HomeMy WebLinkAbout10-23-23 F&A Committee Packet1
OTAY WATER DISTRICT
FINANCE AND ADMINISTRATION
COMMITTEE MEETING
and
SPECIAL MEETING OF THE BOARD OF DIRECTORS
2554 SWEETWATER SPRINGS BOULEVARD
SPRING VALLEY, CALIFORNIA
BOARDROOM
MONDAY
October 23, 2023
12:00 P.M.
This is a District Committee meeting. This meeting is being posted as a special meeting
in order to comply with the Brown Act (Government Code Section §54954.2) in the event that
a quorum of the Board is present. Items will be deliberated, however, no formal board actions
will be taken at this meeting. The committee makes recommendations
to the full board for its consideration and formal action.
AGENDA
1.ROLL CALL
2.PUBLIC PARTICIPATION – OPPORTUNITY FOR MEMBERS OF THE PUBLIC TO
SPEAK TO THE BOARD ON ANY SUBJECT MATTER WITHIN THE BOARD’S
JURISDICTION INCLUDING AN ITEM ON TODAY’S AGENDA
DISCUSSION ITEMS
3.APPROVE TO INCREASE CIP P2676 IN AN AMOUNT OF $92,000.00 (FROM
$3,150,000 TO $3,242,000); APPROVE THE ISSUANCE OF A PURCHASE OR-
DER TO BRAX COMPANY IN THE AMOUNT OF $240,723.76 FOR MOTOR RE-
PLACEMENTS FOR PUMP #2 AT THE 980-2 PUMP STATION AND PUMP #1 AT
THE 980-1 PUMP STATION; AND APPROVE THE SURPLUS OF EXISTING MO-
TORS, INCLUDING THE ORIGINAL PUMP MOTOR #4 AT THE 980-2 PUMP
STATION THAT WAS REPLACED IN DECEMBER 2022 (MEDEROS)
[5 MINUTES]
4.APPROVE THE AUDITED FINANCIAL STATEMENTS, INCLUDING THE INDE-
PENDENT AUDITORS’ UNQUALIFIED OPINION, FOR THE FISCAL YEAR END-
ING JUNE 30, 2023 (DYCHITAN) [5 minutes]
5.ADOPT RESOLUTION NO. 4437 TO UPDATE BOARD POLICY NO. 22, DRUG
FREE WORKPLACE, OF THE DISTRICT’S CODE OF ORDINANCES (LAWSON)
[5 MINUTES]
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6. ADJOURNMENT
BOARD MEMBERS ATTENDING:
Tim Smith, Chair
Ryan Keyes
All items appearing on this agenda, whether or not expressly listed for action, may be de-
liberated and may be subject to action by the Board.
The agenda, and any attachments containing written information, are available at the Dis-
trict’s website at www.otaywater.gov. Written changes to any items to be considered at the
open meeting, or to any attachments, will be posted on the District’s website. Copies of the
agenda and attachments are also available by contacting the District Secretary at (619)
670-2253.
If you have any disability which would require accommodations to enable you to participate
in this meeting, please call the District Secretary at 670-2253 at least 24 hours prior to the
meeting.
Certification of Posting
I certify that on October 19, 2023, 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 October 19, 2023.
/s/ Tita Ramos-Krogman, District Secretary
STAFF REPORT
TYPE MEETING: Regular Board MEETING DATE: November 8, 2023
SUBMITTED BY:
Charles Mederos,
Utility Services Manager
PROJECT: P2676
P2700
DIV. NO. ALL
APPROVED BY: Andrew Jackson, Chief Water Operations
Jose Martinez, General Manager
SUBJECT: APPROVAL TO INCREASE CIP P2676 IN AN AMOUNT OF $92,000.00;
APPROVAL TO REPLACE PUMP MOTORS AT THE 980-2 and 980-1 PUMP STATIONS; AND APPPROVAL OF THE SURPLUS OF EXISTING MOTORS
GENERAL MANAGER’S RECOMMENDATION:
That the Board authorize the General Manager to:
1.Approve to increase CIP P2676 total budget by $92,000.00,
from $3,150,000.00 to $3,242,000.00.2.Approve the issuance of a purchase order to Brax Company inthe amount of $240,723.76 for the motor replacements for pump
#2 at the 980-2 Pump Station and pump #1 at the 980-1 PumpStation; and
3.Approve the surplus of existing motors, including theoriginal pump motor #4 at the 980-2 Pump Station that wasreplaced in December 2022.
COMMITTEE ACTION:
See “Attachment A.”
PURPOSE:
To obtain Board authorization for the replacement of motors for pump #2 at 980-2 Pump Station and pump #1 at the 980-1 Pump Station, located in Chula Vista (Exhibit A), to increase CIP P2676 total
budget by $92,000.00, from $3,150,000.00 to $3,242,000.00, and surplus the existing motors.
AGENDA ITEM 3
ANALYSIS: The District’s 980-2 Pump Station is located at the 624-3 (30 million) Reservoir site in Chula Vista. The pump station is
critical for water distribution and consists of four individual pumps and motors with a total pumping capacity of up to 12,000 Gallons Per Minute (GPM) from the 624-3 to the 980-pressure zone for system demand and storage. The pump station was built in 2006 and the station runs more than 12 hours a day during high demand
periods. The water demand for this pump station was 6.7 Million Gallons a Day (MGD) in 2006 and has now increased to approximately 7.00 MGD during peak usage. Currently, the 980-2 Pump Station has one motor out of service, located at position #2, that requires replacement. This is a 4,160-volt motor that has never been
replaced since the original pump station was built. Electrical tests conducted by an outside company indicate that the pump motor
has a ground fault due to low insulation resistance; to corroborate the motor failure, a second comparative test was conducted with another motor from the same pump station, taking representative
winding insulation readings that confirmed the failure. It is critical to replace the motor for redundancy and to meet water
demands. The typical life expectancy of a pump motor is 10 to 15 years, and this pump motor is 17 years old.
The 980-1 Pump Station is located at 2406 Otay Lakes Road in Chula Vista. The pump station was the main source of water distribution
to the 980-pressure zone before the 980-2 Pump station was built. The pump station is critical for water distribution redundancy when the 980-2 Pump Station needs to be taken out of service for
preventive and corrective maintenance or to run concurrently when there are high water demands. The 980-1 Pump Station was built in
1988 and consists of three individual pumps and motors with a total pumping capacity of 8,000 GPM from the 711-pressure zone for system demand and storage. Currently, the pump station has one 4,160-volt motor out of service, located in position #1, and requires replacement. According to the records of tests performed under the
preventive maintenance program and professional assessment by an outside vibration analysis company, this motor has vibration issues and repetitive failures. Staff have made every effort to repair the pump motor with no successful results. Therefore, it is recommended to replace it to prevent the risk of a major motor
failure at an unpredictable date. Included in the approved FY 2024 budget, CIP P2676 six-year budget was increased from $725,000.00 to $3,150,000.00 for 980-2 Pump Station miscellaneous replacements with $50,000.00 allocated for
980-2 pump motor #2 rebuild. At the time the budget was created,
staff presumed that pump motor #2 would only require rebuilding. Once the District obtained the outside condition assessment results, it was determined that a full replacement was required which will increase the cost, compared to budget, by $92,000.00. CIP P2700 was created with an overall six-year budget
of $750,000.00 for the replacement of motors, pumps, pump valves, etc., to allow for the quick rehab/replacement of equipment at Pump Stations. Staff solicited quotes for the replacement of pump motors at 980-
1 and 980-2 Pump Stations via Periscope, the District’s purchasing
solicitation system. Five quotes were received and are shown below.
Prices include all materials, installation, freight, taxes,
performance, and payment bonds.
Company Sloan Electromechanical
DXP Enterprises, Inc.
Brax Company Weber Water Resources Sulzer EMS
Motor #1 980-1 Pump Station $84,224.00 Not Responsive $99,111.00 Not Responsive Not Responsive
Motor #2 980-2 Pump Station $129,226.00 Not Responsive $141,612.76 Not Responsive Not Responsive
TOTAL BID: $213,450.00 Not Responsive $240,723.76 Not Responsive Not Responsive
Comments: No guarantee that motor will fit; history of change orders
DIR required Subcontractor Form missing
Most Responsible Missing Bid Bond Missing Bid Bond
Staff is recommending that the Purchase Order is issued to Brax
Company for the replacement of pump motor #2 at the 980-2 Pump
Station and pump motor #1 at the 980-1 Pump Station. The other
three companies that submitted quotes did not meet the requirements
of the Request For Quotes (RFQ). Sulzer EMS did not submit a bid
bond with their quote. DXP Enterprises did not submit a
subcontractor form, specified installation limited to one day
only, and since the motor was too old and the manufacturer has
limited information on the original motor, any deviation would
require a re-quote. Sloan Electromechanical requires additional
work to couple the new pump motor to the pump since they stated
that pump head shaft will need to be shortened and requested
additional verification of the pump head shaft diameters for both
motors. Weber Water Resources did not submit a Bid bond and
subcontractor forms. Brax Company is the recommended choice since
they were responsive, adhered to the RFQ, and have previously
performed work for the District with no issues.
FISCAL IMPACT: Joe Beachem, Chief Financial Officer
The total actual cost for the two pump motors is $240,723.76, of
which $99,111.00 will be charged against CIP 2700 and $141,612.76 will be charged to CIP P2676.
The Project Manager anticipates that CIP P2700 has sufficient funds in the current year budget to cover all currently known pump motor
replacements. The total budget for CIP P2676, as approved in the FY 2024 budget is $3,150,000.00. Total expenditures, plus outstanding commitments
and forecast, including this contract, are $3,242,000.00. Based on a review of the financial budget, the Project Manager anticipates that with a budget increase of $92,000.00, CIP P2676 will be completed within the new budget amount of $3,242,000.00.
The Finance Department has determined that 100 percent of the budget and reserve funds are available to cover the cost of the
pump motors. Expenditure Summary
CIP P2700 Six-Year Budget $750,000.00
Cost for 980-1 Pump Station Pump Motor $99,111.00
CIP P2676 Six-Year Budget $3,150,000.00
CIP P2676 Six-Year Budget proposed increase $3,242,000.00
Cost for 980-2 Pump Station Pump Motor $141,612.76
STRATEGIC GOAL:
Operate the system to meet demand 24 hours a day, seven days a week. LEGAL IMPACT: None.
Attachments: Attachment A - Committee Action
Attachment B - Photos Exhibit A – Pump Stations Location
ATTACHMENT A
SUBJECT/PROJECT:
APPROVAL TO INCREASE CIP P2676 IN AN AMOUNT OF $92,000.00; APPROVAL TO REPLACE PUMP MOTORS AT THE 980-2 and 980-1 PUMP
STATIONS; AND APPPROVAL OF THE SURPLUS OF EXISTING MOTORS
COMMITTEE ACTION:
The Finance and Administration Committee reviewed this item at a meeting held on Monday, October 23, 2023, and the following comments
were made: 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.
Attachment B
980-1 Pump Station Pump Motor # 1
980-2 Pump Station Pump Motor # 2
STAFF REPORT
TYPE MEETING: Regular Board MEETING DATE: November 8, 2023
SUBMITTED BY: Marissa Dychitan
Senior Accountant
PROJECT: DIV. NO. All
APPROVED BY: Eid Fakhouri, Finance Manager
Kevin Koeppen, Assistant Chief of Finance
Joseph R. Beachem, Chief Financial Officer
Jose Martinez, General Manager
SUBJECT: Approve the Audited Financial Statements for the Fiscal Year
Ended June 30, 2023
GENERAL MANAGER'S RECOMMENDATION:
That the Board approve the Audited Financial Statements (Attachment
B), including the Independent Auditors' unqualified opinion, for the
fiscal year ending June 30, 2023.
COMMITTEE ACTION:
See Attachment A.
PURPOSE:
To inform the Board of the significant financial events which
occurred during the fiscal year ended June 30, 2023, as reflected in
the audited financial statements.
ANALYSIS:
Davis Farr LLP performed the audit and found that, in all material
respects, the financial statements correctly represent the District's
AGENDA ITEM 4
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financial position. They found no material errors in the financial
records or statements (Attachment D).
Total Assets:
Total assets increased by $6.7 million, or 1.09%, during Fiscal Year
2023, to $619.8 million, due to increases in cash and investments, as
well as lease receivables, which were partially offset by depreciation.
Deferred Outflows & Deferred Inflows:
Deferred outflows increased by $15.1 million, or 199.35%, in Fiscal
Year 2023 due to increases in pension and OPEB actuarial costs.
Deferred inflows decreased by $10.5 million, or 18.21%, due to decreases
in deferred investment income for the Pension and OPEB plans, partially
offset by the increase in deferred inflows from leases.
Total Liabilities & Net Positions:
Total liabilities increased by $25.9 million, or 18.70%, from the
previous fiscal year to $164.3 million. The increase is attributable to
the increases in net pension and OPEB liabilities, partially offset by
the annual debt payment of $5.5 million.
The net position increased by $6.4 million, or 1.50%, to $431.1
million as of June 30, 2023.
Capital Contributions:
Capital contributions for Fiscal Year 2023 were $9.2 million. These
contributions consist of developers' contributions of $5.3 million in
capacity fees and $3.1 million in contributed fixed assets, $0.2
million in CIP grants, and $0.1 million from Caltrans as
reimbursements for utility relocations. Additionally, ratepayers paid
$0.5 million in availability fees, which are considered a part of
capital contributions.
Results of Operations:
Operating revenues decreased by $2.6 million, or 2.36%, due to a
decrease in water sales volume because of higher rainfall, partially
offset by increases in water and wastewater rates.
The cost of water sales increased by $0.8 million, or 1.11%, due to
increased unit purchase costs, partially offset by a reduction in
volumes purchased.
3
Non-Operating Revenues & Expenses:
Non-operating revenues increased by $2.7 million, or 21.66%, for
Fiscal Year 2023, primarily due to a $6.5 million increase in
investment income, partially offset by a decrease in miscellaneous
revenue of $3.4 million.
Non-operating expenses decreased by $0.5 million, or 8.50%, in Fiscal
Year 2023, primarily due to the decrease in interest expense and
expenses associated with non-capitalizable CIP costs.
Conclusion:
In summary, the overall audit process was successful, and the
auditors found no material errors or misstatements in the District's
financial statements.
Additional Audit Correspondence:
As a part of completing the audit engagement, Davis Farr LLP also
provided the following letters summarizing their observations and
conclusions concerning the District's overall financial processes:
• Management Letter: The auditors did not identify any internal
control deficiencies that they considered material weaknesses.
(Attachment C).
• Audit Committee Letter: This letter describes the overall
aspects of the audit, including audit principles, performance,
dealings with management, and significant findings or issues.
There were no disagreements with management concerning
financial accounting, reporting, or auditing matters, and
there were no significant difficulties in dealing with
management in performing the audit. (Attachment D).
• Report on Applying Agreed-Upon Procedures: A review of the
District's investment portfolio at year-end and a sample of
specific investment transactions completed throughout the
fiscal year were performed. There were no exceptions to
compliance from the District's Investment Policy. (Attachment
E).
FISCAL IMPACT:
None.
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STRATEGIC GOAL:
The District ensures its continued financial health through long-term
financial planning, formalized financial policies, enhanced budget
controls, fair pricing, debt planning, and improved financial
reporting.
LEGAL IMPACT:
None.
Attachments:
A) Committee Action
B) Audited Annual Financial Statements
C) Management Letter
D) Audit Committee Letter
E) Report on Applying Agreed-Upon Procedures
F) PowerPoint Presentation by Davis Farr LLP
ATTACHMENT A
SUBJECT/PROJECT:
Approve the Audited Financial Statements for the Fiscal
Year Ended June 30, 2023
COMMITTEE ACTION:
OTAY WATER DISTRICT
FINANCIAL STATEMENTS
WITH
REPORT ON AUDIT BY INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
JUNE 30, 2023
Attachment B
Table of Contents
Year Ended June 30, 2023
Page
Number
Independent Auditor’s Report 1
Management’s Discussion & Analysis 4
Basic Financial Statements:
Statement of Net Position 13
Statement of Revenues, Expenses, and Changes in Net Position 15
Statement of Cash Flows 16
Notes to Financial Statements 18
Required Supplementary Information:
Schedule of Changes in the Net OPEB Liability and Related Ratios 63
Schedule of Contributions 64
Schedule of Changes in the Net Pension Liability and Related Ratios 65
Schedule of Plan Contributions 67
Independent Auditor’s Report
Board of Directors
Otay Water District
Spring Valley, California
Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements of the Otay Water District (District), as of and for
the year ended June 30, 2023 and the related notes to the financial statements, which
collectively comprise the District’s basic financial statements as listed in the table of contents.
In our opinion, the accompanying financial statements present fairly, in all material respects,
the respective financial position of the District as of June 30, 2023, and the respective changes
in financial position and cash flows thereof for the year then ended in accordance with
accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in the
United States of America (GAAS) and the standards applicable to financial audits contained in
Government Auditing Standards, issued by the Comptroller General of the United States. Our
responsibilities under those standards are further described in the Auditor’s Responsibilities
for the Audit of the Financial Statements section of our report. We are required to be
independent of the District and to meet our other ethical responsibilities, in accordance with
the relevant ethical requirements relating to our audit. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Emphasis of Matter
As described further in Note 5 to the financial statements, during the year ended June 30,
2023, the District implemented Governmental Accounting Standards Board (GASB) Statement
No.96, Subscription-Based Information Technology Arrangements Accounting. Our opinion is
not modified with respect to this matter.
Responsibilities of Management for the Financial Statements
The District’s management is responsible for the preparation and fair presentation of the
financial statements in accordance with accounting principles generally accepted in the United
States of America, and for the design, implementation, and maintenance of internal control
relevant to the preparation and fair presentation of financial statements that are free from
material misstatement, whether due to fraud or error.
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In preparing the financial statements, management is required to evaluate whether there are
conditions or events, considered in the aggregate, that raise substantial doubt about the
District’s ability to continue as a going concern for one year after the date that the financial
statements are issued.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance
but is not absolute assurance and therefore is not a guarantee that an audit conducted in
accordance with GAAS will always detect a material misstatement when it exists. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations,
or the override of internal control. Misstatements are considered material if there is a
substantial likelihood that, individually or in the aggregate, they would influence the judgment
made by a reasonable user based on the financial statements.
In performing an audit in accordance with GAAS, we:
Exercise professional judgment and maintain professional skepticism throughout the
audit.
Identify and assess the risks of material misstatement of the financial statements,
whether due to fraud or error, and design and perform audit procedures responsive to
those risks. Such procedures include examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements.
Obtain an understanding of internal control relevant to the audit in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the District’s internal control.
Accordingly, no such opinion is expressed.
Evaluate the appropriateness of accounting policies used and the reasonableness of
significant accounting estimates made by management, as well as evaluate the overall
presentation of the financial statements.
Conclude whether, in our judgment, there are conditions or events, considered in the
aggregate, that raise substantial doubt about the District’s ability to continue as a
going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other
matters, the planned scope and timing of the audit, significant audit findings, and certain
internal control–related matters that we identified during the audit.
Report on Summarized Comparative Information
We have previously audited the District’s 2022 financial statements, and we expressed an
unmodified audit opinion on those audited financial statements in our report dated October
19, 2022. In our opinion, the summarized comparative information presented herein as of
and for the year ended June 30, 2022, is consistent, in all material respects, with the audited
financial statements from which it has been derived.
2
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the
Management’s Discussion and Analysis, Schedule of Changes in the Net OPEB Liability and
Related Ratios, Schedule of Contributions, Schedule of Changes in the Net Pension Liability
and Related Ratios, and Schedule of Plan Contributions, be presented to supplement the basic
financial statements.Such information is the responsibility of management and, although not
a part of the basic financial statements, is required by the Governmental Accounting
Standards Board who considers it to be an essential part of financial reporting for placing the
basic financial statements in an appropriate operational, economic, or historical context. We
have applied certain limited procedures to the required supplementary information in
accordance with auditing standards generally accepted in the United States of America, which
consisted of inquiries of management about the methods of preparing the information and
comparing the information for consistency with management’s responses to our inquiries, the
basic financial statements, and other knowledge we obtained during our audit of the basic
financial statements. We do not express an opinion or provide any assurance on the
information because the limited procedures do not provide us with sufficient evidence to
express an opinion or provide any assurance.
Other Information
Management is responsible for the other information included in the Annual Comprehensive
Financial Report. The other information comprises the introductory section and statistical
section but does not include the financial statements and our auditor's report thereon. Our
opinions on the financial statements do not cover the other information, and we do not
express an opinion or any form of assurance thereon. In connection with our audit of the
financial statements, our responsibility is to read the other information and consider whether
a material inconsistency exists between the other information and the financial statements,
or the other information otherwise appears to be materially misstated. If, based on the work
performed, we conclude that an uncorrected material misstatement of the other information
exists, we are required to describe it in our report.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated
October 25, 2023 on our consideration of the District’s internal control over financial reporting
and on our tests of its compliance with certain provisions of laws, regulations, contracts, and
grant agreements and other matters. The purpose of that report is solely to describe the
scope of our testing of internal control over financial reporting and compliance and the results
of that testing, and not to provide an opinion on the effectiveness of internal control over
financial reporting or on compliance.That report is an integral part of an audit performed in
accordance with Government Auditing Standards in considering the District’s internal control
over financial reporting and compliance.
Irvine, California
October 25, 2023
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Management’s Discussion and Analysis
As the management of the Otay Water District (the "District"), we offer readers of the District's financial
statements,this narrative overview,and an analysis of the District's financial performance during the fiscal
year ending June 30, 2023.Please read it in conjunction with the District's financial statements that follow
Management's Discussion and Analysis.All amounts, unless otherwise indicated, are expressed in millions
of dollars.
Overview of the Financial Statements
This discussion and analysis is intended to serve as an introduction to the District's basic financial
statements, which are comprised of the following: 1) Statement of Net Position, 2) Statement of Revenues,
Expenses,and Changes in Net Position, 3) Statement of Cash Flows, and 4) Notes to the Financial
Statements.This report also contains other supplementary information in addition to the basic financial
statements.
The Statement of Net Position presents information on the District's assets,deferred outflows of resources,
liabilities,and deferred inflows of resources, with the difference reported as Total Net Position.Over time,
increases or decreases in net positions may serve as a valuable indicator of whether the District's financial
position is improving or weakening.
The Statement of Revenues, Expenses,and Changes in Net Position presents information showing how
the District's net position changed during the most recent fiscal year.All changes in net positions are
reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of
related cash flows.Thus, revenues and expenses are reported in this statement for some items that will
only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation
leave).
The Statement of Cash Flows presents information on cash receipts and payments for the fiscal year.The
Notes to the Financial Statements provide additional information essential to a complete understanding of
the data supplied in the specific financial statements listed above.
Financial Highlights
The assets and deferred outflows of resources of the District exceeded its liabilities and deferred inflows of resources at
the close of the most recent fiscal year by $431.1 million (net position). Of this amount, $83.4 million (unrestricted net
position)may be used to meet the District’s ongoing obligations to residents and creditors.
Total assets increased by $6.7 million or 1.09% during Fiscal Year 2023, to $619.8 million,due to increases in cash and
investments, and the recording of new lease receivables which were partially offset by a drop in capital assets due to
depreciation exceeding current year additions.
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Management’s Discussion and Analysis
In addition to the basic financial statements and accompanying notes, this report also presents certain
required supplementary information concerning the District's progress in funding its obligation to provide
retirement benefits to its employees.
Financial Analysis:
As noted, net position may serve,over time,as a valuable indicator of an entity's financial position.In the
case of the District, assets and deferred outflows of resources exceeded liabilities and deferred inflows of
resources by $431.1 million at the close of Fiscal Year 2023.
The most significant portion of the District's net position, $341.2 million (79.15%), reflects its investment in
capital assets,less any remaining outstanding debt used to acquire those capital assets.The District uses
these capital assets to provide services to customers; consequently, these assets are not available for
future spending.Although the District's investment in its capital assets is reported effectively as a resource,
it should be noted that the resources needed to repay the debt must be provided from other sources since
the capital assets themselves cannot be used to liquidate these liabilities.
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Management’s Discussion and Analysis
Statement of Net Position
(In Millions of Dollars)
2023 2022
Assets
Current and Other Assets $ 176.3 $ 166.4
Capital Assets 443.5 446.7
Total Assets 619.8 613.1
Deferred Outflows of Resources
Deferred Actuarial Pension Costs 15.9 4.5
Deferred Actuarial OPEB Costs 6.7 3.0
Total Deferred Outflows of Resources 22.6 7.5
Liabilities
Current Liabilities 34.2 33.5
Long-Term Debt Outstanding 95.4 100.9
Net Pension Liability 25.9 0.3
Net OPEB Liability 5.0 0.0
Other Liabilities 3.8 3.7
Total Liabilities 164.3 138.4
Deferred Inflows of Resources
Deferred Inflows from Leases 45.4 36.6
Deferred Actuarial Pension Costs 0.0 14.4
Deferred Actuarial OPEB Costs 1.6 6.5
Total Deferred Inflows of Resources 47.0 57.5
Net Position
Net Investment in Capital Assets 341.2 340.3
Restricted for Debt Service 3.5 3.7
Restricted for OPEB Asset 0.0 3.0
Restricted for Capital Assets 3.0 3.0
Unrestricted 83.4 74.7
Total Net Position $ 431.1 $ 424.7
The District's operations and population are growing.Much of this expansion has occurred in the
residential sector, particularly in the multi-family dwellings and commercial areas. By 2055, the District's
service area population is expected to increase by 13% to 271,500 residents.The District has created
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Management’s Discussion and Analysis
several future planning documents to ensure a reliable water supply and sewer system in the future,
including the maintenance of current infrastructure.
In FY 2023,the District's Capital Assets increased by $14.0 million before accumulated depreciation.(See
Note 4 in the Notes to Financial Statements).The District also saw a decrease in long-term debt of $5.5
million (excluding current maturities)due to annual debt service payments (See Note 5 in the Notes to
Financial Statements).
Total liabilities increased by $25.9 million in FY 2023 primarily due to increases in Net Pension and OPEB
liabilities partially offset by the annual debt service payments.
In FY 2023, deferred outflows of resources increased by 15.1 million due to increases in the actuarial
pension and OPEB costs.
Deferred inflows of resources decreased by $10.5 million in FY 2023 due to decreases in the actuarial
pension and OPEB costs partially offset by the increase in deferred inflows from leases.
At the end of FY 2023,the District reports positive balances in all net position categories.This situation also
applies to the prior fiscal year.
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Management’s Discussion and Analysis
Statement of Revenues, Expenses,and Changes in Net Position
(In Millions of Dollars)
2023 2022
Water Sales $99.9 $ 102.8
Wastewater Revenue 3.3 3.1
Connection and Other Fees 3.0 2.9
Non-operating Revenues 14.6 11.9
Total Revenues 120.8 120.7
Depreciation Expense 17.9 17.7
Other Operating Expenses 100.9 91.5
Non-operating Expenses 4.8 5.3
Total Expenses 123.6 114.5
Income (Loss) Before Capital
Contributions (2.8)6.2
Capital Contributions 9.2 13.2
Change in Net Position 6.4 19.4
Beginning Net Position 424.7 405.3
Ending Net Position $ 431.1 $ 424.7
Water Sales decreased by $2.9 million in FY 2023 due to the decrease in units sold caused by higher
rainfall partially offset by increases in water rates necessary to pass through increasing costs placed on the
District.
Other Operating Expenses increased by $9.4 million in FY 2023,predominantly due to the increase in
administrative and general expenses caused by increases in pension and OPEB costs and an increase in
the cost of water.
Specific planning and environmental study costs associated with capital projects do not qualify as capital
costs under Generally Accepted Accounting Principles. These costs are included in the District's
miscellaneous (non-operating) expenses.For FY 2023 those expenses were $0.3 million.
Connection and Other Fees increased by $0.1 million in FY 2023 due to an increase in expansion related
operating costs, which are funded by capacity fees.
8
Management’s Discussion and Analysis
Capital Contributions decreased by $4.0 million in FY2023 due to less developer-built facilities.
Non-operating Revenues
Non-operating Revenues by Major Source
(In Millions of Dollars)
2023 2022
Taxes and Assessments $5.6 $5.2
Rents and Leases 2.2 2.1
Other Non-operating Revenue 6.8 4.6
Total Non-operating Revenues $ 14.6 $ 11.9
The District's total non-operating revenues increased by $2.7 million in FY 2023 due primarily to the
increase in investment earnings.During FY 2023, the Federal Funds Rate increased from 1.75% to 5.25%
which resulted in the overall increase in the market rates of return.
Capital Assets and Debt Administration
The District's capital assets (net of accumulated depreciation) as of June 30, 2023, totaled $443.5 million.
Included in this amount is land, which is a non-depreciable asset.The District's net capital assets
decreased by 0.72% in FY 2023.
9
Management’s Discussion and Analysis
Capital Assets
(In Millions of Dollars)
As indicated by the figures in the table above, most capital assets added during the current fiscal year are
related to the water systems.Additionally,most of the construction-in-progress cost is associated with
water systems.Additional information on the District's capital assets can be found in Note 4 of the Notes to
Financial Statements.
On June 30, 2023,the District had $95.4 million in outstanding debt (net of $5.2 million of maturities
occurring in FY 2024), which consisted of the following:
Lease Payable $ 0.7
Subscription-Based IT Payable 0.1
Revenue Bonds 94.6
Total Long-Term Debt $ 95.4
Additional information on the District's long-term debt can be found in Note 5 of the Notes to Financial
Statements.
