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Home My WebLink About02-01-17 Board Packet 1 OTAY WATER DISTRICT BOARD OF DIRECTORS MEETING DISTRICT BOARDROOM 2554 SWEETWATER SPRINGS BOULEVARD SPRING VALLEY, CALIFORNIA WEDNESDAY February 1, 2017 3:30 P.M. AGENDA 1. ROLL CALL 2. PLEDGE OF ALLEGIANCE 3. APPROVAL OF AGENDA 4. ASSOCIATION OF CALIFORNIA WATER AGENCIES PRESENTATION (TIMOTHY QUINN, EXECUTIVE DIRECTOR) 5. APPROVAL OF THE MINUTES OF THE REGULAR MEETING OF DECEMBER 7, 2016 AND SPECIAL MEETING OF JANUARY 12, 2017 6. 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 CONSENT CALENDAR 7. ITEMS TO BE ACTED UPON WITHOUT DISCUSSION, UNLESS A REQUEST IS MADE BY A MEMBER OF THE BOARD OR THE PUBLIC TO DISCUSS A PAR- TICULAR ITEM: a) AUTHORIZATION TO ACQUIRE PERMANENT UTILITY AND TEMPO- RARY CONSTRUCTION EASEMENTS AT THE RANCHO SAN DIEGO TOWNE CENTER FROM VESTAR FOR THE CAMPO ROAD SEWER RE- PLACEMENT PROJECT IN AN AMOUNT NOT-TO-EXCEED $190,000 b) ADOPT RESOLUTION NO. 4323 AMENDING POLICY NO. 45, THE DEBT POLICY, OF THE DISTRICT’S CODE OF ORDINANCES c) ADOPT ORDINANCE NO. 560 AMENDING SECTION 27, REQUIREMENTS AND LIMITATIONS FOR OBTAINING WATER SERVICE, OF THE DIS- TRICT’S CODE OF ORDINANCES 2 d) ADOPT THE 2017 OTAY WATER DISTRICT LEGISLATIVE PROGRAM GUIDELINES e) ADOPT RESOLUTION NO. 4327 OF THE OTAY WATER DISTRICT CON- FIRMING GARY CROUCHER AND TIM SMITH AS THE DISTRICT’S REP- RESENTATIVES TO THE SAN DIEGO COUNTY WATER AUTHORITY, EACH TO VOTE IN THE ABSENCE OF THE OTHER ACTION ITEMS 8. FINANCE AND ADMINISTRATION a) APPROVE AN ENGAGEMENT LETTER WITH THE AUDITING FIRM OF TEAMAN, RAMIREZ AND SMITH, INC., TO PROVIDE AUDIT SERVICES TO THE DISTRICT FOR THE FISCAL YEAR ENDING JUNE 30, 2017 (BELL) b) ADOPT RESOLUTION NO. 4325 TO APPROVE A ONE (1) YEAR EXTEN- SION TO THE CURRENT MEMORANDUM OF UNDERSTANDING BE- TWEEN THE OTAY WATER DISTRICT AND THE OTAY WATER DISTRICT EMPLOYEES’ ASSOCIATION, AND APPROVE THE SAME PROVISIONS FOR MANAGEMENT, CONFIDENTIAL AND EXECUTIVE EMPLOYEES (WILLIAMSON) 9. BOARD a) DISCUSSION OF 2017 BOARD MEETING CALENDAR INFORMATIONAL ITEMS 10. THIS ITEM IS PROVIDED TO THE BOARD FOR INFORMATIONAL PURPOSES ONLY. NO ACTION IS REQUIRED ON THE FOLLOWING AGENDA ITEM. a) UPDATE ON THE PROGRESS OF THE CITY OF SAN DIEGO’S APPLICA- TION WITH THE CALIFORNIA DEPARTMENT OF WATER RESOURCES FOR A SCIENTIFIC-BASED MODIFICATION TO THE BOUNDARIES OF THE SAN DIEGO FORMATION GROUNDWATER AQUIFER (KENNEDY) REPORTS 11. GENERAL MANAGER’S REPORT a) SAN DIEGO COUNTY WATER AUTHORITY UPDATE 12. DIRECTORS' REPORTS/REQUESTS 13. PRESIDENT’S REPORT 3 RECESS TO CLOSED SESSION 14. CLOSED SESSION a) CONFERENCE WITH LEGAL COUNSEL – ANTICIPATED LITIGATION Ini- tiation of litigation pursuant to paragraph (4) of subdivision (d) of Section 54956.9: 1 CASE b) CONFERENCE WITH REAL PROPERTY NEGOTIATORS [GOVERNMENT CODE §54956.8] PROPERTY: SALT CREEK GOLF COURSE 525 HUNTE PARKWAY CHULA VISTA, CA 91914 AGENCY NEGOTIATOR: MARK WATTON, GENERAL MANAGER NEGOTIATING PARTIES: BILL McWETHY, PACIFIC HOSPITALITY GROUP UNDER NEGOTIATIONS: INSTRUCT NEGOTIATOR CONCERNING PRICE, TERMS OF PAYMENT, OR BOTH, FOR THE PURCHASE, SALE AND/OR LEASE OF THE PROPERTY. c) CONFERENCE WITH LABOR NEGOTIATORS [GOVERNMENT CODE §54957.6] AGENCY DESIGNATED REPRESENTATIVES: MARK ROBAK AND TIM SMITH EMPLOYEE ORGANIZATION: OTAY WATER DISTRICT EMPLOYEES’ ASSOCIATION AND ALL REPRESENTED AND UNREPRESENTED PERSONNEL INCLUDING MANAGEMENT AND CONFIDENTIAL EMPLOYEES RETURN TO OPEN SESSION 15. REPORT ON ANY ACTIONS TAKEN IN CLOSED SESSION. THE BOARD MAY ALSO TAKE ACTION ON ANY ITEMS POSTED IN CLOSED SESSION 16. ADJOURNMENT 4 All items appearing on this agenda, whether or not expressly listed for action, may be deliberated and may be subject to action by the Board. The Agenda, and any attachments containing written information, are available at the District’s website at www.otaywater.gov. Written changes to any items to be considered at the open meeting, or to any attachments, will be posted on the District’s website. Copies of the Agenda and all attachments are also available through the District Secretary by contacting her at (619) 670-2280. If you have any disability which would require accommodation in order to enable you to participate in this meeting, please call the District Secretary at (619) 670-2280 at least 24 hours prior to the meeting. Certification of Posting I certify that on January 27, 2017, 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 72 hours in advance of the regular meeting of the Board of Directors (Government Code Section §54954.2). Executed at Spring Valley, California on January 27, 2017. /s/ Susan Cruz, District Secretary 1 MINUTES OF THE BOARD OF DIRECTORS MEETING OF THE OTAY WATER DISTRICT December 7, 2016 1. The meeting was called to order by President Thompson at 3:31 p.m. 2. ROLL CALL Directors Present: Croucher, Gastelum, Robak, Smith and Thompson Staff Present: General Manager Mark Watton, General Counsel Dan Shinoff, Asst. General Manager German Alvarez, Chief of Administration and Information Technology Adolfo Segura Chief of Engineering Rod Posada, Chief Financial Officer Joe Beachem, Chief of Operations Pedro Porras, Asst. Chief of Operations Jose Martinez, District Secretary Susan Cruz and others per attached list. 3. PLEDGE OF ALLEGIANCE 4. INVOCATION Mr. John Mendez, Mendez Strategy Group, read a prayer to commemorate the 75th Anniversary of the attack on Pearl Harbor. 5. OATH OF OFFICE CEREMONY Former Assemblyman Brian Jones administered the oath of office to newly elected Director Hector Gastelum and re-elected Director Mark Robak. Mr. Isaiah Diamond administered the Oath of Office to Director Mitchell Thompson. The three directors were elected in the November 2016 elections to the District’s Divisions 4, 5 and 2 seats respectively. 6. PRESENTATION OF RECOGNITION PLAQUE TO BOARD PRESIDENT Treasurer Smith presented a recognition plaque on behalf of the Board of Directors and staff to Board President Thompson to thank him for his excellence in public service and outstanding leadership as president of the Otay Water District’s board of Directors during the past year. Director Thompson indicated that the work accomplished at the District is a team effort and the District has had a lot to celebrate over the last year and he hoped that the District will be able to say the same for 2017. He thanked everyone for their work and making it a great year. 7. RECESS FOR RECEPTION 2 The board recessed at 3:43 p.m. for a reception to congratulate Directors Gastelum, Robak and Thompson for their election to the Otay WD board of directors. 8. RECONVENE OTAY WATER DISTRICT BOARD MEETING The board reconvened at 4:05 p.m. 9. ELECTION OF BOARD PRESIDENT A motion was made by Director Croucher to elect Director Thompson as President, Director Smith as Vice President and Director Robak as Treasurer. The motion was not voted upon as it failed to receive a second. Director Smith indicated that he believes that it is appropriate to rotate the presidency. He felt that when a new president is elected it provides a new energy and he indicated that he wished to make a motion to nominate Director Robak as President. The motion was seconded by Director Gastelum and carried with the following vote: Ayes: Directors Croucher, Gastelum, Robak, Smith and Thompson Noes: None Abstain: None Absent: None to elect Director Robak as President. 10. ELECTION OF VICE PRESIDENT A motion was made by President Robak, seconded by Director Croucher and carried with the following vote: Ayes: Directors Croucher, Gastelum, Robak, Smith and Thompson Noes: None Abstain: None Absent: None to elect Director Smith as Vice President. 11. ELECTION OF BOARD TREASURER A motion was made by President Robak, seconded by Director Croucher and carried with the following vote: Ayes: Directors Croucher, Gastelum, Robak, Smith and Thompson Noes: None Abstain: None Absent: None 3 to elect Director Thompson as Treasurer. 12. APPROVAL OF AGENDA A motion was made by Director Croucher, seconded by Director Smith and carried with the following vote: Ayes: Directors Croucher, Gastelum, Robak, Smith and Thompson Noes: None Abstain: None Absent: None to approve the agenda. 13. APPROVE THE MINUTES OF THE REGULAR BOARD MEETING OF OCTOBER 5, 2016 A motion was made by Director Smith, seconded by Director Gastelum and carried with the following vote: Ayes: Directors Croucher, Gastelum, Robak, Smith and Thompson Noes: None Abstain: None Absent: None to approve the minutes of the regular board meeting of October 5, 2016. 14. 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. 15. RECESS OTAY WATER DISTRICT BOARD MEETING AND CONVENE A MEETING OF THE OTAY SERVICE CORPORATION The Otay Water District board meeting was recessed at 4:12 p.m. and a meeting of the Otay Service Corporation board was convened. 16. ROLL CALL Directors Present: Croucher, Gastelum, Robak, Smith and Thompson 17. ELECTION OF OFFICERS: PRESIDENT, VICE-PRESIDENT AND TREASURER 4 A motion was made by Director Croucher, seconded by Director Gastelum and carried with the following vote: Ayes: Directors Croucher, Gastelum, Robak, Smith and Thompson Noes: None Abstain: None Absent: None to elect Director Robak as President, Director Smith as Vice President and Director Thompson as Treasurer. 18. APPOINTMENT OF OFFICERS: EXECUTIVE DIRECTOR, CHIEF FINANCIAL OFFICER AND SECRETARY A motion was made by President Robak, seconded by Director Croucher and carried with the following vote: Ayes: Directors Croucher, Gastelum, Robak, Smith and Thompson Noes: None Abstain: None Absent: None to appoint General Manager Watton as Executive Director, Joe Beachem as Chief Financial Officer and District Secretary Susan Cruz as Secretary. 19. ADJOURN OTAY SERVICE CORPORATION BOARD MEETING AND CONVENE THE OTAY WATER DISTRICT FINANCING AUTHORITY BOARD MEETING President Robak adjourned the Otay Service Corporation board meeting at 4:14 p.m. and convened the Otay Water District Financing Authority board meeting. 20. ROLL CALL Directors Present: Croucher, Gastelum, Robak, Smith and Thompson 21. RE-AFFIRM OFFICERS OF THE OTAY WATER DISTRICT FINANCING AUTHORITY A motion was made by Director Croucher, seconded by Director Gastelum and carried with the following vote: Ayes: Directors Croucher, Gastelum, Robak, Smith and Thompson Noes: None Abstain: None Absent: None 5 to elect Director Robak as President, Director Smith as Vice-President, General Manager Watton as Executive Director, Chief Financial Officer Joe Beachem as Treasurer/Auditor, and District Secretary Susan Cruz as Secretary. 22. ADJOURN OTAY DISTRICT FINANCING AUTHORITY BOARD MEETING AND CONVENE THE OTAY WATER DISTRICT BOARD MEETING President Robak adjourned the Otay District Financing Authority board meeting at 4:15 p.m. and reconvened the Otay Water District board meeting. CONSENT CALENDAR 23. ITEMS TO BE ACTED UPON WITHOUT DISCUSSION, UNLESS A REQUEST IS MADE BY A MEMBER OF THE BOARD OR THE PUBLIC TO DISCUSS A PARTICULAR ITEM: A motion was made by Director Croucher, seconded by Director Smith and carried with the following vote: Ayes: Directors Croucher, Gastelum, Robak, Smith and Thompson Noes: None Abstain: None Absent: None to approve the following consent calendar items: a) APPROVE CHANGE ORDER NO. 4 TO THE EXISTING CONTRACT WITH TRANSTAR PIPELINE, INC. IN THE AMOUNT OF $50,760 FOR THE RANCHO SAN DIEGO BASIN SEWER REHABILITATION - PHASE 1 PROJECT b) ADOPT RESOLUTION NO. 4317, FIXING TERMS AND CONDITIONS FOR THE ANNEXATION OF CERTAIN REAL PROPERTIES OWNED BY LICIA A. BARNETT (APN: 517-112-09-00) INTO THE OTAY WATER DISTRICT IMPROVEMENT DISTRICT NO. 18 c) ADOPT THE MITIGATED NEGATIVE DECLARATION FOR THE 870-2 PUMP STATION PROJECT d) APPROVE THE PURCHASE OF A PERMANENT UTILITY EASEMENT AT THE RANCHO SAN DIEGO VILLAGE SHOPPING CENTER FROM REGENCY CENTERS FOR THE CAMPO ROAD SEWER REPLACEMENT PROJECT IN AN AMOUNT NOT-TO-EXCEED $125,000 e) APPROVE THE ISSUANCE OF A PURCHASE ORDER TO VOLVO CONSTRUCTION EQUIPMENT IN THE AMOUNT NOT-TO-EXCEED 6 $269,764 FOR THE PURCHASE OF TWO (2) REPLACEMENT PORTABLE EMERGENCY GENSETS f) APPROVE A TWO-YEAR FIXED AGREEMENT, PLUS THREE (3) ONE- YEAR OPTIONS, WITH T&T JANITORIAL, INC. FOR JANITORIAL SERVICES IN AN AMOUNT-NOT-TO-EXCEED $286,800 ACTION ITEMS 24. ADMINISTRATION AND FINANCE a) APPROVE THE FIRST AMENDMENT TO THE JOINT POWERS AGENCY WATER CONSERVATION GARDEN OPERATION AGREEMENT, EXTENDING THE EXPIRATION DATE AN ADDITIONAL SIX MONTHS FROM DECEMBER 31, 2016 TO JUNE 30, 2017 Communications Officer Tenille Otero indicated that staff is requesting that the Board approve the first amendment to the Joint Powers Agency (JPA) Water Conservation Garden Operation Agreement (Operation Agreement), extending the expiration date an additional six (6) months from December 31, 2016 to June 30, 2017, which would allow sufficient time for the JPA to thoroughly review and evaluate the agreement and develop a new agreement that is strategically beneficial for JPA members who provide funding to operate the Water Conservation Garden (Garden). Please reference the Committee Action notes attached to staff’s report (Attachment A) for the details of Mr. Otero’s report. There was discussion that the extension to the JPA Operation Agreement would not require additional funding by the members of the JPA. The JPA members provide funding on a fiscal year basis ending June 30 each year and the funding level will stay the same. Director Croucher noted that there were concerns by the JPA members that they were providing 100% of the funding for the operation of the Garden. Today the JPA members’ contribution is down to approximately 50% of the operational budget. He commended the JPA and the Garden staff for their work and efforts towards becoming self-sufficient. President Robak indicated that Otay Water District and Helix Water District funded jointly the vast majority of the construction of the Garden and efforts to continue the Garden protects our agencies’ interest. A motion was made by Director Croucher, seconded by Director Smith and carried with the following vote: Ayes: Directors Croucher, Gastelum, Robak, Smith and Thompson Noes: None Abstain: None Absent: None to approve staffs’ recommendation. 7 25. BOARD a) DISCUSSION OF THE 2016 AND 2017 BOARD MEETING CALENDARS There were no changes to the meeting calendarS. INFORMATIONAL ITEM 26. THE FOLLOWING ITEMS ARE PROVIDED TO THE BOARD FOR INFORMATIONAL PURPOSES ONLY. NO ACTION IS REQUIRED ON THE FOLLOWING AGENDA ITEMS: a) FIRST QUARTER OF FISCAL YEAR 2017 CAPITAL IMPROVEMENT PROGRAM UPDATE REPORT (MARTIN) Engineering Manager Dan Martin provided an update on the District’s first quarter of FY 2017 Capital Improvement Program. He indicated that the FY 2017 budget is divided into 89 projects totaling $10.7 million. The overall expenditures through the first quarter is $2 million which is approximately 19% of the FY 2017 budget. Please reference the Committee Action notes attached to staff’s report (Attachment A) for the details of Mr. Martin’s report. Director Croucher noted that Director Gastelum attended the Engineering, Operations and Water Resources Committee. Director Gastelum commended staff for accomplishing a very low change order rate of -0.6% on projects. In response to an inquiry from Director Robak, staff indicated that allowances are included within contracts for structural repairs that may be needed, etc., and a negative change order percentage indicates that the District is under that allowance. REPORTS 27. GENERAL MANAGER’S REPORT CWA Report General Manager Watton indicated that CWA’s board will be recommending him as CWA’s representative on the State Colorado River Board to State Governor Brown. He indicated that it is hoped that Governor Brown will accept his (Mr. Watton’s) application and appoint him to the board. He also noted that there will be committee appointment changes and a new director from the City of San Diego will be joining CWA’s board, Mr. Jerry Butkiewicz. Director Croucher indicated that CWA’s board officers will be attending the Metropolitan Water District (MWD) board meeting next week and then attend the Colorado River Water Users Conference. They will travel to Sacramento in January to discuss issues related to the State Water Resources Control Board 8 and water restrictions and how they may impact the San Diego County region (water rates, etc.). CWA wishes to assure that the State considers the investments that San Diego County ratepayer have made into developing local water resources (desalination, storage, etc.) and that they consider developing their water use restrictions by region and not penalize those regions who have invested in diversifying and preparing for dry years. He noted that CWA board member, Ms. Christi Guerin, is the new chair of the Legislation and Public Outreach Committee which oversees the local legislative visits and he suggested that the Otay WD board members start meeting with its local legislators regarding the activities of the State Water Resources Control Board to assure that our local legislators are up dated on our region’s issues. He welcomed Ms. Meena Westford who is in the audience today. He stated that she is a project manager for MWD and prior to working for MWD, she worked for CWA and prior to CWA, she worked for the Bureau of Reclamation. President Robak indicated that in the past year he has been trying to reenergize the Conservation Action Committee (CAC) at CWA. The objective of the CAC was to partner with businesses on water conservation and issues. He stated that he was disappointed with what has occurred with the CAC and hoped to raise awareness at CWA to make it more effective. Director Croucher indicated that he shares President Robak’s view on the CAC and he would share this concern with CWA and its officers. General Manager’s Report General Manager Watton presented information from his report which included energy savings through thermostat efficiencies, the employee holiday event, the District’s receipt of the Cityworks Exemplary User award, Information Technology staff being selected to present at the American Water Works Association conference, the meter change-out program, the possible adoption of new laboratory accreditation standards which will increase costs, a vulnerability assessment of the District by Department of Homeland Security, water conservation and water sales. General Manager Watton also reviewed the handouts that were provided to the members of the board on the dias. In response to an inquiry from Director Smith, staff indicated that they had thought about including the AMR Program in the five year CIP plan and plan to include it in the upcoming budget cycle. A cost has not yet been finalized, but when it is presented to the board, staff will include past staff reports on the AMR Program with the report. It was indicated that the automated meters are failing a little earlier, but approximately when anticipated. Director Smith indicated he was inquiring as they had the same issue while he was at Helix Water District and it was quite a big concern. He stated that he does agree with the approach of staggering the installation of automated meters so their registers do fail at the same time. Director Thompson noted that recycled water sales are 29% above budgeted sales and asked what was driving recycled sales. Staff indicated that the District 9 is seeing increased recycled sales to many customers including golf courses and homeowner’s associations. It was noted that Southwestern College is not yet on recycled water, however, they are utilizing recycled water for construction and grading purposes. In response to an inquiry from Director Smith on the Rosarito Desalination Project, staff indicated that it is not expected that the Presidential election will impact the Presidential Permit the District is seeking for the project. The President has authorized an individual to sign the permit and the District has been informed that this individual will continue in their position after the elections. Staff indicated, in response to an inquiry from President Robak, that it is hard to predict when a pipe will break without digging it up which is not cost effective. Because the Hillsdale pipeline has had a couple breaks, it is clear that it is deteriorating. Staff has moved the pipeline up in priority for replacement and it is currently in the design phase which is approximately 90% complete. The project will go to bid and will be presented for the board’s consideration around July 2017. 28. DIRECTORS' REPORTS/REQUESTS Director Smith indicated that he attended the regular board and Engineering, Operations and Water Resources Committee meetings last month. Director Thompson reported that he represented Otay Water District at the swearing ceremony for the Mayor of Rosarito Beach. Director Gastelum indicated that he would like to be part of the special delegation that goes to Sacramento as they sometime make the judgement that “one size fits all” which doesn’t always apply to each individual agency. He thanked General Manager Watton and staff for the orientation meetings to update him on the District’s operations. 29. PRESIDENT’S REPORT President Robak thanked the members of the board for electing him as President. He noted that he also served as President on the Padre Dam MWD and Water Conservation Garden boards and had chaired the Metro Commission. He stated that his belief is to make things as efficient as possible and to spend ratepayer money as if it were our own money. He noted that he was not saying that the District does not do that, but that that is his paradigm. He shared that his brother Steve was elected to the Lakeside WD and Helix WD had two new directors elected to their board in November. He indicated that he attended the San Diego Chamber of Commerce meeting with new Director Gastelum and Ms. Meena Westford and that Mayor Faulconer was also in attendance. He stated that he also attended the California Special Districts Association Quarterly Meeting where Mr. Mike Bardin, General Manager of Santa Fe Irrigation District, served as chair for two (2) years. He noted that the Voice of San Diego 10 published an article regarding artificial turf playing fields funded by taxpayer monies that were failing. One of the fields highlighted was Valhalla High School’s. He indicated that he was curious if there were other fields in the District’s service area and if they were done to the ratepayers’ satisfaction. He also mentioned an article in a water desalination reuse magazine concerning a Rosarito Desalination Project. He stated that Director Thompson was quoted in the article. He indicated that he is mentioning this because he did not receive a copy of the article from the District and asked that all Directors be provided copies of articles/information regarding the District. He shared that he hiked San Miguel Mountain Thanksgiving morning and it was difficult to hike as you have to traverse many fences. He called the San Diego Wildlife Refuge manager and asked why they do not allow hikers and was informed that the area is a combination of public and private lands. The manager also indicated that she had contacted Otay Water District for access on the District’s property for some of the trails and was not able to get access. He indicated that the District does have responsibilities to secure its facilities, however, we also need to do what we can to partner with the community and make things that are accessible accessible. He noted that the District has been doing a lot of promoting for the rain barrel rebates which he was happy to see. He asked that staff tell interested customers exactly where to go to get the rain barrels. He indicated that he attended the Metro Commission meeting and three of the Metro Commission board members did not run again; Mr. Brian Bilbray from Imperial Beach, Mr. Tony Ambrose from El Cajon and Mr. Steve Miesen from Chula Vista. He lastly shared a video he took at the City of Chula Vista’s Starlight Parade on December 3 of the District’s entry (a Christmas lighted vactor truck). He stated that the parade was very well done and was well attended. 30. CLOSED SESSION The board recessed to closed session at 5:18 p.m. to discuss the following matters: a) CONFERENCE WITH LEGAL COUNSEL – ANTICIPATED LITIGATION Initiation of litigation pursuant to paragraph (4) of subdivision (d) of Section 54956.9: 1 CASE b) PUBLIC EMPLOYEE PERFORMANCE EVALUATION: PERIODIC AND CUSTOMARY REVIEW IN DUE COURSE [GOVERNMENT CODE §54957.6] TITLE: GENERAL COUNSEL c) CONFERENCE WITH LABOR NEGOTIATORS [GOVERNMENT CODE §54957.6] 11 AGENCY DESIGNATED REPRESENTATIVES: BOARD AD HOC COMMITTEE MEMBERS EMPLOYEE ORGANIZATION: OTAY WATER DISTRICT EMPLOYEES’ ASSOCIATION AND ALL REPRESENTED AND UNREPRESENTED PERSONNEL INCLUDING MANAGEMENT AND CONFIDENTIAL EMPLOYEES Director Croucher left at 6:05 p.m. The board reconvened at 6:26 p.m. and General Counsel Dan Shinoff reported that the board met in closed session and the board took no reportable actions. 31. ADJOURNMENT With no further business to come before the Board, President Lopez adjourned the meeting at 6:26 p.m. ___________________________________ President ATTEST: District Secretary 12 President’s Report December 7, 2016 Board Meeting A) Meetings attended during the Month of November 2016: 1) Nov 9: a. Attended the Water Conservation Garden JPA Board Meeting. Discussed revisions and the process for approval of the new Garden Operating Agreement. b. Committee Agenda Briefing. Met with General Manager Watton to review items that will be presented at the November committee meetings. 2) Nov 15: Attended the District’s Finance, Administration and Communications Committee. Reviewed, discussed, and made recommendation on items that will be presented at the December board meeting. 3) Nov 17: Attended the CSDA Quarterly Dinner. Alex Tardy, Warning Coordination Meteorologist for the National Weather Service in San Diego, presented on the “State of the Climate and Winter Outlook. Attendees: Directors Robak and Gastelum 4) Nov 30: a. Board Agenda Briefing. Met with General Manager Watton and General Counsel Dan Shinoff to review items that will be presented at the December 7 Board Meeting. b. Attended the Swearing-In Ceremony for the Mayor of Rosarito Beach. 1 MINUTES OF THE SPECIAL MEETING OF THE BOARD OF DIRECTORS OTAY WATER DISTRICT January 12, 2017 1. The meeting was called to order by President Robak at 3:02 p.m. 2. ROLL CALL Directors Present: Croucher, Gastelum, Robak, Smith and Thompson Directors Absent: None Staff Present: General Manager Mark Watton, Assistant General Manager German Alvarez, General Counsel Jeanne Blumenfeld, Chief Financial Officer Joe Beachem, Administrative Chief Adolfo Segura, Human Resources Manager Kelli Williamson, Finance Manager Rita Bell, Engineering Manager Bob Kennedy, Sr. Confidential Executive Secretary Tita Ramos-Krogman and others per attached list. 3. PLEDGE OF ALLEGIANCE 4. APPROVAL OF AGENDA A motion was made by Director Croucher, seconded by President Robak and carried with the following vote: Ayes: Directors Croucher, Gastelum, Robak, Smith and Thompson Noes: None Abstain: None Absent: None 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. RECESS TO CLOSED SESSION 6. CLOSED SESSION 2 The board convened into closed session at 3:04 p.m. to discuss the following item: a) CONFERENCE WITH LEGAL COUNSEL – ANTICIPATED LITIGATION Initiation of litigation pursuant to paragraph (4) of subdivision (d) of Section 54956.9: 1 CASE b) CONFERENCE WITH LABOR NEGOTIATORS [GOVERNMENT CODE §54957.6] AGENCY DESIGNATED REPRESENTATIVES: MARK ROBAK AND TIM SMITH EMPLOYEE ORGANIZATION: OTAY WATER DISTRICT EMPLOYEES’ ASSOCIATION AND ALL REPRESENTED AND UNREPRESENTED PERSONNEL INCLUDING MANAGEMENT AND CONFIDENTIAL EMPLOYEES RETURN TO OPEN SESSION 7. REPORT ON ANY ACTIONS TAKEN IN CLOSED SESSION. THE BOARD MAY ALSO TAKE ACTION ON ANY ITEMS POSTED IN CLOSED SESSION The board reconvened from closed session at 4:19 p.m. and Attorney Jeanne Blumenfeld indicated that the board took no reportable actions in closed session. 8. ADJOURNMENT With no further business to come before the Board, President Robak adjourned the meeting at 4:19 p.m. ___________________________________ President ATTEST: District Secretary STAFF REPORT TYPE MEETING: Regular Board MEETING DATE: February 1, 2017 SUBMITTED BY: Stephen Beppler Senior Civil Engineer Bob Kennedy Engineering Manager PROJECT: S2024- 001102 DIV. NO. 5 APPROVED BY: Rod Posada, Chief, Engineering German Alvarez, Assistant General Manager Mark Watton, General Manager SUBJECT: Authorization to Acquire Easements at Rancho San Diego Towne Center from Vestar for the Campo Road Sewer Replacement Project GENERAL MANAGER’S RECOMMENDATION: That the Otay Water District Board of Directors (Board) authorize the General Manager to acquire permanent utility and temporary construction easements at the Rancho San Diego Towne Center from Vestar for the Campo Road Sewer Replacement Project in an amount not to exceed $190,000 (see Exhibits A and B for location of the easements). COMMITTEE ACTION: Please see Attachment A. PURPOSE: To obtain Board approval authorizing the General Manager to acquire permanent utility and temporary construction easements at the Rancho San Diego Towne Center across Assessor Parcel Numbers 506-130-02, 03 & 04, owned by Vestar and its subsidiary Vestar California XVII, LLC (Vestar), for the Campo Road Sewer Replacement Project (Project) in an amount not to exceed $190,000. 2 ANALYSIS: The District is in the process of replacing a section of sanitary sewer main, known as the Campo Road Sewer, identified in the Wastewater Management Plan as being deficient in capacity. Design and Permit phases of the Project are complete, with the Project awaiting easement procurements prior to beginning the bidding phase. Permanent utility and temporary construction easements are required across Assessor Parcel Numbers 506-130-02, 03 & 04 (Rancho San Diego Towne Center), owned by Vestar and its subsidiary Vestar California XVII, LLC (Vestar), to construct the replacement sanitary sewer line as designed. The alignment reflects the most cost effective and lowest impacts on the community to connect the new sewer line to the existing trunk sewer that already traverses the Vestar property. The permanent utility easement is 25 feet in width and approximately 280 feet in length, while the temporary construction easement is 20 feet in width and about 290 feet in length (see Attachment B for full description). The District, through the project designer Rick Engineering, retained the appraisal services of Colliers International, an independent real estate appraiser, to estimate the “Fair Market Value” of the proposed Permanent Utility Easement acquisition, as that value is defined in Section 1263.320 of the California Code of Civil Procedure. An offer was presented to Vestar by letter dated June 1, 2016 (Attachment C) for an amount of $72,300 for the easements. A response from Vestar’s attorney was received by letter dated October 20, 2016 (Attachment D), which significantly disagreed with the property value based upon other comparable sales in the area and cited severance damage impacts, valued the total just compensation at $579,266. Vestar’s representative, Allan Kasen, Esq., took the position that the District’s appraiser “…material[ly] understated the value of the property sought to be acquired.” (Attachment D) Mr. Kasen believes that the property which comprises the easement should be valued at $40 per square foot (psf) and not $19 psf which was the value used by the District’s appraiser. Mr. Kasen stated that Vestar was willing to accept $40 psf for the easement, which has an area of 7,052 sf, as an effort to amicably resolve the matter. Further, Mr. Kasen disagreed with deducting 50% for the property valuation for the easement factor – he contended that a 20% deduction for valuation of the easement was appropriate. Mr. Kasen also opposed the District appraiser’s position that the underground easement causes no damage to the property. Mr. Kasen’s position was that Vestar had the 3 ability to create new building outparcels on which it could build stores/restaurants because cities have lessened parking requirements for commercial properties, but that the proposed easement foreclosed this ability. Vestar sought the following compensation for the easement and the temporary construction easement: Compensation for permanent easement: $231,720 Compensation for temporary construction easement: $ 11,006 Severance damage for permanent easement: $316,540 Severance damage for temporary easement: $ 20,000 ________ Total: $579,266 The District’s General Counsel and Vestar’s attorney determined through negotiation that the amount of $190,000 constitutes just compensation for both the permanent easement and the temporary construction easement. A revised offer letter (Attachment E) dated December 19, 2016 was then sent to Vestar for their written acceptance of the offer. With Vestar’s acceptance of this offer, the Resolution of Necessity that the Board adopted on November 2, 2016 will not need to be implemented to obtain the easements. The Project will move forward with beginning the bidding of the Project in January 2017, as the two (2) easement acquisitions necessary for the Project [this purchase and the Rancho San Diego Village Shopping Center (Regency Centers) offer authorized by the Board on December 7, 2016] will be resolved in principle, pending execution. Both easements will be conveyed to the District before awarding of a construction contract. FISCAL IMPACT: Joe Beachem, Chief Financial Officer The total budget for CIP S2024, as approved in the FY 2017 budget, is $8,500,000. Total planning and design phase expenditures to date, plus outstanding commitments and forecast, are $ 1,587.344.27. See Attachment F Budget Detail. Forecasted bidding and construction phase costs are approximately $6,700,000, for a total project expense currently estimated at about $8,300,000. Based on a review of the financial budget, the Project Manager anticipates that the budget for CIP S2024 will be sufficient to support the Project. 4 Finance has determined that, under the current rate model, 50% of the funding will be available from the Betterment Fund and 50% will be available from the Replacement Fund. STRATEGIC GOAL: This Project supports the District’s Mission statement, “To provide high quality and reliable water and wastewater services to the customers of the Otay Water District, in a professional, effective, and efficient manner” and the General Manager’s Vision, "A District that is innovative in providing water services at competitive rates, with a reputation for outstanding customer service." LEGAL IMPACT: None. SB/BK/RP:jf P:\WORKING\CIP S2024 Campo Road Sewer Replacement\Staff Reports\Vestar Easement\BD 02-01-17, Staff Report, Campo Rd Sewer Easement Aquisition - Vestar (SB-BK).docx Attachments: Attachment A – Committee Action Attachment B – Easement Description Attachment C – Original Offer Letter to Vestar Attachment D – Vestar Counteroffer Attachment E – Revised Offer Letter to Vestar Attachment F – Budget Detail Exhibit A – Location Map Exhibit B – Easements Map ATTACHMENT A SUBJECT/PROJECT: S2024-001102 Authorization to Acquire Easements at Rancho San Diego Towne Center from Vestar for the Campo Road Sewer Replacement Project COMMITTEE ACTION: The Engineering, Operations, and Water Resources Committee (Committee) reviewed this item at a Committee Meeting held on January 17, 2017, and the following comments were made:  Staff recommended that the Board authorize the General Manager to acquire permanent utility and temporary construction easements at the Rancho San Diego Towne Center from Vestar for the Campo Road Sewer Replacement Project in an amount not to exceed $190,000.  Staff reviewed the analysis/background of the Project with the Committee, which is provided on Page 2 of the staff report.  Staff noted that due to environmentally sensitive areas along most of the Project alignment, timing of the start of construction is vital to coincide with the non-breeding season. It is therefore necessary to complete the acquisition of the easements as soon as possible to meet the bidding and construction schedules.  It was discussed that based upon an appraisal of the Fair Market Value of the easement by Colliers International, a sub- consultant to the project designer Rick Engineering, an initial offer was made to Vestar by a letter dated June 1, 2016, for an amount of $72,300 for both easements. Vestar responded by a letter dated October 20, 2016, and cited several disagreements with the appraisal related to comparable sales and severance damages; Vestar asked for a significantly higher value of $579,266. Vestar’s attorney and the District’s General Counsel were able to negotiate a just compensation agreement of $190,000 with taking into consideration the disagreements that Vestar had with the appraised value. A revised offer letter dated December 19, 2016, was sent to Vestar for written acceptance of the offer.  Staff indicated that with Vestar’s acceptance of the offer, the Resolution of Necessity that the Board adopted on November 2, 2016, will not need to be implemented to obtain the easements.  Staff stated that the Project will move forward with starting the bidding of the Project in January 2017, as the two (2) easement acquisitions (this purchase and the Rancho San Diego Village Shopping Center – Regency Centers) necessary for the Project will be resolved in principle, pending execution. It was noted that both easements will be conveyed to the District before awarding of a construction contract.  The Committee inquired if there was a cost savings associated with the Project’s change in alignment. Staff stated yes; the new alignment reflects the most cost effective and lowest impacts on the community to connect the new sewer line to the existing trunk sewer that already crosses the Vestar property. The Committee commented that although the price for the easement increased, there was a cost savings with the change in alignment.  In response to a question from the Committee, Legal Counsel stated that the easement’s value was determined by the negotiation to the agreed value between Vestar and the District. Following the discussion, the Committee supported staffs’ recommendation and presentation to the full board as a consent item. OWD EASEMENT NO. AS7 Law San Diego/4344/2/MI/S0320472.DOCX RECORDING REQUESTED BY For Recorder's Use AND AFTER RECORDATION MAIL TO: OTAY WATER DISTRICT 2554 SWEETWATER SPRINGS BOULEVARD SPRING VALLEY, CA 91978-2004 APN: 506-130-02, 506-130-04 Documentary Transfer Tax: None (Exempt under Rev & Tax Code Section 11922) GRANT OF EASEMENT OF RIGHT-OF-WAY TO OTAY WATER DISTRICT For good and valuable consideration, receipt of which is hereby acknowledged, the Undersigned Vestar California XVII, LLC as Grantor(s) hereby GRANT(S) to OTAY WATER DISTRICT, a municipal water district formed under the Municipal Water District Law of 1911, as amended, situated in the County of San Diego, State of California, as Grantee, a permanent easement of right-of-way of 25 feet in width for the purpose of laying underground water and sewer pipelines and laterals, trunk lines, collection lines and laterals, sewer manholes and other underground structures appurtenant and ancillary to said water or sewer lines, including, but not limited to, underground power lines for transmission and communication purposes, pumps, regulators, valves and access roads or areas within said easement, hereinafter referred to as "said facilities," together with the right to construct, operate, maintain, repair and replace said facilities, and the right of ingress and egress for such purposes in the reasonably least disruptive manner to Grantor’s adjacent property. Said easement is described and/or depicted as follows: (See Exhibit(s) “A” and “B” attached hereto and made a part hereof) Grantor reserves the right to use said land at Grantor's own risk for any and all purposes not conflicting, interfering or inconsistent with Grantee's use of, and access to, said facilities. Grantor waives any right under Civil Code section 845, and any right to compel Grantee to grade, surface or otherwise improve or maintain said easement area as a roadway. Grantor shall not increase or decrease or permit to be increased or decrease the ground elevations of said easement existing at the time this document is executed, nor construct or permit to be constructed any permanent building, structures, improvements or other encroachment upon said easement, if any of the OWD EASEMENT NO. AS7 Law San Diego/4344/2/MI/S0320472.DOCX foregoing will cause damage to or threaten the safety of any of said facilities of Grantee placed within the easement. Grantee may remove from the easement any building, structure, improvement or other encroachments thereon conflicting, interfering or inconsistent with its use for the purposes hereby granted. Grantee shall have the right to install its own gates and locks in all fences which now cross or may hereafter cross said easement. All repair, replacement, maintenance or renovation of the Grantee’s systems shall be at Grantee’s sole cost and expense and shall be performed in compliance with all applicable laws. Grantee shall keep the easement property free of liens attributable to Grantee’s work. Grantee agrees on its own behalf and on behalf of its successors in interest that it will indemnify, defend and hold harmless Grantor for any and all liability, claims and damages which result from Grantee’s (including its agents and contractors) negligence or willful misconduct in connection with its construction, maintenance and repair operations within the easement. Grantor may use said land as a driveway and to the extent of such use may surface or pave the area, subject to the restrictions as to changes in existing ground elevations and indemnifications set forth above. Grantor may, at Grantor's expense, and subject to Grantee's prior written consent, relocate the above mentioned facilities in the event such conflict with future development of said property, provided that Grantor does not cause discontinuance of service to any area, and provided, further, that Grantee receives, without expenses to Grantee, an easement comparable to this easement for said relocated facilities. Subject to the preceding sentence, Grantee shall not be required to relocate or alter in any way the facilities installed pursuant to this grant of easement, or to bear any cost in connection therewith as a result of changes in the location of any said facilities. Grantee shall have the right to transfer and assign all or a portion of this easement to any utility successor in interest, or to any other political subdivision or public utility for use of the above stated purpose. This easement shall in no way be interpreted as a dedication of the easement property to the public. Date: _______________________ Grantor: Vestar California XVII, L.L.C., an Arizona limited liability company By: Hanley Investments RSD Limited Liability Company, its Managing Member By: _______________________________________, Manager Print Name: ________________________________ OWD EASEMENT NO. DISTRICT CERTIFICATE OF ACCEPTANCE This is to certify that the interest in real property conveyed by the Grant of Easement of Right of Way to Otay Water District dated _, from to OTAY WATER DISTRICT, a municipal water district, is hereby accepted by order of the Board of Directors pursuant to the authority conferred by Resolution No. 1829, adopted on February 23, 1981, and the grantee consents to recordation thereof by its duly authorized officer. Dated: By: Susan Cruz, District Secretary Otay Water District OWD EASEMENT NO. GRANTOR’S SIGNATURE ACKNOWLEDGEMENT State of Arizona ) ) ss. County of Maricopa ) The foregoing instrument was acknowledged before me this _____ day of ___________________, 2016, by Edward J. Reading, as Manager of Hanley Investments RSD Limited Liability Company, an Arizona limited liability company, the Managing Member of Vestar California XVII, L.L.C., an Arizona limited liability company, on behalf of the Grantor. Notary Public My Commission Expires: J-17224 EXHIBIT "A' SEWER EASEMENT Those portions of Lots 2 and 4 of Tract 5092-1 in the County of San Diego, State of California, according to Map thereof No. 13483 filed in the Office of the County Recorder of San Diego County October 10, 1997 said portions being more particularly described as follows: A strip of land 25.00 feet in width, lying easterly measured at right angles from the following described line: Beginning at the Northwest corner of said Lot 4, said corner being the beginning of a non-tangent 710.00 foot radius curye concave northerly to which a radial line bears South 10'29'38" East; thence along the northerly line of said Lot 4, easterly along the arc of said curve through a central angle of 01'33'16" a distance of 19.26 feet to the TRUE POINT OF BEGINNING; thence leaving said northerly line South 27'19'09" East 2B6.89 feet to a point on the northwesterly line of that easement granted to Otay Water District recorded February 15, 1985 as lnstrument No. 85-053055, said point being the POINT OF TERMINUS. The sidelines of said strip of land 25.00 feet in width shall be lengthened or shortened to intersect at the point of beginning with the northerly line of said Lot 4, and at the point of terminus with the northwesterly line of said easement granted to Otay Water District. Containing 0.162 acres, more or less ,F*ár2'4/î-Ze-Z,o/6 Patrick A. McMichael, L.S. 6242 JblK,'|Íilesl17224llegall17224_lgl_sewer ease for Lots 2 & 4 No.6187 ** OF C 1of1 SEWER EASEMENT ACQUIRED, 0.162 ACRES TEMPORARY CONSTRUCTION EASEMENT ACOUIRED, O.ISS ACRES ITEoìo t!! ËUUÈø VICINITY MAPIto scALE P.O.B. ßoú9 6û) NW COR. LOT 4 MAP 't3483 dñe JAlúACflA ßoA0 a1 -'14 /v L5l T.P.O.B.2438' ß"86 N-15 d L=0'55t27',t L43.91'.ACCESS RIGHTS FROM LOTS 3 & 4 IN AND TO JAI,IACHA ROAD 6R 54) REUNOUISED NID WAMED AND 13483 \tt L@7r fn ,'/r' \As N0.2oot-676322-,_ --\ RVE TAB s5g240u'w 2547' 4ìo-,r,NAME DEL A AR c1 0'57',35" 71 0,00 1 1. 89 -N- SCALE 1" = 50'EXHIBIT'B' LAND ** OF c SEWER EASEM ENT PORTIONS OF LOTS 2 & 4 OF TRACT 5092-1 , MAP NO. 13483 COUNTY OF SAN DIEGO, STATE OF CALIFORNIA +'I p úiocoONo N!o+ÞØEÔ ++ccqo oooo ll o onO ô.'EEo o@ I to J-17224 OWD EASEMENT NO. RECORDING REQUESTED BY AND AFTER RECORDATION MAIL TO: OTAY WATER DISTRICT 2554 SWEETWATER SPRINGS BOULEVARD SPRING VALLEY, CA 91977-7299 APN: 506-130-02, 506-130-03, 506-130-04 Documentary Transfer Tax: None (Exempt under Rev & Tax Code Section 11922) TEMPORARY CONSTRUCTION EASEMENT TO OTAY WATER DISTRICT For good and valuable consideration, receipt of which is hereby acknowledged, the undersigned Vestar California XVII, LLC, as Grantor(s) hereby GRANT(S) to OTAY WATER DISTRICT, a municipal water district formed under the Municipal Water District Law of 1911, as amended, situated in the County of San Diego, State of California, as Grantee, and to Grantee's contractors, a temporary construction easement (“Easement”) and the right to access, use and occupy the surface and subsurface of said easement for a period of six (6) months, commencing upon Grantor’s receipt of written notice from Grantee of commencement of construction activity. The Easement is located in the County of San Diego, State of California, more particularly described in Exhibit “A” and depicted in Exhibit “B” attached hereto and made a part hereof. The Easement and right of access shall extend to all acts necessary for the purpose of constructing a sewer pipeline, sewer manholes, and other underground structures appurtenant to said sewer line associated with the Campo Road Sewer Replacement Project (CIP S2024). Grantor further grants to Grantee the right of unobstructed ingress and egress to the Easement in the least disruptive manner, including the right to pass and re-pass over and along the Easement and to deposit tools, implements and other materials on the Easement and to utilize construction, automotive and other equipment thereon when necessary for the purpose of exercising its rights hereunder. Upon completion of any work, for the purposes and uses herein granted, Grantee shall restore, at Grantee's expense, the surface of the Easement to a compacted, neat, clean condition, but not necessarily the same condition as prior to such work, and shall replace any fencing or other improvements removed by Grantee or Grantee's contractors. OWD EASEMENT NO. Grantee agrees on its own behalf and on behalf of its successors in interest that it will indemnify, defend and hold harmless Grantor for any and all liability, claims and damages which result from Grantee’s (including its agents and contractors) negligence or willful misconduct in connection with its construction, maintenance and repair operations within the temporary construction easement. The rights and obligations contained herein shall inure to the benefit of and be binding upon the successors-in-interest, agents, employees, assigns, and transferees of the parties hereto. IN WITNESS WHEREOF, Grantor has executed this Grant of Temporary Construction Easement as of this day of , 20___. Grantor: Vestar California XVII, L.L.C., an Arizona limited liability company By: Hanley Investments RSD Limited Liability Company, its Managing Member By: _______________________________________, Manager Print Name: _________________________________ DISTRICT CERTIFICATE OF ACCEPTANCE This is to certify that the interest in real property conveyed by the Grant of Temporary Construction Easement to Otay Water District dated ________________________, _____________from _______________________ ________________________________ to OTAY WATER DISTRICT, a municipal water district, is hereby accepted by order of the Board of Directors pursuant to the authority conferred by Resolution No. 1829, adopted on February 23, 1981, and the grantee consents to recordation thereof by its duly authorized officer. Dated: _________________________ By: _____________________________ Susan Cruz, District Secretary Otay Water District OWD EASEMENT NO. GRANTOR’S SIGNATURE ACKNOWLEDGEMENT State of Arizona ) ) ss County of Maricopa ) The foregoing instrument was acknowledged before me this _____ day of ___________________, 20___, by Edward J. Reading, as Manager of Hanley Investments RSD Limited Liability Company, an Arizona limited liability company, the Managing Member of Vestar California XVII, L.L.C., an Arizona limited liability company, on behalf of the Grantor. Notary Public My Commission Expires: J-17224 EXHIBIT'A" TEMPORARY CONSTRUCTION EASEMENT Those portions of Lots 2,3 and 4 of Tract 5092-1 in the County of San Diego, State of California, according to Map thereof No. 13483 filed in the Office of the County Recorder of San Diego County October 10, 1997 said portions being more particularly described as follows: A strip of land 20.00 feet in width, lying westerly measured at right angles from the following described line: Beginning at the Northwest corner of said Lot 4, said corner being the beginning of a non-tangent 710.00 foot radius curve concave northerly to which a radial line bears South 10o29'38" East; thence along the northerly line of said Lot 4, easterly along the arc of said curve through a central angle of 01'33'16" a distance of 19.26 feet to the TRUE POINT OF BEGINNING; thence leaving said northerly line South 27'19'09" East 286.89 feet to a point on the northwesterly line of that easement granted to Otay Water District recorded February 15, 1985 as lnstrument No. 85-053055, said point being the POINT OF TERMINUS. The sidelines of said strip of land 20.00 feet in width shall be lengthened or shortened to intersect at the point of beginning with the northerly line of said Lot 4, and at the point of terminus with the northwesterly line of said easement granted to Otay Water District. Containing 0.133 acres, more or less. e- Patrick A. McMichael, L.S. 6242 Jb|KJ'filesl17224Aegall17224_lgl_temp const ease for Lots 2lhru 4 1of1 SEWER EASEMENT ACQUIRED, 0.162 ACRES TEMPORARY CONSTRUCTION EASEMENT ACQUIRED,0.133 ACRES ô Jm ITE F ËaUÈø VICINITY MAP IJO SCALE P.O.B. floúe 6û\ NW COR. LOT 4 MAP 13483 6ñø JAl',l,AcflA ßoh0 þ6 ß"86 QI v?j\ T.P.O.B. N'1t L4 50 d L=0'55',27', L43.gr ACCESS RIGHTS FROM LOTS 3 & 4 IN AND TO JAbIACHA ROAD ßR 54) REUNQUISED Al,lD WAMED AND ACCEPTED 13483 L@Tr 4 D s a/." é,t'"i$ sçdo ¡5 \As N0.200'1676322,__ RVE TA s5t240a'w 25.07'><-,'--\- -- RAD I USNAME DEL A AR c1 0'57',35" 71 0.00 1 1. gg -N- SCALE 1" = 50'EXHIBIT'B' TEMPORARY CONSTRUCTION EASEMENT PORTIONS OF LOTS 2, 3 & 4 OF TRACT 5092-1, MAP NO. 13483 COUNTY OF SAN DIEGO, STATE OF CALIFORNIA .s cÞ QO.oNOON rpl+ cc EE oo oo )a o ono ô-EEo oo J-1 7 224 .'Dedicated to Community fieMCG 2554SWEETWATERSPRINGSBOULEVARD,SPRING VALLEY,CALIFORNIA91978-2004 TELEPHONE:670-2222,AREACODE 619 WWW.Otaywater.gov June 1,2016 Project No.:S2024-001102 Vestar California XVII, LLC c/o Dana Duncan 2907 Shelter Island Dr.,#219 San Diego, CA 92106 SUBJECT:Temporary Construction and Permanent Utility Easement - APN #506-130-02,03 &04; Otay Water District -Campo Road Sewer Replacement Project; Statutory Offer Pursuant to Government Code Section 7267.2(a) Dear Property Owner: The Otay Water District (District)is in the process of relocating District Sewer facilities along Campo Road (SR 94) ("Campo Road Sewer Replacement Project"). In connection with the Campo Road Sewer Replacement Project,the District hereby offers to acquire Temporary Construction and Permanent Utility Easements across a portion of your real property located at 2949,2987 &2991 Jamacha Rd.and identified by Assessor Parcel Number 506-130-02,03 & 04 (the "Real Property").It is our understanding that you are currently the only owner of record of the Real Property.If you are not the owner of the Real Property, or if anyone else owns any portion of, or interest in,the Real Property, please contact us immediately. The District wishes to acquire the Temporary Construction and Permanent Utility Easements amicably,expeditiously,and by negotiation,pending the approval by the Board of Directors ("Board") of the District. To accomplish this,the District is required to (i)establish an amount that the District believes to be "just compensation,"(ii)make an offer to the owner(s)of record to acquire the Temporary Construction and Permanent Utility Easements for the full amount so established,and (iii)provide the owner(s)with a written statement of, and summary of the basis for, the amount established as "just compensation."The District's offer cannot be less than the District's appraisal ofthe value of the property interest to be acquired, (See California Government Code Section 7267.2(a)). Vestar California XVII, LLC Temporary Construction and Permanent Utility Easement -APN #506-130-02,03 & 04 June 1,2016 Page 2 of 3. The District retained the appraisal services of Colliers International,an independent real estate appraiser,to estimate the "Fair Market Value"of the proposed acquisition of Temporary Construction and Permanent Utility Easements,as that value is defined in Section 1263.320 of the California Code of Civil Procedure.The appraiser's Fair Market Value Estimate is shown on the enclosed "Summary of the Basis for the Amount Established as Just Compensation"and "Summary of Salient Facts and Conclusions." Based upon this independent appraisal,the District has determined that the amount of $67,039.00 constitutes Just Compensation for the proposed purchase of a Permanent Utility Easement and $5,229.00 constitutes Just Compensation for the proposed use of your property pursuant to the Temporary Construction Easement,both of which are described and depicted in the enclosed legal description and plat. Ifyou are agreeable with the above offer, an escrow will be opened by or at the direction of the District.Escrow will facilitate the conveyance of the Permanent Utility Easement to the District free and clear of any and all liens,encumbrances,and options or claims for leasehold interests for a total consideration of $72,300.00.The acquisition of the Temporary Construction and Permanent Utility Easements and access rights is subject to District reviewing the escrow Preliminary Title Report, if any, and accepting the conveyance document.The District will pay all eligible incidental expenses associated