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HomeMy WebLinkAbout05-21-18 Board Minutes 1 MINUTES OF THE SPECIAL MEETING OF THE BOARD OF DIRECTORS OTAY WATER DISTRICT May 21, 2018 1. The meeting was called to order by President Smith at 3:04 p.m. 2. ROLL CALL Directors Present: Gastelum, Robak, Smith and Thompson Directors Absent: Croucher (due to a work commitment) Staff Present: General Manager Mark Watton, General Counsel Shinoff, Chief Financial Officer Joe Beachem, Chief of Engineering Rod Posada, Chief of Operations Pedro Porras, Chief of Administration and Information Technology Adolfo Segura, Asst. Chief of Finance Kevin Koeppen, Asst. Chief of Operations Jose Martinez, District Secretary Susan Cruz and others per attached list. 3. PLEDGE OF ALLEGIANCE 4. APPROVAL OF AGENDA A motion was made by Director Robak, seconded by Director Thompson and carried with the following vote: Ayes: Directors GasteIum, Robak, Smith and Thompson Noes: None Abstain: None Absent: Directors Croucher to approve the agenda. 5. PUBLIC PARTICIPATION – OPPORTUNITY FOR MEMBERS OF THE PUBLIC TO SPEAK TO THE BOARD ON ANY SUBJECT MATTER WITHIN THE BOARD'S JURISDICTION BUT NOT AN ITEM ON TODAY'S AGENDA No one wished to be heard. 2 WORKSHOP 6. ADOPT RESOLUTION NO. 4348 ALLOWING FOR THE REIMBURSEMENT OF CERTAIN EXPENDITURES FROM THE PROCEEDS OF THE WATER DEBT OBLIGATIONS OF THE DISTRICT, ANTICIPATED TO BE ISSUED DURING 2018 Finance Manager Eid Fakhouri indicated that staff is presenting for the Board’s consideration a resolution which will help maximize the District’s financial benefit of issuing debt. He indicated that the resolution does not require the District to issue debt, but preserves the District’s right to reimburse itself for qualified expenditures. He stated the U.S. tax code allows the District to reimburse itself for any expenditure incurred within the 60-days prior to the adoption date of the resolution. Following the Board’s adoption of the presented resolution, significant expenditures that are being incurred now are eligible to be funded by the debt. The District’s financial standing is improved by funding these current expenditures with debt. The timing of this resolution is key decision in the timing of the overall process. The District anticipates an actual debt issuance of $30.3 million with an amount not to exceed $35 million. The funds will be used to reimburse the general fund and other capital reserves for water capital improvement expenditures. He noted that the resolution only declares the District’s intent to issue bonds, but does not bind the District to issue debt. Mr. Fakhouri introduced Ms. Suzanne Harrell of Harrell and Associates who is assisting the District in understanding the bond issuance process along with the benefits of using debt obligations to fund the water capital improvement projects. Ms. Harrell will also address the questions the board had from a previous board meeting. Ms. Harrell presented on the District’s Capital Improvement Program (CIP) funding and how it impacts pension liability funding. She stated that the proposed financing plan described by Mr. Fakhouri is for the funding of capital improvements which frees up reserves for the funding of a portion of the District’s pension Unfunded Actuarial Liability (UAL). Her presentation included (please see attached copy of presentation):  The current status of the District’s CalPERS funding  Annual Pension Costs and the UAL amortization bases as of June 30, 2018  UAL Funding Plan  Current UAL Payment Schedule  UAL Bases that are recommended to be funded  Comparison of the current and proposed funding of debt and the UAL  Comparison of UAL reduction to proposed debt service  CalPERS investment fund rate of return for 20 years and 10-year rolling average  UAL Funding Policy 3 President Smith indicated that if the board moves forward with staffs’ recommendation, the CalPERS unfunded liability will be 85% funded and that these provisions have been included in the proposed FY 2019 budget to be presented at today’s budget workshop. Staff indicated that staff will come back before the board to discuss the debt issuance which will include the projected savings, etc. The board had additional comments and questions and staff responded to the comments and questions. A motion was made by Director Thompson, seconded by Director Gastelum and carried with the following vote: Ayes: Directors Gastelum, Robak, Smith and Thompson Noes: None Abstain: None Absent: Director Croucher to approve staffs’ recommendation. 