HomeMy WebLinkAbout04-15-25 F&A Committee Packet 1
OTAY WATER DISTRICT
FINANCE AND ADMINISTRATION
COMMITTEE MEETING
and
SPECIAL MEETING OF THE BOARD OF DIRECTORS
2554 SWEETWATER SPRINGS BOULEVARD
SPRING VALLEY, CALIFORNIA
BOARDROOM
TUESDAY
APRIL 15, 2025
12:00 P.M.
This is a District Committee meeting. This meeting is being posted as a special meeting
in order to comply with the Brown Act (Government Code Section §54954.2) in the event that
a quorum of the Board is present. Items will be deliberated, however, no formal board actions
will be taken at this meeting. The committee makes recommendations
to the full board for its consideration and formal action.
AGENDA
1. ROLL CALL
2. PUBLIC PARTICIPATION – OPPORTUNITY FOR MEMBERS OF THE PUBLIC TO
SPEAK TO THE BOARD ON ANY SUBJECT MATTER WITHIN THE BOARD’S
JURISDICTION INCLUDING AN ITEM ON TODAY’S AGENDA
DISCUSSION ITEMS
3. ADOPT RESOLUTION NO. 4453 AMENDING SECTION 25 OF THE DISTRICT’S
CODE OF ORDINANCES TO INCORPORATE “ESTABLISHING A PROCEDURE
FOR RATEPAYER OBJECTIONS TO PROPOSED WATER AND SEWER FEES
AND CHARGES” (KEVIN KOEPPEN) [5 MINUTES]
4. AUTHORIZE THE GENERAL MANAGER TO ENTER INTO A CONTRACT WITH
U.S. BANK FOR BANKING SERVICES, INCLUDING FIXED FEE SCHEDULE,
FOR A PERIOD OF UP TO FIVE YEARS (KEVIN KOEPPEN) [5 MINUTES]
5. RECEIVE THE DISTRICT’S INVESTMENT POLICY, POLICY NO. 27 OF THE
DISTRICT’S CODE OF ORDINANCES, FOR REVIEW AND RE-DELEGATE AU-
THORITY FOR ALL INVESTMENT RELATED ACTIVITIES TO THE CHIEF FI-
NANCIAL OFFICER, IN ACCORDANCE WITH GOVERNMENT CODE SECTION
53607 (KEVIN KOEPPEN) [5 minutes]
6. DEMONSTRATION OF THE DISTRICT’S INTERACTIVE VOICE RESPONSE
PHONE SYSTEM (CATHY BARNHILL) [15 MINUTES]
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7. ADJOURNMENT
BOARD MEMBERS ATTENDING:
Gary Croucher, Chair
Jose Lopez
All items appearing on this agenda, whether or not expressly listed for action, may be de-
liberated and may be subject to action by the Board.
The agenda, and any attachments containing written information, are available at the Dis-
trict’s website at www.otaywater.gov. Written changes to any items to be considered at the
open meeting, or to any attachments, will be posted on the District’s website. Copies of the
agenda and attachments are also available by contacting the District Secretary at (619)
670-2253.
If you have any disability which would require accommodations to enable you to participate
in this meeting, please call the District Secretary at 670-2253 at least 24 hours prior to the
meeting.
Certification of Posting
I certify that on April 11, 2025, I posted a copy of the foregoing agenda near the
regular meeting place of the Board of Directors of Otay Water District, said time being at
least 24 hours in advance of the meeting of the Board of Directors (Government Code
Section §54954.2).
Executed at Spring Valley, California on April 11, 2025.
/s/ Tita Ramos-Krogman, District Secretary
STAFF REPORT
TYPE MEETING: Regular Board MEETING DATE: May 7, 2025
SUBMITTED BY: Kevin Koeppen
Assistant Chief of Finance
PROJECT: Various DIV. NO.ALL
APPROVED BY: Joe Beachem, Chief of Finance
Jose Martinez, General Manager
SUBJECT: Adopt Resolution No. 4453 Amending Section 25 of the
District’s Code of Ordinances to incorporate “Establishing a
Procedure for Ratepayer Objections to Proposed Water and Sewer
Fees and Charges”
GENERAL MANAGER’S RECOMMENDATION:
That the Board Adopt Resolution No. 4453 amending Section 25 of the
District’s Code of Ordinances to incorporate “Establishing a
Procedure for Ratepayer Objections to Proposed Water and Sewer Fees
and Charges.”
PURPOSE:
The purpose of this item is to request that the Board adopt
Resolution No. 4453 amending Section 25 of the District’s Code of
Ordinances to incorporate “Establishing a Procedure for Ratepayer
Objections to Proposed Water and Sewer Fees and Charges.”
ANALYSIS:
Proposition 218 established procedural requirements and limitations
that agencies must follow when adopting property-related fees for
water or sewer service. Assembly Bill 2257 (2024) authorizes agencies
to adopt a procedure that requires any legal objections to a fee
structure to be timely made in writing and allows the District to
AGENDA ITEM 3
2
respond to and resolve any objections prior to the Board adopting
proposed rates. Adopting this procedure will protect the District
against unanticipated legal challenges to its fee structure and will
ensure a clear administrative record of the basis for, and any legal
objections to, the fee structure.
The District’s current budgeting and rate-setting process includes
adopting water and sewer fees and charges in accordance with
procedures outlined in Article XIII D of the California Constitution,
commonly referred to as “Proposition 218.” Proposition 218
establishes certain procedural requirements and substantive
limitations that local public agencies must follow to adopt a
property-related fee, charge, or assessment (“fee”) for water or
sewer service.
Staff recommends that the Board adopt Resolution No. 4453, which
establishes an exhaustion of administrative remedies procedure
(“exhaustion procedure”) consistent with Assembly Bill No. 2257
(2024) (chaptered at Government Code sections 53759.1 and 53759.2).
The exhaustion procedure allows ratepayers to raise legal objections
to a proposed fee structure to the District’s attention early in the
fee consideration process, providing the District with an opportunity
to address or resolve any objections before the District’s Board of
Directors makes a final decision on whether to adopt a proposed fee
pursuant to Proposition 218. The exhaustion procedure requires that a
customer present any legal objections to the fee prior to that fee’s
adoption to preserve any legal right to later pursue legal action
against the District regarding the fee structure.
Under the exhaustion procedure, the District will generally:
• Notify the public of the amount of the proposed fee;
• Make publicly available (including on the District’s website)
the District’s written basis for the proposed fee;
• Provide a 45-day period for ratepayers to review the proposed
fee and its basis and make any legal objections;
• Require that any legal objection be submitted in writing to the
District and specify the grounds for alleged noncompliance with
Proposition 218; and
• Require that the District consider and respond in writing to any
timely-submitted legal objections prior to the close of the
protest hearing required under Proposition 218.
In connection with the District’s consideration of water or sewer
rate increases, the Board will determine at the hearing whether:
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• The written objections and the District’s response warrant
clarifications to the proposed fee or assessment or the Cost of
Service Report;
• The proposed fee or assessment should be reduced;
• Further review of the Cost of Service Report and proposed fee or
assessment is necessary before making a determination on whether
clarification or reduction is needed; and
• The protest hearing or ballot tabulation hearing, as required
under Sections 4 or 6 of Article XIII D of the California
Constitution, should proceed.
Approximately 15 days will be added to the 45-day window required
under the District’s traditional Proposition 218 notice and protest
procedures. These additional days will allow for time to respond in
writing to all written objections, as required under AB 2257.
Adopting this procedure will protect the District against
unanticipated legal challenges to its fee structure and will ensure a
well-documented administrative record of the basis for, and any legal
objections to, the fee structure.
FISCAL IMPACT: Joe Beachem, Chief Financial Officer
None
STRATEGIC GOAL:
The District ensures its continued financial health through long-term
financial and debt planning.
LEGAL IMPACT:
None
Attachments: Attachment A – Committee Action
Attachment B – Resolution No. 4453
Exhibit I Strike-through Section 25
Exhibit II Proposed Section 25
ATTACHMENT A
SUBJECT/PROJECT:
Adopt Resolution No. 4453 Amending Section 25 of the
District’s Code of Ordinances to incorporate “Establishing
a Procedure for Ratepayer Objections to Proposed Water and
Sewer Fees and Charges”
COMMITTEE ACTION:
RESOLUTION NO. 4453
A RESOLUTION OF THE BOARD OF DIRECTORS OF
THE OTAY WATER DISTRICT TO AMEND SECTION 25
OF THE DISTRICT’S CODE OF ORDINANCES
ESTABLISHING A PROCEDURE FOR
RATEPAYER LEGAL OBJECTIONS TO
PROPOSED WATER AND SEWER FEES AND CHARGES
WHEREAS, the Otay Water District Board of Directors has
been presented with a resolution “ESTABLISHING A PROCEDURE FOR
RATEPAYER LEGAL OBJECTIONS TO PROPOSED WATER AND SEWER FEES AND
CHARGES” authorizing the establishment of an administrative
remedies procedure (“exhaustion procedure”); and
WHEREAS, the Otay Water District is a Municipal Water
District (“District”), formed pursuant to Water Code Section 711
et seq. and provides water and sewer service to its retail
customers; and
WHEREAS, California law requires that certain changes to
retail water and sewer fees and charges be adopted in accordance
with procedures outlined in Article XIII D, of the California
Constitution, commonly referred to as “Proposition 218;" and
WHEREAS, Proposition 218 establishes certain procedural
requirements and substantive limitations that a local public
agency must follow to adopt a property-related fee, charge, or
assessment (“fee”) for water or sewer service; and
Attachment B
WHEREAS, this resolution is intended to adopt an exhaustion
procedure consistent with Assembly Bill No. 2257 (2024)
(chaptered at Government Code sections 53759.1 and 53759.2).
The exhaustion procedure allows ratepayers to bring a legal
objection regarding the proposed fee to the District’s attention
early in the fee consideration process, and provides an
opportunity for the District to address or resolve any
objections before the District’s Board of Directors makes a
final decision on whether to adopt a proposed fee pursuant to
Proposition 218. The exhaustion procedure requires ratepayers to
participate in the pre-adoption objection process in order to
preserve a legal right to sue the District regarding the fee
structure.
WHEREAS, the proposed exhaustion procedure will generally
require the District to: notify the public of the amount of the
proposed fee, make the District’s written basis for the proposed
fee publicly available (including on the District’s website),
provide 45 days for any ratepayer to review the proposed fee and
its basis and make any legal objection, require any such
objection to be in a writing to the District that specifies the
grounds for alleged noncompliance with Proposition 218, and
require the District to consider and respond in writing to
timely submitted objections prior to the close of the protest
hearing required under Proposition 218; and
WHEREAS, the Otay Water District Board of Directors has
been presented with an amended Section 25 of the District’s Code
of Ordinances for the conditions for water service of the Otay
Water District; and
WHEREAS, the amended Section 25 has been reviewed and
considered by the Board, and has determined that it is in the
interest of the District to adopt the amended Section 25; and
WHEREAS, the strike-through copy of the proposed policy is
attached as Exhibit I to this resolution; and
NOW, THEREFORE, BE IT RESOLVED, DETERMINED AND ORDERED by
the Board of Directors of the Otay Water District that the
amended Section 25, attached as Exhibit II, is hereby adopted
and the following is ordered:
1.The District Board hereby adopts the exhaustion of
administrative remedies procedure contained in Government
Code section 53759.1(c), as further described below.
