VALLEY CENTER MUNICIPAL WATER DISTRICT
Regular Board Meeting Monday, March 19, 2012 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 de Sousa, District Engineer Grabbe, Director of Finance Jeffrey, Director of Operations Hoyle, IT Manager Pilve, Board Secretary Johnson, Accounting Manager Pugh and Meter Services Supervisor LoPresti. Spectators present were Ms. Marilyn Jones – The Epler Co., and Ms. Kathleen Steffen.
Ms. Kathleen Steffen addressed the Board to have her concerns and comments on record. She stated that the south line of her property was common with the north property line of the Cool Valley Reservoir. She reported that in February, a large area of brush was cut and chipped from the Reservoir property by CDF then all vegetation was removed from the same area by heavy equipment. She had been advised by Mr. Hoyle and Mr. Arant that this was done for fire protection and the tractor work was to repair erosion seen after brush removal. She was also advised that there is a possibility of solar panels being placed in the area in the future.
Ms. Steffen is concerned with the heavy equipment work which removed all ground cover, as runoff from this site goes into a riparian area. Mr. Hoyle pointed out that erosion control measures were installed on the property and no run-off occurred during the last rain storm.Also, the brush clearing that was done only covered about two-thirds of the Steffen fence line and none of the Chester fence line. Ms. Steffen and Ms. Chester met with Mr. Arant and Mr. Hoyle previously and were told that further clearing would be done. They further requested that clearing of the fence line be done on a regular basis.
If any progress is made towards placing solar panels in the area, Ms. Steffen requested that she and her neighbors be advised and suggested the planting of native, low maintenance, drought tolerant trees along the north side of the panels to help screen the view.
Mr. Arant reported that a feasibility analysis is being prepared on four possible solar sites. If a site is determined to be feasible, it would then be brought before the Board for approval to include it in a capital improvement program. The environmental review process for such a project would require the District to notify property owners around the proposed site.
The Board advised Ms. Steffen that staff would meet with her and make sure all of her concerns were addressed.
1. Upon motion by Polito, seconded by Stone and unanimously carried, the following consent calendar items were approved:
• Minutes of the Board meeting held February 21, 2012• Audit demand check numbers 131316 through 131519 for the period February 10 through March 8, 2012 and wire disbursements for February 2012.• Treasurer’s Report for period ended January 31, 2012• Board of Director’s request for reimbursement of expenses and report of expenses• Resolution No. 2012-02 affirming the District’s authorized debt limits per Ordinance No. 171, effective January 1, 2012• Resolution No. 2012-04 adopting 2012 Revisions to Local Guidelines for implementing the California Environmental Quality Act• Re-issuance of Concept Approval for the Free Waterline Extension project (TPM 20450), consisting of approximately 700 ft. of 8-inch water line and associated appurtenances.
2. Actuarial Valuation for Retiree’s Health Benefits Plan:
Director of Finance Jeffrey stated that the District is required to do a valuation every two years. Although a report was prepared last year, the Government Accounting Standards Board Statement No. 57 (GASB 57) now requires all participants in the California Employers’ Retiree Benefit Trust (CERBT) to have their actuarial valuation prepared as of the same date. This report, however, is not duplicative as it will cover the next two years.
Mr. Jeffrey reported that CalPERS has lowered its earnings assumption for CERBT from 7.75% to 7.61% for its default strategy (“Strategy 1”). Two alternative investment strategies have been added which provide lower earnings assumptions and less volatility. The effects of these strategies are summarized below:
Ms. Marilyn Jones of The Epler Company, reviewed the actuarial valuation and explained that the purpose of the valuation is to measure the District’s liability for retiree health benefits and to determine the District’s accounting requirements under GASB in regard to unfunded liabilities for retiree health benefits.
Ms. Jones explained that three investment strategies are being offered. CalPERS determined the strategies by using five asset classes: global equities, fixed income, commodities, real estate, and Treasury Inflation Protected Securities (TIPS). Strategy 1 is heavier in the equity side going down to Strategy 3 which is higher in the fixed income market. An analysis determined the medium for each strategy. For Strategy 1, 50% of the scenarios that could happen, in terms of those investments, come in under the 7.61% and 50% come in over it. The same was done for the other two strategies. There is a risk involved, but the risk is that the District could earn something less than the 7.61%. If less is earned, the District’s future contributions, determined in the valuation process, will be affected. There is an opportunity to be more conservative in the contributions to build in a margin for diverse deviations. The valuation could be run on a lower discount rate but that is not recommended because of the option to be more conservative if less risk is wanted. The District also has the opportunity to fund at the other alternative discount rates and still keep money invested in Strategy 1. In their report, The Epler Company has given the District scenarios under each strategy and shows the impacts to the expected contributions.
