HomeMy WebLinkAbout10-21-14 FA&C Committee Packet 1
OTAY WATER DISTRICT
FINANCE, ADMINISTRATION AND COMMUNICATIONS
COMMITTEE MEETING
and
SPECIAL MEETING OF THE BOARD OF DIRECTORS
2554 SWEETWATER SPRINGS BOULEVARD
SPRING VALLEY, CALIFORNIA
BOARDROOM
TUESDAY
October 21, 2014
11:30 A.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 BUT NOT AN ITEM ON TODAY'S AGENDA
DISCUSSION ITEMS
3. ADOPT ORDINANCE NO. 548 AMENDING SECTION 6, CONFLICT OF
INTEREST CODE, OF THE DISTRICT’S CODE OF ORDINANCES (WATTON)
[5 minutes]
4. APPROVE THE DISTRICT BECOMING A MEMBER OF THE NATIONAL JOINT
POWERS ALLIANCE, WHICH WOULD ENABLE THE DISTRICT TO ACCESS
THE SUNLIFE POOL FOR SHORT AND LONG TERM DISABILITY; AND
APPROVE THE DISTRICT JOINING THE CSAC EIA POOL FOR DENTAL
THIRD PARTY ADMINISTRATOR SERVICES (WILLIAMSON) [ 5 minutes]
5. ADOPT RESOLUTION NO. 4245 TO REVISE BOARD POLICY NO. 47, POLICY
AGAINST DISCRIMINATION AND HARASSMENT AND COMPLAINT
PROCEDURE (WILLIAMSON) [5 minutes]
6. ADOPT RESOLUTION NO. 4244 AMENDING POLICY NO. 25, RESERVE
POLICY, OF THE DISTRICT’S CODE OF ORDINANCES (BELL) [5 minutes]
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7. APPROVE THE DISTRICT’S AUDITED FINANCIAL STATEMENTS,
INCLUDING THE INDEPENDENT AUDITORS’ UNQUALIFIED OPINION, FOR
THE FISCAL YEAR ENDED JUNE 30, 2014 (DYCHITAN) [10 minutes]
8. UPDATE ON THE DISTRICT’S PLACEMENT OF A TEMPORARY
MORATORIUM ON THE INSTALLATION OF NEW RECYCLED WATER
FACILITIES ON OTAY MESA (MARTIN) [5 minutes]
9. UPDATE ON THE OTAY WATER DISTRICT’S WATER USE TO DATE AND
THE VARIOUS PROGRAMS AND SERVICES OFFERED THROUGH THE
DISTRICT’S CONSERVATION DIVISION (CAREY) [5 minutes]
10. UPDATE ON POTENTIAL DEMONSTRATION GARDEN TO BE LOCATED AT
THE OTAY RANCH TOWN CENTER (CAREY) [5 minutes]
11. ADJOURNMENT
BOARD MEMBERS ATTENDING:
Mitch Thompson, Chair
Jose Lopez
All items appearing on this agenda, whether or not expressly listed for action, may be
deliberated and may be subject to action by the Board.
The Agenda, and any attachments containing written information, are available at the
District’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 all attachments are also available through the District Secre-
tary by contacting her at (619) 670-2280.
If you have any disability which would require accommodation in order to enable you to
participate in this meeting, please call the District Secretary at 670-2280 at least 24
hours prior to the meeting.
Certification of Posting
I certify that on October 17, 2014 I posted a copy of the foregoing agenda near
the regular meeting place of the Board of Directors of Otay Water District, said time be-
ing 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 October 17, 2014.
______/s/_ Susan Cruz, District Secretary _____
STAFF REPORT
TYPE MEETING: Regular Board
MEETING DATE: November 5, 2014
SUBMITTED BY:
Mark Watton
General Manager
PROJECT: Various DIV. NO. ALL
APPROVED BY:
Susan Cruz, District Secretary
Mark Watton, General Manager
SUBJECT: ADOPT ORDINANCE NO. 548 AMENDING SECTION 6, CONFLICT OF
INTEREST CODE, OF THE DISTRICT’S CODE OF ORDINANCES
GENERAL MANAGER’S RECOMMENDATION:
That the Board adopt Ordinance No. 548 amending Section 6, Conflict
of Interest Code, of the District’s Code of Ordinances to expand the
list of positions required to file a Form 700 and amend the
disclosure categories. The updates and amendments are reflected in
Exhibit A of Attachment B.
COMMITTEE ACTION:
Please see attachment A.
PURPOSE:
To amend the District’s Conflict of Interest Code contained within
the District’s Code of Ordinances to expand the list of positions
required to file a Form 700 and amend the disclosure categories.
ANALYSIS:
As required by the Political Reform Act (“Act”), staff and General
Counsel has conducted a biennial review of the District’s Conflict of
Interest Code (“COI Code”). The District desires to expand the list
of positions required to file a Form 700 to include the Assistant
Chief of Administrative Services and Information Technology and
Assistant Chief of Water Operations as these positions participate in
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the making of decisions that may have a material affect on financial
interests as established by the District’s COI Code. In addition,
Counsel suggested that the District amend the disclosure categories
for several positions that are required to file a Form 700 as
follows:
Chief of Administrative Services 1, 2, 3, 4, 5, 6, 7
Chief Financial Officer 1, 2, 5, 6, 7
Chief Information Officer 1, 2, 3, 6, 7
Chief of Engineering 1, 2, 3, 4, 6, 7
Chief of Water Operations 1, 2, 3, 4, 6, 7
These proposed changes to the COI Code are reflected in Exhibit A to
Attachment B of this staff report.
FISCAL IMPACT: Joe Beachem, Chief Financial Officer
None.
LEGAL IMPACT:
None.
Attachments:
Attachment A: Committee Action
Attachment B: Ordinance No. 548, Amending Conflict of Interest
Code
ATTACHMENT A
SUBJECT/PROJECT:
COMMITTEE ACTION:
The Finance, Administration and Communications Committee reviewed this
item in detail at a meeting held on October 21, 2014 and supported
staffs’ recommendation and 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 from the committee prior to
presentation to the full board.
Page 1 of 1
ORDINANCE NO. 548
AN ORDINANCE OF THE BOARD OF DIRECTORS
OF THE OTAY WATER DISTRICT
AMENDING SECTION 6,
CONFLICT OF INTEREST CODE,
OF THE DISTRICT’S CODE OF ORDINANCE
BE IT ORDAINED by the Board of Directors of Otay Water
District that the District’s Code of Ordinances, Section 6,
Conflict of Interest Code, be amended to expand the list of
positions required to file a Form 700 and amend the disclosure
categories. The amendments are presented in Exhibit A attached
to this ordinance.
NOW, THEREFORE, BE IT RESOLVED that the amendments to
Section 6, Conflict of Interest Code, to the District’s Code of
Ordinances shall become effective immediately upon adoption.
PASSED, APPROVED AND ADOPTED by the Board of Directors of
the Otay Water District at a regular meeting duly held this 5th
day of November 2014, by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
________________________________
President
ATTEST:
_____________________________
District Secretary
Attachment B
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DIVISION I DISTRICT ADMINISTRATION
CHAPTER 5 PERSONNEL PRACTICES
SECTION 6 CONFLICT OF INTEREST CODE
6.01 DEFINITIONS
The definitions contained in the Political Reform Act of 1974,
regulations of the Fair Political Practices Commission (2 Cal. Code of
Regs. Sections 18100, et seq.), and any amendments to the Act or
regulations, are incorporated by reference into this conflict of
interest code.
6.02 DESIGNATED EMPLOYEES
The persons holding positions listed in the Appendix are
designated employees. It has been determined that these persons make
or participate in the making of decisions which may foreseeably have a
material effect on financial interests.
6.03 DISCLOSURE CATEGORIES
This Code does not establish any disclosure obligation for those
designated employees who are also specified in Government Code Section
87200 if they are designated in this code in that same capacity or if
the geographical jurisdiction of this agency is the same as or is
wholly included within the jurisdiction in which those persons must
report their financial interest pursuant to Article 2 of Chapter 2 of
the Political Reform Act, Government Code Sections 87200, et seq.1 In
addition, this code does not establish any disclosure obligation for
any designated public officials who are designated in a conflict of
interest code for another agency, if all of the following apply:
(A) The geographical jurisdiction of this agency is the same as
or is wholly included within the jurisdiction of the other agency;
(B) The disclosure assigned in the code of the other agency is
the same as that required under article 2 of chapter 7 of the
Political Reform Act, Government Code Section 87200; and
(C) The filing officer is the same for both agencies.
1 Designated employees who are required to file statements of economic interest under
any other agency’s Conflict of Interest Code or under Article 2 for a different
jurisdiction, may expand their statement of economic interests to cover reportable
interest in both jurisdictions, and file copies of this expanded statement with both
entities in lieu of filing separate and district statements, provided that each copy
of such expanded statement filed in place of an original is signed and verified by
the designated employee as if it were an original. See Government Code Section
81004.
Exhibit A
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Such persons are covered by this Code for disqualification
purposes only. With respect to all other designated employees, the
disclosure categories set forth in the Appendix specify which kinds of
financial interest are reportable. Such a designated employee shall
disclose in his or her statement of economic interest those financial
interests he or she has which are of the kind described in the
disclosure categories to which he or she is assigned in the Appendix.
It has been determined that the financial interests set forth in a
designated employee’s disclosure categories are the kinds of financial
interest which he or she foreseeably can affect materially through the
conduct of his or her office.
6.04 STATEMENTS OF ECONOMIC INTERESTS: PLACE OF FILING
All officials and employees required to submit a statement of
economic interest (employees in Designated Positions) shall file their
statements with the General Manager, or his or her designee. The
District shall make and retain a copy of all statements filed by
Designated Positions and forward the originals of such statements to
the Executive Office of the Board of Supervisors of San Diego County.
All retained statements, originals or copies shall be available for
public inspection and reproduction. (Cal. Gov’t Code § 81008)2
6.05 STATEMENTS OF ECONOMIC INTERESTS: TIME OF FILING
(A) Initial Statements. All designated employees employed by
the agency on the effective date of this code, as originally adopted,
promulgated and approved by the code reviewing body, shall file
statements within 30 days after the effective date of this code.
Thereafter, each person already in a position when it is designated by
an amendment to this code shall file an initial statement within 30
days after the effective date of the amendment.
(B) Assuming Office Statements. All persons assuming designated
positions after the effective date of this code shall file statements
within 30 days after assuming the designated positions, or if subject
to State Senate confirmation, 30 days after being nominated or
appointed.
(C) Annual Statements. All designated employees shall file
statements no later than April 1.
(D) Leaving Office Statements. All persons who leave designated
positions shall file statements within 30 days after leaving office.
2 See Government Code section 81010 and 2 Cal. Code of Regs. section 18115 for the
duties of filing officers and persons in agencies who make and retain copies of
statements and forward the originals to the filing officer.
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6.06 STATEMENTS FOR PERSONS WHO RESIGN PRIOR TO ASSUMING OFFICE
Any person who resigns within 12 months of initial appointment,
or within 30 days of the date of notice provided by the filing officer
to file an assuming office statement, is not deemed to have assumed
office or left office, provided he or she did not make or participate
in the making of, or use his or her position to influence any decision
and did not receive or become entitled to receive any form of payment
as a result of his or her appointment. Such persons shall not file
either an assuming or a leaving office statement.
(A) Any person who resigns a position within 30 days of the date
of a notice from the filing officer shall do both of the following:
1. File a written resignation with the appointing power; and
2. File a written statement with the filing officer declaring
under penalty of perjury that during the period between
appointment and resignation he or she did not make,
participate in the making, or use the position to influence
any decision of the agency or receive, or become entitled to
receive, any form of payment by virtue of being appointed to
the position.
6.07 CONTENTS OF AND PERIOD COVERED BY STATEMENTS OF ECONOMIC
INTERESTS
(A) Contents of Initial Statements
Initial statements shall disclose any reportable investments,
interests in real property and business positions held on the
effective date of the code and income received during the 12 months
prior to the effective date of the code.
(B) Contents of Assuming Office Statements
Assuming office statements shall disclose any reportable
investments, interests in real property and business positions held on
the date of assuming office or on the date of appointment, and income
received during the 12 months prior to the date of assuming office or
the date of being appointed, respectively.
(C) Contents of Annual Statements
Annual statements shall disclose any reportable investments,
interests in real property, income and business positions held or
received during the previous calendar year provided, however, that the
period covered by an employee’s first annual statement shall begin on
the effective date of the code or the date of assuming office,
whichever is later.
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(D) Contents of Leaving Office Statements
Leaving office statements shall disclose reportable investments,
interest in real property, income and business positions held or
received during the period between the closing date of the last
statement filed and the date of leaving office.
6.08 MANNER OF REPORTING
Statements of economic interest shall be made on forms prescribed
by the Fair Political Practices Commission and supplied by the agency,
and shall contain the following information:
(A) Investments and Real Property Disclosure
When an investment or an interest in real property3 is required to
be reported4, the statement shall contain the following:
1. A statement of the nature of the investment or interest;
2. The name of the business entity in which each investment is
held, and a general description of the business activity in
which the business entity is engaged;
3. The address or other precise location of the real property;
4. A statement whether the fair market value of the investment
or interest in real property exceeds two thousand dollars
($2,000), exceeds ten thousand dollars ($10,000), exceeds
one hundred thousand dollars ($100,000), or exceeds one
million dollars ($1,000,000).
(B) Personal Income Disclosure
When personal income is required to be reported5, the statement
shall contain:
3 For the purpose of disclosure only (not disqualification), an interest in real
property does not include the principal residence of the filer.
4 Investments and interests in real property which have a fair market value of less
than $2,000 are not investments and interests in real property within the meaning of
the Political Reform Act. However, investments or interests in real property of an
individual include those held by the individual’s spouse and dependent children as
well as a pro rata share of any investment or interest in real property of any
business entity or trust in which the individual, spouse and dependent children own,
in the aggregate, a direct, indirect or beneficial interest of 10 percent or greater.
5 A designated employee’s income includes his or her community property interest in
the income of his or her spouse but does not include salary or reimbursement for
expenses received from a state, local or federal government agency.
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1. The name and address of each source of income aggregating
$500 or more in value or $50 or more in value if the income
was a gift, and a general description of the business
activity, if any, of each source;
2. A statement whether the aggregate value of income from each
source, or in the case of a loan, the highest amount owed to
each source, was one thousand dollars ($1,000) or less,
greater than one thousand dollars ($1,000), greater than ten
thousand dollars ($10,000), or greater than one hundred
thousand dollars ($100,000);
3. A description of the consideration, if any, for which the
income was received;
4. In the case of a gift, the name, address and business
activity of the donor and any intermediary through which the
gift was made; a description of the gift; the amount or
value of the gift; and the date on which the gift was
received;
5. File In the case of a loan, the annual interest rate and the
security, if any, given for the loan.
(C) Business Entity Income Disclosure
When income of a business entity, including income of a sole
proprietorship is required to be reported6, the statement shall
contain:
1. The name, address and a general description of the business
activity of the business entity;
2. The name of every person from whom the business entity
received payments if the filer’s pro rata share of gross
receipts from such person was equal to or greater than
$10,000.
(D) Business Position Disclosure
When business positions are required to be reported, a designated
employee shall list the name and address of each business entity in
6 Income of a business entity is reportable if the direct, indirect or beneficial
interest of the filer and the filer’s spouse in the business entity aggregates a 10
percent or greater interest. In addition, the disclosure of persons who are clients
or customers of a business entity is required only if the clients or customers are
within one of the disclosure categories of the filer.
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which he or she is a director, officer, partner, trustee, employee or
in which he or she holds any position of management, a description of
the business activity in which the business entity is engaged, and the
designated employee’s position with the business entity.
(E) Acquisition or Disposal During Reporting Period
In the case of an annual or leaving office statement, if an
investment or an interest in real property was partially or wholly
acquired or disposed of during the period covered by the statement,
the statement shall contain the date of acquisition or disposal.
6.09 PROHIBITION ON RECEIPT OF HONORARIA
A. No designated public official shall accept any honorarium from
any source, if the member or employee would be required to report the
receipt of income or gifts from that source on his or her statement of
economic interests.
Subdivisions (a), (b), and (c) of Government Code Section 89501 shall
apply to the prohibitions in this section.
This section shall not limit or prohibit payments, advances, or reim-
bursements for travel and related lodging and subsistence authorized
by Government Code section 89506.
6.10 PROHIBITION ON RECEIPT OF GIFTS IN EXCESS OF AMOUNT
ESTABLISHED BY LAW7
A. No designated public official shall accept gifts with a total
value of more than the maximum amount established by law, in any
calendar year, from any single source, if the member or employee would
be required to report the receipt of income or gifts from that source
on his or her statement of economic interests.
Subdivisions (e), (f), and (g) of Government Code section 89503 shall
apply to the prohibitions in this section.
6.11 LOANS TO PUBLIC OFFICIALS
A. No elected officer of a state or local government agency shall,
from the date of his or her election to office through the date that
he or she vacates office, receive a personal loan from any officer,
employee, member, or consultant of the state or local government
7 Designated Persons are prohibited from accepting gifts from any single source in a
calendar year with a total value in excess of designated amounts. See Govt. Code §
89503, sub-divisions (e), (f) and (g). [Note: Pursuant to 2 CCR § 18940.2 (b), the
FPPC adjusts the gift limit every odd-numbered year to reflect changes in the
Consumer Price Index; therefore, the $390 limit adopted by the FPPC in January of
2007 will be updated in January 2009 and every odd year thereafter, until further
notice.]
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agency in which the elected officer holds office or over which the
elected officer’s agency has direction and control.
B. No public official who is exempt from the state civil service
system pursuant to subdivisions (c), (d), (e), (f), and (g) of Section
4 of Article VII of the Constitution shall, while he or she holds
office, receive a personal loan from any officer, employee, member, or
consultant of the state or local government agency in which the public
official holds office or over which the public official’s agency has
direction and control. This subdivision shall not apply to loans made
to a public official whose duties are solely secretarial, clerical, or
manual.
C. No elected officer of a state or local government agency shall,
from the date of his or her election to office through the date that
he or she vacates office, receive a personal loan from any person who
has a contract with the state or local government agency to which that
elected officer has been elected or over which that elected officer’s
agency has direction and control. This subdivision shall not apply to
loans made by banks or other financial institutions or to any
indebtedness created as part of a retail installment or credit card
transaction, if the loan is made or the indebtedness created in the
lender’s regular course of business on terms available to members of
the public without regard to the elected officer’s official status.
D. No public official who is exempt from the state civil service
system pursuant to subdivisions (c), (d), (e), (f), and (g) of Section
4 of Article VII of the Constitution shall, while he or she holds
office, receive a personal loan from any person who has a contract
with the state or local government agency to which that elected
officer has been elected or over which that elected officer’s agency
has direction and control. This subdivision shall not apply to loans
made by banks or other financial institutions or to any indebtedness
created as part of a retail installment or credit card transaction, if
the loan is made or the indebtedness created in the lender’s regular
course of business on terms available to members of the public without
regard to the elected officer’s official status. This subdivision
shall not apply to loans made to a public official whose duties are
solely secretarial, clerical, or manual.
E. This section shall not apply to the following:
1. Loans made to the campaign committee of an elected officer
or candidate for elective office.
2. Loans made by a public official’s spouse, child, parent,
grandparent, grandchild, brother, sister, parent-in-law, brother-in-
law, sister-in-law, nephew, niece, aunt, uncle, or first cousin, or
the spouse of any such persons, provided that the person making the
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loan is not acting as an agent or intermediary for any person not
otherwise exempted under this section.
3. Loans from a person which, in the aggregate, do not exceed
five hundred dollars ($500) at any given time.
4. Loans made, or offered in writing, before January 1, 1998.
6.12 LOAN TERMS
A. Except as set forth in subdivision (B), no elected officer of a
state or local government agency shall, from the date of his or her
election to office through the date he or she vacates office, receive
a personal loan of five hundred dollars ($500) or more, except when
the loan is in writing and clearly states the terms of the loan,
including the parties to the loan agreement, date of the loan, amount
of the loan, term of the loan, date or dates when payments shall be
due on the loan and the amount of the payments, and the rate of
interest paid on the loan.
B. This section shall not apply to the following types of loans:
1. Loans made to the campaign committee of the elected officer.
2. Loans made to the elected officer by his or her spouse,
child, parent, grandparent, grandchild, brother, sister, parent-in-
law, brother-in-law, sister-in-law, nephew, niece, aunt, uncle, or
first cousin, or the spouse of any such person, provided that the
person making the loan is not acting as an agent or intermediary for
any person not otherwise exempted under this section.
3. Loans made, or offered in writing, before January 1, 1998.
4. Nothing in this section shall exempt any person from any
other provision of Title 9 of the Government Code.
6.13 PERSONAL LOANS
A. Except as set forth in subdivision (B), a personal loan received
by any designated public official shall become a gift to the
designated public official for the purposes of this section in the
following circumstances:
1. If the loan has a defined date or dates for repayment, when
the statute of limitations for filing an action for default has
expired.
2. If the loan has no defined date or dates for repayment, when
one year has elapsed from the later of the following:
a. The date the loan was made.
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b. The date the last payment of one hundred dollars ($100)
or more was made on the loan.
c. The date upon which the debtor has made payments on the
loan aggregating to less than two hundred fifty dollars ($250) during
the previous 12 months.
B. This section shall not apply to the following types of loans:
1. A loan made to the campaign committee of an elected officer
or a candidate for elective office.
2. A loan that would otherwise not be a gift as defined in this
title.
3. A loan that would otherwise be a gift as set forth under
subdivision (A), but on which the creditor has taken reasonable action
to collect the balance due.
4. A loan that would otherwise be a gift as set forth under
subdivision (A), but on which the creditor, based on reasonable
business considerations, has not undertaken collection action. Except
in a criminal action, a creditor who claims that a loan is not a gift
on the basis of this paragraph has the burden of proving that the
decision for not taking collection action was based on reasonable
business considerations.
5. A loan made to a debtor who has filed for bankruptcy and the
loan is ultimately discharged in bankruptcy.
C. Nothing in this section shall exempt any person from any other
provisions of Title 9 of the Government Code.
6.14 DISQUALIFICATION
No designated employee shall make, participate in making, or in
any way attempt to use his or her official position to influence the
making of any governmental decision which he or she knows or has
reason to know will have a reasonably foreseeable material financial
effect, distinguishable from its effect on the public generally, on
the official or a member of his or her immediate family or on:
(A) Any business entity in which the designated employee has a
direct or indirect investment worth $2,000 or more;
(B) Any real property in which the designated employee has a
direct or indirect interest worth $2,000 or more;
(C) Any source of income, other than gifts and other than loans
by a commercial lending institution in the regular course of
business on terms available to the public without regard to
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official status, aggregating $500 or more in value provided
to, received by or promised to the designated employee
within 12 months prior to the time when the decision is
made;
(D) Any business entity in which the designated employee is a
director, officer, partner, trustee, employee, or holds any
position of management; or
(E) Any donor of, or any intermediary or agent for a donor of, a
gift or gifts aggregating to the maximum amount established
by law, or more, in value provided to, received by, or
promised to the designated employee within 12 months prior
to the time when the decision is made.
6.15 LEGALLY REQUIRED PARTICIPATION
No designated public official shall be prevented from making or
participating in the making of any decision to the extent his or her
participation is legally required for the decision to be made. The
fact that the vote of a designated public official who is on a voting
body is needed to break a tie does not make his or her participation
legally required for purposes of this section.
6.16 DISQUALIFICATION OF STATE OFFICERS AND EMPLOYEES
In addition to the general disqualification provisions of Section
6.14, no state administrative official shall make, participate in
making, or use his or her official position to influence any
governmental decision directly relating to any contract where the
state administrative official knows or has reason to know that any
party to the contract is a person with whom the state administrative
official, or any member of his or her immediate family has, within 12
months prior to the time when the official action is to be taken:
(A) Engaged in a business transaction or transactions on terms
not available to members of the public, regarding any
investment or interest in real property; or
(B) Engaged in a business transaction or transactions on terms
not available to members of the public regarding the
rendering of goods or services totaling in value $1000 or
more.
6.17 DISCLOSURE OF DISQUALIFYING INTEREST
When a designated public official determines that he or she
should not make a governmental decision because he or she has a
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disqualifying interest in it, the determination not to act may be
accompanied by disclosure of the disqualifying interest.
6.18 ASSISTANCE OF THE COMMISSION AND COUNSEL
Any designated employee who is unsure of his or her duties under
this code may request assistance from the Fair Political Practices
Commission pursuant to Government Code Section 83114 or from the
attorney for his or her agency, provided that nothing in this section
requires the attorney for the agency to issue any formal or informal
opinion.
6.19 VIOLATIONS
This code has the force and effect of law. Designated employees
violating any provision of this code are subject to the
administrative, criminal and civil sanctions provided in the Political
Reform Act, Government Code Sections 81000 – 91015. In addition, a
decision in relation to which a violation of the disqualification
provisions of this code or of Government Code Section 87100 or 87450
has occurred may be set aside as void pursuant to Government Code
Section 91003.
6.20 PROHIBITED TRANSACTIONS
Members of the Board of Directors and Designated Employees shall
comply with the Prohibited Transactions policy, annexed hereto as
Exhibit A, pursuant to California Government Code Sections 1090, et
seq.
6.21 INCOMPATIBLE ACTIVITIES
Members of the Board of Directors, District officers, and all
other District employees shall comply with the Incompatible Activities
policy, annexed hereto as Exhibit B, pursuant to California Government
Code Sections 1126, et seq.
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APPENDIX
OTAY WATER DISTRICT
CONFLICT OF INTEREST CODE
DESIGNATED POSITIONS
The Treasurer and all District Officials who manage the investment of
public funds are included in and governed by this Conflict of Interest
Code only with respect to its disqualification provisions. For
purposes of disclosure, the Treasurer and all District Officials who
manage the investment of public funds are governed by the statutory
conflict of interest provisions of Article 2 of Chapter 7 of the
Political Reform Act of 1974. (Government Code Sections 87200, et
seq.)
DESIGNATED EMPLOYEES’
TITLE OR FUNCTION__ DISCLOSURE CATEGORIES ASSIGNED
Members of the Board of Directors 1, 2, 3, 4, 5, 6
General Manager 1, 2, 3, 4, 5, 6
District Secretary 6
Assistant Chief Administrative
Services and Information Tech. 1, 2, 3, 4, 5, 6
Assistant Chief of Water Operations 1, 2, 3, 4, 6, 7
Assistant. General Manager, 1, 2, 3, 4, 5, 6, 7
Chief of Administrative Services 1, 2, 3, 4, 5, 6, 7
Chief Financial Officer 1, 2, 5, 6, 7
Chief Information Officer 1, 2, 3, 6, 7
Chief of Engineering 1, 2, 3, 4, 6, 7
Chief of Water Operations 1, 2, 3, 4, 6, 7
Associate Civil Engineer 1, 2, 3, 4, 7
Communications Officer 6
Customer Service Manager 2, 5, 7
Environmental Compliance
Specialist 1, 2, 3, 4, 7
6-13
Engineering Manager/ 1, 2, 3, 4, 7
Finance Manager, Controller,
and Budget 2, 5, 7
Finance Manager, Treasury,
and Accounting 2, 5, 7
GIS Manager 3, 6, 7
Human Resources Manager 3, 6
IT Manager 3, 6, 7
Network Engineer 3, 6, 7
Purchasing and Facilities Manager 2, 6
Safety and Security Administrator 1, 2, 3, 4, 6
Senior Buyer 6
Senior Civil Engineer 1, 2, 3, 4, 7
System Operations Manager 1, 2, 3, 4, 7
Utility Services Manager 1, 2, 3, 4, 7
Water Conservation Manager 2, 3, 4, 6
Consultant8 1, 2, 3, 4, 5, 6
8 Consultants are required to file disclosure statements where they: (a) conduct research and arrive at
conclusions with respect to rendition of information, advice, recommendation or counsel independent of
control and direction of the agency or any agency official other than normal contract monitoring; and (b)
possess no authority with respect to any agency decision beyond the rendition of information, advice,
recommendation or counsel. The determination as to whether a consultant shall be required to file a
disclosure statement shall be made by the General Manager or his or her designee.
6-14
APPENDIX, CONTINUED
DISCLOSURE CATEGORIES
The disclosure categories listed below identify the types of
investments, business entities, sources of income, or real property
which the designated employee must disclose for each disclosure
category to which he or she is assigned.
Category 1: All investments and business positions in, and sources
of income from, all business entities that do business or own real
property in the District, plan to do business or own real property in
the District within the next year or have done business or owned real
property in the District within the past two years.
Category 2: All interests in real property which are located in
whole or in part within, or not more than two (2) miles outside the
boundaries of the District.
Category 3: All investments and business positions in, and sources
of income from, business entities subject to the regulatory, permit or
licensing authority of the Designated Employee’s Department, will be
subject to such authority within the next year or have been subject to
such authority within the past two years.
Category 4: All investments, business positions, and sources of
income from, business entities that are engaged in land development,
construction or the acquisition or sale of real property in the
District, plan to engage in such activities in the District within the
next year or have engaged in such activities in the District within
the past two years.
Category 5: All investments and business positions in, and sources
of income from, business entities that are banking, savings and loan
or other financial institutions.
Category 6: All investments and business positions in, and sources
of income from, business entities that provide services, supplies,
materials, machinery or equipment of a type purchased, leased, used,
or administered by the District.
Category 7: All investments and business positions in, and sources
of income from, business entities that provide services, supplies,
materials, machinery or equipment of a type purchased, leased, used,
or administered by the Designated Employee’s Department.
6-15
EXHIBIT A
Prohibited Transactions for Specified Personnel
Members of the Board of Directors (“Members”) shall comply with this
Prohibited Transactions policy pursuant to California Government Code
§§ 1090, et seq.
Members shall not be financially interested in any contract made by
them in their official capacity, or by any body or board of which they
are members. Members shall not be purchasers at any sale or vendors
at any purchase made by them in their official capacity. Members
shall not be deemed to be interested in a contract entered into by a
body or board of which they are members if the Member has only a
remote interest in the contract and if the fact of that interest is
disclosed to the body or board of which the Member is a member and
noted in its official records, and thereafter the body or board
authorizes, approves, or ratifies the contract in good faith by a vote
of its membership sufficient for the purpose without counting the vote
or votes of the Board of Directors member with the remote interest.
“Remote interest” shall be defined as in California Government Code
§ 1091(b).
Members shall not be considered to be financially interested in a
contract if their interest is including, but not limited to, any of
the following (Government Code § 1091.5):
1. That of an officer in being reimbursed for his/her actual
and necessary expenses incurred in the performance of an official
duty;
2. That of a recipient of public services generally provided by
the public body or board of which he/she is a member, on the same
terms and conditions as if he or she were not a member of the
board;
3. That of a landlord or tenant of the contracting party if
such contracting party is the federal government or any federal
department or agency, this state or an adjoining state, any
department or agency of this state or an adjoining state, any
county or city of this state or an adjoining state, or an public
corporation or special, judicial or other public district of this
state or an adjoining state unless the subject matter of such
contract is the property in which such officer or employee has
such interest as landlord or tenant in which even his/her
interest shall be deemed a remote interest within the meaning of,
and subject to, the provisions of Government Code 1091;
4. That of a spouse of an officer or employee of a public
agency if his/her spouse’s employment or office-holding has
6-16
existed for at least one year prior to his/her election or
appointment;
5. That of a non-salaried member of a nonprofit corporation,
provided that such interest is disclosed to the board at the time
of the first consideration of the contract, and provided further
that such interest is noted in its official records;
6. That of a non-compensated officer of a nonprofit, tax-exempt
corporation, which, as one of its primary purposes, supports the
functions of the board or to which the board has legal obligation
to give particular consideration, and provided further that such
interest is noted in its official records;
7. That of compensation for employment with a governmental
agency, other than the governmental agency that employs the
officer or employee, provided that the interest is disclosed to
the board at the time of consideration of the contract, and
provided further that the interest is noted in its official
records;
8. That of an attorney of the contracting party of that of an
owner, officer, employee or agent of a firm which renders, or has
rendered, service to the contracting party in the capacity of
stockbroker, insurance agent, insurance broker, real estate
agent, or real estate broker if these individuals have not
received and will not receive remuneration, consideration, or a
commission as a result of the contract and if these individuals
have an ownership interest of less than 10 percent in the law
practice or firm, stock brokerage firm, insurance firm or real
estate firm.
In addition, Members shall not be deemed to be interested in a
contract made pursuant to competitive bidding under a procedure
established by law if their sole interest is that of an officer,
director, or employee of a bank or savings and loan association with
which a party to the contract has the relationship of borrower or
depositor, debtor or creditor (Government Code § 1091.5).
Authority:
California Government Code §§ 1090, et seq.
6-17
EXHIBIT B
Incompatible Activities Policy
District officers, members of the Board of Directors, and all other
District employees (collectively, “district personnel”) shall comply
with this Incompatible Activities policy pursuant to California
Government Code §§ 1126, et seq.
District personnel shall not engage in any employment, activity, or
enterprise for compensation which is inconsistent, incompatible, in
conflict with, or inimical to his or her duties as a member of the
Board of Directors, or with the duties, functions, or responsibilities
of his or her appointing power or the agency by which he or she is
employed.
The outside employment, activity, or enterprise of district personnel
is prohibited if it: (1) involves the use for private gain or
advantage of his or her local District time, facilities, equipment and
supplies; or the badge, uniform, prestige, or influence of his or her
local District office or employment or, (2) involves receipt or
acceptance by district personnel of any money or other consideration
from anyone other than the District for the performance of an act
which district personnel, if not performing such act, would be
required or expected to render in the regular course or hours of their
local District employment or as a part of their duties as a local
District officer or employee or, (3) involves the time demands as
would render performance of his or her duties as a local district
personnel member less efficient.
Nothing in this policy shall be interpreted to prohibit any outside
employment, activity, counsel, or enterprise on behalf of another
governmental entity, subject to common law and professional conflict
of interest rules.
Copies of this regulation shall be posted in prominent places at the
District Office. District personnel who violate this regulation may
be subject to discipline as set forth in the applicable Code of
Ordinances and Policies. Board of Directors members who violate this
section may be subject to censure. Disciplinary appeals by district
personnel shall be handled pursuant to applicable Code of Ordinances
and Policies.
Authority:
California Government Code §§ 1125, et seq.
STAFF REPORT
TYPE MEETING: Regular Board MEETING DATE: November 5, 2014
PROJECT: Various DIV. NO. ALL
SUBMITTED BY: Kelli Williamson
Human Resources Manager
APPROVED BY:
Adolfo Segura, Asst. Chief, Administrative Services & IT
German Alvarez, Assistant General Manager
Mark Watton, General Manager
SUBJECT: REQUEST BOARD APPROVAL TO CHANGE SHORT AND LONG TERM DISABILITY
INSURANCE CARRIERS AND DENTAL THIRD PARTY ADMINISTRATOR
GENERAL MANAGER’S RECOMMENDATION:
That the Board:
a. Authorize the General Manager to take the steps necessary to have
the Otay Water District (District) become a member the National
Joint Powers Alliance (NJPA), which would enable the District to
access the SunLife pool for Short and Long Term Disability; and
b. Authorize the General Manager to take the steps necessary to have
the District join the CSAC EIA pool for Dental Third Party
Administrator services.
COMMITTEE ACTION:
See “Attachment A”.
PURPOSE:
Authorize the General Manager to take the steps necessary to join the
SunLife pool for Short and Long Term Disability benefits through
membership in the NJPA, and to join the CSAC EIA pool for Dental Third
Party Administrator services.
ANALYSIS:
The District works with Alliant Employee Benefits, its benefit
consultant, on an annual basis to review insurance plans to ensure that
the District is receiving the highest level of service at the most cost-
effective prices. We are nearing the end of a three year rate guarantee
for the Short and Long Term Disability Plan and are at the end of an
annual contract with our Dental Third Party Administrator. Alliant
recently provided information on both plans which shows that there are
more cost-effective options. The District believes it will continue to
receive the highest level of service while creating a long-term savings
for the District by changing carriers for both plans.
Short and Long Term Disability
The Short and Long Term Disability insurance provides protection for
employees when they are unable to work due to an injury or illness by
providing 66 2/3% of their base salary. There is a 30-day elimination
period before an employee would be eligible to receive disability
payment. The District is currently with The Hartford for our Short and
Long Term Disability Plans.
The Hartford initially provided the District with an annual renewal
rate with an increase of 31%. This increase is due to our high claims
experience during the three years we have been their client. Alliant
contacted six other providers, including two benefit pools, to receive
bids.
Hartford
(original renewal) $88,131
Hartford
(negotiated renewal) $67,098
CIGNA IEA Program $60,626
Guardian Declined
MetLife Declined
SunLife $58,250
UNUM $75,749
VOYA (aka ING) CSAC $105,294
As you can see from the chart above, two companies declined to quote
since their rates would not be competitive (Guardian and MetLife), and
two companies provided quotes but the quotes were not competitive (UNUM
and VOYA). Alliant also gathered information from two benefit pools
(SunLife and CIGNA). Both were able to provide competitive rates and
Alliant was able use this information to re-negotiate with The Hartford
to maintain the current cost. The Hartford rate pass, however, is still
more than the bids offered by SunLife and CIGNA.
Based on the District’s claims experience and in anticipation of
potential long term savings, District staff recommends switching to the
SunLife Short and Long Term Disability pool.
In order to qualify for this pooled program with SunLife, the District
will be required to become a member of National Joint Powers Alliance
(Attachment B). This national arrangement places the District into the
largest pool established for the public entity sector, pooling all
experience for the entire membership. The District still owns and
maintains its disability contracts and benefit schedules but eliminates
experience rating and the risk of future large increases specifically
to our premiums. There is no financial or organizational liability to
NJPA or to its organization activities.
Dental Insurance
The District currently uses Delta Dental as the Third Party
Administrator to the self-funded Dental Plan. Delta Dental charges an
administration fee (ASO) based on a per-member per-month (PMPM) figure.
The current rate is $7.50 PMPM and the proposed rate beginning January
1, 2015 is $8.15, an 8.7% increase.
Beginning next year, the District is interested in moving our dental
program to the Alliant pooled program to control future renewal ASO
increases. This is the first year that this pool has been made available
to outside participants that already have an ASO contract in place with
Delta Dental. Although the District proposes to move to the pooled
program, Delta Dental would continue to provide network savings, handle
claims processing and underwriting. The District will be required to
pay an $8.50 PMPM ASO fee for the first year in the program (2015).
This includes the $8.15 ASO Delta Dental fee and a $0.35 fee for
Preferred Benefit Insurance Administrators to provide eligibility and
billing/reconciliation services. Other related work would transition to
Alliant and the CSAC EIA program. Beginning in 2016, the District would
pay the reduced ASO fee of approximately $6.81 PMPM (including all fees
based on 2015 rates) in the Alliant program, a 20% reduction from our
current fee. Alliant’s underwriters predict this ASO fee will be
reduced in the 2016 renewal due to overall growth in the pool.
Insurance Pools
These pools are less expensive than continuing with an arrangement
similar to what the District currently has outside of the pool, and
would also alleviate the need to bid our provider continuously every
few years. There will be some set up required for District staff under
the new arrangement, however, this will not result in any changes to
the plan design or dental providers and the change will be seamless for
the employees and retirees. Should the District decide to change
carriers in the future, the District may do so by providing a 30-day
notice to the carriers.
FISCAL IMPACT: Joe Beachem, Chief Financial Officer
If approved the combined annual savings on the disability and dental
plans is approximately $13,048 per year. This savings does not account
for the initial staff time cost that will be necessary to coordinate
the change. As the current cost levels were budgeted, the recommended
lower cost options would be more than covered by the current budget.
The current estimated cost of Short and Long Term Disability insurance
is approximately $67,098 based on the District’s payroll provided to
our benefit consultant and has been budgeted through the annual budget
process. By changing carriers, the estimated annual cost is $58,250, a
savings of $8,848 per year (13.2%). The SunLife premium will be
guaranteed for three years. The only fluctuation will be due to payroll
increasing, which means the District could yield greater savings.
For the dental plan, the District will pay the renewal fee of $8.15
PMPM which has been budgeted through the annual budget process, plus an
additional $0.35 PMPM fee for the first year. Beginning the second year,
it is estimated the fee will be $6.81 PMPM or possibly less. Annually,
the fee will be approximately $21,300 next year and approximately
$17,100 or less in future years, resulting in an annual cost-savings of
approximately $4,200, a 19.7% decrease.
STRATEGIC GOAL:
Optimize the District’s Operating Efficiency.
LEGAL IMPACT:
None.
ATTACHMENTS:
Attachment A – Committee Action Report
Attachment B – Membership Agreement for the National Joint Powers
Alliance
ATTACHMENT A
SUBJECT/PROJECT:
REQUEST BOARD APPROVAL TO CHANGE SHORT AND LONG TERM
DISABILITY INSURANCE CARRIERS AND DENTAL THIRD PARTY
ADMINISTRATOR
COMMITTEE ACTION:
The Finance, Administration, and Communications Committee met on October
21, 2014, to review this item. 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 from the committee prior to presentation to the
full Board.
MEMBERSHIP AGREEMENT
PARTICIPATING MEMBER
09/21/2010
This Agreement, made and entered into this
day of
, 20
,
by and between National Joint Powers Alliance®, hereinafter referred to as "NJPA" and
hereinafter referred to as the "Applicant".
