VALLEY CENTER MUNICIPAL WATER DISTRICT
Regular Board Meeting
Monday, October 2, 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 and Haskell. Director Aleshire arrived at 2:07 p.m. and Director Stone was absent. Staff members present were: General Manager Arant, General Counsel Cowett, Director of Finance Jeffrey, District Engineer Grabbe, Director of Operations Hoyle, Board Secretary Stetson, IT Specialist Learue and Project Manager Kilwein. Spectators present were: Messrs. Gallagher, Wikle, Rolapp, Poor, Diven, Bunts, Ross and others.
1. Upon motion by Polito, seconded by Haskell and unanimously carried, the following consent calendar items were approved:
• Minutes of the Board meeting held September 18, 2006
• Audit demand check numbers 110355 through 110533
2. Live Oak Ranch Project, Initiation of Assessment District Proceedings:
District Engineer Grabbe stated that the Board will be requested to initiate assessment district proceedings for the formation of the Live Oak Ranch Project followed by developer agreements for the Board’s consideration.
Mr. Joe Gallagher, President of MSK Development, addressed the Board providing information on the proposed Live Oak Ranch development and the request for the formation of an assessment district. Mr. Gallagher noted that the proposed Live Oak Ranch project has been in the processing stage since 1996 which consists of 317 acres near Valley Center Road and Cobb Lane and, as proposed, will be developed into 146 residential lots. He stated that MSK Development is the
Managing Member of Live Oak Ranch, LLC. In May of 2005, the property was purchased from Mr. Cobb and is now owned by the Live Oak Ranch, LLC. The first phase final maps are being processed with the County for 32 lots, and their infrastructure. The request for the formation of an assessment district is in compliance with the District’s policies and procedures. Mr. Gallagher noted that funding of the water, wastewater, and reclamation facilities for the development is being secured. United Commercial Bank has provided a letter to the District acknowledging and confirming its agreement with the solicitation of formation of an assessment district for the Live Oak Ranch project. Homes within the 1st phase are expected to be available in 2008.
Mr. Larry Rolapp of Fieldman, Rolapp & Associates provided an overview of the application process for the formation of the assessment district as submitted by MSK Development, proponents of the Live Oak Ranch Project. Mr. Rolapp concurred that the assessment district application is in conformance with the District’s policy pertaining to such procedures. Pending is a review of the letter from the bank acknowledging the land secured financing for water and wastewater facilities to serve the proposed Live Oak Ranch project, and consenting to and supporting the formation of the assessment district.
Mr. Rolapp clarified that because the District is located in an unincorporated area of the County, consent and jurisdiction from the County must be secured for formation of an assessment district. Therefore, Resolution No. 2006-43 requests the County to approve the formation of the proposed Assessment District No. 2006-1, Live Oak Ranch. Assessment District legal procedures do not commence until adoption of a Resolution of Intention which will not be presented for the Board’s adoption until a preliminary engineer’s report is completed which outlines the facilities to be included in the proposed assessment district. In addition, prior to consideration of the Resolution of Intention for A.D. 2006-1, a benefit analysis which shows how the assessments are apportioned to each proposed parcel, and how the proceedings would be conducted, would be presented for the Board’s analysis. If the Resolution of Intention is initiated by the Board, notice would be mailed to affected property owners and a public hearing conducted not sooner than 45 days of the mailing of the notice. During the public hearing, action to initiate the assessment district would be open to protest and a ballot election held. A vote can only be cast by the landowner of the proposed assessment district. Regardless of the outcome of the vote, the District’s board has the authority to proceed further or to not proceed with the adoption of the Resolution of Intention. If a Resolution of Intention for the formation of Assessment District 2006-1 is adopted, the financing team will work with staff regarding the structure, terms, conditions and other matters related to the financing.
Mr. Robert Poor, Vice President, of Fieldman, Rolapp & Associates, provided information on the consultants proposed for Assessment District 2006-1, Live Oak Ranch Project, which is outlined below:
Bond Counsel - Best, Best & Krieger (Warren Diven). Bond Counsel will prepare documents that provide bond holders’ rights and the District’s rights as well as legal opinions.
Disclosure Counsel – Best, Best & Krieger. Provides disclosure document (prospectus), offers bonds to investors, and provide opinions pertaining to security laws.
Assessment Engineer – Boyle Engineering. Calculates the benefit of the improvements to each of the parcels within the assessment district and calculates the assessments that will be levied on the parcels based on the calculated benefits.
Market Absorption Consultant – Empire Economics. Provides an independent evaluation of the pricing of the homes and the timing of the sales.
Appraiser – Steven White and Associates. Provides an evaluation of the land and the improvements in the assessment district which determines a value that is included in the disclosure document.
Financial Adviser – Fieldman, Rolapp and Associates. Establishes the financial objectives and the financing time. Services provided also include review of the documentation and provide advice on how the documentation is impacted in the financial markets. Upon the sale of bonds, assistance is provided during selection of an investment banking firm, negotiating the underwriters’ fees and market advice given.
