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HomeMy WebLinkAbout02-19-2014 Administration Committee Agenda ORAKIJECOUN Orange County Sanitation District SANITATION eisrxn- Wednesday, February 19, 2014 Regular Meeting of the \ 5:30 P.M. Administration Committee 1 Administration Building Board Room 10844 Ellis Avenue Fountain Valley, CA Lfl� (714) 593-7130 AGENDA PLEDGE OF ALLEGIANCE: DECLARATION OF QUORUM: PUBLIC COMMENTS: If you wish to speak, please complete a Speaker's Form and give it to the Clerk of the Board. Speakers are requested to limit comments to three minutes. REPORTS: The Committee Chair and the General Manager may present verbal reports on miscellaneous matters of general interest to the Committee Members. These reports are for information only and require no action by the Committee. REPORT OF DIRECTOR OF FINANCE AND ADMINISTRATIVE SERVICES: CONSENT CALENDAR: 1. Approve Minutes of the December 11, 2013, Administration Committee Meeting. 2. A. Approve an agreement for Deferred Compensation Program 457(b) Investment Consulting Services, Specification No. CS-2013-588, with SST Benefits Consulting for a term of three years, in an amount not to exceed $158,000 with the option to renew for one additional one-year period; and B. Approve a contingency of$15,800 (10%) =9/14 Administration Committee Agenda Page 1 of NON-CONSENT: 3. Authorize the General Manager to advertise a request for proposal and subsequently award a Consultant Services Agreement for an OCSD-wide classification and compensation study, for a total amount not to exceed $100,000. 4. A. Approve a Professional Services Agreement for Specification S-2013- 562BD with CiM Maintenance, Inc., for Enterprise Asset Management - Planning and Scheduling Software, for an amount not to exceed $147,297; and B. Approve a contingency in the amount of$14,730 (10%). 5. Recommend to the Board of Directors to: Authorize the General Manager to: A. Approve agreement with East Orange County Water District (EOCWD), to transfer ownership of local sewers in Service Area 7, and the appropriate reserve balances; and B. Provide EOCWD with technical and financial information to assist with its submittal of a reorganization application to the Orange County Local Area Formation Commission (OC LAFCO) to facilitate the transfer of ownership of the local sewers and agreed assets; and C. Draft and execute a letter of support to OC LAFCO in favor of EOCWD's reorganization application, subject to and contingent upon OC LAFCO's acceptance of the terms and conditions of transfer agreed upon by OCSD and EOCWD; and D. Approve an agreement with EOCWD to reimburse OCSD for staff support requested during an agreed transition period. 6. Recommend to the Board of Directors to: A. Advertise a request for proposal for managing the District's Investment Program that includes making the investment decisions and execution of the investment transactions; and B. Advertise a request for proposal for an investment advisor to assist with the selection process of an investment management firm in an amount not to exceed $40,000. 02/19/14 Administration Committee Agenda Page 2 of 4 7. Recommend to the Board of Directors to: Approve the budget assumptions to be used for the preparation of the FY 2014- 15 and FY 2015-16 two-year budget. CLOSED SESSION: During the course of conducting the business set forth on this agenda as a regular meeting of the Administration Committee, the Chair may convene the Committee in closed session to consider matters of pending real estate negotiations, pending or potential litigation, or personnel matters, pursuant to Government Code Sections 54956.8, 54956.9, 54957 or 54957.6, as noted. Reports relating to (a) purchase and sale of real property; (b) matters of pending or potential litigation; (c) employment actions or negotiations with employee representatives;or which are exempt from public disclosure under the California Public Records Act, may be reviewed by the Board during a permitted closed session and are not available for public inspection. At such time as the Board takes final action on any of these subjects, the minutes will reflect all required disclosures of information. Convene in closed session. (1) CONFER WITH DISTRICT NEGOTIATORS (Government Code Section 54957.6) • Agency Designated Representatives: Steve Filarsky (Consultant); James Herberg (General Manager); Robert Ghirelli (Assistant General Manager); Jeff Reed (Director of Human Resources); and, Richard Spencer (Human Resources Manager). • Employee Organizations: 2 o Orange County Employees Association (OCEA) o International Union of Operating Engineers, Local 501 OTHER BUSINESS AND COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY: ADJOURNMENT: The next Administration Committee meeting is scheduled for Wednesday, March 12, 2014 at 5:30 p.m. 02/19/14 Administration Committee Agenda Page 3 of 4 Accommodations for the Disabled: Meeting Rooms are wheelchair accessible. If you require any special disability related accommodations, please contact the Orange County Sanitation District Clerk of the Board's once 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. Agenda Posting: In accordance with the requirements of California Government Code Section 54954.2,this agenda has been posted outside the main gate of the Sanitation District's Administration Building located at 10844 Ellis Avenue, Fountain Valley, California, 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 the Board of Directors,are available for public inspection in the office of the Clerk of the Board. NOTICE TO DIRECTORS: To place items on the agenda for the Committee Meeting, items must be submitted to the Clerk of the Board 14 days before the meeting. Made E.Ayala Clerk of the Board (714)593-7130 mavalafglocsd.com For any questions on the agenda,Committee members may contact staff at General Manager James Herberg (714)593-7300 iherberofgocsd.com Assistant General Manager Bob Ghirelli (714)593-7400 rohirelli0ocsd.com Director of Finance and Lorenzo Tyner (714)593-7550 Itvnerfrpocsd.com Administrative Services Director of Human Resources Jeff Reed (714)593-7144 ireeddocsd.com 02/19/14 Administration Committee Agenda Page 4 of 4 ITEM NO. 1 MINUTES OF THE REGULAR MEETING OF THE ADMINISTRATION COMMITTEE Orange County Sanitation District Wednesday, December 11, 2013, at 5:30 P.M. A regular meeting of the Administration Committee of the Orange County Sanitation District was held on December 11, 2013, at 5:30 p.m., in the Sanitation Districts Administration Building. Following the Pledge of Allegiance, a quorum was declared present, as follows: COMMITTEE MEMBERS PRESENT: STAFF PRESENT: Brad Reese, Chair Jim Herberg, General Manager John Withers, Vice-Chair Bob Ghirelli, Assistant General Manager David Benavides Lorenzo Tyner, Director of Finance Steven Choi & Administrative Services Tyler Diep Jeff Reed, Director of Human Resources Peter Kim Nick Kanetis, Director of Engineering Prakash Narain Maria Ayala, Clerk of the Board Bob Ooten (Alternate) Norbert Gaia Joe Shaw Al Garcia Teresa Smith Andrew Nau Troy Edgar, Board Chair Sarah Redinger COMMITTEE MEMBERS ABSENT: OTHERS PRESENT: Jim Ferryman Brad Hogin, General Counsel Todd Staley, PIMCO Stephanie King, PIMCO PUBLIC COMMENTS: None. REPORT OF COMMITTEE CHAIR: Committee Chair Reese did not give a report. REPORT OF GENERAL MANAGER: General Manager, Jim Herberg, did not give a report. 12/11/13 Administration Committee Minutes Page 1 of 3 REPORT OF DIRECTOR OF FINANCE AND ADMINISTRATIVE SERVICES: Lorenzo Tyner, Director of Finance and Administrative Services, introduced Stephanie King and Todd Staley. Ms. King and Mr. Staley are representatives from Pacific Investment Management Company (PIMCO). They distributed a report of the District's investment strategy review, and proceeded to review the report and explained the performance of the District's investment portfolio. The Committee asked questions and made comments regarding: the firm's current management of the portfolio; changing the District's investment strategy; requesting more information on comparisons between OCSD and other similar agencies that the firm manages with similar portfolios; and what changes can be made to avoid a negative performance in the future. Director Nguyen made a request for the comparison information to be provided to the Committee at a later date. Staff, Ms. King, and Mr. Staley responded to questions from the Committee. CONSENT CALENDAR: 1. MOVED, SECONDED, AND DULY CARRIED: Approve Minutes of the November 13, 2013 Administration Committee Meeting. ACTION ITEMS: 2. Interview and select a labor relations consulting services firm per Steering Committee direction regarding meet and confer with represented employee groups, including assistance in developing labor negotiations strategies and providing assistance with other labor relations matters. Jeff Reed, Director of Human Resources, briefly explained the item and the direction received from the Steering Committee. He introduced Andrew Nau, Sr. Human Resource Analyst, to explain the current status of labor unit contracts and negotiations process. He announced the four firms that would be interviewed by the Committee, members of each firm were present in the audience, and the briefly explained the interview process. After considerable dialogue and discussion by the Committee, with staff responding to various questions, the Administration Committee came to the following vote: 12/11/13 Administration Committee Minutes Page 2 of 3 MOVED, SECONDED, and DULY CARRIED: Director Choi motioned, with Board Chair Edgar seconding the motion, for Committee Chair Reese to survey the Committee and select members to an ad hoc committee to conduct the interviews, after which the final recommendation will be brought back for the Administration Committee to consider for approval. OTHER BUSINESS AND COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY: None. ADJOURNMENT: Committee Chair Reese declared the meeting adjourned at 6:44 p.m. Submitted by: Maria E. Ayala, Clerk of the Board I211/13 Administration Committee Minutes Page 3 of 3 ADMINISTRATION COMMITTEE Neebng Dare To ad.of Dir. 02/19/14 -- AGENDA REPORT Item Number Item Number 2 Orange County Sanitation District FROM: James D. Herberg, General Manager Originator: Lorenzo Tyner, Director of Finance and Administrative Services SUBJECT: DEFERRED COMPENSATION ADVISORY COMMITTEE —VENDOR SELECTION GENERAL MANAGER'S RECOMMENDATION A. Approve an agreement for Deferred Compensation Program 457(b) Investment Consulting Services, Specification No. CS-2013-588, with SST Benefits Consulting for a term of three years, in an amount not to exceed $158,000 with the option to renew for one additional one-year period; and B. Approve a contingency of$15,800 (10%) SUMMARY SST Benefits Consulting has served as the Deferred Compensation Advisory Committee's investment consultant for the past four years. The investment consultant assists the Deferred Compensation Advisory Committee with: • Monitoring of the investment funds on a semi-annual basis and, when necessary, recommending replacement funds. • Minimizing the cost and risks associated with providing and maintaining the Plan to the plan participants. • Serving as a fiduciary partner to the Plan with OCSD. • Providing independent and unbiased advice. Staff has completed a competitive proposal process to ensure the Committee receives high quality, timely and effective investment services. A Request for Proposal went out to over 500 well-established and experienced investment consultant firms, with twenty downloading and reviewing it. One firm, SST Benefits Consulting, submitted a proposal. The Proposal Review Team reviewed the proposal and determined that the current investment consultant was well qualified and capable of continuing to provide the services required at a reasonable cost. The Sanitation District pays no money directly to the investment consultant; rather, any compensation to the investment consultant comes from the fees paid by participants in the Deferred Compensation Program 457(b). Page 1 of 3 PRIOR COMMITTEE/BOARD ACTIONS 03/25/09: Resolution No. OCSD 09-02 - Approving a Deferred Compensation Plan with ING Financial Services for Officers and Employees of OCSD. 11116/05: Resolution No. OCSD 05-27 - Amending the Deferred Compensation Plan to include a mandatory cash-out provision for Officers and Employees of OCSD. 11/19/03: Resolution No. OCSD 03-27 - Amending the Deferred Compensation plan to authorize the Plan Administrator, or her designee, to execute, on behalf of the District, any and all documents necessary to effect the District's Deferred Compensation Plan Loan Program. O5128/03: Resolution No. OCSD 03-10 - Amending the Deferred Compensation plan to include a loan provision. 07/12/02: Resolution No. OCSD 02-12 - Amending the Deferred Compensation plan to comply with amendments to the Economic Growth and Tax Relief Reconciliation Act of 2001. 07/01/98: Resolution No. OCSD 98-36 - Reaffirming Resolutions 94-36, 95-80, 98-07, and 98-20 consolidating County Sanitation Districts Nos. 1, 2, 3, 5, 6, 7, 11, 13, and 14 into a single District; approving and adopting the OCSD Deferred Compensation plan. ADDITIONAL INFORMATION Due to numerous legislative and regulatory changes which significantly changed the way public sector employers must administer deferred compensation plans with regard to fiduciary responsibility as Plan Administrators, OCSD conducted an evaluation of the deferred compensation plan and identified several areas for improvement. In December, 2008 Human Resources staff formed the Deferred Compensation Advisory Committee. The Committee, the Human Resources Division, along with an investment consultant developed and issued a request for proposal (RFP). The result of this RFP was the selection and transition of the Deferred Compensation Program 457(b) to ING Financial Services. The transition was completed in June, 2009. The Deferred Compensation Advisory Committee is made up of OCSD employees and retirees who act as fiduciaries for the Plan. The Committee is responsible for ensuring compliance with numerous legislative and regulatory acts such as; Small Business Job Protection Act, the Economic Growth and Tax Relief Reconciliation Act, and the Pension Protection Act. To assist the Committee in fulfilling its mandate, it is necessary to contract for an independent qualified investment consultant. The investment consultant assists the Committee with; the monitoring of the investment funds on a semi-annual basis and, when necessary, recommends replacement funds; minimizing the cost and risks Page 2 of 3 associated with providing and maintaining the Plan to the plan participants; serves as a fiduciary partner to the Plan with OCSD and provides independent and unbiased advice. CEQA N/A BUDGET/DELEGATION OF AUTHORITY COMPLIANCE OCSD funds will be not be expended for this project. The Director of Finance and Administrative Services serves as the Plan Sponsor for the Deferred Compensation Advisory Committee. ATTACHMENT The following attachment(s) may be viewed on-line and at the OCSD website (www.ocsd.com) with the complete agenda package: • Professional Services Agreement • SST Benefits Consulting Proposal, Response to OCSD Request for Proposals CS-2013-588 Page 3 of 3 Return to Mende Report PROFESSIONAL CONSULTANT SERVICES AGREEMENT Deferred Compensation Program 457(b) Plan Oversight Specification No. CS-2013-588 THIS AGREEMENT is made and entered into as of [the date fully executed below] by and between Orange County Sanitation District, with a principal place of business at 10844 Ellis Avenue, Fountain Valley, CA 92708-7018 (hereinafter referred to as "OCSD") and SST Benefits Consulting with a principal business at 4364 Town Center Blvd., Suite 315, El Dorado Hills, CA 95762 (hereinafter referred to as "Consultant") collectively referred to as the "Parties". WITNESSETH WHEREAS, based on Consultant's expertise and experience, OCSD wishes to temporarily engage Consultant to provide Deferred Compensation Program 457(b) Plan Oversight as described in Exhibit"A"; and WHEREAS, OCSD's General Manager has determined the outsourcing of said Services is in the best interest of OCSD; and WHEREAS, Consultant submitted its proposal, dated October 21, 2013; and WHEREAS, on February 19, 2014, the Administration Committee of the Board of Directors of OCSD authorized execution of this Agreement between OCSD and Consultant; and WHEREAS, OCSD has chosen Consultant to conduct these Services in accordance with Purchasing Resolution No. OCSD07-04; and NOW, THEREFORE, in consideration of the mutual promises and mutual benefits exchanged between the Parties, the Parties mutually agree as follows: 1. Introduction 1.1 This Agreement and all exhibits hereto (called the "Agreement") is made by OCSD and Consultant. The Terms and Conditions herein exclusively govern the purchase of Services. 