VALLEY CENTER MUNICIPAL WATER DISTRICT
Regular Board Meeting
Monday, May 1, 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.
ROLL CALL
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 and IT Specialist Rivard. Spectators present were: Representatives from the San Diego County Water Authority: Ms. Dana Friehauf, Tim Bombardier and Rich Pyle; Mr. Doug Mair, TMV Systems Engineering, and Mr. Pascal Stalder, Contango Capital Advisors.
PRESENTATION
President Broomell was presented commendation plaques from the San Diego County Water Authority and the District in recognition of and appreciation for his 14 years of dedicated service as the District’s Board representative on the San Diego County Water Authority Board of Directors. President Broomell was appointed in January of 1992 as the District’s representative on the Authority board and continued as the District’s representative through to April 2006.
Wally Grabbe, District Engineer, was commended for completing the ACWA Joint Powers Insurance Authority Professional Development Program. The Program involves completing 18 required courses and 9 elective courses.
CONSENT CALENDAR
1. Upon motion by Stone, seconded by Polito and unanimously carried, the following consent calendar items were approved:
• Minutes of the Board meeting held April 17, 2006
• Audit demand check numbers 108431 through 108605
• Treasurer’s Report and Financial Statement for the period ended March 31, 2006
PUBLIC HEARINGS
2. Proposed Increase of the
Lower
Moosa
Canyon
Water Reclamation Facility Sewer Capacity Charge:
Property owners requesting sewer capacity from the Lower Moosa Canyon Water Reclamation Facility currently pay a sewer capacity charge of $6,550 per equivalent dwelling unit (EDU). The funds are used to construct improvements required to expand the capacity of the treatment facilities as needed to meet new demands on the sewer system. The current sewer capacity charge was adopted in June of 2005 utilizing estimated construction costs based on preliminary design reports. It had been recommended that the Engineering News Record Construction Cost Index be used to adjust estimated construction costs for inflation. Per the ENR CCI for March 2006, construction costs have increased by 3.44% since the last increase in the Moosa sewer capacity charge. Therefore, an increase in the sewer capacity fee of $225 per EDU or a sewer capacity charge totaling $6,775 was recommended. If adopted, the proposed increase in the Lower Moosa Canyon Water Reclamation Facility sewer capacity charge would become effective July 1, 2006.
The public hearing to consider an increase in the Lower Moosa Canyon Water Reclamation Facility sewer capacity charge was opened at 2:10 p.m.
An evaluation of the District’s sewer master plan is underway which could result in changes in the sewer capacity charge. The San Diego County Water Authority is analyzing the benefits of developing indices that would be based on the more specific applications of a water industry project which the District may be able to utilize in the future for cost estimating.
District Engineer Grabbe recommended the adoption of Ordinance No. 2006-07 approving an increase in the Lower Moosa Canyon Water Reclamation Facility sewer capacity charge to $6,775 per EDU and revisions to the Administrative Code to reflect the revised charge to be effective July 1 , 2006. No comments were received from those in attendance and there had been no written or oral comments received on the proposed increase in the sewer capacity charge. The public hearing was closed at 2:15 p.m.
Upon motion by Aleshire, seconded by Haskell and unanimously carried, the following ordinance, entitled:
ORDINANCE NO. 2006-07
ORDINANCE OF THE BOARD OF DIRECTORS
OF
VALLEY
CENTER
MUNICIPAL WATER
DISTRICT AMENDING ADMINISTRATIVE CODE
SECTIONS 171.2 AND 171.10 TO INCREASE
THE SEWER CAPACITY CHARGE FOR THE
LOWER
MOOSA
CANYON
WATER RECLAMATION FACILITY
was adopted by the following vote, to wit:
AYES: Directors Broomell, Polito, Aleshire, Stone and Haskell
NOES: None
ABSENT: None
3. Adoption of Proposed Increase in the Water Meter Capacity Charge:
The District’s meter capacity charges, a component of the cost for a new water meter installation, are collected and the revenue allocated toward construction of capital facilities, such as reservoirs, pump stations and pipelines needed to provide service to the new meter accounts. The facilities to serve new developments are identified in the District’s 2002 Water Master Plan and as adjusted, such as the inclusion of a portion of the Corporate Facility Project. As recommended in the Water Master Plan, the meter capacity charges are reviewed each year and adjustments, if necessary, are recommended to provide for cost increases due to inflation as determined by the Engineering News Record Construction Cost Index. The District’s 2002 Water System Master Plan is being updated which may affect the identified projects and, therefore, the meter capacity charges. Following review of the meter capacity charges, a 3.44% increase in the charges was recommended, which is the increase in construction costs since the last increase in the meter capacity charges in May of 2005, per the Engineering News Record Construction Cost Index.