2023 2022
Land $14.5 $14.4
Construction in Progress 11.7 7.3
Potable Water System 542.6 535.5
Recycled Water System 119.2 117.8
Wastewater System 59.4 59.1
Field Equipment 8.3 8.1
Buildings 19.7 19.6
Transportation Equipment 3.9 3.8
Communication Equipment 2.6 2.5
Office Equipment 8.1 8.1
Right to Use Assets 0.9 0.7
Total Capital Assets 790.9 776.9
Less Accumulated
Depreciation (347.4)(330.2)
Net Capital Assets $ 443.5 $ 446.7
10
Management’s Discussion and Analysis
Fiscal Year 2023-2024 Budget
Economic Factors
The San Diego region imports 72%of its potable supply; therefore, factors such as local rainfall and
weather conditions elsewhere in the western portion of the nation can affect the region.San Diego
received above-average rainfall of 17.12 inches in FY 2023.The 10-year average of 9.94 inches for San
Diego rainfall reflects the long-term drought conditions for our area.San Diego's rainfall average over 20
years is 9.52 inches,the 30-year average is 9.40 inches,and the 40-year average is 9.77 inches.
While water sales peaked in 2008, prolonged droughts led to an increase in conservation which has had
permanent influence on volumes.Higher rainfall resulted in an 8.73% decline in potable water sales
volume in FY 2023.The FY 2024 sales volume is budgeted to increase modestly by 0.84% compared to the
previous year's budget.
The District continues to respond to the challenges presented by growth, State mandates,and drought by
creating new opportunities and new organizational efficiencies.Utilizing and refining its Strategic Business
Plan has captured the Board of Directors'vision and united its staff in a joint mission.The District has
achieved several significant accomplishments due to its successful adherence to its Strategic Business
Plan.The District is poised to continue successfully providing an affordable,safe, and reliable water supply
for the people of its service area, while also passing through the benefits of greater efficiencies and
economies of scale.
The District is currently at about 87%of its projected ultimate population, serving approximately 240,000
people.Long-term, this percentage should continue to increase as the District's service area develops and
grows.By 2055,the District is projected to serve approximately 271,500 people, with an average daily
demand of 38.5.million gallons per day (MGD)compared to the current average daily demand of 28.9
million gallons per day (MGD).Currently,the District services the needs of this growing population by
purchasing water from the San Diego County Water Authority (CWA), which in turn purchases its water
from the Metropolitan Water District (MWD) and the Imperial Irrigation District (IID).
Otay takes delivery of water through several connections of large-diameter pipelines owned and operated
by CWA.The District receives treated water from CWA directly and from the Helix Water District via a CWA
contract.Also, the District has an emergency agreement with the City of San Diego to purchase water in
the case of a shutdown of the primary treated water source.The City of San Diego also has a long-term
contract with the District to provide recycled water for landscape and irrigation usage.Through innovative
agreements like these, both parties can benefit by using another agency's excess capacity and diversifying
local supply, thereby increasing reliability.
11
Management’s Discussion and Analysis
Financial
The District is budgeted to deliver approximately 27,566.5 acre-feet of potable water to 51,758 potable
customer accounts during FY 2024.The FY 2024 budget was prepared with the continuing challenges of
inflation,regulatory compliance requirements, and endeavors related to the District’s strategic plan.
Inflation is expected to have a significant impact on material and administrative expenses in FY 2024, with
an estimated $1.2 million impact and $18.4 million impact on the CIP. SDG&E rate increases are expected
to increase energy costs by 10.1%, resulting in a $392 thousand increase. Regulatory mandates are also
adding pressure to both operating and CIP budgets, increasing material and administrative expense
budgets by $848 thousand. The District partially mitigates inflationary impacts through returns on
investments and long-term contracts that fix District expenses. The London Moeder Advisors' economic
report suggests inflation will likely continue into 2024 at a moderately tempered pace,supported by March
2023 CPI data at a 5.3% inflation rate. The six-year rate model assumes administrative and material
inflation to decrease gradually from 5.5% in FY 2025 to 4.0% by 2028.
District staff projects that the District will sell another 1,123 meters over the next six years,translating to
3,964.5 equivalent dwelling units (EDUs).This growth is estimated to increase sales volumes by an
average of less than 1% per year over the next five years.While all these factors impact the region's water
usage, people's water needs remain an underlying constant.
Management is unaware of any other conditions that are likely to have a significant impact on the District's
current financial position, net position,or operating results.
Contacting the District's Financial Management
This financial report provides a general overview of the Otay Water District's finances for the Board of
Directors, customers, creditors, and other interested parties.Questions concerning any information
provided in the report or requests for additional information should be addressed to the District's Finance
Department, 2554 Sweetwater Springs Blvd., Spring Valley, CA 91978-2004.
12
STATEMENT OF NET POSITION
June 30, 2023
(with comparative totals as of June 30, 2022)
2023 2022
ASSETS
Current Assets:
Cash and Cash Equivalents (Notes 1 and 2)43,753,408$ 87,556,645$
Restricted Cash and Cash Equivalents (Notes 1 and 2)3,078,363 3,208,111
Investments (Notes 1 and 2)59,781,150 11,689,224
Restricted Investments (Notes 1 and 2)3,444,377 3,499,094
Accounts Receivable, Net 14,313,664 15,450,919
Accrued Interest Receivable 846,231 262,315
Taxes and Availability Charges Receivable, Net 305,094 277,505
Restricted Taxes and Availability Charges Receivable, Net 6,182 15,059
Current Lease Receivable (Note 11)962,482 1,055,499
Inventories 2,053,393 1,350,220
Prepaid Items and Other Receivables 1,501,252 2,507,703
Total Current Assets 130,045,596 126,872,294
Non-current Assets:
Capital Assets (Note 4):
Land 14,479,573 14,423,773
Construction in Progress 11,741,448 7,306,003
Capital Assets, Net of Depreciation 417,230,754 425,017,900
Net OPEB Asset - 3,005,037
Lease Receivable (Note 11)46,270,266 36,446,255
Total Non-current Assets 489,722,041 486,198,968
Total Assets 619,767,637 613,071,262
DEFERRED OUTFLOWS OF RESOURCES
Deferred Actuarial Pension Costs (Note 7)15,951,074 4,481,769
Deferred Actuarial OPEB Costs (Note 8)6,679,231 3,078,056
Total Deferred Outflows of Resources 22,630,305 7,559,825
Continued
The accompanying notes are an integral part of this statement.
13
STATEMENT OF NET POSITION
Continued
June 30, 2023
(with comparative totals as of June 30, 2022)
2023 2022
LIABILITIES
Current Liabilities:
Current Maturities of Long-term Debt (Note 5)5,212,060$ 5,525,676$
Accounts Payable 14,985,218 15,694,680
Accrued Payroll Liabilities 1,102,208 978,174
Other Accrued Liabilities 5,729,278 4,973,784
Customer and Developer Deposits 5,573,296 4,658,907
Accrued Interest 1,573,222 1,649,672
Liabilities Payable from Restricted Assets:
Restricted Accrued Interest - 9,600
Total Current Liabilities 34,175,282 33,490,493
Non-current Liabilities:
Long-term Debt (Note 5):
General Obligation Bonds - 2,726
Revenue Bonds 94,634,295 100,237,053
Lease Payable 690,539 707,725
Subscription-Based IT Payable (Note 5)35,476 -
Net Pension Liability (Note 7)25,951,095 280,298
Net OPEB Liability (Note 8)5,051,261 -
Other Non-current Liabilities (Note 1)3,768,468 3,704,232
Total Non-current Liabilities 130,131,134 104,932,034
Total Liabilities 164,306,416 138,422,527
DEFERRED INFLOWS OF RESOURCES
Deferred Inflows from Leases 45,442,359 36,619,439
Deferred Actuarial Pension Costs (Note 7)- 14,422,139
Deferred Actuarial OPEB Costs (Note 8)1,574,138 6,444,195
Total Deferred Inflows of Resources 47,016,497 57,485,773
NET POSITION
Net Investment in Capital Assets 341,227,728 340,274,496
Restricted for Debt Service 3,476,509 3,685,440
Restricted for OPEB Asset - 3,005,037
Restricted for Capital Assets 3,046,231 3,021,765
Unrestricted (Note 6)83,324,561 74,736,049
Total Net Position 431,075,029$ 424,722,787$
The accompanying notes are an integral part of this statement.
14
STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION
Year Ended June 30, 2023
(with comparative totals for the year ended June 30, 2022)
2023 2022
OPERATING REVENUES
Water Sales 99,901,174$ 102,807,098$
Wastewater Revenue 3,315,754 3,073,326
Connection and Other Fees 2,975,495 2,874,174
Total Operating Revenues 106,192,423 108,754,598
OPERATING EXPENSES
Cost of Water Sales 71,342,741 70,562,038
Wastewater 2,497,316 1,802,256
Administrative and General 27,073,523 19,174,479
Depreciation 17,880,335 17,688,535
Total Operating Expenses 118,793,915 109,227,308
Operating Income (Loss)(12,601,492)(472,710)
NON-OPERATING REVENUES (EXPENSES)
Investment Earnings (Losses)4,088,331 (1,506,486)
Taxes and Assessments 5,618,253 5,244,584
Availability Charges 710,954 740,928
Gain (Loss) on Disposal of Capital Assets (111,029)(187,313)
Rents and Leases 2,181,634 2,071,200
Miscellaneous Revenues 1,961,168 5,417,588
Donations (92,000)(106,913)
Interest Expense (4,310,352)(4,551,134)
Miscellaneous Expenses (330,421)(447,192)
Total Non-operating Revenues (Expenses)9,716,538 6,675,262
Income (Loss) Before Capital Contributions (2,884,954)6,202,552
Capital Contributions 9,237,196 13,269,160
Change in Net Position 6,352,242 19,471,712
Total Net Position, Beginning 424,722,787 405,251,075
Total Net Position, Ending 431,075,029$ 424,722,787$
The accompanying notes are an integral part of this statement.
15
STATEMENT OF CASH FLOWS
For the Year Ended June 30, 2023
(with comparative totals for the year ended June 30, 2022)
2023 2022
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from Customers 105,268,572$ 105,448,398$
Receipts from Connections and Other Fees 2,975,495 2,874,174
Receipts from Property Rents and Leases 314,995 109,941
Other Receipts 1,178,333 4,634,753
Payments to Suppliers (75,408,680) (73,728,635)
Payments to Employees (25,602,901) (22,002,283)
Other Payments (422,421) (554,105)
Net Cash Provided By (Used For) Operating Activities 8,303,393 16,782,243
CASH FLOWS FROM NONCAPITAL AND RELATED
FINANCING ACTIVITIES
Receipts from Taxes and Assessments 6,065,432 5,483,041
Net Cash Provided By (Used For) Noncapital and Related
Financing Activities 6,065,432 5,483,041
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Proceeds from Capital Contributions 6,148,060 9,236,895
Proceeds from Sale of Capital Assets 64,042 35,370
Proceeds from Property Rents and Leases 1,503,495 1,553,886
Proceeds from Debt Related Taxes and Assessments 245,063 483,260
Principal Payments on Long-Term Debt (5,563,365) (5,265,100)
Interest Payments and Fees (4,074,051) (4,324,324)
Acquisition and Construction of Capital Assets (11,547,330) (8,325,724)
Net Cash Provided By (Used For) Capital and Related
Financing Activities (13,224,086) (6,605,737)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest Received on Investments 2,407,520 518,928
Proceeds from Sale and Maturities of Investments 7,600,000 3,666,096
Purchase of Investments (55,085,244) (17,806,819)
Net Cash Provided By (Used For) Investing Activities (45,077,724) (13,621,795)
Net Increase (Decrease) in Cash and Cash Equivalents (43,932,985) 2,037,752
Cash and Cash Equivalents - Beginning 90,764,756 88,727,004
Cash and Cash Equivalents - Ending 46,831,771$ 90,764,756$
Continued
The accompanying notes are an integral part of this statement.
16
STATEMENT OF CASH FLOWS
Continued
For the Year Ended June 30, 2023
(with comparative totals for the year ended June 30, 2022)
2023 2022
Reconciliation of Operating Income (Loss) to Net Cash Flows
Provided By (Used For) Operating Activities:
Operating Income (Loss)(12,601,492)$ (472,710)$
Adjustments to Reconcile Operating Income to
Net Cash Provided By (Used For) Operating Activities:
Depreciation 17,880,335 17,688,535
Receipts from Property Rents and Leases 314,995 109,941
Miscellaneous Revenues 1,178,333 4,634,753
Miscellaneous Expenses and Donations (422,421) (554,105)
(Increase) Decrease in Accounts Receivable 1,137,255 (609,982)
(Increase) Decrease in Inventory (703,173) (494,657)
(Increase) Decrease in Prepaid Items and Other Receivables 1,006,451 202,534
(Increase) Decrease in Net OPEB Asset 3,005,037 (3,005,037)
(Increase) Decrease in Deferred Actuarial Pension Costs (11,469,305) 939,754
(Increase) Decrease in Deferred Actuarial OPEB Costs (3,601,175) (638,424)
Increase (Decrease) in Accounts Payable (709,462) 958,954
Increase (Decrease) in Accrued Payroll and Related Expenses 124,034 68,001
Increase (Decrease) in Other Accrued Liabilities 755,494 (11,909)
Increase (Decrease) in Customer and Developer Deposits 914,389 177,956
Increase (Decrease) in Other Non-current Liabilities 64,236 (88,779)
Increase (Decrease) in Net OPEB Liability 5,051,261 (1,801,159)
Increase (Decrease) in Net Pension Liability 25,670,797 (19,763,221)
Increase (Decrease) in Deferred Actuarial Pension Costs (14,422,139) 14,422,139
Increase (Decrease) in Deferred Actuarial OPEB Costs (4,870,057) 5,019,659
Net Cash Provided By (Used For) Operating Activities 8,303,393$ 16,782,243$
Schedule of Cash and Cash Equivalents:
Current Assets:
Cash and Cash Equivalents 43,753,408$ 87,556,645$
Restricted Cash and Cash Equivalents 3,078,363 3,208,111
Total Cash and Cash Equivalents 46,831,771$ 90,764,756$
Supplemental Disclosures
Non-Cash Investing and Financing Activities Consisted of the Following:
Contributed Capital for Water and Sewer System 3,089,136$ 4,032,265$
Change in Fair Value of Investments and Recognized Gains/Losses (551,965) 2,618,502
Amortization Related to Long-term Debt 460,484 474,108
The accompanying notes are an integral part of this statement.
17
Notes To Financial Statements
Year Ended June 30, 2023
1)REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A)Reporting Entity
The reporting entity Otay Water District (the “District”) includes the accounts of the District and the
Otay Water District Financing Authority (the “Financing Authority”).
The District is a public entity established in 1956 pursuant to the Municipal Water District Law of 1911
(Section 711 et. Seq. of the California Water Code) for the purpose of providing water and wastewater
services to the properties in the District.The District is governed by a Board of Directors consisting
of five directors elected by geographical divisions based on District population for a four-year
alternating term.
The District formed the Financing Authority on March 3, 2010 under the Joint Exercise of Powers Act,
constituting Articles 1 through 4 (commencing with Section 6500) of Chapter 5, Division 7, Title 1 of
the California Government Code. The Financing Authority was formed to assist the District in the
financing of public capital improvements.
The financial statements present the District and its component unit. The District is the primary
government unit.Component units are those entities which are financially accountable to the
primary government, either because the District appoints a voting majority of the component unit’s
board, or because the component units will provide a financial benefit or impose a financial burden
on the District. The District has accounted for the Financing Authority as a “blended” component
unit. Despite being legally separate, the Financing Authority is so intertwined with the District that it
is in substance, part of the District’s operations. Accordingly, the balances and transactions of this
component unit are reported within the funds of the District. Separate financial statements are not
issued for the Financing Authority.
B)Measurement Focus, Basis of Accounting and Financial Statement Presentation
Measurement focus is a term used to describe “which” transactions are recorded within the various
financial statements. Basis of accounting refers to “when” transactions are recorded regardless of
the measurement focus applied. The accompanying financial statements are reported using the
economic resources measurement focus, and the accrual basis of accounting. Under the economic
measurement focus all assets and liabilities (whether current or noncurrent) associated with these
activities are included on the Statement of Net Position.
18
Notes To Financial Statements
Year Ended June 30, 2023
1)REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES –Continued
B)Measurement Focus, Basis of Accounting and Financial Statement Presentation -Continued
The Statement of Revenues, Expenses and Changes in Net Position present increases (revenues)
and decreases (expenses) in total net position. Under the accrual basis of accounting, revenues are
recorded when earned and expenses are recorded when a liability is incurred, regardless of the
timing of related cash flows.
The District reports its activities as an enterprise fund, which is used to account for operations that are
financed and operated in a manner similar to a private business enterprise, where the intent of the
District is that the costs (including depreciation) of providing goods or services to the general public
on a continuing basis be financed or recovered primarily through user charges.
The basic financial statements of the Otay Water District have been prepared in conformity with
accounting principles generally accepted in the United States of America. The Governmental
Accounting Standards Board (GASB) is the accepted standard setting body for governmental
accounting financial reporting purposes.
Net position of the District is classified into three components: (1) net investment in capital assets,
(2) restricted net position, and (3) unrestricted net position. These classifications are defined as
follows:
Net Investment in Capital Assets
This component of net position consists of capital assets, net of accumulated depreciation and
reduced by the outstanding balances of notes or borrowing that are attributable to the acquisition of
the assets, construction, or improvement of those assets. If there are significant unspent related debt
proceeds at year-end, the portion of the debt attributable to the unspent proceeds are not included in
the calculation of the net investment in capital assets.
Restricted Net Position
This component of net position consists of net position with constrained use through external
constraints imposed by creditors (such as through debt covenants), grantors, contributions, or laws or
regulations of other governments or constraints imposed by law through constitutional provisions or
enabling legislation.
19
Notes To Financial Statements
Year Ended June 30, 2023
1)REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -Continued
B)Measurement Focus, Basis of Accounting and Financial Statement Presentation -Continued
Unrestricted Net Position
This component of net position consists of net position that do not meet the definition of “net investment
in capital assets” or “restricted net position”.
The District distinguishes operating revenues and expenses from those revenues and expenses that
are non-operating. Operating revenues are those revenues that are generated by water sales and
wastewater services while operating expenses pertain directly to the furnishing of those services. Non-
operating revenues and expenses are those revenues and expenses generated that are not associated
with the normal business of supplying water and wastewater treatment services.
The District recognizes revenues from water sales, wastewater revenues, and meter fees as they are
earned. Taxes and assessments are recognized as revenues based upon amounts reported to the
District by the County of San Diego, net of allowance for delinquencies of $34,587 at June 30, 2023.
Additionally, capacity fee contributions received which are related to specific operating expenses are
offset against those expenses and included in Cost of Water Sales in the Statement of Revenues and
Expenses and Changes in Net Position.
Sometimes the District will fund outlays for a particular purpose from both restricted (e.g., restricted
bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as
restricted -net position and unrestricted -net position, a flow assumption must be made about the
order in which the resources are considered to be applied.It is the District’s practice to consider
restricted -net position to have been depleted before unrestricted -net position is applied, however it
is at the Board’s discretion.
20
Notes To Financial Statements
Year Ended June 30, 2023
1)REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -Continued
C)New Accounting Pronouncements
Implemented as of June 30, 2023
Governmental Accounting Standard Board Statement No. 94
In March 2020, GASB issued Statement No. 94, Public-Private and Public-Public Partnerships and
Availability Payment Arrangements. The primary objective of this Statement is to improve financial
reporting by addressing issues related to public-private and public-public partnership arrangements
(PPPs). As used in this Statement, a PPP is an arrangement in which a government (the transferor)
contracts with an operator (a governmental or nongovernmental entity) to provide public services
by conveying control of the right to operate or use a nonfinancial asset, such as infrastructure or
other capital asset (the underlying PPP asset), for a period of time in an exchange or exchange-like
transaction. Currently this Statement has no effect on the District’s financial statements.
Governmental Accounting Standard Board Statement No. 96
In May 2020, GASB issued Statement No. 96, Subscription-Based Information Technology
Arrangements. This Statement provides guidance on the accounting and financial reporting for
subscription-based information technology arrangements (SBITAs) for government end users
(governments). This Statement (1) defines a SBITA; (2) establishes that a SBITA results in a right-to-
use subscription asset –an intangible asset –and a corresponding liability; (3) provides the
capitalization criteria for outlays other than subscription payments, including implementation costs
of a SBITA; and (4) requires note disclosures regarding a SBITA. To the extent relevant, the standards
for SBITAs are based on the standards established in Statement No. 87, Leases, as amended.
Pending Accounting Pronouncements
GASB has issued the following statements which may impact the District’s financial reporting
requirements in the future:
i.GASB Statement 99 -“Omnibus 2022”, effective for reporting periods beginning after June 15,
2023.
ii.GASB Statement 100 -“Accounting Changes and Error Corrections”, effective for reporting
periods beginning after June 15, 2023.
iii.GASB Statement 101 -“Compensated Absences”, effective for reporting periods beginning
after December 15, 2023.
21
Notes To Financial Statements
Year Ended June 30, 2023
1)REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -Continued
D)Deferred Outflows/Deferred Inflows
In addition to assets, the Statement of Net Position will sometimes report a separate section for
deferred outflows of resources. This separate financial statement element, deferred outflows of
resources, represents a consumption of net assets that applies to a future period(s) and so will not be
recognized as an outflow of resources (expense/expenditure) until then. The District has two items
that qualify for reporting in this category, deferred actuarial pension costs and deferred actuarial OPEB
costs are items that are deferred and recognized as an outflow of resources in the period the amounts
become available.
In addition to liabilities, the Statement of Net Position will sometimes report a separate section for
deferred inflows of resources. This separate financial statement element, deferred inflows of resources,
represents an acquisition of net assets that applies to a future period(s) and will not be recognized as
an inflow of resources (revenue) until that time. The District has two items that qualify for reporting in
this category.
Accordingly, the items deferred actuarial OPEB costs and deferred lease revenue are deferred and
recognized as an inflow of resources in the period that the amounts become available.
E)Statement of Cash Flows
For purposes of the Statement of Cash Flows, the District considers all highly liquid investments
(including restricted assets) with a maturity period, at purchase, of three months or less to be cash
equivalents.
F)Investments
Investments are stated at their fair value, which represents the quoted or stated market value.
Investments that are not traded on a market, such as investments in external pools, are valued based
on the stated fair value as presented by the external pool. All investments are stated at their fair value.
The District has not elected to report certain investments at amortized costs.
22
Notes To Financial Statements
Year Ended June 30, 2023
1)REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES –Continued
G)Inventory and Prepaid Items
Inventory consists primarily of materials used in the construction and maintenance of the water and
wastewater system and is valued at weighted average cost. Both inventory and prepaid items use the
consumption method whereby they are reported as an asset and expensed as they are consumed.
H)Capital Assets
Capital assets are recorded at cost, where historical records are available, and at an estimated
historical cost where no historical records exist.
Right-to-use assets for leases and subscription-based information technology arrangements are
recorded at net present value at the time of inception.
Infrastructure assets in excess of $20,000 and other capital assets in excess of $10,000 are capitalized
if they have an expected useful life of two years or more. The District will also capitalize individual
purchases under the capitalization threshold if they are part of a new capital program. The cost of
purchased and self-constructed additions to utility plant and major replacements of property are
capitalized. Costs include materials,direct labor, transportation, and such indirect items as
engineering, supervision, employee fringe benefits and overhead. Repairs, maintenance, and minor
replacements of property are charged to expense. Donated assets are capitalized at their acquisition
value on the date contributed.
Depreciation is calculated using the straight-line method over the following estimated useful lives:
Water System 15-70 Years
Field Equipment 2-50 Years
Buildings 30-50 Years
Communication Equipment 2-10 Years
Transportation Equipment 2-7 Years
Office Equipment 2-10 Years
Recycled Water System 15-70 Years
Wastewater System 25-50 Years
Right to Use Asset The estimated life of the leased/subscribed
asset or the contract term whichever is shorter
23
Notes To Financial Statements
Year Ended June 30, 2023
1)REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -Continued
I)Other Non-Current Liabilities
For compensated absences, the District’s policy is to record vested and accumulated vacation and
sick leave as an expense and liability as benefits accrue to employees.
The current portion is reflected in accrued payroll liabilities and remainder in other non-current liabilities
on the Statement of Net Position.
J)Classification of Liabilities
Certain current liabilities have been classified as current liabilities payable from restricted assets as
they will be funded from restricted assets.
K)Allowance for Doubtful Accounts
The District charges doubtful accounts arising from water sales receivable to bad debt expense when
it is probable that the accounts will be uncollectible. Uncollectible accounts are determined by the
allowance method based upon prior experience and management’s assessment of the collectability
of existing specific accounts. The allowance for doubtful accounts was $166,312 for 2023.
L)Property Taxes
Tax levies are limited to 1% of full market value (at time of purchase) which results in a tax rate of
$1.00 per $100 assessed valuation, under the provisions of Proposition 13. Tax rates for voter-
approved indebtedness are excluded from this limitation.
Beginning Ending Due Within
Balance Additions Deletions Balance One Year
Compensated absences 3,424,551$1,483,424$(1,422,524)$3,485,451$ 348,545$
Customer credits 265,493 9,425 - 274,918 -
Reimbursement agreements 356,644 - - 356,644 -
Total 4,046,688$1,492,849$(1,422,524)$4,117,013$ 348,545$
24
Notes To Financial Statements
Year Ended June 30, 2023
1)REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -Continued
L)Property Taxes -Continued
The County of San Diego (the “County”) bills and collects property taxes on behalf of the District. The
County’s tax calendar year is July 1 to June 30. Property taxes attach as a lien on property on January
1. Taxes are levied on July 1 and are payable in two equal installments on November 1 and February
1, and become delinquent after December 10 and April 10, respectively.
M)Pensions
For purposes of measuring the net pension liability,deferred outflows of resource, and deferred
inflows of resources related to pensions, and pension expense, information about the fiduciary net
position of the Plan and additions to/deductions from the Plans’ fiduciary net position have been
determined on the same basis.For this purpose, benefit payments (including refunds of employee
contributions) are recognized when currently due and payable in accordance with the benefit terms.
Investments are reported at fair value.
Valuation Date June 30, 2021
Measurement Date June 30, 2022
Measurement Period July 1, 2021 to June 30, 2022
N)Other Post-Employment Benefits (OPEB)
For purposes of measuring the net OPEB liability(asset), deferred outflows/inflows of resources related
to OPEB, and OPEB expense, information about the fiduciary net position of the District’s plan (OPEB
Plan) and additions to/deductions from the OPEB Plan’s fiduciary net position have been determined
on the same basis. For this purpose, benefit payments are recognized when currently due and payable
in accordance with the benefit terms. Investments are reported at fair value.
25
Notes To Financial Statements
Year Ended June 30, 2023
1)REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -Continued
N) Other Post-Employment Benefits (OPEB)
Generally accepted accounting principles require that the reported results must pertain to liability and
asset information within certain defined timeframes. For this report, the following timeframes are used:
Valuation Date June 30, 2021
Measurement Date June 30, 2022
Measurement Period July 1, 2021 to June 30, 2022
O)Leases
The District is a lessor and lessee for leases as detailed in Footnotes 5 and 11. The District recognizes
a lease receivable, a deferred inflow of resources, right to use capital assets, and a lease payable in
the financial statements.
At the commencement of the lease, the District initially measures the lease receivable at the present
value of payments expected to be received and paid during the lease term. Subsequently, the lease
receivable is reduced by the principal portion of lease payments received and the lease payable is
reduced by the principal portion of lease payments made. The deferred inflow of resources is initially
measured as the initial amount of the lease receivable, adjusted for lease payments received at or
before the lease commencement date.Subsequently, the deferred inflows of resources are
recognized as revenue over the life of the lease term.
Key estimates and judgments include how the district determines the discount rate it uses to
discount the expected lease receipts and payments to present value, lease term and lease receipts.
The District used the weighted average cost of capital rate as the discount rate for leases.
The lease term includes the non-cancellable period of the lease.
The District monitors changes in circumstances that would require a remeasurement of its leases
and will remeasure the lease receivable and deferred inflows of resources if certain changes occur
that are expected to significantly affect the amount of the lease receivable.
P)Subscription Based Information Technology Arrangements (SBITAs)
The District is a participant in subscription-based IT arrangements as detailed in Footnote 5. The
District recognizes a subscription-based IT payable and right to use IT assets in the financial
statements.
26
Notes To Financial Statements
Year Ended June 30, 2023
1)REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -Continued
P)Subscription Based Information Technology Arrangements (SBITAs)-Continued
At the commencement of the arrangement, the District initially measures the payable at the present
value of payments expected to be paid during the arrangement term. Subsequently, the payable is
reduced by the principal portion of payments made. The right to use assets are initially measured at
the initial amount of the subscription-based IT payable. Subsequently, the right to use assets are
amortized over the life of the arrangement term.
Q)Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in
the United States of America requires management to make estimates and assumptions that affect
the reported amounts of assets, deferred outflows of resources, liabilities, and deferred inflows of
resources, and disclosure of contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. Actual results could differ
from those estimates.
R)Prior Year Comparative Information
Selected information regarding the prior year has been included in the accompanying financial
statements. This information has been included for comparison purposes only and does not represent
a complete presentation in accordance with generally accepted accounting principles. Accordingly,
such information should be read in conjunction with the government’s prior year financial statements,
from which this selected financial data was derived. In addition, certain minor reclassifications of the
prior year data have been made to enhance their comparability to the current year.
2)CASH AND INVESTMENTS
The primary goals of the District’s Investment Policy are to assure compliance with all Federal, State, and
Local laws governing the investment of funds under the control of the organization, protect the principal of
investments entrusted, remain sufficiently liquid to enable the District to meet all operating requirements
and generate income at a market rate of return under the parameters of such policies.
27
Notes To Financial Statements
Year Ended June 30, 2023
2)CASH AND INVESTMENTS -Continued
Cash and Investments are classified in the accompanying financial statements as follows:
Cash and Investments consist of the following:
Investments Authorized by the California Government Code and the District’s Investment Policy
The table below identifies the investment types that are authorized for the District by the California
Government Code (or the District’s Investment Policy, where more restrictive). The table also identifies
certain provisions of the California Government Code (or the District’s Investment Policy, where more
restrictive) that address interest rate risk, credit risk, and concentration of credit risk. This table does not
address investments of debt proceeds held by bond trustees that are governed by the provisions of debt
agreements of the District, rather than the general provisions of the California Government Code or the
District’s Investment Policy.
