CONFIRM THIS, BUT MY PUBLIC INFORMATION REQUESTS RELEVANT TO THE SUBJECT HAS NOT BEEN ANSWERED YET, EVEN IN SITUATIONS WHERE THE NEW CODE DOES SAVE SLIGHTLY MORE ENERGY THAN BEFORE IT IS HARDLY A LEADING EXAMPLE FOR THE COUNTRY TO FOLLOW.

THERE WILL BE NO EARTH SHATTERING CRISIS.

IF APPROVAL IS DELAYED.

AND I AM AGAIN ASKING YOU TO POSTPONE ITEM 55 UNTIL YOUR TWO COMMISSIONS CAN ADEQUATELY REVIEW IT.

I APPRECIATE YOUR TIME.

THANK YOU, MR. ROBINS.

APPRECIATE THE HEADS UP ON THAT ITEM.

UM, WE ARE NOW GOING TO CONSIDER THE MINUTES.

[1. Approve the minutes of the Audit and Finance meeting of April 28, 2021.]

DO I HAVE A MOTION TO APPROVE THE MINUTES? MAY I ADD THAT THERE'S APPROVAL SECONDED BY COUNCIL MEMBER POOL? AND I SHOULD NOTE THAT I'M ALSO JOINED ON THE DIASPORA BY COUNCIL MEMBER TOVO, UH, COUNCIL MEMBER.

I CAN SEE KELLY WAS NOT ABLE TO JOIN US THIS MORNING.

UM, LOOKS LIKE COUNCIL MEMBER HAD RUN.

MADISON IS NOT ON THE COMMITTEES, ALSO, UM, JOINED US FOR THE CALL.

WELCOME.

UM, SO SEEING NO OBJECTIONS, UH, THOSE MINUTES WILL BE APPROVED.

UM, WE WILL NOW MOVE

[2. Fiscal Year 2020 Single Audit Report by Deloitte & Touche LLP, the City's external auditor.]

TO, UM, A PRESENTATION FROM OUR FINANCE DEPARTMENT AND DELOITTE.

UM, THIS IS OUR FISCAL YEAR 2020 SINGLE AUDIT REPORT.

UM, THIS IS ONE OF THE FUNCTIONS THAT THE AUDIT AND FINANCE COMMITTEE HAS, IS TO HERE, UM, THESE AUDITS AND IS PART OF OUR AUDIT, UM, PROCEDURE.

SO I WILL, UH, RECOGNIZE DIANA THOMAS.

GOOD MORNING, COUNCIL MEMBERS.

I'M DIANA THOMAS, INTERIM, DEPUTY CHIEF FINANCIAL OFFICER AND MARIA.

YOU GET OUR INTERIM CONTROLLER WILL BE LEADING THE PRESENTATION TODAY.

THANK YOU, DIANA.

UH, CAN WE BRING UP THE PRESENTATION PLEASE? THANK YOU.

GOOD MORNING, MAYOR AND COUNCIL MEMBERS.

I'M MARIA INTERIM CITY CONTROLLER.

I'M HERE WITH BLAKE ROGERS FROM DELOITTE AND TOUCHE, THE CITY'S EXTERNAL AUDITOR TO PRESENT THE RESULTS OF THE FISCAL YEAR 2020 SINGLE AUDIT.

I'D LIKE TO BEGIN BY THANKING DELOITTE FOR THEIR PROFESSIONAL AND THOROUGH MANNER IN WHICH THEY CONDUCTED THIS AUDIT, UM, CITY STAFF, ESPECIALLY THE STAFF IN THE CONTROLLER'S OFFICE, GOVERNMENTAL ACCOUNTING DIVISION AND CITY DEPARTMENTS WITH GRANTS AUDITED FOR THIS REPORT FOR THEIR MANY HOURS OF DEDICATED SERVICE SOURCE OF COMPLETION OF THE SINGLE AUDIT, THE MAYOR AND COUNCIL MEMBERS FOR YOUR CONTINUED SUPPORT OF THE CITY'S GOAL

[00:05:01]

OF EXCELLENCE.

IN ALL ASPECTS OF FINANCIAL MANAGEMENT, THE SINGLE AUDIT WAS ISSUED ON MAY 24TH, 2021, ABOUT FIVE WEEKS IN ADVANCE OF THE REGULAR JUNE 30TH, 2021 REPORTING DEADLINE AND WELL IN ADVANCE OF THE SIX MONTHS SINGLE AUDIT EXTENSION DEADLINE DUE TO THEIR COVID 19 PANDEMIC.

UH, BLAKE ROGERS FROM DELOITTE WILL NOT TAKE OVER THE PRESENTATION FOLLOWING THEIR PRESENTATION.

I'LL PROVIDE A BRIEF RESPONSE FROM MANAGEMENT RELATED TO THE FINDING.

I APPRECIATE THAT.

AND GOOD MORNING THERE IN COUNCIL MEMBERS, UH, I'M BLAKE ROGERS, A PARTNER WITH DELOITTE.

I WORKED DIRECTLY WITH RHEEM SAMRA AND PROVIDING THE EXTERNAL AUDIT SERVICES FOR THE CITY FOR THE FISCAL YEAR ENDING SEPTEMBER 30TH, 2020 REAM HAD PREVIOUSLY PRESENTED TO YOU ON THIS COMMITTEE ON APRIL 28TH, 2021, AND THE RESULTS OF THE AUDIT OF THE CITY'S FINANCIAL STATEMENTS.

BUT IN ADDITION TO THE AUDIT OF THE CITY'S FINANCIAL STATEMENTS, AS MARIA MENTIONED, WE'RE ALSO ENGAGED TO PERFORM COMPLIANCE OVER THE CITY STATE AND FEDERAL AWARD PROGRAMS. AND TODAY I'M PRESENTING TO YOU THE RESULTS OF THOSE AUDITS ON THE NEXT, UH, PAGE OF OUR PRESENTATION.

UM, THE CITY IS REQUIRED FIRST TO UNDERGO BOTH A STATE AND FEDERAL GRANT COMPLIANCE AUDIT BECAUSE THE CITY EXPENDS MORE THAN $750,000 IN FEDERAL AWARDS ON THIS IN AN ANNUAL BASIS AND EXPENDS MORE THAN $750,000 OF STATE GRANT AWARDS ON AN ANNUAL BASIS.

SO THUS BOTH AUDITS ARE REQUIRED, UH, FOR THE FEDERAL PROGRAMS, WE PERFORMED OUR AUDIT UNDER A GENERALLY ACCEPTED AUDITING STANDARDS, GENERALLY ACCEPTED GOVERNMENT AUDITING STANDARDS AND IN COMPLIANCE WITH THE REQUIREMENTS OF UNIFORM GRANT GUIDANCE.

WE DID ISSUE OUR REPORT, AS MARIA SAID, ON MAY 24, 2021, WE ISSUED AN UNMODIFIED OPINION.

THAT'S THE CLEAN OPINION, THAT'S THE AICP LANGUAGE FOR THE APPENDANT OPINION IN THIS CASE? UM, LIKE, WELL, AS WITH THE STATE PROGRAMS, WE PERFORMED OUR AUDIT IN ACCORDANCE WITH GENERALLY ACCEPTED AUDITING STANDARDS, GOVERNMENT AUDITING STANDARDS, AND THE REQUIREMENTS OF THE STATE OF TEXAS UNIFORM GRANT MANAGEMENT STANDARDS.

IN THIS CASE, WE ALSO ISSUED OUR OPINION ON THAT SAME DAY AND ALSO ISSUED AN UNMODIFIED OR CLEAN OPINION ON THE STATE PROGRAMS ON THE NEXT SLIDE.

UM, WE'LL PROVIDE A LITTLE BIT MORE DETAILED TO THE COMMITTEE AND COUNCIL ABOUT WHAT WE HAVE, UH, WHAT WE AUDITED THIS YEAR FOR THE FEDERAL PROGRAMS, UNIFORM GRANT GUIDANCE, PRESCRIBES TO US AS AUDITORS, THE PROCESS THAT WE HAVE TO USE TO SELECT WHICH PROGRAMS THAT WE'RE GOING TO TEST AND AN INDIVIDUAL YEAR, AND THIS PAGE, UH, GIVES YOU INFORMATION ON WHICH PROGRAMS, WHICH WERE SUBJECT TO OUR PROCEDURES THIS YEAR, WHICH PROGRAMS WERE MAJOR PROGRAMS ESSENTIALLY.

UH, SO YOU CAN SEE HERE THAT THE CITY EXPENDED A TOTAL OF $219 MILLION OF FEDERAL AWARDS DURING FISCAL YEAR 20 AS A RECORD YEAR FOR THE CITY OF AUSTIN.

UM, AND THE MAJOR PROGRAMS LISTED ARE LISTED BELOW.

I WANT YOU TO KNOW THAT THE CORONAVIRUS AID RELIEF AND ECONOMIC SECURITY ACT SPECIFICALLY THE CORONAVIRUS RELIEF FUND WAS THE ONE OF OUR MAJOR PROGRAMS THAT WE SUBJECTED TO TESTING THIS YEAR, TOTALING $137 MILLION OF THE CITY'S EXPENDITURES DURING FISCAL YEAR 20.

SO CERTAINLY AN EXTRAORDINARY INCREASE IN AWARD SPENDING DUE TO THE CORONAVIRUS RELIEF FUND THAT MAKES UP APPROXIMATELY 62% OF THE CITY'S EXPENDITURES THIS YEAR, AND THE GRANT SUBJECTED TO TESTING AND TOTAL FOR THE FEDERAL PROGRAMS MAKE UP OVER 71% OF THE TOTAL EXPENDITURES FOR THIS YEAR FOR FEDERAL AWARDS ON THE NEXT SLIDE, YOU'LL SEE A BREAK, THE SAME BREAKDOWN THIS TIME, LOOKING AT THE STATE PROGRAMS, UH, SIMILARLY THE UNIFORM GRANT MANAGEMENT STANDARDS FROM THE STATE OF TEXAS ALSO PRESCRIBED TO US AS AUDITORS, HOW WE SHOULD GO ABOUT SELECTING, WHICH PROGRAMS TO TEST AND LIST PROVIDES YOU WITH THE PROGRAMS THAT WERE SUBJECT TO TESTING OR IDENTIFIED AS MAJOR PROGRAMS FOR TESTING DURING FISCAL YEAR 20, UH, FOR REFERENCE THESE PROGRAMS REPRESENT APPROXIMATELY 41% OF THE TOTAL EXPENDITURES OF 4.3 MILLION THAT THE CITY INCURRED FOR STATE AWARDS DURING FISCAL YEAR 20.

AND ON THE NEXT PAGE, WE DID, UM, ISSUE OUR CLEAN OPINION AS I MENTIONED, BUT WE DID IDENTIFY ONE COMPLIANCE FINDING AND RELATED CONTROL DEFICIENCY THAT WE WANTED TO BRING TO YOUR ATTENTION.