The public hearing to consider the proposed increases in the District’s meter capacity charges was opened at 2:17 p.m. The proposed increases had been published and posted. No written communication was received and there were no comments from the audience.
District Engineer Grabbe explained that to accommodate proposed condominiums that will be individually metered and small lot residences, the addition of a 5/8” meter was proposed. The proposed increases in the meter capacity charges were reviewed which are set forth below:
Meter Size |
Current Meter Capacity Charge |
Proposed Meter Capacity Charge |
5/8” |
N/A |
$2,114 |
¾” |
$3,050 |
$3,155 |
1” |
$5,185 |
$5,363 |
1½ |
$10,065 |
$10,411 |
2” |
$16,165 |
$16,721 |
3” |
$30,500 |
$31,550 |
The public hearing was closed at 2:20 p.m. Adoption of Ordinance No. 2006-05 approving the proposed water meter capacity charges with an effective date of July 1, 2006, was recommended.
Upon motion by Polito, seconded by Stone and unanimously carried, the following ordinance, entitled:
ORDINANCE NO. 2006-05
ORDINANCE OF THE BOARD OF DIRECTORS OF
VALLEY CENTER MUNICIPAL WATER DISTRICT
AMENDING ADMINISTRATIVE CODE SECTION 160.4(c)
INCREASING THE METER CAPACITY CHARGES
was adopted by the following vote, to wit:
AYES: Directors Broomell, Polito, Aleshire, Stone and Haskell
NOES: None
ABSENT: None
4. Consideration of Revisions to Miscellaneous Fees and Deposits and Establishment of a Special Project Application and Review Fee:
A review of miscellaneous charges, fees and deposits indicated the current fee structure does not cover the costs associated with staff time expended to process certain forms, the review process, and that deposits collected for developer projects are insufficient.
Ordinance No. 2006-06, presented for the Board’s consideration of adoption, would 1) revise the fee for the review of County Project Facility forms, 2) revise the deposits required for processing developer projects, and 3) establish a special project application and review fee. The proposed changes were reviewed as follows:
County project facility availability and commitment forms - $15.00 is currently charged for the completion of the County’s PFA and PFC forms for water and sewer which are required to be completed for any lot split, subdivision, boundary adjustment, MUP, rezone or Certificate of Compliance. The process to complete the
forms takes staff from 30 to 60 minutes. A proposed increase in the fee to $50.00 per form completed was proposed.
Developer Project Deposits – In compliance with the District’s Standard Facilities Agreement, developers pay all District costs for review and inspection of their proposed facilities and deposits are requested prior to initiating work on the project. However, the current minimum deposits are not sufficient to complete any project. An increase in the deposits required was proposed as follows in which the current deposits are shown in parenthesis:
▪ Initial review and concept approval – Deposit of 0.5% of estimated construction cost, with the minimum deposit increased to $500 ($50) and a maximum of $3,000 ($1,500).
▪ Plan review and approval – Deposit of 2% of estimated construction cost, with the minimum deposit increased to $2,000 ($1,000) and the maximum to $10,000 ($3,000).
▪ Construction inspection – 5% of estimated construction cost deposited with the minimum deposit increased to $5,000 ($1,500).
Special Projects –Upon the request by a developer or property owner, the District reviews and approves improvement plans to determine compliance with District requirements. There currently is no charge for this initial review and determination. The establishment of a new fee for application and review of special projects of $500 was recommended which represents the average cost for staff to process and review a project. Modification to the District’s Administrative Code to include this new fee and the requirements for processing and approving of special projects will be presented for approval at a subsequent Board meeting.
