Loading...
HomeMy WebLinkAbout06-19-18 F&A Committee Packet 1 OTAY WATER DISTRICT FINANCE AND ADMINISTRATION COMMITTEE MEETING and SPECIAL MEETING OF THE BOARD OF DIRECTORS 2554 SWEETWATER SPRINGS BOULEVARD SPRING VALLEY, CALIFORNIA BOARDROOM TUESDAY June 19, 2018 11:30 A.M. This is a District Committee meeting. This meeting is being posted as a special meeting in order to comply with the Brown Act (Government Code Section §54954.2) in the event that a quorum of the Board is present. Items will be deliberated, however, no formal board actions will be taken at this meeting. The committee makes recommendations to the full board for its consideration and formal action. AGENDA 1. ROLL CALL 2. PUBLIC PARTICIPATION – OPPORTUNITY FOR MEMBERS OF THE PUBLIC TO SPEAK TO THE BOARD ON ANY SUBJECT MATTER WITHIN THE BOARD'S JU- RISDICTION BUT NOT AN ITEM ON TODAY'S AGENDA DISCUSSION ITEMS 3. RECEIVE AN UPDATE ON THE DISTRICT’S COMPUTER AND CYBERSECURITY LANDSCAPE (KERR) [5 minutes] 4. APPROVE THE TRANSFER $30.0 MILLION OF POTABLE RESERVES TO CALPERS AND THE TRANSFER $1.8 MILLION OF SEWER RESERVES TO CALPERS; AND APPROVE THE SALE OF CURRENTLY HELD INVESTMENTS, AS NEEDED, TO TRANSFER THESE FUNDS (KOEPPEN) [5 minutes] 5. RECEIVE A PRESENTATION OF THE IMPACT OF SEWER ISSUING DEBT IN FY 2019 VS. FY 2020; AND DIRECT STAFF TO PREPARE THE SEWER 218 NOTICES USING THE RATES ASSOCIATED WITH THE FY 2020 DEBT ISSUANCE (KOEPPEN) [5 minutes] 6. ADOPT RESOLUTION NO. 2018-01 TO AMEND THE OTAY WATER DISTRICT FINANCING AUTHORITY BY-LAWS AUTHORIZING THE AUTHORITY TO HOLD REGULAR MEETINGS ON EACH DATE THAT IS A REGULAR MEETING DATE OF THE BOARD OF DIRECTORS OF THE OTAY WATER DISTRICT (KOEPPEN) [5 minutes] 7. ADJOURNMENT 2 BOARD MEMBERS ATTENDING: Mark Robak, Chair Mitch Thompson All items appearing on this agenda, whether or not expressly listed for action, may be delib- erated and may be subject to action by the Board. The Agenda, and any attachments containing written information, are available at the Dis- trict’s website at www.otaywater.gov. Written changes to any items to be considered at the open meeting, or to any attachments, will be posted on the District’s website. Copies of the Agenda and 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 par- ticipate in this meeting, please call the District Secretary at 670-2280 at least 24 hours prior to the meeting. Certification of Posting I certify that on June 15, 2018 I posted a copy of the foregoing agenda near the regu- lar meeting place of the Board of Directors of Otay Water District, said time being at least 24 hours in advance of the meeting of the Board of Directors (Government Code Section §54954.2). Executed at Spring Valley, California on June 15, 2018. /s/ Susan Cruz, District Secretary STAFF REPORT TYPE MEETING: Regular Board MEETING DATE: July 11, 2018 PROJECT: Various DIV. NO. ALL SUBMITTED BY: Michael Kerr, Information Technology Manager APPROVED BY: Adolfo Segura, Chief, Administrative Services Mark Watton, General Manager SUBJECT: UPDATE ON THE DISTRICT’S COMPUTER AND CYBERSECURITY LANDSCAPE GENERAL MANAGER’S RECOMMENDATION: To brief and update the Board on the current state of the District’s computer and cybersecurity landscape. COMMITTEE ACTION: Please see “Attachment A”. PURPOSE: This is an informational item regarding the current state of the District’s computer and cybersecurity landscape. ANALYSIS: The District’s technology infrastructure is the critical platform supporting all essential electronic services ranging from email to SCADA operations. With ever-growing demands and dependency of technology services, maintaining a reliable, scalable, and secure infrastructure is a constant for the District’s IT team. Although technology has brought many efficiencies to District operations, it has also presented a number of security risks that must be managed appropriately and consistently to ensure efficient and reliable operations. With technology and data security at the forefront of any industry, the District is no different. The District has made significant technology investments and changes in its technology architecture in order to protect and mitigate from security breaches and cyber threats. The District follows technology security best 2 practices and has implemented a comprehensive and layered approach to technology operations and systems security management. Following is a summary of assets and protection mechanisms in place: Desktops/Laptops The District’s computer inventory consists of over 140 workstation computers and 49 field ruggedized laptops and tablets. The useful life for this equipment is approximately five years. All District computer systems run on Microsoft Windows operating system, Microsoft Office Productivity Suite, and additional standard applications for day-to- day work. Staff continuously updates and monitors District computers through the use of a system asset management solution, KACE1000, which provides comprehensive management of all District workstations. The continuous monitoring and updates ensures that the latest workstation security protection is applied to mitigate risks ranging from viruses to ransomware. The District’s desktops and laptops are protected with the latest anti-virus software. Field Device Technology Support The District’s mobile device inventory consists of over 80 District- issued smartphones and electronic tablets. This is a combination of iPhones, iPads, Surface Tablets, and ruggedized laptops. These devices are also regularly updated with the latest system and security patches. Business Enterprise Servers The District business-server environment is a mix of over one-hundred physical and virtual application and database servers. Some of the key server services include our Enterprise Resource Planning (ERP) system, Tyler Eden, Enterprise Content Management System (ECMS), LaserFiche, Work-Order Management System, Cityworks, and the District’s enterprise Geographical Information System (GIS). With a combination of administrative and performance tools, IT