May 26, 2009
VALLEY CENTER WATER DISTRICT
Adjourned Regular Board Meeting
Tuesday, May 26, 2009
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 and Haskell. Director Stone was absent. Staff members present were: General Manager Arant, General Counsel de Sousa, District Engineer Grabbe, Director of Operations Hoyle, Director of Finance Jeffrey, Board Secretary Stetson, Manager of IT Pilve. Manager of Accounting Pugh, Sr. Human Resources Analyst Shough, and Administrative Assistant Deresh. Spectator present was Ms. Jones, The Epler Company.
EMPLOYEE RECOGNITION
Charlene Deresh, Engineering Department Administrative Assistant, was recognized and commended for her leadership in the International Right-of-Way Association, San Diego Chapter. Charlene accepted the position of Education Chairperson and endeavored to schedule and coordinate classes for the Right-of-Way Association’s members. For her efforts in expanding the organization’s educational programs, Charlene was nominated and chosen for the San Diego Chapter Right-of-Way Association’s 2008 Professional of the Year award. Charlene was then nominated for a regional award (California, Nevada, Arizona and Hawaii) and received the Regional Professional of the Year award and has been nominated for the International Award of the Right-of-Way Association which covers the U.S. and Canada. The local chapter of the Right-of-Way Association is sponsoring her trip to Indianapolis, Indiana, for the international forum to be held from June 29th to July 2nd. The Board expressed their appreciation for her role in the Right-of-Way Association and for her initiative in expanding her knowledge of right-of-way issues which is of value to the District.
CONSENT CALENDAR
1. Upon motion by Polito, seconded by Haskell and unanimously carried, the following consent calendar items were approved:
• Minutes of the Board meeting held May 4, 2009
• Resolution No. 2009-26 adopting the 2009 Revisions to Local Guidelines for Implementing the California Environmental Quality Act (CEQA)
• Audit demand check numbers 122246 through 122450 and wire disbursements for April 2009
• Treasurer’s Report and Financial Statement for the period ended March 31, 2009
ACTION AGENDA
2. Actuarial Valuation for Retirees’ Health Benefits Plan:
Director of Finance Jeffrey reported that the Government Accounting Standards Board (GASB) Statement No. 45 requires that beginning in Fiscal Year 2008-09 that the District actuarially value its Retirees’ Health Benefits Plan. GASB requires that agencies account for retiree health plans in a specified method; i.e. recorded as an expense. In the past, a level to “fund” the plan was determined and that amount recorded as an expense and was added to the liability for the Plan. It was noted that the Retirees’ Health Benefits Plan is not available to employees hired after June 30, 2008.
The Epler Company was retained to perform the actuarial review which was conducted by Marilyn Jones, Actuary and Vice President of the company. Ms. Jones noted that the actuarial valuation estimates the current liability for the retirees’ health benefits, determines the accounting requirements under GASB 45, and the impact of pre-funding.
Ms. Jones reviewed that the District participates in ACWA’s Health Program and eligible employees may continue medical benefits at retirement. In FY 2008-09, the expected payment for retiree health benefits is $93,330. The actuarial valuation of the Retirees’ Health Benefits Plan utilizes the participants’ census data and then projects retiree health contributions expected to be paid by the District for future years, determines present value of District’s retiree health contributions and allocates the present value to past, future and current period using an actuarial cost method.
Valuation results of the Plan are that the total projected District Retiree Health Plan contributions will be $45.2 million, or a present value of District retiree contributions of $9.7 million using a 5% discount rate. The actuarial accrued liability is $5.8 million. In compliance with GASB 45, the impact upon the financial statements is that the $5.8 million unfunded actuarial accrued liability and accrual expense are disclosed, which for 2008-09 the present value for the accrual expense is $689,926 ($315,455 benefit accrual and $374,471 amortization over a 30 year period). The net impact on the financial statement for the fiscal year ending June 30, 2009, will be the net Other Post Employment Benefit (OPEB) liability of $596,596 which is the annual required contribution of $689,926 less the 2008-09 pay-as-you-go expense of $93,330.
