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HomeMy WebLinkAboutBOARD MINUTES 10-07-98 234 MINUTES OF THE ADJOURNED REGULAR BOARD MEETING OF THE DISTRICT BOARD OF THE CENTRAL CONTRA COSTA SANITARY DISTRICT HELD ON OCTOBER 7, 1998 The District Board of the Central Contra Costa Sanitary District convened in an adjourned regular session in the Second Floor Conference Room, 5019 Imhoff Place, Martinez, County of Contra Costa, State of California, at 2: 1 0 p.m. on October 7, 1998. Member Boneysteele, Chair of the Budget and Finance Committee, requested that the Secretary call roll. 1. ROLL CALL PRESENT: Members: Lucey, Boneysteele ABSENT: Members: Menesini, Hockett, Nejedly Member Menesini had advised staff that he would be unable to attend this meeting and had requested to be excused. In the absence of a quorum, Member Boneysteele adjourned the Board Meeting and convened as the Budget and Finance Committee. 2. PUBLIC COMMENTS None 3. BUDGET AND FINANCE a. REVIEW AUDITED FINANCIAL STATEMENTS WITH THE DISTRICT AUDITORS. HOOD & STRONG Ms. Deborah Ratcliff, Controller, distributed the draft Financial Statements, Independent Auditors' Report and Supplementary Information for the fiscal year ended June 30, 1998 and the independent auditors' letter relating to investment results. Ms. Ratcliff introduced Mr. Jim McCamish, Partner, and Ms. Susan Malone, Audit Manager, Hood & Strong, Certified Public Accountants. Members Hockett and Nejedly entered the meeting at the hour of 2: 13 p.m. Member Boneysteele relinquished the Chairmanship of the committee meeting, and President Nejedly convened the Adjourned Regular Meeting of the Central Contra Costa Sanitary District Board of Directors. Ms. Malone reviewed the management letter, stating that if there were any significant management recommendations, they would be incorporated in this letter. There were none this year. Last year some management recommendations were made which were addressed by the District. There are no additional ones this year. Ms. Malone provided a brief overview of the financial statements. At the conclusion of the overview, Ms. Malone stated that an unqualified or clean audit opinion is presented. Discussion followed with regard to the cash flow statement, and revision of Note 11 on page 19 to reflect that the District ceased to be a member of the Central Contra Costa Solid Waste Authority during the audit year. Ms. Malone reviewed the Independent Accountants' Report on Agreed-Upon Procedures and Investment Performance. The three month Treasury bill average yield was 5.08 percent and the average yield on the District's temporary investments was 5.69 percent. Ms. Malone noted that the District met its performance criteria. 10 07 98 235 Mr. Roger J. Dolan, General Manager-Chief Engineer, stated that in 1997-1998, the Board adopted a deficit Operations and Maintenance (O&M) Budget and had deficit performance. When the budget was adopted, a rate increase in the spring of 1999 was discussed. Labor and benefit costs continue to be driving forces. There is still a significant reserve. After the first of the year, the Board must consider these issues. It would be possible to cut back on the Capital Improvement Program and return the capital component of the Sewer Service Charge to O&M. There is also the issue of how property taxes will be utilized. The bottom line is that costs are going up. There being no further questions or discussion, President Nejedly thanked Ms. Malone and Mr. McCamish for attending this meeting. Ms. Malone and Mr. McCamish left the meeting. b. CONSIDER EXTENDING HOOD & STRONG AS DISTRICT AUDITORS FOR THE NEXT TWO YEARS Ms. Deborah Ratcliff, Controller, stated that the District has used Hood & Strong for three years. It is the policy of the District that auditors rotate every four years with an option to remain for a fifth year. Ms. Ratcliff recommended that Hood & Strong be extended for two more years, through the fifth year. This should allow a smoother transition for the new General Manager since the audited financial statements will be presented in the same format as the three previous years. It was moved by Member Boneysteele and seconded by Member Hockett, that Hood & Strong be extended as the District auditors for the next two years. There being no objection, the motion was approved with Member Menesini being absent. At this time, President Nejedly departed from the order of the agenda to consider Item 3.e. e. CONSIDER INCREASING THE DISTRICT'S INVESTMENT IN LOCAL AGENCY INVESTMENT FUND (LAIF) Ms. Deborah Ratcliff, Controller, recommended that the amount of funds that the Board allows to be invested in the District's Local Agency Investment Fund (LAIF) account be increased. Ms. Ratcliff stated that LAIF is overseen by the Pooled Money Investment Board and Local Agency Investment Advisory Board and is subject to various Government Code provisions which state that LAIF is not subject to loans or transfers and it is not subject to impoundment or seizure by State Official or State Agency. The $11.5 billion LAIF is part of a $31 billion pooled investment account. LAIF is subject to annual audits. There are 2,582 member agencies. Ms. Ratcliff reviewed the LAIF policies and goals which include safety, liquidity, and maximization of returns using safe and prudent treasury management. Ms. Ratcliff reviewed the LAIF monthly and annual reporting requirements and analysis of the Pooled Money Investment Account portfolio. If the District increased its investment in LAIF from the District's current $7.5 million limit to the $30 million limit allowed by LAIF, the District's interest income would increase by approximately $258,600 per year. Because of the diversity, low risk, and liquidity of LAIF, Ms. Ratcliff recommended that the Board authorize increasing the District's investment limit in LAIF to the $30 million. It was moved by Member Boneysteele that increase in the District's Local Agency Investment Fund (LAIF) account to $30 million be approved. In the discussion that followed, President Nejedly requested more time to consider this matter. Member Boneysteele withdrew his motion and it was agreed that this matter be calendared for Board consideration on the October 15, 1998 Board agenda. Member Hockett stated that she would not be present at the October 15, 1998 Board Meeting but indicated that she supports the increase in the District's LAIF investment amount. At this time President Nejedly reverted to the order of the agenda. 