with the escrow closing,including any recording fees. Please note that the proceeds related to the purchase of the Temporary Construction and Permanent Utility Easements may be subject to payment demands for county taxes, assessment liens,federal and state tax liens,creditor judgements,and beneficiaries of trust deeds.Please note further,that ifa condemnation action is approved and filed,the District may continue to discuss a negotiated purchase based upon the offer set forth herein. This offer will be deemed revoked,if it has not been accepted before the earlier of (i)the date on which the Board of Directors of the District holds a public hearing on a possible condemnation action,if any,or (ii)within 45 days of the date of this letter. Ifthe above offer meets with your approval,please sign this letter on Page 3 under the heading "Offer Accepted" and return itto myattention. Aduplicate copy ofthis letter is enclosed for your records.Please review allthe enclosed documents priorto making a decision.If you accept our offer,please be ready to execute and deliver the Temporary Construction and Permanent Utility Easements enclosed with this offer. Vestar California XVII,LLC Temporary Construction and Permanent Utility Easement - APN #506-130-02,03 &04 June 1,2016 Page 3 of 3. If you have any questions regarding the project or the terms of the Temporary Construction and Permanent Utility Easements acquisition proposal,please contact the District's Project Manager,Stephen Beppler, P.E.,Senior Civil Engineer,at (619) 670- 2209 or by e-mail at steve.beppler@otaywater.gov. Sincerely, OTAY WATER DISTRICT Mark Watton General Manager MW:jf Enclosures: Summary of the Basis for the Amount Established as Just Compensation - Permanent Easement Summary ofthe Basis forthe Amount Established as Just Compensation - Temporary Construction Easement Appraisal Summary Statement Proposed Permanent Utility Easement with Exhibit A&B- Legaland Plat Proposed Temporary Construction Easement with Exhibit A&B- Legaland Plat The Public Acquisition Process Copy of this Offer Letter OFFER ACCEPTED:VESTAR CALIFORNIA XVII,LLC Dated: By: Signature Print P:\WORKING\CIP S2024 Campo Road Sewer Replacement\Easements\Proposed Easements\Offers\Vestar RSDTC - Constructionand Permanent EasementOffer 20160518.docx Summary of the Basis for the Amount Established as Just Compensation (Pursuant to Section 1255.010 of the California Code of Civil Procedure) (Accompanying the offer made pursuant to Government Code Section 7267.2) The following is a summary of the basis for the amount established as just compensation for the Permanent Utility Easement the District desires to acquire on a portion of the Real Property described in the Offer to which this Summary is attached. The appraisal was made in accordance with accepted appraisal principles, consistent with California valuation law. An identification of the parcel, the project for which the permanent utility easement is required, the required property rights and the valuation analysis which was the basis for the valuation conclusion is as follows: PROJECT: Otay Water District Campo Road Sewer Replacement Project ASSESSOR PARCEL NUMBER: 506-130-02 & 04 SUBJECT PROPERTY LOCATION: 2949 & 2987 Jamacha Rd., El Cajon, CA 92019 OWNER OF RECORD: Vestar California XVII, LLC 2907 Shelter Island Dr. #219, San Diego, CA 92106 Telephone: 619-223-9400 (Dana Duncan) INTEREST BEING VALUED: Permanent Utility Easement AREA AFFECTED: Approximately 7,057 square feet, or 0.162 acres DATE OF VALUE: February 12, 2016 SUMMARY OF VALUE CONCLUSIONS AND DESCRIPTION OF THE LARGER PARCEL: Refer to enclosed copy of Appraisal Summary Statement PROPOSED PROJECT: The purpose of the Otay Water District Campo Road Sewer Replacement Project is for the District to replace its facilities that are no longer meeting the District’s needs. The District anticipates using the Permanent Utility Easement as a means to access the trench for the pipe to be realigned. After the realignment of the pipe is accomplished, the District will return the easement to its condition prior to the access. Summary of the Basis for the Amount APN 506-130-02 & 04 Established as Just Compensation – Permanent Utility Easement Page 2 of 3. DESCRIPTION OF THE PERMANENT UTILITY EASEMENT USE: The permanent easement has an area of approximately 7,057 square feet. The District will construct a 15” sewer within the easement. Upon completion the District will return the easement to its condition prior to the access and will access the sewer through manholes. REMAINDER OF PARCEL: The permanent utility easement is not anticipated to have significant impact on the Real Property. VALUATION OF THE LARGER PARCEL Definition of Fair Market Value Fair Market Value is defined under California law as the highest price on the date of valuation that would be agreed by a seller willing to sell but under no particular or urgent necessity to sell and a buyer being ready, willing and able to buy but under no particular necessity for so doing, each dealing with the other with full knowledge of all the uses and purposes for which the property is reasonably adaptable and available. Definition of Highest and Best Use Highest and best use is defined as the reasonably probable use of land that is legally permissible, physically possible, financially feasible, and maximally productive resulting in the highest value. The highest and best use analysis is used in the appraisal process to identify comparable properties and, where applicable, to determine whether the existing improvements should be retained, renovated, or demolished. The results of the highest and best use analysis are discussed below. HIGHEST AND BEST USE The highest and best use for the Real Property was determined to be industrial building, as zoned. METHODOLOGY The sales comparison approach was used to estimate the fair market value of the Real Property and the temporary construction easement. Summary of the Basis for the Amount APN 506-130-02 & 04 Established as Just Compensation – Permanent Utility Easement Page 3 of 3. SALES COMPARISON APPROACH The following is a summary of the principal sales considered applicable to the valuation of the larger parcel: SUMMARY OF IMPROVED TRANSACTIONS No. Location Sale Date Size in AC Price Price/SF 1 5900 Severin Dr., La Mesa Pending 2/4/2016 0.46 $400,000 $19.96 2 1338 E. Main St., El Cajon 8/28/2014 1.31 $1,020,000 $17.87 3 714 Grand Ave., Spring Valley 4/3/2015 0.27 $230,000 $19.56 4 230 El Cajon, El Cajon 7/21/2015 0.80 $500,000 $14.35 5 1164 Coushatta, Spring Valley 10/12/2015 1.42 $885,000 $14.31 Broker opinion of value varies from $15 to $20 per square foot depending on size and location of the parcels. The property at Jamacha Rd., consisting of 4.10 acres, has an estimated value of $19 per square foot. VALUATION OF PERMANENT UTILITY EASEMENT The compensation for the permanent easement which encumbers 7,057 square feet was based on the fee simple interest of the property, and is a percentage of the fee simple value based on the fact that it is shared property with some rights retained by the current property owner. The fee simple value of the land was established at $19 per square foot. With 50% of the rights taken by the permanent easement. Therefore, the value of the part taken is $67,039 ($19.00 per square foot x 50% shared rights x 7,057 square feet). VALUE OF THE REMAINDER Following the proposed realignment/relocation of the District’s facilities, the Real Property will have an area that is unchanged from its present condition. No significant adverse impact is anticipated from the Project. The acquisition of the easement does not change the zoning or other land use regulations applicable to the Real Property. Based on the investigation, there are no damages occasioned by the Project to the reminder of the Real Property. BENEFIT The proposed sewer line continues to be underground and will be available through manholes for use on the Real Property. There is no market evidence suggesting that there is a benefit to the Real Property. Therefore, there are no demonstrable benefits to the Real Property directly resulting from the Project. Summary of the Basis for the Amount Established as Just Compensation (Pursuant to Section 1255.010 of the California Code of Civil Procedure) (Accompanying the offer made pursuant to Government Code Section 7267.2) The following is a summary of the basis for the amount established as just compensation for the Temporary Construction Easement the District desires to acquire on a portion of the Real Property described in the Offer to which this Summary is attached. The appraisal was made in accordance with accepted appraisal principles, consistent with California valuation law. An identification of the parcel, the project for which the temporary construction easement is required, the required property rights and the valuation analysis which was the basis for the valuation conclusion is as follows: PROJECT: Otay Water District Campo Road Sewer Replacement Project ASSESSOR PARCEL NUMBER: 506-130-02, 03 & 04 SUBJECT PROPERTY LOCATION: 2949, 2987 & 2991 Jamacha Rd., El Cajon, CA 92109 OWNER OF RECORD: Vestar California XVII, LLC 2907 Shelter Island Dr. #219, San Diego, CA 92106 Telephone: 619-223-9400 (Dana Duncan) INTEREST BEING VALUED: Temporary Construction Easement AREA AFFECTED: Approximately 5,793 square feet, or 0.133 acres DATE OF VALUE: February 12, 2016 SUMMARY OF VALUE CONCLUSIONS AND DESCRIPTION OF THE LARGER PARCEL: Refer to enclosed copy of Appraisal Summary Statement PROPOSED PROJECT: The purpose of the Otay Water District Campo Road Sewer Replacement Project is for the District to replace its facilities that are no longer meeting the District’s needs. The District anticipates using the Temporary Construction Easement as a means to access the trench for the pipe to be realigned. After the realignment of the pipe is accomplished, the District will return the temporary construction easement to its condition prior to the access. Summary of the Basis for the Amount APN 506-130-02, 03 & 04 Established as Just Compensation –Temporary Construction Easement Page 2 of 3. DESCRIPTION OF THE TEMPORARY CONSTRUCTION EASEMENT USE: The temporary construction easement has an area of approximately 5,793 square feet and is required for a period of six months. However, actual work on that portion of the pipeline is anticipated to be a few weeks. The area that the District needs to access is within the Real Property through the existing parking lot. REMAINDER OF PARCEL: The temporary construction easement is not anticipated to have significant impact on the Real Property. VALUATION OF THE LARGER PARCEL Definition of Fair Market Value Fair Market Value is defined under California law as the highest price on the date of valuation that would be agreed by a seller willing to sell but under no particular or urgent necessity to sell and a buyer being ready, willing and able to buy but under no particular necessity for so doing, each dealing with the other with full knowledge of all the uses and purposes for which the property is reasonably adaptable and available. Definition of Highest and Best Use Highest and best use is defined as the reasonably probable use of land that is legally permissible, physically possible, financially feasible, and maximally productive resulting in the highest value. The highest and best use analysis is used in the appraisal process to identify comparable properties and, where applicable, to determine whether the existing improvements should be retained, renovated or demolished. The results of the highest and best use analysis are discussed below. HIGHEST AND BEST USE The highest and best use for the Real Property was determined to be industrial building, as zoned. METHODOLOGY The sales comparison approach was used to estimate the fair market value of the Real Property and the temporary construction easement. Summary of the Basis for the Amount APN 506-130-02, 03 & 04 Established as Just Compensation –Temporary Construction Easement Page 3 of 3. SALES COMPARISON APPROACH The following is a summary of the principal sales considered applicable to the valuation of the larger parcel: SUMMARY OF IMPROVED TRANSACTIONS No. Location Sale Date Size in AC Price Price/SF 1 5900 Severin Dr., La Mesa Pending 2/4/2016 0.46 $400,000 $19.96 2 1338 E. Main St., El Cajon 8/28/2014 1.31 $1,020,000 $17.87 3 714 Grand Ave., Spring Valley 4/3/2015 0.27 $230,000 $19.56 4 230 El Cajon, El Cajon 7/21/2015 0.80 $500,000 $14.35 5 1164 Coushatta, Spring Valley 10/12/2015 1.42 $885,000 $14.31 Broker opinion of value varies from $15 to $20 per square foot depending on size and location of the parcels. The property at Rancho San Diego Towne Center, consisting of 4.10 acres, has an estimated value of $19 per square foot. VALUATION OF TEMPORARY CONSTRUCTION EASEMENT The compensation for a temporary construction easement typically amounts to compensation to the owner for loss in utility of the area during the period of time the portion of the property is used for another purpose. A rental rate of return of 9.5 percent per year was applied to reflect the value of the temporary rights. The temporary construction easement will be needed for a period of six months (.5 of a year). Therefore, the value of the part taken is $5,229. The resulting calculation is as follows: $19.00 x 5,793= $110,067 $110,067 x 9.5% per year = $10,456 per year $10,456 x .5 year = $5,229 VALUE OF THE REMAINDER Following the proposed relocation of the District’s facilities, the Real Property will have an area that is unchanged from its present condition. No significant adverse impact is anticipated from the Project. The acquisition of the easement does not change the zoning or other land use regulations applicable to the Real Property nor does it have a significant impact on the use of the Real Property during the time the temporary construction easement is anticipated to remain in effect. Based on the investigation, there are no damages occasioned by the Project to the remainder of the Real Property. BENEFIT The proposed sewer line continues to be underground and will not be available for use on the Real Property. There is no market evidence suggesting that there is a benefit to the Real Property. Therefore, there are no demonstrable benefits to the Real Property directly resulting from the Project. OTAY Ðsd¿caisd to Comr,rnunttg Se,rt;¿ce 2554 SWEETWATER SPRINGS BOULEVARD, SPRING VALLEY CALIFORNIA 91 978-2004 TELEPHONE: 670-2222, AREACODE619 www.otawater.gov December 19, 2016 Project No.: 52024-001 102 Vestar c/o Allan J. Kasen 2425 East Camelback Road, Suite 750 Phoenix, AZ 85016 SUBJECT Temporary Construction and Permanent Utility Easement - APN # 506-130-02,03 & 04; Otay Water District - Campo Road Sewer Replacement Project; Statutory Offer Pursuant to Government Code Secfion 7267.2(a) Dear Mr. Kasen The Otay Water District (District) hereby presents a revised statutory offer to acquire Temporary Construction and Permanent Utility Easements across a portion of the real property located a|2949,2987, & 2991 Jamacha Road and identified by Assessor Parcel Number 506-130-02,03 & 04 (the "Real Property"), owned byVestar and its subsidiary Vestar California XVll, LLC, upon which the District initially offered in a letter dated June 1 , 2016. The easement is related to the District's relocation of sanitary sewer facilities along Campo Road (SR 94) ("Campo Road Sewer Replacement Project"). Based upon negotiations between the District's legal counsel and Vestar and considering the appraised value and your disagreements with it, an amount of $190,000.00 has been deemed as Just Compensation for the proposed purchase of the Permanent Utility Easement and Temporary Construction Easement, both of which are described and depicted in the enclosed legaldescriptions and plats. The descriptions have been revised from the original version provided in the June 1 , 2016 offer to reflect agreed upon changes. Upon acceptance of this offer, an escrow will be opened by or at the direction of the District. Escrow will facilitate the conveyance of the Permanent Utility Easement and Temporary Construction Easement to the District free and clear of any and all liens, encumbrances, and options or claims for leasehold interests for a total consideration of $190,000.00. The acquisition of the Temporary Construction and Permanent Utility Easements and access rights is subject to District reviewing the escrow Preliminary Title Report, if any, and accepting the conveyance document. The District will pay all eligible incidental expenses associated with the escrow closing including any recording fees. Vestar Temporary Construction and Permanent Utility Easement - APN # 506-1 30-02,03 & 04 December 19,2016 Page 2 of 2. Please note that the proceeds related to the purchase of the Temporary Construction and Permanent Utility Easements may be subject to payment demands for county taxes, assessment liens, federal and state tax liens, creditor judgements, and beneficiaries of trust deeds. This offer will be deemed revoked if it has not been accepted within 30 days of the date of this letter. Please have the appropriately authorized signatory sign this letter below under the heading "Offer Accepted" with notary acknowledgment and return it to my attention along with a completed Federal IRS Form W-9 (enclosed). A copy of this letter is enclosed for your records. Please also be prepared to execute and deliver the Temporary Construction and Permanent Utility Easements enclosed with this offer. Sincerely, OTAY WA R DISTRICT rk Watton General Manager MW:jf Enclosures: Proposed Permanent Utility Easement with Exhibit A & B - Legal and Plat Proposed Temporary Construction Easement with Exhibit A & B - Legal and Plat Federal IRS Form W-9 Copy of this Offer Letter OFFER ACCEPTED: VESTAR CAL¡FORNIA XVII, LLC Dated By: Title Signature Print ATTACHMENT F – Budget Detail Project Budget Detail S2024‐Campo Road Sewer Main Replacement Level Title1 Committed Expenditures Outstanding Commitment Projected Final Cost Vendor Planning Consultant Contracts $20,020.00 $20,020.00 $0.00 $20,020.00 AEGIS ENGINEERING MGMT INC Regulatory Agency Fees $132.00 $132.00 $0.00 $132.00 US BANK $2,260.00 $2,260.00 $0.00 $2,260.00 COUNTY OF SAN DIEGO Service Contracts $161.70 $161.70 $0.00 $161.70 SAN DIEGO DAILY TRANSCRIPT $42.50 $42.50 $0.00 $42.50 EAST COUNTY GAZETTE Standard Salaries $138,106.13 $138,106.13 $0.00 $138,106.13 Total $160,722.33 $160,722.33 $0.00 $160,722.33 Design Consultant Contracts $9,315.00 $9,315.00 $0.00 $9,315.00 WATER SYSTEMS CONSULTING INC $765,074.35 $689,661.45 $75,412.90 $765,074.35 RICK ENGINEERING COMPANY $4,025.00 $4,025.00 $0.00 $4,025.00 MICHAEL D KEAGY REAL ESTATE $3,507.75 $3,507.75 $0.00 $3,507.75 NINYO & MOORE GEOTECHNICAL Professional Legal Fees $182.32 $182.32 $0.00 $182.32 STUTZ ARTIANO SHINOFF $1,910.00 $1,910.00 $0.00 $1,910.00 ARTIANO SHINOFF Regulatory Agency Fees $956.00 $956.00 $0.00 $956.00 COUNTY OF SAN DIEGO Service Contracts $158.20 $158.20 $0.00 $158.20 SAN DIEGO DAILY TRANSCRIPT Easement Acquisition $125,000.00 $0.00 $125,000.00 $125,000.00 REGENCY CENTERS $190,000.00 $0.00 $190,000.00 $190,000.00 VESTAR Standard Salaries $253,089.60 $253,089.60 $0.00 $253,089.60 Total $1,353,218.22 $962,805.32 $390,412.90 $1,353,218.22 Construction Consultant Contracts $42,460.65 $0.00 $42,460.65 $42,460.65 RICK ENGINEERING COMPANY $12,258.00 $12,258.00 $0.00 $12,258.00 NINYO & MOORE GEOTECHNICAL $17,400.00 $17,400.00 $0.00 $17,400.00 ALYSON CONSULTING Standard Salaries $1,285.07 $1,285.07 $0.00 $1,285.07 Total $73,403.72 $30,943.07 $42,460.65 $73,403.72 Budget $8,500,000.00 Total $1,587,344.27 $1,154,470.72 $432,873.55 $1,587,344.27 SUBJECT/PROJECT: S2024-001102 Authorization to Acquire Easements at Rancho San Diego Towne Center from Vestar for the Campo Road Sewer Replacement SKYLINEWESLEYANCHURCH ?Ë AV O C A D O B L V D FURY LANE JAM A C H A B L V D JAMAC H A R D CUYAMACACOLLEGE C A M P O R D C A M P O R D ?Ë OWDREGULATORYSITE Ralph W. ChapmanWater ReclamationFacility SINGER L N RANCHOSAN DIEGOVILLAGE RANCHOSAN DIEGOTOWNECENTER EASEMENTACQUISITION VICINITY MAP PROJECT SITE NTS DIV 5 DIV 1 DIV 2 DIV 4 DIV 3 ?ò Aä;&s ?p ?Ë !\ OTAY WATER DISTRICTCAMPO ROAD SEWER MAIN REPLACEMENTLOCATION MAP EXHIBIT A CIP S2024 0 1,000500 Feet F F P: \ W O R K I N G \ C I P S 2 0 2 4 C a m p o R o a d S e w e r R e p l a c e m e n t \ G r a p h i c s \ E x h i b i t s - F i g u r e s \ E x h i b i t A , L o c a t i o n M a p , O c t 2 0 1 6 . m x d Legend Proposed 15-Inch Sewer Main Alignment Existing 10-inch Gravity Sewer to be Replaced Existing Sewer Mains OTAY WATER DISTRICTCAMPO ROAD SEWER REPLACEMENTRANCHO SAN DIEGO TOWNE CENTERPROPOSED EASEMENT CIP S2024F P: \ W O R K I N G \ C I P S 2 0 2 4 C a m p o R o a d S e w e r R e p l a c e m e n t \ G r a p h i c s \ E x h i b i t s - F i g u r e s \ R S D T o w n e C e n t e r P r o p o s e d E a s e m e n t - R E V 1 . m x d RANCHO SAN DIEGOTOWNE CENTER C a m p o R d Jamacha Rd Jamach a R d 331 0 10050 Feet EXHIBIT B PROPOSED EASEMENT PERMANENT EASEMENT TEMPORARY CONSTRUCTION EASEMENT STAFF REPORT TYPE MEETING: Regular Board MEETING DATE: February 1, 2017 SUBMITTED BY: Marissa Dychitan, Senior Accountant PROJECT: DIV. NO. All APPROVED BY: Rita Bell, Finance Manager Joseph R. Beachem, Chief Financial Officer German Alvarez, Assistant General Manager Mark Watton, General Manager SUBJECT: Adopt Resolution No. 4323 Amending Policy No. 45, the Debt Policy, of the District’s Code of Ordinances GENERAL MANAGER’S RECOMMENDATION: That the Board adopt Resolution No. 4323 amending Policy No. 45, the Debt Policy, of the District’s Code of Ordinances. COMMITTEE ACTION: See Attachment A. PURPOSE: The Debt Policy is being updated in an effort to reflect the current debt standards and environment. The proposed Debt Policy (Attachment C) revises and expands upon the existing Policy (Exhibit 1) that was previously approved by the Board on September 4, 2013. ANALYSIS: Senate Bill 1029 Section 2(i)(1)states “The issuer of any proposed debt issue of state or local government shall, no later than 30 days prior to the sale of any debt issue, submit a report of the proposed issuance to the commission by any method approved by the commission.” The report of proposed debt issuance shall include a certification by the issuer that it has adopted local debt policies concerning the use of debt and that the contemplated debt issuance is consistent with those local debt policies. A local debt policy shall include all of the following: 1. The purposes for which the debt proceeds may be used. 2. The types of debt that may be issued. 3. The relationship of the debt to, and integration with, the issuer’s capital improvement program or budget, if applicable. 4. Policy goals related to the issuer’s planning goals and objectives. 5. The internal control procedures that the issuer has implemented, or will implement, to ensure that the proceeds of the proposed debt issuance will be directed to the intended use. The following proposed changes have been added to comply with the above law: Section 14.0 - Internal Control By adopting this policy the following procedures will be added to the Debt Policy. These processes have already been in place to ensure that the proceeds of the proposed debt issuance will be directed to the intended use: 1. A separate Reserve/Cash Account shall be maintained for the proceeds of each bond to ensure that there is no comingling of funds. 2. All related expenditure charges against the bond proceeds shall be properly approved by the authorized authority. 3. All related transactions shall be fully documented so that an undisputable audit trail exists. 4. All related transactions shall be tracked in the District’s accounting system. A financial report reflecting all charges related to the bond shall be prepared and maintained. 5. The District shall establish a retention policy which states that all supporting documents related to bond proceeds spending shall be kept indefinitely. 6. The reserve account shall be reconciled on a monthly basis. Sections 15.0 through 18.0 have been renumbered to reflect the addition of Section 14.0 above. The policy is consistent with the current law and the overall objectives of the policy are being met. FISCAL IMPACT: Joe Beachem, Chief Financial Officer A debt policy improves the quality of decisions, provides guidelines for the structure of debt issuance, and demonstrates a commitment to long-term capital and financial planning. Adherence to a debt policy signals to rating agencies and capital markets that the District is well managed and therefore is likely to meet its debt obligations. The District’s fiscal budgeting process includes a five-year projection of debt financing needs. According to the FY 2017 budget, the District does not foresee issuing debt for potable and recycled water projects, but identifies the need for financing in fiscal 2018 for sewer projects. The District uses the Debt Coverage ratio as a Key Performance Indicator for evaluating the financial ability to repay debt. The District has a debt covenant requiring a ratio of at least 125%. The actual ratio for fiscal 2016 was 171%. The District currently maintains an AA-/AA rating. STRATEGIC GOAL: Demonstrate financial health through formalized policies, prudent investing, and efficient operations. The strategic plan measurement goal for fiscal 2017 is to obtain a debt coverage ratio of 196%. LEGAL IMPACT: None. Attachments: A) Committee Action B) Resolution No. 4323 Exhibit 1: Strike-through Debt Policy C) Proposed Debt Policy D) Presentation ATTACHMENT A SUBJECT/PROJECT: Adopt Resolution No. 4323 Amending Policy No. 45, the Debt Policy, of the District’s Code of Ordinances COMMITTEE ACTION: The Finance, Administration, and Communications Committee (FA&C Committee) reviewed this item at a meeting held on January 18, 2017 and the following comments were made:  Staff is requesting that the Board adopt Resolution No. 4323 amending Policy #45, the Debt Policy of the District’s Code of Ordinances.  Staff reviewed the information in the staff report.  Staff indicated that the policy review includes a review of the existing outstanding debt, the debt coverage ratio and proposed updates to the Debt Policy. Total outstanding debt to date is $94.8 million. The debt coverage ratio for FY 2016 is 171%. The projected debt coverage ratio for the next five years shows that the debt and operational debt ratio are above the minimum of 125%.  It was indicated that the District’s debt policy adheres to the guidelines of the following professional finance organizations: - Government Finance Officers Association - California Municipal Treasurers Association - California Society of Municipal Finance Officers  In response to an inquiry from the committee, it was indicated that staff has established a reserve account for each bond debt. The funding in these accounts is drawn down monthly for CIP expenditures and staff monitors these expenditures. The District’s accounts are reconciled monthly as it is a standard best accounting practice. Additionally, if a debt reserve earns interest, that interest (during the time when you still have proceeds) is transferred out of the reserve fund and can be used on various CIP projects. When the proceeds are fully drawn down, any interest earnings on that reserve account can be used to pay principal or interest of the debt.  The Committee indicated that the policy utilizes the terms “Reserve” and “Cash Accounts” and since the terms refer to the same thing, the Committee suggested that the Policy utilize the same term (Reserve) throughout the Policy. Staff will present the revised policy to the Board for adoption.  The Committee inquired, as interest rates are so low, if staff has looked at potentially refinancing outstanding debt with a straight interest loan. Staff indicated that the majority of the debt issuances are not callable and the 2010 Build America Bonds-B have a “Make-Whole Premium” provision which would not make it financially feasible to convert to a straight loan. Staff indicated the 2010 Build America Bonds-A that is callable in 2020, that they could explore the possibility for this bond at that time.  Staff indicated, in response to an inquiry from the Committee, that every now and then staff would put together a list of agencies’ current bond rating and debt coverage ratios, however, these are not lists that are maintained on an ongoing basis. Staff indicated that the District is not high or low, it is more moderate (somewhere in the middle). Upon completion of the discussion, the committee supported staffs’ recommendation and presentation to the full board on the consent calendar. Page 1 of 2 RESOLUTION NO. 4323 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE OTAY WATER DISTRICT AMENDING DEBT POLICY NO. 45 OF THE DISTRICT’S CODE OF ORDINANCES WHEREAS, the Otay Water District Board of Directors has been presented with an amended Debt Policy No. 45 of the District’s Code of Ordinances for the financial management of the Otay Water District; and WHEREAS, the amended Debt Policy has been reviewed and considered by the Board, and it is in the interest of the District to adopt the amended Debt Policy; and WHEREAS, the strike-through copy of the proposed policy is attached as Exhibit 1 to this resolution; and NOW, THEREFORE, BE IT RESOLVED, DETERMINED AND ORDERED by the Board of Directors of the Otay Water District that the amended Debt Policy, incorporated herein as Attachment C, is hereby adopted. PASSED, APPROVED AND ADOPTED by the Board of Directors of Otay Water District at a board meeting held this 1st day of February 2017, by the following vote: Ayes: Noes: Abstain: Absent: ________________________ President Attachment B Page 2 of 2 ATTEST: ____________________________ District Secretary OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 9/4/13 2/1/17 Page 1 of 23 1.0: POLICY It is the policy of the Otay Water District to finance the acquisition of high value assets that have an extended useful life through a combination of current revenues and debt financing. Regularly updated debt policies and procedures are an important tool to insure the use of the District’s resources to meet its commitments, to provide the highest quality of service to the District’s customers, and to maintain sound financial management practices. These guidelines are for general use and allow for exceptions as circumstances dictate. 2.0: SCOPE This policy is enacted in an effort to standardize the issuance and management of debt by the Otay Water District. The primary objective is to establish conditions for the use of debt, to minimize the District’s debt service requirements and cost of issuance, to retain the highest practical credit rating, maintain full and complete financial disclosure and reporting, and to maintain financial flexibility for the District. This policy applies to all debt issued by the District including general obligation bonds, revenue bonds, capital leases and special assessment debt. 3.0: LEGAL & REGULATORY REQUIREMENTS The Chief Financial Officer (CFO) and the District’s Legal Counsel will coordinate their activities to ensure that all securities are issued in full compliance with Federal and State law. 4.0: CAPITAL FACILITIES FUNDING Financial Planning The District maintains a six-year financial projection that identifies operating requirements and public facility and equipment requirements, and has developed a Rate Model for funding the District’s 6-Year Capital Improvement Program (CIP). The District’s CIP Budget places the capital requirements in order of priority and schedules them for funding and implementation. It identifies a full range of capital needs, provides for the ranking of the importance of such needs, and identifies all the funding sources that are available to cover the costs of the projects. In cases where the program identifies project funding through the use of debt financing, the budget should provide Exhibit 1 OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 9/4/13 2/1/17 Page 2 of 23 information needed to determine debt capacity. The Rate Model and the CIP Budget give the Board part of the data needed to make informed judgments concerning the possibility of issuing debt. Funding Criteria The Chief Financial Officer (CFO) will evaluate all capital project requests and develop a proposed funding plan. Priority may be given to those projects that can be funded with current resources (annual cash flow, fund balances or reserves). Those projects that cannot be funded with current resources may be deferred or the CFO may recommend that they be funded with debt financing. However, debt financing will not be considered appropriate for any recurring purpose such as current operating and maintenance expenditures. The issuance of short-term cash-flow instruments is excluded from this limitation. The General Manager will recommend the funding plan to the Board. The General Manager may deem it necessary or desirable in certain circumstances to convene a Finance Committee meeting to evaluate funding options presented by the Chief Financial Officer. Funding Sources The District’s capital improvements can be classified in three categories: those related to an expansion of the system (“expansion”), those related to upgrading the existing system (“betterment”) and those related to repairing or replacing existing infrastructure (“replacement”). In general, capital improvements for betterment or replacement are financed primarily through user charges, availability charges, and betterment charges. Capital improvements for expansion are financed through capacity fees. Accordingly, these fees are reviewed at least annually or more frequently as required and set at levels sufficient to ensure that new development pays its fair share of the costs of constructing necessary infrastructure. Additionally, the District will seek State and Federal grants and other forms of intergovernmental aid wherever possible. Pay-As-You-Go Projects The District’s capacity fees are the major funding source in financing additions to the water system and the recycled water system. Over time, the fees collected and the cost to construct the capital projects should balance. However, collection of these fees is subject to significant fluctuation based on the rate of new development. Accordingly, the Chief Financial Officer, in developing the funding OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 9/4/13 2/1/17 Page 3 of 23 plan for the CIP, will determine that current revenues and adequate fund balances are available so project phasing can be accomplished. If this is not the case, the Chief Financial Officer may recommend that: 1. The project be deferred until funds are available, or 2. Based on the priority of the project, long-term debt is issued to finance the project. Debt Financed Projects If a project or projects are to be financed with long-term debt, the District should use the following criteria to evaluate the suitability of the financing for the particular project or projects: 1. The life of the project or asset to be financed is 10 years or longer and its useful life is expected to exceed the term of the financing. 2. Revenues available for debt service are deemed to be sufficient and reliable so that long-term financing can be marketed without jeopardizing the credit rating of the District. 3. Market conditions present favorable interest rates and demand for District financing. 4. The project is mandated by State and/or Federal requirements and current resources are insufficient or unavailable. 5. The project is immediately required to meet or relieve capacity needs and current resources are insufficient or unavailable. 5.0: DEBT STRUCTURE General The District will normally issue debt with a maturity of not more than 30 years. The structure should approximate level debt service for the term where it is practical or desirable. There will be no debt structures that include increasing debt service levels in subsequent years, with the first and second year of a debt payoff schedule the exception and related to projected additional income to be generated by the project to be funded. There will be no "balloon" debt repayment schedules that consist of low annual payments and one large payment of the balance due at the end of the term. There will always OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 9/4/13 2/1/17 Page 4 of 23 be at least interest paid in the first fiscal year after debt issuance and principal starting no later than the first fiscal year after the date the facility or equipment is expected to be placed in service. Capitalized interest will not be for a period of more than necessary to provide adequate security for the financing. Limitations on the Issuance of Variable Rate Debt The District will normally issue debt with a fixed rate of interest. The District may issue variable rate for the purpose of managing its interest costs. At the same time, the District should protect itself from too much exposure to interest rate fluctuations. In determining that it is in the District’s best interest to issue certain debt at variable rates instead of fixed rates, at the time of issuing any variable rate debt, there should be at least a 10% estimated reduction in annual debt costs by issuing variable rate debt when compared to a similar issuance of fixed rate debt. If the estimated overall cost savings from issuing variable rate debt is not at least 10% at the time of issuance, relatively small fluctuations in rates could actually increase the District’s financing costs over the life of the bonds compared to a similar fixed rate financing. By using this 10% factor at the time of issuance, the District can be relatively assured that its variable rate financing will be cost-effective over the term of the bonds. The comparison will be based on the following criteria: 1. The interest rate used to estimate variable interest costs will be the higher of the 10 year average rate or the current weekly variable rate. 2. The variable rate debt costs will include an estimate for annual costs such as letter of credit fees, liquidity fees, remarketing fees, monthly draw fees and annual rating fees applicable to the letter of credit. 3. Any potential reserve fund earnings will reduce the fixed rate debt service or variable rate debt service as applicable. Periodically, using the criteria described above, the Chief Financial Officer will compare the estimated annual debt service costs to maturity of any variable rate debt with estimated debt service if the debt was converted to fixed rates. If this analysis produces a break even in total payments over the life of the issue, the Chief Financial OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 9/4/13 2/1/17 Page 5 of 23 Officer will recommend converting such variable rate debt to fixed rate. Variable rate debt should not represent more than 25% of the District’s total debt portfolio. This level of exposure to interest rate fluctuations is considered to be manageable in an environment of increasing interest rates. At a higher ratio than this, the District might be faced with an unplanned water rate increase to meet its Rate Covenants. Rating agencies use this ratio in their analysis of the District’s overall credit rating. Further, Rate Covenants applicable to variable rate debt shall not compromise the issuance of additional debt planned by the District and variable rate debt should always contain a provision to allow conversion to a fixed rate at the District’s option. 6.0: CREDIT OBJECTIVES The Otay Water District seeks to maintain the highest possible credit ratings for all categories of long-term debt that can be achieved without compromising delivery of basic services and achievement of District policy objectives. Factors taken into account in determining the credit rating for a financing include: 1. Diversity of the District’s customer base. 2. Proven track record of completing capital projects on time and within budget. 3. Strong, professional management. 4. Adequate levels of staffing for services provided. 5. Reserves. 6. Ability to consistently meet or exceed Rate Covenants. The District recognizes that external economic, natural, or other events may from time to time affect the creditworthiness of its debt. Nevertheless, the District is committed to ensuring that actions within its control are prudent and well planned. 7.0: COMPETITIVE AND NEGOTIATED SALE CRITERIA Competitive Sale OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 9/4/13 2/1/17 Page 6 of 23 The District will use a competitive bidding process in the sale of debt unless the nature of the issue or specific circumstances warrants a negotiated sale. The CFO will determine the best bid in a competitive sale by calculating the true interest cost (TIC) of each bid. Negotiated Sale Types of debt that would typically lend themselves to the negotiated sale format are variable rate debt and unrated debt. Circumstances that might warrant a negotiated sale may occur when the issue is of a limited size that would not attract wide-spread investor interest, during periods of high levels of issuance by other entities in the State, or during periods of market volatility or with relatively new financing techniques. In the event the District decides to use a negotiated sale, it will pay management fees only to those firms that place orders for bonds. If the size of the District’s proposed issue is not cost effective, the District may also consider issuing its debt by private placement or through any qualified Joint Power Authority (JPA) in the State of California whose principal business is issuing bonds. 8.0: REFUNDING DEBT Purpose Periodic reviews of all outstanding debt will be undertaken by the Chief Financial Officer to determine refunding (refinancing) opportunities. The purpose of the refinancing may be to: 1. Lower annual debt service by taking advantage of lower current interest rates. 2. Update or revise covenants on outstanding debt issue if a Rate Covenant appears to be too high, has precluded the District from implementing its financing plan, or has caused the District to increase rates to customers. 3. Restructure debt service associated with an issue to facilitate the issuance of additional debt, usually in order to smooth out peaks in total debt service which can occur frequently as one debt issue is layered on top of existing debt issues. 4. Alter bond characteristics such as call provisions or payment dates. OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 9/4/13 2/1/17 Page 7 of 23 5. Pay for conversion costs such as funding a reserve fund or paying for credit enhancement when converting variable rate debt to fixed rate debt. Restrictions on Refunding Tax-exempt bonds typically have provisions that preclude early redemption of the bonds for a period of years after issuance. The number of times a tax-exempt bond can be refinanced prior to its Optional Redemption date (known as Advance Refunding) is limited by the IRS. For debt issued after 1986, issuers may only provide for Advance Refunding of obligations in advance of the Optional Redemption date one time. There is no limit by the IRS on the ability of issuers to redeem bonds early once the Optional Redemption date has been reached (known as Current Refunding). Savings Criteria In cases where an Advance Refunding or Current Refunding is intended to provide debt service savings, the District may commence the refinancing process if a minimum five percent (5%) present value savings net of issuance costs and any cash contributions can be demonstrated. Since interest rates may fluctuate between the time when a refinancing is authorized and when the debt is issued, beginning the process with at least a 5% savings should provide the District with some level of protection that it can achieve a minimum of three percent (3%) net present value savings of the refunding bonds when and if the debt is issued. These minimum standards are intended to protect the District staff from spending time on refinancings that become marginally cost-effective after the entire issuance process is complete. The savings target may be waived, however, if sufficient justification for lowering the savings target can be provided by meeting one or more of the other refunding objectives described above. 9.0: SUBORDINATE LIEN DEBT The District will issue subordinate lien debt only if it is financially beneficial to the District or consistent with creditworthiness objectives. Subordinate lien debt is structured to be payable second in priority to the District’s other outstanding debt. Typically, subordinate lien debt might be issued if the District desired a more flexible Rate Covenant with respect to its new OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 9/4/13 2/1/17 Page 8 of 23 obligations and did not want to refinance all of its existing debt to obtain that less restrictive Rate Covenant. 10.0: FINANCING PARTICIPANTS The District’s purchasing guidelines provide the process for securing professional services related to individual debt issues. The solicitation and selection process include encouraging participation from qualified service providers, both local and national, and securing services at competitive prices. Financial Advisor: The use of a Financial Advisor is necessary for the sale of debt by a competitive bid process and is desirable when issuing debt through a negotiated sale. The Financial Advisor has a fiduciary duty to the District and will seek to structure the District’s debt in the manner that is saleable, yet meets the District’s objectives for the financing. The Financial Advisor will advise the District on alternative structures for its debt, the cost of different debt structures and potential pricing mechanisms that can be expected from underwriters (such as call features, term bonds and premium and discount bond pricing) and, at the District’s direction, will write the offering document (preliminary official statement). With respect to competitive sales, the Financial Advisor will arrange for distributing the preliminary official statement, accepting bids via an internet bidding platform, verifying the lowest bid and provide detailed instructions for the flow of funds at closing to the winning Underwriter, the Trustee and the District. In a negotiated sale, the Financial Advisor will provide independent confirmation on the Underwriter’s proposed pricing to ensure that interest rates and Underwriter’s compensation are appropriate for the credit quality of the issue and competitive in the overall public finance market in California. Underwriter: The Underwriter markets the bonds for sale to investors. While the District’s preference is to select the Underwriter for the debt via sale of the debt at competitive bid, there are circumstances when a negotiated issue is in the best interests of the District. Negotiated sales are preferable if the security features are particularly complex or market conditions are volatile. The Chief Financial Officer will recommend whether the method of sale is competitive or negotiated based on the type of issue and other market conditions. In the case of negotiated sales, the Underwriter will be required to demonstrate sufficient capitalization and sufficient experience related to the specific type of debt issuance. OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 9/4/13 2/1/17 Page 9 of 23 The Underwriter will work in connection with the District’s Financial Advisor on structuring the issue and offering different pricing ideas. Bond Counsel: The District’s Bond Counsel provides the primary legal documents that detail the security for the bonds and the authority under which bonds are issued. The Bond Counsel also provides an opinion to bond holders that the bonds are tax-exempt under both State and Federal law. All closing documents in connection with an issue are also prepared by Bond Counsel. Disclosure Counsel: The District’s Disclosure Counsel provides legal advice to the District regarding the adequacy of the District’s disclosure of financial information or risks of investing in the District’s debt issue to the investing public. The Disclosure Counsel can prepare the official statement or review the official statement and gives the District an opinion that there is no information missing from the official statement of a material nature that would be necessary for an investor to make an informed decision about investing in the District’s bonds. Trustee: The Trustee is a financial institution selected by the District to administer the collection of revenues pledged to repay the bonds and to distribute those funds to bondholders. Letter of Credit Bank: The Letter of Credit Bank is a U.S. or foreign bank that has issued a letter of credit providing both credit enhancement (the Letter of Credit Bank will pay the debt in the event that the District defaults on the payment) and liquidity for a variable rate bond issue. These banks have their own short-term credit rating, which can be higher than the District’s short-term credit rating. Liquidity is needed because variable rate bondholders are allowed to “put” their bonds back to the District if they do not like the interest rate currently being offered. The District’s Remarketing Agent then finds a new buyer for those bonds, but in the event that no buyer is found, a draw is made under the letter of credit to purchase the bonds that have been “put.” As soon as the bonds are remarketed to another buyer, the letter of credit is repaid. The letter of credit fees are paid annually or quarterly. Letter of credits are typically issued for not more than 3 years and must be renewed during the life of the bonds. Credit enhancement is discussed further under the heading “CREDIT ENHANCEMENT.” Municipal Bond Insurer: The Municipal Bond Insurer can be one of several insurance companies that provide municipal bond insurance OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 9/4/13 2/1/17 Page 10 of 23 policies securing payment of the District’s debt. These policies provide that the Municipal Bond Insurer will pay the District’s debt in the event that the District defaults on its payments. Debt which is insured carries the Municipal Bond Insurer’s credit rating. The insurance premium for the bond insurance policy is paid one time at the issuance of the debt and is non-cancelable for the term of the debt. Unlike a letter of credit, bond insurance policies do not provide liquidity and are most typically purchased for fixed rate debt. Remarketing Agent: The Remarketing Agent is an investment bank that, each week, determines the interest rate for the District’s variable rate obligations. The rate is set at the rate at which the obligations could be sold on the open market at 100% of their face value. The Remarketing Agent also finds new buyers for any of the obligations that are “put” back to the District. Rating Agencies: Currently, there are three widely recognized rating agencies that rate municipal debt in the United States: Standard & Poor’s, Moody’s Investors Service, and Fitch Investors Service. Rating agencies establish objective criteria under which each type of financing undertaken by the District is to be analyzed. Upon request, a rating agency will rate the underlying strength of the District’s financings, without regard to the purchase of any credit enhancement. The rating is released to the general public and thereafter, the rating agency will periodically update its analysis of a particular issue, and may raise or lower the rating if circumstances warrant. Investment-grade ratings range from “AAA” to “BBB-.” A rating below “BBB-” is not investment grade. Many mutual funds cannot buy bonds that do not carry an investment grade. Verification Agent: In a refunding, the District will deposit funds with an escrow agent (usually the trustee) in an amount sufficient, together with earnings thereon, to pay the debt service and redemption price of the debt being refunded through and including the call date. The Verification Agent verifies the mathematical accuracy of calculation of the amount to be deposited in escrow and the bond counsel relies on this verification in giving their opinion that the debt is defeased within the meaning of the indenture and that the lien of the debt on the revenues pledged to the debt being refunded is released. 11.0: CONFLICT OF INTEREST AND STANDARDS OF CONDUCT OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 9/4/13 2/1/17 Page 11 of 23 Members of the District, the Board of Directors and its consultants, service providers and underwriters shall adhere to standards of conduct and conflict of interest rules as stipulated by the California Political Reform Act or the Municipal Securities Rulemaking Board (MSRB), as applicable. All debt financing participants shall maintain the highest standards of professional conduct at all times, in accordance with MSRB Rules, including Rule G-37. There shall be no conflict of interest with the District with any debt financing participant. 12.0: CONTINUING DISCLOSURE The District acknowledges the responsibilities of the underwriting community and pledges to make all reasonable efforts to assist underwriters in their efforts to comply with SEC Rule 15c2-12 and MSRB Rule G-36. The District will file its official statements with the MSRB and the nationally recognized municipal securities information repositories. The District will also post copies of its comprehensive financial reports on the MSRB’s Electronic Municipal Market Access (EMMA) website, and will disseminate other information that it deems pertinent to the market in a timely manner (For bonds issued after 2012, 10 days). While initial bond disclosure requirements pertain to underwriters, the District will provide financial information and notices of material events on an ongoing basis throughout the life of the issue. Material events are defined as those events which are considered to likely reflect on the credit supporting the securities. (a) The events considered material according to the SEC are: 1. Principal and interest payment delinquencies; 2. Unscheduled draws on debt service reserves reflecting financial difficulties; 3. Unscheduled draws on credit enhancements reflecting financial difficulties; 4. Substitution of credit or liquidity providers, or their failure to perform; 5. Adverse tax opinions or the issuance by the Internal Revenue Service of proposed or final determinations of taxability or of a Notice of Proposed Issue (IRS Form 5701-TEB); OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 9/4/13 2/1/17 Page 12 of 23 6. Tender offers; 7. Defeasances; 8. Ratings changes; and 9. Bankruptcy, insolvency, receivership or similar proceedings. Note: Ffor the purposes of the event identified in subparagraph (9) above, the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person. (b) Pursuant to the provisions of this section (b), the District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material: 1. Unless described in paragraph (a) above, notices or determinations by the Internal Revenue Service with respect to the tax status of the Bonds or other material events affecting the tax status of the Bonds; 2. The consummation of a merger, consolidation or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms; OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 9/4/13 2/1/17 Page 13 of 23 3. Appointment of a successor or additional trustee or the change of the name of a trustee; 4. Nonpayment related defaults; 5. Modifications to the rights of Owners of the Bonds; 6. Notices of redemption; and 7. Release, substitution or sale of property securing repayment of the Bonds. Whenever the District obtains knowledge of the occurrence of a Listed Event under (b) above, the District shall as soon as possible determine if such event would be material under applicable federal securities laws. 13:0 INVESTMENT & ARBITRAGE COMPLIANCE Tax-exempt bonds are required to meet certain provisions of the federal tax code in order to maintain their tax-exempt status. In order to prevent municipal issuers from borrowing money at tax-exempt rates solely for the purpose of investing the proceeds in higher yielding investments and making a profit (“arbitrage”), the federal tax code contains a provision that requires issuers to compare the interest earned on any bond funds held (such as a reserve fund) with interest that would theoretically be earned if the funds were invested at the yield of the bonds, and to “rebate” to the federal government any interest earned in excess of the theoretical earnings limit. The Chief Financial Officer shall invest the bond proceeds subject to the District’s Investment Policy in a timely manner, to ensure the availability of funds to meet operational requirements. In doing so, the CFO will maintain a system of record keeping and reporting to meet the arbitrage rebate compliance requirements of the federal tax code. 14.0: INTERNAL CONTROL The District has implemented the following procedure to ensure that the proceeds of the proposed debt issuance will be directed to the intended use: Formatted: Font: Bold, Underline OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 9/4/13 2/1/17 Page 14 of 23 1. A separate Reserve/Cash Account shall be maintained for the proceeds of each bond to ensure that there is no comingling of funds. 