VALLEY CENTER MUNICIPAL WATER DISTRICT
Regular Board Meeting
Monday, December 18, 2006
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, Aleshire, Stone and Haskell. Staff members present were: General Manager Arant, General Counsel Cowett, Director of Finance Jeffrey, District Engineer Grabbe, Director of Operations Hoyle, Board Secretary Stetson, Project Manager Kilwein, Accounting Manager Pugh, and IT Specialist Rivard. Spectators present were: Messrs. Belanich, Bernsen, I., Bernsen, S., Wynn, Hilbig, Lewis, Ross, Mr. and Mrs. Olson and others.
1. Upon motion by Polito, seconded by Stone and unanimously carried, the following consent calendar items were approved:
• Minutes of the Board meeting held November 20, 2006
• Audit demand check numbers 111135 through111521
• Treasurer’s Report and Financial Statement for the period ended October 31, 2006
• Board of Director’s request for reimbursement of expenses and per diem compensation
2. Status Report on the South Village Water Reclamation Project and Authorization to Proceed:
In September, property owners within the South Village Water Reclamation Project boundary received letters from the District outlining the proposed expansion of the Woods Valley Ranch Water Reclamation Facility to provide wastewater service to their properties along with a Capacity Reservation Agreement and the maximum EDU yield under the current zoning. Property owners within the South Village interested in obtaining wastewater service had until November 17, 2006, to complete the Capacity Reservation Agreement for each parcel and provide a deposit of $2,500 per equivalent dwelling unit (EDU). Project Manager Kilwein provided a status of the capacity reservation deposits received for the proposed South Village Water Reclamation Project as follows:
Reservations with current zoning 99
Reservations outside the South Village boundary 5
Reservations over current entitlement 37
Orchard Run 308
Total Potential EDUs 634
Project Manager Kilwein noted that a District sponsored assessment district for all participants is preferred in which the private projects (Bell/Alti/Orchard Run) would be combined with the private projects. Based on the Capacity Reservations received, there will be an expansion of the Woods Valley Reclamation facility of between 75,000 to 150,000 GPD.
If the Board approves proceeding with the proposed sewer expansion project for the South Village area, staff will initiate a Preliminary Design Report for the water reclamation project once the participant level is ascertained in which more refined information on the project’s costs, collection system, seasonal storage facilities and disposal areas will be obtained. Also to be pursued are the completion of the Master Plan to reflect the current zoning and ultimate service within the South Village boundary, and initiation of the CEQA process considering the ultimate service area under the current zoning. As such, staff recommended that the Board authorize staff to complete the Master Plan, initiate CEQA and begin the Preliminary Design Report for the proposed South Village Water Reclamation Expansion Project.
Property owners within the South Village area will again receive notification of the proposed wastewater expansion project to provide sewer service to their area and their opportunity to become a participant. A determination of participation in the expansion project will be needed when the Preliminary Design Report is initiated or in approximately one month.
Mr. Belanich, owner of the proposed Orchard Run Project property, addressed the Board stating that no wastewater capacity has yet been reserved for the Orchard Run project in conjunction with the wastewater expansion project to be financed through the formation of an assessment district. Mr. Belanich stated that there have been substantial funds expended for the development process of the proposed Orchard Run Project. He noted that there are executed agreements between the District and D.R. Horton, former developer of the Orchard Run Project, and that he in good faith is abiding by the terms of the agreements. He added that approvals have been obtained from the County for the Orchard Run Project and approval to proceed with expansion of the Woods Valley Ranch Water Reclamation Facility. Therefore, he stated, participating in the proposed assessment district which will finance the wastewater expansion project for participating property owners in the South Village Area would for him be a double payment. Mr. Belanich asked for consideration of the time and money expended for the approvals already obtained. Mr. Belanich stated that he is asking for good faith and fair play and he will need to take action accordingly.
