HomeMy WebLinkAbout2008-09 ADM MINUTES OF THE REGULAR MEETING OF
THE ADMINISTRATION COMMITTEE
Orange County Sanitation District
Wednesday, September 10, 2008, at 5:00 P.M.
A meeting of the Administration Committee of the Orange County Sanitation District was held on
September 10, 2008, at 5:00 p.m., in the Sanitation District's Administrative Office.
(2) Following the Pledge of Allegiance, a quorum was declared present, as follows:
ADMINISTRATION COMMITTEE STAFF PRESENT:
MEMBERS: Jim Ruth, General Manager
DIRECTORS PRESENT: Bob Ghirelli, Assistant General Manager
Mark Waldman, Chair Lorenzo Tyner, Director of Finance and
Phil Luebben, Vice Chair Administrative Services
Jim Ferryman Lilia Kovac, Committee Secretary
Chris Norby Wes Bauer
Brad Reese Rich Castillon
Douglas Reinhart (Alt.) Norbert Gaia
Christina Shea Jeff Reed
Sal Tinajero Rich Spencer
Jim Winder Mike White, Controller
Doug Davert, Board Chair
OTHERS PRESENT:
DIRECTORS ABSENT: Brad Hogin, General Counsel
Jon Dumitru Debby Cherney
Don Hansen Ed Soong
Larry Crandall, Board Vice Chair H
THIELCLERK OF TTHE BOARD
(3) APPOINTMENT OF CHAIR PRO TEM ORANGE COUNTY SANITATION DISTRICT
No appointment was necessary. SEP 17 2008
(4) PUBLIC COMMENTS
BY.
There were no public comments.
(5) REPORT OF THE COMMITTEE CHAIR
Chair Waldman did not give a report.
(6) REPORT OF THE GENERAL MANAGER
General Manager, Jim Ruth, did not give a report.
(7) REPORT OF DIRECTOR OF FINANCE AND ADMINISTRATIVE SERVICES
Lorenzo Tyner, Director of Finance and Administrative Services, did not give a report.
117
Minutes of the Administration Committee
September 10, 2008
Page 2
(8) REPORT OF GENERAL COUNSEL
Brad Hogin, General Counsel, did not give a report.
(9) CONSENT CALENDAR ITEMS
Consideration of motion to approve all agenda items appearing on the Consent Calendar not
specifically removed from same, as follows:
a. MOVED, SECONDED AND DULY CARRIED: Approve minutes of the July 9, 2008
meeting of the Administration Committee.
b. ADMO8-25 MOVED, SECONDED AND DULY CARRIED: Recommend to
the Board of Directors to adopt Resolution No. OCSD 08- ,
Adoption of District's 2008 Conflict of Interest Code, and
Repealing Resolution No. OCSD 06-23.
C. ADM08-26 MOVED, SECONDED AND DULY CARRIED: Recommend to
the Board of Directors to approve a pay grade change for the
Senior CIP Project Manager class cation from pay grade 90 to
pay grade 92.
END OF CONSENT CALENDAR
(10) ACTION ITEMS
a. ADMO8-27 MOVED, SECONDED AND DULY CARRIED: Recommend to
the Board of Directors to approve the Debt Financing Policy
dated September 17, 2008.
b. ADM08-28 MOVED, SECONDED AND DULY CARRIED: Recommend to the
Board of Directors to: 1)Approve an agreement with OCB
Reprographics for Reprographics and Related Services,
Specification No. 5-2008-3856D, for a three-year period from
October 1, 2008 to September 30, 2011, for an amount not to
exceed $400,000 per year;
2)Approve the option of two additional one-year renewals for an
amount not to exceed $400,000 per year; and,
3) Authorize a $40,000 contingency (10%) per year.
Minutes of the Administration Committee
September 10, 2008
Page 3
(11) INFORMATIONAL ITEMS
a. ADM08-29 Succession Management Program Update
A brief update was provided to the committee members on the
progress and success of the program implemented in 2007 with
the goal to meet future staffing needs through coaching,
leadership development, and training.
b. AOM08-30 Safety and Health Program Update
Directors were updated on the Safety and Health department's
activities and achievements, followed by safety performance
metrics.
(12) CLOSED SESSION
There was no closed session.
(13) OTHER BUSINESS, COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF
ANY
There were none.
(14) MATTERS WHICH A DIRECTOR MAY WISH TO PLACE ON A FUTURE AGENDA FOR
ACTION AND STAFF REPORT
There were none.
(15) ADJOURNMENT AND FUTURE MEETING DATES
The Chair declared the meeting adjourned at 6:02 p.m. The next regular Administration Committee
meeting is scheduled for October 8, 2008, at 5:00 p.m.
Submitted by:
Lilia Kovac
Committee Secretary
H:Weppa9endaW min Cwmleee120081090&091008 Admin Minules.dmx
ORANGE COUNTY SANITATION DISTRICT
Refunding Certificates of Participation
Refunding Summary
SERIES 2008A
Closing Date May 29, 2008
Refunding Costs:
Estimated in Agenda Report $ 2,100,000
Actual Cost 94( 6.768)
Savings from Agenda Report Estimate
Series 1992
Original Expected Present Value Savings $ 7,147,890
11 Series 2008A Refunding Cost 946 768
Net 1992 Savings after incoMorating Refunding Cost : 1 $ 6 201 122
SERIES 2008B
Closing Date September 11, 2008
Refunding Costs:
Estimated in Agenda Report $ 785,000
Current Estimated Cost(') (426,603)
Savings from Agenda Report Estimate('): $ 358.397
Series 1993
Original Expected Present Value Savings $ 7,369,473
Series 20088 Estimated Refunding Cost(') 42( 6,603)
Net 1993 Savings after estimated Refunding Cost)(a): I $ 6 942 870
' Actual Cost/Savings will be known after Series 1993 is entirely redeemed (by November 1, 2008).
Daily interest rate resets assumed to be 5.00%(current resets are 4.50%).
Distributed at the Fln ae 8,
Administration e
Meeting
NPA/'s COodamenls and setanps\vnfleLLawl sawdos\Tempomry Intwow niestoonlenLOUJIMMY&
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Orange County Sanitation District
Administration Committee
THE
Distributed
Meeting
�•n .
V.
J
Debt Policy
❑ Sets forth parameters for issuing and managing debt
❑ Provides guidance regarding:
Timing and purposes of debt;
Types of debt;
Methods of sale; and
Structural features
❑ Helps towards a sound debt position and protection of credit quality
❑ Advantages of policy:
Promotes consistency and continuity;
Rationalizes the decision-making process;
- Commits to long-term financial planning;
Enhances quality of decisions; and
Promotes credit quality to rating agencies
1
Proposed • - • Debt Policy
Rationale Goals
Guidance from
Administration
Committee Provide greater
flexibility
Credit / liquidity
crisis in the
financial markets
Require more
analysis in
Most recent administration
changes occurre of debt
in 2003
Proposed Changes to Debt Policy
Provide greaJter
flexibility .-
Proposed Changes
Category Before I After
Purpose for debt Projects whose funding needs Projects with long-term benefits for
exceed revenues the District
Variable rate Less than 100% of reserve Less than 150% of reserve, net of
exposure limit hedges
Principal Level debt service Level debt service by series or in
amortization aggregate
Credit Pre-qualify each issue Pre-qualification, based on market
enhancement conditions
3
Proposed Changes to Debt Policy
Require more
analysis in
administration
f debt
Proposed Changes
Category Before After
Debt structure Lowest cost Lowest cost, including investment
evaluation method opportunities, and associated risks
Refunding Present value savings of 3% Net present value savings of 3% or
selection criteria when potential savings are limited
Target financial Informal use Part of long-term plan and prior to
ratios debt issuance
Financial Informal use Require monitoring of "benchmarks"
performance and consider as part of an overall
"benchmarks" financial plan
4
Impact of Target Financial Ratios
❑ Optimal ratio
When net revenue requirement to debt service ratio most efficiently funds pay-
as-you-go portion of project costs and balances against reserve requirements
CIP Debt-Funding Ratio vs. Rate Projections"'
12.5%
12.1%
N M
m N 12.0%
N
c N 11.5% 11.4%
m
A L o
U 11.0% 10.9/°
vyi � 10.5%
q 10.5% 10.2%
c o
c c
10.0% 9.7%
> 9.5%
9.0%
50% 55% 60% 65% 70% 75% 80%
Target CIP Debt-Funding Ratio
(1) Calculations based on May 2008 projections and 2.00x target debt service coverage.
5
Impact of Target Financial Ratios
Debt Service Coverage vs. Rate Projections(')
12.5%
12.1%
W M
S 12.0%
y N
U O
c } 11.5% 11.3% 11.3%
N LL
10 t
U 11.0% - 10.7%
$ 10.6%
m o 10.5%
� r +
c c
c O
Q N 10.0%
rn LL 9.7% 9.7%
m
w o 9.5%
Qw 9.0% --
1.7x 1 .8x 1.9x 2.Ox 2.1 x 2.2x 2.3x
Target Debt Service Coverage
(1) Calculations based on May 2008 projections and 65% target CIP debt-funding ratio.
6
Comparison to Large California Wastewater Municipal Utilities
Orange Orange East Bay
County County Municipal Los
sanitation Sanitation Utility City of Los Angeles Sacra-
District District District Angeles County mento
Ratings
Moody's Investors Service Aa3 ?? Aa3 Aa3 Aa2 Aa3(1)
Standard & Poor's AAA ?? AA+ AA AA AA-
Fitch Ratings AA ?? AA AA NR AA-(z)
Debt Service Coverage 3.55x 2.00x 1 .81 x 1.92x 1.86x 1.35x
DSC (exc. Connection 2.91x 1.78x 1 .38x 1.75x 1.32x 0.92x
Fees)(z)
Floating Rate % (gross) 64.2% 50% 62.1% 24.9% 0.0% 46.7%
Floating Rate % (net) 49.6% 50% 13.4% 14.3% 0.0% 10.0%
Debt / Net Plant 50.3% 78% 69.0% 67.5% 41.5% 83.7%
Operating Margin 33.9% 34% 27.5% 52.3% 11.5% 33.1%
Days of Cash on Hand 1 935 1 752 97 172 124 1,770
(1) Negative outlook.
(2) Recent downgrade in June 2008.
7
"Arbitrage" in the Current Market
❑ Arbitrage is achieved through the difference between interest rates on borrowed
funds and investments
Tax-exempt versus taxable
Short- versus long-term
Current versus expected future
❑ Retention of positive difference is subject to the IRS arbitrage regulations
Spend-down exceptions include defined milestones and deadlines for
expenditure of funds
Exception 6-month 18-month 24-month
Type of Project Any Capital Projects Construction Only
Within 6 months 100% 15% 10%
Within 12 months -- 60% 45%
Within 18 months -- 100% 75%
Within 24 months -- -- 100%
8
Sample Current Interest Rates
❑ Limited opportunities for "arbitrage"
Variable Rate
Debt Structure Fixed Rate Bonds Bonds
Borrowing Cost
Tax-exempt Interest Rate 4.67% 1 .84%
Estimated Ongoing Fees 0.00% 0.58%
Net Borrowing Cost 4.67% 2.42%
Construction Fund
Investment Type 18-mo. Fixed Variable Variable
Investment Rate 2.98% 2.49% 2.49%
Net Arbitrage Benefit / (Cost) (1 .69%) (2.18%) 0.07%
9
Implied Breakeven Interest Rate Changes
❑ Equivalent future borrowing cost
Current borrowing cost less negative arbitrage
❑ Implied breakeven interest rate change
Equivalent future borrowing cost less current borrowing cost
Debt Acceleration Breakeven Analysis(')
90
80 78.4 bps
m
70
o. 60 51.8 bps
d
50
c c 40
Y cLi 30 22.7 bps
y 20
In 10
0
6 Month 12 Month 18 Month
Debt Issuance Acceleration
(1) Calculations based on California AA-rated Revenue MMD as of
August 29, 2008 and investment rate of 2.50% per annum.
10
Appendix 1:
Notes on Large California Wastewater Municipal Utilities
❑ East Bay Municipal Utility District
3.75% increase per year on dry weather fee from 1991
Treatment capacity (dry) at 5.2x annual flow for primary and 2.1 x for
secondary
Limited 5-year CIP at $172mm
- Cash on hand at 172 days in prior fiscal year
✓ After fiscal year end, funds transferred from restricted
❑ City of Los Angeles
Projected debt service coverage of 3.7x (senior) and 2.1x (subordinate) by
FY2012
7% annual rate increases since 2005
9.5x projected annual increases through 2012
Much higher coverage for senior lien
✓ No reserve fund for subordinate
$1 .8B CIP remains
✓ $5.5B already spent since 1985
11
Appendix 1:
Notes on Large California Wastewater Municipal Utilities
❑ Los Angeles County
Secured by ad valorem tax, as well as revenues
Debt service coverage of 2.7x to 4.5x in prior years
20-year principal amortization
Low debt ratio
✓ No projected future debt
❑ Sacramento
Downgraded by Fitch in June 2008
Negative outlook for Moody's as of June 2008
Debt service coverage of 2.Ox in prior fiscal year
Historic EDU growth of 10% per year
Projected long-term EDU growth of 5% to 9%
Ratings reliant on reserves and rate stabilization fund
12
Appendix 2:
Financial Ratio Definitions
DefinitionFinancial Ratio Formulaic
Debt Service Coverage (DSC) Total Revenues — Operations and Maintenance (O&M)
All Debt Service (including State SRF loans)
DSC (excluding Connection Fees) Total Revenues — Capital Facilities Charges — O&M
All Debt Service (including State SRF loans)
Total Revenues — O&M
MAIDS Coverage
Maximum Annual Debt Service for Outstanding Bonds
Floating Rate % (gross) Outstanding Floating Rate Bonds
Outstanding Bonds
Floating Rate % (net) Outstanding Floating Rate Bonds — Interest Rate Swaps
Outstanding Bonds
Debt/ Net Plant Outstanding Long-Term Debt
(Total Capital Assets —Accumulated Depreciation)
Operating Margin Operating Revenues — Operating Expenditures
Operating Revenues
Current Unrestricted Cash and Investments x 365
Days of Cash on Hand
Operating Expenditures
Days of Working Capital (Current Assets — Current Liabilities) x 365
Operating Expenditures
13
FINANCIAL MANAGEMENT POLICY AND PROCEDURE
Subject: Debt Policy Index: Finance Administration
1 Number., 201-3-1
/ Effective Date: Aegdst-33, Prepared by: Financial Management
2GG3September 17. Division
2008
Supersedes: August13, Approved By: AdministrationF-AHR
2003Septembera G, Committee
240-4
1.0 PURPOSE:
The foundation of any well-managed debt program is a comprehensive debt
policy. A debt policy sets forth the parameters for issuing debt and managing
outstanding debt, and provides guidance to decision makers regarding the timing
and purposes for which debt may be issued, types and amounts of permissible
debt, methods of sale that may be used and structural features that may be
incorporated. The debt policy should recognize a binding commitment to full and
timely repayment of all debt as an intrinsic requirement for entry into the capital
markets. Adherence to a debt policy helps to ensure that a government
maintains a sound debt position and that credit quality is protected. Advantages
of a debt policy are as follows:
1.1 enhances the quality of decisions by imposing order and discipline, and
promoting consistency and continuity in decision making;
1.2 rationalizes the decision-making process;
1.3 identifies objectives for staff to implement;
1.4 demonstrates a commitment to long-term financial planning objectives, and;
1.5 is viewed positively by the rating agencies in reviewing credit quality.
Distributed at the in nce &
Administration
Meeting
Page 1 of 18
2.0 ORGANIZATIONS AFFECTED:
General Managers Department, Finance Department, General Counsel, bond rating
agencies, financial advisors, bond underwriters, bond counsel, and external
independent auditors.
3.0 REFERENCES:
3.1 2002 Interim Strategic Plan Update
3.2 1999 Strategic Plan Update.
3.3 1989 "2020 Vision" Master Plan.
3.4 Government Finance Officers Association publication"A Guide for Preparing
a Debt Policy'.
3.5 "Moody's on Municipals- An Introduction to Issuing Debt" by Moody's
Investor Services.
3.6 Handbook for Muni-Bond Issuers by Joe Mysak, published by Bloomberg
Professional Library.