The public hearing to consider miscellaneous changes to current charges and deposits and the establishment of a special project application and review fee was opened at 2:35 p.m. Director Aleshire questioned the policy of charging for tasks performed by employees. General Counsel noted that approximately 25 years ago, a substantial amount of the District’s revenue was derived from property taxes. Since the Jarvis-Gann Initiative was adopted, the ratepayers fund operational costs. It is Board policy to establish if the ratepayers should fund tasks, such as the evaluation of improvement plans, or establish a fee to recoup the expenses from the developer or benefiting customer.
The public hearing was closed at 2:50 p.m. No additional comments were received from the audience and there had been no written or oral communication received on the proposed changes.
Upon motion by Polito, seconded by Haskell and unanimously carried, the following ordinance, entitled:
ORDINANCE NO. 2006-06
ORDINANCE OF THE BOARD OF DIRECTORS OF
VALLEY CENTER MUNICIPAL WATER DISTRICT
AMENDING THE ADMINISTRATIVE CODE TO
REVISE MISCELLANEOUS CHARGES IN SECTIONS
160.21, 171.10 AND 190.12, AND TO ESTABLISH A
NEW APPLICATION AND REVIEW FEE
was adopted by the following vote, to wit:
AYES: Directors Broomell, Polito, Stone and Haskell
NOES: Director Aleshire
ABSENT: None
ACTION AGENDA
5. San Diego County Water Authority’s Presentation on Its Draft Drought Management Plan:
The San Diego County Water Authority’s Draft Drought Management Plan was developed through the efforts of the Drought Management Task Force, which consisted of member agency General Managers/Department Directors and Water Authority Water Resources department staff. Development of the Draft Drought Management Plan sets forth policy and implementation measures in the event of a long-term drought.
Dana Friehauf, Principal Water Resource Specialist, reviewed the San Diego County Water Authority’s Draft Drought Management Plan noting that the Plan could not have been completed without the input and support from the Authority’s member agencies that participated in the Member Agencies’ Technical Advisory Committee. Ms. Friehauf noted that Metropolitan, the San Diego County Water Authority and its member agencies are actively taking steps to develop a diverse water supply for the region and that water shortages are not anticipated. However, it is prudent planning to develop a Drought Management Plan as there are uncertainties in developing and maintaining the region’s imported and local supplies. The Draft Drought Management Plan had been reviewed at the Authority’s March Board meeting and is expected to be presented in May for adoption.
The three main elements of the Drought Management Plan were presented which consist of a Drought Response Matrix, Allocation Methodology and Communication Strategy, as summarized below:
Drought Response Matrix – Consists of three stages: Voluntary, Authority Supply Enhancement, and Mandatory Cutbacks. The voluntary cutback stage would occur when Metropolitan is experiencing some shortages in their imported supplies, but water is available in Diamond Valley Reservoir and its groundwater conjunctive water use programs. The 2nd stage, Authority Supply enhancement, would be in effect when Metropolitan experiences extreme shortages in which the Interim Agricultural Water Program participants have had their supplies cut by 30% and implementing cutbacks to M&I customers. The Authority’s action in this stage would be to attempt to absorb the cutbacks to member agencies’ M&I customers through efforts such as water transfers and carry-over supplies. Mandatory cutbacks would be invoked when all water supplies have been optimized and demands exceed supplies. Member agencies would be required to cut back water consumption based on the percent established by the Authority and method of implementation to achieve the cut backs determined by each agency. Emergency Storage Project supplies will only be used during a hydrologic drought as a last resort and its use would be minimal to maintain health and safety supplies for domestic use, for fire protection and sanitation.
Allocation of water during a drought would be the last stage in response to an extended drought and required when the Authority’s supplies are insufficient to meet M&I demands. The challenge in developing an allocation methodology was to minimize regional economic impacts and strive for fairness and equity to all customers. Initial cut-backs would be administered to IAWP participants according to Metropolitan’s IAWP guidelines of up to a 30% cut-back before cut-backs to M&I customers. IAWP customers have a lower reliability in exchange for a reduced rate. Cut-backs to IAWP participants beyond the 30% level would be equal to M&I reduction level.
