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Home My WebLink About06-24-13 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 MONDAY June 24, 2013 12:00 P.M. This is a District Committee meeting. This meeting is being posted as a special meeting in order to comply with the Brown Act (Government Code Section §54954.2) in the event that a quorum of the Board is present. Items will be deliberated, however, no formal board actions will be taken at this meeting. The committee makes recommendations to the full board for its consideration and formal action. AGENDA 1. ROLL CALL 2. PUBLIC PARTICIPATION – OPPORTUNITY FOR MEMBERS OF THE PUBLIC TO SPEAK TO THE BOARD ON ANY SUBJECT MATTER WITHIN THE BOARD'S JURISDICTION BUT NOT AN ITEM ON TODAY'S AGENDA DISCUSSION ITEMS 3. APPROVE LEASE AMENDMENTS WITH SPRINT PCS ASSETS, LLC, A DELAWARE LIMITED LIABILITY COMPANY (SPRINT PCS) FOR MODIFICATIONS TO SIX (6) EXISTING COMMUNICATIONS FACILITIES LOCATED THROUGHOUT THE DISTRICT (MARTIN) [5 minutes] 4. ADOPT RESOLUTION NO. 4211 TO CONTINUE WATER AND SEWER AVAILABILITY CHARGES FOR DISTRICT CUSTOMERS FOR FISCAL YEAR 2013-2014 TO BE COLLECTED THROUGH PROPERTY TAX BILLS (MENDEZ- SCHOMER) [5 minutes] 5. ADOPT RESOLUTION NO. 4212 TO ESTABLLISH THE TAX RATE FOR IMPROVEMENT DISTRICT NO. 27 AT $0.005 FOR FISCAL YEAR 2013-2014 (ZIOMEK) [5 minutes] 2 6. RECEIVE THE DISTRICT’S INVESTMENT POLICY (POLICY NO. 27) FOR REVIEW, AND ADOPT RESOLUTION NO. 4213 AMENDING THE POLICY AND RE-DELEGATING AUTHORITY FOR ALL INVESTMENT RELATED ACTIVITIES TO THE CHIEF FINANCIAL OFFICER IN ACCORDANCE WITH GOVERNMENT CODE SECTION 53607 (KOEPPEN) [5 minutes] 7. ADOPT RESOLUTION NO. 4215 FOR THE ELECTION OF FOUR (4) CANDIDATES FOR THE SPECIAL DISTRICT RISK MANAGEMENT AUTHORITY’S (SDRMA) BOARD OF DIRECTORS (SARNO) [5 minutes] 8. CONSIDER CASTING A VOTE TO ELECT A MEMBER TO THE CALIFORNIA SPECIAL DISTRICTS ASSOCIATION’S BOARD OF DIRECTORS (WATTON) [5 minutes] 9. APPROVE INFORMATION TECHNOLOGY CONTRACTS FOR PHONE SERVICES, MANAGED SERVICES FOR THE DATA CENTER AND GPS TRACKING (STEVENS) [5 minutes] 10. ADJOURNMENT BOARD MEMBERS ATTENDING: Mitch Thompson, Chair Jose Lopez 3 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 June 21, 2013 I posted a copy of the foregoing agenda near the regular meeting place of the Board of Directors of Otay Water District, said time being at least 24 hours in advance of the meeting of the Board of Directors (Government Code Section §54954.2). Executed at Spring Valley, California on June 21, 2013. ______/s/_ Susan Cruz, District Secretary _____ STAFF REPORT TYPE MEETING: Regular Board MEETING DATE: July 3, 2013 SUBMITTED BY: Dan Martin Engineering Manager PROJECT: AS001- CS0005 DIV. NOS. 2,3,5 APPROVED BY: Rod Posada, Chief, Engineering German Alvarez, Assistant General Manager Mark Watton, General Manager SUBJECT: Request to Approve Lease Amendments with Sprint PCS Assets, LLC, a Delaware Limited Liability Company, for Modifications to Six (6) Existing Communications Facilities Located Throughout the District GENERAL MANAGER'S RECOMMENDATION: That the Otay Water District (District) Board of Directors (Board) authorize the General Manager to execute lease amendments with Sprint PCS Assets, LLC, a Delaware Limited Liability Company (Sprint PCS) for modifications to six (6) existing communications facilities located throughout the District (see Exhibit A for Property locations). COMMITTEE ACTION: See Attachment A. PURPOSE: To obtain Board approval authorizing the General Manager to execute lease amendments (see Attachment B) with Sprint PCS that allows modifications to six (6) existing communications facilities located throughout the District. The lease amendments will grant Sprint PCS the right to upgrade their existing site to Long Term Evolution (LTE) technology. AGENDA ITEM 3 2 ANALYSIS: The District currently maintains six (6) lease agreements with Sprint PCS that allow Sprint PCS to operate and maintain unmanned wireless communication facilities that include panel antennas that are attached to the District’s water reservoirs and enclosures that contain Sprint PCS’ equipment cabinets. The Sprint sites that are included in the existing lease agreements are at the following locations, as reflected in Exhibit A: 1. Point Barrow Drive (458-1 & 2 Reservoirs) 2. Weighorst Way (850-3 Reservoir) 3. Bear Mountain Way (1296-1, 2 & 3 Reservoirs) 4. Pence Drive (803-3 Reservoir) 5. Campo Road (832-1 & 2 Reservoirs) 6. Sweetwater Springs Boulevard (Otay Water District Headquarters) Sprint PCS approached the District with a request to perform modifications to the existing wireless communication facilities to upgrade the facilities to LTE technology. Sprint PCS’ scope work will include switching out existing four (4) foot antennas with larger six (6) foot antennas as well as the addition of Radio Repeater Units (RRUs) for each new antenna. The new antennas and RRUs work together as part of Sprint PCS’ LTE upgrade to increase data capacity. Each facility has an existing SDG&E electrical service/meter and connection to a landline telephone service. As a result of the request from Sprint PCS, the District has required that the existing leases be amended to memorialize the addition of new improvements on the District’s property and to strengthen the terms of the existing leases with language that reflects the current District lease terms. The additional language in the proposed lease amendments include terms for the following:  Security Deposit equal to the sum of two months’ rent  Elimination of pro-rating language to simplify the billing process  20 percent penalties for late payment  Non-curable Event of Default for failure to pay rent  Magnetic mount or other non-destructive alternative attachment requirement  Utilities and back-up power provisions  New Assignment of Lease requirement to assist in documenting change of ownership 3 As part of the lease amendments the Rent shall be increased on each calendar anniversary of the Commencement Date at a rate of four percent (4%) per annum or the annual Consumer Price Index change (“CPI”), whichever is greater. The lease amendments also include a non-refundable administrative fee of $4,500 for each amendment that will be due within (30) days of the date of execution of the lease amendment by both parties to reimburse the District for administrative expenses and costs related to the District's supervision and assistance with the construction phases of the Project. The District will receive copies of construction drawings, all permits, and approvals by local regulatory agencies prior to granting permission to start construction. Staff agrees with the design concept for the proposed facility construction. FISCAL IMPACT: Joseph Beachem, Chief Financial Officer The District will continue to receive rent which will now be subject to an annual inflation adjustment of four percent or the annual Consumer Price Index change (“CPI”), whichever is greater, effective upon the execution of the lease amendments. LEGAL IMPACT: The lease amendments have been reviewed and approved by District General Counsel for content and form. 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. DJM/RP:jf P:\WORKING\CELLULAR LEASE FILE\SPRINT\BD 07-03-2013, Staff Report, Sprint PCS_6 Amendments\BD 07-03-2013, Staff Report, Sprint PCS_6 Amendments, (DM).doc Attachments: Exhibit A – Location Map Attachment A – Committee Action Attachment B-1 - Point Barrow Drive Agreement Attachment B-2 - Weighorst Way Agreement Attachment B-3 - Bear Mountain Way Agreement Attachment B-4 - Pence Drive Agreement Attachment B-5 - Campo Road Agreement Attachment B-6 - Sweetwater Springs Boulevard Agreement ATTACHMENT A SUBJECT/PROJECT: AS002-CS0005 AS002-CS0006 AS002-CS0010 AS002-CS0013 AS004-CS0001 AS005-CS0012 Request to Approve Lease Amendments with Sprint PCS Assets, LLC, a Delaware Limited Liability Company, for Modifications to Six (6) Existing Communications Facilities Located Throughout the District COMMITTEE ACTION: The Finance, Administration, and Communications Committee (Committee) reviewed this item at a meeting held on June 24, 2013. 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. ATTACHMENTS B-1 – B-6 SUBJECT/PROJECT: AS002-CS0005 AS002-CS0006 AS002-CS0010 AS002-CS0013 AS004-CS0001 AS005-CS0012 Request to Approve Lease Amendments with Sprint PCS Assets, LLC, a Delaware Limited Liability Company, for Modifications to Six (6) Existing Communications Facilities Located throughout the District See attached lease agreements. FIRST AMENDMENT TO LEASE This First Amendment to Lease (the "First Amendment")is made this day of ,2013, ("Effective Date")by and between Otay Water District ("OTAY")and Sprint PCS Assets, L.L.C.,a Delaware limited liability company,f/k/a Cox PCS Assets,L.L.C.,a Delaware limited liability company ("TENANT"),with reference to the facts set forth in the Recitals below: RECITALS A.OTAY is the owner of that certain real property and facilities known as the "I.D.10", 458-1-10 and 458-2-10,a Reservoir Site (the "Property"). B.OTAY and TENANT are parties to that certain Lease dated July 19,2001 (the "Lease"or "Agreement")pursuant to which TENANT is leasing from OTAY land at the Property,together with the right of access to and from the nearest public right-of-way and the right to install utilities (collectively,the "Premises"). C.Tenant has requested a modification to the type and mounting of the Improvements currently on the Premises (the "New Improvements"). D.OTAY and TENANT have agreed to amend the Agreement to memorialize the addition of the New Improvements to the Premises. AGREEMENT NOW,THEREFORE,in consideration of the facts contained in the Recitals above,the mutual covenants and conditions below,and other good and valuable consideration,the receipt and sufficiency ofwhich are hereby acknowledged,the parties agree as follows: 1.New Improvements.OTAY consents to TENANT construction and installation of new communications facilities,as more particularly described and depicted on Exhibit "B-l "which is attached hereto and made a part hereof.The parties acknowledge and agree that the attached Exhibit "B-l"is intended to supplement the Exhibit "B"attached to the Agreement. 2.Governmental Approvals.Any required permits for the use or operation of the New Improvements shall be obtained by TENANT at TENANT'S sole expense.Furthermore,it is understood and agreed that TENANT'S ability to install the New Improvements is contingent upon its obtaining all of the certificates,permits and other approvals that may be required by any Federal,State or Local authorities which will permit TENANT to install and operate the New Improvements within the Premises.OTAY agrees,at no expense to OTAY,to reasonably cooperate with TENANT in making application for and obtaining all governmental licenses, permits and approvals that may be required for TENANT'S intended use ofthe Premises. 3.Amended Provisions.The following provisions shall be amended as follows: 3a.Section 6;Rent shall be replaced with the following: FIRST AMENDMENT TO LEASE This First Amendment to Lease (the "First Amendment") is made this day of ____, 2013, (“Effective Date”) by and between Otay Water District ("OTAY") and Sprint PCS Assets, L.L.C., a Delaware limited liability company ("TENANT"), with reference to the facts set forth in the Recitals below: RECITALS A. OTAY is the owner of that certain real property located 12887 Weighorst Way, El Cajon, California a Reservoir Site formerly known as 12885 Jamacha Boulevard, El Cajon, California (the "Property"). B. OTAY and TENANT are parties to that certain Lease dated August 24, 2000 (the "Lease" or “Agreement”) pursuant to which TENANT is leasing from OTAY land at the Property, together with the right of access to and from the nearest public right-of-way and the right to install utilities (collectively, the "Premises"). C. Tenant has requested a modification to the type and mounting of the Improvements currently on the Premises (the “New Improvements”). D. OTAY and TENANT have agreed to amend the Agreement to memorialize the addition of the New Improvements to the Premises. AGREEMENT NOW, THEREFORE, in consideration of the facts contained in the Recitals above, the mutual covenants and conditions below, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. New Improvements. OTAY consents to TENANT construction and installation of new communications facilities, as more particularly described and depicted on Exhibit "B-l " which is attached hereto and made a part hereof. The parties acknowledge and agree that the attached Exhibit "B-1" is intended to supplement the Exhibit "B" attached to the Agreement. 2. Governmental Approvals. Any required permits for the use or operation of the New Improvements shall be obtained by TENANT at TENANT's sole expense. Furthermore, it is understood and agreed that TENANT's ability to install the New Improvements is contingent upon its obtaining all of the certificates, permits and other approvals that may be required by any Federal, State or Local authorities which will permit TENANT to install and operate the New Improvements within the Premises. OTAY agrees, at no expense to OTAY, to reasonably cooperate with TENANT in making application for and obtaining all governmental licenses, permits and approvals that may be required for TENANT’S intended use of the Premises. 3. Amended Provisions. The following provisions shall be amended as follows: FIRST AMENDMENT TO LEASE This First Amendment to Lease (the "First Amendment")is made this day of ,2013, ("Effective Date")by and between Otay Water District ("OTAY")and Sprint PCS Assets, L.L.C.,a Delaware limited liability company,f/k/a Cox PCS Assets,L.L.C.,a Delaware limited liability company ("TENANT"),with reference to the facts set forth in the Recitals below: RECITALS A.OTAY is the owner of that certain real property located on 13635 Bear Mountain Road, Jamul,California a Reservoir Site (the "Property"). B.OTAY and TENANT are parties to that certain Lease dated July 12,2000 (the "Lease"or "Agreement")pursuant to which TENANT is leasing from OTAY land at the Property,together with the right of access to and from the nearest public right-of-way and the right to install utilities (collectively,the "Premises"). C.Tenant has requested a modification to the type and mounting of the Improvements currently on the Premises (the "New Improvements"). D.OTAY and TENANT have agreed to amend the Agreement to memorialize the addition of the New Improvements to the Premises. AGREEMENT NOW,THEREFORE,in consideration of the facts contained in the Recitals above,the mutual covenants and conditions below,and other good and valuable consideration,the receipt and sufficiency of which are hereby acknowledged,the parties agree as follows: 1.New Improvements.OTAY consents to TENANT construction and installation of new communications facilities,as more particularly described and depicted on Exhibit "B-l "which is attached hereto and made a part hereof.The parties acknowledge and agree that the attached Exhibit "B-l"is intended to supplement the Exhibit "B"attached to the Agreement. 2.Governmental Approvals.Any required permits for the use or operation of the New Improvements shall be obtained by TENANT at TENANT'S sole expense.Furthermore,it is understood and agreed that TENANT'S ability to install the New Improvements is contingent upon its obtaining all of the certificates,permits and other approvals that may be required by any Federal,State or Local authorities which will permit TENANT to install and operate the New Improvements within the Premises.OTAY agrees,at no expense to OTAY,to reasonably cooperate with TENANT in making application for and obtaining all governmental licenses, permits and approvals that may be required for TENANT'S intended use of the Premises. 3.Amended Provisions.The following provisions shall be amended as follows: 3a.Section 5;Rent shall be replaced with the following: FIRST AMENDMENT TO LEASE This First Amendment to Lease (the "First Amendment")is made this day of ,2013, ("Effective Date")by and between Otay Water District ("OTAY")and Sprint PCS Assets, L.L.C.,a Delaware limited liability company ("TENANT"),with reference to the facts set forth in the Recitals below: RECITALS A.OTAY is the owner of that certain real property and facility known as the "Singing Hills" (803-3)Reservoir Site (the "Property"). B.OTAY and TENANT are parties to that certain Lease dated December 8,2000 (the "Lease"or "Agreement")pursuant to which TENANT is leasing from OTAY land at the Property,together with the right of access to and from the nearest public right-of-way and the right to install utilities (collectively,the "Premises"). C.Tenant has requested a modification to the type and mounting of the Improvements currently on the Premises (the "New Improvements"). D.OTAY and TENANT have agreed to amend the Agreement to memorialize the addition of the New Improvements to the Premises. AGREEMENT NOW,THEREFORE,in consideration of the facts contained in the Recitals above,the mutual covenants and conditions below,and other good and valuable consideration,the receipt and sufficiency of which are hereby acknowledged,the parties agree as follows: 1.New Improvements.OTAY consents to TENANT construction and installation of new communications facilities,as more particularly described and depicted on Exhibit "B-l "which is attached hereto and made a part hereof.The parties acknowledge and agree that the attached Exhibit "B-l"is intended to supplement the Exhibit "B"attached to the Agreement. 