Loading...
The URL can be used to link to this page
Your browser does not support the video tag.
Home
My WebLink
About
2019-05-14 - Board of Directors Meeting Agenda Packet
AGENDA YORBA LINDA WATER DISTRICT BOARD OF DIRECTORS REGULAR MEETING Tuesday, May 14, 2019, 6:30 PM 1717 E Miraloma Ave, Placentia CA 92870 1. CALL TO ORDER 2. PLEDGE OF ALLEGIANCE 3. ROLL CALL Brooke Jones, President Phil Hawkins, Vice President Andrew J. Hall, Director J. Wayne Miller, Director Al Nederhood, Director 4. ADDITIONS/DELETIONS TO THE AGENDA 5. INTRODUCTIONS AND PRESENTATIONS 5.1. Elected Official Liaison Reports 5.2. Federal and State Legislative Update 6. PUBLIC COMMENTS Any individual wishing to address the Board is requested to identify themselves and state the matter on which they wish to comment. If the matter is on the agenda, the Board will recognize the individual for their comment when the item is considered. No action will be taken on matters not listed on the agenda. Comments are limited to matters of public interest and matters within the jurisdiction of the Water District. Comments are limited to three minutes. 7. CONSENT CALENDAR All items listed on the consent calendar are considered to be routine matters, status reports, or documents covering previous Board instructions. The items listed on the consent calendar may be enacted by one motion. There will be no discussion on the items unless a member of the Board, staff, or public requests further consideration. 7.1. Minutes of the Board of Directors Special and Regular Meetings Held March 26, 2019 Recommendation: That the Board of Directors approve the minutes as presented. 7.2. Minutes of the Board of Directors Special and Regular Meetings Held April 9, 2019 Recommendation: That the Board of Directors approve the minutes as presented. 7.3. Payments of Bills, Refunds, and Wire Transfers Recommendation: That the Board of Directors ratify and authorize disbursements of April 23, 2019 and for May 14, 2019 in the amount of $2,003,276.36. 8. ACTION CALENDAR This portion of the agenda is for items where staff presentations and Board discussions are needed prior to formal Board action. 8.1. Nominations for Orange County Local Area Formation Commission (LAFCO) Regular and Alternate Special District Member Seats Recommendation: That the Board of Directors consider nominating candidate(s) for election to OC LAFCO's Regular and Alternate Special District Member Seats and designate two Directors to serve as the primary and alternate voting representatives in the associated election. 8.2. Request from Mesa Water District for Financial Contribution to Support Advocacy Efforts Related to South Coast Air Quality Management District's (SCAQMD) Proposed Amended Rule (PAR) 1403 Recommendation: That the Board of Directors consider including funds in the budget for Fiscal Year 2020 to support advocacy efforts related to PAR 1403 to be expended at the discretion of the General Manager. 8.3. Request from Municipal Water District of Orange County (MWDOC) for Financial Contribution to Conduct Financial Analysis for Small Non-Compliant Drinking Water Systems Recommendation: That the Board of Directors consider this request and provide direction to staff. 8.4. Request from California Association of Sanitation Agencies (CASA) Education Foundation for Donation to Support Scholarship Program Recommendation: That the Board of Directors consider this request and provide direction to staff. 8.5. Draft Operating Budgets for Fiscal Years 2020-21 Recommendation: That the Board of Directors approve and adopt a 9% increase to the base charge, effective July 1, 2019, and any potential commodity rate adjustment by October 1, 2019. 9. DISCUSSION ITEMS This portion of the agenda is for matters that cannot reasonably be expected to be concluded by action of the Board of Directors at the meeting, such as technical presentations, drafts of proposed policies, or similar items for which staff is seeking the advice and counsel of the Board of Directors. Time permitting, it is generally in the District’s interest to discuss these more complex matters at one meeting and consider formal action at another meeting. This portion of the agenda may also include items for information only. 9.1. Draft Capital Improvement Plan for Fiscal Years 2020-24 9.2. Capital Asset Planning Policy 9.3. Unaudited Financial Statements for Third Quarter of Fiscal Year 2019 9.4. Cash and Investment Report for Period Ending March 31, 2019 9.5. Status of Operations Activities 9.6. Status of Community Facilities Districts / Assessment Districts for Connecting Customers with Septic Tanks to District's Wastewater Collection System (Jones) 10. REPORTS, INFORMATION ITEMS, AND COMMENTS 10.1. Directors' Reports · Intergovernmental Meetings, Conferences, and Events 10.2. General Manager's Report 10.3. General Counsel's Report 10.4. Future Agenda Items and Staff Tasks 11. COMMITTEE REPORTS 11.1. Interagency Committee with MWDOC and OCWD (Jones/Hawkins) · Minutes of meeting held March 28, 2019 at 4:00 p.m. · Next meeting scheduled May 23, 2019 at 4:00 p.m. 11.2. Joint Agency Committee with City of Yorba Linda (Jones/Hawkins) · Next meeting scheduled June 17, 2019 at 4:00 p.m. at Yorba Linda City Hall. 11.3. Joint Agency Committee with City of Placentia (Jones/Hawkins) · Next meeting yet to be scheduled. 12. BOARD OF DIRECTORS ACTIVITY CALENDAR 12.1. Meetings from May 15 - June 30, 2019 13. ADJOURNMENT 13.1. The next Regular Board Meeting will be held Tuesday, May 28, 2019. Closed Session (if necessary) will begin at 5:30 p.m. and regular business at 6:30 p.m. Items Distributed to the Board Less Than 72 Hours Prior to the Meeting Pursuant to Government Code section 54957.5, non-exempt public records that relate to open session agenda items and are distributed to a majority of the Board less than seventy-two (72) hours prior to the meeting will be available for public inspection in the lobby of the District’s business office located at 1717 E. Miraloma Avenue, Placentia, CA 92870, during regular business hours. When practical, these public records will also be made available on the District’s internet website accessible at http://www.ylwd.com/. Accommodations for the Disabled Any person may make a request for a disability-related modification or accommodation needed for that person to be able to participate in the public meeting by telephoning the Executive Secretary at 714-701-3020, or writing to Yorba Linda Water District, P.O. Box 309, Yorba Linda, CA 92885-0309. Requests must specify the nature of the disability and the type of accommodation requested. A telephone number or other contact information should be included so the District staff may discuss appropriate arrangements. Persons requesting a disability-related accommodation should make the request with adequate time before the meeting for the District to provide the requested accommodation. ITEM NO. 7.1 AGENDA REPORT Meeting Date: May 14, 2019 Subject:Minutes of the Board of Directors Special and Regular Meetings Held March 26, 2019 STAFF RECOMMENDATION: That the Board of Directors approve the minutes as presented. ATTACHMENTS: Name:Description:Type: 2019-03-26_-_Minutes_-_BOD_(A).docx Minutes Minutes 2019-03-26_-_Minutes_-_BOD_(B).docx Minutes Minutes Minutes of the YLWD Board of Directors Special Meeting March 26, 2019 at 6:00 p.m. 1 2019-XXX MINUTES OF THE YORBA LINDA WATER DISTRICT BOARD OF DIRECTORS SPECIAL MEETING Tuesday, March 26, 2019, 6:00 p.m. 1717 E Miraloma Ave, Placentia CA 92870 1. CALL TO ORDER The meeting was called to order at 6:01 p.m. 2. ROLL CALL DIRECTORS PRESENT STAFF PRESENT Brooke Jones, President Marc Marcantonio, General Manager Phil Hawkins, Vice President Brett Barbre, Assistant General Manager Andrew J. Hall Gina Knight, HR/Risk and Safety Manager Al Nederhood Annie Alexander, Executive Asst/Board Secretary DIRECTORS ABSENT ALSO PRESENT J. Wayne Miller Andrew Gagen, General Counsel, Kidman Gagen Law LLP 3. PUBLIC COMMENTS None. 4. CLOSED SESSION The meeting was adjourned to Closed Session at 6:02 p.m. All Directors in attendance were present. Also present were General Manager Marc Marcantonio, Asst General Manager Brett Barbre, HR/Risk and Safety Manager Gina Knight, and General Counsel Andrew Gagen. 4.1. Conference with Legal Counsel – Existing Litigation Pursuant to Paragraph (1) of Subdivision (d) of Section 54956.9 of the California Government Code Name of Case: Brian Wooldridge v. Yorba Linda Water District (Orange County Superior Court – Case No. 00886870) HR/Risk and Safety Manager Knight left the Closed Session at 6:07 p.m. Minutes of the YLWD Board of Directors Special Meeting March 26, 2019 at 6:00 p.m. 2 2019-XXX 4.2. Conference with Legal Counsel – Existing Litigation Pursuant to Paragraph (1) of Subdivision (d) of Section 54956.9 of the California Government Code Name of Case: Irvine Ranch Water District v. Orange County Water District, et al. (Los Angeles County Superior Court – Case No. BS168278) The Board reconvened in Open Session at 6:30 p.m. General Counsel Gagen reported that no action was taken during Closed Session that was required to be reported under the Brown Act. 5. ADJOURNMENT 5.1. The meeting adjourned at 6:30 p.m. Annie Alexander Board Secretary Minutes of the YLWD Board of Directors Regular Meeting Held March 26, 2019 at 6:30 p.m. 1 2019-XXX MINUTES OF THE YORBA LINDA WATER DISTRICT BOARD OF DIRECTORS REGULAR MEETING Tuesday, March 26, 2019, 6:30 p.m. 1717 E Miraloma Ave, Placentia CA 92870 1. CALL TO ORDER The meeting was called to order at 6:30 p.m. 2. PLEDGE OF ALLEGIANCE 3. ROLL CALL DIRECTORS PRESENT STAFF PRESENT Brooke Jones, President Marc Marcantonio, General Manager Phil Hawkins, Vice President Brett Barbre, Assistant General Manager Andrew J. Hall Gina Knight, HR/Risk and Safety Manager Al Nederhood Delia Lugo, Finance Manager Rosanne Weston, Engineering Manager DIRECTORS ABSENT Annie Alexander, Exec Asst/Board Secretary J. Wayne Miller Freddie Ojeda, Operations Superintendent ALSO PRESENT Andrew Gagen, General Counsel, Kidman Gagen Law LLP 4. ADDITIONS/DELETIONS TO THE AGENDA None. 5. INTRODUCTIONS AND PRESENTATIONS 5.1. Elected Official Liaison Reports None. 5.2. Federal and State Legislative Update Asst General Manager Brett Barbre commented on a request received from the California Special Districts Association (CSDA) to take an oppose Minutes of the YLWD Board of Directors Regular Meeting Held March 26, 2019 at 6:30 p.m. 2 2019-XXX position on Assembly Bill 1486. This matter will be placed on the Consent Calendar for the next regular meeting. 5.3. Overview of California Association of Sanitation Agencies (CASA) Education Foundation – Provided by Mike Dunbar, President Mr. Dunbar provided a presentation regarding the Foundation’s purpose and goals. He also requested the District consider making a contribution to help support the agency’s scholarship program. 6. PUBLIC COMMENTS None. 7. CONSENT CALENDAR Director Hawkins made a motion, seconded by Director Hall, to approve the Consent Calendar. Motion carried 4-0-0-1 with Director Miller being absent. 7.1. Minutes of the Board of Directors Regular Meeting Held February 26, 2019 Recommendation: That the Board of Directors approve the minutes as presented. 7.2. Payments of Bills, Refunds, and Wire transfers Recommendation: That the Board of Directors ratify and authorize disbursements in the amount of $646,438.82. 7.3. Notice of Completion for the Fairmont Booster Pump Station Upgrade Project Recommendation: That the Board of Directors authorize staff to file the Notice of Completion for construction of the Fairmont Booster Pump Station Upgrade Project, Job No. J2010-11B. 7.4. Opposition of Senate Bill 307 (Roth) – Water Conveyance: Use of Facility with Unused Capacity Recommendation: That the Board of Directors adopt an oppose position on Senate Bill 307 (Roth). Minutes of the YLWD Board of Directors Regular Meeting Held March 26, 2019 at 6:30 p.m. 3 2019-XXX 8. DISCUSSION ITEMS Staff reviewed key information contained in the following financial reports. 8.1. Cash and Investment Report for Period Ending February 28, 2019 8.2. Budget to Actual Reports for the Month Ending February 28, 2019 9. REPORTS, INFORMATION ITEMS, AND COMMENTS 9.1. Directors' Reports Intergovernmental Meetings, Conferences, and Events The Directors noted their attendance at the listed meetings and events. 9.2. General Manager's Report General Manager Marc Marcantonio commented on a request for support for backfill funding for the Paradise Irrigation District and concerns associated with Perfluorooctane Sulfonate (PFOS) and Perfluorooctanoic Acid (PFOA). He then asked each of the managers or their designees to report on activities within their respective departments. 9.3. General Counsel’s Report None. 9.4. Future Agenda Items and Staff Tasks President Jones requested an item on a future agenda to discuss the status of the potential formation of Community Facilities Districts for connecting customers with septic tanks to the District’s wastewater collection system. He also spoke in favor of highlighting the use of Smart Timers and rotating nozzles as part of the District’s Water Use Efficiency Program. 10. COMMITTEE REPORTS 10.1. Interagency Committee with MWDOC and OCWD (Jones/Hawkins) Next meeting is scheduled March 28, 2019 at 4:00 p.m. Minutes of the YLWD Board of Directors Regular Meeting Held March 26, 2019 at 6:30 p.m. 4 2019-XXX 10.2. Joint Agency Committee with City of Yorba Linda (Jones/Hawkins) Minutes of the meeting held March 18, 2019 at 4:00 p.m. will be provided when available. Next meeting yet to be scheduled. 10.3. Joint Agency Committee with City of Placentia (Jones/Hawkins) Next meeting scheduled April 11, 2018 at 8:30 a.m. at Placentia City Hall. 11. BOARD OF DIRECTORS ACTIVITY CALENDAR 11.1. Meetings from March 27 – May 31, 2019 The Board made no changes to the activity calendar. 12. ADJOURNMENT 12.1. The meeting was adjourned at 7:45 p.m. Annie Alexander Board Secretary ITEM NO. 7.2 AGENDA REPORT Meeting Date: May 14, 2019 Subject:Minutes of the Board of Directors Special and Regular Meetings Held April 9, 2019 STAFF RECOMMENDATION: That the Board of Directors approve the minutes as presented. ATTACHMENTS: Name:Description:Type: 2019-04-09_-_Minutes_-_BOD_(A).docx Minutes Minutes 2019-04-09_-_Minutes_-_BOD_(B).docx Minutes Minutes Minutes of the YLWD Board of Directors Special Meeting April 9, 2019 at 5:30 p.m. 1 2019-XXX MINUTES OF THE YORBA LINDA WATER DISTRICT BOARD OF DIRECTORS SPECIAL MEETING Tuesday, April 9, 2019, 5:30 p.m. 1717 E Miraloma Ave, Placentia CA 92870 1. CALL TO ORDER The meeting was called to order at 5:32 p.m. 2. ROLL CALL DIRECTORS PRESENT STAFF PRESENT Brooke Jones, President Marc Marcantonio, General Manager Andrew J. Hall Annie Alexander, Executive Asst/Board Secretary J. Wayne Miller (Arrived 5:34 p.m.) Al Nederhood ALSO PRESENT Andrew Gagen, General Counsel, Kidman Gagen Law LLP DIRECTORS ABSENT Phil Hawkins, Vice President 3. PUBLIC COMMENTS None. 4. CLOSED SESSION The meeting was adjourned to Closed Session at 5:33 p.m. All Directors in attendance were present. Also present were General Manager Marc Marcantonio and General Counsel Andrew Gagen. 4.1. Conference with Legal Counsel – Threat to Public Services or Facilities Pursuant to Subdivision (e) of Section 54954.5 of the California Government Code Consultation with General Manager to Provide Annual Homeland Security Briefing Minutes of the YLWD Board of Directors Special Meeting April 9, 2019 at 5:30 p.m. 2 2019-XXX The Board reconvened in Open Session at 6:32 p.m. No action was taken during Closed Session that was required to be reported under the Brown Act. 5. ADJOURNMENT 5.1. The meeting adjourned at 6:32 p.m. Annie Alexander Board Secretary Minutes of the YLWD Board of Directors Regular Meeting Held April 9, 2019 at 6:30 p.m. 1 2019-XXX MINUTES OF THE YORBA LINDA WATER DISTRICT BOARD OF DIRECTORS REGULAR MEETING Tuesday, April 9, 2019, 6:30 p.m. 1717 E Miraloma Ave, Placentia CA 92870 1. CALL TO ORDER The meeting was called to order at 6:32 p.m. 2. PLEDGE OF ALLEGIANCE 3. ROLL CALL DIRECTORS PRESENT STAFF PRESENT Brooke Jones, President Marc Marcantonio, General Manager Andrew J. Hall Brett Barbre, Assistant General Manager J. Wayne Miller (Arrived 6:37 p.m.) John DeCriscio, Operations Manager Al Nederhood Delia Lugo, Finance Manager Pasquale Talarico, Director of Public Affairs DIRECTORS ABSENT Rosanne Weston, Engineering Manager Phil Hawkins, Vice President Annie Alexander, Exec Asst/Board Secretary Vivian Lim, Human Resources Analyst ALSO PRESENT Andrew Gagen, General Counsel, Kidman Gagen Law LLP 4. ADDITIONS/DELETIONS TO THE AGENDA None. 5. INTRODUCTIONS AND PRESENTATIONS 5.1. Elected Official Liaison Reports Brett Barbre, in his capacity as Director for the Metropolitan Water District of Southern California (MWD) and President for Municipal Water District of Orange County (MWDOC), commented on the status of water related state and federal legislation. Minutes of the YLWD Board of Directors Regular Meeting Held April 9, 2019 at 6:30 p.m. 2 2019-XXX 5.2. Federal and State Legislative Update Director of Public Affairs Pasquale Talarico introduced himself and briefed the Board on the District’s Strategic Communication Plan. He also reviewed the status of multiple Senate and Assembly bills and noted the District’s position in comparison to MWD, MWDOC, and OCW D. 6. PUBLIC COMMENTS None. 7. CONSENT CALENDAR Director Nederhood requested to remove Item No. 7.2. and President Jones requested to remove Item No. 7.3. from the Consent Calendar for separate consideration. Director Hall made a motion, seconded by Director Miller, to approve the remainder of the Consent Calendar. Motion carried 4-0-0-1 on a Roll Call vote with Director Hawkins being absent. 7.1. Minutes of the Board of Directors Regular Meeting Held March 12, 2019 Recommendation: That the Board of Directors approve the minutes as presented. 7.4. Adopting State Department of Transportation (Caltrans) Prevailing Equipment Rental Rates Recommendation: That the Board of Directors approve Resolution No. 2019-11 adopting the State Department of Transportation (Caltrans) Prevailing Equipment Rental Rates as the District’s official equipment rental rate schedule for reimbursement of operational expenses incurred during the course of responding to and preforming regular and emergency repairs. 7.5. Disclosure of Critical Infrastructure Information Recommendation: That the Board of Directors adopt Resolution No. 2019-12 regarding the disclosure of critical infrastructure information. Minutes of the YLWD Board of Directors Regular Meeting Held April 9, 2019 at 6:30 p.m. 3 2019-XXX 7.6. Amending the District’s Conflict of Interest Code Recommendation: That the Board of Directors approve Resolution No. 2019-13 adopting a Conflict of Interest Code which supersedes all prior Conflict of Interest Codes and amendments previously adopted. 7.7. Opposition of Assembly Bill 1486 (Ting) Unless Amended Recommendation: That the Board of Directors adopt an oppose position on Assembly Bill 1486 (Ting) unless amended. ITEMS REMOVED FROM THE CONSENT CALENDAR FOR SEPARATE ACTION 7.2. Payments of Bills, Refunds, and Wire transfers Staff responded to questions from Director Nederhood regarding some items on the check register. Director Nederhood requested an item on a future agenda to review the status of the District’s Asset Management Plan. Director Nederhood made a motion, seconded by Director Jones, to ratify and authorize disbursements in the amount of $1,397,538.54. Motion carried 4-0-0-1 with Director Hawkins being absent. 7.3. Establishing Certain Emergency Procedures and Organization for Responding to a Threatened or Actual Disaster Staff responded to questions from President Jones regarding the process for declaring a local emergency. Director Jones made a motion, seconded by Director Hall, to adopt Ordinance No. 2019-01 establishing certain emergency procedures and organization for responding to a threatened or actual disaster and rescinding Ordinance No. 90-02. Motion carried 4-0-0-1 on a Roll Call vote with Director Hawkins being absent. 8. ACTION CALENDAR 8.1. Request for Contribution from Southern California W ater Coalition (SCWC) Staff reviewed the purpose of SCWC’s request. Director Miller noted that the Association of California Water Agencies (ACWA) was currently performing similar work. Minutes of the YLWD Board of Directors Regular Meeting Held April 9, 2019 at 6:30 p.m. 4 2019-XXX President Jones requested an item on the agenda for the next regular meeting to consider a request from Mesa Water District for a financial contribution to support advocacy efforts related to South Coast Air Quality Management District’s (SCAQMD) proposed amendments to Rule 1403. No action was taken on Item No. 8.1. 9. DISCUSSION ITEMS 9.1. Status of Engineering Activities Staff reviewed the status of multiple projects. 10. REPORTS, INFORMATION ITEMS, AND COMMENTS 10.1. Directors' Reports Intergovernmental Meetings, Conferences, and Events The Directors noted their attendance at the listed meetings and events. 10.2. General Manager's Report General Manager Marc Marcantonio asked each of the managers or their designees to report on activities within their respective departments. He then noted that Director Miller would be presenting at the upcoming OC Water Summit. 10.3. General Counsel’s Report General Counsel Andrew Gagen briefed the Board on recent court decisions related to public officials blocking constituents from their social media platforms. He also noted the importance of Directors utilizing their YLWD e-mail address to conduct District business. 10.4. Future Agenda Items and Staff Tasks Director Hall requested staff look into participating in the next Children’s Water Education Festival. Director Miller requested staff provide an overview of the City of Fullerton’s recent Proposition 218 process, rate structure, and public outreach campaign. Minutes of the YLWD Board of Directors Regular Meeting Held April 9, 2019 at 6:30 p.m. 5 2019-XXX President Jones requested staff keep the Board apprised regarding the status of Senate Bill 522. 11. COMMITTEE REPORTS 11.1. Interagency Committee with MWDOC and OCWD (Jones/Hawkins) Minutes of the meeting held March 28, 2019 at 4:00 p.m. will be provided when available. Next meeting is scheduled May 23, 2019 at 4:00 p.m. 11.2. Joint Agency Committee with City of Yorba Linda (Jones/Hawkins) Minutes of the meeting held March 18, 2019 at 4:00 p.m. were included in the agenda packet. Next meeting is scheduled June 17, 2019 at 4:00 p.m. at Yorba Linda City Hall. 11.3. Joint Agency Committee with City of Placentia (Jones/Hawkins) Next meeting scheduled April 11, 2018 at 8:30 a.m. at Placentia City Hall. 12. BOARD OF DIRECTORS ACTIVITY CALENDAR 12.1. Meetings from April 10 – May 31, 2019 The Board made no changes to the activity calendar. 13. ADJOURNMENT 13.1. The meeting was adjourned at 8:16 p.m. Annie Alexander Board Secretary ITEM NO. 7.3 AGENDA REPORT Meeting Date: May 14, 2019 Budgeted:Yes To:Board of Directors Cost Estimate:$2,003,276.36 Funding Source:All Funds From:Marc Marcantonio, General Manager Presented By:Delia Lugo, Finance Manager Dept:Finance Reviewed by Legal:N/A Prepared By:Richard Cabadas, Accounting Assistant I CEQA Compliance:N/A Subject:Payments of Bills, Refunds, and Wire Transfers SUMMARY: Section 31302 of the California Water Code says the District shall pay demands made against it when they have been approved by the Board of Directors. Pursuant to law, staff is hereby submitting the list of disbursements for Board of Directors’ approval. STAFF RECOMMENDATION: That the Board of Directors ratify and authorize disbursements of April 23, 2019 and for May 14, 2019 in the amount of $2,003,276.36. DISCUSSION: The items on this disbursement list include: a check of $127,694.25 to ACWA/JPIA for May 2019 medical & dental premiums; a check of $247,292.00 to Best Drilling and Pump, Inc. for Well #5 & #7 pump and well repairs; a check of $68,857.83 to Quinn Company for Well #18 – engine removal, overhaul and installation; a check of $41,014.20 to CalCard US Bank for April 2019 credit card transactions; a check of $43,490.16 to City of Anaheim for March 2019 electricity charges; a wire of $16,863.44 to So. California Gas Co. for March 2019 gas charges at multiple locations; a wire of $44,272.34 to So. California Edison for March 2019 electricity charges at multiple locations; a wire of $35,018.37 to MWDOC for February 2019 water deliveries; and a wire of $11,099.12 to So. California Edison for March 2019 electricity charges at multiple locations. The balance of $459,489.95 is routine invoices. The two Accounts Payable check registers total $1,095,091.66, Payroll No. 07 total is $329,019.47, Payroll No. 08 total is $287,425.03, and Payroll No. 09 total is $291,740.20, where the total of all listed disbursements for this agenda report is $2,003,276.36. A summary of the disbursements is attached. PRIOR RELEVANT BOARD ACTION(S): The Board of Directors approves bills, refunds and wire transfers semi-monthly. ATTACHMENTS: Name:Description:Type: 19-CS_0514.pdf Cap Sheet Backup Material CkReg051419.pdf Check Register - 05/14/19 Backup Material CkReg042319.pdf Check Register - 04/23/19 Backup Material 19_CC_0514.pdf Credit Card Summary Backup Material Summary of Disbursements April 23, 2019 & May 14, 2019 CHECK NUMBERS & WIRES: 04/23/2019 Computer Checks 74043-74136 $ 686,926.06 05/14/2019 Computer Checks 74137-74228 $ 300,912.33 ____________ $ 987,838.39 WIRES: W041119 So. California Gas Co. $ 16,863.44 W041519 So. California Edison $ 44,272.34 W041519A MWDOC $ 35,018.37 W050319 So. California Edison $ 11,099.12 ____________ $ 107,253.27 TOTAL OF CHECKS & WIRES $ 1,095,091.66 PAYROLL NO. 07: Direct Deposits $ 200,575.98 Third Party Checks 7172—7176 $ 20,113.72 Payroll Taxes $ 66,734.69 EFT – CalPERS & TASC Payroll #07 $ 41,595.08 $ 329,019.47 PAYROLL NO. 08: Direct Deposits $ 175,950.31 Third Party Checks 7077—7085 $ 23,490.68 Payroll Taxes $ 47,248.06 EFT – CalPERS & TASC Payroll #08 $ 40,735.98 $ 287,425.03 PAYROLL NO. 09: Direct Deposits $ 181,575.21 Third Party Checks 7086—7090 $ 20,113.72 Payroll Taxes $ 48,456.19 EFT – CalPERS & TASC Payroll #09 $ 41,595.08 $ 291,740.20 TOTAL OF PAYROLLS $908,184.70 ---------------------------------------------------------------------------------------------------------------------- DISBURSEMENT TOTAL: $2,003,276.36 ================================================================== APPROVED BY THE BOARD OF DIRECTORS MINUTE ORDER AT BOARD MEETING OF MAY 14, 2019 ==================================================================. Check No.Date Vendor Name Amount Description 74160 05/14/2019 ADAM MORALES 32.49 CUSTOMER REFUND 74157 05/14/2019 ALEX BALDERAS 32.61 CUSTOMER REFUND 74144 05/14/2019 ALEX MARKOVSKI 179.98 CUSTOMER REFUND 74151 05/14/2019 ALLEN JOHNCOX 116.81 CUSTOMER REFUND 74165 05/14/2019 America's Instant Signs 517.20 YWLD LOGO & AMERICAN FLAGS FOR HARD HATS 74163 05/14/2019 ANGELA CHEN 82.87 CUSTOMER REFUND 74166 05/14/2019 Anthony Manzano 105.00 CERTIFICATE REIMBURSEMENT - WATER DISTRIBUTION OPERATOR 74167 05/14/2019 Aramark 435.29 UNIFORM SERVICE 74140 05/14/2019 AROONA STEWART 183.38 CUSTOMER REFUND 74169 05/14/2019 AT & T - Calnet3 2,454.60 ATT CALNET 3 74168 05/14/2019 ATS Communications 630.00 PROFESSIONAL SERVICES - MARCH 2019 74147 05/14/2019 ATUL PATEL 39.99 CUSTOMER REFUND 74170 05/14/2019 Autoscribe Corporation 1,246.00 TRANSACTION VISION GATEWAY - MARCH 2019 74171 05/14/2019 Bee Busters, Inc 150.00 BEE ABATEMENT 74172 05/14/2019 Best Drilling and Pump, Inc.4,745.00 WELL #20 - PULL AND REINSTALL MOTOR 74173 05/14/2019 Brooke Jones 34.97 TRAVEL EXPENSE - SAFE DRINKING WATER 74139 05/14/2019 BRUCE MACKIE 95.24 CUSTOMER REFUND 74174 05/14/2019 CalCard US Bank 41,014.20 CREDIT CARD TRANSACTION - APRIL 2019 74162 05/14/2019 CDG CONSTRUCTION 1,559.20 CUSTOMER REFUND 74175 05/14/2019 CDW Government, Inc 106.03 CISCO WALL MOUNT 74176 05/14/2019 City Of Anaheim 43,490.16 MULTIPLE LOCATIONS - ELECTRICITY CHARGES - MARCH 2019 74177 05/14/2019 Coastal Ignition & Controls 113.54 STATIONARY ENGINE MAINTENANCE - LAKEVIEW 74178 05/14/2019 Cortech Engineering 4,128.47 CL2 PARTS 74179 05/14/2019 Culligan of Santa Ana 485.00 EQUIPMENT - PE SOFTENER 74141 05/14/2019 DAVID JL STEEVES 49.28 CUSTOMER REFUND 74156 05/14/2019 DAVID YANG 26.95 CUSTOMER REFUND 74180 05/14/2019 Delta Wye Electric, Inc.12,837.45 CONTROL PANEL WIRING AT WELL 10 & MOTOR REPLACEMENT AT LAKEVIEW PUMP 74181 05/14/2019 Dick's Lock & Safe Inc.2,770.83 DEAD LOCKS, DISTRICT KEYS AND CYLINDER COMBINATION CHANGES7418205/14/2019 Easi File 6,444.32 OFFICE EQUIPMENT 74137 05/14/2019 Eileen Broaddus 47.65 CUSTOMER REFUND 74183 05/14/2019 Eisel Enterprises, Inc.282.85 METER BOX COVER 74138 05/14/2019 EVELYN KATZAROFF 400.00 CUSTOMER REFUND 74184 05/14/2019 Factory Motor Parts 444.92 VEHICLE MAINTENANCE - UNIT #191 74185 05/14/2019 Francisco J. Martinez 105.00 CERTIFICATE REIMBURSEMENT - SWRCB GRADE 5 74158 05/14/2019 GARY KHATCHOYAN 154.36 CUSTOMER REFUND 74186 05/14/2019 Grainger 100.77 STRICKING WRENCH - VALVE CREW 74187 05/14/2019 Graybar Electric Co 3,302.15 HARDWARE SUPPLIES 74188 05/14/2019 Greg Smith Equipment 5,479.09 ATLAS - WHEEL BALANCE & TIRE CHANGER 74189 05/14/2019 Haaker Equipment Co.3,915.11 VEHICLE MAINTENANCE - UNIT #168 74190 05/14/2019 Hach Company 1,099.77 WATER SAMPLING SUPPLIES 74191 05/14/2019 Howard Industries 747.61 AC PARTS AND MATERIALS 74192 05/14/2019 Hydrex Pest Control 175.00 PEST CONTROL 74193 05/14/2019 Infosend Inc.8,371.45 BILLING & POSTAGE - CUSTOMER BILLING 74194 05/14/2019 Jackson's Auto Supply - Napa 80.21 VEHICLE MAINTENANCE - UNIT #208 74159 05/14/2019 JOE KIM 70.32 CUSTOMER REFUND 74142 05/14/2019 JOHN KIM 125.44 CUSTOMER REFUND 74195 05/14/2019 John Seiler 300.00 OP-ED ARTICLE & PUBLICATION 74152 05/14/2019 JOSHUA DOYLE 12.45 CUSTOMER REFUND 74145 05/14/2019 KDG INVESTMENTS INC 81.37 CUSTOMER REFUND 74196 05/14/2019 Kidman Gagen Law 165.00 LEGAL SERVICES - 13577.124 74197 05/14/2019 Konica Minolta Business 854.48 COPIER LEASE - C258 & C558 74143 05/14/2019 LAN YANG 83.01 CUSTOMER REFUND 74198 05/14/2019 Liebert Cassidy Whitmore 3,340.80 LEGAL SERVICES - MARCH 2019 74146 05/14/2019 MATTHEW SMITH 75.07 CUSTOMER REFUND 74199 05/14/2019 Mc Fadden-Dale Hardware 491.41 WATER SERVICE REPAIR PARTS & HARDWARE SUPPLIES 74154 05/14/2019 MIKE CONROY 158.90 CUSTOMER REFUND 74200 05/14/2019 NatPay Online Business Solutions 26.18 DOCULIVERY - MARCH 2019 74201 05/14/2019 New Pig Corporation 1,802.19 SAFETY EQUIPMENT 74202 05/14/2019 Nicholas A. Hollon 280.00 CERTIFICATE REIMBURSEMENT - CWEA COLLECTION GRADE 2 74203 05/14/2019 Nickey Kard Lock Inc 6,164.51 FUEL - 04/01/19 - 04/15/19 74204 05/14/2019 Norman A. Traub Associates 10,341.38 PROFESSIONAL SERVICES - FEBRUARY & MARCH 2019 74205 05/14/2019 Office Solutions 1,630.09 OFFICE SUPPLIES & TONER 74206 05/14/2019 Omni Enterprise Inc.2,990.00 JANITORIAL SERVICE - MARCH 2019 74207 05/14/2019 One Source Distributors, LLC 542.62 SCADA SUPPLIES & MATERIALS 74210 05/14/2019 P.T.I. Sand & Gravel, Inc.812.89 ROAD MATERIAL Yorba Linda Water District Check Register For Checks Dated: 04/24/2019 thru 05/14/2019 74208 05/14/2019 Pacific Hydrotech Corporation 11,662.37 REPAIR OF PLUMBING LINES 74209 05/14/2019 Praxair Distribution 164.88 WELDING SUPPLIES 74211 05/14/2019 R.E. Michel Company, LLC 291.18 AC REPAIR PARTS & MATERIALS 74149 05/14/2019 RICHARD COSNER 180.08 CUSTOMER REFUND 74212 05/14/2019 Robert Rodriguez 90.00 CERTIFICATE REIMBURSEMENT - DISTRICT OPERATOR D3 74213 05/14/2019 Ronald Ubrun Farms 15,960.00 WEED ABATEMENT AT HIGHLAND RESERVOIR & HERBICIDE APPLICATION AT SEVERAL RESERVOIRS7421405/14/2019 Sanders Paving, Inc.30,934.70 ASPHALT PAVING - 23 LOCATIONS 74161 05/14/2019 SANG LEE 190.21 CUSTOMER REFUND 74215 05/14/2019 Security Solutions 1,230.00 REPAIR - SECURITY GATE 74153 05/14/2019 SELECT PORTFOLIO SERVICING INC 435.63 CUSTOMER REFUND 74217 05/14/2019 Source 1 Environmental 8,925.00 SEWER MAIN REPAIR PARTS 74216 05/14/2019 South Coast AQMD 3,479.49 ANNUAL RENEWAL FEES & EMISSION FEES W050319 05/03/2019 Southern Calif Edison Co.11,099.12 ELECTRICITY CHARGES - MULTIPLE LOCATIONS - MARCH 2019 74218 05/14/2019 Stater Bros. Markets 65.87 MEETING SUPPLIES 74219 05/14/2019 Step Saver Inc 1,936.91 COARSE SALT 74164 05/14/2019 STRONGARM ENV 1,562.00 CUSTOMER REFUND 74220 05/14/2019 Sunrise Medical Group 746.82 POST EMPLOYEE PHYSICAL 74221 05/14/2019 Switch Ltd 552.00 DATA HOSTING - COLOCATION 74155 05/14/2019 TAIHO INVESTMENTS LLC 132.39 CUSTOMER REFUND 74222 05/14/2019 Titan Water Technology Inc 295.00 SITE SERVICE & ANALYSIS - APRIL 2019 74223 05/14/2019 Toxguard Fluid Technologies 743.21 MECH SHOP SUPPLIES 74224 05/14/2019 United Industries 400.91 PPE EQUIPMENT 74225 05/14/2019 United Water Works, Inc.8,694.55 OPERATIONS WORK MATERIAL 74148 05/14/2019 VANESSA CRUZ 60.06 CUSTOMER REFUND 74226 05/14/2019 WCT Product 4,575.07 EQUIPMENT - vLOC PRO3 5 WATT KIT 74227 05/14/2019 Western A/V 2,809.36 MAINTENANCE & TOOLS 74150 05/14/2019 WILLIAM LANGFORD 83.07 CUSTOMER REFUND 74228 05/14/2019 YO Fire 25,550.66 OPERATIONS WORK MATERIAL 312,011.45 4/18/2019 PAYROLL #08 - EMPLOYEE DIRECT DEPOSIT 175,950.31 4/18/2019 PAYROLL #08 - PAYROLL TAX PAYMENT 47,248.06 4/18/2019 PAYROLL #08 - CALPERS EFT 38,481.84 4/18/2019 PAYROLL #08 - TASC 2,254.14 7177 04-18-2019 COLONIAL LIFE 107.10 7178 04-18-2019 LINCOLN FINANCIAL GROUP 4,784.41 7179 04-18-2019 NATIONWIDE RETIREMENT SOLUTIONS 14,249.91 7180 04-18-2019 CA STATE DISBURSEMENT UNIT 366.92 7181 04-18-2019 CA STATE DISBURSEMENT UNIT 384.92 7182 04-18-2019 AMERICAN HERITAGE LIFE 1,476.13 7183 04-18-2019 MIDLAND LIFE INSURANCE 200.00 7184 04-18-2019 RELIANCE DI 66.61 7185 04-18-2019 AMERITAS 1,854.68 287,425.03 5/2/2019 PAYROLL #09 - EMPLOYEE DIRECT DEPOSIT 181,575.21 5/2/2019 PAYROLL #09 - PAYROLL TAX PAYMENT 48,456.19 5/2/2019 PAYROLL #09 - CALPERS EFT 39,340.94 5/2/2019 PAYROLL #09 - TASC 2,254.14 7186 5/2/2019 COLONIAL LIFE & ACCIDENT 107.10 7187 5/2/2019 LINCOLN FINANCIAL GROUP 4,807.64 7188 5/2/2019 NATIONWIDE RETIREMENT SOLUTIONS 14,447.14 7189 5/2/2019 CALIFORNIA STATE DISBURSEMENT UNIT 366.92 7190 5/2/2019 CALIFORNIA STATE DISBURSEMENT UNIT 384.92 291,740.20 Payroll Checks #08 Payroll Checks #09 Check No.Date Vendor Name Amount Description 74055 04/23/2019 A. SMITH INVESTMENTS 392.81 CUSTOMER REFUND 74056 04/23/2019 ACWA/JPIA 127,694.25 MEDICAL & DENTAL PREMIUM - MAY 2019 74136 04/23/2019 ACWA/JPIA 30,673.75 WORKER COMP - 1/1/2019 - 3/31/2019 74053 04/23/2019 ADAM MORALES 77.35 CUSTOMER REFUND 74058 04/23/2019 Al Nederhood 57.77 MILEAGE REIMBURSEMENT - MARCH 19 74057 04/23/2019 Aljon Graphics, Inc 549.40 #10 WINDOW ENVELOPES 74043 04/23/2019 ANNE JOHNSON 1,994.81 CUSTOMER REFUND 74059 04/23/2019 Applied Best Practices 663.50 PROFESSIONAL SERVICES - CDAR 74060 04/23/2019 Aqua-Metric Sales Co.39,272.24 OPERATIONS WORK MATERIALS 74061 04/23/2019 Aramark 689.34 UNIFORM SERVICE 74134 04/23/2019 ARC 20.00 PW DOC MANAGEMENT 74045 04/23/2019 AROONA STEWART 199.72 CUSTOMER REFUND 74062 04/23/2019 AT & T - Calnet3 1,906.58 ATT CALNET 3 74063 04/23/2019 Best Drilling and Pump, Inc.247,292.00 J18-30 -WELL 7 PUMP & WELL REPAIR & J19-11 - WELL #5 PUMP REPAIRS7406404/23/2019 Brooke Jones 131.72 MILEAGE REIMBURSEMENT - MARCH 2019 74071 04/23/2019 C. Wells Pipeline 1,055.95 HYDRANT REPAIR PARTS 74065 04/23/2019 City Of Placentia 320.00 ENCROACHMENT PERMIT #190027/28 74066 04/23/2019 CivicPlus 5,425.00 PROFESSIONAL DEVELOPMENT 74135 04/23/2019 Cla-Val Co.182.01 CL2 REPLACEMENT PARTS 74067 04/23/2019 Coastal Ignition & Controls 1,591.61 SUPPLIES - FLEET MAINTENANCE 74068 04/23/2019 Coastline Equipment 2,177.17 VEHICLE MAINTENANCE - UNIT #145 74069 04/23/2019 Core Support Resources Inc.7,000.00 2 YR ULTRA SEMI ANNUAL SERVICE PLAN 74070 04/23/2019 Culligan of Santa Ana 2,530.00 EQUIPMENT PE SOFTENER 74072 04/23/2019 Daniels Tire Service 4,909.17 FLEET MAINTENANCE 74073 04/23/2019 Dartco Transmission Sales 701.37 VEHICLE MAINTENANCE - UNIT #197 74077 04/23/2019 Dean Criske Trucking 761.17 ROAD MATERIAL 74074 04/23/2019 Delta Wye Electric, Inc.2,378.38 CONTROL CHANGES - BRYANT RANCH 74075 04/23/2019 Dick's Lock & Safe Inc.5,426.75 NEW KEYS & RE-KEY DISTRICT LOCKS 74076 04/23/2019 Don Wolf & Associates Inc.1,049.56 REPAIR OF TESTO 350/340 74078 04/23/2019 Eduardo Gutierrez 170.00 CERTIFICATE REIMBURSEMENT - D3 74079 04/23/2019 Eisel Enterprises, Inc.345.34 METER BOXES, LIDS & COVERS 74080 04/23/2019 Employee Relations, Inc.252.90 PRE-EMPLOYEE BACKGROUND CHECK 74081 