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110ENTRAL SAN
REGULAR MEETING OF THE
CENTRAL CONTRA COSTA
SANITARY DISTRICT
FINANCE COMMITTEE
MINUTES
Tuesday, June 25, 2024
2:30 p.m.
Committee:
Chair Tad Pilecki
Member Barbara Hockett (Alternate)
Guests:
Lesley Murphy, PFMAM (left after Item 3.c.)
Justin Resuello, PFMAM (left after Item 3.c.)
Attachment 1
BOARD OF DIRECTORS:
MARIAHN LAURITZEN
President
MICHAEL R. MCGILL
President Pro Tent
BARBARA D.HOCKETT
TAD J PILECKI
FLORENCE T WEDINGTON
PHONE: (925) 228-9500
FAX.• (925) 372-0192
www.centralsan.org
Staff. -
Roger S. Bailey, General Manager
Katie Young, Secretary of the District
Greg Norby, Deputy GM — Engineering & Operations (joined during Item 3.c.)
Philip Leiber, Deputy GM — Administration
Edgar Lopez, Capital Projects Division Manager
Kevin Mizuno, Finance Manager
Stephanie King, Contracts & Procurement Administrator (left after Item 4.b.)
Diana Diaz, Provisional Accounting Supervisor (left after Item 3.b.)
Shari Deutsch, Risk Management Administrator
Stacey Durocher, Administrative Services Assistant
Karen DeLong, Administrative Services Assistant
Call Meeting to Order
Chair Pilecki called the meeting to order at 3:18 p.m.
2. Public Comments
None.
As requested by staff in advance of the meeting, Chair Pilecki announced that Item
3.c. would be heard as the first order of business.
July 11, 2024 Special Board Meeting Agenda Packet - Page 35 of 41
Page 3 of 8
Finance Committee Minutes
June 25, 2024
Page 2
3. Items for Committee Recommendation to the Board
a. Review and recommend approval of expenditures incurred May 10, 2024
through June 13, 2024
Item 3.a. and the balance of the agenda were heard at the conclusion of Item
3. c.
The Committee had no questions.
COMMITTEE ACTION: Reviewed and recommended Board approval.
b. Receive Budget -to -Actual Expenditure overview through the month of May
2024
Mr. Mizuno provided an overview of the Fiscal Year (FY) 2023-24 Budget -to -
Actual Expenditures for the Operations and Maintenance (O&M) and Sewer
Construction Fund (SCF) through the month of May 2024.
Operations & Maintenance (O&M):
Total year-to-date expenditures through May 2024 were $78.3 million and
were lower than the year-to-date budget estimate of $84 million resulting in a
$5.7 million or eight percent favorable variance. Mr. Mizuno stated that the
main contributor to this variance was a full-time employee (FTE) vacancy
rate of 5.7 percent rate in May, which has been higher than budgeted
throughout the year. One main driver for this large vacancy factor was that
four new FTEs were added in the FY 2023-24 budget. Other noteworthy
vacancies included four out of five budgeted General Manager (GM) specials
that were not filled during the fiscal year as well as the Director of
Engineering position remaining vacant throughout FY 2023-24. Mr. Leiber
also clarified that the new Limited Duration Employee (LDE) program was
also delayed despite being budgeted for six LDE positions.
Sewer Construction Fund:
Total expenditures through May 2024 were $66.9 million and were less than
the year-to-date target amount of $107.4 million. The actual spending
projection for the end of the current Fiscal Year (FY) was approximately
$80.7 million and is slightly less than the proposed 2024-25 FY Budget
amount of $92.1 million. Chair Pilecki expressed his concern that the dotted
line (projected spend) is less than what was previously presented to the
Finance Committee, lower by approximately $12 million. Mr. Lopez stated
that there are still two months' worth of expenditure's that are not accounted
for in the projections.
July 11, 2024 Special Board Meeting Agenda Packet - Page 36 of 41
Page 4 of 8
Finance Committee Minutes
June 25, 2024
Page 3
There was a discussion regarding being too optimistic in making projections.
Mr. Bailey stated that rates are being set based on higher production and if
not met it appears that rates are being raised prematurely.
COMMITTEE ACTION: Reviewed and recommended Board receipt.
C. Review draft Position Paper to authorize the General Manager to execute a
contract with PFM Asset Management (PFMAM) for investment management
and advisory services for a five-year term
This Item was heard as the first order of business.
Mr. Mizuno provided an overview of the draft Position Paper included in the
agenda materials. He stated that with the assistance of Eide Bailly, staff
developed a Request for Proposal (RFP) for the investment management
and advisory services. The RFP was issued on March 20, 2024, and six
proposals were received on May 1, 2024. Three firms were considered
finalists and invited to participate in the interview process, and ultimately
PFMAM was selected.