2.Governmental Approvals.Any required permits for the use or operation of the New Improvements shall be obtained by TENANT at TENANT'S sole expense.Furthermore,it is understood and agreed that TENANT'S ability to install the New Improvements is contingent upon its obtaining all of the certificates,permits and other approvals that may be required by any Federal,State or Local authorities which will permit TENANT to install and operate the New Improvements within the Premises.OTAY agrees,at no expense to OTAY,to reasonably cooperate with TENANT in making application for and obtaining all governmental licenses, permits and approvals that may be required for TENANT'S intended use ofthe Premises. 3.Amended Provisions.The following provisions shall be amended as follows: 3a.Section 5;Rent shall be replaced with the following: FIRST AMENDMENT TO LEASE This First Amendment to Lease (the "First Amendment")is made this day of ,2013, ("Effective Date")by and between Otay Water District ("OTAY")and Nextel of California, Inc.,a Delaware corporation ("TENANT"),with reference to the facts set forth in the Recitals below: RECITALS A.OTAY is the owner of that certain real property and facilities known as the "2-1"Site,at 12118 Campo Road,Spring Valley,California,a Reservoir Site (the "Property"). B.OTAY and TENANT are parties to that certain Lease dated August 14,1998 (the "Lease" or "Agreement")pursuant to which TENANT is leasing from OTAY land at the Property, together with the right of access to and from the nearest public right-of-way and the right to install utilities (collectively,the "Premises"). C.Tenant has requested a modification to the type and mounting of the Improvements currently on the Premises (the "New Improvements"). D.OTAY and TENANT have agreed to amend the Agreement to memorialize the addition of the New Improvements to the Premises. AGREEMENT NOW,THEREFORE,in consideration of the facts contained in the Recitals above,the mutual covenants and conditions below,and other good and valuable consideration,the receipt and sufficiency of which are hereby acknowledged,the parties agree as follows: 1.New Improvements.OTAY consents to TENANT construction and installation of new communications facilities,as more particularly described and depicted on Exhibit "B-l "which is attached hereto and made a part hereof.The parties acknowledge and agree that the attached Exhibit "B-l"is intended to supplement the Exhibit "B"attached to the Agreement. 2.Governmental Approvals.Any required permits for the use or operation of the New Improvements shall be obtained by TENANT at TENANT'S sole expense.Furthermore,it is understood and agreed that TENANT'S ability to install the New Improvements is contingent upon its obtaining all of the certificates,permits and other approvals that may be required by any Federal,State or Local authorities which will permit TENANT to install and operate the New Improvements within the Premises.OTAY agrees,at no expense to OTAY,to reasonably cooperate with TENANT in making application for and obtaining all governmental licenses, permits and approvals that may be required for TENANT'S intended use of the Premises. 3.Amended Provisions.The following provisions shall be amended as follows: 3a.Section 5;Rent shall be replaced with the following: ANTENNA DETAILS A-9 SAN DIEGO MARKET OFFICE DESCRIPTION DATE BY ISSUED FOR 90% CD REVIEW 03/26/13 NAB REV. 0 PROPRIETARY INFORMATION THE INFORMATION CONTAINED IN THIS SET OF DRAWINGS IS PROPRIETARY & CONFIDENTIAL TO SPRINT ANY USE OR DISCLOSURE OTHER THAN AS IT RELATES TO SPRINT IS STRICTLY PROHIBITED 9605 SCRANTON RD. SUITE 400 SAN DIEGO, CA 92121 A Technology Associates Engineering Corporation Inc. ISSUED FOR 100% FINAL CD 04/04/13 SMS A 3 NOT USED 4 5 9 6 (N) 3-1/2" DIA ANTENNA MAST MOUNT MAST MOUNT BRACKET (ALCATEL-LUCENT #849073713),(2) PER RRH (N) RRH MAIN SUPPORT BRACKET(ALCATEL-LUCENT #849147038) SIDE SUPPORT BRACKET WITH EARS(ALCATEL-LUCENT #849147053),(2) PER RRH WHEN REQUIRED ANTENNA MOUNTING7 TOP FRONTSIDE MANUFACTURER: ALU MODEL: CDMA/LTE DUAL TECH 4 X 40 W WEIGHT: 60 LBS POWER SUPPLY: -48 VDC POWER CONSUMPTION: <700W TYPICAL 8 RRH MOUNTING DETAIL ANTENNA MOUNTING DETAIL 4-8- 6-FIBERGLASS STEALTH COVER - SIZE & TYPE TO MATCH ANTENNA COVER SECURE TO (E) WATER TANK USING ADHESIVE FIBERGLASS STEALTH COVER RIGHT ANGLE CONNECTOR SECURE TO (E) WATER TANK USING ADHESIVE BOTTOM COVER TO PREVENT VIEW FROM BELOW FIBERGLASSSTEALTH COVER SECURE TO (E) WATER TANK USING ADHESIVE (E) WATER TANK ANTENNA SUPPORT NOTES: 1. CONTRACTOR TO VERIFY CLEARANCE AND CONDITIONS OF (E) WATER TANK AT LOCATION OF WORK AND REVIEW DETAILS FOR ANY REQUIRED ADJUSTMENTS. 2. CONTRACTOR TO PROVIDE COMPLETE SHOP DRAWINGS FOR REVIEW PRIOR TO FABRICATION. 3. CONTRACTOR TO NOTIFY A&E OF ANY DISCREPANCIES WITH THE NEW LAYOUT PRIOR TO PROCEEDING. ALL PIPES, BRACKETS AND MISC. HARDWARE TO BE GALVANIZED UNLESS NOTED OTHERWISE. NEW SPRINT PANEL ANTENNA (PER ANTENNA)WITH REQ'D 4°DOWNTILT 24"MAX PE R P L A N 10 " MIN . 1" 24"MAX PLAN VIEW TOP VIEW SECTION VIEW (E) WATER TANK SECURE TO (E)WATER TANK USING ADHESIVE 1ANTENNA SPECIFICATIONS "MAGNEMOUNT" SIDE TANK MOUNT SPECIFICATIONS FOR MOUNTING SEE:9- 2 ANTENNA SPECIFICATIONS FOR MOUNTING SEE:3- FOR MOUNTING SEE:5- FOR MOUNTING SEE:7- FOR MOUNTING SEE:7- FOR MOUNTING SEE:3- 4-8- 1- 4-8- 1- 6- 24" 7'- 0 " 24" 7'-0 " FIRST AMENDMENT TO LEASE This First Amendment to Lease (the "First Amendment")is made this day of ,2013, ("Effective Date")by and between Otay Water District ("OTAY")and Sprint PCS Assets, L.L.C.,a Delaware limited liability company ("TENANT"),with reference to the facts set forth in the Recitals below: RECITALS A.OTAY is the owner of that certain real property located on 2554 Sweetwater Springs Boulevard,Spring Valley,California (the "Property"). B.OTAY and TENANT are parties to that certain Lease dated August 24,2000 (the "Lease" or "Agreement")pursuant to which TENANT is leasing from OTAY land at the Property, together with the right of access to and from the nearest public right-of-way and the right to install utilities (collectively,the "Premises"). C.Tenant has requested a modification to the type and mounting of the Improvements currently on the Premises (the "New Improvements"). D.OTAY and TENANT have agreed to amend the Agreement to memorialize the addition of the New Improvements to the Premises. AGREEMENT NOW,THEREFORE,in consideration of the facts contained in the Recitals above,the mutual covenants and conditions below,and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged,the parties agree as follows: 1.New Improvements.OTAY consents to TENANT construction and installation of new communications facilities,as more particularly described and depicted on Exhibit "B-l "which is attached hereto and made a part hereof.The parties acknowledge and agree that the attached Exhibit "B-l"is intended to supplement the Exhibit "B"attached to the Agreement. 2.Governmental Approvals.Any required permits for the use or operation of the New Improvements shall be obtained by TENANT at TENANT'S sole expense.Furthermore,it is understood and agreed that TENANT'S ability to install the New Improvements is contingent upon its obtaining all ofthe certificates,permits and other approvals that may be required by any Federal,State or Local authorities which will permit TENANT to install and operate the New Improvements within the Premises.OTAY agrees,at no expense to OTAY,to reasonably cooperate with TENANT in making application for and obtaining all governmental licenses, permits and approvals that may be required for TENANT'S intended use ofthe Premises. 3.Amended Provisions.The following provisions shall be amended as follows: 3a.Section 5;Rent shall be replaced with the following: STAFF REPORT TYPE MEETING: Regular Board MEETING DATE: July 3, 2013 SUBMITTED BY: Alicia Mendez-Schomer, 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: Adopt Resolution No. 4211 to Continue Water and Sewer Availability Charges for District Customers for Fiscal Year 2013-2014 to be Collected through Property Tax Bills GENERAL MANAGER’S RECOMMENDATION: That the Board adopt Resolution No. 4211 to continue water and sewer availability charges for District customers for Fiscal Year 2013-2014 to be collected through property tax bills. COMMITTEE ACTION: See Attachment A. PURPOSE: That the Board consider the adoption of Resolution No. 4211 to continue water and sewer availability charges for District customers for Fiscal Year 2013-2014 to be collected through property tax bills. ANALYSIS: State Water Code Section 71630-71637 authorizes the District to access such availability charges. The District levies availability charges each year on property in both developed and undeveloped AGENDA ITEM 4 2 areas. In order to place these charges on the tax roll, the County of San Diego requires the District to provide a resolution authorizing the charges. Each year, the District provides a resolution along with the listing of charges by parcel. Current legislation provides that any amount up to $10 per parcel (one acre or less) is for general use and any amount over $10 per parcel ($30 per acre for parcels over one acre) is restricted, to be expended in and for that Improvement District. The District uses amounts over $10 per parcel to develop water and sewer systems within the Improvement Districts where the funds are collected. In accordance with legislation, the District places amounts up to $10 per parcel in the General Fund. FISCAL IMPACT: Joe Beachem, Chief Financial Officer The availability charges, as budgeted will generate approximately $1.24 million in revenue. STRATEGIC GOAL: This revenue source will help the District meet its fiscal responsibility to its ratepayers. LEGAL IMPACT: None. Attachments: Attachment A – Committee Action Form Attachment B – Resolution No. 4211 ATTACHMENT A SUBJECT/PROJECT: Adopt Resolution No. 4211 to Continue Water and Sewer Availability Charges for District Customers for Fiscal Year 2013-2014 to be Collected through Property Tax Bills COMMITTEE ACTION: That the Finance, Administration and Communications Committee recommend that the Board adopt Resolution No. 4211 to continue water and sewer availability charges for District customers for Fiscal Year 2013-2014 to be collected through property tax bills. 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. 4211 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE OTAY WATER DISTRICT CONTINUING PREVIOUSLY ESTABLISHED WATER AND SEWER AVAILABILITY CHARGES FOR FISCAL YEAR 2013-2014; REQUESTING THE COUNTY TO COLLECT SUCH AVAILABILITY CHARGES ON THE 2013-2014 SECURED TAX ROLL AND TAKING OTHER RELATED ACTIONS WHEREAS, the Otay Water District (herein "District") is a member of the San Diego County Water Authority and the Metropolitan Water District of Southern California and, as a member, the District is entitled to purchase water for distribution within the District and water so purchased is available to property in the District that is also within the San Diego County Water Authority and the Metropolitan Water District of Southern California, without further need for annexation to any agency; and WHEREAS, Improvement Districts No. 14 and 18 and Assessment District No. 4 (Hillsdale) have been formed within the Otay Water District (herein "District") and sanitary sewers have been constructed and sewer service is available to land within each of the said districts; and WHEREAS, in consideration of the benefit that water availability confers upon property within the District, and in further consideration of the need for revenue to pay the cost of water storage and transmission facilities which directly and specially benefit property within the District, the District has previously determined that water availability charges be fixed and established under applicable provisions of law; and WHEREAS, in consideration of the benefit which sewer availability confers upon property within Improvement Districts No. Attachment B 2 14 and 18 and within Assessment District No. 4 (Hillsdale), and in further consideration of the need to pay the cost of sanitary sewers which directly and specifically benefit those properties, the District has previously determined that sewer availability charges be fixed and established for Improvement Districts No. 14 and 18 and Assessment District No. 4 (Hillsdale), all as provided under applicable provisions of law; and WHEREAS, the District desires to continue the collection of such water and sewer availability charges without increases or revisions in methodology or application. NOW, THEREFORE, the Board of Directors of the Otay Water District resolves, determines and orders as follows: 1. SCHEDULE OF WATER CHARGES (A) The water availability charges previously fixed and established are hereby continued for Fiscal Year 2013-2014 at the existing rates, as follows: (1) In Improvement Districts No. 5 and La Presa No. 1 the charge shall be $10.00 per acre of land and $10.00 per parcel of land less than one acre. (2) In Improvement Districts No. 2, 3, 7, 9, 10, 19, 20, 22, 25 and 27 the charge shall be $30.00 per acre of land and $10.00 per parcel of land less than one acre. (3) For land located outside an improvement district and within one mile of a District water line, the charge shall be $10.00 per acre of land and $10.00 for each parcel less than one acre. 3 (4) For land located outside an improvement district and greater than one mile from District facilities, the charge shall be $3.00 per acre of land and $3.00 for each parcel less than one acre. (B) Modifications The charges provided for in subparagraphs (1) through (4) in (A) above shall be modified upon petition by the property owner where the property does not receive water from the District as follows: (1) where a parcel of land or a portion thereof is within an open space easement approved by San Diego County, the charge for such parcel or portion thereof shall be fifty percent (50%) of the charge determined pursuant to paragraph (A), provided the owner files with the District proof, satisfactory to the District, that said parcel of land or portion thereof is within such a designated permanent open space area; (2) where a parcel of land or portion thereof is in an agricultural reserve under a Land Conservation Contract with the County of San Diego, pursuant to the Land Conservation Act of 1965 as amended, the charge for such parcel shall be $3.00 per acre, provided the owner files with the District proof, satisfactory to the District, that said parcel of land or portion thereof is within such an agricultural preserve; 4 (3) where a parcel of land or a portion thereof is within an area designated as a floodplain by the County of San Diego, the charge for such a parcel or portion thereof shall be $3.00 per acre, provided the owner files with the District proof, satisfactory to the District, that said parcel of land or portion thereof is within such designated floodplain; and (4) where a parcel of land or portion thereof exceeds a 30% slope, and where such is not within a legal subdivision, lot-split or planned residential development, the charge for the slope portion shall be $3.00 per acre, or if such a parcel is less than one acre and more than one-half of the area exceeds 30% slope, $3.00 for the parcel, provided the owner files with the District proof, satisfactory to the District, that said parcel of land or portion thereof meets or exceeds the slope. (C) Exceptions The charges provided for in (A) and (B) above shall not apply, upon petition by the property owner, to the following: (1) land located within an area designated as a floodway by the County of San Diego; (2) land designated as a vernal pool area by a govern- mental agency authorized to make such a designation and which designation prohibits use of such area for any purpose; 5 (3) land owned by non-profit, tax-exempt conservation organizations specializing in identifying and protecting the natural habitat of rare species; or (4) land that is located within the boundaries of the Otay Water District but not within the boundaries of the Metropolitan Water District of Southern California and the San Diego County Water Authority. 2. SCHEDULE OF SEWER CHARGES (A) Sewer standby assessment or availability charges are hereby fixed and established for Fiscal Year 2013-2014 as follows: (1) In Improvement Districts No. 14, 18 and Assessment District No. 4 (Hillsdale), the charges shall be $30.00 per acre of land and $10.00 per parcel of land less than one acre. The preceding charges shall not apply, upon petition by the property owner, to the following: (a) any portion of a parcel which is undeveloped and maintained in its natural state within an Open Space Area as a requirement under the San Diego County General Plan, provided the owner of such parcel files proof, satisfactory to the District, of such designed Open Space Area; (b) any portion of a parcel located within an area designated by the County of San Diego as a floodway or floodplain; or (c) any portion of a parcel of land which exceeds a slope of 30% and which is not within a legal 6 subdivision, lot split or planned lot split or planned residential development. 