VALLEY CENTER MUNICIPAL WATER DISTRICT
Regular Board Meeting
Monday, October 3, 2005
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 President Broomell at 2:00 P.M.
Board members present were: Directors Broomell, Polito, and Aleshire. Directors Stone and Haskell were absent. Staff members present were: General Manager Arant, General Counsel Cowett, Director of Finance Jeffrey, District Engineer Grabbe, Pumps & Motors Supervisor Stetson, Board Secretary Stetson, Project Manager Williams, Manager of Accounting Pugh and IT Specialist Rivard. Spectators present were. Mr. Zizzi of Leaf & Cole and Mr. Ross, Valley Roadrunner Newspaper.
1. Upon motion by Polito, seconded by Aleshire and unanimously carried, the following consent calendar items were approved:
• Minutes of the Board meeting held September 19, 2005
• Audit demand check numbers 105779 through 105965
• Board of Directors’ requests for per diem compensation and reimbursement of expenses
• Treasurer’s Report and Financial Statements for the period ended August 31, 2005
• Resolution No. 2005-33 concurring in the nomination of Joan C. Finnegan for Vice President of ACWA-JPIA
• Concept approval of the Molly Anne Court water line extension project consisting of approximately 1,145 feet of 8-inch water main, one 6-inch fire hydrant and other required appurtenances
2. Review of the 2004-05 Comprehensive Annual Financial Report (CAFR):
The District’s financial reports for the period ended June 30, 2005, were presented for the Board’s review which include the Comprehensive Annual Financial Report (CAFR), Independent Auditor’s Report and Appropriations Limit Worksheet. The complete CAFR consists of 1) an introduction discussing the activity of the District, 2) a financial section including Management’s discussion and analysis, and 3) the statistical section which provides a financial history of the District over the last ten years. Director of Finance Jeffrey provided the following summaries:
• In FY 2004-05, an 8% growth in meters was realized. As of June 30, 2005, there were 9,217 active meters of which 624 are fire system meters. Residential meters increased by 9.4%.
• 36,090 acre feet of water was sold which is a decrease of 26.8% from the previous fiscal year. The decrease in water sales is largely due to the substantial rainfall (34 inches) for the year. Just over 15% of the water sold was to the District’s 10 largest customers and 78% of the water sold was delivered to participants in the Interim Agricultural Water Program (certified agricultural customers).
• Strategic Plan Specific Goals and their status were reviewed. They include GIS integration, SCADA and Energy Resources Replacement progress, completion of the Corporate Facility Plan, Capital Financing Plan, Economic Study Group’s governance issue, Employee Training and Development Plan and the Phase 1 of the Emergency Response Plan.
• Performance Measurement Standards as established were met with two exceptions: Local share of water costs was 16.5% of the certified agricultural total commodity costs (goal is 16%), and average yield on investments was 2.53% which is below the goal established of greater than the return on one-year Treasury bills which had averaged 2.78%. The District’s commodity rate for local operating and maintenance costs was impacted by the need to raise rates to offset the loss of property tax revenue. The yield on investments will improve as investments mature in the next 3 to 6 months.
Mr. Michael Zizzi of the auditing firm Leaf & Cole LLP reviewed the Independent Auditor’s Report stating that the financial statements are the responsibility of the District and that the auditor’s responsibility is to express an opinion on the financial statements. In the report, the auditor expressed a “Clean Opinion” in that the statements present fairly the financial position of the District as of June 30, 2005, and the results of its operations for the year then ended in conformity with generally accepted accounting principles.
The Statements of Cash Flows and Revenues, Expenses and Changes in Net Assets reported that cash and cash equivalents at the end of the year to be $7,338,046, a decrease of $4,920,300 from the end of FY 2003-04. This can largely be attributed to the expenditure of approximately $6 million for capital improvement projects and the reduction in property tax receipts. Net assets at the end of Fiscal Year 2004-05 increased from $79,745,868 to $80,381,621 from the end of FY 2003-04. Total liabilities and net assets were at $91,398,488.
