1. Call to Order.
Directors Amoroso and Comstock; General Manager Jennifer Blackman also present.
3. Draft Five-Year Capital Improvement Plan; Draft Financial Reserve Policy
Staff presented an overview of the revised Five-Year Capital Improvement Plan (“CIP”) and draft Financial Reserve Policy. Staff prepared a preamble to the Five-Year CIP that explains how the plan was formulated; the plan also references 3 spreadsheets with the various projects planned for installation during the next five years identified, along with notes and estimates of the costs of each project. The CIP also contains 3 exhibits: the district’s asset inventory; the district’s Prioritization Worksheet, and the estimates prepared by the district’s outside engineers, Brelje & Race, for each of the projects on the Prioritization Worksheet.
Staff also arranged the projects identified on the spreadsheets to the CIP into two tiers: Tier 1 and Tier 2. Tier 1 projects are projects than can be funded based on the district’s budget (or reasonably within its budget as estimated in subsequent years) and Tier 2 projects are those that will need supplemental funding above and beyond the district’s anticipated budget. Director Comstock inquiried if the projects are still prioritized based on need, not simply cost, and staff confirmed that they are. The directors reviewed the Stinson Beach County Water District’s CIP, a copy of which was provided to staff by that district’s general manager, which is similarly structured. For purposes of obtaining grant funding, it is helpful to have needed projects identified, even if they cannot be paid for out of a district’s operating budget, to demonstrate to funding agencies that the district has evaluated and prioritized its needs and is ready to install projects when/if funding becomes available.
Discussion ensued about the specific projects and tier structure, among other things. Staff directed the Board’s attention to the current debt schedule of the district, as well as the status of the district’s reserves. There is one loan outstanding on the books with the Department of Water Resources that will retire in 2022, but the district is paying over $55,000 annually (two paymens per year of over $27,000 each) to service this loan at an interest rate of almost 3%. The balance due to retire the loan is just under $300,000 and, per discussions with the district’s bookkeeper, staff recommended that the Committee consider paying off this loan now as the interest earned on the district’s reserves is only 0.3%. The Committee directed staff to investigate with the lender whether there are any penalties or other impediments to the early payoff of this loan and report back to the Committee at the next meeting.
Turning back to the draft CIP, director Comstock said he is pleased with the tiered format of the document, as well as the development of the preamble and exhibit documents. He said he plans to read it closely and offer comments, but feels the process is going in the right direction. Director Amoroso concurred. With respect to the projects planned for the water system, the Tier 1 projects are those planned using the district’s estimated revenues based on the draft budget for fiscal year 2015-16. The main project planned for the upcoming year on the raw water system is the slip-lining of the overflow pipe at the Woodrat #1 reservoir; it will be necessary to schedule this project for a time when the water level in the reservoir is sufficiently low to allow the work to proceed. With regard to water treatment, the main project is the chlorine disinfection byproduct reduction project; as for the distribution system, the replacement of five fire hydrants. Discussion ensued about the capitalization of the staff time needed to install these hydrants and how to reflect that in the draft CIP, as well as the district budget. The committee then discussed whether the money the district is spending on the water supply study can be capitalized, and staff agreed to confer with the district’s bookkeeper and CPA about this question. Finally, staff explained that the Tier 2 water distribution system projects are a compilation of all of the separate specific projects that will need to be done to fully replace the 2”– 4” steel mains (i.e., the most problematic pipeline in the distribution system) within the next five years. Staff noted that the Five-Year CIP will be a “living document” and if and when Tier 2 projects can be moved up to Tier 1, because funding becomes available or for other reasons, then the CIP will be revised accordingly.
Director Comstock suggested the district consider hiring a consultant to assist the district in planning/forecasting Tier 2 projects for the next two five-year periods following the current CIP period, particularly if the district is unable to install most or many of the Tier 2 projects during the 2015-2020 timeframe, so that the Board can foresee the likely capital/financial impact of the district’s future needs. He pointed out that the potential costs of capital projects down the road for the district may be very large and the district’s capital needs swing much more significantly than do it’s operating costs.
The Committee turned to the projects identified for sewer system capital improvements; staff said these projects are much less developed because the district has not engaged engineers to develop estimates for specific projects (the estimates currently in the plan are staff estimates and need further development). Discussion ensued about potential projects, including the replacement of perimeter fencing at the spray fields, as well as video’ing of the collection system and rehabilitation of the wetwell at the lift station. The Committee also discussed the informal recommendation offered by Bailey Greene, one of the original engineers who designed the district’s sewer treatment system, during a site visit last Fall to the effect that the district consider upgrading its pond transfer and spray disposal process by changing the transfer and intake levels, and eliminating its existing deep irrigation pumps. Staff plans to ask Mr. Greene to assist the district and develop a conceptual design and estimate for this project.
With regard to projects needed to improve the district’s buildings, office and vehicle/mobile equipment, staff recommends that the district plan to replace its exising backhoe in the next fiscal year, replace the windows and doors at the Woodrat Water Treatment Plant, and repair or upgrade the septic system serving the office building. Several projects, including the replacement of the buildings in the district’s corporation yard, are planned as Tier 2 projects. Staff acknowledged that the building replacement estimates are staff estimates; staff intends to follow-up with Steve Matson and/or Alethea Patton to obtain more accurate cost estimates for these projects.
Finally, the Committee discussed the development of a new budget format within Quickbooks to better present the district’s annual budget in a more clear and understandable way. The current excel spreadsheet is difficult to follow and based on a historical format that essentially is obsolete. The Committee members asked staff to work with the district’s bookkeeper to recommend a new format to be used beginning with the FY 2016-17 budget.
4. Draft Fiscal Year 2015-16 Budget.
The Committee agreed to meet again on April 14, 2015 at 10:00 a.m. to review the draft FY 2015-16 budget. Director Comstock said he would like to focus on the sewer reserves, which are too low relative to the level of capital projects forecast for the next five years.
5. Community Expression