04/23/2019 Enthalpy Analytical, Inc.1,806.00 WATER QUALITY SAMPLING - MARCH 2019 74084 04/23/2019 EyeMed 1,416.32 PREMIUM - EYE MED - APRIL 2019 74082 04/23/2019 Factory Motor Parts 631.51 VEHICLE MAINTENANCE - UNIT #186, #190, & #198 74083 04/23/2019 Fairway Ford Sales, Inc.66.50 VEHICLE MAINTENANCE - UNIT #168 74085 04/23/2019 Fleet Services, Inc 11,898.70 VEHICLE MAINTENANCE - UNIT #168 & #210 74054 04/23/2019 FRANK PORTILLO 85.26 CUSTOMER REFUND 74086 04/23/2019 Fullerton Paint & Flooring 258.09 CLEANING/PAINTING SUPPLIES 74087 04/23/2019 Haaker Equipment Co.391.13 TOOLS - INSERTS 74088 04/23/2019 Hach Company 1,422.30 WATER QUALITY TEST MATERIALS 74089 04/23/2019 Harold D. Hulbert 231.00 MEETING SUPPLIES - YLWD 74052 04/23/2019 HARVEST REALTY DEVELOPMENT 409.33 CUSTOMER REFUND 74090 04/23/2019 Hayes Automation Inc.10,184.02 SCADA SUPPLIES & MATERIALS 74091 04/23/2019 Infosend Inc.13,120.19 BILLING & POSTAGE - CUSTOMER BILLING 74092 04/23/2019 Jackson's Auto Supply - Napa 183.61 SHOP SUPPLIES 74044 04/23/2019 JEREMY BENTLEY 76.76 CUSTOMER REFUND 74093 04/23/2019 Jeremy Smith 36.45 MEETING SUPPLIES - 4/04 74094 04/23/2019 Jesse Diaz 80.00 CERTIFICATE REIMBURSEMENT - CWEA COLLECTION 74095 04/23/2019 Jonathan Carren 86.19 REIMBURSEMENT - BOOTS 74096 04/23/2019 KB Design 537.56 PPE EQUIPMENT 74050 04/23/2019 KEUN YOO 177.04 CUSTOMER REFUND 74097 04/23/2019 Kidman Gagen Law 20,592.23 LEGAL SERVICES - MARCH 2019 74098 04/23/2019 Konica Minolta Business 854.48 COPIER LEASE - C258 & C558 74046 04/23/2019 LBC IRWINDALE, LLC 393.50 CUSTOMER REFUND 74051 04/23/2019 LOMAVISTA362017,LLC 898.15 CUSTOMER REFUND 74048 04/23/2019 LOUIS E OSBORN 159.85 CUSTOMER REFUND 74099 04/23/2019 Managed Health Network 168.75 EAP - APRIL 2019 74100 04/23/2019 Marc Marcantonio 108.81 MILEAGE REIMBURSEMENT - MARCH 2019 74101 04/23/2019 Mc Fadden-Dale Hardware 97.28 HARDWARE SUPPLIES 74102 04/23/2019 Mc Master-Carr Supply Co.412.44 PRODUCTION REPAIR PARTS 74047 04/23/2019 MICHAEL KANE 105.50 CUSTOMER REFUND 74103 04/23/2019 Mobile Industrial Supply 8.00 WELDING SUPPLIES 74049 04/23/2019 MONICA BENAVIDES 152.21 CUSTOMER REFUND 74104 04/23/2019 Municipal Water District 333.00 TURF REMOVAL & SPRAY DRIP PROGRAM FEES Yorba Linda Water District Check Register For Checks Dated: 04/10/2019 thru 04/23/2019 W041519A 04/15/2019 Municipal Water District 35,018.37 WATER DELIVERIES - FEBRUARY 2019 74105 04/23/2019 Muzak LLC 633.57 CUSTOMER MESSAGE/PHONE SERVICE - 1 YR 74106 04/23/2019 National Safety Services, Inc.2,700.00 TRAINING - CONFINE SPACE RESCUE 74107 04/23/2019 Nickey Kard Lock Inc 3,468.40 FUEL - 03/15/19 - 03/31/19 74108 04/23/2019 Office Solutions 989.21 OFFICE SUPPLIES, PAPER & TONER 74109 04/23/2019 Omni Enterprise Inc.2,990.00 JANITORIAL SERVICE - FEBRUARY 2019 74110 04/23/2019 OUR FIRST AID COMPANY 78.44 FIRST AID SUPPLIES 74111 04/23/2019 Pete's Road Service Inc 129.00 VEHICLE MAINTENANCE - UNIT #206 74112 04/23/2019 Plumbing And Industrial Supply 4,556.12 BUILDING REPAIR PARTS 74113 04/23/2019 Praxair Distribution 151.29 WELDING SUPPLIES 74114 04/23/2019 Quinn Company 68,857.83 J19-10 - WELL18 - REMOVE, OVERHAUL & INSTALL ENGINE 74124 04/23/2019 Rachel Padilla/Petty Cash 20.98 PETTY CASH - O040219 74115 04/23/2019 RKI Engineering, LLC 3,600.00 J10-11B - SCADA SUPPORT - PROGRAMMING 74116 04/23/2019 Rosanne Weston 9.00 TRAVEL EXPENSE - OC BOARD 74117 04/23/2019 Sanders Paving, Inc.11,873.42 ASPHALT PAVING - (9) LOCATIONS 74118 04/23/2019 Security Solutions 845.49 LABOR ON SITE - WAREHOUSE DOOR & ALARM 74119 04/23/2019 Selman Chevrolet Company 130.00 VEHICLE MAINTENANCE - UNIT #208 74120 04/23/2019 Sergio D. Fierro 2,250.00 MAINTENANCE & TROUBLESHOOTING 74121 04/23/2019 Shred Confidential, Inc.63.00 ONSITE SHRED SERVICE 74122 04/23/2019 SKC West, Inc.489.41 PPE & SAFETY EQUIPMENT 74123 04/23/2019 Solarwinds Inc.4,142.00 SOFTWARE LICENSE RENEWAL W041519 04/15/2019 Southern Calif Edison Co.44,272.34 ELECTRICITY CHARGES - MULTIPLE LOCATIONS - MARCH 2019 W041119 04/11/2019 Southern Calif Gas Co.16,863.44 GAS CHARGES - MULTIPLE LOCATIONS - MARCH 2019 74125 04/23/2019 Stater Bros. Markets 90.66 MEETING SUPPLIES 74126 04/23/2019 Sunrise Medical Group 320.00 (5) POST EMPLOYEE PHYSICALS 74127 04/23/2019 Underground Service Alert 144.98 DIG SAFE BOARD FEES 74128 04/23/2019 Underground Service Alert 222.85 DIGALERT - MARCH 2019 74129 04/23/2019 United Industries 1,735.86 PPE EQUIPMENT 74131 04/23/2019 United Water Works, Inc.7,373.07 OPERATIONS WORK MATERIAL 74130 04/23/2019 USA Blue Book 1,326.63 PRODUCTION REPAIR PARTS 74132 04/23/2019 Westside Building Material 419.74 MISCELLANEOUS WAREHOUSE PARTS 74133 04/23/2019 YO Fire 12,041.33 OPERATIONS WORK MATERIAL 783,080.21 4/4/2019 PAYROLL #07 - EMPLOYEE DIRECT DEPOSIT 200,575.98 4/4/2019 PAYROLL #07 - PAYROLL TAX PAYMENT 66,734.69 4/4/2019 PAYROLL #07 - CALPERS EFT 39,340.94 4/4/2019 PAYROLL #07 - TASC 2,254.14 7172 4/4/2019 COLONIAL LIFE & ACCIDENT 107.10 7173 4/4/2019 LINCOLN FINANCIAL GROUP 4,807.64 7174 4/4/2019 NATIONWIDE RETIREMENT SOLUTIONS 14,447.14 7175 4/4/2019 CALIFORNIA STATE DISBURSEMENT UNIT 366.92 7176 4/4/2019 CALIFORNIA STATE DISBURSEMENT UNIT 384.92 329,019.47 Payroll Checks #07 Vendor Name Amount Description Answer One Communications 435.00 Virtual reception services - After hours monthly service fee Light Bulbs Etc 25.60 Electrical supplies - facilities Jackson's Auto Supply - Napa 123.46 Vehicle maintenance - Unit #195 Red Wing Shoe Store 704.62 (3) Safety boots Eventbrite 158.61 Registration - Santa Ana River Watershed - Pres. Jones Minuteman Press 57.78 Business cards - Talarico County of Orange 230.20 Encroachment permit Home Depot 98.44 Electrical supplies - facilities Amazon.com 209.00 Computer monitor - Talarico's office Blake's Place 42.31 Lunch meeting - (2) attendees Eventbrite 158.61 Travel expense - Santa Ana River Watershed - Dir. Nederhood Lowe's Home Improving 64.59 Plumbing parts - facilities Haaker Equipment Co.98.55 Vehicle maintenance - Unit #215 Light Bulbs Etc 193.63 Ballast replacements for light fixtures Uline 41.18 (2) scraper brushes Costco 345.76 Office & breakroom supplies Empreus Technologies 249.00 Webinar - Dysfunctions of a team leadership training Amazon.com 47.18 Safety WORKS - safety incentive Praxair Distribution 176.11 Welding supplies - valve crew Home Depot 300.33 Supplies and tools Farmer Boys 17.26 Lunch meeting - (2) attendees NEOGOV, Inc.2,028.60 NEOGOV onboard software license - 4/19 - 4/20 Amazon.com 36.03 Safety WORKS - safety incentive Amazon.com 29.99 Safety WORKS - safety incentive Red Wing Shoe Store 499.92 Safety boots -Araujo, E & Rodriguez, R Mobile Industrial Supply 480.13 Welding supplies Home Depot 13.47 Plumbing supplies - facility Home Depot 153.13 (56) bags of Quickcrete 60# Home Depot 54.50 Lumber & landscape supplies Uline 41.18 (2) replacement boot brush scrapper O.C. Driveline 336.84 Repair parts - Paso Fino engine Mc Fadden-Dale Hardware 12.28 Repair parts for Well #10 Safelite Autoglass 390.44 Vehicle maintenance - Unit #224 Lamp Post Pizza 178.09 Meals for confined space training - (15) attendees Home Depot 518.69 (3) ladders - confined space Smart & Final 278.56 BBQ supplies - team building OC United 3,500.00 Platinum sponsor - Love Yorba Linda King's Fish 110.50 Lunch meeting - (3) attendees Jobs Available 30.00 Annual subscription Amazon.com 150.82 Retiree recognition Amazon.com 37.68 Safety WORKS - safety incentive Amazon.com 22.59 Office Supplies - tent cards Costco 624.94 Fireproof safe City Clerks Association of California 75.00 CCAC Workshop - Alexander, A 14-May-19 Cal Card Credit Card U S Bank Verizon Wireless 4,324.21 Verizon Wireless - 01/21/19 - 02/20/19 IN-N-OUT RESTAURANTS 103.55 Meals for confined space training - (15) attendees Light Bulbs Etc 310.15 Ballast replacement for light fixtures Home Depot 118.82 Hardware supplies Amazon.com 31.44 (2) plantronic snap-on headband Amazon.com 35.98 Safety WORKS - safety incentive Amazon.com 38.19 Safety WORKS - safety incentive Orange County Water Assn 45.00 OCWA Luncheon - Dir. Miller Time Warner Cable 2,020.67 T10MB dedicated internet access Tool Renewed, Inc.104.38 Equipment maintenance - Unit #E221 Smart & Final 111.27 Supplies for district event Amazon.com 218.20 Plantronics hook switch adapter Amazon.com 43.09 Safety WORKS - safety incentive Amazon.com 347.71 Wellness grant - fitness equipment Amazon.com 1,189.56 Wellness grant - fitness equipment Amazon.com 195.00 Wellness grant - fitness equipment Time Warner Cable 650.00 Ethernet intranet - Las Vegas co-location eReplacementParts.com 57.61 Repair parts - concrete cutter Union 76 60.52 Travel expense - AWWA Conference - (7) IN-N-OUT RESTAURANTS 62.63 Travel expense - AWWA Conference - (7) Firestone Public House 178.07 Travel expense - AWWA Conference - (7) Hunt Parking 32.00 Travel expense - AWWA Conference - (7) ISDOC (Independent Special Dist OC)17.00 ISDOC Quarterly meeting - Dir. Nederhood Delta Airlines 302.10 J19-14 - Travel expense - IT network rebuild Grainger 277.16 Solenoid for Well 5 Light Bulbs Etc 232.61 Ballast replacement - light fixtures Mc Fadden-Dale Hardware 10.88 Well 7 repair parts Village Nurseries 131.89 Sod for landscape repair Chando's Cantina 173.93 Travel expense - AWWA Conference - (7) Amazon.com 23.59 Water jug for plant operator Starbucks Store 6.40 Meeting - Walkemeyer & Knight Chipotle Mexican Grill 61.19 New hire lunch - (5) attendees Powerstride Battery 342.40 Batteries - stationary engines Alternative Hose Inc.327.71 Vehicle maintenance - Unit #120 Home Depot 146.48 Landscape & facility supplies Station 16 255.42 Travel expense - AWWA Conference - (7) Baci Firenze Trator 60.48 Lunch meeting - (3) attendees SCIE ARMA 50.00 SCIE-ARMA Chapter meeting ARMA International 1,598.00 ARMA Conference Registration - (2) Quality Logo Products 235.86 Retractable carabiner badges Alternative Hose Inc.478.34 Hose reel - Unit #175 Union 76 68.31 Travel expense - AWWA Conference - (7) Residence Inn Marriot 4,879.35 Travel expense - AWWA Conference - (7) Los Tacos 70.24 Travel expense - AWWA Conference - (7) Chefs Toys 61.09 Supplies for meeting events Cal State University, Fullerton 8.00 Travel expense - Santa Ana River Watershed - Pres. Jones Cal State University, Fullerton 8.00 Travel expense - Santa Ana Watershed- Dir. Nederhood Ralphs 44.24 District events Home Depot 150.57 Batteries & electrical supplies Fairway Ford Sales, Inc.65.47 Vehicle maintenance - Unit #198 Grainger 102.03 PPE - Hearing protection Baci Firenze Tratoria 75.46 Lunch meeting - (3) attendees Project Management Institute 1,895.00 Project management training - Logsdon, D Grainger 180.44 Solenoid valve replacement Light Bulbs Etc 167.44 Light bulb replacement - facilities Home Depot 153.13 (56) bag of #60 concrete Jackson's Auto Supply - Napa 3.87 Vehicle maintenance - Unit #211 Best Value Tire & Wheel 23.64 Vehicle maintenance - Unit #179 Fairway Ford Sales, Inc.84.95 Vehicle maintenance - Unit #211 Fairway Ford Sales, Inc.189.64 Vehicle maintenance - Unit #211 eReplacementParts.com 27.81 Equipment maintenance - Unit #E211 Veriato 220.50 Computer software - 10 licenses Staples 34.47 Hardware supplies Time Warner Cable 208.16 Business TV - Richfield Rd Time Warner Cable 200.80 Business TV - Miraloma Ave California Truck Equip. Co 41.55 Vehicle maintenance - Unit #174 Mc Master-Carr Supply Co.33.34 Shop supplies Selman Chevrolet Company 306.09 Vehicle maintenance - Unit #144 Orange County Water Assn 45.00 OCWA Luncheon - Pres. Jones Coastline Equipment 87.77 Vehicle maintenance - Unit #145 Alternative Hose Inc.210.41 Vehicle maintenance - Unit #145 FIRST AID SUPPLIES ONLINE 549.53 First aid supplies Cloudary 49.99 Reimbursable - Image and cloud software Answer One Communications 435.00 Virtual reception services - After hours monthly service fee ONLINE Information Services, Inc.375.95 Online collection services Best Value Tire & Wheel 24.47 Vehicle maintenance - Unit #139 North American Recycling and Crushing, LLC 560.00 Road material disposal The Flame Broiler 53.55 New hire lunch - (5) attendees Orange County Water Assn 45.00 OCWA Luncheon - Pres. Jones Southwest Airlines 159.98 Travel expense - Water Trust Hearing - Pres. Jones Orange County Water Assn 30.00 OCWA Luncheon - Dir. Miller Orange County Water Assn 30.00 OCWA Luncheon - Marcantonio, M United Rentals - Fullerton 212.67 Rental of concrete mixer & concrete mix Fairway Ford Sales, Inc.67.88 Vehicle maintenance - Unit #190 Amazon.com 15.99 30 pc A/C gasket kit Factory Motor Parts 120.12 Vehicle maintenance - Unit #190 & #208 Amazon.com 33.23 Office supplies Jet Blue 183.98 Travel expense - Water Trust Hearing - Pres. Jones Kesh Cab Service 30.00 Travel expense - Water Trust Hearing - Pres. Jones 41,014.20 ITEM NO. 8.1 AGENDA REPORT Meeting Date: May 14, 2019 To:Board of Directors From:Marc Marcantonio, General Manager Prepared By:Annie Alexander, Executive Assistant Subject:Nominations for Orange County Local Area Formation Commission (LAFCO) Regular and Alternate Special District Member Seats STAFF RECOMMENDATION: That the Board of Directors consider nominating candidate(s) for election to OC LAFCO's Regular and Alternate Special District Member Seats and designate two Directors to serve as the primary and alternate voting representatives in the associated election. DISCUSSION: One of the two OC LAFCO Regular Special District Member seats was vacated on April 10, 2019. The expiration date of this term is June 30, 2020. If the incumbent alternate special district member decides to run for and is elected to the regular special district seat, the alternate seat will also be open. The incumbent is not required to resign from the alternate seat if they decide to run for the open regular seat. Therefore, the OC LAFCO Executive Officer will accept nominations for both the regular and alternate special district seats. Nominations must be received no later than 3:00 p.m. on Friday, June 7, 2019. In accordance with the Independent Special District Selection Committee's Bylaws, the appointment process is conducted by mailed ballot and the Board will need to designate two Directors to serve as the primary and alternate voting representatives. The attached declaration form must be returned no later than Friday, June 7, 2019 at 3:00 p.m. OC LAFCO will distribute election ballots and any supplemental candidate information to each special district electronically on June 17, 2019. Only the designated voting representatives may vote for a candidate and only one ballot for each agency will be accepted. Ballots will be due no later than July 19, 2019 at 3:00 p.m. and election results will be announced on July 22, 2019. Additionally, the Board has the option to nominate candidates for these seats in the upcoming election. Should the Board desire to do so, the attached nomination form must be completed and returned no later than June 7, 2019 at 3:00 p.m. Candidate resumes or other supplemental information may also be included and will be distributed with the election ballots. The District has received a request for support from Saundra F. Jacobs, President, Santa Margarita Water District, for the Regular Special District Member Seat. Information regarding her candidacy is also attached and she's planning to attend the next regular Board meeting to comment. ATTACHMENTS: Name:Description:Type: OC_LAFCO_Spc_Dist_Seats.pdf Backup Material Backup Material SJacobs_Nom_Req.pdf Backup Material Backup Material Local Agency Formation Commission Orange County 2677 North Main Street, Suite 1050, Santa Ana, CA 92705 (714) 640-5100 FAX (714) 640-5139 http://www.oclafco.org REGULAR MEMBERS CHAIR Cheryl Brothers City Member VICE CHAIR Douglass Davert Special District Member IMMEDIATE PAST CHAIR Derek J. McGregor Public Member Lisa Bartlett County Member Dr. Allan Bernstein City Member Donald P. Wagner County Member Vacant Special District Member ALTERNATES Wendy Bucknum City Member James Fisler Special District Member Lou Penrose Public Member Michelle Steel County Member STAFF Carolyn Emery Executive Officer May 1, 2019 TO: Independent Special Districts Presiding Officers FROM: Carolyn Emery, Executive Officer SUBJECT: Appointment Process for OC LAFCO Regular and Alternate Special District Member Seats One of the two OC LAFCO Regular Special District Member seats was vacated on April 10, 2019. The expiration date of this term is June 30, 2020. If the incumbent Alternate Special District member decides to run for and is elected to the regular special district seat, the alternate seat will also be open. The incumbent is not required to resign from the alternate seat if he decides to run for the open regular seat. Therefore, the OC LAFCO Executive Officer will accept nominations for both the regular and alternate special district seats. Nominations must be received by OC LAFCO no later than 3 PM on Friday, June 7, 2019. The appointment process for special district seats is governed by Government Code Section 56332 and the Independent Special District Selection Committee Bylaws. In accordance with the Committee’s Bylaws, the appointment process is conducted by mailed ballot and attached to this notification are the following: (1)The “Declaration of Qualification to Vote” for designating the authorized regular voting member and the alternate voting member of your district, for this appointment process. This form must be returned to OC LAFCO no later than 3 PM on Friday, June 7, 2019. Please note that if OC LAFCO does not receive the form by that date, your district will be ineligible to vote. (2)The “2019 Nomination Form” for submitting a candidate’s name for the Regular and Alternate Special District seats. If your district is nominating a candidate for the OC LAFCO Regular and/or Alternate Special District Member seats, the form must be filled out completely and returned to OC LAFCO no later than 3 PM on Friday, June 7, 2019. Candidate resumes or other supplemental Appointment Process for OC LAFCO Regular and Alternate Special District Seats May 1, 2019 Page 2 of 3 information may also be included and will be distributed with the ballots. Both forms may be returned to OC LAFCO by any of the following: Email: cemery@oclafco.org Mail: Orange County LAFCO 2677 North Main Street, Suite 1050 Santa Ana, CA 92705 Attn: Carolyn Emery, Executive Officer FAX: (714) 640-5139 Attn: Carolyn Emery, Executive Officer For your reference, a timeline of key dates for the appointment process is below: Nomination Process for Appointment of OC LAFCO Special District Seats DATE EVENT May 1, 2019 OC LAFCO Executive Officer emails notification letters with Declaration of Qualification to Vote and Nomination Form to independent special district presiding officers, special district general managers. June 7, 2019 Deadline for submitting Declaration of Qualification to Vote and Nomination Form for the regular and alternate special district members to OC LAFCO by 3:00 p.m.* June 10 – 14, 2019 OC LAFCO develops ballots. June 17, 2019 Ballots emailed to all special district presiding officers/designees. Please ensure that ballot is executed by the designee indicated in your Declaration of Qualification to Vote. July 19, 2019 Ballots due to OC LAFCO by 3:00 p.m. July 22, 2019 OC LAFCO staff (or designee) tabulates ballots and announces results. August 14, 2019 Oath of office administered (Commission Hearing). * Pursuant to Government Code §56332 (c)(1), if only one candidate is nominated for a vacant seat, that candidate shall be deemed selected, with no further proceedings. Appointment Process for OC LAFCO Regular and Alternate Special District Seats May 1, 2019 Page 3 of 3 Should you have any questions regarding the appointment process, please contact me or our Commission Clerk, Cheryl-Carter Benjamin at (714) 640-5100. Sincerely, Carolyn Emery Executive Officer Attachments: A. Declaration of Qualification to Vote B. 2019 Nomination Form – Regular and Alternate Special District Member cc: Special District General Managers Special District Board Clerks DECLARATION OF QUALIFICATION TO VOTE Brooke Jones, Presiding Officer Yorba Linda Water District 1717 E. Miraloma Avenue Placentia, CA 92870-6785 bjones@ylwd.com I, ___________________________________,* hereby attest that _____________________________**has been authorized by the Board of _____________________________________to vote in the Orange County Special District Selection Committee election as the regular voting member. The Board also designated _________________________ **as the alternate voting member. Name and Title*: _____________________________________ Signature*: ________________________________ Date: __________________________ *Must be signed by either Board President or Board Secretary ** Must be a member of the Board Completed forms must be received by OC LAFCO by 3 PM, Friday, June 7, 2019. Forms must be delivered to OC LAFCO by: (1)Email at: cemery@oclafco.org, or (2)Mail at: Orange County LAFCO 2677 North Main Street, Suite 1050 Santa Ana, CA 92705 Attn: Carolyn Emery, or (3) FAX at: (714) 640-5139, Attn: Carolyn Emery 2019 NOMINATION FORM Candidates for the Orange County Local Agency Formation Commission (OC LAFCO) CANDIDATE INFORMATION FOR REGULAR SPECIAL DISTRICT MEMBER: NAME: _____________________________________________________________ TITLE: ______________________________________________________________ DISTRICT: ______________________________________________________________ Check box if resume or statement of qualifications is attached. CANDIDATE INFORMATION FOR ALTERNATE SPECIAL DISTRICT MEMBER IF THE INCUMBENT ALTERNATE SPECIAL DISTRICT MEMBER IS ELECTED TO THE REGULAR SPECIAL DISTRICT MEMBER SEAT: NAME: _____________________________________________________________ TITLE: ______________________________________________________________ DISTRICT: ______________________________________________________________ Check box if resume or statement of qualifications is attached. SPECIAL DISTRICT SELECTION COMMITTEE MEMBER SUBMITTING NOMINATION (Must be the presiding officer or a designated alternate board member.) NAME: ___________________________________ DATE: _____________________ SIGNATURE: TITLE: DISTRICT: A resume or other supplemental information about the candidate may be included and will be distributed with the ballots. All completed nomination forms and any supplemental information must be returned to OC LAFCO by: 1. Email at: cemery@oclafco.org, or 2. Mail at: Orange County LAFCO 2677 North Main Street, Suite 1050 Santa Ana, CA 92705 Attn: Carolyn Emery, or 3. Fax at: (714) 640-5139, Attn: Carolyn Emery All forms and supplemental information must be received by OC LAFCO by 3:00 p.m. on Friday, June 7, 2019. Nomination forms or candidate information received after that deadline will not be considered. a ` BOARD OF DIRECTORS SAUNDRA F.JACOBS BETTY H.OLSON,PH.D CHARLEY WILSON CHARLES GIBSON JUSTIN McCUSKER DANIEL R.FERONS GENERAL MANAGER Santa Manfjauita Watem Distaict April 221, 2019 RECEIVED ECE"VED President Brooke Jones Yorba Linda Water District APR 3 0 2019 1717 E. Miraloma Ave. Placentia, CA 92870 By LINCr1 NA.T x,(�l5RiCT Dear President Jones: I am delighted to announce my candidacy for Special District Representative to the Orange County Local Agency Formation Commission("LAFCO"). I would be honored to receive your district's support to elect me as your next LAFCO Commissioner. In the next few years, LAFCO will be called on to address a host of issues on the governance in our county particularly as it relates to special districts. From the planned schedule of Municipal Service Reviews to the ultimate governance of the remaining unincorporated areas of the county— many of which are in south Orange County where I currently serve on the Board of the Santa Margarita Water District; there is much work to be done. My passion for public service and the work of special districts comes from my 23 years on the Santa Margarita Water District Board. As your President of the Executive Committee for the Independent Special Districts of Orange County I have a keen interest and awareness of the needs and requirements for the success of all special districts—from library, cemetery and vector control districts,to water, sewer, and other community services,both non-enterprise and enterprise. I hope that I have adequately demonstrated my willingness to provide leadership in organization, advo- cacy, and communications to benefit and nurture special districts of every stripe and that I am fully prepared to step in the role of LAFCO Commissioner. I have enclosed some background information on my experience in public service and business as well as my platform as a candidate for LAFCO Special District Representative. I would be de- lighted to meet with you and your board colleagues to discuss my candidacy and answer any ques- tions you may have. I hope you will contact me at 949/702-1145 or at saundrainasmwd.com. It would be my honor to serve you and our organizations and I humbly ask for your vote and support. Sincerely, aunara Jacobs, President Santa Margarita Water District Santa Margarita Water District •26111 Antonio Parkway,Rancho Santa Margarita,CA 92688 www.SMWD.com 0 (949)459-6420 Saundra F. Jacobs Candidate for Special District Representative,LAFCO Special District Organizations • President, Santa Margarita Water District, (Current; Elected board member since 1996) • President, Executive Committee, Independent Special Districts of Orange County, (Cur- rent; Board member since 1999 • South Orange County Watershed Management Area Executive Committee. (Current member, Former Chair) • Santiago Aqueduct Committee, Board of Directors, Alternate • California Special Districts Association, Member • California Women's Leadership Association, member • Association of California Water Agencies (ACWA), Region 10 member, Communica- tions Committee • ACWA Joint Powers Authority, Executive Committee Member • Orange County Water Association, member • Former President, Board of Directors, Lake Mission Viejo Association Professional Organizations • Registered Environmental Assessor • American Planning Association, Member • Association of Environmental Professionals, Member • California Wireless Association, Member Personal Backiaround I've been married to my husband Jeff for 25 years and have lived in Mission Viejo since 1992. I've raised 4 step-daughters and now have 14 beautiful grandchildren. I have an engrained work ethic from my mother who raised me and my 3 siblings by herself. Business Background I have been a business owner for the past 25 years and I specialize in regulatory compliance in the telecommunication industry. As a business owner of over 80 employees, 1 understand the value of budgets and working within those budgets. No Conflict of Interest I do not have any conflicts of interest or other external influences that would affect my judgement and decisions as a LAFCO Commissioner. Platform I believe LAFCO is a facilitating organization. Its job is to support and enable cooperative and voluntary applications and conduct the reviews and inquiries required by statute without bias or favor. I believe in local control; that local communities know what is best for their ratepayers, their residents and their businesses. I do not support involuntary consolidations or dissolutions of special districts or other units of government except in extreme cases of insolvency or other dire circumstances. 2 ITEM NO. 8.2 AGENDA REPORT Meeting Date: May 14, 2019 To:Board of Directors From:Marc Marcantonio, General Manager Prepared By:Annie Alexander, Executive Assistant Subject:Request from Mesa Water District for Financial Contribution to Support Advocacy Efforts Related to South Coast Air Quality Management District's (SCAQMD) Proposed Amended Rule (PAR) 1403 STAFF RECOMMENDATION: That the Board of Directors consider including funds in the budget for Fiscal Year 2020 to support advocacy efforts related to PAR 1403 to be expended at the discretion of the General Manager. DISCUSSION: Mesa Water District has requested contributions to support the Buried Utilities Coalition (BUC) advocacy efforts pertaining to SCAQMD's PAR 1403. Rule 1403 specifies work practice requirements to limit asbestos emissions from building and facility demolition and renovation activities, including the removal and associated disturbance of asbestos- containing materials. PAR 1403 would delay and increase the cost of buried water utilities' repairs to asbestos-cement pipe. Mesa Water estimates its financial investment for technical expertise and advocacy services related to this matter will total $52,500 by June 30, 2019. This effort and associated expenditures are also expected to continue through the next fiscal year. Mesa Water has requested YLWD and some other local agencies consider contributing funds to support their advocacy efforts. ATTACHMENTS: Name:Description:Type: Mesa_Water_Advocacy_Effort.pdf Backup Material Backup Material From: Stacy Taylor <stacyt@mesawater.org> Sent: Tuesday, April 2, 2019 10:33 AM Subject: SCAQMD PAR 1403 (asbestos) - Advocacy Effort support request Greetings, As you are aware, Mesa Water District has taken the lead on organizing the Buried Utilities Coalition (BUC) for advocacy pertaining to the South Coast Air Quality Management District’s (SCAQMD) Proposed Amended Rule (PAR) 1403 regarding how asbestos is handled…this includes how buried water utilities handle our AC Pipe repairs. Mesa Water® has been engaged on this issue since January 2019, and some progress has been made in that the BUC was able to delay SCAQMD’s adoption of PAR 1403, and we facilitated a meeting which took place in March between the BUC and SCAQMD staff. As we continue the BUC’s advocacy with SCAQMD Governing Board members and their consultants/assistants, we are also anticipating that SCAQMD staff will invite the BUC to a Working Group meeting to take place in the near future. In addition to my time dedicated on this effort, Mesa Water retained the services of: Yorke Engineering (for technical expertise); and, Whittingham Public Affairs Advisors (for advocacy services). As of March 31st, Mesa Water has spent $10,000 with Yorke and $15,000 with Whittingham, and we have committed to an added $10,000 with Yorke and $17,500 with Whittingham for services through June 30, 2019 when our grand total investment will be $52,500. I’m contacting you at the request of Mesa Water’s General Manager, Paul E. Shoenberger, P.E., to see if your agency may be able to contribute funds to this effort. Any amount would be appreciated. In addition to contacting ETWD, IRWD, MNWD, MWDOC, SMWD, and YLWD, we have submitted this request to the cities of Anaheim and Huntington Beach. I will let you know when any organization commits to contribute funds (and how much). Meanwhile, Mesa Water would be grateful if your agency could please consider this request and kindly get back to me at your earliest opportunity with your response. Also, feel free to contact me with any questions regarding this matter. Thanks, Stacy Taylor External Affairs Manager 1965 Placentia Ave • Costa Mesa, CA 92627 tel 714.791.0848 • dept 949.631.1201 StacyT@MesaWater.org • MesaWater.org ITEM NO. 8.3 AGENDA REPORT Meeting Date: May 14, 2019 Budgeted:No To:Board of Directors Cost Estimate:$5,000 - $10,000 From:Marc Marcantonio, General Manager Prepared By:Pasquale Talarico, Director of Public Affairs Subject:Request from Municipal Water District of Orange County (MWDOC) for Financial Contribution to Conduct Financial Analysis for Small Non-Compliant Drinking Water Systems STAFF RECOMMENDATION: That the Board of Directors consider this request and provide direction to staff. DISCUSSION: MWDOC is working with Brown & Caldwell to add to a study being conducted by the California Urban Water Agencies. The study will classify the nature of non-compliant drinking water systems and match them with potential solutions to develop a high- level cost estimate to resolve drinking water issues in the State. MWDOC’s share of the study is $141,772 and they're encouraging Yorba Linda Water District to join them in this effort by helping to fund the add-on scope with a cost-share contribution in the amount of $5,000 - $10,000, or whatever level the YLWD wishes to contribute. ATTACHMENTS: Name:Description:Type: MWDOC_Request.pdf Backup Material Backup Material MWDOC_Staff_Report.pdf Backup Material Backup Material MUNICIPAL WATER DISTRICT OF ORANGE COUNTY Street Address: 18700 Ward Street Fountain Valley, California 92708 Mailing Address: P.O. Box 20895 Fountain Valley, CA 92728-0895 (714) 963-3058 Fax: (714) 964-9389 www.mwdoc.com Brett R. Barbre President Joan C. Finnegan Vice President Larry D. Dick Director Wayne S. Osborne Director Megan Yoo Schneider Director Sat Tamaribuchi Director Jeffery M. Thomas Director Robert J. Hunter General Manager MEMBER AGENCIES City of Brea City of Buena Park East Orange County Water District El Toro Water District Emerald Bay Service District City of Fountain Valley City of Garden Grove Golden State Water Co. City of Huntington Beach Irvine Ranch Water District Laguna Beach County Water District City of La Habra City of La Palma Mesa Water District Moulton Niguel Water District City of Newport Beach City of Orange Orange County Water District City of San Clemente City of San Juan Capistrano Santa Margarita Water District City of Seal Beach Serrano Water District South Coast Water District Trabuco Canyon Water District City of Tustin City of Westminster Yorba Linda Water District May 2, 2019 RE: MWDOC Seeks Better Information to Oppose the State Water Tax Dear Interested Party, The Municipal Water District of Orange County (MWDOC) is opposed to any type of water tax or water fee that has been discussed in the Legislature during the last couple of years. The Governor and members of the Legislature are looking for sustainable, ongoing revenue sources to provide assistance to communities with contaminated drinking water, primarily in the Central Valley. One approach that has been introduced the past two legislative sessions includes a water tax at about $1 per month to fund primarily disadvantaged communities that currently do not have safe, reliable drinking water. This is an issue that absolutely needs to be addressed, but a water tax is not the right approach. If passed, the tax will grow. Future taxes or fees on water could be required to fund a statewide Low Income Rate Assistance Program, as well as additional projects outlined in the DWR California Water Plan. We may be looking at $15 per month or more in water taxes in the very near future Like you, MWDOC supports access to safe, clean drinking water for all residents throughout California. However, we believe that well-founded information on this topic has been slow to develop. The California Urban Water Agencies (CUWA) is, a non-advocacy group of 11 urban water agencies, is currently working in conjunction with the Water Research Foundation and Pacific Institute. CUWA has authorized a study by Brown and Caldwell to classify the nature of the non- compliant drinking water systems and match them with potential solutions to develop a high level cost estimate to resolve drinking water issues in the State. The study will focus on small systems (10,000 people served) with persistent Safe Drinking Water Act violations, along with smaller systems that could be consolidated relatively easily. MWDOC reviewed the scope of work by CUWA and noted that an analysis of the large sums of funding already provided through grants to help bring small agencies into compliance over the last seven years would further the understanding of what has worked and not worked. MWDOC has decided to undertake a separate study with Brown and Caldwell to analyze where funds have been spent to date, the resultant outcomes, and where additional funds would be effective. The results of this work may inform the State’s needs assessment and help to direct resources where they would have MWDOC Seeks Better Information to Oppose the State Water Tax May 1, 2019 Page 2 MUNICIPAL WATER DISTRICT OF ORANGE COUNTY the greatest impact. MWDOC agreed to fund the add-on at an estimated cost of $141,272. Our Board has requested that MWDOC staff seek potential funding contributions from other water providers to help fund this work. While we have already contracted for the study, we are reaching out to you now as we felt it prudent not to delay the study. At this time MWDOC is seeking funding assistance from other agencies in the $5,000 to $10,000 range, or whatever level you feel is appropriate for your agency to contribute. MWDOC will keep a full accounting and