The present value of the District Paid Retiree Health Benefits is $5.5M. The past service liability, or unfunded portion, is $4M. As of June 30, 2011 the CERBT assets were $1.3M, with the unfunded liability being $2.7M. The $2.7M is amortized over 26 years. The annual required contribution (ARC), using the 7.61%, is $443,000 for the upcoming fiscal year (2012-13). The ARC will be reassessed at the next valuation to include any changes in participants, health care costs, asset returns, etc.
The pay as you go costs are $150,000 per year and are scheduled to go up in the range of $500-600K. That is the money the District would need to contribute if it earned the 7.61% (targeted rate of return) over the year. The present value of the cash flow at the discount rate would be enough money with the District’s contributions, plus the earnings, to pay the future benefits.
The reason for the sharp increase is that health care costs continue going up and new retirees are going into the program. Mr. Jeffrey reminded the Board that the plan is closed to employees hired after July 1, 2008. There are currently 24 retirees with 70 other employees who could participate in the future.
The valuation was accepted and filed utilizing Strategy 1.
3. Resolution to Establish Date and Time to Conduct Public Hearing to Consider Levy of a District-Wide Water Availability Charge and Woods Valley Sewer Service Charge:
Resolution No. 2011-06 was presented for the Board’s consideration to set June 18, 2012, at 2:00 p.m. as the date and time set for the public hearing to consider levying the proposed District-wide water availability charge. The proposed $10.00/acre, $10.00/parcel minimum water availability charge, which has been levied since 1995-96, is expected to be used for:
Revenue Debt Service $55,000 Ongoing Capital Requirements 536,000 Total Availability Charge $591,000
Director of Finance Jeffrey also noted that a public hearing will also be conducted at the June 18th Board meeting on the assessment of the Woods Valley Sewer Service Charge.
Upon motion by Aleshire, seconded by Haskell and unanimously carried, the following resolution, entitled:
RESOLUTION NO. 2012-03
RESOLUTION OF THE BOARD OF DIRECTORS OFVALLEY CENTER MUNICIPAL WATER DISTRICT SETTINGFORTH A SCHEDULE OF WATER AVAILABILITY CHARGES PROPOSEDTO BE ESTABLISHED FOR ALL PROPERTY WITHIN THE DISTRICTFOR 2012-2013, FIXING THE TIME AND PLACE OF HEARING,AND GIVING NOTICE OF HEARING
was adopted by the following vote, to wit:
AYES: Directors Broomell, Polito, Aleshire, Stone and Haskell NOES: None ABSENT: None
4. Annual Review and Update of the District’s Investment Policy:
The District’s Administrative Code and the Government Code require that the Board review the District’s investment policy annually to confirm its appropriateness to the District’s operation.
The proposed changes to Administrative Code Section 50.1, Investment Policy, include adding references to the related Government Code sections and a change to add federally licensed branches of a foreign bank to the list of where certificates of deposit may be purchased. Another proposed change was that a bank that uses a private sector third party to assist in the placement of CDs was added. Mr. Jeffrey did not think the District would use this at this time but it is allowed per Government Code 53601.8.
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. 2012-01
ORDINANCE OF THE VALLEY CENTER MUNICIPALWATER DISTRICT AMENDING THE ADMINISTRATIVE CODETO PROVIDE FOR CHANGES IN THE STATEMENT OF INVESTMENTPOLICY AND TO RENEW THE DELEGATION OF INVESTMENTAUTHORITY TO THE TREASURER OF THE DISTRICT
was adopted by the following vote, to wit:
5. Cal Fire Conservation Camp Labor Service Agreement Status Report:
An update on the labor service agreement with Cal Fire’s Puerta La Cruz Conservation Camp was reviewed by Meter Service Supervisor LoPresti. Since entering into the agreement with Cal Fire in June 2011, 53 sites have been cleared. In addition to easement clearings, the labor crews have cleared a number of the District’s off-site facilities to reduce the fuel loading, increase leak detection, and improve site appearance.
Mr. LoPresti presented before and after pictures of easements cleared by the labor crews indicating the rugged terrain and dense growth they work through. The program is only available to public agencies and the cost benefits to the District have been outstanding. He reported that renting a chipper from the rental yard is $490/day. A chipper from Cal Fire comes with a Captain to run it at a cost of $100/day and a full crew is $200/day. The 53 easements and off-site facilities that have been cleared utilized 2,352 Puerta La Cruz personnel and 86 work days at a total cost of $28,000. In contrast, five District employees working one day to clear an easement with a leaking fire hydrant cost approximately $3,000.
This program has been a win-win situation for both the work camps and the District.
GENERAL MANAGER’S AGENDA:
6. Functional Consolidation Project Status Report:
General Manager Arant provided an update on the progress of the Functional Consolidation Project. He reported that the wireless network between all four participating agencies is the priority. This would establish the framework for integrating the IT systems. The sites have been selected and an inventory of equipment purchases has been generated. The goal is to have the integrated wireless network up and running by fiscal year 2012-13.
