March 15, 2010
VALLEY CENTER WATER DISTRICT
Regular Board Meeting
Monday, March 15, 2010
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 De Sousa, District Engineer Grabbe, Director of Operations Hoyle, Director of Finance Jeffrey, Manager of Accounting Pugh, Board Secretary Stetson and Manager of IT Pilve. Spectators present were: Mr. Kuchinsky, ACWA/JPIA, and Mr. MacLaggan, Poseidon Resources.
CONSENT CALENDAR
1. Upon motion by Aleshire, seconded by Polito and unanimously carried, the following consent calendar items were approved:
• Minutes of the Board meeting held March 1, 2010
• Audit demand check numbers 125064 through 125176 and wire disbursements for February 2010
• Treasurer’s Report and Financial Statements for the period ended February 28, 2010
• Survey of General Counsel and Auditing Services fees per the District’s Administrative Code Article 135
• Board of Directors’ requests for reimbursement of expenses and report of expense reimbursements
PRESENTATIONS
2. ACWA/Joint Powers Insurance Authority, Review of Insurance and Training Programs:
Mr. Peter Kuchinsky, Sr. Risk Management Consultant, explained that the ACWA/JPIA is a public agency with a pooled insurance program. The ACWA/JPIA’s pooled insurance program reviews its member agencies’ loss histories and issues refunds or “Retrospective Premium Adjustment” to those member agencies with a low loss history. The District received a retrospective premium adjustment refund from ACWA/JPIA in the amount of $119,617.12. Mr. Kuchinsky reviewed that the ACWA/JPIA provides Liability coverage of $100 million and Property Damage insurance of $60 million.
ACWA/JPIA offers several services to its member agencies to reduce losses that include risk transfer consultation, and an employment practices hotline. Training programs include Ethics and Sexual Harassment training as well as extensive on-line training, webinars and professional development programs that are available to its member agencies. These programs have proven to be effective in containing costs through education and the proper training. Mr. Kuchinsky noted that the District is pro-active and exemplary in its training which has minimized its liability exposure.
3. Update on the Carlsbad-Poseidon Seawater Desalination Project:
Mr. Peter MacLaggan, Vice President of Poseidon Resources, addressed the Board and provided an update on the Carlsbad-Poseidon Desal. Project, its financing, and status of agreements for water delivery, as outlined below:
• All permits have been issued and are vested. Two legal challenges are pending, but are not expected to delay construction. Initial site preparation is underway and the contractor has been issued a limited notice to proceed.
• The California Debt Limitation Allocation Committee authorized Poseidon to issue $530 million in private activity bonds which will be a long-term, fixed rate and tax exempt debt. The balance of approximately $120 million will be funded through private equity. The full notice to proceed to the contractor is expected by late May 2010.
• Agreements for the delivery of the water to participating agencies must be finalized in order to market the bonds, which are:
~ Wheeling and Exchange Agreement – Agreement with the San Diego County Water Authority that will allow Poseidon to deliver the water into the aqueduct and, through an indirect wheeling or exchange, the flow will be delivered to the agency.
~ Water Purchase Agreement – To be amended to identify the delivery point for the water which for the District will be the 2nd aqueduct, uniform delivery of the 7,500 ac. ft. per year with a mechanism for deferral during low demand periods, a delivery charge and provision for a shortfall allocation for the desal. partners to proportionally share in a production shortfall.
~ Agreements with the San Diego County Water Authority are expected to be addressed at its April 22nd Board meeting which include a Wheeling and Exchange Agreement, Connection Agreement and Local Water Supply Development Program Agreement.
• Several options are being explored to facilitate the District accepting a reduced volume during low water demands such as an allowance to reduce daily delivery with an increased delivery later in the year or reduction of the water purchase contract from 7,500 AFY to 5,000 AFY with the reduced supply being delivered to another agency such as the City of San Diego or the City of Escondido.
• Metropolitan Water District’s Local Water Supply Development Program, which will provide a $250/ac. ft. subsidy for the desal. water produced, has the provision that the funding would terminate for a MWD member agency that is part of a successful effort to modify MWD’s rate structure for Local Resources Projects. Such termination of the MWD’s subsidy would effect the economic viability of the desal. project at this time. As such, a contingency plan in the event of the termination of MWD’s Local Water Supply Development Program subsidy is being pursued with the San Diego County Water Authority.
• Daily reconciliation of the water transfers which is being requested by the San Diego County Water Authority would be onerous. A provision of the Wheeling and Exchange agreement between Poseidon and the San Diego County Water Authority allows for the desal. water in the aqueducts that is in excess of the quantity accepted by the desal. partners would go to the San Diego County Water Authority with no compensation. However, the desal. partner would be charged for the water. A daily reconciliation as requested by the San Diego County Water Authority would not accommodate adjustments in deliveries to avoid this situation. A modification to allow 30 days reconciliation is being considered.
