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HomeMy WebLinkAbout04-23-26 F&A Committee Meeting Packet1 OTAY WATER DISTRICT FINANCE AND ADMINISTRATION COMMITTEE MEETING and SPECIAL MEETING OF THE BOARD OF DIRECTORS 2554 SWEETWATER SPRINGS BOULEVARD SPRING VALLEY, CALIFORNIA BOARDROOM THURSDAY APRIL 23, 2026 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. AUTHORIZE THE GENERAL MANAGER TO ENTER INTO A FIVE-YEAR SEWER BILLING SERVICES AGREEMENT WITH THE CITY OF CHULA VISTA AND TO EXECUTE, AT HIS DISCRETION, ONE (1) ADDITIONAL FIVE-YEAR EXTENSION (JON RAVAGLIOLI) [5 MINUTES] 4. RECEIVE THE DISTRICT’S INVESTMENT POLICY OF THE DISTRICT’S CODE OF ORDINANCES FOR REVIEW AND RE-DELEGATE AUTHORITY FOR ALL IN- VESTMENT-RELATED ACTIVITIES TO THE CHIEF FINANCIAL OFFICER, IN ACCORDANCE WITH GOVERNMENT CODE SECTION 53607 (JON RAVAGLIO- LI) [5 MINUTES] 5. UPDATE ON THE DISTRICT-WIDE METER CHANGEOUT PROJECT (ANDREA CAREY) [5 MINUTES] 6. FISCAL YEAR 2026 MID-YEAR UPDATE FOR THE DISTRICT’S FISCAL YEAR 2023-2026 STRATEGIC PLAN (MICHAEL KERR) [10 MINUTES] 7. ADJOURNMENT 2 BOARD MEMBERS ATTENDING: Jose Lopez, Chair Delfina Gonzalez 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 I posted a copy of the foregoing agenda near the regular meeting place of the Board of Directors of Otay Water District, Spring Valley, California, said time being at least 24 hours in advance of the special meeting of the Board of Directors (Government Code Section §54954.2). /s/ Jenny Diaz, District Secretary STAFF REPORT TYPE MEETING: Regular Board MEETING DATE: May 13, 2026 SUBMITTED BY: Jon Ravaglioli Finance Manager PROJECT: DIV. NO.All APPROVED BY: Joseph R. Beachem, Chief Financial Officer Jose Martinez, General Manager SUBJECT: Authorize the General Manager to Enter into a Five-Year Sewer Billing Services Agreement with the City of Chula Vista and to Execute, At His Discretion, One Additional Five-Year Extension GENERAL MANAGER’S RECOMMENDATION: That the Board authorize the General Manager to enter into a five- year Sewer Billing Services Agreement with the City of Chula Vista and to execute, at his discretion, one additional five-year extension. COMMITTEE ACTION: See Attachment A. PURPOSE: To authorize the General Manager to enter into a new five-year Sewer Billing Services Agreement with the City of Chula Vista, effective July 1, 2027, and to execute, at his discretion, one additional five- year extension. ANALYSIS: Since May of 1981, the District has agreed to collect sewer service charges from all of its water customers who receive sewer service from the City of Chula Vista (City). Over time, several agreements between the City and the District have been in place for sewer billing services. AGENDA ITEM 3 Beginning with the December of 1995 agreement, the City and the District added numerous obligations that emphasized cooperation and planning between the two agencies. The agreement had a 20-year term and expired on June 30, 2016. The City elected to allow the agreement to expire, as many of the previously outstanding issues, such as growth and development, had been resolved. Upon the 2016 expiration, a new agreement was put in place for five years, with five additional one-year extension options, through June 30, 2026. Under the 1995 agreement, the billing rate was $0.50 per bill. In November of 2004, the City and the District agreed that due to cost increases in providing this service, the billing rate would increase to $1.03. The billing rate was further increased from $1.03 to $1.05 in November of 2015, reflecting the increase in the December 2014 San Diego Consumer Price Index (CPI). As part of the 2016 agreement, the billing rate has been adjusted annually on July 1 based on the preceding December’s San Diego CPI. The most recent rate billed for FY 2026 was $1.45 per bill. The proposed agreement defines the sewer billing services to be provided and establishes a term of five years, with one optional five-year extension. This agreement also proposes that the billing rate of $1.45 be automatically adjusted each July 1 based on changes in the prior December’s San Diego CPI. The most recent CPI change, from December 2024 to December 2025, was 3.788%, resulting in an adjusted billing rate of $1.50 per account effective July 1, 2026. FISCAL IMPACT: Joe Beachem, Chief Financial Officer The annual revenue for sewer billing services will be approximately $585,000, increasing annually according to the terms of the agreement. STRATEGIC GOAL: The District ensures its continued financial health through long-term financial planning. LEGAL IMPACT: None. Attachments: Attachment A - Committee Action Attachment B – Presentation Slide ATTACHMENT A SUBJECT/PROJECT: Authorize the General Manager to Enter into a Five-Year Sewer Billing Services