Tim Bombardier, Sr. Water Resources Specialist, reviewed the allocation methodology noting that it will be for the allocation of the Authority’s supply and that each member agency will implement its own methodology to obtain cut-backs. M&I base demands from the San Diego County Water Authority would be determined using an average of the last full 3 years of water deliveries For IAWP participants, the base period demands would be based on the single full fiscal year prior to the allocation. Adjustments to the base period of demands to address fairness and equity were considered for growth, demand hardening, loss of local supply and local supply development. Each agency’s percent share of the total adjusted base period demands is calculated and used to determine the agency’s allocation of the Authority’s available supplies. A reliability adjustment will be implemented during extreme conditions where cut-backs to the Authority’s supplies reach or exceed 30% in an effort to avoid large uneven retail impacts and to minimize economic impacts. In this manner, there would be an incentive for the development of local supplies and the hardship on agencies 100% dependent on local supplies should be minimized. The reliability floor was set at 5% below the regional total M&I level of service. The level of service is based on the Authority’s allocation and local supplies. The District’s level of reliability to its M&I customers will increase substantially with the participation in the transfer of water from the Carlsbad Desalination Plant, a local water supply. Also, development of reclaimed water in the community will enhance the District’s level of service.
Communication strategy of the Drought Management Plan will include preparation of media advisories, speakers’ bureau and paid advertising. The communication would acknowledge the Authority’s regional message and the member agencies’ local messages. A Drought Communication Team would coordinate messages and information to and from the media, public officials and the general public.
6. Annual Review of the District’s Investment Policy and Delegation of Investment Authority by the Board:
Government Code Section 53846(a)(2) and the District’s Administrative Code Section 50.3 require that the Board review the District’s investment policy to confirm its appropriateness to the District’s operation. An initial review had been conducted at the April 3rd Board meeting. Director of Finance Jeffrey had been directed to evaluate alternative performance measurement standard benchmarks for the District’s investments. The District’s Strategic Plan’s Performance Measurement Standard seeks an “average rate of return on one-year U.S. Treasury Bonds”. The 12-month rolling average more accurately reflects a real portfolio whereby 1/12th of the portfolio matures and is reinvested each month. Director of Finance Jeffrey explained that this weighted average is calculated using each end-of-month Treasury bond yield weighted by the book value of the investment at that time. The average District yield on its investments for FY 2005-06 was 2.88% which is 0.83% below its benchmark of the average one-year Treasury bond yield (3.71%). However, the District’s average yield on its investments was higher than the 12-month rolling Treasury bond yield of 2.84%. The District’s Strategic Plan’s Performance Measurement Standard pertaining to return on investments was recommended to be changed to read “Greater than the 12-month rolling average return on U.S. Treasury bonds”.
As had been reviewed during the April 3rd Board meeting, the District’s investment policy, as adopted, is conservative in that the types of investments allowed are limited to those that carry the least risk while continuing to pay at least a market rate of return. Primary goals of the policy are: preservation of capital, followed by maintaining liquidity and then yield on investments. Also, the Government Code requires that the Board annually confirm the delegation of investment authority by the Board. The Board has delegated the authority to invest and reinvest District funds to the Treasurer of the District, who is Bill Jeffrey, Director of Finance.
A change to Section 50.1(g), of the District’s Administrative Code, Authorized Investments, was recommended to include participation in a joint powers authority that can invest in a diversified portfolio for the benefit of its members, as now permitted per the Government Code.
Mr. Pascal Stalder of Contango Capital Advisors, investment advisor, addressed the Board providing information on historical market rates and yield curves. He stated that the District’s investment policy prudently puts yield below safety and liquidity. At a time when LAIF rates were around 1.5%, funds were invested in securities yielding an average of 2.25%. At that time, it was predicted that rates would stay low and rise slowly. As such, 2-year maturities were purchased with the anticipation of reinvesting at a higher rate upon maturity. In hindsight, a higher yield would have been obtained if the funds had remained in LAIF for another year when the higher rates were available. Mr. Stalder explained that when rates rise, it is more difficult to meet the return on the one-year Treasury bonds. As interest rates rise, investment values drop though no loss is realized if held until maturity. Selling investments at a loss is considered if the loss can be recovered through higher earnings. In 2005, the yield curve flattened in which by the end of the year there was no benefit in buying long-term bonds. Currently, the 5-year bonds are only paying 0.1% more than the 1-year bonds. Also, maturities purchased by the District are shorter term because of lower sales and the need for cash with the aggressive capital improvement program.