1.2 Exhibits to this Agreement are incorporated by reference and made a part of this Agreement as though fully set forth at length herein. Exhibits to this Agreement are as follows in order of precedence: Exhibit"A" Scope of Work/Technical Specifications Exhibit"B" Proposal Section F: Cost File, dated 11/11/2013 Exhibit"C" Proposal, dated 10/21/2013 1.3 In the event of any conflict or inconsistency between the provisions of this Agreement and any of the provisions of the exhibits hereto, the provisions of this Agreement shall in all respects govern and control. 1.4 This Agreement may not be modified, changed or supplemented, nor may any obligations hereunder be waived or extensions of time for performance granted, except by written instrument signed by both Parties. Professional Consultant Services Agreement 1 of 9 Specification No.CS-2013-588 1.5 The various headings in this Agreement are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or any Paragraph or provision hereof. 1.6 The term "days", when used in the Agreement, shall mean calendar days, unless otherwise noted as workdays. 1.7 Work hours: Meetings with OCSD staff shall be scheduled from Monday through Thursday between the hours of 8AM and 4PM. OCSD will not pay Travel Time. 1.8 The term 'Workday": Workdays are defined as all days that are not Saturday, Sunday, or OCSD observed holidays. OCSD holidays (non-working days) are as follows: New Year's Day, Lincoln's Birthday, Presidents' Day Monday, Memorial Day Monday, Independence Day, Labor Day Monday, Veterans Day, Thanksgiving Day, Day after Thanksgiving, Christmas Eve, and Christmas Day. 1.9 The term "Services" shall be inclusive of all the Services and Deliverables as described in Exhibit "A". 1.10 Consultant shall provide OCSD with all required premiums and/or overtime work at no charge beyond the price provided in Exhibit"B". 1.11 Except as expressly provided otherwise, OCSD accepts no liability for any expenses, losses, or action incurred or undertaken by Consultant as a result of work performed in anticipation of purchases of said services by OCSD. 2. Scope of Work Subject to the terms of this Agreement, Consultant shall perform the Services identified in the Exhibits hereto. Consultant warrants that all of its Services shall be performed in a competent, professional and satisfactory manner. 3. Modifications to Scope of Work Requests for modifications to the Scope of Work hereunder can be made by OCSD at any time. All modifications must be made in writing and signed by both Parties. A review of the time required for the modification will be made by OCSD and Consultant and the Agreement period adjusted accordingly. 4. Compensation Compensation to be paid by OCSD to Consultant for the Services provided under this Agreement shall be a total amount not to exceed One Hundred Fifty-eight Thousand and 00/00 Dollars($158,000.00). 5. Payment and Invoicing 5.1 Consultant shall be paid by OCSD upon approval of invoices by OCSD Project Manager, Marc Brown or his designee, for Tasks completed as outlined in Exhibits "A" and "B". OCSD, at its sole discretion, shall be the determining party as to whether the Services have been satisfactorily completed. 5.2 OCSD shall pay, Net 30 days, upon receipt and approval, by OCSD Project Manager, of itemized invoices submitted for Tasks completed. 5.3 Invoices shall be emailed by Consultant to OCSD at the following email address and the Purchase Order number shall be referenced in the subject line: APStaff(aOCSD.com. Professional Consultant Services Agreement 2 of 9 Specification No.CS-2013-588 Return to Aaenda Report 6. Audit Rights Consultant agrees that, during the term of this Agreement and for a period of three (3) years after its termination, OCSD shall have access to and the right to examine any directly pertinent books, documents, and records of Consultant relating to the invoices submitted by Consultant pursuant to this Agreement. 7. Commencement and Term The Services to be provided by Consultant under this Agreement shall commence on the date of the Notice to Proceed (Effective Date), and continue for a period of three (3)years. 6. Renewals 8.1 OCSD may exercise the option to renew the Agreement for up to one additional one- year period based upon the criteria set forth in the specifications, Exhibit "A", under the terms and conditions contained herein. OCSD shall make no obligation to renew nor give reason if it elects not to renew. 8.2 Renewal may be made through the OCSD Purchase Order Process. 9. Extensions The Term of this Agreement may be extended only by written instrument signed by both Parties. 10. Performance Time is of the essence in the performance of the provisions hereof. 11. Termination 11.1 OCSO reserves the right to terminate this Agreement for its convenience, with or without cause, in whole or in part, at any time, by written notice from OCSD, (delivered by certified mail, return receipt requested) of intent to terminate. Upon receipt of a termination notice, Consultant shall immediately discontinue all work under this Agreement (unless the notice directs otherwise). OCSD shall thereafter, within thirty (30) days, pay Consultant for work performed (cost and fee) to the date of termination. Consultant expressly waives any claim to receive anticipated profits to be earned during the uncompleted portion of this Agreement. Such notice of termination shall terminate this Agreement and release OCSD from any further fee, cost or claim hereunder by Consultant other than for work performed to the date of termination. 11.2 OCSD reserves the right to terminate this Agreement immediately upon OCSD's determination that Consultant is not meeting specification requirements, if the level of service is inadequate, or any other default of this Agreement. 11.3 OCSD may also immediately cancel for default of this Agreement in whole or in part by written notice to Consultant: 1.1 • if Consultant becomes insolvent or files a petition under the Bankruptcy Act;or • if Consultant sells its business; or • if Consultant breaches any of the terms of this Agreement; or • if total amount of compensation exceeds the amount authorized under this Agreement. 11.4 All OCSD property in the possession or control of Consultant shall be returned by Consultant to OCSD on demand, or at the termination of this Agreement,whichever occurs first. Professional Consultant Services Agreement 3 of 9 Specification No.CS-2013-588 12. Indemnification and Hold Harmless Provision Consultant agrees to save, indemnify, defend and hold harmless OCSD, its officers, employees and agents against any and all liability, claims, judgments, cost and demands, including demands arising from injuries or death of persons and damage to property, arising directly or indirectly out of the negligence or willful misconduct of Consultant, its employees or agents, in relation to the rendition of Services pursuant to this Agreement, except claims or litigations arising through the sole negligence or willful misconduct of OCSD. Consultant agrees to reimburse OCSD for any expenditure, including reasonable attorney's fees, OCSD may incur by reason of such matters, and, if requested by OCSD, will defend any such suits at the cost and expense of Consultant. 13. Insurance Consultant and all subcontractors shall purchase and maintain, throughout the life of this Agreement and any periods of warranty or extensions, insurance in amounts equal to the requirements set forth in the signed Acknowledgement of Insurance Requirements, located in Exhibit "C. Consultant shall not commence work under this Agreement until all required insurance is obtained in a form acceptable to OCSD, nor shall Consultant allow any subcontractor to commence service pursuant to a subcontract until all insurance required of the subcontractor has been obtained. Failure to maintain required insurance coverage shall result in termination of this Agreement. 14. Confidentiality and Non-Disclosure 14.1 Consultant acknowledges that in performing the Services hereunder, OCSD may have to disclose to Consultant orally and in writing certain confidential information that OCSD considers proprietary and has developed at great expense and effort. 14.2 Consultant agrees to maintain in confidence and not disclose to any person, firm, or corporation, without OCSD's prior written consent, any trade secret or confidential information, knowledge or data relating to the products, process, or operation of OCSD. 14.3 Consultant further agrees to maintain in confidence and not to disclose to any person, firm, or corporation any data, information, technology, or material developed or obtained by Consultant during the term of this Agreement. 14.4 Consultant agrees as follows: • To use the Confidential Information only for the purposes described herein; to not reproduce the Confidential Information; to hold in confidence and protect the Confidential Information from dissemination to and use by anyone not a party to this Agreement; and to not use the Confidential Information to benefit itself or others. • To restrict access to the Confidential Information to its Consultant or personnel of Consultant who (1) have a need to have such access and (2) have been advised of and have agreed in writing to treat such information in accordance with the terms of this Agreement. • To return all Confidential Information in Consultant's possession upon termination of this Agreement or upon OCSD's request, whichever occurs first. • To hold in confidence information and materials, K any, developed pursuant to the Services hereunder. 14.5 The provisions of this Section shall survive termination or expiration of this Agreement and shall continue for so long as the material remains confidential. Professional Consultant Services Agreement 4 of 9 Specification No.CS-2013-588 Return to Mende Report 15. Key Personnel Personnel, Bill Tugaw and Scott Dauenhauer as provided in Exhibit"C", are considered "key' to the work under this Agreement and will be available for the term of the Agreement. No person designated as key under this Agreement shall be removed or replaced without prior written consent of OCSD. 16. Ownership of Intellectual Property 16.1 Consultant agrees that all designs, plans, reports, specifications, drawings, schematics, prototypes, models, inventions, and all other information and items made during the course of this Agreement and arising from the Services (hereinafter referred to as "New Developments") shall be and are assigned to OCSD as its sole and exclusive property. 16.2 Consultant agrees to promptly disclose to OCSD all such New Developments. Upon OCSD's request, Consultant agrees to assist OCSD, at OCSD's expense, to obtain patents or copyrights for such New Developments, including the disclosure of all pertinent information and data with respect thereto, the execution of all applications, specifications, assignments, and all other instruments and papers which OCSD shall deem necessary to apply for and to assign or convey to OCSD, its successors and assigns, the sole and exclusive right, title and interest in such New Developments. Consultant agrees to obtain or has obtained written assurances from its employees and contract personnel of their agreement to the terms hereof with regard to New Developments and Confidential Information. 16.3 Consultant warrants that Consultant has good title to any New Developments, and the right to assign New Developments to OCSD free of any proprietary rights of any other party or any other encumbrance whatever. 16.4 The originals of all computations, drawings, designs, graphics, studies, reports, manuals, photographs, videotapes, data, computer files, and other documents prepared or caused to be prepared by Consultant or its subcontractors in connection with these Services shall be delivered to and shall become the exclusive property of OCSD. OCSD may utilize these documents for OCSD applications on other projects or extensions of this project, at its own risk. 17. No Solicitation of Employees Or Subcontractors 17.1 Consultant agrees that it shall not, during the term of this Agreement and for a period of one (1) year immediately following termination of this Agreement, or any extension hereof, call on, solicit, or take away any of the employees or subcontractors about whom Consultant became aware as a result of Consultant's Services to OCSD. 17.2 Consultant acknowledges that OCSD's employees are critical to its business. Consultant agrees not to employ or otherwise engage OCSD's employees or subcontractors during the term of this Agreement and for a period of one (1) year following termination of this Agreement. Should Consultant violate this provision, Consultant will pay OCSD fifty percent (50%) of the former employee's annual salary which payment is in addition to OCSD's rights and remedies. 18. Independent Contractor Canaciri 18.1 The relationship of Consultant to OCSD is that of an independent contractor and nothing herein shall be construed as creating an employment or agency relationship. 18.2 Consultant shall act independently and not as an officer or employee of OCSD. OCSD assumes no liability for Consultant's action and performance, nor assumes responsibility for taxes, funds, payments or other commitments, implied or expressed, by or for Consultant. Professional Consultant Services Agreement 5 of 9 Specification No.CS-2013-588 18.3 Consultant shall not be considered an agent of OCSD for any purpose whatsoever, nor shall Consultant have the right to, and shall not, commit OCSD to any agreement, contract or undertaking. Consultant shall not use OCSD's name in its promotional material or for any advertising or publicity purposes without expressed written consent. 18.4 Consultant shall not be entitled to any benefits accorded to those individuals listed on OCSD's payroll as regular employees including, without limitation, worker's compensation, disability insurance, vacation, holiday or sick pay. Consultant shall be responsible for providing, at Consultant's expense, disability, worker's compensation or other insurance as well as licenses and permits usual or necessary for conducting the Services hereunder. 18.5 Consultant shall be obligated to pay any and all applicable local, state and federal payroll and other taxes incurred as a result of fees hereunder. Consultant hereby indemnifies OCSD for any claims, losses, costs, fees, liabilities, damages or penalties suffered by OCSD arising out of Consultant's breach of this provision. 18.6 Consultant shall not be eligible to join or participate in any benefit plans offered to those individuals listed on OCSD's payroll as regular employees. Consultant shall remain ineligible for such benefits or participation in such benefit plans even if a court later decides that OCSD misclassified Consultant for tax purposes. 