provide credit and recognition for all contributing agencies, and of course, share the results of the study. Attached is our Board write-up, background and information on the Study Scope of Work from Brown and Caldwell (attached). Katie Porter is the lead on the study and can be reached at 213- 271-2239. Should additional information be needed, do not hesitate to call me at 714-593-5026 or Karl Seckel our Assistant General Manager at 714-593-5024. Sincerely, Robert J. Hunter General Manager Attachment: Study Scope of Work from Brown & Caldwell Budgeted (Y/N): No Budgeted amount: TBD Core X Choice __ Action item amount: TBD Line item: Fiscal Impact (explain if unbudgeted): Item No. 8-5 REVISED ACTION ITEM March 20, 2019 TO: Board of Directors FROM: Public Affairs and Legislation Committee (Directors Dick, Osborne, and Thomas) Robert Hunter Staff Contact: Heather Baez General Manager SUBJECT: Sole Source Contract for Brown and Caldwell to Develop Information Relative to Small Non-Compliant California Drinking Water Systems STAFF RECOMMENDATION Staff recommends the Board of Directors to authorize the GM to enter into a contract with Brown and Caldwell to complete the scope of work attached at a cost not to exceed $141,772. The Committee also directed staff to seek contributions towards with work from agencies within and outside of Orange County. COMMITTEE RECOMMENDATION Committee discussed the study in detail and had a number of questions. During the meeting, staff received an email and reported the Brown & Caldwell (B&C) estimated cost of the study at $141,772. Questions raised and responses to those questions are: Will MWDOC own the database upon completion of the study? This issue was discussed with B&C. CUWA is paying B&C to develop one database (who are the non-compliant entities, what water quality problems do they have, what will it take to correct, etc) and CUWA will be the owner of this database, parts of which they will share for portions of the MWDOC study. MWDOC is paying B&C to develop the financial database (what has been spent, what was achieved, what is the remaining gap, how much funding is available, etc.) and per our contract, MW DOC would be the owner. At that point, we can share our database and make it available to whomever we desire. Page 2 The Board asked if staff can solicit funding assistance from agencies within and outside of OC to help support our costs. MWDOC will commit to the entire amount and will seek funding partners in such a way that the contract will not be held up or delayed in waiting for other contributions. Staff also confirmed that CUWA nor B&C would have a problem with these efforts as long as MWDOC is the only signatory to the contract. Will any intellectual property (IP) be maintained by MWDOC? Neither staff nor B&C see the likelihood of any IP coming out of the study, but our contract provides that any IP is owned by MWDOC? What is the cost of the study? The budgeted costs developed by B&C were $141,772 in accordance with the attached breakdown. Staff confirmed that B&C is comfortable working on a time and materials basis not to exceed the amount shown. In this manner, if all the money is not needed, it will not be spent. BACKGROUND In September 2018, the MWDOC Board of Directors authorized a scoping study for Black & Veatch to begin preparation of cost estimates to bring, small, non-compliant water systems, statewide, into compliance. In the process of researching this effort, and meeting with other groups who have done similar work, it was determined that Brown and Caldwell, collaborating with the California Urban Water Agencies (CUWA) and the Pacific Institute, was developing a similar study. MWDOC staff reached out to Brown and Caldwell to see if there was an opportunity to “add-on” to what was already being funded by CUWA to take advantage of economies of scale. REPORT MWDOC discussed our interests with staff from Brown and Caldwell and requested that they prepare a scope of work and cost estimate. We requested that they focus on a financial analysis of funds that have been spent so far on chronically non-compliant water systems, and what has been accomplished. We believe the insight from this analysis will assist in presenting information to the SWRCB and others to re-focus the “water tax” discussions. Attached is the scope of work that Brown and Caldwell has proposed for MWDOC to research to determine the impacts/outcomes of past investments and delineate areas where additional funds could be targeted now to address systems with persistent health-based violations. In addition, Brown and Caldwell has shared an overview of the work they will be completing concurrently for CUWA and the Pacific Institute. The CUWA study focuses on small public water systems with persistent drinking water quality violations (at least 12 or more quarters of violations out of the 20 quarters between 2013 and 2017). Although in some instances, there is more current data available, not all water quality data is housed in the same database, especially if a contaminant is not regulated. CUWA has augmented information on drinking water violations and then added information relative to 1,2,3-TCP (only regulated since 2017) and Chromium VI (not yet regulated but being developed). The report will identify systems with long-term water quality problems, the approaches best Page 3 suited for those systems based on type of contaminant and proximity to water of higher quality, and the potential range of costs for these solutions. This can inform the ongoing discussions at the State level on the best way to find long-lasting sustainable solutions for all failing water systems. Work on both studies is expected to be done concurrently, with both studies complementing one another without conflicting with one another. When advised about MWDOC’s areas of interest, the CUWA Board expressed enthusiasm for the additional work as it will improve the overall effort. The completion date is estimated to be August 2019. Brown and Caldwell has not yet provided a cost to complete the scope of work. They indicated the scoping would be completed and provided to MWDOC prior to the March 18 PAL meeting. Staff will provide it to the Board as soon as it is received. Attached: Brown and Caldwell proposed Scope of Work - Proposal for MWDOC Financial Analysis for Small Non-Compliant Drinking Water System CUWA and the Pacific Institute - Summary of Work, Solutions for Failing Drinking Water Systems in California Municipal Water District of Orange County (MWDOC) - Financial Analysis for Small Non-Compliant Drinking Water SystemsPorter,KatieHooks,Paulette EPaulson, CindyRuby,KatieMcCauley,TaylorSurio,Lindsay BPhase Phase Description PM PATotal Labor HoursTotal Labor Effort ODCs Total Effort$280.00$123.00$348.00$145.00$123.00$101.00100 Project Management24 16 0 0 0 848 9,496 100 9,596Leave Blank and Protected200Identify Funding Sources and Existing Utilization48 0 8 80 40 0176 32,744 0 32,744Leave Blank and Protected300 Determine Funding Gap80 0 8 150 150 0388 65,384 0 65,384Leave Blank and Protected400 Develop Draft and Final Report40 8 8 80 60 0196 33,948 100 34,048Leave Blank and ProtectedGRAND TOTAL 192 24 24 310 250 8 808 141,572 200 141,772Hours and Dollars are rounded to nearest whole number. To display decimals, change the format of the cells. 808March 15, 2019Brown and Caldwell March 13, 2019 1 Proposal for MWDOC Financial Analysis for Small Non-Compliant Drinking Water Systems Background: Nearly a million Californians receive drinking water from failing public water systems, primarily from small sized water systems with persistent compliance issues. The State of California, State Water Resources Control Board (SWRCB) is exploring various approaches to funding their Human Right to Water (HR2W) initiative and has embarked on a needs assessment, which is expected to be completed in 2021. A number of funding sources are being leveraged to address systems in violation; however, the reporting of results of improvements and the need for additional funding has not been quantified. Estimates in legislative discussions have indicated that the need is around $140 million, however it is unclear how this was quantified and there is no central source of information that documents the collective financial efforts and results of efforts being undertaken to solve this problem. A recent analysis by the California Urban Water Agencies (CUWA) showed that nearly 700,000 people are served by small public water systems with one or more water quality violation(s) over the last five years. Of these, 150 systems collectively serving over 137,000 people have had persistent violations, defined for the purpose of their analysis as health-based violations in 12 or more quarters from 2013- 2017 (Figure 1), but additional information is required to ascertain the cost of returning to compliance and how 100% compliance might be achieved. Figure 1 also predicts potential persistent non- compliance from chromium VI which is expected to be regulated in the near future. Figure 1: Types of Water Quality Challenges for Public Water Systems with Persistent Violations (2013- 2017). Source: CUWA, 2018 An analysis of where funds have been spent to date, the resultant outcomes, and where additional funds are needed would provide valuable information to the State Board in its current needs assessment and help to direct resources where they would have the greatest impact. It is also complementary to an ongoing Water Research Foundation (WRF) project by CUWA/Pacific Institute which will match potential solutions and develop a high-level estimate of costs for persistently violating systems. Brown and Caldwell (BC) staff have been engaged in various discussions regarding Safe and Affordable Water in California via our involvement with CUWA and the California-Nevada Section of AWWA (CA-NV AWWA). These organizations have been examining ways to make progress and leverage existing resources. The information developed from the project described below can contribute to and March 13, 2019 2 complement this body of work by informing the ongoing discussions at the State level and encourage lasting solutions rather than short-term fixes requiring additional assistance/intervention down the road. Project Goal/Outcome: Determine the impacts/outcomes of past investments and delineate areas where additional funds could be directed to address systems with persistent health-based violations. Scope: This effort funded by Municipal Water District of Orange County (MWDOC) will help to examine which specific system’s needs can be met with existing funding sources, and which will require new or additional sources of funding. • Existing Resources/Identified Projects - Review existing financial reports (e.g. Drinking Water State Revolving Fund (DWSRF), Proposition 1, Proposition 84, others,) and what remedies and investments are already in process to the extent data and information are available. For example, several projects to improve drinking water quality have already been identified and are in various stages of the funding approval process. Based on conversations with Division of Drinking Water (DDW) staff, systems with arsenic compliance issues are in various stages of funding and the process is regularly being tracked by DDW and USEPA Region 9. Since this information is not readily available outside these agencies, it is possible that the financial need to address these systems may be double-counted. The Office of Financial Assistance also tracks the status of funding applications. It would be good to understand where systems are on the funding path, and what additional steps and funding are needed to provide solutions. To accomplish this, BC will: o Classify projects as either temporary (e.g. interim water source such as provision of bottled water) or long-term solutions (e.g. new treatment system, new management structure). The focus would be on long-term solutions as the ultimate goal to establish system sustainability and resolve the recurring compliance issues and prevent them from recurring, rather than continuing to subsidize interim fixes. o Understand whether one-time funding measures have been effective. o Classify additional funding needs for projects in progress. o Identify existing funding sources that are underutilized. o Review grants for technical assistance providers and NGOs (e.g. RCAC, CA Rural Water, CWC, Self-Help, etc.) to determine what work is underway and how effective the work has been in identifying costs and solutions. • Future Projects – Identify which systems do not have an identified project (remedy) or potential funding source and leverage the upcoming WRF project by CUWA/Pacific Institute for class 5 treatment costs for arsenic and 1,2,3-TCP as well as the SWRCB estimate of needs if available. A targeted approach to this analysis will help identify where the greatest progress can be made. The 2018 CUWA Issue Brief further determined that of the 150 systems in persistent violation, 80% of the population affected by persistent violations can be addressed by initially targeting 20% of these systems (those with ≥200 connections), or 33 systems (Table 1). March 13, 2019 3 Table 1: Population Impacted by System Size for Public Water Systems with Persistent Violations (2013- 2017). Source: CUWA, 2018 We recommend segmenting this financial analysis to first consider the 33 systems with ≥200 connections and then examine the remaining 117 systems. This analysis will leverage CUWA’s compiled data which focuses on community water systems and schools/daycares serving < 10,000 people and is more robust than the HR2W database. Deliverable: BC will produce a report documenting findings from the above document review and analyses. The overall goal of the report will be to articulate and quantify the needs met by existing funding and what additional funding may be needed to achieve compliance for persistently violating systems. Schedule: Assuming NTP of April 2019, BC proposes to deliver a draft report by August 2019 to inform the ongoing discussions at the State level on sustainable solutions for failing water systems. BC will incorporate comments from MWDOC and will deliver a final report by October 2019. Technical Lead: Katie Porter Katie Porter is based in Brown and Caldwell’s Los Angeles office and has been focused on California water issues for the last ten years consulting on regulatory compliance, resource planning, and aging infrastructure projects. She previously served as an Associate Branch Chief in USEPA’s Office of Ground Water and Drinking Water in Washington DC, where she developed national policy in conformance with the Safe Drinking Water Act (SDWA), participated on workgroups for regulatory development, and implemented programs to improve system sustainability and small system compliance. Katie is a staff member for the California Urban Water Agencies (CUWA) focused on Water Accessibility & Affordability issues and Water Quality issues. She also serves as the Chair of the SDWA committee for the California- Nevada Section of AWWA, and is a Board Member of the Urban Water Institute. Katie has a BS in Chemical Engineering from MIT and an MS in Chemical Engineering from Tufts University. She is a registered Professional Engineer in CA and a certified Envision Sustainability Professional. Reference: California Urban Water Agencies. Issue Brief - Restoring Water Accessibility in California. 2019 https://www.cuwa.org/pubs/2019/accessibility-update Project Summary: Solutions for Failing Drinking Water Systems in California Research Team: California Urban Water Agencies (CUWA) and Pacific Institute Supported by the Water Research Foundation February 2019 An estimated million Californians receive unsafe drinking water from failing public water systems. Yet there are solutions at hand: capital improvements for treatment systems, consolidation, water trading, and financial assistance for operations and maintenance can help systems deliver safe drinking water. CUWA and Pacific Institute plan to develop a decision tree to match failing systems with likely solutions. The project will focus on small public water systems with persistent drinking water quality violations. The report will identify systems with long-term water quality problems, the approaches best suited for those systems based on type of contaminant and proximity to water of higher quality, and the potential range of costs for these solutions. This can inform the ongoing discussions at the State level on the best way to find long-lasting sustainable solutions for all failing water systems. Accessibility to safe drinking water is a national problem, and the strategy developed under this research could be leveraged by other states. Project Goal/Outcome: Develop a report detailing a systematic approach to dealing with communities lacking consistent access to safe water, using small failing public water systems in California as a case study for a framework that could be applied in other states. Scope: Develop a decision tree to classify systems and match them with potential solutions, and develop a high level estimate of costs. Focus on small systems (200 – 10,000 people served) with persistent Safe Drinking Water Act violations, along with smaller systems that could be consolidated relatively easily. Task 1: Develop Decision Tree and Match Systems with Solutions • Focusing on small systems with long-term water quality problems, classify systems according to major characteristics: type of contaminant, proximity to other water systems, potential for water trading, and capacity deficiencies. • Link categories of systems with likely solutions: treatment upgrades, consolidation, water trading, and operations and maintenance support. Task 2: Explore Likely Solutions and Estimate Costs • Identify innovative technology solutions (e.g. BATs, package systems, remote operation) • Provide high level estimates of treatment and operation costs to the extent possible Task 3: Gather Stakeholder Input • Consult an Advisory Committee representing a range of viewpoints • Conduct site visit to provide better understanding of existing conditions and technical challenges • Convene a thought-leaders workshop to brainstorm innovative technical solutions. Schedule: • Site Visit: March 2019 • Thought-Leaders Workshop: April 2019 • Preliminary Findings: Summer 2019 • Final Report: Spring 2020 ITEM NO. 8.4 AGENDA REPORT Meeting Date: May 14, 2019 To:Board of Directors From:Marc Marcantonio, General Manager Prepared By:Annie Alexander, Executive Assistant Subject:Request from California Association of Sanitation Agencies (CASA) Education Foundation for Donation to Support Scholarship Program STAFF RECOMMENDATION: That the Board of Directors consider this request and provide direction to staff. DISCUSSION: At the March 25, 2018 regular Board meeting, Mike Dunbar, President of the CASA Education Foundation, provided a presentation regarding the agency's purpose and goals. Mr. Dunbar also requested the District consider making a contribution to help support the Foundation's scholarship program. The program awards $5,000 scholarships to students pursuing higher education in the following fields and who show an interest in serving the clean water community: Public Administration Environmental Science Engineering Water Resources Resource Economics Wastewater Operations Certification Other degrees which would prepare a student for a career in a clean water agency. Three scholarships were awarded in 2018. Additional information regarding the program is available on the agency's website: https://casaweb.org/about-us/casa-education-foundation/ ATTACHMENTS: Name:Description:Type: CASA_Edu_Fdn_Presentation.pdf Backup Material Backup Material jwCASA EDUCATION FOUNDATION CASA Education Foundation Supporting Students Committed to Clean Water and Environmental Protection 0 M---1 wmm,.,- M,4 MCASA EDUCATION FOUNDATION INTRODUCTION Why - Education Foundation What - Goals of Education Foundation Who - Education Foundation r MCASA-, EDUCATION FOUNDATION Why - • Need for next generation of clean water professionals • Present $5,,000 scholarships to students MCASA EDUCATION FOUNDATION 2018 Success • In 6 years (since 2013) the F oundation s contributions have reached $118,750., • 16 college students, in five years received scholarships totaling $77,500. We've had $20,000 in contributions from members this year. • The Associates committee contributes every year to the Foundation, totaling $251000 to date. 2018 Associates Reception and silent auction raised $3,800 in January. • The selection committee received and reviewed 12 student applications and granted three scholarships in 2018. jXA- SA- EDUCATION FOUNDATION Who -- 2018/2019 Board of Directors • Mike Dunbar, Emerald Bay Service District • Jim Dunbar, Lystek International • E. J. Shalaby - DNS Strategic Partners • Joyce Gwidt, CASA Conferences Ft Fundraising • Bobbi Larson, CASA Board • Marco Palilla, HDR • Rick Vaccaro, Fairfield Suisun Sewer District • Jim Herberg, OCSD jW ksI EDUCATION FOUNDATION Help Support the CASA Education Foundation Program • Help replenish the scholarship account. • Spread the word. Let your academic community know about the Foundation's scholarship program. • Thank for your support ! } f - Pq w 1�1 'AN tkp -�M' Scholarships for F Clean Water Professionals The CASA Education Foundation wants to help you make a difference within the clean water community. With a CASA Education Foundation scholarship, you can focus more on your studies and less on your expenses. The scholarship program is open to California undergraduate The deadline to apply students seeking a degree in .-_. for a scholarship Is April 28, 2019. • Public Administration • Environmental Science • Engineering • Natural Resources How to Apply • Water Resources For more information about the CASA Education Foundation • Resource Economics scholarship program, please visit: • Wastewater Operations Certification Casaweb.orglabout-uslcasa-education-foundation • Related degrees Sponsored by the California Association of Sanitation Agencies (CASA) in partnership with the CASA E4ucation Foundation. jwC SA EDUCATION FOUNDATION Questions? Contact: Mike Dunbar CASA Education Foundation, President (949) 494-8572 mdunbar:�ebservicedistrkct.com Bobbi Larson CASA Education Foundation Board Member (916) 446-0388 blars,.. casae,..-.or Debbie Welch CASA Education Foundation Board Liaison (916) 446-0388 dwu,..,n wcasaweo.or ITEM NO. 8.5 AGENDA REPORT Meeting Date: May 14, 2019 To:Board of Directors From:Marc Marcantonio, General Manager Prepared By:Kaden Young, Management Analyst Subject:Draft Operating Budgets for Fiscal Years 2020-21 SUMMARY: At the April 23, 2019 budget workshop, the Board of Directors asked staff to provide an update in regards to potential base charge adjustments. Utilizing the water model, staff executed five different scenarios. STAFF RECOMMENDATION: That the Board of Directors approve and adopt a 9% increase to the base charge, effective July 1, 2019, and any potential commodity rate adjustment by October 1, 2019. DISCUSSION: For FY20 – FY24, rate adjustments to the base charge and commodity rate are necessary for the District to provide safe and reliable water to protect public health and the environment, meet projected annual maintenance and operation costs to effectively maintain existing infrastructure, and provide superior customer service. Staff recommended a minimum 10% increase to the base charge for FY20 and FY21 at the April 23, 2019 budget workshop. As a result, the BOD requested staff to prepare and present the results of potential rate adjustments from various scenarios. 1. 5% increase to base charge, effective July 1 st of every fiscal year 2. 9% increase to base charge, effective July 1 st of every fiscal year 3. 9% increase to base charge, effective January 1 st of every fiscal year 4. 10% increase to base charge, effective July 1 st of every fiscal year 5. 10% increase to base charge, effective January 1st of every fiscal year In addition to the base charge adjustments, staff projected commodity rate adjustments (actual pass-through cost) for each fiscal year with an effective date of October 1st: FY20: 1¢ per unit increase, [$2.81/unit] FY21: 3¢ per unit increase, [$2.84/unit] FY22: 14¢ per unit increase, [$2.98/unit] FY23: 6¢ per unit increase, [$3.04/unit] FY24: 9¢ per unit increase, [$3.13/unit] In all five scenarios, the debt covenant ratio was within or exceeded the preferred acceptable range of 225%. However, on the contrary, the days in cash requirement of 365 days were never met. Many variables can change the projected outcome on a yearly basis including, but are not limited to: Higher than expected volumetric revenue; a 1% increase in retail consumption would yield approximately $222,872 per year Utilize debt funding for CIP (scenarios did not include any new debt funding); PAYGO depletes unrestricted reserves to a level that affects the District’s credit and financial stability, as well as days in cash Decreasing/increasing total operating expenses from which was projected Attachment 1 (July Effective Date) and (January Effective Date) includes the required funding amount to meet the days in cash for all scenarios, by year. Attachment 2 - Statements and ProForma provides the consolidated statement, sewer statement, water statement, and Water ProForma for further detail. STRATEGIC PLAN: G2 1D - Retain cash on hand of 365+ days at fiscal year end. G2 1A G2 1B G2 1C ATTACHMENTS: Name:Description:Type: Item_9-3_Attachment.pdf Attachment 1 - Rate Adjustment Scenarios Backup Material Statements_and_ProForma.pdf Attachment 2 - Statements and ProForma Backup Material BASE CHARGE ADJUSTMENTS: EFFECTIVE JULY 1ST OF EVERY YEAR 5%Base Charge on July 1st of every year FY20 FY21 FY22 FY23 FY24 Base Charge Adjustment Revenue $ 491,303 $ 517,356 $ 544,908 $ 573,877 $ 604,192 Adjusted Commodity Rate* $ 2.81 $ 2.84 $ 2.98 $ 3.04 $ 3.13 Projected Pass Through $ 0.01 $ 0.03 $ 0.14 $ 0.06 $ 0.09 Commodity Rate Adjustment Revenue $ 52,225 $ 159,809 $ 745,774 $ 319,618 $ 479,426 Debt Covenant Ratio 246% 229% 205% Reserve Balance $ 29,136,490 $ 26,658,721 $ 23,612,515 $ 20,351,132 $ 16,496,414 Days in Cash 351 302 257 211 163 Required$to meet metrics $ 1,126,196 $ 5,525,700 $ 9,927,710 $ 14,882,633 $ 20,489,885 9%Base Charge on July 1st of every year FY20 FY21 FY22 FY23 FY24 Base Charge Adjustment Revenue $ 884,345 $ 966,717 $ 1,056,987 $ 1,155,587 $ 1,262,979 Adjusted Commodity Rate* $ 2.81 $ 2.84 $ 2.98 $ 3.04 $ 3.13 Projected Pass Through $ 0.01 $ 0.03 $ 0.14 $ 0.06 $ 0.09 Commodity Rate Adjustment Revenue $ 52,225 $ 159,809 $ 745,774 $ 319,618 $ 479,426 Debt Covenant Ratio 260% 255% 281% 295% 308% Reserve Balance $ 29,529,533 $ 27,926,375 $ 26,309,909 $ 25,120,686 $ 24,077,346 Days in Cash 356 317 286 260 238 Required$to meet metrics $ 733,154 $ 4,258,046 $ 7,230,317 $ 10,113,080 $ 12,908,954 10%Base Charge on July 1st of every year FY20 FY21 FY22 FY23 FY24 Base Charge Adjustment Revenue $ 982,606 $ 1,083,985 $ 1,196,079 $ 1,319,650 $ 1,455,521 Adjusted Commodity Rate* $ 2.81 $ 2.84 $ 2.98 $ 3.04 $ 3.13 Projected Pass Through $ 0.01 $ 0.03 $ 0.14 $ 0.06 $ 0.09 Commodity Rate Adjustment Revenue $ 52,225 $ 159,809 $ 745,774 $ 319,618 $ 479,426 Debt Covenant Ratio 264% 264% 295% 315% 336% Reserve Balance $ 29,627,793 $ 28,248,276 $ 27,005,715 $ 26,370,631 $ 26,095,926 Days in Cash 357 320 294 273 258 Required$to meet metrics $ 634,893 $ 3,936,145 $ 6,534,511 $ 8,863,134 $ 10,890,374 *Effective October 1st of every fiscal year Attachment 1—July Effective Date BASE CHARGE ADJUSTMENTS: EFFECTIVE JANUARY IST OF EVERY YEAR 9%Base Charge on January 1st of every year FY20 FY21 FY22 FY23 FY24 Base Charge Adjustment Revenue $ 429,669 $ 469,690 $ 513,549 $ 561,455 $ 613,633 Adjusted Commodity Rate $ 2.81 $ 2.84 $ 2.98 $ 3.04 $ 3.13 Projected Pass Through $ 0.01 $ 0.03 $ 0.14 $ 0.06 $ 0.09 Commodity Rate Adjustment Revenue $ 34,653 $ 106,038 $ 494,845 $ 212,076 $ 318,115 Debt Covenant Ratio 243% 235% 251% 267% 276% Reserve Balance $ 29,057,284 $ 26,885,168 $ 24,439,393 $ 22,494,537 $ 20,566,899 Days in Cash 350 305 266 233 203 Required$to meet metrics $ 1,205,402 $ 5,299,253 $ 9,100,833 $ 12,739,229 $ 16,419,401 10% Base Charge on January 1st of every year FY20 FY21 FY22 FY23 FY24 Base Charge Adjustment Revenue $ 477,410 $ 526,666 $ 581,128 $ 641,167 $ 707,181 Adjusted Commodity Rate $ 2.81 $ 2.84 $ 2.98 $ 3.04 $ 3.13 Projected Pass Through $ 0.01 $ 0.03 $ 0.14 $ 0.06 $ 0.09 Commodity Rate Adjustment Revenue $ 34,653 $ 106,038 $ 494,845 $ 212,076 $ 318,115 Debt Covenant Ratio 245% 241% 262% 284% 300% Reserve Balance $ 29,105,025 $ 27,094,298 $ 24,947,308 $ 23,466,652 $ 22,200,704 Days in Cash 351 307 271 243 219 Required$to meet metrics $ 1,157,661 $ 5,090,123 $ 8,592,918 $ 11,767,114 $ 14,785,596 *Effective January 1st of every fiscal year Attachment 2—January Effective Date Yorba Linda Water District Water&Sewer Enterprise Draft of Operating Budgets for FY 20 and FY 21 FY18 FY18 FY19 FY19 FY20 FY21 Budget Actual Budget Forecast Proposed Proposed Budget Budget Revenue(Operating): Water Revenue(Residential) $14,278,688 $16,151,211 $16,592,437 $15,335,194 $16,548,758 $16,946,962 Water Revenue(Commercial&Fire Det.) $ 2,071,031 $ 1,897,346 $ 1,964,205 $ 1,834,606 $ 1,872,073 $ 1,969,765 Water Revenue(Landscape/Irrigation) $ 3,079,054 $ 4,031,102 $ 3,863,805 $ 3,552,435 $ 3,917,982 $ 4,056,592 Service Charges $10,106,382 $10,002,493 $10,116,528 $10,046,253 $10,988,263 $12,011,758 Sewer Charge Revenue $ 2,032,245 $ 2,064,083 $ 2,229,246 $ 2,188,390 $ 2,421,665 $ 2,447,582 Sewer Parcel Assessments $ 223,000 $ 266,726 $ 273,250 $ 278,967 $ 324,173 $ 324,173 Other Operating Revenue' $ 866,161 $ 831,733 $ 894,617 $ 993.202 $ 964.708 $ 1.017.210 Total Operating Revenue $32,656,561 $35,244,694 $35,934,088 $34,229,047 $37,037,621 $38,774,042 Revenue(Non-Operating): Interest $ 310,000 $ 518,600 $ 358,000 $ 684,563 $ 812,306 $ 838,230 Property Tax $ 1,710,000 $ 1,749,957 $ 1,850,000 $ 1,770,314 $ 1,820,471 $ 1,850,000 Other Non-Operating Revenue $ 624,521 $ 413,465 $ 639,846 $ 704,319 $ 632,910 $ 662,438 Total Non-Operating Revenue $ 2,644,521 $ 2,682,022 $ 2,847,846 $ 3,159,196 $ 3,265,687 $ 3,350,669 Total Revenue $35,301,082 $37,926,716 $38,781,934 $37,388,243 $40,303,307 $42,124,710 Expenses(Operating): Variable Costs Water-Related Costs $11,240,088 $12,644,569 $12,247,280 $11,900,339 $12,485,582 $13,665,365 Fixed Costs $ 1,443,355 $ 1,129,360 $ 1,188,085 $ 1,188,085 $ 1,179,009 $ 1,182,773 Power-Related Costs $ 1,285,413 $ 1,254,202 $ 1,358,012 $ 1,285,103 $ 1,446,219 $ 1,475,826 Variable Water Costs Related Expenses T $13,968,855 $15,028,131 $14,793,377 $14,373,528 $15,110,810 $16,323,964 Salary Related Expenses $ 9,889,124 $ 9,874,212 $11,084,493 $10,742,011 $11,959,922 $12,576,273 Salary Related Expenses-Limited-term Si $ - $ - $ - $ - $ - $ - Reduction for Capital Project Labor $ (246,000) $ - $ (300,000) $ - $ (295,000) $ (387,000) Salary Related Expenses Total $ 9,643,124 $ 9,874,212 $10,784,493 $10,742,011 $11,664,922 $12,189,273 Supplies&Services: Communications $ 201,575 $ 147,634 $ 171,097 $ 171,238 $ 241,595 $ 244,525 Contractual Services $ 547,890 $ 430,320 $ 505,732 $ 432,794 $ 527,481 $ 525,306 Data Processing $ 250,400 $ 245,068 $ 282,450 $ 298,030 $ 345,450 $ 319,300 Dues&Memberships $ 86,545 $ 84,263 $ 88,230 $ 81,853 $ 84,790 $ 88,525 Fees&Permits $ 282,115 $ 254,832 $ 280,453 $ 310,418 $ 305,780 $ 306,176 Board Election $ - $ - $ 75,000 $ 75,000 $ - $ 138,700 Insurance $ 283,340 $ 269,236 $ 303,190 $ 302,978 $ 327,385 $ 338,125 Materials $ 849,000 $ 758,870 $ 687,336 $ 1,009,586 $ 1,013,400 $ 1,034,000 District Activities, Emp Recognition $ 24,200 $ 29,033 $ 46,250 $ 38,142 $ 46,635 $ 48,070 Maintenance $ 509,900 $ 538,874 $ 604,600 $ 681,275 $ 736,300 $ 732,040 Non-Capital Equipment $ 124,825 $ 150,182 $ 151,450 $ 171,769 $ 210,320 $ 163,220 Office Expense $ 42,625 $ 43,080 $ 43,300 $ 38,433 $ 36,505 $ 36,375 Professional Services $ 690,525 $ 710,380 $ 552,800 $ 534,742 $ 742,200 $ 872,400 Training $ 68,510 $ 37,749 $ 78,240 $ 62,942 $ 86,870 $ 79,695 Travel&Conferences $ 115,245 $ 84,182 $ 139,340 $ 107,700 $ 140,640 $ 152,390 Uncollectible Accounts $ 18,500 $ 4,611 $ 3,000 $ 4,268 $ 4,500 $ 5,100 Utilities $ 170,700 $ 183,057 $ 183,400 $ 169,307 $ 192,750 $ 162,700 Vehicle Expenses $ 356,000 $ 327,492 $ 375,400 $ 370,593 $ 376,700 $ 379,400 Supplies&Services Sub-Total $ 4,621,895 $ 4,298,863 $ 4,571,268 $ 4,861,064 $ 5,419,301 $ 5,626,047 Total Operating Expenses $28,233,874 $29,201,206 $30,149,138 $29,976,602 $32,195,034 $34,139,284 Expenses(Non-Operating): Interest Expense $ 1,489,796 $ 1,106,515 $ 1,325,785 $ 1,350,616 $ 1,303,967 $ 1,236,960 Other Expense $ 15,220 $ 89,021 $ 14,200 $ 7,642 $ 13,520 $ 13,545 Total Non-Operating Expenses $ 1,505,016 $ 1,195,536 $ 1,339,985 $ 1,358,258 $ 1,317,487 $ 1,250,505 Total Expenses $29,738,890 $30,396,742 $31,489,123 $31,334,860 $33,512,520 $35,389,789 Net Income Before Capital Contributions $ 5,562,192 $ 7,529,974 $ 7,292,811 $ 6,053,382 $ 6,790,787 $ 6,734,921 and Special Item(s) Special Item(s) $ - $ (2,205,847) $ - $ - $ - $ - Capital Contributions $ - $ 3,554,123 $ - $ 38,556 $ - $ - Net Income Before Depreciation $ 5,562,192 $ 8,878,250 $ 7,292,811 $ 6,091,938 $ 6,790,787 $ 6,734,921 Depreciation $ 7,182,000 $ 7,465,977 $ 7,726,142 $ 7,708,222 $ 7,720,659 $ 7,720,659 Income(Loss) $ (1,619,808) $ 1,412,273 $ (433,331) $ (1,616,284) $ (929,872) $ (985,737) Yorba Linda Water District Sewer Enterprise Draft Operating Budgets for FY 20 and FY 21 FY18 FY18 FY19 FY19 FY20 FY21 Budget Actual Budget Forecast Proposed Proposed Budget Budget Revenue(Operating): Sewer Charge Revenue $ 2,032,245 $ 2,064,083 $ 2,229,246 $2,188,390 $ 2,421,665 $2,447,582 Sewer Parcel Assessments $ 223,000 $ 266,726 $ 273,250 $ 278,967 $ 324,173 $ 324,173 Other Operating Revenue $ 97,055 $ 68,664 $ 66,730 $ 65,802 $ 61,712 $ 67,484 Total Operating Revenue $ 2,352,300 $ 2,399,473 $ 2,569,226 $2,533,159 $ 2,807,549 $2,839,239 Revenue(Non-Operating): Interest $ 35,000 $ 74,229 $ 48,000 $ 91,291 $ 113,528 $ 117,152 Other Non-Operating Revenue $ 19,875 $ 9,744 $ 34,500 $ 24,317 $ 24,480 $ 24,480 Total Non-Operating Revenue $ 54,875 $ 83,973 $ 82,500 $ 115,608 $ 138,008 $ 141,632 Total Revenue $ 2,407,175 $ 2,483,446 $ 2,651,726 $2,648,767 $ 2,945,557 $2,980,870 Expenses(Operating): Salary Related Expenses $ 1,029,257 $ 1,045,574 $ 1,152,721 $1,135,139 $ 1,206,668 $1,315,959 Reduction for Capital Project Labor $ (31,000) $ - $ (21,000) $ (70,000) $ (75,000) Salary Related Expenses Total $ 998,257 $ 1,045,574 $ 1,131,721 $1,135,139 $ 1,136,668 $1,240,959 Supplies&Services Communications $ 12,010 $ 8,676 $ 11,977 $ 4,783 $ 13,412 $ 13,617 Contractual Services $ 28,237 $ 29,493 $ 29,766 $ 12,496 $ 30,764 $ 30,611 Data Processing $ 15,078 $ 16,965 $ 17,322 $ 16,426 $ 21,382 $ 19,551 Dues&Memberships $ 6,053 $ 6,044 $ 6,153 $ 17,488 $ 5,928 $ 6,190 Fees&Permits $ 17,474 $ 10,636 $ 15,907 $ 13,717 $ 15,509 $ 15,529 Board Election $ - $ - $ 5,250 $ 3,970 $ - $ 9,709 Insurance $ 19,834 $ 18,743 $ 21,223 $ 17,329 $ 22,917 $ 23,669 Materials $ 51,653 $ 38,460 $ 28,622 $ 58,258 $ 65,206 $ 69,950 District Activities, Emp Recognition $ 1,694 $ 2,023 $ 3,238 $ 10,900 $ 3,264 $ 3,365 Maintenance $ 170,559 $ 140,363 $ 171,630 $ 156,010 $ 171,135 $ 170,487 Non-Capital Equipment $ 20,147 $ 26,187 $ 36,157 $ 22,284 $ 39,542 $ 36,595 Office Expense $ 2,963 $ 2,993 $ 2,957 $ 2,756 $ 2,555 $ 2,546 Professional Services $ 40,417 $ 35,565 $ 33,996 $ 32,613 $ 156,229 $ 199,736 Training $ 6,782 $ 5,399 $ 13,052 $ 11,177 $ 8,569 $ 12,179 Travel&Conferences $ 12,752 $ 5,753 $ 14,061 $ 9,762 $ 14,362 $ 15,184 Uncollectible Accounts $ 1,295 $ 456 $ 210 $ 1,863 $ 315 $ 357 Utilities $ 12,600 $ 13,299 $ 13,489 $ 11,653 $ 13,493 $ 11,389 Vehicle Expenses $ 69,188 $ 72,075 $ 59,138 $ 45,478 $ 41,100 $ 43,800 Supplies&Services Sub-Total $ 488,735 $ 433,130 $ 484,145 $ 448,962 $ 625,681 $ 684,464 Total Operating Expenses $ 1,486,991 $ 1,478,704 $ 1,615,866 $1,584,101 $ 1,762,348 $1,925,423 Expenses(Non-Operating): Interest Expense $ - $ - $ - $ - $ - $ Other Expense $ $ 41,556 $ 5,600 $ (2,116) $ $ Total Non-Operating Expenses $ $ 41,556 $ 5,600 $ (2,116) $ $ Total Expenses $ 1,486,991 $ 1,520,260 $ 1,621,466 $1,581,985 $ 1,762,348 $1,925,423 Net Income(Loss)Before Capital Contributions $ 920,183 $ 963,186 $ 1,030,260 $1,066,782 $ 1,183,209 $1,055,447 and Special Items Specialltem(s) $ - $ - $ - $ - $ - $ Capital Contributions $ - $ 1,646,479 $ - $ 4,056 $ - $ Net Income Before Depreciation $ 920,183 $ 2,609,665 $ 1,030,260 $1,070,838 $ 1,183,209 $1,055,447 Depreciation $ 1,350,000 $ 1,367,602 $ 1,396,996 $1,396,996 $ 1,430,756 $1,430,756 Income(Loss) $ (429,817) $ 1,242,063 $ (366,736) $ (326,158) $ (247,547) $ (375,3081 Yorba Linda Water District Water Enterprise Draft Operating Budgets for FY 20 and FY 21 FY18 FY18 FY19 FY19 FY20 FY21 Budget Actual Budget Forecast Proposed Proposed Budget Budget Water Revenue(Residential) $ 14,278,688 $16,151,211 $16,592,437 $ 15,335,194 $16,548,758 $16,946,962 Water Revenue(Commercial&Fire Det.) $ 2,071,031 $ 1,897,346 $ 1,964,205 $ 1,834,606 $ 1,872,073 $ 1,969,765 Water Revenue(Landscape/Irrigation) $ 3,079,054 $ 4,031,102 $ 3,863,805 $ 3,552,435 $ 3,917,982 $ 4,056,592 Service Charges $ 10,106,382 $10,002,493 $10,116,528 $ 10,046,253 $10,988,263 $12,011,758 Other Operating Revenue" $ 769,106 $ 763,069 $ 827,887 $ 927,400 $ 902,996 $ 949,726 Total Operating Revenue $ 30,304,261 $32,845,221 $33,364,862 $ 31,695,888 $34,230,072 $35,934,803 Revenue(Non-Operating): Interest $ 275,000 $ 444,371 $ 310,000 $ 593,272 $ 698,777 $ 721,079 Property Taxes $ 1,710,000 $ 1,749,957 $ 1,850,000 $ 1,770,314 $ 1,820,471 $ 1,850,000 Other Non-Operating Revenue $ 604,646 $ 403,721 $ 605,346 $ 680,002 $ 608,430 $ 637,958 Total Non-Operating Revenue $ 2,589,646 $ 2,598,049 $ 2,765,346 $ 3,043,588 $ 3,127,678 $ 3,209,037 Total Revenue $ 32,893,907 $35,443,270 $36,130,208 $ 34,739,476 $37,357,750 $39,143,840 Expenses(Operating): Variable Water Costs(G.W., Import&Power) Water-Related Costs $ 11,240,088 $12,644,569 $12,247,280 $ 11,900,339 $12,485,582 $13,665,365 Fixed Costs $ 1,443,355 $ 1,129,360 $ 1,188,085 $ 1,188,085 $ 1,179,009 $ 1,182,773 Power-Related Costs $ 1,285,413 $ 1,254,202 $ 1,358,012 $ 1,285,103 $ 1,446,219 $ 1,475,826 Variable Water Costs Related Expenses Total $ 13,968,855 $15,028,131 $14,793,377 $ 14,373,528 $15,110,810 $16,323,964 Salary Related Expenses $ 8,859,867 $ 8,828,638 $ 9,931,772 $ 9,606,872 $10,753,255 $11,260,314 Salary Related Expenses-Limited-term Staff $ - Reduction for Capital Project Labor $ (215,000) $ (279,000) $ (225,000) $ (312,000) Salary Related Expenses Total $ 8,644,867 $ 8,828,638 $ 9,652,772 $ 9,606,872 $10,528,255 $10,948,314 Supplies&Services Communications $ 189,565 $ 138,958 $ 159,120 $ 166,455 $ 228,183 $ 230,908 Contractual Services $ 519,653 $ 400,827 $ 475,966 $ 420,298 $ 496,717 $ 494,695 Data Processing $ 235,322 $ 228,103 $ 265,129 $ 281,604 $ 324,069 $ 299,749 Dues&Memberships $ 80,492 $ 78,219 $ 82,077 $ 64,365 $ 78,862 $ 82,335 Fees&Permits $ 264,641 $ 244,196 $ 264,546 $ 296,701 $ 290,271 $ 290,647 Board Election $ - $ - $ 69,750 $ 71,030 $ - $ 128,991 Insurance $ 263,506 $ 250,493 $ 281,967 $ 285,649 $ 304,468 $ 314,456 Materials $ 797,347 $ 720,410 $ 658,714 $ 951,328 $ 948,195 $ 964,050 District Activities, Emp Recognition $ 22,506 $ 27,010 $ 43,013 $ 27,242 $ 43,371 $ 44,705 Maintenance $ 339,342 $ 398,511 $ 432,971 $ 525,265 $ 565,165 $ 561,553 Non-Capital Equipment $ 104,678 $ 123,995 $ 115,294 $ 149,485 $ 170,778 $ 126,625 Office Expense $ 39,662 $ 40,087 $ 40,343 $ 35,677 $ 33,950 $ 33,829 Professional Services $ 650,108 $ 674,815 $ 518,804 $ 502,129 $ 585,971 $ 672,664 Training $ 61,728 $ 32,350 $ 65,188 $ 51,764 $ 78,301 $ 67,516 Travel&Conferences $ 102,493 $ 78,429 $ 125,279 $ 97,937 $ 126,278 $ 137,206 Uncollectible Accounts $ 17,205 $ 4,155 $ 2,790 $ 2,405 $ 4,185 $ 4,743 Utilities $ 158,100 $ 169,758 $ 169,911 $ 157,653 $ 179,258 $ 151,311 Vehicle Expenses $ 286,812 $ 255,417 $ 316,262 $ 325,115 $ 335,600 $ 335,600 Supplies&Services Sub-Total $ 4,133,160 $ 3,865,733 $ 4,087,123 $ 4,412,101 $ 4,793,620 $ 4,941,583 Total Operating Expenses $ 26,746,883 $27,722,502 $28,533,272 $ 28,392,501 $30,432,685 $32,213,861 Expenses(Non-Operating) Interest on Long Term Debt $ 1,489,796 $ 1,106,515 $ 1,325,785 $ 1,350,616 $ 1,303,967 $ 1,236,960 Other Expense $ 15,220 $ 47,465 $ 8,600 $ 9,758 $ 13,520 $ 13,545 Total Non-Operating Expenses $ 1,505,016 $ 1,153,980 $ 1,334,385 $ 1,360,374 $ 1,317,487 $ 1,250,505 Total Expenses $ 28,251,898 $28,876,482 $29,867,657 $ 29,752,875 $31,750,172 $33,464,366 Net Income(Loss)Before Capital Contributions $ 4,642,009 $ 6,566,788 $ 6,262,551 $ 4,986,601 $ 5,607,578 $ 5,679,474 and Special Item(s) Special Item(s) $ - $ (2,205,847) $ - $ - $ - $ - Capital Contributions $ - $ 1,907,644 $ - $ 34,500 $ - $ - Net Income(Loss)Before Depreciation $ 4,642,009 $ 6,268,585 $ 6,262,551 $ 5,021,101 $ 5,607,578 $ 5,679,474 Depreciation $ 5,832,000 $ 6,098,375 $ 6,329,146 $ 6,311,226 $ 6,289,903 $ 6,289,903 Income(Loss) $ (1,189,991) $ 170,210 $ (66,595) $ (1,290,125) $ (682,325) $ (610,429) Yorba Linda Water District Water Enterprise Proforma Draft Operating Budgets for FY 20 and FY 21 9%Base Charge Rate Adjustment, Effective July 1,2019 FY19 FY19 FY20 FY21 Budget Forecast Proposed Proposed Budget Budget Water Revenue(Residential) $16,592,437 $ 15,335,194 $ 16,548,758 $ 16,946,962 Water Revenue(Commercial&Fire Det.) $ 1,964,205 $ 1,834,606 $ 1,872,073 $ 1,969,765 Water Revenue(Landscape/Irrigation) $ 3,863,805 $ 3,552,435 $ 3,917,982 $ 4,056,592 Service Charges $10,116,528 $ 10,046,253 $ 10,988,263 $ 12,011,758 Other Operating Revenue $ 827,887 $ 927,400 $ 902,996 $ 949,726 Total Operating Revenue $33,364,862 $ 31,695,888 $34,230,072 $35,934,803 Revenue(Non-Operating): Interest $ 310,000 $ 593,272 $ 698,777 $ 721,079 Property Taxes $ 1,850,000 $ 1,770,314 $ 1,820,471 $ 1,850,000 Other Non-Operating Revenue $ 605,346 $ 680,002 $ 608,430 $ 637,958 Total Non-Operating Revenue $ 2,765,346 $ 3,043,588 $ 3,127,678 $ 3,209,037 Total Revenue $36,130,208 $ 34,739,476 $37,357,750 $39,143,840 Expenses(Operating): Variable Water Costs(G.W., Import&Power) Water-Related Costs $12,247,280 $ 11,900,339 $ 12,485,582 $ 13,665,365 Fixed Costs $ 1,188,085 $ 1,188,085 $ 1,179,009 $ 1,182,773 Power-Related Costs $ 1,358,012 $ 1,285,103 $ 1,446,219 $ 1,475,826 Variable Water Costs Related Expenses Total $14,793,377 $ 14,373,528 $ 15,110,810 $ 16,323,964 Salary Related Expenses $ 9,931,772 $ 9,606,872 $ 10,753,255 $ 11,260,314 Salary Related Expenses-Limited-term Staff Reduction for Capital Project Labor $ (279,000) $ (225,000) $ (312,000) Salary Related Expenses Total $ 9,652,772 $ 9,606,872 $ 10,528,255 $ 10,948,314 Supplies&Services Communications $ 159,120 $ 166,455 $ 228,183 $ 230,908 Contractual Services $ 475,966 $ 420,298 $ 496,717 $ 494,695 Data Processing $ 265,129 $ 281,604 $ 324,069 $ 299,749 Dues&Memberships $ 82,077 $ 64,365 $ 78,862 $ 82,335 Fees&Permits $ 264,546 $ 296,701 $ 290,271 $ 290,647 Board Election $ 69,750 $ 71,030 $ - $ 128,991 Insurance $ 281,967 $ 285,649 $ 304,468 $ 314,456 Materials $ 658,714 $ 951,328 $ 948,195 $ 964,050 District Activities, Emp Recognition $ 43,013 $ 27,242 $ 43,371 $ 44,705 Maintenance $ 432,971 $ 525,265 $ 565,165 $ 561,553 Non-Capital Equipment $ 115,294 $ 149,485 $ 170,778 $ 126,625 Office Expense $ 40,343 $ 35,677 $ 33,950 $ 33,829 Professional Services $ 518,804 $ 502,129 $ 585,971 $ 672,664 Training $ 65,188 $ 51,764 $ 78,301 $ 67,516 Travel&Conferences $ 125,279 $ 97,937 $ 126,278 $ 137,206 Uncollectible Accounts $ 2,790 $ 2,405 $ 4,185 $ 4,743 Utilities $ 169,911 $ 157,653 $ 179,258 $ 151,311 Vehicle Expenses $ 316,262 $ 325,115 $ 335,600 $ 335,600 Supplies&Services Sub-Total $ 4,087,123 $ 4,412,101 $ 4,793,620 $ 4,941,583 Total Operating Expenses $28,533,272 $ 28,392,501 $30,432,685 $32,213,861 Expenses(Non-Operating) Other Expense $ 8,600 $ 9,758 $ 13,520 $ 13,545 Total Non-Operating Expenses $ 8,600 $ 9,758 $ 13,520 $ 13,545 Total Expenses $28,541,872 $ 28,402,259 $30,446,205 $32,227,406 Net Revenues $ 7,588,336 $ 6,337,217 $ 6,911,545 $ 6,916,434 Less: Debt Service(Principal &Interest) $ 2,738,258 $ 2,738,256 $ 2,726,956 $ 2,729,381 Less: Committed Capital Expenditures(Pay-GO) $ 4,484,500 $ 3,204,555 $ 3,518,470 $ 4,109,796 Transfer to/(from)Reserves $ 365,578 $ 394,406 $ 666,119 $ 77,256 Net Total $ - $ - $ - $ - ITEM NO. 9.1 AGENDA REPORT Meeting Date: May 14, 2019 To: Board of Directors From: Marc Marcantonio, General Manager Presented By: Rosanne Weston, Engineering Manager Prepared By: Bryan Hong, Principal Engineer Subject: Draft Capital Improvement Plan for Fiscal Years 2020-24 SUMMARY: Attached is the District's FY20 - FY24 Draft Capital Improvement Plan (CIP) for review and discussion. Following the budget workshop meeting on 4/23/19, staff made these updates to the 5- year CIP: . Separated "Capitalized Labor" for water and sewer projects . Added Community Facilities District/Assessment District projects . Separated "Operations Capital Outlay" for water and sewer ATTACHMENTS: game: Description: Type: Draft FY20-24 CIP Budaet 20190507.edf Backup Material Backup Material YLWD 5 YEAR CIP - WATER AND SEWER DRAFT 05/07/19 Comment FY20 FY21 FY22 FY23 FY24 Capital and Rehabilitation and Replacement(R&R) Proiects PH&S Mickel and Camino Verde Waterline Replacement Fire flow deficient and failing pipes $ 600,000 PH&S Lakeview Booster Pump Station Piping(Water Quality) Problems maintaining chlorine residual $ 200,000 PH&S Timber Ridge Pump 4 Replacement Failed pump and natural gas engine. Parts no longer available. Feeds fire interface area. $ 300,000 PH&S Hidden Hills BPS Upgrades Not included in Cielo Vista Project. Required for fire protection for 1000 zone and above $ 300,000 PH&S Ridgeway Waterline Replacement Extensive leak history on old pipes and remove meter clusters in backyard $ 700,000 PH&S Avolinda and Imperial Waterline Replacement Broken valves and leak history.Abandon Imperial and realign in other streets. $ 1,300,000 Reg Site and Security Upgrades at District Facilities(Bioterrorism Act of 2002) Cyber Security, Natural Disasters,Terrorism Protection $ 500,000 $ 500,000 $ 500,000 $ 500,000 R&R Well 22 Equipping Replaces aging wells $ 900,000 R&R Field Headquarters Rehabilitation (HVAC, Roof, Paving) Leaking roof, HVAC is beyond useful life, deteriorating pavement/concrete $ 500,000 R&R Well Equipment Rehabilitation Extend useful life of well $ 150,000 $ 150,000 $ 150,000 $ 150,000 $ 150,000 R&R Reservoir Operational Repair and Replacement Included in AMP. Extend useful life. $ 100,000 $ 100,000 $ 100,000 $ 100,000 R&R Box Canyon Pump 2 Replacement Operational inefficiency $ 70,000 R&R Apple Creek and Del Rey PRS Replacement Included in AMP. Reaching the end of useful life. $ 450,000 R&R Dominguez Hills and Paseo Del Prado PRS Replacement Included in AMP. Reaching the end of useful life. $ 600,000 R&R Waterline Replacement Included in AMP. Replace pipes based on consequence and likelihood of failure. $ 2,000,000 $ 2,000,000 $ 2,000,000 R&R Richfield Chemical System Replacement Included in AMP. Reaching the end of useful life. $ 800,000 R&R Well 20 Chemical System Replacement Included in AMP. Reaching the end of useful life and undersized. $ 400,000 EP Reservoir Fire Hardening(4 sites) Fire Protection $ 500,000 Water Capitalized Labor $ 225,000 $ 312,000 $ 380,000 $ 355,000 $ 405,000 R&R Sewer System Rehabilitation and Replacement Based on CCTV inspection and also included in AMP $ 350,000 $ 350,000 $ 350,000 $ 350,000 $ 350,000 SU Community Facilities District/Assessment District Projects $ 350,000 $ 400,000 $ 500,000 $ 500,000 $ 500,000 Sewer Capitalized Labor $ 70,000 $ 75,000 $ 85,000 $ 85,000 $ 85,000 Capital and R&R Projects Subtotal = $ 3,245,000 $ 4,257,000 $ 5,115,000 $ 4,840,000 $ 5,390,000 Project Total Water Only= $ 2,475,000 $ 3,432,000 $ 4,180,000 $ 3,905,000 $ 4,455,000 Project Total Sewer Only= $ 770,000 $ 825,000 $ 935,000 $ 935,000 $ 935,000 Vehicle and Capital Equipment Replacement PH&S SCADA Radio Communications System Enhancement $ 175,000 R&R IT Capital Outlay $ 187,425 $ 196,796 $ 262,235 $ 272,235 $ 300,000 R&R/EP Operations Water Capital Outlay $ 367,000 $ 481,000 $ 222,000 $ 285,000 $ 300,000 R&R Vehicle Replacement-Sewer $ 475,000 R&R Operations Sewer Capital Outlay $ 314,045 Vehicle&Capital Equipment Subtotal= $ 1,043,470 $ 677,796 $ 959,235 $ 557,235 $ 600,000 CIP Total = 4,288,470 $ 4,934,796 $ 6,074,235 $ 5,397,235 $ 5,990,000 CIP Total Water Only= CIP Total Sewer Only= t,084,045 $ 825,000 $ 1,410,000 $ 935,000 $ 5 Year CIP Total = $ 26,684,736 Note:All costs are 2019 dollars and do not include escalation. PH&S = Public Health and Safety Reg = Regulatory R&R = Repair and Replace EP = Emergency Preparedness SU =System Upgrade ITEM NO. 9.2 AGENDA REPORT Meeting Date: May 14, 2019 Subject:Capital Asset Planning Policy ATTACHMENTS: Name:Description:Type: 3010-009_-_Captial_Asset_Planning_Policy.docx Backup Material Backup Material 3010-009 Capital Asset Planning and Investment Policy Page 1 of 4 Policies and Procedures Policy No.: 3010-009 Adoption Method: Resolution No. 2019-XX Effective Date: July 1, 2019 Last Revised: Unknown Prepared By: Delia Lugo, Finance Manager Applicability: District Wide POLICY: CAPITAL ASSET PLANNING POLICY 1.0 GENERAL POLICY 1.1 The Yorba Linda Water District (“District”) Capital Asset Planning and Investment Policy (this “Policy”) establishes policies and procedures for planning the Districts capital expenditures. 1.2 This Policy will ensure sound fiscal and capital planning and requires effective leadership and cooperation of the District’s Management Team (“Team”). The responsibility for overseeing the Capital Asset process should rest with the Districts General Manager and Board of Directors (“Board”). 2.0 AUTHORIZATION 2.1 By adoption of this Policy, the Board is authorizing the District’s Management Team to objectively analyze capital proposals and make recommendations to General Manager and Board on the annual capital budget and ongoing capital program. 3.0 DEFINITIONS The terms referenced in this Policy shall have the meanings as defined below. 3.1 Asset Management Plan (AMP) – An Asset Management Plan is a tactical plan for managing an organization’s infrastructure and other assets to deliver an agreed standard of service. 3.2 Board – The Board of Directors of Yorba Linda Water District. 3.3 Capital Assets – Capital projects with a useful life of one year or more and a cost of at least $5,000. 3010-009 Capital Asset Planning and Investment Policy Page 2 of 4 3.4 Capital Outlay – Capital assets not part of CIP or AMP. Examples include vehicles and equipment having a value greater than $5,000. 3.5 Clean Water State Revolving Fund (CWSRF) – Low cost financing/loans provided by the State of California to protect California Water from pollution. 3.6 Construction-In-Progress (CIP) – Capital assets an organization construct over a period of time. Labor and material are used in the construction of them. Examples included the Reservoirs, Pump Stations, and Buildings. 3.7 Commercial Paper - Short-term promissory notes either unsecured or backed by assets such as loans or mortgages issued by the District. 3.8 Debt – An obligation to pay something, liability. 3.9 District – Yorba Linda Water District. 3.10 Emergency – A situation in which unforeseen circumstances present an immediate risk of harm or hazard to the public’s health, safety, or District personnel/property, or a situation which threatens serious interruption of District operations. 3.11 Financing – refers to the method of paying for an asset or service, including debt financing. 3.12 Funding – District revenue that pays for or offsets the cost of an asset or service or supports repayment of debt that finances the asset. 3.13 General Manager – General Manager of the District or the person appointed by the Board to act in the capacity of the General Manager and authorized to administer this Policy on his/her behalf. 3.14 Grant Funding – Federal or State funds provide to the District for a particular purpose. 3.15 Line of Credit (LOC) – Loan established with a financial institution to provide funding for capital investments for a time period shorter than 5 years, over the course of which the District will pay off the debt principal and interest. 3.16 Municipal Bonds – General Obligation Bonds that are issue for a time period ranging from 5 to 30 years, over the course of which the District will pay off the debt principal and interest. 3.17 Pay-as-You-Go Financing (Pay-Go) - The use of currently available cash resources to pay for capital investments. 3010-009 Capital Asset Planning and Investment Policy Page 3 of 4 3.18 Public Works – As defined by California Public Code Section 22002, public projects include construction, reconstruction, alteration, publicly owned, leased or operated facility. Maintenance work is not considered a public project for purposes of this definition. 3.19 Renewal and Replacement (R&R) – Existing capital assets renovated or replaced which extends the useful life of the asset greater than on year and cost of $5,000. 4.0 GENERAL CAPITAL ASSET POLICIES 4.1 The District Management Team will review the AMP, consistent repairs of the water/sewer within the system, and capital outlay requests to establish capital assets requirements of the District. 4.2 The team will establish criteria to help differentiate between the merits of each capital asset to determine the most effective and efficient capital project. The assessment should identify renewal and replacement projects. This will enable the committee to prioritize projects based on objective analysis. 4.3 Based the prioritizing of capital projects the Team will establish a five-year Capital Improvement Budget (the “CIB”). The CIB will include a discussion of major trends affecting Agency operations and incorporate the operating and capital impact of new projects. 4.4 Upon establishing the five-year CIB, the Finance Manager will recommend a method to finance each project while adhering to the Debt Management Policy #3010-003. The Finance Manager will work with the municipal finance advisor to determine the right source of financing while keeping in mind the metrics to meet as established and set in the 2019 YLWD Strategic Plan Goals and Initiatives. The Goal of “Fiscal Responsibility” lists initiatives such as: Maintain Fiscal Responsibility, Maintain Equitable Rates, and Review Sources of Funding. More specifically the “Maintain Fiscal Responsibility” prompts the District Staff to plan for the Districts Year-End Financial Statements result in a positive Net Position while maintaining a bond rating of “AA” or higher which requires a debt covenant ratio of 225 and 365 days in cash calculation. Staff must promote/recommend appropriate rates/fees on an annual basis during the budget process to provide the necessary funding for the Capital Plan. 4.5 While maintaining Strategic Plan Goals and Metrics state above under 4.4, the District will want to assess how quickly the projects will be needed, availability of existing funds to apply towards capital expenditures, and the District access to the capital markets. This will provide a guide as to the ways to finance the five-year CIB through existing Pay-Go funds, bonding for municipal debt 3010-009 Capital Asset Planning and Investment Policy Page 4 of 4 (municipal bonds), commercial paper, LOC, or taking advantage of state grants, federal grant, or CWRSF program. 4.6 Once the Finance Manager has determined the proper financing options the Team will present the five-year CIB to the General Manager and Board for review and approval. ITEM NO. 9.3 AGENDA REPORT Meeting Date: May 14, 2019 To:Board of Directors From:Marc Marcantonio, General Manager Presented By:Delia Lugo, Finance Manager Dept:Finance Prepared By:Saira Hernandez, Accountant Subject:Unaudited Financial Statements for Third Quarter of Fiscal Year 2019 SUMMARY: Presented are the Unaudited Financial Statements for the Period Ending March 31, 2019 for the District. DISCUSSION: For the period ending March 31, 2019, staff is presenting “unaudited” statements in the CAFR format. We have included a Statement of Net Position, a Debt Service Ratio Calculation, a ProForma Use of Funds for the Water Enterprise, a Consolidated Budget to Actual Statement, as well as the individual Water and Sewer Budget to Actual Statements. As reported in the Balance Sheet of the Statement of Net Position, the District’s Net Position reflects a negative result when compared to that of the same reporting period of the prior fiscal year by approximately $3.1 million. This is prominently due to an increase in Net Pension Liability (GASB Statement 68), as well as the addition Net OPEB Liability as required by GASB Statement 75. Cumulative Volumetric Water Revenue, as reported through the Period Ending March 31, 2018, reflects an average decrease in customer consumption of approximately 11.49% as compared to prior year for the same reporting period. Total Variable Water Costs results reflect 10.33% decrease when compared to prior year for the same reporting period. The decrease in costs is reflective of lower demands from the water system and the District's ability to support the demand, the last few months in particular, with Ground Water supply. In addition, the District's BPP has increased to 75% for the current fiscal year, where last fiscal year it was held at 70%. ATTACHMENTS: Name:Description:Type: 3rd_Qtr_2019_Fin_Stmts.pdf Backup Material Backup Material ASSETS March 2019 March 2018 CURRENT ASSETS: Cash and cash equivalents 32,640,404$ 27,510,664$ Investment 2,091,615 6,548,201 Accounts receivable - water and sewer services 2,463,107 3,084,879 Accrued interest receivable 8,709 18,570 Notes Receivable - 78,567 Prepaid expenses & other deposits 511,383 476,269 Inventory 272,829 226,481 TOTAL CURRENT ASSETS 37,988,047 37,943,631 NONCURRENT ASSETS: Bond issuance costs 356,935 381,766 Deferred Pension Plan 2,749,826 1,966,284 Deferred OPEB Plan 399,599 411,343 Capital assets: Non-depreciable 14,209,503 9,518,968 Depreciable, net of accumulated depreciation 178,307,519 184,815,170 TOTAL NONCURRENT ASSETS 196,023,382 197,093,531 TOTAL ASSETS 234,011,429 235,037,162 LIABILITIES CURRENT LIABILITIES: Accounts payable 1,596,246 993,844 Accrued expenses 1,087,324 1,074,875 Accrued OPEB - 3,336 Accrued interest payable - - Refunding Revenue Bond(s) - current portion 1,175,000 1,140,000 Compensated absences 418,662 406,655 Customer and construction deposits 561,578 638,012 Deferred revenue 269,283 304,105 TOTAL CURRENT LIABILITIES 5,108,093 4,560,827 LONG-TERM LIABILITIES (LESS CURRENT PORTION): Deferred annexation revenue 13,236,693 13,731,738 Compensated absences 1,255,985 1,287,739 Net Pension Liability 8,575,054 7,240,999 Net OPEB Liability 2,273,415 - Deferred Pension Plan 639,586 753,101 Deferred OPEB Plan 44,966 - Deferred Inflow - Gain on Bond 99,349 104,444 Refunding Revenue Bond(s) 37,755,074 39,186,050 Certificate of Participation - - TOTAL LONG TERM LIABILITIES (LESS CURRENT PORTION)63,880,122 62,304,071 TOTAL LIABILITIES 68,988,215 66,864,898 NET ASSETS:165,023,214$ 168,172,264$ YORBA LINDA WATER DISTRICT UNAUDITED COMBINING SCHEDULE OF NET ASSETS March 31, 2019 (With March 31, 2018 Actuals for comparison only) 1 March 2019 March 2018 OPERATING REVENUES: Water sales 21,962,299$ 23,807,244$ Sewer revenues 1,845,450 1,722,430 Other operating revenues 757,742 621,251 TOTAL OPERATING REVENUES 24,565,491 26,150,925 OPERATING EXPENSES Variable water costs 9,930,011 11,074,421 Personnel services 7,168,801 7,206,191 Supplies and services 3,254,137 3,130,995 Depreciation and amortization 5,508,399 5,580,357 TOTAL OPERATING EXPENSES 25,861,348 26,991,964 OPERATING INCOME/(LOSS)(1,295,857) (841,039) NONOPERATING REVENUES (EXPENSES): Property taxes 1,185,314 1,177,867 Investment income 530,526 329,169 Interest expense (1,015,812) (1,025,950) Other nonoperating revenues 690,235 255,699 Other nonoperating expenses (986,613) 55,622 TOTAL NONOPERATING REVENUES/EXPENSES 403,650 792,407 NET INCOME/(LOSS) BEFORE CAPITAL CONTRIBUTIONS, SPECIAL/EXTRAORDINARY ITEM(S)(892,207) (48,632) SPECIAL ITEM(S) - CONSERVATION CREDIT - (1,105,809) SPECIAL ITEM(S) - RATE CREDIT - (1,100,039) CAPITAL CONTRIBUTIONS 38,556 3,447,323 CHANGES IN NET ASSETS (853,651) 1,192,844 NET POSITION - BEGINNING OF YEAR 165,876,865 166,979,420 NET POSITION - FOR PERIOD END March 31, 2019 165,023,214$ 168,172,264$ YORBA LINDA WATER DISTRICT UNAUDITED COMBINING SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS March 31, 2019 (With March 31, 2018 Actuals for comparison only) 2 YTD Debt Prior YTD PY Debt Actual Service Actual Service FY19 Calculation FY18 Calculation Revenue (Operating): Water Revenue (Residential)10,439,982$ 10,439,982$ 11,766,325$ 11,766,325$ Water Revenue (Commercial & Fire Det.)1,299,310 1,299,310 1,454,074 1,454,074 Water Revenue (Landscape/Irrigation)2,694,904 2,694,904 3,087,755 3,087,755 Water Revenue (Service Charge)7,528,103 7,528,103 7,499,091 7,499,091 Other Operating Revenue 707,391 707,391 555,318 555,318 Total Operating Revenue:22,669,690 22,669,690 24,362,563 24,362,563 Revenue (Non-Operating): Interest 454,329 454,329 290,025 290,025 Property Tax 1,185,314 1,185,314 1,177,867 1,177,867 Other Non-Operating Revenue 660,377 289,093 276,620 (94,664) Total Non-Operating Revenue:2,300,020 1,928,736 1,744,512 1,373,228 Total Revenue 24,969,710 24,598,426 26,107,075 25,735,791 Expenses (Operating): Variable Water Costs (G.W., Import & Power)9,930,011 9,930,011 11,074,421 11,074,421 Salary Related Expenses 6,507,499 6,507,499 6,436,776 6,436,776 Supplies & Services 2,955,983 2,955,983 2,802,909 2,802,909 Depreciation 4,477,243 - 4,557,167 - Total Operating Expenses 23,870,736 19,393,493 24,871,273 20,314,106 Expenses (Non-Operating): Interest on Long Term Debt 1,015,812 - 1,025,950 - Other Expense 977,238 977,238 (53,507) (53,507) Total Non-Operating Expenses:1,993,050 977,238 972,443 (53,507) Total Expenses 25,863,786 20,370,731 25,843,716 20,260,599 Net Position Before Capital Contributions/Special Items (894,076) 4,227,695 263,359 5,475,192 Special Item - Conservation Credit - - 2,205,847 - Transfers (To)/From - - - - Capital Contributions (Non-Cash Transaction -34,500 - 1,847,505 - GASB 34 Compliant) Net Position (859,576)$ 4,227,695$ (94,983)$ 5,475,192$ DEBT SERVICE RATIO CALCULATION: Net Revenues 4,227,695$ 5,475,192$ Debt Service 2,053,692$ 2,047,349$ %206% 267% Yorba Linda Water District Unaudited Water Enterprise Debt Service Ratio Calculation For Period Ending March 31, 2019 (With March 31, 2018 for comparison purposes) 3 FY19 Annual Budget YTD Actuals thru March 2019 YTD % of Budget Water Revenue (Residential)16,592,437$ 10,439,982$ 62.92% Water Revenue (Commercial & Fire Det.)1,964,205 1,299,310 66.15% Water Revenue (Landscape/Irrigation)3,863,805 2,694,904 69.75% Service Charges 10,116,528 7,528,103 74.41% Other Operating Revenue 827,887 707,391 85.45% Total Operating Revenue 33,364,861 22,669,690 67.94% Revenue (Non-Operating): Interest 310,000 454,329 146.56% Property Taxes 1,850,000 1,185,314 64.07% Other Non-Operating Revenue 605,346 660,377 109.09% Total Non-Operating Revenue 2,765,346 2,300,020 83.17% Total Revenue 36,130,207$ 24,969,710$ 69.11% Expenses (Operating): Variable Water Costs (G.W., Import & Power) Water-Related Costs 12,247,280$ 8,120,742$ 66.31% Fixed Costs 1,188,085 553,550 46.59% Power-Related Costs 1,358,012 1,255,718 92.47% Variable Water Costs Related Expenses Total 14,793,377 9,930,011 67.12% Salary Related Expenses 9,931,772 6,719,640 67.66% Reduction for Capital Project Labor (279,000) (212,141) 76.04% Salary Related Expenses Total 9,652,772 6,507,499 67.42% Supplies & Services Communications 159,120 115,245 72.43% Contractual Services 475,966 275,595 57.90% Data Processing 285,129 231,567 81.21% Dues & Memberships 82,077 73,333 89.35% Fees & Permits 264,546 210,811 79.69% Board Election 69,750 52,742 75.62% Insurance 281,967 205,282 72.80% Materials 658,714 650,816 98.80% District Activities, Emp Recognition 43,013 24,918 57.93% Maintenance 432,971 304,459 70.32% Non-Capital Equipment 136,294 82,699 60.68% Office Expense 40,343 28,247 70.02% Professional Services 475,804 288,399 60.61% Training 67,188 23,238 34.59% Travel & Conferences 125,279 57,625 46.00% Uncollectible Accounts 2,790 4,122 147.75% Utilities 169,911 126,447 74.42% Vehicle Expenses 316,262 200,438 63.38% Supplies & Services Sub-Total 4,087,123 2,955,983 72.32% Total Operating Expenses 28,533,272 19,393,493 67.97% Expenses (Non-Operating) Other Expense 8,600 105 1.22% Total Non-Operating Expenses 8,600 105 1.22% Total Expenses 28,541,872$ 19,393,598$ 67.95% Net Revenues 7,588,335 5,576,112 73.48% Less: Debt Service (Principal & Interest)2,738,258 2,738,256 100.00% Less: Committed Capital Expenditures (PayGo)4,484,500 2,517,857 56.15% Transfer to/(from) Reserves 365,577 319,998 87.53% Net Total -$ -$ Yorba Linda Water District Water Enterprise FY19 ProForma - Use of Funds March 2019 4 Yorba Linda Water District Summary Financial Report Water & Sewer Funds For Period Ending March 31, 2019 Annual YTD March YTD YTD Actual Prior Year Prior Year YTD Actual YTD Actual Budget Budget Actual Actual (Under) Over Mar Actual Actual (thru vs vs FY19 FY19 FY19 FY19 YTD Budget FY18 Mar 2018)PY Actual $PY Actual % Revenue (Operating): Water Revenue (Residential)16,592,437$ 12,110,820$ 465,873$ 10,439,982 (1,670,838)$ 638,530$ 11,766,325$ (1,326,343)$ -11.27% Water Revenue (Commercial & Fire Det.)1,964,205 1,433,673 88,114 1,299,310 (134,363) 129,942 1,454,074 (154,764) -10.64% Water Revenue (Landscape/Irrigation)3,863,805 2,820,191 26,351 2,694,904 (125,287) 223,487 3,087,755 (392,851) -12.72% Water Revenue (Service Charge)10,116,528 7,587,396 838,578 7,528,103 (59,293) 832,913 7,499,091 29,012 0.39% Sewer Charge Revenue 2,229,246 1,671,934 188,051 1,655,230 (16,704) 172,526 1,539,358 115,871 7.53% Locke Ranch Assessments 273,250 179,867 17,353 190,220 10,353 16,183 183,072 7,148 0.00% Other Operating Revenue 894,617 670,963 54,104 757,743 86,780 61,742 621,250 136,493 21.97% Total Operating Revenue:35,934,087 26,474,843 1,678,424 24,565,492 (1,909,352) 2,075,323 26,150,925 (1,585,434) -6.06% Revenue (Non-Operating): Interest 358,000 268,500 47,588 530,526 262,026 22,604 329,169 201,357 61.17% Property Tax 1,850,000 1,274,650 117,866 1,185,314 (89,335) 111,450 1,177,867 7,447 0.00% Other Non-Operating Revenue 639,846 479,885 148,373 690,235 210,350 39,898 255,699 434,535 169.94% Total Non-Operating Revenue:2,847,846 2,023,034 313,827 2,406,075 383,041 173,953 1,762,735 643,340 36.50% Total Revenue 38,781,933 28,497,877 1,992,251 26,971,567 (1,526,311) 2,249,276 27,913,660 (942,094) -3.38% Expenses (Operating): Variable Water Costs (G.W., Import & Power)14,793,377 10,888,522 590,007 9,930,011 (958,511) 788,116 11,074,421 (1,144,410) -10.33% Salary Related Expenses 10,784,493 7,382,000 738,490 7,168,801 (213,199) 784,678 7,206,191 (37,390) -0.52% Supplies & Services 4,571,268 3,237,656 411,032 3,254,137 16,481 392,596 3,130,995 123,142 3.93% Total Operating Expenses 30,149,138 21,508,178 1,739,529 20,352,949 (1,155,229) 1,965,390 21,411,607 (1,058,659) -4.94% Expenses (Non-Operating): Interest on Long Term Debt 1,325,785 1,146,692 111,601 1,015,812 (130,880) 115,401 1,025,950 (10,138) -0.99% Other Expense 14,200 10,650 (671) 986,613 975,963 51,731 (55,622) 1,042,235 -1873.78% Total Non-Operating Expenses:1,339,985 1,157,342 110,930 2,002,425 845,083 167,132 970,328 1,032,097 106.37% Total Expenses 31,489,123 22,665,520 1,850,459 22,355,374 (310,147) 2,132,522 22,381,935 (26,562) -0.12% Net Position Before Capital Contributions 7,292,810 5,832,358 141,792 4,616,193 (1,216,164) 116,754 5,531,725 (915,532) -16.55% Special Item - - - - - (2,205,847) 2,205,847 -100.00% Capital Contributions (Non-Cash - - 38,556 38,556 977 3,447,323 (3,408,767) 0.00% Transaction GASB 34 Compliant) Net Position Before Depreciation 7,292,810 5,832,358 141,792 4,654,749 (1,177,608) 117,731 6,773,201 (2,118,452) -31.28% Depreciation & Amortization 7,726,142 5,762,107 607,846 5,508,399 (253,707) 625,129 5,580,357 (71,958) -1.29% Total Net Position (433,332)$ 70,252$ (466,054)$ (853,650)$ (923,901)$ (507,398)$ 1,192,844$ (2,046,495)$ -171.56% Capital - Direct Labor (300,000)(225,000)(18,475) (268,466) (43,466) (14,961) (191,367) (77,099) 40.29% (With March 31, 2018 for comparison purposes) 5 Annual YTD March YTD YTD Actual Prior Year Prior YTD YTD Actual YTD - CUR Budget Budget Actual Actual (Under)Over Mar Actual Actual (thru vs vs FY19 FY19 FY19 FY19 YTD Budget FY18 Mar 2018) PY Actual $PY Actual % Revenue (Operating): Water Revenue (Residential)16,592,437$ 12,110,820$ 465,873$ 10,439,982$ (1,670,838)$ 638,530$ 11,766,325$ (1,326,343)$ -11.27% Water Revenue (Commercial & Fire Det.)1,964,205 1,433,673 88,114 1,299,310 (134,363) 129,942 1,454,074 (154,764) -10.64% Water Revenue (Landscape/Irrigation)3,863,805 2,820,191 26,351 2,694,904 (125,287) 223,487 3,087,755 (392,850) -12.72% Water Revenue (Service Charge)10,116,528 7,587,396 838,578 7,528,103 (59,293) 832,913 7,499,091 29,012 0.39% Other Operating Revenue 827,887 620,915 51,706 707,391 86,476 44,191 555,318 152,073 27.38% Total Operating Revenue:33,364,861 24,572,995 1,470,622 22,669,690 (1,903,305) 1,869,063 24,362,563 (1,692,873) -6.95% Revenue (Non-Operating): Interest 310,000 232,500 45,187 454,329 221,829 19,208 290,025 164,304 56.65% Property Tax 1,850,000 1,274,650 117,866 1,185,314 (89,337) 111,450 1,177,867 7,447 0.63% Other Non-Operating Revenue 605,346 454,010 142,941 660,377 206,368 39,898 276,620 383,757 138.73% Total Non-Operating Revenue:2,765,346 1,961,160 305,995 2,300,020 338,860 170,556 1,744,512 555,508 31.84% Total Revenue 36,130,207 26,534,154 1,776,616 24,969,710 (1,564,445) 2,039,619 26,107,075 (1,137,365) -4.36% Expenses (Operating): Variable Water Costs (G.W., Import & Power)14,793,377 10,888,522 590,007 9,930,011 (958,511) 788,116 11,074,421 (1,144,410) -10.33% Salary Related Expenses 9,652,772 6,634,628 654,829 6,507,499 (127,129) 710,446 6,436,776 70,723 1.10% Supplies & Services: Communications 159,120 119,340 6,697 115,245 (4,095) 24,060 104,597 10,649 10.18% Contractual Services 475,966 301,975 37,821 275,595 (26,379) 25,395 296,472 (20,877) -7.04% Data Processing 285,129 219,549 18,493 231,567 12,018 11,530 134,413 97,154 72.28% Dues & Memberships 82,077 68,124 4,128 73,333 5,209 (74) 76,507 (3,174) -4.15% Fees & Permits 264,546 198,410 21,534 210,811 12,401 20,826 187,496 23,315 12.43% Board Election 69,750 69,750 52,742 (17,008) - - 52,742 Insurance 281,967 211,475 22,996 205,282 (6,194) 21,295 186,451 18,830 10.10% Materials 658,714 520,384 68,950 650,816 130,432 66,399 561,856 88,960 15.83% District Activities, Emp Recognition 43,013 32,260 903 24,918 (7,342) 3,233 14,970 9,948 66.45% Maintenance 432,971 300,728 43,537 304,459 3,730 39,884 283,405 21,054 7.43% Non-Capital Equipment 136,294 102,221 10,108 82,699 (19,521) 6,028 90,223 (7,523) -8.34% Office Expense 40,343 30,257 3,892 28,247 (2,011) 5,962 27,544 703 2.55% Professional Services 475,804 269,853 69,259 288,399 18,546 66,756 461,924 (173,525) -37.57% Training 67,188 47,391 (2,146) 23,238 (24,153) 5,270 24,007 (769) -3.20% Travel & Conferences 125,279 86,459 10,110 57,625 (28,833) 10,902 45,644 11,981 26.25% Uncollectible Accounts 2,790 2,093 1,380 4,122 2,030 1,803 3,296 826 25.07% Utilities 169,911 127,433 15,776 126,447 (986) 6,753 125,824 623 0.50% Vehicle Equipment 316,262 216,247 31,171 200,438 (15,809) 12,125 178,280 22,157 12.43% Supplies & Services Sub-Total 4,087,123 2,923,947 364,609 2,955,983 32,036 328,147 2,802,909 153,074 5.46% Total Operating Expenses 28,533,272 20,447,097 1,609,445 19,393,493 (1,053,605) 1,826,709 20,314,106 (920,613) -4.53% Expenses (Non-Operating): Interest on Long Term Debt 1,325,785 1,146,692 111,601 1,015,812 (130,881) 115,401 1,025,950 (10,138) -0.99% Other Expense 8,600 6,450 (671) 977,238 970,788 51,731 (53,507) 1,030,745 -1926.37% Total Non-Operating Expenses:1,334,385 1,153,142 110,930 1,993,050 839,908 167,132 972,443 1,020,607 104.95% Total Expenses 29,867,657 21,600,239 1,720,375 21,386,543 (213,697) 1,993,841 21,286,549 99,994 0.47% Net Position Before Capital Contributions 6,262,550 4,933,915 56,241 3,583,167 (1,350,748) 45,778 4,820,526 (1,237,359) -25.67% Special Item - - - - - (2,205,847) 2,205,847 -100.00% Capital Contributions (Non-Cash Transaction -- - 34,500 34,500 - 1,847,505 (1,813,005) -98.13% GASB 34 Compliant) Net Position Before Depreciation 6,262,550 4,933,915 56,241 3,617,667 (1,316,248) 45,778 4,462,184 (844,517) -18.93% Depreciation & Amortization 6,329,146 4,714,360 492,994 4,477,243 (237,117) 510,171 4,557,167 (79,925) -1.75% Total Net Position (66,596)$ 219,556$ (436,753)$ (859,576)$ (1,079,131)$ (464,393)$ (94,983)$ (764,592)$ 804.97% Capital - Direct Labor (279,000) (209,250) (14,652) (212,141) (2,891) (17,195) (162,069) (50,072) 