Prefunding strategies of the OPEB liability are that the plan assets under GASB 45 are segregated for exclusive payment of the Retiree Health Benefits and secured from creditors. Advantages to prefunding the liability were reviewed which are: liability impact is mitigated, lower liability/expense with a higher rate of return under long-term investment strategy and financial stability/benefit security are increased. Using a trust fund, such as the Cal-PERS Trust, there is currently a targeted rate of return of 7.75%. The settlement liability of the present value of the cash flows for full funding strategy is a $3.6 million unfunded amount to be disclosed under GASB 45 and an annual contribution of $476,396 for 2008-09. The pre-funded amount for 2008-09 is $383,066, which is the difference between the annual contribution and the expected expense of $93,300. The net OPEB obligation at the end of FY 2008-09 would be $0 as $476,396 would be an expense and funded. The Actuarial Valuation of the District’s Retirees’ Health Benefits Plan prepared by The Epler Company was received and filed.
3. Agreement to Prefund Other Post Employment Benefits (OPEB) Through Cal-PERS:
Director of Finance Jeffrey requested approval of resolutions to prefund the Retirees’ Health Benefits Plan costs through the Cal-PERS California Employers’ Retiree Benefit Trust (CERBT) and to amend the 2008-09 budget. He reported that the actuarial liability to fully pay all future benefits is $9,700,678 (discount factor of 5%) with a contribution for 2008-09 of $689,926 or 12.9% of projected payroll. Participating in the Cal-PERS CERBT, which has a discount factor of 7.75%, the benefits liability is reduced to $5,310,547 and a contribution in 2008-09 of $476,396 or 8.9% of projected payroll. With the expected payment for current retirees’ insurance premiums of $93,330 in 2008-09, a contribution to the Cal-PERS CERBT of $383,066 would be required. As such, the annual expense is reduced by $213,530 with the transfer of $383,066 to a trust rather than earmarking assets for future expenditures.
The District has recorded $2.5 million as a benefit liability for the Retirees’ Health Benefits Plan and staff recommended depositing a contribution into the CERBT with Cal-PERS of $383,066 with the balance in a proposed new Restricted Reserve, the Benefit Plan Liability Reserve. Director of Finance Jeffrey stated that funding the trust does not obligate funding in future years and that funds in the trust can be used to pay retiree insurance premiums in future years. Also, the funds transferred to the District’s Benefit Plan Liability Reserve can be used for the payment of the annual contributions to the CERBT.
The California Employers’ Retiree Benefit Trust (CERBT) is administered by Cal-PERS and was established to assist California’s public employers in meeting OPEB obligations. The CERBT provides investment opportunities and diversification that would not be available if the District were to do this on its own, and reduces costs and
time required to manage an account. Staff recommended adoption of Resolution Nos. 2009-21, 2009-22 and 2009-23 to approve the prefunding of retirees’ health benefits plan costs through the Cal-PERS California Employers’ Retiree Benefit Trust and to amend the budget to fund the costs.
Upon motion by Aleshire, seconded by Polito and unanimously carried, the following resolution, entitled:
RESOLUTION NO. 2009-21
CALIFORNIA
EMPLOYER’S RETIREE BENEFIT
TRUST PROGRAM (“CERBT”) AGREEMENT
AND ELECTION OF VALLEY CENTER MUNICIPAL
WATER DISTRICT TO PREFUND OTHER POST
EMPLOYMENT BENEFITS THROUGH CALPERS
was adopted by the following vote, to wit:
AYES: Directors Broomell, Polito, Aleshire and Haskell
NOES: None
ABSENT: Director Stone
Upon motion by Aleshire, seconded by Haskell and unanimously carried, the following resolution, entitled:
RESOLUTION NO. 2009-22
DELEGATION OF AUTHORITY TO REQUEST
DISBURSEMENTS, RESOLUTION OF THE
BOARD OF DIRECTORS OF THE VALLEY CENTER
MUNICIPAL WATER DISTRICT
was adopted by the following vote, to wit:
AYES: Directors Broomell, Polito, Aleshire and Haskell
NOES: None
ABSENT: Director Stone
Upon motion by Aleshire, seconded by Polito and unanimously carried, the following resolution, entitled:
RESOLUTION NO. 2009-23
RESOLUTION OF THE BOARD OF DIRECTORS OF
VALLEY CENTER MUNICIPAL WATER DISTRICT
AMENDING THE 2008-09 BUDGET TO PREFUND
BENEFIT PLAN LIABILITY TO CALPERS TRUST
was adopted by the following vote, to wit:
AYES: Directors Broomell, Polito, Aleshire and Haskell
NOES: None
ABSENT: Director Stone
6. Review 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 as summarized below:
▪ Rate Stabilization Reserves – Used to level water and pumping rates. The rate stabilization reserve has been depleted. A portion of the pumping rate stabilization reserve will be used to fund several pump station capital projects in Fiscal Year 2009-10.