staff continuously monitors the activities of the business server environment to not only maintain optimal operations, but to react to any abnormal behaviors related to potential threats. The District’s business servers are also protected with the latest anti-virus software. Public Facing Website & Electronic Bill Pay The District’s public facing website, otaywater.gov, is hosted and supported by an outside service provider with reinforced safeguards. Our web hosting provider has met both SSAE-16 and SOC-3 compliance certifications for security, availability, and confidentiality principles and criteria. For online bill paying customers, the District partners with an external service provider, Paymentus, for payment processing. Paymentus, retains only the necessary District customer information, and is certified with level 1 Payment Card Industry Data Security Standard (PCI DSS), which is the highest level of credit card 3 security compliance in the industry. Infrastructure, Storage, and Network Services The District’s enterprise technology infrastructure consist of traditional Local Area Network (LAN) equipment to include network switches for physical and wireless connection, firewalls for protection, leased communication circuits for phone, facility, and internet services, small data center housing business servers, data storage and backup devices. The District also manages a Wide Area Network (WAN) for SCADA services, which the connectivity covers most of the District’s service footprint. As a best practice, the SCADA WAN and Wi-Fi environments are isolated from the District’s corporate network. Both LAN and WAN environments have been engineered with security and redundancy components, and both environments are monitored 24/7 with an in-house solution and outside vendor. Monitored activities include user access, connectivity status, temperature status, general performance, and custom alarm reporting. Data and Cybersecurity Commencing at the user level, the District began a cyber social awareness training campaign approximately two years ago, which entailed regular flow of phishing type messages, solicitations, execution of fake viruses, and redirection to fake websites. At the data level, in the event suspect data or messages attempt to make their way into District systems, it’ll often be quarantined, and then released upon verification. In the event that suspect data or messages do make their way into District systems, they will be interrogated by the anti-virus on the local workstation, or application server it’s attempting to interact with. At the cloud and firewall level, the District utilizes a security cloud service, which interrogates known cyber threats that masks themselves as legitimate web our email sources. The web or message threat is neutralized at the cloud level and therefore, never touch District systems. As a best practice, the District’s firewalls have been programmed to block known electronic data ports of entry and file extensions for malware, ransomware, crypto ware, and other known vulnerabilities. And lastly, at the community level, approximately three years ago, the District partnered with Department of Homeland Security’s Cyber Security Group. The partnership allows for the District to be kept up to date with information on latest threats, and also benefit from a monthly cyber security assessment, which informs us of potential weak points in our network infrastructure. Reflective Principles In parallel to many of the recent infrastructure enhancements and upgrades, there’s a very strong technology protection culture by staff. 4 This can be seen by staff’s regular interaction ranging from local security vendors to DHS partnership. In addition to the aforementioned safeguards, IT staff have also developed an Information Technology Disaster Recovery Plan, IT Service Catalog, and continue to enhance our security practices by adopting framework elements from the National Institute of Standards and Technology (NIST). Through these practices and efforts, staff is and has been able to maintain a high-performing and secure computing environment for the District. FISCAL IMPACT: Joe Beachem, Chief Financial Officer None. Informational item only. LEGAL IMPACT: None. ATTACHMENTS: Attachment A – Committee Action Report Attachment B – District Technology Landscape ATTACHMENT A SUBJECT/PROJECT: UPDATE ON THE DISTRICT’S COMPUTER AND CYBERSECURITY LANDSCAPE COMMITTEE ACTION: The Finance, Administration and Communications Committee met on June 19, 2018 to review this item. The Committee supports presentation to the full Board for their review. 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. 150‐Mbps Fiber Administrative Building Enterprise Systems Desktop Software Microsoft Mail Exchange GE‐iFix/SCADA Websense Endpoint Sec.  KACE 1000 Mgmt.  ERP Tyler Eden 5.20 ECMS LaserFiche (ECMS) GIS/ESRI 8X8 Phone System SharePoint Content Mgmt. CityWorks WO Mgmt. Sys. Solarwinds Notification  Zetta Bkup & Recovery Meraki Wireless Access  Dotgov WordPress  SendGrid GETs Veeam ARIN   Nintex (Mobile/Forms) Secure Authentication  Rapid Notify Finance   Sympro Financials Master Meter MetroScan MasterLinx Procurement BidsSync Visitor Management HR NeoGov IdentiCard Engineering XC2 NoteVault Permits Itron Operations Site‐O‐Mat MMRS HACH Win911 Servers/Databases Server Environment MS. Windows Servers Virtual Servers (88) Physical Servers (45) Hardware  Tegile (SAN) Cisco F/W ASA  Cisco Switches Cisco Routers SQL/Databases 2008R2 Databases (40) 2012 GIS DB’s (20) Clustered DB’s (50) Geographic Information System (GIS) Windows 7 Enterprise MS Office Suite 2013 MS Exchange 2013 Tyler Eden 5.18 Client Bit Defender MS Explorer v.11 Chrome Acrobat Reader 11.0 KACE 1000 Client Websense Agent Phone System App  (8X8) ArcGIS Server 10.3             Innovyze (InfoMaster) ArcGis Desktop 10.3           InfraMap GIS Dashboard 10.3 Pipeline Observation System Mgmt.  