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HomeMy WebLinkAbout01.a. Approve minutes of 03-08-18 Special Board meeting Page 1 of 9 Item l.a. 1 Central Contra Costa Sanitary District April 5, 2018 TO: HONORABLE BOARD OF DIRECTORS FROM: KATIE YOUNG, SECRETARY OF THE DISTRICT SUBJECT: MARCH 8, 2018 SPECIAL BOARD MEETING MINUTES Attached are the draft minutes of the above Board meeting. Stratedc Plan Tie-In GOAL ONE: Provide Exceptional Customer Service Strategy 1 - Foster Customer Engagement and Awareness ATTACHMENTS: 1. Draft Minutes of Special Meeting 03-08-18 April 5, 2018 Regular Board Meeting Agenda Packet- Page 6 of 164 Page 2 of 9 CENTRAL SAN CENTRAL •NTRA COSTA SANITARY DISTRICT 5019 • MINUTES* BOARD OF DIRECTORS: JAMES A.NEJEDLY President SPECIAL BOARD MEETING DAVID R. WILLIAMS President Pro Tent Multi-Purpose Room PAUL CAUSEY Thursday, March 8, 2018 MICHAEL R.MCGILL TAD J.PILECKI 2:00 p.m. DRAFT Open Session — Multi-Purpose Room (Video recorded) ROLL CALL A special meeting of the Board of Directors was called to order by President Nejedly at 2:00 p.m. Secretary of the District Katie Young called roll: PRESENT: Members: Causey, McGill, Pilecki, Williams, Nejedly ABSENT. Members: None PUBLIC COMMENT PERIOD No comments. FINANCIAL PLANNING WORKSHOP 1. Ten-Year Capital Improvement Plan (CIP) Update, Proposed Fiscal Year (FY) 2018- 19 Capital Improvement Budget (CIB), and Rate Scenarios a. Workshop Presentation Outline — Introduction General Manager Roger S. Bailey presented an outline for the staff presentation and advised that staff will present various financial information, including rate scenarios for the workshop. These summary minutes are supplemented by a corresponding video recording available on the District's website at centralsan.org. April 5, 2018 Regular Board Meeting Agenda Packet- Page 7 of 164 Page 3 of 9 CENTRAL CONTRA COSTA SANITARY DISTRICT March 8, 2018 Special Board Meeting Minutes-Page 2 Kent Alm, Counsel to the District stated that the information today is provided for Board consideration only and no decisions will be made regarding future rates; only guidance would be provided if any additional information is needed to make the decision at the upcoming public hearing. b. Fiscal Year (FY) 2017-18 Capital Improvement Budget (CIB) Accomplishments Director of Engineering & Technical Services Jean-Marc Petit reviewed the presentation included with the agenda materials. BOARD ACTION: Received the presentation. C. Update on Ten-Year Capital Improvement Plan (CIP) Mr. Petit reviewed the presentation included with the agenda materials. Member McGill asked if the 3% increase was included in all the fiscal years moving forward. Mr. Petit indicated that staff had inflated in prior year CIP by 3% to reflect 2018 dollars. The financial model does account for inflation and uses a 3% inflation factor to calculate future value of money. Member Causey suggested considering the construction cost index rather than using a 3% flat increase. Mr. Petit stated that staff will consider that suggestion when updating the CIP in future years. Mr. Petit also responded that the project costs are an estimation and the 3% is used globally for future projects. Specific projects will have detailed cost estimates and use current dollars, but for long-term planning the District uses 3%. Member Williams asked if all six pump stations mentioned needed to be upgraded in the next five years. Mr. Petit responded that the pump stations should be upgraded due to significant deficiencies and the increased cost of maintenance. Member Williams also asked if all the upgrades recommended on the solids handling project need to be done at the same time. Mr. Petit responded that the elements highlighted for solids handling facilities Phase 1 project are to address aging infrastructure, significant deficiencies and the increased cost of maintenance. Member Pilecki inquired if the projects are not cost effective would the District be able to spread out the projects. April 5, 2018 Regular Board Meeting Agenda Packet- Page 8 of 164 Page 4 of 9 CENTRAL CONTRA COSTA SANITARY DISTRICT March 8, 2018 Special Board Meeting Minutes-Page 3 Mr. Petit stated that the projects could be spread out but should not be pushed far into the future. It is staff's recommendation to perform these upgrades to prevent future emergency repairs/upgrades. BOARD ACTION: Received the presentation and provided input to staff. d. Proposed FY 2018-19 and FY 2019-20 CIB Capital Projects Division Manager Edgar Lopez reviewed the presentation included with the agenda materials. Member Williams inquired if the Recycled Water Capacity Improvements are included with the CIB. Mr. Lopez responded that it is just to keep the existing capacity up and running. BOARD ACTION: Received the presentation. BREAK The Board Members and staff took an approximately 15-minute break starting at 3:11 p.m. e. Revenue Requirement Assumptions Director of Finance and Administration Phil Leiber reviewed the presentation included with the agenda materials, including an overview of the changes that have occurred since