4.0 POLICY.
4.1 Limitations on Indebtedness-
4.1.1 The Distdct's debt capacity will not exceed legal limitations, such as
coverage requirements or additional bonds tests imposed by existing
bond covenant_, and :..;I net n_n to _ level that w 11 impA F the
District's bona FatiAgs
4.1.2 Before any new debt is issued, the impact of debt service payments
on total annual fixed costs will be analyzed. In accordance with
existing COP indenture agreements, Net Operating Revenues must
be at least a 1.25 coverage ratio to the maximum annual debt service.
4.1.3 The District will restrict long-term borrowing teof capital improvements
that provide lono-term benefits to the District
eeFFent revenue.
4.1.4 Proceeds from long-term debt will not be used for current ongoing
operations.
4.2 Types of Debt-
Page 2 of 18
4.2.1 The District may use short-term debt to cover temporary or
emergency cash flow shortages. All short-term borrowing will be
subject to Board approval by resolution.
4.2.2 The District may utilize Board approved intra-agency loans rather than
outside debt instruments to meet short-term cash needs. Intra-
agency loans will be permitted only if an analysis of the affected
Revenue Areas Indicates funds are available and the use of these
funds will not impact current operations. The principal, along with
interest at the prevailing rate as established by the District's
Treasurer, will be paid to the lending Revenue Area.
4.2.3 Commercial Paper- The District may issue short-term debt in the
form of Commercial Paper.
debt-
4.2.4 Revenue Bonds- The District may issue as special obligations
various types of revenue securities including notes,warrants, interim
debentures, bonds, and temporary bonds. Securities issued as
special obligations do not constitute outstanding indebtedness of the
District nor do they exhaust Its legal debt-incurring power. Bonding
should be limited to projects with available revenue sources,whether
self-generated or dedicated from other sources such as user fees.
Adequate financing feasibility studies should be performed for each
revenue issue. Sufficiency of revenues should continue throughout
the life of the bonds.
4.2.5 Certificates of Participation- Certificates of participation are
essentially leases which are sold to the public. The lease payments
are subject to annual appropriation. Investors purchase certificates
representing their participation in the lease. Often, equipment or
facilities being acquired serve as collateral. These securities are most
useful when other means to finance are not available under state law.
4.2.6 Refundings-A refunding is generally the underwriting of anew bond
issue whose proceeds are used to redeem an outstanding issue.
4.2.6.1 Prior to beginning a refunding bond issue, the District will
review and estimate of the savings achievable from the
refunding. The District may also review a pro fora
schedule estimating the savings assuming that the
refunding is done at various points in the future. Following
are the conditions under which the District will consider
refunding outstanding bonds:
Page 3 of 18
J
4.2.6.1.1 Net Reresent value savings are at least three(3)
percent of the par amount of the refunded"
bonds. Net present value savings of less than
three (3) percent of refunded bonds are
acceptable when comoared to savings that could
be achieved by waiting for more favorable
interest rates and/or call premiums.
42.6.1.2 Net sent value savings exceed the costs of
issuing the bonds.
4.2.6.1.3 The bonds to be refunded have restrictive or
outdated covenants.
4.2 6 1 5.1 54.2.6.1.4 Restructuring debt is deemed to be
desirable.
4.3 Debt Structure-
4.3.1 Debt will be structured to achieve the lowest possible net overall cost
to the District balanced against potential risks given market
conditions, the urgency of the capital program, and the nature and
type of security to be provided. Structuring options shall also consider
available opportunities related to maximizing earnings and minimizina
costs while complying with all Arbitrage regulations. including the
timing of issuance and current market conditions.
4334.3.2 The term of District debt issues should not extend beyond the
useful life of the project and generally should not extend beyond 30
years unless there are compelling factors which make it necessary to
extend the tens further.
4.3.3 For the issuance of new money debt.the District should consider the
appropriate amount to be sold based on the overall debt- versus
revenue-fundina targets as part of its Iona-term capital Plan and prior
to each issuance of new money debt.
4334.3.4 New money dGebt issued by the District should be structured
to provide for either level principal or level debt service on an
individual issuance or aggregate debt service basis. Deferring the
Page 4 of 18
repayment of principal should be avoided except in select instances
where It will take a period of time before project revenues are
sufficient to pay debt service. Ascending debt service should
generally be avoided.
4.3.4.1 The Dlstrict should consider target financial ratios(including
debt service ooveraae) and future financial flexibility when
determining the structure of its new money debt.
4:2 44.3.5 Variable Rate Obligations- When appropriate, the District
may choose to issue variable rate obligations,or securities that pay a
rate of interest that varies according to a predetermined formula or
results from a periodic remarketing or auction of the securities.
4 2 4-44.3.5.1 The maximum level of net variable rate
obligations incurred shall not exceed eneaad-a-half
fimes150%of the level of available invested reserves. The
Percentage is intended to reflect the inherent relationship
between taxable and tax-exempt interest rates based on
the highest marginal federal income tax rate. Such
percentage should be adiusted as the highest marginal
federal income tax changes.
4.4 Credit Objectives-
4.4.1 The District's goal is to maintain or improve its bond ratings. To that
end, prudent financial management policies will be adhered to In all
areas.
4.4.1.1 The District should monitor the District's current and
proiected key financial ratios(e.a., debt service coverage,
debt-to-eguity. not floating rate exposure, reserve level) in
comparison to those of other similar municipal entities.
These ratios should be updated and compared prior to the
issuance of new money debt or the restructuring of existino
debt. The District will consider these ratios in its financial
management policies.
4.4.2 Rating Agencies -
4.4.2.1 Full disclosure of operations will be made to the bond rating
agencies. District staff,with the assistance of the financial
advisors and bond counsel, will prepare the necessary
materials for and presentation to the rating agencies.
Page 5 of 18
4.4.2.2 The District will maintain a line of communications with the
rating agencies(Moody's,Standard&Poor's,and/or Fitch),
informing them of major financial events at the District as
they occur. The Comprehensive Annual Financial Report
(CAFR) shall be distributed to the rating agencies after it
has been accepted by the Board of Directors.
4.4.2.3 The rating agencies will be notified when the District begins
preparation for a debt issuance. After the initial contact,a
formal ratings application will be prepared and sent along
with the draft of the Official Statement relating to the bond
sale to the rating agencies. This application and related
documentation should be sent several weeks prior to the
bond sale to give the rating agencies sufficient time to
perform their review.
4.4.2.4 A personal meeting with representatives of the rating
agencies will be scheduled at least once every threefew,
years or whenever a major project is initiated.
4.4.3 Credit Enhancements- are mechanisms which guarantee principal
and interest payments. They include bond insurance and a line or
letter of credit. A credit enhancement, while costly, will sometimes
bring a higher rating from the rating agencies and a lowerinterest rate
on debt, thus lowering overall costs. Credit enhancements will only
be used when net debt service is reduced by more than the cost of
the enhancement. During the debt issuance planning, the Financial
Advisor or Underwriter will advise the District which credit
enhancements if any, should be purchased.
4.4.4 Dedicated Revenue Sources- In orderto ensure the mostfavorable
credit ratings, District revenues are dedicated to debt service in the
following order:
4.4.4.1 Ad valorem property tax.
4.4.4.2 Sanitary sewer service charges.
4.4.4.3 Other revenues.
4.5 Method of Sale-
4.5.1 The District will select a method of sale that is the most appropriate in
light of financial, market, transaction-speck and issuer-related
conditions, and explain the rationale for its decision.
Page 6 of 18
4.5.1.1 Competitive Sales- Debt obligations are generally issued
through a competitive sale. The District and its financial
advisor will set the terms of the sale to encourage as many
bidders as possible. By maximizing bidding, the District
seeks to obtain the lowest possible interest rates on its
bonds.
4.5.1.2 Negotiated Sales-Whencertainconditions favorable fora
competitive sale do not exist and when a negotiated sale
will provide significant benefits to the District that would not
be achieved through a competitive sale, the District may
elect to sell its debt obligations through a private or
negotiated sale. Such determination may be made on an
issue-by-issue basis,for a series of issues,or for part or all
of a specific financing program upon approval by the
Fiaanse;-Administrations Committee
Fes•
4.6 Methods of Selecting Consultants-
4.6.1 Financial Advisor- The District will retain an external independent
financial advisor,te4e-selected ,through
a competitive process and renewed at the discretion of the
Administration Committee. The financial advisor contract will be
administered by the District's Finance Department. The utilization of
the financial advisor for a particular bond sale will be on a case by
case basis upon recommendation by the Director of Finance and
Administrative Services and approval by the Administration
Committee.FAWR pursuant to a financial advisory service contract.
eoatparaFile-sa7es�iy-etheFis6uers-
4.6.2 Underwriters-For-a4Fser+petirive negotiated sales, underwriters
will be required to demonstrate sufficient capitalization and
experience related to the debt issuance. The selection of
underwriters may be for an individual or series of financings or a
specified time period.
4.6.3 Bond Counsel-The District will retain external bond counsel for all
debt issues. All debt issued by the District will include a written
opinion by bond counsel affirming that the District is authorized to
issue the debt, stating that the District has met all state constitutional
and statutory requirements necessary for issuance,and determining
the debt's federal income tax status. Bond counsel will be selected
through a competitive process
Page 7 of 18
administered by the District's Finance Department. The selection
process will require comprehensive municipal debt experience.
4.6.4 Disclosure Counsel- The District will retain, when appropriate.
Disclosure Counsel for debt issues. Disclosure Counsel will be
responsible for ensuring that the official statement complies with all
applicable rules regulations and guidelines. Disclosure Counsel fora
particular transaction may also serve the District as bond counsel on
the same issue. Disclosure counsel will be selected through a
competitive process administered by the District's Finance
Department. The selection process will require comprehensive
municipal debt experience.
aleng with 8theF qua!tative FneaswemeRtG, in developing a Paying
agceegieat.
4.7 Disclosure and Arbitrage Compliance-
4.7.1 The District will follow all State and federal regulations and
requirements regarding bond provisions, issuance, taxaton, and
disclosure.
4.7.2 The District will monitor compliance with bond covenants and adhere
to federal arbitrage regulations. Any Instances of noncompliance will
be reported to the€A14RAdminisVation Committee.
4.7.3 The District will maintain good communications with bond rating
agencies about its financial condition and will follow a policy of full
disclosure in every financial report and bond prospectus (Official
Statement).
4.7.4 Official Statements accompanying debt issues, CAFRs, and
continuous disclosure statements will meet, at a minimum, the
standards articulated by the Municipal Standards Rulemaking Board
(MSRB), the Government Accounting Standards Board (GASB), the
National Federation of Municipal Analysts, the Securities and
Exchange Commission (SEC), and Generally Accepted Accounting
Principles (GAAP). The Finance Department will be responsible for
ongoing disclosure to all Nationally Recognized Municipal Information
Depositories(NRMSIRs)designated by the SEC and for maintaining
compliance with disclosure standards promulgated by state and
national regulatory bodies.
4.7.4.1 Quarterly compliance reports to NRMSIRs.
Page 8 of 18
4.7.4.2 Copies of CAFR and updated tables from the Official
Statement to NRMSIRs within six month of year end.
5.0 DEFINITIONS:
5.1 ACCRUED INTERST- In the sale of a new issue of municipal bonds, the
dollar amount, based on the stated rate or rates of interest, which has
accrued on the bonds from the dated date,or other stated date, up to but not
including the date of delivery. When a bond is purchased In the secondary
market,the dollar amount, based upon the stated rate of interest,which has
accrued on the bond from the most recent interest payment date, up to but
not including the date of settlement. Accrued interest is paid to the seller by
the purchaser and is usually calculated on a 360-day year basis (assumes
each month has 30 days).
5.2 ADDITIONAL BONDS TEST- Refers to legal test found in resolution or
ordinance securing bonds; governs ability to issue additional bonds having
the same lien on pledged revenues. Usually expressed as a ratio in which
historic earnings meet certain levels of future debt service coverage.
5.3 ADDITIONAL OBLIGATIONS TEST- Refers to legal test found in the
resolution which governs an agencies ability to issue additional obligations
having the same lien on pledged revenues. The District's additional
obligations test is expressed as a ratio in which historic earnings must meet
or exceed certain levels of future obligation service coverage.
5.4 AD VALOREM TAX- A direct tax based "according to value" of property.
Counties and school districts and municipalities usually are,and special tax
districts may be,authorized by law to levy ad valorem taxes on property other
than intangible personal property. Local government bodies with taxing
powers may issue bonds or short-term certificates payable from ad valorem
taxation.
5.5 ADVANCE REFUNDING- A transaction in which new debt is issued to
provide monies to pay interest on old, outstanding debt as it becomes due,
and to pay the principal on the old debt either as it matures or at an earlier
call date. An advance refunding occurs before the maturity or call date
(more than 90 days before the maturity or call date)of the old debt, and the
proceeds of the new debt are invested until the maturity or call date of the old
debt. Most advance refundings result in defeasance of debt.
5.6 AMORTIZATION-The process of paying the principal amount of an issue of
bonds by periodic payments either directly to certificate holders or to a
sinking fund for the benefit of certificate holders. Payments are usually
calculated to include interest in addition to a partial payment of the original
principal amount.
Page 9 of 18
5.7 ARBITRAGE-Classically,the simultaneous purchase and sale of the same
or an equivalent security in order to profit from price discrepancies. The
most common occurrence in the public sector involves the Investment of the
proceeds from the sale of tax-exempt securities in a taxable money market
instrument that yields a higher rate,resulting in interest revenue in excess of
interest costs.
5.8 ARBITRAGE REBATE REQUIREMENTS-Arbitrage profiits(interest revenue
in excess of interest costs)from investment bond proceeds that are invested
in taxable instruments must be rebated to the U.S. Treasury Department.
5.9 AVERAGE COUPON- Weighted average interest cost of an issue.
5.10 BANK INVESTMENT CONTRACT- A separate account at a financial
institution that functions like a guaranteed investment contract,whereby the
contract is designed to provide guarantees of principal and interest on funds
deposited for a specified period.
5.11 BASIS POINT- Yields on municipal securities are usually quoted in basis
points where one basis point is equal to 1/100 of one percent.
5.12 BOND- Written evidence of the issuer's obligation to repay a specified
principal amount on a date certain(maturity date),togetherwith interest at a
stated rate, or according to a formula for determining that rate. Bonds are
distinguishable from notes, which mature in a much shorter period of time.
5.13 BOND COUNSEL-An attorney(orfinn of attorneys)retained bythelssuerto
give a legal opinion on the legality and security of the issue and its tax
exemption or taxability. Typically, bond counsel may prepare,or review and
advise the issuer regarding, authorizing resolutions or ordinances, trust
indentures, official statements, validation proceedings, and litigation.
5.14 BONDED DEBT- The portion of an issuer's total indebtedness as
represented by outstanding bonds.
5.15 BOND INSURANCE- An insurance policy purchased by an issuer or an
underwriter for either an entire issue or specific maturities,which guarantees
the payment of principal and Interest. This security provides a higher credit
rating and thus a lower borrowing cost for an issuer. Bond insurance can be
purchased directly by the District prior to the bond sale(direct purchase)or at
the underwriter's option and expense (bidder's option) The MiRIFIAt Will
Page 10 of 18
5.16 BOND RESOLUTION OR ORDINANCE- The document or documents
representing action of the issuer authorizing the issuance and sale of
municipal bonds. Issuance of the bonds is usually approved in the
authorizing resolution or ordinance, and the sale is usually authorized in a
separate document known as the "sale" or "award" resolution. All of such
resolutions, read together, constitute the bond resolution, which describes
the nature of the obligation and the issuer's duties to the bondholders.
5.17 BROKER-A person orfirm,other than a bank,which ads as an intermediary
by purchasing and selling securities for others rather than for its own
account.
5.18 CALLABLE BOND-A bond which permits or requires the issuer to redeem
the obligation before the stated maturity date at a specked price, usually at
or above par by giving notice of redemption in a manner specked in the
bond contract.
5.19 CAPITALIZED INTEREST-Interest paid on long-term obligations during the
period of time required to complete and prepare an assetfor its intended use
is capitalized as part of the acquisition cost of an asset.
5.20 CERTIFICATES OF PARTICIPATION-Obligations of a public entity based
on a lease or installment sale agreement. These are not considered debt
under Article 13 of the California Constitution.
5.21 CERTIFICATE HOLDER- The owner of a municipal certificate of
participation to whom payments of principal and interest are made.
Generally certificates are registered, and the owner is the person whose
name is noted on the certificate register.
5.22 CERTIFICATE REGISTER- The listing of names and addresses of the
current registered owners of the certificates, as maintained by the trustee or
certificate registrar.