2. All related expenditures charged against the bond proceeds shall be properly approved by the authorized authority. 3. All related transactions shall be fully documented so that an undisputable audit trail exists. 4. All related transactions shall be tracked in the District’s Accounting System. A financial report reflecting all charges related to the bond shall be prepared and maintained. 5. The District shall establish a retention policy which states that all supporting documents related to bond proceeds spending shall be kept indefinitely. 6. The Reserve Account shall be reconciled on a monthly basis. 145.0: TYPES OF DEBT FINANCING General Obligation Bonds General obligation bonds are secured by a pledge of the ad-valorem taxing power of the issuer and are also known as a full faith and credit obligations. Bonds of this nature must serve a public purpose to be considered lawful taxation of the property owners within the District and require a two third’s majority vote in a general election. The benefit of the improvements or assets constructed and acquired as a result of this type of bond must be generally available to all property owners. The District can issue general obligation bonds up to but not in excess of 15% of the assessed valuation under Article XVI, Section 18 of the State constitution. An annual amount of the levy necessary to meet debt service requirements is calculated and placed on the tax roll through the County of San Diego. The District also has a policy that the ad-valorem tax to be used to pay debt service on general obligation bonds will not exceed $.10 per $100 of assessed value. Formatted: Indent: Left: 0.63", Hanging: 0.38", Numbered+ Level: 1 + Numbering Style: 1, 2, 3, … + Start at: 1 + Alignment: Left + Aligned at: 0.25" + Indent at: 0.5" Formatted: Indent: Left: 0.13", Hanging: 0.38" OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 9/4/13 2/1/17 Page 15 of 23 Voters within Improvement District No. 27 of the District authorized $100 million general obligation bonds in 1989. The District issued $11,500,000 general obligation bonds in 1992 and refinanced the bonds in 1998 and again in 2009. The District also has approximately $29 million in general obligation bonds authorized between 1960 and 1978 for various improvement districts throughout the District, but unissued. General obligation bonds can only be issued under these existing authorizations to the extent necessary to fund the improvements specified by each ballot measure. General obligation bonds generally are regarded as the broadest and soundest security among tax-secured debt instruments. An unlimited- tax pledge would enable a trustee to invoke mandamus to force the District to raise the tax rate as much as necessary to pay off the bonds. General obligation bonds have other credit strengths as well: the property tax tends to be a steady and predictable revenue source, and when a vote is required to issue them, bondholders have some indication of taxpayers’ willingness to pay. General obligation bonds carry the highest credit rating that a public agency can achieve and therefore, the lowest interest cost. General obligation bonds typically are issued to finance capital facilities and not for ongoing operational or maintenance costs. The District will use an objective analytical approach to determine whether it can afford to assume new general obligation debt for the improvement districts, or in the case of projects not approved by the original ID 27 vote, prior to any submission of a general obligation bond ballot measure to voters. This process will compare generally accepted standards of affordability to the current values for the District. These standards will include debt per capita, debt as a percent of taxable value, debt service payments as a percent of current revenues and current expenditures, and the level of overlapping net debt of all local taxing jurisdictions. The process will also examine the direct costs and benefits of the proposed expenditures. The decision on whether or not to assume new debt will be based on these costs and benefits, the current conditions of the municipal bond market, and the District’s ability to "afford" new debt as determined by the aforementioned standards. Revenue Bonds Revenue bonds are limited-liability obligations that pledge net revenues of the District to debt service. The net revenue pledge is after payment of all operating costs. Since revenue bonds are not OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 9/4/13 2/1/17 Page 16 of 23 generally secured by the full faith and credit of the District, the financial markets require coverage ratios of the pledged revenue stream and a covenant to levy rates and charges sufficient to produce net income at some level in excess of debt service (a Rate Covenant). Also there may be a test required to demonstrate that future revenues will be sufficient to maintain debt service coverage levels after any proposed additional bonds are issued. The District will strive to meet industry and financial market standards with such ratios without impacting the current rating. Annual adjustments to the District’s rate structure may be necessary to maintain these coverage ratios. The underlying credit of revenue bonds is judged on the ability of the District’s existing rates to provide sufficient net income to pay debt service and the perceived willingness of the District to raise rates and charges in accordance with its Rate Covenant. Actual past performance also plays a role in evaluating the credit quality of revenue bonds, as well as the diversity of the customer base. Revenue bonds generally carry a credit rating one or two investment grades below a general obligation bond rating. The District may use a debt structure called “Certificates of Participation” to finance capital facilities. However, if the certificates contain a pledge of net revenues and a Rate Covenant, they are treated as essentially the same as a revenue bond. Lease/Purchase Agreements Over the lifetime of a lease, the total cost to the District will generally be higher than purchasing the asset outright. As a result, the use of lease/purchase agreements in the acquisition of vehicles, equipment and other capital assets will generally be avoided, particularly if smaller quantities of the capital asset(s) can be purchased on a "pay-as-you-go" basis. The District may utilize lease-purchase agreements to acquire needed equipment and facilities. Criteria for such agreements should be that the asset life is three years or more, the minimum value of the agreement is $50,000 and interest costs must not exceed the interest rate earned by the District’s portfolio for the average of the past 6 months. Lease payments of this type are considered operating expenses and would reduce net operating income available to pay any District revenue bonds. There are no coverage requirements or rate covenants associated with lease/purchase agreements. OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 9/4/13 2/1/17 Page 17 of 23 State Water Loans The State Water Resources Control Board makes certain funds available to water districts throughout the State. These loans typically carry a below-market rate of interest and are short term in nature. While State loans should be incorporated into the District’s debt portfolio for the financing of capital improvements, the payment of the loan should not compromise the District’s ability to issue other planned debt or cause the District to violate its rate covenants or make it necessary for the District to increase rates to maintain existing rate covenants. Land Based Financing The District may consider developer or property owner initiated applications requesting the formation of community facilities or assessment districts and the issuance of bonds to finance eligible District facilities necessary to serve newly developing commercial, industrial and/or residential projects. Facilities will be financed in accordance with the provisions of the Municipal Improvement Act of 1913 and the Improvement Bond Act of 1915, or the Mello-Roos Community Facilities Act of 1982. Typically, the bonds issued would be used to prepay, in a lump-sum, the District’s capacity fees with respect to a large tract of land under development, or to finance in-tract infrastructure that will eventually be dedicated to the District. The bonds are secured by a special tax or assessment to be levied on property within the boundaries established for the community facilities district (sometimes known as a “Mello-Roos” district) or the assessment district. If the District becomes the sponsoring public agency for such financing district and the issuance of debt, the District will be required to enter into a Funding, Construction and Acquisition agreement for any of the facilities to be dedicated to the District upon completion. This agreement governs the type of facilities to be constructed with bond proceeds and how the facilities will be accepted by the District. In some cases, the District may not be asked to be the sponsoring agency for the formation of a financing district, rather, the developer or property owner may approach a school district or a city to be the sponsoring agency. Nonetheless, the property owner may want to include lump-sum payment of District fees in the financing or construction of certain facilities to be dedicated to the District OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 9/4/13 2/1/17 Page 18 of 23 upon completion. In this case, if the District desired to participate, the District would enter into a Joint Financing Agreement with the sponsoring agency, again governing the type of facilities to be constructed with bond proceeds and how the facilities will be accepted by the District. On a case-by-case basis, the Board shall make the determination as to whether a proposed district will proceed under the provisions of the Assessment Acts or the Mello-Roos Community Facilities Act. The Board may confer with other consultants and the applicant to learn of any unique district requirements, such as long-term development phasing, prior to making any final determination. All District and District consultant costs incurred in the evaluation of new development, district applications and the establishment of districts will be paid by the applicant(s) by advance deposits in those instances where a party or parties other than the District have initiated a proposed district. Expenses not legally reimbursable by the financing district will be borne by the applicant. The District may incur expenses for analyzing proposed assessment or community facilities districts where the District is the principal proponent of the formation or financing of the district. Prior to the issuance of any land secured financing and in accordance with State law, the Board will adopt policies and procedures with criteria to be met before any special tax bonds or assessment district bonds may be issued. These criteria include the qualifications of the appraiser, the minimum value to lien ratio to be achieved prior to issuing the land secured debt and the maximum tax to be levied on different categories of property. 156.0: RATING AGENCY APPLICATIONS The District may seek one or more ratings on all new issues that are being sold in the public market. These rating agencies include, but are not limited to, Fitch Investors Service, Moody’s Investors Service, and Standard & Poor’s. When applying for a rating on an issue over $1 million or more, the District shall make a formal presentation of the finances and positive developments within the District to the rating agencies. The District will report all financial information to the rating agencies upon request. This information shall include, but shall not be limited to, the District’s Comprehensive Annual Financial Report (CAFR), and the Adopted Operating and Capital Budget. OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 9/4/13 2/1/17 Page 19 of 23 167.0: USE OF CREDIT ENHANCEMENT Credit enhancement is a generic term that means any third-party guarantee of debt service. Credit enhancement providers include municipal bond insurance companies or financial institutions. The purchase of credit enhancement allows the District’s bond issue to carry the same credit rating as the credit provider. The District will seek to use credit enhancement when such credit enhancement proves cost-effective. Selection of credit enhancement providers will be subject to a competitive bid process using the District’s purchasing guidelines, if applicable. Fixed Rate Bonds Credit enhancement for fixed rate bonds is obtained by the purchase of bond insurance. If a commitment for bond insurance is obtained for a particular issue, the District will estimate the annual debt service for the issue based on current interest rates applicable to the credit rating of the bond insurer. If the estimated debt service on this basis is less than or equal to estimated debt service for the issue based on interest rates for bonds with the District’s underlying or stand-alone credit rating, the District will purchase the bond insurance. Any intention of the District to prepay the debt ahead of its scheduled maturity will be taken into account in the analysis. Credit enhancement may be used to improve or establish a credit rating on a District debt obligation even if such credit enhancement is not cost effective if, in the opinion of the Chief Financial Officer, the use of such credit enhancement meets the District’s debt financing goals and objectives, such as, funding of a reserve fund for the bonds. Variable Rate Bonds Credit enhancement for variable rate bonds is comprised of two components: credit support and liquidity. The interest on variable rate bonds is based on a short-term investment rate (usually 7 days). Any investor can tender their bonds back to the District to be repurchased on short notice (usually 7 days). Because of the short- term nature of the investment, the securities that the District is “competing” with for investors are AA-rated mutual funds. Therefore, variable debt needs to have credit enhancement to achieve a comparable AA rating, as well as liquidity support to provide the District with a mechanism to purchase any bonds that are tendered before they can be remarketed to new investors. A limited number of financial OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 9/4/13 2/1/17 Page 20 of 23 institutions offer letters of credit that combine both credit support and liquidity for one fee. An alternative is to purchase bond insurance to provide credit support and enter into a separate purchase agreement with a financial institution to provide liquidity. The difference in cost between the two structures will be analyzed before either alternative is selected for variable rate debt. 178.0: GLOSSARY Ad Valorem Tax: A tax calculated “according to the value” of property. Such a tax is based on the assessed valuation of tangible personal property. In most jurisdictions, the tax is a lien on the property enforceable by seizure and sale of the property. General restrictions, such as overall restrictions on rates, or the percent of charge allowed, sometimes apply. As a result, ad valorem taxes often function as the balancing element in local budgets. Advance Refunding: A procedure whereby outstanding bonds are refinanced by the proceeds of a new bond issue prior to the date on which outstanding bonds become due or are callable. Typically an advance refunding is performed to take advantage of interest rates that are significantly lower than those associated with the original bond issue. At times, however, an advance refunding is performed to remove restrictive language or debt service reserve requirements required by the original issue. Amortization: The planned reduction of a debt obligation according to a stated maturity or redemption schedule. Arbitrage: The gain that may be obtained by borrowing funds at a lower (often tax-exempt) rate and investing the proceeds at higher (often taxable) rates. The ability to earn arbitrage by issuing tax- exempt securities has been severely curtailed by the Tax Reform Act of 1986, as amended. Assessed Valuation: The appraised worth of property as set by a taxing authority through assessments for purposes of ad valorem taxation. Basis Point: One one-hundredth of one percent. Bond: A security that represents an obligation to pay a specified amount of money on a specific date in the future, typically with periodic interest payments. OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 9/4/13 2/1/17 Page 21 of 23 Bond Counsel: An attorney (or firm of attorneys) retained by the issuer to give a legal opinion concerning the validity of the securities. The bond counsel’s opinion usually addresses the subject of tax exemption. Bond counsel may prepare, or review and advise the issuer regarding authorizing resolutions or ordinances, trust indentures, official statements, validation proceedings and litigation. Bond Insurance: A type of credit enhancement whereby a monocline insurance company indemnifies an investor against a default by the issuer. In the event of a failure by the issuer to pay principal and interest in-full and on-time, investors may call upon the insurance company to do so. Once assigned, the municipal bond insurance policy generally is irrevocable. The insurance company receives an up-front fee, or premium, when the policy is issued. Call Option: A contract through which the owner is given the right but is not obligated to purchase the underlying security or commodity at a fixed price within a limited time frame. Cap: A ceiling on the interest rate that would be paid. Capital Lease: The acquisition of a capital asset over time rather than merely paying rent for temporary use. A lease-purchase agreement, in which provision is made for transfer of ownership of the property for a nominal price at the scheduled termination of the lease, is referred to as a capital lease. Certificate of Participation: A financial instrument representing a proportionate interest in payments such as lease payments by one party (such as the District acting as a lessee) to another party (often a trustee). CIP: Capital Improvement Program. Competitive Sale: The sale of securities in which the securities are awarded to the bidder who offers to purchase the issue at the best price or lowest cost. Continuing Disclosure: The requirement by the Securities and Exchange Commission for most issuers of municipal debt to provide current financial information to the informational repositories for access by the general marketplace. OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 9/4/13 2/1/17 Page 22 of 23 Debt Service: The amount necessary to pay principal and interest requirements on outstanding bonds for a given year or series of years. Defeasance: Providing for payment of principal of premium, if any, and interest on debt through the first call date or scheduled principal maturity in accordance with the terms and requirements of the instrument pursuant to which the debt was issued. A legal defeasance usually involves establishing an irrevocable escrow funded with only cash and U.S. Government obligations. Derivative: A financial product that is based upon another product. Generally, derivatives are risk mitigation tools. Discount: The difference between a bond’s par value and the price for which it is sold when the latter is less than par. Financial Advisor: A consultant who advises an issuer on matters pertinent to a debt issue, such as structure, sizing, timing, marketing, pricing, terms and bond ratings. General Obligation Bonds: Debt that is secured by a pledge of the ad valorem taxing power of the issuer. Also known as a full faith and credit obligation. Municipal Securities Rulemaking Board (MSRB): The MSRB, comprised of representatives from investment banking firms, dealer bank representatives, and public representatives, is entrusted with the responsibility of writing rules of conduct for the municipal securities market. Negotiated Sale: A sale of securities in which the terms of sale are determined through negotiation between the issuer and the purchaser, typically an underwriter, without competitive bidding. Official Statement: A document published by the issuer that discloses material information on a new issue of municipal securities including the purposes of the issue, how the securities will be repaid, and the financial, economic and social characteristics of the issuing government. Investors may use this information to evaluate the credit quality of the securities. Option: A derivative contract. There are two primary types of options (see Put Option and Call Option). An option is considered a wasting asset because it has a stipulated life to expiration and may expire worthless. Hence, the premium could be wasted. OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 9/4/13 2/1/17 Page 23 of 23 Optional Redemption: The redemption of an obligation prior to its stated maturity, which can only occur on dates specified in the bond indenture. Overlapping Debt: The legal boundaries of local governments often overlap. In some cases, one unit of government is located entirely within the boundaries of another. Overlapping debt represents the proportionate share of debt that must be borne by one unit of government because another government with overlapping or underlying taxing authority issued its own bonds. Par Value: The face value or principal amount of a security. Pay-as-you-go: To pay for capital improvements from current resources and fund balances rather than from debt proceeds. Put Option: A contract that grants to the purchaser the right but not the obligation to exercise. Rate Covenant: A covenant between the District and bondholders, under which the District agrees to maintain a certain level of net income compared to its debt payments, and covenants to increase rates if net income is not sufficient to meet such level. Refunding: A procedure whereby an issuer refinances an outstanding bond issue by issuing new bonds. Revenue Bonds: A bond which is payable from a specific source of revenue and to which the full faith and credit of an issuer with taxing power is not pledged. Revenue bonds are payable from identified sources of revenue, and do not permit the bondholders to compel a jurisdiction to pay debt service from any other source. Pledged revenues often are derived from the operation of an enterprise. Generally, no voter approval is required prior to issuance. Special Assessments: A charge imposed against property or parcel of land that receives a special benefit by virtue of some public improvement that is not, or cannot be enjoyed by the public at large. Special assessment debt issues are those that finance such improvements and are repaid by the assessments charged to the benefiting property owners. Swap: A customized financial transaction between two or more counterparties who agree to make periodic payments to one another. OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 9/4/13 2/1/17 Page 24 of 23 Swaps cover interest rate, equity, commodity and currency products. They can be simple floating for fixed exchanges or complex hybrid products with multiple option features. True Interest Cost (TIC): A method of calculating the overall cost of a financing that takes into account the time value of money. The TIC is the rate of interest that will discount all future payments so that the sum of their present value equals the issue proceeds. Underwriter: The term used broadly in the municipal market, to refer to the firm that purchases a securities offering from a governmental issuer. Yield Curve: Refers to the graphical or tabular representation of interest rates across different maturities. The presentation often starts with the shortest-term rates and extends towards longer maturities. It reflects the market’s views about implied inflation/deflation, liquidity, economic and financial activity, and other market forces. OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 2/1/17 Page 1 of 24 1.0: POLICY It is the policy of the Otay Water District to finance the acquisition of high value assets that have an extended useful life through a combination of current revenues and debt financing. Regularly updated debt policies and procedures are an important tool to insure the use of the District’s resources to meet its commitments, to provide the highest quality of service to the District’s customers, and to maintain sound financial management practices. These guidelines are for general use and allow for exceptions as circumstances dictate. 2.0: SCOPE This policy is enacted in an effort to standardize the issuance and management of debt by the Otay Water District. The primary objective is to establish conditions for the use of debt, to minimize the District’s debt service requirements and cost of issuance, to retain the highest practical credit rating, maintain full and complete financial disclosure and reporting, and to maintain financial flexibility for the District. This policy applies to all debt issued by the District including general obligation bonds, revenue bonds, capital leases and special assessment debt. 3.0: LEGAL & REGULATORY REQUIREMENTS The Chief Financial Officer (CFO) and the District’s Legal Counsel will coordinate their activities to ensure that all securities are issued in full compliance with Federal and State law. 4.0: CAPITAL FACILITIES FUNDING Financial Planning The District maintains a six-year financial projection that identifies operating requirements and public facility and equipment requirements, and has developed a Rate Model for funding the District’s 6-Year Capital Improvement Program (CIP). The District’s CIP Budget places the capital requirements in order of priority and schedules them for funding and implementation. It identifies a full range of capital needs, provides for the ranking of the importance of such needs, and identifies all the funding sources that are available to cover the costs of the projects. In cases where the program identifies project funding through the use of debt financing, the budget should provide information needed to determine debt capacity. The Rate Model and the Attachment C OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 2/1/17 Page 2 of 24 CIP Budget give the Board part of the data needed to make informed judgments concerning the possibility of issuing debt. Funding Criteria The Chief Financial Officer (CFO) will evaluate all capital project requests and develop a proposed funding plan. Priority may be given to those projects that can be funded with current resources (annual cash flow, fund balances or reserves). Those projects that cannot be funded with current resources may be deferred or the CFO may recommend that they be funded with debt financing. However, debt financing will not be considered appropriate for any recurring purpose such as current operating and maintenance expenditures. The issuance of short-term cash-flow instruments is excluded from this limitation. The General Manager will recommend the funding plan to the Board. The General Manager may deem it necessary or desirable in certain circumstances to convene a Finance Committee meeting to evaluate funding options presented by the Chief Financial Officer. Funding Sources The District’s capital improvements can be classified in three categories: those related to an expansion of the system (“expansion”), those related to upgrading the existing system (“betterment”) and those related to repairing or replacing existing infrastructure (“replacement”). In general, capital improvements for betterment or replacement are financed primarily through user charges, availability charges, and betterment charges. Capital improvements for expansion are financed through capacity fees. Accordingly, these fees are reviewed at least annually or more frequently as required and set at levels sufficient to ensure that new development pays its fair share of the costs of constructing necessary infrastructure. Additionally, the District will seek State and Federal grants and other forms of intergovernmental aid wherever possible. Pay-As-You-Go Projects The District’s capacity fees are the major funding source in financing additions to the water system and the recycled water system. Over time, the fees collected and the cost to construct the capital projects should balance. However, collection of these fees is subject to significant fluctuation based on the rate of new development. Accordingly, the Chief Financial Officer, in developing the funding plan for the CIP, will determine that current revenues and adequate OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 2/1/17 Page 3 of 24 fund balances are available so project phasing can be accomplished. If this is not the case, the Chief Financial Officer may recommend that: 1. The project be deferred until funds are available, or 2. Based on the priority of the project, long-term debt is issued to finance the project. Debt Financed Projects If a project or projects are to be financed with long-term debt, the District should use the following criteria to evaluate the suitability of the financing for the particular project or projects: 1. The life of the project or asset to be financed is 10 years or longer and its useful life is expected to exceed the term of the financing. 2. Revenues available for debt service are deemed to be sufficient and reliable so that long-term financing can be marketed without jeopardizing the credit rating of the District. 3. Market conditions present favorable interest rates and demand for District financing. 4. The project is mandated by State and/or Federal requirements and current resources are insufficient or unavailable. 5. The project is immediately required to meet or relieve capacity needs and current resources are insufficient or unavailable. 5.0: DEBT STRUCTURE General The District will normally issue debt with a maturity of not more than 30 years. The structure should approximate level debt service for the term where it is practical or desirable. There will be no debt structures that include increasing debt service levels in subsequent years, with the first and second year of a debt payoff schedule the exception and related to projected additional income to be generated by the project to be funded. There will be no "balloon" debt repayment schedules that consist of low annual payments and one large payment of the balance due at the end of the term. There will always be at least interest paid in the first fiscal year after debt issuance OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 2/1/17 Page 4 of 24 and principal starting no later than the first fiscal year after the date the facility or equipment is expected to be placed in service. Capitalized interest will not be for a period of more than necessary to provide adequate security for the financing. Limitations on the Issuance of Variable Rate Debt The District will normally issue debt with a fixed rate of interest. The District may issue variable rate for the purpose of managing its interest costs. At the same time, the District should protect itself from too much exposure to interest rate fluctuations. In determining that it is in the District’s best interest to issue certain debt at variable rates instead of fixed rates, at the time of issuing any variable rate debt, there should be at least a 10% estimated reduction in annual debt costs by issuing variable rate debt when compared to a similar issuance of fixed rate debt. If the estimated overall cost savings from issuing variable rate debt is not at least 10% at the time of issuance, relatively small fluctuations in rates could actually increase the District’s financing costs over the life of the bonds compared to a similar fixed rate financing. By using this 10% factor at the time of issuance, the District can be relatively assured that its variable rate financing will be cost-effective over the term of the bonds. The comparison will be based on the following criteria: 1. The interest rate used to estimate variable interest costs will be the higher of the 10 year average rate or the current weekly variable rate. 2. The variable rate debt costs will include an estimate for annual costs such as letter of credit fees, liquidity fees, remarketing fees, monthly draw fees and annual rating fees applicable to the letter of credit. 3. Any potential reserve fund earnings will reduce the fixed rate debt service or variable rate debt service as applicable. Periodically, using the criteria described above, the Chief Financial Officer will compare the estimated annual debt service costs to maturity of any variable rate debt with estimated debt service if the debt was converted to fixed rates. If this analysis produces a break even in total payments over the life of the issue, the Chief Financial Officer will recommend converting such variable rate debt to fixed rate. OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 2/1/17 Page 5 of 24 Variable rate debt should not represent more than 25% of the District’s total debt portfolio. This level of exposure to interest rate fluctuations is considered to be manageable in an environment of increasing interest rates. At a higher ratio than this, the District might be faced with an unplanned water rate increase to meet its Rate Covenants. Rating agencies use this ratio in their analysis of the District’s overall credit rating. Further, Rate Covenants applicable to variable rate debt shall not compromise the issuance of additional debt planned by the District and variable rate debt should always contain a provision to allow conversion to a fixed rate at the District’s option. 6.0: CREDIT OBJECTIVES The Otay Water District seeks to maintain the highest possible credit ratings for all categories of long-term debt that can be achieved without compromising delivery of basic services and achievement of District policy objectives. Factors taken into account in determining the credit rating for a financing include: 1. Diversity of the District’s customer base. 2. Proven track record of completing capital projects on time and within budget. 3. Strong, professional management. 4. Adequate levels of staffing for services provided. 5. Reserves. 6. Ability to consistently meet or exceed Rate Covenants. The District recognizes that external economic, natural, or other events may from time to time affect the creditworthiness of its debt. Nevertheless, the District is committed to ensuring that actions within its control are prudent and well planned. OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 2/1/17 Page 6 of 24 7.0: COMPETITIVE AND NEGOTIATED SALE CRITERIA Competitive Sale The District will use a competitive bidding process in the sale of debt unless the nature of the issue or specific circumstances warrants a negotiated sale. The CFO will determine the best bid in a competitive sale by calculating the true interest cost (TIC) of each bid. Negotiated Sale Types of debt that would typically lend themselves to the negotiated sale format are variable rate debt and unrated debt. Circumstances that might warrant a negotiated sale may occur when the issue is of a limited size that would not attract wide-spread investor interest, during periods of high levels of issuance by other entities in the State, or during periods of market volatility or with relatively new financing techniques. In the event the District decides to use a negotiated sale, it will pay management fees only to those firms that place orders for bonds. If the size of the District’s proposed issue is not cost effective, the District may also consider issuing its debt by private placement or through any qualified Joint Power Authority (JPA) in the State of California whose principal business is issuing bonds. 8.0: REFUNDING DEBT Purpose Periodic reviews of all outstanding debt will be undertaken by the Chief Financial Officer to determine refunding (refinancing) opportunities. The purpose of the refinancing may be to: 1. Lower annual debt service by taking advantage of lower current interest rates. 2. Update or revise covenants on outstanding debt issue if a Rate Covenant appears to be too high, has precluded the District from implementing its financing plan, or has caused the District to increase rates to customers. 3. Restructure debt service associated with an issue to facilitate the issuance of additional debt, usually in order to smooth out OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 2/1/17 Page 7 of 24 peaks in total debt service which can occur frequently as one debt issue is layered on top of existing debt issues. 4. Alter bond characteristics such as call provisions or payment dates. 5. Pay for conversion costs such as funding a reserve fund or paying for credit enhancement when converting variable rate debt to fixed rate debt. Restrictions on Refunding Tax-exempt bonds typically have provisions that preclude early redemption of the bonds for a period of years after issuance. The number of times a tax-exempt bond can be refinanced prior to its Optional Redemption date (known as Advance Refunding) is limited by the IRS. For debt issued after 1986, issuers may only provide for Advance Refunding of obligations in advance of the Optional Redemption date one time. There is no limit by the IRS on the ability of issuers to redeem bonds early once the Optional Redemption date has been reached (known as Current Refunding). Savings Criteria In cases where an Advance Refunding or Current Refunding is intended to provide debt service savings, the District may commence the refinancing process if a minimum five percent (5%) present value savings net of issuance costs and any cash contributions can be demonstrated. Since interest rates may fluctuate between the time when a refinancing is authorized and when the debt is issued, beginning the process with at least a 5% savings should provide the District with some level of protection that it can achieve a minimum of three percent (3%) net present value savings of the refunding bonds when and if the debt is issued. These minimum standards are intended to protect the District staff from spending time on refinancings that become marginally cost-effective after the entire issuance process is complete. The savings target may be waived, however, if sufficient justification for lowering the savings target can be provided by meeting one or more of the other refunding objectives described above. OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 2/1/17 Page 8 of 24 9.0: SUBORDINATE LIEN DEBT The District will issue subordinate lien debt only if it is financially beneficial to the District or consistent with creditworthiness objectives. Subordinate lien debt is structured to be payable second in priority to the District’s other outstanding debt. Typically, subordinate lien debt might be issued if the District desired a more flexible Rate Covenant with respect to its new obligations and did not want to refinance all of its existing debt to obtain that less restrictive Rate Covenant. 10.0: FINANCING PARTICIPANTS The District’s purchasing guidelines provide the process for securing professional services related to individual debt issues. The solicitation and selection process include encouraging participation from qualified service providers, both local and national, and securing services at competitive prices. Financial Advisor: The use of a Financial Advisor is necessary for the sale of debt by a competitive bid process and is desirable when issuing debt through a negotiated sale. The Financial Advisor has a fiduciary duty to the District and will seek to structure the District’s debt in the manner that is saleable, yet meets the District’s objectives for the financing. The Financial Advisor will advise the District on alternative structures for its debt, the cost of different debt structures and potential pricing mechanisms that can be expected from underwriters (such as call features, term bonds and premium and discount bond pricing) and, at the District’s direction, will write the offering document (preliminary official statement). With respect to competitive sales, the Financial Advisor will arrange for distributing the preliminary official statement, accepting bids via an internet bidding platform, verifying the lowest bid and provide detailed instructions for the flow of funds at closing to the winning Underwriter, the Trustee and the District. In a negotiated sale, the Financial Advisor will provide independent confirmation on the Underwriter’s proposed pricing to ensure that interest rates and Underwriter’s compensation are appropriate for the credit quality of the issue and competitive in the overall public finance market in California. Underwriter: The Underwriter markets the bonds for sale to investors. While the District’s preference is to select the Underwriter for the OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 2/1/17 Page 9 of 24 debt via sale of the debt at competitive bid, there are circumstances when a negotiated issue is in the best interests of the District. Negotiated sales are preferable if the security features are particularly complex or market conditions are volatile. The Chief Financial Officer will recommend whether the method of sale is competitive or negotiated based on the type of issue and other market conditions. In the case of negotiated sales, the Underwriter will be required to demonstrate sufficient capitalization and sufficient experience related to the specific type of debt issuance. The Underwriter will work in connection with the District’s Financial Advisor on structuring the issue and offering different pricing ideas. Bond Counsel: The District’s Bond Counsel provides the primary legal documents that detail the security for the bonds and the authority under which bonds are issued. The Bond Counsel also provides an opinion to bond holders that the bonds are tax-exempt under both State and Federal law. All closing documents in connection with an issue are also prepared by Bond Counsel. Disclosure Counsel: The District’s Disclosure Counsel provides legal advice to the District regarding the adequacy of the District’s disclosure of financial information or risks of investing in the District’s debt issue to the investing public. The Disclosure Counsel can prepare the official statement or review the official statement and gives the District an opinion that there is no information missing from the official statement of a material nature that would be necessary for an investor to make an informed decision about investing in the District’s bonds. Trustee: The Trustee is a financial institution selected by the District to administer the collection of revenues pledged to repay the bonds and to distribute those funds to bondholders. Letter of Credit Bank: The Letter of Credit Bank is a U.S. or foreign bank that has issued a letter of credit providing both credit enhancement (the Letter of Credit Bank will pay the debt in the event that the District defaults on the payment) and liquidity for a variable rate bond issue. These banks have their own short-term credit rating, which can be higher than the District’s short-term credit rating. Liquidity is needed because variable rate bondholders are allowed to “put” their bonds back to the District if they do not like the interest rate currently being offered. The District’s Remarketing Agent then finds a new buyer for those bonds, but in the event that no buyer is found, a draw is made under the letter of OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 2/1/17 Page 10 of 24 credit to purchase the bonds that have been “put.” As soon as the bonds are remarketed to another buyer, the letter of credit is repaid. The letter of credit fees are paid annually or quarterly. Letter of credits are typically issued for not more than 3 years and must be renewed during the life of the bonds. Credit enhancement is discussed further under the heading “CREDIT ENHANCEMENT.” Municipal Bond Insurer: The Municipal Bond Insurer can be one of several insurance companies that provide municipal bond insurance policies securing payment of the District’s debt. These policies provide that the Municipal Bond Insurer will pay the District’s debt in the event that the District defaults on its payments. Debt which is insured carries the Municipal Bond Insurer’s credit rating. The insurance premium for the bond insurance policy is paid one time at the issuance of the debt and is non-cancelable for the term of the debt. Unlike a letter of credit, bond insurance policies do not provide liquidity and are most typically purchased for fixed rate debt. Remarketing Agent: The Remarketing Agent is an investment bank that, each week, determines the interest rate for the District’s variable rate obligations. The rate is set at the rate at which the obligations could be sold on the open market at 100% of their face value. The Remarketing Agent also finds new buyers for any of the obligations that are “put” back to the District. Rating Agencies: Currently, there are three widely recognized rating agencies that rate municipal debt in the United States: Standard & Poor’s, Moody’s Investors Service, and Fitch Investors Service. Rating agencies establish objective criteria under which each type of financing undertaken by the District is to be analyzed. Upon request, a rating agency will rate the underlying strength of the District’s financings, without regard to the purchase of any credit enhancement. The rating is released to the general public and thereafter, the rating agency will periodically update its analysis of a particular issue, and may raise or lower the rating if circumstances warrant. Investment-grade ratings range from “AAA” to “BBB-.” A rating below “BBB-” is not investment grade. Many mutual funds cannot buy bonds that do not carry an investment grade. Verification Agent: In a refunding, the District will deposit funds with an escrow agent (usually the trustee) in an amount sufficient, together with earnings thereon, to pay the debt service and redemption price of the debt being refunded through and including the call date. OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 2/1/17 Page 11 of 24 The Verification Agent verifies the mathematical accuracy of calculation of the amount to be deposited in escrow and the bond counsel relies on this verification in giving their opinion that the debt is defeased within the meaning of the indenture and that the lien of the debt on the revenues pledged to the debt being refunded is released. 11.0: CONFLICT OF INTEREST AND STANDARDS OF CONDUCT Members of the District, the Board of Directors and its consultants, service providers and underwriters shall adhere to standards of conduct and conflict of interest rules as stipulated by the California Political Reform Act or the Municipal Securities Rulemaking Board (MSRB), as applicable. All debt financing participants shall maintain the highest standards of professional conduct at all times, in accordance with MSRB Rules, including Rule G-37. There shall be no conflict of interest with the District with any debt financing participant. 12.0: CONTINUING DISCLOSURE The District acknowledges the responsibilities of the underwriting community and pledges to make all reasonable efforts to assist underwriters in their efforts to comply with SEC Rule 15c2-12 and MSRB Rule G-36. The District will file its official statements with the MSRB and the nationally recognized municipal securities information repositories. The District will also post copies of its comprehensive financial reports on the MSRB’s Electronic Municipal Market Access (EMMA) website, and will disseminate other information that it deems pertinent to the market in a timely manner (For bonds issued after 2012, 10 days). While initial bond disclosure requirements pertain to underwriters, the District will provide financial information and notices of material events on an ongoing basis throughout the life of the issue. Material events are defined as those events which are considered to likely reflect on the credit supporting the securities. (a) The events considered material according to the SEC are: 1. Principal and interest payment delinquencies; 2. Unscheduled draws on debt service reserves reflecting financial difficulties; OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 2/1/17 Page 12 of 24 3. Unscheduled draws on credit enhancements reflecting financial difficulties; 4. Substitution of credit or liquidity providers, or their failure to perform; 5. Adverse tax opinions or the issuance by the Internal Revenue Service of proposed or final determinations of taxability or of a Notice of Proposed Issue (IRS Form 5701-TEB); 6. Tender offers; 7. Defeasances; 8. Ratings changes; and 9. Bankruptcy, insolvency, receivership or similar proceedings. Note: For the purposes of the event identified in subparagraph (9) above, the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person. (b) Pursuant to the provisions of this section (b), the District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material: 1. Unless described in paragraph (a) above, notices or determinations by the Internal Revenue Service with respect to the tax status of the Bonds or other material events affecting the tax status of the Bonds; OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 2/1/17 Page 13 of 24 2. The consummation of a merger, consolidation or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms; 3. Appointment of a successor or additional trustee or the change of the name of a trustee; 4. Nonpayment related defaults; 5. Modifications to the rights of Owners of the Bonds; 6. Notices of redemption; and 7. Release, substitution or sale of property securing repayment of the Bonds. Whenever the District obtains knowledge of the occurrence of a Listed Event under (b) above, the District shall as soon as possible determine if such event would be material under applicable federal securities laws. 13:0 INVESTMENT & ARBITRAGE COMPLIANCE Tax-exempt bonds are required to meet certain provisions of the federal tax code in order to maintain their tax-exempt status. In order to prevent municipal issuers from borrowing money at tax-exempt rates solely for the purpose of investing the proceeds in higher yielding investments and making a profit (“arbitrage”), the federal tax code contains a provision that requires issuers to compare the interest earned on any bond funds held (such as a reserve fund) with interest that would theoretically be earned if the funds were invested at the yield of the bonds, and to “rebate” to the federal government any interest earned in excess of the theoretical earnings limit. The Chief Financial Officer shall invest the bond proceeds subject to the District’s Investment Policy in a timely manner, to ensure the availability of funds to meet operational requirements. In doing so, OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 2/1/17 Page 14 of 24 the CFO will maintain a system of record keeping and reporting to meet the arbitrage rebate compliance requirements of the federal tax code. 14.0: INTERNAL CONTROL The District has implemented the following procedure to ensure that the proceeds of the proposed debt issuance will be directed to the intended use: 1. A separate Reserve Account shall be maintained for the proceeds of each bond to ensure that there is no comingling of funds. 2. All related expenditures charged against the bond proceeds shall be properly approved by the authorized authority. 3. All related transactions shall be fully documented so that an undisputable audit trail exists. 4. All related transactions shall be tracked in the District’s Accounting System. A financial report reflecting all charges related to the bond shall be prepared and maintained. 5. The District shall establish a retention policy which states that all supporting documents related to bond proceeds spending shall be kept indefinitely. 6. The Reserve Account shall be reconciled on a monthly basis. 