19. Licenses. Permits Consultant represents and warrants to OCSD that it has obtained all licenses, permits, qualification and approvals of whatever nature that are legally required to engage in this work. Any and all fees required by State, County, City and/or municipal laws, codes and/or tariffs that pertain to work performed under the terms of this Agreement will be paid by Consultant. 20. Consultant's Representations In the performance of duties under this Agreement, Consultant shall adhere to the highest fiduciary standards, ethical practices and standards of care and competence. Consultant agrees to comply with all applicable Federal, State and local laws and regulations. 21. Right to Review Services. Facilities. and Records 21.1 OCSD reserves the right to review any portion of the Services performed by Consultant under this Agreement, and Consultant agrees to cooperate to the fullest extent possible. 21.2 Consultant shall furnish to OCSD such reports, statistical data, and other information pertaining to Consultant's Services as shall be reasonably required by OCSD to carry out its rights and responsibilities under its agreements with its bondholders or noteholders and any other agreement relating to the development of the project(s) and in connection with the issuance of its official statements and other prospectuses with respect to the offering, sale, and issuance of its bonds and other obligations. 21.3 The right of OCSD to review or approve drawings, specifications, procedures, instructions, reports, test results, calculations, schedules, or other data that are developed by Consultant shall not relieve Consultant of any obligation set forth herein. 22. Governing Law This Agreement shall be governed by and interpreted under the laws of the State of California and the Parties submit to jurisdiction in Orange County, in the event any action is brought in connection with this Agreement or the performance thereof. Professional Consultant Services Agreement 6 of 9 Specification No.CS-2013-588 Return to Mende Report 23. Force Maieure Neither party shall be liable for delays caused by accident, flood, acts of God, fire, labor trouble, war, acts of government or any other cause beyond its control, but said party shall use reasonable efforts to minimize the extent of the delay. Work affected by a Force Majeure condition may be rescheduled by mutual consent or may be eliminated from the Agreement. 24. Severability If any section, subsection, or provision of this Agreement, or any agreement or instrument contemplated hereby, or the application of such section, subsection, or provision is held invalid, the remainder of this Agreement or instrument in the application of such section, subsection or provision to persons or circumstances other than those to which it is held invalid, shall not be affected thereby, unless the effect of such invalidity shall be to substantially frustrate the expectations of the Parties. 25. Breach The waiver of either party of any breach or violation of, or default under, any provision of this Agreement, shall not be deemed a continuing waiver by such party of any other provision or of any subsequent breach or violation of this Agreement or default thereunder. Any breach by Consultant to which OCSD does not object shall not operate as a waiver of OCSD's rights to seek remedies available to it for any subsequent breach. 26. Remedies In addition to other remedies available in law or equity, if the Consultant fails to make delivery of the goods or Services or repudiates its obligations under this Agreement, or if OCSD rejects the goods or Services or revokes acceptance of the goods or Services, OCSD may (1) cancel the Agreement; (2) recover whatever amount of the purchase price OCSD has paid, and/or (3) "cover' by purchasing, or contracting to purchase, substitute goods or Services for those due from Consultant. In the event OCSD elects to "cover' as described in (3), OCSD shall be entitled to recover from Consultant as damages the difference between the cost of the substitute goods or Services and the contract price, together with any incidental or consequential damages. 27. Attorney's Fees If any action at law or inequity or if any proceeding in the form of an Alternative Dispute Resolution (ADR) is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorney's fees, costs and necessary disbursements in addition to any other relief to which he may be entitled. 28. Dispute Resolution 28.1 In the event of a dispute as to the construction or interpretation of this Agreement, or any rights or obligations hereunder, the Parties shall first attempt, in good faith, to resolve the dispute by mediation. The Parties shall mutually select a mediator to facilitate the resolution of the dispute. If the Parties are unable to agree on a mediator, the mediation shall be conducted in accordance with the Commercial Mediation Rules of the American Arbitration Agreement, through the alternate dispute resolution procedures of Judicial Arbitration through Mediation Services of Orange County ("JAMS"), or any similar organization or entity conducting an alternate dispute resolution process. 28.2 In the event the Parties are unable to timely resolve the dispute through mediation, the issues in dispute shall be submitted to arbitration pursuant to California Code of Civil Procedure, Part 3, Title 9, Sections 1280 at seq. For such purpose, an agreed arbitrator shall be selected, or in the absence of agreement, each parry shall select an arbitrator, and those two arbitrators shall select a third. Discovery may be conducted in connection with the arbitration proceeding pursuant to California Code of Civil Procedure Section 1283.05. The arbitrator, or three arbitrators acting as a board, shall take such evidence and make such investigation as deemed Professional Consultant Services Agreement 7 of 9 Specification No.CS-2013-588 appropriate and shall render a written decision on the matter in question. The arbitrator shall decide each and every dispute in accordance with the laws of the State of California. The arbitrator's decision and award shall be subject to review for errors of fact or law in the Superior Court for the County of Orange, with a right of appeal from any judgment issued therein. 29. Damage to OCSD's Property Any OCSD property damaged by Consultant will be subject to repair or replacement by Consultant at no cost to OCSD. 30. OCSD Safety and Human Resources Policies In addition to the Safety and Accident Prevention requirements stated in the Scope of Work/Technical Specifications, OCSD requires all contractors and consultants to follow and ensure their employees and all subcontractors follow all State and Federal regulations as well as OCSD requirements while working at OCSD locations. If during the course of a contract it is discovered that OCSD policies, safety manuals, or contracts do not comply with State or Federal regulations then the Consultant is required to follow the most stringent regulatory requirement at no cost to OCSD. Consultant and all their employees and subcontractors, shall adhere to all applicable OCSD Safely and Human Resources Policies found at: OCSD.com, "Doc Central" (bottom of page), under"Safety". 31. Smoking Smoking is only allowed in designated areas. Smoking is not allowed in any building, electrically classified area or process area where methane gas may be present. Lack of compliance with OCSD Smoking policy will be cause for removal of offending personnel from the site, termination of the Agreement, or both. 32. Assignments Consultant shall not delegate any duties nor assign any rights under this Agreement without the prior written consent of OCSD. Any such attempted delegation or assignment shall be void. 33. Conflict of Interest and Reporting 33.1 Consultant shall at all times avoid conflict of interest or appearance of conflict of interest in performance of this Agreement. 33.2 Consultant affirms that to the best of its knowledge there exists no actual or potential conflict between Consultant's families, business or financial interest or its Services under this Agreement, and in the event of change in either its private interests or Services under this Agreement, it will raise with OCSD any question regarding possible conflict of interest which may arise as a result of such change. 34. Third Party Rights Nothing in this Agreement shall be construed to give any rights or benefits to anyone other than OCSD and Consultant. 35. Authority to Execute The persons executing this Agreement on behalf of the Parties warrant that they are duly authorized to execute this Agreement and that by executing this Agreement, the Parties are formally bound. 36. Read and Understood By signing this Agreement, Consultant represents that he has read and understood the terms and conditions of the Agreement. 37. Entire Agreement This Agreement constitutes the entire agreement of the Parties and supersedes all prior written or oral and all contemporaneous oral agreements, understandings, and negotiations between the Parties with respect to the subject matter hereof. Professional Consultant Services Agreement 8 of 9 Specification No.CS-2013-588 Return to Mende Report 38. Notices All notices under this Agreement must be in writing. Written notice shall be sent by registered or certified mail, postage prepaid, return receipt requested, or by any other overnight delivery service which delivers to the noticed destination and provides proof of delivery to the sender. Any facsimile notice must be followed within three (3) days by written notice. All notices shall be effective when first received at the following addresses: OCSD: Clarice M. Marcin Senior Contracts Administrator Orange County Sanitation District 10844 Ellis Avenue Fountain Valley, CA 92708-7018 Consultant: SST Benefits Consulting IN WITNESS WHEREOF, intending to be legally bound, the Parties hereto have caused this Agreement to be signed by the duly authorized representatives. ORANGE COUNTY SANITATION DISTRICT Dated: By: Chair Administration Committee Dated: By: Clerk of the Board Dated: By: Contracts/Purchasing Manager SST BENEFITS CONSULTING Dated: By: Print Name and Title of Officer IRS Employers I.D. Number Professional Consultant Services Agreement 9 of 9 Specification No.CS-2013-588 ORANGE COUNTY SANITATION DISTRICT R E Q U E S T F O R P R O P O S A L ( R F P ) E L E C T R O N I C S U B M ITT A L F O R D E F E R R E D C O M P E N S A T I O N P R O G R A M 4 5 7 ( b ) P L A N C S - 2 0 1 3 - 5 8 8 R E S P O N S E F I L E SST rBENEFITS CONSULTING 4364 Town Center Blvd., Suite 315 El Dorado Hills, CA 95762 866-443-1557 OUR EXPERIENCE IS YOUR ADVANTAGE... Return to Aaenda Report SST 8 R� "Our Experience it YonrAdunntage" rCONSULTING California Lic.OC 17931 October 21, 2013 Chris Yates, M.B.A., C.P.M., CPPB Contracts, Purchasing& Materials Management Orange County Sanitation District 10844 Ellis Avenue Fountain Valley, CA 92708-7018 RE: REQUEST FOR PROPOSAL(RFP)ELECTRONIC SUBMITTAL FOR DEFERRED COMPENSATION PROGRAM 457(b) PLAN—CS-2013.588 Dear Ms. Yates: Enclosed is our response to your request for consulting services for the Orange County Sanitation District's Deferred Compensation Plan. On behalf of SST Benefits Consulting (SST), I commit to our willingness and ability to perform the services contained in this proposal. Our proposal is valid for 120 days from date of submittal. Our proposal complies with all the requirements and qualifications established by the District's Request for Proposal (RFP). Questions regarding this proposal may be directed to: Bill Tugaw, President & CEO SST Benefits Consulting 4364 Town Center Blvd., Suite 315 El Dorado Hills, CA 95762 (866)443-1557, ext. 103 bil Ituaawc&sstbenefits.com I am the lead consultant for this project and will be assisted by Scott Dauenhauer and Paul Hackleman. Summaries of our experience are included in our response. As a California based consultant and the current contracted consultant for the Orange County Sanitation District, we look forward to the opportunity of continuing our working relationship with the District's Deferred Compensation Committee. Since 2008, we have worked closely with the District to make this defined contribution plan "state-of-the-art" and represent "best practices" in the public sector defined contribution arena. Despite these past accomplishments, we do not intend to rest on our laurels. We propose making recommendations to the Committee by restructuring the plan's administrative costs to "revenue neutral" or "revenue equalization" whereby each participant pays their fair, pro rate cost of operating the plan. We also propose the development of an Education Policy Statement (EPS) structured similarly to the existing Investment Policy Statement (IPS) to facilitate the rate at which new participants join the plan and the levels of contributions from existing participants. Headquarters: 4364 Town Center Blvd. • Suite 315 • El Dorado Hills,CA 95762 • 916/270-2020 • Fax 916/939-1419 Offices: San Francisco Bay Area. • Los Angeles Basin • Inland Empire • Greater Phoenix • Greater Portland Chris Yates, M.B.A., C.P.M., CPPB Orange County Sanitation District October 21, 2013 Page 2 We also think It is critical for the District, ING (or successful future provider) and SST to develop a process that increases contributions, diversification, and participation. Our pledge to the District is to assure that its plan has the highest educational standards in the country. We would also like to explore the feasibility of adopting an auto-acceleration program to systematically increase contributions over time, helping participants achieve maximum retirement potential. It has been a pleasure working with the District over the past several years and we hope to have the opportunity of continuing this relationship. Sincer e� I ll Tugaw President&CEO BT:ap enclosures Return to Aaenda Report This Affidavit To Be Fully Executed Non-Collusion Affidavit State Of California ) )Ss. County Of El Dorado ) William Jerald Tugaw , Being First Duly Sworn, Deposes And Says That He Or She Is President Of SST Benefits Consulting The Party Making The Bid, That The Bid Is Not Made In The Interest Of, Or On Behalf Of, Any Undisclosed Person, Partnership, Company,Association, Organization, Or Corporation; That The Bid Is Genuine And Not Collusive Or Sham; That The Bidder Has Not Directly Or Indirectly Induced Or Solicited Any Other Bidder To Put In A False Or Sham Bidder, And Has Not Directly Or Indirectly Colluded, Conspired, Connived, Or Agreed With Any Bidder Or Anyone Else To Put In A Sham Bid, Or That Anyone Shall Refrain From Submitting A Bid; That The Bidder Has Not In Any Manner, Directly Or Indirectly, Sought By Agreement, Communication, Or Conference With Anyone To Fix The Bid Price Of The Bidder Or Any Other Bidder, Or To Fix Any Overhead, Profit, Or Cost Element Of The Bid Price, Or Of That Of Any Other Bid, Or To Secure Any Advantage Against The Public Body Awarding The Contract Of Anyone Interested In The Proposed Contract; That All Statements Contained In The Bid Are True; And, Further, That The Bidder Has Not, Directly Or Indirectly, Submitted His Or Her Bid Price Or Any Breakdown Thereof, Or The Contents Thereof, Or Divulged Information Or Data Relative Thereto, Or Paid, And Will Not Pay Any Fee To Any Corporation, Partnership, Company Association, Organization, Bid Depository, Or To Any Member Or Agent Thereof To Effectuate A Collusive Or Sham Bid. I Declare Under Penalty Of Perjury Under The Laws Of T State Of California That The Foregoing Is True And Correct �`— Signature Of. Pr dent, cretary, M er, Owner Or Representative Subscribed And Sworn To Before Me (Seal) This�21 �LDay Of October 2013. /iI•%/�rZl�� A.PHILLIPS a.. Comrn.k1958790 Signatur Of N ary Public In And For i !I Notary Public-California The County Of El Dorado tomm13or.do County o ofaots, � Stale Of. California All Signatures Must Be Witnessed By Notary ATTACHMENT F Specification No. CS-2013-588 Orange County Sanitation District(OCSD) 10844 Ellis Avenue, Fountain Valley, CA 92708-7018 Phone (714) 962-2411 Fax (714) 593-7784 ACKNOWLEDGMENT OF INSURANCE REQUIREMENTS" AND CERTIFICATION OF ABILITY TO PROVIDE AND MAINTAIN COVERAGES SPECIFIED I, William Tugaw ,the President (President, Secretary, Manager, Owner or Representative) of SST Benefits Consulting , certify that the Specifications and (Name of Company,Corporation or Owner) General Provisions regarding insurance requirements as stated below, for the Purchase Contract designated Specification No. CS-2013-588 . have been read and understood and that our firm, as bidder on this project is able to provide and maintain the coverage as specified below. If the awarded bidder fails to provide said coverace. thialihall be sufficientcause for contract termination. Failure to maintain said coverage shall result in terminal a aw dens contract. l � ^-9 r/wr"��' Date: 10/21/13 (Sign§ PROVdenl,0 er or Authorized Company Representative) Return the signed Acknowledgement to the Buyer handling the bid/RFP. INSURANCE REQUIREMENTS 'WE STRONGLY RECOMMEND THIS SHEET BE GIVEN TO YOUR INSURANCE AGENT/BROKER IMMEDIATELYTO ENSURE YOUR FIRM CAN COMPLY WITH OUR REQUIREMENTS IN THE EVENT YOUR FIRM IS AWARDED THE CONTRACT Once you have been awarded the contract,please provide us with a certificate of insurance and supporting endorsements as described below. The actual endorsements(see Proofof Coverage below for specific form numbers)must be provided-a statement on an Insurance certificate will not be accepted In lieu of the actual endorsement. We prefer to receive original electronic documents in PDF format via e-mail to rkleinmanna ocsd.com. Only if you cannot send electronic carts and endorsements will we accept hard copies sent to Randall Kleinman,Orange County Sanitation District, Div. 260, 10844 Ellis Avenue, Fountain Valley,CA 82708. Faxed copies are not considered original documents;your insurance is not considered in compliance until all originals are received. 