Statement of Net Position:
Cash and Cash Equivalents 43,753,408$
Restricted Cash and Cash Equivalents 3,078,363
Investments 59,781,150
Restricted Investments 3,444,377
Total Cash and Investments 110,057,298$
Cash on Hand 2,950$
Deposits with Financial Institutions 629,278
Investments 109,425,070
Total Cash and Investments 110,057,298$
28
Notes To Financial Statements
Year Ended June 30, 2023
2)CASH AND INVESTMENTS -Continued
Maximum Maximum
Authorized Maximum Percentage Investment
Investment Type Maturity Of Portfolio(1)In One Issuer
U.S. Treasury Obligations 5 years 100%100%
U.S. Government Sponsored Entities 5 years 100% 100%
Certificates of Deposit 5 years 15%100%
Corporate Medium-Term Notes 5 years 10%2%
Commercial Paper 270 days 10%2%
Money Market Mutual Funds N/A 10%100%
County Pooled Investment Funds N/A 100%N/A
Local Agency Investment Fund (LAIF)N/A $75 Million N/A
(1)Excluding amounts held by bond trustee that are not subject to California Government Code
restrictions.
Investments Authorized by Debt Agreements
Investments of debt proceeds held by the bond trustee are governed by provisions of the debt agreements,
rather than the general provisions of the California Government Code or the District’s Investment Policy.
Disclosures Relating to Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an
investment. Generally,the longer the maturity of an investment, the greater the sensitivity of its fair value
to changes in market interest rates.
One of the ways that the District manages its exposure to interest rate risk is by purchasing investments
with shorter durations than the maximum allowable under the District’s Investment Policy and by timing
cash flows from maturities,so that a portion of the portfolio is maturing or coming close to maturity evenly
over time,as necessary,to provide the cash flow and liquidity needed for operations.
Information about the sensitivity of the fair values of the District’s investments to market interest rate
fluctuations are provided by the following tables that show the distribution of the District’s investments by
maturity as of June 30, 2023.
29
Notes To Financial Statements
Year Ended June 30, 2023
2)CASH AND INVESTMENTS –Continued
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of
the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating
organization. Presented below is the minimum rating required by (where applicable) the California
Government Code or the District’s Investment Policy, or debt agreements, and the Moody’s ratings as of
June 30, 2023.
Concentration of Credit Risk
The investment policy of the District contains various limitations on the amounts that can be invested in
any one type or group of investments and in any issuer, beyond that stipulated by the California
Government Code, Sections 53600 through 53692. All the investments for fiscal year 2023 are within the
limitations of the District’s investment policy.
12 Months 13 to 36 More than
Investment Type Total Or Less Months 36 Months
U.S. Government Sponsored Entities $ 66,215,327 29,737,950$ 36,477,377$ -$
U.S. Treasury Obligations 4,939,250 4,939,250 - -
Local Agency Investment Fund (LAIF) 18,543,575 18,543,575 - -
San Diego County Pool 14,948,000 14,948,000 - -
Money Market Funds 4,778,918 4,778,918 - -
Total $ 109,425,070 $ 72,947,693 $ 36,477,377 -$
Remaining Maturity (in Months)
Legal
Minimum Not
Investment Type Total Rating AAA Rated
U.S. Government Sponsored Entities $ 66,215,327 A 66,215,327$ -$
U.S. Treasury Obligations 4,939,250 N/A - 4,939,250
Local Agency Investment Fund (LAIF) 18,543,575 N/A - 18,543,575
San Diego County Pool 14,948,000 AAA 14,948,000 -
Money Market Funds 4,778,918 AAA - 4,778,918
Total $ 109,425,070 81,163,327$ 28,261,743$
Rating as of Year End
30
Notes To Financial Statements
Year Ended June 30, 2023
2)CASH AND INVESTMENTS –Continued
The investments listed below disclose the concentration of risk within the District’s investment portfolio.
Investments in any one issuer (other than U.S. Treasury securities, mutual funds, and external investment
pools) that represent 5% or more of total District investments as of June 30, 2023:
Custodial Credit Risk
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution,
the District will not be able to recover its deposits or will not be able to recover collateral securities that are
in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event
of the failure of the counterparty (e.g., broker-dealer) to a transaction, the District will not be able to recover
the value of its investment or collateral securities that are in the possession of another party. The California
Government Code and the District’s Investment Policy do not contain legal or policy requirements that
would limit the exposure to custodial credit risk for deposits or investments, other than the following
provision for deposits: The California Government Code requires that a financial institution secure deposits
made by state or local government units by pledging securities in an undivided collateral pool held by a
depository regulated under state law (unless so waived by the governmental unit). The market value of
the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the
District. California law also allows financial institutions to secure deposits by pledging first trust deed
mortgage notes having a value of 150% of the secured public deposits.As of June 30, 2023, $2,199,718 of
the District’s deposits with financial institutions in excess of federal depository insurance limits, were held
in collateralized accounts.
Local Agency Investment Fund (LAIF)
The District is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by
California Government Code Section 16429 under the oversight of the Treasurer of the State of California.
The fair value of the District’s investment in this pool is reported in the accompanying financial statements
at amounts based upon District’s pro-rata share of the fair value provided by LAIF for the entire LAIF portfolio
(in relation to the amortized cost of that portfolio). The balance available for withdrawal is based on the
accounting records maintained by LAIF, which are recorded on an amortized cost basis.
Reported
Issuer Investment Type Amount
Federal Home Loan Bank U.S. Government Sponsored Entities 34,611,320$
Federal National Mortgage Assoc.U.S. Government Sponsored Entities 11,423,540
Federal Farm Credit Bank U.S. Government Sponsored Entities 10,788,950
Federal Home Loan Mortgage U.S. Government Sponsored Entities 9,391,517
31
Notes To Financial Statements
Year Ended June 30, 2023
2)CASH AND INVESTMENTS –Continued
The LAIF is a special fund of the California State Treasury through which local governments may pool
investments. The District may invest up to $75,000,000 in the fund. Investments in LAIF are highly liquid,
as deposits can be converted to cash within twenty-four hours without loss of interest. Investments with
LAIF are secured by the full faith and credit of the State of California. The annualized yield of LAIF for the
quarter ended June 30, 2023 was 3.01%. The estimated amortized cost and fair value of the LAIF pool at
June 30, 2023 was $18,543,575.
San Diego County Pooled Fund
The San Diego County Pooled Investment Fund (SDCPIF) is a pooled investment fund program governed
by the County of San Diego Board of Supervisors and administered by the County of San Diego Treasurer
and Tax Collector. Investments in SDCPIF are highly liquid as deposits and withdrawals can be made at
any time without penalty, determined on an amortized cash basis, the same as the fair value of the District’s
position in the pool.
The County of San Diego’s bank deposits are either federally insured or collateralized in accordance with
the California Government Code. Pool detail is included in the County of San Diego Comprehensive Annual
Financial Report (“Annual Report”). Copies of the Annual Report may be obtained from the County of San
Diego Auditor-Controller’s Office –1600 Pacific Coast Highway, San Diego California 92101.
Cash and investments are restricted for the cost of the following District projects and debt service:
Cash and Cash Equivalents:
New Water Supply 3,046,231$
Cash and Cash Equivalents:
Debt Service:
Water Revenue Bond Series 2010A 10,452$
Water Revenue Bond Series 2010B 21,680
32,132$
32
Notes To Financial Statements
Year Ended June 30, 2023
2)CASH AND INVESTMENTS –Continued
Restricted Investments
3)FAIR VALUE MEASUREMENTS
Governmental Accounting Standards Board (GASB) Statement No. 72, Fair Value Measurements and
Application, provides the framework for measuring fair value. The framework provides a fair value
hierarchy that prioritizes the inputs to valuation techniques used to measure fair value with Level 1 given
the highest priority and Level 3 the lowest priority. The three levels of the fair value hierarchy are as
follows:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the
organization has the ability to access at the measurement date.
Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the
asset or liability, either directly or indirectly. Level 2 inputs include the following:
a.Quoted prices for similar assets or liabilities in active markets.
b.Quoted prices for identical or similar assets or liabilities in markets that are not active.
c.Inputs other than quoted prices are observable for the asset or liability (for example, interest rates
and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss
severities, credit risks, and default rates).
d.Inputs that are derived principally from or corroborated by observable market data by correlation
or other means (market-corroborated inputs).
Level 3 inputs are unobservable inputs for the asset or liability.
Debt Service:
Water Revenue Bond Series 2010A 948,202$
Water Revenue Bond Series 2010B 2,496,175
3,444,377$
33
Notes To Financial Statements
Year Ended June 30, 2023
3)FAIR VALUE MEASUREMENTS -Continued
Fair value of assets measured on a recurring basis at June 30, 2023 are as follows:
Investments classified in Level 2 of the fair value hierarchy are valued using a matrix pricing technique.
Matrix pricing is used to value securities based on the securities’ relationship to benchmark quoted
prices. Investments not measured at fair value do not fall under the fair value hierarchy as there is no
active market for the investments.
Ouoted Prices in Significant Other
Active Markets Observable Inputs Not Measured
Total (Level 1)(Level 2)at Fair Value
U.S. Government Sponsored Entities 66,215,327$ -$ 66,215,327$ -$
U.S. Treasury Obligations 4,939,250 4,939,250 - -
Local Agency Investment Fund (LAIF) 18,543,575 - - 18,543,575
San Diego County Pool 14,948,000 - - 14,948,000
Money Market Funds 4,778,918 - - 4,778,918
Total $109,425,070 $ 4,939,250 $ 66,215,327 $ 38,270,493
34
Notes To Financial Statements
Year Ended June 30, 2023
4)CAPITAL ASSETS
The following is a summary of changes in Capital Assets for the year ended June 30, 2023:
Depreciation expense for the year ended June 30, 2023 was $17,880,335.
Beginning Ending
Balance Additions Deletions Balance
Capital Assets, Not Depreciated:
Land $ 14,423,773 $ 55,800 $ - $ 14,479,573
Construction in Progress 7,306,003 11,547,328 (7,111,883) 11,741,448
Total Capital Assets, Not Depreciated 21,729,776 11,603,128 (7,111,883) 26,221,021
Capital Assets, Being Depreciated:
Infrastructure 712,401,304 9,071,961 (316,856) 721,156,409
Field Equipment 8,109,764 286,247 (59,010) 8,337,001
Buildings 19,618,254 195,140 (84,091) 19,729,303
Transportation Equipment 3,739,832 357,857 (181,536) 3,916,153
Communication Equipment 2,511,818 223,867 (132,830) 2,602,855
Office Equipment 8,101,720 10,146 (47,491) 8,064,375
Right to Use Assets 738,501 123,039 - 861,540
Total Capital Assets, Being Depreciated 755,221,193 10,268,257 (821,814) 764,667,636
Less Accumulated Depreciation:
Infrastructure 300,713,023 16,326,675 (184,603) 316,855,095
Field Equipment 6,594,349 274,193 (59,010) 6,809,532
Buildings 10,507,211 550,471 (42,103) 11,015,579
Transportation Equipment 2,740,153 280,505 (181,536) 2,839,122
Communication Equipment 2,289,429 92,724 (132,830) 2,249,323
Office Equipment 7,323,961 282,751 (46,664) 7,560,048
Right to Use Assets 35,167 73,016 - 108,183
Total Accumulated Depreciation 330,203,293 17,880,335 (646,746) 347,436,882
Total Capital Assets, Being Depreciated, Net 425,017,900 (7,612,078) (175,068) 417,230,754
Total Capital Assets, Net $ 446,747,676 $ 3,991,050 $ (7,286,951) $ 443,451,775
35
Notes To Financial Statements
Year Ended June 30, 2023
5) LONG-TERM DEBT
Long-term liabilities for the year ended June 30, 2023 are as follows:
General Obligation Bonds
In June 1998, the District issued $11,835,000 of General Obligation Refunding Bonds. The proceeds of this
issue, together with other lawfully available monies, were to be used to establish an irrevocable escrow to
advance refund and defease in their entirety the District’s previous outstanding General Obligation Bond
issue. In November 2009, the District issued $7,780,000 of General Obligation Refunding Bonds
Improvement District No. 27-2009 to refund the 1998 issue. The proceeds from the bond issue were
$7,989,884, which included an original issue premium of $209,884. At June 30, 2023, the bonds were paid
off.
Beginning Ending Due Within
Balance Additions Deletions Balance One Year
General Obligation Bonds:
Improvement District No. 27 – 2009 720,000$ -$ (720,000)$ -$ -$
Unamortized Bond Premium 2,726 - (2,726) - -
Net General Obligation Bonds 722,726 - (722,726) - -
Revenue Bonds:
2010 Water Revenue Bonds Series A 3,705,000 - (1,175,000) 2,530,000 1,235,000
2010 Water Revenue Bonds Series B 36,355,000 - - 36,355,000 -
2013 Water Revenue Refunding Bonds 1,640,000 - (805,000) 835,000 835,000
2016 Water Revenue Refunding Bonds 26,655,000 - (1,285,000) 25,370,000 1,350,000
2018 Water Revenue Bonds 28,510,000 - (1,455,000) 27,055,000 1,650,000
2019 Wastewater Revenue Bonds 3,055,000 - (70,000) 2,985,000 75,000
2010 Series A Unamortized Premium 167,404 - (74,402) 93,002 -
2013 Bonds Unamortized Premium 112,111 - (96,096) 16,015 -
2016 Bonds Unamortized Premium 2,529,762 - (178,572) 2,351,190 -
2018 Bonds Unamortized Premium 2,310,303 - (109,149) 2,201,154 -
2019 Bonds Unamortized Discount (12,527) - 461 (12,066) -
Net Revenue Bonds 105,027,053 - (5,247,758) 99,779,295 5,145,000
Lease Payable 723,401 - (15,674) 707,727 17,188
Subscription-Based IT Payable - 123,039 (37,691) 85,348 49,872
Total Long-Term Liabilities 106,473,180$123,039$(6,023,849)$ 100,572,370$5,212,060$
36
Notes To Financial Statements
Year Ended June 30, 2023
5)LONG-TERM DEBT –Continued
Water Revenue Bonds
In April 2010, Water Revenue Bonds with a face value of $50,195,000 were sold by the Otay Water District
Financing Authority to provide funds for the construction of water storage and transmission facilities. The
bond issue consisted of two series; Water Revenue Bonds, Series 2010A (Non-AMT Tax Exempt) with a
face value of $13,840,000 plus a $1,078,824 original issue premium, and Water Revenue Bonds,Series
2010B (Taxable Build America Bonds) with a face value of $36,355,000. The Series 2010A bonds are due
in annual installments of $785,000 to $1,295,000 from September 1, 2012 through September 1, 2025;
bearing interest at 2% to 5.25%. The Series 2010B bonds are due in annual installments of $1,365,000 to
$3,505,000 from September 1, 2026 through September 1, 2040; bearing interest at 6.377% to 6.577%.
Interest on both Series is payable on September 1, 2010 and semiannually thereafter on March 1st and
September 1st of each year until maturity or earlier redemption. The installment payments are to be made
from taxes and net revenues of the Water System as described in the installment purchase agreement, on
parity with the payments required to be made by the District for the 2013, 2016 Water Revenue Refunding
Bonds and 2018 Water Revenue Bonds described below.
The original issue premium is being amortized over the 14-year life of the Series 2010A bonds. Amortization
for the year ending June 30, 2023 was $74,402. The amortization is included in interest expense. The
unamortized premium at June 30, 2023 is $93,002.
The 2010 Water Revenue Bonds contains various covenants and restrictions, principally that the District fix,
prescribe, revise and collect rates, fees and charges for the Water System which will at least be sufficient
to yield, during each fiscal year, taxes and net revenues equal to one hundred twenty-five percent (125%)
of the debt service for such fiscal year. The District was in compliance with these rate covenants for the
fiscal year ended June 30, 2023.
In June 2013, the 2013 Water Revenue Refunding Bonds were issued to defease the 2004 Refunding
Certificates of Participation. The bonds were issued with a face value of $7,735,000 plus a $984,975 original
issue premium. The bonds are due in annual installments of $660,000 to $835,000 from September 1, 2013
through September 1, 2023; bearing interest at 1% to 4%. The installment payments are to be made from
taxes and net revenues of the Water System, on parity with the payments required to be made by the
District for the 2016 Water Revenue Refunding Bonds, the 2010A, 2010B and 2018 Water Revenue Bonds.
37
Notes To Financial Statements
Year Ended June 30, 2023
5)LONG-TERM DEBT –Continued
Water Revenue Bonds –Continued
The original issue premium is being amortized over the 11-year life of the Series 2013 bonds. Amortization
for the year ending June 30, 2023 was $96,096. The amortization is included in interest expense. The
unamortized premium at June 30, 2023 is $16,015.
In May 2016, Water Revenue Refunding Bonds were issued to defease the 2007 Revenue Certificates of
Participation. The bonds are due in annual installments of $1,200,000 to $2,235,000 from September 1,
2016 through September 1, 2036; bearing interest of 2% to 5%. The bonds were issued with a face value
of $33,385,000 plus $3,630,950 original issue premium. The savings between the cash flow required to
service, the old debt and the cash flow required to service the new debt is $5,664,140 and represent an
economic gain on refunding of $4,538,175.
The original issue premium is being amortized over the 20-year life of the Series 2016 bonds. Amortization
for the year ending June 30, 2023 was $178,572. The amortization is included in interest expense. The
unamortized premium at June 30, 2023 is $2,351,190.
In November 2018, Water Revenue Bonds were issued by the Otay Water District Financing Authority to
provide funds for construction of water storage, treatment and transmission facilities and to refinance the
1996 Certificates of Participation. The bonds are due in annual installments of $775,000 to $1,915,000 from
September 1, 2019 through September 1, 2043; bearing interest of 3% to 5%. The bonds were issued with
a face value of $32,435,000 plus $2,710,512 original issue premium.
The original issue premium is being amortized over the 25-year life of the Series 2018 bonds. Amortization
for the year ending June 30, 2023 was $109,149. The amortization expense is included in interest expense.
The unamortized premium at June 30, 2023 is $2,201,154.
38
Notes To Financial Statements
Year Ended June 30, 2023
5)LONG-TERM DEBT –Continued
Water Revenue Bonds –Continued
The total amount outstanding at June 30, 2023 and aggregate maturities of the revenue bonds for the fiscal
years subsequent to June 30, 2023, are as follows:
For the Year
Ended June 30,Principal Interest Principal Interest Principal Interest
2024 1,235,000$ 98,863$ -$ 2,371,868$ 835,000$ 16,700$
2025 1,295,000 33,994 - 2,371,868 - -
2026 - - 1,365,000 2,328,345 - -
2027 - - 1,450,000 2,238,589 - -
2028 - - 1,545,000 2,143,093
2029-2033 - - 9,320,000 9,049,258 - -
2034-2038 - - 12,795,000 5,459,732 - -
2039-2043 - - 9,880,000 1,002,335 - -
2,530,000$ 132,857$ 36,355,000$26,965,088$ 835,000$ 16,700$
2013 Water Revenue
Refunding Bonds
2010 Water Revenue Bond
Series A
2010 Water Revenue Bond
Series B
For the Year
Ended June 30,Principal Interest Principal Interest
2024 1,350,000$ 875,831$ 1,650,000$ 1,145,788$
2025 1,420,000 806,581 1,730,000 1,061,288
2026 1,495,000 733,706 1,820,000 972,538
2027 1,570,000 657,081 1,915,000 879,163
2028 1,645,000 584,931 1,030,000 805,538
2029-2033 9,315,000 1,917,681 5,950,000 3,207,338
2034-2038 8,575,000 498,078 6,715,000 1,855,625
2039-2043 - - 5,445,000 655,894
2044 - - 800,000 16,000
25,370,000$ 6,073,889$ 27,055,000$ 10,599,172$
2016 Water Revenue 2018 Water Revenue
Refunding Bonds Refunding Bonds
39
Notes To Financial Statements
Year Ended June 30, 2023
5)LONG-TERM DEBT –Continued
Wastewater Revenue Bonds
In December 2019, Wastewater Revenue Bonds were issued by the Otay Water District Financing Authority
to provide funds to pay for certain capital improvements to the District’s wastewater system. The bonds
are due in annual installments of $65,000 to $160,000 from September 1, 2021 through September 1, 2049;
bearing interest of 2% to 3.125%. The bonds were issued with a face value of $3,120,000 less a $13,680
original issue discount.
The original issue discount is being amortized over the 30-year life of the Series 2019 bonds. Amortization
for the year ending June 30, 2023 was $461. The amortization expense is included in interest expense. The
unamortized discount at June 30,2023 is $12,066.
The 2019 Wastewater Revenue Bonds contains various covenants and restrictions, principally that the
District fix, prescribe, revise and collect rates, fees and charges for the Wastewater System which will at
least be sufficient to yield, during each fiscal year, net revenues equal to one hundred fifteen percent
(115%) of the debt service for such fiscal year. The District was in compliance with these rate covenants
for the fiscal year ended June 30, 2023.
Future debt service requirements for the bonds are as follows:
For the Year
Ended June 30,Principal Interest
2024 75,000$ 87,291$
2025 75,000 85,416
2026 80,000 83,091
2027 80,000 80,691
2028 85,000 78,216
2029-2033 455,000 352,234
2034-2038 520,000 285,497
2039-2043 600,000 204,422
2044-2048 700,000 105,469
2049-2051 315,000 9,922
2,985,000$ 1,372,249$
2019 Wastewater
Revenue Bonds
40
Notes To Financial Statements
Year Ended June 30, 2023
5)LONG-TERM DEBT –Continued
Revenues Pledged
The District has pledged a portion of future water sales revenues to repay its Water Revenue and Water
Revenue Refunding Bonds. The total principal and interest remaining on the water revenue bonds and
water revenue refunding bonds is $135,932,706 payable through fiscal year 2044. For June 30, 2023,
principal and interest paid by the water sales revenues were $4,720,000 and $4,745,600 respectively.
The District has pledged a portion of future wastewater sales revenues to repay its Wastewater Revenue
Bonds. The total principal and interest remaining on the wastewater revenue bonds is $4,357,249 payable
through fiscal year 2050. For June 30, 2023, principal and interest paid by the wastewater sales revenues
were $70,000 and $88,741, respectively.
Lease Payable
Antenna Site Lease
The District has one antenna site sublease payable with a lease term of forty-eight years. The District is
required to make annual fixed payments ranging from $15,100 to $64,303, with a discount rate of 1.39%.
The lease has three extension options of 5 years each. As of June 30, 2023, the value of the lease payable
is $707,727. Future lease payable requirements are as follows:
For the Year
Ended June 30,Principal Interest
2024 17,188$ 9,728$
2025 18,781 9,479
2026 20,469 9,207
2027 22,253 8,911
2028 24,134 8,590
2029-2033 152,686 37,142
2034-2038 217,905 24,399
2038-2042 234,311 6,914
707,727$ 114,370$
41
Notes To Financial Statements
Year Ended June 30, 2023
5)LONG-TERM DEBT –Continued
Subscription-Based Information Technology Arrangements
Fracta AI-Based Condition Assessment Software
On July 20, 2022, the District entered into a 36-month subscription for the use of Fracta AI-Based Condition
Assessment Software. An initial subscription liability was recorded in the amount of $35,494. As of June
30, 2023, the value of the subscription liability is $23,500. The District is required to make annual fixed
payments of $11,995. The subscription has an interest rate of 1.39%. The value of the right to use asset as
of June 30, 2023 is $35,494 with accumulated amortization of $11,831 is included in note 4 with right to
use assets.
Samsara Networks, Inc.
On July 5, 2022, the District entered into a 36-month subscription for the use of GPS fleet management
system software. An initial subscription liability was recorded in the amount of $70,934. As of June 30,
2023, the value of the subscription liability is $46,962. The District is required to make annual fixed
payments of $23,972. The subscription has an interest rate of 1.39%. The value of the right to use asset
as of June 30, 2023 of $70,934 with accumulated amortization of $23,645 is included in note 4 with right
to use assets.
Drone Deploy
On April 30, 2023, the District entered into a 14-month subscription for the use of Drone Deploy software.
An initial subscription liability was recorded in the amount of $16,611. As of June 30, 2023, the value of the
subscription liability is $14,887. The District is required to make annual fixed payments of $1,743 for fiscal
year 2022-23, and $14,999 for fiscal year 2023-24. The subscription has an interest rate of 1.39%.The value
of the right to use asset as of June 30, 2023 of $16,611 with accumulated amortization of $2,373 is included
in note 4 with right to use assets.
For the Year
Ended June 30,Principal Interest
2024 49,872$ 1,092$
2025 35,476 493
85,348$ 1,585$
42
Notes To Financial Statements
Year Ended June 30, 2023
6)NET POSITION
Designations of Net Position
In addition to the restricted net position, a portion of unrestricted net position has been designated by the
Board of Directors for the following purposes as of June 30, 2023:
7)DEFINED BENEFIT PENSION PLAN
A)General Information about the Pension Plans
Plan Descriptions
All qualified permanent and probationary employees are eligible to participate in the District’s Plan,
agent multiple-employer defined benefit pension plans administered by the California Public
Employees’ Retirement System (CalPERS), which acts as a common investment and administrative
agent for its participating member employers. Benefit provisions under the Plans are established by
State statute and District resolution.
CalPERS issues publicly available reports that include a full description of the pension plans
regarding provisions, assumptions and membership information that can be found on the CalPERS
website.
CalPERS provides service retirement and disability benefits, annual cost of living adjustments and
death benefits to plan members, who must be public employees and beneficiaries. Benefits are
based on years of credited service, equal to one year of full-time employment. Members with five
years of total service are eligible to retire at age 50 (52 if new PERS member)with statutorily reduced
benefits. All members are eligible for non-duty disability benefits after 10 years of service. The death
benefit is one of the following: the Basic Death Benefit, the 1959 Survivor Benefit, or the Optional
Settlement 2W Death Benefit. The cost-of-living adjustments for the plan are applied as specified by
the Public Employees’ Retirement Law.
Designated Betterment 3,076,209$
Replacement Reserve 62,800,637
Designated Insurance 889,183
Designated New Supply Fund 6,132
Undesignated 16,552,400
Total $ 83,324,561
43
Notes To Financial Statements
Year Ended June 30, 2023
7) DEFINED BENEFIT PENSION PLAN –Continued
Benefits Provided
The Plans’ provisions and benefits in effect at June 30, 2023 are summarized as follows:
Prior to On or After
Hire Date January 1, 2013 January 1, 2013
Benefit Formula 2.7% at 55 2% at 62
Benefit Vesting Schedule 5 years’ service 5 years’ service
Benefit Payments Monthly for life Monthly for life
Retirement Age 50 –55+52 –67+
Monthly Benefits, as a % of Eligible Compensation 2.0% to 2.7% 1.0% to 2.5%
Required Employee Contribution Rates
2023 8.00% 7.00%
Required Employer Contribution Rates
2023 22.59% 22.59%
Employees Covered
The following employees were covered by the benefit terms for the Plan:
Inactive Employees or Beneficiaries Currently Receiving Benefits 215
Inactive Employees Entitled to But Not Yet Receiving Benefits 122
Active Employees 134
Total 471
Contributions
Section 20814(c) of the California Public Employees’ Retirement Law requires that the employer
contribution rates for all public employers be determined on an annual basis by the actuary and shall
be effective on the July 1 following notice of a change in the rate. The total plan contributions for the
Plan are determined through CalPERS’ annual actuarial valuation process. The actuarially
determined rate is the estimated amount necessary to finance the costs of benefits earned by
employees during the year, with an additional amount to finance any unfunded accrued liability.
44
Notes To Financial Statements
Year Ended June 30, 2023
7)DEFINED BENEFIT PENSION PLAN –Continued
The employer is required to contribute the difference between the actuarially determined rate and
the contribution rate of employees. Employer contribution rates may change if plan contracts are
amended.
B)Net Pension Liability
The District’s net pension liability for the Plan is measured as the total pension liability, less the
pension plan’s fiduciary net position. The net pension liability of the Plan is measured as of June 30,
2022 rolled forward to June 30, 2023 using standard update procedures. A summary of actuarial
assumptions and methods used to determine the net pension liability is shown below:
Actuarial Assumptions
The total pension liabilities in the June 30, 2022 actuarial valuations were determined using the
following actuarial assumptions:
Actuarial Cost Method Entry-Age Normal Cost Method
Actuarial Assumptions:
Discount Rate 6.90%
Inflation 2.30%
Salaries Increases Varies by entry age and service
Mortality Rate Table Derived using CalPERS
membership data for all funds(1)
Post Retirement Benefit Increase See Footnote(2)
(1)The mortality table used was developed based on CalPERS-specific data. The probabilities of
mortality are based on the 2021 CalPERS Experience Study for the period from 2001 to 2019. Pre-
retirement and Post-retirement mortality rates include generational mortality improvement using
80% of Scale MP-2020 published by the Society of Actuaries. For more details on this table, please
refer to the CalPERS Experience Study and Review of Actuarial Assumptions report from
November 2021 that can be found on the CalPERS website.
(2)The lesser of contract COLA or 2.30% until Purchasing Power Protection Allowance floor on
purchasing power applies, 2.30% thereafter.
45
Notes To Financial Statements
Year Ended June 30, 2023
7)DEFINED BENEFIT PENSION PLAN –Continued
Discount Rate
The discount rate used to measure the total pension liability was 6.90%. The projection of cash flows
used to determine the discount rate assumed that contributions from plan members will be made at
the current member contribution rates and that contributions from employers will be made at
statutorily required rates, actuarially determined. Based on those assumptions, the Plan’s fiduciary
net position was projected to be available to make all projected future benefit payments of current
plan members. Therefore, the long-term expected rate of return on plan investments was applied to
all periods of projected benefit payments to determine the total pension liability.
