VALLEY CENTER MUNICIPAL WATER DISTRICT
Regular Board Meeting
Tuesday, April 7, 2008
Time: 2:00 P.M.
Place: Board Room
29300 Valley Center Road
Valley Center, CA 92082
The Valley Center Municipal Water District Board of Directors’ meeting was called to order by Vice President Polito at 2:00 P.M.
ROLL CALL
Board members present were: Directors Polito, Aleshire, Stone and Haskell. Director Broomell was absent. Staff members present were: General Manager Arant, General Counsel Akins, District Engineer Grabbe, Director of Finance Jeffrey, Director of Operations Hoyle, Board Secretary Stetson and IT Manager Rivard. Audience members present were: Messrs. Knutson, Hancock, Sells, Kochinsky, Holtz, B., Holtz, E, McClury, Kramer, Slominski, Ross, Mr. and Mrs. Olson and Mses. Dehoney and D’Agostino.
CONSENT CALENDAR
1. Upon motion by Aleshire, seconded by Stone and unanimously carried, the following consent calendar items were approved:
• Minutes of the Board meeting held March 17, 2008
• Concept approval of the Free waterline extension project (TPM 20450) consisting of approximately 700 feet of 8-inch water main and other required appurtenances
• Survey of comparable agencies of fees for General Counsel and auditing services
• Audit demand check numbers 117460 through 117763 and wire disbursements for the period January 1 through March 31, 2008
• Treasurer’s Report and Financial Statements for the period ended February 29, 2008
• Quarterly report of expense reimbursements for the quarter ended March 31, 2008
APPROVAL OF AGENDA
Upon motion by Aleshire, seconded by Haskell and unanimously carried, the agenda was modified to move item number 10, Discussion of Policy Pertaining to Existing IAWP Accounts Electing to Purchase Additional Meters, to directly follow item no. 7 to accommodate the number in attendance interested in agenda item number 10.
ACTION AGENDA
2. Certification of the Final Environmental Impact Report for the South Village Water Reclamation Project:
An Environmental Impact Report (EIR) was prepared in compliance with the California Environmental Quality Act for the proposed South Village Water Reclamation Project to extend wastewater service to the South Village Area of Valley Center. Project Manager Kilwein stated that HDR Engineering, Inc. was contracted to prepare the EIR document to address specific impacts related to a program level analysis of the ultimate service area expansion project and project specific analysis of the Phase II project, which consists of providing wastewater service to properties whose owners desire to participate in the sewer expansion project. It was clarified that build-out of the service area is strictly limited to development consistent with the current zoning and General Plan.
The South Village Water Reclamation Project Phase II to provide wastewater service to participating property owners in the South Village will entail:
▪ Creation of an assessment district
▪ Application for amendment to the Waste Discharge Permit and expansion of the Woods Valley Ranch Water Reclamation Facility
▪ Installation of new wastewater collection and conveyance pipelines
▪ Creation of a seasonal wet weather storage pond
A Draft EIR for the Project was prepared that addressed the potential significant impacts that include agricultural, cultural and biological resources, along with hazards and hazardous material. During public review of the document, comment letters were received and then addressed in the Final EIR which clarified the Phase II and ultimate service area expansion.
The Final EIR document has identified Biological Resources, Cultural Resources, and Hazards and Hazardous Materials to be potentially significant impacts but can be mitigated to below a level of significance. Agricultural impacts were also identified as potentially significant impacts, however, they cannot be mitigated to a level of less than significant and the Statement of Overriding Considerations was prepared.
Adoption of Resolution No. 2008-14 was recommended which:
~ Finds and certifies that the Final EIR for the South Village Water Reclamation Project has been completed in compliance with CEQA, State Guidelines and the District’s Local Guidelines,
~ Adopts the Findings and Statement of Overriding Considerations,
~ Adopts the proposed Mitigation and Monitoring Program, and
~ Authorizes staff to prepare and file a Notice of Determination
A status report on the South Village Water Reclamation Project was provided by Project Manager Kilwein. She reported that the Master Plan is being finalized and the Preliminary Design Report for Phase II is nearly complete. A letter will be forwarded to property owners for the execution of a Lien Agreement. In approximately June 2008, design of the project will begin as well as formation of the assessment district. The sale of bonds for the project is anticipated by the end of 2008, with construction beginning in early 2009 and ending by early 2010.
