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2019-01-08 Agenda with Backup
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City Hall City of Denton 215 E. McKinney St. Denton, Texas 76201 www.cityofdenton.com Legislation Text File #:ID 19-039,Version:1 AGENDA CAPTION Receive a report, hold a discussion, and give staff feedback regarding the final report from the Police Executive Research Forum Organizational Review of the Denton Police Department. City of DentonPage 1 of 1Printed on 1/4/2019 powered by Legistar© City of Denton City Hall 215 E. McKinney Street Denton, Texas www.cityofdenton.com _____________________________________________________________________________________ AGENDA INFORMATION SHEET DEPARTMENT: Police Department CM/ DCM/ ACM: Todd Hileman th DATE: January 8, 2019 SUBJECT Receive a report, hold a discussion, and give staff direction regarding a report and recommendations from the Police Executive Research Forum (PERF). BACKGROUND In May 2018, the Police Executive Research Forum (PERF) was commissioned by the City Manager to perform an organizational review of the Denton Police Department (DPD). PERF is an industry leading independent research organization focused on critical issues within policing. The initial review included current policies and procedures, organizational structure and management systems, response to critical incidents and organizational climate. The intent of the review was not to investigate any particular incident or specific police officer, but rather to identify areas where the department could improve core business practices. DISCUSSION In June 2018, PERF conducted a broad assessment of zational climate and structure. As part of this review, PERF was charged with completing the following tasks: internal communication, organizational efficiency, accountability mechanisms, and the processes for determining promotions and specialized assignments. to ensure that accountability mechanisms are in place. Conducting an organi dissatisfaction, and assessing perceptions about the workplace environment of the DPD. Developing findings and recommendations, to be presented in a report to the City of Denton. OTHER INITIATIVES AND PROGRESS The draft report provided to the Department August 2018, contained a large number of recommendations related to policy and procedure, particularly the use of force, deadly force, less-lethal devices, and organizational climate. In October, Chief Dixon directed the development of a matrix to document and prioritize each recommendation. This has been an invaluable tool in prioritizing each recommendation. To facilitate the development and update of the Departments policies and procedures manual, Chief Dixon assigned Detective Elisa Howell as the project manager in the complete review and revision of DPD policy. To date, Detective Howell has worked directly with Chief Dixon in not only revising policy, but in researching and bringing Lexipol to the Department. Lexipol is the industry leader in law enforcement policy and procedure, having a large staff of attorneys who track current trends, industry standards, and case law to develop and deploy the best and most comprehensive policy management solution available. Included in the Lexipol solution is the ability to remotely access policy, ongoing training that can be customized, updates, and daily tips that can directly be pushed to officers on the street. STRATEGIC PLAN RELATIONSHIP Plan is an action-oriented road map that will help the City achieve its vision. The foundation for the plan is the five long-term Key Focus Areas (KFA): Organizational Excellence; Public Infrastructure; Economic Development; Safe, Livable, and Family-Friendly Community; and Sustainability and Environmental Stewardship. While individual items may support multiple KFAs, this specific City Council agenda item contributes most directly to the following KFA and goal: Related Key Focus Area: Organizational Excellence Related Goal: 1.2 Develop a high-performance workforce EXHIBITS 1. Agenda Information Sheet 2. Presentation 3. PERF Final Report Respectfully submitted: Frank Dixon Chief of Police Prepared by: Bobby Smith Assistant Chief of Police Organizational Review of the Denton Police Department Final Report December 2018 Table of Contents 4!",% /& #/.4%.43 Table of Contents ............................................................................................................................ 1 EXECUTIVE SUMMARY ............................................................................................................ 4 Summary of Findings and Recommendations ............................................................................ 4 Policies and Procedures .......................................................................................................... 4 ICAT Train-the-Trainer ........................................................................................................ 13 Organizational Climate Survey of the DPD .......................................................................... 13 Workplace Environment and Procedural Justice .................................................................. 15 Additional Recommendations ............................................................................................... 17 Moving Forward ....................................................................................................................... 18 INTRODUCTION ........................................................................................................................ 19 About the Denton Police Department ....................................................................................... 19 Project Scope and Methodology ............................................................................................... 20 SECTION I. DPD POLICIES AND PROCEDURES ................................................................. 22 DPD General Order 5.1 - Use of Force..................................................................................... 22 DPD General Order 5.1.1 (Policy) ........................................................................................ 23 DPD Policy 5.1.2 (Definitions) ............................................................................................. 25 DPD Policy 5.1.3 (Use of Force/General Rules) .................................................................. 26 DPD Policy 5.1.6 (Use of Force Restrictions) ...................................................................... 28 DPD Policy 5.1.7 (Medical Treatment) ................................................................................ 29 DPD Policy 5.1.9 (Reporting and Review) ........................................................................... 29 DPD General Order 5.2 Officer Involved Shootings ............................................................. 32 DPD Policy 5.2.2 (Reporting Discharge of Weapons) ......................................................... 32 DPD Policy 5.2.3 (Investigation of Officer-Involved Shootings) ........................................ 33 DPD Policy 5.2.4 (Post-Shooting Procedure) ....................................................................... 34 DPD General Order 5.4 Less Lethal Devices and Weapons ................................................. 35 DPD Policy 5.4.1 (Policy) .................................................................................................... 35 DPD Policy 5.4.2 (Definitions) ............................................................................................. 36 DPD Policy 5.4.3 (Certification Requirements) ................................................................... 38 DPD Policy 5.4.5 (Tasers) .................................................................................................... 39 DPD Policy 5.4.7 (Police Canine Deployment).................................................................... 43 DPD Policy 5.4.10 (Medical Treatment and Decontamination) ........................................... 44 DPD Policy 5.4.11 (Reporting the Use of Less Lethal Force).............................................. 45 1 Table of Contents DPD General Order 4.2 Emergency Vehicle Operations and Pursuits .................................. 46 DPD Policy 4.2.13 (Prohibited Actions During a Pursuit) ................................................... 46 DPD Policy 4.2.19 (Inter-jurisdictional Pursuit Policy) ....................................................... 46 DPD General Order 10.2 Office of Professional Standards and Administrative Investigations ................................................................................................................................................... 48 DPD Policy 10.2.6 (Criminal Investigations Relating to Employee Misconduct) ............... 48 DPD Policy 10.2.7 (Investigation Process)........................................................................... 48 DPD General Order 12.1 Active Critical Incidents ............................................................... 49 ............................................................................................... 49 SECTION II. ICAT TRAIN-THE-TRAINER .............................................................................. 51 ................... 51 SECTION III. ORGANIZATIONAL CLIMATE SURVEY OF THE DENTON POLICE DEPT. ....................................................................................................................................................... 53 Survey Background and Methodology ..................................................................................... 53 Survey Instrument: ................................................................................................................ 53 Data Collection: .................................................................................................................... 53 Survey Sample. ..................................................................................................................... 53 Survey Results .......................................................................................................................... 54 Organizational Commitment and Job Satisfaction ............................................................... 55 Perceptions of the Work Environment at DPD ..................................................................... 56 Perceptions of Internal Communication ............................................................................... 58 Perceptions of Department Supervision................................................................................ 59 Perceptions of Department Leaders ...................................................................................... 60 Perceptions of Training Opportunities and Available Resources ......................................... 61 Perception of the Promotion and Special Assignment Process ............................................ 62 Open-Ended Survey Questions ............................................................................................. 66 SECTION IV. WORKPLACE ENVIRONMENT AND PROCEDURAL JUSTICE ................. 70 Internal Procedural Justice ........................................................................................................ 70 Benefits of Internal Procedural Justice ................................................................................. 71 Applying Procedural Justice Principles at DPD ....................................................................... 72 Internal Department Communications .................................................................................. 72 Recognizing Exceptional Performance ................................................................................. 74 SECTION V. ADDITIONAL RECOMMENDATIONS ............................................................. 75 CONCLUSION ............................................................................................................................. 77 Policies and Procedures ............................................................................................................ 77 2 Table of Contents Organizational Structure ........................................................................................................... 78 Organizational Climate Survey ................................................................................................. 78 Workplace Environment and Procedural Justice ...................................................................... 78 Moving Forward ....................................................................................................................... 79 APPENDIX DENTON POLICE DEPARTMENT ORGANIZATIONAL CLIMATE SURVEY ....................................................................................................................................................... 80 3 EXECUTIVE SUMMARY %8%#54)6% 35--!29 In May 2018, the Police Executive Research Forum (PERF) was commissioned by the City of Denton to perform an organizational review of the Denton Police Department (DPD). PERF policies on use of force and responding to organizational climate. The purpose of this study was not to investigate any particular incident or specific police officer, but rather to identify areas where DPD can improve its core business practices. s use-of-force 3´¬¬ ±¸ ®¥ &¨£¨¦² £ 2¤¢®¬¬¤£ ³¨®² review of DPD-of-force policy and other related policies, an analysis of organizational chart, a survey of DPD employees regarding job satisfaction and other indicators , interviews with DPD personnel, and observations made Throughout the course of this reviewits ongoing findings and recommendations with DPD leaders. DPD began making changes to its policies and practices based on these discussions, and at the time of this report the DPD also developed a matrix that documents and prioritizes each recommendation, and PERF found this matrix to be a useful tool and agrees with the priority level given to each recommendation. This executive summary presents an overview of key findings and recommendations that are included in the report. considerable progress in implementing these recommendations. 0®«¨¢¨¤² £ 0±®¢¤£´±¤² DPD General Order 5.1 Use of Force Finding: -of-force policy did not have a statement regarding the sanctity of life, de-escalation, or the duty to intervene if an officer witnesses a fellow officer using unnecessary force or appearing to be on the verge of using unnecessary force. In addition, - The use-of-force policy also did not direct officers to only use force that is proportional to the threat encountered, and it did not prohibit the use of lethal force against individuals who are a 4 EXECUTIVE SUMMARY danger only g at vehicles, but policy does not provide a narrow exception in cases where a vehicle is being used as a weapon of mass destruction. cal treatment following the use of force, and the policy does not seem to require a medical evaluation of a person who complains of a physical injury (currently, medical evaluations are only required for subjects with visible injuries). DPD does not have a policy requiring supervisors to be dispatched to the scene of critical incidents in which there is a high likelihood that officers may use force. PERF also found that DPD uses different forms to document specific uses of force m, while all other use-of-force incidents are captured using the generic use-of-force form), and that officers are currently required to document only certain types of use of force. Finally, DPD does not utilize a review board to critically analyze use-of-force incidents, and DPD does not publish an annual use-of-force report. Recommendation: DPD should add a sentence emphasizing the sanctity of human life as a core value in its use-of-force policy. For example, the Baltimore Police -of- 1 This recommendation has been implemented. Recommendation: DPD should adopt de-escalation as formal agency policy, and language should be added to policy to reflect this approach. The policy should state that de-escalation is the preferred, tactically sound approach in many critical incidents. The policy should require officers to receive training on key de-escalation principles. Many agencies already provide crisis intervention training as a key element of de-escalation, but crisis intervention policies and training must be merged with a new focus on tactics that officers can use to de-escalate situations. De-escalation policy should also include discussion of proportionality; using distance, cover, and tactical repositioning to ; calling for supervisory and other resources; and related concepts. This recommendation has been implemented. Recommendation: DPD should add a statement regarding the duty to intervene to its use-of-Officers have a duty to intervene if they anticipate or observe the unreasonable, unnecessary, or This recommendation has been implemented. Recommendation: PERF recommends the use of the terms and - throughout all of DPies, rather - because many weapons that are not designed to be lethal sometimes do result in death. DPD should carefully review all policies to ensure the consistent use of these terms. This recommendation has been implemented. 1 https://www.baltimorepolice.org/sites/default/files/Policies/1115_Use_Of_Force.pdf 5 EXECUTIVE SUMMARY Recommendation: DPD should add a definition of . The definition should state that proportionality involves officers: (1) using only the level of force necessary to mitigate the threat and safely achieve lawful objectives; (2) considering, if appropriate, alternate force options that are less likely to result in injury but will allow officers to achieve lawful objectives; and 2 actions. Proportionality also considers the nature and severity of the underlying events. (The concept of proportionality does not mean that officers, at the moment they have determined that a particular use of force is necessary and appropriate to mitigate a threat, should delay their response in order to consider how their actions will be viewed by others. Rather, officers should begin considering what might be appropriate and proportional as they approach an incident, and they should keep this consideration in their minds as they are assessing the situation and deciding how to respond. This recommendation has been implemented. Recommendation: DPD should add a definition of -escalation. The definition should emphasize proportionality; the use of distance, cover, and tactical repositioning to ; calling for supervisors and 3 other resources; and similar actions and tactics. This recommendation has been implemented. Recommendation: DPD should add language to its policy that force used by officers should be proportional to the threat. In assessing whether a response is proportional to the threat being faced, officers should consider the following factors: (1) whether the level of force is necessary to mitigate the threat and safely achieve a lawful objective; (2) whether there is another, less injurious option available that will allow the officer to achieve the same objective as effectively and safely; and (3) w will be viewed as appropriate given the severity of the threat and the totality of the circumstances. This recommendation has been implemented. Recommendation: DPD should add language that prohibits the use of lethal force against individuals who pose a danger only to themselves and not to other members of the public or to officers. Officers should also be required to consider the use of many available less-lethal options in these situations. Officers should be prepared to exercise considerable discretion to take as much time as necessary to resolve a situation 4 peacefully. This recommendation has been implemented. Recommendation: DPD should add the following language to its policy regarding shooting at vehicles: This recommendation has been implemented. 2 See PERF, Guiding Principles on Use of Force, pp. 38-40. http://www.policeforum.org/assets/guidingprinciples1.pdf. 3 Ibid, pp. 54-65. 4 See PERF, Guiding Principles on Use of Force, p. 48. 6 EXECUTIVE SUMMARY Recommendation: DPD should add language to its policy that officers shall promptly request medical assistance as soon as it is safe and practical to do so following a force incident. This recommendation has been implemented. Recommendation: DPD policy should include language that requires a medical evaluation of subjects who complain of injury, even if injuries are not visible, following a use-of-force incident. This recommendation has been implemented. Recommendation: DPD should add a requirement that supervisors immediately respond to any scene: where a weapon (including a firearm, edged weapon, rocks, or other improvised weapons) is reported; where a person experiencing a mental health crisis is reported; or where a dispatcher or other member of the department believes there is potential for significant use of force. This recommendation has been implemented in practice, and will be added to policy in the near future Recommendation: DPD should add the following statement to its policyOfficers will document all uses of force that involve a hand or leg technique; the use of a lethal weapon, less-lethal weapon, or weapon of opportunity; or any instance where injury is observed or alleged by the subject that is th pointing of a firearm or an Electronic Control Weapon at an individual as a threat of force This recommendation has been implemented in practice, and will be added to policy in the near future Recommendation: DPD reporting uses of force as simple as possible, one form should be used for reporting all use-of-force incidents. This recommendation has been implemented. Recommendation: DPD should publish its annual use-of-force report on the -of-force incidents are captured, the number of incidents that occurred during the year, and whether the incidents were within policy. This report should be used to better understand use-of- force trends and opportunities for improvements, and to demonstrate transparency to the community. Many police departments publish annual use-of-force reports on their 5 department websites. One example is the Seattle, WA Police Department. This recommendation is in the process of implementation. Recommendation: PERF recommends conducting a formal review of all officer- involved shootings, in-custody deaths, hospitalizations of prisoners, and serious use-of- force incidents (electronic control weapon, baton, OC spray), by establishing a performance review board. The formal review of these incidents, conducted as a matter of course, will provide valuable opportunities to identify lessons that can be incorporated into officer training, gaps in tactics, any need for additional equipment to be provided to 5 Seattle Police Department. (2017). Use of Force Annual Report. https://www.seattle.gov/Documents/Departments/Police/Publications/Use%20of%20Force%20Annual%20Report% 20-%20Final.pdf 7 EXECUTIVE SUMMARY officers, or any need for changes in policy. Incidents that were captured by body-worn cameras can be especial and tools while providing accountability. The review board, consisting at a minimum of the assistant chief of operations, a lieutenant or sergeant from training, and a representative from professional standards, should convene quarterly to review each serious use-of-force incident. The board should review any use of force that resulted in a death or injury or involved the use of a lethal or less-lethal tool. The review board should serve to ensure that tactics, equipment, and policy are reviewed, and areas of concern are addressed. In addition, the review board should meet within 24 to 48 hours following an officer- involved shooting or in-custody death. The review board should be briefed by investigators regarding the facts of the case known at that time to ensure that no immediate changes to policy, training, or equipment are necessary. The review board should present all findings and recommendations to the chief of police. This recommendation is in the process of implementation. DPD General Order 5.2 Officer Involved Shootings Finding: -involved shooting policy to be thorough, but some improvements can be made. For example, the policy title should be changed to reflect that in- custody deaths should follow the same reporting and investigation process as officer-involved shootings. DPD should also mandate that officers involved in a shooting or in-custody death schedule a follow-up appointment with the department-approved psychologist roughly six months after the shooting incident, to ensure the well-being of the officer. It is also crucial for the use-of-force review board to examine all in-custody deaths and officer-involved shootings 24 to 48 hours following the incident to determine if immediate changes to training, policy, or equipment are necessary. Recommendation: DPD should change the title of General Order 5.2 from --Involved Shootings and In- should be followed for fatal officer-involved shootings and in-custody deaths. This recommendation has been implemented. Recommendation: All officer-involved shootings or in-custody deaths should be examined by the use-of-force review board within 24 to 48 hours following the incident. The review board should be briefed by investigators regarding the facts of the case known at that time to determine whether any immediate changes to policy, training, or equipment are necessary. This recommendation has been implemented. Recommendation: DPD should continue the practice of requiring all officers involved in an officer-involved shooting or in-custody death to schedule a session with the department-approved psychologist prior to returning to work. In addition, the department should initiate the practice of a mandatory follow-up appointment with the department- 8 EXECUTIVE SUMMARY approved psychologist, approximately six months from the original visit, to ensure the mental health and well-being of the officer are being addressed. This recommendation has been implemented. DPD General Order 5.4 Less-Lethal Devices and Weapons Findings: -lethal weapons policy could be condensed -of-force policy. However, if DPD does not combine these policies, then statements regarding the sanctity of life, proportionality, and de-escalation should be added to the Less-Lethal Devices policy. Additionally, some definitions in the less-lethal weapons policy should be changed to conform to the same definition used in other policies, while other definitions should be added to the Less-Lethal Devices policy. Regardless of whether the policies are combined, DPD should adopt several guidelines regarding Electronic Control Weapons (ECW) (e.g., discouraging officers from targeting sensitive areas or using drive stun mode). In addition, DPD should require any authorization for canine use for crowd control to come from a lieutenant or higher-ranked officer. PERF also found that the current policy does not require a medical evaluation following ECW deployment or canine bites, and that reporting and supervisor requirements are not thorough. Recommendation: DPD should add language regarding the sanctity of life to the Less- Lethal Devices policy to demonstrate that it is fully committed to progressive policing practices. This recommendation has been implemented. Recommendation: DPD should include language about objective reasonableness to this policy. The language should state that officers are to only use the amount of force that appears necessary to accomplish a lawful objective, that uses of force must be objectively reasonable, and that officers will use only the force that a reasonably prudent officer would use under the same or similar circumstances. This recommendation has been implemented. Recommendation: DPD should add language to the Less-Lethal Devices policy stating that force used by officers should be proportional to the threat. In assessing whether a response is proportional to the threat being faced, officers should consider the following factors: (1) whether the level of force is necessary to mitigate the threat and safely achieve a lawful objective; (2) whether there is another, less injurious option available that will allow the officer to achieve the same objective as effectively and safely; and (3) w and the totality of the circumstances. This recommendation has been implemented. Recommendation: DPD should add language regarding the use of de-escalation tactics to this policy. The language should state that de-escalation is the preferred, tactically sound approach in many critical situations, and officers should use de-escalation tactics when it is safe and time permits. This recommendation has been implemented. Recommendation: DPD should change the definition of currently used in Section 5.4.2 to match the definition for the term that is found in 9 EXECUTIVE SUMMARY General Order 5.1. The definit necessity for force and the appropriate level of force, officers shall evaluate each situation in light of the known circumstances, including, but not limited to, the severity of the crime at issue, whether the suspect poses an immediate threat to the safety of the officers or others, and whether the suspect is actively resisting arrest or attempting to evade arrest This recommendation has been implemented. Recommendation: DPD should add a definition of to the Less- Lethal Devices policy. The definition should state that proportionality involves officers: (1) using only the level of force necessary to mitigate the threat and safely achieve lawful objectives; (2) considering, if appropriate, alternate force options that are less likely to result in injury but will allow officers to achieve lawful objectives; and (3) considering an that officers, at the moment they have determined that a particular use of force is necessary and appropriate to mitigate a threat, should delay their response in order to consider how their actions will be viewed by others. Rather, officers should begin considering what might be appropriate and proportional as they approach an incident, and they should keep this consideration in their minds as they are assessing the situation and deciding how to respond. Proportionality also considers the nature and severity of the 6 underlying events. This recommendation has been implemented. Recommendation: DPD should add a definition of - to this section. The definition should emphasize proportionality; the use of distance, cover, and tactical repositioning to ; calling for 7 supervisors and other resources; and similar actions and tactics. This recommendation has been implemented. Recommendation: DPD should require that officers be recertified to use Electronic Control Weapons (ECWs) on an annual basis, and language should be added to this policy to reflect that change. This recommendation has been implemented. Recommendation: DPD should revise its policy to replace al This change will help clarify that ECWs are in fact weapons that carry a risk of harming persons, including fatal injuries in some cases. The change should be made through all DPD policies and in all other orders, directives, and training curricula which reference such devices. This recommendation has been implemented. Recommendation: DPD should add language instructing officers not to purposefully target sensitive areas with an ECW. should not intentionally target sensitive areas (e.g., head, neck, genitalia) when deploying This recommendation has been implemented. 6 See PERF, Guiding Principles on Use of Force, pp. 38-40. http://www.policeforum.org/assets/guidingprinciples1.pdf. 7 Ibid, pp. 54-65. 10 EXECUTIVE SUMMARY Recommendation: DPD should add language restricting the deployment of an ECW on a person in physical control of a vehicle in motion (e.g., automobiles, trucks, motorcycles, ATVs, bicycles, scooters). This recommendation has been implemented. Recommendation: DPD should revise its ECW for one standard cycle (five seconds) and then evaluate the situation to determine if subsequent cycles are necessary. Personnel should consider that exposure to the ECW for longer than 15 seconds (whether due to multiple applications or continuous cycling) may increase the risk of death or serious injury. Any subsequent application should be This recommendation has been implemented. Recommendation: In policy and training, DPD should discourage officers from using the drive stun mode as a pain compliance technique. The policy should state that the drive stun mode should only be used to complete the incapacitation circuit in order to supplement the probe mode, or to create separation between an officer and a subject. This recommendation has been implemented and will be emphasized in follow-up training. Recommendation: DPD should add the following language to its Less-Lethal Devices evaluation by emergency medical responders in the field or at a medical facility. Any subject who has been exposed to prolonged application (i.e., more than 15 seconds) should be transported to an emergency department for evaluation. Medical personnel conducting the evaluation should be made aware that the subject has experienced ECW activation, so they can better evaluate the need for further medical tr This recommendation has been implemented. Recommendation: If DPD continues to allow police canines to be used to control crowds during riots or other civil disturbances, then the authorization to allow police canines to be used in those situations should come from the position of lieutenant or higher. Recommendation: DPD should include the following statement to the canine ndividual who experiences a bite by a police canine will be taken to a hospital for medical evaluation and Recommendation: DPD should include the following language in its policy will document all uses of force that involve a hand or leg technique; the use of a lethal weapon, less-lethal weapon, or weapon of opportunity; or any instance where injury is The pointing of a firearm or an Electronic Control Weapon at an individual as a threat of force Relevant language has been added to this section. 11 EXECUTIVE SUMMARY Recommendation: DPD should add language to this policy that, except in the case of mitigating circumstances, supervisors should immediately respond to the scene of incidents where an officer has used any less-lethal force and initiate an investigation. This recommendation has been implemented. DPD General Order 4.2 Emergency Vehicle Operations and Pursuits Finding: does not emphasize strongly enough that officers shall not shoot at a moving vehicle unless the occupants are using deadly force against the officer by means other than the vehicle. This is a -of-force policy (General Order 5.1), and DPD should ensure that this language is consistent through all of its policies. Recommendation: DPD should add language to its Emergency Vehicle Operations and Pursuits policy (DPD General Order 4.2) stating that officers are not to shoot at a moving vehicle unless the occupants are using deadly force against the officer by means other than the vehicle. This language should be added to both Sections 4.2.13 and 4.2.19 of this policy. This recommendation has been implemented. DPD General Order 10.2 Office of Professional Standards and Administrative Investigations Finding: t, when possible, criminal investigations related to a citizen or internal complaint should be completed before any administrative investigation is conducted. This practice can unnecessarily delay the department in discharging an employee who, in an administrative investigation, clearly would be shown to have violated departmental rules seriously enough to justify dismissal. PERF also found that although DPD accepts complaints made by methods other than in-es, the language alternative methods. Recommendation: The DPD should routinely conduct concurrent criminal and administrative investigations. The administrative investigation is conducted by the Office of Professional Standards (OPS) and the criminal investigation by the Criminal Investigations Bureau. The policy should be very clear that there must be a process to protect the integrity of the criminal case. The implications of Garrity and Miranda warnings, along with the potential for a lost criminal case against an employee due to mishandling of information, should be addressed in this policy. an interview in an administrative -incrimination by advising the employee that statements made in the administrative investigation will not be used in any criminal proceeding. Recommendation: The language in this section should simply and clearly state that complaints made using any method (e.g., online, telephone, letter, etc.) will be investigated. DPD should remove any language that refers to accepting a complaint via 12 EXECUTIVE SUMMARY telephone or letter if the complainant location makes it difficult to come to the department or the complainant declines an in-person interview. Complaints made by methods other than in-person at the police department should be accepted regardless of the complainant location. This recommendation has been implemented. )#!4 4± ¨-the-Trainer To help law enforcement agencies implement 30 Guiding Principles on Use of Force, 8 PERF developed ICAT: Integrating Communications, Assessment, and Tactics, a training guide that represents a new way of thinking about use-of-force training for American police officers. ICAT takes the essential building blocks of critical thinking, crisis intervention, communications, and tactics, and puts them together in an integrated approach to training. In June 2018, PERF conducted ICAT train-the-trainer instruction for several Denton Police Department trainers. Participants were carefully selected for the implementation of the training. The participants were actively engaged throughout the day, discussing methods to adapt and deliver the instruction to all DPD personnel. Eleven ICAT training sessions have been scheduled through December 14, 2018. DPD anticipates departmentwide training will be complete by the spring of 2019. /±¦ ¨¹ ³¨® « #«¨¬ ³¤ 3´±µ¤¸ ®¥ ³§¤ $0$ solicit Denton s of the department. The survey asked employees how they feel about several aspects of the department, including internal communications, supervision, leadership, job satisfaction, work environment, and the process used to determine promotion and special assignments. The survey was distributed to all DPD personnel. At the close of data collection, PERF had received a response from 151 DPD employees, for a 59.7% response rate. Finding: Overall, DPD employees provided positive responses to statements pertaining to organizational commitment and job satisfaction. For example, nearly 50% of respondents that I department politics and weak leadership as areas in which DPD could improve. Finding: Most DPD employees provided favorable responses to statements regarding their perception of the work environment. For example, a large majority of respondents provided agreed and another 38% strongly agreed with the statement. 8 Police Executive Research Forum (2016). ICAT: Integrating Communications, Assessment, and Tactics. Training Guide for Defusing Critical Incidents. http://www.policeforum.org/assets/icattrainingguide.pdf 13 EXECUTIVE SUMMARY Finding: DPD employees had less favorable responses to statements regarding their perceptions of intra-agency communication. For example, most respondents believe that DPD leaders were doing a poor job of informing employees about matters affecting them. Many DPD employees also indicated that they are not asked for input regarding decisions that will affect them, that the rationale behind decisions is not communicated effectively, and that they are not satisfied with the information they receive from management. Finding: Most DPD employees responded favorably to statements regarding their level of satisfaction with supervisors in the department. For example, employees generally agreed that their immediate supervisors treat them fairly and with respect. Finding: DPD employees provided less favorable responses regarding their perceptions of department leaders. The majority of respondents agreed or strongly agreed with the statement responses regarding whether employees are held accountable for poor performance. Finding: Overall, DPD employees provided positive responses to statements regarding their satisfaction with department resources and training opportunities. An overwhelming majority of respondents believe they have the equipment and supplies needed to do their jobs, and 80% of respondents agreed or strongly agreed that they receive the necessary training to do their jobs. Finding: DPD employees had mixed views regarding the promotion and special assignment assignments and professional development opportunities are provided to those who demonstrate no not think that DPD is unfair in its hiring practices, but just over half of respondents also believe that promotions are seldom related to employee performance. Finding: The organizational climate survey included open-ended questions that allowed respondents to provide additional comments. Several common themes emerged from the responses to these open-ended questions, including: the belief that cronyism is a problem at DPD, especially with respect to promotions and special assignments; a severe lack of internal 9 and the hiring of racial minorities; an uneven disciplinary atmosphere created by significant differences in performance expectations among patrol supervisors and commanders; and inconsistency in the expectations among sergeants and lieutenants. Recommendation: PERF believes the DPD would be best served by consistently adhering to the following process for determining special assignments: 1) Open positions for special assignments should be advertised department-wide, preferably via an email sent to every DPD employee. 2) Interested employees should complete an application. immediate DPD supervisors for comments. 4) Completed applications should be sent to the specialized unit filling the position. 9 Also known as District Five, this unit is responsible for policing the downtown Denton entertainment area. 14 EXECUTIVE SUMMARY Additionally, PERF recommends the use of a three-person interview panel made up of subject matter experts for the specialized unit. The position-level requirements for the three-person interview panel should be indicated in policy. The three-person interview panel should use fixed questions and a consistent scoring method (e.g., a scoring rubric) for evaluating applicants. A basic skills test may be administered, but DPD must ensure that applicants know it is part of the process and why the test is included in the process. This recommendation has been implemented. Recommendation: DPD leaders must work to better integrate the Downtown Unit into the department. The Downtown Unit is designed to provide visitors and residents with a sense of safety and security while enjoying the local businesses, restaurants, and nightlife. The Downtown Unit assists the City of Denton in making the downtown area an attractive destination. DPD leaders should consider a constant rotation of temporarily assigned patrol officers into the Downtown Unit to expose them to the work of the unit. This will also give patrol officers exposure to the business community and to the problem-solving and communication skills that are essential in the unit. Recommendation: PERF recommends that through the use of hiring data, DPD leaders readdress the misinformation so that the department can continue to move forward. Recommendation: ship team must clarify the mission and vision of the agency and make a true effort to share this vision through effective internal communication and transparency. This recommendation has been implemented. Recommendation: that performance and behavioral expectations that can lead to disciplinary action are clearly stated in writing, and are not subject to overly broad or inconsistent interpretations by first-line and mid-level leaders. Consideration should be given to publishing summaries on a quarterly basis of adjudicated misconduct complaints to reduce suspicions of disparate treatment or biased outcomes. Recommendation: PERF recommends that provide commanders and supervisors with clear expectations and consistent practices for officers to follow regarding their daily law enforcement activities (e.g., report writing, handling calls for service, etc.). Providing clear, consistent requirements for all patrol officers will increase accountability and significantly reduce the confusion that currently exists. This recommendation has been implemented. 7®±ª¯« ¢¤ %µ¨±®¬¤³ £ 0±®¢¤£´± « *´²³¨¢¤ t emerged was the belief among many procedural justice. 15 EXECUTIVE SUMMARY with dignity, respect, and fairness. In policing, agencies should strive to ensure that officers provide a sense of procedural justice to the community members they encounter every day. which is about applying these principles within a police agency, so that officers and other employees feel 10 that they are treated fairly and even-handedly, with respect and dignity. Based on feedback that PERF received during focus groups with DPD employees, as well as a review of the organizational climate survey data, PERF believes that incorporating the principles of internal procedural justice throughout the department workplace culture and environment. Finding: DPD can adopt a number of strategies to improve internal department communications and promote internal procedural justice. Such strategies include soliciting input from employees, improving email communications to DPD employees, holding regularly scheduled formal meetings with department personnel, and using - Recommendation: DPD should make use of regular, ongoing department-wide meetings, involving both sworn and civilian staff members. These meetings should be used to share information about upcoming changes within the agency and soliciting employee feedback. This recommendation has been implemented. Recommendation: DPD should explore other ways to solicit feedback from employees, including circulating feedback forms regarding possible changes in the department, holding focus groups with a cross- meetings between employees and the chief of police. Recommendation: The DPD Chief of Police should establish the following standing formal meeting schedule: o Command staff (once per week) o Supervisors (once per month) o Denton Police Officers Association (once per month) o Denton Municipal Police Association (once per month) o Crime meeting (once per month). This recommendation has been implemented. 10 Police Executive Research Forum (2014). Legitimacy and Procedural Justice: A New Element of Police Leadership. http://www.policeforum.org/assets/docs/Free_Online_Documents/Leadership/legitimacy%20and%20procedural%20 justice%20-%20a%20new%20element%20of%20police%20leadership.pdf ; Police Executive Research Forum (2015). Critical Response Technical Assessment Review: Police Accountability Findings and National Implications of an Assessment of the San Diego Police Department. Washington, DC: Office of Community Oriented Policing Services. https://www.sandiego.gov/sites/default/files/legacy/police/pdf/perfrpt.pdf. 16 EXECUTIVE SUMMARY Recommendation: DPD should explore the use of after-action briefings following critical incidents or challenging situations, in order to share information about what strategies were effective and to explore aspects of the response that, in hindsight, could be improved upon. In addition to teaching lessons about best practices, such briefings can provide constructive feedback to other unit members and encourage mentoring relationships between junior and senior staff members. This recommendation has been implemented. Recommendation: DPD should periodically recognize employees whose work has had a positive impact on the community or the department. One simple way to ensure that the entire department learns about such awards is for the chief of police to send an email to all DPD employees announcing the honors. This recommendation has been implemented. !££¨³¨® « 2¤¢®¬¬¤£ ³¨®² PERF is offering several other recommendations that will assist the DPD in improving its day-to- day operations. Several of these recommendations are intended to strengthen agency transparency and accountability to the community. Recommendation: - of- practice demonstrates a commitment to transparency with the communities they serve. Examples of two major law enforcement agencies that have posted their policies online are the Seattle and Los Angeles Police Departments. http://www.seattle.gov/police/publications/manual/default.htm http://www.lapdonline.org/lapd_manual/ Recommendation: DPD follows progressive policing practices for accepting complaints against agency personnel. However, the manner in which complaints are accepted is somewhat limited. Because the complaint process may not be intuitive for some people who are not familiar with how law enforcement agencies are structured, there should be a clearly identifiable link on the DPD the complaint process, the complaint form, and instructions for completing the form. Instructions for completing the form, and the form itself, should be available in English and Spanish. DPD also should accept commendations, as well as complaints against officers, through t This recommendation has been implemented. Recommendation: If at all possible, DPD should move the Office of Professional Standards (OPS) to an off-site location. An off-site facility, such as a mixed-use office building or another city property, can be less intimidating than the regular police facility for complainants. Furthermore, for officers who visit OPS to be questioned by investigators, the use of an off-site location may protect officer privacy. 17 EXECUTIVE SUMMARY Recommendation: DPD should utilize an ombudsman or independent auditor (e.g., a retired judge or prosecutor) to conduct periodic, random reviews of its internal affairs investigations. The U.S. Department of Justice (DOJ) has routinely mandated the creation of an external oversight component in consent decrees and memoranda of agreement during the past 15 years. DOJ documents detailing these agreements serve as excellent resources for the considerations that are involved in establishing an oversight 11 mechanism. Recommendation: It was mentioned several times during focus groups that special requests from municipal government officials are often disseminated through DPD without following the chain of command. DPD should implement a consistent process for handling the concerns of local politicians. When such requests come to the agency, the request should be reviewed by the Assistant Chief, then sent through the chain of command to the proper employee for action. Once the request is complete, the findings or action taken should go back up the chain of command to the Chief, so it then can be relayed back to the requestor. Agency leaders should maintain a record of these actions. It is important that these requests not skip the chain of command and go directly to officers, because that can cause confusion and misunderstanding among agency supervisors and commanders. This recommendation has been implemented. Requests are routed through the Chief of Police to the proper member of the department, with the chain of command involved. -®µ¨¦ &®±¶ ±£ By commissioning this review and implementing the suggested reforms, DPD has signaled that it is committed to strengthening its policies, operations, and overall service that it provides to the and the recommendations provided in this report are intended to build upon this foundation and provide the agency with additional tools and suggestions for taking DPD to the next level of service and professionalism. 11 See U.S. Department of Justice Civil Rig Law Enforcement Agencies section. https://www.justice.gov/crt/special-litigation-section-cases-and-matters0#police 18 INTRODUCTION INTRODUCTION In May 2018, the City of Denton, Texas commissioned the Police Executive Research Forum (PERF) to conduct an organizational review was broad in scope, covering , including internal leadership and communication, agency transparency and accountability, and use of force and the response to critical incidents. The purpose of this study was not to investigate any specific incident or police officer, but rather to operations overall. s policies to determine whether they were aligned with progressive practices and national standards. In addition, PERF reviewed the train-the-grating Communications, Assessment, and Tactics (ICAT) course, which is designed to increase officer safety and reduce the need for force in many types of incidents. DPD procedures, organization structure, and results from the organizational climate survey. !¡®´³ ³§¤ $¤³® 0®«¨¢¤ $¤¯ ±³¬¤³ The DPD is a full-service police department that serves the City of Denton, Texas. Denton is located in north Texas and is part of the Dallas-Fort Worth metroplex. The city has a population 12 of approximately 136,000. 13 was: 59.9% White 14 23.4% Hispanic or Latino 10.1% Black or African-American 3.9% Asian 3.4% Two or More Races. department is divided into an Operations Division and an Administration Division, each of which 15 was led by an Assistant Chief. The Operations Division includes the Patrol, Neighborhood Services, and Criminal Investigations Sections. The Administration Division includes the Office of Professional Standards, Support, Accounting and Technology, and Communications Sections. 12 , 2018 https://www.census.gov/quickfacts/fact/table/dentoncitytexas/PST045217. 13 Ibid. 14 may be of any race, so also 15 Due to restructuring following the recent resignation of the Chief of Police and the two Assistant Chiefs, these divisions are now led by two Deputy Chiefs. 19 INTRODUCTION The violent crime rate in Denton is relatively low, compared to cities of similar size. Most 16 criminal activity involves property crimes, such as larceny and theft. 0±®©¤¢³ 3¢®¯¤ £ -¤³§®£®«®¦¸ PERF conducted a brd structure. As part of this review, PERF was charged with completing the following tasks: Reviewing the organizational structure and management systems, including those related to internal communication, organizational efficiency, accountability mechanisms, and the processes for determining promotions and specialized assignments. incidents to ensure that accountability mechanisms are in place. Conducting an organizational climate survey to understand employee satisfaction or dissatisfaction, and assessing perceptions about the workplace environment of the DPD. Developing findings and recommendations, to be presented in a report to the City of Denton. and organization climate: Policy review: following DPD policies: DPD General Or . Interviews and on-site observations: The PERF team conducted a site visit to Denton in June 2016. PERF also conducted several focus groups with DPD personnel and Denton city officials, including: The Denton City Manager, Deputy City Manager, Assistant City Manager, and Director of Public Affairs 16 United States Departme- Offenses Crime in the United States, 2016. https://ucr.fbi.gov/crime-in-the- u.s/2016/crime-in-the-u.s.-2016/tables/table-6/table-6-state-cuts/texas.xls 20 INTRODUCTION Denton City Council members Denton Human Resources personnel The Chief of Police Assistant Chiefs of Police Command Staff Sergeants Criminal Investigations Bureau investigators Patrol officers Traffic, Downtown, and School Resource Officers Civilian personnel Denton Police Officers Association (DPOA) leaders Denton Municipal Police Association (DMPA) leaders. During the site visit, PERF also participated in ride-alongs with DPD patrol officers. Data collection and analysis: PERF conducted an organizational climate survey to elicit the views of DPD personnel on organizational commitments and job satisfaction, work environment, intra-agency communication, supervision, leadership, training and resources, and the process for hiring and determining opportunities for professional development and special assignments. This report presents contains recommendations on how DPD can strengthen its policies and practices to improve its operations. The recommendations contained in this report are based on progressive policing practices. This report also provides information regarding the considerable progress that DPD has recommendations with DPD leaders. DPD began making changes to its policies and practices based on these discussions, and at the time of this report the department had 21 SECTION I. DPD POLICIES AND PROCEDURES 3%#4)/. )ȁ $0$ 0/,)#)%3 !.$ 0ROCEDURES PERF began this project by reviewing the Denton DPD) written rules, policies, and procedures that pertain to the use of force and critical incidents. Specifically, PERF reviewed D-of-force policy (DPD General Order 5.1), the officer-involved shootings policy (DPD Special Order 5.2), the less-lethal weapons policy (DPD General Order 5.4), the vehicle pursuit policy (DPD General Order 4.2), the policy for administrative investigations (DPD General Order 10.2), and the critical incidents policy (DPD General Order 12.1). D-of-force policies are aligned with progressive practices and national standards regarding use of force. PERF also examined whether Dare sufficient to give officers a clear understanding of the rules, expectations, and guidelines regarding use of force. This section presents recommendations for how DPD can strengthen its policies on use of force and other issues. $0$ '¤¤± « /±£¤± ΘȁΔ - 5²¤ ®¥ &®±¢¤ In reviewing DPD General Order 5.1, which governs use of force, PERF identified positive elements and areas that could be strengthened. PERF has spent several years studying police use of force from a national perspective, based on extensive research and a series of national and regional conferences. In these PERF meetings, many hundreds of police chiefs and other law enforcement officials, academics, federal officials, and other experts shared information and explored options for national best practices to minimize police use of force, particularly in situations in which police encounter persons in mental health crisis or persons with developmental disabilities or other conditions that can cause them to behave erratically or dangerously. Police chiefs from across the nation agreed that officers have few options for de-escalation when confronting criminal suspects armed with firearms, but officers often do have opportunities to situations involving persons with a mental illness or other condition who may be armed with a knife, rocks, or other weapon, but not a firearm. Guiding Principles on Use of 17 Force, as a well as a comprehensive training guide focused on integrating communications, 18 assessment, and tactics (ICAT). These materials also present a new tool to support decision- making in the field, including during critical incidents. This five-step tool, known as the Critical Decision-Making Model (CDM), is designed to help officers think critically about the various situations they encounter, and make decisions that are safer and more effective, based on a wider 17 Police Executive Research Forum (2016). Guiding Principles on Use of Force. http://www.policeforum.org/assets/guidingprinciples1.pdf. 18 Police Executive Research Forum (2016). ICAT: Integrating Communications, Assessment, and Tactics. http://www.policeforum.org/assets/icattrainingguide.pdf. 22 SECTION I. DPD POLICIES AND PROCEDURES array of options for responding and a more complete analysis of their goals in a particular situation, the nature of any threats, the risks of various responses, and the laws and policies governing their authority. D-of-force policies, practices, and training reflects this research, as well as the expertise PERF has gained through conducting dozens of reviews for other law enforcement agencies throughout the country that are similar to Denton. $0$ '¤¤± « /±£¤± Δȁΐȁΐ Ȩ0®«¨¢¸ȩ #´±±¤³ $0$ 0®«¨¢¸ȁ this Department that officers and/or employees use only the amount of force that appears necessary to accomplish a lawful objective. The use of force must be objectively reasonable, and employ only that force which a reasonably prudent officer/agent would use under the same or similar circumstances. 0®«¨¢¸ ! «¸²¨²ȁ meets the legal requirements under the U.S. 19 landmark ruling in Graham v. Connor, which establishes a general standard the legal standard by which police use of force is judged by the courts. Many police departments have chosen to go beyond the bare requirements of Graham. For example, many police agencies have detailed policies and training on issues such as prohibitions against shooting at moving vehicles, rules on pursuits, guidelines on the use of Electronic Control Weapons, and other use-of-force issues that are not required by Graham. Many of consist of policies and practices that build upon the bedrock of Graham in order to achieve better outcomes, including the following: Establishing the concept of the sanctity of human life as the basis of what police agencies do; Requiring that police use of force meet a test of proportionality; Adopting de-escalation as formal agency policy; Teaching officers how to use a Critical Decision-Making Model to assess critical incidents; duty to intervene Rendering first aid following a use of force; Prohibiting use of lethal force against persons who pose a danger only to themselves; distance, cover, and time - Using effective communications to de-escalate incidents; Implementing comprehensive training of officers to deal with persons with mental health issues; 19 Graham v. Connor, 490 U.S. 386 (1989). http://caselaw.findlaw.com/us-supreme-court/490/386.html. 23 SECTION I. DPD POLICIES AND PROCEDURES Providing a prompt supervisory response to critical incidents to reduce the likelihood of unnecessary force; Using scenario-based training to help officers improve their response to challenging situations; Documenting use-of-force incidents and reviewing data and enforcement practices to 20 ensure they are fair and non-discriminatory. DPD can strengthen its policy by adding language to General Order 5.1.1 that more clearly defines the basis for using force. This language should go beyond the minimum legal standard established in Graham, and reflect key concepts such as de-escalation and proportionality. These concepts should also be incorporated into all DPDtraining on use of force. More specifically, de-escalation, or the duty to intervene. 2¤¢®¬¬¤£¤£ 0®«¨¢¸ #§ ¦¤²ȁ PERF recommends making the following changes to General Order 5.1.1: Recommendation: At the beginning of this section, DPD should add a sentence emphasizing the sanctity of human life. For example, the Baltimore Police use-of-force policy statesThe policy of the Baltimore Police Department 21 is Status: This recommendation has been implemented. Recommendation: DPD should adopt de-escalation as formal agency policy, and language should be added to this section to reflect this approach. The policy should state that de-escalation is the preferred, tactically sound approach in many critical incidents. The policy should require officers to receive training on key de-escalation principles. Many agencies already provide crisis intervention training as a key element of de- escalation, but crisis intervention policies and training must be merged with a new focus on tactics that officers can use to de-escalate situations. De-escalation policy should also include discussion of proportionality, using distance and cover, tactical repositioning, and other resources, and related concepts. o the totality of the circumstances and time and circumstances permit, officers shall 22 use de- 20 Police Executive Research Forum (2016). Guiding Principles on Use of Force. http://www.policeforum.org/assets/guidingprinciples1.pdf. 21 https://www.baltimorepolice.org/sites/default/files/Policies/1115_Use_Of_Force.pdf 22 Se http://www.seattle.gov/police-manual/title-8---use-of-force/8000---use-of-force-core-principles 24 SECTION I. DPD POLICIES AND PROCEDURES Status: This recommendation has been implemented. Recommendation: DPD should add a statement regarding the duty to intervene to this section of the use-of-force policy. This statement should include the following language: Officers have a duty to intervene if they anticipate or observe the unreasonable, Status: This recommendation has been implemented. $0$ 0®«¨¢¸ ΔȁΐȁΑ Ȩ$¤¥¨¨³¨®²ȩ #´±±¤³ $0$ 0®«¨¢¸ȁ five definitions: Deadly Force: Any use of force that is reasonably likely to cause death. Non-deadly Force: Any use of force other than that which is considered deadly force. This includes any physical effort used to control or restrain another or to overcome the resistance of another, i.e., physical strength or skill of one or more officers, use of oleoresin capsicum (OC spray), baton, TASER device, or other approved equipment. Objectively Reasonable: This term means that, in determining the necessity for force and the appropriate level of force, officers shall evaluate each situation in light of the known circumstances, including, but not limited to, the seriousness of the crime, the level of threat or resistance presented by the subject, and the level of danger to the officer/agent or the community. Reasonable Force: Force used by Department members that is reasonable and/or necessary in the performance of their duties and evaluated in light of the totality of facts and circumstances known to the member at the time force is used. Normal Circumstances: Circumstances in which the officer has not been deprived of his/her ability to employ approved methods or weapons. 0®«¨¢¸ ! «¸²¨²ȁ Some of the terms are dated. For example, the - - many casesions for several key terms, such as proportionality and de-escalation. These terms reflect concepts that PERF recommends DPD incorporate into its policy, and they should be clearly defined at the outset. 2¤¢®¬¬¤£¤£ 0®«¨¢¸ #§ ¦¤²ȁ PERF recommends making the following changes to 5.1.2 (Definitions): Recommendation: PERF recommends the use of the terms and - throughout all of DPies, rather -DPD should carefully review all policies to ensure the consistent use of these terms. Status: This recommendation has been implemented. 25 SECTION I. DPD POLICIES AND PROCEDURES Recommendation: DPD should add a definition of to this section. The definition should state that proportionality involves officers: (1) using only the level of force necessary to mitigate the threat and safely achieve lawful objectives; (2) considering, if appropriate, alternate force options that are less likely to result in injury but will allow officers to achieve lawful objectives; and (3) considering the officers, at the moment they have determined that a particular use of force is necessary and appropriate to mitigate a threat, should delay their response in order to consider how their actions will be viewed by others. Rather, officers should begin considering what might be appropriate and proportional as they approach an incident, and they should keep this consideration in their minds as they are assessing the situation and deciding how to 23 respond. Proportionality also considers the nature and severity of the underlying events. Status: This recommendation has been implemented. Recommendation: DPD should add a definition of - to this section. The definition should emphasize proportionality, the use of distance and cover, tactical 24 supervisors and other resources, and similar actions and tactics. Status: This recommendation has been implemented. $0$ 0®«¨¢¸ ΔȁΐȁΒ Ȩ5²¤ ®¥ &®±¢¤ȝ'¤¤± « 2´«¤²ȩ #´±±¤³ $0$ Policy. This section, in its entirety, reads as follows: method, or instrumentality unless it is Department approved and not until he/she has been properly trained in its use of, except as provided in the next paragraph. Training shall include competence in the mechanical and physical aspects of its function and knowledge/understanding of any laws or applicable policy regarding its use. The Department realizes that in exigent, tense, uncertain, and/or rapidly evolving confrontations an officer may need to use techniques, weapons, and/or improvised curricula, and/or which may not be specifically addressed by this policy. Also, the officer may need to use a technique or weapon in a manner that does not parallel Department training. It is further recognized, that due to the unpredictable nature of a technique(s) and/or weapon(s) may unintentionally (on the part of the officer) impact a bodily area, or produce an outcome which does not parallel Department training. In 23 See PERF, Guiding Principles on Use of Force, pp. 38-40. http://www.policeforum.org/assets/guidingprinciples1.pdf. 24 Ibid, pp. 54-65. 26 SECTION I. DPD POLICIES AND PROCEDURES Department will examine each instance on a case-by-case basis in light of the foregoing to determine whether or not the force used was reasonable, and thus, 0®«¨¢¸ ! «¸²¨²ȁ Many agencies-of-force polices also include a discussion of proportionality and prohibitions against using force against those who are only a danger to themselves. The determination of whether force is reasonable should include a calculation of whether the proportionality includes examining factors such as the nature and severity of the underlying threat, as well as 25 circumstances. Additionally, some police agencies have faced situations in which an officer uses lethal force against individuals who posed a danger only to themselves, such as a person threatening suicide or experiencing a mental health crisis. Even though it may seem obvious that this not the appropriate course to take, agencies have found it helpful to include language in their policies that explicitly prohibits officers from using lethal force against individuals in these situations. 2¤¢®¬¬¤£¤£ 0®«¨¢¸ #§ ¦¤²ȁ PERF recommends the following changes to 5.1.3 (Use of Force/General Rules): Recommendation: DPD should add language to this section stating that force used by officers should be proportional to the threat. In assessing whether a response is proportional to the threat being faced, officers should consider the following factors: o Whether the level of force is necessary to mitigate the threat and safely achieve a lawful objective; o Whether there is another, less injurious option available that will allow the officer to achieve the same objective as effectively and safely; and o the threat and the totality of the circumstances. Status: This recommendation has been implemented. Recommendation: DPD should add language to this section that prohibits the use of lethal force against individuals who pose a danger only to themselves and not to other members of the public or to officers. Officers should also be required to consider the use of many available less-lethal options in these situations. Officers should be prepared to exercise considerable discretion to wait as long as necessary so that the situation can be 26 resolved peacefully. Status: This recommendation has been implemented. 25 See PERF, Guiding Principles on Use of Force, pp. 38-40. 26 See PERF, Guiding Principles on Use of Force, p. 48. 27 SECTION I. DPD POLICIES AND PROCEDURES $0$ 0®«¨¢¸ ΔȁΐȁΕ Ȩ5²¤ ®¥ &®±¢¤ 2¤²³±¨¢³¨®²ȩ #´±±¤³ $0$ 0®«¨¢¸ȁ -of-force policy includes language prohibiting the use of warning shots under any circumstances, and explains approach to shooting at moving vehicles. The portion of this section regarding shooting a moving vehicle states: r at a moving vehicle is governed by the Use of Deadly Force (5.1.4) and should only be considered in cases whereby an officer reasonably believes that use of a firearm is immediately necessary to protect the officer or another from the risk of death or serious bodily injury. The Department recognizes that shooting at vehicles to disable or stop them is seldom effective and often poses unreasonable risks to the officer or others. Therefore, the Department discourages officers from intentionally placing themselves in vulnerable positions such as attempting to enter a moving vehicle, or standing in front of or behind a vehicle that is moving or may likely suddenly move in order to flee: Thus, officers shall not discharge their firearms at a moving vehicle, unless the occupants are using deadly force against the officer or another person, by means other than the vehicle; and officers are therefore authorized to exercise the use 0®«¨¢¸ ! «¸²¨²ȁ Many police agencies have adopted strict prohibitions on shooting at or from a example, agencies with this policy include the following: the New York City Police Department (which adopted it in 1972); the Boston Police Department; the Cincinnati Police Department; the Denver Police Department; the Philadelphia Police Department; and the Washington, DC 27 Metropolitan Police Department. Some agencies have found that the number of police shootings was significantly reduced by enacting this type of absolute prohibition. However, PERF recognizes the recent trend of using motor vehicles as a weapon of mass 28 destruction. This has been observed both internationally and within the United States. PERF understands that this type of threat may require an extraordinary response to stop the threat and protect life. If this event were to occur within the City of Denton, any use of force, particularly lethal force, must be evaluated based on the totality of the circumstances and the necessary, reasonable, and proportional use of force. 