minutes of the regular meeting of the

MINUTES OF THE JOINT ADJOURNED REGULAR MEETING OF THE
FINANCE AND AUDIT COMMITTEE AND
SPECIAL MEETING OF THE BOARD OF DIRECTORS OF THE
RANCHO CALIFORNIA WATER DISTRICT
Tuesday, January 6, 2015
8:30 a.m.
DIRECTORS PRESENT:
Lisa Herman, Chairman
James Stewart
Roger Ziemer, Alternate
DIRECTORS ABSENT:
Ben Drake
STAFF PRESENT:
Matt Stone, General Manager
Richard Williamson, Assistant General Manager
Jeff Armstrong, CFO/Treasurer
Andrew Webster, Chief Engineer
Eileen Dienzo, Human Resources Manager
Fred Edgecomb, Director of Operations & Maintenance
Corey Wallace, Engineering Manager – Design
Jason Martin, IT/Customer Service Manager
Kathy Naylor, Accounting Manager
Heath McMahon, Construction Contracts Manager
Warren Back, Engineering Manager – Planning
Rich Ottolini, Water Operations Manager
Mark Kaveney, Acting Water Reclamation Manager
Bill Barnes, Field Services Manager – Facilities
Tim Carlisle, Field Services Manager – Construction
Denise Landstedt, Sr. Water Resources Planner
Vicki Browder, Budget/Debt Administrator
Dave Morrison, Safety/Risk Officer
Meggan Valencia, Sr. Public Information Officer
Dale Badore, Datacenter Operations Supervisor
Billy Browder, Purchasing Agent II
Nikki Reedy, Administrative Assistant II
Samantha Brown, Accountant
Milin Ream, Sr. Administrative Assistant/Recording Secretary
OTHERS PRESENT:
Steve Corona, RCWD Board of Directors
John Hoagland, RCWD Board of Directors
William Plummer, RCWD Board of Directors
Jeff Brown, Urban Parks Concessionaires
Tim DeGraff, WRA, Inc.
This Committee meeting is also noticed as a special meeting of the Board of Directors
because a quorum of the Board may be present. Members of the Board who are not
members of the Committee may attend and participate in the meeting, but only
members of the Committee may make, second, or vote on any motion or other action of
the Committee. Any actions taken pursuant to this agenda will be actions within the
purview of the Committee and shall be approved by an affirmative vote of a majority of
the quorum of the Committee. The Committee is not empowered to act for or on behalf
of the Board or the District unless exercising delegated authority from the Board. Any
actions taken by the Committee shall be deemed recommendations of the Committee
for future consideration by the Board at a separately noticed regular or special meeting
of the Board of Directors. The Board of Directors retains all powers, privileges, and
duties to exercise and perform the business of the District.
Upon request, this agenda will be made available in appropriate alternative formats to
persons with disabilities, as required by Section 202 of the Americans with Disabilities
Act of 1990. Any person with a disability who requires a modification or accommodation
in order to participate in a meeting should direct such request to the District Secretary at
(951) 296-6900 at least 48 hours before the meeting, if possible.
The meeting was called to order at 8:30 a.m. by Chairman Herman.
ADDITIONS TO AGENDA
Items may be added to the Agenda in accordance with Section 54954.2(b)(2) of
the Government Code (Brown Act), upon a determination by a two-thirds vote of the
members of the legislative body present at the meeting, or, if less than two-thirds of the
members are present, a unanimous vote of those members present, that there is a need
to take immediate action and that the need for action came to the attention of the
District after the Agenda was posted.
There were no additions to the Agenda.
APPROVAL OF AGENDA
Chairman Herman called for approval of the Agenda of the Adjourned Regular
Meeting of the Finance and Audit Committee of the Rancho California Water District of
January 6, 2015 as presented.
January 6, 2015
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Finance and Audit Committee
MOTION:
Director Ziemer moved to approve the Agenda of the Adjourned Regular
Meeting of the Finance and Audit Committee of the Rancho California
Water District of January 6, 2015. Director Stewart seconded the motion,
and it carried unanimously.
PUBLIC COMMENT
An opportunity was given for any person to address the Finance and Audit
Committee (Committee) upon any subject not identified on the Agenda, but within the
jurisdiction of the Rancho California Water District (RCWD/District). For items not listed
on the agenda, the Brown Act imposes limitations on what the Committee may do
during public comment. As to matters on the Agenda, persons will be given an
opportunity to address the Committee when the matter is considered.
There was no public comment.
Item 1.
Cayenta Project Update
IT/Customer Service Manager Jason Martin addressed the Finance and Audit
Committee (Committee) and provided an update on Rancho California Water District’s
(District) Cayenta Information and Utility Billing System project.
