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HomeMy WebLinkAboutBOARD MINUTES 01-26-06 MINUTES OF THE SPECIAL MEETING OF THE CENTRAL CONTRA COSTA SANITARY DISTRICT BOARD OF DIRECTORS HELD ON JANUARY 26, 2006 The District Board of the Central Contra Costa Sanitary District convened in a special meeting at its regular place of business, 5019 Imhoff Place, Martinez, County of Contra Costa, State of California, at 2:00 p.m. on Thursday, January 26, 2006. President Menesini called the meeting to order and requested that the Secretary call roll. I 1. ROLL CALL PRESENT: Members: Boneysteele, Hockett, Nejedly, Menesini ABSENT: Members: Lucey a. PLEDGE OF ALLEGIANCE TO THE FLAG Board and staff joined in the Pledge of Allegiance to the Flag. 2. PUBLIC COMMENTS There were no public comments. 3. CALL FOR REQUESTS TO CONSIDER ITEMS OUT OF ORDER None. 4. OPERATIONS I a. BOARD ACCEPTANCE OF THE 2005 NATIONAL POLLUTANT DISCHARGE ELIMINATION SYSTEM (NPDES) REPORT General Manager Charles Batts stated that Plant Operations Division Manager Douglas Craig will provide a brief overview on the District's Annual National Pollutant Discharge Elimination System Report, which summarizes the District's 2005 performance. Mr. Batts noted that the 2005 submittal should lead to the District's eight consecutive gold award. This record is the result of dedicated employees, outstanding operations, excellent facilities and a sense of teamwork between the Operations Department, the Engineering Department, the Administrative Department, and with the foresight and support of the Board. Mr. Craig presented a report, stating that in 2005, 17.5 billion gallons of wastewater were treated, which is an average daily flow of 48 million gallons. 4,708 tons of ash were produced. 15,000 analytical tests were completed, which comprised approximately 11,000 hours of laboratory work. The District was in 100 percent compliance with NPDES permit requirements. He stated that the results of a copper test approached the peak limit requirement, but after a retest it fell within the limits of the permit. Similar results occurred with nickel and enterococcus tests, but retesting showed the samples were at the appropriate permit levels. I He stated that staff met recently with Regional Water Quality Control Board Senior Engineer Robert Schlipf, who is reviewing the District's NPDES application. The next step is to hold follow-up discussions with Mr. Schlipf and the subsequent issuance of a draft tentative order. He stated that the major permit issue continues to be mercury levels, and the District will be issued interim limits which will be the same as the current permit, but ultimately, the District Book 54 - Page 90 .._,-----~-----~~-~-----~_._._'~-'-_._--~'-"_..".,_._'-"---_._----. I I I Board Minutes of January 26, 2006 will have a compliance schedule and new limits which will be difficult, if not impossible, to meet under current operations. He thanked staff for their work and the Board Members for their support. It was moved by Member Hockett and seconded by Member Nejedly to accept the 2005 National Pollutant Discharge Elimination System Report. Motion passed by the following vote of the Board: AYES: Boneysteele, Hockett, Nejedly, Menesini NOES: None ABSENT: Lucey 5. BUDGET AND FINANCE a. FINANCIAL PLANNING AND POLICY WORKSHOP General Manager Charles Batts stated that the purpose of the presentation today is to review the "State of the District," discuss rate-setting philosophy, discuss future budgets and rate impacts, and to receive input from the Board. The theme of the workshop is "Keeping the Waters Calm." He stated that the District continues to provide a public service to the community and strives to achieve its mission to provide excellent customer service and to run a high-performance organization. The District has achieved a successful workforce transition, addressing the fact that over 50 percent of District employees have held their position less than five years. The District has $68 million in reserves, and a low debt level. Future financial impacts anticipated by the District include unfunded liabilities, such as post-retirement health care; pending regulations; and possible economic downturn. He stated that the first budget workshop was held in 2000, when the District, with limited financial reserves, faced different financial issues, including the loss of ad valorem tax, economic downturn, and an expanding regulatory role. In response to these issues, the Board developed cost-saving strategies, deferred certain capital projects, and raised rates. He described the rate-setting philosophy: . Reserves should always be adequate to cover upcoming cash flow needs. . A ten-year planning horizon is adequate for most financial planning purposes. . Debt service should be reserved for major financial issues, such as major capital projects and plant expansion. . Fees and charges should reflect the full cost of service. . Rate and fee increases may not always be required. . Modest annual sewer service charge increases may be preferred over large, periodic rate increases. The breakdown of District revenue shows that 54 percent of revenue comes from Sewer Service Charges. Additional revenue from the City of Concord and capital fees bring the percent to 84 of total revenues, which are projected to be $81.4 million in 2005-06. Mr. Batts described District expenses, the three highest of which are labor, benefits and utilities. The District's budget generally has increased approximately 4-5 percent per year. Over the past six years of Board workshops, the Board has approved four major rate increases and has currently adopted a multi-year rate proposal of approximately 3 percent per year. He stated that the District has the reserves to finance future near-term budget requirements, but should also consider funding "unfunded liabilities" and preserve the ability to debt finance large capital projects. He described financial challenges the District has faced in the past, and how they were addressed. He stated that, in the future, reserves will decline and rate increases will be needed. He discussed outstanding liabilities, incluqing a current unfunded pension liability of $34 million, unfunded liability for GASB 45 of $90 million, and $34 million in outstanding debt. Future costs include $293 million over the next ten years for the Capital Improvement Program, and unknown regulatory compliance costs. Book 54 - Page 91 _.__.,_._------".__.__._._-_.,_.~"'<..,,-,.._....._""._..----"_.