3. DEFERRALS (A) Deferral of Charge, Purpose Situations may arise when an owner of a parcel of land does not use and has no present intention of using water and/or sewer provided by the District on a parcel of land, as defined in Section 4. The purpose of this section is to permit an evaluation by the District, on a case-by-case basis, of the circumstances which pertain to such situations to determine whether a deferral of charges should be approved according to the terms and conditions herein provided. Any owner of a parcel of land who believes that the amount of the water and/or sewer availability charges fixed against such parcel should be deferred may file an application with the District for deferral of the charge, as follows: (a) Application The application shall include a statement describing the circumstances and factual elements which support the request for deferral. (b) The General Manager shall consider the request within sixty (60) days after the filing of a completed application. If the application for deferral meets the established criteria, the General Manager may decide whether to approve the request and order the charge deferred accordingly. If the request is denied, the applicant shall be notified in writing stating the reasons for the denial. 7 (B) Appeal to Board of Directors If the General Manager denies a request, the owner may file an appeal with the Board of Directors within sixty (60) days after such denial. No new application for deferral need be considered by the General Manager until expiration of twelve (12) months from the date of a denial, unless differently directed by the Board of Directors. (C) Deferred Charges on Restricted Parcels, Criteria The levy of the charge may be deferred annually as to any parcel of land which meets each of the following criteria: (a) The owner of such parcel makes a timely application requesting deferral of the charge. (b) The parcel, which is the subject of the request, will become subject to enforceable restrictions which prohibits the connection to the District sewer system or use of water on the parcel, except by means of natural precipitation or runoff; provided, however, if considered appropriate by the General Manager, local water may be used for limited domestic stock watering and irrigation uses. (c) The owner executed a recordable agreement which includes provisions that: (1) set forth the enforceable restrictions pertinent to the subject parcel; (2) the agreement may be terminated upon written request by the owner and payment of all deferred water and/or sewer availability charges, plus interest thereon, compounded 8 annually, and accruing at the legal rate from the date such charges would have been otherwise due and payable; (3) no water and/or sewer service from the District shall be provided to such parcel for a period of ten (10) years after the total amount due for the charges deferred, plus annually compounded interest, is paid in full to the District, unless a surcharge penalty as described below is paid to the District prior to connection of any water and/or sewer service; (4) if the surcharge is not paid, during the ten (10) year period, while water and/or sewer service is not available to the subject land, the owner shall pay all annual water or availability charges as fixed; and (5) contains such other provisions considered by the General Manager to be appropriate. (D) Surcharge Upon termination of the deferral agreement, an owner may elect to receive water and/or sewer service prior to the expiration of the ten (10) year penalty period upon payment of a surcharge. The surcharge shall be equal to the amount of the annual water and/or sewer availability charges fixed for the parcel(s) of land in the year of election to receive water and/or sewer service multiplied by the number of years remaining of the ten (10) 9 year penalty period. This surcharge shall also apply if a property owner develops a parcel that is subject to a deferral agreement without termination of said agreement. (E) Enforcement Procedures In order to insure that terms and conditions of the recordable agreement are being met, the General Manager shall: (1) Maintain a record of all parcels approved for deferral of the water assessments or availability charges. (2) Report to the Board of Directors any instances where the terms of the agreement are being violated. (3) Take such other actions or procedures considered appropriate. 4. DEFINITION OF PARCEL The term "parcel" as used herein shall mean a parcel of land as shown on the assessment rolls of the County Assessor of San Diego County as of March, 2013. 5. NOTICE AND REQUEST TO THE BOARD OF SUPERVISORS AND AUDITOR As provided in Sections 71634 to 71637, on or before the third Monday in August, 2013, the Secretary of this District shall furnish, in writing to the Board of Supervisors of San Diego County and to the County Auditor, a description of the land within the District upon which availability charges are to be levied and collected for Fiscal Year 2013-2014 together with the amount of the assessments or charges. At the time and in the manner required by law for the levying of taxes for county purposes, the Board of Supervisors of San Diego County shall levy, in addition to taxes it levies, water and/or sewer availability charges in the amounts fixed by this 10 Resolution for the respective parcels of land described in Section 1 of this Resolution. All County officers charged with the duty of collecting taxes shall collect the charges with the regular property tax payments in the same form and manner as County taxes are collected. Such availability charges are a lien on the property with respect to which they are fixed. Collection of the charges may be enforced by the same means as provided for the enforcement of liens for state and county taxes. 6. CERTIFICATION TO COUNTY BOARD OF SUPERVISORS The District certifies that this Resolution complies with the provisions of Article XIIID of the California Constitution in that the availability charges are existing charges first set by the Board of Directors of the District prior to November 6, 1996. At the time the availability charges were initially established, the District followed the applicable provisions of law then in effect, and the District has continued to comply with such provisions, including any requirements for notices or hearings, as from time to time in effect. Therefore, pursuant to Section 71632 and Section 71638 of the California Water Code, as currently in effect, the District may continue the availability charges in successive years at the same rate. The District further certifies that the charge is not increased hereby and the methodology for the rate is the same as in previous years. The charge is imposed exclusively to finance the capital costs, maintenance and operating expenses of the water or sewer system of the District, as applicable. 7. CERTIFIED COPIES The Secretary of this District shall deliver certified copies of this Resolution to the Board of Supervisors and 11 to the Auditor of San Diego County with the list of charges described in Section 4 above. 8. CORRECTIONS; OTHER ACTIONS The General Manager of the District is hereby authorized to correct any clerical error made in any assessment or charge pursuant to this Resolution and to make an appropriate adjustment in any assessment or charge made in error. Furthermore, the General Manager and the Secretary of this District are hereby directed to take any further actions and deliver such documents and certificates as necessary to carry out the purpose of this Resolution. PASSED, APPROVED AND ADOPTED by the Board of Directors of the Otay Water District at a regular meeting duly held this 3rd day of July, 2013. ___________________________ President ATTEST: ______________________________ Secretary 12 I HEREBY CERTIFY that the foregoing Resolution No. 4211 was duly adopted by the BOARD OF DIRECTORS of the OTAY WATER DISTRICT at a regular meeting thereof held on the 3rd day of July, 2013 by the following vote: Ayes: Noes: Abstain: Absent: District Secretary STAFF REPORT TYPE MEETING: Regular Board MEETING DATE: July 3, 2013 SUBMITTED BY: Jeanette Ziomek, Senior Accountant 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. 4212 to Establish the Tax Rate for Improvement District No. 27 (ID 27) for Fiscal Year 2013-2014 GENERAL MANAGER’S RECOMMENDATION: That the Board adopt Resolution No. 4212 to establish the tax rate for Improvement District No. 27 (ID 27) at $0.005 for Fiscal Year 2013-2014. COMMITTEE ACTION: See Attachment A. PURPOSE: Improvement District No. 27 (ID 27) has outstanding general obligation bonds which mature in Fiscal Year 2023. On an annual basis, staff must evaluate the tax rate charged upon all property within ID 27 to ensure the amount of tax collections will support the annual debt service requirement. Currently, ID 27 is the only improvement district with outstanding general obligation debt service. AGENDA ITEM 5 2 BACKGROUND: In December 1992, the District sold $11,500,000 of general obligation bonds in ID 27 for the construction of the 30mg reservoir. At the time of the formation of ID 27, the District intended to have a maximum tax rate of $0.10 per $100 of assessed valuation. The tax rate has remained well below the intended maximum rate. In Fiscal Year 1998, the bonds were refinanced which reduced the annual debt payment. In Fiscal Year 2010, the bonds were refinanced again and reduced the annual debt payment even further. During that time, ID 27 also experienced rapid growth in its assessed valuation. The combination of the reduced debt service requirement and the increased assessed values resulted in the District’s reserve level exceeding the target level. Beginning in 2009, property valuations began decreasing and the tax collections dropped below the required debt payment. Rather than increase the tax rate, the District chose to cover the tax collection shortfall from the reserves to the extent that the reserve level remained above the target. Staff proposes to keep the tax rate at $.005 and to continue to draw down the reserves until it comes closer to the target. The rate and reserve balance will be re-evaluated again next year to determine if the rate requires adjustment to meet the District’s reserve target level. FISCAL IMPACT: Joseph R. Beachem, Chief Financial Officer The tax proceeds are legally restricted for the sole purpose of the repayment of this debt. These proceeds will be collected until the debt obligation is fully paid, at which time the fund will have a zero balance. The $0.005 tax rate will generate $598,296 in revenue. The estimated revenue, given the recommended tax rate combined with the current fund balance, will meet the annual ID 27 debt service payment of $755,438. This action lowers the fund balance, bringing it closer to the target level of six months of bond payments while maintaining a positive cash balance for the foreseeable future. STRATEGIC GOAL: Through well-established financial policies and wise management of funds, the District will continue to guarantee fiscal responsibility to its ratepayers and the community at large. 3 LEGAL IMPACT: None. Attachments: A) Committee Action Form B) Resolution No. 4212 C) ID 27 Tables ATTACHMENT A SUBJECT/PROJECT: Adopt Resolution No. 4212 to Establish the Tax Rate for Improvement District No. 27 (ID 27) for Fiscal Year 2013-2014 COMMITTEE ACTION: That the Finance, Administration and Communications Committee recommend that the Board adopt Resolution No. 4212 to establish the tax rate for Improvement District No. 27 (ID 27) at $0.005 for Fiscal Year 2013-2014. 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. 1 RESOLUTION NO. 4212 A RESOLUTION OF THE BOARD OF DIRECTORS OF OTAY WATER DISTRICT FIXING TAX RATES FOR FISCAL YEAR 2013-2014 FOR PAYMENT OF PRINCIPAL AND INTEREST ON GENERAL OBLIGATION BONDS OF IMPROVEMENT DISTRICTS (GF 1600) WHEREAS, California Water Code Section 72091 authorizes the Otay Water District, as a municipal water district, to levy an ad valorem property tax which is 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. NOW, THEREFORE, the Board of Directors of the Otay Water District resolves, determines and orders as follows: 1. Findings. It is necessary that this Board of Directors cause taxes to be levied in Fiscal Year 2013-2014 for Improvement District No. 27 of the Otay Water District to pay the amount of the principal and interest on the bonded debt of such improvement district. 2. Amounts to be Raised by Taxes. The amount required to be raised by taxation during Fiscal Year 2013-2014 for the principal and interest on the bonded debt of Improvement District No. 27 is as follows: Improvement District No. 27 $598,296 3. Tax Rates. The tax rates per one hundred dollars ($100) of the full value of all taxable property within said improvement district necessary to pay the aforesaid amounts of principal and interest on the bonded debt of said improvement district for Fiscal Year 2013-2014 is hereby determined and fixed as follows: Improvement District No. 27 $0.005 Attachment B 2 4. Certification of Tax Rates. Pursuant to Water Code Section 72094, this Board of Directors hereby certifies to the Board of Supervisors and the County Auditor of the County of San Diego the tax rates hereinbefore fixed, and said County Auditor shall, pursuant to Section 72095 of said Code, compute and enter in the County assessment roll the respective sums to be paid as tax on the property in Improvement District No. 27, using the rate of levy hereinabove fixed for such improvement district and the full value as found on the assessment roll for the property therein, and the Secretary of this Board of Directors is hereby authorized and directed to transmit certified copies of this resolution, Attachment B, and made a part hereof, to said Board of Supervisors and said Auditor. PASSED AND ADOPTED by the Board of Directors of the Otay Water District at a regular meeting held this 3rd day of July, 2013. Ayes: Noes: Abstain: Absent: ____________________________ President ATTEST: ________________________________ Secretary Attachment C History 1989 Improvement District 27 was formed with $100,000,000 bonding authorized. 1992 District issued $11,500,000 in General Obligation Bonds primarily for the constructionof a 30 million gallon storage reservoir. 1998 District refinanced outstanding debt of $10,900,000. 2009 District refinanced again outstanding debt of $7,780,000. TAXES DEBT TAX ASSESSED COLLECTED SERVICE NET RATE VALUATION INC% FY01 $1,628,500 $841,500 $787,000 $0.06000 $2,037,206,308 32% FY02 $570,300 $842,000 ($271,700)$0.02000 $2,809,479,840 38% FY03 $725,085 $848,600 ($123,515)$0.01500 $3,837,693,353 37% FY04 $829,036 $848,700 ($19,664)$0.01400 $5,047,625,296 32% FY05 $997,082 $840,800 $156,282 $0.01200 $6,454,909,846 28% FY06 $1,081,991 $840,385 $241,606 $0.01000 $8,579,576,581 33% FY 07 $868,624 $837,936 $30,688 $0.00700 $10,348,663,242 21% FY 08 $917,168 $835,017 $82,151 $0.00600 $12,518,643,676 21% FY09 $764,971 $830,823 ($65,852)$0.00500 $12,308,043,285 -2% FY10(1)$605,405 $934,674 ($329,269)$0.00500 $10,378,404,507 -16% FY11 $600,685 $781,144 ($180,459)$0.00500 $10,131,397,697 -2.4% FY12 $597,799 $752,976 ($155,177)$0.00500 $9,941,622,812 -1.9% FY13(2)$649,257 $773,863 ($124,606)$0.00500 $9,869,377,173 -0.7% TAXES DEBT TAX ASSESSEDCOLLECTEDSERVICENETRATEVALUATION INC% Fund Balance 6/30/13 $895,316 FY14 $595,829 $755,438 ($159,609)$0.00500 $9,918,724,059 -0.2% Interest $3,820 Est Fund Balance 6/30/14 $739,527 (1) Due the the debt refinancing in FY2009, there was a refunding cost of $150,625 that added to the debt service amount this year. (2) Due to timing of the report, taxes collected is an estimate. IMPROVEMENT DISTRICT 27 Historical Data Change in Fund Balance $0 $2 $4 $6 $8 $10 $12 Bi l l i o n s ASSESSED VALUATION STAFF REPORT TYPE MEETING: Regular Board MEETING DATE: July 3, 2013 SUBMITTED BY: Kevin Koeppen, Finance Manager PROJECT: DIV. NO. All APPROVED BY: Joseph R. Beachem, Chief Financial Officer German Alvarez, Assistant General Manager Mark Watton, General Manager SUBJECT: Annual Review of the District’s Investment Policy (Policy No. 27) and Adoption of Resolution No. 4213 Amending the Policy and Re-Delegating Authority for All Investment Related Activities to the Chief Financial Officer GENERAL MANAGER’S RECOMMENDATION: That the Board receives the District’s Investment Policy (Policy No. 27) for review, and adopts Resolution No. 4213 amending the policy and re-delegating authority for all investment related activities to the Chief Financial Officer (CFO), in accordance with Government Code Section 53607. COMMITTEE ACTION: See Attachment A. PURPOSE: Government Code Section 53646 recommends that the District’s Investment Policy be rendered to the Board on an annual basis for review. In addition, Government Code Section 53607 requires that for the CFO’s delegation of authority to remain effective, the governing board must re-delegate authority over investment activities on an annual basis. ANALYSIS: The primary goals of the Investment Policy are to assure compliance with the California Government Code, Sections 53600 et seq. The primary objectives, in priority order, of investment activities are: 1. Protect the principal of the funds. AGENDA ITEM 6 2. Remain sufficiently liquid to enable the District to meet all operating requirements which might be reasonably anticipated. 