Minutes - Rancho California Water District

MINUTES OF THE JOINT REGULAR MEETING OF THE
FINANCE AND AUDIT COMMITTEE AND
SPECIAL MEETING OF THE BOARD OF DIRECTORS OF THE
RANCHO CALIFORNIA WATER DISTRICT
Thursday, March 3, 2016
8:30 a.m.
DIRECTORS PRESENT:
John Hoagland, Chairman
Ben Drake
Danny Martin
STAFF PRESENT:
Jeff Armstrong, General Manager
Rick Aragon, Director of Finance/Treasurer
Jason Martin, Director of Administration
Rich Ottolini, Interim Director of Operations & Maintenance
Andrew Webster, Chief Engineer
Heath McMahon, Construction Contracts Manager
Kathy Naylor, Accounting Manager
Mark Kaveney, Water Reclamation Manager
Corey Wallace, Engineering Manager – CIP & Development
Tim Carlisle, Field Services Manager r – Construction
Darren Milner, Field Services Manager – Facilities
Mike Calvert, Operations Project Manager
Vicki Browder, Budget/Debt Administrator
Dale Badore, Datacenter Operations Supervisor
Larry Weir, Field Services Foreman – Fleet & Facilities
Bill Moses, Finance Analyst
Dave Morrison, Safety/Risk Officer
Meggan Valencia, Sr. Public Information Officer
Samantha Brown, Accountant
Billy Browder, Purchasing Supervisor
Milin Ream, Sr. Administrative Assistant/Recording Secretary
OTHERS PRESENT:
Bill Wilson, Alternate, Finance and Audit Committee
Lisa Herman, RCWD Board of Directors
Bill Plummer, RCWD Board of Directors
Robert Porr, Fieldman Rolapp & Associates
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 Hoagland.
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 Hoagland called for approval of the Agenda of the Regular Meeting of the
Finance and Audit Committee of the Rancho California Water District of March 3, 2016 as
presented.
MOTION:
March 3, 2016
Director Drake moved to approve the Agenda of the Regular Meeting of
the Finance and Audit Committee of the Rancho California Water District
of March 3, 2016. Director Martin seconded the motion, and it carried
unanimously.
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Finance and Audit Committee
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.
Presentation and Review of First Draft Non-Operating Budget, Fiscal
Year 2016-2017
A.
B.
C.
D.
Long-Range Capital Financing Plan Narrative
Ad Valorem Assessments: Standby Charges; Water and
Wastewater Capacity Fees
Capital Acquisition Budget, Fiscal Year 2016-2017
Report of Annual Standby Charges, Fiscal Year 2016-2017
Director of Finance/Treasurer Rick Aragon addressed the Finance and Audit
Committee (Committee) to report on Rancho California Water District’s (RCWD/District)
first draft of the Non-Operating Budget for fiscal Year (FY) 2016-2017. Prior to his
report, he illustrated a PowerPoint (PP) slide titled Budget Development Schedule
whereby General Manager Jeff Armstrong briefly commented on the timeline for the
District’s budget process and Proposition 218 noticing requirements.
Continuing, Mr. Aragon provided a brief overview on budget classifications and
their breakdown. He advised that there are three categories that expenditures are
classified, which include capital, operational, and special services. He noted that these
categories have specific revenues in order to recover the costs associated with each
expenditure category.
Next, Mr. Aragon reported on the divisional demographics that form the Rancho
and Santa Rosa (SR) Divisions of the District, as they have a key role in the difference
between the two divisions’ rates. He explained that although the two divisions’ service
area acres are similar, the number of customers differs considerably. As a result, the
SR Division has fewer customers to mitigate the cost of paying for the division’s capital;
therefore, the rates are higher than the Rancho Division.
With regard to the shift in costs identified in the 5-Year Capital Improvement Plan
(CIP) from new to replacement facilities, Mr. Aragon indicated that new facilities were
estimated at $206 million through the year 2021, at which time the plan shifts to
replacement at approximately $3.2 billion. He acknowledged the efforts put forth by the
engineering staff to prepare the comprehensive detailed study, noting that the
replacement data is significant and critical to the long-range financial plan (LRFP) for
the District’s Divisions.
March 3, 2016
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Finance and Audit Committee
Illustrating the impacts of each of the District’s divisions, Mr. Aragon conveyed
that staff is proposing the Ad Valorem assessments in the Rancho and SR Divisions of
$.30 and $.50, respectively, per $100 of land assessed value be maintained at the
current levels for FY 2016-2017. Moreover, he noted the water capacity fees; staff
recommends an increase consistent with the increase in the Engineering News Record
(ENR) to keep the fees in line with construction cost increases. The increase
recommended for FY 2016-2017 is 2 percent for both the Rancho and SR Divisions.
Speaking on the wastewater capacity fees, Mr. Aragon reported that staff
proposes the capacity fees be increased by 8 percent from $8,859 to $9,568, increase
the monthly debt service charge to $9.50 per equivalent dwelling unit (EDU), and
maintain the monthly replacement charge at $4.00 per EDU for FY 2016-2017.
Next, Mr. Aragon advised that staff conducted a thorough review of its current
year Capital Acquisition needs and reported that the proposed Capital Acquisition
Budget for FY 2016-2017 is $1,125,840.