Upon motion by Aleshire, seconded by Stone and unanimously carried, the following resolution, entitled:
RESOLUTION NO. 2008-14
RESOLUTION OF THE BOARD OF DIRECTORS OF
THE VALLEY CENTER MUNICIPAL WATER DISTRICT
FINDING AND CERTIFYING THE FINAL ENVIRONMENTAL
IMPACT REPORT (EIR) FOR THE SOUTH VILLAGE WATER
RECLAMATION PROJECT HAS BEEN COMPLETED IN
COMPLIANCE WITH CEQA AND STATE AND LOCAL GUIDELINES
was adopted by the following vote, to wit:
AYES: Directors Polito, Aleshire, Stone and Haskell
NOES: None
ABSENT: Director Broomell
3. Review and Discussion of Policy Pertaining to Existing Interim Agricultural Water Program (IAWP) Accounts Electing to Purchase an Additional Meter:
Staff had been directed at the March 17th Board meeting to develop a policy for Board consideration that addresses meters purchased for property that is served by an existing agricultural or mixed agricultural meter (IAWP account) and, thus, is currently subject to the 30% water supply cutbacks based on 2006-07 water usage. With the purchase of a new water meter designated municipal & industrial for the property there is the potential for existing Interim Agricultural Water Program (IAWP) accounts to secure access to unrestricted full price water to supplement reduced deliveries under the IAWP. Two such meters were purchased and a third purchased, but its installation is pending a determination of policy.
It is felt that in order to maintain the IAWP for agriculturalists, the parameters of the program must be adhered to. There continues to be opposing viewpoints among Metropolitan Water District’s member agencies regarding continuation of the Program. Because Valley Center Municipal Water District is the largest participant in the IAWP, the District will be closely monitored for compliance. If Metropolitan Water District determines that the water delivered through the newly purchased M&I meters is being utilized for agricultural purposes on an IAWP account, it would be viewed as circumventing the Program and would certainly affect sustaining the ag. discount provided by the IAWP. Also, if the District's IAWP customers exceed their total allocations for 2008, the allocation for agricultural water will be reduced next year.
General Manager Arant reviewed the proposed policy addressing the addition of a meter to an existing IAWP account during or under a threat of a supply reduction. The proposed policy would allow the purchase of an additional meter classified as ag/domestic, but the new meter would be grouped with the existing ag. meter and the total IAWP allocation for the grouped meters would be the same and subject to the supply reduction and penalties for over-usage. Further, if an existing IAWP account lot splits or has a boundary adjustment, a new meter would be classified ag/domestic and be apportioned from the existing IAWP meter a minimum of 37 billing units per meter. The existing and new meters would be considered a group account pertaining to monthly allocations, usage credits and penalties. If ownership of one of the meters in the group account changes, the parcel would be removed from the group and retain the assigned water allocation and be subject to usage credits and penalties. Said proposed amendment to the District’s Administrative Code pertaining to the addition of a meter to an existing IAWP account during or under a threat of an IAWP supply reduction is attached hereto as Exhibit “A”.
Director Stone pointed out that the District is in full compliance with Metropolitan Water District’s Interim Agricultural Water Program and implementing the current 30% cutbacks through its Supply Reduction Implementation Plan. The 30% reduction in ag. water deliveries will reduce MET’s water deliveries by 48,000 ac. ft. in 2008. Director Stone stated that Metropolitan is selling the water available through the ag. reduction program and selling it to other qualified consumers. He voiced that agricultural users should be just as eligible to consume this water as a new homeowner. General Manager Arant responded that Metropolitan considers its groundwater replenishment program and the IAWP as water resource programs and investments for the ability, when needed, to reduce usage such as the call for supply reductions for IAWP participants. General Manager Arant noted that since the inception of the current IAWP in 1994, the District’s participants have saved $76 million. A shift of demand from the IAWP to full price M&I water would not be acceptable to Metropolitan as they would not receive the water management benefit that they intended with the IAWP.