3. Attain a benchmark rate of return throughout budgetary and economic cycles, commensurate with the District’s investment risk constraints and the cash flow characteristics of the portfolio. LAIF is the benchmark rate of return that is currently used to evaluate investments. Consistent with the first of the primary goals, the code provides a range of investment options that are low risk. These include Federal Treasuries, Federal Agencies, Callable Federal Agencies, the State Pool, the County Pool, high-grade corporate debt, and others. Because of the District’s adherence to a conservative range of authorized investments, we have been able to maintain a healthy and diversified portfolio with no investment losses despite an extended period of turmoil and instability in the national financial markets. The District’s policy complies with the current law and the overall objectives of the policy are being met. Over the recent years, the size of the District’s portfolio has decreased from $110 million to the current $82 million. This reduction is primarily due to planned outlays for construction projects and the drawdown of debt proceeds. FISCAL IMPACT: None. STRATEGIC GOAL: Demonstrate financial health through formalized policies, prudent investing, and efficient operations. LEGAL IMPACT: None. General Manager Attachments: A) Committee Action Form B) Resolution No. 4213 Exhibit 1: Strike-through Investment Policy No. 27 C) Proposed Investment Policy No. 27 D) Presentation ATTACHMENT A SUBJECT/PROJECT: Annual Review of Investment Policy (Policy No. 27) and Adoption of Resolution No. 4213 Amending the Policy and Re-delegating Authority for all Investment Related Activities to the Chief Financial Officer (CFO) COMMITTEE ACTION: The Finance, Administration, and Communications Committee recommend that the Board adopt Resolution No. 4213 amending Investment Policy No. 27 and re-delegating authority for all investment related activities to the Chief Financial Officer (CFO). 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.4213 WHEREAS, the Otay Water District Board of Directors has been presented with an amended Investment Policy No. 27 of the District’s Code of Ordinances for the financial management of the Otay Water District; and WHEREAS, the amended Investment Policy has been revised for, among other reasons, consistency with changes in the law, changes to FDIC insurance limits, and changes to government agency issues; and WHEREAS, the amended Investment Policy has been reviewed and considered by the Board, and it is in the interest of the District to adopt the amended Investment 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 Investment Policy, incorporated herein as Attachment C, is hereby adopted. A RESOLUTION OF THE BOARD OF DIRECTORS OF THE OTAY WATER DISTRICT AMENDING INVESTMENT POLICY NO.27 OF THE DISTRICT’S CODE OF ORDINANCES Attachment B Page 2 of 2 PASSED, APPROVED AND ADOPTED by the Board of Directors of Otay Water District at a board meeting held this 3rd day of July 2013, by the following vote: Ayes: Noes: Abstain: Absent: ________________________ President ATTEST: ____________________________ District Secretary OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject Policy Number Date Adopted Date Revised DISTRICT INVESTMENT POLICY 27 9/15/93 8/10/116/5/13 Page 1 of 17 1.0: POLICY It is the policy of the Otay Water District to invest public funds in a manner which will provide maximum security with the best interest return, while meeting the daily cash flow demands of the entity and conforming to all state statues governing the investment of public funds. 2.0: SCOPE This investment policy applies to all financial assets of the Otay Water District. The District pools all cash for investment purposes. These funds are accounted for in the District’s audited Comprehensive Annual Financial Report (CAFR) and include: 2.1) General Fund 2.2) Capital Project Funds 2.2.1) Designated Expansion Fund 2.2.2) Restricted Expansion Fund 2.2.3) Designated Betterment Fund 2.2.4) Restricted Betterment Fund 2.2.5) Designated Replacement Fund 2.2.6) Restricted New Water Supply Fund 2.3) Other Post Employment Fund (OPEB) 2.4) Debt Reserve Fund Exceptions to the pooling of funds do exist for tax-exempt debt proceeds, debt reserves and deferred compensation funds. Funds received from the sale of general obligation bonds, certificates of participation or other tax-exempt financing vehicles are segregated from pooled investments and the investment of such funds are guided by the legal documents that govern the terms of such debt issuances. 3.0: PRUDENCE Investments should be made with judgment and care, under current prevailing circumstances, which persons of prudence, discretion and intelligence, exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived. The standard of prudence to be used by investment officials shall be the ‘‘Prudent Person’’ and/or "Prudent Investor" standard (California Government Code 53600.3) and shall be applied in the context of managing an overall portfolio. Investment officers acting in accordance with written procedures and the investment policy and Exhibit 1 OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject Policy Number Date Adopted Date Revised DISTRICT INVESTMENT POLICY 27 9/15/93 8/10/116/5/13 Page 2 of 17 exercising due diligence shall be relieved of personal responsibility for an individual security's credit risk or market price changes, provided deviations from expectations are reported in a timely fashion and appropriate action is taken to control adverse developments. 4.0: OBJECTIVE As specified in the California Government Code 53600.5, when investing, reinvesting, purchasing, acquiring, exchanging, selling and managing public funds, the primary objectives, in priority order, of the investment activities shall be: 4.1) Safety: Safety of principal is the foremost objective of the investment program. Investments of the Otay Water District shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. To attain this objective, the District will diversify its investments by investing funds among a variety of securities offering independent returns and financial institutions. 4.2) Liquidity: The Otay Water District’s investment portfolio will remain sufficiently liquid to enable the District to meet all operating requirements which might be reasonably anticipated. 4.3) Return on Investment: The Otay Water District’s investment portfolio shall be designed with the objective of attaining a benchmark rate of return throughout budgetary and economic cycles, commensurate with the District’s investment risk constraints and the cash flow characteristics of the portfolio. 5.0 DELEGATION OF AUTHORITY Authority to manage the Otay Water District’s investment program is derived from the California Government Code, Sections 53600 through 53692. Management responsibility for the investment program is hereby delegated to the Chief Financial Officer (CFO), who shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate officials and their procedures in the absence of the CFO. The CFO shall establish written investment policy procedures for the operation of the investment program consistent with this policy. Such procedures shall include explicit delegation of authority to persons responsible for investment transactions. No person may engage in an OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject Policy Number Date Adopted Date Revised DISTRICT INVESTMENT POLICY 27 9/15/93 8/10/116/5/13 Page 3 of 17 investment transaction except as provided under the terms of this policy and the procedures established by the CFO. 6.0: ETHICS AND CONFLICTS OF INTEREST Officers and employees involved in the investment process shall refrain from personal business activity that could conflict with the proper execution and management of the investment program, or that could impair their ability to make impartial investment decisions. Employees and investment officials shall disclose to the General Manager any material financial interests in financial institutions with which they conduct business. They shall further disclose any personal financial/investment positions that could be related to the performance of the investment portfolio. Employees and officers shall refrain from undertaking personal investment transactions with the same individual with whom business is conducted on behalf of the District. 7.0: AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS The Chief Financial Officer shall maintain a list of financial institutions authorized to provide investment services. In addition, a list will also be maintained of approved security broker/dealers who are authorized to provide investment services in the State of California. These may include ‘‘primary’’ dealers or regional dealers that qualify under Securities & Exchange Commission Rule 15C3-1 (Uniform Net Capital Rule). No public deposit shall be made except in a qualified public depository as established by state laws. All financial institutions and broker/dealers who desire to become qualified bidders for investment transactions must supply the District with the following, as appropriate: • Audited Financial Statements. • Proof of National Association of Security Dealers (NASD) certification. • Proof of state registration. • Completed broker/dealer questionnaire. • Certification of having read the District’s Investment Policy. • Evidence of adequate insurance coverage. An annual review of the financial condition and registrations of qualified bidders will be conducted by the CFO. A current audited OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject Policy Number Date Adopted Date Revised DISTRICT INVESTMENT POLICY 27 9/15/93 8/10/116/5/13 Page 4 of 17 financial statement is required to be on file for each financial institution and broker/dealer in which the District invests. 8.0: AUTHORIZED AND SUITABLE INVESTMENTS From the governing body perspective, special care must be taken to ensure that the list of instruments includes only those allowed by law and those that local investment managers are trained and competent to handle. The District is governed by the California Government Code, Sections 53600 through 53692, to invest in the following types of securities, as further limited herein: 8.01) United States Treasury Bills, Bonds, Notes or those instruments for which the full faith and credit of the United States are pledged for payment of principal and interest. There is no percentage limitation of the portfolio which can be invested in this category, although a five-year maturity limitation is applicable. 8.02) Local Agency Investment Fund (LAIF), which is a State of California managed investment pool, may be used up to the maximum permitted by State Law (currently $50 million). The District may also invest bond proceeds in LAIF with the same but independent maximum limitation. 8.03) Bonds, debentures, notes and other evidence of indebtedness issued by any of the following government agency issuers: OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject Policy Number Date Adopted Date Revised DISTRICT INVESTMENT POLICY 27 9/15/93 8/10/116/5/13 Page 5 of 17 • Federal Home Loan Bank (FHLB) • Federal Home Loan Mortgage Corporation (FHLMC or "Freddie Mac") • Federal National Mortgage Association (FNMA or "Fannie Mae") • Government National Mortgage Association (GNMA or ‘‘Ginnie Mae’’) • Student Loan Marketing Association (SLMA or "Sallie Mae") • Federal Farm Credit Bank (FFCB) • Federal Agricultural Mortgage Corporation ( FAMCA or ‘‘Farmer Mac’’) There is no percentage limitation of the portfolio which can be invested in this category, although a five-year maturity limitation is applicable. 8.04) Interest-bearing demand deposit accounts and Certificates of Deposit (CD) will be made only in Federal Deposit Insurance Corporation (FDIC) insured accounts. For deposits in excess of the insured maximum of $100,000$250,000, approved collateral shall be required in accordance with California Government Code, Section 53652. Investments in CD’s are limited to 15 percent of the District’s portfolio. 8.05) Commercial paper, which is short-term, unsecured promissory notes of corporate and public entities. Purchases of eligible commercial paper may not exceed 10 percent of the outstanding paper of an issuing corporation, and maximum investment maturity will be restricted to 270 days. Investment is further limited as described in California Government Code, Section 53601(hg). Purchases of commercial paper may not exceed 15 percent of the District’s portfolio and no more than 10 percent of the outstanding commercial paper of any single issuer. . 8.06) Medium-term notes defined as all corporate debt securities with a maximum remaining maturity of five years or less, and that meet the further requirements of California Government Code, Section 53601(jk). Investments in medium-term notes are limited to 15 percent of the District’s portfolio. 8.07) Money market mutual funds that invest only in Treasury securities and repurchase agreements collateralized with Treasury securities, and that meet the further requirements of California OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject Policy Number Date Adopted Date Revised DISTRICT INVESTMENT POLICY 27 9/15/93 8/10/116/5/13 Page 6 of 17 Government Code, Section 53601(kl). Investments in money market mutual funds are limited to 15 10 percent of the District's portfolio. 8.08) The San Diego County Treasurer’s Pooled Money Fund, which is a County managed investment pool, may be used by the Otay Water District to invest excess funds. There is no percentage limitation of the portfolio which can be invested in this category. 8.09) Under the provisions of California Government Code 53601.6, the Otay Water District shall not invest any funds covered by this Investment Policy in inverse floaters, range notes, interest-only strips derived from mortgage pools, or any investment that may result in a zero interest accrual if held to maturity. Also, the borrowing of funds for investment purposes, known as leveraging, is prohibited. 9.0: INVESTMENT POOLS/MUTUAL FUNDS A thorough investigation of the pool/fund is required prior to investing, and on a continual basis. There shall be a questionnaire developed which will answer the following general questions: • A description of eligible investment securities, and a written statement of investment policy and objectives. • A description of interest calculations and how it is distributed, and how gains and losses are treated. • A description of how the securities are safeguarded (including the settlement processes), and how often the securities are priced and the program audited. • A description of who may invest in the program, how often, and what size deposits and withdrawals are allowed. • A schedule for receiving statements and portfolio listings. • Are reserves, retained earnings, etc., utilized by the pool/fund? • A fee schedule, and when and how is it assessed. • Is the pool/fund eligible for bond proceeds and/or will it accept such proceeds? OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject Policy Number Date Adopted Date Revised DISTRICT INVESTMENT POLICY 27 9/15/93 8/10/116/5/13 Page 7 of 17 10.0 COLLATERALIZATION Collateralization will be required on certificates of deposit. In order to anticipate market changes and provide a level of security for all funds, the collateralization level will be 102% of market value of principal and accrued interest. Collateral will always be held by an independent third party with whom the entity has a current custodial agreement. A clearly marked evidence of ownership (safekeeping receipt) must be supplied to the entity and retained. The right of collateral substitution is granted. 11.0: SAFEKEEPING AND CUSTODY All security transactions entered into by the Otay Water District shall be conducted on a delivery-versus-payment (DVP) basis. Securities will be held by a third party custodian designated by the District and evidenced by safekeeping receipts. 12.0: DIVERSIFICATION The Otay Water District will diversify its investments by security type and institution, with limitations on the total amounts invested in each security type as detailed in Paragraph 8.0, above, so as to reduce overall portfolio risks while attaining benchmark average rate of return. With the exception of U.S. Treasury securities, government agencies, and authorized pools, no more than 50% of the District’s total investment portfolio will be invested with a single financial institution. 13.0: MAXIMUM MATURITIES To the extent possible, the Otay Water District will attempt to match its investments with anticipated cash flow requirements. Unless matched to a specific cash flow, the District will not directly invest in securities maturing more than five years from the date of purchase. However, for time deposits with banks or savings and loan associations, investment maturities will not exceed two years. Investments in commercial paper will be restricted to 270 days. OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject Policy Number Date Adopted Date Revised DISTRICT INVESTMENT POLICY 27 9/15/93 8/10/116/5/13 Page 8 of 17 14.0: INTERNAL CONTROL The Chief Financial Officer shall establish an annual process of independent review by an external auditor. This review will provide internal control by assuring compliance with policies and procedures. 