WHEN TESTING A SAMPLE OF EXPENDITURES FOR THE CORONAVIRUS RELIEF FUND, WE NOTED THAT FIVE OF OUR SAMPLES TOTALLING $74,000, UH, AND 30 $774,036 WERE FOR SERVICES THAT THE CITY PROVIDED TO NEARBY GOVERNMENTAL ENTITIES THAT WERE REIMBURSABLE TO THE CITY FROM THOSE ENTITIES.

AND OUR INTERPRETATION OF THE CORONAVIRUS RELIEF ON REQUIREMENTS IS THAT THE CITY SHOULD ONLY CLAIM EXPENDITURES THAT THAT HAD EXPENDED AND NOT CLAIM EXPENDITURES

[00:10:01]

THAT WOULD BE REIMBURSED, UH, FROM OTHER SOURCES.

SO WE CONSIDERED THIS TO BE NON-COMPLIANCE WITH THE CORONAVIRUS RELIEF FUND REQUIREMENTS AND A SIGNIFICANT DEFICIENCY IN THE CITY'S CONTROLS OVER THE COMPLIANCE, UH, OVER ALLOWABLE COSTS FOR THIS SPECIFIC PROGRAM.

I WILL ALSO MENTION HERE THAT IN OUR FINDING, WE NOTE THAT CITY MANAGEMENT, UH, QUICKLY RESEARCHED THIS ISSUE.

UH, ONCE IT WAS IDENTIFIED, REMOVED $2.2 MILLION OF COSTS FROM THE PROGRAM AND REPLACED IT WITH $2.2 MILLION OF COSTS THAT WERE ALLOWABLE TO THE PROGRAM VERY QUICKLY, WE WERE ALSO AS PART OF OUR AUDIT PROCEDURES, ABLE TO TEST THOSE REPLACEMENT $2.2 MILLION OF COSTS AND HAD NO ADDITIONAL FINDINGS RELATED TO THAT ADDITIONAL $2.2 MILLION.

THE CITY WAS ABLE TO CLAIM ON THE LAST SLIDE, I WON'T TOUCH ON IT.

IT JUST PROVIDES THE DEFINITION OF A SIGNIFICANT DEFICIENCY, WHICH I MENTIONED THAT THIS, THE FINDING THAT ON THE PREVIOUS SLIDE WE HAD NOTED IS CONSIDERED A SIGNIFICANT DEFICIENCY RATHER THAN A MATERIAL WEAKNESS.

SO NOT SOMETHING THAT WE FELT LIKE WAS MATERIAL TO THE PROGRAM OVERALL, BUT CERTAINLY SOMETHING THAT WE FELT LIKE MEREDITH THE ATTENTION OF THIS COMMITTEE, UH, WITH THAT, I'D BE HAPPY TO TAKE ANY QUESTIONS THAT YOU HAVE ABOUT OUR SINGLE AUDIT PROCESS.

THANK YOU, MR. ROGERS, ON, UM, YOU KNOW, REALLY PROUD OF HOW OUR STAFF HAS HANDLED, UH, THE ENORMOUS PRESSURES OF THE PANDEMIC AND MANAGING ALL OF THE FINANCIAL, UM, YOU KNOW, STEPS THAT WERE NEEDED IN ORDER FOR US TO BE ABLE TO EFFECTIVELY USE THE FUNDS ACCORDING TO THE GUIDELINES.

SO, SO THANK YOU FOR THAT.

UM, COLLEAGUES, DOES ANYONE HAVE ANY QUESTIONS, MAYOR ADLER WHO'S THAT POWERPOINT POSTED SOMEWHERE? I COULDN'T FIND IT IN BACKUP.

IT MAY HAVE COME IN LATER.

I MAY HAVE MISSED IT OR MAY HAVE BEEN EMAILED OUT THE MAYOR.

I SENT IT YESTERDAY TOO TO THE COMMITTEE MEMBERS, BUT I ALSO, UM, UH, MENTIONED THAT IT'S GOING TO BE POSTED TO THE CITY'S WEBSITE AFTER THIS MEETING.

OKAY.

THANK YOU.

MAY I BELIEVE THAT ANGIE ALSO RE SENT IT THIS MORNING.

THANK YOU, THE COMMITTEE.

ANY OTHER QUESTIONS ON THIS? UM, SO YOU HIT TO, DO YOU WANT TO RESPOND TO THAT? YES.

YES.

IF WE CAN GO TO THE, TO THE SLIDE WITH THE CITY'S RESPONSES, UM, AS, AS, UM, BLAKE MENTIONED, UH, DELOITTE DID, UH, IDENTIFY ONE SIGNIFICANT DEFICIENCY RELATED TO, UM, TO THE SINGLE AUDIT.

UM, SO GO A FEW PAGES DOWN TOWARDS THE END.

ONE MORE, ONE MORE.

OKAY.

THANK YOU.

UM, DELOITTE DID IDENTIFY ONE SIGNIFICANT DEFICIENCY, UM, ESSENTIALLY, UM, EXPENDITURES THAT RELATED TO SERVICES PROVIDED TO, UM, UM, WITH AN INTER LOCAL AGREEMENT THAT WAS GOING TO BE REIMBURSED TO THE CITY, UM, WERE PROCESSED USING MEMOS TASK ORDERS AND MEMORY TASK ORDERS ARE ESSENTIALLY A MECHANISM, UM, USED BY THE CITY TO AGGREGATE COSTS FOR A SPECIFIC PURPOSE.

UM, SO SOME OF THESE EXPENDITURES WERE RELATED TO IN OUR LOCAL AGREEMENTS THAT WE HAD WITH OUTSIDE ENTITIES THAT WERE GOING TO BE REIMBURSED BY THOSE OUTSIDE ENTITIES.

UM, AND ONCE WE WERE MADE AWARE OF THE UNALLOWABLE EXPENDITURES, OUR STAFF PERSON GETS REMOVED ALL EXPENDITURES THAT YOU WILL USING MEMO TASK ORDERS, REGARDLESS OF WHETHER, WHETHER OR NOT, UM, THEY WERE REIMBURSABLE FROM OUTSIDE SOURCES.

AND THAT'S THE 2.5 OR 2.2 MILLION THAT BLAKE IS REFERRING TO, UM, WHILE NOT ALL EXPENDITURES USING THE MEMO TASK ORDERS WERE REIMBURSABLE FROM OUTSIDE SOURCES.

WE PROCEEDED TO GO AHEAD AND REMOVE ALL OF THEM, UH, AS, UH, OUT OF AN ABUNDANCE OF CAUTION TO MAKE SURE THAT WE WEREN'T INCLUDING EXPENDITURES THAT WERE NOT ALLOWABLE UNDER THE CRF.

UM, AND SO WE, WE DO CONCUR WITH THE FINDING, BUT WE HAVE PUT A PROCESS IN PLACE GOING FORWARD TO MAKE SURE THAT THIS DOESN'T OCCUR WITH ANY FUTURE, UM, COVID-19 RELATED CLASS CHARGED TO THE US DEPARTMENT OF TREASURY.

WE'VE ADDED AN ADDITIONAL LEVEL OF LEVEL OF REVIEW TO MAKE SURE WE'RE, UH, WE'RE COMPLIANT WITH US.

AND I HAVE A QUESTION WITH RESPECT TO, YOU KNOW, THE CORONAVIRUS RELIEF FUNDS OR ONE SET OF FUNDS THAT, UM, WE RECEIVED FROM THE FEDERAL GOVERNMENT, BUT THEN THERE ANOTHER BLOCK OF FUNDS THAT ARE REIMBURSEMENTS FROM FEMA, UM, AND UNDERSTAND THERE'S A PROCESS BY WHICH FEMA GRANTS US THOSE.

UM, BUT HOW, HOW DOES THAT GET AUDITED OR HOW DOES THAT PROCESS, UM, GET REVIEWED? SO,

[00:15:02]

YES, SO JUST TO SPEAK A LITTLE BIT ABOUT THE FEMA PROCESS, AS WE SUBMIT THOSE EXPENDITURES TO FEMA FOR REIMBURSEMENT, THEY WOULD BECOME ELIGIBLE EXPENDITURES UNDER, UNDER THE SINGLE AUDIT, AND THEN THEY WOULD BE SUSCEPTIBLE TO AUDIT FOLLOWING THE GUIDELINES THAT DELOITTE WOULD, WOULD, WOULD FOLLOW UNDER THE AUDIT RULES, UH, TO MAKE SURE THAT WE GET THE APPROPRIATE COVERAGE AND THEY MAY OR MAY NOT BE SELECTED FOR AUDIT DEPENDING ON WHAT PROGRAMS DELOITTE SELECTS THROUGH THAT AUDIT PROCESS.

AT THIS STAGE, WE ARE STILL REVIEWING ALL OF OUR EXPENDITURES, TRYING TO MAINTAIN THAT FLEXIBILITY, UM, UH, FUNDING AND SELECTING THE MOST APPROPRIATE FUNDING SOURCE FOR THE, THE, UM, FOR THESE COSTS.

AND WE ARE WORKING WITH OUR CONSULTANTS TO DETERMINE WHICH EXPENDITURES ARE BEST SUBMITTED UNDER FEMA.

SO WE'RE STILL WORKING THROUGH THAT PROCESS AND SUBMITTING ITEMS TO FEMA AS WE GO.

BUT IN FISCAL YEAR 2020, WE HAD NOT SUBMITTED ANY, UH, CORONAVIRUS EXPENDITURES TO FEMA AT THAT POINT.

OKAY.

SO THESE ARE ALL FROM THE EXPENDITURES THROUGH OCTOBER UP TO OCTOBER 1ST, AND THEN, UM, YOU HADN'T AT THAT POINT SUBMITTED THE FEMA REIMBURSEMENTS.

AND SO YOU WOULDN'T HAVE CHOSEN THE FEMALE FUNDS TO BE REVIEWED AT THIS POINT IN TIME FOR THIS AUDIT.

THAT IS CORRECT.

UM, THE, THE FEDERAL GOVERNMENT REQUIRES THAT SIMA AWARDS NOT BE PRESENTED AND SUBJECTED TO AUDIT AS PART OF THIS PROCESS UNTIL FEMA HAS APPROVED ALL FINAL POS, UH, FROM THE CITY THAT DID NOT OCCUR DURING FISCAL YEAR 20, UH, HOPEFULLY WILL OCCUR IN FISCAL YEAR 21 OR, OR QUICKLY DIANE, I HOPE BUT, UH, BUT YEAH, SO THOSE WILL LIKELY BE, UH, INCLUDED IN THE 21 AUDIT.

OKAY.

SO, SO MOVING FORWARD, WE WOULD ANTICIPATE WHEN YOU COME BACK TO REVIEW FISCAL YEAR 21, THERE WILL BE POTENTIALLY ADDITIONAL, UM, CARES MONEY AS WELL AS ARPA MONEY THAT WILL GET AUDITED, BECAUSE THAT WOULD OBVIOUSLY BE THE THING THAT IS THE LARGEST AMOUNT AND THE MOST NEW FOR US.