Witnesseth:
That for a good and valuable consideration of the premises, mutual terms, covenants, provisions, and conditions
hereafter set forth, it is agreed by and between the parties as follows:
Whereas, the NJPA is created by Minnesota Statute §123A.21 (with membership further defined in M.S. §471.59)
to serve cities, counties, towns, public or private schools, political subdivisions of Minnesota or another state,
another state, any agency of the State of Minnesota or the United States including instrumentalities of a
governmental unit and all non-profits; and
Whereas, NJPA's purpose as defined in M.S. §123A.21 is to assist in meeting specific needs of clients which could
be better provided by NJPA than by the members themselves; and
Whereas, the NJPA Board of Directors has established the ability for an "Applicant" desiring to participate in
NJPA contracts and procurement programs to become a Participating Member; and
Whereas, the NJPA Board of Directors has determined that Participating Members will have no financial or
organizational liability to NJPA or to its organizational activities;
Now Therefore, it is hereby stipulated and agreed that the "Applicant" Agency desires to be a Participating Member of
NJPA with contract purchasing benefits, in accordance with terms and conditions of the applicable contract(s), and that
NJPA hereby grants said Membership to said "Applicant."
Term:
This continuing agreement shall remain in force or until either party elects to dissolve the Agreement by written notice.
THEREFORE, IN WITNESS THEREOF,
the parties hereto have executed this Agreement the day and year written above.
Member Name:
National Joint Powers Alliance®
200 1st Street NE, Suite 1
Staples, MN 56479
By
AUTHORIZED SIGNATURE AUTHORIZED SIGNATURE
Its
TITLE TITLE
DATE
DATE
MEMBERSHIP AGREEMENT
PARTICIPATING MEMBER
09/21/2010
PATICIPATING MEMBER INFORMATION
Applicant Name:
Address:
Please indicate an address to which your
Membership materials may be delivered.
Thank you.
Federal ID Number:
Contact Person:
Title:
E-mail:
Phone:
Website
APPLICANT ORGANIZATION TYPE:
K-12
Government or Municipality
Higher Education
Non-Profit
Other (please specify):
I WAS REFERRED BY: (please specify)
Advertisement
Current NJPA Member
Vendor Representative
Trade Show
NJPA Website
Other
Completed applications may be returned to:
National Joint Powers Alliance ®
200 First Street NE, Suite 1
Staples, MN 56479
Duff Erholtz
phone 218-894-5490
fax 218-894-3045
e-mail duff.erholtz@njpaoop.org
STAFF REPORT
TYPE MEETING: Regular Board MEETING DATE: November 5, 2014
PROJECT: DIV. NO. ALL
SUBMITTED BY: Kelli Williamson
Human Resources Manager
APPROVED BY:
Adolfo Segura, Assistant Chief, Admin. Services and IT
German Alvarez, Assistant General Manager
Mark Watton, General Manager
SUBJECT: ADOPT RESOLUTION #4245 TO REVISE THE POLICY AGAINST
DISCRIMINATION AND HARASSMENT AND COMPLAINT PROCEDURE (BOARD
POLICY #47)
GENERAL MANAGER’S RECOMMENDATION:
That the Board adopt Resolution #4245 to revise Board Policy #47, Policy
Against Discrimination and Harassment and Complaint Procedure.
COMMITTEE ACTION:
Please see “Attachment A”.
PURPOSE:
To request that the Board adopt Resolution #4245 and approve revisions
to Board Policy #47, Policy Against Discrimination and Harassment and
Complaint Procedure (Attachment B).
ANALYSIS:
Consistent with the District’s Strategic Plan, the District regularly
reviews policies and procedures to ensure they are streamlined and are
clear and consistent with applicable laws.
After consultation with General Counsel, District staff is recommending
revisions to the attached policy. This policy was also reviewed with
the Otay Water District Employees’ Association (Association). The
Association has agreed to the policy as presented. Updates deemed
appropriate at this time are detailed below and revisions are shown in
the attached strike-through versions of the policy (Exhibit 1).
Policy Against Discrimination and Harassment and Complaint Procedure
(Board Policy #47)
Based on recent legislative updates, District staff is recommending minor
revisions to the attached policy to clarify certain protected
classifications to include military and veteran status, gender identity,
gender expression and related updates.
Based on the above, it is requested that the Board of Directors adopt
Resolution #4245 in support of the proposed revisions.
FISCAL IMPACT: Joe Beachem, Chief Financial Officer
None.
STRATEGIC GOAL:
Optimize the District’s Operating Efficiency.
LEGAL IMPACT:
None.
ATTACHMENTS:
Attachment A – Committee Action Report
Attachment B – Resolution #4245
Exhibit 1 – Draft Copy, Policy Against Discrimination
and Harassment and Complaint Procedure (Board Policy #47)
Attachment C – Proposed Copy, Policy Against Discrimination and
Harassment and Complaint Procedure (Board Policy #47)
ATTACHMENT A
SUBJECT/PROJECT:
ADOPT RESOLUTION #4245 TO REVISE THE POLICY AGAINST
DISCRIMINATION AND HARASSMENT AND COMPLAINT PROCEDURE (BOARD
POLICY #47)
COMMITTEE ACTION:
The Finance, Administration, and Communications Committee met on October
21, 2014, to review this item. 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 from the committee prior to presentation to the
full Board.
1
RESOLUTION NO. 4245
RESOLUTION OF THE BOARD OF DIRECTORS
OF THE OTAY WATER DISTRICT TO
REVISE DISTRICT POLICY
WHEREAS, the Board of Directors of Otay Water District
have established policies, procedures, ordinances, and
resolutions for the efficient operation of the District; and
WHEREAS, it is the policy of the District to establish
procedures to review policies, procedures, ordinances, and
resolutions periodically to ensure they are current and
relevant; and
WHEREAS, District staff has identified Board Policy #47,
Policy Against Discrimination and Harassment and Complaint
Procedure, as requiring revisions as per the attached strike-
through copies.
NOW, THEREFORE, BE IT RESOLVED that the Board of
Directors of the Otay Water District amends the Board
Policies indicated above in the form presented to the Board
at this meeting.
PASSED, APPROVED AND ADOPTED by the Board of Directors of
the Otay Water District at a regular meeting held this 5th of
November, 2014.
__________________________
President
ATTEST:
___________________________
Secretary
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject: POLICY AGAINST DISCRIMINATION AND
HARASSMENT AND COMPLAINT PROCEDURE
Policy
Number
Date
Adopted
Date
Revised
47 10/11/05 10/5/11
11/5/14
Page 1 of 5
PURPOSE
The purpose of this policy is to (i) advise all employees that the
Otay Water District (“District”) disapproves of and will not
tolerate unlawful discrimination or harassment of its employees, or
retaliation against those who report such behavior, and (ii) set
forth a procedure for investigating and resolving internal
complaints of discrimination, harassment, or retaliation.
POLICY
The District is committed to providing a work environment free of
unlawful discrimination, harassment, or retaliation against those
who report discrimination or harassment. Discrimination or
harassment based on sex (including gender, gender identity, gender
expression, pregnancy, childbirth or related medical condition),
race, color, religionreligious creed, national origin, ancestry,
physical or mental disability, medical condition, genetic
information, marital status, age, sexual orientation, military or
veteran status or any other basis protected by federal, state or
local law is prohibited. Discrimination or harassment based on the
perception that a person has any of those characteristics, or is
associated with a person who has or is perceived as having any of
those characteristics, is prohibited. Retaliation against any
person who complains of unlawful discrimination or harassment or who
provides evidence relating to such a complaint, is prohibited.
This Policy applies to all terms and conditions of employment,
including, but not limited to: hiring, placement, advancement,
promotion, disciplinary action, layoff, recall, transfer, leave of
absence, compensation and training. It applies to each District
employee, member of the Board of Directors, and to all vendors
conducting business with the District. Similarly, the District will
not tolerate discrimination or harassment by its employees of non-
employees with whom the District employees have a business, service
or professional relationship. The District will also attempt to
protect employees from harassment by non-employees in the workplace.
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject: POLICY AGAINST DISCRIMINATION AND
HARASSMENT AND COMPLAINT PROCEDURE
Policy
Number
Date
Adopted
Date
Revised
47 10/11/05 10/5/11
11/5/14
Page 2 of 5
DEFINITIONS
Discrimination – Any decision or action that is based on an
individual’s status as a member of a protected class that adversely
affects a District employee or the employee’s work conditions, terms
of employment, or work environment.
Harassment – Any decision or action that is based on a District
employee’s status as a member of a protected class, made for the
purpose or having the effect of adversely affecting that employee’s
work conditions, terms of employment, or work environment.
Harassment may include, but is not limited to:
Verbal conduct such as epithets, derogatory jokes or
comments, slurs, or unwelcome sexual advances, invitations or
comments;
Visual displays such as derogatory and/or sexually-oriented
posters, photography, cartoons, drawings or gestures;
Physical conduct including assault, unwanted touching,
intentionally blocking normal movement or interfering with
work;
Threats and demands to submit to sexual requests as a
condition of continued employment or to avoid an adverse
consequence, and offers of employment benefits in return for
sexual favors.
Such conduct constitutes harassment when (1) submission to the
conduct is made either an explicit or implicit condition of
employment; (2) submission or rejection of the conduct is used as
the basis for an employment decision; or (3) the harassment
interferes with an employee’s work performance or creates an
intimidating, hostile, or offensive work environment.
Protected Class – Any class of persons who share a common sex ,
race, color, religionus creed, national origin, ancestry, physical
or mental disability, medical condition, genetic information,
marital status, age, sexual orientation, military or veteran status
or any other “protected class” recognized by federal, state or local
laws. For purposes of this definition, “sex” includes gender,
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject: POLICY AGAINST DISCRIMINATION AND
HARASSMENT AND COMPLAINT PROCEDURE
Policy
Number
Date
Adopted
Date
Revised
47 10/11/05 10/5/11
11/5/14
Page 3 of 5
gender identity, gender expression, pregnancy, childbirth, or a
pregnancy- or childbirth-related medical condition.
Retaliation – Any decision or action that is based on the fact that
a District employee has previously complained of discrimination,
harassment, or retaliation prohibited by this Policy (regardless of
whether a formal complaint has been made) or has provided evidence
in the investigation of another District employee’s complaint under
this Policy, made for the purpose of adversely affecting the
employee’s conditions of employment, terms of employment, or work
environment.
Sexual Harassment – A form of harassment that is based on an
employee’s gender but which objectively and subjectively creates an
adverse impact on the employee regardless of the purpose or intent
of the alleged harasser.
COMPLAINT PROCEDURE
An employee or job applicant who believes he or she has been the
victim of discrimination, harassment, or retaliation by a District
employee, a member of the Board of Directors, or a vendor may make a
complaint verbally, or in writing by completing the District’s
Discrimination and Harassment Complaint Form. An employee may make
a complaint to any of the following:
Human Resources;
Any supervisor, manager, Department Chief, Assistant General
Manager, or General Manager;
Complaints against the General Manager should be directed to
the President of the Board of Directors.
Applicants may make a complaint to any of the following:
Human Resources or;
General Manager.
Any person described above shall forward each written discrimination
complaint to the General Manager or designee immediately of
receiving the complaint or having knowledge of the complaint. If a
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject: POLICY AGAINST DISCRIMINATION AND
HARASSMENT AND COMPLAINT PROCEDURE
Policy
Number
Date
Adopted
Date
Revised
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11/5/14
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complaint is made verbally, the person receiving the complaint shall
notify Human Resources immediately.
Every reported complaint of discrimination, harassment or
retaliation will be investigated thoroughly and promptly. If any
manager, supervisor, Assistant Department Chief, Department Chief,
or Assistant General Manager becomes aware of or suspects
discrimination, harassment, or retaliation against a District
employee or applicant, or any allegation thereof, he/she must
immediately notify the Human Resources Manager of the relevant facts
and circumstances.
The General Manager or designee may conduct the investigation of
alleged discrimination, harassment, or retaliation, or may delegate
responsibility for the investigation to another District management
employee. If the complaint is against the General Manager, the
President of the Board of Directors shall be responsible for
conducting the investigation, assigning another management employee,
or outside investigator and overseeing the investigation. If the
complaint is against the Board of Directors, the General Manager
shall be responsible for contracting with an outside investigator to
conduct the investigation. The Board will take appropriate action
based on the findings.
During its investigation, the District shall take appropriate steps
to protect the privacy of all parties involved. However, This this
shall not be construed to justify refusing to inform a person who
has been accused of violating this Policy of the identity of the
complainant and witnesses against him/her, however. Reports of
discrimination, harassment, or retaliation may not be made
anonymously, but information regarding any report and subsequent
investigation will be disseminated on a “need to know” basis.
In the event that an investigation will take longer than 60 calendar
days to complete, the investigator must notify the complainant of
this fact prior to the expiration of 60 days and provide an
anticipated completion date, in writing.
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject: POLICY AGAINST DISCRIMINATION AND
HARASSMENT AND COMPLAINT PROCEDURE
Policy
Number
Date
Adopted
Date
Revised
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11/5/14
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If a finding is made that discrimination, harassment, or retaliation
has occurred, the District shall take remedial action appropriate to
the circumstances, which may include disciplinary action up to and
including termination for an employee who has violated this Policy
or sanctions for a vendor who has violated this Policy.
Every District employee has a duty to participate in good faith in
any investigation conducted under this Policy. Failure to
participate in good faith is a ground for disciplinary action
appropriate to the circumstances. All employees are encouraged to
report in good faith discrimination, harassment, or retaliation.
The District will not tolerate retaliation against any employee
making a good faith complaint of discrimination, harassment or
retaliation, or for cooperating in an investigation. However,
reports made maliciously or in bad faith may subject an employee to
disciplinary action appropriate to the circumstances up to and
including termination.
The action of making a complaint does not preclude a complainant
from filing a complaint with the appropriate State or Federal
agency. For information as to where to file a claim, an employee
may contact the Equal Employment Opportunity Commission at
www.eeoc.gov or (213) 894-1000 or the Department of Fair Employment
and Housing at www.dfeh.ca.gov or (800) 884-1684.
POLICY HISTORY
Human Resources Policy and Procedure, Effective August 4, 1993.
Board Policy adopted October 11, 2005.
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject: POLICY AGAINST DISCRIMINATION AND
HARASSMENT AND COMPLAINT PROCEDURE
Policy
Number
Date
Adopted
Date
Revised
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Page 1 of 5
PURPOSE
The purpose of this policy is to (i) advise all employees that the
Otay Water District (“District”) disapproves of and will not
tolerate unlawful discrimination or harassment of its employees, or
retaliation against those who report such behavior, and (ii) set
forth a procedure for investigating and resolving internal
complaints of discrimination, harassment, or retaliation.
POLICY
The District is committed to providing a work environment free of
unlawful discrimination, harassment, or retaliation against those
who report discrimination or harassment. Discrimination or
harassment based on sex (including gender, gender identity, gender
expression, pregnancy, childbirth or related medical condition),
race, color, religious creed, national origin, ancestry, physical or
mental disability, medical condition, genetic information, marital
status, age, sexual orientation, military or veteran status or any
other basis protected by federal, state or local law is prohibited.
Discrimination or harassment based on the perception that a person
has any of those characteristics, or is associated with a person who
has or is perceived as having any of those characteristics, is
prohibited. Retaliation against any person who complains of
unlawful discrimination or harassment or who provides evidence
relating to such a complaint, is prohibited.
This Policy applies to all terms and conditions of employment,
including, but not limited to: hiring, placement, advancement,
promotion, disciplinary action, layoff, recall, transfer, leave of
absence, compensation and training. It applies to each District
employee, member of the Board of Directors, and to all vendors
conducting business with the District. Similarly, the District will
not tolerate discrimination or harassment by its employees of non-
employees with whom the District employees have a business, service
or professional relationship. The District will also attempt to
protect employees from harassment by non-employees in the workplace.
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject: POLICY AGAINST DISCRIMINATION AND
HARASSMENT AND COMPLAINT PROCEDURE
Policy
Number
Date
Adopted
Date
Revised
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DEFINITIONS
Discrimination – Any decision or action that is based on an
individual’s status as a member of a protected class that adversely
affects a District employee or the employee’s work conditions, terms
of employment, or work environment.
Harassment – Any decision or action that is based on a District
employee’s status as a member of a protected class, made for the
purpose or having the effect of adversely affecting that employee’s
work conditions, terms of employment, or work environment.
Harassment may include, but is not limited to:
Verbal conduct such as epithets, derogatory jokes or
comments, slurs, or unwelcome sexual advances, invitations or
comments;
Visual displays such as derogatory and/or sexually-oriented
posters, photography, cartoons, drawings or gestures;
Physical conduct including assault, unwanted touching,
intentionally blocking normal movement or interfering with
work;
Threats and demands to submit to sexual requests as a
condition of continued employment or to avoid an adverse
consequence, and offers of employment benefits in return for
sexual favors.
Such conduct constitutes harassment when (1) submission to the
conduct is made either an explicit or implicit condition of
employment; (2) submission or rejection of the conduct is used as
the basis for an employment decision; or (3) the harassment
interferes with an employee’s work performance or creates an
intimidating, hostile, or offensive work environment.
Protected Class – Any class of persons who share a common sex ,
race, color, religious creed, national origin, ancestry, physical or
mental disability, medical condition, genetic information, marital
status, age, sexual orientation, military or veteran status or any
other “protected class” recognized by federal, state or local laws.
For purposes of this definition, “sex” includes gender, gender
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject: POLICY AGAINST DISCRIMINATION AND
HARASSMENT AND COMPLAINT PROCEDURE
Policy
Number
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Adopted
Date
Revised
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identity, gender expression, pregnancy, childbirth, or a pregnancy-
or childbirth-related medical condition.
Retaliation – Any decision or action that is based on the fact that
a District employee has previously complained of discrimination,
harassment, or retaliation prohibited by this Policy (regardless of
whether a formal complaint has been made) or has provided evidence
in the investigation of another District employee’s complaint under
this Policy, made for the purpose of adversely affecting the
employee’s conditions of employment, terms of employment, or work
environment.
Sexual Harassment – A form of harassment that is based on an
employee’s gender but which objectively and subjectively creates an
adverse impact on the employee regardless of the purpose or intent
of the alleged harasser.
COMPLAINT PROCEDURE
An employee or job applicant who believes he or she has been the
victim of discrimination, harassment, or retaliation by a District
employee, a member of the Board of Directors, or a vendor may make a
complaint verbally, or in writing by completing the District’s
Discrimination and Harassment Complaint Form. An employee may make
a complaint to any of the following:
Human Resources;
Any supervisor, manager, Department Chief, Assistant General
Manager, or General Manager;
Complaints against the General Manager should be directed to
the President of the Board of Directors.
Applicants may make a complaint to any of the following:
Human Resources or;
General Manager.
Any person described above shall forward each written discrimination
complaint to the General Manager or designee immediately of
receiving the complaint or having knowledge of the complaint. If a
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject: POLICY AGAINST DISCRIMINATION AND
HARASSMENT AND COMPLAINT PROCEDURE
Policy
Number
Date
Adopted
Date
Revised
47 10/11/05 11/5/14
Page 4 of 5
complaint is made verbally, the person receiving the complaint shall
notify Human Resources immediately.
Every reported complaint of discrimination, harassment or
retaliation will be investigated thoroughly and promptly. If any
manager, supervisor, Assistant Department Chief, Department Chief,
or Assistant General Manager becomes aware of or suspects
discrimination, harassment, or retaliation against a District
employee or applicant, or any allegation thereof, he/she must
immediately notify the Human Resources Manager of the relevant facts
and circumstances.
The General Manager or designee may conduct the investigation of
alleged discrimination, harassment, or retaliation, or may delegate
responsibility for the investigation to another District management
employee. If the complaint is against the General Manager, the
President of the Board of Directors shall be responsible for
conducting the investigation, assigning another management employee,
or outside investigator and overseeing the investigation. If the
complaint is against the Board of Directors, the General Manager
shall be responsible for contracting with an outside investigator to
conduct the investigation. The Board will take appropriate action
based on the findings.
During its investigation, the District shall take appropriate steps
to protect the privacy of all parties involved. However, this shall
not be construed to justify refusing to inform a person who has been
accused of violating this Policy of the identity of the complainant
and witnesses against him/her. Reports of discrimination,
harassment, or retaliation may not be made anonymously, but
information regarding any report and subsequent investigation will
be disseminated on a “need to know” basis.
In the event that an investigation will take longer than 60 calendar
days to complete, the investigator must notify the complainant of
this fact prior to the expiration of 60 days and provide an
anticipated completion date, in writing.
If a finding is made that discrimination, harassment, or retaliation
has occurred, the District shall take remedial action appropriate to
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject: POLICY AGAINST DISCRIMINATION AND
HARASSMENT AND COMPLAINT PROCEDURE
Policy
Number
Date
Adopted
Date
Revised
47 10/11/05 11/5/14
Page 5 of 5
the circumstances, which may include disciplinary action up to and
including termination for an employee who has violated this Policy
or sanctions for a vendor who has violated this Policy.
Every District employee has a duty to participate in good faith in
any investigation conducted under this Policy. Failure to
participate in good faith is a ground for disciplinary action
appropriate to the circumstances. All employees are encouraged to
report in good faith discrimination, harassment, or retaliation.
The District will not tolerate retaliation against any employee
making a good faith complaint of discrimination, harassment or
retaliation, or for cooperating in an investigation. However,
reports made maliciously or in bad faith may subject an employee to
disciplinary action appropriate to the circumstances up to and
including termination.
The action of making a complaint does not preclude a complainant
from filing a complaint with the appropriate State or Federal
agency. For information as to where to file a claim, an employee
may contact the Equal Employment Opportunity Commission at
www.eeoc.gov or (213) 894-1000 or the Department of Fair Employment
and Housing at www.dfeh.ca.gov or (800) 884-1684.
POLICY HISTORY
Human Resources Policy and Procedure, Effective August 4, 1993.
Board Policy adopted October 11, 2005.
STAFF REPORT
TYPE MEETING: Regular Board MEETING DATE: November 5, 2014
SUBMITTED BY: Rita Bell, Finance Manager PROJECT: DIV. NO. All
APPROVED BY:
Joseph R. Beachem, Chief Financial Officer
German Alvarez, Assistant General Manager
Mark Watton, General Manager
SUBJECT: Adopt Resolution No. 4244 Amending Policy No. 25, the Reserve
Policy, of the District’s Code of Ordinances
GENERAL MANAGER’S RECOMMENDATION:
That the Board adopt Resolution No. 4244 amending Policy No. 25, the
Reserve Policy, of the District’s Code of Ordinances.
COMMITTEE ACTION:
Please see Attachment A.
PURPOSE:
To present to the Board three revisions of the Reserve Policy.
First, to reflect the changes to the Water and Sewer Capacity and
Annexation Fees as a result of the study. Second, to remove the
Special Rates and Charges related to North District, Improvement
Districts (IDs) 1, 3, 9, and 10 which have reached the end of the
intended purpose of these fees. Lastly, to modify the descriptions
of the 1% property tax, OPEB, and betterment sources. In addition,
four definitions in the Reserve Policy Glossary were changed to
reflect current practices.
BACKGROUND:
In August 2012, the Reserve Policy was modified to incorporate the
results of a water and sewer capacity fee and annexation fee study
which changed the methodology of calculation and created a new water
supply fee. As a result of these Board approved changes, the new
sources and uses of fees were incorporated into the Reserve Policy.
ANALYSIS:
In September 2014, the District adopted new water and sewer capacity
and annexation fees as the result of a study performed by HDR. The
most significant change due to the study was to create a sewer
annexation fee and to calculate two sewer capacity fees based on
whether the parcel is located within or outside of an ID.
Additionally, a change was made to reflect the percentage allocation
between the expansion and the “buy-in” portion of the water capacity
fee. The proposed modifications to the Reserve Policy reflect these
approved changes in fees.
In addition, after reviewing the basis of the calculation of the
annexation fee it appeared this fee more closely fits into the
general use revenue. Legal counsel agreed with this change and
accordingly, staff is recommending the necessary modifications to the
Reserve Policy.
On January 1, 2014, the special rates and charges for IDs 1 and 3
expired. In March 2014 the Board voted to eliminate the special
rates and charges for IDs 9, 10, and North District effective January
1, 2015, since the purpose of these special fees has been achieved.
Accordingly, any reference to these special fees is being removed
from the Reserve Policy.
As part of continuous quality assurance review performed by staff,
some necessary changes to the descriptions of the 1% property tax,
the OPEB reserve, and the sources of the betterment fund as well as
glossary definitions, were identified and are being recommended for
Board approval. These changes are consistent with both staff’s and
legal counsel’s understanding of the sources and uses of District
revenues.
The proposed policy is in alignment with the District’s financial
plan and is an integral part of the annual rate model update which
impacts the District’s rates and fees.
FISCAL IMPACT:
None.
STRATEGIC GOAL:
The District ensures its continued financial health through long-term
financial planning and debt planning.
LEGAL IMPACT:
None.
Attachments:
A) Committee Action
B) Resolution No. 4244
Exhibit I Strike-through Policy No. 25
C) Proposed Policy No. 25
ATTACHMENT A
SUBJECT/PROJECT:
Adopt Resolution No. 4244 Amending Policy No. 25, the
Reserve Policy, of the District’s Code of Ordinances
COMMITTEE ACTION:
The Finance, Administration and Communications Committee
recommends that the Board adopt Resolution No. 4244 amending
Policy No. 25, the Reserve Policy, of the District’s Code of
Ordinances.
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.
Page 1 of 2
RESOLUTION NO.4244
A RESOLUTION OF THE BOARD OF DIRECTORS OF THE
OTAY WATER DISTRICT AMENDING
RESERVE POLICY NO. 25 OF THE
DISTRICT’S CODE OF ORDINANCES
WHEREAS, the Otay Water District Board of Directors have
been presented with an amended Reserve Policy No. 25 of the
District’s Code of Ordinances for the financial management of the
Otay Water District; and
WHEREAS, the amended Reserve Policy has been reviewed and
considered by the Board, and it is in the interest of the
District to adopt the amended Reserve Policy; and
WHEREAS, the strike-through copy of the proposed policy is
attached as Exhibit 1 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 Policy No. 25, incorporated herein as Attachment C, is
hereby adopted.
PASSED, APPROVED AND ADOPTED by the Board of Directors of
Otay Water District at a board meeting held this 5th day of
November, 2014, by the following vote:
Ayes:
Noes:
Abstain:
Absent:
________________________
President
Attachment B
Page 2 of 2
ATTEST:
____________________________
District Secretary
OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY
Subject Policy
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1.0 The District
The Otay Water District is a California municipal water district,
authorized in 1956 by the State Legislature under the provisions
of the Municipal Water District Act of 1911. The District is a
"revenue neutral" public agency; meaning each end user pays their
fair share of the District's costs of water acquisition,
construction of infrastructure, and the operation and maintenance
of the public water facilities.
The District provides water service within its boundaries, and
provides sewer and recycled water service within certain portions
of the District. As such, the District operates three distinct
business segments:
Potable water
Recycled water
Sewer
Each of these business segments has an identifiable customer base.
In addition, the developer community, large and small, makes up a
significant class of customer for each business segment. As a
result, the District has four distinct customer service types:
Developers
Potable water users
Recycled water users
Sewer users
The District has established practices and developed computer
systems that have enabled the District to maintain a clear
separation between the service costs relating to each of its four
customer service types. Regardless of customer class, financial
principles regarding cost allocation and fund accounting are
fundamental to the District’s Reserve Policy. These principles
are derived from the statements of the Governmental Accounting
Standards Board (GASB), and from oversight and advisory bodies
such as the California State Auditor, the Little Hoover
Commission, and the Government Finance Officers Association
(GFOA). These have significant impacts on how the finances of
the District are organized and how financial processes work within
the organization.
Exhibit 1
OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY
Subject Policy
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1.1 The District’s Use of Financial Resources
All of the District’s expenditures fall into two broad categories:
operating costs and capital expenditures. The operating costs
include costs relating to the purchase and delivery of potable and
recycled water, and the transportation and treatment of sewage.
The capital expenditures support the construction of
infrastructure necessary to deliver services. The District uses
various funds to support the operating and capital efforts.
Operations and maintenance is financed only by rates and charges,
also called pay-as-you-go, while capital infrastructure is
financed using two financing methods: pay-as-you-go and debt
issuance (requiring annual debt service). The Capital Improvement
Program (CIP) and the two funding methods support the
construction, betterment, and replacement of infrastructure in all
three business areas: potable, recycled, and sewer.
The District establishes different funds to track revenues
allocated to different activities. Once established, each fund
receives financial resources up to the levels defined in this
policy. Every year, as a part of the annual budget process, the
District’s rate model is updated for each fund with the current
fund balances and the estimated revenues and expenditures for the
next six years. The expenditure requirements and financial
resources are then evaluated to ensure that the existing fund
balances and additional revenues are sufficient within the current
budget cycle and for the next five years to maintain target fund
levels. If a deficit is identified, then options for transfers,
shifting CIP projects, debt, cost saving measures, and/or rate
increases are evaluated.
1.2 The District’s Capital Improvement Program (CIP)
The planning, design, and construction costs of all capital
facilities within the three business segments are allocated to
four cost types and corresponding fund categories: New Water
Supply, Expansion, Replacement, and/or Betterment. The allocation
to these four cost types is defined in the District’s Capital
Improvement Program (CIP) and is determined by an engineering
analysis that identifies which type of customer will benefit from
each facility, planned or existing. The costs of the capital
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improvements are borne by either existing users or by the
developing areas, or by a combination of the two, as applicable.
This Reserve Policy protects both the existing users and the
developing areas from incurring unwarranted costs. Developing
areas are not required to finance facilities that are replacement
or betterment and established areas are not required to replace
facilities before they are worn out because of new development.
However, to ensure a fair allocation of costs, each facility has
the potential to be classified into any or all of the four cost
types. In addition to these cost types there are occasional CIPs
that may be billable to a third party, if for example a third
party requires a District facility be relocated. Paragraphs a
through d below, describe how the costs of capital facilities are
financed through various fees.
a. New Water Supply
The portion of a new supply project that benefits new users
is financed from the reserves in the New Water Supply Fund
category. These reserves are primarily derived from proceeds
of the new water supply fee. The New Water Supply Fund is
restricted, meaning the amounts credited to this fund are
accounted for separately and are used solely for the
planning, design, and construction of the new water supply
expansion facilities. Debt financing may also be a temporary
financial resource to finance new water supply projects. The
District has a Debt Policy (Policy No. 45) that guides the
debt issuance process. Any debt proceeds used for this
purpose would be restricted in nature and tracked separately.
General use reserves may also be placed in the Designated New
Water Supply Fund and used for water supply projects.
b. Expansion
The portion of a CIP project that benefits new users is
financed from the reserves in the Expansion Fund category.
These reserves are primarily derived from proceeds of the
“incremental” portion of the capacity fees collected within
developing areas. Capacity fees are accounted for separately
and used for the planning, design, and construction of
expansion facilities. Additionally, expansion may be
financed by annexation fees or the “buy-in” portion of the
capacity fee. Both of these fees arewhich is restricted for
CIP purposes, but not specifically for expansion. Debt
financing may also be a temporary financial resource for
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expansion projects. General use reserves may also be placed
in the Designated Expansion Fund and used for expansion
projects.
c. Replacement
The portion of a CIP project that benefits existing users by
replacing an existing facility is financed from the reserves
in the Replacement Fund category. Replacement of facilities
may be financed with proceeds of annexation fees, the “buy-
in” portion of the capacity fees, general use reserves held
in the Designated Replacement Fund, and debt proceeds. The
various funding sources available for replacement projects is
anticipated to provide the necessary flexibility to begin
projects while any necessary debt financing is being
obtained.
d. Betterment
Facilities that improve reliability, meet new regulations, or
create increased levels of service are considered betterment
facilities that benefit existing users. The reserves in the
Betterment Fund category are used to finance these projects
or portions of projects. Certain user rates, and charges,
and betterment fees are restricted geographically for
betterment of facilities, but may also be used for general
maintenance of facilities in that area. Proceeds of the
annexation fee and the “buy-in” portion of the capacity fees
may also be used to finance betterment projects. General use
reserves may be placed in the Designated Betterment Fund and
used for betterment projects.
1.21 Relocations
Occasionally, relocation of a District facility is required by a
third party. If the District has a superior easement the
relocation cost will be paid by the third party, but only to the
extent that the District does not benefit from the relocation.
When relocation is required, a CIP project may be created which is
wholly or partially financed by a third party. On occasion, the
District will require that its own facilities be relocated.
Depending on the nature of the facilities, the financial resources
for these projects could be from new water supply, expansion,
replacement, betterment or third party financing. Each project is
individually negotiated with the third party based on the facts
and circumstances of the relocation. Occasionally, the District
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will improve the facilities that are being relocated. When
determining how to allocate costs to various funds the following
guideline is suggested: if a project has more than five years of
useful life remaining, an incremental cost view should be
considered; if the project has less than five years of useful life
remaining, a pro-rata cost approach should be considered. Also,
the likelihood the District will benefit from an asset’s life
extension should be evaluated prior to allocating costs.
1.22 Oversizing
If deemed reasonable by the District, in connection with the
construction of backbone facilities, a developer may be required
to oversize new facilities for future development. The developer
is reimbursed for incremental oversizing costs as per Policy
No. 26. These reimbursements are not available for the
distribution system within a development which is an obligation
of the developer.
1.23 Exclusion of Developed Areas from Expansion Costs
Developed areas are assumed to have sufficient supply and capacity
to meet their current requirements as provided by the developers.
In addition, they are considered to have borne capital financial
costs that are at least proportionate to the benefits they have
received from capital facilities. Accordingly, no regional
capital financing costs are allocated to these areas so that they
will not incur any costs for newly developing areas, except for
capital projects that produce district-wide benefit or cost
savings.
1.24 Improvement Districts (IDs)
Improvement Districts (IDs) are established to facilitate the
financing of particular improvements by the specific
beneficiaries. The District has a number of improvement districts
that were established for General Obligation (GO) debt repayment.
Most GO debt has been paid off and it is unlikely that the
District will issue additional GO debt. Improvement districts
continue to be used for other purposes: 1) to distinguish sewer
customers from water customers on the county tax roll; or 2) to
place parcels on the county tax roll for the collection of
availability fees; or 3) for charging special water rates.
Over the years, the District moved to a district-wide perspective
of financing improvements. This philosophy is evident by the
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district-wide capacity and annexation fees. The District also
uses district-wide water rates. As time goes on, it is expected
that IDs will continue to outgrow their purpose and their use will
diminish.
1.3 The Purpose of the Policy
Public entities accumulate and maintain reserves to ensure both
financial stability and continuous availability of services.
Financial stability and the resulting improved credit quality
allow the public entity to weather times of uncertainty and the
impact of negative events, both major and minor. Reserves allow
for the ongoing maintenance of property and timely payment of
expenses even when such expenses exceed money available from a
single fiscal period. In the final analysis, the type and level
of reserves are driven by the type and magnitude of uncertainty
faced by the public entity.
A “reserve” has a number of meanings, as follows:
Working capital is required to insure timely payment of
obligations.
A buffer against volatility in revenues.
Liquidity is required to obtain other goods and services
(e.g., bank services).
Designated money to protect creditors.
Money set aside to replace assets at the end of their useful
lives.
Money set aside to repair or replace assets damaged or
destroyed at unanticipated times.
It is important to note that reserves, fund balance, and net
assets are not the same. Fund balance and net assets are
accounting terms and may not always be in the form of cash or
liquid investments. Fund balances and net assets may not always
be reserves unless a designation of all or a portion of fund
balance is made. In addition, the term fund balance was replaced
by net assets as codified by the Governmental Accounting Standards
Board (GASB).
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In short, reserves are the liquid assets of the District,
accumulated and maintained for application to finance contingent
future activities, whether known or unanticipated, operating or
capital in nature. The District’s Reserve Policy governs the
management and use of these financial resources. Few policies
have a more significant impact on the financial health and
stability of the District. This policy explains several key
financial concepts used by the District and provides some
background information to the overall strategies and practices
utilized. The District has a fiduciary obligation to its
customers, to manage and direct the use of public funds for the
purpose of providing water and sewer services in an efficient and
financially sound manner.
1.4 Policy Guidelines
In 2000, the Little Hoover Commission reviewed the levels of
reserve funds for special districts in California and prepared a
report reflecting that special districts were accumulating
unreasonable levels of funds. As a proactive response, the
California Special Districts Association (CSDA) prepared Reserve
Guidelines for its members. The Reserve Guidelines were
significant in noting that reserve levels need to be in context of
the organization’s overall business model and capital improvement
plan.
There are a number of potential events which the District should
consider in the development of reserves:
Economic Uncertainty - performance of the regional economy
and the impact of that performance on demand for water.
Weather - the amount of rainfall and the impact of weather on
the availability and the cost of water as well as the demand
for water.
Government Mandates - the impact of federal and state
regulation, particularly environmental regulation.
Tax Changes - limitations on the District’s taxing and
spending powers through the passage of a voter referendum,
the impound of District property taxes or the removal of the
District’s power to levy property taxes, further increases to
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Educational Revenue Augmentation Fund (ERAF) contributions or
changes in calculation methodology.
Operating Costs - increases in operating and maintenance
costs because of inflation, labor agreement or other
modification.
Force Majeure - unanticipated expenditures resulting from
natural disasters or intentional acts.
Emergency Maintenance - unanticipated expenditures resulting
from unexpected failure of assets (e.g., rupture in the
primary transmission system).
Unexpected Variation in Cash Flow - the incidence of
additional costs or decreased revenues that require short-
term borrowing in the absence of sufficient financial
resources.
The California State Auditor has, in its oversight role, offered a
number of quality recommendations for the development of reserve
policies as outlined in its report entitled, “California’s
Independent Water Districts: Reserve Amounts Are Not Always
Sufficiently Justified, and Some Expenses and Contract Decisions
Are Questionable,” dated June 2004, Report No. 2003-137. All of
these recommendations have been incorporated into this policy in
an effort to address key issues surrounding the management and use
of District reserves. The detailed objectives as identified by
the State Auditor are as follows:
Distinguish between restricted and unrestricted reserves.
Establish distinct purposes for all reserves.
Set target levels, including minimums and maximums, for the
accumulation of reserves.
Identify the events or conditions that prompt the use of
reserves.
Conform to plans to acquire or build capital assets.
Receive Board approval and that it is in writing.
Require periodic review of reserve balances and rationale for
maintaining them.
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Yet, the State Auditor’s report acknowledges that the California
Constitution (Article XIII B, Section 5) is vague in its
provisions governing the accumulation and use of reserves.1
1 California State Auditor, Bureau of State Audits, “California’s Independent Water Districts: Reserve Amounts Are
Not Always Sufficiently Justified, and Some Expenses and Contract Decisions Are Questionable,” dated June 2004,
2003-137; p. 8.
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Specifically, the Constitution states that “each entity of the
government can establish contingency, emergency, unemployment,
reserve, sinking fund…or similar funds as it shall deem reasonable
and proper.”2 Similarly, the State’s Water Code does not impose
any requirements as to specific or recommended reserve fund
levels. As a result, the public finance community as a whole has
yet to settle on any real objective standards for the level of
reserve funds appropriate for governmental enterprises. This lack
of consensus as to specific standards is indicative of the wide
variance of the financial and operations context for different
districts and different contingencies justifying reserves.
The Government Finance Officers Association (GFOA) in its
“Recommended Practice on Appropriate Level of Unreserved Fund
Balance in the General Fund” (2002) states that in
establishing a policy governing the level of unreserved fund
balance in the general fund, a government should consider a
variety of factors. These include:
The predictability of its revenues and the volatility of
its expenditures (i.e., higher levels of the unreserved
fund balances may be needed if significant revenue
sources are subject to unpredictable fluctuations or if
operating expenditures are highly volatile).
The availability of resources in other funds as well as
the potential drain upon general fund resources from
other funds (i.e., the availability of resources in
other funds may reduce the amount of the unreserved fund
balance needed in the general fund, just as deficits in
other funds may require that a higher level of
unreserved fund balance be maintained in the general
fund).
Liquidity (i.e., a disparity between when financial
resources actually become available to make payments and
the average maturity of related liabilities may require
that a higher level of resources be maintained).
Designations (i.e., governments may wish to maintain
higher levels of the unreserved fund balance to
2 California Constitution, Article XIII B, Section 5.
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compensate for any portion of unreserved fund balance
already designated for a specific purpose).
In the preparation of this policy, each of the CSDA guidelines and
the GFOA recommendations has been considered. In addition, all
seven objectives provided by the State Auditor are specifically
addressed for each reserve. The District wholly supports the
State Auditor’s efforts to bring a high-level of quality to
reserve governance and establishing a standard of performance.
The District recognizes that the customer pays for services
provided. Quality management requires that periodic valuations be
performed so that fees and charges can be set at appropriate
levels to recover the cost of service. The District’s Reserve
Policy has been drafted with consideration of the GFOA, CSDA, and
State Auditor’s general guidelines as provided above. In
addition, the District has adopted the following principles in the
management of its financial resources:
Reserves are held and used only for the purpose for which
they are collected. This is done to maintain equity among
customers.
Each of the service types is tracked separately so that
expenditures and revenues can be monitored and evaluated for
each customer type. This provides the District with the
necessary information to appropriately charge for each of the
services.
Separation of operations and maintenance from capital
expenditures occurs within each of the service types. This
is done because the financing of these expenditures is often
on different timelines or use different reserves.
The District will hold its reserves at responsible and
prudent levels. This policy sets minimum, maximum, and
target levels for each of the various funds. This has been
done so that the District can maintain reserves to meet the
purpose for which the funds were established. The levels are
set by reference to line items in the District’s financial
statements and approved budgets. This allows reserve levels
to adjust to the District’s changing financial circumstances.