General Manager Arant reviewed that Mr. Belanich had been pursuing a stand alone treatment plant to serve the wastewater needs of the Orchard Run Project in which the waste discharge permit had been obtained and a preliminary design completed for the facilities. D.R. Horton entered into a development agreement with Mr. Belanich for the proposed Orchard Run Project and began to pursue expansion of the Woods Valley Ranch Water Reclamation Plant with the seasonal storage and disposal of the effluent on the Orchard Run Project’s property. Approval had been granted for the Phase 1 water, sewer and water reclamation drawings for the proposed Orchard Run Project. D.R. Horton then withdrew as the developer of the Orchard Run Project. In response to Mr. Belanich’s position that participating in the expansion project financed with an assessment district would result in duplicate payments for him, General Manager Arant stated that design work for the development would not be considered as expenses for the assessment district financing nor would the Orchard Run Project’s water, sewer and reclaimed water lines within the project. Also, work completed by Orchard Run that is identified as benefiting other properties would be considered a pre-investment and eligible for reimbursement from the assessment district. The agreements with D.R. Horton are the facility agreement which specified the improvements to be constructed and time frames, and a reclamation agreement that established the disposal of the treated effluent for use on the Orchard Run Property and the seasonal storage. The agreements with D.R. Horton are assignable with the District’s permission. District Engineer Grabbe stated that as part of an assessment district formation, an assessment district engineer analyzes all of the costs to determine benefit for the cost. As such, if a property does not benefit from an improvement, it is not assessed for that cost such as the collection lines and waste discharge permit for the Orchard Run Project. The assessment district proceedings apportion costs appropriately so that properties that benefit from a facility are assessed for the cost.
Upon motion by Aleshire, seconded by Stone and unanimously carried, staff was directed to complete the Master Plan, initiate the CEQA process and the Preliminary Design Report for the South Village Water Reclamation Project.
3. Review of the 2005-06 Comprehensive Annual Financial Report (CAFR):
The District’s financial reports for the period ended June 30, 2006, were presented for the Board’s review, which include the Comprehensive Annual Financial Report (CAFR), Independent Auditor’s Report and Appropriations Limit Worksheet. The CAFR consists of three parts: the Introduction discussing activities of the District during FY 2005-06, the Financial Section which contains financial statements and management’s discussion and analysis, and the Statistical Section which provides a financial history of the District over the last ten years. Accounting Manager Pugh provided the following summaries:
• In FY 2005-06, a 4.4% growth in meters was realized in which there were 408 new domestic meters, 12 commercial meters and a decline of 16 certified agricultural meters. As a result, as of June 30, 2006, there were 9,621 active meters of which 838 are fire system meters.
• Total water sales for the fiscal year were 41,728 acre feet. Of these water sales, 79% was to agricultural accounts. Water sales increased 15.6% from the previous year, but were 3.7% below the previous five year average. Rainfall was 13.5 inches.
• Strategic Plan Specific Goals and their status were reviewed. They include GIS integration, SCADA improvements, adoption of the employee training and development program, capital financing plan, Economic Study Group’s efforts to reform the San Diego County Water Authority’s governance, and resources evaluation including solar power analysis and desalination transfer agreement.
• The ten Performance Measurement Standards were met with the exception of the operating reserve which was less than one months operating and maintenance expenses (performance measurement standard goal for operating reserves is equal to six months expenses). The reserve’s funds were reallocated to capital projects and the reserves will be replenished upon the District’s debt issuance anticipated in 2007.
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. The Report expresses that in the auditor’s opinion, the District’s financial statements present fairly the financial position of the District at June 30, 2006, and the results of its operations for the year then ended in conformity with generally accepted accounting principles.
The Statement of Cash Flows for the Year Ended June 30, 2006, reports there was a net decrease in cash and cash equivalents of $655,610. This is largely attributable to expenditures for capital improvement projects and the reduction in property tax revenue. The end of Fiscal Year 2005-06 cash and cash equivalents was $6,682,436.
