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-= I CENTRAL SAN
CENTRAL CONTRA COSTA SANITARY DISTRICT 5019 IMHOFF PLACE, MARTINEZ, CA 9,45.53-4392
REGULAR MEETING OF THE BOARD OF DIRECTORS:
CENTRAL CONTRA COSTA DAVIDR, WILLIAMS
President
SANITARY DISTRICT MICHAEL R.MCcrLL
FINANCE COMMITTEE President Pro Tem
PAUL H CA USEY
JAMES A.NEJEDLY
M I N U T E S TAD J PHECKI
PHONE: (925)228-9500
92
Tuesday, September 24, 2019 FAx cent alsan. rg
www.centralsan.org
2:00 p.m.
Executive Conference Room
5019 Imhoff Place
Martinez, California
Committee:
Chair Paul Causey
Member Jim Nejedly
Staff.-
Roger S. Bailey, General Manager
Katie Young, Secretary of the District
Ann Sasaki, Deputy General Manager
Phil Leiber, Director of Finance and Administration
Danea Gemmell, Planning and Development Services Division Manager (left after Item 4.d.)
Edgar Lopez, Capital Projects Division Manager
Kevin Mizuno, Finance Manager
Teji O'Malley, Human Resources Manager (arrived during Item 3.b.) (left after Item 4.b.)
Todd Smithey, Financial Analyst (left after Item 4.b.)
Brian McGloin, Management Analyst (left after Item 4.d.)
Laci Kolc, Risk Management Specialist (left after Item 4.a.)
Donna Anderson, Assistant to the Secretary of the District
1. Call Meeting to Order
Chair Causey called the meeting to order at 2:00 p.m.
2. Public Comments
None.
3. Items for Committee Recommendation to the Board
a. Review and recommend approval of expenditures incurred August 15, 2019
through September 12, 2019
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Finance Committee Minutes
September 24, 2019
Page 2
The Committee reviewed the expenditures included with the agenda
material, and staff responded to several questions posed by Chair Causey in
advance of the meeting.
COMMITTEE ACTION: Recommended Board approval.
b. Review August 2019 Financial Statements and Investment Reports
Mr. Mizuno and Mr. Lopez addressed several questions that had been posed
by Chair Causey in advance of the meeting.
COMMITTEE ACTION: Recommended Board receipt.
C. Receive Pre-Audit Fiscal Year 2018-19 Capital Improvement Budget (CIB)
Year-End Status Report
The Committee had no questions about this report.
COMMITTEE ACTION: Recommended Board receipt.
d. Review draft Position Paper to receive Fiscal Year 2018-19 Pre-Audit Year-
End Financial Statement Summary Report; consider alternatives for
allocation of (1) $9.78 million FY 2018-19 favorable budget variance, and (2)
$1.25 million budgeted in FY 2019-20 toward employee-related unfunded
liabilities
Mr. Leiber introduced this item, stating that while staff has made a
recommendation for use of the $9.78 million favorable budget variance from
FY 2018-19, it was open to other ideas from the Committee Members.
In response to a question from Chair Causey, Mr. Leiber explained that the
staff recommendation to restore the CIB contingency fund by$1.61 million,
includes $1.11 million to restore funds previously redirected to the Enterprise
Resource Planning (ERP) system and an additional$500,000 which would
allow for the purchase of three generators and trailers (roughly$170,000)
and additional diesel fuel (approximately$180,000) to run the treatment plant
if PG&E were to cut off power as part of its Public Safety Power Shutoff
(PSPS) Program to reduce the potential for fire/weather related
emergencies.
Chair Causey also inquired about accounting for interest earned on the
Pension Prefunding Trust and Other Post-Employment Benefits (OPEB)
Trust. Mr. Mizuno explained that this question has arisen as part of the
Enterprise Resource Planning (ERP) implementation process and a solution
is still in development. He said that regardless of where the income was
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Finance Committee Minutes
September 24, 2019
Page 3
reported, the interest earnings for trusts are restricted and not available for
unrestricted use.
Getting back to the alternatives for allocating the $9.78 million FY 2018-19
favorable budget variance, Member Nejedly suggested placing the entire
amount in a rate stabilization fund for lowering future sewer service charge
rate increases.
Mr. Leiber said a separate rate stabilization fund could be established, but
there also exists the possibility of utilizing the Pension Prefunding Trust in
that regard, making drawdowns in order to fund the normal annual pension
contribution to the Contra Costa County Employees'Retirement Association
(CCCERA). Chair Causey was not in favor of this option.
Mr. Bailey said the idea of a rate stabilization fund is fairly common and
asked what$1.61 million would represent in terms of the sewer service
charge per ratepayer. Ms. Gemmell said approximately$10 per ratepayer.
Member Nejedly said his preference would be that all$9.78 million be used
to establish a rate stabilization fund. Chair Causey said he would be
comfortable if the amount that staff was proposing to utilize toward
increasing the CIB contingency fund ($1.61 million) were used to establish
such a fund. Upon further discussion, Chair Causey also suggested adding
the $1 million proposed for increasing the Self-Insurance reserve, for a total
of$2.61 million to establish a rate stabilization fund.
A discussion took place about the ramifications of eliminating the proposed
allocation of funds toward the CIB contingency for power resiliency projects
to prepare for a potential PG&E power shutdown. It was noted that if this
work proceeded (and some has), any needed funds would have to come
from the capital program, either through use of the remaining contingency or
project transfers.
COMMITTEE ACTION: Recommended Board approval of allocations as
set forth below:
A. $9.78 million FY 2018-19 favorable budget variance as follows:
(1) $5.92 million to the Sewer Construction Fund,
(2) $2.61 million to a newly established rate stabilization fund, and
(3) $1.25 million to the Pension Prefunding Trust; and
B. $1.25 million budgeted in FY 2019-20 toward paying down unfunded
OPEB or pension-related liabilities to the OPEB Trust.
