1 2 3 4 5 6 7 8 KERR COUNTY COMMISSIONERS COURT 9 Special Session (Reconvened) 10 Tuesday, November 28, 2006 11 10:30 a.m. 12 Commissioners' Courtroom 13 Kerr County Courthouse 14 Kerrville, Texas 15 16 17 18 19 20 21 22 23 PRESENT: PAT TINLEY, Kerr County Judge H. A. "BUSTER" BALDWIN, Commissioner Pct. 1 24 WILLIAM "BILL" WILLIAMS, Commissioner Pct. 2 JONATHAN LETZ, Commissioner Pct. 3 25 DAVE NICHOLSON, Commissioner Pct. 4 2 1 I N D E X November 28, 2006 2 PAGE November 27, 2006 Special Session Reconvened 3 1.7 Receipt of responses from County Treasurer with 4 respect to various IRS issues as set forth in memos from County Judge to County Treasurer 5 dated September 18, 2006, October 27, 2006, and November 2, 2006, and appropriate action 6 concerning such responses 3 7 1.8 Consider, discuss and take appropriate action to set amount of Kerr County Treasurer's official 8 bond, effective January 1, 2007, in accordance with provisions of § 83.002, Texas Local Government Code 18 9 --- Adjourned 36 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 3 1 On Tuesday, November 28, 2006, at 10:30 a.m., the 2 special meeting of the Kerr County Commissioners Court held on 3 Monday, November 27, 2006, was reconvened in the 4 Commissioners' Courtroom, Kerr County Courthouse, Kerrville, 5 Texas, and the following proceedings were had in open court: 6 P R O C E E D I N G S 7 JUDGE TINLEY: Okay. Let's come back to order. We 8 were in recess at approximately 12:30 yesterday afternoon, 9 scheduled to resume today at 10:30; it's a bit past that now, 10 on our -- the remaining items that were not fully addressed on 11 our regular agenda of yesterday, Monday, November the 27th, 12 2006. Let's go to Item 7, if we might recall that item. 13 Receipt of various -- of responses from County Treasurer with 14 respect to various I.R.S. issues, as set forth in memos from 15 County Judge to County Treasurer dated September 18, 2006, 16 October 27, 2006, and November 2, 2006, and appropriate action 17 concerning such responses. Ms. Nemec, do you have responses 18 to the memos that are listed in the agenda item? 19 MS. NEMEC: As I promised, yes, I do. 20 COMMISSIONER BALDWIN: Thank you. 21 MS. NEMEC: I had my assistant stapling these 22 together this morning, so I just want to make sure -- I'll go 23 real slow to make sure that all these are in order. I was 24 talking to a representative from I.R.S. last night and trying 25 to get some explanation on the memos that Judge Tinley had 11-28-06 4 1 been sending me. And my first paragraph, the November 2nd 2 memo, if you'll turn to the first page -- do you have the 3 November 2nd memo on the second page? 4 COMMISSIONER LETZ: Yes. 5 MS. NEMEC: Okay. On this memo here, I'm awaiting a 6 phone call from them back this morning. They were doing some 7 research on it. So, I just want to mention that to you all, 8 that I don't have an explanation on that this morning. So, I 9 will be getting something this morning on that, and I'll let 10 you know as soon as possible on that first memo. But all the 11 other memos, I do have an explanation on them. Okay. We'll 12 go down to the October 27th memo, which is on the following 13 page. The October 27th memo and the October 9th memo -- let's 14 see here. The October 9th memo and the May 8th memo, which 15 makes reference to a levy for 527.01, and then the May 18th 16 memo from Judge Tinley, those three memos are all talking 17 about the same thing. 18 So, if you'll look at the October 27th memo on the 19 next page, and then you'll see the October 9th letter from the 20 I.R.S. for the 974.95 overpayment. And then on the 21 September 18th memo, that number one, that makes reference to 22 the May 18th levy for 527. I was talking to Mr. Wackowski 23 with I.R.S. last night. His employee number is 1605630. What 24 he was telling me was that they had initially charged us a 25 $527 tax and penalty, and when they reviewed their -- I 11-28-06 5 1 questioned it and I sent them a letter, and when they reviewed 2 my letter, they realized that they had made an error, so they 3 sent us a refund for the 974.95. That was what -- that was 4 the 527.01 that they had initially charged us plus interest, 5 so those are the three memos combined. So, that takes care of 6 those three memos that I just made reference to. 7 COMMISSIONER BALDWIN: Are you telling me that they 8 paid us -- they made a mistake and they paid us back the 9 527.01, plus the interest that accrued during their mistake? 10 MS. NEMEC: Right. So they do make mistakes. 11 JUDGE TINLEY: Ms. Nemec, my recollection as to the 12 May 8th, 2006 levy for the $527.01 amount, that you indicated 13 in open court in response to, I believe, a question from 14 Commissioner Nicholson, when you indicated that that matter 15 had been resolved, and he asked you how was it resolved, and 16 you said it was paid. That's my clear recollection of that 17 discussion in open court. From what I understood from you 18 just moments ago, that 527.01 never was paid. Is that -- 19 which is correct? 20 MS. NEMEC: It was paid, and then they researched it 21 and they sent us the money back. 22 JUDGE TINLEY: Okay. 23 MS. NEMEC: So when I said it was paid, it was paid. 24 JUDGE TINLEY: Okay. Let's talk about the levy that 25 I.R.S. issued under date of August 30, 2006. That levy was 11-28-06 6 1 for a total amount of $6,572.84. You provided us, I believe 2 on September 15th of this year, in open court, a release of 3 that levy. Do you recall that? 4 MS. NEMEC: That's in my last paragraph; I'm getting 5 to that. 6 JUDGE TINLEY: Okay. 7 MS. NEMEC: So, I've resolved all the other memos 8 that we have been talking about. Now, the last -- on the last 9 paragraph, I have -- memo dated September 18th, there were no 10 penalties, no interest or taxes expended, as Judge Tinley had 11 been asking on his last memo dated September 18th on Number 2. 