2.In connection with the District’s consideration of water or
sewer rate increases, the District Board hereby directs the
staff to take the following actions:
a.Public Hearing Date. Establish a date certain for a
public hearing on any proposed water or sewer rates,
at which hearing the staff shall present a summary of
any written legal objections from the public during
the objection period and responses from staff to those
objections. The Board may consider any protests to
the proposed fee increases on the same or a different
date, but only after considering all objections and
responses. The Board may continue the hearing from
time-to-time in order to provide additional time for
consideration of, and responses to, any timely-
submitted legal objections and/or protests.
b.Cost of Service Report. Make available to the public
the written basis for the proposed fee or assessment
(the “Cost of Service Report”) by:
i.posting it on the District’s website,
ii.making it available at the headquarters of the
District, and
iii.mailing it to any property owner upon request.
c.Objection Period. Establish a time frame for an
“objection period” of not less than 45 days between
mailing of the notice described below and the public
hearing, during which period the public may submit a
written legal objection to any aspect of the Cost of
Service Report.
d.Public Notice. Notify the public in writing of the
availability of the Cost of Service Report in the
notice sent pursuant to subdivision (c) of Section 4
or paragraph (1) of subdivision (a) of Section 6 of
Article XIII D of the California Constitution, and
include in that notice:
i.a prominently displayed statement that all
written legal objections must be submitted within
the written objection period and that a failure
to timely object in writing bars any right to
challenge that fee or assessment through a legal
proceeding; and
ii.a prominently displayed description of all
substantive and procedural requirements for
submitting a legal objection to the proposed fee
or assessment; and
iii.the process for submitting protests.
3.In connection with the District’s consideration of water or
sewer rate increases, the District Board will determine at
the hearing:
a.Whether the written legal objections and the
District’s response warrant clarifications to the
proposed fee or assessment or the Cost of Service
Report.
b.Whether to reduce the proposed fee or assessment.
c.Whether to further review the Cost of Service Report
and proposed fee or assessment before making a
determination on whether clarification or reduction is
needed.
d.Whether to proceed with the protest hearing or ballot
tabulation hearing required under Section 4 or 6 of
Article XIII D of the California Constitution.
4.This resolution will take effect immediately and will apply
to any proposed water or sewer fees for which notice is
provided pursuant to Proposition 218.
5.Pursuant to Government Code sections 53759.1 and 53759.2, a
person or entity will be prohibited from bringing a
judicial action or proceeding that alleges non-compliance
with Proposition 218 for any new, increased, or extended
fee adopted by the District, unless that person or entity
has timely submitted to the District a written legal
objection to that fee that specifies the grounds for the
alleged non-compliance.
6.The Board authorizes District staff to take such other and
additional actions as may be reasonably necessary to
implement the purpose of this resolution and implement the
exhaustion procedure.
PASSED, APPROVED and ADOPTED by the Board of Directors of the
Otay Water District at a board meeting held this 7th day of May
2025, by the following vote:
Ayes:
Noes:
Abstain:
Absent:
________________________
President
ATTEST:
____________________________
District Secretary
APPROVED AS TO FORM:
Claire Hervey Collins, Special Counsel
Hanson Bridgett LLP
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25 SECTION 25 CONDITIONS FOR WATER SERVICE
25.01 SERVICE AREA
Water service shall be furnished by the District only to
property within (annexed to) a water improvement district within
the District’s service area. Water service to property located
outside an improvement district may be furnished only upon prior
approval of the Board of Directors. Temporary water service to
property located outside an improvement district may be
furnished, in accordance with Section 25.03 D.15., upon the
approval of the General Manager.
25.02 DEFINITION OF "HCF" AND "UNIT OF WATER"
As used in the Code the terms "HCF" and "unit of water" are
interchangeable and each shall mean 100 cubic feet or 748
gallons of water.
25.03 DEFINITIONS OF WATER SERVICE CATEGORIES, WATER RATES, CHARGES
AND FEES
Water service furnished by the District shall be under the
categories of services and at the rates, charges and fees as set
forth in Appendix A, Section 25.
All District water rates, charges and fees are subject to Board
approval of rate increases beginning January 1, 2023 and
periodically thereafter through December 31, 2027. The
increases shall be the amount sufficient to cover pass-through
costs from wholesale water and energy suppliers, and increases
in overall non-supplier costs, in addition to increases in pass-
through costs, not to exceed the annual increase in the Consumer
Price Index-U for the San Diego-Carlsbad Area as of January 31
of the preceding year.
Five-year periodic pass–through rate increases or decreases from
District wholesalers – All District water rates, charges and
fees are subject to periodic rate changes from the District’s
public agency wholesalers for a five-year period beginning
January 1, 2023 through December 31, 2027.
A.Set-up Fees for Accounts A set-up fee shall be charged for
each account transferred to another customer. See Appendix
A, 25.03 A. for charges. A deposit will be required of all
customers who do not own the property to be served. See
Appendix A, 25.04 A. for deposit amounts.
B.Monthly Fixed MWD & CWA Charges Each potable water service
customer shall pay a monthly MWD and CWA fixed system
charge, as set forth in Appendix A, 25.03 B. Proceeds of
the charge will be used to pay for operating and
maintenance costs, including the following: MWD Readiness-
Exhibit I
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to-Serve Charge and Capacity Reservation Charge; CWA
Infrastructure Access Charge, Customer Service Charge,
Emergency Storage Charge, and Supply Reliability Charge.
The MWD & CWA charge is based on the size of the water
meter(s) in service with the exception of upsizing the
meter for individually metered residential fire service, as
described in Section 38.03 of the Code. The MWD & CWA
charge shall start upon installation of the meter.
C.Monthly Fixed System Charges Each water service customer
shall pay a monthly fixed system charge, as set forth in
Appendix A, 25.03 C. Proceeds of the charge will be used
to pay for water system replacement, maintenance, and
operation expenses. The system charge is based on the
customer class and the size of the water meter(s) in
service. For individually metered residential fire
service, as outlined in Section 38.03 of the Code, the size
and fee would be set based on water use requirements
without additional fire capacity. The system charge shall
start upon installation of the meter.
D.Categories of Water Service The definitions and rates and
charges for water service furnished by the District shall
be as follows:
1.DOMESTIC RESIDENTIAL WATER
(a)Defined as: Water service for single residential
and individually metered attached households as
well as other domestic uses (other than that
provided for in Paragraph 2.(a)).
(b) Base Rate: The tiered base rates of water
furnished under this category shall be set forth
in Appendix A, 25.03 D.1.(b).
(c) Monthly system charge: The monthly system charge
for water service is set forth in Appendix A,
25.03 C.1.
2.MULTI-RESIDENTIAL WATER
(a)Defined as: Master metered water service for
multiple residential households, for example,
duplexes, townhomes, apartments, and mobile
homes.
(b)Base Rate: The tiered base rates of water
furnished for each dwelling unit in this category
shall be as set forth in Appendix A, 25.03
D.2.(b).
(c) Monthly system charge: The monthly system charge
for water service is set forth in Appendix A,
25.03 C.2.
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3.BUSINESS AND COMMERCIAL WATER
(a)Defined as: Potable water service for commercial
and industrial establishments.
(b)Base Rate: The base rate for water furnished
under this category shall be determined as set
forth in Appendix A, 25.03 D.3.(b).
(c) Monthly system charge: The monthly system charge
for water service is set forth in Appendix A,
25.03 C.3.
4.NON-PUBLIC IRRIGATION AND COMMERCIAL AGRICULTURE USING
POTABLE WATER
(a)Non-public irrigation is potable water service
provided solely for irrigation of landscape or
landscaping, as defined in Section 0.02 of this
Code.
(b) Commercial agricultural engaged in the growing or
raising of livestock, in conformity with
recognized practices of husbandry, for the
purpose of commerce, trade or industry, or
agricultural horticultural or floricultural
products and produced,
(i) for human consumption or for the market,
or
(ii)for the feeding of fowl or livestock
produced for human consumption or for the
market, or
(iii) for feeding fowl or livestock for the
purpose of obtaining their products for
human consumption or for the market, such
products to be grown or raised on a
parcel of land having an area of not less
than one acre utilized exclusively
therefore.
(c)Base Rate: The base rate for water furnished
under this category shall be determined as set
forth in Appendix A, 25.03 D.4.(c).
(d) Monthly system charge: The monthly system charge
for water service is set forth in Appendix A,
25.03 C.4.
5.PUBLICLY-OWNED WATER
(a)Defined as: Potable water service for publicly-
owned establishments and/or entities exempt from
District property taxes.
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(b)Base Rate: The base rate for water furnished
under this category shall be determined as set
forth in Appendix A, 25.03 D.5.(b).
(c) Monthly system charge: The monthly system charge
for water service is set forth in Appendix A,
25.03 C.5.
6.PUBLIC IRRIGATION WATER
(a)Defined as: Potable water service provided
solely for irrigation of publicly-owned landscape
or landscaping as defined in Section 0.02 of this
Code and/or entities exempt from District
property taxes.
(b)Base Rate: The base rate for water furnished
under this category shall be determined as set
forth in Appendix A, 25.03 D.6.(b).
(c) Monthly system charge: The monthly system charge
for water service is set forth in Appendix A,
25.03 C.6.
7.CONSTRUCTION WATER
(a)Defined as: Potable water service for
construction or for temporary purposes pursuant
to Section 31 of this Code.
(b)The rates for water furnished under this category
is set forth in Appendix A, 25.03 D.7.(b).
(c)Monthly system charge: The monthly system charge
for water service is set forth in Appendix A,
25.03 C.7.
8.RECYCLED WATER – NON-PUBLIC IRRIGATION, CONSTRUCTION,
AND CERTAIN NON-IRRIGATION PURPOSES
(a)Defined as: Non-potable and recycled water service
provided for irrigation of landscaping, as defined
in Section 0.02 of the Code, and certain non-
irrigation purposes, other than domestic use, in
compliance with federal, state, and local laws and
regulations regarding use of recycled water.
(b)The provisions of this Code, relating to use of
recycled water, set forth in Section 26 of the Code,
including but not limited to cross-connections and
backflow protective devices, shall be strictly
enforced in connection with the use of recycled
water.
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(c)Base Rate: The base rate for water furnished
under this category shall be determined as set
forth in Appendix A, 25.03 D.8.(c).
(d) Monthly system charge: The monthly system charge
for recycled water service is set forth in
Appendix A, 25.03 C.8.
9.RECYCLED WATER - COMMERCIAL
(a)Defined as: Non-potable and recycled water service
provided for commercial customers, as defined in
Section 0.02 of the Code, and certain non-irrigation
purposes, other than domestic use, in compliance
with federal, state and local laws and regulations
regarding use of recycled water.
(b)The provisions of this Code, relating to use of
recycled water, set forth in Section 26 of the Code,
including but not limited to cross-connections and
backflow protective devices, shall be strictly
enforced in connection with the use of recycled
water.
(c)Base Rate: The base rate for water furnished
under this category shall be determined as set
forth in Appendix A, 25.03 D.9.(c).
(d) Monthly system charge: The monthly system charge
for recycled water service is set forth in
Appendix A, 25.03 C.8.
10.RECYCLED WATER – PUBLIC IRRIGATION
(a)Defined as: Non-potable and recycled water service
provided for irrigation of publicly-owned
landscaping, as defined in Section 0.02 of the Code,
and/or entities exempt from District property taxes,
and certain non-irrigation purposes, other than
domestic use, in compliance with federal, state and
local laws and regulations regarding use of recycled
water.
(b)The provisions of this Code, relating to use of
recycled water, set forth in Section 26 of the Code,
including but not limited to cross-connections and
backflow protective devices, shall be strictly
enforced in connection with the use of recycled
water.
(c)Base Rate: The base rate for water furnished
under this category shall be determined as set
forth in Appendix A, 25.03 D.10.(c).
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(d) Monthly system charge: The monthly system charge
for recycled water service is set forth in
Appendix A, 25.03 C.8.
11.POTABLE INTERIM BUSINESS AND COMMERCIAL WATER
(a) Defined as: Potable water service provided by
the District on a temporary basis to business and
commercial customers in Improvement District 7
(ID 7) pursuant to individual agreements.
(b)If capacity fees have not been paid by the
customer, the rates for water furnished under
this category is set forth in Appendix A, 25.03
D.11.(b).
(c)If the customer has paid equivalent capacity and
annexation fees, the rates and charges for water
furnished under this category shall be the rates
set forth in Appendix A, 25.03 D.3.(b).
(d)The applicable monthly system charge shall be the
same rates charged to customers in the same
category of service on a permanent meter basis
per Appendix A, 25.03 C.3.
(e)Conversion to Permanent Service. At such time as
use expires, the customer shall be required to
pay all unpaid fees in effect at the time the
permanent use is implemented.