2¤¢®¬¬¤£¤£ 0®«¨¢¸ #§ ¦¤²ȁ PERF recommends the following changes to this section: 27 Discussion and citations available in Guiding Principles on Use of Force, p. 44-47. http://www.policeforum.org/assets/guidingprinciples1.pdf 28 In July 2016, a cargo truck was rammed into a crowd in Nice, France. This attack resulted in the deaths of 86 people and 458 people were injured. In the United States, a vehicle was used to attack a crowd in Charlottesville, VA in August 2017. One person was killed, and 19 others were injured. In October 2017, a vehicle was rammed through a crowded bike lane in New York City. Eight people were killed, and 12 were injured. 28 SECTION I. DPD POLICIES AND PROCEDURES Recommendation: DPD should and officers are therefore authorized to exercise the use of deadly force otherwise provided and add the following language to the end of the first paragraph regarding shooting at vehicles: Status: This recommendation has been implemented. $0$ 0®«¨¢¸ ΔȁΐȁΖ Ȩ-¤£¨¢ « 4±¤ ³¬¤³ȩ #´±±¤³ $0$ 0®«¨¢¸ȁ Section 5.1.7 specifies instructions for providing medical assistance to necessary medical treatment will be provided in the form of first aid or EMS response consistent 0®«¨¢¸ ! «¸²¨²ȁ not clearly state that officers shall promptly request medical assistance as soon as it is safe and are not obvious following a force situation, but the subject complains of injury. 2¤¢®¬¬¤£¤£ 0®«¨¢¸ #§ ¦¤²ȁ PERF recommends making the following changes to Section 5.1.7 (Medical Treatment): Recommendation: DPD should add language to Section 5.1.7 stating that officers shall promptly request medical assistance as soon as it is safe and practical to do so following a force incident. Status: This recommendation has been implemented. Recommendation: DPD should include language that requires a medical evaluation of subjects who complain of injury, regardless of whether injuries are visible, following a use-of-force incident. Status: This recommendation has been implemented. $0$ 0®«¨¢¸ ΔȁΐȁΘ Ȩ2¤¯®±³¨¦ £ 2¤µ¨¤¶ȩ #´±±¤³ $0$ 0®«¨¢¸ȁ Section 5.1.9 states the following: lications included, but not limited to: firearm discharges (other than those exceptions listed in General Order 5.2.1), other deadly or non-deadly force applications, and weaponless physical force measures, will record their actions and document any resulting injuries to any person, included any Department personnel, by completing all appropriate The policy also instructs officers to photograph subjects injuries or alleged injuries, damaged property, and injuries to Department personnel. This section goes on to state that officers need to 29 SECTION I. DPD POLICIES AND PROCEDURES must be reviewed by the handcuffing, may be documented within applicable police reports; however, such activities do not require completion of the Finally, the policy requires the Office of Professional Standards (OPS) to present a written report to the Chief of Police on an annual basis. According to the policy, OPS is to coordinate with the Training Section to analyze all reported use-of-force applications to identify trends, discipline issues, training needs, weapon/equipment concerns, officer safety issues, and/or potential policy modifications. 0®«¨¢¸ ! «¸²¨²ȁ DPD policy does not require supervisors to respond to critical incidents where force may be necessary. Many police agencies have found that dispatching a supervisor to the scene of a critical incident can reduce the likelihood that lethal forced will be used. There is often a short period of time between when an officer is dispatched to a scene and when force is used, so supervisory response should be prompt. Some police agencies have trained their dispatchers to go on the radio and specifically ask patrol supervisors if they are en route to certain high-risk calls. noted that there is typically about a 15-minute window of time from when a call comes in regarding a critical incident, and when your organization that gets a supervisor to the scene early on, within the 15-minute window, your chance of having an officer-involved shooting getting someone hurt, your officer or the person 29 said. Additionally, Guiding Principles on Use of Force recommend that police agencies e use of a deadly weapon, less-lethal weapon, or weapon of opportunity; or any instance where injury is observed or alleged by the subject. In addition, agencies should capture and review reports on the pointing of 30 a firearm or an Electronic Control Weapo The reason for requiring reporting in these circumstances is to help agencies identify areas for improvement with respect to policies and training, and to promote accountability and transparency within the agency. PERF agrees with the requirements for the annual use-of-force report. In addition, DPD should publish the annual use-of- to promote transparency. st According to the Century Policing enforcement agencies should establish a culture of transparency and accountability in order to 31 29 PERF, Guiding Principles on Use of Force, p. 63. 30 PERF, Guiding Principles on Use of Force, pp. 48-49. 31st Century Policing. 2015. Washington, DC: Office of Community Oriented Policing Services. https://ric-zai-inc.com/Publications/cops-p311-pub.pdf 30 SECTION I. DPD POLICIES AND PROCEDURES Finally, law enforcement agencies have moved toward instituting use-of-force review boards to identify policy, training, or equipment issues following officer-involved shootings. A use-of- force board allows an agency to quickly identify issues and take immediate action if necessary. DPD should consider creating a board to review all serious use-of-force incidents. 2¤¢®¬¬¤£¤£ 0®«¨¢¸ #§ ¦¤²ȁ PERF recommends making the following changes to Section 5.1.9 (Reporting and Review): Recommendation: DPD should add a requirement that supervisors immediately respond to any scene where a weapon is reported (including a firearm, edged weapon, rocks, or other improvised weapons); where a person experiencing a mental health crisis is reported; or where a dispatcher or other member of the department believes there is potential for significant use of force. Status: This recommendation has been implemented in practice, and will be added to policy in the near future. Recommendation: DOfficers will document all uses of force that involve a hand or leg technique; the use of a lethal weapon, less- lethal weapon, or weapon of opportunity; or any instance where injury is observed or se of force. The pointing of a firearm or an Electronic Control Weapon at an individual as a threat of force should be Status: This recommendation has been implemented in practice, and will be added to policy in the near future. Recommendation: DPD reporting uses of force as simple as possible, one form should be used for reporting all use-of-force incidents. Status: This recommendation has been implemented. Recommendation: DPD should publish its annual use-of-force report on the about how data on use-of- force incidents are captured, the number of incidents that occurred, and whether the incidents were within policy. This report should be used to analyze use-of-force trends, opportunities for improvements, and demonstrate transparency. Many police departments publish annual use-of-force reports on their departmental websites. One 32 example is the Seattle, WA Police Department. Status: This recommendation is in the process of implementation. 32 Seattle Police Department. (2017). Use of Force Annual Report. https://www.seattle.gov/Documents/Departments/Police/Publications/Use%20of%20Force%20Annual%20Report% 20-%20Final.pdf 31 SECTION I. DPD POLICIES AND PROCEDURES Recommendation: PERF recommends formalizing the review of officer-involved shootings, in-custody deaths, hospitalization of prisoners, and serious use-of-force incidents (including use of Electronic Control Weapons, batons, and OC spray) by establishing a performance review board. The formal review of these incidents, conducted as a matter of course, will provide valuable opportunities to identify lessons that can be incorporated into officer training, gaps in tactics, any need for additional equipment to be provided to officers, or any need for changes in policy. Incidents that were captured by body-worn cameras can be and tools while providing accountability. The review board, consisting at a minimum of the assistant chief of operations, a lieutenant or sergeant from training, and a representative from professional standards, should convene quarterly to review each serious use-of-force incident. The board should review any use of force that resulted in a death or injury or involved the use of a lethal or less-lethal tool. The review board should serve to ensure that tactics, equipment, and policy are reviewed, and areas of concern are addressed. In addition, the review board should meet within 24 to 48 hours following an officer- involved shooting or in-custody death. The review board should be briefed by investigators regarding the facts of the case known at that time to ensure that no immediate changes to policy, training, or equipment are necessary. The review board should present all findings and recommendations to the chief of police. Status: This recommendation is in the process of implementation. $0$ '¤¤± « /±£¤± ΘȁΕ /¥¥¨¢¤± )µ®«µ¤£ 3§®®³¨¦² Upon reviewing this policy, PERF found that much of the content also applies to the handling of in-custody deaths, in addition to officer-involved shootings. Based upon this finding, PERF recommends DPD make the following change to this policy: Recommendation: - Status: This recommendation has been implemented. $0$ 0®«¨¢¸ ΔȁΑȁΑ Ȩ2¤¯®±³¨¦ $¨²¢§ ±¦¤ ®¥ 7¤ ¯®²ȩ #´±±¤³ $0$ Policy. use-of-force form to report all weapon discharges except those occurring during training exercises, qualification courses or practice sessions, or incidents in which a firearm was used to destroy a critically injured or vicious animal. 32 SECTION I. DPD POLICIES AND PROCEDURES 0®«¨¢¸ ! «¸²¨²ȁ treatment of all officer-involved shootings as serious in nature, regardless of whether the bullet or other projectile struck someone (contact shooting) or did not (non-contact shooting), is a progressive policing practice. It is the officerintent to shoot that should be documented, marksmanship in a particular situation. Therefore, it is a good practice for the agency to document and review the use of lethal force, whether or not injury or death occurred. 2¤¢®¬¬¤£¤£ 0®«¨¢¸ #§ ¦¤²ȁ None. DPD should continue to enforce this policy. $0$ 0®«¨¢¸ ΔȁΑȁΒ Ȩ)µ¤²³¨¦ ³¨® ®¥ /¥¥¨¢¤±-)µ®«µ¤£ 3§®®³¨¦²ȩ #´±±¤³ $0$ 0olicy. As this section is presently titled, it only seems to cover the investigatory process for non-fatal and fatal officer-involved shootings. 0®«¨¢¸ ! «¸²¨²ȁ PERF believes the section regarding the investigation of fatal officer-involved shootings should also be used to investigate all in-custody deaths. 2¤¢®¬¬¤£¤£ 0®«¨¢¸ #§ ¦¤²ȁ PERF recommends the following changes to this section: Recommendation: Officer-Involved Shootings and In- investigation procedure should be followed for fatal officer-involved shootings and in- custody deaths. Status: This recommendation has been implemented. No Death or Injury #´±±¤³ $0$ Policy. investigating officer- non-contact shooting). This section includes the following language: where an officer uses deadly force that does not result in death or supervisor. The supervisor will investigate the incident to determine compliance with this and any other applicable policy. When necessary, the supervisor may call out an investigator to assist in the investigation. The supervisor will prepare an investigative report and forward it, via the chain of command, to the Chief of 0®«¨¢¸ ! «¸²¨²ȁ As considered a progressive policing practice for all officer-involved shootings to be treated as arksmanship, DPD is taking the steps necessary to investigate non-contact shootings to actions were permitted by department policy. 33 SECTION I. DPD POLICIES AND PROCEDURES 2¤¢®¬¬¤£¤£ 0®«¨¢¸ #§ ¦¤²ȁ None. DPD should continue to enforce this policy. Death or Injury Curr¤³ $0$ 0®«¨¢¸ȁ The remaining portion of this section details the actions to be taken if the The policy requires that the on-duty field supervisor be notified immediately. In addition to preserving the scene, the field supervisor must contact the Criminal Investigations Division Lieutenant, the Field Operations Lieutenant, the on-call Public Information Officer, on-call Investigator, and the Peer Support Team. The Criminal Investigations Division Lieutenant is responsible for requesting the Texas Ranger assigned to the Denton area, Forensics Officer, and the Criminal Investigations Division Deputy Chief each respond to the scene. The Field Operations Lieutenant has the responsibility of notifying the Deputy Chief of the involved officer, the Chief of Police, and the Office of Professional Standards (OPS). While the Texas Rangers are responsible for conducting vestigation to determine if the s were within policy. 0®«¨¢¸ ! «¸²¨²ȁ Many agencies have moved toward instituting use-of-force review boards to identify policy, training, or equipment issues following officer-involved shootings. A use-of- force board allows an agency to quickly identify issues and take immediate action if necessary. 2¤¢®¬¬¤£¤£ 0®«¨¢¸ #§ ¦¤²ȁ PERF recommends making the following changes to Section 5.2.3 (Investigation of Officer-Involved Shootings): Recommendation: All officer-involved shootings or in-custody deaths should be examined by the use-of-force review board within 24 to 48 hours following the incident. The review board should be briefed by investigators regarding the facts of the case known at that time to determine whether any immediate changes to policy, training, or equipment are necessary. Status: This recommendation has been implemented. $0$ 0®«¨¢¸ ΔȁΑȁΓ Ȩ0®²³-3§®®³¨¦ 0±®¢¤£´±¤ȩ #´±±¤³ 0®«¨¢¸ȁ This section includes the procedure that is to be followed for officers involved in a shooting incident. The language used in this policy addresses the actions that are to occur immediately following the shooting, leave or special assignment requirements, mandatory counseling requirements, and guidance to officers on the extent to which they are to cooperate with the Texas Rangers and the Office of Professional Standards. 0®«¨¢¸ ! «¸²¨². PERF agrees with the mandatory requirement for officers to attend counseling prior to returning to regular duty following an officer-involved shooting. In addition, because the psychological impact may not be felt immediately following a shooting incident, it is recommended that a follow-up counseling appointment occur approximately six months after officers return to normal duty to ensure their well-being. 34 SECTION I. DPD POLICIES AND PROCEDURES 2¤¢®¬¬¤£¤£ 0®«¨¢¸ #§ ¦¤². PERF recommends that DPD make the following changes to Section 5.2.4: Recommendation: DPD should continue the practice of requiring all officers involved in an officer-involved shooting or in-custody death to schedule a session with the department-approved psychologist prior to returning to work. In addition, the department should initiate the practice of a mandatory follow-up appointment with the department- approved psychologist, approximately six months after the original visit, to ensure that the mental health and well-being of the officer are being addressed. Status: This recommendation has been implemented. $0$ '¤¤± « /±£¤± ΘȁΗ ,¤²² ,¤³§ « $¤µ¨¢¤² £ 7¤ ¯®² PERF believes DPD would be better served if General Order 5.4 (Less-Lethal Devices and Weapons) was combined with DPD general use-of-force policy (General Order 5.1), specifically in Section 5.1.5 (Use of Less Lethal Force). If DPD combines these policies, then the department should include definitions listed in General Order 5.4 that are not already in General Order 5.1 and should delete Sections 5.4 (Purpose) and 5.4.1 (Policy). If DPD chooses to maintain separate policies, then the department should implement recommendations listed below for Sections 5.4.1 (Policy) and 5.4.2 (Definitions). $0$ 0®«¨¢¸ ΔȁΓȁΐ Ȩ0®«¨¢¸ȩ #´±±¤³ $0$ 0®«¨¢¸ȁ use of less lethal tools and the circumstances of their use. Supervisors shall rigorously enforce Departmental weapons standards. Employees shall neither carry nor use any less lethal weapons unless they have received training and have qualified. Uniformed officers shall carry at least one less lethal weapon system when on-duty or when working an extra- 0®«¨¢¸ ! «¸²¨²ȁ Section 5.4.1 does not include language regarding the sanctity of life, objective reasonableness, proportionality, and de-escalation. policy language about the sanctity of life is a progressive policing practice. In addition, the policy does not clearly define the basis for using force. DPD can strengthen this section by including language 33 that meets the legal standard established in Graham v. Connor and also goes beyond the minimum legal standard established in Graham. 33 Graham v. Connor, 490 U.S. 386 (1989). http://caselaw.findlaw.com/us-supreme-court/490/386.html. 35 SECTION I. DPD POLICIES AND PROCEDURES 2¤¢®¬¬¤£¤£ 0®«¨¢¸ #§ ¦¤²ȁ PERF recommends making the following changes to Section 5.4.1 (Policy): Recommendation: DPD should add language regarding the sanctity of life to this policy to demonstrate that it is fully committed to progressive policing practices. Status: This recommendation has been implemented. Recommendation: DPD should include language about objective reasonableness to this policy. The language should state that officers are to only use the amount of force that appears necessary to accomplish a lawful objective, that uses of force must be objectively reasonable, and that officers will use only the force that a reasonable officer would use under the same or similar circumstances. Status: This recommendation has been implemented. Recommendation: DPD should add language to this section stating that force used by officers should be proportional to the threat. In assessing whether a response is proportional to the threat being faced, officers should consider the following factors: o Whether the level of force is necessary to mitigate the threat and safely achieve a lawful objective; o Whether there is another, less injurious option available that will allow the officer to achieve the same objective as effectively and safely; and o are appropriate given the severity of the threat and the totality of the circumstances. Status: This recommendation has been implemented. Recommendation: DPD should add language regarding the use of de-escalation tactics to this policy. The language should state that de-escalation is the preferred, tactically sound approach in many critical situations, and officers should use de-escalation tactics when it is safe and time permits. Status: This recommendation has been implemented. $0$ 0®«¨¢¸ ΔȁΓȁΑ Ȩ$¤¥¨¨³¨®²ȩ #´±±¤³ $0$ 0®«¨¢¸ȁ nine definitions: Active Aggression: A physical act threatening assault or a verbal statement threatening assault, coupled with the immediate ability to carry out the threat or assault that would cause a reasonable person to believe bodily injury is imminent to any person. Defensive Resistance: Physical actions that attempt to prevent the o control, but make no direct to harm the Officer. At this level of resistance the subject attempts to push or pull away in a manner that does not allow the 36 SECTION I. DPD POLICIES AND PROCEDURES officer to establish control. This would include muscle tensing that prevents the officer from safely controlling the subject. However, the subject never attempts to strike the officer. Kinetic Energy Impact Projectiles: Flexible or non-flexible projectiles, which are intended to gain compliance or incapacitate a subject through pain compliance, with a reduced potential for causing death or serious injury when properly used, as compared to conventional weapons or projectiles. Less-lethal Force: An amount of force that is not likely to cause death or serious bodily injury. Less-lethal Weapons: Weapons designed to, under ideal circumstances, incapacitate, or gain compliance from a subject to affect a safer transition of the subject into custody. Objectively Reasonable: In determining the appropriate level of force, officers shall evaluate each situation in light of the known circumstances, including, but not limited to, the seriousness of the crime, the level of the threat or resistance presented by the subject, and the level of threat to the community. The appropriate level of force would be that level of force that any reasonable and prudent officer would employ under similar circumstances. Oleoresin Capsicum (OC): A liquid or foam spray containing oleoresin capsicum in sufficient concentration to produce a short period of pain, gagging, and impairment of vision. Passive Resistance: to comply with a lawful order from an officer or jailer that does not include any physical act, verbal statement, or pre- fight behavioral indicators that would cause the officer or jailer to believe that there is an imminent risk of bodily injury to any person. Warning: Verbally informing the subject and other officers that a less-lethal device or weapon is about to be deployed. 0®«¨¢¸ ! «¸²¨²ȁ the definition of the same policy does not include the definition of key terms, such as proportionality and de-escalation. 2¤¢®¬¬¤£¤£ 0®«¨¢¸ #§ ¦¤²ȁ PERF recommends the following changes to 5.4.2 (Definitions): Recommendation: DPD should change the definition of Objectively R currently used in Section 5.4.2 to match the definition for the term that is found in General Order 5.1. The definition should read: e necessity for force and the appropriate level of force, officers shall evaluate each situation in light of the known circumstances, including, but not limited to, the severity of the crime at issue, whether the suspect poses an immediate threat to the safety of the officers or others, and whether the suspect is actively resisting arrest or attempting to evade arrest Status: This recommendation has been implemented. Recommendation: DPD should add a definition of to this section. The definition should state that proportionality involves officers: (1) using only the level of force necessary to mitigate the threat and safely achieve lawful objectives; (2) 37 SECTION I. DPD POLICIES AND PROCEDURES considering, if appropriate, alternate force options that are less likely to result in injury but will allow officers to achieve lawful objectives; and (3) considering the officers, at the moment they have determined that a particular use of force is necessary and appropriate to mitigate a threat, should delay their response in order to consider how their actions will be viewed by others. Rather, officers should begin considering what might be appropriate and proportional as they approach an incident, and they should keep this consideration in their minds as they are assessing the situation and deciding how to 34 respond. Proportionality also considers the nature and severity of the underlying events. Status: This recommendation has been implemented. Recommendation: DPD should add a definition of - to this section. The definition should emphasize proportionality; the use of distance, cover, and tactical repositioning to immediate threat; calling for 35 supervisors and other resources; and similar actions and tactics. Status: This recommendation has been implemented. $0$ 0®«¨¢¸ ΔȁΓȁΒ Ȩ#¤±³¨¥¨¢ ³¨® 2¤°´¨±¤¬¤³²ȩ #´±±¤³ $0$ 0®«¨¢¸ȁ for less-lethal weapons. According to the policy, DPD officers are not permitted to carry weapons unless they receive the appropriate training and certification. The policy also stipulates that certification courses must include competence in the mechanical and physical aspects of the weapon, and knowledge of law and policies governing the use of the weapon. The policy further rained user of a specific weapon system, the -certify at least once every two years with the specific 0®«¨¢¸ ! «¸²¨²ȁ The language in this policy regarding how often officers must recertify as a trained user of a specific weapon system is too generic and does not differentiate recertification requirements for the various types of less-lethal weapons issued by the department. While some less-lethal weapons may only require officers to be recertified once every two years, that is not the case for all less-lethal weapons. According to the report, 2011 Electronic Control Weapon Guidelines, annually and should consist of physical competency and weapon retention, agency policy including any changes, technology changes, and reviews of local and national trends in ECW 36 use. Recertification should also include scenario- 34 See PERF, Guiding Principles on Use of Force, pp. 38-40. http://www.policeforum.org/assets/guidingprinciples1.pdf. 35 Ibid, pp. 54-65. 36 Police Executive Research Forum and COPS Office (2011). 2011 Electronic Control Weapons Guidelines. http://www.policeforum.org/assets/docs/Free_Online_Documents/Use_of_Force/electronic%20control%20weapon %20guidelines%202011.pdf. 38 SECTION I. DPD POLICIES AND PROCEDURES 2¤¢®¬¬¤£¤£ 0®«¨¢¸ Changes. PERF recommends making the following changes to Section 5.4.3 (Certification Requirements): Recommendation: DPD should require that recertification for Electronic Control Weapons (ECWs) occur on an annual basis, and language should be added to this policy to reflect that change. Status: This recommendation has been implemented. $0$ 0®«¨¢¸ ΔȁΓȁΔ Ȩ4 ²¤±²ȩ Section 5.4.5 governs the use of Tasers (hereinafter referred to as Electronic Control Weapons, or ECWs, as recommended below, except when citing directly to DPD policy language). The recommendations included in this section are largely based on the report 2011 Electronic Control Weapon Guidelines, which was 37 Office of Community Oriented Policing Services (COPS Office) in 2011. That publication provides a set of guidelines for ECWs that address policies, training, use, medical considerations, reporting and accountability, and public information and community relations. The PERF/COPS Office guidelines from 150 police executives, researchers, doctors, attorneys, and other experts to participated in a 2010 PERF conference that explored key policy issues. (Significantly, the PERF/COPS Office ECW guidelines were cited in a 2016 decision by the U.S. Court of Appea-criminal, mentally ill individual, who seconds before had been conversational, was not objectively 38 In response to the Pinehurst decision, several agencies in jurisdictions within the Fourth Circuit amended their use-of-force and ECW policies to reflect the ruling and the PERF/COPS Office guidelines. For example, the Hendersonville, NC Police Department changed its policy to restrict the use of ECWs to individuals who only pose an immediate threat 39 to an officer. The Baltimore City Police Department moved the ECW closer to lethal force and updated its policy to only allow the use of ECWs against an individual displaying aggravated or 40 aggressive resistance.) practices outlined in the 2011 guidelines. The recommendations below are intended to address 37 Ibid. 38 Armstrong v. the Village of Pinehurst, No. 15-1191. January 11, 2016. Page 21. http://www.ca4.uscourts.gov/Opinions/Published/151191.P.pdf 39 Margulis, Abigail (2016). Law Enforcement Advised to Change Taser Policies. January 23. http://www.blueridgenow.com/news/20160123/law-enforcement-advised-to-change-taser-policies 40 Donovan, Doug and Mark Puente (2016). Police Officers Could Be Sued Over Unconstitutional Taser Use, Courts Find. March 26. http://www.baltimoresun.com/news/maryland/investigations/bs-md-taser-project-legal- 20160326-story.html 39 SECTION I. DPD POLICIES AND PROCEDURES ECW Terminology #´±±¤³ $0$ 0®«¨¢¸ȁ Throughout this policy, DPD refers to an ECW by the brand name, TASER. 0®«¨¢¸ ! «¸²¨²ȁ The PERF/COPS Office guidelines recommend not using the brand name of the Instead, it is recommended less-lethal weapons that are meant to help control persons who are actively resisting authority or 41 Recommend¤£ 0®«¨¢¸ #§ ¦¤²ȁ PERF recommends the following changes: Recommendation: This change will help clarify of harming persons, including fatal injuries in some cases. The change should be made through all DPD policies and in all other orders, directives, and training curricula which reference such devices. Status: This recommendation has been implemented. Limitation on ECW Deployment #´±±¤³ $0$ 0®«¨¢¸ȁ In Section 5.4.5, officers are warned of the risk and advised not to use materials or any other highly combustible materials including, but not limited to, any subject who may be contaminated with combustible liquids; Persons in wheelchairs or with obvious physical disabilities; Women known to be pregnant; People with heart problems, biomedical devices, or other debilitating illnesses know to the officer; An individual is handcuffed or otherwise restrained; Elderly persons (persons known to be older than 65), children (persons known to be younger than 14); In elevated locations where a fall may cause injury (this excludes a fall from a mere standing position); and P The policy strictly forbids officers from displaying or deploying an ECW in the following instances: To escort individuals; To move or control a crowd of people; Against a person merely engaged in passive resistance; or In an elevated location where a fall may cause substantial injury (this excludes a fall from a mere 0®«¨¢¸ ! «¸²¨²ȁ D a prohibition against deploying an 41 Police Executive Research Forum and COPS Office (2011). 2011 Electronic Control Weapons Guidelines. http://www.policeforum.org/assets/docs/Free_Online_Documents/Use_of_Force/electronic%20control%20weapon %20guidelines%202011.pdf. 40 SECTION I. DPD POLICIES AND PROCEDURES ECW against a person operating any type of vehicle in motion. It is recommended in the PERF/COPS Office 2011 guidelines that agencies include these restrictions in their ECW 42 policies. 2¤¢®¬¬¤£ ³¨® 0®«¨¢¸ #§ ¦¤²ȁ PERF recommends the following changes to Section 5.4.5: Recommendation: DPD should add language instructing officers not to purposefully target sensitive areas Status: This recommendation has been implemented. 42 Ibid. 41 SECTION I. DPD POLICIES AND PROCEDURES Recommendation: DPD should add language to Section 5.4.5 prohibiting the deployment of an ECW on a person in physical control of a vehicle in motion (e.g., automobiles, trucks, motorcycles, ATVs, bicycles, scooters). Status: This recommendation has been implemented. ECW Activations/Cycles #´±±¤³ $0$ 0®«¨¢¸ȁ standard cycle or less and evaluate the situation. Officers will utilize the minimum number of activations of the TASER necessary to control the situation or stop the treat. Officers must articulate independent justification for each TASER activation. Officers should limit a subject to no more than three (3) exposures under ideal circumstances. Cases involving more than one (1) cycle will be reviewed individually. 0®«¨¢¸ ! «¸²¨²ȁ and instructs officer to evaluate the situation after the initial ECW activation, the policy does not include language specifically stating how long each exposure should last, or any limitations on the total length of time a subject can be exposed to an ECW cycle. It is recommended in the 2011 PERF/COPS Office ECW guidelines that subject not be exposed to ECW deployments for 43 longer than 15 seconds. 2¤¢®¬¬¤£¤£ 0®«¨¢¸ #§ ¦¤²ȁ PERF recommends the following policy change: Recommendation: ECW for one standard cycle (five seconds) and then evaluate the situation to determine if subsequent cycles are necessary. Personnel should consider that exposure to the ECW for longer than 15 seconds (whether due to multiple applications or continuous cycling) may increase the risk of death or serious injury. Any subsequent application should be Status: This recommendation has been implemented. Drive Stun Mode #´±±¤³ $0$ 0®«¨¢¸ȁ Section 5.4.5 includes the following language: mode. Officers may choose to deliver a drive stun in lieu of hard strikes on a subject displaying defensive resistance. Instances where this might be appropriate include by are not limited to: A drive stun in lieu of a knee strike to load a prison\[er\] in a squad car; A drive stun in lieu of a strike to get a subject to 43 Ibid. 42 SECTION I. DPD POLICIES AND PROCEDURES release their hold on something/someone; or A drive stun in lieu of a strike to move a suspect into cuffing position. If a hard strike would be considered inappropriate, the drive stun would be inappropriate. For example, a hard strike would be inappropriate against a person engaged in passive resistance. Therefore, a drive stun would be 0®«¨¢¸ ! «¸²¨²ȁ The 2011 PERF/COPS Office ECW guidelines recommend that law enforcement agencies discourage the use of the drive stun mode as a pain compliance technique. probe mode to complete the incapacitation circuit, or as a countermeasure to gain separation 44 between officers and the 2¤¢®¬¬¤£¤£ 0®«¨¢¸ #§ ¦¤²ȁ PERF recommends the following changes to Section 5.4.5: Recommendation: In policy and training, DPD should discourage officers from using the drive stun mode as a pain compliance technique. The policy should state that the drive stun mode should only be used to complete the incapacitation circuit in order to supplement the probe mode, or to create separation between an officer and a subject. Status: This recommendation has been implemented and will be emphasized in follow-up training. $0$ 0®«¨¢¸ ΔȁΓȁΖ Ȩ0®«¨¢¤ # ¨¤ $¤¯«®¸¬¤³ȩ #´±±¤³ $0$ 0®«¨¢¸ȁ governs permitted and prohibited uses of the police canine as a less-lethal weapon. This policy allows for the canine to be used in certain situations during a riot or other civil disturbances that cannot be safely controlled by other means with the approval of the on- 0®«¨¢¸ ! «¸²¨²ȁ Because of the liability and risk associated with using police canines for crowd control, many police departments strictly prohibit the use of police canine in crowd control situations during a riot or other civil disturbances. Police departments that continue to allow canine for crowd control (e.g., Las Vegas Metropolitan Police Department) stipulate that 45 authorization for such usage must come from the position of lieutenant or higher. 2¤¢®¬¬¤£¤£ 0®«¨¢¸ #§ ¦¤²ȁ PERF recommends the following changes to Section 5.4.7: Recommendation: If DPD continues to allow police canines to be used to control crowds during a riot or other civil disturbances, then the authorization to allow police 44 Ibid. 45 https://www.lvmpd.com/en- us/InternalOversightConstitutionalPolicing/Documents/Use-of-Force-Policy-2017.pdf 43 SECTION I. DPD POLICIES AND PROCEDURES canines to be used in those situations should come from the position of lieutenant or higher. $0$ 0®«¨¢¸ ΔȁΓȁΐΏ Ȩ-¤£¨¢ « 4±¤ ³¬¤³ £ $¤¢®³ ¬¨ ³¨®ȩ #´±±¤³ $0$ 0®«¨¢¸ȁ details first aid, medical attention, and decontamination requirements after the use of less-lethal munitions, OC spray, and an ECW deployment. The guidelines for medical treatment following an ECW deployment includes the following language: mstances, when a TASER is used, officers will remove the probes from subjects that were exposed to a TASER deployment. The cartridge and probes will be stored until they can be disposed of by the officer in a biohazard sharps container. Denton FD will not be called to remove probes from individuals except under the following circumstances: Probes lodged in breast tissue of a female; Probes lodged in genitalia; throat, or neck; Probes the officer suspects may be lodged in bone; or Probes the 0®«¨¢¸ ! «¸²¨²ȁ It is recommended in the PERF/COPS Office 2011 ECW guidelines that any exposure to an ECW be followed by a medical evaluation because the electrical charge 46 transmitted by the device can potentially result in a subject experiencing cardiac problems. 2¤¢®¬¬¤£¤£ 0®«¨¢¸ #§ ¦¤²ȁ PERF recommends DPD make the following changes to Section 5.4.10: Recommendation: who have been exposed to ECW application must receive a medical evaluation by emergency medical responders in the field or at a medical facility. Any subject who has been exposed to prolonged application (i.e., more than 15 seconds) should be transported to an emergency department for evaluation. Medical personnel conducting the evaluation should be made aware that the subject has experienced ECW activation, so they can better evaluate Status: This recommendation has been implemented. #´±±¤³ $0$ 0®«¨¢¸ȁ for subjects who experienced a canine bite. 46 Police Executive Research Forum and COPS Office (2011). 2011 Electronic Control Weapons Guidelines. http://www.policeforum.org/assets/docs/Free_Online_Documents/Use_of_Force/electronic%20control%20weapon %20guidelines%202011.pdf. 44 SECTION I. DPD POLICIES AND PROCEDURES 0®«¨¢¸ ! «¸²¨²ȁ Dog bites can become infected and may spread harmful diseases to those who 47 experience a bite. DPD should take every precaution to ensure that individuals who experience a bite by a police canine receive treatment in order to prevent disease and infection. 2¤¢®¬¬¤£¤£ 0®«¨¢¸ #§ ¦¤ȁ PERF recommends the following changes to Section 5.4.10: Recommendation: DPD should include the following statement to the canine hospital for medical evaluation and $0$ 0®«¨¢¸ ΔȁΓȁΐΐ Ȩ2¤¯®±³¨¦ ³§¤ 5²¤ ®¥ ,¤²² ,¤³§ « &®±¢¤ȩ #´±±¤³ $0$ 0®«¨¢¸ȁ This section establishes reporting requirements for officers following the use of less-lethal force. Under this policy, officers must immediately notify an on-duty supervisor when they have displayed or deployed less-lethal force. This policy instructs officers -of-force reporting form and describes the information that should be included in the report. Supervisor responsibilities are also detailed in the policy, including a statement advising supervisors to conform to the responsibilities described in the -of- 0®«¨¢¸ ! «¸²¨²ȁ The language used in this policy does not state the specific types of less-lethal force that should be documented. Also, it should be clear in this policy that supervisors are to immediately respond to the scene to investigate, if possible. This language is included in the should be added it to Section 5.4.11 to clearly articulate that the department expects supervisors to respond to the scene of any use-of-force incident to begin an investigation. 2¤¢®¬¬¤£¤£ 0®«¨¢¸ #§ ¦¤²ȁ PERF recommends the following changes to Section 5.4.11: Recommendation: DPD should add will document all uses of force that involve a hand or leg technique; the use of a deadly weapon, less-lethal weapon, or weapon of opportunity; or any instance where injury is observed or alleged by the The pointing of a firearm or an Electronic Control Weapon at an individual as a threat of force Status: Relevant language has been added to this section. Recommendation: DPD should add language to this policy that, except in the case of mitigating circumstances, supervisors should immediately respond to the scene of incidents where an officer has used any less-lethal force and initiate an investigation. 47 https://www.cdc.gov/features/dog- bite-prevention/index.html 45 SECTION I. DPD POLICIES AND PROCEDURES Status: This recommendation has been implemented. $0$ '¤¤± « /±£¤± ΗȁΕ %¬¤±¦¤¢¸ 6¤§¨¢«¤ /¯¤± ³¨®² £ 0´±²´¨³² $0$ 0®«¨¢¸ ΓȁΑȁΐΒ Ȩ0±®§¨¡¨³¤£ !¢³¨®² $´±¨¦ 0´±²´¨³ȩ #´±±¤³ $0$ 0®«¨¢¸ȁ Section 4.2.13 includes a list of actions that officers are prohibited from taking during a vehicle pursuit. The policy prohibits discharging firearms at a moving vehicle unless an occupant of the vehicle is using or attempting to use deadly force on an officer or other 0®«¨¢¸ ! «¸²¨²ȁ -of-force policy (General Order 5.1) prohibits officers from shooting at a moving vehicle unless the occupants are using deadly force against the officer by means other than the vehicle. The language included in Section 4.2.13 does not include this limitation. DPD should ensure that all policy language governing shooting at moving vehicles is consistent. 2¤¢®¬¬¤£¤£ 0®«¨¢¸ #§ ¦¤²ȁ PERF recommends making the following changes to Section 4.2.13: Recommendation: DPD should add language to Section 4.2.13 that officers are not to shoot at a moving vehicle unless the occupants are using deadly force against the officer by means other than the vehicle. Status: This recommendation has been implemented. $0$ 0®«¨¢¸ ΓȁΑȁΐΘ Ȩ)³¤±-©´±¨²£¨¢³¨® « 0´±²´¨³ 0®«¨¢¸ȩ #´±±¤³ $0$ 0®«¨¢¸ȁ Section -jurisdictional pursuits. This section provides officers with guidelines for permitted and prohibited actions during vehicle pursuits that extend beyond the jurisdiction of DPD. The language on prohibited actions includes a ban on shooting at pursued vehicle (except to protect against the use of unlawful 0®«¨¢¸ ! «¸²¨²ȁ The language included in Section 4.2.19 does not emphasize that officers shall not shoot at a moving vehicle unless the occupants are using deadly force against the officer by means other than the vehicle. Because this limitation is included in the depa-of- force policy (General Order 5.1), DPD should ensure that any policy regarding shooting at moving vehicles contains consistent language. 2¤¢®¬¬¤£¤£ 0®«¨¢¸ #§ ¦¤²ȁ PERF recommends making the following changes to Section 4.2.19: Recommendation: DPD should add language to Section 4.2.19 that officers are not to shoot at a moving vehicle unless the occupants are using deadly force against the officer by means other than the vehicle. 46 SECTION I. DPD POLICIES AND PROCEDURES Status: This recommendation has been implemented. 47 SECTION I. DPD POLICIES AND PROCEDURES DPD '¤¤± « /±£¤± ΔΓȁΕ /¥¥¨¢¤ ®¥ 0±®¥¤²²¨® « 3³ £ ±£² £ !£¬¨¨²³± ³¨µ¤ )µ¤²³¨¦ ³¨®² $0$ 0®«¨¢¸ ΐΏȁΑȁΕ Ȩ#±¨¬¨ « )µ¤²³¨¦ ³¨®² 2¤« ³¨¦ ³® %¬¯«®¸¤¤ -¨²¢®£´¢³ȩ #´±±¤³ $0$ 0®«¨¢¸ȁ This section contains the following language regarding criminal e 0®«¨¢¸ ! «¸²¨²ȁ While some law enforcement agencies wait until the completion of a criminal investigation before initiating an internal administrative review or investigation, this is not required. In fact, this practice can unnecessarily delay the department in discharging an employee who, in an administrative investigation, clearly would be shown to have violated departmental rules seriously enough to justify dismissal. Many other departments recognize that with the proper process in place, administrative and criminal investigations can be conducted concurrently. This permits the department to complete the administrative process and, if termination is recommended, to act on the recommendation promptly. The criminal investigation and court process, including appeals, typically take much longer and can continue long after the administrative outcome is final. 2¤¢®¬¬¤£¤£ 0®«¨¢¸ #§ ¦¤²ȁ PERF recommends the following changes to Section 10.2.6: Recommendation: The DPD should routinely conduct concurrent criminal and administrative investigations. The administrative investigation is conducted by the Office of Professional Standards (OPS) and the criminal investigation by the Criminal Investigations Bureau. The policy should be very clear that there must be a process to protect the integrity of the criminal case. The implications of Garrity and Miranda warnings, along with the potential for a lost criminal case against an employee due to mishandling of information, should be addressed in this policy. s constitutional right against self-incrimination by advising the employee that statements made in the administrative investigation will not be used in any criminal proceeding. $0$ 0®«¨¢¸ ΐΏȁΑȁΖ Ȩ)µ¤²³¨¦ ³¨® 0±®¢¤²²ȩ #´±±¤³ 0®«¨¢¸ȁ Section 10.2.7 includes the following language regarding methods in which a to the Police Department to file personnel complaints. However, if they insist on an alternative site, meet in person, or they refuse an in- 48 SECTION I. DPD POLICIES AND PROCEDURES 0®«¨¢¸ ! «ysis. Even though DPD will accept complaints made by methods other than a citizen coming to the police department, the language currently used in this policy seems to only allow for narrow exceptions for a complaint made using an alternative method (e.g., phone, letter, etc.). 2¤¢®¬¬¤£¤£ 0®«¨¢¸ #§ ¦¤²ȁ PERF recommends making the following policy changes: Recommendation: The language in this section should simply and clearly state that complaints made using any method (e.g., online, telephone, letter, etc.) will be investigated. DPD should remove any language that refers to accepting a complaint via telephone or letter if the complainant location makes it difficult to come to the department or the complainant refuses an in-person interview. Complaints made by methods other than in-person at the police department should be accepted regardless of the complainant location. Status: This recommendation has been implemented. $0$ '¤¤± « /±£¤± ΔΕȁΔ !¢³¨µ¤ #±¨³¨¢ « )¢¨£¤³² #´±±¤³ $0$ Policy. The policy provides officers with response guidelines for active critical incidents, including man-made events, civil disturbances, active shooter incidents, hostage situations, barricaded subjects, etc. 0®«¨¢¸ ! «¸²¨²ȁ Law enforcement agencies should have a policy in place that details police responsibilities during active critical incidents. The policy should be thorough and provide detailed instruction for responding officers, uniforms and equipment requirements, the establishment of incident command, and a notification matrix for various types of critical incidents. 2¤¢®¬¬¤£¤£ 0®«¨¢¸ #§ ¦¤²ȁ No changes are recommended. The current policy includes the provisions we would recommend. DPD should continue to enforce General Order 12.1 in its entirety. In addition to reviewing policies on use of force and critical incidents, PERF reviewed When PERF started its review, the senior leadership of the Denton Police Department consisted of one Chief and two Assistant Chiefs. This structure was 48 also reflected in the organization chart provided to PERF by DPD personnel. One Assistant Chief was responsible for the Operations Division (which includes Patrol, Neighborhood Services, and Criminal Investigations Sections) and the other oversaw the Administration Division (which includes the Office of Professional Standards, Support, Accounting and Technology, and Communications Sections). 48 The organizational chart dated June 27, 2018. 49 SECTION I. DPD POLICIES AND PROCEDURES disparity in the span of control between the two Assistant Chiefs, and many focus group participants suggested that Patrol and Criminal Investigations be split between the Assistant Chiefs. PERF believes dividing the Operations Division is unnecessary, and that it would create greater communication gaps in an agency that currently struggles to communicate at many levels . One Assistant Chief in charge of the operational components (patrol and investigations) of a police department is a common practice, and arguably reduces top-level command disputes over human resources and priorities. Furthermore, PERF does not believe it is a necessity for DPD to add a third Assistant Chief position, as some have suggested. During review, the Chief of Police and both Assistant Chiefs submitted their resignations. After this occurred, City of Denton officials made the decision to restructure the senior leadership of the department. Chief (who is serving as the interim Chief until a permanent replacement is found), and two Deputy Chiefs. The Deputy Chiefs are now responsible for overseeing the Operations and Administration Divisions. PERF believes this is a good arrangement for the organization of senior leadership. 50 SECTION II. ICAT TRAIN-THE-TRAINER 3%#4)/. ))ȁ )#!4 42!).-THE-TRAINER In June 2018, PERF conducted ICAT train-the-trainer instruction for several Denton Police Department trainers. Participants were carefully selected for the implementation of the training. The participants were actively engaged throughout the day, discussing methods to adapt and deliver the instruction to all DPD personnel. To help law enforcement agencies implement the 30 Guiding Principles on Use of Force, 49 PERF developed ICAT: Integrating Communications, Assessment, and Tactics, a training guide that represents a new way of thinking about use-of-force training for American police officers. ICAT takes the essential building blocks of critical thinking, crisis intervention, communications, and tactics, and puts them together in an integrated approach to training. ICAT is anchored by the Critical Decision-Making Model, and is designed to increase officer safety and public safety by providing officers with more tools, skills, and options for handling critical incidents, especially those involving subjects who are in crisis but who are not armed with firearms. The cornerstones of ICAT include slowing incidents down in order to avoid reaching a point where there is a need to use lethal force; upholding the sanctity of life; building community trust; and protecting officers from physical, psychological, and legal harm. The ICAT Training Guide is comprised of six modules: Introduction to ICAT Critical Decision-Making Model Crisis Recognition and Response Tactical Communications Operational Safety Tactics Integration and Practice. The ICAT Training Guide includes model lesson plans, scenario-based training exercises, PowerPoint presentations, case study videos of use-of-force incidents, and other resources. The Training Guide was developed with the help of a Working Group of more than 60 professionals representing law enforcement agencies and other organizations from across the country. A panel of 10 policing experts reviewed a draft of the Training Guide, and the training was pilot-tested in seven sites throughout the country in August and September of 2016. 50 Feedback from the expert review and pilot sites was incorporated into a final report, which was released in October 2016. In December 2016, PERF held a national meeting on how to implement ICAT Training. This meeting, which was held in New Orleans, was attended by more than 400 individuals representing more than 160 police agencies. 49 Police Executive Research Forum (2016). ICAT: Integrating Communications, Assessment, and Tactics. Training Guide for Defusing Critical Incidents. http://www.policeforum.org/assets/icattrainingguide.pdf 50 Ibid. 51 SECTION II. ICAT TRAIN-THE-TRAINER PERF held similar meetings in 2017 in Baltimore; Los Angeles; Columbia, SC; and Camden County, NJ to assist agencies across the country in implementing ICAT training. As of October 2017, approximately 1,100 police professionals from 425 law enforcement agencies have attended these ICAT training meetings. Status: Eleven ICAT training sessions have been scheduled through December 14, 2018. DPD anticipates departmentwide training will be complete by the spring of 2019. 52 SECTION III. ORGANIZATIONAL CLIMATE SURVEY OF THE DENTON POLICE DEPT. 3%#4)/. )))ȁ /2'!.):!4)/.!, #,)-!4% 3526%9 /& 4(% $%.4/. 0/,)#% $%0T. With input from City of obtain information about s of the Police Department. The survey provided information about how the employees feel about several aspects of the department, including internal communications, supervision, leadership, job satisfaction, work environment, and the process used to determine promotions and special assignments. The survey was distributed to all DPD personnel. The goal of the study was to determine the overall workplace climate at DPD, and to identify any DPD leaders incorporate principles of internal procedural justice within the agency (see Section IV for more information on internal procedural justice). This section discusses the climate survey, including its development, methodology, and results. The findings from this survey are relevant to many of the recommendations in this report. 3´±µ¤¸ " ¢ª¦±®´£ £ -¤³§®£®«®¦¸ 3´±µ¤¸ )²³±´¬¤³Ȁ The survey included 83 statements designed to assess employee perceptions of job satisfaction, work environment, communication within the department, s and special assignment processes. Additionally, the survey contained six demographic and 13 open-ended questions. (See Appendix for the survey instrument). $ ³ #®««¤¢³¨®Ȁ On July 5, 2018, PERF sent an email containing a user name, a password, and a link to the survey to all 253 people who were employed at DPD at the time the survey was fielded. PERF sent additional emails on July 16 and July 23 to remind DPD personnel about the survey. A final email reminder was sent on July 27. During each of these communications, DPD employees were notified that their responses to the survey would be anonymous. Data collection concluded on July 31, 2018. 3´±µ¤¸ 3 ¬¯«e. At the close of data collection, PERF had received a response from 151 DPD employees, for a 59.7% response rate. The demographics of the sample are shown below in Table 1. 53 SECTION III. ORGANIZATIONAL CLIMATE SURVEY OF THE DENTON POLICE DEPT. Table 1. Demographics of Survey Sample (N=151) Demographic Category % Gender Male 75.5% Female 24.5% Education High school graduate/GED 6.0% Some college, no degree 36.4% 9.9% 36.4% 11.3% Race White/Caucasian 85.4% Black/African American 7.3% Biracial (two racial categories selected) 2.6% American Indian/Alaskan Native 2.0% Asian/Pacific Islander 1.3% Refused/None selected 1.3% Ethnicity Non-Hispanic 88.6% Hispanic 11.4% Years of Service 0-5 years 25.2% 6-10 years 10.6% 11-15 years 17.9% 16-20 years 15.9% More than 20 years 30.5% Employment Type Sworn 76.2% Non-sworn 23.8% 3´±µ¤¸ 2¤²´«³² This section presents the results of the Denton Police Department Organizational Climate Survey. The results are divided into seven categories: Organizational commitment and job satisfaction; Perceptions of the work environment at DPD; Perceptions of internal communication; Perceptions of department supervision; Perceptions of department leaders; Perceptions of training opportunities and available resources; and Perception of the promotion and special assignment process. 54 SECTION III. ORGANIZATIONAL CLIMATE SURVEY OF THE DENTON POLICE DEPT. /±¦ ¨¹ ³¨® « #®¬¬¨³¬¤³ £ *®¡ 3 ³¨²¥ ¢³¨® The first section of the survey contained 13 statements pertaining to organizational commitment and job satisfaction. The results for items assessing organization commitment and job satisfaction for DPD employees are displayed in Table 2. Overall, DPD employees provided positive responses to these statements; however, some statements received more positive responses than others. Nearly 50% of respondents strongly w agreeing. One statement in particular had the most positive responses. Fifty-nine percent Table 2. Employee Organizational Commitment and Job Satisfaction Survey Item Strongly Disagree Neutral/No Agree Strongly Mean disagree opinion Agree Response* I am proud to tell others 0.7% 2.6% 10.6% 36.4% 49.7% 4.3 that I work for this department. I feel very little loyalty to 40.0% 30.7% 12.7% 9.3% 7.3% 2.1 this department. I tell my friends and family 1.3% 7.3% 14.0% 42.0% 35.3% 4.0 that this is a good organization to work for. This department really inspires the best in me in 7.9% 19.2% 19.9% 41.1% 11.9% 3.3 the way of my job performance. I really care about the fate 1.3% 2.0% 6.6% 31.1% 58.9% 4.4 of this department. I feel myself to be part of 3.3% 4.7% 12.0% 41.3% 38.7% 4.1 this department. I would not recommend a 37.7% 31.8% 10.6% 13.2% 6.6% 2.2 close friend to join this department. I find that my values and 7.3% 16.7% 17.3% 46.7% 12.0% 3.4 very similar. I feel fairly well satisfied 3.3% 13.2% 7.9% 53.0% 22.5% 3.8 with my job. I like my job better than the 1.3% 8.6% 21.2% 39.1% 29.8% 3.9 average worker does. Most days I am enthusiastic 1.3% 12.7% 9.3% 52.0% 24.7% 3.9 about my job. 55 SECTION III. ORGANIZATIONAL CLIMATE SURVEY OF THE DENTON POLICE DEPT. I enjoy my roles and 2.0% 6.7% 7.3% 50.7% 33.3% 4.1 responsibilities at my job. 57.3% 30.0% 6.7% 5.3% 0.7% 1.6 I definitely dislike my job. *On a scale in = The additional comments provided to the open-ended question in this section (see Appendix) suggest that DPD employees like their jobs and genuinely care about the department. While several responden From the comments provided, PERF staff identified department politics as a major theme. De¯ ±³¬¤³ 0®«¨³¨¢² Some DPD employees feel that there are personal agendas among members of rank in the visit. PERF was told by DPD personnel that some lieutenants may disagree with department Related to this matter, others commented that there is a lack of accountability for violating department policies or improper conduct. Essentially, there is a feeling that some members of DPD believe they do not have to follow the rules because they do not experience consequences for violating rules. 0¤±¢¤¯³¨®² ®¥ ³§¤ 7®±ª %µ¨±®¬¤³ ³ $0$ PERF used 12 statement Respondents used the same five-item Likert scale to respond their level of agreement with each As shown in Table 3, most of the responses in this section were favorable. An overwhelming Ther Overall, more employees disagreed (or strongly disagreed) with this statement than agreed (or strongly agreed) with it. 56 SECTION III. ORGANIZATIONAL CLIMATE SURVEY OF THE DENTON POLICE DEPT. Table 3. Perceptions of the Work Environment at the Denton Police Department Survey Item Strongly Disagree Neutral/No Agree Strongly Mean disagree opinion Agree Response* I find myself in conflicts with coworkers that 47.0% 39.7% 10.6% 1.3% 1.3% 1.7 escalate into angry exchanges. Employees treat each other the same, regardless 5.3% 10.7% 12.7% 40.7% 30.7% 3.8 of their racial/ethnic group. Employees treat each other the same, regardless 3.3% 10.0% 12.0% 42.7% 32.0% 3.9 of their gender. Employees treat each other the same, regardless 1.3% 4.6% 13.9% 47.0% 33.1% 4.1 of their sexual orientation. Overall, the environment of this department encourages employees to 3.3% 10.7% 16.0% 46.7% 23.3% 3.8 behave in an equitable, inclusive, and respectful manner. My work environment is more uncomfortable than 32.0% 35.3% 15.3% 10.0% 7.3% 2.3 it should be. I have positive relationships with my 0.0% 0.7% 9.3% 52.3% 37.7% 4.3 coworkers. The working relationship between sworn and non- sworn employees is 6.6% 9.9% 18.5% 53.0% 11.9% 3.5 constructive toward achieving department goals. The department rewards the efforts of employees 12.6% 29.1% 20.5% 29.8% 7.9% 2.9 who do outstanding work. As an employee of this department, I am treated 3.3% 6.0% 9.3% 56.3% 25.2% 3.9 with respect. As an employee of this department, I receive fair 5.4% 9.5% 9.5% 49.3% 26.4% 3.8 treatment. I know what resources 2.0% 14.6% 9.9% 49.0% 24.5% 3.8 are available to me if I 57 SECTION III. ORGANIZATIONAL CLIMATE SURVEY OF THE DENTON POLICE DEPT. need to discuss a workplace-related complaint. = 0¤±¢¤¯³¨®² ®¥ Internal Communication PERF used seven independent statements to evaluate -agency communication. The overall responses in this area were not favorable. As shown in Table 4, most respondents believe department leaders were doing a poor job of informing employees about matters affecting them (35% agreed and 27% strongly agreed). And only 25% of DPD employees agreed or strongly agreed with Similar results were obtained f impact me is communicated effectivemost employees who responded to the survey disagreed or strongly disagreed with Table 4. Perceptions of Internal Communication Survey Item Strongly Disagree Neutral/No Agree Strongly Mean disagree opinion Agree Response* I feel free to express my opinions in my job 11.9% 28.5% 11.3% 34.4% 13.9% 3.1 without worrying about negative results. Department leaders do a poor job of informing 6.0% 14.0% 18.7% 34.7% 26.7% 3.6 employees about matters affecting us. Information about things relevant to my job are 12.6% 29.1% 25.2% 27.8% 5.3% 2.8 communicated in a timely manner. I am satisfied with the information I receive from management on 19.2% 37.7% 17.9% 19.9% 5.3% 2.5 what is going on in the department. The rationale behind important decisions that impact me is 19.2% 38.4% 17.9% 21.8% 2.6% 2.5 communicated effectively. Employees are asked for input regarding decisions 24.0% 29.3% 24.7% 19.3% 2.7% 2.5 that will affect them. 58 SECTION III. ORGANIZATIONAL CLIMATE SURVEY OF THE DENTON POLICE DEPT. I am dissatisfied with my involvement in decisions 8.6% 21.2% 32.5% 29.1% 8.6% 3.1 that affect my work. = 0¤±¢¤¯³¨®² ®¥ $¤¯ ±³¬¤³ 3´¯¤±µ¨²¨® Thirteen department. The results for this section are displayed in Table 5. Most of the questions asked employees about their supervisors ability to evaluate their job perfor The responses to the received positive responses. The average response for this question was 4.2, meaning that respondents generally agreed with the statement. Fifty-six percent agreed or strongly agreed with that statement. Regarding supervisors ability to evaluate their subordinates job performance, substantial majorities of DPD employees provided positive responses to the statements immediate supervisor is familiar enough with my job performance to fairly eval Table 5. Perceptions of the Department Supervision Survey Item Strongly Disagree Neutral/No Agree Strongly Mean disagree opinion Agree Response* My immediate supervisor treats the employees he 1.3% 4.6% 9.3% 39.1% 45.7% 4.2 or she supervises with respect. Generally, the supervision in my department favorably 5.4% 10.8% 17.6% 47.3% 18.9% 3.6 affects my work and moral. My immediate supervisor is available to me when I 1.3% 4.0% 7.9% 38.4% 48.3% 4.3 have questions or need help. I am often unclear about just what is expected of 26.7% 47.3% 11.3% 12.7% 2.0% 2.2 me on the job. Employees who perform their jobs well are 9.9% 21.9% 24.5% 37.1% 6.6% 3.1 recognized by their 59 SECTION III. ORGANIZATIONAL CLIMATE SURVEY OF THE DENTON POLICE DEPT. immediate supervisors for their contributions. The supervisors in this department treat their 4.7% 20.0% 19.3% 42.0% 14.0% 3.4 subordinates fairly. The supervisors in this department show 9.3% 27.3% 20.7% 20.7% 22.0% 3.2 favoritism. My immediate supervisor is familiar enough with 5.3% 6.0% 6.6% 47.0% 35.1% 4.0 my job performance to fairly evaluate me. My job performance is reviewed in person with 6.0% 8.6% 10.6% 53.0% 21.9% 3.8 me at least one time each year. The standards used to evaluate my performance 5.3% 10.6% 23.8% 46.4% 13.9% 3.5 have been fair and objective. I receive inaccurate feedback pertaining to 21.9% 41.1% 19.9% 13.9% 3.3% 2.4 my job performance. I receive useful recommendations on how 4.0% 16.6% 28.5% 43.7% 7.3% 3.3 I can improve my job performance. I have little trust in my supervisor's evaluation of 28.7% 43.3% 13.3% 8.7% 6.0% 2.2 my work performance. = 0¤±¢¤¯³¨®² ®¥ $¤¯ ±³¬¤³ ,¤ £¤±² This section of the survey contained nine statements s of department leaders. The results revealed concerns in this area. As shown in Table 6, more respondents overall disagreed than agreed with Morale among employees is good. More than half of all respondents agreed A large majority of employees disagreed with the statement poor job are held accountable.And a plurality disagreed with the statement, violate department policies are held accoun 60 SECTION III. ORGANIZATIONAL CLIMATE SURVEY OF THE DENTON POLICE DEPT. responses. Thirty-four percent did not agree with this statement, while 35% agreed that the disciplinary process is fair. Table 6. Perceptions of the Department Leaders Survey Item Strongly Disagree Neutral/No Agree Strongly Mean disagree opinion Agree Response* Morale among employees 11.3% 32.5% 19.2% 33.8% 3.3% 2.9 is good. I have doubts about the 7.3% 21.3% 19.3% 38.7% 13.3% 3.3 Department leaders can 11.3% 20.0% 25.3% 32.7% 10.7% 3.1 be trusted. Clear goals for the department are 15.3% 28.0% 29.3% 23.3% 4.0% 2.7 established by its leaders. The department is managed ineffectively by 8.6% 31.8% 23.8% 24.5% 11.3% 3.0 its leaders. Employees who consistently do a poor job 34.4% 38.4% 18.5% 8.6% 0.0% 2.0 are held accountable. Employees who violate department policies are 18.5% 30.5% 24.5% 24.5% 2.0% 2.6 held accountable. Department leaders model equitable, inclusive, and respectful 8.7% 18.8% 26.2% 41.6% 4.7% 3.2 behavior in interactions with employees. The disciplinary process is unfair at this 9.9% 24.5% 31.1% 21.9% 12.6% 3.0 department. = 0¤±¢¤¯³¨®² ®¥ 4± ¨¨¦ /¯¯®±³´¨³¨¤² £ !µ ¨« ¡«¤ 2¤²®´±¢¤² equipment) and training opportunities. Results for this section are displayed in Table 7. Overall, respondents provided positive responses to these statements. PERF found that a large majority believed they had the equipment and supplies needed to do their jobs (59% agreed and 19% strongly agreed), and most respondents did not think that the equipment provided was in poor condition. Eighty percent of employees who completed the survey provided positive Three-fourths of 61 SECTION III. ORGANIZATIONAL CLIMATE SURVEY OF THE DENTON POLICE DEPT. employees believe that the employees of DPD receive high-quality training. Finally, most . Table 7. Perceptions of Training Opportunities and Available Resources Survey Item Strongly Disagree Neutral/No Agree Strongly Mean disagree opinion Agree Response* I have the equipment and supplies I need to do my 2.0% 12.7% 7.3% 58.7% 19.3% 3.8 job. The equipment I need for my job is in poor 17.3% 44.0% 14.0% 19.3% 5.3% 2.5 condition. I have access to information I need to do 2.0% 7.3% 8.0% 60.7% 22.0% 3.9 my job. I received the necessary 2.0% 6.1% 12.2% 54.1% 25.7% 4.0 training to do my job. I have opportunities to attend training courses 4.7% 7.4% 8.7% 51.7% 27.5% 3.9 that assist me in doing my job. Employees of this department receive high 1.3% 6.7% 16.7% 53.3% 22.0% 3.9 quality training. My training did not prepare me well for my 32.9% 52.3% 11.4% 2.7% 0.7% 1.9 actual work. My job makes poor use 27.3% 42.0% 16.0% 12.0% 2.7% 2.2 of my training. The frequency with which training opportunities are 3.4% 12.2% 18.9% 48.6% 16.9% 3.6 provided meet my needs as an employee. = 0¤±¢¤¯³¨® ®¥ ³§¤ 0±®¬®³¨® £ 3¯¤¢¨ « !²²¨¦¬¤³ 0±®¢¤²² DPD employees seemed to have very mixed feelings about the promotions and special assignment processes in the department. As shown in Table 8, half of the employees who completed the survey provided positive r professional development opportunities are provided to those who demonstrate appropriate work performance, while only 22% disagreed. 62 SECTION III. ORGANIZATIONAL CLIMATE SURVEY OF THE DENTON POLICE DEPT. However, with mean responses of 3.0, respondents provided mixed responses to the statements, More than half of respondents thought that promotions are seldom related to employee performance. However, more than half agreed or strongly agreed with there are opportunities for upward mobility in this department. More than half of the DPD employees who completed the organization climate survey did not think the department is unfair in its hiring practices. Table 8. Perceptions of the Promotion and Special Assignment Process Survey Item Strongly Disagree Neutral/No Agree Strongly Mean disagree opinion Agree Response* Special assignments and professional development opportunities are 5.3% 16.7% 28.0% 37.3% 12.7% 3.4 provided to those who demonstrate appropriate work performance. The department has an ineffective system for determining special 9.3% 23.2% 30.5% 28.5% 8.6% 3.0 assignments or professional development opportunities. The department has an ineffective system for 14.7% 20.7% 30.0% 24.0% 10.7% 3.0 promotion. The department is unfair 24.5% 32.5% 32.5% 7.3% 3.3% 2.3 in its hiring practices. Promotions are seldom related to employee 5.4% 12.1% 30.2% 36.9% 15.4% 3.5 performance. Promotions are more related to whom you 19.9% 31.1% 27.2% 15.2% 6.6% 2.6 know rather than the quality of your work. There is a fair opportunity to be 2.6% 17.2% 27.2% 37.7% 15.2% 3.5 promoted. I feel that there are opportunities for upward 3.3% 15.2% 25.8% 45.7% 9.9% 3.4 mobility in this department. = 63 SECTION III. ORGANIZATIONAL CLIMATE SURVEY OF THE DENTON POLICE DEPT. DPD employees were asked how much emphasis should be placed on the following items in the promotion process and when determining opportunities for special assignments: Written exams; Assessment from outside of the department (e.g., independent reviewers); Officer performance evaluations; Seniority; and Interviews. emphasis are displayed in Tables 9 and 10 below. Table 9 Promotion Process Less Emphasis Same Emphasis/No More Emphasis Not Used at All (% of Respondents) Change (% of Respondents) (% of Respondents) (% of Respondents) Written exams 33.8% 50.7% 10.1% 5.4% Assessment from outside of the department 15.6% 18.4% 36.7% 29.3% (e.g. independent reviewers) Employee performance 4.1% 25.2% 66.7% 4.1% evaluations Seniority 16.3% 50.3% 28.6% 4.8% Interview 7.4% 33.1% 55.4% 4.1% As Table 9 illustrates, regarding the promotions process, 51% of respondents believe that no changes should be made to the emphasis placed on written exams, but 39% think that written exams should receive less emphasis or should not be used at all. Only 37% of respondents believe more emphasis should be placed on assessments from outside of the department., while 45% believe outside assessments should receive less emphasis or not be used at all. Two-thirds of respondents think more emphasis should be placed on performance evaluations, and 55% believe more emphasis should be given to interviews. Half of the DPD employees who completed the survey believe that the current level of emphasis on seniority should not be changed. 64 SECTION III. ORGANIZATIONAL CLIMATE SURVEY OF THE DENTON POLICE DEPT. Table 10mendations About Emphasis Placed on Factors Influencing Special Assignment Opportunities Less Emphasis Same Emphasis/No More Emphasis Not Used at All (% of Respondents) Change (% of Respondents) (% of Respondents) (% of Respondents) Written exams 19.9% 46.6% 17.8% 15.8% Assessment from outside of the department 14.4% 24.0% 19.9% 41.8% (e.g. independent reviewers) Employee performance 2.1% 28.1% 67.8% 2.1% evaluations Seniority 19.9% 45.2% 29.5% 5.5% Interview 3.4% 44.1% 49.0% 3.4% Regarding special assignment opportunities, 47% of respondents believe no changes should be made to the emphasis placed on written exams, but 36% believe written exams should receive less emphasis or not be used at all. Similar to findings regarding the promotion process, two-thirds of respondents believe that employee evaluations should receive more emphasis when determining opportunities for special assignment. Forty-five percent of respondents believe the emphasis placed on seniority should not be changed, and among the other respondents, there was a slight preference for giving seniority greater emphasis. Forty-nine percent of respondents said that that interviews should be given more emphasis in determining special assignments, and most others thought that emphasis should not change; few said that interviews should receive less emphasis. DPD employees were also asked two questions about whether they believe race and gender impact opportunities for special assignment/professional development and promotion. The results are presented in Tables 11 and 12. As shown in Table 11, DPD employees overwhelming responded that they believe whites and minorities are treated the same when it comes to opportunities for special assignment/professional development and promotion. 65 SECTION III. ORGANIZATIONAL CLIMATE SURVEY OF THE DENTON POLICE DEPT. Table 11. Perceptions of Special Assignment/Professional Development Opportunities and Promotion Based on Race Survey Item % Whites are treated better than minorities. 5.6% Minorities are treated better than whites. 7.0% Whites and minorities are treated about the same. 87.3% Similarly, 86% respondents believe that men and women are treated the same when it comes to opportunities for special assignment/professional development and promotion. Table 12. Perceptions of Special Assignment/Professional Development Opportunities and Promotion Based on Gender Survey Item % Men are treated better than women 10.5% Women are treated better than men 3.5% Men and women are treated about the same 86.0% Open-%£¤£ 3´±µ¤¸ Questions At the end of each section of the survey, respondents were asked if they had any additional comments based upon their responses for those sections. In addition, at the end of the survey, PERF asked the following open-partment could improve were asked to write in responses. ys the department could improve the overall environment within the agency as well as better serve the community? This level of response rate is much higher than PERF has seen in similar surveys in other agencies. Several common themes emerged from the responses to the open-ended questions. These themes included: Cronyism; Poor internal communication; Perceptions of disparate discipline and accountability; and Personal agendas among ranking DPD personnel. Several of the themes listed above were also topics of discussion when PERF conducted focus groups during the site visit. The sections below provide further details on these themes. 66 SECTION III. ORGANIZATIONAL CLIMATE SURVEY OF THE DENTON POLICE DEPT. Cronyism It was mentioned several times during focus groups, and in the comments on the survey, that the DPD for determining special assignments, and told PERF that special assignments were based on with individuals qualifications. It is critical that selection processes be fair and consistent. The process for determining special assignments must be clearly described in policy and always followed. Recommendation: PERF believes the DPD would be best served by consistently adhering to the following process for determining special assignments: 1) Open positions for special assignment should be advertised department-wide, preferably via an email sent to every DPD employee. 2) Interested employees should complete an application. 