HomeMy WebLinkAbout1986-07-09 District 6 COUNTY SANITATION DISTRICTS
�r OF ORANGE COUNTY, CALIFORNIA
V.O.BOX 8127,FOUNTAIN VALLEY,CALIFORNIA 9272"127
10844 ELLIS, FOUNTAIN VALLEY.CALIFORNIA 927W7018
(714)992-2411
July 8 , 1986
NOTICE OF SPECIAL MEETING
DISTRICT NO. 6
WEDNESDAY, JULY 9, 1986 - 6: 30 P.M.
10844 Ellis Avenue
Fountain Valley, California
u
I am calling a special meeting of the Board of Directors of County
Sanitation District No. 6 of Orange County, California, at the
above hour and date.
The purpose of the meeting is to review long-term debt financing
alternatives.
/s/ James A. Wahner
Chairman
BOARDS OF DIRECTORS
County Sanitation Districts post of i. B. 8127
of Orange County, California 10844 Ellis Avenue
Fountain Valley, Calif., 92708
Telephones:
Are. Code 714
DISTRICT No. 6 962-2411
AGENDA
SPECIAL MEETING
JULY 9, 1986 - 6:30 P.M.
(1) Roll Call
(2) Consideration of items re long-range debt financing
alternatives :
(a Verbal report and presentation by consultants/staff on
long-term debt financing alternatives
b) Discussion
(c) Consideration of direction to consultants/staff re
long-term debt financing
( 3) Other business and communications, if any
(4) Consideration of motion to adjourn -7%a S
� a
MEETING DATE July 91 1986 TIME 6:30 P.M-DISTRICTS 5 6 6
DISTRICT 1 JOINT BOARDS
(SALTARELLI)...HOESTEREY..._ (MANDIC).........BAILEY...... _
(CRANK)........HANSON...... (MURPHY).........BEVERAGE...._
(LUXEMBOURGER).GRISET......_ (ZIEGLER)........SUCK........
�V (WIEDER).......STANTON....._ (NORBY)..........CATLIN......
(RISHER).........CLIFT.......
DISTRICT 1 (PERRY)..........CULVER......
— — (SALTARELLI).....EDGAR.......
(NORBY)........CATLIN......_ (REESE)..........GRIFFIN..... _
(ZIEGLER)......BUCK........_ _ _ (LUXEMBOURGER)...GRISET......
(LUXEMBOURGER).GRISET......_ _ _ (CRANK)..........HANSON......
(SILZEL).......KAYANAMI...._ _ _ (COX)............MART........
(WEDEL)........MAHONEY..... _ (SALTARELLI).....HOESTEREY..._
(BEVERAGE).....MURPHY...... _ _ (SILZEL).........KAWAKAMI...._
(SCOTT)........NEAL........ (SALTARELLI).....KENNEDY.....
(CULVER).......PERRY....... (WEDEL)..........MAHONEY.....
(OVERHOLT).....RUTH........ (COX)............MAURER......
(BEYER)........SMITH....... _ _ (BAKER)..........MILLER......
(WIEDER).......STANTON..... (BEVERAGE).......MURPHY...... _
(NELSON).......SUTTON......_ _ _ (SCOTT)..........NEAL........
(SUTTON).........HELSON......
DISTRICT 3 (LACAYO).........PAA T IN......
(CULVER).........PERRY.......
_
(LACAYO).......PARTIN......_ _ _ (Cox)............PLUMIER.....
_
(NELSON).......POLIS ...... _ _ (NELSON).........POLIS.......
(MANDIC).......BAILEY...... _ _ (WIEDER).........RILEY.......
(WORST)........CATLIN...... (OVERHOLT).......ROTH........
(RISHER).......CLIFT....... _ _ (PACE)...........SAPIEN......
(PERRY)........CULVER...... _ (WILES)..........SIEFEN......
(REESE)........GRIFFIN..... _ (BEYER)..........SMITH....... _
(LUXEMBOURGER).GRISET......_ _ INIEGER).........STANTON.....
(WEDEL)........MAHONEY..... _ _ (NELSON).........SUTTON......
(SCOTT)........NEAL........ _ _ (MILLER).........SWAN........
(SUTTOW).......MELSON......_ (SELVACCI).......SYLVIA......
(OVERMOLT).....ROTH........ _ (FINLEY).........THOMAS......
(PACE).........SAPIEM...... _ (GREEN)..........WANNER......
(WILES)........SIEFEN......
(WIEDER).......STANTON....._
(SELVAGGI).....SYLVIA......_ _ _ STAFF:
DISTRICT S SYLVESTER..._
CLARKE......
(COX)..........MART........ DAWES.......J.
(COX)..........MAURER......_ _ _ ANDERSON—._
(VIEDER).......STANTON..... _ _ BUTLER......fC
BROWN.........