Long-term Expected Rate of Return
The long-term expected rate of return on pension plan investments was determined using a building-
block method in which future real rates of return (expected returns, net of pension plan investment
expense and inflation) are developed for each major asset class. In determining the long-term
expected rate of return, CalPERS took into account both short-term and long-term market return
expectations. Using historical returns of all the funds’ asset classes, expected compound
(geometric) returns were calculated over the next 20 years using a building block approach. The
expected rate of return was then adjusted to account for assumed administrative expenses of 10
Basis points. The expected real rates of return by asset class are as follows:
(a)An expected inflation of 2.30% used for this period.
(b)Figures are based on the 2021 Asset Liability Management study.
Assumed
Asset Class(a)Asset Allocation Real Return(b)
Global Equity - Cap-weighted 30.00%4.54%
Global Equity - Non-Cap-weighted 12.00 3.84
Private Equity 13.00 7.28
Treasury 5.00 0.27
Mortgage-backed Securities 5.00 0.50
Investment Grade Corporates 10.00 1.56
High Yield 5.00 2.27
Emerging Market Debt 5.00 2.48
Private Debt 5.00 3.57
Real Assets 15.00 3.21
Leverage (5.00) (0.59)
46
Notes To Financial Statements
Year Ended June 30, 2023
7)DEFINED BENEFIT PENSION PLAN –Continued
C)Changes in the Net Pension Liability (Asset)
The changes in the Net Pension Liability (Asset) for the Plan for the year ending June 30, 2023:
Total Pension Plan Fiduciary Net Pension
Liability Net Position Liability (Asset)
Beginning Balance 154,871,502$154,591,204$ 280,298$
Changes in the Year:
Service Cost 2,994,291 - 2,994,291
Interest on the Total Pension Liability 10,864,205 - 10,864,205
Changes in Benefit Terms - - -
Changes in Assumptions 4,984,447 - 4,984,447
Difference Between Expected and Actual Experience 174,717 - 174,717
Net Plan to Plan Resource Movement - - -
Contributions - Employer 3,928,187 (3,928,187)
Contributions - Employees 1,099,592 (1,099,592)
Net Investment Income (11,584,615) 11,584,615
Benefit Payments, Including Refunds of Employee Contributions (8,151,116) (8,151,116) -
Administrative Expense - (96,301) 96,301
Other Miscellaneous Income (Expense)- - -
Net Changes 10,866,544 (14,804,253) 25,670,797
Ending Balance 165,738,046$139,786,951$ 25,951,095$
Increase ( Decrease)
47
Notes To Financial Statements
Year Ended June 30, 2023
7)DEFINED BENEFIT PENSION PLAN –Continued
Sensitivity of the Net Pension Liability to Changes in the Discount Rate
The following presents the net pension liability of the District for the Plan, calculated using the
discount rate for the Plan, as well as what the District’s net pension liability would be if it were
calculated using a discount rate that is 1-percentage point lower or 1-percentage point higher than
the current rate:
Pension Plan Fiduciary Net Position
Detailed information about the pension plan’s fiduciary net position is available in the separately
issued CalPERS financial reports.
D) Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions
For the year ended June 30, 2023, the District recognized pension expense of $5,275,049. At June 30,
2023, the District reported deferred outflows of resources and deferred inflows of resources related
to pensions from the following services:
1% Decrease 5.90%
Net Pension Liability 47,137,614$
Current Discount Rate 6.90%
Net Pension Liability 25,951,095$
1% Increase 7.90%
Net Pension Liability/(Asset)8,293,919$
Deferred Outflows Deferred Inflows
of Resources of Resources
Pension contributions subsequent to measurement date 5,477,698$ -$
Changes of assumptions 3,204,287 -
Differences between actual and expected experience 313,868 -
Net difference between projected and actual earnings
on pension plan investments 6,955,221 -
Total 15,951,074$ -$
48
Notes To Financial Statements
Year Ended June 30, 2023
7)DEFINED BENEFIT PENSION PLAN –Continued
D)Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions -Continued
For fiscal year 2023, $5,477,698 reported as deferred outflows of resources related to contributions
subsequent to the measurement date will be recognized as a reduction of the net pension liability in
the fiscal year ended June 30, 2024. Other amounts reported as deferred outflows of resources and
deferred inflows of resources related to pensions will be recognized as pension expense as follows:
Under GASB 68, gains and losses related to changes in total pension liability and fiduciary net
position are recognized in pension expense systematically over time.The first amortized amounts
are recognized in pension expense for the year the gain or loss occurs. The remaining amounts are
categorized as deferred outflows and deferred inflows of resources related to pensions and are to
be recognized in future pension expense.The amortization period differs depending on the source
of the gain or loss:
Net difference between projected and actual
earnings on pension plan investments
5-year straight-line amortization
All other amounts Straight-line amortization over the expected
average remaining service lifetime (EARSL) of
all members that are provided with
benefits (active, inactive, and retired) as of the
beginning of the measurement period
Fiscal Deferred
Year Ended Outflow/(Inflows)
June 30 of Resources
2024 3,039,724$
2025 2,506,829
2026 500,203
2027 4,426,620
2028 -
Thereafter -
49
Notes To Financial Statements
Year Ended June 30, 2023
7)DEFINED BENEFIT PENSION PLAN –Continued
E)Payable to the Pension Plan
At June 30, 2023, the District reported a payable of $122,701 for the outstanding amount of
contributions to the pension plan required for the year ended June 30, 2023. These payables are
reflected in the accrued payroll liabilities on the Statement of Net Position.
8)OTHER POST EMPLOYMENT BENEFITS (OPEB)
Plan Description
The District’s defined benefit postemployment healthcare plan, (DPHP), provides medical benefits to
eligible retired District employees and beneficiaries. DPHP is part of the Public Agency portion of the
California Employers’ Retiree Benefit Trust Fund (CERBT), an agent multiple-employer plan administered
by California Public Employees’ Retirement System (CalPERS), which acts as a common investment and
administrative agent for participating public employers within the State of California. CalPERS issues a
separate Comprehensive Annual Financial Report. Copies of the CalPERS’ annual financial report may
be obtained from the CalPERS Executive Office, 400 P Street, Sacramento, California 95814.
Prior to the plan agreements signed in 2011, the eligibility in the plan was broken into 3 tiers, employees
hired before January 1, 1981, employees hired on or after January 1, 1981 but before July 1, 1993 and
employees hired on or after July 1, 1993. Board members elected before January 1, 1995 are also eligible
for the plan. Eligibility also includes age and years of service requirements which vary by tier. Benefits
include up to 100% medical and/or dental premiums for life for the retiree for Tier I or II employees, and
up to 100% spouse premium until death of retiree or age 65 whichever is greater and dependent
premium up to age 19.Tier III employees received up to 50% medical (no dental coverage) up to age
65 and did not include dependent coverage.
Subsequent to the agreements in 2011 and 2012 all employees are eligible for the plan after 20 years of
consecutive service and unrepresented employees hired before January 1, 2013 are eligible after 15
years. Survivor benefits are covered beyond Medicare.
50
Notes To Financial Statements
Year Ended June 30, 2023
8)OTHER POST EMPLOYMENT BENEFITS (OPEB) -Continued
Employees Covered
As of June 30, 2021 actuarial valuation, the following current and former employees were covered by the
benefit terms under the Plan:
Contributions
The annual contribution is based on the actuarially determined contribution. For the fiscal year ended
June 30, 2023, the District made cash contributions to the trust of $1,265,368 and had an estimated
implied subsidy of $129,513, resulting in total payments of $1,394,881.
Net OPEB Liability
The District’s net OPEB liability was measured as of June 30, 2022 and the total OPEB liability used to
calculate the net OPEB liability was determined by actuarial valuations dated June 30, 2021 based on
the following actuarial methods and assumptions:
Actuarial Assumptions
Discount Rate 6.75%
Inflation 2.50%
Salary Increases 2.75% plus merit
Investment Rate of Return 6.75%
Mortality Rate(1)Derived using CalPERS Membership Data for all funds
Pre-Retirement Turnover(2)Derived using CalPERS Membership Data for all funds
Healthcare Trend Rate 6.00% PPO decreasing to 4.50% PPO
Notes:
(1)The pre-retirement mortality information is derived from the 2017 CalPERS Retiree Mortality for All
Employees table created by CalPERS. CalPERS periodically studies mortality for participating agencies
and establishes mortality tables that are modified versions of commonly used tables. This table
incorporates mortality projection as deemed appropriate based on CalPERS analysis.
Active Employees 132
Inactive Employees or Beneficiaries Currently Receiving Benefits 80
Inactive Employees Entitled to But Not Yet Received Benefits -
Total 212
51
Notes To Financial Statements
Year Ended June 30, 2023
8)OTHER POST EMPLOYMENT BENEFITS (OPEB) -Continued
Net OPEB Liability (Continued)
(2)The pre-retirement turnover information is based on the 2017 CalPERS Turnover for Miscellaneous
Employees table created by CalPERS. CalPERS periodically studies the experience for participating
agencies and establishes tables that are appropriate for each pool.
The long-term expected rate of return on OPEB plan investments was determined using a building block
method in which best-estimate ranges of expected future real rates of return (expected returns, net of OPEB
plan investment expense and inflation) are developed for each major asset class. These ranges are
combined to produce the long-term expected rate of return by weighting the expected future real rates of
return by the target asset allocation percentage and by adding expected inflation. Best estimates of
arithmetic real rates of return for each major asset class included in the OPEB plan’s target asset are
summarized in the following table for the June 30, 2021 actuarial valuation:
Discount Rate
The discount rate used to measure the total OPEB liability was 6.75% for the June 30, 2022 measurement
period. The projection of cash flows used to determine the discount rate assumed that District
contributions will be made at rates equal to the actuarially determined contribution rates. Based on those
assumptions, the OPEB plan’s fiduciary net position was projected to be available to make all projected
OPEB payments for current active and inactive employees and beneficiaries. Therefore, the long-term
expected rate of return on OPEB plan investments was applied to all periods of projects benefit payments
to determine the total OPEB liability.
Long-Term
Target Expected Real
Asset Class Allocation Rate of Return
Global Equity 59.00%7.55%
Global Fixed Income 25.00%4.25%
TIPS 5.00% 3.00%
Commodities 3.00% 7.55%
REITs 8.00% 7.25%
52
Notes To Financial Statements
Year Ended June 30, 2023
8)OTHER POST EMPLOYMENT BENEFITS (OPEB) -Continued
Changes in the OPEB Liability (Asset)
The changes in the net OPEB liability (asset) for the Plan for the year ending June 30, 2023:
Sensitivity of the Net OPEB Liability (Asset) to Changes in the Discount Rate
The following presents the net OPEB liability (asset) of the District if it were calculated using a discount
rate that is one percentage point lower or one percentage point higher than the current rate, for the
measurement period ended June 30, 2022:
Total OPEB Plan Fiduciary Net OPEB
Liability Net Position Liability (Asset)
Beginning Balance 32,530,042$ 35,535,079$ (3,005,037)$
Changes in the year:
Service Cost 991,108 - 991,108
Interest on TOL/Return on FNP 2,189,619 (4,739,093) 6,928,712
Difference Between Expected and Actual Experience 254,888 - 254,888
Changes of Assumptions - - -
Contributions - Employer 127,444 (127,444)
Benefit Payments (1,428,491) (1,428,491) -
Administrative Expenses - (9,034) 9,034
Net Changes 2,007,124 (6,049,174) 8,056,298
Ending Balance 34,537,166$ 29,485,905$ 5,051,261$
Increase ( Decrease)
Current
1% Decrease Discount Rate 1% Increase
2023 Net OPEB Liability (Asset)
(2022 Measurement Date)9,858,523$ 5,051,261$ 1,087,142$
53
Notes To Financial Statements
Year Ended June 30, 2023
8)OTHER POST EMPLOYMENT BENEFITS (OPEB) -Continued
Sensitivity of the Net OPEB Liability (Asset) to Changes in the Healthcare Cost Trend Rates
The following presents the net OPEB liability of the District if it were calculated using health care cost
trend rates that are one percentage point lower or one percentage point higher than the current rate, for
measurement period ended June 30, 2022:
OPEB Plan Fiduciary Net Position
CERBT issues a publicly available financial report that may be obtained from the California Public
Employees Retirement System Executive Office, 400 P Street, Sacramento, California 95814.
Recognition of Deferred Outflows and Deferred Inflows of Resources
Gains and losses related to changes in total OPEB liability and fiduciary net position are recognized in
OPEB expense systematically over time.
Amounts are first recognized in OPEB expense for the year the gain or loss occurs. The remaining
amounts are categorized as deferred outflows and deferred inflows of resources related to OPEB and
are to be recognized in future OPEB expense.
The recognition period differs depending on the source of the gain or loss:
Net difference between projected and
actual earnings on OPEB plan investments
5 years
All other amounts Expected average remaining service lifetime
(EARSL)
Current Healthcare Cost
1% Decrease Trend Rates 1% Increase
(4.00% HMO/4.00% PPO (5.00% HMO/5.00% PPO (6.00% HMO/6.00% PPO
Decreasing to Decreasing to Decreasing to
3.50% HMO/3.50% PPO)4.50% HMO/4.50% PPO)5.50% HMO/5.50% PPO)
2023 Net OPEB Liability (Asset)
(2022 Measurement Date)230,573$ 5,051,261$ 11,042,643$
54
Notes To Financial Statements
Year Ended June 30, 2023
8)OTHER POST EMPLOYMENT BENEFITS (OPEB) -Continued
OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB
For the fiscal year ended June 30, 2023, the District recognized OPEB credit of ($400,921). As of the fiscal
year ended June 30, 2023, the District reported deferred outflows and inflows of resources related to
OPEB from the following sources:
For fiscal year 2023, $1,394,881 reported as deferred outflows of resources related to contributions
subsequent to the measurement date will be recognized as a reduction of the net OPEB liability in the
fiscal year ended June 30, 2024. Other amounts reported as deferred outflows of resources and deferred
inflows of resources related to pensions will be recognized as pension expense as follows:
Deferred Outflows Deferred Inflows
of Resources of Resources
OPEB contributions subsequent to measurement date 1,394,881$ -$
Differences between expected and actual experience 2,769,724 (405,822)
Changes in assumptions - (1,168,316)
Net difference between projected and actual earnings
on OPEB plan investments 2,514,626 -
Total 6,679,231$ (1,574,138)$
Fiscal Deferred
Year Ended Outflows/(Inflows)
June 30, of Resources
2024 307,081$
2025 749,881
2026 566,721
2027 1,752,895
2028 303,651
Thereafter 29,983
55
Notes To Financial Statements
Year Ended June 30, 2023
9)COMMITMENTS AND CONTINGENCIES
Construction Commitments
The District has commitments related to capital projects under construction with an estimated cost to
complete of $8,239,534 at June 30, 2023.
Litigation
Certain claims, suits and complaints arising in the ordinary course of operation have been filed or are
pending against the District. In the opinion of the staff and counsel, most of those matters are adequately
covered by insurance, or if not so covered,are without merit or are of such kind, or involved such amounts,
as would not have significant effect on the financial position or results of operations of the District if
disposed of unfavorably. There is one potential case, see below, that could have a significant effect on the
District’s financial position.
In November 2015, a District ratepayer filed a lawsuit against the District (Coziahr v.Otay Water District,
Superior Court of the State of California, County of San Diego, contending that the District’s water rates
violated Article XIIID of the California Constitution (“Proposition 218”). The court subsequently certified the
action as a class action on behalf of all single-family residential ratepayers who have received water
service at any time after July 14, 2014.
On March 4, 2021, the court issued a decision in favor of the plaintiffs holding its tiered water rates adopted
in 2013 and 2017 for the following 5-year periods were not proportionate to the cost of service attributable
to each customer’s parcel, as required by Proposition 218.
On June 15, 2022, the court issued a Statement of Decision in the case. The Statement of Decision adopts
a methodology for computing overcharges to ratepayers in the class based on the court’s earlier finding
that the District’s tiered water rates adopted in 2013 and 2017 were not proportionate to the cost of service
attributable to each customer’s parcel, as required by Proposition 218.
Applying its methodology, the court states that the overcharges to ratepayers through June 2021 is
estimated to be approximately $18,105,256, with an approximate additional $208,762 of overcharges, plus
interest accruing each month subsequent to June 2021 until the District changes its rates to be consistent
with Proposition 218.
56
Notes To Financial Statements
Year Ended June 30, 2023
9)COMMITMENTS AND CONTINGENCIES –Continued
The District’s position is that the Court decision is inconsistent with rates set by water districts across the
State and the District will vigorously defend its interests. The District also notes that the court’s ruling is
inconsistent with some case law. The District and its Attorney has objected to the decision and the District
filed an appeal to the Courts decision and believes a favorable outcome is reasonable and as such a
liability has not been recorded.
Refundable Terminal Storage Fees
The District has entered into an agreement with several developers whereby the developers prepaid the
terminal storage fee in order to provide the District with the funds necessary to build additional storage
capacity. The agreement further allows the developers to relinquish all or a portion of such water storage
capacity. If the District grants to another property owner the relinquished storage capacity, the District shall
refund to the applicable developer $746 per equivalent dwelling unit (EDU). There were 17,867 EDUs that
were subject to this agreement. At June 30, 2023, 1,750 EDUs had been relinquished and refunded, 15,100
EDUs had been connected, and 1,017 EDUs have neither been relinquished nor connected.
Developer Agreements
The District has entered into various Developer Agreements with developers towards the expansion of
District facilities. The developers agree to make certain improvements and after the completion of the
projects,the District agrees to reimburse such improvements with a maximum reimbursement amount for
each developer. Contractually, the District does not incur a liability for the work until the work is accepted
by the District. As of June 30, 2023, none of the outstanding developer projects had been completed.
10)RISK MANAGEMENT
General Liability and Property
The District is exposed to various risks of loss related to torts, theft, damage and destruction of assets, errors
and omissions, and natural disasters. Beginning in July 2020, the District began participation as a member
in an insurance pool through the Association of California Water Agencies Joint Powers Insurance Authority
(ACWA JPIA). ACWA JPIA is a not-for-profit public agency formed under California Government Code
Sections 6500 et. Seq.
57
Notes To Financial Statements
Year Ended June 30, 2023
10)RISK MANAGEMENT -Continued
ACWA JPIA is governed by a board composed of members from participating agencies. The District pays
an annual premium for commercial insurance covering general liability, excess liability, property,
automobile, public employee dishonesty, and various other claims. Separate financial statements of
ACWA JPIA may be obtained at ACWA JPIA 2100 Professional Drive, Roseville, CA 95661-3700.
General and Auto Liability, Public Officials’ Errors and Omissions and Employment Practices Liability: Total
limits of $5 million combined single limit at $5 million per occurrence, with excess aggregate coverage at
$55 million subject to the following deductibles:
$50,000 per occurrence for third party general liability property damage;
$50,000 per occurrence for third party auto liability property damage;
Employee Dishonesty Coverage: Total of $1,000,000 per loss includes Public Employee Dishonesty,
Forgery or Alteration and Theft and Faithful Performance of Duty effective July 1, 2022.
Property Loss: Replacement cost, for property on file, paid on an actual cash value basis, to a combined
total of $500 million per occurrence, subject to a $25,000 deductible per occurrence, effective July 1, 2022.
Boiler and Machinery: Replacement costs up to $100 million per occurrence, subject to a $25,000
deductible, effective July 1, 2022.
Comprehensive and Collision: Deductibles of $1,000, as elected; ACV limits; fully self-funded by ACWA,
effective July 1, 2022.
Workers’ Compensation Coverage and Employer’s Liability: Statutory limits per occurrence for Workers’
Compensation and $2.0 million for Employer’s Liability Coverage, subject to the terms, conditions and
exclusions as provided in the Memorandum of Coverage, effective July 1, 2022.
Cyber Coverage: $5,000,000 Annual Program-Wide Aggregate Limit of Liability and $2,000,000 maximum
for each Insured/Member for Information Security & Privacy Liability. The policy includes a $50,000
deductible per claim,effective July 1, 2022.
58
Notes To Financial Statements
Year Ended June 30, 2023
11) LEASES RECEIVABLE
Leases Receivable
The District has entered into 32 cell site leases with lease terms ranging from less than one year to sixty
years. The lessees are required to make annual fixed payments ranging from $29,532 to $60,503, with
discount rates of 1.39%. As of June 30, 2023, the lease receivable is $47,232,748 and deferred inflows of
resources is $45,442,359. The District recognized $1,508,382 of lease revenue during the fiscal year.
12)SEGMENT INFORMATION
The District has issued Water and Wastewater Revenue Bonds in the previous fiscal years to finance
certain capital improvements. While water and wastewater services are accounted for jointly in these
financial statements, the investors in the Water Revenue Bonds rely solely on the revenues of the water
services for repayment and the Wastewater Revenue Bonds solely on the revenues of the wastewater
services for repayment.
Summary financial information for the water and wastewater services is presented for June 30, 2023:
59
Notes To Financial Statements
Year Ended June 30, 2023
12)SEGMENT INFORMATION –Continued
Water Wastewater
Services Services Total
Assets
Cash and Investments 104,214,333$ 5,842,965$ 110,057,298$
Accounts Receivable, Net 14,103,005 210,659 14,313,664
Other Current Assets 4,444,567 267,585 4,712,152
Leases Receivable 47,232,748 - 47,232,748
Capital Assets 415,372,735 28,079,040 443,451,775
Total Assets 585,367,388 34,400,249 619,767,637
Deferred Outflows of Resources
Deferred Actuarial Pension Costs 15,369,944 581,130 15,951,074
Deferred Actuarial OPEB Costs 6,394,398 284,833 6,679,231
Total Deferred Outflows of Resources 21,764,342 865,963 22,630,305
Liabilities
Accounts Payable 14,875,947 109,271 14,985,218
Other Miscellaneous Liabilities 5,872,516 958,970 6,831,486
Other Current Liabilities 12,254,231 104,347 12,358,578
Revenue Bonds 91,736,361 2,897,934 94,634,295
Lease Payable 690,539 - 690,539
Subscription-Based IT Payable 35,476 - 35,476
Net Pension Liability 25,109,322 841,773 25,951,095
Net OPEB Liability 4,834,231 217,030 5,051,261
Other Non-current Liabilities 3,768,468 - 3,768,468
Total Liabilities 159,177,091 5,129,325 164,306,416
Deferred Inflows of Resources
Deferred Actuarial Pension Costs 21,458 (21,458) -
Deferred Actuarial OPEB Costs 1,517,621 56,517 1,574,138
Deferred Inflows from Leases 45,442,359 - 45,442,359
Total Deferred Inflows of Resources 46,981,438 35,059 47,016,497
Net Position
Net Investment in Capital Assets 316,121,622 25,106,106 341,227,728
Restricted for Debt Service 3,476,509 - 3,476,509
Restricted for Capital Assets 3,046,231 - 3,046,231
Unrestricted 78,328,839 4,995,722 83,324,561
Total Net Position 400,973,201$ 30,101,828$ 431,075,029$
June 30, 2023
Condensed Statement of Net Position
60
Notes To Financial Statements
Year Ended June 30, 2023
12)SEGMENT INFORMATION –Continued
Water Wastewater
Services Services Total
Operating Revenues
Water Sales 99,901,174$ -$ 99,901,174$
Wastewater Revenue - 3,315,754 3,315,754
Connection and Other Fees 2,959,693 15,802 2,975,495
Total Operating Revenues 102,860,867 3,331,556 106,192,423
Operating Expenses
Cost of Water Sales 71,342,741 - 71,342,741
Wastewater - 2,497,316 2,497,316
Administrative and General 27,073,523 - 27,073,523
Depreciation 16,801,306 1,079,029 17,880,335
Total Operating Expenses 115,217,570 3,576,345 118,793,915
Operating Income (Loss)(12,356,703) (244,789) (12,601,492)
Non-Operating Revenues (Expenses)
Investment Earnings (Losses)4,032,973 55,358 4,088,331
Taxes and Assessments 5,618,253 - 5,618,253
Availability Charges 659,061 51,893 710,954
Gain (Loss) on Sale of Capital Assets (111,029) - (111,029)
Rents and Leases 2,181,634 - 2,181,634
Miscellaneous Revenues 1,952,540 8,628 1,961,168
Donations (92,000) - (92,000)
Interest Expense (4,221,662) (88,690) (4,310,352)
Miscellaneous Expenses (274,285) (56,136) (330,421)
Total Non-operating Revenues (Expenses)9,745,485 (28,947) 9,716,538
Income (Loss) Before Capital Contributions
and Transfers (2,611,218) (273,736) (2,884,954)
Capital Contributions 9,195,101 42,095 9,237,196
Change in Net Position 6,583,883 (231,641) 6,352,242
Total Net Position, Beginning 394,389,318 30,333,469 424,722,787
Total Net Position, Ending 400,973,201$ 30,101,828$ 431,075,029$
Condensed Statement of Revenues, Expenses and Changes in Net Pension
Year Ended June 30, 2023
61
Notes To Financial Statements
Year Ended June 30, 2023
12)SEGMENT INFORMATION –Continued
13)IMPLEMENTATION OF NEW ACCOUNTING STANDARDS
As described in Note 5 to the financial statements, the District changed accounting policies related to
subscription-based information technology arrangements by adopting Statement of Governmental
Accounting Standards Board (GASB) Statement No. 96, Subscription-Based Information Technology
Arrangements, in the fiscal year 2023. The District did not restate the prior year balances as it was not
practical to do so.
Water Wastewater
Services Services Total
Net Cash Provided/(Used) by:
Operating Activities 7,175,806$ 1,127,587$ 8,303,393$
Non-capital and Related Financing Activities 6,013,539 51,893 6,065,432
Capital and Related Financing Activities (12,590,597) (633,489) (13,224,086)
Investing Activities (45,122,081) 44,357 (45,077,724)
Net Increase(Decrease) in
Cash and Cash Equivalents (44,523,333) 590,348 (43,932,985)
Cash and Cash Equivalents, Beginning 85,512,139 5,252,617 90,764,756
Cash and Cash Equivalents, Ending 40,988,806$ 5,842,965$ 46,831,771$
For the Year Ended June 30, 2023
Condensed Statement of Cash Flows
62
Schedule of Changes in the Net OPEB Liability and Related Ratios
Last Ten Years (1)
June 30, 2023
Measurement Period: June 30 2022 2021 2020 2019 2018 2017
Total OPEB Liability
Service Cost 991,108$ 755,756$ 735,529$ 757,725$ 735,655$ 687,528$
Interest on the Total OPEB Liability 2,189,619 2,077,446 1,915,358 1,970,613 1,864,967 1,764,343
Actual and Expected Experience Difference 254,888 2,595,855 1,151,927 (2,029,118) - -
Changes in Assumptions - (1,557,334) - (345,110) - -
Changes in Benefit Terms - - - - - -
Benefit Payment (1,428,491) (1,201,678) (1,120,146) (1,141,344) (1,085,586) (1,039,420)
Net Change in Total OPEB Liability 2,007,124 2,670,045 2,682,668 (787,234) 1,515,036 1,412,451
Total OPEB Liability - Beginning 32,530,042 29,859,997 27,177,329 27,964,563 26,449,527 25,037,076
Total OPEB Liability - Ending (a)34,537,166$ 32,530,042$ 29,859,997$ 27,177,329$ 27,964,563$ 26,449,527$
Plan Fiduciary Net Position
Contributions - Employer 127,444$ 807,867$ 1,011,358$ 2,206,363$ 2,202,004$ 2,284,420$
Net Investment Income (4,739,093) 7,880,863 983,790 1,595,092 1,734,626 2,011,985
Benefit Payments (1,428,491) (1,201,678) (1,120,146) (1,141,344) (1,085,586) (1,039,420)
Administrative Expenses (9,034) (10,811) (13,514) (12,299) (11,784) (10,167)
Other Expenses - - - - - -
Net Change in Plan Fiduciary Net Position (6,049,174) 7,476,241 861,488 2,647,812 2,839,260 3,246,818
Plan Fiduciary Net Position - Beginning 35,535,079 28,058,838 27,197,350 24,549,538 21,739,035 18,492,217
Plan Fiduciary Net Position - Ending (b)29,485,905$ 35,535,079$ 28,058,838$ 27,197,350$ 24,578,295$ 21,739,035$
Net OPEB Liability/(Asset) - Ending (a)-(b)5,051,261$ (3,005,037)$ 1,801,159$ (20,021)$ 3,386,268$ 4,710,492$
Plan Fiduciary Net Position as a Percentage of
the Total OPEB Liability 85.37%109.24%94.00%100.10%87.80%82.20%
Covered-Employee Payroll 14,148,052$ 14,006,918$ 13,538,959$ 13,176,602$ 12,677,000$ 12,513,000$
Net OPEB Liability/(Asset) as a Percentage of
Covered-Employee Payroll 35.70%-21.45%13.30%-0.20%26.90%37.60%
Notes to Schedule
(1)Historical information is required only for measurement periods for which GASB 75 is applicable.Future years’information will be
displayed up to 10 years as information becomes available.Contributions are determined by an actuarial valuation based on eligible
participants’ estimated medical and dental benefits.
63
Schedule of Contributions
Last Ten Years (1)
June 30, 2023
Actuarially
Determined Contributions in Contribution Contributions as a
Fiscal Contribution Relation to the Deficiency Covered-Percentage of Covered-
Year (ADC)ADC (Excess)Payroll Payroll
2018 1,116,418$ (2,202,004)$ (1,085,586)$ 12,677,000$ 17.37%
2019 1,149,911 (2,206,363) (1,056,452) 13,176,602 16.74%
2020 1,011,358 (1,011,358) - 13,538,959 7.47%
2021 807,867 (807,867) - 14,006,918 5.80%
2022 - - - 14,148,052 0.00%
2023 - (1,394,881) (1,394,881) 14,054,264 9.92%
Notes to Schedule:
Methods and assumptions used to determine contributions:
Actuarial Cost Method Entry Age Normal
Amortization Method/Period Level percent of payroll over a closed rolling 15-year period
Asset Valuation Method Market value
Inflation 2.50%
Payroll Growth 2.75%
Investment Rate of Return 6.75%
Healthcare Cost-trend Rates 6.00% HMO/6.00% PPO decreasing to 4.50% HMO/4.50% PPO
Retirement Age
Mortality
The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2023 were
from the June 30, 2021 actuarial valuation.Also note,that some of the data from prior years were updated with the
most current available information.