5.23 COMPETITIVE SALE-The sale of bonds through sealed bids.
5.24 COST OF ISSUANCE- The expenses associated with the sale of a new
issue of municipal securities, including such items as underwriters spread,
printing, legal fees, and rating costs.
5.25 COVENANTS- The issuer's enforceable promise to perform or refrain from
performing certain actions. With respect to municipal bonds,covenants are
generally stated in the bond contract, resolution, or indenture.
5.26 COVERAGE-The ratio of pledged revenues available annually to pay debt
service obligations, as compared to the annual debt service obligation
Page 11 of 18
requirement. This ratio is one indication of the margin of safety for debt
service obligations.
5.27 CREDIT ENHANCEMENT- The availability of additional outside support
designed to improve an issuer's own credit standing. Examples include bank
lines of credit or collateralized funds.
5.28 CURRENT REFUNDING-A refunding transaction in which the proceeds of
the refunding debt are applied immediately (no more than 90 days from
issuance)to redeem the debt to be refunded. This situation differs from an
advance refunding,where the proceeds of the refunding bonds are placed in
escrow pending the call date or maturity of the debt to be refunded.
5.29 CURRENT YIELD- The ratio of the annual dollar amount of interest to the
purchase price of a bond, stated as a percentage.
5.30 CUSIP NUMBERS (COMMITTEE ON UNIFORM SECURITY
IDENTIFICATION PROCEDURES)- Identification numbers assigned each
maturity of a bond issue, and usually printed on the face of each individual
bond in the issue. The CUSIP numbers are intended to facilitate
identification and clearance of municipal securities.
5.31 DEBT LIMIT- The maximum amount of debt which an issuer of municipal
securities is permitted to incur under constitutional, statutory, or charter
provisions.
5.32 DEBT PER CAPITA-Bonded debt divided by population.
5.33 DEBT SERVICE OBLIGATION- The amount of funds necessary to pay
principal and interest, and the required contributions to an amortization
sinking fund for term certificates on an outstanding obligation. Debt service
obligation on certificates may be calculated on a calendar-year or on a fiscal-
year basis.
5.34 DEBT SERVICE RESERVE FUND- A fund usually amounting to principal
and interest payments for one year and used only if pledged revenues do not
generate sufficient funds to satisfy the debt service requirement. The
reserve fund is typically funded in whole or in part from the proceeds of the
debt issuance. The size and investment of the reserve fund are usually
subject to arbitrage regulations.
5.35 DEBT SERVICE SCHEDULE.A table listing the annual payments necessary
to meet debt service requirements over the period of time the bonds are to
be outstanding.
5.36 DEFAULT- Failure to make timely payment of principal and interest or to
comply with other features of the indenture.
Page 12 of 18
F5.39
EFEASANCE- Eliminating bonded indebtedness off an issuer's books
hrough creation of a portfolio of allowableT+easwy securities sufficient to
ake all debt service payments on pre-refunded, outstanding bonds.
IRECT DEBT- The debt that a governmental agency incurs in its own
ame.
ISCOUNT- The amount by which par value exceeds the price paid for a
ecurity which generally represents the difference between the nominal
terest rate and the actual or effective return to the investor.
5.40 DOUBLE-BARRELED BOND- Traditionally, a bond secured by a defined
source of revenue plus the full faith and credit of the issuer. The term is
occasionally, although erroneously, used to refer to bonds secured by any
two sources of pledged revenue.
5.41 DOWNGRADE- The lowering of a bond rating by a rating service. A
downgrade would be considered if the issuer encountered major financial
difficulties or an economic decline, which may be viewed by the rating
service as reducing the credit quality of the bond issue.
5.42 EFFECTIVE INTEREST RATE- The actual rate of interest earned by the
investor on bonds purchased, after allowing for premiums, discounts, or
accrued interest over the period of the investment.
5.43 FEASIBILITY STUDY-A report by an independent expert on the economic
need and practicality of a proposed debt program.
5.44 FINANCIAL ADVISOR- Performs analysis as to the appropriateness of a
bond sale and, if the governing body of the agency determines that a bond
sale is necessary, they then assist in its planning and preparation.
5.45 FLOATER- A security sold with a variable rate that changes at intervals
ranging from daily to annually.
5.46 FULL FAITH AND CREDIT- The pledge of a government's general taxing
power to pay off its debt obligations.
5.47 GENERAL OBLIGATION BONDS-Bonds which are secured by the full faith
and credit of the issuer. General obligation bonds are secured by a pledge
of a portion of the ad valorem taxing power. Such bonds constitute debts of
the issuer and require approval by election prior to issuance.
5.48 GUARANTEED INVESTMENT CONTRACT(GIC)-A group annuity contract
designed to provide guarantees of principal and interest on funds deposited
with an insurance company for a specified period.
Page 13 of 18
5.49 HIGH GRADE BONDS-Top-rated bonds, usually triple-A.
5.50 INDENTURE-Legal document describing the terms and conditions of a bond
offering,the rights of the bondholder, and the obligations of the issuer to the
bondholder. The document is alternatively referred to as a bond resolution
or deed of trust.
5.51 INTEREST RATE SWAP-An agreement between two parties to exchange
future flows of interest payments. One paFty agrees to pay the other a fixed
Fate; the etheF pays the fiFst paFty aR adjustable Fate usually tied te a shaFt
-•^` ,^-' Swap payments may be based on actual bond Payments and/or
based on various market indices.
5.52 INVERTED YIELD CURVE-When short-term rates are higher than long-tens
rates.
5.53 INVESTMENT GRADE- The broad credit designation given bonds which
have a high probability of being paid. Such bonds, have few, if any,
speculative features and are rated by the rating agencies in one of their top
four categories, ranging from triple-A to BBB and Baa.
5.54 ISSUER- A state, political subdivision, agency, or authority that borrows
money through the sale of bands or notes.
5.55 JUNIOR LIEN BONDS- Bond with a subordinate claim against pledged
revenues.
5.56 LETTER OF CREDIT- An agreement, usually with a commercial bank, to
guarantee demands for payment upon compliance with conditions
established in the agreement. Bank letters of credit are typically used as
additional sources of security and liquidity with variable rate obligations.
5.57 LIQUIDITY-The ability to convert assets, such as investments, readily into
cash.
5.58 MATURITY-The date on which the principal amount of a security is due and
payable to the certificate holder.
5.59 NEGOTIATED SALE-The sale of a new issue of municipal securities by an
issuer through an exclusive agreement with a previously selected underwriter
or underwriting syndicate. A negotiated sale should be distinguished from a
competitive sale,which requires public bidding by the underwriters. Primary
points of negotiation for the issuer are the interest rate and purchase price,
which reflect the issuers cost of offering its securities in the market.
Page 14 of 18
5.60 NET INTEREST COST(NIC)-Traditional method of calculating an issuer's
borrowing cost. NIC is derived by adding the total volume of interest
payments for the entire offering and dividing by the amount of certificates
outstanding times the years they are outstanding.
5.61 NET PRESENT VALUE SAVINGS- Present value of gross savings
discounted at the refunding bond yield to the closing date plus accrued
interest less any contribution from a reserve or debt service fund and
anticipated loss investment earnings.
&.445.62 NOTES- A written, short-tens promise of the issuer to repay a
speed principal amount on a certain date,togetherwith interest at a stated
rate, or according to a formula for determining that rate, payable from a
defined source of anticipated revenue. Notes usually mature in less than five
years. Notes are used to cover seasonal cash flow needs or interim
financings.
& 25.63 OFFICIAL STATEMENT(OS)-A document published by the issuer
who generally discloses material information on a bond issue, including the
purpose of the bond issue, how the bonds will be repaid, and the financial,
economic,and demographic characteristics of the issuer. Investors may use
this information to evaluate the credit quality of the bonds.
5.£35.64 ORIGINAL ISSUE DISCOUNT(DID)-Thediscountfromparatwhich
a new issue comes to market. For tax-exempt bonds. Tthe capital gain
represented by the OID is deemed tax-exempt by the IRS.
&..645.65 OVERLAPPING DEBT-The issuer's share of the debt of other local
units.
� a-655.66 PAR VALUE-The principal amount of a security,which must be paid
at maturity. Par value is also referred to as the face amount of a security.
5.655.67 PARITY BONDS- Separate bond issues that have the same lien
against pledged revenues.
g-675.68 PAY-AS-YOU GO BASIS- The financial policy of a municipality that
finances all capital outlays from current revenues rather than from borrowing.
&"5.69 PAYING AGENT-The entity responsible for the payment of principal
and interest on municipal obligations on behalf of the issuer. The paying
agent is usually a bank or trust company.
5-605.70 PLEDGED REVENUES- Funds obligated for the payment of debt
service and other deposits as required by the bond contract.
Page 15 of 18
3-7e5.71 PRELIMINARY OFFICIALSTATEMENT(POS)-A preliminary version
of the official statement which is used by the issuer or underwriter to describe
the proposed issue of municipal bonds prior to the determination of an
interest rate and offering price. The preliminary official statement is a
marketing tool used to gauge buyer's interest in the issue and Is relied upon
by potential purchasers in making their investment decisions.
5-745.72 PREMIUM-The amount bywhich the price paid fora security exceeds
par value,generally representing the difference between the nominal interest
rate and the actual or effective return to the investor.
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5.73 PRINCIPAL- The par value or face amount of a bond payable or issue of
bonds payable on stated dates of maturity.
5.74 PRIMARY MARKET-The market for new issues of municipal securities.
5.75 PRIVATE PLACEMENT- An original issue of municipal securities sold
directly to an institutional or private investor by way of a negotiated sale
rather than through a public offering.
5.76 RATE CONVENANT- A bond indenture provision requiring rate changes
necessary to meet annual debt service payments.
5.7-95.77 RATING AGENCIES-Credit quality evaluation of an issuer's securities
made by independent rating services. The three primary rating agencies with
regard to municipal debt are Moody's Investors Services,Standard&Poor's
Corporation, and Fitch.
3�95.78 RATINGS- Evaluations of the credit quality of obligations usually
made by independent rating services. Ratings generally measure the
probability of the timely repayment of principal and interest on municipal
obligations. The higher the credit rating,the more favorable the effect on the
marketability of the security.
54395.79 REDEMPTION-A transaction in which the issuer pays an outstanding
obligation at a specified price, usually at or above par prior to the specified
maturity date. Also known as a call.
Page 16 of 18
5-845.80 REFUNDING-Selling a new bond issue for redemption ordefeasance
of an outstanding bond issue. There are generally two reasons for refunding:
to reduce the issuer's interest costs orto remove a burdensome or restrictive
covenant imposed by the terms of the bonds being refinanced.
&.W5.81 REGISTRAR: The person or entity responsible for maintaining
records on behalf of the issuer for the purpose of noting the owners of
registered obligations. The paying agent frequently performs this function.
5-835.82 REVENUE BONDS-Bonds payable from a specific source of revenue
and which do not pledge the full faith and credit of the issuer.
&.945.83 SECONDARY MARKET- Market for bonds previously offered and
sold.
&,-M5.84 SENIOR LIEN OBLIGATIONS: Obligations having a prior claim on
pledge revenues.
3-865.85 SERIAL BONDS-Bonds of an issue in which some bonds mature in
each year over a period of years.
5475.86 SETTLEMENT- Delivery of and payment for anew issue of municipal
bonds. Settlement usually occurs within 30 days after the bonds are awarded
to the underwriters, which allows for the printing of the bonds and the
completion of certain legal matters.
5-885.87 SETTLEMENT DATE- The date used in price and interest
computations, usually the date of delivery.
5.885.88 SINKING FUND-Afund established in a bond indenturethat contains
money available to call bonds priorto maturity.
5,805.89 STANDBY BOND PURCHASE AGREEMENT- A legal agreement
with a commercial bank or trust company whereby the bank agrees to
purchase demand bonds which the remarketing agent was unable to
remarket to other parties and chose not to purchase for itself.
5-9-5.90 SUBORDINATE(JUNIOR)LIEN OBLIGATIONS-Obligations having
a subordinate claim against pledged revenues.
&925.91 TAX-EXEMPT OBLIGATIONS-Obligations whose interest is exempt
from federal income taxation pursuant to Section 103 of the Internal
Revenue Code, and may or may not be exempt from state income or
personal property taxation in the jurisdiction where issued.
Page 17 of 18
g-W5.92 TERM BONDS- Bonds coming due in a single maturity. The issuer
usually agrees to make periodic payments into a sinking fund for mandatory
redemption of term bonds before maturity or for payment at maturity.
6-945.93 TRUE INTEREST COST(TIC)-The present value borrowing cost of
the Issuer is reflected by taking into account the costs of issuance and
underwriting. TIC is similar to NIC, but also accounts for the time value of
money.
&.065.94 TRUSTEE- A financial institution with trust powers which acts in a
fiduciary capacity for the benefit of bond holders in enforcing the terms of the
bond indenture agreement.
61365.95 TRUST INDENTURE- A contract between the issuer of municpal
securities and a trustee, serving for the benefit of the security holders.
58Z5.96 UNDERWRITER-A dealer at a bank or brokerage house who buys an
agencys bonds in order for the fire's sales force to resell them to both
institutional and retail investors. The underwriter may acquire the bonds
either by negotiation with the issuer,or by award on the basis of competitive
bidding.
3-965.97 UNDERWRITERS COUNSEL-A lawyer involved in the transaction,
who represents the securities firm buying an issuerageasy's bonds.
5-W5.98 VARIABLE RATE OBLIGATIONS- A t.ax exempt security whose
interest rate is reset periodically by the remarketing agent according to a
preset formula defined in the indenture agreement. The variable interest
rate,also known as a"floater,is determined by the remarketing agent as the
level at which all bonds trade at par.
53095.99 YIELD CURVE- Graph displaying the term structure of interest rates
by plotting the yields of all bonds of the same quality with maturities ranging
from shortest to the longest available.
5.1045.100 YIELD TO MATURITY-The rate of return to the investor earned from
payments of principal and interest,which is compounded semiannually and
assumes that interest paid is reinvested at the same rate. Yield to maturity
takes into consideration the time value of the investment.
"25.101 ZERO-COUPON BONDS- Bonds sold at a deep discount from par,
which pay no interest and appreciate to full value at maturity. Also known as
capital appreciation bonds.
Page 18 of 18
Z ORANGE COUNTY SANITATION DISTRICT
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F cA NOTICE OF MEETING
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'"EEBo a127 ADMINISTRATION COMMITTEE
°° V.".�" Finance, Human Resources and Information Technology
Phone
(71479622411
F. ORANGE COUNTY SANITATION DISTRICT
(714)9621139E
Se g WEDNESDAY, SEPTEMBER 10, 2008 - 5:00 P.M.
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131uesa FOUNTAIN VALLEY, CALIFORNIA 92708
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ADMINISTRATION COMMITTEE
MEETING DATES
Meeting Date Board Meetina Dates
September 10, 2008 *September 17, 2008
October 8, 2008 October 22, 2008
November 12, 2008 *November 19, 2008
December 10, 2008 *December 17, 2008
January 2009 - Dark January 28, 2009
February 11, 2009 February 25, 2009
March 11, 2009 March 25, 2009
April 8, 2009 April 22, 2009
May 13, 2009 May 27, 2009
June 10, 2009 June 24, 2009
July 8, 2009 July 22,2009
August 2009 - Dark August 26, 2009
September 9, 2009 September 23, 2009
-Meetings being held the third Wednesday of the month.
ROLL CALL
ADMINISTRATION COMMITTEE
Finance, Human Resources and Information Technology
Meeting Date: September 10, 2008 Time: 5:00 p.m.
Adjourn:
COMMITTEE MEMBERS (14)
Mark Waldman Chair
Phil Luebben ice Chair
Jon Dumitru
Jim Ferryman
Don Hansen
Darryl Miller
Chris Norb
Brad Reese
Christina Shea
Sal Tina ero
Jim Winder
Doug Davert Board Chair
Larry Crandall Board Vice Chair
OTHERS
Brad Ho in, General Counsel
STAFF
Jim Ruth General Mana er
Bob Ghirelli, Assistant General Manager
Nick Arhontes, Dir. of Operations & Maintenance
Jim Herberg, Director of Engineering
Ed Torres, Director of Technical Services
Lorenzo Tyner, Director of Finance and
Administrative Services
Lilia Kovac, Committee Secretary
Jeff Reed, Human Resources and Employee
Relations Mana er
Mike White, Controller
H1ntglobalAgenda Draft RepodMAdm1n19aal1on\02.Roll Call.dou
AGENDA
REGULAR MEETING OF THE
ADMINISTRATION COMMITTEE
ORANGE COUNTY SANITATION DISTRICT
WEDNESDAY, SEPTEMBER 10, 2008, AT 5:00 P.M.