• Funding from the San Diego County Water Authority’s Local Water Supply Development Program of $200/AF is still in question. The Authority’s staff had opined that the Carlsbad-Poseidon Desal. project does not qualify for the funding as the contracts between Poseidon and the SDCWA member agencies provide that the contracting member agencies will not pay more than the avoided cost from the SDCWA. A renegotiation of the purchase agreements may be initiated so that the contracting member agencies’ cost for the desal water is $200 more per ac. ft. than the avoided cost to the Authority with the contracting agencies applying directly for the Authority’s Local Water Supply Development Program funding.
ACTION AGENDA
4. Annual Review and Update of the District’s Investment Policy:
The District’s Administrative Code Section 50.1 and the Government Code require that the Board review the District’s investment policy annually to confirm its appropriateness to the District’s operation. Primary goals of the District’s investment policy are: preservation of capital followed by maintaining liquidity and then yield on investments. A change in the law allows purchasing of the Proposition 1A receivables, which was not recommended by staff. The Board concurred with the current investment practice of purchasing mostly short-term investments for cash availability for the District’s operating and capital needs due to lower water sales.
To conform with updates to the California Government Code, changes to references to the Government Code contained in Section 50.1, Investment Policy, were proposed.
Government Code Section 53607 requires that the Board annually confirm the delegation of investment authority. The Board has delegated the authority to invest and reinvest District funds to the Treasurer of the District, who is the District’s Director of Finance.
Upon motion by Aleshire, seconded by Stone and unanimously carried, the following ordinance, entitled:
ORDINANCE NO. 2010-01
ORDINANCE OF THE VALLEY CENTER MUNICIPAL
WATER DISTRICT AMENDING THE ADMINISTRATIVE
CODE TO PROVIDE FOR CHANGES IN THE
STATEMENT OF INVESTMENT 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
5. Review and Update of the District’s Budget Policies:
The District’s Budget Policies, which are set forth in Section 50.2 of the Administrative Code, were reviewed. Modifications to Sec. 50.2(a), Reserves, were recommended as follows:
▪ Pumping Rate Stabilization Reserve – Add that revenues in excess of the cost of pumping facility capital projects shall be placed in this reserve and eliminate the requirement for Board approval for the funds to be used for the replacement of pump facilities.
▪ Operating Reserve – Establish that the Operating and Rate Stabilization Reserves are considered to be discretionary reserves, unrestricted or uncommitted reserves not anticipated to be used in the current fiscal year in compliance with the District’s Strategic Plan and that the District will endeavor to maintain these reserves at a minimum three and a maximum six months operations and maintenance budget.
▪ Replacement Reserves – Delete the Replacement Reserve for licensed motor vehicles with vehicles purchased as provided in the adopted Budget.
▪ Capital Reserves – Combine the Master Plan System Improvements Reserve into the Capital Improvements Reserve which provides funding for future capital additions and replacements.
▪ Energy Efficiency Reserve – Delete this reserve which was established after deregulation as funds in this reserve from the energy litigation settlements have been depleted.
Upon motion by Aleshire, seconded by Stone and unanimously carried, the following ordinance, entitled:
ORDINANCE NO. 2010-02
ORDINANCE OF THE VALLEY CENTER WATER DISTRICT
AMENDING THE ADMINISTRATIVE CODE SECTION 50.2
TO PROVIDE FOR CHANGES IN BUDGET POLICIES
was adopted by the following vote, to wit:
AYES: Directors Broomell, Polito, Aleshire, Stone and Haskell
NOES: None
ABSENT: None
6. Audit Contract for Fiscal Years 2009-10, 2010-11 and 2011-12:
Accounting Manager Pugh reported that proposals were solicited from five auditing firms to perform the financial audit of the District’s records. Only two responses were received; one from Leaf & Cole, LLP (auditor for the District since 2002-03), and the other from Mayer Hoffman McCann PC. The auditor selection committee consisting of Directors Aleshire and Haskell and Accounting Manager Pugh reviewed the proposals and unanimously agreed that Leaf & Cole, LLP, with a new partner in charge of the audit and new audit staff, be retained to provide auditing services for Fiscal Years 2009-10, 2010-11 and 2011-12. The auditing fee would be $19,700 for Fiscal Year 2009-10 with CPI adjustments for the following two fiscal years.
Upon motion by Aleshire, seconded by Polito and unanimously carried, the following resolution, entitled:
RESOLUTION NO. 2010-15
RESOLUTION OF THE BOARD OF DIRECTORS OF
VALLEY CENTER MUNICIPAL WATER DISTRICT ENTERING
INTO AN AGREEMENT WITH LEAF & COLE, LLP TO AUDIT
THE FINANCIAL RECORDS OF THE DISTRICT FOR THE
YEARS ENDING JUNE 30, 2010, 2011 AND 2012
was adopted by the following vote, to wit:
AYES: Directors Broomell, Polito, Aleshire, Stone and Haskell
NOES: None
ABSENT: None
7. Resolution Supporting the “Local Taxpayer, Public Safety and Transportation Act of 2010”:
The “Local Taxpayer, Public Safety and Transportation Act of 2010” to amend the State Constitution to prohibit the State from taking, borrowing or redirecting local taxpayer funds dedicated to public safety, emergency response and other vital local government services will be on the November 2010 election ballot. This proposed Act is being sponsored by The League of California Cities and the California Alliance for Jobs. Resolution No. 2010-14 in support of the “Local Taxpayer, Public Safety and Transportation Act of 2010” was presented for the Board’s adoption.