30.90% Yorba Linda Water District Water Fund For Period Ending March 31, 2019 (With March 31, 2018 for comparison purposes) 6 $22,572,702 $23,718,578 $23,096,797 $26,107,075 $24,969,710 -4.36% $19,242,416 $17,637,070 $19,110,715 $21,286,549 $21,386,543 0.47% $- $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 $30,000,000 Mar. 2015 Mar. 2016 Mar. 2017 Mar. 2018 Mar. 2019 Water Revenues & Expenses -3rd Qtr 2019 (excludes Depreciation, Special Items, and Contributed Capital ) Total Revenue Total Expenses 7 Annual YTD Mar YTD YTD Actual Prior Year Prior Year YTD Actual YTD - CUR Budget Budget Actual Actual (Under)Over Mar Actual Actual (thru vs vs FY19 FY19 FY19 FY19 YTD Budget FY18 Mar 2018)PY Actual $PY Actual % Revenue (Operating): Sewer Charge Revenue 2,229,246$ 1,671,934$ 188,051$ 1,655,230$ (16,704)$ 172,526$ 1,539,358$ 115,872$ 7.53% Locke Ranch Assessments 273,250 179,867 17,353 190,220 10,353 16,183 183,072 7,148 0.00% Other Operating Revenue 66,730 50,048 2,398 50,352 304 17,550 65,933 (15,581) -23.63% Total Operating Revenue:2,569,226 1,901,848 207,802 1,895,802 (6,047) 206,259 1,788,363 107,439 6.01% Revenue (Non-Operating): Interest 48,000 36,000 2,401 76,197 40,197 3,397 39,144 37,053 94.66% Other Non-Operating Revenue 34,500 25,875 5,432 29,858 3,983 - (20,921) 50,779 -242.72% Total Non-Operating Revenue:82,500 61,875 7,833 106,055 44,180 3,397 18,224 87,832 481.97% Total Revenue 2,651,726 1,963,723 215,635 2,001,857 38,133 209,656 1,806,586 195,270 10.81% Expenses (Operating): Salary Related Expenses 1,131,721 747,372 83,661 661,302 (86,069) 74,232 769,416 (108,114) -14.05% Supplies & Services: Communications 11,977 8,982 504 5,908 (3,074) 1,787 6,089 (181) -2.98% Contractual Services 29,766 22,324 2,578 17,007 (5,317) 1,713 22,038 (5,032) -22.83% Data Processing 17,322 12,991 953 14,166 1,174 806 10,055 4,110 40.87% Dues & Memberships 6,153 4,615 311 5,520 905 151 5,916 (396) -6.69% Fees & Permits 15,907 11,930 660 8,549 (3,382) 418 8,255 294 3.56% Board Election 5,250 3,938 - 3,970 33 - - 3,970 Insurance 21,223 15,917 1,731 15,381 (536) 1,491 13,922 1,459 10.48% Materials 28,622 29,967 898 33,663 3,697 460 32,585 1,079 3.31% District Activities, Emp Recognition 3,238 2,429 68 1,807 (621) 237 1,117 690 61.79% Maintenance 171,630 78,723 27,480 75,553 (3,170) 47,589 108,140 (32,587) -30.13% Non-Capital Equipment 36,157 27,118 4,359 18,262 (8,856) 1,242 18,164 98 0.54% Office Expense 2,957 2,218 252 1,918 (300) 441 2,035 (116) -5.72% Professional Services 33,996 25,497 2,965 33,683 8,186 2,259 23,161 10,522 45.43% Training 13,052 9,789 486 16,512 6,723 533 4,804 11,708 243.68% Travel & Conferences 14,061 10,545 527 5,403 (5,142) 544 3,414 1,989 58.26% Uncollectible Accounts 210 158 126 404 247 125 326 78 23.81% Utilities 13,489 10,117 1,187 9,882 (235) 453 9,874 8 0.08% Vehicle Equipment 59,138 36,853 1,337 30,566 (6,287) 4,199 58,193 (27,627) -47.47% Supplies & Services Sub-Total 484,145 314,109 46,423 298,154 (15,955) 64,448 328,088 (29,934) -9.12% Total Operating Expenses 1,615,866 1,061,481 130,084 959,456 (102,024) 138,680 1,097,504 (138,047) -12.58% Expenses (Non-Operating): Other Expense 5,600 4,200 9,375 5,175 - (2,116) 11,490 -543.12% Total Non-Operating Expenses:5,600 4,200 - 9,375 5,175 - (2,116) 11,490 -543.12% Total Expenses 1,621,466 1,065,681 130,084 968,831 (96,850) 138,680 1,095,388 (126,557) -11.55% Net Position Before Capital Contributions 1,030,259 898,043 85,551 1,033,026 134,983 70,976 711,198 321,827 45.25% Capital Contributions (Non-Cash - - 4,056 4,056 977 1,599,818 (1,595,762) -99.75% Transaction GASB 34 Compliant) Net Position Before Depreciation 1,030,259 898,043 85,551 1,037,082 139,039 71,953 2,311,017 (1,273,935) -55.12% Depreciation & Amortization 1,396,996 1,047,747 114,852 1,031,156 (16,591) 114,958 1,023,190 7,966 0.78% Total Net Position (366,736)$ (149,704)$ (29,301)$ 5,926$ 155,630$ (43,005)$ 1,287,827$ (1,281,901)$ -99.54% Capital - Direct Labor (21,000) (15,750) (3,823) (56,325)(40,575) (1,468) (15,805)(40,520)256.38% Yorba Linda Water District Sewer Fund For Period Ending March 31, 2019 (With March 31, 2018 for comparison purposes) 8 $1,387,791 $1,471,989 $1,709,587 $1,806,586 $2,001,857 10.81% $908,664 $910,662 $1,048,563 $1,095,388 $968,831 -11.55% $- $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 Mar. 2015 Mar. 2016 Mar. 2017 Mar. 2018 Mar. 2019 Sewer Revenues & Expenses -3rd Qtr 2019 (excludes Depreciation, Special Items, and Contributed Capital) Total Revenue Total Expenses 9 ITEM NO. 9.4 AGENDA REPORT Meeting Date: May 14, 2019 To:Board of Directors From:Marc Marcantonio, General Manager Presented By:Delia Lugo, Finance Manager Dept:Finance Prepared By:Saira Hernandez, Accountant Subject:Cash and Investment Report for Period Ending March 31, 2019 SUMMARY: Government Code Section 530607, et. seq., requires the person delegated to invest funds to make monthly report of investments to the legislative body. DISCUSSION: The Cash & Investment Portfolio Report presents the market value and percent yield for all District investments by institution. The Cash & Investment Summary Report includes budget and actual interest and average term portfolio information as well as market value broken out by reserve categories. The Fair Value Measurement Report categorizes investments with the fair value hierarchy established by generally accepted accounting principles. The Unrestricted Reserves and Days in Cash Graph presents Water Unrestricted Reserve Balances and Days in Cash at a particular point in time for the last four years. The average portfolio yield for the month ending March 31, 2019 is 2.36%. The District's Total Cash and Investment balance at March 31, 2019 resulted in a decrease of approximately $201,000 when compared to the ending balance of the previous month. A large balance change includes a decrease between Water and Sewer Operating Funds of $219,000 due to a negative net effect between operating revenues and expenses through the reporting month of the fiscal year. STRATEGIC PLAN: G2 1D - Retain cash on hand of 365+ days at fiscal year end. ATTACHMENTS: Name:Description:Type: Cash_Invest_Reports_Mar_19.pdf Backup Material Backup Material Market %Date of Percent Value Par of Total Institution Maturity Yield Checking Account: 317,994$ 317,994$ Wells Fargo Bank 317,994$ 317,994$ 0.93%Total 0.00% Money Market Accounts: 95$ 95$ US Bank (Revenue Bonds)2.04% 3,279,133 3,273,199 US Bank (Money Market)2.16% 252,689 252,689 Public Agency Retirement Svcs. (PARS) 3,531,918$ 3,525,983$ 10.28%Total 2.16% Certificates of Deposits: 199,626$ 200,000$ World's Foremost Bk Sydney 05/28/19 1.30% 247,707 248,000 Capital One Bk USA Natl Assn 05/13/19 1.20% 243,958 249,000 Comenity Cap Bk Salt Lake City 06/30/21 1.68% 243,982 248,000 EnerBank USA Salt Lake City 08/26/20 1.32% 246,715 248,000 EverBank Jacksonville Fla CTF 08/30/19 1.16% 177,404 180,000 HSBC BK USA, NA MC Clean CTF 08/31/21 1.27% 242,313 248,000 Wells Fargo Bank NA Sioux Falls D 08/31/21 1.64% 243,100 247,000 PrivateBank & Tr Chicago Ill CTF 03/30/22 2.24% 246,809 249,000 JP Morgan Chase Bk NA Columbus 03/31/22 2.47% 2,091,615$ 2,117,000$ 6.09%Total 1.60% Pooled Investment Accounts: 10,015,899$ 10,015,899$ Local Agency Investment Fund 2.44% 1,358,964 1,357,769 CalTRUST Short Term 2.51% 17,048,715 17,134,900 CalTRUST Medium Term 2.47% 28,423,578$ 28,508,568$ 82.71%2.46% 34,365,105$ 34,469,545$ 100%Total Investments 2.36% Per Government Code requirements, the Investment Report is in compliance with the Yorba Linda Water District's Investment Policy, and there are adequate funds available to meet budgeted and actual expenditures for the next six months. 3/31/19 Yorba Linda Water District Cash & Investment Portfolio Report March 31, 2019 ________________________________ Saira Hernandez, Accountant 1 Below is a chart summarizing the yields as well as terms and maturities for the month of March 2019: Average # of Month Portfolio Days to of 2019 Yield Maturity March 2.36%56 Below are charts comparing operating fund interest for current and prior fiscal years. Actual Interest 3/31/2018 3/31/2019 Monthly - March 22,605$ 39,934$ Year-to-Date 329,169$ 522,872$ Budget 2017/2018 2018/2019 Interest Budget, March YTD 232,500$ 268,500$ Interest Budget, Annual 310,000$ 358,000$ Interest earned on investments is recorded in the fund that owns the investment. The distribution of investments in the portfolio both in dollars and as a percentage of the total portfolio by funds is as follows: The table below displays the District's Cash and Investment balance of $34.3 million which is allocated between the established reserve funds, Wells Fargo Checking Account, and the restricted funds held at U.S. Bank for the construction of the Fairmont Booster Pump Station. The number of Days in Cash are 365 for the Un-Restricted Water Reserve balance and 1,090 for the Un-Restricted Sewer Reserve balances, as of March 31, 2019. FY19 Reserve Cash and Requirements Investments February 2019 % Alloc March 2019 % Alloc "Target Available for Fund Description Balance 2/28/2019 Balance 3/31/2019 Levels"CY Obligations Water Operating Reserve 13,189,906$ 39.03%13,206,060$ 39.08%7,593,220$ 5,612,840$ Water Emergency Reserve 7,033,064 20.81%7,066,038 20.91%5,813,701 1,252,337 Water Capital Project Reserve 4,287,852 12.69%4,235,567 12.53%6,327,500 (2,091,933) Rate Stabilization Reserve 4,031,784 11.93%4,059,565 12.01%1,600,999 2,458,566 Un-Restricted Water Reserve Balance 28,542,606 28,567,231 21,335,420 7,231,811 Conservation Reserve 103,546 0.31%103,546 0.31%- 103,546 Employee Liability Reserve 298,124 0.88%298,124 0.88%273,000 25,124 Restricted Reserve Balance 401,669 401,669 273,000 128,669 Sewer Operating Reserve 1,659,765 4.91%1,860,999 5.51%403,967 1,457,032 Sewer Emergency Reserve 2,601,952 7.70%2,607,911 7.72%1,899,951 707,960 Sewer Capital Project Reserve 355,939 1.05%356,516 1.05%2,000,000 (1,643,484) Un-Restricted Sewer Reserve Balance 4,617,655 4,825,427 4,303,918 521,509 Total Reserve Balances 33,561,930$ 99.31%33,794,327$ 100.00%25,912,338$ 7,881,989$ Water Operating 541,834 197,510 Sewer Operating 213,338 120,484 755,172 317,994 Rev. Bond 2012A & 2017A-Principal & Interest 405 95 Public Agency Retirement Svc. -PARS (Restricted)248,688 252,689 Total Cash and Investments 34,566,194$ 34,365,105$ Cash & Investment Summary Report Cash & Investment Summary Comparison Between Current and Previous Month Wells Fargo Bank Checking US Bank Held (Restricted) 2 Investment Balances (as of 3-31-2019) Checking Account: 10.93% Money Market Accounts: 10.28% Certificates of Deposit: 6.09% In 4 Pooled Investment Accounts: 82.71% OF Checking Account: $ 317,994 0.93% Money Market Accounts: $ 3,531,918 10.28% Certificates of Deposit. $ 2,091,615 6.09% Pooled Investment Accounts: $ 28,423,578 82.71% Total $ 34,365,105 100.00% 3 Yorba Linda Water District Fair Value Measurement Report March 31, 2019 Quoted Observable Unobservable Prices Inputs Inputs Investments Level 1 Level 2 Level 3 Total CalTRUST Investment Pool -$ 18,407,679$ -$ 18,407,679$ Local Agency Investment Fund - 10,015,899 - 10,015,899 U.S. Government Sponsored Agency Securities - - - - Negotiable Certificates of Deposit - 2,091,615 - 2,091,615 Total Investments -$ 30,515,193$ -$ 30,515,193$ 4 PARS (Public Agency Retirement Services) Funding Reconciliation Transaction Contributions PARS Expenses Investment Available Description Date & Gains & Losses Return (%)Balance Beginning Balance 7/1/2018 247,389.78$ 247,389.78$ Investment Return 7/31/2018 3,520.41$ 250,910.19$ Investment Expenses 7/31/2018 (51.54)$ 250,858.65$ Investment Return 8/31/2018 3,307.14$ 254,165.79$ Investment Expenses 8/31/2018 (52.26)$ 254,113.53$ Investment Return 9/30/2018 (332.13)$ 253,781.40$ Investment Expenses 9/30/2018 (52.94)$ 253,728.46$ Investment Return 10/31/2018 (10,505.63)$ 243,222.83$ Investment Expenses 10/31/2018 (52.86)$ 243,169.97$ Investment Return 11/30/2018 2,837.57$ 246,007.54$ Investment Expenses 11/30/2018 (50.66)$ 245,956.88$ Investment Return 12/31/2018 (9,674.65)$ 236,282.23$ Investment Expenses 12/31/2018 (51.24)$ 236,230.99$ Investment Return 1/31/2019 12,505.79$ 248,736.78$ Investment Expenses 1/31/2019 (49.21)$ 248,687.57$ Investment Return 2/28/2019 4,053.65$ 252,741.22$ Investment Expenses 2/28/2019 (51.81)$ 252,689.41$ subtotal =252,689.41$ Initial Deposit 12/28/2017 247,599.00$ Gain(Loss) from initial Deposit 5,090.41$ 5 $30,659,591 $25,968,169 $25,968,169 $28,567,231 417 367 369 365 60 110 160 210 260 310 360 410 460 $20,000 $5,020,000 $10,020,000 $15,020,000 $20,020,000 $25,020,000 $30,020,000 $35,020,000 Mar. 2016 Mar. 2017 Mar. 2018 Mar. 2019 Unrestricted Reserves & Days in Cash (Water) Unrestricted Reserves (Water)Days in Cash (Water) 6 ITEM NO. 10.1 AGENDA REPORT Meeting Date: May 14, 2019 Subject:Directors' Reports · Intergovernmental Meetings, Conferences, and Events SUMMARY: The Directors will report on their attendance at the following events: 1. OC LAFCO - April 10, 2019 (Nederhood - As Needed) 2. Safe Drinking Water Trust Hearing - April 10, 2019 (Jones) 3. WACO Planning Committee - April 16, 2019 (Jones) 4. SAWPA Commission - April 16, 2019 (Jones - As Needed) 5. YL City Council - April 16, 2019 (Hall) 6. MWDOC Board - April 17, 2019 (Nederhood) 7. OCWA Luncheon - April 17, 2019 (Jones/Miller/Nederhood) 8. OCWD Board - April 17, 2019 (Jones) 9. MWDOC/OCWD Joint Planning Committee - April 24, 2019 (Jones/Nederhood) 10. OCSD Board - April 24, 2019 (Hawkins) 11. MWDOC Board - May 1, 2019 (Miller/Nederhood) 12. OCWD Board - May 1, 2019 (Jones) 13. WACO - May 3, 2019 (Jones/Nederhood) 14. ACWA-JPIA and ACWA Spring Conferences - May 6-10, 2019 (Jones) 15. ACWA Groundwater Committee - May 7, 2019 (Jones) 16. ACWA Energy Committee - May 7, 2019 (Miller) 17. ACWA Water Quality Committee - May 7, 2019 (Miller) 18. YL City Council - May 7, 2019 (Nederhood) 19. OC LAFCO - May 8, 2019 (Nederhood - As Needed) 20. ISDOC Executive Committee - May 14, 2019 (Nederhood) ITEM NO. 11.1 AGENDA REPORT Meeting Date: May 14, 2019 Subject:Interagency Committee with MWDOC and OCWD (Jones/Hawkins) · Minutes of meeting held March 28, 2019 at 4:00 p.m. · Next meeting scheduled May 23, 2019 at 4:00 p.m. ATTACHMENTS: Name:Description:Type: 2019-03-28_-_Minutes_-_YLWD-MWDOC-OCWD.docx Minutes Minutes Minutes of the YLWD/MWDOC/OCWD Interagency Committee Meeting Held March 28, 2019 at 4:00 p.m. 1 MINUTES OF THE YORBA LINDA WATER DISTRICT INTERAGENCY COMMITTEE MEETING WITH MWDOC AND OCWD Thursday, March 28, 2019, 4:00 P.M. 1717 E Miraloma Ave, Placentia CA 92870 1. CALL TO ORDER The meeting was called to order at 4:00 p.m. 2. ROLL CALL YLWD COMMITTEE MEMBERS YLWD STAFF Brooke Jones, President Marc Marcantonio, General Manager Rosanne Weston, Engineering Manager MWDOC COMMITTEE MEMBER MWDOC STAFF Brett R. Barbre, President Rob Hunter, General Manager OCWD COMMITTEE MEMBER OCWD STAFF Roger Yoh, Director Mike Markus, General Manager OTHER ATTENDEES J. Wayne Miller, Director 3. PUBLIC AND COMMENTS None. 4. DISCUSSION ITEMS 4.1. MWD Water Supply Conditions and Outlook MWD has between 2.7 to 2.8 AF of storage. Lake Mead water elevation could rise up 60 feet behind the dam. 4.2. Condition of OCWD Groundwater Basin, Water Purchased for Recharge, and In-Lieu Recharge OCWD is projecting an overdraft of (-252) AF by end of June 2019. OCWD purchased 40,000 AF this year of the 65,000 that is purchased annually from MWD by end of June. In-lieu recharge will be contingent on what MWD does. This coming year, OCWD will take 25,000 AF in-lieu and purchase another 30,000 to 40,000 AF. The BPP at 75% would have an RA of $487/AF. With a BPP of 77%, the RA would be $487/AF. The budget will be adopted at the second meeting in April. Minutes of the YLWD/MWDOC/OCWD Interagency Committee Meeting Held March 28, 2019 at 4:00 p.m. 2 4.3. PFOS/PFOA Testing and Mitigation Certification of OCWD’s laboratory to test PFOS/PFOA was received in February. PFOS/PFOA Producers workgroup meetings have been held on February 20, 2019 and March 20, 2019. A SAWPA PFOS/PFOA workgroup meeting was held on February 20, 2019 with WWTP dischargers, regulatory agencies, laboratories and potentially affected ground water producers. Director Miller mentioned that YLWD is interested in participating in an ion exchange pilot plant study to treat PFAS using water from YLWD’s well field. Mr. Markus mentioned that OCWD is considering conducting a pilot plant. Ms. Weston set up a meeting with Purolite on May 2nd at 9 am and will send a meeting invitation to interested OCWD participants. 4.4. Huntington Beach Desalination Project No change. 4.5. MNWD Groundwater Basin Storage Proposal Moulton Niguel Water District (MNWD) is paying for a feasibility study, which can be used as a guide to evaluate storage arrangements with other parties. A consultant was selected through an RFP process and a kick-off meeting date will be set. The study is expected to be completed within 6 months. 4.6. California WaterFix Project A workshop was held on Tuesday, and more information should be available in June/July 2019. 4.7. North and South Basin Projects North Basin: OCWD requested an NPL listing for a designation as a Superfund site. By the end of 2019, the site may be listed. OCWD is still meeting with Northrop (one of the major PRPs) and hopes to settle with them before the site is listed. South Basin: Negotiations with PRPs are proceeding. OCWD has settled with some of the smaller PRPs through mediation, and hopes to settle with more PRPs as things progress. Minutes of the YLWD/MWDOC/OCWD Interagency Committee Meeting Held March 28, 2019 at 4:00 p.m. 3 4.8. YLWD Well Projects Well 22: Design is complete and the project is shovel-ready. YLWD is seeking grant funding (SARCCUP) from OCWD for well equipping. The Engineer’s Estimate for construction is approximately $1.5 million. Mr. Markus suggested that Ms. Weston contact Gregg Woodside at OCWD regarding the grant. Well 23: Mike Markus presented YLWD’s request to secure the well site on the west side of Warner Basin to OCWD’s Property Management Committee Board of Directors. YLWD has been in discussions with Daniel Park and Chris Olsen regarding next steps for negotiating an agreement. Mr. Marcantonio sent an official letter of request to OCWD for a well easement. 4.9. Future Agenda Items None 5. ADJOURNMENT 5.1. The meeting was adjourned at 4:45 p.m. RPW ITEM NO. 12.1 AGENDA REPORT Meeting Date: May 14, 2019 Subject:Meetings from May 15 - June 30, 2019 ATTACHMENTS: Name:Description:Type: BOD_-_Activities_Calendar.pdf Backup Material Backup Material Board of Directors Activity Calendar Event Date Time Attendance_by_ May MWDOC Board Wed, May 15 8:30 AM Miller/Nederhood OCWA Luncheon Wed, May 15 11:30 AM Jones/Miller OCWD Board Wed, May 15 5:30 PM Jones YL Planning Commission Wed, May 15 6:30 PM _____ District Open House Sat, May 18 9:00 AM WACO Planning Committee Tue, May 21 7:30 AM Jones/Nederhood SAWPA Commission Tue, May 21 9:30 AM Jones (As Needed) YL City Council Tue, May 21 6:30 PM Nederhood OCSD Board Wed, May 22 6:00 PM Hawkins Interagency Committee Meeting with MWDOC and OCWD Thu, May 23 4:00 PM Jones/Hawkins District Offices Closed Mon, May 27 7:00 AM Board of Directors Regular Meeting Tue, May 28 6:30 PM YL Planning Commission Wed, May 29 6:30 PM Hawkins (As Needed) Special Districts Summit Thu, May 30 8:30 AM Jones OC Water Summit Fri, May 31 7:30 AM Hawkins/Jones/Miller/Nederhood June ISDOC Executive Committee Tue, Jun 4 7:30 AM Nederhood SAWPA Commission Tue, Jun 4 9:30 AM Jones (As Needed) YL City Council Tue, Jun 4 6:30 PM Jones MWDOC Board Wed, Jun 5 8:30 AM Miller/Nederhood OCWD Board Wed, Jun 5 5:30 PM Jones WACO Fri, Jun 7 7:30 AM TBD AWWA Annual Conference Mon, Jun 10 8:00 AM Jones AWWA Annual Conference Tue, Jun 11 8:00 AM Jones Board of Directors Regular Meeting Tue, Jun 11 6:30 PM AWWA Annual Conference Wed, Jun 12 8:00 AM Jones OC LAFCO Wed, Jun 12 8:15 AM Nederhood (As Needed) YL Planning Commission Wed, Jun 12 6:30 PM Hawkins (As Needed) TENTATIVE - FBPS Dedication Ceremony Sat, Jun 15 10:00 AM Joint Committee Meeting with City of Yorba Linda Mon, Jun 17 4:00 PM Jones/Hawkins WACO Planning Committee Tue, Jun 18 7:30 AM Jones/Nederhood SAWPA Commission Tue, Jun 18 9:30 AM Jones (As Needed) YL City Council Tue, Jun 18 6:30 PM Hawkins MWDOC Board Wed, Jun 19 8:30 AM Miller/Nederhood OCWA Luncheon Wed, Jun 19 11:30 AM TBD OCWD Board Wed, Jun 19 5:30 PM Jones Board of Directors Regular Meeting Tue, Jun 25 6:30 PM OCSD Board Wed, Jun 26 6:00 PM Hawkins YL Planning Commission Wed, Jun 26 6:30 PM Hawkins (As Needed) ISDOC Thu, Jun 27 11:30 AM TBD As of May 7, 2019 BACKUP MATERIALS DISTRIBUTED LESS THAN 72 HOURS PRIOR TO THE MEETING www.fitchratings.com May 13, 2019 Public Finance Water & Sewer / U.S.A. Exposure Draft: U.S. Water and Sewer Rating Criteria Sector-Specific Criteria Scope This criteria report details Fitch Ratings’ methodology for assigning Issuer Default Ratings (IDRs) and issue- and obligation-specific ratings to U.S. municipal water and sewer (including both wastewater and stormwater) utilities, whether operating as stand-alone legal entities or an enterprise fund of a local government. This rating methodology also applies to certain municipally owned combined utilities, for which water and sewer revenue accounts for, or is expected to account for, the largest share of total revenue on an ongoing basis. Ratings under these criteria may also be applied in conjunction with Fitch’s “U.S. Public Finance Tax-Supported Rating Criteria” to tax-supported water and/or sewer utilities, for which the issue or obligation rating is constrained by the operating risks reflected in the IDR. The criteria apply to both new and surveillance ratings. Key Rating Drivers Fitch does not explicitly weight the assessments of individual key rating drivers in concluding its overall rating. There is no standard formula to link the following inputs into an exact rating. The individual assessments inform, but do not dictate, the final rating outcome. The relationship between individual and aggregate qualitative and quantitative factors varies between entities in the sector. As a general guideline, where a material factor is significantly weaker or stronger than others, this factor tends to attract a greater emphasis in the overall analysis. Revenue Defensibility: This entails analysis of the ability of a utility to generate cash flow based on its legal framework and the fundamental economics of the service area. Fitch will evaluate demand and pricing characteristics that influence revenue volatility and the tools available to the utility to respond to fluctuation in demand. Operating Risks: This entails analysis of the utility’s operating profile, including predictability and volatility of costs, life cycle/capital renewal risks, key resource cost risks and the ability to manage growth in costs over time. Financial Profile: This entails analysis of a utility’s liquidity profile and leverage in the context of its overall risk profile. These metrics are evaluated on both a historical and forward-looking basis, which considers an individual utility’s overall financial flexibility to withstand a stress scenario through a five-year horizon. Asymmetric Additive Risk Factors: Risk factors such as debt structure, management and governance, legal and regulatory are also considered when assigning a rating. These risk factors are not scaled, and only weaker characteristics affect the rating. Exposure Draft Fitch invites feedback from market participants on the proposed criteria. Comments should be sent to https://www.fitchratings.com/site/criteria by July 12, 2019. Fitch will apply the existing criteria to existing ratings. Fitch will apply the criteria described in this exposure draft to new issuer/transaction rating assignments during the exposure draft period. Fitch will publish on its website any written responses it receives, in full, including the names and addresses of such respondents, unless the response is clearly marked as confidential by the respondent. This report replaces “U.S. Water and Sewer Rating Criteria,” dated Nov. 29, 2018. Concurrent with the release of this report, Fitch is releasing the new “FAST Water & Sewer – Fitch Analytical Stress Test V1.0.0.” Inside This Report Page Scope 1 Key Rating Drivers 1 Exposure Draft 1 Key Proposed Criteria Changes 2 General Credit Quality Reflected in IDR 2 Expected Impact of Proposed Criteria Revisions on Ratings 2 Sector Risk Profile 3 Three Key Rating Drivers 4 Revenue Defensibility 5 Operating Risks 8 Financial Profile 11 Rating Guidance: Applying Analytical Judgement to Align Key Risk Factors and Ratings 19 Asymmetric Additive Risk Considerations 20 Data Sources 23 Rating Sensitivities 23 Variations from Criteria 23 Limitations 23 Disclosure 24 Appendix A: FAST Water & Sewer – Fitch Analytical Stress Test 25 Appendix B: Wholesale Water/Sewer Utilities Key Rating Drivers 27 Appendix C: Purchaser Credit Index Scoring Matrix 33 Related Criteria Rating Criteria for Public-Sector, Revenue- Supported Debt (February 2018) U.S. Public Finance Tax-Supported Rating Criteria (April 2018) Analysts Doug Scott +1 512 215-3725 douglas.scott@fitchratings.com Dennis Pidherny +1 212 908-0738 dennis.pidherny@fitchratings.com ITEM NO. 8.5. MATERIALS SUBMITTED BY: Delia Lugo MEETING DATE: May 14, 2019 Exposure Draft: U.S. Water and Sewer Rating Criteria 2 May 13, 2019 Public Finance Key Proposed Criteria Changes The objective of the proposed criteria enhancements is to provide more transparent analyses that are explicitly oriented toward future expectations. The criteria revisions aim to communicate Fitch’s credit opinions more clearly and better express the characteristics that affect a credit’s relative resilience amid changing economic conditions and investment cycles. Fitch believes this will facilitate a more forward-looking approach to ratings. It will also better highlight differences among credits within the same rating category. The key proposed changes to the evaluation of water/sewer utilities are: x publication of category-specific assessments for each key rating driver; x explicit alignment of financial profile with business profile in assessing the rating; x introduction or recharacterization of certain metrics; x explicit forward-looking consideration of the impact of existing or needed capital investments that may increase financial leverage; x introduction of utility-specific scenario analysis, including stress from unanticipated capital demands; and x a more comprehensive analysis of purchaser risk for wholesale utilities. General Credit Quality Reflected in IDR Fitch will assign an IDR to utilities that are legally separate, stand-alone entities, as well as an issue-specific rating for each Fitch-rated security. Utilities organized and reported as enterprise funds that are not separate legal entities may also be assigned an IDR. Assigning IDRs aligns default risk ratings in this sector to those assigned by other groups across Fitch’s global ratings platform. Conduit issuers, including issuers that benefit from pass-through contractual frameworks, will not be assigned IDRs. An IDR reflects an assessment of a utility’s relative vulnerability to default on its financial obligations. Typically, all of a utility’s individual securities will be assigned the same rating as the IDR. IDRs and issue ratings do not incorporate any assessment of recovery prospects, and distinctions between default risk in securities by seniority in this sector will only be made where there is a basis in the finance documentation and legal framework to support a conclusion that a default on one tranche will not result in a payment default on other senior tranches. A specific debt structure may include additional security devices such as a mortgage. However, these protections are not effective at preventing default in bankruptcy and are not a basis to distinguish the instrument rating from the IDR. Where rating distinctions can be made based on the seniority of debt, the rating of the most junior tranche will be commensurate with the IDR. Where conditions appropriate to making distinctions between securities based on seniority do not exist, all securities will be rated at the same level as the IDR. For more information on IDRs, see Fitch’s master criteria “Rating Criteria for Public-Sector, Revenue-Supported Debt.” Expected Impact of Proposed Criteria Revisions on Ratings Fitch estimates approximately 10% of the ratings covered by the criteria will be affected, with slightly more upgrades than downgrades anticipated. Rating changes will most likely reflect the criteria’s heightened emphasis on leverage through the cycle, with upgrades reflecting relatively low leverage, and downgrades resulting from the recognition of higher leverage and elevated operating risk. Fitch notes, as a baseline, roughly 5% of water and sewer ratings changed annually in recent years. While the impact of the new criteria is expected to have a somewhat higher effect on Glossary of Terms CAGR – Compound annual growth rate. Capex – Capital expenditures. CIP – Capital improvement plan. COFO – Coverage of full obligations. CP – Commercial paper. DB – Defined benefit. DSC – Debt service coverage. EBITDA – Earnings before interest, tax, depreciation and amortization. FADS – Funds available for debt service. FAST – Fitch Analytical Stress Test. GASB – Governmental Accounting Standards Board. IDR – Issuer Default Rating. MG – Million gallons. NPL – Net pension liability. PSM – Portfolio Stress Model. ITEM NO. 8.5. MATERIALS SUBMITTED BY: Delia Lugo MEETING DATE: May 14, 2019 Exposure Draft: U.S. Water and Sewer Rating Criteria 3 May 13, 2019 Public Finance rating changes from typical annual transitions, the scope of the changes are similar to what has been experienced in other Fitch sectors where changes to criteria have been introduced. Upon conclusion of the exposure draft period, Fitch will review all responses received and, if deemed appropriate, make changes to the exposure draft criteria. Once the criteria are finalized, the criteria will be applied immediately to any new issue and surveillance rating review. It is Fitch’s policy to review all credits whose rating may be affected positively or negatively by application of the criteria revision within a six-month period from the date of the new criteria adoption. Sector Risk Profile Monopoly Providers The starting point for analysis of municipal water and sewer utility enterprises is recognition that the sector’s business model and fundamental credit strengths reduce volatility of financial performance and mitigate the effects of macro events on the underlying utility. These strengths include relatively stable demand driven by the essentiality of water and sewer services, mandates to serve well-defined areas with monopolistic characteristics, strong contractual frameworks and considerable pricing flexibility provided through the sector’s largely autonomous rate-setting authority. Rate-Setting Autonomy An overwhelming majority of Fitch’s rated water and sewer utility systems possess the ability to autonomously determine their rates for service, free from the oversight of state utility regulatory commissions. With such powerful pricing flexibility at hand, the governing body’s actual use of its rate-making authority strongly influences revenue, profitability, operating liquidity and overall credit quality. Although exempt from rate regulation in most jurisdictions, municipal water and sewer utilities remain subject to a myriad of state and federal regulations related to asset and resource planning and environmental standards. Changes in market dynamics, regulatory initiatives or political influence, whether implemented or expected, can affect both revenue defensibility and operating risk throughout the sector as a whole, and may introduce positive or negative rating pressure for specific credits. Not-for-Profit Business Model Public water and sewer utilities operate on a not-for-profit basis and with the fundamental mission of providing safe, reliable and affordable water and sewer services. Excess cash flow is typically retained and used to build financial cushion, fund capital investment or reduce borrowings, although a portion of net revenues may be returned to host municipalities through transfers. Given the balance of these fundamentals, ratings in this sector, in most cases, range from ‘AAA’ to ‘A–’ (with a current median rating of AA), denoting high credit quality. However, individual utilities can be assigned lower, even speculative-grade (BB and below), ratings due to specific credit features or issues. This sector risk profile range does not establish a rating floor or ceiling, and does not simply replicate the range of existing ratings in the sector. Rather, the range emerges from the core features common to U.S. public water and sewer utilities. ITEM NO. 8.5. MATERIALS SUBMITTED BY: Delia Lugo MEETING DATE: May 14, 2019 Exposure Draft: U.S. Water and Sewer Rating Criteria 4 May 13, 2019 Public Finance Three Key Rating Drivers Fitch’s three key rating drivers are revenue defensibility, operating risks and financial profile. For retail public water and sewer utilities, as well as certain other water-related utilities that are not considered wholesalers, the three key rating drivers are assessed using the following guidance, which outlines general expectations for a given rating category. Guidance related to wholesale utilities is outlined in Appendix B. The subfactors composing each rating driver highlight the components most critical to making the assessment. All assessments are grounded in utility-specific historical data and qualitative analysis to support a forward-looking view on the expectation for future performance, rather than at a single point in time. The correspondence of revenue defensibility, operating risks, financial profile and ratings is presented in the Rating Positioning table on page 19. The ratings are not formulaic or model driven, but require qualitative judgment to place metrics in an overall context for each utility. Key Rating Drivers — Retail Water/Sewer Utilities Revenue Defensibility aa a bbb bb Revenue Source Characteristics Nearly all revenue is derived from services or business lines exhibiting monopoly characteristics. Reliance on revenue from competitive sources is insignificant. A significant portion of revenue is derived from services or business lines exhibiting monopoly characteristics. Reliance on revenue from competitive sources is manageable. The majority of revenue is derived from services or business lines exhibiting monopoly characteristics. Reliance on revenue from competitive sources is meaningful. Less than 50% of revenue is derived from services or business lines exhibiting monopoly characteristics. Reliance on revenue from competitive sources is significant. Service Area Characteristics Very favorable demographic trends characterized by strong customer growth, above- average income levels and low unemployment rates. Favorable demographic trends characterized by average customer growth, with average income levels or average unemployment rates. Stable demographic trends characterized by little or no customer growth, and below- average income and above- average unemployment rates. Weak demographic trends characterized by a declining customer base, well below- average income and high unemployment rates. Rate Flexibility Independent legal ability to increase service rates without external approval. Legal ability to increase service rates is subject to approval of external authorities. The history and expectation of operating and capital costs being recovered on a timely basis are strong. Legal ability to increase service rates is subject to approval of external authorities. History and expectation that operating and capital costs may not be recovered on a full or timely basis. Legal ability to increase service rates is subject to approval of external authorities. History and expectation that operating and capital cost recovery will be neither full nor timely. Utility costs are affordable for the vast majority of customers. Utility costs are affordable for most customers but are high for a large segment of customers. Utility costs are high for a significant portion of customers. Utility costs are high for the majority of customers. Asymmetric Rating Factor Considerations The analysis of a utility’s revenue defensibility also considers the effect of customer concentration, customer mix, industry concentration, tax revenue volatility, wholesale contract structure and counterparty