AutoDesk ArcSDE Treatment Plant Co‐Location (Backup Internet)  100‐Mbps Fiber Circuit Primary Internet    100‐Mbps Fiber Circuit  GE‐iFix SCADA  Win911 Metro‐Ethernet Cox 20‐Mbps Fiber Cox 1.5‐Mbps Full Redundancy/  High Availability  OTAY WATER DISTRICT TECHNOLOGY LANDSCAPE www.otaywater.gov STAFF REPORT TYPE MEETING: Regular Board Meeting MEETING DATE: July 11, 2018 SUBMITTED BY: Kevin Koeppen, Asst Chief of Finance W.O./G.F. NO: DIV. NO. All APPROVED BY: Joseph R. Beachem, Chief Financial Officer Mark Watton, General Manager SUBJECT: Approve the Transfer $30.0 Million of Potable Reserves to CalPERS and the Transfer $1.8 Million of Sewer Reserves to CalPERS. Approve the Sale of Currently Held Investments, as Needed, to Transfer These Funds GENERAL MANAGER’S RECOMMENDATION: That the Otay Water District (District) Board of Directors: 1. Approve the transfer $30.0 million of potable reserves to CalPERS, 2. Approve the transfer $1.8 million of sewer reserves to CalPERS, 3. Approve the sale of currently held investments, as needed, to transfers these funds. COMMITTEE ACTION: See Attachment A. PURPOSE: To obtain Board approval for the transfer $30.0 million of potable reserves to CalPERS and the transfer $1.8 million of sewer reserves to CalPERS to reduce the District’s unfunded pension liability. ANALYSIS: On May 2 and May 21, 2018, Staff presented informational items regarding an option for providing an advance funding to CalPERS, which will reduce the District’s unfunded actuarial liability (UAL) and provide a cashflow benefit to the District. Based on the analysis performed by the District’s Financial Advisor, Suzanne Harrell, presented to the Board on May 21, 2018 the District expects to achieve a cumulative cashflow savings of $16.4 million over 25 years. As of June 30, 2018, the District is projected to have a UAL of $51.3 million, which is charged interest at 7.0%, and is approximately 62% funded. The advance payment will reduce the high interest UAL cost and will result in the savings communicated in the previous paragraph. After the advance payment the UAL will be approximately $19.5 million and approximately 85% funded. The UAL is comprised of several layers related to CalPERS actuarial assumptions differing from actual results and changes in actuarial assumptions. The balance of the UAL carries is charged interest at a rate of 7.0%, which is the District’s highest cost debt. The annual UAL payment charged by CalPERS represents the annual amortization of these tiers and a prepayment will result in the elimination of defined tiers and a reduction in the annual UAL payment. As part of the advance funding the District is able to define which layers of the UAL it would like to pay down. The following table summarizes the UAL tier balance as of June 30, 2016, the application of the $31.8 million advance funding, and the balance remaining after the advance funding. Tiers were selected based on maximizing the savings and avoiding the creation of a stranded asset. The purpose of not backloading the remaining UAL obligation is to provide a safeguard for additional tiers that CalPERS will add in the future. A stranded asset is created when a negative UAL tier, which reduces the UAL, has no offsetting negative tier, which increases the UAL. A negative tier cannot be used to offset the pensions normal cost, so if the negative tier has no offsetting positive tier the asset is stranded until future positive tiers are created. The tiers selected maximize the cashflow benefit, reduce the District interest costs and do not result in a stranded asset. The District will have approximately $15 million of reserves that can be transferred to CalPERS in July. The remaining amounts would need to be funded through the sale or maturity of investments. Due to rising interest rates and currently held investments yielding lower rates than the currently available investments, the sale of the District’s investments prior to maturity would likely result in an investment loss. The District has identified investments to sell based on minimizing this loss. The estimated loss as of June 6, 2018 would be $75,000. By selling these investments and reinvesting the funds with CalPERS, the funds will effectively earn 7.0%. The District will realize a greater interest rate and will realize more earnings than were lost on the sale. FISCAL IMPACT: This action would generate a cashflow savings of approximately $16.4 million over the next 25 years, including an average savings of $1.3 million per year from FY 2020 to FY 2025. STRATEGIC GOAL: The District ensures its continued financial health through long-term financial planning and debt planning. LEGAL IMPACT: None. General Manager Attachments: A) Committee Action ATTACHMENT A SUBJECT/PROJECT: Approve the Transfer $30.0 Million of Potable Reserves to CalPERS and the Transfer $1.8 Million of Sewer Reserves to CalPERS. Approve the Sale of Currently Held Investments, as Needed, to Transfers These Funds COMMITTEE ACTION: That the Finance and Administration Committee recommend that the Board approve the following: 1. Approve the transfer $30.0 million of potable reserves to CalPERS, 2. Approve the transfer $1.8 million of sewer reserves to CalPERS, 3. Approve the sale of currently held investments, as needed, to transfers these funds. STAFF REPORT TYPE MEETING: Regular Board Meeting MEETING DATE: July 11, 2018 SUBMITTED BY: Kevin Koeppen, Asst Chief of Finance W.O./G.F. NO: DIV. NO. All APPROVED BY: Joseph R. Beachem, Chief Financial Officer Mark Watton, General Manager SUBJECT: Present to the Board the Impact of Sewer Issuing Debt in FY 2019 vs. FY 2020; and Obtain Direction to Prepare the Sewer 218 Notices Using the Recommended Timing of the Debt Issuance GENERAL MANAGER’S RECOMMENDATION: That the Board direct staff to prepare the Sewer 218 Notices using the rates associated with the FY 2020 debt issuance. COMMITTEE ACTION: See Attachment A. PURPOSE: Present to the Board the rate impact of sewer issuing debt in FY 2019 vs. FY 2020; and obtain direction to prepare the Sewer 218 Notices using the recommended timing of the debt issuance. ANALYSIS: As part of the FY 2019 Budget presented to the Board on May 21, 2018, staff communicated that the District’s sewer side would need to issue $5.0 million of debt in FY 2020. This staff report responds to a question raised at that meeting. Staff was asked to evaluate the timing of the sewer debt issuance to determine if it would be cost beneficial for the debt to be issued in FY 2019 versus issuing debt in FY 2020, which would likely be issued at a higher interest rate. The following two debt scenarios are being presented as part of this Staff Report followed by a discussion of each scenario including: the net present value benefit, revenue/rate impact and other risks/benefits: 1. Issue $5.0 million in FY 2020 (FY 2019 Budget proposal) 2. Issue $5.0 million in FY 2019 The following table demonstrates the rate impacts of the each scenario. Scenario #1: Issue $5.0 million in FY 2020 If the District were to issue $5.0 million in FY 2020 (November 2019) and interest rates were to increase 0.3% compared to interest rates associated with an FY 2019 issuance (November 2018), the annual debt service would be $342,000. This option allows the impacts of the debt issuance to be gradually inputted into customer rates from FY 2019 to FY 2021, and would result in proposed sewer rate increases of 4.6% for FY 2019 and 5.0% for FY 2020. The FY 2020 increase of 5.0% is greater than the 4.6% presented in the May 21, 2018 board workshop due to reducing the maturities on $1.8 million of the debt from 30 years to 20 years. The following table demonstrates the estimated impact on residential monthly bills based on this scenario. The risk associated with this option would be increasing interest rates. At this time our Financial Advisor’s best estimate is that long-term interest rates may increase around 30 basis points between the timing of the two issuance scenarios. A 25 basis point increase in the effective interest rate equates to an $8,000 increase in annual debt service, which has a 0.30% impact on sewer rates. The estimated overall impact of increasing interest rates is summarized in the next scenario. 2019 2020 2021 2022 2023 2024 Issue Debt in  2019 7.7% 7.7% 3.0% 3.0% 3.0% 3.0% Issue Debt in  2020 4.6% 5.0% 4.6% 4.6% 4.6% 4.6% Proposed Revenue Increases Winter Average Range (HCF) FY18 Winter Average FY19 Winter Average Increase in Winter Average % Increase in Winter Average Current Monthly Charge FY 2019 Proposed Monthly Charge $ Inc/( Dec) % Inc/(Dec) 0 - 10 5.8 6.1 0.3 4.3% $30.82 $29.91 ($0.91) -3.0% 11 - 20 10.7 14.4 3.6 33.9% $42.34 $47.87 $5.53 13.1% 21 - 29 15.2 24.2 9.0 59.4% $52.43 $68.52 $16.09 30.7% 30 and up 20.2 36.2 16.0 78.9% $63.71 $91.07 $27.36 42.9% Residential Scenario #2: Issue $5.0 million in FY 2019 If the District were to issue $5.0 million in FY 2019 (November 2018), the annual debt service would be approximately $324,000, which is $18,000 less per year than issuing the debt in FY 2020. When compared to issuing the debt in FY 2020, this equates to a net 30- year present value savings of $75,000. However, this compacts the period over which the revenues must increase to meet debt coverage covenants. To meet the debt coverage covenant under this earlier scenario revenues would need to increase 7.7% in both FY 2019 and FY 2020. The following table demonstrates the estimated impact on residential monthly bills based on this scenario. Under this earlier scenario the short-term percentage impacts on residential customer monthly bills is greater than under the previous scenario. In addition, there remain risks associated with the City of San Diego’s Pure Water funding program that could result in near term metro costs increasing more than the current projections, which would put additional pressure on revenues and rates. Waiting to the point where the debt is necessary allows various uncertainties to play out and makes it more certain that the optimal amount of debt will be issued. With a 2019 debt issuance, it may be advisable to modify the language proposed for sewer’s 218 notice. As part of the May 21, 2018 budget approval, staff proposed a 10% maximum rate increase be allowed for internal cost increases, which includes the need to meet debt coverage covenants. The maximum single year decline in winter average that a 10% maximum internal cost limit could absorb is 16%. The maximum actual single year winter average decline the District has realized in recent history was approximately 20%. With winter averages now close to normal levels this level of decline is repeatable. If winter averages were to decline 20% in a single year, a 12% maximum allowable increase for internal costs would be needed to meet the debt covenant. As a note, under the 2020 debt issuance scenario, the 10% proposed maximum internal cost increase would be sufficient to meet the debt service coverage covenant in the event winter averages declined 20% in a single year. Winter Average Range (HCF) FY18 Winter Average FY19 Winter Average Increase in Winter Average % Increase in Winter Average Current Monthly Charge FY 2019 Proposed Monthly Charge $ Inc/( Dec) % Inc/(Dec) 0 - 10 5.8 6.1 0.3 4.3% $30.82 $30.98 $0.16 0.5% 11 - 20 10.7 14.4 3.6 33.9% $42.34 $48.94 $6.60 15.6% 21 - 29 15.2 24.2 9.0 59.4% $52.43 $70.48 $18.05 34.4% 30 and up 20.2 36.2 16.0 78.9% $63.71 $93.88 $30.17 47.4% Residential Recommendation Based on the upfront impacts on rates, the smoothing of rates, and the greater certainty of issuing the optimal amount staff is recommending sewer debt be issued in FY 2020. FISCAL IMPACT: Joe Beachem, Chief Financial Officer The below tables summarize the proposed revenue increases and debt service associated with the two options above. Issuing debt in 2020 aligns with the FY 2019 budget and no additional revenues are needed. Issuing debt in 2019 would result in the need to raise additional revenues in the near term in accordance with the tables above. STRATEGIC GOAL: The District ensures its continued financial health through long-term financial planning and debt planning. LEGAL