1. WORKER'S COMPENSATION INSURANCE: The Vendor shall provide such Workers Compensation Insurance as required by the Labor Code of the State of California, including Employer's Liability Insurance with a minimum limit of$1,000,000.00. Such Worker's Compensation Insurance shall be endorsed to provide for a waiver of subrogation in favor of OCSD A statement on an Insurance certificate will not be accepted in lieu of the actual endorsements unless your Insurance carrier is State of California Insurance Fund(SCIF) and the endorsement numbers 2570 and 2065 are referenced on the certificate of Insurance. 2. GENERAL LIABILITY INSURANCE: The Vendor shall maintain during the life of this contract,including the period of warranty,Commercial General Liability Insurance written on an occurrence basis providing the following minimum limits of liability coverage:$500,000 per occurrence with$1.0 million aggregate. Said Insurance shall include coverage for the following hazards:Premises-Operations,blanket contractual liability(for this Agreement),products liability/completed operations(including any product manufactured or assembled),broad form property damage,contractual liability,Independent contractors liability,personal and advertising injury, mobile equipment,cross liability and severability of interest clauses. A statement on an Insurance certificate will not be accepted in lieu of the actual additional insured endorsement(s). If requested by OCSD and applicable,XCU coverage (Explosion,Collapse and Underground)and Riggers Liability must be Included In the General Liability policy and coverage must be reflected on submitted Certificate of Insurance. Rev.112112rk Level i w/o E&O Return to Aoenda Reoo SST ORANGE COUNTY SANITATION DISTRICT -Y BENEFITS DEFERRED COMPENSATION PROGRAM 457(b)PLAN CONSULTING RFP p CS-2013.588 REFERENCE SHEET The following are the names, addresses and telephone numbers for five (5) municipal or industrial contacts which proposer has provided similar service to within the past five (5) years. 1. Company: Alameda County Water District Telephone: (510) 659-1970, ext. 4211 Contact: Altarine Vernon, Manager Admin Services Fax: (510) 661-9406 Address: 43885 S. Grimmer Blvd. Email: altarine.vernon@acwd.com Fremont, CA 94535 2. Company: City of Pomona Telephone: (909) 620-2353 Contact: Paula Chamberlain, Finance Director Fax: (909) 620-3711 Address: 505 S. Garey Avenue Email: Paula_Chamberlain@ci.pomona.ca.us Pomona, CA 91766 3. Company: County of San Bernardino Telephone: (909) 387-5664 Contact: Lori Goldman, Benefits Chief Fax: (909) 387-5566 Address: 157 West 51° Street Email: Igoldman@hr.sbcounly.gov San Bernardino, CA 92415 4. Company: County of San Mateo Telephone: (650) 363-4676 Contact: Jay Castellano, Interim Benefits Manager Fax: (650) 599-1573 Address: 455 County Center, 5tn Floor Email: jastellano@smcgov.org Redwood City, CA 94063 5. Company: Golden Gate Bridge, Hwy&Trans District Telephone: (415) 923-2339 Contact: Alice Ng, Business Process Manager Fax: (415) 923-2017 Address: P.O. Box 9000, Presidio Station Email: ang@goldengale.org San Francisco, CA 94129 It�,ta Printed on recycled paper OUR EXPERIENCE IS YOUR ADVANTAGE... ,� SST ORANGE COUNTY SANITATION DISTRICT YTB ENEFM DEFERRED COMPENSATION PROGRAM 457(b)PLAN CONSULTING RFP#CS-2013-588 PROPOSAL SECTION B: TECHNICAL PROPOSAL BA Qualifications, Related Experience and References of Proposer— This section of the proposal should establish the ability of Proposer to satisfactorily perform the required work by reasons of:experience in performing work of a similar nature;demonstrated competence in the services to be provided;strength and stability of the firm;staffing capability, work load; record of meeting schedules on similar projects;and supportive client references. Proposer shall: B.1.1 Provide a brief profile of the firm, including the types of services offered;the year founded;form of the organization (corporation, partnership, sole proprietorship); number, size and location of offices; and number of employees. Originally formed in 1982, SST Benefits Consulting (SST) is a Registered Investment Advisor Firm. Our consultants deliver comprehensive fiduciary support with a focus on providing specialized advisory services, fiduciary education and in-depth investment analysis. SST is a private corporation organized under the laws of California, has been privately held since inception, and currently services public sector defined contribution plans with combined assets exceeding $6 billion. SST currently employs nine (9) consultants and support staff with offices in El Dorado Hills, CA; Scottsdale, AZ; San Francisco Bay Area; Inland Empire, CA and Greater Portland. Six (6) are located in California, two (2) in Arizona and one (1) in Washington. Bill Tugaw, President/CEO, directs our team of independent consultants, Investment Advisor Representatives and Certified Financial Planners, collectively representing over 100 years of experience. As former defined contribution plan sponsors, former plan providers, authors, nationally recognized speakers and skilled negotiators, SST consultants bring a rare set of skills to the practice of finding custom solutions and positive outcomes designed to address the unique goals of each of our clients. Our consultants provide our clients with the benefits of their longevity, scope of knowledge, proven capabilities and broad range of experience. SST delivers comprehensive fiduciary support with a focus on providing specialized advisory services, fiduciary education and in-depth investment analysis reporting. With over 90% of our current in-force business focused on public sector clientele, SST offers an extensive understanding of the unique needs of this industry. Among the characteristics that set SST apart from the field is our: • EXPERIENCE: Focused on serving the Public Sector market for over 30 years • INNOVATION: Drawing on our experience, we develop innovative solutions to best meet the needs of our clients • EDUCATION: We promote and provide valuable educational opportunities to decision makers and plan participants • SERVICE: Our contracts hold vendors accountable through guaranteed performance standards tied to monetary penalties Printed on recycled paper 1 OUR EXPERIENCE IS YOUR ADVANTAGE... Return to Aaenda Report ,� SST ORANGE COUNTY SANITATION DISTRICT YBENEFITS DEFERRED COMPENSATION PROGRAM 457(b)PLAN CONSULTING RFP#CS-2013-588 • RELATIONSHIPS: Using a collaborative approach, we engage providers to achieve the desired outcomes for our clients SST consulting practice includes services for: • 457(b) Deferred Compensation plans • 401(a) Defined Contribution plans • 403(b)Tax Sheltered Account plans • 401(k) Cash or Deferred Arrangement plans We also provide consulting services for post-employment health savings accounts utilizing • Voluntary Employee Beneficiary Association (VEBA), and • Public Sector Integral Part Trusts (§115). 8.1.2 Provide a general description of the firm's financial condition and identify any conditions (e.g. bankruptcy, pending litigation, planned office closures, impending merger) that may impede Proposer's ability to complete the Scope of Work/ Technical Specifications. SST's financial condition is, and always has been, solid. There are no conditions, past or present, that would impede our ability to complete the Scope of Work/Technical Specifications of this proposal. 8.1.3 Describe the firm's experience in performing work of a similar nature to that solicited in this RFP and highlight the participation in such work by the key personnel proposed for assignment to this Scope of Work/Technical Specifications. Our experience as an organization includes 18 years of developing and administering Requests for Disclosure (RFD), Requests for Proposal (RFP), investment manager searches, transition implementation, recordkeeper searches and negotiating services for public sector defined contribution and deferred compensation plans. Most of our clients' Scope of Work is very similar to the services requested by this RFP. Bill Tugaw is generally the lead consultant responsible for project oversight and the liaison between our clients and the provider community. He is assisted by Scott Dauenhauer who handles all matters related to investments and Paul Hackleman who is responsible for the internal processes of the RFP and compliance. 8.1.4 Identify subcontractors by company name, address, contact person, telephone number and project function. Describe Proposer's experience working with each subcontractor. SST will not utilize any subcontractors for this project. 8.1.5 Provide five (5) references for the services cited as related experience, and furnish the name, title, address, email, and telephone number of the person(s) at the client organization who is most knowledgeable about the work performed. References are provided in the Section A of this response. Printed on recycled paper 2 OUR EXPERIENCE IS YOUR ADVANTAGE... ,� SST ORANGE COUNTY SANITATION DISTRICT YTB ENEFM DEFERRED COMPENSATION PROGRAM 457(b)PLAN CONSULTING RFP#CS-2013-588 B.2 Proposed Staffing and Project Organization - This section of the proposal should establish the method that will be used by the Proposer to manage the Scope of Work/Technical Specifications as well as identify key personnel assigned. Proposer shall: B.2.1 Provide education, experience, and applicable professional credentials of Propose✓s staff assigned to provide the services requested in this RFP. This information follows item B.2.4. B.2.2 Furnish brief resumes (not more than two[2]pages each) for the proposed Project Manager and other key personnel. This information follows item B.2.4. B.2.3 Indicate adequacy of labor resources utilizing a table, projecting the labor-hour allocation to the Scope of Work/Technical Specifications, by individual task. INVESTMENT SELECTION, MEASUREMENT, MONITORING AND REPORTING Investment Performance Review Estimated 20 hours per review Replacement Fund Recommendations Estimated 4 hours per fund Investment Policy Statement Estimated 4 hours per review Plan Provider Performance Review Estimated 16 hours per review Monitor Investment Funds Included in Investment Performance Review Investment Trends&Legislative Issues Included in Quarterly Meetings Market Trends Included in Investment Performance Review Peer Comparison Included in Investment Performance Review GENERAL PLAN CONSULTING Fiduciary Education Estimated 16 hours for basic 457U and 3 hours per session for 457U Graduate Quarterly Meetings & Minutes Estimated 5 hours per meeting Compliance Review Estimated 12 hours per basic review and 60 hours per comprehensive audit Legislative Issues Included in Quarterly Meetings Communication & Enrollment Materials Included in Quarterly Meetings Administrative Deficiencies Included in Quarterly Meetings PLAN PROVIDER RFP DEVELOPMENT&CONTRACT NEGOTIATIONS Request for Proposal &Transition Services I Estimated 140 hours B.2.4 Identify key personnel proposed to perform the work in the specified tasks and include major areas of subcontract work. FOY- Printed on recycled paper 3 OUR EXPERIENCE IS YOUR ADVANTAGE... Return to AaeWa Report SST ORANGE COUNTY SANITATION DISTRICT Y' BENEFITS DEFERRED COMPENSATION PROGRAM 457(b)PLAN N CONSULTING RFP#CS-2013-588 The tasks requested in the RFP require the skill sets of various individuals on the SST team. Project lead will be Bill Tugaw with more than 30 years of experience providing defined contribution retirement plan advice and consulting. He will be assisted by Scott Dauenhauer, who will oversee all investment related activities and Paul Hackleman who will facilitate the Request for Proposal (RFP) process. All of these consultants bring a wealth of 457(b), 401(a) and investment management experience to the team. The following are brief biographies of these consultants. Detailed biographies are included at the end of this section. BILL TUGAw As PresidentICEO of SST, Bill leads the team with an appreciation of the strengths of each individual consultant and a common goal of providing quality service to our clients. Bill's ability to understand the broad scope of investment market trends, his negotiating skills with providers and his commitment to participant education distinguishes SST in this competitive field. For 30 years, Bill has focused on voluntary investment plan consulting within the public sector and provides our clients with a seasoned, comprehensive understanding of this specialized marketplace. Bill is located in El Dorado Hills, California and is a graduate of the W. P. Carey School of Business at Arizona State University. He has successfully completed the FINRA Series 65, Uniform Investment Adviser Law Examination and is a registered Investment Advisor Representative. SCOTT DAUENHAUER Since beginning his practice in 2001, Scott has focused on the unique needs presented by public sector plan management. He was influential in revamping the California State Teachers' Retirement System's 403(b) product which resulted in a 60% reduction in fees. He created the first Target Risk Date Portfolios implemented through the CaISTRS Pension 2 403(b) and 457 plans and is one of six (6) fee-only advisors approved by CaISTRS to give presentations to California State Teachers' Retirement System members. Scott applies energy and vision to the improvement of investment products for SST clients. Scott is a resident of Orange County, California, he earned a Bachelor's degree in Finance from Vanguard University and a Master's degree in Financial Planning from the College of Financial Planning. He is a Certified Financial Planner (CFP®), an Accredited Investment Fiduciary (AIF®), a NAPFA Registered Financial Advisor and a registered Investment Advisor Representative. PAUL HACKLEMAN Paul is the Process/Compliance Practice