Tier 1 employees -2.7%at 55 and Tier 2 employees -2.0%at 62.The probabilities
of Retirement are based on the 2014 CalPERS Experience Study for the period
from 1997 to 2011.
Pre-retirement mortality and post-retirement mortality probability
based on CalPERS Experience Study with mortality improvements
using Mortality Improvement Scale MP2018
(1)Historical information is required only for measurement periods for which GASB 75 is applicable.Future years’
information will be displayed up to 10 years as information becomes available.Contributions are determined by an
actuarial valuation based on eligible participants’ medical and dental benefits.
64
Schedule of Changes in the Net Pension Liability and Related Ratios
Last Ten Years(1)
June 30, 2023
Measurement Period: June 30 2022 2021 2020 2019
Total Pension Liability
Service Cost 2,994,291$ 2,662,845$ 2,623,208$ 2,586,911$
Interest 10,864,205 10,489,284 10,043,778 9,638,674
Changes in Benefit Terms - - - -
Changes in Assumptions 4,984,447 - - -
Difference Between Expected and actual Experience 174,717 705,426 260,337 1,183,213
Benefit Payments, including Refunds of
Employee Contributions (8,151,116) (7,304,947) (7,017,816) (6,658,719)
Net Change in Total Pension Liability 10,866,544 6,552,608 5,909,507 6,750,079
Total Pension Liability - Beginning 154,871,502 148,318,894 142,409,387 135,659,308
Total Pension Liability - Ending (a)165,738,046$ 154,871,502$ 148,318,894$ 142,409,387$
Plan Fiduciary Net Position
Net Plan to Plan Resource Movement -$ -$ -$ -$
Contributions - Employer 3,928,187 3,945,147 2,437,119 36,706,983
Contributions - Employee 1,099,592 1,095,898 1,055,769 1,019,255
Net Investment Income (11,584,615) 28,707,870 6,185,108 7,516,686
Benefit Payments, Including Refunds of
Employee Contributions (8,151,116) (7,304,947) (7,017,816) (6,658,719)
Administrative Expenses (96,301) (128,139) (177,337) (62,278)
Other Changes in Fiduciary Net Position - - - 203
Net Change in Plan Fiduciary Net Position (14,804,253) 26,315,829 2,482,843 38,522,130
Plan Fiduciary Net Position - Beginning 154,591,204 128,275,375 125,792,532 87,270,402
Plan Fiduciary Net Position - Ending (b)139,786,951$ 154,591,204$ 128,275,375$ 125,792,532$
Plan Net Pension Liability/(Asset) - Ending (a)-(b)25,951,095$ 280,298$ 20,043,519$ 16,616,855$
Plan Fiduciary Net Position as a Percentage of the
Total Pension Liability 84.34%99.82%86.49%88.33%
Covered Payroll 14,148,052$ 13,768,586$ 13,383,715$ 12,892,655$
Plan Net Pension Liability/(Asset) as a
Percentage of Covered Payroll 183.43%2.04%149.76%128.89%
(1)Measurement period 2021-22 (fiscal year 2022-2023)was the ninth year of implementation;therefore,only nine years are
shown.
(2)Historical information is required only for measurement periods for which GASB 68 is applicable.Future years’
information will be displayed up to 10 years as information becomes available.
65
Schedule of Changes in the Net Pension Liability and Related Ratios
Last Ten Years(1)
June 30, 2023
Measurement Period: June 30 2018 2017 2016 2015 2014
Total Pension Liability
Service Cost 2,528,271$ 2,556,902$ 2,298,617$ 2,250,860$ 2,330,709$
Interest 9,168,092 8,836,284 8,575,275 8,229,312 7,907,915
Changes in Benefit Terms - - - - -
Changes in Assumptions (1,312,634) 7,308,486 - (1,996,819) -
Difference Between Expected and actual Experience 461,917 (1,208,593) (613,440) (981,200) -
Benefit Payments, including Refunds of
Employee Contributions (5,995,949) (5,779,040) (5,448,218) (5,288,251) (4,885,406)
Net Change in Total Pension Liability 4,849,697 11,714,039 4,812,234 2,213,902 5,353,218
Total Pension Liability - Beginning 130,809,611 119,095,572 114,283,338 112,069,436 106,716,218
Total Pension Liability - Ending (a)135,659,308$ 130,809,611$ 119,095,572$ 114,283,338$ 112,069,436$
Plan Fiduciary Net Position
Net Plan to Plan Resource Movement (203)$ -$ -$ -$ -$
Contributions - Employer 4,441,517 4,105,810 3,819,770 3,557,098 3,137,174
Contributions - Employee 1,015,008 1,014,329 1,010,337 1,007,023 1,074,954
Net Investment Income 6,949,676 8,149,097 369,214 1,601,760 10,874,999
Benefit Payments, Including Refunds of
Employee Contributions (5,995,949) (5,779,040) (5,448,218) (5,288,251) (4,885,406)
Administrative Expenses (126,575) (109,029) (45,185) (83,511) -
Other Changes in Fiduciary Net Position (240,367) - - - -
Net Change in Plan Fiduciary Net Position 6,043,107 7,381,167 (294,082) 794,119 10,201,721
Plan Fiduciary Net Position - Beginning 81,227,295 73,846,128 74,140,210 73,346,091 63,144,370
Plan Fiduciary Net Position - Ending (b)87,270,402$ 81,227,295$ 73,846,128$ 74,140,210$ 73,346,091$
Plan Net Pension Liability/(Asset) - Ending (a)-(b)48,388,906$ 49,582,316$ 45,249,444$ 40,143,128$ 38,723,345$
Plan Fiduciary Net Position as a Percentage of the
Total Pension Liability 64.33%62.10%62.01%64.87%65.45%
Covered Payroll 12,969,485$ 12,829,415$ 12,767,963$ 12,451,513$ 12,276,578$
Plan Net Pension Liability/(Asset) as a
Percentage of Covered Payroll 373.10%386.47%354.40%322.40%315.42%
'(1) Measurement period 2021-22 (fiscal year 2022-2023) was the ninth year of implementation; therefore, only nine years are shown.
(2)Historical information is required only for measurement periods for which GASB 68 is applicable.Future years’information will be
displayed up to 10 years as information becomes available.
66
Schedule of Plan Contributions
Last Ten Years(1)
June 30, 2023
Actuarially
Determined Contributions in Contribution Covered-Contributions as a
Fiscal Contribution Relation to the Deficiency Employee Percentage of Covered-
Year (ADC)(2)ADC(2)(Excess)Payroll(3)Employee Payroll(3)
2015 3,557,098$ (3,557,098)$ -$ 12,451,513$ 28.57%
2016 3,819,770 (3,819,770) - 12,767,963 29.92%
2017 4,105,810 (4,105,810) - 12,829,415 32.00%
2018 4,441,517 (4,441,517) - 12,969,485 34.25%
2019 4,906,983 (36,706,983) (31,800,000) 12,892,655 284.71%
2020 2,437,119 (2,437,119) - 13,383,715 18.21%
2021 2,765,952 (3,965,952) (1,200,000) 13,768,586 28.80%
2022 2,971,785 (3,960,785) (989,000) 14,148,052 28.00%
2023 3,163,698 (5,477,698) (2,314,000) 14,539,529 37.67%
Notes to Schedule:
Actuarial Cost Method Entry Age Normal
Amortization Method/Period For details see June 30, 2020 Funding Valuation Report
Asset Valuation Method Equal to the market value of assets. Asset values includes accounts receivable
Discount Rate 7.15%
Inflation 2.50%
Salary Increases Varies by Entry Age and Service
Payroll Growth 2.75%
Investment Rate of Return 7.00% Net of Pension Plan Investments and Administrative Expenses, includes inflation.
Retirement Age
Mortality The probabilities of mortality are based on the 2017 CalPERS
(1)Historical information is required only for measurement periods for which GASB 68 is applicable.Future years’information will be
displayed up to 10 years as information becomes available.
(2)Employers are assumed to make contributions equal to the actuarially determined contributions.However,some employers may
choose to make additional contributions toward their unfunded liability.Employer contributions for such plans exceed the actuarially
determined contributions.
(3) Includes one year’s payroll growth assumption using 2.75% payroll growth assumption for fiscal years 2018-2021; 3.00% payroll
growth assumption for fiscal years 2015-2017.
The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2022-23 were from the
June 30, 2020 public agency valuations. Also note, that some of the data from prior years were updated with the most current available
information.
The probabilities of Retirement are based on the 2017 CalPERS
67
Report on Internal Control Over Financial Reporting and on Compliance and Other
Matters Based on an Audit of Financial Statements Performed in Accordance with
Government Auditing Standards
Board of Directors
Otay Water District
Spring Valley, California
Independent Auditor’s Report
We have audited, in accordance with the auditing standards generally accepted in the United
States of America and the standards applicable to financial audits contained in Government
Auditing Standards issued by the Comptroller General of the United States, the financial
statements of Otay Water District (“the District”), as of and for the year ended June 30, 2023,
and the related notes to the financial statements, which collectively comprise the District’s
basic financial statements, and have issued our report thereon dated October 25, 2023.
Report on Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the District's internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District’s internal control. Accordingly, we do not express an opinion on the effectiveness of the District’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses or significant deficiencies may exist that have not been identified.
Attachment C
Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the District's financial statements
are free from material misstatement, we performed tests of its compliance with certain
provisions of laws, regulations, contracts, and grant agreements, noncompliance with which
could have a direct and material effect on the financial statements.However, providing an
opinion on compliance with those provisions was not an objective of our audit, and
accordingly, we do not express such an opinion. The results of our tests disclosed no instances
of noncompliance or other matters that are required to be reported under Government
Auditing Standards.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and
compliance and the results of that testing, and not to provide an opinion on the effectiveness
of the District’s internal control or on compliance. This report is an integral part of an audit
performed in accordance with Government Auditing Standards in considering the District’s
internal control and compliance. Accordingly, this communication is not suitable for any other
purpose.
Irvine, California October 25, 2023
To the Board of Directors
Otay Water District
Spring Valley, California
We have audited the financial statements of the Otay Water District (“the District”)as of and
for the year ended June 30, 2023 and have issued our report thereon dated October 25, 2023.
Professional standards require that we advise you of the following matters relating to our
audit.
Our Responsibility in Relation to the Financial Statement Audit
As communicated in our engagement letter dated February 17, 2023, our responsibility, as
described by professional standards, is to form and express an opinion about whether the
financial statements that have been prepared by management with your oversight are
presented fairly, in all material respects, in accordance with accounting principles generally
accepted in the United States of America. Our audit of the financial statements does not
relieve you or management of your respective responsibilities.
Our responsibility, as prescribed by professional standards, is to plan and perform our audit
to obtain reasonable, rather than absolute, assurance about whether the financial statements
are free of material misstatement. An audit of financial statements includes consideration of
internal control over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control over financial reporting. Accordingly, as part of
our audit, we considered the internal control of the District solely for the purpose of
determining our audit procedures and not to provide any assurance concerning such internal
control.
We are also responsible for communicating significant matters related to the audit that are,
in our professional judgment, relevant to your responsibilities in overseeing the financial
reporting process. However, we are not required to design procedures for the purpose of
identifying other matters to communicate to you.
Planned Scope and Timing of the Audit
We conducted our audit consistent with the planned scope and timing we previously
communicated to you.
Compliance with All Ethics Requirements Regarding Independence
The engagement team, others in our firm, and as appropriate, our firm, have complied with
all relevant ethical requirements regarding independence.
We identified self-review threats to independence as a result of non-attest services provided.
Those non-attest services included the preparation of the financial statements. To mitigate
the risk,management has compared the draft financial statements and footnotes to the
underlying accounting records to verify accuracy and has reviewed a disclosure checklist to
ensure footnotes are complete and accurate.
Attachment D
Additionally, we utilize a quality control reviewer to perform a second review of the financial
statements. We believe these safeguards are sufficient to reduce the independence threats to
an acceptable level.
Significant Risks Identified
We have identified implementation of Governmental Accounting Standards Board No. 96 –
Subscription Based IT Arrangements (SBITAs) as a significant risk. We compared the terms
of the agreements to the information included in the calculation of the SBITA payable for 83%
of the outstanding balance.
Qualitative Aspects of the Entity’s Significant Accounting Practices
Significant Accounting Policies
Management has the responsibility to select and use appropriate accounting policies. A
summary of the significant accounting policies adopted by the District is included in Note 1 to
the financial statements. As described in Note 5 to the financial statements, the District
changed accounting policies related to SBITAs by adopting Statement of Governmental
Accounting Standards (GASB Statement) No. 96, Subscription-Based Information Technology
Arrangements, in the fiscal year 2023.No matters have come to our attention that would
require us, under professional standards, to inform you about (1) the methods used to account
for significant unusual transactions and (2) the effect of significant accounting policies in
controversial or emerging areas for which there is a lack of authoritative guidance or
consensus.
Significant Accounting Estimates
Accounting estimates are an integral part of the financial statements prepared by
management and are based on management’s current judgments.Those judgments are
normally based on knowledge and experience about past and current events and assumptions
about future events. Certain accounting estimates are particularly sensitive because of their
significance to the financial statements and because of the possibility that future events
affecting them may differ markedly from management’s current judgments.
The most sensitive accounting estimates affecting the financial statements are:
Management’s estimate of which capital projects represent ordinary maintenance
activities necessary to keep an asset operational for its originally intended useful life
versus significant improvement, replacement, and life extending projects that should
be capitalized as additions to capital assets is based on management’s knowledge of
the assets and their useful lives. We evaluated the key factors and assumptions used
to develop the amounts added to capital assets in determining that it is reasonable in
relation to the financial statements taken as a whole.
Management’s estimate of transactions related to net pension liabilities based on
actuarial information. We evaluated the key factors and assumptions used to develop
the amounts by the actuary and determined that it is reasonable in relation to the
financial statements taken as a whole.
Management’s estimate of transactions related to net OPEB liabilities based on
actuarial information. We evaluated the key factors and assumptions used to develop
the amounts by the actuary and determined that it is reasonable in relation to the
financial statements taken as a whole.
Financial Statement Disclosures
Certain financial statement disclosures involve significant judgment and are particularly
sensitive because of their significance to financial statement users. The most sensitive
disclosures affecting the District’s financial statements were:
The disclosure of pensions in note 7 of the financial statements.
The disclosure of OPEB in note 8 to the financial statements.
The financial statement disclosures are neutral, consistent, and clear.
Significant Unusual Transactions
For purposes of this communication, professional standards require us to communicate to you
significant unusual transactions identified during our audit.There were no significant unusual
transactions identified as a result of our audit procedures.
Identified or Suspected Fraud
We have not identified or have obtained information that indicates that fraud may have
occurred.
Significant Difficulties Encountered during the Audit
We encountered no significant difficulties in dealing with management relating to the
performance of the audit.
Uncorrected and Corrected Misstatements
For purposes of this communication, professional standards also require us to accumulate all
known and likely misstatements identified during the audit, other than those that we believe
are trivial, and communicate them to the appropriate level of management. Further,
professional standards require us to also communicate the effect of uncorrected
misstatements related to prior periods on the relevant classes of transactions, account
balances or disclosures, and the financial statements as a whole and each applicable opinion
unit.There were no uncorrected misstatements that we identified as a result of our audit
procedures.
In addition, professional standards require us to communicate to you all material, corrected
misstatements that were brought to the attention of management as a result of our audit
procedures. There were no material misstatements that we identified as a result of our audit
procedures.
Disagreements with Management
For purposes of this letter, professional standards define a disagreement with management
as a matter, whether or not resolved to our satisfaction, concerning a financial accounting,
reporting, or auditing matter, which could be significant to the District’s financial statements
or the auditor’s report. No such disagreements arose during the course of the audit.
Circumstances that Affect the Form and Content of the Auditor’s Report
For purposes of this letter, professional standards require that we communicate any
circumstances that affect the form and content of our auditor’s report. There were none.
Representations Requested from Management
We have requested certain written representations from management, which are included in
the attached letter dated October 25, 2023.
Management’s Consultations with Other Accountants
In some cases, management may decide to consult with other accountants about auditing
and accounting matters. Management informed us that, and to our knowledge, there were no
consultations with other accountants regarding auditing and accounting matters.
Other Significant Matters, Findings, or Issues
In the normal course of our professional association with the District, we generally discuss a
variety of matters, including the application of accounting principles and auditing standards,
significant events or transactions that occurred during the year,operating and regulatory
conditions affecting the entity, and operational plans and strategies that may affect the risks
of material misstatement. None of the matters discussed resulted in a condition to our
retention as the District’s auditors.
Restriction on Use
This report is intended solely for the information and use of the Board of Directors and
management of the District and is not intended to be and should not be used by anyone other
than these specified parties.
Irvine, California
October 25, 2023
Otay Water District
Spring Valley, California
INDEPENDENT ACCOUNTANT’S REPORT
We have performed the procedures enumerated below, in reviewing the Otay Water District’s
(“the District”) compliance with the requirements of the Investment Policy as such
requirements apply to the Investments of the District for the period July 1, 2022, through
June 30, 2023. The District is responsible for compliance with the requirements as noted in
the referenced Investment Policies.
The District has agreed to acknowledge that the procedures performed are appropriate to
meet the intended purpose of determining compliance by the District with respect to the
Investment Policy for the period July 1, 2022, through June 30, 2023.This report may not be
suitable for any other purpose. The procedures performed may not address all the items of
interest to a user of this report and may not meet the needs of all users of this report and, as
such, users are responsible for determining whether the procedures performed are
appropriate for their purposes.
The procedures performed, and the results of those procedures are as follows:
1.Obtain a copy of the District’s investment policy and determine that it is in effect for the
fiscal year ended June 30, 2023.
Results:No exceptions were noted as a result of applying the above procedure.
2.Select 4 investments held at year end and determine if they are allowable investments
under the District’s Investment Policy.
Results:No exceptions were noted as a result of applying the above procedure.
3.For the four investments selected in #2 above, determine if they are held by a third-party
custodian designated by the District.
Results:No exceptions were noted as a result of applying the above procedure.
4.Confirm the par or original investment amount and market value for the four investments
selected above with the custodian or issuer of the investments.
Results:No exceptions were noted as a result of applying the above procedure.
5.Select two investment earnings transactions that took place during the year and recompute
the earnings to determine if the proper amount was received.
Results:No exceptions were noted as a result of applying the above procedure.
Attachment E
Otay Water District
Spring Valley, California
Page 2
6. Trace amounts received for transactions selected at #5 above into the District’s bank
accounts.
Results:No exceptions were noted as a result of applying the above procedure.
7. Select five investment transactions (buy, sell, trade or maturity) occurring during the year
under review and determine that the transactions are permissible under the District’s
investment policy.
Results:No exceptions were noted as a result of applying the above procedure.
8. Review the supporting documents for the five investments selected at #7 above to
determine if the transactions were appropriately recorded into the District’s general ledger.
Results:No exceptions were noted as a result of applying the above procedure.
We were engaged by Otay Water District to perform this agreed-upon procedures engagement
and conducted our engagement in accordance with attestation standards established by the
American Institute of Certified Public Accountants. We were not engaged to and did not
conduct an examination or review engagement, the objective of which would be the
expression of an opinion or conclusion, respectively, on the District’s accounting records.
Accordingly, we do not express such an opinion or conclusion. Had we performed additional
procedures other matters might have come to our attention that would have been reported
to you.
We are required to be independent of the District and to meet our other ethical responsibilities
in accordance with the relevant ethical requirement related to our agreed-upon procedures
engagement.
This report is intended solely for the information and use of management of Otay Water
District and is not intended to be and should not be used by anyone other than those specified
parties.
Irvine, California
October 25, 2023
OTAY
WATER DISTRICT
AUDIT RESULT
FISCAL YEAR ENDED JUNE 30, 2023
October 23, 2023
Attachment F
Audit Reports
2
❑Basic Financial Statements
❑ Unmodified opinion will be dated October 25, 2023
❑Implementation of GASB 96 – SBITA
❑Government Auditing Standards Opinion
❑Letter to Those in Governance
❑Agreed-Upon Procedures Report over
Investments
Audit Results
3
❑Finance staff was prepared for the audit
❑No material journal entries detected as a
result of the audit procedures
❑Noted no instances of noncompliance with
laws and regulations that are direct and
material to the financial statements
❑No material weaknesses or significant
deficiencies in internal controls
Areas of Audit Focus
4
Cash
Disbursement
Testing
Implementation
of GASB 96
Capital
Asset
Testing
Benford’s Law
5
Questions?
Shannon Ayala | Partner
Davis Farr LLP | 5927 Priestly Drive, Suite 201 | Carlsbad, CA 92008
Phone: Direct:760.298.5872 | Email:sayala@davisfarr.com
STAFF REPORT
TYPE MEETING: Regular Board MEETING DATE: November 8, 2023
PROJECT: Various DIV. NO. ALL
SUBMITTED BY: Suzie Lawson
Human Resources Manager
Emilyn B. Zuniga
Safety & Security Specialist
APPROVED BY: Adolfo Segura, Chief, Administrative Services
Jose Martinez, General Manager
SUBJECT: ADOPT RESOLUTION #4437 TO REVISE BOARD POLICY #22, “DRUG FREE
WORKPLACE POLICY AND PROCEDURE”
GENERAL MANAGER’S RECOMMENDATION:
That the Otay Water District (District) Board of Directors (Board) adopt
Resolution #4437 to revise Board Policy #22, “Drug Free Workplace Policy
and Procedure” due to Assembly Bill 2188 (AB 2188), effective January
1, 2024, and administrative updates.
COMMITTEE ACTION:
See “Attachment A”.
PURPOSE:
To request that the Board adopt Resolution #4437 to revise Board Policy
#22, “Drug Free Workplace Policy and Procedure” due to AB 2188 and
administrative updates.
ANALYSIS:
The District periodically reviews and updates its Board policies as
needed or as legally required. The District’s “Drug Free Workplace
Policy and Procedure” is being revised due to AB 2188, which addresses
employment actions based on testing of employees or potential employees
AGENDA ITEM 5
for cannabis use. AB 2188, which becomes operative on January 1, 2024,
amends the California Fair Employment and Housing Act (FEHA) to
generally prohibit an employer from discriminating against an employee
or applicant because of the employee’s or applicant’s cannabis use off
the job and away from work. AB 2188 makes it unlawful for a covered
employer to discriminate against a person in hiring, termination, or
any term or condition of employment, or otherwise penalizing a person,
if the discrimination is based upon any of the following:
•The person’s use of cannabis off the job and away from the
workplace; or
•An employer-required drug-screening test has found the person to
have non-psychoactive cannabis metabolites in their hair, blood,
urine, or other bodily fluids.
AB 2188 only applies to marijuana, not other drugs. AB 2188 does not
permit an employee to possess, be impaired by, or use cannabis on the
job.
AB 2188 also does not affect the rights or obligations of an employer
to maintain a drug- and alcohol-free workplace under California Health
and Safety Code Section 11362.45, or by federal law or regulation.
AB 2188 does not impact drug testing for Department of Transportation
(DOT)-regulated positions.
AB 2188 also expressly allows employers to make employment-related
decisions based on tests that apply to current impairment, in
particular, scientifically valid pre-employment drug screening
conducted through methods that do not screen for non-psychoactive
cannabis metabolites, such as those that test for tetrahydrocannabinol
(THC).
Although AB 2188 takes effect on January 1, 2024, the legislation
preceded the drug testing technology. Drug testing service providers
are still working to establish scientifically valid drug screening
methods to comply with this legislation. In addition, employers and the
legal community are still determining how employers can best abide by
this legislation. More information and legal guidance are expected in
2024, at which time additional policy revisions will be brought forward
to the Board.
The District’s “Drug Free Workplace Policy and Procedure” also
includes and allows for the testing of non-safety sensitive
management staff and are currently subject to random testing.
However, after surveying other water agencies, consulting with ACWA
JPIA, consultants, and legal resources, and barring any reasonable
suspicion, staff is recommending that non-safety sensitive management
staff be removed from the District’s random testing. The District
has been recently advised that conducting a random drug test of
management staff who do not perform safety-sensitive duties and
without reasonable suspicion creates significant risks and liability
exposure for the District. Given these risks, staff recommends
removing management staff from the random testing unless they hold a
safety-sensitive position. Note that removing management staff from
the program will not exempt them and all employees for being tested
under the reasonable suspicion procedures, which are still part of
District’s “Drug Free Workplace Policy and Procedure.”
Federal authorities still require California employers to establish
a controlled substance and alcohol testing program that includes
random testing. The District will continue to engage in and enforce
random testing for employees working in safety-sensitive positions,
and commercial drivers as required by DOT and the Federal Motor
Carrier Safety Administration. These positions perform duties which,
if performed under the influence of drugs, would pose imminent safety
or health risks with irremediable consequences.
Before you is Resolution #4437 to revise Board Policy #22, “Drug Free
Workplace Policy and Procedure”. This policy provides a directive of
zero tolerance for the use of controlled substances or the abuse of
alcohol while employed at the District. It provides guidelines and
requirements for exceptions of over-the-counter or prescription
drugs. It also provides definitions for terms and processes related to
this policy.
Revisions required at this time are detailed in the attached strike-
through version of the policy (Attachment C). Based on the above,
staff recommends that the Board adopt Resolution #4437 (Attachment
B)in support of the proposed revisions.
FISCAL IMPACT: Joe Beachem, Chief Financial Officer
Based on policy and legal changes, existing budgeted funds are
anticipated to cover expenditures for ongoing and routine testing services.
STRATEGIC GOALS:
1)Improve organization effectiveness.
2) Coordinate workforce planning activities to determine future needs,
identify gaps, and implement actions to close the gaps.
LEGAL IMPACT:
None.
ATTACHMENTS:
Attachment A – Committee Action Report
Attachment B – Resolution #4437
Exhibit 1 – Board Policy #22, “Drug Free Workplace Policy
and Procedure”
Attachment C - Recommended Revisions to Board Policy #22, “Drug Free
Workplace Policy and Procedure”
Attachment D – Proposed Copy of Board Policy #22, “Drug Free
Workplace Policy and Procedure”
Attachment E – PowerPoint Presentation
ATTACHMENT A
SUBJECT/PROJECT: ADOPT RESOLUTION #4437 TO REVISE BOARD POLICY #22, “DRUG
FREE WORKPLACE POLICY AND PROCEDURE”
COMMITTEE ACTION:
The Finance & Administration Committee reviewed this item at a
meeting held on October 23, 2023. The Committee supports presentation
to the full Board.
NOTE:
The “Committee Action” is written in anticipation of the Committee
moving the item forward for Board approval. This report will be sent
to the Board as a committee approved item or modified to reflect any
discussion or changes as directed by the committee prior to
presentation to the full Board.
1
RESOLUTION NO. 4437
RESOLUTION OF THE BOARD OF DIRECTORS
OF THE OTAY WATER DISTRICT TO REVISE
BOARD POLICY #22, “DRUG FREE WORKPLACE
POLICY AND PROCEDURE”
WHEREAS, the Board of Directors of Otay Water District have
established policies, procedures, ordinances, and resolutions
for the efficient operation of the District; and WHEREAS, it is
the policy of the District to establish procedures to review
policies, procedures, ordinances, and resolutions periodically
to ensure they are current and relevant; and
WHEREAS, District staff has identified Board Policy #22,
“Drug Free Workplace Policy and Procedure” as requiring legal
updates mandated by Assembly Bill 2188.
WHEREAS, District staff has identified administrative
updates to Board Policy #22, “Drug Free Workplace Policy and
Procedure”, based on legal consultation.
NOW, THEREFORE, BE IT RESOLVED that the Board of Directors
of the Otay Water District amend the Board Policy indicated
above in the form presented to the Board at this meeting.
PASSED, APPROVED AND ADOPTED by the Board of Directors of
the Otay Water District at a regular meeting held this 8th of
November 2023.
__________________________
Board President
ATTEST:
___________________________
District Secretary
ATTACHMENT B
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
DRUG FREE WORKPLACE POLICY AND PROCEDURE 22 9/19/90 7/6/16
Page 1 of 17
A. Policy
The Otay Water District (‘‘District’’) has zero tolerance for the
use of controlled substances or the abuse of alcohol. Employees who
are under the influence of a drug or alcohol on the job compromise
the District’s interests and endanger their own health and safety
as well as the health and safety of others. The District prohibits
the use, possession, manufacture, distribution, or being under the
influence of alcohol or controlled substances by any District
employee while on District property or while on duty, except as
specified herein. Violation of this policy is an act of misconduct
meriting dismissal without prior warning or disciplinary action in
accordance with the District’s Discipline Policy and Procedures.
B. Exceptions
The following exceptions apply to this policy:
1.Events -- Authorized Use of Alcohol
The General Manager or his/her designee, at his/her discretion,
may authorize the use of alcohol at a District event, subject
to any conditions he/she elects to impose.
2. Customary Use of Over-the Counter or Prescription Drugs
The exceptions set forth in this section do not extend to the
use of marijuana, or any product made or derived from
marijuana, regardless of whether the employee’s doctor
prescribes, recommends, or authorizes its use. With respect to
an employee, use of an over-the-counter drug, or a
prescription-only drug under a prescription for the employee,
in the manner prescribed, will not be treated as a violation of
this policy unless the drug has potential side effects which
impair the employee’s ability to perform any safety-sensitive
duty and/or the core duties of his/her position and the
employee has failed to notify his/her supervisor or Human
Resources of such side effects before performing duties while
under the influence of the drug. The District may require a
note from the employee’s doctor concerning authorization for a
prescription and/or the possible side effects of the prescribed
drugs. The District shall comply with all applicable laws
concerning the privacy of employees’ medical information.
