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HomeMy WebLinkAboutBOARD MINUTES 01-27-00 10 MINUTES OF THE ADJOURNED REGULAR MEETING OF THE BOARD OF DIRECTORS OF THE CENTRAL CONTRA COSTA SANITARY DISTRICT HELD ON JANUARY 27, 2000 The District Board of the Central Contra Costa Sanitary District convened in an adjourned regular session in the Second Floor Conference Room at 5019 Imhoff Place, Martinez, County of Contra Costa, State of California, at 2:00 p.m. on January 27, 2000. President Lucey called the meeting to order and requested that the Secretary call roll. 1. ROLL CALL PRESENT: Members: Nejedly, Menesini, Boneysteele, Lucey ABSENT: Members: Hockett Member Hockett had advised that she would be unavoidably detained and requested that the meeting begin without her. Member Hockett entered the meeting at the hour of 2:20 p.m. 2. PUBLIC COMMENTS None 3. BOARD WORKSHOP ON FIVE-YEAR BUDGET PLANNING. PROJECTIONS. RATE SETTING. AND FINANCE ISSUES Mr. Charles W. Batts, General Manager, thanked the Board for taking time from their busy schedules to attend this workshop. Mr. Batts stated that the purpose of the workshop is to provide information to the Board for use in future rate-setting decisions and to provide an opportunity for the Board to give direction and guidance to staff for use in the budgeting and rate-setting process. Mr. Batts stated that of primary importance is the need to maintain balance between the cost of service and the quality of service. Mr. Batts reviewed the goals established in the recent Strategic Planning process as follows: . To protect public health and the environment; . To be acknowledged as effective and efficient; . To value our community, customers, and employees; and . To maintain integrity. Mr. Batts stated that questions for the District are: Do our ratepayers get value from the Sewer Service Charge? Are we protecting the environment? Are we preserving public assets for future ratepayers? Are we providing excellent customer service? Are we fiscally responsible with public funds? Are we still an industry leader? Mr. Batts stated that Board input is critical to provide direction to staff with regard to services and activities the Board wants the District to pursue and the resources the Board is willing to commit for those purposes. Mr. Batts stated that as the Board is aware, the District's Sewer Service Charge (SSC) has remained unchanged at $188 since 1994. In order for the District to meet its future commitments, the Board must consider the amount and timing of future rate increases. Mr. Batts stated that he believes this decision to be the single, most important decision facing the Board at this time. This decision will affect the District's ability to hire and retain quality employees, meet present and future regulations, maintain our investment in infrastructure, and provide quality customer service to our ratepayers. Mr. Batts stated that in order for the District to perform its mission, a rate increase is critical. As stated 01 27 00 11 earlier, the goal of this workshop is not to establish a SSC rate increase, but to provide direction to staff for future budget presentations and rate decisions. Mr. Batts stated that in his presentation the term "funds required" will be used in addressing the cash flow problem. Funds required is defined as the funds in the District's temporary investments needed to cover the typical cash flow shortfall before the semi- annual SSC revenue is received, plus a 15 percent contingency to cover uncertainties. Mr. Batts showed graphs illustrating the actual funds available by month from April through December 1 999 and the projected decline in availab,le funds given the current Capital Improvement Plan (CIP) and projected Operations and Maintenance (O&M) expenses and assuming no SSC rate increases. In the 2001-2002 fiscal year, funds available drops below minimum funds required of $25-$30 million, falling below zero in 2004-2005. Mr. Batts reviewed the history of the District's SSC beginning in 1990-1991 when the SSC was $136 through the State's taking 40 percent of the ad valorem tax revenue and the increase in SSC to $185 in 1994-1 995, to the present $1 88 SSC which includes designation of $31 to the Capital Improvement Budget. Member Boneysteele requested a history of SSC rates for each of the agencies listed in the SSC comparison chart. Member Boneysteele stated that he would like to see how other agencies' rates increased or decreased over the years while the District SSC held steady. Mr. Batts indicated that staff will try to get that information. Mr. Batts reviewed the schedule for SSC rate increases dictated by Proposition 218. In order to comply with the 45-day notice requirement, the latest date which the Board may decide to notice the public that they may consider a SSC rate increase is the second Board Meeting in March. If the Board decides to consider increasing the SSC, the public would be notified, a public hearing date would be set, and the public hearing would be held at the first Board Meeting in June. Using charts showing actual 1998-1999 O&M and Sewer Construction (capital) revenue, Mr. Batts stated that the SSC makes up 75 percent of O&M revenue and is critical to the O&M program. SSC makes up 24 percent of the capital revenue and