February 20, 2001

Regular Board Meeting

Tuesday, February 20, 2001

Time: 2:00 P.M.

Place: Board Room

29300 Valley Center Rd.

Valley Center, CA 92082

The Valley Center Municipal Water District Board of Directors’ meeting was called to order by

President Broomell at 2:00 P.M.

Board members present were: Directors Broomell, Armstrong, Polito, Aleshire and Stone. Staff

members present were: General Manager Arant, General Counsel Cowett, District Engineer

Jewell, Director of Finance Jarrell, Water Facilities Supervisor Stetson, Project Engineer Grabbe

and Board Secretary Stetson. No spectators were present.

1.

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Map Processing Manual provides an alternate procedure for dedication referred to as “onmap

dedications” in which the developer can show the easements on the subdivision/parcel

map together with a County/District approved statement of dedication. If the proposed

change to provide for the dedication of easements for water and sewer facilities on

subdivision maps is approved by the Board, approval of this procedural change by County

Counsel will be sought.

On-map dedication of easements will reduce paperwork and save time in processing of

improvement plans for both the District and developers. The District’s right to access facilities

prior to map recordation (processing of plans, inspection of facilities during construction and

operation of facilities) will be allowed as language permitting access to the property will be

included in the Developer or Line Extension Agreement.

4. Old Castle P.R.V. Station Reconstruction – Request for Budget Adjustment and Award of

Contract:

Bids were received for reconstruction of the District’s Old Castle P.R.V. Station on

February 6

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5. Lower Moosa Canyon Water Reclamation Facility – Request for Reduction of Pre-

Assessment Lien (Assessment District No. 93-1):

Assessment District 93-1 had been formed as a securement for the funds advanced by the

District for the planning and design phase of the Lower Moosa Canyon Water Reclamation

Facility Expansion Project. Participants in the assessment district were property owners

requesting sewer capacity. Each parcel included in this assessment district have an

assessment lien for $740.29 per EDU of sewer capacity requested or a zero ($0) assessment

upon payment of the $2,950 per EDU sewer deposit.

Property owners requesting that their parcels be removed from the assessment district have

been allowed to do so upon payment of the site specific costs that were incurred; namely

$68.53/EDU. Mr. Paul Kiesel, the owner of parcels 186-612-34 and 186-612-35 has an

assessment lien for 7 EDUs. Mr. Kiesel has notified the District that he does not wish to

develop these parcels with sewer service and has requested that these parcels be removed

from Assessment District No. 93-1. Staff recommended approval of Mr. Kiesel’s request for

removal of his parcels from AD 93-1 upon payment of the collection study amount of $68.53

per EDU.

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6. Adoption of Resolution Establishing Implementation of the California Public Employees’

Retirement System (CalPERS):

Pursuant to replacing the District’s current retirement plan with the California Public

Employees’ Retirement System (CalPERS), an agreement has been reached with the Valley

Center Municipal Water District Employees’ Association to amend the current Memorandum

of Understanding between the District and Employees to establish implementation details for

providing employees’ retirement benefits through CalPERS. The provisions, subject to a

majority vote of all District employees and Board approval of the contract, include the

following:

• Membership in the CalPERS program at 2% at age 55 level, a 30% prior service buy-in,

and the fourth level of 1959 survivor benefits, and

• Implementation of a deferred compensation match program for employees on the date

of the CalPERS contract, with a maximum match of $100 per month per eligible

employee.

The CalPERS Retirement Program as proposed for employees will cost 26.07% of payroll.

A deferred compensation matching pool is the difference between the actual CalPERS cost

and the 28% of salary maximum amount, not to exceed a cost of $38,400 (employer/employee

dollar match not to exceed $100 per employee per month) for employees hired on or before

the effective date for CalPERS retirement benefits. Initially, the deferred compensation plan

employer/employee dollar match will be $50.00 per month per employee based on the

maximum pool of $38,400 and 64 eligible employees. The remaining balance will be

allocated to fund the District’s post retirement medical plan.

In compliance with CalPERS membership procedures, adoption of their Resolution of

Intention will be presented for Board consideration at the meeting of March 19

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7. Authorization to Invest Retirement Plan Funds in LAIF:

In anticipation of changing from the District’s current retirement plan to the California Public

Employees’ Retirement System (CalPERS), the District’s Retirement Plan Advisory

Committee has recommended opening a fund with the State of California Local Agency

Investment Fund (LAIF) for investment of the District’s contribution for employees’ retirement.