Mr. Martin was pleased to announce that the system has successfully completed
three billing cycles with no issues and further noted that customer call times remain
unchanged.
For informational purposes, Mr. Martin briefed the Committee members on staff’s
efforts to comply with Assembly Bill (AB) 2747. AB 2747 requires utility agencies to
notify both the account holder and the property owner when service is in arrears, and
that said service would be terminated at least 10 days prior to termination. It further
provides for the District to make service available to actual users who were willing and
able to assume responsibility for the entire account, in six different languages. He
further noted that staff is working closely with legal counsel on the matter.
Following review and discussion, the Committee continued onto the next order of
business.
Item 2.
Consider Revisions to the Rancho California Water District Water
Shortage Contingency Plan and Recommend Setting a Public
Hearing for Adoption of an Ordinance Approving the Water Shortage
Contingency Plan
CFO/Treasurer Jeff Armstrong addressed the Finance and Audit Committee
(Committee) with regard to revisions to Rancho California Water District’s
(RCWD/District) Water Shortage Contingency Plan (WSCP). Mr. Armstrong advised
that District staff has prepared a draft structure of the revised WSCP, which includes
recommendations and direction received from the Board of Directors (Board) at their
December 2014 meeting. He summarized said revisions, which include the following:
January 6, 2015
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Finance and Audit Committee
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


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Suspend Rolling Budget – beginning in Stage 3a
Restriction on New Water Meters
Stage 4a – No new meters (construction of service) except for:
o Health and safety
o Supply offset so that there is a net zero demand increase for new
or upsized meters in accordance with Water Demand Offset Policy
Stage 5 – No new meters allowed, except for health and safety
Variance policy changes:
o Allow submittal of a variance request letter any time after
implementation of a shortage stage
o Limit variances to only health and safety variances in Stages 4 and
5
Next, Mr. Armstrong reviewed the format changes to the WSCP document
structure. He stated that in order for said changes to be incorporated into the WSCP,
staff structured and reorganized the document by shortage stages 1 to 5. Voluntary and
mandatory measures and water budget reductions in each stage are also illustrated for
the following:



All customer classes
Commercial, Institutional and Industrial Customers
Agricultural Customers
Continuing, he reported that within the Authorization section, the WSCP now
acknowledges that in Stage 1 there is a Water Supply Watch to remain in effect at all
times. Staff also added affirmation that the District’s General Manager (GM) would
recommend appropriate shortage stages based on conditions, and that said
recommendation would be based off supply and demand expectations of RCWD. He
further conveyed that the Board would be the authorizing body approving water stages;
however, in the event of an emergency the GM can declare shortage and stage.
Reviewing Enforcement and Variances, Mr. Armstrong highlighted wordsmithing
by explaining that the word “penalties” was used throughout the previous document and
has now been changed to “Allocation Surcharges” to correspond to Metropolitan Water
District of Southern California’s plan document. In addition, he remarked that the term
“Monetary Assessments” was added to allow for recovery of drought-related costs
incurred while achieving the WSCP objectives.
Concluding, Mr. Armstrong reviewed the next steps and noted that District legal
counsel is currently reviewing the WSCP document and advised that any recommended
changes would be presented and discussed at the Board of Directors’ January 8, 2015
regular meeting.
Following review and discussion, Chairman Herman entertained a motion from
the Committee.
January 6, 2015
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Finance and Audit Committee
MOTION:
Director Stewart recommended the Board of Directors consider revisions
to the Rancho California Water District Water Shortage Contingency Plan
and set the required public hearing to March 12, 2015 to adopt the Plan.
Director Ziemer seconded the motion, and it carried unanimously.
Item 3.
Fiscal Year 2015-2016 Budget Information
CFO/Treasurer Jeff Armstrong addressed the Finance and Audit Committee
(Committee) to report on the subject item. Mr. Armstrong advised that one of the
challenges Rancho California Water District (RCWD/District) will be facing is an
increased pressure for its fiscal resources. Looking forward to the budget cycle, he
conveyed that these pressures appear in two areas: 1) operating side, and 2) capital
projects in the Santa Rosa (SR) Division.
On the Operating side, Mr. Armstrong explained that one item creating rate
pressure is water costs, related to the District’s source of supply. He reported that staff
reviewed its annual water audit and analyzed how much water can be produced.
Unfortunately, next year’s ground-water basin is expected to produce less water, which
will require purchasing more import water, resulting in the District trying to recover
costs. Secondly, he explained that there has been an increase in demand over what
was forecast—increased demand means higher-costing import water, thus creating an
operating loss. He opined, that this budget cycle may necessitate either a more
aggressive or conservative approach, which is yet to be determined.
