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HomeMy WebLinkAboutFinance MINUTES 05-17-21 (Special) -= I CENTRAL SAN CENTRAL CONTRA COSTA SANITARY DISTRICT 5019 IMHOFF PLACE, MARTINEZ, CA 9A553-A392 SPECIAL MEETING OF THE BOARD OF DIRECTORS: TAD J PILECKI CENTRAL CONTRA COSTA President SANITARY DISTRICT DAVID R. WILLIAMS President Pro Tent FINANCE COMMITTEE BARBARA D.HOCKETT MARIAHN LAURITZEN MICHAEL R.MCGILL MINUTES (As Amended) PHONE: (925)228-9500 FAX.- (925)372-0192 Monday, May 17, 2021 www.centralsan.org 1:30 p.m. (All attendees participated via videoconference) Committee: Chair Tad Pilecki Member Mike McGill Staff. Roger S. Bailey, General Manager Katie Young, Secretary of the District Philip Leiber, Director of Finance and Administration Steve McDonald, Director of Operations Jean-Marc Petit, Director of Engineering and Technical Services Danea Gemmell, Planning and Development Services Manager (joined during Item 4.a.) Stephanie King, Purchasing and Materials Manager (joined during Item 4.a.) Edgar Lopez, Capital Projects Division Manager (left during Item 5.a.) Kevin Mizuno, Finance Manager Shari Deutsch, Risk Management Administrator (left after Item 4.a.) Christina Gee, Management Analyst (left during Item 4.a.) Lupe Saldana, Administrative Services Supervisor-Records 1. Notice This meeting was held in accordance with the Brown Act as in effect under the State Emergency Services Act, the Governor's Emergency Declaration related to COVID-19, and the Governor's Executive Order N-29-20 issued on March 17, 2020 that allowed attendance by Board Members, District staff, and the public to participate and conduct the meeting by teleconference, videoconference, or both. The agenda included instructions for options in which the public could participate in the meeting. Special Finance Committee Minutes May 17, 2021 Page 2 2. Call Meeting to Order Chair Pilecki called the meeting to order at 1:31 p.m. 3. Public Comments None. 4. Agenda Item a. Review proposed Fiscal Year 2021-22 Central San Operations and Maintenance (O&M), Self-Insurance, and Debt Service budgets Mr. Bailey opined the proposed budget is a "good news"item. It reflects the goals set by the Board to maintain a high level of customer service while maintaining a reasonably flat O&M budget and ensuring the District's infrastructure is sustainable. Mr. Bailey expressed that the Committee is not being asked to make a rushed decision or provide a Board recommendation today, rather, it is an opportunity to provide staff with input on the document; and noted that the schedule is generally the same as followed in previous years. He thanked the Board for its commitment to ensuring Central San is properly managed and providing the resources. He expressed his appreciation to staff that participated in the creation of this proposed budget. Mr. Leiber and Mr. Mizuno reviewed the proposed budget and highlighted updates made to various slides after the agenda packet was published, and responded to numerous questions from the Committee, summarized below. Presentation Material Concerning slide 12 (Sewer Service Charge Rates and Revenues), Mr. Leiber noted certain changes to the slide relating to describing the nature of the rate adjustment that will be effective July 1, 2021. The change made to the "% Increase"in the upper right corner of the slide from "10.4%`to "4.75%**"relates to just the new increase effective on that date. Mr. Bailey added that the Board legally approved a rate increase for FY 2020-21, though it was not collected during that year, it would be collected for FY 2021-22 forward. Member McGill requested that the presentation to the full Board distinguish all changes. Special Finance Committee Minutes May 17, 2021 Page 3 Concerning the discussion on slide 16 (Operating Expense Trend), Mr. Leiber stated that the explanations at the bottom of this slide had been revised for clarity. Chair Pilecki asked whether staff anticipates "Other Costs" will go up due to the increasing cost of materials such as lumber and concrete. Mr. Mizuno responded that supplies and materials are included in the 3.3%; however, he could not ensure that staff has gone over every line item (for example, lumber.) He expects an increase in "Other Costs"due to the prevailing wage settlement, but that amount is unknown. Mr. Bailey stated that staff monitors such concerns when comparing the overall budget versus actuals at the end of each year. Still, he believes the budget will cover any increases in material costs. Concerning slide 19 (O&M Labor-Related Budget Highlights), Chair Pilecki noted that changes made to the fourth sub-bullets under the main bullets make it consistent with the budget. Concerning slide 22 (Operating Fund - Funding Sources) and the City of Concord, Member McGill shared that a Councilmember previously expressed that the City did not want to take on debt indirectly and asked if the City's concern had been resolved. Mr. Bailey responded that the issue was discussed, and the assumption is that Central San is taking on the debt service, at least for the Solids Handling Facility Improvements project. The City will continue to pay its proportionate share of the annual debt services. Though the City would prefer Central San to carry the City's portion of the debt on Central San's books, with future projects, the Board would have to decide to debt finance only Central San's portion or the whole portion, the latter being favorable to the City. Ms. Gemmell shared that she spoke recently with Concord's City Manager and the Public Works Director, inquiring if Central San would be pursuing loan funding through the State Revolving Fund (SRF) program because they wanted Central San to take advantage of the low-interest rate. Concerning slide 26 (Self-Insurance Budget FY 2021-22), Mr. Leiber said the reasons were not known why past practice had the funding for self-insurance routed through the O&M budget, which had the effect of potentially showing duplicated costs. Proposed practice of funding self-insurance directly from sewer service charges would avoid this issue. Proposed Budget Book Member McGill commented on the complexity of the budget book, and although he thought it was very well done, he was concerned with the short timeframe the Committee