Funds on deposit in the LAIF are currently earning in excess of 6% interest. Authorization

to invest District retirement plan funds in the LAIF will segregate the retirement funds in a

separate account and not commingle retirement funds with District operating funds. If

conversion of the employees’ retirement plan to the CalPERS Plan is completed, the LAIF

could be utilized to invest the existing Retirement Plan monies upon liquidation of the assets.

Under IRS regulations, the District will have one year to liquidate the accounts in the

Employees’ Retirement Plan after the effective start date of the CalPERS Plan, which is

estimated to be June 3, 2001.

Director of Finance Jarrell explained that two issues need to be addressed concerning

converting the current retirement plan to CalPERS, which are the whole life insurance

policies, and employees’ outstanding loans. The life insurance policies will either be

transferred to the participant and be a taxable transaction or terminated and the value rolled

into each employee’s retirement plan side fund. The nine loans employees have against their

retirement plan funds will need to be addressed prior to conversion to CalPERS.

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8. Contract to Perform Audit of the District’s Records for Fiscal Year 2000-2001:

A proposal was received from Buechler, Gilchrist & Steen to perform the audit of the District’s

records for the year ending June 30, 2001. Fees included in the proposal are $15,700 for the

general audit and $5,500 for the retirement audit for a total cost of $21,200. The general

audit fee proposal is $500 over last year’s fee and the retirement audit has increased $1,000

over the previous fee. The increase in the retirement plan audit fee is largely due to

anticipated additional work that will result if the existing retirement plan is terminated.

9. First Amendment to the Retirees’ Health Benefits Plan:

The District’s Retirees’ Health Benefits Plan contains a formula for calculating points to

determine eligibility of benefits. The formula is based on the age of the employee and time

in service including accumulated unused sick leave. The formula does not specifically state

that accumulated vacation or compensatory time is to be used in computing time of service

with the District.

In the event of an employee’s illness or injury, accumulated sick leave and then accumulated

vacation and compensatory leave is used by the employee until the employee either returns

to work or is terminated. As such, the Retirement Plan Advisory Committee has opined that

the intent of the formula to compute benefit units was to include accumulated vacation and

compensatory leave as well as sick leave in determining an employee’s time of service with

the District. Staff recommended adoption of Resolution No. 2001-07 to amend two sections

of the Retirees’ Health Benefits Plan to be effective July 1, 1994, which read as follows:

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“For all purposes of this Plan and the accrual of Benefit Units, an Employee’s hours

worked during a Plan Year shall include as hours worked any paid leave (which

includes sick leave, vacation leave, and compensating time-off leave) of the

Employee during a Plan Year.”

“If an Employee dies and is survived by a Dependent Spouse, any unused and

unpaid accumulated leave (which includes sick leave, vacation leave, and

compensating time-off leave) of the Employee as of his or her death shall be credited

as hours worked for determining the Employee’s Benefit Units.”

10. Update on Electricity Deregulation:

An analysis prepared by ACWA on AB 1X, signed into law by Governor Davis on February 1

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of exemption from rotating outages (rolling black-outs) in electricity shortages. ACWA has

submitted its filing on behalf of its member agencies, including the District.

The proposal that the state take over the 26,000 mile transmission system owned by SDG&E,

PG&E and SCE in exchange for paying off their debts accumulated since the deregulation

of electricity is being pursued. The transmission systems of these utilities comprise the

majority of their assets. However, this will not address the shortage of electricity. Dr. Lon

House’s analysis concludes that the state is not addressing the specific needs of California

and producing additional energy supplies for the upcoming summer months. It is felt that the

demand for electricity this summer will be greater and the available supply of electricity will

be less than last year.

San Diego Gas & Electric’s web site lists the average price that customers will be billed for

a particular period. The electricity prices per kWh were as follows:

Cycles Ending Between

Tariff 1/14 - 1/20 2/11 - 2/17 2/18 - 2/24

A* $0.25162 $0.18361 $0.18676

AD 0.25830 0.18463 0.18734

PA 0.29150 0.18214 0.18515

TOU-off 0.20049 0.16513 0.17095

TOU-se 0.28125 0.19195 0.19361

TOU-on 0.37420 0.20716 0.20635

*Capped at $.065 (prices do not include SDG&E’s

operating charges of $.01 to $.04 per kWh)

The District’s time of use (TOU) meters are not utilized during peak electricity hours. Prices

for natural gas have increased in one year by approximately $10.00 per million therms or a

300% increase. Senator Alpert has introduced a bill (AB 43X) which, if adopted, will result

in all SDG&E’s electrical meters (tariffs) being subject to the price cap. The bill, as proposed,

would be retroactive to February 7, 2001 and in effect through December 31, 2002, though

it may have been amended to exclude larger meters.