SO WE WOULD WANT TO HAVE OUR AUDITORS LOOKING AT TO MAKE SURE THAT WE WERE DOING THAT, UM, ALL AS WE NEEDED TO DO.

AND THEN THE FEMA MAY OR MAY NOT COME WITH THE FISCAL YEAR 21 BECAUSE WE MAY NOT BE DONE WITH ALL OF THOSE REIMBURSEMENTS FROM CENTRAL LONG.

UH, BUT WE ARE WORKING WITH CONSULTANTS TO HELP US TO NAVIGATE THAT PROCESS, TO BRING DOWN AS MUCH OF THOSE FUNDS AS POSSIBLE.

UM, WHILE WE'RE ON THE SUBJECT, I WILL JUST SAY, I REALLY DO HOPE THAT WE WILL BE ABLE TO GET REIMBURSED FOR THE TESTING COSTS.

UM, THAT REIMBURSEMENT AMOUNT SEEMS PARTICULARLY LOW, UM, IN WHAT WE'VE BEEN, WHAT WE'VE BEEN SEEING, UM, AND REALLY LIKE US TO SEE IF WE CAN GET THOSE, UM, THE UNIVERSE NOW FOR THE STORM.

AGAIN, THIS WOULDN'T BE, THIS WOULD BE COMING IN FISCAL YEAR 21 THEN, UM, DO WE COUNT THE STORM AND THE PANDEMIC FEMA, UM, PROCESSES SEPARATELY, OR ARE THEY ALL WRAPPED UP TOGETHER AT THIS POINT, THEY'RE GOING TO BE SEPARATE, BUT THEY FOLLOW THE SIMILAR PROCESS THAT WE FOLLOW FOR, FOR THE FEMA CORONAVIRUS RESPONSE.

SO WE WERE GOING TO AGGREGATE ALL THE COSTS AND MAKE SURE WE HAVE EVERYTHING TOGETHER IN A PACKET.

AND BEFORE, AFTER WE SUBMIT IT TO FEMA, THAT'S WHEN WE'LL ADD IT TO, UM, TO THE SINGLE AUDIT.

OKAY.

THANK YOU.

UM, DO ANY OF THE COMMITTEE MEMBERS OR COUNCILMAN BARBARA MADISON HAVE QUESTIONS, COUNCIL MEMBER TOPO, JUST A QUICK ONE.

THANK YOU FOR THE PRESENTATION.

UM, CAN YOU HELP US UNDERSTAND THE EXTENT TO, I, IT SOUNDED AS IF SOME COSTS WERE REIMBURSED WHEN THE SIGNIFICANT, UM, SORRY, I'VE FORGOTTEN THE TERMINOLOGY WHEN THEY, WHEN IT WAS NOTED THAT SOME, UH, SOME COSTS HAD BEEN INCLUDED THAT WERE DUE TO, THAT WERE BEING REIMBURSED BY OTHER ENTITIES AND THE CITY MADE THE ADJUSTMENT.

UM, I THINK ONE OF YOU EXPLAINED THAT, THAT IT ALSO CAPTURED SOME COSTS THAT WEREN'T REIMBURSED BY OTHER ENTITIES.

AND DO YOU HAVE SOME SENSE OF THE SCALE OF WHAT THE, THE TOTAL AMOUNTS WERE OF COSTS THAT WERE NOT, THAT WERE NOT REIMBURSED BY OTHER ENTITIES, BUT WERE EXCLUDED FROM THE CARES DUE TO THE TIMING OF THE AUDIT? WE DIDN'T GO THROUGH THAT DETAILED TO MAKE THAT ANALYSIS, BUT WE DID HAVE ELIGIBLE EXPENSES THAT WE KNEW FOR A FACT, WE'RE NOT GOING TO CREATE ISSUES AND WE'RE GOING TO BE ALLOWABLE UNDER THE CARES, CARES ACT.

UM, SO WE JUST WENT AHEAD AND MOVED, ELIGIBLE COSTS OVER TO THE CARES, UM, CARES FUND.

SO THAT WAY WE COULD MAKE SURE THAT ALL EXPENSES THAT WERE BEING CHARGED TO THE CORONAVIRUS

[00:20:01]

WERE ELIGIBLE EXPENSES.

UM, AND THESE WERE ALL RELATED TO PUBLIC SAFETY WAGES.

SO WE HAVE PLENTY OF ELIGIBLE WAGES THAT WE COULD MOVE OVER TO, TO THE CARES FUND, BUT WE DID NOT HAVE THAT BURDEN.

I SEE.

ARE THERE, ARE THERE ELIGIBLE EXPENSES THAT ARE NOT BEING REIMBURSED NOW BECAUSE THEY WERE REMOVED? I MAY HAVE MISUNDERSTOOD WHAT YOU WERE NOW.

SO OUT OF THE, ALL OF THE FUNDS THAT WE RECEIVED UNDER THE CORONA VIRUS RELIEF FUND, WE WERE ABLE TO, UM, RECEIVE EXPEND ALL OF THE, ALL OF THE EXPENSES FOR GRANTED.

SO THANK YOU VERY MUCH.

I THINK THAT WAS NOT BUILT.

YEAH, THANK YOU VERY MUCH.

AND JUST AS AN FYI, UM, ABOUT A HUNDRED, 137 MILLION OF THE CORONAVIRUS RELIEF FUND WAS EXPENDED IN FISCAL YEAR 2020, AND THEN THE REMAINDER, WHICH I THINK IT WAS 37 MILLION EXPENDED IN FISCAL YEAR 2021.

SO THAT'S GOING TO BE CAPTURED IN THE FISCAL YEAR 2021 SINGLE ONE.

AND DOES THE SINGLE AUDIT COVER, UM, THE CARES MONEY THAT WENT TO THE AIRPORT CARE'S MONEY THAT WENT TO THE AIRPORT IS INCLUDED ON THE SOFA.

UM, THE C BECAUSE OF THE SELECTION PROCESS THAT THE FEDERAL GOVERNMENT MANDATES, WE DID NOT HAVE TO TEST THAT PORTION OF FUNDING THIS PARTICULAR YEAR.

OKAY, GREAT.

WELL, THANK YOU.

WE APPRECIATE, UM, SEEING YOU DO WE NEED TO TAKE ANY KIND OF MOTION TO ACCEPT THE AUDITOR OR ANYTHING LIKE THAT.

OKAY, GREAT.

WELL, UH, THANK YOU, MR. ROGERS FOR BEING WITH US.

THANK YOU, MRS. CHEESECAKE.

OKAY.

AND MS. THOMAS, UM, I THINK SOME OF YOU MAYBE, UM, STAYING WITH US FOR SOME OF THE NEXT ONES.

UM, SO COLLEAGUES, WE ARE NOW ACTUALLY GOING TO MOVE TO THE ABLE ITEM.

UM, THE AIRPORT STAFF HAVE ASKED IF THEY CAN GO A LITTLE BIT EARLIER BECAUSE THEY HAD ANOTHER MEETING THAT THEY NEEDED TO ACCOMMODATE.

WE CAN MOVE THEM OVER.

UM, I WILL JUST ACKNOWLEDGE THAT WE ARE JOINED BY COUNCIL MEMBER OF AS WELL.

GOOD MORNING.

SO THAT TABLE ITEM IS ITEM

[5. Discuss issues related to Austin-Bergstrom Landhost Enterprises, Inc. (ABLE) and the operations and financial information of the Hilton Hotel at Austin-Bergstrom International Airport.]

FIVE, DISCUSS ISSUES RELATED TO AUSTIN BERGSTROM LAND HOST ENTERPRISES, INC ABEL, AND THE OPERATIONS AND FINANCIAL INFORMATION OF THE HILTON HOTEL AT AUSTIN BERGSTROM INTERNATIONAL AIRPORT.

UM, WE HAVE TWO ITEMS, UM, RELATED TO APRIL ON OUR AGENDA COUNCIL AGENDA NEXT WEEK.

AND, UM, THE AIRPORT STAFF HAVE ASKED TO SPEAK WITH US IN ADVANCED IN OUR COMMITTEE.

UM, GOOD MORNING, MS. THOMPSON, ARE YOU LEADING US OFF? I'M GOING TO KICK IT OFF THIS MORNING.

OKAY, WELCOME.

THANK YOU.

AND THANK YOU VERY MUCH TO THE COMMITTEE AND THE ATTENDEES.

MY NAME IS TRACY THOMPSON.

I'M SORRY.

CAN WE PUT THE POWERPOINT UP, PLEASE? HERE WE GO.

AND THE NEXT SLIDE PLEASE.

OKAY.

HI, MY NAME IS TRACY THOMPSON.

I AM, I HAVEN'T MET A LOT OF YOU YET.

I HAVE BEEN WITH THE CITY OF AUSTIN DEPARTMENT OF AVIATION FOR ABOUT 10 MONTHS.

NOW MY POSITION IS AIRPORT CHIEF, OFFICER ADMINISTRATIVE AND EXTERNAL AFFAIRS, ALSO INTERIM AIRPORT, CHIEF OFFICER FOR OUR DEVELOPMENT PROGRAM.

AND, UH, MORE RECENTLY I'VE BECOME THE VICE PRESIDENT OF THE BOARD OF DIRECTORS OF THE ABL CORPORATION.

SO THAT'S WHO I AM.

AND I'M JOINED TODAY BY MY COLLEAGUE AT THE DEPARTMENT OF AVIATION RAJIV THOMAS WHO'S, OUR AIRPORT, DEPUTY CHIEF OF FINANCE.

WE HAVE A VERY SHORT PRESENTATION THIS MORNING, UH, FOR THE BENEFIT OF THE COMMITTEE.

IT'S BASICALLY FOCUSED ON THE TWO RCAS THAT ARE PENDING FOR CITY COUNCIL MEETING ON JUNE THE THIRD RELATED TO THE HILTON HOTEL REZ RESILIENCY PROGRAM.

SO WE WANTED TO UPDATE YOU, UH, AND ANSWER ANY QUESTIONS THAT THE COMMITTEE MAY HAVE REGARDING THESE TWO RCA ACTION ITEMS, KNOWING THAT WE ARE PLEASED TO COME BACK TO THIS COMMITTEE AND TO COUNCIL IN THE FUTURE TO TALK ABOUT OTHER ITEMS RELATED TO THE ABEL HOTEL ENTERPRISE PHASE, TO DO THAT IN THE FUTURE.

SO WE'RE GOING TO TRY TO BE SUCCINCT TODAY OR THIS COMMITTEE'S BENEFIT.

UM, NEXT SLIDE PLEASE.

I WAS ASKED, UH, WHEN I JOINED THE AIRPORT LAST SUMMER, UM, I WON ONE OF MY FIRST JOBS WAS TO COME UP WITH A PROGRAM ALONG WITH MY COLLEAGUES AND TEAM.