Debt financing of facilities provides intergenerational
equity and maintains rates at reasonable levels. This equity
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is accomplished with long-term financing which spreads the
cost of facilities over the life of the facilities. The
burden to pay for facilities is then paid by those who use
them. The District could amass significant reserves by pre-
collecting financial resources in a Replacement Reserve Fund
allowing the District to cash finance all replacements.
However, this would require significant rate increases
burdening the current customers and creating reserve levels
difficult to defend to the ratepayers or other oversight
entities.
These concepts are fundamental to the way the District manages its
funds and have a direct impact on the way rates and charges are
set. The District performs annual budget evaluations and updates
its rate model on an annual basis to monitor and adjust the
various funds and revenue sources. The separation, tracking, and
projecting of the various funds and expenditures create the
essential information necessary for the equitable rate structure
maintained by the District. The annual review preserves the
balance between services provided and the fees charged. This
review also insures that reserves will be available to continue to
serve the District’s customers.
Financial Sources
2.0 Developers
a. Meter Installation Charges (General Use)
Meter fees are charges collected for new water service
connections. Fees vary depending upon meter size and type of
service. The costs associated with meter installations are
included in the Operating Expenses section of the budget.
These charges are financed by developers.
b. Developer Deposits (General Use)
These deposits are for the engineering and operations
services provided to developers. They are tracked separately
for each developer and any excess amount is returned to the
developer.
c. Water Annexation Fees (General UseRestricted)Is this
restricted?
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Annexation fees3 are collected as a condition of annexing
into the District’s potable and or recycled water facilities.
Since the existing facilities have been built and maintained
by developers or customers within the District, the
annexation fee is calculated based on the present value of
all property taxes (1% property tax and availability fees)
paid by existing and prior customers. The annexation fee
insures that future users finance a portion of facilities
that were sized, built, and maintained for both existing and
future users.reimburses existing customers for past
contributions so that all customers have contributed more
equally to water facilities. Proceeds of annexation fees are
unrestricted and can may be used for any expansion,
replacement, or betterment projects. These reserves may be
shifted back and forth as financing needs change.general fund
purposes.
d. Sewer Annexation Fees (UnrRestrictedGeneral Use) Is this
restricted?
d. A sewer annexation fee is collected when property is
annexed into an improvement district. This fee is calculated
using the “buy-in” basis and therefore is unrestricted. Since
the existing facilities have been built and maintained by
developers or customers within the Districta sewer IDs, the
annexation fee is calculated based on the present value of
all availability fees paid by existing and prior customers.
The annexation fee reimburses existing customers for past
contributions so that all customers have contributed more
equally to sewer facilities. insures that future users
finance a portion of facilities that were sized, built, and
maintained for both existing and future users. Proceeds of
the annexation fees are unrestricted and canmay be used for
any general fund purposes.
are restricted and can be used for expansion, replacement,
or betterment projects. These reserves may be shifted back
and forth as financing needs change.
e. New Water Supply Fee (Restricted)
New water supply fees4 are based on the cost of the expansion
portion of new water supply projects divided by the number of
3 Code of Ordinances, Section 9.
4 Code of Ordinances, Section 28
Formatted: Indent: Left: 0.5", First line: 0", Numbered +Level: 1 + Numbering Style: a, b, c, … + Start at: 1 +Alignment: Left + Aligned at: 0.19" + Indent at: 0.44"
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future equivalent dwelling units (EDU). The new water supply
fee covers the cost of planning, design, construction, and
financing associated with facilities for the District’s new
supply needs. These fees are paid by developers. The
proceeds of this fee may be used only for new potable or
recycled water supply projects. Although the fees collected
are not restricted separately, one portion for potable and
the other for recycled, they are tracked separately.
f. Water Capacity Fees (Restricted)
Water Ccapacity fees4 are based on the value of existing and
future facilities divided by the number of existing and
future equivalent dwelling units. This method of calculating
capacity fees is called the combined method, where the “buy-
in” portion of the capacity fee covers costs to repay
existing customers for the facilities that they have built,
and where the “incremental” portion of the capacity fee
covers the cost of future expansion facilities. The “buy-in”
portion of the capacity fee is restricted to pay for
planning, design, construction, and financing associated with
expansion, replacement or betterment facilities. The “buy-
in” portion may be shifted back and forth between expansion,
betterment or replacement as the financing needs change. The
“incremental” portion of the capacity fee is limited to
planning, design, construction, and financing exclusively for
expansion facilities (excluding new water supply expansion).
g. Sewer Capacity Fees (Restricted)
Sewer capacity fees are based on the value of existing and
future facilities divided by the number of existing and
future equivalent dwelling units. This method of calculating
capacity fees is called the combined method, whereuses the
“buy-in” portion process whereof the capacity fee covers cost
to repay existing customers for the facilities that they have
built, and where the “incremental” portion of the capacity
fee covers the cost of future expansion facilities. At
anythe time an expansion project is determinedplanned, the
fee calculation will include the cost of the expansion
project and the expansion EDUs, making this calculation a
combined approach. The “buy-in” portion of the capacity fee
is restricted to pay for planning, design, construction, and
financing associated with expansion, replacement or
betterment facilities. The “buy-in” portion may be shifted
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back and forth between expansion, betterment or replacement
as the financing needs change. The “incremental” portion of
the capacity fee is limited to planning, design,
construction, and financing exclusively for expansion
facilities. For parcels within a sewer ID the calculation
excludes the tax debt already paid by these customers
therefore, producing a lower fee than for parcels outside of
a sewer ID. The capacity fees are restricted to pay for
planning, design, construction, and financing associated with
the expansion, replacement, or betterment of facilities.
Facility needs are based on projected land use planning. Changes
in anticipated future land use occur and can alter projected
facility requirements. Thus, both the anticipated facilities
needs and their projected costs change over time as regulatory
agencies make changes to land use. The District periodically
reviews the capacity fee calculation to accommodate such
variations. These fees are paid by developers.
The District’s construction of infrastructure occurs prior to the
addition of EDUs. This sequence serves two purposes: one it
ensures that the District can serve the pending construction as it
is completed; and two, it is more efficient to oversize many
facilities at the outset rather than build for the current need
and then reconstruct when the future need is realized. As a
result of this strategy, the District has financed construction
with bond financing as the existing expansion reserves are
depleted.
The water capacity fee is calculated based on the combined
recycled and potable water systems needs. This methodology is
used because the two water systems work hand-in-hand. All
capacity fees can be used for either potable or recycled but must
be tracked to distinguish between the “buy-in” and “incremental”
portions as described above. So, while capacity fees are not
restricted separately by potable and recycled, they are tracked
separately.
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2.1 Customers/Users
a. Uniform Rates and Charges (General Use)
Charges to users for water, sewer, and recycled water are
uniform throughout the District for similar customer types.
b. Monthly System Fees (General Use)
This is a fixed revenue source that is charged monthly. The
amount of the charge is based on the meter size.
c. Energy Charges (General Use)
The energy pumping fee is a charge per Unit of water for each
100 feet of lift, or fraction thereof, above the base
elevation of 450 feet. This charge is placed on the monthly
water bills of all water customers.
d. Penalties (General Use)
Penalties are added to the monthly water and sewer bills for
late charges, locks, etc.
e. Pass-through Fixed Charges (General Use)
A fixed monthly charge to the District’s customers intended
to collect sufficient funds to pass-through the increased
DEVELOPERS
Diagram 2.0: Flow of Funds ‐ Developer Sources
Unrestricted and
Undesignated
(General Use) Funds
Meter
Installation
Charges
Developer
Deposits
Restricted Funds
Annexation
Fees
Capacity
Fees
New Water
Supply Fees
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fixed costs from the County Water Authority (CWA) and the
Metropolitan Water District (MWD).
f. Special Rates and Charges (UnrRestrictedGeneral Use)
In addition to the uniform water and sewer charges, the
District currently has five a special water rates and one
sewer rate for the Russell Square lift station. The five
water rates are Russell Square fee is for construction,
installation, and maintenance or repair of water storage
reservoirs, pump stations, and water lines the Russell Square
lift station. Each of these rates and charges must be used
within the respective geographic areas from which they are
collected. These special charges are listed below: This fee
is collected in accordance with the Russell Square sewer
charge (see Code of Ordinances Section 53.03B).
North District water charge (Code section 25.03G)
ID 9 water charge (Code section 25.03H)
ID 3 water charge (Code section 25.03I)
ID 10 water charge (Code section 25.03I)
La Presa water charge (Code section 25.03I)
Russell Square sewer charge (Code section 53.04C)
When these rates were established they were for the specific
purpose of constructing, installing, and maintaining the
water and sewer systems in the areas in which the fees were
collected. Therefore, these are restricted reserves by
geographic area as well as by purpose. These rates and
charges can also be used for maintenance; unlike the
availability fees (discussed in 2.2 B.). These six special
rates and charges along with availability fees are tracked
separately, by geographic area, so they can be individually
evaluated to maintain the targeted reserve levels. To meet
this need, each special rate and charge is accounted for in a
“sub-fund” of the Betterment Fund.
g. Temporary Meter Fees (General Use/Restricted)
Water charges, in lieu of capacity fees, are charged on
temporary meters. This is done because temporary meters use
system capacity but they are not charged a capacity fee.
Temporary water use is charged at two times the water rate
with the added charge placed in the Restricted Expansion
Formatted: Indent: Left: 1", No bullets or numbering
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Fund. The primary users of these temporary meters are
developers; however, general customers also use these for
various purposes.
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2.2 County-Collected Taxes and Fees
a. General Levy Property Tax Receipts (1% Property Tax)
(General Use)
In 1978, Proposition 13 limited the levy of ad valorem
property taxes on real property to one percent of the
assessed value of such property. Subsequent legislation,
AB 8, established that the receipts from the one percent levy
were to be distributed to taxing agencies proportionate to
each agency’s general levy receipts prior to Proposition 13.
Taxes received are for general use. Spending limits for the
District are governed by the 1979 passage of California
Proposition 4, Limitations of Government Appropriations (GANN
limit). Proposition 4 places an appropriation limit on most
spending from tax proceeds.
b. Availability Charges (General Use/Restricted)
The District levies availability charges each year in
developed and undeveloped areas. Current legislation
provides that any amount up to $10 per parcel is general use
and any amount over $10 per parcel is restricted to be
expended in and for the improvement district (ID) within
CUSTOMERS / USERS
Diagram 2.1: Flow of Funds ‐Customer Sources
Unrestricted and
Undesignated
(General Use) Funds
Monthly
System Fees
Restricted Funds
Energy
Charges
Penalties
Pass –Through
Fixed Charges
2x Water
Rate
Special Rates
and Charges
Uniform Rates
and Charges
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which it is collected. Accordingly, the District may use
availability charges in excess of $10 toward costs of water
and sewer facilities which are either, expansion, betterment,
or replacement of facilities consistent with the purpose of
the ID in which they are collected. This portion of the
proceeds of availability charges is geographically restricted
and restricted by purpose. As costs are incurred on these
projects the respective IDs are charged, reducing the
reserves. To the extent that availability charges are not
used for the purpose for which they are collected, they must
be returned to the property owners that paid them. The
District has historically used these reserves for betterment
capital facilities thus, the restricted reserves are
accounted for in “sub-funds” of the Betterment Fund
(see 2.1 f.).
c. Improvement District General Obligation (GO) Bond
Assessments (Restricted)
The District has historically issued general obligation (GO)
debt and establishes an improvement district for the
repayment of that debt. When this financing method is used,
the county tax roll can be used to collect special taxes or
assessments within the ID to pay the debt obligation. The
proceeds of the debt are restricted for the purpose as
defined in the bond documents.
2.3 Miscellaneous Income
a. Miscellaneous Rents and Leases (General Use)
Revenues received from the rental and lease of District
property are general use revenues. Not only are they
COUNTY COLLECTED TAXES AND FEES
Unrestricted and
Undesignated
(General Use)
Funds
General Levy
Property Tax
Receipts
Availability
Charges
Restricted Funds
General Obligation
Bond Assessments
Diagram 2.2: Flow of Funds – County Collection Sources
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periodic revenues, but there is also a one-time fee charged
with the setup of each new lease. The District incurs
expenses related to these rents and leases. The one-time
fees are calculated to recover the costs to setup the leases.
b. Sewer Billing Fees (General Use)
Sewer billing fees are general use revenues. The District
provides processing and billing services to the City of Chula
Vista to bill and collect from their customers for sewer
service. These fees are to recover the cost the District
incurs to provide this service.
c. Interest Income or Expense Allocation (General Use,
Designated, and Restricted)
Interest income (expense) will be allocated every month based
upon each fund's month-ending balance. In this way, each
fund receives credit for interest earned by that fund and
each fund with a negative balance is charged for the use of
the other fund’s reserves.
2.4 Debt Issuance
a. Loans (General/Restricted Use)
As the District determines that additional financing is
required for a particular purpose, the option of borrowing is
considered. The determination to borrow is made as a part of
the annual rate model update and is evaluated in accordance
MISCELLANEOUS INCOME
Unrestricted and
Undesignated
(General Use) Funds
Miscellaneous
Rents and Leases
Sewer Billing
Fees
Restricted Funds
Interest Income or
Expense Allocation
Diagram 2.3: Flow of Funds – Miscellaneous Income Sources
Designated Funds
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with the Debt Policy before it is recommended to the Board
for action. As an option to bond indebtedness, loans are
available to satisfy short-term financing needs. These loans
may or may not be contractually restricted for a particular
purpose.
b. General Obligation (GO) Bonds (Restricted)
As the District becomes more developed it becomes less likely
that general obligation debt will be used as it requires a
vote of the public to be approved. Bond proceeds are
restricted for the construction of those facilities
identified in the GO bond issuance. Occasionally, specific
portions of bond proceeds may be allocated for the repayment
of the principal and interest, also called debt service, on
these bonds. As the District determines that additional
financing is required for a particular purpose, the option of
debt issuance is considered. The determination to issue debt
is made as a part of the annual rate model update and is
evaluated in accordance with the Debt Policy before it is
recommended to the Board for action.
c. Certificates of Participation (COPs) (Restricted)
General revenues of the District are pledged as security for
Certificates of Participation (COPs) indebtedness. If the
District determines that additional financing is required for
a particular purpose, the option of debt issuance is
considered. The determination to issue debt is made as a
part of the annual rate model update and is evaluated in
accordance with the Debt Policy before it is recommended to
the Board for action. This form of financing has become the
industry’s preferred form of financing as it does not require
a vote of the general public.
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2.5 Inter-fund Transfers
Each year in the budgeting process, future fund levels are
projected for the next six years. Based on these projections
transfers are recommended. Reserves may be transferred
between Unrestricted or Designated Funds and the General Fund
(see 4.0 “Funding Levels” and 4.1 “Fund Transfers”).
Reserves may not be transferred to or from any of the
restricted funds unless it is between two restricted funds
with a shared purpose.
Fund Types and Categories
3.0 General Funds
a. Purpose
The General Fund is neither restricted nor designated. The
District maintains one General Fund for each business segment
(water, sewer, and recycled). This fund holds the working
capital and emergency operating reserves. While the General
Fund has a short-term focus to finance the District’s annual
operations, it is supported by the six-year rate model. This
DEBT PROCEEDS
Unrestricted and
Undesignated
(General Use) Funds
Loans General
Obligation Bonds
Restricted Funds
Certificates of
Participation
Diagram 2.4: Flow of Funds – Debt Issuance Sources
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fund is primarily used to finance the operations of the
District; however, it can be used for any District purpose.
This fund can be used to supplement the District’s rates and
charges and be a temporary source of revenue to balance the
Operating Budget. This fund can also be used to avoid spikes
in the rates or significant and abrupt increases. It is an
industry practice to have a fund that can be used to
stabilize rates. This would only occur if there was a
temporary need for reserves that would smooth out a rate
spike or to ramp up what would otherwise be a dramatic rate
increase.
The General Fund also plays a role in the debt planning of
the District. This fund is viewed by the debt markets as a
commitment by the District to ensure financial stability of
the rates and charges of the District. The District is
anticipated to need a number of debt issuances over the years
and this fund will help the District not only to stabilize
rate fluctuations but also to access low cost financing for
future projects.
b. Sources
Meter installation charges, temporary meter fees, uniform
rates and charges, monthly system fees, energy charges,
penalties, pass-through fixed charges, general levy property
tax receipts, water annexation fees, availability charges,
miscellaneous rents and leases, sewer billing fees, interest
income or expense allocation, loans, and a portion of the
temporary water sales.
The sewer general fund receives sewer charges, penalties,
availability charges, sewer annexation fees (calculated on
the “buy-in” basis), and interest income or expense
allocation.
c. Funding Levels
I. Minimum Level – The minimum reserve level for each
business segment of the General Fund is three
months of operating budget expenses (evaluated
separately for each segment).
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II. Maximum Level – The maximum reserve level for the
General Fund is nine months of operating budget
expenses. In the event that this fund exceeds the
seven month level, the excess will be evaluated or
transferred to one or more of the designated funds.
III. Target Level – The target level of reserves is
three months of operating budget expenses. In the
event that the fund drops below the target level,
rate increases or fund transfers would be
considered.
3.1 Designated Other Post Employment Benefits (OPEB) Fund
a. Purpose
Designated Other Post Employment Benefits (OPEB) reserves are
“general use” reserves that have been set apart by Board
action to finance the medical benefits of qualified retirees
as outlined in the District’s benefits plan. This fund is
available to hold any Board designated OPEB funds.District
fund holds only a portion of the total OPEB reserves. The
other portion is held in The District also has a trust at
CalPERS and is restricted for the purpose of financing the
OPEB liability. Money held in the CalPERS trust restricts
the funds from any use other than OPEB. The two portions
funds are considered jointly when looking at target reserve
levels. Every two years, the fund is evaluated by an
actuarial study is performedy to update the annual financing
requirements. Changes in the actuarial valuation may result
from changes in benefit levels, employee population, health
insurance costs, or general market conditions. The reserves
held by the District are currently designated and may be
placed into the CalPERS trust to legally restrict the funds,
removing the District’s legal access to these reserves.
b. Sources
The OPEB liability may be financed by general use reserves
coming from user rates and charges, either from an operating
budget expenditure or from interfund transfers. Transfers of
unrestricted reserves may come from the various designated
funds or from the General Fund. As a part of the normal
budget process, annual operating revenues have been
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sufficient to finance the ongoing needs of this designated
fund. While debt financing is also an option, the District
has only used user rates and charges to finance this fund.
c. Funding Levels
I. Minimum Level – The minimum reserve level for this
fund is equal to the District’s OPEB liability as
determined by the actuarial study. When
considering the reserve level of this fund, both
the District held OPEB reserves and CalPERS held
OPEB reserves must be considered jointly.
II. Maximum Level – The maximum reserve level for this
fund is equal to the District’s OPEB liability as
determined by the actuarial study. In the event
that the two funds, as described above, exceed the
OPEB liability, the District will reduce the annual
funding levels as defined by the actuarial study.
III. Target Level – The target reserve level for this
fund is equal to the District’s OPEB liability as
determined by the actuarial study. In the event
that the two funds, as described above, fall below
the OPEB liability, the District will increase the
annual funding levels as defined by the actuarial
study.
3.2 New Water Supply Fund Category
a. Purpose
The New Water Supply Fund category is to finance the
expansion portion of new water supply projects and is
therefore to be paid by developers. When considering the
reserve level of the New Water Supply category; the New Water
Supply Fund, the New Water Supply Debt Fund, and the
Designated New Water Supply Fund all work in concert and must
be considered jointly.
b. Sources
The New Water Supply Fund receives reserves only from the new
water supply fee. Other funds within the new water supply
category of funds receive debt proceeds and general use
reserves through a designation to this category.
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c. Funding Levels
I. Minimum Level – As the District matures the CIP
will move to purely replacement projects. As the
District moves through its lifecycle the need for
new water supply reserves will decrease and may be
reduced to zero.
II. Maximum Level – The maximum reserve level for the
new water supply category of funds is limited to
five years of the unfinanced new water supply
facilities as described in the District’s CIP
Budget. To determine the unfinanced amount, the
total new water supply financing needs must be
reduced by the projected new water supply revenues,
general fund designations, and bond financing. If
the combined new water supply reserves exceed the
target level, the District should consider
transferring designated reserves to meet other
purposes, reduce the new water supply fee, or
change the timing of the new water supply projects.
III. Target Level – In order to facilitate debt
financing of the new water supply, it is important
that the various new water supply funds retain an
overall reserve level of six months, prior to any
attempt to obtain debt financing. This reserve
level allows the District the time necessary to
issue additional debt without depleting new water
supply reserves. If the combined new water supply
reserve levels drop below six months of
expenditures, this would trigger a transfer of
general use reserves, a bond sale, or a change in
the timing of new water supply projects. Bond
proceeds would be placed in the Restricted New
Water Supply Debt Fund while transfers would be
placed in the Designated New Water Supply Fund.
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3.3 Expansion Fund Category
a. Purpose
The Expansion Fund category is to finance the expansion
portion of capital projects and therefore is to be paid for
by developers. When considering the reserve levels of the
expansion category, the following funds work in concert and
must be considered jointly: the Expansion Fund, Expansion
Debt Fund, Annexation Fund (potable and recycled only),
Capital Improvement Fund, and the Designated Expansion Fund.
Restricted Funds
Unrestricted and
Undesignated Funding
Sources
Funding Source New Water
Supply Fees
Debt
Proceeds
Restricted Funds
Restricted Funds
Designated Funds
New Water
Supply Fund
Expansion
New Water
Supply Fund
Designated
New Water
Supply Fund
Debt Fund
General Fund – Rates and Charges
New Water
Supply Fund
Category
New Water
Supply
Debt Fund
Diagram 3.2: New Water Supply Fund Category
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Potable and recycled reserves are considered jointly while
sewer is evaluated separately.
b. Sources
The Expansion Fund is financed by water charges in lieu of
capacity fees (for temporary meters) and the “incremental”
portion of the capacity fee. The other funds in this
category may also be financed by debt proceeds, annexation
fees, the “buy-in” portion of the capacity fee, and the
general fund through a designation of reserves.
c. Funding Levels
I. Minimum Level – As the District matures the CIP
will move to purely replacement and betterment
projects. As the District moves through this
lifecycle the need for expansion reserves will
decrease and may be reduced to zero.
II. Maximum Level – The maximum reserve level for the
expansion category of funds is limited to five
years of unfinanced expansion facilities as
described in the District’s CIP Budget. To
determine the unfinanced amount, the total
financing needs must be reduced by the projected
expansion revenues, bond financing, and any
restricted or general fund revenues allocated to
this fund category. If the combined expansion
reserves exceed target levels, the District should
consider reducing capacity fees, reallocating
restricted or designated funds to meet other
purposes, or shifting the timing of expansion
projects.
III. Target Level – The target level is six months of
expansion expenditures. It is important that the
expansion reserves remain at a minimum of six
months of expansion expenditures. This reserve
level allows the District the time necessary to
issue additional debt without depleting expansion
reserves. If the combined expansion reserves drop
below six months of expenditures this would trigger
a transfer of general use reserves, a bond sale, an
adjustment to the timing of expansion projects, or
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a reallocation of restricted reserves. Bond
proceeds would be placed in the Restricted Bond
Fund, transfers of general use reserves would be
placed in the Designated Expansion Fund, and
transfers of restricted reserves would be placed in
either the Expansion Annexation Fund or the
Expansion Capital Improvement Fund.
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Unrestricted and
Undesignated Funding
Sources
Diagram 3.3: Expansion Fund Category
Funding Source 2x Water
Rates
Capacity
Fees (1)
Restricted Funds
Restricted Funds
Designated Funds
Expansion
Fund
Expansion
Debt Fund
Annexation
Fund
General Fund – Rates and Charges
Annexation
Fees
Restricted Funds Expansion Capital
Improvement
Fund
Debt
Proceeds
Restricted Funds
Capital
Improvement
Fund
Bond
Debt
Expansion
Fund
Designated
Expansion
Fund
59. 467.6%
Expansion
Fund
Category
Restricted Funds Expansion
Annexation Fund
40. 632.4%%%
(1) For Water Capacity Fees 32.4% goes into the Expansion fund and 67.6% goes into
the Capital Improvement Fund. For Sewer Capacity Fees, 100% would gogoes to the
Capital Improvement Fund to be used for replacement or betterment.
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3.4 Replacement Fund Category
a. Purpose
The Replacement Fund category is to finance replacement
projects. When considering the reserve levels of the
replacement category of funds, the following funds work
in concert and must be considered jointly: the
Annexation Fund, Debt Fund, Capital Improvement Fund,
and the Designated Replacement Fund. The purpose of
these reserves is to pay for the replacement of capital
infrastructure and capital purchases. These reserves
are not to be used for the replacement of non-capital
items.
With the District’s development of its financial systems
and the greater need and ability to separate and track
reserves, the replacement reserves have been separated
into three funds: water, recycled, and sewer.
Projects undertaken solely for the purpose of replacing
major capital equipment or facilities, i.e., where the
cost exceeds $10,000 for capital purchases or $20,000
for infrastructure items, generally these are not
considered normal maintenance. When the cost is below
$10,000, the costs are financed annually as operational
maintenance. As charges are incurred on replacement
projects the reserves are deducted from the respective
Replacement Funds on a monthly basis.
b. Sources
The various funds in this category are financed by debt
proceeds, annexation fees, the “buy-in” portion of the
capacity fee, and general fund designations.
c. Funding Levels
I. Minimum Level – The minimum reserve level of this
category of funds is 3% of the historical value of
existing assets as identified in the District’s
current financial statements. Potable, recycled,
and sewer replacement are evaluated separately.
II. Maximum Level – The maximum reserve level of this
category of funds is 6% of existing assets. If the
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combined replacement reserves exceed target levels,
the District should consider transferring
annexation fees or the “buy-in” portion of the
capacity fee to meet other purposes. Another
consideration would be to shift the timing of
replacement projects.
III. Target Level – The target reserve level of this
category of funds is 4% of existing assets. In the
event that the reserves fall below the recommended
target level, the District should consider
transferring annexation fees or the “buy-in”
portion of the capacity fee. The District should
also consider shifting the timing of replacement
projects or issuing debt to support the planned
level of facility replacement. The District will
act based on the annual six-year rate model, to
insure that at the end of that planning horizon the
reserves exceed the minimum level and is
approaching the target level.
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Funding Source
Unrestricted and
Undesignated Funding
Sources
Capacity
Fees (1)
Diagram 3.4: Replacement Fund Category
Annexation
Fees
Restricted Funds
Restricted Funds
Designated Funds
Capital
Improvement Fund
Replacement
Debt Fund
Designated
Replacement
Fund
Annexation Fund
General Fund – Rates and Charges
Debt
Proceeds
Restricted Funds
Debt Fund
Replacement
Annexation
Fund
Restricted Funds
Replacement
Capital
Improvement
Fund
59. 467.6%
Replacement
Fund
Category
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(1) For Water Capacity Fees 67.6% goes into the Capital Improvement Fund.
For Sewer Capacity Fees, 100% would gogoes to the Capital Improvement
Fund to be used for replacement or betterment.
3.5 Betterment Fund Category
a. Purpose
The Betterment Fund category is to finance the
betterment portion of capital projects with a portion
going to maintenance of the potable, recycled, and sewer
systems. The District maintains separate Betterment
Fund categories, one for each improvement district. An
improvement district is a legally defined geographic
area usually established for the purpose of bond
financing of facilities. The betterment reserves within
these funds are restricted by law for use within the
improvement district in which the fees were collected
(Water Code 71631.6). However, the legal restriction of
this reserve depends upon the particular revenue source.
(See Section 2.1 2 fb. for a review of the special rates
and availability fees).
When considering the reserve levels of the betterment
category of funds, the following funds work in concert
and must be considered jointly: the Betterment Fund,
Annexation Fund, Debt Fund, Capital Improvement Fund,
and Designated Betterment Fund.
b. Sources
The Betterment Fund category receives restricted
revenues by improvement district via special water rates
and from availability fees (the first $10 is
unrestricted, while amounts over $10 are restricted)
collected through the county tax roll. Betterment may
also be financed by debt proceeds, annexation fees, the
“buy-in” portion of the capacity fee, as well as the
general fund through a designation of reserves.
c. Funding Levels
I. Minimum Level – As the District matures the CIP
will move to purely replacement projects. As the
District moves through this lifecycle the need for
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betterment reserves will decrease and may be
reduced to zero.
II. Maximum Level – The maximum reserve level for the
betterment category of funds is limited to five
years of unfinanced betterment facilities as
described in the District’s CIP Budget. To
determine the unfinanced amount, the total
financing need must be reduced by the projected
betterment revenues, bond financing, annexation,
and general fund designations. If this maximum is
exceeded, then the District should evaluate
reductions in the special water rates and
availability fees, transferring designated reserves
to meet other purposes, or shifting the timing of
betterment projects.
III. Target Level – The target is six months of
betterment expenditures. It is important that the
betterment reserves remain at a minimum of six
months of betterment expenditures. This reserve
level allows the District the time necessary to
issue additional debt without depleting betterment
reserves. If the combined betterment reserves drop
below six months of expenditures this would trigger
a transfer of general use reserves, a bond sale, or
an adjustment to the timing of betterment projects.
Bond proceeds would be placed in the Betterment
Bond Fund while transfers would be placed in the
Designated Betterment Fund.
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Fund
Diagram 3.6: Fund Targets
Restricted Funds
Unrestricted and
Undesignated Funding
Sources
Diagram 3.5: Betterment Fund Category
Funding Source Capacity
Fees (2)
Annexation
Fees
Restricted Funds
Restricted Funds
Designated Funds
Capital
Improvement
Fund
Betterment
Debt Fund
Betterment
Fund
General Fund – Rates and Charges
Special Rates
and Availability
Charges (1)
Restricted Funds
Betterment
Annexation
Fund
Debt
Proceeds
Restricted Funds
Annexation
Fund
Bond
Debt
Designated
Betterment
Fund
Betterment
Fund
Betterment
Capital
Improvement
Fund
59.467.6%
Betterment
Fund
Category
(1) The portion of charges over $10 per parcel is restricted.(2) For Water Capacity Fees 67.6% goes into the Capital Improvement Fund. For Sewer
Capacity Fees, 100% would gogoes to the Capital Improvement Fund.
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Diagram 3.6: Fund Targets
Fund or Fund
Category
Actions to Consider if
below Target Target Maximum
New Supply Fund
Category
New supply fee
increase, bond
financing, or transfer to
designation designated
or to CIF Fundsor
Annexation Fund
Total of all funds in fund
category = six months
of capital expenditures
Nexus of cost to fee
Expansion Fund
Category
Capacity fee increase,
bond financing, or
transfer to
designatedion or to CIF
Funds or Annexation
Fund
Total of all funds in fund
category = six months
of capital expenditures
Nexus of cost to fee
Replacement Fund
Category
Bond financing, or
transfer to
designatedion or to CIF
Funds or Annexation
Fund
Total of all funds in fund
category = 4% of
infrastructure
Nexus of cost to fee
Betterment Fund
Category
Bond financing, or
transfer to
designatedion or to CIF
Funds or Annexation
Fund
Total of all funds in fund
category = six months
of capital expenditures
5 years unfunded needs
Debt Reserve Fund Increase tax collection
or rates
One semi‐annual
payment
Two semi‐annual
payments
OPEB Fund Fund transfers Full funding Full funding
General Fund Rate increase or fund
transfers
Three months of
operating budget
expenses
Nine months of
operating budget
expenses
Note: The annexation fee for sewer is a general fund revenue.
Additional Restricted Funds
4.0 Capital Improvement Fund
a. Purpose
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The “Capital Improvement Fund’s sole purpose is to track the
“buy-in” portion of the capacity fee and to ensure these fees
are expended solely for the purpose for which they were
collected. In this case it is to pay for facilities that
were in existence at the time this fee was established.
These fees may be used for expansion, replacement, or
betterment projects or any debt related to these categories.
These water capacity fees may also be used for either the
potable or the recycled systems. As capacity fees are
collected, the “buy-in” portion of the fee is allocated as
needed to one of three capital improvement funds, one in each
of the Expansion, Replacement, and Betterment Fund
categories. These reserves are used to pay debt or offset
any negative balance within these three categories of funds.
For sewer, these fees fund the Expansion, Replacement, or
Betterment Fund cateagories. These fees may not be used to
finance the New Water Supply category, as there were no new
water supply facilities in existence at the time the new
methodology for capacity fees was established.
b. Sources
The “buy-in” portion of the capacity fee collected after
June 30, 2010 or after September 30, 2014 for sewer.
c. Funding Levels
There are no minimums, maximums, or target levels for these
reserves on an individual basis. The allocation of this fee
to the various capital improvement funds is dependent on the
overall reserve levels within each fund category.
4.1 Annexation Fund
a. Purpose
The Annexation Fund’s sole purpose is to track the potable,
and recycled, and sewer annexation fees collected and to
ensure these fees are expended solely for the purpose for
which they were collected. The annexation fees may be used
for expansion, replacement, or betterment projects or any
debt related to these categories. These fees may be used for
either the potable or recycled systems. These reserves may
not be used to finance the New Water Supply category, as it
was not in existence at the time the fee was established. As
these fees are collected they are allocated as needed to one
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of three capital improvement funds, one in each of the
Expansion, Replacement, and Better Fund categories.
b. Sources
Potable and recycled annexation fees collected after
June 30, 2010 or after September 30, 2014 for sewer.
c. Uses
There are no minimums, maximums, or target levels for these
reserves on an individual basis. The allocation of this fee
to the various Annexation Funds is dependent on the overall
reserve levels within each fund category.
4.21 Debt Reserve Fund
a. Purpose
The Debt Reserve Fund is established to hold the proceeds
from the various debt issuances. There are two types of
debt, General Obligation bonds and Certificates of
Participation bonds. The proceeds are transferred to the New
Water Supply, Expansion, Replacement, or Betterment Debt
Funds as they are expended for various facilities within
those fund categories. As repayment of the debt occurs, the
balances within these individual funds are reduced so that
the financial impact of issuing debt is tracked within the
category for which the debt was issued.
b. Sources
Debt proceeds.
c. Uses
There are no minimums, maximums, or target levels for this
fund on an individual basis. This fund is available on an as
needed basis to fund CIP projects for new water supply,
expansion, replacement, or betterment. From a funding level
perspective, these reserves are evaluated in the context of
all the various funds within each fund category.
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Fund Transfers
5.0 Funding Levels
As described in the preceding sections, the District maintains
reserves for its operating and capital activities. These reserves
can be of three types: 1) undesignated or general use reserves,
2) designated, and 3) restricted for a specific purpose. The
restricted reserves can be restricted geographically and/or by
purpose. The District maintains various funds to track the
various designations and restrictions. The source of the money
for each fund was discussed along with the purpose, source of
funds, and levels. Key characteristics of these funds are the
target levels, minimums, and maximums. The funding levels must be
viewed in the context of the economic environment, political
environment, and in light of the District’s rate model. The
District’s six-year rate model not only shows the current balance
but also shows the trend of the fund balances. Often the trend of
the fund is a greater indicator of financial stability than is the
current balance.
The rate model is updated each year with the budget process and
evaluates each fund over the next six years. The rate model will
take into account the general economic environment, looking at the
development rate, supply rate increases, the possibility of
raising rates, capital infrastructure spending, and strategic plan
initiatives. The fund balances may at times be over or under the
target amount. This is not only acceptable but expected. The
rate model provides an empirical estimate of the conformance
between the projected District’s financial activities and the
guidelines of this policy.
5.1 Fund Transfers
Reserves within the District’s various designated funds come from
interfund transfers of unrestricted general use reserves. It is
important to note that the District has the ability to use general
use reserves for any business purpose. General use reserves may
be transferred to and from any unrestricted fund for any business
need. Designated reserves are general use reserves which have
been set aside for a specific purpose by Board action. These
reserves can only be used for the purpose they were designated, or
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with Board action they may be used for any other business purpose.
While general use reserves may be used for any restricted purpose
they may not be transferred to Restricted Funds due to the
sensitivity of the tracking of restricted reserves. If reserves
are needed for a restricted purpose they are transferred to a
Designated Fund within the fund category with that particular
purpose. Reserves restricted to a fund category may only be used
within that category and may not be transferred to another
category. For example, the new water supply fee and the
“incremental” portion of the capacity fee are restricted reserves
for a specific purpose, and may not be transferred to another
category as no other category has the same purpose. However, the
“buy-in” portion of the capacity fees and annexation fees are
restricted for purposes that are shared by more than one category
of funds and may therefore be transferred to a restricted fund
within another fund category as long as it shares the same
purpose.
In many situations reserve transfers are expected as some fund
categories will exceed their maximums or drop below their
minimums. Only fund categories that are below the stated target
are eligible to receive transferred reserves. Fund categories
that exceed their maximums are first to be considered for
transfers out, followed by funds that exceed their targets. Funds
that exceed their minimums are also available for reserve
transfers out, but only when other options are not available.
The rationale for prioritizing reserve transfers is based on the
immediacy of the need and the availability of reserves from other
funding sources. For example, the General Fund is first to
receive reserves when it drops below its target or minimum levels.
This is because of the immediate and ongoing nature of the
expenditures that are served by this fund. The operation of the
District is first and foremost of the objectives of the District.
On the other end of the spectrum, the Replacement Fund has a long-
term perspective and will be used to partially finance replacement
assets for many years to come. Debt financing is available to
respond to this long term, foreseeable, and planned cash flow.
This fund is less likely to have immediate needs and has other
financing options.
When making the determination of when transfers are necessary, all
funds within a fund category work as a group. The combined
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balance of the restricted and designated funds is looked at when
determining whether the fund category requires additional funding
from the Restricted Capital Improvement Fund, Restricted
Annexation Fund, Restricted Debt Fund, or the General Fund.
Because the Capital Improvement Fund and Annexation Fund may
finance expansion, replacement or betterment reserves may be
transferred between these fund categories, but only back and forth
within its own type of restricted fund.
As an example, if during the rate model update process it was
determined that the Expansion Funds (designated and restricted)
would drop and stay below the minimum during the six-year planning
horizon, this would trigger a bond sale, a transfer of general use
reserves, and/or a transfer of restricted reserves. If in the
cash planning process, it was anticipated that the General Fund
would remain above target during the planning horizon and that the
trend did not present a problematic underfunded status, then
General Fund reserves would be considered available for transfer
prior to making proceeds available from a bond sale. Also, if
during this period the Betterment Fund category was anticipated to
exceed its maximum, then reserves from either the Designated
Betterment Fund, the Annexation Fund, or the Capital Improvement
Fund would be transferred to the corresponding Expansion Fund
prior to a bond sale. All funds are evaluated to determine which
has the greatest need or availability of reserves before any
reserve transfer recommendation is presented to the Board.
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GLOSSARY
The Reserve Policy contains terminology that is unique to public
finance and budgeting. The following glossary provides assistance
in understanding these terms.
Annexation Fees: When water service is requested for land outside
the boundaries of the District, the land to be serviced must first
be annexed. For sewer service the land must be annexed into an
improvement district within the District.
Assets: Resources owned or held by Otay Water District that has
monetary value.
Availability Fees: The District levies charges each year in
developed areas to be used for upgrades, betterment, or
replacement and in undeveloped areas to provide a source of
funding for planning, mapping, and preliminary design of
facilities to meet future development. Current legislation
provides that any availability charge in excess of $10.00 per acre
shall be used only for the purpose of the improvement district for
which it was assessed.
Betterment Fees: In addition to other applicable water rates and
charges, water customers pay a fee based on water service zone or
Improvement District. These fees are restricted for use in the
area where they are collected and may be used for the construction
and maintenance of facilities.
Bond: A written promise to pay a sum of money on a specific date
at a specified interest rate. The interest payments and the
repayment of the principal are authorized in a District bond
resolution. The most common types of bonds are General Obligation
(GO) bonds and Certificates of Participation (COPs). These are
frequently used for construction of large capital projects such as
buildings, reservoirs, pipelines and pump stations.
Capital Equipment: Fixed assets such as vehicles, marine
equipment, computers, furniture, technical instruments, etc. which
have a life expectancy of more than two years and a value over
$10,000.
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Capital Improvement Program: A long-range plan of the District
for the construction, rehabilitation and modernization of the
District-owned and operated infrastructure.
CWA: The County Water Authority was organized in 1944 under the
State County Water Authority Act for the primary purpose of
importing Colorado River water to augment the local water supplies
of the Authority's member agencies. The Authority purchases water
from the Metropolitan Water District of Southern California (MWD)
which imports water from the Colorado River and the State Water
Project.
Debt Service: The District's obligation to pay the principal and
interest of bonds and other debt instruments according to a
predetermined payment schedule.
Expenditures/Expenses: These terms refer to the outflow of funds
paid or to be paid for an asset, goods, or services obtained
regardless of when actually paid for. (Note: An encumbrance is
not an expenditure). An encumbrance reserves funds to be expended
in a future period.
Fund: An account used to track the collection and use of monies
for a specifically defined purpose.
Fund Balance: The current funds on hand resulting from the
historical collection and use of monies. The difference between
assets and liabilities reported in the District’s Operating Fund
plus residual equities or balances and changes therein, from the
results of operations.
Interest Income: Earnings from the investment portfolio. Per
District Policy Number 25, interest income will be allocated to
the various funds each month based upon each fund’s prior month-
ending balance.
Late Charges/Penalties: Charges and penalties are imposed on
customer accounts for late payments, returned payments, and other
infringements of the District’s Code of Ordinances.