12.POTABLE INTERIM NON-PUBLIC IRRIGATION AND COMMERCIAL
AGRICULTURE WATER
(a) Defined as: Potable water service provided by
the District on a temporary basis to non-public
irrigation and commercial agriculture customers
in Improvement District 7 (ID 7).
(b)If capacity fees have not been paid by the
customer, the rates for water furnished under
this category is set forth in Appendix A, 25.03
D.12.(b).
(c)If the customer has paid capacity and annexation
fees, the rates and charges for water furnished
under this category shall be the rates set forth
in Appendix A, 25.03 D.4.(c).
(d)The applicable monthly system charge shall be the
same rates charged to customers in the same
category of service on a permanent meter basis
per Appendix A, 25.03 C.4.
(e)Conversion to Permanent Service. At such time as
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use expires, the customer shall be required to
pay all unpaid fees in effect at the time the
permanent use is implemented.
13.TANK TRUCKS
(a)Defined as: Water service provided for the
filling of tanks on motor vehicles transporting
water used for other than earth grading purposes,
which service shall be made only through a
portable meter issued by the District to a
customer specifically for use in accordance with
the provisions herein for such service.
(b)The rate for metered water furnished under this
category is reflected in Appendix A, 25.03.D.13.
(b), plus a monthly system charge at the rate set
forth in Appendix A, 25.03 C.4.
(c)Requirements for Use of Water Meter
(1)To receive such service, the customer must
make a deposit for the use a water meter
furnished by the District. The fee is set
forth in Appendix A, 31.03 A.1.
(2)Upon termination of the service, the Dis-
trict will refund the amount of deposit
remaining after making the following
deductions:
(i)Cost of repairing or replacing the
meter, fire hydrant and/or any fittings
damaged or lost while in use; and
(ii)Unpaid charges for water or other
applicable charges.
(3)Prior to the end of each six month period
following issuance of a meter under this
section, or at the request of the District,
whichever is earlier, the customer shall
return the meter to the District for
inspection, repair, or calibration as deemed
necessary by the District.
(4)Payment for water service under this cate-
gory shall be made as follows:
(i)The bill shall be based on the amount
of water actually used, which shall be
determined by the District’s reading of
the meter or by a report made by the
customer to the District in the manner
prescribed by the District.
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(ii) Where the actual amount of water used
cannot be determined as provided in
(i), the District will issue a bill
based on a District estimate of the
amount of water used, as determined by
the District. Such estimates shall be
reconciled with actual amounts used
when the customer returns the meter to
the District as provided in paragraph 3
above.
(iii)Payments shall be made as specified on
the bill.
14.WATER SERVICE OUTSIDE DISTRICT BOUNDARIES
(a)Defined as: Water service for real property
outside the service area of the District.
(b)This service will be provided only upon prior
approval of the General Manager when there is a
surplus of water over and above the existing
needs for service in the District. This service
is temporary and may be terminated upon written
notice from the District. Customers for this
service are sometimes referred to as "outside
users."
(c)Customers applying for this category of service
shall pay an application fee as set forth in
Appendix A, 25.03 D.14.(c).
(d)The rate for metered water furnished under this
category shall be charged the rate as described
in Appendix A, 25.03 D.14.(d), plus a monthly
system charge at the rate set forth in Appendix
A, 25.03 C.5.
(e)Customers requesting only fire service or a fire
hydrant under this category shall be charged a
capacity fee based on one (1) EDU for a permanent
meter in the improvement district from which the
fire service derives its flow, plus a monthly
system charge at the rate set forth in Appendix
A, 25.03 D.16.(c).
15.WATER SERVICE OUTSIDE AN IMPROVEMENT DISTRICT
(a)Defined as: Water service for property located
within the boundaries of the District, but not
within a water improvement district. Customers
for this service are sometimes referred to as
"outside users."
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(b)Customers applying for this service shall pay an
application fee as set forth in Appendix A, 25.03
D.15.(b). The District will review the
application to determine whether the land to be
served should be annexed to an improvement
district. If it is determined that annexation is
not practical, the Board of Directors may
authorize service as an outside user. This
service will be reviewed periodically until it is
determined that the property must be annexed to
an improvement district or that service must be
terminated.
(c) The rate for metered water furnished under this
category is as set forth in Appendix A, 25.03
D.15.(c), plus a monthly system charge as set
forth in Appendix A, 25.03 C.5.
(d)Upon approval of the Board of Directors, a cus-
tomer, who has paid all construction costs for
facilities necessary to serve the customer's
property in lieu of annexation to a water
improvement district, shall be exempt from the
provision for this category of service.
16.SERVICE FOR FIRE PROTECTION
(a)Defined as: Water service provided by the Dis-
trict solely to feed fire hydrants or fire
sprinkler systems from lines or laterals con-
nected to District water mains.
(b)The District will not make a charge for the
quantity of water used for fire protection
purposes.
(c)The monthly system charge for this category
of service is set forth in Appendix A, 25.03
D.16.(c) for each connection to a District water
main made for fire protection service.
17.WATER SERVICE UNDER SPECIAL AGREEMENTS
(a)Defined as: Water service provided under express
agreements approved by the Board of Directors for
service to golf courses and other entities, which
service may be curtailed or interrupted by the
District under conditions provided in such
agreements.
(b)For water service under this category the base
rate shall be determined on a case-by-case basis.
E.Energy Charges for Pumping Water
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In addition to water rates and other charges provided for
in this Section 25.03, customers shall be charged an energy
pumping charge based on the quantity of water used and the
elevation to which the water has been lifted to provide
service.
1.Potable Water Energy Pumping Charge: The energy
pumping charge for potable water shall be made at the
rate set forth in Appendix A, 25.03 E.1.
2.Recycled Water Energy Pumping Charge: The energy
pumping charge for recycled water shall be made at the
rate set forth in Appendix A, 25.03 E.2.
25.04 DEPOSITS BY LESSEES OR NON-OWNERS OF PROPERTY
A.AMOUNT OF DEPOSIT
The customer's deposit shall be applied to reduce or
satisfy any delinquent payment or other amount due the
District at the time of termination of water service to
the customer. Any portion of the deposit remaining, after
satisfaction of the amount due, shall be refunded to the
customer that made the deposit.
The deposits listed per Appendix A, 25.04 A. may be waived
for a new residential applicant where the applicant
demonstrates credit worthiness based upon prior utility
payments or a non-delinquent water account for one year or
other similar evidence of credit.
B.REFUND OF DEPOSIT
Where funds have been on deposit for twelve months in a
domestic service account and there has been no more than
one delinquent payment on that account during that period,
the District will apply a credit to the water account in
the amount of the deposit.
C.LETTER OF CREDIT
A letter of credit, in a form approved by the General
Manager or Department Head of Finance, may be submitted to
the District to satisfy the deposit requirements.
25.05 SERVICE TO SUBSEQUENT CUSTOMERS
After a water meter has been installed for a customer and all
fees and charges have been paid, water service may be furnished
to a subsequent customer through the water meter installed
without payment of further charges, except for the set-up fee
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for transferred accounts, payment of delinquent charges for the
applicant's service or other deposits that may be required by
this Code.
25.06 PUBLIC NOTIFICATION AND LEGAL OBJECTION PROCESS FOR RATE CHANGES
California law requires that certain changes to retail water and
sewer fees and charges be adopted in accordance with procedures
outlined in Article XIII D, of the California Constitution,
commonly referred to as “Proposition 218." Additionally, the
Otay Water District has established a formal process, an
exhaustion of administrative remedies procedure (“exhaustion
procedure”) consistent with Assembly Bill No. 2257 (2024)
(chaptered at Government Code sections 53759.1 and 53759.2). The
exhaustion procedure allows ratepayers to raise legal objections
regarding proposed water or sewer rate increases. This process
ensures that ratepayers have an opportunity to voice legal
objections to a proposed property-related fee, charge, or
assessment (“fee”) for water or sewer service, and provides an
opportunity for the District to address or resolve any legal
objections before the Board of Directors makes a final decision
on whether to adopt a proposed fee pursuant to Proposition 218.
The exhaustion procedure outlined below provides a structured
framework and requires ratepayers to participate in the pre-
adoption legal objection process in order to preserve the legal
right to bring forward any judicial action or proceeding against
the District regarding the fee structure.
A.GENERAL DISTRICT REQUIREMENTS PER THE EXHAUSTION PROCEDURE
1.District will notify the public of the amount of the
proposed fee by way of the Proposition 218 notice
mailed to all customers and/or owners of record,
2.Make the District’s written basis for the proposed fee
(including any cost of service report) publicly
available (including on the District’s website),
3.Provide 45 days for any ratepayer to review the
proposed fee and its basis and make any legal
objection,
4.Require any such objection to be in a writing to the
District that specifies the grounds for alleged
noncompliance with Proposition 218, and
5.Require the District to consider and respond in
writing to timely submitted objections prior to the
close of the protest hearing required under
Proposition 218.
B.BOARD ACTIONS AND PUBLIC PARTICIPATION
1.The District Board hereby adopts the exhaustion of
administrative remedies procedure contained in
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Government Code section 53759.1(c), as further
described below.
2.In connection with the District’s consideration of
water or sewer rate increases, the District Board
hereby directs the staff to take the following
actions:
(a)Public Hearing Date. Establish a date certain for
a public hearing on any proposed water or sewer
rates, at which hearing the staff shall present a
summary of any written legal objections from the
public during the objection period and responses
from staff to those objections. The Board may
consider any protests to the proposed fee
increases on the same or a different date, but
only after considering all objections and
responses. The Board may continue the hearing
from time-to-time in order to provide additional
time for consideration of, and responses to, any
timely-submitted legal objections and/or
protests.
(b)Cost of Service Report. Make available to the
public the written basis for the proposed fee or
assessment (the “Cost of Service Report”) by:
(i)posting it on the District’s website,
(ii)making it available at the headquarters
of the District, and
(iii)mailing it to any property owner upon
request.
(c)Objection Period. Establish a time frame for an
“objection period” of not less than 45 days
between mailing of the notice described below and
the public hearing, during which period the
public may submit a written legal objection to
any aspect of the Cost of Service Report.
(d)Public Notice. Notify the public in writing of the
availability of the Cost of Service Report in the
notice sent pursuant to subdivision (c) of
Section 4 or paragraph (1) of subdivision (a) of
Section 6 of Article XIII D of the California
Constitution, and include in that notice:
(i)a prominently displayed statement that
all written legal objections must be
submitted within the written objection
period and that a failure to timely
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object in writing bars any right to
challenge that fee or assessment through
a legal proceeding; and
(ii)a prominently displayed description of
all substantive and procedural
requirements for submitting an objection
to the proposed fee or assessment; and
(iii)the process for submitting protests.
3.In connection with the District’s consideration of
water or sewer rate increases, the District Board will
determine at the hearing:
(a)Whether the written legal objections and the
District’s response warrant clarifications to the
proposed fee or assessment or the Cost of Service
Report.
(b)Whether to reduce the proposed fee or assessment.
(c)Whether to further review the Cost of Service
Report and proposed fee or assessment before
making a determination on whether clarification
or reduction is needed.
(d)Whether to proceed with the protest hearing or
ballot tabulation hearing required under Section
4 or 6 of Article XIII D of the California
Constitution.
4.This exhaustion procedure will apply to any proposed
water or sewer fees for which notice is provided
pursuant to Proposition 218.
5.Pursuant to Government Code sections 53759.1 and
53759.2, a person or entity will be prohibited from
bringing a judicial action or proceeding that alleges
non-compliance with Proposition 218 for any new,
increased, or extended fee adopted by the District,
unless that person or entity has timely submitted to
the District a written legal objection to that fee
that specifies the grounds for the alleged non-
compliance.
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25 SECTION 25 CONDITIONS FOR WATER SERVICE
25.01 SERVICE AREA
Water service shall be furnished by the District only to
property within (annexed to) a water improvement district within
the District’s service area. Water service to property located
outside an improvement district may be furnished only upon prior
approval of the Board of Directors. Temporary water service to
property located outside an improvement district may be
furnished, in accordance with Section 25.03 D.15., upon the
approval of the General Manager.