Director of Finance Jeffrey presented a summary of the District’s water fund equity account. Fixed assets grew approximately $4.7 million with reserves decreasing approximately $4.8 million. General Fund Reserves total nearly $18 million with $2.58 million in the Rate Stabilization Reserves (majority of the funds in the Pumping Rate Stabilization fund with limited funds in the Water Rate Stabilization Fund due to low water sales). The Operating Reserve is fully funded at a level of 6 months’ operations and maintenance budget. Capital Projects Reserves totaled $10.1 million. Director of Finance Jeffrey stated that if FY 2005-06 is another wet year with low water sales, the District’s reserves will be depleted rather quickly. Also, the capital improvements projects such as Valley Center Road Water Improvements ($4 million), and those identified in the Master Plan are proceeding. Considering the volatility of water sales in a predominantly agricultural community, the expenditures for capital improvement programs, and our wholesale water suppliers’ transition to fixed rate charges, it was proposed to set the District’s water rates on lower base water sales. In this manner, the District will be better positioned to cover its fixed costs in the event of lower water sales. In addition, it will be proposed that the rate increase implemented to offset the loss of property tax revenue be retained to fund capital improvement projects. And, as provided for in the District’s Administrative Code, the use of Pumping Rate Stabilization funds for pump station improvements will be proposed. Increases in the District’s pump zone rates will also be proposed due to rising energy costs. A revised rate structure will be considered in November for implementation as of January 1, 2006. Director of Finance Jeffrey informed the Board that preparation for a debt issue is expected to commence in the summer of 2006.
An appropriations limit worksheet in compliance with Article XIIIB of the California Constitution and Proposition 4, which established a limit on how much tax revenue can be received, shows the District’s appropriations limit from property taxes as of June 30, 2005, at $3.6 million and property tax receipts totaled less than $1 million.
Upon motion by Aleshire, seconded by Polito and unanimously carried, the Auditor’s Report of the District’s Financial Statements for Fiscal Year 2004-05 and the Appropriations Limit Worksheet were approved.
3. Auditor’s Letter of Comment Regarding Strengthening Internal Controls and Operating Efficiency:
Mr. Michael Zizzi of Leaf & Cole explained that while completing the audit of the District’s financial statements, potential opportunities for strengthening internal controls and operating efficiency were noted and provided in a memo. They are:
▪ Cash Disbursements: Recommended utilizing a system offered by the bank called “Positive Pay” which prevents the cashing of a District check not issued by the District and the altering of said checks. Mr. Zizzi stated that with improved computer graphics and printing capabilities, it is easy to create a false check and successfully cash it. Through the Positive Pay program, the bank is provided with the check numbers to be released for payment and their amounts. As such, when a check is presented to the bank, it has the ability to determine the validity of the check, that it was truly issued by the District and verify the check’s value.
Staff recommended establishing a “Positive Pay” procedure with the bank which will cost approximately $2,000 per year.
▪ Sewer Inspection Deposits: Currently, a $250 fully refundable deposit for a sewer inspection is collected, however, the deposit is often forfeited by the builders as the District is not contacted for an inspection and occupancy can be secured without said District inspection of the sewer connection. Mr. Zizzi recommended determining the cost to fund excavating the sewer connection for an inspection and that the inspection fee be set at this amount.
Staff recommended that the Board direct staff to set a refundable sewer inspection deposit for consideration of adoption at a future meeting that will fund the District’s costs associated with uncovering and accessing the sewer clean-out opening to complete an inspection. An increase in the sewer inspection deposit will serve to motivate builders and developers to contact the District for the inspection. Staff will also inquire if notice from the County of San Diego can be received with the District’s inspection becoming a condition for the County’s issuance of a certificate of occupancy.
▪ Sewer Expansion Deposit: Agreements were executed with the Bell Family Trust and the Alti Corporation to provide the District with 40% and 10%, respectively, of the initial project budget (up to $198,000) pursuant to expansion of the Woods Valley Water Reclamation Facility. Mr. Zizzi recommended that additional funds be requested as 50% of the cost of the project to date exceeds the amount deposited by the Bell Family Trust and the Alti Corporation.
Staff noted that expansion of the Woods Valley Ranch Reclamation Facility will be proceeding in earnest in the near future and that additional funds will be requested from the Bell Family Trust, Alti Corporation and all interested parties.
Upon motion by Aleshire, seconded by Polito and unanimously carried, staff’s recommendations in response to the auditor’s letter regarding strengthening internal controls and operating efficiency were approved.
4. Review of the
County’s Bids for the Valley Center Road Widening Project:
District Engineer Grabbe reported that bids for the Valley Center Road Widening Project were received by the San Diego County Department of Public Works on September 15th. Included in the bids was the District’s project, the Valley Center Road Pipeline Project.
