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HomeMy WebLinkAbout16.a. Committee Minutes-Finance 02-21-2023 Page 1 of 7 Item 16.a. CENTRALSAN jdf A- hom CENTRAL CONTRA COSTA SANITARY DISTRICT March 2, 2023 TO: HONORABLE BOARD OF DIRECTORS FROM: KATIE YOUNG, SECRETARYOF THE DISTRICT SUBJECT: FEBRUARY 21, 2023 - FINANCE COMMITTEE - PRESIDENT HOCKETT AND MEMBER LAURITZEN Attached are minutes of the above Committee meeting. ATTACHMENTS: 1. Minutes of 02-21-23 meeting March 2, 2023 Regular Board Meeting Agenda Packet- Page 307 of 313 Page 2 of 7 I CENTRAL SAN CENTRAL •NTRA COSTA SANITARY DISTRICT 5019 • REGULAR MEETING OF THE BOARD OF DIRECTORS: BARBARA D.HOCKETT CENTRAL CONTRA COSTA President SANITARY DISTRICT MARIAHNLAURITZEN President Pro Tena FINANCE COMMITTEE MICHAEL R.MCGILL TAD J PILECKI DAVID R. WILLIAMS MINUTES Tuesday, February 21, 2023 PHONE: (925)228-9500 y FAX.- (925)372-0192 9:30 a.m. www.centralsan.org (All attendees participated via videoconference) Committee: Chair Barbara Hockett Member Mariah Lauritzen Guest: Mindy Harris, NFP Staff. Roger S. Bailey, General Manager (joined during Item 4.a.) Katie Young, Secretary of the District Danea Gemmell, Provisional Director of Engineering and Technical Services (joined during Item 4.a.) Philip Leiber, Director of Finance and Administration Emily Barnett, Communications and Government Relations Manager (joined during Item 4.a., left after Item 5.b.) Benjamin Johnson, Internal Auditor Edgar Lopez, Capital Projects Division Manager (joined during Item 4.a., left during Item 4.d.) Kevin Mizuno, Finance Manager Thomas Brightbill, Senior Engineer Olivia Ruiz, Accounting Supervisor Chris Thomas, Accounting Supervisor 1. Notice This meeting was conducted virtually in accordance with the provisions stipulated in Assembly Bill 361 and adopted on February 2, 2023 by the Central San Board of Directors. The agenda included instructions for options in which the public could participate in the meeting. March 2, 2023 Regular Board Meeting Agenda Packet- Page 308 of 313 Page 3 of 7 Finance Committee Minutes February 21, 2023 Page 2 2. Call Meeting to Order Chair Hockett called the meeting to order at 9:30 a.m. 3. Public Comments None. 4. Items for Committee Recommendation to the Board a. Review draft Position Paper to receive the 2022 Annual Deferred Compensation Report encompassing Central San's 457(b) Deferred Compensation, 401(a) Money Purchase, and Health Reimbursement Arrangement Plans Mr. Mizuno reviewed the presentation included in the agenda materials. The presentation provided an overview of the deferred compensation programs offered by the District, the role and composition of the Deferred Compensation Advisory Committee (DCAC), and important issues the DCAC has reviewed in the past year. These include working with a dedicated fiduciary to review the plan investment alternatives and a proposal to streamline the investment choices to providing many benefits including reducing fees, and avoiding more choices than can be monitored to ensure the investments are of high quality on multiple criteria. In response to a question posed by Member Lauritzen, Ms. Harris responded that the investment rating system is based off a 10-point system and includes elements such as fund management, fees, and performance compared with similar funds in those asset classes. Mr. Mizuno added that style, risk/return, peer groups and qualitative components are also factors in the rating system. There was a discussion on a Social Security income cap and Mr. Leiber explained that the cap in 2023 of$160,200 would result in a maximum contribution of approximately$9,932 per employee to the 401(a) account for the in-liue of Social Security payment by the agency. COMMITTEE ACTION: Recommended Board receipt. Mr. Leiber requested Item 5.b. be heard as the next item of business, the Committee concurred. At the conclusion of Item 4.a., the agenda moved to hear Item 5.b. as the next order of business. b. Review draft Position Paper to conduct a public hearing to receive public comment and consider 1) adopting Ordinance No. amending District March 2, 2023 Regular Board Meeting Agenda Packet- Page 309 of 313 Page 4 of 7 Finance Committee Minutes February 21, 2023 Page 3 Code Section 6.12.030, and 