15.0: TYPES OF DEBT FINANCING General Obligation Bonds General obligation bonds are secured by a pledge of the ad-valorem taxing power of the issuer and are also known as a full faith and credit obligations. Bonds of this nature must serve a public purpose to be considered lawful taxation of the property owners within the District and require a two third’s majority vote in a general election. The benefit of the improvements or assets constructed and acquired as a result of this type of bond must be generally available to all property owners. The District can issue general obligation bonds up to but not in excess of 15% of the assessed valuation under Article XVI, Section 18 of the State constitution. An annual amount of the levy necessary to OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 2/1/17 Page 15 of 24 meet debt service requirements is calculated and placed on the tax roll through the County of San Diego. The District also has a policy that the ad-valorem tax to be used to pay debt service on general obligation bonds will not exceed $.10 per $100 of assessed value. Voters within Improvement District No. 27 of the District authorized $100 million general obligation bonds in 1989. The District issued $11,500,000 general obligation bonds in 1992 and refinanced the bonds in 1998 and again in 2009. The District also has approximately $29 million in general obligation bonds authorized between 1960 and 1978 for various improvement districts throughout the District, but unissued. General obligation bonds can only be issued under these existing authorizations to the extent necessary to fund the improvements specified by each ballot measure. General obligation bonds generally are regarded as the broadest and soundest security among tax-secured debt instruments. An unlimited- tax pledge would enable a trustee to invoke mandamus to force the District to raise the tax rate as much as necessary to pay off the bonds. General obligation bonds have other credit strengths as well: the property tax tends to be a steady and predictable revenue source, and when a vote is required to issue them, bondholders have some indication of taxpayers’ willingness to pay. General obligation bonds carry the highest credit rating that a public agency can achieve and therefore, the lowest interest cost. General obligation bonds typically are issued to finance capital facilities and not for ongoing operational or maintenance costs. The District will use an objective analytical approach to determine whether it can afford to assume new general obligation debt for the improvement districts, or in the case of projects not approved by the original ID 27 vote, prior to any submission of a general obligation bond ballot measure to voters. This process will compare generally accepted standards of affordability to the current values for the District. These standards will include debt per capita, debt as a percent of taxable value, debt service payments as a percent of current revenues and current expenditures, and the level of overlapping net debt of all local taxing jurisdictions. The process will also examine the direct costs and benefits of the proposed expenditures. The decision on whether or not to assume new debt will be based on these costs and benefits, the current conditions of the municipal bond market, and the District’s ability to "afford" new debt as determined by the aforementioned standards. OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 2/1/17 Page 16 of 24 Revenue Bonds Revenue bonds are limited-liability obligations that pledge net revenues of the District to debt service. The net revenue pledge is after payment of all operating costs. Since revenue bonds are not generally secured by the full faith and credit of the District, the financial markets require coverage ratios of the pledged revenue stream and a covenant to levy rates and charges sufficient to produce net income at some level in excess of debt service (a Rate Covenant). Also there may be a test required to demonstrate that future revenues will be sufficient to maintain debt service coverage levels after any proposed additional bonds are issued. The District will strive to meet industry and financial market standards with such ratios without impacting the current rating. Annual adjustments to the District’s rate structure may be necessary to maintain these coverage ratios. The underlying credit of revenue bonds is judged on the ability of the District’s existing rates to provide sufficient net income to pay debt service and the perceived willingness of the District to raise rates and charges in accordance with its Rate Covenant. Actual past performance also plays a role in evaluating the credit quality of revenue bonds, as well as the diversity of the customer base. Revenue bonds generally carry a credit rating one or two investment grades below a general obligation bond rating. The District may use a debt structure called “Certificates of Participation” to finance capital facilities. However, if the certificates contain a pledge of net revenues and a Rate Covenant, they are treated as essentially the same as a revenue bond. Lease/Purchase Agreements Over the lifetime of a lease, the total cost to the District will generally be higher than purchasing the asset outright. As a result, the use of lease/purchase agreements in the acquisition of vehicles, equipment and other capital assets will generally be avoided, particularly if smaller quantities of the capital asset(s) can be purchased on a "pay-as-you-go" basis. The District may utilize lease-purchase agreements to acquire needed equipment and facilities. Criteria for such agreements should be that the asset life is three years or more, the minimum value of the agreement is $50,000 and interest costs must not exceed the interest rate earned by the District’s portfolio for the average of the past 6 OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 2/1/17 Page 17 of 24 months. Lease payments of this type are considered operating expenses and would reduce net operating income available to pay any District revenue bonds. There are no coverage requirements or rate covenants associated with lease/purchase agreements. State Water Loans The State Water Resources Control Board makes certain funds available to water districts throughout the State. These loans typically carry a below-market rate of interest and are short term in nature. While State loans should be incorporated into the District’s debt portfolio for the financing of capital improvements, the payment of the loan should not compromise the District’s ability to issue other planned debt or cause the District to violate its rate covenants or make it necessary for the District to increase rates to maintain existing rate covenants. Land Based Financing The District may consider developer or property owner initiated applications requesting the formation of community facilities or assessment districts and the issuance of bonds to finance eligible District facilities necessary to serve newly developing commercial, industrial and/or residential projects. Facilities will be financed in accordance with the provisions of the Municipal Improvement Act of 1913 and the Improvement Bond Act of 1915, or the Mello-Roos Community Facilities Act of 1982. Typically, the bonds issued would be used to prepay, in a lump-sum, the District’s capacity fees with respect to a large tract of land under development, or to finance in-tract infrastructure that will eventually be dedicated to the District. The bonds are secured by a special tax or assessment to be levied on property within the boundaries established for the community facilities district (sometimes known as a “Mello-Roos” district) or the assessment district. If the District becomes the sponsoring public agency for such financing district and the issuance of debt, the District will be required to enter into a Funding, Construction and Acquisition agreement for any of the facilities to be dedicated to the District upon completion. This agreement governs the type of facilities to be constructed with bond proceeds and how the facilities will be accepted by the District. In some cases, the District may not be asked to be the sponsoring agency for the formation of a financing district, rather, the OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 2/1/17 Page 18 of 24 developer or property owner may approach a school district or a city to be the sponsoring agency. Nonetheless, the property owner may want to include lump-sum payment of District fees in the financing or construction of certain facilities to be dedicated to the District upon completion. In this case, if the District desired to participate, the District would enter into a Joint Financing Agreement with the sponsoring agency, again governing the type of facilities to be constructed with bond proceeds and how the facilities will be accepted by the District. On a case-by-case basis, the Board shall make the determination as to whether a proposed district will proceed under the provisions of the Assessment Acts or the Mello-Roos Community Facilities Act. The Board may confer with other consultants and the applicant to learn of any unique district requirements, such as long-term development phasing, prior to making any final determination. All District and District consultant costs incurred in the evaluation of new development, district applications and the establishment of districts will be paid by the applicant(s) by advance deposits in those instances where a party or parties other than the District have initiated a proposed district. Expenses not legally reimbursable by the financing district will be borne by the applicant. The District may incur expenses for analyzing proposed assessment or community facilities districts where the District is the principal proponent of the formation or financing of the district. Prior to the issuance of any land secured financing and in accordance with State law, the Board will adopt policies and procedures with criteria to be met before any special tax bonds or assessment district bonds may be issued. These criteria include the qualifications of the appraiser, the minimum value to lien ratio to be achieved prior to issuing the land secured debt and the maximum tax to be levied on different categories of property. 16.0: RATING AGENCY APPLICATIONS The District may seek one or more ratings on all new issues that are being sold in the public market. These rating agencies include, but are not limited to, Fitch Investors Service, Moody’s Investors Service, and Standard & Poor’s. When applying for a rating on an issue over $1 million or more, the District shall make a formal presentation of the finances and positive developments within the District to the rating agencies. The District will report all OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 2/1/17 Page 19 of 24 financial information to the rating agencies upon request. This information shall include, but shall not be limited to, the District’s Comprehensive Annual Financial Report (CAFR), and the Adopted Operating and Capital Budget. 17.0: USE OF CREDIT ENHANCEMENT Credit enhancement is a generic term that means any third-party guarantee of debt service. Credit enhancement providers include municipal bond insurance companies or financial institutions. The purchase of credit enhancement allows the District’s bond issue to carry the same credit rating as the credit provider. The District will seek to use credit enhancement when such credit enhancement proves cost-effective. Selection of credit enhancement providers will be subject to a competitive bid process using the District’s purchasing guidelines, if applicable. Fixed Rate Bonds Credit enhancement for fixed rate bonds is obtained by the purchase of bond insurance. If a commitment for bond insurance is obtained for a particular issue, the District will estimate the annual debt service for the issue based on current interest rates applicable to the credit rating of the bond insurer. If the estimated debt service on this basis is less than or equal to estimated debt service for the issue based on interest rates for bonds with the District’s underlying or stand-alone credit rating, the District will purchase the bond insurance. Any intention of the District to prepay the debt ahead of its scheduled maturity will be taken into account in the analysis. Credit enhancement may be used to improve or establish a credit rating on a District debt obligation even if such credit enhancement is not cost effective if, in the opinion of the Chief Financial Officer, the use of such credit enhancement meets the District’s debt financing goals and objectives, such as, funding of a reserve fund for the bonds. Variable Rate Bonds Credit enhancement for variable rate bonds is comprised of two components: credit support and liquidity. The interest on variable rate bonds is based on a short-term investment rate (usually 7 days). Any investor can tender their bonds back to the District to be repurchased on short notice (usually 7 days). Because of the short- term nature of the investment, the securities that the District is OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 2/1/17 Page 20 of 24 “competing” with for investors are AA-rated mutual funds. Therefore, variable debt needs to have credit enhancement to achieve a comparable AA rating, as well as liquidity support to provide the District with a mechanism to purchase any bonds that are tendered before they can be remarketed to new investors. A limited number of financial institutions offer letters of credit that combine both credit support and liquidity for one fee. An alternative is to purchase bond insurance to provide credit support and enter into a separate purchase agreement with a financial institution to provide liquidity. The difference in cost between the two structures will be analyzed before either alternative is selected for variable rate debt. 18.0: GLOSSARY Ad Valorem Tax: A tax calculated “according to the value” of property. Such a tax is based on the assessed valuation of tangible personal property. In most jurisdictions, the tax is a lien on the property enforceable by seizure and sale of the property. General restrictions, such as overall restrictions on rates, or the percent of charge allowed, sometimes apply. As a result, ad valorem taxes often function as the balancing element in local budgets. Advance Refunding: A procedure whereby outstanding bonds are refinanced by the proceeds of a new bond issue prior to the date on which outstanding bonds become due or are callable. Typically an advance refunding is performed to take advantage of interest rates that are significantly lower than those associated with the original bond issue. At times, however, an advance refunding is performed to remove restrictive language or debt service reserve requirements required by the original issue. Amortization: The planned reduction of a debt obligation according to a stated maturity or redemption schedule. Arbitrage: The gain that may be obtained by borrowing funds at a lower (often tax-exempt) rate and investing the proceeds at higher (often taxable) rates. The ability to earn arbitrage by issuing tax- exempt securities has been severely curtailed by the Tax Reform Act of 1986, as amended. Assessed Valuation: The appraised worth of property as set by a taxing authority through assessments for purposes of ad valorem taxation. Basis Point: One one-hundredth of one percent. OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 2/1/17 Page 21 of 24 Bond: A security that represents an obligation to pay a specified amount of money on a specific date in the future, typically with periodic interest payments. Bond Counsel: An attorney (or firm of attorneys) retained by the issuer to give a legal opinion concerning the validity of the securities. The bond counsel’s opinion usually addresses the subject of tax exemption. Bond counsel may prepare, or review and advise the issuer regarding authorizing resolutions or ordinances, trust indentures, official statements, validation proceedings and litigation. Bond Insurance: A type of credit enhancement whereby a monocline insurance company indemnifies an investor against a default by the issuer. In the event of a failure by the issuer to pay principal and interest in-full and on-time, investors may call upon the insurance company to do so. Once assigned, the municipal bond insurance policy generally is irrevocable. The insurance company receives an up-front fee, or premium, when the policy is issued. Call Option: A contract through which the owner is given the right but is not obligated to purchase the underlying security or commodity at a fixed price within a limited time frame. Cap: A ceiling on the interest rate that would be paid. Capital Lease: The acquisition of a capital asset over time rather than merely paying rent for temporary use. A lease-purchase agreement, in which provision is made for transfer of ownership of the property for a nominal price at the scheduled termination of the lease, is referred to as a capital lease. Certificate of Participation: A financial instrument representing a proportionate interest in payments such as lease payments by one party (such as the District acting as a lessee) to another party (often a trustee). CIP: Capital Improvement Program. Competitive Sale: The sale of securities in which the securities are awarded to the bidder who offers to purchase the issue at the best price or lowest cost. Continuing Disclosure: The requirement by the Securities and Exchange Commission for most issuers of municipal debt to provide current OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 2/1/17 Page 22 of 24 financial information to the informational repositories for access by the general marketplace. Debt Service: The amount necessary to pay principal and interest requirements on outstanding bonds for a given year or series of years. Defeasance: Providing for payment of principal of premium, if any, and interest on debt through the first call date or scheduled principal maturity in accordance with the terms and requirements of the instrument pursuant to which the debt was issued. A legal defeasance usually involves establishing an irrevocable escrow funded with only cash and U.S. Government obligations. Derivative: A financial product that is based upon another product. Generally, derivatives are risk mitigation tools. Discount: The difference between a bond’s par value and the price for which it is sold when the latter is less than par. Financial Advisor: A consultant who advises an issuer on matters pertinent to a debt issue, such as structure, sizing, timing, marketing, pricing, terms and bond ratings. General Obligation Bonds: Debt that is secured by a pledge of the ad valorem taxing power of the issuer. Also known as a full faith and credit obligation. Municipal Securities Rulemaking Board (MSRB): The MSRB, comprised of representatives from investment banking firms, dealer bank representatives, and public representatives, is entrusted with the responsibility of writing rules of conduct for the municipal securities market. Negotiated Sale: A sale of securities in which the terms of sale are determined through negotiation between the issuer and the purchaser, typically an underwriter, without competitive bidding. Official Statement: A document published by the issuer that discloses material information on a new issue of municipal securities including the purposes of the issue, how the securities will be repaid, and the financial, economic and social characteristics of the issuing government. Investors may use this information to evaluate the credit quality of the securities. Option: A derivative contract. There are two primary types of options (see Put Option and Call Option). An option is considered a OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 2/1/17 Page 23 of 24 wasting asset because it has a stipulated life to expiration and may expire worthless. Hence, the premium could be wasted. Optional Redemption: The redemption of an obligation prior to its stated maturity, which can only occur on dates specified in the bond indenture. Overlapping Debt: The legal boundaries of local governments often overlap. In some cases, one unit of government is located entirely within the boundaries of another. Overlapping debt represents the proportionate share of debt that must be borne by one unit of government because another government with overlapping or underlying taxing authority issued its own bonds. Par Value: The face value or principal amount of a security. Pay-as-you-go: To pay for capital improvements from current resources and fund balances rather than from debt proceeds. Put Option: A contract that grants to the purchaser the right but not the obligation to exercise. Rate Covenant: A covenant between the District and bondholders, under which the District agrees to maintain a certain level of net income compared to its debt payments, and covenants to increase rates if net income is not sufficient to meet such level. Refunding: A procedure whereby an issuer refinances an outstanding bond issue by issuing new bonds. Revenue Bonds: A bond which is payable from a specific source of revenue and to which the full faith and credit of an issuer with taxing power is not pledged. Revenue bonds are payable from identified sources of revenue, and do not permit the bondholders to compel a jurisdiction to pay debt service from any other source. Pledged revenues often are derived from the operation of an enterprise. Generally, no voter approval is required prior to issuance. Special Assessments: A charge imposed against property or parcel of land that receives a special benefit by virtue of some public improvement that is not, or cannot be enjoyed by the public at large. Special assessment debt issues are those that finance such improvements and are repaid by the assessments charged to the benefiting property owners. OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY Subject DEBT POLICY Policy Number Date Adopted Date Revised 45 4/13/04 2/1/17 Page 24 of 24 Swap: A customized financial transaction between two or more counterparties who agree to make periodic payments to one another. Swaps cover interest rate, equity, commodity and currency products. They can be simple floating for fixed exchanges or complex hybrid products with multiple option features. True Interest Cost (TIC): A method of calculating the overall cost of a financing that takes into account the time value of money. The TIC is the rate of interest that will discount all future payments so that the sum of their present value equals the issue proceeds. Underwriter: The term used broadly in the municipal market, to refer to the firm that purchases a securities offering from a governmental issuer. Yield Curve: Refers to the graphical or tabular representation of interest rates across different maturities. The presentation often starts with the shortest term rates and extends towards longer maturities. It reflects the market’s views about implied inflation/deflation, liquidity, economic and financial activity, and other market forces. District Debt Policy Policy No. 45 Board of Director’s Meeting February 1, 2017 Attachment D 1 Policy Review Review Existing Outstanding Debt Debt Coverage Ratio Update of the Debt Policy 2 Schedule of Debt Outstanding Debt December 31st, 2016 Description Year Issued Year of Final Payment Call Options Effective Rate Original Amount Amount Outstanding Purpose 1996 Certificates of Participation (Non‐taxable) 1996 2026 Any time Variable (1.15% as of 8/7/13) $15,400,000 $8,200,000 Terminal Storage, Water Storage Ponds, Pump Stations, Operational Reservoirs, Pipeline Projects, Headquarters 2016 Water Revenue Refunding Bonds (Non‐taxable) 2016 2036 Not Callable 2.90% $33,385,000 $32,185,000 Refunding of 2007 COPS, which were used for 640‐1 and 640‐2 Reservoirs, which were both 10MM gallon reservoirs 2009 General Obligation Bonds (Non‐taxable) 2009 2022 Not Callable 3.39% $7,780,000 $3,995,000 Redemption of 1998 GO Bonds, which were used for ID 27 including: 30MM gallon reservoir and replacement/addition of pipeline 2010 Build America Bonds ‐ A (Non‐taxable)2010 2024 3/1/2020 4.18% $13,840,000 $8,820,000 2010 Build America Bonds ‐ B (Taxable)2010 2040 Any time (Make‐ Whole*) 4.18% $36,355,000 $36,355,000 2013 Water Revenue Refunding Bonds 2013 2023 Not Callable 1.56% $7,735,000 $5,220,000 Refunding of 1993/2004 COPS, which were used for terminal storage reservoirs, pump stations, operational reservoirs and 50,000 feet of pipeline Total $114,495,000 $94,775,000 Jamacha Road Pipeline Project Conveyance System for desal plant 3 Debt Coverage Ratio 1.96 2.40 2.80 3.12 3.36 3.54 1.60 1.68 1.71 1.71 1.74 1.73 1.25 1.25 1.25 1.25 1.25 1.25 0% 50% 100% 150% 200% 250% 300% 350% 400% 2017 2018 2019 2020 2021 2022 Debt Ratio Operational Debt Ratio Minimum Debt Ratio* * FY 17 Strategic Plan Debt ratio is 150% which excludes growth. 4 Debt Policy Guidelines Professional Finance Organizations: Government Finance Officers Association (GFOA) California Municipal Treasurers Association (CMTA) California Society of Municipal Finance Officers (CSMFO) 5 Debt Policy Changes Added an Internal Control Section to comply with Senate Bill 1029 Section 2(i)(1) “The District has included the following procedures (which are already in placed) to ensure that the proceeds of the proposed debt issuance will be directed to the intended use.” 6 Debt Policy Changes A separate Reserve Account shall be maintained for the proceeds of each bond to ensure that there is no comingling of funds. All related expenditure charges against the bond proceeds shall be properly approved by the authorized authority. All related transactions shall be fully documented so that an undisputable audit trail exists. 7 Debt Policy Changes All related transactions shall be tracked in the District’s accounting system. A financial report reflecting all charges related to the bond shall be prepared and maintained. The District shall establish a retention policy which states that all supporting documents related to bond proceeds spending shall be kept indefinitely. The Reserve Account shall be reconciled on a monthly basis. 8 Requested Board Action The Finance, Administration and Communications Committee reviewed the amended Debt Policy No. 45 and recommends the Board adopt Resolution No. 4323 amending the Debt Policy. 9 STAFF REPORT TYPE MEETING: Regular Board MEETING DATE: February 1, 2017 SUBMITTED BY: Dan Martin Engineering Manager PROJECT: Various DIV. NO. ALL APPROVED BY: Rod Posada, Chief of Engineering German Alvarez, Assistant General Manager Mark Watton, General Manager SUBJECT: Adopt Ordinance No. 560 Amending Section 27 Requirements and Limitations for Obtaining Water Service of the District’s Code of Ordinances GENERAL MANAGER’S RECOMMENDATION: That the Otay Water District (District) Board of Directors (Board) adopt Ordinance No. 560 amending Section 27 Requirements and Limitations for Obtaining Water Service of the District’s Code of Ordinances. COMMITTEE ACTION: Please see Attachment A. PURPOSE: The purpose of the proposed amendments to Section 27 of the District’s Code of Ordinances is to provide clarification on requirements for multiple meters - specifically for buildings that contain a mix of commercial units and multi-family residential dwelling units. ANALYSIS: Section 27 of the District’s Code of Ordinances provides the requirements and limitations for obtaining water service. Within Section 27.02, “Size of Water Meter,” under subparagraph F, the 2 language states that the General Manager may require multiple meters when it is in the best interest of the District. As new areas of the District develop, the approved developments include multistory buildings that contain both commercial units on the street level and multiple-family residential dwelling units above (mixed use buildings). Staff is recommending language that requires separate metering for commercial and multiple-family uses in mixed use buildings. The primary reasons for this requirement includes the following:  The District has established separate water rates for multi- family residential versus commercial use. The separate rates are the result of different peaking factors associated with each use type. The basis for these rates are supported by the District’s rate study.  A mixed use building is anticipated to have a life that exceeds fifty years. Over the life of a mixed use building, the type and use of the commercial space is anticipated to change multiple times resulting in different fixtures being added or subtracted, which may require changes to the meter sizing associated with the commercial use.  This year, the Governor of California issued Executive Order B- 37-16 (https://www.gov.ca.gov/docs/5.9.16_Executive_Order.pdf) titled, “Making Water Conservation a California Way of Life”. Within that Executive Order, there is language stating that the Department of Water Resources shall establish new water use targets. The Executive Order states that the new water use targets shall generate more statewide conservation than existing requirements and be based on strengthened standards for indoor residential per capita use and commercial, industrial, and institutional water use. The State is moving towards requiring Water Agencies to provide separate reporting for residential and commercial water use to demonstrate compliance with targets established by the Water Resources Department. Separate metering for commercial and multi-family residential will support compliance reporting to the State. The proposed changes to the District’s Code of Ordinance include the following:  Section 27.03 F - language is added to state that buildings that contain a mix of commercial units and multiple-family residential dwelling units are required to isolate commercial water use from multiple-family residential water use through separate master meters. 3 The draft language included in the proposed Section 27 of the Code of Ordinances was transmitted to the development community on November 8, 2016 with a request to receive comments. As of January 3, 2017, two (2) letters have been received regarding the proposed changes (Exhibit A). The comments received express hardship with respect to the additional metering required to separate the commercial and multi-family residential use. Staff has responded to the comment letters received and discussed the reasons for the change, as described in this staff report. No additional concerns have been expressed. FISCAL IMPACT: Joe Beachem, Chief Financial Officer None. STRATEGIC GOAL: Adoption of Ordinance No. 560 supports the District’s Mission statement, “To provide high quality and reliable water and wastewater services to the customers of the Otay Water District, in a professional, effective, and efficient manner” and the General Manager’s Vision, "A District that is innovative in providing water services at competitive rates, with a reputation for outstanding customer service." LEGAL IMPACT: None. DM/RP: P:\Public-s\STAFF REPORTS\2017\BD 02-01-17\BD 02-01-17 Staff Report Code Section 27 Proposed Changes Report (DM).docx Attachments: Attachment A – Committee Action Attachment B - Ordinance No. 560 Exhibit 1 – Strike-through Section 27 Attachment C – Proposed Section 27 Exhibit A - Comment letters ATTACHMENT A SUBJECT/PROJECT: VARIOUS Adopt Ordinance No. 560 Amending Section 27 Requirements and Limitations for Obtaining Water Service of the District’s Code of Ordinances COMMITTEE ACTION: The Finance, Administration, and Communications Committee (FA&C Committee) reviewed this item at a meeting held on January 18, 2017 and the following comments were made:  Staff is requesting that the Board adopt Ordinance No. 560 amending Section 27, Requirements and Limitations for Obtaining Water Service, of the District’s Code of Ordinances.  Staff reviewed the information in the staff report.  In response to an inquiry from the Committee, staff indicated that the Governor’s Executive Order is geared for residential (houses, condominiums and apartments) and seeks to strengthen standards for commercial, industrial, and institutional use. The Executive Order wishes to set water budgets for residential users to drive down use, but they do not want to impact commercial users at this time.  It was discussed that developers would prefer not to pay another meter fee (current fees for a 3/4” meter total $15,121.90) for these mixed use buildings. The District’s concern is that over the life of the mixed use building, the use of the commercial space will change. The changes in commercial space use may go from a less intensive use such as a clothing store to a more intensive use such as a laundry mat. A separate commercial meter in this case will allow District staff to manage the upsize of the meter more effectively in accordance with the Code of Ordinances. Staff also noted that if a customer came to the District and indicated that they would be opening a laundry mat in a small commercial space that is not part of a mixed used building, they would pay for and be issued a commercial meter for their laundry mat. Additionally, staff noted that commercial meters have a different rate structure versus multi-family residential. It was indicated that the District could be challenged legally from a rate and equity stand point if water use is not billed at the correct rate through separate metering. 5  There was further discussion that the Governor’s Executive Orders are directives and agencies must comply or they can be subject to fines. It was indicated that the State has clear authority on the regulatory issues, however, on some of these conservation directives (i.e., water rights, local agencies being allowed to use their water supplies, etc.) there is no clear authority.  The Committee noted that the commercial water use of live/work units are de minimis and therefore should not require a separate commercial meter. The Committee provided guidance that that live/work units should be considered multi-family residential. Upon completion of the discussion, the committee supported staffs’ recommendation and presentation to the full board on the consent calendar. Attachment B ORDINANCE NO. 560 AN ORDINANCE OF THE BOARD OF DIRECTORS OF THE OTAY WATER DISTRICT AMENDING SECTION 27 REQUIREMENTS AND LIMITATIONS FOR OBTAINING WATER SERVICE OF THE DISTRICT’S CODE OF ORDINANCES BE IT ORDAINED by the Board of Directors of Otay Water District that the District’s Code of Ordinances, Section 27 Requirements and Limitations for Obtaining Water Service be amended as per Exhibit 1 (attached). NOW, THEREFORE, BE IT RESOLVED that the new proposed Section 27 (Attachment C) of the Code of Ordinances shall become effective February 1, 2017. PASSED, APPROVED, AND ADOPTED by the Board of Directors of the Otay Water District at a regular meeting duly held this 1st day of February, 2017, by the following roll call vote: AYES: NOES: ABSENT: ABSTAIN: ________________________________ President ATTEST: _____________________________ District Secretary Attachment B - Exhibit 1 SECTION 27REQUIREMENTS AND LIMITATIONS FOR OBTAINING WATER SERVICE 27.01 REQUIREMENT FOR WATER/SEWER PERMIT AND PAYMENT OF FEES, CHARGES, AND DEPOSITS A. Requirement for Water/Sewer Permits. Water meters shall not be installed nor water service furnished until an application, in the form of a water/sewer permit, has been executed by the customer at the District office. B. Requirement for Payment of Fees, Charges, and Deposits. Payment of all required fees, charges, and depos- its shall be made by the customer at the time the water meter is purchased. A customer requesting water service shall pay the fees, charges, and deposits as set forth in Section 28 of this Code. C. Requirement for a Building Permit. A customer requesting permanent water service shall be required to present a valid building permit for the property issued by the appropriate governmental agency, except that a building permit is not required by a customer requesting permanent water service to: 1) install and maintain landscaping prior to the construction of a building; 2) perform mass grading operations; or 3) to satisfy conditions imposed by other government agencies, including a single meter for grading four lots or less which are part of the same parcel map. Government agencies shall be exempt from the requirement of presenting a valid building permit. D. Requirement for a Service Lateral. The customer requesting water service shall either have an existing service lateral or purchase a new lateral installation at the time of the meter purchase. E. Commercial Parcels -- 5,000 square feet or Larger Irrigated Landscape. When a customer requests water service on a parcel of land with irrigated landscape equal to 5,000 square feet or more, a separate meter will be required for irrigation purposes on the site. F. Recycled Water Service Areas. In areas designated as recycled water service areas, the customer may be required to install a separate recycled water service lateral and meter to supply irrigation to the parcel. G. Second Meter for Indoor Use. Any customer who obtained a single meter prior to October 17, 1990, a second meter for indoor use may be obtained, without paying water capacity fees, San Diego County Water Authority fees, and applicable zone charges on the second meter, if the following criteria are met: 27-2 1. The additional meter is solely for the purpose of isolating current domestic (indoor) water use from that used for outdoor landscaping. The additional meter shall be on a separate lateral. 2. All costs of on-site plumbing changes, including approved back-flow prevention devices, will be the responsibility of the customer. 3. The customer acknowledges that adding a second meter will result in a second water bill and associated monthly system fee. 4. The customer will be required to pay all fees and charges prior to meter installation. H. Water Service Use Changes Resulting in Increased System Utilization. The use of a water service shall be limited to the type and size authorized by the original water meter permit. The property owner shall make a supplementary water permit application to the District before adding or subtracting any additional equivalent dwelling units; adding or subtracting buildings; modifying existing buildings; or changing occupancy type. The property owner shall be responsible for all additional fees, as may be applicable resulting from the changes included in the supplementary water permit application. 1. If the supplementary water permit application requires a larger meter, the property owner will be responsible for all costs associated with the upsize of the existing meter in the manner provided in Section 33.05 paragraph C. 2. Periodic inspections of the premises may be made by the District to verify conformance with the approved permit. The District may also perform periodic inspections if actual use is greater than estimated use as included in the original water meter permit. If it is determined by periodic inspections that the type and size authorized by the original water meter permit has been exceeded, the property owner will be responsible for all costs associated with the upsize of the existing meter in the manner provided in Section 33.05 paragraph C. 27.02 SIZE OF WATER METER A water meter shall be sized to ensure that the maximum demand (in gallons per minute) will not exceed 80% of the manufacturer's recommended maximum flow rate, as shown in 27-3 Section 27.03. In no case shall the water meter size be less than ¾-inch. The size of the water meter and service lateral required for water service shall be determined by the General Manager as follows: A. Detached Single-Family Residential Dwelling Unit. The customer may submit calculated maximum demand (in gallons per minute), provided that maximum demand must be no more than twenty four (24) gallons per minute for a ¾-inch meter. B. Apartments, Condominiums, Mobile Home Parks, and other Multiple Family Residential Dwelling Units with Individual Meters. The calculated maximum demand shall be per Section 27.02A. C. Business, Commercial, Industrial, Apartments, Condominiums, Mobile Home Parks, and other Multiple-Family Residential Dwelling Units. The customer shall submit building plans signed by a licensed building architect. The plans shall list the number of fixture units, the parcel size (in acres), and the calculated maximum demand (in gallons per minute) to be placed on each water meter. D. Irrigation. The customer shall submit irrigation plans signed by a licensed landscape architect. The plans shall indicate the calculated maximum demand (in gallons per minute) to be placed on each water meter and the total area to be irrigated (in square feet). The plans must also be in compliance with the requirements of Section 27.05. E. Other. In the case of other types of service not included above, the customer shall submit information as requested by the General Manager. Any customer may request and purchase a separate meter to isolate landscaping from indoor use. F. Requirement for Multiple Meters. The General Manager may require multiple meters when it is in the best interest of the District. Buildings that contain a mix of commercial units and multiple-family residential dwelling units are required to isolate commercial water use from multiple-family residential water use through separate master meters. G. Phased Projects. Should the developer choose to phase a multi-family project and determines the use of a smaller meter is practical within the initial phase, they must provide fixture unit calculations for review and approval by the District for each phase of development, including the build-out of the project. The developer shall provide a letter to the District stating they acknowledge the initial meter is temporary and they understand that they must purchase a larger meter, paying all applicable meter upsize fees when they connect future phases to this system. 27-4 At Plan Review and Submittal the developer shall show fixture count and meter size for each of the phases to final build-out. 27.03 MANUFACTURERS RECOMMENDED MAXIMUM FLOW RATE FOR DISTRICT METERS Customers are cautioned to control the rates of flow of water through District meters. Operation of a meter at flows in excess of the manufacturer's recommendations will cause severe damage to operating parts. Rated capacities for meters used in this District are as follows: ORDINARY METERS Meter Size Manufacturer's Recommended Maximum Rate in U.S. Gallons in Inches per Minute 3/4 30 1 50 1-1/2 100 2 160 3 500 4 1000 6 2000 8 3400 10 5000 27.04 RESALE OR DISTRIBUTION OF WATER No customer may resell or redistribute any portion of the water furnished by the District except as provided below: A. Use of Sub Meters for Resale or Redistribution of Water. Owners or operators of mobile home parks, apartments, condominium complexes, industrial complexes, and land used for agricultural purposes may resell water furnished by the District through the use of a sub metering system under the following conditions: 1. Owners and operators shall comply with State law (California Code of Regulations Section 4090) prohibiting any surcharge on the water rate; 2. The water system on the private property side of the master meter, including the sub meters, shall be solely the responsibility of the owner or operator; and 3. The owner or operator shall clearly delineate on the bill that any cost associated with the sub meters is a cost imposed by the property 27-5 owner or operator and not by Otay Water District. B. Ratio Utility Billing Systems. To the extent permitted under law, owners or operators of multi-unit structures where sub meters have not been installed may elect to implement a Ratio Utility Billing System (RUBS) or alternative billing system to determine proportionate shares of water charges and bill tenants accordingly. 27.05 CONSERVATION AND LOCAL SUPPLY USE REQUIREMENTS The requirements below apply to all new residential and commercial developments or redevelopments. The landscape requirements also apply to any re-landscaping that is subject to review by the District, the County of San Diego, City of Chula Vista, or the City of San Diego. A. Indoor Fixtures and Appliances. All water fixtures and appliances installed, including the ones in the following list, must be high-efficiency: o Toilets and urinals o Faucets o Showerheads o Clothes Washers o Dishwashers ‘‘High-efficiency’’ means fixtures and appliances that comply with the most efficient specifications under the EPA WaterSense® or Energy Star programs,1 as in effect at the time installation commences. B. Landscape requirements. Only ‘‘Smart’’ irrigation controllers2 may be installed and only low-water use plants may be used in non-recreational landscapes. All landscapes must also be designed and managed consistent with requirements of the local agency within which the property is located, be it the County of San Diego, the City of Chula Vista, or the City of San Diego. 1. Installed smart irrigation controllers shall be properly programmed/scheduled according to the manufacturer’s instructions and/or site specific conditions based on soil type, plant type, irrigation type, weather, and/or reference evapotranspiration data. 1 Certified EPA WaterSense® products, and Energy Star products, are at least 20% more efficient than the applicable federal standards. 2 Smart Irrigation Controller means a controller that uses real time, soil moisture or weather data to automatically adjust irrigation run- times. Furthermore, to qualify as a Smart Irrigation Controller, the device must be certified by the Irrigation Association and/or the EPA WaterSense® program. 27-6 2. Two irrigation schedules shall be prepared, one for the initial establishment period of three months or until summer hardened, and one for the established landscape which incorporates the specific water needs of the plants and turf throughout the calendar year. The schedules shall be continuously available on site to those responsible for the landscape maintenance and posted at the smart controller. 3. Any Covenants, Conditions, and Restrictions (CC&Rs) pertaining to a new subdivision/development shall not limit or prohibit the use and maintenance of low water use plant materials and the use of artificial turf, and shall require property owners to design and maintain their landscapes consistent with applicable City and County regulations. 4. Dedicated irrigation meters shall be installed in: o All parks and common areas with 5,000 square feet or more of irrigated landscape; and o Commercial sites with 5,000 square feet or more of irrigated landscape 5. In compliance with Section 23.03 of this Code of Ordinance, pressure regulators must be installed when and where appropriate to maximize the life expectancy and efficiency of the irrigation system. C. New commercial developments must install separate, dual-distribution systems for potable and recycled water. D. The requirements of this Section shall not be interpreted in any way to limit the owner’s obligation to comply with any other applicable federal, state, or local laws or regulations. Attachment C SECTION 27REQUIREMENTS AND LIMITATIONS FOR OBTAINING WATER SERVICE 27.01 REQUIREMENT FOR WATER/SEWER PERMIT AND PAYMENT OF FEES, CHARGES, AND DEPOSITS A. Requirement for Water/Sewer Permits. Water meters shall not be installed nor water service furnished until an application, in the form of a water/sewer permit, has been executed by the customer at the District office. B. Requirement for Payment of Fees, Charges, and Deposits. Payment of all required fees, charges, and depos- its shall be made by the customer at the time the water meter is purchased. A customer requesting water service shall pay the fees, charges, and deposits as set forth in Section 28 of this Code. C. Requirement for a Building Permit. A customer requesting permanent water service shall be required to present a valid building permit for the property issued by the appropriate governmental agency, except that a building permit is not required by a customer requesting permanent water service to: 1) install and maintain landscaping prior to the construction of a building; 2) perform mass grading operations; or 3) to satisfy conditions imposed by other government agencies, including a single meter for grading four lots or less which are part of the same parcel map. Government agencies shall be exempt from the requirement of presenting a valid building permit. D. Requirement for a Service Lateral. The customer requesting water service shall either have an existing service lateral or purchase a new lateral installation at the time of the meter purchase. E. Commercial Parcels -- 5,000 square feet or Larger Irrigated Landscape. When a customer requests water service on a parcel of land with irrigated landscape equal to 5,000 square feet or more, a separate meter will be required for irrigation purposes on the site. F. Recycled Water Service Areas. In areas designated as recycled water service areas, the customer may be required to install a separate recycled water service lateral and meter to supply irrigation to the parcel. G. Second Meter for Indoor Use. Any customer who obtained a single meter prior to October 17, 1990, a second meter for indoor use may be obtained, without paying water capacity fees, San Diego County Water Authority fees, and applicable zone charges on the second meter, if the following criteria are met: 27-2 1. The additional meter is solely for the purpose of isolating current domestic (indoor) water use from that used for outdoor landscaping. The additional meter shall be on a separate lateral. 2. All costs of on-site plumbing changes, including approved back-flow prevention devices, will be the responsibility of the customer. 3. The customer acknowledges that adding a second meter will result in a second water bill and associated monthly system fee. 4. The customer will be required to pay all fees and charges prior to meter installation. H. Water Service Use Changes Resulting in Increased System Utilization. The use of a water service shall be limited to the type and size authorized by the original water meter permit. The property owner shall make a supplementary water permit application to the District before adding or subtracting any additional equivalent dwelling units; adding or subtracting buildings; modifying existing buildings; or changing occupancy type. The property owner shall be responsible for all additional fees, as may be applicable resulting from the changes included in the supplementary water permit application. 1. If the supplementary water permit application requires a larger meter, the property owner will be responsible for all costs associated with the upsize of the existing meter in the manner provided in Section 33.05 paragraph C. 2. Periodic inspections of the premises may be made by the District to verify conformance with the approved permit. The District may also perform periodic inspections if actual use is greater than estimated use as included in the original water meter permit. If it is determined by periodic inspections that the type and size authorized by the original water meter permit has been exceeded, the property owner will be responsible for all costs associated with the upsize of the existing meter in the manner provided in Section 33.05 paragraph C. 27.02 SIZE OF WATER METER A water meter shall be sized to ensure that the maximum demand (in gallons per minute) will not exceed 80% of the manufacturer's recommended maximum flow rate, as shown in 27-3 Section 27.03. In no case shall the water meter size be less than ¾-inch. The size of the water meter and service lateral required for water service shall be determined by the General Manager as follows: A. Detached Single-Family Residential Dwelling Unit. The customer may submit calculated maximum demand (in gallons per minute), provided that maximum demand must be no more than twenty four (24) gallons per minute for a ¾-inch meter. B. Apartments, Condominiums, Mobile Home Parks, and other Multiple Family Residential Dwelling Units with Individual Meters. The calculated maximum demand shall be per Section 27.02A. C. Business, Commercial, Industrial, Apartments, Condominiums, Mobile Home Parks, and other Multiple-Family Residential Dwelling Units. The customer shall submit building plans signed by a licensed building architect. The plans shall list the number of fixture units, the parcel size (in acres), and the calculated maximum demand (in gallons per minute) to be placed on each water meter. D. Irrigation. The customer shall submit irrigation plans signed by a licensed landscape architect. The plans shall indicate the calculated maximum demand (in gallons per minute) to be placed on each water meter and the total area to be irrigated (in square feet). The plans must also be in compliance with the requirements of Section 27.05. E. Other. In the case of other types of service not included above, the customer shall submit information as requested by the General Manager. Any customer may request and purchase a separate meter to isolate landscaping from indoor use. F. Requirement for Multiple Meters. The General Manager may require multiple meters when it is in the best interest of the District. Buildings that contain a mix of commercial units and multiple-family residential dwelling units are required to isolate commercial water use from multiple-family residential water use through separate master meters. G. Phased Projects. Should the developer choose to phase a multi-family project and determines the use of a smaller meter is practical within the initial phase, they must provide fixture unit calculations for review and approval by the District for each phase of development, including the build-out of the project. The developer shall provide a letter to the District stating they acknowledge the initial meter is temporary and they understand that they must purchase a larger meter, paying all applicable meter upsize fees when they connect future phases to this system. 27-4 At Plan Review and Submittal the developer shall show fixture count and meter size for each of the phases to final build-out. 27.03 MANUFACTURERS RECOMMENDED MAXIMUM FLOW RATE FOR DISTRICT METERS Customers are cautioned to control the rates of flow of water through District meters. Operation of a meter at flows in excess of the manufacturer's recommendations will cause severe damage to operating parts. Rated capacities for meters used in this District are as follows: ORDINARY METERS Meter Size Manufacturer's Recommended Maximum Rate in U.S. Gallons in Inches per Minute 3/4 30 1 50 1-1/2 100 2 160 3 500 4 1000 6 2000 8 3400 10 5000 27.04 RESALE OR DISTRIBUTION OF WATER No customer may resell or redistribute any portion of the water furnished by the District except as provided below: A. Use of Sub Meters for Resale or Redistribution of Water. Owners or operators of mobile home parks, apartments, condominium complexes, industrial complexes, and land used for agricultural purposes may resell water furnished by the District through the use of a sub metering system under the following conditions: 1. Owners and operators shall comply with State law (California Code of Regulations Section 4090) prohibiting any surcharge on the water rate; 2. The water system on the private property side of the master meter, including the sub meters, shall be solely the responsibility of the owner or operator; and 3. The owner or operator shall clearly delineate on the bill that any cost associated with the sub meters is a cost imposed by the property 27-5 owner or operator and not by Otay Water District. B. Ratio Utility Billing Systems. To the extent permitted under law, owners or operators of multi-unit structures where sub meters have not been installed may elect to implement a Ratio Utility Billing System (RUBS) or alternative billing system to determine proportionate shares of water charges and bill tenants accordingly. 27.05 CONSERVATION AND LOCAL SUPPLY USE REQUIREMENTS The requirements below apply to all new residential and commercial developments or redevelopments. The landscape requirements also apply to any re-landscaping that is subject to review by the District, the County of San Diego, City of Chula Vista, or the City of San Diego. A. Indoor Fixtures and Appliances. All water fixtures and appliances installed, including the ones in the following list, must be high-efficiency: o Toilets and urinals o Faucets o Showerheads o Clothes Washers o Dishwashers ‘‘High-efficiency’’ means fixtures and appliances that comply with the most efficient specifications under the EPA WaterSense® or Energy Star programs,1 as in effect at the time installation commences. B. Landscape requirements. Only ‘‘Smart’’ irrigation controllers2 may be installed and only low-water use plants may be used in non-recreational landscapes. All landscapes must also be designed and managed consistent with requirements of the local agency within which the property is located, be it the County of San Diego, the City of Chula Vista, or the City of San Diego. 1. Installed smart irrigation controllers shall be properly programmed/scheduled according to the manufacturer’s instructions and/or site specific conditions based on soil type, plant type, irrigation type, weather, and/or reference evapotranspiration data. 1 Certified EPA WaterSense® products, and Energy Star products, are at least 20% more efficient than the applicable federal standards. 2 Smart Irrigation Controller means a controller that uses real time, soil moisture or weather data to automatically adjust irrigation run- times. Furthermore, to qualify as a Smart Irrigation Controller, the device must be certified by the Irrigation Association and/or the EPA WaterSense® program. 27-6 2. Two irrigation schedules shall be prepared, one for the initial establishment period of three months or until summer hardened, and one for the established landscape which incorporates the specific water needs of the plants and turf throughout the calendar year. The schedules shall be continuously available on site to those responsible for the landscape maintenance and posted at the smart controller. 3. Any Covenants, Conditions, and Restrictions (CC&Rs) pertaining to a new subdivision/development shall not limit or prohibit the use and maintenance of low water use plant materials and the use of artificial turf, and shall require property owners to design and maintain their landscapes consistent with applicable City and County regulations. 4. Dedicated irrigation meters shall be installed in: o All parks and common areas with 5,000 square feet or more of irrigated landscape; and o Commercial sites with 5,000 square feet or more of irrigated landscape 5. In compliance with Section 23.03 of this Code of Ordinance, pressure regulators must be installed when and where appropriate to maximize the life expectancy and efficiency of the irrigation system. C. New commercial developments must install separate, dual-distribution systems for potable and recycled water. D. The requirements of this Section shall not be interpreted in any way to limit the owner’s obligation to comply with any other applicable federal, state, or local laws or regulations. STAFF REPORT TYPE MEETING: Regular Board MEETING DATE: February 1, 2017 SUBMITTED BY: Tenille M. Otero, Communications Officer PROJECT: Various DIV. NO. ALL APPROVED BY: Mark Watton, General Manager SUBJECT: 2017 Legislative Program Guidelines GENERAL MANAGER’S RECOMMENDATION: That the Board of Directors adopt the 2017 Otay Water District Legislative Program Guidelines. COMMITTEE ACTION: See Attachment A. PURPOSE: To provide direction to staff and the District’s Legislative Advocates in the formulation of the District’s response to legislative initiatives on issues affecting the District during the 2017 legislative session. ANALYSIS: Otay Water District maintains a set of legislative policy guidelines to direct staff and legislative advocates on issues important to the District. The legislative guidelines are updated annually with the proposed updates presented to the Otay Water District’s Board of Directors for review, comment, and adoption. The attached 2017 Legislative Program represents policy positions on legislation for the Board’s consideration. Each legislative session, representatives to the California Legislature sponsor 2,000 or more bills or significant resolutions. 