Agreement with the City of Chula Vista and to Execute, At His Discretion, One Additional Five-Year Extension COMMITTEE ACTION: City of Chula Vista Sewer Billing Agreement ▪Agreement for Otay to bill City of Chula Vista sewer customers on Otay water bills ▪Billings remitted to City of Chula Vista every two months ▪Otay charges a fixed rate per customer ▪Most recent agreement ran from July 1, 2016 –June 30, 2021; five optional one-year renewals were then exercised ▪Rate increased annually based on San Diego CPI ▪Last renewal expires June 30, 2026 ▪New agreement ▪Term: five years with one five-year extension option ▪Beginning rate on July 1, 2026: $1.50 (previous rate $1.45 + CPI 3.788% = $1.50) 1 Attachment B STAFF REPORT TYPE MEETING: Regular Board MEETING DATE: May 13, 2026 SUBMITTED BY: Jon Ravaglioli, Finance Manager PROJECT: DIV. NO.All APPROVED BY: 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 4 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, and 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. As part of the annual financial audit, each year the District’s external auditors apply agreed-upon procedures to investment transactions for the year. These procedures include sampling investments to determine that they are compliant with the Investment Policy and are properly recorded in the financial statements. Roughly every three years, staff submit the District’s Investment Policy to the California Municipal Treasurers Association (CMTA) as part of their Investment Policy Certification Program. Through this program, a committee reviews submitted policies for adherence to the State of California Government Code and evaluates whether the policies meet program requirements across 18 different topic areas identified as best practices for investment policies. The District’s policy was submitted in March 2026 and earned the ‘Certified’ distinction. 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 Slide 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 Committee Action The Finance and Administration Committee recommend that the Board review the Investment Policy (Policy No. 27) of the District’s Code of Ordinances and re-delegate authority for all investment related activities to the Chief Financial Officer. Note The “Committee Action” is written in anticipation of the Finance and Administration Committee moving the item forward for Board approval. This report will be sent to the Board as a committee approved item, or modified to reflect any discussion or changes as directed from the committee prior to presentation to the full board. 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. OTAY WATER DISTRICT 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. Annual Investment Policy Review & Delegation of Investing Authority to CFO ▪Annual Investment Policy Review ▪California Government Code Section 53646 ▪Recommends the Investment Policy be tendered to the Board annually for review ▪Each year, the District reviews Investment Policy No. 27 against any legislative changes to ensure compliance ▪No legislative changes for the current fiscal year ▪The District annually recertifies its authorized security broker/dealers by reviewing their most current audited financial statements, Financial Industry Regulatory Authority (FINRA) records, registrations and insurance. ▪As part of this process, brokers are asked to certify they have read and understand the District’s Investment Policy and may recommend changes, if applicable. ▪No changes were recommended from the brokers’ review ▪Each year, as part of the annual financial audit, the District’s investments are tested by the External Auditors for compliance with the Investment Policy. ▪Every three years, the District submits its Investment Policy to the California Municipal Treasurers Association (CMTA) for certification ▪Certified March 2026 ▪Delegation of Investment Authority to CFO ▪California Government Code Section 53607 ▪Management responsibility for the investment program is annually delegated to the Chief Financial Officer (CFO) 1 Attachment C STAFF REPORT TYPE MEETING: Regular Board MEETING DATE: May 13, 2026 SUBMITTED BY: Andrea Carey, Customer Service Manager PROJECT: P2662 DIV. NO.All APPROVED BY: Joseph R. Beachem, Chief Financial Officer Jose Martinez, General Manager SUBJECT: Update on the District-Wide Meter Changeout Project GENERAL MANAGER’S RECOMMENDATION: This is an informational item only. COMMITTEE ACTION: N/A PURPOSE: To provide the Board with an update on the District-wide Meter Changeout Project. BACKGROUND: On January 8, 2025, the Board authorized the General Manager to enter into an agreement with Badger Meter, Inc. for the purchase and installation of water meters and cellular transponders as part of a District-wide meter changeout program scheduled to span the next six years. This project includes the changeout of ¾-inch to 2-inch water meters and the installation of cellular Automated Metering Infrastructure (AMI). ANALYSIS: The Meter Changeout Project is expected to span six years. District staff; the District’s project management consultant, ESource; the meter manufacturer, Badger Meter; and the installation contractor, Professional Meters, Inc.