Leader for SST and is responsible for internal processes and compliance. Prior to officially joining SST, Paul began co-consulting in 1995. He holds a Bachelor's degree in Political Science and History from the University of the Pacific and a Master's degree in European Intellectual History from the University of Chicago. Paul is located in the San Francisco Bay Area. Paul's total experience with 457 Deferred Compensation plans is 28 years, most of which was as staff to the San Mateo County 457 Defamed Compensation Committee. Fa Printed on recycled paper 4 OUR EXPERIENCE IS YOUR ADVANTAGE... ,� SST ORANGE COUNTY SANITATION DISTRICT YTB ENEFM DEFERRED COMPENSATION PROGRAM 457(b)PLAN CONSULTING RFP#CS-2013-588 t3.2.5 Include a project organization chart that clearly delineates communication/reporting relationships among the proposed staff. SCOTT DAUENHAUER INVESTMENT ANALYSIS (949)394-8245 ORANOECOUNTY BILLTUGAW ppUL HACKLEMAN SANITATION LEADCONSULTANT pROCESSCONSU LTANT (650)888.8983 (650) 342-7861 SST BENEFITS CONSULTING SUPPORT STAFF (866) 443-1557 t3.2.6 Include a statement that key personnel will be available to the extent proposed for the duration of the Scope of Work/Technical Specifications acknowledging that no person designated as "key"to the services requested herein shall be removed or replaced without the prior written concurrence of OCSD. Key personnel as outlined in this RFP response will be available to the extent proposed for the duration of the Scope of Work I Technical Specifications. We acknowledge that no person designated as "key' to the services requested herein shall be removed or replaced without the prior written concurrence of OCSD. FOY- Printed on recycled paper 5 OUR EXPERIENCE IS YOUR ADVANTAGE... ReW m to Agenda Report - � ORANGE COUNTY SANITATION DISTRICT SST DEFERRED COMPENSATION PROGRAM 457(b)PLAN Y N CONSULTING RFP#CS-2013-588 B.3 Work Plan—Proposer shall provide a narrative that addresses the Scope of Work/ Technical Specifications and shows Proposer's understanding of OCSD's needs and requirements. Proposer shall., B.3.1 Describe the approach and sequential activities to completing the tasks specified in the Scope of Work/Technical Specifications. Investment Selection, Measurement, Monitoring and Reporting INVESTMENT PERFORMANCE REVIEW: (Estimated 20 hours per review) SST will provide a semi-annual comprehensive Investment Performance Review as outlined below. Investment performance constantly changes as new investment options emerge and current options fail to meet performance standards or are not competitive with alternative funds. Part of the plan sponsor's fiduciary responsibility is the monitoring and evaluation of existing funds and exercising constant due diligence in replacing underperforming funds. Responding to the needs of our clients in this vibrant environment is where SST consultants excel. SST Consultants specialize in analyzing existing investment choices for quality, performance, reasonableness of fees, social responsibility and consistency. Using proprietary tools and those developed in association with Morningstar®, SST has the ability to obtain detailed information on more than 70,000 mutual fund share classes, stocks, variable insurance products, exchange traded funds, closed end funds, separate accounts, offshore funds and hedge funds. We also utilize additional resources for research such as Wilshire Compass, Wall Street Journal Online and FundAlarm. Expenses are tracked to reveal the transparency of fees, which are reported both as a percentage and as a dollar amount, specific for the examination period. Expense reports include administration fees, advisory services fees, 121b-1 marketing fees and other fees totaling the entire revenue structure generated to the various fund families and providers. The technical research team at SST brings together more than 100 years of combined experience. Internal research is performed utilizing the extensive experience of Bill Tugaw, Scott Dauenhauer and staff. Detailed fund reviews are presented to our clients in person by the lead Investment Advisor Representative and contain the following information: MARKET OVERVIEW • An overview of the economy and its related impact on the investment market. The overview also includes a review of the equity markets, both domestic and international, and fixed income markets, sector analysis and major indices, including category as well as asset class comparisons. EXECUTIVE SUMMARY • The performance of the overall portfolio compared to a customized benchmark (based on the asset allocation of the participants), a narrative on each investment option, including the fixed interest account and quantitative detail on each investment. I W Printed on recycled paper 6 OUR EXPERIENCE IS YOUR ADVANTAGE... ,� SST ORANGE COUNTY SANITATION DISTRICT YTB ENEFM DEFERRED COMPENSATION PROGRAM 457(6)PLAN CONSULTING RFP#CS-2013-588 • Performance compared to the appropriate benchmarks and peer groups outlined in the Investment Policy. • Portfolio Statistics compared to a customized portfolio benchmark and average categorical statistics that are compared to the individual investment option statistics. • Asset Allocation that captures the dollar amounts and percentage of assets in each investment option with a comparison to the previous reporting period. • Examination of the mutual fund family history to identify Compliance related issues, management turnover, management's investments in their own funds and compensation structure. PORTFOLIO OVERVIEW • Asset composition by asset class and categories. • Portfolio detail compared to the customized benchmark. • Stock overlay to determine the concentration of stock holdings in order to ensure proper diversification. • Risk characteristics of the portfolio and the individual investment options to determine the level of risk and appropriateness of the risk compared to performance. • Analytical detail on the overall portfolio. This report includes, but is not limited to, the year to date return on the overall portfolio, a comparison of risk, investment performance and average fund expense against averages of the appropriate peer group. • A summary of the diversification of the equity styles and the fixed income styles. For example, the equity style includes what percentage of equity investments are invested in large capitalized value funds. WATCH LIST • Identifies investments that fail to equal or outperform the benchmark. After identifying why the fund under-performed, we recommend a course of action as outlined in the Investment Policy Statement. INVESTMENT DETAIL • Glossary of Terms • Individual Fund Detail This comprehensive report is presented and discussed in detail with the Committee on a semi-annual basis with specific recommendations regarding any potential changes to the investment line-up. SST will facilitate any changes to the investments. To demonstrate the quality of our comprehensive investment review process and with the environment in mind, a sample fund review has been posted on a secure portal developed specifically for the District. We encourage you to visit this site: FOY- Printed on recycled paper 7 OUR EXPERIENCE IS YOUR ADVANTAGE... Return to Agenda Rewft ,� SST ORANGE COUNTY SANITATION DISTRICT YBENEFITS DEFERRED COMPENSATION PROGRAM 457(b)PLAN CONSULTING RFP#CS-2013-588 www.sstbenefits.com Click on "Client Portal"and enter the following case sensitive login: User Name: OCSD Password: OrangeCountyl 3 REPLACEMENT FUND RECOMMENDATIONS: (Estimated 4 hours per fund) In the event that the Committee recommends replacement of funds based upon the criteria in the Investment Policy Statement, SST will assist with researching potential funds. INVESTMENT POLICY STATEMENT: (Estimated 4 hours per review) Fiduciary standards have become explicitly applicable to public sector defined contribution plans. We believe that the Investment Policy Statement (IPS) is a corner stone of any Plan as it provides a road map for plan investment policy, as well as guidance in decision making, policy changes, review of investment options and action steps for addressing investment performance issues. The IPS makes the process predictable and can serve as an important educational tool for participants because it reflects the plan sponsor's commitment to fund monitoring and provides the basis for participants to evaluate their own individual selections. We believe that a current and closely followed IPS is a key safe harbor in helping plan sponsors meet their fiduciary responsibilities. SST will provide an annual review of the IPS and recommend edits as appropriate. Ultimately, the IPS should reflect and support the plan's long term goals and objectives. By following the IPS, the investment portfolio will be diversified and provide safe and cost-effective investment options to participants. The IPS should clearly articulate plan objectives and include a summary explanation of investment options. The basic framework includes the following: • Identification and description of all asset classes in the Plan • Fund selection criteria • Frequency of fund review and monitoring • Actions that will be taken for under-performing funds • Process followed for removal/replacement of funds • Responsibilities of all decision makers PLAN PROVIDER PERFORMANCE: (Estimated 18 hours per review) SST introduced performance standards as a way to hold providers accountable for promises made during the Request for Proposal (RFP) process. These standards tie service and education related promises to monetary penalties if providers fall short. An additional innovative feature of the contracted performance standards is "exit standards" identifying performance requirements for the provider should they lost the District's business in the future. FOY- Printed on recycled paper 8 OUR EXPERIENCE IS YOUR ADVANTAGE... SST ORANGE COUNTY SANITATION DISTRICT Y' BENEFITS DEFERRED COMPENSATION PROGRAM 457(b)PLAN N CONSULTING RFP#CS-2013-588 SST consultants will perform an annual "provider review" to ensure the provider is successfully meeting basic standards of performance as delineated in the RFP and their contract with the District. MONITOR INVESTMENT FUNDS: (Estimated hours included in Investment Performance Review) In addition to reporting on investment funds during the semi-annual investment review, funds will be continuously monitored for adverse events such as, but not limited to, key person departures, significant changes in organizational ownership, significant client losses and other negative product concerns. The Committee will be advised regarding the continuing appropriateness of an investment option, fund or fund manager, when concerns are identified. INVESTMENT TRENDS&LEGISLATIVE ISSUES: (Estimated hours included in Quarterly Meetings) SST monitors and reports on legislative and regulatory changes that may have an impact on our clients' benefit offerings. We have a number of ways that we track industry trends and legislative progress in the defined contribution marketplace. Our primary sources of information come from our membership and participation in: • National Association of Government Defined Contribution Administrators (NAGDCA), • National Association of Health Underwriters (NAHU), and • International Foundation of Employee Benefit Plans (IFEBP). Our consultants are involved with legislative and other committees within the above associations which allows us access to current information at the earliest possible time. We also monitor communication from all of the major public sector defined contribution plan providers and major publications. Constant legislative and regulatory guidance have introduced many new changes to defined contribution plan benefits and options. We provide an overview of major legislative and regulatory changes and possible options the Committee may consider in implementing and incorporating these requirements as ongoing plan governance. We offer advice and direction on legislative changes that must be incorporated into the Plan versus those that are at the discretion of the decision makers. Additionally, we publish a quarterly newsletter, "News and Views" in order to provide legislative outlines, thoughtful insights and the benefit of our experience to help our clients understand and implement complex policies. The most recent copy of this newsletter is posted on the sample website created for the District as described above. Along with the quarterly "News and Views", SST provides our clients with periodic legislative updates summarizing pending legislation and identifies newly passed legislation and regulatory changes that may require updates to policies or benefit programs. We take the time to evaluate and explain how these changes impact operations and educate our clients toward appropriate actions. FOY- Printed on recycled paper 9 OUR EXPERIENCE IS YOUR ADVANTAGE... Return to Aoenda Reoor SST ORANGE COUNTY SANITATION DISTRICT Y' BENEFITS DEFERRED COMPENSATION PROGRAM 457(b)PLAN N CONSULTING RFP#CS-2013-588 MARKET TRENDS: (Estimated hours included in Investment Performance Review) SST is a leader in assisting clients with innovative ways to address the ever more present responsibility of plan sponsors. Beginning with the change in plan sponsor responsibilities outlined in the Small Business Jobs Protection Act, SST was one of the first consulting firms that developed a Request for Proposal (RFP) process that would highlight the advantages of going from multiple providers to a sole provider, generating significant gains in plan sponsor administration pressures while reducing overall expenses, improving investment options and generally making these supplemental retirement plans more advantageous for plan participants. SST was also one of the first firms to recognize the funding needs of plan sponsors and developed the Administrative Expense Reimbursement Allowance (AERA) as a part of the provider RFP process. The AERA generates the revenue plan sponsors need to fund their increased responsibilities. By integrating the funding mechanism into the outcomes of the RFP process, employers now generate the ability to create the revenue necessary to adequately support these plans without requirements from general funds. In addition, SST is one of the leading consulting firms recommending "revenue neutral" or "revenue equalization" of plans whereby all revenue generated by 12b-1 and other fees are eliminated. Any revenue to pay for the recordkeeper/provider and any revenue generated for the operation of the plan by the District becomes an explicit, transparent fee. SST would like to explore this concept with the District. Beyond reducing plan expenses by utilizing "revenue neutral" or "revenue equalization" mentioned above, SST has pioneered the use of lower expense Collective Investment Trusts (CITs) and Exchange Traded Funds (ETFs) in certain client portfolios. We see these fee reducing techniques as continuing into the near future. As an active Industry member of the National Association of Government Defined Contribution Administrators (NAGDCA), our consultants are extremely active on various committees that keep us aware and on the leading edge of all market trends. PEER COMPARISON: (Estimated hours included in Investment Performance Review) Annual benchmarking of the Plan's fees and expenses against other agency plans of similar composition can be provided. SST will provide a detailed comparison of each comparable asset class and the portfolio in its entirety against other existing SST clients. Samples of other agency plans include: The City of Tempe, Arizona; The City and County of Honolulu, Hawaii; the County of San Bernardino, California; the County of Multnomah, Oregon; the Anchorage School District, Alaska; the County of San Mateo, California; and the Los Angeles Unified School District. We could also include the OCSD Deferred Compensation Plan in