1. Call to Order.
10:00 a.m.
2. Roll.
Directors Amoroso and Comstock present; General Manager Jennifer
Blackman also present.
3. Draft Fiscal Year 2014-15 Budget
General Manager Jennifer Blackman
presented an overview of a first draft of the budget for fiscal year 2014-15
with a cover memo detailing the following highlights of the draft budget.
1. Staff applied a 2.6% cost-of-living adjustment to the
district’s operations and maintenance costs based on the CPI for the San
Francisco Bay Area for 2013.
2. Staff applied a PERS employer contribution rate of
11.264% of payroll, based on the 2013 actuarial report from CalPERS.
3. Staff assumed an employee wage adjustment of 3% based
on the CPI for the San Francisco Bay Area and historic past practice. The operations staff currently is preparing a
negotiation proposal for the Personnel Committee’s consideration.
4. Staff assumed the district will renew Lewie Likover’s
limited duration employment contract to continue his work on drainage projects
(8 hrs/wk or 416 hours per year) and the chlorine disinfection byproduct
reduction project (about 556 hours per year).
These hours will be paid from the septic/drainage annual service charge
and from water reserves, respectively.
5. Staff has made adjustments to all operations and
maintenance accounts given (1) reduction in personnel (Lewie), (2) retirement
of debt (one bond, one loan), (3) end of CSI rebate program, and (4) actual
costs for FY 2012-13.
6. Staff included the estimated loan repayment obligation
for the Terrace Avenue Water Main Relocation project.
7. Staff budgeted for the following capital improvement
projects:
a. Water main replacement (Birch, between Elm and Ocean
Parkway)
b. Water main replacement (Fern, between Elm and Alder)
($25,000 for both projects)
c. Continue the DBP reduction project ($25,000)
d. Rehabilitate the lift station wet well ($25,000)
e. Replace (not upgrade) the control panels at the sewer
ponds ($15,000)
f.
Purchase a
“gently used” utility vehicle ($16,000)
8. Staff has doubled the amount to be devoted to water
and sewer reserves ($60,000 to water
reserves and $18,000 to sewer reserves).
9. Staff is NOT recommending an increase in the annual
service charges or water rates.
Discussion
ensued about the specifics of some of the recommended capital improvement
projects. Staff explained that the
district still intends to slipline the sewer main under Wharf Road between the
beach and the lift station, but wants to focus first on the rehabilitation of
the wetwell because the County of Marin will be working on this section of
Wharf Road to repair the seawall. The
County’s seawall repair work is tentatively scheduled for the summer of 2014. Staff said the recent repairs to sewer
laterals on this same section of Wharf Road appear to have significantly
addressed the problem of seawater intrusion during high tides. The
committee discussed the details of some of the other proposed capital projects
such as the replacement (rather than upgrade) of the control panels at the
sewer ponds. Director Comstock asked how
the recommended capital projects fit into the district’s Five-Year Capital
Plan; staff explained that the Plan will be informed by the asset inventory analysis
– a process that is currently underway – and that the recommended projects for
the upcoming year are based on staff’s existing knowledge of the district’s
needs and prioritization of improvements.
Director Comstock said that if the asset inventory analysis ultimately
indicates that the district’s capital budget is inadequate, then the operating
budget should come down or rates should go up in order to supplement the
capital budget. He said that the
operating budget could potentially be brought down via the reallocation of
staff time away from operations and toward capital projects; staff agreed and
acknowledged a past practice at the district of expensing rather than
capitalizing staff time on projects, which staff is in the process of revising. Staff performs a significant amount of
capital improvement work in-house and that to the extent the district’s
bookkeeping practices do not reflect this, those practices should be
improved. Director Comstock concurred,
noting that it will enable the district to compare its operations to other
districts’ operations on an “apples to apples” basis (assuming those districts
are, in fact, capitalizing their employee services costs where
appropriate).
Director
Comstock suggested that staff time planned for capital improvement projects
should be in the capital section of the budget, not the operations section of
the budget. Discussion ensued about how
the district’s budgetary process would need to be revised in light of this
suggestion. Director Comstock noted that
the district’s audited financial statements are not broken down by “line of
business”, meaning water, sewer, septic/drainage, Resource Recovery; as such,
the best place to track and monitor the district’s performance across these
separate enterprises is via the budgetary process, which is broken down by line
of business (and then track budget-to-actual performance during the year, as is
currently done). Director Amoroso said
he would prefer to track the anticipated employee time on capital projects in
the employee services section of the budget rather than the capital section –
perhaps in new line items in this section.
Director Comstock said that the district should investigate how other
districts handle this topic and what the “best practices” are; he said the
district’s bookkeeper and accountant may also have good advice. He emphasized that he is not seeking to “reinvent
the wheel” or impose more work on staff, but he feels that it is important for
the district to be able to better track its capital improvement
expenditures.
Director Comstock said he is interested in how the
district makes decisions to “repair vs. replace” its infrastructure and what
goes into that analysis. For example, he
saw the staff repairing a water line on Walnut Road recently and, based on his
observation of the condition of the water line, perhaps it should be replaced
rather than repaired. Staff agreed that
this water line should be replaced and said that it is a high priority pipe for
replacement (right after replacing the water lines on Birch and Fern); however,
when there is a leak the staff must repair it immediately. Director Comstock suggested the staff may
need to look more closely at its decision-making regarding replacement vs.
repair – he said that by simply repairing the pipe and then not coming back to
replace it, the district de facto is deciding not to replace it. He said that he is interested in the pace at
which other, comparable water districts conduct their pipeline
replacement. Staff agreed that the
prioritization of the pipeline in need of replacement should happen and it is
underway; the operations staff is very knowledgeable about the conditions of
the district’s pipeline and will help inform this process.