3) C immediate DPD supervisors for comments. 4) Completed application should be sent to the specialized unit filling the position. Additionally, PERF recommends the use of a three-party interview panel, comprised of subject matter experts for the specialized unit. The position-level requirements for the three-party interview panel should be indicated in policy. The three-party interview panel should use fixed questions and a consistent scoring method (e.g., a scoring rubric) for evaluating applicants. A basic skills test may be administered, but DPD must ensure that applicants know it is part of the process and why the test is included in the process. Status: This recommendation has been implemented. 0®®± )³¤± « #®¬¬´¨¢ ³¨® A number of survey respondents said that department communications are severely lacking. Focus group participants and survey respondents told PERF that information is not disseminated hear news about the department only through gossip and rumors. Furthermore, it appears that there have been 51 misunderstandings and misinformation about the Downtown Unit. It is important that all DPD personnel understand the functions of the Downtown Unit. Recommendation: DPD leaders must work to better integrate the Downtown Unit into the department. The Downtown Unit is designed to provide visitors and residents with a sense of safety and security while enjoying the local businesses, restaurants, and nightlife. The Downtown Unit assists the City of Denton in making the downtown area an attractive destination. DPD leaders should consider a constant rotation of temporarily assigned patrol officers into the Downtown Unit to expose them to the work of the unit. 51 Also known as District Five, this unit is responsible for policing the downtown Denton entertainment area. 67 SECTION III. ORGANIZATIONAL CLIMATE SURVEY OF THE DENTON POLICE DEPT. This will also give patrol officers exposure to the business community and to the problem-solving and communication skills that are essential in the unit. Along the same lines, DPD personnel told PERF that misinformation regarding the hiring of racial minorities has been an internal issue for the department. This issue was mentioned in focus groups and on the survey. PERF learned that department leaders took steps to examine this issue and found that unfair practices have not been used to give preferential treatment to minority applicates in the hiring process. PERF also learned that to address this issue and dispel misconceptions. However, this continues to be an underlying issue in the department. Recommendation: PERF recommends that DPD leaders readdress the misinformation so that the department can continue to move forward. Interviews indicated that prior reviews of hiring practices, positions filled, and processes that were used did not give preferential treatment to minority applicants. This information should be shared agency- wide to address misunderstandings. Survey respondents and focus group participants also said and expectations were not clearly known. This is important and should be clearly communicated to every employee of DPD. Recommendation: ship team must make their mission and vision of the agency clear, and must share this vision through effective internal communications and transparency. Status: This recommendation has been implemented. 0¤±¢¤¯³¨® ®¥ $¨²¯ ± ³¤ $¨²¢¨¯«¨¤ £ !¢¢®´³ ¡¨«¨³¸ During focus groups, DPD personnel described an uneven disciplinary atmosphere created by significant differences in performance expectations among patrol supervisors and commanders. Examples were given of similar behaviors and performances receiving significantly different levels of leadership scrutiny. Respondents to the organization climate survey also described this behavior by patrol supervisors and commanders. Recommendation: D new leadership team should ensure that performance and behavioral expectations that lead to disciplinary action are organizational, and not subject to inconsistent interpretations by first-line and mid-level leadership. Consideration should be given to publishing summaries on a quarterly basis of adjudicated misconduct complaints to reduce suspicions of disparate treatment and biased outcomes. 0¤±²® « !¦¤£ ² ¬®¦ 2 ª¨¦ $0$ 0¤±²®¤« Feedback from DPD personnel during focus groups and in responses to open-ended questions on the organizational climate survey indicates that there is an inconsistency in the expectations 68 SECTION III. ORGANIZATIONAL CLIMATE SURVEY OF THE DENTON POLICE DEPT. among sergeants and lieutenants. Some members of the department said that lieutenants and sergeants running their own separate police departments. Recommendation: PERF recommends that hip team provide commanders and supervisors with clear expectations and consistent practices for officers to follow regarding their daily law enforcement activities (e.g., report writing, handling calls for service, etc.). Providing clear, consistent requirements for all patrol officers will increase accountability and significantly reduce the confusion that currently exists. Status: This recommendation has been implemented. 69 SECTION IV. WORKPLACE ENVIRONMENT AND PROCEDURAL JUSTICE 3%#4)/. )6ȁ 7/2+0,!#% %.6)2/.-%.4 !.$ 02/#%$52!, JUSTICE DPD person fairness, and internal transparency. poor internal communications, inconsistent processes for discipling and holding people accountable, and a lack of confidence in department leaders. discusses the principles of internal procedural justice and provides recommendations for how DPD can apply these principles within the agency. PERF believes that incorporating the principles of internal procedural justice throughout the department workplace culture and environment. This includes ensuring that all employees are treated with dignity, respect, and fairness, and are given opportunities to share their views about issues, and gender, race, or sworn or civilian status will not affect how they are treated by the department. Internal 0±®¢¤£´± « *´²³¨¢¤ st 52 Century Policing. This Task Force was created by executive order in 2014 by President Obama to identify best practices in law enforcement and to provide recommendations on policing 53 practices that will reduce crime while increasing public trust. Final Report, procedurally just behavior is based on four central principles: 1. Treating people with dignity and respect; 2. ; 3. Being neutral and transparent in decision-making; and 4. Conveying trustworthy motives. In the field of policing, refers to the way in which officers apply these principles when interacting with members of the public. Research has shown that external 54 procedural justice is critical for increasing 52 stst Century Policing (2015). Century Policing. Washington, DC: Office of Community Oriented Policing Services. http://www.theiacp.org/Portals/0/taskforce_finalreport.pdf 53 Ibid. 54 Police Executive Research Forum (2014). Legitimacy and Procedural Justice: A New Element of Police Leadership. http://www.policeforum.org/assets/docs/Free_Online_Documents/Leadership/legitimacy%20and%20procedural%20 justice%20-%20a%20new%20element%20of%20police%20leadership.pdf ; stst Century Policing (2015). Century Policing. Washington, DC: Office of Community Oriented Policing Services. http://www.cops.usdoj.gov/pdf/taskforce/taskforce_finalreport.pdf. 70 SECTION IV. WORKPLACE ENVIRONMENT AND PROCEDURAL JUSTICE Similarly, refers to the way in which these principles treating people with dignity, respect, and fairness are applied within a police agency, by department employees, to the benefit of other employees and the 55 department as a whole. Recommendation 1.4 of the final report of the justice begins with the clear articulation of organizational core values and the transparent creation and fair application of an organiza-making 56 Examples of how police leaders may apply aspects of procedural justice within their agencies include: Ensuring that disciplinary systems are fair; cy issues; Creating meaningful paths for career advancement; and 57 Encouraging collaboration and strong relationships between employees and supervisors. "¤¤¥¨³² of )³¤± « 0±®¢¤£´± « *´²³¨¢¤ Applying the principles of internal procedural justice can help improve organizational culture 58 and create a safe and healthy working environment for all members of a police agency. actions as legitimate, and to voluntarily comply with departmental policies when they are given a 59 voice and are active participants in the decision-making process. 55 Police Executive Research Forum (2014). Legitimacy and Procedural Justice: A New Element of Police Leadership. http://www.policeforum.org/assets/docs/Free_Online_Documents/Leadership/legitimacy%20and%20procedural%20 justice%20-%20a%20new%20element%20of%20police%20leadership.pdf ; Police Executive Research Forum (2015). Critical Response Technical Assessment Review: Police Accountability Findings and National Implications of an Assessment of the San Diego Police Department. Washington, DC: Office of Community Oriented Policing Services. https://www.sandiego.gov/sites/default/files/legacy/police/pdf/perfrpt.pdf. 56stst Century Policing (2015). Century Policing. Washington, DC: Office of Community Oriented Policing Services. http://www.cops.usdoj.gov/pdf/taskforce/taskforce_finalreport.pdf. 57 Police Executive Research Forum (2014). Legitimacy and Procedural Justice: A New Element of Police Leadership. http://www.policeforum.org/assets/docs/Free_Online_Documents/Leadership/legitimacy%20and%20procedural%20 justice%20-%20a%20new%20element%20of%20police%20leadership.pdf ; stst Century Policing (2015). Century Policing. Washington, DC: Office of Community Oriented Policing Services. http://www.cops.usdoj.gov/pdf/taskforce/taskforce_finalreport.pdf. 58 Ibid. 59 Ibid. 71 SECTION IV. WORKPLACE ENVIRONMENT AND PROCEDURAL JUSTICE Additionally, there is an important link between internal and external procedural justice. As the 60 Thus, by promoting the principles of fairness, dignity, and respect within the agency, police leaders provide an example of how officers should treat community members. !¯¯«¸¨¦ Procedural *´²³¨¢¤ 0±¨¢¨¯«¤² ³ $0$ Based on feedback that PERF received during focus groups with DPD employees, as well as a review of the organizational climate survey data, PERF believes that incorporating the principles of internal procedural justice throughout the department can help improve overall workplace culture and environment. This includes ensuring that all employees are treated with dignity, respect, and fairness, regardless of their gender, race, or sworn/civilian status. This section discusses how the principles of internal procedural justice can help create an equitable workplace environment throughout the department. Internal $¤¯ ±³¬¤³ #®¬¬´¨¢ ³¨®² DPD can adopt a number of strategies to improve internal department communications, with an eye toward promoting internal procedural justice. Such strategies include soliciting input from employees, holding regularly scheduled formal meetings with department personnel, and the use - 3®«¨¢¨³¨¦ )¯´³ ¥±®¬ %¬¯«®¸¤¤² When a new policy or initiative is proposed, DPD leaders should involve members of the department by conducting briefings and soliciting feedback. This helps promote internal procedural justice by giving employees a voice into the issues that directly affect them. For example, DPD can create a feedback form that can be filled out and submitted via a drop box at headquarters. DPD leaders can also hold small employee focus groups (involving both sworn staff and civilians) to hear comments about proposed policies and procedures. DPD can also hold regular department-wide meetings to ensure that all members of the department are made aware of significant issues within the agency. These meetings should be held any time there is a change in policy, a new initiative is launched, or there is a major personnel change. At these meetings, DPD leaders should explain the reasons behind these changes, and provide adequate time to address concerns and answer questions. DPD supervisors should hold follow-up meetings with their direct reports to verify that they understand what was discussed and to answer any additional questions. 60 Ibid. 72 SECTION IV. WORKPLACE ENVIRONMENT AND PROCEDURAL JUSTICE These types of regular, ongoing meetings will promote frequent two-way communication and foster a sense of transparency and camaraderie within the organization. These meetings should not be limited to front-line officers. They should include the agency as a whole, including civilian support staff. This will create a sense of connectedness among units that do not often interact directly. meetings. These meetings do not need to have a formal agenda; rather, they can be held to give all agency employees, sworn and civilian, an opportunity to express issues of concern. These meetings can also be used by the chief to solicit information about any ongoing issues about which the chief should be aware. Recommendation: DPD should make use of regular, ongoing department-wide meetings, involving both sworn and civilian staff. These meetings should be used to promote transparency within the agency by sharing information about upcoming changes within the agency and soliciting employee feedback. Status: This recommendation has been implemented. Recommendation: DPD should also explore other ways to solicit feedback from employees, including circulating feedback forms, holding focus groups with a cross- employees and the chief of police. 2¤¦´« ±«¸ 3¢§¤£´«¤£ -¤¤³¨¦² ¶¨³§ $¤¯ ±³¬¤³ 0¤±²®¤« As a way of increasing department communications and transparency, standing meetings between the Chief of Police, Assistant Chiefs, command staff, supervisors, and officer associations should occur at regularly scheduled intervals. Open-door policies should be avoided, as this type of informal meeting style can result in misunderstandings about some employees having greater access to department leaders or undue influence. Recommendation: PERF recommends the DPD Chief of Police should create a practice that establishes the following standing formal meeting schedule: o Command staff (once per week) o Supervisors (once per month) o Denton Police Officers Association (once per month) o Denton Municipal Police Association (once per month) o Crime meeting (once per month). Status: This recommendation has been implemented. 73 SECTION IV. WORKPLACE ENVIRONMENT AND PROCEDURAL JUSTICE (®«£¨¦ After-A¢³¨® Debriefings Patrol staff can make use of after-action debriefings in order to promote informal mentoring opportunities and promote team-building. After a patrol team handles a particularly challenging call, supervisors should encourage the team to come back at the end of the shift to informally talk about the incident and discuss what worked well and what could be improved upon in the future. This does not need to be done on a daily basis, but rather when a shift sergeant believes that a particular incident or call for service warrants a discussion about tactics and strategy. Such after-action debriefings need not be limited to patrol functions. Communications Operations staff can hold similar debriefings after challenging incidents to increase team- building, provide constructive feedback, and encourage mentoring relationships. Even employees who perform routine day-to-day tasks (such as civilian clerical and administrative functions within DPD) can participate in monthly meetings prior to the close of a day to accomplish these objectives. Recommendation: DPD should explore the use of after-action briefings for all functions of the department in order to share information, provide constructive feedback to other unit members, and encourage mentoring relationships between junior and senior staff. Status: This recommendation has been implemented. 2¤¢®¦¨¹¨¦ %·¢¤¯³¨® « 0¤±¥®±¬ ¢¤ Recognizing employee contributions and successes is another way to incorporate the principles of internal procedural justice at DPD. DPD should highlight the accomplishments of sworn and civilian members of the department. A special email could be sent out by the chief of police to all DPD members to highlight and recognize an employee whose work has had a positive impact on the community or the agency. Recommendation: DPD should routinely recognize sworn and civilian members whose work has had a positive impact on the community or the agency. A special email recognizing that employ should be sent to all DPD staff by the chief of police. Status: This recommendation has been implemented. 74 SECTION V. ADDITIONAL RECOMMENDATIONS 3%#4)/. 6ȁ !$$)4)/.!, 2%#/--%.$!4)/.3 PERF is offering several other recommendations that will assist the Denton Police Department in improving its day-to-day operations to strengthen agency transparency and accountability to the community. Recommendation: - of- practice demonstrates a commitment to transparency with the communities they serve. Examples of two major law enforcement agencies that have posted their policies online are the Seattle and Los Angeles Police Departments. http://www.seattle.gov/police/publications/manual/default.htm http://www.lapdonline.org/lapd_manual/ Recommendation: DPD follows progressive policing practices for accepting complaints against agency personnel. However, the manner in which complaints are accepted is somewhat limited. Because the complaint process may not be intuitive for some people who are not familiar with how law enforcement agencies are structured, there should be a clearly identifiable link on the DPD the complaint process, the complaint form, and instructions for completing the form. Instructions for completing the form, and the form itself, should be available in English and Spanish. DPD also should accept commendations, as well as complaints against officers, through t This recommendation has been implemented. Recommendation: If at all possible, DPD should move the Office of Professional Standards (OPS) to an off-site location. An off-site facility, such as a mixed-use office building or another city property, can be less intimidating than the regular police facility for complainants. Furthermore, for officers who visit OPS to be questioned by investigators, the use of an off-site location may protect officer privacy. Recommendation: DPD should utilize an ombudsman or independent auditor (e.g., a retired judge or prosecutor) to conduct periodic, random reviews of its internal affairs investigations. The U.S. Department of Justice (DOJ) has routinely mandated the creation of an external oversight component in consent decrees and memoranda of agreement during the past 15 years. DOJ documents detailing these agreements serve as excellent resources for the considerations that are involved in establishing an oversight 61 mechanism. Recommendation: It was mentioned several times during focus groups that special requests from municipal government officials are often disseminated through DPD without following the chain of command. DPD should implement a consistent process 61 Law Enforcement Agencies section. https://www.justice.gov/crt/special-litigation-section-cases-and-matters0#police 75 SECTION V. ADDITIONAL RECOMMENDATIONS for handling the concerns of local politicians. When such requests come to the agency, the request should be reviewed by the Assistant Chief, then sent through the chain of command to the proper employee for action. Once the request is complete, the findings or action taken should go back up the chain of command to the Chief, so it then can be relayed back to the requestor. Agency leaders should maintain a record of these actions. It is important that these requests not skip the chain of command and go directly to officers, because that can cause confusion and misunderstanding among agency supervisors and commanders. This recommendation has been implemented. Requests are routed through the Chief of Police to the proper member of the department, with the chain of command involved. 76 CONCLUSION CONCLUSION leaders have demonstrated a desire to improve the working environment and the operations of the agency. One of the driving reasons behind the commissioning of this report was to examine the overall organizational climate of the department. Perceptions exist to a certain extent in the department about matters of equity and fairness, transparency in leadership, communications, and related DPD and city staff members, DPD employees. While challenges remain in addressing some of these issues, they are not insurmountable, as long as DPD leaders are committed to agency-wide improvement. The recommendations contained in this report will assist DPD in moving forward. Where feasible, recommendations should be implemented with an eye toward promoting a which involves giving DPD employees a voice in changes to the department, and providing transparency, fairness, and respect to employees. This report also identifies areas where Duse-of-force policies and practices are already aligned with progressive policing practices, and presents several recommendations for how DPD can strengthen its policies and practices. project team regularly discussed these recommendations with DPD leaders. DPD began making changes to its policies and practices based on these discussions, and at the time of recommendations. 0®«¨¢¨¤² £ 0±®¢¤£´±¤² PERF made a number of recommendations for how DPD can strengthen its written policies and procedures, particularly those related to officer use of force. For example, PERF recommends that DPD adopt de-escalation as a formal agency policy, and that its use-of-force policy be revised to reflect this approach. This includes adding definitions for proportionality and de- 62 escalation, adopting the Critical Decision-Making Model (CDM), and providing additional guidance on using distance and cover, tactical repositioning not pose an immediate threat, and calling for supervisory resources to critical incidents, such as police encounters with mentally ill persons who are behaving erratically or dangerously. DPD has already adopted many of these recommendations and has made several changes to its use-of- force policies and practices. PERF also recommends several changes to D (ECWs). DPD should revise its policy to replace all references to 62 Police Executive Research Forum (2016). ICAT: Integrating Communications, Assessment, and Tactics. http://www.policeforum.org/assets/icattrainingguide.pdf www.policeforum.org/icat. 77 CONCLUSION reflect the reality that these tools are less-lethal weapons that are meant to help control persons 63 who are actively resisting authority or acting aggressively. PERF also recommends that DPD revise its policies to ECW, prohibit use of an ECW against a person operating any type of vehicle in motion, and 64 discourage the use of the drive stun mode as a pain compliance technique. Again, DPD has recommendations. /±¦ ¨¹ ³¨® « 3³±´¢³´±¤ senior leadership positions. Upon receiving the resignation of the Chief and both Assistant Chiefs, City of Denton officials determined it would be best to restructure the organization of the executive positions to include a Chief of Police, one Assistant Chief, and two Deputy Chiefs. PERF believes this structure will serve the department well and does not recommend any further /±¦ ¨¹ ³¨® « #«¨¬ ³¤ 3´±µey With were to determine the overall workplace climate at DPD and to guid policies and practices going forward. The survey allowed anonymous replies, in order to elicit maximum response and encourage respondents to be candid about their perceptions of the agency. Survey results were mixed with respect to employee perceptions of the working environment at DPD. For example, most respondents believe that DPD is a good organization to work for and are satisfied with their jobs. However, most respondents felt that department leaders struggled with communicating effectively with personnel, that discipline is administered inconsistently, and that there are shortcomings in holding personnel accountable for poor performances. 7®±ª¯« ¢¤ %µ¨±®¬¤³ £ 0±®¢¤£´± « *´²³¨¢¤ As PERF heard from DPD personnel about their perceptions of the department, both in person as well as via the anonymous survey, we realized that a discussion of the principles of internal procedural justice would be of value to the agency in order to promote a sense of transparency, openness, and fairness. 63 PERF and COPS Office, 2011 Electronic Control Weapons Guidelines. http://www.policeforum.org/assets/docs/Free_Online_Documents/Use_of_Force/electronic%20control%20weapon %20guidelines%202011.pdf. 64 Ibid. See also PERF, Guiding Principles on Use of Force. http://www.policeforum.org/assets/guidingprinciples1.pdf. 78 CONCLUSION For example, DPD should hold periodic department-wide meetings to inform employees about potential changes in DPD and to solicit their feedback. Such meetings should involve both as needed to elicit feedback on issues that DPD employees may have. Opportunities for encouraging mentoring relationships among staff members should be encouraged. Such programs should occur on a regular, ongoing basis. PERF learned that DPD is in the process of implementing several changes to help promote communication and transparency. -®µ¨¦ &®±¶ ±£ The Denton Police Department is made up of talented and dedicated officers and civilians who are committed to serving the City of Denton and its residents. City officials are committed to improving tOne of the most important things PERF can recommend is improving internal procedural justice at DPD, to promote fairness and equity among its employees. One important step that DPD can take in this regard is to share the results of this report with its members. This can be accomplished by disseminating the report agency-wide and organizing a series of open forums where employees can discuss the report and their concerns with the chief of police and command staff. DPD has many excellent employees and a unique opportunity to make improvements to take the agency to the next level. PERF wrote this report to serve as a guide for implementing these efforts. 79 APPENDIX DENTON POLICE DEPARTMENT ORGANIZATIONAL CLIMATE SURVEY !00%.$)8 $%.4/. 0/,)#% $%0!24-%.4 /2'!.):!4)/.!, #,)-!4% SURVEY The Police Executive Research Forum (PERF) has been hired by the City of Denton to examine current police practices. As part of this process, PERF is conducting a climate survey of the Denton Police Department. Our role is to understand how employees feel about several aspects of the department and their role within the organization. This survey is confidential and the content will be submitted directly to PERF. No individual responses will be shared with the department. Results from the surveys will only be reported as aggregate numbers and broad summaries of comments without a way to identify individual respondents. You may stop the survey at any time or not answer questions. The survey should take between 15-20 minutes to complete. Your candid and honest responses are Police Department. If you have any questions about the survey, please contact Dr. Meredith Mouser at (202) 454- 8318 or mmouser@policeforum.org. Additionally, you can learn more about PERF at www.policeforum.org. PERF thanks you in advance for your participation. DEMOGRAPHIC QUESTIONS Gender ___ Male ___ Female ___ Other Highest Level of Education ___ High school graduate/GED ___ Some college, no degree ___ Professional degree (JD, PhD) Race (check all that apply) ___ American Indian/Alaskan Native ___ Asian/Pacific Islander ___ Black/African American ___ White/Caucasian ___ Other ________________ Ethnicity ___ Yes, of Hispanic origin ___ No, not of Hispanic origin Years of service at DPD ___ 0-5 years ___ 6-10 years ___11-15 years ___16-20 years ___ More than 20 years Employee type ___ Sworn ___ Non-Sworn 80 APPENDIX DENTON POLICE DEPARTMENT ORGANIZATIONAL CLIMATE SURVEY Please indicate the level to which you agree with each of the following statements. ORGANIZATIONAL COMMITMENT AND JOB SATISFACTION Strongly Neutral/No Strongly disagree Disagree opinion Agree agree (1) (2) (3) (4) (5) I am proud to tell others that I work for this department. I feel very little loyalty to this department. I tell my friends and family that this is a good organization to work for. This department really inspires the best in me in the way of my job performance. I really care about the fate of this department. I feel myself to be part of this department. I would not recommend a close friend to join this department. I find that my values and the I feel fairly well satisfied with my job. I like my job better than the average worker does. Most days I am enthusiastic about my job. I enjoy my roles and responsibilities at my job. I definitely dislike my job. For the section above, please provide additional comments if you feel strongly about the answers you have provided. ___________________________ 81 APPENDIX DENTON POLICE DEPARTMENT ORGANIZATIONAL CLIMATE SURVEY WORK ENVIRONMENT Strongly Neutral/No Strongly disagree Disagree opinion Agree agree (1) (2) (3) (4) (5) I find myself in conflicts with coworkers that escalate into angry exchanges. Employees treat each other the same, regardless of their racial/ethnic group. Employees treat each other the same, regardless of their gender. Employees treat each other the same, regardless of their sexual orientation. Overall, the environment of this department encourages employees to behave in an equitable, inclusive, and respectful manner. My work environment is more uncomfortable than it should be. I have positive relationships with my coworkers. The working relationship between sworn and non-sworn employees is constructive toward achieving department goals. The department rewards the efforts of employees who do outstanding work. As an employee of this department, I am treated with respect. As an employee of this department, I receive fair treatment. I know what resources are available to me if I need to discuss a workplace- related complaint. For the section above, please provide additional comments if you feel strongly about the answers you have provided. ___________________________ 82 APPENDIX DENTON POLICE DEPARTMENT ORGANIZATIONAL CLIMATE SURVEY COMMUNICATION Strongly Neutral/No Strongly disagree Disagree opinion Agree agree (1) (2) (3) (4) (5) I feel free to express my opinions in my job without worrying about negative results. Department leaders do a poor job of informing employees about matters affecting us. Information about things relevant to my job are communicated in a timely manner. I am satisfied with the information I receive from management on what is going on in the department. The rationale behind important decisions that impact me is communicated effectively. Employees are asked for input regarding decisions that will affect them. I am dissatisfied with my involvement in decisions that affect my work. For the section above, please provide additional comments if you feel strongly about the answers you have provided. ___________________________ SUPERVISION Strongly Neutral/No Strongly disagree Disagree opinion Agree agree (1) (2) (3) (4) (5) My immediate supervisor treats the employees he or she supervises with respect. Generally, the supervision in my department favorably affects my work and moral. My immediate supervisor is available to me when I have questions or need help. I am often unclear about just what is expected of me on the job. 83 APPENDIX DENTON POLICE DEPARTMENT ORGANIZATIONAL CLIMATE SURVEY Employees who perform their jobs well are recognized by their immediate supervisors for their contributions. The supervisors in this department treat their subordinates fairly. The supervisors in this department show favoritism. My immediate supervisor is familiar enough with my job performance to fairly evaluate me. My job performance is reviewed in person with me at least one time each year. The standards used to evaluate my performance have been fair and objective. I receive inaccurate feedback pertaining to my job performance. I receive useful recommendations on how I can improve my job performance. I have little trust in my supervisor's evaluation of my work performance. For the section above, please provide additional comments if you feel strongly about the answers you have provided. ___________________________ LEADERSHIP Strongly Neutral/No Strongly disagree Disagree opinion Agree agree (1) (2) (3) (4) (5) Morale among employees is good. leadership. Department leaders can be trusted. Clear goals for the department are established by its leaders. The department is managed ineffectively by its leaders. Employees who consistently do a poor job are held accountable. Employees who violate department policies are held accountable. 84 APPENDIX DENTON POLICE DEPARTMENT ORGANIZATIONAL CLIMATE SURVEY Department leaders model equitable, inclusive, and respectful behavior in interactions with employees. The disciplinary process is unfair at this department. For the section above, please provide additional comments if you feel strongly about the answers you have provided. ___________________________ TRAINING AND RESOURCES Strongly Neutral/No Strongly disagree Disagree opinion Agree agree (1) (2) (3) (4) (5) I have the equipment and supplies I need to do my job. The equipment I need for my job is in poor condition. I have access to information I need to do my job. I received the necessary training to do my job. I have opportunities to attend training courses that assist me in doing my job. Employees of this department receive high quality training. My training did not prepare me well for my actual work. My job makes poor use of my training. The frequency with which training opportunities are provided meet my needs as an employee. For the section above, please provide additional comments if you feel strongly about the answers you have provided. ___________________________ 85 APPENDIX DENTON POLICE DEPARTMENT ORGANIZATIONAL CLIMATE SURVEY HIRING, PROFESSIONAL DEVELOPMENT/SPECIAL ASSIGNMENTS, & PROMOTIONS Strongly Neutral/No Strongly disagree Disagree opinion Agree agree (1) (2) (3) (4) (5) Special assignments and professional development opportunities are provided to those who demonstrate appropriate work performance. The department has an ineffective system for determining special assignments or professional development opportunities. The department has an ineffective system for promotion. The department is unfair in its hiring practices. Promotions are seldom related to employee performance. Promotions are more related to whom you know rather than the quality of your work. There is a fair opportunity to be promoted. I feel that there are opportunities for upward mobility in this department. In the promotion process, how much emphasis should there be on the following? Less Same More Not used emphasis emphasis emphasis at all Written exams Assessment from outside of the department (e.g., independent reviewers) Employee performance evaluations Seniority Interview In determining special assignments or professional development opportunities, how much emphasis should there be on the following? Less Same More Not used emphasis emphasis emphasis at all Written exams Assessment from outside of the department (e.g., independent reviewers) 86 APPENDIX DENTON POLICE DEPARTMENT ORGANIZATIONAL CLIMATE SURVEY Employee performance evaluations Seniority Interview Please indicate which of the following you believe to be true. Regarding special _____ Whites are treated better than minorities _____ Minorities are treated better than whites _____ Whites and minorities are treated about the same Regarding special assignments/professi _____ Men are treated better than women _____ Women are treated better than men _____ Men and women are treated about the same For the section above, please provide additional comments if you feel strongly about the answers you have provided. ___________________________ Are there ways the department could improve the overall environment within the agency as well as better serve the community? __________________ Is there anything else important you feel we should know? __________________________ 87 City Hall City of Denton 215 E. McKinney St. Denton, Texas 76201 www.cityofdenton.com Legislation Text File #:ID 19-033,Version:1 AGENDA CAPTION Receive a report, hold a discussion, and give staff direction regarding an update on the City of Denton’s landfill permit amendment, MSW Permit No. 1590B, and the use of a specific use permit to regulate landfill operations. City of DentonPage 1 of 1Printed on 1/4/2019 powered by Legistar© City of Denton City Hall 215 E. McKinney Street Denton, Texas www.cityofdenton.com _____________________________________________________________________________________ AGENDA INFORMATION SHEET DEPARTMENT: Solid Waste CM/ DCM/ ACM: Mario Canizares DATE: January 8, 2019 SUBJECT Receive a report, hold a discussion, and give staff direction regarding an update on the City of Denton’s landfill permit amendment, MSW Permit No. 1590B, and the use of a specific use permit to regulate landfill operations. BACKGROUND The City of Denton’s Solid Waste Department currently operates a Type 1 Municipal Solid Waste landfill under the Texas Commission on Environmental Quality’s Permit No. 1590A. The facility was originally permitted in 1995 and is located at 1527 S. Mayhill Rd. Based on current waste tonnage and future growth projections, staff estimates that the existing disposal capacity of the facility may be depleted as early as 2028. To address the community’s future waste disposal needs, the City filed for an amendment to the current permit in January 2017. The amendment allows for the vertical and lateral expansion of existing waste limits. If approved as submitted, staff estimates the permit amendment will provide the community with up to 70 years of additional landfill capacity. The permit is currently undergoing technical review by the TCEQ, and public comments are still being accepted by the agency. Upon approval of the permit, staff will seek City Council direction on a revised site plan and specific use permit (SUP). At that time, the City Council may elect to apply more restrictive standards on the facility’s height, land use, and operating procedures. The purpose of this presentation is to brief Council on the status of the permit application. PRIOR ACTION/REVIEW (Council, Boards, Commissions) The City Council previously received an update on the landfill permit process during the January 23, 2018 work session. STRATEGIC PLAN RELATIONSHIP The City of Denton’s Strategic Plan is an action-oriented road map that will help the City achieve its vision. The foundation for the plan is the five long-term Key Focus Areas (KFA): Organizational Excellence; Public Infrastructure; Economic Development; Safe, Livable, and Family-Friendly Community; and Sustainability and Environmental Stewardship. While individual items may support multiple KFAs, this specific City Council agenda item contributes most directly to the following KFA and goal: Related Key Focus Area: Public Infrastructure Related Goal: 2.3 Promote superior utility services and City facilities EXHIBITS Respectfully submitted: Ethan Cox, 349-7421 Director of Solid Waste Prepared by: Ethan Cox, 349-7421 Director of Solid Waste City Hall City of Denton 215 E. McKinney St. Denton, Texas 76201 www.cityofdenton.com Legislation Text File #:ID 19-023,Version:1 AGENDA CAPTION Receiveareport,holdadiscussion,andprovidestaffdirectionregardingthePhase2updatetotheexisting"Denton Municipal Electric - Energy Risk Management Policy". City of DentonPage 1 of 1Printed on 1/4/2019 powered by Legistar© City of Denton City Hall 215 E. McKinney Street Denton, Texas www.cityofdenton.com _____________________________________________________________________________________ AGENDA INFORMATION SHEET DEPARTMENT:Denton Municipal Electric CM: Todd Hileman DATE: January 8, 2019 SUBJECT Receive a report, hold a discussion, and provide staff direction regarding the Phase 2 update to the existing "Denton Municipal Electric - Energy Risk Management Policy". BACKGROUND The current DME Energy Risk Management Policy(“Policy”), approved by the City Council on May1, 2018 by City Ordinance 18-237, provides a framework under which DME’s Energy Management Organization (EMO) manages DME’s energy portfolio on a day to day basis, including control structures and protocols that provide for 1) segregation of duties and delegation of authority, 2) governance and oversight processes, 3) rigorous management reporting and 4) strict adherence to authorized hedging products and transaction limits. At the time the current Policy was adopted, DME indicated it would be updated in two phases. The first phase of the Policy reflected lessons learned over the first four years the EMO was in operation, organizational changes made at the City and DME during that time, and a portion of the recommendations from the Deloitte review of the EMO (presented to the City Council on 12/12/17). In this Phase 2 update to the Policy, DME is bringing to the Council and PUB additional changes, including: • The implementation of all additional recommendations from the Deloitte review of the EMO, except those related to the implementation of a new Energy Trading & Risk Management (ETRM) system. • Recommendations offered by Energy Risk Consultants (ERC) regarding laying out of DME’s congestion management strategy, development of hedging and position management targets, and more precisely defining segregation of duties between front, middle and back office functions. • Implementation of “grey box” items (flagged in the current policy as areas still under development). Key revisions to the Policy include the following: 1. Key Performance Indicators and Objectives (Section 1.2) a. Risk Reduction - Reduce the risk associated with exposure to price volatility and volumetric variability b. Competitive Costs - Keep actual energy costs at or below the average annual ERCOT Day Ahead price, plus a hedging premium c. Reasonable Rates – Comparison of DME average rate to other similar-sized Texas municipal utilities 2. Annual validation and stress testing of models used by the EMO (Sections 3.3.3 and 3.3.4) 3. Anoverview of the inherent risks DME faces in managing its energy portfolio (Appendix A) 4. Risk exposure limits & targets (Appendix B) a. $15 million Risk Tolerance limit (on rolling 12 month basis) b. Use of “at risk” metrics to capture impact of forward price volatility and volumetric uncertainty c. Targets for managing Open Position, which narrow as delivery date approaches d. Congestion Management strategy and targets 5. Additional detail about approved transaction types (Appendix D) 6. A framework for developing hedging plans and strategies and hedge reporting (Appendix E) a. Clearly defined forward periods b. Justification for hedges c. Volumetric limits d. Hedging instruments to be used e. Price triggers f. Rigorous RMC oversight 7. New Product / Market Instrument Approval Checklist (Appendix F) About 25% of the recommendations offered by Deloitte were associated with changes to DME’s ETRM system. DME is currently in the ETRM system procurement process and will implement these recommendations in conjunction with the new system chosen. Additionally, a few Deloitte recommendations are being implemented outside of the Policy itself, including cross training and knowledge sharing between, front, middle and back office personnel and periodic independent reviews of “at risk” measures once they are implemented. Standard report templates for communicating with the RMC, Council and PUB are currently under development. Upon adoption of the Phase 2 updates described above, report templates will be finalized and used at future annual re-authorizations of this Policy. RECOMMENDATION DME recommends the City Council adopt the changes the Energy Risk Policy as described above and as shown in the attached draft redline. STRATEGIC PLAN RELATIONSHIP The City of Denton’s Strategic Plan is an action-oriented road map that will help the City achieve its vision. The foundation for the plan is the five long-term Key Focus Areas (KFA): Organizational Excellence; Public Infrastructure; Economic Development; Safe, Livable, and Family-Friendly Community; and Sustainability and Environmental Stewardship. While individual items may support multiple KFAs, this specific City Council agenda item contributes most directly to the following KFA and goal: Related Key Focus Area: Organizational Excellence Related Goal: 1.1 Manage financial resources in a responsible manner EXHIBITS 1. Agenda Information Sheet 2. PowerPoint Presentation 3. Updated Energy Risk Management Policy 4. Red Line showing changes to existing Energy Risk Management Policy 5. Risk Policy Implementation Tasks Status Report 6. Enterprise Risk Consulting Memorandum Respectfully submitted: George Morrow DME General Manager Prepared by: Philip DiPastena, Senior Risk Control Analyst DRAFT Denton Municipal Electric Energy Risk Management Policy Approvedby City of Denton Texas City Council City Ordinance No. 18-237 Page 15/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. Energy Risk Management Policy Contents SECTION 1 PROGRAM OVERVIEW .................................................................. 5 1.1 Introduction ............................................................................................................... 5 1.2 Objectives................................................................................................................... 5 1.3 Energy Risk Management Framework....................................................................... 6 1.3.1 Organizational Objectives ........................................................................... 6 1.3.2 Risk Mitigation and Measurement............................................................. 6 1.3.3 Portfolio Management ................................................................................ 6 1.3.4 Risk Control Infrastructure .......................................................................... 6 1.4 Procedures and Guidelines........................................................................................ 7 1.5 Policy Review ............................................................................................................. 7 SECTION 2 ORGANIZATION STRUCTURE ......................................................... 8 2.1 Risk Management Committee (“RMC”)..................................................................... 8 2.1.1 Risk Management Committee Structure....................................................... 8 2.1.2 Meeting Timing, Frequency, Member Vacancies and Voting Procedures .... 9 2.2 Front, Middle, and Back Offices ............................................................................... 10 2.2.1Front Office ............................................................................................... 10 2.2.2Middle Office............................................................................................ 11 2.2.3Back Office................................................................................................ 12 SECTION 3 MARKET RISK PROTOCOLS AND EXPOSURE CONTROL ................ 14 3.1 Market Risk Protocols.............................................................................................. 14 3.2 Authorized Transactions .......................................................................................... 15 3.3 Market Risk Control ................................................................................................. 15 3.3.1Risk Tolerance ........................................................................................... 15 3.3.2Transaction and Exposure Limits .............................................................. 15 3.3.3Stress Testing............................................................................................ 16 3.3.4Model Validation and Controls .................................................................16 Page 2 5/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. Energy Risk Management Policy 3.4Credit Risk Control...................................................................................................17 3.4.1Credit Policies ............................................................................................ 17 3.4.2Credit Limits .............................................................................................. 18 3.4.3Counterparty Credit Function ................................................................... 18 3.4.4Exceptions to Credit Limits....................................................................... 19 3.5 Information Systems and Models ............................................................................ 19 SECTION 4 RISK REPORTING ......................................................................... 20 4.1 Risk Management Reporting Policy ......................................................................... 20 4.2 Required Reports..................................................................................................... 20 4.3 Transaction Valuation.............................................................................................. 21 SECTION 5 OTHER RESPONSIBILITIES AND POLICIES ..................................... 22 5.1 Organization-Wide Responsibilities ......................................................................... 22 5.2 Commercial Interests and Trading for Personal Accounts ...................................... 22 5.3 Acknowledgment of Policy Requirements ............................................................... 23 Appendix A PORTFOLIO RISKS ...................................................................... 24 A.1. MARKET RISK ............................................................................................................... 24 A.1.1. Price Risk ..................................................................................................... 24 A.1.2. Volume Risk ................................................................................................ 24 A.1.3. Liquidity Risk ............................................................................................... 25 A.2. CREDIT RISK .................................................................................................................. 25 A.2.1 Credit Risk .................................................................................................... 25 A.2.2. Funding Risk ................................................................................................ 26 A.3. OPERATIONAL RISK ...................................................................................................... 26 A.3.1. MODEL RISK ................................................................................................ 26 A.4. REGULATORY RISK....................................................................................................... 26 A.4.1 Carbon Cost .................................................................................................26 A.4.2 Changes to ERCOT market design ............................................................... 27 A.4.3 Ongoing changes to ERCOT Protocols......................................................... 27 A.4.4 Regulatory Compliance ................................................................................ 27 Appendix B RISK EXPOSURE AND TRANSACTION LIMITS .............................. 28 Page 3 5/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. Energy Risk Management Policy B.1 Risk Books ..................................................................................................................... 28 B.2 Risk Exposure Limits...................................................................................................... 28 B.3 Portfolio Risk Exposure Limits...................................................................................... 29 B.4 Open Position Management ......................................................................................... 30 B.5 Transaction Limits ......................................................................................................... 31 B.5.1 Bilateral or Financial Power Transaction Limits......................................... 33 B.5.2 ERCOT Congestion Revenue Rights (CRRs) Transaction Limits.................... 34 B.5.3 Physical or Financial Natural Gas Transaction Limits ................................ 35 B.5.4 Renewable Energy Credit (“REC”) Transaction Limits ............................... 36 Appendix C ORGANIZATIONAL STRUCTURE .................................................. 37 Appendix D APPROVED TRANSACTION TYPES .............................................. 39 Appendix E FORWARD HEDGING STRATEGIES AND PLANS ........................... 42 Appendix F New Product/Market Instrument Approval Checklist ................ 43 Appendix G ENERGY RISK MANAGEMENT POLICY ACKNOWLEDGEMENT FORM .......................................................................................................... 45 Page 4 5/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. Energy Risk Management Policy SECTION 1 PROGRAM OVERVIEW 1.1 Introduction Denton Municipal Electric (“DME”), is in the business of providing affordable and reliable energy and energy services to its customers in an environmentally sustainable manner. This Energy Risk Management Policy (“Policy”) has been developed to establish a comprehensive framework for DME to meet and exceed the overall goals and objectives set by the City Council, subject to approved risk tolerances. This Policy provides specific controls (e.g., segregation of duties, oversight, etc.) for the management of strategic and operational risks and establishes guidelines for DME to plan, execute and control the risks inherent in the generation, purchase and sale of energy for its retail customers. The resulting framework shall govern DME’s energy portfolio activities through which City Management and DME personnel identify, capture, measure, manage, control, monitor and report financial and other risks. This program specifically addresses management of energy portfolio risk and provides a framework to maintain proper controls over portfolio activities as they change over time. 1.2 Objectives DME’s energy portfolio consists of its assets such as power plants, power supply contracts of 1 varying delivery patterns and maturity, wholesale physical and financial hedges, and retail load obligations. A number of inherent risks are associated with DME’s energy portfolio,including market (price)risk, volumetric risk, operational risk, organizational risk, counterparty creditrisk, liquidity (funding)risk, and regulatory and legal risks (for more detail, see Appendix Afor a summary of DME’s portfolio risks). DME managesthese risks to achieve its core business objectives of delivering energy to its customers at reasonable and stable rates. Key risk management objectives and performance measures are shown in the table below. Objective Performance Metric Reduce risk Reduction in exposure to price volatility and volumetric variability 1 As used in this Policy, physical and financial hedges are market transactions used to offset some other pre- existing risk in the portfolio, and are generally used to manage an imbalance between DME supply and demand, price volatility or transmission congestion. Page 5 5/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. Energy Risk Management Policy Competitive costsComparison of actual energy costs (including hedges and ERCOT balancing transactions, but excluding PPAs) to the average annual ERCOT Day Ahead Market (DAM) price, plus a hedging premium Reasonable rates Comparison of DME average rate to that of other Texas municipal utilities 1.3 Energy Risk Management Framework DME’s Energy Risk Management Policy isbuilt around a frameworkthat includes the following fourelements: Organizational Objectives, Risk Mitigationand Measurement, Portfolio Management and Risk Control Infrastructure. Each of these elements is discussed further below. 1.3.1 Organizational Objectives TheRisk Management Committee (“RMC”) approves goals, strategies, and objectives which help define the appropriate portfolio management activities that are undertaken by DME. This is done in coordination with strategic and business planning activities conducted to establish the budget and through periodic strategic planning activities. 1.3.2 Risk Mitigation and Measurement As part of clarifying organizational objectives, this Policy defines the EMO’s role in identifying, measuring and mitigating energy risks. DME’s risk mitigation practices focus on monthly hedging plans and targets, along with transaction and risk exposure limits. 1.3.3 Portfolio Management DME engages in transactions that are conducted in accordance with hedging targets and risk management and transaction limits specified in connection with this Policy and in broader DME policies and operating procedures. 1.3.4 Risk Control Infrastructure DME maintains a collection of internal controls, systems, and processes necessary to achieve the objectives of this Policy. These controls comprise DME’s energy risk control infrastructure and includes provisions for: Energy Risk Management Organization Structure and Responsibilities Page 6 5/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. Energy Risk Management Policy Transaction and Risk Exposure Targets and Limits Portfolio Position Tracking Risk Measurementand Mitigation Performance Measurement Management Reporting Operating Procedures 1.4 Procedures and Guidelines This Policy prescribes the management, organization, authority, processes, tools and systems to monitor, measure, control and mitigate market risks through DME’s energy management activities. Upon adoption by the City Council, this Policy shall be implemented through a supporting setof standard operating procedures(“EMO Procedures Manual”).The operating criteria and parameters shall be updated as necessary to reflect changes in market conditions and staffing levels. All standard operating procedures shall be approved by the RMC. All departmental procedures that may impactDME’s energy portfolio shall be in full compliance with this Policy. DME executive management shall evaluate the degree of detail necessary in the operating procedures and may require thatadditional procedures be developed and implemented. 1.5 Policy Review The Risk Management Committee periodically, but no less than annually, reviews thisPolicy and recommendsupdates, or provide notice that no updates are recommended, to the PUB and City Councilas necessary. Examples of events prompting Policy updates and reviews are significant changes in regulatory requirements, DME’s energyportfolio, natural gasprices,ERCOT market prices, political direction orreliability concerns. Because the results of this type of risk management program must be continually evaluated in relationship to the City’s objectives to ensure effective performance, this Policy shall be reviewed/ reauthorized annually by the City Council. Page 7 5/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. Energy Risk Management Policy SECTION 2 ORGANIZATION STRUCTURE 2.1 Risk Management Committee (“RMC”) Consistent with industry best practices, the executive oversight of DME’s energy management activities is conducted through the Risk Management Committee (“RMC”). TheRMC is also responsible for activities governed by this Policy and ensuring that Policy requirements are met. The RMC membership is be comprised of five voting members and two non-voting members. The RMC has the responsibility for executive oversight over the Program, which includes: Understanding DME’s risk management objectives and risk tolerances. Approving appropriate risk plans, targets and limits. Ensuring Program strategies are consistent with overall City goals and obligations. Reviewing this Policy at least annually and making recommendations for changes to the City Council and Public Utilities Board. Approving changes to new transaction types Approving market exposure measurement criteria Approving the credit limit framework, including credit limit criteria, exceptions and maximums Ensuring the review and approval of operating procedures Reviewing and monitoring DME’s progress in managing its hedging plans/targets and proximity to transaction and risk exposure limits Ensuing that evaluation of credit limits and credit rating methodologies is regularly conducted for energy entities that are conducting business with DME to buy and sell energy (“counterparties”) Understanding and discussing DME’s energy-related financial risk exposures and DME’s strategies for monitoring and controlling these exposures. Authorizing specific individuals to transact on behalf of DME and ensuring that such individuals are appropriately skilled. 2.1.1 Risk Management Committee Structure The five voting members are: PUB Chair (or designee) –Ex Officio Member Deputy City Manager Page 8 5/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. Energy Risk Management Policy DME General Manager (Chairman) DME Compliance Manager City Director of Finance The two non-voting members are: City Auditor Deputy City Attorney – Legal Other key personnel may participate in RMC meetings as needed. The RMC meetsas necessary,but not less than quarterly,and isresponsible for prudent implementation of this Policy and oversight and governance of the Program. 2.1.2 Meeting Timing, Frequency, Member Vacancies and Voting Procedures The RMCis responsible to the Public Utilities Board and City Council for prudent executive oversight of this Policy.Member attendance is recorded in the RMC meeting minutes. Any member of the RMC can request an emergency meeting of the RMC to address circumstances or issues that may require immediate attention. As needed, but not less than annually, the RMC reports results of DME’s energy management activities and compliance with this Policy to the Public Utilities Board and the City Council. Each of the five voting members shall have a single vote on matters that come before the RMC and a voting member, or designee, must participate in the RMC meeting in order to vote and approve a proposed action. If a voting member is unable to attend an RMC meeting in person or by telephone, the member may designate an alternate to vote in his or her absence. If any two of the voting members, or their designees, are not present at an RMC meeting, a vote on a proposed action cannot take place. The RMC makes decisions and take actions by a simple majority vote. If the RMC reaches an impasse that cannot be addressed through a vote, the DME General Manager makes a final decision by the end of the next business day. In cases where a member of the RMC leaves the employ of the City, the DME General Manager will resolve the RMC vacancy by making an interim appointment at his discretion. A standard set of reports shall be prepared and distributed by the Chairman in advance of the meeting. The representative from the Office of the City Attorney will act as Secretary to the RMC and will document all meetings and actions taken by the RMC in meeting notes that will be distributed to RMC members for their review and acceptance. Meeting notes approved by the Page 9 5/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. Energy Risk Management Policy RMC will be distributed by the Office of the City Attorney to the RMC members, the City Manager, City Council and PUB. As Chairman of the Risk Management Committee, the DME General Manager is responsible for all DME energy management activities, including the day-to-day efforts of the risk control function. At a high level, these responsibilities include understanding and measuring market risk, validating risk mitigation activities, hedge strategy compliance and risk reporting. 2.2 Front, Middle, and Back Offices The “Front-Middle-Back Office” model provides for segregation of duties and efficient administrative support. It is a way to segregate DME energy management activities into transactional (“Front Office”), independent risk control and transaction compliance (“Middle Office”) and financial, accounting, and contract administration support (“Back Office”) functions. 2.2.1 Front Office The Front Office is primarily responsible for managing the energy supply portfolio associated with DME’s wholesale market activities and directing its daily physical and financial trading. The Front Office directly executes physical or financial transactions to support activities such as management of fuel, power, congestion, ancillary services procurement, environmental attributes, and wholesale sales activities as well as develops measurable hedge strategies and plans at least annually (see Appendix E for details on hedging framework). Specific responsibilities of Front Office personnel include: 1. Evaluating whether prospective strategies are consistent with program objectives and this Policy. 2. Monitoring the energy marketplace for structural changes, changes in counterparties and market liquidity, and new supply and hedging market instruments. 3. Advising the RMC of significant changes in the market and in the liquidityof approved hedging instruments, along with requesting authorization by the RMC for transactions in new hedging instruments that may help DME achieve its risk objectives. New hedging instruments shall be approved based on the guidelines shown in Appendix E –New Product / Market Instrument Approval Checklist. Page 10 5/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. Energy Risk Management Policy 4.Managing the portfolio of positions in physical and financial energy and energy- related commodities in a manner consistent with DME’s risk management objectives and the corresponding Hedge Strategies contained in Appendix E– Forward Hedging Strategies and Plans. 5. Executing physical and financial transactions with approved counterparties. 6. Recording details of financial and physical transactions for DME’s risk information system. 7. Ensuring that transactions are in compliance with DME’s Energy Risk Policy. The Front Office oversight role is accomplished through supervisory review and approval. DME’s Front Office consists of Market Operations and the Market Analytics group. 2.2.2 Middle Office The Middle Office is responsible for monitoring compliance with this Policy, for assuring that energy transactions and exposures are within authorized limits and meet minimum targets, and for reporting the market exposure associated with all transactions entered into by the Front Office on an ongoing basis. The Middle Office institutes and reviews energy portfolio management activities, such as portfolio credit exposure, transaction compliance and approval of counterparties. The Middle Office also quantifies risk exposure of native business activities (including both price and volumetric uncertainty), excluding hedges. In the event hedge decisions do not achieve program objectives, the Middle Office will determine why the objectives were not achieved and recommend to the RMC how to re-align hedge decisions with program objectives to promote improved effectiveness. The Middle Office responsibilities include monitoring DME’s energy management risk exposures and mitigation measures and ensuring compliance with policies, guidelines, and procedures. In connection with this responsibility, the Middle Office maintains a compliance log of any operational and/or procedural violations, which can be used to monitor issues and their severity, frequency and resolution. Additionally, the Middle Office is responsible for recommending to the RMC when changes in policy or operating procedures are required. These recommendations may involve the temporary or permanent halting of transactions with one or more counterparties, and any other topic the Middle Officebelieves represents potential unacceptable risk exposure. Page 11 5/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. Energy Risk Management Policy The Middle Office adopts and updates, as necessary, the Energy Risk Management Policy, guidelines and procedures so that portfolio management functions occur in compliance with Energy Risk Management Policies and energy risk procedures and guidelines. Specific responsibilities of the Middle Office include the following: 1. On a daily basis, confirms and reconciles physical and financial transactions, including conditions, quantities, and amounts to be paid and dates. The Middle Office verifies and reconciles every position that has been entered into by Front Office to ensure that the terms recorded and understood by DME to match the terms actually agreed upon with counter parties and/or brokers. 2. Compares energy portfolio to the market (market to market) by collecting and validating market prices, and preparing position reports identifying the financial positions, physical positions, anticipated physical exposures, and the market value of the energy portfolio(s) on a position-by-position and aggregate basis. 3. Operates risk measurement, performance, and valuation models, including various stress tests. 4. Prepares routine risk reports, including those identified in Section 4.2 – Required Reports. 5. On a daily basis, confirms that all exposures and activities comply with authorized market instruments as contained in Appendix D – Approved Types, the risk limits as contained in Appendix A – Risk Exposure and Transaction Limits and hedge coverage targets as contained in Appendix E – Forward Hedging Strategies and Plans. In doing so, the Middle Office monitors transactions and position limits, review daily positions, and activity reports, and ensures that trading instruments are in compliance with current hedging strategies and are permissible. 6. Follows the remedial actions process in the event of any risk limit or hedge target breaches. 7. Ensures all transactions are in compliance with DME’s Energy Risk Policy. 8. Generates and sends written confirmations to counterparties to ensure terms and conditions are mutually agreed upon. 2.2.3 Back Office The Back Office’s primary responsibility is to ensure that financial records of DME’s energy management operation accuratelyreflect the current state of energy risk management and power supply portfolio management activity. The Back Office is responsible for verifying supply payments, invoicing, and settlements. The Back Office is also responsible, Page 12 5/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. Energy Risk Management Policy in coordination with City of Denton Finance, AR, and AP departments, for accurately calculating and booking the financial results of energy transaction activities, billing, and accounts payable, as well as recording, reporting and accounting for risk management and hedging. Specific responsibilities of the Back Office include the following: 1. Supports accounts payable and receivable operations. 2. Coordinates with City Finance the recording of all revenue and expenses in the general ledger and other subsidiary ledgers when appropriate. 3. Coordinates the recording of posted cash receipts and revenues with City Finance to the appropriate subsidiary ledger. 4. Settles transactions (verification, accounts payable/receivable) 5. Develops and maintain documentation outlining standard procedures for performing the settlement functions described herein. 6. Notifies the Front Office, Middle Office, and the General Manager of any discrepancies that result from the reconciliation process. 7. Oversees the safekeeping of transaction-related documents. 