12 I.R.S. levy dated August 30th for 6,572.84, I had provided a 13 release of lien, and his question was if there were any 14 penalties, interest, or taxes expended on that. There were 15 not. And then also his question was, did I have any copies 16 of -- any copies of any revised documents. My answer is no, I 17 do not have any copies of any revised documents. And when 18 I.R.S. calls me back this morning, that's another question 19 I'll be asking, is do they have any copies of any revisions 20 that they made. I know when I went to the I.R.S., there were 21 many things that we discussed as far as why the taxes were -- 22 what the problems were and things like that. I know that they 23 were in the computer looking at some things. I never -- I 24 never got anything back from them. All I know is that they 25 gave me a -- a release of -- a release of lien, and that's all 11-28-06 7 1 I got from them. If they actually did anything to our taxes 2 or anything like that, if they changed anything, I don't know 3 that. But I will be asking for copies of if they actually did 4 anything else or not. So, that's all I know at this point. 5 JUDGE TINLEY: Then I gather your answer to my 6 question in that memo, "What was the consideration for I.R.S. 7 executing the release of levy to you?" That was done when you 8 were at the San Antonio office on the 13th day of September of 9 this year; is that correct? 10 MS. NEMEC: If that was the date that I went. I 11 don't know that that was the date. 12 JUDGE TINLEY: That's the date on the release. 13 MS. NEMEC: Okay. Then, yes, that was the date. 14 JUDGE TINLEY: You received no indication or 15 explanation of why they were executing the release? They just 16 said, "Here, here's a release"? 17 MS. NEMEC: I don't remember. 18 COMMISSIONER LETZ: Barbara -- 19 JUDGE TINLEY: But no funds were paid -- 20 MS. NEMEC: No. 21 JUDGE TINLEY: -- to I.R.S. at that time? 22 MS. NEMEC: Never. 23 JUDGE TINLEY: This was at the San Antonio office 24 that you got the release of levy for what was -- of 25 October 30, which indicated some significant penalties and 11-28-06 8 1 interest, correct? 2 MS. NEMEC: There were no funds paid at that time or 3 at any other time for that particular time -- time period, for 4 that. 5 JUDGE TINLEY: And this -- this release of levy you 6 got at the San Antonio office? 7 MS. NEMEC: Yes, while I was there. 8 JUDGE TINLEY: And that was the same San Antonio 9 office that you and Ms. Hyde and Ms. Magenheimer went to here 10 just a few weeks ago concerning the assessment of penalty of 11 12,000, mas or menos, correct? 12 MS. NEMEC: Correct. 13 JUDGE TINLEY: And were told when you went this most 14 recent time that that office had no authority -- 15 MS. NEMEC: That is correct. 16 JUDGE TINLEY: -- to -- to adjudicate those things 17 or to otherwise take any action on them? 18 MS. NEMEC: That's correct. 19 JUDGE TINLEY: When you were in San Antonio at that 20 office most recently with Ms. Hyde and Ms. Magenheimer, did 21 you happen to mention to the folks there that -- when they 22 told you they had no authority to do that there, that that was 23 kind of strange, because when you were down there just a month 24 or two before, that they they'd taken pretty prompt and 25 summary action in giving you a release of levy? 11-28-06 9 1 MS. NEMEC: No, I didn't. 2 JUDGE TINLEY: Okay. 3 MS. NEMEC: It's always the individual you talk to 4 with I.R.S. 5 COMMISSIONER LETZ: The -- this is -- I don't know 6 if this is really to you, Barbara, or possibly the Judge. 7 I've become very confused about the number of -- about the 8 whole history. And, granted, my personal finances have 9 nothing -- are nowhere even close to county finances, but I 10 know from the I.R.S., you can get a -- basically, a journal 11 page of everything that goes on on your accounts. Can we get 12 that? 13 MS. NEMEC: Sure. 14 COMMISSIONER LETZ: So that we can look and see what 15 payments were made, what penalties were assessed by that, and 16 they could break it up by category, I believe. I mean, I -- 17 I'm just confused. You know, seems like everything's been 18 taken care of, but it's hard to understand exactly how it's 19 taken care of, what was taken care of. You know, different 20 offices, you talk to different people. But if we can get a 21 copy of our journal -- I would think they would give it to 22 us -- that would, in my mind, clear it up. So, in your 23 conversation with them, maybe you could ask for that. 24 MS. NEMEC: I'll get one. I've requested it in the 25 past. I mean, you know, this is things that you deal with 11-28-06 10 1 I.R.S. all the time. You just go back and forth with them, 2 and as you can tell by this, you know, with the 527.01, they 3 make mistakes, too, all the time. And this is dialogue that 4 you have to have with them constantly, that I have had with 5 them for years, and you just go back and forth and you fix it 6 and you go on. 7 COMMISSIONER LETZ: But the difference is, we're 8 receiving levies on a regular basis, and we -- to my 9 knowledge, we weren't receiving those until about two years 10 ago, a year ago, something like that -- about a year ago. 11 That's, you know, what has brought it to the Court, anyway, is 12 because, you know, obviously -- I mean, I -- you know, 13 everyone deals with I.R.S., and yes, they do make mistakes, 14 but it's relatively -- it takes a -- it's a lot of work to get 15 to the point they're doing levies. That doesn't happen 16 without a whole lot of things not being done prior to that 17 point. So that's why I think there are concerns here, at 18 least my concerns. 