DISTRICT 6 BAKER.......
KYLE........
I I....WANNER...... VON LANCER
(COX)..........PLUMMER..... WINSOR......
(WIEDER).......STANTON..... _ _ STREED......
CLAWSON.....
DISTRICT OOTEN.......
LINDER......
((BAKERRELLI)...KILLER......_
BAKER)........MILLER......_
(LUXEMBOURGE—MAURER......_
(COY)..........SMITH.......
_ OTHERS: WOODRUFFATKINS......
(GREEN)........STAMANNTON ER......_ _ _ HOWARD......
_
(GREEN)........WARNER......_ _ _ HUNT........_
HUNT........_
DISTRICT 11 KEITM.......
()UINDlC).......BAILEY...... KNOPF.......
_ _ _ LE BLANC—._
INTEGER I.......STANTON....._ _ _ LINDSTROM..._
(FINLEY).......THOMAS......_ _ _ LYNCH......._
MARTINSON..._
DISTRICT 13 PEARCE......�
WASON.......
(NELSON).......SUTTON...... YOUNG.......
(MURPHY).......BEVERAGE...._
(OVERHOLT).....ROTM........_
(BEYER)........SMITH....... "
(WIEDER).......STANTON.....
DISTRICT if � ' /`•
( ) .......MILLER......
(MILLEMILLER)).......SWAN........
KENNEDY
(BEYER)........SMITH.......
(WIPER)........SMITH.......
(WtEDER).......STANTON.....
_
07/09/86
DISTRICT ND. 5 SPECIAL MEETING (JULY 9, 1986 @ 6:30 p.m.) and
DISTRICT NO. 6 SPECIAL MEMN3 (JULY 9, 1986, @ 6:30 p.m.) NOTES
�./ (Separate meetings were called but the two Districts met jointly prior to the
regular Joint Board Meeting)
$2 - consideration of long-term debt financing alternatives
The Director of Finance reviewed revenues in operating and capital funds. He
stated that the two Districts were in slightly different financial positions.
Re District 5, he said that during the budget process we attempt to spend money
as fast as possible which makes expenditures high and operating costs go up
about 15% per year. Budgets provide worst case scenario. The figures before
Directors were a little bit worst case than normal. These figures include
federal and state grants but we expect that the grant program is almost
finished. The rash flow information does not include grant funds. $1.7 million
is expected to be received over the next five years for both Districts 5 & 6.
District 5 is in excellent financial health. The user fee and connection fee
allows the District to stay above the line (referred to yellow package).
The case is slightly different with District 6. As presented in budget
documents, District 6 is headed down. The grant revenues reflected in the
budget documents allow the District to stay solvent for five years. If we
assume grant revenues are gone, the District finds itself overall in a negative
position in 1990-91. District 6 has some alternatives available to them. They
increased their user fee and connection fees this year from $26 to $29 and from
$500 to $1,000. They ran increase fees again. Anticipate that a 10% per year
�./ increase would be appropriate, considering the loss of grant revenues. The
'Swmary schedule includes a 10% increase in supplemental user fees. It would be
$39.60 by 1990-91. It could still be inadequate to fund the District's needs
long term. The District has the option of increasing the user fee or connection
fee or both and participating in the long-term debt financing program.
With the long-term debt financing program, sufficient funds are provided to meet
requirements for three years of joint works capital construction work.
Net bond proceeds for District 5 would be $7.4 million and for District 6 would
be $7.6 million. Even though the Districts would participate in debt financing,
it wouldn't mean their financial problems would go away. Will still need to
increase fees in the future. It is appropriate for District 6 to consider sane
other alternatives to provide for $7 million of expenditures required in 1991-92
and 1992-93. Director Wahner asked if they went with bond financing, would
there be an immediate increase in the rates? Bill Butler answered that there is
riot a need for an immediate increase because the District will receive
$7.6 million and will generate interest earnings on that money. District 6's
debt service requirement would be $833,000 per year at 88 for a payback of
25 years.
Director Plummer referred to tan report which indicated no further grant funding
plus 10% increase per year. Asked why they would be in a better position if
they borrowed $7 million now and then in 1995-96 would still have deficit of
$8 million, and they would still have 15 years more to pay the money off. If
the District didn't borrow the money, by that same period (1995-96) would need
$9 million. Only $1 million difference, right? She added that they would also
have an opportunity to make sore changes in 1995. Thought one of the problems
in District 6 is that they don't have the potential for growth. Don't have the
increase in property values like District 5. However, wanted the District to
realize that there are 500 acres being developed. The first project will be
caning dawn the line in a couple years. The 500 acres are along the Santa Ana
River (Banning Ranch) and will eventually be annexed. Said that is an important
consideration when thinking long-term. Should look into increasing connection
fees. Said at this point she didn't support going into debt for $1 million less
deficit. Doesn't make sense to borrow $7 million if figures are correct.