October 3, 2019 Regular Board Meeting Agenda Packet- Page 242 of 263
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Finance Committee Minutes
September 24, 2019
Page 4
4. Other Items
a. Review Risk Management Loss Control Report as of September 9, 2019
Ms. Kolc reviewed the Loss Control Report with the Committee.
COMMITTEE ACTION: Received the report.
b. Receive update on processing of Medicare reimbursements
Ms. O'Malley briefly summarized the memorandum in the agenda materials,
noting that utilizing an outside service to process Medicare reimbursements
will save staff time. Chair Causey said he believes the District's retirees also
will appreciate the new service.
COMMITTEE ACTION: Received the update.
C. Receive update on State Revolving Fund (SRF) Loan Status for Solids
Handling Facilities Improvements Project
Mr. Gemmell distributed a new Attachment 2 which reflected the corrected
Clean Water SRF interest rate history. With the discount for a shorter 20-
year loan term, the District will pay 1.05% interest on a roughly$89 million
SRF loan. The loan will greatly reduce the amount of bond funding needed
in the future. All loan proceeds will be geared toward the construction phase
of the project, which is expected to take approximately four years. Central
San's debt service payments will not begin until construction is complete.
COMMITTEE ACTION: Received the update.
d. Receive presentation entitled Recycled Water Program Full Cost Recovery
Ms. Gemmell reviewed the presentation included with the agenda material
and responded to multiple questions from the Committee Members.
She said that when the District's treatment plant was expanded in the 1970s
it began requiring an advanced treatment process (recycled water) to
operate. The expansion was funded by the Environmental Protection
Agency (EPA) Clean Water grant funds. Zone 1 was established in the mid-
1990s to utilize Central San's filter plant and promote recycled water use by
external customers. The idea was to bring as many recycled water
customers on board as possible because more customers reduces the unit
cost.
Mr. Bailey added that the goal has been to assure that recycled water users
are paying their fair share of the operations and maintenance costs, but
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Finance Committee Minutes
September 24, 2019
Page 5
Central San's ratepayers have been subsidizing the infrastructure costs for
Zone 1 to expand and market the use of recycled water. Ms. Gemmell
reviewed the material which indicated that there is full cost recovery of the
recycled water expenditures for utility water($1,168,008) and for the
residential fill station ($125,859). The total cost for Zone 1 customers is
$1,000,081 in FY 2017-18.
Mr. Bailey said there are two classes of recycled water customers — those
who take treated water and those who take untreated water. A volumetric
rate for each class was originally set at 80% of the competing water source
rate, and in recent years that rate has escalated annually by 3%.
Ms. Gemmell stated that the current rate for treated water users is $3.80 per
1,000 gallons (kgal), and for untreated users the rate is $1.81 per kgal. The
current cost to produce and distribute recycled water to Zone 1 customers is
$4.69 per kgal. The net amount currently being subsidized by Central San
ratepayers for recycled water customers is $478,254 per year.
Mr. Bailey said the policy decision for the Board is whether to raise rates to
the level of full cost recovery. Doing so will most likely result in the loss of
customers (such as the country clubs) because they will probably switch
back to purchasing untreated water from Contra Costa Water District
(CCWD) as those rates are below the $4.69 cost of service breakeven
amount. When customers are lost, the per-customer cost to produce the
recycled water rises because the fixed costs remain constant.
Mr. Bailey concluded by remarking that the biggest user of recycled water is
the treatment plant. If the Filter Plant Project (Phase 1A) does not go
forward, the District may be faced with purchasing potable water to operate
the treatment plant and the costs would be more expensive.
Member Nejedly said the District will most assuredly lose customers if it
raises rates to the level of full cost recovery and doing so will put even higher
demands on CCWD for potable water. As a ratepayer himself, he said
subsidizing half a million dollars per year(which equates to roughly$2-3 per
ratepayer per year) is part of the District's stewardship because it saves a
great deal of treated water.
COMMITTEE ACTION: Received the information and provided input to
staff.
e. Review Moody's Annual Issuer Comment Report
COMMITTEE ACTION: Received the report.
5. Announcements — None.
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Finance Committee Minutes
September 24, 2019
Page 6
6. Suggestions for Future Agenda Items
a. Receive list of upcoming agenda items and provide suggestions for any
other future agenda items
COMMITTEE ACTION: Received the list and provided input to staff.
7. Future Scheduled Meetings
Tuesday, October 22, 2019 at 2:00 p.m.
Tuesday, November 26, 2019 at 2:00 p.m.
Wednesday, December 18, 2019 at 2:00 p.m.
8. Adjournment— at 3:23 p.m.
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Item 4.c. (Handout)
Attachment 2 Update
Clean Water State Revolving Fund
Interest Rate History
BOND SALE DATE RATE
September 5,2019 1.3%
April 11, 2019 1.3%
October 17, 2018 1.9%
March 9, 2017 1.8%
March 8,2016 1.7%
December 16, 2015 1.6%
October 20, 2015 1.8%
March 4, 2015 1.6%
November 13, 2014 1.5%
October 8, 2014 1.7%
March 13, 2014 1.9%
October 22, 2013 2.1%
A ril 11, 2013 1.9%
March 14, 2013 1.9%
October 23, 2012 1.7%
April 12, 2012 2.2%
March 1, 2012 1.8%
October 19, 2011 2.2%
September 20, 2011 2.0%
November 22, 2010 2.6%
March 11, 2010 2.7%
..........%0
Water Boards
'1
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