VALLEY CENTER MUNICIPAL WATER DISTRICT
Regular Board MeetingMonday, December 6, 2010Time: 2:00 P.M.Place: Board Room29300 Valley Center RoadValley 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 de Sousa, District Engineer Grabbe, Director of Finance Jeffrey, Director of Operations Hoyle, Board Secretary Stetson, Information Technology Specialist Pham and Manager of Accounting Pugh. Spectators present were: Mrs. Stone and Mr. Northcote and Mr. Glass of Leaf and Cole, LLP.
1. Upon motion by Stone, seconded by Haskell and unanimously carried, the following consent calendar items were approved:
• Minutes of the Board meeting held November 16, 2010 • Audit demand check numbers 127365 through 127547 • Treasurer’s Report and Financial Statements for the period ended October 31, 2010
2. Review of the 2009-10 Comprehensive Annual Financial Report (CAFR):
The District’s Comprehensive Annual Financial Report (CAFR) for the Fiscal Year ending June 30, 2010 was presented for the Board’s review. The CAFR includes Introduction, Financial and Statistical Sections with the Independent Auditor’s Report. Manager of Accounting Pugh provided a summary of activities during FY 2009-2010 as follows:
• Total water sales were 27,837 acre feet which is a decrease of 15.7% from the previous year water sales and is 29.2% under the previous 5-year average. The acreage in productive avocados in Valley Center has decreased 25% since 2005 (currently 6,667 acres in production) according to the California Avocado Commission.
• Status of the Strategic Plan Specific Goals:
▪ SCADA – 8 sites were completed and the data radio enhanced. ▪ Carbon Footprint – Upgrading and replacing older pumping facilities and developing energy management strategies and practices. ▪ Facility Upgrades – Improvements completed to increase reliability, serviceability and productivity. ▪ Water Quality – Reduced water storage capacity to reduce storage times. ▪ Emergency Generation – Evaluating and installing emergency generators at pump stations and SCADA communication sites. ▪ Carlsbad Seawater Desalination Project – San Diego County Water Authority is negotiating a direct purchase agreement with Poseidon Resources. ▪ Information Technology Server Room Relocation – New server room was completed with increased security, cooling capacity and fire suppression. ▪ Customer Online Account Access - Allows customers to pay online, access billing information and water usage. ▪ Information Technology System Upgrades – Improvements allow enhanced reporting capabilities for SCADA and financial data. ▪ Phone System Upgrade - Installing Voice-over-Internet Protocol phone system that, once completed, will facilitate phone system improvements and advanced features.
• Water Operations: Net loss before capital contributions was $3.4 million. After capital contributions the change in assets was $3.2 million. Water sales revenue increased 3% from the previous year and there was a 15.7% decrease in the volume of water sold. Energy and pumping expenses decreased 28.5% due to lower demands, energy management strategies and higher pump efficiencies.
• Property taxes and assessments decreased 6.1% from FY 2008-09 and investment income decreased 53.4% due to lower yields and reduced cash balances.
• Lower Moosa Wastewater Facility: Revenues increased 7.7%, $92,956 from the previous year with increased service charges effective September 2009. Capital contributions were up $142,121. The collection and treatment costs were 2.8% lower ($18,984) due to lower labor, maintenance and outside service costs. The energy and pumping expenses decreased $15,519 from the prior year due to aeration system upgrades.
• Woods Valley Ranch Wastewater Facility: Total expenses were $177,502 higher than the previous year largely due to increased depreciation of the new treatment plant. Total revenues for 2009 include $11.6 million contributed capital which is the conditional acceptance of the permanent facilities.
Mr. Steven Northcote of the auditing firm Leaf & Cole, LLP, completed the audit of the District’s financial condition as of June 30, 2010, and the results of operations for Fiscal Year 2009-10. Neil Glass was introduced who conducted the field work for the audit. Mr. Northcote reviewed the auditor’s required communication letter and Independent Auditor’s Report which states 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, 2010, and the results of its operations for the year then ended in conformity with generally accepted accounting principles.
The Balance Sheet at June 30, 2010, shows that cash and cash equivalents were $9.26 million. Total assets as of June 30th were $108,471,958 and total liabilities were $10,079,260.