19 MS. NEMEC: The CPA's have meetings on -- I don't 20 know what day of the week it is, in the mornings at the Inn of 21 the Hills. You know, I suggest if y'all are worried about our 22 account, you ought to go to the meetings that CPA's have in 23 the morning at Inn of the Hills, and you'll hear shocking 24 stories about what goes on with Internal Revenue. And, you 25 know, we were the topic of their discussion one morning, and 11-28-06 11 1 they could sympathize with what we're going through, because 2 they go through it all the time with their clients. 3 COMMISSIONER WILLIAMS: I'm sure that's true. 4 Barbara, I have a couple questions. First I'll take the most 5 recent, I think, first. What is the status of the levy for 6 which we authorized payment of $12,000? 7 MS. NEMEC: We haven't heard back. It will be six 8 weeks before we hear back on that. 9 COMMISSIONER WILLIAMS: Okay. And in the documents 10 that were a part of the agenda item backup material is a copy 11 of a notice dated October 30, in which the caption says, "We 12 changed your tax return because we found a calculation error." 13 Can you expound on that and tell us what that's all about? 14 MS. NEMEC: October 30th, that is the one that I'm 15 waiting to hear back from them on. That was the memo dated 16 November the 2nd. 17 COMMISSIONER WILLIAMS: Well, I don't know about the 18 memo. 19 MS. NEMEC: That's on the first page that I attached 20 to the memo, today's memo -- today's letter. 21 COMMISSIONER WILLIAMS: Okay. 22 MS. NEMEC: Also mentioned on that 12,000, at last 23 week's meeting with the CPA's, one CPA -- it took them 24 three -- three letters before they got their money back. So, 25 we're not going to -- we're not going to just drop it. If 11-28-06 12 1 they send us a letter back saying no, they're not going to 2 refund us the 12,000, you know, we're going to send them back 3 another memo and try again. You just don't stop at the first 4 letter; you just keep trying. 5 COMMISSIONER WILLIAMS: Okay, I understand that. I 6 do have one other question, though. At the last meeting, I 7 believe it was, the Court authorized this $12,000, which was a 8 payment to stem any further action, we thought, on the part of 9 the I.R.S., but for us it was a special tax payment. It 10 wasn't a routine tax payment. 11 MS. NEMEC: Right. 12 COMMISSIONER WILLIAMS: Earlier -- I'm looking at 13 the memo from the Judge to you dated October 27th, and that 14 memo talks about a tax deposit in the amount of 7,232.65. Was 15 that not out of the routine, just as the 12,000 would have 16 been out of the routine, requiring Commissioners Court to know 17 what that was all about? 18 MS. NEMEC: That -- again, that's the one that I'm 19 telling you there was an I.R.S. error, and that's the one that 20 I said that I talked to Mr. Wackowski about last night, where 21 they made an error and they charged us the $527.01 as a -- as 22 a tax penalty. And then they reviewed their records and they 23 sent us -- if you'll look at your -- the next page, the next 24 page shows that 7,232.65 -- a memo from I.R.S., it shows that 25 7,232.65, and then it shows where there was an overpayment of 11-28-06 13 1 974.95; that they refunded us that amount. Amount of refund 2 up at the top, 974.95. 3 COMMISSIONER WILLIAMS: I see that, but my question 4 goes to -- to the authorization for the 7,232.65. Does that 5 fall under the same category as the Court authorizing the 6 payment of the 12,000? And if it does, my second part of my 7 question is, why is the Court just now learning about that? 8 Would we not have had to authorize that as well? 9 MS. NEMEC: No, this is an adjustment from the 10 I.R.S. that they made. 11 COMMISSIONER BALDWIN: The words, "penalty 12 decrease," is that the magic words here? 13 COMMISSIONER WILLIAMS: They put that as a credit to 14 our account? We did not make that as a tax payment? 15 MS. NEMEC: Right. Right. 16 COMMISSIONER WILLIAMS: Thank you for the 17 explanation. 18 JUDGE TINLEY: So, the statement, "Penalty 19 decrease - federal tax deposit," your statement today is that 20 federal tax deposit portion is incorrect? There was no such 21 deposit? 22 MS. NEMEC: Right. 23 JUDGE TINLEY: Okay. Ms. Nemec, Commissioner Letz 24 asked if you could obtain a journal of the various payments 25 and the chronological history of payments, and you indicated 11-28-06 14 1 that you could obtain that. 2 MS. NEMEC: Mm-hmm. 3 JUDGE TINLEY: If you would, please, go back to 2002 4 and bring that forward from January 2002. Could you do that? 5 MS. NEMEC: 2002? 6 JUDGE TINLEY: Yeah. January 1, 2002, forward. 7 MS. NEMEC: Okay. 8 JUDGE TINLEY: All right? The -- I'm not sure if 9 I -- if you've answered this question or not. I apologize if 10 you have. In the -- in the earlier memo, I also inquired, at 11 the time you went to San Antonio on September the 13th and got 12 the release of levy, did you provide any additional documents 13 to the I.R.S. at that time or shortly before, or amend any of 14 the documents that had previously been provided to I.R.S. in 15 order to facilitate getting that release of levy? 16 MS. NEMEC: All I took them was my 941 report that I 17 had already submitted to them. 18 JUDGE TINLEY: Okay. Had you completed a new 19 Schedule B? 20 MS. NEMEC: I took them the -- the Schedule B that I 21 had already provided to them. 22 JUDGE TINLEY: Okay. Did they indicate to you at 23 that time that the problem was that they did not have a 24 Schedule B, on your initial submission of the 941? 