risk on the utility’s revenue defensibility. Operating Risks Operating Cost Burden Very low operating cost burden. Low operating cost burden. Midrange operating cost burden. High operating cost burden. Capital Planning and Management Low life cycle investment needs. Elevated life cycle investment needs but supported by adequate capital investment. Elevated life cycle investment needs with weak capital investment. Elevated life cycle investment needs with extremely weak capital investment. Asymmetric Rating Factor Considerations Resource management, project completion risk and counterparty risks can also constrain the assessment. Financial Profile Leverage Profile Refer to the Rating Positioning table on page 19. Refer to the Rating Positioning table on page 19. Refer to the Rating Positioning table on page 19. Refer to the Rating Positioning table on page 19. Liquidity Profile Liquidity profile is based on coverage of full obligations and liquidity cushion. A weaker liquidity profile can constrain the financial profile assessment. Source: Fitch Ratings. ITEM NO. 8.5. MATERIALS SUBMITTED BY: Delia Lugo MEETING DATE: May 14, 2019 Exposure Draft: U.S. Water and Sewer Rating Criteria 5 May 13, 2019 Public Finance Revenue Defensibility Fitch considers both demand and pricing characteristics in its assessment of revenue defensibility. Water and sewer utilities have broadly stable demand characteristics, but exhibit some volatility across the typical economic and business cycle. Base demand for water and sewer service is somewhat insensitive to external factors given the essentiality of service and absence of a competitive marketplace. However, demand fluctuation on the margin is sensitive to changes in regional economics and demographics, as well as weather conditions. In its assessment of revenue defensibility, Fitch analyzes the historical patterns of revenue performance through economic and investment cycles, as well as growth trends over time, taking into account the utility’s revenue mix, customer characteristics, contractual framework, the economic dynamics of its service area, and its capability to preserve revenue generation through rate increases. While weather is among the most significant factors driving variability in demand for water service, particularly for residential users, normal fluctuations in temperature and seasonality are considered in the context of a utility’s normal business cycle in Fitch’s scenario analysis and are unlikely to affect Fitch’s assessment of revenue defensibility. Revenue Source Characteristics Retail water and sewer utilities typically exhibit strong revenue source characteristics as most, if not all, of their revenue (including charges, taxes and assessments) is directly or indirectly derived from monopolistic services: providing water and/or sewer service to end users within single certified areas that are not subject to competitive pressures. Fitch views revenue derived from monopolistic business lines to be more durable, secure and supportive of strong revenue defensibility than revenue generated by competitive activities. Combined utility systems also derive revenues from other essential utility services, including public power and natural gas, which are similarly monopolistic. Wholesale services provided to other retail utilities exhibiting monopolistic characteristics through either long-term contracts (minimum tenor of two years) or in situations where such purchasing retailer has no perceived viable and/or economic alternative to the wholesale service provided are also considered to exhibit monopolistic characteristics. Water and sewer utilities may also derive revenue from non-utility services or less traditional business lines subject to varying degrees of competitive pressures on both demand and price. These services may include agricultural water sales, competitive energy supply and uncontracted or short-term (less than two years) off-system energy sales as well as solid waste services. Revenue defensibility risk to a utility can be affected by the degree of the competition of such business lines as well as the extent to which the utility relies on such revenues and income to meet its covenanted revenue requirements and debt service obligations, if such situations occur. In cases where a retail water and sewer utility derives more than 20% of its revenue from competitive or non-utility service/less traditional business lines, Fitch may also consider in its analysis whether the off-taker(s) has the reasonable ability to procure related service elsewhere, as well as the tenor, counterparty and terms of relevant contracts to assess the degree to which replacement funds — either from replacement contracts or retail rate increases — may be necessary to meet scheduled debt payments. Contracts with weak counterparties, tenors of less than two years and termination provisions may subject a utility to contract renewal risk or merchant risk, and lower revenue defensibility. ITEM NO. 8.5. MATERIALS SUBMITTED BY: Delia Lugo MEETING DATE: May 14, 2019 Exposure Draft: U.S. Water and Sewer Rating Criteria 6 May 13, 2019 Public Finance Revenue Source Characteristics Metrics to Support Assessment x Fitch assesses revenue risk through an analysis of a utility’s business lines and the related revenue relied on to support both operations and debt service. Retail utility systems that derive more than 95% of operating income from services or business lines exhibiting monopolistic characteristics have revenue source characteristics consistent with a ‘aa’ factor assessment; over 80% to 95%, ‘a’; over 50% to 80%, ‘bbb’; and 50% and less, ‘bb’. x Fitch may also consider in its assessment, if available, each business line’s contribution to total income and funds available for debt service (FADS) using the thresholds outlined above. Source: Fitch Ratings. Service Area Characteristics A water and sewer utility’s demand and pricing characteristics, as well as its overall revenue stability, will be highly influenced by its service area characteristics and demographic trends since the essentiality of the enterprises’ services provides localities with a de facto ability to tax for their provisions. Retail customer growth, elevated income levels, a strong and diverse employer base, and low unemployment levels are all positive credit factors that can influence both demand and pricing characteristics. Service areas characterized by strong employment metrics and income levels are more likely to benefit from stronger collections driven by customer migration, as well as organic growth. Moreover, stronger income levels throughout an area are likely to result in more inelastic demand and rate flexibility during periods of economic weakness. Areas experiencing declining customers and employment are more likely to experience lower service demand. Fitch reviews income and employment indices of the representative service territory to help assess not only the prospects for stronger growth and more inelastic demand, but also the capacity of residential users to meet current obligations and absorb future rate increases. While income also provides some indication of an end user’s ability to pay utility bills, Fitch has observed that the essential nature of water and sewer service and the remedies available to most utilities (i.e. shutoffs and liens) make payment delinquencies in the sector extremely low, regardless of income levels and other economic indicators. Rate Flexibility The final component of the revenue defensibility assessment is a utility’s rate flexibility, which considers both the utility’s independent legal ability to determine rates of service and its relative affordability based on a benchmark of 5% of household income for all water-related services, or, in some cases, its price competitiveness. Service Area Characteristics Metrics to Support Assessment x Strong economic, customer and demographic trends support strong revenue defensibility. Fitch analyzes representative customer growth rates and service area unemployment rates and income levels relative to national averages. x Utilities that experience a historical compounded average annual growth in customers of more than 1.5% exhibit stronger growth characteristics; 1.5% to 0.0%, midrange; and less than 0.0%, weaker. x Service areas that report median household income in excess of 125% of the national average exhibit stronger income characteristics; 125%–75%, midrange; and less than 75%, weaker. x Service areas that report unemployment rates that are less than 75% of the national average exhibit stronger employment characteristics; 75%–125%, midrange; more than 125%, weaker. x Markets that exhibit positive retail customer growth and average to slightly below-average demographic trends are considered strong and consistent with factor assessments of at least ’a’. Markets that experience a declining retail customer base and exhibit well below-average demographic trends are considered weak and consistent with a factor assessment of ’bb’. Source: Fitch Ratings. ITEM NO. 8.5. MATERIALS SUBMITTED BY: Delia Lugo MEETING DATE: May 14, 2019 Exposure Draft: U.S. Water and Sewer Rating Criteria 7 May 13, 2019 Public Finance Assessing a utility’s independent legal ability to determine rates and increase operating revenue involves consideration of any limits on the utility’s autonomy in this area, including requirements for approval from local government groups or state regulatory commissions. Fitch considers a utility system to have independent legal rate-raising ability as long as such action is at the discretion of the utility’s governing body — be it a board of directors, local government council/commission or both. Utilities whose rates for service must be approved by an external regulatory authority are viewed as having less rate flexibility. Although utilities operating within a well-established and historically supportive regulatory regime may exhibit strong financial performance and credit quality, their revenues are nonetheless subject to scrutiny, regulatory lag and the potential for cost disallowance. Fitch will consider in its assessment historical rate-making decisions, methodologies and recovery mechanisms to determine the likelihood costs will be recovered in a timely manner. A utility system’s ability to independently set rates for service significantly enhances revenue defensibility, allowing the utility to increase revenue as necessary to offset the effects of lower unit sales or meet unanticipated cost increases. However, Fitch believes a governing body’s capability to exercise its rate-making authority and sustain strong financial performance can be influenced to a large degree by the resulting residential cost of service to the most economically vulnerable ratepayers given the essentiality of water and sewer service to public health and safety. Consequently, the rate flexibility component is capped by the affordability assessment. Fitch assesses affordability by measuring the approximate percentage of the population for which combined utility charges (consisting of water, sewer and stormwater) exceed 5% of household income based on the representative service territory’s income distribution. Alternatively, Fitch may base its calculation on individual or combined charges where one or more of the costs of service are unknown or not applicable using a threshold of 2.0% for water, 2.5% for sewer and 0.5% for stormwater. In measuring utility charges, Fitch assumes a residential bill based on 7,500 gallons of water consumption and/or 6,000 gallons of sewer flows. Stormwater charges will be based on either the service area’s established equivalent residential unit, average residential charge or a 2,000 -square foot calculation of impervious cover, whichever is deemed relevant. Retail utilities that possess the legal ability to determine rates and provide affordable utility service to the vast majority of the most economically vulnerable customers are viewed as having ample rate flexibility. For utilities whose business model is more susceptible to competitive pressures and where Fitch’s measurement of affordability may not be the best reflection of ultimate revenue -raising flexibility, such as agricultural irrigation districts, Fitch may use other quantitative and/or qualitative information to assess overall affordability, including relative price burden and importance of available water supplies. Affordability Metric to Support Assessment x Fitch calculates an affordability rate to determine the number of people whose bills account for an outsized portion of their income. A combined water-related bill that is greater than 5% of household income (or individually, 2.0% for water, 2.5% for sewer and 0.5% for stormwater) is considered unaffordable. Utilities with 20% or less of their population whose bills are considered high are deemed to have an affordability assessment factor of ‘aa’; over 20% to 30%, ‘a’; over 30% to 40%, ‘bbb’; and over 40%, ‘bb’. Source: Fitch Ratings. ITEM NO. 8.5. MATERIALS SUBMITTED BY: Delia Lugo MEETING DATE: May 14, 2019 Exposure Draft: U.S. Water and Sewer Rating Criteria 8 May 13, 2019 Public Finance Asymmetric Rating Factor Considerations – Revenue Defensibility In addition to the aforementioned considerations, the assessment of revenue defensibility can be constrained by revenue source concentration and tax revenue volatility, where applicable. Fitch evaluates tax revenue volatility consistent with its “U.S. Public Finance Tax-Supported Rating Criteria,” while Fitch evaluates a utility’s vulnerability to sudden drops in demand and the impact on revenue defensibility by assessing the degree to which demand and revenue rely on a particular customer, industry or commercial segment, where available. Customer concentration is assessed by reviewing the revenue contribution from a utility’s largest retail customers. Utilities that derive more than 10% of operating revenue from their largest customer or more than 25% of operating revenue from their 10 largest retail customers exhibit meaningful customer concentration. Utilities exhibiting customer concentration will be further evaluated to determine whether individual customer risk detracts from revenue stability. For example, revenue stability will be viewed as greater for a utility whose dominant customer is a university or medical center, than a utility dominated by a manufacturing facility or industrial complex. Operating Risks The second key rating driver is operating risks, which focus on operating cost burden and capital planning and management. A water and sewer utility’s ability to generate adequate margin while preserving affordability or cost competitiveness is largely a function of its ability to effectively manage operating and capital expenses. Long-term investment in property, plant and equipment is necessary to ensure sectorwide resource adequacy, regulatory compliance, accurate revenue recognition, reliability and efficient operations. While capital expenditures (capex) may limit financial flexibility in the near term, investment is essential for ensuring strong utility performance over the long term. Operating Cost Burden Fitch believes water and sewer utilities with a high operating cost burden generally are subject to a higher degree of overall operating risk. The measurement of total operating costs reflects the wide range of individual costs associated with supply, treatment and delivery of water as well as collection, treatment and disposal of wastewater. These include purchased water and/or sewer services, labor, administration, maintenance and fixed assets (as measured by depreciation). Fitch also includes net transfers in its calculation of operating costs. Overall, Fitch believes that the benefits and challenges related to operating decisions, as well as the effect of regional differences, macroeconomic factors and external restrictions on operations, are most commonly captured in operating costs. Operating Cost Burden Metric to Support Assessment x Fitch measures a utility’s ratio of total operating costs to historical average annual million gallons (mg) of water produced and/or sewer flows treated to determine operating cost burden. Retail utility systems with an operating cost of $6,500/mg or less have an operating cost factor assessment of ‘aa’; over $6,500/mg to $9,500/mg, ‘a’; over $9,500/mg to $12,500/mg, ‘bbb’; and over $12,500/mg, ‘bb’. x Stormwater utilities generally have limited operations and lack measured flows, and, thus, are assumed to have an operating cost factor assessment of ‘aa’ for stand-alone utilities unless there is evidence to suggest the assessment should be lower, in which case, the rationale for a lower assessment will be noted. Source: Fitch Ratings. For the retail utilities that purchase water and/or sewer service from wholesale providers, these costs typically represent a material portion of operating expenses. Contract costs for purchasing utilities will typically encompass all costs borne directly by the provider, including purchased resources, if applicable, and capital costs. ITEM NO. 8.5. MATERIALS SUBMITTED BY: Delia Lugo MEETING DATE: May 14, 2019 Exposure Draft: U.S. Water and Sewer Rating Criteria 9 May 13, 2019 Public Finance Depreciation expense is highly reflective of asset ownership. While all retail utility systems own distribution or collection assets, higher levels of depreciation are typically associated with utilities that own treatment assets as well. Other expenses include labor and administrative costs, and taxes or payments in lieu of taxes. Fitch includes amounts transferred to a host municipality as an operating expense because the importance of these payments to the recipients significantly increases the likelihood that payments will be made, even during periods of financial stress. However, Fitch nets transfers out against incoming transfers as utilities may receive support from another fund on an ongoing basis (e.g. repayment of a loan from another fund, reimbursement of billing costs from another fund or support from a host municipality) and these moneys would be available for ongoing operations. Labor costs, including pension-related costs, are generally a moderate portion of total utility expenses given the relatively low labor intensity of water and sewer service compared to other general government operations, but could become increasingly burdensome for utilities with large unfunded pension obligations. The key metric Fitch uses to measure operating cost burden is the ratio of total annual operating costs to total million gallons of water produced and/or sewer flows treated on an average annual basis or, in the case of non-traditional utilities, the total average annual amount of water where there is an associated cost. Specifically, Fitch assesses each utility’s ratio against levels it considers to be representative of varying degrees of operating risk. Because stormwater utilities’ primary activity revolves around managing the conveyance of intermittent flows (where measurement of flow amounts is largely unknown) and these utilities generally have much more limited operations than other water and sewer utilities, Fitch generally considers stand-alone stormwater utilities to have an operating cost assessment of ‘aa’, although the assessment could be constrained if average annual growth in operating expenses significantly exceeds inflationary-type adjustments or unanticipated operating or regulatory risks develop. Capital Planning and Management Fitch believes producing and transmitting potable and non-potable water as well as collecting, treating and disposing of wastewater safely and reliably require significant and consistent capital investment. Ensuring the adequacy of resources to meet current and projected demand and the ability to deliver these essential services reliably are fundamental planning requirements of water and sewer utility systems and central to their missions. Expenditures necessary to add new resources and facilities or comply with environmental regulations often entail sizable and costly multiyear projects that can result in periodic spikes in expenditures. In contrast, the need for continual system investment, particularly to replace depreciating infrastructure, is necessary to maintain operating efficiency and preserve reliability. Fitch assesses capital planning and management for U.S. water and sewer utilities through a review of the utility’s historical spending practices and relative position within the facilities’ life cycle. Fitch will also consider a utility’s capital investment plan (CIP) and projected spending requirements, when available. Where appropriate, Fitch may also review the CIP and projected spending of a retail utility’s wholesale provider. The relative position of utilities within their life cycle is used to provide an indication of the condition of the physical operating plant, while the level of capital spending relative to depreciation helps to inform the sufficiency of infrastructure reinvestment. Utilities whose cumulative depreciation relative to combined plant age and remaining useful life (i.e. life cycle ratio) is 45% or less are considered to have low investment needs, supporting a strong operating risk assessment. Utilities that are more than 45% through their life cycle may be susceptible to the effects of historical underinvestment in operating assets, which can include ITEM NO. 8.5. MATERIALS SUBMITTED BY: Delia Lugo MEETING DATE: May 14, 2019 Exposure Draft: U.S. Water and Sewer Rating Criteria 10 May 13, 2019 Public Finance elevated levels of routine maintenance, weak production metrics and poor reliability. However, capital planning and management can be highly cyclical. Therefore, CIPs and recent spending aimed at addressing system deficiencies and increasing investment, as evidenced by capital spending near to well in excess of annual depreciation, support a midrange assessment, despite the age of facilities. Conversely, older utilities that continue to underinvest, as evidenced by historical and projected capital spending that is significantly less than annual depreciation, are deemed to have high capital planning and management needs, and weak practices that are additive to operating risk. Fitch’s capital planning and management assessment may also include analysis of how planned projects fit with the utility’s integrated resource plan and its long-term strategies, and the potential implications for operating risk. Operating risk could increase for utilities contemplating major construction projects specifically when plans exhibit weak planning mechanisms or involve complex or new technology judged to be higher risk. The project team’s qualifications and experience could also be considerations. Guaranteed maximum price contracts, owners’ and builders’ contingencies, liquidated damages and capitalized interest funding are standard features utilized in most large utility construction projects, and serve to reduce the inherent construction and development risk in any large capital project. Where the completion risk is considered material, it may constrain the overall operating risk assessment and will be considered in the scenario analysis described in the Financial Profile section. If not included in the CIP, Fitch may request a multiyear capital budget — typically five years — to assess the effect planned or proposed capital investments will have on the financial profile of the utility system. The manner of intended funding, and the near- and longer-term effect on leverage, would be taken into account. A utility’s expected funding sources can affect the credit rating outcome, depending on the degree of debt funding, versus cash on hand and cash from operations. Fitch reviews the timing, availability and assumptions regarding planned debt issuance and the effect on the borrower’s balance sheet and cash flow. See the Financial Profile section. Asymmetric Rating Factor Consideration – Operating Risk The availability of adequate water supplies is critical for a utility to meet its customer demands. While supply or resource-management risk is considered low for most water utilities given the natural replenishment that typically occurs, a utility’s operating risk assessment may be constrained where supplies may be insufficient to meet ongoing demands. Shortfalls in resource capacity are expected to be met through either wholesale purchases (where available) or construction of additional infrastructure to enable diversion of such resources. The emphasis of Fitch’s operating risk assessment is therefore on cost and perceived difficulties in ensuring adequate supply resources. Capital Planning and Management Metrics to Support Assessment x Fitch calculates a ratio to measure the status of a utility’s life cycle. The life cycle ratio is calculated as age of plant as the numerator divided by the sum of age of plant plus remaining useful life. Age of plant is calculated as accumulated depreciation divided by annual depreciation expense, while remaining useful life is calculated as net capital assets divided by annual depreciation expense. In cases where accumulated depreciation is not available, Fitch will calculate age of plant as follows: 45 – (remaining useful life). x Low life cycle ratio indicates low investment needs. A utility with a life cycle ratio of 45% or less is considered to have low investment needs and a capital assessment of ‘aa’. A life cycle ratio greater than 45% indicates elevated investment needs. A high life cycle ratio (over 45%), combined with moderate average capital spending as a percentage of depreciation expense greater than or equal to 80%, has a capital assessment of ’a’; where capital spending is between 40% and 80% of depreciation, the assessment is ‘bbb’, while capital spending below 40% is assessed at ‘bb’. Source: Fitch Ratings. ITEM NO. 8.5. MATERIALS SUBMITTED BY: Delia Lugo MEETING DATE: May 14, 2019 Exposure Draft: U.S. Water and Sewer Rating Criteria 11 May 13, 2019 Public Finance Financial Profile The third key rating driver is a utility’s financial profile. Having evaluated a utility’s revenue defensibility and operating risks, Fitch considers the entity’s financial flexibility through a range of scenarios intended to assess its relative capacity to repay debt and other liabilities. This analysis will connect the utility’s overall risk profile, through its revenue defensibility and operating risks assessments, with its leverage and liquidity profile, assessed on a forward-looking and through-the- cycle basis, rather than a single point in time. The evolution of the profile, its low point and its average through-the-cycle performance, is considered. The assessment considers direct debt liabilities, pension liabilities and capitalized obligations, as described below. Leverage Profile Fitch will develop cash flow scenarios to frame the financial profile assessment. These scenarios will include a base case and a stress case. Revenue and operating cost assumptions, together with planned capex and additional debt capital or liability growth, are developed for the scenarios based on Fitch’s review of a utility’s historical performance and expectations for future performance. Scenarios may be revised as appropriate to reflect changes in assumptions, as well as updated spending and debt plans. Fitch’s expectations reflected in the scenario will further be shaped by revenue and operating risk key rating driver assessments. Peer analysis will be used wherever appropriate and if ratings for a relevant group of peers with similar operating and revenue defensibility profiles can be compiled. For conduit issuers, including issuers that benefit from contractual frameworks in which revenues and costs are largely balanced and passed through to other obligors, the leverage profile may be less of a consideration in the rating, and scenario analysis may be unnecessary. Base Case Informs Scenario Analysis for Rating Case Fitch will evaluate a base case cash flow scenario that serves as Fitch ’s expected performance in the current operating environment, typically over the next five years. The rating case will consist of a through-the-cycle scenario that incorporates a capital stress as described below. The rating case scenario analysis will reveal levels and shifts in key operating, leverage and liquidity metrics contrasted with the base case to determine if they are consistent with a stable rating through that stress. Leverage Profile Key Focus of Rating Case Scenario The rating case scenario highlights expected future financial leverage of the utility, considering both through-the-cycle elements and forward-looking expectations. The measure of financial leverage considers the level of debt as it relates to the generation of cash flow. The relative strength of balance sheet and available resources to absorb changes in working capital is considered in the context of the ability to adjust revenue to recover expenses and manage operating risks when forming a rating view. Net Adjusted Debt to Adjusted FADS Future financial leverage in the rating case scenario is reflected in net adjusted debt to adjusted FADS, which measures a utility’s debt and other fixed obligations (net of certain balance sheet resources), relative to its annual cash flows available to service those obligations. The resulting value is expressed as a multiple and may be positive or negative (where a utility holds more cash and investments than the amount of its outstanding debt or reports operating losses). High values, or negative values as a result of operating losses, imply lower flexibility in meeting and ITEM NO. 8.5. MATERIALS SUBMITTED BY: Delia Lugo MEETING DATE: May 14, 2019 Exposure Draft: U.S. Water and Sewer Rating Criteria 12 May 13, 2019 Public Finance managing debt and long-term liability obligations, as well as a lower capacity for additional debt absent rate increases and improved cash flows (see Rating Positioning table on page 19). Rationale for Capitalization of Fixed Charges Fitch views fixed obligations related to purchased water and/or sewer services as a debt-equivalent form of funding for operational assets and adjusts its core leverage ratios to include the debt-like features of these agreements. Where purchased services agreements exist, Fitch will capitalize 35% of a utility’s purchased service expenses using a 7.0x multiple to create a debt-equivalent figure. This figure represents the estimated funding level for a hypothetical purchase of the assets and is included in Fitch’s core leverage metrics. A multiple of 7.0x reflects assets with an average remaining economic life of 28 years, consistent with the long-dated infrastructure assets owned by water and sewer utilities, in a 6% interest rate environment. This adjustment enables a broad comparison between rated entities that incur debt to finance supply and treatment assets and those that contract for services. In cases where a utility’s actual fixed charges and related off-balance sheet debt are available, or prevailing agreements include no fixed charges, appropriate adjustments may be used in Fitch’s analysis. Certain operating leases that are long term in nature and function more like capital leases or debt will be capitalized in a similar manner and included in adjusted debt metrics. Rationale for Pension Treatment in Leverage Metrics Utility systems vary considerably in the types of pension benefits offered to workers, which also affects whether and how Fitch incorporates pensions in its analysis of an entity’s financial flexibility. Utilities with defined-benefit (DB) pensions carry a financial obligation that is long term in nature, and uncertain in timing and amounts to be paid. Ongoing employer and employee contributions, which accumulate as invested assets in a trust fund and generate investment returns, are the Net Adjusted Debt to Adjusted FADS Ratio Total Debt + Capitalized Fixed Charges + Adjusted Net Pension Liability – Available Cash – Funds Restricted for Debt Service FADS + Fixed Services Expense + Operating Leases + Net Transfers + Pension Expense Available Cash: Cash and investments available for short-term liquidity needs with no limitations on use, including funds restricted solely by board or management policy and/or available for general utility purposes (e.g. rate stabilization fund, operating reserve, and renewal and replacement reserve). Funds that are explicitly limited for construction or other capital investment such as bond proceeds are not included. Capitalized Fixed Charges: (Fixed services expense + operating leases) * 7 See Rationale for Capitalization of Fixed Charges on page 12 for more information. FADS: EBITDA plus interest income, taxes, other non-operating cash receipts not restricted as to spending and connection/availability fees. FADS may further reflect adjustments for noncash expenses, nonrecurring items and non- operating expenses paid ahead of debt service as appropriate. Fixed Services Expense: Purchased water and/or sewer services * 35%. See Rationale for Capitalization of Fixed Charges on page 12 for more information. Funds Restricted for Debt Service: Includes amounts deposited in debt service and debt service reserve funds. Net Transfers: Sum of transfers in less transfers out. See Rationale for Transfer Treatment in Leverage Metrics on page 14 for more information. Total Debt: All long-term and short-term debt obligations including capital leases, outstanding commercial paper, notes payable and current maturities. Certain nonrecourse obligations and separately secured obligations may be excluded. Pension Expense: Equals the utility’s reported annual pension expense. See Rationale for Pension Treatment in Leverage Metrics on page 12 for more information. Adjusted Net Pension Liability: Equals the utility’s reported net pension liability adjusted upward to reflect Fitch’s assumed 6% discount rate, if the plan uses a higher discount rate. See Rationale for Pension Treatment in Leverage Metrics on page 12 for more information. EBITDA – Earnings before interest, taxes, depreciation and amortization. FADS – Funds available for debt service. Source: Fitch Ratings. ITEM NO. 8.5. MATERIALS SUBMITTED BY: Delia Lugo MEETING DATE: May 14, 2019 Exposure Draft: U.S. Water and Sewer Rating Criteria 13 May 13, 2019 Public Finance primary sources for funding benefits and offsetting the pension liability incurred by a utility. Through a series of actuarial calculations that can vary, the present value of the pension obligation accrued to date can be compared to the invested assets available to meet the obligation. An excess of that liability over the invested assets value represents the unfunded portion of the pension obligation that has accrued (generally reported as the net pension liability [NPL] by the utility under GASB pension accounting standards). In some cases, a utility will be a participant in a multi-employer plan and the employer’s share of that calculated liability will be considered in the analysis. Fitch views the unfunded balance of accrued DB pension liability as a debt-equivalent obligation. The size of the reported liability and the annual payments necessary to amortize it can be subject to a range of institutional decisions regarding benefit levels and actuarial assumptions, economic trends and statutory considerations. Changes in these factors may affect the size of the unfunded liability over time. However, the most important drivers of unfunded liability tend to be the level of actual returns on the investment portfolio supporting the pension when compared to a target return and the adequacy of the employer contribution actually made. Fitch will review the reported unfunded liability over time versus point in time. Material volatility in a plan’s asset values due to market movement is less relevant to Fitch’s assessment of pension-related risk than is the plan’s longer-term prospects for funding improvement over time. The calculation of the related pension liability, if any, to be added to an institution's adjusted debt varies as described below. Notwithstanding this difference, the calculations and adjustments made by Fitch are intended to create equivalency to the leverage assessment regardless of the accounting methodology applied. Public-Sector DB Pensions: Public-sector DB pensions represent a source of uncertainty given the absence of uniform regulations that compels progress on prefunding, the irrevocable nature of vested benefits and the variability of reported liabilities. These factors in combination have led to the