The Finance/Administration work group has determined that the upfront investment costs involved in unifying the current billing software are not justified by the potential short-term savings. There is also a potential that all four agencies will have to migrate to a new billing system in the next few years if the billing software company is bought out and support is no longer available. The group will continue to coordinate on individual programming changes and explore opportunities to reduce printing and processing costs through joint procurement.
Once the physical radio network is installed and running, emphasis will shift to working on the details of how to integrate the IT support for 3 or 4 of the agencies.
7. San Diego County Water Authority’s Board of Directors’ Meeting:
General Manager Arant reported on the following items from the February 23, 2012 SDCWA Board of Directors’ meeting:
• The CWA Board adopted a policy approving the allocation and distribution to Member Agencies of any net refund proceeds from the Metropolitan Water District rate litigation, if successful.• Delta policy principles were adopted to ensure accurate water supply requirements are reported. There is a difference between what MET expects its member agencies to need and what the member agencies expect to need. The CWA is pushing Metropolitan to change its rate structure so that the member agencies and MET make a financial commitment to their share of the Bay Delta improvements.
8. Miscellaneous Information Items:
• General Manager Arant reported that water sales in January were up significantly over sales at the same time last year. 1,849 acre feet vs. 1,058 acre feet.• A draft Facility Plan Approval for the South Village Water Reclamation Project is under review. This is the latest iteration of the State Water Resources’ staff recommendation for approval. It is tentatively scheduled to go before the State Board for approval on April 17, 2012.
• Staff met with the South Village project proponents, their engineer, and several community members to discuss some cost savings measures. The District has not yet received the details requested on their proposal.
• The next District board meeting on April 2nd will focus on the Meadowood Annexation and the South Village project.
• A Board member tour of the District is being planned for late April or May.
• Placards advertising Valley Center’s 150th Sesquicentennial celebration have been put on District vehicles and a banner will be displayed on the fence.
• The Water Authority has been requested to maintain the current discount agriculture water rate. It will be discussed at the next CWA board meeting.
• Messrs. Jeffrey and Pugh have been working on a concept to refinance past service debt at a lower interest rate. The District has a side fund with CalPers of approximately $11M which CalPers charges 7.75%. Fieldman Rolapp is working with the District to possibly issue revenue bonds at 5%, saving the District a significant amount. This will be to pay off existing debt to CalPers, not increasing benefits to employees.
• Bill Jeffrey announced his retirement from the District effective May 2013.
9. General Counsel de Sousa responded to some questions concerning Best, Best & Krieger’s involvement with one of their clients in a study that was procured on their behalf. Western MWD is one of their long term clients and is served by BBK’s Riverside office. A consultant was retained by their General Counsel to conduct an independent study of the water transfer between CWA and Imperial Irrigation District. The study was based on public records and was always intended to be made public. It is common for consultants to be retained by counsel for public agencies.
BBK learned that Western also entered into cost sharing agreements with several other agencies to help pay for the study. Western is not a party to the MET Litigation; however, Western is a member agency of MET. BBK played no active part in any larger MET strategy regarding the utilization of this study in the MET Litigation, was not a party to any cost sharing arrangement, nor did they receive funds from other agencies participating in the cost sharing.
General Counsel de Sousa does not believe this is an impediment to BBK’s representation of Valley Center MWD. BBK is not representing any party in the CWA Litigation against Metropolitan.
In addition, two attorneys at BBK’s Irvine office had previously represented the Municipal Water District of Orange County (MWDOC) in the MET Litigation when they worked at their prior law firm which dissolved. One continues in his role as General Counsel to MWDOC, and through him BBK provides services to MWDOC, as they do for many other agencies on both sides of the MET/CWA dispute. These attorneys have been instructed to not discuss the MET Litigation or MWDOC’s position with anyone at BBK, and not to discuss any matter involving CWA with anyone at BBK. Additional screening procedures have been placed on their electronic files related to CWA and VCMWD which will continue until the conclusion of the MET Litigation.
BBK is troubled by remarks made regarding allegations of wrong doing and do not believe those relationships affect their ability to provide quality legal services to VCMWD as its General Counsel.
BOARD OF DIRECTORS’ AGENDA AND REPORTS ON MEETINGS ATTENDED
10. Director Aleshire reported that resolutions to dissolve the HBA and to join the JPIA are being developed and are on the agenda for the JPIA Executive Committee and the HBA Board of Directors on March 28th. Instructions will be going out to all the member agencies. A session on the transfer will be discussed at the ACWA conference. The effective date of the transfer is planned for July 1, 2012.
11. A closed session was called by President Broomell at 4:02 p.m. pursuant to:
• Government Code §54956.9(c), Conference with Legal Counsel, Initiation of Litigation Number of potential cases: 1
12. Upon motion by Polito, seconded by Haskell and unanimously carried, the meeting was adjourned at 4:22 p.m.
____________________________ _______________________________ President Secretary