8. Maintains funding and reconciles and records activity in cash accounts held with other ERCOT and other market participants. Page 13 5/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. Energy Risk Management Policy SECTION 3 MARKET RISK PROTOCOLSAND EXPOSURE CONTROL 3.1 Market Risk Protocols The following market risk protocols shall govern DME’s participation in wholesale energy markets. Specific limits, methodologies, reports, operational procedures and approval processes are detailed in the EMO Procedures Manual. DMEwill ensure that it has full knowledge of its energy portfolio position and the resulting exposure, and understands the implications of its energy management activities; Only personnel authorized by the DME General Manager, or his designee,pursuant to a written Delegation of Authority Memorandum can transact on behalf of DMEin the wholesale energy market (see Transaction Limits section of Appendix B); Personnel involved with DME’s energy management activities will ensure they obtain competitive prices, transact “at the market” and that counterparty credit risk is diversified by setting up master enabling agreements\[such as the International Swaps and Derivatives Association, Inc. (ISDA), Edison Electric Institute (EEI), and the North American Energy Standards Board (NAESB)\] with as many pre-qualified financial counterparties as possible. DMEmay only transact in wholesale energy-market products authorized by this Policy. DME may only transact within transaction limits approved and defined in this Policy. All wholesale energy transactions will be carried out on recorded phone lines, electronic trading platforms, or other media that can be recorded and documented; Metrics for assessing DME’s market risk exposure will be specified, measured, monitored, and reported on a regular basis to the RMC; On a daily basis, all wholesale market transactions will be recorded in the official system of record which will capture and report physical and financial positions so that each can be reviewed separately and in total so that net volume and price risk and collateralization requirements can be accurately assessed and managed in real time. This system will also serve as a central check and balance tool; therefore, it will allow for reconciliation of physical and financial confirmations with transactional input.This system will also support and report risk information. Models and inputs for valuation and risk measurement and mitigation shall be subjected to a validation and change control process. The models employed and associated processes shall be described in detail in the EMO Procedures Manual; and Page 14 5/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. Energy Risk Management Policy 3.2 Authorized Transactions Authorized types of transactions are addressed in Appendix D of this Policy. These transactions types are, and shall continue to be, focused on supporting the energy portfolio goals of the City Council and this Policy. The addition of any new transaction types, including the revision of existing transaction types, shall be controlled through written operating procedures and approved by the RMC. 3.3 Market Risk Control An important element to any energy riskmanagement and mitigation program is the regular identification, measurement, and communication of market risk. DME’s net “open” position (i.e., whether it needs to buy or sell energy products on a daily, hourly, monthly or annual basisto balance the energy portfolio) and the market exposure associated with its net open positions shall be quantified and compared against exposure limits contained in this Policy and discussed, on a regular basis, within the RMC. Market exposure associated with these net positions shallbe quantified using forms of measurement approved by the RMC. The market exposure measurement criteria shall be reviewed at least annually and consider changes in DME’s net positions and existing and projected market conditions. The Middle Office shall have primary responsibility for coordinating the development, maintenance, and modification all market measurement methodologies within DME and for recommending approval of these methodologies by the RMC. 3.3.1 Risk Tolerance For the purposes of this Policy, DME’sEnergy Risk tolerance is defined by the degree of uncertainty that DME can accept in its future financial ratios and customer rates on a projected basis. DME’s Energy Risk tolerance and measurement of Energy Risk shall include “at risk” forms of risk measurement such as Cash Flow at Risk (“CFaR”) or Value at Risk (“VaR”), augmented with scenario analysis and stress testing. These forms of risk measurement are described in more detail in Appendix A – Risk Exposure and Transaction Limits and in sections of the EMO Procedures Manual. 3.3.2 Transaction and Exposure Limits The setting of and the adherence to transaction limits is an important control elementto ensure DME does not assume greater aggregate energy market exposure than is intended and helps ensure that the transaction strategy level is appropriate at various levels of aggregation (e.g. by commodity, delivery period, strategy, energy portfolio, etc.). Page 15 5/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. Energy Risk Management Policy AppendicesB and D, along with the EMO Procedures Manual, contain the Approved Transaction Types and the Transaction Limits for DME. It is the responsibility of the Front Office, Middle Office and the RMC to utilize these limits to manage and mitigate risk- taking activities. The Front Office shall be responsible for maintaining exposures within prescribed limits and for recommending changes to those limits to the RMC when market conditions or operating circumstances result in limits becoming ineffective or inappropriate in controlling these activities. The Middle Office shall be responsible for monitoring compliance with the Transaction Limits, and obtaining approval from the RMC for any changes to Transaction Limits or the Transaction Limit structure. It is the responsibility of the Middle Office and Front Office to ensure that Transaction Limits are strictly enforced. 3.3.3 Stress Testing In addition to mitigating and measuring financial exposure using the methods above, stress testing isused to examine performance of the energy portfolio under extreme adverse conditions. In stress testing, extreme market conditions are applied to the portfolio to determine how the portfolio will perform undersuch conditions. Stress testing requires thorough evaluation of past market periods to determine those that would represent severe outcomes. In addition, the performance of the portfolio is also estimated for individual and combined potential market conditions. Such conditions are intentionally chosen to represent adverse conditions and combinations of conditions, even if they are extremely unlikely. The Middle Office shall design and maintain a stress testing program, in consultation with the Front Office. The stress testing approach shall be reviewed by the Middle Office semi- annually, and the stress testing program shall be presented to the RMC for review on at least an annual basis. 3.3.4 Model Validation and Controls A risk commonly faced by those involved with energy management activity is model risk— the risk that either the methodology or assumptions used to value the portfoliobecomes invalid. Inaccurate assumptions and incorrectly designed models can cause risk management problems in every market. However, the complexity of energy models and their extended lifetimes, make these problems especially common in the energy markets. Model risk occurs primarily for two reasons: Page 16 5/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. Energy Risk Management Policy • The model may have fundamental errors the user is unaware of and may produce inaccurate outputs when viewed against the design objective and intended business uses. • The model may be used incorrectly or inappropriately. Ensuring adequate model documentation is an important control formanaging modeling risk. This requires both organizing model information and accountability from people using and developing models. DMEkeeps a record of all internally and externally developed models used in its operation (see EMO Operating Procedures 1-4), including a description of the information input component (assumptions and data used by the model, including quantitative approaches whose inputs are partially or wholly qualitative or based on expert judgment), version control(when key model inputs or model processes change) processing component (which transform inputs into estimates), and reporting component (which translates the estimates into useful business information). The Middle Office will review and validate models used by DME and report to the RMC annually. 3.4 Credit Risk Control Credit Risk is the potential impact on DME’sfinancial performance due to the chance of non- performance in payment or delivery (either physical or financial) by an energy entity that has executed a commercial agreement with DME to buy and sell energy (“counterparty”). DME actively mitigates its energy credit risk by making informed decisions regarding which counterparties to transact with and to what degree. Credit risk is defined as the risk of counterparty nonperformance, or failure to deliver its obligation (whether with an energy product itself or the payment of amounts owed). 3.4.1 Credit Policies DME mitigatesits energy credit risk by Incorporating the expected transacting volumes, timing, and expected energy prices, Page 17 5/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. Energy Risk Management Policy when establishing an energy credit risk tolerance for a calendar year; Assessing counterparty creditworthiness and establishing credit limits for counterparties based on that assessment; Requiring a counterparty to be assigned a credit limit prior to transacting with it; Monitoring and assessing market and counterparty events to adjust credit limits as appropriate; Calculating and reporting the maximum expected loss if a counterparty defaults (“counterparty credit exposure”); and 3.4.2 Credit Limits The EMO Procedures Manual includes a credit limit frameworkfor DME’s counterparties based on various factors such as debt ratings and financial statistics. Specific counterparty credit limits include consideration of financial ratios, audited financial statements, and asset quality. Credit limits on all counterparties arereviewed at least semi-annuallyby the Middle Office, or immediately if their business conditions change or their credit rating has been downgraded. Prior to execution of any transaction with a counterparty, the Front Office verifies that the counterparty has available credit. In addition, no transaction shall be executed that will cause the counterparty credit limit to be exceeded unless explicitly approved by the RMC. 3.4.3 Counterparty Credit Function The counterparty credit function concerns counterparty credit analysis and approval of new and existing counterparties as well as the calculation, aggregation, monitoring and reporting of credit exposures. DME’scredit function is managed by the Middle Officeand reports to the DME ComplianceManager. The objective of the counterparty credit functionis to minimize the potential adverse financialimpacts on DMEin the event of a potential default by a counterparty. The counterparty credit functionwillminimize DME’scredit exposure and potential adverse financial impacts by: Establishing a credit risk mitigationstructure within theenergy riskmanagement program; Providing a framework to enable DMEto qualify energy suppliers and transact with approved counterparties; Determining counterparty transacting parameters (“transaction limits”) to Page 18 5/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. Energy Risk Management Policy conservatively control and measure DME’s exposure to any one supplier; and Implementing conservative business processes and procedures (to be included in the EMO Procedures Manual) to gather and monitor financial information on each counterparty to estimatecounterparty credit exposures 3.4.4 Exceptions to Credit Limits If DME personnel determine that the credit limits set forth in the EMO Procedures Manual should be exceededfor certain key counterparties, they may request that the Middle Office perform a review to determine if the counterparty could support a higher credit limit. The Middle Office shall perform a financial/creditanalysis and, if the analysis determines that the counterparty could support a higher credit limit, the Middle Office will make a recommendation to the RMC for review and approval of extending additional credit to the counterparty. 3.5 Information Systems and Models Energy risk management information systems consist of the data, models and other software and hardware used to collect, analyze, test, and validate transactions within DME’s portfolio in order to monitor and control risk. Although various departments within the City of Denton or DME may have responsibilities for using and maintaining DME’s risk management systems, the Middle Office shall have overall responsibility for ensuring that the systems are sufficient to perform the risk management functions outlined in this Policy. As part of a service level agreement with the City of Denton Technology Services, the Middle Office shall also be responsible for maintaining the security, integrity and reliability of the software used for energy risk management purposes (e.g. valuation models, administrative and reporting software, energy risk management databases, etc.). In accordance with the Service Level Agreement between DME and the City of Denton Technology Services, Technology Services shall be responsible for maintaining the integrity and reliability of the hardware used for both energy management and energy risk management purposes, including business continuity, disaster protection and recovery plans. Page 19 5/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. Energy Risk Management Policy SECTION 4 RISK REPORTING 4.1 Risk Management Reporting Policy Key to energy risk management is the monitoring of risks and the accurate and timely information that must be provided to all parties involved in any aspect of energy risk management to allow them to perform their functions appropriately. The separation of execution and reporting responsibilities ensures that timely and accurate information is being reported. On an annual basis, the RMC Chairman will meet with the PUB and City Council and provide details of the DME’s forward purchases, market exposure, credit exposure, counterparty credit ratings, transaction compliance and other relevant data. In addition, DMEwill provide periodic training to the PUB and Council on energy market fundamentals and commodity trading best practices to help facilitate more productive risk meetings. 4.2 Required Reports Minimum reporting requirements are listed below and are prepared for the RMC by the Middle Office and reviewed by both the Middle Office and Front Office. Minutes and meeting materials from quarterly RMC meetings will be distributed to thePUB and Council for their review. Controls Compliance Report Identifies any activities that have exceeded permissible limits. Hedge Target Compliance Report Provides an understanding of the status of portfolio exposure relative to program objectives and associated hedge targets. Competitiveness Report Provides a comparison of latest 12-month cost/mwh vs ERCOT spot markets (Day- Ahead and Real-Time Market) Renewable Resource Effective Cost Report Tracks the effective cost of each renewable resource, including the cost of market purchases when renewables output is insufficient to meet load. Price Risk Reduction Report Measures the inherent market risk exposure over a given time horizon for DME’s energy portfolio prior to market hedges and the residual market risk exposure after hedging. Page 20 5/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. Energy Risk Management Policy Credit Exposure Report Identifies the credit limit for each counterparty, current level of exposure with the counterparty, and remaining available credit. 4.3 Transaction Valuation DME’s financial records will be maintained in full accordance with generally accepted accounting principles (“GAAP”) and will be consistent with FERC Uniform System of Accounts. Front, Middle, and Back Office functions shall coordinate their efforts and maintain vigilance to ensure that DME’s energy management transactions and risk exposures are accurately valued in an unbiased manner. Transaction valuation and reporting of positions shall be based on objective, market-observed prices or models as authorizedby the RMC. Open positions (i.e., whether DME needs to buy or sell energy on a daily, hourly, monthlyor annual basis to balance customer loads against available resources) should be valued (“marked- to-market”) daily, based on consistent valuation methods and data sources. Whenever possible, these valuations shall be based on independent, publicly available market information and data sources (e.g., Bloomberg, Reuters, NYMEX, ICE, broker quotes, etc.). The Middle Office shall develop, and the RMC shall approve, valuation standards for those cases where data is not publicly available. It is important that the data used for valuation, reporting and other energy risk management calculations represent accurate and timely information from the market or be based upon appropriate RMC-approved internal sources or models. The specification of position valuation methods is the responsibility of the Middle Office and is subject to RMC review. The Middle Office is responsible for obtaining and disseminating market information in a timely and consistent manner, along with maintaining and updating transaction data and information sources used for trade evaluation. The Middle Officeis also responsible for assuring that data used for energy risk management calculations represent accurate and timely information available from RMC-approved market or internal sources. Page 21 5/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. Energy Risk Management Policy SECTION 5 OTHER RESPONSIBILITIES AND POLICIES 5.1 Organization-Wide Responsibilities It is the policy of DME and the City of Denton that all personnel adhere to standards of integrity, ethics, conflicts of interest, compliance with statutory law and regulations and other applicable standards of personal conduct. The willful misrepresentation or concealment of information regarding portfolio management and/or risk management activities from senior management or any person responsible for the accurate tracking and reporting of such activities shall result in disciplinary action up to and including termination in accordance with DMEand City of Denton policies and possible legal action as allowed or required by law. As an employee of the City of Denton, all DME personnel involved with its energy management activity should not have an expectation of privacy in the conduct of their duties. At any time, recorded phone calls and electronic transactions may be reviewed to ensure appropriate conduct or to review transactional information. 5.2 Commercial Interests and Trading for Personal Accounts All DME personnel who have any specific responsibilities delineated under this Policy or in the EMO Procedures Manual, are prohibited from engaging in the activities listed below: Physical or financial trading of any commodities stipulated in this Policy or in supporting departmental procedures for their own account Holding anundisclosed interest in any account or corporate entity (other than DME), which is used to trade the commodities described above. If there is any doubt as to whether a prohibited condition exists, then it is the employee’s responsibility to disclose and discuss the possible prohibited condition with their supervisor. In addition, any employee receiving taxable income from any person or business doing business with DME must file a Conflicts Disclosure Statement in accordance with Chapter 176 of the Texas Local Government Code. Failure to comply with these requirements may result in disciplinary action up to and including immediate termination of employment, in accordance with DME and City of Denton policies. Page 22 5/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. Energy Risk Management Policy 5.3 Acknowledgment of Policy Requirements All DME personnel connected with the energy risk management program must sign a statement attesting that they have received, read, and understand this Policy document and the City of Denton policies regarding employee conduct. A sample statement is provided in Appendix G. Page 23 5/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. Energy Risk Management Policy Appendix A PORTFOLIO RISKS As an electric utility, participationin physical and financial energy markets has the inherent potential to expose DME to the risks of cost and pricing uncertainty, revenue and commodity market volatility, and uncertainty in meeting budget targets. These risks may be broadly categorized into three risk categories: market, credit, and operational. Each category of risk is described below. The categories are not entirely separate: disruptions of planned operations, for instance, can expose a utility to the risk of having to enter into unforeseen transactions in adverse market conditions. The following section provides descriptions of the energy-related risks the Policy is intended to address. A.1. MARKET RISK DME manages energy purchases and sales with the goal of reducingthe business risks associated with its obligation to serve energy to its ratepayers. These risks include volume-related and price- related risks. A.1.1. Price Risk Because of continual changes in the supply and demand for electricity, significantprice changes can occur over a short time frame, otherwise known as price volatility. High price volatility means a high degree of uncertainty about the level of prices in the future. DME’s price risk takes several forms, including: 1) exposure to changes in spot prices which DME faces in purchasing electric energy from the ERCOT market, 2) forward price risk of anticipated purchases or sales of power or fuel in the future and 3) the cost of energy- related products and services such as congestion revenue rights and ancillary services. Price risk also includes the basis risk associated with potential differences in the price of a commodity between geographic locations. For example, whenever DME must purchase power to satisfy native load requirements or is exposed to natural gas price uncertainty at various physical delivery points, DME is financially at risk due to the uncertainty in transmission or transportation costs between various locations. A.1.2. Volume Risk Volume Risk refers to uncertainty in the quantity of a commodity or service demanded, acquired, or supplied that has a potential economic impact. A primary volume risk for Page 24 5/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. Energy Risk Management Policy DME is the uncertainty associated with the amount of load DME will be required to serve. Weather conditions affect customer energy usage, and weather changes make forecasting of load and non-dispatchable resources a challenge, causing actual quantities to deviate from forecasts. Forced or unexpected outages of generation resources also impact DME’s volumetric risk. EMO Operating Procedures 1-4 contain details about DME’s processes for developing forecasts of expected volumes associated with its portfolio of load and resources. A.1.3. Liquidity Risk DME transacts business in commodity markets that have inherent liquidity risk. Liquidity risk for DME arises when its intended transaction quantities exceed the size of current market bids (to buy) and offers (to sell). When DME desires to execute a transaction for a volume/quantity in excess of current market bids or offers, potential counterparties may be unwilling or unavailable to transact with DME. Transactions of nonstandard sizes and types also present liquidity risks. Liquidity risk should also be considered with regard to positions thought to be offsetting, but that may become open in the event that a counterparty defaults on their transaction responsibility (also referred to as “default risk”). It may be difficult to replace defaulted transactions on short notice. If a position must be covered quickly, the price of the necessary replacement transaction can be worse than if no urgency existed, especially if the potential counterparties know about the urgent need, putting DME as a significant disadvantage. A.2. CREDIT RISK DME is at risk if a customer, supplier or trading counterparty is unable or unwilling to fulfill its present or future contractual obligations to deliver power or fuel, or to make a timely payment of invoices or collateral. A.2.1 Credit Risk Credit Risk equals the potential replacement value of counterparty contractual obligations to deliver or receive power or fuel, or to make a timely payment to settle a financial contractual obligation. The potential financial impact from counterparty Page 25 5/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. Energy Risk Management Policy defaults is significant. DME’s credit risk is addressed in a separateCredit Risk Management Policy. A.2.2. Funding Risk Funding risk is related to credit risk. This term refers to the risk that DME might have to pay margin or post collateral to meet requirements to securitize its credit under credit provisions of Power Purchase Agreements, wholesale energy market, or to meet margin requirements for cleared contracts. A.3. OPERATIONAL RISK The term operational risk is often used as a catch-all category intended to include all risks that are not explicitly designated by other names, such as market risk, volume risk, liquidity risk, and credit risk. Operational risks include problems of several types that can have adverse financial consequences, and that relate to the operations of DME’s energy portfolio, identification and control of risks, and processing and settlement of transactions. One such risk is Model Risk. A.3.1. MODEL RISK Model risk is a form of systems risk associated with unrecognized deficiencies of information systems used to in value transactions. A model may incorporate assumptions to derive unobservable pricing parameters from observable ones. There is a risk that a particular model used to value a transaction may not properly capture the value and risks of the transaction, and that its deficiencies may emerge only after the fact, following unfavorable market movements. A.4. REGULATORY RISK Regulatoryrisk is the uncertainty to DME’s performance due to potential changes in laws or regulatory mandates. Examples include, but are not limited to, the following. A.4.1 Carbon Cost Unless explicitly borne by an energy supplier, DME is exposed to the potential risk of carbon costs. Any applicable law, rule, regulation, ordinance,protocol, order, decree, judgment or other similar legal mandate could cause DME to pay carbon costs associated with the production, generation, sale, metering, measurement, transmission, storage or delivery of electric energy. Page 26 5/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. Energy Risk Management Policy A.4.2 Changes to ERCOT market design The PUCT has directed ERCOT to study the impact of changes to its market design, which could have a significant impact on the flow of dollars between suppliers and consumers of power, possibly triggering the need to renegotiate long-term power contracts and changing the valuation of existinggeneration assets. A.4.3 Ongoing changes to ERCOT Protocols The rules under which ERCOT operates are in a constant state of change. In fact, they change so often that ERCOT’s governing board has a committee (Protocol Revisions Subcommittee) that meets monthly to review and process proposed changes submitted by ERCOT and its market participants. These changes usually impact how costs are allocated within ERCOT among market sectors, consumers and suppliers of power, and individual market participants like DME. A.4.4 Regulatory Compliance Market Participants in the ERCOT region are subject to both state and federal laws and regulations. Market Participants that own or operate facilities that are part of the Bulk Electric System, as defined in federal law, are subject to oversight by the Federal Energy Regulatory Commission (FERC), the North American Electric Reliability Corporation (NERC), and Texas Reliability Entity, Inc. (Texas RE). Additionally, all ERCOT Market Participants are subject to oversight by the Public Utility Commission of Texas (PUCT). The PUCT administers the Public Utility Regulatory Act (PURA), and adopts and enforces rules pursuant to the authority granted in PURA. The PUCT also has oversight and enforcement authority over the ERCOT Protocols, Operating Guides, and Other Binding Documents. The PUCT has contracts with an Independent Market Monitor (16 T.A.C. §25.365) and a Reliability Monitor (16 T.A.C. §25.503) to assist with oversight and enforcement activities. Page 27 5/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. Energy Risk Management Policy Appendix B RISK EXPOSURE AND TRANSACTION LIMITS DME’s energy supply, trading and risk management-related activities shall be segregated among a number of “risk books.” A risk book is a way of classifying and tracking positions and transactions that have similar or directly related purposes so that value and risk can be measured in sufficient detail to support both risk control and transaction strategy decisions. B.1 Risk Books System Book A System Book captures the value and risk position of native load obligations and long- term power and fuel supply obligations. Positions in the System Book will generally be of duration greater than one month or have a transaction start date of greater than one month into the future. Hedge Book The purpose of a Hedge Book is to track all positions that are entered into to reduce the total net risk exposure of the System Book. Hedge Book transactions should demonstrate their value (on a prospective basis) in mitigating the underlying source of risk to DME’s native load, generation assets and long-term power and fuel supply obligations. Total Portfolio Book A Total Portfolio consists of the combination of all positions in the System Book and Hedge Book. B.2 Risk Exposure Limits An essential control element in the management of market risk is the development and adherence to an appropriate limit structure. A well-designed limit structure helps ensure DME does not assume greater aggregate risk than intended and helps ensure that risk taking at the transaction strategy level is appropriate at various levels of aggregation (e.g., by commodity, delivery period, strategy, etc.). The primary forms of limits listed below shall be applied to DME’s energy management activity: Rates at Risk – Rates at Risk (“RaR”) is a form of Cash Flow at Risk (CFaR) measurement. RaR limits will be set to limit the amount of uncertainty in future rates over the immediately upcoming 12-24 month period. If uncertainty in future rate requirements is higher than DME’s risk tolerance, DME will consider hedging or implementing other risk Page 28 5/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. Energy Risk Management Policy management strategies to reduce the potential need for unforeseen rate increases and/or deterioration of DME’sfinancial condition. Value at Risk –Value at Risk (“VaR”) limits will be set to limit the potential loss in value of the portfolio. Notional/Volumetric –To augment RaR and VaR limits, notional limits and/or volumetric limits will be established. Notional limits are specified based on transaction or strategy dollar amount (i.e., contract or strategy volume x price). Volumetric limits are specified based on volume (e.g., MW, MWH, MMBTU, etc.). This provides a concrete limit to account for uncertainties in risk measurement and human judgment capabilities. Other volumetric limits may be established in relation to specific risks not captured by RaR or VaR. ERCOT–Implementation of the ERCOT Real Time Market (RTM) and Day Ahead Markets (DAM) require daily attention to Available Credit Limits (ACL) and forward liability calculations. The BackOffice shall actively monitor and communicate any changes affecting current credit positions. Stop Loss –Stop loss limits are set, such that, if an individual position or strategy (or a hedge transaction or strategy which has become ineffective) is performing adversely and approaches a predetermined level of losses, the position or strategy must be liquidated or completely hedged to prevent further loss. B.3 Portfolio Risk Exposure Limits Because ERCOT is responsible for ensuring physical reliability of the grid, DME’s efforts focus primarily on managing the rate impact of price volatility risk of its portfolio. For the purposes of managing this risk, DME will assume an averageconsumer risk tolerance (CRT) equivalent to 1 cent per kwh of load over a rolling 12-month period. Hedging is DME’s primary method for reducing market price volatility risk, either by locking in or limiting the amount of variation of a future market price. The “downside” of hedging is that it not only reduces the chances of incurring higher costs than expected, it also reduces the chances of lower than expected energy costs, and correspondingly lower electric rates. 2 methodology to estimate, at a 95% confidence level, the amount of an DME uses an “at Risk” electric rate increase that could occur due to changes in market conditions such as volumetric 2 The “at Risk” metric DME will use is based on a “Rates at Risk” (RaR) methodology, which refers to the statistical dollar amount that can be lost on the net open position of a portfolio over a specific time horizon and with a given confidence interval. DME’s RaR methodology accounts for the increasing potential distribution of prices as time Page 29 5/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. Energy Risk Management Policy risk associated with its renewable resources, ERCOT day-ahead and real time market price volatility, gas price volatility, nodal price congestion, price correlations and credit risk. If DME’s estimate of a rate increase, at a 95% confidence level, exceeds the CRT threshold by 25%, DME will meet and confer with the RMC, and with the City Council and PUB as noted in the table below, to discuss alternatives for implementing additional hedging strategies to bring the level of possible price volatility back inside the CRT threshold. No particular portfolio action is required, making this notification requirement very different from a trading limit. “At Risk” limits for the total portfolio are: RMC Notification Council / PUB Notification Rolling 12 months (in aggregate) $15.0 million $19.0 million B.4 Open Position Management DME’s primary objective is to protect against risks inherent in its portfolio, such as exposure to pricevolatilityand from variability in supply and demand.DME plans to execute hedging transactions relatively evenly over time, to diversify timing risk(similar to dollar cost averaging), 3 and does not speculate. Market transactions shall be executed as a result of strategies designed to maintain the net open position (the gap between expected demand and committed supply) within tolerances which are consistent with current hedging strategies. The resultant net open position shall be updated to reflect the new transactions as soon as practical, but generally no later than the next business day. Net open position energy tolerances (before accounting for the Denton Energy Center) shall be set at the following,on a total MWH basis either by time of use (TOU) period (through Balance 4 or on an annual basis (for prompt Calendar Year and beyond): of Year) passes, as well as the expiration of the positions in the portfolio with the passage of time. The result is the estimation of loss, at the specified confidence level, assuming that the portfolio remains constant over time until all positions within it have expired. 3 The US Commodity Futures Trading Commission defines a speculator as “a trader who does not hedge, but who trades with the objective of achieving profits through the successful anticipation of price movements” (CFTC Glossary: A guide to the language of the futures industry). 4 Within the ERCOT region, through at least the balance of year, DME’s open position can generally be managed by three time of use periods; Peak Weekday (weekdays HE 7-22), Peak Weekend (weekends and holidays HE 7-22) and Nights (HE 1-6, 23-24). Page 30 5/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. Energy Risk Management Policy Tolerance if Net Tolerance if Net 56 Open is "Short" Open is "Long" Period Minimum Maximum Minimum Maximum Prompt Month 90%110% 100% 120% (by TOU) Prompt Quarter (by 90%110% 100% 120% TOU) Balance of 80%110% 100% 120% Year (by TOU) Prompt calendar year 80%110% 100% 120% (Annual) Second calendar year 70%110% 100% 120% (Annual) Third calendar 60%110% 100% 120% year (Annual) No action is required if the net open position in a given period exceeds these tolerances. However, in the event that it does, DME shall evaluate alternatives to flatten the net open position (whether long or short) and will inform the RMC of any exceedance expectations for annual periods. B.5 Transaction Limits Anothervital control element in the management of energy risk is the development and adherence to transaction limits. Transaction limits ensure the energy portfolio management function is prudent, deliberate and controlled at various levels of position aggregation and transaction duration. Transaction limits are established in consideration of overall portfolio strategies, market conditions and risk tolerance levels and include the following principles: Page 31 5/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. Energy Risk Management Policy DME personnel involved with its energy management activity are authorized to execute any intra-day or day-ahead transaction which is necessary to mitigate market and financial risk exposure to DME customers. Speculative transactions are those transactions not intended for hedging purposes and are strictly prohibited. All transactions shall either reduce risks or be risk-neutral to DME customers. No transaction may be executed for which DME does not have adequate systems or analytical methods to track, record, value, or analyze the incremental cash flow and risk. Any single transaction for a term greater than one year must be approved by the RMC prior to execution. Scheduling of loads and resources, along with corresponding bid or offer prices associated with ERCOT Day Ahead Market (DAM), ERCOT Real Time Market (RTM) or ERCOT Supplementary Ancillary Services (SASM) Market are not subject to this Risk Policy or to the limits outlined below and do not require prior RMC approval. All executed transactions must be recorded and captured in DME’s system of record. Further, all transactions shall be conducted on recorded phone lines, electronic trading platforms, or other media that can be recorded and documented. Any confirmations received must be signed by the person with the authority to enter into such transaction. Confirmations for transactions with ERCOT are evidenced through the ERCOT Settlement Summary statement. The following tables outline the transaction authorization limits established for DME personnel involved with its energy management activity when executing transactions. Those personnel are permitted to execute transactions less than or equal to their designated limits or under the direction of someone having the required authority. Only the Approved Transaction Types listed in Appendix D may be executed unless otherwise approved by the RMC. Page 32 5/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. Energy Risk Management Policy B.5.1 Bilateral or Financial Power Transaction Limits Transaction Title Term Lead Time Size (MW) City Council No LimitNo LimitNo Max City Manager or RMC < 1 Year < 3 Years 100 DME General Manager < 1 Year < 2 Years 100 Market Operations Manager < 1 Month < 12 Month 50 Analytics & Fundamentals Manager Market Operations < 1 Week Supervisor < 1 Week 100 Senior Market Analyst <1 Day <1 Day 400 Senior Market Operator Notes: Transaction Limits represent MW volume per hour. Lead time represents the time period from the date a trade is executed to the start of delivery. Authorized products include electric power, including both physical and financial 5 derivatives, as well as ancillary services. Financial derivatives may be over the counter Electric Forwards and Options or Exchange Traded Products 5 As used here, a derivative is a contract that derives its value from the performance of an underlying asset or index. Page 33 5/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. Energy Risk Management Policy B.5.2 ERCOT Congestion Revenue Rights (CRRs) Transaction Limits DME’s primary objective for hedging congestion risk is to mitigate potentially adverse financial consequences from uncertain price differences caused by transmission congestion between the location where it consumes power (ERCOT LZ_North), the locations where it purchases power on a forward basis (EROTT North Hub), and the ERCOT nodes associated with its resources (Denton Energy Center, Gibbons Creek, White Tail & Santa Rita Wind farms, Blue Bell solar farm and future renewable resources). DME is exposed to transmission congestion risk for all amounts of energy forecasted to be consumed in the ERCOT North Load Zone, and energy that could potentially be produced at their respectiveresource nodes. By default, ERCOT charges all DME load for energy, along with any congestion, in the Real Time Market (“RT”). DME mitigates congestion risk with congestion hedges using Congestion Revenue Rights (CRRs). Figure 1 Figure 2 DME hedges congestion risk between each resource and ERCOT’s North Hub location, and between North Hub and North Load Zone, by participating in ERCOT’s annual and monthly auctions, layering in CRR purchases for up to 3 years into the future. The North Hub is also used as a delivery point for bilateral trades (for liquidity purposes) Consistent with DME’s approach to hedging energy, DME seeks to acquire CRRs at steadily increasing amounts roughly corresponding to Auction Capacity Percentages, to diversify timing risk, similar to dollar cost averaging, and does not use event-driven trading to time the market, Page 34 5/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. Energy Risk Management Policy trading in and out of positions. DME employs a tiered approach in ERCOT’s annual and monthly 6 . auctions DME also hedges congestion in ERCOT’s Real-Time market by buying CRR-like instruments called Point to Point (PTP) Obligations. B.5.3Physical or Financial Natural Gas Transaction Limits Transaction Size TitleTermLead Time (MMBTU/day) City Council No Limit No Limit No Max City Manager or RMC < 1 Years < 3 Years 50,000 DME General Manager < 1 Year < 2 Years 50,000 Market Operations Manager <1 Month < 12 Month 50,000 Analytics & Fundamentals Manager Market Operations Supervisor < 1 Week < 12 Month 50,000 Senior Market Operator Senior Market Operator <1 Day < 1 Day 50,000 6 In practice, this “buy as much as possible as early as possible” strategy means DME includes low bids for the full amount of remaining CRRs needed in each auction to maximize the chances of capturing low clearing prices while at the same time preventing credit collateral requirements from becoming unnecessarily high Page 35 5/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. Energy Risk Management Policy Notes: Natural Gas transactions limited to the following locations: Henry hub or locations within Texas which are physically or financially correlated to DME energy costs Authorized products include natural gas, including both physical and financial derivatives. Financial derivatives may be over the counter Gas Futures and Options or Exchange Traded Products B.5.4 Renewable Energy Credit (“REC”) Transaction Limits Per Transaction Limits (up to) TitleVintageVolume $/REC City CouncilNo Limit No Limit No Max City Manager <2 Years 1,200,000No Max DME General Manager < 1 Year 600,000 No Max Market Operations Manager < 1 Year 300,000 No Max Analytics & Fundamentals Manager Page 36 5/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. Energy Risk Management Policy Appendix C ORGANIZATIONAL STRUCTURE Energy Management Organization Front Office Executive Mgr Power Supply Mkt Operations Analytics & MgrFundamentals Mgr Market Ops Sr Market Analyst Supervisor Sr Market Business OperatorIntellegence Analyst Sr Market SCADA Tech Operator Sr Market Operator Sr Market Operator Sr Market Operator Page 37 5/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. Energy Risk Management Policy Energy Management Organization Middle Office DME Compliance Mgr Sr Risk Control Analyst Energy Management Organization Back Office General Manager Settlements & Business Rate Analysts Administrator Page 38 5/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. Energy Risk Management Policy Appendix D APPROVED TRANSACTION TYPES Products allowed for energy management activities include the purchase and sale of electric energy, ancillary services, ERCOT Congestion Revenue Rights/Point to Point Obligations, Renewable Energy Credits and natural gas. TheRMC is responsible for authorizing all products and commodity types as further detailed in the EMO Procedures Manual. All transactions must follow certain requirements as described throughout this Policy. Key elements include: All transactions must be executed to by authorized transacting personnel All transactions must be with approved counterparties and/or commodity exchanges All transactions must be with counterparties with adequate availablecredit or fully collateralized All transactions must be committed over recorded phone lines or via recordable electronic communications All transactions must be approved transaction types All transactions must be consistent with this Policy and the EMO Procedures Manual Failure to observe the above minimum requirements when executing energy transaction is a violation of Policy and is subject to disciplinary action. AURTHORIZED MARKETS DME may only execute transactions to buy or sell energy-related products after some type of enabling agreement has been signed with a counterparty or commodity exchange. In approving DME’s Energy Risk Policy, the City Council has authorized the City Manager, or his designee, to sign such agreements. Examples of markets where DME is currently authorized to transact include: Intercontinental Exchange (ICE) o ERCOT Physical and Financial Power o Natural Gas futures Bilateral markets with approved counterparties Page 39 5/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. Energy Risk Management Policy o Physical Natural Gas at locations within Texasand Oklahoma to support fuel purchases for the Denton Energy Centerand DME’s energy portfolio o Physical and Financial Power ERCOT o Day Ahead Market o Real Time Market o Ancillary Services Market o Congestion Management Auctions and Markets AUTHORIZED POWER TRANSACTIONS Power transactions shall be limited to delivery or exposure to power within ERCOT. 1. Physical a. Fixed-price & Index-price purchases and sales b. Call & Put Options (e.g., fixed & indexed, hourly, Time of Use, daily monthly, annually) c. Ancillary services 2. Financial a. Fixed-price & Index-price purchases and sales 7 b. Exchange traded, bilateral or OTC Call or Put options c. Ancillary Services d. ERCOT Congestion Revenue Rights (CRRs), Point to Point Obligations (PTPs) and other similar congestion management transactions AUTHORIZED NATURAL GAS TRANSACTIONS Natural Gas transactions shall be limited to Henry Hub or a location within Texas or Oklahoma to support commodity exposure for DME’s energy portfolio. 1. Physical Gas which may be needed to support operation of the Denton Energy Center a. Fixed and index price Natural Gas commodity b.Fixed and index price Natural Gas transportation c.Fixed and index price Natural Gas storage 2.Financial 7 For example, fixed & indexed, hourly, Time of Use, daily monthly, annual options Page 40 5/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. Energy Risk Management Policy a. Exchange traded, bilateral or cleared futures and Exchange or OTC swaps 8 b.Exchange traded, bilateral or cleared and or OTC Call or Put options c. Index options Other authorized energy-related commodity transactions 1. Physical Renewable Energy Credits (RECs) associated with energy that has already been generated within the last 3 years. 8 Ibid. Page 41 5/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. Energy Risk Management Policy Appendix EFORWARD HEDGING STRATEGIES AND PLANS Successful managementof the price and volumetric risks faced by DME requires analysis, monitoring, and communication. Analysis of published weather forecasts and marketprice data serve as key inputs to models used for planning and ensures that the appropriate data is converted into useful information. Consistent with market risk policies defined herein and the risk limits defined in Appendix A, DME, in concert with the RMC, develops annual hedging strategies with underlying hedging plans as a means to manage the volumetric and price risks faced by the utility. A review of the status of current hedging plans will typically be a topic of discussion at RMC meetings. Prior to February 1 of each year, DME shall submit a written Hedging Strategy for managing its expected net open position for the upcoming three (3)full calendar years. Due to the complexity ofthe wholesale energy markets and the energy regulatory environment, the Hedging Strategy is expected to require several Hedging Plans to be developed and approved duringeach year.TheRMCwillapprovetheHedgingStrategybytheendofFebruaryeach yearor at its first meeting thereafter. Each Hedging Plan will: Cover a clearly specified forward time period; Explain the justification for the hedge (a general description of the resource mix and load that contribute to the open position for the specified time period, along with the Open Position tolerances for the specified forward time period); Define a volumetric limit for hedge purchases and sales; and Document transaction types expected to be used to carry out the Hedging Plan; Proposed price triggers that will enable hedging activity within the Hedging Plan’s limits. DME may,at any time, request that the RMC consider changes to the current Hedging Strategy or to an individual Hedging Plan. Any approved changes to the Hedging Strategy or Hedging Plan shall be recorded in the RMC meeting minutes and an updated written Hedging Strategy or Hedging Plan document will be prepared as soon as practical incorporating such changes. On occasion, it will become apparent to DME management that additional transactions to reshape expected monthly forward positions are necessary given changes in generation forecasts, market conditions, and load forecasts. The DME General Manager may direct EMO staff to enter into and execute such transactions to rebalance the forward position. These transactions will be discussed in RMC meetings ahead of time if conditions allow, or reported after the fact and documented in the minutes of the next RMC meeting. Page 42 5/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. Energy Risk Management Policy Appendix F New Product/Market Instrument Approval Checklist Checklist Items Primary Accountability Benefits Identify and describe the benefits of using the new product Front Office Risk Understand and document the payoff profile of the new productFront Office Identify and analyze credit risk of new productMiddle Office Develop methodology for measuring credit risk of new product (mark-to-Middle Office market, potential exposure, stress exposure. Identify prospective counterparties for new product/instrument and Front Office & determine credit suitability. Middle Office Approve new product valuation methodology. Middle Office Determine if staff, systems, and management skill sets are sufficient for Middle Office valuing and transacting new product. Determine physical disposal or financial settlement requirements.Front Office& Back Office Determine stress test requirements for new product. Middle Office Define how stress testing must be performed (frequency, scope, Middle Office independent source). Financial Define the capital requirements (exchange margin or collateral) of the Front Office & new product. Middle Office Determine contract documentation required. Front Office& Middle Office Accounting, Tax, and Regulations Identify applicable U.S. and local regulatory restrictions for new product.Back Office/City Finance Determine regulatory compliance requirements, if any, for new product.Middle Office & Back Office/City Finance Page 43 5/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. Energy Risk Management Policy Review accounting policies and approve proposed treatment. Back Office/City Finance Determine audit requirements.Back Office/City Finance Consider tax consequences of new product. Back Office/City Finance Policy Verify counterparty authority to enter into contract for new product. Middle Office Develop and implement monitoring and review procedures to ensure Middle Office Policy compliance. Define procedures and responsibilities for independent verification of Middle Office positions and market valuation inputs (prices, and volatilities if applicable). Determine impact on position/risk limits/hedge targetsMiddle Office Determine and define procedures for confirmation and reconciliation of Middle Office new product. Verify that all groups involved in new product transaction procedures can Middle Office handle anticipated transaction volume. Determine and define management reporting requirements.Middle Office Page 44 5/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. Energy Risk Management Policy Appendix G ENERGY RISK MANAGEMENT POLICY ACKNOWLEDGEMENT FORM The purpose of this form is to confirm that City of Denton employees involved with the Energy Portfolio Management program have received, read, and understand DME’s Energy Risk Management Policy. Employee Name: _______________________________ Title: _______________________________ Department: _______________________________ Supervisor: _______________________________ My signature below confirms that I have received, read and understand DME’s Energy Risk Management Policy and appendices, and the City of Denton policies regarding employee conduct. _______________________________ Signature of Employee _______________________________ Date Page 45 5/1/18 This document and any attachments thereto may contain information that is confidential, commercially-sensitive, proprietary, and/or public power utility competitive and financial information in accordance with the provisions of Texas Government Code, Section 552.101, 552.104, 552.110 and/or 552.133, and may be protected from required public disclosure. DRAFT DentonMunicipalElectric EnergyRiskManagementPolicy ApprovedbyCityofDentonTexasCityCouncil CityOrdinanceNo.18237 Page15/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublicpower utilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104,552.110and/or 552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy Contents SECTION1PROGRAMOVERVIEW.................................................................7 1.1Introduction...............................................................................................................7 1.2Objective....................................................................................................................7 1.3EnergyRiskManagementFramework.......................................................................8 1.3.1OrganizationalObjectives...........................................................................8 1.3.2RiskMitigationandMeasurement.............................................................8 1.3.3PortfolioManagement................................................................................9 1.3.4RiskControlInfrastructure..........................................................................9 1.4ProceduresandGuidelines........................................................................................9 1.5PolicyReview...........................................................................................................10 SECTION2ORGANIZATIONSTRUCTURE......................................................11 2.1RiskManagementCommitteeΛͻwa/ͼΜ...................................................................11 2.1.1RiskManagementCommitteeStructure.....................................................12 2.1.2MeetingTiming,Frequency,MemberVacanciesandVotingProcedures..12 2.2Front,Middle,andBackOffices...............................................................................13 2.2.1FrontOffice...............................................................................................13 2.2.2MiddleOffice............................................................................................14 2.2.3BackOffice................................................................................................16 SECTION3MARKETRISKPROTOCOLSANDEXPOSURECONTROL................18 3.1MarketRiskProtocols..............................................................................................18 3.2AuthorizedTransactions..........................................................................................19 3.3MarketRiskControl.................................................................................................19 3.3.1RiskTolerance...........................................................................................19 3.3.2TransactionandExposureLimits..............................................................19 3.3.3StressTesting............................................................................................20 3.4CreditRiskControl...................................................................................................21 Page25/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy 3.4.1CreditPolicies............................................................................................22 3.4.2CreditLimits..............................................................................................22 3.4.3CounterpartyCreditFunction...................................................................23 3.4.4ExceptionstoCreditLimits.......................................................................23 3.5InformationSystemsandModels............................................................................23 SECTION4RISKREPORTING........................................................................25 4.1RiskManagementReportingPolicy.........................................................................25 4.2RequiredReports.....................................................................................................25 4.3TransactionValuation..............................................................................................26 SECTION5OTHERRESPONSIBILITIESANDPOLICIES.....................................28 5.1OrganizationWideResponsibilities.........................................................................28 5.2CommercialInterestsandTradingforPersonalAccounts......................................28 5.3AcknowledgmentofPolicyRequirements...............................................................29 AppendixARISKEXPOSUREANDTRANSACTIONLIMITS..............................31 A.1RiskBooks.....................................................................................................................35 A.2RiskExposureLimits.....................................................................................................35 A.3TotalPortfolioRiskExposureLimits.............................................................................37 A.4OpenPositionManagement.........................................................................................38 A.5TransactionLimits.........................................................................................................39 A.5.1BilateralorFinancialPowerTransactionLimits.........................................40 A.5.2ERCOTCongestionRevenueRights(CRRs)TransactionLimits...................42 A.5.3PhysicalorFinancialNaturalGasTransactionLimits................................42 A.5.4RenewableEnergyCreditTransactionLimits............................................45 AppendixBDEFINITIONS............................................................................46 AppendixCORGANIZATIONALSTRUCTURE.................................................49 AppendixDAPPROVEDTRANSACTIONTYPES.............................................53 AppendixEENERGYRISKMANAGEMENTPOLICYACKNOWLEDGEMENT FORM.........................................................................................................57 SECTION1PROGRAMOVERVIEW.................................................................7 1.1Introduction...............................................................................................................7 Page35/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy 1.2Objectives...................................................................................................................7 1.3EnergyRiskManagementFramework.......................................................................8 1.3.1OrganizationalObjectives...........................................................................8 1.3.2RiskMitigationandMeasurement.............................................................8 1.3.3PortfolioManagement................................................................................9 1.3.4RiskControlInfrastructure..........................................................................9 1.4ProceduresandGuidelines........................................................................................9 1.5PolicyReview...........................................................................................................10 SECTION2ORGANIZATIONSTRUCTURE......................................................11 2.1RiskManagementCommitteeΛͻwa/ͼΜ...................................................................11 2.1.1RiskManagementCommitteeStructure.....................................................12 2.1.2MeetingTiming,Frequency,MemberVacanciesandVotingProcedures..12 2.2Front,Middle,andBackOffices...............................................................................13 2.2.1FrontOffice...............................................................................................13 2.2.2MiddleOffice............................................................................................14 2.2.3BackOffice................................................................................................16 SECTION3MARKETRISKPROTOCOLSANDEXPOSURECONTROL................18 3.1MarketRiskProtocols..............................................................................................18 3.2AuthorizedTransactions..........................................................................................19 3.3MarketRiskControl.................................................................................................19 3.3.1RiskTolerance...........................................................................................19 3.3.2TransactionandExposureLimits..............................................................19 3.3.3StressTesting............................................................................................20 3.3.4ModelValidationandControls.................................................................21 3.4CreditRiskControl...................................................................................................21 3.4.1CreditPolicies............................................................................................22 3.4.2CreditLimits..............................................................................................22 3.4.3CounterpartyCreditFunction...................................................................23 3.4.4ExceptionstoCreditLimits.......................................................................23 3.5InformationSystemsandModels............................................................................23 SECTION4RISKREPORTING........................................................................25 Page45/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy 4.1RiskManagementReportingPolicy.........................................................................25 4.2RequiredReports.....................................................................................................25 4.3TransactionValuation..............................................................................................26 SECTION5OTHERRESPONSIBILITIESANDPOLICIES.....................................28 5.1OrganizationWideResponsibilities.........................................................................28 5.2CommercialInterestsandTradingforPersonalAccounts......................................28 5.3AcknowledgmentofPolicyRequirements...............................................................29 AppendixAPORTFOLIORISKS.....................................................................31 A.1.MARKETRISK...............................................................................................................31 A.1.1.PriceRisk.....................................................................................................31 A.1.2.VolumeRisk................................................................................................31 A.1.3.LiquidityRisk...............................................................................................32 A.2.CREDITRISK..................................................................................................................32 A.2.1CreditRisk....................................................................................................32 A.2.2.FundingRisk................................................................................................33 A.3.OPERATIONALRISK......................................................................................................33 A.3.1.MODELRISK................................................................................................33 A.4.REGULATORYRISK.......................................................................................................33 A.4.1CarbonCost.................................................................................................33 A.4.2ChangestoERCOTmarketdesign...............................................................34 A.4.3OngoingchangestoERCOTProtocols.........................................................34 A.4.4RegulatoryCompliance................................................................................34 AppendixBRISKEXPOSUREANDTRANSACTIONLIMITS..............................35 B.1RiskBooks.....................................................................................................................35 B.2RiskExposureLimits......................................................................................................35 B.3PortfolioRiskExposureLimits......................................................................................37 B.4OpenPositionManagement.........................................................................................38 B.5TransactionLimits.........................................................................................................39 B.5.1BilateralorFinancialPowerTransactionLimits.........................................41 B.5.2ERCOTCongestionRevenueRights(CRRs)TransactionLimits....................42 B.5.3PhysicalorFinancialNaturalGasTransactionLimits.................................43 Page55/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy B.5.4RenewableEnergyCreditΛͻw9/ͼΜTransactionLimits...............................44 AppendixCORGANIZATIONALSTRUCTURE.................................................49 AppendixDAPPROVEDTRANSACTIONTYPES.............................................53 AppendixEFORWARDHEDGINGSTRATEGIESANDPLANS...........................56 AppendixFNewProduct/MarketInstrumentApprovalChecklist................58 AppendixGENERGYRISKMANAGEMENTPOLICYACKNOWLEDGEMENT FORM.........................................................................................................60 Page65/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy SECTION1PROGRAMOVERVIEW 1.1Introduction DentonMunicipalElectricΛͻ5a9ͼΜͲisinthebusinessofprovidingaffordableandreliableenergy andenergyservicestoitscustomersinanenvironmentallysustainablemanner.ThisEnergy RiskManagementPolicyΛͻtƚƌźĭǤͼΜhasbeendevelopedtoestablishacomprehensiveframework forDMEtomeetandexceedtheoverallgoalsandobjectivessetbytheCityCouncil,subjectto approvedrisktolerances. ThisPolicyprovidesspecificcontrols(e.g.,segregationofduties,oversight,etc.)forthe managementofstrategicandoperationalrisksandestablishesguidelinesforDMEtoplan, executeandcontroltherisksinherentinthegeneration,purchaseandsaleofenergyforitsretail customers.Theresultingframeworkshallgovern5a9ƭenergyportfolioactivitiesthroughwhich CityManagementandDMEpersonnelidentify,capture,measure,manage,control,monitorand reportfinancialandotherrisks.Thisprogramspecificallyaddressesmanagementofenergy as portfolioriskandprovidesaframeworktomaintainpropercontrolsoverportfolioactivities theychangeovertime. 1.2Objective DME,throughtheRiskManagementCommittee,willestablishspecificgoalsandobjectivesfor theEnergyPriceRiskManagementProgramΛͻtƩƚŭƩğƒͼΜtominimizetheimpacttoelectricrates attributabletoenergysupplyvariabilityandtofuelandenergypricevolatility.Theobjectiveof thisPolicyistomaximizebenefitstocustomersfromshortterm,marketbasedhedgingactivities whileminimizingtheriskthatsuchactivitieswilladverselyaffectretailprices.DME,throughthe RMC,willdevelopandimplementaplanwhichwillsupporttheoverallgoalsandobjectivesof theProgram. 1.2Objectives 5a9ƭenergyportfolioconsistsofitsassetssuchaspowerplants,powersupplycontractsof 1 varyingdeliverypatternsandmaturity,wholesalephysicalandfinancialhedges,andretailload obligations.Anumberofinherentrisksareassociatedwith5a9ƭenergyportfolio,including market(price)risk,volumetricrisk,operationalrisk,organizationalrisk,counterpartycreditrisk, 1 AsusedinthisPolicy,physicalandfinancialhedgesaremarkettransactionsusedtooffsetsomeotherpre existingriskintheportfolio,andaregenerallyusedtomanageanimbalancebetweenDMEsupplyanddemand, pricevolatilityortransmissioncongestion. Page75/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy liquidity(funding)risk,andregulatoryandlegalrisks(formoredetail,seeAppendixAfora summaryof5a9ƭportfoliorisks). DMEmanagestheseriskstoachieveitscorebusinessobjectivesofdeliveringenergytoits customersatreasonableandstablerates.Keyriskmanagementobjectivesandperformance measuresareshowninthetablebelow. ObjectivePerformanceMetric ReduceriskReductioninexposuretopricevolatilityandvolumetric variability CompetitivecostsComparisonofactualenergycosts(includinghedgesand ERCOTbalancingtransactions,butexcludingPPAs)tothe averageannualERCOTDayAheadMarket(DAM)price,plusa hedgingpremium ReasonableratesComparisonofDMEaverageratetothatofotherTexas municipalutilities 1.3EnergyRiskManagementFramework 5a9ƭEnergyRiskManagementPolicyshallbeisbuiltaroundaframeworkthatincludesthe followingfourelements:OrganizationalObjectives,RiskMitigationandMeasurement,Portfolio ManagementandRiskControlInfrastructure.Eachoftheseelementsisdiscussedfurtherbelow. 1.3.1OrganizationalObjectives TheRiskManagementCommitteeΛͻRMCwillğƦƦƩƚǝĻͼΜapprovesgoals,strategies,and objectiveswhichhelpdefinetheappropriateportfoliomanagementactivitiesthatwillto beareundertakenbytheEMODME.Thiswillbeisdonethroughincoordinationwith strategicandbusinessplanningactivitiesconductedinestablishingtoestablishthebudget andthroughperiodicstrategicplanningactivities. 1.3.2RiskMitigationandMeasurement Aspartofclarifyingorganizationalobjectives,thisPolicywilldefinedefinesthe9ahƭrole inidentifying,measuringandmitigatingenergyrisks.5a9ƭriskmitigationpracticeswill focusonconservativemonthlyhedgingplansandtargets,alongwithtransactionandrisk exposurelimits. Page85/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy 1.3.3PortfolioManagement DMEwillengageengagesintransactionsthatshallbeareconductedinaccordancewith hedgingtargetsandriskmanagementandtransactionlimitsspecifiedinconnectionwith thisPolicyandinbroaderDMEpoliciesandoperatingprocedures. 1.3.4RiskControlInfrastructure DMEwillmaintainmaintainsacollectionofinternalcontrols,systems,andprocesses necessarytoachievetheobjectivesofthisPolicy.Thesecontrolscomprise5a9ƭenergy riskcontrolinfrastructureandshallincludeincludesprovisionsfor: EnergyRiskManagementOrganizationStructureandResponsibilities TransactionandRiskExposureTargetsandLimits PortfolioPositionTracking RiskMeasurementandMitigation PerformanceMeasurement ManagementReporting OperatingProcedures 1.4ProceduresandGuidelines ThisPolicyprescribesthemanagement,organization,authority,processes,toolsandsystemsto monitor,measure,controlandmitigatemarketrisksthrough5a9ƭenergymanagement activities.UponadoptionbytheCityCouncil,thisPolicyshallbeimplementedthrougha supportingsetofstandardoperatingproceduresΛͻ9ahProceduresağƓǒğƌͼΜ͵Theoperating criteriaandparametersshallbeupdatedasnecessarytoreflectchangesinmarketconditions andstaffinglevels.AllstandardoperatingproceduresshallbeapprovedbytheRMC. Alldepartmentalproceduresthatmayimpact5a9ƭenergyportfolioshallbeinfullcompliance withthisPolicy.DMEexecutivemanagementshallevaluatethedegreeofdetailnecessaryinthe operatingproceduresandmayrequirethatadditionalproceduresbedevelopedand implemented. Page95/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy 1.5PolicyReview FollowingapprovalofthisPolicy,theTheRiskManagementCommitteeshallperiodically,butno lessthanannually,reviewthereviewsthisPolicyandrecommendrecommendsupdates,or providenoticethatnoupdatesarerecommended,asnecessary,tothePUBandCityCouncilas necessary.ExamplesofeventspromptingPolicyupdatesandreviewsaresignificantchangesin regulatoryrequirements,theƩĻƭƚǒƩĭĻ5a9ƭenergyportfolio,fuelnaturalgaspricesof alternativeresources,ERCOTmarketprices,politicaldirectionorreliabilityconcerns. Becausetheresultsofthistypeofriskmanagementprogrammustbecontinuallyevaluatedin relationshiptothe/źƷǤƭobjectivestoensureeffectiveperformance,thisPolicyshallbereviewed and/reauthorizedannuallybytheCityCouncil. Page105/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy SECTION2ORGANIZATIONSTRUCTURE 2.1RiskManagementCommitteeΛͻwa/ͼΜ Consistentwithleadingindustrybestpractices,theexecutiveoversightstructureoftheEMO beof5a9ƭenergymanagementactivitiesisconductedthroughtheRiskManagement CommitteeΛͻwa/ͼΜ͵TheRMCshallisalsoberesponsibleforactivitiesgovernedbythisPolicy andtoensureensuringthatPolicyrequirementsaremet.TheRMCmembershipwillisbe comprisedoffivevotingmembersandtwononvotingmembers. TheRMChastheresponsibilityforexecutiveoversightovertheProgram,whichincludes: Understanding5a9ƭriskmanagementobjectivesandrisktolerances. Approvingappropriateriskplans,targetsandlimits. EnsuringProgramstrategiesareconsistentwithoverallCitygoalsandobligations. Approvingchangestoportfoliomanagementstrategies Reviewingprogramresultsperiodically ReviewingthisPolicyatleastannuallyandmakingrecommendationsforchangestothe CityCouncilandPublicUtilitiesBoard. Approvingchangestonewtransactiontypes Approvingmarketexposuremeasurementcriteria Approvingthecreditlimitframework,includingcreditlimitcriteria,exceptionsand maximums Ensuringthereviewandapprovalofoperatingprocedures Reviewingandmonitoring5a9ƭprogressinmanagingitshedgingplans/targetsand proximitytotransactionandriskexposurelimits Ensuingthatevaluationofcreditlimitsandcreditratingmethodologiesareisregularly conductedforenergycompaniesentitiesthatareconductingbusinesswiththeEMODME tobuyandsellenergyΛͻĭƚǒƓƷĻƩƦğƩƷźĻƭͼΜ Discussingtheexecutionofportfoliomanagementstrategies Understandinganddiscussing5a9ƭenergyrelatedfinancialriskexposuresand5a9ƭ strategiesformonitoringandcontrollingtheseexposures. AuthorizingspecificindividualstotransactonbehalfofDMEandensuringthatsuch individualsareappropriatelyskilled. Page115/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy 2.1.1RiskManagementCommitteeStructure Thefivevotingmembersare: PUBChair(ordesignee)ΑExOfficioMember DeputyCityManager DMEGeneralManager(Chairman) DMEComplianceManager CityDirectorofFinance Thetwononvotingmembersare: CityAuditor DeputyCityAttorneyΑLegal OtherkeypersonnelmayparticipateinRMCmeetingsasneeded. TheRMCwillmeetmeetsasnecessary,butnotlessthanquarterly,andwillbeisresponsible forprudentimplementationofthisPolicyandoperationaloversightandgovernanceofthe Program. 