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1% Property Tax: In 1978, Proposition 13 limited general levy
property tax rates for all taxing authorities to a total rate of
1% of full cash value. Subsequent legislation, AB 8, established
that the receipts from the 1% levy were to be distributed to
taxing agencies according to approximately the same proportions
received prior to Proposition 13. Funds received are to be used
for facilities construction or debt service on bonds sold to build
facilities.
Operating Budget: The portion of the budget that pertains to
daily operations that provide basic governmental services. The
operating budget contains appropriations for such expenditures as
personnel, supplies, utilities, materials, travel and fuel, and
does not include purchases of major capital plant or equipment
which is budgeted for separately in the Capital Budget. The
Operating Budget also identifies planned non-operating revenues
and expenses.
Revenue: Monies that the District receives as income. It
includes such items as water sales and sewer fees. Estimated
revenues are those expected to be collected during the fiscal
year.
Russell Square: A sewer lift station constructed in 1983 that
serves four properties in the Russell Square Development.
System Fees: Each water service customer pays a monthly system
charge for water system replacement, maintenance, and operation
expenses. The charge is based on the size of the meter and class
of service.
Tax Collection for Bond Debtes: California Water Code Section
72091 authorizes the District, as a municipal water district, to
levy ad valorem property taxes which are equal to the amount
required to make annual payments for principal and interest on
General Obligation bonds approved by the voters prior to July 1,
1978.
Unit: A Unit of water is 100 cubic feet or 748 gallons of water.
Water Rates: Rates vary among classes of service and are measured
in Units. The water rates for residential customers are based on
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an accelerated block structure. As more Units are consumed, a
higher Unit rate is charged. Effective in 2009, all non-
residential customers are charged for water based on a tiered rate
structure in which water rates are based on meter size and amount
of Units consumed.
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1.0 The District
The Otay Water District is a California municipal water district,
authorized in 1956 by the State Legislature under the provisions
of the Municipal Water District Act of 1911. The District is a
"revenue neutral" public agency; meaning each end user pays their
fair share of the District's costs of water acquisition,
construction of infrastructure, and the operation and maintenance
of the public water facilities.
The District provides water service within its boundaries, and
provides sewer and recycled water service within certain portions
of the District. As such, the District operates three distinct
business segments:
Potable water
Recycled water
Sewer
Each of these business segments has an identifiable customer base.
In addition, the developer community, large and small, makes up a
significant class of customer for each business segment. As a
result, the District has four distinct customer service types:
Developers
Potable water users
Recycled water users
Sewer users
The District has established practices and developed computer
systems that have enabled the District to maintain a clear
separation between the service costs relating to each of its four
customer service types. Regardless of customer class, financial
principles regarding cost allocation and fund accounting are
fundamental to the District’s Reserve Policy. These principles
are derived from the statements of the Governmental Accounting
Standards Board (GASB), and from oversight and advisory bodies
such as the California State Auditor, the Little Hoover
Commission, and the Government Finance Officers Association
(GFOA). These have significant impacts on how the finances of
the District are organized and how financial processes work within
the organization.
Attachment C
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1.1 The District’s Use of Financial Resources
All of the District’s expenditures fall into two broad categories:
operating costs and capital expenditures. The operating costs
include costs relating to the purchase and delivery of potable and
recycled water, and the transportation and treatment of sewage.
The capital expenditures support the construction of
infrastructure necessary to deliver services. The District uses
various funds to support the operating and capital efforts.
Operations and maintenance is financed only by rates and charges,
also called pay-as-you-go, while capital infrastructure is
financed using two financing methods: pay-as-you-go and debt
issuance (requiring annual debt service). The Capital Improvement
Program (CIP) and the two funding methods support the
construction, betterment, and replacement of infrastructure in all
three business areas: potable, recycled, and sewer.
The District establishes different funds to track revenues
allocated to different activities. Once established, each fund
receives financial resources up to the levels defined in this
policy. Every year, as a part of the annual budget process, the
District’s rate model is updated for each fund with the current
fund balances and the estimated revenues and expenditures for the
next six years. The expenditure requirements and financial
resources are then evaluated to ensure that the existing fund
balances and additional revenues are sufficient within the current
budget cycle and for the next five years to maintain target fund
levels. If a deficit is identified, then options for transfers,
shifting CIP projects, debt, cost saving measures, and/or rate
increases are evaluated.
1.2 The District’s Capital Improvement Program (CIP)
The planning, design, and construction costs of all capital
facilities within the three business segments are allocated to
four cost types and corresponding fund categories: New Water
Supply, Expansion, Replacement, and/or Betterment. The allocation
to these four cost types is defined in the District’s Capital
Improvement Program (CIP) and is determined by an engineering
analysis that identifies which type of customer will benefit from
each facility, planned or existing. The costs of the capital
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improvements are borne by either existing users or by the
developing areas, or by a combination of the two, as applicable.
This Reserve Policy protects both the existing users and the
developing areas from incurring unwarranted costs. Developing
areas are not required to finance facilities that are replacement
or betterment and established areas are not required to replace
facilities before they are worn out because of new development.
However, to ensure a fair allocation of costs, each facility has
the potential to be classified into any or all of the four cost
types. In addition to these cost types there are occasional CIPs
that may be billable to a third party, if for example a third
party requires a District facility be relocated. Paragraphs a
through d below, describe how the costs of capital facilities are
financed through various fees.
a. New Water Supply
The portion of a new supply project that benefits new users
is financed from the reserves in the New Water Supply Fund
category. These reserves are primarily derived from proceeds
of the new water supply fee. The New Water Supply Fund is
restricted, meaning the amounts credited to this fund are
accounted for separately and are used solely for the
planning, design, and construction of the new water supply
expansion facilities. Debt financing may also be a temporary
financial resource to finance new water supply projects. The
District has a Debt Policy (Policy No. 45) that guides the
debt issuance process. Any debt proceeds used for this
purpose would be restricted in nature and tracked separately.
General use reserves may also be placed in the Designated New
Water Supply Fund and used for water supply projects.
b. Expansion
The portion of a CIP project that benefits new users is
financed from the reserves in the Expansion Fund category.
These reserves are primarily derived from proceeds of the
“incremental” portion of the capacity fees collected within
developing areas. Capacity fees are accounted for separately
and used for the planning, design, and construction of
expansion facilities. Additionally, expansion may be
financed by the “buy-in” portion of the capacity fee which is
restricted for CIP purposes, but not specifically for
expansion. Debt financing may also be a temporary financial
resource for expansion projects. General use reserves may
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also be placed in the Designated Expansion Fund and used for
expansion projects.
c. Replacement
The portion of a CIP project that benefits existing users by
replacing an existing facility is financed from the reserves
in the Replacement Fund category. Replacement of facilities
may be financed with proceeds of the “buy-in” portion of the
capacity fees, general use reserves held in the Designated
Replacement Fund, and debt proceeds. The various funding
sources available for replacement projects is anticipated to
provide the necessary flexibility to begin projects while any
necessary debt financing is being obtained.
d. Betterment
Facilities that improve reliability, meet new regulations, or
create increased levels of service are considered betterment
facilities that benefit existing users. The reserves in the
Betterment Fund category are used to finance these projects
or portions of projects. Proceeds of the “buy-in” portion of
the capacity fees may also be used to finance betterment
projects. General use reserves may be placed in the
Designated Betterment Fund and used for betterment projects.
1.21 Relocations
Occasionally, relocation of a District facility is required by a
third party. If the District has a superior easement the
relocation cost will be paid by the third party, but only to the
extent that the District does not benefit from the relocation.
When relocation is required, a CIP project may be created which is
wholly or partially financed by a third party. On occasion, the
District will require that its own facilities be relocated.
Depending on the nature of the facilities, the financial resources
for these projects could be from new water supply, expansion,
replacement, betterment or third party financing. Each project is
individually negotiated with the third party based on the facts
and circumstances of the relocation. Occasionally, the District
will improve the facilities that are being relocated. When
determining how to allocate costs to various funds the following
guideline is suggested: if a project has more than five years of
useful life remaining, an incremental cost view should be
considered; if the project has less than five years of useful life
remaining, a pro-rata cost approach should be considered. Also,
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the likelihood the District will benefit from an asset’s life
extension should be evaluated prior to allocating costs.
1.22 Oversizing
If deemed reasonable by the District, in connection with the
construction of backbone facilities, a developer may be required
to oversize new facilities for future development. The developer
is reimbursed for incremental oversizing costs as per Policy
No. 26. These reimbursements are not available for the
distribution system within a development which is an obligation
of the developer.
1.23 Exclusion of Developed Areas from Expansion Costs
Developed areas are assumed to have sufficient supply and capacity
to meet their current requirements as provided by the developers.
In addition, they are considered to have borne capital financial
costs that are at least proportionate to the benefits they have
received from capital facilities. Accordingly, no regional
capital financing costs are allocated to these areas so that they
will not incur any costs for newly developing areas, except for
capital projects that produce district-wide benefit or cost
savings.
1.24 Improvement Districts (IDs)
Improvement Districts (IDs) are established to facilitate the
financing of particular improvements by the specific
beneficiaries. The District has a number of improvement districts
that were established for General Obligation (GO) debt repayment.
Most GO debt has been paid off and it is unlikely that the
District will issue additional GO debt. Improvement districts
continue to be used for other purposes: 1) to distinguish sewer
customers from water customers on the county tax roll; or 2) to
place parcels on the county tax roll for the collection of
availability fees.
Over the years, the District moved to a district-wide perspective
of financing improvements. This philosophy is evident by the
district-wide capacity and annexation fees. The District also
uses district-wide water rates. As time goes on, it is expected
that IDs will continue to outgrow their purpose and their use will
diminish.
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1.3 The Purpose of the Policy
Public entities accumulate and maintain reserves to ensure both
financial stability and continuous availability of services.
Financial stability and the resulting improved credit quality
allow the public entity to weather times of uncertainty and the
impact of negative events, both major and minor. Reserves allow
for the ongoing maintenance of property and timely payment of
expenses even when such expenses exceed money available from a
single fiscal period. In the final analysis, the type and level
of reserves are driven by the type and magnitude of uncertainty
faced by the public entity.
A “reserve” has a number of meanings, as follows:
Working capital is required to insure timely payment of
obligations.
A buffer against volatility in revenues.
Liquidity is required to obtain other goods and services
(e.g., bank services).
Designated money to protect creditors.
Money set aside to replace assets at the end of their useful
lives.
Money set aside to repair or replace assets damaged or
destroyed at unanticipated times.
It is important to note that reserves, fund balance, and net
assets are not the same. Fund balance and net assets are
accounting terms and may not always be in the form of cash or
liquid investments. Fund balances and net assets may not always
be reserves unless a designation of all or a portion of fund
balance is made. In addition, the term fund balance was replaced
by net assets as codified by the Governmental Accounting Standards
Board (GASB).
In short, reserves are the liquid assets of the District,
accumulated and maintained for application to finance contingent
future activities, whether known or unanticipated, operating or
capital in nature. The District’s Reserve Policy governs the
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management and use of these financial resources. Few policies
have a more significant impact on the financial health and
stability of the District. This policy explains several key
financial concepts used by the District and provides some
background information to the overall strategies and practices
utilized. The District has a fiduciary obligation to its
customers, to manage and direct the use of public funds for the
purpose of providing water and sewer services in an efficient and
financially sound manner.
1.4 Policy Guidelines
In 2000, the Little Hoover Commission reviewed the levels of
reserve funds for special districts in California and prepared a
report reflecting that special districts were accumulating
unreasonable levels of funds. As a proactive response, the
California Special Districts Association (CSDA) prepared Reserve
Guidelines for its members. The Reserve Guidelines were
significant in noting that reserve levels need to be in context of
the organization’s overall business model and capital improvement
plan.
There are a number of potential events which the District should
consider in the development of reserves:
Economic Uncertainty - performance of the regional economy
and the impact of that performance on demand for water.
Weather - the amount of rainfall and the impact of weather on
the availability and the cost of water as well as the demand
for water.
Government Mandates - the impact of federal and state
regulation, particularly environmental regulation.
Tax Changes - limitations on the District’s taxing and
spending powers through the passage of a voter referendum,
the impound of District property taxes or the removal of the
District’s power to levy property taxes, further increases to
Educational Revenue Augmentation Fund (ERAF) contributions or
changes in calculation methodology.
Operating Costs - increases in operating and maintenance
costs because of inflation, labor agreement or other
modification.
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Force Majeure - unanticipated expenditures resulting from
natural disasters or intentional acts.
Emergency Maintenance - unanticipated expenditures resulting
from unexpected failure of assets (e.g., rupture in the
primary transmission system).
Unexpected Variation in Cash Flow - the incidence of
additional costs or decreased revenues that require short-
term borrowing in the absence of sufficient financial
resources.
The California State Auditor has, in its oversight role, offered a
number of quality recommendations for the development of reserve
policies as outlined in its report entitled, “California’s
Independent Water Districts: Reserve Amounts Are Not Always
Sufficiently Justified, and Some Expenses and Contract Decisions
Are Questionable,” dated June 2004, Report No. 2003-137. All of
these recommendations have been incorporated into this policy in
an effort to address key issues surrounding the management and use
of District reserves. The detailed objectives as identified by
the State Auditor are as follows:
Distinguish between restricted and unrestricted reserves.
Establish distinct purposes for all reserves.
Set target levels, including minimums and maximums, for the
accumulation of reserves.
Identify the events or conditions that prompt the use of
reserves.
Conform to plans to acquire or build capital assets.
Receive Board approval and that it is in writing.
Require periodic review of reserve balances and rationale for
maintaining them.
Yet, the State Auditor’s report acknowledges that the California
Constitution (Article XIII B, Section 5) is vague in its
provisions governing the accumulation and use of reserves.1
1 California State Auditor, Bureau of State Audits, “California’s Independent Water Districts: Reserve Amounts Are
Not Always Sufficiently Justified, and Some Expenses and Contract Decisions Are Questionable,” dated June 2004,
2003-137; p. 8.
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Specifically, the Constitution states that “each entity of the
government can establish contingency, emergency, unemployment,
reserve, sinking fund…or similar funds as it shall deem reasonable
and proper.”2 Similarly, the State’s Water Code does not impose
any requirements as to specific or recommended reserve fund
levels. As a result, the public finance community as a whole has
yet to settle on any real objective standards for the level of
reserve funds appropriate for governmental enterprises. This lack
of consensus as to specific standards is indicative of the wide
variance of the financial and operations context for different
districts and different contingencies justifying reserves.
The Government Finance Officers Association (GFOA) in its
“Recommended Practice on Appropriate Level of Unreserved Fund
Balance in the General Fund” (2002) states that in
establishing a policy governing the level of unreserved fund
balance in the general fund, a government should consider a
variety of factors. These include:
The predictability of its revenues and the volatility of
its expenditures (i.e., higher levels of the unreserved
fund balances may be needed if significant revenue
sources are subject to unpredictable fluctuations or if
operating expenditures are highly volatile).
The availability of resources in other funds as well as
the potential drain upon general fund resources from
other funds (i.e., the availability of resources in
other funds may reduce the amount of the unreserved fund
balance needed in the general fund, just as deficits in
other funds may require that a higher level of
unreserved fund balance be maintained in the general
fund).
Liquidity (i.e., a disparity between when financial
resources actually become available to make payments and
the average maturity of related liabilities may require
that a higher level of resources be maintained).
Designations (i.e., governments may wish to maintain
higher levels of the unreserved fund balance to
compensate for any portion of unreserved fund balance
already designated for a specific purpose).
2 California Constitution, Article XIII B, Section 5.
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In the preparation of this policy, each of the CSDA guidelines and
the GFOA recommendations has been considered. In addition, all
seven objectives provided by the State Auditor are specifically
addressed for each reserve. The District wholly supports the
State Auditor’s efforts to bring a high-level of quality to
reserve governance and establishing a standard of performance.
The District recognizes that the customer pays for services
provided. Quality management requires that periodic valuations be
performed so that fees and charges can be set at appropriate
levels to recover the cost of service. The District’s Reserve
Policy has been drafted with consideration of the GFOA, CSDA, and
State Auditor’s general guidelines as provided above. In
addition, the District has adopted the following principles in the
management of its financial resources:
Reserves are held and used only for the purpose for which
they are collected. This is done to maintain equity among
customers.
Each of the service types is tracked separately so that
expenditures and revenues can be monitored and evaluated for
each customer type. This provides the District with the
necessary information to appropriately charge for each of the
services.
Separation of operations and maintenance from capital
expenditures occurs within each of the service types. This
is done because the financing of these expenditures is often
on different timelines or use different reserves.
The District will hold its reserves at responsible and
prudent levels. This policy sets minimum, maximum, and
target levels for each of the various funds. This has been
done so that the District can maintain reserves to meet the
purpose for which the funds were established. The levels are
set by reference to line items in the District’s financial
statements and approved budgets. This allows reserve levels
to adjust to the District’s changing financial circumstances.
Debt financing of facilities provides intergenerational
equity and maintains rates at reasonable levels. This equity
is accomplished with long-term financing which spreads the
cost of facilities over the life of the facilities. The
burden to pay for facilities is then paid by those who use
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them. The District could amass significant reserves by pre-
collecting financial resources in a Replacement Reserve Fund
allowing the District to cash finance all replacements.
However, this would require significant rate increases
burdening the current customers and creating reserve levels
difficult to defend to the ratepayers or other oversight
entities.
These concepts are fundamental to the way the District manages its
funds and have a direct impact on the way rates and charges are
set. The District performs annual budget evaluations and updates
its rate model on an annual basis to monitor and adjust the
various funds and revenue sources. The separation, tracking, and
projecting of the various funds and expenditures create the
essential information necessary for the equitable rate structure
maintained by the District. The annual review preserves the
balance between services provided and the fees charged. This
review also insures that reserves will be available to continue to
serve the District’s customers.
Financial Sources
2.0 Developers
a. Meter Installation Charges (General Use)
Meter fees are charges collected for new water service
connections. Fees vary depending upon meter size and type of
service. The costs associated with meter installations are
included in the Operating Expenses section of the budget.
These charges are financed by developers.
b. Developer Deposits (General Use)
These deposits are for the engineering and operations
services provided to developers. They are tracked separately
for each developer and any excess amount is returned to the
developer.
c. Water Annexation Fees (General Use)
Annexation fees3 are collected as a condition of annexing
into the District’s potable or recycled water facilities.
Since the existing facilities have been built and maintained
3 Code of Ordinances, Section 9.
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by developers or customers within the District, the
annexation fee is calculated based on the present value of
all property taxes (1% property tax and availability fees)
paid by existing and prior customers. The annexation fee
reimburses existing customers for past contributions so that
all customers have contributed more equally to water
facilities. Proceeds of annexation fees are unrestricted and
may be used for any general fund purpose.
d. Sewer Annexation Fees (General Use)
A sewer annexation fee is collected when property is annexed
into an improvement district. Since the existing facilities
have been built and maintained by developers or customers
within a sewer IDs, the annexation fee is calculated based on
the present value of all availability fees paid by existing
and prior customers. The annexation fee reimburses existing
customers for past contributions so that all customers have
contributed more equally to sewer facilities. Proceeds of the
annexation fees are unrestricted and may be used for any
general fund purpose.
e. New Water Supply Fee (Restricted)
New water supply fees4 are based on the cost of the expansion
portion of new water supply projects divided by the number of
future equivalent dwelling units (EDU). The new water supply
fee covers the cost of planning, design, construction, and
financing associated with facilities for the District’s new
supply needs. These fees are paid by developers. The
proceeds of this fee may be used only for new potable or
recycled water supply projects. Although the fees collected
are not restricted separately, one portion for potable and
the other for recycled, they are tracked separately.
f. Water Capacity Fees (Restricted)
Water capacity fees4 are based on the value of existing and
future facilities divided by the number of existing and
future equivalent dwelling units. This method of calculating
capacity fees is called the combined method, where the “buy-
in” portion of the capacity fee covers costs to repay
existing customers for the facilities that they have built,
and where the “incremental” portion of the capacity fee
covers the cost of future expansion facilities. The “buy-in”
4 Code of Ordinances, Section 28
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portion of the capacity fee is restricted to pay for
planning, design, construction, and financing associated with
expansion, replacement or betterment facilities. The “buy-
in” portion may be shifted back and forth between expansion,
betterment or replacement as the financing needs change. The
“incremental” portion of the capacity fee is limited to
planning, design, construction, and financing exclusively for
expansion facilities (excluding new water supply expansion).
g. Sewer Capacity Fees (Restricted)
Sewer capacity fees are based on the value of existing and
future facilities divided by the number of existing and
future equivalent dwelling units. This method of calculating
capacity fees is called the combined method, where the “buy-
in” portion of the capacity fee covers cost to repay existing
customers for the facilities that they have built, and where
the “incremental” portion of the capacity fee covers the cost
of future expansion facilities. The “buy-in” portion of
the capacity fee is restricted to pay for planning, design,
construction, and financing associated with expansion,
replacement or betterment facilities. The “buy-in” portion
may be shifted back and forth between expansion, betterment
or replacement as the financing needs change. The
“incremental” portion of the capacity fee is limited to
planning, design, construction, and financing exclusively for
expansion facilities. For parcels within a sewer ID the
calculation excludes the tax debt already paid by these
customers therefore, producing a lower fee than for parcels
outside of a sewer ID. The capacity fees are restricted to
pay for planning, design, construction, and financing
associated with the expansion, replacement, or betterment of
facilities.
Facility needs are based on projected land use planning. Changes
in anticipated future land use occur and can alter projected
facility requirements. Thus, both the anticipated facilities
needs and their projected costs change over time as regulatory
agencies make changes to land use. The District periodically
reviews the capacity fee calculation to accommodate such
variations. These fees are paid by developers.
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The District’s construction of infrastructure occurs prior to the
addition of EDUs. This sequence serves two purposes: one it
ensures that the District can serve the pending construction as it
is completed; and two, it is more efficient to oversize many
facilities at the outset rather than build for the current need
and then reconstruct when the future need is realized. As a
result of this strategy, the District has financed construction
with bond financing as the existing expansion reserves are
depleted.
The water capacity fee is calculated based on the combined
recycled and potable water systems’ needs. This methodology is
used because the two water systems work hand-in-hand. All
capacity fees can be used for either potable or recycled but must
be tracked to distinguish between the “buy-in” and “incremental”
portions as described above. So, while capacity fees are not
restricted separately by potable and recycled, they are tracked
separately.
2.1 Customers/Users
a. Uniform Rates and Charges (General Use)
Charges to users for water, sewer, and recycled water are
uniform throughout the District for similar customer types.
DEVELOPERS
Diagram 2.0: Flow of Funds - Developer Sources
Unrestricted and
Undesignated
(General Use) Funds
Meter
Installation
Charges
Developer
Deposits
Restricted Funds
Annexation
Fees
Capacity
Fees
New Water
Supply Fees
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b. Monthly System Fees (General Use)
This is a fixed revenue source that is charged monthly. The
amount of the charge is based on the meter size.
c. Energy Charges (General Use)
The energy pumping fee is a charge per Unit of water for each
100 feet of lift, or fraction thereof, above the base
elevation of 450 feet. This charge is placed on the monthly
water bills of all water customers.
d. Penalties (General Use)
Penalties are added to the monthly water and sewer bills for
late charges, locks, etc.
e. Pass-through Fixed Charges (General Use)
A fixed monthly charge to the District’s customers intended
to collect sufficient funds to pass-through the increased
fixed costs from the County Water Authority (CWA) and the
Metropolitan Water District (MWD).
f. Special Rates and Charges (General Use)
In addition to the uniform water and sewer charges, the
District has a special sewer rate for the Russell Square lift
station. The Russell Square fee is for construction,
installation, maintenance or repair of the Russell Square
lift station. This fee is collected in accordance with the
Russell Square sewer charge (see Code of Ordinances Section
53.03B).
g. Temporary Meter Fees (General Use/Restricted)
Water charges, in lieu of capacity fees, are charged on
temporary meters. This is done because temporary meters use
system capacity but they are not charged a capacity fee.
Temporary water use is charged at two times the water rate
with the added charge placed in the Restricted Expansion
Fund. The primary users of these temporary meters are
developers; however, general customers also use these for
various purposes.
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2.2 County-Collected Taxes and Fees
a. General Levy Property Tax Receipts (1% Property Tax)
(General Use)
In 1978, Proposition 13 limited the levy of ad valorem
property taxes on real property to one percent of the
assessed value of such property. Subsequent legislation,
AB 8, established that the receipts from the one percent levy
were to be distributed to taxing agencies proportionate to
each agency’s general levy receipts prior to Proposition 13.
Taxes received are for general use. Spending limits for the
District are governed by the 1979 passage of California
Proposition 4, Limitations of Government Appropriations (GANN
limit). Proposition 4 places an appropriation limit on most
spending from tax proceeds.
b. Availability Charges (General Use/Restricted)
The District levies availability charges each year in
developed and undeveloped areas. Current legislation
provides that any amount up to $10 per parcel is general use
and any amount over $10 per parcel is restricted to be
expended in and for the improvement district (ID) within
CUSTOMERS / USERS
Diagram 2.1: Flow of Funds - Customer Sources
Unrestricted and
Undesignated
(General Use) Funds
Monthly
System Fees
Restricted Funds
Energy
Charges
Penalties
Pass –Through
Fixed Charges
2x Water
Rate
Special Rates
and Charges
Uniform Rates
and Charges
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which it is collected. Accordingly, the District may use
availability charges in excess of $10 toward costs of water
and sewer facilities which are either, expansion, betterment,
or replacement of facilities consistent with the purpose of
the ID in which they are collected. This portion of the
proceeds of availability charges is geographically restricted
and restricted by purpose. As costs are incurred on these
projects the respective IDs are charged, reducing the
reserves. To the extent that availability charges are not
used for the purpose for which they are collected, they must
be returned to the property owners that paid them. The
District has historically used these reserves for betterment
capital facilities thus, the restricted reserves are
accounted for in “sub-funds” of the Betterment Fund
(See 2.1 f.).
c. Improvement District General Obligation (GO) Bond
Assessments (Restricted)
The District has historically issued general obligation (GO)
debt and establishes an improvement district for the
repayment of that debt. When this financing method is used,
the county tax roll can be used to collect special taxes or
assessments within the ID to pay the debt obligation. The
proceeds of the debt are restricted for the purpose as
defined in the bond documents.
COUNTY COLLECTED TAXES AND FEES
Unrestricted and
Undesignated
(General Use)
Funds
General Levy
Property Tax
Receipts
Availability
Charges
Restricted Funds
General Obligation
Bond Assessments
Diagram 2.2: Flow of Funds – County Collection Sources
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2.3 Miscellaneous Income
a. Miscellaneous Rents and Leases (General Use)
Revenues received from the rental and lease of District
property are general use revenues. Not only are they
periodic revenues, but there is also a one-time fee charged
with the setup of each new lease. The District incurs
expenses related to these rents and leases. The one-time
fees are calculated to recover the costs to setup the leases.
b. Sewer Billing Fees (General Use)
Sewer billing fees are general use revenues. The District
provides processing and billing services to the City of Chula
Vista to bill and collect from their customers for sewer
service. These fees are to recover the cost the District
incurs to provide this service.
c. Interest Income or Expense Allocation (General Use,
Designated, and Restricted)
Interest income (expense) will be allocated every month based
upon each fund's month-ending balance. In this way, each
fund receives credit for interest earned by that fund and
each fund with a negative balance is charged for the use of
the other fund’s reserves.
MISCELLANEOUS INCOME
Unrestricted and
Undesignated
(General Use) Funds
Miscellaneous
Rents and Leases
Sewer Billing
Fees
Restricted Funds
Interest Income or
Expense Allocation
Diagram 2.3: Flow of Funds – Miscellaneous Income Sources
Designated Funds
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2.4 Debt Issuance
a. Loans (General/Restricted Use)
As the District determines that additional financing is
required for a particular purpose, the option of borrowing is
considered. The determination to borrow is made as a part of
the annual rate model update and is evaluated in accordance
with the Debt Policy before it is recommended to the Board
for action. As an option to bond indebtedness, loans are
available to satisfy short-term financing needs. These loans
may or may not be contractually restricted for a particular
purpose.
b. General Obligation (GO) Bonds (Restricted)
As the District becomes more developed it becomes less likely
that general obligation debt will be used as it requires a
vote of the public to be approved. Bond proceeds are
restricted for the construction of those facilities
identified in the GO bond issuance. Occasionally, specific
portions of bond proceeds may be allocated for the repayment
of the principal and interest, also called debt service, on
these bonds. As the District determines that additional
financing is required for a particular purpose, the option of
debt issuance is considered. The determination to issue debt
is made as a part of the annual rate model update and is
evaluated in accordance with the Debt Policy before it is
recommended to the Board for action.
c. Certificates of Participation (COPs) (Restricted)
General revenues of the District are pledged as security for
Certificates of Participation (COPs) indebtedness. If the
District determines that additional financing is required for
a particular purpose, the option of debt issuance is
considered. The determination to issue debt is made as a
part of the annual rate model update and is evaluated in
accordance with the Debt Policy before it is recommended to
the Board for action. This form of financing has become the
industry’s preferred form of financing as it does not require
a vote of the general public.
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2.5 Inter-fund Transfers
Each year in the budgeting process, future fund levels are
projected for the next six years. Based on these projections
transfers are recommended. Reserves may be transferred
between Unrestricted or Designated Funds and the General Fund
(see 4.0 “Funding Levels” and 4.1 “Fund Transfers”).
Reserves may not be transferred to or from any of the
restricted funds unless it is between two restricted funds
with a shared purpose.
Fund Types and Categories
3.0 General Funds
a. Purpose
The General Fund is neither restricted nor designated. The
District maintains one General Fund for each business segment
(water, sewer, and recycled). This fund holds the working
capital and emergency operating reserves. While the General
Fund has a short-term focus to finance the District’s annual
operations, it is supported by the six-year rate model. This
DEBT PROCEEDS
Unrestricted and
Undesignated
(General Use) Funds
Loans General
Obligation Bonds
Restricted Funds
Certificates of
Participation
Diagram 2.4: Flow of Funds – Debt Issuance Sources
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fund is primarily used to finance the operations of the
District; however, it can be used for any District purpose.
This fund can be used to supplement the District’s rates and
charges and be a temporary source of revenue to balance the
Operating Budget. This fund can also be used to avoid spikes
in the rates or significant and abrupt increases. It is an
industry practice to have a fund that can be used to
stabilize rates. This would only occur if there was a
temporary need for reserves that would smooth out a rate
spike or to ramp up what would otherwise be a dramatic rate
increase.
The General Fund also plays a role in the debt planning of
the District. This fund is viewed by the debt markets as a
commitment by the District to ensure financial stability of
the rates and charges of the District. The District is
anticipated to need a number of debt issuances over the years
and this fund will help the District not only to stabilize
rate fluctuations but also to access low cost financing for
future projects.
b. Sources
Meter installation charges, temporary meter fees, uniform
rates and charges, monthly system fees, energy charges,
penalties, pass-through fixed charges, general levy property
tax receipts, water annexation fees, availability charges,
miscellaneous rents and leases, sewer billing fees, interest
income or expense allocation, loans, and a portion of the
temporary water sales.
The sewer general fund receives sewer charges, penalties,
availability charges, sewer annexation fees, and interest
income or expense allocation.
c. Funding Levels
I. Minimum Level – The minimum reserve level for each
business segment of the General Fund is three
months of operating budget expenses (evaluated
separately for each segment).
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II. Maximum Level – The maximum reserve level for the
General Fund is nine months of operating budget
expenses. In the event that this fund exceeds the
seven month level, the excess will be evaluated or
transferred to one or more of the designated funds.
III. Target Level – The target level of reserves is
three months of operating budget expenses. In the
event that the fund drops below the target level,
rate increases or fund transfers would be
considered.
3.1 Designated Other Post Employment Benefits (OPEB) Fund
a. Purpose
Designated Other Post Employment Benefits (OPEB) reserves are
“general use” reserves that have been set apart by Board
action to finance the medical benefits of qualified retirees
as outlined in the District’s benefits plan. This fund is
available to hold any Board designated OPEB funds. The
District also has a trust at CalPERS and is restricted for
the purpose of financing the OPEB liability. Money held in
the CalPERS trust restricts the funds from any use other than
OPEB. The two funds are considered jointly when looking at
target reserve levels. Every two years, actuarial study is
performed to update the annual financing requirements.
Changes in the actuarial valuation may result from changes in
benefit levels, employee population, health insurance costs,
or general market conditions.
b. Sources
The OPEB liability may be financed by general use reserves
coming from user rates and charges, either from an operating
budget expenditure or from interfund transfers. Transfers of
unrestricted reserves may come from the various designated
funds or from the General Fund. As a part of the normal
budget process, annual operating revenues have been
sufficient to finance the ongoing needs of this designated
fund. While debt financing is also an option, the District
has only used user rates and charges to finance this fund.
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c. Funding Levels
I. Minimum Level – The minimum reserve level for this
fund is equal to the District’s OPEB liability as
determined by the actuarial study. When
considering the reserve level of this fund, both
the District held OPEB reserves and CalPERS held
OPEB reserves must be considered jointly.
II. Maximum Level – The maximum reserve level for this
fund is equal to the District’s OPEB liability as
determined by the actuarial study. In the event
that the two funds, as described above, exceed the
OPEB liability, the District will reduce the annual
funding levels as defined by the actuarial study.
III. Target Level – The target reserve level for this
fund is equal to the District’s OPEB liability as
determined by the actuarial study. In the event
that the two funds, as described above, fall below
the OPEB liability, the District will increase the
annual funding levels as defined by the actuarial
study.
3.2 New Water Supply Fund Category
a. Purpose
The New Water Supply Fund category is to finance the
expansion portion of new water supply projects and is
therefore to be paid by developers. When considering the
reserve level of the New Water Supply category; the New Water
Supply Fund, the New Water Supply Debt Fund, and the
Designated New Water Supply Fund all work in concert and must
be considered jointly.
b. Sources
The New Water Supply Fund receives reserves only from the new
water supply fee. Other funds within the new water supply
category of funds receive debt proceeds and general use
reserves through a designation to this category.
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c. Funding Levels
I. Minimum Level – As the District matures the CIP
will move to purely replacement projects. As the
District moves through its lifecycle the need for
new water supply reserves will decrease and may be
reduced to zero.
II. Maximum Level – The maximum reserve level for the
new water supply category of funds is limited to
five years of the unfinanced new water supply
facilities as described in the District’s CIP
Budget. To determine the unfinanced amount, the
total new water supply financing needs must be
reduced by the projected new water supply revenues,
general fund designations, and bond financing. If
the combined new water supply reserves exceed the
target level, the District should consider
transferring designated reserves to meet other
purposes, reduce the new water supply fee, or
change the timing of the new water supply projects.
III. Target Level – In order to facilitate debt
financing of the new water supply, it is important
that the various new water supply funds retain an
overall reserve level of six months, prior to any
attempt to obtain debt financing. This reserve
level allows the District the time necessary to
issue additional debt without depleting new water
supply reserves. If the combined new water supply
reserve levels drop below six months of
expenditures, this would trigger a transfer of
general use reserves, a bond sale, or a change in
the timing of new water supply projects. Bond
proceeds would be placed in the Restricted New
Water Supply Debt Fund while transfers would be
placed in the Designated New Water Supply Fund.
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3.3 Expansion Fund Category
a. Purpose
The Expansion Fund category is to finance the expansion
portion of capital projects and therefore is to be paid for
by developers. When considering the reserve levels of the
expansion category, the following funds work in concert and
must be considered jointly: the Expansion Fund, Expansion
Debt Fund, Capital Improvement Fund, and the Designated
Expansion Fund. Potable and recycled reserves are considered
jointly while sewer is evaluated separately.
Restricted Funds
Unrestricted and
Undesignated Funding
Sources
Funding Source New Water
Supply Fees
Debt
Proceeds
Restricted Funds
Restricted Funds
Designated Funds
New Water
Supply Fund
Expansion
New Water
Supply Fund
Designated
New Water
Supply Fund
Debt Fund
General Fund – Rates and Charges
New Water
Supply Fund
Category
New Water
Supply
Debt Fund
Diagram 3.2: New Water Supply Fund Category
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b. Sources
The Expansion Fund is financed by water charges in lieu of
capacity fees (for temporary meters) and the “incremental”
portion of the capacity fee. The other funds in this
category may also be financed by debt proceeds, the “buy-in”
portion of the capacity fee, and the general fund through a
designation of reserves.
c. Funding Levels
I. Minimum Level – As the District matures the CIP
will move to purely replacement and betterment
projects. As the District moves through this
lifecycle the need for expansion reserves will
decrease and may be reduced to zero.
II. Maximum Level – The maximum reserve level for the
expansion category of funds is limited to five
years of unfinanced expansion facilities as
described in the District’s CIP Budget. To
determine the unfinanced amount, the total
financing needs must be reduced by the projected
expansion revenues, bond financing, and any
restricted or general fund revenues allocated to
this fund category. If the combined expansion
reserves exceed target levels, the District should
consider reducing capacity fees, reallocating
restricted or designated funds to meet other
purposes, or shifting the timing of expansion
projects.
III. Target Level – The target level is six months of
expansion expenditures. It is important that the
expansion reserves remain at a minimum of six
months of expansion expenditures. This reserve
level allows the District the time necessary to
issue additional debt without depleting expansion
reserves. If the combined expansion reserves drop
below six months of expenditures this would trigger
a transfer of general use reserves, a bond sale, an
adjustment to the timing of expansion projects, or
a reallocation of restricted reserves. Bond
proceeds would be placed in the Restricted Bond
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Fund, transfers of general use reserves would be
placed in the Designated Expansion Fund, and
transfers of restricted reserves would be placed in
the Expansion Capital Improvement Fund.
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Unrestricted and
Undesignated Funding
Sources
Diagram 3.3: Expansion Fund Category
Funding Source 2x Water
Rates
Capacity
Fees (1)
Restricted Funds
Restricted Funds
Designated Funds
Expansion
Fund
Expansion
Debt Fund
General Fund – Rates and Charges
Restricted Funds Expansion Capital
Improvement
Fund
Debt
Proceeds
Restricted Funds
Capital
Improvement
Fund
Bond
Debt
Expansion
Fund
Designated
Expansion
Fund
Expansion
Fund
Category
(1) For Water Capacity Fees 32.4% goes into the Expansion fund and 67.6% goes into
the Capital Improvement Fund. For Sewer Capacity Fees 100% goes into the Capital
Improvement Fund.
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3.4 Replacement Fund Category
a. Purpose
The Replacement Fund category is to finance replacement
projects. When considering the reserve levels of the
replacement category of funds, the following funds work
in concert and must be considered jointly: the Debt
Fund, Capital Improvement Fund, and the Designated
Replacement Fund. The purpose of these reserves is to
pay for the replacement of capital infrastructure and
capital purchases. These reserves are not to be used
for the replacement of non-capital items.
With the District’s development of its financial systems
and the greater need and ability to separate and track
reserves, the replacement reserves have been separated
into three funds: water, recycled, and sewer.
Projects undertaken solely for the purpose of replacing
major capital equipment or facilities, i.e., where the
cost exceeds $10,000 for capital purchases or $20,000
for infrastructure items, generally these are not
considered normal maintenance. When the cost is below
$10,000, the costs are financed annually as operational
maintenance. As charges are incurred on replacement
projects the reserves are deducted from the respective
Replacement Funds on a monthly basis.
b. Sources
The various funds in this category are financed by debt
proceeds, the “buy-in” portion of the capacity fee, and
general fund designations.
c. Funding Levels
I. Minimum Level – The minimum reserve level of this
category of funds is 3% of the historical value of
existing assets as identified in the District’s
current financial statements. Potable, recycled,
and sewer replacement are evaluated separately.
II. Maximum Level – The maximum reserve level of this
category of funds is 6% of existing assets. If the
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combined replacement reserves exceed target levels,
the District should consider transferring the “buy-
in” portion of the capacity fee to meet other
purposes. Another consideration would be to shift
the timing of replacement projects.
III. Target Level – The target reserve level of this
category of funds is 4% of existing assets. In the
event that the reserves fall below the recommended
target level, the District should consider
transferring the “buy-in” portion of the capacity
fee. The District should also consider shifting
the timing of replacement projects or issuing debt
to support the planned level of facility
replacement. The District will act based on the
annual six-year rate model, to insure that at the
end of that planning horizon the reserves exceed
the minimum level and is approaching the target
level.
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(1) For Water Capacity Fees 67.6% goes into the Capital Improvement Fund.
For Sewer Capacity Fees 100% goes into the Capital Improvement Fund.
3.5 Betterment Fund Category
a. Purpose
The Betterment Fund category is to finance the
betterment portion of capital projects with a portion
going to maintenance of the potable, recycled, and sewer
systems. The District maintains separate Betterment
Fund categories, one for each improvement district. An
improvement district is a legally defined geographic
area usually established for the purpose of bond
financing of facilities. The betterment reserves within
Funding Source
Unrestricted and
Undesignated Funding
Sources
Capacity
Fees (1)
Diagram 3.4: Replacement Fund Category
Restricted Funds
Restricted Funds
Designated Funds
Capital
Improvement Fund
Replacement
Debt Fund
Designated
Replacement
Fund
General Fund – Rates and Charges
Debt
Proceeds
Debt Fund
Restricted Funds
Replacement
Capital
Improvement
Fund
Replacement
Fund
Category
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these funds are restricted by law for use within the
improvement district in which the fees were collected
(Water Code 71631.6). However, the legal restriction of
this reserve depends upon the particular revenue source.
(See Section 2.2 b. for a review of the availability
fees).