2) amending Exhibit A to Ordinance No. 324, an uncodified Ordinance, for the Schedule of Capacity Fees, Rates, and Charges This item was heard immediately following Item 5.b. and the balance of the agenda was heard at the conclusion of 5.b. Mr. Brightbill reviewed the draft Position Paper included in the agenda materials. He stated that in recent years, staff has seen a marked increase in the number of projects with Additional Dwelling Units (ADUs) constructed or converted by a previous property owner for which no permit was issued by Central San. Most of these current property owners were not aware that the unit was unpermitted, and the proper fees had not been paid to Central San at the time they purchased the property. He advised that most of the current property owners are willing to pay some fees to rectify the situation but several of them have expressed concerns that they are in effect paying a penalty based on what a prior property owner did. Mr. Brightbill reminded the Committee of the property owners of three parcels with unpermitted ADUs, constructed or converted by prior property owners, who appealed to the Board requesting that they be allowed to pay the reduced Capacity Fees under the current fee schedule for properly permitted new-construction projects. All three appeals were granted by the Board. Once completed, the Board requested staff review the District Code in light of the possibility of further appeals. Mr. Brightbill advised that staff began reviewing how unpermitted ADUs are handled under the current District Code and the current Capacity Fee schedule and discussed several topics including how Capacity Fees should be charged with different types of unpermitted ADU projects, how fair and equitable the proposed changes would be in different scenarios, and what level of administrative effort would be required for the various scenarios. It was noted that staff believes that the fairest and most straightforward method is to charge all unpermitted ADU projects the same Capacity Fee, regardless of which property owner did the work. The Capacity Fees for unpermitted Additional Residential Units or ADUs would be charged the same rate as for the construction of a new permitted ADU. Mr. Brightbill stated that if the proposed changes to District Code and the Capacity Fee schedule using this approach are approved, the revised fees will be based on square footage and will vary from project to project. The Committee Members had no questions. COMMITTEE ACTION: Recommended the Board conduct a public hearing. March 2, 2023 Regular Board Meeting Agenda Packet- Page 310 of 313 Page 5 of 7 Finance Committee Minutes February 21, 2023 Page 4 C. Review and recommend approval of expenditures incurred January 6, 2023 through February 9, 2023 The Committee had no questions. COMMITTEE ACTION: Recommended Board approval. d. Review draft Position Paper to approve updated administrative overhead and benefits rate of 164% for Fiscal Year (FY) 2023-24 Mr. Mizuno reviewed the presentation included in the agenda materials and responded to minimal questions from the Committee. There was a discussion regarding the visuals of pie-charts graphs, which display incorrectly in Powerpoint presentation model and are also confusing due to the percentages exceeding 100%. Staff indicated the graph would be corrected for the Board packet and future updates. Mr. Mizuno explained the historical trends and the use of percentages to assess fees, stating that the rate helps standardize a billable rate for each employee to be charged to specific capital projects and for other outside agencies for certain work conducted by Central San, which is based on the concept of full cost recovery. The Committee had no further questions. COMMITTEE ACTION: Recommended Board approval. e. Receive Budget-to-Actual Expenditure overview through the month of January 2023 Mr. Mizuno provided the Committee with a detailed explanation of the monthly expenditure overview reports. The Committee was satisfied with the overview and did not have further questions. COMMITTEE ACTION: Recommended Board receipt. f. Receive Quarterly Financial Review for quarter ending December 31, 2022 Mr. Mizuno advised that the financial review is on track and there are no adverse variances to report. It was noted that the District is under-spending the approved O&M by about $1.5 million to date. Capital spending is substantially under, continuing a trend of lower than anticipated spending in the first portion of the year with some catch-up in later months. March 2, 2023 Regular Board Meeting Agenda Packet- Page 311 of 313 Page 6 of 7 Finance Committee Minutes February 21, 2023 Page 5 The Committee Members had no questions. COMMITTEE ACTION: Recommended Board receipt. 