▪ Operating Reserve – Provides funds for emergencies and natural disasters and it is endeavored to maintain the reserve at 6 months operations and maintenance budget. Staff recommending changing the Strategic Plan Measurement Goal for this reserve from “at six months operations and maintenance budget“ to “at a maximum six months operations and maintenance budget”. It is anticipated that the Operating Reserve and Pumping Rate Stabilization Reserve for the water general fund will meet the 6 month measurement standard goal, and the Woods Valley Ranch Operating Reserve will be fully funded. The estimated operating reserve at the Lower Moosa Canyon Water Reclamation Plant will be approximately 4 months operations and maintenance budget, but proposed rate increases in FY 2009-10 and subsequent years are expected to bring the reserve to the 6 months O&M budget goal.
▪ Restricted Reserves – These reserves include the Agricultural Rebate Reserve and Replacement Reserves (licensed motor vehicles, Lower Moosa Canyon Water Reclamation Facility and the Woods Valley Ranch Water Reclamation Facility). Implementation of the Government Accounting Standards Board (GASB) Statement No. 45 for other post-employment benefits beginning in FY 2008-09, the unfunded actuarial liability will be calculated and the current liability reset at zero. The funds of approximately $2.5 million for this liability was recommended to be transferred to a new Benefit Plan Liability Reserve that will be utilized to fund the District’s Other Post Employment Benefit (OPEB) obligation.
▪ Capital Reserves – Provides funding for budgeted capital projects, improvements funded from capacity charges, and future capital additions and replacements. Property taxes are being used for capital improvements reserve funding.
▪ Fees and Charges – Sets forth that each water and wastewater system should be self-sufficient and that all fees and charges from wholesale agencies are passed through to customers.
▪ Debt – Set forth in Section 50.3, and establishes that long-term debt shall not be used to fund current operating costs, and debt issues should be limited to the District’s capacity to repay from related revenue streams.
▪ One-time and Unpredictable Revenues – Significant one-time revenues should be allocated to the source of the receipt.
▪ Balanced Budget – Operating expenditures shall be funded with current revenues and reserves used with Board approval.
▪ Revenue Diversification – District will attempt to cover at least 50% of the District’s fixed operating expenditures from fixed revenues
▪ Contingencies – Procedures for use of contingency funds during water emergencies are set forth in Article 225 of the Administrative Code.
Proposed changes to Section 50.2 (Budget Policies) of the Administrative Code include:
● Operating Reserves – Modify the goal of “at six months operations and maintenance budget” to “at a maximum six months operations and maintenance budget”.
● Restricted Reserve – Modify this reserve to add a new Benefit Plan Liability Reserve and fund the reserve by transferring approximately $2.5 million from a liability account for the Retirees’ Health Medical Plan.
The proposal to amend the Operating Reserve measurement goal to be “at a maximum six months operations and maintenance budget” was discussed in which it was expressed that it would be prudent to establish a minimum level which would trigger consideration of raising revenue and/or reducing expenses.