When considering the reserve levels of the betterment
category of funds, the following funds work in concert
and must be considered jointly: the Betterment Fund,
Debt Fund, Capital Improvement Fund, and Designated
Betterment Fund.
b. Sources
The Betterment Fund category receives restricted
revenues by improvement district from availability fees
(the first $10 is unrestricted, while amounts over $10
are restricted) collected through the county tax roll.
Betterment may also be financed by debt proceeds, the
“buy-in” portion of the capacity fee, as well as the
general fund through a designation of reserves.
c. Funding Levels
I. Minimum Level – As the District matures the CIP
will move to purely replacement projects. As the
District moves through this lifecycle the need for
betterment reserves will decrease and may be
reduced to zero.
II. Maximum Level – The maximum reserve level for the
betterment category of funds is limited to five
years of unfinanced betterment facilities as
described in the District’s CIP Budget. To
determine the unfinanced amount, the total
financing need must be reduced by the projected
betterment revenues, bond financing, and general
fund designations. If this maximum is exceeded,
then the District should evaluate reductions in the
special water rates and availability fees,
transferring designated reserves to meet other
purposes, or shifting the timing of betterment
projects.
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
RESERVE POLICY 25 2/10/93 11/5/14
Page 33 of 42
III. Target Level – The target is six months of
betterment expenditures. It is important that the
betterment reserves remain at a minimum of six
months of betterment expenditures. This reserve
level allows the District the time necessary to
issue additional debt without depleting betterment
reserves. If the combined betterment reserves drop
below six months of expenditures this would trigger
a transfer of general use reserves, a bond sale, or
an adjustment to the timing of betterment projects.
Bond proceeds would be placed in the Betterment
Bond Fund while transfers would be placed in the
Designated Betterment Fund.
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
RESERVE POLICY 25 2/10/93 11/5/14
Page 34 of 42
Fund
Unrestricted and
Undesignated Funding
Sources
Diagram 3.5: Betterment Fund Category
Funding Source Capacity
Fees (2)
Restricted Funds
Restricted Funds
Designated Funds
Capital
Improvement
Fund
Betterment
Debt Fund
Betterment
Fund
General Fund – Rates and Charges
Availability
Charges (1)
Restricted Funds
Debt
Proceeds
Restricted Funds
Bond
Debt
Designated
Betterment
Fund
Betterment
Fund
Betterment
Capital
Improvement
Fund
Betterment
Fund
Category
(1) The portion of charges over $10 per parcel is restricted.
(2) For Water Capacity Fees 67.6% goes into the Capital Improvement Fund. For Sewer
Capacity Fees 100% goes into the Capital Improvement Fund.
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
RESERVE POLICY 25 2/10/93 11/5/14
Page 35 of 42
Diagram 3.6: Fund Targets
Fund or Fund
Category
Actions to Consider if
below Target Target Maximum
New Supply Fund
Category
New supply fee
increase, bond
financing, or transfer to
designated or CIF Funds
Total of all funds in fund
category = six months
of capital expenditures
Nexus of cost to fee
Expansion Fund
Category
Capacity fee increase,
bond financing, or
transfer to designated
or CIF Funds
Total of all funds in fund
category = six months
of capital expenditures
Nexus of cost to fee
Replacement Fund
Category
Bond financing, or
transfer to designated
or CIF Funds
Total of all funds in fund
category = 4% of
infrastructure
Nexus of cost to fee
Betterment Fund
Category
Bond financing, or
transfer to designated
or CIF Funds
Total of all funds in fund
category = six months
of capital expenditures
5 years unfunded needs
Debt Reserve Fund Increase tax collection
or rates
One semi-annual
payment
Two semi-annual
payments
OPEB Fund Fund transfers Full funding Full funding
General Fund Rate increase or fund
transfers
Three months of
operating budget
expenses
Nine months of
operating budget
expenses
Additional Restricted Funds
4.0 Capital Improvement Fund
a. Purpose
The “Capital Improvement Fund’s sole purpose is to track the
“buy-in” portion of the capacity fee and to ensure these fees
are expended solely for the purpose for which they were
collected. In this case it is to pay for facilities that
were in existence at the time this fee was established.
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
RESERVE POLICY 25 2/10/93 11/5/14
Page 36 of 42
These fees may be used for expansion, replacement, or
betterment projects or any debt related to these categories.
The water capacity fees may also be used for either the
potable or the recycled systems. As capacity fees are
collected, the “buy-in” portion of the fee is allocated as
needed to one of three capital improvement funds, one in each
of the Expansion, Replacement, and Betterment Fund
categories. These reserves are used to pay debt or offset
any negative balance within these three categories of funds.
For sewer, these fees fund the Expansion, Replacement, or
Betterment Fund categories. These fees may not be used to
finance the New Water Supply category, as there were no new
water supply facilities in existence at the time the new
methodology for capacity fees was established.
b. Sources
The “buy-in” portion of the capacity fee collected after
June 30, 2010 or after September 30, 2014 for sewer.
c. Funding Levels
There are no minimums, maximums, or target levels for these
reserves on an individual basis. The allocation of this fee
to the various capital improvement funds is dependent on the
overall reserve levels within each fund category.
4.1 Debt Reserve Fund
a. Purpose
The Debt Reserve Fund is established to hold the proceeds
from the various debt issuances. There are two types of
debt, General Obligation bonds and Certificates of
Participation bonds. The proceeds are transferred to the New
Water Supply, Expansion, Replacement, or Betterment Debt
Funds as they are expended for various facilities within
those fund categories. As repayment of the debt occurs, the
balances within these individual funds are reduced so that
the financial impact of issuing debt is tracked within the
category for which the debt was issued.
b. Sources
Debt proceeds.
c. Uses
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
RESERVE POLICY 25 2/10/93 11/5/14
Page 37 of 42
There are no minimums, maximums, or target levels for this
fund on an individual basis. This fund is available on an as
needed basis to fund CIP projects for new water supply,
expansion, replacement, or betterment. From a funding level
perspective, these reserves are evaluated in the context of
all the various funds within each fund category.
Fund Transfers
5.0 Funding Levels
As described in the preceding sections, the District maintains
reserves for its operating and capital activities. These reserves
can be of three types: 1) undesignated or general use reserves,
2) designated, and 3) restricted for a specific purpose. The
restricted reserves can be restricted geographically and/or by
purpose. The District maintains various funds to track the
various designations and restrictions. The source of the money
for each fund was discussed along with the purpose, source of
funds, and levels. Key characteristics of these funds are the
target levels, minimums, and maximums. The funding levels must be
viewed in the context of the economic environment, political
environment, and in light of the District’s rate model. The
District’s six-year rate model not only shows the current balance
but also shows the trend of the fund balances. Often the trend of
the fund is a greater indicator of financial stability than is the
current balance.
The rate model is updated each year with the budget process and
evaluates each fund over the next six years. The rate model will
take into account the general economic environment, looking at the
development rate, supply rate increases, the possibility of
raising rates, capital infrastructure spending, and strategic plan
initiatives. The fund balances may at times be over or under the
target amount. This is not only acceptable but expected. The
rate model provides an empirical estimate of the conformance
between the projected District’s financial activities and the
guidelines of this policy.
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
RESERVE POLICY 25 2/10/93 11/5/14
Page 38 of 42
5.1 Fund Transfers
Reserves within the District’s various designated funds come from
interfund transfers of unrestricted general use reserves. It is
important to note that the District has the ability to use general
use reserves for any business purpose. General use reserves may
be transferred to and from any unrestricted fund for any business
need. Designated reserves are general use reserves which have
been set aside for a specific purpose by Board action. These
reserves can only be used for the purpose they were designated, or
with Board action they may be used for any other business purpose.
While general use reserves may be used for any restricted purpose
they may not be transferred to Restricted Funds due to the
sensitivity of the tracking of restricted reserves. If reserves
are needed for a restricted purpose they are transferred to a
Designated Fund within the fund category with that particular
purpose. Reserves restricted to a fund category may only be used
within that category and may not be transferred to another
category. For example, the new water supply fee and the
“incremental” portion of the capacity fee are restricted reserves
for a specific purpose, and may not be transferred to another
category as no other category has the same purpose. However, the
“buy-in” portion of the capacity fees are restricted for purposes
that are shared by more than one category of funds and may
therefore be transferred to a restricted fund within another fund
category as long as it shares the same purpose.
In many situations reserve transfers are expected as some fund
categories will exceed their maximums or drop below their
minimums. Only fund categories that are below the stated target
are eligible to receive transferred reserves. Fund categories
that exceed their maximums are first to be considered for
transfers out, followed by funds that exceed their targets. Funds
that exceed their minimums are also available for reserve
transfers out, but only when other options are not available.
The rationale for prioritizing reserve transfers is based on the
immediacy of the need and the availability of reserves from other
funding sources. For example, the General Fund is first to
receive reserves when it drops below its target or minimum levels.
This is because of the immediate and ongoing nature of the
expenditures that are served by this fund. The operation of the
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
RESERVE POLICY 25 2/10/93 11/5/14
Page 39 of 42
District is first and foremost of the objectives of the District.
On the other end of the spectrum, the Replacement Fund has a long-
term perspective and will be used to partially finance replacement
assets for many years to come. Debt financing is available to
respond to this long term, foreseeable, and planned cash flow.
This fund is less likely to have immediate needs and has other
financing options.
When making the determination of when transfers are necessary, all
funds within a fund category work as a group. The combined
balance of the restricted and designated funds is looked at when
determining whether the fund category requires additional funding
from the Restricted Capital Improvement Fund, Restricted Debt
Fund, or the General Fund. Because the Capital Improvement Fund
may finance expansion, replacement or betterment reserves may be
transferred between these fund categories, but only back and forth
within its own type of restricted fund.
As an example, if during the rate model update process it was
determined that the Expansion Funds (designated and restricted)
would drop and stay below the minimum during the six-year planning
horizon, this would trigger a bond sale, a transfer of general use
reserves, and/or a transfer of restricted reserves. If in the
cash planning process, it was anticipated that the General Fund
would remain above target during the planning horizon and that the
trend did not present a problematic underfunded status, then
General Fund reserves would be considered available for transfer
prior to making proceeds available from a bond sale. Also, if
during this period the Betterment Fund category was anticipated to
exceed its maximum, then reserves from either the Designated
Betterment Fund, or the Capital Improvement Fund would be
transferred to the corresponding Expansion Fund prior to a bond
sale. All funds are evaluated to determine which has the greatest
need or availability of reserves before any reserve transfer
recommendation is presented to the Board.
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
RESERVE POLICY 25 2/10/93 11/5/14
Page 40 of 42
GLOSSARY
The Reserve Policy contains terminology that is unique to public
finance and budgeting. The following glossary provides assistance
in understanding these terms.
Annexation Fees: When water service is requested for land outside
the boundaries of the District, the land to be serviced must first
be annexed. For sewer service the land must be annexed into an
improvement district within the District.
Assets: Resources owned or held by Otay Water District that has
monetary value.
Availability Fees: The District levies charges each year in
developed areas to be used for upgrades, betterment, or
replacement and in undeveloped areas to provide a source of
funding for planning, mapping, and preliminary design of
facilities to meet future development. Current legislation
provides that any availability charge in excess of $10.00 per acre
shall be used only for the purpose of the improvement district for
which it was assessed.
Bond: A written promise to pay a sum of money on a specific date
at a specified interest rate. The interest payments and the
repayment of the principal are authorized in a District bond
resolution. The most common types of bonds are General Obligation
(GO) bonds and Certificates of Participation (COPs). These are
frequently used for construction of large capital projects such as
buildings, reservoirs, pipelines and pump stations.
Capital Equipment: Fixed assets such as vehicles, marine
equipment, computers, furniture, technical instruments, etc. which
have a life expectancy of more than two years and a value over
$10,000.
Capital Improvement Program: A long-range plan of the District
for the construction, rehabilitation and modernization of the
District-owned and operated infrastructure.
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
RESERVE POLICY 25 2/10/93 11/5/14
Page 41 of 42
CWA: The County Water Authority was organized in 1944 under the
State County Water Authority Act for the primary purpose of
importing Colorado River water to augment the local water supplies
of the Authority's member agencies. The Authority purchases water
from the Metropolitan Water District of Southern California (MWD)
which imports water from the Colorado River and the State Water
Project.
Debt Service: The District's obligation to pay the principal and
interest of bonds and other debt instruments according to a
predetermined payment schedule.
Expenditures/Expenses: These terms refer to the outflow of funds
paid or to be paid for an asset, goods, or services obtained
regardless of when actually paid for. (Note: An encumbrance is
not an expenditure). An encumbrance reserves funds to be expended
in a future period.
Fund: An account used to track the collection and use of monies
for a specifically defined purpose.
Fund Balance: The current funds on hand resulting from the
historical collection and use of monies. The difference between
assets and liabilities reported in the District’s Operating Fund
plus residual equities or balances and changes therein, from the
results of operations.
Interest Income: Earnings from the investment portfolio. Per
District Policy Number 25, interest income will be allocated to
the various funds each month based upon each fund’s prior month-
ending balance.
Late Charges/Penalties: Charges and penalties are imposed on
customer accounts for late payments, returned payments, and other
infringements of the District’s Code of Ordinances.
1% Property Tax: In 1978, Proposition 13 limited general levy
property tax rates for all taxing authorities to a total rate of
1% of full cash value. Subsequent legislation, AB 8, established
that the receipts from the 1% levy were to be distributed to
taxing agencies according to approximately the same proportions
received prior to Proposition 13.
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
RESERVE POLICY 25 2/10/93 11/5/14
Page 42 of 42
Operating Budget: The portion of the budget that pertains to
daily operations that provide basic governmental services. The
operating budget contains appropriations for such expenditures as
personnel, supplies, utilities, materials, travel and fuel, and
does not include purchases of major capital plant or equipment
which is budgeted for separately in the Capital Budget. The
Operating Budget also identifies planned non-operating revenues
and expenses.
Revenue: Monies that the District receives as income. It
includes such items as water sales and sewer fees. Estimated
revenues are those expected to be collected during the fiscal
year.
Russell Square: A sewer lift station constructed in 1983 that
serves four properties in the Russell Square Development.
System Fees: Each water service customer pays a monthly system
charge for water system replacement, maintenance, and operation
expenses. The charge is based on the size of the meter and class
of service.
Tax Collection for Bond Debt: California Water Code Section 72091
authorizes the District, as a municipal water district, to levy ad
valorem property taxes which are equal to the amount required to
make annual payments for principal and interest on General
Obligation bonds approved by the voters prior to July 1, 1978.
Unit: A Unit of water is 100 cubic feet or 748 gallons of water.
Water Rates: Rates vary among classes of service and are measured
in Units. The water rates for residential customers are based on
an accelerated block structure. As more Units are consumed, a
higher Unit rate is charged. Effective in 2009, all non-
residential customers are charged for water based on a tiered rate
structure in which water rates are based on meter size and amount
of Units consumed.
STAFF REPORT
TYPE MEETING: Regular Board MEETING DATE: November 5, 2014
SUBMITTED BY:
Marissa Dychitan
Senior Accountant
PROJECT: DIV. NO. All
APPROVED BY:
Kevin Koeppen, Finance Manager
Joseph R. Beachem, Chief Financial Officer
German Alvarez, Assistant General Manager
Mark Watton, General Manager
SUBJECT: Approve the District’s Audited Financial Statements for the
Fiscal Year Ended June 30, 2014
GENERAL MANAGER’S RECOMMENDATION:
That the Board approve the District’s Audited Financial Statements
(Attachment B), including the Independent Auditors’ unqualified
opinion, for the fiscal year ended June 30, 2014.
COMMITTEE ACTION:
See Attachment A.
PURPOSE:
To inform the Board of the significant financial events which
occurred during the fiscal year ended June 30, 2014 as reflected in
the audited financial statements.
ANALYSIS:
Teaman, Ramirez & Smith, Inc., performed the audit and found that, in
all material respects, the financial statements correctly represent
2
the financial position of the District. They found no material
errors in the financial records or statements (Attachment D).
Total Assets:
Total assets decreased by $5.7 million or .99% during Fiscal Year
2014, to $576.6 million, due primarily to depreciation and the
expenditure of CIP planning and environmental costs that do not
qualify as capital costs under the Generally Accepted Accounting
Principles(GAAP). Another significant factor was the annual payment
of long-term debt.
Deferred Outflows:
In June 2013, the District issued $7.7 million of 2013 Water Revenue
Refunding Bonds for an advanced refunding of its 2004 Certificates of
Participation, which will be called on September 1, 2014. Excluding
costs of issuance the District received $8.5 million in proceeds,
including a $1.0 million premium, to fund the $8.1 million of
outstanding principal and $.4 million of remaining interest payments.
In accordance with GASB Nos. 23 and 65, the remaining interest
payments of $.1 million in FY2014 and $.4 million in FY2013 are
reflected as a deferred outflow of resources on the Statement of Net
Position.
Total Liabilities & Net Positions:
Total liabilities decreased by approximately $2.6 million or 1.96%
from the previous fiscal year, to $131.9 million. This is
attributable to a decrease in long-term debt of $3.7 million.
The decrease in total assets of $5.7 million and decrease in deferred
outflow of resources of $.3 million, along with the decrease in total
liabilities of $2.6 million, yields a decrease in net
positions(equity) of $3.4 million or .76%, to $444.8 million.
Capital Contributions:
Capital contributions for the year totaled $3.4 million during Fiscal
Year 2014, an increase of $.6 million or 22.24% from Fiscal Year 2013
contributions. This increase is mainly due to the increased in
contributed fixed assets.
Results of Operations:
Operating revenues increased $9.1 million or 11.89%, mainly as a
result of the overall increase in water rates from the prior fiscal
3
year and increases in units sold due to drier weather and higher
temperatures.
Cost of water sales increased $5.5 million or 10.81% due to the
increase in CWA water costs.
Non-Operating Revenues & Expenses:
Non-operating revenues increased $0.1 million or .22%, to $7.8
million for FY2014. The increase was primarily a result of increased
investment income.
Additional Audit Correspondence:
As a part of completing the audit engagement, the audit firm also
provides the following letters summarizing their observations and
conclusions concerning the District’s overall financial processes:
Management Letter: The auditors did not identify any
deficiencies in internal controls that they considered to be
material weaknesses. See Attachment C.
Audit Committee Letter: This letter describes overall aspects
of the audit to include audit principles, performance,
dealings with management, and significant findings or issues.
There were no transactions entered into by the District during
the year for which there is a lack of authoritative guidance
or consensus. All significant transactions have been
recognized in the financial statements in the proper period.
There were no disagreements with management concerning
financial accounting, reporting, or auditing matters, and
there were no significant difficulties in dealing with
management in performing the audit. See Attachment D.
Report on Applying Agreed-Upon Procedures: A review of the
District’s investment portfolio at year end, and a sample of
specific investment transactions completed throughout the
fiscal year was performed and there were no exceptions to
compliance from the District’s Investment Policy. See
Attachment E.
FISCAL IMPACT:
None.
4
STRATEGIC GOAL:
The District ensures its continued 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:
A) Committee Action Form
B) Audited Annual Financial Statements
C) Management Letter
D) Audit Committee Letter
E) Report on Applying Agreed-Upon Procedures
ATTACHMENT A
SUBJECT/PROJECT:
Approve the District’s Audited Financial Statements for the
Fiscal Year Ended June 30, 2014
COMMITTEE ACTION:
The Finance, Administration, and Communications Committee recommend
that the Board approve the District’s audited financial statements,
including the Independent Auditor’s unqualified opinion, for the
Fiscal Year Ended June 30, 2014.
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.
OTAY WATER DISTRICT
FINANCIAL STATEMENTS
WITH
REPORT ON AUDIT BY INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
JUNE 30, 2014 AND 2013
DRAFT COPY – 10/13/2014
PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
TABLE OF CONTENTS
JUNE 30, 2014 and 2013
Page
Number
Independent Auditors’ Report 1 - 2
Management’s Discussion & Analysis 3 - 10
Basic Financial Statements:
Statements of Net Position 11 - 12
Statements of Revenues, Expenses, and Changes in Net Position 13
Statements of Cash Flows 14 - 15
Notes to Financial Statements 16 - 46
Required Supplementary Information:
Schedule of Funding Progress for PERS 47
Schedule of Funding Progress for DPHP 47
DRAFT COPY – 10/13/2014
PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
INDEPENDENT AUDITORS' REPORT
Board of Directors
Otay Water District
Spring Valley, California
Report on Financial Statements
We have audited the accompanying financial statements of the business-type activities of the Otay Water District (the “District”),
as of and for the year ended June 30, 2014, and the related notes to the financial statements, which collectively comprise the
District’s basic financial statements as listed in the table of contents.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting
principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of
internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement,
whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance
with auditing standards generally accepted in the United States of America and the standards applicable to financial audits
contained in Government Auditing Standards, issued by the Comptroller General of the United States and the State Controller’s
Minimum Audit Requirements for California Special Districts. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.
The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the
financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the District’s preparation and fair presentation of the financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the District’s internal
control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies
used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
DRAFT COPY – 10/13/2014
PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position
of the business-type activities of the Otay Water District as of June 30, 2014, and the respective changes in financial position and
cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of
America, as well as the accounting systems prescribed by the California State Controller’s Office and California regulations
governing Special Districts.
Other Matters
Prior Period Financial Statements
The financial statements of the District as of June 30, 2013, were audited by other auditors whose report dated October 22, 2013,
expressed an unqualified opinion on those statements. Additionally, those statements included an emphasis of matter paragraph
describing the implementation of GASB standards and an other matter paragraph relating to required supplementary information
and other information.
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management's discussion and analysis,
Schedule of Funding Progress for PERS, and DPHP on pages 3-10 and 47 be presented to supplement the basic financial
statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting
Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an
appropriate operational, economic, or historical context. We have applied certain limited procedures to the required
supplementary information in accordance with auditing standards generally accepted in the United States of America, which
consisted of inquiries of management about the methods of preparing the information and comparing the information for
consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained
during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information
because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated ________ __, 2014, on our
consideration of the District’s internal control over financial reporting and on our tests of its compliance with certain provisions
of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our
testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on
internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance
with Government Auditing Standards in considering the District’s internal control over financial reporting and compliance.
Riverside, California
________ __, 2014
DRAFT COPY – 10/13/2014
PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
Management’s Discussion and Analysis
3
As management of the Otay Water District (the “District”), we offer readers of the District’s financial
statements this narrative overview and analysis of the District’s financial performance during the fiscal
year ending June 30, 2014. Please read it in conjunction with the District’s financial statements that
follow Management’s Discussion and Analysis. All amounts, unless otherwise indicated, are expressed
in millions of dollars.
Financial Highlights
The assets of the District exceeded its liabilities at the close of the most recent fiscal year by $444.8 million (net
position). Of this amount, $83.0 million (unrestricted net position) may be used to meet the District’s ongoing
obligations to citizens and creditors.
Total assets decreased by $5.7 million or .99% during Fiscal Year 2014, to $576.6 million, due primarily to
depreciation offset by investments in capital infrastructure, contributions and improved operating results.
Overview of the Financial Statements
This discussion and analysis is intended to serve as an introduction to the District’s basic financial
statements, which are comprised of the following: 1) Statements of Net Position, 2) Statements of
Revenues, Expenses and Changes in Net Position, 3) Statements of Cash Flows, and 4) Notes to the
Financial Statements. This report also contains other supplementary information in addition to the basic
financial statements.
The Statements of Net Position presents information on all of the District’s assets, deferred outflows of
resources, liabilities and deferred inflows of resources, with the difference reported as net position. Over
time, increases or decreases in net positions may serve as a useful indicator of whether the financial
position of the District is improving or weakening.
The Statements of Revenues, Expenses and Changes in Net Position presents information showing how
the District’s net position changed during the most recent fiscal year. All changes in net positions are
reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of
related cash flows. Thus, revenues and expenses are reported in this statement for some items that will
only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation
leave).
The Statements of Cash Flows presents information on cash receipts and payments for the fiscal year.
The Notes to the Financial Statements provide additional information that is essential to a full
understanding of the data supplied in each of the specific financial statements listed above.
DRAFT COPY – 10/13/2014
PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
Management’s Discussion and Analysis
4
In addition to the basic financial statements and accompanying notes, this report also presents certain
required supplementary information concerning the District’s progress in funding its obligation to provide
pension benefits to its employees.
Financial Analysis:
As noted, net position may serve over time as a useful indicator of an entity’s financial position. In the
case of the District, assets and deferred outflows of resources exceeded liabilities and deferred inflows of
resources by $444.8 million at the close of the most recent fiscal year.
By far the largest portion of the District’s net position, $357.9 million (80%), reflects its investment in
capital assets, less any remaining outstanding debt used to acquire those assets. The District uses these
capital assets to provide services to citizens; consequently, these assets are not available for future
spending. Although the District’s investment in its capital assets is reported effectively as a resource, it
should be noted that the resources needed to repay the debt must be provided from other sources, since
the capital assets themselves cannot be used to liquidate these liabilities.
Statements of Net Position
(In Millions of Dollars)
2014 2013 2012
Assets
Current and Other Assets $ 109.9 $ 106.3 $ 109.9
Capital Assets 466.7 476.0 480.8
Total Assets 576.6 582.3 590.7
Deferred Outflows of Resources
Deferred Amount on Refunding 0.1 0.4 0.0
Total Deferred Outflows of Resources 0.1 0.4 0.0
Liabilities
Long-Term Debt Outstanding 105.3 109.0 112.0
Other Liabilities 26.6 25.5 24.6
Total Liabilities 131.9 134.5 136.6
Net Position
Net Investment in Capital Assets 357.9 376.5 381.7
Restricted for Debt Service 3.9 4.6 4.7
Unrestricted 83.0 67.1 67.7
Total Net Position $ 444.8 $ 448.2 $ 454.1
DRAFT COPY – 10/13/2014
PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
Management’s Discussion and Analysis
5
While the District’s operations and population continue to grow, albeit at slower rates than in prior years,
the pattern of reduced growth of the District’s Net Position is indicative of the reduction in new
development projects within the District. This reduction is a result of the ongoing national housing slump
and slow recovery from financial crisis.
In FY-2014 the District has fully used the remainder of the $51.2 million proceeds from the issuance of its
2010 Water Revenue Bonds program (See Note 4 in the Notes to Financial Statements) for its CIP program
(See Note 3 in the Notes to Financial Statements) as seen by the increase in Capital Assets of $3.4 million
before accumulated depreciation. The District also saw a decrease in Long-Term Debt of $3.7 million due
to the annual payments of long-term debt.
Certain planning and environmental study costs associated with capital projects such as the Otay Mesa
Desalination and Disinfection System or San Miguel Habitat Management/Mitigation Area do not qualify
as capital costs under Generally Accepted Accounting Principles and are included in the miscellaneous
expenses of the District. For FY-2013 and FY-2014 those expenses were $1.6 million and $2.9 million,
respectively.
For the entire financial reporting period, Fiscal Years 2014 and 2013, Total Net Position decreased
approximately $3.4 million for FY-2014, to $444.8 million, as compared to FY-2013 when Net Position
decreased by $5.9 million. At the end of FY-2014 the District is able to report positive balances in all
categories of net position. This situation also held true for the prior two fiscal years.
DRAFT COPY – 10/13/2014
PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
Management’s Discussion and Analysis
6
Statements of Revenues, Expenses, and Changes in Net Position
(In Millions of Dollars)
2014 2013 2012
Water Sales $ 81.3 $ 72.2 $ 63.8
Wastewater Revenue 2.8 2.6 2.4
Connection and Other Fees 1.9 2.1 2.2
Non-operating Revenues 7.8 7.7 8.4
Total Revenues 93.8 84.6 76.8
Depreciation Expense 16.1 16.5 15.2
Other Operating Expense 76.5 70.8 65.8
Non-operating Expense 8.0 6.0 5.7
Total Expenses 100.6 93.3 86.7
Loss Before Capital
Contributions (6.8) (8.7) (9.9)
Capital Contributions 3.4 2.8 6.8
Change in Net Position
(3.4) (5.9) (3.1)
Beginning Net Position 448.2 454.1 457.2
Ending Net Position $ 444.8 $ 448.2 $ 454.1
Water Sales increased by $9.1 million in FY-2014 and $8.4 million in FY-2013, mainly due to rate increases
in both years and an increase in units sold in FY14 due to the ongoing drought conditions. The slowdown
in District growth, as a result of the economic crisis, continues to impact the District as Connection and
Other Fees revenues declined by $0.2 million in FY-2014 and $0.1 million in FY-2013.
Other Operating Expense increased predominantly due to the increase in Cost of Water Sales, from a
combination of the increased price-per-acre-foot of water obtained from the Los Angeles Metropolitan
Water District of 7.7%, and 4.0% from San Diego County Water Authority, brought on by the high cost of
supply programs as well as higher energy and operating costs. Increases in units purchased in FY14 also
contributed to the increases in Operating Expenses.
The slowdown in the economy appears to have leveled off. However, during the nationwide housing
mortgage crisis, developers had either slowed-down or totally stopped work on many projects until
economic conditions improve and the demand for growth returns. The development that has returned has
done so at a much slower rate. This has resulted in Capital Contributions remaining low over the last 3
years, compared to the extended growth of the previous 10 years. While this slowdown now appears to
have stabilized, the District was also aided in its Capital Contributions through the receipt of additional
federal grant monies and state reimbursements of $169,000 in FY-2014 and $184,000 in FY-2013.
DRAFT COPY – 10/13/2014
PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
Management’s Discussion and Analysis
7
Non-operating Revenues
Non-operating Revenues by Major Source
(In Millions of Dollars)
2014 2013 2012
Taxes and Assessments $ 3.5 $ 3.5 $ 3.5
Rents and Leases 1.3 1.3 1.2
Other Non-operating Revenue 3.0 2.9 3.7
Total Non-operating Revenues $ 7.8 $ 7.7 $ 8.4
The District’s non-operating revenues increased by $0.1 million in FY-2014 and decreased by $0.8 million
in FY-2013. The decrease in FY-2013 was primarily a result of decreased miscellaneous and investment
earnings.
DRAFT COPY – 10/13/2014
PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
Management’s Discussion and Analysis
8
Capital Assets and Debt Administration
The District’s capital assets (net of accumulated depreciation) as of June 30, 2014, totaled $466.7 million.
Included in this amount is land. The District’s capital assets decreased by 2.0% for FY-2014 and by 1.0%
in FY-2013.
Capital Assets
(In Millions of Dollars)
2014 2013 2012
Land $ 13.7 $ 13.7 $ 13.7
Construction in Progress 11.7 17.1 17.5
Water System 465.9 458.8 452.1
Recycled Water System 110.3 108.9 108.0
Sewer System 41.2 41.2 37.8
Field Equipment 8.8 8.9 8.6
Buildings 18.9 18.8 18.6
Transportation Equipment 3.3 3.5 3.2
Communication Equipment 2.9 2.6 2.5
Office Equipment 17.5 17.3 17.2
694.2 690.8 679.2
Less Accumulated
Depreciation (227.5) (214.8) (198.4)
Net Capital Assets $ 466.7 $ 476.0 $ 480.8
As indicated by figures in the table above, the majority of capital assets added during both fiscal years
were related to the potable and recycled water systems. In addition, the majority of the cost of
construction-in-progress is also related to these water systems. Additional information on the District’s
capital assets can be found in Note 3 of the Notes to Financial Statements.
At June 30, 2014, the District had $105.3 million in outstanding debt (net of $3.5 million of maturities
occurring in FY-2015), which consisted of the following:
General Obligation Bonds $ 5.3
Certificates of Participation 45.0
Revenue Bonds 55.0
Total Long-Term Debt $ 105.3
DRAFT COPY – 10/13/2014
PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
Management’s Discussion and Analysis
9
In June 2013, the District issued $7.7 million of 2013 Water Revenue Refunding Bonds for an advance
refunding of its 2004 Certificates of Participation, which will be called on September 1, 2014. Excluding
costs of issuance the District received $8.5 million in proceeds, including a $1.0 million premium, to fund
the $8.1 million of outstanding principal and $0.4 million of remaining interest payments. In accordance
with GASB Nos. 23 and 65, the remaining interest payments of $0.1 million in FY-2014 and $0.4 million in
FY-2013 are reflected as a deferred outflow of resources on the Statement of Net Position.
Additional information on the District’s long-term debt can be found in Note 4 of the Notes to Financial
Statements.
Fiscal Year 2014-2015 Budget
Growth in the San Diego area has declined over the last 4 years, but is now slowly improving. This
modest shift is also being reflected in the demand for housing. Although San Diego received less than
normal rainfall in Fiscal Year 2014, the District is expecting that San Diego’s rainfall will return to its
average pattern and volume in the coming years. Water sales volumes are expected to increase slightly,
by less than one percent over FY-2014 actual sales as the economy improves and both hotter and drier
than normal climatic conditions persist. Higher usage is expected to occur even as efforts to promote
water conservation ramp-up due to the adoption of emergency drought regulations. The coming years
will continue to pose challenges for those in California’s water community. It is uncertain if the
challenges facing the Sacramento-San Joaquin Bay Delta, the source of 30% of Southern California’s
water supply, will be addressed. In addition, proposals to construct tunnels under the Bay Delta are
extremely costly, face tremendous environmental obstacles, and will be tested and challenged in the
court as well as at the ballot box. The combination of these factors add to the cost of providing a stable
supply of water as water providers look to new and more costly sources of water.
The District is currently at about 75% of its projected ultimate population, serving approximately 213,000
people. Long-term, this percentage should continue to increase as the District's service area continues
to develop and grow. Ultimately, the District is projected to serve approximately 285,000 people, with an
average daily demand of 46 million gallons per day (MGD). Currently, the District services the needs of
this growing population by purchasing water from CWA, who in turn purchases its water from MWD and
the Imperial Irrigation District (IID). Otay takes delivery of the water through several connections of large
diameter pipelines owned and operated by CWA. The District currently receives treated water from CWA
directly and from Helix Water District via contract with CWA. In addition, the District has an emergency
agreement with the City of San Diego to purchase water in the case of a shutdown of the main treated
water source. The City of San Diego also has a long-term contract with the District to provide recycled
water for landscape and irrigation usage. Through innovative agreements like these, benefits can be
achieved by both parties by using excess capacity of another agency, and diversifying local supply,
thereby increasing reliability.
DRAFT COPY – 10/13/2014
PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
Management’s Discussion and Analysis
10
Financial
The District is projected to deliver approximately 29,192 acre-feet of potable water to 49,257 potable
customer accounts during Fiscal Year 2014-2015. Management feels that these projections are realistic
after accounting for low growth, supply changes, and a focus on conservation. A combination of factors,
including the ongoing drought and recession, have created challenges in developing economic
projections for the current fiscal year. Both unemployment and levels of distressed activity in the
commercial and residential resale market have improved from their economic crisis peaks. However,
both economic indicators remain significantly above the levels of the boom years from 2001 to 2005. The
ongoing negative impacts to the District of the economic indicators and conservation are partially offset
by growth as the District’s commercial and residential permits have shown slow and steady
improvement from the lows of the economic crisis. While all of these factors impact the region’s water
usage, people’s need for water remains an underlying constant. Staff continues working diligently on
developing new water supplies as they work through the financial impacts of conservation and the
modest economic turnaround.
Management is unaware of any other conditions that could have a significant impact on the District’s
current financial position, net position, or operating results.
Contacting the District’s Financial Management
This financial report is designed to provide a general overview of the Otay Water District’s finances for
the Board of Directors, citizens, creditors, and other interested parties. Questions concerning any of the
information provided in the report or requests for additional information should be addressed to the
District’s Finance Department, 2554 Sweetwater Springs Blvd., Spring Valley, CA 91978-2004.
DRAFT COPY – 10/13/2014
PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
2014 2013
ASSETS
Current Assets:
Cash and Cash Equivalents (Notes 1 and 2)30,493,474$ 33,958,281$
Restricted Cash and Cash Equivalents (Notes 1 and 2)116,639 4,087,042
Investments (Note 2)27,631,622 16,258,960
Board Designated Investments (Note 2)21,605,368 14,860,502
Restricted Investments (Notes 1 and 2)4,564,972 13,560,004
Accounts Receivable, Net 12,879,121 11,856,029
Accrued Interest Receivable 83,679 53,950
Taxes and Availability Charges Receivable, Net 333,589 431,159
Restricted Taxes and Availability Charges Receivable, Net 41,091 41,657
Inventories 775,007 800,085
Prepaid Items and Other Receivables 1,047,708 1,072,706
Total Current Assets 99,572,270 96,980,375
Non-current Assets:
Net OPEB Asset (Note 7)10,385,336 9,345,437
Capital Assets (Note 3):
Land 13,714,963 13,714,963
Construction in Progress 11,642,506 17,110,048
Capital Assets, Net of Depreciation 441,293,934 445,203,648
Total Capital Assets, Net of Depreciation 466,651,403 476,028,659
Total Non-current Assets 477,036,739 485,374,096
Total Assets 576,609,009 582,354,471
DEFERRED OUTFLOWS OF RESOURCES
Deferred Amount on Refunding 78,118 390,591
Total Deferred Outflows of Resources 78,118$ 390,591$
Continued
STATEMENTS OF NET POSITION
JUNE 30, 2014 AND 2013
The accompanying notes are an integral part of this statements.
11 DRAFT COPY – 10/13/2014
PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
2014 2013
LIABILITIES
Current Liabilities:
Current Maturities of Long-term Debt (Note 4)3,495,000$ 3,470,000$
Accounts Payable 11,906,026 11,733,543
Accrued Payroll Liabilities 3,054,520 2,755,421
Other Accrued Liabilities 3,397,500 3,487,430
Customer and Developer Deposits 2,418,754 1,756,983
Accrued Liabilities 1,564,992 1,518,651
Liabilities Payable from Restricted Assets:
Restricted Accrued Interest 70,804 76,154
Total Current Liabilities 25,907,596 24,798,182
Non-current Liabilities:
Long-term Debt (Note 4):
General Obligation Bonds 5,283,563 5,849,918
Certificates of Participation 44,980,314 46,465,525
Revenue Bonds 55,058,490 56,678,987
Other Non-current Liabilities 649,344 718,543
Total Non-current Liabilities 105,971,711 109,712,973
Total Liabilities 131,879,307 134,511,155
NET POSITION
Net Investment in Capital Assets 357,912,154 376,549,168
Restricted for Debt Service 3,855,673 4,612,890
Unrestricted 83,039,993 67,071,849
Total Net Position 444,807,820$ 448,233,907$
STATEMENTS OF NET POSITION - CONTINUED
JUNE 30, 2014 AND 2013
The accompanying notes are an integral part of this statements.
12 DRAFT COPY – 10/13/2014
PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
2014 2013
OPERATING REVENUES
Water Sales 81,287,164$ 72,187,081$
Wastewater Revenue 2,791,523 2,625,087
Connection and Other Fees 1,946,886 2,069,220
Total Operating Revenues 86,025,573 76,881,388
OPERATING EXPENSES
Cost of Water Sales 56,068,147 50,600,551
Wastewater 1,834,465 1,638,354
Administrative and General 18,608,603 18,550,811
Depreciation 16,055,808 16,545,622
Total Operating Expenses 92,567,023 87,335,338
Operating Income (Loss)(6,541,450) (10,453,950)
NON-OPERATING REVENUES (EXPENSES)
Investment Earnings 522,286 22,155
Taxes and Assessments 3,537,162 3,545,595
Availability Charges 729,961 707,881
Gain (Loss) on Sale of Capital Assets (426,140)(546,799)
Rents and Leases 1,317,736 1,276,914
Miscellaneous Revenues 2,088,132 2,780,603
Donations (119,687)(120,684)
Interest Expense (4,872,060)(3,977,538)
Miscellaneous Expenses (3,054,447)(1,917,389)
Total Non-operating Revenues (Expenses)(277,057)1,770,738
Income (Loss) Before Capital Contributions (6,818,507)(8,683,212)
Capital Contributions 3,392,420 2,775,132
Change in Net Position (3,426,087)(5,908,080)
Total Net Position, Beginning 448,233,907 454,141,987
Total Net Position, Ending 444,807,820$ 448,233,907$
STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET POSITION
FOR THE YEARS ENDED JUNE 30, 2014 AND 2013
The accompanying notes are an integral part of this statements.