2 While many bills fail to make it out of their house of origin, many others go on to be signed by the governor and become law. These new laws can affect special districts in substantive ways. The same is true with each session of the House of Representatives and the U.S. Senate. The 2017 Legislative Program establishes guidelines and policy direction that can be used by staff when monitoring legislative activity to facilitate actions that can be taken quickly in response to proposed bills. The guidelines provide a useful framework for staff when evaluating the potential impact of state or federal legislation on the District. This is particularly helpful when a timely response is necessary to address a last minute amendment to legislation and should calls or letters of support or opposition be needed. Legislation that does not meet the guidelines as set forth or that has potentially complicated or varied implications will not be acted upon by staff or the legislative advocates, and will instead be presented to the Board directly for guidance in advance of any position being taken. The 2017 Legislative Guidelines presents staff’s initial recommendations for the Board’s review, and seeks the Board’s recommendations for any additional modifications. Staff will then incorporate feedback into the final document. In general, the guidelines look to protect the District’s interest in a reliable, diverse, and affordable water supply. Moreover, they seek to maintain local control over special district actions to protect the Board’s discretion and ratepayer interests, and maintain the ability to effectively and efficiently manage District operations. In addition they express the District’s ongoing support for water conservation, recycled water, seawater desalination, capital improvement project development, organization-wide safety and security, binational cooperation, and the equitable distribution of water bond proceeds. FISCAL IMPACT: Joe Beachem, Chief Financial Officer None. LEGAL IMPACT: None 3 Attachments: Attachment A – Committee Action Attachment B – 2017 Otay Water District Legislative Program Attachment C - 2017 Otay Water District Legislative Program Redline ATTACHMENT A SUBJECT/PROJECT: 2017 Legislative Program Guidelines COMMITTEE ACTION: The Finance, Administration, and Communications Committee (FA&C Committee) reviewed this item at a meeting held on January 18, 2017 and the following comments were made:  Staff is requesting that the Board adopt the 2017 Otay Water District Legislative Program Guidelines.  The legislative program was first developed in 2003 and the policy positions in the program are updated annually to address possible issues that may affect the District during the 2017 legislative session.  Staff reviewed the information in the staff report.  Staff indicated that items are added or changed to keep Otay in alignment with the San Diego County Water Authority and other regional water agencies on topics important to the region.  The Committee indicated that the Legislative Guidelines is a comprehensive list, however, it has grown over the years and has become quite a long list, which makes it more difficult to know what specific legislation or issues the District is proactively reviewing for the year. The Committee suggested that the Legislative Guidelines list should be reviewed and condensed into a separate list prioritizing the District’s “top ten” (10) or so priorities for the year.  It was discussed that the guidelines list is quite large as staff wished it to be comprehensive. Staff indicated that they could present at the next FA&C Committee meeting a list of legislation that the District is proactively monitoring.  Staff indicated, in response to an inquiry from the Committee, that staff reviewed the San Diego County Water Authority’s 2017 legislative guidelines and updated the District’s guidelines based on issues that could affect the District. Pertinent departments were asked for their feedback if additional clarification was needed.  The Committee requested that staff update the Board on the District’s legislative activities more frequently throughout the year.  The Committee indicated that they were supportive of adopting the presented Legislative Program Guidelines at the February Board meeting and recommended that staff present a prioritized list of proactive issues at the next FA&C Committee meeting. Upon completion of the discussion, the committee supported staffs’ recommendation and presentation to the full board on the consent calendar. Otay Water District Legislative Program 2017 1 | Page Effective Date: 02/01/2017 Legislative Policy Guidelines The Otay Water Legislative Policy Guidelines for the 2017 Legislative Session includes the following: Sacramento-San Joaquin Bay Delta (Bay-Delta) Support efforts to: 1. Finalize and implement the Bay-Delta Conservation Plan to address Bay-Delta environmental and water quality issues. 2. Analyze or support a “Portfolio Approach”, “Around-the-Delta”, “right-sized”, or other alternatives that feature smaller conveyance facilities as a way to improve water quality, water transport, and reduce the possibility or impacts of levee failure, lower costs to water users and the public, reduce the level of environmental impacts, while potentially facing fewer legal and political challenges. 3. Finalize Bay-Delta planning work and ongoing studies of new water storage facilities, and support efforts to promote additional surface and underground water storage infrastructure that are cost effective ensure water availability and quality. 4. Resolve conflicts between urban and rural water users, water management and the environment in the Bay-Delta. 5. Provide ongoing federal and state funding for the Bay-Delta, and those, which focus attention to Bay-Delta financing, affordability, commitments to pay, and the demand for Bay-Delta water. 6. Equitably allocate costs of the Bay-Delta solution to all those benefiting from improvements in proportion to the benefits they receive. 7. Fast-track design, permits and construction for pilot projects in the Bay-Delta to create barriers to keep fish away from Bay-Delta water pumps, improve water quality and supply reliability. 8. Provide deliberative processes that are designed to ensure meaningful dialogue with all stakeholders in an open and transparent process in order to reduce future conflicts and challenges in implementing a Bay-Delta solution. 9. Provide a Bay-Delta solution that acknowledges, integrates and supports the development of water resources at the local level. 10. Improve the ability of water-users to divert water from the Bay-Delta during wet periods when impacts to fish and the ecosystem are lower and water quality is higher. 11. Improve the existing Bay-Delta water conveyance system to increase flexibility and enhance water supply, water quality, levee stability and environmental protection. 12. Evaluate long-term threats to the Bay-Delta levees and conveyance system and pursues actions to reduce risks to the state’s water supply and the environment. 13. Improve coordination of the Central Valley Project and State Water Project Operations. 14. Provide a Bay-Delta solution and facilities that are cost-effective when compared with other water supply development options for meeting Southern California’s water needs. Otay Water District Legislative Program 2017 2 | Page 15. Identify the total cost or perform appropriate cost studies to estimate consumer financial impact as well as the expected yield of any Bay-Delta solution before financing and funding decision are made to determine whether the solution is worth the expense. 16. Provide the State Water Project (SWP) with more flexibility to operate their systems to maximize water deliveries while avoiding unacceptable impacts to third parties, habitat or the environment. 17. Require a firm commitment and funding stream by all parties to pay for the proportional benefits they will receive from a Bay-Delta solution through take-or-pay contracts or the legal equivalent, and identify the impact to the remaining contractors if one or more contractors default or back out. 18. Provide “right-sized” facilities to match firm commitments to pay for the Bay-Delta solution. 19. Provide SWP contractors and their member agencies access to all SWP facilities to facilitate water transfers to improve water management. 20. Continue state ownership and operation of SWP as a public resource. 21. Improve efficiency and transparency of all SWP operations. 22. Focus on statewide priorities, including construction of an approved method of conveyance of water through or around the Delta that provides water supply reliability to the Delta water uses. 23. Provide a solution that acknowledges, integrates and supports the development of resources at the local level including water-use efficiency, seawater desalination, groundwater storage and conjunctive use, and recycled water including direct and indirect potable water reuse. 24. Provides for the state’s share of funding for Bay-Delta conveyance projects. 25. Consider complementary investments in local water supply sources, regional coordination, and south of Delta storage as part of an overall comprehensive Bay-Delta solution. 26. Protects and safeguards San Diego region’s Preferential Rights. Oppose efforts that: 1. Require additional reviews or approvals of Delta conveyance options beyond those provided by SBX7-1 (2009). 2. Transfer control of the State Water Project from the state to Metropolitan Water District of Southern California (MWD), the State Water Contractors, the Central Valley Project Contractors, the State and Federal Water Contractors Authority, or to any entity comprised of MWD and other water contractors. Otay Water District Legislative Program 2017 3 | Page Recycled Water Support efforts to: 1. Reduce restrictions on recycled water usage or promote consistent regulation of recycled water projects to reduce impediments to the increased use of recycled water. 2. Reduce restrictions on injecting recycled water into basins where there is no direct potable use. 3. Provide financial incentives for recharge of groundwater aquifers using recycled water. 4. Make recycled water regulations clear, consolidated, and understandable to expedite related project permitting. 5. Promote recycled water as a sustainable supplemental source of water. 6. Allow the safe use of recycled water. 7. Facilitate development of technology aimed at improving water recycling. 8. Increasing funding for water recycling projects. 9. Support continued funding of the Title XVI Water Reclamation and Reuse Program including Water Reclamation and Reuse Projects, the WaterSMART Program, and the Desalination and Water Purification Research Program. 10. Increase awareness of the ways recycled water can help address the region’s water supply challenges. 11. Create federal and state incentives to promote recycled water use and production. 12. Establish federal tax incentives to support U.S. companies in the development of new water technologies that can lower productions costs, address by products such as concentrates, and enhance public acceptance of recycled water. 13. Establish a comprehensive national research and development, and technology demonstration, program to advance the public and scientific understanding of water recycling technologies to encourage reuse as an alternative source of water supply. 14. Provide incentives for local agencies to work cooperatively, share costs or resources to promote or expand the use of recycled water. 15. Further refine emergency regulations to reward local suppliers that have invested in using recycled water for landscape irrigation to maintain an incentive to continue expanding areas served by recycled water. 16. Encourages the use of recycled water in commercial, industrial, institutional, and residential settings. 17. Recognizes and supports the development of potable reuse as a new supply. 18. Defines purified recycled water as a source of water supply and not as waste. 19. Mandates the reduction of wastewater discharges to the ocean absent inclusion of funding to offset the significant costs of implementation. Oppose efforts that: 1. Restrict use of recycled water for groundwater recharge. 2. Establish new water or recycled water fees solely to recover State costs without also providing some benefit. 3. Establish unreasonable regulatory requirements or fees, which may unreasonably impede or create a disincentive to the existing authority for the development of the safe use of recycled water. Otay Water District Legislative Program 2017 4 | Page Water Services and Facilities Support efforts to: 1. Provide funding to implement actions identified in the California Water Action Plan to lay a solid fiscal foundation for implementing near-term actions, including funding for water efficiency projects, wetland and watershed restoration, groundwater programs, conservation, flood control, and integrated water management and result in a reliable supply of high-quality water for the San Diego region. 2. Provide financial support to projects designed to mitigate the potential negative impacts of Global Climate Change on water supply reliability. 3. Promote the coordination and integration of local, state and federal climate change policies and practices to the greatest extent feasible. 4. Fund or otherwise facilitate ongoing implementation of the Quantification Settlement Agreement. 5. Provide reliable water supplies to meet California’s short and long-term needs. 6. Promote desalination pilot studies and projects. 7. Encourage feasibility studies of water resource initiatives. 8. Increase funding for infrastructure and grant programs for construction, modernization or expansion of water, wastewater treatment, reclamation facilities and sewer systems including water recycling, groundwater recovery and recharge, surface water development projects and seawater desalination. 9. Fund enhancements to water treatment, recycling, and other facilities to meet increased regulations. 10. Mandate uniform or similar regulations and procedures by state agencies in the processing and administering of grants and programs. 11. Streamline grant application procedures. 12. Reduce regulations and other impediments for willing sellers and buyers to engage in water transfer agreements. 13. Promote or assist voluntary water transfers between willing buyers and willing sellers and move those transactions through without delay. 14. Streamline the permitting and approval process for implementing water transfers. 15. Establish reasonable statewide approaches to sewer reporting standards. 16. Generate greater efficiencies, better coordinate program delivery, and eliminate duplication in programs for source water protection without lessening the focus on public health of the state’s Drinking Water Program. 17. Target efforts to fix specific issues with water supplies within the state’s Drinking Water Program. 18. Establish federal tax incentives to support U.S. companies in the development of new desalination technologies that can lower productions costs, eliminate or reduce impingement or entrainment, reduce energy use, and enhance public acceptance of desalinated water. 19. Establish a comprehensive national research and development, and technology demonstration program to advance the scientific understanding of desalination to expand its use as an alternative source of water supply. 20. Require the State Water Resources Control Board to exercise its authority, ensure robust funding, and implement the Salton Sea mitigation and restoration plan, meet state obligations, Otay Water District Legislative Program 2017 5 | Page and work with QSA stakeholders to find workable solutions to ensure the continuation of IID water transfers. 21. Support solutions to water supply issues that address common challenges, provide a comprehensive approach that is fair to all users, balance the needs of urban and rural communities, and take into consideration the interests of all stakeholders as well as the impact to the environment. 22. Further refine emergency drought regulations to eliminate a cap on credits and adjustments so as not to impose undue burden, financial or otherwise, on communities that have already invested in water conservation, development of new water sources, storage, or loss prevention. 23. Provide funding for water infrastructure development, infrastructure security, and rehabilitation and replacement projects that benefit ratepayers. 24. Provide funding for habitat preservation programs that address impacts resulting from construction or operation of water system facilities. 25. Provide funding for projects that enhance security against terrorist acts or other criminal threats to water operation, services, facilities, or supplies. 26. Provide incentives that encourage contractors to recycle or reduce waste associated with construction of water facilities. Oppose efforts that: 1. Make urban water supplies less reliable or substantially increase the cost of imported water without also improving the reliability and/or quality of the water. 2. Create unrealistic or costly water testing or reporting protocol. 3. Disproportionately apportion the cost of water. 4. Create undo hurtles for seawater desalination projects. 5. Create unreasonable or confusing sewer reporting standards. 6. Create administrative or other barriers to sales between willing buyers and willing sellers that delay water transfers. 7. Create a broad-based user fee that does not support a specific local program activity or benefit; any fee must provide a clear nexus to the benefit local ratepayers or local water supplies from the establishment that charge or fee would provide. 8. Create unrealistic or costly to obtain water quality standards for potable water, recycled water or storm water runoff. 9. Change the focus of the state’s Drinking Water Program or weaken the parts of the program that work well. 10. Lessen the focus on public health of the state’s Drinking Water Program. 11. Create one-size-fit-all approaches to emergency drought regulations that ignore variations among communities, regions, and counties with respect to their ability to withstand the impact and effects of drought. 12. Impose undue burden, financial or otherwise, on communities that have already invested in water conservation, development of new water sources, storage, or loss prevention. 13. Impose additional mitigation costs or obligations for the Salton Sea on the non-state parties to the Quantification Settlement Agreement. 14. Impairs local agencies’ ability to provide and operate the necessary facilities for a safe, reliable and operational flexible water system. Otay Water District Legislative Program 2017 6 | Page 15. Limits local agencies’ sole jurisdiction over planning, design, routing, approval, construction, operation, or maintenance of water facilities. 16. Restricts local agencies’ ability to respond swiftly and decisively to an emergency that threatens to disrupt water deliveries or restricts the draining of pipelines or other facilities in emergencies for repairs or preventive maintenance. 17. Authorizes state and federal wildlife agencies to control, prevent, or eradicate invasive species in a way that excessively interferes with the operations of water supplies. 18. Prohibit or in any way limit the ability of local agencies from making full beneficial use of any water, wastewater, or recycling facility and resource investments. Financial Support efforts to: 1. Require the federal government and State of California to reimburse special districts for all mandated costs or regulatory actions. 2. Give special districts the discretion to cease performance of unfunded mandates. 3. Provide for fiscal reform to enhance the equity, reliability, and certainty of special district funding. 4. Provide incentives for local agencies to work cooperatively, share costs or resources. 5. Provide for the stable, equitable and reliable allocation of property taxes. 6. Continue to reform workers compensation. 7. Authorize financing of water quality, water security, and water supply infrastructure improvement programs. 8. Promote competition in insurance underwriting for public agencies. 9. Establish spending caps on State of California overhead when administering voter approved grant and disbursement programs. 10. Require disbursement decisions in a manner appropriate to the service in question. 11. Encourage funding infrastructure programs that are currently in place and that have been proven effective. 12. Produce tangible results, such as water supply reliability or water quality improvement. 13. Provide financial incentives for energy projects that increase reliability, diversity, and reduce greenhouse gasses. 14. Continue energy rate incentives for the utilization of electricity during low-peak periods. 15. Provide loan or grant programs that encourage water conservation for water users who are least able to pay for capital projects. 16. Require the Metropolitan Water District of Southern California (MWD) to refund or credit to its member agencies revenues collected from them that result in reserve balances greater than the maximum reserve levels established pursuant to state legislation. 17. Maintains the authority of water agencies to establish water rates locally, consistent with the cost-of-service requirement of the law. 18. Maximizes the ability of water agencies to design rate structures to meet local water supply goals and that conform to the cost-of-service requirements of the law. Otay Water District Legislative Program 2017 7 | Page Oppose efforts that: 1. Impose new, unfunded state mandates on local agencies and their customers. 2. Undermine Proposition 1A - Protection of Local Government Revenues – and the comprehensive reform approved by voters in 2004. 3. Reallocate special district reserves in an effort to balance the state budget. 4. Reallocate special district revenues or reserves to fund infrastructure improvements or other activities in cities or counties. 5. Usurp special district funds, reserves, or other state actions that force special districts to raise rates, fees or charges. 6. Complicate or deter conservation-based rate structures. 7. Establish funding mechanisms that put undue burdens on local agencies or make local agencies de facto tax collectors for the state. 8. Complicate compliance with SB 610 and SB 221. 9. Adversely affect the cost of gas and electricity or reduce an organization’s flexibility to take advantage of low peak cost periods. 10. Add new reporting criteria, burdensome, unnecessary or costly reporting mandates to Urban Water Management Plans. 11. Add new mandates to the Department of Water Resources (DWR) to review and approve Urban Water Management Plans beyond those already addressed in DWR guidelines. 12. Mandate that water agencies include an embedded energy calculation for their water supply sources in Urban Water Management Plans or any other water resources planning or master planning document. 13. Weaken existing project retention and withholding provisions that limit the ability of public agencies to drive contractor performance. 14. Establish change order requirements that place an unreasonable burden on local agencies, or raise financial risk associated with public works contracts. 15. Establish a Public Goods Charge, excise tax for excessive water use, or other permanent tax or fee on water. 16. Impairs the San Diego County Water Authority or its member agencies’ ability to provide reasonable service at reasonable costs to member agencies or to charge all member agencies the same rate for each class of service consistent with cost-of-service requirements of the law. 17. Undermines or weakens cost-of-service rate-making requirements in existing law. 18. Impairs the local water agencies’ ability to maintain reasonable reserve funds and obtain and retain reasonable rates of return on its reserve accounts. 19. Mandates a specific rate structure for retail water agencies. 20. Imposes a water user fee on water agencies or water users that does not provide a commensurate and directly linked benefit in the local area or region from which the water user fee is collected. Otay Water District Legislative Program 2017 8 | Page Governance/Local Autonomy Support efforts to: 1. Expand local autonomy in governing special district affairs. 2. Promote comprehensive long-range planning. 3. Assist local agencies in the logical and efficient extension of services and facilities to promote efficiency and avoid duplication of services. 4. Streamline the Municipal Service Review Process or set limits on how long services reviews can take or cost. 5. Establish clear and reasonable guidelines for appropriate community sponsorship activities. 6. Reaffirm the existing “all-in” financial structure, or protect the San Diego County Water Authority voting structure based on population. 7. Promote measures that increase broader community and water industry representation/appointments on State decision making bodies Oppose efforts that: 1. Assume the state legislature is better able to make local decisions that affect special district governance. 2. Create one-size-fits-all approaches to special district reform. 3. Unfairly target one group of local elected officials. 4. Usurp local control from special districts regarding decisions involving local special district finance, operations or governance. 5. Limit the board of directors’ ability to govern the district. 6. Create unfunded local government mandates. 7. Create costly, unnecessary or duplicative oversight roles for the state government of special district affairs. 8. Create new oversight roles or responsibility for monitoring special district affairs. 9. Change the San Diego County Water Authority Act regarding voting structure, unless it is based on population. 10. Shift the liability to the public entity and relieve private entities of reasonable due diligence in their review of plans and specifications for errors, omissions and other issues. 11. Place a significant and unreasonable burden on public agencies, resulting in increased cost for public works construction or their operation. 12. Impair the ability of water districts to acquire property or property interests required for essential capital improvement projects. 13. Increase the cost of property and right-of-way acquisition, or restricts the use of right-of- ways. 14. Work to silence the voices of special districts and other local government associations on statewide ballot measures impacting local government policies and practices, including actions that could prohibit special districts and associations from advocating for positions on ballot measures by severely restricting the private resources used to fund those activities. 15. Prescribe mandatory conservation-based or other rate structures that override the authority of the board of directors to set its rate structure. Otay Water District Legislative Program 2017 9 | Page 16. Circumvent the legislative committee process, such as the use of budget trailer bills, to advance policy issues including impacting special districts without full disclosure, transparency, or public involvement. Conservation Support efforts to: 1. Provide funding for water conservation programs. 2. Encourage the installation of water-efficient fixtures in new and existing buildings. 3. Promote the environmental benefits of water conservation. 4. Enhance efforts to promote water awareness and conservation. 5. Offer incentives for landscape water-efficient devices including, but not limited to ET controllers and soil moisture sensors. 6. Develop landscape retrofit incentive programs and/or irrigation retrofit incentive programs. 7. Permit or require local agencies to adopt ordinances that require or promote water-wise landscape for commercial and residential developments. 8. Create tax incentives for citizens or developers who install water-wise landscapes. 9. Create tax incentives for citizens who purchase high-efficiency clothes washers, dual-flush and high-efficiency toilets and irrigation controllers above the state standards. 10. Expand community-based conservation and education programs. 11. Develop incentives for developers and existing customers to install water-wise landscape in existing developments or new construction. 12. Encourage large state users to conserve water by implementing water-efficient technologies in all facilities both new and retrofit. 13. Maintain incentives for solar power. 14. Encourage large state water users to conserve water outdoors. 15. Educate all Californians on the importance of water, and the need to conserve, manage, and plan for the future needs. 16. Encourage technological research targeted to more efficient water use. 17. Give local agencies maximum discretion in selecting conservation programs that work for their customers and the communities they serve. 18. Require the Department of Water Resources to implement a uniform statewide turf rebate subsidy or incentive program. 19. Require Property Owners Associations to allow low water use plants, mulch, artificial turf, or semi-permeable materials in well-maintained landscapes. 20. Creates a process for development and implementation of emergency drought declarations and regulations that recognizes variations among communities, regions, and counties with respect to their abilities to withstand the impacts and effects of drought. 21. Recognizes variations among communities, regions, and counties with respect to their abilities to withstand the impacts and effects of droughts, and ensures that any temporary or permanent statutory or regulatory direction for improving water-use efficiency to meet statutory or regulatory goals or standards is focused on regional achievement of objectives rather than a one-size-fits-all approach. 22. Provides for federal tax-exempt status for water use efficiency rebates, consistent with income tax treatment at the state level. Otay Water District Legislative Program 2017 10 | Page Oppose efforts that: 1. Weaken federal or state water-efficiency standards. 2. Introduce additional analytical and reporting requirements that are time-consuming for local agencies to perform and result in additional costs to consumers, yet yield no water savings. 3. Permit Property Owners Associations to restrict low water use plants, mulch, artificial turf, or semi-permeable materials in landscaping. 4. Create one-size-fit-all approaches to emergency drought regulations that ignore variations among communities, regions, and counties with respect to their ability to withstand the impact and effects of drought. Safety, Security and Information Technology Support efforts to: 1. Provide funding for information security upgrades to include integrated alarms, access/egress, and surveillance technology. 2. Provide incentives for utilities and other local agencies to work cooperatively, share costs or resources. 3. Provide funding for communication enhancements, wireless communications, GIS or other technological enhancements. 4. Encourage or promote compatible software systems. 5. Fund infrastructure and facility security improvements that include facility roadway access, remote gate access and physical security upgrades. 6. Protect state, local and regional drinking water systems from terrorist attack or deliberate acts of destruction, contamination or degradation. 7. Provide funds to support training or joint training exercises to include contingency funding for emergencies and emergency preparedness. 8. Equitably allocate security funding based on need, threats and/or population. 9. Encourage or promote compatible communication systems. 10. Encourage and promote funding of Department of Homeland Security Risk Mitigation programs. 11. Recognizes water agencies as emergency responders to damage and challenges caused by wildfires, earthquakes, and other natural disasters, as well as terrorist and other criminal activities that threaten water operations, facilities and supplies. 12. Provide state grant or other funding opportunities to support seismic risk assessment and mitigation plans, or to mitigate vulnerabilities. 13. Provide funding for projects that enhance security against terrorist acts or other criminal threats to water operation, services, facilities, or supplies. Oppose efforts that: 1. Create unnecessary, costly, or duplicative security or safety mandates. 2. Require expanded water system descriptions or additional public disclosure of public water systems details for large water suppliers in Urban Water Management Planning documents, potentially compromising public water systems and creating a conflict with the Department of Otay Water District Legislative Program 2017 11 | Page Homeland Security’s recommendation to avoid reference to water system details in plans available to the general public. Optimize District Effectiveness Support efforts to: 1. Give utilities the ability to avoid critical peak energy pricing or negotiate energy contracts that save ratepayers money. 2. Develop reasonable Air Pollution Control District engine permitting requirements. 3. Reimburse or reduce local government mandates. 4. Allow public agencies to continue offering defined benefit plans. 5. Result in predictable costs and benefits for employees and taxpayers. 6. Eliminate abuses. 7. Retain local control of pension systems. 8. Be constitutional, federally legal and technically possible. Oppose efforts that: 1. Restrict the use of, or reallocate, district property tax revenues to the detriment of special districts. 2. Create unrealistic ergonomic protocol. 3. Micromanage special district operations. 4. Balance the state budget by allowing regulatory agencies to increase permitting fees. 5. Tax dependent benefits. 6. Require new reporting criteria on energy intensity involved in water supply. Bi-National Initiatives Support efforts to: 1. Promote and finance cross-border infrastructure development such as water pipelines, desalination plants or water treatment facilities to serve the border region while protecting local interests. 2. Develop cooperative and collaborative solutions to cross-border issues. 3. Develop and enhance communications and understanding of the interdependence of communities on both sides of the border with the goal of improved cross-border cooperation. Oppose efforts that: 1. Usurp local control over the financing and construction of water supply and infrastructure projects in the San Diego/Baja California region. Otay Water District Legislative Program 2017 12 | Page State Water Bonds Support efforts to: 1. Ensure funding from various propositions for local and regional water-related projects. 2. Ensure funding for water infrastructure projects help to resolve conflicts in the state’s water system and provide long-term benefits to statewide issues including water supply, reliability, water quality, and ecosystem restoration. 3. Ensure primary consideration is given to funding priorities established by local and regional entities through their IRWM planning process. 4. Ensure that the application process for funding is not unnecessarily burdensome and costly, with an emphasis on streamlining the process. 5. Fund emergency and carryover storage projects including those in San Diego County. 6. Consolidate administration of all voter-approved water-related bond funding in one place, preserves existing expertise within the state bureaucracy to manage bond funding processes, and provide consistent application and evaluation of bond funding applications. 7. Expedite the funding for projects that advance the achievement of the co-equal goals of water supply reliability and Delta ecosystem restoration. Oppose efforts that: 1. Change the share of funding to make San Diego County’s share less equitable, not based on the San Diego County taxpayers’ proportional contribution to repayment of the bonds, or change the understanding that all beneficiaries pay an equitable share. 2. Do not provide funding for infrastructure that resolves statewide or regional conflicts of water supplies. 3. Do not provide funding that result in net increases in real water supply and water supply reliability. 4. Commit a significant portion of bond funding to projects that do not result in net increases in real water supply or water supply reliability. Otay Water District Legislative Program 20162017 1 | Page Effective Date: 02/031/20167 Legislative Policy Guidelines The Otay Water Legislative Policy Guidelines for the 20167 Legislative Session includes the following: Sacramento-San Joaquin Bay Delta (Bay-Delta) Support efforts to: a.1. Finalize and implement the Bay-Delta Conservation Plan to address Bay-Delta environmental and water quality issues. b.2.Analyze or support a “Portfolio Approach”, “Around-the-Delta”, “right-sized”, or other alternatives that feature smaller conveyance facilities as a way to improve water quality, water transport, and reduce the possibility or impacts of levee failure, lower costs to water users and the public, reduce the level of environmental impacts, while potentially facing fewer legal and political challenges. c.3. Finalize Bay-Delta planning work and ongoing studies of new water storage facilities, and support efforts to promote additional surface and underground water storage infrastructure that are cost effective ensure water availability and quality. d.4.Resolve conflicts between urban and rural water users, water management and the environment in the Bay-Delta. e.5. Provide ongoing federal and state funding for the Bay-Delta, and those whichthose, which focus attention to Bay-Delta financing, affordability, commitments to pay, and the demand for Bay-Delta water. f.6. Equitably allocate costs of the Bay-Delta solution to all those benefiting from improvements in proportion to the benefits they receive. g.7.Fast-track design, permits and construction for pilot projects in the Bay-Delta to create barriers to keep fish away from Bay-Delta water pumps, improve water quality and supply reliability. h.8.Provide deliberative processes that are designed to ensure meaningful dialogue with all stakeholders in an open and transparent process in order to reduce future conflicts and challenges in implementing a Bay-Delta solution. i.9. Provide a Bay-Delta solution that acknowledges, integrates and supports the development of water resources at the local level. j.10. Improve the ability of water-users to divert water from the Bay-Delta during wet periods when impacts to fish and the ecosystem are lower and water quality is higher. k.11. Improve the existing Bay-Delta water conveyance system to increase flexibility and enhance water supply, water quality, levee stability and environmental protection. l.12. Evaluate long-term threats to the Bay-Delta levees and conveyance system and pursues actions to reduce risks to the state’s water supply and the environment. m.13. Improve coordination of the Central Valley Project and State Water Project Operations. n.14. Provide a Bay-Delta solution and facilities that are cost-effective when compared with other water supply development options for meeting Southern California’s water needs. Formatted: Numbered + Level: 1 + Numbering Style: 1,2, 3, … + Start at: 1 + Alignment: Left + Aligned at: 0.25" + Indent at: 0.5" Otay Water District Legislative Program 20162017 2 | Page o.15. Identify the total cost or perform appropriate cost studies to estimate consumer financial impact as well as the expected yield of any Bay-Delta solution before financing and funding decision are made to determine whether the solution is worth the expense. p.16. Provide the State Water Project (SWP) with more flexibility to operate their systems to maximize water deliveries while avoiding unacceptable impacts to third parties, habitat or the environment. q.17. Require a firm commitment and funding stream by all parties to pay for the proportional benefits they will receive from a Bay-Delta solution through take-or-pay contracts or the legal equivalent, and identify the impact to the remaining contractors if one or more contractors default or back out. r.18. Provide “right-sized” facilities to match firm commitments to pay for the Bay-Delta solution. s.19. Provide SWP contractors and their member agencies access to all SWP facilities to facilitate water transfers to improve water management. t.20. Continue state ownership and operation of SWP as a public resource. u.21. Improve efficiency and transparency of all SWP operations. 22. Focus on statewide priorities, including construction of an approved method of conveyance of water through or around the Delta that provides water supply reliability to the Delta water uses., promotion of greater regional and local self-sufficiency, surface storage and promotion of water use efficiency. v.23. Provide a solution that acknowledges, integrates and supports the development of resources at the local level including water-use efficiency, seawater desalination, groundwater storage and conjunctive use, and recycled water including direct and indirect potable water reuse. w.24. Provides for the state’s share of funding for Bay-Delta conveyance projects. x.25. Consider complementary investments in local water supply sources, regional coordination, and south of Delta storage as part of an overall comprehensive Bay-Delta solution. y.26. Protects and safeguards San Diego region’s Preferential Rights. Oppose efforts that: a.1. Require additional reviews or approvals of Delta conveyance options beyond those provided by SBX7-1 (2009). b.2.Transfer control of the State Water Project from the state to Metropolitan Water District of Southern California (MWD), the State Water Contractors, the Central Valley Project Contractors, the State and Federal Water Contractors Authority, or to any entity comprised of MWD and other water contractors. Formatted: Numbered + Level: 1 + Numbering Style: 1,2, 3, … + Start at: 1 + Alignment: Left + Aligned at: 0.25" + Indent at: 0.5" Otay Water District Legislative Program 20162017 3 | Page Recycled Water Support efforts to: a.1. Reduce restrictions on recycled water usage or promote consistent regulation of recycled water projects to reduce impediments to the increased use of recycled water. b.2.Reduce restrictions on injecting recycled water into basins where there is no direct potable use. c.3. Provide financial incentives for recharge of groundwater aquifers using recycled water. d.4.Make recycled water regulations clear, consolidated, and understandable to expedite related project permitting. e.5. Promote recycled water as a sustainable supplemental source of water. f.6. Allow the safe use of recycled water. g.7.Facilitate development of technology aimed at improving water recycling. 8. Increasing funding for water recycling projects. h.9.Support continued funding of the Title XVI Water Reclamation and Reuse Program including Water Reclamation and Reuse Projects, the WaterSMART Program, and the Desalination and Water Purification Research Program. i.10. Increase awareness of the ways recycled water can help address the region’s water supply challenges. j.11. Create federal and state incentives to promote recycled water use and production. k.12. Establish federal tax incentives to support U.S. companies in the development of new water technologies that can lower productions costs, address by products such as concentrates, and enhance public acceptance of recycled water. l.13. Establish a comprehensive national research and development, and technology demonstration, program to advance the public and scientific understanding of water recycling technologies to encourage reuse as an alternative source of water supply. m.14. Provide incentives for local agencies to work cooperatively, share costs or resources to promote or expand the use of recycled water. n.15. Further refine emergency regulations to reward local suppliers that have invested in using recycled water for landscape irrigation to maintain an incentive to continue expanding areas served by recycled water. 16. Encourages the use of recycled water in commercial, industrial, institutional, and residential settings. 17. Recognizes and supports the development of potable reuse as a new supply. 18. Defines purified recycled water as a source of water supply and not as waste. o.19. Mandates the reduction of wastewater discharges to the ocean absent inclusion of funding to offset the significant costs of implementation. Oppose efforts that: a.1. Restrict use of recycled water for groundwater recharge. b.2.Establish new water or recycled water fees solely to recover State costs without also providing some benefit. c.3. Create Establish unreasonable regulatory requirements or fees, schemes that which may unreasonably impede or create a disincentive to the existing authority for the development of the safe use of recycled water.alter or limit the existing authority to reuse and recycle water. Formatted: Numbered + Level: 1 + Numbering Style: 1, 2, 3, … + Start at: 1 + Alignment: Left + Aligned at: 0.25" + Indent at: 0.5" Formatted: Font: (Default) +Body (Calibri), 11 pt, Font color: Auto Formatted: Font: (Default) +Body (Calibri), 11 pt, Fontcolor: Auto Formatted: Font color: Auto Formatted: Font: (Default) Times New Roman, 12 pt Formatted: Numbered + Level: 1 + Numbering Style: 1, 2, 3, … + Start at: 1 + Alignment: Left + Aligned at: 0.25" + Indent at: 0.5" Otay Water District Legislative Program 20162017 4 | Page Water Services and Facilities Support efforts to: a.1. Provide funding to implement actions identified in the California Water Action Plan to lay a solid fiscal foundation for implementing near-term actions, including funding for water efficiency projects, wetland and watershed restoration, groundwater programs, conservation, flood control, and integrated water management and result in a reliable supply of high-quality water for the San Diego region. b.2.Provide financial support to projects designed to mitigate the potential negative impacts of Global Climate Change on water supply reliability. c.3. Promote the coordination and integration of local, state and federal climate change policies and practices to the greatest extent feasible. d.4.Support Fund or otherwise facilitate ongoing implementation of the Quantitative Quantification Settlement Agreement. e.5. Provide reliable water supplies to meet California’s short and long-term needs. f.6. Reduce impediments for willing sellers and buyers to engage in water transfer agreements. g.7.Promote desalination pilot studies and projects. h.8.Encourage feasibility studies of water resource initiatives. 9. Increase funding for infrastructure and grant programs for construction, modernization or expansion of water, wastewater treatment, reclamation facilities and sewer systems including water recycling, groundwater recovery and recharge, surface water development projects and seawater desalination. i.10. Fund enhancements to water treatment, recycling, and other facilities to meet increased regulations. j.11. Mandate uniform or similar regulations and procedures by state agencies in the processing and administering of grants and programs. k.12. Streamline grant application procedures. 13. Reduce regulations and other impediments for willing sellers and buyers to engage in water transfer agreements. l.14. Promote or assist voluntary water transfers between willing buyers and willing sellers and move those transactions through without delay. m.15. Streamline the permitting and approval process for implementing water transfers. n.16. Establish reasonable statewide approaches to sewer reporting standards. o.17. Generate greater efficiencies, better coordinate program delivery, and eliminate duplication in programs for source water protection without lessening the focus on public health of the state’s Drinking Water Program. 18. Target efforts to fix specific issues with water supplies within the state’s Drinking Water Program. p. 19. Establish federal tax incentives to support U.S. companies in the development of new desalination technologies that can lower productions costs, eliminate or reduce impingement or entrainment, reduce energy use, and enhance public acceptance of desalinated water. p. 20. Establish a comprehensive national research and development, and technology demonstration program to advance the scientific understanding of desalination to expand its use as an alternative source of water supply. Formatted: Numbered + Level: 1 + Numbering Style: 1, 2, 3, … + Start at: 1 + Alignment: Left + Aligned at: 0.25" + Indent at: 0.5" Formatted: Numbered + Level: 1 + Numbering Style: 1, 2, 3, … + Start at: 1 + Alignment: Left + Aligned at: 0.25" + Indent at: 0.5" Formatted: Font: (Default) Times New Roman, 12 pt, Font color: Black Formatted: Font: (Default) Times New Roman, 12 pt,Font color: Black Formatted: Indent: Left: 0.25", Numbered + Level: 1 + Numbering Style: 1, 2, 3, … + Start at: 1 + Alignment: Left + Aligned at: 0.5" + Indent at: 0.75" Formatted: Font: (Default) Times New Roman, 12 pt, Font color: Black Formatted: Font: Italic Otay Water District Legislative Program 20162017 5 | Page q. 21. Require the State Water Resources Control Board to exercise its authority, ensure robust funding, and implement the Salton Sea mitigation and restoration plan, meet state obligations, and work with QSA stakeholders to find workable solutions to ensure the continuation of IID water transfers. r. 22. Support solutions to water supply issues that address common challenges, provide a comprehensive approach that is fair to all users, balance the needs of urban and rural communities, and take into consideration the interests of all stakeholders as well as the impact to the environment. 23. Further refine emergency drought regulations to eliminate a cap on credits and adjustments so as not to impose undue burden, financial or otherwise, on communities that have already invested in water conservation, development of new water sources, storage, or loss prevention. 24. Provide funding for water infrastructure development, infrastructure security, and rehabilitation and replacement projects that benefit ratepayers. 25. Provide funding for habitat preservation programs that address impacts resulting from construction or operation of water system facilities. 26. Provide funding for projects that enhance security against terrorist acts or other criminal threats to water operation, services, facilities, or supplies. 27. Provide incentives that encourage contractors to recycle or reduce waste associated with construction of water facilities. Oppose efforts that: a.1. Make urban water supplies less reliable or substantially increase the cost of imported water without also improving the reliability and/or quality of the water. b.2.Create unrealistic or costly water testing or reporting protocol. c.3. Disproportionately apportion the cost of water. d.4.Create undo hurtles for seawater desalination projects. e.5. Create unreasonable or confusing sewer reporting standards. f.6. Create administrative or other barriers to sales between willing buyers and willing sellers that delay water transfers. g.7.Create a broad-based user fee that does not support a specific local program activity or benefit; any fee must provide a clear nexus to the benefit local ratepayers or local water supplies from the establishment that charge or fee would provide. h.8.Create unrealistic or costly to obtain water quality standards for potable water, recycled water or storm water runoff. i.9. Change the focus of the state’s Drinking Water Program or weaken the parts of the program that work well. j.10. Lessen the focus on public health of the state’s Drinking Water Program. k.11. Create one-size-fit-all approaches to emergency drought regulations that ignore variations among communities, regions, and counties with respect to their ability to withstand the impact and effects of drought. l.12. Impose undue burden, financial or otherwise, on communities that have already invested in water conservation, development of new water sources, storage, or loss prevention. 13. Impose additional mitigation costs or obligations for the Salton Sea on the non-state parties to the Quantification Settlement Agreement. Formatted: Font: (Default) Times New Roman, 12 pt, Font color: Black Formatted: Numbered + Level: 1 + Numbering Style: 1, 2, 3, … + Start at: 23 + Alignment: Left + Aligned at: 0.5" + Indent at: 0.75" Formatted: Font: (Default) Times New Roman, 12 pt, Font color: Black Formatted: Font: (Default) Times New Roman, 12 pt, Font color: Black Formatted: Font: (Default) Times New Roman, 12 pt, Font color: Black Formatted: Numbered + Level: 1 + Numbering Style: 1, 2, 3, … + Start at: 1 + Alignment: Left + Aligned at: 0.25" + Indent at: 0.5" Otay Water District Legislative Program 20162017 6 | Page 14. Impairs local agencies’ ability to provide and operate the necessary facilities for a safe, reliable and operational flexible water system. 15. Limits local agencies’ sole jurisdiction over planning, design, routing, approval, construction, operation, or maintenance of water facilities. 16. Restricts local agencies’ ability to respond swiftly and decisively to an emergency that threatens to disrupt water deliveries or restricts the draining of pipelines or other facilities in emergencies for repairs or preventive maintenance. 17. Authorizes state and federal wildlife agencies to control, prevent, or eradicate invasive species in a way that excessively interferes with the operations of water supplies. 18. Prohibit or in any way limit the ability of local agencies from making full beneficial use of any water, wastewater, or recycling facility and resource investments. Financial Support efforts to: a.1. Require the federal government and State of California to reimburse special districts for all mandated costs or regulatory actions. b.2.Give special districts the discretion to cease performance of unfunded mandates. c.3. Provide for fiscal reform to enhance the equity, reliability, and certainty of special district funding. d.4.Provide incentives for local agencies to work cooperatively, share costs or resources. e.5. Provide for the stable, equitable and reliable allocation of property taxes. f.6. Continue to reform workers compensation. g.7.Authorize financing of water quality, water security, and water supply infrastructure improvement programs. h.8.Promote competition in insurance underwriting for public agencies. i.9. Establish spending caps on State of California overhead when administering voter approved grant and disbursement programs. j.10. Require disbursement decisions in a manner appropriate to the service in question. k.11. Encourage funding infrastructure programs that are currently in place and that have been proven effective. l.12. Produce tangible results, such as water supply reliability or water quality improvement. m.13. Provide financial incentives for energy projects that increase reliability, diversity, and reduce greenhouse gasses. n.14. Continue energy rate incentives for the utilization of electricity during low-peak periods. o.15. Provide loan or grant programs that encourage water conservation for water users who are least able to pay for capital projects. 16. Require the Metropolitan Water District of Southern California (MWD) to refund or credit to its member agencies revenues collected from them that result in reserve balances greater than the maximum reserve levels established pursuant to state legislation. 