Mr. Kenneth Hancock of 12464 Montanya Drive stated that he had purchased 7.5 acres 3 years ago and was not aware of the agriculture program’s regulations or that in 2007 he had had the option to withdraw from the program. Mr. Hancock expressed that the proposed policy affecting the sale of a meter to an IAWP account is unfair to farmers and that if he could withdraw from the ag. program, he would. He questioned the fairness of the restriction of a new meter’s usage for IAWP customers when new meters are being installed for new homes and they have unrestricted water usage. Mr. Hancock asked that the Board consider approving his request to purchase a domestic meter for his rental home on his agricultural property that would have unrestricted domestic use, or a domestic allocation of 26 HCF per month that would not affect the allocation on his agricultural meter. Staff noted that there currently is restricted use (monthly allocation) on all IAWP accounts as they had received a discount on their water deliveries in exchange for being interruptible and first to be cut back in the event of a supply shortage. Staff reiterated that, as proposed, an agricultural account, such as Mr. Hancock’s, would be eligible to purchase a new meter, but it would be grouped with his existing ag. meter for purposes of allocation, and penalties for over usage. As such, Mr. Hancock could purchase a new meter, but he would need to manage his water consumption to be within the allocation of his grouped meters.
In response to Mr. Hancock’s assertion that the proposed policy on new meter sales for agricultural customers is unfair to the farmers, General Manager Arant stated that he has worked diligently to protect the existence of the ag. program, as the price discount it provides is a vital benefit to Valley Center's farmers. The District has worked hard to protect the program so that it will not be revoked and our farmers could continue to receive the benefits of the program. The Program could be terminated if participants circumvent the regulations, such as a participating agricultural account utilizing M&I water to effectively avoid reducing water consumption and nullifying the intention of the IAWP as a water resource management program.
Ben Holtz of 9370 Circle R Drive addressed the Board stating he is speaking on behalf of his father, Edward Holtz, and also is representing Nick Stehly, Sr. and Nick Stehly and Richard Stehly who have agricultural interests on property on McNally Road. Mr. Holtz stated that he has applied for two new domestic meters for the residences on his agricultural property and that requests for seven domestic meters were submitted to the District by the Stehly family.
Mr. Holtz expressed that the policy to cap an agriculturalist’s water consumption is discriminatory as there is unrestricted usage for all domestic accounts. Mr. Holtz informed the Board that on his father’s property on Circle R Drive, 1600 trees were stumped in March of 2007 and now are in need of water with the one year of regrowth. Mr. Holtz stated that the water provided through a new domestic meter will allow him to continue and expand his farming business.
Mr. Holtz conceded that the IAWP is a contract binding the participants to reduce their water consumption. However, he questioned if the reduction in water supplies to IAWP participants was changed as he had understood that farmers would be required to reduce their consumption to provide water for domestic users in a state of emergency. Mr. Holtz requested a copy of the contract signed by his father to participate in the IAWP program for the property on Circle R Drive. He asked that the District’s Supply Reduction Implementation Plan for mixed agricultural/domestic accounts allow for the monthly domestic consumption with no percentage reduction on this amount.
Mr. Holtz presented proposed solutions to the current water supply shortage, as follows:
1. All water rates shall receive an equal water shortage surcharge.
2. The IAWP program shall remain in effect with one modification that IAWP users may withdraw from the program and pay full rate for water plus an added fine for withdrawing from the program.
3. All customers shall have the option to purchase new domestic water meters.
Termination of the IAWP in which all water consumers in Metropolitan Water District’s service area would be subject to water supply cutbacks on an equal basis was discussed. Under the current IAWP, agriculturalists must adjust their operations to utilize less water. Mr. Holtz was encouraged to attend the Agricultural Water Team meeting on April 16th to further discuss the Interim Agricultural Water Program and get their input. It was felt that a careful analysis of implementation procedures to allow a transition out of the IAWP should be undertaken. Any action, however, should be delayed until Metropolitan completes a review of its Integrated Water Resources Program.
Staff was directed to include on the next Board meeting agenda the proposed policy as presented for a new meter request on an existing IAWP account during or under a threat of water shortage (Exhibit “A”), and consideration of administering the supply reduction plan for the domestic usage of mixed ag/domestic accounts.
4. Presentation Providing Update on the ACWA/Joint Powers Insurance Authority Programs and Benefits:
Mr. Andy Sells, Chief Financial and Operations Officer of the Association of California Water Agencies Joint Powers Insurance Authority (ACWA/JPIA), provided an update of the District’s insurance programs and its benefits.