the Board last considered the financial plan and adopted the two-year rate increase. These changes included the CIP reforecast, closing the financial records for FY 2016-17, updates and adoption of financial policies, and benefit cost projection changes for healthcare and pension matters. Mr. Leiber also presented the status of a potential opportunity to refinance existing debt and provided an overview of the changing forecast of the need for new money bond proceeds between last year and this year. During the presentation numerous questions and dialogue took place. Mr. Bailey asked about the allocation of the FY 2016-17 budget variance between the trust funds and capital improvement reserve. Mr. Leiber noted that the Board agreed to direct $2 million of the $8.8 million savings toward the Pension Prefunding Trust, while the reminder went towards Capital Projects. In response to a question from Member Pilecki, Mr. Leiber confirmed that the $3.359 budget variance from FY 2015-16 was used to initially fund the newly created Pension Prefunding Trust. April 5, 2018 Regular Board Meeting Agenda Packet- Page 9 of 164 Page 5 of 9 CENTRAL CONTRA COSTA SANITARY DISTRICT March 8, 2018 Special Board Meeting Minutes-Page 4 Member Causey expressed interest in a scenario where the District held Operations & Maintenance (O&M) spending flat for the next couple of years (related to eliminating the budget-versus-actual variance in O&M that has historically been seen) and how that would affect the potential bond issues. Mr. Bailey noted that it would be important to distinguish between variances that arise from one-time savings versus potentially ongoing savings, where one-time savings should not be counted as a reliable basis to assume less- than-budgeted spending. Member Causey stated that the District should aim to drive as much money as possible into the Sewer Construction Fund for capital improvements over the next five years to reduce bond issuance amounts by keeping O&M flat. With respect to the Capital Budget, he said he is in favor of a $5 million contingency going forward and believes it is worth looking into cutting projects, reconsidering staff levels and limiting the use of bond financing. Member Causey asked that staff provide data regarding historical variances between the Sewer Construction Fund and O&M fund. Member Pilecki agreed with Member Causey that such information would be useful and asked if there was an alternative scenario of the contingency from $2.5 million to $5 million. Ms. Gemmell stated that a $2 million contingency would start in FY 2019-20. Member Pilecki also expressed interest in seeing as soon as possible an analysis of the savings the District could obtain by switching to the CaIPERS system for healthcare. Mr. Bailey responded that while that is an important goal, it is hard to envision the savings occurring within the next 8-10 months. Mr. Leiber concluded by summarizing the assumptions in the updated financial plan and the basis of the scenarios to be presented by Ms. Gemmell. BOARD ACTION: Received the Revenue Requirement Assumptions. f. Updated Sewer Service Rate Impact Scenarios and Rate Comparisons Planning and Development Services Division Manager Danea Gemmell reviewed the presentation included with the agenda materials. Member McGill asked if the District receives annual cost reductions from Contra Costa County Employees'Retirement Association (CCCERA) associated with the additional$2.5 million payment toward the District's Unfunded Actuarial Accrued Liability (UAAL) and Other Post-Employment Benefits (OPEB) Trust payments. April 5, 2018 Regular Board Meeting Agenda Packet- Page 10 of 164 Page 6 of 9 CENTRAL CONTRA COSTA SANITARY DISTRICT March 8, 2018 Special Board Meeting Minutes-Page 5 Todd Smithey, Finance Administrator, responded that the District does not get a rate deduction and it is not factored into the normal cost. Member Williams asked for clarification on the contingencies. Ms. Gemmell stated that currently the District has roughly$1.5 million allocated for overrun or capital contingencies next year, with $2 million allocated thereafter and the scenario would be increased to $5 million to have adequate funds available. Member Causey noted that this discussion was held during the recent Engineering & Operations Committee meeting because there has already been $4 million in contingencies this year. Mr. Bailey asked that the Board Members be willing to give staff the capability to move money around within the CIB. He stated that staff does its best to estimate the cost of the projects but to the extent there is need for additional funding, staff would like the flexibility to move money around. If the Board does not allow staff to do this, a contingency increase may be critical. Member Pilecki stated that he is not in support of increasing the contingencies to $5 million as some of the projects listed may be deferred and staff should have the discretion as to where money should be moved around in projects and he does not want to increase the amount of borrowing and take away staff's flexibility. The Board