THIS WAS NOT ME ALONE.

OUR TEAM WAS ASKED TO PUT TOGETHER A, A FINANCIAL ANALYSIS OF THE HOTEL OPERATIONS IN A COVID ENVIRONMENT, SIMILAR TO WHAT WE HAD TO DO AT THE AIRPORT FOR OUR AIRLINES OR RENTAL CARS OR CONCESSIONAIRES EVERY BUSINESS AT THE AIRPORT WAS STRUGGLING AS A RESULT OF THE IMPACTS OF COVID.

SO WE FIRST DUG INTO THE HOTEL AND ITS OPERATIONS, UM, MAINLY FROM A FINANCIAL STANDPOINT TO LOOK AT WHAT TYPE OF BUSINESS CONTINUITY PROGRAM COULD WE PUT TOGETHER TO HELP SUSTAIN THIS ASSET OF THE CITY OF AUSTIN THROUGH THE PANDEMIC CRISIS SITUATION.

UM, THROUGH THAT PROCESS OF LOOKING AT HOW WE COULD SUSTAIN THE HOTEL ENTERPRISE,

[00:25:01]

WE ALSO UNCOVER THAT THERE WERE SOME GOVERNANCE ISSUES AND SOME CLEANUP THAT WE NEEDED TO DO, UM, WITH RESPECT TO ARTICLES OF INCORPORATION AND BYLAWS.

AND SO, UM, THOSE ACTION ITEMS HAVE PREVIOUSLY COME TO THE COUNCIL HAD BEEN APPROVED.

SO WHAT'S LEFT TO BE, UM, RESOLVED IS TO, UM, GET APPROVAL FOR THE AMENDMENT, TO OUR BYLAWS, FOR THE ABEL CORPORATION THAT ACCURATELY REFLECT WHAT THE ARTICLES OF INCORPORATION, UM, UH, DESIGNATE.

AND THE SECOND COMPONENT IS THE LOAN AGREEMENT.

THE LOAN AGREEMENT IS A CRITICAL COMPONENT OF THE AIRPORTS, UH, PROGRAM FOR THE RESILIENCY OF THE AUSTIN HOTEL AT THE AIRPORT.

SORRY.

SO FOR A LITTLE BIT OF CONTEXT, AND I'M GOING TO TURN THE MIC OVER TO RAJEEV HERE IN JUST A SECOND, FOR THOSE WHO MIGHT NOT BE FAMILIAR.

UM, ABEL, WHICH IS THE ACRONYM FOR AUSTIN BERGSTROM FROM LAND HOUSE ENTERPRISES WAS DEVELOPED BY THE CITY OF AUSTIN IN 1998 FOR THE PURPOSE OF THE, UM, HOTEL AT THE LOCATED AT THE AIRPORT PROPERTY.

SO THE CORPORATION ACTUALLY OPERATES THIS HOTEL.

THESE ARE THE PRIMARY CONTRACTS FOR HOTEL OPERATIONS.

THERE IS A SEPARATE FRANCHISE AGREEMENT FROM THE MANAGEMENT AGREEMENT.

SO THE BRAND IS HILTON, UH, THROUGH A FRANCHISE AGREEMENT.

AND THEN THERE'S A SEPARATE MANAGEMENT AGREEMENT WITH BOYKIN PROSPERA, WHICH WE REFERRED TO AS PROSPERA THE OTHER THREE PRIMARY DOCUMENTS THAT GOVERNED THE OPERATIONS OF THIS HOTEL OR THE GROUND LEASE WITH THE CITY OF AUSTIN, THE GRANT AGREEMENT, THAT WAS PART OF THE BOND INDENTURE THAT WAS, UM, RESTRUCTURED IN 2017.

AND OF COURSE OUR 2017 BOND INDENTURE WITH THE TRUSTEE ISSUE IS BANK.

SO THOSE ARE THE PRIMARY, UH, CONTROLLING DOCUMENTS FOR WHICH WE HAVE, UH, DEVELOPED OUR RESILIENCY PROGRAM.

NEXT SLIDE, PLEASE.

THIS IS THE LAST LOT I WILL SPEAK TO.

UM, IF YOU LOOK ACROSS THE TOP OF THE, OF THIS SLIDE, YOU'LL SEE THAT THE TOTAL PASSENGERS FOR AUSTIN BERGSTROM INTERNATIONAL AIRPORT IN 2020 DROPPED 63% FROM THE 2019 NUMBERS.

SIMILARLY, THE HILTON HOTEL REFLECTED AT THE BOTTOM OF THIS SLIDE, HILTON HOTEL OCCUPANCY, AND THE CORRESPONDING REVENUES DROPPED 60%.

SO THE HILTON HOTEL IS, UH, NOT ONLY COMPETES WITH, OF COURSE THE OTHER HOTELS WITHIN THE AUSTIN COMMUNITY, BUT ALSO IS, UH, ALMOST A DIRECT REFLECTION OF HOW WELL THE AIRPORT IS, UM, IS, UM, DOING WITH RESPECT TO THE COVID IMPACTS.

SO AS WE HAD A REDUCTION IN OUR PASSENGER COUNTS, THE HILTON HOTEL AT THE AIRPORT, UH, WAS A CORRESPONDING.

THEY HAVE LARGE CREW, UH, CONTRACTS WITH AIRLINES FOR CRUISE STAYS.

AND SO THEIR, UM, OCCUPANCY ALSO DROPPED THEREFORE REQUIRING A BUSINESS CONTINUITY PLAN.

SO WITH THAT KIND OF IS JUST CONTEXT.

I'M GOING TO TURN THE MIC OVER TO RAJIV THOMAS, WE'LL TALK A LITTLE BIT ABOUT THE DETAILS OF THE LOAN AGREEMENT, WHICH ARE, UH, AND THE DETAILS OF THAT.

UH, AND THEN WE'LL BE PLEASED TO ANSWER ANY QUESTIONS AT THE END OF THE PRESENTATION.

THANK YOU VERY MUCH.

GOOD MORNING, COUNCIL MEMBERS.

MY NAME IS RAJEEV THOMAS, UH, DEPUTY CHIEF OF FINANCE WITH THE AIRPORT.

UH, IF YOU GO TO THE NEXT SLIDE, PLEASE.

OKAY.

SO BACK IN MID 2020, WHEN THE PANDEMIC, UH, YOU KNOW, WAS AT ITS WORST AND TRAFFIC AT THE AIRPORT WAS DOWN BY 90%, ET CETERA.

UH, THE OCCUPANCY LEVELS AT THE HOTEL WERE DOWN TO ABOUT 20%.

YOU KNOW, THAT THE HOTEL IS REALLY KIND OF VERY CLOSELY CORRELATED, UM, TO WHAT HAPPENS AT THE AIRPORT, UM, SINCE IT'S ON THE SAME PROPERTY.

AND SO, YOU KNOW, WE WERE LOOKING AT FINANCIAL PROJECTIONS AND WHAT OUR CASH RESERVES WOULD BE, UH, GOING FORWARD AND HOW LONG THE CASH THE OPERATING CASH W HAD WOULD LAST.

AND WHEN WE MADE THOSE CALCULATIONS BACK IN MAY, 2020, UH, WE REALIZED THAT WE WERE GOING TO RUN OUT OF MONEY IN THE OPERATING ACCOUNT BY FEBRUARY OF 2020.

AND WE PRESENTED THIS TO THE RATING AGENCIES TOO.

AND, UH, THIS IS WHEN WE DECIDED THAT WE NEED A, ANOTHER TYPE OF, UH, YOU KNOW, FUNDING SOURCE, UH, TO GET THE HOTEL THROUGH, UH, THE PANDEMIC, UM, UH, YOU KNOW, UNLIKE SOME OTHER HOTELS, YOU KNOW, WHICH WERE ABLE TO SHUT DOWN ITS OPERATIONS, UH, CLOSE THE DOORS.

THIS HOTEL HAS, UH, CONTRACTS WITH THE AIRLINES FOR THEIR CREW, UH, FOR THE OVERNIGHT STAYS.

SO THEY HAD TO STAY OPEN TO HONOR THOSE CONTRACTS AND, YOU KNOW, THEY HAVE TO ACTUALLY EVEN KEEP THE RESTAURANTS OPEN TO, TO, TO HAVE, UH, AVAILABLE FOOD FOR THOSE, UH, FLIGHT ATTENDANTS AND THE PILOTS NOW THAT STAY OVERNIGHT.

SO THERE IS A LOT THAT YOU CANNOT DO IN TERMS OF WHAT OTHER, UH, WHAT ELSE CAN DO.

SO, BUT STILL, UH, WHAT WE DID WAS WE, WE REDUCED THE OPERATING EXPENSES BY 44% LAST YEAR, WE DID THIS, OBVIOUSLY, YOU KNOW, AS THE DEMAND WENT

[00:30:01]

DOWN, WE HAD TO DO REDUCTIONS IN STAFF.

UH, WE RE RENEGOTIATE, WE TRIED TO RENEGOTIATE SOME CONTRACTS.

WE EVER USED THE SCOPE OF SOME OF THE, UH, WORK, UM, THAT FOR EXAMPLE, THEY'RE DOING ET CETERA.

AND WE ALSO POSTPONED SEVERAL CAPITAL PROJECTS AND SOME SERVICES TO, AND ONE OF THE OTHER THINGS THAT WE GOT FROM PROSPERO WAS, UH, YOU KNOW, THE, THEY WAY THEIR FEES, UM, LATE, I THINK, FOURTH QUARTER OF 2020, UM, THEY ARE ONLY CHARGING 50% OF WHAT THEY WERE CHARGING BEFORE ABOUT $18,000 A MONTH VERSUS ABOUT $37,000 A MONTH.

AND THEY DID THAT FOR SIX MONTHS TO KIND OF HELP THE HOTEL, UM, DURING THAT TIME.

BUT WE KNEW THAT, YOU KNOW, EVEN WITH ALL THOSE MEASURES, YOU KNOW, THERE WASN'T ENOUGH MONEY TO PAY, UM, ALL THE EXPENSES THAT WE NEEDED TO PAY.

SO SOME OF THE INVOICES WERE DEFERRED.

AND I THINK I MENTIONED THIS BEFORE, YOU KNOW, WE, WE DEFER, UH, THE INVOICES TO HILTON.

WE DISPERSE THE INVOICES TO PROSPERA.

UH, THOSE HAVEN'T BEEN PAID FOR AWHILE, AND ALSO WE DEFERRED OUR PAYMENTS TO HARDY PARTNERS, UH, AND, UH, GREG MILLIGAN AND ALSO TO OUR, OUR OUTSIDE LEGAL COUNSEL TO, SO THOSE HAVEN'T, SO THOSE BILLS HAVEN'T BEEN PAID SINCE MARCH FOR APRIL OF LAST YEAR.

UM, SO THIS OPERATING LOAN WAS TO KIND OF HELP CATCH UP ON PAYING ALL THOSE BILLS.

