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HomeMy WebLinkAbout2010-04-12 - Finance-Accounting Committee Meeting Minutes MINUTES OF THE YORBA LINDA WATER DISTRICT FINANCE -ACCOUNTING COMMITTEE MEETING April 12, 2010 A meeting of the Finance-Accounting Committee was called to order by Director Collett 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 Ric Collett Ken Vecchiarelli, General Manager Director William R. Mills, Alternate Stephen Parker, Finance Director Cindy Navaroli, Consultant 1. PUBLIC COMMENTS None. 2. ACTION CALENDAR 2.1. Authorization to Invest in CaITRUST Mr. Parker discussed how establishing separate accounts in CaITRUST would improve the accounting of designated and reserve funds while helping to improve investment returns by matching term maturity options to the District's short-term and long-term cash flow needs. The Committee discussed the advantages of this investment vehicle at this time and supported Staff's recommendation to authorize the transfer of funds from Wells Capital and California Asset Management Program to CaITRUST. The Committee and staff reviewed the objectives of maximizing investment returns while maintaining the security levels established by law and reinforced by the District's investment policy, while also achieving adequate liquidity to meet the District's capital projects financing needs. 2.2. February Budget to Actual Results Mr. Parker presented the February budgeted results and noted that operating revenues are 64% of budgeted revenue as a result of conservation efforts year to date, trending 7% greater than the budgeted 10% conservation. He also reported that variable expenses are 56% of budgeted expenses due to the same conservation efforts and due to operational strategies that lowered costs during the high usage months of the summer. Mr. Vecciarelli added that he anticipated the larger use months coming up to eat away at some of the year to date variable expenses savings, but that we should still end the year below budget in both operating revenues and variable expenses. The Committee asked where we were expecting to end the year, and Ms. Navaroli indicated that we were on pace to meet our bond covenant rate. The Committee accepted the monthly investment report. 1 2.3. Monthly Investment Report for February Mr. Parker presented the monthly investment reports and noted changes that had been made to the Investment Summary Comparison section to show more readily the different designations that had been made on District investments. The Committtee asked if there were any other investment options for Bond proceeds invested in money market accounts and Mr. Parker explained that the Official Statement of the 2008 Revenue Bonds restricted investments to a very conservative pool of investment options. The Committee accepted the monthly investment report. 3. DISCUSSION ITEMS 3.1. Monthly Portfolio Reports for February Mr. Parker presented the monthly portfolio reports received from Wells Capital and indicated that the March amounts had just been received and the portfolio yield to maturity is trending down from 0.71% in February to 0.68% in March. 3.2. Budget Calendar Update and Progress Report Mr. Parker presented a revised budget calendar. Revisions from the calendar presented in the previous Committee Meeting held March 15, 2010, reflected the establishment of the April 30th date for a Board Workshop to discuss budget information and reserve fund discussion. 3.3. Preliminary 2011 Budget Numbers Mr. Parker presented draft numbers for the 2011 budget. Mr. Parker noted that Staff had been diligent to reduce supplies and services expenses by over 6.7% from the FY 2009/10 budget. Factoring out large expenses of $80,000 for the Board Election and $100,000 for a CEQA study for the OCWD Annexation, would bring the percentage decrease to 10.7%. Similarly, vehicle and capital equipment outlays deceased by 57% compared to the 2009/10 budget. In addition, preliminary salary-related expenses do not include any cost of living allowances, but do factor in potential step increases for merit and required increases in other post- employment pension expenses. Mr. Parker indicated that the single largest increase in expense relates to variable water costs, as Metropolitan Water District of Southern California (MWD) is anticipating another increase effective January 1, 2011. Mr. Parker indicated that Staff's preliminary budget assumptions included a 10% MWD increase, and would result in variable water costs being 6.9% higher than the 2009/10 budget. In contrast, because no corresponding rate increase was factored in on the revenue side, and our revenues budget included the average conservation of the current fiscal year, operating revenues decreased by 2.0% from the 2009/10 budget. Mr. Parker informed the Committtee that using these preliminary figures, the 2010/11 bond covenant calculation has the District significantly under 2 the required amount. Mr. Vecchiarelli reminded the Committee that the Board has not relinquished it's ability to pass through increases from MWD, and that such a pass-through increase could be spread throughout the entire year rather than having to wait until January 1, 2011 when the rate increase goes into effect. It was stressed that the information brought before the Committee was preliminary numbers, but revealed that there would be financial stresses on the District in the upcoming fiscal year. Mr. Vecchiarelli stated that more refined numbers and options for funding the budget would be presented at the Board Workshop later this month. 3.4. Proposed Reserve Discussions/Policies Ms. Navaroli indicated that while the Board has designated various funds for different purposes, the District does not have a formal reserve policy. She explained that a Board-adopted reserve policy sends a positive signal to ratepayers, bondholders, rating and regulatory agencies that the Board is committeed to the District's long-term financial health and viability. She further stated that prudent financial management dictates that the District maintain appropriate reserves for a number of purposes inlcuding emergency use, capital projects and legal obligations accruing on a current basis that will be paid in the future. Ms. Navaroli went through a number of reserves that local and similarly sized water districts utilized, pointing out their methodology for its existence and size. She also showed the District's current reserves as compared to those of other water districts. The Committee suggested that when this information is presented to the full Board that it include charts and graphs to help simplify the concepts. The Committee recommended that the reserve policy discussion be separated from the budget presentation on April 30tH as there was a lot of discussion that would need to take place. 3.5. Future Agenda Items and Staff Tasks None. 4. ADJOURNMENT 4.1. The Committee adjourned at 5:52 p.m. The next regular meeting of the Finance-Accounting Committee is tentatively scheduled for May 17, 2010 at 4:00 p.m. Director Collett indicated that he had a conflict with that date, and Mr. Vecchiarelli said that the actual date could be established at the next Board meeting on April 22nd 3