Mr. Sells explained that there are over 200 JPIAs operating in California that facilitate a partnership of public agencies to pool their resources to secure insurance coverage. The ACWA/JPIA is governed by contract law with policy set by its Board of Directors and Executive Committee members. It was formed in 1979 and provides pooled programs for liability, property and workers’ compensation insurance coverage. Public agencies elect JPIAs for insurance coverage as they are very cost effective with premium savings of between 10%-30%. Insurance coverage unique to the JPIA are inverse condemnation, pollution and directors and officers liability.
The Liability, Property and Workers’ Compensation insurance programs were reviewed. Coverage under the Liability Program is $50 million per occurrence per member. Retrospective premium adjustments are provided in which over $23 million has been refunded to members. Property insurance provides up to $100 million per loss per member with a pooled retention to $50,000 per loss. The coverages unique to the JPIA are earthquake, flood and boiler and machinery insurance. Member agencies have received $10 million in refunds or 25% of premiums. The workers’ compensation program has 150 members with over $300 million in payroll. Retrospective premium adjustments have resulted in refunds to members of $11 million, or 11% of deposit premiums.
The ACWA/JPIA provides cost effective insurance coverage and its member agencies reduce exposure to losses through programs tailored to fit water districts that include:
~ Risk management consultations
~ Property appraisals
~ Training classes, professional development program
~ Video lending library
~ Pre-employment physicals and fit-for-duty exams
~ Risk transfer consultations
~ Personnel policy and handbook review
~ Human resources regional networking groups
~ Employment practices hotline
Mr. Sells reported that the Valley Center Municipal Water District’s employees’ active participation in these programs has improved safety practices and has decreased insurance costs for the District.
5. Budget Adjustment to Appropriate Funds for the Aeration Basin Improvement Project at the Lower Moosa Canyon Water Reclamation Facility:
District Engineer Grabbe requested adoption of Resolution No. 2008-15 to transfer funds in the Moosa Digester budget account (No. 13-5670.78) to the Aeration Basin budget account (No. 13-5612.78) and to appropriate an additional $550,000 for the Moosa Digester/Aeration Basin Improvement Project.
In the current budget, funding for design and construction of improvements to the Moosa aerobic digester in the amount of $950,000 had been included. Funds were included in the budget for design of improvements to the aeration basin. This improvement project was estimated at $965,000 of which $650,000 would be from future allocations. The total budget proposed for both projects was $1,915,000.
Design of the aerobic digester and aeration basin improvement projects have been completed and additional funding is requested to construct the projects at the same time that will save contract administration costs and eliminate duplicate mobilization costs. Thus, the total cost of the projects is now estimated at $1,685,000 and an additional $550,000 was requested for the construction phase. The remaining balance in the aerobic digester improvement project budget account would be transferred to the aeration basin system improvement project budget account to track costs in one budget account.
The additional funds request of $550,000 would be allocated from the Moosa replacement and operating reserves. Because the improvements will increase capacity at the plant, a portion of the project’s cost (approximately 40%) will be funded from wastewater capacity charges. As these charges are collected, the replacement and operating reserves will be reimbursed.
Upon motion by Aleshire, seconded by Stone and unanimously carried, the following resolution, entitled:
RESOLUTION NO. 2008-15
RESOLUTION OF THE BOARD OF DIRECTORS OF
VALLEY CENTER MUNICIPAL WATER DISTRICT
AMENDING THE FISCAL YEAR 2007-08 BUDGET
BY APPROPRIATING $550,000 TO THE MOOSA
AERATION BASIN ACCOUNT NO. 13-5612.78
was adopted by the following vote, to wit:
AYES: Directors Polito, Aleshire, Stone and Haskell
NOES: None
ABSENT: Director Broomell
6. Modification of District Budget Policies:
The District’s Budget Policies which are set forth in Section 50.2 of the Administrative Code were reviewed as summarized below:
▪ Rate Stabilization Reserves – Used to level water and pumping rates. The water rate stabilization reserve is expected to be depleted at the end of the current fiscal year. A portion of the pumping stabilization reserve will be used to fund several capital projects in Fiscal Year 2008-09.