With regard to deferred maintenance being an additional contributing factor, Mr.
Armstrong reported that the District has been working on asset management with its
Computerized Maintenance Management System; yet, it is not 100 percent complete.
He noted that there is a sentiment that perhaps too many items are being deferred and
not receiving the necessary maintenance and advised that this budget cycle would be
an advantageous time to quantify and address a plan for action moving forward.
Director Hoagland commented that he does not recall any conversations with the
Board regarding deferred maintenance. He further stated that he would not defer much
maintenance, since it is cheaper to do it on RCWD’s schedule rather than on an assets
schedule.
Next, Mr. Armstrong focused on the capital side in the SR Division; he explained
that the SR Division’s reserve levels dropped because of the acquisition of the Vail
properties. At the end of the fiscal year, he reported that the SR Division’s cash position
balance is projected to be just under $5 million. He provided a series of PowerPoint
slides with graphs illustrating, over the next three years, the projections for the SR
Division cash position with and without capital improvement projects. The good news,
Mr. Armstrong reported, is that the fund is in a good position to grow; however, the
question is will there be enough financial strength to complete everything required. Mr.
Armstrong remarked that the challenge will be finding a balance between deferring
items, accomplishing what needs to be done currently, and where the District can afford
cash projects.
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Finance and Audit Committee
Addressing a comment by Chairman Herman, Mr. Armstrong explained that
borrowing from the Rancho Division has been a successful approach in the past and is
an alternative that could potentially be considered for greater flexibility.
Concluding, Mr. Armstrong briefed the Committee on some of staff’s other
considerations in preparation for the next budget cycle.
With no further discussion, Chairman Herman moved to Agenda Item 4.
Item 4.
Presentation of Vail Lake Master Planning and Habitat Entitlement
Studies Proposal
Assistant General Manager Richard Williamson addressed the Finance and Audit
Committee (Committee) to report on staff’s recommendation for the Board of Directors
(Board) to approve the Master Plan and Habitat Entitlement work efforts for the period
of January 1, 2015 through June 30, 2015.
At this time, Mr. Williamson introduced Tim DeGraff of WRA, Inc. (WRA) to
provide a presentation on WRA’s analysis of riparian restoration projects and land
mitigation banks as a potential appreciable revenue stream for Rancho California Water
District (District).
Utilizing a PowerPoint (PP) Presentation, Mr. DeGraff discussed the following
areas:





Survey requirements
Survey timeline
2015 banking estimate (minimum surveys)
Turn-Key Benefits
2016 banking estimate
With regard to the first year of a banking or mitigation project, Mr. DeGraff
reported that biological and/or baseline studies are required to show what is present on
the land. Based upon what has been documented at the Vail properties, Mr. DeGraff
conveyed that WRA would need to perform protocol level surveys for a variety of
species. At this time, however, he conveyed that WRA proposes not to move forward
with the upland species survey and instead focus mainly on the survey for the aquatic
species.
Referencing a PP slide illustrating a cost estimate, Mr. DeGraff explained the
cost estimate of the required (aquatic) base-line surveys from January through July
2015 at $517,000.
With the survey timeline, Mr. DeGraff noted that survey reports are good for three
years and advised that 2015 will likely be the best year to perform such a survey since
heavy water years are advantageous for maximizing the biological value of the property.
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Finance and Audit Committee
Continuing, Mr. DeGraff touched briefly on some optional surveys available
which include an assessment overview of the property, which will aid in developing the
master plan and identifying the high-level biological resources that are located to either
monetize, or avoid. To help illustrate this, Mr. DeGraff illustrated Tejon Ranch’s
conservation priorities via a Geographical Information System visual.
Next, Mr. DeGraff displayed a few aerial maps of Vail Lake and provided a
marketability review of the opportunities for riparian credits, including restoration and
preservation areas.
At this time discussion ensued regarding restoration design, dynamic systems,
and the level of effects on said property in the long-term.
Director Plummer commented that he understands the environmental side of
such a project, yet, queried the recreational side. Mr. Williamson addressed the
comment by explaining that the highest valuation was from the mitigation banking and
that recreation utilization would take a much longer period to generate a net return. He
further conveyed that staff is seeking input from the Committee and Board if it is
reasonable to move forward with the biological studies, as said studies would drive the
whole planning process for the Vail properties.
Director Stewart remarked that the whole purpose of purchasing the Vail property
was to further watershed protection. As far as impact is concerned, he stated that
mitigation is a far greater opportunity to protect the District’s water supply than pursuing
a recreational one.