In response to Director Aleshire’s inquiry as to the current softening in the real estate market conditions and its potential affect on the proposed Live Oak Ranch project, Mr. Gallagher responded that his property acquisition price ($7.5 million) of approximately $55,000 per lot is favorable to successfully overcome market conditions that may be encountered, and he has sound financial backing that will be subordinated upon the assessment district formation. Mr. Rolapp, financial adviser, affirmed that with the District’s adopted policy pertaining to assessment district standards and procedures, including a value to lien ratio of 4 to 1, letter of credit requirements, and other security measures, safeguards for the District have been established should the formation of the assessment district proceed to sale of bonds. Also, per the District’s policy, the only public facilities that are eligible to be financed by an assessment district are facilities which are completed, owned and operated or maintained by the District. As such, debt is only issued after the facilities are constructed to the District’s specifications which further protects the District’s financial interest.
Upon motion by Aleshire, seconded by Polito and unanimously carried, the following resolution, entitled:
RESOLUTION NO. 2006-43
RESOLUTION OF THE BOARD OF DIRECTORS OF THE
VALLEY CENTER MUNICIPAL WATER DISTRICT REQUESTING
APPROVAL OF THE BOARD OF SUPERVISORS OF THE
COUNTY OF SAN DIEGO OF THE FORMATION OF PROPOSED
ASSESSMENT DISTRICT NO. 2006-1 (LIVE OAK RANCH),
VALLEY CENTER MUNICIPAL WATER DISTRICT, COUNTY OF
SAN DIEGO, STATE OF CALIFORNIA, AND OF THE PROPOSED
RESOLUTION OF INTENTION AND BOUNDARY MAP THEREFORE
was adopted by the following vote, to wit:
AYES: Directors Broomell, Polito, Aleshire and Haskell
ABSENT: Director Stone
Upon motion by Aleshire, seconded by Polito and unanimously carried, staff was authorized to initiate assessment district formation proceedings pursuant to the proposed Assessment District 2006-1, Live Oak Ranch Project, approved the Deposit ($135,000) and Reimbursement Agreement, and authorized staff to enter into agreements with the financing team consultants.
Adoption of Resolution No. 2006-44 was recommended that authorizes staff to execute the District Facilities Agreement, Water Reclamation Agreement and the Reclaimed Water Agreement pursuant to the Live Oak Ranch Project’s facility improvements. Project Manager Kilwein reviewed the agreements as summarized below:
District Facilities Agreement sets forth developer requirements for the design, construction and dedication to the District of the water distribution and wastewater collection facilities for the proposed project in accordance with the District’s standard specifications and requirements. This agreement also identifies the District’s participation in the replacement of the 16-inch water line in Cobb Lane, over sizing of water distribution facilities, and an extension of a water line to connect with the existing water distribution system, which are projects identified in the District’s Master Plan.
The Water Reclamation Facilities Agreement identifies requirements for the design, construction and facilities required for the treatment, disposal and seasonal storage of the wastewater. This agreement also identifies specific requirements for the issuance of capacity rights prior to completion of the treatment facilities.
The Reclaimed Water Agreement establishes the requirements and cost for the use of the reclaimed water.
Upon motion by Aleshire, seconded by Haskell and unanimously carried, the following resolution, entitled:
RESOLUTION NO. 2006-44
RESOLUTION OF THE BOARD OF DIRECTORS OF
VALLEY CENTER MUNICIPAL WATER DISTRICT
ENTERING INTO A DISTRICT FACILITIES AGREEMENT,
WATER RECLAMATION FACILITIES AGREEMENT AND
RECLAIMED WATER AGREEMENT FOR THE
LIVE OAK RANCH PROJECT
3. Report on the Implementation of the Fiscal Years 2006-07 and 2007-08 Budget:
General Manager Arant provided a status report on the District’s two-year budget for Fiscal Years 2006-2008 to address adjustments implemented in response to changes in the development and economic environment, and other external considerations. The proposed and approved new positions (10) in the two-year budget were recommended based on projections of continued growth, but the need for the positions would be re-evaluated at the end of FY 2006-07.
Several factors, however, in the beginning of the current FY budget have prompted a re-evaluation of the implementation of the approved positions and programs in the 2006-07 budget. These changes include DR Horton withdrawing from developing the Orchard Run project and signals that there is a slow-down in projects being developed. Therefore, the following changes have been implemented:
Deferral of Approved New Positions:
Construction Inspector (Engineering Dept.)
Engineering Technician – GIS & Mapping (Engineering Dept.)
Construction & Maintenance Technician (Field Dept.)
Defer Replacing An Existing Position:
Sr. Human Resources Analyst – Position not filled following a resignation with some tasks assigned to other departments and assistance provided the HR division on an as-needed basis. The need to fill this position will be re-evaluated at the end of the current fiscal year.
Code Enforcement/Assistant Safety Officer (Field Dept.) – Upon the incumbent’s retirement in December of 2006, this position’s responsibilities will be allocated to other existing Field Department operations and administrative personnel. Funding for this position will be shifted to the Construction & Maintenance Division for a Construction & Maintenance Technician to replace the position that had been approved for FY 2006-07 but deferred. In this manner, water system maintenance and water loss control efforts as anticipated will be maintained.