5. Other Items a. Receive Highmark Other Post-Employment Benefits (OPEB) and Pension Prefunding Sub-trust Reports for the Fourth Quarter of calendar year 2022 Mr. Leiber provided a brief overview of the OPEB and pension prefunding sub-trust reports included in the agenda materials. Despite an overall negative reduce of 14.5% for the calendar year there was a 5% recovery in the fourth quarter. It was also observed that despite the downturn seen in 2022, the District is well-funded compared to other agencies, and that the annual return of the OPEB trust since its inception in 2009 is still running about 2% ahead of the targeted return of 5.75% It was also noted that the District began in recent years to draw down a portion of the assets to meet the pay-go costs, which had begun to exceed the actuarily defined contribution rates. This is a normal part of the lifecycle of such OPEB accounts, as more retirees begin to collect on the OPEB benefits. Staff also noted that a contribution of$1 million is being made this year from the favorable close out of FY 2021-22 financial results, to further bolster the financial adequacy of the fund. COMMITTEE ACTION: Received the reports. b. Receive update on potential changes to expenditure review requirements This item was heard immediately following Item 4.a. This item relates to the potential for changing the Board expenditure review process, which is currently driven by a requirement in the State Code governing Sanitary Districts that dates from the 1930s. Without a change to this element, the flexibility to modernize this practice is limited. Accordingly, Central San has discussed this matter with the California Association of Sanitation Agencies (CASA) regarding the possibility for legislation to conform this requirement to practices seen at other types of special districts. Ms. Barnett advised that there is a piece of legislation moving forward, Assembly Bill (AB) 759 by Assemblymember Grayson and co-authors Senator Glazer and Assemblymember Connolly regarding expenditure review requirements. Staff has received support from California Special Districts Association (CSDA), and CASA in running the sponsored piece of legislation. The bill will not be a consent bill as it has to do with transparency, so it will be a status bill moving forward in the committee process. The Committee had no questions. March 2, 2023 Regular Board Meeting Agenda Packet- Page 312 of 313 Page 7 of 7 Finance Committee Minutes February 21, 2023 Page 6 At the conclusion of Item 5.b., the agenda reverted to the original order, beginning with Item 4.b. COMMITTEE ACTION: Received the information. C. Review Risk Management Loss Control Report as of February 7, 2023 Mr. Leiber highlighted that one new claim had been received since the last report regarding a mudslide in Orinda during the storms. Investigations are underway and the District hopes to recovery funds from the Federal Emergency Management Agency (FEMA) for costs that may be incurred. The Committee had no questions. COMMITTEE ACTION: Received the report. 6. Announcements Mr. Bailey made the following announcements: • The Central San Citizen Academy kicks off tonight for the sixth year. • Tomorrow there will be a reception for the candidates for the Deputy General Manager position to meet some of the Board Members and the District Management Team. 7. 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. 8. Future Scheduled Meetings Ms. Young advised the Committee that all future Committee meetings will be held in-person in the 2nd Floor Conference Room. Tuesday, March 21, 2023 at 9:30 a.m. Tuesday, April 25, 2023 at 9:30 a.m. Tuesday, May 9, 2023 at 9:30 a.m. (Budget Review) 9. Adjournment— at 10:45 a.m. March 2, 2023 Regular Board Meeting Agenda Packet- Page 313 of 313