Bill Butler stated that the figures were correct if you go out 10 years. Need to
increase fees 2-3 times greater next year.
Chairman Hart asked about District 5 for 10 years plus. Bill replied that
District 5 doesn't need to change their fees for the next 10 years. Because of
the outstanding tax base in Newport Beach, they have a sufficient amount of
reserves in their Operating Fund. Their increase in property tax base is about
17% versus 9.5% for District 6. The existing supplemental user fee is adequate
to meet the District's requirements.
Director Stanton referred to the two projections--"with" and "without" the
secondary treatment waiver. In bond assumptions there are no grant monies
included. Said that bothers him that this is so conservative. What is the
probability of no grant monies? The General Manager explained that there is
currently pending before Congress reauthorization of the Clean Water Act and
both the House and Senate have passed separate versions and are waiting to work
out the differences. In both versions they propose to phase cot the
construction grant program which has been in effect since 1972. The major
difference in the two versions is how soon they phase them out. 1992 is the
latest phase-out proposed. It is fairly complicated. The current level of
grant funding ($2.4 billion) is allocated to the State. The proposed House and
Senate versions have different formulas. Senate proposes to change and House
proposes to remain with existing formula. State must then allocate to local
.� entities. The difference between the two versions means $42 million to
California. Over the phase-out period, the annual allocation for grants reduces
each year $2.4 - 2.0 million. The projects that we are talking about in the
next five years would not be eligible for grants even if the grants are
available. Grants are available for advanced treatment. The only grants we
would be eligible for would be after the five-year horizon if we don't have our
waiver renewed. There nay be a limited amount of funds available depending upon
which bill passes. The Administration would like to phase out grants by 1989.
Another provision of the bill is to drop the federal share to 55%. Whatever
funds were available would be at a reduced share.
Stanton questioned why we are projecting zero and are actually getting something
in the next five years. Said what is the real probability of what we are going
to get in the next five years? He was told that the project that is in the
budget that reflect the grant, is the long-term sludge project. $40 million for
ultimate solids disposal project. We are still very much in the study phase of
this project in sorting out what to do with our sludge. Our position on the
State's priority list- for grant money is not terribly high in comparison to
other agencies that have more pressing priorities. The Districts have received
significant funds at Plants 1 and 2. The only major funds we might expect
relate to this project which is still in study stage. This project is not high
on the State's priority list. The majority of the money reflected in the budget
documents is shown toward the end of the five-year planning period. We feel the
probability of receiving any grant money is not high. The Hyperion project is
taking a significant amount of grant money now. The General Manager stated that
�.s our assessment of availability of grant money is appropriate at this tine.
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Question was asked re proposed loan program to replace grant program. Tom
-- Woodruff replied that they are doing away with the grant program but can't
comment on loan program at this time. They are all being administered pursuant
to rules and regulations of EPA. Can't say today who will qualify. Was asked
when he would have a better idea. TLW said he wasn't optimistic re whether
there will be a bill even passed this year. Have to work under existing law and
..i appropriation. The best estimate is hopefully that the Clean Water Act will get
out before the fall recess. Then there will be a lot of cmprcmise. Both sides
propose reducing federal share to 55% and total appropriation is greatly
reduced. It will be passed but is a question of when.
The General Manager added that there are actually three versions of the bill.
The House, Senate and the Administration takes a position. The Administration
would like to phase grants out by 1988-89. Senate proposes one year earlier and
House one more year.
Mr. Sylvester commuted re bonding. Said Director Swan had suggested
considering these bonds because of pending tax reform legislation which will
phase out current favorable tax laws by September 1st. Stanton asked what the
difference was between bonding now and bonding afterwards. Was told that it
means you keep interest on money and use it, or you send a check to the federal
government for that amount of money. Stanton asked, if you bond next year, what
does that mean in terms of money? TIN replied re arbitrage. If you get bond
proceeds, you have those earnings. They would go to the benefit of the
Districts. Under the new law, you give federal government the arbitrage
earnings. How much it will be depends on interest rate. It is 1-28 higher
than the cost of the borrowing right now. If you bond before 9/l/86 then
throughout the remainder of the term of the bond proceeds you are free to invest
at mas+mnm yield. You would lose interest on bond proceeds in excess of cost of
borrowing.
Stanton said he felt uneasy. He thought assumptions were excessively
.� conservative as far as what is going out and the need for reserve funds.
Each District briefly caucaused re long-term debt financing.
DISTRICT 5 - It was moved, seconded and duly carried to terminate consideration
of long-term debt financing. Did not wish to participate.