7. ADOPT RESOLUTION NO. 4345 TO APPROVE THE FY 2018-2019 OPERATING AND CAPITAL BUDGET; APPROVE FUND TRANSFERS FOR POTABLE, RECYCLED, AND SEWER; ADOPT THE SALARY SCHEDULE; APPROVE THE WATER RATES; ADOPT ORDINANCE NO. 567 AMENDING THE CODE OF ORDINANCES SECTION 25, CONDITIONS FOR WATER SERVICE INCLUDING APPENDIX A, WITH THE APPROVED WATER RATE CHANGES, EFFECTIVE JANUARY 1, 2019; DIRECT STAFF TO DRAFT AND MAIL WATER RATE INCREASE NOTICES FOR POTABLE AND RECYCLED WATER CUSTOMERS; AND DIRECT STAFF TO DRAFT AND MAIL PROPOSITION 218 RATE DECREASE NOTICES TO SEWER CUSTOMERS Chief Financial Officer Beachem reviewed the objectives of the workshop which included:  Review of the FY 2018 - 2019 Strategic Plan  Presentation of a $108 million Operating Budget and $24.2 million CIP Budget for approval  Request approval of the annual fund transfers  Request adoption of the Salary Schedule  Request approval of a 3.2% water rate increase effective January 1, 2019  Adopt Ordinance 567 amending the Code of Ordinances, including Appendix A with the proposed water rate changes to be effective January 1, 2018  Direct staff to draft and mail water rate and fee increase notices  Direct staff to draft and mail the Proposition 218 notices for recommended sewer rate changes Mr. Alan Nevin of Xpera Group indicated that the national economy is incredibly strong and despite the fact that oil prices have risen and the interest rate is slowly moving upward, the job market is staying amazingly strong. He stated in 2010 there 4 were 3 million unfilled job openings and today there are about 6.5 million unfilled job openings. It is expected that 2 million additional jobs will be added this year so the demand for labor is extraordinary. He provided an overview of the economic outlook for San Diego County and projections for population growth, the unemployment rate, job growth and residential construction through 2024. He stated that residential construction will continue to move upward and that the single family market has recovered very well and is continuing to do well. He indicated that Otay WD’s growth will continue and developers are building both multi-family and single residential units equally. He stated that the unemployment rate is very low at 3.6% to 3.7% and the market is finding it very difficult to find construction laborers. He indicated that most of the construction for single family residential homes is in the Otay WD service area and that multifamily construction is mainly rental apartments. He noted that industrial construction will also do well and much of that construction will occur in the Otay Mesa area. He stated that he sees a positive future for Otay WD. The board had comments and questions and Mr. Nevin responded to their comments and questions. Presentations were then provided by staff that included challenges for the upcoming fiscal year, the proposed 4-year Strategic Plan and each of the Department Chiefs reviewed their department budgets for FY 2018 which was comprised of the Capital Improvement Project (CIP) budget for FY 2018, the CIP plan for the next six (6) years and the details of the operating budget. During the presentations there were questions asked by members of the board and responses were provided by staff. President Smith suggested that staff include the Right of Way, Encroachment and Weed Abatement Program in the Strategic Plan. He stated he would like staff to enhance it to make it a more robust program. General Manager Watton indicated that the District does have a program and to help track progress and give the program more visibility, staff can add a performance measure for the program. President Smith agreed with the suggestion. Director Robak also suggested with regard to the Strategic Plan that staff indicate in the picture of Rancho San Diego, where the regulatory site appears, a caption stating, “Rancho San Diego Town Center,” so the reader has an idea of what they are viewing. Staff indicated that they would make that change. Director Robak stepped off the dias at 4:59 p.m. and returned at 5:01 p.m. The board was concerned about reducing the District’s sewer rate by 7% and then raising it next fiscal year by 4.6%. Staff indicated that it is proposed that sewer rates be reduced by 7% because if rates are not reduced, then sewer bills will go up 33% due to higher water usage. Following the discussion, the board was supportive of staffs’ recommendation and suggested that staff review the possibility of utilizing a three-year running average when setting rates. Staff indicated that this 5 is something they would review. Counsel also note that rates must conform with Proposition 218 (cost of service). Director Thompson stepped off the dias at 5:34 p.m. and returned at 5:37 p.m. Director Thompson requested that staff make the board aware when the City of Chula Vista sewer rates are changing. Staff indicated that they would do so. President Smith stepped off the dias at 6:03 p.m. and returned 6:05 p.m. Staff requested that the board:  Adopt Resolution No. 4345 to approve the FY 2018-2019 Operating and Capital Budget  Approve fund transfers for potable, recycled, and sewer  Approve the water rate changes and adopt Ordinance No. 567 to amend the Code of Ordinances, including Appendix A with the proposed 3.2% water rate increase on all billings that begin in January 1, 2019  Adopt the Salary Schedule pursuant to CA Code of Regulations 570.5 (CalPERS enforced)  Provide direction to draft and mail water rate increase notices  Provide direction to draft and mail Proposition 218 hearing notices for recommended sewer rate changes A motion was made by Director Robak, seconded by Director Gastelum and carried with the following vote: Ayes: Directors Gastelum, Robak, Smith and Thompson Noes: None Abstain: None Absent: Director Croucher to approve staffs’ recommendations. 8. ADJOURNMENT With no further business to come before the Board, President Smith adjourned the meeting at 7:45 p.m. ___________________________________ President ATTEST: District Secretary