10 07 98 236 c. DISCUSS ISSUES RELATING TO REFINANCING THE DISTRICT'S 1994 REVENUE INSTALLMENT CERTIFICATES WITH THE DISTRICT FINANCIAL ADVISOR. STONE & YOUNGBERG. AND THE DISTRICT'S BOND COUNSEL. JONES HALL Ms. Deborah Ratcliff, Controller, stated that the purpose of this item is to recommend that the Board consider refinancing the District's 1994 Revenue Installment Certificates. Ms. Ratcliff introduced Mr. Charles IIChick" Adams, Bond Counsel, of the firm Jones Hall, and Mr. Tom Lockard, Underwriter, of the firm Stone & Youngberg. Mr. Kenton L. Aim, Counsel for the District, entered the meeting at the hour of 3: 1 0 p.m. Mr. Tom Lockard, of Stone & Youngberg, stated that District staff and Stone & Youngberg have been monitoring market conditions. Interest rates on new-issue tax- exempt municipal securities are at historic lows. At currently available interest rates, a net present value savings of approximately $800,000 could be achieved. Mr. Charles IIChick" Adams, of Jones Hall, discussed the difference between bonds and Certificates of Participation. Mr. Adams stated that bonds are preferred in this case because they are more familiar to the public, the paperwork is easier, and the District's Facilities Financing Authority is not needed, making the process simpler. In response to a question from Mr. Aim, Mr. Adams stated that this refinancing transaction would be completely neutral from a Proposition 218 standpoint. Mr. Adams explained how the refinancing would work. Bonds would be sold. The proceeds would be invested in State and Local Government Series Certificates (SLGS) to match the cash flow of the 1994 Certificates to the first call date of 2004. Revenue bonds at a lower interest rate than Certificates would remain after 2004. Bond amounts and maturities would be structured to realize most of the savings in the first two to three years. A change in interest rate of 0.10 percent will result in a change in net present value savings of about $70,000. Mr. Jarred Miyamoto-Mills, Principal Engineer, presented the staff recommendation that the District proceed with the refinancing if savings achievable are greater than $500,000. Mr. Miyamoto-Mills noted that the approximate savings of $800,000 referenced earlier are net of all issuance costs. Member Lucey had indicated earlier he would have to leave the meeting. Prior to excusing himself, Member Lucey recommended that the District proceed with the refinancing. Member Lucey left the meeting at the hour of 3:28 p.m. Discussion continued relative to full or partial refunding, bond insurance, the method of sale, and the pricing consultant. Mr. Miyamoto-Mills presented the staff recommendation that the District refund its 1994 Revenue Installment Certificates if the net present value savings are greater than $500,000; that a negotiated sale of a maximum of $27 million of 1998 Refunding Revenue Bonds be used with Stone & Youngberg (Tom Lockard) as Underwriter, Jones Hall (Chick Adams) as Bond Counsel, and Gary Kitahata as Pricing Consultant; and that the decision of full versus partial refunding be deferred so that market conditions at the time of pricing determine optimal refunding. Mr. Lockard reviewed the tentative schedule for the 1998 Refunding Program. Discussion followed with regard to the District's recent use and disclosure of Contractual Assessment District financing. Members Hockett and Nejedly excused themselves and left the meeting at the hour of 3:54 p.m. It was noted that both Members Hockett and Nejedly indicated support for proceeding with the refinancing. Member Boneysteele continued to conduct the meeting as the Budget and Finance Committee. 10 07 98 237 d. DISCUSS FUNQING THE DISTRICT'S UNFUNDED LIABILITY Mr. Dolan, General Manager-Chief Engineer, stated that staff is continuing its efforts to quantify the potential economic advantages of financing the District's unfunded liability for pension/retirement benefits, and found that there is a technicality in the law that prevents the District from enjoying the full benefit of doing that. Only counties, and not special districts, can take advantage of this. It may be appropriate to try to get legislation which would allow special districts to take advantage of the same law as counties. On behalf of the Budget and Finance Committee, Member Boneysteele recommended that staff move forward to explore legislation which would allow the District to finance its unfunded liability for pension/retirement benefits. e. CONSIDER INCREASING THE DISTRICT'S INVESTMENT IN LOCAL AGENCY INVESTMENT FUND (LAIF) This item was taken out of order earlier in the agenda. 4. REPORTS/ANNOUNCEMENTS None 5. ADJOURNMENT There being no further business, Member Boneysteele adjourned the meeting at the hour of 4:05 p.m. ~. sident of the Board irectors, Central Contra Costa Sanitary District, County of Contra Costa, State of California COUNTERSIGNED: S Cri f~ ry of the Central ntra Costa Sa tary District, County of Contra Costa, State of California 10 07 98