Upon motion by Aleshire, seconded by Haskell and unanimously carried, the following ordinance with the amendment to reflect that it shall be endeavored to maintain the Operating Reserve at a minimum of three months and a maximum of six months operations and maintenance budget was adopted, as follows:
ORDINANCE NO. 2009-03
ORDINANCE OF THE VALLEY CENTER WATER DISTRICT
AMENDING THE ADMINISTRATIVE CODE SECTION 50.2
TO PROVIDE FOR CHANGES IN BUDGET POLICIES
by the following vote, to wit:
AYES: Directors Broomell, Polito, Aleshire and Haskell
NOES: None
ABSENT: Director Stone
7. Review of Proposed Changes to Water and Wastewater Rates to be Effective September 1, 2009:
Proposed rate changes and the Notice of the July 20th Public Hearing to consider the rate changes, which will be mailed to all property owners of record in the District in compliance with Proposition 218, were reviewed.
Director of Finance Jeffrey noted that on September 1, 2009, the aggregate wholesale costs from the San Diego County Water Authority and the Metropolitan Water District will increase and on January 1, 2010, their wholesale fixed charges levied on the District will increase. At the public hearing scheduled for July 20, 2009, the proposed increase in water and wastewater rates, if adopted, would be effective on the bills mailed on and after September 1, 2009, on the bills mailed on and after January 1, 2010, and annually thereafter through September 2014. Legislation was adopted (AB 3030) which allows a Proposition 218 hearing to provide for pass-throughs of wholesale rates and for automatic adjustments for inflation for a period of five years as well as the ability to pass through the effects of a loss of property tax revenue. Said Notice of Public Hearing to be mailed to all property owners includes language regarding the aforementioned wholesale increase pass-throughs and the ability to raise local rates by no more than the percentage increase in the wholesale rate. Staff clarified that the increases would not be automatic, and would be presented to the Board at public hearings for consideration, as needed. Authorization for limited future increases in rates over the five-year period allowed by AB 3030 eliminates the expense of preparing and mailing the approximately 25,000 notices each year. Per Board direction, there is no increase in the District’s components of the retail rate or the monthly water meter service charge for FY 2009-10.
The proposed water rates effective September 1, 2009, and January 1, 2010, are shown below (estimates only as the San Diego County Water Authority has not yet adopted its increase):
Current Effective 9/1/09 Effective 1/1/10
(per HCF) (per HCF) (per HCF)
Domestic/Commercial
Wholesale $2.0023 $2.2677 $2.3329
VCWD $0.2351 $0.2351 $0.2351
Total $2.2374 $2.5028 $2.5680
IAWP:
Wholesale $1.4249 $1.6949 $1.7860
VCWD $0.2351 $0.2351 $0.2351
Total $1.6600 $1.9300 $2.0211
SAWR:
Wholesale $1.7270 $2.0190 $2.0272
VCWD $0.2351 $0.2351 $0.2351
Total $1.9621 $2.2541 $2.2623
Reclaimed & Nonpotable Water:
Reclaimed $1.6262 $2.1272 $2.1828
Nonpotable $1.4349 $1.8771 $1.9260
Other increases addressed in the Notice of Public Hearing to be mailed to property owners affect the:
SDCWA Infrastructure Access Charge – The Infrastructure Access Charge assessed annually by the San Diego County Water Authority is a fixed charge based on the number and size of active meters within the District’s service area. This charge from the SDCWA is passed through. The charge for calendar 2010 for a ¾” meter will increase from $1.90 per month to $2.02 per month.
Lower Moosa Canyon Water Reclamation Facility – It is proposed to increase effective September 1, 2009, the Moosa Reclamation Facility monthly service fee by $4.00 per EDU or to $44.50 per EDU to offset inflation costs. Also proposed is an increase in the wastewater capacity reservation fee to $22.50/EDU (a $2.00/EDU change), and an increase in the STEP surcharge to $36.75/EDU (a $3.25/EDU increase). At the July 20th public hearing, authorization for future increases of the wastewater rates by the greater of the San Diego CPI or 10% will be considered.