Director of Finance Jeffrey recommended approval of the change in the benchmark for return on investments to be greater than the 12-month rolling average return on U.S. Treasury bonds and to adopt Ordinance No. 2006-02 to amend the District’s investment policy to permit investment in a joint powers authority and to renew the delegation of investment authority to the Treasurer of the District.
Upon motion by Aleshire, seconded by Stone and unanimously carried, the District’s benchmark for return on investments was changed to be greater than the 12-month rolling average return on U.S. Treasury bonds, and the following ordinance, entitled:
ORDINANCE NO. 2006-02
ORDINANCE OF THE VALLEY CENTER MUNICIPAL WATER
DISTRICT AMENDING THE ADMINISTRATIVE CODE TO
PROVIDE FOR CHANGES IN THE STATEMENT OF INVEST-
MENT POLICY AND TO RENEW THE DELEGATION OF
INVESTMENT AUTHORITY TO THE TREASURER OF THE DISTRICT
was adopted by the following vote, to wit:
AYES: Directors Broomell, Polito, Aleshire, Stone and Haskell
NOES: None
ABSENT: None
7. Approval of Modified Performance Measurement Standards for the District’s Strategic Plan Through to Fiscal Year 2007-2008:
At the April 3, 2006, Board meeting, the District’s Strategic Plan was amended to include the adopted Code of Ethical Practices and elimination of specific Strategic Plan goals (corporate facility master plan and regional water supply alternatives) which had been completed. Also, the addition of Plan goals to complete the Integrated Water and Wastewater Resource Plan and integration of the data processing and management systems were approved, as well as an extension of the Strategic Plan for Fiscal Years 2006-07 and 2007-08.
Changes to the performance measurement standards for water loss and return on investments were recommended to read:
• Unknown Water Loss: 5% or less per calendar year, and
• Return on Investments: Greater than the 12-month rolling average return on U.S. Treasury bonds.
Upon motion by Aleshire, seconded by Polito and unanimously carried, the District’s Strategic Plan extended through to Fiscal Years 2006-07 and 2007-08 with the recommended revisions to the Performance Measurement Standards for Unknown Water Loss and Return on Investments was adopted.
8. Update on the Supervisory Control and Data Acquisition Project and Request for Approval for the Sole Sourcing of Specific Equipment and an Amendment to the Contract with TMV Systems Engineering, Inc.:
District Engineer Wally Grabbe stated that preliminary planning of the SCADA Project, radio survey, master plan, standard specifications and conversion of the control room to eliminate the control panel have been completed. Design work is nearly complete for Phases 1 and 2 and an architect has been selected and contract approved for the remodel of the Central Control facility..
Implementation of the SCADA project consists of the integration of a total of 63 sites in 7 phases of 8-10 sites each and the remodeling of the Central Control Facility. Completion of the project extends over the next 3 fiscal years with a 6-month construction period scheduled for each phase. Integration of the site security components with the SCADA system has been developed.
Board approval for sole sourcing of specific equipment for the SCADA project and the approval of an amendment to the design and system integration contract with TMV Systems Engineering, Inc. are required to proceed with the project.
Staff requested approval of Resolution No. 2006-20 to approve the sole sourcing of specific equipment for the SCADA project, which are:
♦ Data radios for the SCADA network
♦ Programmable Logic Controllers (PLC)
♦ Network Routers
♦ Security cameras (PT2 & day/night still)
♦ Digital video recorders and video servers
♦ Security motion sensors
Additional engineering and system integration work is needed to complete the SCADA project. Approval of an amendment to the design and system integration contract with TMV Systems Engineering, Inc. was requested with the adoption of Resolution No. 2006-21. The requested additional SCADA design and integration services to be completed by TMV Systems Engineering, Inc., for an amount not to exceed $217,650, are outlined on the attached Exhibit “A”. If approved, the multi-task contract for SCADA Design Consultant and System Integrator would total $1,101,493.