25.02 DEFINITION OF "HCF" AND "UNIT OF WATER"
As used in the Code the terms "HCF" and "unit of water" are
interchangeable and each shall mean 100 cubic feet or 748
gallons of water.
25.03 DEFINITIONS OF WATER SERVICE CATEGORIES, WATER RATES, CHARGES
AND FEES
Water service furnished by the District shall be under the
categories of services and at the rates, charges and fees as set
forth in Appendix A, Section 25.
All District water rates, charges and fees are subject to Board
approval of rate increases beginning January 1, 2023 and
periodically thereafter through December 31, 2027. The
increases shall be the amount sufficient to cover pass-through
costs from wholesale water and energy suppliers, and increases
in overall non-supplier costs, in addition to increases in pass-
through costs, not to exceed the annual increase in the Consumer
Price Index-U for the San Diego-Carlsbad Area as of January 31
of the preceding year.
Five-year periodic pass–through rate increases or decreases from
District wholesalers – All District water rates, charges and
fees are subject to periodic rate changes from the District’s
public agency wholesalers for a five-year period beginning
January 1, 2023 through December 31, 2027.
A.Set-up Fees for Accounts A set-up fee shall be charged for
each account transferred to another customer. See Appendix
A, 25.03 A. for charges. A deposit will be required of all
customers who do not own the property to be served. See
Appendix A, 25.04 A. for deposit amounts.
B.Monthly Fixed MWD & CWA Charges Each potable water service
customer shall pay a monthly MWD and CWA fixed system
charge, as set forth in Appendix A, 25.03 B. Proceeds of
the charge will be used to pay for operating and
maintenance costs, including the following: MWD Readiness-
Exhibit II
25-2
to-Serve Charge and Capacity Reservation Charge; CWA
Infrastructure Access Charge, Customer Service Charge,
Emergency Storage Charge, and Supply Reliability Charge.
The MWD & CWA charge is based on the size of the water
meter(s) in service with the exception of upsizing the
meter for individually metered residential fire service, as
described in Section 38.03 of the Code. The MWD & CWA
charge shall start upon installation of the meter.
C.Monthly Fixed System Charges Each water service customer
shall pay a monthly fixed system charge, as set forth in
Appendix A, 25.03 C. Proceeds of the charge will be used
to pay for water system replacement, maintenance, and
operation expenses. The system charge is based on the
customer class and the size of the water meter(s) in
service. For individually metered residential fire
service, as outlined in Section 38.03 of the Code, the size
and fee would be set based on water use requirements
without additional fire capacity. The system charge shall
start upon installation of the meter.
D.Categories of Water Service The definitions and rates and
charges for water service furnished by the District shall
be as follows:
1.DOMESTIC RESIDENTIAL WATER
(a)Defined as: Water service for single residential
and individually metered attached households as
well as other domestic uses (other than that
provided for in Paragraph 2.(a)).
(b) Base Rate: The tiered base rates of water
furnished under this category shall be set forth
in Appendix A, 25.03 D.1.(b).
(c) Monthly system charge: The monthly system charge
for water service is set forth in Appendix A,
25.03 C.1.
2.MULTI-RESIDENTIAL WATER
(a)Defined as: Master metered water service for
multiple residential households, for example,
duplexes, townhomes, apartments, and mobile
homes.
(b)Base Rate: The tiered base rates of water
furnished for each dwelling unit in this category
shall be as set forth in Appendix A, 25.03
D.2.(b).
(c) Monthly system charge: The monthly system charge
for water service is set forth in Appendix A,
25.03 C.2.
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3.BUSINESS AND COMMERCIAL WATER
(a)Defined as: Potable water service for commercial
and industrial establishments.
(b)Base Rate: The base rate for water furnished
under this category shall be determined as set
forth in Appendix A, 25.03 D.3.(b).
(c) Monthly system charge: The monthly system charge
for water service is set forth in Appendix A,
25.03 C.3.
4.NON-PUBLIC IRRIGATION AND COMMERCIAL AGRICULTURE USING
POTABLE WATER
(a)Non-public irrigation is potable water service
provided solely for irrigation of landscape or
landscaping, as defined in Section 0.02 of this
Code.
(b) Commercial agricultural engaged in the growing or
raising of livestock, in conformity with
recognized practices of husbandry, for the
purpose of commerce, trade or industry, or
agricultural horticultural or floricultural
products and produced,
(i) for human consumption or for the market,
or
(ii)for the feeding of fowl or livestock
produced for human consumption or for the
market, or
(iii) for feeding fowl or livestock for the
purpose of obtaining their products for
human consumption or for the market, such
products to be grown or raised on a
parcel of land having an area of not less
than one acre utilized exclusively
therefore.
(c)Base Rate: The base rate for water furnished
under this category shall be determined as set
forth in Appendix A, 25.03 D.4.(c).
(d) Monthly system charge: The monthly system charge
for water service is set forth in Appendix A,
25.03 C.4.
5.PUBLICLY-OWNED WATER
(a)Defined as: Potable water service for publicly-
owned establishments and/or entities exempt from
District property taxes.
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(b)Base Rate: The base rate for water furnished
under this category shall be determined as set
forth in Appendix A, 25.03 D.5.(b).
(c) Monthly system charge: The monthly system charge
for water service is set forth in Appendix A,
25.03 C.5.
6.PUBLIC IRRIGATION WATER
(a)Defined as: Potable water service provided
solely for irrigation of publicly-owned landscape
or landscaping as defined in Section 0.02 of this
Code and/or entities exempt from District
property taxes.
(b)Base Rate: The base rate for water furnished
under this category shall be determined as set
forth in Appendix A, 25.03 D.6.(b).
(c) Monthly system charge: The monthly system charge
for water service is set forth in Appendix A,
25.03 C.6.
7.CONSTRUCTION WATER
(a)Defined as: Potable water service for
construction or for temporary purposes pursuant
to Section 31 of this Code.
(b)The rates for water furnished under this category
is set forth in Appendix A, 25.03 D.7.(b).
(c)Monthly system charge: The monthly system charge
for water service is set forth in Appendix A,
25.03 C.7.
8.RECYCLED WATER – NON-PUBLIC IRRIGATION, CONSTRUCTION,
AND CERTAIN NON-IRRIGATION PURPOSES
(a)Defined as: Non-potable and recycled water service
provided for irrigation of landscaping, as defined
in Section 0.02 of the Code, and certain non-
irrigation purposes, other than domestic use, in
compliance with federal, state, and local laws and
regulations regarding use of recycled water.
(b)The provisions of this Code, relating to use of
recycled water, set forth in Section 26 of the Code,
including but not limited to cross-connections and
backflow protective devices, shall be strictly
enforced in connection with the use of recycled
water.
25-5
(c)Base Rate: The base rate for water furnished
under this category shall be determined as set
forth in Appendix A, 25.03 D.8.(c).
(d) Monthly system charge: The monthly system charge
for recycled water service is set forth in
Appendix A, 25.03 C.8.
9.RECYCLED WATER - COMMERCIAL
(a)Defined as: Non-potable and recycled water service
provided for commercial customers, as defined in
Section 0.02 of the Code, and certain non-irrigation
purposes, other than domestic use, in compliance
with federal, state and local laws and regulations
regarding use of recycled water.
(b)The provisions of this Code, relating to use of
recycled water, set forth in Section 26 of the Code,
including but not limited to cross-connections and
backflow protective devices, shall be strictly
enforced in connection with the use of recycled
water.
(c)Base Rate: The base rate for water furnished
under this category shall be determined as set
forth in Appendix A, 25.03 D.9.(c).
(d) Monthly system charge: The monthly system charge
for recycled water service is set forth in
Appendix A, 25.03 C.8.
10.RECYCLED WATER – PUBLIC IRRIGATION
(a)Defined as: Non-potable and recycled water service
provided for irrigation of publicly-owned
landscaping, as defined in Section 0.02 of the Code,
and/or entities exempt from District property taxes,
and certain non-irrigation purposes, other than
domestic use, in compliance with federal, state and
local laws and regulations regarding use of recycled
water.
(b)The provisions of this Code, relating to use of
recycled water, set forth in Section 26 of the Code,
including but not limited to cross-connections and
backflow protective devices, shall be strictly
enforced in connection with the use of recycled
water.
(c)Base Rate: The base rate for water furnished
under this category shall be determined as set
forth in Appendix A, 25.03 D.10.(c).
25-6
(d) Monthly system charge: The monthly system charge
for recycled water service is set forth in
Appendix A, 25.03 C.8.
11.POTABLE INTERIM BUSINESS AND COMMERCIAL WATER
(a) Defined as: Potable water service provided by
the District on a temporary basis to business and
commercial customers in Improvement District 7
(ID 7) pursuant to individual agreements.
(b)If capacity fees have not been paid by the
customer, the rates for water furnished under
this category is set forth in Appendix A, 25.03
D.11.(b).
(c)If the customer has paid equivalent capacity and
annexation fees, the rates and charges for water
furnished under this category shall be the rates
set forth in Appendix A, 25.03 D.3.(b).
(d)The applicable monthly system charge shall be the
same rates charged to customers in the same
category of service on a permanent meter basis
per Appendix A, 25.03 C.3.
(e)Conversion to Permanent Service. At such time as
use expires, the customer shall be required to
pay all unpaid fees in effect at the time the
permanent use is implemented.
12.POTABLE INTERIM NON-PUBLIC IRRIGATION AND COMMERCIAL
AGRICULTURE WATER
(a) Defined as: Potable water service provided by
the District on a temporary basis to non-public
irrigation and commercial agriculture customers
in Improvement District 7 (ID 7).
(b)If capacity fees have not been paid by the
customer, the rates for water furnished under
this category is set forth in Appendix A, 25.03
D.12.(b).
(c)If the customer has paid capacity and annexation
fees, the rates and charges for water furnished
under this category shall be the rates set forth
in Appendix A, 25.03 D.4.(c).
(d)The applicable monthly system charge shall be the
same rates charged to customers in the same
category of service on a permanent meter basis
per Appendix A, 25.03 C.4.
(e)Conversion to Permanent Service. At such time as
25-7
use expires, the customer shall be required to
pay all unpaid fees in effect at the time the
permanent use is implemented.
13.TANK TRUCKS
(a)Defined as: Water service provided for the
filling of tanks on motor vehicles transporting
water used for other than earth grading purposes,
which service shall be made only through a
portable meter issued by the District to a
customer specifically for use in accordance with
the provisions herein for such service.
(b)The rate for metered water furnished under this
category is reflected in Appendix A, 25.03.D.13.
(b), plus a monthly system charge at the rate set
forth in Appendix A, 25.03 C.4.
(c)Requirements for Use of Water Meter
(1)To receive such service, the customer must
make a deposit for the use a water meter
furnished by the District. The fee is set
forth in Appendix A, 31.03 A.1.
(2)Upon termination of the service, the Dis-
trict will refund the amount of deposit
remaining after making the following
deductions:
(i)Cost of repairing or replacing the
meter, fire hydrant and/or any fittings
damaged or lost while in use; and
(ii)Unpaid charges for water or other
applicable charges.
(3)Prior to the end of each six month period
following issuance of a meter under this
section, or at the request of the District,
whichever is earlier, the customer shall
return the meter to the District for
inspection, repair, or calibration as deemed
necessary by the District.
(4)Payment for water service under this cate-
gory shall be made as follows:
(i)The bill shall be based on the amount
of water actually used, which shall be
determined by the District’s reading of
the meter or by a report made by the
customer to the District in the manner
prescribed by the District.
25-8
(ii) Where the actual amount of water used
cannot be determined as provided in
(i), the District will issue a bill
based on a District estimate of the
amount of water used, as determined by
the District. Such estimates shall be
reconciled with actual amounts used
when the customer returns the meter to
the District as provided in paragraph 3
above.
(iii)Payments shall be made as specified on
the bill.
14.WATER SERVICE OUTSIDE DISTRICT BOUNDARIES
(a)Defined as: Water service for real property
outside the service area of the District.
