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HomeMy WebLinkAboutFinance MINUTES 12-19-22Page 2 of 8 110ENTRAL SAN SPECIAL MEETING OF THE BOARD OF DIRECTORS: DAVID R. WILLIAMS CENTRAL CONTRA COSTA President SANITARY DISTRICT BARBARAD.H°CKETT President Pro Tens FINANCE COMMITTEE MARIAHNLAURITZEN MICHAEL R. MCGILL TAD J PILECKI MINUTES PHONE: (925) 228-9500 Monday, December 19, 2022 FAX.- (925) 372-0192 2:00 p.m. www.eentralsan.org (All attendees participated via video conference) Committee: Chair Mike McGill Member Tad Pilecki (alternate for Member D. Williams) Guest: David Alvey, Maze & Associates (left after Item 4.c.) 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 (left after Item 4.b.) Kevin Mizuno, Finance Manager Christopher Thomas, Accounting Supervisor Olivia Ruiz, Accounting Supervisor Shari Deutsch, Risk Management Administrator Amelia Berumen, Assistant to the Secretary of the District Stacey Durocher, Administrative Services Assistant 1. Notice This meeting was conducted virtually in accordance with the provisions stipulated in Assembly Bill 361 and adopted on December 15, 2022 by the Central San Board of Directors. The agenda included instructions for options in which the public could participate in the meeting. 2. Call Meeting to Order Chair McGill called the meeting to order at 2.00 p.m. January 19, 2023 Regular Board Meeting Agenda Packet - Page 292 of 319 Page 3 of 8 Special Finance Committee Minutes December 19, 2022 Page 2 3. Public Comments None. It was requested that Item 4.c. be heard as the first item of business; the Committee concurred. 4. Items for Committee Recommendation to the Board Item 4.a. and the balance of the agenda was heard at the conclusion of Item 4.c. a. Review and recommend approval of expenditures incurred November 11, 2022 through December 8, 2022 Staff responded satisfactorily to questions posed by the Committee on various expenditures listed in the report. One notable item is summarized below. Check 307693, Alfred Conhagen, Inc. for $531, 768.74 There was a discussion on the work performed by the contractor to repair the turbine equipment as part of an emergency declared earlier in the year, and whether the cost should be capitalized rather than expended under the Operations and Maintenance fund. It was questioned whether the work should not be considered routine maintenance but rather a significant, capitalizable improvement. Mr. Leiber stated his commitment to having an internal discussion to determine the proper avenue for this expenditure. Mr. Bailey added that capitalizing costs is an advantage and should be handled in a best practice manner. COMMITTEE ACTION: Recommended Board approval. b. Receive Financial Overview through the month of November 2022 Chair McGill noted this month's overview appeared to show trends consistent with prior months, particularly the rate of capital expenditures. Member Pilecki inquired if the target for the Capital Improvement Budget (CIB) will be revised when staff has completed the reshuffling of projections with the shift of the Solids Handling Facility Improvements (Solids Project) that occurred last year. He opined that the reports do not reflect a favorable impression to the layperson reviewing the report without knowing the history, and suggested staff revise the chart to show what is expected to occur. Chair McGill concurred. January 19, 2023 Regular Board Meeting Agenda Packet - Page 293 of 319 Page 4 of 8 Special Finance Committee Minutes December 19, 2022 Page 3 Staff acknowledged this concern and a discussion followed. It was emphasized that while the prior year capital spending projection needed to be updated to reduce the amount of spend attributable to the Solids Project, this year's CIB was significantly reduced to show much of the construction to be spent in FY 2024-25 and thereafter. However, the rollover from prior years still results in an overstatement of the current year's CIB "authorized spend." Staff responded they will continue to look into the matter, especially for the upcoming rates discussion at the January 2023 Financial Planning Workshop and during the development of next year's CIB. Member Pilecki suggested staff provide an educational overview to the incoming Committee Members of what has transpired to date. COMMITTEE ACTION: Recommended Board receipt. C. Review draft Position Paper to accept (1) the audited Annual Comprehensive Financial Report (ACFR) for the fiscal year ended June 30, 2022, performed by Maze & Associates, and (2) the independent auditors' memorandum