IMPACT: None. General Manager Attachments: A) Committee Action Form 201920202021202220232024 Issue Debt in  2019 7.7% 7.7% 3.0% 3.0% 3.0% 3.0% Issue Debt in  2020 4.6% 5.0% 4.6% 4.6% 4.6% 4.6% 201920202021202220232024 Issue Debt in  2019 $100 $324 $324 $324 $324 $324 Issue Debt in  2020 $0 $103 $342 $342 $342 $342 Proposed Revenue Increases Annual Debt Service (thousands $'s) ATTACHMENT A SUBJECT/PROJECT: Present to the Board the Impact of Sewer Issuing Debt in FY 2019 vs. FY 2020; and Obtain Direction to Prepare the Sewer 218 Notices Using the Recommended Timing of the Debt Issuance COMMITTEE ACTION: That the Board direct staff to prepare the Sewer 218 Notices using the rates associated with the FY 2020 debt issuance. STAFF REPORT TYPE MEETING: Regular Board Meeting MEETING DATE: July 11, 2018 SUBMITTED BY: Kevin Koeppen, Asst Chief of Finance W.O./G.F. NO: DIV. NO. All APPROVED BY: Joseph R. Beachem, Chief Financial Officer Mark Watton, General Manager SUBJECT: Adopt Resolution No. 2018-01 to Amend the Otay Water District Financing Authority By-Laws Authorizing the Otay Water District Financing Authority to Hold Regular Meetings on Each Date That is a Regular Meeting Date of the Board of Directors of the Otay Water District GENERAL MANAGER’S RECOMMENDATION: That the Board adopt Resolution No. 2018-01 to amend the Otay Water District Financing Authority by-laws authorizing the Otay Water District Financing Authority to hold regular meetings on each date that is a regular meeting date of the Board of Directors of the Otay Water District. COMMITTEE ACTION: None. PURPOSE: To present for the Board’s consideration the adoption of Resolution No. 2018-01 to amend the Otay Water District Financing Authority By- Laws authorizing the Otay Water District Financing Authority to hold regular meetings on each date that is a regular meeting date of the Board of Directors of the Otay Water District. ANALYSIS: At the May 2 and May 21, 2018 Board meetings staff presented items proposing to the Board that the District’s water side issue approximately $30 million of debt to fund the District’s eligible CIP projects. Based on feedback from the Board, staff has proceeded with the process to engage the financing team in June, and update documents associated with issuing debt. Based on the current timeline, staff anticipates requesting approval from the Board authorizing the General Manager to issue debt in September or October of 2018. The proposed debt would be issued by the Otay Water District Financing Authority (the Authority) and must be approved at an Authority regular board meeting. The Authority’s current by-laws define January and March as the only months the Authority can hold regular meetings and must be updated to meet the current timeline for issuing debt. The requested changes will provide the ability for the Authority to hold a regular meeting that meets the timeframe of the proposed debt issuance and prevent undo delays in future debt issuances. FISCAL IMPACT: Joe Beachem, Chief Financial Officer There is no fiscal impact associated with this action. STRATEGIC GOAL: The District ensures its continued financial health through long-term financial planning and debt planning. LEGAL IMPACT: None. General Manager Attachments: A) Committee Action B) Resolution No. 2018-01 Exhibit A - Strike-through By-laws C) Proposed By-Laws ATTACHMENT A SUBJECT/PROJECT: Adopt Resolution No. 2018-01 to Amend the Otay Water District Financing Authority By-Laws Authorizing the Otay Water District Financing Authority to Hold Regular Meetings on Each Date That is Regular Meeting Date of the Board of Directors of the Otay Water District COMMITTEE ACTION: That the Board adopt Resolution No. 2018-01 to amend the Otay Water District Financing Authority by-laws authorizing the Otay Water District Financing Authority to hold regular meetings on each date that is a regular meeting date of the Board of Directors of the Otay Water District. DOCSOC/1893123v1/200077-0008 RESOLUTION NO. 2018-01 A RESOLUTION OF THE AUTHORITY COMMISSION OF THE OTAY WATER DISTRICT FINANCING AUTHORITY AMENDING ITS BYLAWS WHEREAS, the Otay Water District Financing Authority (the “Authority”) has been formed pursuant to a Joint Exercise of Powers Agreement (the “Agreement”) between the Otay Water District (the “District”) and the California Municipal Finance Authority (“CMFA”), dated as of March 3, 2010, between the District and CMFA; and WHEREAS, the Authority Commission, as the governing board of the Authority, has adopted bylaws (the “Bylaws”) which provide various provisions for the operation of the Authority including when regular meetings will be held; and WHEREAS, the Authority has determined that it is desirable and furthers its public purpose to amend Article III, Section 1 of the Bylaws in order to provide for more frequent regular meetings; and WHEREAS, Article IV, Section 1 of the Bylaws provide that the Bylaws may be amended at a regular or a special meeting of the Authority Commission; and WHEREAS, the meeting at which this resolution is being adopted is a special meeting called with all notice required by law; NOW, THEREFORE, BE IT RESOLVED by the Authority Commission as follows: Section 1. The Authority Commission hereby adopts the amendment to Article XIII, Section 1 of the Bylaws set forth in Exhibit A hereto which highlights the change from the original text of the Bylaws. Section 2. Pursuant to the Bylaws, regular meetings of the Authority Commission will be held on each date that is a regular meeting date of the Board of Directors of the District and on such other dates and times as are established by resolution of the Authority Commission from time to time. Section 3. All of the recitals herein set forth are true and correct and the Authority Commission so finds and determines. Section 4. This Resolution shall take effect immediately upon passage. ATTACHMENT B DOCSOC/1893123v1/200077-0008 PASSED, APPROVED AND ADOPTED this 11th day of July, 2018. ________________________________________ Tim