(b)This service will be provided only upon prior
approval of the General Manager when there is a
surplus of water over and above the existing
needs for service in the District. This service
is temporary and may be terminated upon written
notice from the District. Customers for this
service are sometimes referred to as "outside
users."
(c)Customers applying for this category of service
shall pay an application fee as set forth in
Appendix A, 25.03 D.14.(c).
(d)The rate for metered water furnished under this
category shall be charged the rate as described
in Appendix A, 25.03 D.14.(d), plus a monthly
system charge at the rate set forth in Appendix
A, 25.03 C.5.
(e)Customers requesting only fire service or a fire
hydrant under this category shall be charged a
capacity fee based on one (1) EDU for a permanent
meter in the improvement district from which the
fire service derives its flow, plus a monthly
system charge at the rate set forth in Appendix
A, 25.03 D.16.(c).
15.WATER SERVICE OUTSIDE AN IMPROVEMENT DISTRICT
(a)Defined as: Water service for property located
within the boundaries of the District, but not
within a water improvement district. Customers
for this service are sometimes referred to as
"outside users."
25-9
(b)Customers applying for this service shall pay an
application fee as set forth in Appendix A, 25.03
D.15.(b). The District will review the
application to determine whether the land to be
served should be annexed to an improvement
district. If it is determined that annexation is
not practical, the Board of Directors may
authorize service as an outside user. This
service will be reviewed periodically until it is
determined that the property must be annexed to
an improvement district or that service must be
terminated.
(c) The rate for metered water furnished under this
category is as set forth in Appendix A, 25.03
D.15.(c), plus a monthly system charge as set
forth in Appendix A, 25.03 C.5.
(d)Upon approval of the Board of Directors, a cus-
tomer, who has paid all construction costs for
facilities necessary to serve the customer's
property in lieu of annexation to a water
improvement district, shall be exempt from the
provision for this category of service.
16.SERVICE FOR FIRE PROTECTION
(a)Defined as: Water service provided by the Dis-
trict solely to feed fire hydrants or fire
sprinkler systems from lines or laterals con-
nected to District water mains.
(b)The District will not make a charge for the
quantity of water used for fire protection
purposes.
(c)The monthly system charge for this category
of service is set forth in Appendix A, 25.03
D.16.(c) for each connection to a District water
main made for fire protection service.
17.WATER SERVICE UNDER SPECIAL AGREEMENTS
(a)Defined as: Water service provided under express
agreements approved by the Board of Directors for
service to golf courses and other entities, which
service may be curtailed or interrupted by the
District under conditions provided in such
agreements.
(b)For water service under this category the base
rate shall be determined on a case-by-case basis.
E.Energy Charges for Pumping Water
25-10
In addition to water rates and other charges provided for
in this Section 25.03, customers shall be charged an energy
pumping charge based on the quantity of water used and the
elevation to which the water has been lifted to provide
service.
1.Potable Water Energy Pumping Charge: The energy
pumping charge for potable water shall be made at the
rate set forth in Appendix A, 25.03 E.1.
2.Recycled Water Energy Pumping Charge: The energy
pumping charge for recycled water shall be made at the
rate set forth in Appendix A, 25.03 E.2.
25.04 DEPOSITS BY LESSEES OR NON-OWNERS OF PROPERTY
A.AMOUNT OF DEPOSIT
The customer's deposit shall be applied to reduce or
satisfy any delinquent payment or other amount due the
District at the time of termination of water service to
the customer. Any portion of the deposit remaining, after
satisfaction of the amount due, shall be refunded to the
customer that made the deposit.
The deposits listed per Appendix A, 25.04 A. may be waived
for a new residential applicant where the applicant
demonstrates credit worthiness based upon prior utility
payments or a non-delinquent water account for one year or
other similar evidence of credit.
B.REFUND OF DEPOSIT
Where funds have been on deposit for twelve months in a
domestic service account and there has been no more than
one delinquent payment on that account during that period,
the District will apply a credit to the water account in
the amount of the deposit.
C.LETTER OF CREDIT
A letter of credit, in a form approved by the General
Manager or Department Head of Finance, may be submitted to
the District to satisfy the deposit requirements.
25.05 SERVICE TO SUBSEQUENT CUSTOMERS
After a water meter has been installed for a customer and all
fees and charges have been paid, water service may be furnished
to a subsequent customer through the water meter installed
without payment of further charges, except for the set-up fee
25-11
for transferred accounts, payment of delinquent charges for the
applicant's service or other deposits that may be required by
this Code.
25.06 PUBLIC NOTIFICATION AND LEGAL OBJECTION PROCESS FOR RATE CHANGES
California law requires that certain changes to retail water and
sewer fees and charges be adopted in accordance with procedures
outlined in Article XIII D, of the California Constitution,
commonly referred to as “Proposition 218." Additionally, the
Otay Water District has established a formal process, an
exhaustion of administrative remedies procedure (“exhaustion
procedure”) consistent with Assembly Bill No. 2257 (2024)
(chaptered at Government Code sections 53759.1 and 53759.2). The
exhaustion procedure allows ratepayers to raise legal objections
regarding proposed water or sewer rate increases. This process
ensures that ratepayers have an opportunity to voice legal
objections to a proposed property-related fee, charge, or
assessment (“fee”) for water or sewer service, and provides an
opportunity for the District to address or resolve any legal
objections before the Board of Directors makes a final decision
on whether to adopt a proposed fee pursuant to Proposition 218.
The exhaustion procedure outlined below provides a structured
framework and requires ratepayers to participate in the pre-
adoption legal objection process in order to preserve the legal
right to bring forward any judicial action or proceeding against
the District regarding the fee structure.
A.GENERAL DISTRICT REQUIREMENTS PER THE EXHAUSTION PROCEDURE
1.District will notify the public of the amount of the
proposed fee by way of the Proposition 218 notice
mailed to all customers and/or owners of record,
2.Make the District’s written basis for the proposed fee
(including any cost of service report) publicly
available (including on the District’s website),
3.Provide 45 days for any ratepayer to review the
proposed fee and its basis and make any legal
objection,
4.Require any such objection to be in a writing to the
District that specifies the grounds for alleged
noncompliance with Proposition 218, and
5.Require the District to consider and respond in
writing to timely submitted objections prior to the
close of the protest hearing required under
Proposition 218.
B.BOARD ACTIONS AND PUBLIC PARTICIPATION
1.The District Board hereby adopts the exhaustion of
administrative remedies procedure contained in
25-12
Government Code section 53759.1(c), as further
described below.
2. In connection with the District’s consideration of
water or sewer rate increases, the District Board
hereby directs the staff to take the following
actions:
(a) Public Hearing Date. Establish a date certain for
a public hearing on any proposed water or sewer
rates, at which hearing the staff shall present a
summary of any written legal objections from the
public during the objection period and responses
from staff to those objections. The Board may
consider any protests to the proposed fee
increases on the same or a different date, but
only after considering all objections and
responses. The Board may continue the hearing
from time-to-time in order to provide additional
time for consideration of, and responses to, any
timely-submitted legal objections and/or
protests.
(b) Cost of Service Report. Make available to the
public the written basis for the proposed fee or
assessment (the “Cost of Service Report”) by:
(i) posting it on the District’s website,
(ii) making it available at the headquarters
of the District, and
(iii) mailing it to any property owner upon
request.
(c) Objection Period. Establish a time frame for an
“objection period” of not less than 45 days
between mailing of the notice described below and
the public hearing, during which period the
public may submit a written legal objection to
any aspect of the Cost of Service Report.
(d) Public Notice. Notify the public in writing of the
availability of the Cost of Service Report in the
notice sent pursuant to subdivision (c) of
Section 4 or paragraph (1) of subdivision (a) of
Section 6 of Article XIII D of the California
Constitution, and include in that notice:
(i) a prominently displayed statement that
all written legal objections must be
submitted within the written objection
period and that a failure to timely
25-13
object in writing bars any right to
challenge that fee or assessment through
a legal proceeding; and
(ii) a prominently displayed description of
all substantive and procedural
requirements for submitting an objection
to the proposed fee or assessment; and
(iii) the process for submitting protests.
3. In connection with the District’s consideration of
water or sewer rate increases, the District Board will
determine at the hearing:
(a) Whether the written legal objections and the
District’s response warrant clarifications to the
proposed fee or assessment or the Cost of Service
Report.
(b) Whether to reduce the proposed fee or assessment.
(c) Whether to further review the Cost of Service
Report and proposed fee or assessment before
making a determination on whether clarification
or reduction is needed.
(d) Whether to proceed with the protest hearing or
ballot tabulation hearing required under Section
4 or 6 of Article XIII D of the California
Constitution.
4. This exhaustion procedure will apply to any proposed
water or sewer fees for which notice is provided
pursuant to Proposition 218.
5. Pursuant to Government Code sections 53759.1 and
53759.2, a person or entity will be prohibited from
bringing a judicial action or proceeding that alleges
non-compliance with Proposition 218 for any new,
increased, or extended fee adopted by the District,
unless that person or entity has timely submitted to
the District a written legal objection to that fee
that specifies the grounds for the alleged non-
compliance.
STAFF REPORT
TYPE MEETING: Regular Board MEETING DATE: May 7, 2025
SUBMITTED BY: Jon Ravaglioli
Finance Manager
PROJECT: N/A DIV. NO.ALL
APPROVED BY: Kevin Koeppen, Assistant Chief of Finance
Joseph R. Beachem, Chief Financial Officer
Jose Martinez, General Manager
SUBJECT: Authorize the General Manager to Enter Into a Contract With
U.S. Bank for Banking Services, Including Fixed Fee Schedule,
For a Period of up to Five Years.
General Manager’s Recommendation
That the Otay Water District (District) Board of Directors approve to
authorize the General Manager to enter into a contract with U.S. Bank
for banking services, including fixed fee schedule, for a period of
up to five years.
Committee Action
Please see Attachment A.
Purpose
To obtain Board approval to authorize the General Manager to enter
into a contract with U.S. Bank for banking services, including fixed
fee schedule, for a period of up to five years.
Analysis
The District has historically performed recurring reviews of banking
pricing and services against the current market to ensure that the
AGENDA ITEM 4
2
current banking partner offers competitive pricing and access to
modern technologies and products.
U.S. Bank has been the District’s banking partner since FY 2023,
following its acquisition of MUFG Union Bank and the subsequent
transition to U.S. Bank’s systems and operations. Previously, MUFG
Union Bank had served as the District’s banking partner since 2006.
During that time, staff performed periodic pricing and in-depth
service reviews, consistently concluding that the current partner
offered the best pricing, range of services, and customer service. In
the most recent review, conducted in January 2019 and presented to
the Board at the March 6, 2019, Board Meeting, staff recommended that
the Board lock in pricing and review services in six years.
This report is based on pricing received from a request for
quotations conducted by the District in January 2025.
Staff is recommending that the District Board of Directors continue
the District’s banking partnership with U.S. Bank by authorizing the
General Manager to enter into a contract with U.S. Bank for banking
services for a period of up to five years.
Based on the analysis performed, U.S. Bank is the lowest-cost
provider in terms of monthly fees, and the District is satisfied with
their overall performance. Additionally, the financial and
administrative costs of changing banks, along with the potential for
customer disruptions and service risks, further support the
recommendation to remain with U.S. Bank. The District also utilizes
U.S. Bank as its corporate trust and custody provider under a
separate agreement, reinforcing the rationale to remain with U.S.
Bank.
Quotation Process
Staff requested quotes from seven banking institutions. Prospective
providers were given instructions for submitting the required fee
schedules, along with their qualifications and financials, and were
given a one-month deadline. Providers also received a detailed report
of the services required by The District.
The table below summarizes the banks and their responses to the
request for quotation:
Institution Response
U.S. Bank Response and quote received
California Bank and Trust Response and quote received
J.P. Morgan Chase Declined to respond
3
Bank of America No response
Wells Fargo No response
BMO (Bank of the West) No response
Banc of California No response
For cost comparison purposes, staff evaluated U.S. Bank’s current
pricing, U.S. Bank’s updated pricing, and California Bank and Trust’s
pricing. Staff also reviewed the pricing of neighboring agencies that
utilize banks other than U.S. Bank. Where comparable services could
be identified, U.S. Bank was the lower-cost provider.