the beta testing currently underway with Fiduciary Benchmarks, Inc. (FBi) and obtain benchmarking reports that include a broader national comparison of other plans including: Plan Fees Summary, Service Provider's Fee Disclosure, Investment Lineup Summary, Relative Plan Complexity and Participant Success Measures. FZY- Printed On recycled paper 10 OUR EXPERIENCE IS YOUR ADVANTAGE... SST ORANGE COUNTY SANITATION DISTRICT Y' BENEFM DEFERRED COMPENSATION PROGRAM 457(6)PLAN N CONSULTING RFP#CS-2013-588 General Plan Consulting FIDUCIARY RELATIONSHIP: SST accepts co-fiduciary responsibility with respect to this RFP. SST acknowledges that in performing the consulting services listed in the Scope of Services it is acting as a "fiduciary" as such term is defined under Section 3(21)(A)(11) of the Employee Retirement Income Security Act of 1974 ("ERISA") for purposes of providing non-discretionary investment advice only. SST acts in a manner consistent with the requirements of a fiduciary under ERISA if, based upon the facts and circumstances, such services cause SST to be a fiduciary as a matter of law. FIDUCIARY EDUCATION: (Estimated 16 hours for basic 457U and 3 hours per session for 457 Graduate) COMMITTEE FIDUCIARY EDUCATION/ON-SITE TRAINING PFIFTYSA The management of deferred compensation and defined contribution plans LJI has changed significantly during the past decade. With these changes have =Y11 come unprecedented new responsibilities for decision-makers. Responding to the needs of our clients in this dynamic marketplace, SST %NER`+ began offering comprehensive training programs in 1999 and continues to present these highly regarded seminars. Past participants in these sessions have included policy and decision makers, senior and mid-level managers, legal counsel and support staff. Using a flexible format, we offer these comprehensive, six (6) hour programs on-site at a location convenient to our clients. These informative workshops explain the foundation of plan due diligence and educate decision makers on the practical application of fulfilling their fiduciary responsibilities. They cover fiduciary responsibilities as they relate to client specific plans as well as the broader fiduciary functions of plan sponsors. Course content is continually updated to reflect changing legislative requirements on both the Federal and State levels, as well as general market trends. Additional information can be found by visiting www.457U.com. SST Consultants Bill Tugaw, Paul Hackleman and Mindy Harris are the trainers of 457 University educational workshops, which are intended for decision-making and administrative personnel. SST Consultants are nationally recognized speakers, educators and authors specializing in legislative topics and their impact on employer sponsored retirement plans. QUARTERLY MEETINGS AND MINUTES: (Estimated 5 hours per meeting) SST Consultants understand the importance of building positive working relationships with Committee members and decision makers. We commit to attendance at quarterly meetings, timely responses to member concerns and prompt dissemination of information that impacts fiduciary responsibilities or activities of the Committee. Our ongoing commitment to due diligence includes meeting minutes, the education of Committee members and other stakeholders regarding their fiduciary responsibilities to the plan. Printed On recycled paper 11 OUR EXPERIENCE IS YOUR ADVANTAGE... Retum to Agenda Report SST ORANGE COUNTY SANITATION DISTRICT Y- BENEFITS DEFERRED COMPENSATION PROGRAM 457(b)PLAN N CONSULTING RFP#CS-2013-588 COMPLIANCE REVIEW: (Estimated 12 hours per basic review and 60 hours per comprehensive audit) As a co-fiduciary to the plan, it is in our best interest to make certain that all plans are in compliance and operate according to the 457(b) regulations, as well as comply with ERISA 404(c) "safe harbor' provisions for plan sponsors. SST will provide a basic review and analysis of existing compliance procedures once every three (3) years beginning in the second year of the contract. If the District would like, SST can provide a significantly more detailed Comprehensive Compliance Audit as described below. We have included pricing for both. The Internal Revenue Service (IRS) has recently notified public employers through forums like the National Association of Government Defined Contribution Administrators (NAGDCA) that it intends to audit public plans. The IRS has specifically identified eligibility requirements, adherence to annual maximums, appropriate standards for determining catch-up, adherence to hardship and loan requests and Domestic Relations Orders. Additionally, the IRS has indicated they wish to scrutinize decision- making meeting minutes to assure that decisions are made for reasons that reflect due diligence and compliance with legislative and regulatory mandates. SST will provide an external audit of the functions likely to be examined by the IRS for plan sponsor compliance. This service examines: • Decision-maker policies regarding actions and decisions that impact plan compliance and governance. • Hardship procedures (whether administered internally or externally) and adherence to IRS guidelines regarding the appropriate basis for approvals. • Administration of loans, domestic relations orders and catch-up provisions. • Recommendations that may bring the employer into a stronger position relative to potential future audits. LEGISLATIVE ISSUES: (Estimated hours included in Quarterly Meetings) Legislative Issues are covered under "Industry Trends and Legislative Issues" on page 9. COMMUNICATION AND ENROLLMENT MATERIALS: (Estimated hours included in Quarterly Meetings) SST will provide general advice and assistance regarding current communication and enrollment materials, including drafting participant communications to plan participants for the Committee's consideration. As an example, we have recently been actively renegotiating on behalf of clients with their current Deferred Compensation provider to transition the existing 457 plan to a "revenue neutral" plan whereby all plan participants pay their fair pro-rata cost of the administration and recordkeeping of the plan. Upon approval of the renegotiation with the client and the provider, SST will draft the participant communication and lead the transition to the new, "state of the art" and "best practices" plan design. W Printed On recycled paper 12 OUR EXPERIENCE IS YOUR ADVANTAGE... ,� SST ORANGE COUNTY SANITATION DISTRICT YTB ENEFM DEFERRED COMPENSATION PROGRAM 457(b)PLAN CONSULTING RFP#CS-2013-588 SST also drafts the initial communication for any regulatory or legal changes to the plan as well as any investment replacements and deletions approved by the Committee. ADMINISTRATIVE DEFICIENCIES: (Estimated hours included in Quarterly Meetings) SST will assist with an action plan to resolve any administrative issues or deficiencies that may require a solution. We prefer to work in partnership with recordkeeping providers, their investment personnel and avoid adversarial relationships. We have excellent working relationships with recordkeeping providers and have the ability to navigate their corporate hierarchy to achieve our client's goals. OTHER: SST will assist with other Plan-related, non-routine items as requested by the Committee. Printed On recycled paper 13 OUR EXPERIENCE IS YOUR ADVANTAGE... ReW m to Agenda Report SST ORANGE COUNTY SANITATION DISTRICT YTB ENEFT1S DEFERRED COMPENSATION PROGRAM 457(6)PLAN CONSULTING RFP#CS-2013-588 Plan Provider RFP Development, Process and Contract Negotiations REQUEST FOR PROPOSAL AND TRANSITION SERVICES: (Estimated 140 hours) Understanding that each client has a unique set of goals and challenges, our consultants begin by gaining a thorough understanding of the history of your plan and your future objectives. Applying decades of "best practice" data and using our proprietary tools, our consultants work with your Committee to design a retirement plan and communication strategy, which engages participants and offers a variety of high quality choices at the lowest practical cost. REQUEST FOR DISCLOSURE (RFD) We begin with a complete review of your existing plan by requesting plan data from the current provider utilizing our proprietary Request for Disclosure process: INS component provides a retrospective review and analysis of your current providers. -This process will identify where current assets and participants are concentrated and includes: • Determination of existing participation • Review of historical rates of return • Determination of existing investment fund objectives • Full disclosure of all current fees, charges and expenses associated with the plan • Specific determination of any existing deferred sales or surrender charges • Review of stable value and fixed interest accounts • Review of existing contracts, reports and services offered Analysis of this information allows benchmarking the current plan with similar public employer plans and provides a foundation on which to address the responsibilities outlined in the Scope of Services. REQUEST FOR PROPOSAL (RFP) DEVELOP RFP OBJECTIVES: SST will meet with the District's identified decision makers and stakeholders to: • Summarize key strengths I weaknesses of the current 457 plan, both in terms of investment returns and administrative services, • Develop critical objectives upon which proposals will be evaluated, • Develop Standards of Performance for respondents. These will be the contractual measurements upon which ongoing provider performance will be evaluated, and • Identify asset categories to emphasize with prospective respondents (e.g. categories covering the largest number of plan participants and/or greatest amount of assets). Printed on recycled paper 14 OUR EXPERIENCE IS YOUR ADVANTAGE... Ill: SST ORANGE COUNTY SANITATION DISTRICT YTB ENEFM DEFERRED COMPENSATION PROGRAM 457(b)PLAN CONSULTING RFP#CS-2013-588 DEVELOP AUTOMATED RFP: This component includes the automated Deferred Compensation RFP. This proprietary, automated system reduces time and costs, facilitates unbiased evaluation of the detailed information contained in proposals and provides an outcome specifically aligned with the District's objectives. The Automated RFP includes the following key components: • Submission requirements, which become the basis of eligibility for consideration. This includes proposal guarantees for fees, length of contract, legal parameters and other basic requirements respondents must meet in order to be considered, • Primary criteria, which are the basis for selecting the finalists, • Secondary criteria are solicited from all respondents but reviewed only for those respondents who are selected as finalists, • Performance Standards which respondents must agree to. Performance Standards become part of the contract and are tied to monetary guarantees in the event of failure to achieve, and • References for those respondents who are considered finalists. CUSTOMIZE RFP: The deferred compensation decision makers and SST consultants review the automated RFP and suggest changes to incorporate into the District's objectives and preferences. SST Consultants and support staff work with the District to complete the following: • Modifying the RFP to include the District's recommended changes, • Working with legal counsel to assure compliance with internal policies and procedures, • Identifying a list of potential respondents which can be augmented by the District, • Distribution of the RFP to identified respondents, • Attend and facilitate a pre-proposal conference if desired by the District, • Solicit RFP questions from potential respondents, and • Provide written responses to questions asked by potential RFP respondents. EVALUATE/ANALYZE PROPOSALS- PRIMARY CRITERIA: SST will utilize our proprietary Automated RFP to objectively: • Rank investment returns, risk and expenses on mutual funds and the stable value funds for all respondents in writing, • Rank investment administrative charges and expenses in writing for all respondents, Printed on recycled paper is OUR EXPERIENCE IS YOUR ADVANTAGE... ReW m to Agenda Report ,� SST ORANGE COUNTY SANITATION DISTRICT YBENEFITS DEFERRED COMPENSATION PROGRAM 457(b)PLAN CONSULTING RFP#CS-2013-588 • Evaluate and rank the transition, branding and education plans for both the participants and decision makers, • Discuss and summarize strengths and weaknesses of primary criteria, • Recommend top finalists based on primary criteria and the strength of key funds as identified by consultants and the District, and • Develop questions related to investment and administrative issues in each response for use in finalist interviews. EVALUATE/ANALYZE PROPOSALS—SECONDARY CRITERIA: SST utilizes our Automated RFP to evaluate secondary criteria for the finalists and includes: • Executive summary of secondary criteria strengths and weaknesses for each of the finalists, • Questions and issues to be discussed with each finalist to clarify their proposal and improve weaknesses, and • Specific issues in primary and secondary criteria that should be incorporated into reference checking. FINALIST INTERVIEWS RECOMMENDATIONS: The prior components identify questions and issues that form the basis of the finalist interviews. In this component, SST consultants: • Develop questions/clarifications and issues for finalist review and response prior to finalist interviews, • Lead the finalist Interviews which includes review of questions/clarifications issued to finalists prior to interviews. SST requires responses in writing, and incorporates their commitments into the final contract. • Debrief with the District on the strengths and weaknesses of respondents, and deliver consultant recommendations following interviews, and • Debrief with respondents on strengths and weaknesses of their proposal. IMPLEMENTATION/TRANSITION SERVICES: SST Consultants excel in the facilitation of the transition process. As former plan sponsors and former plan providers, SST consultants have direct experience in the complexities involved with transition and a broad understanding of how best to assist our clients through this complicated process. After selection of the successful respondent(s), the following services are provided throughout the transition period: • Finalize the selection of funds, mapping RFP standards, guarantees and other mutually agreed upon administrator actions from the RFP to appropriate documents, Printed on recycled paper 16 OUR EXPERIENCE IS YOUR ADVANTAGE... ,� SST ORANGE COUNTY SANITATION DISTRICT YBENEFITS DEFERRED COMPENSATION PROGRAM 457(b)PLAN CONSULTING RFP#CS-2013-588 • Leading transition meetings to assign responsibilities and timeframes to the implementation process and acting as a liaison on behalf of the District with the provider(s), • Monitor the transition to insure the provider is adhering to the timeline, key dates are met and provide resolution to issues and delays, • Review all communications and documents from the provider by SST and consulting manager prior to release, and • Conduct the mapping of existing funds to proposed funds. CONTRACT REVIEW: • Review of initial provider documents to assure that the proposed services are incorporated into the appropriate legal agreements between the plan sponsor and the successful provider(s), and • Review of plan documents to assure that current legislative options and RFP proposed services are incorporated into the formal plan documents that are provided to plan participants. COMMUNICATION WITH PARTICIPANTS I STAKEHOLDERS: Throughout our years of assisting clients with making improvements to their retirement plan options, SST has found that a comprehensive communications program with stakeholders and participants aids in the smooth implementation of changes, avoids confusion and reduces the strain on administrative staff. Although this component is