15.0: PERFORMANCE STANDARDS The investment portfolio shall be designed with the objective of obtaining a rate of return throughout budgetary and economic cycles, commensurate with the investment risk constraints and the cash flow needs. The Otay Water District’s investment strategy is passive. Given this strategy, the basis used by the CFO to determine whether market yields are being achieved shall be the State of California Local Agency Investment Fund (LAIF) as a comparable benchmark. 16.0: REPORTING The Chief Financial Officer shall provide the Board of Directors monthly investment reports which provide a clear picture of the status of the current investment portfolio. The management report should include comments on the fixed income markets and economic conditions, discussions regarding restrictions on percentage of investment by categories, possible changes in the portfolio structure going forward and thoughts on investment strategies. Schedules in the quarterly report should include the following: • A listing of individual securities held at the end of the reporting period by authorized investment category. • Average life and final maturity of all investments listed. • Coupon, discount or earnings rate. • Par value, amortized book value, and market value. • Percentage of the portfolio represented by each investment category. 17.0: INVESTMENT POLICY ADOPTION The Otay Water District’s investment policy shall be adopted by resolution of the District’s Board of Directors. The policy shall be reviewed annually by the Board and any modifications made thereto must be approved by the Board. OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject Policy Number Date Adopted Date Revised DISTRICT INVESTMENT POLICY 27 9/15/93 8/10/116/5/13 Page 9 of 17 18.0: GLOSSARY See Appendix A. OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject Policy Number Date Adopted Date Revised DISTRICT INVESTMENT POLICY 27 9/15/93 8/10/116/5/13 Page 10 of 17 APPENDIX A: GLOSSARY ACTIVE INVESTING: Active investors will purchase investments and continuously monitor their activity, often looking at the price movements of their stocks many times a day, in order to exploit profitable conditions. Typically, active investors are seeking short term profits. AGENCIES: Federal agency securities and/or Government-sponsored enterprises. BANKERS’ ACCEPTANCE (BA): A draft or bill or exchange accepted by a bank or trust company. The accepting institution guarantees payment of the bill, as well as the issuer. BENCHMARK: A comparative base for measuring the performance or risk tolerance of the investment portfolio. A benchmark should represent a close correlation to the level of risk and the average duration of the portfolio’s investments. BROKER/DEALER: Any individual or firm in the business of buying and selling securities for itself and others. Broker/dealers must register with the SEC. When acting as a broker, a broker/dealer executes orders on behalf of his/her client. When acting as a dealer, a broker/dealer executes trades for his/her firm's own account. Securities bought for the firm's own account may be sold to clients or other firms, or become a part of the firm's holdings. CERTIFICATE OF DEPOSIT (CD): A short or medium term, interest bearing, FDIC insured debt instrument offered by banks and savings and loans. Money removed before maturity is subject to a penalty. CDs are a low risk, low return investment, and are also known as ‘‘time deposits’’, because the account holder has agreed to keep the money in the account for a specified amount of time, anywhere from a few months to several years. COLLATERAL: Securities, evidence of deposit or other property, which a borrower pledges to secure repayment of a loan. Also refers to securities pledged by a bank to secure deposits of public monies. COMMERCIAL PAPER: An unsecured short-term promissory note, issued by corporations, with maturities ranging from 2 to 270 days. OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject Policy Number Date Adopted Date Revised DISTRICT INVESTMENT POLICY 27 9/15/93 8/10/116/5/13 Page 11 of 17 COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR): The official annual report for the Otay Water District. It includes detailed financial information prepared in conformity with generally accepted accounting principles (GAAP). It also includes supporting schedules necessary to demonstrate compliance with finance-related legal and contractual provisions, extensive introductory material, and a detailed statistical section. COUPON: (a) The annual rate of interest that a bond’s issuer promises to pay the bondholder on the bond’s face value. (b) A certificate attached to a bond evidencing interest due on a set date. DEALER: A dealer, as opposed to a broker, acts as a principal in all transactions, buying and selling for his own account. DEBENTURE: A bond secured only by the general credit of the issuer. DELIVERY VERSUS PAYMENT: There are two methods of delivery of securities: delivery versus payment and delivery versus receipt. Delivery versus payment is delivery of securities with an exchange of money for the securities. Delivery versus receipt is delivery of securities with an exchange of a signed receipt for the securities. DERIVATIVES: (1) Financial instruments whose return profile is linked to, or derived from, the movement of one or more underlying index or security, and may include a leveraging factor, or (2) financial contracts based upon notional amounts whose value is derived from an underlying index or security (interest rates, foreign exchange rates, equities or commodities). DISCOUNT: The difference between the cost price of a security and its maturity when quoted at lower than face value. A security selling below original offering price shortly after sale also is considered to be at a discount. DISCOUNT SECURITIES: Non-interest bearing money market instruments that are issued at a discount and redeemed at maturity for full face value, e.g., U.S. Treasury Bills. DIVERSIFICATION: Dividing investment funds among a variety of securities offering independent returns. FEDERAL CREDIT AGENCIES: Agencies of the Federal government set up to supply credit to various classes of institutions and individuals, e.g., OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject Policy Number Date Adopted Date Revised DISTRICT INVESTMENT POLICY 27 9/15/93 8/10/116/5/13 Page 12 of 17 S&L’s, small business firms, students, farmers, farm cooperatives, and exporters. FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC): A federal agency that insures deposits in member banks and thrifts, currently up to $100,000 per deposit. FEDERAL FARM CREDIT BANK (FFCB): The Federal Farm Credit Bank system supports agricultural loans and issues securities and bonds in financial markets backed by these loans. It has consolidated the financing programs of several related farm credit agencies and corporations. FEDERAL FUNDS RATE: The rate of interest at which Fed funds are traded. This rate is currently pegged by the Federal Reserve through open-market operations. Federal Agricultural Mortgage Corporation (FAMC or Farmer Mac): A stockholder owned, publicly-traded corporation that was established under the Agricultural Credit Act of 1987, which added a new Title VIII to the Farm Credit Act of 1971. Farmer Mac is a government sponsored enterprise, whose mission is to provide a secondary market for agricultural real estate mortgage loans, rural housing mortgage loans, and rural utility cooperative loans. The corporation is authorized to purchase and guarantee securities. Farmer Mac guarantees that all security holders will receive timely payments of principal and interest. FEDERAL HOME LOAN BANK (FHLB): Government sponsored wholesale banks (currently 12 regional banks), which lend funds and provide correspondent banking services to member commercial banks, thrift institutions, credit unions and insurance companies. FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC or Freddie Mac): A stockholder owned, publicly traded company chartered by the United States federal government in 1970 to purchase mortgages and related securities, and then issue securities and bonds in financial markets backed by those mortgages in secondary markets. Freddie Mac, like its competitor Fannie Mae, is regulated by the United States Department of Housing and Urban Development (HUD). FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA or Fannie Mae): FNMA, like GNMA was chartered under the Federal National Mortgage Association Act in 1938. FNMA is a federal corporation working under the auspices of the Department of Housing and Urban Development (HUD). It is the OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject Policy Number Date Adopted Date Revised DISTRICT INVESTMENT POLICY 27 9/15/93 8/10/116/5/13 Page 13 of 17 largest single provider of residential mortgage funds in the United States. Fannie Mae is a private stockholder-owned corporation. The corporation’s purchases include a variety of adjustable mortgages and second loans, in addition to fixed-rate mortgages. FNMA’s securities are also highly liquid and are widely accepted. FNMA assumes and guarantees that all security holders will receive timely payment of principal and interest. FEDERAL RESERVE SYSTEM: The central bank of the United States created by Congress and consisting of a seven member Board of Governors in Washington, D.C., 12 regional banks and about 5,700 commercial banks that are members of the system. GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA or Ginnie Mae): A government owned agency which buys mortgages from lending institutions, securitizes them, and then sells them to investors. Because the payments to investors are guaranteed by the full faith and credit of the U.S. Government, they return slightly less interest than other mortgage-backed securities. INTEREST-ONLY STRIPS: A mortgage backed instrument where the investor receives only the interest, no principal, from a pool of mortgages. Issues are highly interest rate sensitive, and cash flows vary between interest periods. Also, the maturity date may occur earlier than that stated if all loans within the pool are pre-paid. High prepayments on underlying mortgages can return less to the holder than the dollar amount invested. INVERSE FLOATER: A bond or note that does not earn a fixed rate of interest. Rather, the interest rate is tied to a specific interest rate index identified in the bond/note structure. The interest rate earned by the bond/note will move in the opposite direction of the index. An inverse floater increases the market rate risk and modified duration of the investment. LEVERAGE: Investing with borrowed money with the expectation that the interest earned on the investment will exceed the interest paid on the borrowed money. LIQUIDITY: A liquid asset is one that can be converted easily and rapidly into cash without a substantial loss of value. In the money market, a security is said to be liquid if the spread between bid and asked prices is narrow and reasonable size can be done at those quotes. OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject Policy Number Date Adopted Date Revised DISTRICT INVESTMENT POLICY 27 9/15/93 8/10/116/5/13 Page 14 of 17 LOCAL AGENCY INVESTMENT FUND (LAIF): The aggregate of all funds from political subdivisions that are placed in the custody of the State Treasurer for investment and reinvestment. MARKET VALUE: The price at which a security is trading and could presumably be purchased or sold. MASTER REPURCHASE AGREEMENT: A written contract covering all future transactions between the parties to repurchase/reverse repurchase agreements that establish each party’s rights in the transactions. A master agreement will often specify, among other things, the right of the buyer-lender to liquidate the underlying securities in the event of default by the seller borrower. MATURITY: The date upon which the principal or stated value of an investment becomes due and payable. MONEY MARKET: The market in which short-term debt instruments (bills, commercial paper, bankers’ acceptances, etc.) are issued and traded. MUTUAL FUNDS: An open-ended fund operated by an investment company which raises money from shareholders and invests in a group of assets, in accordance with a stated set of objectives. Mutual funds raise money by selling shares of the fund to the public. Mutual funds then take the money they receive from the sale of their shares (along with any money made from previous investments) and use it to purchase various investment vehicles, such as stocks, bonds, and money market instruments. MONEY MARKET MUTUAL FUNDS: An open-end mutual fund which invests only in money markets. These funds invest in short term (one day to one year) debt obligations such as Treasury bills, certificates of deposit, and commercial paper. NATIONAL ASSOCIATION OF SECURITIES DEALERS (NASD): A self-regulatory organization of the securities industry responsible for the operation and regulation of the NASDAQ stock market and over-the-counter markets. Its regulatory mandate includes authority over firms that distribute mutual fund shares as well as other securities. PASSIVE INVESTING: An investment strategy involving limited ongoing buying and selling actions. Passive investors will purchase investments with the intention of long term appreciation and limited maintenance, and typically don’t actively attempt to profit from short term price fluctuations. Also known as a buy-and-hold strategy. OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject Policy Number Date Adopted Date Revised DISTRICT INVESTMENT POLICY 27 9/15/93 8/10/116/5/13 Page 15 of 17 PRIMARY DEALER: A designation given by the Federal Reserve System to commercial banks or broker/dealers who meet specific criteria, including capital requirements and participation in Treasury auctions. These dealers submit daily reports of market activity and positions and monthly financial statements to the Federal Reserve Bank of New York and are subject to its informal oversight. Primary dealers include Securities and Exchange Commission registered securities broker/dealers, banks, and a few unregulated firms. PRUDENT PERSON RULE: An investment standard. In some states the law requires that a fiduciary, such as a trustee, may invest money only in a list of securities selected by the custody state----the so-called legal list. In other states the trustee may invest in a security if it is one which would be bought by a prudent person of discretion and intelligence who is seeking a reasonable income and preservation of capital. PUBLIC SECURITIES ASSOCIATION (PSA): A trade organization of dealers, brokers, and bankers who underwrite and trade securities offerings. QUALIFIED PUBLIC DEPOSITORIES: A financial institution which does not claim exemption from the payment of any sales or compensating use or ad valorem taxes under the laws of this state, which has segregated for the benefit of the commission eligible collateral having a value of not less than its maximum liability and which has been approved by the Public Deposit Protection Commission to hold public deposits. RANGE NOTE: An investment whose coupon payment varies and is dependent on whether the current benchmark falls within a pre-determined range. RATE OF RETURN: The yield obtainable on a security based on its purchase price or its current market price. This may be the amortized yield to maturity on a bond the current income return. REGIONAL DEALER: A securities broker/dealer, registered with the Securities & Exchange Commission (SEC), who meets all of the licensing requirements for buying and selling securities. REPURCHASE AGREEMENT (RP OR REPO): A holder of securities sells these securities to an investor with an agreement to repurchase them at a fixed price on a fixed date. The security ‘‘buyer’’ in effect lends the ‘‘seller’’ money for the period of the agreement, and the terms of the agreement are structured to compensate him for this. Dealers use RP extensively to finance their positions. Exception: When the Fed is OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject Policy Number Date Adopted Date Revised DISTRICT INVESTMENT POLICY 27 9/15/93 8/10/116/5/13 Page 16 of 17 said to be doing RP, it is lending money that is increasing bank reserves. SAFEKEEPING: A service to customers rendered by banks for a fee whereby securities and valuables of all types and descriptions are held in the bank’s vaults for protection. SECONDARY MARKET: A market made for the purchase and sale of outstanding securities issues following their initial distribution. SECURITIES & EXCHANGE COMMISSION: Agency created by Congress to protect investors in securities transactions by administering securities legislation. SEC RULE 15C3-1: See Uniform Net Capital Rule. STRUCTURED NOTES: Notes issued by Government Sponsored Enterprises (FHLB, FNMA, FAMCASLMA, etc.), and Corporations, which have imbedded options (e.g., call features, step-up coupons, floating rate coupons, derivative-based returns) into their debt structure. Their market performance is impacted by the fluctuation of interest rates, the volatility of the imbedded options and shifts in the shape of the yield curve. STUDENT LOAN MARKETING ASSOCIATION (SLMA or Sallie Mae): A federally established, publicly traded corporation which buys student loans from colleges and other lenders, pools them, and sells them to investors. TREASURY BILLS: A non-interest bearing discount security issued by the U.S. Treasury to finance the national debt. Most bills are issued to mature in three months, six months, or one year. TREASURY BONDS: Long-term coupon-bearing U.S. Treasury securities issued as direct obligations of the U.S. Government and having initial maturities of more than 10 years. TREASURY NOTES: Medium-term coupon-bearing U.S. Treasury securities issued as direct obligations of the U.S. Government and having initial maturities from two to 10 years. UNIFORM NET CAPITAL RULE: Securities and Exchange Commission requirement that member firms as well as nonmember broker-dealers in securities maintain a maximum ratio of indebtedness to liquid capital of 15 to 1; also called net capital rule and net capital ratio. OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject Policy Number Date Adopted Date Revised DISTRICT INVESTMENT POLICY 27 9/15/93 8/10/116/5/13 Page 17 of 17 Indebtedness covers all money owed to a firm, including margin loans and commitments to purchase securities, one reason new public issues are spread among members of underwriting syndicates. Liquid capital includes cash and assets easily converted into cash. YIELD: The rate of annual income return on an investment, expressed as a percentage. (a) INCOME YIELD is obtained by dividing the current dollar income by the current market price for the security. (b) NET YIELD or YIELD TO MATURITY is the current income yield minus any premium above par or plus any discount from par in purchase price, with the adjustment spread over the period from the date of purchase to the date of maturity of the bond. OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject Policy Number Date Adopted Date Revised INVESTMENT POLICY 27 9/15/93 6/5/13 Page 1 of 15 1.0: POLICY It is the policy of the Otay Water District to invest public funds in a manner which will provide maximum security with the best interest return, while meeting the daily cash flow demands of the entity and conforming to all state statues governing the investment of public funds. 