reviewed several scenarios. BOARD ACTION: Received the Updated Sewer Service Rate Impact Scenarios and Rate Comparisons. g. Recapitulation and Closing Mr. Bailey stated that staff wishes to obtain clear guidance from the Board. Mr. Bailey asked if the Board would still like staff to continue putting $2.5 million annually in the budget toward unfunded liabilities. Members Causey, Williams and McGill stated that they would like an annual $2.5 million to continue to be used toward unfunded pension liabilities and/or the OPEB Trust unfunded liabilities. Mr. Alm reminded the Board Members that they were being asked to provide direction to staff on which scenarios to review, not a final decision with respect to the FY 2018-19 sewer service charge. Mr. Bailey asked if the Board would like to see a scenario with the $5 million contingency for capital projects. April 5, 2018 Regular Board Meeting Agenda Packet- Page 11 of 164 Page 7 of 9 CENTRAL CONTRA COSTA SANITARY DISTRICT March 8, 2018 Special Board Meeting Minutes -Page 6 Member McGill said he would be inclined to increase the contingency to $5 million, but if the District does not use it, it can be reallocated. Member Williams stated he was not in favor of borrowing or collecting any more money and would like to stay with the current $1.5 million contingency and give staff the flexibility to move money around. Member Pilecki and President Nejedly agreed. Member Causey requested staff leave the $5 million contingency in the scenario and he requested a historical summary of the favorable variances. Mr. Bailey stated that the majority of the Board Members would like to drop the scenario with the $5 million contingency. Mr. Bailey asked the Board which they wanted to hold constant, the rates or the bond issuance. Member Pilecki stated that he would rather borrow less. Member Causey stated that he would not be in favor of reducing the rates and would like to put it towards construction costs. Member Williams stated that he is in favor of collecting as little as the District needs given the CIP and to keep the rate increase at 7%. Member McGill supported keeping rates constant at 7%. Member Causey would like to see an O&M budget cut. In response to a question from Member McGill, Ms. Gemmell said staff anticipates holding the public hearing on April 26, 2018 to finalize the FY 2018-19 sewer service charge. Mr. Bailey summarized the direction given by the Board Members as follows: a. Keeping rates constant at 7%. b. Holding the revenue requirements as projected previously but potentially changing the components. C. The Board agreed to keep $2.5 million UAAL payment. 1. Rate model update to reflect the direction given at the Board workshop, including: a. Removing the scenarios with 5% capital projects contingency. b. Continue to direct the $2.5 million to UAAL. C. Creating flat O&M budget scenario for FY 2018-19. April 5, 2018 Regular Board Meeting Agenda Packet- Page 12 of 164 Page 8 of 9 CENTRAL CONTRA COSTA SANITARY DISTRICT March 8, 2018 Special Board Meeting Minutes -Page 7 Mr. Alm stated that none of the above was a final decision. The Board can see variables and if they incline to change positions staff would handle it. BOARD ACTION: Held the workshop and provided direction to staff. ANNOUNCEMENTS 2. General Manager Announcements a. Announcements — March 8, 2018 1) Emergency repairs needed to variable frequency drive at Headworks Facilities Mr. Bailey made the following additional announcement at the meeting: 2) Public workshop scheduled for March 14, 2018 regarding North Orinda Sewer Renovation Project, Phase 7, District Project 8445 BOARD ACTION: Received the announcements. ANNOUNCE CLOSED SESSION (pursuant to Government Code Section 54957.7) District Counsel Kent Alm announced that a closed session would be held for Item 3. RECESS TO CLOSED SESSION The Board recessed at 4:44 p.m. to reconvene in closed session in the Caucus Room. Closed Session (Not video recorded) CLOSED SESSION 3. Conference with labor negotiators pursuant to Government Code Section 54957.6: District Negotiators: • IEDA • Roger S. Bailey, General Manager • Ann K. Sasaki, Deputy General Manager • Philip R. Leiber, Director of Finance and Administration • Teji O'Malley, Human Resources Manager Employee Organizations: • Employees' Association, Public Employees Union, Local One April 5, 2018 Regular Board Meeting Agenda Packet- Page 13 of 164 Page 9 of 9 CENTRAL CONTRA COSTA SANITARY DISTRICT March 8, 2018 Special Board Meeting Minutes-Page 8 • Management Support/Confidential Group (MS/CG) • Management Group RECESS TO OPEN SESSION The Board recessed at 5:39 p.m. to reconvene in open session in the MPR Room. REPORT OUT OF CLOSED SESSION No report. ADJOURNMENT The meeting was adjourned at 5:40 p.m. James A. Nejedly President of the Board of Directors Central Contra Costa Sanitary District County of Contra Costa, State of California COUNTERSIGNED: Katie Young Secretary of the District Central Contra Costa Sanitary District County of Contra Costa, State of California April 5, 2018 Regular Board Meeting Agenda Packet- Page 14 of 164