December 2, 2002

VALLEY CENTER MUNICIPAL WATER DISTRICT

Regular Board Meeting

Monday, December 2, 2002

Time: 2:00 P.M.

Place: Board Room

29300 Valley Center Rd.

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 Cowett, District Engineer

Jewell, Director of Operations Dacus, Director of Finance Jeffrey, Manager of Human Resources

Hale, Information Systems Specialist Learue and Board Secretary Stetson. Spectator present was

Mr. Bill Gilchrist of Gilchrist, Steen, Stanfield & Newquist.

CONSENT CALENDAR

Upon motion by Stone, seconded by Haskell and unanimously carried, the following

consent calendar items were approved:

• Minutes of the Board meeting held November 4, 2002

• Concept approval of the Rancho Vista Court water line extension project -

consisting of approximately 800 feet of 8-inch water main, one 6-inch fire hydrant

and other required appurtenances

• Audit demand check numbers 91415 through 91787

ACTION AGENDA

2. Administrative Code Changes to Authorize Accountant Position:

Amendments to Administrative Code Section 8.9(c), Classification and Compensation Plan,

and Section 40.9, Organizational Chart, were proposed to authorize the position of

Accountant within the Finance Department. As proposed, the Manager of Accounting position

vacated by Director of Finance Jeffrey will not be filled, but rather fill the newly created

position of Accountant to satisfy the current workload within the Finance Department.

Manager of Human Resources Hale explained that authorization of the position of Accountant

will not increase the total number of authorized positions (currently 69), and that there will

be a net savings to the District.

Valley Center Municipal Water District

Board of Directors’ Meeting

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Upon motion by Aleshire, seconded by Stone and unanimously carried, the following

ordinance, entitled:

ORDINANCE NO. 2002-12

ORDINANCE OF THE VALLEY CENTER MUNICIPAL

WATER DISTRICT AMENDING THE ADMINISTRATIVE

CODE TO PROVIDE FOR CHANGES IN PROVISIONS OF

DISTRICT CLASSIFICATION AND COMPENSATION PLAN

was adopted by the following vote, to wit:

AYES: Directors Broomell, Polito, Aleshire, Stone and Haskell

NOES: None

ABSENT: None

3. Comprehensive Annual Financial Report for FY 2001-02, Appropriations Limit Worksheet and

Auditor’s Management Letter:

The District’s financial reports for the period ended June 30, 2002, including the

Comprehensive Annual Financial Report (CAFR), Appropriations Limit Worksheet, and

Auditor’s Management Letter were presented and reviewed.

Director of Finance Jeffrey provided an overview of the Fiscal Year 2001-2002 CAFR as

outlined below:

82% of water sales is purchased by participants in the Interim Agricultural Water

Program (certified ag.). Approximately 85% of all water used is for agriculture with

17% of water sales delivered to our top 10 customers. Total water sales volume

increased 12% to 47,150 acre feet.

A 2.5% increase in water meters was experienced (185 new meters)

Revenue:

Revenue from water sales increased 15%

Energy revenue increased 63% as the pump zone charges had been increased

72% at the end of FY 2001-2002. The Pumping Rate Stabilization Fund

recovered the $2 million loss experienced when energy rates escalated, and

pumping rates were reduced 15% in October 2002. As of June 30, 2002, the

Pumping Rate Stabilization Reserve Fund had a balance of $1,021,606

Taxes and assessments were up 5% due to increases in assessed valuations

Investment income was down 46% with interest rates decreasing from 6.2% to

4.1%

Valley Center Municipal Water District

Board of Directors’ Meeting

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Expenses:

Pumping expenses were down 29% with the tempering of electric rates and a

$358,000 refund from SD&E

Other expenses increased 6% due to additional staff positions, insurance rates

and legal fees

General Fund book value declined $1.5 million which is attributed to energy costs

General Fund Reserves as of June 30, 2002 were:

Total Rate Stabilization Reserves $ 2,551,401

Operating Reserve 7,206,409

Total Restricted Reserve 670,724

Total Capital Projects Reserve 10,323,767

$20,752,381

Lower Moosa Sewer Fund - Revenues increased $158,900 which includes the $3.00

increase in the monthly sewer service charge effective as of January 1, 2002. The

net loss excluding capital contributions is $279,000, or $68,574 with capital

contributions.

Skyline Ranch Sewer Treatment Plant - Per agreement, Skyline Ranch is selfsupporting

and, as such, the District is reimbursed for operational expenses.