2.0: SCOPE This investment policy applies to all financial assets of the Otay Water District. The District pools all cash for investment purposes. These funds are accounted for in the District’s audited Comprehensive Annual Financial Report (CAFR) and include: 2.1) General Fund 2.2) Capital Project Funds 2.2.1) Designated Expansion Fund 2.2.2) Restricted Expansion Fund 2.2.3) Designated Betterment Fund 2.2.4) Restricted Betterment Fund 2.2.5) Designated Replacement Fund 2.2.6) Restricted New Water Supply Fund 2.3) Other Post Employment Fund (OPEB) 2.4) Debt Reserve Fund Exceptions to the pooling of funds do exist for tax-exempt debt proceeds, debt reserves and deferred compensation funds. Funds received from the sale of general obligation bonds, certificates of participation or other tax-exempt financing vehicles are segregated from pooled investments and the investment of such funds are guided by the legal documents that govern the terms of such debt issuances. 3.0: PRUDENCE Investments should be made with judgment and care, under current prevailing circumstances, which persons of prudence, discretion and intelligence, exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived. The standard of prudence to be used by investment officials shall be the ‘‘Prudent Person’’ and/or "Prudent Investor" standard (California Government Code 53600.3) and shall be applied in the context of managing an overall portfolio. Investment officers acting in accordance with written procedures and the investment policy and exercising due diligence shall be relieved of personal responsibility Attachment C OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject Policy Number Date Adopted Date Revised INVESTMENT POLICY 27 9/15/93 6/5/13 Page 2 of 15 for an individual security's credit risk or market price changes, provided deviations from expectations are reported in a timely fashion and appropriate action is taken to control adverse developments. 4.0: OBJECTIVE As specified in the California Government Code 53600.5, when investing, reinvesting, purchasing, acquiring, exchanging, selling and managing public funds, the primary objectives, in priority order, of the investment activities shall be: 4.1) Safety: Safety of principal is the foremost objective of the investment program. Investments of the Otay Water District shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. To attain this objective, the District will diversify its investments by investing funds among a variety of securities offering independent returns and financial institutions. 4.2) Liquidity: The Otay Water District’s investment portfolio will remain sufficiently liquid to enable the District to meet all operating requirements which might be reasonably anticipated. 4.3) Return on Investment: The Otay Water District’s investment portfolio shall be designed with the objective of attaining a benchmark rate of return throughout budgetary and economic cycles, commensurate with the District’s investment risk constraints and the cash flow characteristics of the portfolio. 5.0 DELEGATION OF AUTHORITY Authority to manage the Otay Water District’s investment program is derived from the California Government Code, Sections 53600 through 53692. Management responsibility for the investment program is hereby delegated to the Chief Financial Officer (CFO), who shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate officials and their procedures in the absence of the CFO. The CFO shall establish written investment policy procedures for the operation of the investment program consistent with this policy. Such procedures shall include explicit delegation of authority to persons responsible for investment transactions. No person may engage in an investment transaction except as provided under the terms of this policy and the procedures established by the CFO. OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject Policy Number Date Adopted Date Revised INVESTMENT POLICY 27 9/15/93 6/5/13 Page 3 of 15 6.0: ETHICS AND CONFLICTS OF INTEREST Officers and employees involved in the investment process shall refrain from personal business activity that could conflict with the proper execution and management of the investment program, or that could impair their ability to make impartial investment decisions. Employees and investment officials shall disclose to the General Manager any material financial interests in financial institutions with which they conduct business. They shall further disclose any personal financial/investment positions that could be related to the performance of the investment portfolio. Employees and officers shall refrain from undertaking personal investment transactions with the same individual with whom business is conducted on behalf of the District. 7.0: AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS The Chief Financial Officer shall maintain a list of financial institutions authorized to provide investment services. In addition, a list will also be maintained of approved security broker/dealers who are authorized to provide investment services in the State of California. These may include ‘‘primary’’ dealers or regional dealers that qualify under Securities & Exchange Commission Rule 15C3-1 (Uniform Net Capital Rule). No public deposit shall be made except in a qualified public depository as established by state laws. All financial institutions and broker/dealers who desire to become qualified bidders for investment transactions must supply the District with the following, as appropriate: • Audited Financial Statements. • Proof of National Association of Security Dealers (NASD) certification. • Proof of state registration. • Completed broker/dealer questionnaire. • Certification of having read the District’s Investment Policy. • Evidence of adequate insurance coverage. An annual review of the financial condition and registrations of qualified bidders will be conducted by the CFO. A current audited financial statement is required to be on file for each financial institution and broker/dealer in which the District invests. OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject Policy Number Date Adopted Date Revised INVESTMENT POLICY 27 9/15/93 6/5/13 Page 4 of 15 8.0: AUTHORIZED AND SUITABLE INVESTMENTS From the governing body perspective, special care must be taken to ensure that the list of instruments includes only those allowed by law and those that local investment managers are trained and competent to handle. The District is governed by the California Government Code, Sections 53600 through 53692, to invest in the following types of securities, as further limited herein: 8.01) United States Treasury Bills, Bonds, Notes or those instruments for which the full faith and credit of the United States are pledged for payment of principal and interest. There is no percentage limitation of the portfolio which can be invested in this category, although a five-year maturity limitation is applicable. 8.02) Local Agency Investment Fund (LAIF), which is a State of California managed investment pool, may be used up to the maximum permitted by State Law (currently $50 million). The District may also invest bond proceeds in LAIF with the same but independent maximum limitation. 8.03) Bonds, debentures, notes and other evidence of indebtedness issued by any of the following government agency issuers: • Federal Home Loan Bank (FHLB) • Federal Home Loan Mortgage Corporation (FHLMC or "Freddie Mac") • Federal National Mortgage Association (FNMA or "Fannie Mae") • Government National Mortgage Association (GNMA or ‘‘Ginnie Mae’’) • Federal Farm Credit Bank (FFCB) • Federal Agricultural Mortgage Corporation ( FAMCA or ‘‘Farmer Mac’’) There is no percentage limitation of the portfolio which can be invested in this category, although a five-year maturity limitation is applicable. 8.04) Interest-bearing demand deposit accounts and Certificates of Deposit (CD) will be made only in Federal Deposit Insurance Corporation (FDIC) insured accounts. For deposits in excess of the insured maximum of $250,000, approved collateral shall be required in accordance with California Government Code, OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject Policy Number Date Adopted Date Revised INVESTMENT POLICY 27 9/15/93 6/5/13 Page 5 of 15 Section 53652. Investments in CD’s are limited to 15 percent of the District’s portfolio. 8.05) Commercial paper, which is short-term, unsecured promissory notes of corporate and public entities. Purchases of eligible commercial paper may not exceed 10 percent of the outstanding paper of an issuing corporation, and maximum investment maturity will be restricted to 270 days. Investment is further limited as described in California Government Code, Section 53601(h). Purchases of commercial paper may not exceed 15 percent of the District’s portfolio and no more than 10 percent of the outstanding commercial paper of any single issuer. 8.06) Medium-term notes defined as all corporate debt securities with a maximum remaining maturity of five years or less, and that meet the further requirements of California Government Code, Section 53601(k). Investments in medium-term notes are limited to 15 percent of the District’s portfolio. 8.07) Money market mutual funds that invest only in Treasury securities and repurchase agreements collateralized with Treasury securities, and that meet the further requirements of California Government Code, Section 53601(l). Investments in money market mutual funds are limited to 10 percent of the District's portfolio. 8.08) The San Diego County Treasurer’s Pooled Money Fund, which is a County managed investment pool, may be used by the Otay Water District to invest excess funds. There is no percentage limitation of the portfolio which can be invested in this category. 8.09) Under the provisions of California Government Code 53601.6, the Otay Water District shall not invest any funds covered by this Investment Policy in inverse floaters, range notes, interest-only strips derived from mortgage pools, or any investment that may result in a zero interest accrual if held to maturity. Also, the borrowing of funds for investment purposes, known as leveraging, is prohibited. 9.0: INVESTMENT POOLS/MUTUAL FUNDS A thorough investigation of the pool/fund is required prior to investing, and on a continual basis. There shall be a questionnaire developed which will answer the following general questions: OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject Policy Number Date Adopted Date Revised INVESTMENT POLICY 27 9/15/93 6/5/13 Page 6 of 15 • A description of eligible investment securities, and a written statement of investment policy and objectives. • A description of interest calculations and how it is distributed, and how gains and losses are treated. • A description of how the securities are safeguarded (including the settlement processes), and how often the securities are priced and the program audited. • A description of who may invest in the program, how often, and what size deposits and withdrawals are allowed. • A schedule for receiving statements and portfolio listings. • Are reserves, retained earnings, etc., utilized by the pool/fund? • A fee schedule, and when and how is it assessed. • Is the pool/fund eligible for bond proceeds and/or will it accept such proceeds? 10.0 COLLATERALIZATION Collateralization will be required on certificates of deposit. In order to anticipate market changes and provide a level of security for all funds, the collateralization level will be 102% of market value of principal and accrued interest. Collateral will always be held by an independent third party with whom the entity has a current custodial agreement. A clearly marked evidence of ownership (safekeeping receipt) must be supplied to the entity and retained. The right of collateral substitution is granted. 11.0: SAFEKEEPING AND CUSTODY All security transactions entered into by the Otay Water District shall be conducted on a delivery-versus-payment (DVP) basis. Securities will be held by a third party custodian designated by the District and evidenced by safekeeping receipts. 12.0: DIVERSIFICATION The Otay Water District will diversify its investments by security type and institution, with limitations on the total amounts invested in each security type as detailed in Paragraph 8.0, above, so as to reduce overall portfolio risks while attaining benchmark average rate of return. With the exception of U.S. Treasury securities, government agencies, and authorized pools, no more than 50% of the District’s total investment portfolio will be invested with a single financial institution. OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject Policy Number Date Adopted Date Revised INVESTMENT POLICY 27 9/15/93 6/5/13 Page 7 of 15 13.0: MAXIMUM MATURITIES To the extent possible, the Otay Water District will attempt to match its investments with anticipated cash flow requirements. Unless matched to a specific cash flow, the District will not directly invest in securities maturing more than five years from the date of purchase. However, for time deposits with banks or savings and loan associations, investment maturities will not exceed two years. Investments in commercial paper will be restricted to 270 days. 14.0: INTERNAL CONTROL The Chief Financial Officer shall establish an annual process of independent review by an external auditor. This review will provide internal control by assuring compliance with policies and procedures. 15.0: PERFORMANCE STANDARDS The investment portfolio shall be designed with the objective of obtaining a rate of return throughout budgetary and economic cycles, commensurate with the investment risk constraints and the cash flow needs. The Otay Water District’s investment strategy is passive. Given this strategy, the basis used by the CFO to determine whether market yields are being achieved shall be the State of California Local Agency Investment Fund (LAIF) as a comparable benchmark. 16.0: REPORTING The Chief Financial Officer shall provide the Board of Directors monthly investment reports which provide a clear picture of the status of the current investment portfolio. The management report should include comments on the fixed income markets and economic conditions, discussions regarding restrictions on percentage of investment by categories, possible changes in the portfolio structure going forward and thoughts on investment strategies. Schedules in the quarterly report should include the following: • A listing of individual securities held at the end of the reporting period by authorized investment category. • Average life and final maturity of all investments listed. • Coupon, discount or earnings rate. • Par value, amortized book value, and market value. OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject Policy Number Date Adopted Date Revised INVESTMENT POLICY 27 9/15/93 6/5/13 Page 8 of 15 • Percentage of the portfolio represented by each investment category. 17.0: INVESTMENT POLICY ADOPTION The Otay Water District’s investment policy shall be adopted by resolution of the District’s Board of Directors. The policy shall be reviewed annually by the Board and any modifications made thereto must be approved by the Board. 