(PMI); spent the latter part of calendar year 2025 discussing system design, establishing testing requirements, and planning customer communication materials and outreach schedule. From January through April of this year, AGENDA ITEM 5 approximately 500 meters were installed as part of the Initial Deployment Area (IDA). The IDA meters were selected to test project workflow, field quality control, cellular connectivity, and overall system readiness before proceeding to full deployment. The project is currently in the IDA phase, and, pending successful system testing, full deployment is anticipated to begin in August 2026. Project Workflow Prior to beginning the project, the project team established workflows for data transfer, customer communications, and work order management. The IDA allowed these workflows to be implemented on a smaller scale to test functionality. Data Transfer The project requires data to flow in multiple directions. Data from the District to PMI’s work order management system is transmitted daily to ensure PMI has the most current customer and meter information. In return, all completed meter changeout information is relayed from PMI to the District so the final read on the old meter and all new meter information is promptly entered into the utility billing system. To minimize staff time associated with this process, the District’s IT staff developed automated processes to facilitate these data transfers. Once the meters are installed and added to the District’s billing system, the information needs to be relayed to Badger Meter’s meter data management system (Beacon). This allows customer account information to be connected to the meter/cellular endpoint within Badger’s system, which is necessary for meter read exports, data analysis, and account troubleshooting. As new meters were added, staff successfully imported and exported data from both systems. After confirming that the process was functioning effectively, an automated process was implemented to download the files from the utility billing system, which are then imported into Beacon by the District’s Meter Services team. Customer Communication Prior to the installation of any meters, District staff developed various communication tools, including a project webpage, a Frequently Asked Questions (FAQs) document, social media posts, a postcard, a door hanger, an email, and an automated phone call recording. Most recently, the District completed a customized project video addressing common questions about the installation process and overall project. All outreach materials are available in English and Spanish. The communication workflow was explained in depth during the Meter Changeout informational item presented to the Board in November. In summary, each residential property within the IDA was mailed a postcard prior to meter installation. Emails and phone calls were also sent to affected customers approximately one week prior to the installers being in their neighborhood. On the day of installation, a door hanger was left at the property upon completion of the installation or to notify the customer if the meter could not be changed out due to an issue. Work Order Management PMI utilizes a robust work order management system that allows District staff to view the addresses within a route scheduled to be changed out and the status of the changeout. For completed changeouts, staff can review photographs of the site prior to installation, the old meter prior to removal, the newly installed meter, and the final condition of the meter box. The work order management system also tracks meters that could not be changed out and have been turned back over to the District. Common reasons for this return to the District include a non-functioning District-side shutoff valve, an inaccessible meter, or an improper customer-side connection. If the issue can be resolved quickly, the meter can be returned to PMI’s active workload; otherwise, the District will complete the changeout and it will show removed in PMI’s system. District staff have worked closely with PMI throughout the IDA phase to ensure the installation process proceeds smoothly. Meter Services staff maintain regular communication with the PMI supervisor, and when necessary, meet installers onsite to assist with locating and accessing meters. Full Deployment Although