2.1.2MeetingTiming,Frequency,MemberVacanciesandVotingProcedures TheRMCwillbeisresponsibletothePublicUtilitiesBoardandCityCouncilforprudent executiveoversightofthisPolicyandshallmeetnolessthanoncepercalendarquarter.. MemberattendanceshallbeisrecordedintheRMCmeetingminutes.Anymemberofthe RMCcanrequestanemergencymeetingoftheRMCtoaddresscircumstancesorissuesthat mayrequireimmediateattention.Asneeded,butnotlessthanannually,theRMCwill reportreportsresultsofthe9ah5a9ƭenergymanagementactivitiesandcompliancewith thisPolicytothePublicUtilitiesBoardandtheCityCouncil. EachofthefivevotingmembersshallhaveasinglevoteonmattersthatcomebeforetheRMC andavotingmember,ordesignee,mustparticipateintheRMCmeetinginordertovoteand approveaproposedaction.IfavotingmemberisunabletoattendanRMCmeetinginpersonor bytelephone,themembermaydesignateanalternatetovoteinhisorherabsence.Ifanytwo ofthevotingmembers,ortheirdesignees,arenotpresentatanRMCmeeting,avoteona proposedactioncannottakeplace.TheRMCwillmakemakesdecisionsandtakeactionsbya Page125/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy simplemajorityvote.IftheRMCreachesanimpassethatcannotbeaddressedthroughavote, theDMEGeneralManagerwillmakemakesafinaldecisionbytheendofthenextbusinessday. IncaseswhereamemberoftheRMCleavestheemployoftheCity,theDMEGeneralManager willresolvetheRMCvacancybymakinganinterimappointmentathisdiscretion. AstandardsetofreportsshallbepreparedanddistributedbytheChairmaninadvanceofthe meeting.TherepresentativefromtheOfficeoftheCityAttorneywillactasSecretarytotheRMC andwilldocumentallmeetingsandactionstakenbytheRMCinmeetingnotesthatwillbe distributedtoRMCmembersfortheirreviewandacceptance.Meetingnotesapprovedbythe RMCwillbedistributedbytheOfficeoftheCityAttorneytotheRMCmembers,theCityManager, CityCouncilandPUB. AsChairmanoftheRiskManagementCommittee,theDMEGeneralManagerisresponsible forallEMODMEenergymanagementactivities,includingthedaytodayeffortsoftherisk controlfunction.Atahighlevel,theseresponsibilitiesincludeunderstandingandmeasuring marketrisk,validatingriskmitigationactivities,hedgestrategycomplianceandriskreporting. 2.2Front,Middle,andBackOffices TheͻCƩƚƓƷMiddleBackhŅŅźĭĻͼmodelprovidesforsegregationofdutiesandefficient administrativesupport.ItisawaytosegregateEMODMEenergymanagementactivitiesinto transactionalΛͻCƩƚƓƷhŅŅźĭĻͼΜͲindependentriskcontrolandtransactioncomplianceΛͻaźķķƌĻ hŅŅźĭĻͼΜandfinancial,accounting,andcontactcontractadministrationsupportΛͻ.ğĭƉhŅŅźĭĻͼΜ functions. 2.2.1FrontOffice TheFrontOfficeisprimarilyresponsibleforresourceplanning,andprocuringmanaging theenergysuppliesandservice.Theresourceplanningfunctionincludesdefiningclear objectivesanddevelopingsupplyportfolioassociatedwith5a9ƭwholesalemarket activitiesanddirectingitsdailyphysicalandfinancialtrading. TheFrontOfficedirectlyexecutesphysicalorfinancialtransactionstosupportactivities suchasmanagementoffuel,power,congestion,ancillaryservicesprocurement, environmentalattributes,andwholesalesalesactivitiesaswellasdevelopsmeasurable hedgestrategieswhichcanberigorouslytestedviasimulation.TheFrontOfficewill develophedgingandplansandperformhedgestrategysimulationsatleastannuallyto confirmandupdate5a9ƭongoingstrategy.(seeAppendixEfordetailsonhedging framework). Page135/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy Implementationdetailsofhedgingplansand SpecificresponsibilitiesofFrontOffice personnelinclude: 1.Evaluatingwhetherprospectivestrategiesare underdevelopmentandwillbe incorporatedinto consistentwithprogramobjectivesandthisPolicy aspart. 2.Monitoringtheenergymarketplaceforstructuralchanges,changesin counterpartiesandmarketliquidity,andnewsupplyandhedgingmarket instruments. 3.AdvisingtheRMCof Phase2 significantchangesinthemarketandintheliquidityof approvedhedginginstruments,alongwithrequestingauthorizationbytheRMCfor transactionsinnewhedginginstrumentsthatmayhelpDMEachieveitsrisk objectives.Newhedginginstrumentsshallbeapprovedbasedontheguidelines showninAppendixEΑNewProduct/MarketInstrumentApprovalChecklist. 4.Managingtheportfolioofpositionsinphysicalandfinancialenergyandenergy relatedcommoditiesinamannerconsistentwith5a9ƭriskmanagement objectivesandthecorrespondingHedgeStrategiescontainedinAppendixEΑ ForwardHedgingStrategiesandPlans. 5.Executingphysicalandfinancialtransactionswithapprovedcounterparties. 6.Recordingdetailsoffinancialandphysicaltransactionsfor5a9ƭriskinformation system. 7.Ensuringthattransactionsareincompliancewith5a9ƭEnergyRiskPolicy. TheFrontOfficeoversightroleisaccomplishedthroughsupervisoryreviewandapproval. 5a9ƭFrontOfficeconsistsofEMOpersonnelMarketOperationsandtheMarket OperationsManagerAnalyticsgroup. 2.2.2MiddleOffice TheMiddleOfficeprovidestheprimaryindependentmanagementoversightrole.The MiddleOfficeisresponsibleformonitoringcompliancewiththisPolicy,forassuringthat energytransactionsandexposuresarewithinauthorizedlimitsandmeetminimum targets,andforreportingthemarketexposureassociatedwithalltransactionsentered intobytheFrontOfficeonanongoingbasis.TheMiddleOfficeinstitutesandreviews energyportfoliomanagementactivities,suchasportfoliocreditexposure,transaction complianceandapprovalofcounterparties.TheMiddleOfficealsoquantifiesrisk exposureofnativebusinessactivityactivities(includingbothpriceandvolumetric uncertainty),excludinghedges.Intheeventhedgedecisionsdonotachieveprogram objectives,theMiddleOfficewilldeterminewhytheobjectiveswerenotachievedand Page145/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy recommendtotheRMChowtorealignhedgedecisionswithprogramobjectivesto promoteimprovedeffectiveness. TheMiddleOfficeresponsibilitiesincludemonitoring9ahƭ5a9ƭenergymanagement riskexposuresandmitigationmeasuresandensuringcompliancewithpolicies, guidelines,andprocedures.Inconnectionwiththisresponsibility,theMiddleOfficewill maintainmaintainsacompliancelogofanyoperationaland/orproceduralviolations, whichcanbeusedtomonitorissuesandtheirseverity,frequencyandresolution. Implementationdetailsofhedgingplan,hedgingstrategyandhedgingeffectiveness reportareunderdevelopmentandwillbeincorporatedintoanappendixtothisPolicy aspartofPhase2. Additionally,theMiddleOfficeisresponsibleforrecommendingtotheRMCwhen changesinpolicyoroperatingproceduresarerequired.Theserecommendationsmay involvethetemporaryorpermanenthaltingoftransactionswithoneormore counterparties,andanyothertopictheMiddleOfficebelievesrepresentspotential unacceptableriskexposure. TheMiddleOfficeadoptsandupdates,asnecessary,theEnergyRiskManagementPolicy, guidelinesandproceduressothatportfoliomanagementfunctionsoccurincompliance withEnergyRiskManagementPoliciesandenergyriskproceduresandguidelines. SpecificresponsibilitiesoftheMiddleOfficeincludethefollowing: 1.Onadailybasis,confirmsandreconcilesphysicalandfinancialtransactions, includingconditions,quantities,andamountstobepaidanddates.TheMiddle OfficeverifiesandreconcileseverypositionthathasbeenenteredintobyFront OfficetoensurethatthetermsrecordedandunderstoodbyDMEtomatchthe termsactuallyagreeduponwithcounterpartiesand/orbrokers. 2.Comparesenergyportfoliotothemarket(markettomarket)bycollectingand validatingmarketprices,andpreparingpositionreportsidentifyingthefinancial positions,physicalpositions,anticipatedphysicalexposures,andthemarketvalue oftheenergyportfolio(s)onapositionbypositionandaggregatebasis. 3.Operatesriskmeasurement,performance,andvaluationmodels,includingvarious stresstests. 4.Preparesroutineriskreports,includingthoseidentifiedinSection4.2ΑRequired Reports. Page155/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy 5.Onadailybasis,confirmsthatallexposuresandactivitiescomplywithauthorized marketinstrumentsascontainedinAppendixDΑApprovedTypes,therisklimitsas containedinAppendixAΑRiskExposureandTransactionLimitsandhedgecoverage targetsascontainedinAppendixEΑForwardHedgingStrategiesandPlans.Indoing so,theMiddleOfficemonitorstransactionsandpositionlimits,reviewdaily positions,andactivityreports,andensuresthattradinginstrumentsarein compliancewithcurrenthedgingstrategiesandarepermissible. 6.Followstheremedialactionsprocessintheeventofanyrisklimitorhedgetarget breaches. 7.Ensuresalltransactionsareincompliancewith5a9ƭEnergyRiskPolicy. 2.2.3BackOffice TheBackOfficeisprimarilyresponsibleforsettlementofERCOTandcounterpartybillings, recordingtransactions,andcontractadministration.TheBackOfficerolesinoversight includeensuringthatinvoicesaccuratelyreflectconfirmationorders,independently monitoringandrecordingtransactionsintoatrackingdatabase,andverifyingand reportingoncompliancewithproceduresasreflectedintransactiontracking documentation. TheBackhŅŅźĭĻƭprimaryresponsibilityistoensurethatfinancialrecordsof5a9ƭenergy managementoperationaccuratelyreflectthecurrentstateofenergyriskmanagement andpowersupplyportfoliomanagementactivity.TheBackOfficeisresponsiblefor verifyingsupplypayments,invoicing,andsettlements.TheBackOfficeisalsoresponsible, incoordinationwithCityofDentonFinance,AR,andAPdepartments,foraccurately calculatingandbookingthefinancialresultsofenergytransactionactivities,billing,and accountspayable,aswellasrecording,reportingandaccountingforriskmanagement andhedging.SpecificresponsibilitiesoftheBackOfficeincludethefollowing: 1.Supportsaccountspayableandreceivableoperations. 2.CoordinateswithCityFinancetherecordingofallrevenueandexpensesinthe generalledgerandothersubsidiaryledgerswhenappropriate. 3.CoordinatestherecordingofpostedcashreceiptsandrevenueswithCityFinance totheappropriatesubsidiaryledger. 4.Settlestransactions(verification,accountspayable/receivable) 5.Developsandmaintaindocumentationoutliningstandardproceduresfor performingtheaccountingfunctionsdescribedherein. 6.NotifiestheFrontOffice,MiddleOffice,andtheGeneralManagerofany discrepanciesthatresultfromthereconciliationprocess. Page165/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy 7.Overseesthesafekeepingoftransactionrelateddocuments. 8.Maintainsfundingandreconcilesandrecordsactivityincashaccountsheldwith otherERCOTandothermarketparticipants. 9.Generatingandsendingwrittenconfirmationstocounterpartiestoensureterms andconditionsaremutuallyagreedupon. Page175/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy SECTION3MARKETRISKPROTOCOLSANDEXPOSURE CONTROL 3.1MarketRiskProtocols Thefollowingmarketriskprotocolsshallgovern5a9ƭparticipationinwholesaleenergy markets.Specificlimits,methodologies,reports,operationalproceduresandapprovalprocesses shallbearedetailedintheEMOProceduresManual. DMEwillensurethatithasfullknowledgeofitsenergyportfoliopositioninalltransacted productsandtheresultingexposure,andunderstandstheimplicationsofitsenergy managementactivities; OnlypersonnelauthorizedbytheDMEGeneralManager,orhisdesignee,pursuanttoa writtenDelegationofAuthorityMemorandumcantransactonbehalfofDMEinthe wholesaleenergymarket(seeTransactionLimitssectionofAppendixAB); TheEMOPersonnelinvolvedwith5a9ƭenergymanagementactivitieswillensureit obtainstheyobtaincompetitiveprices,transactstransactͻğƷtheƒğƩƉĻƷͼanddiversifies itsthatcounterpartycreditriskisdiversifiedbysettingupmasterenablingagreements\[such astheInternationalSwapsandDerivativesAssociation,Inc.(ISDA),EdisonElectricInstitute (EEI),andtheNorthAmericanEnergyStandardsBoard(NAESB)\]withasmanyprequalified financialcounterpartiesaspossible. DMEmayonlytransactinwholesaleenergymarketproductsapprovedauthorizedbythe RMC;thisPolicy. DMEmayonlytransactwithintransactionlimitsapprovedanddefinedinthisPolicyandthe EMOProceduresManual;. Allwholesaleenergytransactionswillbecarriedoutonrecordedphonelines,electronic tradingplatforms,orothermediathatcanberecordedanddocumented; Metricsforassessing5a9ƭmarketriskexposurewillbespecified,measured,monitored, andreportedonaregularbasistotheRMC; basis,allwholesalemarkettransactionswillbecapturedrecordedintheofficial Onadaily systemofrecordwhichwillcaptureandreportphysicalandfinancialpositionssothateach canbereviewedseparatelyandintotalsothatnetvolumeandpriceriskandcollateralization requirementscanbeaccuratelyassessedandmanagedinrealtime.Thissystemwillalso serveasacentralcheckandbalancetool;therefore,itwillallowforreconciliationofphysical andfinancialconfirmationswithtransactionalinput.Thissystemwillalsogeneratenet pricesupportandreportriskinformation. Modelsandinputsforvaluationandriskmeasurementandmitigationshallbesubjectedtoa Page185/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy validationandchangecontrolprocess.Themodelsemployedandassociatedprocessesshall bedescribedindetailintheEMOProceduresManual;and 3.2AuthorizedTransactions AuthorizedtypesoftransactionsareaddressedinAppendixEDofthisPolicy.Thesetransactions typesare,andshallcontinuetobe,focusedonsupportingtheenergyportfoliogoalsoftheCity Council.andthisPolicy.Theadditionofanynewtransactiontypes,includingtherevisionof existingtransactiontypes,shallbecontrolledthroughwrittenoperatingproceduresand approvedbytheRMC. 3.3MarketRiskControl Animportantelementtoanyenergyriskmanagementandmitigationprogramistheregular identification,measurement,andcommunicationofmarketrisk.5a9ƭnetͻƚƦĻƓͼposition(i.e., whetheritneedstobuyorsellenergyproductsonadaily,hourlyor,monthlyorannualbasisto balancecustomerloadsagainstavailablegeneratingresourcestheenergyportfolio)andthe marketexposureassociatedwiththeseitsnetopenpositionsshallbequantifiedandcompared againstexposurelimitscontainedinthisPolicyanddiscussed,onaregularbasis,withintheRMC. Marketexposureassociatedwiththesenetpositionsshallbequantifiedusingformsof measurementapprovedbytheRMC.Themarketexposuremeasurementcriteriashallbe reviewedatleastannuallyandconsiderchangesin5a9ƭnetpositionsandexistingand projectedmarketconditions.TheMiddleOfficeshallhaveprimaryresponsibilityforcoordinating thedevelopment,maintenance,andmodificationallmarketmeasurementmethodologieswithin DMEandforrecommendingapprovalofthesemethodologiesbytheRMC. 3.3.1RiskTolerance ForthepurposesofthisPolicy,5a9ƭEnergyRisktoleranceisdefinedbythedegreeof uncertaintythatDMEcanacceptinitsfuturefinancialratiosandcustomerratesona projectedbasis. 5a9ƭEnergyRisktoleranceandmeasurementofEnergyRiskshallbebasedoninclude ͻğƷƩźƭƉͼformsofriskmeasurementsuchasCashFlowatRiskΛͻ/CğwͼΜorValueatRisk ΛͻğwͼΜformsofriskƒĻğƭǒƩĻƒĻƓƷͲͼΜͲaugmentedwithscenarioanalysisandstress testing.TheseformsofriskmeasurementaredescribedinmoredetailinAppendixAΑ RiskExposureandTransactionLimitsandinsectionsoftheEMOProceduresManual. 3.3.2TransactionandExposureLimits Thesettingofandtheadherencetotransactionlimitsisanimportantcontrolelementto ensureDMEdoesnotassumegreateraggregateenergymarketexposurethanisintended andhelpsensurethatthetransactionstrategylevelisappropriateatvariouslevelsof Page195/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy aggregation(e.g.bycommodity,deliveryperiod,strategy,EnergyMarketOperatorenergy portfolio,etc.). AppendixAAppendicesBandD,alongwiththeEMOProceduresManual,containthe ApprovedTransactionTypesandtheTransactionLimitsforDME.Itistheresponsibility oftheFrontOffice,MiddleOfficeandtheRMCtoeffectivelyutilizetheselimitsto controlmanageandmitigaterisktakingactivities.TheFrontOfficeshallberesponsible tomonitorformaintainingexposureswithinprescribedlimitsandrecommendfor recommendingchangesinTransactionLimitstothoselimitstotheRMCwhenmarket conditionsoroperatingcircumstancesresultinlimitsbecomingineffectiveor inappropriateincontrollingtheseactivities. TheMiddleOfficeshallberesponsibleformaintainingallTransactionLimits,monitoring compliancewiththeTransactionLimits,andobtainingapprovalfromtheRMCforany changestoTransactionLimitsortheTransactionLimitstructure.Itistheresponsibilityof theMiddleOfficeandFrontOfficetoensurethatTransactionLimitsarestrictlyenforced. 3.3.3StressTesting Inadditiontolimitingmitigatingandmeasuringfinancialexposureusingthemethods above,stresstestingshallalsobeisusedtoexamineperformanceoftheenergyportfolio underextremeadverseconditions. Instresstesting,worstcasehistoricalaswellashypotheticalextrememarketconditions areappliedtotheportfoliotodeterminehowtheportfoliowillperformifundersuch conditionswererepeated.Stresstestingrequiresthoroughevaluationofpastmarket periodstodeterminethosethatwouldrepresentaworstcaseevent.severeoutcomes.In addition,theperformanceoftheportfolioisalsoestimatedforindividualandcombined hypotheticalpotentialmarketconditions.Suchconditionsareintentionallychosento representextremelyunlikelyandadverseconditionsandcombinationsofconditions, eveniftheyareextremelyunlikely. TheMiddleOfficeshalldesignandmaintainastresstestingprogram,inconsultationwith theFrontOffice.ThestresstestingapproachshallbereviewedbytheMiddleOfficesemi annually,andthestresstestingprogramshallbepresentedtotheRMCforreviewonat leastanannualbasis. Implementationdetailsofmodelvalidation,controlsframeworkandstresstestingare underdevelopmentandwillbeincorporatedintoanappendixtothisPolicywithdetails addressedinanOperatingProcedureaspartofPhase2. Page205/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy 3.3.4ModelValidationandControls Ariskcommonlyfacedbythoseinvolvedwithenergymanagementactivityis modelrisk Γ theriskthateitherthemethodologyorassumptionsusedtovaluetheportfoliobecomes invalid.Inaccurateassumptionsandincorrectlydesignedmodelscancauserisk managementproblemsineverymarket.However,thecomplexityofenergymodelsand theirextendedlifetimes,maketheseproblemsespeciallycommonintheenergymarkets. Modelriskoccursprimarilyfortworeasons: ΘThemodelmayhavefundamentalerrorstheuserisunawareofandmayproduce inaccurateoutputswhenviewedagainstthedesignobjectiveandintendedbusiness uses. ΘThemodelmaybeusedincorrectlyorinappropriately. Ensuringadequatemodeldocumentationisanimportantcontrolformanaging modelingrisk.Thisrequiresbothorganizingmodelinformationandaccountabilityfrom peopleusinganddevelopingmodels. DMEkeepsarecordofallinternallyandexternallydevelopedmodelsusedinitsoperation (seeEMOOperatingProcedures14),including adescriptionoftheinformationinputcomponent(assumptionsanddatausedby themodel,includingquantitativeapproacheswhoseinputsarepartiallyorwholly qualitativeorbasedonexpertjudgment), versioncontrol(whenkeymodelinputsormodelprocesseschange) processingcomponent(whichtransforminputsintoestimates),and reportingcomponent(whichtranslatestheestimatesintousefulbusiness information). TheMiddleOfficewillreviewandvalidatemodelsusedbyDMEandreporttotheRMC annually. 3.4CreditRiskControl CreditRiskisthepotentialimpacton5a9ƭfinancialperformanceduetothehypotheticalchance ofnonperformanceinpaymentordelivery(eitherphysicalorfinancial)byanenergy Page215/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy companyentitythathasexecutedacommercialagreementwithDMEtobuyandsellenergy ΛͻĭƚǒƓƷĻƩƦğƩƷǤͼΜ͵ DMEwillactivelymitigatemitigatesitsenergycreditriskbymakinginformeddecisionsregarding whichcounterpartiestotransactwithandtowhatdegree.Creditriskisdefinedastheriskof counterpartynonperformance,orfailuretodeliveritsobligation(whetherthatiswithanenergy productitselforthepaymentofamountsowed). 3.4.1CreditPolicies DMEmitigatesitsenergycreditriskby Incorporatingtheexpectedtransactingvolumes,timing,andexpectedenergyprices, whenestablishinganenergycreditrisktoleranceforacalendaryear; Assessingcounterpartycreditworthinessandestablishingcreditlimitsfor counterpartiesbasedonthatassessment; Requiringacounterpartytobeassignedacreditlimitpriortotransactingwithit; Monitoringandassessingmarketandcounterpartyeventstoadjustcreditlimitsas appropriate; Calculatingandreportingthemaximumexpectedlossifacounterpartydefaults ΛͻĭƚǒƓƷĻƩƦğƩƷǤcreditĻǣƦƚƭǒƩĻͼΜͳand Requiringalltransactionsintheforwardmarkets(promptmonthandbeyond)tobe plannedforandincludedinanapprovedenergymanagementplanpriortoexecution ofthetransaction 3.4.2CreditLimits TheEMOProceduresManualshallincludeincludesacreditlimitframeworkfor5a9ƭ counterpartiesbasedonvariousfactorssuchasdebtratingsandfinancialstatistics. Specificcounterpartycreditlimitswillincludeconsiderationoffinancialratios,audited financialstatements,andassetquality.Creditlimitsonallcounterpartieswillbeare reviewedatleastsemiannuallybytheMiddleOffice,orimmediatelyiftheirbusiness conditionschangeortheircreditratinghasbeendowngraded. Priortoexecutionofanytransactionwithacounterparty,theFrontOfficemust verifyverifiesthatthecounterpartyhasavailablecredit.Inaddition,notransactionshall beexecutedthatwillcausethecounterpartycreditlimittobeexceededunlessexplicitly approvedbytheRMC. Page225/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy 3.4.3CounterpartyCreditFunction Thecounterpartycreditfunctionconcernscounterpartycreditanalysisandapprovalof newandexistingcounterpartiesaswellasthecalculation,aggregation,monitoringand reportingofcreditexposures.5a9ƭcreditfunctionisorganizedwithinmanagedbythe MiddleOfficeandreportstotheDMEComplianceManager. Theobjectiveofthecounterpartycreditfunctionistominimizethepotentialadverse financialimpactsonDMEintheeventofapotentialdefaultbyacounterparty.The counterpartycreditfunctionwillminimize5a9ƭcreditexposureandpotentialadverse financialimpactsby: Establishingacreditriskmitigationstructurewithintheenergyriskmanagement program; ProvidingaframeworktoenableDMEtoqualifyenergysuppliersandtransactwith approvedcounterparties; DeterminingcounterpartytransactingparametersΛͻƷƩğƓƭğĭƷźƚƓƌźƒźƷƭͼΜto conservativelycontrolandmeasure5a9ƭexposuretoanyonesupplier;and Implementingconservativebusinessprocessesandprocedures(tobeincludedinthe EMOProceduresManual)togatherandmonitorfinancialinformationoneach counterpartytoestimatecounterpartycreditexposures 3.4.4ExceptionstoCreditLimits IfEMODMEpersonneldeterminethatthecreditlimitssetforthintheEMOProcedures Manualshouldbeexceededforcertainkeycounterparties,theymayrequestthatthe MiddleOfficeperformareviewtodetermineifthecounterpartycouldsupportahigher creditlimit.TheMiddleOfficeshallperformafinancial/creditanalysisand,iftheanalysis determinesthatthecounterpartycouldsupportahighercreditlimit,theMiddleOffice willmakearecommendationtotheRMCforreviewandapprovalofextendingadditional credittothecounterparty. 3.5InformationSystemsandModels Energyriskmanagementinformationsystemsconsistofthedata,modelsandothersoftwareand hardwareusedtocollect,analyze,test,andvalidatetransactionswithin5a9ƭportfolioinorder tomonitorandcontrolrisk.AlthoughvariousdepartmentswithintheCityofDentonorDME mayhaveresponsibilitiesforusingandmaintaining5a9ƭriskmanagementsystems,theMiddle Officeshallhaveoverallresponsibilityforensuringthatthesystemsaresufficienttoperformthe riskmanagementfunctionsoutlinedinthisPolicy. Page235/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy AspartofaservicelevelagreementwiththeCityofDentonTechnologyServices,theMiddle Officeshallalsoberesponsibleformaintainingthesecurity,integrityandreliabilityofthe softwareusedforenergyriskmanagementpurposes(e.g.valuationmodels,administrativeand reportingsoftware,energyriskmanagementdatabases,etc.). InaccordancewiththeServiceLevelAgreementbetweenDMEandtheCityofDenton TechnologyServices,TechnologyServicesshallberesponsibleformaintainingtheintegrityand reliabilityofthehardwareusedforbothenergymanagementandenergyriskmanagement purposes,includingbusinesscontinuity,disasterprotectionandrecoveryplans. Page245/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy SECTION4RISKREPORTING 4.1RiskManagementReportingPolicy Keytoenergyriskmanagementisthemonitoringofrisksandtheaccurateandtimelyinformation thatmustbeprovidedtoallpartiesinvolvedinanyaspectofenergyriskmanagementtoallow themtoperformtheirfunctionsappropriately.Theseparationofexecutionandreporting responsibilitiesensuresthattimelyandaccurateinformationisbeingreported. Onanannualbasis,theRMCChairmanwillmeetwiththePUBandCityCouncilandprovide detailsofthe9ahƭ5a9ƭforwardpurchases,marketexposure,creditexposure,counterparty creditratings,transactioncomplianceandotherrelevantdata.Inaddition,theEMODMEwill provideperiodictrainingtothePUBandCouncilonenergymarketfundamentalsandcommodity tradingbestpracticestohelpfacilitatemoreproductiveriskmeetings. 4.2RequiredReports MinimumreportingrequirementsarelistedbelowandshallbearepreparedfortheRMCbythe MiddleOfficeandreviewedbyboththeMiddleOfficeandFrontOffice.Minutesandmeeting materialsfromquarterlyRMCmeetingswillbedistributedtothePUBandCouncilfortheir review. ControlsComplianceReport Identifiesanyactivitiesthathaveexceededpermissiblelimits. HedgeTargetComplianceReport Providesanunderstandingofthestatusofportfolioexposurerelativeto programobjectivesandassociatedhedgetargets. Hedgetargetmetricsareunderdevelopmentandwillbeincorporatedintoanappendix tothisPolicyaspartofPhase2. CompetitivenessReport Providesacomparisonoflatest12monthcost/mwhvsERCOTspotmarkets(Day AheadandRealTimeMarket) RenewableResourceEffectiveCostReport Trackstheeffectivecostofeachrenewableresource,includingthecostofmarket purchaseswhenrenewablesoutputisinsufficienttomeetload. Page255/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy PriceRiskReductionReport Measuresthetotalinherentmarketriskexposureoveragiventimehorizonfor eachcounterpartywithin5a9ƭenergyportfolio,theaggregatepriortomarket hedgesandtheresidualmarketriskexposure,andtheeffectivenessof5a9ƭ afterhedgingactivities. Riskreductionmetricsareunderdevelopmentandwillbeincorporatedintoanappendix tothisPolicyaspartofPhase2. CreditExposureReport Identifiesthecreditlimitforeachcounterparty,currentlevelofexposurewiththe counterparty,andremainingavailablecredit. 4.3TransactionValuation 5a9ƭfinancialrecordswillbemaintainedinfullaccordancewithgenerallyacceptedaccounting principlesΛͻD!!tͼΜandwillbeconsistentwithFERCUniformSystemofAccounts. Front,Middle,andBackOfficefunctionsshallcoordinatetheireffortsandmaintainvigilanceto valuedin ensurethat5a9ƭenergymanagementtransactionsandriskexposuresareaccurately anunbiasedmanner.Transactionvaluationandreportingofpositionsshallbebasedon objective,marketobservedpricesormodelsasauthorizedbytheRMC. Openpositions(i.e.,whethertheEMODMEneedstobuyorsellenergyonadaily,hourlyor, monthlyorannualbasistobalancecustomerloadsagainstavailablegeneratingresources)should bevaluedΛͻƒğƩƉĻķtoƒğƩƉĻƷͼΜdaily,basedonconsistentvaluationmethodsanddatasources. Wheneverpossible,thesevaluationsshallbebasedonindependent,publiclyavailablemarket informationanddatasources(e.g.,Bloomberg,Reuters,NYMEX,ICE,brokerquotes,etc.).The MiddleOfficeshalldevelop,andtheRMCshallapprove,valuationstandardsforthosecases wheredataisnotpubliclyavailable.Itisimportantthatthedatausedforvaluation,reporting andotherenergyriskmanagementcalculationsrepresentaccurateandtimelyinformationfrom themarketorbebaseduponappropriateRMCapprovedinternalsourcesormodels. ThespecificationofpositionvaluationmethodsistheresponsibilityoftheMiddleOfficeunder thedirectionoftheandissubjecttoRMCreview.TheFrontMiddleOfficeisresponsiblefor obtaininganddisseminatingmarketinformationinatimelyandconsistentmanner.Itisthe responsibilityoftheFrontOfficetomaintain,alongwithmaintainingandupdateupdating transactiondataandinformationsourcesusedfortradeevaluationanddecisionmaking..The Page265/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy MiddleOfficeisalsoresponsibleforassuringthatdatausedforenergyriskmanagement calculationsrepresentaccurateandtimelyinformationavailablefromRMCapprovedmarketor internalsources. Page275/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy SECTION5OTHERRESPONSIBILITIESANDPOLICIES 5.1OrganizationWideResponsibilities ItisthepolicyofDMEandtheCityofDentonthatallpersonneladheretostandardsofintegrity, ethics,conflictsofinterest,compliancewithstatutorylawandregulationsandotherapplicable standardsofpersonalconduct. Thewillfulmisrepresentationorconcealmentofinformationregardingportfoliomanagement and/orriskmanagementactivitiesfromseniormanagementoranypersonresponsibleforthe accuratetrackingandreportingofsuchactivitiesshallresultindisciplinaryactionuptoand includingterminationinaccordancewithDMEandCityofDentonpoliciesandpossiblelegal actionasallowedorrequiredbylaw. AsanemployeeoftheCityofDenton,allEMODMEpersonnelinvolvedwithitsenergy managementactivityshouldnothaveanexpectationofprivacyintheconductoftheirduties.At anytime,recordedphonecallsandelectronictransactionsmaybereviewedtoensure appropriateconductortoreviewtransactionalinformation. 5.2CommercialInterestsandTradingforPersonalAccounts AllDMEpersonnelwhohaveanyspecificresponsibilitiesdelineatedunderthisPolicyorin departmentalproceduresthatsupportthisPolicytheEMOProceduresManual,arestrictly prohibitedfromengaginginanyoftheactivitieslistedbelow: Physicalorfinancialtradingofanycommoditiesorauthorizedinstrumentsstipulatedinthis Policyorinsupportingdepartmentalproceduresfortheirownaccount Holdingamajoranundisclosedinterestinanyaccountorcorporateentity(otherthanDME), whichisusedtotradetheinstrumentsandcommoditiesdescribedabove. Ifthereisanydoubtastowhetheraprohibitedconditionexists,thenitistheĻƒƦƌƚǤĻĻƭ responsibilitytodiscloseanddiscussthepossibleprohibitedconditionwiththeirsupervisor.In addition,anyemployeereceivingtaxableincomefromanypersonorbusinessdoingbusiness withDMEmustfileaConflictsDisclosureStatementinaccordancewithChapter176oftheTexas LocalGovernmentCode.Failuretocomplywiththeserequirementsmayresultindisciplinary actionuptoandincludingimmediateterminationofemployment,inaccordancewithDMEand CityofDentonpolicies. Page285/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy 5.3AcknowledgmentofPolicyRequirements AllDMEpersonnelconnectedwiththeenergyriskmanagementprogrammustsignastatement attestingthattheyhavereceived,read,andunderstandthisPolicydocumentandtheCityof Dentonpoliciesregardingemployeeconduct.AsampleformstatementisprovidedinAppendix F. Page295/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy G. Page305/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy AppendixAPORTFOLIORISKS Asanelectricutility,participationinphysicalandfinancialenergymarketshastheinherent potentialtoexposeDMEtotherisksofcostandpricinguncertainty,revenueandcommodity marketvolatility,anduncertaintyinmeetingbudgettargets.Theserisksmaybebroadly categorizedintothreeriskcategories:market,credit,andoperational.Eachcategoryofriskis describedbelow.Thecategoriesarenotentirelyseparate:disruptionsofplannedoperations, forinstance,canexposeautilitytotheriskofhavingtoenterintounforeseentransactionsin adversemarketconditions. ThefollowingsectionprovidesdescriptionsoftheenergyrelatedrisksthePolicyisintendedto address. A.1.MARKETRISK DMEmanagesenergypurchasesandsaleswiththegoalofreducingthebusinessrisksassociated withitsobligationtoserveenergytoitsratepayers.Theserisksincludevolumerelatedandprice relatedrisks. A.1.1.PriceRisk Becauseofcontinualchangesinthesupplyanddemandforelectricity,significantprice changescanoccuroverashorttimeframe,otherwiseknownaspricevolatility.Highprice volatilitymeansahighdegreeofuncertaintyaboutthelevelofpricesinthefuture.5a9ƭ pricerisktakesseveralforms,including:1)exposuretochangesinspotpriceswhichDME facesinpurchasingelectricenergyfromtheERCOTmarket,2)forwardpriceriskof anticipatedpurchasesorsalesofpowerorfuelinthefutureand3)thecostofenergy relatedproductsandservicessuchascongestionrevenuerightsandancillaryservices. Priceriskalsoincludesthebasisriskassociatedwithpotentialdifferencesinthepriceof acommoditybetweengeographiclocations.Forexample,wheneverDMEmustpurchase powertosatisfynativeloadrequirementsorisexposedtonaturalgaspriceuncertainty atvariousphysicaldeliverypoints,DMEisfinanciallyatriskduetotheuncertaintyin transmissionortransportationcostsbetweenvariouslocations. A.1.2.VolumeRisk VolumeRiskreferstouncertaintyinthequantityofacommodityorservicedemanded, acquired,orsuppliedthathasapotentialeconomicimpact.Aprimaryvolumeriskfor Page315/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy DMEistheuncertaintyassociatedwiththeamountofloadDMEwillberequiredtoserve. Weatherconditionsaffectcustomerenergyusage,andweatherchangesmake forecastingofloadandnondispatchableresourcesachallenge,causingactualquantities todeviatefromforecasts.Forcedorunexpectedoutagesofgenerationresourcesalso impact5a9ƭvolumetricrisk.EMOOperatingProcedures14containdetailsabout 5a9ƭprocessesfordevelopingforecastsofexpectedvolumesassociatedwithits portfolioofloadandresources. A.1.3.LiquidityRisk DMEtransactsbusinessincommoditymarketsthathaveinherentliquidityrisk.Liquidity riskforDMEariseswhenitsintendedtransactionquantitiesexceedthesizeofcurrent marketbids(tobuy)andoffers(tosell).WhenDMEdesirestoexecuteatransactionfor avolume/quantityinexcessofcurrentmarketbidsoroffers,potentialcounterparties maybeunwillingorunavailabletotransactwithDME.Transactionsofnonstandardsizes andtypesalsopresentliquidityrisks. Liquidityriskshouldalsobeconsideredwithregardtopositionsthoughttobeoffsetting, butthatmaybecomeopenintheeventthatacounterpartydefaultsontheirtransaction responsibility(alsoreferredtoasͻķĻŅğǒƌƷƩźƭƉͼΜ͵Itmaybedifficulttoreplacedefaulted transactionsonshortnotice.Ifapositionmustbecoveredquickly,thepriceofthe necessaryreplacementtransactioncanbeworsethanifnourgencyexisted,especiallyif thepotentialcounterpartiesknowabouttheurgentneed,puttingDMEasasignificant disadvantage. A.2.CREDITRISK DMEisatriskifacustomer,supplierortradingcounterpartyisunableorunwillingtofulfillits presentorfuturecontractualobligationstodeliverpowerorfuel,ortomakeatimelypayment ofinvoicesorcollateral. A.2.1CreditRisk CreditRiskequalsthepotentialreplacementvalueofcounterpartycontractual obligationstodeliverorreceivepowerorfuel,ortomakeatimelypaymenttosettlea financialcontractualobligation.Thepotentialfinancialimpactfromcounterparty Page325/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy defaultsissignificant.5a9ƭcreditriskisaddressedinaseparateCreditRisk ManagementPolicy. A.2.2.FundingRisk Fundingriskisrelatedtocreditrisk.ThistermreferstotheriskthatDMEmighthaveto paymarginorpostcollateraltomeetrequirementstosecuritizeitscreditundercredit provisionsofPowerPurchaseAgreements,wholesaleenergymarket,ortomeetmargin requirementsforclearedcontracts. A.3.OPERATIONALRISK Thetermoperationalriskisoftenusedasacatchallcategoryintendedtoincludeallrisksthat arenotexplicitlydesignatedbyothernames,suchasmarketrisk,volumerisk,liquidityrisk,and creditrisk.Operationalrisksincludeproblemsofseveraltypesthatcanhaveadversefinancial consequences,andthatrelatetotheoperationsof5a9ƭenergyportfolio,identificationand controlofrisks,andprocessingandsettlementoftransactions.OnesuchriskisModelRisk. A.3.1.MODELRISK Modelrisk isaformofsystemsriskassociatedwithunrecognizeddeficienciesof informationsystemsusedtoinvaluetransactions.Amodelmayincorporateassumptions toderiveunobservablepricingparametersfromobservableones.Thereisariskthata particularmodelusedtovalueatransactionmaynotproperlycapturethevalueandrisks ofthetransaction,andthatitsdeficienciesmayemergeonlyafterthefact,following unfavorablemarketmovements. A.4.REGULATORYRISK Regulatoryriskistheuncertaintyto5a9ƭperformanceduetopotentialchangesinlawsor regulatorymandates.Examplesinclude,butarenotlimitedto,thefollowing. A.4.1CarbonCost Unlessexplicitlybornebyanenergysupplier,DMEisexposedtothepotentialriskof carboncosts.Anyapplicablelaw,rule,regulation,ordinance,protocol,order,decree, judgmentorothersimilarlegalmandatecouldcauseDMEtopaycarboncostsassociated withtheproduction,generation,sale,metering,measurement,transmission,storageor deliveryofelectricenergy. Page335/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy A.4.2ChangestoERCOTmarketdesign ThePUCThasdirectedERCOTtostudytheimpactofchangestoitsmarketdesign,which couldhaveasignificantimpactontheflowofdollarsbetweensuppliersandconsumers ofpower,possiblytriggeringtheneedtorenegotiatelongtermpowercontractsand changingthevaluationofexistinggenerationassets. A.4.3OngoingchangestoERCOTProtocols TherulesunderwhichERCOToperatesareinaconstantstateofchange.Infact,they changesooftenthat9w/hƭgoverningboardhasacommittee(ProtocolRevisions Subcommittee)thatmeetsmonthlytoreviewandprocessproposedchangessubmitted byERCOTanditsmarketparticipants.Thesechangesusuallyimpacthowcostsare allocatedwithinERCOTamongmarketsectors,consumersandsuppliersofpower,and individualmarketparticipantslikeDME. A.4.4RegulatoryCompliance MarketParticipantsintheERCOTregionaresubjecttobothstateandfederallawsand regulations. MarketParticipantsthatownoroperatefacilitiesthatarepartoftheBulkElectric System,asdefinedinfederallaw,aresubjecttooversightbytheFederalEnergy RegulatoryCommission(FERC),theNorthAmericanElectricReliabilityCorporation (NERC),andTexasReliabilityEntity,Inc.(TexasRE). Additionally,allERCOTMarketParticipantsaresubjecttooversightbythePublicUtility CommissionofTexas(PUCT).ThePUCTadministersthePublicUtilityRegulatoryAct (PURA),andadoptsandenforcesrulespursuanttotheauthoritygrantedinPURA.The PUCTalsohasoversightandenforcementauthorityovertheERCOTProtocols, OperatingGuides,andOtherBindingDocuments.ThePUCThascontractswithan IndependentMarketMonitor(16T.A.C.§25.365)andaReliabilityMonitor(16T.A.C. §25.503)toassistwithoversightandenforcementactivities. Page345/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy AppendixBRISKEXPOSUREANDTRANSACTIONLIMITS The9ahƭ5a9ƭenergysupply,tradingandriskmanagementrelatedactivitiesshallbe segregatedamonganumberofͻƩźƭƉĬƚƚƉƭ͵ͼAriskbookisawayofclassifyingandtracking positionsandtransactionsthathavesimilarordirectlyrelatedpurposessothatvalueandrisk canbemeasuredinsufficientdetailtosupportbothriskcontrolandtransactionstrategy decisions. alongwithriskexposureandtransactionlimits,aredescribedbelow. Theseriskbooks, AB.1RiskBooks SystemBook TheASystemBookcapturesthevalueandriskpositionofnativeloadobligationsandlong termpowerandfuelsupplyobligations.AllpositionsPositionsintheSystemBook shallwillgenerallybeofdurationgreaterthanonemonthorhaveatransactionstartdate ofgreaterthanonemonthintothefuture. HedgeBook ThepurposeoftheaHedgeBookistotrackallpositionsthatareenteredintotoreduce thetotalnetriskexposureoftheSystemBook.AllHedgeBooktransactionsmaintained intheHedgeBookshallbedemonstratedtobehighlyeffectiveshoulddemonstratetheir value(onaprospectivebasis)inmitigatingtheunderlyingsourceofriskto5a95a9ƭ nativeload,generationassetsandlongtermpowerandfuelsupplyobligations. TotalPortfolioBook TheATotalPortfolioconsistsofthecombinationofallpositionsintheSystemBookand HedgeBook. AB.2RiskExposureLimits Anessentialcontrolelementinthemanagementofmarketriskisthedevelopmentand adherencetoanappropriatelimitstructure.Awelldesignedlimitstructurehelpsensurethe EMODMEdoesnotassumegreateraggregateriskthanintendedandhelpsensurethatrisktaking atthetransactionstrategylevelisappropriateatvariouslevelsofaggregation(e.g.,by commodity,deliveryperiod,strategy,etc.). Page355/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy Theprimaryformsoflimitslistedbelowshallbeappliedtothe9ah5a9ƭenergymanagement activity: RatesatRisk ΑRatesatRiskΛͻwğwͼΜisaformofCashFlowatRisk(CFaRrisk) measurement.RaRlimitswillbesettolimittheamountofuncertaintyinfuturerates overtheimmediatelyupcoming1224monthperiod.Ifuncertaintyinfuturerate requirementsishigherthan5a9ƭrisktolerance,theEMODMEwillberequiredto considerhedgingorimplementimplementingotherriskmanagementstrategiestoreduce thepotentialneedforlargeunforeseenrateincreasesand/ordeteriorationof5a9ƭ financialcondition. ValueatRisk ΑğƌǒĻatRiskΛͻğwͼΜlimitswillbesettolimitthepotentiallossinvalueof individualtransactionsorgroupsoftransactionswhichmaybeheldintheportfoliofor specificpurposes,and/ortolimitthesizeandriskassociatedwithnettradingpositionsif suchactivitiesareallowed.theportfolio. Notional/Volumetric ΑƚaugmentRaRandVaRlimits,notionallimitsand/orvolumetric limitsmaywillbeestablished.Notionallimitsarespecifiedbasedontransactionor strategydollaramount(i.e.,contractorstrategyvolumexprice).Volumetriclimitsare specifiedbasedonvolume(e.g.,MW,MWhMWH,MMBTU,etc.).Thiswill provideprovidesaconcretelimittoaccountforuncertaintiesinriskmeasurementand humanjudgmentcapabilities.Othervolumetriclimitsmaybeestablishedinrelationto specificrisksnotcapturedbyRaRorVaR. ERCOT ΑImplementationoftheERCOTRealTimeMarket(RTM)andDayAheadMarkets (DAM)requiredailyattentiontoAvailableCreditLimits(ACL)andforwardliability calculations.TheBackOfficeshallactivelymonitorandcommunicateanychanges affectingcurrentcreditpositions. HedgeIneffectiveness Settinglimitsrelativetoanticipatedhedgingstrategieswhich helplimitpotentiallossesintheeventahedgingstrategy(orportionthereof)becomes partiallyorfullyineffective. StopLoss Α{ƷƚƦlosslimitsareset,suchthat,ifanindividualpositionorstrategy(ora hedgetransactionorstrategywhichhasbecomeineffective)isperformingadverselyand approachesapredeterminedleveloflosses,thepositionorstrategymustbeliquidated example,ifaforwardfuelpurchase orcompletelyhedgedtopreventfurtherloss.For endsupnotbeingneededbecauseofanunforeseenplantoutage,itisimportanttolimit themagnitudeofmarktomarketlossesthatmayaccrueonthepurchase. Page365/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy AB.3TotalPortfolioRiskExposureLimits Energyandfuelriskexposureof5a9ƭportfolioshallbemanagedbasedonRatesatRisk(RaR). RaRisthedifferencebetweenthetotalexpectedrevenuesfromtheEnergyCostAdjustmentand thepotentialrevenuerequirementneededtofullycoverpotentialnetfuelandpowersupply costs. RaRBecauseERCOTisresponsibleforensuringphysicalreliabilityofthegrid,5a9ƭeffortsfocus primarilyonmanagingtherateimpactofpricevolatilityriskofitsportfolio.Forthepurposesof managingthisrisk,DMEwillassumeanaverageconsumerrisktolerance(CRT)equivalentto1 centperkwhofloadoverarolling12monthperiod. Hedgingis5a9ƭprimarymethodforreducingmarketpricevolatilityrisk,eitherbylockinginor limitingtheamountofvariationofafuturemarketprice.TheͻķƚǞƓƭźķĻͼofhedgingisthatit notonlyreducesthechancesofincurringhighercoststhanexpected,italsoreducesthechances oflowerthanexpectedenergycosts,andcorrespondinglylowerelectricrates. 2 methodologytoestimate,ata95%confidencelevel,theamountofan DMEusesanͻğƷwźƭƉͼ electricrateincreasethatcouldoccurduetochangesinmarketconditionssuchasvolumetric riskassociatedwithitsrenewableresources,ERCOTdayaheadandrealtimemarketprice volatility,gaspricevolatility,nodalpricecongestion,pricecorrelationsandcreditrisk. If5a9ƭestimateofarateincrease,ata95%confidencelevel,exceedstheCRTthresholdby 25%,DMEwillmeetandconferwiththeRMC,andwiththeCityCouncilandPUBasnotedinthe tablebelow,todiscussalternativesforimplementingadditionalhedgingstrategiestobringthe levelofpossiblepricevolatilitybackinsidetheCRTthreshold.Noparticularportfolioactionis required,makingthisnotificationrequirementverydifferentfromatradinglimit. ͻ!ƷwźƭƉͼlimitsforthetotalportfolioare: WarningLimitRMCHardLimitCouncil Notification/PUBNotification Rolling12months(inaggregate)$XX15.0million$XX19.0million JunethroughSeptember(inaggregate)$XXmillion$XXmillion Anysinglemonthwithinrolling12months$XXmillion$XXmillion 2 TheͻğƷwźƭƉͼmetricDMEwilluseisbasedonaͻwğƷĻƭatwźƭƉͼ(RaR)methodology,whichreferstothestatistical dollaramountthatcanbelostonthenetopenpositionofaportfoliooveraspecifictimehorizonandwithagiven confidenceinterval.5a9ƭRaRmethodologyaccountsfortheincreasingpotentialdistributionofpricesastime passes,aswellastheexpirationofthepositionsintheportfoliowiththepassageoftime.Theresultistheestimation ofloss,atthespecifiedconfidencelevel,assumingthattheportfolioremainsconstantovertimeuntilallpositions withinithaveexpired. Page375/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy AssumptionsandspecificlimitsassociatedwithͻğƷƩźƭƉͼmetricswillbeincorporated intothisappendixaspartofPhase2. AB.4OpenPositionManagement 5a9ƭprimaryobjectiveistoprotectagainstrisksinherentinitsportfolio,suchasexposureto pricevolatilityandfromvariabilityinsupplyanddemand.DMEplanstoexecutehedging transactionsrelativelyevenlyovertime,todiversifytimingrisk(similartodollarcostaveraging), 3 anddoesnotspeculate.Markettransactionsshallbeexecutedasaresultofstrategiesdesigned tomaintainthenetopenposition(thegapbetweenexpecteddemandandcommittedsupply) withintoleranceswhichareconsistentwithcurrenthedgingstrategies.Theresultantnetopen positionshallbeupdatedtoreflectthenewtransactionsassoonaspractical,butgenerallyno laterthanthenextbusinessday. Netopenpositionenergytolerances(beforeaccountingfortheDentonEnergyCenter)shallbe setatthefollowing,onatotalMWHbasiseitherbytimeofuse(TOU)period(throughBalance 4 ofYear)oronanannualbasis(forpromptCalendarYearandbeyond): Minimum Tolerance Maximum Tolerance ifNetOpenisifNetOpenis 56 Period"Short""Long" 3 TheUSCommodityFuturesTradingCommissiondefinesaspeculatorasͻğtraderwhodoesnothedge,butwho tradeswiththeobjectiveofachievingprofitsthroughthesuccessfulanticipationofpriceƒƚǝĻƒĻƓƷƭͼ(CFTC Glossary:Aguidetothelanguageofthefuturesindustry). 4 WithintheERCOTregion,throughatleastthebalanceofyear,5a9ƭopenpositioncangenerallybemanagedby threetimeofuseperiods;PeakWeekday(weekdaysHE722),PeakWeekend(weekendsandholidaysHE722)and Nights(HE16,2324). Page385/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy PeriodMinimumMaximumMinimumMaximum xx%ofxxx%of PromptMonth Inserted Cells 100%120% load 90%load 110% (byTOU) Inserted Cells Prompt xx%ofxxx%of Quarter(by100%120% load 90%load 110% TOU) xx%ofxxx%of Balanceof 100%120% load 80%load 110% Year(byTOU) Prompt xx%ofxxx%of calendaryear100%120% load 80%load 110% (Annual) Second xx%ofxxx%of calendaryear100%120% load 70%load 110% (Annual) xx%ofxxx%of Thirdcalendar 100%120% load 60%load 110% year(Annual) TolerancelimitsareunderdevelopmentandshallbesetaspartofPhase2. ANoactionisrequiredifthenetopenpositioninagivenperiodexceedsthese tolerances.However,intheeventthatitdoes,DMEshallevaluatealternativestoflattenthenet openposition(whetherlongorshort)andwillinformtheRMCofanyexceedanceexpectations forannualperiods. B.5TransactionLimits Anothervitalcontrolelementinthemanagementofenergyriskisthedevelopmentand adherencetotransactionlimits.Transactionlimitsensuretheenergyportfoliomanagement functionisappropriateprudent,deliberateandcontrolledatvariouslevelsofposition aggregationandtransactionduration.Transactionlimitsareestablishedinconsiderationof overallportfoliostrategies,marketconditionsandrisktolerancelevelsandincludethefollowing principles: Page395/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy EMODMEpersonnelinvolvedwithitsenergymanagementactivityareauthorizedto executeanyintradayordayaheadtransactionwhichisnecessarytomitigatemarketand financialriskexposuretoDMEcustomers. Speculativetransactionsarethosetransactionswithincrease5a9ƭriskexposurenot intendedforhedgingpurposesandarestrictlyprohibited.Alltransactionsshalleither reducerisksorberiskneutraltoDMEcustomers. NotransactionmaybeexecutedforwhichDMEdoesnothaveadequatesystemsor analyticalmethodstotrack,record,value,oranalyzetheincrementalcashflowandrisk. Anysingletransactionforatermgreaterthantwoyearsoneyearmustbeapprovedby theRMCpriortoexecution. Schedulingofloadsandresources,alongwithcorrespondingbidorofferpricesassociated withERCOTDayAheadMarket(DAM),ERCOTRealTimeMarket(RTM)orERCOT SupplementaryAncillaryServices(SASM)MarketarenotsubjecttothisRiskPolicyorto thelimitsoutlinedbelowanddonotrequirepriorRMCapproval. Allexecutedtransactionsmustbeevidencedbyapaperconfirmationthatincludesatime/date stamp.recordedandcapturedin5a9ƭsystemofrecord.Further,alltransactionsshallbe conductedonrecordedphonelines,electronictradingplatforms,orothermediathatcanbe recordedanddocumented.AllAnyconfirmationsreceivedmustbesignedbythepersonwith theauthoritytoenterintosuchtransaction.ConfirmationsfortransactionswithERCOTare evidencedthroughtheERCOTSettlementSummarystatement. ThefollowingtablesoutlinesoutlinethetransactionauthorizationlimitsestablishedforEMODME personnelinvolvedwithitsenergymanagementactivitywhenexecutingtransactions. EMOThosepersonnelarepermittedtoexecutetransactionslessthanorequaltotheirdesignated limitsorunderthedirectionofsomeonehavingtherequiredauthority.OnlytheApproved TransactionTypeslistedinAppendixDmaybeexecutedunlessotherwiseapprovedbytheRMC. A Page405/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy B.5.1BilateralorFinancialPowerTransactionLimits Transaction TitleTermLeadTime Size(MW) CityCouncilNoLimitNoLimitNoMax CityManagerorRMC<1Year<3Years100 DMEGeneralManager<1Year<2Years100 <1Month MarketOperationsManager <12Month50 Analytics&Fundamentals Manager DayAheadto1 Month <1Week MarketOperations Supervisor <1Week100 SeniorEnergyMarket DayAheadto Analyst balanceof week <1Day Energy 400 <1Day SeniorMarketOperator Hourlyto balanceofday Notes: TransactionLimitsrepresentMWvolumeperhour. Leadtimerepresentsthetimeperiodfromthedateatradeisexecutedtothestartof delivery. Page415/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy Authorizedproductsincludeelectricpower,includingbothphysicalandfinancial 5 derivatives,aswellasancillaryservices.Financialderivativesmaybeoverthecounter ElectricForwardsandOptionsorExchangeTradedProducts AB.5.2ERCOTCongestionRevenueRights(CRRs)TransactionLimits CRRtransactionlimitsunderdevelopment !5a9ƭprimaryobjectiveforhedgingcongestionriskistomitigatepotentiallyadversefinancial consequencesfromuncertainpricedifferencescausedbytransmissioncongestionbetweenthe locationwhereitconsumespower(ERCOTLZ_North),thelocationswhereitpurchasespoweron aforwardbasis(EROTTNorthHub),andtheERCOTnodesassociatedwithitsresources(Denton EnergyCenter,GibbonsCreek,WhiteTail&SantaRitaWindfarms,BlueBellsolarfarmandfuture renewableresources). DMEisexposedtotransmissioncongestionriskforallamountsofenergyforecastedtobe consumedintheERCOTNorthLoadZone,andenergythatcouldpotentiallybeproducedattheir respectiveresourcenodes.Bydefault,ERCOTchargesallDMEloadforenergy,alongwithany congestion,intheRealTimeMarketΛͻwͼΜ͵DMEmitigatescongestionriskwithcongestion hedgesusingCongestionRevenueRights(CRRs). 5 Asusedhere,aderivativeisacontractthatderivesitsvaluefromtheperformanceofanunderlyingassetor index. Page425/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy Figure1 Figure2 DMEhedgescongestionriskbetweeneachresourceand9w/hƭNorthHublocation,and betweenNorthHubandNorthLoadZone,byparticipatingin9w/hƭannualandmonthly auctions,layeringinCRRpurchasesforupto3yearsintothefuture.TheNorthHubisalsoused asadeliverypointforbilateraltrades(forliquiditypurposes) Consistentwith5a9ƭapproachtohedgingenergy,DMEseekstoacquireCRRsatsteadily increasingamountsroughlycorrespondingtoAuctionCapacityPercentages,todiversifytiming risk,similartodollarcostaveraging,anddoesnotuseeventdriventradingtotimethemarket, tradinginandoutofpositions.DMEemploysatieredapproachin9w/hƭannualandmonthly 6 auctions. DMEalsohedgescongestionin9w/hƭRealTimemarketbybuyingCRRlikeinstruments calledPointtoPoint(PTP)Obligations. B.5.3PhysicalorFinancialNaturalGasTransactionLimits TransactionSize TitleTermLeadTime (MMBTU/day) CityCouncilNoLimitNoLimitNoMax 6 Inpractice,thisͻĬǒǤasmuchaspossibleasearlyasƦƚƭƭźĬƌĻͼstrategymeansDMEincludeslowbidsforthefull amountofremainingCRRsneededineachauctiontomaximizethechancesofcapturinglowclearingpriceswhile atthesametimepreventingcreditcollateralrequirementsfrombecomingunnecessarilyhigh Page435/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy CityManagerorRMC<1Years<3Years4550,000 DMEGeneralManager<1Year<2Years4550,000 MarketOperationsManager <1Month<12Month4550,000 Analytics&Fundamentals Manager MarketOperationsSupervisor <1Week<12Month4550,000 SeniorEnergyMarket Operator EnergySeniorMarket <1Day<1Day4550,000 Operator Notes: NaturalGastransactionslimitedtothefollowinglocations:Henryhuborlocationswithin TexaswhicharephysicallyorfinanciallycorrelatedtoDMEenergycosts Authorizedproductsincludenaturalgas,includingbothphysicalandfinancialderivatives. FinancialderivativesmaybeoverthecounterGasFuturesandOptionsorExchange TradedProducts Theneedfornaturalgasservicesotherthancommoditypurchasestosupportthe DentonEnergyCenter(e.g.,naturalgasstorageandtransportationservices)iscurrently underreview.Ifneeded,transactionlimitstocovertheseserviceswillbeaddedtothis appendixaspartofPhase2. Page445/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy AB.5.4RenewableEnergyCreditΛͻw9/ͼΜTransactionLimits PerTransactionLimits(upto) TitleVintageVolume$/REC CityCouncilNoLimitNoLimitNoMax CityManager<2Years1,200,000NoMax DMEGeneralManager<1Year600,000NoMax MarketOperationsManager <3Month1Year300,000NoMax Analytics&Fundamentals Manager MonthtoQuarter <1Week SeniorEnergyMarket N/AN/A Operator DayAheadto balanceofweek <1Day EnergyMarketOperatorN/AN/A Hourlytobalanceof day Theneedfortradingadditionalenergyrelatedproducts,suchascarbonoffsets, emissionsallowancesandweatherderivativesiscurrentlyunderreview.Ifneeded, transactionlimitstocovertheseserviceswillbeaddedtothisappendixaspartofPhase 2. Page455/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy AppendixBDEFINITIONS ParticipationinphysicalandfinancialenergymarketshasthepotentialtoexposeDMEtothe risksofcostandpricinguncertainty,revenueandcommoditymarketvolatility,anddifficultyin meetingbudgetedcashflowtargets.Thefollowingsectionprovidesdescriptionsoftheenergy relatedrisksthePolicyisintendedtoaddress. BASISRISK Basisriskisthedifferencebetweentheindexusedinafinancialhedgeversusthephysical commoditybeinghedged.Forexample,ifacompanyhedgedfuturepurchasesofnaturalgas withanindexbasedonthepriceofnaturalgasatacertaindeliverypoint,ariskwouldexistthat thepriceofnaturalgasdeliveredtothecompanywouldgoupandthepriceofnaturalgasatthe financialdeliverypointwouldnot. CREDITRISK Creditriskistheriskthatacounterpartytoatransactionmaybeunableorunwillingtofulfillits presentandfutureobligations;i.e.performonasaleorpurchaseagreement.Thepotentialfor unrealizedgainsorlossesmayaccrueinphysicalcontractspriortoactualdeliveryobligation. Thecreditworthinessofcounterpartiesisafunctionofdifferentfactorsaffectingthecreditrating assignedtoacounterpartybymajorcreditratingservicesoraninternalevaluationofthe ĭƚǒƓƷĻƩƦğƩƷǤƭfinancialstrength.Factorsincludefuturemarketvaluesandcreditvariables(i.e. pricelevel,pricedifferentials,volatility,correlation,defaultrates,etc.)thataffectearnings,cash flows,andfairvalues.Thecreditstandingofanexistingorpotentialcounterpartymaybe establishedfromitscreditrating(publishedbyoneofthecommonlyrecognizedratingagencies), marketintelligence,electronicnewsreleases,orotherpublicinformationsources. Managingcreditexposureisanimportantcomponentinbilateraloverthecounter(OTC)energy transactions.Somepracticesinmanagingcreditexposure: Establishappropriatemeasuresofcounterpartycreditworthinesssuchasfinancialstrength, marketpresence,extentandlocationofgenerationassets,performancehistory,and contractingterms. Setaminimumcreditstandardorcriteriaforcounterpartiesbasedon5a9ƭrequirements fortheabovemeasures. Applythecriteriatopotentialcounterpartiesanddevelopalistofpreapprovedcounter parties. Requirelettersofcreditorotheracceptablecollateralfromcounterpartieswhodonotmeet thecriteria. Engageinbilateraltransactionswith only preapprovedcounterpartieswhomeetorexceed Page465/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy thecriteria. Thepotentialfinancialimpactfromacounterpartydefaultcouldbesignificant.However,itis believedthatSection3.4ofthisPolicyprovidesaneffectivemechanismtoappropriatelyand effectivelymanagesuchrisk. LIQUIDITYRISK Liquidityriskistheuncertaintyof5a9ƭpotentialperformanceduetotheinabilitytotransactat expectedmarketprices.FromtheFrontOfficeperspective,liquidityistheeasewithwhicha tradercanenterorexitafinancialpositionwithoutimpactingprice.Anilliquidmarketisamarket wherefewtransactionsoccurandlargebidaskspreadspersistforlongperiodsoftime. FromaMiddleOfficeperspective,liquidityistheuncertaintyof5a9ƭpotentialperformance duetoashortageofcashandavailablelinesofcreditintheeventofalargecollateralcallby ERCOTorabilateraltradingpartnerorduetoalargetradingloss.Keydriversofliquidityriskare thesizeof5a9ƭenergycommodityposition,thecontracttenor,pricevolatilityandtheability tomaintainasolidcreditrating. MARKETPRICERISK MarketRiskistheuncertaintyof5a9ƭpotentialperformanceduetovolatilecommoditymarket prices(i.e.pricerisk).Thepotentialformarketriskisinherentin5a9ƭoperationsduetothe financialimpactofvariableenergycommodities,ancillaryservicepricesandpotentiallyrelated financialvariables.Variabilityinanyoftheseparametershasthepotentialtocausevolatilityin expenses,customerrates,andrevenuesaswellasthevalueofenergybasedassetsandliabilities. Toprotectitselffromelectricityorfuelmarketpricespikes,thisPolicyauthorizesDMEto participateintheenergymarketsdescribedinAppendixEtomanageitsenergyportfolio proactively,seizinguponopportunitiestolimitenergycommodityriskandproduceadditional revenues.Theelectricityandnaturalgasmarketscontainnumerousopportunitiestostabilize pricesthroughforwardtransactions. MODELRISK ModelRiskistheuncertaintyof5a9ƭperformanceduetopotentiallyinaccurateorincomplete characterizationofatransactionorportfolioelementsduetofundamentaldeficienciesinmodels and/orinformationsystems. OPERATIONALANDVOLUMETRICRISKS OperationalriskistheriskthatnotenoughresourcesareavailabletomeetDMEcustomerload requirements.Volumetricriskisriskthatenergycommoditypurchasesfailtoexactlymatch Page475/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy requirements,creatinganunplannednetlongorshortposition.Theserisksaremanagedbya seriesofacceptedindustrypractices,includingthefollowing: Electricsupplyriskismanagedbymaintainingadequateplanningresourcemarginsand operatingreserves; Fuelsupplyriskismanagedbyowningorcontractingforstorageservicesandmaintaining fuelsupplyinventoriestoassurecontinuedoperationsundermostpotentialshortage conditions; TakingtheopportunitytostabilizecoststhroughforwardͻƭĻğƭƚƓğƌƷƩğƓƭğĭƷźƚƓƭͼ Operationalriskofextremeloadconditionsandresourceortransmissionoutagesarenot specificallyaddressedinthisPolicy.Theimportanceofanaccurateload/resourcebalance forecastandtheabilitytoreacttocontingenciesandtominimizevolumetricriskaretobe handledthrough5a9ƭstandardoperatingprocedures. ORGANIZATIONALRISK Organizationalriskistheriskofunclearlinesofresponsibilityandaccountabilityandthelackof adequatecontrolstoensureeffectiveimplementationofthisPolicy.However,overly burdensomeorrestrictivecontrolsorrestraintsthatrenderaprocessineffectiveinitsabilityto maketimelydecisionscanalsoresultinorganizationalrisk.Thisriskisbelievedtobeminimalas organizationalandoversightresponsibilitiesandexpectationsareclearlydelineatedthroughout thisPolicy. OUTAGERISK Outageriskistheuncertaintyof5a9ƭperformanceduetouncertaintyintheavailability,forced outagefrequency,and/orplannedoutageschedulinganddurationof5a9ƭgeneratingfacilities (includingthoseinwhichDMEhaspartialownershiporcontractualentitlements). REGULATORYRISK Regulatoryriskistheuncertaintyof5a9ƭperformanceduetopotentialchangeinlawsand/or regulations. Page485/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy AppendixCORGANIZATIONALSTRUCTURE EnergyManagementOrganizationFrontOffice MktOperationsEnergyAnalytics MgrMgr Business Market MarketAnalystsSCADATech Intellegence Operators Analyst Page495/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy ExecutiveMgrPower Supply MktOperationsAnalytics& MgrFundamentalsMgr MarketOps SrMarketAnalyst Supervisor SrMarketBusiness OperatorIntellegenceAnalyst SrMarket SCADATech Operator SrMarket Operator SrMarket Operator SrMarket Operator Page505/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy EnergyManagementOrganizationMiddleOffice DMECompliance Mgr SrControl Analyst DMECompliance Mgr SrRiskControl Analyst EnergyManagementOrganizationBackOffice General Manager Settlements& Business Rate Analysts Administrator Page515/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy General Manager Settlements& Business Rate Analysts Administrator Page525/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy AppendixDAPPROVEDTRANSACTIONTYPES Productsallowedforenergymanagementactivitiesincludethepurchaseandsaleofelectric energy,ancillaryservices,ERCOTCongestionRevenueRights/PointtoPointObligations, RenewableEnergyCreditsandnaturalgas(commodity)..TheRMCisresponsibleforauthorizing allproductsandcommoditytypesasfurtherdetailedintheEMOProceduresManual. AlltransactionsmustfollowcertainrequirementsasdescribedthroughoutthisPolicy.Key elementsinclude: Alltransactionsmustbecommittedexecutedtobyauthorizedtransactingpersonnel Alltransactionsmustbewithapprovedcounterpartiesand/orcommodityexchanges Alltransactionsmustbewithcounterpartieswithadequateavailablecreditorfully collateralized Alltransactionsmustbecommittedoverrecordedphonelinesorviarecordable electronicmailcommunications Alltransactionsmustbeapprovedtransactiontypes AlltransactionsmustbeconsistentwiththisPolicyandtheEMOProceduresManual Failuretoobservetheaboveminimumrequirementswhenexecutingenergytransactionisa violationofPolicyandissubjecttodisciplinaryaction. AuthorizedMarkets TheEMO AURTHORIZEDMARKETS DMEmayonlyexecutetransactionstobuyorsellenergyrelatedproductsaftersometypeof enablingagreementhasbeensignedwithacounterpartyorcommodityexchange.Inapproving 5a9ƭEnergyRiskPolicy,theCityCouncilhasauthorizedtheCityManager,orhisdesignee,to signsuchagreements. ExamplesofmarketswhereDMEiscurrentlyauthorizedtotransactinthefollowing marketsinclude: o IntercontinentalExchange(ICE) o ERCOTPhysicalandFinancialPower Page535/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy o NaturalGasfutures Bilateralmarketswithapprovedcounterparties PhysicalNaturalGasatlocationswithinTexas FinancialNaturalGas o NewYorkMercantileExchange(NYMEX) HenryHub LocationsinTexas o NaturalGasContractstradedOverandOklahomatosupportfuelpurchasesfor theCounter(OTC) o NYMEXClearPort o IntercontinentalExchange(ICE) o NaturalGasExchange(NGX)RenewableDentonEnergyCreditsCenterand5a9ƭ energyportfolio WeatherDerivatives o PhysicalandFinancialPower ERCOT o DayAheadMarket o RealTimeMarket o AncillaryServicesMarket o CongestionManagementAuctionsandMarkets AUTHORIZEDPOWERTRANSACTIONS PowertransactionsshallbelimitedtodeliveryorexposuretopowerwithinERCOT. 1.Physical a.Fixedprice&Indexpricepurchasesandsales b.Indexpricepurchasesandsales c.FixedpriceforwardblockpurchasesandsalesCall&PutOptions(e.g.,Peak Weekday,PeakWeekend,Nights) d.Forwardblockpurchasesandsaleswithpricefixed&indexedtonaturalgas Page545/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy e.b.SpotpurchasesandsalesthroughDayAheadorReal,hourly,Time markets,CommodityExchangesorbilateralcontractsofUse,dailymonthly, annually) f.CallOptions g.PutOptions h.c.Ancillaryservices 2.Financial a.Fixedforfloatingpriceswaps&Indexpricepurchasesandsales b.Exchangetraded,bilateralorOTCCalloptions 7 c.b.ExchangeorOTCPutoptions d.c.AncillaryServices e.d.ERCOTCongestionRevenueRights(CRRs)),PointtoPointObligations (PTPs)andothersimilarcongestionmanagementtransactions AUTHORIZEDNATURALGASTRANSACTIONS NaturalGastransactionsshallbelimitedtoexposuretoHenryHuboralocationwithinTexasor Oklahomatosupportcommodityexposurefor5a9ƭenergyportfolio. 1.PhysicalGaswhichmaybeneededtosupportoperationoftheDentonEnergyCenter a.FixedandindexpriceNaturalGascommodity b.FixedandindexpriceNaturalGastransportation c.FixedandindexpriceNaturalGasstorage 2.Financial a.Exchangetraded,bilateralorclearedfutures b.a.andExchangetradedorOTCCalloptionsswaps 8 c.b.Exchangetraded,bilateralorclearedandorOTCCallorPutoptions d.c.Indexoptions Otherauthorizedenergyrelatedcommoditytransactions 1.PhysicalRenewableEnergyCredits(RECs)associatedwithenergythathasalreadybeen generatedwithinthelast3years.NotallowedareRECsassociatedwithenergythatwill begeneratedatsomefuturepointintime.2014060 7 Forexample,fixed&indexed,hourly,TimeofUse,dailymonthly,annualoptions 8 Ibid. Page555/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy 2.WeatherDerivatives Page565/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy AppendixEFORWARDHEDGINGSTRATEGIESANDPLANS SuccessfulmanagementofthepriceandvolumetricrisksfacedbyDMErequiresanalysis, monitoring,andcommunication.Analysisofpublishedweatherforecastsandmarketprice dataserveaskeyinputstomodelsusedforplanningandensuresthattheappropriatedatais convertedintousefulinformation.Consistentwithmarketriskpoliciesdefinedhereinandthe risklimitsdefinedinAppendixA,DME,inconcertwiththeRMC,developsannualhedging strategieswithunderlyinghedgingplansasameanstomanagethevolumetricandpricerisks facedbytheutility.Areviewofthestatusofcurrenthedgingplanswilltypicallybeatopicof discussionatRMCmeetings. PriortoFebruary1ofeachyear,DMEshallsubmitawrittenHedgingStrategyformanagingits expectednetopenpositionfortheupcomingthree(3)fullcalendaryears.Duetothe complexityofthewholesaleenergymarketsandtheenergyregulatoryenvironment,the HedgingStrategyisexpectedtorequireseveralHedgingPlanstobedevelopedandapproved duringeachyear.TheRMCwillapprovetheHedgingStrategybytheendofFebruaryeachyearor atitsfirstmeetingthereafter. EachHedgingPlanwill: Coveraclearlyspecifiedforwardtimeperiod; Explainthejustificationforthehedge(ageneraldescriptionoftheresourcemixand loadthatcontributetotheopenpositionforthespecifiedtimeperiod,alongwiththe OpenPositiontolerancesforthespecifiedforwardtimeperiod); Defineavolumetriclimitforhedgepurchasesandsales; and DocumenttransactiontypesexpectedtobeusedtocarryouttheHedgingPlan; ProposedpricetriggersthatwillenablehedgingactivitywithintheHedgingtƌğƓƭ limits. DMEmay,atanytime,requestthattheRMCconsiderchangestothecurrentHedging StrategyortoanindividualHedgingPlan.AnyapprovedchangestotheHedgingStrategyor HedgingPlanshallberecordedintheRMCmeetingminutesandanupdatedwrittenHedging StrategyorHedgingPlandocumentwillbepreparedassoonaspracticalincorporatingsuch changes.Onoccasion,itwillbecomeapparenttoDMEmanagementthatadditional transactionstoreshapeexpectedmonthlyforwardpositionsarenecessarygivenchangesin generationforecasts,marketconditions,andloadforecasts.TheDMEGeneralManager maydirectEMOstafftoenterintoandexecutesuchtransactionstorebalancetheforward Page575/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy position.ThesetransactionswillbediscussedinRMCmeetingsaheadoftimeifconditions allow,orreportedafterthefactanddocumentedintheminutesofthenextRMCmeeting. AppendixFNewProduct/MarketInstrumentApproval Checklist ChecklistItemsPrimary Accountability Benefits IdentifyanddescribethebenefitsofusingthenewproductFrontOffice Risk UnderstandanddocumentthepayoffprofileofthenewproductFrontOffice IdentifyandanalyzecreditriskofnewproductMiddleOffice Developmethodologyformeasuringcreditriskofnewproduct(marktoMiddleOffice market,potentialexposure,stressexposure. Identifyprospectivecounterpartiesfornewproduct/instrumentandFrontOffice& determinecreditsuitability.MiddleOffice Approvenewproductvaluationmethodology.MiddleOffice Determineifstaff,systems,andmanagementskillsetsaresufficientforMiddleOffice valuingandtransactingnewproduct. Determinephysicaldisposalorfinancialsettlementrequirements.FrontOffice&Back Office Determinestresstestrequirementsfornewproduct.MiddleOffice Definehowstresstestingmustbeperformed(frequency,scope,MiddleOffice independentsource). Financial Definethecapitalrequirements(exchangemarginorcollateral)oftheFrontOffice& newproduct.MiddleOffice Determinecontractdocumentationrequired.FrontOffice& MiddleOffice Accounting,Tax,andRegulations IdentifyapplicableU.S.andlocalregulatoryrestrictionsfornewproduct.BackOffice/City Finance Page585/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy Determineregulatorycompliancerequirements,ifany,fornewproduct.MiddleOffice& BackOffice/City Finance Reviewaccountingpoliciesandapproveproposedtreatment.BackOffice/City Finance Determineauditrequirements.BackOffice/City Finance Considertaxconsequencesofnewproduct.BackOffice/City Finance Policy Verifycounterpartyauthoritytoenterintocontractfornewproduct.MiddleOffice DevelopandimplementmonitoringandreviewprocedurestoensureMiddleOffice Policycompliance. DefineproceduresandresponsibilitiesforindependentverificationofMiddleOffice positionsandmarketvaluationinputs(prices,andvolatilitiesif applicable). Determineimpactonposition/risklimits/hedgetargetsMiddleOffice DetermineanddefineproceduresforconfirmationandreconciliationofMiddleOffice newproduct. VerifythatallgroupsinvolvedinnewproducttransactionprocedurescanMiddleOffice handleanticipatedtransactionvolume. Determineanddefinemanagementreportingrequirements.MiddleOffice Page595/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. EnergyRiskManagementPolicy AppendixGENERGYRISKMANAGEMENTPOLICY ACKNOWLEDGEMENTFORM ThepurposeofthisformistoconfirmthatCityofDentonemployeesinvolvedwiththe EnergyPortfolioManagementprogramhavereceived,read,andunderstand5a9ƭ EnergyRiskManagementPolicy. EmployeeName:_______________________________ Title:_______________________________ Department:_______________________________ Supervisor:_______________________________ MysignaturebelowconfirmsthatIhavereceived,readandunderstand5a9ƭEnergy RiskManagementPolicyandappendices,andtheCityofDentonpoliciesregarding employeeconduct. _______________________________ SignatureofEmployee _______________________________ Date Page605/1/18 Thisdocumentandanyattachmentstheretomaycontaininformationthatisconfidential,commerciallysensitive,proprietary,and/orpublic powerutilitycompetitiveandfinancialinformationinaccordancewiththeprovisionsofTexasGovernmentCode,Section552.101,552.104, 552.110and/or552.133,andmaybeprotectedfromrequiredpublicdisclosure. Enterprise Risk Consulting, LLC 1000 Cordova Place, Suite 381 Santa Fe, NM 87505 512-633-0100 12/5/18 George Morrow General Manager Denton Municipal Electric 601 E. Hickory St. Denton, TX 76201 RE: Risk Management Policy Dear George, I have reviewed the latest revision to DMEÈs energy risk management policy. It has come a long way since we first reviewed it just over a year ago. As you know, risk management documents are living documents, and this means that a) they will continue to evolve over time, and b) it can take a while to develop a policy to bring it up to best practice standards. As a utilityÈs energy risk management program grows and evolves, the policy will evolve with it, and we anticipate the further growth of the policy as DME moves toward a 100% renewable energy supply portfolio. Specifically, we have been involved in assisting DME in making substantial improvements to the policy. These improvements are in important subject areas including: Risk management objectives The definition and measurement of risk tolerance Expanded terms of reference for the RMC An expansion of the description of the role and responsibilities of the Front, Middle and Back offices An expanded description of the various energy market-related risks being managed by DME The inclusion of limits and targets for congestion risk management A new section to reference various energy hedging strategies A formal checklist for adding new market instruments I look forward to working with you as DMEÈs risk management and supply management programs continue to develop and evolve, and as the policy will continue to evolve to reflect DMEÈs future progress. Yours very truly, Larry Lawrence President, Enterprise Risk Consulting, LLC City Hall City of Denton 215 E. McKinney St. Denton, Texas 76201 www.cityofdenton.com Legislation Text File #:ID 19-079,Version:1 AGENDA CAPTION Consultation with Attorneys - Under Texas Government Code Section 551.071; Deliberations regarding Personnel Matters - Under Texas Government Code Section 551.074. ConsultwiththeCity’sattorneystoreviewanddiscussaCompromiseSettlementAgreementinlitigationstyled CleopatraBirckbichlerv.CityofDenton,CauseNo.4:18-CV-00893-ALM,pendingintheEasternDistrictof Texas,ShermanDivision,andpostedforapprovalbyordinancebelowasanitemforindividualconsideration, andtoreceivelegaladviceregardingsame,wheretheCity’sAttorneys’dutiestothegovernmentalbodyunder theTexasDisciplinaryRulesofProfessionalConductoftheStateBarofTexasclearlyconflictwithChapter 551oftheTexasOpenMeetingsAct.Thisclosedsessionalsoconcernsdeliberationsinvolvingapublicofficer oremployee,undercircumstancesallowingclosedsessionundersection551.074oftheTexasOpenMeetings Act. City of DentonPage 1 of 1Printed on 1/4/2019 powered by Legistar© City Hall City of Denton 215 E. McKinney St. Denton, Texas 76201 www.cityofdenton.com Legislation Text File #:ID 19-093,Version:1 AGENDA CAPTION DeliberationsregardingRealProperty-UnderTexasGovernmentCodeSection551.072;Consultationwith Attorneys - Under Texas Government Code Section 551.071. Discuss,deliberate,andreceiveinformationfromstaffandprovidestaffwithdirectionpertainingtothe acquisitionofrealpropertyinterestslocatedintheAlexanderHillSurvey,AbstractNo.623,DentonCounty, Texas,generallylocatedinthe800blockofEagleDrive,a1.656acretractsituatedatthesoutheastcornerof theBernardStreet/EagleDriveintersection,CityofDenton,Texas.ConsultationwiththeCity’sattorneys regardinglegalissuesassociatedwiththeacquisitionorcondemnationoftherealpropertydescribedabove whereapublicdiscussionoftheselegalmatterswouldconflictwiththedutyoftheCity’sattorneystotheCity ofDentonandtheDentonCityCouncilundertheTexasDisciplinaryRulesofProfessionalConductoftheState BarofTexas,orwouldjeopardizetheCity’slegalpositioninanyadministrativeproceedingorpotential litigation. (Eagle Electric Substation) City of DentonPage 1 of 1Printed on 1/4/2019 powered by Legistar© City Hall City of Denton 215 E. McKinney St. Denton, Texas 76201 www.cityofdenton.com Legislation Text File #:ID 19-085,Version:1 AGENDA CAPTION Beth Honeycutt regarding a community concern in neighborhoods. City of DentonPage 1 of 1Printed on 1/4/2019 powered by Legistar© City Hall City of Denton 215 E. McKinney St. Denton, Texas 76201 www.cityofdenton.com Legislation Text File #:ID 19-003,Version:1 AGENDA CAPTION Consider adoption of an ordinance approving an at-grade road crossing Supplemental Agreement by and between the City of Denton and the Union Pacific Railroad Company relating to the widening of Vintage Boulevard within the railroad right-of-way located at Mile Post 723.02, Choctaw Subdivision, within the County and City of Denton, Texas; providing for the expenditure of funds (the initial estimate is $649,220.00 for the rework of signals and surface materials, plus $8,300.00 License Fee. The City will receive a final invoice upon completion of the work.); and providing an effective date. City of DentonPage 1 of 1Printed on 2/1/2019 powered by Legistar© City of Denton City Hall 215 E. McKinney Street Denton, Texas www.cityofdenton.com _____________________________________________________________________________________ AGENDA INFORMATION SHEET DEPARTMENT: Capital Projects CM/ DCM/ ACM: Mario Canizares DATE: January 8, 2019 SUBJECT Consider adoption of an ordinance approving an at-grade road crossing Supplemental Agreement by and between the City of Denton and the Union Pacific Railroad Company relating to the widening of Vintage Boulevard within the railroad right-of-way located at Mile Post 723.02, Choctaw Subdivision, within the County and City of Denton, Texas; providing for the expenditure of funds (the initial estimate is $649,220.00 for the rework of signals and surface materials, plus $8,300.00 License Fee, the City will receive a final invoice upon completion of the work.); and providing an effective date. BACKGROUND The scope of the Vintage Boulevard widening and improvements project (programmed as Bonnie Brae Phase 2) is to widen existing Vintage Boulevard from a two-lane street section to a six-lane divided urban street section (curb & gutter throughout, with medians). The present budget estimate for the planned street project, inclusive of the subject railroad crossing improvements, is $13,000,000. OPTIONS 1. Approve the proposed ordinance. 