Annual Comprehensive Financial Report 2021

X. COMMITMENTS AND CONTINGENCIES
Wastewater Treatment Services
The City has entered into a contract with the Trinity River Authority of Texas - Red Oak Creek Regional
Wastewater System to obtain wastewater treatment services, which has no expiration date. In the
contract, the Authority agreed to acquire and construct a regional wastewater treatment system to serve
the City and other contractual parties, in the area of the watershed or drainage basin of Red Oak Creek,
being a tributary of the Trinity River, and located in Ellis and Dallas Counties, Texas. The Trinity River
Authority is a governmental agency, which is controlled by directors appointed by the governor.
The City is responsible for a proportionate share of the system's annual operation, maintenance and
debt service costs for the term of the contract. These costs are determined annually and are payable in
monthly installments. Actual payments for the year ended September 30, 2021 were $3,452,046. The
payments to be received from the City of Red Oak are used as collateral for the bonds issued by TRA to
construct the facility.
Complete separate financial statements far the Trinity River Authority may be obtained at Trinity River
Authority of Texas, 5300 South Collins, P.O. Box 60, Arlington, Texas 76004.
Police Dispatching Services
The City has entered into a contract with the City of Midlothian, Texas to combine dispatching services
for both cities, effective October 1, 2009. In May 2020, the contract was extended another five years.
In the contract, the City of Midlothian will assume and provide all dispatching services.
The City of Red Oak is responsible for a proportionate share of the cost of dispatching services for the
term of the contract. The City of Red Oak has agreed to pay the sum of $585,396 to the City of Midlothian
annually for the first three years of the contract, payable in quarterly installments. After the initial three
years of the contract the costs will be determined annually and are payable in quarterly installments.
Amounts received or receivable from grantor agencies ore subject to audit and adjustment by grantor
agencies. Any disallowed claims, including amounts already collected, may constitute a liability of the
applicable funds. The amount, if any, of expenditures which may be disallowed by the grantor, cannot
be determined at this time although the government expects such amounts, if any, to be immaterial.
Litigation Settlement
In March 2022, the City of Red Oak and the City of Red Oak Industrial Development Corporation
(CROIDC) signed a settlement agreement with the Rockett Special Utility District (RSUD). Under the
settlement, the City has accrued $4,760,000 as of September 30, 2021 for the transfer of a portion of
RSUD’s Certificate of Convenience and Necessity (CCN) to the City of Red Oak.
XI.
RISK MANAGEMENT
The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of
assets; errors and omissions; injuries to employees; and natural disasters. The City maintains
commercial insurance coverage covering each of those risks of loss. Management believes such coverage
is sufficient to preclude any significant uninsured losses to the City. Settled claims have not exceeded
this commercial coverage in any of the past three fiscal years.
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