--_....,-~.._~'- Board Minutes of January 26, 2006 He ex~lained the growth in GASB 45 liability. Compounding factors rapidly increase the liability, and deferred rate increases also have a significant impact over time. Unfunded liabilities are inherent in every public agency, and represent a growing concern. He stated that staff is looking at options to address the GASB 45 liability and will present those to the Board at a future meeting for consideration. In summary, he stated that the District is currently in a strong financial position with stable revenue sources. Expenses and revenues are fairly predictable. Property tax revenue will return, and could be used to fund an OPEB (GASB 45) trust. I ! He stated that any increase in the Sewer Service Charges is a Board policy issue, as is the determination of what is an appropriate reserve balance. Modest annual versus larger periodic rate increases are also a policy issue, but he cautioned that deferring rate increases adds to the future cost. He discussed the pros and cons of whether large projects should be bond-funded or pay-as-you go. Mr. Batts presented the recommended scenario, which imposes a $9 rate increase this year. Reserves would be spent down over the next ten years. If no rate increase is approved, it is projected that rates will go up to $16/year in future years. The decision regarding rates will have an impact mainly on long-term rates beyond the next five years, and short-term rates over the next three years. The cost of a short-term rate deferment would be approximately $1 million per year. He compared the "pay now" scenario versus the "pay later" option. He concluded his presentation, stating that staff recommends a $9 sewer service charge increase. A Proposition 218 notice is not required, but a public hearing would be held and a new resolution adopted. The next step would be to approve the 2006-07 budget. A separate report to the Board will present options for addressing the Other Post Employment Benefits (OPEB) benefit liability. Member Nejedly requested information regarding how many other districts, whose fees are I lower than the District's, are augmented by waste disposal fees. He also requested information regarding the City of Richmond's fees. Member Boneysteele commented on a recent Contra Costa Times article regarding retirement and medical costs and the challenges faced by public agencies in funding those costs. I i Mr. B~tts stated that, in 2000, the District was suffering from cash flow problems and diminished reserves. That is no longer the case, and the Board will be asked to make a decision with regard to where long-term rates are going. He stated that two options were presented: no rate increase, or modest annual rate increases. Mr. Batts stated that, in his opinion, modest annual rate increases would be in the best interests of the District. Member Hockett commented on assumptions made for the actuarial studies regarding the aging population and health care costs. She stated that the revenue from the Dougherty Valley will decline over the next several years. In response to a question from Member Hockett regarding ad valorem tax, Mr. Batts responded that the voters passed Proposition 1 A returning the ad valorem tax to the District, unless the Governor declares an emergency. He stated that, if there is an economic I downturn, he would expect that there would be a Proposition put forward that would change the ad valorem tax distribution. Mr. Batts stated that the development of the Concord Naval Weapons Station could include construction of approximately 13,000 homes. This would create a flow increase of approximately 3.4 million gallons per day. He stated that certain capital projects have been moved forward to address capacity handling issues. In response to a question from Member Boneysteele, Mr. Batts stated that, to the best of his knowledge, Buchanan Field Airport will remain an airport in the foreseeable future. Book 54 - Page 92 I I I Board Minutes of January 26, 2006 Member Hockett stated that her inclination is to support the "soft landing" approach described by the General Manager. Since no incremental rate increase was assessed last year, imposing a $9 increase this year and lower rates thereafter appears to be in the best interest of the District. She commented that District reserves are already allocated. Mr. Batts confirmed that the District expects to spend $293 million over the next ten years on capital projects, assuming that the regulatory climate remains fairly constant. He stated that the majority of District spending has been on its collection system. President Menesini stated that steps the District takes now will affect future generations. He stressed the importance of emergency preparedness, particularly with regard to the potential impact of seismic activity. He commended the General Manager on his report. 6. REPORTS a. General Manaqer General Manager Charles Batts announced that, with regard to the Lancaster Road repairs, the District has received permission from CalTrans to initiate repairs to the Lancaster Road trunk sewer pierced by a CalTrans soundwall support piling. The line has been excavated and by-pass lines installed. The declaration of an "Emergency" was not required and this repair will be completed during the spring, with support from CalTrans. The Board will be updated the progress of this project. b. COUNSEL FOR THE DISTRICT District Counsel was not present. General Manager Batts stated that District Counsel Aim and Director of Administration Randy Musgraves were attending a mediation hearing. c. SECRETARY OF THE DISTRICT None. d. BOARD OF DIRECTORS 1) Member Boneysteele, Member of the Budget and Finance Committee, reported that he and Alternate Committee Member Menesini reviewed the Expenditures and took no exception. It was moved by Member Boneysteele and seconded by President Menesini to approve the Expenditure List dated January 26, 2006, including Self Insurance Check Nos. 102286 to 102288, Running Expense Check Nos. 158847 to 159195, Sewer Construction Fund Check Nos. 28331 to 28366, Payroll Manual Check Nos. 49082 to 49088, and Payroll Regular Check Nos. 55678 to 55703 as recommended. Motion passed by the following vote of the Board: AYES: Boneysteele, Hockett, Nejedly, Menesini NOES: None ABSENT: Lucey 7. EMERGENCY SITUATIONS REQUIR:ING BOARD ACTION None. 8. ANNOUNCEMENTS/SUGGESTIONS FOR FUTURE AGENDA ITEMS President Menesini requested that a report be scheduled on an upcoming agenda regarding the work and recent developments of the District's laboratory. Book 54 - Page 93 Board Minutes of January 26, 2006 9. ADJOURNMENT There being no further business to come before the Board, President Menesini adjourned the meeting at 3:15 p.m. COUNTERSIGNED: c~~. President 0 he Board of Direc ors, Central Contra Costa Sanitary District, County of Contra Costa, State of California ~eL- Secretary of the Central Contra Costa Sanitary District, County of Contra Costa, State of California Book 54 - Page 94 I I I