2. Decline to approve the proposed ordinance. 3. Table for future consideration. RECOMMENDATION Staff recommends approval of the ordinance. ESTIMATED SCHEDULE OF PROJECT Bonnie Brae Phase 2 (Vintage Blvd.) project is scheduled to be advertised for bid June 2019, construction start October 2019 (24 months to complete). PRIOR ACTION/REVIEW (Council, Boards, Commissions) None related to the subject Supplemental Agreement FISCAL INFORMATION The subject road project is being funded with a combination of Regional Toll Revenue (RTR) funds, match funds. Specifically, funding for the subject grade crossing improvements will be drawn on Capital Project account number 350288402.1360.40100. STRATEGIC PLAN RELATIONSHIP -oriented road map that will help the City achieve its vision. The foundation for the plan is the five long-term Key Focus Areas (KFA): Organizational Excellence; Public Infrastructure; Economic Development; Safe, Livable, and Family-Friendly Community; and Sustainability and Environmental Stewardship. While individual items may support multiple KFAs, this specific City Council agenda item contributes most directly to the following KFA and goal: Related Key Focus Area: Public Infrastructure Related Goal: 2.1 Continuously improve the quality of City roadways EXHIBITS 1. Agenda Information Sheet 2. Location map 3. Site map 4. Ordinance Respectfully submitted: W. Todd Estes, P.E. Director Capital Projects/City Engineer Prepared by: Paul Williamson Capital Projects Location Map CITY OF DENTON Downtown Denton E OAK ST E HICKORY ST E SYCAMORE ST MAPLE ST MORSE ST Vintage Blvd. RR Crossing Area E RYAN RD Vintage Boulevard Union Pacific RR grade crossing µ 07001,4002,800 Feet Site Map CITY OF DENTON Vintage Blvd. RR Crossing Area Vintage Boulevard RR crossing µ 012.52550 Feet UNION PACIFIC RAILROAD COMPANY SUPPLEMENTAL AGREEMENT Form Approved: AVP-Law 01/21/2013 UPRR Folder No.: 2357-20 UPRR Audit No.: 240631 SUPPLEMENTAL AGREEMENT _______________________________________ THIS SUPPLEMENTAL AGREEMENT(the “Supplement”)is made as of the ______ day of ______________, 2018, by and between UNION PACIFIC RAILROAD COMPANY, a Delaware corporation (“Railroad”)and the CITY OF DENTON, a municipal corporation or political subdivision,to be addressed at601 East Hickory, Suite B, Denton, TX 76205. (“Political Body”). RECITALS: By instrument datedMay, 16, 2006,Union Pacific Railroad Company and the Political Body entered into an Agreement for Public At-grade CrossingAgreementidentified as the Railroad’s Folder No. 2357-20, UPRR Audit No. 240631 (the “OriginalAgreement”) covering the construction, maintenance, and repair, of theVintage Parkway at-grade public road Existing Crossing Area(DOTNo. 795327T), located at Mile Post 723.02 on its Choctaw Subdivision in or near Denton, Denton County, Texas(the “Existing Crossing Area”)as shown on the revised Exhibit A-1 (railroad survey print) and Exhibit A-2 (detailed plans), bothattached hereto and hereby made part hereof. The Political Bodydesires to amend the Original Agreement to widen the Existing Crossing Area to include the “Additional Crossing Area”. The Existing Crossing Area and Additional Crossing Area are defined as the Road Crossing. Additionally, the Original Agreement is amended to include a new Exhibit C-4 for theSurface Estimate of Material and Force Account Work,andnew Exhibit C-5for Signal Estimate of Material and Force Account Work. AGREEMENT: NOW, THEREFORE, IT IS MUTUALLY AGREEDBY AND BETWEEN THE PARTIES HERETO AS FOLLOWS: SECTION 1 - AMENDMENT OF THE ORIGINAL AGREEMENT Effective as of , 2018,Railroadand Political Body amend the Original Agreement to replace Exhibits A-1andExhibit A-2,Location Print and Detailed Print, with the attached Exhibit A-1 dated 1/23/18and Exhibit A-2 dated 6/7/17attached hereto and hereby made part hereof. Railroad and Political Body further amend the Original Agreement to include a new Exhibit C-4 and Exhibit C-5, Estimates of Signal and Surface Material and Force Account Work for the installation of a new warning devices and crossing surface at DOT 795327T, attached hereto and hereby made a part hereof. Page1of3 Page 1of 2 UNION PACIFIC RAILROAD COMPANY SUPPLEMENTAL AGREEMENT Form Approved: AVP-Law 01/21/2013 Article 6(A) of the Original Agreement is amended to include a new Signal Estimate ofMaterial and Force Account Work, dated ,markedExhibit C-4,and newSurface Estimate of Material and Force Account Work, dated , , xhibit C-5attached hereto and hereby made a part hereof(the “NewEstimate”). As markedE noted in theNewEstimate, the Licensor’s estimated cost for the Licensor’s work associated with the RoadCrossing is . SECTION 2 - RAILROAD GRANTS RIGHT For and in consideration EIGHTTHOUSAND THREE HUNDRED DOLLARS ($8,300.00)to be paid by the Political Body to the Railroad upon the execution and delivery of this Agreement and in further considerationof the Political Body’s agreement to perform and comply with the terms of this Agreement, the Railroad hereby grants to the Political Body the right to construct, maintain and repair the Roadway over and across the Crossing Area. SECTION 3. WORK TO BE PERFORMED BY RAILROAD; BILLING SENT TO POLITICAL BODY; POLITICALBODY'S PAYMENT OF BILLS A.The work to be performed by the Railroad, at the Political Body's sole cost and expense, is described in the Railroad's Material and Force Account Estimate dated 9/12/18,markedExhibit C, attached hereto and hereby made a part hereof (the "Estimate"). As set forth in the Estimate, the Railroad's estimated cost for the Railroad's work associated with the Projectis Thousand Dollars ($.00) B.The Railroad, if it so elects, may recalculate and update the Estimate submitted to the Political Body in the event the Political Body does not commence construction on the portion of the Project located on the Railroad’s property within six (6) months from the date of the Estimate. C.The Political Body acknowledges that the Estimate does not include any estimate of flagging or other protective service costs that are to be paid by the Political Body or the Contractor in connection with flagging or other protective services provided by the Railroad in connection with the Project. All of such costs incurred by the Railroad are to be paid by the Political Body or the Contractor as determined by the Railroad andthe Political Body. If it is determined that the Railroad will be billing the Contractor directly for such costs, the Political Body agrees that it will pay the Railroad for any flagging costs that have not been paid by any Contractor within thirty (30) days of the Contractor's receipt of billing. D. The Railroad shall send progressive billing to the Political Body during the Project, and final billing to the Political Body within one hundred eighty (180) days after receiving written notice from the Political Body that all Project work affecting the Railroad's property has been completed. Page2of3 Page 2of 2 EXHIBIT A-1 To Supplemental Agreement Railroad Survey Print Additional A-1 EXHIBIT A-2 To Supplemental Agreement Detailed Plans EXHIBIT C-4 To Supplemental Agreement Signal Material and Force Account Work EXHIBIT C-5 To Supplemental Agreement Surface Material and Force Account Work DATE: 2018-09-12 ESTIMATE OF MATERIAL AND FORCE ACCOUNT WORK BY THE UNION PACIFIC RAILROAD THISESTIMATE GOOD FOR 6 MONTHS EXPIRATION DATE IS :2019-03-13 DESCRIPTION OF WORK: DENTON,TX / VINTAGE PKWY / DOT # 795327T-4 CHOCTAW SUB / MP 723.02 REMOVE EXISTING 56' CROSSING SURFACE, INSTALL NEW 112' CROSSING SURFACE INCLUDING TIES,RAIL, AND OTM PROJECT WAS BUILT USING FED ADDITIVE W/ OVERHEAD AND INDIRECT 234% PROJECT TO BE FUNDED 100% BY THE CITY OF DENTON PID: 93918 AWO: 32270MP,SUBDIV: 723.01, CHOCTAW SERVICE UNIT: 11 CITY: ROANOKESTATE: TX DESCRIPTIONQTY UNIT LABOR MATERIAL RECOLL UPRR TOTAL ------------------------------------------------ ENGINEERING WORK ENGINEERING360836083608 LABOR ADDITIVE 234%844484448444 --------------------------------------- TOTAL ENGINEERING120521205212052 SIGNAL WORK LABOR ADDITIVE 234%188918891889 SIGNAL 960 5 965965 --------------------------------------- TOTAL SIGNAL2849 5 28542854 TRACK & SURFACE WORK BALAST 1.00 CL 825 1002 18271827 BILL PREP FEE900900900 CONTRACT EQUIPMENT RNTL10000 1000010000 ENVIRONMENTAL PERMIT10 1010 FOREIGN LINE FREIGHT1006 10061006 HOMELINE FREIGHT900 900900 LABOR ADDITIVE 234%188971889718897 MATL STORE EXPENSE26 2626 OTM771 1104 18751875 RAIL320.00 LF 2578 5532 81108110 RDXING112.00 TF 871 18285 1915619156 SALES TAX1479 14791479 TRK-SURF,LIN214221422142 WELD1341 356 16971697 XTIE99.00 EA 3191 10729 1392013920 --------------------------------------- TOTAL TRACK & SURFACE30616 51329 8194581945 --------------- LABOR/MATERIAL EXPENSE45517 51334 ---------------- RECOLLECTIBLE/UPRR EXPENSE96851 0 -------- ESTIMATED PROJECT COST96851 THE ABOVE FIGURES ARE ESTIMATES ONLY AND SUBJECT TO FLUCTUATION. IN THE EVENT OF AN INCREASE OR DECREASE IN THE COST OR QUANTITY OF MATERIAL OR LABOR REQUIRED, UPRR WILL BILL FOR ACTUAL CONSTRUCTION COSTS AT THE CURRENT EFFECTIVE RATE. City Hall City of Denton 215 E. McKinney St. Denton, Texas 76201 www.cityofdenton.com Legislation Text File #:ID 19-004,Version:1 AGENDA CAPTION ConsideradoptionofanordinancebytheCityofDentonauthorizingtheCityManager,orhisdesignee,to executeanaddendumtotheInterlocalAgreementbetweentheCityofDentonandtheTexasDepartmentof PublicSafetyfortheenforcementofstatelawsonuniformcommercialvehicleweightwithintheTexas Transportation Code Chapter 621, Subchapter F; and providing an effective date. City of DentonPage 1 of 1Printed on 2/1/2019 powered by Legistar© City of Denton City Hall 215 E. McKinney Street Denton, Texas www.cityofdenton.com _____________________________________________________________________________________ AGENDA INFORMATION SHEET DEPARTMENT: POLICE CM/ DCM/ ACM: Todd Hileman DATE: January 8, 2019 SUBJECT Consider approval of an ordinance by the City of Denton authorizing the City Manager, or his designee, to execute an addendum to the Interlocal Agreement between the City of Denton and the Texas Department of Public Safety for the enforcement of state laws on uniform commercial vehicle weight within the Texas Transportation Code Chapter 621, Subchapter F; and providing an effective date. BACKGROUND On May 22, 2018, the City of Denton and the Texas Department of Public Safety executed an Interlocal Agreement, per Ordinance No. 18-787. Since the inception of the agreement, an addendum has been added for the inclusion of the Township of Little Elm as a partnering agency. RECOMMENDATION Staff recommends approval. FISCAL INFORMATION None. STRATEGIC PLAN RELATIONSHIP -oriented road map that will help the City achieve its vision. The foundation for the plan is the five long-term Key Focus Areas (KFA): Organizational Excellence; Public Infrastructure; Economic Development; Safe, Livable, and Family-Friendly Community; and Sustainability and Environmental Stewardship. While individual items may support multiple KFAs, this specific City Council agenda item contributes most directly to the following KFA and goal: Related Key Focus Area: Safe, Liveable & Family-Friendly Community Related Goal: 4.1 Enhance public safety in the community EXHIBITS Exhibit 1: Agenda Information Sheet Exhibit 2: Ordinance and Addendum Respectfully submitted: Frank Dixon Chief of Police Prepared by: Frank Padgett Deputy Chief City Hall City of Denton 215 E. McKinney St. Denton, Texas 76201 www.cityofdenton.com Legislation Text File #:ID 19-005,Version:1 AGENDA CAPTION ConsideradoptionofanordinanceoftheCityofDentonauthorizingaserviceagreementbetweentheCityof DentonandDentonCountyFriendsoftheFamily;authorizingtheCityManager,orhisdesignee,toexecute saidagreement;providingfortheexpenditureofCouncilContingencyfunds;andprovidingforaneffective date. ($950) City of DentonPage 1 of 1Printed on 2/1/2019 powered by Legistar© City of Denton City Hall 215 E. McKinney Street Denton, Texas www.cityofdenton.com _____________________________________________________________________________________ AGENDA INFORMATION SHEET DEPARTMENT: CM/ DCM/ ACM: Todd Hileman DATE: January 8, 2019 SUBJECT Consider adoption of an ordinance of the City of Denton authorizing a service agreement between the City of Denton and Denton County Friends of the Family; authorizing the City Manager, or his designee, to execute said agreement; providing for the expenditure of Council Contingency funds; and providing for an effective date. ($950) BACKGROUND This Agreement allows for the total expenditure of $950 from Council Contingency Funds. (Council Member Deb Armintor, $500; Council Member Keely Briggs, $200; and Council Member Paul Meltzer, $250. Key provisions of the Agreement include: Funds shall be used by Denton County Friends of the family for expenses related to the 2019 Black History Program. In addition to other reporting requirements, documentation in the form of cancelled checks and/or corresponding receipts specifically detailing expenditure of funds for the purpose provided is required upon request. FISCAL INFORMATION Funding for the Agreement will come from Council Contingency Funds. STRATEGIC PLAN RELATIONSHIP -oriented road map that will help the City achieve its vision. The foundation for the plan is the five long-term Key Focus Areas (KFA): Organizational Excellence; Public Infrastructure; Economic Development; Safe, Livable, and Family-Friendly Community; and Sustainability and Environmental Stewardship. While individual items may support multiple KFAs, this specific City Council agenda item contributes most directly to the following KFA and goal: Related Key Focus Area: Safe, Liveable & Family-Friendly Community Related Goal: 4.4 Provide outstanding leisure, cultural, and educational opportunities EXHIBITS Exhibit 1 Agenda Information Sheet Exhibit 2 Ordinance and Agreement Respectfully submitted: Todd Hileman City Manager Prepared by: Robin Fox Senior Executive Assistant City Hall City of Denton 215 E. McKinney St. Denton, Texas 76201 www.cityofdenton.com Legislation Text File #:ID 19-006,Version:1 AGENDA CAPTION ConsideradoptionofanordinanceoftheCityofDentonauthorizingaserviceagreementbetweentheCityof DentonandDentonCountyMHMR;authorizingtheCityManager,orhisdesignee,toexecutesaidagreement; providing for the expenditure of Council Contingency funds; and providing for an effective date. ($1,100) City of DentonPage 1 of 1Printed on 2/1/2019 powered by Legistar© City of Denton City Hall 215 E. McKinney Street Denton, Texas www.cityofdenton.com _____________________________________________________________________________________ AGENDA INFORMATION SHEET DEPARTMENT: CM/ DCM/ ACM: Todd Hileman DATE: January 8, 2019 SUBJECT Consider adoption of an ordinance of the City of Denton authorizing a service agreement between the City of Denton and Denton County MHMR; authorizing the City Manager, or his designee, to execute said agreement; providing for the expenditure of Council Contingency funds; and providing for an effective date. ($1,100) BACKGROUND This Agreement allows for the total expenditure of $1,100 from Council Contingency Funds. (Council Member Deb Armintor). Key provisions of the Agreement include: Funds shall be used by Denton County MHMR for the Crisis Residential Home program. In addition to other reporting requirements, documentation in the form of cancelled checks and/or corresponding receipts specifically detailing expenditure of funds for the purpose provided is required upon request. FISCAL INFORMATION Funding for the Agreement will come from Council Contingency Funds. STRATEGIC PLAN RELATIONSHIP -oriented road map that will help the City achieve its vision. The foundation for the plan is the five long-term Key Focus Areas (KFA): Organizational Excellence; Public Infrastructure; Economic Development; Safe, Livable, and Family-Friendly Community; and Sustainability and Environmental Stewardship. While individual items may support multiple KFAs, this specific City Council agenda item contributes most directly to the following KFA and goal: Related Key Focus Area: Safe, Liveable & Family-Friendly Community Related Goal: 4.4 Provide outstanding leisure, cultural, and educational opportunities EXHIBITS Exhibit 1 Agenda Information Sheet Exhibit 2 Ordinance and Agreement Respectfully submitted: Todd Hileman City Manager Prepared by: Robin Fox Senior Executive Assistant City Hall City of Denton 215 E. McKinney St. Denton, Texas 76201 www.cityofdenton.com Legislation Text File #:ID 19-009,Version:1 AGENDA CAPTION ConsideradoptionofanordinanceoftheCityofDentonauthorizingtheCityManager,orhisdesignee,to executeacooperativeagreementwiththeTexasParksandWildlifeDepartmentestablishingtheRangeCreek public hunting area; and providing an effective date. City of DentonPage 1 of 1Printed on 2/1/2019 powered by Legistar© City of Denton City Hall 215 E. McKinney Street Denton, Texas www.cityofdenton.com _____________________________________________________________________________________ AGENDA INFORMATION SHEET DEPARTMENT: Utilities Administration CM/ DCM/ ACM: Mario Canizares DATE: January 8, 2019 SUBJECT Consider adoption of an ordinance of the City of Denton authorizing the City Manager, or his designee, to execute a cooperative agreement with the Texas Parks and Wildlife Department establishing the Range Creek public hunting area; and providing an effective date. BACKGROUND The Range Creek Wetlands area, located on the north east edge of Ray Roberts Lake, is included in Supplement Agreement 1 to the Park Management Contract for Ray Roberts Lake. The area is generally 5 miles northeast of Tioga along Range Creek and consists of six wetland cells constructed in 1991. The area has been managed under a cooperative agreement between the City of Denton and Texas Parks and Wildlife since September of 2001 which allowed public hunting under Type II or an Annual Public Hunting/ Walk-In Hunting permit. The Texas Parks and Wildlife Department (TPWD) has been upgrading public hunting access points around Ray Roberts Lake and determined that the existing Agreement should be updated prior to any work being completed on the Range Creek Area. The agreement being considered includes terms and language updates desired by both parties and consistent with TPWD and City of Denton agreements. The revised agreement will ensure that Texas Parks and Wildlife continues to manage the public hunting land associated with the Range Creek area and that improvements can be made as TPWD funding allows. RECOMMENDATION Staff recommends approval of an Ordinance authorizing the City Manager, or his designee, to execute a Cooperative Agreement with Texas Parks and Department for the Range Creek public hunting area. ESTIMATED SCHEDULE OF PROJECT Ongoing PRIOR ACTION/REVIEW (Council, Boards, Commissions) N/A FISCAL INFORMATION There is no financial obligation associated with this agreement. BID INFORMATION STRATEGIC PLAN RELATIONSHIP -oriented road map that will help the City achieve its vision. The foundation for the plan is the five long-term Key Focus Areas (KFA): Organizational Excellence; Public Infrastructure; Economic Development; Safe, Livable, and Family-Friendly Community; and Sustainability and Environmental Stewardship. While individual items may support multiple KFAs, this specific City Council agenda item contributes most directly to the following KFA and goal: Related Key Focus Area: Sustainable & Environmental Stewardship Related Goal: 5.1 Responsibly manage Denton's water, land, and other natural resources EXHIBITS Exhibit 1: Agenda Information Sheet Exhibit 2: Range Creek Ordinance and Agreement Respectfully submitted: Katherine Barnett Sustainability and Customer Initiatives Manager Legal point of contact: Trey Lansford at 940-349-8333. City Hall City of Denton 215 E. McKinney St. Denton, Texas 76201 www.cityofdenton.com Legislation Text File #:ID 19-020,Version:1 AGENDA CAPTION ConsideradoptionofanordinanceoftheCityofDenton,Texas,aTexashome-rulemunicipalcorporation, authorizingtheCityManagertoexecuteacontractforthesupplyofbulkhydratedlime,slurrylime,andquick limeforvariousCityofDentondepartments;providingfortheexpenditureoffundstherefor;andprovidingan effectivedate(IFB-6929awardedtoLhoistNorthAmericaofTexas,Ltd.,inthefive(5)yearnot-to-exceed amount of $800,000). City of DentonPage 1 of 1Printed on 2/1/2019 powered by Legistar© City Hall City of Denton 215 E. McKinney Street Denton, Texas www.cityofdenton.com _____________________________________________________________________________________ AGENDA INFORMATION SHEET DEPARTMENT: Materials Management CM: Todd Hileman DATE: January 8, 2019 SUBJECT Consider adoption of an ordinance of the City of Denton, Texas, a Texas home-rule municipal corporation, authorizing the City Manager to execute a contract for the supply of bulk hydrated lime, slurry lime, and quick lime for various City of Denton departments; providing for the expenditure of funds therefor; and providing an effective date (IFB 6929 awarded to Lhoist North America of Texas, Ltd., in the five (5) year not-to-exceed amount of $800,000). BID INFORMATION /BACKGROUND Request for the supply of bulk hydrated lime, slurry lime, and quick lime utilized by various City departments in the maintenance and new construction of streets, utility lines, street cuts and backfilling operations. These materials are ordered on an as-needed basis. Lime is used to stabilize the subgrade of the roadway. City crews mix a certain percentage of lime into the soil during the reconstruction process based on the recommendations from the geotechnical study. The soil is then compacted and tested for proper moisture content. The lime stabilized soil creates a sturdy platform to support the asphalt or concrete roadways on both our Capital Improvement Projects and our Operating and Maintenance projects. Invitation for Bids was sent to 193 prospective suppliers of this item. In addition, specifications were placed on the Materials Management website for prospective suppliers to download and advertised in the local newspaper. One (1) bid was received by Lhoist North America of Texas, Ltd. RECOMMENDATION Award a contract with Lhoist North America of Texas, Ltd., for the supply of bulk hydrated lime, slurry lime and quick lime for the City of Denton, in the five (5) year not-to-exceed amount of $800,000. PRINCIPAL PLACE OF BUSINESS Lhoist North America of Texas, Ltd. Fort Worth, TX ESTIMATED SCHEDULE OF PROJECT This is a five (5) year contract. FISCAL INFORMATION These services will be funded from multiple departments Operating Budget throughout the five (5) years. The initial purchase will be funded from Streets account 350469467. Requisition #140757 has been entered into the Purchasing software system in the amount of $22,100. STRATEGIC PLAN RELATIONSHIP gic Plan is an action-oriented road map that will help the City achieve its vision. The foundation for the plan is the five long-term Key Focus Areas (KFA): Organizational Excellence; Public Infrastructure; Economic Development; Safe, Livable, and Family-Friendly Community; and Sustainability and Environmental Stewardship. While individual items may support multiple KFAs, this specific City Council agenda item contributes most directly to the following KFA and goal: Related Key Focus Area: Public Infrastructure Related Goal: 2.1 Continuously improve the quality of City roadways EXHIBITS Exhibit 1: Agenda Information Sheet Exhibit 2: Bid Tabulation Exhibit 3: Ordinance and Contract Respectfully submitted: Lori Hewell, 940-349-7100 Purchasing Manager For information concerning this acquisition, contact: Todd Estes at 940-349-8917. Legal point of contact: Mack Reinwand at 940-349-8333. City Hall City of Denton 215 E. McKinney St. Denton, Texas 76201 www.cityofdenton.com Legislation Text File #:ID 19-054,Version:1 AGENDA CAPTION ConsideradoptionofanordinanceoftheCityofDenton,Texas,aTexashome-rulemunicipalcorporation, authorizingtheCityManagertoexecuteaProfessionalServicesAgreementwithHDREngineering,Inc.,for EngineeringServicesnecessaryforthedesignofintersectionimprovementsfortheSmallTransportation Projectassetforthintheagreement;providingfortheexpenditureoffundstherefor;andprovidinganeffective date(RFQ6590-047-ProfessionalServicesAgreementforEngineeringServicesawardedtoHDR Engineering, Inc., in the not-to-exceed amount of $346,680). City of DentonPage 1 of 1Printed on 2/1/2019 powered by Legistar© City of Denton City Hall 215 E. McKinney Street Denton, Texas www.cityofdenton.com _____________________________________________________________________________________ AGENDA INFORMATION SHEET DEPARTMENT: Materials Management CM: Todd Hileman DATE: January 8, 2019 SUBJECT Consider adoption of an ordinance of the City of Denton, Texas, a Texas home-rule municipal corporation, authorizing the City Manager to execute a Professional Services Agreement with HDR Engineering, Inc., for Engineering Services necessary for the design of intersection improvements for the Small Transportation Project as set forth in the agreement; providing for the expenditure of funds therefor; and providing an effective date (RFQ 6590-047 Professional Services Agreement for Engineering Services awarded to HDR Engineering, Inc., in the not-to-exceed amount of $346,680). INFORMATION /BACKGROUND At the August 26, 2017, City Council Retreat, City Council gave direction to Staff to develop a short-term plan that would make immediate traffic flow improvements within the City. As a result, traffic engineering staff identified six intersection improvements that would address citizen complaints, alleviate congestion, and improve safety. The intersections were identified based on the amount of traffic congestion, the ease of design and implementation, and the immediate and noticeable impact on drivers. This program will continue in FY 2018-2019 with six new intersections: Project Service Area Short Term Improvement University Dr/Nottingham D Add left turn lanes (north-south) Loop 288/McKinney E Add right turn lanes in the north-south direction Sherman/Loop 288 D Align through lanes by widening Sherman Drive McKinney/Woodrow Ln E Add westbound right turn lane Hercules/Locust C Add left turn lanes in all direction Improve intersection sight distance (safety) by Long Road/Stuart Road D realigning the westbound approach HDR will design the shaded intersections noted above as described in more detail in their scope of work. City of Denton staff will design the other two intersection improvements. Request for Qualifications for professional engineering services was solicitation process. City Council approved a pre-qualified list of engineering firms on March 6, 2018, and June 5, 2018 (Ordinance 2018-331). RECOMMENDATION Award a contract with HDR Engineering, Inc., for Professional Engineering Services for the Fiscal Year 2018-2019 Small Transportation Project, in the not-to-exceed amount of $346,680. PRINCIPAL PLACE OF BUSINESS HDR Engineering, Inc. Dallas, TX ESTIMATED SCHEDULE OF PROJECT The final design of all four intersections will be completed within approximately six (6) months from notice to proceed. FISCAL INFORMATION These services will be funded from Engineering Project account 360166402.1341.40100. Requisition# 140618 has been entered into the Purchasing software system for this project in the amount of $346,680. The budgeted amount for this project is $3,236,976.26. STRATEGIC PLAN RELATIONSHIP -oriented road map that will help the City achieve its vision. The foundation for the plan is the five long-term Key Focus Areas (KFA): Organizational Excellence; Public Infrastructure; Economic Development; Safe, Livable, and Family-Friendly Community; and Sustainability and Environmental Stewardship. While individual items may support multiple KFAs, this specific City Council agenda item contributes most directly to the following KFA and goal: Related Key Focus Area: Public Infrastructure Related Goal: 2.2 Enhance connectivity and seek solutions to improve mobility EXHIBITS Exhibit 1: Agenda Information Sheet Exhibit 2: Ordinance and Contract Respectfully submitted: Lori Hewell, 349-7148 Purchasing Manager For information concerning this acquisition, contact: Michael D. Smith, 940-349-7656. Legal point of contact: Mack Reinwand at 940-349-8333. City Hall City of Denton 215 E. McKinney St. Denton, Texas 76201 www.cityofdenton.com Legislation Text File #:ID 19-055,Version:1 AGENDA CAPTION ConsideradoptionofanordinanceoftheCityofDenton,Texas,aTexashome-rulemunicipalcorporation, authorizingtheCityManagertoexecuteacontractwithNorthTexasUmpireAssociation(NTUA),forthe supplyofcertifiedsoftballofficiatingservicesfortheParksandRecreationDepartment;providingforthe expenditureoffundstherefor;andprovidinganeffectivedate(IFB6907-SectionB-Part1awardedtoNorth Texas Umpire Association, in the three (3) year not-to-exceed amount of $135,150). City of DentonPage 1 of 1Printed on 2/1/2019 powered by Legistar© City of Denton City Hall 215 E. McKinney Street Denton, Texas www.cityofdenton.com _____________________________________________________________________________________ AGENDA INFORMATION SHEET DEPARTMENT: Materials Management CM: Todd Hileman DATE: January 8, 2019 SUBJECT Consider adoption of an ordinance of the City of Denton, Texas, a Texas home-rule municipal corporation, authorizing the City Manager to execute a contract with North Texas Umpire Association (NTUA), for the supply of certified softball officiating services for the Parks and Recreation Department; providing for the expenditure of funds therefor; and providing an effective date (IFB 6907 - Section B Part 1 awarded to North Texas Umpire Association, in the three (3) year not-to-exceed amount of $135,150). INFORMATION /BACKGROUND The Adult Softball league is operated by the Parks and Recreation Department (PARD) staff and offered in the spring, summer, and fall seasons. A three (3) year history of adult softball enrollment and revenue are displayed on the graphic below. PARD is estimating to generate a ten (10) percent increase in revenue for the current fiscal year. Adult Softball 3 year Enrollment History Total Registered # of teams/season Total # of games/season Total Revenue/year Year Spring Summer Fall Total Year Spring Summer Fall Total Year Revenue $ 78,245.00 2016 78 75 60 213 2016 312 300 240 852 2016 $ 66,180.00 2017 78 68 52 198 2017 312 272 208 792 2017 $ 54,860.00 2018 58 63 47 168 2018 232 252 188 672 2018 Invitation for Bids was sent to 37 prospective suppliers for these items. In addition, specifications were placed on the Materials Management website for prospective suppliers to download and advertised in the local newspaper. No bids were submitted for Section A Sports Officials or Section B Part 2 USSSA and will be going back out to re-bid Section A and Section B - Part 2 at later date. One (1) bid was received for Section B Part 1. Under the contract, NTUA would be scheduled to officiate approximately 850 softball games for the Parks and Recreation Department during the 2018-19 fiscal year. The Association will provide two USA Softball umpires and one scorekeeper per game. NTUA will provide officials and scorekeepers for the City of Denton Parks & Recreation, Adult Softball Leagues that will be sanctioned by USA Softball rules/governing body. RECOMMENDATION Award a contract with North Texas Umpire Association, for the supply of certified softball officiating services for the Parks and Recreation Department, in a three (3) year not-to-exceed amount of $135,150. PRINCIPAL PLACE OF BUSINESS North Texas Umpire Association (NTUA) Denton, TX ESTIMATED SCHEDULE OF PROJECT This is a three (3) year contract. FISCAL INFORMATION These services will be funded from Parks and Recreation account 411170.7868. Invoices will be paid as work is performed. STRATEGIC PLAN RELATIONSHIP -oriented road map that will help the City achieve its vision. The foundation for the plan is the five long-term Key Focus Areas (KFA): Organizational Excellence; Public Infrastructure; Economic Development; Safe, Livable, and Family-Friendly Community; and Sustainability and Environmental Stewardship. While individual items may support multiple KFAs, this specific City Council agenda item contributes most directly to the following KFA and goal: Related Key Focus Area: Safe, Liveable & Family-Friendly Community Related Goal: 4.4 Provide and support outstanding leisure, cultural, and educational opportunities EXHIBITS Exhibit 1: Agenda Information Sheet Exhibit 2: Bid Tabulation Exhibit 3: Ordinance and Contract Respectfully submitted: Lori Hewell, 940-349-7100 Purchasing Manager For information concerning this acquisition, contact: Laura Behrens at 940-349-7469. Legal point of contact: Mack Reinwand at 940-349-8333. Exhibit 2 IFB 6907 - Bid Tabulation for Sports Referees and Softball Umpires Respondent's Business Name:North Texas Umpire Association (NTUA) Principal Place of Business (City and State): Denton, TX Game Slot Length Max Number Rate Per Total (incl. warm-up, Number of Extended Assigning SPORT Item #of UOMOfficial, Price, per game half-time, Referees Amt.Fee SeasonsPer Game changeover)Needed SECTION A - SPORTS OFFICIALS Youth Basketball 6U$ - 12EA45 minutes2$ -$ - $ - Youth Basketball 8U-12U$ - 22EA60 minutes2$ -$ - $ - Adult Basketball$ - 33EA55 minutes2$ -$ - $ - Youth Flag Football 6U$ - 42EA45 minutes2$ -$ - $ - Youth Flag Football 8U-16U$ - 52EA60 minutes2$ -$ - $ - Adult Flag Football$ - 62EA60 minutes2$ -$ - $ - Youth Volleyball 8U-14U$ - 73EA60 minutes1$ -$ - $ - Adult Volleyball$ - 83EA55 minutes1$ -$ - $ - Adult Kickball$ - 92EA60 minutes1$ -$ - $ - Youth Outdoor Soccer 6U$ - 102EA45 minutes1$ -$ - $ - Youth Outdoor Soccer 8U-11U$ - 112EA60 minutes1$ -$ - $ - Youth Indoor Soccer 4-5U$ - 122EA45 minutes1$ -$ - $ - Youth Indoor Soccer 8U-11U$ - 132EA60 minutes1$ -$ - $ - Adult Outdoor Soccer $ - 142EA60 minutes2$ -$ - $ - SECTION B - SOFTBALL UMPIRES - PART 1: USA SOFTBALL Game Slot Length Max Number Rate Per Scorekeeper Total Month Seasons (incl. warm-up, Number of Extended Assigning Item #of UOMSPORTOfficial, Cost, Per Game SuppliesPrice, per Beginhalf-time, UMPIRES Amt.Fee SeasonsPer Game(if applicable)game changeover)Needed 153EAAdult Softball Co-Ed LeaguesMarch, May, August55 minutes2$ 18.00 $ 12.00$ 48.00$ 3.00 $ 2.00$ 53.00 Adult Softball Co-Ed For 163EAFunMarch, May, August55 minutes1$ 27.00 $ 12.00$ 39.00$ 2.00 $ 2.00$ 43.00 (1 Umpire & 1 Scorekeeper 173EAAdult Softball Mens LeaguesMarch, May, August55 minutes2$ 18.00 $ 12.00$ 48.00$ 3.00 $ 2.00$ 53.00 18VariesEAAdult Softball TournamentsSpring, Summer, Fall55 minutes2$ 18.00 $ 12.00$ 48.00$ 3.00 $ 2.00$ 53.00 Contract Total (3 Years): $ 135,150.00 SECTION B - SOFTBALL UMPIRES - PART 2: USSSA SOFTBALL Game Slot Length Max Number Rate Per Scorekeeper Total Month Seasons (incl. warm-up, Number of Extended Assigning Item #of UOMSPORTOfficial, Cost, Per Game SuppliesPrice, per Beginhalf-time, UMPIRES Amt.Fee SeasonsPer Game(if applicable)game changeover)Needed 193EAAdult Softball Co-Ed LeaguesMarch, May, August55 minutes2$ -$ - $ - $ -$ - $ - 203EAAdult Softball Mens LeaguesMarch, May, August55 minutes2$ -$ - $ - $ -$ - $ - 21VariesEAAdult Softball TournamentsSpring, Summer, Fall55 minutes2$ -$ - $ - $ -$ - $ - City Hall City of Denton 215 E. McKinney St. Denton, Texas 76201 www.cityofdenton.com Legislation Text File #:ID 19-056,Version:1 AGENDA CAPTION ConsideradoptionofanordinanceoftheCityofDenton,aTexashome-rulemunicipalcorporation,extending theauthoritytopurchasethroughtheNationalInter-localGovernmentalPurchasingAlliance(NationalIPA) GasolineandDieselFuelsasawardedbytheCityofFortWorthContract#14-012;andprovidinganeffective date (File 5750 - extending a contract with Martin Eagle Oil Company, Inc., to December 31, 2019). City of DentonPage 1 of 1Printed on 2/1/2019 powered by Legistar© City of Denton City Hall 215 E. McKinney Street Denton, Texas www.cityofdenton.com _____________________________________________________________________________________ AGENDA INFORMATION SHEET DEPARTMENT: Materials Management CM: Todd Hileman DATE: January 8, 2019 SUBJECT Consider adoption of an ordinance of the City of Denton, a Texas home-rule municipal corporation, extending the authority to purchase through the National Inter-local Governmental Purchasing Alliance (National IPA) Gasoline and Diesel Fuels as awarded by the City of Fort Worth Contract #14-012; and providing an effective date (File 5750 - extending a contract with Martin Eagle Oil Company, Inc., to December 31, 2019). FILE INFORMATION /BACKGROUND On February 3, 2015, City Council approved the purchase of gasoline and diesel fuel through an interlocal contract with the City of Fort Worth and the National Intergovernmental Purchasing Alliance (National IPA), from the awarded vendor, Martin Eagle Oil Company, Inc. Based on the competitive pricing offered through this contract, and the availability of the fuel from a local vendor, staff is recommending the extension of the authority to purchase from Martin Eagle Oil Company, Inc., utilizing the National Intergovernmental Purchasing Alliance Fuel Agreement. Since February 3, 2015, we have spent approximately $9.6 million of this contract. This leaves approximately $2.9 million available in 2019. Pricing obtained through the City of Fort Worth and the National Intergovernmental Purchasing Alliance (National IPA) has been competitively bid and meets the statutory requirements of Texas Local Government Code 271.102. PRIOR ACTION/REVIEW (COUNCIL, BOARDS, COMMISSIONS) On February 3, 2015, Council approved the contract with Martin Eagle Oil Company, Inc. (Ordinance 15- 017) RECOMMENDATION Award an extension of the authority to purchase through the National Intergovernmental Purchasing Alliance Fuel Agreement of Ethanol Blend (E85), Unleaded, Diesel, and Bio-Diesel fuels from Martin Eagle Oil Company to December 31, 2019. PRINCIPAL PLACE OF BUSINESS Martin Eagle Oil Company, Inc. Denton, TX ESTIMATED SCHEDULE OF PROJECT The City of Fort Worth Agreement was approved for a five (5) year term through December 31, 2019. FISCAL INFORMATION Funds have been budgeted for this contract in the Fiscal Year 2017-2018 Transportation Operations account 350000.7854. STRATEGIC PLAN RELATIONSHIP -oriented road map that will help the City achieve its vision. The foundation for the plan is the five long-term Key Focus Areas (KFA): Organizational Excellence; Public Infrastructure; Economic Development; Safe, Livable, and Family-Friendly Community; and Sustainability and Environmental Stewardship. While individual items may support multiple KFAs, this specific City Council agenda item contributes most directly to the following KFA and goal: Related Key Focus Area: Organizational Excellence Related Goal: 1.1 Manage financial resources in a responsible manner EXHIBITS Exhibit 1: Agenda Information Sheet Exhibit 2: National IPA Fuel Agreement Exhibit 3: Extension Letter Exhibit 4: Ordinance 2015-017 Exhibit 5: Ordinance Respectfully submitted: Lori Hewell, 940-349-7100 Purchasing Manager For information concerning this acquisition, contact: Lori Hewell at 940-349-7100. Legal point of contact: Mack Reinwand at 940-349-8333. City Hall City of Denton 215 E. McKinney St. Denton, Texas 76201 www.cityofdenton.com Legislation Text File #:ID 19-030,Version:1 AGENDA CAPTION Considernominations/appointmentstotheCity’sBoards,Commissions,andCommittees:Health&Building Standards Commission, Library Board, and Committee on Persons with Disabilities. City of DentonPage 1 of 1Printed on 1/4/2019 powered by Legistar© City of Denton City Hall 215 E. McKinney Street Denton, Texas www.cityofdenton.com _____________________________________________________________________________________ AGENDA INFORMATION SHEET DEPARTMENT: City Manager’s Office DCM: Bryan Langley DATE: January 8, 2019 SUBJECT Consider nominations/appointments to the City’s Boards, Commissions, and Committees: Health & Building Standards Commission, Library Board, and Committee on Persons with Disabilities. BACKGROUND Exhibit 2 includes the vacancies for Boards, Commissions, and Committees plus nominations Council has submitted for consideration. Nominations made at this meeting can be voted on should the Council desire. Approval would be contingent on completion of the confirmation process. EXHIBITS Exhibit 1 – Agenda Information Sheet Exhibit 2 – Nominations Sheet Respectfully submitted: Jennifer Walters City Secretary BOARDANDCOMMISSIONNOMINATIONS BoardCouncilMemberNomination City Hall City of Denton 215 E. McKinney St. Denton, Texas 76201 www.cityofdenton.com Legislation Text File #:ID 19-107,Version:1 AGENDA CAPTION Consider adoption of an ordinance approving a compromise settlement agreement implementing the mediated terms of a claim settlement in litigation styled Cleopatra Birckbichler v. City of Denton, cause no. 4:18-cv- 00893-ALM, pending in the federal district court for the eastern district of Texas, Sherman division, as discussed in closed session;and further approving the expenditure of funds therefor; and directing the city manager, or his designee, and the City’s Attorneys to effectuate as necessary and appropriate the terms of the compromise settlement agreement; and declaring an effective date. City of DentonPage 1 of 1Printed on 1/4/2019 powered by Legistar© City of Denton City Hall 215 E. McKinney Street Denton, Texas www.cityofdenton.com _____________________________________________________________________________________ AGENDA INFORMATION SHEET DEPARTMENT: LEGAL CM/ DCM/ ACM: Aaron Leal, City Attorney AGENDA DATE: January 8, 2019 SUBJECT Consider adoption of an Ordinance approving a compromise settlement agreement implementing the mediated terms of a claim settlement in Cleopatra Birckbichler v. City of Denton, Cause No. 4:18-cv-00893-ALM, pending in the Federal District Court for the Eastern District of Texas, Sherman Division, as discussed in closed session; and further approving the expenditure of funds therefor; and directing the City Manager, or his designee, and the Cittorneys to effectuate as necessary and appropriate the terms of the compromise settlement agreement; and declaring an effective date. BACKGROUND: This is an employment discrimination claim alleged against the City of Denton by employee Cleopatra Birckbichler, through her attorney, Austin P. Campbell. At mediation, the parties negotiated a settlement that included a settlement in the amount of $68,000, pursuant to mediated terms. th Upon presentation of the terms to Council in closed session on December 18, requested to proceed in accordance with the mediated terms, and to prepare a compromise settlement agreement. This compromise settlement agreement will be publicly approved by ordinance as an item for individual consideration. OPTIONS: As settlement of the matter was already negotiated in accordance with Council direction, within previously delegated settlement authority, the option is to formally approve the settlement. RECOMMENDATION: Proceed with formal approval. EXHIBITS: Draft ordinance. Respectfully submitted: /s/ Jerry E. Drake, Jr. First Assistant City Attorney Prepared by: Kelly Campbell Legal Secretary Legal Staff Contact: Jerry E. Drake, Jr. Stephanie Lang First Assistant City Attorney Deputy City Attorney City Hall City of Denton 215 E. McKinney St. Denton, Texas 76201 www.cityofdenton.com Legislation Text File #:Z17-0004d,Version:1 AGENDA CAPTION HoldapublichearingandconsideradoptionofanordinanceoftheCityofDenton,Texas,assigninganinitial zoningclassificationandusedesignationofNeighborhoodResidential6(NR-6)withanoverlay,on approximately118.04acresofland,generallylocated,northofEastMcKinneyStreetwestofSouthTrinity Road,intheCityofDenton,DentonCounty,Texas;adoptinganamendmenttotheCity’sofficialzoningmap; providingforapenaltyinthemaximumamountof$2,000.00forviolationsthereof;providingforseverability andestablishinganeffectivedate.ThePlanningandZoningCommissionrecommendapproval(7-0).(Z17- 0004,TheWoodlandsofMcKinney,CindyJackson)ThisitemwascontinuedfromtheDecember4,2018 Council Meeting. City of DentonPage 1 of 1Printed on 1/4/2019 powered by Legistar© City of Denton City Hall 215 E. McKinney Street Denton, Texas www.cityofdenton.com _____________________________________________________________________________________ AGENDA INFORMATION SHEET DEPARTMENT: Department of Development Services CM: Todd Hileman DATE: January 8, 2019 SUBJECT Hold a public hearing and consider adoption of an ordinance of the city of Denton, Texas, assigning an initial zoning classification and use designation of Neighborhood Residential 6 (NR-6) with an overlay on approximately 118.04 acres of land generally located north of East McKinney Street and west of South zoning map; providing for a penalty in the maximum amount of $2,000.00 for violations thereof; providing forseverability and establishing an effective date. The Planning and Zoning Commission recommend approval (7-0). (Z17-0004, The Woodlands of McKinney, Cindy Jackson) This item was continued from the December 4, 2018 Council meeting. BACKGROUND The applicant is requesting an initial zoning designation of Neighborhood Residential 6 (NR-6) District in conjunction with a SUP request (S17-0008) in order to develop the site with a Manufactured Housing Development with a density of 4.15 dwelling units per acre and six single family residences on one-acre lots, totaling six acres. The NR-6 District permits manufactured housing developments upon approval of a SUP. The zoning request must be approved in order for the SUP to be considered. A full staff analysis is attached in Exhibit 2. OPTIONS 1. Approve as submitted. 2. Approve subject to conditions. 3. Table item. 4. Deny RECOMMENDATION Staff and the Planning and Zoning Commission recommends approval of the request subject to the following conditions for approval of this request. These conditions will bring the site into compliance with the goals and objectives of the Denton Plan 2030. The proposed conditions for approval are: An overlay be placed on the property with the following conditions: 1. The maximum permitted density on the site shall be no more than four dwelling units per gross acre. 2. Permitted land uses on the site: a. 498 Modular and manufactured homes on 120.1 gross acres; and b. Six single family detached housing on minimum one-acre lots. PRIOR ACTION/REVIEW (Council, Boards, Commissions) On August 22, 2017, the City Council approved a request to annex 118.04 acres of the subject site into the city. (A17-0001) On October 24, 2018, the Planning and Zoning Commission recommended approval of a request for an initial zoning classification of Neighborhood Residential 6 (NR-6) with conditions on 118.04 acres of land. STRATEGIC PLAN RELATIONSHIP -oriented road map that will help the City achieve its vision. The foundation for the plan is the five long-term Key Focus Areas (KFA): Organizational Excellence; Public Infrastructure; Economic Development; Safe, Livable, and Family-Friendly Community; and Sustainability and Environmental Stewardship. While individual items may support multiple KFAs, this specific City Council agenda item contributes most directly to the following KFA and goal: Related Key Focus Area: Economic Development Related Goal: 3.4 Encourage development, redevelopment, recruitment, and retention EXHIBITS 1. Agenda Information Sheet 2. Staff Analysis 3. Site Location Map 4. Existing Zoning Map 5. Proposed Zoning Map 6. Future Land Use Map 7. Comparison of Permitted Uses 8. Proposed Project Amenities and Housing Styles 9. Concept Plan 10. Public Notification Map 11. Planning and Zoning Commission Meeting Minutes 12. Draft Ordinance 13. Staff Presentation Respectfully submitted: Richard Cannone, AICP Deputy Director/Planning Director Prepared by: Cindy Jackson, AICP Senior Planner Z17-0004 Notification Map 500ft Buffer 200ft Buffer 5301 E McKinney St 6601 Grissom Rd LUTHA 0165330660 Feet SITECOD In Favor µ ETJ Neutral Parcels NAA 8/1/20 Opposed Roads Date: 10/23/2018 The City of Denton has prepared maps for departmental use. These are not official maps of the City of Denton and should not be used for legal, engineering or surveying purposes but rather for reference purposes. These maps are the property of the City of Denton and have been made available to the public based on the Public Information Act. The City of Denton makes every effort to produce and publish the most current and accurate information possible. No warranties, expressed or implied, are provided for the data herein, its use, or its interpretation. Utilization of this map indicates understanding and acceptance of this statement. Locatedoutside200-ftBoundary 0.289 acre property is generally located on the east side of Bernard Street, approximately 350 feet north of Eagle Drive, in the City of Denton, Denton County, Texas. (FR18-0009, 711 Bernard, Ron Menguita) Chair Rozell opened the Public Hearing item 4C. Ron Menguita, Principal Planner, presented Public Hearing item 4C. Menguita stated the applicant intends to replat the property into two lots and develop a duplex on each lot. The approximately 0.289 acre property is generally located on the east side of Bernard Street, approximately 350 feet north of Eagle Drive. Notices were sent out and no responses were received. Chair Rozell closed the Public Hearing. Commissioner Larry Beck motioned, Commissioner Mat Pruneda seconded approve Public Hearing item 4C. Motion approved (7-0). Commissioner Alfred Sanchez "aye", Commissioner Larry Beck "aye", Commissioner Jason Cole "aye", Chair Andrew Rozell "aye", Commissioner Mat Pruneda "aye", Commissioner Margie Ellis "aye", and Commissioner Tim Smith "aye". D. Hold a public hearing and consider a request by The Woodlands on McKinney Street, LLC to provide an initial zoning district designation of Neighborhood Residential 6 (NR- 6) District to an approximately 118.041 acre property. The property is generally located north of East McKinney Street and west of South Trinity Road. (Z17-0004, The Woodlands of McKinney Street, Cindy Jackson) E. Hold a public hearing and consider making a recommendation to City Council regarding a Specific Use Permit request by The Woodlands on McKinney Street, LLC. for a manufactured housing park on approximately 126.148 acres of land. The property is generally located north of East McKinney Street and west of South Trinity Road. (S17- 0008, The Woodlands of McKinney Street, Cindy Jackson) Chair Rozell stated Public Hearing items 4D and 4E would be heard together. Chair Rozell opened the Public Hearing 4D and 4E Cindy Jackson, Senior Planner, presented Public Hearing item 4D and 4E. Jackson stated the applicant is requesting an initial zoning designation of Neighborhood Residential 6 (NR-6) District, in conjunction with a SUP request (S17-0008) in order to develop the site with a Manufactured Housing Development with a density of 4.15 dwelling units per acre and six single family residences on one-acre lots, totaling six acres, the current zoning is Rural Residential (RD- 5X). The NR-6 District permits manufactured housing developments upon approval of a SUP. The zoning request must be approved in order for the SUP to be considered. Jackson stated staff does recommend approval of the request subject to the following conditions for approval of this request. These conditions will bring the site into compliance with the goals and objectives of the Denton Plan 2030. The proposed conditions for approval are: An overlay be placed on the property with the following conditions: 1. the maximum permitted density on the Б site shall be no more than four dwelling units per gross acre. 2. Permitted land uses on the site: A. 498 Modular and manufactured homes on 120.1 gross acres; and B. six single family detached housing on minimum one-acre lots. Jackson stated notices were sent out and the one response received a super majority vote is required from City Council in order of approval. Cindy Jackson, Senior Planner, presented Public Hearing item 4E. Jackson stated the applicant is requesting approval of a SUP to develop a Manufactured Housing Development with 498 stands on 120.1 acres with a density of 4.15 dwelling units per acre. The overall site contains 126.1 acres, however six one-acre lots for single family homes are proposed along South Trinity Road. A request to provide an initial zoning designation of NR-6 on the approximately 118 acres of the site is being heard concurrently with this request. The NR-6 District permits manufactured housing developments upon approval of a SUP. The zoning request must be approved in order for the SUP to be considered. Jackson stated staff does recommend approval of the request with the following conditions: 1. Allowed Land Uses: Only allowed land uses are 498 Modular and Manufactured Housing on 126.1 gross acres and six One-Acre Single Family Detached Housing. 2. There shall be a minimum of 6 acres of land developed as one-acre single family lots. These lots shall front TrinityRoad. 3. 40% of the existing tree canopy must be preserved. 4. 100% of the City of Denton ESA Areas shall be preserved, except for one roadway crossing. 5. A minimum 10 acres of open space/green space shall be provided. 6. Amenity Center - Minimum 4,500 square foot air- conditioned club house with pool and cabana. 7. Minimum of two 2-inch diameter trees shall be planted on each lot. 8. The homes to have brick or stone wainscoting for the skirting. 9. Deed Restrictions shall be reviewed and approved by the city prior to filing of the first Final Plat. Deed restrictions shall be filed with the county and include the following minimum requirements: A. Property ownership shall own and maintain all improvements on the property. This shall include all streets, wet utilities, landscaping, irrigation systems, fencing, landscape buffers along perimeter, creeks, drainage ways, ESA areas, etc. Only franchise utility improvements shall be owned and maintained by others. These utilities shall be installed specific easements as identified by the Final Plat. B. Property ownership is required to mow and edge all common areas and stand areas at least every two weeks in the Spring and Summer months. Every three weeks is required in the Fall and D. Property shall 100% owned by one entity. Winter months. C. Property shall be gated. E. Property shall be platted as a single lot. F. All manufactured homes shall be installed on an engineered reinforced concrete slab. G. All manufactured homes shall be structurally affixed to the concrete pad. H. Manufactured Homes must be offset a minimum of off the back of curb. Minimum wide driveway must be installed in front of the homes, therefore providing 2 off- street parking spots per home. I. All homes to have masonry skirting down to the concrete slab, on all sides of the home. 10. McKinney Street Screening & Landscape Buffer Improvements: A. B. 4-inch minimum diameter shade trees landscape buffer with automated irrigation systems. planted on ters, with a staggered row on each side of the proposed screening wall. C. masonry screening wall built on a 2- tall berm. Berm shall have a flat top of at least and a maximum side slope of 5:1. Creating an effective screening height of 10-11. 11. masonry screening wall to be installed between the one acre lots and remaining development. Fence to be installed with the first adjoining phase. 12. As a result of the TIA: A. There shall be three (3) public street access points for the development. Two connections along McKinney Street and one (1) alongTrinity Road. B. Developer shall dedicate the ultimate right-of-way for future Post Oak В Boulevard at no fee to the city, upon filing of the first Final Plat. This is approximately 1,100 linear feetparallel to the west property line and 1wide, equating to approximately 3.4 acres of land. C. Developer shall install two left turn lanes into the development along McKinney Street. D. Developer to install reinforced concrete public trail along the property frontage and terminate at the Ryan High School. Along the property frontage this trail will meander within the 2 landscape buffer and McKinney Street right-of- way. North of the site the trail will be installed inside the McKinney Street right- of-way. Jackson stated notices were sent out and with the one response received, super majority vote would be required from City Council in order of approval. Commissioner Beck requested the difference between a trailer park and the proposed development. Jackson stated a trailer home would have been developed before 1976 were on wheels, manufactured homes were built after 1976 are placed on an engineered foundation. Commissioner Sanchez questioned if modular homes are permitted within the City limits. Jackson stated yes modular homes are permitted by right. Commissioner Pruneda questioned what the yard size would be for these lots. Richard Cannone, Deputy Director of Development Services, stated the minimum requirements are no less than 40 feet in width, no less than 100 feet in depth and minimum area of 5000 square feet. Michael Holigan and Brent Murphree, the applicants, provided a presentation on the modular home development. Holigan stated the reason they choose this site was the location with other developments in the area. Commissioner Smith questioned the applicant if the intent for these homes is for the primary homeowner to purchase the home or the home to be purchased by the owner and converted into a rental property. Holigan stated the only part of the property that will be rented is the stands the modular homes sit on. Commissioner Smith questioned the cost to lease a stand. Holigan stated between 400 and 500 dollars per month. Commissioner Smith questioned if the commission could add a restriction to not allow occupancy tophase one McKinney Street has been updated. Jackson stated a condition could be added to the SUP stating the release of phase one should coincide with the completion of McKinney Street. Commissioner Ellis questioned if the maintenance to the homes is included in the lot rent. Holigan confirmed it is included in the rent cost. Commissioner Beck questioned City staff what it would take to help the residence of Lakeview Ranch with speed midigation. Cannone stated the issue is currently Lakeview Boulevard is designated as Collector Street, but with the mobility plan update it could be looked at and change with the direction of Post Oak Road. ЊЉ Commissioner Smith questioned if the applicant would consider adding speed mitigation to Lakeview Boulevard. Holigan agreed to add speed mitigation to Lakeview Boulevard. Commissioner Beck requested the applicant to explain their plans for tree mitigation. Murphree stated they are going to be preserving two heavily treed Environmentally Sensitive Areas (ESA) and also planting back matured trees. Jackson stated a tree preservation plan will be required during the platting process, in which the applicant will be required to preserve the high quality trees as well as secondary quality trees. Chair Rozell requested the Commission to take notes, only ask questions to the individual speaking and hold questions for the applicant or City staff until all public individuals have spoken. Chair Rozell stated since there are two public hearings open each speaker is being given six minutes to speak. The following individuals spoke during the Public Hearing: Michael Holigan, 2837 Creekway Dr., Carrollton, Texas 75010. Supports this request. Brent Murphree, 5750 Genesis Court, Frisco, Texas 75034. Supports this request. Jason Vannucci, 1901 Lakeview Blvd. Denton, Texas 76208. Opposed to the request Merritt Kirk, 1301 Lakeview Blvd., Denton, Texas 76208. Opposed to the request. Martha Lang, 908 Lakeview Blvd., Denton, Texas 76208. Opposed to the request. Sheila Roepke, 1402 Lakeview Blvd., Denton, Texas 76208. Opposed to the request. Ronald Bashor, 1108 Lakeview Boulevard, Denton, Texas 76208. Opposed to the request. Doug Herzog, 7909 Rodeo Drive, Denton, Texas 76208. Opposed to the request. Dainel Donegen, 1308 Lakeview Boulevard, Denton, Texas 76208. Opposed to the request. Emily Wilson, 8216 Oak Creek Lane, Denton, Texas 76208. Opposed to the request. Bill Roepka, 1402 Lakeview Boulevard, Denton, Texas 76208. Opposed to the request. Janet Glowicz, 8017 Stallion Street, Denton, Texas 76208. Opposed to the request. Steven Leach, 8200 Oak Creek Lane, Denton, Texas 76208. Opposed to the request Brian Flatley, 901 Lakeview Boulevard, Denton, Texas 76208. Opposed to the request. Bill Haddon, 2000 Lakeview Boulevard, Denton, Texas 76208. Opposed to the request. Kourosh Hemyari, 5915 Haraby Court, Dallas, Texas 75248. Opposed to the request. Berry Sangani, 4541 Lancelot Drive, Plano, Texas 75024. Opposed to the request. David Laney, 2501 Laney Circle, Denton, Texas 76208. Opposed to the request. Bobby Self, 7800 E McKinney Street, Denton, Texas 76208. Opposed to the request. Shane Broughton, 8540 Stallion Court, Denton, Texas 76208. Opposed to the request. Tim Blakenship, 1197 S. Trinity Road, Denton, Texas 76208. Opposed to the request. David Pritchard, 1125 S. Trinity Road, Denton, Texas 76202. Neutral to the request. Luigi Manzi, 1115 S Trinity Road, Denton, Texas 76208. Opposed to the request. Don Wiley, 8001 Stallion Street, Denton, Texas 76208. Opposed to the request. Cody Hogan, 589 Trinity Road, Denton, Texas 76208. Opposed to the request. Sunny Emery, 8009 Stallion Street, Denton, Texas 76208. Opposed to the request. Janet McKinstry, 8108 Oak Creek Lane, Denton, Texas 76208. Opposed to the request. Gail Ashby, 8209 Oak Creek Lane, Denton, Texas 76208. Opposed to the request. ЊЊ The following individuals requested not to speak during the Public Hearing: Ronald Zitsch, 2200 Lakeview Boulevard, Denton, Texas 76208. Opposed to the request. Eric J Saull, 908 Lakside Boulevard, Denton, Texas 76208. Opposed to the request. Alberta Kirk, 1301 Lakeview Boulevard, Denton, Texas 76208. Opposed to the request. Alice Gill, 7401 Stallion Street, Denton, Texas 76208. Opposed to the request. Scott Henkes, 409 Lakeview Boulevard, Denton, Texas 76208. Opposed to the request. Jenifer Gellhest, 8509 Stallion Court, Denton, Texas 76208. Opposed to the request. Alice Haddon, 2000 Lakeview Boulevard, Denton, Texas 76202. Opposed to the request. Max Estes, 801 Lakeview Boulevard, Denton, Texas 76208. Opposed to the request. Don Albrectit, 1100 Lakeview Boulevard, Denton, Texas 76208. Opposed to the request. Chris Lohmann, 8208 Oak Creek Lane, Denton, Texas 76208. Opposed to the request. Bill McKinarey, 8108 Oak Creek Lane, Denton, Texas 76208. Opposed to the request. Patricia Battiato, 7909 Oak Creek Lane, Denton, Texas 76208. Opposed to the request. Larry Ashby, 8209 Oak Creek Lane, Denton, Texas 76208. Opposed to the request. Debbie Henkes, 409 Lakeview Boulevard, Denton, Texas 76208. Opposed to the request. The residents from the Lakeview Ranch development and located on Trinity Road, voiced their concerns regarding speeding issues, traffic concerns, dumping issues, property value decreases, drainage issues and the lift station capabilities. Chair Rozell closed the Public Hearing. Chair Rozell called a recess at 11:43p.m. Chair Rozell reconvened the Regular Meeting at 11:53p.m. Commissioner Beck requested the applicant to discuss the amenities they will be providing. Murphee stated they will have an amenity center, eight foot fence and adding enhancements. Commissioner Beck stated the proposed amenities is accessible on the website. Murphee responded to the concerns of the speakers, he stated it is required by the City of Denton if you are on an arterial street than you have to have a six foot fence as a barrier but they are adding an eight foot fence as an enhancement. Commissioner Pruneda questioned what the terms of the lease and are homeowners able to lock in a rate. Holigan stated it would depend on the rates the competition is promoting. Commissioner Pruneda questioned if the applicant has looked a drainage issues. Murphee stated they are required to do a drainage analysis to assure the development will not be impacting any one downstream. Sanchez questioned the interest rate on a modular home. Holigan stated last time he spoke to Palm Harbor homes it was 5 to 7 percent. Commissioner Ellis questioned if the applicant spoke with Denton Independent School District (DISD). Holigan stated no they have not spoken with DISD. ЊЋ Chair Rozell questioned if there would be garages or car ports and what parking will be available. Murphee stated there will be driveways for each unit that fit two cars, the garages or car ports will be up to the homeowner. Commissioner Beck requested staff to explain the notification process. Jackson stated the 200 foot notification is based on the Texas local government code requirements, the City of Denton also sends out postcards to the residents 500 feet from the property. Jerry Drake, First Assistant City Attorney, stated the mailings would go to the owners on the most current tax role and does not include properties in the Extra-Territorial Jurisdiction (ETJ). Chair Rozell questioned if the Commission has the ability to add a condition to mitigate the traffic issues on another property. Jackson stated the applicant cannot be required to improve offsite, however staff is able to talk to the traffic engineer regarding the issue. Commissioner Ellis thanked the citizens for coming out, she stated as a city we need to remove Lakeview Boulevard as a collector street. Commissioner Ellis continued to state she is struggling with the vote, but a lot of the issues everyone is having is not the applicants fault and she wishes DISD was notified. Jackson stated when a property is annexed into the City of Denton staff is required to contact all the service providers including DISD. Jackson noted DISD is required to respond back and is aware of the development. Commissioner Beck stated he is also having issues with the development. Commissioner Beck stated this development is not the ideal solution for low income housing, but it is an element of it and it will help to some degree. Commissioner Beck continued to state the main issue he has is the diminishing effect. Commissioner Smith stated no applicant, City staff, Planning and Zoning Commissioners, City Council members, would ever bring a project that has deception or devious intent to the City of Denton. Commissioner Smith noted safety is a big issue for him regarding this project and by no volition of the action, but if this development is going to cause a higher safety issue in Lakeview Ranch development. Commissioner Smith stated if there is a denial from City Council the applicant would be required to wait 12 months until they are able to bring back the application for reconsideration, unless there is substantial change in the circumstances. Commissioner Smith questioned if a substantial change could be where the Director of Transportation provides assistance to the safety issues in Lakeview Ranch to predicate substantial change in an application. Jackson stated substantial change typically has to do with the land use, density or lay out. Drake stated those are usually the factors considered. Jackson stated the applicant has requested to self-impose a requirement to improve the safety on Trinity Road. Murphee stated they are here to help and self-impose the condition. Commissioner Pruneda stated one of the things he finds encouraging is when talking with the applicant thru out the night they have been more than willing to make accommodations to try and make things better. ЊЌ Chair Rozell noted the zoning case will be voted on first and the specific use will be second. Commissioner Larry Beck motioned, Commissioner Mat Pruneda seconded to approve Public Hearing item 4D, along with the purposed conditions: An overlay be placed on the property with the following conditions: 1. the maximum permitted density on the site shall be no more than four dwelling units per gross acre. 2. Permitted land uses on the site: A. 498 Modular and manufactured homes on 120.1 gross acres; and B. six single family detached housing on minimum one-acre lots; and an amendment to require the applicant to work with the Lakeview Ranch neighborhood with the goal of reducing traffic issues in the neighborhood. Motion approved (7-0). Commissioner Alfred Sanchez "aye", Commissioner Larry Beck "aye", Commissioner Jason Cole "aye", Chair Andrew Rozell "aye", Commissioner Mat Pruneda "aye", Commissioner Margie Ellis "aye", and Commissioner Tim Smith "aye". Drake stated the amendment requested from Commissioner Beck should be included motion for Public Hearing item 4E. Commissioner Alfred Sanchez motioned, Commissioner Mat Pruneda seconded to approve Public Hearing item 4E with staffs condtions: with the following conditions: 1. Allowed Land Uses: Only allowed land uses are 498 Modular and Manufactured Housing on 126.1 gross acres and six One- Acre Single Family Detached Housing. 2. There shall be a minimum of 6 acres of land developed as one-acre single family lots. These lots shall front Trinity Road. 3. 40% of the existing tree canopy must be preserved. 4. 100% of the City of Denton ESA Areas shall be preserved, except for one roadway crossing. 5. A minimum 10 acres of open space/green space shall be provided. 6. Amenity Center - Minimum 4,500 square foot air-conditioned club house with pool and cabana. 7. Minimum of two 2-inch diameter trees shall be planted on each lot. 8. The homes to have brick or stonewainscoting for the skirting. 