The District’s post-employment medical plan’s unfunded actuarial liability is addressed in the Notes to Financial Statements. A liability for post employment benefits will need to be reported when the Governmental Accounting Standards Board Statement 45 is implemented. It is planned to retain an actuary to determine the GASB 45 calculations for the District’s reporting of its post employment benefits. As recently approved, the proposed increases in water rates proposed to become effective in March 2007 include an increment to contribute toward this liability.
The appropriations limit worksheet in compliance with Article XIIIB of the California Constitution establishes a limit on how much tax revenue can be received reflects the District’s appropriations limit from property taxes as of June 30, 2006, at $3.9 million.
An auditor’s Management Letter was submitted to the Board of Directors which addresses the District’s internal controls and operational efficiencies. Items noted in the Letter were that the certificates of deposit in lieu of bond for a project’s warranty retention should be held by the District for improved control through California Bank and Trust. The second item addressed was deposits collected for a developer’s project to be tracked more effectively to assure sufficient deposit funds are maintained. To correct this situation, increased deposits or more timely requests for additional funds will be evaluated along with tracking of the funds by finance personnel.
The District’s Comprehensive Annual Financial Report, appropriations limit worksheet, and Independent Auditor’s Report for Fiscal Year 2005-06 were received.
GENERAL MANAGER’S AGENDA
4. San Diego County Water Authority’s Board of Directors Meeting:
General Manager reported that at the November 30th Board meeting the Board established the vote and representative entitlements of each member agency to be effective January 1, 2007, as is done annually. The vote is based on an all-in financial formula with representative entitlements determined by assessed value of an agency. Upon an agency attaining 10% of the Authority’s total assessed value, the agency is entitled to a second representative on the Board. Currently, the District’s assessed value is approximately 5.8% of the Authority’s total assessed value.
Revisions to the Authority’s Reclaimed Water Development Fund Program were adopted which include changing the name to the Local Water Supply Development Program which will expand eligibility to all local projects such as groundwater and seawater desalination. The maximum incentive level for eligible projects increased to $200/ac. ft. from $147/ac. ft. for recycled water beneficially reused.
5. Notices of Public Hearing to Consider Proposed Water and Sewer Rate Increases:
Director of Finance Jeffrey informed the Board that letters were mailed to customers, property owners (including time share owners) and tenants in compliance with Proposition 218 providing notification of the public hearing to be conducted January 29, 2007, concerning proposed increases in the water and sewer rates. Total notices that were mailed were 38,053 after eliminating duplicate mailings if the name was identical. Inquiries received from the mailed notices have included:
24 -- Why am I receiving this notice as do not reside in Valley Center? (time share condominium owners)
9 -- Why did I receive a duplicate mailing? (if name was not identical, did not consider a duplicate)
3 -- What will be the impact on my bill?
3 -- Miscellaneous questions including sewer availability and the property tax record
BOARD OF DIRECTORS’ AGENDA
6. Report on ACWA Conference:
Director Aleshire reported that at the ACWA Fall Conference in Anaheim, AB 573 was discussed which prohibits public agencies from entering into contracts with design professionals that require indemnification of the agency by the design professionals for liability claims. Staff noted that contracts will be revised to incorporate the provisions.
Legislative action to approve a surface storage bond issue has been proposed. The proponents have indicated that if the proposal is not successful in the Legislature, it will be pursued through the initiative process. ACWA will be working with the proponents of the bond to include desired water projects.
Director Aleshire noted that General Manager Arant had been nominated to be the recipient of ACWA’s first “Emissary Award” in recognition of his contributions to the development of water resources in California and ACWA. He was one of four nominees. The award was given to an attorney who has volunteered as Chair of the ACWA State Legislative Committee for many years.
7. A Closed Session was called by Vice President Polito at 4:12 p.m. pursuant to:
$ Government Code '54956.9(a), Conference with Legal Counsel - Existing Litigation.
Names of Parties: Cheri Codding vs. Jose Rios, et al.
Case Number: GIN048867
8. The regular Board meeting was reconvened at 4:23 p.m. No action was reported.
9. Upon motion by Aleshire, seconded by Stone and unanimously carried, the meeting was adjourned at 4:24 p.m.