listed toward the end, these services are actually provided throughout the RFP selection process. Using robust tools, SST works with your committee to accomplish the following steps: • Develop Initial communication to participants and other identified recipients to describe the beginning of a review and selection process covering their defined contribution /deferred compensation benefit plans, • Communicate initial responses and preliminary evaluation of primary criteria to reinforce key objectives and keep participants and others informed of the progress, • Summarize preliminary recommendations to final decision-makers to assure that any concerns or issues are addressed prior to final actions, and • Summarize final recommendation and supporting rationale to participants and the District. Printed on recycled paper 17 OUR EXPERIENCE IS YOUR ADVANTAGE... Return to Aaenda Reoort ,� SST ORANGE COUNTY SANITATION DISTRICT YBENEFITS DEFERRED COMPENSATION PROGRAM 457(b)PLAN CONSULTING RFP#CS-2013-588 B.3.1 Identify methods that Proposer will use to ensure quality control as well as budget and schedule control for the Scope of Work/Technical Specifications. Quality, Budget and Schedule Control SST was instrumental in assisting OCSD's Deferred Compensation Committee in establishing its first administrative expense budget. As a named fiduciary partner with the District for this plan, SST will continue to be engaged with the Committee while reviewing this budget on an annual basis. In 2004, Bill Tugaw and Paul Hackleman published a book Defined Contribution Decisions — The Education Challenge with the assistance of the International Foundation of Employee Benefit Plans (IFEBP) and focused one of the chapters on Internal Revenue Service (IRS) and ERISA guidelines of acceptable expenses a plan could cover by utilizing plan assets. This excerpt from the book is still used as a guidance tool by SST and many plan sponsors. Schedule control is maintained by a time tested process timeline that SST utilizes during the entire RFP process. The timeline is presented to the Committee during the final steps of developing the RFP Introduction and Summary. Respondents to the RFP are encouraged to schedule dates as appropriate if they prevail to the finalist level of the RFP process. Printed On recycled paper 18 OUR EXPERIENCE IS YOUR ADVANTAGE... ,� SST ORANGE COUNTY SANITATION DISTRICT YTB ENEFM DEFERRED COMPENSATION PROGRAM 457(b)PLAN CONSULTING RFP#CS-2013-588 BILL TUGAW, PRESIDENT AND CEO, I NVESTMENT ADVISOR REPRESENTATIVE Bill has been the President and CEO of SST Benefits Consulting since the inception of the organization in 1982. Bill is an Investment Advisor Representative and is also licensed for life, health and property/casualty insurance. With over thirty years of diversified financial services experience, Bill brings longevity and reliability to the SST Team. Bill is currently active as an employee benefit plan broker/consultant and serves primarily large employers in both public and private sectors. He specializes in alternative financing and managed care of benefit plans, post employment health plans (VEBA, 115 Integral Part Trusts, Health Savings Accounts, etc.)and 457(b) Deferred Compensation, 403(b), 401(k)and 401(a) Defined Contribution plan consulting. Bill is a faculty instructor for the International Foundation of Employee Benefit Plans (IFEBP) on Public Sector 401, 403 and 457 plans. Realizing a need existed for training plan trustees, Administrators and committee members on the intricacies of 457 plans, Bill led the development of "457 University" and "Defined Contribution University (DCU).' These comprehensive seminars provide detailed information to public employers/plan sponsors to assure compliance and to develop plans for repositioning the defined contribution benefit in retirement strategies. Bill is frequently invited to lecture on employee benefits, post employment health plan options, automated Requests for Disclosure (RFDs) and Request for Proposals (RFPs) Active in the employee benefit industry, he is the Past President of the California Association of Health Underwriters (CAHU), Past President of the Silicon Valley Association of Health Underwriters (SVAHU) and founding director of the CAHU Charitable Community Foundation. He was honored as a member in the 2005-2006 Edition of National Register's Who's Who in Executives and Professionals. Bill is a graduate of Arizona State University with a Bachelor of Science degree from the W.P. Carey School of Business and is co-author of two books: Deferred Compensation/Defined Contribution: New Rules/New Game for Public and Private Plans and Defined Contribution Decisions: The Education Challenge. FZY- Printed On recycled paper 19 OUR EXPERIENCE IS YOUR ADVANTAGE... Return to Aaenda Reood ,� SST ORANGE COUNTY SANITATION DISTRICT YBENEFITS DEFERRED COMPENSATION PROGRAM 457(b)PLAN CONSULTING RFP#CS-2013-588 SCOTT DAUENHAUER, CFP®, MSFP,AIFO, INVESTMENT ADVISOR REPRESENTATIVE Scott Dauenhauer, CFP, MSFP is the Principal and owner of Meridian Wealth Management and is a partnering consultant with SST Benefits Consulting & Insurance Services, Inc. Scott earned a Bachelor's degree in Finance from Vanguard University and a Master's degree in Financial Planning from the _ College of Financial Planning. He is also an Accredited Investment Fiduciary, a NAPFA Registered Financial advisor and a Registered Investment Advisor. Additionally, Meridian Wealth Management is registered as an investment advisory firm (RIA) with the State of California and provides services for individuals, families, and government retirement plans. Scott has been involved with 457(b) plans since he started his practice in 2001, conducting RFPs for several school districts in California. He also helped created the California State Teachers' Retirement System's (CaISTRS)457(b) plan. In addition to being a Fiduciary Advisor to individuals, Scott helped revamp the California State Teachers' Retirement System's 403(b) product and lowered fees by over 60%. He also helped create a statewide compliance entity to help school districts comply with the new regulations. He created the first Target Risk Date Portfolios implemented through the CaISTRS Pension 2 403(b) and 457 plans and is one of six fee-only advisors approved by CaISTRS to give presentations to California State Teachers' Retirement System members. He is also an approved Investment Advisor for Dimensional Fund Advisors. As an Adjunct Professor for Vanguard University Scott taught International Finance. He is a recognized professional speaker for such organizations as CaISTRS, the Collegiate Schools in Virginia and Cascade School District in Cascade, Idaho. He is a guest speaker at the Financial Planning Association of Orange County, Garrett Planning Network, 403(b) Conferences in Atlanta and Washington, D.C., and "It's Your Money"Workshops in Orange County. Scott is widely quoted in the media on a wide variety of financial topics and has authored several articles and a book, The 403(b) Wise Guide. Media interviews include the Wall Street Journal, Kiplingers Magazine, Chronicles of Higher Ed, Money Magazine, L.A. Times, Financial Planning Magazine, Journal of Accountancy and Teacher Talk. His website was named as one of"The Best Stops on the Web" by the Journal of Accountancy. He is a member of the National Association of Personal Financial Advisors (NAPFA) and the Center for Fiduciary Studies. I`- Printed On recycled paper 20 OUR EXPERIENCE IS YOUR ADVANTAGE... ,� SST ORANGE COUNTY SANITATION DISTRICT YTB ENEFM DEFERRED COMPENSATION PROGRAM 457(b)PLAN CONSULTING RFP#CS-2013-588 PAUL HACKLEMAN, SENIOR CONSULTANT Paul Hackleman, former Benefits Manager for The County of San Mateo, brings 27 years of employee benefit experience to the SST Team. In San Mateo County, he managed the County's full array of employee benefits, including health, dental, vision, life, defined contribution, short-term disability, work-life programs and risk reduction programs. Paul consults with public sector employers on benefit strategic planning, contracting strategies, GASB and retiree health strategies and Request for Proposal (RFP) processes in order to reduce costs and improve outcomes through improved services. Paul is a co-trainer at 457 University and Defined Contribution University (DCU) which provides comprehensive information to public employers to assure compliance and to develop plans for repositioning the defined contribution benefit in retirement strategies. For his County and consulting activities, Paul was honored as the 2006 Benefit Manager of the Year by Business Insurance. Paul is a former voting Director with the International Foundation of Employee Benefit Plan's Board of Directors and former Chair of the Foundation's Public Employees Board and is a faculty member of the Foundation's CAPPP (Certificate of Achievement in Public Plan Policy - Health), American Federation of Teachers Negotiators Health Program and Benefits Certificate Program - Public Sector Defined Contribution Plans. He is also a former faculty member for the Canadian ATMS (Advanced Trustee Management Standards - Pension) program. Paul is a current member of the Foundation's Health Care Management Committee, which is the Foundation's point Committee for legislative and regulatory health reform initiatives. Paul's participation on this committee will benefit clients as significant changes emerge from the Obama administration and Congress. Paul is also a member of the Foundation's Ad Hoc Value Based Purchasing Committee, which will begin establishing "gold standards" for employers who wish to pursue value-based purchasing approaches to health care coverage. In addition to numerous published articles in a variety of professional journals, Paul is the co-author of three books: Public Employee Benefits: From Inquiry to Strategy published in May, 2000; Deferred Compensation / Defined Contribution: New Rules / New Game for Public and Private Plans published in June, 2001 and Defined Contribution Decisions: The Education Challenge published in March, 2004. Paul has a Masters degree in European Intellectual History from the University of Chicago, and a Bachelor's degree in Political Science and History from Callison College, University of the Pacific. He also completed International Studies at Bangalore University in India. He is a frequent speaker at national conferences on strategic planning and employee benefits. He is a past professor at Orinda's John F. Kennedy Graduate School in employee benefits. I`- Printed On recycled paper 21 OUR EXPERIENCE IS YOUR ADVANTAGE... Retum to Agenda ReDa1 ,� SST ORANGE COUNTY SANITATION DISTRICT YTB ENEFY S DEFERRED COMPENSATION PROGRAM 457(b)PLAN CONSULTING RFP#CS-2013-588 PROPOSAL SECTION C: PROCEDURAL OR TECHNICAL ENHANCEMENTS Proponent may also propose procedural or technical enhancements/innovations to the Scope of Work/Technical Specifications which do not materially deviate from the objectives or required content of this RFP. EDUCATION POLICY STATEMENT One of the new services offered by SST is an Education Policy Statement (EPS). Similar to an Investment Policy Statement that establishes the roadmap for selecting and monitoring the investments available to plan participants, the EPS is designed to provide an educational roadmap and strategy for the Committee for participant education as well as committee education. An EPS will be designed specifically for the District's plan. "REVENUE NEUTRAL OR REVENUE EQUALIZATION" PLANS As the road to plan expenses transparency continues to improve, SST suggests that plan sponsors consider moving from the current revenue generating model to a revenue neutral plan design whereby plan providers receive absolutely no revenue sharing from mutual funds or investment companies. Any fees that are generated by a specific participant account is credited directly back to the specific participant. All share classes in the portfolio are the best possible with the lowest expense ratio. Then, a specific fee is accessed to all plan participants on an equal basis to generate the revenue necessary for the provider to properly service the plan based upon the scope of work. CONTRACT RENEGOTIATION VS. FULL REQUEST FOR PROPOSAL SST has successfully renegotiated fees and plan design with vendors for several clients. This process also begins with a Request for Disclosure (RFD) to gain a retrospective review and analysis of the current provider. We then develop, with our client's assistance, the goals and objectives of the renegotiation with the current provider. Upon receipt of the proposal of renegotiation, an onsite meeting is scheduled with the provider to improve and/or further clarify their position. Following the renegotiation we measure and quantify the improvements against the analysis developed from the discovery process and provide a sample communication piece for plan participants. Although the provider remains the same, there is still a transition period and SST assists with this process. Past results of full requests for proposal and contract renegotiations have included improved fund line- ups, substantial reduction of fees, improved services and administrative expense reimbursement allowances to offset the plan sponsor administrative costs of the plan. As a part of a recent contract renegotiation with a sole provider, SST assisted with moving the Defined Contribution Plans into a new model of fee transparency and reasonableness as is now required in the private sector. This move to "revenue neutral" pricing spreads the administrative cost of operating the plan equally among all plan participants and allows the Plan to offer the "Best of Class" investment options at the lowest possible share class cost. Fa Printed on recycled paper OUR EXPERIENCE IS YOUR ADVANTAGE... ,� SST ORANGE COUNTY SANITATION DISTRICT YTB ENEFM DEFERRED COMPENSATION PROGRAM 457(6)PLAN CONSULTING RFP#CS-2013-588 PROPOSAL SECTION D: TECHNICAL EXCEPTIONS/DEVIATIONS State any exceptions to or deviations from the technical requirements of this RFP. Where Proponent wishes to propose alternative approaches to meeting OCSD'S technical requirements, these should be thoroughly explained. There are no exceptions or deviations from the technical requirements of this RFP. FOY- Printed on recycled paper OUR EXPERIENCE IS YOUR ADVANTAGE... Return to Aoende Reoort ,� SST ORANGE COUNTY SANITATION DISTRICT YTB ENEFYIS DEFERRED COMPENSATION PROGRAM 457(6)PLAN CONSULTING RFP#CS-2013-588 PROPOSAL SECTION E: CONTRACTUAL EXCEPTIONS/ DEVIATIONS State any exceptions to or deviations from the Contractual requirements of this RFP. Where Proponent wishes to propose alternative approaches to meeting OCSD'S contractual requirements, these should be thoroughly explained. There are no exceptions to or deviations from the Contractual requirements of this RFP. Printed On recycled paper OUR EXPERIENCE IS YOUR ADVANTAGE... SST YBENEFITS CONSULTING TABLE OF CONTENTF A: LETTER OF OFFER NON-COLLUSION AFFIDAVIT ACKNOWLEDGMENT OF INSURANCE REQUIREMENTS REFERENCE SHEET B: TECHNICAL PROPOSAL C: PROCEDURAL OR TECHNICAL ENHANCEMENTS D: TECHNICAL EXCEPTIONS/ DEVIATIONS E: CONTRACTUAL EXCEPTIONS/ DEVIATIONS PRINTED ON RECYCLED PAPER OUR EXPERIENCE IS YOUR ADVANTAGE... ADMINISTRATION COMMITTEE Meebng Date To ad.ofDir. 