25 MS. NEMEC: Not that I remember. I don't know. 11-28-06 15 1 JUDGE TINLEY: But you provided them with -- 2 MS. NEMEC: A copy. 3 JUDGE TINLEY: You carried those documents with you 4 and exhibited those to them? 5 MS. NEMEC: Right. 6 JUDGE TINLEY: Did they make any copies of those 7 documents at that time? 8 MS. NEMEC: I don't remember. 9 JUDGE TINLEY: Okay. 10 MS. NEMEC: They may have. 11 JUDGE TINLEY: Okay. There was another attachment 12 along with the -- there were two different correspondences 13 that came in on -- on October the 30th, as I'm sure you 14 recall -- or that date, actually. There was also a letter 15 from the -- from them concerning the first quarter of 2006. 16 That would be the quarter ending March 31. Do you recall 17 receiving that letter? I think it was attached to the -- to 18 one of those memos. 19 MS. NEMEC: I don't know. I'd have to look; I don't 20 know. 21 JUDGE TINLEY: Okay. Probably would have been 22 attached to the November 2 memo. It's referred to in the 23 second paragraph of the November 2 memo, a letter from I.R.S. 24 dated October the 30th. Do you recall receiving that? 25 MS. NEMEC: Not without looking at it. 11-28-06 16 1 JUDGE TINLEY: Okay. I would represent to you it 2 was attached to the November 2, 2006 memo, because it was 3 attached to that and indicated -- 4 MS. NEMEC: I'd have to look at it. I don't know. 5 I have a lot of memos. 6 JUDGE TINLEY: Do you not have that with you today? 7 MS. NEMEC: No. 8 JUDGE TINLEY: I'll be happy to give you one here to 9 review, if you'd like. 10 (Judge Tinley handed a document to Ms. Nemec.) 11 MS. NEMEC: Oh, okay. Yeah, this is the one I'm... 12 JUDGE TINLEY: Okay, thank you. You recall that 13 letter starts off by saying, "You must reply. We're proposing 14 a federal tax deposit penalty"? 15 MS. NEMEC: Mm-hmm. That's for the March 2006 that 16 I'm awaiting a phone call back on. 17 JUDGE TINLEY: Mm-hmm. That's different from the 18 $12,000 penalty that's been imposed, which relates to the 19 second quarter of 2006? 20 MS. NEMEC: Right. 21 JUDGE TINLEY: Okay. The second full paragraph 22 says, "Please complete the enclosed Schedule B to 941." 23 MS. NEMEC: I've already -- they have the -- 24 JUDGE TINLEY: Did you do that? 25 MS. NEMEC: They have the Schedule B. Yeah, I 11-28-06 17 1 talked to them last night. They have the Schedule B. 2 JUDGE TINLEY: My question to you is, in response to 3 the October 30, 2006 letter that you just reviewed, in which 4 they asked you to complete the enclosed Schedule B, did you do 5 that? 6 MS. NEMEC: For what period? 7 JUDGE TINLEY: March 31, 2006. Did you -- did you 8 respond to this letter by completing the enclosed Schedule B 9 and forwarding that to the Internal Revenue Service? 10 MS. NEMEC: Yes. And if you remember, you came and 11 got a copy of the March 2006 941, and you have a copy of the 12 Schedule B. 13 JUDGE TINLEY: I have a copy of -- of what you 14 showed out of your file. I'm asking you if you complied with 15 the request of I.R.S. in this October 30 letter to please 16 complete the enclosed Schedule B. 17 MS. NEMEC: Yes. Yes, of which have you a copy of. 18 JUDGE TINLEY: Okay. And did you send that in to 19 the Internal Revenue Service? 20 MS. NEMEC: Yes. 21 JUDGE TINLEY: Okay, thank you. 22 COMMISSIONER LETZ: Do -- are all of the, I guess, 23 notifications we received from the I.R.S., whether it be of 24 any type, have they all been taken care of up to this point? 25 MS. NEMEC: Yes. 11-28-06 18 1 COMMISSIONER LETZ: Do you know of any others that 2 we're going to be -- or that are coming down the road? 'Cause 3 I know there was a timeline -- 4 MS. NEMEC: No. 5 COMMISSIONER LETZ: Okay. 6 JUDGE TINLEY: Anything further? 7 COMMISSIONER BALDWIN: No, sir. Seemed to be a 8 satisfactory report to me. 9 COMMISSIONER WILLIAMS: I'm all right. 10 JUDGE TINLEY: Thank you. 11 MS. NEMEC: Thank you. 12 JUDGE TINLEY: Anybody on the Court have anything 13 further to offer with regard to Agenda Item Number 7? Let's 14 move on, then, to Agenda Item Number 8. Consider, discuss, 15 and take appropriate action to set amount of Kerr County 16 Treasurer's official bond effective January 1, 2007, in 17 accordance with provisions of Section 83.002 of the Texas 18 Local Government Code. The matter was considered yesterday, 19 and deferred action primarily, according to my understanding, 20 to ascertain what the bonding cost would be. As of my last 21 report from Ms. Mitchell, we've not gotten a response from 22 First Insurance Agency. However, with another general 23 agent -- independent agent, it was indicated that the bond 24 cost is $5 -- the premium is $5 per $1,000 of coverage per 25 year, which, roughly translated, means that a $50,000 bond 11-28-06 19 1 would be $250 a year. A $65,000 bond would be $325, and a 2 $75,000 bond would be $375 per year. 3 COMMISSIONER WILLIAMS: Times the number of years? 4 Times the number of years, right? 