the IDA installations were completed successfully, there are additional steps necessary prior to full deployment. The following items will be addressed in the coming months to prepare for the first full year of installations, currently anticipated to begin in August: •Beacon Training for End Users o The meter data management system will allow Customer Service and Meter Services to access detailed meter information, including 15-minute interval data. •Data Management o The transition to AMI will generate a significant volume of data that must be managed effectively. •Project Dashboard o Development of a platform to provide District stakeholders with a high-level summary of the project’s progress. •Meter and Cellular Performance o Many meters in the IDA were selected due to their location in areas that may have difficult cellular performance, staff will be monitoring their connections. In addition, staff will be doing some field read verifications to ensure the Beacon readings match the physical meters. FISCAL IMPACT: Joe Beachem, Chief Financial Officer This is an informational item only. STRATEGIC GOAL: Invest in technology infrastructure to enhance customer engagement and satisfaction by implementing advanced metering solutions that streamline service delivery and provide customers with timely, accessible information about their water use. LEGAL IMPACT: This is an informational item only. Attachments: A)Committee Action B)PowerPoint Presentation ATTACHMENT A SUBJECT/PROJECT: Update on the District-Wide Meter Changeout Project COMMITTEE ACTION: NOTE: The “Committee Action” is written in anticipation of the Committee moving the item forward for board approval. This report will be sent to the Board as a committee approved item, or modified to reflect any discussion or changes as directed from the committee prior to presentation to the full board. Water Meter Changeout Project Update Attachment B Meter Changeout •Meters are reaching the end of their 20-year lifecycle •District contracted with Esource, Inc. to assist with the procurement process •Request for Proposal issued mid-June 2024, to include meters, installation, AMI, and MDMS. Responses due July 31, 2024 •Six proposals received •Staff from Finance, Engineering, Water Operations, and IT involved in evaluation Meter Changeout •The Otay Board of Directors authorized the General Manager to enter into an agreement with Badger Meter, Inc. for a District-wide meter changeout program Project Timeline September 2025 - August 2026 August 2026 - June 2031 Planning & System Design Initial Meter Deployment (500 meters) System Integration & Testing Full Scale Deployment Meter Changeout •Meters are reaching the end of their 20-year lifecycle •District contracted with Esource, Inc. to assist with the procurement process •Request for Proposal issued mid-June 2024, to include meters, installation, AMI, and MDMS. Responses due July 31, 2024 •Six proposals received •Staff from Finance, Engineering, Water Operations, and IT involved in evaluation Initial Meter Deployment •In anticipation of the initial meter deployment, staff established testing requirements and planned customer communications and the outreach schedule from September – December 2025. •Installation of approximately 500 meters occurred from January – April 2026. •The initial meter deployment will allow staff to test installation workflow, field quality control, cellular connectivity, and system readiness. Data Transfer Customer Communication Customer Communication Customer Communication Work Order Management Work Order Management Return to Utility Next Steps ➢Beacon training for all end users. ➢Implement best practices for data management. ➢Develop a project dashboard. ➢Continue to evaluate meter and cellular performance. Questions? STAFF REPORT TYPE MEETING: Regular Board MEETING DATE: May 13, 2026 PROJECT: Various DIV. NO. ALL SUBMITTED BY: Michael Kerr, Information Technology Manager APPROVED BY: Kevin Koeppen, Chief, Administrative Services Jose Martinez, General Manager SUBJECT: FY26 MID-YEAR REPORT OF THE DISTRICT’S FY23-26 STRATEGIC PLAN GENERAL MANAGER’S RECOMMENDATION: No recommendation. This is an informational item only. COMMITTEE ACTION: Please see “Attachment A”. PURPOSE: To provide a mid-year report on the District’s FY23-26 Strategic Plan for FY26. ANALYSIS: Summary The current Otay Water District Strategic Plan is a four-year initiative, spanning from the start of FY23 through the end of FY26. This report provides a mid-year update on the progress made during the last year of the plan. Objectives – Target 90% Strategic Plan objectives are designed to ensure the District’s execution of mission-derived strategies and the implementation of changes necessary to guide the agency, address emerging