With respect to an applicant, use of an over-the-counter drug,
or a prescription-only drug under a prescription for the
applicant, in the manner prescribed, will not disqualify the
applicant for employment if he/she satisfactorily explains such
use upon being informed of a positive test for controlled
EXHIBIT 1
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
DRUG FREE WORKPLACE POLICY AND PROCEDURE 22 9/19/90 7/6/16
Page 2 of 17
substances. The District may require a note from the
applicant’s doctor concerning authorization for a prescription
and/or the possible side effects of the prescribed drugs.
C. Definitions
1. Accident:
a.Any accident, in which an employee is driving on District
business, and is at fault or suspected of having
significantly contributed to an accident. This shall apply to
employees covered by the Department of Transportation
(‘‘DOT’’) policy only if the accident is not subject to the
DOT policy.
b.Any accident, not involving the driving of a District
vehicle, that is reasonably believed by management or
credibly reported by another person to have been caused by an
on-duty employee and which results in serious physical
injury.
2. Controlled Substance:
a. Any drug or substance identified by section 40.85 of title 49
of the Code of Federal Regulations or sections 11054-11058 of
the California Health and Safety Code.
b. Any drug or substance.
3. Dilute Specimen: A specimen with creatinine and specific
gravity values that are lower than expected for human urine or
a specimen that is adulterated in any way.
4.Drug Paraphernalia: This term has the same definition as is
used in section 11364.5(d) of the California Health and Safety
Code and applies only to paraphernalia deemed unlawful under
section 11364.5(d).
5.Manager/Management: A District employee who is designated as a
supervisor, manager, or executive.
6.Medical Review Officer: A person who is a licensed physician
and who is responsible for receiving and reviewing laboratory
results for substance tests and evaluating medical explanations
for certain test results.
7.Negative: A person is considered to have tested negative for a
substance if his/her substance test does not produce a positive
result.
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
DRUG FREE WORKPLACE POLICY AND PROCEDURE 22 9/19/90 7/6/16
Page 3 of 17
8.Positive: A person is considered positive for alcohol if he/she
has a blood alcohol concentration of 0.04 or greater at the
time he/she submits to testing. A person is considered positive
for a Controlled Substance if he/she has any amount of a
Controlled Substance at or above a ‘‘cutoff concentration’’
specified in section 40.87 of title 49 of the Code of Federal
Regulations at the time he/she submits to testing.
9. Reasonable Suspicion: A reasonable suspicion exists that a
person is under the influence of a substance if a trained
observer (who has received the appropriate training to
recognize the signs and symptoms of drug and alcohol use)
reasonably comes to the conclusion that the person is under the
influence of a substance due to having personally observed,
with respect to the person, some or all of the effects
specified in Appendix A of this policy.
Additionally, a reasonable suspicion exists that a person is
under the influence of a substance if an observer has seen the
person use a substance.
No one factor is sufficient to create a reasonable suspicion,
but an observer may make a reasonable assessment based on the
quantity, degree, and/or severity of applicable factors.
10. Refusal to Submit to Testing. Each of the following constitutes
a refusal to submit to testing:
a. Failing to immediately report for substance testing when
directed to do so;
b. Failing to complete the testing process (including signing
any forms necessary to authenticate or identify a
specimen);
c. Failing to provide an adequate amount of breath, saliva, or
urine for a test;
d. Failing to cooperate with any aspect of the testing
process, including but not limited to refusing to wash
hands when directed, being confrontational with testing
personnel, or failing to comply with instructions in a
‘‘direct observation,’’ as that term is used in section
40.197 of title 49 of the Code of Federal Regulations;
e. Using or wearing a prosthetic device to interfere with the
collection process;
f. Admitting to adulterating or diluting the specimen; or
g. Any act or failure to act that is intended to interfere
with the testing or alter the results of the testing.
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
DRUG FREE WORKPLACE POLICY AND PROCEDURE 22 9/19/90 7/6/16
Page 4 of 17
11. Safety-Sensitive Duties: Duties which consist of any of the
following:
Operating any assigned District vehicle or equipment
(includes management and non-management employees);
Work in ‘‘confined spaces,’’ as that term is defined in
District regulations or CalOSHA regulations;
Performing maintenance on any vehicle;
Loading, unloading or attending any District vehicle or
equipment;
Access to sensitive/classified information related to
emergency response, safety or security duties;
Participation in Hazardous Waste Operations and Emergency
Response Confined Space Rescue Team;
Work performed at elevated or depth locations more than 4ft
above or below ground; or
Work involving the use or disposal of hazardous chemicals
as that term is defined in District regulations or Cal OSHA
regulations.
12. Serious Physical Injury: An injury to an employee that causes
the employee to be absent from work following an Accident or
which requires hospitalization of the employee.
13. Substance: Any substance containing alcohol or any Controlled
Substance.
14. Under the Influence: With respect to alcohol, a person is under
the influence at the time he/she is ordered to submit to
testing if he/she tests Positive for alcohol at the time he/she
submits to testing. With respect to Controlled Substances, a
person is under the influence at the time he/she is ordered to
submit to testing if he/she tests Positive for a Controlled
Substance at the time he/she submits to testing.
D. Conflicts with DOT Policy
As to applicants or employees to whom the DOT Policy applies, to
the extent this policy imposes a requirement that is less stringent
than the DOT Policy the more stringent requirements of the DOT
Policy will control.
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
DRUG FREE WORKPLACE POLICY AND PROCEDURE 22 9/19/90 7/6/16
Page 5 of 17
E. Testing Procedures
When an employee or applicant is to be tested, the District shall
use the same testing procedures that are used for testing under the
DOT Drug and Alcohol Testing Policy, including the procedures for
testing a ‘‘split specimen,’’ as that term is defined in section
40.3 of title 49 of the Code of Federal Regulations. The service
providers shall comply with section 40.47 of title 49 of the Code
of Federal Regulations except they shall use a non-federal custody
and control form for applicants and employees.
1. Alcohol Testing
Alcohol testing will be conducted using evidential breath
testing devices (‘‘EBT’’) approved by the National Highway
Traffic Safety Administration. A screening test must be
conducted first. If the result is an alcohol concentration
level of less than 0.02, the test is considered a Negative
test. If the alcohol concentration level is 0.02 or more, a
second confirmation test must be conducted. Alcohol testing
shall be accomplished by a laboratory certified by the U.S.
Department of Health and Human Services.
2. Controlled Substance Testing
a. The test must be conducted by analyzing the employee's
urine.
b. The urinalysis shall be done at a laboratory certified by
the U.S. Department of Health and Human Services.
c. The urine specimen must be split into two bottles labeled as
"primary" and "split" specimen. Both bottles must be sent to
the laboratory.
d. If the urinalysis of the primary specimen tests Positive for
the presence of illegal Controlled Substances, the employee
has 72 hours from time of notification to request that the
split specimen be analyzed by a different certified
laboratory.
e. The urine sample shall be tested for the following:
marijuana metabolites, cocaine metabolites, opiates,
amphetamines and phencyclidine (‘‘PCP’’);
f. If the test is Positive for one or more of the drugs listed
in subsection "e" above, a confirmation test must be
performed using gas chromatography/mass spectrometry
analysis.
g. All drug test results will be reviewed and interpreted by
the Medical Review Officer before they are reported to the
District.
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
DRUG FREE WORKPLACE POLICY AND PROCEDURE 22 9/19/90 7/6/16
Page 6 of 17
h. With all Positive drug tests, the Medical Review Officer
will contact the employee to determine if there is a medical
explanation for the Positive test result. If documentation
is provided and the Medical Review Officer determines that
there is a legitimate medical use for the prohibited drug,
the test result may be reported to the District as Negative.
F. Testing
1. Persons Subject to Substance Screening
All applicants for employment, in conjunction with pre-
employment physical examination;
All employees reasonably suspected of using Substances
while on duty or on District property or while working
while Under The Influence of Substances;
All employees reasonably suspected of possessing,
manufacturing, or distributing Substances while on duty or
on District property;
Any employee at fault or reasonably suspected of having
significantly contributed to an Accident while on duty;
Any employee who performs Safety-Sensitive Duties whose
name is selected for testing pursuant to the District’s
random testing procedure; or
Any District employee who applies for and is selected for a
position that will require the performance of Safety-
Sensitive Duties.
2. Pre-employment, Promotions and Transfer Physicals
All applicants for employment shall, as part of their pre-
employment physical examination, submit to a urine analysis or
other legally authorized testing methods as selected by the
District for Substances.
Any District employee who applies for a position that will
require the performance of Safety-Sensitive Duties shall, as a
precondition to appointment to such position, submit to a urine
analysis or other legally authorized testing method as selected
by the District for Substances.
3. Random Testing of Managers and Safety-Sensitive Duty Employees
Each year the District shall randomly conduct Substance tests
of employees who perform Safety-Sensitive Duties. Based on the
number of such employees employed by the District on January 1,
the District shall conduct by the following December 31, a
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number of tests for Controlled Substances equal to 25 percent
of the total number of employees who perform Safety-Sensitive
Duties, or the minimum amount required by DOT regulations,
whichever is greater. Within the same time period, the District
shall randomly conduct a number of tests for alcohol equal to
25 percent of the same number of safety-sensitive employees, or
the minimum amount required by DOT regulations, whichever is
greater.
Each year the District shall randomly conduct Substance tests
of managers who are not randomly tested as employees performing
Safety-Sensitive Duties. Based on the number of managers
employed by the District on January 1, the District shall
conduct by the following December 31 a number of tests for
Controlled Substances equal to 25 percent of the total number
of such managers, or the minimum amount required by DOT
regulations, whichever is greater. Within the same time period,
the District shall randomly conduct a number of tests for
alcohol equal to 25 percent of the same number of such
managers, or the minimum amount required by DOT regulations,
whichever is greater. Managers who perform Safety-Sensitive
Duties and who are included in the pool of Safety-Sensitive
Duty employees selected for random testing shall not be
included in the pool of non-Safety-Sensitive Duty managers who
are selected for random testing.
The General Manager will contract with a service provider to
perform the random selection of employee names for Substance
testing and select the dates upon which the employees will be
tested. The service provider must ensure that every Safety-
Sensitive employee has an equal chance of being selected each
time a name is randomly drawn and that any employee whose name
is selected is not exempt from having his/her name selected in
any subsequent drawing in the same year.
The service provider shall provide the selected names and dates
to the Safety and Security Specialist and/or Human Resources
Manager, who shall not disclose this information to any other
person except to the employee selected for testing and the
employee’s supervisor at the time that the employee is required
to submit to testing. If the employee is absent from duty on a
date that he/she has been randomly selected for testing, an
alternate name may be selected or he/she may be required to
submit to a test immediately upon returning to work, without
prior notice.
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Upon being informed that he/she is required to submit to a
random test, the employee must report to the testing location,
as quickly as possible but no greater than one hour from being
informed, and complete the test as directed by personnel at the
testing location. Upon completing testing, the employee shall
report back to duty if his/her duty day has not yet concluded.
Random testing is separate from the other forms of testing
described in this policy. An employee who submits to a
Reasonable Suspicion or post-Accident test does not satisfy the
requirement that he/she submit to a random test when ordered.
4. Post-Accident Testing
If an employee is involved in an Accident that under this
policy requires that the employee submit to Substance testing,
the employee’s supervisor shall immediately contact Human
Resources and the Safety and Security Specialist to report the
Accident and the necessity of testing. After consultation with
Human Resources, if it is determined that the employee should
be tested, then the supervisor shall direct the employee to
report to the testing location and complete the test as
directed by personnel at the testing location. The supervisor
shall arrange to transport the employee to the testing
location. Upon completing testing, the employee shall report
back to duty if his/her duty day has not yet concluded, unless
a Reasonable Suspicion exists, based on the observation of the
employee’s supervisor and in consultation with Human Resources,
that the employee was Under the Influence of a Substance at the
time or shortly after the Accident. If such a Reasonable
Suspicion exists, the employee shall be released from duty for
the remainder of the day. The supervisor, in consultation with
Human Resources, thereafter shall determine on a day-to-day
basis whether to permit the employee to return to duty, until
the results of the test have returned. If an employee has been
ordered to submit to Substance testing for post-Accident
testing, and Reasonable Suspicion exists, the District may
place the employee on leave without pay pending the test
results. If the employee’s test results are Negative, the
District shall restore any salary lost by the employee for the
days he/she was on leave, as though the employee had reported
for duty.
If the employee requires immediate medical assistance due to
the Accident, such that he/she is unable to report to the
testing location, the supervisor shall coordinate with the
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hospital to conduct the test or require the employee to report
to the testing location as soon as is practicable.
The determination as to whether an employee is involved in an
Accident shall be made by the employee’s supervisor in
consultation with the Safety and Security Specialist and Human
Resources, based on the information available to him/her. If it
cannot be immediately determined whether the employee was
involved in an Accident, the supervisor shall not order the
employee to testing until a determination can be made.
The following criteria apply when conducting drug and alcohol
tests due to an Accident:
a. A breath alcohol test must be administered as soon as
possible. Every effort should be made to ensure that a
breath alcohol test is performed within eight hours
following the Accident. If testing has not occurred within
eight hours, attempts to test should be discontinued.
However, if testing did not occur within eight hours, and
Reasonable Suspicion existed at the time or shortly after
the Accident the employee may resume duties with his/her
next shift that begins after the eight hours have passed.
Prior to the employee’s return, management shall observe the
employee’s condition before the employee is allowed to
resume duties to ensure that there is no longer Reasonable
Suspicion.
b. A drug screening test should be initiated prior to the 32nd
hour following an Accident.
c. The employee must remain readily available for testing or he
or she will be deemed to have refused the test (see Refusal
to Submit to Testing). This rule does not require the delay
of necessary medical attention for injured persons following
the Accident nor prohibit the employee from leaving the
scene to obtain assistance or necessary emergency medical
care.
d. An employee subject to post-Accident testing may not use
alcohol within eight hours following the Accident or before
an alcohol test, whichever comes first.
e. Testing will not be conducted on any deceased employee.
f. The results of a breath or blood test for the use of alcohol
or a urine test for Controlled Substances, conducted by
Federal, State, or local officials having independent
authority for the test, shall be considered to meet the
requirements of this policy provided such results are
obtained by the employer, and conform to the applicable
Federal, State or local requirements.
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g. The potentially affected employee will not be allowed to
proceed alone to or from the collection site. Time spent in
complying with post-Accident testing is compensable.
h. Documentation of the activity being performed by the
employee that supports the determination to conduct post-
Accident testing should be prepared and signed by the
supervisor requesting the test within 24 hours of the
Accident or before the results of the drug test are
released, if possible.
5. Reasonable Suspicion Testing
If a supervisor, manager, the Safety and Security Specialist,
other personnel has a Reasonable Suspicion that the employee is
Under the Influence of a Substance while on District property
or on duty, he/she shall consult with Human Resources of this
observation to determine if testing is appropriate. After
consultation with Human Resources, if it is determined that the
employee should be tested, a supervisor shall direct the
employee to immediately report for testing and complete the
test as directed by personnel at the testing location. The
supervisor shall arrange to transport the employee to the
testing location. If the person who advises Human Resources of
the Reasonable Suspicion is not the employee’s supervisor,
Human Resources must immediately notify the supervisor of the
Reasonable Suspicion, and the supervisor shall arrange to
transport the employee to the testing location. The
supervisor(s) witnessing the impairment must document the
specific observations upon which the Reasonable Suspicion is
based.
Upon completing testing, the employee shall be released from
duty for the remainder of the day. The supervisor, in
consultation with Human Resources, thereafter, shall determine
on a day-to-day basis whether to permit the employee to return
to duty, until the results of the test have returned. If an
employee has been ordered to submit to Substance testing for
Reasonable Suspicion, the District may place the employee on
leave without pay pending the test results. If the employee’s
test results are Negative, the District shall restore any
salary lost by the employee for the days he/she was on leave,
as though the employee had reported for duty.
The following criteria apply when conducting drug and alcohol
tests due to Reasonable Suspicion:
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a. Alcohol
A breath alcohol test must be administered as soon as
possible. Every effort should be made to ensure that a
breath alcohol test is performed within eight hours. If
testing has not occurred within eight hours, attempts to
test should be discontinued and the employee may resume
duties with his/her next shift that begins after the eight
hours have passed. However, prior to the employee’s return,
management shall observe the employee’s condition before the
employee is allowed to resume duties to ensure that there is
no longer Reasonable Suspicion.
b. Controlled Substances
A urinalysis test for Controlled Substances must be
administered as soon as possible. Every effort should be
made to ensure the urinalysis is performed within 32 hours
of the observation.
c. The employee may not proceed alone to or from the collection
site. The supervisor or other appropriate person making the
observation shall arrange to transport the employee to the
testing site.
d. Documentation to support the determination to conduct
Reasonable Suspicion testing should be prepared and signed
by the person who made the determination within 24 hours of
the determination or before the results of the test are
released, whichever is earlier, if possible.
6. Acknowledgment and Consent
Any employee subject to testing under this policy will be asked
to sign a form acknowledging the procedures governing testing,
and consenting to (1) the collection of a urine sample for the
purpose of determining the presence of alcohol or Controlled
Substances, and (2) the release to the District of medical
information regarding the test results. Refusal to sign the
agreement and consent form, or to submit to the drug test, will
result in the revocation of an applicant’s job offer, or will
subject an employee to discipline up to and including
termination.
7. Refusal to Submit to Testing
If an applicant refuses to submit to testing for any Substance,
the applicant is disqualified for employment. If a District
employee who has applied for a position that requires the
performance of Safety-Sensitive Duties refuses to submit to
testing for any Substance, the employee is disqualified for
such position.
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If an employee refuses to submit to testing for any Substance,
the District may treat such refusal as an act of
insubordination. The District shall also impose the same
disciplinary action of dismissal for a refusal to test that it
would impose for a Positive test result, so as not to encourage
employees to refuse to test in the hope of avoiding more severe
disciplinary action. The District may immediately place an
employee on leave without pay if the employee refuses to submit
for testing.
8. Refusal to Authorize Disclosure of Results of Testing
If an applicant refuses to authorize the disclosure of the
testing results to the District, the applicant is disqualified
for employment. If a District employee who has applied for a
position that requires the performance of Safety-Sensitive
Duties refuses to authorize the disclosure of the test results
to the District, the employee is disqualified for such
position.
If an employee refuses to authorize the disclosure of results
of testing to the District, the District will impose the same
disciplinary action of dismissal for a refusal to authorize the
disclosure of results of testing, that it would impose for a
Positive test result, so as not to encourage employees to
refuse to authorize the disclosure of test results in the hope
of avoiding more severe disciplinary action.
9. Positive Test
If an applicant tests Positive for a Controlled Substance,
he/she shall be disqualified for employment unless he/she meets
the requirements for the over-the-counter/prescription drug
exception set forth in Section B(2) of this policy. If a
District employee who has applied for a position that requires
the performance of Safety-Sensitive Duties tests Positive for a
Substance, the employee is disqualified for such position.
If an employee tests Positive for a Substance, the employee
shall not be returned to duty and shall not receive pay during
his/her absence until the employee requests that the split
urine specimen be tested and the test of that specimen is not
Positive for a Substance.
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This unpaid absence shall not be considered a disciplinary or
punitive action against the employee and any record of such
absence shall be maintained separately from the employee’s
personnel file. The absence is for the administrative and
safety interests of the District. This unpaid absence has no
effect on the District’s decision or ability to discipline an
employee for violating this policy.
If the Medical Review Officer determines that an employee’s
specimen is a Dilute Specimen and the specimen is Positive for
a Substance, the employee shall be considered to have tested
Positive for that Substance. If a Dilute Specimen produces a
Negative result then the employee shall be required to submit
to a second Substance test, in the manner prescribed in section
40.197 of title 49 of the Code of Federal Regulations.
10. Request for Retest
If an employee tests Positive for any Substance, the employee
may, within 72 hours of being notified of the Positive test
result, request of the Medical Review Officer that the split
specimen be tested. If the employee does not timely submit a
request, the employee shall be considered to have waived
his/her right to have the split specimen tested. The employee
shall pay for the cost of testing the split specimen. If the
employee is unable to pay this cost at the time of the request,
the District must ensure that the split specimen is tested even
if it means that the District may have to initially bear the
cost. The District may recover the cost from the employee at a
later time.
If a split specimen does not produce a Positive result for a
Substance, the District shall restore any salary lost by the
employee as a result of an absence imposed because of the
Positive result on the first specimen. The employee shall be
considered to have not tested Positive for a Substance. The
District shall also reimburse the employee for the cost of the
retest if the employee paid for the retest.
The District may not request that the split specimen be tested.
G. Employee Assistance Programs
The District may refer any employee, including an employee who is
dismissed because of a Positive test for a Substance, to its
employee assistance program. If in any instance the District is
required to lawfully accommodate an employee’s disability related
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to Substance abuse, the District shall refer the employee to a
Substance abuse professional.
H. Suspicion of Possession/Distribution/Manufacture of Controlled
Substances
If a supervisor has a Reasonable Suspicion that an employee
unlawfully possesses or is distributing or manufacturing a
Controlled Substance or Drug Paraphernalia on or in District
property, or while on duty, the supervisor must report this
suspicion to Human Resources.
1. For purposes of Section H only, ‘‘Reasonable Suspicion’’ means
the following:
a.As to possession, the supervisor or a reporting credible
source must have seen a Substance or item on the person of
the employee, in the employee’s work area, or in or on
District property assigned to the use of the employee that
a reasonable person would believe is a Controlled Substance
or Drug Paraphernalia, or have seen in any of the same
areas a container that a reasonable person would believe
contains a Controlled Substance or Drug Paraphernalia.
b.As to distribution, the supervisor must have seen the
employee convey to another person a Substance or item that
a reasonable person would believe is a Controlled Substance
or Drug Paraphernalia, or have seen the employee convey a
container to another person that a reasonable person would
believe contains a Controlled Substance or Drug
Paraphernalia, or have received a report of observation of
the same from a credible source.
c.As to manufacture, the supervisor must have observed
conditions that a reasonable person would equate to the
manufacture of a Controlled Substance or Drug
Paraphernalia, which may include the observation of smell,
appearance, or sound. The supervisor must also have
observed conditions that would attribute suspected
manufacture to the employee, such as observing these
conditions in the employee’s work area or in or on District
property assigned to the use of the employee. If the
conditions are observed on the person of the employee, the
supervisor must consider whether the employee reported to
duty in such condition instead of changing to such
condition while on duty, or have received a report of
observation of the same from a credible source.
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2. After a report of a Reasonable Suspicion has been made to Human
Resources, the Human Resources Manager must confer with
management representatives to consider whether the reported
observation constituted Reasonable Suspicion, and decide what
steps to take in response to the reported observation.
a.If the decision is to take no further action, the matter
will be dismissed.
b.If the decision is to discuss the observation with the
employee, Human Resources and the supervisor will meet with
the employee to discuss the observation. If as a result of
the discussion, Human Resources and/or the supervisor
believe that a search is necessary, they will confer with
management representatives to determine whether to conduct
a search.
c.If the decision is to conduct a search, the search must be
limited to a search of District property, such as the
employee’s work area (including desk drawers and file
cabinets), District vehicle or equipment, and District
facilities. The search may be performed by the Human
Resources representative or another person designated by
the Human Resources representative, which may include the
supervisor. The employee does not need to be present during
the search. If any material is retrieved that appears to
bear out the supervisor’s Reasonable Suspicion, the Human
Resources representative must take possession of the
material.
d.If the decision is to conduct a search and the distribution
of Controlled Substances or Drug Paraphernalia is
reasonably suspected, the search may include not only the
work area/equipment of the employee suspected of
distributing Controlled Substances or Drug Paraphernalia,
but the work area/equipment of any employee whom was
observed receiving the item from the employee suspected of
distributing Controlled Substances or Drug Paraphernalia.
The receiving employee is entitled to the same rights as
the distributing employee.
e.Any search of the person of the employee or personally-held
possessions of the employee, such as a briefcase, purse,
pocketbook, backpack or personal vehicle, must be conducted
by a law enforcement officer. If the decision to conduct a
search extends to these areas, Human Resources should
contact law enforcement to request such a search.
3. If the Human Resources representative takes possession of any
material as a result of the search, and the employee does not
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confirm that it is a Controlled Substance or Drug
Paraphernalia, the District shall contact the local law
enforcement agency and will forward the Substance to have the
item tested/analyzed to determine if it is a Controlled
Substance or Drug Paraphernalia. If a law enforcement officer
takes possession of an item as a result of a search, and the
employee does not confirm that it is a Controlled Substance or
Drug Paraphernalia, the District shall follow up with the law
enforcement agency to verify the item is a Controlled Substance
or Drug Paraphernalia. The employee shall not return to duty
and shall not receive pay during his/her absence until the law
enforcement agency has verified that the tested/analyzed item
is not Positive for a Controlled Substance or Drug
Paraphernalia. If the tested/analyzed item does not produce a
Positive result for a Controlled Substance or Drug
Paraphernalia, the District shall restore any salary lost by
the employee as a result of the absence.
I. Disciplinary Action
Disciplinary action for violations of this policy will be taken in
accordance with the District’s Discipline Policy and Procedures.
J. Accommodation of Individuals with Disabilities
Nothing in this policy shall be construed so as to relieve the
District of its lawful obligation to accommodate individuals with
disabilities.
K. Confidentiality
All alcohol and drug-testing records will be treated as
confidential.
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APPENDIX A
INDICATION OF DRUG USE
REMEMBER THAT THESE SYMPTOMS ARE ONLY INDICATIONS. THEY MAY BE A SIGN
OF SOMETHING OTHER THAN DRUG OR ALCOHOL USE.
PHYSICAL
1. Increased pulse rate 10. Nasal sores
2. Weak and rapid pulse 11. Slowed respirations
3. Increased blood pressure 12. Shallow respiration
4. Increased body temperature 13. Cold and clammy skin
5. Constricted pupils 14. Chills and sweats
6. Dilated pupils 15. Cramps
7. Bloodshot eyes 16. Nausea
8. Water eyes 17. Convulsions
9. Runny nose
MENTAL AND EMOTIONAL
1. Increased alertness 10. Disorientation
2. Excitation 11. Visual illusions
3. Anxiety 12. Hallucinations
4. Irritability 13. Paranoia
5 Euphoria 14. Delirium
6. Increased emotionality 15. Irrational fears
7. Impaired attention 16. Panic
8. Impaired memory 17. Depressed mood
9. Altered perceptions
BEHAVIORAL
1. Slurred speech 8. Hyperactivity
2. Staggered gait 9. Agitation
3. Fatigue 10. Argumentative
4. Apathy 11. Hostility
5. Drowsiness 12. Tremors
6. Loss of appetite 13. Insomnia
7. Increased appetite
Page 1 of 20 Page 1 of 20
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11/8/23
A.Policy
The Otay Water District (“‘‘District”’’) has zero tolerance for the
use of controlled substances or the abuse of alcohol. Employees who
are under the influence of a drug or alcohol on the job compromise
the District’s interests and endanger their own health and safety as
well as the health and safety of others. The District prohibits the
use, possession, manufacture, distribution, or being under the
influence of alcohol or controlled substances by any District
employee while on District property or while on duty, except as
specified herein. Violation of this policy is an act of misconduct
meriting dismissal without prior warning or disciplinary action in
accordance with the District’s Discipline Policy and Procedures.
Effective January 1, 2024, theOtay Water District will abide by
California Assembly Bill 2188 (AB 2188).
1.Non-Discrimination:
a.It is the District’s policy to comply with AB 2188, which
prohibits discrimination against individuals based on the
presence of non-psychoactive cannabis metabolites detected in
employer-required drug screening tests. The District will not
discriminate against employees or job applicants based on
such test results.
b.Exceptions for Safety Reasons: There are limited exceptions
to the off-duty cannabis use policy. The following categories
of employees are not covered by the protection of AB 2188:
•Building and construction trades employees
•Federal contractors
•Federal funding recipients
•Federal licensees required to maintain drug- free
workplaces.
2.Cannabis Use on the Job:
Employees are prohibited from possessing, being impaired by,
or using cannabis while on the job. This includes all work-
related activities and premises. Violation of this policy may
result in disciplinary action, up to and including
termination.
1.3. Drug- and Alcohol-Free Workplace:
ATTACHMENT C
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a.AB 2188 does not affect the District’s commitment to
maintaining a drug and alcohol-free workplace. All employees
are expected to comply with the District’s existing policies
regarding substance abuse. Violation of these policies may
result in disciplinary action, up to and including
termination.
B.Exceptions
The following exceptions apply to this policy:
1.Events - Authorized Use of Alcohol
The General Manager or his/hertheir designee, at his/hertheir
discretion, may authorize the use of alcohol at a District event,
subject to any conditions he/shethey elects to impose.
2.Customary Use of Over-the Counter or Prescription
DrugsPrescription Medications And Over- The- Counter Drugs
The exceptions set forth in this section do not extend to the use of
marijuana, or any product made or derived from marijuana, regardless
of whether the employee’s doctor prescribes, recommends, or authorizes
its use. With respect to an employee, use of an over-the-counter drug,
or a prescription-only drug under a prescription for the employee, in
the manner prescribed, will not be treated as a violation of this policy
unless the drug has potential side effects which impair the employee’s
ability to perform any safety-sensitive duty and/or the core duties of
his/her position and the employee has failed to notify his/her
supervisor or Human Resources of such side effects before performing
duties while under the influence of the drug.Employees are
responsible to report to duty free from the effects of any
controlled substance or alcohol. Covered employees must report
the use of prescriptions and over-the-counter drugs that could
have a disabling effect, bares a prescription warning label or
otherwise adversely affect the covered employee’s fitness for
duty or job performance to their immediate supervisor (without
giving the name of prescription/over- the- counter drug).
It is the covered employee’s responsibility to determine from the
physician, pharmacist, or other health care professional whether
or not the prescribed or over-the-counter drugs could affect the
covered employee’s fitness for duty or impair job performance.