17. Maintains the authority of water agencies to establish water rates locally, consistent with the cost-of-service requirement of the law. Formatted: Numbered + Level: 1 + Numbering Style: 1, 2, 3, … + Start at: 1 + Alignment: Left + Aligned at: 0.25" + Indent at: 0.5" Formatted: Numbered + Level: 1 + Numbering Style: 1, 2, 3, … + Start at: 1 + Alignment: Left + Aligned at: 0.25" + Indent at: 0.5" Otay Water District Legislative Program 20162017 7 | Page p.18. Maximizes the ability of water agencies to design rate structures to meet local water supply goals and that conform to the cost-of-service requirements of the law. Oppose efforts that: a.1. Impose new, unfunded state mandates on local agencies and their customers. b.2.Undermine Proposition 1A - Protection of Local Government Revenues – and the comprehensive reform approved by voters in 2004. c.3. Reallocate special district reserves in an effort to balance the state budget. d.4.Reallocate special district revenues or reserves to fund infrastructure improvements or other activities in cities or counties. e.5. Usurp special district funds, reserves, or other state actions that force special districts to raise rates, fees or charges. f.6. Complicate or deter conservation-based rate structures. g.7.Establish funding mechanisms that put undue burdens on local agencies or make local agencies de facto tax collectors for the state. h.8.Complicate compliance with SB 610 and SB 221. i.9. Adversely affect the cost of gas and electricity or reduce an organization’s flexibility to take advantage of low peak cost periods. j.10. Add new reporting criteria, burdensome, unnecessary or costly reporting mandates to Urban Water Management Plans. k.11. Add new mandates to the Department of Water Resources (DWR) to review and approve Urban Water Management Plans beyond those already addressed in DWR guidelines. l.12. Mandate that water agencies include an embedded energy calculation for their water supply sources in Urban Water Management Plans or any other water resources planning or master planning document. m.13. Weaken existing project retention and withholding provisions that limit the ability of public agencies to drive contractor performance. n.14. Establish change order requirements that place an unreasonable burden on local agencies, or raise financial risk associated with public works contracts. 15. Establish a Public Goods Charge, excise tax for excessive water use, or other permanent tax or fee on water. 16. Impairs the San Diego County Water Authority or its member agencies’ ability to provide reasonable service at reasonable costs to member agencies or to charge all member agencies the same rate for each class of service consistent with cost-of-service requirements of the law. 17. Undermines or weakens cost-of-service rate-making requirements in existing law. 18. Impairs the local water agencies’ ability to maintain reasonable reserve funds and obtain and retain reasonable rates of return on its reserve accounts. 19. Mandates a specific rate structure for retail water agencies. o.20. Imposes a water user fee on water agencies or water users that does not provide a commensurate and directly linked benefit in the local area or region from which the water user fee is collected. Formatted: Numbered + Level: 1 + Numbering Style: 1, 2, 3, … + Start at: 1 + Alignment: Left + Aligned at: 0.25" + Indent at: 0.5" Formatted: Font: (Default) Times New Roman, 12 pt, Font color: Black Formatted: Font: (Default) Times New Roman, 12 pt,Font color: Black Formatted: Font: (Default) Times New Roman, 12 pt, Font color: Black Formatted: Numbered + Level: 1 + Numbering Style: 1, 2, 3, … + Start at: 1 + Alignment: Left + Aligned at: 0.25" + Indent at: 0.5" Otay Water District Legislative Program 20162017 8 | Page Governance/Local Autonomy Support efforts to: a.1. Expand local autonomy in governing special district affairs. b.2.Promote comprehensive long-range planning. c.3. Assist local agencies in the logical and efficient extension of services and facilities to promote efficiency and avoid duplication of services. d.4.Streamline the Municipal Service Review Process or set limits on how long services reviews can take or cost. e.5. Establish clear and reasonable guidelines for appropriate community sponsorship activities. f.6. Reaffirm the existing “all-in” financial structure, or protect the San Diego County Water Authority voting structure based on population. g.7.Promote measures that increase broader community and water industry representation/appointments on State decision making bodies Oppose efforts that: a.1. Assume the state legislature is better able to make local decisions that affect special district governance. b.2.Create one-size-fits-all approaches to special district reform. c.3. Unfairly target one group of local elected officials. d.4.Usurp local control from special districts regarding decisions involving local special district finance, operations or governance. e.5. Limit the board of directors’ ability to govern the district. f.6. Create unfunded local government mandates. g.7.Create costly, unnecessary or duplicative oversight roles for the state government of special district affairs. h.8.Create new oversight roles or responsibility for monitoring special district affairs. i.9. Change the San Diego County Water Authority Act regarding voting structure, unless it is based on population. j.10. Shift the liability to the public entity and relieve private entities of reasonable due diligence in their review of plans and specifications for errors, omissions and other issues. k.11. Place a significant and unreasonable burden on public agencies, resulting in increased cost for public works construction or their operation. l.12. Impair the ability of water districts to acquire property or property interests required for essential capital improvement projects. m.13. Increase the cost of property and right-of-way acquisition, or restricts the use of right- of-ways. n.14. Work to silence the voices of special districts and other local government associations on statewide ballot measures impacting local government policies and practices, including actions that could prohibit special districts and associations from advocating for positions on ballot measures by severely restricting the private resources used to fund those activities. o.15. Prescribe mandatory conservation-based or other rate structures that override the authority of the board of directors to set its rate structure. p.16. Circumvent the legislative committee process, such as the use of budget trailer bills, to advance policy issues including impacting special districts without full disclosure, transparency, or public involvement. Formatted: Numbered + Level: 1 + Numbering Style: 1, 2, 3, … + Start at: 1 + Alignment: Left + Aligned at: 0.25" + Indent at: 0.5" Formatted: Numbered + Level: 1 + Numbering Style: 1, 2, 3, … + Start at: 1 + Alignment: Left + Aligned at: 0.25" + Indent at: 0.5" Otay Water District Legislative Program 20162017 9 | Page Conservation Support efforts to: a.1. Provide funding for water conservation programs. b.2.Encourage the installation of water-efficient conserving fixtures in new and existing buildings. c.3. Promote the environmental benefits of water conservation. d.4.Enhance efforts to promote water awareness and conservation. e.5. Offer incentives for landscape water- efficiency efficient devices such as including, but not limited to ET controllers and soil moisture sensors. f.6. Develop landscape retrofit incentive programs and/or irrigation retrofit incentive programs. g.7.Permit or require local agencies to adopt ordinances that require or promote water- wise landscape for commercial and residential developments. h.8.Create tax incentives for citizens or developers who install water- wise landscapes. i.9. Create tax incentives for citizens who purchase high- efficiency clothes washers, dual- flush and high-efficiency toilets and irrigation controllers above the state standards. j.10. Expand community-based conservation and education programs. k.11. Develop incentives for developers and existing customers to install water- wise landscape in existing developments or new construction. l.12. Encourage large state users to conserve water by implementing water- efficient technologies in all facilities both new and retrofit. m.13. Maintain incentives for solar power. n.14. Encourage large state water users to conserve water outdoors. o.15. Educate all Californians on the importance of water, and the need to conserve, manage, and plan for the future needs. p.16. Encourage technological research targeted to more efficient water use. q.17. Give local agencies maximum discretion in selecting conservation programs that work for their customers and the communities they serve. r.18. Require the Department of Water Resources to implement a uniform statewide turf rebate subsidy or incentive program. 19. Require Property Owners Associations to allow low water use plants, mulch, artificial turf, or semi-permeable materials in well-maintained landscapes. 20. Creates a process for development and implementation of emergency drought declarations and regulations that recognizes variations among communities, regions, and counties with respect to their abilities to withstand the impacts and effects of drought. 21. Recognizes variations among communities, regions, and counties with respect to their abilities to withstand the impacts and effects of droughts, and ensures that any temporary or permanent statutory or regulatory direction for improving water-use efficiency to meet statutory or regulatory goals or standards is focused on regional achievement of objectives rather than a one-size-fits-all approach. s.22. Provides for federal tax-exempt status for water use efficiency rebates, consistent with income tax treatment at the state level. Oppose efforts that: a.1. Weaken federal or state water- efficiency standards. Formatted: Numbered + Level: 1 + Numbering Style: 1, 2, 3, … + Start at: 1 + Alignment: Left + Aligned at: 0.25" + Indent at: 0.5" Formatted: Font: (Default) Times New Roman, 12 pt, Font color: Black Formatted: Font: (Default) Times New Roman, 12 pt, Font color: Black Formatted: Font: (Default) Times New Roman, 12 pt, Font color: Black Formatted: Numbered + Level: 1 + Numbering Style: 1, 2, 3, … + Start at: 1 + Alignment: Left + Aligned at: 0.25" + Indent at: 0.5" Formatted: Font: (Default) Times New Roman, 12 pt, Font color: Black Formatted: Font: (Default) Times New Roman, 12 pt,Font color: Black Formatted: Numbered + Level: 1 + Numbering Style: 1, 2, 3, … + Start at: 1 + Alignment: Left + Aligned at: 0.25" + Indent at: 0.5" Formatted: Font: (Default) Times New Roman, 12 pt, Font color: Black Otay Water District Legislative Program 20162017 10 | Page b.2. Introduce additional analytical and reporting requirements that are time-consuming for local agencies to perform and result in additional costs to consumers, yet yield no water savings. c. 3. Permit Property Owners Associations to restrict low water use plants, mulch, artificial turf, or semi-permeable materials in landscaping. 4. Create one-size-fit-all approaches to emergency drought regulations that ignore variations among communities, regions, and counties with respect to their ability to withstand the impact and effects of drought. Safety, Security and Information Technology Support efforts to: a.1. Provide funding for information security upgrades to include integrated alarms, access/egress, and surveillance technology. b.2.Provide incentives for utilities and other local agencies to work cooperatively, share costs or resources. c.3. Provide funding for communication enhancements, wireless communications, GIS or other technological enhancements. d.4.Encourage or promote compatible software systems. e.5. Fund infrastructure and facility security improvements that include facility roadway access, remote gate access and physical security upgrades. f.6. Protect state, local and regional drinking water systems from terrorist attack or deliberate acts of destruction, contamination or degradation. g.7.Provide funds to support training or joint training exercises to include contingency funding for emergencies and emergency preparedness. h.8.Equitably allocate security funding based on need, threats and/or population. i.9. Encourage or promote compatible communication systems. j.10. Encourage and promote funding of Department of Homeland Security Risk Mitigation programs. k.11. Recognizes water agencies as emergency responders to damage and challenges caused by wildfires, earthquakes, and other natural disasters, as well as terrorist and other criminal activities that threaten water operations, facilities and supplies. 12. Provide state grant or other funding opportunities to support seismic risk assessment and mitigation plans, or to mitigate vulnerabilities. l.13. Provide funding for projects that enhance security against terrorist acts or other criminal threats to water operation, services, facilities, or supplies. Oppose efforts that: a.1. Create unnecessary, costly, or duplicative security or safety mandates. b.2.Require expanded water system descriptions or additional public disclosure of public water systems details for large water suppliers in Urban Water Management Planning documents, potentially compromising public water systems and creating a conflict with the Department of Homeland Security’s recommendation to avoid reference to water system details in plans available to the general public. Formatted: Indent: Left: 0", Numbered + Level: 1 + Numbering Style: 1, 2, 3, … + Start at: 1 + Alignment: Left + Aligned at: 0.25" + Indent at: 0.5" Formatted: Font: (Default) Times New Roman, 12 pt, Font color: Black Formatted: List Paragraph, Numbered + Level: 1 +Numbering Style: 1, 2, 3, … + Start at: 1 + Alignment: Left + Aligned at: 0.25" + Indent at: 0.5" Formatted: Font: (Default) Times New Roman, 12 pt, Not Bold, Font color: Black Formatted: Font: Not Bold Formatted: Indent: Left: 0.25" Formatted: Font: (Default) Times New Roman, 12 pt, Bold, Underline, Font color: Black Formatted: Numbered + Level: 1 + Numbering Style: 1,2, 3, … + Start at: 1 + Alignment: Left + Aligned at: 0.25" + Indent at: 0.5" Formatted: Font: (Default) Times New Roman, 12 pt, Font color: Black Formatted: Numbered + Level: 1 + Numbering Style: 1, 2, 3, … + Start at: 1 + Alignment: Left + Aligned at: 0.25" + Indent at: 0.5" Otay Water District Legislative Program 20162017 11 | Page Optimize District Effectiveness Support efforts to: a.1. Give utilities the ability to avoid critical peak energy pricing or negotiate energy contracts that save ratepayers money. b.2.Develop reasonable Air Pollution Control District engine permitting requirements. c.3. Reimburse or reduce local government mandates. d.4.Allow public agencies to continue offering defined benefit plans. e.5. Result in predictable costs and benefits for employees and taxpayers. f.6. Eliminate abuses. g.7.Retain local control of pension systems. h.8.Be constitutional, federally legal and technically possible. Oppose efforts that: a.1. Restrict the use of, or reallocate, district property tax revenues to the detriment of special districts. b.2.Create unrealistic ergonomic protocol. c.3. Micromanage special district operations. d.4.Balance the state budget by allowing regulatory agencies to increase permitting fees. e.5. Tax dependent benefits. f.6. Require new reporting criteria on energy intensity involved in water supply. Bi-National Initiatives Support efforts to: a.1. Promote and finance cross-border infrastructure development such as water pipelines, desalination plants or water treatment facilities to serve the border region while protecting local interests. b.2.Develop cooperative and collaborative solutions to cross-border issues. c.3. Develop and enhance communications and understanding of the interdependence of communities on both sides of the border with the goal of improved cross-border cooperation. Oppose efforts that: a.1. Usurp local control over the financing and construction of water supply and infrastructure projects in the San Diego/Baja California region. State Water Bonds Support efforts to: a. Ensure San Diego County receives an equitable share of funding from Proposition 1 (2014) with major funding categories being divided by county and funded on a per-capita basis to ensure bond proceeds are distributed throughout the state in proportion to taxpayers’ payments on the bonds. Formatted: Numbered + Level: 1 + Numbering Style: 1, 2, 3, … + Start at: 1 + Alignment: Left + Aligned at: 0.25" + Indent at: 0.5" Formatted: Numbered + Level: 1 + Numbering Style: 1, 2, 3, … + Start at: 1 + Alignment: Left + Aligned at: 0.25" + Indent at: 0.5" Formatted: Space After: 10 pt, Line spacing: Multiple 1.15 li, Adjust space between Latin and Asian text,Adjust space between Asian text and numbers Formatted: Numbered + Level: 1 + Numbering Style: 1, 2, 3, … + Start at: 1 + Alignment: Left + Aligned at: 0.25" + Indent at: 0.5" Formatted: Numbered + Level: 1 + Numbering Style: 1, 2, 3, … + Start at: 1 + Alignment: Left + Aligned at: 0.25" + Indent at: 0.5" Formatted: Indent: Left: 0.25", Space After: 0 pt, Linespacing: single, Don't adjust space between Latin and Asian text, Don't adjust space between Asian text and numbers Formatted: Font: (Default) Times New Roman, 12 pt, Bold, Underline, Font color: Black Formatted: Space After: 0 pt, Line spacing: single, Don't adjust space between Latin and Asian text, Don't adjust space between Asian text and numbers Formatted: List Paragraph, Don't adjust space betweenLatin and Asian text, Don't adjust space between Asian text and numbers Formatted: Indent: First line: 0.25" Formatted: Numbered + Level: 1 + Numbering Style: 1, 2, 3, … + Start at: 1 + Alignment: Left + Aligned at: 0.31" + Indent at: 0.56" Otay Water District Legislative Program 20162017 12 | Page 1. Ensure funding from various propositions for local and regional water-related projects. b.2.Ensure funding for water infrastructure projects help to resolve conflicts in the state’s water system and provide long-term benefits to statewide issues including water supply, reliability, water quality, and ecosystem restoration. c.3. Ensure primary consideration is given to funding priorities established by local and regional entities through their IRWM planning process. d.4.Ensure that the application process for funding is not unnecessarily burdensome and costly, with an emphasis on streamlining the process. e.5. Fund emergency and carryover storage projects including those in San Diego County. f.6. Consolidate administration of all voter-approved water-related bond funding in one place, preserves existing expertise within the state bureaucracy to manage bond funding processes, and provide consistent application and evaluation of bond funding applications. g.7.Expedite the funding for projects that advance the achievement of the co-equal goals of water supply reliability and Delta ecosystem restoration. Oppose efforts that: a.1. Change the share of funding to make San Diego County’s share less equitable, not based on the San Diego County taxpayers’ proportional contribution to repayment of the bonds, or change the understanding that all beneficiaries pay an equitable share. b.2.Do not provide funding for infrastructure that resolves statewide or regional conflicts of water supplies. c.3. Do not provide funding that result in net increases in real water supply and water supply reliability. d.4. Commit a significant portion of bond funding to projects that do not result in net increases in real water supply or water supply reliability. Formatted: Numbered + Level: 1 + Numbering Style: 1, 2, 3, … + Start at: 1 + Alignment: Left + Aligned at: 0.25" + Indent at: 0.5" 1 RESOLUTION 4327 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE OTAY WATER DISTRICT CONFIRMING GARY CROUCHER AND TIM SMITH AS THE OTAY WATER DISTRICT’S REPRESENTATIVES TO THE SAN DIEGO COUNTY WATER AUTHORITY, EACH TO VOTE IN THE ABSENCE OF THE OTHER WHEREAS, Section 45-6(g) of the San Diego County Water Au- thority (Chapter 545 of the Statutes of 1943, Chapter 45 Water Code-Appendix) was amended to provide that a member agency’s rep- resentative to the San Diego County Water Authority may designate another member of the board of directors of the San Diego County Water Authority to vote in the absence of such representative, provided the designee is confirmed by the governing body of the member agency; and, provided a written notice is filed with the San Diego County Water Authority prior to the meeting at which the representative is absent; and WHEREAS, the Otay Water District desires to designate Gary Croucher and Tim Smith as the Otay Water District representatives to the San Diego County Water Authority, to cast votes on behalf of each other when one or the other is absent from a meeting. NOW, THEREFORE, BE IT RESOLVED, DETERMINED AND ORDERED by the Board of Directors of the Otay Water District as follows: SECTION 1. That the duly appointed representatives of the Otay Water District are hereby confirmed and authorized to vote as proxy for each other when one or the other is absent from a meeting of the San Diego County Water Authority. 2 SECTION 2. If either of the representatives wishes to cast his vote by proxy, a written notice thereof shall be sent to the clerk of the board of the San Diego County Water Authority prior to the meeting at which the director will be absent SECTION 3. Otay Water District Board Secretary Susan Cruz is directed to file a certified copy of this resolution with the clerk of the board of the San Diego County Water Authority. PASSED, ADOPTED AND APPROVED by the Otay Water District Board of Directors at a regular meeting held this 1st day of Feb- ruary, 2017. AYES: NOES: ABSENT: ABSTAIN: ___________________________ President ATTEST: ________________________ District Secretary 3 Certification I, Susan Cruz, Board Secretary of the Otay Water District, hereby certify the foregoing to be true and exact copy of Resolu- tion 4327 adopted by the board of director of Otay Water District on February 1, 2017. IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of said Water District this _________________________, 2017. ___________________________________ Susan Cruz Board Secretary STAFF REPORT TYPE MEETING: Regular Board MEETING DATE: February 1, 2017 SUBMITTED BY: Rita Bell, Finance Manager PROJECT: DIV. NO. All APPROVED BY: Joseph R. Beachem, Chief Financial Officer German Alvarez, Assistant General Manager Mark Watton, General Manager SUBJECT: Appointment of Auditor for Fiscal Year Ending June 30, 2017 GENERAL MANAGER’S RECOMMENDATION: That the Board authorize the General Manager to sign the engagement letters from the auditing firm of Teaman, Ramirez & Smith, Inc., to contract for audit services for fiscal year ending June 30, 2017. COMMITTEE ACTION: Please see Attachment A. PURPOSE: The District is required to retain the services of an independent accounting firm to perform an audit of the District’s financial records each year. ANALYSIS: At the Board meeting on January 7, 2014, the Board approved Teaman, Ramirez & Smith, Inc., as the District’s auditors for a 1-year contract, with four (4) 1-year options, with each option year subject to Board review and approval. On February 3, 2016, the Board authorized the General Manager to engage Teaman, Ramirez & Smith, Inc., for the second option year for the FY 2016 audit. Staff is recommending the appointment of Teaman, Ramirez & Smith, Inc. as the District’s auditors for FY 2017, in conjunction with the third 1-year contract option. This is based on their staff’s knowledge of the District’s operations and finances, their technical qualifications, and their performance as the District’s auditors during the fiscal years 2014, 2015, and 2016 audits. The audit will consist of four major components: 1) Standard audit services, to provide an audit opinion on the District’s financial statements; 2) Agreed upon procedures related to the District’s Investment Policy procedures, to issue a report on staff’s compliance with District policy; 3) A State Controllers Report, required by the State of California; and 4) Assistance in preparation of the District’s Comprehensive Annual Financial Report (CAFR). The following is a tentative planning schedule for the major activities involved in completing the FY 2017 financial audit:  May-2017: Pre-audit fieldwork (3–4 days).  Aug-2017: Year-end audit fieldwork (4–5 days).  Nov-2017: Board presentation of the audited financial statements.  Dec-2017: CAFR submission to Government Finance Officers Association (GFOA). FISCAL IMPACT: The fee for auditing services for the fiscal year ending June 30, 2017, will be $27,750. This is an increase of $750 over the prior year’s fee. 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: Required by law. Attachments: A) Committee Action Form B) Audit Engagement Letter C) State Controllers Report Engagement Letter D) Agreed Upon Procedures Engagement Letter ATTACHMENT A SUBJECT/PROJECT: Appointment of Auditor for Fiscal Year Ending June 30, 2017 COMMITTEE ACTION: The Finance, Administration, and Communications Committee (FA&C Committee) reviewed this item at a meeting held on January 18, 2017 and the following comments were made:  Staff is requesting that the Board approve the engagement letters from the auditing firm of Teaman, Ramirez & Smith, Inc., to contract for audit services for fiscal year ending June 30, 2017.  Staff reviewed the information in the staff report.  It was indicated that the fee will increase $750 over the prior year’s fee for a total of $27,750.  The committee discussed that the new fee is still very competitive.  In response to an inquiry from the Committee, staff confirmed that the FA&C Committee has been serving as the Audit Committee as well.  The Committee requested that staff schedule the auditors to attend a FA&C Committee to discuss the audit process at the time the auditors will be here for the pre-audit field work in May of 2017. Upon completion of the discussion, the committee supported staffs’ recommendation and presentation to the full board as an action item. ıTRS TEAMAN, RAMIREZ & SMITH, INC.cERïtf ItI) PlJ8tIC ÁCC0UilTAilTS December 16,2016 Joseph Beachem, Chief Financial Officer Otay Water District 2554 Sweetwater Springs Blvd Spring Valley, CA 91778-2004 We are pleased to confirm our understanding of the services we are to provide the Otay Water District (the "District") for the year ended June 30, 2017. We will audit the financial statements of the business- fype activities, and each major fund, including the related notes to the financial statements, which collectively comprise the basic financial statements, of the Otay Water District as of and for the year ended June 30, 2017. Accounting standards generally accepted in the United States provide for certain required supplementary information (RSI), such as management's discussion and analysis (MD&A), to supplement the District's basic financial statements. Such information, although not a part of the basic financial statements, is required by the Government 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 contest. As part of our engagement, we will apply certain limited procedures to the District's RSI in accordance with auditing standards generally accepted in the United States of America. These limited procedures willconsist principally of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We will 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. The following RSI is required by generally accepted accounting principles and will be subjected to certain limited procedures, but will not be audited: 1. Management's Discussion and Analysis 2. Schedule of Funding Progress for DPHP 3. Schedule of Changes in the Net Pension Liability and Related Ratios4. Schedule of Contributions The following other information accompanying the financial statements will not be subjected to the auditing procedures applied in our audit of the financial statements, and for which our auditors' report will not provide an opinion or any assurance on that other information. 1. Introductory Section2. Statistical Section Audit Objectives The objective of our audit is the expression of opinions as to whether your financial statements are fairly presented, in all material respects, in conformity with U.S. generally accepted accounting principles and to report on the fairness of the supplementary information refered to in the second paragraph when considered in relation to the financial statements as a whole. Our audit will be conducted in accordance with auditing standards generally accepted in the United States of America and the standards for financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, and will include tests of the accounting records of the District and other procedures we consider Richard A. Teaman, CPA o David M. Ram¡rez, CPA o Javier H. Carrillo, CPA o Bryan P. Daugherty, CPA o Joshua J. Calhoun, CpA 4201 Brockton Avenue Suite 100 Riverside CA 92501 951.274.9500 TEL 95L274.7828 FAX www.trscpas.com necessary to enable us to express such opinions. We will issue a written report upon completion of our audit of the District's financial statements. Our report will be addressed to the Board of Directors of the District. We cannot provide assurance that unmodified opinions will be expressed. Circumstances may arise in which it is necessary for us to modifi our opinions or add emphasis-of-matter or other-matter paragraphs. If our opinions on the financial statements are other than unmodified, we will discuss the reasons with you in advance. If, for any reason, we are unable to complete the audit or are unable to form or have not formed opinions, we may decline to express opinions or issue reports, or may withdraw from this engagement. We will also provide a report (that does not include an opinion) on internal control related to the financial statements and compliance with the provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a material effect on the financial statements as required by Government Auditing Standards. The report on internal control and on compliance and other matters will include a paragraph that states (l) that the purpose ofthe report is solely to describe the scope oftesting 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 on compliance, and (2)thatthe report is an integral part of an audit performed in accordance with Government Auditíng Standards in considering the District's internal control and compliance. The paragraph will also state that the report is not suitable for any other purpose. If during our audit we become aware that the District is subject to an audit requirement that is not encompassed in the terms of this engagement, we will communicate to management and those charged with governance that an audit in accordance with U,S. generally accepted auditing standards and the standards for financial audits contained in Government Auditing Standards may not satis$r the relevant legal, regulatory, or contractual requirements. Audit Procedures - General An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; therefore, our audit will involve judgment about the number of transactions to be examined and the areas to be tested. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We will plan and perform the audit to obtain reasonable rather than absolute assurance about whether the financial statements are free of material misstatement, whether from (l) errors, (2) fraudulent financial reporting, (3) misappropriation of assets, or (4) violations of laws or governmental regulations that are attributable to the District or to acts by management or employees acting on behalf of the District. Because the determination of abuse is subjective, Government Auditing Standards do not expect auditors to provide reasonable assurance of detecting abuse. Because of the inherent limitations of an audit, combined with the inherent limitations of internal control, and because we will not perform a detailed examination of all transactions, there is a risk that material misstatements may exist and not be detected by us, even though the audit is properly planned and performed in accordance with U.S. generally accepted auditing standards and Government Auditing Standards.In addition, an audit is not designed to detect immaterial misstatements or violations of laws or governmental regulations that do not have a direct and material effect on the financial statements. However, we will inform the appropriate level of management of any material enors or any fraudulent financial reporting or misappropriation of assets that come to our attention. We will also inform the appropriate level of management of any violations of laws or governmental regulations that come to our attention, unless clearly inconsequential, and of any material abuse that comes to our attention. Our responsibility as auditor is limited to the period covered by our audit and does not extent to later periods for which we are not engaged as auditors. B-l Our procedures will include tests of documentary evidence supporting the transactions recorded in the accounts, and may include tests of the physical existence of inventories, and direct confirmation of receivables and certain other assets and liabilities by correspondence with selected individuals, funding sources, creditors, and financial institutions. We will request written representations from your attorneys as part of the engagement, and they may bill you for responding to this inquiry. At the conclusion of our audit, we will require certain written representations from you about your responsibilities for the financial statements; compliance with laws, regulations, contracts, and grant agreements; and other responsibilities required by generally accepted auditing standards. Audit Procedures - Internal Controls Our audit will include obtaining an understanding of the District and its environment, including internal control sufficient to assess the risks of material misstatement of the hnancial statements and to design the nature, timing, and extent of further audit procedures. Tests of controls may be performed to test the effectiveness of certain controls that we consider relevant to preventing and detecting errors and fraud that are material to the financial statements and to preventing and detecting misstatements resulting from illegal acts and other noncompliance matters that have a direct and material effect on the financial statements. Our tests, if performed, will be less in scope than would be necessary to render an opinion on internal control and, accordingly, no opinion will be expressed in our report on internal control issued pursuant to Government Auditing Standards. An audit is not designed to provide assurance on internal control or to identiff significant deficiencies or material weaknesses. However, during the audit, we will communicate to management and those charged with governance internal control related matters that are required to be communicated under AICPA profes s ional standards and G ov e r nm e nt Audit ing S t and ar ds . Audit Procedures - Compliance As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we will perform tests of the District's compliance with the provisions of applicable laws, regulations, contracts, agreements, and grants. However, the objective of our audit will not be to provide an opinion on overall compliance and we will not express such an opinion in our report on compliance issued pursuant fo Government Auditing Standards. Other Services We will also assist in preparing the financial statements and related notes of the District in conformity with U.S. generally accepted accounting principles and prepare the State Controllers Report (see separate engagement letter) in conformity of the requirements of the California State Controller's Office based on information provided by you. These nonaudit services do not constitute an audit under Government Auditing Standards and such services will not be conducted in accordance with Government Auditing Standards. We will perform the services in accordance with applicable professional standards. The other services are limited to the financial statement services previously defined. We, in our sole professional judgment, reserve the right to refuse to perform any procedure or take any action that could be construed as assuming management responsibilities. B-l Management ResponsÍbilities Management is responsible for establishing and maintaining effective internal controls, including evaluating and monitoring ongoing activities, to help ensure that appropriate goals and objectives are met; following laws and regulations; and ensuring that management is reliable and financial information is reliable and properly reported. Management is also responsible for implementing systems designed to achieve compliance with applicable laws, regulations, contracts, and grant agreements. You are also responsible for the selection and application of accounting principles, for the preparation and fair presentation of the financial statements in conformity with U.S. generally accepted accounting principles, and for compliance with applicable laws and regulations and the provisions of contracts and grant agreements. Management is also responsible for making all financial records and related information available to us and for the accuracy and completeness of that information. You are also responsible for providing us with (1) access to all information of which you are aware that is relevant to the preparation and fair presentation of the financial statements, (2) additional information that we may request for the purpose of the audit, and (3) unrestricted access to persons within the government from whom we determine it necessary to obtain audit evidence. Your responsibilities include adjusting the financial statements to correct material misstatement and for confirming to us in the written representation letter that the effects of any uncorrected misstatements aggregated by us during the current engagement and pertaining to the latest period presented are immaterial, both individually and in the aggregate, to the financial statements taken as a whole. You are responsible for the design and implementation of programs and controls to prevent and detect fraud, and for informing us about all known or suspected fraud affecting the District involving (1) management, (2) employees who have significant roles in internal control, and (3) others where the fraud or illegal acts could have a material effect on the financial statements. Your responsibilities include informing us of your knowledge of any allegations of fraud or suspected fraud affecting the District received in communications from employees, former employees, grantors, regulators, or others. In addition, you are responsible for identi$ing and ensuring that the District complies with applicable laws, regulations, contracts, agreements, and grants for taking timely and appropriate steps to remedy any fraud and noncompliance with provisions of laws, regulations, contracts or grant agreements, or abuse that we report. You are responsible for the preparation of the supplementary information, which we have been engaged to report on, in conformity with U.S. generally accepted accounting principles. You agree to include our report on the supplementary information in any document that contains and indicates that we have reported on the supplementary information. You also agree to include the audited financial statements with any presentation of the supplementary information that includes our report thereon or make the audited financial statements readily available to users of the supplementary information no later than the date the supplementary information is issued with our report thereon. Your responsibilities include acknowledging to us in the written representation letter that (l) you are responsible for presentation of the supplementary information in accordance with GAAP; (2) you believe the supplementary information, including its form and content, is fairly presented in accordance with GAAP; (3) the methods of measurement or presentation have not changed from those used in the prior period or if they have changed the reasons for such changes; and (4) you have disclosed to us any significant assumptions or interpretations underlying the measurement or presentation of the supplementary information. B-l Management is responsible for establishing and maintaining a process for tracking the status of audit findings and recommendations. Management is also responsible for identifying and providing report copies of previous financial audits, attestation engagements, performance audits or other studies related to the objectives discussed in the Audit Objectives section of this letter. This responsibility includes relaying to us corrective actions taken to address significant findings and recommendations resulting from those audits, attestation engagements, performance audits, or other studies. You are also responsible for providing management's views on our current findings, conclusions, and recommendations, as well as your planned corrective actions, for the report, and for the timing and format for providing that information. You agree to assume all management responsibilities relating to the financial statements and related notes and any other nonaudit services we provide. You will be required to acknowledge in the management representation letter our assistance with preparation of the financial statements and related notes and that you have reviewed and approved the financial statements and related notes prior to their issuance and have accepted responsibility for them. Further, you agree to oversee the nonaudit services by designating an individual, preferably from senior management, with suitable skill, knowledge, or experience; evaluate the adequacy and results of those services; and accept responsibility for them. With regard to the electronic dissemination of audited financial statements, including financial statements published electronically on your website, you understand that electronic sites are a means to distribute information and, therefore, we are not required to read the information contained in these sites or to consider the consistency of other information in the electronic site with the original document. With regard to the electronic dissemination of audited financial statements, including financial statements published electronically on your website, you understand that electronic sites are a means to distribute information and, therefore, we are not required to read the information contained in these sites or to consider the consistency of other information in the electronic site with the original document. Engagement Administration, X'ees, and Other We understand that your employees will prepare all cash or other confirmations we request and will locate any documents selected by us for testing. We will provide copies of our reports to the District; however, management is responsible for distribution of the reports and the financial statements. Unless restricted by law or regulation, or containing privileged and confidential information, copies of our reports are to be made available for public inspection. The audit documentation for this engagement is the property of Teaman, Ramirez & Smith, Inc. and constitutes confidential information. However, pursuant to authority given by law or regulation, we may be requested to make certain audit documentation available to grantor agencies or their designee, a federal agency providing direct or indirect funding, or the U.S. Government Accountability Office for purpose of a quality review of the audit, to resolve audit findings, or to carry out oversight responsibilities. We will notify you of any such request. If requested, access to such audit documentation will be provided under the supervision of our firm. Furthermore, upon request, we may provide copies of selected audit documentation to the aforementioned parties. These parties may intend, or decide, to distribute the copies or information contained therein to others, including other governmental agencies. In such cases, Teaman, Ramirez & Smith, Inc. is not responsible for the distribution of the copies or information contained therein. B-l The audit documentation for this engagement will be retained for a minimum of five years after the report release date or for any additional period requested by a grantor or federal agency. If we are aware that a federal awarding agency or auditee is contesting an audit finding, we will contact the party(ies) contesting the audit finding for guidance prior to destroying the audit documentation. We expect to begin our final audit fieldwork approximately in August 2017 and to issue our reports approximately in October 2017. Richard Teaman is the engagement partner and is responsible for supervising the engagement and signing the reports or authorizing another individual to sign them. Our fee for these services will be $27 ,750. Our invoices for these fees will be rendered as work progresses and are payable on presentation. If we elect to terminate our services for nonpayment, our engagement will be deemed to have been completed upon written notification of termination, even if have not completed our report. You will be obligated to compensate us for all time expended through the date of termination. The above fee is based on anticipated cooperation from your personnel and the assumption that unexpected circumstances will not be encountered during the audit. If significant additional time is necessary, we will discuss it with you and arrive at a new fee estimate before we incur the additional costs. We appreciate the opportunity to be of service to the Otay Water District and believe this letter accurately summarizes the significant terms of our engagement. If you have any questions, please let us know. If you agree with the terms of our engagement as described in this letter, please sign the enclosed copy and return it to us. Very truly yours, TEAMAN, RAMIREZ & SMITH,INC. Richard A. Teaman Certified Public Accountant RESPONSE This letter correctly sets forth the understanding of the Otay Water District. By: Title: Date: (î. B-l ıf RS FflYî,t',*iM' ffr r,TY,lII' ^' il,"d December 16,2016 Joseph Beachem, Chief Financial Officer Otay Water District 2554 Sweetwater Springs Blvd Spring Valley, CA 91778-2004 Dear Joseph: We are pleased to confirm our understanding of the services we are to provide for the year ended June 30, 2017. We will prepare the Annual Financial Transactions Report (State Controller's Report) of the Otay Water District (the "District"), which comprise the balance sheet as of June 30,2017, and the related statements of revenue and expenses and changes in fund equity for the year then ended, and perform a compilation engagement with respect to the State Controller's Report. V/e will also assist in preparing the supplementary information that accompanies the State Controller's Report which is additional information requested by the California State Controller. The supplementary information will be compiled from information that is the representation of management. It is our understanding that the Government Compensation in Califomia (GCC) Report will be prepared and submitted by management. Our Responsibilities The objective of our engagement is to- l) prepare the State Controller's Report and supplementary information (excluding the GCC Report) in accordance with the requirements prescribed by the Califomia State Controller based on information provided by you and 2) apply accounting and financial reporting expertise to assist you in the presentation of financial information in the forms prescribed by the Califomia State Controller without undertaking to obtain or provide any assurance that there are no material modifications that should be made to those form in order for them to be in accordance with the requirements prescribed by the Califomia State Controller. We will conduct our compilation engagement in accordance with Statements on Standards for Accounting and Review Services (SSARS) promulgated by the Accounting and Review Services Committee of the AICPA and comply with applicable professional standards, including the AICPA's Code of Professionql Conducl and its ethical principles of integrity, objectivity, professional competence, and due care, when performing the services, preparing the State Controller's Report, supplementary information (excluding the GCC Report), and performing the compilation engagement. We are not required to, and will not, veri$r the accuracy or completeness of the information you will provide to us for the engagement or otherwise gather evidence for the purpose of expressing an opinion or a conclusion. Accordingly, we will not express an opinion or a conclusion nor provide any assurance on the State Controller's Report and supplementary information. Our engagement cannot be relied upon to identify or disclose any misstatements in the State Controller's Report, and supplementary information including those caused by fraud or elror, or to identi$, or disclose any wrongdoing within the District or noncompliance with laws and regulations. However, we will inform the appropriate level of management of any material errors and any evidence or information that comes to our attention during the performance of our procedures that fraud may have occurred. In addition, we will inform you of any evidence or Richard A. Teaman, CPA o David M. Ramirez, CPA o Javier H. Carr¡llo, CPA o Bryan P. Daugherty, CPA o Joshua J. Calhoun, CpA 4201 Brockton Avenue Su¡te 100 Rivers¡de CA 92501 951.274.9500 TEL 95I.274.7828 FAX www.trscpas.com information that comes to our attention during the performance of our compilation procedures regarding any wrongdoing within the District or noncompliance with laws and regulations that may have occurred, unless they are clearly inconsequential. We have no responsibility to identifii and communicate deficiencies or material weaknesses in your intemal control as part of this engagement. We, in our sole professional judgment, reserve the right to refuse to perform any procedure or take any action that could be construed as assuming management responsibilities. Your Responsibilities The engagement to be performed is conducted on the basis that you acknowledge and understand that our role is to assist you in the presentation of the State Controller's Report and supplementary information (excluding the GCC Report) in accordance with the requirements prescribed by the California State Controller. You have the following overall responsibilities that are fundamental to our undertaking the engagement in accordance with SSARS: 1) The preparation and fair presentation of the State Controller's Report and supplementary information in accordance with the requirements prescribed by the Califomia State Controller and the inclusion of all related informative disclosures that are appropriate, if applicable. 2) The design, implementation, and maintenance of intemal control relevant to the preparation and fair presentation of the State Controller's Report and supplementary information. 3) The prevention and detection of fraud. 4) To ensure that the District complies with the laws and regulations applicable to its activities. 5) The accuracy and completeness of the records, documents, explanations, and other information, including significant judgments, you provide to us for the engagement. 6) To provide us with- access to all information of which you are aware that is relevant to the fair presentation of the State Controller's Report and supplementary information, such as records, documentation, and other matters. a o additional information that we may request from you for the purpose of the compilation engagement. o unrestricted access to persons within the entity of whom we determine it necessary to make inquiries. 7) To include our compilation report in any document containing the State Controller's Report and supplementary information (excluding the GCC Report) that indicates we have performed a compilation engagement on such prescribed forms and, prior to inclusion of the report, to ask our permission to do so. You are also responsible for all management decisions and responsibilities and for designating an individual with suitable skills, knowledge, and experience to oversee our services and the preparation of your State Controller's Report and supplementary information (excluding the GCC Report). You are responsible for evaluating the adequacy and results ofthe services performed and accepting responsibility for such services. Our Report As part of our engagement, we will issue a report that will state that we did not audit or review the State Controller's Report and that, accordingly, we do not express an opinion, a conclusion, or provide any assurance on them. If, for any reason, we are unable to complete the compilation of your State Controller's Report and supplementary information (excluding the GCC Report), we will not issue a report on such prescribed forms as a result of this engagement. Other Relevant Information Richard Teaman is the engagement partner and is responsible for supervising the engagement and signing the report or authorizing another individual to sign it. Our fee to prepare the report is included in the fee quoted in the engagement letter to conduct the June 30, 2017 financial audit of the Disfict dated December 16,2016. The fee is based on anticipated cooperation from your personnel and the assumption that unexpected circumstances will not be encountered during the work performed. If sigrrificant additional time is necessary, we will discuss it with you and anive at a new fee estimate before we incur the additional costs. We appreciate the opportunity to be of service to you and believe this letter accurately summarizes the significant terms of our engagement. If you have any questions, please let us know. If you agree with the terms of our engagement as prescribed in this letter, please sign the enclosed copy and return it to us. Very truly yours, TEAMAN, RAMIREZ & SMITH, INC. â. Richard A. Teaman Certified Public Accountant RESPONSE: This letter conectly sets forth the understanding of the Otay Water District. By Title: Date ıf RS FflYlT',"iM' ffr r,lvtTl'^' ilR December 16,2016 Joseph Beachem, Chief Financial Officer Otay Water District 2554 Sweetwater Springs Blvd Spring Valley, CA 91778-2004 Dear Joseph: We are pleased to confirm our understanding of the nature and limitations of the services we are to provide for the Otay Water District (the "District"). We will apply the agreed-upon procedures which the District's management has specified, listed in the attached schedule, for the investments of the District for the fiscal year ending June 30, 2017 (prepared in accordance with generally accepted accounting principles). This engagement is solely to assist the District's management in evaluating the compliance with the District's investment policy. Our engagement to apply agreed-upon procedures will be conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of the procedures is solely the responsibility of those parties specified in the report. Consequently, we make no representation regarding the sufficiency of the procedures described in the attached schedule either for the purpose for which this report has been requested or for any other purpose. Iffor any reason, we are unable to complete the procedures, we will describe any restrictions on the performance of the procedures in our report, or will not issue a report as a result of this engagement. Because the agreed-upon procedures listed in the attached schedule do not constitute an examination, we will not express an opinion on the Dishict's investments or any elements, accounts, or items thereof. In addition, we have no obligation to perform any procedures beyond those listed in the attached schedule. We will submit a report listing the procedures performed and our findings. This report is intended solely for the information and use of the District, and is not intended to be and should not be used by anyone other than this specified party. Our report will contain a paragraph indicating that had we performed additional procedures, other matters might have come to our attention that would have been reported to you. You are responsible for the presentation of the investments of the District in accordance with generally accepted accounting principles; and for selecting the criteria and determining that such criteria are appropriate for your purposes. You are responsible for assuming all management responsibilities and for overseeing any nonattest services we provide by designating an individual, preferably within senior management, who possesses suitable skill, knowledge, and/or experience. In addition, you are responsible for evaluating the adequacy and results of the services performed and accepting responsibility for the results of such services. Richard A. Teaman is the engagement partner and is responsible for supervising the engagement and signing the report or authorizing another individual to sign it. R¡chard A. Teaman, CPA o David M. Ramirez, CPA o Javier H. Carrillo, CPA t Bryan P. Daugherty, CPA o Joshua J. Calhoun, CpA 4201 Brockton Avenue Suite 100 Riverside CA 92501 951.274.9500T8L 951.274.7828FAX www.trscpas.com We plan to begin our procedures in approximately August 2017 and, unless unforeseeable problems encountered, the engagement should be completed in October 2017. At the conclusion of our engagement, we will require a representation letter from management that, among other things, will confirm management's responsibility for the presentation of the investments of the District in accordance with generally accepted accounting principles. Our fees for these services will be $1,500 and is included in the fee quoted in the engagement letter to conduct the June 30, 2017 financial audit of the District dated December 16,2016. The fee is based on anticipated cooperation your personnel and the assumption that unexpected circumstances will not be encountered during the engagement. If significant additional time is necessary, we will discuss it with you and arive at a new fee before we incur the additional costs. We appreciate the opportunity to assist you and believe this letter accurately summarizes the significant terms of our engagement. If you have any questions, please let us know. If you agree with the terms of our engagement as described in this letter, please sign the enclosed copy and retum it to us. Ifthe need for additional services arises, our agreement with you will need to be revised. It is customary for us to enumerate these revisions in an addendum to this letter. If additional specified parties of the report are added, we will require that they acknowledge in writing their responsibility for the sufficiency of procedures. Very truly yours, TEAMAN, RAMIREZ & SMITH,INC pJ ú,'J.