challenges, and foster positive adaptation to change. FY26 mid-year results are at 91%, with 32 of 35 active items completed or on schedule; one (1) behind AGENDA ITEM 6 schedule, and two (2) on hold. Objective Behind Schedule (1): INTERNAL BUSINESS PROCESS Strategy: Leverage the use of renewable and clean energy resources and reduce the use of hazardous chemicals. Objective: Evaluate and implement alternative energy opportunities. Evaluation of alternative energy options is being conducted through the Climate Adaptation and Resiliency Plan (CARP). CARP includes a detailed analysis of climate impacts, resilience strategies, and energy opportunities. As the effort has expanded beyond the original scope, requiring data validation, cross-department coordination, and consideration of regulatory and funding factors, this objective is behind schedule, with an estimated completion date at the end of FY27. Objectives On Hold (2): FINANCIAL Strategy: Maintain a long-range financing plan that sets forth the long-term funding needs of the District. Objective: Evaluate banking functions for lower cost and process efficiencies. This objective remained on hold as staff prioritized several time- sensitive projects, including implementation of the new customer information system (CIS). With the upcoming implementation of a new CIS, the District will also be updating its customer-facing bill and payment portal. Staff anticipates soliciting a new payment processor in the third and fourth quarter of FY26. At that time, staff will also be looking at cost-savings options that may be implemented with 05 10152025303540 45 32 1 2 On Schedule/Completed Behind On Hold 32 of 35 Objectives are Completed or On Schedule (91%) the new vendor. These options are expected to be presented for management review by the end of FY26 but not implemented until the rollout of the new customer portal anticipated in third quarter of 2027. Objective: Evaluate the District’s cash reserve policies to consider optimal uses and levels of reserves, to ensure financial resiliency. This objective remained on hold while the final steps of the financial ERP implementation become operational. While the system is live, staff is completing the operational implementation of the budgeting module and building supporting reporting models. Progress is also pending the hiring of a new Finance Manager and the issuance of debt in FY27. Key Performance Indicators (KPI’s) – Target 75% KPI’s are designed to track the District’s day-to-day performance. These indicators measure the effectiveness and efficiency of essential operational services. The District’s overall KPI goal of 75% is considered “on target”. For FY26, the mid-year results surpassed this goal, achieving 100% with 22 of 22 items meeting or exceeding the desired level. KPIs are defined using established AWWA performance benchmarks, water agency standards, and historical trends. Of the total measures outlined in the Strategic Plan, eleven (11) are reported annually to include:  Water Rate Ranking  Sewer Rate Ranking  Water Debt Coverage  Sewer Debt Coverage  Reserve Level  Accounts Per Full-Time Employee (FTE)  Hydrant Maintenance Program  Business Recovery Exercises  Vulnerability Assessments  Potable Tank Inspection and Cleaning  Injury Incident Rate One (1) measure is reported biennially to triennially:  Customer Opinion Survey Next Steps Staff will continue to focus on the plan’s objectives, key performance indicators, and emerging trends as it closes out this Strategic Plan and transitions to the new FY27-30 Strategic Plan adopted by the Board at the April 1, 2026 Board meeting. Committee Reports – Slideshow The Strategic Plan mid-year results are presented to both the Engineering, Operations, and Water Resources Committee and the Finance and Administration Committee (see “Attachment B”). The Strategic Plan is also available on the District’s website. FISCAL IMPACT: Joe Beachem, Chief Financial Officer Informational item only; no fiscal impact. STRATEGIC GOAL: Strategic Plan and Performance Measure reporting is a critical element in providing performance reporting to the Board and staff. LEGAL IMPACT: None. ATTACHMENTS: Attachment A – Committee Action Report Attachment B – PowerPoint Presentation 22 of 22 Key Performance Indicators are On Target (100%) 0510152025303540 22 0 On Target Not on Target ATTACHMENT A SUBJECT/PROJECT: FY26 MID-YEAR REPORT OF THE DISTRICT’S FY23-26 STRATEGIC PLAN COMMITTEE ACTION: The Engineering, Operations, & Water Resources Committee, and the Finance & Administration Committee reviewed this item at a meeting held on April 22 and 23, 2026, respectively. The Committee supports presentation to the full Board. NOTE: The “Committee Action” is written in anticipation of the Committee moving the