UH, THE, ANOTHER COMPONENT OF WHAT WE ARE FINDING OUT IS THAT WE HAVE ESSENTIALLY RUN OUT OF MONEY IN OUR ADMIN FEE FUND.

UH, WE HAVE, UM, ITEMS THAT ARE DUE PER THE BOND, UM, IN DANGER AND THE, THE, I MEAN, THE TRUST INDENTURE THAT, UH, ANNUAL REPORTS THAT WE HAVE TO SUBMIT TO THE, UM, TO THE BOND TRUSTEE, WHICH WE ENABLE WE ARE NOT ABLE TO DO RIGHT NOW BECAUSE OF, UH, THERE'S NOT ENOUGH MONEY IN OUR ADMIN FEE FOR FIND THERE'S ONLY $1,500 LEFT IN, IN THERE.

AND, UH, SO THIS OPERATING LOAN IS SUPPOSED TO HELP PAY FOR ALL OF THOSE CALLS GOING FORWARD.

UM, AND YOU KNOW, MEDIATOR, UH, WE ALSO, UH, RECEIVED THE PPP ONE LOAN, WHICH WAS ABOUT $907,000.

WE USE THAT MONEY TO REHIRE ABOUT 75, UM, PERSONNEL BACK TO DO SOME PROJECTS AROUND THE AIRPORT.

I MEAN, SORRY, AROUND THE HOTEL.

AND YOU CAN SEE THERE'S ABOUT, YOU KNOW, THEY IDENTIFIED ABOUT 46 PROJECTS AND ABOUT 22,440 IN WORK HOURS, HOURS.

BUT MOST OF THAT PPP LOAN, 83% WAS USED TOWARDS PAYROLL EXPENSES.

THE REST OF IT WAS USED TOWARDS UTILITIES LIKE ELECTRICITY AND WATER UTILITIES, UM, AS, UM, STATED BY THE FBA ON, IN THE SMALL BUSINESS ASSOCIATION ON WHAT YOU CAN USE THE, THOSE FUNDS FOR.

SO WE EXPECT THAT WHOLE $907,000 TO BE FORGIVEN.

WE HAVE, WE ARE SUBMITTING AN APPLICATION TO CHASE BANK.

WE, UM, RECEIVED THE FUNDS FROM, UH, FOR FULL FORGIVENESS OF THAT $907,000.

AND WE SHOULD RECEIVE AN ANSWER BACK IN ABOUT SIX WEEKS OR SO.

IT WAS WHAT PEOPLE, UM, AND ALSO WE APPLIED FOR PPP TWO LOAN THIS YEAR.

SO WE RECEIVED 1.27 MILLION IN PPP TO LOAN ALSO, WHICH IS ALSO GOING TO BE USED, UH, MOSTLY ALL TOWARDS PAYROLL, AS MUCH AS WE CAN.

YEAH.

NEXT SLIDE PLEASE.

UM, A COUPLE OF THINGS REGARDING, UH, YOU KNOW, WHAT I MENTIONED TO YOU BEFORE REGARDING THE ADMIN FEE FUND, AND THERE ARE ITEMS OF THE ADMIN FEE FUND THAT WE NEED TO PAY OUT OF THAT WE ARE NOW OUT OF FUNDS IN THAT FORM.

UM, FOR EXAMPLE, THE HOTTIE PARTNERS INVOICE, UH, TH THAT GETS PAID OUT OF THE ADMIN FEE.

I DON'T KNOW, YOU PROBABLY CANNOT SEE THE FLOW OF FUNDS VERY CLEARLY, BUT IT'S NOT THROUGH THE ONM EXPENSES.

THEN THERE'S A REBATE FUND AND THERE'S AN ADMIN FEE FUND THAT IS A THIRD, UM, BUCKET IN THAT, YOU KNOW, FLOW FUNDS RIGHT THERE.

AND, UH, ALSO THE, THE CONSULTANT REPORTS THAT IS DUE TO THE BOND TRUSTEE, WHICH IS THERE'S A CONSULTING ENGINEER'S REPORT THAT WE HAVE TO SUBMIT ANNUALLY.

AND ALSO THERE'S A REVENUE CONSULTANT REPORT THAT KIND OF STATES, YOU KNOW, HOW MUCH REVENUE YOU NEED TO COLLECT TO MEET THE RATE COVENANT IN THE COMING YEAR, ET CETERA.

SO THOSE ARE REQUIREMENTS IN, UH, BASED ON THE BOND INJURED IN DANGER THAT GETS PAID OUT OF THE ADMIN FEE FUND.

UH, IN ADDITION TO THAT, UM, AS YOU ALL KNOW, PROBABLY, UM, WE HAVE A GRANT AGREEMENT WITH ABEL WHERE, UM, IF THE DEBT SERVICE RESERVE FUND IS DIP INTO TO PAY THE DEBT SERVICE PAYMENT, WE HAVE TO REPLENISH THAT THE AIRPORT HAS TO REPLENISH THAT.

SO WE DID MAKE A PAYMENT INTO THAT, THAT SERVICE RESERVE ON NASA, OCTOBER 1ST, 2020 FOR $1.5 BILLION.

UH, IT WAS AGAIN

[00:35:01]

DRAWN FOR $1.08 MILLION IN APRIL ONE OF 2021.

SO THAT PAYMENT IS PENDING, BUT THAT IS COMING OUT OF THE AIRPORTS, UM, ACCOUNTS.

AND WE ALSO ANTICIPATE, UH, THAT, UH, WE WOULD HAVE TO MAKE THE OCTOBER 1ST 20, 21 PAYMENT, THE APRIL 1ST, 2022 PAYMENT, BECAUSE WE DON'T FEEL THERE WILL BE SUFFICIENT CASH FLOW, UH, THAT WOULD, UH, THAT, YOU KNOW, THAT WOULD FLOW INTO THAT SENIOR DEBT SERVICE FUND ACCOUNT TO PAY THE DEBT SERVICE PAYMENT, UM, WITHIN THAT TIMEFRAME.

UM, SO, SO I MEAN, THOSE, YOU KNOW, THOSE EXPERTS, SO THOSE ARE KIND OF ANTICIPATED BY THE AIRPORT AND, YOU KNOW, WE'VE ALREADY COMMUNICATED THAT TO THE CONTROLLER'S OFFICE, ET CETERA, THAT WE EXPECT TO MAKE THE PAYMENT.

AND IF YOU LOOK AT THE CURRENT OCCUPANCY LEVEL AT THE HOTEL IN MARCH AND APRIL, IT'S ABOUT 50 TO 60%.

SO IT IS NOW AT A BREAKEVEN POINT, BUT IT DOESN'T GENERATE ENOUGH EXCESS CASH TO BE ABLE TO GO BACK AND MAKE THE PLANS THAT ARE PAST DUE, YOU KNOW, DOES IT PROVIDE ENOUGH SUFFICIENT CASH FLOW, UH, TO FILL THIS DEBT SERVICE, UH, SENIOR DEBT SERVICE FUND.

SO, I MEAN, THAT'S SORT OF THE SITUATION THAT THE HOTEL IS IN.

UH, SO THAT'S WHY IT IS, YOU KNOW, OPERATING LOAN KIND OF HELPS THEM MEET THOSE PRIOR OBLIGATIONS.

AND THEN, YOU KNOW, AS THEY BREAK EVEN HOPEFULLY, YOU KNOW, THE TRAFFIC TRENDS HIGHER, UM, AND THEY BREAK EVEN, THEY'RE ABLE TO MEET ALL THE CURRENT OBLIGATIONS OUT OF THE OPERATING FUND GOING FORWARD, AND MAYBE SOMEBODY WILL START TRICKLING INTO THESE OTHER ACCOUNTS THAT NEED TO, UH, SHOULD BE FUNDED.

UM, UH, TRACY ALREADY MADE, I MENTIONED ABOUT THE, YOU KNOW, THE GOVERNANCE AND THE AMENDED BYLAWS.

AND SO LET ME JUST GET TO THE NEXT SLIDE AND TALK ABOUT THE LOAN AGREEMENT.

OKAY.

SO, UM, WE DID APPROVE A NEW BUDGET.

UM, WERE THEY ABLE TO BOARD OF DIRECTORS AS OF MAY 17, THERE WAS AN ORIGINAL BUDGET THAT WAS DONE IN MARCH, BUT THAT WAS KIND OF PUT TOGETHER BEFORE WHAT WE S WE SAW THE TRIBAL REBOUND IN MARCH AND APRIL.

SO WE PUT A TICKET IN AN AMENDED BUDGET THAT WAS APPROVED BY THE BOARD OF DIRECTORS, BUT WHEN WE LOOK AT THE FULL YEAR OCCUPANCY LEVELS AND THE REVENUE PROJECTIONS, WE STILL FEEL LIKE, YOU KNOW, YOU NEED THE OPERATING LOAN BECAUSE THE OCCUPANCY LEVEL REALLY, UH, THE EXPECTED OCCUPANCY LEVELS, WE ARE STILL X, YOU KNOW, WE THINK IT IS GOING TO BE IN THE 60% LEVELS RATHER THAN 80%, UM, OCCUPANCY LEVELS WHEN IT WAS BACK IN 2018 BEFORE THE PRE PANDEMIC.

SO WE'RE NOT QUITE BACK TO FULL RECOVERY, AND WE DON'T EXPECT TO BE BACK TO FULL RECOVERY TOOL THE YEAR 2010, 22.

UM, SO THE LOAN AGREEMENT, UM, THE PURPOSE OF IT IS AN ASSURANCE TO THE BOND TRUSTEE AND EXTERNAL AUDITORS THAT ABEL WILL REMAIN A GOING CONCERN BECAUSE, UM, YOU KNOW, THE AUDITOR'S HAD HAD, UM, AT SOME TIMES ABOUT, ABOUT ABEL AS A GOING CONCERN BECAUSE OF THE CASHFLOW ISSUES THAT IT WOULD PHASE IN THE COMING YEAR.

SO THIS OPERATING LOAN WAS ALSO AN ASSURANCE TO THE, TO THE AUDITORS THAT, YOU KNOW, WE CAN FUND THE, THE OPERATING EXPENSES, UM, WITH WHAT WE GET FROM THE PPP LOANS AND ALSO FROM THE OPERATING LOAN, UM, AS IF NEEDED, BECAUSE THERE'S A LINE OF CREDIT IN THAT, UH, OPERATING LOAN COMPONENT THAT I'LL GET TO IN A SECOND.

AND THEN, YOU KNOW, AS I MENTIONED BEFORE, RETOOL PAY IN THE OPERATING BUDGET, UH, THE VENDORS AND SUPPLIERS THAT I MENTIONED BEFORE, UH, SOME OF THE PROFESSIONAL SERVICES, AND THEN IT WILL ALSO AUGMENT THE PPP LOAN PROCEEDS AND WHAT IT IS KIND OF PROVIDING, IT'S SORT OF LIKE A BRIDGE LOAN TILL THE YEAR 2022, BEFORE WE SEE THE FULL OCCUPANCY LEVELS RETURN.