Upon motion by Polito, seconded by Haskell and unanimously carried, the following resolution, entitled:
RESOLUTION NO. 2010-14
RESOLUTION OF THE BOARD OF DIRECTORS OF
THE VALLEY CENTER MUNICIPAL WATER DISTRICT
IN SUPPORT OF THE “LOCAL TAXPAYER, PUBLIC
SAFETY AND TRANSPORTATION ACT OF 2010”
was adopted by the following vote, to wit:
AYES: Directors Broomell, Polito, Aleshire, Stone and Haskell
NOES: None
ABSENT: None
8. Board of Directors’ Per Diem:
Per Board direction, the Board of Directors’ per diem is reviewed annually for consideration of modification. The Board may increase its per diem by 5% for each calendar year since the date of the last adjustment, which was February 1993. Therefore, the Board could increase its current $100 per diem to a maximum of $229.23 per day of Board business.
Upon motion by Stone, seconded by Aleshire and unanimously carried, the Board elected to retain its current $100.00 per diem compensation.
GENERAL MANAGER’S AGENDA
9. Review of Miscellaneous Informational Items:
• Water sales for Fiscal Year 2009-10 are projected to be 30,000 ac. ft. Savings from the solar project at Lake Turner/Betsworth Pump Station are $49,692 for the current fiscal year through February 2010. Water allocation conservation levels are: 85% conservation for Interim Agricultural Water Program participants (year to date for calendar 2010), 35% for Special Agricultural Water Rate customers and 28% for M&I customers (data for SAWR and M&I customers is for the FY 2009-2010 through February 28).
• The water allocation level from the State Water Project may be at 40%, the same as the previous year. At this level, a proposal will be presented to the Board to allow the District’s agricultural customers with allocations to use their accumulated credits which may assist them in avoiding penalties from over usage.
• The San Diego County Water Authority’s Special Agricultural Water Rate (SAWR) workgroup will recommend that the current discount be sustained and extended through December 2012, which would coincide with the termination of Metropolitan’s Interim Agricultural Water Program. It is proposed that beginning January 2013, the SAWR from the San Diego County Water Authority will provide a discount based on the avoided cost of the storage segment of the Authority’s rate structure.
• Mediation meetings for the development of a new fire safety plan are continuing as ruled by the CPUC upon its rejection of San Diego Gas & Electric’s Fire Safety Emergency Power Shut-off Plan. General Manager Arant stated that at the meetings he reiterates that the District has critical pumping stations that will require back-up power that should be the responsibility of SDG&E. A plan for the emergency power requirements is to be developed and then a cost benefit analysis will be completed.
GENERAL COUNSEL’S AGENDA
10. State Mandated Cost Program:
General Counsel de Sousa reported that Senate Bill 90 allows reimbursement to local governments from the State of California for complying with state mandates. Local agencies can submit claims for reimbursement for costs relating to the preparation and posting of local agency meeting agendas in compliance with the Ralph M. Brown Act. This reimbursement was reinstated following litigation and a court ruling for the processing of reimbursements. Reimbursement claims for Brown Act compliance must be filed with the State Controller’s Office on or before April 20, 2010. Also, a reimbursement claim for the preparation of the Municipal Service Review for the San Luis Rey M.W.D. will be submitted.
CLOSED SESSION
11. A Closed Session was called by President Broomell at 3:42 p.m. pursuant to:
● Government Code §54956.9(a), Conference with Legal Counsel, Existing Litigation
Names of parties: Harbor Bay, Inc. vs. Valley Center Municipal Water District
Case No. 37-2010-00050483-CU-BC-NC
RECONVENE
12. The Regular Board meeting was reconvened at 3:49 p.m. There was no reportable action from the Closed Session.
13. Proposed Use of the District’s Lilac Road Property:
General Manager Arant reported he had met with the representatives of the Valley Center Vacqueros that have proposed the use of the District’s Lilac Road property for their horse-related activities. They met with the County Chief of Land Use Planning and were advised that in order to develop and utilize the Lilac Road Property for their activities a Major Use Permit and full EIR would be required. As such, traffic, lighting, archeological and noise studies would be needed, as well as a permanent subsurface waste disposal system.
ADJOURNMENT
14. Upon motion by Aleshire, seconded by Haskell and unanimously carried, the meeting was adjourned at 3:55 p.m.
ATTEST: ATTEST:
____________________________ _______________________________
President Secretary