1.
Call to Order.
10:18 a.m.
2.
Roll.
Directors
Amoroso and Comstock; General Manager Jennifer Blackman also present.
3.
Draft Five-Year Capital
Improvement Plan.
The Committee previously asked staff to research the
possibility of prepaying one or more of the district’s outstanding debt
obligations. The district currently has
a loan out with the Department of Water Resources (“DWR”) that is eligible for
prepayment with no penalty. DWR
confirmed that many districts are prepaying debt right now as they are not able
to earn any appreciable interest on their reserves, so they are using their
reserves to pay down debt. The amount
outstanding to repay the loan is just under $300,000; the Committee reviewed a
letter provided by DWR to that effect.
If the district prepays the loan, the district will save approximately
$30,000 in interest payments otherwise due through 2022 (the interest rate on
this loan is 2.781%), and will eliminate annual debt payments of approximately
$55,000.
Director Comstock said he favors prepayment of this
debt as he views such debt as “negative reserves”; it is a required obligation
to repay this debt and eliminating the debt is a functional equivalent of
increasing the district’s reserves. Director Amoroso said he does not favor using
the $500,000 “endowment fund” for this purpose;
director Comstock disagreed. Discussion
ensued about the source of funds to repay the debt. The Committee agreed to bring the matter to
the full Board for consideration and requested staff to include an item on the
April 2015 regular meeting agenda to consider the prepayment of this debt.
Turning to the capital improvement plan, staff
incorporated revisions provided by director Comstock and discussion ensued
about the revised plan. The Committee
discussed the capitalization of staff time in light of the applicable
accounting standards, which allow only work “reasonable and necessary” for the
installation of a capital project to be capitalized. Director Comstock said he believes it is
important for the district to reflect whether it is spending its funds on
capital projects vs. operating expenses; the district should be and does
operate efficiently, and the district’s financial statement should reflect that
by properly capitalizing staff time (as well as other capital costs). Staff agreed and noted that procedures have
been implemented for the district to keep track of time spent by the operations
staff on capital projects and special projects (which may not qualify as
capital projects from an accounting standpoint), as well as general operational
tasks. At year-end, staff will analyze these
timesheets with the bookkeeper and/or CPA to determine whether and how much of
the documented time properly can be capitalized; this will help inform staff’s
estimates of the time to be spent by staff on capital projects for budget
purposes going forward. Discussion then
ensued about how to reflect the estimated staff time in the draft budget so that
it shows up in the capital section, rather than the operational section and
staff agreed to revise the budget accordingly.
4. Draft Fiscal Year 2015-16 Budget.
The Committee reviewed the
changes made to the draft budget as a result of the decisions made at the
previous meeting. Discussion ensued
about the proportionality assigned (in the revenue section of the budget) to
the district’s share of the County’s property tax revenue between the water and
sewer enterprises. Director Comstock
suggested that the district develop a proportion allotment based on the
percentage of revenues the district receives directly from its customers for
these specific enterprises; director
Amoroso suggested that perhaps the relative number of connections could be
used. Ultimately, the committee agreed
upon a 75% (water) - 25% (sewer) allocation.
The Committee then reviewed the amount of the proposed service charge
increases for water and sewer; the budget reflects a proposed 10% increase for
both enterprises. Director Comstock inquired how the allocation
of “other” capital expenses in the Five-Year CIP will be accounted for between
water and sewer; staff said the budget currently reflects a 2/3 (water) vs. 1/3
(sewer) basis, based on anticipated usage of the capital assets between the two
enterprises. Director Comstock said this
approach is fine for this upcoming year, but suggested the Committee review
this percentage and perhaps revise it in upcoming years.
Director
Comstock noted that the draft budget currently contains a line for capitalized
staff time on septic/drainage, but this should be revised since the district
does not capitalize the culvert installation projects; staff agreed. Director Comstock questioned whether the
district should keep capital reserves for septic/drainage given that the
projects are not capitalized; he noted, however, that such reserves could be
used in the event of an operating deficit.
Discussion ensued about the foreseeable drainage projects and whether
the current service charge should be revised; the main expenses funded by the
service charge are Lewie Likover’s wages as drainage coordinator, the purchase
of culverts for projects, and the installation of drainage projects by outside
contractors. The Committee agreed to
consider this issue during the fiscal year 2016-17 budgetary process.
The
Committee next reviewed the amount of funds to be spent on debt servicing,
including the impact of pre-paying the outstanding loan with the Department of
Water Resources, which will retire approximately $55,000 of annual debt
payments. The Committee agreed this
amount should be deleted from the upcoming budget as a debt service expense and
allocated instead to water reserves (to replenish the reserves used to pre-pay
the debt). After some discussion, the
Committee agreed that the pre-payment of the loan should be proposed to the
Board to be funded by $150,000 in water reserves (which will be replenished)
and $150,000 in “community benefit” funds from the money on deposit with the
Local Agency Investment Fund (from the district’s sale of its Pine Gulch Creek
property to the National Park Service).
Discussion
then ensued about the line items on the revenue side of the budget. Staff said that in light of the ongoing
drought, water sales are not likely to be $120,000 as currently anticipated in
the draft budget. Last fiscal year, the
district collected approximately $94,000 in quarterly metered water sales and,
so far this fiscal year, the district is on track to bill about the same amount. Staff noted that the revenue estimate for
property tax revenue this year is likely understated (due to the robust home
sales in the County) and recommended that the Committee revised down the
anticipated revenue from water sales to $100,000, and increase the amount of
revenue anticipated to be received from the County via the property tax
distribution by the same amount.
Director
Amoroso inquired how the district plans to pay for the replacement pumps at the
downtown lift station and staff said the payment will be made from the sewer
reserves. At present, staff estimates the cost of
installing two new pumps (including the pump cost + cost of installation)
likely will exceed $100,000. Discussion ensued about the pump options under
consideration, which range from replacing them with the same model of pump or
selecting a completely different model of pump; staff has not yet finalized a
recommendation.
The
Committee asked staff to circulate a revised version of the budget and capital
improvement plan with the changes discussed during the meeting for the
Committee members’ review. The Committee
agreed to next meet on Monday, April 20, 2015 at 1:00 p.m.
5.
Community Expression
None.
6.
Adjournment
12:20 p.m.