AND IT IS JUST TO MAKE SURE THAT IT HAS THE HOTEL AS A FINANCIAL LIFELINE TO GET THROUGH THIS PANDEMIC.

UM, IF YOU GO TO THE NEXT SLIDE, PLEASE.

SO THE STRUCTURE OF THIS LOAN AGREEMENT, IT IS, IT IS FOR A FULL AMOUNT OF $2.6 MILLION.

WE EXPECT THE INITIAL DRAW TO BE ABOUT $1.3 MILLION OR SO TO MAKE SURE THAT, YOU KNOW, ALL THE PRIOR OBLIGATIONS ARE MET.

AND THEN, YOU KNOW, THERE IS A 1.2, 5 MILLION AS A, AS A LINE OF CREDIT THAT, UM, THAT IS GOING TO BE DRAWN ON JUST BASED ON WHAT THE HOTEL SUBMITS TO THE AIRPORT, UH, IN TERMS OF THEIR PROJECTIONS FOR THE COMING QUARTER.

SO THEY ARE GOING TO, WE ARE GOING TO LOOK AT, UM, THE FORECAST FOR THE HOTEL, UM, ON A QUARTER BY QUARTER BASIS AND SEE WHETHER THERE IS ANY NEED FOR ANY ADDITIONAL AMOUNTS OTHER THAN THE INITIAL DRAMA.

AND THE LOAN INTEREST RATE IS 2%.

IT WAS BASED ON A, A, A, THE FED FEDERAL RESERVE RATES.

OR IF YOU LOOK AT THE FEDERAL RESERVE

[00:40:01]

RATES FOR A FIVE-YEAR LOAN, IT IS RIGHT BELOW 1%.

AND A SEVEN YEAR LOAN IS ABOUT 1.3% IS WHAT IS THE AVERAGES? SO IT HAS A LITTLE BIT OF A RISK PREMIUM IN THERE THAT TAKES IT TO 2%.

AND THEN THE PAYMENTS START IN APRIL 1ST OF 2024, AS STARTED AS AN INTEREST ONLY PAYMENTS.

AND THEN IN APRIL 1ST OF 2025 TO MARCH 31ST OF 2028, YOU GET THE PRINCIPAL AND INTEREST PAYMENTS.

SO WHAT THAT ALLOWS THE HOTEL TO DO IS START REPLENISHING SOME OF THOSE THAT SERVICE FUND BUCKETS THAT IS THE DEBT SERVICE FUND, AND ALSO THE DEBT SERVICE RESERVE FUND BUCKETS, UM, UM, UH, BEFORE THEY HAVE TO PAY THE LOAN BACK.

SO, UM, THAT'S, THAT WAS THE END OF MY PRESENTATION.

SO, YOU KNOW, UH, WHEN WE CAN TAKE ANY QUESTIONS, YOU'D LIKE, THANK YOU, THANK YOU.

IF WE CAN, THERE WE GO.

UM, COLLEAGUES, DO FOLKS HAVE ANY QUESTIONS? THAT'S A MEMBER OF QUANTIS.

THANK YOU.

AND THANK YOU FOR THE PRESENTATION.

UM, MY QUESTION IS ABOUT THE SECOND PPE LOAN.

YOU MENTIONED THAT THE INTENTION IS TO SPEND THAT F Y 21.

UM, HAVE YOU, HOW HAVE WE RECEIVED THE, THE PP, THOSE, THE FUNDS YET? ARE THEY, YEAH, WE HAVE RECEIVED IT.

YEAH.

OKAY.

SO IT IS GOING TO GO TOWARDS JUST LIKE THE DPP ONE LOAN, MOSTLY TOWARDS PAYROLL 80.

I MEAN, THE PROJECTION IS THAT 80 SOMETHING PERCENT WILL BE TOO EXPENSIVE.

SO IF THAT, IF THAT LOAN IS GOING TO PAYROLL, WHAT DO WE HAVE? LIKE A BETTER, IF I COULD GET A BETTER UNDERSTANDING OF HOW THIS OPERATING LOAN WOULD HELP SUPPLEMENT THE OTHER COSTS THAT ARE OWED, UM, THAT WOULD BE HELPFUL.

AND I KNOW YOU HAVE A SLIDE THERE THAT KIND OF BROKE IT DOWN, BUT IT WAS, YEAH.

SO, SO LET ME, LET ME ALSO BRING UP ANOTHER POINT.

UM, YOU KNOW, AS, AS YOU PROBABLY KNOW, MOST BUSINESSES AROUND THE CITY ARE HAVING A LOT OF TROUBLE REHIRING EMPLOYEES RIGHT NOW, RIGHT? UH, OUR CONCESSIONS ARE, THE AIRPORT IS REALLY HAVING A HARD TIME TO THAT.

LIKEWISE, THE HOTEL, WHAT THE HOTEL IS TELLING US IS THAT THEY ARE GOING TO HAVE TO INCREASE THEIR MINIMUM WAGES THERE AND START HIRING, UM, AND START OFFERING $14 AND ABOVE.

SO THAT IS ALSO ADDING AN EXTRA COST TO THE PAYROLL EXPENSES IN THIS COMING YEAR.

SO WE HOPE THAT THIS PPP ONE LOAN WOULD HELP, UH, YOU KNOW, SUPPLEMENT SOME OF THOSE INCREASES IN THE PAYROLL COSTS THAT WE ARE EXPECTING TO INCUR THE CO2.

OKAY.

OKAY.

AND THEN IF YOU COULD JUST WALK US THROUGH, AND I'M GLAD TO HEAR THAT WE'RE RAISING WAGES CERTAINLY WANT TO GET TO, TO MARKET WAGES AND, AND LIVABLE WAGE.

SO THAT'S GREAT NEWS, UM, AND DEFINITELY NEEDED.

AND SO, UM, SO THEN THE, I KNOW IT'S ON COUNCIL AGENDA FOR NEXT WEEK FOR US TO APPROVE THE OPERATING LOAN.

AND SO I JUST WANNA UNDERSTAND IF THERE'S ANY, UM, IF THERE'S ANY OTHER LIKE TIME SENSITIVITY OR RISKS THAT WE SHOULD BE AWARE OF.

UM, YEAH.

YES.

I MEAN, THE TIME SENSITIVITY IS REGARDING, YOU KNOW, WHAT, WHAT I MENTIONED BEFORE, UH, REGARDING THE DOCUMENTS THAT WE HAVE TO PROVIDE TO THE BOND TRUSTEE, THOSE ARE ACTUALLY PASSED YOU.

UM, THEY WERE DUE THIS MONTH, UM, AND WE DON'T HAVE THE MONEY IN THAT BIN FEE TO, TO PRODUCE THE CONSULTANT REPORT OR THE CONSULTING ENGINEER'S REPORT THAT IS DUE ANNUALLY.

UM, SO YOU KNOW, THAT, THAT IS, THAT, YOU KNOW, PUTS US IN NONCOMPLIANCE WITH THE TRUST IN DANGER RIGHT NOW.

UM, SO, YOU KNOW, THAT IS ONE OF THE THINGS THAT WE HAVE TO CONSIDER, UH, PLUS THE OTHER RISK, YOU KNOW, THAT WE TALKED ABOUT EARLIER WAS, UM, YOU KNOW, WE HAVE NON-PAYMENT, WE HAVE ALSO INCURRING LATE FEES WITH HILTON.

UM, WE WE'VE ALREADY INCURRED OVER $3,000 IN LATE FEES WITH HILTON BECAUSE WE, YOU KNOW, AND, UH, YOU KNOW, WE, YOU KNOW, ONE OF OUR, OUR, UM, POINTS TO THEM WAS THAT WE HAD THIS OPERATING LOAN COMING, YOU KNOW, HOPEFULLY, AND THEN WE WOULD CATCH UP ON ALL THOSE PAYMENTS.

SO I DON'T KNOW HOW LONG THEY WOULD GO BACK.

UM, YOU KNOW, UH, THERE IS ISSUES WITH COLLECTION AGENCIES THAT THEY CAN SEND THIS TO IF THEY FEEL LIKE, YOU KNOW, UM, YOU KNOW, MAKING THE PAYMENTS.

SO ALL THOSE RISKS IS STILL THERE, BUT I WOULD SAY THE BOND IN DANGER AND MEETING THE, UH, AND BEING COMPLIANT WITH THE, UH, THE BOND IN DANGER IS RIGHT UP THERE.

GOTCHA.

THANK YOU.

SO, UM, MR. DAVIS, THIS IS A LOAN FROM THE DEPARTMENT OF AVIATION TO THE, AND THOSE FUNDS ARE NOT PART OF THE GENERAL FUND THEY'RE PART OF THE ENTERPRISE FUND.

THAT IS

[00:45:01]

THE AIRPORT, CORRECT? THAT'S CORRECT.

AND FROM THE AIRPORT SIDE OF IT, FROM THE AVIATION DEPARTMENT WHERE THOSE FUNDS COMING FROM, THEY'RE COMING FROM THE OPERATING BUDGET, IT'S COMING FROM OUR SURPLUS CAPITAL FUND.

UM, WE DO HAVE, UM, YOU KNOW, WE HAVE ABOUT 170 MILLION IN THERE CURRENTLY AS A BALANCE.

UM, SO THAT IS OUR, OUR SORT OF AFTER THE OPERATING EXPENSES, THAT'S WHERE ALL OUR FUNDS KIND OF FLOW INTO.

AND IT'S THE FUNDING THAT WE HAVE FOR EXPANSION, ET CETERA.

I MEAN, IT'S NOT, I MEAN, YOU HAVE TO HAVE ENOUGH FUNDS IN THERE TO BE ABLE TO PULL OFF THE EXPANSION.

I MEAN, IT'S NOT, YEAH.

I MEAN, IT, IT, YOU KNOW, SO, YOU KNOW, IT'S, IT'S SORT OF, YOU KNOW, WE WANT THOUGH, I MEAN, WE DON'T SEE ANOTHER ALTERNATIVE.

RIGHT, RIGHT NOW, IF THERE WAS ANOTHER ALTERNATIVE THAT WE COULD GO WITH, DEFINITELY, YOU KNOW, WE WOULD, BUT, UH, I MEAN, THIS LOAN WOULD BE PAID BACK, RIGHT.

WE EXPECT IT TO BE PAID BACK AND WE, AND ONE OF THE OPTIMISM WE HAVE ABOUT THE HOTEL IS THIS AREA AROUND THE AIRPORT, YOU KNOW, IT'S REALLY GOING THROUGH A REVITALIZATION WITH THE TESLA PLANT NEARBY AND SOME OF THE INTEREST IN THE DEVELOPMENT.