DISTRICT 6 - It was also nmved, seconded and duly carried to terminate
consideration of long-term debt financing. Did not wish to
participate.
Director Stanton commented that he appreciated the staff's professional and
conservative financial reports.
. i
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COUNTY SANITATION DISTRICTS NOS. 5 6 6
OF ORANGE COUNTY, CALIFORNIA
MINUTES OF SPECIAL MEETING
`sa✓ July 9, 1986 - 6:30 p.m.
10844 Ellis Avenue
Fountain Valley, California
Pursuant to the call of the Chairmen, the Boards of Directors of County
Sanitation Districts Nos. 5 and 6 of Orange County, California met in a special
meeting at the above hour and date at the Districts' administrative office.
The Chairmen called the meeting to order at 6:30 p.m. The roll was called
and the Secretary reported a quorum present.
District 5:
DIRECTORS PRESENT: Evelyn Hart, Chairman, Philip Maurer,
Roger Stanton
DIRECTORS ABSENT: None
District 6•
DIRECTORS PRESENT: James Wahner, Chairman, Ruthelyn
Plummer, Roger Stanton
DIRECTORS ABSENT; None
STAFF MEMBERS PRESENT: J. Wayne Sylvester, General Manager,
Rita J. Brown, Secretary, William H.
Butler, Thomas M. Dawes
OTHERS PRESENT: Thomas L. Woodruff, General Counsel,
Joint Chairman Don R. Griffin, Ed
Long, Frank Coughlin, Jr. , Lora Stovall
+ + + + + + + + + + + + +
DISTRICTS 5 6 6 Chairpersons Hart and Wahner reported
Report, discussion and actions re that the purpose of the Special Meeting
long-term debt financing for was to review and give further
funding capital construction consideration to the alternative of
projects partially funding the Districts'
long-term capital construction program
needs by issuance of tax-exempt certificates of participation, as discussed at
the regular meeting of the Boards on June 11, 1986.
The Director of Finance then reviewed the five and ten-year updated fiscal
projections of the Districts based upon two sets of assumptions for the Joint
Works Master Plan Sewerage Facilities Construction Program requirements; and the
supplemental financial information prepared by staff and the Districts' financial
consultant, Bartle Wells Associates, which had been provided to the Directors.
He also reviewed the alternative financing methods for funding Districts'
operations as well as the capital expansion program including ad valorem taxes,
-1-
Districts 5 6 6
07/09/86
user and connection fees, federal and state construction grants, use of existing
reserves and long-term debt financing. District 5 projections indicate that it
is in relatively good financial condition. District 6 projections, however,
indicate that it will have a capital funding shortfall in the early 1990's.
Considerable discussion centered around the potential availability of federal and
state construction grants. Both the O.S. Senate and the House have passed
different versions of proposed reauthorization of the Federal Clean Water Act.
The bill is awaiting resolution of the differences by the Conference Committee.
Both versions propose the phase out of the federal Clean Water Construction Grant
Program over the next few years by reducing the level of funding appropriations
each year until totally phased out, as well as a reduction in the federal
participation from 75% to 55% of projects deemed to be eligible. The Districts
do not anticipate receiving any major grant appropriations over the next five
years because our construction program is primarily for hydraulic capacity rather
than grant-fundable advanced treatment facilities.
Following a review of financial projections reflecting the Districts' fiscal
position with and without issuance of long-term debt securities, and the impact
on the Districts' financial position by issuing. debt instruments, the Board
entered into a lengthy discussion on the relative merits of issuing tax-exempt
certificates of participation to partially fund the Districts' share of joint
works capital construction requirements over the next three years. Also
discussed was the benefit to the Districts of issuing long-term debt securities
prior to September 1, 1986, to take advantage of currently favorable tax lava,
versus issuance of such securities in future years because of pending changes in
the tax laws by Congress.
DISTRICT 5 It was moved, seconded and duly carried: �ss►�
That the District not proceed with issuance of tax-exempt certificates of
participation to partially fund the District's share of joint works sewerage
facility requirements.
DISTRICT 6 It was moved, seconded and duly carried:
That the District not proceed with issuance of tax-exempt certificates of
participation to partially fund the District's share of joint works sewerage
facility requirements.
DISTRICT 5 Moved, seconded and duly carried:
Adjournment
That this meeting of the Board of
Directors of County Sanitation District No: 5 be adjourned. The Chairman then
declared the meeting so adjourned at 7:25 p.m., July 9, 1986.
DISTRICT 6 Moved, seconded and duly carried:
Adjournment
That this meeting of the Board of
Directors of County Sanitation District No. 6 be adjourned. The Chairman then
declared the meeting so adjourned at 7:25 p.m. , July 9, 1986.
Secretary, Dire
County Sanitation Districts Noe. 5 6 6 of
Orange County, California
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