item forward for Board approval. This report will be sent to the Board as a committee approved item or modified to reflect any discussion or changes as directed by the committee prior to presentation to the full Board. OTAY WATER DISTRICT STRATEGIC PLAN FY2026 Mid-Year Report OTAY WATER DISTRICT STRATEGIC PLAN FY2026 Mid-Year Report 2023 2026 ATTACHMENT B BALANCED SCORECARDBALANCED SCORECARD 2 Focuses on the financial performance of the District FINANCIALFINANCIAL Focuses on the District’s culture and development of staff to ensure there is a productive and skilled workforce in place LEARNING AND GROWTH LEARNING AND GROWTH Focuses on customer service levels, satisfaction, brand, and confidence CUSTOMERCUSTOMER Focuses on business processes designed to deliver and improve customer objectives and services INTERNAL BUSINESS PROCESS INTERNAL BUSINESS PROCESS 90% Total 35 ON SCHEDULE COMPLETED BEHIND SCHEDULE ON HOLD OBJECTIVESOBJECTIVES MID-YEAR FY 2026 32 Objectives 32/35 = 91% Overall Target Active/Completed 35 Not Started 0 1 Objective 1/35 = 3% 2 Objectives 2/35 = 6% CUSTOMER Enhance and build public awareness of the District’s priorities, initiatives, programs, and services Collect and analyze customer feedback on District operations, projects, programs, service experience, and expectations Advance the District's web and social media presence Enhance internal communications, tools, and technology to disseminate information to District staff effectively Enhance education, outreach, and communication tools to the public on the understanding of water supply constraints and rates and how they affect/support a reliable water supply 4 On ScheduleCompleted EILEEN SALMERON Communications Assistant (With 2025 Landscape Winner, Catherine S.) FINANCIAL Maintain a long-range financing plan that sets forth the long-term funding needs of the District Evaluate grant funding opportunities Evaluate banking functions for lower cost and process efficiencies Evaluate the District’s cash reserve policies to consider optimal uses and levels of reserves, to ensure financial resiliency Conduct an evaluation of a health savings investment account program for an optional post-employment benefit Conduct a compensation study to evaluate labor industry conditions and the District’s competitiveness Invest in technology infrastructure to enhance customer engagement and satisfaction Evaluate Interactive Voice Response (IVR)/Online customer portal for water use management and assistance Deploy Advanced Metering Infrastructure (AMI) technology in service areas to improve the District Operation 5 Left to right: OLIVIA READY & BETH GENTRY Engineering Staff On-HoldOn ScheduleCompleted INTERNAL BUSINESS PROCESS Leverage the use of renewable and clean energy resources and reduce the use of hazardous chemicals Evaluate and implement energy-efficient systems Evaluate and implement alternative energy opportunities Advance Clean Fleet Regulations District Implementation Program of Zero or near Zero Emissions Vehicles Reduce the District’s chemical footprint by substituting hazardous chemicals for similar, less hazardous chemicals Implement technologies to improve response time, security, and operational effectiveness Conversion of the District’s enterprise Geographic Information System (GIS/Esri) from a Geometric Network to a Utility Network Model Conduct needs assessment/replacement of District's financial management system Maintain and regularly evaluate internal financial controls Leverage Cityworks to further develop job task process standardization and work order cost modeling 6 Behind ScheduleOn ScheduleCompleted JEFF GOIN Sr. Disinfection Technician INTERNAL BUSINESS PROCESS Develop appropriate water resource mix to meet the water reliability needs of the community Use the Water Facilities Water Management Plan/Urban Water Management Plan to analyze future needs and prescribe approaches to meeting future requirements Evaluate City of San Diego’s recycled water purchase Develop the District’s long-term water supply strategies and planning efforts with regional partnerships Respond to anticipated water shortages through rate structure modification, conservation assistance, and outreach Monitor and modify the Water Shortage Contingency Plan, as needed Identify, evaluate, and implement new opportunities for recycled water, including potential for potable reuse 7 On ScheduleCompleted JULIANA LUENGAS Environmental Compliance Specialist INTERNAL BUSINESS PROCESS Advancement of District's Asset Management Program Formalization of Standard Operating Procedures (SOP) and Planned Job Observations (PJO) Develop long-term strategic operations and maintenance program (Total Asset Management) Collect and maintain accurate asset records, including criticality, maintenance