1. Call to Order.
10:07 a.m.
2. Roll.
Directors Amoroso and Comstock present; General Manager Jennifer
Blackman also present.
3. Approve Minutes of the February 4, 2014
Committee Meeting.
Director Comstock offered clarifying corrections to the draft minutes.
L.
Comstock/V. Amoroso all in favor to approve the minutes of the February
4, 2014 Finance Committee meeting.
4. Draft Fiscal Year 2014-15 Budget
Director Comstock requested that staff present
additional information about the capital side of the budget for the Committee’s
consideration. Ideally, he would like
staff to confer with other districts to ascertain “best practices” on this
topic, but he acknowledged that process is time-consuming and the district’s
budget cycle should not be delayed or slowed down. Staff suggested that it may be most efficient
to confer with the district’s outside CPA and the Committee agreed. Discussion ensued about the important of
capitalizing staff time devoted to capital improvement projects. The Committee then turned it’s focus to the
employee services section of the budget; staff proposed to divide this section
into operations and capital projects, assuming that staff will devote
approximately eight weeks of time per fiscal year to capital projects. Director Comstock said the goal should be to
present the most accurate reflection of the district’s actual operations; to
the extent the staff is engaged in capital projects, that time should be
capitalized and reflected in the budget and in audited financials. A lengthy discussion ensued about the best
way to revise the budget spreadsheet to achieve this goal. Staff said that the internal processes at the
district have been revised to ensure that the district captures and capitalizes
all eligible expenses (including but not limited to staff time) throughout the
year and that beginning with FY 2014-15, all necessary processes should be in
place. Staff noted it is much more
difficult to prospectively predict how much staff time will be devoted to
capital projects for budget purposes.
Director Comstock suggested that the district develop a list of the
planned capital projects for the upcoming fiscal year, with a cost estimate for
each one. Director Amoroso said he still
wants to know how much money is spent overall on employee services, whether
those services are devoted to operations or to capital improvements. The committee discussed how to revise the
budget presentation in light of historical practice and the district’s
objectives. At the conclusion of this
discussion, the committee directed staff to prepare “sub-budgets” for each of
the capital projects proposed for the upcoming fiscal year, acknowledging that the
preparation of these budgets will require the input of the chief operator and
likely other staff for employee and materials cost estimates.
The committee then focused on the
“Capital” section of the budget and directed staff to separate out the debt
service payable for past capital improvement projects to a new section of the
budget entitled “Debt Service”. The
committee reviewed the CREBs repayment presentation in the draft budget to
ensure the revenue to be received and payments to be made are properly
reflected. Discussion turned to the
district’s reserves; staff noted that the draft budget proposes a tripling of
the amount to be dedicated to district reserves. Director Comstock said he would like to
review the projected change to the district’s reserves and the projected change
to the district’s debt during the upcoming fiscal year. Staff agreed to prepare this information as
one-page addenda to the budget. Director Comstock said that it is important
for him to understand what level of capital improvement the district can
undertake each year, relative to the size and age of the district’s
infrastructure, without having to borrow money from outside sources (thereby
increasing the district’s debt).
Director Amoroso said the district historically does not borrow money
for routine capital projects; to the contrary, the district has sought outside
financing only for the most significant of its past projects such as the
construction of the new water treatment plant, or the installation of the
wastewater treatment facility.
Director Comstock said a key
question is whether the levels of capital improvement and district reserves are
adequate in light of the size/status of the district’s infrastructure. He believes that the district’s assets have
a $15-20 million replacement value and he is concerned that the district may
not be investing enough to replace/improve its assets. He urged staff to complete the asset
inventory analysis in order to quantify the district’s position. Staff reported that the prioritization
worksheet is in process; this document will identify and quantify the asset
replacement that needs to be done in the next 5 – 10 years. For example, of the district’s 110,000 linear
feet of water distribution pipeline, approximately 12,600 linear feet (or less
than 12%) – the steel piping -- needs to be replaced within that
timeframe.
Director Comstock inquired whether
the district has any “off-balance sheet” items, noting that big financial
companies are loaded with such items. Director Amoroso and staff said the district
does not have any such items. Director
Comstock inquired about the deferred compensation payable liability on the
district’s Balance Sheet; staff responded that this is the amount accrued on
behalf of the employees in the district’s 457 plan, which is the local
government equivalent of a 401k plan, but will check with the district’s CPA to
be sure. Director Comstock inquired about the
district’s annual audit process and whether the Finance Committee is
responsible for reviewing auditor comments.
Staff responded that that staff generally prepares a draft response to
the Management letter which is then approved by the full Board at a regular
meeting. Director Comstock inquired whether there is a specific process
for review of the district’s insurance coverage and the adequacy of that
coverage. Staff said that the coverage
amounts for property insurance are reviewed annually and adjusted as
necessary. Director Comstock suggested
that staff make an annual report to the Board about the district’s insurance
coverage.
In response to questions from the
Committee, staff noted that if the district proposes to increase any of its
rates for FY 2014-15, the Board will need to approve a Proposition 218 mailing
at the regular monthly meeting in April and the mailing must be sent out to all
residents on or before May 2, 2014.
Staff emphasized that a rate increase is not recommended at this
time. Staff offered to meet on an interim basis on
March 18, 2014 if sufficient progress can be made on the draft budget to warrant
such a meeting. If not, the next meeting
of the Committee is scheduled for April 1, 2014 at 10:00 a.m. In addition, a tentative special meeting of
the Finance Committee is scheduled for April 15, 2014 in advance of the April
16th regular Board meeting.
5. Community Expression.
None.
6.
Adjournment.
12:25 p.m.