13 DRAFT COPY – 10/13/2014
PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
2014 2013
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from Customers 83,717,366$ 73,425,100$
Receipts from Connections and Other Fees 1,946,886 2,069,220
Other Receipts 2,088,132 2,780,603
Payments to Suppliers (57,217,950) (50,206,581)
Payments to Employees (19,974,636) (20,491,758)
Other Payments (3,231,510) (2,038,073)
Net Cash Provided By (Used For) Operating Activities 7,328,288 5,538,511
CASH FLOWS FROM NONCAPITAL AND RELATED
FINANCING ACTIVITIES
Receipts from Taxes and Assessments 3,635,298 3,612,045
Receipts from Property Rents and Leases 1,202,050 1,276,914
Net Cash Provided By (Used For) Noncapital and Related
Financing Activities 4,837,348 4,888,959
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Proceeds from Capital Contributions 1,903,528 1,515,238
Proceeds from Sale of Capital Assets 102,574 -
Proceeds from Debt Related Taxes and Assessments 729,961 707,881
Net Proceeds from Issuance of Long-Term Debt - 8,329,385
Retirements of Long-Term Debt - (8,100,000)
Principal Payments on Long-Term Debt (3,470,000) (3,320,000)
Interest Payments and Fees (4,518,596) (5,201,467)
Acquisition and Construction of Capital Assets (5,718,373) (10,035,376)
Net Cash Provided By (Used For) Capital and Related
Financing Activities (10,970,906) (16,104,339)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest Received on Investments 492,557 395,773
Proceeds from Sale and Maturities of Investments 52,121,219 68,832,000
Purchase of Investments (61,243,716) (60,638,762)
Net Cash Provided By (Used For) Investing Activities (8,629,940)8,589,011
Net Increase (Decrease) in Cash and Cash Equivalents (7,435,210)2,912,142
Cash and Cash Equivalents - Beginning 38,045,323 35,133,181
Cash and Cash Equivalents - Ending 30,610,113$ 38,045,323$
Continued
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2014 AND 2013
The accompanying notes are an integral part of this statements.14 DRAFT COPY – 10/13/2014
PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
2014 2013
Reconciliation of Operating Income (Loss) to Net Cash Flows
Provided By (Used For) Operating Activities:
Operating Income (Loss)(6,541,450)$ (10,453,950)$
Adjustments to Reconcile Operating Income to
Net Cash Provided By (Used For) Operating Activities:
Depreciation 16,055,808 16,545,622
Miscellaneous Revenues 2,088,132 2,780,603
Miscellaneous Expenses (3,231,510) (2,038,073)
(Increase) Decrease in Accounts Receivable (1,023,092) (1,280,059)
(Increase) Decrease in Inventory 25,078 (10,316)
(Increase) Decrease in Net OPEB Asset (1,039,899) (1,023,535)
(Increase) Decrease in Prepaid Items and Other Receivables 20,997 153,997
Increase (Decrease) in Accounts Payable 172,483 1,255,177
Increase (Decrease) in Accrued Payroll and Related Expenses 299,099 164,149
Increase (Decrease) in Other Accrued Liabilities (89,930) (445,012)
Increase (Decrease) in Customer Deposits 661,771 (107,009)
Increase (Decrease) in Prepaid Capacity Fees (69,199) (3,083)
Net Cash Provided By (Used For) Operating Activities 7,328,288$ 5,538,511$
Schedule of Cash and Cash Equivalents:
Current Assets:
Cash and Cash Equivalents 30,493,474$ 33,958,281$
Restricted Cash and Cash Equivalents 116,639 4,087,042
Total Cash and Cash Equivalents 30,610,113$ 38,045,323$
Supplemental Disclosures
Non-Cash Investing and Financing Activities Consisted of the Following:
Contributed Capital for Water and Sewer System 1,488,893$ 1,259,894$
Change in Fair Value of Investments and Recognized Gains/Losses 201,891 (353,950)
Amortization Related to Long-term Debt 177,063 154,246
STATEMENTS OF CASH FLOWS - CONTINUED
FOR THE YEARS ENDED JUNE 30, 2014 AND 2013
The accompanying notes are an integral part of this statements.15 DRAFT COPY – 10/13/2014
PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
16
NOTE DESCRIPTION PAGE
1 Reporting Entity and Summary of Significant Accounting Policies..……….. 17 - 21
2 Cash and Investments………………………………………………………... 22 - 27
3 Capital Assets…………………………………………………..……………. 28 - 29
4 Long-Term Debt………………………………………………….………….. 30 - 35
5 Net Position………………………………………………………………….. 35
6 Defined Benefit Pension Plan……………………………………………….. 36 - 37
7 Other Post Employment Benefits………………………..…………............... 37 - 40
8 Water Conservation Authority………………………………………............ 40
9 Commitments and Contingencies……………………………………………. 41
10 Risk Management……………………………………………………………. 41 - 43
11 Interest Expense……………………………………………………............... 43
12 Segment Information………………………………………………..……….. 43 - 46
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2014 AND 2013
DRAFT COPY – 10/13/2014
PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
17
1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A) Reporting Entity
The reporting entity Otay Water District (the “District”) includes the accounts of the District and the Otay Water
District Financing Authority (the “Financing Authority”).
The Otay Water District (the “District”) is a public entity established in 1956 pursuant to the Municipal Water District
Law of 1911 (Section 711 et. Seq. of the California Water Code) for the purpose of providing water and sewer services
to the properties in the District. The District is governed by a Board of Directors consisting of five directors elected by
geographical divisions based on District population for a four-year alternating term.
The District formed the Financing Authority on March 3, 2010 under the Joint Exercise of Powers Act, constituting
Articles 1 through 4 (commencing with Section 6500) of Chapter 5, Division 7, Title 1 of the California Government
Code. The Financing Authority was formed to assist the District in the financing of public capital improvements.
The financial statements present the District and its component units. The District is the primary government unit.
Component units are those entities which are financially accountable to the primary government, either because the
District appoints a voting majority of the component unit’s board, or because the component unit will provide a
financial benefit or impose a financial burden on the District. The District has accounted for the Financing Authority as
a “blended” component unit. Despite being legally separate, the Financing Authority is so intertwined with the District
that it is in substance, part of the District’s operations. Accordingly, the balances and transactions of this component
unit are reported within the funds of the District. Separate financial statements are not issued for the Financing
Authority.
B) Measurement Focus, Basis of Accounting and Financial Statement Presentation
Measurement focus is a term used to describe “which” transactions are recorded within the various financial
statements. Basis of accounting refers to “when” transactions are recorded regardless of the measurement focus
applied. The accompanying financial statements are reported using the economic resources measurement focus, and
the accrual basis of accounting. Under the economic measurement focus all assets and liabilities (whether current or
noncurrent) associated with these activities are included on the Statements of Net Position. The Statements of
Revenues, Expenses and Changes in Net Position present increases (revenues) and decreases (expenses) in total net
position. Under the accrual basis of accounting, revenues are recorded when earned and expenses are recorded
when a liability is incurred, regardless of the timing of related cash flows.
The District reports its activities as an enterprise fund, which is used to account for operations that are financed and
operated in a manner similar to a private business enterprise, where the intent of the District is that the costs (including
depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered
primarily through user charges.
The basic financial statements of the Otay Water District have been prepared in conformity with accounting
principles generally accepted in the United States of America. The Governmental Accounting Standards Board
(GASB) is the accepted standard setting body for governmental accounting financial reporting purposes.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2014 AND 2013
DRAFT COPY – 10/13/2014
PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
18
1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
B) Measurement Focus, Basis of Accounting and Financial Statement Presentation - Continued
Net position of the District is classified into three components: (1) net investment in capital assets, (2) restricted net
position, and (3) unrestricted net position. These classifications are defined as follows:
Net Investment in Capital Assets
This component of net position consists of capital assets, net of accumulated depreciation and reduced by the
outstanding balances of notes or borrowing that are attributable to the acquisition of the assets, construction, or
improvement of those assets. If there are significant unspent related debt proceeds at year-end, the portion of the debt
attributable to the unspent proceeds are not included in the calculation of the net investment in capital assets.
Restricted Net Position
This component of net position consists of net position with constrained use through external constraints imposed by
creditors (such as through debt covenants), grantors, contributions, or laws or regulations of other governments or
constraints imposed by law through constitutional provisions or enabling legislation.
Unrestricted Net Position
This component of net position consists of net position that do not meet the definition of “net investment in capital
assets” or “restricted net position”.
The District distinguishes operating revenues and expenses from those revenues and expenses that are nonoperating.
Operating revenues are those revenues that are generated by water sales and wastewater services while operating
expenses pertain directly to the furnishing of those services. Nonoperating revenues and expenses are those revenues
and expenses generated that are not associated with the normal business of supplying water and wastewater treatment
services.
The District recognizes revenues from water sales, wastewater revenues, and meter fees as they are earned. Taxes and
assessments are recognized as revenues based upon amounts reported to the District by the County of San Diego, net of
allowance for delinquencies of $41,631 and $52,535 at June 30, 2014 and 2013, respectively.
Additionally, capacity fee contributions received which are related to specific operating expenses are offset against
those expenses and included in Cost of Water Sales in the Statements of Revenues and Expenses and Changes in Net
Position.
Sometimes the District will fund outlays for a particular purpose from both restricted (e.g., restricted bond or grant
proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted - net position and
unrestricted - net position, a flow assumption must be made about the order in which the resources are considered to be
applied.
It is the District’s practice to consider restricted - net position to have been depleted before unrestricted - net position is
applied, however it is at the Board’s discretion.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2014 AND 2013
DRAFT COPY – 10/13/2014
PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
19
1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
C) New Accounting Pronouncements
Implemented
The GASB has issued Statement No. 66, “Technical Corrections – 2012; an amendment of GASB Statements No. 10
and No. 62.” The requirements of this Statement are effective for financial statements for periods beginning after
December 15 2012. Currently, the Statement is not applicable to the District.
Pending Accounting Standards
GASB has issued the following statements which impact the District’s financial reporting requirements in the future:
GASB 68 - “Accounting and Financial Reporting for Pensions, an amendment of GASB Statement No. 27”,
effective for the fiscal years beginning after June 15, 2014.
GASB 69 - “Government Combinations and Disposals of Government Operations”, effective for periods
beginning after December 15, 2013.
GASB 70 - “Accounting and Financial Reporting for Nonexchange Financial Guarantees”, effective for the
periods beginning after June 15, 2013.
D) Deferred Outflows / Inflows of Resources
In addition to assets, the statements of net position will sometimes report a separate section for deferred outflows of
resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net
position that applies to a future period(s) and so will not be recognized as an outflow of resources
(expense/expenditure) until then. The District has one item that qualifies for reporting in this category, deferred
amount on refunding, which resulted from the difference in the carrying value of refunded debt and its reacquisition
price. This amount is shown as deferred and amortized over the shorter of the life of the refunded or refunding debt.
In addition to liabilities, the statements of net position will sometimes report a separate section for deferred inflows of
resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net
position that applies to a future period(s) and will not be recognized as an inflow of resources (revenue) until that time.
The District does not have any type of these items as of June 30, 2014 or June 30, 2013.
E) Statements of Cash Flows
For purposes of the Statements of Cash Flows, the District considers all highly liquid investments (including
restricted assets) with a maturity period, at purchase, of three months or less to be cash equivalents.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2014 AND 2013
DRAFT COPY – 10/13/2014
PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
20
1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
F) Investments
Investments are stated at their fair value, which represents the quoted or stated market value. Investments that are
not traded on a market, such as investments in external pools, are valued based on the stated fair value as
represented by the external pool. All investments are stated at their fair value, the District has not elected to report
certain investments at amortized costs.
G) Inventory and Prepaids
Inventory consists primarily of materials used in the construction and maintenance of the water and sewer system and is
valued at weighted average cost. Both inventory and prepaids use the consumption method whereby they are reported
as an asset and expensed as they are consumed.
H) Capital Assets
Capital assets are recorded at cost, where historical records are available, and at an estimated historical cost where no
historical records exist. Infrastructure assets in excess of $20,000 and other capital assets in excess of $10,000 are
capitalized if they have an expected useful life of two years or more. The District will also capitalize individual
purchases under the capitalization threshold if they are part of a new capital program. The cost of purchased and self-
constructed additions to utility plant and major replacements of property are capitalized. Costs include materials, direct
labor, transportation, and such indirect items as engineering, supervision, employee fringe benefits, overhead, and
interest incurred during the construction period. Repairs, maintenance, and minor replacements of property are charged
to expense. Donated assets are capitalized at their approximate fair market value on the date contributed.
The District capitalizes interest on construction projects up to the point in time that the project is substantially
completed. Capitalized interest for fiscal years ending June 30, 2014 and 2013 of $176,782 and $995,721, respectively,
is included in the cost of water system assets and is depreciated on the straight-line basis over the estimated useful lives
of such assets.
Depreciation is calculated using the straight-line method over the following estimated useful lives:
Water System 15-70 Years
Field Equipment 2-50 Years
Buildings 30-50 Years
Communication Equipment 2-10 Years
Transportation Equipment 2-4 Years
Office Equipment 2-10 Years
Recycled Water System 50-75 Years
Sewer System 25-50 Years
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2014 AND 2013
DRAFT COPY – 10/13/2014
PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
21
1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
I) Compensated Absences
It is the District’s policy to record vested or accumulated vacation and sick leave as an expense and liability as benefits
accrue to employees. As of June 30, 2014 and 2013, total accrued paid time off was $2,352,861 and $2,120,399,
respectively.
J) Classification of Liabilities
Certain current liabilities have been classified as current liabilities payable from restricted assets as they will be
funded from restricted assets.
K) Allowance for Doubtful Accounts
The District charges doubtful accounts arising from water sales receivable to bad debt expense when it is probable that
the accounts will be uncollectible. Uncollectible accounts are determined by the allowance method based upon prior
experience and management’s assessment of the collectibility of existing specific accounts. The allowance for doubtful
accounts was $152,680 and $150,000 for 2014 and 2013, respectively.
L) Property Taxes
Tax levies are limited to 1% of full market value (at time of purchase) which results in a tax rate of $1.00 per $100
assessed valuation, under the provisions of Proposition 13. Tax rates for voter-approved indebtedness are excluded
from this limitation.
The County of San Diego (the “County”) bills and collects property taxes on behalf of the District. The County’s tax
calendar year is July 1 to June 30. Property taxes attach as a lien on property on January 1. Taxes are levied on July 1
and are payable in two equal installments on November 1 and February 1, and become delinquent after December 10
and April 10, respectively.
M) Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States
of America requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
N) Reclassifications
Certain reclassifications have been made to prior year amounts to conform to the current year presentation.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2014 AND 2013
DRAFT COPY – 10/13/2014
PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
22
2) CASH AND INVESTMENTS
The primary goals of the District’s Investment Policy are to assure compliance with all Federal, State, and Local laws
governing the investment of funds under the control of the organization, protect the principal of investments entrusted, and
generate income under the parameters of such policies.
Cash and Investments are classified in the accompanying financial statements as follows:
2014 2013
Statement of Net Position:
Cash and Cash Equivalents $ 30,493,474 $ 33,958,281
Restricted Cash and Cash Equivalents 116,639 4,087,042
Investments 27,631,622 16,258,960
Board Designated Investments 21,605,368 14,860,502
Restricted Investments 4,564,972 13,560,004
Total Cash and Investments $ 84,412,075 $ 82,724,789
Cash and Investments consist of the following:
2014 2013
Cash on Hand $ 2,950 $ 2,950
Deposits with Financial Institutions 2,065,122 1,107,051 Investments 82,344,003 81,614,788
Total Cash and Investments $ 84,412,075 $ 82,724,789
Investments Authorized by the California Government Code and the District’s Investment Policy
The table below identifies the investment types that are authorized for the District by the California Government Code
(or the District’s Investment Policy, where more restrictive). The table also identifies certain provisions of the
California Government Code (or the District’s Investment Policy, where more restrictive) that address interest rate risk,
credit risk, and concentration of credit risk. This table does not address investments of debt proceeds held by bond
trustee that are governed by the provisions of debt agreements of the District, rather than the general provisions of the
California Government Code or the District’s Investment Policy.
Maximum Maximum Authorized Maximum Percentage Investment
Investment Type Maturity Of Portfolio(1) In One Issuer
U.S. Treasury Obligations 5 years None None
U.S. Government Sponsored Entities 5 years None None
Certificates of Deposit 5years15%None
Corporate Medium-Term Notes 5 years 15%None
Commercial Paper 270 days 15%10%
Money Market Mutual Funds N/A 15%None
County Pooled Investment Funds N/A None None
Local Agency Investment Fund (LAIF)N/A None None
(1) Excluding amounts held by bond trustee that are not subject to California Government Code restrictions.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2014 AND 2013
DRAFT COPY – 10/13/2014
PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
23
2) CASH AND INVESTMENTS - Continued
Investments Authorized by Debt Agreements
Investments of debt proceeds held by the bond trustee are governed by provisions of the debt agreements, rather than the
general provisions of the California Government Code or the District’s Investment Policy.
Disclosures Relating to Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment.
Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest
rates. One of the ways that the District manages its exposure to interest rates risk is by purchasing a combination of shorter
term and longer term investments and by timing cash flows from maturities, so that a portion of the portfolio is maturing or
coming close to maturity evenly over time, as necessary, to provide the cash flow and liquidity needed for operations.
Information about the sensitivity of the fair values of the District’s investments to market interest rate fluctuations are
provided by the following tables that show the distribution of the District’s investments by maturity as of June 30, 2014 and
2013.
June 30, 2014
Remaining Maturity (in Months)
12 Months 13 to 24 25 to 60 More Than
Investment Type Or Less Months Months 60 Months
U.S. Government Sponsored Entities $ 53,716,144 $ 3,005,760 $ 7,001,050 $ 43,709,334 $ -
Local Agency Investment Fund (LAIF) 11,368,272 11,368,272 - - -
San Diego County Pool 17,143,000 17,143,000 - - -
Money Market Funds 116,587 116,587 - - -
Total $ 82,344,003 $ 31,633,619 $ 7,001,050 $ 43,709,334 $ -
June 30, 2013
Remaining Maturity (in Months)
12 Months 13 to 24 25 to 60 More Than
Investment Type Or Less Months Months 60 Months
U.S. Government Sponsored Entities $ 44,599,731 $ 3,002,850 $ 17,974,890 $ 23,621,991 $ -
Local Agency Investment Fund (LAIF) 17,032,057 17,032,057 - - -
San Diego County Pool 19,983,000 19,983,000 - - -
Total $ 81,614,788 $ 40,017,907 $ 17,974,890 $ 23,621,991 $ -
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2014 AND 2013
DRAFT COPY – 10/13/2014
PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
24
2) CASH AND INVESTMENTS - Continued
Disclosures Relating to Credit Risk
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment.
This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is
the minimum rating required by (where applicable) the California Government Code or the District’s Investment Policy, or
debt agreements, and the Moody’s ratings as of June 30, 2014 and 2013 for each investment type.
June 30, 2014
Legal Not
Investment Type Rating AAA AA A-1 Rated
U.S. Government Sponsored Entities $ 53,716,144 N/A $ 53,716,144 $ - $ - $ -
Local Agency Investment Fund (LAIF) 11,368,272 N/A - - - 11,368,272
San Diego County Pool 17,143,000 N/A - - - 17,143,000
Money Market Funds 116,587 N/A - - 116,587 -
Total $ 82,344,003 $ 53,716,144 $ - $ 116,587 $ 28,511,272
June 30, 2013
Minimum Rating as of Year End
Legal Not
Investment Type Rating AAA AA Rated
U.S. Government Sponsored Entities $ 44,599,731 N/A $ 44,599,731 $ - $ -
Local Agency Investment Fund (LAIF) 17,032,057 N/A - - 17,032,057
San Diego County Pool 19,983,000 N/A - - 19,983,000
Total $ 81,614,788 $ 44,599,731 $ - $ 37,015,057
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2014 AND 2013
DRAFT COPY – 10/13/2014
PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
25
2) CASH AND INVESTMENTS - Continued
Concentration of Credit Risk
The investment policy of the District contains various limitations on the amounts that can be invested in any one type or
group of investments and in any issuer, beyond that stipulated by the California Government Code, Sections 53600 through
53692. Investments in any one issuer (other than U.S. Treasury securities, mutual funds, and external investment pools) that
represent 5% or more of total District investments as of June 30, 2014 and 2013 are as follows:
June 30, 2014
Issuer Investment Type Reported Amount
Federal Home Loan Bank U.S. Government Sponsored Entities $ 19,723,794
Federal Home Loan Mortgage Corp U.S. Government Sponsored Entities $ 17,997,640
Federal National Mortgage Association U.S. Government Sponsored Entities $ 7,986,280
Federal Farm Credit Banks U.S. Government Sponsored Entities $ 8,008,430
June 30, 2013
Issuer Investment Type Reported Amount
Federal Home Loan Bank U.S. Government Sponsored Entities $ 12,961,010
Federal Home Loan Mortgage Corp U.S. Government Sponsored Entities $ 9,720,091
Federal National Mortgage Association U.S. Government Sponsored Entities $ 4,976,820
Federal Farm Credit Banks U.S. Government Sponsored Entities $ 14,955,390
Custodial Credit Risk
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government
will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an
outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g.,
broker-dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities
that are in the possession of another party. The California Government Code and the District’s investment policy do not
contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other
than the following provision for deposits: The California Government Code requires that a financial institution secure
deposits made by state or local government units by pledging securities in an undivided collateral pool held by a depository
regulated under state law (unless so waived by the governmental unit). The market value of the pledged securities in the
collateral pool must equal at least 110% of the total amount deposited by the public agencies. California law also allows
financial institutions to secure deposits by pledging first trust deed mortgage notes having a value of 150% of the secured
public deposits.
As of June 30, 2014, $1,553,944 of the District’s deposits with financial institutions in excess of federal depository
insurance limits were held in collateralized accounts. As of June 30, 2013, $1,063,279 of the District’s deposits with
financial institutions in excess of federal depository insurance limits were held in collateralized accounts.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2014 AND 2013
DRAFT COPY – 10/13/2014
PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
26
2) CASH AND INVESTMENTS - Continued
Local Agency Investment Fund (LAIF)
The District is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by California
Government Code Section 16429 under the oversight of the Treasurer of the State of California. The fair value of the
District’s investment in this pool is reported in the accompanying financial statements at amounts based upon District’s pro-
rata share of the fair value provided by LAIF for the entire LAIF portfolio (in relation to the amortized cost of that
portfolio). The balance available for withdrawal is based on the accounting records maintained by LAIF, which are recorded
on an amortized cost-basis.
San Diego County Pooled Fund
The San Diego County Pooled Investment Fund (SDCPIF) is pooled investment fund program governed by the County of
San Diego Board of Supervisors, and administered by the County of San Diego Treasurers and Tax Collector. Investments
in SDCPIF are highly liquid as deposits and withdrawals can be made at anytime without penalty.
The County of San Diego’s bank deposits are either federally insured or collateralized in accordance with the California
Government Code. Pool detail is included in the County of San Diego Comprehensive Annual Financial Report (CAFR).
Copies of the CAFR may be obtained from the County of San Diego Auditor-Controller’s Office - 1600 Pacific Coast
Highway, San Diego California 92101.
Collateral for Deposits
All cash is entirely insured or collateralized.
Under the provisions of the California Government Code, California banks and savings and loan associations are required to
secure the District’s deposits by pledging government securities as collateral. The market value of the pledged securities
must equal at least 110% of the District’s deposits. California law also allows financial institutions to secure District
deposits by pledging first trust deed mortgage notes having a value of 150% of the District’s total deposits.
The District may waive the 110% collateral requirement for deposits which are insured up to $250,000 by the FDIC.
Board Designated Investments
Investments are Board restricted for the cost of the following District projects:
2014 2013
New Water Supply $ 322,087 $ 863,973
Expansion 6,078 369,791
Replacement 21,277,203 13,626,738
Total $ 21,605,368 $ 14,860,502
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2014 AND 2013
DRAFT COPY – 10/13/2014
PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
27
2) CASH AND INVESTMENTS - Continued
Restricted Cash and Cash Equivalents
2014 2013
Debt Service:
Water Revenue Bond Series 2010 $ 116,639 $ 4,087,042
Total $ 116,639 $ 4,087,042
Restricted Investments
2014 2013
Debt Service:
General Obligation Bond ID No. 27-2009 $ 812,239 $ 917,708
Water Revenue Bond Series 2010A 1,026,909 1,029,999
Water Revenue Bond Series 2010B 2,696,849 11,602,893
Construction:
Betterment 28,975 9,404
Total $ 4,564,972 $ 13,560,004
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2014 AND 2013
DRAFT COPY – 10/13/2014
PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
28
3) CAPITAL ASSETS
The following is a summary of changes in Capital Assets for the year ended June 30, 2014:
Beginning Ending
Balance Additions Deletions Balance
Capital Assets, Not Depreciated
Land $ 13,714,963 $ - $ - $ 13,714,963
Construction in Progress 17,110,048 8,498,574 (13,966,116) 11,642,506
Total Capital Assets Not Depreciated 30,825,011 8,498,574 (13,966,116) 25,357,469
Capital Assets, Being Depreciated
Infrastructure 608,634,474 11,562,280 (2,848,379) 617,348,375
Field Equipment 8,934,034 144,207 (265,548) 8,812,693
Buildings 18,849,509 79,370 - 18,928,879
Transportation Equipment 3,497,789 422,566 (611,753) 3,308,602
Communication Equipment 2,562,480 428,140 (110,479) 2,880,141
Office Equipment 17,298,342 274,011 (59,160) 17,513,193
Total Capital Assets Being Depreciated 659,776,628 12,910,574 (3,895,319) 668,791,883
Less Accumulated Depreciation:
Infrastructure 181,997,301 13,313,914 (2,086,011) 193,225,204
Field Equipment 7,579,663 181,393 (265,548) 7,495,508
Buildings 7,832,547 504,021 - 8,336,568
Transportation Equipment 2,615,775 295,826 (611,753) 2,299,848
Communication Equipment 1,448,152 408,940 (110,479) 1,746,613
Office Equipment 13,099,542 1,351,714 (57,048) 14,394,208
Total Accumulated Depreciation 214,572,980 16,055,808 (3,130,839) 227,497,949
Total Capital Assets Being Depreciated,
Net
445,203,648
(3,145,234)
(764,480)
441,293,934
Total Capital Assets, Net $ 476,028,659 $ 5,353,340 $ (14,730,596) $ 466,651,403
Depreciation expense for the year ended June 30, 2014 was $16,055,808.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2014 AND 2013
DRAFT COPY – 10/13/2014
PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
29
3) CAPITAL ASSETS - Continued
The following is a summary of changes in Capital Assets for the year ended June 30, 2013:
Beginning Ending
Balance Additions Deletions Balance
Capital Assets, Not Depreciated
Land $ 13,703,463 $ 11,500 $ - $ 13,714,963
Construction in Progress 17,452,274 11,751,086 (12,093,312) 17,110,048
Total Capital Assets Not Depreciated 31,155,737 11,762,586 (12,093,312) 30,825,011
Capital Assets, Being Depreciated
Infrastructure 597,894,929 11,620,876 (881,331) 608,634,474
Field Equipment 8,602,060 331,974 - 8,934,034
Buildings 18,649,209 200,300 - 18,849,509
Transportation Equipment 3,221,249 277,860 (1,320) 3,497,789
Communication Equipment 2,514,151 81,670 (33,341) 2,562,480
Office Equipment 17,201,420 209,037 (112,115) 17,298,342
Total Capital Assets Being Depreciated 648,083,018 12,721,717 (1,028,107) 659,776,628
Less Accumulated Depreciation:
Infrastructure 169,258,402 12,993,086 (254,187) 181,997,301
Field Equipment 7,373,481 206,182 - 7,579,663
Buildings 7,347,820 484,727 - 7,832,547
Transportation Equipment 2,306,300 310,796 (1,321) 2,615,775
Communication Equipment 1,035,846 445,648 (33,342) 1,448,152
Office Equipment 11,086,817 2,105,183 (92,458) 13,099,542
Total Accumulated Depreciation 198,408,666 16,545,622 (381,308) 214,572,980
Total Capital Assets Being Depreciated,
Net
449,674,352
(3,823,905)
(646,799)
445,203,648
Total Capital Assets, Net $ 480,830,089 $ 7,938,681 $ (12,740,111) $ 476,028,659
Depreciation expense for the year ended June 30, 2013 was $16,545,622.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2014 AND 2013
DRAFT COPY – 10/13/2014
PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
30
4) LONG-TERM DEBT
Long-term liabilities for the year ended June 30, 2014 are as follows:
Beginning Ending Due Within
Balance Additions Deletions Balance One Year
General Obligation Bonds:
Improvement District No. 27 - 2009 $ 6,235,000 $ - $ 535,000 $ 5,700,000 $ 550,000
Unamortized Bond Premium 149,918 - 16,355 133,563 -
Net General Obligation Bonds 6,384,918 - 551,355 5,833,563 550,000
Certificates of Participation:
1996 Certificates of Participation 10,400,000 - 500,000 9,900,000 500,000
2007 Certificates of Participation 37,745,000 - 955,000 36,790,000 995,000
1996 COPS Unamortized Discount (10,432) - (745) (9,687) -
2007 COPS Unamortized Discount (214,043) - (9,044) (204,999) -
Net Certificates of Participation 47,920,525 - 1,445,211 46,475,314 1,495,000
Revenue Bonds:
2010 Water Revenue Bonds Series A 12,255,000 - 820,000 11,435,000 845,000
2010 Water Revenue Bonds Series B 36,355,000 - - 36,355,000 -
2013 Water Revenue Refunding Bonds 7,735,000 - 660,000 7,075,000 605,000
2010 Series A Unamortized Premium 837,019 - 74,402 762,617 -
2013 Bonds Unamortized Premium 976,968 - 96,095 880,873 -
Net Revenue Bonds 58,158,987 - 1,650,497 56,508,490 1,450,000
Total Long-Term Liabilities $ 112,464,430 $ - $ 3,647,063 $ 108,817,367 $ 3,495,000
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2014 AND 2013
DRAFT COPY – 10/13/2014
PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
31
4) LONG-TERM DEBT - Continued
Long-term liabilities for the year ended June 30, 2013 are as follows:
Beginning
Balance Ending Due Within
(As Restated) Additions Deletions Balance One Year
General Obligation Bonds:
Improvement District No. 27 - 2009 $ 6,755,000 $ - $ 520,000 $ 6,235,000 $ 535,000
Unamortized Bond Premium 166,271 - 16,353 149,918 -
Net General Obligation Bonds 6,921,271 - 536,353 6,384,918 535,000
Certificates of Participation:
1996 Certificates of Participation 10,900,000 - 500,000 10,400,000 500,000
2004 Certificates of Participation 8,680,000 - 8,680,000 - -
2007 Certificates of Participation 38,665,000 - 920,000 37,745,000 955,000
1996 COPS Unamortized Discount (11,178) - (746) (10,432) -
2007 COPS Unamortized Discount (223,087) - (9,044) (214,043) -
2004 COPS Unamortized Premium 13,005 - 13,005 - -
Net Certificates of Participation 58,023,740 - 10,103,215 47,920,525 1,455,000
Revenue Bonds:
2010 Water Revenue Bonds Series A 13,055,000 - 800,000 12,255,000 820,000
2010 Water Revenue Bonds Series B 36,355,000 - - 36,355,000 -
2010 Series A Unamortized Premium 911,421 - 74,402 837,019 -
2013 Water Revenue Refunding Bonds - 7,735,000 - 7,735,000 660,000
2013 Bonds Unamortized Premium - 984,976 8,008 976,968 -
Net Revenue Bonds 50,321,421 8,719,976 882,410 58,158,987 1,480,000
Total Long-Term Liabilities $ 115,266,432 $ 8,719,976 $ 11,521,978 $ 112,464,430 $ 3,470,000
General Obligation Bonds
In June 1998, the District issued $11,835,000 of General Obligation Refunding Bonds. The proceeds of this issue, together
with other lawfully available monies, were to be used to establish an irrevocable escrow to advance refund and defease in
their entirety the District’s previous outstanding General Obligation Bond issue. In November 2009, the District issued
$7,780,000 of General Obligation Refunding Bonds Improvement District No. 27-2009 to refund the 1998 issue. The
proceeds from the bond issue were $7,989,884, which included an original issue premium of $209,884. An amount of
$7,824,647, which consisted of unpaid principal and accrued interest, was deposited into an escrow fund. Pursuant to an
optional redemption clause in the 1998 bonds, the District was able to redeem the 1998 bonds, without premium at any time
after September 1, 2009. On December 15, 2009 the 1998 bonds were refunded.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2014 AND 2013
DRAFT COPY – 10/13/2014
PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
32
4) LONG-TERM DEBT - Continued
General Obligation Bonds - Continued
These bonds are general obligations of Improvement District No. 27 (ID 27) of the District. The Board of Directors has the
power and is obligated to levy annual ad valorem taxes without limitation, as to rate or amount for payment of the bonds and
the interest upon all property which is within ID 27 and subject to taxation. The General Obligation Bonds are payable from
District-wide tax revenues. The Board may utilize other sources for servicing the bond debt and interest.
The Improvement District No. 27-2009 General Obligation Refunding Bonds have interest rates from 3.00% to 4.00% with
maturities through Fiscal Year 2023.
Future debt service requirements for the bonds are as follows:
For the Year Ended
June 30, Principal Interest Total
2015 $ 550,000 $ 204,162 $ 754,162
2016 570,000 187,362 757,362
2017 585,000 169,306 754,306
2018 605,000 147,700 752,700
2019 635,000 122,900 757,900
2020-2023 2,755,000 225,100 2,980,100
$ 5,700,000 $ 1,056,530 $ 6,756,530
Certificates of Participation (COPS)
In June 1996, COPS with face value of $15,400,000 were sold by the Otay Service Corporation to finance the cost of
design, acquisition, and construction of certain capital improvements. An installment purchase agreement between the
District, as Buyer, and the Corporation, as Seller, was executed for the scheduled payment of principal and interest
associated with the COPS. The installment payments are to be paid from taxes and “net revenues,” as described in the
installment agreement. The certificates bear interest at a variable weekly rate not to exceed 12%. The variable interest rate
is tied to the 30-day LIBOR index and the Securities Industry and Financial Markets Association (SIFMA) index. An
irrevocable letter of credit facility is necessary to market the District’s variable rate debt. This facility is with Union Bank
and covers the outstanding principal and interest. The facility expires on June 29, 2017. The interest rate at June 30, 2014
was 0.15%. The installment payments are to be paid annually at $350,000 to $900,000 from September 1, 1996 through
September 1, 2026.
In July 2004, Refunding Certificates of Participation (COPS) with a face value of $12,270,000 were sold by the Otay
Service Corporation to advance refund $11,680,000 of outstanding 1993 COPS. An installment agreement between the
District, as Buyer, and the Corporation, as Seller, was executed for the scheduled payment of principal and interest
associated with the COPS.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2014 AND 2013
DRAFT COPY – 10/13/2014
PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
33
4) LONG-TERM DEBT - Continued
Certificates of Participation (COPS) - Continued
In March 2007, Revenue Certificates of Participation (COPS) with face value of $42,000,000 were sold by the Otay Service
Corporation to improve the District’s water storage system and distribution facilities. An installment purchase agreement
between the District, as a Buyer, and the Corporation, as Seller, was executed for the scheduled payment of principal and
interest associated with the COPS. The installment payments are to be paid from taxes and “net revenues,” as described in
the installment agreement. The certificates are due in annual installments of $785,000 to $2,445,000 from September 1,
2007 through September 1, 2036; bearing interest at 3.7% to 4.47%.
Defeased Certificate of Participation (COPS)
In June 2013, the July 2004 COPS were refunded with the issuance of the 2013 Water Revenue Refunding Bonds (see
Revenue Bonds on page 33). Proceeds of $8,575,519, which consisted of unpaid principal and accrued interest, were used
to establish an irrevocable escrow to advance refund and defease in their entirety the District’s 2004 COPS. Pursuant to an
optional redemption clause in the 2004 COPS, the District will be able to redeem the 2004 bonds, without premium at any
time after September 1, 2014. As a result, the 2004 COPS are considered to be defeased and the liability of those bonds has
been removed from long-term liabilities. The outstanding balance at June 30, 2014 is $7,500,000.
There is no aggregate reserve requirement for the COPS. Future debt service requirements for the certificates are as
follows:
For the Year 1996 COPS 2007 COPS
Ended June 30, Principal Interest* Principal Interest
2015 $ 500,000 $ 14,225 $ 995,000 $ 1,517,301
2016 600,000 13,350 1,035,000 1,479,239
2017 600,000 12,450 1,075,000 1,439,408
2018 600,000 11,550 1,115,000 1,397,798
2019 700,000 10,525 1,155,000 1,354,234
2020-2024 3,900,000 35,925 6,515,000 6,031,444
2025-2029 3,000,000 5,550 7,995,000 4,538,196
2030-2034 - - 9,875,000 2,644,028
2035-2036 - - 7,030,000 470,094
$ 9,900,000 $ 103,575 $ 36,790,000 $ 20,871,742
*Variable Rate - Interest reflected at June 30, 2014 at a rate of 0.15%.
The two COP debt issues contain various covenants and restrictions, principally that the District fix, prescribe, revise and
collect rates, fees and charges for the Water System which will at lease sufficient to yield, during each fiscal year, taxes and
net revenues equal to one hundred twenty-five percent (125%) of the debt service for such fiscal year. The District was in
compliance with these rate covenants for the fiscal year ended June 30, 2014.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2014 AND 2013
DRAFT COPY – 10/13/2014
PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
34
4) LONG-TERM DEBT - Continued
Water Revenue Bonds
In April 2010, Water Revenue Bonds with a face value of $50,195,000 were sold by the Otay Water District Financing
Authority to provide funds for the construction of water storage and transmission facilities. The bond issue consisted of two
series; Water Revenue Bonds, Series 2010A (Non-AMT Tax Exempt) with a face value of $13,840,000 plus a $1,078,824
original issue premium, and Water Revenue Bonds Series 2010B (Taxable Build America Bonds) with a face value of
$36,255,000. The Series 2010A bonds are due in annual installments of $785,000 to $1,295,000 from September 1, 2012
through September 1, 2025; bearing interest at 2% to 5.25%. The Series 2010B bonds are due in annual installments of
$1,365,000 to $3,505,000 from September 1, 2026 through September 1, 2040; bearing interest at 6.377% to 6.577%.
Interest on both Series is payable on September 1, 2010 and semiannually thereafter on March 1st and September 1st of each
year until maturity or earlier redemption. The installment payments are to be made from Taxes and Net Revenues of the
Water System as described in the installment purchase agreement, on parity with the payments required to be made by the
District for the 1996, and 2007 Certificates of Participation described above and the 2013 Water Revenue Refunding Bonds
described below.
The proceeds of the bonds will be used to fund the project described above as well as to fund reserve funds of $1,030,688
(Series 2010A) and $2,707,418 (Series 2010B). $542,666 was used to fund various costs of issuance.
The original issue premium is being amortized over the 14 year life of the Series 2010A bonds. Amortization for the year
ending June 30, 2014 was $74,402 and is included in interest expense. The unamortized premium at June 30, 2014 is
$762,617.
The 2010 Water Revenue Bonds contains various covenants and restrictions, principally that the District fix, prescribe,
revise and collection rates, fees and charges for the Water System which will at lease sufficient to yield, during each fiscal
year, taxes and net revenues equal to one hundred twenty-five percent (125%) of the debt service for such fiscal year. The
District was in compliance with these rate covenants for the fiscal year ended June 30, 2014.
In June 2013, the 2013 Water Revenue Refunding Bonds were issued to defease the 2004 Refunding Certificates of
Participation. The bonds were issued with a face value of $7,735,000 plus a $984,975 original issue premium. The bonds
are due in annual installments of $660,000 to $835,000 from September 1, 2013 through September 1, 2023; bearing
interest at 1% to 4%. The installment payments are to be made from Taxes and Net Revenues of the Water System, on
parity with the payments required to be made by the District for the 1996, and 2007 Certificates of Participation and the
2010A and 2010B described above.
The original issue premium is being amortized over the 11 year life of the Series 2013 bonds. Amortization for the year
ending June 30, 2014 was $96,095 and is included in interest expense. The unamortized premium at June 30, 2014 is
$880,873.
C NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2014 AND 2013
DRAFT COPY – 10/13/2014
PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
35
4) LONG-TERM DEBT - Continued
Water Revenue Bonds - Continued
The total amount outstanding at June 30, 2014 and aggregate maturities of the revenue bonds for the fiscal years subsequent
to June 30, 2014, are as follows:
For the Year
2010 Water Revenue Bond
Series A
2010 Water Revenue Bond
Series B
2013 Water Revenue
Refunding Bonds
Ended June 30, Principal Interest Principal Interest Principal Interest
2015 $ 845,000 $ 508,563 $ - $ 2,371,868 $ 605,000 $ 258,700
2016 870,000 478,488 - 2,371,868 615,000 243,425
2017 900,000 443,088 - 2,371,868 635,000 221,500
2018 940,000 406,288 - 2,371,868 660,000 195,600
2019 975,000 367,988 - 2,371,868 685,000 168,700
2020-2024 5,610,000 1,068,687 - 11,859,342 3,875,000 399,500
2025-2029 1,295,000 33,994 6,000,000 11,123,436 - -
2030-2034 - - 9,925,000 8,425,226 - -
2035-2039 - - 13,635,000 4,590,582 - -
2040-2042 - - 6,795,000 453,978 - -
$ 11,435,000 $ 3,307,096 $ 36,355,000 $ 48,311,904 $ 7,075,000 $ 1,487,425
5) NET POSITION
Designations of Net Position
In addition to the restricted net position, a portion of unrestricted net position, have been designated by the Board of
Directors for the following purposes as of June 30, 2014 and 2013:
2014 2013
Designated Betterment $ 4,543,776 $ 3,629,786
Expansion Reserve 4,457,117 623,834
Replacement Reserve 21,473,229 24,182,442
Designated New Supply Fund 24,125 24,000
Employee Benefits Reserve 307,279 149,705
Total $ 30,805,526 $ 28,609,767
C NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2014 AND 2013
DRAFT COPY – 10/13/2014
PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
36
6) DEFINED BENEFIT PENSION PLAN
Plan Description
The District’s defined plan, (the “Plan”), provides retirement and disability benefits, annual cost-of-living adjustments, and
death benefits to plan members and beneficiaries. The Plan is part of the Public Agency portion of the California Public
Employees’ Retirement System (CalPERS), an agent multiple-employer plan administered by CalPERS, which acts as a
common investment and administrative agent for participating public employers within the State of California. A menu of
benefit provisions as well as other requirements is established by State statute within the Public Employees’ Retirement
Law. The Plan selects optional benefit provisions from the benefit menu by contract with CalPERS and adopts those
benefits through District resolution. CalPERS issues a separate Comprehensive Annual Financial Report. Copies of the
CalPERS’ annual financial report may be obtained from the CalPERS Executive Office, 400 P Street, Sacramento,
California 95814.