Available Services
The District requires a range of banking services, which were
outlined in the RFQ document. These include account reconciliation,
account analysis, online reporting, wire transfers, lockbox services,
availability of funds, payroll services, tax payments, check fraud
protection, daylight overdraft protection, and debt services. Both
respondents met the District’s service requirements.
Banking Facilities
As part of the minimum qualifications outlined in the RFQ document,
respondents must be chartered banking institutions with full-service
branch banking facilities located within the District’s boundaries or
within 15 miles of the District offices. Both U.S. Bank (two
locations) and California Bank & Trust (one location) have facilities
within the District’s boundaries and less than three miles from
District headquarters.
Level of Customer Service
Both the Accounting and Customer Service sections have periodic,
direct interactions with U.S. Bank. Neither group reported any
dissatisfaction or unresolved service issues. U.S. Bank has been
responsive to any issues or inquires and maintains controls over the
District’s accounts. Staff is satisfied with U.S. Bank’s service
offerings and assigned support personnel.
Banking Fees
Staff used the fee schedule provided with each quote to estimate
annual fees based on an average month of service levels. The quotes
from U.S. Bank and California Bank & Trust were then compared to the
most recent pricing provided by U.S. Bank in 2023. The results of
this analysis are presented in the following table:
4
Institution Estimated Annual Fees
U.S. Bank (2023) $74,500
U.S. Bank (2025) $68,000
California Bank & Trust (2025) $110,500
Comparing the quotes received from U.S. Bank and California Bank &
Trust, there was a significant cost savings with U.S. Bank, given the
average volume of monthly transactions. Comparing the current U.S.
Bank quote with the previous U.S Bank quote, pricing decreased by
approximately 10%. Given the increase in the Consumer Price Index
(CPI) and the rising costs of other services during this period, the
decline in proposed banking fees is particularly notable.
Additionally, U.S. Bank has agreed to fix the proposed banking fees
for the five-year period.
Fiscal Impact Joe Beachem, Chief Financial Officer
The District’s banking fees will be slightly less than current fees.
Based on the analysis performed, staff estimates total banking
service fees to be $68,000, an approximate 10% decrease from the
prior analysis.
Strategic Goal
The District ensures its continue financial health through long-term
financial planning, formalized financial policies, enhanced budget
controls, fair pricing, debt planning, and improved financial
reporting.
Legal Impact
None.
Attachments:
Attachment A – Committee Action
ATTACHMENT A
SUBJECT/PROJECT:
Authorize the General Manager to Enter Into a Contract With
U.S. Bank for Banking Services, Including Fixed Fee
Schedule, For a Period of up to Five Years.
Committee Action
STAFF REPORT
TYPE MEETING: Regular Board MEETING DATE: May 7, 2025
SUBMITTED BY: Jon Ravaglioli,
Finance Manager
PROJECT: DIV. NO.All
APPROVED BY: Kevin Koeppen, Assistant Chief of Finance
Joseph R. Beachem, Chief Financial Officer
Jose Martinez, General Manager
SUBJECT: Annual Review of the Investment Policy (Policy No. 27) of the
District’s Code of Ordinances and the Re-delegation of
Authority for All Investment Related Activities to the Chief
Financial Officer
General Manager’s Recommendation
That the Board receives the District’s Investment Policy (Policy No.
27) of the District’s Code of Ordinances for review and re-delegate
authority for all investment related activities to the Chief
Financial Officer, in accordance with Government Code Section 53607.
Committee Action
See Attachment A.
Purpose
Government Code Section 53646 recommends that the District’s
Investment Policy be tendered to the Board on an annual basis for
review. In addition, Government Code Section 53607 requires that for
the Board’s delegation of investment responsibilities to the Chief
Financial Officer to remain effective, the governing board must re-
delegate authority over investment activities on an annual basis.
Analysis
The primary goals of the Investment Policy are to assure compliance
with the California Government Code, Sections 53600 et seq. The
primary objectives, in priority order, of investment activities are:
AGENDA ITEM 5
1. Protect the principal of the funds.
2. Remain sufficiently liquid to enable the District to meet
all operating requirements which might be reasonably
anticipated.
3. The District’s return is a market rate of return that is
commensurate with the conservative investments approach to
meet the first two objectives of safety and liquidity.
The government code restricts local agency investment options to a
conservative list of investments, including Federal Treasuries,
Federal Agencies, Callable Federal Agencies, the State Pool, the
County Pool, high-grade corporate debt.
Each year, staff reviews legislative updates to ensure our Investment
Policy reflects the most recent and relevant updates approved by the
California State Legislature. During this year’s policy review, there
were no relevant legislative changes that affect our Investment
Policy.
On an annual basis, staff submits the Investment Policy to our list
of Broker/Dealers for their professional review and to ensure they
acknowledge and understand the District’s Investment Policy. This
year, District Brokers/Dealers did not recommend any changes be made
to our Investment Policy.
Because of the District’s adherence to a conservative range of
authorized investments, we have been able to maintain a healthy and
diversified portfolio that meets our overall investment objectives
and supports our long-term financial plans. The current policy is
consistent with the current law and the overall objectives of the
policy are being met; therefore, there are no recommended changes to
the District’s Investment Policy at this time.
Fiscal Impact Joe Beachem, Chief Financial Officer
None.
Strategic Goal
Demonstrate financial health through formalized policies, prudent
investing, and efficient operations.
Legal Impact
None.
Attachments:
A)Committee Action
B)Policy No. 27
C)Presentation Slides
ATTACHMENT A
SUBJECT/PROJECT: Annual Review of the Investment Policy (Policy No. 27) of
the District’s Code of Ordinances and the Re-delegation of
Authority for All Investment Related Activities to the
Chief Financial Officer
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
INVESTMENT POLICY 27 09/15/93 05/05/21
Page 1 of 17
1.0 POLICY
It is the policy of the Otay Water District to invest public funds in
a manner which will provide maximum security with the best interest
return, while meeting the daily cash flow demands of the entity and
conforming to all state statues governing the investment of public
funds.
2.0 SCOPE
This investment policy applies to all financial assets of the Otay
Water District. The District pools all cash for investment purposes.
These funds are accounted for in the District’s audited Comprehensive
Annual Financial Report (CAFR) and include:
2.1) General Fund
2.2) Capital Project Funds
2.2.1) Designated Expansion Fund
2.2.2) Restricted Expansion Fund
2.2.3) Designated Betterment Fund
2.2.4) Restricted Betterment Fund
2.2.5) Designated Replacement Fund
2.2.6) Restricted New Water Supply Fund
2.3) Other Post Employment Fund (OPEB)
2.4) Debt Reserve Fund
Exceptions to the pooling of funds do exist for tax-exempt debt
proceeds, debt reserves and deferred compensation funds. Funds
received from the sale of general obligation bonds, certificates of
participation or other tax-exempt financing vehicles are segregated
from pooled investments and the investment of such funds are guided by
the legal documents that govern the terms of such debt issuances.
3.0 PRUDENCE
Investments should be made with judgment and care, under current
prevailing circumstances, which persons of prudence, discretion and
intelligence, exercise in the management of their own affairs, not for
speculation, but for investment, considering the probable safety of
their capital as well as the probable income to be derived.
Attachment B
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
INVESTMENT POLICY 27 09/15/93 05/05/21
Page 2 of 17
The standard of prudence to be used by investment officials shall be
the “Prudent Person” and/or "Prudent Investor" standard (California
Government Code 53600.3) and shall be applied in the context of
managing an overall portfolio. Investment officers acting in
accordance with written procedures and the investment policy and
exercising due diligence shall be relieved of personal responsibility
for an individual security's credit risk or market price changes,
provided deviations from expectations are reported in a timely fashion
and appropriate action is taken to control adverse developments.
4.0 OBJECTIVE
As specified in the California Government Code 53600.5, when
investing, reinvesting, purchasing, acquiring, exchanging, selling and
managing public funds, the primary objectives, in priority order, of
the investment activities shall be:
4.1) Safety: Safety of principal is the foremost objective of
the investment program. Investments of the Otay Water
District shall be undertaken in a manner that seeks to
ensure the preservation of capital in the overall portfolio.
To attain this objective, the District will diversify its
investments by investing funds among a variety of securities
offering independent returns and financial institutions.
4.2) Liquidity: The Otay Water District’s investment portfolio
will remain sufficiently liquid to enable the District to
meet all operating requirements which might be reasonably
anticipated.
4.3) Return on Investment: The Otay Water District’s investment
portfolio shall be designed with the objective of attaining
a benchmark rate of return throughout budgetary and economic
cycles, commensurate with the District’s investment risk
constraints and the cash flow characteristics of the
portfolio.
5.0 DELEGATION OF AUTHORITY
Authority to manage the Otay Water District’s investment program is
derived from the California Government Code, Sections 53600 through
53692. Management responsibility for the investment program is hereby
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
INVESTMENT POLICY 27 09/15/93 05/05/21
Page 3 of 17
delegated to the Chief Financial Officer (CFO), who shall be
responsible for all transactions undertaken and shall establish a
system of controls to regulate the activities of subordinate officials
and their procedures in the absence of the CFO.
The CFO shall establish written investment policy procedures for the
operation of the investment program consistent with this policy. Such
procedures shall include explicit delegation of authority to persons
responsible for investment transactions. No person may engage in an
investment transaction except as provided under the terms of this
policy and the procedures established by the CFO.
6.0 ETHICS AND CONFLICTS OF INTEREST
Officers and employees involved in the investment process shall
refrain from personal business activity that could conflict with the
proper execution and management of the investment program, or that
could impair their ability to make impartial investment decisions.
Employees and investment officials shall disclose to the General
Manager any material financial interests in financial institutions
with which they conduct business. They shall further disclose any
personal financial/investment positions that could be related to the
performance of the investment portfolio. Employees and officers shall
refrain from undertaking personal investment transactions with the
same individual with whom business is conducted on behalf of the
District.
7.0 AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS
The Chief Financial Officer shall maintain a list of District selected
financial institutions and security broker/dealers authorized and
approved to provide investment services in the State of California.
Investment services include the buying or selling of permissible
investments such as treasuries, government agencies, etc. for delivery
to the custodian bank. These may include “primary” dealers or regional
dealers that qualify under Securities & Exchange Commission Rule 15C3-
1 (Uniform Net Capital Rule). No public deposit shall be made except
in a qualified public depository as established by state laws. All
financial institutions and broker/dealers who desire to become
qualified bidders for investment transactions must supply the District
with the following, as appropriate:
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
INVESTMENT POLICY 27 09/15/93 05/05/21
Page 4 of 17
Audited Financial Statements.
Proof of Financial Industry Regulatory Authority (FINRA)
certification.
Proof of state registration.
Completed broker/dealer questionnaire.
Certification of having read the District’s Investment
Policy.
Evidence of adequate insurance coverage.
An annual review of the financial condition and registrations of
qualified bidders will be conducted by the CFO. A current audited
financial statement is required to be on file for each financial
institution and broker/dealer through which the District invests.
8.0 AUTHORIZED AND SUITABLE INVESTMENTS
From the governing body perspective, special care must be taken to
ensure that the list of instruments includes only those allowed by law
and those that local investment managers are trained and competent to
handle. The District is governed by the California Government Code,
Sections 53600 through 53692, to invest in the following types of
securities, as further limited herein:
8.01) United States Treasury Bills, Bonds, Notes or those
instruments for which the full faith and credit of the United
States are pledged for payment of principal and interest. There
is no percentage limitation of the portfolio which can be
invested in this category, although a five-year maturity
limitation is applicable.
8.02) Local Agency Investment Fund (LAIF), which is a State
of California managed investment pool, may be used up to the
maximum permitted by State Law (currently $75 million). The
District may also invest bond proceeds in LAIF with the same but
independent maximum limitation.