9. Deed Restrictions shall be reviewed and approved by the city prior to filing of the first Final Plat. Deed restrictions shall be filed with the county and include the following minimum requirements: A. Property ownership shall own and maintain all improvements on the property. This shall include all streets, wet utilities, landscaping, irrigation systems, fencing, landscape buffers along perimeter, creeks, drainage ways, ESA areas, etc. Only franchise utility improvements shall be owned and maintained by others. These utilities shall be installed specific easements as identified by the Final Plat. B. Property ownership is required to mowand edge all common areas and stand areas at least every two weeks in the Spring and Summer months. Every three weeks is required in the Fall and Winter months. C. Property shall be gated. D. Property shall 100% owned by one entity. E. Property shall be platted as a single lot. F. All manufactured homes shall be installed on an engineered reinforced concrete slab. G. All manufactured homes shall be structurally affixed to the concrete pad. H. Manufactured Homes must be offset a minimum of off the back of curb. Minimum wide driveway must be installed in front of the homes, therefore providing 2 off-street parking spots per home. I. All homes to have masonry skirting down to the concrete slab, on all sides of the home. 10. McKinney Street Screening & Landscape Buffer Improvements: A. landscape buffer with automated irrigation B. 4-inch minimum diameter shade trees planted on ters, with a systems. staggered row on each side of the proposed screening wall. C. masonry screening wall built on a 2- tall berm. Berm shall have a flat top of at least and a maximum side slope of 5:1. Creating an effective screening height of 10-11. 11. masonry screening wall to be installed between the one acre lots ЊЍ and remaining development. Fence to be installed with the first adjoining phase. 12. As a result of the TIA: A. There shall be three (3) public street access points for the development. Two connections along McKinney Street and one (1) along Trinity Road. B. Developer shall dedicate the ultimate right-of-way for future Post Oak Boulevard at no fee to the city, upon filing of the first FinalPlat. This is approximately 1,100 linear feet parallel to the west property line and 1wide, equating to approximately 3.4 acres of land. C. Developer shall install two left turn lanes into the development along McKinney Street. D. Developer to install reinforced concrete public trail along the property frontage and terminate at the Ryan High School. Along the property frontage this trail will meander within the 2landscape buffer and McKinney Street right-of- way. North of the site the trail will be installed inside the McKinney Street right- of-way. Motioned approved (7-0). Commissioner Alfred Sanchez "aye", Commissioner Larry Beck "aye", Commissioner Jason Cole "aye", Chair Andrew Rozell "aye", Commissioner Mat Pruneda "aye", Commissioner Margie Ellis "aye", and Commissioner Tim Smith "aye". F. Hold a public hearing and consider a request by Budget Self Storage - Denton, Ltd., for a Specific Use Permit to allow quick vehicle servicing in Suite #110 and Suite #111 of Budget Self-Storage. The property is located at 2820 Virginia Circle. (S18-0002, Budget Self Storage, Cindy Jackson) Chair Rozell opened the Public Hearing item 4F. Cindy Jackson, Senior Planner, presented Public Hearing 4F. Jackson stated the request is for a Specific Use Permit (SUP) for two existing automobile repair facilities located on the site. Quick Vehicle Service is permitted with the approval of a Specific Use Permit in the NRMU zoning district. The building in which the two subject automotive repair facilities are located was designed as an office/warehouse building comprising ten office/warehouse suites. Jackson stated staff recommends denial of this request. Should the Planning and Zoning Commission decide to approve this request, Staff recommends the following conditions: 1. A new Certificate of Occupancy for the correct use, Quick Vehicle Servicing, must be applied for and approved. 2. This Specific Use Permit shall be limited to these two particular business owners and these two particular suites. 3. This Specific Use Permit will be limited to the use description and floor plan shown in Exhibit 7 and Exhibit 8. 4. Overnight outdoor storage of automobiles is prohibited. 5. No more than two customer vehicles per each business can be parked in the parking spaces in front of the building during business hours. Jerry Drake, First Assistant City Attorney stated he is unable to endorse the second recommended condition due to the issue regarding the use of the land and should be designated to the owner of the land not the business owners. Jackson stated staff can withdraw the second recommendation. Commissioner Smith questioned if the second condition could be placed on this specific Certificate of Occupancy (CO). Drake stated the Commission would need to add verbiage to the SUP that includes the suites and states upon consideration of a CO in order to prevent this use from being grandfather in. The following individual spoke during the Public Hearing: ЊЎ S:\\Planning\\Projects\\2017 Cases\\Z17-0004 Woodlands of McKinney Street\\Ordianances\\Z17-0004 Ordinance Rev.docx ORDINANCE NO. ______________ AN ORDINANCE OF THE CITY OF DENTON, TEXAS, ASSIGNING AN INITIAL ZONING CLASSIFICATION AND USE DESIGNATION OF NEIGHBORHOOD RESIDENTIAL 6 (NR- 6), WITH AN OVERLAY, ON APPROXIMATELY 118.04 ACRES OF LAND, GENERALLY LOCATED, NORTH OF EAST McKINNEY STREET AND WEST OF SOUTH TRINITY ROAD, IN THE CITY OF DENTON, DENTON COUNTY, TEXAS; ADOPTING AN PROVIDING FOR A PENALTY IN THE MAXIMUM AMOUNT OF $2,000.00 FOR VIOLATIONS THEREOF; PROVIDING FOR SEVERABILITY; AND ESTABLISHING AN EFFECTIVE DATE. (Z17-0004) WHEREAS, Brent Murphree, representing The Woodlands of McKinney, L.P., has applied for an initial zoning designation on approximately 118.04 of land legally described and depicted in Exhibit B, attached hereto and incorporated herein by reference (hereinafter, the to a Neighborhood Residential 6 (NR-6) zoning district and use classification; and WHEREAS, on October 24, 2018, the Planning and Zoning Commission, in compliance with the laws of the State of Texas, have given the requisite notices by publication and otherwise, and have held due hearings and afforded full and fair hearings to all property owners interested in this regard, and have recommended approval (7-0) of the change in zoning district and use classification; and WHEREAS, on December 4, 2018, the City Council postponed the public hearing to January 8, 2019; and WHEREAS, on January 8, 2019, the City Council likewise conducted a public hearing as required by law, and finds that the request meets and complies with all substantive and procedural standards set forth in Section 35.3.4 of the Denton Development Code, and is consistent with the Denton Plan and the Denton Development Code; WHEREAS, the Planning and Zoning Commission and the City Council of the City of Denton, in considering the application for a change in the zoning classification of the property, have determined that the proposed use is in the best interest of the health, safety, morals,and general welfare of the City of Denton, and accordingly, the City Council of the City of Denton is of the opinion and finds that said zoning change is in the public interest and should be granted as set forth herein; NOW THEREFORE, THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS: SECTION 1. The findings and recitations contained in the preamble of this ordinance are incorporated herein by reference and found to be true. SECTION 2. The initial zoning district and use classification for the Property is hereby assigned as Neighborhood Residential 6 (NR-6), with the following overlay conditions: 1. The maximum permitted density on the site shall be no more than four dwelling units per gross acre. 2. Permitted land uses on the site: a. Modular and manufactured homes; and b. Six single family detached housing on minimum one-acre lots located along S. Trinity Road. SECTION 3. hereby amended to show the change in the zoning district and use classification. SECTION 4. If any provision of this ordinance or the application thereof to any person or circumstance is held invalid by any court, such invalidity shall not affect the validity of the provisions or applications, and to this end, the provisions of this ordinance are severable. SECTION 5. Any person, firm, partnership or corporation violating any provision of this ordinance shall, upon conviction, be deemed guilty of a misdemeanor and shall be punished by fine in a sum not exceeding $2,000.00 for each offense. Each day that a provision of this ordinance is violated shall constitute a separate and distinct offense. SECTION 6. An offense committed before the effective date of this ordinance is governed by prior law and the provisions of the Denton Code of Ordinances, as amended, in effect when the offense was committed and the former law is continued in effect for this purpose. SECTION 7. In compliance with Section 2.09(c) of the Denton Charter, this ordinance shall become effective fourteen (14) days from the date of its passage, and the City Secretary is hereby directed to cause the caption of this ordinance to be published twice in the Denton Record- Chronicle, a daily newspaper published in the City of Denton, Texas, within ten (10) days of the date of its passage. The motion to approve this ordinance was made by __________________________ and seconded by _________________________________, the ordinance was passed and approved by the following vote \[___ - ___\]: Aye Nay Abstain Absent Chris Watts, Mayor: ______ ______ ______ ______ Gerard Hudspeth, District 1: ______ ______ ______ ______ Keely G. Briggs, District 2: ______ ______ ______ ______ Don Duff, District 3: ______ ______ ______ ______ John Ryan, District 4: ______ ______ ______ ______ Deb Armintor, At Large Place 5: ______ ______ ______ ______ Paul Meltzer, At Large Place 6: ______ ______ ______ ______ PASSED AND APPROVED this the _________ day of ___________________, 2019. _____________________________________ CHRIS WATTS, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY BY: __________________________________ APPROVED AS TO LEGAL FORM: AARON LEAL, CITY ATTORNEY BY: _________________________________ Exhibit A Legal Description S:\\Planning\\Projects\\2017 Cases\\Z17-0004 Woodlands of McKinney Street\\Ordianances\\Z17-0004 Ordinance Rev.docx Exhibit B Planning Analysis Z17-0004/The Woodlands on McKinney City Council District 2 January 8, 2019 REQUEST: Hold a public hearing and consider adoption of an ordinance of the city of Denton, Texas, regarding an initial zoning classification from a Neighborhood Residential 6 (NR-6) zoning district and use classification with an overlay on approximately 118.04 acres of land generally located west of South Trinity Road in the City of Denton, Denton County, Texas; adopting an amendment violations thereof; providing a severability clause and an effective date. The Planning and Zoning Commission recommend approval (Z17-0004, The Woodlands of McKinney, Cindy Jackson) This item was continued from the December 4, 2018 Council meeting. OWNER: Michael Holigan The Woodlands on McKinney Street LLC APPLICANT: Brent Murphree, Kinley-Horn and Associates Inc. BACKGROUND: Brent Murphree, on behalf of The Woodlands on McKinney Street LLC, is requesting an initial zoning designation of Neighborhood Residential 6 (NR-6) District in conjunction with a SUP request (S17-0008) in order to develop the site with a Manufactured Housing Development. The NR-6 District permits manufactured housing developments upon approval of a Specific Use Permit (SUP). The zoning request must be approved in order for the SUP to be considered. Approximately 118.041 acres of the subject site was annexed into the City on August 22, 2017. The site has a placeholder zoning designation of Rural Residential 5X (RD-5X). The request for an initial zoning designation of NR-6 on this portion of the site will be an extension of the existing NR-6 zoning which is located adjacent to McKinney Street. The accompanying SUP application (S17-0008) includes the approximately 8.08 acres of land located along McKinney Street which is already zoned NR-6. With the SUP application, the applicant is proposing a gated manufactured housing development on the site to be developed in three phases as shown on Exhibit 9. The development will accommodate 498 stands for manufactured and modular homes and six one-acre lots developed with single family homes with an overall density of four dwelling units per acre. The 498 homes are anticipated to be both manufactured homes and modular homes (as defined below) built on permanent concrete foundations with a density of 4.15 dwelling units per acre. For clarification purposes, a manufactured home, modular home, and mobile home are defined as: 1. Manufactured homes are factory built in compliance with the HUD Title 6 construction standards which were approved in June, 1976. A manufactured home is not a mobile home and does not have wheels. 2. Modular homes are treated as traditional single family homes and are constructed per local building codes. The interior and exterior of modular homes are typically highly customized to the preferences of the home buyer. 3. Mobile homes are homes built prior to June, 1976. They were not built to any type of construction code, and they have wheels. Mobile homes are not proposed for this development. The site contains approximately 18.5 acres of Environmentally Sensitive Area (ESA) of which 100% will be preserved as a natural open space amenity for the residents. In addition to the ESA preservation area, the owner/developer proposes to provide approximately 15.4 acres of recreational open space including several small parks and an amenity center for the residents. Perimeter masonry screening walls are proposed along both McKinney Street and S. Trinity Road along with street trees and landscaping. The applicant has provided a list of project amenities with photos of anticipated housing types, attached as Exhibit 8. If this project is approved, platting and site plan approval is required to ensure compliance with all applicable land development codes. SITE DATA: The subject site for the zoning application consists of approximately 118.04 acres of land located on the north side of E. McKinney Street and the west side of S. Trinity Road. The site is currently used as a farm/ranch site with several single family homes, with the majority of the site devoted to agricultural uses and native pasture. The site has approximately 1,645.39 linear feet of frontage along E. McKinney Street and approximately 1,281 linear feet of frontage along S. Trinity Road. A future extension of Post Oak Boulevard is located on the western side of the site. Per the Mobility Plan: Post Oak Boulevard is designated as a Primary Arterial requiring 135 feet of right of way, designed with three travel lanes in each direction divided by a median; McKinney Street is classified as a Secondary Arterial requiring 110 feet of right of way, designed with two travel lanes in each direction divided by a median; and S. Trinity Road is classified as a Collector Street requiring 70 feet of right of way designed with two travel lanes, one in each direction, and street parking on both sides. The site will take access from McKinney Street with entrances, a right-in/right-out and a full access entrance aligning with a future median opening on McKinney. The applicant will install two left turn lanes into the site from McKinney Street. The ultimate right-of-way for Post Oak, equating to 1,100 linear feet, parallel to the subject site, will be dedicated with this project. The four-lane intersection of Post Oak and McKinney, with a transition to two-lanes will be constructed will be constructed with this project at the time of McKinney Street improvements. There are two planned access points along Post Oak, a right-in/right-out and a full access entrance aligning with a future median opening on Post Oak. SURROUNDING ZONING AND LAND USES: Northwest: North: Northeast: NR-2 and RD-5X RD-5X RD-5X Mobile Home Park and Mobile Home Park Farm/Ranch, and single Undeveloped family residential West: East: NR-2 ETJ and RD-5X SUBJECT PROPERTY Mobile Home Park Church and cemetery, S. Trinity Road, Farm/Ranch and Improved Pasture Southwest: South: Southeast: RD-5X NR-2, and RD-5X NR-1 and RD-5X E. McKinney Street, and E. McKinney Street, and Single Family Homes and Atmos Gas Storage Facility Atmos Gas Storage Facility Mobile Home Park CONSIDERATIONS: The request is to zone approximately 118.04 acres of land to the NR-6 District to permit a gated, Manufactured Housing Development on the site, along with six large lot single family lots located along S. Trinity Road. Section 35.3.4.B of the DDC establishes the following criteria for approval: 1. The proposed rezoning conforms to the Future Land Use element of The Denton Plan 2030. Per the Future Land Use Map in Denton Plan 2030, the subject property is designated as Low Density Residentialon is primarily intended to promote single- family housing, with lot sizes ranging from one acre or more in rural fringe areas up to . Dwellings in this land use district are generally one to two stories with private driveways and open space, consisting of privately maintained tree canopy and front, back, and side yards. Building and driveway orientation, the location of private garages, building material, and the presence of sidewalks vary by neighborhood and the era of neighborhood development. Generally these types of single-family neighborhoods are developed as distinct subdivisions that are linked by internal circulation systems with limited access to local and connector roads. Appropriate zoning districts for this designation would be Neighborhood Residential 1 (NR-1), Neighborhood Residential 2 (NR-2), and Neighborhood Residential 4 (NR-4). The proposed NR-6 is not consistent with the Future Land Use Map designation. 2. The proposed rezoning or Specific Use Permit facilitates the adequate provision of transportation, water, sewers, schools, parks, other public requirements and public convenience. The applicant will install two left turn lanes into the site from McKinney Street. The ultimate right-of-way for Post Oak, equating to 1,100 linear feet, parallel to the subject site, will be dedicated with this project. The four-lane intersection of Post Oak and McKinney, with a transition to two-lanes will be constructed will be constructed with this project at the time of McKinney Street improvements. There are two planned access points along Post Oak, a right-in/right-out and a full access entrance aligning with a future median opening on Post Oak. Water will be available from McKinney Street, and improvements to the lift station located on Trinity may be needed to accommodate this development. Compliance with all transportation, drainage, and infrastructure requirements is mandatory with platting and development of the site. 3. When a rezoning request does not conform to the Future Land Use designation for the property, which this request does not, then there are additional criteria provided in Section 35.3.3.B.3 that must be examined. The following criteria are intended to evaluate the competing interests of public health, safety, morals, and general welfare against the right to the use of the property: a. The existing land use pattern surrounding the property and the possible impact on existing or future development or uses that are in accordance with existing regulations. The existing land use pattern in this area of the City is a combination of agricultural uses such as farms and ranches mixed with some large lot single family homes, and mobile home parks. As previously noted, the mobile home park located on the west side of the subject site (Ashli Oaks) contains approximately 624 lots with a density of 5.99 dwelling units per acre. The site was developed between 1985 and 1986, and was zoned NR-2 during the 2002 citywide rezoning. The mobile home park located to the southeast (Denton Falls MHP) contains approximately 188 lots with a density of 5.12 dwelling units per acre. This site was developed with a mobile home park prior to being annexed into the city in 2013. The mobile home park to the north is mostly vacant with only approximately twelve homes located in the twelve acre park, giving it a density of one dwelling unit per acre. The park has been in this location since 1975 per DCAD records. Regardless, the proposed NR- 6 District would permit a higher density of residential development than what is intended for this area based on the Future Land Use designation. It should be noted that the applicant is proposing a maximum overall density of four dwelling units per acre on the subject site. The purpose of the NR-6 zoning is to permit the manufactured housing park, which is not permitted in the NR-4 zoning district, at a density of 4.15 dwelling units per acre. b. The possible creation of an isolated district unrelated to adjacent and nearby districts. The requested zoning designation of NR-6 permits a significantly higher residential density than is permitted in the surrounding NR-1 and NR-2 zoning districts, which are intended for single family uses with a maximum density of one to two dwelling units per acre. Non-residential uses permitted by right or with limitations in these two districts include churches, outdoor recreation, kennels, and veterinary clinics. More intensive non-residential uses, including day cares, elementary schools, and equestrian facilities, are permitted with a Specific Use Permit (SUP). The NR-6 district includes these uses with the same restrictions, and also permits duplexes by right, and live/work units with limitations. The NR-6 district permits Manufactured Housing Developments with approval of a SUP, which is the reason this zoning district is being requested. The proposed zoning district is not consistent with the existing surrounding zoning due to the higher permitted density, however, the applicant is proposing an overall density of four dwelling units per acre, which is considered low density per the Denton Plan 2030. The proposed NR-6 District would be an extension of the existing NR-6 district located along the north side of E. McKinney. NR-6 District is in the same surrounding zoning districts, but it is not considered to be a low-density residential district. The NR-6 district is typically more appropriate in transitional areas between low-density residential and more mixed-use areas. NR-6 District permits higher-density housing types such as duplexes and townhomes by right, whereas the surrounding lower-density districts either prohibit or limit these uses. These more intensive single-family residential uses do not currently exist in the subdivisions surrounding the subject property. However, staff has worked with the applicant developing conditions for approval which would bring the proposed density of the site down to 4.15 dwelling units per acre, and require six one-acre single family housing lots along South Trinity which would be consistent with the surrounding area. c. The population density in order to facilitate the adequate provision of transportation, water, sewer, schools, parks, public convenience, and other public requirements. The proposed rezoning would increase the population density in this area of the City. As previously noted, the site will take access from McKinney Street with entrances, a right-in/right-out and a full access entrance aligning with a future median opening on McKinney. The applicant will install two left turn lanes into the site from McKinney Street. The ultimate right-of-way for Post Oak, equating to 1,100 linear feet, parallel to the subject site, will be dedicated with this project. The four-lane intersection of Post Oak and McKinney, with a transition to two-lanes will be constructed will be constructed with this project at the time of McKinney Street improvements. There are two planned access points along Post Oak, a right- in/right-out and a full access entrance aligning with a future median opening on Post Oak. Water and Wastewater are available to the site. d. The cost to the City and other governmental entities in providing, improving, increasing or maintaining public utilities, schools, streets and other public safety measures. During the platting process, the precise requirements for public infrastructure extensions will be determined. Impact fees for water, wastewater, and roadways would be assessed with building permits. e. The possible impact on the environment, including but not limited to, drainage, soil erosion and sedimentation, flooding, air quality and water quantity. The applicant is proposing to preserve 100% of the ESA which is located on the site. A drainage analysis of the site will be conducted during the platting and civil engineering process to ensure no negative impact occurs to adjoining properties. f. Whether there are substantial reasons why the property cannot be used in accordance with existing zoning or that proposed by the Future Land Use Map. The property was recently annexed into the city and does not have a zoning designation beyond the RD-5X holding zone. The density of development as proposed (four dwelling units per acre) would be consistent with the current land use designation. g. The action shall be made with reasonable consideration of the character of the district and its peculiar suitability for particular uses, and with a view of conserving the value of buildings and encouraging the most appropriate use of land throughout the City. Based on the Denton Plan 2030 the most appropriate zoning for the subject property is the NR-4 District. The surrounding area is currently developed with higher density mobile home parks, however they were either developed before annexation into the city or under obsolete zoning codes. The proposed zoning would introduce a much high density than what currently permitted per the Future Land Use Plan. The applicant has proposed conditions for the site which limits the overall density of the site to four dwelling units per acre. STAFF RECOMMENDATION: Staff recommends approval of the request subject to the following conditions for approval of this request. These conditions will bring the site into compliance with the goals and objectives of the Denton Plan 2030. The proposed conditions for approval are: An overlay be placed on the property with the following conditions: 1. The maximum permitted density on the site shall be no more than four dwelling units per gross acre. 2. Permitted land uses on the site: a. 498 Modular and manufactured homes on 120.1 acres; and b. Six single family detached housing on minimum one-acre lots. PUBLIC NOTIFICATION: To comply with the public hearing notice requirements, 18 notices were sent to property owners within 200 feet of the subject property, 21 courtesy notices were sent to physical addresses within 500 feet of the subject property, a notice was published in the Denton Record Chronicle, and signs were placed on the property. As of this writing, we have not received any property owner response. The applicant held a neighborhood meeting on November 11, 2017. The majority of the attendees expressed approval for the proposed development. A second neighborhood meeting was held on October 22, 2018. Those in attendance expressed concerns regarding traffic generated from the site along Trinity Road, and McKinney Street. Respectfully submitted: Richard Cannone, AICP Deputy Director/Planning Director Prepared by: Cindy Jackson, AICP Senior Planner Z17-0004 Site Location 426 03106201,240 Feet SITE µ Parcels Roads Date: 9/11/2017 The City of Denton has prepared maps for departmental use. These are not official maps of the City of Denton and should not be used for legal, engineering or surveying purposes but rather for reference purposes. These maps are the property of the City of Denton and have been made available to the public based on the Public Information Act. The City of Denton makes every effort to produce and publish the most current and accurate information possible. No warranties, expressed or implied, are provided for the data herein, its use, or its interpretation. Utilization of this map indicates understanding and acceptance of this statement. Z17-0004 Existing Zoning Map NRMU-12 NR-6 RD-5X NR-4 NR-2 ETJ NR-1 NR-3 NRMU 426 IC-G 03106201,240 Feet SITEETJNR-2NR-6 µ IC-GNR-3NRMU Parcels NR-1NR-4NRMU-12 Roads RD-5X Date: 9/11/2017 The City of Denton has prepared maps for departmental use. These are not official maps of the City of Denton and should not be used for legal, engineering or surveying purposes but rather for reference purposes. These maps are the property of the City of Denton and have been made available to the public based on the Public Information Act. The City of Denton makes every effort to produce and publish the most current and accurate information possible. No warranties, expressed or implied, are provided for the data herein, its use, or its interpretation. Utilization of this map indicates understanding and acceptance of this statement. Z17-0004 Proposed Zoning NRMU-12 NR-6 NR-2 RD-5X NR-4 NR-1 NR-3 NRMU IC-G 426 03106201,240 Feet SITEETJNR-2NR-6 µ IC-GNR-3NRMU Parcels NR-1NR-4NRMU-12 Roads RD-5X Date: 1/4/2018 The City of Denton has prepared maps for departmental use. These are not official maps of the City of Denton and should not be used for legal, engineering or surveying purposes but rather for reference purposes. These maps are the property of the City of Denton and have been made available to the public based on the Public Information Act. The City of Denton makes every effort to produce and publish the most current and accurate information possible. No warranties, expressed or implied, are provided for the data herein, its use, or its interpretation. Utilization of this map indicates understanding and acceptance of this statement. Z17-0004 Future Land Use Map Low Residential Rural Areas Community Mixed Use Moderate Residential Government / Institutional 426 05001,0002,000 Feet SITENeighborhood Mixed Use Future Land Use Business Innovation Rural Areas Parcels µ Industrial Commerce Low Residential Roads Moderate ResidentialGovernment / Institutional Parks / Open Space Regional Mixed Use Community Mixed Use Date: 9/11/2017 The City of Denton has prepared maps for departmental use. These are not official maps of the City of Denton and should not be used for legal, engineering or surveying purposes but rather for reference purposes. These maps are the property of the City of Denton and have been made available to the public based on the Public Information Act. The City of Denton makes every effort to produce and publish the most current and accurate information possible. No warranties, expressed or implied, are provided for the data herein, its use, or its interpretation. Utilization of this map indicates understanding and acceptance of this statement. Exhibit7 ComparisonofPermittedUses RD5NR6 ResidentialUses Agriculture PP Livestock L(7)L(7) SinglefamilyDwellings PP AccessoryDwellingUnits PSUP/L(1) AttachedSinglefamilyDwellings NP DwellingsaboveBusinesses NN Live/WorkUnits PL(16) Duplexes NP CommunityHomesfortheDisabled PP GroupHomes SUPN MultifamilyDwellings NN FraternityorSororityHouse NN Dormitory NN ManufacturedHousing Developments PSUP RD5NR6 CommercialLandUses HomeOccupation PP SaleofProductsGrownonSite PN Hotels NN Motels NN BedandBreakfast L(10)N RetailSalesandService NN MovieTheaters NN Restaurant NN PrivateClub NN Bar NN DriveThroughFacility NN ProfessionalServicesandOffices NN QuickVehicleServicing NN VehicleRepair NN AutoandRVSales NN LaundryFacilities NN EquestrianFacilities PN OutdoorRecreation PP IndoorRecreation NN MajorEventEntertainment NN CommercialParkingLots NN AdministrativeorResearch Facilities SUPN BroadcastingorProductionStudio SUPN SexuallyOrientedBusiness NN RD5NR6 IndustrialLandUses CraftAlcoholProduction NN Printing/Publishing NN Bakeries NN ManufactureofNonOdiferous Foods NN FeedLots SUPN FoodProcessing NN LightManufacturing NN HeavyManufacturing NN WholesaleSales NN WholesaleNurseries PN DistributionCenter/Warehouse, General NN Warehouse,Retail NN SelfServiceStorage NN ConstructionMaterialsSales NN JunkYardsandAutoWrecking NN WreckerServicesandImpoundLots NN Kennels L(14)N VeterinaryClinics PN SanitaryLandfills,Commercial Incineratiors,TransferStations NN GasWells L(27)L(27) RD5NR6 InstitutionalLandUses BasicUtilities PL(25) CommunityService NN ParksandOpenSpace PP Churches PP SemiPublicHalls,Clubs,and Lodges NSUP Business/TradeSchool NN AdultorChildDayCare PSUP Kindergarten,ElementarySchool PSUP MiddleSchool NN HighSchool NN Colleges NN Conference/ConventionCenters NN Hospital NN ElderlyHousing NSUP MedicalCenters NN Cemeteries NN Mortuaries NN WECS L(41)SUP WECS L(42)SUP RD5NR6 GeneralRegulations MinimumLotArea(squarefeet) 5acres6,000 MaximumDensity 0.26 MaximumLotCoverage 15%60% MinimumLandscapedArea 75%40% MaximumBuildingHeight 65feet40feet LIMITATIONS: L(1)ΑSubjecttothefollowingcriteria: 1.Theproposalmustconformwiththeoverallmaximumlotcoverageandsetbacksrequirementsoftheunderlyingzone. 2.Themaximumnumberofaccessorydwellingunitsshallnotexceedoneperlot. 3.Themaximumgrosshabitablefloorarea(GHFA)oftheaccessoryresidentialstructureshallnotexceed50%oftheGHFAoftheprimary residenceonthelot,andshallnotexceed1,000squarefeetGHFAunlessthelotmeetstherequirementsofL(1).5. 4.OneadditionalparkingspaceshallbeprovidedthatconformstotheoffstreetparkingprovisionsoftheDDC. 5.ThemaximumGHFAoftheaccessoryresidentialstructureshallnotexceed50%oftheGHFAoftheprimaryresidenceonthelot,where thelotsizeisequaltoorgreaterthan10acresinsize.AnSUPisnotrequiredforsuchanaccessoryresidentialstructurewherethelotsize isequaltoorgreaterthan10acres. addedatarateofonepereachacreover L(7)ΑLimitedtotwoanimalsonparcelsonetothreeacresinsize.Additionalanimalsmaybe threeacres. L(8)ΑTravelers'accommodations,arepermitted,providedthat: 1.Thebusinessownerormanagershallberequiredtoresideonthepropertyoccupiedbytheaccommodation,oradjacentproperty. streetparkingspace,andtheownersshallhavetwo(2)parkingspaces.Allspaces 2.Thateachaccommodationunitshallhaveone(1)off shallbeinconformancewiththerequirementsoftheOffStreetParkingsectionofthisChapter. 3.Thatonlyone(1)groundorwallsign,constructedofanonplasticmaterial,noninteriorilluminatedoffour(4)sq.ft.maximumsizebe allowed.Anyexteriorilluminationofsignageshallbeinstalledsuchthatitdoesnotdirectlyilluminateanyresidentialstructuresadjacent ornearbythetravelers'accommodation. 4.Thatthenumberofaccommodationunitsallowedshallbeproportionaltothepermitteddensityofthezone.Eachtraveler's accommodationunitshallbecountedas0.6unitsforthepurposeofcalculatingthepermittednumberoftraveler'saccommodations. 5.Alltraveler'saccommodationsshallbewithintwohundred(200)feetofacollectororarterial.Streetdesignationsshallbeas viapublicstreetoralleyaccesstothesitefromthearterial. determinedbytheCityComprehensivePlan.Distancesshallbemeasured 6.Excludingthebusinessowner'sunitandtheareaofthestructureitwilloccupy,theremustbeatleastfourhundred(400)sq.ft.of grossinteriorfloorspaceremainingperunit. 7.Traveler'saccommodationsarelimitedtonomorethaneight(8)guestunits. L(10)ΑAllrestrictionsofL(8),butlimitedtonomorethanfive(5)guestunits. L(14)ΑUsesarelimitedtonomorethantenthousand(10,000)squarefeetofgrossfloorarea. L(16)ΑUsesarelimitedtonomorethan1,500squarefeetofgrossfloorareaperlot. L(25)ΑIfproposeduseiswithin200feetofaresidentialzone,approvalissubjecttoanSUP. L(27)ΑMustcomplywiththeprovisionsofSubchapter22,GasWellDrillingandProduction L(38)ΑMustmeettherequirementsofSection35.12.9. L(41)ΑLotswheretheproposedWECSwillbelocatedshallhaveaminimumlotareaoftwo(2)acres.Amaximumofone(1)WECSis permittedbyright.MultipleWECSarepermittedonlywithapprovalofaSUP. abovewheretheWECSismountedonthebuilding.Theheight L(42)ΑBuildingmountedWECSmaynotextendhigherthanten(10)feet shallbemeasuredfromthebaseoftheWECSwhereitismountedonthebuildingtothehighestpointofthearcoftheblades'elevation. IftheWECSdoesnotuseblades,thenheightismeasuredfromthebaseoftheWECSwhereitismountedonthebuildingtothehighest pointoftheWECS. Exhibit8 ProposedProjectAmenitiesandHousingStyles City Hall City of Denton 215 E. McKinney St. Denton, Texas 76201 www.cityofdenton.com Legislation Text File #:S17-0008d,Version:1 AGENDA CAPTION HoldapublichearingandconsideradoptionofanordinanceoftheCityofDenton,Texas,approvingaSpecific UsePermittoallowamanufacturedhousingparkwithconditionsonapproximately126.1acres,generally locatednorthofEastMcKinneyStreetandwestofSouthTrinityRoad,intheCityofDenton,DentonCounty, Texas;adoptinganamendmenttotheCity’sofficialzoningmap;providingforapenaltyinthemaximum amountof$2,000.00forviolationsthereof;providingforseverability;andestablishinganeffectivedate.The PlanningandZoningCommissionrecommendapproval(7-0).(S17-0008,TheWoodlandsofMcKinney,Cindy Jackson) This item was continued from the December 4, 2018 City Council Meeting. City of DentonPage 1 of 1Printed on 1/2/2019 powered by Legistar© City of Denton City Hall 215 E. McKinney Street Denton, Texas www.cityofdenton.com _____________________________________________________________________________________ AGENDA INFORMATION SHEET DEPARTMENT: Department of Development Services CM: Todd Hileman DATE: January 8, 2019 SUBJECT Hold a public hearing and consider adoption of an ordinance of the city of Denton, Texas, approving a Specific Use Permit to allow a manufactured housing park with conditions on approximately 126.1 acres of land generally located north of East McKinney Street and west of South Trinity Road in the City of penalty in the maximum amount of $2,000.00 for violations thereof; providing for severability; and establishing an effective date. The Planning and Zoning Commission recommend approval (7-0). (S17- 0008, The Woodlands of McKinney, Cindy Jackson) This item was continued from the December 4, 2018 Council meeting. BACKGROUND The applicant is requesting approval of a SUP to develop a Manufactured Housing Development with 498 stands on 120.1 acres with a density of 4.15 dwelling units per acre. The overall site contains 126.1 acres, however six one-acre lots for single family homes are proposed along South Trinity Road. A request to provide an initial zoning designation of NR-6 on the approximately 118 acres of the site is being heard concurrently with this request. The NR-6 District permits manufactured housing developments upon approval of a SUP. The zoning request must be approved in order for the SUP to be considered. A full staff analysis is attached in Exhibit 2. OPTIONS 1. Approve as submitted. 2. Approve subject to conditions. 3. Table item. 4. Deny RECOMMENDATION The Planning and Zoning Commission recommends approval of the request with the conditions stated in Exhibit 7, and an additional condition requiring the applicant to further mitigate off-site traffic impacts by paying $75,000 for traffic mitigation efforts including, but not limited to, traffic circles, speed tables, pavement markings, signage, and landscaping in the Lakeview Ranch neighborhood. The $75,000 shall be paid prior to the issuance of a building permit for the site. Staff recommends approval of the request subject to the conditions stated in Exhibit 7, as it is consistent with the goals and objectives of the Denton Plan 2030 and complies with all the criteria for approval of a SUP. Staff worked with the applicant to create the conditions stated in Exhibit 7, Woodlands SUP Conditions as conditions for approval of this request. PRIOR ACTION/REVIEW (Council, Boards, Commissions) On August 22, 2017, the City Council approved a request to annex 118.04 acres of the subject site into the city. (A17-0001) On October 24, 2018, the Planning and Zoning Commission recommended approval of a request for Specific Use Permit on 118.04 acres of land subject to conditions. STRATEGIC PLAN RELATIONSHIP -oriented road map that will help the City achieve its vision. The foundation for the plan is the five long-term Key Focus Areas (KFA): Organizational Excellence; Public Infrastructure; Economic Development; Safe, Livable, and Family-Friendly Community; and Sustainability and Environmental Stewardship. While individual items may support multiple KFAs, this specific City Council agenda item contributes most directly to the following KFA and goal: Related Key Focus Area: Economic Development Related Goal: 3.4 Encourage development, redevelopment, recruitment, and retention EXHIBITS 1. Agenda Information Sheet 2. Staff Analysis 3. Site Location Map 4. Future Land Use Map 5. Concept Plan 6. Proposed Project Amenities and Housing Styles 7. Woodlands SUP Conditions 8. Notification Map 9. Planning and Zoning Commission Meeting Minutes 10. Draft Ordinance 11. Staff Presentation Respectfully submitted: Richard Cannone, AICP Deputy Director/Planning Director Prepared by: Cindy Jackson, AICP Senior Planner S:\\Planning\\Projects\\2017 Cases\\S17-0008 The Woodlands of McKinney Street\\Ordinance\\S17-0008 Ordinance Rev.docx ORDINANCE NO. ______________ AN ORDINANCE OF THE CITY OF DENTON, TEXAS, APPROVING A SPECIFIC USE PERMIT TO ALLOW A MANUFACTURED HOUSING PARK WITH CONDITIONS ON APPROXIMATELY 126.1 ACRES, GENERALLY LOCATED NORTH OF EAST McKINNEY STREET AND WEST OF SOUTH TRINITY ROAD, IN THE CITY OF DENTON, DENTON COUNTY, TEXAS; ADOPTING AN MAP; PROVIDING FOR A PENALTY IN THE MAXIMUM AMOUNT OF $2,000.00 FOR VIOLATIONS THEREOF; PROVIDING FOR SEVERABILITY; AND ESTABLISHING AN EFFECTIVE DATE. (S17-0008) WHEREAS, Brent Murphree, on behalf of The Woodlands of McKinney LLC, has applied for a Specific Use Permit (SUP) to allow a manufactured housing park on approximately 126.1 acres, within the Neighborhood Residential 6 (NR-6) zoning district and use classification, as described in Exhibit A and depicted in Exhibit B; and WHEREAS, on October 24, 2018, the Planning and Zoning Commission, in compliance with the laws of the State of Texas, have given the requisite notices by publication and otherwise, and have held due hearings and afforded full and fair hearings to all property owners interested in this regard, and have recommended approval \[7-0\] of the change requested SUP subject to conditions attached as Exhibit C; and WHEREAS, on December 4, 2018, the City Council postponed the public hearing to January 8, 2019; and WHEREAS, on January 8, 2019, the City Council likewise conducted a public hearing as required by law, to consider the Specific Use Permit request. Upon consideration, the City Council hereby finds that the request is consistent with the Denton Plan and federal, state and local law, and the applicant has agreed to comply with all provision of the Denton Development Code (DDC), as they exist, may be amended, or in the future arising, including but not limited to this ordinance and has further agreed to comply with the additional restrictions and conditions set forth in Exhibit C, and; WHEREAS, the City Council of the City of Denton have determined that it will be beneficial to Denton and its citizens to grant the SUP; and such grant will not be detrimental to the health, safety, morals, and general welfare of the City of Denton, and that the SUP should be granted as set forth herein; NOW THEREFORE, THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS: SECTION 1. The findings and recitations contained in the preamble of this ordinance are incorporated herein by reference and found to be true. SECTION 2. The SUP to allow the manufactured housing park on the Property, is hereby approved, subject to the Conditions in Exhibit C. SECTION 3. Except as otherwise stated above, all terms of the SUP shall be complied with prior to issuance of a Certificate of Occupancy. Failure to comply with any term or condition of the Ordinance will result in the SUP being declared null and void, and of no force and effect. The SUP is issued to the entity named above runs with the land, and is assignable and transferable to subsequent owners of the Property. The applicant shall further mitigate off-site traffic impacts by paying $75,000 for traffic mitigation efforts including, but not limited to, traffic circles, speed tables, pavement markings, signage, and landscaping in the Lakeview Ranch neighborhood. The $75,000 shall be paid prior to the issuance of a building permit for the site. SECTION 4. If any provision of this ordinance or the application thereof to any person or circumstance is held invalid by any court, such invalidity shall not affect the validity of the provisions or applications, and to this end the provisions of this ordinance are severable. SECTION 5. Any person, firm, partnership or corporation violating any provision of this ordinance shall, upon conviction, be deemed guilty of a misdemeanor and shall be punished by fine in a sum not exceeding $2,000.00 for each offense. Each day that a provision of this ordinance is violated shall constitute a separate and distinct offense. SECTION 6. That an offense committed before the effective date of this ordinance is governed by prior law and the provisions of the Denton Code of Ordinances, as amended, in effect when the offense was committed and the former law is continued in effect for this purpose. SECTION 7. In compliance with Section 2.09(c) of the Denton Charter, this ordinance shall become effective fourteen (14) days from the date of its passage, and the City Secretary is hereby directed to cause the caption of this ordinance to be published twice in the Denton Record- Chronicle, a daily newspaper published in the City of Denton, Texas, within ten (10) days of the date of its passage. The motion to approve this ordinance was made by __________________________ and seconded by _________________________________, the ordinance was passed and approved by the following vote \[___ - ___\]: Aye Nay Abstain Absent Chris Watts, Mayor: ______ ______ ______ ______ Gerard Hudspeth, District 1: ______ ______ ______ ______ Keely G. Briggs, District 2: ______ ______ ______ ______ Don Duff, District 3: ______ ______ ______ ______ John Ryan, District 4: ______ ______ ______ ______ Deb Armintor, At Large Place 5: ______ ______ ______ ______ Paul Meltzer, At Large Place 6: ______ ______ ______ ______ PASSED AND APPROVED this the _________ day of ___________________, 2018. __________________________________ CHRIS WATTS, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY BY: __________________________________ APPROVED AS TO LEGAL FORM: AARON LEAL, CITY ATTORNEY BY: /s/ Jerry E. Drake, Jr.__________________ Exhibit A Legal Description Exhibit B Exhibit C THE WOODLANDS ON MCKINNEY STREET SUP Conditions October, 2018 Applicant/Developer/Home Builder The Woodlands on McKinney Street, LLC 14114 N. Dallas Parkway, Suite 265 Dallas, TX 75254 Planner/Engineer/Surveyor Kimley-Horn and Associates, Inc. 5750 Genesis Ct., Suite 200 Frisco, Texas 75034 (972) 335-3580 S:\\Planning\\Projects\\2017 Cases\\S17-0008 The Woodlands of McKinney Street\\Ordinance\\S17-0008 Ordinance Rev.docx 1.0 Purpose The purpose of these NR-6 Zoning Overlay Conditions is to specify and provide quality measures for this development. 2.0 Modular and Manufactured Housing Property would be developed in accordance with NR-6 Zoning District as stated in the Citys Development Code with the following conditions and restrictions stated below: Allowed Land Uses: Only allowed land uses are 497 Modular and Manufactured Housing units on 120.1 gross acres and six One-Acre Single Family Detached Housing. There shall be a minimum of 6 acres of land developed as one-acre single family lots. These lots shall front Trinity Road. 40% of the existing tree canopy must be preserved. 100% of the City of Denton ESA Areas shall be preserved, except for one roadway crossing. A minimum 10 acres of open space/green space shall be provided. Amenity Center - Minimum 4,500 square foot air-conditioned club house with pool and cabana. Minimum of two 2-inch diameter trees shall be planted on each lot. The homes to have brick or stone wainscoting for the skirting. Deed Restrictions shall be reviewed and approved by the city prior to filing of the first Final Plat. Deed restrictions shall be filed with the county and include the following minimum requirements: o Property ownership shall own and maintain all improvements on the property. This shall include all streets, wet utilities, landscaping, irrigation systems, fencing, landscape buffers along perimeter, creeks, drainage ways, ESA areas, etc. Only franchise utility improvements shall be owned and maintained by others. These utilities shall be installed in specific easements as identified by the Final Plat. o Property ownership is required to mow and edge all common areas and stand areas at least every two weeks in the Spring and Summer months. Every three weeks is required in the Fall and Winter months. o Property shall be gated. o Property shall 100% owned by one entity. o Property shall be platted as a single lot. o All manufactured homes shall be installed on an engineered reinforced concrete slab. o All manufactured homes shall be structurally affixed to the concrete pad. o Manufactured Homes must be offset a minimum of 20off the back of curb. Minimum 18 wide driveway must be installed in front of the homes, therefore providing 2 off-street parking spots per home. o All homes to have masonry skirting down to the concrete slab, on all sides of the home. McKinney Street Screening & Landscape Buffer Improvements: o 20landscape buffer with automated irrigation systems. 4-inch minimum diameter shade trees planted on 30nters, with a o staggered row on each side of the proposed screening wall. o masonry screening wall built on a 2- tall berm. Berm shall have a flat top of at least nd a maximum side slope of 5:1. Creating an effective screening height of 10-11. masonry screening wall to be installed between the one acre lots and remaining development. Fence to be installed with the first adjoining phase. There shall be three (3) public street access points for the development. Two connections along McKinney Street and one (1) along Trinity Road. Developer shall dedicate the ultimate right-of-way for future Post Oak Boulevard at no fee to the city, upon filing of the first Final Plat. This is approximately 1,100 linear feet parallel to the west property line and 135wide, equating to approximately 3.4 acres of land. Developer shall install two left turn lanes into the development along McKinney Street. terminate at Ryan High School. Along the property frontage this trail will meander within -of-way. North of the site, the trail will be installed inside the McKinney Street right-of-way. Planning Analysis S17-0008/The Woodlands on McKinney City Council District 2 January 8, 2019 REQUEST: Hold a public hearing and consider adoption of an ordinance of the city of Denton, Texas, approving a Specific Use Permit to allow a manufactured housing park with conditions on approximately 126.1 acres of land generally located north of East McKinney Street and west of South Trinity Road in the City of Denton, Denton County, Texas; adopting an amendment to the violations thereof; providing for severability and establishing an effective date. The Planning and Zoning Commission recommend approval (7-0). (S17-0008, The Woodlands of McKinney, Cindy Jackson) This item was continued from the December 4, 2018 Council meeting. OWNER: Michael Holigan The Woodlands on McKinney Street LLC APPLICANT: Brent Murphree, Kinley-Horn and Associates Inc. BACKGROUND: Brent Murphree, on behalf of The Woodlands on McKinney Street LLC, is requesting approval of an SUP to develop a Manufactured Housing Development on a 126.1 acre site. A request to provide an initial zoning designation of NR-6 on the approximately 118.04 acres of the site is being heard concurrently with this request. The NR-6 District permits manufactured housing developments upon approval of a SUP. The zoning request must be approved in order for the SUP to be considered. Approximately 118.04 acres of the subject site was annexed into the City on August 22, 2017. A companion application (Z17-0004) is a request for an initial zoning designation of NR-6 on this portion of the site and will be an extension of the existing NR-6 zoning which is located adjacent to McKinney Street. The SUP application includes the zoning subject site and the adjacent land located along McKinney Street which is already zoned NR-6. With the SUP application, the applicant is proposing a gated manufactured housing development on the site to be developed in three phases as shown on Exhibit 9. The development will accommodate 498 homes at a density of 4.15 dwelling units per acre. The homes are anticipated to be both manufactured homes and modular homes (as defined below) built on permanent concrete foundations. The concept plan also includes six one-acre lots intended for single family development located along South Trinity Road. For clarification purposes, a manufactured home, modular home, and mobile home are defined as: 1. Manufactured homes are factory built in compliance with the HUD Title 6 construction standards which were approved in June, 1976. A manufactured home is not a mobile home and does not have wheels. 2. Modular homes are treated as traditional single family homes and are constructed per local building codes. The interior and exterior of modular homes are typically highly customized to the preferences of the home buyer. 3. Mobile homes are homes built prior to June, 1976. They were not built to any type of construction code, and they have wheels. Mobile homes are not proposed for this development. The site contains approximately 18.5 acres of Environmentally Sensitive Area (ESA) of which 100% will be preserved as a natural open space amenity for the residents. In addition to the ESA preservation area, the owner/developer proposes to provide approximately 15.4 acres of recreational open space including several small parks and an amenity center for the residents. Perimeter masonry screening walls are proposed along both McKinney Street and S. Trinity Road along with street trees and landscaping. The applicant has provided a list of project amenities with photos of anticipated housing types, attached as Exhibit 6. If this project is approved, platting and site plan approval is required to ensure compliance with all applicable land development codes. SITE DATA: The site is currently used as a farm/ranch site with several single family homes, with the majority of the site devoted to agricultural uses and native pasture. The site has approximately 1,645.39 linear feet of frontage along E. McKinney Street and approximately 1,281 linear feet of frontage along S. Trinity Road. A future extension of Post Oak Boulevard is located on the western side of the site. Per the Mobility Plan: Post Oak Boulevard is designated as a Primary Arterial requiring 135 feet of right of way, designed with three travel lanes in each direction divided by a median; McKinney Street is classified as a Secondary Arterial requiring 110 feet of right of way, designed with two travel lanes in each direction divided by a median; and S. Trinity Road is classified as a Collector Street requiring 70 feet of right of way designed with two travel lanes, one in each direction, and street parking on both sides. The site will take access from McKinney Street with two entrances, a right-in/right-out and a full access entrance aligning with a future median opening on McKinney. The applicant will install two left turn lanes into the site from McKinney Street. The ultimate right-of-way for Post Oak, equating to 1,100 linear feet, parallel to the subject site, will be dedicated with this project. The four-lane intersection of Post Oak and McKinney, with a transition to two-lanes will be constructed will be constructed with this project at the time of McKinney Street improvements. There are two planned access points along Post Oak, a right-in/right-out and a full access entrance aligning with a future median opening on Post Oak. SURROUNDING ZONING AND LAND USES: Northwest: North: Northeast: NR-2 and RD-5X RD-5X RD-5X Mobile Home Park and Mobile Home Park Farm/Ranch, and single Undeveloped family residential East: West: ETJ and RD-5X SUBJECT PROPERTY NR-2 Church and cemetery, S. Mobile Home Park Trinity Road, Farm/Ranch and Improved Pasture Southwest: South: Southeast: RD-5X NR-2, and RD-5X NR-1 and RD-5X E. McKinney Street, and E. McKinney Street, and Single Family Homes and Atmos Gas Storage Facility Atmos Gas Storage Facility Mobile Home Park CONSIDERATIONS: 1. Pending approval of the request to zone the site for the NR-6 District, the initial request is for an SUP to allow the development of a manufactured housing development on approximately 126.1 acres of land. However, the applicant has included six acres located on the west side of South Trinity which are to be developed as one-acre single family home sites. 2. Section 35.6.4 of the DDC outlines the criteria for approval of a SUP. These criteria are as follows: a. That the use would be in conformance with all standards within the zoning district in which the use is proposed to be located, and in conformance with The Denton Plan and federal, state, or local law. If the rezoning and proposed use are approved, the development would be required to go through a full site plan review procedure prior to permitting. At that time, the site would be required to be in compliance with all site design and parking regulations in the DDC. b. A SUP shall only be granted if all of the following conditions have been met: i. That the specific use will be compatible with and not injurious to the use and enjoyment of other property nor significantly diminish or impair property values within the immediate vicinity. ii. That the establishment of the specific use will not impede the normal and orderly development and improvement of surrounding vacant property. iii. That adequate utilities, access roads, drainage and other necessary supporting facilities have been or will be provided. iv. The design, location and arrangement of all driveways and parking spaces provides for the safe and convenient movement of vehicular and pedestrian traffic without adversely affecting the general public or adjacent developments. v. That adequate nuisance prevention measures have been or will be taken to prevent or control offensive odor, fumes, dust, noise and vibration. vi. That directional lighting will be provided so as not to disturb or adversely affect neighboring properties. vii. That there is sufficient landscaping and screening to ensure harmony and compatibility with adjacent property. The subject property is situated adjacent to three existing mobile home parks on the north, west and southeast sides of the site. The mobile home park located on the west side of the subject site (Ashli Oaks) contains approximately 624 lots with a density of 5.99 dwelling units per acre. The site was developed between 1985 and 1986, and was zoned NR-2 during the 2002 citywide rezoning. The mobile home park located to the southeast (Denton Falls MHP) contains approximately 188 lots with a density of 5.12 dwelling units per acre. This site was developed with a mobile home park prior to being annexed into the city in 2013. The mobile home park to the north is mostly vacant with only approximately twelve homes located in the twelve acre park, giving it a density of one dwelling unit per acre. The park has been in this location since 1975 per DCAD records. With a proposed density of four dwelling units per acre, this proposed development has a lower density than the mobile home parks located on the west and southeast sides of the site. The proposed use is situated between three existing mobile home parks located on the northern, southeastern and western side of the property, along with single family homes, ranches, and various agricultural uses. The site is bounded by McKinney Street to the south and S. Trinity Road to the east, both of which are unimproved, two lane roads. The landscape plan indicates that 100% of the ESA located on the site will be preserved, as well as many of the onsite trees. Approximately 15 acres of open space will be provided for the residents in addition to the ESA areas. DDC requirements for lighting and screening will facilitate compatibility with the existing land uses. Furthermore, the proposed development must meet City requirements for tree preservation, tree canopy, and street tree planting. The applicant, in response to concerns expressed by residents in the area, has eliminated access to and from the site via Trinity Road except for a gated emergency access. c. That adequate capacity of infrastructure can and will be provided to and through the subject property. As a result of the Traffic Impact Analysis (TIA), the applicant will be required to install two left turn lanes into the site from McKinney Street. The ultimate right-of- way for Post Oak, equating to 1,100 linear feet, parallel to the subject site, will be dedicated with this project. The four-lane intersection of Post Oak and McKinney, with a transition to two-lanes will be constructed will be constructed with this project at the time of McKinney Street improvements. There are two planned access points along Post Oak, a right-in/right-out and a full access entrance aligning with a future median opening on Post Oak. A six-inch reinforced concrete public trail is planned along McKinney Street to connect the site to Ryan High School, giving students safe passage to school. Water will be available from McKinney Street, and improvements to the lift station located on Trinity may be needed to accommodate this development. Compliance with all transportation, drainage, and infrastructure requirements is mandatory with platting and development of the site. d. That the Special Use is compatible with and will not have an adverse impact on the surrounding area. When evaluating the effect of the proposed use on the surrounding area, the following factors shall be considered in relation to the target use of the zone: i. Similarity in scale, bulk, and coverage. ii. Generation of traffic and effects on surrounding streets. Increases in pedestrian, bicycle, and mass transit use are considered beneficial regardless of capacity of facilities. iii. Architectural compatibility with the impact area. iv. Air quality, including generation of dust, odors, and other environmental pollutants. v. Generation of noise, light, and glare. vi. The development of adjacent property as envisioned in the Denton Plan. vii. Other factors found to be relevant to satisfy the requirements of this Chapter. With a proposed overall density of four dwelling units per acre, the site is considered to be low density residential per the Future Land Use Plan, and as such is similar in density to other low density residential development in the area. Proposed roadway improvements as previously discussed will help to ameliorate traffic impacts in the area. Masonry screening walls with landscaping are proposed along McKinney and S. Trinity to help screen the park, and reduce any adverse effects regarding noise, light, and glare. Due to the residential nature of the proposal, in addition to the plan to preserve 100% of the onsite ESA, environmental impacts are not expected. The applicant proposes one-acre single family residences along Trinity to provide greater compatibility to the east. STAFF RECOMMENDATION: Staff recommends approval of the request for a SUP for a gated manufactured housing development subject to conditions as it is consistent with the goals and objectives of the Denton Plan 2030 and complies with all the criteria for approval of a SUP. Staff recommends the conditions stated in Exhibit 7, Woodlands SUP Conditions as conditions for approval of this request. PUBLIC NOTIFICATION: To comply with the public hearing notice requirements, 18 notices were sent to property owners within 200 feet of the subject property, 21 courtesy notices were sent to physical addresses within 500 feet of the subject property, a notice was published in the Denton Record Chronicle, and signs were placed on the property. As of this writing, we have not received any property owner response. The applicant held a neighborhood meeting on November 11, 2017. The majority of the attendees expressed approval for the proposed development. A second neighborhood meeting was held on October 22, 2018. Those in attendance expressed concerns regarding traffic generated from the site along Trinity Road, and McKinney Street. Respectfully submitted: Richard Cannone, AICP Deputy Director/Planning Director Prepared by: Cindy Jackson, AICP Senior Planner S17-0008 Site Location 426 " ) 03857701,540 Feet SITECOD µ ETJ Parcels NAA 8/1/20 Roads Date: 9/19/2018 The City of Denton has prepared maps for departmental use. These are not official maps of the City of Denton and should not be used for legal, engineering or surveying purposes but rather for reference purposes. These maps are the property of the City of Denton and have been made available to the public based on the Public Information Act. The City of Denton makes every effort to produce and publish the most current and accurate information possible. No warranties, expressed or implied, are provided for the data herein, its use, or its interpretation. Utilization of this map indicates understanding and acceptance of this statement. S17-0008 Future Land Use Map Business Moderate Innovation Residential Low Residential Rural Areas Community Mixed Use 426 288 " ) ! ( Government / Institutional Regional Mixed Use 06251,2502,500 Feet SITERegional Mixed UseIndustrial Commerce Future Land Use Rural AreasCommunity Mixed UseGovernment / Institutional µ Parcels Neighborhood Mixed UseParks / Open Space Low Residential Roads Business Innovation Moderate Residential Date: 9/19/2018 The City of Denton has prepared maps for departmental use. These are not official maps of the City of Denton and should not be used for legal, engineering or surveying purposes but rather for reference purposes. These maps are the property of the City of Denton and have been made available to the public based on the Public Information Act. The City of Denton makes every effort to produce and publish the most current and accurate information possible. No warranties, expressed or implied, are provided for the data herein, its use, or its interpretation. Utilization of this map indicates understanding and acceptance of this statement. Exhibit6 ProposedProjectAmenitiesandHousingStyles THE WOODLANDS ON MCKINNEY STREET Proposed SUP Conditions October, 2018 Applicant/Developer/Home Builder The Woodlands on McKinney Street, LLC 14114 N. Dallas Parkway, Suite 265 Dallas, TX 75254 Planner/Engineer/Surveyor Kimley-Horn and Associates, Inc. 5750 Genesis Ct., Suite 200 Frisco, Texas 75034 (972) 335-3580 1.0 Purpose The purpose of these NR-6 Zoning Overlay Conditions is to specify and provide quality measures for this development. 2.0 Modular and Manufactured Housing Property would be developed in accordance with NR-6 Zoning District as stated in the Citys Development Code with the following conditions and restrictions stated below: Allowed Land Uses: Only allowed land uses are 497 Modular and Manufactured Housing units on 120.1 gross acres and six One-Acre Single Family Detached Housing. There shall be a minimum of 6 acres of land developed as one-acre single family lots. These lots shall front Trinity Road. 40% of the existing tree canopy must be preserved. 100% of the City of Denton ESA Areas shall be preserved, except for one roadway crossing. A minimum 10 acres of open space/green space shall be provided. Amenity Center - Minimum 4,500 square foot air-conditioned club house with pool and cabana. Minimum of two 2-inch diameter trees shall be planted on each lot. The homes to have brick or stone wainscoting for the skirting. Deed Restrictions shall be reviewed and approved by the city prior to filing of the first Final Plat. Deed restrictions shall be filed with the county and include the following minimum requirements: o Property ownership shall own and maintain all improvements on the property. This shall include all streets, wet utilities, landscaping, irrigation systems, fencing, landscape buffers along perimeter, creeks, drainage ways, ESA areas, etc. Only franchise utility improvements shall be owned and maintained by others. These utilities shall be installed in specific easements as identified by the Final Plat. o Property ownership is required to mow and edge all common areas and stand areas at least every two weeks in the Spring and Summer months. Every three weeks is required in the Fall and Winter months. o Property shall be gated. o Property shall 100% owned by one entity. o Property shall be platted as a single lot. o All manufactured homes shall be installed on an engineered reinforced concrete slab. o All manufactured homes shall be structurally affixed to the concrete pad. o Manufactured Homes must be offset a minimum of 20off the back of curb. Minimum 18 wide driveway must be installed in front of the homes, therefore providing 2 off-street parking spots per home. o All homes to have masonry skirting down to the concrete slab, on all sides of the home. McKinney Street Screening & Landscape Buffer Improvements: o 20landscape buffer with automated irrigation systems. o 4-inch minimum diameter shade trees planted on 30nters, with a staggered row on each side of the proposed screening wall. o masonry screening wall built on a 2- tall berm. Berm shall have a flat top of at least nd a maximum side slope of 5:1. Creating an effective screening height of 10-11. masonry screening wall to be installed between the one acre lots and remaining development. Fence to be installed with the first adjoining phase. There shall be three (3) public street access points for the development. Two connections along McKinney Street and one (1) along Trinity Road. Developer shall dedicate the ultimate right-of-way for future Post Oak Boulevard at no fee to the city, upon filing of the first Final Plat. This is approximately 1,100 linear feet parallel to the west property line and 135wide, equating to approximately 3.4 acres of land. Developer shall install two left turn lanes into the development along McKinney Street. Developer to instal reinforced concrete public trail along the property frontage and terminate at the Ryan High School. Along the property frontage this trail will meander within the 20landscape buffer and McKinney Street right-of- way. North of the site the trail will be installed inside the McKinney Street right-of- way. S17-0008 Notification Map 500ft Buffer 200ft Buffer Paul & Wen Tsai Kornu Khosrow Sadeghian Trts of Kamy Real Property Trust 0175350700 Feet In Favor SITECOD µ ETJ Neutral Parcels NAA 8/1/20 Opposed Roads Date: 10/24/2018 The City of Denton has prepared maps for departmental use. These are not official maps of the City of Denton and should not be used for legal, engineering or surveying purposes but rather for reference purposes. These maps are the property of the City of Denton and have been made available to the public based on the Public Information Act. The City of Denton makes every effort to produce and publish the most current and accurate information possible. No warranties, expressed or implied, are provided for the data herein, its use, or its interpretation. Utilization of this map indicates understanding and acceptance of this statement. 0.289 acre property is generally located on the east side of Bernard Street, approximately 350 feet north of Eagle Drive, in the City of Denton, Denton County, Texas. (FR18-0009, 711 Bernard, Ron Menguita) Chair Rozell opened the Public Hearing item 4C. Ron Menguita, Principal Planner, presented Public Hearing item 4C. Menguita stated the applicant intends to replat the property into two lots and develop a duplex on each lot. The approximately 0.289 acre property is generally located on the east side of Bernard Street, approximately 350 feet north of Eagle Drive. Notices were sent out and no responses were received. Chair Rozell closed the Public Hearing. Commissioner Larry Beck motioned, Commissioner Mat Pruneda seconded approve Public Hearing item 4C. Motion approved (7-0). Commissioner Alfred Sanchez "aye", Commissioner Larry Beck "aye", Commissioner Jason Cole "aye", Chair Andrew Rozell "aye", Commissioner Mat Pruneda "aye", Commissioner Margie Ellis "aye", and Commissioner Tim Smith "aye". D. Hold a public hearing and consider a request by The Woodlands on McKinney Street, LLC to provide an initial zoning district designation of Neighborhood Residential 6 (NR- 6) District to an approximately 118.041 acre property. The property is generally located north of East McKinney Street and west of South Trinity Road. (Z17-0004, The Woodlands of McKinney Street, Cindy Jackson) E. Hold a public hearing and consider making a recommendation to City Council regarding a Specific Use Permit request by The Woodlands on McKinney Street, LLC. for a manufactured housing park on approximately 126.148 acres of land. The property is generally located north of East McKinney Street and west of South Trinity Road. (S17- 0008, The Woodlands of McKinney Street, Cindy Jackson) Chair Rozell stated Public Hearing items 4D and 4E would be heard together. Chair Rozell opened the Public Hearing 4D and 4E Cindy Jackson, Senior Planner, presented Public Hearing item 4D and 4E. Jackson stated the applicant is requesting an initial zoning designation of Neighborhood Residential 6 (NR-6) District, in conjunction with a SUP request (S17-0008) in order to develop the site with a Manufactured Housing Development with a density of 4.15 dwelling units per acre and six single family residences on one-acre lots, totaling six acres, the current zoning is Rural Residential (RD- 5X). The NR-6 District permits manufactured housing developments upon approval of a SUP. The zoning request must be approved in order for the SUP to be considered. Jackson stated staff does recommend approval of the request subject to the following conditions for approval of this request. These conditions will bring the site into compliance with the goals and objectives of the Denton Plan 2030. The proposed conditions for approval are: An overlay be placed on the property with the following conditions: 1. the maximum permitted density on the Б site shall be no more than four dwelling units per gross acre. 2. Permitted land uses on the site: A. 498 Modular and manufactured homes on 120.1 gross acres; and B. six single family detached housing on minimum one-acre lots. Jackson stated notices were sent out and the one response received a super majority vote is required from City Council in order of approval. Cindy Jackson, Senior Planner, presented Public Hearing item 4E. Jackson stated the applicant is requesting approval of a SUP to develop a Manufactured Housing Development with 498 stands on 120.1 acres with a density of 4.15 dwelling units per acre. The overall site contains 126.1 acres, however six one-acre lots for single family homes are proposed along South Trinity Road. A request to provide an initial zoning designation of NR-6 on the approximately 118 acres of the site is being heard concurrently with this request. The NR-6 District permits manufactured housing developments upon approval of a SUP. The zoning request must be approved in order for the SUP to be considered. Jackson stated staff does recommend approval of the request with the following conditions: 1. Allowed Land Uses: Only allowed land uses are 498 Modular and Manufactured Housing on 126.1 gross acres and six One-Acre Single Family Detached Housing. 