Smith, President of the Commission Otay Water District Financing Authority Attest: _________________________ Susan Cruz, Secretary to the Otay Water District Financing Authority DOCSOC/1893123v1/200077-0008 STATE OF CALIFORNIA ) ) ss COUNTY OF SAN DIEGO ) I, Susan Cruz, Secretary to the Commission of the Otay Water District Financing Authority, do hereby certify that the foregoing Resolution No. 2018-01 was duly adopted by the Commission of the Otay Water District Financing Authority at a regular meeting thereof held on the 11th day of July, 2018 by the following vote: Ayes: Noes: Abstain: Absent: I further certify that the foregoing is a full, true and correct copy of Resolution No. 2018-01, and that the same has not been modified, amended or repealed. DATE: _____________, _______ _______________________________ Susan Cruz, Secretary to the Otay Water District Financing Authority DOCSOC/1893123v1/200077-0008 Strike-through change to Bylaws BYLAWS OF THE OTAY WATER DISTRICT FINANCING AUTHORITY ARTICLE I - THE AUTHORITY Section 1. Name of Authority. The name of the Authority shall be the "Otay Water District Financing Authority" (the "Authority"). Section 2. Office of Authority. The office of the Authority shall be at the offices of Otay Water District (the “District”) the 2554 Sweetwater Springs Blvd., Spring Valley, CA 91978. Section 3. Governing Body. The members of the Board of Directors of Otay Water District shall constitute the governing body of the Authority, which governing body shall be known as the Authority Commission. The members of the Authority Commission shall serve in the same capacity for the Authority as they serve for the Otay Water District. The President and Vice-President of the Authority Commission shall be as follows: President. The President shall be the member of the Authority Commission who is the then current President of the Board of Directors of the District. The President shall preside at all meetings of the Authority Commission. Vice-President. The Vice-President shall be the member of the Authority Commission who is the then current Vice President of the Board of Directors of the District. The Vice-President shall perform the duties of the President in the absence or incapacity of the President. ARTICLE II - OFFICERS Section 1. Officers. The officers of the Authority, in addition to the President and the Vice President of the Authority Commission, shall be an Executive Director, a Secretary and a Treasurer/Auditor. An officer is authorized to sign for and in the name of the Authority all contracts, deeds and other instruments approved by the Authority Commission to be made by the Authority. Section 2. Executive Director. The Executive Director of the Authority shall be the General Manager of the Otay Water District. The Executive Director shall conduct day-to-day administration of the Authority's business and affairs, subject to the direction of the Authority Commission. EXHIBIT A DOCSOC/1893123v1/200077-0008 Section 3. Treasurer/Auditor. The Treasurer/Auditor shall be the then current or acting Chief Financial Officer of the Otay Water District. The Treasurer/Auditor shall keep regular books of accounts showing receipts and expenditures and shall render to the Authority Commission, as requested, an account of the transactions of the Authority and shall perform the duties required by the Joint Exercise of Powers Act, being California Government Code Section 6500 et seq. (the "Act") and any other duties that are designated from time to time by the Authority. The Treasurer/Auditor or in the absence of the Treasurer/Auditor, a person appointed by the Treasurer/Auditor or the Authority Commission, shall have the care and custody of all funds of the Authority. The Treasurer/Auditor may enter into agreements on behalf of the Authority with any financial institution authorized to accept deposits of public funds, providing for the transfer of funds between accounts maintained therein by the Authority upon request by telephone. Such agreements may also provide for the investment upon request by telephone of funds maintained in such accounts, in property or securities in which public agencies may legally invest money subject to their control. Such agreements shall designate the accounts maintained by the Authority which are subject thereto, and the persons who may, from time to time, make such transfers and direct such investments by telephone request. Section 4. Secretary. The Secretary shall be the then current or acting Secretary of Otay Water District. The Secretary shall keep the records of the Authority, shall act as Secretary of the meetings of the Authority Commission and record all votes, and shall keep a record of the proceedings of the Authority Commission in the form of minutes to be kept for such purpose, and shall perform all duties incident to the office of Secretary. Section 7. General Counsel. The then current General Counsel of the District shall serve as General Counsel to the Authority. Section 8. Duties. The officers of the Authority shall perform such other duties and functions as may from time to time be required by the Authority or these Bylaws or by resolution, rules and regulations or by motion of the Authority Commission. Any officer of the Authority may sign, with the countersignature of one other officer, deputy officer or member of the Authority, all orders and checks for the payment of money under the direction of the Authority. Section 9. Assistants and Deputies; Additional Personnel. Whenever an officer of the Otay Water District is designated an officer of the Authority, the assistants and deputies of such officers from time to time shall also be, ex officio, officers of the Authority; and whenever a power is granted to, or a duty imposed upon, such officer, the power may be exercised, or a duty performed, by such assistant or deputy. The Authority Commission may from time to time employ such other personnel as it deems necessary to exercise its powers, duties and functions. The selection and