history, asset condition, and performance for continuous improvement Cloud migration of the District’s enterprise Geographic Information System (GIS/Esri) and the associated Asset Management and Field Applications Cyber and Physical Security Advance the use of the District's Supervisory Control and Data Acquisition (SCADA) system to further enhance the security and reliability of the distribution system and optimize administration Evaluate new disaster recovery solutions and advance the District's enterprise business continuity program 8 On ScheduleCompleted KEVIN WINDER Water Systems Operator III LEARNING AND GROWTH Coordinate workforce planning activities to determine future needs, identify gaps, and implement actions to close the gaps Maximize opportunities to develop employees through training and mentoring Evaluate the implementation of learning and development programs in coordination with partner agencies Analyze and identify workforce trends to address critical gaps between the current workforce and future needs Improve Organization Effectiveness Negotiate successor Memorandum of Understanding (MOU) with the employee association and unrepresented employees to focus on recruitment and retention Implement a cross-functional innovation committee to advance the District’s culture of collaboration and process improvement among departments 9 On ScheduleCompleted ANDREA CAREY Customer Service Manager KEY PERFORMANCE INDICATORSKEY PERFORMANCE INDICATORS MID-YEAR FY 2026 Overall Target 75% Total 34 Reported Quarterly 22 Reported Annually 11 22 KPIs 22/22 = 100% ON TARGET NOT ON TARGET 0 KPIs 0/23 = 0% Reported Biennial to Triennial 1 10 11 0.97 0.830 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Q1 Q2 Q3 Q4 Result Target 75th Percentile Median 25th Percentile TECHNICAL QUALITY COMPLAINT (AWWA | Customer Relations) DEANDRE SAVAGE Lead Water Systems Operator TARGET No more than 1.15 complaints per 1,000 customer accounts per quarter | No more than 4.6 complaints per 1,000 customer accounts annually CALCULATION Number of technical quality complaints per year/Number of active accounts per reporting period AWWA BENCHMARK Average of 75th Percentile, 2.6, and Median, 6.6, for population served between 100,001 – 500,000 (Combined Utilities) TARGET 100% of all health-related drinking water standards per quarter and annually CALCULATION Number of days the primary health regulations are met/Number of days in the reporting period AWWA BENCHMARK 100% - 75 th Percentile for population served between 100,001 – 500,000 (Water)12 100%100% (FY 23 Q1 & Q2 Result)98.10%97.94% 95% 96% 97% 98% 99% 100% Q1 Q2 Q3 Q4 Result Target ANSWER RATE 100%100% 95% 96% 97% 98% 99% 100% Q1 Q2 Q3 Q4 Result Target POTABLE WATER COMPLIANCE RATE (AWWA | Water Operations) TARGET 97% average answer rate per quarter and annually CALCULATION Number of calls answered/Total number of calls 13 $884.93 $1,183.81 $500 $700 $900 $1,100 $1,300 $1,500 $1,700 $1,900 Q1 Q2 Q3 Q4 Result Target DIRECT COST OF TREATMENT PER MGD EDOARDO GONZALEZ Reclamation Plant Operator III TARGET No more than $1255 MGD spent in Q1 & Q4 and $1673 MGD spent in Q2 & Q3 | No more than $1464 per MGD spent on wastewater treatment annually CALCULATION Total O&M costs directly attributable to sewer treatment/Total volume in MG for one quarter 14 15% 45% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Q1 Q2 Q3 Q4 Result Target CIP PROJECT EXPENDITURES VS. BUDGET TARGET 95% of the budget annually Q1: 15% + Q2: 21% + Q3: 29% + Q4: 30% = 95% CALCULATION Actual Expenditures/Annual Budget BOARD MEMBERS & STAFF 870-2 Reservoir Tour 15 73%73% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Q1 Q2 Q3 Q4 Result Target PLANNED POTABLE WATER MAINTENANCE RATIO IN $ TARGET 70% of all labor costs spent on preventative maintenance per quarter and annually CALCULATION Total Planned Maintenance Cost/Total Maintenance Cost -0.1% -0.8% -5% -3% -1% 1% 3% 5% Q1 Q2 Q3 Q4 Result Target CONSTRUCTION CHANGE ORDER INCIDENCE TARGET No more than 5% per quarter and annually CALCULATION Cost of Change Orders (not including allowances)/Original construction contract amount (not including allowances) 16 97% 83% 50% 55% 60% 65% 70% 75% 80% 85% 90% 95% 100% Q1 Q2 Q3 Q4 Result Target PLANNED WASTEWATER MAINTENANCE RATIO IN $ TARGET 80% of all labor costs spent on preventative maintenance per quarter and annually CALCULATION Total Planned Maintenance Cost/Total Maintenance Cost 90%90% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Q1 Q2 Q3 Q4 Result Target PLANNED RECYCLED WATER MAINTENANCE RATIO IN $ TARGET 70% of all labor costs spent on preventative maintenance per quarter and annually CALCULATION Total Planned Maintenance Cost/Total Maintenance Cost 17 4%4% 0% 1% 2% 3% 4% 5% 6% 7% Q1 Q2 Q3 Q4 Result