Sr. Engineer (Engineering Dept.) –Position had been authorized in FY 2005-06 but will be deferred indefinitely and an Engineering Technician recruited instead. The Engineering Tech. position will assist with the Capital Improvement Projects. The need for the Sr. Engineer position will be re-evaluated for FY 2007-08 or later based upon development activity.
Other Budget Considerations
Integrated Resources Master Plan – Project had been approved for FY 2006-07 at a total cost of $300,000. However, the project will be deferred to FY 2007-08 to coincide with the anticipated completion of the GP 2020 Update at a net savings of $280,000.
City Works Data Accessing Program – Full implementation of this program had been funded in FY 2006-07 including the purchase of the software licensing, at a cost of $240,000. Only the software work needed to configure the data base to integrate with City Works in the current fiscal year will be purchased at a cost of $30,000. Funds will be requested in 2008-09 for the purchase of the licensing and to install the balance of the software licensing. This modification results in a net savings of $210,000 for the 2006-07 budget.
General Manager Arant reported that the deferment and restructuring of positions approved in the current budget will result in a net savings of approximately $390,000. These savings, combined with the cost reductions of $490,000 to be realized from the program deferrals, result in a total estimated cost reduction in Fiscal Year 2006-07 amounting to $880,000.
4. Initial Status Report of the FY 2006-07 and 2007-08 Capital Funded Projects:
The Initial Status Report of Capital Funded Projects as of July 1, 2006, was presented. The capital funded projects listed for the Engineering, Field and Finance Departments include those approved in the current and previous fiscal years with their current status. Updates on these projects are provided monthly in the District’s Status Report. Mid-fiscal year and end of fiscal year summary reports will be compiled for the Board’s review.
GENERAL MANAGER’S AGENDA
5. Review of Miscellaneous Informational Items:
• San Diego County Water Authority’s Board of Directors Meeting - General Manager Arant reported that at the September 28th Authority Board meeting, the request of Assembly Member Plescia was deliberated which requested a ruling from the attorney general concerning the issue of an incompatibility of office for General Managers and other paid staff serving on the Board of Directors of the San Diego County Water Authority. The Authority Board authorized a letter to the attorney general to clarify that the initial request to Assembly Member Plescia requesting the ruling was not approved by action of the Board of Directors and request a suspension of the preparation of the requested opinion. The Authority Board members will deliberate whether an opinion of the Attorney General is warranted at a future workshop following receipt of the Authority’s files on this subject and its review by member agencies’ counsels. The consensus of the Authority’s members is that as long as the member agency’s appointed representative meets the current requirements of the Authority’s Act, the member agency’s appointment of a representative to the Authority should be left to that agency’s discretion.
General Counsel Cowett noted that the San Diego County Water Authority’s Act specifically provides for the appointment of Board representatives from the member agencies. The Act provides that Board Members of water districts may serve on the Authority’s Board without there being an incompatibility of office. An amendment was passed last year to the Authority’s Act which also waived the incompatibility of office for City Council members to serve as an Authority
representative. The issue remains concerning General Managers for an agency serving as that agency’s Authority representative without there being an incompatible office. General Counsel Cowett opined that, upon a review of the Legislature’s statute on incompatibility, there is no incompatibility as it pertains to an agency’s General Manager serving as the representative on the Authority’s Board.
• Election of San Diego County Water Authority Officers - Elections for the San Diego County Water Authority’s officers for two-year terms beginning January 2007 will be conducted. Nominated for Chair is Fern Steiner of the City of San Diego, and Bud Lewis of the Carlsbad Municipal Water District for Vice Chair. Three nominations were submitted for the Secretary position: Bud Pocklington of Sweetwater Authority, Mark Watton, Otay Water District, and Bill Knutson, representative from Yuima Municipal Water District. General Manager Arant was directed to cast the District’s vote for Bud Pocklington for Secretary.
• Legislation to Establish Committee to Study Solutions for the Delta - General Manager Arant reported that Governor Schwarzenegger signed Senate Bill 1574 (Kuehl), which directs the appointment of a Blue Ribbon Committee to study solutions to the Delta. This action had been one of the recommended implementation goals contained in the ACWA Blueprint for California Water, “No Time to Waste”.
BOARD OF DIRECTORS’ AGENDA
6. Director Aleshire reported he had participated, as a Board member of ACWA, in a tour of the Colorado River which was sponsored by Metropolitan. A number of representatives from Northern California agencies also participated. Their understanding of the complexity of the water delivery system to our region could be advantageous.
An Ad Hoc Committee was approved by the ACWA/JPIA Executive Committee to evaluate and draft an expense policy for the Committee members. Director Aleshire will serve as Chair of this Ad Hoc Committee.
7. A Closed session was called by President Broomell at 3:23 p.m. pursuant to:
● Government Code §54956.9(c), Conference with Legal Counsel – Anticipated Litigation
Number of potential cases: 1
8. Upon motion by Aleshire, seconded by Haskell and unanimously carried, the meeting was adjourned at 3:30 p.m. to Wednesday, October 11th at 6:00 p.m.