Bolinas Community Public Utility District
A Meeting of the Finance Committee Of The Board Of Directors
April 14, 2015     270 Elm Road, Bolinas


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




6.      Adjournment


12:20 p.m.