Loading...
HomeMy WebLinkAboutFinance MINUTES 10-25-22Page 2 of 8 110ENTRAL SAN REGULAR MEETING OF THE BOARD OF DIRECTORS: DAVID R. WILLIAMS CENTRAL CONTRA COSTA President SANITARY DISTRICT BARBARA D. HOCKETT President Pro Tent FINANCE COMMITTEE MARIAHNLAURITZEN MICHAEL R. MCGILL TAD J PILECKI MINUTES PHONE: (925) 228-9500 Tuesday, October 25, 2022 FAX.- (925) 372-0192 2:00 p.m. www.centralsan.org (All attendees participated via videoconference) Committee: Chair Mike McGill Member David Williams Staff. - Roger S. Bailey, General Manager Katie Young, Secretary of the District Philip Leiber, Director of Finance and Administration Steve McDonald, Director of Operations Benjamin Johnson, Internal Auditor Danea Gemmell, Planning and Development Services Division Manager (joined during Item 5.a., left after Item 5.e.) Kevin Mizuno, Finance Manager Thomas Brightbill, Senior Engineer (joined during Item 5.a., left after Item 5.c.) Craig Mizutani, Senior Engineer Sasha Mestetsky, Senior Engineer Oliva Ruiz, Accounting Supervisor Christopher Thomas, Accounting Supervisor Shari Deutsch, Risk Management Administrator Warren Gaines, Materials Services Supervisor (joined during Item 4.a.) Amelia Berumen, Assistant to the Secretary of the District Eileen Hansen, Records Program Administrator Stacey Durocher, Administrative Services Assistant Notice This meeting was conducted virtually in accordance with the provisions stipulated in Assembly Bill 361 and adopted by the Central San Board of Directors on October 6, 2022. The agenda included instructions for options in which the public could participate. November 3, 2022 Regular Board Meeting Agenda Packet - Page 239 of 245 Page 3 of 8 Finance Committee Minutes October 25, 2022 Page 2 2. Call Meeting to Order Chair McGill called the meeting to order at 2:01 p.m. 3. Public Comments None 4. Old Business a. Follow-up to questions asked at the September 27, 2022 Finance Committee meeting regarding specific expenditures Mr. Mizuno reviewed the details of the information provided in the agenda packet. The Committee had no questions. COMMITTEE ACTION: Received the information. b. Receive status update of Warehouse Inventory Cycle Counts Mr. Leiber outlined the memorandum provided in this agenda packet. Mr. Gaines provided additional detail including that, with the implementation of the Oracle Program system, the warehouse has also implemented a barcode tracking system to aid with inventory cycles. Reports can be run with various parameters that helps manage the inventory, which has been segmented into A, 8 and C categories based on value. Mr. Gaines spoke of a current project in coordination with Risk Management staff to link the barcode system to staff access badges that will help expedite the inventory count process. As to the accuracy of the overall inventory system, it was announced that the results of a recent count found that actual stock variance was well under 1 % compared to book value. Mr. Leiber added that staff is also working with the Plant Maintenance Division to link the inventory detail with the Asset Management system. Among other initiatives, this will help account for items in inventory that are related assets to determine whether items still need to be maintained or can be declared obsolete. The Committee had no questions. Chair McGill stated his appreciation for the efforts involved. COMMITTEE ACTION: Received the information. November 3, 2022 Regular Board Meeting Agenda Packet - Page 240 of 245 Page 4 of 8 Finance Committee Minutes October 25, 2022 Page 3 5. Items for Committee Recommendation to the Board a. Review and recommend approval of expenditures incurred September 16, 2022 through October 13, 2022 Staff responded to limited questions to the Committee's satisfaction. Chair McGill noted there were various payments made to "Woodard & Curran, Inc. formerly RMC,"and asked when the vendor's name would or could be updated to simply state the business name. Mr. Mizuno advised it is sometimes directed on the invoice as a payable entity but staff would look into the matter. Staff was also instructed to confirm if any contracts remain open that were executed prior to the company merger that could be affected by a correction to the vendor description. COMMITTEE ACTION: Recommended Board approval and provided input to staff. b. Receive Financial Overview through the month of September 2022 Mr. Mizuno reviewed the September financial overview and stated the year- to-date spending for the Operations & Maintenance (O&M) budget was 2.6% under projection. Compared to last fiscal year at this time, the variance was a little higher, largely due to timing and the methodology used in the closing of the books. As it pertained to the Sewer Construction Fund (capital spending), the trending of expenditures was low and is attributed to a continuance of labor and supply shortages for construction projects. Member Williams cited that on the surface it may appear the District is saving money on the capital budget, but on the