Following review and discussion, Chairman Herman entertained a motion from
the Committee.
MOTION:
Director Stewart recommended the Board of Directors approve the $400,
000.00 Riparian Mitigation Bank Studies. Director Ziemer seconded the
motion, and it carried unanimously.
Item 5.
Request Additional Funding for Vail Activities
Accounting Manager Kathy Naylor addressed the Finance and Audit Committee
(Committee) to discuss and review staff’s request for additional funds related to capital
projects and operational activities at Vail Lake through June 30, 2015.
Ms. Naylor reported that the Rancho California Water District (RCWD/District)
Board of Directors (Board) approved approximately $1,386,000 for annual contracts,
capital projects required for health and safety compliance, as well as operational
expenses for Vail Lake facilities through December 31, 2014. Reviewing a cost
breakdown of the Vail property activities, she reported that one of the biggest
expenditures was related to utilities and RCWD labor due to repairs required at said
property. Ms. Naylor conveyed that the District expects to incur an additional $2 million
through June 30, 2015 in capital project expenses including compliance, security, asset
valuation, and master plan projects.
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Finance and Audit Committee
At this time, Ms. Naylor reviewed some of the expedited projects at the Vail
properties, which include a septic system upgrade, tree removal, and cross connection
improvements.
MOTION:
Director Stewart recommended the Board of Directors approve additional
funds in the amount of $1.4 million related to capital projects and
operational activities for Vail Activities with the proposed source of funding
being a 70/30 percent split between the Rancho Division and Santa Rosa
Division reserve funds Director Ziemer seconded the motion, and it
carried unanimously.
Item 6.
Review of Financial Statements – November 30, 2014
A.
B.
C.
Statement of Net Position
Statement of Revenues, Expenses and Changes in Net
Position
Statement of Cash Flows
Presented for the Finance and Audit Committee’s (Committee) review and
acceptance were the Rancho California Water District (District) Financial Statements of
November 30, 2014, which were included in the Committee information packets that
Committee members received prior to the meeting, consisting of the District Financial
Statements along with a report containing a written summary and graphic illustrations of
operating and non-operating revenues, and expenses for the month of November 2014.
Following review and discussion of the November 30, 2014 Financial
Statements, Chairman Herman entertained a motion from the Committee.
MOTION:
Director Ziemer recommended the Board of Directors approval of the
November 30, 2014 Financial Statements. Director Stewart seconded the
motion, and it carried unanimously.
Item 7.
Review of Treasurer’s Report; Certification for Cash Sufficiency and
Related Investment Activity Data, as of November 30, 2014
Presented for the Finance and Audit Committee’s (Committee) review and
acceptance were the Rancho California Water District (District) Treasurer’s Report and
Certification of Cash Sufficiency for November 2014. Included in the Committee
information packets, which were received by Committee members prior to the meeting,
were copies of the Treasurer’s Report and Certification of Cash Sufficiency, Cash
Reserve, Compliance and Treasury Fund reports, and individual investment activity
reports for the month of November 2014.
Following review and discussion, Chairman Herman entertained a motion from the
Committee.
January 6, 2015
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Finance and Audit Committee
MOTION:
Director Stewart recommended the Board of Directors approval of the
November 30, 2014 Treasurer’s Report. Director Ziemer seconded the
motion, and it carried unanimously.
Item 8.
Review of Outside Contracts, Capital Projects, and Purchasing
Reports
For informational purposes, Chief Engineer Andrew Webster provided a
PowerPoint presentation on the Santa Rosa Water Reclamation Facility digester pipe
failure.
The Finance and Audit Committee accepted the Outside Contracts Summary
Report and Capital Projects Status Report, dated November 30, 2014, as presented,
without discussion.
Item 9.
Review and Ratification of the Register of Audited Demands for the
Period November 26, 2014 through December 23, 2014
The Finance and Audit Committee (Committee) reviewed the Register of Audited
Demands for the period November 26 through December 23, 2014. Accounting Manager
Kathy Naylor reviewed the Register of Audited Demands, and provided further clarification
on Warrant Nos. 130967, 131082, 131090, 131094, and 131155. The Committee
accepted the Register of Audited Demands as presented and forwarded it to the Board of
Directors for approval.
MOTION:
Director Stewart recommended the Board of Directors approval of the
Register of Audited Demands for the period November 26 through
December 23, 2014, totaling $7,540,705.60. Director Ziemer seconded
the motion, and it carried unanimously.
Item 10.
Adjournment
There being no further business to come before the Committee, the meeting
adjourned at 10:37 a.m.
/s/Milin J. Ream
Milin J. Ream, Recording Secretary
January 6, 2015
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Finance and Audit Committee