is important to that program as well. Member Hockett entered the meeting at the hour of 2:20 p.m. Discussion followed with regard future development in the District's service area and Concord, and the potential impact on revenue and expenses and the Capital Improvement Budget. Mr. Batts stated that in order to compensate for the loss of ad valorem tax revenue and to maintain a steady SSC, the District worked to become more efficient. Reserves were spent down, revenue was enhanced, costs were reduced, planned capital improvements were reduced, staff was reduced through attrition, and $25 million was borrowed to fund capital projects. President Lucey asked whether the reduction in the Capital Improvement Budget is from simply not doing as much as planned. Mr. Batts stated that projects in the Capital Improvement Budget are for replacement of assets, new projects to meet regulations, and projects to meet growth in the service area. The District has capacity from projects authorized by the Board over the last several years to grow from a 45 MGD plant to a 54 MGD plant. In the last ten years some very large projects were completed, but also during that ten-year program, the Capital Program in the collection system to reduce overflows has been extended three times to future dates. Mr. Batts stated that over the last five years, the reserves have intentionally been spent down. Each department has been asked to develop 5-year O&M Budget projections for consideration with the 5-year projections from Capital Improvement Plan already in place. Mr. Batts stated that based on review of the combined revenue and expenditures streams, the District may not be able to pay its bills beginning in the year 2001-2002. 01 27 00 12 President Lucey noted that the District cannot pay its bills based on the cash flow at the lowest point of the revenue stream. Mr. Batts agreed, stating that there are several ways to take care of that shortfall such as Tax and Revenue Anticipation Notes (TRANS) financing, but that will have future impacts as well. Mr. Batts reviewed issues which could impact future budgets including: . Economic assumptions . Cost containment for both O&M and Capital . Revenue enhancement . Labor contracts . Impact of future regulatory requirements . Future ad valorem tax changes . Self Insurance Fund . Impact of future financing . Dougherty Valley development . Concord annexation In the discussion that followed, President Lucey suggested that the composition and/or charge of the Revenue Enhancement Task Force be reviewed and modified if appropriate. Mr. Batts briefly reviewed the range of options for future rate increases that the Board may want to consider, and the recommended Scenarios 1 through 4 as summarized in the handouts provided to the Board. Member Boneysteele stated that when it comes to the final decision, he believes that the Board will want staff to make specific recommendations and perhaps rank the options and scenarios. Mr. Batts stated that could be done. Mr. Batts provided a SSC comparison for neighboring agencies in 1 994 and 2000 and the percentage of change between those two years. Member Boneysteele withdrew his earlier request, indicating that this comparison answers his question sufficiently. Mr. Batts stated that in three years, the District SSC needs to be in the range of $230 to $235 per year, the current range of the Mt. View Sanitary District SSC. Mr. Batts recommended that the Board consider a SSC rate increase in the range of $6 to $28 per year until that figure is reached. Mr. Batts briefly reviewed the timing for Proposition 218 notice to the public, and requested that the Board provide input and guidance to staff for use in the upcoming budget process. Mr. Kenton L. Aim, Counsel for the District, stated that in his best judgment Proposition 21 8 would allow sending a notice and raising rates on an as-needed basis under one notice and one ordinance without going back to the voters. The Board also has the ability to establish a multi-year rate increase. Mr. Aim stated that there are certain limitations relative to borrowing and shifting funds designated and collected for capital programs to O&M, and using monies collected for one purpose for another. Member Menesini requested a short digest of the Proposition 218 requirements provided by staff in the past. A copy was provided to all Board Members. 01 27 00 13 President Lucey declared a recess at the hour of 3:05 p.m. Mr. Aim, Counsel for the District, advised that he had an unavoidable conflict and requested to be excused. President Lucey reconvened the meeting at the hour of 3:15 p.m. with all parties present with the exception of Mr. Aim. Mr. Batts requested that the Board consider and discuss the scenarios recommended by staff that would fund existing O&M Budget programs and the current Capital Improvement Program, and that the Board discuss and provide direction to staff concerning the Board's preferred scenario and multi-year rate setting approach. - President Lucey stated that he is opposed to adoption of a four- or five-year budgets or rate increases because it would tie future Boards. President Lucey stated that the District should have a one- or two-year budget. President Lucey stated that he would also like to see a reduction in the Capital