*'-u^ Richard A. Teaman Certified Public Accountant RESPONSE: This letter correctly sets forth the understanding of the Otay Water District. Title Date Otay Water District Agreed-Upon Procedures Investments 1. Obtain a copy of the District's investment policy and determine that it is in effect for the fiscal year ended June 30, 2017. 2. Select 4 investments held at year end and determine if they are allowable investments under the District's Investment Policy. 3. For the four investments selected n#2 above, determine if they are held by a third parly custodian designated by the District. 4. Confirm the part or original investment amount and market value of the four investments selected above with the custodian or issuer of the investments. 5. Select two investment earnings transactions that took place during the year and recomputed the earnings to determine if they proper amount was received. 6. Trace amounts received for transactions selected at #5 above into the District's bank accounts. 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. 8. Review supporting documentation for the five investments selected at #7 above to determine if the transactions were appropriately recorded in the District's general ledger. STAFF REPORT TYPE MEETING: Regular Board MEETING DATE: February 1, 2017 PROJECT: DIV. NO. ALL SUBMITTED BY: Kelli Williamson Human Resources Manager APPROVED BY: Adolfo Segura, Chief, Administrative Services German Alvarez, Assistant General Manager Mark Watton, General Manager SUBJECT: ADOPT RESOLUTION #4325 TO APPROVE A ONE (1) YEAR EXTENSION TO THE CURRENT MEMORANDUM OF UNDERSTANDING BETWEEN THE OTAY WATER DISTRICT AND THE OTAY WATER DISTRICT EMPLOYEES’ ASSOCIATION, AND APPROVE THE SAME PROVISIONS FOR MANAGEMENT, CONFIDENTIAL AND EXECUTIVE EMPLOYEES GENERAL MANAGER’S RECOMMENDATION: That the Board adopt Resolution #4325 to approve a one (1) year extension (July 1, 2017 through June 30, 2018) to the current Memorandum of Understanding (MOU) between the Otay Water District (District) and the Otay Water District Employees’ Association (OWDEA), to include a cost-of-living adjustment (COLA) under the same terms as referenced in the MOU for years 2015 and 2016 for Represented employees, and approve the same provisions for Management, Confidential and Executive employees. COMMITTEE ACTION: Please see “Attachment A”. PURPOSE: To request that the Board adopt Resolution #4325 (Attachment B) to approve a one (1) year extension to the current MOU, to include a COLA under the same terms as referenced in the MOU for years 2015 and 2016 for Represented employees, and apply the same provisions for Management, Confidential and Executive employees. ANALYSIS: The District and the OWDEA expressed a mutual desire to extend the existing MOU for one (1) additional year from July 1, 2017 through June 30, 2018. In January 2017, they reached a tentative agreement and this desire to extend the MOU was solidified and approved by an OWDEA member vote on January 25, 2017. The MOU will continue with the same provisions and COLA effective July 1, 2017, as was applied on July 1, 2015 and July 1, 2016 (Exhibit 1). The same provisions will apply to Management, Confidential and Executive employees. MOU COLA Formula The District’s MOU includes the following language related to COLA for July 1, 2015 and July 1, 2016 and this formula will also be used for the July 1, 2017 COLA: Effective July 1, 2015 and July 1, 2016, the salary schedule and base pay of all represented employees shall be increased by the San Diego CPI-U, Less Medical Care, Annual (SDCPI-U), pursuant to the following formula:  The minimum increase shall be two percent (2%) and the maximum of the increase shall not exceed three percent (3%).  If the SDCPI-U increase is between two percent (2%) and two-and- a-half percent (2.5%), the increase shall equal the SDCPI-U.  If the SDCPI-U is between two and six tenths percent (2.6%) and three-and-a-half percent (3.5%), the salary range shall be increased by two-and-a-half (2.5%) plus one half (1/2) of the amount between two-and-six-tenths (2.6%) and three-and-a-half percent (3.5%). (The maximum COLA increase would be 3.0% if the CPI is 3.5%.) Consumer Price Index (CPI)/Cost-of-Living Adjustment The SDCPI-U Less Medical Annual figure that will be used to calculate the July 1, 2017 COLA was reported at 1.9%; therefore the COLA for July 1, 2017 will be 2.0%. The cost related to the 2.0% COLA for FY 2018 is estimated to be $246,000. FISCAL IMPACT: Joe Beachem, Chief Financial Officer The cost related to the 2.0% COLA for FY 2018 is estimated to be $246,000. This agreement maintains the status quo on other benefits such as Health insurance, Social Security matching, Workers’ Compensation insurance, CalPERS and various other benefits. By rolling over the current MOU, some costs will increase; however, the overall payroll costs resulting from the rollover of the MOU are within the District’s anticipated rate model, and therefore the increased costs will have no unexpected or unplanned impact on the foreseen rates. STRATEGIC GOAL: 4.1.1.4 Negotiate a successor Memorandum of Understanding for represented employees for 2017 and beyond and related compensation and benefits for unrepresented employees with emphasis on making necessary updates to Employee Health Benefits related to Health Care Reform. LEGAL IMPACT: None. ATTACHMENTS: Attachment A – Committee Action Report Attachment B – Resolution #4325 Exhibit 1 – Side Letter Agreement ATTACHMENT A SUBJECT/PROJECT: ADOPT RESOLUTION #4325 TO APPROVE A ONE (1) YEAR EXTENSION TO THE CURRENT MEMORANDUM OF UNDERSTANDING BETWEEN THE OTAY WATER DISTRICT AND THE OTAY WATER DISTRICT EMPLOYEES’ ASSOCIATION, AND APPROVE THE SAME PROVISIONS FOR MANAGEMENT, CONFIDENTIAL AND EXECUTIVE EMPLOYEES COMMITTEE ACTION: The Ad Hoc Negotiations Committee met on January 9, 2017, to review this item. Additionally, the Board met in Closed Session on January 4 and January 12, 2017. The Committee recommended approval by the full Board. NOTE: The “Committee Action” is written in anticipation of the Committee moving the item forward for Board approval. This report will be sent to the Board as a Committee approved item, or modified to reflect any discussion or changes as directed from the Committee prior to presentation to the full Board. ATTACHMENT B RESOLUTION NO. 4325 RESOLUTION OF THE BOARD OF DIRECTORS OF THE OTAY WATER DISTRICT TO EXTEND THE PROVISIONS OF THE CURRENT MEMORANDUM OF UNDERSTANDING WITH THE REPRESENTED EMPLOYEES, AND APPROVE EXTENDING THE SAME CHANGES FOR MANAGEMENT, CONFIDENTIAL AND EXECUTIVE EMPLOYEES WHEREAS, the Board of Directors set compensation and benefits for all employees; and WHEREAS, the Board of Directors wishes to extend the Memorandum of Understanding with the Otay Water District Employees’ Association for one (1) year with the same cost-of-living adjustment provided to employees on July 1, 2015 and July 1, 2016, and to apply the same provisions for Management, Confidential and Executive employees; and NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the Otay Water District as follows: 1. That the Board of Directors extend the existing Memorandum of Understanding (MOU) from July 1, 2017 through June 30, 2018 for Represented employees with the same cost-of-living adjustment provided to employees on July 1, 2015 and July 1, 2016 and to apply the same provisions for Management, Confidential and Executive employees; 2. The effective date of this resolution shall be February 1, 2017. BE IT FURTHER RESOLVED that the Board authorizes and directs the appropriate staff of the District to take any and all actions necessary to implement the above-referenced changes. PASSED, APPROVED AND ADOPTED by the Board of Directors of the Otay Water District at a regular meeting held this 1st day of February 2017. ATTACHMENT B Ayes: Noes: Abstain: Absent: President ATTEST: District Secretary SIDE LETTER AGREEMENT BETWEEN THE OTAY WATER DISTRICT AND THE OTAY WATER DISTRICT EMPLOYEES’ ASSOCIATION TO EXTEND THE MEMORANDUM OF UNDERSTANDING The current three-year Memorandum of Understanding (MOU) for the period from July 1, 2014 through June 30, 2017, between the Otay Water District (District) and the Otay Water District Employees’ Association (Association) is hereby amended as set forth herein. District Management and Association employee representatives have met and conferred and have agreed to the following additional provisions, which shall constitute an amendment to the MOU effective February 1, 2017, as follows: 1. The District and the Association hereby enter into this Side Letter Agreement, which shall be considered an amendment to the Memorandum of Understanding in effect from July 1, 2014 to June 30, 2017. This Side Letter Agreement shall expire June 30, 2018, with the Memorandum of Understanding. 2. Summary: Extend term of MOU for one (1) year with cost of living increase subject to the provisions of Article 4, Section 1: Wages. 3. The District submits the following proposal for Article 2. ARTICLE 2 - TERM Upon adoption by the Board of Directors of the District, the provisions of this Memorandum of Understanding shall be effective during the period commencing at 8:00 a.m. on July 1, 2017 through 5:00 p.m. on June 30, 2018 for those employees working in the Field and Administrative Units, subject to the provisions of Article 13, Section 7: Implementation. 4. The District submits the following proposal for Article 4, Section 1: Wages. ARTICLE 4, SECTION 1: WAGES A. WAGES: Effective July 1, 2017, the salary schedule and base pay of all represented employees shall be increased by the San Diego CPI-U, Less Medical Care, Annual (SDCPI-U), pursuant to the following formula: • The minimum increase shall be two percent (2%) and the maximum of the increase shall not exceed three percent (3%). • If the SDCPI-U increase is between two percent (2%) and two-and-a-half percent (2.5%), the increase shall equal the SDCPI-U. • If the SDCPI-U is between two and six tenths percent (2.6%) and three-and- a-half percent (3.5%), the salary range shall be increased by two-and-a-half (2.5%) plus one half (1/2) of the amount between two-and six tenths (2.6%) and three-and-a-half percent (3.5%). 5. Except as modified herein, all other terms and conditions of the MOU shall remain unchanged and in full force and effect. Association: Dale Strunks, Association President Otay Water District Employees’ Association Otay Water District: Mark Watton, General Manager Otay Water District ARTICLE 2 - TERM Upon adoption by the Board of Directors of the District, the provisions of this Memorandum of Understanding shall be effective during the period commencing at 8:00 a.m. on July 1, 201714 through 5:00 p.m. on June 30, 201817 for those employees working in the Field and Administrative Units, subject to the provisions of Article 13, Section 7: Implementation. ARTICLE 4, SECTION 1: WAGES A. WAGES: Effective July 1, 2014, the salary schedule and base pay of all represented employees shall be increased by two and one-half percent (2.5%). Effective July 1, 201715 and July 1, 2016, the salary schedule and base pay of all represented employees shall be increased by the San Diego CPI-U, Less Medical Care, Annual (SDCPI-U), pursuant to the following formula: • The minimum increase shall be two percent (2%) and the maximum of the increase shall not exceed three percent (3%). • If the SDCPI-U increase is between two percent (2%) and two-and-a-half percent (2.5%), the increase shall equal the SDCPI-U. • If the SDCPI-U is between two and six tenths percent (2.6%) and three-and-a- half percent (3.5%), the salary range shall be increased by two-and-a-half (2.5%) plus one half (1/2) of the amount between two-and six tenths (2.6%) and three- and-a-half percent (3.5%). STAFF REPORT TYPE MEETING: Regular Board Meeting MEETING DATE: February 1, 2017 SUBMITTED BY: Mark Watton, General Manager W.O./G.F. NO: DIV. NO. APPROVED BY: Susan Cruz, District Secretary Mark Watton, General Manager SUBJECT: Board of Directors 2017 Calendar of Meetings GENERAL MANAGER’S RECOMMENDATION: At the request of the Board, the attached Board of Director’s meeting calendar for 2017 is being presented for discussion. PURPOSE: This staff report is being presented to provide the Board the opportunity to review the 2017 Board of Director’s meeting calendar and amend the schedule as needed. COMMITTEE ACTION: N/A ANALYSIS: The Board requested that this item be presented at each meeting so they may have an opportunity to review the Board meeting calendar schedule and amend it as needed. STRATEGIC GOAL: N/A FISCAL IMPACT: None. LEGAL IMPACT: None. Attachment: Calendar of Meetings for 2017 G:\UserData\DistSec\WINWORD\STAFRPTS\Board Meeting Calendar 2-4-17.doc Board of Directors, Workshops and Committee Meetings 2017 Regular Board Meetings: Special Board or Committee Meetings (3rd Wednesday of Each Month or as Noted) January 4, 2017 February 1, 2017 March 1, 2017 April 5, 2017 May 3, 2017 June 7, 2017 July 5, 2017 August 2, 2017 September 6, 2017 October 4, 2017 November 1, 2017 December 6, 2017 January 18, 2017 February 15, 2017 March 15, 2017 April 19, 2017 May 17, 2017 June 21, 2017 July 19, 2017 August 16, 2017 September 20, 2017 October 18, 2017 November 15, 2017 December 20, 2017 SPECIAL BOARD MEETINGS: BOARD WORKSHOPS: Budget Workshop, Wednesday, May 24, 2017 at 3:00pm STAFF REPORT TYPE MEETING: Regular Board MEETING DATE: February 1, 2017 SUBMITTED BY: Bob Kennedy Engineering Manager PROJECT: P2467- 001101 DIV. NO. 4 APPROVED BY: Rod Posada, Chief, Engineering German Alvarez, Assistant General Manager Mark Watton, General Manager SUBJECT: Informational Update of the San Diego Formation Basin Boundary Modification and Sustainable Groundwater Management Act Requirements GENERAL MANAGER’S RECOMMENDATION: No recommendation. This is an informational item only. COMMITTEE ACTION: Please see Attachment A. PURPOSE: To update the Otay Water District (District) Board of Directors (Board) on the progress of the City of San Diego’s application with the California Department of Water Resources (DWR) for a scientific-based modification to the boundaries of the San Diego Formation Groundwater (SDF) aquifer (see Exhibit A for Project location). ANALYSIS: In September of 2014, Governor Brown signed into law the Sustainable Groundwater Management Act (SGMA) (Water Code Sections 10720-10736.5) in response to persistent and drought- driven severe overdraft and related ground subsidence issues in portions of the state, primarily the Central Valley of 2 California. SGMA set forth a process and timeline for the formation of Groundwater Sustainability Agencies (GSAs) to establish and implement Groundwater Sustainability Plans (GSPs) and restore groundwater sustainability in basins classified by the DWR as being of “medium” to “high” priority. On March 25, 2016, the City of San Diego filed an application with DWR for a scientific-based modification to the boundaries of the SDF aquifer. It is described as a scientific-based modification to the boundaries of the Sweetwater Valley (Basin 9-17), Otay Valley (Basin 9-18), and Tijuana Valley (Basin 9 19) groundwater basins, as defined in DWR Bulletin 118. These basins are located in the southern San Diego County portion of the South Coast Hydrologic Region. The proposed modification will consolidate the three basins into one, and expand the boundaries to include the whole of the underlying SDF aquifer. The modification of the basin boundary is not a project under CEQA Guideline Section 15378 (b). The proposed SDF basin is bounded on the east side by the La Nacion fault zone that extends from Mission Valley south to the Mexico border. The western SDF basin boundary would be defined by the shoreline. The northern proposed SDF basin overlaps with a fourth DWR designated basin, the Mission Valley basin DWR Basin 9-14. The Mission Valley basin is independent and not included in the proposed modification of the SDF aquifer. The southerly basin boundary would be at the U.S./Mexico International Border. The District’s Rancho del Rey well is located within the SDF aquifer (see Exhibit B). In 2001, local water agencies and the United States Geological Survey (USGS) began a comprehensive geologic, hydrologic, and geochemical investigation of the groundwater resource in the coastal San Diego area known as the San Diego Hydrogeology Project. Funding for this project was provided by the District, Sweetwater Authority, the City of San Diego, the State of California via water bonds, and the United States Federal Government via appropriations for the USGS. The two (2) primary objectives of the USGS study are (1) to develop an integrated, comprehensive understanding of the geology and hydrology of the San Diego area, focusing on the SDF and the overlying alluvial deposits, and (2) to use this understanding to evaluate expanded use of the alluvial deposits and the SDF for recharge and extraction. The USGS has installed a system of multi-point monitoring wells in coastal San Diego and has compiled subsurface data and physical properties of the SDF. Groundwater data dating back more than ten years and other resources from 3 the USGS pertaining to the SDF can be accessed at the attached URL. URL: http://ca.water.usgs.gov/projects/sandiego/index.html The City of San Diego and Sweetwater Authority reviewed the proposed boundary modification with District staff at information workshops held on March 3, 2016 and on December 1, 2016. DWR is expected to accept the basin boundary modification and move the basin to a Medium priority and then requirements will be triggered for SGMA compliance. The SGMA act requires the formation of local groundwater sustainability agencies (GSAs) that must assess conditions in their local water basins and adopt locally-based groundwater sustainability management plans (GSP). The SGMA act provides substantial time – 20 years – for GSAs to implement plans and achieve long-term groundwater sustainability. According to the state, SGMA does not affect water rights. The purpose of SGMA is to address water management issues together as stakeholders in the basin. One option is for multiple agencies to form a single GSA and prepare a single GSP. A second option would be for multiple agencies to form multiple GSAs and work together to prepare a single GSP with an optional inter-basin agreement. A third option is for multiple agencies to form multiple GSAs and prepare multiple GSPs. The state will require the plans to be coordinated through a coordination agreement. Allocation is a future issue that is addressed during GSA and GSP discussions. Scientific data is the basis for allocations. It is expected the District will have up to two (2) years to decide how to form a GSA and another two (2) years to prepare a GSP or participate in the preparation with Sweetwater Authority and the City of San Diego. The budget for the City’s GSP is $1 million dollars, which will have to be prorated with the participating agencies sharing the costs, if a joint GSP is prepared. District staff will meet with Sweetwater Authority and City of San Diego staff over the next six months to better understand the benefits of the District having an active role in groundwater resource management and the cost of the GSA formation, GSP plan preparation, ongoing monitoring responsibilities and the long-term commitment for the reporting and GSP updates required by the state. FISCAL IMPACT: Joe Beachem, Chief Financial Officer No fiscal impact as this is an informational item for the Board. 4 STRATEGIC GOAL: This Project supports the District’s Mission statement, “To provide high value water and wastewater services to the customers of the Otay Water District in a professional, effective, and efficient manner” and the General Manager’s Vision, “A District that is at the forefront in innovations to provide water services at affordable rates, with a reputation for outstanding customer service.” LEGAL IMPACT: No legal impact is anticipated. BK/RP:jf P:\WORKING\CIP P2467 SD Formation Groundwater Feasibility Study\Staff Reports\BD 02-01-17, Staff Report, GSA- GSP Info Item.docx Attachments: Attachment A – Committee Action Exhibit A – Project Location Exhibit B – Rancho del Rey Well Location Exhibit C - Presentation ATTACHMENT A SUBJECT/PROJECT: P2467-001101 Informational Update of the San Diego Formation Basin Boundary Modification and Sustainable Groundwater Management Act Requirements COMMITTEE ACTION: The Engineering, Operations, and Water Resources Committee reviewed this item at a meeting held on January 17, 2017 and the following comments were made:  Staff reviewed the information in the staff report to provide an update on the progress of the City of San Diego’s application with the California Department of Water Resources (DWR) for a scientific-based modification to the boundaries of the San Diego Formation Groundwater (SDF) aquifer. The City submitted an application on March 25, 2016.  The proposed modification will consolidate three basins into one, and expand the boundaries to include the whole of the underlying SDF aquifer. These other basins are: o Sweetwater Valley (Basin 9-17) o Otay Valley (Basin 9-18) o Tijuana Valley (Basin 9-19)  Staff indicated that the City of San Diego and the Sweetwater Authority reviewed the proposed boundary modification with District staff at workshops held on March 3, 2016 and December 1, 2016.  It is anticipated that DWR will accept the basin boundary modification and move the basin to a Medium priority, then requirements will be triggered for the Act compliance. It was noted that the Act requires the formation of local groundwater sustainability agencies (GSAs) that must assess conditions in their local water basins and adopt locally- based groundwater sustainability management plans (GSP).  Staff noted that the District is interested not only because of the United States Geological Survey (USGS), but also because of the District’s Rancho del Rey well that is located just inside this basin boundary. The proposed SDF basin is bounded on the east side by the La Nacion fault zone that extends from Mission Valley south to the Mexico border.  Staff anticipates that the District will have up to two (2) years to decide how to form a GSA and another two (2) years to prepare a GSP or participate in the preparation with Sweetwater Authority and the City of San Diego.  The budget for the City’s GSP is $1M dollars, which will have to be prorated with the participating agencies sharing the costs, if a joint GSP is prepared.  In response to several questions from the Committee, staff stated that the District and Sweetwater Authority (SWA) did a joint study in June 2009, with consultants from RBF and MWH), on the potential to develop groundwater in this basin. Staff indicated that the cost of the development was about $1,500 per AF for SWA and $2,100 per AF for the District (in FY 2009 dollars). Conveyance cost makes up some of the differences. Cost for brine disposal was not defined and was one of the obstacles for development of this project. The potential for litigation with the City of San Diego is unknown. The City legally challenged the environmental document for SWA’s expansion of their Reynolds Plant, not the water rights. The District will reevaluate the projects as regulatory requirements change, technology evolves, brine disposal options change, or the price of imported water increases.  The Committee inquired if it was ok for the City of San Diego to have control of the basins once they are combined. Staff indicated that SWA has expressed to the City that water rights are not to be a part of the Groundwater Sustainability Plans (GSPs).  The Committee inquired if the Rancho del Rey well was active or proposed, and will it be inside or outside of the boundary of the new basin. Staff stated that a well has been drilled; however, plans are not complete for the design of a RO facility. A brine disposal agreement will be needed with the City of Chula Vista. A permit from DDW must be secured prior to awarding for construction. Currently, the project is inactive. With respect to the basin boundary, Exhibit B of the staff report identifies that the location of the Ranch del Rey well is within its boundary.  The Committee inquired if the basins were hydraulically linked. Staff indicated that no basin linkage was evaluated. In response to other inquiries from the Committee, staff stated that the USGS study found the presence of modern water in only the shallowest monitoring wells and the eastern part of the study area indicated very little modern (<60 years old) groundwater is present in the coastal aquifer. Carbon 14 analysis indicate most of the groundwater in the coastal aquifer was recharged thousands of years ago. Other studies have found the San Diego Formation layer is on top of the Otay Formation which sits on top of the Pomerado Conglomerate, Mission Valley Formation, Stadium Conglomerate and Friars Formation that are collectively known as the Poway Group (Kennedy 1975). The Pliocene San Diego Formation and the upper fluvial (non-marine) sedimentary interval consists of alternating layers of gravel and cobble-sized clasts, interbedded with silty sand, clayey sand, and poorly graded sand. The uppermost marine portion of the San Diego Formation is predominantly medium to coarse sand. Thin layers of cemented shell fragments (“coquina”) and the marine portion becomes finer-grained with depth.  The Committee commented that the State says SGMA does not affect water rights, but it does affect control. In response to the Committee’s comment, staff stated that according to the State, SGMA does not affect water rights. The purpose of the Act is to address water management issues together as stakeholders in the basin. Agencies may adopt a single plan covering an entire basin or combine a number of plans created by multiple agencies. Allocation is a future issue that is addressed during GSA and GSP discussions. Scientific data is the basis for allocations.  The Committee inquired about the District’s options. Staff indicated that recommendations for the formation of a GSA and GSP will be presented to the Board at a future meeting.  In response to a question from the Committee, staff stated that the basin boundary modification is almost complete with DWR. The next step is the formation of a GSA and the preparation of the GSP.  The Committee inquired about the next steps for the Sweetwater Authority (SWA). Staff indicated that as a result of their settlement of the legal challenge on the environmental report for the expansion of the Reynolds plant with the City of San Diego, SWA is required to participate on a GSP with the City. SWA and the City have an MOU in place to divide the cost for the preparation of the plan, all as a condition of settling. District staff has asked SWA to consider forming a GSA with the District since SWA has little interest in forming one with the City of San Diego. Following the discussion, the Committee supported staffs’ recommendation and presentation to the full board as an informational item. CHULAVISTA CORONADO IMPERIALBEACH LA MESA LEMONGROVE NATIONALCITY SANDIEGO SANDIEGO CORONADO CHULAVISTA S.D.COUNTY S.D.COUNTY S.D.COUNTY Path:U:\Projects\_Jobs\60438044City of SD -Groundwater MgmtPlan- SD Fm\012 GIS MAPS & CAD\!GSP Figures\map_docs\Agencies_Municipalities_ALL.mxd,janssenn,10/18/2016, 4:44:34PM Legend Coastal Plain of San Diego Boundary Municipal Boundaries City of San Diego Otay Water District South Bay Irrigation District City of National City Navy Public Works California-American Water Co SOURCES: ESRI, CA DWR. CITY AND WATER AGENCYJURISDICTION BOUNDARIESSAN DIEGO, CA FIG. NO:1SCALE: 1" = 2.5 miles (1:158,400) 1.25 0 1.25 2.5 Miles O SCALE CORRECT WHEN PRINTED AT 8.5X11Portions of this DERIVED PRODUCT contains geographic information copyrighted by SanGIS. All Rights Reserved. OTAY WATER DISTRICTRANCHO DEL REY WELL &EAST BOUNDARY OF THE PROPOSEDGROUNDWATER MANAGEMENT BASIN F P: \ D R A F T I N G D E P A R T M E N T \ I n f o f o r O t h e r s \ O W D \ B o b K \ R a n c h o D e l R e y W e l l S i t e & P r o p o s e d G r o u n d w a t e r M a n a g e m e n t B a s i n B o u n d a r y . m x d ^_Terr a N o v a D r Huerto P l Calle L a g a s c a N Ranc h o d e l R e y P k w y Ra n c h o d e l R e y P k w y M i l a g r o s a C i r Verin Ln P a d e r a W a y P l a z a d e l C i d Del C o r r o C t Montera Ct Lagasc a P l Mil a g r o s a P l 127 111 ROW 5921210600 5921210300 5921210400 5921210500 6400102400 6400201100 6400101800 5933823800 59 2 1 9 2 1 8 0 0 59 2 1 9 2 1 0 0 0 6400101900 59 3 3 8 2 4 1 0 0 5934001500 5933 8 0 3 6 0 0 59 3 3 9 2 1 4 0 0 0 1,000500 Feet Legend Proposed Groundwater Management Basin Boundary OWD Rancho Del Rey Well Site^_ September 2016 1) Provide for sustainable management of California’s groundwater resources 2) Promote local control and cooperation SGMA Purpose EXHIBIT C Background – The Coastal Plain of San Diego Groundwater Basin 2 Basin Boundary Modification 3 4 1) The Water Agencies are willing to lead as GSAs, retaining water management responsibility for GW within their service areas. 2) Cities have the option to be GSAs, but are not required to do so 3) Cal Am is not eligible to form a GSA, but could participate by MOU or similar. 4) GSA Coverage for the Cal Am Service area could be provided by the overlying cities, CSD, or the County. Executive Summary 2) GSA Formation Options IMPLICATIONS PROPOSED BASIN BOUNDARY MODIFICATION 5 Rancho del Rey Well Site 5 IMPLICATIONS PROPOSED BASIN BOUNDARY MODIFICATION 6 GSP Options 6 7 COST • Staff and/or consultants participation in management activities & meetings • Contribute to preparation of GSP • Ongoing monitoring responsibility • Regular GSP updates • Long term commitment • $$$ BENEFIT • Have an active role in groundwater resource management Any “Local Agency” as defined is eligible to form GSA: 10721 (n):“Local agency” means a local public agency that has water supply, water management, or land use responsibilities within a groundwater basin. Executive Summary 3) GSA Benefits and Costs GSA Authorities 8 • GSAs are empowered by SGMA to manage groundwater basins and regulate use Significant Authorities Granted to GSAs by SGMA 1. Adopt Rules and Regulations 2. Impose Fees 3. Monitor Groundwater Extractions 4. Acquire Property and Water Rights / Construct Projects 5. Arrange Transfers and Exchanges 6. Regulate Well Spacing 7. Regulate Groundwater Extractions 8. Coordinate with County on Issuance of Well Permits 9. Enforcement GSA Formation Process 9 Also: •Principles of Understanding among intended GSA formation agencies • Future formal MOU(s)or Coordination Agreement as needed 1) Public Notice of Intent to form GSA 2) Document Public Outreach 3) Adopt Resolution 4) Submittal to DWR 5) DWR Designates Exclusive GSA GSP Elements • Basin Characterization / Water Balance • Sustainability Objectives / Avoidance of Undesirable Results Chronic Overdraft Seawater Intrusion (TDS, Chlorides) Land Subsidence Surface Water Depletion • Thresholds and Monitoring • Projects and Actions to Reach Goals • Annual Reporting 10 IMPLICATIONS PROPOSED BASIN BOUNDARY MODIFICATION 11 Questions? 11 STAFF REPORT TYPE MEETING: Regular Board MEETING DATE: February 1, 2017 SUBMITTED BY: Mark Watton General Manager W.O./G.F. NO: N/A DIV. NO. N/A APPROVED BY: Mark Watton, General Manager SUBJECT: General Manager’s Report ADMINISTRATIVE SERVICES: Purchasing & Facilities:  Facility Storm Preparations and Report – The District’s facilities fared well during the recent series of heavy rain and wind. Staff’s yearlong preparations, including vegetation clearing, brow ditch and drainage maintenance, along with straw waddle and silt fence placement, have contained runoff and averted major flooding. However, driving rain exposed minor roof leaks at a few facilities, which were quickly addressed. Human Resources:  Required Tax Reporting for Health Benefits – HR staff submitted the required data to our third party administrator, Businessolver, and is awaiting the next step of auditing and issuing the required tax forms (1095c) and required IRS reporting (1094c) related to Health Care Reform. Tax forms for participants will be distributed by March 2nd, and the IRS tax filing is due by March 31, 2017.  Training – On January 31, Mr. Gordon Graham was onsite to provide training on topics related to organizational risk management and performance management. The training was attended by leads, supervisors, managers, and executive staff.  Recruitments/New Hires/Promotions:  There were no recruitments, new hires, or promotions this month. 2 Safety & Security:  Vulnerability Assessment – The Department of Homeland Security (DHS) completed a facility vulnerability assessment of three District facilities: the Treatment Plant, Regulatory Site, and Administration building. The final infrastructure surveys, security and resilience reports have been received. As part of these assessments, the District’s infrastructures were compared to similar facilities. o Results: On all three District facilities, the overall Protective Measure (PMI) and the Resilience Measurement Indexes (RMI) were positively higher than the average. o Additional Information: Measurements which make up the PMI are: Physical Security, Security Management, Security Force, Information Sharing and Security Activity (history/background). Measurements which make up the RMI are: Preparedness, Mitigation Measures, Response Capabilities, and Recovery Mechanisms. o Recommendations: A few recommendations were made, which the District will further evaluate for applicability, feasibility and objectivity. o Quality and Cost of Reports: These assessments were completed by DHS security and vulnerabilities experts, and were conducted at no cost to the District. Similar assessments can run well over $100,000.  WebEOC – Staff completed the January monthly exercise, which consisted of navigating to the Water Agencies Emergency Coordination section; checking the District’s emergency contacts, and making updates as needed.  Emergency Preparedness - Staff attended the “January Event Disaster Exercise for the Business Community” at the County of San Diego Office of Emergency Services (OES). OES staffers facilitated an exercise based on an earthquake scenario designed to provide insight into governmental response activities, encourage discussion on private sector preparedness and response procedures, sharing best practices, and identifying areas for improvement. INFORMATION TECHNOLOGY AND STRATEGIC PLANNING:  SCADA Telecommunications Redesign Update - To date, 28 sites have been converted to internet physical connectivity with 13 facilities remaining. SCADA and IT staff continue to perform and execute configuration testing and monitoring of the new activated service sites to ensure data transmission, reliability, and performance. 3 FINANCE:  Accounts Payable Efficiencies – Staff is viewing various A/P products to look for ways to cut cost and streamline the accounts payable process.  FY2018 Operating and CIP Budget – Staff has begun preparing the FY2018 Operating and CIP Budget, which will be presented to the Board in May.  AMR Change-Out Update - Staff is currently reviewing contractor bids for the AMR change-out. Staff will be bringing the recommendation to the March Board meeting. In the meantime, a team comprised of staff from Customer Service, Purchasing, GIS, and IT are working together to develop a streamlined process for the change-out project. The financial reporting for December 31, 2016 is as follows:  For the five months ending December 31, 2016, there are total revenues of $50,794,865 and total expenses of $47,487,864. The revenues exceeded expenses by $3,307,001. The financial reporting for investments for December 31, 2016 is as follows:  The market value shown in the Portfolio Summary and in the Investment Portfolio Details as of December 31, 2016 total $88,429,690 with an average yield to maturity of 0.95%. The total earnings year-to-date are $408,717. ENGINEERING AND WATER SYSTEM OPERATIONS: Engineering:  927 Zone, Force Main Assessment and Repair Project: This project consists of inspection, condition assessment, and repair of the existing Ralph W. Chapman Water Reclamation Facility (RWCWRF) 1980 era, 16,000 feet long, 14-inch diameter steel force main. During the month of January, Charles King continued the construction of the new blow offs and began installation of the cathodic protection improvements. Execution of the work has been impacted by recent rains and rock in the areas of cathodic protection improvements. In response, Charles King has been working on weekends and holidays to complete the work within the approved environmental window that is part of the contract. Charles King is working to place the main back into service by early February 2017. Staff is working with the regulatory agencies to extend the permits to February 14, 2017. This will allow for completion of the backfill operations and restoring the access road to a serviceable condition. If the 4 cathodic protection improvements and final roadway grading are not completed within this year’s environmental window, staff will work with Charles King to carry these items to the next available environmental window in FY 2018 for completion. The overall project is within budget. (R2116)  36-Inch Main Pumpouts and Air/Vacuum Ventilation Installations: This project consists of inspection, repairs, and improvements to the District’s La Presa 36-Inch Pipeline between San Diego County Water Authority Flow Control Facility Number 11 and the District’s Regulatory site. The construction agreement between the District and Underground Pipeline Solutions, Inc., from Alpine, CA, has been approved. The project consists of the relocation of six (6) existing air/vacuum valves from underground vaults to above ground locations. Construction is scheduled to begin in February 2017. The project is within budget and on schedule to complete in April 2017. (P2267)  978-1 & 850-2 Reservoir Interior/Exterior Coatings & Upgrades: This project consists of removing and replacing the interior and exterior coatings of the 978-1 0.5 MG Reservoir and the 850-2 3.1 MG Reservoir, along with providing structural upgrades, to ensure the tanks comply with both State and Federal OSHA standards as well as the American Water Works Association and the County Health Department standards. A structural inspection blast at the 978-1 Reservoir has concluded that the rafters which support the reservoir roof require replacement. The submittals for rafter replacement have been approved and the contractor, Blastco, Inc., began replacement of rafters under the contract’s allowance item in January 2017. The project is within budget and on schedule to complete in June 2017. (P2534 & P2544)  Rancho San Diego Basin Sewer Rehabilitation – Phase 1: This project consists of sewer system improvements at fourteen (14) locations within the Rancho San Diego Basin. The work includes replacement of approximately 3,250 linear feet of 8-inch gravity sewer main and the installation of four (4) new manholes. The contractor, Transtar Pipeline, Inc., has installed sewer along Hillsdale Road, Juliana Street, Donahue Drive, Paseo Grande, Vista Grande Road, Tina Street, Burris Drive, and Fuerte Knolls with final punch list work requested by the County of San Diego pending. The project is substantially complete and within budget. (S2033)  Ralph W. Chapman Water Reclamation Facility (RWCWRF) Facility Master Plan: On February 29, 2016, the District issued a Task Order to Arcadis to prepare a Master Plan for the RWCWRF to develop a phased approach to implement improvements and prioritizing the identified improvements while considering the needs, overall costs, long-term payback on investment, and other factors. The District 5 assembled a list of projects to begin the study, but Arcadis will draw upon their expertise to identify additional work that would improve the operation of the facility. Improved instrumentation to enhance the operation and automation is also being studied. The final master plan was submitted to the District on December 23, 2016. It is anticipated that Arcadis will resubmit a revised final version in February 2017. The final plan will be used for prioritizing future CIP projects. (R2119)  State Route 94 Campo Road at Melody Road: The District has entered into an agreement for construction of a water system with the Jamul Indian Village Development Corporation. Under the agreement, the Jamul Indian Village Development Corporation is required to relocate approximately 1,860 linear feet of 16-inch potable water main. The 16-inch main is currently under construction and tie-in of the new main is anticipated in mid-March 2017. Staff is working with the developer on the tie-in plan in an effort to minimize any customer impacts during the tie-in. (D0644-090254)  Campo Road Sewer Replacement: The existing sanitary sewer from Avocado Road to Singer Drive is undersized and located in environmentally sensitive areas that are difficult to access. The design of a replacement sewer by Rick Engineering Company is complete and procurement of easements has been in progress since May 2016, with agreements in principle reached with Vestar and Regency Centers. The District is actively pursuing funding for the project through the Clean Water State Revolving Fund, with the complete submission package currently under review by the state. Advertisement for bids was published on January 30, 2017 in The Daily Transcript, with opening of bids in early March 2017. Construction is scheduled to begin in Fall 2017. Activities near environmentally sensitive areas will be halted during the breeding season of endangered species, between February and September. Staff previously performed public outreach in late 2015 through early 2016 to elected officials, planning groups, and other parties that may be impacted by the project and will be contacting them again starting with Supervisor Jacob on February 21, 2017. (S2024)  Hillsdale Road Water and Sewer Replacement: The existing water line in Hillsdale Road between Jamacha Road and Vista Grande Road has experienced several breaks and found to be in need of replacement. As the County plans to repave the road as soon as the project is completed, the replacement of two (2) segments of sanitary sewer are also included in the scope of work. Through the District’s As- Needed Engineering Design Contract, a Task Order was issued on June 23, 2016 to Psomas to design the project. The 60% Design was submitted on November 17, 2016, with the District returning comments on December 1, 2016. Geotechnical investigation and potholing were performed in late December 2016, during the holiday 6 break for Valhalla High School, to minimize traffic disruptions. Submission of traffic control plans to Caltrans is now the primary item on the project critical path. The 90% Design submittal is expected by February 2017. It is anticipated that the construction Advertisement to Bid will be published in The Daily Transcript in early March 2017. The project is within budget and on schedule. (P2573 & S2048)  Trenchless Sewer Rehabilitation: The District completed the in- house design of sewer repairs for 60 locations using trenchless technologies. The project was advertised for bids on December 15, 2016 and opening of bids was held on January 24, 2017. Construction is anticipated to begin in April 2017 with completion by July 2017. The project is within budget. (S2044)  Rosarito Desalination: Aguas de Rosarito (a partnership between NSC Agua, New Water and Suez) (AdR), finalized a 40-year definitive public-private partnership agreement with the State of Baja California on August 25, 2016. An update on the project was presented to the Desalination Committee on January 19, 2017. An article in the Water Desalination Report (23 January 2017) titled, “State Moves to Guarantee Mega-SWRO” is attached for review (Attachment A). (P2451)  870-2 Pump Station Replacement: This project consists of a new pump station to replace the existing Low Head 571-1 and High Head 870-1 Pump Stations. The project consultant (Carollo) provided a revised 95% design submittal on January 19, 2017. The Mitigated Negative Declaration (MND) was approved for adoption at the December 2016 Board meeting. The project is scheduled to begin construction October 2017. (P2083)  SR-11 Utility Relocations: This project consists of relocating several District potable water pipelines located in Otay Mesa Road, Sanyo Avenue, Enrico Fermi Drive, Alta Road, and within District easements. The first two rounds of relocations (Caltrans Utility Agreement Numbers 33592 and 33622) were completed in FY 2016. Staff met with Caltrans on January 12, 2017 to begin planning and design of relocations from Enrico Fermi Drive to the future Mexico/USA international border crossing. (P2453)  OWD Administration and Operations Parking Lot Improvements, Phase I – Lighting and Vehicle Charging Station: This project consists of replacing the existing parking lot light fixtures in both the Administration and Operations lots with high efficiency LED fixtures. The project also includes constructing an electric vehicle charging station in the Employee Administration parking lot. The District’s as-needed electrical engineer (BSE Engineering) is finalizing comments from the 100% design, and the 7 project will go out to bid in February 2017. The construction contract is scheduled to be presented to the Board in April 2017, and construction is anticipated to begin in May 2017. (P2555 & P2547)  For the month of December 2016, the District sold 6 meters (12.5 EDUs), generating $119,182 in revenue. Projection for this period was 9.7 meters (28.5 EDUs), with budgeted revenue of $270,175. Total revenue for Fiscal Year 2017 is $1,194,641 against the annual budget of $3,242,100.  The following table summarizes purchases and Change Orders issued during the period of December 1, 2016 through January 23, 2017 that were within staff signatory authority: Date Action Amount Contractor/ Consultant Project 12/13/16 PO $7,250.00 Pump Check Pump Efficiency Testing 1/17/17 CO 1 ($10,000.00) Fordyce Construction Inc. RWCWRF Replacement Surge Tank (P2559)  Water Conservation - December 2016 usage was 15% lower than December 2013 usage. Since the State’s Conservation Mandate began in June 2015, customers have saved an average of 18%. 8 Water System Operations (reporting for December):  As previously mentioned, on November 18, the State Water Resources Control Board (SWRCB) sent their Sanitary Survey Report from the inspection that they conducted at the District in late September. (Their findings state that the District’s water system is well operated and maintained.) The report requested a couple of additional data on the monthly reports that are sent to the SWRCB. The letter also approved the revised bacteriological sampling plan that was submitted in October. After having dialogue with the SWRCB on the two additional reporting requirements, they amended their request to require only formatting changes on January 5.  On December 5, the District received notification from the SWRCB regarding water agencies to test school plumbing systems for lead if it is requested by school superintendents. On January 17, the SWRCB issued a press release concurring this new requirement and the SWRCB will be sending the District an amended permit that includes this testing requirement in the coming weeks.  On December 15, Water Systems and Utility Maintenance staff performed a planned shutdown on Coronado Avenue and Date Street in Spring Valley to replace a defective 4-inch gate valve. Twenty-five residential customers were affected and water trailers were available during the shutdown.  On December 15, Water Systems Operators discovered a contractor/developer taking water from a fire hydrant without a District meter in the 600 block of Alta Road in Otay Mesa. A report, including photos, was taken and forwarded to customer service for processing. The contractor was identified as FJ Willert. This was not the first time this contractor has been cited for an illegal connection. They were involved in an incident at Sea World Aquatica in 2013. Based on this repeat violation, a fine of $5,000 was assessed. A letter, along with the corresponding invoice, notifying the customer of the fine and fees associated with the illegal connection was sent on December 28th. Per the District’s Code of Ordinances, the contractor had 10 days to appeal the fine. There has not been a request for appeal and the 10-day appeal period has ended. Staff expects that the fine will be paid by FJ Willert.  On January 1, California Senate Bill (SB) 1398 went into effect. SB 1398 establishes a program requiring public water systems to develop an inventory and schedule for removal of lead service lines in public water systems by July 1, 2018. Staff is in the process of reviewing records to confirm that no lead service lines exist in the District. 9  On January 5, the District experienced a main break on an 8-inch PVC main line on Sutter Buttes Street in Chula Vista. Eight residential customers were affected by the emergency shutdown. A water trailer was on site for the affected customers. The main line was repaired the same day and water restored to all customers.  On January 12, the County performed a Hazardous Materials Business Plan (HMBP) inspection of the 711-3 Reservoir site. No significant issues were noted; however, the county did note in the report that training records were not provided by staff at the time of the inspection and the District has 30 days to provide a copy of these records. The District is reviewing this requirement since the site is unmanned and staff offered to show the inspector the records which are maintained electronically at the District main offices.  On January 17, at approximately 1:40 am the District experienced a main break on a 12-inch PVC main line on Magdalena Avenue between Sutter Buttes Street and E. Palomar Street in Chula Vista. There were two master meters affected by the emergency shutdown that serves a large community of 188 units. Staff high-lined a master meter and was able to provide water to the community while repairs were made. The main was repaired and all services restored by 7:00 pm the same day.  On January 18, a kickoff meeting with the leak detection contractor was held for the 2017 leak detection project. The project is underway and is expected to take about 8 weeks to complete. An additional 2.64 miles were added to the 239 mile leak detection project scope so that water mains near the site of the recent main breaks in Chula Vista could be surveyed, as a precaution.  January 18 through January 23, a series of heavystorms swept through the District resulting in a power outage affecting the 978- 1 Pump Station and the 1200-1 Reservoir for over 24 hours due to felled SDG&E power lines. During these storms, Staff identified roof leaks at three pump station sites and erosion accumulation at some drainages. The Calavo Sewer Lift Station was also used due to inflow and infiltration from the storms. 10  The December potable water purchases were 1,767.4 acre-feet which is 1.4% below the budget of 1,792.0 acre-feet. The cumulative purchases through December were 15,089.2 acre-feet which is 8.8% above the cumulative budget of 13,874.5 acre-feet.     The December recycled water purchases and production were 94.6 acre-feet which is 55.0% below the budget of 210.5 acre-feet. The cumulative production and purchases through December were 2,235.3 acre-feet which is 1.6% above the cumulative budget of 2,200.1 acre-feet. 11 Potable, Recycled, and Sewer (Reporting up to the month of December):  Total number of potable water meters is 49,596.  Recycled water consumption for the month of December is as follows: o Total consumption was 150.8 acre-feet or 49,136,120 gallons and the average daily consumption was 1,585,036 gallons per day. o Total cumulative recycled water consumption since July 1, 2016 is 2486.6 acre-feet. o Total number of recycled water meters is 716.  Wastewater flows for the month of December were as follows: o Total basin flow, gallons per day: 1,553,935. This is an increase of 2.39% from December 2015. o Spring Valley Sanitation District Flow to Metro, gallons per day: 513,774. o Total Otay flow, gallons per day: 1,040,226. o Flow Processed at the Ralph W. Chapman Water Recycling Facility, gallons per day: 0. o Flow to Metro from Otay Water District was 1,040,581 gallons per day.  