2. There shall be a minimum of 6 acres of land developed as one-acre single family lots. These lots shall front TrinityRoad. 3. 40% of the existing tree canopy must be preserved. 4. 100% of the City of Denton ESA Areas shall be preserved, except for one roadway crossing. 5. A minimum 10 acres of open space/green space shall be provided. 6. Amenity Center - Minimum 4,500 square foot air- conditioned club house with pool and cabana. 7. Minimum of two 2-inch diameter trees shall be planted on each lot. 8. The homes to have brick or stone wainscoting for the skirting. 9. Deed Restrictions shall be reviewed and approved by the city prior to filing of the first Final Plat. Deed restrictions shall be filed with the county and include the following minimum requirements: A. Property ownership shall own and maintain all improvements on the property. This shall include all streets, wet utilities, landscaping, irrigation systems, fencing, landscape buffers along perimeter, creeks, drainage ways, ESA areas, etc. Only franchise utility improvements shall be owned and maintained by others. These utilities shall be installed specific easements as identified by the Final Plat. B. Property ownership is required to mow and edge all common areas and stand areas at least every two weeks in the Spring and Summer months. Every three weeks is required in the Fall and D. Property shall 100% owned by one entity. Winter months. C. Property shall be gated. E. Property shall be platted as a single lot. F. All manufactured homes shall be installed on an engineered reinforced concrete slab. G. All manufactured homes shall be structurally affixed to the concrete pad. H. Manufactured Homes must be offset a minimum of off the back of curb. Minimum wide driveway must be installed in front of the homes, therefore providing 2 off- street parking spots per home. I. All homes to have masonry skirting down to the concrete slab, on all sides of the home. 10. McKinney Street Screening & Landscape Buffer Improvements: A. B. 4-inch minimum diameter shade trees landscape buffer with automated irrigation systems. planted on ters, with a staggered row on each side of the proposed screening wall. C. masonry screening wall built on a 2- tall berm. Berm shall have a flat top of at least and a maximum side slope of 5:1. Creating an effective screening height of 10-11. 11. masonry screening wall to be installed between the one acre lots and remaining development. Fence to be installed with the first adjoining phase. 12. As a result of the TIA: A. There shall be three (3) public street access points for the development. Two connections along McKinney Street and one (1) alongTrinity Road. B. Developer shall dedicate the ultimate right-of-way for future Post Oak В Boulevard at no fee to the city, upon filing of the first Final Plat. This is approximately 1,100 linear feetparallel to the west property line and 1wide, equating to approximately 3.4 acres of land. C. Developer shall install two left turn lanes into the development along McKinney Street. D. Developer to install reinforced concrete public trail along the property frontage and terminate at the Ryan High School. Along the property frontage this trail will meander within the 2 landscape buffer and McKinney Street right-of- way. North of the site the trail will be installed inside the McKinney Street right- of-way. Jackson stated notices were sent out and with the one response received, super majority vote would be required from City Council in order of approval. Commissioner Beck requested the difference between a trailer park and the proposed development. Jackson stated a trailer home would have been developed before 1976 were on wheels, manufactured homes were built after 1976 are placed on an engineered foundation. Commissioner Sanchez questioned if modular homes are permitted within the City limits. Jackson stated yes modular homes are permitted by right. Commissioner Pruneda questioned what the yard size would be for these lots. Richard Cannone, Deputy Director of Development Services, stated the minimum requirements are no less than 40 feet in width, no less than 100 feet in depth and minimum area of 5000 square feet. Michael Holigan and Brent Murphree, the applicants, provided a presentation on the modular home development. Holigan stated the reason they choose this site was the location with other developments in the area. Commissioner Smith questioned the applicant if the intent for these homes is for the primary homeowner to purchase the home or the home to be purchased by the owner and converted into a rental property. Holigan stated the only part of the property that will be rented is the stands the modular homes sit on. Commissioner Smith questioned the cost to lease a stand. Holigan stated between 400 and 500 dollars per month. Commissioner Smith questioned if the commission could add a restriction to not allow occupancy tophase one McKinney Street has been updated. Jackson stated a condition could be added to the SUP stating the release of phase one should coincide with the completion of McKinney Street. Commissioner Ellis questioned if the maintenance to the homes is included in the lot rent. Holigan confirmed it is included in the rent cost. Commissioner Beck questioned City staff what it would take to help the residence of Lakeview Ranch with speed midigation. Cannone stated the issue is currently Lakeview Boulevard is designated as Collector Street, but with the mobility plan update it could be looked at and change with the direction of Post Oak Road. ЊЉ Commissioner Smith questioned if the applicant would consider adding speed mitigation to Lakeview Boulevard. Holigan agreed to add speed mitigation to Lakeview Boulevard. Commissioner Beck requested the applicant to explain their plans for tree mitigation. Murphree stated they are going to be preserving two heavily treed Environmentally Sensitive Areas (ESA) and also planting back matured trees. Jackson stated a tree preservation plan will be required during the platting process, in which the applicant will be required to preserve the high quality trees as well as secondary quality trees. Chair Rozell requested the Commission to take notes, only ask questions to the individual speaking and hold questions for the applicant or City staff until all public individuals have spoken. Chair Rozell stated since there are two public hearings open each speaker is being given six minutes to speak. The following individuals spoke during the Public Hearing: Michael Holigan, 2837 Creekway Dr., Carrollton, Texas 75010. Supports this request. Brent Murphree, 5750 Genesis Court, Frisco, Texas 75034. Supports this request. Jason Vannucci, 1901 Lakeview Blvd. Denton, Texas 76208. Opposed to the request Merritt Kirk, 1301 Lakeview Blvd., Denton, Texas 76208. Opposed to the request. Martha Lang, 908 Lakeview Blvd., Denton, Texas 76208. Opposed to the request. Sheila Roepke, 1402 Lakeview Blvd., Denton, Texas 76208. Opposed to the request. Ronald Bashor, 1108 Lakeview Boulevard, Denton, Texas 76208. Opposed to the request. Doug Herzog, 7909 Rodeo Drive, Denton, Texas 76208. Opposed to the request. Dainel Donegen, 1308 Lakeview Boulevard, Denton, Texas 76208. Opposed to the request. Emily Wilson, 8216 Oak Creek Lane, Denton, Texas 76208. Opposed to the request. Bill Roepka, 1402 Lakeview Boulevard, Denton, Texas 76208. Opposed to the request. Janet Glowicz, 8017 Stallion Street, Denton, Texas 76208. Opposed to the request. Steven Leach, 8200 Oak Creek Lane, Denton, Texas 76208. Opposed to the request Brian Flatley, 901 Lakeview Boulevard, Denton, Texas 76208. Opposed to the request. Bill Haddon, 2000 Lakeview Boulevard, Denton, Texas 76208. Opposed to the request. Kourosh Hemyari, 5915 Haraby Court, Dallas, Texas 75248. Opposed to the request. Berry Sangani, 4541 Lancelot Drive, Plano, Texas 75024. Opposed to the request. David Laney, 2501 Laney Circle, Denton, Texas 76208. Opposed to the request. Bobby Self, 7800 E McKinney Street, Denton, Texas 76208. Opposed to the request. Shane Broughton, 8540 Stallion Court, Denton, Texas 76208. Opposed to the request. Tim Blakenship, 1197 S. Trinity Road, Denton, Texas 76208. Opposed to the request. David Pritchard, 1125 S. Trinity Road, Denton, Texas 76202. Neutral to the request. Luigi Manzi, 1115 S Trinity Road, Denton, Texas 76208. Opposed to the request. Don Wiley, 8001 Stallion Street, Denton, Texas 76208. Opposed to the request. Cody Hogan, 589 Trinity Road, Denton, Texas 76208. Opposed to the request. Sunny Emery, 8009 Stallion Street, Denton, Texas 76208. Opposed to the request. Janet McKinstry, 8108 Oak Creek Lane, Denton, Texas 76208. Opposed to the request. Gail Ashby, 8209 Oak Creek Lane, Denton, Texas 76208. Opposed to the request. ЊЊ The following individuals requested not to speak during the Public Hearing: Ronald Zitsch, 2200 Lakeview Boulevard, Denton, Texas 76208. Opposed to the request. Eric J Saull, 908 Lakside Boulevard, Denton, Texas 76208. Opposed to the request. Alberta Kirk, 1301 Lakeview Boulevard, Denton, Texas 76208. Opposed to the request. Alice Gill, 7401 Stallion Street, Denton, Texas 76208. Opposed to the request. Scott Henkes, 409 Lakeview Boulevard, Denton, Texas 76208. Opposed to the request. Jenifer Gellhest, 8509 Stallion Court, Denton, Texas 76208. Opposed to the request. Alice Haddon, 2000 Lakeview Boulevard, Denton, Texas 76202. Opposed to the request. Max Estes, 801 Lakeview Boulevard, Denton, Texas 76208. Opposed to the request. Don Albrectit, 1100 Lakeview Boulevard, Denton, Texas 76208. Opposed to the request. Chris Lohmann, 8208 Oak Creek Lane, Denton, Texas 76208. Opposed to the request. Bill McKinarey, 8108 Oak Creek Lane, Denton, Texas 76208. Opposed to the request. Patricia Battiato, 7909 Oak Creek Lane, Denton, Texas 76208. Opposed to the request. Larry Ashby, 8209 Oak Creek Lane, Denton, Texas 76208. Opposed to the request. Debbie Henkes, 409 Lakeview Boulevard, Denton, Texas 76208. Opposed to the request. The residents from the Lakeview Ranch development and located on Trinity Road, voiced their concerns regarding speeding issues, traffic concerns, dumping issues, property value decreases, drainage issues and the lift station capabilities. Chair Rozell closed the Public Hearing. Chair Rozell called a recess at 11:43p.m. Chair Rozell reconvened the Regular Meeting at 11:53p.m. Commissioner Beck requested the applicant to discuss the amenities they will be providing. Murphee stated they will have an amenity center, eight foot fence and adding enhancements. Commissioner Beck stated the proposed amenities is accessible on the website. Murphee responded to the concerns of the speakers, he stated it is required by the City of Denton if you are on an arterial street than you have to have a six foot fence as a barrier but they are adding an eight foot fence as an enhancement. Commissioner Pruneda questioned what the terms of the lease and are homeowners able to lock in a rate. Holigan stated it would depend on the rates the competition is promoting. Commissioner Pruneda questioned if the applicant has looked a drainage issues. Murphee stated they are required to do a drainage analysis to assure the development will not be impacting any one downstream. Sanchez questioned the interest rate on a modular home. Holigan stated last time he spoke to Palm Harbor homes it was 5 to 7 percent. Commissioner Ellis questioned if the applicant spoke with Denton Independent School District (DISD). Holigan stated no they have not spoken with DISD. ЊЋ Chair Rozell questioned if there would be garages or car ports and what parking will be available. Murphee stated there will be driveways for each unit that fit two cars, the garages or car ports will be up to the homeowner. Commissioner Beck requested staff to explain the notification process. Jackson stated the 200 foot notification is based on the Texas local government code requirements, the City of Denton also sends out postcards to the residents 500 feet from the property. Jerry Drake, First Assistant City Attorney, stated the mailings would go to the owners on the most current tax role and does not include properties in the Extra-Territorial Jurisdiction (ETJ). Chair Rozell questioned if the Commission has the ability to add a condition to mitigate the traffic issues on another property. Jackson stated the applicant cannot be required to improve offsite, however staff is able to talk to the traffic engineer regarding the issue. Commissioner Ellis thanked the citizens for coming out, she stated as a city we need to remove Lakeview Boulevard as a collector street. Commissioner Ellis continued to state she is struggling with the vote, but a lot of the issues everyone is having is not the applicants fault and she wishes DISD was notified. Jackson stated when a property is annexed into the City of Denton staff is required to contact all the service providers including DISD. Jackson noted DISD is required to respond back and is aware of the development. Commissioner Beck stated he is also having issues with the development. Commissioner Beck stated this development is not the ideal solution for low income housing, but it is an element of it and it will help to some degree. Commissioner Beck continued to state the main issue he has is the diminishing effect. Commissioner Smith stated no applicant, City staff, Planning and Zoning Commissioners, City Council members, would ever bring a project that has deception or devious intent to the City of Denton. Commissioner Smith noted safety is a big issue for him regarding this project and by no volition of the action, but if this development is going to cause a higher safety issue in Lakeview Ranch development. Commissioner Smith stated if there is a denial from City Council the applicant would be required to wait 12 months until they are able to bring back the application for reconsideration, unless there is substantial change in the circumstances. Commissioner Smith questioned if a substantial change could be where the Director of Transportation provides assistance to the safety issues in Lakeview Ranch to predicate substantial change in an application. Jackson stated substantial change typically has to do with the land use, density or lay out. Drake stated those are usually the factors considered. Jackson stated the applicant has requested to self-impose a requirement to improve the safety on Trinity Road. Murphee stated they are here to help and self-impose the condition. Commissioner Pruneda stated one of the things he finds encouraging is when talking with the applicant thru out the night they have been more than willing to make accommodations to try and make things better. ЊЌ Chair Rozell noted the zoning case will be voted on first and the specific use will be second. Commissioner Larry Beck motioned, Commissioner Mat Pruneda seconded to approve Public Hearing item 4D, along with the purposed conditions: An overlay be placed on the property with the following conditions: 1. the maximum permitted density on the site shall be no more than four dwelling units per gross acre. 2. Permitted land uses on the site: A. 498 Modular and manufactured homes on 120.1 gross acres; and B. six single family detached housing on minimum one-acre lots; and an amendment to require the applicant to work with the Lakeview Ranch neighborhood with the goal of reducing traffic issues in the neighborhood. Motion approved (7-0). Commissioner Alfred Sanchez "aye", Commissioner Larry Beck "aye", Commissioner Jason Cole "aye", Chair Andrew Rozell "aye", Commissioner Mat Pruneda "aye", Commissioner Margie Ellis "aye", and Commissioner Tim Smith "aye". Drake stated the amendment requested from Commissioner Beck should be included motion for Public Hearing item 4E. Commissioner Alfred Sanchez motioned, Commissioner Mat Pruneda seconded to approve Public Hearing item 4E with staffs condtions: with the following conditions: 1. Allowed Land Uses: Only allowed land uses are 498 Modular and Manufactured Housing on 126.1 gross acres and six One- Acre Single Family Detached Housing. 2. There shall be a minimum of 6 acres of land developed as one-acre single family lots. These lots shall front Trinity Road. 3. 40% of the existing tree canopy must be preserved. 4. 100% of the City of Denton ESA Areas shall be preserved, except for one roadway crossing. 5. A minimum 10 acres of open space/green space shall be provided. 6. Amenity Center - Minimum 4,500 square foot air-conditioned club house with pool and cabana. 7. Minimum of two 2-inch diameter trees shall be planted on each lot. 8. The homes to have brick or stonewainscoting for the skirting. 9. Deed Restrictions shall be reviewed and approved by the city prior to filing of the first Final Plat. Deed restrictions shall be filed with the county and include the following minimum requirements: A. Property ownership shall own and maintain all improvements on the property. This shall include all streets, wet utilities, landscaping, irrigation systems, fencing, landscape buffers along perimeter, creeks, drainage ways, ESA areas, etc. Only franchise utility improvements shall be owned and maintained by others. These utilities shall be installed specific easements as identified by the Final Plat. B. Property ownership is required to mowand edge all common areas and stand areas at least every two weeks in the Spring and Summer months. Every three weeks is required in the Fall and Winter months. C. Property shall be gated. D. Property shall 100% owned by one entity. E. Property shall be platted as a single lot. F. All manufactured homes shall be installed on an engineered reinforced concrete slab. G. All manufactured homes shall be structurally affixed to the concrete pad. H. Manufactured Homes must be offset a minimum of off the back of curb. Minimum wide driveway must be installed in front of the homes, therefore providing 2 off-street parking spots per home. I. All homes to have masonry skirting down to the concrete slab, on all sides of the home. 10. McKinney Street Screening & Landscape Buffer Improvements: A. landscape buffer with automated irrigation B. 4-inch minimum diameter shade trees planted on ters, with a systems. staggered row on each side of the proposed screening wall. C. masonry screening wall built on a 2- tall berm. Berm shall have a flat top of at least and a maximum side slope of 5:1. Creating an effective screening height of 10-11. 11. masonry screening wall to be installed between the one acre lots ЊЍ and remaining development. Fence to be installed with the first adjoining phase. 12. As a result of the TIA: A. There shall be three (3) public street access points for the development. Two connections along McKinney Street and one (1) along Trinity Road. B. Developer shall dedicate the ultimate right-of-way for future Post Oak Boulevard at no fee to the city, upon filing of the first FinalPlat. This is approximately 1,100 linear feet parallel to the west property line and 1wide, equating to approximately 3.4 acres of land. C. Developer shall install two left turn lanes into the development along McKinney Street. D. Developer to install reinforced concrete public trail along the property frontage and terminate at the Ryan High School. Along the property frontage this trail will meander within the 2landscape buffer and McKinney Street right-of- way. North of the site the trail will be installed inside the McKinney Street right- of-way. Motioned approved (7-0). Commissioner Alfred Sanchez "aye", Commissioner Larry Beck "aye", Commissioner Jason Cole "aye", Chair Andrew Rozell "aye", Commissioner Mat Pruneda "aye", Commissioner Margie Ellis "aye", and Commissioner Tim Smith "aye". F. Hold a public hearing and consider a request by Budget Self Storage - Denton, Ltd., for a Specific Use Permit to allow quick vehicle servicing in Suite #110 and Suite #111 of Budget Self-Storage. The property is located at 2820 Virginia Circle. (S18-0002, Budget Self Storage, Cindy Jackson) Chair Rozell opened the Public Hearing item 4F. Cindy Jackson, Senior Planner, presented Public Hearing 4F. Jackson stated the request is for a Specific Use Permit (SUP) for two existing automobile repair facilities located on the site. Quick Vehicle Service is permitted with the approval of a Specific Use Permit in the NRMU zoning district. The building in which the two subject automotive repair facilities are located was designed as an office/warehouse building comprising ten office/warehouse suites. Jackson stated staff recommends denial of this request. Should the Planning and Zoning Commission decide to approve this request, Staff recommends the following conditions: 1. A new Certificate of Occupancy for the correct use, Quick Vehicle Servicing, must be applied for and approved. 2. This Specific Use Permit shall be limited to these two particular business owners and these two particular suites. 3. This Specific Use Permit will be limited to the use description and floor plan shown in Exhibit 7 and Exhibit 8. 4. Overnight outdoor storage of automobiles is prohibited. 5. No more than two customer vehicles per each business can be parked in the parking spaces in front of the building during business hours. Jerry Drake, First Assistant City Attorney stated he is unable to endorse the second recommended condition due to the issue regarding the use of the land and should be designated to the owner of the land not the business owners. Jackson stated staff can withdraw the second recommendation. Commissioner Smith questioned if the second condition could be placed on this specific Certificate of Occupancy (CO). Drake stated the Commission would need to add verbiage to the SUP that includes the suites and states upon consideration of a CO in order to prevent this use from being grandfather in. The following individual spoke during the Public Hearing: ЊЎ City Hall City of Denton 215 E. McKinney St. Denton, Texas 76201 www.cityofdenton.com Legislation Text File #:ID 19-024,Version:1 AGENDA CAPTION Holdapublichearingandconsideradoptionofanordinancegrantingapproval,inaccordancewithChapter26 oftheTexasParksandWildlifeCode,ofthenon-parkuseofapartofLakeForestParkforthepurposeof installingandmaintainingasanitarysewerlinetoservetheneedsoftheLakeForestParkaddition,providing foranoticebytheCityofDentonofnon-parkuseforinstallingandmaintainingasanitarysewerlineand reservation of easement in the event of sale of park; and providing an effective date. City of DentonPage 1 of 1Printed on 1/2/2019 powered by Legistar© City of Dent City Hall 215 E. McKinney Street Denton, Texas www.cityofdenton.com _____________________________________________________________________________________ AGENDA INFORMATION SHEET DEPARTMENT: Parks and Recreation ACM: Bryan Langley DATE: January 8, 2019 SUBJECT Hold a public hearing and consider adoption of an ordinance granting approval, in accordance with Chapter 26 of the Texas Parks and Wildlife Code, of the non-park use of a part of Lake Forest Park for the purpose installing and maintaining a sanitary sewer line to serve the needs of the Lake Forest Park addition, providing for a notice by the City of Denton of non-park use for installing and maintaining a sanitary sewer line and reservation of easement in the event of sale of park; and providing an effective date. BACKGROUND In the summer of 2018, representatives from Kimley Horn and VS Development LLC. began talking to Parks and Recreation staff regarding the need of easement(s) needed to support the development of a neighborhood to the east of Lake Forest Park. State law as defined in Chapter 26, Protection of Public Parks and Recreational Lands, of the Texas Parks and Wildlife Code require that: (a) A municipality of this state may not approve any program or project that requires the use or taking of any public land designated and used prior to the arrangement of the program or project as a park unless the municipality, acting through its duly authorized governing body or officer, determines that: (1) There is no feasible and prudent alternative to the use or taking of such land; and (2) The program or project includes all reasonable planning to minimize harm to the land, as a park, resulting from the use or taking. (b) A finding required by Subsection (a) of this section may be made only after notice and a hearing as required by this chapter. (c) The governing body or officer shall consider clearly enunciated local preferences, and the provisions of this chapter do not constitute a mandatory prohibition against the use of the area if the findings are made that justify the approval of a program or project. On November 5, 2018, the Parks, Recreation and Beautification Board approved (6-1) easements for Good Samaritan East Tract Development. determined by staff after working with City Departments. Following the Parks, Recreation and Beautification Board meeting, staff met with numerous city departments and the development group to discuss the project. As a result, an alternate plan was identified. drainage and right of way easement. This plan increased more land for neighborhood development thus the park and the development will not have to cons expenses. In addition, more land will be developed which could increase the lot size instead of roadway infrastructure. On December 3, 2018, the Parks, Recreation and Beautification Board was presented with the alternate plan for a sanitary sewer easement, which was recommended for approval (5-1). The upcoming development of Good Samaritan East is requesting a sanitary sewer easement within Lake Forest Park from the Parks and Recreation Department. The sanitary sewer line would connect to the lift station located on Good Samaritan Society - Lake Forest Village property west of the park property and allow the proposed development to gravity sewer within a public easement to the lift station (Exhibit 3 & 4). Parks and Recreation have reviewed the location for the easement, and it will not inhibit the recreational use of the park. Any structure, such as a manhole will be placed outside of any turf area that could be used for recreational play. The City provided notice in the Denton Record-Chronicle (DRC) on December 14, 2018, December 21, 2018, and December 28, 2018 of a public hearing to be held on January 8, 2019 in the Council Chambers to consider the alternatives to the non-park use of the park for the installation and maintenance of the sanitary sewer infrastructure. Summary: Good Samaritan East Tract Developer requests: c Sanitary Sewer Easement 0.181 of an acre (7,881 sq. ft.). Good Samaritan East Tract Developer offers: Public sanitary sewer easement $7,240.00 ($40,000 per acre): o $40,000 per acre is 100% of the contracted land value of Good Samaritan East Tract and is over 55% higher than the land value listed by the Denton County Appraisal District. o Denton County Appraisal District value of $25,970.18 per acre (Exhibit 5) o Tommy Marshall & Associates completed an appraisal for Access Bank of Texas in October of 2018 provided a value of $40,469.97 per acre (Exhibit 6) Tree replacement or mitigation: o Trees impacted by the construction of the sewer line will be relocated, replaced or mitigated. Mitigation will be a 1:1.5 per caliper inch at a cost of $125 per caliper inch. City of Denton, Parks and Recreation provides: Sanitary Sewer Easement from the Good Samaritan East Samaritan Society Lake Forest Village property west of the park. City of Denton, Parks and Recreation receives: A fee for a public sanitary sewer easement $7,240.00 ($40,000 per acre). Trees impacted by the construction of the sewer line will be relocated, replaced or mitigated. PRIOR ACTION/REVIEW (COUNCIL, BOARDS, COMMISSIONS) On November 5, 2018, Parks, Recreation and Beautification Board recommended the approval of easements (6-1). After meeting with numerous departments and the developer, a new plan of action has been identified that eliminates the need for the drainage and right of way easements and better serves the community and the development. On December 3, 2018, The Parks, Recreation and Beautification Board was presented the alternate plan for a sanitary sewer easement, which was recommended for approval (5-1). RECOMMENDATION Parks and Recreation staff recommends granting approval for the sanitary sewer easement requested by the Good Samaritan East Tract Developer to support development within the City. In addition, the staff recommend utilizing the funding from this easement for the improvements to Lake Forest Park. FISCAL INFORMATION Good Samaritan East Tract Developer to pay $7,240.00 ($40,000 per acre) for the sanitary sewer easement. STRATEGIC PLAN RELATIONSHIP -oriented road map that will help the City achieve its vision. The foundation for the plan is the five long-term Key Focus Areas (KFA): Organizational Excellence; Public Infrastructure; Economic Development; Safe, Livable, and Family-Friendly Community; and Sustainability and Environmental Stewardship. While individual items may support multiple KFAs, this specific City Council agenda item contributes most directly to the following KFA and goal: Related Key Focus Area: Economic Development Related Goal: 3.4 Encourage development, redevelopment, recruitment, and retention EXHIBITS Exhibit 1 Agenda Information Sheet Exhibit 2 Presentation Exhibit 3 Aerial Sanitary Sewer Exhibit 4 Sanitary Sewer Legal Description and Survey Exhibit 5 Denton County Appraisal District Value Exhibit 6 Tommy Marshall & Associates Appraisal Exhibit 7 Ordinance 2019 Respectfully submitted: Gary Packan Director, Parks and Recreation Drafted by: Jason Donnell Associate Planner, Parks and Recreation Exhibit3 00100'200' GRAPHIC SCALE 100' Good Samaritan 5750 Genesis Court Denton, Texas Suite 200 Frisco, Texas 75034 November 2018 972-335-3580 State of Texas Registration No. F-928 DWG NAMEK:\\FRI_CIVIL\\069306728 - GOOD SAMARITAN EAST TRACT\\CAD\\PRELIMINARY\\EXHIBITS\\20181107 - XPSIT- EXHIBIT.DWGNOTE: THIS PLAN IS CONCEPTUAL IN NATURE AND HAS BEEN PRODUCED WITHOUT THE BENEFIT OF A LAST SAVED11/8/2018 6:27 PMSURVEY OR CONTACT WITH THE CITY, COUNTY, ETC. Exhibit4 LEGAL DESCRIPTION BEING a tract of land situated in the N. Britton Survey, Abstract No. 51, Denton County, Texas, and being a portion of Lot 1, Block A, Lake Forest Park Addition, according to the Final Plat thereof recorded in Cabinet W, Page 349 of the Plat Records of Denton County, Texas, and being a portion of a called 69.320 acre tract of land described in a deed to City of Denton, Texas, as recorded in Volume 5224, Page 2912 of the Deed Records of Denton County, Texas, and being more particularly described as follows: COMMENCING Lot 1, being on the southerly right-of-way line of Ryan Road, a variable width right-of-way; THENCE of said Lot 1, a distance of 820.99 feet to the POINT OF BEGINNING of the herein described easement tract; THENCE THENCE of 331.36 feet to a point for corner; THENCE westerly line of said Lot 1; THENCE THENCE of 166.10 feet to a point for corner; THENCEPOINT OF BEGINNING, and containing 0.181 of an acre (7,881 square feet) of land, more or less. EXHIBIT "A" 16' PUBLIC SANITARY SEWER PRELIMINARY EASEMENT THIS DOCUMENT SHALL N. BRITTON SURVEY, ABSTRACT NO. 51 NOT BE RECORDED FOR DENTON COUNTY, TEXAS ANY PURPOSE AND SYLVIANA GUNAWAN SHALL NOT BE USED OR REGISTERED PROFESSIONAL LAND SURVEYOR NO. 6461 VIEWED OR RELIED 5750 GENESIS COURT, SUITE 200 UPON AS A FINAL 5750 Genesis Court, Suite 200Tel. No. (972) 335-3580 FRISCO, TEXAS 75034 Frisco, Texas 75034FIRM # 10193822Fax No. (972) 335-3779 SURVEY DOCUMENT PH. 972-335-3580 Drawn byProject No. ScaleChecked byDateSheet No. sylviana.gunawan@kimley-horn.com N/ASGKHA11/20/20180693067281 OF 2 GUNAWAN, SYLVIANA 11/20/2018 10:50 AM K:\\FRI_SURVEY\\069306728-GOOD SAMARITAN EAST TRACT\\DWG\\EASEMENTS\\069306728 16' SSE.DWG PHASE 1 OF RIDGEMONT ADDITION C. POILLALIER SURVEY RIGHT-OF-WAY 40 CAB. O, PG. 196 1 1 DEDICATION ABSTRACT NO. 1006 BLOCK B P.R.D.C.T. BLOCK A CAB. O, PG. 196 XF 1/2" IRF P.R.D.C.T. 1/2" IRF 1/2" IRF RYAN ROAD DEDICATION 1/2" IRFC 1/2" IRFC VOLUME 845, PAGE 32, D.R.D.C.T. "RPLS 4561" "RPLS 4561" 17.5' RIGHT-OF-WAY 8' P.U.E.NGG GATHERING COMPANY, 25' 25' RIGHT-OF-WAY DEDICATION L.L.C. PIPELINE EASEMENT CAB. W, PG. 349, RIGHT-OF-WAY DEDICATION CAB. W, PG. 349 P.R.D.C.T.DATED 10/02/2006 DEDICATION CAB. F, PG. 36 P.R.D.C.T. (UNRECORDED EASEMENT; CAB. F, PG. 36 P.R.D.C.T. DESCRIBED AS 15' AND P.R.D.C.T. DEPICTED AS 25') P.O.C. PORTION OF LOT 1, BLOCK A LOT 1, BLOCK A LAKE FOREST GOOD LAKE FOREST GOOD SAMARITAN VILLAGE SAMARITAN VILLAGE CAB. F, PG. 36 CAB. F, PG. 36 P.R.D.C.T. P.R.D.C.T. REMAINDER OF TRACT 4 CALLED 84.897 ACRES THE EV. LUTHERAN GOOD SAMARITAN SOCIETY OF SIOUX FALLS, SOUTH DAKOTA VOL. 1623, PG. 58 D.R.D.C.T. 0 75 150 LEGEND P.O.B. = POINT OF BEGINNING GRAPHIC SCALE IN FEET P.O.C. = POINT OF COMMENCEMENT IRSC = 5/8" IRON ROD W/ "KHA" CAP SET IRFC = IRON ROD W/CAP FOUND LOT 1, BLOCK A D.R.D.C.T. = DEED RECORDS OF DENTON LAKE FOREST PARK ADDITION COUNTY, TEXAS CAB. W, PG. 349 O.P.R.D.C.T. = OFFICIAL PUBLIC RECORDS OF P.R.D.C.T. DENTON COUNTY, TEXAS O.R.D.C.T. = OFFICIAL RECORDS OF DENTON CALLED 69.320 ACRES COUNTY, TEXAS CITY OF DENTON, TEXAS VOL. 5224, PG. 2912 D.R.D.C.T. WETLAND MITIGATION AREA CITY OF DENTON ORDINANCE NO. 18.75' 2004-154 NOTES All bearings shown are based on grid north of the Texas Coordinate System of 1983 using the City of Denton control monumentation. All dimensions shown are ground distances. To obtain a grid distance, multiply the ground distance by the Project Combined Factor (PCF) of 0.999850925. EXHIBIT "B" 16' PUBLIC SANITARY SEWER PRELIMINARY EASEMENT THIS DOCUMENT SHALL N. BRITTON SURVEY, ABSTRACT NO. 51 NOT BE RECORDED FOR DENTON COUNTY, TEXAS ANY PURPOSE AND SYLVIANA GUNAWAN SHALL NOT BE USED OR REGISTERED PROFESSIONAL VIEWED OR RELIED LAND SURVEYOR NO. 6461 5750 GENESIS COURT, SUITE 200 UPON AS A FINAL 5750 Genesis Court, Suite 200Tel. No. (972) 335-3580 FRISCO, TEXAS 75034 Frisco, Texas 75034FIRM # 10193822Fax No. (972) 335-3779 SURVEY DOCUMENT PH. 972-335-3580 Drawn byProject No. ScaleChecked byDateSheet No. sylviana.gunawan@kimley-horn.com 1" = 150'SGKHA11/20/20180693067282 OF 2 GUNAWAN, SYLVIANA 11/20/2018 10:50 AM K:\\FRI_SURVEY\\069306728-GOOD SAMARITAN EAST TRACT\\DWG\\EASEMENTS\\069306728 16' SSE.DWG Exhibit6 Tommy Marshall & Associates FROM: INVOICE Tommy Marshall INVOICE NUMBER Tommy Marshall & Associates A-18-10-4323 101 S. Locust Street, Suite 600 DATE P.O. Box 158 Denton, TX 7620210/10/2018 Telephone Number:Fax Number: 940-243-2387940-243-5352 REFERENCE TO: Internal Order #: A-18-10-4323 RYAN LYLES Lender Case #: AccessBank Texas Client File #: 320 W Eagle Drive, Suite 100 Main File # on form: A-18-10-4323 Denton , TX 76201 Other File # on form: Federal Tax ID: 75-2441347 Telephone Number:Fax Number: (940) 382-3962 x136(940) 382-3942 Employer ID: Alternate Number:E-Mail: (940) 297-6330rlyles@accessbanktx.com DESCRIPTION Lender:Client: AccessBank TexasAccessBank Texas Purchaser/Borrower: VS Development Llc Property Address: Tbd Ryan Road City: Denton County:State:Zip: DentonTX76207 Legal Description: 45.968 Ac in the T Labar Survey, Abst No. 779 and N Britton Survey, Abst No. 51, Denton Co, TX FEESAMOUNT APPRAISAL FEE 500.00 500.00 SUBTOTAL PAYMENTSAMOUNT Check #:Date:Description: Check #:Date:Description: Check #:Date:Description: SUBTOTAL TOTAL DUE$ 500.00 Please Return This Portion With Your Payment FROM: AMOUNT DUE:$ 500.00 RYAN LYLES AMOUNT ENCLOSED:$ AccessBank Texas INVOICE NUMBER 320 W Eagle Drive, Suite 100 Denton , TX 76201A-18-10-4323 DATE Telephone Number:Fax Number: (940) 382-3962 x136(940) 382-3942 10/10/2018 Alternate Number:E-Mail: (940) 297-6330rlyles@accessbanktx.com REFERENCE Internal Order #: A-18-10-4323 TO: Lender Case #: Tommy Marshall Client File #: Tommy Marshall & Associates Main File # on form: A-18-10-4323 101 S. Locust Street, Suite 600 Other File # on form: P.O. Box 158 Federal Tax ID: 75-2441347 Denton, TX 76202 Employer ID: Form NIV1 - "TOTAL" appraisal software by a la mode, inc. - 1-800-ALAMODE APPRAISAL OF REAL PROPERTY *LINES ARE APPROXIMATE, FOR INFORMATIONAL PURPOSES LOCATED AT Tbd Ryan Road Denton, TX 76207 45.968 Ac in the T Labar Survey, Abst No. 779 and N Britton Survey, Abst No. 51, Denton Co, TX FOR AccessBank Texas 320 W Eagle Drive, Suite 100 Denton , TX 76201 OPINION OF VALUE 1,860,000 AS OF 10/09/2018 BY Pedro Torres Tommy Marshall & Associates 101 S Locust Street, Suite 600, P.O. Box 158 Denton, TX 76202 (940) 243-2387 jerry@tma-appraisal.com tommy@tma-appraisal.com Form GA1V - "TOTAL" appraisal software by a la mode, inc. - 1-800-ALAMODE Assumptions and Limiting Conditions File # A-18-10-4323 Thisappraisalreportissubjecttothefollowingscopeofwork,intendeduse,intendeduser,definitionofmarketvalue,statementof assumptionsandlimitingconditions,andcertifications.Theappraisermayexpandthescopeofworktoincludeanyadditional researchoranalysisnecessarybasedonthecomplexityofthisappraisalassignment. SCOPE OF WORK:The scope of work for this appraisal is defined by the complexity of this appraisal assignment and the reporting requirementsofthisappraisalassignment,includingthefollowingdefinitionofmarketvalue,statementofassumptionsandlimiting conditions,andcertifications.Theappraisermust,ataminimum:(1)performacompletevisualinspectionofthesubjectproperty, (2)inspecttheneighborhood,(3)inspecteachofthecomparablesalesfromatleastthestreet,(4)research,verify,andanalyze datafromreliablepublicand/orprivatesources,and(5)reporthisorheranalysis,opinions,andconclusionsinthisappraisalreport. INTENDED USE:The intended use of this appraisal report is for the lender/client to evaluate the property that is the subject of this appraisalforamortgagefinancetransaction. INTENDED USER: The intended user of this appraisal report is the lender/client. DEFINITION OF MARKET VALUE:The most probable price which a property should bring in a competitive and open market underallconditionsrequisitetoafairsale,thebuyerandseller,eachactingprudently,knowledgeablyandassumingthe priceisnotaffectedbyunduestimulus.Implicitinthisdefinitionistheconsummationofasaleasofaspecifieddateand thepassingoftitlefromsellertobuyerunderconditionswhereby:(1)buyerandselleraretypicallymotivated;(2)both partiesarewellinformedorwelladvised,andeachactinginwhatheorsheconsidershisorherownbestinterest;(3)a reasonabletimeisallowedforexposureintheopenmarket;(4)paymentismadeintermsofcashinU.S.dollarsorinterms offinancialarrangementscomparablethereto;and(5)thepricerepresentsthenormalconsiderationforthepropertysold unaffected by special or creative financing or sales concessions*granted by anyone associated with the sale. *Adjustments to the comparables must be made for special or creative financing or sales concessions. No adjustments are necessaryforthosecostswhicharenormallypaidbysellersasaresultoftraditionorlawinamarketarea;thesecostsare readilyidentifiablesincethesellerpaysthesecostsinvirtuallyallsalestransactions.Specialorcreativefinancing adjustmentscanbemadetothecomparablepropertybycomparisonstofinancingtermsofferedbyathirdpartyinstitutional lenderthatisnotalreadyinvolvedinthepropertyortransaction.Anyadjustmentshouldnotbecalculatedonamechanical dollarfordollarcostofthefinancingorconcessionbutthedollaramountofanyadjustmentshouldapproximatethemarket's reactiontothefinancingorconcessionsbasedontheappraiser'sjudgment. STATEMENT OF ASSUMPTIONS AND LIMITING CONDITIONS:The appraiser's certification in this report is subject to the followingassumptionsandlimitingconditions: 1.Theappraiserwillnotberesponsibleformattersofalegalnaturethataffecteitherthepropertybeingappraisedorthetitle toit,exceptforinformationthatheorshebecameawareofduringtheresearchinvolvedinperformingthisappraisal.The appraiserassumesthatthetitleisgoodandmarketableandwillnotrenderanyopinionsaboutthetitle. 2.TheappraiserhasexaminedtheavailablefloodmapsthatareprovidedbytheFederalEmergencyManagementAgency (orotherdatasources)andhasnotedinthisappraisalreportwhetheranyportionofthesubjectsiteislocatedinan identifiedSpecialFloodHazardArea.Becausetheappraiserisnotasurveyor,heorshemakesnoguarantees,expressor implied,regardingthisdetermination. 3.Theappraiserwillnotgivetestimonyorappearincourtbecauseheorshemadeanappraisalofthepropertyinquestion, unlessspecificarrangementstodosohavebeenmadebeforehand,orasotherwiserequiredbylaw. 4.Theappraiserhasnotedinthisappraisalreportanyadverseconditions(suchasthepresenceofhazardouswastes,toxic substances,etc.)observedduringtheinspectionofthesubjectpropertyorthatheorshebecameawareofduringtheresearch involvedinperformingthisappraisal.Unlessotherwisestatedinthisappraisalreport,theappraiserhasnoknowledgeofanyhidden orunapparentdeficienciesoradverseconditionsoftheproperty(suchas,butnotlimitedto,thepresenceofhazardouswastes, toxicsubstances,adverseenvironmentalconditions,etc.)thatwouldmakethepropertylessvaluable,andhasassumedthatthere arenosuchconditionsandmakesnoguaranteesorwarranties,expressorimplied.Theappraiserwillnotberesponsibleforany suchconditionsthatdoexistorforanyengineeringortestingthatmightberequiredtodiscoverwhethersuchconditionsexist. Becausetheappraiserisnotanexpertinthefieldofenvironmentalhazards,thisappraisalreportmustnotbeconsideredas anenvironmentalassessmentoftheproperty. 5.Iftheappraiserhasbasedhisorherappraisalreportandvaluationconclusionforanappraisalsubjecttocertainconditions,it isassumedthattheconditionswillbemetinasatisfactorymanner. Form ACR3 - "TOTAL" appraisal software by a la mode, inc. - 1-800-ALAMODE Certifications File # A-18-10-4323 APPRAISER'S CERTIFICATION:The Appraiser certifies and agrees that: 1.Ihave,ataminimum,developedandreportedthisappraisalinaccordancewiththescopeofworkrequirementsstatedin thisappraisalreport. 2.Iperformedacompletevisualinspectionofthesubjectproperty.Ireportedthesitecharacteristicsinfactual,specificterms. 3.IperformedthisappraisalinaccordancewiththerequirementsoftheUniformStandardsofProfessionalAppraisalPractice thatwereadoptedandpromulgatedbytheAppraisalStandardsBoardofTheAppraisalFoundationandthatwereinplaceatthe timethisappraisalreportwasprepared. 4.Idevelopedmyopinionofthemarketvalueoftherealpropertythatisthesubjectofthisreportbasedonthesalescomparison approachtovalue.Ihaveadequatecomparablemarketdatatodevelopareliablesalescomparisonapproachforthisappraisal assignment. 5.Iresearched,verified,analyzed,andreportedonanycurrentagreementforsaleforthesubjectproperty,anyofferingfor saleofthesubjectpropertyinthetwelvemonthspriortotheeffectivedateofthisappraisal,andthepriorsalesofthesubject propertyforaminimumofthreeyearspriortotheeffectivedateofthisappraisal,unlessotherwiseindicatedinthisreport. 6.Iresearched,verified,analyzed,andreportedonthepriorsalesofthecomparablesalesforaminimumofoneyearprior tothedateofsaleofthecomparablesale,unlessotherwiseindicatedinthisreport. 7.Iselectedandusedcomparablesalesthatarelocationally,physically,andfunctionallythemostsimilartothesubjectproperty. 8.Ihavereportedadjustmentstothecomparablesalesthatreflectthemarket'sreactiontothedifferencesbetweenthesubject propertyandthecomparablesales. 9.Iverified,fromadisinterestedsource,allinformationinthisreportthatwasprovidedbypartieswhohaveafinancialinterestin thesaleorfinancingofthesubjectproperty. 10.Ihaveknowledgeandexperienceinappraisingthistypeofpropertyinthismarketarea. 11.Iamawareof,andhaveaccessto,thenecessaryandappropriatepublicandprivatedatasources,suchasmultiplelisting services,taxassessmentrecords,publiclandrecordsandothersuchdatasourcesfortheareainwhichthepropertyislocated. 12.Iobtainedtheinformation,estimates,andopinionsfurnishedbyotherpartiesandexpressedinthisappraisalreportfrom reliablesourcesthatIbelievetobetrueandcorrect. 13.Ihavetakenintoconsiderationthefactorsthathaveanimpactonvaluewithrespecttothesubjectneighborhood,subject property,andtheproximityofthesubjectpropertytoadverseinfluencesinthedevelopmentofmyopinionofmarketvalue.Ihave notedinthisappraisalreportanyadverseconditions(suchas,butnotlimitedto,thepresenceofhazardouswastes,toxic substances,adverseenvironmentalconditions,etc.)observedduringtheinspectionofthesubjectpropertyorthatIbecameaware ofduringtheresearchinvolvedinperformingthisappraisal.Ihaveconsideredtheseadverseconditionsinmyanalysisofthe propertyvalue,andhavereportedontheeffectoftheconditionsonthevalueandmarketabilityofthesubjectproperty. 14.Ihavenotknowinglywithheldanysignificantinformationfromthisappraisalreportand,tothebestofmyknowledge,all statementsandinformationinthisappraisalreportaretrueandcorrect. 15.Istatedinthisappraisalreportmyownpersonal,unbiased,andprofessionalanalysis,opinions,andconclusions,which aresubjectonlytotheassumptionsandlimitingconditionsinthisappraisalreport. 16.Ihavenopresentorprospectiveinterestinthepropertythatisthesubjectofthisreport,andIhavenopresentor prospectivepersonalinterestorbiaswithrespecttotheparticipantsinthetransaction.Ididnotbase,eitherpartiallyor completely,myanalysisand/oropinionofmarketvalueinthisappraisalreportontherace,color,religion,sex,age,marital status,handicap,familialstatus,ornationaloriginofeithertheprospectiveownersoroccupantsofthesubjectpropertyorofthe presentownersoroccupantsofthepropertiesinthevicinityofthesubjectpropertyoronanyotherbasisprohibitedbylaw. 17.Myemploymentand/orcompensationforperformingthisappraisaloranyfutureoranticipatedappraisalswasnotconditioned onanyagreementorunderstanding,writtenorotherwise,thatIwouldreport(orpresentanalysissupporting)apredetermined specificvalue,apredeterminedminimumvalue,arangeordirectioninvalue,avaluethatfavorsthecauseofanyparty,orthe attainmentofaspecificresultoroccurrenceofaspecificsubsequentevent(suchasapprovalofapendingmortgageloan application). 18.Ipersonallypreparedallconclusionsandopinionsabouttherealestatethatweresetforthinthisappraisalreport.IfIreliedon significantrealpropertyappraisalassistancefromanyindividualorindividualsintheperformanceofthisappraisalorthe preparationofthisappraisalreport,Ihavenamedsuchindividual(s)anddisclosedthespecifictasksperformedinthisappraisal report.Icertifythatanyindividualsonamedisqualifiedtoperformthetasks.Ihavenotauthorizedanyonetomakeachangeto anyiteminthisappraisalreport;therefore,anychangemadetothisappraisalisunauthorizedandIwilltakenoresponsibilityforit. 19.Iidentifiedthelender/clientinthisappraisalreportwhoistheindividual,organization,oragentfortheorganizationthat orderedandwillreceivethisappraisalreport. 20.Thelender/clientmaydiscloseordistributethisappraisalreportto:theborrower;anotherlenderattherequestoftheborrower; themortgageeoritssuccessorsandassigns;mortgageinsurers;governmentsponsoredenterprises;othersecondarymarket participants;datacollectionorreportingservices;professionalappraisalorganizations;anydepartmentagency,orinstrumentalityof theUnitedStates;andanystate,theDistrictofColumbia,orotherjurisdictions;withouthavingtoobtaintheappraiser'sor supervisoryappraiser's(ifapplicable)consent.Suchconsentmustbeobtainedbeforethisappraisalreportmaybedisclosedor distributedtoanyotherparty(including,butnotlimitedto,thepublicthroughadvertising,publicrelations,news,sales,orother media). Form ACR3 - "TOTAL" appraisal software by a la mode, inc. - 1-800-ALAMODE Certifications File # A-18-10-4323 21.Iamawarethatanydisclosureordistributionofthisappraisalreportbymeorthelender/clientmaybesubjecttocertainlaws andregulations.Further,IamalsosubjecttotheprovisionsoftheUniformStandardsofProfessionalAppraisalPracticethat pertaintodisclosureordistributionbyme. 22.Ifthisappraisalreportwastransmittedasan"electronicrecord"containingmy"electronicsignature",asthosetermsare definedinapplicablefederaland/orstatelaws(excludingaudioandvideorecordings),orafacsimiletransmissionofthis appraisalreportcontainingacopyorrepresentationofmysignature,theappraisalreportshallbeaseffective,enforceableand validasifapaperversionofthisappraisalreportweredeliveredcontainingmyoriginalhandwrittensignature. 23.Unlessotherwiseindicated,Ihaveperformednoservices,asanappraiserorinanyothercapacity,regardingthepropertythat isthesubjectofthisreportwithinthethree-yearperiodimmediatelyprecedingacceptanceofthisassignment. SUPERVISORY APPRAISER'S CERTIFICATION:The Supervisory Appraiser certifies and agrees that: 1.Idirectlysupervisedtheappraiserforthisappraisalassignment,havereadtheappraisalreport,andagreewiththeappraiser's analysis,opinions,statements,conclusions,andtheappraiser'scertification. 2.Iacceptfullresponsibilityforthecontentsofthisappraisalreportincluding,butnotlimitedto,theappraiser'sanalysis,opinions, statements,conclusions,andtheappraiser'scertification. 3.Theappraiseridentifiedinthisappraisalreportiseitherasub-contractororanemployeeofthesupervisoryappraiser(orthe appraisalfirm),isqualifiedtoperformthisappraisal,andisacceptabletoperformthisappraisalundertheapplicablestatelaw. 4.ThisappraisalreportcomplieswiththeUniformStandardsofProfessionalAppraisalPracticethatwereadoptedand promulgatedbytheAppraisalStandardsBoardofTheAppraisalFoundationandthatwereinplaceatthetimethisappraisal reportwasprepared. 5.Ifthisappraisalreportwastransmittedasan"electronicrecord"containingmy"electronicsignature",asthosetermsare definedinapplicablefederaland/orstatelaws(excludingaudioandvideorecordings),orafacsimiletransmissionofthis appraisalreportcontainingacopyorrepresentationofmysignature,theappraisalreportshallbeaseffective,enforceableand validasifapaperversionofthisappraisalreportweredeliveredcontainingmyoriginalhandwrittensignature. APPRAISER SUPERVISORY APPRAISER (ONLY IF REQUIRED) SignatureSignature NameName Pedro TorresTommy Marshall Company NameCompany Name Tommy Marshall & AssociatesTommy Marshall & Associates Company AddressCompany Address 101 S Locust Street, Suite 600, P.O. Box 158101 S Locust St, Suite 600, PO Box 158 Denton, TX 76202Denton, TX 76202 Telephone NumberTelephone Number (940) 243-2387(940) 243-2387 Email AddressEmail Address jerry@tma-appraisal.comtommy@tma-appraisal.com Date of Signature and ReportDate of Signature 10/10/201810/10/2018 Effective Date of AppraisalState Certification # 10/09/20181322676-G State Certification #or State License # or State License #State 1341245-TraineeTX or Other (describe)State #Expiration Date of Certification or License 03/31/2020 State TX SUBJECT PROPERTY Expiration Date of Certification or License 11/30/2018 Did not inspect subject property ADDRESS OF PROPERTY APPRAISED Did inspect exterior of subject property from street Tbd Ryan Road Date of Inspection Denton, TX 76207 Did inspect interior and exterior of subject property APPRAISED VALUE OF SUBJECT PROPERTY $ 1,860,000 Date of Inspection LENDER/CLIENT Name RYAN LYLES COMPARABLE SALES Company Name AccessBank Texas Company Address 320 W Eagle Drive, Suite 100 Did not inspect exterior of comparable sales from street DENTON , TX 76201 Did inspect exterior of comparable sales from street Email Address rlyles@accessbanktx.com Date of Inspection Form ACR3 - "TOTAL" appraisal software by a la mode, inc. - 1-800-ALAMODE Tommy Marshall & Associates FIRREA / USPAP ADDENDUM File No. Borrower VS Development LlcA-18-10-4323 Property Address Tbd Ryan Road CityCountyStateZip Code DentonDentonTX76207 Lender/Client AccessBank Texas Purpose THE INTENDED USE OF THIS APPRAISAL REPORT IS TO DEVELOP AN OPINION OF MARKET VALUE FOR PURCHSE FINANCING PURPOSES. Scope of Work THE APPRAISER MADE AN ON SITE INSPECTION OF THE SUBJECT PROPERTY. PHOTOS WERE TAKEN TO DEPICT THE PROPERTY AND ARE PRESENTED IN THIS REPORT. THE SUBJECT NEIGHBORHOOD WAS VISUALLY EXAMINED TO ASSIST THE APPRAISER IN DETERMINING MARKET AND PHYSICAL CHARACTERISTICS. SALES WERE UTILIZED AND CONFIRMED UTILIZING AREA REALTORS, THE MLS, OFFICE FILES, AND THE DENTON CENTRAL APPRAISAL DISTRICT. THE INCOME APPROACH TO VALUE WAS NOT DEVELOPED AS VACANT LAND IS NOT TYPICALLY PURCHASED AS AN INCOME PRODUCING PROPERTY. ADEQUATE SALES OF LAND IN THE IMMEDIATE AREA PROVIDED NECESSARY INFORMATION TO DEVELOP THE SALES COMPARISON APPROACH. THE COST APPROACH TO VALUE IS NOT DEVELOPED DUE TO THE LACK OF IMPROVEMENTS AND THE SUBJECT BEING APPRAISED AS IF VACANT LAND. Intended Use / Intended User Intended Use: THE INTENDED USE OF THIS REPORT IS TO DEVELOP AN OPINION OF VALUE FOR PURCHASED FINANCING PURPOSES Intended User(s): THE INTENDED USER IS ACCESS BANK. History of Property Current listing information:THE SUBJECT PROPERTY IS NOT CURRENTLY LISTED WITH THE MULTI LISTING SERVICE; HOWEVER, THE SUBJECT IS IN CONTRACT FOR SALE FROM THE CURRENT OWNER EV LUTHERAN GOOD SAMARITAN TO VS DEVELOPMENT LLC FOR A REPORTED $1,850,000 (SEE ATTACHED CONTRACT PAGE 1 IN THE ADDENDA). Prior sale:ACCORDING TO THE DENTON CENTRAL APPRAISAL DISTRICT AND NTREIS TAX, THE SUBJECT SITE IS CURRENTLY OWNED BY EV LUTHERAN GOOD SAMARITAN SINCE 1985. NO OTHER SALES OR TRANSFERS WERE DISCOVERED WITHIN THE PAST THREE YEARS. Exposure Time / Marketing Time EXPOSURE TIME IS ESTIMATED TO BE 12 MONTHS OR LESS. A SEARCH OF COMPARABLE PROPERTIES INDICATES THAT PROPERTY SIMILAR TO THE SUBJECT THAT IS PROPERLY MARKETED AND LISTED WITH A REAL ESTATE PROFESSIONAL WILL SELL WITHIN APPROXIMATELY 12 MONTHS OR LESS. Personal (non-realty) Transfers NONE KNOWN Additional Comments TOMMY MARSHALL & ASSOCIATES HAS NOT APPRAISED OR PROVIDED OTHER VALUATION SERVICES FOR THE SUBJECT PROPERTY IN THE PREVIOUS THREE YEAR PERIOD. Certification Supplement 1.This appraisal assignment was not based on a requested minimum valuation, a specific valuation, or an approval of a loan. 2.Mycompensationisnotcontingentuponthereportingofapredeterminedvalueordirectioninvaluethatfavorsthecauseoftheclient,theamountofthevalue estimate, the attainment of a stipulated result or the occurrence of a subsequent event. Supervisory Appraiser:Appraiser: Pedro TorresTommy Marshall Signed Date:10/10/2018 Signed Date:10/10/2018 Certification or License #:1341245-Trainee Certification or License #:1322676-G Certification or License State:Expires:Certification or License State:Expires: TX11/30/2018TX03/31/2020 Effective Date of Appraisal:Inspection of Subject:Did NotExterior OnlyInterior and Exterior 10/09/2018 Form FUA_LG2 - "TOTAL" appraisal software by a la mode, inc. - 1-800-ALAMODE Tommy Marshall & Associates LAND APPRAISAL REPORT File No. A-18-10-4323 BorrowerCensus TractMap Reference VS Development Llc0214.0619124 Property Address Tbd Ryan Road CityCountyStateZip Code DentonDentonTX76207 Legal Description 45.968 Ac in the T Labar Survey, Abst No. 779 and N Britton Survey, Abst No. 51, Denton Co, TX Sale Price $Date of SaleLoan Termyrs.Property Rights AppraisedFeeLeaseholdDe Minimis PUD Price Per AcrePendingPending Actual Real Estate Taxes $(yr)Loan charges to be paid by seller $Other sales concessions 28,700N/ANone known Lender/ClientAddress AccessBank Texas320 W Eagle Drive, Suite 100, DENTON , TX 76201 OccupantAppraiserInstructions to Appraiser Vacant LandPedro TorresDevelop Opinion of Market Value "As Is" LocationUrbanSuburbanRuralGoodAvg.FairPoor Built UpOver 75%25% to 75%Under 25%Employment Stability Growth RateFully Dev.RapidSteadySlowConvenience to Employment Property ValuesIncreasingStableDecliningConvenience to Shopping Demand/SupplyShortageIn BalanceOversupplyConvenience to Schools Marketing TimeUnder 3 Mos.4-6 Mos.Over 6 Mos.Adequacy of Public Transportation Present% One-Unit% 2-4 Unit% Apts.% Condo% CommercialRecreational Facilities 65510 Land Use % Industrial% Vacant%Adequacy of Utilities 515 Change in PresentNot LikelyLikely (*)Taking Place (*)Property Compatibility Land Use (*) FromToProtection from Detrimental Conditions Vacant LandResidential Predominant OccupancyOwnerTenant% VacantPolice and Fire Protection 1 One-Unit Price Range$to $Predominant Value $General Appearance of Properties 851,150275 One-Unit Age Rangeyrs. toyrs.Predominant Ageyrs.Appeal to Market 150+25 Comments including those factors, favorable or unfavorable, affecting marketability (e.g. public parks, schools, view, noise) The subject is located on the east side of Marshall Road. Commercial/Industrial facilities are located in close proximity to the subject site to the east. The railroad borders the subject site to the east. Dimensions=Corner Lot 45.968 Acres 45.96ac Zoning ClassificationPresent ImprovementsDoDo NotConform to Zoning Regulations NR-6 Highest and Best UsePresent UseOther (specify) PublicOther (Describe)Topo OFF SITE IMPROVEMENTS Gently Rolling Heavily Treed Elec.Street AccessPublicPrivateSize 45.968 (Per Plat) GasSurfaceShape AsphaltRectangular WaterMaintenancePublicPrivateView Residential San. SewerStorm SewerCurb/GutterDrainage Appears Adequate Is the property located in a FEMA Special Flood Hazard Area? Underground Elect. & Tel.SidewalkStreet LightsYesNo Comments (favorable or unfavorable including any apparent adverse easements, encroachments, or other adverse conditions) No apparent adverse easements or encroachments were noted. Typical utility easements are assumed. The subject does not appear to lie within the 100 year flood plain, see attached Fema Flood Map. Theundersignedhasrecitedthefollowingrecentsalesofpropertiesmostsimilarandproximatetosubjectandhasconsideredtheseinthemarketanalysis.Thedescription includesadollaradjustmentreflectingmarketreactiontothoseitemsofsignificantvariationbetweenthesubjectandcomparableproperties.Ifasignificantiteminthe comparablepropertyissuperiortoormorefavorablethanthesubjectproperty,aminus(–)adjustmentismade,thusreducingtheindicatedvalueofsubject;ifa significantiteminthecomparableisinferiortoorlessfavorablethanthesubjectproperty,aplus(+)adjustmentismadethusincreasingtheindicatedvalueofthesubject. ITEMSUBJECT PROPERTYCOMPARABLE NO. 1COMPARABLE NO. 2COMPARABLE NO. 3 Address Tbd Ryan Road4001 N Locust St1201 N Loop 288Tbd Old Justin Road Denton, TX 76207Denton, TX 76207Denton, TX 76205Argyle, TX Proximity to Subject 6.89 miles N5.15 miles N6.24 miles SW Sales Price$$$$ Price Per Acre47,76049,45538,151 Price$$$$ Total Sales Total Sales Price2,388,0001,000,0001,900,000 Data Source(s) Denton Cad/NtreisMls#13127850;Dom 803DCAD R35941;Dom UndisclosedDcad R339705;Dom Undisclosed ITEMDESCRIPTIONDESCRIPTION+( )$ Adjust.–DESCRIPTION+( )$ Adjust.–DESCRIPTION+( )$ Adjust.– Date of Sale/Time Adj. Pending12/05/201705/03/201702/16/2018 Location N;Res;N;Res;N;Res;N;Res; Site/View N;ResN;Res;N;Res;N;Res; Site Size 45.96 ac50.00 ac20.22 ac-5,00049.80 ac Topography Gently Rolling/TreesSuperior-4,800Superior-5,000Superior-3,800 Utilities/Zoning Access to allSimilarSimilarSimilar Flood NoneNoneNot DetrimentalNone Sales or Financing N/AConventionalUndisclosedUndisclosed Concessions None knownNoneUndisclosedUndisclosed +–+–+– Net Adj. (Total)$$$ -4,800-10,000-3,800 Indicated Value of Subject$$$ 42,96039,45534,351 Comments on Market Data See attached addenda. Comments and Conditions of Appraisal THE VALUE IS SUBJECT TO THE ATTACHED LIMITING CONDITIONS. SEE LIMITING CONDITIONS. Final Reconciliation THE INCOME APPROACH AND COST APPROACH WERE NOT DEVELOPED AS THE SUBJECT IS VACANT LAND. THE FINAL OPINION OF VALUE FOR THE SUBJECT SITE "AS VACANT" IS (45.96 ACRES @ $40,500/ACRE=$1,861,380) ROUNDED TO $1,860,000. I(WE)ESTIMATETHEMARKETVALUE,ASDEFINED,OFTHESUBJECTPROPERTYASOFTO BE $ 10/09/20181,860,000 AppraiserSupervisory Appraiser (if applicable) Pedro TorresTommy Marshall Date of Signature and ReportDate of Signature 10/10/201810/10/2018 TitleTitle Appraiser-TraineeAppraiser State Certification #STState Certification #ST 1322676-GTX Or State License #STOr State License #ST 1341245-TraineeTX Expiration Date of State Certification or LicenseExpiration Date of State Certification or License 11/30/201803/31/2020 Date of Inspection (if applicable)DidDid NotInspect PropertyDate of Inspection 10/09/2018 08/11 Form LAND - "TOTAL" appraisal software by a la mode, inc. - 1-800-ALAMODE ADDITIONAL COMPARABLE SALES File No. A-18-10-4323 ITEMSUBJECT PROPERTYCOMPARABLE NO.COMPARABLE NO.COMPARABLE NO. 456 Address Tbd Ryan RoadTbd Hickory Hill Road Denton, TX 76207Argyle, TX 76226 Proximity to Subject 4.44 miles SW Sales Price$$$$ Price Per Acre51,254 Price$$$$ Total Sales Total Sales Price3,125,000 Data Source(s) Denton Cad/NtreisMls#13565633;Dom 234 ITEMDESCRIPTIONDESCRIPTION+( )$ Adjust.–DESCRIPTION+( )$ Adjust.–DESCRIPTION+( )$ Adjust.– Date of Sale/Time Adj. Pending12/19/2017 Location N;Res;N;Res; Site/View N;ResN;Res; Site Size 45.96 ac60.97 ac Topography Gently Rolling/TreesSuperior-5,100 Utilities/Zoning Access to allSimilar Flood NoneNot Detrimental Sales or Financing N/ACash Concessions None knownNone +–+–+– Net Adj. (Total)$$$ -5,100 Indicated Value of Subject$$$ 46,154 Comments on Market Data 08/11 Form LAND.(AC) - "TOTAL" appraisal software by a la mode, inc. - 1-800-ALAMODE File No. Supplemental Addendum A-18-10-4323 Borrower VS Development Llc Property Address Tbd Ryan Road CityCountyStateZip Code DentonDentonTX76207 Lender/Client AccessBank Texas • Land: Neighborhood Boundaries THE SUBJECT PROPERTY BOUNDARIES ARE CONSIDERED TO BE LOOP 288 TO THE NORTH AND EAST, FM 407 TO THE SOUTH, AND INTERSTATE I-35 W TO THE WEST. • Land : Neighborhood Market Factors THE SUBJECT PROPERTY IS LOCATED ON THE SOUTH SIDE OF RYAN ROAD AND EAST SIDE OF DUFFY WAY, IN THE CITY OF DENTON. THE SUBJECT PROPERTY'S PROXIMITY TO SCHOOLS, SHOPPING, SUPPORT SERVICES, AND EMPLOYMENT IS CONSIDERED AVERAGE. NEARBY IH-35 AND HIGHWAY 380 PROVIDE ACCESS TO DENTON AND THE DALLAS/FORT WORTH METROPLEX. POLICE, VOLUNTEER FIRE, AND OTHER CITY SERVICES ARE AVAILABLE. THE COMPLEMENTARY LAND USES IN THE NEIGHBORHOOD ARE HOMOGENEOUS AND APPEAR TO BE IN THE GROWTH STAGE OF THE REAL ESTATE LIFE CYCLE. A NETWORK OF COUNTY ROADS LINK THE PROPERTY, CONVENIENTLY, TO THE CITY, STATE AND US HIGHWAY SYSTEMS. DENTON PROVIDES REGIONAL SHOPPING, MAJOR EMPLOYMENT,HOSPITALS, PHYSICIANS, HIGHER EDUCATION AND OTHER SERVICES. RECREATIONAL FACILITIES ARE ABUNDANT ON NEARBY LAKES, GOLF FACILITIES, AND CITY PARKS. THE DENTON ISD PROVIDES EDUCATION FOR AREA RESIDENTS GRADES KINDERGARTEN THROUGH TWELFTH GRADES. THESE SCHOOLS ARE REGARDED HIGHLY BY AREA EDUCATORS AND RESIDENTS FOR THEIR GOOD ACADEMIC AND EXTRACURRICULAR REPUTATION. OVERALL THE NEIGHBORHOOD IS RATED AVERAGE. MARKET CONDITIONS FOR THE AREA ARE REMAINING STABLE. NO SUBSTANTIAL GAINS OR LOSSES ARE TAKING PLACE IN THE MARKET. INTERVIEWS WITH LOCAL REAL ESTATE BROKERS, MLS DATA, BANKERS, APPRAISERS AND THE DENTON COUNTY APPRAISAL DISTRICT INDICATE, OVER THE PAST TWO YEARS, SALES ACTIVITY HAS REMAINED STEADY TO SLIGHTLY RISING. MORTGAGE MONEY IS AVAILABLE TO AREA RESIDENCES THROUGH CONVENTIONAL, VA, FHA AND BANK LOANS. NO FINANCING CONCESSIONS WERE FOUND IN THE MARKET THAT INDICATED VALUES WERE AFFECTED DUE TO THAT TYPE OF STIMULUS. IT APPEARS THERE ARE A NUMBER OF REAL ESTATE BROKERS IN THE AREA CAPABLE OF MARKETING THE PROPERTY, ESTABLISHING FAIR LISTING PRICES AND PROCESSING THE NECESSARY KNOWLEDGE TO CONSUMMATE REAL ESTATE TRANSACTIONS. PROPERLY MARKETED, THE SUBJECT PROPERTY WOULD SELL IN APPROXIMATELY SIX TO TWELVE MONTHS. • Land : Other Highest & Best Use Explanation THE HIGHEST AND BEST USE OF THE SUBJECT SITE MUST MEET FOUR CRITERIA. THE HIGHEST AND BEST USE IS THAT USE WHICH IS CONSIDERED TO BE THE BEST COMBINATION OF: 1. PHYSICALLY POSSIBLE 2. LEGALLY PERMISSIBLE 3. FINANCIALLY FEASIBLE 4. MAXIMALLY PRODUCTIVE. PHYSICALLY POSSIBLE UPON ESTIMATING THE PHYSICALLY POSSIBLE USE OF THE SUBJECT , SEVERAL FACTORS MUST BE CONSIDERED. THESE FACTORS INCLUDE THE SUBJECT’S SIZE, CONFIGURATION, ROAD FRONTAGE, TOPOGRAPHY, AND THE AVAILABILITY AND CAPACITY OF MUNICIPAL UTILITIES. IN ADDITION, EASEMENTS AND/OR ENCROACHMENTS WHICH WOULD INHIBIT THE DEVELOPMENT OF THE PROPERTY ARE CONSIDERED. THE SUBJECT SITE HAS GENERALLY LEVEL TO GENTLY ROLLING TOPOGRAPHY, DRAINAGE APPEARS TO BE ADEQUATE. THE SUBJECT HAS ACCESS TO ALL NECESSARY UTILITIES. FROM A PHYSICAL STANDPOINT, THE SUBJECT SITE IS SUITED TO VARIOUS USES AND MOST SUITED TO RESIDENTIAL USE DUE TO ACCESS/VISIBILITY CHARACTERISTICS. LEGALLY PERMISSIBLE THE SUBJECT SITE IS ZONED NR-6, NEIGHBORHOOD RESIDENTIAL. THIS ZONING AREA ARE PRIMARILY RESIDENTIAL DEVELOPMENT. FINANCIALLY FEASIBLE IN CONSIDERING THE FINANCIAL FEASIBILITY OF DEVELOPMENT, SEVERAL FACTORS MUST BE CONSIDERED CONCERNING THE MARKET THAT THE PROPERTY IS LOCATED. THE USES THAT ARE PHYSICALLY POSSIBLE AND LEGALLY PERMISSIBLE MUST BE ANALYZED FURTHER TO DETERMINE THOSE THAT ARE LIKELY TO PRODUCE SOME INCOME, OR RETURN, GREATER THAN THE COMBINED INCOME NEEDED TO SATISFY OPERATING EXPENSES, FINANCIAL EXPENSES AND CAPITAL AMORTIZATION. ALL USES THAT ARE EXPECTED TO PRODUCE A POSITIVE RETURN ARE REGARDED AS FINANCIALLY FEASIBLE. HIGHEST AND BEST USE OF THE SITE, AS VACANT DEMAND FOR RESIDENTIAL USE IN THE SUBJECT AREA APPEARS TO BE STABLE BASED ON THE AMOUNT OF EXISTING RESIDENTIAL STRUCTURES IN THE AREA. TAKING THIS INFORMATION INTO CONSIDERATION, THE HIGHEST AND BEST USE OF THE SUBJECT, AS VACANT, IS TO HOLD FOR RESIDENTIAL USE. Form TADD - "TOTAL" appraisal software by a la mode, inc. - 1-800-ALAMODE File No. Supplemental Addendum A-18-10-4323 Borrower VS Development Llc Property Address Tbd Ryan Road CityCountyStateZip Code DentonDentonTX76207 Lender/Client AccessBank Texas • Land : Final Reconciliation LARGER PROPERTIES TEND TO SELL FOR LESS PER SQUARE FOOT THAN SIMILAR SMALLER PROPERTIES DUE TO ECONOMIES OF SCALE. SALES 1, 3 AND 4 ARE CONSIDERED SIMILAR IN SITE SIZE, ADJUSTMENT CONSIDERATION IS NOT WARRANTED. SALE 2 IS CONSIDERED SMALLER AND ADJUSTED DOWNWARD FOR SITE SIZE. THE SUBJECT'S LOCATION IS CONSIDERED SIMILAR TO THE FOUR SALES, ADJUSTMENT CONSIDERATION IS NOT WARRANTED. THE SUBJECT AND THE COMPARABLE SALES DISPLAY SIMILAR ZONING; THEREFORE, ADJUSTMENT CONSIDERATION IS NOT WARRANTED. THE TOPOGRAPHY OF THE SUBJECT IS CONSIDERED GENTLY ROLLING SIMILAR TO THE FOUR SALES; HOWEVER, THE SUBJECT IS CONSIDERED TO BE HEAVILY TREED AND IS CONSIDERED INFERIOR TO THE FOUR SALES WARRANTING DOWNWARD ADJUSTMENT BASED ON 10% OF PRICE PER ACRE (ROUNDED). ALL FOUR COMPARABLE SALES DISPLAY SIMILAR UTILITY CHARACTERISTICS; THEREFORE ADJUSTMENT CONSIDERATION IS NOT WARRANTED. NO OTHER ADJUSTMENTS ARE DEEMED NECESSARY. THE ADJUSTED SALE PRICE PER ACRE RANGE IS $34,351 -$46,154. PLACING WEIGHTED EMPHASIS ON THE FOUR COMPARABLE SALES, WHICH ARE CONSIDERED THE MOST SIMILAR TO THE SUBJECT AND REQUIRE THE FEWEST OVERALL ADJUSTMENTS, WHEN USING THE SALES COMPARISON APPROACH, THE ESTIMATED OPINION OF VALUE IS $1,860,000, ROUNDED. IT IS THE APPRAISERS' OPINION THAT THE SUBJECT PROPERTY'S 45.968 ACRES IS ESTIMATED TO BE $40,500/ACRE, WHICH FALLS INSIDE THE INDICATED RANGE. THE APPRAISER'S FINAL OPINION OF VALUE IS $1,860,000 (45.96 ACRES @ $40,500/ACRE=$1,861,380) ROUNDED TO $1,860,000. • Land : Final Reconciliation NO INCOME APPROACH WAS DEVELOPED FOR THE SUBJECT PROPERTY AS PROPERTIES SIMILAR TO THE SUBJECT SELDOM SELL AS INCOME PRODUCING PROPERTIES. THE COST APPROACH WAS NOT DEVELOPED AS THE SUBJECT IS BEING APPRAISED AS LAND ONLY. THE SALES COMPARISON APPROACH GENERALLY INDICATES THE ACTIONS OF BUYERS AND SELLERS IN THE MARKETPLACE. THE MOST WEIGHT IS PLACED ON THE SALES COMPARISON APPROACH IN DETERMINING THE FINAL OPINION OF MARKET VALUE FOR THE SUBJECT PROPERTY. THE SALES ARE CONSIDERED IN THE FINAL OPINION OF MARKET VALUE AND ARE CONSIDERED TO BE REPRESENTATIVE OF SUBJECT PROPERTY VALUE ONCE ADJUSTMENTS ARE TAKEN INTO CONSIDERATION. PLACING EQUAL EMPHASIS ON ALL THREE SALES, THE FINAL OPINION OF VALUE OF THE SUBJECT PROPERTY IS $1,860,000. Form TADD - "TOTAL" appraisal software by a la mode, inc. - 1-800-ALAMODE Subject Photo Page Borrower VS Development Llc Property Address Tbd Ryan Road CityCountyStateZip Code DentonDentonTX76207 Lender/Client AccessBank Texas Subject Front Tbd Ryan Road Sales Price Price Per Acre Gross Living Area 4,792 Total Rooms 9 Total Bedrooms 3 Total Bathrooms 3.1 Location N;Res; View N;Res Site 5.00 ac Quality Q3 Age 50 Subject Aerial *Lines are Approximate Subject Street Form PICPIX.SR - "TOTAL" appraisal software by a la mode, inc. - 1-800-ALAMODE Comparable Photo Page Borrower VS Development Llc Property Address Tbd Ryan Road County City DentonDenton State TX Zip Code 76207 Lender/Client AccessBank Texas Comparable 1 4001 N Locust St Prox. to Subject 6.89 miles N Sale Price 47,760 Gross Living Area Total Rooms Total Bedrooms Total Bathrooms Location N;Res; View N;Res; Site Quality Age *Lines are approximate Comparable 2 1201 N Loop 288 Prox. to Subject 5.15 miles N Sale Price 49,455 Gross Living Area Total Rooms Total Bedrooms Total Bathrooms Location N;Res; View N;Res; Site Quality Age *Lines are approximate Comparable 3 Tbd Old Justin Road Prox. to Subject 6.24 miles SW Sale Price 38,151 Gross Living Area Total Rooms Total Bedrooms Total Bathrooms Location N;Res; View N;Res; Site Quality Age Form PICPIX.CR - "TOTAL" appraisal software by a la mode, inc. - 1-800-ALAMODE Comparable Photo Page Borrower VS Development Llc Property Address Tbd Ryan Road County City DentonDenton State TX Zip Code 76207 Lender/Client AccessBank Texas Comparable 4 Tbd Hickory Hill Road Prox. to Subject 4.44 miles SW Sale Price 51,254 Gross Living Area Total Rooms Total Bedrooms Total Bathrooms Location N;Res; View N;Res; Site Quality Age Comparable 5 Prox. to Subject Sale Price Gross Living Area Total Rooms Total Bedrooms Total Bathrooms Location View Site Quality Age Comparable 6 Prox. to Subject Sale Price Gross Living Area Total Rooms Total Bedrooms Total Bathrooms Location View Site Quality Age Form PICPIX.CR - "TOTAL" appraisal software by a la mode, inc. - 1-800-ALAMODE Location Map Borrower VS Development Llc Property Address Tbd Ryan Road CityCountyStateZip Code DentonDentonTX76207 Lender/Client AccessBank Texas Form MAP.LOC - "TOTAL" appraisal software by a la mode, inc. - 1-800-ALAMODE Flood Map Borrower VS Development Llc Property Address Tbd Ryan Road CityCountyStateZip Code DentonDentonTX76207 Lender/Client AccessBank Texas Form MAP.FLOOD - "TOTAL" appraisal software by a la mode, inc. - 1-800-ALAMODE Metes and Bounds Description Borrower VS Development Llc Property Address Tbd Ryan Road CityCountyStateZip Code DentonDentonTX76207 Lender/Client AccessBank Texas Form MAP.LOC - "TOTAL" appraisal software by a la mode, inc. - 1-800-ALAMODE Plat Map 45.968 Ac Borrower VS Development Llc Property Address Tbd Ryan Road CityCountyStateZip Code DentonDentonTX76207 Lender/Client AccessBank Texas Form MAP.FLOOD - "TOTAL" appraisal software by a la mode, inc. - 1-800-ALAMODE Contract Page 1 Borrower VS Development Llc Property Address Tbd Ryan Road CityCountyStateZip Code DentonDentonTX76207 Lender/Client AccessBank Texas Form SCNLGH - "TOTAL" appraisal software by a la mode, inc. - 1-800-ALAMODE Engagement Request Borrower VS Development Llc Property Address Tbd Ryan Road CityCountyStateZip Code DentonDentonTX76207 Lender/Client AccessBank Texas Form SCNLGH - "TOTAL" appraisal software by a la mode, inc. - 1-800-ALAMODE Engagement Request Borrower VS Development Llc Property Address Tbd Ryan Road CityCountyStateZip Code DentonDentonTX76207 Lender/Client AccessBank Texas Form SCNLGH - "TOTAL" appraisal software by a la mode, inc. - 1-800-ALAMODE Qualifications Borrower VS Development Llc Property Address Tbd Ryan Road CityCountyStateZip Code DentonDentonTX76207 Lender/Client AccessBank Texas Form SCNLGH - "TOTAL" appraisal software by a la mode, inc. - 1-800-ALAMODE Certification Borrower VS Development Llc Property Address Tbd Ryan Road CityCountyStateZip Code DentonDentonTX76207 Lender/Client AccessBank Texas Form SCNLGH - "TOTAL" appraisal software by a la mode, inc. - 1-800-ALAMODE Certificate Borrower VS Development Llc Property Address Tbd Ryan Road CityCountyStateZip Code DentonDentonTX76207 Lender/Client AccessBank Texas Form SCNLGH - "TOTAL" appraisal software by a la mode, inc. - 1-800-ALAMODE �.� � l. 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