ADMINISTRATIVE OFFICE
10844 Ellis Avenue
Fountain Valley, California 92708
wvvw.orsd.com
(1) PLEDGE OF ALLEGIANCE
(2) DECLARATION OF QUORUM
(3) APPOINTMENT OF CHAIR PRO TEM IF NECESSARY
(4) PUBLIC COMMENTS
(5) REPORT OF COMMITTEE CHAIR
(6) REPORT OF GENERAL MANAGER
(7) REPORT OF DIRECTOR OF FINANCE AND ADMINISTRATIVE SERVICES
(8) REPORT OF GENERAL COUNSEL
(9) CONSENT CALENDAR ITEMS
Consideration of motion to approve all agenda items appearing on the Consent Calendar not
specifically removed from same, as follows:
a. Approve minutes of the July 9, 2008, meeting of the Administration Committee.
b. ADMOS-25 Recommend to the Board of Directors to adopt Resolution No.
OCSD 08-_, Adoption of District's 2008 Conflict of Interest Code,
and Repealing Resolution No. OCSD 06-23. (Book Page 9)
Book Page I
September 10, 2008 Page 2
C. ADM08-26 Recommend to the Board of Directors to approve a pay grade
change for the Senior CIP Project Manager classification from pay
grade 90 to pay grade 92. (Book Page 15)
END OF CONSENT CALENDAR
d. Consideration of items deleted from Consent Calendar, if any.
(10) ACTION ITEMS
a. ADMOB-27 Recommend to the Board of Directors to approve the Debt
Financing Policy dated September 17, 2008. (Book Page 16)
b. ADMOB-28 Recommend to the Board of Directors to: 1)Approve an agreement
with OCB Reprographics for Reprographics and Related Services,
Specification No. S-2008-38513D,for a three-year period from
October 1, 2008 to September 30, 2011, for an amount not to exceed
$400,000 per year;
2)Approve the option of two additional one-year renewals for an
amount not to exceed $400,000 per year; and,
3)Authorize a $40,000 contingency(10%) per year. (Book Page 41)
(11) INFORMATIONAL ITEMS
a. ADM08-29 Succession Management Program Update (Book Page 43)
b. ADMOB-30 Safety and Health Program Update (Book Page 46)
(12) CLOSED SESSION
.....-...... -.........-....-.--..--.--.-..-...._--.-___...........................-....-..-..-...-.....-...--'--'.--'-.......'-'-----
During the course of conducting the business set forth on this agenda as a regular meeting of the Committee, -I
the Chair may convene the Committee in closed session to consider matters of pending real estate negotiations, i
pending or potential litigation,or personnel matters, pursuant to Government Code Sections 54956.8, 54956.9,
54957 or 54957.6,as noted. i
Reports relating to (a) purchase and sale of real property; (b) matters of pending or potential litigation; (c)
i employee actions or negotiations with employee representatives; or which are exempt from public disclosure
under the California Public Records Act, may be reviewed by the Committee dudng a permitted closed session
and are not available for public inspection. At such time as final actions are taken by the Committee on any of
': these subjects;the minutes will reflect ell required disclosures,of information._ -- ---t
a. Convene in closed session.
to. Reconvene in regular session.
C. Consideration of action, if any, on matters considered in closed session.
Book Page 2
September 10, 2008 Page 3
(13) OTHER BUSINESS, COMMUNICATIONS , SUPPLEMENTAL AGENDA ITEMS, OR ITEMS
FOR FUTURE AGENDAS, IF ANY
(14) ADJOURNMENT: The next regular Administration Committee meeting is
scheduled for October B. 2008, at 5 p.m.
Book Page 3
September 10, 2008 Page 4
Agenda Posting: In accordance with the requirements of Califomia Government Code Section 54954.2,this agenda
has been posted in the main lobby of the District's Administrative offices not less than 72 hours prior to the meeting
date and time above. All public records relating to each agenda item, including any public records distributed less
than 72 hours prior to the meeting to all, or a majority of all, of the members of District's Board, are available for public
inspection in the office of the Clerk of the Board, located at 10844 Ellis Avenue, Fountain Valley, California.
Items Not Posted: In the event any matter not listed on this agenda is proposed to be submitted to the Committee for
discussion and/or action, it will be done in compliance with Section 54954.2(b) as an emergency item or because
there is a need to take immediate action, which need came to the attention of the Committee subsequent to the
posting of agenda, or as set forth on a supplemental agenda posted in the manner as above, not less than 72 hours
prior to the meeting date.
Public Comments: Any member of the public may address the Administration Committee on specific agenda items or
matters of general interest. As determined by the Chair, speakers may be deferred until the specific item is taken for
discussion and remarks may be limited to three minutes.
Matters of interest addressed by a member of the public and not listed on this agenda cannot have action taken by
the Committee except as authorized by Section 54954.2(b).
Consent Calendar: All matters placed on the consent calendar are considered as not requiring discussion or further
explanation, and unless a particular item is requested to be removed from the consent calendar by a Director of staff
member,there will be no separate discussion of these items. All items on the consent calendar will be enacted by
one action approving all motions, and casting a unanimous ballot for resolutions included on the consent calendar.
All items removed from the consent calendar shall be considered in the regular order of business.
The Committee Chair will determine if any items are to be deleted from the consent calendar.
Items Continued. Items may be continued from this meeting without further notice to a Committee meeting held
vnthin five(5)days of this meeting per Government Code Section 54954.2(b)(3).
Meeting Adioumment: This meeting may be adjourned to a later time and items of business from this agenda may be
considered at the later meeting by Order of Adjournment and Notice in accordance with Government Code Section
54955(posted within 24 hours).
Accommodations for the Disabled: The Board of Directors Meeting Room is wheelchair accessible. If you require
any special disability related accommodations, please contact the Orange County Sanitation District Clerk of the
Board's office at(714) 593.7130 at least 72 hours prior to the scheduled meeting. Requests must specify the nature
of the disability and the type of accommodation requested.
Notice to Committee Members:
For any questions on the agenda or to place any items on the agenda, Committee members should contact the Committee Chair
or Clerk of the Board ten days in advance of the Committee meeting.
Committee Chair: Mark Waldman (714)827-1969
Committee Secretary: Lilia Kovac (714)593-7124 Ikovac(fiiocsd.com
General Manager. Jim Ruth (714)593.7110 inrthCdocsd.com
Assistant General Manager Bob Ghirelli (714)593-7400 r_ghirelli(docsd.com
Director of Finance and Lorenzo Tyner (714)693-76M Ityner(accsd.com
Administrative Services
Human Resources and Employee Jeff Reed (714)593.7144 ireed(raocsd com
Relations Manager
R:WepMsd'210\CRANEWDMINISTRATIONCOMMITTEE'ADMIN 20D8\C0MMITTEE_FINAL_OFFICIAL
DOCUMENTS\090503 091008 Admin Agenda.docx
Book Page 4
September 10,2008
ADMINISTRATION COMMITTEE
AGENDA CALENDAR
ITEM ACTION
October Alternative Billing Methodologies Information
Book Page 5
MINUTES OF THE REGULAR MEETING OF
THE ADMINISTRATION COMMITTEE
Orange County Sanitation District
Wednesday, July 9, 2008, at 5:00 P.M.
A meeting of the Administration Committee of the Orange County Sanitation District was held on
July 9, 2008, at 5:00 p.m., in the Sanitation Districrs Administrative Office.
(2) Following the Pledge of Allegiance, a quorum was declared present, as follows:
ADMINISTRATION COMMITTEE STAFF PRESENT:
MEMBERS: Jim Ruth, General Manager
DIRECTORS PRESENT: Bob Ghirelli,Assistant General Manager
Mark Waldman, Chair Lorenzo Tyner, Director of Finance and
Phil Luebben, Vice Chair Administrative Services
Jim Ferryman Mike White, Controller
Don Hansen Life Kovac, Committee Secretary
Darryl Miller Bob Bell
Chris Norby Rich Castillon
Brad Reese Norbert Gaia
Christina Shea Jeff Reed
Sal Tinajero Simon Watson
Larry Crandall, Board Vice Chair
OTHERS PRESENT:
DIRECTORS ABSENT: James Eggert, General Counsel
Jon Dumitru
Jim Winder
Doug Davert, Board Chair
(3) APPOINTMENT OF CHAIR PRO TEM
No appointment was necessary.
(4) PUBLIC COMMENTS
There were no public comments.
(5) REPORT OF THE COMMITTEE CHAIR
Chair Waldman did not give a report.
(6) REPORT OF THE GENERAL MANAGER
General Manager, Jim Ruth, briefly reported on the continued efforts with lobbyists and
legislators to retain property tax funding. Mr. Ruth also reported that the Financial Management
Division has been awarded the Certification of Excellence Award from the Municipal Treasurer's
Association of United States and Canada.
Book Page 6
Minutes of the Administration Committee j
July 9, 2008
Page 2
(7) REPORT OF DIRECTOR OF FINANCE AND ADMINISTRATIVE SERVICES
Lorenzo Tyner, Director of Finance and Administrative Services, did not give a report.
(8) REPORT OF GENERAL COUNSEL
Brad Hogin, General Counsel, did not give a report.
(9) CONSENT CALENDAR ITEMS
Consideration of motion to approve all agenda items appearing on the Consent Calendar not
specifically removed from same, as follows:
a. MOVED, SECONDED AND DULY CARRIED: Approve minutes of the June 12, 2008
meeting of the Administration Committee.
END OF CONSENT CALENDAR
(10) ACTION ITEMS
a. ADMOB-21 MOVED, SECONDED AND DULY CARRIED: Recommend to the Board
of Director:to: 1)Award a purchase contract to TCS America, a division
of Tate America International Corporation, for Installation &
Implementation of IBM-Maximo Computerized Maintenance Management
System (CMMS), Specification No. CS-2008-364BD, for a total amount
not to exceed $874,480; and,
2)Approve an $87,448 contingency(10%).
b. ADM08-22 MOVED, SECONDED AND DULY CARRIED: Recommend to the Board
of Directors to approve an agreement with Banc of America Securities as
the Orange County Sanitation District's Remarketing Agent for the COP
Series 2000A and Series 2000E variable rate debt issues, in a form
approved by General Counsel.
C. ADMO8-23 MOVED, SECONDED AND DULY CARRIED: Recommend to the Board
of Directors to adopt Resolution No. OCSD 08-XX, Authorizing the
Orange County Sanitation District's Treasurer to Invest and/or Reinvest
District's Funds; Adopting District's Investment Policy Statement and
Performance Benchmarks for FY 2008-09; and Repealing Resolution No.
OCSD 07-17.
Book Page 7
Minutes of the Administration Committee
July 9, 2008
Page 3
(11) INFORMATIONAL ITEMS
a. ADM08-24 Alternative Billing Methodologies
Director of Finance and Administrative Services, Lorenzo Tyner, briefly
reviewed the results of prior studies which focused on developing a more
equitable method of billing for actual sewer use. These studies indicated
that the options presented at the time were found to be financially
ineffective. Staff was given direction to research billing processes used
by other agencies and provide additional information at a future
committee meeting.
(12) CLOSED SESSION
There was no closed session.
(13) OTHER BUSINESS, COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF
ANY
There were none.
(14) MATTERS WHICH A DIRECTOR MAY WISH TO PLACE ON A FUTURE AGENDA FOR
ACTION AND STAFF REPORT
There were none.
(15) ADJOURNMENT AND FUTURE MEETING DATES
The Chair declared the meeting adjourned at 5:44 p.m. The next regular Administration Committee
meeting is scheduled for September 10, 2008, at 5:00 p.m.
Suubbm�itteed by: 7y�
Lilia Kovac
Committee Secretary
H:Wept%gendaVWmin Commipeet200M70OW0908 Admin Minutee.d=
Book Page 8
ADMINISTRATION COMMITTEE NeB Date TOBd of D
ov/ieb"o/os os/v/oe
AGENDA REPORT Item Numbe Rem Numbe
ADNos u
Orange County Sanitation District
FROM: Brad Hogin, General Counsel
SUBJECT: ADOPTION OF DISTRICT'S 2008 CONFLICT OF INTEREST
CODE
GENERAL MANAGER'S RECOMMENDATION
Adopt Resolution No. OCSD 08- , Adoption of District's 2008 Conflict of Interest
Code, and Repealing Resolution No. OCSD 06-23.
SUMMARY
Please see attached memorandum from General Counsel dated August 29, 2008.
PRIOR COMMITTEE/BOARD ACTIONS
September 27, 2006 — Board amended Conflict of Interest Code.
ADDITIONAL INFORMATION
N/A
ATTACHMENTS
1. General Counsel Memo dated August 29, 2008
2. 2008 Conflict of Interest Code
Page 1
Book Page 9
LAW OFFICES OF
WOODRUFF, SPRADLIN & SMART
A PROFESSIONAL CORPORATION
MEMORANDUM
TO: Chair and Members of the Board of Directors
Orange County Sanitation District
FROM: Bradley R. Hogin,Esq.
DATE: August 29, 2008
RE: 2008 Conflict of Interest Code
The District is required to re-adopt its Conflict of Interest Code every two years. The
attached 2008 Code revises the District's list of designated employees that are required to file
statements of economic interest. The changes are necessary because some positions have been
deleted,some positions have been added,and certain changes have been made to classification
names.
General Counsel recommends that the Board adopt the 2008 Code,thus keeping the
District in compliance with state law. Upon adoption,the Code will be submitted to the County
Board of Supervisors as the code-reviewing body.
Bradley R. Hogin
General Counsel
59ssm.l
Book Page 10
2008 CONFLICT OF INTEREST CODE OF THE
ORANGE COUNTY SANITATION DISTRICT
Section 1: Purpose. The purpose of this 2008 Conflict of Interest Code
of the Orange County Sanitation District, is to comply with the requirements of
the California Political Reform Act of 1974 (California Government Code Sections
87100 et seq.), and particularly the requirement to adopt and promulgate a local
Conflict of Interest Code (California Government Code Section 87300).
Section 2: Designated Positions. The positions listed on Exhibit "A',
attached hereto and incorporated herein by reference, are Designated Positions.
Officers and employees holding those positions are Designated Employees, and
are deemed to make, or participate in the making, of decisions which may
foreseeably have a material effect on economic interests.
Section 3: Disclosure Categories. Each Designated Employee shall
disclose on Fair Political Practices Commission Form 700, all required
information for the following disclosure categories, and as specified for the
Designated Position:
Category I - Investments
Category II - Interests in Real Property
Category III - Income
Category IV - Business Positions
Section 4: Incorporation by Reference of Section 18730 of Title 2 of the
California Code of Regulations. Pursuant to authority of Section 18730 of Title 2
of the California Code of Regulations, the Regulations set forth in Title 2, Division
6, Chapter 7, Articles 1-3, and any amendments thereto, duly adopted by the Fair
Political Practices Commission, along with the attached Exhibit "A", in which
officers and employees of the District are designated and disclosure categories
are set forth, are hereby incorporated by reference and constitute the Conflict of
Interest Code of the Orange County Sanitation District.
Section 5: Place of Filing for Statements of Economic Interest. Persons
occupying Designated Positions shall file Statements of Financial Interest with
the Orange County Sanitation District Clerk of the Board. Upon receipt of the
Statements of the Board of Directors and General Manager, the District's Clerk of
the Board shall make and retain a copy and forward the original of these
Statements to the Clerk of the Orange County Board of Supervisors. Statements
for all other persons occupying Designated Positions will be retained by the
District.
1
Book Page 1 I
Section 6: Severability. If any article, section, subsection, paragraph,
subparagraph, sentence, clause, or phrase of this Code is for any reason held to
be invalid, unconstitutional, or unenforceable, such decision shall not affect the
validity of the remaining portions of this Code. The District declares that it would
have adopted this Code and each article, section, subsection, paragraph,
subparagraph, sentence, clause, and phrase thereof irrespective of the fact that
any one or more of such portions of this Code be declared invalid,
unconstitutional, or unenforceable.
Section 7: Effective Date: The District's 2008 Conflict of Interest Code shall take
effect ten (10)days after approval by the Orange County Board of Supervisors,
acting as the Code-reviewing body, pursuant to Government Code Section
87303.