The engineer’s estimates for the total project had been $28,000,000 with $4,000,000 for the District’s portion, the pipeline project. A clause had been included in the agreement with the county providing that the District could withdraw from the project and obtain separate bids if the county’s bid exceeded the engineer’s estimate by 5% or more. The county’s bid results were:
Total Project VCMWD
Contractor Bid Amount Portion
Archer Western Contractors, Ltd. $34,141,816 $4,843,957
FCI Constructors, Inc. 38,380,989 3,533,226
Yeager Skanska, Inc. 53,269,250 4,361,311
The bid from the low bidder had the highest bid for the District’s pipeline work, or 21.1% over the engineer’s estimate. The lowest bid for the District’s portion (middle over-all bidder) was 11.7% below the engineer’s estimate and the highest over-all bidder’s estimate was 9% over the engineer’s estimate for the District’s portion.
The bid results indicate that there is a good probability that the District would obtain a more favorable cost by bidding the project separately. However, a separate contract would be more difficult to manage and may adversely affect the project’s schedule. It was estimated that if the District were to award a contract for its pipeline portion of the Valley Center Road Widening Project that the contractor could be ready to proceed by January 2006. The County’s contractor could commence work on the project by approximately November of 2005.
A letter was prepared for the Board’s consideration proposed to be forwarded to Mr. Fakhrriddine, County Department of Public Works Deputy Director, which sets forth the bid amounts and that it is apparent that there is a discrepancy in the perceived value of the District’s portion of the work and that the low bid from Archer-Western for the overall project is slightly imbalanced in the county’s favor. The letter requests that the county fund that portion of the District’s pipeline work that is in excess of the contractual limit of $4.2 million or approximately $600,000 additional funding by the county. Said proposed letter is attached as Exhibit “A”.
Also included in the letter is the request that the county confirm funding for three additional items of the Valley Center Road Widening Project which are separate from
the project bid issue and based on previous agreements and understanding with the county. These items are:
~ Additional design costs for the Southern portion (approx. $121,000)
~ Additional design costs for the Northern portion (approx. $81,000)
~ Construction costs for pipeline relocation in the Ridge Ranch easement
area (approx. $42,000)
Upon motion by Aleshire, seconded by Polito and unanimously carried, the letter to Mr. Fakhrriddine, San Diego County Department of Public Works, was approved requesting the County’s approval of a contract amount for the pipeline improvement’s portion of the Valley Center Road Widening Project be set at $4.2 million with additional funding required provided by the County.
5. Review of Proposed Policy for the Provision of Wastewater Services:
The draft policy for the District’s provision of wastewater services, which had been reviewed at the September 19th Board meeting, was presented for further discussion and comments. The policy as drafted sets forth:
• That the appropriate land-use agencies (Valley Center Planning Group and the County of San Diego) are responsible for determining where wastewater services should be provided and the District’s role is to oversee and facilitate the process.
• Parameters for evaluating the provision or extension of wastewater services to other areas; including, properties with a Specific Plan Area (SPA) designation or special designation area, site specific conditions, the proximity to planned wastewater service area, economic viability, and when the development accommodates its reclaimed wastewater disposal and storage capacity.
It was emphasized that as an inland discharger, development projects pursuing sewer service will be limited by the capacity for wastewater disposal and seasonal storage. The Board concurred with the policy for the provision of wastewater services as drafted, and staff was directed to forward said policy to the County Department of Planning and Land Use, Valley Center Planning Group, and to other interested parties for comments prior to consideration of adoption.
6. Engineering Services Credit from R. W. Beck:
The Board was informed that R. W. Beck will be issuing $9,500 in engineering services credit to the District pursuant to the design discrepancies for the Reidy Creek Pipeline and Meadows Reservoir projects.
BOARD OF DIRECTORS’ AGENDA
7. Nominating Committee – ACWA Officers for 2006 and 2007:
Director Aleshire reported that he served on the Nominating Committee to review candidates for President and Vice President of the Association of California Water Agencies for 2006 and 2007. The committee’s recommendations are: Randy Fiorini of the Turlock Irrigation District and current ACWA Vice President for the position of President, and Glen Peterson of the Las Virgenes Municipal Water District for Vice President of ACWA. Mr. Fiorini has expressed that his focus as President of ACWA will be implementation of the provisions of the ACWA Blue Print “No Time to Waste”. He will pursue development of a program promoting ACWA’s Blue Print to be aired on KPBS. The cost for this project has been estimated at $360,000.
8. A Closed Session was called by President Broomell at 3:37 p.m. pursuant to:
$ Government Code '54956.9(a), Conference with Legal Counsel - Existing Litigation.
Name of Case: Sweetwater Authority, et al. v. Dynegy, Inc., et al.
San Diego Superior Court Case GIC 760743
. The Regular Board meeting was reconvened at 3:40 p.m. No action was reported.
9. Upon motion by Aleshire, seconded by Polito and unanimously carried, the meeting was adjourned at