Funding Policy
Active classic members in the Plan are required to contribute 8% of their annual covered salary. By agreement between the
Employee Association and the District, the represented employees paid 5.25% of covered salaries beginning August 15,
2011. Also by agreement, the unrepresented employees began paying 4.5% of covered salaries as of July 15, 2011. Prior to
these agreements all employees paid 1% of covered salaries. In these same agreements, all employees, after June 30, 2012,
contributed an additional 3.5% of covered salaries. Effective January 1, 2013, classic represented employees contribution
was reduced to an additional 2.75% of covered salaries. For new members (employees hired on or after January 1, 2013
and are new entrants to the PERS System), employees pay a 6.25% contribution. The District is required to contribute the
actuarially determined remaining amounts necessary to fund the 2.7% at age 55 retirement plan benefits for its classic
members and 2.0% at age 62 for its new members under the California Employees’ Pension Reform Act (PEPRA)
provisions. The actuarial methods and assumptions used are those adopted by the CalPERS Board of Administration. The
required employer contribution rate for the fiscal year ended June 30, 2014 was 25.435%. The contribution requirements of
the Plan members are established by State statute and the employer contribution rate is established and may be amended by
CalPERS.
Annual Pension Costs
For the fiscal year ended June 30, 2014, the District’s annual pension cost and actual contribution was $3,294,341. The
required contribution for the fiscal year ended June 30, 2014 was determined as part of the June 30, 2011 actuarial
valuation.
The following is a summary of the actuarial assumptions and methods:
Valuation Date June 30, 2011Actuarial Cost Method Entry Age Actuarial Cost Method
Amortization Method Level Percent of Payroll
Average Remaining Period 21 Years as of the Valuation Date
Asset Valuation Method 15-Year Smoothed MarketActuarial Assumptions:
Investment Rate of Return 7.50% (Net of Administrative Expenses)
Projected Salary Increase 3.30% to 14.20% Depending on Age, Service, and Type of Employment Inflation 2.75%
Payroll Growth 3.00%
Individual Salary Growth A merit scale varying by duration of employment coupled with an assumedannual inflation component of 2.75% and an annual production growth of 0.25%.
C NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2014 AND 2013
DRAFT COPY – 10/13/2014
PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
37
6) DEFINED BENEFIT PENSION PLAN - Continued
Annual Pension Costs - Continued
Initial unfunded liabilities are amortized over a closed period that depends on the Plan’s date of entry into CalPERS.
Subsequent Plan amendments are amortized as a level percentage of pay over a closed 20-year period. Gains and losses that
occur in the operation of the plan are amortized over a 30 year rolling period, which results in an amortization of 6% of
unamortized gains and losses each year. If the plan’s accrued liability exceeds the actuarial value of the plan assets, then the
amortization payment of the total unfunded liability may not be lower than the payment calculated over a 30-year
amortization period.
THREE-YEAR TREND INFORMATION FOR PERS
Fiscal Annual Pension Percentage of Net Pension
Year Cost (APC) APC Contributed Obligation
6/30/14 $ 3,294,341 100% $ 0
6/30/13 $ 3,130,754 100% $ 0
6/30/12 $ 2,951,409 100% $ 0
Fund Status and Funding Progress
As of June 30, 2012, the most recent actuarial valuation date, the plan was 69.4% funded. The actuarial accrued liability
(AAL) for benefits was $95,927,777, and the actuarial value of assets was $66,578,121, resulting in an unfunded actuarial
accrued liability (UAAL) of $29,349,656. The covered payroll (annual payroll of active employees covered by the plan)
was $11,474,462, and the ratio of the UAAL to the covered payroll was 255.8%.
The schedule of funding progress, presented as required supplementary information following the notes to the financial
statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing
over the time relative to the actuarial accrued liability for benefits.
7) OTHER POST EMPLOYMENT BENEFITS
Plan Description
The District’s defined benefit postemployment healthcare plan, (DPHP), provides medical benefits to eligible retired District
employees and beneficiaries. DPHP is part of the Public Agency portion of the California Employers’ Retiree Benefit Trust
Fund (CERBT), an agent multiple-employer plan administered by California Public Employees’ Retirement System
(CalPERS), which acts as a common investment and administrative agent for participating public employers within the State
of California. CalPERS issues a separate Comprehensive Annual Financial Report. Copies of the CalPERS’ annual
financial report may be obtained from the CalPERS Executive Office, 400 P Street, Sacramento, California 95814.
C NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2014 AND 2013
DRAFT COPY – 10/13/2014
PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
38
7) OTHER POST EMPLOYMENT BENEFITS - Continued
Plan Description - Continued
Prior to the plan agreements signed in 2011, the eligibility in the plan was broken into 3 tiers, employees hired before
January 1, 1981, employees hired between January 1, 1981 but before July 1, 1993 and employees hired on or after July
1, 1993. Board members elected before January 1, 1995 are also eligible for the plan. Eligibility also includes age and
years of service requirements which vary by tier. Benefits include 100% medical and dental premiums for life for the
retiree for Tier I, II or III employees, and up to 100% spouse premium for life and dependent premium up to age 19
depending on the tier. The plan also includes survivor benefits to Medicare.
Subsequent to the agreements in 2011 and 2012 all employees are eligible for the plan after 20 years of consecutive
service and unrepresented employees hired before January 1, 2013 are eligible after 15 years. Survivor benefits are
covered beyond Medicare.
Funding Policy
The contribution requirements of plan members and the District are established and may be amended by the Board of
Directors. Effective January 1, 2013, represented employees hired prior to January 1, 2013 or hired on or after January
1, 2013 from another public agency that has reciprocity without having a break in service of more than six months,
contribute .75% of covered salaries. In addition, unrepresented and represented employees hired on or after January 1,
2013, and do not have reciprocity from another public agency, contribute 1.75% and 2.5% of covered salaries,
respectively. DPHP members receiving benefits contribute based on their selected plan options of EPO, HMO or PPO
and whether they are outside the State of California. Contributions by plan members range from $0 to $154 per month
for coverage to age 65, and from $0 to $154 per month, respectively, thereafter.
Annual OPEB Cost and Net OPEB Obligation/Asset
The District’s annual OPEB cost (expense) is calculated based on the annual required contribution of the employer
(ARC), an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC
represents a level of funding that, if paid on an ongoing basis is projected to cover the normal annual cost. Any
unfunded actuarial liability (or funding excess) is amortized over a period not to exceed thirty years. The current ARC
rate is 12.0% of the annual covered payroll.
The following table shows the components of the District’s annual OPEB cost for the year, the amount actually
contributed to the plan, and changes in the District’s net OPEB obligation/asset:
2014 2013
Annual Required Contribution (ARC)$ 1,439,000 $ 1,287,000
Interest on Net OPEB Asset (677,544) (603,338)
Adjustment to Annual Required Contribution (ARC)625,000 543,000
Annual OPEB Cost (Expense) 1,386,456 1,226,662
Contributions Made 2,426,355 2,250,198
Increase in Net OPEB Asset (1,039,899) (1,023,535)
Net OPEB Asset - Beginning of Year (9,345,437) (8,321,902)
Net OPEB Asset - End of Year $(10,385,336) $ (9,345,437)
C NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2014 AND 2013
DRAFT COPY – 10/13/2014
PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
39
7) OTHER POST EMPLOYMENT BENEFITS - Continued
Annual OPEB Cost and Net OPEB Obligation/Asset - Continued
For 2014, in addition to the ARC, the District contributed cash benefit payments outside the trust (healthcare premium
payments for retirees to Special District Risk Management Authority (SDRMA) in the amount of $940,355, which is
included in the $2,426,355 of contributions shown on the previous page. For 2013 this amount was $877,196, which is
included in the $2,250,198 of contributions shown on the previous page.
The District’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB
obligation/asset for the fiscal years 2014, 2013 and 2012 were as follows:
THREE-YEAR TREND INFORMATION FOR CERBT
Fiscal Annual OPEB Percentage of Net OPEB
Year Cost (AOC) OPEB Cost Contributed Obligation
6/30/14 $ 1,386,456 175% $ (10,385,336)
6/30/13 $ 1,226,662 183% $ (9,345,437)
6/30/12 $ 1,239,315 173% $ (8,321,902)
Funded Status and Funding Progress
The funded status of the plan as of June 30, 2013, the most recent actuarial valuation date, was as follows:
Actuarial Accrued Liability (AAL) $ 22,891,000
Actuarial Value of Plan Assets $ 11,831,000
Unfunded Actuarial Accrued Liability (UAAL) $ 11,060,000
Funded Ratio (Actuarial Value of Plan Assets/AAL) 51.68%
Covered Payroll (Active Plan Members) $ 11,969,000
UAAL as a Percentage of Covered Payroll 92.41%
Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the
probability of occurrence of events far into the future. Examples include assumptions about future employment,
mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual
required contributions of the employer are subject to continual revision as actual results are compared with past
expectations and new estimates are made about the future. The schedule of funding progress, presented as required
supplementary information following the notes to the financial statements, presents multi-year trend information about
whether the actuarial value of the plan assets is increasing or decreasing over time relative to the actuarial accrued
liabilities for benefits.
C NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2014 AND 2013
DRAFT COPY – 10/13/2014
PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
40
7) OTHER POST EMPLOYMENT BENEFITS - Continued
Actuarial Methods and Assumptions
Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the
employer and plan members) and include the types of benefits provided at the time of each valuation and the historical
pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and
assumptions used include techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and
the actuarial value of assets, consistent with the long-term perspective of the calculations.
The following is a summary of the actuarial assumptions and methods:
Valuation Date June 30, 2013
Actuarial Cost Method Entry Age Normal Cost Method
Amortization Method Level Percent of Payroll
Remaining Amortization Period 24-Year Fixed (Closed) Period as of the Valuation Date
Asset Valuation Method 5-Year Smoothed Market
Actuarial Assumptions:
Investment Rate of Return 7.25% (Net of Administrative Expenses)
Projected Salary Increase 3.25%
Inflation 3.00%
Individual Salary Growth CalPERS 1997-2007 Experience Study
Healthcare Cost Trend Rate Medical: 10% per annum graded down in approximately
one-half percent increments to an ultimate rate of 5%.
Dental: 4% per annum.
8) WATER CONSERVATION AUTHORITY
In 1999 the District formed the Water Conservation Garden Authority (the “Authority”), a Joint Powers Authority, with
other local entities to construct, maintain and operate a xeriscape demonstration garden in the furtherance of water
conservation. The authority is a non-profit public charity organization and is exempt from income taxes. During the years
ended June 30, 2014 and 2013, the District contributed $119,687 and $120,684, respectively, for the development,
construction and operation costs of the xeriscape demonstration garden.
A summary of the Authority’s June 30, 2013 audited financial statement is as follows (latest report available):
Assets $ 1,555,790
Liabilities $3,750
Net Assets $ 1,552,040
Revenues, Gains and Other Support $ 135,000
Expenses 238,551
Changes in Net Assets $ (103,551)
C NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2014 AND 2013
DRAFT COPY – 10/13/2014
PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
41
9) COMMITMENTS AND CONTINGENCIES
Construction Commitments
The District had committed to capital projects under construction with an estimated cost to complete of $8,488,804 at June
30, 2014.
Litigation
Certain claims, suits and complaints arising in the ordinary course of operation have been filed or are pending against the
District. In the opinion of the staff and counsel, all such matters are adequately covered by insurance, or if not so covered,
are without merit or are of such kind, or involved such amounts, as would not have significant effect on the financial
position or results of operations of the District if disposed of unfavorably.
Refundable Terminal Storage Fees
The District has entered into an agreement with several developers whereby the developers prepaid the terminal storage fee
in order to provide the District with the funds necessary to build additional storage capacity. The agreement further allows
the developers to relinquish all or a portion of such water storage capacity. If the District grants to another property owner
the relinquished storage capacity, the District shall refund to the applicable developer $746 per equivalent dwelling unit
(EDU). There were 17,867 EDUs that were subject to this agreement. At June 30, 2013, 1,751 EDUs had been
relinquished and refunded, 15,031 EDUs had been connected, and 1,085 EDUs have neither been relinquished nor
connected. At June 30, 2014, 1,751 EDUs had been relinquished and refunded, 15,073 EDUs had been connected, and
1,043 EDUs have neither been relinquished nor connected.
Developer Agreements
The District has entered into various Developer Agreements with developers towards the expansion of District facilities.
The developers agree to make certain improvements and after the completion of the projects the District agrees to reimburse
such improvements with a maximum reimbursement amount for each developer. Contractually, the District does not incur a
liability for the work until the work is accepted by the District. As of June 30, 2014, none of the outstanding developer
agreements had been accepted, however it is anticipated that the District will be liable for an amount not to exceed $221,320
at the point of acceptance. Accordingly, the District has accrued a liability as of year end.
10) RISK MANAGEMENT
General Liability
The District is exposed to various risks of loss related to torts, theft, damage and destruction of assets, errors and omissions,
and natural disasters. Beginning in July 2003, the District began participation in an insurance pool through the Special
District Risk Management Authority (SDRMA). SDRMA is a not-for-profit public agency formed under California
Government Code Sections 6500 et. Seq. SDRMA is governed by a board composed of members from participating
agencies. The mission of SDRMA is to provide renewable, efficiently priced risk financing and risk management services
through a financially sound pool. The District pays an annual premium for commercial insurance covering general liability,
C NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2014 AND 2013
DRAFT COPY – 10/13/2014
PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
42
10) RISK MANAGEMENT - Continued
General Liability - Continued
excess liability, property, automobile, public employee dishonesty, and various other claims. Accordingly, the District
retains no risk of loss. Separate financial statements of SDRMA may be obtained at Special District Risk Management
Authority, 1112 “I” Street, Suite 300, Sacramento, CA 95814.
General and Auto Liability, Public Officials’ Errors and Omissions and Employment Practices Liability: Total risk
financing limits of $10 million combined single limit at $10 million per occurrence, subject to the following deductibles:
$500 per occurrence for third party general liability property damage;
$1,000 per occurrence for third party auto liability property damage;
50% co-insurance of cost expended by SDRMA, in excess of $10,000 up to $50,000, per occurrence, as respects
any employment practices claim or suit arising in whole or any part out of any action involving discipline,
demotion, reassignment or termination of any employee of the member.
Employee Dishonesty Coverage: Total of $400,000 per loss includes Public Employee Dishonesty, Forgery or Alteration
and Theft, Disappearance and Destruction coverage’s effective July 1, 2013.
Property Loss: Replacement cost, for property on file, if replaced, and if not replaced within two years after the loss, paid
on an actual cash value basis, to a combined total of $1 billion per occurrence, subject to a $2,000 deductible per
occurrence, effective July 1, 2013.
Boiler and Machinery: Replacement cost up to $100 million per occurrence, subject to a $1,000 deductible, effective July 1,
2013.
Public Officials Personal Liability: $500,000 each occurrence, with an annual aggregate of $500,000 per each
elected/appointed official to which this coverage applies, subject to the terms, conditions and exclusions as provided in the
Memorandum of Coverage’s, deductible of $500 per claim, effective July 1, 2013.
Comprehensive and Collision: On selected vehicles, with deductibles of $250/$500 or $500/$1,000, as elected; ACV limits;
fully self-funded by SDRMA; Policy No. LCA - SDRMA - 201314, effective July 1, 2013.
Workers’ Compensation Coverage and Employer’s Liability: Statutory limits per occurrence for Workers’ Compensation
and $5.0 million for Employer’s Liability Coverage, subject to the terms, conditions and exclusions as provided in the
Memorandum of Coverage, effective July 1, 2013.
Health Insurance
Beginning in January 2008, the District began providing health insurance through SDRMA covering all of its employees,
retirees, and other dependents. SDRMA is a pooled medical program, administered in conjunction with the California State
Association of Counties (CSAC).
C NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2014 AND 2013
DRAFT COPY – 10/13/2014
PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
43
10) RISK MANAGEMENT - Continued
Adequacy of Protection
During the past three fiscal (claims) years none of the above programs of protection have had settlements or judgments that
exceeded pooled or insured coverage. There have been no significant reductions in pooled or insured liability coverage
from coverage in the prior year.
11) INTEREST EXPENSE
Interest expense for the years ended June 30, 2014 and 2013, is as follows:
2014 2013
Amount Expensed $ 4,872,060 $ 3,977,538
Amount Capitalized as a Cost of
Construction Projects 176,782 995,721
Total Interest $ 5,048,842 $ 4,973,259
12) SEGMENT INFORMATION
During the June 30, 2011 fiscal year, the District issued Revenue Bonds to finance certain capital improvements. While
water and wastewater services are accounted for jointly in these financial statements, the investors in the Revenue Bonds
rely solely on the revenues of the water services for repayment.
C NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2014 AND 2013
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PRELIMINARY & TENTATIVE
for DISCUSSION PURPOSES ONLY
44
12) SEGMENT INFORMATION - Continued
Summary financial information for the water services is presented for June 30, 2014:
Condensed Statement of Net Position
June 30, 2014
Water Services
ASSETS
Current Assets $ 99,383,693
Capital Assets 448,775,521
Other Assets 11,756,796
Total Assets 559,916,010
DEFERRED OUTFLOWS OF RESOURCES
Deferred Amount on Refunding 78,118
Total Deferred Outflows of Resources 78,118
LIABILITIES
Current Liabilities 25,670,427
Long-term Liabilities 105,971,711
Total Liabilities 131,642,138
NET POSITION
Invested in Capital Assets 343,531,272
Restricted for Debt Service 3,855,673
Unrestricted 80,965,045
Total Net Position $ 428,351,990
C NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2014 AND 2013
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45
12) SEGMENT INFORMATION - Continued
Condensed Statement of Revenues, Expenses and Changes in Net Position
For the Year Ended June 30, 2014
Water Services
Operating Revenues
Water Sales $ 81,287,164
Connection and Other Fees 1,943,306
Total Operating Revenues 83,230,470
Operating Expenses
Cost of Water Sales 56,068,147
Administrative and General 18,608,603
Depreciation 15,014,281
Total Operating Expenses 89,691,031
Operating Income (Loss) (6,460,561)
Nonoperating Revenues (Expenses)
Investment Earnings 459,098
Taxes and Assessments 3,536,200
Availability Charges 685,444
Gain (Loss) on Sale of Capital Assets (426,140)
Rents and Leases 1,317,736
Miscellaneous Revenues 2,034,182
Donations (119,687)
Interest Expense (4,872,060)
Miscellaneous Expenses (3,054,447)
Total Nonoperating Revenues (Expenses) (439,674)
Income (Loss) Before Capital Contributions (6,900,235)
Capital Contributions 2,725,666
Change in Net Position (4,174,569)
Total Net Position, Beginning 432,526,559
Total Net Position, Ending $ 428,351,990
C NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2014 AND 2013
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12) SEGMENT INFORMATION - Continued
Condensed Statement of Cash Flows
For the Year Ended June 30, 2014
Water Services
Net Cash Provided/(Used) by:
Operating Activities $ 6,536,602
Non-capital and Related Financing Activities 4,836,386
Capital and Related Financing Activities (10,115,070)
Investing Activities (8,693,128)
Net Increase (Decrease) in Cash and Cash Equivalents (7,435,210)
Cash and Cash Equivalents, Beginning 38,045,323
Cash and Cash Equivalents, Ending $ 30,610,113
C NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2014 AND 2013
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C REQUIRED SUPPLEMENTARY INFORMATION
YEARS ENDED JUNE 30, 2014 AND 2013
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47
Schedule of Funding Progress for PERS
Actuarial
Accrued UAAL as a
Actuarial Actuarial Liability Unfunded Percentage of
Valuation Value of (AAL) Entry AAL Funded Covered Covered
Date Assets Age (UAAL) Ratio Payroll Payroll
(A) (B) (B - A) (A/B) (C) [(B-A)/C]
6/30/12
Miscellaneous $ 66,578,121 $ 95,927,777 $ 29,349,656 69.4% $ 11,474,462 255.8%
6/30/11
Miscellaneous $ 62,435,349 $ 88,411,019 $ 25,975,670 70.6% $ 12,289,529 211.4%
6/30/10
Miscellaneous $ 57,613,987 $ 81,306,934 $ 23,692,947 70.9% $ 12,140,989 195.1%
Schedule of Funding Progress for DPHP
Actuarial
Accrued UAAL as a
Actuarial Actuarial Liability Unfunded Percentage of
Valuation Value of (AAL) Entry AAL Funded Covered Covered
Date Assets Age (UAAL) Ratio Payroll Payroll
(A) (B) (B - A) (A/B) (C) [(B-A)/C]
6/30/13
Miscellaneous $ 11,831,000 $ 22,891,000 $ 11,060,000 51.68% $ 11,969,000 92.41%
6/30/11
Miscellaneous $ 7,893,000 $ 18,289,000 $ 10,396,000 43.16% $ 12,429,000 83.64%
6/30/09
Miscellaneous $ 6,273,000 $ 10,070,000 $ 3,797,000 62.29% $ 11,878,000 31.97%
C REQUIRED SUPPLEMENTARY INFORMATION
YEARS ENDED JUNE 30, 2014 AND 2013
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Independent Auditors’ Report on Internal Control Over Financial Reporting and on
Compliance and Other Matters Based on an Audit of Financial Statements
Performed in Accordance with Government Auditing Standards
Board of Directors
Otay Water District
Spring Valley, California
We have audited, in accordance with the auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government Auditing Standards, issued
by the Comptroller General of the United States, the financial statements of the business-type activities of the
Otay Water District (the “District”), as of and for the year ended June 30, 2014, and the related notes to the
financial statements, which collectively comprise the District’s basic financial statements, and have issued
our report thereon dated ________ __, 2014.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the District’s internal control
over financial reporting (internal control) to determine the audit procedures that are appropriate in the
circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose
of expressing an opinion on the effectiveness of the District’s internal control. Accordingly, we do not
express an opinion on the effectiveness of the District’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management
or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct,
misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in
internal control, such that there is a reasonable possibility that a material misstatement of the District’s
financial statements will not be prevented, or detected and corrected on a timely basis. A significant
deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a
material weakness, yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this
section and was not designed to identify all deficiencies in internal control that might be material weaknesses
or significant deficiencies. Given these limitations, during our audit, we did not identify any deficiencies in
internal control that we consider to be material weaknesses. However, material weaknesses may exist that
have not been identified.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the District’s financial statements are free from
material misstatement, we performed tests of its compliance with certain provisions of laws, regulations,
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contracts and grant agreements, noncompliance with which could have a direct and material effect on the
determination of financial statement amounts. However, providing an opinion on compliance with those
provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The
results of our tests disclosed no instances of noncompliance or other matters that are required to be
reported under Government Auditing Standards.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and
the results of that testing, and not to provide an opinion on the effectiveness of the District’s internal control
or on compliance. This report is an integral part of an audit performed in accordance with Government
Auditing Standards in considering the District’s internal control and compliance. Accordingly, this
communication is not suitable for any other purpose.
Riverside, California
_________ __, 2014
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_________ __, 2014
Board of Directors
Otay Water District
Spring Valley, CA
We have audited the financial statements of the business-type activities of the Otay Water District (the “District”)
for the year ended June 30, 2014. Professional standards require that we provide you with information about our
responsibilities under generally accepted auditing standards, as well as certain information related to the
planned scope and timing of our audit. We have communicated such information in our letter to you dated
April 29, 2014. Professional standards also require that we communicate to you the following information
related to our audit.
Significant Audit Findings
Qualitative Aspects of Accounting Practices
Management is responsible for the selection and use of appropriate accounting policies. The significant
accounting policies used by the District are described in Note 1 to the financial statements. No new accounting
policies were adopted and the application of existing policies has not changed during the year. We noted no
transactions entered into by the District during the year for which there is a lack of authoritative guidance or
consensus. All significant transactions have been recognized in the financial statements in the proper period.
Accounting estimates are an integral part of the financial statements prepared by management and are based on
management’s knowledge and experience about past and current events and assumptions about future events.
Certain accounting estimates are particularly sensitive because of their significance to the financial statements and
because of the possibility that future events affecting them may differ significantly from those expected. The most
sensitive estimates affecting the business-type activities’ financial statements were:
Management’s estimate of the fair value of investments is based on information provided by financial
institutions. We evaluated the key factors and assumptions used to develop the fair value of investments
in determining that it is reasonable in relation to the financial statements taken as a whole.
Management’s estimate of capital assets depreciation is based on historical estimates of each capitalized
item’s useful life. We evaluated the key factors and assumptions used to develop the capital assets
depreciation in determining that it is reasonable in relation to the financial statements taken as a whole.
Management’s estimate of net other postemployment benefits (OPEB) obligation is based on an actuarial
valuation. We evaluated the key factors and assumptions used to develop the net OPEB obligation in
determining that it is reasonable in relation to the financial statements taken as a whole.
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Certain financial statement disclosures are particularly sensitive because of their significance to financial statement
users. The most sensitive disclosures affecting the financial statements were:
The disclosure of the fair value of investments in Note 2 to the financial statements represents amounts
susceptible to market fluctuation.
The disclosure of capital assets in Note 3 to the financial statements is based on historical information
which could differ from actual useful lives of each capitalized item.
The disclosure of other postemployment benefits and the net OPEB obligation in Note 7 to the financial
statements represents management’s estimate based on an actuarial valuation. Actual results could differ
depending on these key factors and assumptions used for the actuarial valuation
The financial statement disclosures are neutral, consistent and clear.
Difficulties Encountered in Performing the Audit
We encountered no significant difficulties in dealing with management in performing and completing our audit.
Corrected and Uncorrected Misstatements
Professional standards require us to accumulate all known and likely misstatements identified during the audit, other
than those that are trivial, and communicate them to the appropriate level of management. Management has
corrected all such misstatements. In addition, none of the misstatements detected as of a result of audit procedures
and corrected by management were material, either individually or in the aggregate, to the financial statements
taken as a whole.
Disagreements with Management
For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter,
whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor’s
report. We are pleased to report that no such disagreements arose during the course of our audit.
Management Representations
We have requested certain representations from management that are included in the management representation
letter dated _________ __, 2014.
Management Consultations with Other Independent Accountants
In some cases, management may decide to consult with other accountants about auditing and accounting matters,
similar to obtaining a “second opinion” on certain situations. If a consultation involves application of an accounting
principle to the District’s financial statements or a determination of the type of auditor’s opinion that may be
expressed on those statements, our professional standards require the consulting accountant to check with us to
determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with
other accountants.
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Other Audit Findings or Issues
We generally discuss a variety of matters, including the application of accounting principles and auditing standards,
with management each year prior to retention as the District’s auditors. However, these discussions occurred in the
normal course of our professional relationship and our responses were not a condition to our retention.
Other Matters
We applied certain limited procedures to the Schedule of Funding Progress for PERS and the Schedule of Funding
Progress for DPHP, which are required supplementary information (RSI) that supplements the basic financial
statements. Our procedures consisted of inquiries of management regarding the methods of preparing the
information and comparing the information for consistency with management’s responses to our inquiries, the basic
financial statements, and other knowledge we obtained during our audit of the basic financial statements. We did
not audit the RSI and do not express an opinion or provide any assurance on the RSI.
We were not engaged to report on the introductory and statistical sections, which accompany the financial
statements but are not RSI. We did not audit or perform other procedures on this other information and we do not
express an opinion or provide any assurance on it.
Restriction on Use
This information is intended solely for the use of the Board of Directors and management of the District and is not
intended to be, and should not be, used by anyone other than these specified parties.
Very truly yours,
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PRELIMINARY & TENTATIVE
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INDEPENDENT ACCOUNTANTS’ REPORT
ON APPLYING AGREED-UPON PROCEDURES
Mr. Joseph Beachem
Chief Financial Officer
Otay Water District
Spring Valley, CA
We have performed the procedures enumerated below, which were agreed to by the Otay Water District (the
“District”), solely to assist the District’s senior management in evaluating the investments of the District as of and
for the fiscal year ended June 30, 2014. The District’s management is responsible for evaluating the investments
of the District. This agreed-upon procedures engagement was conducted in accordance with attestation standards
established by the American Institute of Certified Public Accountants. The sufficiency of these procedures is
solely the responsibility of those parties specified in the report. Consequently, we make no representation
regarding the sufficiency of the procedures described below either for the purpose for which this report has been
requested or for any other purpose.
Our procedures and findings are as follows:
1. Obtain a copy of the District’s investment policy and determine that it is in effect for the fiscal year
ended June 30, 2014.
Finding: At June 30, 2014, the current investment policy (Policy #27) is dated August 10, 2011
and was amended on July 3, 2013. This policy was reviewed and approved for the
2013-2014 fiscal year under Resolution No. 4213 at the July 3, 2013 regular board
meeting. Therefore the investment policy is in effect for the time period under review.
2. Select 4 investments held at year end and determine if they are allowable investments under the
District’s Investment Policy.
Finding: We selected the following investments: FNMA - Maturity 9/6/2016, FHLB - Maturity
5/19/2017, FHLMC - Maturity 11/28/2016, and FNMA - Maturity 8/26/2016. All four
investments are allowable and within maturity limits as stated in the District’s
investment policy at June 30, 2014.
3. For the four investments selected in #2 above, determine if they are held by a third party custodian
designated by the District.
Finding: The four investments examined are held by a third party custodian, Union Bank of
California, designated by the District in compliance with the District’s investment
policy. Per discussion with the District’s management and evidenced by Union Bank of
California’s statement, Union Bank does not act as a broker dealer for the District but
acts as a custodial agent of the District holding the investments in a trust capacity.
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2
4. Confirm the par or original investment amount and market value for the four investments selected
above with the custodian or issuer of the investments.
Finding: No exceptions were noted as a result of our procedures.
5. Select two investment earnings transactions that took place during the year and recompute the earnings
to determine if the proper amount was received.
Finding: Selected the following investment earnings transactions: interest earned on FNMA
Note on December 24, 2013 and interest earned on FHLB Bond on February 24, 2014.
No exceptions were noted as a result of our procedures.
6. Trace amounts received for transactions selected at #5 above into the District’s bank accounts.
Finding: No exceptions were noted as a result of our procedures.
7. Select five investment transactions (buy, sell, trade or maturity) occurring during the year under review
and determine that the transactions are permissible under the District’s investment policy.
Finding: We selected the following investment transactions: FHLB Bond sold on October 21,
2013, FHLMC Note sold on October 22, 2013, and FNMA Note purchased on
December 19, 2013, FFCB Bond purchased on January 7, 2014, FHLB Bond purchased
on February 14, 2014. Those transactions were permissible under the District’s
investment policy. No exceptions were noted as a result of our procedures.
8. Review the supporting documents for the five investments selected at #7 above to determine if the
transactions were appropriately recorded into the District’s general ledger.
Finding: No exceptions were noted as a result of our procedures.
We were not engaged to, and did not, conduct an audit, the objective of which would be the expression of an
opinion on the investments of the District for the fiscal year ending June 30, 2014. Accordingly, we do not
express such an opinion. Had we performed additional procedures, other matters might have come to our
attention that would have been reported to you.
This report is limited solely for the information and use of the Board of Directors and senior management of the
Otay Water District and is not limited to be and should not be used by anyone other than these specified parties.
Riverside, California
___________ __, 2014
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PRELIMINARY & TENTATIVE
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STAFF REPORT
TYPE MEETING: Regular Board
MEETING DATE: November 5, 2014
SUBMITTED BY:
Dan Martin
Engineering Manager
PROJECT: R2087-
001101
DIV. NO. 2
APPROVED BY:
Rod Posada, Chief, Engineering
German Alvarez, Assistant General Manager
Mark Watton, General Manager
SUBJECT: Informational Item – Temporary Moratorium on the Installation
of New Recycled Water Facilities on Otay Mesa Update
GENERAL MANAGER’S RECOMMENDATION:
No recommendation. This is an informational item only.
COMMITTEE ACTION:
Please see Attachment A.
PURPOSE:
To update the Board on the status of activities that have occurred
subsequent to the placement of the temporary moratorium on the
installation of new recycled water facilities on Otay Mesa.
ANALYSIS:
As the District has pursued expansion of the District’s recycled
water system to the Otay Mesa area, the District has encountered a
number of issues and risks when considered in total, that challenge
both the technical and financial feasibility of delivering recycled
water to Otay Mesa. On July 2, 2014, staff presented information to
the Board on the uncertainty of recycled water availability for Otay
Mesa, the financial feasibility considerations associated with
anticipated recycled water rates from the City of San Diego, the
uncertainty of securing easements to support the Otay Mesa Recycled
2
Water Supply Link Project, and the delivery horizon of Indirect
Potable Reuse (IPR) and/or Direct Potable Reuse (DPR). As a result
of the information presented to the Board, the Board voted to place
a temporary moratorium on the installation of new recycled water
facilities on Otay Mesa (see Exhibit A for Project location).
As of October 10, 2014, subsequent to the placement of the July 2,
2014 temporary moratorium on the installation of new recycled water
facilities on Otay Mesa, staff has focused efforts in the following
areas:
Continued efforts with the City of San Diego (City) to discuss
issues and amendments to the agreements between the District
and the City.
Notification to Developers regarding the temporary moratorium
on the installation of new recycled water facilities on Otay
Mesa and Developer project assessment and implementation.
A review and assessment of existing District maintained
recycled water facilities on Otay Mesa.
Continued efforts with the City to discuss issues and amendments to
the agreements between the District and the City
On August 12, 2014, the District sent correspondence to the City
regarding issues related to the October 23, 2003 Agreement Between
the Otay Water District and the City of San Diego for Purchase of
Reclaimed Water from the South Bay Water Reclamation Plant
("Agreement"), as well as issues related to Otay's purchase of
potable water from the City's Otay Water Treatment Plant. Within
the letter staff presented proposals regarding: the “Take-Or-Pay”
requirement included in the recycled water Agreement, the City’s
recycled water rates, miscellaneous terms missing from the recycled
water Agreement, and a proposal regarding the unauthorized use of
Otay facilities.
Additionally, the August 12, 2014 correspondence includes a proposal
to simplify terms included in the Agreement for the Purchase of
Treated Water from the Otay Water Treatment Plant Between the City
of San Diego and the Otay Water District, dated January 11, 1999 so
that the cost of the potable water is understood in advance of
ordering the water.
District staff understands that the City staff is currently
reviewing the letter and considering the District’s proposals.
3
Notification to Developers regarding the temporary moratorium on the
installation of new recycled water facilities on Otay Mesa and
Developer project assessment and implementation.
In the immediate weeks following the July 2, 2014 Board approval of
the temporary moratorium, staff reached out to the Developer
community to provide notification to Developers regarding the
temporary moratorium. This included direct phone calls to
Developers and the posting of a notice regarding the temporary
moratorium on the District’s Public Services web page (Exhibit B).
The notice informs Developers that during the course of the
temporary moratorium, the District will not be advancing recycled
water projects, requiring the installation of new recycled water
infrastructure, nor issuing permits for new recycled water meters on
Otay Mesa. Developers have been informed that water to new
developments on Otay Mesa will be supplied from the District’s
potable water system to meet current and future Developer project
demand.
District staff also completed a review of the Developer projects on
Otay Mesa that are affected by the temporary moratorium. In total,
thirty (30) projects were identified. These projects which include
both private recycled water systems and public recycled water mains
were found to be in various stages of project development ranging
from planning to construction. Project specific correspondence on
the thirty projects was sent out by staff in August. In light of
the temporary moratorium, staff is working with Developers on
solutions for each affected project on Otay Mesa to bring the
recycled water projects to completion.
Each project has been notified that the District will not be issuing
recycled water meters on Otay Mesa while the temporary moratorium is
in effect. Furthermore, each project has been notified that water
for projects on Otay Mesa will be provided through potable meters
(domestic and irrigation) while the temporary moratorium is in
effect and that the associated capacity fees for the potable meters
will be collected.
Staff reached out to representatives of the Pio Pico Power Plant
(Pio Pico) project which anticipates needing a 6-inch recycled water
meter and to Corrections Corporation of America (CCA) whose San
Diego Correctional Facility project anticipates needing a 4-inch
recycled water meter to inform them about the temporary moratorium
and to discuss any potential impacts to their respective projects.
During discussions with APEX Power Group (APEX), applicants for the
Pio Pico project, APEX indicated that a moratorium on the
installation of new recycled water facilities and non-availability
of recycled water does not appear to impact the Pio Pico project.
4
The San Diego Correctional Facility project is currently under
construction by CCA. Staff is working with CCA on modifications to
the planned construction to mitigate impacts to the project as a
result of the temporary moratorium. At this time, CCA has not
stated if the temporary moratorium or a permanent moratorium will
impact the overall construction and operations of the project
facilities.
On October 9, 2014, staff attended a joint meeting of the East Otay
Mesa Property Owners Association and the Otay Mesa Property Owners
Association. Staff presented information on the Otay Water
District’s temporary moratorium on the installation of new recycled
water facilities on Otay Mesa. As a result of the presentation,
Association representatives inquired how the District would respond
to a new “Super User” water customer if the opportunity presented
itself.
A “Super User” that comes to the District or any Water Authority
member agency could use the Accelerated Forecasted Growth component
of the Water Authority’s 2010 Urban Water Management Plan of 2,224
Acre-Feet per year (AFY) for 2015 and increases to 10,948 AFY by
2035. The demand associated with accelerated forecasted is intended
to account for SANDAG’s land-use development currently projected to
occur between 2035 and 2050, but has the likely potential to occur
on an accelerated schedule. This land-use is not included in local
jurisdictions’ general plans, so their projected demands are
incorporated at a regional level. When necessary, this additional
demand increment, termed, “Accelerated Forecasted Growth,” could be
used by member agencies to meet the demands of development projects
not identified in the general land use plans.
The Association representatives also noted that Developers are
pulling recycled water facilities out of their plans due to the
temporary moratorium. The representatives expressed concerns that
the District may require the recycled water facilities to be
installed at a later date if a permanent moratorium is not approved.
Staff responded that the District does not intend to go back and
require the installation of recycled water facilities removed from
projects as a result of the temporary moratorium.
Lastly, Association representatives inquired about the possibility
of a more in-depth review of the District’s financial analysis that
supports the temporary moratorium. Staff will work to set up a
follow-up meeting to present this specific information to
Association representatives.
5
Review and assessment of existing District maintained recycled water
facilities on Otay Mesa.
A review of the existing recycled water infrastructure on Otay Mesa
indicates that the recycled water mains have been tested to potable
standards. The District maintains interconnection facilities which
includes backflow prevention devices at twenty-four (24) locations
on Otay Mesa. These devices connect the recycled water mains to the
existing potable mains and were put into place in order to provide a
water supply until recycled water is available on Otay Mesa. A
significant majority of the recycled water infrastructure on Otay
Mesa has been placed into service and is currently serving water to
the active recycled water meters. In total, less than 1.4 percent
of the 16.4 miles of recycled water mains are not charged with
water. Should a permanent moratorium on the installation of new
recycled water facilities be placed on Otay Mesa, the existing
recycled water infrastructure can remain functioning as it does
today providing water to the District’s customers. Additionally,
this infrastructure could serve to provide redundancy to the potable
system on Otay Mesa which would enhance reliability.
Next Steps
During the coming months, staff plans to meet with City staff to
discuss the District’s proposals included in the District’s
August 12, 2014 correspondence.
Staff will also initiate discussions with the San Diego County Water
Authority (SDCWA) regarding SDCWA capacity fees that may be assessed
on recycled water meters set on Otay Mesa should the Board decide
that a future permanent moratorium of recycled water facilities on
Otay Mesa is required. Additionally, staff will initiate
discussions with the United States Bureau of Reclamation (USBR)
regarding the $950,000 in grant funds that were received for
recycled water projects on Otay Mesa.
Staff will continue work on impacted projects on Otay Mesa to bring
the recycled water projects to completion. To conclude, staff
hasn’t seen any reason that would require a change in the direction
of the moratorium and will continue addressing the questions and
concerns to the Otay Mesa Developers. Staff anticipates providing
an update to the Board in spring of 2015.
FISCAL IMPACT: Joe Beachem, Chief Financial Officer
The issues, risks, and financial analysis, as presented in the
July 2, 2014 staff report, recommending the temporary moratorium on
the installation of new recycled water facilities on Otay Mesa
6
indicate that the temporary moratorium will assist in mitigating
financial impacts to the District should the Board decide that a
future permanent moratorium of recycled water facilities on Otay
Mesa is required.
There are financial risks associated with a future permanent
moratorium. Those risks include reimbursement of $950,000 in grant
funds that were received from the United States Bureau of
Reclamation (USBR) and SDCWA capacity fees.
STRATEGIC GOAL:
This Project supports the District’s Mission statement, “To provide
high value water and wastewater services to the customers of the
Otay Water District in a professional, effective, and efficient
manner” and the District’s Vision, “A District that is innovative in
providing water services at affordable rates, with a reputation for
outstanding customer service.”
LEGAL IMPACT:
None.
DM/RP:jf
P:\WORKING\CIP R2087\Staff Reports\BD 11-05-14\BD 11-05-14 Staff Report Otay Mesa Recycled Water
Temporary Moratorium Update_rev1.docx
Attachments: Attachment A – Committee Action
Exhibit A – Project Location Map
Exhibit B – Temporary Moratorium Notice
ATTACHMENT A
SUBJECT/PROJECT:
N/A
Informational Item – Temporary Moratorium on the
Installation of New Recycled Water Facilities on Otay Mesa
Update
COMMITTEE ACTION:
Finance, Admin, and Communications Committee (Committee) reviewed this
item at a meeting held on October 21, 2014. The Committee supported
Staff’s recommendation.
