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HomeMy WebLinkAboutBOARD MINUTES 01-29-09MINUTES OF THE SPECIAL MEETING OF THE CENTRAL CONTRA COSTA SANITARY DISTRICT BOARD OF DIRECTORS HELD ON JANUARY 29, 2009 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 29, 2009. President Nejedly called the meeting to order and requested that the Secretary call roll. 1. ROLL CALL PRESENT: Members: Hockett, Lucey, McGill, Menesini, Nejedly ABSENT: Members: None 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. BUDGET AND FINANCE a. FINANCIAL PLANNING AND POLICY WORKSHOP General Manager James Kelly provided an overview of the workshop, which will cover the State of the District, rate-setting approach, items that impact rates, and proposed rates and alternatives. He stated that staff recommends publishing a Proposition 218 notice for up to $15 per year sewer service charge increase for two years. This increase will support the District goals of excellent customer service, regulatory compliance, responsible rates, and being ahigh-performance organization. It will also support the GASB 45 costs. The increase can be reduced if conditions change. Mr. Kelly stated that staff proposes that the 2009-10 sewer service charge rate increase be between $13 to $15. He stated that budget policy issues to be addressed include how to address unfunded liabilities and the role of bond funding for the District's Capital program. He stated that a $1 increase in the sewer service charge results in an additional $170,000 revenue. A one per cent increase in employee salaries would require a $2 increase in the sewer service charge. Loss of the ad valorem tax would equate to a $73 increase in the sewer service charge. Book 58 -Page 161 Board Minutes of January 29, 2009 Threats facing the District include the possible reduction of property tax, income reduction from connection fees, decreased revenues and increased costs due to the drought, a much larger current unfunded liability for retirement, and poor economy. Opportunities include a great bidding and hiring climate, and lower natural gas prices. He stated that the District is in a strong financial position, with cash reserves of $60 million as of June 30, 2008. Expenses have increased over the Consumer Price Index, largely due to increased benefit costs, but are expected to be on budget. Revenue sources are generally stable, although expected to be less than budgeted this year. The District's Capital program is generally "pay-as-you-go." Mr. Kelly described the rate-setting approach used since 2000, which uses a financial cash flow model to analyze policy issues and predict future rates. The approach uses aten-year planning horizon. No short-term borrowing is planned to meet cash flow needs, and the plan assumes the use of District reserves to allow modest annual sewer service charge increases. The approach also assumed that bonds will only be used for future major capital projects, and that the sewer service charge and other fees and charges for services should include full cost recovery. Mr. Kelly described the model assumptions, which include the funding of the GASB 45 trust each year, and no new positions over the next ten years. A vacancy factor of 3 percent for salary and 4 percent for benefits has been factored in. Salary increases are calculated at 4.33 percent per year. He showed charts illustrating the history of sewer service charge rates and available funds, and temporary investment balances. He stated that items that impact rates include revenues and expenses, liabilities, regulatory compliance, reserves, and the prior year's rates. The sewer service charge currently makes up 49 percent of District revenue. He displayed additional charts showing historical revenue and reserves; sewer service charge, property tax and capacity fee trends; ten-year expenses; and the history of capital expenditures. Current liabilities for GASB 45 are estimated to be $48-$68 million. Unfunded Actuarial Accrued Liability (UAAL) is estimated to be $36.5 -$105 million, compared with $43 million the prior year. Total estimated liability is $118.7-$207.20 million. Future regulatory compliance and District initiative may include continuing to address mercury control, further reduction of sanitary sewer overflows, greenhouse gas reduction, nutrient removal, emerging contaminants, and water recycling costs. These efforts are not in the capital plan or the rate model. Mr. Kelly stated that the District's cash reserves have allowed for rate stabilization for year- to-year variations in the Capital program, and have been drawn down to subsidize and smooth rates. He showed a chart of historical reserve levels. With regard to rates, modest annual rate increases have been adopted since 2004. Forecasts show needed projects can be funded and the current level of service maintained Book 58 -Page 162 Board Minutes of January 29, 2009 with continued moderate increases in the future. In 2007, the public notice announced a two-year rate increase of up to $13 per year. An increase of $11 was approved in 2007-08, which increased the rate from $289 per year to $300 per year. The two-year rate increase ordinance is completed this year with a current sewer service charge of $311, and staff recommends the publishing of a Proposition 218 notice for future increases. Mr. Kelly stated that staff recommends publishing a Proposition 218 notice for up to a $15 per year increase for 2009-10 (increasing rates from $311 to $326 per year), and a $15 per year increase for 2010-11 (increasing rates from $326 to $341 per year). Staff also recommends adopting annual increases to fees, rates and charges, and administrative overhead, at full cost pricing. Options and liability for UAAL should be further analyzed this year. Mr. Kelly presented various rate scenarios that addressed the economic conditions, possible tax take-aways, and natural gas prices. He explained the reasons for his recommendation to raise the Sewer Service Charge and the impact that no rate increase would have on the District. Member Menesini stated that he would support continuing with the existing scenario but would like to see it in the context of what is happening nationwide. Member Lucey stated that he will not vote for the Proposition 218 notice because of the current economic conditions and will not support a rate increase this year. He noted they are not rate payers; they are neighbors. Member McGill asked what effect natural gas prices may have on the budget. He stated that he would support an increase but would like to see it lower than proposed if a low natural gas purchase price can be locked in. He added that a loss of property tax revenue could have a serious impact on the District. City of Concord Director of Public Works Qamar Khan responded to a question from President Nejedly, stating that the City of Concord intends to increase its sewer service charge by $35. President Nejedly stated that approving the Proposition 218 notice does not commit the District to a specific increase at this point and that he is inclined to support the mailing of the notice. He stated that he would like to see no rate increase this year, and felt that the good bidding climate may result in large savings on projects. He stated that if the District loses its ad valorem tax, then he would definitely support a rate increase. Member Hockett stated that the District must not lose sight of its purpose which is to serve its customers and protect the environment and public health. The District does not have the ability to cut back on its services, and stated that smoothing out the rates is preferable to irregular rate increases. Member Lucey concurred with Member Hockett's comments but felt that the District's goal can be accomplished without a rate increase for this year. Book 58 -Page 163 Board Minutes of January 29, 2009 Member Menesini stated that he would not want the District to take a step backward with regard to its financial situation and observed that, if that occurs, it is hard to catch up later. He recommended waiting a month or two to see what happens to economic conditions and if there might be federal funding for some of our projects. He added that he is not prepared to make a decision regarding a rate increase at this time. Board Members thanked Mr. Kelly for his presentation and thanked staff for their work in putting the information together. Mr. Kelly stated that he will provide the Board with additional information regarding the timeline for Proposition 218 noticing, capital projects financing options, and an update on operations and maintenance and capital expenses and revenues for the year to date, further analysis of scenarios with updated information, and to develop atax-take response. 4. ANNOUNCEMENTS a. City of Walnut Creek to consider approving Pharmaceutical Collection Pilot Study. 5. EMERGENCY SITUATIONS REQUIRING BOARD ACTION None. 6. ANNOUNCEMENTS/SUGGESTIONS FOR FUTURE AGENDA ITEMS None. 7. ADJOURNMENT There being no further business to come before the Board, President Nejedly adjourned the meeting at 3:12 p.m. G. es A. Nejedly President of the Board of Directors, Central Contra Costa Sanitary District, County of Contra Costa, State of California COUNTERSIGNED: C~~ Elaine R. Boehme Secretary of the Central Contra Costa Sanitary District, County of Contra Costa, State of California Book 58 -Page 164