▪ Operating Reserve – Provides funds for emergencies and natural disasters. Maximum funds for this reserve is six months of operations and maintenance budget. This reserve will be fully funded at the end of the FY 2007-08.
▪ Restricted Reserves – These reserves include the Agricultural Rebate Reserve, Debt Service Reserve and Replacement Reserves (licensed motor vehicles, Lower Moosa Canyon Water Reclamation Facility and the Woods Valley Ranch Water Reclamation Facility). At this time, there is no requirement to fund the Debt Service Reserve.
▪ Capital Reserves – Provides funding for budgeted capital projects, improvements funded from capacity charges, future capital additions and replacements and energy conservation projects funded from energy company settlements. Property taxes are being used for capital improvements reserve funding.
▪ Fees and Charges – Sets forth that each water and wastewater system should be self-sufficient and that all fees and charges from wholesale agencies are passed through to customers.
▪ Debt – Set forth in Section 50.3, and establishes that long-term debt shall not be used to fund current operating costs, and debt issues should be used only for capital projects.
▪ Use of One-time and Unpredictable Revenues –Will not be relied on for long-term projects or to initiate new programs.
▪ Balancing the Operating Budget – Operating expenditures shall be funded with current revenues and reserves used for the purpose for which the reserves were established.
▪ Revenue Diversification – Consideration given to meeting at least 50% of the District’s fixed operating expenditures from fixed revenues
▪ Contingencies – Are addressed in Article 225 of the Administrative Code.
Proposed changes to Section 50.2 (Budget Policies) of the Administrative Code include:
● Agricultural Rebate Reserve - Deletion of the reference to the dollar value of the agricultural charge collected prior to the establishment of a special agricultural rate. These funds will be used in the event a supplier’s agricultural rate is terminated before the end of a billing cycle or to cover costs should agricultural water sales exceed the agricultural wholesale allotment.
● Replacement Reserves – Replace the word sewer with wastewater and delete the reference to the Skyline Ranch Sewer Treatment Plant and include the Woods Valley Ranch Water Reclamation Facility.
● Capital Improvements Reserve – Include that property taxes not otherwise allocated shall be credited to the capital improvements reserve rather than interest income.
● Fees and Charges – Replaces the word sewer with wastewater.
● Debt – Modified reference to the section on debt policy which is Section 50.3.
Upon motion by Stone, seconded by Aleshire and unanimously carried, the following ordinance, entitled:
ORDINANCE NO. 2008-01
ORDINANCE OF THE VALLEY CENTER MUNICIPAL
WATER DISTRICT AMENDING THE ADMINISTRATIVE
CODE SECTION 50.2 TO PROVIDE FOR CHANGES
IN BUDGET POLICIES
was adopted by the following vote, to wit:
AYES: Directors Polito, Aleshire, Stone and Haskell
NOES: None
ABSENT: Director Broomell
7. Overview of New Programs and Capital Projects Proposed in the Fiscal Year 2008-09 Budget:
An overview of proposed new programs and capital projects that will be requested in the Fiscal Year 2008-09 budget were reviewed as follows:
• Water sales for FY 2008-09 are estimated at 34,115 acre feet. In FY 2007-08, water sales are expected to be 37,987 acre feet. Water sales estimates reflect the reduced deliveries to agricultural customers.
• Total wholesale water rates are estimated to increase 13.3% for agricultural customers, and 9.6% for domestic and commercial customers. The District’s local cost component of the water rate is proposed to be unchanged ($102.41 per acre foot). Total increase in the District’s water rates effective January 1, 2009, are estimated at 11.3% for agriculture and 8.6% for domestic/commercial customers.
• Installation of 100 new water meters of which 50 are fire system meters.
• Interest income of 3% which will earn $630,000 which is an equivalent of $18.00 per acre foot.
• Property taxes are budgeted at $2,308,000
• Pumping costs are budgeted at $105 per acre foot and the current pumping charge is adequate at this time.
• Approved staffing level is currently at 80 employees. No new positions are being requested in the budget, and any vacancies during the year will be evaluated on a case by case basis. An estimated net cost of living adjustment of 3% is included. Total personnel costs are $10,477,385 which is 7.1% below the previous year’s costs.