8.03) Bonds, debentures, notes and other evidence of
indebtedness issued by any of the following government agency
issuers:
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
INVESTMENT POLICY 27 09/15/93 05/05/21
Page 5 of 17
Federal Home Loan Bank (FHLB)
Federal Home Loan Mortgage Corporation (FHLMC or "Freddie
Mac")
Federal National Mortgage Association (FNMA or "Fannie Mae")
Government National Mortgage Association (GNMA or “Ginnie
Mae”)
Federal Farm Credit Bank (FFCB)
Federal Agricultural Mortgage Corporation (FAMCA or “Farmer
Mac”)
There is no percentage limitation of the portfolio which can be
invested in this category, although a five-year maturity from the
settlement date limitation is applicable. Government agencies
whose implied guarantee has been reduced or eliminated shall
require an “A” rating or higher by a nationally recognized
statistical rating organization.
8.04) Interest-bearing demand deposit accounts must be made
only in Federal Deposit Insurance Corporation (FDIC) insured
accounts. For deposits in excess of the insured maximum of
$250,000, approved collateral shall be required in accordance
with California Government Code, Section 53652. Certificates of
Deposit (CD) will be made only to the FDIC-insured limit of
$250,000. Investments in CD’s are limited to 15 percent of the
District’s portfolio.
8.05) Commercial paper, which is short-term, unsecured
promissory notes of corporate and public entities. Purchases of
eligible commercial paper may not exceed 2 percent of the
outstanding paper of an issuing corporation, and maximum
investment maturity will be restricted to 270 days. Investment is
further limited as described in California Government Code,
Section 53601(h). Purchases of commercial paper may not exceed 10
percent of the District’s portfolio.
8.06) Medium-term notes defined as all corporate debt
securities with a maximum remaining maturity of five years from
the settlement date or less, and that meet the further
requirements of California Government Code, Section 53601(k).
Investments in medium-term notes are limited to 10 percent of the
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
INVESTMENT POLICY 27 09/15/93 05/05/21
Page 6 of 17
District’s portfolio and no more than 2 percent of the
outstanding medium-term notes of any single issuer.
8.07) Money market mutual funds that invest only in Treasury
securities and repurchase agreements collateralized with Treasury
securities, and that meet the further requirements of California
Government Code, Section 53601(l). Investments in money market
mutual funds are limited to 10 percent of the District's
portfolio.
8.08) The San Diego County Treasurer’s Pooled Money Fund,
which is a County managed investment pool, may be used by the
Otay Water District to invest excess funds. There is no
percentage limitation of the portfolio which can be invested in
this category.
8.09) Under the provisions of California Government Code
53601.6, the Otay Water District shall not invest any funds
covered by this Investment Policy in inverse floaters, range
notes, interest-only strips derived from mortgage pools, or any
investment that may result in a zero-interest accrual if held to
maturity. Also, the borrowing of funds for investment purposes,
known as leveraging, is prohibited.
9.0 INVESTMENT POOLS/MUTUAL FUNDS
A thorough investigation of the pool/fund is required prior to
investing, and on a continual basis. There shall be a questionnaire
developed which will answer the following general questions:
A description of eligible investment securities, and a
written statement of investment policy and objectives.
A description of interest calculations and how it is
distributed, and how gains and losses are treated.
A description of how the securities are safeguarded
(including the settlement processes), and how often the
securities are priced and the program audited.
A description of who may invest in the program, how often,
and what size deposits and withdrawals are allowed.
A schedule for receiving statements and portfolio listings.
Are reserves, retained earnings, etc., utilized by the
pool/fund?
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
INVESTMENT POLICY 27 09/15/93 05/05/21
Page 7 of 17
A fee schedule, and when and how is it assessed.
Is the pool/fund eligible for bond proceeds and/or will it
accept such proceeds?
10.0 COLLATERALIZATION
Collateralization will be required on certificates of deposit
exceeding the $250,000 FDIC insured maximum. In order to anticipate
market changes and provide a level of security for all funds, the
collateralization level will be 102% of market value of principal and
accrued interest. Collateral will always be held by an independent
third party with whom the entity has a current custodial agreement. A
clearly marked evidence of ownership (safekeeping receipt) must be
supplied to the entity and retained. The right of collateral
substitution is granted.
11.0 SAFEKEEPING AND CUSTODY
All security transactions entered into by the Otay Water District
shall be conducted on a delivery-versus-payment (DVP) basis.
Securities will be held by a third-party custodian designated by the
District and evidenced by safekeeping receipts.
12.0 DIVERSIFICATION
The Otay Water District will diversify its investments by security
type and institution, with limitations on the total amounts invested
in each security type as detailed in Paragraph 8.0, above, so as to
reduce overall portfolio risks while attaining benchmark average rate
of return. With the exception of U.S. Treasury securities, government
agencies, and authorized pools, no more than 50% of the District’s
total investment portfolio will be invested with a single financial
institution.
13.0 MAXIMUM MATURITIES
To the extent possible, the Otay Water District will attempt to match
its investments with anticipated cash flow requirements. Unless
matched to a specific cash flow, the District will not directly invest
in securities maturing more than five years from the settlement date
of the purchase. However, for time deposits with banks or savings and
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
INVESTMENT POLICY 27 09/15/93 05/05/21
Page 8 of 17
loan associations, investment maturities will not exceed two years.
Investments in commercial paper will be restricted to 270 days.
14.0 INTERNAL CONTROL
The Chief Financial Officer shall establish an annual process of
independent review by an external auditor. This review will provide
internal control by assuring compliance with policies and procedures.
15.0 PERFORMANCE STANDARDS
The investment portfolio shall be designed with the objective of
obtaining a rate of return throughout budgetary and economic cycles,
commensurate with the investment risk constraints and the cash flow
needs.
The Otay Water District’s investment strategy is passive. Given this
strategy, the basis used by the CFO to determine whether market yields
are being achieved shall be the State of California Local Agency
Investment Fund (LAIF) as a comparable benchmark.
16.0 REPORTING
The Chief Financial Officer shall provide the Board of Directors
monthly investment reports which provide a clear picture of the status
of the current investment portfolio. The management report should
include comments on the fixed income markets and economic conditions,
discussions regarding restrictions on percentage of investment by
categories, possible changes in the portfolio structure going forward
and thoughts on investment strategies. Schedules in the quarterly
report should include the following:
A listing of individual securities held at the end of the
reporting period by authorized investment category.
Average life and final maturity of all investments listed.
Coupon, discount or earnings rate.
Par value, amortized book value, and market value.
Percentage of the portfolio represented by each investment
category.
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
INVESTMENT POLICY 27 09/15/93 05/05/21
Page 9 of 17
17.0 INVESTMENT POLICY ADOPTION
The Otay Water District’s investment policy shall be adopted by
resolution of the District’s Board of Directors. The policy shall be
reviewed annually by the Board and any modifications made thereto must
be approved by the Board.
18.0 GLOSSARY
See Appendix A.
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
INVESTMENT POLICY 27 09/15/93 05/05/21
Page 10 of 17
APPENDIX A: GLOSSARY
ACTIVE INVESTING: Active investors will purchase investments and
continuously monitor their activity, often looking at the price
movements of their stocks many times a day, in order to exploit
profitable conditions. Typically, active investors are seeking short
term profits.
AGENCIES: Federal agency securities and/or Government-sponsored
enterprises.
BANKERS’ ACCEPTANCE (BA): A draft or bill or exchange accepted by a
bank or trust company. The accepting institution guarantees payment
of the bill, as well as the issuer.
BENCHMARK: A comparative base for measuring the performance or risk
tolerance of the investment portfolio. A benchmark should represent a
close correlation to the level of risk and the average duration of the
portfolio’s investments.
BROKER/DEALER: Any individual or firm in the business of buying and
selling securities for itself and others. Broker/dealers must register
with the SEC. When acting as a broker, a broker/dealer executes
orders on behalf of his/her client. When acting as a dealer, a
broker/dealer executes trades for his/her firm's own account.
Securities bought for the firm's own account may be sold to clients or
other firms, or become a part of the firm's holdings.
CERTIFICATE OF DEPOSIT (CD): A short or medium term, interest bearing,
FDIC insured debt instrument offered by banks and savings and loans.
Money removed before maturity is subject to a penalty. CDs are a low
risk, low return investment, and are also known as “time deposits”,
because the account holder has agreed to keep the money in the account
for a specified amount of time, anywhere from a few months to several
years.
COLLATERAL: Securities, evidence of deposit or other property, which a
borrower pledges to secure repayment of a loan. Also refers to
securities pledged by a bank to secure deposits of public monies.
COMMERCIAL PAPER: An unsecured short-term promissory note, issued by
corporations, with maturities ranging from 2 to 270 days.
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
INVESTMENT POLICY 27 09/15/93 05/05/21
Page 11 of 17
COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR): The official annual
report for the Otay Water District. It includes detailed financial
information prepared in conformity with generally accepted accounting
principles (GAAP). It also includes supporting schedules necessary to
demonstrate compliance with finance-related legal and contractual
provisions, extensive introductory material, and a detailed
statistical section.
COUPON: (a) The annual rate of interest that a bond’s issuer promises
to pay the bondholder on the bond’s face value. (b) A certificate
attached to a bond evidencing interest due on a set date.
DEALER: A dealer, as opposed to a broker, acts as a principal in all
transactions, buying and selling for his own account.
DEBENTURE: A bond secured only by the general credit of the issuer.
DELIVERY VERSUS PAYMENT: There are two methods of delivery of
securities: delivery versus payment and delivery versus receipt.
Delivery versus payment is delivery of securities with an exchange of
money for the securities. Delivery versus receipt is delivery of
securities with an exchange of a signed receipt for the securities.
DERIVATIVES: (1) Financial instruments whose return profile is linked
to, or derived from, the movement of one or more underlying index or
security, and may include a leveraging factor, or (2) financial
contracts based upon notional amounts whose value is derived from an
underlying index or security (interest rates, foreign exchange rates,
equities or commodities).
DISCOUNT: The difference between the cost price of a security and its
maturity when quoted at lower than face value. A security selling
below original offering price shortly after sale also is considered to
be at a discount.
DISCOUNT SECURITIES: Non-interest bearing money market instruments
that are issued at a discount and redeemed at maturity for full face
value, e.g., U.S. Treasury Bills.
DIVERSIFICATION: Dividing investment funds among a variety of
securities offering independent returns.
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BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
INVESTMENT POLICY 27 09/15/93 05/05/21
Page 12 of 17
FEDERAL CREDIT AGENCIES: Agencies of the Federal government set up to
supply credit to various classes of institutions and individuals,
e.g., S&L’s, small business firms, students, farmers, farm
cooperatives, and exporters.
FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC): A federal agency that
insures deposits in member banks and thrifts.
FEDERAL FARM CREDIT BANK (FFCB): The Federal Farm Credit Bank system
supports agricultural loans and issues securities and bonds in
financial markets backed by these loans. It has consolidated the
financing programs of several related farm credit agencies and
corporations.
FEDERAL FUNDS RATE: The rate of interest at which Fed funds are
traded. This rate is currently pegged by the Federal Reserve through
open-market operations.
FEDERAL AGRICULTURAL MORTGAGE CORPORATION (FAMC or Farmer Mac): A
stockholder owned, publicly-traded corporation that was established
under the Agricultural Credit Act of 1987, which added a new Title
VIII to the Farm Credit Act of 1971. Farmer Mac is a government
sponsored enterprise, whose mission is to provide a secondary market
for agricultural real estate mortgage loans, rural housing mortgage
loans, and rural utility cooperative loans. The corporation is
authorized to purchase and guarantee securities. Farmer Mac
guarantees that all security holders will receive timely payments of
principal and interest.
FEDERAL HOME LOAN BANK (FHLB): Government sponsored wholesale banks
(currently 12 regional banks), which lend funds and provide
correspondent banking services to member commercial banks, thrift
institutions, credit unions and insurance companies.
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC or Freddie Mac): A
stockholder owned, publicly traded company chartered by the United
States federal government in 1970 to purchase mortgages and related
securities, and then issue securities and bonds in financial markets
backed by those mortgages in secondary markets. Freddie Mac, like its
competitor Fannie Mae, is regulated by the United States Department of
Housing and Urban Development (HUD).