The Notice of the Public Hearing to be held July 20th, attached hereto as Exhibit “A”, will be mailed to all property owners in the District’s service area by June 4th with the rate changes, if adopted, to be effective September 1, 2009.
8. Review of Proposed Changes to the District’s Water Supply Shortage Response Program:
At the May 5th Board meeting, Level 2 of the District’s Water Supply Shortage Response Program was declared with the exception of the restriction on meter sales and staff was directed to present for further consideration an amendment to the Program pertaining to meter sales/usage restrictions.
General Manager Arant presented revised language to Section 230.5 of the District’s Administrative Code (Water Supply Shortage Response Level 2 – Water Supply Shortage Alert Condition) to reference the Water Supply Shortage Reduction Implementation Plan as modified to establish that meter sales restrictions would become effective upon the declaration of a Level 2 Water Supply Shortage with mandatory reductions of greater than 10%. In addition, upon a mandatory reduction of greater than 10% within Level 2, meters with monthly usage histories of less than or equal to 10 Hundred Cubic Feet per month would be limited to 10 HCF per month usage allocation.
Staff was directed to include the provisions as outlined above for the restriction of meter sales and water use allocation upon a Level 2 declaration with a mandatory reduction of greater than 10% in Section 230.5 of the Administrative Code which will be presented for formal adoption at the June 15th Board meeting.
9. Status Report on the District’s Automated Meter Reading Program and Budget Adjustment:
Director of Operations Hoyle reported that in April 2007, an acceleration of the District’s Automated Meter Reading (AMR) program was approved. The AMR program was cited as an improvement in efficiency and labor savings and would reduce unaccounted for water deliveries. It was reported that the change-out of meters to the AMR units has been completed ahead of schedule. The AMR accelerated program was completed with expenditures totaling $2,341,208.88 during Fiscal Years 2006-2009. Additional funds totaling $100,000 are needed in Fiscal Year 2008-09 for expenses associated with completion of the accelerated program. The funds are available in the Paradise Reservoir No. 2 Roof Replacement project budget. No additional funds for the AMR program will be requested in the FY 2009-10 budget.
Upon motion by Aleshire, seconded by Haskell and unanimously carried, an amendment of the 2008-09 budget to transfer $100,000 to the Automated Meter Reading budget account (01-5640.76) from the Paradise No. 2 Roof Replacement Project budget account (01-5676.78) was approved.
GENERAL MANAGER’S AGENDA
10. Status Report for April 2009:
The District’s Status Report for April 2009 was presented which reported that water purchases during the month decreased 8%. The solar project at Lake Turner has generated 421,806 kWh of electric power.
BOARD OF DIRECTORS’ AGENDA
11. Report on the ACWA/JPIA 2009 Spring Conference:
Director Aleshire reported that the ACWA/JPIA Board of Directors adopted the proposed change for brokerage services approving conducting a competitive procurement for broker services and an agreement with the JPIA insurance broker defining total compensation for services rendered.
Many informative and pertinent workshops and presentations were scheduled at the recent ACWA Spring Conference including Senator Steinberg’s opening statements on the multi-stressors in the Delta and that there should be a focus on co-equal priorities for both the environment and the water supply. Dan Walters, Political Columnist of the Sacramento Bee, spoke on California’s government structure, the impact of the initiative process and concluded that California has a severe governance crisis.
Legislation has been introduced (S 787) that, if adopted, will allow Federal government control of all waters, not just navigable streams; including, mud flats, ponds wetlands, sloughs, prairie potholes and wet meadows. This legislation will be watched and ACWA’s evaluation requested.
A rally for water on the Capital Building’s steps was arranged during the ACWA Spring Conference in which approximately 400 to 500 supporters participated. During the rally, eight Assembly Members and two Senators addressed the crowd. However,
due to the week’s headline news regarding the election and budget, there was no news coverage of the rally.
ADJOURNMENT
12. Upon motion by Aleshire, seconded by Haskell and unanimously carried, the meeting was adjourned at 4:27 p.m.
ATTEST: ATTEST:
____________________________ _______________________________
President Secretary