2
Book Page 12
2008 CONFLICT OF INTEREST CODE OF THE
ORANGE COUNTY SANITATION DISTRICT
EXHIBIT "A"
DESIGNATED POSITIONS
Designated Position Disclosure Categories
General Manager I, 11, 111, IV
Assistant General Manager 1, 1[. III, IV
Director of Engineering 1, II, III, IV
Director of Finance &Administrative Services I, 11, III, IV
Director of Operations and Maintenance I, 11, 111, IV
Director of Technical Services 1, II, Ill, IV
Accounting Manager 1, II, III, IV
Contracts and Purchasing Manager I, 11, III, IV
Controller 1, 11, III, IV
Engineering Manager I, 11, III, IV
Environmental Assessment Manager 1, 11, III, IV
Facilities Manager I, II, III, IV
Human Resources & Employee Relations Manager I, II, III, IV
Information Technology Manager 1, 11, III, IV
Information Technology Systems & Operations Manager I, II, III, IV
Public Information Manager 1, 11, III, IV
Laboratory Manager I, II, III, IV
Maintenance Manager 1, 11, III, IV
Safety Manager 1, 11, III, IV
Operations Manager 1, 11, III, IV
Source Control Manager 1, 11, III, IV
Accounting Supervisor I, II, III, IV
Chief Plant Operator 1, 11, Ill, IV
Clerk of the Board I, II, III, IV
Purchasing Supervisor 1, 11, III, IV
Contracts Supervisor 1, 11, III, IV
Construction Inspection Supervisor I, II, III, IV
Senior Construction Inspection Supervisor 1, 11, III, IV
Engineering Supervisor I, 11, III, IV
Environmental Supervisor 1, 11, III, IV
Human Resources Supervisor I, II, III, IV
Laboratory Supervisor I, 11, III, IV
Maintenance Supervisor 1, 11, III, IV
3
Book Page 13
2008 CONFLICT OF INTEREST CODE OF THE
ORANGE COUNTY SANITATION DISTRICT
EXHIBIT "A"
DESIGNATED POSITIONS
Designated Position Disclosure Categories
Senior Maintenance Supervisor I, 11, III, IV
Materials Control Supervisor 1, 11, III, IV
Operations Supervisor 1, 11, III, IV
Safety & Health Supervisor 1, 11, III, IV
Source Control Supervisor 1, 11, Ill, N
Principal Accountant 1, 11, III, IV
Principal Financial Analyst 1, 11, III, IV
Buyer 1, 11, III, IV
Senior Buyer 1, 11, III, IV
Capital Improvement Program Project Manager 1, 11, Ill, IV
Construction Inspector 1, 11, Ill, IV
Senior Construction Inspector 1, 11, III, IV
Contracts Administrator 1, 11, Ill, IV
Senior Contracts Administrator I, 11, III, IV
Principal Contracts Administrator 1, 11, III, IV
Senior Engineer 1, 11, III, IV
Regulatory Specialist 1, 11, III, IV
Senior Regulatory Specialist 1, 11, III, IV
Senior Scientist 1, 11, III, IV
General Counsel 1, 11, III, IV
'Consultants 1, 11, III, IV
'The governing body of the District shall determine on a case-by-case basis
whether a particular Consultant is required to comply with the disclosure
requirements in this Section. If the governing body determines that a particular
Consultant must comply with the disclosure requirements of this Section, the
governing body shall notify the Consultant in writing. The written notification shall
include a description of the Consultant's duties, and based upon those duties, a
statement of the extent of disclosure requirements. The governing body's
notification is a public record and shall be retained for public inspection by the
Clerk of the Board.
4
Book Page 14
ADMINISTRATION COMMITTEE o/� Toydi�oDIr'
AGENDA REPORT MM Number Mn Number
MM08-26
Orange County Sanitation District
FROM: James D. Ruth, General Manager
Originator: Lorenzo Tyner, Director of Finance &Administrative Services
SUBJECT: Senior CIP Project Manager Pay Grade Change
GENERAL MANAGER'S RECOMMENDATION
Approve a pay grade change for the Senior CIP Project Manager classification from pay
grade 90 to pay grade 92.
SUMMARY
The Senior CIP Project Manager job classification pay grade was changed from pay
grade 92 to pay grade 90 during the annual budget process in June 2008. A further
review of contract provisions does not support the change. Therefore, the pay grade
should be reset at 92. This position is currently vacant.
PRIOR COMMITTEE/BOARD ACTIONS
• June 2007 - Board Meeting
• April 2008 - Board Meeting
• June 2008 - Board Meeting -Annual Budget Approval
ADDITIONAL INFORMATION
N/A
JDR:LT:JR:lc
F..N. UW,Q] ReIUN.O]N1N]
Page t
Book Page 15
ADMINISTRATION COMMITTEE Meeting oaee To 9d.of Dlr.
09/10/08 09/17/08
AGENDA REPORT 1 AD 08-2 tem Numb
Am Nurr47
Orange County Sanitation District
FROM: James D. Ruth, General Manager
Originator: Lorenzo Tyner, Director of Finance and Administrative Services
SUBJECT: DEBT FINANCING POLICY
GENERAL MANAGER'S RECOMMENDATION
Approve the Debt Financing Policy dated September 17, 2008,
SUMMARY
At the December 2007 Administration Committee meeting, staff provided an overview of the
District's Debt Financing Program. This overview included a discussion on the types of debt,
the process for issuance, and related OCSD policies.
At the conclusion of staffs presentation, the following requests were expressed by the
committee members:
• Strengthen the guidance within the policy on the administration of debt.
• Develop scenarios in recommending the appropriate debt coverage ratio as it relates to
the ratings provided by the debt rating agencies.
• Provide benchmarking data from other agencies on debt coverage ratios.
• Develop procedures for maximizing arbitrage.
Staff has taken the above requests into consideration in drafting the District's revised debt policy
and will report on them at the meeting.
Additionally, staff anticipates issuing new debt in December 2008. As part of that process, staff
will present options which vary the mix of the fixed and variable debt components of the
District's financing program.
PRIOR COMMITTEEIBOARD ACTIONS
• June 25, 2008:The OCSD Board of Directors approved the FY 2008-09 and 2009-10
Budget which includes new money debt issuances in each budget year.
ADDITIONAL INFORMATION
See attached staff report.
ATTACHMENTS
1. Staff Report dated September 3, 2008
2. Debt Financing Policy dated September 17, 2008
JDR:LT:MW:lc
Page 1
Book Page 16
a ice.......
September 3, 2008
STAFF REPORT
TO: Board of Directors
James D. Ruth, General Manager
FROM: Lorenzo Tyner
Director of Finance and Administrative Services
SUBJECT: Revisions to Debt Policy
The District issues debt obligations to fund a portion of its capital improvement program
(CIP). The issuance of debt allows the District to (1) stabilize and maintain affordable
user rates, (2) equitably distribute capital costs among current and future users and
(3) preserve the financial health of the District. Therefore, the District has issued
approximately $800 million of new money debt obligations since 2003. The ongoing
management of the District's outstanding debt portfolio and long-term capital planning,
including future issuances of debt, are an integral part of the District's financial
operations.
At the December 2007 Administration Committee meeting, staff provided an overview of
the District's debt financing program. This overview included a discussion on the types
of debt, the process for issuance, and proposed revisions to the District's Debt Policy.
During the presentation to the Administration Committee, follow-up information was
requested by committee members, specifically pertaining to the following:
• Strengthen the guidance within the policy on the administration of debt.
• Develop scenarios in recommending the appropriate debt service coverage and
debt-to-equity ratios.
• Provide benchmarking data from other agencies on debt coverage ratios.
• Develop procedures for maximizing arbitrage.
This correspondence includes information in response to these requests, except for the
benchmarking data which will be provided as a handout at the Administration
Committee meeting. Staff has taken the above requests into consideration in the
updated proposed revisions to the District's current Debt Policy.
If you have any questions or concems, please feel free to contact me.
Book Page 17
i,
Revisions to Debt Policy i
Page 2 of 7
September 3, 2008
I
Debt Policy
Consistent with industry best practices and rating agency guidelines, the District in 2001
developed a written Debt Policy on the management of existing debt obligations and
future issuance of debt obligations. The Debt Policy provided a framework for:
• Promoting consistency and continuity;
• Rationalizing the decision making process;
• Committing to long-term financial planning;
• Enhancing the quality of decisions; and
• Promoting credit quality to rating agencies.
It is intended that the Debt Policy would be revised from time to time to reflect the
changing financial needs of the District and the evolving market conditions. Therefore,
in September 2007, staff introduced a revision to the Debt Policy, which was last
updated in August 2003. The attached revision to the Debt Policy has been updated to
accommodate feedback received during the December 2007 Administration Committee
meeting.
The current proposed changes to the Debt Policy are driven in part by guidance from
the Administration Committee and in part by the recent events in the financial markets.
Since last summer, credit and liquidity difficulties stemming from the subprime mortgage
crisis have negatively affected the financial markets, including the municipal bond
market. Although the District thus far has successfully and proactively limited such
negative exposure to its operations, the extent and rapidity of the effects on the financial
markets underscore the prudence of providing greater flexibility in, and requiring more
attention to, the management of the District's debt portfolio.
The proposed changes to the Debt Policy provide for greater flexibility by making certain
requirements less restrictive and by introducing more comprehensive goals for
structuring debt financings. The following highlights some of these proposed changes:
• Reduces restriction from limiting debt issuance only for projects which cannot be
funded with current revenues to those providing long-term benefits for the District;
• Expands evaluation of debt structure to include, not only costs, but also risks;
• Provides calculation variable rate exposure by netting against interest rate
hedges;
• Increases limit on variable rate exposure to not exceed one-and-a-half times
available invested reserves, approximately reflecting the current marginal tax rate
for the highest income bracket of 35% (i.e., 1 / (1-35%) = 1.5);
• Allows principal amortization of new money debt to be based on aggregate debt
service of the District's outstanding debt obligations, rather than on an individual
basis, and
• Eliminates requirement to prequalify all debt issuances for bond insurance.
Book Page 18
Revisions to Debt Policy
Page 3 of 7
September 3,2008
The proposed changes also strengthen the guidelines used for the decision-making
process. However, consistent with the need for greater flexibility, the new guidelines do
not include precise limitations on measurable financial ratios, but rather require
evaluations on the District's financing approach prior to the issuance of additional debt.
The evaluations include (1) a review of the impact of target financial ratios (i.e., debt-to-
equity funding ratio and debt service coverage), (2) comparisons of the District's current
and projected key financial ratios (e.g., debt service coverages, floating rate exposure,
debt-to-equity ratio, reserve level) to those of other large municipal wastewater utilities
in California, and (3) a comprehensive analysis on the economics of issuing debt as it
relates to investment opportunities and perceived near-term changes in market
conditions.
The above quantitative evaluations based on currently available information have been
prepared by the District's financial advisor Public Resources Advisory Group (PRAG)
and are discussed below.
Impact of Target Financial Ratios
One important measure of the impact of target financial ratios on the District's
operations is the resulting revenue requirements to maintain cash flow and cash reserve
sufficiency. The resulting revenue requirements can be translated to percentage sewer
service charge (SSC) rate increases.
The relationship between target financial ratios and percentage rate increases generally
is not linear. For a given set of assumptions, there is often an optimal ratio at which the
revenues above target debt service coverage ratio are efficiently spent to finance the
revenue-funded (or pay-as-you-go) portion of project costs or to enhance reserve levels
necessary to support the increase in debt service obligations.
Using the most recent projections of the District's future revenues and expenditures,
PRAG has analyzed the resulting required percentage rate increases for a number of
different target financial ratio scenarios. The results of these analyses are shown in the
following graphs.
Book Page 19
Revisions to Debt Policy
Page 4 of 7
September 3, 2008
CIP Debt-Funding Ratio vs. Rate Projections(')
12.5
m 12.1%
m ry 12.0
m
y 11.5%
11.4%
LL
L 10.9%
U w 11.0%
m o 10.5% 10.2% 10.2%
0
c o
c o
m i 70.0% 9.7%
m LL
m
m m 9.5%
Q `
9.0
60% 66% 60% 65% 70% 75% 80%
Target CIP Debt-Funding Ratio
Calculations based on May 2008 projections and 2.00x target debt service coverage.
Debt Service Coverage vs. Rate Projections(l)
12.6%
m 12.1%
m n
mm
12.0%
u o
E > 11.5% 11.3% 11.3%
m LL
R L
m c` 11.0% 10.7%
w 10.6%
n q 10.5%
c c
c o
10.0%
LL L9.71A 9.7%
m
`m m 9.5%
a `
9.0%
1.7x 1.8x 1.9x 2.Ox 2.1x 2.2x 2.3x
Target Debt Service Coverage
Calculations based on May 2008 projections and 65%target CIP debt-funding ratio.
Book Page 20
Revisions to Debt Policy
Page 5 of 7
September 3, 2008
"Arbitrage" in the Current Market
As a public entity, the District is granted the ability to issue debt obligations, the interest
on which is exempt from taxation by the Federal government and the State of California,
to finance qualified projects. As a result, the District can borrow at tax-exempt interest
rates which are lower than taxable interest rates. This generates an economic
opportunity for the District to "arbitrage" between tax-exempt and taxable interest rates,
provided the District observes certain laws and regulations related to the issuance of
tax-exempt debt.
The primary example of arbitrage relates the ability of the District to issue debt at tax-
exempt rates and then to invest the proceeds of the issuance at taxable rates. If the
investment income at taxable interest rates were to exceed the tax-exempt interest
borrowing costs of the District, the District would achieve a net benefit equal to the
difference. The ability to realize an economic benefit is dependent not only on the
differences due to taxability but also market conditions.
Because of this ability to arbitrage between tax-exempt and taxable interest rates, the
Internal Revenue Service (IRS) has developed regulations governing the treatment of
earnings on proceeds for tax-exempt debt. In general, the investment earnings on the
proceeds of tax-exempt debt which exceed the arbitrage yield (or the effective
borrowing cost) must be rebated to the IRS, unless the proceeds fall under certain
exceptions. The most salient of these are the spending exceptions. If the rate of
expenditure of the proceeds can meet defined milestones and deadlines, the investment
earnings on the proceeds may be exempt from rebate, allowing the issuer to retain any
arbitrage earnings. The defined milestones and deadlines depend on the purpose of
the issue, as shown in the following table.
Exception 6-month 18-month 24-month
Type of Project Anv Capital Proiects Construction Only
Within 6 months 100% 15% 10"/0
Within 12 months 60% 45%
Within 18 months 100% 75%
Within 24 months 100%
The failure to comply with the spending exception requirements would require the issuer
to rebate any earnings above the arbitrage yield and incur monetary penalties, voiding
the ability to achieve "arbitrage".
Besides the nature of tax-exempt and taxable bonds, it is possible to arbitrage based on
differences between short-and long-term interest rates. As with the example above,
the ability to realize an economic benefit based on these differences is dependent on
market conditions.
The following table sets forth sample interest rates based on current market conditions
for a number of different scenarios. As shown, there exist only limited opportunities to
achieve arbitrage under current market conditions.
Book Page 21
Revisions to Debt Policy
Page 6 of 7
September 3, 2008
Debt Structure Fixed Rate Bonds Variable Rate Bonds
Tax-exempt Interest Rate 4.67% 1.84%
Estimated Ongoing Fees 0.00"/0 0.589/6
Net Borrowing Cost 4.67% 2.42%
InvestmentT a 18-mo. Fixed Variable Variable
Taxable Investment Rate 2.98% 2.49% 2.49%
Net Arbitrage Benefit/ Cost 1.69% 2.18% 0.07%
-11 Based on 20-year California AA-rated Revenue MMD on 8/2912008.
121 Based on SIFMA municipal swap index on 8/28/2008.
In Represents remarketing agent fee of 7.5 bps per annum and liquidity facility fee of 50 bps per annum.
141 Based on 18-month Federal Agency security yields on 8/29/2008.
I51 Assumes rate of return equal to 1-month LIBOR on 8/2912008.
Another economic opportunity, resulting in part from the difference between tax-exempt
and taxable interest rates, is the potential benefit of issuing tax-exempt debt earlier
rather than later. Under"normal" market conditions when the net economic cost of
carrying tax-exempt debt (i.e., paying tax-exempt interest less earning taxable
investment income) is low, there may be an economic advantage to accelerating the
issuance of tax-exempt bonds. The advantage is greater, if the issuer expects future
interest rates to be higher than current interest rates. The potential economic benefit is
assessed by comparing the "breakeven" interest rate change—the amount of the
change in tax-exempt interest rates to remain economically neutral—to the expected
change in interest rates.