By the end of December there were 6,102 wastewater EDUs. Attachments: Attachment A: Water Desalination Report (23 January 2017) titled, “State Moves to Guarantee Mega-SWRO” W¡,TER DESATINATION REPONT The international weekly for desalination and advanced water treatment since i 965 Volume 53, Number 3 Mexico SmrT MovES To GUARANTEE MTcI-swno In its official newspaper, the state of Baja California, Mexico, has announced that the legislature has taken the initiative to ensure its payment obligations for the proposed 100 MGD (378,500 m3ld) Rosarito Desalination Plant. The plant will be designed, built, owned and operated by Aguas de Rosarito (AdR), a special purpose company owned by NSC Agua, Consolidated Water Company's Mexican subsidiary, and S.A.P.I. de C.V. The project will be constructed under a \-year public- private partnership contract governed by the State's new Asociaciones Público Privadas (APP) legislation, with financing to be syndicated by the North American Development Bank (NADB). According to the announcement, the State has pledged a guaranteed monthly payment of MXN 149,312,018 ($6.8 million) for a period of 37 years, beginning in June 2019. \VDR understands that the amount will be paid into an independently managed trust to guarantee the project. Under the arrangement, any invoice that is not paid by the state's water utility would be paid from the trust. The pledge is said to account for index-linked tariffescalation via corresponding inflationary growth in the pledged payroll taxes. The contract is to be executed in two phases, with 50 percent of the production capacity to be delivering water in late 20 l9 or 2020, and the second phaseby 2024. This action appears to move the project another significant step closer to financial closure. California WuvEn DENTED roR SWR0 pRoJEcr pERMrr rEE California's Coastal Commission has denied Poseidon Water's request for a waiver of the $286,649 application fee for a coastal development permit (CDP) for the proposed 50 MGD (189,250 m3ld) Huntington Beach Desalination Plant. Despite Poseidon's suggestion that the upcoming review 23 January 2017 should not require a substantial amount of the Commission's additional staff time to review, the Commissioner staff "strongly disagrees". At a 13 January public hearing, Coastal Commission deputy director Alison Dettmer explained that the already complex project continues to take a significant amount of staff time and was about to undergo one or more CEQA reviews and a State Regional Board review, which require the Coastal Commission's staff participation. She estimated that Tom Luster, the Commission's senior environmental scientist and lead staffer for desal projects, currently spends up to 70 percent of his time on the project each week. Although one Commissioner suggested that based on the amount of work already completed and the amount of work that remains, the fee should be higher, another suggested that The "Byzantine processes" that had to be followed were not Poseidon's fault and that both sides have "stubbed their toes" with stops and starts in the project's permitting process. Besides the concern over the amount of staff time required to review the permit, it was noted that Poseidon did not cite financial hardship as a reason to waive the fee. The staff observed that its one-time fee was 0.5 percent of Poseidon's $60 million development cost, and only slightly higher than the Regional Board's $220,000 annual NPDES permit fee. A Commissioner said that the amount seems reasonable when considering that the same fee applies to both $100 million hotel projects as well as complex $900,000 desal projects. Poseidon anticipates the permitting process to be completed in 2017 and, subject to approval, for the Project to then proceed to the construction phase. Palestine INtucunlr¡oN DAY Last week, representatives from the European Union (EU) and UNICEF helped inaugurate the Gaza Strip's largest seawater desal plant. The €10 million ($10.7 million), 6,000 m3/d (1.6 MGD) SWRO plant was funded by the EU, and will produce enough water for 75,000 thirsty Palestinians. GWí Tom Pankratz, Editor, P.O.8ox75064, Houston,Texas 77234-5064 USA Telephone: +1-281-857-6571, www.desalination.com/wdr, email: tp@globalwaterintel.com o 2017 Media Analytics. Published in cooperation with Global Water lntelligence. s4,000,000 S3,ooo,ooo s2,000,000 Sl,ooo,ooo JUL AUG SEP ocr -51,000,000 -S2,ooo,ooo COMPARATIVE BUDGET SUMMARY NET REVENUES AND EXPENSES FOR THE SIX MONTHS ENDED DECEMBER 31, 2016 NOV Dec JAN YTD Actual Net Revenues YTD Variance Net Revenues YTD Budget in Net Revenues May JUN So Mar The year{o-date actual net revenues through December show a positive var¡ance of $2,605,791 OTAY WATER DISTRICT COMPARATIVE BUDGET SUMMARY FOR SIX MONTHS ENDED DECEMBER 31,2016 Actual Budget YTD Variance Exhibit A Yar o/o ll.5o/o 6.lo/o 12.7o/o 0.3% 0.2% (18.7o/o) REVENUES: Potable Water Sales Recycled Water Sales Potable Energy Charges Potable System Charges Potable MWD & CWA Fixed Charges Potable Penalties Total Water Sales Sewer Charges Meter Fees Capacity Fee Revenues Non-Operating Revenues Tax Revenues Interest Total Revenues EXPENSES: Potable Water Purchases Recycled Water Purchases CWA-Infrastructure Access Charge CWA-Customer Service Charge CWA-Reliability Charge CWA-Emergency Storage Charge MWD-Capacity Res Charge MWD-Readiness to Serve Charge Subtotal Water Purchases Power Charges Payroll & Related Costs Material & Maintenance Administrative Expenses Legal Fees Transfer to General Fund Reserve Expansion Reserve Betterment Reserve Replacement Reserve Transfer to Sewer General Fund OPEB Trust New Supply Reserve Total Expenses EXCESS REVENUES(EXPENSE) 24,501,596 $ 5,615,494 1,622,976 6,642,780 6,560,798 404,593 21,971,400 $ 5,293,400 1,447,400 6,619,800 6,546,000 497,500 2,530,796 322,094 175,476 22,980 14,798 (92,907) $ 45,348,137 42,375,500 2,972,637 7.0% 1,531,522 33,778 723,438 I ,5 l5,3o l 1,551,079 91,610 1,541,100 33,100 674,100 1,006,900 1,479,100 88,500 (9,578) 678 49,338 508,401 71,979 16,163,400 2,361,700 966,600 873,000 949,800 2,302,200 480,000 793,400 (1,416,163) (57,840) (258) (2e3) (2s2) 173 (222) 159,320 (0.6%o) 2.0% 7.3% 50j% 49Yo 3.5o/o 7.60/o (8.8%) (2.4%) (0.0%) (0.0%) 0.0o/o 0.0o/o (0.0%) 20.1% 110J $ 50,794,865 $ 47,198,300 $ 3,596,565 $$$17,579,563 2,419,540 966,858 873,293 950,052 2,302,029 480,222 634,080 26,205,636 24,890,100 (1,315,536) (5.3%) 1,570,272 l 0, r 59,803 1,435,003 2,031,313 l4g,33g 741,300 2,046,900 7,733,200 232,300 685,900 480,500 17,500 1,559,200 10,202,300 1,557,1 lo 2,225,890 125,000 741,300 2,046,goo 1,733,200 232,300 685,900 480,500 (11,072) 42,497 122,107 194,568 (23,338) (0.7%) 0.4o/o 7.80/, 8.7% (18.7%) 0.0o/o 0.0o/o 0.0% 0.0o/o 0.0o/o 0.0o/o 0.0o/o17500 $ $ 47,487,864 $ 3,307,001 $ 46,497,090 $(990,774) 2,605,791 (2.1%) Annual Budget $ 44,450,600 9,900,300 2,164,200 12,204,600 72,535,200 884,000 81,138,900 2,9l8,goo 66,200 1,248,200 2,179,300 4,033,100 156,900 $ 91,741"500 $ 31,271,300 3,615,900 7,976,400 1,714,200 1,848,000 4,579,900 988,800 1,429,000 47,422,400 2,g3g,ooo 20,899,900 3,456,300 4,900,100 250,000 1,482,500 4,093,600 3,466,400 464,500 1,371,800 961,000 35,000 $ $ 91,741,500 F:/MORPT/FS2017-1216 701,210 $ 112012017 3:21 PM OTAY \ryATER DISTRICT INVESTMENT PORTFOLIO REVIEW December 3lr2016 INVESTMENT OVERVIE\il & MARKET STATUS: At the most recent Federal Reserve Board's regular scheduled meeting, on December 14,2016, the federal funds rate was increased from 0.50% to 0,75o/o" in view of realized and expected labor market conditions and inflation. On December 16, 2015, at the Federal Reserve Board's regular scheduled meeting, the federal funds rate was increased from0.25o/oto 0.50oÁ" in response to the nation's gradual economic improvement. Prior to these two increases, the federal funds rate was held at 0.25% for over 5 years. The Committee judges that there has been considerable improvement in labor market conditions this year, and it is reasonably confident that inflation will rise, over the medium term, to its 2 percent objective. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a return to 2 percent inflation. In determining the timing and size of future adjustments to the target range for the federal funds rate, they went on to say: "the Committee will cssess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide ronge of inþrmation, including measures of labor market conditions, indicators of inflotion pressures and inflation expectations, and readings on Jìnancial and international developments. In light of the current shortfall of inflationfrom 2 percent, the Committee will carefully monitor actual and expected progress toward its inflation goal. The Committee expects that economic conditions will evolve in a manner that will wqruant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as inþrmed by incoming data. " The District's effective rate of return for the month of December 2016 was 0.97Yo, which was two basis points lower than the previous month. At the same time the LAIF return on deposits has improved over the previous month, reaching an average effective yield of 0.72% for the month of December 2016. Based on our success at maintaining a competitive rate of return on our portfolio during this extended period of low interest rates, no changes in investment strategy regarding returns on investment are being considered at this time. The desired portfolio mix is important in mitigatingany liquidity risk from unforeseen changes in LAIF or County Pool policy. In accordance with the District's Investment Policy, all District funds continue to be managed based on the objectives, in priority order, of safety, liquidity, and return on investment. PORTFOLIO COMPLIANCE: December 31,2016 Investment 8.01: Treasury Securities 8.02: Local Agency Investment Fund (Operations) 8.02: Local Agency Investment Fund (Bonds) 8.03: Federal Agency Issues 8.04: Certificates of Deposit 8.05: Short-Term Commercial Notes 8.06: Medium-Term Commercial Debt 8.07: Money Market Mutual Funds 8.08: San Diego County Pool I2.0: Maximum Single Financial Institution State Limit 100% $65 Million 100% 100% 30% 2s% 30% 20% t00% l00o/r Otav Limit Otay Actual 0 $12.85 Million 0 69.38% .09% 0 0 0 t5.t0% .98% 100% $65 Million 100% 100% t5% t0% t0% t0% 100% s0% Target: Meet or Exceed 100% of LAIF Performance Measure FY-1 7 Return on lnvestment Month NLAIF rOtay ¡ Difference 1.20 r.00 0.80 0.60 0.40 0.20 0.00 attco E U'o E troc oú July FYI6 Aug FYI6 sep FY16 lst Qtr FYI6 Oct FYI6 Nov FYI6 Dec FYI6 2nd Qtr FYI6 Jan FYI6 Feb FYI6 Mar FYI6 3rd Qtr FYI6 Apr FYI6 May FYI6 Jun FYI6 4rh Qtr FYI6 July FYIT Aug FYIT sep FYIT lst Qtr FY17 Oct FYIT Nov FYIT Dec FYIT 2nd Qtr FYIT ELAIF 0.32 0.33 0.34 0.33 0.36 0.37 0.40 0.38 0.45 0.47 0.51 0.47 0.53 0.55 0.58 0.55 0.59 0.61 0.63 0.61 0.65 0.68 0.72 0.68 lOtay 0.75 0.78 0.78 0.77 0.76 0.79 0.79 0.78 0.80 0.85 0.87 0.84 0.87 0,89 0.96 0.91 0.95 0.92 0.97 0.94 0.95 0.99 0.97 0.97 trDifference 0.43 0.45 0.44 0.44 0.40 0.42 0.39 0.40 0.35 0.38 0.36 0.37 0.34 0.34 0.38 0.35 0.36 0.31 0.34 0.33 0.30 0.31 0.25 0.29 Otay Water District Investment Portfolio: tz/ 3t/ zo16 s952,505 t.o7% trAgencies & Corporate Notes s6L,73L,6L4 69.38% Total Cash and lnvestments: $88,911,861 tr Ba nks ( Passbook/Checking/CD)I Pools (LAIF & County) 526,293,748 29.s5% lnvestments Par Month End Portfolio Management Portfolio Summary December 31,2016 Market Value Book Value olo ol Portfol¡o Term Days to Matur¡ty YTM YTM 360 Equiv, 365 Equiv.Value Federâl Agency lssues- Callable Federal Agency lssues - Coupon Cert¡ficates of Deposit - Bank Local Agency lnvestment Fund (LAIF) San D¡ego County Pool 59,735,000.00 2,000,000.00 81,833.21 12,854,040.26 13,439,706.77 59,315,51 I .05 2,000,040.00 81,833.21 12,846,634.06 13,315,000.00 59,732,183.57 1,999,430.85 81,833.21 12,854,040.26 13,439,706.77 944 640 731 1 1 67,79 2.27 0.09 14.59 15.25 777 85 386 1 I 1.084 0.661 0.030 0.709 0.970 1.099 0.670 0.030 0.719 0.983 88,1 10,580.24 87,559,018.32 88,107,194.66 100.00%529656 t.001 1.015lnvestments Cash PassbooldChecking(not included in yield calculations) Total Gash and lnvostments 870,671.94 870,671.94 870,671.94 0.357 0.362 88,981,252. I 8 88,429,690.26 88,977,866.60 529 1.00t 1.015 Total Earnings December 31 Month Ending Fiscal Yoar ïo Dato Current Year Average Daily Balance Effective Rate of Return I hereby certiff that the information provided by 72,'t46.97 87,910,554.81 0.97% 408,717.45 85,143,820.16 0.95% investments contained in this report are made in accordance with the District lnvestment Pol¡cy Number 27 adopted by the Board of Directors on May 4, 2016. The market value The investments provide suffic¡ent liquidity to meet the cash flow requirements of the District for the next six months of expenditures.l-/v-17 Portfolio OTAY NL! AP PM (PRF_PM1) 7.3.0 Rsport Vêr 7.3.5 Joseph Rêport¡ng petiod 1 2101 12016-12131 12016 Data Updated: SET_ME8: 0111712017 17:43 Run Date: o'lh7l20'17 - 17:44 CUSIP lnvestment #lssuêr Average Balance Month End Portfolio Management Portfolio Details - lnvestments December 31,2016 Purchasê D¡ta Par V¡lue Market Value StatedBookValuê Rate s&P YTM Daysto 360 Matur¡ty Page I Maturlty Date Federal Agency lssues- Callable 3134G8NM7 234s 313381820 2376 3134G9D38 2363 3130A8547 2355 313047H73 2346 3133EGJU0 2362 3130A8KR3 2358 3134G8XA2 2348 3133EGBG9 2354 313049C90 2368 3135G0G64 2336 3'136G2R665 2334 3134G92R1 2360 3134G94W 2347 3'I30A7Vì/K7 2352 3!33EGCZ6 2357 3133EGGS8 2359 3I34G9SL2 23s6 3133EGJR7 2361 3136G33N3 2364 3136G33N3 2365 3136G33N3 2366 3136G34U6 2367 3133EGWF8 2369 313049NJ6 2371 3136G4DR1 2373 3136G4D23 2370 3136G4FY4 2372 3130AABM9 2374 3136G4JU8 2375 Federal Home Loan Mortgage Federal Home Loan Bank Federal Home Loan Mortgage Federal Home Loan Bank Federal Home Loan Bank Federal Farm Credit Bank Federal Home Loan Bank Federal Home Loan Mortgage Federal Farm Credit Bank Federal Home Loan Bank Fann¡e Mae Fannie Mae Federal Home Loan Mortgage Federal Home Loan Mortgage Federel Home Loan Bank Federal Farm Credit Bank Federal Farm Cred¡t Bank Federal Home Loan Mortgage Federal Farm Credit Bank Federal National Mortage Assoc Federal National Mortage Assoc Federal National Mortsge Assoc Federal Netional Mortage Assoc Federal Farm Cred¡t Eank Federal Home Loan Bank Federal National Morlage Assoc Federal National Mortage Assoc Federal National Mortage Assoc Federal Home Loan Bank Federal National Mortage Assoc Subtotal and Average 03t29t2016 12t21t2016 06t29t2016 05t26t2016 0312912016 07t05t2016 06t23t2016 04127120'16 05t23t2016 09nu2016 10t30t2015 11t19t2015 06t28t2016 04t26t2016 05t2412016 0ô/06/2016 06t27t2016 0612812016 07t05t2016 08/30/2016 08/30/2016 08/30/2016 08/30/201 ô 10t03t2016 10t26t2016 10t27 t2016 10n5t2016 11t08t2016 12t27t2016 12t30t2016 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 1,030,000.00 2,705,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 1,996,760.00 1,995,920.00 1 ,991,760.00 1,992,180.00 1,993,600.00 1,984,520.00 1,987,380.00 I,987,900.00 '1,988,460.00 't,985,260.00 1,989,140.00 2,000,1 00.00 1,988,460.00 I,989,440.00 1,984,860.00 1,991 ,520.00 I,974,100.00 1,980,920.00 1,982,960.00 1,021,172.90 2,681,818.15 1,982,860.00 1,971,680.00 I,975,040.00 1,974,260.00 1,974,340.00 1,973,760.00 1,980,560.00 't,996,360.00 1,998,420.00 2,000,000.00 1,997,183.57 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 I,030,000.00 2,705,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 09t29t20't7 1210812017 12t29t2017 02t2612018 03t29t2018 07t05t2018 07 t0612018 07 t27 t2018 08t23t2018 09t28t2018 10t29t2018 11t19t2018 12t28t2018 04t26t2019 0512412019 06t06t2019 0612712019 06t28t2019 0710512019 0812812019 o812812019 0812812019 0812812019 1010312019 1011112019 101't712019 1012512019 1110812019 12127120't9 1213012019 0.850 0.750 0.700 0.900 1.000 0.820 0.820 1.000 1.000 1.050 1.100 1.150 1.000 1.150 1.250 1.300 1.200 1.300 1.020 1.125 1.125 1.125 1.125 1.170 't.200 1.100 1.200 1.250 1.450 1.580 AA AAA AAA AA AA 0.838 0.889 0.690 0.888 0.986 0.809 0.809 0.986 0.986 1.036 1.085 1.134 0.986 1.'134 1.233 1.282 1.184 1.282 1.006 1.110 1.1 10 1.110 1.1 10 1.154 1.183 1.085 1.184 1.233 1.430 1.558 271 341 362 421 452 550 551 572 599 635 666 687 726 845 873 886 907 908 915 969 969 969 969 1,005 1 ,013 I ,019 1,027 1,041 1,090 1,093 AA AA AA AA AA AA AA AA AA AA 58,508,r82.04 59,736,000.00 59,315,511.05 59,732,183.67 1.084 777 Federal Agency lssues - Coupon 3133EEC73 2329 Data Updated: SET_ME8: 0111712017 17:43 Federal Farm Credit Bank 1,999,430.85 0.550 AA 0.661 85 03t27t2017 Portfolio OTAY NL! AP Pl\il (PRF_PM2) 7.3,0RunDale: O'll'1712O17 - 17:44 06n6t2015 2,000,000.00 2,000,040.00 Report Ver. 7.3.5 Month End Portfolio Management Portfolio Details - lnvestments December 3'1,2016 Page2 Avorage Purchase Stated YTM Daysto MaturityCUSIP lnvestment# lseuer Balance Date ParValue MarketValue Bookvatue Rate S&P 360 Maturity Date Subtotal and Average 1,999,337.98 2,000,000.00 2,000,040.00 1,999,430.85 0.661 85 Certificates of Doposit - Bank 20500031 83-7 2341 Californ¡a Bank & Trust o112212016 81,833.21 81,833.21 81,833.21 0.030 0.030 386 01t22t2018 Subtotal and Average 81,833.21 81,833.2t 81,833.21 8l,833.21 0.030 386 LAIF LAIF BABS 2O1O Local Agency lnvestmênt Fund (LAIF) 9001 9012 STATE OF CALIFORNIA STATE OF CALIFORNIA Subtotal and Average 07t01t2016 12,854,040.26 0.00 12,846,634.06 0.00 12,854,040.26 0.00 0.719 0.267 0.709 0.2ô3 I 1,534,685.42 12,864,040.26 12,846,634.06 12,854,040.26 0.709 1 San Diego County Pool SD COUNTY POOL 9OO7 13,439,706.77 13,315,000.00 13,439,706.77 0.983 0.970San Diego County Subtotal and Averege 13,439,706.77 13,439,706.77 t3,315,000.00 13,439,706.77 0.970 Total and Average 87,910,554.81 88,1 10,5E0.24 87,559,0r8.32 88,107,194.66 1.001 529 Data Updated: SET_ME8: 0111712017 17:43 Portfolio OTAY NL! AP PM (PRF_PM2) 7.3.0Run Dale: 01 h7 l2O17 - 17 :44 Month End Portfolio Management Portfolio Details - Cash December 31,2016 Page 3 custP lnvestment #lSaugr Averago Purchase Statod YTM Daysto Balance Date Parvalue Marketvaluo Bookvaluô Rato S&P 360 Matur¡ty Union Bank UNION MONEY PETTY CASH UNION OPERATING PAYROLL RESERVE.IO COPS RESERVE.IO BABS UBNA-2010 BOND UBNA-FLEX ACCT STATE OF CALIFORNIA STATE OF CALIFORNIA STATE OF CALIFORNIA STATE OF CALIFORNIA STATE OF CALIFORNIA STATE OF CALIFORNIA STATE OF CALIFORNIA STATE OF CALIFORNIA Average Belance 0.010 0.400 0.010 0.010 0.010 0.000 0.395 0.000 0.010 0.010 0.000 0.000 9002 9003 9004 9005 9010 901 1 901 3 9014 07t01t2016 0710112016 07101t2016 16,502.89 2,950.00 785,796.08 27,861.29 8,087.12 21,239.40 0.00 8,235.16 16,502.89 2,950.00 785,796.08 27 ,861.29 8,087.12 21,239.40 0.00 8,235.16 16,502.89 2,950.00 785,796.08 27,861.29 8,087.12 21,239.40 0.00 8,235.16 0.00 1 Total Cash and lnvestments Data Updated: SET_ME8: 011'1712017 17:43 87,9r0,564.8r 88,981,252.18 88,429,690.26 88,977,866.60 L001 529 Portfolio OTAY NL! AP PM (PRF_Pt\¡2) 7.3.0Run Date: 011'17120'17 - 17:44 Month End GASB 31 Compliance Detail Sorted by Fund - Fund December '1, 20'16 - December 31,2016 Maturity Datê Beg lnvosted inn¡ng Valuê of Principal to Princ¡pal Purchase Additlon Adjustment ln Value CUSIP lnvestment# Fund lnvestment Class Redemption of Princ¡pal Amort¡zetion Adjustment Chango in Market Value End¡ng lnvested Velue Fund: Troasury Fund LA|F 9001 UNION MONEY 9OO2 PETTY CASH 9OO3 UNION OPERATING 9OO4 PAYROLL 9OO5 SD COUNTY POOL 9OO7 RESERVE-10 COPS 90IO RESERVE-10 BABS 9011 LA|F BABS 2010 9012 UBNA-2010 BOND 9013 UBNA-FLEXACCT 9014 3134Gs447 2301 3133EEC73 2329 3136G2R665 2334 3135G0G64 2336 313046U28 2338 2050003183-7 2341 3134G8NM7 2345 313047H73 2346 3134G9AW 2347 3134G8X42 2348 313047WK7 2352 3'133EGBG9 2354 313048547 2355 3134G9S12 2356 3133EGCZ6 2357 313048KR3 2358 3133EGGS8 2359 3134G92R1 2360 3133EGJR7 2361 99 99 99 99 99 99 99 99 99 99 99 99 99 99 99 99 99 99 99 99 99 99 99 99 99 99 99 99 99 99 Fair Value Amortized Amortized Amort¡zed Amortized Fair Value Amortizêd Amortized Fair Value Amortized Amortized Fair Value Amort¡zed Amortized Amortized Amortized Amorlized Amortized Fa¡r Value Fair Value Fair Value Fair Value Fair Value Fair Value Amortized Fair Value Fair Value Fair Value Fair Value Amortized 12130t2016 03t2712017 1111912018 1012912018 12l28l2UA 01t22t2018 0912912017 03t29t2018 0412612019 07t27t2018 05t24t2019 08t23t2018 02t26t2018 06t2812019 06i06i201 9 07t06t2018 06t27t20't9 12t28t2018 07t05t2019 9,056,811.09 10,000.67 2,950.00 1,904,552.71 342,022.27 1 3,346,000.00 8,085.59 21,235.24 0.00 0.00 15,821.72 2,000,480.00 1,999,232.30 2,000,000.00 2,000,000.00 2,000,000.00 81,833.21 2,000,000.00 1,994,060.00 1,984,280.00 1,989,400.00 1 ,988,140.00 1,989,360.00 I,992,440.00 2,000,000.00 1,993,040.00 1,987,820.00 1,974,240.O0 1 ,989,140.00 2,000,000.00 I 0,300,000.00 6,060,894.56 0.00 584.61 0.00 0.00 1.53 4.16 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 6,500,000.00 6,054,392,34 0.00 1,119,341.24 314,160.98 0.00 0.00 0.00 0.00 0.00 7,586.56 2,000,000.00 0.00 0.00 0.00 2,000,000.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -10,177.03 0.00 0.00 0.00 0.00 -31,000.00 0.00 0.00 0.00 0.00 0.00 -480.00 0.00 0.00 0.00 0.00 0.00 0.00 -460.00 5,160.00 -1,500.00 -3,280.00 -900.00 -260.00 0.00 -1,520.00 -440.00 -140.00 -680.00 0.00 12,846,634.06 16,502.89 2,950.00 785,796.08 27,861.29 1 3,31 5,000.00 8,087.12 21,239.40 0.00 0.00 8,235.16 0.00 1,999,430.85 2,000,000.00 2,000,000.00 0.00 81,833.21 2,000,000.00 1,993,600.00 1,989,440.00 1,987,900.00 1,984,860.00 1,988,460.00 1,992,180.00 2,000,000.00 1 ,991,520.00 I,987,380.00 1,974,100.00 I,988,460.00 2,000,000.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 198.55 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Data Updated: SET_ME8: 0111712017 17:43 Portfolio OTAY NLI AP GD (PRF_GD) 7.1.1 Report Ver. 7.3.5 Run Dâlø: O'U'l7l2O'17 - 17:44 Month End GASB 3l Compliance Dotail Sorted by Fund - Fund Adjustment in Value Page 2 Ending lnvested ValuecusrPlnveatment# Fund lnvoslment Glass Maturity Dato Beginn¡ng lnvested Value Redomption of Pr¡nc¡pal Amort¡zat¡on Adjustment Change in Market Value Purchase Addit¡on of Princ¡pal to Principal Fund: Troasury Fund 31 33EGJUO 31 34G9D38 31 36G33N3 31 36G33N3 31 36G33N3 3 I 36G34U6 3 t 3049C90 3133EGWF8 3136G4D23 31 30A9NJ6 3136G4FY4 3136G4DR1 313OAABMg 31 36G4JU8 3l 3381 820 Fair Value Fair Value Fair Value Fair Value Fair Value Fair Value Fair Value Amortized Fair Value Fair Value Fair Value Fair Value Fair Value Fair Value Fair Value 07t05t2018 12t29t2017 08t28t2019 08t28t2019 08t28t2019 08t28t2019 09t28t2018 10t03t2019 10t25t2019 't0t11t2019 11lOAl20'19 1011712019 12t27t2019 12130120',t9 1210812017 Subtotal 1,984,720.00 1,989,960.00 1,014,694.20 2,664,803.70 1,970,280.00 1,972,920.00 1,985,760.00 2,000,000.00 1,975,240.00 1,975,720.00 1,984,560.00 1,974,800.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 198.65 -200.00 1,800.00 6,478.70 17,014.45 12,580.00 -1,240.00 -500.00 0.00 -1,480.00 -1,460.00 -4,000.00 -460.00 -3,640.00 -1,580.00 -1,1 80.00 1,984,520.00 1,991,760.00 1,021,172.90 2,681 ,818.15 '1,982,860.00 r ,971,680.00 1,985,260.00 2,000,000.00 I,973,760.00 1,974,260.00 1,980,560.00 1,974,340.00 1,996,360.00 1,998,420.00 1,995,920.00 2362 2363 2364 2365 2366 2367 2368 2369 2370 237 1 2372 2373 2374 2375 2376 99 99 99 99 99 99 99 99 99 99 99 99 oo 99 99 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2,000,000.00 2,000,000.00 1.997.100.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 84,164,402.70 5,997,100.00 16,361,484.86 17,996,481.12 -23,543.88 88,604,161.fi Data Updated: SET_ME8: 01117120'17 17:43 Total 84,164,402.70 5,997,100.00 16,361,484.86 t7,995,481.12 198.65 -23,543.88 88,504,t6t.11 Portfolio OTAY NL! AP GD (PRF_GD) 7.1.1 Report Ver. 7.3.5 Run Datê: O'U17nO17 - 17:44 Month End Activity Report Sorted By lssuer December 1,2016 - December 31,2016 CUSIP lnvestment # Percont lssuer of Portfolio Par Value Beginn¡ng Balance Transact¡on Date Purchases or Deposits Par Value Redempt¡ons or Wthdrawals Current Rate End¡ng Balance lssuer: STATE OF CALIFORNIA Union Bank UNION MONEY UNION OPERATING PAYROLL RESERVE-IO COPS RESERVE-10 BABS UBNA.FLEX ACCT STATE OF CALIFORNIA STATE OF CALIFORNIA STATE OF CALIFORNIA STATE OF CALIFORNIA STATE OF CALIFORNIA STATE OF CALIFORNIA 6,060,894.56 584.61 0.00 1.53 4.16 0.00 6,054,392.34 1,119,341.24 314,160.98 0.00 0.00 7,586.56 9002 9004 9005 901 0 901 1 9014 0.010 0.400 0.010 0.010 Subtotal and Balance 2,304,668.20 6,061,¿184.86 7,496,ß1,12 870,671.94 Local Agency lnvestmont Fund (LAIF) LAIF 9OO1 STATE OF CALIFORNIA Subtotal and Balance lssuerSubtotal 16.424010 0.7'19 I 0,300,000.00 6,500,000.00 9,054,040.26 I 1,358,708.46 r0,300,000.00 6,500,000.00 12,864,040.26 16,361,484.86 13,995,481.r 2 13,724,712.20 lssuer: California Bank & Trust Certificates of Deposit - Bank Subtotal and Balance lssuer Subtotal 8l,833.21 0.0920/0 8r,833.21 81,833.21 0.00 0.00 81,833.21 lssuer: Fannie Mae Federal Agency lssues- Callablo Subtotal and Balance lssuer Subtotal 4,000,000.00 4.495%4,000,000.00 4,000,000.00 0.00 0.00 4,000,000.00 lssuer: Federal Farm Gredit Bank Data Updated: SEï_ME8: 0111712017 17:43 Portfolio OTAY NL! AP DA (PRF_DA) 7.2.0 Rêpod Ver. 7.3.5 Run Date: 0111712017 - 17:44 Month End Activity Report December 1, 2016 - December 31, 2016 Par Value Page 2 CUSIP lnvestment # Percent l8suer of Portfolio Purchases or Deposits Par Value Redemptions or W¡thdrawals Beginning Balance Current Rate Transaction Date Ending Balance lssuer: Federal Farm Credit Bank Federal Agency lssues- Callable Subtotal and Balance r2,000,000.00 12,000,000.00 Fedsral Agency lssuos - Coupon Subtotal and Balancs lssuer Subtot¡l 2,000,000.00 16.734o/o 14,000,000.00 2,000,000.00 0.00 0.00 14,000,000.00 lssuer: Federal Home Loan Bank Federal Agency lssues- Callable 31 30A6U28 313OAABM9 31 338 1 820 2338 Federal Home Loan Bank 2374 Federal Home Loan Bank 2376 Federal Home Loan Benk Subtotal and Balance lgsuerSubtotal 17.9810/6 1.375 1.450 0.750 12t28t2016 12t27t2016 12t2112016 0.00 2,000,000.00 2,000,000.00 2,000,000.00 0.00 0.00 14,000,000.00 14,000,000.00 4,000,000.00 2,000,000.00 16,000,000.00 4,000,000.00 2,000,000.00 16,000,000.00 lssuer: Federal Home Loan Mortgage Federal Agency lssues- Callable 31 34G5A47 2301 0.650 12t30t2016 0.00 2,000,000.00Federal Home Loan Mortgage Subtotal and Balance lssuerSubtotal 13.486% t4,000,000.00 0.00 2,000,000.00 r2,000,000.00 14,000,000.00 0.00 2,000,000.00 r2,000,000.00 lssuer: Federal National Mortage Assoc Federal Agency lssues- Callablo 3I36G4JLJ8 2375 Federal National Mortage Assoc 1.580 12t30t20'16 2,000,000.00 0.00 Subtotal and B¡lance lsEuer Subtotal I 3,735,000.00 2,000,000.00 0.00 15,735,000.00 17.684%13,735,000.00 2,000,000.00 0.00 15,735,000.00 lssuer: San Diego Gounty Data Updated: SET_ME8: 0111712017 17:43 Portfolio OTAY NLI AP DA (PRF_DA) 7.2.0 Report Ver. 7.3.5 Run Dalê: 01 1 17 12017 - 17 :44 Month End Activlty Roport Dgcembor 1, 2016 - Decembor 31, 20î6 Page 3 CUSIP lnvestment # Percent laauer of Portfol¡o Par Value Beginnlng Balanco Currgnt' Rate Transact¡on Date Purchases or Deposits Par Value Redemptions or Wthdrawals Ending Balance lssuer: San Diego County San Diego County Pool Subtotal and Balance lsauer Subtotal 13,4t9,706.77 16.104o/o 13,439,706.77 13,439,706.77 0.00 0.00 13,439,706.77 Total 100.000%84,616,248.44 22,361,484.86 17,995,481.12 88,981,2ı2.r8 Data Updated: SET_ME8: 0111712017 17i43 Portfolio OTAY NL! AP DA (PRF_DA) 7.2.0 Report Vêr. 7.3.5 RunDals. ou17l2o'17 - 17:44 Month End Duration Report Sorted by lnvestment Type - lnvestment Type Through 1213112016 lnvestment Clasg Book Value Par Markel Valuo Curront Rate YTM Current Yiêld Matur¡ty/ Modif¡ed Call Date Durãlionsecuritv lD lnvostment# Fund laauer Value 360 31 36G2R665 31 35G0G64 31 34G8NM7 31 3047H73 3134G94W7 3134G8X42 313047WK7 3I33EGBGg 31 30A8547 31 34GgSL2 3133EGCZ6 3130A8KR3 3133EGGS8 3l34G92R1 31 33EGJR7 31 33ËGJU0 31 34G9D38 31 36G33N3 31 36G33N3 31 36G33N3 31 36G34U6 31 30A9C90 3133EG! /F8 3136G4D23 31 30A9NJ6 3136G4FY4 3136G4DR1 31 3OAABM9 31 36G4JU8 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 1,030,000.00 2,705,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000,00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 1,030,000.00 2,705,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,100.00 1,989,140.00 1,996,760.00 1,993,600.00 1,989,440.00 1,987,900.00 I,984,860.00 I,988,460.00 I,992,180.00 I,980,920.00 1,991,520.00 1,987,380.00 1,974,100.00 1,988,460.00 1,982,960.00 1,984,520.00 1,991,760.00 1,021,172.90 2,681,818.15 1,982,860.00 1,97r,680.00 I,985,260.00 I,975,040.00 1,973,760.00 1,974,260.00 1,980,560.00 1,974,340.00 1,996,360.00 1,998,420.00 1.150000 1.100000 .8500000 1,000000 1 .1 50000 1,000000 1.250000 1.000000 .9000000 1.300000 1.300000 .8200000 1.200000 1.000000 1.020000 .8200000 .7000000 't.125000 1.125000 1.125000 1.125000 1.050000 1.170000 1.200000 1.200000 1.250000 1.'100000 1.450000 L580000 2334 2336 2345 2346 2347 2348 2352 2354 235s 2356 2357 2358 2359 2360 2361 2362 2363 2364 2365 2366 2367 2368 2369 2370 2371 2372 2373 2374 2375 oô 99 99 99 99 99 99 99 99 99 99 99 99 99 99 99 99 99 99 99 99 99 99 99 oo 99 99 99 99 Fannie Mae Fannie Mao Federal Home Loan Mortgage Federal Home Loan Bank Federal Home Loan Mortgage Federal Home Loan Mortgage Federal Home Loan Bank Federal Farm Credit Bank Federal Home Loan Bank Federal Home Loan Mortgage Federal Farm Crêd¡t Bank Federal Home Loan Bank Federal Farm Cred¡t Bank Federal Home Loan Mortgage Federal Farm Cred¡t Bank Federal Farm Credit Bank Federal Home Loan Mortgage Federal Nat¡onal Mortage Assoc Federal Nat¡onal Mortage Assoc Federal National Mortage Assoc Federal National Mortage Assoc Federal Home Loan Bank Federal Farm Credit Bank Federal National Mortege Assoc Fêderal Home Loan Bank Federal Nat¡onal Mortage Assoc Federal National Mortage Assoc Federal Home Loan Bank Federal Nat¡onal Mortage Assoc Amort Amort Amort Fair Fatr Fair Fair Fair Fair Amort Fair Fa¡r Fair Fair Amort Fair Fair Fa¡r Fair Fair Fa¡r Fa¡r Amort Fair Fa¡r Fair Fair Fair Fair 1.134 1.085 0.838 0.986 1.134 0.986 1.233 0.986 0.888 1.282 1.282 0.809 1.184 0.986 1.006 0.809 0.690 1.110 1.110 1.110 1.1 10 1.036 1.154 1.184 1.183 1.233 '1.085 1.430 1.558 1.147 1.402 1.069 1.260 1.382 1.390 1.573 1.356 1.689 1.693 1.478 1.242 1.734 1.294 1.366 '1.339 1.118 1.455 1.4s5 1.455 1.672 1.480 1.635 1.679 1.676 1.600 1 .571 1 .513 1.607 11t19t2018 1.853 10t29t2018 1.798 09t29t2017 0,738 03t29t2018 1.228 0412612019 2.274 07t27t2018 1.550 05t2412019 2.348 0812312018 I .618 02t26120',t8 1.136 06128t2019 2.438 06/06/2019 2.380 0710612018 1.492 06127t2019 2.438 1212812018 1.963 0710512019 2.456 0710512018 1.488 12t29t2017 0.986 08128t2019 2.s97 08128120',ts 2.597 0812812019 2.597 oa12812019 2.594 09t28t2018 1.712 10t03t2019 2.689 10t25t2019 2.748 10t11t2019 2.710 11t08t2019 2,784 10t1712019 2.732 1212712019 2.913 12t30t2019 2.916 Portfolio OTAY NL! AP DU (PRF_DU) 7.1.1 Report Vsr. 7.3.5 Data Updated: SET_ME8: O111712017 17:43 Run DaIe: O111712017 - 17:44 Page I Security lD lnvestmont # Fund lssuer Month End Duration Report Sorted by lnvestment Type - lnvostment Type Through 1213112018 lnvestment Book Par Market Current YTM Current Maturlty/ Mod¡f¡edClass Value Value Value Rate 360 Yield Call Date Duration 313381820 2376 3133EEC73 2329 2050003183-7 2341 LA|F 9001 LAIF BABS 2O1O 9012 SD COUNTY 9OO7 99 99 99 99 99 99 Federal Home Loan Bank F€deral Farm Credit Bank Californ¡a Bank & Trust STATE OF CALIFORNIA STATE OF CALIFORNIA San Diego County Fa¡r Amort Amort Fair Fair Fair .7500000 .5500000 .0300000 .71 90000 .2670000 .9830000 0.889 0.661 0.030 0.709 0.263 0.970 0.970 0.546 0.030 0.719 0.267 0.983 12t08t2017 0312712017 0112212018 0.929 0.232 1.057 t 0.000 0.000 0.000 1,997, I 83.57 1,999,430.85 81,833.21 12,854,040.26 0.00 13,439,706.77 2,000,000.00 2,000,000.00 8l,833.21 12,854,040.26 0.00 13,439,706.77 I,995,920.00 2,000,040.00 81,833.21 12,846,634.06 0.00 1 3,315,000.00 Report Total t = Duration can not be calculated on these ¡nvestments due to incomplete Market price data. Data Updated: SET_ME8: O111712O17 17:43 88,107,194.66 88,1 I 0,580.24 87,669,0r8.32 1.246 r.4r9 t Portfolio OTAY NL! AP DU (PRF_DU) 7.1.1 Report Ver, 7.3.5 Run Dalø: 01.11712017 - 17:44 Page 2 Month End lnterest Earnings Sorted by Fund - Fund December 1,2016 - December 31, 2016 Yield on Beginning Book Value Adjusted lntorest Earn¡ngg CUSIP lnvestment# Fund Securlty Typs End¡ng Par Value Bog¡nning Book Value Ending Book Value Maturity Date CurrentAnnualizedRate Yield lnterest Earned Amort¡zat¡on/ Adjusted lnterestAccret¡on Earn¡ngs Fund: Treasury Fund LAIF 9001 UNION MONEY 9OO2 UNION OPERATING 9OO4 SD COUNTY POOL 9OO7 RESERVE-I0COPS 9010 RESERVE.IO BABS 9011 3134G5447 2301 3133EEC73 2329 3136G2R665 2334 3135G0G64 2336 3130A6U28 2338 2050003183-7 2341 3134G8NM7 2345 3130A7H73 2346 3134G9AW 2347 3134G8X42 2348 313047\ K7 2352 3133EGBG9 2354 313048547 2355 3134G9S12 2356 3133EGCZ6 2357 313048KR3 2358 3133EGGS8 2359 3134G92R1 2360 3133EGJR7 2361 3133EGJU0 2362 3134G9D38 2363 3136G33N3 2364 3136G33N3 2365 99 99 99 99 99 99 99 99 99 ôô 99 99 99 99 99 99 99 99 99 99 99 99 99 99 99 99 99 99 99 LAl PA1 PA1 LA3 PA1 PA1 MC1 FAC MCt MC1 MC1 BCD MC1 MC1 MC1 MC1 MCl MC1 MC1 MCl MC1 MC1 MC1 MC1 MC1 MCl MCr MC1 MC1 12,854,040.26 16,502.89 785,796.08 13,439,706.77 8,087.12 21,239.40 0.00 2,000,000.00 2,000,000.00 2,000,000.00 0.00 81,833.21 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 1,030,000.00 2,705,000.00 9,054,040.26 10,000.67 1,904,552.71 13,439,706.77 8,085.59 21,235.24 2,000,000.00 1,999,232.30 2,000,000.00 2,000,000.00 2,000,000.00 81,833.21 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 1,030,000.00 2,705,000.00 12,854,040.26 16,502.89 785,796.08 13,439,706.77 8,087.12 21,239.40 0.00 1,999,430.85 2,000,000.00 2,000,000.00 0.00 81,833.21 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 1,030,000.00 2,705,000.00 1213012016 03t27t2017 1111912018 10n9t2018 12t28t2018 01t22t2018 09t29t2017 0312912018 04t26t20't9 07t27120'.t8 05t24t2019 08t23t20't8 0212612018 06t28t2019 06/06/2019 07t06t2018 06t27t2019 12128t2018 07t05t2019 07t0512018 1212912017 08128t2019 0812812019 0.719 0.010 0.400 0.983 0.010 0.010 0.650 0.550 1.150 1.100 1.375 0.030 0.850 1.000 1.150 1.000 1.250 1.000 0.900 1.300 1.300 0.820 1.200 1.000 1.020 0.820 0.700 1.125 1.125 0.916 0,338 0,343 0.983 0.009 0.011 0.659 0.657 1.160 1.079 1.394 0.031 0.834 0.981 1.128 0.981 1.226 0.981 0.883 1.276 1.276 0.805 1.177 0.981 1.001 0.805 0.687 1.104 1.104 7,043.74 2.87 554.45 11,220.50 0.06 0.19 1,047,22 916.67 1,969.61 I,833.34 2,062.50 2.12 1,416.66 1,666.67 1,916.67 1,666.67 2,083.33 1,666.67 1,500.00 2J66.67 2,166.67 1,366.66 2,000.00 1,666.67 1,700.00 1,366.67 I,166.67 965.63 2,535.94 0.00 0.00 0.00 0.00 0.00 0.00 0.00 198.55 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 7,043.74 2.87 554.45 11,220.50 0.06 0.19 1,047 .22 1,115.22 I,969.61 1,833.34 2,062.50 2.12 1,416.66 1,666.67 1 ,916.67 I,666.67 2,083.33 1,666.67 1,500.00 2,166.67 2,166.67 1,366.66 2,000.00 1,ô66.67 I,700.00 1,366.67 1,166.67 965.63 2,535.94 Portfolio OTAY NL! AP tE (PRF_|E) 7.2.0 Report Vsr. 7.3.5 Data Updated: SET_ME8: 0111712017 17:43 Run Dâle: 01117no17 - 17:44 Month End lntorsst Earn¡ngs Dscember 1,2016 - Decsmber 31,2016 Page 2 Adjusted lnterest Earnings Secur¡ty Ending Par Value Beginning Book Valuo Ending Book Valuo Matur¡ty CurrentAnnual¡zedDate Rata Yiêld lntorêst EarnedCUSIPlnveEtment# Fund Amortizat¡on/ Adjusted lnterestAccret¡on Earn¡ngs Fund: Treasury Fund 31 36G33N3 31 36G34U6 31 3049C90 3133EGWF8 3136G4D23 31 30A9NJ6 3136G4FY4 3136G4DR1 31 3OAABMg 31 36G4JU8 31 3381 820 2366 2367 2368 2369 2370 2371 2372 2373 2374 2375 2376 99 99 99 99 99 99 99 99 99 99 99 MCl MC1 MC1 MC1 MC1 MC1 MC1 MC't MCl MC1 MC1 1.125 1.125 1.050 1.170 1.200 1.200 1.250 1.100 1.450 1.580 0.750 1.104 1.104 1.030 1.'t48 1.177 1.177 1.226 1.O79 1.176 0.801 0.831 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 83.57 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 0.00 0.00 0.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 1,997,183.57 08t28t2019 08t28t2019 09t28t2018 10t03t2019 1012512019 10t11t2019 11t08t2019 1011712019 1212712019 1213012019 1210812017 1,875.00 1,875.00 1,750.00 1,950.00 2,000.00 2,000.00 2,083.34 1,833.33 322.22 87.78 416.66 1,875.00 1,875.00 1,7s0.00 1,950.00 2,000.00 2,000.00 2,083.34 1,833.33 322.22 87,78 500.23 Subtotal 88,942,205.73 84,253,686.75 88,938,820.15 0.999 71,864.85 282.'.t2 72,146.97 Data Updated: SET_ME8: 0111712017 '17:43 Totâl 88,942,205.73 84,253,686.75 88,938,820.t5 0.999 71,864.85 282.'.t2 72,146.97 Portfolio OTAY NL! AP rE (PRF_rE) 7.2.0 Report V6r. 7.3.5 Run Date: 01l'1712017 - 17:44 STAFF REPORT PURPOSE: Att.ached is the list of demands for the Board's information FISCAI. IMPACT: TYPE MEETING: SUBMITTED BY: APPROVED BY: (chief) APPROVED BY: (Asst. GM) SUBJECT: Regular Board n MEETING DATE RiLa 8e11, Finance Manage r ,)4L4.o./G.F. No: Treasury & Accounting s"t.ri"ã"-- ,Joseph Beachem, Chief Financial- Officer German Alvarez, AssisLant General Manager AccounLs Payable Demand List February 1, 201,7 DIV. NO. srndMARY FOR PERTOD L2/22/20L6 L/L8/20L7 NET DEI4A¡IDS CHECKS (2047332 - 2047467) vorD cHEcKS (2) TOTAL CHECKS WIRE TO: CALPERS - OTHER POST EMPLOYMENT BENEFITS (MONTHLY) crTY TREASURER - RECLATMED V'TATER PURCHASE (1.1/1./1,6-1"2/2/1.6) OTAY WATER DISTRICT - BÏ-WEEKIJY PAYROTJI' DEDUCTION OTAY WATER DTSTRICT - BÏ-WEEKÍ,Y PAYROI.L DEDUCTION PREFERRED BENEFTT INSURANCE - DENTAL & COBRA CLAIMS (DEC 20]-6) SAN DIEGO COUNTY WATER AUTH - hIATER DELTVERTES & CHARGES (NOV 20].6) STATE DISBURSEMENT UNTT - BT-WEEKI,Y PAYROI,L DEDUCTTON STATE DÏSBURSEMENT UNIT - B]-WEEKLY PAYROLL DEDUCTION STATE D]SBURSEMENT UNIT - BT-WEEKIJY PAYROIJIJ DEDUCTION STATE DTSBURSEMENT UNIT - BT-WEEKLY PAYROIJIJ DEDUCTION STATE OF CALTFORNTA - CA SALES USE TAX (4TH QTR 20L6) UNION BANK - BT-WEEKIJY PAYROLL TAXES UNTON BANK . B]-WEEKLY PAYROLI, TAXES uNroN BANK NA - COPS 1996 (MONTHLY) UNION BANK NA - COPS ]-996 (QUARTERI,Y) # L,627 ,'775 .56 ($ L4o ,4t6 .20) ç 'J, , 487 ,3s9 .36 ç t24,500.00 ç 22t,988 .72 $ 644.00 $ 651.00 ç L6,054.42 $ 3,546 t1"51 .66 ç 237.69 Ë 62L.22 ç 237.69 # 621.22 $ 886.00 ç 299,480.48 $ 135 ,625 .L6 $ 5,179.87 $ 19, 78B . 73 TOTÀI, CASH DISBURSEMENTS s 5,860,027 .22 RECOMMENDED ÀCTION: That the Board received Lhe attached list of demands. ,Jb,/Attachment Check #Check Total 5,033.70 4,565.94 67,854.53 3,165.50 15,770.00 CHECK REGISTER Otay Water District Date Range: 12/22/2016 - 1/18/2017 Date Vendor Vendor Name Invoice Inv. Date Description Amount 2047351 01/04/17 01910 ABCANA INDUSTRIES 999422 12/15/16 SODIUM HYPOCHLORITE 1,810.44 999143 12/08/16 SODIUM HYPOCHLORITE 1,326.37 999423 12/15/16 SODIUM HYPOCHLORITE 814.46 999144 12/08/16 SODIUM HYPOCHLORITE 594.52 999145 12/08/16 SODIUM HYPOCHLORITE 487.91 2047429 01/18/17 01910 ABCANA INDUSTRIES 999790 12/29/16 SODIUM HYPOCHLORITE 1,089.14 999625 12/22/16 SODIUM HYPOCHLORITE 837.51 999626 12/22/16 SODIUM HYPOCHLORITE 783.72 999791 12/29/16 SODIUM HYPOCHLORITE 700.16 999628 12/22/16 SODIUM HYPOCHLORITE 591.63 999627 12/22/16 SODIUM HYPOCHLORITE 563.78 2047380 01/11/17 08488 ABLEFORCE INC 7310 01/04/17 SHAREPOINT SERVICES (12/1/16-12/20/16)2,175.00 2,175.00 2047381 01/11/17 17751 ADVANCED GEOTECHNICAL SOLUTION Ref002474531 01/09/17 UB Refund Cst #0000231502 1,531.24 1,531.24 2047333 12/28/16 13901 ADVANCED INDUSTRIAL SVCS INC 1011302016 12/06/16 711-1 & 2 RESERVOIR (ENDING 11/30/16)3,278.09 3,278.09 2047352 01/04/17 13901 ADVANCED INDUSTRIAL SVCS INC 00016621 12/06/16 RETAINAGE RELEASE 60,498.28 811302016 12/06/16 980-1 RESERVOIR (ENDING 11/30/16)5,310.25 2100121516 12/15/16 CUSTOMER REFUND 2,046.00 2047430 01/18/17 07732 AIRGAS SPECIALTY PRODUCTS INC 131470680 12/30/16 AQUA AMMONIA 2,179.00 131470682 12/30/16 AQUA AMMONIA 770.00 131470681 12/30/16 AQUA AMMONIA 216.50 2047431 01/18/17 13753 AIRGAS USA LLC 9941942123 12/31/16 BREATHING AIR BOTTLES 52.02 52.02 2047353 01/04/17 15024 AIRX UTILITY SURVEYORS INC 1111302016 12/06/16 UTILITY LOCATING SERVICES (11/1/16-11/30/16)9,186.00 9,186.00 2047354 01/04/17 14462 ALYSON CONSULTING CM201675 12/12/16 MGMT/INSP (11/1/16-11/30/16)6,460.00 CM201676 12/12/16 MGMT/INSP (11/1/16-11/30/16)3,710.00 CM201677 12/12/16 MGMT/INSP (11/1/16-11/30/16)3,600.00 CM201680 12/12/16 MGMT/INSP (11/1/16-11/30/16)880.00 CM201679 12/12/16 MGMT/INSP (11/1/16-11/30/16)710.00 CM201678 12/12/16 MGMT/INSP (11/1/16-11/30/16)410.00 2047334 12/28/16 17716 AMANDA SHEPPLER Ref002472680 12/22/16 UB Refund Cst #0000217709 51.03 51.03 2047432 01/18/17 03492 AQUA-METRIC SALES COMPANY 0063555IN 12/23/16 SENSUS OMNI METERS 31,630.24 31,630.24 2047433 01/18/17 13171 ARCADIS US INC 0823342 12/29/16 AS-NEEDED DESIGN (10/24/16-11/20/16)1,107.00 1,107.00 2047382 01/11/17 17264 ARTIANO SHINOFF 215032 12/13/16 LEGAL SERVICES (NOV 2016)30,203.74 30,203.74 2047355 01/04/17 08156 BROWNSTEIN HYATT FARBER 662017 12/16/16 LEGISLATIVE ADVOCACY (NOV 2016)2,935.00 2,935.00 Page 1 of 7 Check #Check Total CHECK REGISTER Otay Water District Date Range: 12/22/2016 - 1/18/2017 Date Vendor Vendor Name Invoice Inv. Date Description Amount 636.33 1,818.00 6,374.50 355.00 394.72 5,334.52 2047383 01/11/17 17750 BURTECH PIPELINE INC Ref002474530 01/09/17 UB Refund Cst #0000231199 2,004.36 2,004.36 2047434 01/18/17 15447 CANNON, LARRY 01102017LC 01/12/17 TUITION REIMBURSEMENT 755.65 755.65 2047356 01/04/17 02758 CARMEL BUSINESS SYSTEMS INC 8106 12/11/16 REPROGRAPHICS SERVICES 593.13 8105 12/06/16 SCANNING SERVICES (12/5/16)43.20 2047435 01/18/17 02758 CARMEL BUSINESS SYSTEMS INC 8111 12/30/16 REPROGRAPHICS SERVICES 1,177.13 1,177.13 2047384 01/11/17 17022 CASTLE ACCESS INC 0223093045 01/01/07 COLOCATION SERVICES 2,098.75 2,098.75 2047436 01/18/17 04349 CHAMBERS, JONATHAN 012417012617 01/12/17 TRAVEL ADVANCEMENT 257.68 257.68 2047437 01/18/17 01719 CHULA VISTA CHAMBER OF 15887 12/02/16 BUSINESS MEETING 16.00 16.00 2047438 01/18/17 04119 CLARKSON LAB & SUPPLY INC 88290 12/31/16 832.00 88291 12/31/16 BACTERIOLOGICAL TESTING & SAMPLING 452.00 BACTERIOLOGICAL TESTING & SAMPLING 88289 12/31/16 BACTERIOLOGICAL TESTING & SAMPLING 262.00 88286 12/31/16 BACTERIOLOGICAL TESTING & SAMPLING 178.00 88288 12/31/16 BACTERIOLOGICAL TESTING & SAMPLING 38.00 88287 12/31/16 BACTERIOLOGICAL TESTING & SAMPLING 28.00 88292 12/31/16 BACTERIOLOGICAL TESTING & SAMPLING 28.00 2047385 01/11/17 17740 COFFMAN SPECIALTIES INC Ref002474520 01/09/17 UB Refund Cst #0000207197 1,212.53 1,212.53 2047386 01/11/17 15616 COGENT COMMUNICATIONS INC 0002010117 01/01/17 INTERNET CIRCUITS (JAN 2017)1,333.00 1,333.00 2047335 12/28/16 11056 CONCHAS, FREDERICK FC122216 12/22/16 SAFETY BOOTS REIMBURSEMENT 136.69 136.69 2047439 01/18/17 05622 CORRPRO COMPANIES INC 415501 12/20/16 COATING INSPECTION (12/1/16-12/20/16)3,308.00 412963 11/30/16 COATING INSPECTION (10/1/16-10/31/16)3,066.50 2047440 01/18/17 02612 COUNCIL OF WATER UTILITIES 01172017 01/12/17 BUSINESS MEETING 50.00 50.00 2047336 12/28/16 00184 COUNTY OF SAN DIEGO 2003193E602481116 12/04/16 SHUT DOWN TEST (11/3/16)213.00 2003193E602421116 12/04/16 SHUT DOWN TEST (11/3/16)142.00 2047357 01/04/17 00134 COUNTY OF SAN DIEGO 122916 12/29/16 CEQA FILING FEES 3,128.25 3,128.25 2047387 01/11/17 00099 COUNTY OF SAN DIEGO DPWAROTAYMWD111612/12/16 EXCAVATION PERMITS (NOV 2016)3,764.58 3,764.58 2047358 01/04/17 02756 COX COMMUNICATIONS INC 0301122916 12/29/16 TELECOMM SVCS / METRO-E (12/28/16-1/27/17)133.65 2401122916 12/29/16 TELECOMM SVCS / METRO-E (12/28/16-1/27/17)133.65 7001122916 12/29/16 TELECOMM SVCS / METRO-E (12/28/16-1/27/17)127.42 2047388 01/11/17 02756 COX COMMUNICATIONS INC 6702122416 12/24/16 TELECOMM SVCS / METRO-E (12/29/16-1/28/17)5,200.87 6101123016 12/30/16 TELECOMM SVCS / METRO-E (12/29/16-1/28/17)133.65 2047441 01/18/17 02756 COX COMMUNICATIONS INC 7601010317 01/03/17 TELECOMM SVCS / METRO-E (1/3/17-2/2/17)133.74 Page 2 of 7 Check #Check Total CHECK REGISTER Otay Water District Date Range: 12/22/2016 - 1/18/2017 Date Vendor Vendor Name Invoice Inv. Date Description Amount 1,069.92 3,356.76 1,260.75 304.56 2047441 01/18/17 02756 COX COMMUNICATIONS INC 7601010317 01/03/17 TELECOMM SVCS / METRO-E (1/3/17-2/2/17)133.74 8801010417 01/04/17 TELECOMM SVCS / METRO-E (1/4/17-2/3/17)133.74 9201010417 01/04/17 TELECOMM SVCS / METRO-E (1/4/17-2/3/17)133.74 3001010417 01/04/17 TELECOMM SVCS / METRO-E (1/4/17-2/3/17)133.74 0201011217 01/12/17 TELECOMM SVCS / METRO-E (1/9/17-2/8/17)133.74 7501011217 01/12/17 TELECOMM SVCS / METRO-E (1/9/17-2/8/17)133.74 4801011217 01/12/17 TELECOMM SVCS / METRO-E (1/9/17-2/8/17)133.74 6701010817 01/08/17 TELECOMM SVCS / METRO-E (1/8/17-2/7/17)133.74 2047359 01/04/17 10977 CRAFCO INC 9401565737 12/07/16 HP COLD PATCH 2,241.20 2,241.20 2047442 01/18/17 17731 DANIEL S HENTSCHKE 12292016 12/29/16 OUTSIDE SERVICES (NOV-DEC 2016)11,069.25 11,069.25 2047389 01/11/17 05134 DYCHITAN, MARISSA 01042017MD 01/05/17 TUITION REIMBURSEMENT 145.00 145.00 2047390 01/11/17 17747 EASTLAKE PROFESSIONAL CENTER Ref002474527 01/09/17 UB Refund Cst #0000226324 1,588.86 1,588.86 2047391 01/11/17 17733 EDITH TORNERO Ref002474512 01/09/17 UB Refund Cst #0000094909 497.47 497.47 2047337 12/28/16 08023 EMPLOYEE BENEFIT SPECIALISTS 0079458IN 11/30/16 EMPLOYEE BENEFITS (OCT-NOV 2016)1,340.00 1,340.00 2047392 01/11/17 17736 ERIC TWITE Ref002474516 01/09/17 UB Refund Cst #0000198920 135.94 135.94 2047393 01/11/17 17738 ESTHER SAKHI Ref002474518 01/09/17 UB Refund Cst #0000203690 28.55 28.55 2047338 12/28/16 14320 EUROFINS EATON ANALYTICAL INC L0296557 12/19/16 OUTSIDE LAB SERVICES (12/8/16)40.00 40.00 2047394 01/11/17 04986 FARR, STEVEN 121416 01/09/17 SAFETY BOOTS 146.45 146.45 2047360 01/04/17 03546 FERGUSON WATERWORKS # 1083 0579001 12/14/16 INVENTORY 2,788.47 0578544 12/09/16 INVENTORY 343.44 05772251 12/09/16 INVENTORY 224.85 2047395 01/11/17 03546 FERGUSON WATERWORKS # 1083 0561886 11/29/16 FILTER 2B VALVE 3,530.90 3,530.90 2047443 01/18/17 03546 FERGUSON WATERWORKS # 1083 0580076 12/23/16 INVENTORY 1,211.76 05790011 12/22/16 INVENTORY 48.99 2047444 01/18/17 12187 FIRST AMERICAN DATA TREE LLC 9003401216 12/31/16 ONLINE DOCUMENTS (MONTHLY)99.00 99.00 2047339 12/28/16 16469 FIRST CHOICE SERVICES 072734 12/21/16 COFFEE SERVICES 765.36 765.36 2047445 01/18/17 02591 FITNESS TECH 10278 12/01/16 EQUIPMENT MAINTENANCE (DEC 2016)135.00 135.00 2047396 01/11/17 11962 FLEETWASH INC x925027 12/09/16 VEHICLE WASHING (12/9/16)187.92 x922659 12/02/16 VEHICLE WASHING (12/2/16)116.64 2047397 01/11/17 01612 FRANCHISE TAX BOARD Ben2474547 01/12/17 BI-WEEKLY PAYROLL DEDUCTION 175.00 175.00 2047398 01/11/17 17742 FREDY TOLOSA Ref002474522 01/09/17 UB Refund Cst #0000222408 8.23 8.23 Page 3 of 7 Check #Check Total CHECK REGISTER Otay Water District Date Range: 12/22/2016 - 1/18/2017 Date Vendor Vendor Name Invoice Inv. Date Description Amount 3,879.44 13,051.41 27,936.83 95.66 10,653.51 19,097.06 16,235.30 3,186.00 2047361 01/04/17 03094 FULLCOURT PRESS 31119 12/16/16 PIPELINE NEWSLETTER 2,799.36 2,799.36 2047340 12/28/16 17715 GEORGE COWAN Ref002472679 12/22/16 UB Refund Cst #0000021014 42.48 42.48 2047362 01/04/17 00174 HACH COMPANY 10231111 12/12/16 HACH APA6000 2,050.02 10226618 12/08/16 HACH APA6000 845.53 10236991 12/15/16 HACH APA6000 527.04 10233205 12/13/16 HACH APA6000 456.85 2047399 01/11/17 17749 HAZARD CONSTRUCTION CO Ref002474529 01/09/17 UB Refund Cst #0000230722 1,401.36 1,401.36 2047363 01/04/17 06640 HD SUPPLY WATERWORKS LTD G352606 12/01/16 3G REGISTER 8,580.04 G555777 12/14/16 INVENTORY 4,471.37 2047400 01/11/17 06640 HD SUPPLY WATERWORKS LTD G472230 11/23/16 INVENTORY 22,027.91 G484150 12/19/16 INVENTORY 5,908.92 2047446 01/18/17 10973 HDR ENGINEERING INC 1200030288 01/11/17 CAPACITY FEE STUDY (11/27/16-12/31/16)1,880.00 1,880.00 2047447 01/18/17 17758 HELEN NEGRETE 6083121716 01/17/17 CUSTOMER REFUND 115.00 115.00 2047341 12/28/16 00062 HELIX WATER DISTRICT 3300121216 12/12/16 WATER USAGE (10/7/16-12/7/16)48.14 4283121216 12/12/16 WATER USAGE (10/7/16-12/7/16)47.52 2047401 01/11/17 13349 HUNSAKER & ASSOCIATES 2016110003 12/15/16 LAND SURVEYING (10/29/16-11/25/16)1,666.00 1,666.00 2047448 01/18/17 15622 ICF JONES & STOKES INC 0119408 12/22/16 ENVIRONMENTAL SERVICES (10/29/16-11/25/16)4,692.68 0119404 12/22/16 ENVIRONMENTAL SERVICES (10/29/16-11/25/16)4,453.33 0119400 12/22/16 ENVIRONMENTAL SERVICES (10/29/16-11/25/16)1,507.50 2047342 12/28/16 08969 INFOSEND INC 114420 11/30/16 BILL PRINTING SERVICES (NOV 2016)12,529.67 114419 11/30/16 BILL PRINTING SERVICES (NOV 2016)4,437.63 114066 12/02/16 BILL PRINTING SERVICES (NOV 2016)2,129.76 2047364 01/04/17 08969 INFOSEND INC 114421 12/13/16 BILL PRINTING SERVICES (11/3/16)350.00 350.00 2047449 01/18/17 08969 INFOSEND INC 115146 12/30/16 BILL PRINTING SERVICES (DEC 2016)11,981.61 115145 12/30/16 BILL PRINTING SERVICES (DEC 2016)4,253.69 2047402 01/11/17 17106 INSITE TOWERS DEVELOPMENT LLC 376797 01/01/17 ANTENNA SUBLEASE (JAN 2017)1,593.00 374274 12/01/16 ANTENNA SUBLEASE (DEC 2016)1,593.00 2047403 01/11/17 17734 JILL CRADDOCK Ref002474513 01/09/17 UB Refund Cst #0000120428 47.74 47.74 2047404 01/11/17 17732 JOSE LUCAS Ref002474511 01/09/17 UB Refund Cst #0000041346 124.28 124.28 2047405 01/11/17 15294 JOSEPH SALVI Ref002474514 01/09/17 UB Refund Cst #0000139610 20.74 20.74 2047406 01/11/17 17741 JUNE CROMWELL Ref002474521 01/09/17 UB Refund Cst #0000221997 11.66 11.66 Page 4 of 7 Check #Check Total CHECK REGISTER Otay Water District Date Range: 12/22/2016 - 1/18/2017 Date Vendor Vendor Name Invoice Inv. Date Description Amount 36,936.59 8,364.10 2047343 12/28/16 05840 KIRK PAVING INC 6362 12/19/16 ASPHALTIC CONCRETE PAVING 5,479.00 5,479.00 2047450 01/18/17 07784 LICON, HECTOR 010617 01/12/17 SAFETY BOOTS 150.00 150.00 2047407 01/11/17 17748 MARIO OLMEDO Ref002474528 01/09/17 UB Refund Cst #0000226437 9.84 9.84 2047408 01/11/17 16613 MISSION RESOURCE CONSERVATION 372 01/03/17 HOME WATER USE EVAL (DEC 2016)750.00 750.00 2047409 01/11/17 17735 MONTE MELLON Ref002474515 01/09/17 UB Refund Cst #0000145236 210.00 210.00 2047365 01/04/17 16956 MONTGOMERY CONST SVCS INC 00016641 07/05/16 RETAINAGE RELEASE 21,133.38 606302016 07/05/16 OPS YARD IMPROVEMENTS (ENDING 6/30/16)15,803.21 2047344 12/28/16 01136 NATIONAL SOCIETY OF PROF'L ENGRS 5132121516 12/15/16 MEMBERSHIP RENEWAL 308.00 308.00 2047346 12/28/16 16255 NATIONWIDE RETIREMENT Ben2473010 12/29/16 BI-WEEKLY DEFERRED COMP PLAN 9,528.12 9,528.12 2047410 01/11/17 16255 NATIONWIDE RETIREMENT Ben2474537 01/12/17 BI-WEEKLY DEFERRED COMP PLAN 14,274.20 14,274.20 2047451 01/18/17 00761 NINYO & MOORE GEOTECHNICAL 204365 12/28/16 GEOTECHNICAL SERVICES (10/28/16-11/25/16)2,586.25 2,586.25 2047366 01/04/17 17609 NU FLOW AMERICA INC SITU191264 12/16/16 PIPE INSPECTION 1,000.00 1,000.00 2047367 01/04/17 01002 PACIFIC PIPELINE SUPPLY 311671 12/16/16 INVENTORY 5,161.10 311551 12/12/16 INVENTORY 1,792.95 311538 12/12/16 INVENTORY 1,347.84 311587 12/16/16 INVENTORY 62.21 2047452 01/18/17 14183 PACIFIC SAFETY CENTER 72944 12/22/16 HAZWOPER TRAINING 1,299.58 1,299.58 2047411 01/11/17 17752 PELTZER PLUMBING Ref002474532 01/09/17 UB Refund Cst #0000231619 1,494.19 1,494.19 2047453 01/18/17 00137 PETTY CASH CUSTODIAN 011717 01/17/17 PETTY CASH REIMBURSEMENT 749.67 749.67 2047368 01/04/17 15081 PINOMAKI DESIGN 5455 12/16/16 OUTSIDE SERVICES 127.50 127.50 2047369 01/04/17 03613 PSOMAS 125417R 12/15/16 DESIGN SERVICES (ENDING 11/24/16)23,808.49 23,808.49 2047370 01/04/17 00078 PUBLIC EMPLOYEES RET SYSTEM Ben2473012 12/29/16 BI-WEEKLY PERS CONTRIBUTION 195,924.03 195,924.03 2047454 01/18/17 00078 PUBLIC EMPLOYEES RET SYSTEM Ben2474539 01/12/17 BI-WEEKLY PERS CONTRIBUTION 200,864.31 200,864.31 2047455 01/18/17 01890 RECON 54826 12/16/16 SUBAREA PLAN (5/23/15-11/30/16)18,428.00 18,428.00 2047371 01/04/17 08972 RICK ENGINEERING COMPANY 0052249 12/19/16 DESIGN SERVICES (10/29/16-11/25/16)870.00 870.00 2047412 01/11/17 17746 RUTH CLERICO Ref002474526 01/09/17 UB Refund Cst #0000225386 13.86 13.86 2047372 01/04/17 09148 S & J SUPPLY COMPANY INC S100081741001 12/12/16 INVENTORY 7,555.95 7,555.95 2047413 01/11/17 02586 SAN DIEGO COUNTY ASSESSOR 201700018 01/03/17 ASSESSOR DATA (12/5/16)125.00 125.00 2047456 01/18/17 00003 SAN DIEGO COUNTY WATER AUTH 0000001495 12/22/16 MWD SCWS - HEWS 1,469.00 1,469.00 Page 5 of 7 Check #Check Total CHECK REGISTER Otay Water District Date Range: 12/22/2016 - 1/18/2017 Date Vendor Vendor Name Invoice Inv. Date Description Amount 112,211.53 64,881.60 12,464.48 2047456 01/18/17 00003 SAN DIEGO COUNTY WATER AUTH 0000001495 12/22/16 MWD SCWS - HEWS 1,469.00 1,469.00 2047373 01/04/17 00121 SAN DIEGO GAS & ELECTRIC 122716 12/27/16 UTILITY EXPENSES (MONTHLY)57,595.27 121816 12/18/16 UTILITY EXPENSES (MONTHLY)29,891.88 122316 12/23/16 UTILITY EXPENSES (MONTHLY)24,069.17 122116 12/21/16 UTILITY EXPENSES (MONTHLY)590.49 121516 12/15/16 UTILITY EXPENSES (MONTHLY)38.59 121816a 12/18/16 UTILITY EXPENSES (MONTHLY)26.13 2047457 01/18/17 00121 SAN DIEGO GAS & ELECTRIC 010417 01/04/17 UTILITY EXPENSES (MONTHLY)64,045.63 122416 12/24/16 UTILITY EXPENSES (MONTHLY)835.97 2047414 01/11/17 15086 SAVAGE, DEANDRE 12312016 01/05/17 SAFETY BOOTS 117.16 117.16 2047458 01/18/17 05512 SD COUNTY VECTOR CONTROL PROG sd100372017 01/02/17 OTHER AGENCY FEES (7/1/16-6/30/17)441.35 441.35 2047415 01/11/17 17744 SHERI STEPHENSON Ref002474524 01/09/17 UB Refund Cst #0000224824 20.64 20.64 2047416 01/11/17 17743 SIEMPRE VIVA ROAD DEV LLLP Ref002474523 01/09/17 UB Refund Cst #0000223054 1,911.23 1,911.23 2047459 01/18/17 13327 SILVA-SILVA INTERNATIONAL 1612 12/10/16 OUTSIDE SERVICES (NOV 2016)1,143.90 1,143.90 2047417 01/11/17 17745 SILVIA CRUZ Ref002474525 01/09/17 UB Refund Cst #0000225091 10.96 10.96 2047418 01/11/17 17737 SOCORRO GARCIA Ref002474517 01/09/17 UB Refund Cst #0000198978 5.74 5.74 2047419 01/11/17 17753 ST PAULS SENIOR SERVICES Ref002474533 01/09/17 UB Refund Cst #0000231954 1,106.07 1,106.07 2047420 01/11/17 00097 STATE BOARD OF EQUALIZATION 213301102017 01/10/17 UNDERGROUND STORAGE TANK FEES 1,010.82 1,010.82 2047460 01/18/17 01460 STATE WATER RESOURCES 4188121216 12/12/16 CERTIFICATION RENEWAL 130.00 130.00 2047347 12/28/16 15974 SUN LIFE FINANCIAL Ben2473008 12/29/16 MONTHLY CONTRIBUTION TO LTD 5,095.22 5,095.22 2047421 01/11/17 17739 SUNAO TAKEDA Ref002474519 01/09/17 UB Refund Cst #0000206844 60.85 60.85 2047374 01/04/17 10339 SUPREME OIL COMPANY 432183 12/14/16 UNLEADED FUEL 7,855.33 432184 12/14/16 DIESEL FUEL 4,609.15 2047461 01/18/17 14576 SWIATKOWSKI, KEITH 01172017KS 01/17/17 TUITION REIMBURSEMENT 201.00 201.00 2047348 12/28/16 15926 TEXAS CHILD SUPPORT UNIT Ben2473020 12/29/16 BI-WEEKLY PAYROLL DEDUCTION 184.61 184.61 2047422 01/11/17 15926 TEXAS CHILD SUPPORT UNIT Ben2474549 01/12/17 BI-WEEKLY PAYROLL DEDUCTION 184.61 184.61 2047375 01/04/17 16744 THE SAN DIEGO UNION-TRIBUNE 4863552102916 12/08/16 SUBSCRIPTION RENEWAL 429.80 429.80 2047423 01/11/17 14177 THOMPSON, MITCHELL 120116123116 12/30/16 MILEAGE REIMBURSEMENT (DEC 2016)18.90 18.90 2047376 01/04/17 17000 TRANSTAR PIPELINE INC 911302016 12/08/16 RSD SEWER REHAB PHASE 1 (ENDING 11/30/16)159,509.21 159,509.21 2047462 01/18/17 00427 UNDERGROUND SERVICE ALERT OF 1220160486 01/01/17 UNDERGROUND ALERTS (MONTHLY)385.50 385.50 Page 6 of 7 Check #Check Total CHECK REGISTER Otay Water District Date Range: 12/22/2016 - 1/18/2017 Date Vendor Vendor Name Invoice Inv. Date Description Amount 578.10 140,336.20 157,647.72 230.00 2047462 01/18/17 00427 UNDERGROUND SERVICE ALERT OF 1220160486 01/01/17 UNDERGROUND ALERTS (MONTHLY)385.50 385.50 2047424 01/11/17 15675 UNITED SITE SERVICES INC 1144760001 12/08/16 PORTABLE TOILET RENTALS (12/1/16-12/28/16)98.17 1144781438 12/14/16 PORTABLE TOILET RENTALS (12/9/16-1/5/17)80.03 1144781434 12/14/16 PORTABLE TOILET RENTALS (12/10/16-1/6/17)79.98 1144760100 12/08/16 PORTABLE TOILET RENTALS (12/2/16-12/29/16)79.98 1144781436 12/14/16 PORTABLE TOILET RENTALS (12/9/16-1/5/17)79.98 1144781437 12/14/16 PORTABLE TOILET RENTALS (12/9/16-1/5/17)79.98 1144824287 12/23/16 PORTABLE TOILET RENTALS (12/21/16-1/17/17)79.98 157,647.72 CAL CARD EXPENSES (MONTHLY)140,336.20204733212/22/16 07674 US BANK CC20161122296 11/22/16 PATROLLING SERVICES (DEC 2016)110.00 110.00 2047378 01/04/17 07674 US BANK CC20161222096 12/22/16 CAL CARD EXPENSES (MONTHLY) 2047463 01/18/17 06829 US SECURITY ASSOCIATES INC 1555591 12/31/16 2047349 12/28/16 01095 VANTAGEPOINT TRANSFER AGENTS Ben2473016 12/29/16 BI-WEEKLY DEFERRED COMP PLAN 14,460.26 14,460.26 2047350 12/28/16 06414 VANTAGEPOINT TRANSFER AGENTS Ben2473018 12/29/16 BI-WEEKLY 401A PLAN 1,052.95 1,052.95 2047425 01/11/17 01095 VANTAGEPOINT TRANSFER AGENTS Ben2474543 01/12/17 BI-WEEKLY DEFERRED COMP PLAN 14,901.90 14,901.90 2047426 01/11/17 06414 VANTAGEPOINT TRANSFER AGENTS Ben2474545 01/12/17 BI-WEEKLY 401A PLAN 12,054.21 12,054.21 2047464 01/18/17 15807 WATCHLIGHT CORPORATION, THE 505156 01/15/17 ALARM MONITORING (FEB 2017)1,568.92 1,568.92 2047379 01/04/17 14879 WATER CONSERVATION GARDEN 1177 12/13/16 GARDEN COSTS (3RD QTR FY 2016-2017)24,405.50 24,405.50 2047465 01/18/17 15726 WATER SYSTEMS CONSULTING INC 2351 12/31/16 HYDRAULIC MODELING (ENDING 12/31/16)5,827.50 5,827.50 2047427 01/11/17 03781 WATTON, MARK 110116121616 01/09/17 MILEAGE/TRANSPORT REIMB (11/1/16-12/16/16)205.72 205.72 2047428 01/11/17 01343 WE GOT YA PEST CONTROL 109923 11/25/16 BEE REMOVAL 115.00 109628 11/10/16 BEE REMOVAL 115.00 2047466 01/18/17 16135 WESCO DISTRIBUTION INC 237382 12/28/16 SOFT STARTER 6,352.56 6,352.56 2047345 12/28/16 00125 WESTERN PUMP INC J005106 10/20/16 RETROFIT FUEL ISLAND 12,675.48 12,675.48 2047467 01/18/17 17755 WM ALLEN & SONS 0969011117 01/11/17 W/O REFUND D0969-090264 1,598.93 1,598.93 Amount Pd Total:1,627,775.56 Check Grand Total:1,627,775.56 Page 7 of 7