The District’s Appropriations Limit Worksheet for Fiscal Year 2001-2002 reported an

appropriations limit of $3,295,730 as of June 30, 2002 which is prepared in compliance with

Article XIIIB of the State Constitution.

Mr. Bill Gilchrist of the auditing firm Gilchrist, Steen, Stanfield & Newquist addressed the

Board stating that there were no exceptions noted and there were no unexpected adjustments

in completing the District’s audit for Fiscal Year 2001-2002. In response to the noted

reportable condition contained in the Management Letter regarding segregation of duties,

Mr. Gilchrist stated that there is a lack of segregation of functions in several areas in the

finance department due to the limited staff size, but that this is not uncommon with

organizations of similar size. It was noted, however, that the functions are monitored and

overseen by management staff and the Board of Directors. Additional personnel

(approximately 3-4) would be needed in order to segregate the functions of the Finance

Department. Bill Jeffrey and the Finance Department were commended for their outstanding

efforts in compiling the District’s CAFR for Fiscal Year 2001-2002.

GENERAL MANAGER’S AGENDA

4. Status Report for October 2002:

District’s Status Report for October 2002 projects Fiscal Year 2002-03 water purchases and

water sales at 43,424 ac. ft. and 40,819 ac. ft., respectively. These projections are less than

actual water purchases and sales during FY 2001-02 as a wet winter is anticipated and, thus,

lower agricultural sales. Budgeted water purchases and water sales are 41,500 ac. ft. and

39,000 ac. ft., respectively.

Valley Center Municipal Water District

Board of Directors’ Meeting

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In response to a question from Director Stone regarding the October 11

th meeting with San

Luis Rey Indian water staff regarding distribution of the Indian water rights, General Manager

Arant reported that as part of the 4.4 Plan and quantification settlement agreement, the

5 Indian bands that are members of the San Luis Rey Water Authority will receive 16,000 ac.

ft. of water from Metropolitan. The method of conveying this water is being analyzed. The

water to be allocated to the 5 Indian Bands is part of the settlement of the lawsuit filed against

the City of Escondido and the Vista Irrigation District for illegally appropriating water from the

San Luis Rey River and diverting it into the Escondido/Vista Canal. A bill supported by

Congressman Packard conjoined the Indian Lawsuit settlement with the lining of the All

American Canal to secure additional water. Funding for the lining project came from the

quantification settlement agreement. An alternative to convey the water from the San Diego

County Water Authority’s facilities to the Indian Reservations is to wheel it through existing

water systems such as the Districts. The Indian Bands are also considering construction of

their own water distribution facilities.

5. Issuance of Request for Proposals:

General Manager Arant reported that requests for proposals have been issued for the

Corporate Facilities Master Planning Project and Public Opinion Survey. Proposals have

been requested to be submitted by December 13, 2002.

BOARD OF DIRECTORS’ AGENDA

6. San Diego County Water Authority’s Board of Directors’ Meeting:

At the San Diego County Water Authority’s November 14

th Board meeting, execution of the

Term Sheet with Poseidon Resources Corp. for development of the desalination plant

component of the Carlsbad Seawater Desalination Project was authorized.

Authority staff was authorized to work jointly with Mexico to complete the supplemental

technical studies to determine the feasibility of a binational conveyance option.

CLOSED SESSION

7. A Closed Session was called by President Broomell at 3:00 p.m. pursuant to:

• Government Code §54956.9(a), Conference with Legal Counsel - Existing Litigation.

Name of Case: Sweetwater Authority, et al. v. Dynegy, Inc., et al.

Superior Court Case GIC 760743

• Government Code §54956.9(a), Conference with Legal Counsel - Existing Litigation.

Name of Case: Rincon del Diablo Municipal Water District, et al. vs. San Diego County

Water Authority

Case No. GIC798230

Valley Center Municipal Water District

Board of Directors’ Meeting

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• Government Code §54957.6(a), Employee Performance Evaluation

Title of Position: General Manager

The Regular Board meeting was reconvened at 4:31 p.m., and the following action was

reported:

Pursuant to the energy lawsuit, Sweetwater Authority, et al. v. Dynegy, Inc., et al., a

settlement was reached with Williams Energy Marketing & Trading totaling $4.8 million

of which the District’s share is $1.3 million to be used for the construction of energy

efficiency and/or reduction of pollution associated with the consumption of energy.

ADJOURNMENT

Upon motion by Aleshire, seconded by Stone and unanimously carried, the meeting

was adjourned at 4:33 p.m.

ATTEST: ATTEST:

______________________________ _______________________________

Secretary President