5 JUDGE TINLEY: Yeah, that's per year. That's a 6 per-annum cost. 7 COMMISSIONER LETZ: Judge, maybe y'all went over 8 this yesterday, and I apologize. The -- this is probably a 9 really stupid question. I've been on the Court for going on 10 11 years. What's the purpose of the bond? 11 COMMISSIONER BALDWIN: I asked the same question 12 yesterday. 13 COMMISSIONER WILLIAMS: The purpose -- 14 COMMISSIONER BALDWIN: I've been here 15 years. 15 COMMISSIONER WILLIAMS: The purpose of the increase? 16 COMMISSIONER LETZ: Well, the purpose of the bond. 17 What are we bonding? 18 COMMISSIONER NICHOLSON: I think it's insurance. 19 JUDGE TINLEY: Mm-hmm. 20 COMMISSIONER NICHOLSON: We're insuring against 21 claims. So, if I make a mistake, the County can ask my -- and 22 it costs the County money, the County can ask my bonder to pay 23 the costs of my mistake. 24 COMMISSIONER WILLIAMS: Or if there's a criminal 25 action in which money is absconded with. 11-28-06 20 1 COMMISSIONER LETZ: So, as it relates to the 2 Treasurer, if there was a -- a penalty assessed because of her 3 actions -- or her official actions by the I.R.S., is that 4 subject to the bonding? Is that why we're talking about it? 5 COMMISSIONER NICHOLSON: That's a question. And 6 then the other question is, we currently have a $15,000 bond, 7 and the Government Code would allow us to go up to some 75,000 8 or 80,000 by some formula. 9 JUDGE TINLEY: Almost 80,000. 10 COMMISSIONER NICHOLSON: But if we haven't made a 11 claim against the 15,000, what are we -- what are we gaining 12 by buying a larger bond? 13 COMMISSIONER WILLIAMS: Frankly, I don't see we gain 14 anything except spending money unnecessarily. 15 COMMISSIONER LETZ: I mean, I tend to agree. I 16 mean, I don't -- you know, I'm -- while there's certainly been 17 a lot of problems, they're -- they all seem to be being 18 resolved. And -- you know, so, I mean, I kind of tend to 19 agree. I mean, I don't want to waste taxpayers' money on 20 increasing the bond when it really doesn't -- isn't 21 benefitting the taxpayers. And I think that we're in a 22 position that we have taken a lot of measures in the county 23 to, you know, I guess reduce the risks that we were having 24 previously. I believe we ought to leave the bond where it is. 25 JUDGE TINLEY: All I can say, gentlemen, is that 11-28-06 21 1 there's a lot of money that goes through that office. That 2 office will continue to handle the I.R.S. reporting, which, 3 over the past year and a half, there have been considerable 4 difficulties; by my count, four I.R.S. levies. That should be 5 a significant red flag. We've made no claim against the 6 existing bond. I had asked the Court to allow me to proceed 7 to do that with regard to a $2,500 issue. That was averted by 8 virtue of the Treasurer stepping forward and reimbursing the 9 County personally for that loss, and but for that, I would 10 have continued to ask that we be allowed to assert a claim on 11 her bond. I think there's some performance issues that 12 have -- that have been -- that have demonstrated themselves 13 that -- you know, the phrase that comes to mind is "penny wise 14 and pound foolish." But it's your call. 15 COMMISSIONER LETZ: I'm only 20 percent of the call. 16 JUDGE TINLEY: I assure you that if we revisit the 17 issue, we may have to go back and look at this discussion. 18 COMMISSIONER LETZ: What's your recommendation? 19 JUDGE TINLEY: I made a recommendation yesterday of 20 $65,000 to $75,000. 21 COMMISSIONER BALDWIN: That's a $325 -- 22 JUDGE TINLEY: To 375. 23 COMMISSIONER BALDWIN: And I apologize; I didn't 24 bring my notes from yesterday, and I kind of was hung in 25 there. That's a -- that's kind of a medium point between -- 11-28-06 22 1 from where we're at to the max -- the cap that the law allows 2 us. It's kind of in the middle there somewhere. 3 COMMISSIONER NICHOLSON: I think that formula allows 4 something like $75,000 or $80,000. 5 COMMISSIONER BALDWIN: 79. 6 JUDGE TINLEY: Just under 80. 7 COMMISSIONER NICHOLSON: Yeah, cap. 8 JUDGE TINLEY: According to my calculations, right. 9 COMMISSIONER LETZ: And -- on that. So, what the 10 law says is that if -- I don't know that -- if there's an 11 error made in excess of 80,000, it's just not bonded? 12 JUDGE TINLEY: That's correct. Yeah, the maximum 13 liability as a surety on the bond is the -- 14 COMMISSIONER WILLIAMS: Face value of the bond. 15 JUDGE TINLEY: Yeah. And that's not -- I don't -- 16 I'm not -- I'm not sure that's per claim. I think that's -- 17 COMMISSIONER LETZ: I agree. 18 JUDGE TINLEY: -- that's an aggregate. 19 COMMISSIONER WILLIAMS: That's the limit of their 20 exposure. 21 JUDGE TINLEY: Mm-hmm. 22 COMMISSIONER LETZ: Mr. Pearson has a comment. 23 MR. PEARSON: What's the annual amount of negotiable 24 securities that go through that office? Cash collected plus 25 negotiable securities? In other words, you invest in -- 11-28-06 23 1 COMMISSIONER LETZ: Coming and going? 2 MR. PEARSON: Yeah. In other words, what's -- 3 COMMISSIONER LETZ: Be our budget. Be our annual 4 budget. 5 COMMISSIONER WILLIAMS: Annual budget. 6 COMMISSIONER LETZ: Annual budget, about 18 million. 7 So, I mean -- 8 MR. PEARSON: We're talking about -- 9 COMMISSIONER LETZ: -- so double that, 'cause it's 10 coming in, then it's going out. 11 MR. PEARSON: You're talking about 65,000. 12 COMMISSIONER LETZ: That's what I'm saying. But the 13 maximum the law allows is 80,000. 14 MR. PEARSON: I understand. I understand. I think 15 that's kind of a difference. Most businesses I've ever been 16 in, you bond in excess of the amount that -- that you 17 anticipate an individual handling or having access to. 18 COMMISSIONER LETZ: I would agree, but that's on 19 the -- 20 COMMISSIONER WILLIAMS: The law caps it. 21 MR. PEARSON: I understand that. I understand that. 22 COMMISSIONER WILLIAMS: At 1 percent. 