compensation of such officers and other personnel shall be determined by the Authority Commission. DOCSOC/1893123v1/200077-0008 ARTICLE III - MEETINGS Section 1. Regular Meetings. Regular meetings of the Authority Commission shall be held at least once a year at the business office of the Authority, or at such other place as the President may designate, onon each date that is a regular meeting date of the Board of Directors of the Otay Water District at the same location as the meeting of the Board of Directors and on such other dates and at a time as fixed by the President oftimes as are established by resolution adopted by the Authority Commission. If at any time any regular meeting falls on a legal holiday, such at a regular or special meeting shall be held on the next business day at the same time. Initially, regular meetings will be held on the first Wednesday of January and March in each calendar year. Section 2. Special Meetings. A special meeting may be called at any time by the President or upon the request of a majority of the members of the Authority Commission as permitted by law. Section 3. Closed Sessions. Nothing contained in these bylaws shall be construed to prevent the Authority Commission from holding closed sessions during a regular or special meeting concerning any matter permitted by law to be considered in a closed session. Section 4. Public Hearing. All public hearings held by the Authority Commission shall be held during regular or special meetings of the Authority Commission. Section 5. Adjourning Meetings and Continuing Public Hearings to Other Times or Places. The Authority Commission may adjourn any meeting to a time and place specified in the order of adjournment. Less than a quorum may so adjourn from time-to-time. If all members are absent from any regular meeting or adjourned regular meeting, the Secretary or Acting Secretary of the Authority may declare the meeting adjourned to a stated time and place and shall cause a written notice of the adjournment to be given in the manner permitted by law. Any public hearing being held, or any hearing noticed or ordered to be held at any meeting may by order or notice of continuance be continued, or recontinued to any subsequent meeting in the same manner and to the same extent set forth herein for the adjournment of the meetings; provided, that if the hearing is continued to a time less than 24 hours after the time specified in the order or notice of hearing a copy of the order or notice of continuance shall be posted immediately following the meeting at which the order or declaration of continuance was adopted or made. Section 6. Applicability of Ralph M. Brown Act. Meetings of the Authority shall be held, notice given and the business of the Authority conducted, all as provided in the Ralph M. Brown Act, being California Government Code Section 54950 et seq. DOCSOC/1893123v1/200077-0008 Section 7. Quorum. A majority of the members of the Authority Commission shall constitute a quorum for the purpose of conducting its business and exercising its powers and for all other purposes, but a smaller number may adjourn from time to time until a quorum is obtained. Action may be taken by the Authority Commission upon a vote of a majority of a quorum, unless a higher vote is required by law or by these Bylaws. Section 8. Manner of Voting. The manner of voting on resolutions and on other matters shall be as prescribed by the President. ARTICLE IV - AMENDMENTS Section 1. Amendments to Bylaws. The Bylaws may be amended by the Authority at any regular or special meeting by the affirmative vote of a majority of the members of the Authority Commission. DOCSOC/1893123v1/200077-0008 Proposed Bylaws AMENDED BYLAWS OF THE OTAY WATER DISTRICT FINANCING AUTHORITY ARTICLE I - THE AUTHORITY Section 1. Name of Authority. The name of the Authority shall be the "Otay Water District Financing Authority" (the "Authority"). Section 2. Office of Authority. The office of the Authority shall be at the offices of Otay Water District (the “District”) the 2554 Sweetwater Springs Blvd., Spring Valley, CA 91978. Section 3. Governing Body. The members of the Board of Directors of Otay Water District shall constitute the governing body of the Authority, which governing body shall be known as the Authority Commission. The members of the Authority Commission shall serve in the same capacity for the Authority as they serve for the Otay Water District. The President and Vice-President of the Authority Commission shall be as follows: President. The President shall be the member of the Authority Commission who is the then current President of the Board of Directors of the District. The President shall preside at all meetings of the Authority Commission. Vice-President. The Vice-President shall be the member of the Authority Commission who is the then current Vice President of the Board of Directors of the District. The Vice-President shall perform the duties of the President in the absence or incapacity of the President. ARTICLE II - OFFICERS Section 1. Officers. The officers of the Authority, in addition to the President and the Vice President of the Authority Commission, shall be an Executive Director, a Secretary and a Treasurer/Auditor. An officer is authorized to sign for and in the name of the Authority all contracts, deeds and other instruments approved by the Authority Commission to be made by the Authority. Section 2. Executive Director. The Executive Director of the Authority shall be the General Manager of the Otay Water District. The Executive Director shall conduct day-to-day administration of the Authority's business and affairs, subject to the direction of the Authority Commission. ATTACHMENT C DOCSOC/1893123v1/200077-0008 Section 3. Treasurer/Auditor. The Treasurer/Auditor shall be the then current or acting Chief Financial Officer of the Otay Water District. The Treasurer/Auditor shall keep regular books of accounts showing receipts and expenditures and shall render to the Authority Commission, as requested, an