Mr. Mizuno pointed out that PFM and PFMAM are separate entities, after the
asset management branch of PFM was acquired by U.S. Bank a few years
ago. PFMAM is an independent subsidiary that is a separate division of U.S.
Bank and is subject to different regulations and managed separately from the
banking and custodial services of U.S. Bank.
Mr. Mizuno stated that it was important to note that of the six firms, PFMAM
was the second lowest in terms of overall cost. He stated that while cost was
important to consider, it was not the ultimate driver in the selection process.
PFMAM was selected for meeting multiple criteria such as understanding the
unique needs of the District, their experience working with other public
entities like Central San, and their understanding of relevant government
investments. Other criteria such as the qualifications of the proposed team
and the quality of their references were also considered. It was also noted
that PFMAM had the largest governmental investment portfolio of all the
firms that participated in this process.
Member Hockett asked what a basis point standard fee was. Mr. Leiber
explained that it is just terminology that is used. A basis point is 11100th of
one percent.
Chair Pilecki referenced prior communication regarding Central San possibly
leaving the investment function with the County but did not see that option
listed as an alternative. Mr. Leiber stated that the County did not offer that as
an option again after Russell Watts' retirement.
July 11, 2024 Special Board Meeting Agenda Packet - Page 37 of 41
Page 5 of 8
Finance Committee Minutes
June 25, 2024
Page 4
In response to Chair Pilecki's question about the unavoidable perception that
non -independence may exist, Mr. Leiber stated this was discussed and was
not considered to be a red flag. He stated that this was more of a theoretical
risk.
The Committee was pleased that staff mentioned the possible perception of
a conflict because it provided a high level of transparency for the public. Mr.
Mizuno stated that Government Finance Officers Association (GFOA) Best
Practice recommendations provided specific language and guidance
regarding this issue. Ms. Murphy added that aside from being a separate
division and under separate management from U.S. Bank, PFMAM is subject
to different regulatory procedures than the U.S. Bank International Trust &
Custody (IT&C) group.
Following this item, the agenda reverted to the original order hearing Item
3. a.
COMMITTEE ACTION: Reviewed and recommended Board approval.
4. Other Items
*a. Review Risk Management Loss Control Report as of June 6, 2024
Ms. Deutsch provided an overview of the report included in the agenda
materials. She stated that the Loss Control Report has been updated since it
was posted in the agenda.
Ms. Deutsch mentioned that the claim for D&D Jewelers was denied based
on the work permit hours that were allowed by the City of Walnut Creek. Mr.
Bailey stated that the District needs to be sensitive to the business owners in
that area. Member Hockett suggested circling back with D&D Jewelers. Ms.
Deutsch stated she would do so.
COMMITTEE ACTION: Reviewed and provided input to staff.
b. Review annual contracts and blanket purchase orders (BPO's) older than
five years with an annual spend greater than $25,000
Ms. King provided an overview of the report included in the agenda
materials.
Chair Pilecki asked about the RFP for Security services. Ms. Deutsch
explained that the RFP has been delayed. She added that the District's
security consultant, Guidepost Solutions, Inc. has reviewed and expanded
the scope of work as well as the criteria needed in the RFP to include costs
July 11, 2024 Special Board Meeting Agenda Packet - Page 38 of 41
Page 6 of 8
Finance Committee Minutes
June 25, 2024
Page 5
for services that are currently being provided as well as the ability of the
company to handle additional services that the District may want to add or
enhance when there is a better understanding of the District's overall
security master plan.
In response to Chair Pilecki's question whether the expanded services
include coverage for two entry gates, Ms. Deutsch stated that the entry gates
are included. Member Hockett thanked staff for monitoring the contracts.
COMMITTEE ACTION: Reviewed and provided input to staff.
5. Announcements
Mr. Bailey announced that the Central San Academy will take place June 25, 2024,
at 6:00 p.m. in San Ramon.
6. Suggestions for Future Agenda Items
a. Receive list of upcoming agenda items and provide suggestions for any
other future agenda items
None.
COMMITTEE ACTION: Received the list and provided input to staff.
7. Future Scheduled Meetings
Tuesday, July 23, 2024 at 2:30 p.m.
Tuesday, August 27, 2024 at 2:30 p.m.
Tuesday, September 17, 2024 at 2:30 p.m.
8. Adjournment — at 4:19 p.m.
* Attachments
July 11, 2024 Special Board Meeting Agenda Packet - Page 39 of 41