• Total water capital funding is $3,987,500, as outlined below:
Pipelines and PRVs $1,195,000
Pump Stations 171,000
Reservoirs 1,510,000
Data Management Systems 1,011,000
(Includes automatic meter reading)
Facilities 100,500
• Based on Financial projections and future capital projects, debt issuance is a possibility in FY 2008-09, but no debt service is included in the proposed budget.
• The proposed FY 2008-09 budget requires the use of $843,416 of the District’s property tax revenue. It’s anticipated that $175,125 of pumping rate stabilization reserve funds will be used to fund capital projects and the water rate stabilization reserve will be utilized by the end of the current fiscal year. Expenditures in the FY 2008-09 budget are $6.3 million less than the previous year’s budget and revenue has decreased $7.5 million.
Alternative scenarios for the Fiscal Year 2008-09 budget were presented for the Board’s consideration, as follows:
▪ Increase the District’s local cost by 3% ($3.07/ac. ft. and a 3% increase in the meter service charge) to generate $189,000 in additional revenue.
▪ Update the local cost component for the second installment of the OPEB adjustment which would be an additional $5.45/acre foot on the water rates.
▪ Discontinue pre-funding the first installment of the OPEB adjustment with the funds ($323,000) utilized for local operating costs. The District would continue on a pay-as-you-go basis for OPEB.
Accounting Manager Pugh clarified that the first two alternatives presented above would require compliance with Proposition 218 necessitating mailing notices to all customers and a public hearing. The Board opted for the alternative presented to discontinue pre-funding the first installment of the OPEB adjustment with the funds utilized for local operating costs. An actuarial study will be completed in 2008-09 that will provide an assessment on OPEB funding.
A review of the proposed wastewater budget indicated that:
▪ The wastewater service charge at the Lower Moosa Canyon Water Reclamation Facility is $40.50/EDU/month and no increase in this charge is proposed. Also, no increase in the Low Pressure Wastewater Collection System Maintenance fee currently at $33.50/EDU/month is proposed. The Lower Moosa Canyon Wastewater Treatment Plant’s operating reserve will be slightly over four months’ O&M costs, but will be fully funded in Fiscal Year 2009-10.
▪ Construction of the Woods Valley Ranch Wastewater Facility is nearing completion. A holding tank and temporary 50,000 gpd treatment facility are being utilized for the treatment of wastewater flows. There is no change proposed to the monthly wastewater charge of $98.60 per EDU that is collected on the property tax bill.
The District’s Fiscal Year 2008-09 Operating and Capital Budget will be provided for the Board’s review and consideration of adoption at a meeting in May.
GENERAL MANAGER’S AGENDA
8. Review of Miscellaneous Information Items:
San Diego County Water Authority Board meeting of March 27th – The SDCWA board authorized its General Manager to execute water transfer options with the Butte and Sutter Extension water districts for 24,000 acre feet of water. The water transfer agreement has levels of options in which the final water transfer option payments total $3,461,550. The delivery of the water is contingent upon there being less than 50% water allocation for the State Water Project to facilitate the transfer.
A contract was executed with Mentus, Inc. for professional services to implement the regional conservation advertising and marketing plan in support of the Drought Management Plan communications strategy. The contract is for a not-to-exceed amount of $1,787,000.
The Authority has withdrawn from the ACWA/JPIA workers’ compensation program effective July 1, 2008 and the Board authorized the purchase of workers’ compensation insurance from Wausau at a cost of $300,210. The Authority previously withdrew from the ACWA/JPIA Liability Insurance program.
CLOSED SESSION:
9. A Closed Session was called by Vice President Polito at 5:25 p.m. per:
• Government Code §54957.5(a), Conference with Labor Negotiators
Agency Representative: Gary Arant, General Manager
Employee Organization: Valley Center M.W.D. Employees’ Association
• Government Code §54956.8 – Real Property Transaction, Conference
with Negotiator
Property: 11580 Betsworth Road, Valley Center
Agency Negotiator: Gary T. Arant, General Manager
Negotiating Party: WorldWater & Solar Technologies
Under Negotiation: Terms of Lease
RECONVENE
The Regular Board meeting was reconvened at 6:25 p.m. There was no reportable action.
ADJOURNMENT
10. Upon motion by Stone, seconded by Haskell and unanimously carried, the meeting was adjourned at 6:26 p.m.
ATTEST: ATTEST:
_____________________________ _____________________________
President Secretary