Using current market conditions, the following analysis calculates the breakeven interest
rate changes for different periods of debt issuance acceleration. As shown in the
following chart, average tax-exempt interest rates must rise by more than 22, 51 and 78
bps in order for the acceleration of debt issuance by six, 12 and 18 months,
respectively, to achieve a net economic benefit for the District.
Book Page 22
Revisions to Debt Policy
Page 7 of 7
September 3, 2008
Debt Acceleration Breakeven Analysis"'
90
78.4 bps
a so
a
70
60 51.8 bps
a
50
y 40
i
30 22.7 bps
c
> 20
v
v 10
m`
0
6 Month 12 Month 18 Month
Debt Issuance Acceleration
"I Calculations based on California AA-rated Revenue MMD as of August 29, 2008 and
investment rate of 2.50% per annum.
Under current market conditions, the ability to arbitrage is limited. Borrowing fixed rate
is significantly more expensive than short-term taxable reinvestment rates. Borrowing
variable rate produces little benefit, as credit enhancement costs are currently high, and
there is accompanying interest rate risk. Issuing debt on an accelerated basis is costly
as the break-even interest rates are high (i.e. over 50 basis points for a year of
accelerated funding). To comply with the proposed changes in Section 4.3.1 of the
Debt Policy, staff will conduct similar types of arbitrage analyses prior to any issuance of
debt in order to lower the borrowing cost to the District.
Updates for Future Debt Issuances
The above analyses provide a "snapshot" of the District's financial conditions and
opportunities based on currently available information. It is important to note that
updates to these analyses are necessary as new information, such as updates to the
District's financial projects and the final results of the District and other municipal
utilities, becomes available.
The proposed revisions to the Debt Policy would require these updates to occur at each
financial decision point, including but not limited to each time that debt is to be issued.
The results of the analyses would provide useful measures to guide the development of
the structure of a given debt issuance and the long-term financing plan of the District.
LT:MW
Book Page 23
mo FINANCIAL MANAGEMENT POLICY AND PROCEDURE
Subject., Debt Policy Index: Finance Administration
Number: 201-3-1
Effective Date: September 17, 2008 Prepared by., Financial Management
Division
Supersedes: August 13, 2003 Approved By: Administration
Committee
1.0 PURPOSE:
The foundation of any well-managed debt program is a comprehensive debt
policy. A debt policy sets forth the parameters for issuing debt and managing
outstanding debt, and provides guidance to decision makers regarding the timing
and purposes for which debt may be issued, types and amounts of permissible
debt, methods of sale that may be used and structural features that may be
incorporated. The debt policy should recognize a binding commitment to full and
timely repayment of all debt as an intrinsic requirement for entry into the capital
markets. Adherence to a debt policy helps to ensure that a government
maintains a sound debt position and that credit quality is protected. Advantages
of a debt policy are as follows:
1.1 enhances the quality of decisions by imposing order and discipline, and
promoting consistency and continuity in decision making;
1.2 rationalizes the decision-making process;
1.3 identifies objectives for staff to implement;
1.4 demonstrates a commitment to long-term financial planning objectives, and;
1.5 is viewed positively by the rating agencies in reviewing credit quality.
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2.0 ORGANIZATIONS AFFECTED:
General Manager's Department, Financial Management Division,General Counsel,
bond rating agencies, financial advisors, bond underwriters, bond counsel, and
external independent auditors.
3.0 REFERENCES:
3.1 2002 Interim Strategic Plan Update
3.2 1999 Strategic Plan Update.
3.3 1989 "2020 Vision" Master Plan.
3.4 Government Finance Officers Association publication"A Guide for Preparing
a Debt Policy".
3.5 "Moody's on Municipals- An Introduction to Issuing Debt" by Moody's
Investor Services.
3.6 Handbook for Muni-Bond Issuers by Joe Mysak, published by Bloomberg
Professional Library.
4.0 POLICY:
4.1 Limitations on Indebtedness-
4.1.1 The District's debt capacity will not exceed legal limitations, such as
coverage requirements or additional bonds tests imposed by existing
bond covenants.
4.1.2 Before any new debt is issued, the impact of debt service payments
on total annual fixed costs will be analyzed. In accordance with
existing COP indenture agreements, Net Operating Revenues must
be at least a 1.25 coverage ratio to the maximum annual debt service.
4.1.3 The District will restrict long-term borrowing of capital improvements
that provide long-term benefits to the District.
4.1.4 Proceeds from long-term debt will not be used for current on-going
operations.
4.2 Types of Debt-
4.2.1 The District may use short-term debt to cover temporary or
emergency cash flow shortages. All short-term borrowing will be
subject to Board approval by resolution.
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4.2.2 The District may utilize Board approved infra-agency loans rather than
outside debt instruments to meet short-term cash needs. Intra-
agency loans will be permitted only if an analysis of the affected
Revenue Areas indicates funds are available and the use of these
funds will not impact current operations. The principal, along with
interest at the prevailing rate as established by the District's
Treasurer, will be paid to the lending Revenue Area.
4.2.3 Commercial Paper- The District may issue short-term debt in the
form of Commercial Paper.
4.2.4 Revenue Bonds- The District may issue as special obligations
various types of revenue securities including notes, warrants, interim
debentures, bonds, and temporary bonds. Securities issued as
special obligations do not constitute outstanding indebtedness of the
District nor do they exhaust its legal debt-incurring power. Bonding
should be limited to projects with available revenue sources,whether
self-generated or dedicated from other sources such as user fees.
Adequate financing feasibility studies should be performed for each
revenue issue. Sufficiency of revenues should continue throughout
the life of the bonds.
4.2.5 Certificates of Participation- Certificates of participation are
essentially leases which are sold to the public. The lease payments
are subject to annual appropriation. Investors purchase certificates
representing their participation in the lease. Often, equipment or
facilities being acquired serve as collateral. These securities are most
useful when other means to finance are not available under state law.
4.2.6 Refundings-A refunding is generally the underwriting of a new bond
issue whose proceeds are used to redeem an outstanding issue.
4.2.6.1 Prior to beginning a refunding bond issue, the District will
review and estimate of the savings achievable from the
refunding. The District may also review a pro forma
schedule estimating the savings assuming that the
refunding is done at various points in the future. Following
are the conditions under which the District will consider
refunding outstanding bonds:
4.2.6.1.1 Net present value savings are at least three (3)
percent of the par amount of the refunded
bonds. Net present value savings of less than
three (3) percent of refunded bonds are
acceptable when compared to savings that could
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be achieved by waiting for more favorable
interest rates and/or call premiums.
4.2.6.1.2 Net present value savings exceed the costs of
issuing the bonds.
4.2.6.1.3 The bonds to be refunded have restrictive or
outdated covenants.
4.2.6.1.4 Restructuring debt is deemed to be desirable.
4.3 Debt Structure-
4.3.1 Debt will be structured to achieve the lowest possible net overall cost
to the District balanced against potential risks given market
conditions, the urgency of the capital program, and the nature and
type of security to be provided. Structuring options shall also consider
available opportunities related to maximizing earnings and minimizing
costs while complying with all Arbitrage regulations, including the
timing of issuance and current market conditions.
4.3.2 The term of District debt issues should not extend beyond the useful
life of the project and generally should not extend beyond 30 years
unless there are compelling factors which make it necessary to extend
the term further.
4.3.3 For the issuance of new money debt, the District should consider the
appropriate amount to be sold based on the overall debt- versus
revenue-funding targets as part of its long-term capital plan and prior
to each issuance of new money debt.
4.3.4 New money debt issued by the District should be structured to provide
for either level principal or level debt service on an individual issuance
or aggregate debt service basis. Deferring the repayment of principal
should be avoided except in select instances where it will take a
period of time before project revenues are sufficient to pay debt
service. Ascending debt service should generally be avoided.
4.3.4.1 The District should consider target financial ratios(including
debt service coverage) and future financial flexibility when
determining the structure of its new money debt.
4.3.5 Variable Rate Obligations- When appropriate, the District may
choose to issue variable rate obligations, or securities that pay a rate
of interest that varies according to a predetermined formula or results
from a periodic remarketing or auction of the securities.
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4.3.5.1 The maximum level of net variable rate obligations incurred
shall not exceed 150% of the level of available invested
reserves. The percentage is intended to reflect the
inherent relationship between taxable and tax-exempt
interest rates based on the highest marginal federal income
tax rate. Such percentage should be adjusted as the
highest marginal federal income tax changes.
4.4 Credit Objectives-
4.4.1 The District's goal is to maintain or improve its bond ratings. To that
end, prudent financial management policies will be adhered to in all
areas.
4.4.1.1 The District should monitor the District's current and
projected key financial ratios (e.g., debt service coverage,
debt-to-equity, net floating rate exposure, reserve level) in
comparison to those of other similar municipal entities.
These ratios should be updated and compared prior to the
issuance of new money debt or the restructuring of existing
debt. The District will consider these ratios in its financial
management policies.
4.4.2 Rating Agencies -
4.4.2.1 Full disclosure of operations will be made to the bond rating
agencies. District staff, with the assistance of the financial
advisors and bond counsel, will prepare the necessary
materials for and presentation to the rating agencies.
4.4.2.2 The District will maintain a line of communications with the
rating agencies(Moody's, Standard&Poor's,and/or Fitch),
informing them of major financial events at the District as
they occur. The Comprehensive Annual Financial Report
(CAFR) shall be distributed to the rating agencies after it
has been accepted by the Board of Directors.
4.4.2.3 The rating agencies will be notified when the District begins
preparation for a debt issuance. After the initial contact, a
formal ratings application will be prepared and sent along
with the draft of the Official Statement relating to the bond
sale to the rating agencies. This application and related
documentation should be sent several weeks prior to the
bond sale to give the rating agencies sufficient time to
perform their review.
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4.4.2.4 A personal meeting with representatives of the rating
agencies will be scheduled at least once every three years
or whenever a major project is initiated.
4.4.3 Credit Enhancements- are mechanisms which guarantee principal
and interest payments. They include bond insurance and a line or
letter of credit. A credit enhancement, while costly, will sometimes
bring a higher rating from the rating agencies and a lower interest rate
on debt, thus lowering overall costs. Credit enhancements will only
be used when net debt service is reduced by more than the cost of
the enhancement. During the debt issuance planning, the Financial
Advisor or Underwriter will advise the District which credit
enhancements if any, should be purchased.
4.4.4 Dedicated Revenue Sources- In order to ensure the most favorable
credit ratings, District revenues are dedicated to debt service in the
following order:
4.4.4.1 Ad valorem property tax.
4.4.4.2 Sanitary sewer service charges.
4A.4.3 Other revenues.
4.5 Method of Sale -
4.5.1 The District will select a method of sale that is the most appropriate in
light of financial, market, transaction-specific and issuer-related
conditions, and explain the rationale for its decision.
4.5.1.1 Competitive Sales- Debt obligations are generally issued
through a competitive sale. The District and its financial
advisor will set the terms of the sale to encourage as many
bidders as possible. By maximizing bidding, the District
seeks to obtain the lowest possible interest rates on its
bonds.
4.5.1.2 Negotiated Sales-When certain conditions favorable fora
competitive sale do not exist and when a negotiated sale
will provide significant benefits to the District that would not
be achieved through a competitive sale, the District may
elect to sell its debt obligations through a private or
negotiated sale. Such determination may be made on an
issue-by-issue basis, for a series of issues, or for part or all
of a specific financing program upon approval by the
Administration Committee.
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4.6 Methods of Selecting Consultants-
4.6.1 Financial Advisor- The District will retain an external independent
financial advisor, selected through a competitive process and
renewed at the discretion of the Administration Committee. The
financial advisor contract will be administered by the District's
Financial Management Division. The utilization of the financial
advisor for a particular bond sale will be on a case by case basis upon
recommendation by the Director of Administrative Services and
approval by the Administration Committee. pursuant to a financial
advisory service contract.
4.6.2 Underwriters- For negotiated sales, underwriters will be required to
demonstrate sufficient capitalization and experience related to the
debt issuance. The selection of underwriters may be for an individual
or series of financings or a specified time period.
4.6.3 Bond Counsel- The District will retain external bond counsel for all
debt issues. All debt issued by the District will include a written
opinion by bond counsel affirming that the District is authorized to
issue the debt, stating that the District has met all state constitutional
and statutory requirements necessary for issuance, and determining
the debt's federal income tax status. Bond counsel will be selected
through a competitive process administered by the District's Financial
Management Division. The selection process will require
comprehensive municipal debt experience.
4.6.4 Disclosure Counsel- The District will retain, when appropriate,
Disclosure Counsel for debt issues. Disclosure Counsel will be
responsible for ensuring that the official statement complies w th all
applicable rules regulations and guidelines. Disclosure Counsel for a
particular transaction may also serve the District as bond counsel on
the same issue. Disclosure counsel will be selected through a
competitive process administered by the District's Financial
Management Division. The selection process will require
comprehensive municipal debt experience.
4.7 Disclosure and Arbitrage Compliance-
4.7.1 The District will follow all State and federal regulations and
requirements regarding bond provisions, issuance, taxation, and
disclosure.
4.7.2 The District will monitor compliance with bond covenants and adhere
to federal arbitrage regulations. Any instances of noncompliance will
be reported to the Administration Committee.
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4.7.3 The District will maintain good communications with bond rating
agencies about its financial condition and will follow a policy of full
disclosure in every financial report and bond prospectus (Official
Statement).
4.7A Official Statements accompanying debt issues, CAFRs, and
continuous disclosure statements will meet, at a minimum, the
standards articulated by the Municipal Standards Rulemaking Board
(MSRB), the Government Accounting Standards Board (GASB), the
National Federation of Municipal Analysts, the Securities and
Exchange Commission (SEC), and Generally Accepted Accounting
Principles (GAAP). The Financial Management Division will be
responsible for ongoing disclosure to all Nationally Recognized
Municipal Information Depositories (NRMSIRs) designated by the
SEC and for maintaining compliance with disclosure standards
promulgated by state and national regulatory bodies.
4.7.4.1 Quarterly compliance reports to NRMSIRs.
4.7.4.2 Copies of CAFR and updated tables from the Official
Statement to NRMSIRs within six month of year end.
5.0 DEFINITIONS:
5.1 ACCRUED INTERST- In the sale of a new issue of municipal bonds, the
dollar amount, based on the stated rate or rates of interest, which has
accrued on the bonds from the dated date, or other stated date, up to but not
including the date of delivery. When a bond is purchased in the secondary
market, the dollar amount, based upon the stated rate of interest, which has
accrued on the bond from the most recent interest payment date, up to but
not including the date of settlement. Accrued interest is paid to the seller by
the purchaser and is usually calculated on a 360-day year basis (assumes
each month has 30 days).
5.2 ADDITIONAL BONDS TEST- Refers to legal test found in resolution or
ordinance securing bonds; governs ability to issue additional bonds having
the same lien on pledged revenues. Usually expressed as a ratio in which
historic earnings meet certain levels of future debt service coverage.
5.3 ADDITIONAL OBLIGATIONS TEST- Refers to legal test found in the
resolution which governs an agencies ability to issue additional obligations
having the same lien on pledged revenues. The District's additional
obligations test is expressed as a ratio in which historic earnings must meet
or exceed certain levels Of future obligation service coverage.
5.4 AD VALOREM TAX- A direct tax based "according to value' of property.
Counties and school districts and municipalities usually are, and special tax
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districts maybe, authorized bylaw to levy ad valorem taxes on property other
than intangible personal property. Local government bodies with taxing
powers may issue bonds or short-term certificates payable from ad valorem
taxation.
5.5 ADVANCE REFUNDING- A transaction in which new debt is issued to
provide monies to pay interest on old, outstanding debt as it becomes due,
and to pay the principal on the old debt either as it matures or at an earlier
call date. An advance refunding occurs before the maturity or call date
(more than 90 days before the maturity or call date) of the old debt, and the
proceeds of the new debt are invested until the maturity or call date of the old
debt. Most advance refundings result in defeasance of debt.
5.6 AMORTIZATION-The process of paying the principal amount of an issue of
bonds by periodic payments either directly to certificate holders or to a
sinking fund for the benefit of certificate holders. Payments are usually
calculated to include interest in addition to a partial payment of the original
principal amount.
