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HomeMy WebLinkAbout2016-07-21 - Board of Directors Meeting Minutes 2016-131 MINUTES OF THE YORBA LINDA WATER DISTRICT BOARD OF DIRECTORS SPECIAL MEETING Thursday, July 21, 2016, 8:30 a.m. 1717 E Miraloma Ave, Placentia CA 92870 1. CALL TO ORDER The July 21, 2016 Yorba Linda Water District Board of Directors Special Meeting was called to order by President Collett at 8:30 a.m. The meeting was held in the Board Room at the District's Administration Building located at 1717 East Miraloma Avenue in Placentia, California 92870. 2. PLEDGE OF ALLEGIANCE Director Hawkins led the pledge. ROLL CALL DIRECTORS PRESENT STAFF PRESENT Ric Collett, President Marc Marcantonio, General Manager Michael J. Beverage, Vice President Steve Conklin, Engineering Manager Phil Hawkins John DeCriscio, Operations Manager Robert R. Kiley Delia Lugo,,Finance Manager Gary T. Melton Damon Micalizzi, Public Information Manager Art Vega, Information Technology Manager Annie Alexander, Executive Secretary Cindy Botts, Water Cons Supv/Mgmt Analyst Amelia Cloonan, Human Resources Analyst Laurie McAllaster, Records Mgmt Administrator OTHER ATTENDEES Andrew Gagen, Partner, Kidman Law LLP Gene Hernandez, Councilmember, City of Yorba Linda Ben Parker, Resident Cristy Parker, Resident 4. PUBLIC COMMENTS None. Minutes of the YLWD Board of Directors Special Meeting Held July 21,2016 at 8:30 a.m. 1 2016-132 5. ACTION CALENDAR 5.1. Proposed Operating Budget for FY 2016/17 Mrs. Lugo explained that the proposed operating budget for FY 2016/17 was being presented in the fully illustrated format. Following adoption, it will be submitted to the Government Finance Officers Association (GFOA) for consideration of-the Distinguished Budget Presentation Award. Should the District receive this award, it will be the sixth consecutive year that YLWD has been recognized for this achievement. Mrs. Lugo further explained that the Letter of Transmittal provided an overall summary of the budget which identified $49.3M in total outlay for • the next fiscal year. This includes $29.1M in total expenses, $7.6M in depreciation, and $12.6M for capital projects. Offsetting the $29.1M in total expenses is $33.7M in anticipated revenue, resulting in a positive estimated change in net position of $4.6M with the exclusion of depreciation expenses. The budgeted revenue for FY 2016/17 includes an overall anticipated increase in volumetric water sales due to the State Water Resources Control Board allowing local water agencies to self- certify their own conservation percentages. In an effort to remain revenue neutral and ensure that the District's cost of service and debt covenant ratio requirements are met for the Water Fund, staff is proposing a • decrease to the water service charges (rates). Additionally, the proposed budget for the Sewer Fund reflects an increase in the sewer service charge (rate) as identified in the 2015 Water and Sewer Rate Study. Mrs. Lugo noted that as the Board has determined not to fully fund depreciation, the District will operate with a planned net deficit of approximately $3M. Mr. Ben Parker, resident, commented on reserve amounts, repealing the water rate increase, providing a refund to District customers, reexamining changes to the District's business model, determining equitable rate structures, District's capital improvement program, reconsidering the services provided by Raftelis, and specific line items in the proposed budget. Director Hawkins asked Mr. Parker to share his opinion on the Board's decision not to fully fund depreciation. Mr. Parker responded that he'd need to be more familiar with the District's depreciation methods before formulating an opinion on this matter. Minutes of the YLWD Board of Directors Special Meeting Held July 21,2016 at 8:30 a.m. 2 2016-133 Mrs. Cristy Parker, resident, commented on language contained in the resolution prepared for adopting the budget, and the materials provided at the meeting held July 14, 2016 versus,what was provided at this meeting. She also asked when the fully illustrated draft budget document had been provided to the Board for review. President Collett clarified that the draft budget document was made available to the public at the same time it was provided to the Board and that the Board had reviewed the core financial information at previous meetings. He further explained` that the fully illustrated document contained additional backup material. Mrs. Parker suggested that the Board review the, line items contained in the draft budget in order to identify potential cost savings. Director Melton commented on the number of meetings during which the draft budget had been discussed and stated that he was pleased with the