accretion of long-term liabilities and a rising demand for contributions. Fitch applies the same approach to pension liability of a public-sector enterprise as it does when considering pension obligations of state and local governments. For public enterprises, the primary credit risk of DB pensions is in the accumulation of long-term liabilities. There is no uniform regulation of funding practices and the liability can accrete under multiple circumstances, including due to underperformance of assets, failure to achieve actuarial and economic assumptions, and inadequate annual contributions. Bankruptcy is possible but rare, and liquidation is improbable due to legal constraints. Fitch’s baseline assumption is that vested benefits are irrevocable, and that benefits can be changed only for new hires. The starting point for this analysis is the pension data as disclosed by the institution. To convey more effectively the magnitude of risks associated with public DB plans, and to improve comparability across plans, Fitch adjusts the reported NPL upward to reflect a 6% discount rate, if the NPL is based on a higher discount rate; this approach is identical to the adjustment to NPLs outlined in Fitch’s “U.S. Public Finance Tax-Supported Rating Criteria.” The resulting adjusted NPL is combined with debt obligations in Fitch’s assessment of financial flexibility. In some cases, an enterprise without audited financial statements separate from its primary government may not report detailed pension liability data, as for example when the primary government participates in several pension plans. In such cases, Fitch will adjust the institution's reported NPL for purposes of its analysis based on the primary government's main or general employee plan. Allocating Multi-Employer Liabilities under GASB 68: Although some public-sector enterprises may directly sponsor and manage a DB pension plan, many provide pension benefits as part of a larger cost-sharing, multi-employer system, or within a single-employer system that provides benefits to a primary government and its separate enterprises. As such, the ability of water and ITEM NO. 8.5. MATERIALS SUBMITTED BY: Delia Lugo MEETING DATE: May 14, 2019 Exposure Draft: U.S. Water and Sewer Rating Criteria 14 May 13, 2019 Public Finance sewer utilities to influence pensions is often limited, as decisions on benefits, assumptions and contributions are made by a legislature, local government or pension board. In these cases, multi- employer plan assets are not legally separated by employer. A single actuarial valuation is performed and the resulting NPL, expense, and deferred inflows and outflows for all participating entities are allocated proportionally, based on the pension's contribution practices. Each participating employer’s audit contains only its proportionate share. GASB 68's allocation method informs Fitch’s approach to assessing liabilities in a cost-sharing plan or a single-employer plan allocated to one or more enterprises. GASB 68’s default assumption is that the liability is assigned where the obligation is required to be funded, generally by the participating employers. The standard considers pensions to be deferred compensation for which the direct employer is ultimately obligated. Fitch follows GASB 68 reporting for the liability allocation because the methodology is consistent with our expectations for how pension plans function, including how they resolve funding challenges. The fact that most cost-sharing, multi-employer plans are state-sponsored does not mean that the unfunded liabilities of the plans are responsibilities of the state or of the pension system itself. In some cases, the state has explicit legal and fiscal responsibility for plan funding, and Fitch allocates a share of the liability to the state accordingly, rather than to other participating employers. However, it is much more common for a state to take responsibility only for liabilities associated with its direct employees. Even in cases where they have historically provided support for related governments in the plans, states generally retain the option to pull back on this support. Fitch does not shift the reported liability away from the institution based on this support where GASB 68 assigns it to an institution. However, as noted below, where there is a longstanding history of direct support and through funding provided to a class of employers from the state, Fitch does account for this in its analysis. Treatment of State Support of Public-Pension Obligation in the Leverage Assessment: Fitch relies on the pension liability data as reported by the institution when assessing its liability burdens. Some public institutions report special funding situations, under which states assume some or all of an NPL, and Fitch's analysis reflects such support. In rare instances that fall short of a special funding situation, but where consistent, explicit state subsidy of pensions is provided, Fitch may modify its assessment of leverage to reflect the presence of state appropriations supporting all or part of an enterprise's pension liability. Indicators of explicit state support might include a state making employer contributions on behalf of the utility for the DB plans available to employees, but under a funding mechanism that does not meet the requirement for special funding under GASB's approach. Such mechanisms may include annual appropriation, statute or specific authorizing legislation. Other Post-Employment Benefits: In most cases, Fitch does not consider the credit impact of other post-employment benefits (OPEB) in assessing the long-term liabilities of water and sewer utilities. For most governmental entities providing OPEB, the level of benefits has proven much easier to change than pensions, and legal protections appear limited in most cases. In cases where OPEB is exceptionally large and not subject to modification, Fitch may incorporate OPEB as an asymmetric risk factor. Rationale for Transfer Treatment in Leverage Metrics Fitch includes net transfers in its calculation of adjusted FADS in its leverage assessments. Amounts regularly transferred or paid to owners or a host municipality are subtracted and treated as an operating expense in its calculation of adjusted FADS. These transfer payments may be reported as non-operating expenses or explicitly subordinate to debt service payments. However, Fitch ITEM NO. 8.5. MATERIALS SUBMITTED BY: Delia Lugo MEETING DATE: May 14, 2019 Exposure Draft: U.S. Water and Sewer Rating Criteria 15 May 13, 2019 Public Finance believes the importance of these payments to the recipients significantly increases the likelihood payments will be made, even during periods of financial stress, and particularly during periods of financial stress affecting the host municipality. Moreover, given the timing of remittance, payments are often made prior to debt service. Alternatively, amounts regularly paid to the utility by the host municipality or affiliated enterprise funds may be netted against operating expenses as these types of payments are typically repayments for interfund loans made by the water and/or sewer utility or defined arrangements for particular services or commitments. Establishing the Base Case The development of a base case begins with Fitch’s evaluation of a utility’s recent historical performance based on a review of its audited financial statements and any unaudited financial information — typically interim statements — covering a period of at least three years. The most recent unaudited financials will usually inform year one of the base case scenario. If Fitch is provided with three quarters of year-to-date information, it may add those results as a final year preceding the base case scenario. The base case reflects Fitch’s expectation of both historical financial results and projected performance. Fitch will consider the level of consistency in the recent financial and operating performance of the utility, its management team and its market as one indicator of future performance. Fitch will generally start the base case analysis using assumptions, reflecting variability in revenue and expense performance derived from long-term historical performance. However, there may be analytical reasons to diverge from these assumptions (e.g. nonrecurring events). Fitch will evaluate each utility, and develop and communicate expectations. Although Fitch will review a utility’s annual operating budget or longer-term forecast when presented, the Fitch base case ultimately reflects its criteria and expectations, including macroeconomic assumptions. Fitch will consider the reasonableness of the assumptions that drive projected results if the utility’s forecast suggests future performance is expected to track differently from historical results due to items such as significant capital expenditures, changes in rate design or incorporated stresses. Forecasts that rely on aggressive volume growth, non-core revenue, rate increases that are materially different than historical changes or cost reductions will be viewed with analytical caution in the rating process. Conversely, Fitch’s base case may rely more on historical trends where utility forecasts reflect stresses applied for planning purposes. Rating Case Reflected in Forward-Looking Scenarios The rating case analysis considers potential performance under a common set of assumptions, thereby illustrating how cycles affect individual utilities differently. Ultimately, the rating case reflects a stress through which the rating is expected to remain stable. The Fitch Analytical Stress Test (FAST) is used to formulate the base case and a rating case. The tool in essence highlights how a utility’s financial profile can change through a business cycle and capital stress. While FAST supports Fitch’s through-the-cycle analysis, it is not a forecasting tool. FAST should be considered a scenario tool to be used in the rating process to better differentiate between credits. Fitch’s overarching philosophy is that ratings should not change due to normal cyclical variations. Economic downturns are inevitable, and variations in financial performance in many cases can be observed. Fitch believes ratings should account for this. However, broad shifts different from the ebb and flow of a normal business and capital cycle may also occur. Scenario analysis helps make the distinction between the two and helps communicate both rating sensitivities and what is already anticipated in the current rating. See Appendix A for additional detail on the FAST tool. ITEM NO. 8.5. MATERIALS SUBMITTED BY: Delia Lugo MEETING DATE: May 14, 2019 Exposure Draft: U.S. Water and Sewer Rating Criteria 16 May 13, 2019 Public Finance The typical stress assumed in the rating case scenario for IDRs of ‘BB’ and above will g enerally reflect revenue and cost stresses commensurate with those a utility would encounter following an unexpected increase in capital costs based on its specific characteristics and risk attributes. The purpose of the scenario analysis is to establish benchmark measures of liquidity and leverage that are incorporated in the rating through the cycle. The rating case will reflect a capital cost stress using the assumptions outlined in Appendix A. The effect of the unforeseen capital expenses on leverage will be reflected in the scenario, as will Fitch’s expectations of the utility’s response. The FAST tool applied to the utility systems and discussed further below will be the source for evaluating the change of leverage and prospects for a utility managing through such capital stress while maintaining its financial profile. Liquidity Profile In addition to the leverage metric analysis described above, Fitch also performs a liquidity assessment. The liquidity profile assessment evaluates the liquidity resources available to a utility to meet expected and unexpected current business obligations relating to both operating and debt expenses. The first resource available to most utilities is periodic excess margin above operating costs that acts as a cushion to changing circumstance. A second source is available cash and investments in reserve, and a third, albeit for relatively few water and sewer utilities, is committed liquidity lines from investment-grade financial institutions. A weak liquidity profile relative to operations can constrain the overall assessment of the utility’s financial profile. Two key metrics used by Fitch to measure liquidity are coverage of full obligations (COFO) and liquidity cushion. Coverage of Full Obligations COFO is a measure of operational strength relative to a utility’s debt and fixed obligations that come due in any annual period. Fitch calculates COFO as follows: Coverage of Full Obligations Ratio FADS + Fixed Services Expense + Net Transfers Total Annual Debt Service + Fixed Services Expense FADS: EBITDA plus interest income, taxes, other non-operating cash receipts not restricted as to spending and connection/availability fees. FADS may further reflect adjustments for noncash expenses, nonrecurring items and non- operating expenses paid ahead of debt service as appropriate. Fixed Services Expense: Purchased water and/or sewer services * 35%. See Rationale for Capitalization of Fixed Charges on page 12 for more information. Net Transfers: Sum of transfers in less transfers out. See Rationale for Transfer Treatment in Leverage Metrics on page 14 for more information. Total Annual Debt Service: Interest expense plus scheduled long-term principal payments (i.e. prior year’s current portion of long-term debt). Voluntary prepayments and principal amounts repaid as part of a refinancing are not included. However, where principal incorporates balloon indebtedness, long-term bank facilities, remarketed debt or bullet maturities, Fitch may adjust scheduled debt service to eliminate amounts successfully refinanced, remarketed or renewed, or to include payments on debt obligations reported as operating expenses. Interest expense may also be adjusted for capitalized interest. EBITDA – Earnings before interest, tax, depreciation and amortization. FADS – Funds available for debt service. Source: Fitch Ratings. ITEM NO. 8.5. MATERIALS SUBMITTED BY: Delia Lugo MEETING DATE: May 14, 2019 Exposure Draft: U.S. Water and Sewer Rating Criteria 17 May 13, 2019 Public Finance While Fitch calculates a traditional debt service coverage (DSC) ratio for all public utility issuers, the calculation of COFO facilitates comparability among utilities as it also considers the effect of fixed charges, as well as net transfers, on a utility’s liquidity profile. Fitch takes into consideration growth- sensitive revenues, such as connection/availability fees in the calculation of both COFO and DSC. However, given the potential variability of such revenues, utilities generating COFO or DSC below 1.0x excluding such sources are considered to have a ‘weak’ liquidity profile. A comparison of coverage calculations is provided in the Coverage Ratio Calculations — Example table on the next page to illustrate the effect on coverage of a utility’s obligations when purchased water/sewer services are capitalized and net transfers are accounted for. COFO is used to assess an entity’s liquidity profile as follows: Coverage of Full Obligations Metrics to Support Assessment x COFO less than 1.0x from all available revenues and/or less than 1.0x excluding connection/availability fees is “weak” and risk additive. x COFO below 1.0x may not be considered risk additive if a borrower maintains Current Days Cash on Hand at or over 120 days. Current Cash Available: Current unrestricted cash/investments and current restricted cash/investments that are restricted solely by board or management policy and/or available for general utility purposes (e.g. rate stabilization fund, operating reserve and renewal and replacement reserve). Current Days Cash on Hand: (Current Cash Available / [operating expenses – depreciation and amortization]) * 365. Source: Fitch Ratings. Liquidity Cushion Liquidity cushion measures a utility’s liquidity — current and available cash and investments, and available lines of credit — against average daily cash operating expenses (excluding depreciation and amortization). In addition to assessing a utility’s full liquidity cushion, Fitch also assess es the individual components against average daily cash operating expenses, if applicable. Both of the ratios measure the number of days the utility could continue to pay its average daily cash operating expenses using relevant sources of liquidity. Available borrowing capacity under committed lines of credit is included in the liquidity cushion ratio if the facility continues to be drawable if the utility is rated a full rating category below its existing rating, and if provided by investment-grade financial institutions or lower-rated institutions if the rating is equivalent to the utility rating. Where necessary information is not available, liquidity will be assessed without explicit credit for borrowing capacity. Similarly, borrowing capacity includes available issuance capacity under commercial paper (CP) programs where the allowable use of proceeds includes payment of scheduled debt service or is unrestricted. Programs where the use of proceeds is limited to purposes other than the payment of debt service and programs rated ‘F3’ by Fitch will not be included when calculating borrowing capacity. ITEM NO. 8.5. MATERIALS SUBMITTED BY: Delia Lugo MEETING DATE: May 14, 2019 Exposure Draft: U.S. Water and Sewer Rating Criteria 18 May 13, 2019 Public Finance The liquidity cushion assessment for utility systems organized as enterprise funds may include a separate review of the host municipality when government-wide cash balances are consolidated and held within the general fund. Fitch’s review will include an evaluation of the sufficiency of cash on hand, and the utility’s access and availability to funds. Government-wide current cash available below 60 days is considered “weak” and is risk additive. Liquidity Cushion Metric to Support Assessment x A liquidity cushion at or above 90 days is neutral to ratings, as long Current Cash Available is at or above 30 days. A liquidity cushion below 90 days or Current Cash Available below 60 days are considered “weak” and risk additive. Source: Fitch Ratings. Coverage Ratio Calculations — Example ($) DSC Calculation Coverage of Full Obligations Calculation Operating Revenue 1,000 1,000 Purchased Water/Sewer Services (300) (300) Other Operating Expenses (Excluding Depreciation and Amortization) (500) (500) EBITDA 200 200 Interest Income 10 10 Taxes 50 50 Other Available Revenues 5 5 Connection/Availability Fees 40 40 FADS 305 305 Fixed Charges (Adjusted for Purchased Water and/or Sewer Services) — 105 Net Transfers — (50) Adjusted FADS 305 360 Adjusted FADS without Connection/Availability Fees 265 320 Cash Interest Paid 25 25 Scheduled Principal Payments 25 25 Debt Service 50 50 Fixed Charges (Adjusted for Purchased Water and/or Sewer Services) — 105 Adjusted Debt Service 50 155 Debt Service Coverage (x) 6.1 — Debt Service Coverage without Connection/Availability Fees (x) 5.3 Coverage of Full Obligations (x) — 2.3 Coverage of Full Obligations without Connection/ Availability Fees (x) 2.1 Source: Fitch Ratings. Liquidity Cushion Ratio Current Cash Available + Available Borrowing Capacity Average Daily Cash Operating Expenses Available Borrowing Capacity: Amounts remaining and available from lines of credit. Average Daily Cash Operating Expenses: (Operating expenses – depreciation and amortization) / 365. Current Cash Available: Current unrestricted cash/investments and current restricted cash/investments that are restricted solely by board or management policy and/or available for general utility purposes (e.g. rate stabilization fund, operating reserve, and renewal and replacement reserve). Source: Fitch Ratings. ITEM NO. 8.5. MATERIALS SUBMITTED BY: Delia Lugo MEETING DATE: May 14, 2019 Exposure Draft: U.S. Water and Sewer Rating Criteria 19 May 13, 2019 Public Finance Rating Guidance: Applying Analytical Judgment to Align Key Risk Factors and Ratings The results of the rating case scenario are used to assess the impact of change on key liquidity and leverage metrics. Together, these create a financial profile on a forward-looking and through-the- cycle basis aligned with the assessment of key rating drivers to obtain an indicative rating level. The Rating Positioning table below provides guidance to the analytical outcome, aligning the assessment of the utility’s overall risk profile — through revenue defensibility and operating risk assessments — with its leverage and liquidity profile. However, the evaluation and importance of key rating drivers are specific to the individual credit being considered. In general, Fitch believes that a utility is more capable of absorbing higher leverage in situations where there is higher revenue defensibility and lower operating risk assessments than in the inverse situations (where operating risk is higher but revenue defensibility is lower) as the ability to raise revenues is more critical to credit quality than cost management the lower down the assessment spectrum a utility falls. The Rating Positioning table is the starting point in assessing the final rating. For example, ratings may be higher or lower than suggested by the table based on an analytical judgment made concerning whether there are factors present that suggest a higher or lower risk of a shift in capacity for meeting financial obligations than would be suggested by the rating derived from the table. Factors supporting a higher rating could include a utility’s capex profile and its position within the capital life cycle; rate designs that collect a higher percentage of revenue through fixed service charges or recovery mechanisms that significantly buffer the effect of demand variability; and tax pledges and/or revenues that have or could have the potential to provide meaningful enhancement to revenues or limit exposure to operating risks. The Rating Positioning table is constructed assuming all asymmetric risk-additive features are neutral and the utility does not have a weak liquidity profile. Ratings may be notched lower from the guidance if negative asymmetric factors are present or the utility has a weak liquidity profile. The Rating Positioning Revenue Defensibility Assessment Operating Risks Assessment Financial Profile Assessment Leverage (Net Adjusted Debt/Adjusted FADS) (x) aaa aa a bbb bb aa aa <5 510 1014 1416 >16 aa a <4 48 812 1216 >16 a aa <4 48 812 1216 >16 aa bbb — <7 711 1114 >14 a a — <6 611 1114 >14 a bbb — <6 611 1114 >14 aa bb — <5 59 912 >12 a bb — <4 47 712 >12 bbb aa — <4 47 712 >12 bbb a — <4 47 712 >12 bbb bbb — <0 05 56 >6 bbb bb — <0 01 14 >4 bb aa — — <1 14 >4 bb a — — <0 04 >4 bb bbb — — <0 02 >2 bb bb — — <(3) (3)0 >0 Suggested Analytical Outcome AAA AA A BBB BB FADS – Funds available for debt service. Source: Fitch Ratings. ITEM NO. 8.5. MATERIALS SUBMITTED BY: Delia Lugo MEETING DATE: May 14, 2019 Exposure Draft: U.S. Water and Sewer Rating Criteria 20 May 13, 2019 Public Finance degree of notching is qualitatively assessed and reflects a judgment on the relative additional risks to financial capacity that may result. Multiple asymmetric risk factors are likely to result in multiple notches. A single factor may not result in any notching if its effect on financial capacity is considered limited, or is already reflected in a rating sensitivity or a Negative Rating Outlook. Asymmetric Additive Risk Considerations The final rating assigned will also consider certain additional risk factors that may affect the rating conclusion. These additional risk factors work asymmetrically, where only below- standard features are factored into the final rating levels, while more credit-positive features are expected to be the rule. When multiple risk-additive features exist, the IDR will be lower than the indicative rating, possibly by multiple notches, based on the severity of the risks. For example, a utility with a midrange revenue defensibility assessment, and operating risk assessment and net leverage consistent with an indicative rating of ‘AA’ might only achieve an IDR of ‘A+’ if its debt structure was assessed to be weak, reflecting a material exposure to refinance risk or swap risk. It might only achieve an IDR of ‘A’ if debt structure, and management and governance practices were assessed as weak. The final rating will reflect a qualitative assessment of the extent and impact of the asymmetric risk factors. The asymmetric considerations are discussed fully in Fitch’s master criteria “Rating Criteria for Public-Sector, Revenue-Supported Debt.” Debt Structure and Contingent Liability Exposures U.S. public water and sewer utility debt structures are typically strong, characterized by long-dated (20–40 years) amortizing debt issues with fixed or declining annual debt service requirements. While some utilities utilize bullet structures, variable-rate demand bonds (both hedged and unhedged), direct placement and renewable bank financing, the par value of these financing vehicles is usually manageable or below the level of cash on hand, thereby eliminating significant interest rate and refinancing risk. Thus, the debt structure attribute for many utility systems is neutral. However, there may be utilities whose debt structures have features that add risk, such as non-amortizing bullet maturities or mandatory put bonds. These will be considered when assessing adjustments to the rating suggested by the Rating Positioning table. While most variable-rate demand bonds and CP issuance are supported by external dedicated liquidity facilities provided by financial institutions, borrowers sometimes choose to support these obligations using their own internal liquidity, including unrestricted cash and investments, and general lines of credit. In such instances, Fitch’s analysis considers the stability and availability of funds sufficient to meet potential purchase requirements, as well as the policies and procedures that would be followed if a failed remarketing occurs (see “U.S. Public Finance Short-Term Debt Rating Criteria”). Moreover, Fitch may evaluate the potential change in leverage that could result from utilization of cash resources in the financial profile assessment. A weak debt structure will constrain the overall assessment of the utility’s financial profile. Absent unrestricted cash resources sufficient to address structural shortcomings, Fitch considers the following debt characteristics and terms consistent with a “weak” assessment: x Material exposure to refinance risk (use of bullet maturities; debt not fully amortized at maturity), which distorts near-term financial metrics and increases the uncertainty of both market access and the cost of debt at a future date. x Highly sculpted and substantial use of deferred amortization instruments that materially distort near-term financial metrics. ITEM NO. 8.5. MATERIALS SUBMITTED BY: Delia Lugo MEETING DATE: May 14, 2019 Exposure Draft: U.S. Water and Sewer Rating Criteria 21 May 13, 2019 Public Finance x Material exposure to unhedged floating-rate interest. Fitch considers whether the unhedged portion of exposure, if any, would have a material impact to the utility’s financial profile under stressed interest rate assumptions. x Material exposure to contingent liabilities, including swap and derivative contracts that include collateral posting requirements, and termination events that require a payment of the current marked-to-market value of the swap contract. For more information on Fitch’s global approach to analyzing debt structures, see Fitch’s master criteria “Rating Criteria for Public-Sector, Revenue-Supported Debt.” Management and Governance The quality of management and governance is an important consideration when assessing the potential performance of a utility over the life of its debt. However, Fitch considers this attribute to be asymmetric, where weak management and governance may cause the rating to be lower, all else being equal. In contrast, the presence of strong management and governance — as evidenced by comprehensive strategic planning and adherence to financial policies, particularly rate setting — will be considered when evaluating the impact of stress scenarios and the ability of a utility to manage through those stresses. Weaker characteristics of management and governance that will constrain the rating, when analyzing the ability to execute on organization initiatives and plans, as well as the capacity to manage through the business cycle include: x Lack of experience and depth at the utility. x Significant political pressure in the underlying municipality or in the members’ service areas that can delay or prevent rate increases and impair its financial profile. x Repeated failure to adopt budgets in a timely manner due to absence of consensus in governing body or resistance of key stakeholders. x Failure to disclose financial statements and continuing disclosure in a timely manner. x Failure to maintain open communications between the utility and any relevant governing body, which may reveal itself in unexpected operating changes. x Weak or lack of forecasts and resource-management plans. x Limited or lack of policies and procedures. x Official allegations of substantial corruption, or breach of financial reporting law or regulation. Legal and Regulatory Forming an opinion of the quality of the legal or contractual framework upon which many assumptions rest is a prerequisite to the credit analysis. For instance, the framework may be purely contractual or rely on statute or codified law, or a particular statutory instrument, or the powers of a constitutional or statutory authority. Fitch forms a view on the clarity of the legislation and/or regulation, the scope of regulatory discretion, and any effect this may have on facility performance or dispute resolution. The financing documentation — and if appropriate, any legislation it may depend on — or detailed summary documents, such as offering materials, are reviewed for key commercial elements and contract clarity, especially regarding allocation or transfer of risk. The public water and sewer sector is exposed to a wide range of state and federal regulation. A utility’s effective participation in the regulatory and legislative processes and its response to regulatory developments are therefore considered in Fitch’s analysis. Fitch combines a review of the current and expected regulatory climate with an assessment of the organization’s ability to maintain stable operations in the face of regulatory change. Fitch may review responses to prior regulatory mandates, identifying financial and operational effects. Fitch also examines the potential for future ITEM NO. 8.5. MATERIALS SUBMITTED BY: Delia Lugo MEETING DATE: May 14, 2019 Exposure Draft: U.S. Water and Sewer Rating Criteria 22 May 13, 2019 Public Finance regulatory initiatives and assesses whether the organization, through its systems, practices and resources, will have the ability to manage potential downside risk. Weaker characteristics of legal and regulatory framework include: x Contractual, regulatory or statutory framework dependent on untested or temporary legislation or regulation. x Weak or no legal opinions; contracts not available for inspection. x Less effective participation in regulatory process with negative regulatory outcomes. Information Quality The quality of information received by Fitch, both quantitative and qualitative, can be a constraining factor for ratings. Information quality may constrain the rating category to a maximum level or, in extreme cases, preclude the assignment of a rating. Information quality for the initial rating and for surveillance purposes is considered when a rating is first assigned. Fitch must be confident adequate ongoing data will be available to monitor and maintain a rating once assigned. Information quality encompasses such factors as timeliness and frequency, reliability, level of detail and scope. The information provided to Fitch may contain reports, forecasts or opinions provided to the utility or their agents by various experts. Where these reports contain matters of fact, Fitch will consider the source and reliability. Where the information is a forecast or opinion, Fitch expects these to be based on well-reasoned analysis supported by the facts. The status of the expert and the materiality of their forecast or opinion will also be considered in determining what weight may be given their forecasts or opinions. Factors such as experience in the jurisdiction, location or terrain; experience with the technology or transaction type; and formal qualification or licensing are often relevant. When forming its rating opinion, Fitch may place less weight on expert reports that lack clarity or contain extensive caveats, or were conducted under less relevant circumstances. Such features may lead to adjustments in Fitch’s financial or operational analysis. Fitch expects experts to conduct their reports to professional standards. If possible, reports are compared with similar reports to highlight unusual or optimistic features. The degree to which Fitch uses expert information will depend partly upon the above issues and on the relevance of the information to the identified key risks. Where available, if expert information does not address a material issue, but might be expected to, Fitch may request further information or make an appropriate assumption. Fitch may choose not to provide a rating if it determines the reports are not sufficiently supported, complete or reliable. Fitch considers this attribute to be negative when information is substantially based on assumptions, extrapolated or subject to material caveats; if the data are often subject to delay; there is a history of revisions or errors; or the information is limited in scope. Rating Relationship to Host Government For certain utility systems organized as an enterprise or component unit of a general government, the rating of the utility security may be tied to or influenced by the credit quality of the general government. In addition to sharing common management and service area characteristics, there are situations where significant legal, financial or operational connections may exist — for example where credit agreements cross-default or if one fund is drawing upon the cash of the other. In these cases, the utility rating may be closely tied to the host government’s IDR. ITEM NO. 8.5. MATERIALS SUBMITTED BY: Delia Lugo MEETING DATE: May 14, 2019 Exposure Draft: U.S. Water and Sewer Rating Criteria 23 May 13, 2019 Public Finance Data Sources The key rating assumptions for the criteria are informed by Fitch’s analysis of information provid ed by obligors, financial advisors, legal advisors, third-party engineers, consultants, underwriters and/or available through publicly sources. Information includes, but is not limited to, audited and interim financial statements, regulatory filings, operational data and service area demographic information. In certain cases where data specific to particular factors in these criteria are unavailable, Fitch may use other data sources to extrapolate information or may assign a particular credit factor an assessment level Fitch feels is appropriate. Fitch typically uses both consolidated audited financial statements and segment financial information in its credit analysis. However, there are instances where Fitch is asked to rate a newly formed entity or segment that cannot provide historical audited financial results. In those cases, Fitch may base its analysis on historical pro forma financial statements provided by the entity. Fitch will evaluate the legal, financial, operational and managerial linkage between obligors and affiliated segments. The credit analysis and rating rationale will be based on fully consolidated statements where Fitch deems the dependence or inter-reliance among segments to be significant. Rating Sensitivities Revenue Defensibility: Ratings are sensitive to changes in attributes of revenue defensibility that affect overall assessment. Changes in service area characteristics, rate flexibility or counterparty quality can change the final assessment. Operating Risks: Ratings are sensitive to changes in operating risk attributes, reflecting shifts in operating costs, operating cost flexibility and capital needs. Financial Profile: Ratings are sensitive to changes in leverage profile or liquidity profile that result in a