SO WE FEEL LIKE THE HOTEL WILL DO WELL IN THE FUTURE JUST BECAUSE THE ECONOMIC CONDITIONS AROUND THE AIRPORT SHOULD IMPROVE.

SO, YOU KNOW, YOU KNOW, IT'S TO, IS TO KIND OF FOSTER, UH, THE ABILITY TO SERVE THE AIRLINES.

YOU KNOW, THE HOTEL ALSO SERVES AS A, AS A, AS A, UM, HELPED FOR THE AIRPORT.

YOU KNOW, WHEN WE HAVE THE SPECIAL, I MEAN, THE WEATHER EVENT BACK IN FEBRUARY, WE WERE ABLE TO, YOU KNOW, A LOT OF OUR, OUR, UH, STAFF AT THE STAY OVERNIGHT AT THE AIRPORT FOR FOUR OR FIVE DAYS, AND WE WERE ABLE TO PUT THEM UP AT THE HOTEL, WHICH IS RIGHT ON THE PROPERTY.

SO, YOU KNOW, THERE'S A LOT OF, YOU KNOW, WHAT DO YOU CALL IT, SYMBIOSIS BETWEEN THE AIRPORT AND THE HOTEL THAT, YOU KNOW, YOU'RE TRYING TO ACCOMPLISH HERE, APPRECIATE THAT THIS IS A USEFUL CONVERSATION FOR US TO BE, TO HAVE THE OPPORTUNITY TO HAVE SEPARATE FROM JUST MEMOS FLYING AT US, OR I THINK WE GOT, I KNOW THAT I HAVE MUCH BETTER IDEA OF THE FINANCIAL CHALLENGES THAT YOU'RE TRYING TO SOLVE, UM, WITH THIS, UH, COUNCIL MEMBER TOTO, DID YOU STILL HAVE A QUESTION? I DID.

THANKS.

UH, JUST A QUICK ONE ON SLIDE FIVE, YOU'VE TALKED ABOUT 46 PROJECTS, AND I APOLOGIZE IF I MISSED YOUR EXPLANATION OF WHAT SOME OF THOSE WERE, BUT I WONDERED IF YOU COULD IDENTIFY FOR US WHAT, WHAT SOME OF THE PROJECTS WERE THAT, THAT THE STAFF THAT WERE IDENTIFIED FOR STAFF TO WORK ON DURING THE PERIOD OF TIME WHERE WE'RE, OUR DEMAND IS LOW.

YEAH.

I MEAN, FROM MY UNDERSTANDING, AND I CAN, YOU KNOW, MAYBE REPLY BACK TO YOU WITH A LITTLE BIT OF DETAIL AFTER I GET BACK FROM THE MANAGEMENT COMPANY, BUT, UH, THERE WERE SOME SORT OF, YOU KNOW, ENDINGS AND, YOU KNOW, FIX UPS THAT THEY NEEDED TO DO AT THE HOTEL, LIKE WHITEWASHING THE OUTSIDE OF THE, UH, THE BUILDING, FOR EXAMPLE, I REMEMBER THAT WAS ONE OF THE THINGS THAT THEY DID, UM, ET CETERA.

SO IT'S, I MEAN, I KNOW ALL THE PROJECTS, BUT I CAN GIVE YOU A LIST OF IT, YOU KNOW, AFTER THE MEETING.

YEAH, SURE.

THANKS.

THERE MAY BE.

MAYBE WE COULD TREAT IT AS A Q AND A FOR THE COUNCIL WHEN IT COMES FORWARD FOR THE COUNCIL.

THAT WOULD BE, THAT'D BE USEFUL JUST TO GET A SENSE OF THE KIND OF WORK THAT'S BEEN DONE ON THE HILTON, UM, AS PART OF THE INTEREST IN LEARNING PEOPLE BACK.

SO THANKS.

THANKS VERY MUCH.

YEAH.

AND MAYBE WE CAN, UM, PUT THIS PRESENTATION, UM, BOTH THE, YOU KNOW, THE, THE SLIDES, BUT THEN MAYBE ALSO JUST A NOTE THAT THIS WAS DISCUSSED AT THIS TIME AT AUDIT AND FINANCE IN THE BACKUP, UM, FOR THOSE ITEMS IN CASE OTHER FOLKS ARE IN NEED OR DESIRE OF, UM, ADDITIONAL INFORMATION.

I THINK THERE WAS A LOT OF INFORMATION IN THE PRESENTATION THAT WASN'T NECESSARILY ON THE SLIDES THAT FOLKS MAY FIND HELPFUL IF THEY HAVE HAVE QUESTIONS.

UM, ARE THERE FURTHER QUESTIONS, COUNCIL MEMBER POOL? THIS IS JUST A GENERAL COMMENT TO MY COLLEAGUES ON THE AUDIT AND FINANCE COMMITTEE.

YOU REMEMBER AT OUR LAST MEETING, I MENTIONED THAT I HAD ASKED STAFF TO GET US AN INVENTORY OF THE DIFFERENT, THE VARIOUS DIFFERENT ENTITIES THAT THE CITY OF AUSTIN HAS, THAT ARE EITHER CREATED BY THE COUNCIL, UM, UNDER A SPECIFIC STATUTORY AUTHORITY, LIKE A LGC A LOCAL GOVERNMENT CORPORATION OR CREATED BY COUNCIL OUTSIDE OF CHAPTER TWO, ONE OF THE CODE AND ENTITIES OR ENTITIES THAT ARE CREATED WITH OTHER GOVERNMENTAL ENTITIES, LIKE THE SOBERING CENTER WOULD BE ONE OF THOSE AND BALCONIES CANYON LANDS WOULD BE ANOTHER ONE ENTITIES CREATED BY HOUSING FINANCE CORPORATION.

AND IT LOOKS LIKE THE LAST CATEGORY ENTITIES CREATED

[00:50:01]

BY A STATE OR FEDERAL LAW AND THE COUNCIL OF POINTS MEMBERS TO THAT ENTITIES, A BOARD.

SO I NOW, UM, DO YOU HAVE TO LISTEN, I REALLY APPRECIATE STAFF DIGGING DEEP TO BE ABLE TO ACQUIRE THE INFORMATION AND ORGANIZE IT AND GET IT INTO A SPREADSHEET.

AND THERE'S ABOUT, THERE'S MORE THAN 50.

AND, UM, IT'S AN INTERESTING, AND I, AND I JUST GOT IT YESTERDAY, SO I HAVEN'T ACTUALLY BEEN ABLE TO SPEND TOO MUCH TIME WITH IT OTHER, JUST TO KIND OF GIVE IT A CURSORY REVIEW.

YOU'RE HAPPY TO SHARE THIS WITH EVERYBODY.

UM, WHOEVER'S INTERESTED IN SEEING IT, UM, THERE'S, UH, A WIDE RANGE OF WORK THAT WE DO OBVIOUSLY, AND THIS PUTS TOGETHER ALL OF THE ENTITIES THAT ARE, ARE AFFILIATED, MAYBE NOT AS DIRECTLY, OBVIOUSLY AS, AS LIKE AVIATION DEPARTMENT WOULD BE TO THE CITY, BUT WHOSE, UH, WELFARE AND RESOURCES, AND IS IN OUR STEWARDSHIP.

AND, UM, WHO'S WHICH WELFARE WE REALLY CARE A WHOLE LOT ABOUT ON THE DIET.

SO, UM, AGAIN, I, I WANT TO LET FOLKS WITH, UM, THE CITY MANAGER'S OFFICE AND A LOT OF APARTMENT THAN OUR, UM, LEGAL FOLKS, UM, A LOT DEPARTMENT AND OUR FINANCIAL DEPARTMENT FOR PULLING ALL THIS TOGETHER AND WE'LL HAVE MORE ON IT, UM, IN THE FUTURE, JUST WANTED TO GIVE YOU ALL AN UPDATE THAT WE DO NOW HAVE THAT INVENTORY AND ABLE IS ON THE LIST.

AND WE'RE PLEASED TO COME BACK AND PROVIDE ADDITIONAL INFORMATION AT YOUR REQUEST.

THANK YOU SO MUCH, TRACY, THE, THE BRIEFING THAT YOU GAVE TO MY STAFF AND ME A COUPLE OF WEEKS AGO, IT WAS REALLY INSIGHTFUL.

AND I ANSWERED A LOT OF QUESTIONS THAT WE HAD, AND WE APPRECIATE THE GOOD WORK THAT YOU ALL ARE DOING.

AND JUST TO FLAG JUMPING AHEAD FOR A MOMENT TO ITEM SIX ON FUTURE MEETINGS, I BELIEVE THAT, UM, VICE CIRCLE HAS ASKED US TO HAVE AN ITEM OUR JUNE MEETING RELATED TO OVAL, UM, MORE GENERALLY, UM, TO HELP US BETTER UNDERSTAND THAT HISTORY AND FINANCIAL PROFILE OPERATIONS AND GOVERNANCE AND OTHER KINDS OF THINGS.

UM, SO WE WILL SEE YOU IN A FEW WEEKS.

THANK YOU VERY MUCH.

THANK YOU.

THANK YOU FOR YOUR TIME.

THANKS GELS.

SO THE NEXT ITEM GOING TO TAKE UP THIS ITEM, NUMBER THREE,

[3. Financial Policies Update.]

THE FINANCIAL POLICIES UPDATE MORNING WHISTLING.

GOOD MORNING.

HOW ARE YOU? THANK YOU ALL FOR A HAPPINESS.

I JUST WANT TO MAKE SURE THE ENTIRE TEAM IS ON.

UM, AND WE START SPECTATION PLEASE.

THAT IS ACTUALLY THE BACKUP.

THERE SHOULD BE A THANK YOU.

GOOD MORNING.

MY NAME IS GARY LANG.

I'M THE INTERIM BUDGET OFFICER FOR THE CITY.

UM, AND I WANT TO JUST START OUT WITH, UM, QUITE A CLARIFICATION FOR THE RECORD THAT THERE ARE SEVERAL, UM, FINANCIAL POLICY CHANGES THAT WE'RE BRINGING FORWARD TO THE AUDIT FINANCE COMMITTEE FROM AUSTIN, WATER AVIATION AND AUSTIN ENERGY.

THE ORIGINAL POST, UM, HAD AUSTIN WATERS AS THE LEAD DEPARTMENT.

HOWEVER, THE FINANCIAL SERVICES DEPARTMENT, UM, IS THE LEAD AND HAS WORKED WITH EACH OF THE DEPARTMENTS ON THESE POLICY CHANGES.

UM, A REPRESENTATIVE FROM EACH DEPARTMENT WE'LL DISCUSS THE RELEVANT CHANGES, AND THEN IF THE COMMITTEE SOME MORE SUPPORTS THESE RECOMMENDATIONS, THEY WILL BE INCLUDED IN THE FISCAL YEAR 22 PROPOSED BUDGET THAT WILL BE PRESENTED TO THE FULL COUNCIL ON JULY 9TH.

NEXT SLIDE PLEASE.