final product. Vice President Beverage agreed. At the request of President Collett, Mrs. Lugo provided an overview of the District's depreciation methods. President Collett then commented on the number of meetings held during the budget process and commended staff on their work. At the request of President Collett, Councilmember Hernandez provided an overview of the City's reserve policy. President Collett then asked if the Board would be reviewing the District's reserve policy at the same time that Raftelis was scheduled to present their assessment of staff's in house analysis of the water service charges. Mrs. Lugo confirmed that this would occur in October and that the District's reserve policy would need to be revised so that it aligned with the recommendations contained in the 2015 Water and Sewer Rate Study. She also confirmed that Raftelis would be analyzing the District's bond debt ratio in relation to reserve levels and their impact on YLWD's bond ratings. Director Beverage made a motion, seconded by Director Hawkins, to approve Resolution No. 16-09 Adopting the Operating Budget for Fiscal Year 2016/17 and Rescinding Resolution No. 15-16. Motion carried 5-0 on a roll call vote. 5.2. Proposed Water and Sewer Rates for the FY 2016/17 Mrs. Lugo explained that during the summer of 2015, the Board had determined that the water/sewer rate restructure described in Raftelis' 2015 Water and Sewer Rate Study was necessary and sufficient to cover (without exceeding) the cost of providing service to each customer connection. In compliance with Prop 218, the Board also held a public hearing regarding the proposed rates for the next 5 years (through FY Minutes of the YLWD Board of Directors Special Meeting Held July 21,2016 at 8:30 a.m. 3 2016-134 2019/20). Following the hearing and consideration of protests, the Board adopted new water/sewer rates for the remainder of FY 2015/16 as identified in the Rate Study. The water rates for that time period (Year 1 in the Rate Study) reflected the financial impact of the District's obligation to reduce its consumption by 36% as mandated by the State Water Resources Control Board (SWRCB) in response to the Governor's Emergency Drought Declaration on April 1, 2015. As of April 2016, the District was granted an 8% credit from SWRCB lowering YLWD's conservation mandate to 28% for the remainder of FY 2015/16. For the current fiscal year, SWRCB is allowing local water agencies to self-certify their own conservation percentages. The District has self- certified at a 0% conservation mandate which is pending approval by , SWRCB. Additionally, the District recently suspended administrative penalties for excess water use and entered into Stage 1 of YLWD's Conservation Ordinance, which among other things, allows customers to water 3 days a week. During FY 2016/17 (Year 2 in the Rate Study), the Board anticipates an overall increase in annual volumetric water sales due to SWRCB's suspension of the 36% conservation mandate and the Board's action to suspend administrative penalties and move to Stage 1 of the conservation ordinance. In response to the anticipated increase in water sales, the Board also determined to reduce the monthly basic service charges in order to remain revenue neutral. Mrs. Lugo further explained that staff was currently work with Raftelis to update the Rate Study so that it reflected the decreased conservation percentage and projected increase in volumetric water sales. This process will ensure that the District's rates are fair and equitable, that the District's cost of service continue to be covered, and that the required annual debt service coverage ration continues to be met. As mentioned earlier, the results of Raftelis' analysis are expected to be presented to the Board in October 2016. In preparation of the Board's proposed adoption of the final Operating Budget for FY 2016/17, staff utilized projected water demand estimates and operating costs to develop the proposed monthly basic service charges for the next fiscal year. As these are in-house projections, the proposed rates are subject to change following analysis by Raftelis. This analysis will substantiate either retaining or revising the proposed water and sewer rates. No rates or fees adopted by the Board will exceed those listed in the Rate Study and if adjusted upward, will be done so in accordance with Prop 218. Minutes of the YLWD Board of Directors Special Meeting Held July 21,2016 at 8:30 a.m. 4 2016-135 Additionally, the monthly sewer service charges for FY 2016/17 are proposed to be increased based on customer type as identified in Year 2 of the Rate Study. Mr. Ben Parker, resident, addressed a question to Councilmember Hernandez regarding the City's reserves. Councilmember