different analytical outcome than suggested in the Rating Positioning table. Variations from Criteria Fitch’s criteria are designed to be used in conjunction with experienced analytical judgment exercised through a committee process. The combination of transparent criteria, analytical judgment applied on a transaction-by-transaction or issuer-by-issuer basis, and full disclosure via rating commentary strengthens Fitch’s rating process while assisting market participants in understanding the analysis behind our ratings. A rating committee may adjust the application of these criteria to reflect the risks of a specific transaction or entity. Such adjustments are called variations. All variations will be disclosed in the respective rating action commentaries, including their impact on the rating where appropriate. A variation can be approved by a ratings committee where the risk, feature or other factor relevant to the assignment of a rating and the methodology applied to it are both included within the scope of the criteria, but where the analysis described in the criteria requires modification to address factors specific to the particular transaction or entity. Limitations Ratings, including Rating Watches and Outlooks, assigned by Fitch are subject to the limitations specified in Fitch’s Ratings Definitions and available at www.fitchratings.com/site/definitions. ITEM NO. 8.5. MATERIALS SUBMITTED BY: Delia Lugo MEETING DATE: May 14, 2019 Exposure Draft: U.S. Water and Sewer Rating Criteria 24 May 13, 2019 Public Finance Disclosure Fitch expects to disclose, as part of its rating action commentaries or new issue reports, base case and rating case assumptions, and the rationale for adjustments to either the base case or rating case assumptions. Fitch will also disclose within the appropriate rating action commentary each entity’s functional responsibilities to the extent they serve as the foundation of the assessment as well as any asymmetric risk that arises and that has an effect on the rating (e.g. a direct relationship between the general government’s credit quality and related utility securities). In addition, Fitch will disclose any variation to criteria (as mentioned in the Variations from Criteria section). ITEM NO. 8.5. MATERIALS SUBMITTED BY: Delia Lugo MEETING DATE: May 14, 2019 Exposure Draft: U.S. Water and Sewer Rating Criteria 25 May 13, 2019 Public Finance Appendix A: FAST Water & Sewer – Fitch Analytical Stress Test Fitch’s FAST for U.S. water and sewer utilities highlights the forward-looking performance of a utility, typically over a five-year period, although it is not intended to be a cash flow or operating forecast. FAST assesses the impact of an unanticipated increase in capital spending on operating cash flows and net leverage. Unanticipated increases in capital spending can occur as a result of numerous situations, including sequencing of project timing, change of scope or rising labor and commodity costs, as well as unplanned projects arising from regulatory requirements or operating challenges. Given the potential impact these increases can have on financial leverage and liquidity, Fitch believes such changes within reasonably anticipated ranges should be accounted for in its rating. Scenario Analysis The starting point for FAST’s scenario analysis is a base case that generally follows the last five years (minimum of three) of financial reporting to illustrate a business-as-usual baseline performance scenario. The base case typically relies on standard default assumptions as outlined below. However, in some cases, if deemed reasonable by Fitch, the base case may incorporate projections from the utility. FAST’s rating case assumes a uniform capital spending stress specified as a 10% increase over the assumed base case level that is financed by debt. For each case, the scenario analysis will calculate basic financial metrics, including net adjusted debt to adjusted FADS, COFO and DSC. FAST Default Assumptions x Operating revenues: grown at five- or three-year compound annual growth rate (CAGR). o In instances where the operating revenue CAGR is higher than the operating expense CAGR, the operating revenue CAGR will be capped at the operating expense CAGR. x Non-operating revenues from taxes, investment income, net transfers and subsidies: fixed at last year, adjusted at rate of inflation. x Non-operating revenues from miscellaneous cash: fixed at most recent historical average, typically five-year average. x Connection fees: fixed at most recent historical average, typically five-year average. x Operating expenses (excluding depreciation and purchased water/sewer services): grown at five- or three-year CAGR. x Purchased water/sewer services: fixed at most recent historical average, typically five-year average. x Operating lease expense: held constant in nominal terms. x Capital expenditures: held constant at 150% of most recent five- or three-year historical average, typically five-year average. x New debt issuance: zero. x Principal payments: total long-term debt amortized based on the 15th year of a 30- year time horizon and using the interest rate implied by the last year of historical data. x Cash interest paid: total debt multiplied by the interest rate implied in the last year of historical data. x Inflation assumption: 2%. x Restricted cash and investments (excluding construction funds): adjusted at rate of inflation. ITEM NO. 8.5. MATERIALS SUBMITTED BY: Delia Lugo MEETING DATE: May 14, 2019 Exposure Draft: U.S. Water and Sewer Rating Criteria 26 May 13, 2019 Public Finance x Restricted cash and investments (construction funds): unspent balances held constant in nominal terms. x Capitalization adjustment multiple for fixed services expense: 7.0x. x Capitalization adjustment multiple for operating leases: 7.0x. x Adjustment for fixed services expense: 35% of purchased water/sewer services. x Restricted debt issuance: an amount equal to the additional capital expenditures resulting from the capital stress. x Adjusted net pension liability: held constant in nominal terms. x Pension expense: held constant in nominal terms. Limitations The scenario analysis is a simulation of how a utility might fare if it faced an unforeseen capital stress. The scenario analysis should not be interpreted as a forecast of actual performance under stress. ITEM NO. 8.5. MATERIALS SUBMITTED BY: Delia Lugo MEETING DATE: May 14, 2019 Exposure Draft: U.S. Water and Sewer Rating Criteria 27 May 13, 2019 Public Finance Appendix B: Wholesale Water/Sewer Utilities Key Rating Drivers Fitch’s three key rating drivers are assessed using the following guidance for wholesale public water and sewer utilities, including joint action agencies and other government-owned utilities. Fitch defines wholesale water and sewer providers as utilities whose principal mission is to provide wholesale service and/or over 50% of revenues are typically derived from wholesale operations. The guidance outlines general expectations for a given rating category, and in some cases, includes operational and financial assessments of both the wholesale provider and its purchasing utilities. Key Rating Drivers — Wholesale Water/Sewer Utilities Revenue Defensibility aa a bbb bb Revenue Source Characteristics Required revenues are derived from unconditional wholesale contracts that provide for full cost recovery, as well as the unlimited reallocation of costs among contracted purchasers. Required revenues are derived from unconditional wholesale contracts that provide for full cost recovery, but include limited reallocation of costs among contracted purchasers. Required revenues are derived from wholesale contracts that may include some degree of conditionality or no reallocation of costs among contracted purchasers. Not applicable. Rate Flexibility Independent legal ability to increase service rates without external approval. Legal ability to increase service rates is subject to approval of external authorities. History and expectation of operating and capital costs being recovered on a timely basis are strong. Legal ability to increase service rates is subject to approval of external authorities. History and expectation that operating and capital costs may not be recovered on a full or timely basis. Legal ability to increase service rates is subject to approval of external authorities. History and expectation that operating and capital cost recovery will be neither full nor timely. Purchaser Credit Quality (PCQ) Very strong purchaser credit quality. Strong purchaser credit quality. Midrange purchaser credit quality. Weak purchaser credit quality. Asymmetric Rating Factor Considerations The analysis of revenue defensibility also considers the term, tenor and conditionality of relevant contracts, and any reliance on non-utility revenue. Operating Risks Operating Cost Burden Very low operating cost burden. Low operating cost burden. Midrange operating cost burden. High operating cost burden. Capital Planning and Management Low life cycle investment needs. Elevated life cycle investment needs but supported by adequate capital investment. Elevated life cycle investment needs with weak capital investment. Elevated life cycle investment needs with extremely weak capital investment. Other Asymmetric Rating Factor Considerations Resource management, project completion risk and counterparty risks can also constrain the assessment. Financial Profile Leverage Profile Refer to the Rating Positioning table on page 19. Refer to the Rating Positioning table on page 19. Refer to the Rating Positioning table on page 19. Refer to the Rating Positioning table on page 19. Liquidity Profile Liquidity profile is based on coverage of full obligations and liquidity cushion. A weaker liquidity profile can constrain the financial profile assessment. Source: Fitch Ratings. Revenue Defensibility The assessment of revenue defensibility for wholesale water and sewer providers includes a review of the applicable contractual framework pursuant to which water and/or sewer services are provided, the related obligations of all parties involved, purchaser credit quality (PCQ) and the provider’s legal ability to determine rates. Water and Sewer Service Contract Characteristics Fitch considers the following contracts to be unconditional: x Take or Pay Contracts: Contracts wherein purchasers are obligated to make specified payments to the provider, whether or not service is provided from a specified project or resource. x Take and Pay Contracts: Contracts wherein a purchaser’s payment obligation is contingent only upon the service provided. Source: Fitch Ratings. ITEM NO. 8.5. MATERIALS SUBMITTED BY: Delia Lugo MEETING DATE: May 14, 2019 Exposure Draft: U.S. Water and Sewer Rating Criteria 28 May 13, 2019 Public Finance Revenue Source Characteristics Fitch reviews the contractual framework supporting a wholesale provider focusing specifically on the terms, tenor and conditionality of the payment obligations to assess the defensibility of revenue. Wholesale water and sewer providers generally exhibit very strong revenue defensibility, as revenue is typically derived from retail utilities pursuant to long-term and/or perpetually effective unconditional service contracts (see Water and Sewer Service Contract Characteristics table) that extend through the life of outstanding debt, and that provide for full cost recovery. In addition, there typically are practical limitations of retailers replacing the service provided by the wholesaler. Moreover, a common feature of water and sewer service contracts throughout the sector allows wholesale providers to recover (a) their costs from lower sales (in the case of take-and-pay contracts) or (b) the obligations of a defaulting purchaser (in the case of take-or-pay contracts) by increasing — or stepping up — the obligations or charges to non-defaulting purchasers. Fitch factors the ability, timeliness and degree to which a wholesaler can reallocate its obligations among purchasers in its assessment of revenue defensibility. Wholesale providers that rely exclusively on sales (whether they be contracted or uncontracted) that are subject to meaningful operating risk, termination or are otherwise highly conditional for the repayment of debt may not be rated using these criteria. These may include providers subject to completion risk, fully or significantly exposed to volume risk, or those providing services pursuant to contracts that may be terminated at the purchaser’s option and where the purchaser has the practical ability to replace the service being provided to the extent that it poses significant business risk to the wholesaler. In these cases, Fitch’s “Rating Criteria for Infrastructure and Project Finance” may be applied instead. Rate Flexibility Fitch’s analysis of rate flexibility for wholesale providers focuses primarily on the provider’s independent legal ability to determine rates of service. While a provider’s rate competiveness is evaluated and may be particularly relevant for wholesalers facing contract renewals or seeking to expand membership, the influence of the wholesale cost of water and sewer service on rate competitiveness and affordability is best measured at the retail level. Pressure to moderate or avoid wholesale rate increases is most likely to mount as a result of corresponding retail increases, and is considered a component of Fitch’s analysis of PCQ. Purchaser Credit Quality (PCQ) The final component of the revenue defensibility assessment for wholesale providers is PCQ. An overwhelming majority of purchasers are expected to be municipally owned retail utilities exhibiting strong operating fundamentals. PCQ is therefore expected to be strong to extremely strong for most wholesale providers. Fitch uses a variety of inputs to evaluate PCQ, including both private and public ratings, and internal credit opinions and credit scores. If Fitch does not maintain a rating, credit opinion or credit score on a purchaser, one may be assigned as required. In the event a wholesaler has a concentration of non-municipal purchasers and evaluation of such purchaser(s) would be performed per the parameters below, Fitch may assume such purchaser(s) to have ‘weak’ credit quality, or credit quality generally consistent with no higher than a ‘B’ rating. ITEM NO. 8.5. MATERIALS SUBMITTED BY: Delia Lugo MEETING DATE: May 14, 2019 Exposure Draft: U.S. Water and Sewer Rating Criteria 29 May 13, 2019 Public Finance Fitch’s framework for credit scoring retail municipal utilities incorporates many of the same factors previously outlined. However, a credit score is subject to different standards than a full rating or credit opinion. Credit scores assess a limited range of factors and are point-in-time. Specifically, the credit score considers a utility’s ability to absorb rate increases, measured by its rate flexibility and service area characteristics as a proxy for revenue defensibility, and COFO and liquidity cushion ratio as a proxy for financial profile. Operating risk is not considered for credit scoring. Revenue Source Characteristics — ‘aa’ For providers with a revenue source characteristic assessment of ‘aa’, Fitch will use individual purchaser evaluations to calculate a purchaser credit index (PCI), which numerically reflects the weighted average credit quality of the relevant obligors. Fitch will evaluate purchasers that account for at least 40% of the provider’s total revenue or sales when calculating the PCI and determining the PCQ assessment. In cases where a provider has a revenue source characteristic assessment of ‘aa’ but provides only a small portion of purchaser requirements, the PCQ assessment may be higher than the PCI indicates if a single purchaser exhibiting stronger credit quality could easily assume all contractual payment obligations of the other purchasers without affecting its credit quality. Revenue Source Characteristics — ‘a’ or ‘bbb’ The PCQ factor for wholesale providers with a revenue source characteristics assessment of ‘a’ or ‘bbb’ — because of a limited ability to reallocate costs — will reflect the credit quality of the weakest obligor(s), after factoring in mitigating structural features available to the utility that allow for the absorption of loss. These features include applicable step-up provisions, cash reserves or other credit enhancement provisions. Fitch will only rely on public and private ratings and credit opinions in these cases. Credit scores will not be considered. Where features are insufficient to cover an individual purchaser’s obligations in the event of its default, the PCQ factor assessment will be capped by the credit quality of that purchaser. For example, if a wholesaler’s step-up provision is limited to 25% of a purchaser’s obligation, that wholesaler’s ability to meet debt service obligations would be highly reliant on payments from any purchaser with an allocated share higher than 20%. Stepping up the required payments from the non-defaulting purchasers responsible for less than 80% of contractual obligations by 25% would not restore contractual obligations to 100%, resulting in a potential shortfall in revenue. If a wholesaler is highly reliant on more than one purchaser (i.e. each purchaser has an allocated share of more than 20%), the wholesaler’s rating will be capped by the credit quality of the weakest of those purchasers. In each case, if the relevant purchasers are not rated, a notch-specific private rating will be assigned. For wholesalers with fewer than 10 purchasers, Fitch will evaluate the credit quality of a minimum number of purchasers who collectively account for contractual obligations sufficient to meet the wholesaler’s obligations, after factoring in mitigating structural features. For example, in the scenario above where purchaser obligations may be increased up to 25%, purchasers Purchaser Credit Index (PCI) Metric to Support Assessment x Wholesale utilities whose purchasers have a PCI of less than 1.5 are subject to very strong purchaser credit quality consistent with a ‘aa’ rating factor assessment; between 1.5 and 2.4, strong credit quality or ‘a’; between 2.5 and 3.4, midrange credit quality or ‘bbb’; and above 3.4, weak or ‘bb’. Source: Fitch Ratings. ITEM NO. 8.5. MATERIALS SUBMITTED BY: Delia Lugo MEETING DATE: May 14, 2019 Exposure Draft: U.S. Water and Sewer Rating Criteria 30 May 13, 2019 Public Finance responsible for at least 80% of the total contract obligations in aggregate would be evaluated, because implementing the 25% increase on the pool would restore contract obligations to 100%. The PCQ factor would then be assessed at a level commensurate with the weakest purchaser required to reach the 100% threshold after invoking the step-up protection. In evaluating the requisite purchasers, unrated purchasers will be assigned private ratings or credit opinions. For wholesalers with 10 or more purchasers, Fitch will initially evaluate aggregate credit quality of the purchaser pool using its portfolio stress model (PSM), developed for assigning credit ratings to state revolving fund programs and municipal loan pools. The PSM produces liability stress hurdles based on the aggregate rating, obligation share and term of the purchasers. To capture the risk of large unrated purchasers, Fitch will assign credit opinions to all unrated purchasers with shares of more than 5% of the pool’s contractual obligations, after factoring in available step-up protections. The rating stress hurdle produced by the PSM is measured against the structural loss- absorption features of the contractual arrangement. The measurement determines whether or not sufficient resources, including contract payments, are available to the wholesaler to meet timely bond debt service payments while sustaining purchaser payment defaults. Please refer to “U.S. Public Finance State Revolving Fund and Municipal Finance Pool Program Rating Criteria” for more details. Using the PSM, Fitch calculates the total expected loss — the liability stress hurdle multiplied by (1 minus the assumed recovery rate) — that can be sustained for each rating category. To be eligible for a certain rating category, the structural features and amount of loss absorption must exceed this expected loss. For example, if the characteristics of a pool of purchasers produce ‘AAA’ and ‘AA’ liability stress hurdles of 50.5% and 41.9%, respectively, and an assumed recovery of 90% is applied, then enhancement in excess of 5.1% (10% * 50.5%) and 4.2% (10% * 41.9%) would be necessary to achieve the respective rating category. Thus, if a utility was able to increase contractual obligations in amounts sufficient to absorb losses equal to 4.5%, the ‘AA’ stress hurdle of 4.2% would be met but the ‘AAA’ stress hurdle of 5.1% would not. However, passing a rating hurdle does not guarantee the PCQ factor will receive the corresponding assessment. Fitch also considers the effect of large individual purchasers and the leading role these obligors typically assume in managing these issuers. As a result, while the wholesaler’s PCQ assessment is capped at the credit quality of any single purchaser whose share exceeds the utility’s loss protection, the assessment may also ultimately be capped by the credit quality of other rated purchasers. In these cases, Fitch will begin with the lowest rated purchaser and aggregate the shares of individual purchasers by improving rating category to determine the rating of the purchaser whose share drives the aggregate share above the available protection. The PCQ factor assessment will be capped at the applicable rating. In the above scenario where available support is sufficient to cover losses totaling 5%, and the four weakest rated purchasers — each accounting for a 2% share — were rated ‘BBB’, ‘BBB’, ‘A’ and ‘A’, the PCQ factor assessment would be capped at ‘A’. If the shares were instead 4% (BBB), 3% (BBB), 1% (A) and 1% (A), the assessment would be capped at ‘BBB’. Revenue Defensibility Asymmetric Risk-Additive Considerations In addition to the aforementioned considerations, the assessment of revenue defensibility is reduced in cases where a portion of a wholesale provider’s revenues are derived pursuant to contracts that provide for conditional payments, including termination provisions, and the ITEM NO. 8.5. MATERIALS SUBMITTED BY: Delia Lugo MEETING DATE: May 14, 2019 Exposure Draft: U.S. Water and Sewer Rating Criteria 31 May 13, 2019 Public Finance purchasers could reasonably be expected to replace such service. Revenue defensibility is also reduced in situations where the contracts do not extend through the maturity of outstanding debt and the purchasers could reasonably be expected to replace such service. Fitch will therefore consider in its analysis the tenor, relevant counterparties and terms of relevant contracts to assess the degree to which replacement funds, either from replacement contracts, uncontracted sales or wholesale rate increases, may be necessary to meet scheduled debt payments. Fitch also examines wholesale utility revenue derived from non-monopoly operations, and the extent to which the utility relies on these revenues to meet covenanted revenue requirements and debt service obligations. Non-monopoly revenues are subject to higher volatility as a result of competitive pressures on both demand and price, and generally weaken revenue defensibility. Operating Risks The relevance of operating risk in Fitch’s analysis of wholesale utilities will largely be determined by the degree to which resource performance and the cost of service influence the credit quality of the purchasers and their ability to support provider obligations. Operating risk is expected to be a meaningful factor in Fitch’s analysis where wholesale providers are responsible for meeting the majority of purchaser service requirements. The assessment of operating risk for wholesale water and sewer providers focuses on operating cost burden and capital planning and management. Similar to the evaluation of retail utilities that own and manage their own water supply and treatment and/or sewer treatment and disposal facilities, the ability of a wholesale provider to consistently provide low-cost service enables purchasing retail utilities to achieve a strong financial profile, while preserving affordability. Fitch will initially assess operating cost burden for wholesale utilities and projects by comparing the ratio of total annual operating costs to total MG of water produced and/or sewer flows treated on an average annual basis, which excludes distribution and collection costs borne by purchasers. When evaluating partial requirement providers and single-asset project providers, Fitch may alternatively assess operating cost burden by comparing the relative magnitude of project costs and capacity to the purchasers’ total cost of water and/or sewer service requirements, or by assessing the strategic benefit or importance of the service. A lower ratio indicates a lower operating cost burden. Fitch assesses capital planning and management for wholesale utilities using the same factors and metrics outlined on pages 910. Operating risk is less of a consideration for wholesalers that provide only a small portion of purchaser requirements, or where revenues are derived pursuant to take-or-pay contracts. In these cases, Fitch will evaluate the operating risk, but purchaser credit quality will be given Operating Cost Burden Metric to Support Assessment x Fitch measures a provider’s ratio of total operating costs to historical average annual million gallons (mg) of water produced and/or sewer flows treated to determine operating cost burden. Wholesale utility systems with an operating cost of $6,500/mg or less have an operating cost factor assessment of ‘aa’; over $6,500/mg to $9,500/mg, ‘a’; over $9,500/mg to $12,500/mg, ‘bbb’; and over $12,500/mg, ‘bb’. x Alternatively, Fitch may evaluate operating cost burden for partial requirement providers or single-asset providers by reviewing the relative magnitude of the cost and/or capacity as a percentage of the purchasers’ total resources and related costs, as well as the strategic benefit or importance of the resource. Projects that account for less than 25% of purchaser cost or capacity, or provide significant strategic importance would be deemed to have a very low/low operating cost burden; projects that account for between 25% and 50% of cost or capacity, or provide no extraordinary strategic importance, midrange; and projects that are strategically burdensome, weak. Source: Fitch Ratings. ITEM NO. 8.5. MATERIALS SUBMITTED BY: Delia Lugo MEETING DATE: May 14, 2019 Exposure Draft: U.S. Water and Sewer Rating Criteria 32 May 13, 2019 Public Finance greater consideration in the determination of the final rating. A strong/very strong operating risk assessment could potentially enhance the rating above or toward the higher end of the PCQ rating factor assessment (e.g. A+ with a PCQ of A); whereas weaker operating risk could weigh the rating downward (e.g. A with a PCQ of A). In either case, however, any influence on the rating would be limited and reflect Fitch’s determination of whether the obligations of the weaker purchasers would be assumed upon default given the inherent value of the resources and the incentive of the remaining purchasers to preserve the provider’s credit quality. Financial Profile Fitch expects to use the same factors, metrics and scenario analysis outlined on pages 1120 to evaluate the financial profile of most wholesale providers, including those with an unlimited ability to reallocate costs among purchasers to ensure cost recovery and revenue source characteristics assessed as ‘aa’. Focus on Purchaser Credit Quality For utilities with revenue source characteristic assessments of ‘a’ and ‘bbb’ that possess only a limited ability to reallocate costs or provide only a portion of the purchaser’s requirements, and benefit from a contractual framework in which revenues and costs are largely balanced and passed through to one or more purchasers, leverage profile may be less of a consideration in a rating. The PCQ rating factor assessment, supplemented by the operating risk assessment, will be more relevant to the final rating outcome in these cases. Asymmetric Additive Risk Factors Fitch considers the same asymmetric additional risk factors in its analysis of wholesale water and sewer utilities as outlined on pages 2022. ITEM NO. 8.5. MATERIALS SUBMITTED BY: Delia Lugo MEETING DATE: May 14, 2019 Exposure Draft: U.S. Water and Sewer Rating Criteria 33 May 13, 2019 Public Finance Appendix C: Purchaser Credit Index Scoring Matrix Credit scores for purchasing utility systems that are unrated or not subject to a credit opinion are determined using the Purchaser Credit Index Scoring Matrix below, together with evaluations of ability to absorb rate increases and net margin/cash cushion. Utilities that are rated or subject to a credit opinion may be assigned scores informed by their determined credit quality. In cases where data necessary to meet the assessments outlined below are insufficient, purchasing utilities may be assigned the lowest score. Net Margin/Cash Cushion Net margin/cash cushion measures a utility system’s overall financial performance and readily available cash, after accounting for its purchased services, as well as any operating or financial obligations the utility may have incurred on its own. Ability to Absorb Rate Increases For credit scoring purposes, the ability to absorb rate increases of a purchasing utility is determined using the following matrices, which assess the utility’s service area and rate flexibility, in the context of its legal ability to set rates for service. Purchaser Credit Index Scoring Matrix Net Margin/Cash Cushion Ability to Absorb Rate Increases aa a bbb bb aa 1 2 2 3 a 1 2 2 3 bbb 2 3 3 4 bb 3 3 4 4 Source: Fitch Ratings. Net Margin/Cash Cushion Metrics to Support Assessment x Fitch calculates the net margin and cash cushion as: (net margins + unrestricted cash and investments) / (average daily cash operating expenses). x Utility systems that have a net margin and cash cushion of 170 days or more have a ‘aa’ factor assessment; between 70 days and 169 days, ‘a’; between 30 days and 69 days, ‘bbb’; and less than 30 days, ‘bb’. However, systems with net debt/FADS in excess of 7.0x cannot be assessed higher than ‘a’. Source: Fitch Ratings. Ability to Absorb Rate Increases Ability to Set Rates: Yes Service Area Characteristics Rate Flexibility aa a bbb bb aa aa aa a a a aa aa a a bbb a a a bbb bb a a bbb bbb Ability to Set Rates: No Service Area Characteristics Rate Flexibility aa a bbb bb aa aa a a a a a a a bbb bbb a a bbb bbb bb a bbb bbb bb Source: Fitch Ratings. ITEM NO. 8.5. MATERIALS SUBMITTED BY: Delia Lugo MEETING DATE: May 14, 2019 Exposure Draft: U.S. Water and Sewer Rating Criteria 34 May 13, 2019 Public Finance Service Area Characteristics Fitch’s scoring methodology evaluates a utility’s service area and the ability of its customers to support purchased services by measuring four characteristics: median household income, unemployment, customer growth and revenue mix. Each of these characteristics is separately assessed against nationwide averages or other thresholds. Rate Flexibility Fitch’s scoring methodology evaluates a purchasing utility’s rate flexibility and its ability to generate additional revenue to support purchased service requirements by assessing the percentage of people whose water-related utility charges are considered unaffordable. Service Area Characteristics Metrics to Support Assessment (%) Stronger Midrange Weaker Median Household Income/ U.S. Average Median Household Income > 125 12575 < 75 Unemployment Rate/U.S. Unemployment Rate < 75 75125 > 125 Historical Average Annual Customer Growth Rate > 1.5 1.50.0 < 0.0 x Utilities that exhibit characteristics that are all considered midrange are considered to be consistent with a ‘a’ assessment; utilities that exhibit a greater number of stronger characteristics than weaker characteristics are considered to be consistent with a ‘aa’ assessment; utilities that exhibit a greater number of weaker characteristics than stronger characteristic would be assessed as ‘bbb’. Source: Fitch Ratings. Rate Flexibility Metric to Support Assessment x Residents whose combined water-related bill is greater than 5% of income (or individually 2.0% for water, 2.5% for sewer and 0.5% for stormwater) are considered unaffordable. Utilities with 20% or fewer of their population whose bills are considered high are deemed to have an affordability assessment factor of ‘aa’; over 20% to 30%, ‘a’; over 30% to 40%, ‘bbb’; and over 40% ‘bb’. Source: Fitch Ratings. ITEM NO. 8.5. MATERIALS SUBMITTED BY: Delia Lugo MEETING DATE: May 14, 2019 Exposure Draft: U.S. Water and Sewer Rating Criteria 35 May 13, 2019 Public Finance ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTPS://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2019 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third-party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001. ITEM NO. 8.5. MATERIALS SUBMITTED BY: Delia Lugo MEETING DATE: May 14, 2019 Operations FY 2018-2019 District Well Maintenance Projects Presented by: Javier Martinez Water Production Superintendent ITEM NO. 9.5. MATERIALS SUBMITTED BY: Javier Martinez MEETING DATE: May 14, 2019 District Wells Overview: •Developed 5 year District Well O&M Schedule •FY 2018-2019 District Well 7 and Well 10 ITEM NO. 9.5. MATERIALS SUBMITTED BY: Javier Martinez MEETING DATE: May 14, 2019 History •Well Maintenance Plan: Proactive Approach •Average Well Maintenance Cost ($75,000 to $85,000) •Set Annual O&M Budget for wells at $150,000 •District Well 7 and District Well 10 Well 20 Well 10 Well 5 Well 7 Well 18 ITEM NO. 9.5. MATERIALS SUBMITTED BY: Javier Martinez MEETING DATE: May 14, 2019 Well 20 (2010) •400 Hp Motor Failure •Disconnection, Removal, and Transportation to Electric Motor Shop: $2,373 •Cause of Failure: Shorted Winding •Complete Motor Repair Cost: $18,431 •Cost to Transport to District, Mount, Reconnect , and Start Up: $2,373 •Total Cost: $23,176 ITEM NO. 9.5. MATERIALS SUBMITTED BY: Javier Martinez MEETING DATE: May 14, 2019 Well 10 (1929) •FY 2018-2019 Well Maintenance Schedule •Pump Setting: 225’ •Cost to Disconnect, Remove, and Transport Well Components to the Shop: $6,560 •Electric Motor Repair Cost: $4,596 •Well Casing Maintenance Cost: $12,480 •Cost for New Materials, Pump Installation, and Start Up: $53,039 •Total Cost: $76,675 ITEM NO. 9.5. MATERIALS SUBMITTED BY: Javier Martinez MEETING DATE: May 14, 2019 Well 18 (2002) •Gear Drive Failure •Pump Setting: 220’ •Right Angle Gear Drive Repair Cost : $6,208 •NG Engine Complete Overhaul Cost: $70,605 •Total Cost: $76,803 ITEM NO. 9.5. MATERIALS SUBMITTED BY: Javier Martinez MEETING DATE: May 14, 2019 Well 5 (1950) •Line Shaft Failure •Pump Setting: 280’ •Cost to Disconnect, Remove, and Transport Well Components to the Shop: $6,560 •Right Angle Gear Drive Cost: $6,208 •Well Casing Maintenance Cost: $12,448 •Cost for New Materials, Pump Installation, and Start Up: $66,268 •Total Cost: $91,484 ITEM NO. 9.5. MATERIALS SUBMITTED BY: Javier Martinez MEETING DATE: May 14, 2019 •FY 2018-2019 Well Maintenance Schedule •Pump Setting: 15 0’ •Line Shaft •Concrete Pedestal and G rating •Pump Application •Original Casing Well 7 (1950) Line Shaft Pump CasingCasing Pedestal & GratingPedestal & Grating ITEM NO. 9.5. MATERIALS SUBMITTED BY: Javier Martinez MEETING DATE: May 14, 2019 Well 7 Infrastructure •Remove Right Angle Gear Drive •Pump Base •Line Shaft, Pump, and Strainer •Transport to Shop for Inspection and Final Report •Conduct Survey of the Well Casing ITEM NO. 9.5. MATERIALS SUBMITTED BY: Javier Martinez MEETING DATE: May 14, 2019 Well 7 Rehab/Repairs •Installation SS liner Gravel Pack •Development Swabbing Air Lifting •Test Pump Performance test •Pump Design •Construction Pedestal & Grating •Pump Installation Start Up ITEM NO. 9.5. MATERIALS SUBMITTED BY: Javier Martinez MEETING DATE: May 14, 2019 Well 7 Repair Cost •Cost Remove and Transport Well Components to the Shop: $6,560 •Right Angle Gear Drive Cost: $6,429 •Cost for Materials, SS Liner, Well Development, Concrete Work, New Pump Installation, and Start Up: $260,786 •Total Cost: $276,775 ITEM NO. 9.5. MATERIALS SUBMITTED BY: Javier Martinez MEETING DATE: May 14, 2019 Total Capital Well Repair & Maintenance Cost Well 20 $23,176 Well 10 $76,675 Well 18 $76,803 Well 5 $91,484 Well 7 $276,775 Total: $544,913 ITEM NO. 9.5. MATERIALS SUBMITTED BY: Javier Martinez MEETING DATE: May 14, 2019