By way of a PP slide, Mr. Aragon briefly previewed the Metropolitan Water
District of Southern California’s (MWD) potential rate impacts on the Operating Budget,
which includes an MWD calendar year 2017 rate increase as follows:



Treated water up 4 percent from $942 to $979 Acre-Feet (AF)
Untreated up 12 percent from $594 to $666 AF
Increase in MWD Fixed Charges ($0.57 Million)
Following lengthy review and discussion, Chairman Hoagland advised that he
would make a motion to forward staff’s recommendation with the caveat that staff
provide a more detailed explanation and analysis related to the items requested in the
Capital Acquisition Budget at the March 22 Adjourned Regular Committee meeting.
MOTION:
It was moved by Chairman Hoagland to move staff’s recommendation to the
Board of Directors with the caveat that staff provide a more detailed
explanation and analysis related to the items requested in the Capital
Acquisition Budget at the March 22 Adjourned Regular Committee
meeting. The motion was seconded by Director Drake and it carried
unanimously.
Item 2.
Presentation, Review, and Consideration of 2016 Plan of Finance for
Capital Improvement Projects
Director of Finance/Treasurer Rick Aragon addressed the Finance and Audit
Committee (Committee) to introduce the Agenda item and invited Financial Advisor
Robert Porr with Fieldman Rolapp & Associates (FRA) to provide a presentation on the
2016 Plan of Finance for Rancho California Water District’s (RCWD/District) Capital
Improvement Projects (CIP).
March 3, 2016
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Finance and Audit Committee
Referencing a PowerPoint presentation, Mr. Porr reviewed a series of slides
related to the District’s financing strategy for the wastewater treatment plant. He
reported that the Joint Powers Authority is pursuing funding from the State Revolving
Fund (SRF) and is expected to reduce cost of wastewater debt, as well as also fund
$25.6 million of improvements to the plant.
Continuing, Mr. Porr advised that of the approximately $105 million in projects
identified in the Districts 5-year CIP, $50.2 million in projects have been identified by
staff to finance with long-term debt in the 2016 financing effort. Speaking as to a plan of
finance for these projects as well as alternative financing sources, he advised that the
SRF Loan program, and the California Infrastructure and Economic Development Bank
(I-Bank) were selected as the two primary alternative financing sources for the analysis
based on staff’s research. This analysis evaluated the estimated total cost for the
traditional bond financing, as well as the cost for each of the alternative scenarios.
Based on said analysis, Mr. Porr conveyed that it is FRA’s recommendation to
proceed with the SRF loan in which the goal would be to parallel and track the JPA
financing of wastewater debt.
Concluding, Mr. Aragon reviewed staff’s recommendations and entertained any
questions from the Committee.
Following review and discussion, Chairman Hoagland entertained a motion from
the Committee.
MOTION:
Director Drake recommended the Board of Directors approve the identified
capital projects for the 2016 log-term financing program, as well as
approve us of available Tier IV rate increment proceeds for the Upper
VDC projects. Director Martin seconded the motion, and it carried
unanimously.
Item 3.
Review of Financial Statements – January 31, 2016
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 (RCWD/District) Financial
Statements of January 31, 2016. Included in the Committee information packets, which
were received by Committee members prior to the meeting, were copies of the District’s
Financial Statements as of January 31, 2016 and a report, which included a written
summary, and graphic illustrations of operating and non-operating revenues, and
expenses for the month of January 2016.
March 3, 2016
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Finance and Audit Committee
Following review and discussion of the January 31, 2016 Financial Statements,
Chairman Hoagland entertained a motion from the Committee.
MOTION:
Director Drake recommended the Board of Directors approve the January
31, 2016 Financial Statements. Director Martin seconded the motion, and
it carried unanimously.
Item 4.
Review of Treasurer’s Report; Certification of Cash Sufficiency and
Related Investment Activity Data, as of January 31, 2016
Presented for the Finance and Audit Committee’s (Committee) review and
acceptance were the Rancho California Water District Treasurer’s Report and
Certification of Cash Sufficiency, as of January 31, 2016. 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 January 2016.
MOTION:
Director Martin recommended the Board of Directors approve the January
31, 2016 Treasurer’s Report. Director Drake seconded the motion, and it
carried unanimously.
Item 5.
Review of Outside Contracts, Capital Projects, and Purchasing
Reports
The Finance and Audit Committee accepted the Outside Contracts Summary,
Capital Projects Status Report, and Purchasing Reports, as presented, without
discussion.
Item 6.
Review and Ratification of the Register of Audited Demands for the
Period January 26 through February 24, 2016
The Finance and Audit Committee (Committee) reviewed the Register of Audited
Demands for the period January 26 through February 24, 2016. Accounting Manager
Kathy Naylor reviewed the Register of Audited Demands, and provided further clarification
on Warrant Nos. 136318, 136391, 136538, and 136556.
The Committee accepted the Register of Audited Demands as presented, and
forwarded it to the Board of Directors for approval.
MOTION:
March 3, 2016
Director Drake recommended Board of Directors approval of the Register
of Audited Demands for the period January 26 through February 24, 2016,
totaling $5,626,000.21. Director Martin seconded the motion, and it
carried unanimously.
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Finance and Audit Committee
Item 7.
Adjourn to Tuesday, March 22, 2016
There being no further business to come before the Finance and Audit
Committee, the meeting adjourned to Tuesday, March 22, 2016 at 8:30 a.m.
/s/Milin J. Ream
Milin J. Ream, Recording Secretary
March 3, 2016
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Finance and Audit Committee