other hand the projections needed to be considered in the context of rate setting. Underspending due on construction projects should be recognized so that additional funds are not collected prematurely in rates. Mr. Bailey advised that staff is taking an in- depth look to evaluate all scenarios and ensure that any necessary adjustments are taken to maintain priorities or projections. Part of the priority, if spending is not as projected, is to avoid running the risk of prematurely increasing rates. He stated staff will have the conversation with the full Board at the budget and rates workshops to be held early next year. COMMITTEE ACTION: Recommended Board receipt. November 3, 2022 Regular Board Meeting Agenda Packet - Page 241 of 245 Page 5 of 8 Finance Committee Minutes October 25, 2022 Page 4 C. Receive Pre -Audit Fiscal Year 2021-22 Capital Improvement Budget Year - End Status Report Mr. Leiber led the discussion and noted the information provided with the agenda materials adequately portrayed and explained the pre -audit results. In review of the Year -End Status Report tables provided as Attachment 1 of the agenda packet, Mr. Leiber noted the revenues were on target overall, and reflected a net favorable $100,000 fiscal year actual total than estimated. Although no State Revolving Fund (SRF) Loan reimbursements were received last fiscal year, it was announced that earlier this month $14.7 million in SRF proceeds have been deposited. As discussed in prior Committee meetings, on the expenditure side, spending was delayed due to construction project supply -chain challenges. This affected all four capital programs, for reasons as noted in the fourth slide of the presentation. He noted that while Mr. Lopez was not available for the Committee meeting today, he would present this overview at an upcoming Board meeting and could provide additional commentary. COMMITTEE ACTION: Recommended Board receipt. d. Review draft Position Paper to receive Fiscal Year (FY) 2021-22 Pre -Audit Year -End Financial Statement Summary Report and consider alternatives for handling various pre -audit budget variances Mr. Leiber opened the discussion and stated a decision will need to be made on what to do with the positive variances from the prior fiscal year closeout since there are some favorable balances to consider. He and Mr. Mizuno reviewed the presentation and supplementary information provided with the agenda materials, including the potential uses for the favorable variances and recommended allocations as shown on slides 4-6. Mr. Leiber stated staff proposes to keep $6 million in the O&M Reserve fund to have the policy required balance at the end of FY 2022-23. This was the assumption contained in the FY 2022-23 Budget, and was used as the basis of allocating sewer service charge between the O&M and other sub -funds. Beyond this, $1 million in O&M variance is available for other uses. Staff recommend a transfer of this amount to the Other Post -Employment Benefits (OPEB) Trust given the impact that adverse investment returns have had on the funded ratio for the OPEB obligations. Member Williams inquired about the Rate Stabilization Account (RSA) column shown on slide 7 and inquired if there was not a target identified. Mr. Leiber confirmed that was the case and there is currently no specific targeted level for the RSA. Mr. Leiber also later responded to further inquiry November 3, 2022 Regular Board Meeting Agenda Packet - Page 242 of 245 Page 6 of 8 Finance Committee Minutes October 25, 2022 Page 5 by Member Williams that the Rate Stabilization Account has not been used to date, and would require Board approval if the funds were to be used. Mr. Leiber explained the OPEB Fund was nearly fully funded as of last summer (slide 7). However, this calendar year the funded ratio declined on a market value basis. Mr. Bailey requested staff include an additional column on slide 7 to show the actual unfunded accrued actuarial liability (UAAL) in related dollar terms. Member Williams opined the overall report looked fine; however, stated an eye needs to be kept on the UAAL. His desire is to keep the unfunded liabilities balance as close to zero as possible and, in going forward, continued efforts should be made toward funding the Pension Prefunding Trust. Upon conclusion, the Committee recommended Board approval of the staff recommendations presented. COMMITTEE ACTION: Reviewed and recommended Board approval of staff recommendations for variance balance reallocation as presented. e. Review draft Position Paper to adopt Resolution No. 2022- designating the General Manager, Director of Finance and Administration, and the Risk Management Administrator as authorized agents of Central San to obtain financial assistance under The Stafford Act as amended and the California Disaster Assistance Act Mr. Leiber stated this item is being presented to gain Board approval to designate authorized District agents (representatives) to complete required reimbursement claim forms for available