SO WE HAVE ADAM MCINROY WITH THE AUSTIN ENERGY DEPARTMENT WHO WILL SPEAK TO THE LETTERS OF CREDIT FINANCIAL POLICY CHANGES.

SURE.

THANKS CARRIE.

GOOD MORNING, MAYOR AND COUNCIL MEMBERS.

AND THANK YOU FOR YOUR TIME TODAY.

MY NAME IS ADAM MCINROY AND I'M AUSTIN ENERGY'S FINANCE DIRECTOR FOR RISK.

IN THAT ROLE, I SERVE AS ONE OF THE UTILITIES, PRIMARY STAFF MEMBERS ACCOUNTABLE FOR THE MANAGEMENT OF CREDIT RISK FOR AUSTIN ENERGY, AS PART OF OUR CREDIT RISK MANAGEMENT ON BEHALF OF OUR CITIZENS AND CUSTOMERS, THE CITY OF AUSTIN CAN AUSTIN ENERGY SUPPORT VENDORS, OBLIGATIONS UNDER OUR CONTRACTS, INCLUDING OUR LONGTERM ENERGY MARKET CONTRACTS LIKE POWER PURCHASE AGREEMENTS WITH LETTERS OF CREDIT OR LCS FROM CREDIT WORTHY, THIRD PARTY PROVIDERS OR ISSUERS.

THESE ISSUERS PLEDGED TO DELIVER CASH SECURITY TO THE CITY IF A VENDOR UNDERPERFORMS AND THAT MITIGATES THE OVERALL NEGATIVE IMPACT, THE RISK OF UNDER-PERFORMANCE

[00:55:01]

BY OUR VENDORS.

THE GOAL OF THE LC PRACTICE IS TO MITIGATE THE RISK OF NON-PERFORMANCE OF THE VENDOR.

SO THE CREDIT QUALITY ISSUER OF THE LETTER OF CREDIT IS OF CRITICAL IMPORTANCE TO THAT PLAN.

THE UPDATE HERE TO THE FINANCIAL POLICIES REQUESTED TODAY WOULD DELEGATE OVERSIGHT AUTHORITY OVER ISSUERS OF LETTERS OF CREDIT, JUST FOR ENERGY MARKET CONTRACTS, LIKE PDAS TO AUSTIN ENERGY'S RISK OVERSIGHT COMMITTEE.

THAT COMMITTEE IS CREATED BY COUNCIL RESOLUTION FOR THE PURPOSE OF MANAGING RISKS FOR THE ENERGY MARKETS.

AND THAT EXPLICITLY INCLUDES CREDIT RISKS IN ITS MANDATE, UH, ON BEHALF OF OUR CUSTOMERS.

SO TO MEET THAT MANDATE COMMITTEE HAS DEVELOPED FOCUS AND EXPERIENCE IN OVERSEEING CREDIT RISK IN ENERGY MARKETS IN PARTICULAR, BOTH WITHIN COMMITTEE MEMBERSHIP AND WITHIN THE STAFF THAT SUPPORTS IT IN RECENT YEARS, THE COMMITTEE HAS SEEN THAT THE EVALUATION OF ISSUERS FOR ENERGY MARKETS AS A COMMUNITY OF PRACTICE OF ITS OWN, THAT USES A SIMILAR OVERALL LEVEL OF DILIGENCE FOR SCREENING ISSUERS, BUT SLIGHTLY DIFFERENT DETAILED TESTS FOR ISSUER QUALITY VERSUS THE TEST AND OTHER LOCAL GOVERNMENT PRACTICES LIKE OUR EXISTING LETTER OF CREDIT POLICY IN THE FINANCIAL POLICIES TODAY.

SO STAFF BUILDINGS THAT LOCATING OVERSIGHT OF THE ENERGY MARKET LC ISSUE OR QUALITY AT AUSTIN ENERGY'S RISK OVERSIGHT COMMITTEE CAN HELP ALIGN THE CITY'S DILIGENCE IN THESE MATTERS WITH THE BEST FOR CREDIT MANAGEMENT IN THESE MARKETS, WE BELIEVE THAT CHANGE WILL BENEFIT CITIZENS AND CUSTOMERS BY ALLOWING MORE COHERENT MATCHES BETWEEN ENERGY CONTRACTS AND THE POLICIES THAT THE CITY INCREASING THE FAMILIARITY OF OUR VENDORS WITH OUR CONTRACT STRUCTURES AS THEY BID, SINCE THEY'RE A PART OF THIS OTHER COMMUNITY OF PRACTICE.

AND OVERALL, WE THINK THAT WILL IMPROVE THE OFFER QUALITY AND PRICING FOR OUR POWER PURCHASE AGREEMENTS FOR OUR CUSTOMERS.

SO I'LL PAUSE HERE FOR, UH, THIS SLIDE AND THIS UPDATE REQUESTS.

I'M HAPPY TO ANSWER ANY QUESTIONS THE COMMITTEE MAY HAVE, AND IF THERE ARE NONE, I THINK REGGIE FROM AVIATION WILL DISCUSS THE NEXT CHANGE.

I THINK MAYBE WE'LL GO THROUGH THAT PRESENTATION AND THEN TAKE QUESTIONS.

THAT'S OKAY.

FOLKS.

GOOD MORNING.

UM, NEXT SLIDE PLEASE.

OKAY.

SO THERE'S TWO, UM, CHANGES THAT WE ARE, WE ARE ASKING, UH, REGARDING THE, UH, FINANCIAL POLICIES WHERE AVIATION HERE.

THE FIRST ONE IS, UM, THIS IS THE, THE CURRENT LIABILITY CALCULATION, YOU KNOW, WHICH THE THRESHOLD IS 1.5 1.5.

AND WE ARE ASKING THAT, UH, IT'D BE SUBSTITUTED WITH A MINIMUM 400 DAYS CASH ON HAND, UM, BASED ON THE ANNUAL OPERATING BUDGET, UH, FOR THE AIRPORT.

AND THE REASON WHY WE ARE ASKING FOR THIS IS IN OUR, IN THE AVIATION INDUSTRY AND FOR, YOU KNOW, WHEN RATING AGENCIES LOOK AT AIRPORTS, UH, THE METRIC THAT THEY USUALLY SITE THAT COMPARES AIRPORT TO AIRPORT IN TERMS OF FINANCIAL HEALTH IS THE DAY'S CASH ON HAND.

THERE ARE AIRPORTS, FOR EXAMPLE, LIKE THE HOUSTON AIRPORT SYSTEM THAT HAS OVER A THOUSAND DAYS CASH ON HAND.

AND THERE ARE OTHERS, YOU KNOW, THAT GO TO 400 TO 300 DAYS CASH ON HAND, ET CETERA.

SO IT'S, IT'S, IT'S A WHOLE SPECTRUM OF, UM, YOU KNOW, WHERE, UH, AIRPORTS ARE IN THE CAPITAL DOLPHIN PROGRAM AND HOW MUCH CASH ON HAND THAT THEY, THEY, THEY HAVE.

SO, UM, THE, THE RECOMMENDED RECOMMENDATION HERE IS TO REPLACE THE CURRENT RATIO WITH THE DAY'S CASH ON HAND.

UM, YOU KNOW, THE LOOKING BACK AT THIS FINANCIAL POLICY BACK IN FISCAL YEAR 17 AND 18, UM, WE WERE NOT, THE AIRPORT WAS NOT IN COMPLIANCE WITH THAT FINANCIAL POLICY.

AND THE REASON FOR THAT IS WE HAD LARGE CAPITAL PROJECTS, UM, LIKE THE NINE GATE EXPANSION AND THE PARKING GARAGE THAT WAS ONGOING AT THAT TIME.

AND, AND, AND INVOICES WORTH MILLIONS OF DOLLARS, UH, WERE SHOWING UP IN CURRENT LIABILITIES WHILE THE CASH USED TO PAY FOR THAT WASN'T IN CURRENT ASSETS.

SO IT WASN'T IN COMPLIANCE.

AND SO SINCE THIS IS, YOU KNOW, TRYING TO MEASURE SHORT-TERM LIQUIDITY ANYWAY, WHICH THE AIRPORT HAS AN ABUNDANCE, UH, THIS WOULD BE A BETTER MEASURE, UH, IN OUR OPINION, UH, GOING FORWARD, UM, AND THE RECOMMENDATION, WHAT NUMBER TWO, WHICH IS ALSO REPLACING SIX OR THE FINANCIAL POLICIES SIX FOR THE AIRPORT IS, UM, IS JUST REMOVING THE WORKING CAPITAL CALCULATION OUT OF THAT, UH, POLICY.

UH, BECAUSE AGAIN, THE WORKING CAPITAL POLICY, I MEAN, CALCULATION IS VERY SIMILAR TO THE CURRENT RATIO CALCULATION.

IT'S JUST, IT'S AN ATTRACTION WHERE IT DOESN'T, I MEAN, A DIVISION AND THE, THE ONLY THING THAT THE BOND IN DANGER ASKS FOR IS THAT WE MAINTAIN IN OUR MEAN OUR ONM RESERVE FUND 60 DAYS OF, UH, OF EXPENSES.

AND WE ARE IN COMPLIANCE OF THAT.

AND WE JUST WANTED TO CHANGE THE LANGUAGE THAT, UH, MORE CLOSELY REFLECTS WHAT THE

[01:00:01]

BOND INDENTURE STATES OR THE ONE ORDINANCE IT'S.

SO, UH, NEXT, NEXT SLIDE.

I THINK, UH, AUSTIN WATERS.

THANK YOU.

GOOD MORNING.

UH, MY NAME IS JOSEPH GONZALEZ.

I'M AN ASSISTANT DIRECTOR AND CHIEF FINANCIAL OFFICER FOR AUSTIN WATER.

AND TODAY WE HAVE FOUR PROPOSED UPDATES TO OUR FINANCIAL POLICIES FOR FISCAL YEAR 2022.

AND THE FIRST THREE RECOMMENDATIONS ARE RELATED TO KEY FINANCIAL INDICATORS THAT OUR RATING AGENCIES LOOK AT WHEN EVALUATING AUSTIN WATER'S CREDIT RATING.

AND THE FOURTH RECOMMENDATION WOULD STREAMLINE THE, UH, BOARD BOARDING COMMISSION REVIEW PROCESS FOR CAPITAL PROJECTS WITHIN THE DRINKING WATER PROTECTION ZONE.

THE BIGGEST DRIVING FACTOR FOR THE PROPOSED FINANCIAL POLICY CHANGES IS, UH, THE, THE LESSONS LEARNED DURING THE DROUGHT FROM 2011 TO 2015, UH, DURING THE DROUGHT AUSTIN WATER SAW DROUGHT RELATED REVENUE SHORTFALLS TOTALING $96 MILLION IN FISCAL YEARS, 2012, 2013, 2014 AND 2015 COMBINED.

UM, AND, AND AS A RESULT OF A $49.4 MILLION REVENUE SHORTFALL