Covered employees may be required to provide a written medical
authorization to work from a physician, upon reporting the use
of prescription or over-the-counter drugs. Failure to report the
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use of prescription or over-the-counter drugs that have disabling
effects or otherwise affect the covered employee’s fitness for
duty while at work and failure to provide proper evidence of
medical authorization to work may result in discipline, up to and
including suspension and/or termination. The District may require
a note from the employee’s doctor concerning authorization for a
prescription and/or the possible side effects of the prescribed
drugs. The District shall comply with all applicable laws
concerning the privacy of employees’ medical information.
With respect to an applicant, use of an over-the-counter drug,
or a prescription-only drug under a prescription for the
applicant, in the manner prescribed, will not disqualify the
applicant for employment if he/shethey satisfactorily explains
such use upon being informed of a positive test for controlled substances. The District may require a note from the applicant’s
doctor concerning authorization for a prescription and/or the
possible side effects of the prescribed drugs.
C.Definitions
1.Accident:
a.Any accident, in which an employee is driving on District
business, and is at fault or suspected of having significantly
contributed to an accident. This shall apply to employees
covered by the Department of Transportation (‘‘DOT’’) policy
only if the accident is not subject to the DOTunder this
policy.
b.Any accident, not involving the driving of a District vehicle,
that is reasonably believed by management or credibly reported
by another person to have been caused by an on-duty employee
and which results in serious physical injury.
2.Controlled Substance:
a.Any drug or substance identified by section 40.85 of title 49
of the Code of Federal Regulations or sections 11054-11058 of
the California Health and Safety Code.
b.Any drug or substance.
3.Dilute Specimen: A specimen with creatinine and specific gravity
values that are lower than expected for human urine or a specimen
that is adulterated in any way.
4.Drug Paraphernalia: This term has the same definition as is used
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in section 11364.5(d) of the California Health and Safety Code
and applies only to paraphernalia deemed unlawful under section
11364.5(d).
5.Manager/Management: A District employee who is designated as a
supervisor, manager, or executive.
6.Medical Review Officer (MRO): A person who is a licensed physician
and who is responsible for receiving and reviewing laboratory
results for substance tests and evaluating medical explanations
for certain test results.
D.
1.7. Negative: A person is considered to have tested negative for a
substance if his/hertheir substance test does not produce a
positive result.
2.8. Positive: A person is considered positive for alcohol if he/she
hasthey have a bloodan alcohol concentration of 0.04 or greater
at the time he/shethey submits to testing. A person is considered
positive for a Controlled Substance if he/she hasthey have any
amount of a Controlled Substance at or above a “‘‘cutoff
concentration”’’ specified in section 40.87 of title 49 of the
Code of Federal Regulations at the time he/shethey submits to
testing.
3.9. Reasonable Suspicion: A reasonable suspicion exists that a
person ismay be under the influence of a substance if a trained
observer (who has received the appropriate training to recognize
the signs and symptoms of drug and alcohol use) reasonably comes
to the conclusion that the person ismay be under the influence
of a substance due to having personally observed, with respect
to the person, some or all of the effects specified in Appendix
A of this policy.
Additionally, a reasonable suspicion exists that a person is under
the influence of a substance if an observer has seen the person
use a substance.
No one factor is sufficient to create a reasonable suspicion, but
an observer may make a reasonable assessment based on the
quantity, degree, and/or severity of applicable factors.
4.10. Refusal to Submit to Testing. Each of the following constitutes
a refusal to submit to testing:
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a.Failing to immediately report for substance testing when
directed to do so;
b.Failing to complete the testing process (including signing
any forms necessary to authenticate or identify a specimen);
c.Failing to provide an adequate amount of breath, salivaoral
fluids, or urine for a test;
d.Failing to cooperate with any aspect of the testing process,
including but not limited to refusing to wash hands when
directed, being confrontational with testing personnel, or
failing to comply with instructions in a ‘‘direct
observation,’’ as that term is used in section;
40.197 of title 49 of the Code of Federal Regulations;
e.Using or wearing a prosthetic device to interfere with the
collection process;
f.Admitting to adulterating or diluting the specimen; or
g.Any act or failure to act that is intended to interfere with
the testing or alter the results of the testing.
5.11. Safety-Sensitive Duties: Duties, which consist of any of the
following:
▪Operating any assigned District vehicle or equipment;
(includes management and non-management employees);
▪Working in “‘‘confined spaces,”’’ as that term is defined
in District regulations or CalOSHACal/OSHA regulations;
▪Performing maintenance on any vehicle;
▪Loading, unloading, or attending any District vehicle or
equipment;
▪Access to sensitive/classified information related to
emergency response, safety, or security duties;
▪Participation in Hazardous Waste Operations Materials
(HazMat) Team and Emergency Response Confined Space
Operations Rescue Team;
▪
▪Work performed at elevated or depth locations more than four
feet (4’ft) above or below ground; or
▪Work involving the use or disposal of hazardous chemicals as
that term is defined in District regulations or Cal/ OSHA
regulations.
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6.12. Serious Physical Injury: An injury to an employee that causes
the employee to be absent from work following an Accident or
which requires hospitalization of the employee.
7.13. Substance: Any substance containing alcohol or any Controlled
Substance.
8.14. Under the Influence: With respect to alcohol, a person is under
the influence at the time he/she isthey are ordered to submit to
testing if he/shethey tests Positive for alcohol at the time
he/shethey submits to testing. With respect to Controlled
Substances, a person is under the influence at the time he/she
isthey are ordered to submit to testing if he/shethey tests
Positive for a Controlled Substance at the time he/shethey submits
to testing.
A.D. Conflicts with DOT Policy
As to applicants or employees to whom the DOT Policy applies, to the
extent this policy imposes a requirement that is less stringent than
the DOT Policy the more stringent requirements of the DOT Policy will
control.
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0/1/23
E. E.D. Testing Procedures
When an employee or applicant is to be tested, the District shall
use the same testing procedures that are used for testing under the
DOT Drug and Alcohol Testing Policy, including the procedures for
testing
a “‘‘split specimen,”’’ as that term is defined in section 40.3 of
title 49 of the Code of Federal Regulations. The service providers
shall comply with section 40.47 of title 49 of the Code of Federal
Regulations except they shall use a non-federal custody and control
form for applicants and employees. Drug Screening Method: As part of
the District’s drug screening process on non-DOT positions, the
District may utilize lab-based oral fluid testing. This method does
not test for THC metabolites, specifically Carboxy-THC. Instead, the
District’s focus is on detecting the parent drug, Delta-9-THC. This
policy is subject to change based on future developments in the law
or regulations, or available drug screening methods.
1.Alcohol Testing
Alcohol testing will be conducted using evidential breath testing
devices (“‘‘EBT”’’) approved by the National Highway Traffic
Safety Administration. A screening test must be conducted first.
If the result is an alcohol concentration level of less than
0.02, the test is considered a Negative test. If the alcohol
concentration level is 0.02 or more, a second confirmation test
must be conducted. Alcohol testing shall be accomplished by a
laboratory certified by the U.S. Department of Health and Human
ServicesBreath Alcohol Technician.
1.2.Controlled Substance Testing
a.The test must be conducted by analyzing the employee's
urineoral fluid.
b.The urinalysissample shall be donetested at a laboratory
certified by the U.S. Department of Health and Human Services.
c.The urinesample specimen must be split into two bottles
labeled as “"primary”" and “"split”" specimen. Both bottles
must be sent to the laboratory.
d.If the urinalysis of the primary sample specimen tests Positive
for the presence of illegal Controlled Substances, the
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0/1/23employee has 72 hours from time of notification by the MRO to
request that the split specimen be analyzed by a different
certified laboratory.
e.The urine sample shall be tested for the following: marijuana
metabolitesparent drug, cocaine metabolites, opiates,
opioids, amphetamines, Methamphetamines, MDMA, Barbiturates,
Benzodiazepine, Methadone, and phencyclidine (“‘‘PCP”’’).;All tests will be performed following AB 2188. By using Oral
fluids the window of detection becomes less than urinalysis.
f.If the test is Positive for one or more of the drugs listed
in subsection “"e”" above, a confirmation test must be
performed using gas chromatography/mass spectrometryanalysis.
g.All drug test results will be reviewed and interpreted by the
MROedical Review Officer before they are reported to the
District.
g.
h.With all Positive drug tests, the MROMedical Review Officer
will contact the employee to determine if there is a medical
explanation for the Positive test result. If documentation is
provided and the MROedical Review Officer determines that
there is a legitimate medical use for the prohibited drug,
the test result maywill be reported to the District as
Negative.
F. F. E. Testing
1.Persons Subject to Substance Screening
▪All applicants for employment, will have a pre-employment
drug test. in conjunction with pre- employment physical
examination;
▪All employees reasonably suspected of using Substances while
on duty or on District property or while working while Under
The Influence of Substances;
▪All employees reasonably suspected of possessing,
manufacturing, or distributing Substances while on duty or on
District property;
▪Any employee at fault or reasonably suspected of having
significantly contributed to an Accident while on duty;
▪Any employee who performs Safety-Sensitive Duties whose name
is selected for testing pursuant to the District’s random
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0/1/23testing procedure; or
▪Any District employee who applies for and is selected for a
position that will require the performance of Safety-
Sensitive Duties. The list of positions requiring the
performance of Safety-Sensitive Duties will be maintained by
Human Resources.
2.Pre-employment, Promotions and Transfer Drug Screening Physicals
Pre-employment Drug Screening: The District will conduct
scientifically valid pre-employment drug screenings that do not
screen for non-psychoactive cannabis metabolites. If a positive
result is obtained from this testing, the District may take action
based on it, in accordance with applicable laws and regulations.
All applicants for employment shall, as part of their pre-
employment physical examinationprocess, submit to a urine
analysisdrug test or other legally authorized testing methods as
selected by the District for Substances.
Any District employee who applies for a position that will require
the performance of Safety-Sensitive Duties shall, as a
precondition to appointment to such position, submit to a urine
analysis or other legally authorized testing method as selected
by the District for Substances.
3.Random Testing of Managers and Safety-Sensitive Duty Employees
Each year the District shall randomly conduct Substance tests of
employees who perform Safety-Sensitive Duties. Based on the
number of such employees employed by the District on January 1,
the District shall conduct by the following December 31, a
number of tests for Controlled Substances equal to 2550 percent
of the total number of employees who perform Safety-Sensitive
Duties, or the minimum amount required by DOT regulations,
whichever is greater. Within the same time period, the District
shall randomly conduct a number of tests for alcohol equal to
2510 percent of the same number of safety-sensitive employees, or
the minimum amount required by DOT regulations, whichever is
greater.
Each year the District shall randomly conduct Substance tests of
managers who are not randomly tested as employees performing
Safety-Sensitive Duties. Based on the number of managers employed
by the District on January 1, the District shall conduct by the
following December 31 a number of tests for Controlled Substances
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0/1/23equal to 25 percent of the total number of such managers, or the
minimum amount required by DOT regulations, whichever is greater.
Within the same time period, the District shall randomly conduct
a number of tests for alcohol equal to 25 percent of the same
number of such managers, or the minimum amount required by DOT
regulations, whichever is greater. Managers who perform Safety-
Sensitive Duties and who are included in the pool of Safety-
Sensitive Duty employees selected for random testing shall not
be included in the pool of non-Safety-Sensitive Duty managers who
are selected for random testing.
The General Manager will contract with a service providerThird
party administrator (TPA) to perform the random selection of
employee names for Substance testing and select the dates upon
which the employees will be testedabuse/alcohol testing. The
service provider must ensure that every Safety- Sensitive
employee has an equal chance of being selected each time a name
is randomly drawn and that any employee whose name is selected
is not exempt from having his/hertheir name selected in any
subsequent drawing in the same year.
The service provider shall provide the selected names and dates
to the Safety and Security Specialist and/or Human Resources
Manager, or designee, who shall not disclose this information to
any other person except to the employee selected for testing and
the employee’s supervisor at the time that the employee is
required to submit to testing. If the employee is absent from
duty on a date that he/she hasthey have been randomly selected
for testing, an alternate name may be selected or theyhe/she may
be required to submit to a test immediately upon returning to
work, without prior notice.
Upon being informed that he/she isthey are required to submit to
a random test, the employee must report to the testing location,
as quickly as possible but no greater than one (1) hour from
being informed, and complete the test astesting directed by
personnel at the testing location. Upon completing testing, the
employee shall report back to duty if his/hertheir duty day has
not yet concluded.
Random testing is separate from the other forms of testing
described in this policy. An employee who submits to a Reasonable
Suspicion or post-Accident test does not satisfy the requirement
that he/shethey submit to a random test when ordered.
4.Post-Accident Testing
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0/1/23If any an employee is involved in an Accident that under this
policy requires that the employee submit to Substance testing,
the employee’s supervisor shall immediately contact Human
Resources and the Safety and Security Specialist to report the
Accident and the necessity of testing. After consultation with
Human Resources, if it is determined that the employee should be
tested, then the supervisor shall direct the employee to report
to the testing location and complete the test as directed by
personnel at the testing location. The supervisor shall arrange
to transport the employee to the testing location. Upon completing
testing, the employee shall report back to duty if his/hertheir
duty day has not yet concluded, unless a Reasonable Suspicion
exists, based on the observation of the employee’s supervisor and
in consultation with Human Resources, that the employee was Under
the Influence of a Substance at the time or shortly after the
Accident. If such a Reasonable Suspicion exists, the employee
shall be released from duty for the remainder of the day. The
supervisor, in consultation with Human Resources, thereafter
shall determine on a day-to-day basis whether to permit the
employee to return to duty, until the results of the test have
returned. If an employee has been ordered to submit to Substance
testing for post-Accident testing, and Reasonable Suspicion
exists, the District may place the employee on leave without pay
pending the test results. If the employee’s test results are
Negative, the District shall restore any salary lost by the
employee for the days he/she wasthey were on leave, as though the
employee had reported for duty.
If the employee requires immediate medical assistance due to the
Accident, such that he/she isthey are unable to report to the
testing location, the supervisor shall coordinate with the
TPA and hospital to conduct the test or require the employee to
report to the testing location as soon as is practicable.
The determination as to whether an employee is involved in an
Accident shall be made by the employee’s supervisor in
consultation with the Safety and Security Specialist and Human
Resources, based on the information available to him/her. If it
cannot be immediately determined whether the employee was
involved in an Accident, the supervisor shall not order the
employee to testing until a determination can be made.
The following criteria apply when conducting drug and alcohol
tests due to an Accident:
a.A breath alcohol test must be administered as soon as
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0/1/23possible. Every effort should be made to ensure that a breath
alcohol test is performed within eight (8) hours following
the Accident. If testing has not occurred within eight (8)
hours, attempts to test should be discontinued. However, if
testing did not occur within eight (8) hours, and Reasonable
Suspicion existed at the time or shortly after the Accident
the employee may resume duties with his/hertheir next shift
that begins after the eight (8) hours have passed. Prior to
the employee’s return, management shall observe the employee’s
condition before the employee is allowed to resume duties to
ensure that there is no longer Reasonable Suspicion.
a.b.A drug screening test should be initiated prior to the 32nd
nd hour following an Accident.
c.The employee must remain readily available for testing or he
or she will be deemed to have refused the test (see Refusal
to Submit to Testing). This rule does not require the delay
of necessary medical attention for injured persons following
the Accident nor prohibit the employee from leaving the scene
to obtain assistance or necessary emergency medical care.
d.An employee subject to post-Accident testing may not use
alcohol within eight (8) hours following the Accident or
d.before an alcohol test, whichever comes first.
e.Testing will not be conducted on any deceased employee.
f.The results of a breath or blood test for the use of alcohol
or a urinedrug test for Controlled Substances, conducted by
Federal, State, or local officials having independent
authority for the test, shall be considered to meet the
requirements of this policy provided such results are obtained
by the employer, and conform to the applicable Federal, State
or local requirements. The potentially affected employee will
not be allowed to proceed alone to or from the collection
site. Time spent in complying with post-Accident testing is
compensable.
g.Documentation of the activity being performed by the employee
that supports the determination to conduct post- Accident
testing should be prepared and signed by the supervisor
requesting the test within 24 hours of the Accident or before
the results of the drug test are released, if possible.
5.Reasonable Suspicion Testing
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0/1/23If a supervisor, manager, the Safety and Security Specialist,
and/or other personnel has a Reasonable Suspicion that the
employee is Under the Influence of a Substance while on District
property or on duty, he/shethey shall consult with Human Resources
aboutof this observation to determine if testing is appropriate.
After consultation with Human Resources, if it is determined that
the employee should be tested, a supervisor shall direct the
employee to immediately report for testing and complete the test
as directed by personnel at the testing location. The supervisor
shall arrange to transport the employee to the testing location.
If the person who advises Human Resources of the Reasonable
Suspicion is not the employee’s supervisor, Human Resources must
immediately notify the supervisor of the Reasonable Suspicion,
and the supervisor shall arrange to transport the employee to the
testing location. The supervisor(s) witnessing the impairment
must document the specific observations upon which the Reasonable
Suspicion is based.
Upon completing testing, the employee shall be released from duty
for the remainder of the day. The supervisor, in consultation
with Human Resources, thereafter, shall determine on a day-to-
day basis whether to permit the employee to return to duty, until
the results of the test have returned. If an employee has been
ordered to submit to Substance testing for Reasonable Suspicion,
the District may place the employee on leave without pay pending
the test results. If the employee’s test results are Negative,
the District shall restore any salary lost by the employee for
the days he/she wasthey were on leave, as though the employee had
reported for duty.
The following criteria apply when conducting drug and alcohol
tests due to Reasonable Suspicion:
a.Alcohol
A breath alcohol test must be administered as soon as
possible. Every effort should be made to ensure that a breath
alcohol test is performed within eight (8) hours. If testing
has not occurred within eight (8) hours, attempts to test
should be discontinued and the employee may resume duties with
his/hertheir next shift that begins after the eight (8) hours
have passed. However, prior to the employee’s return,
management shall observe the employee’s condition before the
employee is allowed to resume duties to ensure that there is
no longer Reasonable Suspicion.
b.Controlled Substances
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0/1/23A urinalysis test for Controlled Substances must be
administered as soon as possible. Every effort should be made
to ensure the urinalysissample is performed withinas soon as
possible but no later than 32 hours of the observation.
b.c.The employee may not proceed alone to or from the collection
site. The supervisor or other appropriate person making the
observation shall arrange to transport the employee to and
from the testing site.
c.d.Documentation to support the determination to conduct
Reasonable Suspicion testing should be prepared and signed by
the person who made the determination within 24 hours of the
determination or before the results of the test are released,
whichever is earlier, if possible.
6.Acknowledgment and Consent
Any employee subject to testing under this policy will be asked
to sign a form acknowledging the procedures governing testing,
and consenting to (1) the collection of a urine sample tofor the
purpose of determineing the presence of alcohol or Controlled
Substances, and/or Breath for Alcohol and (2) the release to the
District of medical information regarding the test results.
Refusal to sign the agreement and consent form, or to submit to
the drug test, will result in the revocation of an applicant’s
job offer, or will subject an employee to discipline up to and
including termination.
7.Refusal to Submit to Testing
If an applicant refuses to submit to testing for any Substance,
the applicant is disqualified for employment. If a District
employee who has applied for a position that requires the
performance of Safety-Sensitive Duties refuses to submit to
testing for any Substance, the employee is disqualified for such
position.
If an employee refuses to submit to testing for any Substance,
the District may treat such refusal as an act of insubordination.
The District shall also impose the same disciplinary action of
dismissal for a refusal to test that it would impose for a
Positive test result, so as not to encourage employees to refuse
to test in the hope of avoiding more severe disciplinary action.
The District may immediately place an employee on leave without
pay if the employee refuses to submit for testing.
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0/1/238.Refusal to Authorize Disclosure of Results of Testing
If an applicant refuses to authorize the disclosure of the testing
results to the District, the applicant is disqualified for
employment. If a District employee who has applied for a position
that requires the performance of Safety-Sensitive Duties refuses
to authorize the disclosure of the test results to the District,
the employee is disqualified for such position.
If an employee refuses to authorize the disclosure of results of
testing to the District, the District will impose the same
disciplinary action of dismissal for a refusal to authorize the
disclosure of results of testing, that it would impose for a
Positive test result, so as not to encourage employees to refuse
to authorize the disclosure of test results in the hope of
avoiding more severe disciplinary action.
9.Positive Test
If an applicant tests Positive for a Controlled Substance,
he/shethey shall be disqualified for employment unless theyhe/she
meets the requirements for the over-the-counter/prescription drugexception set forth in Section B(2) of this policy. If a District
employee who has applied for a position that requires the
performance of Safety-Sensitive Duties tests Positive for a
Substance, the employee is disqualified for such position.
If an employee tests Positive for a Substance, the employee shall
not be returned to duty and shall not receive pay during
his/hertheir absence until the employee requests that the split
urine specimen be tested and the test of that specimen is not
Positive for a Substance.
This unpaid absence shall not be considered a disciplinary or
punitive action against the employee and any record of such
absence shall be maintained separately from the employee’s
personnel file. The absence is for the administrative and safety
interests of the District. This unpaid absence has no effect on
the District’s decision or ability to discipline an employee for
violating this policy.
If the MROMedical Review Officer determines that an employee’s
specimen is a Dilute Specimen and the specimen is Positive for a
Substance, the employee shall be considered to have tested
Positive for that Substance. If a Dilute Specimen produces a
Negative result then the employee shall be required to submit to
a second Substance test, in the manner prescribed in section
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0/1/2340.197 of title 49 of the Code of Federal Regulations.
10.Request for Retest
If an employee tests Positive for any Substance, the employee
may, within 72 hours of being notified of the Positive test
result, request of the MROedical Review Officer that the split
specimen be tested. If the employee does not timely submit a
request within 72 hours, the employee shall be considered to have
waived his/hertheir right to have the split specimen tested. The
employee shall pay for the cost of testing the split specimen.
If the employee is unable to pay this cost at the time of the
request, the District must ensure that the split specimen is
tested even if it means that the District may have to initially
bear the cost. The District may recover the cost from the employee
at a later time.
If a split specimen does not produce a Positive result for a
Substance, the District shall restore any salary lost by the
employee as a result of an absence imposed because of the Positive
result on the first specimen. The employee shall be considered
to have not tested Positive for a Substance. The District shall
also reimburse the employee for the cost of the retest if the
employee paid for the retest.
The District may not request that the split specimen be tested.
G. G. F. Employee Assistance Programs
The District may refer any employee, including an employee who is
dismissed because of a Positive test for a Substance, to its employee
assistance program. If in any instance the District is required to
lawfully accommodate an employee’s disability related to Substance
abuse, the District shall refer the employee to a Substance abuse
professional.
H. H. G. Suspicion of Possession/Distribution/Manufacture of
Controlled Substances
If a supervisor has a Reasonable Suspicion that an employee unlawfully
possesses or is distributing or manufacturing a Controlled Substance
or Drug Paraphernalia on or in District property, or while on duty,
the supervisor must report this suspicion to Human Resources.
3.1. For purposes of Section H G only, “‘‘Reasonable Suspicion”’’
means the following:
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0/1/23a.As to possession, the supervisor or a reporting credible
source must have seen a Substance or item on the person of
the employee, in the employee’s work area, or in or on
District property assigned to the use of the employee that
a reasonable person would believe is a Controlled Substance
or Drug Paraphernalia, or have seen in any of the same areas
a container that a reasonable person would believe contains
a Controlled Substance or Drug Paraphernalia.
b.As to distribution, the supervisor must have seen the
employee convey to another person a Substance or item that
a reasonable person would believe is a Controlled Substance
or Drug Paraphernalia, or have seen the employee convey a
container to another person that a reasonable person would
believe contains a Controlled Substance or Drug
Paraphernalia, or have received a report of observation of
the same from a credible source.
c.As to manufacture, the supervisor must have observed
conditions that a reasonable person would equate to the
manufacture of a Controlled Substance or Drug Paraphernalia,
which may include the observation of smell, appearance, or
sound. The supervisor must also have observed conditions
that would attribute suspected manufacture to the employee,
such as observing these conditions in the employee’s work
area or in or on District property assigned to the use of
the employee. If the conditions are observed on the person
of the employee, the supervisor must consider whether the
employee reported to duty in such condition instead of
changing to such condition while on duty, or have received
a report of observation of the same from a credible source.
2.After a report of a Reasonable Suspicion has been made to Human
Resources, the Human Resources Manager must confer with
management representatives to consider whether the reported
observation constituted Reasonable Suspicion, and decide what
steps to take in response to the reported observation.
a.a. If the decision is to take no further action, the matter
will be dismissed.
b.If the decision is to discuss the observation with the
employee, Human Resources and the supervisor will meet with
the employee to discuss the observation. If as a result of
the discussion, Human Resources and/or the supervisor believe
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0/1/23that a search is necessary, they will confer with management
representatives to determine whether to conduct a search will
be conducted.
b.c.If the decision is to conduct a search, the search must be
limited to a search of District property, such as the
employee’s work area (including desk drawers and file
cabinets), District vehicle or equipment, and District
facilities. The search may be performed by the Human Resources
representative or another person designated by the Human
Resources representative, which may include the supervisor.
The employee does not need to be present during the search.
If any material is retrieved that appears to bear out the
supervisor’s Reasonable Suspicion, the Human Resources
representative must take possession of the material.
c.d.If the decision is to conduct a search and the distribution
of Controlled Substances or Drug Paraphernalia is reasonably
suspected, the search may include not only the work
area/equipment of the employee suspected of distributing
Controlled Substances or Drug Paraphernalia, but the work
area/equipment of any employee whom was observed receiving
the item from the employee suspected of distributing
Controlled Substances or Drug Paraphernalia. The receiving
employee is entitled to the same rights as the distributing
employee.
d.e.Any search of the person of the employee or personally-
held possessions of the employee, such as a briefcase, purse,
pocketbook, backpack or personal vehicle, must be conducted
by a law enforcement officer. If the decision to conduct a
search extends to these areas, Human Resources should contact
law enforcement to request such a search.
3.If the Human Resources representative takes possession of any
material as a result of the search, and the employee does not
confirm that it is a Controlled Substance or Drug Paraphernalia,
the District shall contact the local law enforcement agency and
will forward the Substance to have the item tested/analyzed to
determine if it is a Controlled Substance or Drug Paraphernalia.
If a law enforcement officer takes possession of an item as a
result of a search, and the employee does not confirm that it is
a Controlled Substance or Drug Paraphernalia, the District shall
follow up with the law enforcement agency to verify the item is
a Controlled Substance or Drug Paraphernalia. The employee shall
not return to duty and shall not receive pay during his/hertheir
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0/1/23absence until the law enforcement agency has verified that the
tested/analyzed item is not Positive for a Controlled Substance
or Drug Paraphernalia. If the tested/analyzed item does not
produce a Positive result for a Controlled Substance or Drug
Paraphernalia, the District shall restore any salary lost by the
employee as a result of the absence.
B.I.H. Disciplinary Action
Disciplinary action for violations of this policy will be taken in
accordance with the District’s Discipline Policy and Procedures.
C.J. I. Accommodation of Individuals with Disabilities
Nothing in this policy shall be construed so as to relieve the
District of its lawful obligation to accommodate individuals with
disabilities.
D.K. J. Confidentiality
All alcohol and drug-testing records will be treated as confidential.
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0/1/23
APPENDIX A
INDICATION OF DRUG USE
REMEMBER THAT THESE SYMPTOMS ARE ONLY INDICATIONS. THEY MAY BE A SIGN
OF SOMETHING OTHER THAN DRUG OR ALCOHOL USE. THIS LIST IS NOT EXHAUSTIVE.
PHYSICAL
1.Increased pulse rate 10.Nasal sores
2.Weak and rapid pulse 11.Slowed respirations
3.Increased blood pressure 12.Shallow respiration
4.Increased body temperature 13.Cold and clammy skin
5.Constricted pupils 14.Chills and sweats
6.Dilated pupils 15.Cramps
7.Bloodshot eyes 16.Nausea
8.Water eyes 17.Convulsions
9.Runny nose
MENTAL AND EMOTIONAL
1.Increased alertness 10.Disorientation
2.Excitation 11.Visual illusions
3.Anxiety 12.Hallucinations
4.Irritability 13.Paranoia
5 Euphoria 14.Delirium
6.Increased emotionality 15.Irrational fears
7.Impaired attention 16.Panic
8.Impaired memory 17.Depressed mood
9.Altered perceptions
BEHAVIORAL
1.Slurred speech 8.Hyperactivity
2.Staggered gait 9.Agitation
3.Fatigue 10.Argumentative
4.Apathy 11.Hostility
5.Drowsiness 12.Tremors
6.Loss of appetite 13.Insomnia
7.Increased appetite 14.Absenteeism patterns
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A.Policy
The Otay Water District (“District”) has zero tolerance for the use
of controlled substances or the abuse of alcohol. Employees who are
under the influence of a drug or alcohol on the job compromise the
District’s interests and endanger their own health and safety as well
as the health and safety of others. The District prohibits the use,
possession, manufacture, distribution, or being under the influence
of alcohol or controlled substances by any District employee while
on District property or while on duty, except as specified herein.
Violation of this policy is an act of misconduct meriting dismissal
without prior warning or disciplinary action in accordance with the
District’s Discipline Policy and Procedures.
Effective January 1, 2024, the District will abide by California
Assembly Bill 2188 (AB 2188).
1.Non-Discrimination:
a.It is the District’s policy to comply with AB 2188, which
prohibits discrimination against individuals based on the
presence of non-psychoactive cannabis metabolites detected in
employer-required drug screening tests. The District will not
discriminate against employees or job applicants based on
such test results.
b.Exceptions for Safety Reasons: There are limited exceptions
to the off-duty cannabis use policy. The following categories
of employees are not covered by the protection of AB 2188:
•Building and construction trades employees
•Federal contractors
•Federal funding recipients
•Federal licensees required to maintain drug-free
workplaces.
2.Cannabis Use on the Job:
3.Employees are prohibited from possessing, being impaired by, or
using cannabis while on the job. This includes all work-related
activities and premises. Violation of this policy may result in
disciplinary action, up to and including termination. Drug- and
Alcohol-Free Workplace:
ATTACHMENT D
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a.AB 2188 does not affect the District’s commitment to
maintaining a drug and alcohol-free workplace. All employees
are expected to comply with the District’s existing policies
regarding substance abuse. Violation of these policies may
result in disciplinary action, up to and including
termination.