disaster relief funds through the Federal Emergency Management Agency (FEMA), and to correspond with FEMA on the claim. In response to an inquiry by Chair McGill if the listed staff would be a combined source or any individual could represent the District in the claims process, Ms. Deutsch confirmed it could be completed by any one person of those predesignated. COMMITTEE ACTION: Recommended Board approval. November 3, 2022 Regular Board Meeting Agenda Packet - Page 243 of 245 Page 7 of 8 Finance Committee Minutes October 25, 2022 Page 6 6. Other Items a. Receive update and impact analysis on the most recently completed Actuarial Valuations for Contra Costa County Employees' Retirement Association, Central San's defined benefit pension plan administrator, and the anticipated savings from the 2021 unfunded actuarial accrued liability paydown transaction Mr. Mizuno and Mr. Leiber provided an overview of the memorandum update provided in the agenda packet. Mr. Mizuno stated a new section had been added to include some projections on the impact to Central San for paying down the UAAL last June. Mr. Leiber stated staff worked with the financial advisor PFM to conduct various scenarios to analyze the likelihood of the successful UAAL paydown transaction, defined as net savings over the life of the transaction through 2028. A model was constructed and run at various times with results as specified in the memorandum, including: • As of June 2021, the model showed an estimated savings of $15million, or an 87% chance of savings. • July 2021 showed a slight increase to $16 million of estimated savings. December 2021 reflected a probable outcome that went up to 91 change of savings even though the expected savings in dollars was $13 million. In June 2022, the CCCERA investment return was near a loss of 7%, which brought down the estimated savings to about $3 million, but still provided an estimated 72% chance of success (overall net savings). A large unknown is how the stock market will perform in the future and how long a recovery would take. Raw data behind the summary listed above was provided in Appendix 1, which included the model results that used historical CCCERA returns over the last 20 years and randomly selected those annual returns to forecast what could happen over the next seven years. Mr. Leiber stated the bars shown on the histogram will narrow over time, and eventually center on a single number. Mr. Leiber noted that borrowing money at the very low rate of (0.38%) was undoubtedly a good move, but the likelihood of overall savings was impacted due to the adverse stock market returns experienced by CCCERA in the first year of the transaction. Member Williams opined it was early and a lot could happen, but for staff to continue and monitor the situation. COMMITTEE ACTION: Received the information. November 3, 2022 Regular Board Meeting Agenda Packet - Page 244 of 245 Page 8 of 8 Finance Committee Minutes October 25, 2022 Page 7 b. Review Risk Management Loss Control Report as of October 10, 2022 Ms. Deutsch provided insight of the new claim listed on the report that was due to an exterior overflow in a backyard caused by a pressure relief valve that `popped' between two manholes in a downhill location. COMMITTEE ACTION: Received the report. 7. Announcements a. Mr. Bailey reminded the Committee of a water forum townhall meeting that will be held on October 26 in Lafayette, which was posted as a Special Board Meeting in anticipation of having a quorum of the Board present. b. Mr. Leiber shared that staff has received no update, or requests for assistance, to date on the state administered program LIHWAP (Low Income Household Water Assistance Program) that was implemented during the pandemic to assist citizens unable to pay service charges. Central San became a program participant prior to summer, when it was expanded to include wastewater utilities. He opined the challenge may be a public knowledge of the program's availability and said he would follow-up with the Communications staff on outreach for general education. C. Ms. Berumen introduced Stacey Durocher, the new Administrative Services Assistant in the Secretary of the District division to the Committee. 8. Suggestions for Future Agenda Items a. Receive list of upcoming agenda items and provide suggestions for any other future agenda items Chair McGill opined that an introductory meeting may be warranted to pass the torch from the current Committee Members to the new 2023 Committee Members in case there is not an overlap with current members. Mr. Bailey and Ms. Young advised staff would review the types of items the Committee typically reviews and any pending matters not yet addressed with the new Committee. COMMITTEE ACTION: Received the list and provided input to staff. 9. Future Scheduled Meeti Monday, November 21, 2022 at 2:00 p.m. (Special) Monday, December 19, 2022 at 2:00 p.m. (Special) 10. Adjournment — at 3:34 p.m. November 3, 2022 Regular Board Meeting Agenda Packet - Page 245 of 245