on internal control and required communications for the fiscal year ended June 30, 2022 This item was heard out of order as the first business item. Mr. Mizuno presented this discussion item, reviewed the details provided in the draft Position Paper and report included with the agenda packet, and introduced audit partner David Alvey of Maze & Associates, the firm which performed the fiscal year closing auditors' memorandum. Mr. Alvey reviewed the auditor's statement of the comprehensive ACFR report, which conveyed a clean, "unmodified" independent audit opinion. The Memorandum on Internal Control and Required Communications provides findings or whether there were no disagreements with management, or the use of accounting assumptions. He thanked staff for their assistance during the audit process. Mr. Pilecki thanked all parties for the hard work that goes into performing this audit and financial closing. Chair McGill echoed the sentiments of the work involved and found the report to be well written. Mr. Alvey and staff responded to questions posed by the Committee. Regarding the new GASBI rules effective in future years, Member Pilecki inquired whether there may be any impact to Central San. Mr. Alvey mentioned the subscription -based IT arrangements would be one factor. GASB defined as Government Accounting Standards Board January 19, 2023 Regular Board Meeting Agenda Packet - Page 294 of 319 Page 5 of 8 Special Finance Committee Minutes December 19, 2022 Page 4 The District will need to look at those costs and account -for and report -on those accordingly following the new standard. It is expected the task to implement GASB 96 will not be as large an effort at the implementation of GASB 87 that went into effect this year, as the software implemented for compliance can be used for both leases and subscription -based IT arrangements. Chair McGill highlighted an area of the report (p. 111/114) that he would like amended as it did not properly reflect how the Board of Directors is organized under the new Division -based electoral system given that three Board Members remain at -large. Mr. Bailey offered that at the time of the report, the Board was all at -large for the balance of their terms. Mr. Leiber mentioned that an edit could be incorporated to clarify the movement towards the Division -based structure that went into effect this election season. COMMITTEE ACTION: Recommended Board acceptance. d. Review draft Position Paper to authorize the General Manager to execute a contract in an amount not to exceed $213,500 with Foster & Foster to provide Other Post -Employment Benefits (OPEB) and pension actuarial services for a five-year contract period Mr. Mizuno responded to limited questions regarding this agenda item. Member Pilecki requested staff list the other five firms that competed for these services, similar to capital projects. Mr. Mizuno stated this could be updated for the final Position Paper but that he would check with procurement staff first to ensure this is advisable in consideration of public procurement laws and policy. COMMITTEE ACTION: Recommend Board approval. e. Review draft Position Paper to consider approval of a Joint Powers Authority Agreement (JPA) to join the formation of the Northern California Sanitation Agencies Financing Authority Mr. Leiber provided a thorough overview of this matter and that of prior discussions of anticipated future borrowing needs. Financing alternatives include two viable options. use of State Revolving Fund (SRF) loans, or issuing dept directly via revenue bonds or Certificates of Participation (COPS). He discussed some complexities of each path and noted that COPs had been used in the past. SRF loans are the lowest cost, but the demand exceeds the available funding supply. As to the other option of COPs or revenue bonds, revenue bonds are viewed as the more cost effective option, and are a simpler, cleaner approach used commonly by utilities. January 19, 2023 Regular Board Meeting Agenda Packet - Page 295 of 319 Page 6 of 8 Special Finance Committee Minutes December 19, 2022 Page 5 Sanitary Districts in California can issue revenue bonds through a JPA without a public vote. In order to have that option, Central San would need to be a member of a JPA. Sacramento Regional San needs a new, separate partner as their initial JPA partner is merging with them. They are ready to move forward with Central San as a partner if Central San is interested. There was a lengthy discussion of the logistics of the partnership, including