1. Call to Order.
Directors Amoroso and Comstock; General Manager Jennifer Blackman also present.
3. Draft Update of Five-Year Capital Improvement Plan.
Staff presented an updated version of the district’s Five-Year Capital Improvement Plan (“CIP”) for 2016-2021 and staff’s priorities for the 2016-17 fiscal year. First, on the water side of operations, the sliplining of the overflow pipe from Woodrat #1 (at an estimated cost of $75,000) has been identified as a project to complete this year if possible to preserve the integrity of this piece of infrastructure. Discussion ensued about the amount of lead time needed for this project, given potential engineering/design time and given that the work can only be done when the reservoir itself is low enough (i.e, the water level in the reservoir is low enough) to do the work. Director Comstock suggested that a flow-chart of the various capital projects might be helpful, in order to factor in engineering, design, planning and administrative time in addition to the actual construction/installation window. Staff next noted that the next phase of the chlorine disinfection byproduct project also is included in the CIP’s 2016-17 fiscal year ($50,000) – specifically, funds are allocated for the installation of the coagulation process, assuming this is approved by the Board and the district’s regulators at the State Water Resources Control Board (“SWRCB”). In addition, the rehabilitation of the East Tank, one of the district’s two treated water storage tanks, is on schedule for the 2016-17 fiscal year. This is an expensive project, but it is necessary based on an inspection of the tank and an assessment by staff of overall priorities; adding this project to the upcoming fiscal year will have a significant impact on the budget process given the $160,000 estimated project cost. Finally, in light of the planned projects described above, staff has retained the “Tier 2” distribution pipeline replacement projects on the CIP, but has moved each “forward” a year as it is unlikely the district will be able to install any of the pipeline projects during the upcoming fiscal year.
Second, on the wastewater side of operations, staff noted that the wetwell rehabilitation project is now scheduled for installation during the 2016-17 fiscal year (installation has been deferred pending completion of the lift station pump replacement project); funds for the wetwell rehabilitation project were budgeted and collected during the 2015-16 fiscal year. Staff also has prioritized the replacement of the perimeter fencing behind the properties located on Overlook Road and plans to do this project in-house. Discussion ensued about the types of projects staff can complete in-house vs. those that need to be contracted out; staff explained that it is much more difficult for the crew to undertake projects requiring heavy equipment expertise or projects requiring an uninterrupted dedication of time (such as two weeks to install a section of pipeline, for example) because of the demands of daily operations. Staff is best positioned to do smaller projects, such as hydrant replacement, meter upgrades, or building upgrades, that can be done in stages and without the need to rent heavy equipment or contract-out for specialized equipement operators.
Director Comstock said he understands why the projects have been prioritized as they have and he agrees with staff’s prioritizations, but he is concerned about pushing back the pipeline replacement projects too far given the amount of pipeline that has been identified for replacement. Staff noted that the projects as identified have been added to the expense side of the budget and resulted in a $200,000 deficit that will need to be funded, so it doesn’t seem possible to include pipeline replacement at this time. Director Comstock said the challenge for the district is its obligation – with a small staff and small customer base -- to maintain a large amount of infrastructure, which will not get any less expensive to do over time. Staff noted that the draft CIP contemplates the installation of nearly $300,000 worth of Tier 1 capital improvement projects, which is a significant increase over what has been done historically. Each one of these projects require a tremendous amount of energy to plan, design and implement, and staff does not want to spread the district too thin across too many projects in one year – even if a pipeline project is contracted out, for example, it requires staff to plan and oversee the design, implement the bid process, and supervise the installation.
Discussion turned to some of the projects planned for several years out, including the upgrade of the irrigation pump station and aeration process at the sewer ponds. Per the Board’s direction, staff has been working with Oswald Green Technologies and Allied Engineers on a “master plan” for this work and staff anticipates a comprehensive recommendation will be completed within the next few months. With regard to other projects, staff is planning to complete the purchase of a new utility truck during the present fiscal year and has scheduled funds for an assessment and possible design of a new septic system for the office building.
4. Draft Fiscal Year 2016-17 Budget.
Staff said that in this revised version of the draft budget, no changes have been made to the operations section of the budget. Staff noted that a 3% wage increase is assumed based on the Bay Area CPI, but staff has not yet had time to meet or present a specific request to the Personnel Committee. Staff directed the Committee’s attention to page 6 of the draft budget, which reflects the $305,000 anticipated capital improvement costs; staff also has reduced the amount of budgeted revenue anticipated from water sales from $100,000 to $90,000. As a consequence, there is a $212,000 “gap” between proposed expenditures and proposed revenues – however, there is no rate increase yet budgeted, nor has staff proposed a reduction in funds to be deposited into reserves (neither of which is realistic given the planned expenditures). Discussion ensued about the status of reserves and staff promised to update the reserve spreadsheet for the next meeting. Director Comstock requested that staff also re-circulate a copy of the Financial Reserve policy adopted by the Board last year. He noted that sewer reserves quite likely will fall below “0” as a consequence of paying for the lift station pump replacement project. Staff agreed and said the district’s customers likely are expecting a rate increase to pay for that project; in the next version of the budget, staff will propose a service charge increase for both water and sewer to “close the gap” between revenues and expenditures. Director Comstock said it seems that at least a 10% increase in both water and sewer service charges, as well as borrowing from reserves, will be required.
5. Community Expression