account of the transactions of the Authority and shall perform the duties required by the Joint Exercise of Powers Act, being California Government Code Section 6500 et seq. (the "Act") and any other duties that are designated from time to time by the Authority. The Treasurer/Auditor or in the absence of the Treasurer/Auditor, a person appointed by the Treasurer/Auditor or the Authority Commission, shall have the care and custody of all funds of the Authority. The Treasurer/Auditor may enter into agreements on behalf of the Authority with any financial institution authorized to accept deposits of public funds, providing for the transfer of funds between accounts maintained therein by the Authority upon request by telephone. Such agreements may also provide for the investment upon request by telephone of funds maintained in such accounts, in property or securities in which public agencies may legally invest money subject to their control. Such agreements shall designate the accounts maintained by the Authority which are subject thereto, and the persons who may, from time to time, make such transfers and direct such investments by telephone request. Section 4. Secretary. The Secretary shall be the then current or acting Secretary of Otay Water District. The Secretary shall keep the records of the Authority, shall act as Secretary of the meetings of the Authority Commission and record all votes, and shall keep a record of the proceedings of the Authority Commission in the form of minutes to be kept for such purpose, and shall perform all duties incident to the office of Secretary. Section 7. General Counsel. The then current General Counsel of the District shall serve as General Counsel to the Authority. Section 8. Duties. The officers of the Authority shall perform such other duties and functions as may from time to time be required by the Authority or these Bylaws or by resolution, rules and regulations or by motion of the Authority Commission. Any officer of the Authority may sign, with the countersignature of one other officer, deputy officer or member of the Authority, all orders and checks for the payment of money under the direction of the Authority. Section 9. Assistants and Deputies; Additional Personnel. Whenever an officer of the Otay Water District is designated an officer of the Authority, the assistants and deputies of such officers from time to time shall also be, ex officio, officers of the Authority; and whenever a power is granted to, or a duty imposed upon, such officer, the power may be exercised, or a duty performed, by such assistant or deputy. The Authority Commission may from time to time employ such other personnel as it deems necessary to exercise its powers, duties and functions. The selection and compensation of such officers and other personnel shall be determined by the Authority Commission. DOCSOC/1893123v1/200077-0008 ARTICLE III - MEETINGS Section 1. Regular Meetings. Regular meetings of the Authority Commission shall be held on each date that is a regular meeting date of the Board of Directors of the Otay Water District at the same location as the meeting of the Board of Directors and on such other dates and times as are established by resolution adopted by the Authority Commission at a regular or special meeting. Section 2. Special Meetings. A special meeting may be called at any time by the President or upon the request of a majority of the members of the Authority Commission as permitted by law. Section 3. Closed Sessions. Nothing contained in these bylaws shall be construed to prevent the Authority Commission from holding closed sessions during a regular or special meeting concerning any matter permitted by law to be considered in a closed session. Section 4. Public Hearing. All public hearings held by the Authority Commission shall be held during regular or special meetings of the Authority Commission. Section 5. Adjourning Meetings and Continuing Public Hearings to Other Times or Places. The Authority Commission may adjourn any meeting to a time and place specified in the order of adjournment. Less than a quorum may so adjourn from time-to-time. If all members are absent from any regular meeting or adjourned regular meeting, the Secretary or Acting Secretary of the Authority may declare the meeting adjourned to a stated time and place and shall cause a written notice of the adjournment to be given in the manner permitted by law. Any public hearing being held, or any hearing noticed or ordered to be held at any meeting may by order or notice of continuance be continued, or recontinued to any subsequent meeting in the same manner and to the same extent set forth herein for the adjournment of the meetings; provided, that if the hearing is continued to a time less than 24 hours after the time specified in the order or notice of hearing a copy of the order or notice of continuance shall be posted immediately following the meeting at which the order or declaration of continuance was adopted or made. Section 6. Applicability of Ralph M. Brown Act. Meetings of the Authority shall be held, notice given and the business of the Authority conducted, all as provided in the Ralph M. Brown Act, being California Government Code Section 54950 et seq. Section 7. Quorum. A majority of the members of the Authority Commission shall constitute a quorum for the purpose of conducting its business and exercising its powers and for all other purposes, but a smaller number may adjourn from time to time until a quorum is obtained. Action may be taken by the Authority Commission upon a vote of a majority of a quorum, unless a higher vote is required by law or by these Bylaws. DOCSOC/1893123v1/200077-0008 Section 8. Manner of Voting. The manner of voting on resolutions and on other matters shall be as prescribed by the President. ARTICLE IV - AMENDMENTS Section 1. Amendments to Bylaws. The Bylaws may be amended by the Authority at any regular or special meeting by the affirmative vote of a majority of the members of the Authority Commission.