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HomeMy WebLinkAbout2012-07-23 - Finance-Accounting Committee Meeting Minutes MINUTES OF THE YORBA LINDA WATER DISTRICT FINANCE-ACCOUNTING COMMITTEE MEETING July 23, 2012 A meeting of the Finance-Accounting Committee was called to order by Director Kiley at 4:00 p.m. The meeting was held at the District's Administrative Office at 1717 E. Miraloma Ave, Placentia CA 92870. COMMITTEE STAFF Director Robert R. Kiley, Chair Stephen Parker, Finance Manager Director Phil Hawkins Steve Conklin, Interim General Manager OTHER ATTENDEES Nitin Patel, Partner, White Nelson Diehl Evans Daphne Munoz, Partner, White Nelson Diehl Evans 1. PUBLIC COMMENTS None. 2. ACTION CALENDAR 2.1. Sewer Charges Collected on the Tax Roll for Fiscal Year 2012/13 After 3.1 was discussed, Mr. Parker explained that the District collects sewer charges on the tax roll for certain customers, namely those in the Locke Ranch area, and prior City of Yorba Linda customers that are multi- family or commercial, as their rates are different than all other District customers. Mr. Parker indicated that the County of Orange Auditor/Controller required a certified Resolution by the Board of Directors directing the County to add the charges to the tax rolls by early August. Until recently, staff had difficulty obtaining consumption information for City of Yorba Linda commercial customers in order to calculate the appropriate charge on the tax roll. As a result, staff requested to go to the Board of Directors with this action item at the July 26th Board meeting. The Committee supported staff recommendation. 2.2. Investment Report for Period Ending June 30, 2012 Mr. Parker presented the Investment report for June 2012. He shared that this was the information that goes quarterly to the Board and was therefore an action item. Mr. Parker pointed out that the yield increased slightly to 0.93% and indicated that he did not believe the District would see a yield above 1% any time in the near future. The Freeway Complex Fire settlement was the biggest change in investment balance, and overall investments decreased by approximately $4 million primarily because of the $5 million outlay for the settlement. The Committee supported sending this item to the Board to be received and filed. 1 3. DISCUSSION ITEMS 3.1. Auditor Discussion with Those in Governance This item was taken first to allow the representatives from the District's external auditor to be able to leave the meeting quickly. Nitin Patel and Daphne Munoz, both Partners with White Nelson Diehl Evans discussed items with the Committee. Mr. Nitin explained the purpose of and restrictions of an audit and explained the types of testing that would be conducted by the auditors. As a normal requirement of the audit, Mr Nitin asked if the Committee or staff was aware of any fraud, which they were not. Mr. Nitin gave the timeline of the audit and indicated that the expectation was to present a completed report to the Committee in September. That timing would allow the CAFR to be accepted at the first Board meeting in October. There was discussion as to how many years a given auditor should be conducting District audits before switching to another firm. Mr. Parker asked the Committee if there was any specific area of concern they would like the auditors to review, but the Committee had none. 3.2. Line of Credit/Advance Refunding Update (Verbal Report) Mr. Parker shared that with the public announcement of the Freeway Complex Fire settlement, it was now appropriate for staff to pursue establishing a line of credit with Wells Fargo as well as advance refunding the 2003 COPs with Citi as the underwriter. Mr. Parker indicated that a conference call with all involved parties had taken place the previous Thursday. From that discussion, the timeline was established for both items to come to the Board for approval at the second Board meeting in August, followed by an early September date for going to market for the advance refunding. While Mr. Parker could not predict what the market would look like in September, he shared that the market had gotten better since the District began looking towards an advance refunding of the debt. While staff believed annual savings of $25,000 to $40,000 were possible originally, with the previous week's lower rates, savings closer to $50,000 per year might have been possible. Mr. Parker requested guidance from the Board on the dollar value of the line of credit, as figures of $7 million, $10 million and $12 million had been mentioned over the previous months. Director Hawkins asked that staff make a recommendation and bring it to the Board for approval at the next Board meeting. 3.3. Broker Dealer Approval Mr. Parker explained that staff had completed the process of vetting Matthew D'Avanzo, Senior Vice-President — Fixed Income Strategies at First Empire Securities as a broker/dealer according to the requirements of the District's investment policy in Resolution 11-24. Mr. Parker said that staff was in the process of vetting other broker/dealers, and intended to 2 complete a large-scale revision to the investment policy with legal council's help prior to purchasing investments through Mr. D'Avanzo. 3.4. Upcoming Pension Accounting Changes Mr. Parker gave an update on upcoming pension accounting changes initiated by the Governmental Accounting Standards Board (GASB). GASB voted to approve Statement No. 68, Accounting and Financial Reporting for Pensions on June 25, 2012. Some of the key changes that affect the District include requiring that governmental entities place net pension liabilities on the balance sheet and requiring more disclosure in the CAFR in the required supplementary information area. Mr. Parker said that this could cause CalPERS rates to increase in the future and the effective date for these changes was FY 13/14. Mr. Parker also noted that these changes would likely affect Other Post-Employment Benefits a few years down the road. 3.5. June 2012 Budget to Actual Results Mr. Parker presented the June 2012 budget-to-actual results. Mr. Parker explained that these items were on the cash basis, and the numbers would change as expenses occurring in July were accrued back into June. Mr. Parker pointed out that professional services were over budget primarily due to legal expenses related to the Freeway Complex Fire. In addition, a new line item was placed on the budget-to-actual statements for the settlement relating to the Freeway Complex Fire. Staff determined this expense met the definition of an extraordinary item, which is placed below the initial net income line, and is excluded from calculation for the debt-service-coverage ratio. All other expenses are similar to recent trends. 3.6. Status of Strategic Plan Initiatives Mr. Parker presented the update to the strategic plan initiatives. He explained that he removed the initiatives identified in the FY 12/13 budget as being completed and added the new initiatives included in the FY 12/13 budget. The Committee requested that the completed initiatives continue to be shown at this time. 3.7. Future Agenda Items and Staff Tasks Staff was asked to bring a recommendation to the Board at the August 9 meeting as to the value of the line of credit that would be requested from Wells Fargo. The Committee requested that future Status of Strategic Plan Initiatives information items include all FY 11/12 and FY 12/13 initiatives. The September FAC meeting's date was changed to September 26. 4. ADJOURNMENT 4.1. The Committee adjourned at 5:04 p.m. The next meeting of the Finance- Accounting Committee will be held Monday, August 27, 2012 at 4:00 p.m. 3