18.0: GLOSSARY See Appendix A. OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject Policy Number Date Adopted Date Revised INVESTMENT POLICY 27 9/15/93 6/5/13 Page 9 of 15 APPENDIX A: GLOSSARY ACTIVE INVESTING: Active investors will purchase investments and continuously monitor their activity, often looking at the price movements of their stocks many times a day, in order to exploit profitable conditions. Typically, active investors are seeking short term profits. AGENCIES: Federal agency securities and/or Government-sponsored enterprises. BANKERS’ ACCEPTANCE (BA): A draft or bill or exchange accepted by a bank or trust company. The accepting institution guarantees payment of the bill, as well as the issuer. BENCHMARK: A comparative base for measuring the performance or risk tolerance of the investment portfolio. A benchmark should represent a close correlation to the level of risk and the average duration of the portfolio’s investments. BROKER/DEALER: Any individual or firm in the business of buying and selling securities for itself and others. Broker/dealers must register with the SEC. When acting as a broker, a broker/dealer executes orders on behalf of his/her client. When acting as a dealer, a broker/dealer executes trades for his/her firm's own account. Securities bought for the firm's own account may be sold to clients or other firms, or become a part of the firm's holdings. CERTIFICATE OF DEPOSIT (CD): A short or medium term, interest bearing, FDIC insured debt instrument offered by banks and savings and loans. Money removed before maturity is subject to a penalty. CDs are a low risk, low return investment, and are also known as ‘‘time deposits’’, because the account holder has agreed to keep the money in the account for a specified amount of time, anywhere from a few months to several years. COLLATERAL: Securities, evidence of deposit or other property, which a borrower pledges to secure repayment of a loan. Also refers to securities pledged by a bank to secure deposits of public monies. COMMERCIAL PAPER: An unsecured short-term promissory note, issued by corporations, with maturities ranging from 2 to 270 days. COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR): The official annual report for the Otay Water District. It includes detailed financial OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject Policy Number Date Adopted Date Revised INVESTMENT POLICY 27 9/15/93 6/5/13 Page 10 of 15 information prepared in conformity with generally accepted accounting principles (GAAP). It also includes supporting schedules necessary to demonstrate compliance with finance-related legal and contractual provisions, extensive introductory material, and a detailed statistical section. COUPON: (a) The annual rate of interest that a bond’s issuer promises to pay the bondholder on the bond’s face value. (b) A certificate attached to a bond evidencing interest due on a set date. DEALER: A dealer, as opposed to a broker, acts as a principal in all transactions, buying and selling for his own account. DEBENTURE: A bond secured only by the general credit of the issuer. DELIVERY VERSUS PAYMENT: There are two methods of delivery of securities: delivery versus payment and delivery versus receipt. Delivery versus payment is delivery of securities with an exchange of money for the securities. Delivery versus receipt is delivery of securities with an exchange of a signed receipt for the securities. DERIVATIVES: (1) Financial instruments whose return profile is linked to, or derived from, the movement of one or more underlying index or security, and may include a leveraging factor, or (2) financial contracts based upon notional amounts whose value is derived from an underlying index or security (interest rates, foreign exchange rates, equities or commodities). DISCOUNT: The difference between the cost price of a security and its maturity when quoted at lower than face value. A security selling below original offering price shortly after sale also is considered to be at a discount. DISCOUNT SECURITIES: Non-interest bearing money market instruments that are issued at a discount and redeemed at maturity for full face value, e.g., U.S. Treasury Bills. DIVERSIFICATION: Dividing investment funds among a variety of securities offering independent returns. FEDERAL CREDIT AGENCIES: Agencies of the Federal government set up to supply credit to various classes of institutions and individuals, e.g., S&L’s, small business firms, students, farmers, farm cooperatives, and exporters. OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject Policy Number Date Adopted Date Revised INVESTMENT POLICY 27 9/15/93 6/5/13 Page 11 of 15 FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC): A federal agency that insures deposits in member banks and thrifts, currently up to $100,000 per deposit. FEDERAL FARM CREDIT BANK (FFCB): The Federal Farm Credit Bank system supports agricultural loans and issues securities and bonds in financial markets backed by these loans. It has consolidated the financing programs of several related farm credit agencies and corporations. FEDERAL FUNDS RATE: The rate of interest at which Fed funds are traded. This rate is currently pegged by the Federal Reserve through open-market operations. Federal Agricultural Mortgage Corporation (FAMC or Farmer Mac): A stockholder owned, publicly-traded corporation that was established under the Agricultural Credit Act of 1987, which added a new Title VIII to the Farm Credit Act of 1971. Farmer Mac is a government sponsored enterprise, whose mission is to provide a secondary market for agricultural real estate mortgage loans, rural housing mortgage loans, and rural utility cooperative loans. The corporation is authorized to purchase and guarantee securities. Farmer Mac guarantees that all security holders will receive timely payments of principal and interest. FEDERAL HOME LOAN BANK (FHLB): Government sponsored wholesale banks (currently 12 regional banks), which lend funds and provide correspondent banking services to member commercial banks, thrift institutions, credit unions and insurance companies. FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC or Freddie Mac): A stockholder owned, publicly traded company chartered by the United States federal government in 1970 to purchase mortgages and related securities, and then issue securities and bonds in financial markets backed by those mortgages in secondary markets. Freddie Mac, like its competitor Fannie Mae, is regulated by the United States Department of Housing and Urban Development (HUD). FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA or Fannie Mae): FNMA, like GNMA was chartered under the Federal National Mortgage Association Act in 1938. FNMA is a federal corporation working under the auspices of the Department of Housing and Urban Development (HUD). It is the largest single provider of residential mortgage funds in the United States. Fannie Mae is a private stockholder-owned corporation. The corporation’s purchases include a variety of adjustable mortgages and second loans, in addition to fixed-rate mortgages. FNMA’s securities OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject Policy Number Date Adopted Date Revised INVESTMENT POLICY 27 9/15/93 6/5/13 Page 12 of 15 are also highly liquid and are widely accepted. FNMA assumes and guarantees that all security holders will receive timely payment of principal and interest. FEDERAL RESERVE SYSTEM: The central bank of the United States created by Congress and consisting of a seven member Board of Governors in Washington, D.C., 12 regional banks and about 5,700 commercial banks that are members of the system. GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA or Ginnie Mae): A government owned agency which buys mortgages from lending institutions, securitizes them, and then sells them to investors. Because the payments to investors are guaranteed by the full faith and credit of the U.S. Government, they return slightly less interest than other mortgage-backed securities. INTEREST-ONLY STRIPS: A mortgage backed instrument where the investor receives only the interest, no principal, from a pool of mortgages. Issues are highly interest rate sensitive, and cash flows vary between interest periods. Also, the maturity date may occur earlier than that stated if all loans within the pool are pre-paid. High prepayments on underlying mortgages can return less to the holder than the dollar amount invested. INVERSE FLOATER: A bond or note that does not earn a fixed rate of interest. Rather, the interest rate is tied to a specific interest rate index identified in the bond/note structure. The interest rate earned by the bond/note will move in the opposite direction of the index. An inverse floater increases the market rate risk and modified duration of the investment. LEVERAGE: Investing with borrowed money with the expectation that the interest earned on the investment will exceed the interest paid on the borrowed money. LIQUIDITY: A liquid asset is one that can be converted easily and rapidly into cash without a substantial loss of value. In the money market, a security is said to be liquid if the spread between bid and asked prices is narrow and reasonable size can be done at those quotes. LOCAL AGENCY INVESTMENT FUND (LAIF): The aggregate of all funds from political subdivisions that are placed in the custody of the State Treasurer for investment and reinvestment. MARKET VALUE: The price at which a security is trading and could presumably be purchased or sold. OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject Policy Number Date Adopted Date Revised INVESTMENT POLICY 27 9/15/93 6/5/13 Page 13 of 15 MASTER REPURCHASE AGREEMENT: A written contract covering all future transactions between the parties to repurchase/reverse repurchase agreements that establish each party’s rights in the transactions. A master agreement will often specify, among other things, the right of the buyer-lender to liquidate the underlying securities in the event of default by the seller borrower. MATURITY: The date upon which the principal or stated value of an investment becomes due and payable. MONEY MARKET: The market in which short-term debt instruments (bills, commercial paper, bankers’ acceptances, etc.) are issued and traded. MUTUAL FUNDS: An open-ended fund operated by an investment company which raises money from shareholders and invests in a group of assets, in accordance with a stated set of objectives. Mutual funds raise money by selling shares of the fund to the public. Mutual funds then take the money they receive from the sale of their shares (along with any money made from previous investments) and use it to purchase various investment vehicles, such as stocks, bonds, and money market instruments. MONEY MARKET MUTUAL FUNDS: An open-end mutual fund which invests only in money markets. These funds invest in short term (one day to one year) debt obligations such as Treasury bills, certificates of deposit, and commercial paper. NATIONAL ASSOCIATION OF SECURITIES DEALERS (NASD): A self-regulatory organization of the securities industry responsible for the operation and regulation of the NASDAQ stock market and over-the-counter markets. Its regulatory mandate includes authority over firms that distribute mutual fund shares as well as other securities. PASSIVE INVESTING: An investment strategy involving limited ongoing buying and selling actions. Passive investors will purchase investments with the intention of long term appreciation and limited maintenance, and typically don’t actively attempt to profit from short term price fluctuations. Also known as a buy-and-hold strategy. PRIMARY DEALER: A designation given by the Federal Reserve System to commercial banks or broker/dealers who meet specific criteria, including capital requirements and participation in Treasury auctions. These dealers submit daily reports of market activity and positions and monthly financial statements to the Federal Reserve Bank of New York and are subject to its informal oversight. Primary dealers include OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject Policy Number Date Adopted Date Revised INVESTMENT POLICY 27 9/15/93 6/5/13 Page 14 of 15 Securities and Exchange Commission registered securities broker/dealers, banks, and a few unregulated firms. PRUDENT PERSON RULE: An investment standard. In some states the law requires that a fiduciary, such as a trustee, may invest money only in a list of securities selected by the custody state----the so-called legal list. In other states the trustee may invest in a security if it is one which would be bought by a prudent person of discretion and intelligence who is seeking a reasonable income and preservation of capital. PUBLIC SECURITIES ASSOCIATION (PSA): A trade organization of dealers, brokers, and bankers who underwrite and trade securities offerings. QUALIFIED PUBLIC DEPOSITORIES: A financial institution which does not claim exemption from the payment of any sales or compensating use or ad valorem taxes under the laws of this state, which has segregated for the benefit of the commission eligible collateral having a value of not less than its maximum liability and which has been approved by the Public Deposit Protection Commission to hold public deposits. RANGE NOTE: An investment whose coupon payment varies and is dependent on whether the current benchmark falls within a pre-determined range. RATE OF RETURN: The yield obtainable on a security based on its purchase price or its current market price. This may be the amortized yield to maturity on a bond the current income return. REGIONAL DEALER: A securities broker/dealer, registered with the Securities & Exchange Commission (SEC), who meets all of the licensing requirements for buying and selling securities. REPURCHASE AGREEMENT (RP OR REPO): A holder of securities sells these securities to an investor with an agreement to repurchase them at a fixed price on a fixed date. The security ‘‘buyer’’ in effect lends the ‘‘seller’’ money for the period of the agreement, and the terms of the agreement are structured to compensate him for this. Dealers use RP extensively to finance their positions. Exception: When the Fed is said to be doing RP, it is lending money that is increasing bank reserves. SAFEKEEPING: A service to customers rendered by banks for a fee whereby securities and valuables of all types and descriptions are held in the bank’s vaults for protection. OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject Policy Number Date Adopted Date Revised INVESTMENT POLICY 27 9/15/93 6/5/13 Page 15 of 15 SECONDARY MARKET: A market made for the purchase and sale of outstanding securities issues following their initial distribution. SECURITIES & EXCHANGE COMMISSION: Agency created by Congress to protect investors in securities transactions by administering securities legislation. SEC RULE 15C3-1: See Uniform Net Capital Rule. STRUCTURED NOTES: Notes issued by Government Sponsored Enterprises (FHLB, FNMA, FAMCA, etc.), and Corporations, which have imbedded options (e.g., call features, step-up coupons, floating rate coupons, derivative-based returns) into their debt structure. Their market performance is impacted by the fluctuation of interest rates, the volatility of the imbedded options and shifts in the shape of the yield curve. TREASURY BILLS: A non-interest bearing discount security issued by the U.S. Treasury to finance the national debt. Most bills are issued to mature in three months, six months, or one year. TREASURY BONDS: Long-term coupon-bearing U.S. Treasury securities issued as direct obligations of the U.S. Government and having initial maturities of more than 10 years. TREASURY NOTES: Medium-term coupon-bearing U.S. Treasury securities issued as direct obligations of the U.S. Government and having initial maturities from two to 10 years. UNIFORM NET CAPITAL RULE: Securities and Exchange Commission requirement that member firms as well as nonmember broker-dealers in securities maintain a maximum ratio of indebtedness to liquid capital of 15 to 1; also called net capital rule and net capital ratio. Indebtedness covers all money owed to a firm, including margin loans and commitments to purchase securities, one reason new public issues are spread among members of underwriting syndicates. Liquid capital includes cash and assets easily converted into cash. YIELD: The rate of annual income return on an investment, expressed as a percentage. (a) INCOME YIELD is obtained by dividing the current dollar income by the current market price for the security. (b) NET YIELD or YIELD TO MATURITY is the current income yield minus any premium above par or plus any discount from par in purchase price, with the adjustment spread over the period from the date of purchase to the date of maturity of the bond. INVESTMENT POLICY No. 27 & PERFORMANCE REVIEW July 3, 2013 Attachment D POLICY REVIEW Purpose: Annual Policy Review Investment Performance Review Delegation of Investment Authority INVESTMENT POLICY GUIDELINES A. California Government Code: Sections 53600 through 53692 B. Investment Policy Certification: Association of Public Treasurers of the United States & Canada (APT US&C) POLICY REVIEW Review of Proposed Changes Added debt reserves as an exception to the pooling of funds (Section 2.0: Scope). Removed Sallie Mae from the list of government agency issuers and related definition (Section 8.0: Authorized and Suitable Investments, 8.03) Added Federal Agricultural Mortgage Corporation and related definition (Section 8.0: Authorized and Suitable Investments, 8.03) POLICY REVIEW (cont.) Increased the FDIC insured deposit amount from $100,000 to $250,000 (Section 8.0: Authorized and Suitable Investments, 8.04) Added to the commercial paper limitation that the District may not purchase more than 10 percent of the outstanding commercial paper of any single issuer. (Section 8.0: Authorized and Suitable Investments, 8.04) INVESTMENT PERFORMANCE Fund Objectives (in order of priority) Safety Liquidity Return on Investment YTD Performance: FY-13 FY-12 OTAY 0.42% 0.62% LAIF 0.30% 0.40% County Pool 0.41% 0.46% INVESTMENT PORTFOLIO: 4/30/13 Authorized $(‘000s) $ / % Actual % LAIF (Operating) $6,534 $50 Mil 7.89% LAIF (Bonds) $4,081 100% 4.92% Govt. Agency Bonds $50,736 100% 61.22% Bank Deposits & CDs $1,337 15% 1.61% San Diego County Pool $20,187 50% 24.36% TOTAL: $82,875 INVESTMENT PORTFOLIO: 4/30/13 $1,337,189 1.61% $30,802,240 37.17% $50,735,908 61.22% Otay Water District Investment Portfolio: 4/30/2013 Banks (Passbook/Checking/CD) Pools (LAIF & County) Agencies & Corporate Notes Total Cash and Investments: $82,875,337 REQUESTED BOARD ACTION Adopt Resolution No. 4213 to amend Investment Policy No. 27 and re- delegate authority for all investment related activities to the Chief Financial Officer (CFO). Questions? STAFF REPORT TYPE MEETING: Regular Board MEETING DATE: July 3, 2013 PROJECT: Various DIV. NO. All SUBMITTED BY: Rom Sarno Chief, Administrative Services APPROVED BY: German Alvarez, Assistant General Manager Mark Watton, General Manager SUBJECT: ADOPT RESOLUTION NO. 4215 TO ELECT FOUR (4) CANDIDATES FOR SPECIAL DISTRICT RISK MANAGEMENT AUTHORITY’S BOARD OF DIRECTORS GENERAL MANAGER’S RECOMMENDATION: That the Board adopt Resolution No. 4215 for the election of four (4) candidates for the Special District Risk Management Authority’s (SDRMA) Board of Directors. COMMITTEE ACTION: Please see “Attachment A”. PURPOSE: To present for the Board’s consideration, the ballot to elect four (4) candidates for the Special District Risk Management Authority’s (SDRMA) Board of Directors. ANALYSIS: SDRMA is holding an election to fill four (4) seats on its Board of Directors. Staff has reviewed each candidate’s qualifications, background, experience and expertise, and in an effort to provide a good balance of representation (based on agencies represented) on AGENDA ITEM 7 2 SDRMA’s Board, staff is recommending that the following four (4) candidates be considered for election to their Board: Muril Clift (Incumbent) Director, Cambria Community Services District Jean Bracy (Incumbent) Director of Administrative Services, Mojave Desert Air Quality Management District David Aranda (Incumbent) General Manager, North of the River Municipal Water District Mike Scheafer Director/Vice President, Costa Mesa Sanitary District Attached are statements of qualifications (Attachment B) as submitted by each candidate, along with the official election resolution (Attachment C) and ballot (Attachment D), which SDRMA requires to ensure the integrity of the balloting process. The ballot requests that the District select four (4) candidates when placing its vote. The ballot must be sealed and received by 5:00 pm on Tuesday, August 27, 2013. FISCAL IMPACT: Joe Beachem, Chief Financial Officer None. STRATEGIC GOAL: Maintaining effective communications with other cities, special districts, State and Federal governments, community organizations, and Mexico. LEGAL IMPACT: None. Attachments: Attachment A – Committee Action Report Attachment B – Candidates’ Statement of Qualifications Attachment C – Resolution No. 4215 Attachment D – Election Ballot ATTACHMENT A SUBJECT/PROJECT: ADOPT RESOLUTION NO. 4215 TO ELECT FOUR (4) CANDIDATES FOR SPECIAL DISTRICT RISK MANAGEMENT AUTHORITY’S BOARD OF DIRECTORS COMMITTEE ACTION: The Finance, Administration and Communications Committee discussed this item at a meeting held on June 24, 2013. The Committee supports staff’s recommendation to present to the full Board for their consideration. 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. 4215 A RESOLUTION OF THE GOVERNING BODY OF THE OTAY WATER DISTRICT FOR THE ELECTION OF DIRECTORS TO THE SPECIAL DISTRICT RISK MANAGEMENT AUTHORITY BOARD OF DIRECTORS WHEREAS, Special District Risk Management Authority (SDRMA) is a Joint Powers Authority formed under California Government Code Section 6500 et seq., for the purpose of providing risk management and risk financing for California special districts and other local government agencies; and WHEREAS, SDRMA’S Sixth Amended and Restated Joint Powers Agreement specifies SDRMA shall be governed by a seven member Board of Directors nominated and elected from the members who have executed the current operative agreement and are participating in a joint protection program; and WHEREAS, SDRMA’s Sixth Amended and Restated Joint Powers Agreement Article 7 – Board of Directors specifies that the procedures for director elections shall be established by SDRMA’s Board of Directors; and WHEREAS, SDRMA’s Board of Directors approved Policy No. 2012- 05 Establishing Guidelines for Director Elections specifies director qualifications, terms of office and election requirements; and Page 2 of 2 WHEREAS, Policy No. 2012-05 specifies that member agencies desiring to participate in the balloting and election of candidates to serve on SDRMA’s Board of Directors must be made by resolution adopted by the member agency’s governing body. NOW, THEREFORE, BE IT RESOLVED that the governing body of the Otay Water District selects the following candidates to serve as Directors on the SDRMA Board of Directors: (continued) STAFF REPORT TYPE MEETING: Regular Board MEETING DATE: July 3, 2013 SUBMITTED BY: Mark Watton, General Manager PROJECT: Various DIV. NO. ALL APPROVED BY: Mark Watton, General Manager SUBJECT: California Special Districts Association (CSDA) Region 6 Board Election GENERAL MANAGER’S RECOMMENDATION: That the Board consider casting a vote to elect a representative to the California Special Districts Association (CSDA) Board of Directors, Region 6, Seat B. PURPOSE: To present for the board’s consideration the ballot to elect a representative to Region 6, Seat B, on CSDA’s Board of Directors. COMMITTEE ACTION: N/A ANALYSIS: CSDA is holding an election to fill Seat B of Region 6 on its Board of Directors. Mr. William Nelson, Orange County Cemetery District, is the current incumbent of Seat B and is seeking re-election. The individual elected will serve a three (3) year term. There are a total of six [6] regions with each region having three seats on the Board. Attached is a copy of the mail-in ballot and the candidates’ Statement of Qualifications. The ballot must be mailed and received by CSDA by 5:00 p.m. on Friday, August 2, 2013. FISCAL IMPACT: Joe Beachem, Chief Financial Officer None. AGENDA ITEM 8 STRATEGIC GOAL: Participating would support the strategic goal of maintaining effective communications with other cities, special districts, State and Federal governments, community organizations and Mexico. LEGAL IMPACT: None. Attachment A: Committee Action Attachment B: Ballot Attachment C: Candidates’ Statements (2) ATTACHMENT A SUBJECT/PROJECT: California Special Districts Association (CSDA) Region 6 Board Election COMMITTEE ACTION: The Finance, Administration and Communications Committee is scheduled to reviewed this item at a meeting to be held on June 24, 2013. This attachment will be updated with notes summarizing the committee’s discussion. STAFF REPORT TYPE MEETING: Regular Board MEETING DATE: July 3, 2013 SUBMITTED BY: Adolfo Segura Information Technology Manager PROJECT: Various DIV. NO. ALL APPROVED BY: Geoff Stevens, Chief Information Officer German Alvarez, Assistant General Manager Mark Watton, General Manager SUBJECT: INFORMATION TECHNOLOGY RELATED OPERATIONS & MAINTENANCE AND CAPITAL CONTRACTS FOR FY 2014 GENERAL MANAGER’S RECOMMENDATION: That the Board authorize the General Manager to negotiate and enter into the following agreements: 1. One (1) year O&M service agreements with: a. AT&T in the amount of $99,000.00 for local and long-distance telephone and internet service. b. Verizon Wireless in the amount of $72,000.00 for cellular phone and wireless modem service. c. Tyler Technologies in the amount of $127,000.00 for ERP/Financial software maintenance costs and annual technical support. 2. One (1) year, with two (2) one-year option renewal O&M service agreements with: a. Intermedia in the amount of $107,928.00 ($35,976.00 annually) for enterprise hosted exchange email services. AGENDA ITEM 9 2 b. Advanced Call Processing, Inc. in the amount of $106,122.00 ($35,374.00 annually) for telephone software maintenance and technical support service. c. GPS Insight in the amount of $110,304.00 ($36,768.00 annually) for vehicle GPS fleet tracking system and service. COMMITTEE ACTION: See “Attachment A”. PURPOSE: To authorize the purchase of equipment and services necessary to support Information Technology’s daily operations and services, and enhance the District systems to meet emerging business needs as identified in the District Strategic Plan. ANALYSIS: The IT department presents to the Board specific technology related expenses that require Board approval because they exceed the General Manager’s authorized approval limit of $50,000.00 for a specific contract. These contracts and purchases are required to either operate the District’s technology environment or to make planned technology related infrastructure improvements. Each item requiring the District to issue a purchase order or contract for greater than $50,000.00 is described in detail in the following section. All of the items in this staff report are specifically itemized in the FY 2014 budget as well. By presenting these items collectively, we want to provide to the Board a more detailed view of expenses related to the Districts’ information systems. All purchasing guidelines have been met for the specific items in this report. Where possible, items have been competitively bid. Certain items, such as software licenses and vendor support, are sole source contracts, because only one vendor can support the product. Certain items are also purchased utilizing pricing provided in state authorized competitive contracts, primarily CALNET and WSCA (state and regional wide agreements which guarantees competitive pricing). Where possible, agreements will utilize the District’s standard contract form, which provides the ability to terminate the agreement with or without cause upon sixty-day notice. Contracts for software license and support are generally not open to negotiation and the manufacturer standard one (1) year agreement will be utilized. The 3 District has attempted, wherever possible, to synchronize our contract renewal dates with the District’s fiscal year and budget approval process. The following are detailed descriptions of the specific requests: Explanation of Costs Software and Support Agreements: AT&T $99,000.00 - This item covers the purchase of telephone and internet services to support all District operations. This item utilizes CALNET pricing which has been competitively bid by the State of California. Funds for these services are allocated in the IT O&M budget. Verizon Wireless $72,000.00 – This item covers cellular phone and wireless modem service for District operations. Verizon was the lowest bidder. The District inventory is: 78 iPhones for staff use and 91 wireless 3G/4G devices and service for mobile air cards, hot-spots and field connectivity for remote monitoring and alarm systems. Funds for this item are allocated in the IT O&M budget. Service Provider Plan Details One Year Total Verizon Unlimited Data & Pay-as-you-go voice plan -Unlimited 3G & 4G Wireless (basic plan) $6,000 per month Sprint Same as above $6,500 per month AT&T Same as above $6,900 per month Eden Tyler Technologies $127,000 – This item covers yearly required software maintenance for the District’s enterprise resource planning (ERP)software suite, which includes Utility Billing, Financial, Human Resources and Permitting Systems. The ERP software suite is exclusively owned by Tyler Technologies. The yearly maintenance fee includes all core licensing, software support to include required annual service packs and technical support for all software modules. This item is a sole source contract as only the product vendor is authorized to provide maintenance support. Funds for this item are allocated in the IT O&M budget. Intermedia $107,928.00 - This item covers the purchase of one(1) year with two (2) one-year option renewals for hosted enterprise exchange email service. The service will provide 24/7 email service to the District, as well as the associated operation and maintenance work 4 associated with managing an in-house email system. Additional benefits include hardware, data storage, archiving and utility (power/cooling) dollar savings. This item was competitively bid and selected the low cost vendor. Funds for this item are allocated in the IT O&M budget. Service Provider Service Details Overall Three Year Total Intermedia 25 GB Mailboxes & Unlimited storage in archive, Outlook support, Web-based access, Mobility, Shared Calendar & Contacts, Web apps for Outlook/SharePoint, Anti-Spam & anti- malware, In-place Archive, In-Place Hold, Lync for unified communications & voice messaging, 24/7 support $107,928.00 ($35,976 annually) ABTECH WMS Same as above $111,600.00 CenterBeam Same as above $179,856.00 Advanced Call Processing (ACP) $106,122.00 - This item covers the purchase of one(1) year with two (2) one-year option renewals for telecommunication software maintenance, functional programming and general technical support for the District phone system. This service ensures that the District’s telecommunication or voice system operates at a high-level of system up-time, performance and security. The services includes scheduled maintenance, remote monitoring, software and security upgrades, troubleshooting, after-hours and weekend support and on-site engineering services if needed. Although ATI was the lowest bidder, ACP was selected due to their wide client base, expertise with the District i3 phone system and staffing levels. Multiple request to NEC were made, but no pricing or service profile was provided. Funds for this item are allocated in the IT O&M budget. 5 Service Provider Service Details Overall Three Year Total ACP I3 Telecommunication software system, maintenance & voice support & functional programming. Monday- Friday, after-hours & weekend on-call/emergency support $106,122 ($35,374 annually) ATI Same as above $98,695 NEC Non-Responsive $ - GPS Insight Fleet Tracking System $110,304.00 - This item covers the purchase of one(1) year with two (2) one-year option renewals for carrier based GPS, cellular service and solution support for the District’s vehicle fleet. The existing iDEN solution being provided by Sprint/Airtrak, will be shut down on July 1, 2013. In preparation for this change, the District solicited six (6) service proposals. A cross-functional selection team reviewed the proposals and via a structured rating system narrowed the list to two top candidates, Sprint and GPS Insight. Solution proof of concept (POC) based on District requirements followed. Ensuing the POC, GPS Insight became the front-runner as they were overall able to meet the District’s functional, reporting, ease of use and technical integration requirements. In addition, GPS Insight was able to solely fulfill the solution requirements. Other vendors, including Sprint, required partnerships with at least two (2) other vendors. Lastly, GPS Insight was the lowest cost solution and is providing a significant functional upgrade from the previous solution. Funds for vehicle GPS hardware will come from CIP 2469 and monthly wireless service are allocated in the IT O&M budget. Vendor Hardware Cost Wireless Service Overall Three Year Total GPS Insight $25,704 $28,200 $110,304 Sprint/GeoTab $7,500 $32,500 $113,100 EJ Ward $47,000 $26,500 $126,500 SageQuest $0 (equip. lease built into cost) $47,374 $133,120 Air Trak $0 (equip. lease built into cost) $47,000 $141,000 Network Fleet $47,500 $31,200 $141,100 6 FISCAL IMPACT: Joe Beachem, Chief Financial Officer These items are specifically included in either the adopted FY 2014 Capital Budget or the O&M Budget. O&M Totals: All items, excluding the GPS hardware, are budgeted in the FY 2014 O&M Budget and total $596,650.00. These funds are budgeted and available. Capital Totals: The capital costs for the GPS modems ($25,704.00) will be charged to CIP 2469 (Information Technology Network and Hardware). This account has a FY 2014 budget of $350,000.00. After this expenditure, the account will have a remaining balance of $324,296.00. The project manager has verified that CIP 2469 has sufficient funding to complete the project. STRATEGIC GOAL: These items are in support of the District’s Strategic Plan, specifically improve the operating cost and efficiency of data center and network services, which will allow us to make tactical and long term improvements to District technology services LEGAL IMPACT: None. Attachments: Attachment A – Committee Action Report ATTACHMENT A SUBJECT/PROJECT: INFORMATION TECHNOLOGY RELATED OPERATIONS & MAINTENANCE AND CAPITAL CONTRACTS FOR FY 2014 COMMITTEE ACTION: The Finance, Administration and Communications Committee met on June 24, 2013 to review this item. The Committee supports presentation to the full Board for their consideration. 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.