Director Comstock noted that the
BCPUD’s operating costs appear to be high relative to other districts in West
Marin and acknowledged that there are several reasons why this might be the
case: it could be a function of
accounting processes, it could be that the district is inherently more
expensive to run, or any number of other explanations. He said it is important to analyze other
districts’ operations and identify areas for potential improvement at the
BCPUD; Director Comstock said that to the extent the BCPUD needs to charge its
customers more to provide them safe and reliable water service, the customers
deserve to know why. Staff agreed and noted
that the Marin water districts are collaborating right now over drought response
issues and that staff has reached out to other managers to begin a conversation
on these and other topics.
Discussion continued as the Committee members reviewed
the draft budget on a line-by-line basis.
Staff explained the breakdown and formulas behind the budget numbers for
each employee’s compensation and benefits, as well as general maintenance and
operations costs. Staff noted that the
maintenance and operations wages and benefits costs have gone down as a result
of Lewie Likover’s recent retirement and also as a result of the district’s
transition to a less expensive health plan.
The Committee reviewed the projected sub-budgets for the water, sewer,
septic/drainage and Resource Recovery enterprises. Staff explained that all maintenance costs
were reviewed to explore whether funds previously budgeted in these categories
could be redirected to bolster the district’s reserves and pay for capital
projects.
The Committee reviewed the
district’s current debt service schedule; director Comstock requested a
breakdown of the principal and interest on each of the outstanding loans. Staff noted that the district recently
retired a significant amount of debt, although the repayment obligation for the
Terrace Avenue Water Main Relocation Project loan will begin in 2014. The Committee also discussed the repayment of
the Clean Energy Renewable Bonds and the upcoming end of the 5-year rebate
program under the California Solar Initiative.
The district has built up its reserves over time to repay these bonds
(because the amount of the rebates each year exceeds the amount of the annual
bond repayment obligations), supplemented each year by the amount the district
“saves” in power costs. The Committee
next reviewed the district’s budgeted capital improvement projects and
reiterated that in-house labor costs need to be included here to fully reflect
the cost of this work (and, correspondingly, reduce operations costs). Staff noted that the budget also includes the
purchase of a new utility vehicle, which will be paid from revenue collected
via the water and sewer enterprises. Discussion
ensued about different projects planned for improvements to drainage on the
Mesa and a bulkhead at the Resource Recovery site.
The Committee next reviewed the
proposed amounts budgeted for the district’s reserves. Staff proposed $60,000 to water reserves,
which is a doubling of the historic $25,000 amount, plus a supplemental $10,000
to repay the amount spent on the Wharf Road Service Saddle Replacement project,
and a similar doubling of the amount of the district’s sewer reserves. Director Comstock noted that there are two
issues at hand: (1) the adequate maintenance and upgrade of the district’s
infrastructure via a multi-year capital plan – i.e., identifying the projects
that should be completed during a specific timeframe, and (2) how to pay for
it. Director Comstock said he is
concerned about increasing the district’s debt load to finance ongoing capital
projects; he advocated instead bolstering the district’s reserves significantly
to pay for these projects. Director
Amoroso said the district historically has not borrowed money for ongoing
capital projects, rather the district has only taken on debt to finance very
large projects, such as the construction of the water treatment plant and the
rehabilitation of the sewer system; smaller projects have been self-financed by
the district out of its reserves. Director
Comstock said he is glad to hear this, but remains concerned that the size of
the district’s asset base is such that the current reserve practice may not be
sufficient to finance foreseeable needed improvements. He acknowledged staff’s ongoing work on the
asset inventory analysis, as well as staff’s plans to engage with other
districts about their operational and capital improvement approaches, and said
both efforts should result in better information for the district to assess
whether it is moving forward at an appropriate pace on its capital improvements. Staff reminded the Committee about a recent
spreadsheet provided to the Board demonstrating that the district completed
approximately $1.5 million worth of capital improvements, not including
in-house staff time over the last eight years.
Finally, the Committee reviewed the
projected revenue section of the budget.
Staff assumed the same level of water sales as the prior year, but noted
that in light of the drought, that number may need to be revisited. Staff also assumed that the annual service
charges will not be increased in
either the water or sewer enterprises.
Discussion then ensued about the revenue to be derived from the
district’s reserves (meaning the amount the district will spend out of its
reserves). Director Comstock said it
would be helpful, in addition to a more detailed breakdown of the amount going
to repay debt (distinguishing between principal and interest) and the amount of
total debt, to have more detail noted in the budget about money coming into
reserves and the total amount of reserves.
Discussion then ensued about the outstanding bond debt, which is shown
as a “pass through” in the district’s budget (and appears as the bond debt on
the district’s financial statements), some of which will be retired at the end
of 2014, and will inure to the benefit of the district’s customers (by reducing
the total amount charged to district customers, albeit indirectly via the bond
levy process). Director Comstock said it
would be helpful to be able to note this somehow for the benefit of
customers.
The next meeting of the Finance Committee is
scheduled for March 4, 2014 at 10:00 a.m.
4. Community Expression.
None.
5.
Adjournment.