1. Call to Order.
Directors Amoroso and Comstock present; General Manager Jennifer Blackman also present.
3. Approve Minutes of the March 4, 2014 Committee Meeting.
L. Comstock/V. Amoroso all in favor to approve the minutes of the March 4, 2014 Finance Committee meeting.
4. Draft Fiscal Year 2014-15 Budget
Staff reported on a meeting with the district’s CPA concerning the capitalization of employee staff time when working on the district’s capital improvement projects and the necessary internal procedures to be developed to track this time. The CPA recommends that the district commence this process effective with the beginning of the next fiscal year on July 1. Discussion ensued about the specifics of staff time that can be capitalized and what must be expensed. The Committee concurred that staff time spent on a potential capital project later abandoned for one reason or another would have to be expensed. The district’s CPA agrees that properly capitalizing staff time is a best practice from an accounting perspective, as is prospectively budgeting for staff time to be spent on capital projects. The Committee discussed the specifics of several pending projects (i.e., the control panel project, the disinfection byproduct reduction project, the water supply study) and the potential breadth of staff time to be capitalized.
Staff presented the draft budget for the Committee’s consideration on a line by line basis, beginning with the water section of the budget, first discussing the employee costs and then progressing to maintenance and operations costs. Director Comstock inquired about the “plant” costs for the water budget; staff said those costs include all materials and outside services costs budgeted to maintain and operate the transmission, treatment and distribution components of the water system. Director Comstock inquired about the cost of chlorine and whether the district may be able to save costs by purchasing chlorine in bulk delivery; staff agreed to consult with the operations staff on this point. The Committee then examined the sewer budget, which includes projected expenses to vacuum and film the sewer system and clean the wetwell, and to inspect the irrigation spray pumps and motors. Discussion ensued about potential future costs for improvements at the sewage disposal site. After a brief evaluation of the drainage/septic budget, the committee turned its focus to the capital section of the budget.
Staff presented the Committee with a break-out of the district’s outstanding debt prepared by the district’s outside CPA, broken down into principal and interest. Director Comstock reviewed the reduction in the district’s outstanding debt forecast in the FY 2014-15 budget and noted the importance of this accomplishment. Director Amoroso noted that while the district did reduce its overall debt for the fiscal year ending June 30, 2014, the district’s obligation to begin repaying the Terrace Avenue Water Main Relocation loan will commence during the FY 2014-15 and the overall debt load will then increase. Director Comstock acknowledged this, but emphasized that the district’s steady reduction of its debt is just as important as the bolstering of its reserves. The Committee then discussed the status of the district’s reserves as of June 30, 2014 and the projected status of the reserves as of June 30, 2015; during the course of this discussion, staff realized that there were errors in the calculations and promised to have the errors corrected for the next committee meeting. Director Comstock said this would be helpful as he wants to understand the overall impact of the proposed budget on the district’s projected reserves.
The Committee then turned to the proposed capital improvement projects for the upcoming year. Staff reminded the Committee that two water main replacement projects are proposed (for Birch and Fern Roads), as well as various projects in support of the district’s efforts to reduce the chlorine disinfection byproducts in its drinking water, and to purchase a new utility vehicle and a new billing software system. For the sewer system, the budget contemplates the replacement of the control panels and relining of the collection system wetwell. Staff noted that the funds identified in the drainage/septic capital budget are for culvert installation and other drainage improvements in the public rights-of-way.
With regard to the district’s reserves, staff explained that $60,000 is proposed for the water reserves, which is a doubling of the $25,000 amount historically devoted to water reserves plus $10,000 to “repay” the district for its self-financing of the Wharf Road Service Saddle Replacement project. In addition, $27,000 is proposed for the sewer reserves, which is a tripling of the $9,000 historically devoted to sewer reserves. Discussion ensued about the Clean Renewal Energy Bonds that the district is paying off (i.e., the bonds that financed the acquisition of the district’s solar arrays), as well as the “hazardous tree” account that is used to assist the community with the removal of dangerous trees in the public rights-of-way. Staff then reviewed the projected revenues from the County property taxes, which last year exceeded $280,000, as well as the projected funds to be withdrawn from the district’s reserves to help finance the proposed capital improvement projects. Staff is not recommending any increase in rates for the FY 2014-15 year; this is a transition year as the district reallocates funds now available due to the retirement of some debt and reduced payroll costs, and as the district develops its multi-year capital investment program. Director Comstock said that he generally supports this approach and believes the district is going in the right direction, but he remains concerned and wants the district to complete a disciplined analysis of its asset replacement costs as well as a five-year capital improvement plan. He noted that these analyses are necessary to determine whether the district’s reserve policy is adequate and whether the capital improvement program is on the right track.
5. Community Expression.