The Statement of Revenues, Expenses and Changes in Net Assets for the year ended June 30, 2010, shows a net loss of $3,576,825. Net assets at year end were $98,392,698.
The appropriations limit worksheet in compliance with Article XIIIB of the California Constitution establishes a limit on how much tax revenue can be received and reflects the District’s appropriations limit from property taxes as of June 30, 2010, at $4,718,976 million. Leaf & Cole performed a review of the District’s computation of the Article XIII-B Appropriations Limitation and the District’s Appropriations Limit Worksheet and found it met the requirements of the State.
Upon motion by Polito, seconded by Stone and unanimously carried, the District’s Comprehensive Annual Financial Report, appropriations limit worksheet, and Independent Auditor’s Report for Fiscal Year 2009-10 were received and filed.
3. Resolution Commemorating and Honoring the Services of C. Michael Cowett, District General Counsel:
Resolution No. 2010-39 was presented for the Board’s adoption which commemorates and expresses appreciation for the invaluable contributions of C. Michael Cowett while serving as General Counsel for the Valley Center Municipal Water District from January 1993 to his passing on October 7, 2010. Upon adoption by the Board, a plaque of the resolution will be created for presentation to the Cowett family.
Upon motion by Stone, seconded by Polito and unanimously carried, the following resolution, entitled:
RESOLUTION NO. 2010-39
A RESOLUTION OF THE BOARD OF DIRECTORSOF VALLEY CENTER MUNICIPAL WATER DISTRICTCOMMEMORATING AND HONORING THE OUTSTANDINGCONTRIBUTIONS OF C. MICHAEL COWETTDISTRICT GENERAL COUNSEL OF THEVALLEY CENTER MUNICIPAL WATER DISTRICT
was adopted by the following vote, to wit:
AYES: Directors Broomell, Polito, Aleshire, Stone and Haskell
GENERAL MANAGER’S AGENDA
4. Review of Miscellaneous Informational Items:
General Manager Arant provided an update on miscellaneous projects/programs, as follows:
• The San Diego County Water Authority is working with the City of Carlsbad to finalize the termination of the city’s agreement with Poseidon Resources for the purchase of water from the Carlsbad desalination plant to allow execution of a Water Purchase Agreement between the Water Authority and Poseidon Resources. Carlsbad is seeking protection from loss of tax revenue if the Water Authority purchases the desalination plant from Poseidon at some time in the future. General Manager Arant reported that the San Diego County Water Authority is committed to successfully completing the Agreement with Poseidon Resources for desalinated water from the Carlsbad Desalination Plant and the Water Purchase Agreement may be executed by early 2011. The investment firm, Blackstone, will be financing the construction of the plant for Poseidon Resources.
• Assembly Member Kevin Jeffries is proposing a Water Bond for the 2012 ballot, but with a proposed funding for the state’s water supply improvements reduced 25% from the proposed $11.14 billion ballot measure of 2010 that was withdrawn from the ballot. Assembly Member Jeffries’ position is that the ballot measure may be passed by the voters if the bond measure obligation is reduced. However, a 25% across the board reduction might result in there being inadequate financing for some of the proposed projects.
BOARD OF DIRECTORS’ AGENDA
5. ACWA Conference:
Director Aleshire reported he had attended the ACWA Fall Conference in Indian Wells. The State-wide Water Bond is proposed to be on the 2012 general election ballot unless 2/3rd vote of the Legislature votes otherwise. A presentation on the six operating desalination plants in Australia was very informative. Water supplies on the Colorado River basin and its reservoirs are very low. At present, there is approximately 50 million acre feet in Lake Mead (38% of capacity) and Lake Powell (62% of capacity).
Director Aleshire stated that the calculation to determine the District’s unknown water losses should be amended considering the reduced water deliveries. Currently, the District’s unknown water loss goal is 5% or less per year, but the percentage loss would increase with declining water sales as there is a certain amount of embedded loss in the system. A consultant retained by the Lake Arrowhead Water Agency provided assistance in developing methods for reducing their water losses.
6. Upon motion by Polito, seconded by Aleshire and unanimously carried, the Board of Directors meeting was adjourned at 3:02 p.m.