23 COMMISSIONER BALDWIN: So, if you need -- 24 MR. PEARSON: I think that the $65,000 would be a 25 very good identity. 11-28-06 24 1 COMMISSIONER BALDWIN: If you read this in there in 2 your packet, it kind of -- it will kind of clear it up a 3 little bit, just three or four lines. It does kind of clear 4 it up for you. 5 COMMISSIONER LETZ: I understand, but it's a -- 6 seems like it's an antiquated law. But, anyway -- 7 COMMISSIONER BALDWIN: Well, it's my opinion that 8 it -- I don't think it would hurt anything to increase the 9 bond some. And we actually probably need to take a look at 10 several offices around the county family, but I still don't 11 know how much it should be increased. 12 COMMISSIONER NICHOLSON: Well, if we're looking at 13 the issue of simply buying insurance, I'm okay with that too. 14 We're going to pay $200 to $300 for an extra $60,000 worth of 15 insurance or something. But if we have some expectation that 16 it's going to motivate the County Treasurer to perform 17 differently in the future, I don't see that happening. Only 18 one who has any control over that is the County Treasurer. 19 COMMISSIONER BALDWIN: I don't have that in my mind 20 at all. I'm looking at it strictly from the insurance point 21 of view. 22 COMMISSIONER WILLIAMS: Well, I think the point you 23 made a minute ago was valid. If you're going to increase it, 24 any -- any elected official who's responsible for the handling 25 of money, we may want to consider doing it on all cases. 11-28-06 25 1 COMMISSIONER NICHOLSON: Let me make a motion and we 2 can get it on it table. I'll move that we increase the bond 3 required by the County Treasurer to $75,000 for the year 2007. 4 COMMISSIONER BALDWIN: I second that motion, but 5 I've got some questions about it. I could come back and vote 6 against this thing. 7 JUDGE TINLEY: We have a motion and a second. Any 8 question or discussion? 9 COMMISSIONER BALDWIN: 75,000 would cost $375 per 10 year? 11 JUDGE TINLEY: That's according to the formula that 12 was given to me by an independent agent that writes bonds. 13 COMMISSIONER BALDWIN: And we -- today, we have a 14 $15,000 bond. We pay how much? 15 JUDGE TINLEY: I don't know. What I can tell you is 16 that -- 17 COMMISSIONER BALDWIN: Well, the Treasurer can tell 18 us. How much does your bond cost? 19 MS. NEMEC: I believe it's 150, or 100. 20 COMMISSIONER BALDWIN: So, we're quadrupling the 21 amount of insurance. 22 JUDGE TINLEY: Mm-hmm. 23 COMMISSIONER BALDWIN: And doubling the pay. 24 JUDGE TINLEY: Tripling, probably. 25 COMMISSIONER BALDWIN: Tripling. 11-28-06 26 1 JUDGE TINLEY: Yeah. 2 COMMISSIONER BALDWIN: Probably not a bad 3 investment. 4 COMMISSIONER LETZ: Why don't -- we can go ahead and 5 go out for the amount, so we're not guessing on how much it's 6 going to cost, and do it at our next meeting. 7 COMMISSIONER BALDWIN: We could. 8 COMMISSIONER LETZ: 'Cause we don't know what it's 9 going to cost to do a $75,000 bond, or where the money's going 10 to come from out of her budget. I presume from Contingency. 11 COMMISSIONER NICHOLSON: Good point. 12 COMMISSIONER WILLIAMS: I think if we're going to 13 increase the bond, we ought to increase it to all elected 14 officials that handle money, all the way across the board. 15 COMMISSIONER BALDWIN: That's probably true. 16 JUDGE TINLEY: Some of them are -- some of them are 17 fee officers; the County Clerk, the District Clerk, the Tax 18 Assessor. They have a different formula for theirs. And in 19 most cases, in addition, there are insurance requirements on 20 top of the bonding requirements. 21 COMMISSIONER LETZ: What would be the distinction in 22 that? 23 JUDGE TINLEY: Well -- 24 COMMISSIONER WILLIAMS: Insurance on top of bonding? 25 JUDGE TINLEY: I just see it as excess coverage, 11-28-06 27 1 essentially, is what I see it as. Except -- 2 MR. PEARSON: Umbrella policy. 3 JUDGE TINLEY: You know, it's all spelled out in 4 this handy dandy pamphlet that we've got here. And I would 5 invite you to take a look. I've looked at some of it. But in 6 -- for example, the County Clerk, there's bond requirements. 7 There are insurance requirements. Some of the deputies in the 8 office are required to have that. The Tax Assessor, there are 9 bond requirements. 10 COMMISSIONER LETZ: Judge, on the -- 11 JUDGE TINLEY: Lots of different -- 12 COMMISSIONER LETZ: -- on the issue of bonding, 13 which is related in my mind, what does our personnel policy 14 say about -- about non -- well, I guess the deputy, the other 15 people in the Treasurer's office, from the standpoint of 16 background checks and -- you know, and all that? Not just 17 really the Treasurer's office; anyone that handles money. I 18 have not looked at our personnel policy in that light in some 19 time, but I think that's probably a more important issue than 20 the elected official or the department head, is everybody else 21 in the office, what our -- what we're requiring. 22 JUDGE TINLEY: I would agree. And I've had that 23 discussion with Ms. Hyde. As you know, she is -- one of her 24 pet projects is developing a brand-new policy to circulate 25 among the various elected officials and department heads, and 11-28-06 28 1 coming back to this Court with a new personnel policy, 2 financial policies and so forth, after developing those in 3 coordination with those that are directly involved with it. 4 So, I -- we've talked about the fact of background checks and 5 -- and certain criteria that need to be in place for those 6 kind of people, and I think -- 7 COMMISSIONER LETZ: The County Attorney's going to 8 say we're going astray. 