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.
OTAY WATER DISTRICTOTAY MESA RECYCLED WATER AREA
EXHIBIT A
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OTAY WATER DISTRICTBOUNDARY
OTAY MESA
LOWER OTAYRESERVOIR
TEMPORARY MORATORIUM ON THE INSTALLATION OF NEW
RECYCLED WATER FACILITES IN OTAY MESA
At the July 2, 2014 Otay Water District’s Board of Director’s meeting, the District approved a
temporary moratorium on the installation of new recycled water facilities in its Otay Mesa service area
(see shaded area in the map below). The full staff report is available on the District’s website
http://www.otaywater.gov/Otay/agenda.aspx.
As a result of this action, during the course of the temporary moratorium, the District will not be
advancing recycled water projects, requiring the installation of new recycled water infrastructure, nor
issuing permits for new recycled water meters. Water to new development will be supplied from the
District’s potable water system to meet current and future developer project demand. The District will
be contacting active developers currently in the design, plan review or construction phases of their
projects to review and discuss the specifics of their individual projects with respect to the moratorium.
Please note the moratorium is limited to Otay Mesa and does not apply to the implementation of
recycled water projects in east Chula Vista (the District’s Central Area) where recycled water is
available.
The District continues to stand firm in its commitment to the use of recycled water in order to minimize
overall demand for potable water and is proud to operate one of the largest recycled water distribution
systems in San Diego County.
If you have questions regarding the temporary moratorium for Otay Mesa, please contact the Otay
Water District’s Public Services Division at (619) 670-2241.
OTAY WATER DISTRICT
Dan Martin, P.E.
Engineering Manager
STAFF REPORT
TYPE MEETING: Regular Board MEETING DATE: November 5, 2014
SUBMITTED BY:
Andrea Carey,
Customer Service Manager
PROJECT: DIV. NO. All
APPROVED BY:
Joseph R. Beachem, Chief Financial Officer
German Alvarez, Assistant General Manager
Mark Watton, General Manager
SUBJECT: Water Conservation Programs and Services
GENERAL MANAGER’S RECOMMENDATION:
This is an informational item only.
COMMITTEE ACTION:
See Attachment A.
PURPOSE:
To inform the Board of Directors about the District’s water use to-
date and the various programs and services offered through Otay’s
Water Conservation division.
ANALYSIS:
The Otay Water District offers many programs and services to assist and
educate its customers on ways to save water and lower their water use.
District customers have historically taken advantage of many of the
programs offered and the District’s overall water use reflects a more
conservation minded public.
Background
California is experiencing an unprecedented drought due to three years
of lower than anticipated rainfall. In response, Governor Brown
declared a statewide drought emergency on January 17, 2014.
On July 15th the State Water Resources Control Board, in response to
continued drought conditions, set forth emergency conservation
regulations.
Pursuant to the regulations adopted by the State Water Resources
Control Board, Otay is required to report monthly water usage from
both the previous month and year by the 15th of each month. To date,
staff has reported information from June through September 2014. The
District’s monthly potable usage is illustrated below. The numbers
reported are total potable water purchases in acre-feet.
Potable purchases were up for much of FY 2014. Extremely dry
conditions and higher than normal temperatures resulted in an increase
in water usage. So far, FY 2015 is seeing an overall decrease in
water usage even with higher temperatures than last year. This shows
that District customers are taking the drought communications
seriously and taking action to conserve water.
The availability of reclaimed water coupled with increased
conservation practices by District customers have resulted in a 20%
decrease in potable water purchases in the past 10 years.
0
500
1000
1500
2000
2500
3000
3500
4000
Jul Aug Sept Oct Nov Dec Jan Feb Mar Apr May Jun
Monthly Potable Purchases
2013 2014 2015
Conservation Targets
In 2009, Governor Schwarzenegger signed the Water Conservation Act
which requires urban water suppliers to reduce water demand by 20% by
the year 2020. That same year, the California Urban Water Conservation
Council (CUWCC) revised its Water Conservation Best Management
Practices (BMPs). In 1991, the CUWCC was created to maximize urban
water conservation across California. Otay Water District was one of
the initial 120 urban water agencies and environmental groups to sign
the first historic Memorandum of Understanding (MOU) which pledged to
develop and implement urban water conservation practices to reduce the
demand of water supplies. The MOU in 1991 identified 14 BMPs for the
District to follow to achieve water conservation. These included
targeted outreach, rebate program goals and conservation targets. In
2009, the CUWCC reorganized and added flexibility to its MOU. The new
MOU separated the original 14 BMPs into two categories: foundational
and programmatic. The foundational BMPs cover operational practices
and education programs. These are BMPs that all agencies would report
on for compliance. The programmatic BMPs cover residential, commercial
and landscape conservation programs. To achieve compliance with the
programmatic BMPs, agencies had three options for reporting:
1) Checklist Approach: An agency can report on each BMP individually
as it did in the previous MOU.
2) Flex-track approach: This approach sets specific savings goals
based on the calculated savings that would have been achieved in
the checklist approach.
3) Gallons-per-capita-per day (GPCD) approach: An agency can satisfy
the programmatic BMP requirements if it shows a targeted reduction
in per capita usage over time.
To align itself with the 20x2020 regulations, the District chose the
gallons-per-capita-per-day (GPCD) approach. This eliminated the
District having to meet certain rebate or incentive targets as the
assumption is that an agency who is taking appropriate conservation
measures will also have a reduction of overall water use. The CUWCC
set bi-annual GPCD targets beginning in 2010 based on average water
‐
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14
Otay's Potable Water Purchases
Total CWA Purchases
usage from 1997-2006. The District is currently already surpassing the
2018 GPCD target.
In 2010, in accordance with the 20x2020 regulations, the District
developed GPCD goals for 2015 and 2020 based on water use from 1999 to
2008 and, as shown below, is meeting both targets.
Future Conservation Targets
Although the initial drought declaration from the Governor called for a
20% voluntary reduction in water use statewide, there have not been any
specific targets given to water agencies by the State Water Resources
Control Board. Southern California has been working to reduce water
use for many years so there is some concern additional savings targets
may be difficult to achieve. Recognizing the disparity between
Southern and Northern California conservation efforts over the past ten
years, the State Water Resources Control Board is evaluating
residential GPCD levels for the nearly 400 agencies reporting
statewide. The hope is that these figures will assist those water
agencies who have not taken many steps to conserve determine what their
targets should be. According to a report dated October 7, 2014,
statewide water usage in August was down 11.5% which indicates that
agencies throughout California are working to conserve.
With 2013 being the driest year on record statewide, the Metropolitan
Water District (MWD) decided in 2014 to avoid water allocations by
withdrawing from storage reserves. However, in response to continuing
dry conditions, MWD is currently developing an allocation methodology
for 2015. MWD anticipates bringing forward the allocation guidelines
to their Board in November 2014 with approval expected in December
2014. However, with the San Diego County Water Authority’s (CWA)
investments to diversify its water supply, the impact of the
‐
50.00
100.00
150.00
200.00
250.00
FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14
Gallons per Capita per Day
Annual GPCD
2015 Target
2020 Target
allocations will be mitigated. For example, a 20% reduction in MWD
water transfers would translate into a 7% reduction to Otay. Staff is
monitoring this situation closely and currently evaluating the
potential financial impact of reduced water supplies. Staff will
update the Board as more information becomes available.
Currently, quarterly GPCD targets are reported within the District’s
Strategic Plan. These targets align with the 20x2020 mandate. As the
drought continues, staff will be evaluating these levels to determine
if changes need to be made or additional targets tracked.
Water Conservation Programs
In order to ensure the District continues to meet the 20x2020 goal and
to offer customers opportunities to lower water use and save money, the
Water Conservation department has worked closely with the San Diego
County Water Authority (CWA) and the Metropolitan Water District (MWD)
to offer a variety of programs.
Educational Programs
Otay has resources available on its website for teachers and students
to learn more about water and water conservation. For teachers,
information is provided about the District sponsored poster and
photography contests, bus tours to the Water Conservation Garden,
Splash Labs, and water education websites. For students, there is
information about the poster and photography contests, EPA watershed
resources, and State of California water resources.
In addition, the following school programs are financially subsidized
by the District through the San Diego County Water Authority.
Water Garden Field Trips: Every year Otay funds up to 30 school bus
tours to the Water Conservation Garden. Schools contact the Garden
directly to schedule their field trips. In Fiscal Year 2014, 27
classes and over 1,400 students visited the Garden coming from the
District’s service area.
School-wide Assemblies: CWA provides elementary school assemblies at no
cost to the school. Depending on school size, two options are
available: 1) H20, Where did you go? For schools over 500 students or
2) Waterology for schools with 200 to 500 students. As a member of
CWA, Otay helps fund these programs that are available to any
elementary school in San Diego County. In Fiscal Year 2014, CWA
provided assemblies for eight District schools and over 4,600 students.
Splash Lab & Green Machine: The Splash Science Mobile Lab is a self-
contained mobile science laboratory that comes to schools to educate
classes on the impact of water pollution on the environment and the
importance of water conservation. The Green Machine is a mobile field
trip to educate students on the importance of a healthy environment.
Otay Water District, in conjunction with CWA, funds eight Splash Lab or
Green Machine visits per year. The Splash Lab is designed for grades 4
through 6, whereas the Green Machine is designed for Kindergarten
through 4th grade. Last year, the Splash Lab visited La Presa
Elementary School.
Teacher Workshops: Otay, through its membership in CWA, also provides
free workshops for teachers. Currently, workshops on water smart
gardening and regional water quality testing are available for
qualified teachers.
Reduction in school spending and a focus on performance-based standards
have resulted in less requests by school officials for in-school
educational resources. Garden field trips are popular among District
schools and demand is very high. An increase in the number of field
trips budgeted could result in greater conservation exposure to
students. Staff will be working with Garden staff to determine if
additional funding may be warranted for next year’s budget. Staff also
plans to do more outreach campaigns to District schools to educate them
on the programs above and get feedback on other services the District
can provide to schools.
Residential Programs
Partnering with CWA and MWD, Otay provides a variety of conservation
programs and services to District customers. Customers are made aware
of these programs through a variety of sources such as the District
website, the ‘‘Pipeline’’ newsletter, public outreach at community
events and MWD and CWA marketing efforts.
California Friendly Landscape Classes: Otay customers can sign-up for
free three-hour classes on WaterSmart landscaping. Classes are taught
throughout San Diego County on various days and times. The classes
are designed to teach individuals how to design sustainable landscapes
for the San Diego climate.
Garden Friendly Plant Fairs: Otay Water District partners with Home
Depot to offer plant fairs in the fall and spring. Each plant fair
features discounts on more than 20 types of water efficient plants.
Otay staff is on hand to provide information on water conservation
programs and services.
WaterSmart Landscape Makeover Series: CWA offers a series of four
classes which provide homeowners with the information needed to
makeover a traditional turf yard with drought tolerant landscaping.
The classes cover everything from turf removal to design and
irrigation.
Community Outreach: Otay participates in several community events
throughout the year such as Bonitafest and Harborfest. The focus of
the District’s presence is to communicate the wide variety of
conservation programs available to residents and answer conservation
related questions.
Rebates: The chart below shows historical residential rebate data for
the District and estimated water savings as a result of the water
savings device purchased. The annual water savings is determined by
MWD and assumes the devices are replacing old, less efficient
products. (Attachment B)
Fiscal Year Device Type
Number
of
Rebates
Estimated Water
Savings (AF/year)
2012 Toilet 90 2.21
Washer 763 26.32
Rotating Nozzle 1,388 6.11
WBIC 22 5.25
2013 Toilet 19 0.47
Washer 561 19.35
Rotating Nozzle 689 3.03
WBIC 18 4.51
2014 Toilet 225 5.54
Washer 457 15.77
Rotating Nozzle 811 3.57
WBIC 18 3.11
2015 (YTD) Toilet 169 4.16
Washer 150 5.18
Rotating Nozzle 538 2.37
WBIC 3 0.26
In the early 1990’s, federal and state laws were enacted which
required only low-flow toilets, and water efficient shower heads and
faucets be installed in new and existing homes. Given the average
replacement cycle (3-5 percent per year) and the large amount of homes
built within the District after 1992, it is estimated that the vast
majority of homes are equipped with these water saving devices. High
efficiency washing machines are another large indoor water saver.
Regulations on washing machine efficiency started in the early 2000’s
and do not appear to have reached a saturation point yet. Since 1994,
over 10,000 residential rebates have been distributed for clothes
washers.
Turf Removal Programs: As indoor devices became more and more water
efficient, water industry experts turned the focus to outdoor water
efficiency as a way to assist in water conservation. Outdoor
irrigation contributes to between 40% and 60% of all water use in the
District. The removal of water intensive turf and inefficient
landscape irrigation products can save customers a large amount of
water each month. In order to assist Otay customers with migrating to
a more drought tolerant outside landscape, the District has offered a
variety of turf removal programs since 2008. Below is a chart showing
residential customer participation in the programs.
Fiscal
Year Program Coordinating
Agency
Number of
Rebates
Total
Square
Footage
Estimated
Water Savings
(AF/Year)
2008
Artificial Turf
Rebate OWD 34 24,041 3.12533
2009 Cash for Plants OWD 24 37,694 4.90022
2010 Cash for Plants OWD 18 21,847 2.84011
2011 Cash for Plants OWD 17 28,353 3.68589
2012 Cash for Plants OWD 18 25,098 3.26274
2013 Cash for Plants OWD 5 6,683 0.86879
2013 Turf Replacement CWA 7 5,628 0.73164
2014 Turf Replacement
CWA &
MWD 31 24,637 3.20281
2015
(YTD) Turf Replacement
CWA &
MWD 3 2,475 0.32175
The MWD program provides rebates of $2.00 per square-foot when
converting existing live turf grass to a low water use alternative.
This may include artificial or synthetic turf or other permeable
surfaces. MWD’s program includes front, side, and backyards. This
can be combined with the CWA Turf Replacement Rebate. CWA provides
rebates of $1.50 per square-foot when replacing live irrigated grass
in front yards with low water use non-invasive plants. There have
been complaints that CWA’s process is time consuming and difficult to
navigate. As a result, the participation of the CWA program by
District customers has been significantly lower. In FY 2014, 24
customers took advantage of the MWD rebate and only seven customers
participated in the CWA program. In response, CWA is currently
reviewing the program to make changes to the qualification process.
There is also discussion about partnering with artificial turf
suppliers to offer discounts to San Diego residents since the CWA
rebate does not include artificial turf.
Expanded media publicity of the drought has resulted in a large
increase in turf removal applications since July 2014. In FY 2014,
there were 34 total applications approved by MWD. So far, in FY 2015,
there have been 98 applications approved. These applications represent
139,819 square feet of turf removal which, if all are completed, would
result in an estimated 18 acre-feet of water savings. It is estimated
that approximately 7,700 square feet of turf would need to be replaced
to save one acre-foot of water annually.
Site Water Audits: Otay partners with CWA to provide residential
customers free indoor and outdoor water audits. Beginning in October,
CWA has expanded this program to allow customers the option to waive
the indoor portion of the audit in exchange for assistance programming
their irrigation controllers. Recognizing that the biggest
opportunities for savings are outdoor, this will give the homeowner
additional tools to effectively manage irrigation schedules.
PACE Financing Program: The Property Assessed Clean Energy program
(PACE) offers financing options for homeowners on a variety of water
and energy savings projects. Customers who may not be able to afford
the up-front costs of artificial turf removal or an irrigation
overhaul can apply for a loan which is paid through the property tax
system. The amount of the loan can be $5,000 to $20,000 and can be
paid off between 5 and 20 years. There are a variety of lenders that
participate in this program. To find a lender one may visit
www.energycenter.org and search by zip code.
Commercial Programs
Site Water Audits: Otay partners with the MWD and CWA to provide
commercial customers an audit by a certified irrigation professional.
Water Smart Irrigation Upgrade Program: Otay provides funding for
commercial sites to replace older irrigation equipment with more
efficient components. Weather-based irrigation controllers (WBIC) and
rotating nozzles are excluded from this program as they are already
covered under existing MWD rebates. The program reimburses customers
up to 40% of the component costs up to a maximum of $5,000. Otay had
one property management company take advantage of this program in FY
2014.
Water Savings Incentive Program: This program is funded by MWD and
open to all commercial customers. Customers who install water
efficient equipment or change processes to produce water savings can
apply to be reimbursed for project costs. Customers can receive up to
$.60 per 1,000 gallons saved per year over the project life, up to 10
years. Incentives are limited to 50% of eligible project costs.
Emerald Textiles, a healthcare laundry service company in the Otay
Mesa area has recently participated in this program with the
installation of a water treatment and recycled system. The company
expects to see a 60% reduction in water usage which equals over 30
million gallons per year or 95 acre-feet.
Rebates: The chart below shows historical commercial rebate data for
the District and estimated water savings as a result of the water
saving devices purchased. The annual water savings is determined by
MWD and assumes the devices are replacing old, less efficient
products. (Attachment C) Commercial rebate response has historically
been much lower than residential. One reason for low response is the
labor costs for replacing fixtures can far exceed the cost of the
products themselves.
Fiscal Year Device Type Number of
Rebates
Estimated
Water Savings
(AF/year)
2013 Rotating Nozzle 1,375 0.9
Toilet 72 1.77
Flow Regulator 300 11.49
WBIC 16 4.48
2014 Rotating Nozzle 725 7.33
Toilet 298 0.15
Ice Making Machine 1 13.05
Zero Water Urinal 12 1.47
2015 (YTD) Rotating Nozzle 160 0.7
Turf Removal Programs: The MWD and CWA programs explained in the
residential section are also available to commercial customers. Below
is a chart showing commercial participation in turf removal programs
since 2008.
Fiscal Year Program Coordinating
Agency
Number of
Rebates
Square
Footage
Estimated
Water Savings
(AF/Year)
2008 Artificial Turf Rebate OWD 1 76,709 9.97217
2009 Cash for Plants/Artificial Turf OWD 5 126,315 16.42095
2010 Cash for Plants OWD 10 83,291 10.82783
2011 Cash for Plants OWD 6 26,381 3.42953
2012 Cash for Plants OWD 6 49,673 6.45749
2013 Cash for Plants OWD 3 26,670 3.4671
2013 Turf Replacement CWA 1 6,000 0.78
2014 Turf Replacement CWA & MWD 0 0 0
2015 (YTD) Turf Replacement CWA & MWD 1 4,746 0.61698
Budget
All programs listed above are either included in the Fiscal Year 2015
budget or through Otay’s CWA membership. The table below shows the
amount budgeted for each item.
Programs Budget
Garden Field Trip $ 19,900
Bus Costs $ 7,000
Splash Lab $ 1,800
Residential Clothes Washer $ 17,500
Residential WBIC $ 3,000
Commercial Smart Irrigation Program $ 15,000
Multi-Family Toilet $ 2,000
Site Audits $ 17,000
Demonstration Garden $100,000
Total $ 183,200
Additional Conservation Efforts
Marketing Efforts: Otay Water District engages in various marketing
campaigns to give customers the latest conservation and drought
information. YouTube videos, social media posts, bill inserts, and
newsletters have all recently been distributed to Otay customers to
inform them of the District’s move to a Level 2 drought and the
mandatory restrictions in place.
Water Waste Reporting: Customers can go to the District website or
call Customer Service to report all types of water waste such as water
run-off, leaks or washing down paved surfaces. These reports are
acted on by District staff with letters and/or site visits as
warranted. Customers who do not remedy the situation are referred to
the Water Conservation department. Water Conservation will attempt to
contact the customer to discuss the issue and, if not resolved, may
take additional steps such as water turn-off or fines for non-
compliance of water waste restrictions.
Leak Notification: As part of the meter reading process, customers
whose meter registers a leak alarm due to continuous usage for 24 hours
are notified via email, phone call, or site visit. The type of
notification is dependent on various thresholds for larger than
expected usage.
Future Conservation Efforts
District staff will continue to market the conservation programs and
services offered to customers and participate in interagency
conservation meetings to keep updated on the latest drought
information. Should drought conditions continue and the need for
additional conservation be required, staff will coordinate outreach
campaigns to various customer types to determine programs or funding
that can be added to assist with reducing water use.
The District is considering a cooperative endeavor to establish a
demonstration garden which is more central to the District’s
customers. Fiscal year 2015 has an approved budgeted amount of
$100,000 for the demonstration garden.
Staff is currently working with IT to improve the District’s
conservation web pages. Staff would like to better organize the
available information and use links and drop-down menus for faster
navigation. In addition, there is a plan to add an interactive
calculator to give customers the ability to estimate how their water
conservation efforts can translate to a lower water bill.
While the current drought conditions do not seem to be diminishing,
District customers are taking warnings seriously and doing their part
to conserve water. A reduction in overall water use and an increase
in incentive program participation shows the public is committed to
reducing water consumption.
FISCAL IMPACT: Joe Beachem, Chief Financial Officer
This is an informational item only and has no fiscal impact. All
programs are included in the Water Conservation budget. The total
budgeted costs for FY 2015 are $183,200. Other costs of the
conservation programs is incorporated into the general cost of water
paid to CWA and MWD.
STRATEGIC GOAL:
Actively manage water supply and demand.
LEGAL IMPACT:
None.
Attachments:
A) Committee Action Form
B) Residential Programs and Rebates
C) Commercial Programs and Rebates
ATTACHMENT A
SUBJECT/PROJECT:
Water Conservation Programs and Services
COMMITTEE ACTION:
This is an informational item only.
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.
Residential Water Efficient Programs & Rebates
Water Smart Checkup
Free Indoor and Outdoor Water Conserving Recommendations
Dial 1/866/883-1332 or visit watersmartcheckup.org to schedule an
appointment
Turf Replacement Program = SD County Water Authority (CWA) Rebate
$1.50/square foot for replacing grass in the front yard with a Water Smart
landscape
Dial 1/866/685-2322 or visit turfreplacement.watersmartsd.org
for application form and qualifying standards
** Since the rebates listed below are subject to change or termination by the
Metropolitan Water District of Southern California at any time, please call
1/888/376-3314 or visit www.SoCalWaterSmart.com for confirmation of available
rebates**
Rebates Total Rebate
**High Efficiency Washer (HEW) $135.00 **
**High Efficiency Toilet(HET) $100.00**
**Rain Barrel 4 barrel maximum $75.00/barrel**
**Weather Based Irrigation Controller (WBIC) $140.00 **
Under 1 irrigated acre
**Weather Based Irrigation Controller (WBIC) $35.00/station**
Over 1 irrigated acre
**Rotating Nozzles $4.00 /nozzle**
1 rebate per residential address (15 nozzle minimum)
**Moisture Sensor Added to irrigation controller $80.00**
**Turf Replacement $2.00/sqft **
May be added to CWA rebate above
Review each wholesale water agency’s qualifying standards
For additional information on any program, please contact:
Richard.Namba@otaywater.gov
619/670-2730 10.1.2014
Attachment B
Commercial Water Efficient Programs & Rebates
Commercial Landscape Survey
Free Landscape and Irrigation Audit
Dial 1/866/883-1332 or visit watersmartcheckup.org to schedule an
appointment
Commercial Turf Replacement Rebate = SD County Water Authority
$1.50/square foot for replacing grass with a Water Smart landscape
Dial 1/866/685-2322 or visit turfreplacement.watersmartsd.org
for application form and qualifying standards
** Since the commercial rebates listed below are subject to change or termination by the
Metropolitan Water District of Southern California at any time, please call
1/888/376-3314 or visit www.SoCalWaterSmart.com for confirmation of available
rebates**
Rebates (More commercial rebates available at website) Total Rebate
**High Efficiency Tank Toilets $100/multi-family **
**High Efficiency Flushometer Toilet $100**
**Ultra Low & Zero Water Urinals $200**
** Air Cooled Ice Machines $1,000**
**Weather Based Irrigation Controller (WBIC) $35/station**
**Rotating Nozzles $4 /nozzle**
**Large Rotary Nozzles $13/Set**
**In-Stem Flow Regulators $1/Regulator**
**Moisture Sensor Added to irrigation controller $35/station**
**Turf Replacement $2/sqft**
May be added to CWA rebate above when meeting requirements
For additional information on any program, please contact:
Richard.Namba@otaywater.gov
619/670-2730 7.1.2014
Attachment C
STAFF REPORT
TYPE MEETING: Regular Board MEETING DATE: November 5, 2014
SUBMITTED BY:
Andrea Carey,
Customer Service Manager
PROJECT: DIV. NO. All
APPROVED BY:
Joseph R. Beachem, Chief Financial Officer
German Alvarez, Assistant General Manager
Mark Watton, General Manager
SUBJECT: Proposed Water Conservation Demonstration Garden Partnership
GENERAL MANAGER’S RECOMMENDATION:
This is an informational item only.
COMMITTEE ACTION:
See Attachment A.
PURPOSE:
To provide the Board with information regarding the potential sites
for a water conservation demonstration garden.
ANALYSIS:
Staff has reviewed multiple options for a potential demonstration
garden in Chula Vista and has narrowed it down to four sites. After
visiting them and discussing details with the partner entities, staff
has identified Otay Ranch Town Center as a preferred location for the
water conservation demonstration garden. The information below will
provide the details staff used to identify potential sites and the
specific attributes of the four sites considered.
Background
In 1992, Otay was a founding member of the nationally renowned five-
acre Water Conservation Garden and continues to be a supporting
member. The Water Conservation Garden, located in the northern part
of the District, provides visitors with information and examples of
water-wise gardening. As the District’s population continues to grow
in the southern region of San Diego County, Otay is investigating the
viability of a partnership to provide those customers with a more
convenient water demonstration garden in Chula Vista. A location that
might have greater exposure to a larger portion of the District’s
customer base.
The need to conserve water has grown after several years of below
normal rainfall which has created water supply shortages. This has
led to Governor Brown’s statewide proclamation to conserve water in
January 2014. Following suit, Otay declared a Level 2 Supply Alert
on August 6, 2014 that initiates mandatory water restrictions. Since
grass is the most water dependent species of the landscape, Otay is
committed to assisting residential sites in removing grass to
conserve water. While generous grass removal rebates exist, the
District is looking at the option to provide an additional water
conserving demonstration garden that would serve as an inspiration
for homeowners that commit to taking out non-functional grass around
the house. The demonstration garden would illustrate that water
conserving plants provide a multitude of colors, textures, sizes, and
shapes that would enhance property value while conserving significant
amounts of water.
Partnership Responsibilities
Since this project would benefit both partnering organizations in
meeting community outreach educational objectives and environmental
sustainability goals, organization specific responsibilities have
been identified. If the initial responsibilities are agreeable to
the partnering organizations and a tentative site has been
determined, future meetings will focus on finalizing a contract that
will insure the design, maintenance, and longevity of the partnership
demonstration garden.
Otay Water District would provide:
Cost of a professionally designed water conservation
demonstration garden design plan that meets the
landscape/aesthetic standards of the partnering organization and
the community outreach goals of the Otay Water District.
Cost of the installation of irrigation system, hardscape
material and landscape plants that would be identified in the
mutually agreed upon design, irrigation, planting, and
supplemental design plan documents.
Cost of interpretive signage that identifies water savings when
removing grass and replacing it with California friendly,
drought tolerant, and water conserving plants.
Promotion of the water conservation demonstration garden.
Promotion of water sustainability partnership.
Partnership agency would provide:
An area of high visibility to locate the garden with a map of
the site.
Water supply for installation of low volume irrigation system to
maintain landscape.
Public access and egress during site’s normal hours of business
operation.
Public parking.
Garden maintenance and water costs.
Promotion of the water sustainability partnership.
Potential Demonstration Garden Partnership Sites
A preliminary review of the District’s Chula Vista service area
identified potential garden sites that included governmental and
commercial entities. Sites reviewed include:
Chula Vista College (future site);
High Tech High;
HOA common ground areas;
Millenia at Otay Ranch;
Otay Lake;
Otay Ranch Town Center;
City of Chula Vista Open Space;
Salt Creek Community Center;
Salt Creek Golf Course;
Sea World’s Aquatica Park;
Southwestern College; and
U.S. Olympic Training Center.
A variety of factors were considered as criteria for identifying
potential sites and eliminating other sites that would not be
compatible with District goals in supporting a water conservation
demonstration garden at this time. Factors considered in identifying
a potential partner in the District’s Chula Vista service area
include:
space available;
location;
daily hours of accessibility;
parking;
restrooms;
water service;
maintenance commitment;
build-out date;
shared vision of demonstration garden value;
environmental stewardship; and
long-term return on investment.
Of the sites considered, the following four sites best fit the
criteria. Preliminary meetings to discuss a partnership and
mutually beneficial goals of a demonstration garden have
generated positive support from each of the potential partners.
1. Otay Ranch Town Center (ORTC)
2015 Birch Road, Suite 500
Chula Vista, CA 91915
Governing Authority: General Growth Properties (GGP) REIT
Location: Board District 1
Site Location: Proposed garden site located adjacent to the western
side of the Macy’s store located across the street from the ORTC dog
park.
Space Available: 10,987 square feet
ORTC supports the demonstration garden partnership proposal. On
July 8, 2014 there was an inspection of the proposed demonstration
garden site. The REI (Recreational Equipment Incorporated) store is
in close proximity and supports environmentally friendly
sustainability projects.
Attributes of ORTC Site
Accessibility: Easy public access and egress via 125 Expressway,
Birch Road, and Olympic Parkway.
Parking: Ample free public parking in ORTC parking lots.
Restroom Facilities: Public restroom facilities are available.
Maintenance: Brickman/Valley Crest Landscape Company currently
maintains ORTC’s landscaped areas. They are a highly regarded
landscape partnership that also maintains Grossmont Center and
Fashion Valley shopping malls and their landscaping meets commercial
marketing standards.
Improvements: Undeveloped site does not require removal and disposal
of existing landscape.
Exposure: ORTC provides the broadest public exposure of a water
conservation demonstration garden to Chula Vista constituents who
reflect a wide range in age, ethnicity, gender, and income.
Limitations of ORTC Site
Commercial for-profit mall site.
o Long-term financial survivability of ORTC is unknown.
o Long-range development plan of ORTC is unknown.
Demonstration garden site can be displaced by future commercial
mall tenant.
o Length of demonstration garden partnership must be
negotiated.
o Partnership contract must protect District’s financial
investment in site.
Currently, a completely vacant site with no irrigation
infrastructure in place.
2. Salt Creek Community Center (SCCC)
2710 Otay Lakes Road
Chula Vista, CA 91915
Governing Authority: City of Chula Vista Park & Recreation
Department
Location: Board District 1 with Board District 5 located north
of Otay Lakes Road
Site Location: Adjacent to entry road and SCCC parking lot. This is
a 24-acre community center and park that provides a wide range of
recreational activities.
Space Available: 5,095 square feet
SCCC supports the demonstration garden partnership proposal. An
inspection of the proposed demonstration garden site took place on
September 4, 2014.
Attributes of Salt Creek Community Center Site
Accessibility: Easy public access off Otay Lakes Rd.
Parking: Ample public parking is available.
Restroom Facilities: Public restroom facilities are available.
Maintenance: Provided by Parks Department and existing irrigation
system can be reused for demonstration garden landscape.
Improvements: Site consists of grass that must be removed or
eradicated.
Exposure: Community center is used by many people living in the area
for health and sporting events.
Limitations of Salt Creek Community Center Site
Located at eastern edge of District’s Chula Vista residential
service area.
o Primary users of SCCC programs are those living near the
community center and park.
Limited square footage available restricts demonstration garden
design plan potential.
Site maintenance would be provided by city staff with already a
large service area to maintain.
3. Rice Canyon Open Space Preserve (RCOSP)
North side of the intersection of Buena Vista Way and Rancho Del
Rey Parkway
Chula Vista, CA 91910
Governing Authority: City of Chula Vista, Open Space Department
Location: Board District 2
Site Location: Demonstration garden site would be immediately
adjacent to Rancho Del Rey Parkway.
Space Available: 4,850 square feet
RCOSP staff supports demonstration garden partnership proposal.
On September 25, 2014 there was an inspection of proposed
demonstration garden site. There is an existing succulent and cactus
section at the site.
Attributes of Rice Canyon Open Space Preserve Site
Accessibility: Public access off Rancho Del Rey Parkway near Buena
Vista Way.
Parking: Limited parking is available. Eight paved spots exist with a
large gravel overflow area for additional cars.
Restroom Facilities: Public restroom facilities are not available on-
site.
Maintenance: Maintenance is currently provided in part by Open Space
staff and contracted out to Blue Skies Landscape Maintenance Company.
Improvements: Water is available on-site to irrigate demonstration
garden area.
Exposure: RCOSP is the future site of Chula Vista sponsored
composting and sustainability classes. The City of Chula Vista is
applying for a $40,000 grant for RCOSP upgrades.
Limitations of Rice Canyon Open Space Site
Smallest square footage available of the sites considered.
A lack of design plan or planting plan is apparent in the
current distribution of plant material.
Site is currently not well maintained with weeds growing
throughout.
Space occupied by cactus and succulents is four times as large
as the partnership garden area.
o Adjacent cactus and succulents have been planted in a
haphazard, random arrangement.
o Aesthetics of a professionally designed demonstration
garden space will be a stark contrast to a succulent garden
designed with good intentions, volunteer staff, and lack of
a unifying design plan.
o Imbalance in space allocated to existing succulents
compared to proposed demonstration garden area creates a
false sense of relative importance and value.
Minimal signage exists to identify or interpret existing plant
material.
o Interpretive signage has not kept up with addition of new
succulents and cactus.
4. Southwestern College
900 Otay Lakes Road
Chula Vista, CA 91910
Governing Authority: Southwestern Community College District
Location: Board District 4
Still awaiting partnership acknowledgement following the June 18,
2014 campus meeting.
Site Location: Centrally located within District’s Chula Vista
service area.
Space Available: Demonstration garden site on campus has not been
specifically identified within the four-acre garden with adjacent
undeveloped space available.
Attributes of Southwestern College Site
Accessibility: Public access and egress to navigate campus roads
difficult due to normal student traffic.
Parking: Limited public parking available campus-wide. Parking
tickets issued if parking without a permit or in wrong lot.
Restroom Facilities: Public restroom facilities are currently not
available in the SBBG. However, restrooms are located outside the
SBBG in classroom buildings.
Maintenance: Docents may be available to support demonstration
garden.
Improvements: Awaiting a specific site to determine what would need
to be removed or retrofitted.
Exposure: Landscape and Nursery Technology Department offering
courses since 1975. Faculty and students available to support
demonstration garden. Site of South Bay Botanical Garden (SBBG).
Limitations of Southwestern College Site
Multi-tiered college administrative proposal review and approval
levels.
o Southwestern College’s commitment to supporting the L&NT
Department and the SBBG’s long-term role as a campus
resource is uncertain based upon budgetary support for
faculty positions and garden maintenance.
Campus facilities operate on a Monday through Friday schedule.
The South Bay Botanical Garden site is located in southwestern
corner of the campus.
o Limited hours of operation and public accessibility.
o SBBG operates on a Tuesday – Saturday schedule.
o Limited public parking adjacent to SBBG.
o Garden maintenance within SBBG dependent on student and
volunteer availability.
o SBBG was poorly maintained during June 18, 2014 walk
through inspection.
Future Actions
At this time, based on the criteria identified and of the sites
reviewed, Otay Ranch Town Center appears to be the best fit for a
demonstration garden in Chula Vista. However, staff will continue to
evaluate the potential sites with more focused conversations with
potential partnering organizations. This is necessary to develop a
clear path of how a demonstration garden might be accomplished. In
the event staff and a potential partner have a viable path to
accomplish a garden, staff will bring this option to the Board for
direction.
FISCAL IMPACT: Joe Beachem, Chief Financial Officer
Fiscal year 2015 has an approved budgeted amount of $100,000 for the
demonstration garden. Since staff time has been budgeted separately
under operating salaries and benefits, the full $100,000 may be used
to hire third parties to complete the demonstration garden. To date,
none of this budget has been spent.
At this point, staff has been solely focused on evaluating potential
sites. With more certainty of the viability of a particular site,
the next step will be to develop a request for proposal and obtain
bids. Staff will have a better understanding of how to best use the
budgeted amount further along in the process.
STRATEGIC GOAL:
Work with local agencies to influence developers, builders, and the
community to incorporate practical water efficient practices.
LEGAL IMPACT:
None.
Attachments:
A) Committee Action
B) Presentation
ATTACHMENT A
SUBJECT/PROJECT:
Proposed Water Conservation Demonstration Garden
Partnership
COMMITTEE ACTION:
This is an informational item only.
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 Conservation
Demonstration Garden
Attachment B
November 5, 2014
Parameters for Site Selection
•Southern portion of the District (Chula Vista area)
•Willing partnering agency
•Space available
•Accessible to the general public
•Onsite parking
•Access to water for irrigation
2
OWD Responsibilities
•Cost of professional garden design plan
•Cost of installation of irrigation system, hardscape material,
and landscape plants
•Cost of interpretive signage
•Promotion of the demonstration garden
•Promotion of the water sustainability partnership
3
Partner Responsibilities
•An area of high visibility
•Water supply
•Public access
•Maintenance and water costs
•Promotion of the water sustainability partnership
4
Potential Sites
•Otay Ranch Town Center (ORTC)
•Salt Creek Community Center (SCCC)
•Rice Canyon Open Space Preserve (RCOSP)
•Southwestern College
5
6
Otay Ranch Town Center (ORTC)
Site Location: Adjacent to the western side of Macy’s store,
across the street from the ORTC dog park
Size of Space: 10,987 square feet
Governing Authority: General Growth Properties
Location: Board District 1
7
8
Attributes of ORTC Site
Accessibility: Easy access via 125 Expressway, Birch Road and Olympic Parkway
Parking: Ample free parking available
Restrooms: Public restroom facilities available
Maintenance: Brickman/Valley Crest Landscape Co.
Improvements: Completely undeveloped site
Exposure: Provides broadest public exposure to a wide variety of constituents
9
Limitations of ORTC Site
•Commercial for‐profit mall
•Long‐term financial outlook unknown
•Long‐range development plan unknown
•Demonstration garden site could be displaced by future commercial tenant
•Length of demonstration garden partnership must be negotiated
•Partnership contract must protect District’s financial investment
•A vacant site with no irrigation structure in place
10
ORTC Site
11
Salt Creek Community Center (SCCC)
Site Location: Adjacent to entry point at Otay Lakes Rd and
parking lot
Size of Space: 5,095 square feet
Governing Authority: City of Chula Vista Park & Recreation
Department
Location: Board District 1
12
13
Attributes of SCCC Site
Accessibility: Easy access off Otay Lakes Road
Parking: Ample free parking available
Restrooms: Public restroom facilities available
Maintenance: Provided by Chula Vista Parks Department
Improvements: Site consists of grass that must be removed
Exposure: Community center is used by many people living in the area
14
Limitations of SCCC Site
•Located at the eastern edge of District’s Chula Vista service area
•Primary users of SCCC programs are those living nearby
•Limited square footage available, restricts garden design plan potential
•Site maintenance would be provided by city staff with an already large
service area to maintain
15
SCCC Site
16
Rice Canyon Open Space Preserve (RCOSP)
Site Location: Adjacent to Rancho Del Rey Parkway
Size of Space: 4,850 square feet
Governing Authority: City of Chula Vista Open Space Department
Location: Board District 2
17
18
Attributes of RCOSP Site
Accessibility: Easy access off Rancho del Rey Parkway near Buena Vista Way
Parking: Eight paved spots available with a large gravel overflow area
Restrooms: No restrooms available onsite
Maintenance: Blue Skies Landscape Maintenance Company
Improvements: Water is available on‐site for irrigation, existing landscape would need to be
removed/re‐purposed
Exposure: RCOSP is the future site of Chula Vista sponsored composting and sustainability
classes
19
Limitations of RCOSP Site
•Smallest square footage of all sites considered
•Existing cactus and succulent garden would be adjacent to demonstration
garden and four times the size
•Stark contrast between professionally designed garden and succulent
garden installed by volunteers with no design plan
•Minimal signage exists to identify existing plant material
•Site is currently not maintained well with weeds growing throughout
20
RCOSP Site
21
Southwestern College
Site Location: Centrally located within Chula Vista
Size of Space: Site has not been specifically identified
Governing Authority: Southwestern Community College District
Location: Board District 4
22
23
Attributes of Southwestern Site
Accessibility: Public access difficult to normal student traffic
Parking: Limited public parking available campus‐wide
Restrooms: Restrooms located outside existing South Bay Botanical Garden (SBBG)
Maintenance: Docents may be available to support garden
Improvements: Awaiting a specific site to determine what would need to be removed or
retrofitted
Exposure: Current site of SBBG, Landscape and Nursery Technology Department offering
courses since 1975
24
Limitations of Southwestern Site
•Multi‐tiered college administrative proposal review and approval levels
•Commitment to support demonstration garden is uncertain
•Campus facilities operate on a Monday through Friday schedule
•The South Bay Botanical Garden Site is located in the southwestern corner of
campus
•Limited hours of operability and accessibility (Tuesday‐Saturday)
•Limited public parking
•Garden maintenance dependent on student and volunteer availability
•Garden was poorly maintained during walk through on June 18, 2014
25
Southwestern College Site
26
Next Steps
•At this time, staff believes Otay Ranch Town Center to be the best
fit for a demonstration garden
•Staff will begin having more focused conversations with the
potential partnering organizations
•Staff will begin analysis on feasibility of a mutually beneficial
garden site
27