Upon motion by Aleshire, seconded by Polito and unanimously carried, the following resolution, entitled:
RESOLUTION NO. 2006-20
RESOLUTION OF THE BOARD OF DIRECTORS OF
VALLEY CENTER MUNICIPAL WATER DISTRICT
APPROVING SOLE SOURCING OF SPECIFIC
EQUIPMENT AND FOR THE SCADA PROJECT
was adopted by the following vote, to wit:
AYES: Directors Broomell, Polito, Aleshire, Stone and Haskell
NOES: None
ABSENT: None
Upon motion by Aleshire, seconded by Polito and unanimously carried, the following resolution, entitled:
RESOLUTION NO. 2006-21
RESOLUTION OF THE BOARD OF DIRECTORS OF
VALLEY CENTER MUNICIPAL WATER DISTRICT
APPROVING AMENDMENT NO. 2 TO THE TMV
SYSTEMS ENGINEERING CONTRACT FOR
SYSTEM INTEGRTION OF THE SCADA PROJECT
was adopted by the following vote, to wit:
AYES: Directors Broomell, Polito, Aleshire, Stone and Haskell
NOES: None
ABSENT: None
GENERAL MANAGER’S AGENDA
9. Review of Miscellaneous Informational Items:
▪ San Diego County Water Authority Board Meeting of April 27th – General Manager Arant reported that at the Authority’s Board meeting, a resolution of support was adopted for Senate Bill 511 (Hollingsworth) which has a provision that the San Diego County Water Authority will report to the Legislature by 2009 on the Authority’s governance structure. Increases in the CIP budget of $4.0 million for the Coachella Canal Lining project, and $38.3 million for the All American Canal Lining project were approved. The 3rd reach of the All American Canal Lining project was approximately $40 million over budget, which will result in water savings of about 2,100 acre feet of water per year. Due to the high cost for this project ($900/ac. ft. for the first 30 years or an increase in the Authority’s cost of supply by $8/ac. ft. for the 110 year project life), General Manager Arant reported that he cast a “No” vote for expenditure of funds for the canal lining project along with the representatives from Fallbrook P.U.D., Ramona M.W.D. and Rincon del Diablo M.W.D. It was felt that the funds could be better used for desal. or local water development. General Manager Arant reported that he and the Director from the Rincon del Diablo M.W.D. were excused from the Closed Session discussion on the desalination project proposed at Carlsbad due to the contracts that have been entered into with Poseidon Resources for the purchase of desal water from the proposed Poseidon Seawater Desalination Plant.
▪ Board Meetings – The District’s regular Board meeting of May 15th will be adjourned to Tuesday, May 16th beginning at 8:45 a.m. for the tour of facilities. The budget will be reviewed at the May 15th regular meeting and, if the Board desires, a budget workshop can be held prior to the next regularly scheduled meeting in June.
GENERAL COUNSEL’S AGENDA
10. Energy Lawsuit:
General Counsel Cowett reported that the Judge in the wholesale electricity litigation considered the settlement of the Reliant matter which was taken under submission, but is expected to be approved of which the District’s share is approximately $250,000.
BOARD OF DIRECTORS’ AGENDA
11. Caves Initiative – Director Aleshire reported that a coalition of environmental groups turned in signatures for the Caves initiative, the “Safe Drinking Water, Water Quality and Supply, Flood Control, River and Coastal Protection Bond Act of 2006”, that will quality it for the November 2006 election. The bond, if adopted, will cost $11 billion, including interest expenses. The District is on record as opposing this initiative.
12. ACWA/JPIA Executive Committee Election:
At the ACWA Spring Conference, on May 8th, an election for ACWA/JPIA Executive Committee members will be held for four positions. Director Aleshire stated he will cast the District’s vote for 4 candidates from Northern California, unless otherwise directed. Votes for representatives from Northern California will be cast in an effort to improve the parity of regional representation as, currently, of the ten ACWA/JPIA Executive Committee members, only 2 are from Northern California.
ADJOURNMENT
13. Upon motion by Aleshire, seconded by Haskell and unanimously carried, the meeting was adjourned at 5:00 p.m.
ATTEST: ATTEST:
____________________________ _______________________________
President Secretary