matters such as JPA meetings and governance. Cost — The proposed agreement does not specify the costs since expenses could change over time with other partners. Some costs would be split evenly, except bond costs for one member alone would pay that portion. It is anticipated there would be minor costs associated for the entity, such as bookkeeping and an audit (state code indicates a JPA must have an annual audit). While the cost of an audit is unknown at this time, it is estimated to be fairly small given the limited activity of the JPA. Benefits — Mr. Leiber stated exact savings are unknown, but he estimated at an interest rate savings of just 5-basis points per year on $100 million of debt would be $50, 000/year, which would be offset by the share of costs of the JPA that Central San would pay. As there are significant constraints at the state level for future SRF loans, he concluded it would be at the District's interest to have options. Representatives and Meetinq Locations — It was inquired whether JPA meeting could be virtual or if all would be in -person at Sacramento Regional. Staff stated they would explore options to conduct meetings. There was discussion of who would represent Central San (i.e., Board President recommendation, Finance Committee members, Board President/President Pro Tem). Board Compensation — Member Pilecki noted the JPA has no compensation and, if Board Members need to travel, a stipend should be paid by Central San. Mr. Bailey noted a District Board Member would receive a stipend from Central San for their services. Quorum of the JPA — It was noted the JPA would be a four -member Board, whereas, Boards are typically odd -numbered in case of disagreement. Mr. Leiber acknowledged the matter and noted that as there would be two members, a five -member Board would leave one side more heavily represented, however, he does not expect any contentious matters or issues since this is more of a financial vehicle. Mr. Bailey added that an option may be to have a mutually agreed upon representative from a neighboring city, independent of the two entities, as a fifth Board Member. January 19, 2023 Regular Board Meeting Agenda Packet - Page 296 of 319 Page 7 of 8 Special Finance Committee Minutes December 19, 2022 Page 6 Mr. Leiber responded to other questions posed. He stated the agreement was modified to include Central San and that counsel from both sides have reviewed the draft agreement. He stated that District Counsel Kenton Alm also committed to revisiting the draft agreement to ensure all prior member references were amended. Member Pilecki stated his support of the venture and opined it was a good course to pursue. Chair McGill also stated his support and complimented Mr. Leiber for his diligence on this matter. He reflected that Mr. Leiber introduced this matter earlier in 2022 and has found a solution to move forward. He advised the agreement should not be held up for the minor matters raised, and recommended Board approval with any minor clarifications at staffs oversight. COMMITTEE ACTION: Recommend Board approval with understanding staff has ability to finalize the agreement. 5. Other Items a. Review Risk Management Loss Control Report as of December 5, 2022 Ms. Deutsch reviewed the current Loss Control Report. She stated there were three new incidents; two were overflows that were small, exterior situations that required cleanup with no other damages. The other was a minor vehicle accident. Since this report, one more overflow report was received, which was contained outside, but was a second occurrence at the property. Ms. Deutsch report staff has spent time to discuss next steps, including relocation of the overflow protection device, which operated well. The Committee had no questions. COMMITTEE ACTION: Received the report. 6. Announcements As it was the final 2022 Finance Committee meeting, Chair McGill thanked staff for a job well done in presenting clear and concise reports on difficult matters. January 19, 2023 Regular Board Meeting Agenda Packet - Page 297 of 319 Page 8 of 8 Special Finance Committee Minutes December 19, 2022 Page 7 7. Suaaestions for Future Aaenda Items a. Receive list of upcoming agenda items and provide suggestions for any other future agenda items COMMITTEE ACTION: Received the list. 8. Future Scheduled Meetings Tuesday, January 24, 2023 at 9:30 a.m. Tuesday, February 21, 2023 at 9:30 a.m. Tuesday, March 21, 2023 at 9:30 a.m. 9. Adjournment — at 3:34 p.m. January 19, 2023 Regular Board Meeting Agenda Packet - Page 298 of 319