was given to review the content. Mr. Leiber clarified that the memorandum to the full Board corrected the due date for Special Finance Committee Minutes May 17, 2021 Page 4 the Board to submit comments and that they are needed by Friday after the Board review on May 20. Member McGill requested that staff simplify the language used throughout the budget document for public understanding and gave "parent/child relationship roll-up"(page 41) as an example of a language that is not easily understood by anyone not familiar with Central San's accounting practices. On page 19 (Population by Community), concerning the first footnote, Member McGill asked what"...and adjustments for the populations served by those other agencies have been made" meant and asked staff to clarify it. Mr. Leiber agreed the footnote should be clarified and noted that the City of Martinez is an example because Central San does not service the entire population of Martinez. On page 21 (Ten Largest Customers by Sewer Service Charge), Member McGill opined that the public may think Sunvalley Shopping Center is in the City of Concord's service territory and not understand why it is accounted for separately. He requested that staff add an explanation why Sunvalley Shopping Center is separate from Concord, which is served under a wholesale contract. On page 36, concerning the paragraph titled "Other Post-Employment Benefits (OPEB) Trust Fund,"Member McGill asked what the fourth sentence meant. [...For financial reporting purposes pursuant to GASB 84, commencing with FY 2021- 22, this budgetary "other fund" is no longer reported in Central San' s comprehensive annual financial report as a fiduciary fund.] Member McGill noted that the sentence following it attempts to explain but is also not clear. Mr. Bailey commented that it was accounting terminology and said staff would add an explanation wherever such terms are used. Mr. Mizuno explained that specific accounting language is needed to meet the Government Finance Officers Association (GFOA) requirements; however, he agreed explanation is necessary for the benefit of the general public. On page 38 (Basis for Budgeting), Chair Pilecki asked what the second and third sentences of the first paragraph meant. [...Central San' s comprehensive annual financial report provides detail about the actual expenditures of the four subfunds in place as of June 30, 2019, in the Central San enterprise fund reported on a full accrual basis of accounting. In contrast, Central San' s budgets are prepared on a modified cash flow basis which projects the District' s cash inflow and outflow over the course of a fiscal year (July 1 through June 30) excluding physical and intangible assets such as depreciation expense.] Special Finance Committee Minutes May 17, 2021 Page 5 Mr. Leiber explained that the purpose of the sentences is to show the difference between the budget book and the Comprehensive Annual Financial Report. After discussion, it was agreed that staff would simplify the explanation and eliminate the unnecessary reference to 2019. Chair Pilecki stated he would provide staff hard copies of his comments which are mostly minor changes in wording and typographical errors. He opined that the 10% reduction in Capital expenditures and its impact on the overall budget was not sufficiently covered. On page 45 (Financial Summary), Chair Pilecki stated the Capital Improvement Budget (CIB) Funding Ratio at 90% is not explained until four or five pages later. In his opinion, it should receive more upfront coverage. On page 45, Member McGill pointed out that the format used to report the numbers is inconsistent between the first bullet (increase stated as dollars) and the second bullet (increase stated as a percentage) and is not consistent on some other pages. He asked staff to use the same format when reporting the comparisons throughout the budget book. On page 114, concerning Utilities & Fuel under Supplies & Materials, and using Information Technology (IT) as an example, Chair Pilecki asked why Utilities & Fuel is listed in the IT section and not in other Administration sections. He noted that some divisions and sections list only General Supplies, while others list Utilities & Fuel. He asked what rule or criteria determined when Utilities & Fuel is included. Mr. Mizuno explained that a particular line item would only be shown if costs were budgeted to that category. Mr. Bailey added that Supplies & Materials is a roll-up category, if it has costs in any of its subcategories, that subcategory is shown, otherwise it is not. Mr. Mizuno added that natural gas, electricity, telecommunication, and other subcategories are under Utilities & Fuel. Mr. Lopez explained that IT pays for Comcast and other utilities at the District. Mr. Mizuno agreed and pointed out that IT may not use fuel, but because "fuel'is part of the title for the category, it may look as if something is off. Member Pilecki shared that in the past, every cost center had utilities allocated. Mr. Leiber commented that he and Mr. Mizuno would inquire about past practice for reallocating utilities to that level but noted this has not been done recently. Special Finance Committee Minutes May 17, 2021 Page 6 Chair Pilecki restated he would provide Mr. Mizuno with his comments by the end of the week. Member McGill stated he would provide his changes directly to staff in a separate meeting (which took place on May 20) and was comfortable to say that the Committee reviewed the budget and found it acceptable. COMMITTEE ACTION: Reviewed and provided input to staff as noted above. 5. Announcements Mr. Bailey announced that two employees from the Collection System Operations Division recently tested positive for COVID-19 and stated Human Resources is coordinating the resulting testing requirements. 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. 7. Future Scheduled Meetings Tuesday, May 25, 2021, at 2:00 p.m. Tuesday, June 8, 2021, at 2:00 p.m. (Special) Tuesday, June 22, 2021, at 2:00 p.m. Wednesday, July 14, 2021, at 10:00 a.m. (Special) Tuesday, July 27, 2021, at 2:00 p.m. Ms. Young reminded the Committee that the May 25 meeting is scheduled for three hours and that the special meetings will be canceled if not needed. 8. Adjournment— at 3:26 p.m.