Improvement Plan. In terms of a large increase this year or next year, President Lucey stated that he did not care. Member Hockett stated that she favors a five-year planning budget because it would set the District toward a goal that can be envisioned and planned for. Member Hockett stated that she is opposed to reductions in the O&M or Capital Budget that would compromise services. Member Hockett stated that she would support a $21 rate increase this year if that is what is needed. President Lucey stated that he agreed in terms of it being more efficient to have a five- year budget but he will not vote for it because he believes that the voters did not want that when they approved Proposition 218. Member Boneysteele asked whether the District could approve a $21 rate increase this year and state its intention for staff for planning purposes to adopt a $9 per year rate increase in future years? Member Boneysteele stated that he has no problem with either Scenario 1 or 2. An immense amount of information has been provided to the Board, but staff input is needed with regard to day-to-day operation of the District. Member Menesini stated that there are a tremendous amount of variables and issues that must be explored. Member Menesini stated that the revenue from the City of Concord should be reviewed and consideration must be given to what other agencies are doing now and in the future. Member Menesini stated that he does not think the District can cut back on services or the quality of those services. Member Boneysteele voiced a concern over the possible subsidy aspect in the mind of the public of considering a rate increase just when Dougherty Valley is developing. Mr. Batts stated that the District is reimbursed by the contractor for costs associated with providing service to the Dougherty Valley. In addition, each homeowner pays a connection fee and SSC to the District. Each additional connection in Dougherty Valley helps lower costs for the rest of the District ratepayers. Member Menesini stated he is concerned about how the District prepares its ratepayers for a possible rate increase. Mr. Batts stated that he has asked that the current issue of the Pipeline newsletter be held up so it can be used to inform the ratepayers if that is the Board's direction. Member Menesini stated that the District should tell the public what we have done. Member Menesini stated that he does not believe we have done an adequate job of that. Member Menesini stated that the manner in which the message is communicated about an event to the public is often more important than the event itself. Member Nejedly asked how much reserves have been drawn down since 1 994, the last SSC rate increase. Ms. Colette Curtis-Brown, Accounting Supervisor, stated that reserves were approximately $80 million in 1986 and are now down to $50 million. Mr. Batts showed an overhead depicting the historical level of reserves. Member Nejedly stated that he is opposed to many small SSC increases in consecutive years. Member Nejedly stated that the District has gone several years with no rate increase and he would rather go several years with no rate increase and then have a reasonable increase such as the recommended $20-$22 increase that would cover District 01 27 00 14 needs. Member Nejedly stated if that is done, the District needs can be funded and the public has a set price. Member Nejedly stated that he agrees with Member Menesini that it is important not to inundate people with information but people may want at least a brief explanation of why the District is considering raising rates. Member Nejedly stated that whether the rate increase is this year or next does not matter to him. Member Nejedly stated that if it is available, he would like to see the information requested by Member Boneysteele earlier with regard to comparative rates of other agencies. Member Nejedly stated further that he is in favor of five-year budget projections because he thinks the District must look ahead, but having the Board adopt a five-year budget is unfair to future Boards. Mr. Batts stated that the information presented is a projection and an attempt to provide information to the Board on where the District is going. This would be a five-year plan and each year the next five years would be considered. Ms. Deborah Ratcliff, Controller, stated that it would be a living document and would serve as a planning tool. Mr. Batts thanked the Board for their input and indicated that there seems to be a Board consensus that the Board would consider a rate increase in the $20 per year range for this year. Mr. Batts stated that he will bring a proposal to the Board for consideration at the next Board meeting together with an educational/informational piece for the Pipeline newsletter. President Lucey commended Mr. Batts and District staff on the information provided and the excellent presentation. 4. REPORTS/ANNOUNCEMENTS None 5. ADJOURNMENT There being no further business to come before the Board, President Lucey adjourned the meeting at the hour of 3:41 p.m. President of t e Board of Dir ctors, Central Contra Costa Sanitary District, County of Contra Costa, State of California COUNTERSIGNED: Se e ar of the Central on a Costa Sa . ry District, County of Contra Costa, State of California 01 27 00