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
INVESTMENT POLICY 27 09/15/93 05/05/21
Page 13 of 17
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA or Fannie Mae): FNMA, like
GNMA was chartered under the Federal National Mortgage Association Act
in 1938. FNMA is a federal corporation working under the auspices of
the Department of Housing and Urban Development (HUD). It is the
largest single provider of residential mortgage funds in the United
States. Fannie Mae is a private stockholder-owned corporation. The
corporation’s purchases include a variety of adjustable mortgages and
second loans, in addition to fixed-rate mortgages. FNMA’s securities
are also highly liquid and are widely accepted. FNMA assumes and
guarantees that all security holders will receive timely payment of
principal and interest.
FEDERAL RESERVE SYSTEM: The central bank of the United States created
by Congress and consisting of a seven-member Board of Governors in
Washington, D.C., 12 regional banks and about 5,700 commercial banks
that are members of the system.
FINANCIAL INDUSTRY REGULATORY AUTHORITY, INC. (FINRA): An independent,
not-for-profit organization authorized by Congress to protect
America’s investors by making sure the securities industry operates
fairly and honestly. It is dedicated to investor protection and
market integrity through effective and efficient regulation of the
securities industry. FINRA is the successor to the National
Association of Securities Dealers, Inc. (NASD).
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA or Ginnie Mae): A
government owned agency which buys mortgages from lending
institutions, securitizes them, and then sells them to investors.
Because the payments to investors are guaranteed by the full faith and
credit of the U.S. Government, they return slightly less interest than
other mortgage-backed securities.
INTEREST-ONLY STRIPS: A mortgage-backed instrument where the investor
receives only the interest, no principal, from a pool of mortgages.
Issues are highly interest rate sensitive, and cash flows vary between
interest periods. Also, the maturity date may occur earlier than that
stated if all loans within the pool are pre-paid. High prepayments on
underlying mortgages can return less to the holder than the dollar
amount invested.
INVERSE FLOATER: A bond or note that does not earn a fixed rate of
interest. Rather, the interest rate is tied to a specific interest
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
INVESTMENT POLICY 27 09/15/93 05/05/21
Page 14 of 17
rate index identified in the bond/note structure. The interest rate
earned by the bond/note will move in the opposite direction of the
index. An inverse floater increases the market rate risk and modified
duration of the investment.
LEVERAGE: Investing with borrowed money with the expectation that the
interest earned on the investment will exceed the interest paid on the
borrowed money.
LIQUIDITY: A liquid asset is one that can be converted easily and
rapidly into cash without a substantial loss of value. In the money
market, a security is said to be liquid if the spread between bid and
asked prices is narrow and reasonable size can be done at those
quotes.
LOCAL AGENCY INVESTMENT FUND (LAIF): The aggregate of all funds from
political subdivisions that are placed in the custody of the State
Treasurer for investment and reinvestment.
MARKET VALUE: The price at which a security is trading and could
presumably be purchased or sold.
MASTER REPURCHASE AGREEMENT: A written contract covering all future
transactions between the parties to repurchase/reverse repurchase
agreements that establish each party’s rights in the transactions. A
master agreement will often specify, among other things, the right of
the buyer-lender to liquidate the underlying securities in the event
of default by the seller borrower.
MATURITY: The date upon which the principal or stated value of an
investment becomes due and payable.
MONEY MARKET: The market in which short-term debt instruments (bills,
commercial paper, bankers’ acceptances, etc.) are issued and traded.
MUTUAL FUNDS: An open-ended fund operated by an investment company
which raises money from shareholders and invests in a group of assets,
in accordance with a stated set of objectives. Mutual funds raise
money by selling shares of the fund to the public. Mutual funds then
take the money they receive from the sale of their shares (along with
any money made from previous investments) and use it to purchase
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
INVESTMENT POLICY 27 09/15/93 05/05/21
Page 15 of 17
various investment vehicles, such as stocks, bonds, and money market
instruments.
MONEY MARKET MUTUAL FUNDS: An open-end mutual fund which invests only
in money markets. These funds invest in short term (one day to one
year) debt obligations such as Treasury bills, certificates of
deposit, and commercial paper.
PASSIVE INVESTING: An investment strategy involving limited ongoing
buying and selling actions. Passive investors will purchase
investments with the intention of long-term appreciation and limited
maintenance, and typically don’t actively attempt to profit from short
term price fluctuations. Also known as a buy-and-hold strategy.
PRIMARY DEALER: A designation given by the Federal Reserve System to
commercial banks or broker/dealers who meet specific criteria,
including capital requirements and participation in Treasury auctions.
These dealers submit daily reports of market activity and positions
and monthly financial statements to the Federal Reserve Bank of New
York and are subject to its informal oversight. Primary dealers
include Securities and Exchange Commission registered securities
broker/dealers, banks, and a few unregulated firms.
PRUDENT PERSON RULE: An investment standard. In some states the law
requires that a fiduciary, such as a trustee, may invest money only in
a list of securities selected by the custody state—the so-called legal
list. In other states the trustee may invest in a security if it is
one which would be bought by a prudent person of discretion and
intelligence who is seeking a reasonable income and preservation of
capital.
PUBLIC SECURITIES ASSOCIATION (PSA): A trade organization of dealers,
brokers, and bankers who underwrite and trade securities offerings.
QUALIFIED PUBLIC DEPOSITORIES: A financial institution which does not
claim exemption from the payment of any sales or compensating use or
ad valorem taxes under the laws of this state, which has segregated
for the benefit of the commission eligible collateral having a value
of not less than its maximum liability and which has been approved by
the Public Deposit Protection Commission to hold public deposits.
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
INVESTMENT POLICY 27 09/15/93 05/05/21
Page 16 of 17
RANGE NOTE: An investment whose coupon payment varies and is dependent
on whether the current benchmark falls within a pre-determined range.
RATE OF RETURN: The yield obtainable on a security based on its
purchase price or its current market price. This may be the amortized
yield to maturity on a bond the current income return.
REGIONAL DEALER: A securities broker/dealer, registered with the
Securities & Exchange Commission (SEC), who meets all of the licensing
requirements for buying and selling securities.
REPURCHASE AGREEMENT (RP OR REPO): A holder of securities sells these
securities to an investor with an agreement to repurchase them at a
fixed price on a fixed date. The security “buyer” in effect lends the
“seller” money for the period of the agreement, and the terms of the
agreement are structured to compensate him for this. Dealers use RP
extensively to finance their positions. Exception: When the Fed is
said to be doing RP, it is lending money that is increasing bank
reserves.
SAFEKEEPING: A service to customers rendered by banks for a fee
whereby securities and valuables of all types and descriptions are
held in the bank’s vaults for protection.
SECONDARY MARKET: A market made for the purchase and sale of
outstanding securities issues following their initial distribution.
SECURITIES & EXCHANGE COMMISSION: Agency created by Congress to
protect investors in securities transactions by administering
securities legislation.
SEC RULE 15C3-1: See Uniform Net Capital Rule.
STRUCTURED NOTES: Notes issued by Government Sponsored Enterprises
(FHLB, FNMA, FAMCA, etc.), and Corporations, which have imbedded
options (e.g., call features, step-up coupons, floating rate coupons,
derivative-based returns) into their debt structure. Their market
performance is impacted by the fluctuation of interest rates, the
volatility of the imbedded options and shifts in the shape of the
yield curve.
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
INVESTMENT POLICY 27 09/15/93 05/05/21
Page 17 of 17
TREASURY BILLS: A non-interest bearing discount security issued by the
U.S. Treasury to finance the national debt. Most bills are issued to
mature in three months, six months, or one year.
TREASURY BONDS: Long-term coupon-bearing U.S. Treasury securities
issued as direct obligations of the U.S. Government and having initial
maturities of more than 10 years.
TREASURY NOTES: Medium-term coupon-bearing U.S. Treasury securities
issued as direct obligations of the U.S. Government and having initial
maturities from two to 10 years.
UNIFORM NET CAPITAL RULE: Securities and Exchange Commission
requirement that member firms as well as nonmember broker-dealers in
securities maintain a maximum ratio of indebtedness to liquid capital
of 15 to 1; also called net capital rule and net capital ratio.
Indebtedness covers all money owed to a firm, including margin loans
and commitments to purchase securities, one reason new public issues
are spread among members of underwriting syndicates. Liquid capital
includes cash and assets easily converted into cash.
YIELD: The rate of annual income return on an investment, expressed as
a percentage. (a) INCOME YIELD is obtained by dividing the current
dollar income by the current market price for the security. (b) NET
YIELD or YIELD TO MATURITY is the current income yield minus any
premium above par or plus any discount from par in purchase price,
with the adjustment spread over the period from the date of purchase
to the date of maturity of the bond.
Investment
Policy
Review
Jon Ravaglioli
Finance Manager 1May 7, 2025
Attachment C
Policy Review
Purpose:
▪Annual Investment Policy Review
❑California Government Code Section 53646
▪Delegation of Investment Authority to CFO
❑California Government Code Section 53607
2
Investment Objectives
To invest public funds in a manner which will provide maximum security while
achieving the best possible interest return, meeting daily cash flow demands of the
entity, and complying with all state statutes governing public fund investments.
Objectives (in order of priority):
▪Safety
❑Safety of principal is the foremost objective of the investment program. Investments shall
be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. To attain this objective, the District will diversify its investments by investing
funds among a variety of securities offering independent returns and financial institutions.
▪Liquidity
❑The investment portfolio will remain sufficiently liquid to enable the District to meet all
operating requirements which might be reasonably anticipated.
▪Yield
❑The investment portfolio shall be designed with the objective of attaining a benchmark rate of return throughout budgetary and economic cycles, commensurate with the District’s investment risk constraints and the cash flow characteristics of the portfolio.
3
Safety
Liquidity
Yield
Portfolio Allocations
California Government Code restricts the types of securities the District can invest in, as
well as the amounts or percent of funds that can be allocated to each category. The
District overlays additional limits that are as strict or stricter in each category.
4
Portfolio Allocations
The District primarily invests in three types of securities:
▪US Treasuries
❑United States Treasury Bills, Bonds, Notes or those instruments for which the full faith and
credit of the United States are pledged for payment of principal and interest.
▪Government Agencies
❑Bonds, debentures, notes and other evidence of indebtedness issued by any of the following
government agency issuers like: Federal Home Loan Bank (FHLB), Federal Home Loan
Mortgage Corporation (Freddie Mac), Federal National Mortgage Association (Fannie Mae),
Federal Farm Credit Bank (FFCB).
▪LAIF
❑State-managed investment pool for California’s local governments and special districts,
managed by the State Treasurer.
5
Ladder Investment Approach
The District attempts to match its investments with anticipated cash flow requirements.
The approach is to keep a percentage highly liquid (e.g., LAIF), and a percentage in fixed
income with set maturity dates. These maturity dates are generally under 2 years. To
limit risk inherent in longer-term investments, the State of California has mandated a
max maturity of 5 years.
6
Maturity Value
FY25Q4 $5,000,000
FY26Q1 $9,000,000
FY26Q2 $9,500,000
FY26Q3 $3,000,000
FY27Q2 $9,500,000
FY27Q4 $2,000,000
Policy Reviews/Changes
Annual Reviews
▪The District reviews Investment Policy No. 27 annually to ensure compliance with any
legislative changes.
❑No legislative changes for the current fiscal year.
▪Each year, the District recertifies its authorized security brokers and dealers by
reviewing their latest audited financial statements, Financial Industry Regulatory
Authority (FINRA) record, registration, and insurance. As part of this process, brokers
must certify that they have read and understand the District’s Investment Policy and
suggest any recommended changes.
▪No recommended changes from this year’s broker review.
7
Delegation of Investment Authority
▪Authority for managing the Otay Water District’s investment program is derived from
California Government Code Section 53607.
▪The Board delegates investment management responsibility annually to the Chief
Financial Officer (CFO).
▪The CFO is then responsible for all transactions undertaken and establishes a system
of controls to regulate activities, as well as investment procedures aligned with policy.
8
Conclusion – Requesting that the Board:
Review and approve the 2025 Investment Policy No. 27
Re-delegate authority for all investment activities to the District’s Chief Financial Officer
9
Questions
10