B.Exceptions
The following exceptions apply to this policy:
1.Events - Authorized Use of Alcohol
The General Manager or their designee, at their discretion, may
authorize the use of alcohol at a District event, subject to any
conditions they elect to impose.
2.Prescription Medications And Over-The-Counter Drugs
Employees are responsible to report to duty free from the effects
of any controlled substance or alcohol. Covered employees must
report the use of prescriptions and over-the-counter drugs that
could have a disabling effect, bares a prescription warning label
or otherwise adversely affect the covered employee’s fitness for
duty or job performance to their immediate supervisor (without
giving the name of prescription/over-the-counter drug).
It is the covered employee’s responsibility to determine from the
physician, pharmacist, or other health care professional whether
or not the prescribed or over-the-counter drugs could affect the
covered employee’s fitness for duty or impair job performance.
Covered employees may be required to provide a written medical
authorization to work from a physician, upon reporting the use
of prescription or over-the-counter drugs. Failure to report the
use of prescription or over-the-counter drugs that have disabling
effects or otherwise affect the covered employee’s fitness for
duty while at work and failure to provide proper evidence of
medical authorization to work may result in discipline, up to and
including suspension and/or termination. The District may require
a note from the employee’s doctor concerning authorization for a
prescription and/or the possible side effects of the prescribed
drugs. The District shall comply with all applicable laws
concerning the privacy of employees’ medical information.
With respect to an applicant, use of an over-the-counter drug,
or a prescription-only drug under a prescription for the
applicant, in the manner prescribed, will not disqualify the
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applicant for employment if they satisfactorily explain such use
upon being informed of a positive test for controlled
substances. The District may require a note from the applicant’s
doctor concerning authorization for a prescription and/or the
possible side effects of the prescribed drugs.
C.Definitions
1.Accident:
a.Any accident, in which an employee is driving on District
business, and is at fault or suspected of having significantly
contributed to an accident. This shall apply to employees
covered under this policy.
b.Any accident, not involving the driving of a District vehicle,
that is reasonably believed by management or credibly reported
by another person to have been caused by an on-duty employee
and which results in serious physical injury.
2.Controlled Substance:
a.Any drug or substance identified by section 40.85 of title 49
of the Code of Federal Regulations or sections 11054-11058 of
the California Health and Safety Code.
b.Any drug or substance.
3.Dilute Specimen: A specimen with creatinine and specific gravity
values that are lower than expected for human urine or a specimen
that is adulterated in any way.
4.Drug Paraphernalia: This term has the same definition as is used
in section 11364.5(d) of the California Health and Safety Code
and applies only to paraphernalia deemed unlawful under section
11364.5(d).
5.Manager/Management: A District employee who is designated as a
supervisor, manager, or executive.
6.Medical Review Officer (MRO): A person who is a licensed physician
and who is responsible for receiving and reviewing laboratory
results for substance tests and evaluating medical explanations
for certain test results.
7.Negative: A person is considered to have tested negative for a
substance if their substance test does not produce a positive
result.
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8.Positive: A person is considered positive for alcohol if they
have an alcohol concentration of 0.04 or greater at the time they
submit to testing. A person is considered positive for a
Controlled Substance if they have any amount of a Controlled
Substance at or above a “cutoff concentration” specified in
section 40.87 of title 49 of the Code of Federal Regulations at
the time they submit to testing.
9.Reasonable Suspicion: A reasonable suspicion exists that a person
may be under the influence of a substance if a trained observer
(who has received the appropriate training to recognize the signs
and symptoms of drug and alcohol use) reasonably comes to the
conclusion that the person may be under the influence of a
substance due to having personally observed, with respect to the
person, some or all of the effects specified in Appendix A of
this policy.
Additionally, a reasonable suspicion exists that a person is under
the influence of a substance if an observer has seen the person
use a substance.
No one factor is sufficient to create a reasonable suspicion, but
an observer may make a reasonable assessment based on the
quantity, degree, and/or severity of applicable factors.
10.Refusal to Submit to Testing. Each of the following constitutes
a refusal to submit to testing:
a.Failing to immediately report for substance testing when
directed to do so;
b.Failing to complete the testing process (including signing
any forms necessary to authenticate or identify a specimen);
c.Failing to provide an adequate amount of breath, oral fluids,
or urine for a test;
d.Failing to cooperate with any aspect of the testing process,
including but not limited to refusing to wash hands when
directed, being confrontational with testing personnel;
e.Using or wearing a prosthetic device to interfere with the
collection process;
f.Admitting to adulterating or diluting the specimen; or
g.Any act or failure to act that is intended to interfere with
the testing or alter the results of the testing.
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11.Safety-Sensitive Duties: Duties, which consist of any of the
following:
▪Operating any assigned District vehicle or equipment;
▪Working in “confined spaces” as that term is defined in
District regulations or Cal/OSHA regulations;
▪Performing maintenance on any vehicle;
▪Loading, unloading, or attending any District vehicle or
equipment;
▪Access to sensitive/classified information related to
emergency response, safety, or security duties;
▪Participation in Hazardous Materials (HazMat) and Confined
Space Operations Rescue Team;
▪Work performed at elevated or depth locations more than four
feet (4’) above or below ground; or
▪Work involving the use or disposal of hazardous chemicals as
that term is defined in District regulations or Cal/OSHA
regulations.
12.Serious Physical Injury: An injury to an employee that causes the
employee to be absent from work following an Accident or which
requires hospitalization of the employee.
13.Substance: Any substance containing alcohol or any Controlled
Substance.
14.Under the Influence: With respect to alcohol, a person is under
the influence at the time they are ordered to submit to testing
if they test Positive for alcohol at the time they submit to
testing. With respect to Controlled Substances, a person is under
the influence at the time they are ordered to submit to testing
if they test Positive for a Controlled Substance at the time they
submit to testing.
D. Testing Procedures
When an employee or applicant is to be tested, the District shall
use the testing procedures that are used for testing under the DOT
Drug and Alcohol Testing Policy, including the procedures for testing
a “split specimen,” as that term is defined in section 40.3 of
title 49 of the Code of Federal Regulations. The service providers
shall comply with section 40.47 of title 49 of the Code of Federal
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Regulations except they shall use a non-federal custody and control
form for applicants and employees. Drug Screening Method: As part of
the District’s drug screening process on non-DOT positions, the
District may utilize lab-based oral fluid testing. This method does
not test for THC metabolites, specifically Carboxy-THC. Instead, the
District’s focus is on detecting the parent drug, Delta-9-THC. This
policy is subject to change based on future developments in the law
or regulations, or available drug screening methods.
1.Alcohol Testing
Alcohol testing will be conducted using evidential breath testing
devices (“EBT”) approved by the National Highway Traffic Safety
Administration. A screening test must be conducted first. If the
result is an alcohol concentration level of less than 0.02, the
test is considered a Negative test. If the alcohol concentration
level is 0.02 or more, a second confirmation test must be
conducted. Alcohol testing shall be accomplished by Breath Alcohol
Technician.
2.Controlled Substance Testing
a.The test must be conducted by analyzing the employee's oral
fluid.
b.The sample shall be tested at a laboratory certified by the
U.S. Department of Health and Human Services.
c.The sample specimen must be split into two bottles labeled as
“primary” and “split” specimen. Both bottles must be sent to
the laboratory.
d.If the primary sample specimen tests Positive for the presence
of illegal Controlled Substances, the employee has 72 hours
from time of notification by the MRO to request the split
specimen be analyzed by a different certified laboratory.
e.The sample shall be tested for the following: marijuana parent
drug, cocaine, opioids, amphetamines, Methamphetamines, MDMA,
Barbiturates, Benzodiazepine, Methadone, and phencyclidine
(“PCP”). All tests will be performed following AB 2188. By
using Oral fluids the window of detection becomes less than
urinalysis.
f.If the test is Positive for one or more of the drugs listed
in subsection “e” above, a confirmation test must be performed
using gas chromatography/mass spectrometry analysis.
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g.All drug test results will be reviewed and interpreted by the
MRO before they are reported to the District.
h.With all Positive drug tests, the MRO will contact the
employee to determine if there is a medical explanation for
the Positive test result. If documentation is provided and
the MRO determines that there is a legitimate medical use for
the prohibited drug, the test result will be reported to the
District as Negative.
E.Testing
1.Persons Subject to Substance Screening
▪All applicants for employment will have a pre-employment drug
test;
▪All employees reasonably suspected of using Substances while
on duty or on District property or while working while Under
The Influence of Substances;
▪All employees reasonably suspected of possessing,
manufacturing, or distributing Substances while on duty or on
District property;
▪Any employee at fault or reasonably suspected of having
significantly contributed to an Accident while on duty;
▪Any employee who performs Safety-Sensitive Duties whose name
is selected for testing pursuant to the District’s random
testing procedure; or
▪Any District employee who applies for and is selected for a
position that will require the performance of Safety-
Sensitive Duties. The list of positions requiring the
performance of Safety-Sensitive Duties will be maintained by
Human Resources.
2.Pre-employment, Promotions and Transfer Drug Screening
Pre-employment Drug Screening: The District will conduct
scientifically valid pre-employment drug screenings that do not
screen for non-psychoactive cannabis metabolites. If a positive
result is obtained from this testing, the District may take action
based on it, in accordance with applicable laws and regulations.
All applicants for employment shall, as part of their pre-
employment process, submit to a drug test or other legally
authorized testing methods as selected by the District for
Substances.
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Any District employee who applies for a position that will require
the performance of Safety-Sensitive Duties shall, as a
precondition to appointment to such position, submit to a urine
analysis or other legally authorized testing method as selected
by the District for Substances.
3.Random Testing of Safety-Sensitive Duty Employees
Each year the District shall randomly conduct Substance tests of
employees who perform Safety-Sensitive Duties. Based on the
number of such employees employed by the District on January 1,
the District shall conduct by the following December 31, a
number of tests for Controlled Substances equal to 50 percent of
the total number of employees who perform Safety-Sensitive
Duties, or the minimum amount required by DOT regulations,
whichever is greater. Within the same time period, the District
shall randomly conduct a number of tests for alcohol equal to
10 percent of the same number of safety-sensitive employees, or
the minimum amount required by DOT regulations, whichever is
greater.
The General Manager will contract with a Third party administrator
(TPA) to perform the random selection of employee names for
Substance abuse/alcohol testing. The service provider must ensure
that every Safety- Sensitive employee has an equal chance of
being selected each time a name is randomly drawn and that any
employee whose name is selected is not exempt from having their
name selected in any subsequent drawing in the same year.
The service provider shall provide the selected names to the
Safety and Security Specialist and/or Human Resources Manager,
or designee, who shall not disclose this information to any other
person except to the employee selected for testing and the
employee’s supervisor at the time that the employee is required
to submit to testing. If the employee is absent from duty on a
date that they have been randomly selected for testing, an
alternate name may be selected or they may be required to submit
to a test immediately upon returning to work, without prior
notice.
Upon being informed that they are required to submit to a random
test, the employee must report to the testing location, as quickly
as possible but no greater than one (1) hour from being informed,
and complete testing directed by personnel at the testing
location. Upon completing testing, the employee shall report back
to duty if their duty day has not yet concluded.
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Random testing is separate from the other forms of testing
described in this policy. An employee who submits to a Reasonable
Suspicion or post-Accident test does not satisfy the requirement
that they submit to a random test when ordered.
4.Post-Accident Testing
If any employee is involved in an Accident that under this policy
requires that the employee submit to Substance testing, the
employee’s supervisor shall immediately contact Human Resources
and the Safety and Security Specialist to report the Accident and
the necessity of testing. After consultation with Human
Resources, if it is determined that the employee should be tested,
then the supervisor shall direct the employee to report to the
testing location and complete the test as directed by personnel
at the testing location. The supervisor shall arrange to transport
the employee to the testing location. Upon completing testing,
the employee shall report back to duty if their duty day has not
yet concluded, unless a Reasonable Suspicion exists, based on the
observation of the employee’s supervisor and in consultation with
Human Resources, that the employee was Under the Influence of a
Substance at the time or shortly after the Accident. If such a
Reasonable Suspicion exists, the employee shall be released from
duty for the remainder of the day. The supervisor, in consultation
with Human Resources, thereafter shall determine on a day-to-day
basis whether to permit the employee to return to duty, until the
results of the test have returned. If an employee has been ordered
to submit to Substance testing for post-Accident testing, and
Reasonable Suspicion exists, the District may place the employee
on leave without pay pending the test results. If the employee’s
test results are Negative, the District shall restore any salary
lost by the employee for the days they were on leave, as though
the employee had reported for duty.
If the employee requires immediate medical assistance due to the
Accident, such that they are unable to report to the testing
location, the supervisor shall coordinate with the TPA and
hospital to conduct the test or require the employee to report
to the testing location as soon as is practicable.
The determination as to whether an employee is involved in an
Accident shall be made by the employee’s supervisor in
consultation with the Safety and Security Specialist and Human
Resources, based on the information available to him/her. If it
cannot be immediately determined whether the employee was
involved in an Accident, the supervisor shall not order the
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employee to testing until a determination can be made.
The following criteria apply when conducting drug and alcohol
tests due to an Accident:
a.A breath alcohol test must be administered as soon as
possible. Every effort should be made to ensure that a breath
alcohol test is performed within eight (8) hours following
the Accident. If testing has not occurred within eight (8)
hours, attempts to test should be discontinued. However, if
testing did not occur within eight (8) hours, and Reasonable
Suspicion existed at the time or shortly after the Accident
the employee may resume duties with their next shift that
begins after the eight (8) hours have passed. Prior to the
employee’s return, management shall observe the employee’s
condition before the employee is allowed to resume duties to
ensure that there is no longer Reasonable Suspicion.
b.A drug screening test should be initiated prior to the 32nd
hour following an Accident.
c.The employee must remain readily available for testing or he
or she will be deemed to have refused the test (see Refusal
to Submit to Testing). This rule does not require the delay
of necessary medical attention for injured persons following
the Accident nor prohibit the employee from leaving the scene
to obtain assistance or necessary emergency medical care.
d.An employee subject to post-Accident testing may not use
alcohol within eight (8) hours following the Accident or
before an alcohol test, whichever comes first.
e.Testing will not be conducted on any deceased employee.
f.The results of a breath test for the use of alcohol or a drug
test for Controlled Substances, conducted by Federal, State,
or local officials having independent authority for the test,
shall be considered to meet the requirements of this policy
provided such results are obtained by the employer, and
conform to the applicable Federal, State or local
requirements. The potentially affected employee will not be
allowed to proceed alone to or from the collection site. Time
spent complying with post-Accident testing is compensable.
g.Documentation of the activity being performed by the employee
that supports the determination to conduct post-Accident
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testing should be prepared and signed by the supervisor
requesting the test within 24 hours of the Accident or before
the results of the drug test are released, if possible.
5.Reasonable Suspicion Testing
If a supervisor, manager, the Safety and Security Specialist,
and/or other personnel has a Reasonable Suspicion that the
employee is Under the Influence of a Substance while on District
property or on duty, they shall consult with Human Resources
about this observation to determine if testing is appropriate.
After consultation with Human Resources, if it is determined that
the employee should be tested, a supervisor shall direct the
employee to immediately report for testing and complete the test
as directed by personnel at the testing location. The supervisor
shall arrange to transport the employee to the testing location.
If the person who advises Human Resources of the Reasonable
Suspicion is not the employee’s supervisor, Human Resources must
immediately notify the supervisor of the Reasonable Suspicion,
and the supervisor shall arrange to transport the employee to the
testing location. The supervisor(s) witnessing the impairment
must document the specific observations upon which the Reasonable
Suspicion is based.
Upon completing testing, the employee shall be released from duty
for the remainder of the day. The supervisor, in consultation
with Human Resources, thereafter, shall determine on a day-to-
day basis whether to permit the employee to return to duty, until
the results of the test have returned. If an employee has been
ordered to submit to Substance testing for Reasonable Suspicion,
the District may place the employee on leave without pay pending
the test results. If the employee’s test results are Negative,
the District shall restore any salary lost by the employee for
the days they were on leave, as though the employee had reported
for duty.
The following criteria apply when conducting drug and alcohol
tests due to Reasonable Suspicion:
a.Alcohol
A breath alcohol test must be administered as soon as
possible. Every effort should be made to ensure that a breath
alcohol test is performed within eight (8) hours. If testing
has not occurred within eight (8) hours, attempts to test
should be discontinued and the employee may resume duties with
their next shift that begins after the eight (8) hours have
Page 12 of 18
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject
DRUG AND ALCOHOL-FREE WORKPLACE POLICY AND
PROCEDURE
Policy
Number
Date
Adopted
Date
Revised
22 9/19/90 11/8/23
passed. However, prior to the employee’s return, management
shall observe the employee’s condition before the employee is
allowed to resume duties to ensure that there is no longer
Reasonable Suspicion.
b.Controlled Substances
A test for Controlled Substances must be administered as soon
as possible. Every effort should be made to ensure the sample
is performed as soon as possible but no later than 32 hours
of the observation.
c.The employee may not proceed alone to or from the collection
site. The supervisor or other appropriate person making the
observation shall arrange to transport the employee to and
from the testing site.
d.Documentation to support the determination to conduct
Reasonable Suspicion testing should be prepared and signed by
the person who made the determination within 24 hours of the
determination or before the results of the test are released,
whichever is earlier, if possible.
6.Acknowledgment and Consent
Any employee subject to testing under this policy will be asked
to sign a form acknowledging the procedures governing testing,
and consenting to (1) the collection of a sample to determine the
presence of Controlled Substances, and/or Breath for Alcohol and
(2) the release to the District of medical information regarding
the test results. Refusal to sign the agreement and consent form,
or to submit to the drug test, will result in the revocation of
an applicant’s job offer, or will subject an employee to
discipline up to and including termination.
7.Refusal to Submit to Testing
If an applicant refuses to submit to testing for any Substance,
the applicant is disqualified for employment. If a District
employee who has applied for a position that requires the
performance of Safety-Sensitive Duties refuses to submit to
testing for any Substance, the employee is disqualified for such
position.
If an employee refuses to submit to testing for any Substance,
the District may treat such refusal as an act of insubordination.
The District shall also impose the same disciplinary action of
Page 13 of 18
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject
DRUG AND ALCOHOL-FREE WORKPLACE POLICY AND
PROCEDURE
Policy
Number
Date
Adopted
Date
Revised
22 9/19/90 11/8/23
dismissal for a refusal to test that it would impose for a
Positive test result, so as not to encourage employees to refuse
to test in the hope of avoiding more severe disciplinary action.
The District may immediately place an employee on leave without
pay if the employee refuses to submit for testing.
8.Refusal to Authorize Disclosure of Results of Testing
If an applicant refuses to authorize the disclosure of the testing
results to the District, the applicant is disqualified for
employment. If a District employee who has applied for a position
that requires the performance of Safety-Sensitive Duties refuses
to authorize the disclosure of the test results to the District,
the employee is disqualified for such position.
If an employee refuses to authorize the disclosure of results of
testing to the District, the District will impose the same
disciplinary action of dismissal for a refusal to authorize the
disclosure of results of testing, that it would impose for a
Positive test result, so as not to encourage employees to refuse
to authorize the disclosure of test results in the hope of
avoiding more severe disciplinary action.
9.Positive Test
If an applicant tests Positive for a Controlled Substance, they
shall be disqualified for employment unless they meet the
requirements for the over-the-counter/prescription drug exception
set forth in Section B(2) of this policy. If a District employee
who has applied for a position that requires the performance of
Safety-Sensitive Duties tests Positive for a Substance, the
employee is disqualified for such position.
If an employee tests Positive for a Substance, the employee shall
not be returned to duty and shall not receive pay during their
absence until the employee requests that the split urine specimen
be tested and the test of that specimen is not Positive for a
Substance.
This unpaid absence shall not be considered a disciplinary or
punitive action against the employee and any record of such
absence shall be maintained separately from the employee’s
personnel file. The absence is for the administrative and safety
interests of the District. This unpaid absence has no effect on
the District’s decision or ability to discipline an employee for
violating this policy.
Page 14 of 18
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject
DRUG AND ALCOHOL-FREE WORKPLACE POLICY AND
PROCEDURE
Policy
Number
Date
Adopted
Date
Revised
22 9/19/90 11/8/23
If the MRO determines that an employee’s specimen is a Dilute
Specimen and the specimen is Positive for a Substance, the
employee shall be considered to have tested Positive for that
Substance. If a Dilute Specimen produces a Negative result then
the employee shall be required to submit to a second Substance
test, in the manner prescribed in section 40.197 of title 49 of
the Code of Federal Regulations.
10.Request for Retest
If an employee tests Positive for any Substance, the employee
may, within 72 hours of being notified of the Positive test
result, request of the MRO that the split specimen be tested. If
the employee does not submit a request within 72 hours, the
employee shall be considered to have waived their right to have
the split specimen tested. The employee shall pay for the costof testing the split specimen. If the employee is unable to pay
this cost at the time of the request, the District must ensure
that the split specimen is tested even if it means that the
District may have to initially bear the cost. The District may
recover the cost from the employee at a later time.
If a split specimen does not produce a Positive result for a
Substance, the District shall restore any salary lost by the
employee as a result of an absence imposed because of the Positive
result on the first specimen. The employee shall be consideredto have not tested Positive for a Substance. The District shall
also reimburse the employee for the cost of the retest if the
employee paid for the retest.
The District may not request that the split specimen be tested.
F. Employee Assistance Programs
The District may refer any employee, including an employee who is
dismissed because of a Positive test for a Substance, to its employee
assistance program. If in any instance the District is required to
lawfully accommodate an employee’s disability related to Substance
abuse, the District shall refer the employee to a Substance abuse
professional.
G. Suspicion of Possession/Distribution/Manufacture of Controlled
Substances
If a supervisor has a Reasonable Suspicion that an employee unlawfully
possesses or is distributing or manufacturing a Controlled Substance
or Drug Paraphernalia on or in District property, or while on duty,
the supervisor must report this suspicion to Human Resources.
Page 15 of 18
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject
DRUG AND ALCOHOL-FREE WORKPLACE POLICY AND
PROCEDURE
Policy
Number
Date
Adopted
Date
Revised
22 9/19/90 11/8/23
1.For purposes of Section G only, “Reasonable Suspicion” means the
following:
a.As to possession, the supervisor or a reporting credible
source must have seen a Substance or item on the person of
the employee, in the employee’s work area, or in or on
District property assigned to the use of the employee that
a reasonable person would believe is a Controlled Substance
or Drug Paraphernalia, or have seen in any of the same areas
a container that a reasonable person would believe contains
a Controlled Substance or Drug Paraphernalia.
b.As to distribution, the supervisor must have seen the
employee convey to another person a Substance or item that
a reasonable person would believe is a Controlled Substance
or Drug Paraphernalia, or have seen the employee convey a
container to another person that a reasonable person would
believe contains a Controlled Substance or Drug
Paraphernalia, or have received a report of observation of
the same from a credible source.
c.As to manufacture, the supervisor must have observed
conditions that a reasonable person would equate to the
manufacture of a Controlled Substance or Drug Paraphernalia,
which may include the observation of smell, appearance, or
sound. The supervisor must also have observed conditions
that would attribute suspected manufacture to the employee,
such as observing these conditions in the employee’s work
area or in or on District property assigned to the use of
the employee. If the conditions are observed on the person
of the employee, the supervisor must consider whether the
employee reported to duty in such condition instead of
changing to such condition while on duty or have received a
report of observation of the same from a credible source.
2.After a report of a Reasonable Suspicion has been made to Human
Resources, the Human Resources Manager must confer with
management representatives to consider whether the reported
observation constituted Reasonable Suspicion and decide what
steps to take in response to the reported observation.
a.If the decision is to take no further action, the matter will
be dismissed.
b.If the decision is to discuss the observation with the
Page 16 of 18
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject
DRUG AND ALCOHOL-FREE WORKPLACE POLICY AND
PROCEDURE
Policy
Number
Date
Adopted
Date
Revised
22 9/19/90 11/8/23
employee, Human Resources and the supervisor will meet with
the employee to discuss the observation. If as a result of
the discussion, Human Resources and/or the supervisor believe
that a search is necessary, they will confer with management
representatives to determine whether a search will be
conducted.
c.If the decision is to conduct a search, the search must be
limited to a search of District property, such as the
employee’s work area (including desk drawers and file
cabinets), District vehicle or equipment, and District
facilities. The search may be performed by the Human Resources
representative or another person designated by the Human
Resources representative, which may include the supervisor.
The employee does not need to be present during the search.
If any material is retrieved that appears to bear out the
supervisor’s Reasonable Suspicion, the Human Resources
representative must take possession of the material.
d.If the decision is to conduct a search and the distribution
of Controlled Substances or Drug Paraphernalia is reasonably
suspected, the search may include not only the work
area/equipment of the employee suspected of distributing
Controlled Substances or Drug Paraphernalia, but the work
area/equipment of any employee whom was observed receiving
the item from the employee suspected of distributing
Controlled Substances or Drug Paraphernalia. The receiving
employee is entitled to the same rights as the distributing
employee.
e.Any search of the person of the employee or personally-held
possessions of the employee, such as a briefcase, purse,
pocketbook, backpack or personal vehicle, must be conducted
by a law enforcement officer. If the decision to conduct a
search extends to these areas, Human Resources should contact
law enforcement to request such a search.
3.If the Human Resources representative takes possession of any
material as a result of the search, and the employee does not
confirm that it is a Controlled Substance or Drug Paraphernalia,
the District shall contact the local law enforcement agency and
will forward the Substance to have the item tested/analyzed to
determine if it is a Controlled Substance or Drug Paraphernalia.
If a law enforcement officer takes possession of an item as a
result of a search, and the employee does not confirm that it is
a Controlled Substance or Drug Paraphernalia, the District shall
follow up with the law enforcement agency to verify the item is
Page 17 of 18
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject
DRUG AND ALCOHOL-FREE WORKPLACE POLICY AND
PROCEDURE
Policy
Number
Date
Adopted
Date
Revised
22 9/19/90 11/8/23
a Controlled Substance or Drug Paraphernalia. The employee shall
not return to duty and shall not receive pay during their absence
until the law enforcement agency has verified that the
tested/analyzed item is not Positive for a Controlled Substance
or Drug Paraphernalia. If the tested/analyzed item does not
produce a Positive result for a Controlled Substance or Drug
Paraphernalia, the District shall restore any salary lost by the
employee as a result of the absence.
H. Disciplinary Action
Disciplinary action for violations of this policy will be taken in
accordance with the District’s Discipline Policy and Procedures.
I. Accommodation of Individuals with Disabilities
Nothing in this policy shall be construed so as to relieve the
District of its lawful obligation to accommodate individuals with
disabilities.
J.Confidentiality
All alcohol and drug-testing records will be treated as confidential.
Page 18 of 18
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject
DRUG AND ALCOHOL-FREE WORKPLACE POLICY AND
PROCEDURE
Policy
Number
Date
Adopted
Date
Revised
22 9/19/90 11/8/23
APPENDIX A
INDICATION OF DRUG USE
REMEMBER THAT THESE SYMPTOMS ARE ONLY INDICATIONS. THEY MAY BE A SIGN
OF SOMETHING OTHER THAN DRUG OR ALCOHOL USE. THIS LIST IS NOT EXHAUSTIVE.
PHYSICAL
1.Increased pulse rate 10.Nasal sores
2.Weak and rapid pulse 11.Slowed respirations
3.Increased blood pressure 12.Shallow respiration
4.Increased body temperature 13.Cold and clammy skin
5.Constricted pupils 14.Chills and sweats
6.Dilated pupils 15.Cramps
7.Bloodshot eyes 16.Nausea
8.Water eyes 17.Convulsions
9.Runny nose
MENTAL AND EMOTIONAL
1.Increased alertness 10.Disorientation
2.Excitation 11.Visual illusions
3.Anxiety 12.Hallucinations
4.Irritability 13.Paranoia
5 Euphoria 14.Delirium
6.Increased emotionality 15.Irrational fears
7.Impaired attention 16.Panic
8.Impaired memory 17.Depressed mood
9.Altered perceptions
BEHAVIORAL
1.Slurred speech 8.Hyperactivity
2.Staggered gait 9.Agitation
3.Fatigue 10.Argumentative
4.Apathy 11.Hostility
5.Drowsiness 12.Tremors
6.Loss of appetite 13.Insomnia
7.Increased appetite 14.Absenteeism patterns
Drug & Alcohol-Free
Workplace Policy &
Procedure Revision
Assembly Bill (AB) 2188
ATTACHMENT E
Assembly Bill (AB) 2188
•AB 2188 goes into effect on January 1, 2024.
•Prohibits employers from taking adverse employment actions against a
person based on their recreational cannabis use outside of work.
•Tetrahydrocannibol (THC) (Delta 9) is the pertinent cannabis metabolite that
causes impairment and psychoactive effects.
•THC can remain in the body for up to several weeks, after THC is metabolized
and the psychoactive effects have fully dissipated.
•A person can have nonpsychoactive cannabis metabolites in their body but
not be presently impaired.
Assembly Bill (AB) 2188
•AB 2188 prohibits employers from taking adverse employment action
based on a test showing positive for nonpsychoactive cannabis
metabolites.
•Employers should implement and make decisions based upon
scientifically valid drug testing methods that screen for THC to detect
active impairment, not nonpsychoactive cannabis metabolites.
•Many drug tests do not distinguish the nonpsychoactive metabolites
from the psychoactive metabolites.
Assembly Bill (AB) 2188
•The CA Civil Rights Division is expected to issue regulations, but
whether those regulations will be finalized by the end of 2023 is
unclear.
•Future policy revisions are anticipated as drug testing methods,
regulations, and legal advice are updated.
Assembly Bill (AB) 2188
• Additional information:
▪ Current revisions included:
o Removing management positions which are not designated as
“safety-sensitive” from the random drug and alcohol testing
program.
Questions?