Hernandez responded and explained that additional information could be found on the City's website. The Directors briefly discussed sewer rates in other areas as compared to YWLD. Mr. Ben Parker, resident, commented on his personal comparisons of local agencies rates and the Directors' remarks regarding sewer rates in other areas. Director Kiley made a motion, seconded by Director Melton, to adopt Resolution No. 16-10 Setting Water Rates Effective August .1, 2016 and rescinding Resolution No. 15-22. Motion carried 5-0 on a roll call vote. Director Kiley made a motion, seconded by Director Melton, to adopt Resolution No. 16-11 Setting Sewer Rates Effective August 1, 2016 and rescinding Resolution No. 15-23. Motion carried 5-0 on a roll call vote. 5.3. Letter of Support for the Orange'County Water District Mr. Conklin explained that over the past several weeks, District staff had been made aware that Irvine Ranch Water District (IRWD) was pushing the Orange County Water District (OCWD) to negotiate changes in the OCWD Act relative to the definition of supplemental and reclaimed water for calculation of the Basin Pumping Percentage. This ultimately led IRWD to file a lawsuit against OCWD on June 26, 2016 for this and other related matters. In response to the lawsuit, YLWD and other groundwater producer agencies discussed providing letters of support to OCWD. As such, a letter on behalf of YLWD has been drafted for Board consideration. • Director Kiley stated that he had voiced the District's support during OCWD's Board meeting held the previous night. Director Melton made a motion, seconded by Director Kiley, to approve the letter in support of the Orange County Water District and the OCWD Act. Motion carried 5-0. Minutes of the YLWD Board of Directors Special Meeting Held July 21,2016 at 8:30 a.m. 5 2016-136 6. DISCUSSION ITEMS 6.1. Potential Amendments to the Water Conservation Ordinance Mr. Micalizzi explained that he was still waiting for confirmation from SWRCB regarding his potential selection for service on a sub-committee ' or working group to help draft permanent conservation regulations and/or related legislation. A copy of the District's water conservation ordinance was included in the agenda packet for review in regards to potential revisions. Director Hawkins stated that he'd like to see what other Districts were doing. Mr. Micalizzi note that only a handful of agencies had adopted water shortage contingency plans since SWRCB's mandatory conservation regulations were first implemented. The majority of agencies in southern California have something similar to the District's ordinance and are waiting until SWRCB establishes permanent conservation regulations before revising them. President Collett suggested that the restrictions related to swimming pools should mirror the City's for consistency. He also suggested that watering 15 minutes per day per stationmay be too much time. Mr. Micalizzi then reviewed some revisions he thought may be helpful and Mr. Gagen offered to share copies of other District's water conservation ordinances for comparison. Prior to adjourning to Closed Session, Mr. Gagen clarified that the case being discussed under Item No. 7.2. was IRWD vs. OCWD (OC Superior Court - Case No. 00858584). President Collett reported that a public notice had been published in the OC Register notifying all agencies they may be included in the lawsuit. Mr. Gagen confirmed that the District was officially on notice. Councilmember Hernandez then provided some additional information regarding the City's reserves. 7. CLOSED SESSION The meeting was adjourned to Closed Session at 9:12 a.m. All Directors in attendance were present. Also present were Messrs. Gagen, Marcantonio, and Micalizzi. 7.1. Conference with Legal Counsel — Pending Litigation Pursuant to Subdivision (a) of Section 54956.9 of the California Government Code Name of Case: Kent Ebinger and Yorba Linda Taxpayers Association vs. Yorba Linda Water District (OC Superior Court — Case No. 00829548) Minutes of the YLWD Board of Directors Special Meeting Held July 21,2016 at 8:30 a.m. 6 2016-137 7.2. Conference with Legal Counsel — Potential Initiation of Litigation Pursuant to Paragraph (4) of Subdivision (d) of Section 54956.9 of the California Government Code Number of Potential Cases: One The Board reconvened in Open Session at 9:52 a.m. No action was taken during Closed Session that was required to be reported under the Brown Act. 8. ADJOURNMENT 8.1. The meeting was adjourned at 9:53 a.m. The next Regular Board of Directors Meeting will be held Thursday, July 28, 2016 at 8:30 a.m. Annie Alexander Assistant Board Secretary • Minutes of the YLWD Board of Directors Special Meeting Held July 21,2016 at 8:30 a.m. 7