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To fully recover electrical costs, the District’s ordinance approving the pass through of water

related services’ fees and charges could be invoked. A mechanism to establish how the

District’s electrical pumping rates would fluctuate in accordance with the electricity rates could

be approved by the Board. Director of Finance Jarrell stated that water meter consumption

periods and billing periods for electrical charges do not coincide. Director Aleshire suggested

procedures be developed that will enable the District to rapidly respond to energy pumping

prices and recovery of said energy expenses from customers. It was stated that the course

of action taken to transition, over time, the increases in the District’s pump zone rates to

recover electrical pumping costs that have been incurred has been prudent as customers are

given the opportunity to make necessary adjustments. To continue with this practice,

customers could be notified that commencing in May 2001, the District’s pump zone rates will

be adjusted to reflect what is being paid for power and that substantial increases in the

pumping costs may result. In this manner, customers could make informed decisions

regarding water consumption. Staff will provide additional information for further discussion

and analysis by the Board.

11. Update on Suit Against Electrical Generators:

General Counsel Cowett reported that additional plaintiffs, Helix and Ramona Water Districts,

have joined the District, Sweetwater Authority and Padre Dam M.W.D. in the suit against

electrical supply generators. Several other entities are considering joining as plaintiffs.

Contact has been maintained with other attorneys involved in similar lawsuits throughout the

state in which information on interviews with potential experts has been shared. There are

several articles written by scholarly authors regarding the price increases in electrical rates

in California during the summer of 2000. All concluded that the prices cannot be justified by

cost or by supply and demand, and that it clearly is a manipulation of the market by the

energy producers.

It is widely believed that the electrical price issue will be resolved in the courts. Currently, at

issue is whether state or federal law applies. A case is being considered in Los Angeles

Federal District Court in which Edison is suing the PUC to compel an increase in rate caps.

Edison’s position is that it has rights under the Federal Power Act, and, therefore, all state

acts and remedies that compensate for the cost of their power are pre-empted. The

fundamental issue in the forefront is if the Federal Power Act preempts state law and state

remedies or whether the State Anti-Trust Laws and unfair business practice remedies would

apply and supersede the Federal Power Act. This question will also be at issue for other suits

against power generators including the suit that the District has joined. The progress of other

suits is being watched. The first action has been for the power generators to remove the

case from state court to federal court. The plaintiffs then have to file a motion to remove to

get it back into state court. General Counsel will continue to keep the Board and staff

informed as to the progress of litigation on this matter.

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12. Review of Miscellaneous Informational Items:

13. San Diego County Water Authority’s Lawsuit Against Metropolitan Challenging its Preferential

Rights:

The San Diego County Water Authority took action to file suit to revise the method used by

the Metropolitan Water District of Southern California for calculation of the amount of water

each of Metropolitan’s member agencies is legally entitled. Metropolitan’s preferential rights

or an agency’s water entitlements is based on the agency’s property tax payments to

Metropolitan. The Authority’s position is that under Metropolitan’s preferential rights it is

entitled to less than 15 percent of Metropolitan’s water, though it has historically contributed

22 percent of Metropolitan’s total revenue. Los Angeles, which pays more in property taxes,

has a bigger water entitlement under Metropolitan’s preferential rights provision. However,

preferential rights has never been enforced, even during the drought of 1991.

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In recent years, the largest share of Metropolitan’s revenue has shifted from property taxes

to water sales. At present, approximately 9 percent of Metropolitan’s revenues are derived

from property taxes.

An alternative proposal presented by General Manager Arant would include that

Metropolitan’s preferential rights reflect the amount of each agency’s all-in financial

investment in Metropolitan’s capital system. Allocation of water to member agencies in the

event of a drought would be based on the water supply allocation principles of Metropolitan’s

Water Supply Demand Management (WSDM) Plan. One issue that remains clear is the

acrimony between the San Diego County Water Authority and Metropolitan in which efforts

are concentrating on conflicts between the two agencies rather than solving water issues

affecting the region.

14.