5.7 ARBITRAGE-Classically, the simultaneous purchase and sale of the same
or an equivalent security in order to profit from price discrepancies. The
most common occurrence in the public sector involves the investment of the
proceeds from the sale of tax-exempt securities in a taxable money market
instrument that yields a higher rate, resulting in interest revenue in excess of
interest costs.
5.8 ARBITRAGE REBATE REQUIREMENTS-Arbitrage profits(interest revenue
in excess of interest costs)from investment bond proceeds that are invested
in taxable instruments must be rebated to the U.S. Treasury Department.
5.9 AVERAGE COUPON- Weighted average interest cost of an issue.
5.10 BANK INVESTMENT CONTRACT- A separate account at a financial
institution that functions like a guaranteed investment contract,whereby the
contract is designed to provide guarantees of principal and interest on funds
deposited for a specified period.
5.11 BASIS POINT- Yields on municipal securities are usually quoted in basis
points where one basis point is equal to 1/100 of one percent.
5.12 BOND- Written evidence of the issuer's obligation to repay a specified
principal amount on a date certain (maturity date),together with interest at a
stated rate, or according to a formula for determining that rate. Bonds are
distinguishable from notes, which mature in a much shorter period of time.
5.13 BOND COUNSEL-Anattorney(or firm of attorneys)retained bythe issuer to
give a legal opinion on the legality and security of the issue and its tax
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exemption or taxability. Typically, bond counsel may prepare,or review and
advise the issuer regarding, authorizing resolutions or ordinances, trust
indentures, official statements, validation proceedings, and litigation.
5.14 BONDED DEBT- The portion of an issuer's total indebtedness as
represented by outstanding bonds.
5.15 BOND INSURANCE- An insurance policy purchased by an issuer or an
underwriter for either an entire issue or specific maturities,which guarantees
the payment of principal and interest. This security provides a higher credit
rating and thus a lower borrowing cost for an issuer. Bond insurance can be
purchased directly by the District prior to the bond sale(direct purchase)or at
the underwriters option and expense (bidders option).
5.16 BOND RESOLUTION OR ORDINANCE- The document or documents
representing action of the issuer authorizing the issuance and sale of
municipal bonds. Issuance of the bonds is usually approved in the
authorizing resolution or ordinance, and the sale is usually authorized in a
separate document known as the "sale" or "award" resolution. All of such
resolutions, read together, constitute the bond resolution, which describes
the nature of the obligation and the issuer's duties to the bondholders.
5.17 BROKER-A person or firm, other than a bank,which acts as an intermediary
by purchasing and selling securities for others rather than for its own
account.
5.18 CALLABLE BOND-A bond which permits or requires the issuer to redeem
the obligation before the stated maturity date at a specified price, usually at
or above par by giving notice of redemption in a manner specified in the
bond contract.
5.19 CAPITALIZED INTEREST-Interest paid on long-term obligations during the
period of time required to complete and prepare an asset for its intended use
is capitalized as part of the acquisition cost of an asset.
5.20 CERTIFICATES OF PARTICIPATION-Obligations of a public entity based
on a lease or installment sale agreement. These are not considered debt
under Article 13 of the California Constitution.
5.21 CERTIFICATE HOLDER- The owner of a municipal certificate of
participation to whom payments of principal and interest are made.
Generally certificates are registered, and the owner is the person whose
name is noted on the certificate register.
5.22 CERTIFICATE REGISTER- The listing of names and addresses of the
current registered owners of the certificates, as maintained by the trustee or
certificate registrar.
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5.23 COMPETITIVE SALE- The sale of bonds through sealed bids.
5.24 COST OF ISSUANCE- The expenses associated with the sale of a new
issue of municipal securities, including such items as underwriter's spread,
printing, legal fees, and rating costs.
5.25 COVENANTS- The issuer's enforceable promise to perform or refrain from
performing certain actions. With respect to municipal bonds, covenants are
generally stated in the bond contract, resolution, or indenture.
5.26 COVERAGE-The ratio of pledged revenues available annually to pay debt
service obligations, as compared to the annual debt service obligation
requirement. This ratio is one indication of the margin of safety for debt
service obligations.
5.27 CREDIT ENHANCEMENT- The availability of additional outside support
designed to improve an issuer's own credit standing. Examples include bank
lines of credit or collateralized funds.
5.28 CURRENT REFUNDING-A refunding transaction in which the proceeds of
the refunding debt are applied immediately (no more than 90 days from
issuance) to redeem the debt to be refunded. This situation differs from an
advance refunding, where the proceeds of the refunding bonds are placed in
escrow pending the call date or maturity of the debt to be refunded.
5.29 CURRENT YIELD- The ratio of the annual dollar amount of interest to the
purchase price of a bond, stated as a percentage.
5.30 CUSIP NUMBERS (COMMITTEE ON UNIFORM SECURITY
IDENTIFICATION PROCEDURES) - Identification numbers assigned each
maturity of a bond issue, and usually printed on the face of each individual
bond in the issue. The CUSIP numbers are intended to facilitate
identification and clearance of municipal securities.
5.31 DEBT LIMIT- The maximum amount of debt which an issuer of municipal
securities is permitted to incur under constitutional, statutory, or charter
provisions.
5.32 DEBT PER CAPITA- Bonded debt divided by population.
5.33 DEBT SERVICE OBLIGATION- The amount of funds necessary to pay
principal and interest, and the required contributions to an amortization
sinking fund for term certificates on an outstanding obligation. Debt service
obligation on certificates may be calculated on a calendar-year or on a fiscal-
year basis.
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5.34 DEBT SERVICE RESERVE FUND-A fund usually amounting to principal
and interest payments for one year and used only if pledged revenues do not
generate sufficient funds to satisfy the debt service requirement. The
reserve fund is typically funded in whole or in part from the proceeds of the
debt issuance. The size and investment of the reserve fund are usually
subject to arbitrage regulations.
5.35 DEBT SERVICE SCHEDULE-Atable listing the annual payments necessary
to meet debt service requirements over the period of time the bonds are to
be outstanding.
5.36 DEFAULT- Failure to make timely payment of principal and interest or to
comply with other features of the indenture.
5.37 DEFEASANCE- Eliminating bonded indebtedness off an issuer's books
through creation of a portfolio of allowable securities sufficient to make all
debt service payments on pre-refunded, outstanding bonds.
5.38 DIRECT DEBT- The debt that a governmental agency incurs in its own
name.
5.39 DISCOUNT- The amount by which par value exceeds the price paid for a
security which generally represents the difference between the nominal
interest rate and the actual or effective return to the investor.
5.40 DOUBLE-BARRELED BOND- Traditionally, a bond secured by a defined
source of revenue plus the full faith and credit of the issuer. The term is
occasionally, although erroneously, used to refer to bonds secured by any
two sources of pledged revenue.
5.41 DOWNGRADE- The lowering of a bond rating by a rating service. A
downgrade would be considered if the issuer encountered major financial
difficulties or an economic decline, which may be viewed by the rating
service as reducing the credit quality of the bond issue.
5.42 EFFECTIVE INTEREST RATE- The actual rate of interest earned by the
investor on bonds purchased, after allowing for premiums, discounts, or
accrued interest over the period of the investment.
5.43 FEASIBILITY STUDY-A report by an independent expert on the economic
need and practicality of a proposed debt program.
5.44 FINANCIAL ADVISOR- Performs analysis as to the appropriateness of a
bond sale and, if the governing body of the agency determines that a bond
sale is necessary, they then assist in its planning and preparation.
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5.45 FLOATER- A security sold with a variable rate that changes at intervals
ranging from daily to annually.
5.46 FULL FAITH AND CREDIT- The pledge of a government's general taxing
power to pay off its debt obligations.
5.47 GENERAL OBLIGATION BONDS-Bonds which are secured bythefullfaith
and credit of the issuer. General obligation bonds are secured by a pledge
of a portion of the ad valorem taxing power. Such bonds constitute debts of
the issuer and require approval by election prior to issuance.
5.48 GUARANTEED INVESTMENT CONTRACT(GIC)-A group annuity contract
designed to provide guarantees of principal and interest on funds deposited
with an insurance company for a specified period.
5.49 HIGH GRADE BONDS- Top-rated bonds, usually triple-A.
5.50 INDENTURE-Legal document describing the terms and conditions of a bond
offering, the rights of the bondholder, and the obligations of the issuer to the
bondholder. The document is alternatively referred to as a bond !
or deed of trust.
r.
5.51 INTEREST RATE SWAP-An agreement between two parties to exchange
future flows of interest payments. Swap payments may be based on actual
bond payments and/or based on various market indices.
5.52 INVERTED YIELD CURVE-When short-term rates are higher than long-term
rates.
5.53 INVESTMENT GRADE- The broad credit designation given bonds which
have a high probability of being paid. Such bonds, have few, if any,
speculative features and are rated by the rating agencies in one of their top
four categories, ranging from triple-A to BBB and Baa.
5.54 ISSUER- A state, political subdivision, agency, or authority that borrows
money through the sale of bonds or notes.
5.55 JUNIOR LIEN BONDS- Bond with a subordinate claim against pledged
revenues.
5.56 LETTER OF CREDIT- An agreement, usually with a commercial bank, to
guarantee demands for payment upon compliance with conditions
established in the agreement. Bank letters of credit are typically used as
additional sources of security and liquidity with variable rate obligations.
5.57 LIQUIDITY- The ability to convert assets, such as investments, readily into
cash.
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5.58 MATURITY-The date on which the principal amount of a security is due and
payable to the certificate holder.
5.59 NEGOTIATED SALE-The sale of a new issue of municipal securities by an
issuer through an exclusive agreement with a previously selected underwriter
or underwriting syndicate. A negotiated sale should be distinguished from a
competitive sale, which requires public bidding by the underwriters. Primary
points of negotiation for the issuer are the interest rate and purchase price,
which reflect the issuer's cost of offering its securities in the market.
5.60 NET INTEREST COST (NIC) -Traditional method of calculating an issuer's
borrowing cost. NIC is derived by adding the total volume of interest
payments for the entire offering and dividing by the amount of certificates
outstanding times the years they are outstanding.
5.61 NET PRESENT VALUE SAVINGS- Present value of gross savings
discounted at the refunding bond yield to the closing date plus accrued
interest less any contribution from a reserve or debt service fund and
anticipated loss investment earnings.
5.62 NOTES- A written, short-term promise of the issuer to repay a specified
principal amount on a certain date, together with interest at a stated rate, or
according to a formula for determining that rate, payable from a defined
source of anticipated revenue. Notes usually mature in less than five years.
Notes are used to cover seasonal cash flow needs or interim financings.
5.63 OFFICIAL STATEMENT (OS) - A document published by the issuer who
generally discloses material information on a bond issue, including the
purpose of the bond issue, how the bonds will be repaid, and the financial,
economic, and demographic characteristics of the issuer. Investors may use
this information to evaluate the credit quality of the bonds.
5.64 ORIGINAL ISSUE DISCOUNT(DID)-The discount from par at which a new
issue comes to market. For tax-exempt bonds,the capital gain represented
by the OID is deemed tax-exempt by the IRS.
5.65 OVERLAPPING DEBT- The issuer's share of the debt of other local units.
5.66 PAR VALUE- The principal amount of a security, which must be paid at
maturity. Par value is also referred to as the face amount of a security.
5.67 PARITY BONDS- Separate bond issues that have the same lien against
pledged revenues.
5.68 PAY-AS-YOU GO BASIS-The financial policyof a municipality that finances
all capital outlays from current revenues rather than from borrowing.
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5.69 PAYING AGENT- The entity responsible for the payment of principal and
interest on municipal obligations on behalf of the issuer. The paying agent is
usually a bank or trust company.
5.70 PLEDGED REVENUES- Funds obligated for the payment of debt service
and other deposits as required by the bond contract.
5.71 PRELIMINARY OFFICIAL STATEMENT(POS)-A preliminary version of the
official statement which is used by the issuer or underwriter to describe the
proposed issue of municipal bonds prior to the determination of an interest
rate and offering price. The preliminary official statement is a marketing tool
used to gauge buyer's interest in the issue and is relied upon by potential
purchasers in making their investment decisions.
5.72 PREMIUM-The amount by which the price paid for a security exceeds par
value, generally representing the difference between the nominal interest
rate and the actual or effective return to the investor.
5.73 PRINCIPAL- The par value or face amount of a bond payable or issue of
bonds payable on stated dates of maturity.
5.74 PRIMARY MARKET-The market for new issues of municipal securities.
5.75 PRIVATE PLACEMENT- An original issue of municipal securities sold
directly to an institutional or private investor by way of a negotiated sale
rather than through a public offering.
5.76 RATE CONVENANT- A bond indenture provision requiring rate changes
necessary to meet annual debt service payments.
5.77 RATING AGENCIES-Credit quality evaluation of an issuer's securities made
by independent rating services. The three primary rating agencies with
regard to municipal debt are Moody's Investors Services, Standard & Poor's
Corporation, and Fitch.
5.78 RATINGS- Evaluations of the credit quality of obligations usually made by
independent rating services. Ratings generally measure the probability of
the timely repayment of principal and interest on municipal obligations. The
higher the credit rating, the more favorable the effect on the marketability of
the security.
5.79 REDEMPTION- A transaction in which the issuer pays an outstanding
obligation at a specified price, usually at or above par prior to the specified
maturity date. Also known as a call.
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5.80 REFUNDING-Selling a new bond issue for redemption or defeasance of an
outstanding bond issue. There are generally two reasons for refunding: to
reduce the issuer's interest costs or to remove a burdensome or restrictive
covenant imposed by the terms of the bonds being refinanced.
5.81 REGISTRAR: The person or entity responsible for maintaining records on
behalf of the issuer for the purpose of noting the owners of registered
obligations. The paying agent frequently performs this function.
5.82 REVENUE BONDS- Bonds payable from a specific source of revenue and
which do not pledge the full faith and credit of the issuer.
5.83 SECONDARY MARKET- Market for bonds previously offered and sold.
5.84 SENIOR LIEN OBLIGATIONS: Obligations having a prior claim on pledge
revenues.
5.85 SERIAL BONDS- Bonds of an issue in which some bonds mature in each
year over a period of years.
5.86 SETTLEMENT- Delivery of and payment for a new issue of municipal
bonds. Settlement usually occurs within 30 days afterthe bonds are awarded
to the underwriters, which allows for the printing of the bonds and the
completion of certain legal matters.
5.87 SETTLEMENT DATE- The date used in price and interest computations,
usually the date of delivery.
5.88 SINKING FUND-A fund established in a bond indenture that contains money
available to call bonds prior to maturity.
5.89 STANDBY BOND PURCHASE AGREEMENT- A legal agreement with a
commercial bank or trust company whereby the bank agrees to purchase
demand bonds which the remarketing agent was unable to remarket to other
parties and chose not to purchase for itself.
5.90 SUBORDINATE (JUNIOR) LIEN OBLIGATIONS- Obligations having a
subordinate claim against pledged revenues.
5.91 TAX-EXEMPT OBLIGATIONS- Obligations whose interest is exempt from
federal income taxation pursuant to Section 103 of the Internal Revenue
Code, and may or may not be exempt from state income or personal
property taxation in the jurisdiction where issued.
5.92 TERM BONDS- Bonds coming due in a single maturity. The issuer usually
agrees to make periodic payments into a sinking fund for mandatory
redemption of term bonds before maturity or for payment at maturity.
Page 16 of 17
Book Page 39
5.93 TRUE INTEREST COST (TIC) - The present value borrowing cost of the
issuer is reflected by taking into account the costs of issuance and
underwriting. TIC is similar to NIC, but also accounts for the time value of
money.
5.94 TRUSTEE-A financial institution with trust powers which acts in a fiduciary
capacity for the benefit of bond holders in enforcing the terms of the bond
indenture agreement.
5.95 TRUST INDENTURE-A contract between the issuer of municipal securities
and a trustee, serving for the benefit of the security holders.
5.96 UNDERWRITER- A dealer at a bank or brokerage house who buys an
agency's bonds in order for the firm's sales force to resell them to both
institutional and retail investors. The underwriter may acquire the bonds
either by negotiation with the issuer, or by award on the basis of competitive
bidding.
5.97 UNDERWRITERS COUNSEL- A lawyer involved in the transaction, who
represents the securities firm buying an issuer's bonds.
5.98 VARIABLE RATE OBLIGATIONS- A security whose interest rate is reset
periodically by the remarketing agent according to a preset formula defined
in the indenture agreement. The variable interest rate, also known as a
"floater", is determined by the remarketing agent as the level at which all
bonds trade at par.