9 JUDGE TINLEY: Okay, I'm sorry. 10 COMMISSIONER LETZ: My fault. I led us astray. 11 JUDGE TINLEY: Okay. Mr. Trigo? 12 MR. TRIGO: Yes. I sit here and I hear especially 13 you, Tinley, always talking about saving taxpayers money, and 14 yet here you are trying to spend more of the taxpayers' money. 15 I don't get it. Where are you trying to save taxpayers' 16 money? I'd like to ask you a question. Didn't this vendetta 17 towards the County Treasurer start way back when you asked the 18 County Treasurer to move some county money into the Juvenile 19 Detention Center, and she refused, and ever since then you've 20 had a vendetta towards the County Treasurer? 21 JUDGE TINLEY: Is that your question to me, 22 Mr. Trigo? 23 MR. TRIGO: Yes. 24 JUDGE TINLEY: Number one, I've never had a vendetta 25 against the County Treasurer. 11-28-06 29 1 MR. TRIGO: It sure looks that way. 2 JUDGE TINLEY: I've had some very, very serious 3 performance issues with the County Treasurer. The second part 4 to your question is, I've never asked the County Treasurer to 5 transfer a dime to Juvenile Detention. 6 MR. TRIGO: We have witnesses. 7 JUDGE TINLEY: Well, that's fine, sir. 8 MR. TRIGO: We have witnesses. How can you say -- 9 JUDGE TINLEY: You can have that dialogue later. 10 MR. TRIGO: How can you say that? 11 COMMISSIONER LETZ: The County Attorney's -- 12 MR. TRIGO: And -- 13 JUDGE TINLEY: Mr. Trigo, I can sit here and say 14 that, because I just did. And what I'm telling you is the 15 truth, and your daughter, for whatever reason, has told you a 16 falsehood if she's told you otherwise. 17 MR. TRIGO: In other words, you're calling her a 18 liar? 19 JUDGE TINLEY: If you want to characterize it that 20 way, you're certainly welcome to do so, sir. 21 MR. TRIGO: Well, you know -- 22 COMMISSIONER LETZ: Judge, I don't mean to 23 interrupt, but we're way beyond the scope of this. 24 JUDGE TINLEY: We are. We're outside the agenda 25 item. Have a seat, Mr. Trigo. 11-28-06 30 1 AUDIENCE: Out of order. 2 MR. TRIGO: Okay, I'll have a seat, but I just want 3 the public to understand what's going on. 4 JUDGE TINLEY: Have a seat, Mr. Trigo. Now, where 5 were you? 6 COMMISSIONER LETZ: I was just trying to get us back 7 on the agenda item. I'm the one that led us astray. 8 COMMISSIONER WILLIAMS: I'd like to offer a 9 suggestion, Judge. Rather than take an action today on one 10 elected official, to the exclusion of all others, I think, 11 picking up on what Commissioner Letz said about others who 12 handle money, why don't we have a really quick assessment of 13 who handles money, of what kind of bonds are in place, and 14 then the Court take a look at the entire picture and determine 15 what's necessary to do. We can do that by first meeting in 16 December. 17 COMMISSIONER LETZ: You know, I -- I agree with 18 that, but I also -- I do also agree that under the Treasurer's 19 situation, that I don't think you can necessarily look -- you 20 look at performance, and there have been issues. The 21 Treasurer has paid money out of her own personal pocket to 22 avoid some of these that would have been a possible claim 23 against her bond, so I think that just -- I have no problem 24 looking at them all together, but I also don't think you look 25 at all as one item, because performance and past history is an 11-28-06 31 1 issue, and there is an issue on the -- with the I.R.S. and 2 levies for the last couple years. 3 COMMISSIONER WILLIAMS: I don't disagree with you -- 4 with your comment, but when we take a look at the entire 5 package, -- 6 COMMISSIONER LETZ: Right. 7 COMMISSIONER WILLIAMS: -- we'll make a judgment 8 call based on performance and other factors. 9 COMMISSIONER LETZ: Okay. 10 COMMISSIONER WILLIAMS: In terms of each individual 11 or category. 12 JUDGE TINLEY: Not a bad idea at all. 13 COMMISSIONER BALDWIN: No, that's a great idea. 14 It's a good idea. 15 JUDGE TINLEY: We need to move that way anyway, and 16 that's, of course, what Ms. Hyde wants to do. 17 COMMISSIONER BALDWIN: I'd really like us to see -- 18 I'm going to withdraw my second. I'd like us to see Ms. Hyde 19 come forward with that -- at least that part of the policy of 20 bonding everybody that handles money. We do not do that. And 21 I've had some discussions with her -- I know I'm outside, but 22 it -- that needs to be done at the same time, in my opinion. 23 COMMISSIONER LETZ: Right. 24 COMMISSIONER WILLIAMS: Yeah. 25 COMMISSIONER BALDWIN: Let's do it all at one time. 11-28-06 32 1 COMMISSIONER WILLIAMS: That's my point. 2 COMMISSIONER BALDWIN: Can we do that by the first 3 meeting in December? 4 COMMISSIONER WILLIAMS: I don't know why we can't. 5 COMMISSIONER BALDWIN: I don't either. 6 COMMISSIONER NICHOLSON: I'll withdraw my motion. 7 MS. NEMEC: Judge, I have a comment. Judge? I have 8 a comment, please. 9 JUDGE TINLEY: Yes, ma'am? 10 MS. NEMEC: I just want to let y'all know that my 11 deputy is bonded, so there is a background check. Any time 12 you bond somebody, there is a background check. And so, just 13 so you know that there -- she is bonded, and so there is a 14 background check involved as far as my employee goes. 15 COMMISSIONER LETZ: Okay. 16 MS. NEMEC: The other thing is, I don't think I'm 17 out of line in saying what I'm about to say, because it has 18 been discussed in open court. And the Judge brought it up 19 yesterday on the $12,000 penalty that was paid to I.R.S., and 20 I have every confidence that it is going to be reimbursed. 