Target DISTRIBUTION SYSTEM LOSS TARGET Less than 5% of unaccounted water per quarter and annually CALCULATION (Total Potable Water Purchased + Total Recycled Water Purchased & Produced) – (Total Measured Billed & Unbilled Water)/(Total Potable Water Purchased + Total Recycled Water Purchased & Produced) 99.99%99.99% 95% 96% 97% 98% 99% 100% 101% Q1 Q2 Q3 Q4 Result Target BILLINGACCURACY TARGET 99.8% billing accuracy per quarter and annually CALCULATION Number of correct bills/Number of bills issued during the reporting period 18 BRANDON PERRY Utility Crew Leader 0 00 1 2 3 4 5 6 7 8 9 10 Q1 Q2 Q3 Q4 Result Target 75th Percentile Median 25th Percentile SEWER OVERFLOW RATE (AWWA | Wastewater Operations) TARGET 0 overflows per quarter and annually CALCULATION 100 (Number of sewer overflows during the reporting period)/Total miles of pipe in the sewage collection system AWWA BENCHMARK 0 – 75 th Percentile for population served between 0-50,000 0.13 0.130 2 4 6 8 10 12 14 16 Q1 Q2 Q3 Q4 Result Target 75th Percentile Median 25th Percentile 0.13 0.26 0 2 4 6 8 10 12 14 16 18 20 Q1 Q2 Q3 Q4 Result Target 75th Percentile Median 25th Percentile POTABLE WATER DISTRIBUTION SYSTEM INTEGRITY (LEAKS) (AWWA | Water Operations) 19 POTABLE WATER DISTRIBUTION SYSTEM INTEGRITY (BREAKS) (AWWA | Water Operations) TARGET No more than 0.625 leaks per 100 miles of distribution piping per quarter | No more than 2.5 leaks per 100 miles of distribution piping annually CALCULATION 100 (Number of leaks)/Total miles of distribution piping AWWA BENCHMARK 2.5 – 75 th percentile for population served between 100,001-500,000 TARGET No more than 0.75 breaks per 100 miles of distribution piping per quarter | No more than 3 breaks per 100 miles of distribution piping annually CALCULATION 100 (Number of breaks)/Total miles of distribution piping AWWA BENCHMARK 3 – 75 th percentile for population served between 100,001-500,000 0 00 0.5 1 1.5 2 2.5 3 3.5 4 Q1 Q2 Q3 Q4 Result Target RECYCLED WATER SYSTEM INTEGRITY (LEAKS) 20 0 00 0.5 1 1.5 2 2.5 3 3.5 4 Q1 Q2 Q3 Q4 Result Target RECYCLED WATER SYSTEM INTEGRITY (BREAKS) TARGET No more than 0.625 leaks per 100 miles of recycled distribution system per quarter | No more than 2.5 leaks per 100 miles of recycled distribution system annually CALCULATION 100 (Number of leaks)/Total miles of recycled distribution system TARGET No more than 0.75 breaks per 100 miles of recycled distribution system per quarter | No more than 3 breaks per 100 miles of recycled distribution system annually CALCULATION 100 (Number of breaks)/Total miles of recycled distribution system 21 100%100% 95% 96% 97% 98% 99% 100% 101% Q1 Q2 Q3 Q4 Result Target MARK-OUT ACCURACY TARGET 100% mark-out accuracy per quarter and annually CALCULATION Number of mark-outs performed without an at-fault hit, which is damage to a District facility that results from a missing or erroneous mark-out/Total number of mark-outs 25% 50% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Q1 Q2 Q3 Q4 Result Target EASEMENT EVALUATION AND FIELD INSPECTION TARGET 100% assigned easements, evaluated via desktop tools, and inspected annually 25 easements per quarter | 100 easements are assigned for FY26 CALCULATION Number of easements evaluated and inspected/Total easements assigned for the period 22 1715 2373 0 500 1000 1500 2000 2500 3000 3500 4000 4500 5000 Q1 Q2 Q3 Q4 Result Target SYSTEM VALVE EXERCISING PROGRAM TARGET 20% of District valves exercised annually to accomplish 100% every five years 1133 valves per quarter | 4526 valves annually CALCULATION Total number of valves exercised per year Left to right: MARIO BALLEJOS & CARLOS AYALA Utility Maintenance Staff 23 MIRAN JAFF Facilities Maintenance Technician 0.73% 2.19% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% Q1 Q2 Q3 Q4 Result Target EMPLOYEE VOLUNTARY TURNOVER RATE TARGET Less than 1.25% turnover per quarter | Less than 5% turnover annually CALCULATION Number of voluntary terminations (not including retirements)/Average number of employees 5.80 12.29 0 5 10 15 20 25 30 Q1 Q2 Q3 Q4 Result Target 75th Percentile Median 25th Percentile TRAINING HOURS PER EMPLOYEE (AWWA | Organizational Development) 24 TARGET 3.9 hours per employee per quarter | 15.6 hours per employee annually CALCULATION Total qualified training hours for all employees/Average number of FTEs AWWA BENCHMARK 15.6 – Median for combined utilities 9.49 18.09 0 5 10 15 20 25 30 Q1 Q2 Q3 Q4 Result Target SAFETY TRAINING PROGRAM TARGET 6 hours per field employee per quarter | 24 hours per field employee annually CALCULATION Total qualified safety training hours for field employees/Average number of field employees RESOURCE LINKS Otay Water District Website | Strategic Plan FY23 - FY26 Strategic Plan Digital Publication QUESTIONS?QUESTIONS?