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HomeMy WebLinkAbout05.a. Q&A from previous Board meetings and Cost of Service Study Workshops3.0"'4 QUESTIONS FROM PREVIOI)S BOARD MEETINGS AND WORKSHOPS The following are responses to a series of questions and concerns that were raised over the past several months as we have proceeded with the analysis for the Cost of Service Study and the Staffing Needs Assessment. Question 1: Can the District use the Insurance Reserve to mitigate cash flow concerns during the year? Response: The Board has the discretion to adopt a policy that allows a given reserve fund to be used for short term needs in another fund. However, staff does not advise it. Question 2: Can the District borrow money on a short term basis to cover operating costs to take the District through to December when the property tax's first installment is received? Response: The District can secure a short term line of credit or issue Tax Revenue Anticipation Notes (TRAN's) to fund operating costs prior to receiving the first property tax installment in December of each year. Since the Board workshop in January, staff contacted Public Financial Management (PFM), a large national financial advisory firm for public agencies, relative to this issue. The response received was that PFM is unaware of any utility districts having adopted such a practice, which is more prevalently used by School Districts. Staff does not recommend this option. Question 3: Can the District create an Infrastructure Replacement Reserve? Response: Yes — The reason staff recommended reserving twelve months of Capital Expenditures is for the purpose of mitigating future rate increases and borrowing needs relative to the Capital requirements expected to be identified in the upcoming Wastewater Master Plan. In addition, the current CIP includes projects that encompass regulatory upgrades, expansion and renewal, which essentially serves as a Replacement Program. Question 4: Can the District have an annual rate adjustment that more closely reflects the annual CPI? Response: Currently, labor contracts for the District are indexed to the San Francisco Bay Area CPI index. Health care insurance costs have traditionally exceeded CPI indexes; and other materials and commodity costs, such as fuel and chemicals, are variable relative to global demand and available supplies. The biggest driver of rate adjustments at present are Capital costs. The current level of Capital funding is approximately $22 million. Therefore, if it were possible to sufficiently renew and replace the District's infrastructure at that level of funding, it would be possible to keep annual rate increases closer to a CPI index. Alternatively, the District could finance Capital needs over a period of 20 -30 years in the interest of keeping rate increases closer to inflationary indexes. Question 5: When will the various fiscal reserve targets be met, including the underlying assumptions? Response: The current ten -year financial rate making projections fund the fiscal reserve targets in five years or by the year 2020. Question 6: Can a column be added indicating the funding percentages to the table illustrating the effect of the various levels of UAAL pay down options? Response: This column was added to the table and is included in the Financial Planning and Policy Workshop presentation scheduled for the March 5, 2015, Board meeting. Question 7: Can you run a rate scenario that includes the absolute minimum funding that would be required for the Capital Program, taking into consideration regulatory and safety requirements and the recent settlement with California River Watch? Response: This rate scenario is included in the Financial Planning and Policy Workshop presentation scheduled for the March 5, 2015, Board meeting. Scenario C presents an absolute minimum hypothetical CIB based on these criteria. Question 8: Can you evaluate if there is value added from a customer service stand point utilizing full -time employees for inspection services versus outside contractors? Response: A similar issue was evaluated and presented at the October 2, 2014, Board meeting under an item entitled Report Summarizing the District's Collection System Project Costs as Compared to Industry Standards. In that presentation, staff noted that the District does more than most other agencies in public outreach; and excellent customer service comes at a cost. Past practice has been to lump these costs with design costs; however, staff is now tracking public relations and customer survey costs separately. The presentation also included a comparison to the California Multi- Agency CIP Benchmarking Study. Board members were satisfied that the report shows that the current staff process is competitive and efficient. Question 9: Concern was raised regarding the lack of clerical staff in the Engineering Department. Response: The District uses several different classification titles for administrative /clerical positions. Specifically, the Engineering Department utilizes the Administrative Assistant classification and has four assigned positions that perform a wide array of administrative tasks and provide clerical support throughout the Department. Questions 10: Can you provide the total cost of the Recycled Water Program, including both Operating and Capital costs? Response: This information will be provided at the April Real Estate, Environmental and Planning Committee. 3