21 But the Judge had brought up yesterday that it would go 22 against my bond if we had to, indeed, have to pay for it. I 23 don't believe that it would be true that it would be against 24 my bond. That was an error made on my former deputy, and I 25 know that she said in court that it was not her; that she had 11-28-06 33 1 never done it before, but I did obtain bank records, and she, 2 indeed, was the person that was handling that function in my 3 office ever since we started handling it. I have bank records 4 to prove it. Her pass -- her password and -- she was handling 5 that from the time that we started handling it up until the 6 time that the error was made, and then she no longer handled 7 it after that. So, I just wanted to let you know that. I 8 have kept her bond open, because I was feeling that that was 9 going to be the case, and I didn't want to terminate her bond 10 and then not be able to file against it, and so her bond is 11 still in place up until the end of this year. So, I just 12 wanted to let y'all know that. Thank you. 13 JUDGE TINLEY: Ms. Nemec, in regard to the issue of 14 your bond, then it's your statement to the Court that there's 15 no need to increase your bond because any missteps that may be 16 taken in your office, or any lack of performance in your 17 office are -- are things that are occasioned by others in your 18 office and for which you're not responsible? Is that what 19 you're telling this Court? 20 MS. NEMEC: That's -- no, that's not what I'm 21 telling you. I'm just saying my deputies are bonded in case 22 that the errors do occur on their -- on -- occur on their 23 behalf also. 24 JUDGE TINLEY: Are you responsible for all actions 25 that occur in your office? 11-28-06 34 1 MS. NEMEC: I am also responsible. But they are 2 bonded too, in case that they make the error too. Thank you. 3 JUDGE TINLEY: Thank you. Okay. I guess we want to 4 defer on this issue, hopefully to get things put into place on 5 a more comprehensive and -- and complete basis. 6 COMMISSIONER BALDWIN: This -- this particular one, 7 taking a look at all people that handle money. 8 JUDGE TINLEY: Mm-hmm. 9 COMMISSIONER BALDWIN: And the policy of bonding 10 everybody that handles money. 11 JUDGE TINLEY: Okay. 12 COMMISSIONER LETZ: Or beyond -- just policy, 13 period, about everyone that handles money. 14 COMMISSIONER BALDWIN: Yeah. 15 COMMISSIONER LETZ: Judge, if we could also, on that 16 backup, I guess, get the schedule for the cost of the bond, 17 you know, from -- maybe $10,000, something like that, so we 18 can get some dollars, 'cause it will be a budget amendment if 19 we do increase any bonds. 20 JUDGE TINLEY: Okay. 21 COMMISSIONER BALDWIN: One of my concerns is the 22 state law. I mean, I don't have a concern with the law, but 23 I'm wondering when -- Rex, when I look at this and I see it's 24 repealed May 19, 1993, does that mean -- is that when this law 25 went into effect, this particular one? 11-28-06 35 1 MR. EMERSON: Where are you looking? The top of the 2 page? 3 COMMISSIONER BALDWIN: I'm just talking about this 4 law. When did this law go into effect, dealing with -- 5 MR. EMERSON: Initially 1987, and the last revision 6 was September 1, 2005. 7 COMMISSIONER BALDWIN: 2005? 8 MR. EMERSON: Correct. 9 COMMISSIONER BALDWIN: So that's fairly new. That's 10 fairly new stuff. 11 MR. EMERSON: Well, no, its been in existence since 12 '87. It's just in 19 -- September 1, 19 -- or 2005, they made 13 some revision somewhere in that statute. 14 COMMISSIONER LETZ: They looked at it recently. 15 COMMISSIONER BALDWIN: Yeah. Well, and it could be 16 some of these things that we're talking about. We don't know 17 exactly what the revisions were. My point is -- is that, 18 obviously, this piece of legislation is important, and the 19 Treasurer's bonding issue, in my mind, is equally as 20 important. For all people that handle money, not just the 21 Treasurer. So, I just -- I think it -- I think it rises above 22 the level of taking a peek at it. I think it's serious 23 business, and the Legislature thought that it was serious 24 business as well, recently. So, I think we need to -- 25 COMMISSIONER WILLIAMS: I think you're doing the 11-28-06 36 1 right thing. We'll look at it. 2 COMMISSIONER BALDWIN: I don't know what the hell 3 all that meant, but -- 4 COMMISSIONER LETZ: Sounded good. 5 COMMISSIONER WILLIAMS: Well said. What did you 6 say? 7 COMMISSIONER BALDWIN: I don't know. We need to get 8 to it. 9 JUDGE TINLEY: Anything else on those items, or any 10 other matters on the agenda that were not fully taken care of 11 yesterday that need to come before the Court at this time? If 12 not, we will stand adjourned. 13 (Commissioners Court adjourned at 11:29 a.m.) 14 - - - - - - - - - - 15 16 17 18 19 20 21 22 23 24 25 11-28-06 37 1 STATE OF TEXAS | 2 COUNTY OF KERR | 3 The above and foregoing is a true and complete 4 transcription of my stenotype notes taken in my 5 capacity as County Clerk of the Commissioners Court 6 of Kerr County, Texas, at the time and place 7 heretofore set forth. 8 DATED at Kerrville, Texas, this 1st day of 9 December, 2006. 10 11 JANNETT PIEPER, Kerr County Clerk 12 BY: _________________________________ Kathy Banik, Deputy County Clerk 13 Certified Shorthand Reporter 14 15 16 17 18 19 20 21 22 23 24 25 11-28-06