5.99 YIELD CURVE- Graph displaying the term structure of interest rates by
plotting the yields of all bonds of the same quality with maturities ranging
from shortest to the longest available.
L
O MATURITY- The rate of return to the investor earned from
s of principal and interest, which is compounded semiannually and
that interest paid is reinvested at the same rate. Yield to maturity
o consideration the time value of the investment.
OUPON BONDS- Bonds sold at a deep discount from par, which
interest and appreciate to full value at maturity. Also known as
ppreciation bonds.
Page 17 of 17
Book Page 40
ADMINISTRATION COMMITTEE MceOae Dare TOBd.nrD
09/10/09 1 09/17/0e
AGENDA REPORT Itan Nu I"Numbs
ADM09]A
orange County Sanitatlon Dlstnct
FROM: James D. Ruth, General Manager
Originator: Lorenzo Tyner, Director of Finance and Administrative Services
SUBJECT: REPROGRAPHICS AND RELATED SERVICES
GENERAL MANAGER'S RECOMMENDATION
1) Approve an agreement with OCB Reprographics for Reprographics and
Related Services, Specification No. S-2008-3858D, for a three-year period
from October 1, 2008 to September 30, 2011, for an amount not to exceed
$400,000 per year;
2) 'Approve the option of two additional one-year renewals for an amount not to
exceed $400,000 per year; and,
3) Authorize a $40,000 contingency (10%) per year.
SUMMARY
• Orange County Sanitation District (Sanitation District) uses a reprographics firm
for the reproduction of plans, scanning and indexing documents to be loaded into
the engineering Electronic Document Management System, and a filing and
distribution system for the ordering and tracking of plans and specifications for
bidding of projects. These tools have enabled the Sanitation District to maintain
an optimal bid process incorporating a set of agreed upon procedures and
minimum requirements to ensure a smooth bid process.
• To effectively maintain a smooth bid process for upcoming projects, as well as
maintaining reprographics and related services for documentation of construction
phase records and engineering specifications, staff recommends that a new
contract be established with the most qualified proposer meeting the
requirements stipulated in the Scope of Work for Specification No. S-2008-
38513D.
• A standard Request for Proposal (RFP)was used and the following four
reprographics vendors responded: Advantage Mailing, Inc., SABP
Reprographics, Consolidated Reprographics, and OCB Reprographics. OCB
Reprographics was selected as the best value to the Districts. Results of the
evaluations for the above mentioned vendors are listed below:
Page 1
Book Page 41
Total Out of
Firm possible 6000
Points
OCB Reprographics 4683
Consolidated Reprographics 3625
SABP Reprographics 3092
Advantage Mailing, Inc. 3001
PRIOR COMMITTEEIBOARD ACTIONS
N/A
ADDITIONAL INFORMATION
N/A
JDR:LT:RC:PB
Page 2
Book Page 42
ADMINISTRATION COMMITTEE MeebngDate Tosd.ofar.
0911o/os
AGENDA REPORT Bern Number mom Number
ADMOB-29
Orange County Sanitation District
FROM: James D. Ruth, General Manager
Originator: Lorenzo Tyner, Director of Finance&Administrative Services
SUBJECT: SUCCESSION MANAGEMENT PROGRAM UPDATE
GENERAL MANAGER'S RECOMMENDATION
Information only.
SUMMARY
The General Manager initiated implementation of a Succession Management Program
effective July 2007, that supports the organization in its evolution by developing staff to
ensure they are ready to step into leadership positions when needed. The established
formal Succession Management Program remains important as OCSD considers
additional factors that influence its future labor needs and the trends that were discussed
at the March 2007 Administration and November 2D06 FAHR Committee meetings. The
Succession Management Program continues to proactively address the challenge of
ensuring continuity of future leadership.
OCSD has developed numerous tools that support its succession management efforts.
In their totality, the program documents establish the program and related guidelines by
summarizing the organization's status, identifying appropriate individuals to participate in
the program, and providing structure and direction for employee development through
directed coaching, leadership development, and competency-speck training.
PRIOR COMMITTEE/BOARD ACTIONS
FAHR Committee—Succession Management Program Update— 10/11/06
FAHR Committee—Succession Management Program—Trend Information— 11/8/06
Administration Committee—Succession Management Program Update—3/14/07
Administrative Committee—Succession Management Program Update—9/12/07
ADDITIONAL INFORMATION
In July 2007, OCSD launched a pilot Succession Management Program targeted at the
Executive Management Team (EMT) and Managers. This program was designed to provide the
organization's leaders with the proper tools to analyze their workforce, understand gaps, assess
future leaders, and develop these potential leaders through customized leadership,
management, and coaching/mentoring training. During FY 07108 pilot program participation
consisted of six EMT members and six Managers. The program recently passed its halfway
point. Survey results indicate that the program is exceeding expectations.
Page 1
Book Page 43
Spurred by the success of the program at the Manager and EMT level, the Succession
Management Program was opened to employees at the supervisory level in July 2008.
Enrollment for the current period includes nineteen Supervisors and eight Managers. Talent
Assessments are currently being conducted for all newly enrolled employees to determine the
best approach to their development at this time.
OCSD understands the importance of succession planning and career planning at all levels of
the organization. Human Resources staff is currently working with the Clerical group to facilitate
the development and implementation of a career-planning program aimed at providing those
individuals interested in moving up within the clerical ranks or into the professional ranks an
avenue to prepare themselves. A focus group has been formed consisting of five members of
the Clerical group. These members will be responsible for designing and implementing their
own group's career planning program with HR's assistance. A similar program is targeted for
the Professional group beginning in January and slated for implementation in July 2009. Prior
to January, OCSD will be forming a focus group for the Professionals to determine the needs for
a program at that level. Development of the Professional program will follow a process similar
to that for the Clerical staff.
Organizational training programs are in place to support OCSD's Succession Management
Program (SMP). The Leadership Academy and Profession of Management training programs
help EMT, Managers and Supervisors build leadership and management skills. The General
Manager initiated management skills training with the Profession of Management program to
ensure all had a similar, consistent knowledge base. All OCSD management staff completed
this program during FY 06107, and refresher classes are now offered periodically to train new
management employees and provide a voluntary refresher for existing management staff.
OCSD's Leadership Academy, a customized six-session program of 24 hours total presented in
conjunction with Pepperdine University, was established to continue to build a consistent
leadership approach across management. The program contributes to a stronger leadership
culture by building skills that align with OCSD's leadership competencies,the goals of the SMP,
and the General Manager's management and leadership philosophies. Session topics include
Individual Leadership Style, Communication, Interpersonal Skills, Team Leadership, Decision
Making, and Problem Solving. Eighteen employees, specifically six Executive Management
Team members and twelve Managers, participated in the pilot group and completed the
program in June. The next group of nineteen employees, namely seven Managers and twelve
Supervisors, is currently participating in the Leadership Academy and is scheduled to graduate
in December. Each year one to two groups will attend the program, with all current
management employees scheduled to complete by 2011.
Leadership Competency training is offered to SMP participants and other interested
management staff, with half-day classes available on-site for each of OCSD's core leadership
competencies. A different training topic is scheduled each month, providing opportunities for
employees to develop the speck knowledge and skills needed to continue to improve their
leadership. There has been strong interest among SMP participants and other management
staff, and scheduled classes have been near rapacity. During its first seven months, this
program has provided 106 training seats for a total of 424 training hours for the organization.
The cycle of topics will repeat in 2009 to continue to support development as additional
management staff becomes engaged in the Succession Management Program.
Page 2
Book Page 44
The Coaching and Mentoring Program is a key component of OCSD's Succession Management
Program. Partnerships established based on assessment results provide a method for
customized individual development. The pilot group, which consists of six pairs of EMT
members and Managers, has been actively shaping participants'growth since January.
Through the Talent Assessment and other feedback, participants identify areas for development
and appropriate activities through which to accomplish the desired learning. Initial training
sessions start the development partnerships along the right path, and a coaching and mentoring
guide continues to guide the pairs' activities. Each pair meets two to three hours monthly to
discuss and update the participants' Succession Management Development Plan (SMDP), an
action plan developed by each pair to define appropriate development activities specifically
targeted to the participant's areas of opportunity. Guided by the coaching and mentoring
process,the participant may utilize a variety of developmental activities, such as stretch
assignments, special projects,training, or professional organizations. Recent feedback has
shown that participants find the Coaching and Mentoring Program effective in focusing on their
individual needs to prepare for future opportunities. The next group of development
partnerships will be identified in Septemberwith input from the EMT.
JDR:LT:JR:lc
Page 3
Book Page 45
ADMINISTRATION COMMITTEE Meemneam roeaoror.
AGENDA REPORT MW L-09/,Q= I
MMber I neeNUMber
Orange County Sanitation District AOMDB 30
FROM: James D. Ruth, General Manager
Originator: Robert P. Ghirelli, Assistant General Manager
SUBJECT: SAFETY& HEALTH PROGRAM UPDATE
GENERAL MANAGER'S RECOMMENDATION
Information only.
SUMMARY
Over the last six(6) months, program and staffing changes have been made in the Safety&
Health Division. The changes are aimed at enhancing program support of management goals
and providing higher service levels to employees working in both plants and the collection
system, including the Capital Improvement Program (CIP)and associated construction
activities.
In general, efforts are underway to improve the following: identifying safety and health related
risks; developing means and methods to eliminate or mitigate causative factors; and, using
measurement tools to determine program effectiveness and cost reduction opportunities.
Specific examples of where the Safety and Health Division has been focusing efforts include
the following:
• Consolidating related policies, procedures, and programs into single, topic related
documents.
• Trending injury type, frequency, location, and work group through application and
analysis of a quad chart, see attachment; this resulted in industrial ergonomics being
identified as the leading cause of District workplace injuries.
• Planning for use of web based safety training.
• Supporting the implementation and application of the OCIP (owner controlled
insurance program) and construction work site safety.
• Strengthening the Workers' Compensation program by partnering with Risk
Management and Human Resources on program administration.
PRIOR COMMITTEEIBOARD ACTIONS
None.
Page 1
Book Page 46
ADMINISTRATION COMMITTEE Meeft Dare To ad.of Dlr.
09/10/08
AGENDA REPORT 1h�"" 1h°n N onbe
ADMO8-30B-30
Orange County Sanitation District
FROM: James D. Ruth, General Manager
Originator: Robert P. Ghirelli, Assistant General Manager
SUBJECT: SAFETY& HEALTH PROGRAM UPDATE
GENERAL MANAGER'S RECOMMENDATION
Information only.
SUMMARY
Over the last six (6) months, program and staffing changes have been made in the Safety&
Health Division. The changes are aimed at enhancing program support of management goals
and providing higher service levels to employees working in both plants and the collection
system, including the Capital Improvement Program (CIP)and associated construction
activities.
In general, efforts are underway to improve the following: identifying safety and health related
risks; developing means and methods to eliminate or mitigate causative factors; and, using
measurement tools to determine program effectiveness and cost reduction opportunities.
Specific examples of where the Safety and Health Division has been focusing efforts include
the following:
• Consolidating related policies, procedures, and programs into single, topic related
documents.
• Trending injury type,frequency, location, and work group through application and
analysis of a quad chart, see attachment;this resulted in industrial ergonomics being
identified as the leading cause of District workplace injuries.
• Planning for use of web based safety training.
• Supporting the implementation and application of the OCIP(owner controlled
insurance program)and construction work site safety.
• Strengthening the Workers' Compensation program by partnering with Risk
Management and Human Resources on program administration.
PRIOR COMMITTEEIBOARD ACTIONS
None.
Page 1
Book Page 46
ADDITIONAL INFORMATION
During Fiscal Year 2008-2009, the Safety& Health Division has been charged with supporting
OCSD organizational goals and levels of service. This entails the development and
implementation of a Safety & Health Strategic Plan for all Sanitation District activities;
furthermore, staff will uphold level of service obligations through an employee injury incident
rate that does not exceed the industry average and provision of safety training so that
mandatory OSHA training requirements are met.
In order to deliver on these requirements, the Safety& Health Division is puffing together
program elements for improving the identification of safety and health related risks; shoring up
the way these risks are eliminated or mitigated; and, applying statistical measures as an injury
prevention and cost reduction tool. This includes:
• Developing risk identification methods;
• Identifying cost drivers;
• Reviewing and interpreting safety data and information;
• Formulating policies and procedures to eliminate causative factors;
• Evaluating safety program components to ensure responsiveness;
• Applying measurement tools that determine program effectiveness; and,
• Taking steps to reduce costs based on all of the above.
As indicated in the summary, the following serve as specific examples of staff efforts to bolster
the program:
Consolidating Policies, Procedures, and Programs
The Safety Division has published policies that have multiple, related procedures and
programs. An example is the Hearing Conservation policy. It has five procedures that
are linked to the policy. The five procedures have been integrated into the policy
document.
Another example is the Hazardous Energy Control policy. It has one procedure and
two programs that tie back to the policy. The Safety Division is taking the Hazardous
Energy Control policy and integrating the procedure and two programs into the policy
so there is only one document to review and update versus four.
Safety Staff is using the following process for review of the updated policies; Manager
Team; Safety Committee; and Executive Management Team, which will has the final
approval.
Trend Analysis
In 2007 the Sanitation District had 44 OSHA recordable injuries of which 16 were
ergonomic related. The Safety Division will be conducting a two (2) day Industrial
Ergonomics course to teach employees how to identify and mitigate ergonomic risk.
The Safety Division plans on having another two(2) day course later in the fiscal year.
The training will also include the implementation of ergonomic assessment fortes to
quantify and measure ergonomic risk. Staff anticipates that this will help prioritize
efforts to reduce or eliminate the risk.
Trend analysis will continue to be applied so that return on investment in the industrial
ergonomics training can be quantified.
Page 2
Book Page 47
Employee Training
There are approximately 10,000 units(a unit is being used to represent one employee
in one class) of training that must be conducted annually. Last fiscal year the training
requirements were not met. Two of the most prominent impediments identified were:
1) the amount of time staff spends going to training; and, 2) scheduling staff for a class
in a manner that ensures there is coverage. The Safety Division intends on
implementing web based/e-learning courses so employees can take training on their
own schedule so that work activities are not disrupted. Employees will be able to stop
and start a training class on demand and even proceed through it with intermittent
progress without losing credit for work completed. Employees will also have the
opportunity to test out of a training topic if they feel they understand the material and
want to forgo the training.
OCIP Support
Safety Staff worked with Risk Management, Contracts, and Engineering &
Construction to ensure the OCIP was implemented on schedule. Safety reviewed and
developed the Safety Manual for the OCIP as well as the bid submittal safety review
forms. The OCIP program will have a dedicated safety representative assigned to it by
Aon, the OCIP manager. Also, the Sanitation District has 800 hours of Risk
Management consultant services through Liberty Mutual to use in the evaluation of the
OCIP.
Workers' Compensation
The workers' compensation program is being lransitioned to the District's Risk
Management section with support being provided by Safety& Health and Human
Resources staff. Safety will still have the lead role of determining if the injury is work
related and generating the first report of injury. Safety will forward the information to
the Risk Management section for claim processing. If the injured employee needs to
be put off work because of a work related injury, Safety and HR will ensure that all
potential accommodations are reviewed before an employee is put off work. This will
include the interactive process to ensure the employee is informed and has input into
the process and steps are being taken to return the employee to work, which is
required by statute.
JDR:RPG:JR:WB
Page 3
Book Page 48
Safety Performance a/u/oa
Recordable & Lost Work Days $ 00o$90,0,000 Workers' Compensation Cost
8 7 $80A00
$70,000
6 77 $60,000
5 $50,000
it"3.9
4 $40,000
3 $30,000
2 $20,000
1 $1=
0 $D
2006 2007 2008 WD Industry Average
■Total Recordable Injury Rate ■Lost Work Day Rate ■2006 WC Cost ■2007 WC Cost 02008 WC Cost YTD
18 10
16 9 Injury By Division
14 8
12
10 7
8 6
6 5
4 4
2
0 A"Al 3
a 2
c
5 8 g LL p 0 g g
■2006 ■2007 •2008 •2006 ■2007 •20D8
Page 4
ORANGE COUNTY SANITATION DISTRICT
(714) 962-2411
www.ocsd.com
Mailing Address:
P.O. Box 8127
Fountain Valley, California
92728-8127
Street Address:
10844 Ellis Avenue
Fountain Valley, California
92708-7018