02/19/14 -- AGENDA REPORT Item Number Item Number 3 Orange County Sanitation District FROM: James D. Herberg, General Manager Originator: Jeff Reed, Director of Human Resources SUBJECT: CLASSIFICATION AND COMPENSATION STUDY GENERAL MANAGER'S RECOMMENDATION Authorize the General Manager to advertise a request for proposal and subsequently award a Consultant Services Agreement for an OCSD-wide classification and compensation study, for a total amount not to exceed $100,000. SUMMARY The purpose of an OCSD-wide classification and compensation study is to advise the District on its classification plan and compensation plan and how they relate to the jobs in the organization. The classification plan covers job family groupings of all of the District's jobs and includes accurate classification specifications (job descriptions) for each job. The compensation plan provides for how those jobs are paid. Jobs are the basic unit of the District's organization structure. They are the foundation between the people and the work to be done. Ultimately, all of our jobs combine to support achievement of the District's mission and business strategies. Job performance is the basis for all decisions affecting an individual's employment status, and these decisions are tested against the information and requirements contained in the classification specifications. Important deliverables of the proposed study include consultant recommendations regarding classification specification updates and current market position details. During classification specification updates, the organization's job descriptions are reviewed and revised with stakeholder input to ensure appropriate knowledge, skills, abilities, tasks, and requirements are documented. Subsequently, market position analysis is conducted and includes evaluating the list of comparison agencies, comparing classification specifications, obtaining data on total compensation, and providing data regarding percentile placement relative to comparison agencies. Following the extensive data gathering phase, the consultant will provide recommendations that identify any items and options for the Board to consider. Ultimately the Board will have the final decision on what updates, if any, are implemented, including defining (or redefining) the labor market (comparison agencies) and determining market competitiveness (what percentile to pay at). Page 1 of 4 The District has not undertaken a comprehensive study since 2008, which occurred prior to the Global Recession when the economy took a particularly sharp downturn. Industry experts recommend that organizations conduct a study every five-years for business relevance and compliance with the Americans with Disabilities Act (ADA) and the Fair Labor Standards Act (FLSA). Aside from the time lapse from the last study, additional key business reasons for conducting a study at this time include changes due to reorganization, the strategic plan, recruitment/retention considerations, and labor relations. A comprehensive classification and compensation study will provide the Board of Directors with updated data to meet the strategic initiative of organizational efficiency and effectiveness, to include the establishment of an official pay policy to manage labor costs. PRIOR COMMITTEE/BOARD ACTIONS December 2013 Board — Closed session item related to labor negotiations. The compensation and classification study was identified in the agenda report as critical to OCSD's formulation of labor negotiation strategies and ability to respond to fact-finding. While no decision was made with regard to the classification and compensation study, it is pertinent to current labor negotiations. November 2013 Administration Committee — HR staff presented regarding the objective of the classification and compensation study. After questions and comments from the Committee, an alternate motion was made and approved to defer this item to a subsequent Administration Committee meeting. ADDITIONAL INFORMATION The District periodically conducts a comprehensive classification and compensation study. Key business reasons for conducting a study at this time include: Reorganization in 2010 The last study was conducted in 2008, just ahead of the Global Recession of 2009. The General Manager's office, working in conjunction with the Board of Directors, implemented significant organizational change in response to that economic downturn and further change is anticipated. That organizational change was the "Beyond 2012" plan, which consisted of a wide-ranging reorganization in 2010 and included downsizing management, restructuring, and consolidation. The reorganization caused a change in the way District jobs relate to each other. In addition to changes as a result of the reorganization, new technology, new programs, and new procedures have changed job duties. It is important for those changes to be documented through updated classification specifications. Page 2 of 4 Board-Adopted Five-Year Strategic Plan In November 2013, the Board approved a revised five-year strategic plan, which included goals for organizational efficiency and effectiveness. To facilitate its strategic planning process, the Board hired a consultant, and individual interviews were held with a subset of Board members by the consultant. During that process, participants (Board members) expressed consideration of employee job satisfaction and efficiency. Job satisfaction can include elements such as salaries, wages, hours, and other terms and conditions of employment. Options for ensuring District efficiency may include addressing labor costs in the context of a pay policy, market comparisons, and the management of employee performance. A compensation and classification study will yield updated and accurate classification specifications, along with recommendations on a pay policy, which will provide the Board with current data upon which business decisions may be based. In addition, the strategic plan continues to support the ongoing initiative of workforce planning and development. This initiative is to ensure that employees' capabilities match the work required to meet the District's mission and level of service commitments. The results of a classification and compensation study will provide data to assist in effective staff organization and filling of open positions to match the District's identified needs and priorities. Recruitment/ Retention The District has experienced a trend of increased turnover since 2008. The turnover rate was 2.7% in 2008 and has climbed to 8.0% in 2013. About 170 employees have resigned their employment with the District from the beginning of the year in 2010 through the end of the year in 2013, taking more than 2,800 years of job knowledge and job experience with them. Retirements account for the lion's share of the turnover. The District's current demographics suggest that the trend will continue, with about 40% of the core wastewater employees and 78% of supervisor and management employees being eligible to retire over the next three years. Management submits a staffing plan each budget, which includes proposed staffing changes for the upcoming fiscal year. Management also reviews each job before authorizing a recruitment. It is essential that jobs are accurately described in the classification specifications and appropriately compensated to attract quality job candidates. Labor Relations Ongoing and future good faith labor negotiations will require updated classification and compensation information, including data relating to comparison agencies, to support informed Board decision-making. Beyond the need to prepare approaches for negotiations, legislative change has occurred in California since the last study was conducted. In January 2012, the Meyers- Milias-Brown Act (MMBA) was amended to establish mandatory fact-finding for local agencies that have reached impasse. Fact-finding is an advisory and nonbinding form of interest arbitration. In arriving at their findings and recommendations under the MMBA, the fact-finders consider, weigh, and are guided by eight criteria. One of the criteria is Page 3 of 4 the comparison of the wages, hours, and conditions of employment of the employees in the affected bargaining unit versus employees performing similar services at comparable public agencies. According to industry experts who have reviewed numerous fact-finding reports, fact-finders view comparability, alongside ability to pay, as the most important fact-finding criteria. Current and accurate District and comparison agency compensation data is critical to OCSD's ability to participate in the fact-finding process. Conclusion To provide a framework for classifying and compensating employees appropriately within a solid structure, pursuing the Board's interests, and executing on the Board's direction, it is proposed that the District conduct a comprehensive classification and compensation study and develop recommendations for the Board's consideration. CEQA N/A BUDGET/DELEGATION OF AUTHORITY COMPLIANCE This item has been budgeted under Human Resources professional services for fiscal year 2013/14 in the amount of$100,000. Costs for this study are anticipated not to exceed $100,000. A Request for Proposals will be distributed through the competitive bid process to professional classification and compensation firms, and the most qualified consulting firm will be selected based on the content of the proposals, proposed costs, and subsequent firm interviews, as applicable. The Human Resources Department will closely monitor the study and coordinate the consultant services. ATTACHMENTS None Page 4 of 4 ADMINISTRATION COMMITTEE Meeting Date To BA.of Dir. 02/19/14 -- AGENDA REPORT Item Number Item Number 4 Orange County Sanitation District FROM: James D. Herberg, General Manager Originator: Lorenzo Tyner, Director of Finance and Administrative Services SUBJECT: ENTERPRISE ASSET MANAGEMENT— PLANNING AND SCHEDULING SOFTWARE GENERAL MANAGER'S RECOMMENDATION A. Approve a Professional Services Agreement for Specification S-2013-562BD with CiM Maintenance, Inc., for Enterprise Asset Management — Planning and Scheduling Software, for an amount not to exceed $147,297; and B. Approve a contingency in the amount of$14,730 (10%). SUMMARY The Orange County Sanitation District (OCSD) currently owns the IBM-Maximo Enterprise Asset Management software. CiM Maintenance, Inc. specializes in this area with "Visual Planner" that performs complex planning and scheduling tasks which is an integrated suite that plugs into Maximo. CiM will install Visual Planner concurrently with the Maximo Phase 3 implementation, which replaces the current Computerized Maintenance Management System (CMMS) software and adjusts maintenance business practices to follow best practices. For the last several years OCSD has been moving towards best practices for planning and scheduling. Visual Scheduler will provide the tool to enforce those best practices by setting up a four week schedules with the ability to aggregate, manage, and lock schedules for compliance. Visual Scheduler extends the Maximo functionality and provides an interactive smart planning and scheduling solution. OCSD issued a Request for Proposal (RFP) for a planning and scheduling module to supplement Maximo. Three firms submitted proposals and were rated; CiM Maintenance, Inc., Genesis and Solufy. CiM Maintenance, Inc. was rated the highest based on the consensus scoring method. PRIOR COMMITTEE/BOARD ACTIONS August 2013 — Approved Amendment No.3 to the Professional Services Agreement, Issued to TRM, Inc. for Phase 3 of the Implementation of IBM-Maximo Enterprise Asset Management System. May 2012 — Approved Amendment No.2 to the Professional Services Agreement, issued to TRM, Inc. for Phase 2 of the Implementation of IBM-Maximo Enterprise Asset Management System. Page 1 of 3 October 2011 — Awarded a purchase contract to TRM, Inc. for Phase 1 of the Implementation of IBM-Maximo Enterprise Asset Management System and authorized the General Manager to select from proposers TRM, Inc., EMA, or Starboard Consulting, LLC to negotiate and obtain the best value for the implementation of subsequentphases. ADDITIONAL INFORMATION On August 5, 2013, OCSD issued a Request for Proposal (RFP) for a planning and scheduling module to supplement Maximo. On September 5, 2013, three proposals were received. CiM Maintenance, Inc., Genesis and Solufy responded. The Genesis solution was not rated, as their plan was to sub the work out to Solufy, the only difference being the addition of overhead costs. A panel consisting of seven OCSD staff reviewed and ranked each of the proposals in accordance with Resolution No. OCSD 07-04, Section 5.07. This RFP used the consensus scoring method. During consensus scoring sessions, the evaluation facilitator directs the team's attention to each item in the specifications. The evaluation team considers one proposal at a time, comparing the vendor's proposed offering against the specifications in the underlying RFP. Consensus scoring sessions encourage open discussions and questions among members of the evaluation team. Evaluators discuss the relative strengths and weaknesses of a vendor's proposal in each area. The following criteria/weights were used to evaluate the proposals: Work Plan (15%), Qualifications of Firm (25%), Proposed Staffing and Project Organization (30%), and Cost Evaluation (30%). The solution proposed by CiM Maintenance, Inc. was the lowest price and was rated higher than the Solufy solutions. Staff recommends awarding the Professional Services Agreement to CiM Maintenance, Inc. for a not-to- exceed amount of$147,297. PROPOSAL EVALUATION TABLE Criteria Weight Weighted CiM Genesis Solufy Score Maintenance, Inc. Work 15 150 135 n/a 90 Plan/Software Qualifications 25 250 200 n/a 150 of the Firm Staffing and 30 300 270 n/a 150 Project Organization Cost 30 300 300 n/a 266 Evaluation Total 1 100 1000 905 We 656 Initial Proposal Fee $163,274 n/a $166,950 Negotiated Fee $147,297 n/a n/a Page 2 of 3 CEQA N/A BUDGET / DELEGATION OF AUTHORITY COMPLIANCE This request complies with authority levels of the Orange County Sanitation District's Delegation of Authority. This item has been budgeted under SP-100, Asset Management/CMMS System Replacement. ATTACHMENTS The following attachment(s) may be viewed on-line at the OCSD website (MD .ocsd.corn with the complete agenda package: • Professional Services Agreement Page 3 of 3 Return to Aaenda Report PROFESSIONAL SERVICES AGREEMENT Enterprise Asset Management- Planning and Scheduling Software Specification No. 5-2013.562BD THIS AGREEMENT is made and entered into as of the date fully executed below by and between ORANGE COUNTY SANITATION DISTRICT, with a principal place of business at 10844 Ellis Avenue, Fountain Valley, CA 92708-7018 (hereinafter referred to as "OCSD") and CiM Maintenance, Inc. with a principal business at 6300 Brossard, QC J4Z 3P2 (hereinafter referred to as "CONSULTANT")collectively referred to as the "Parties". RECITALS WHEREAS, based on CONSULTANT's expertise and experience, OCSD desires to temporarily engage CONSULTANT to provide Enterprise Asset Management - Planning and Scheduling Software as described in Exhibit "A", and WHEREAS, OCSD's General Manager has determined the outsourcing of said Services is in the best interest of OCSD; and WHEREAS, CONSULTANT submitted its proposal, dated November 28, 2013; and WHEREAS, OCSD has chosen CONSULTANT to conduct Services in accordance with Ordinance No. OCSD-44; and WHEREAS, on February 19, 2014, the Administration Committee of the Board of Directors of OCSD, authorized execution of this Agreement between OCSD and CONSULTANT; and NOW, THEREFORE, in consideration of the mutual promises and mutual benefits exchanged between the Parties, the Parties mutually agree as follows: 1. Definitions 1.1. As-Built Documentation. The term "As-Built Documentation" means the Baseline Documentation plus the Documentation for any Configuration Changes and Customization Modifications. All "As-Built Documentation" shall supplement and not conflict with the terms of this Agreement. In the event of a conflict, the terms of this Agreement shall prevail. 1.2. Configuration Changes. The term "Configuration Changes" is defined as any modification or changes other than a Custom Modification. 1.3. CONSULTANT Application Software. The term "CONSULTANT Application Software" is defined as any Software owned or sublicensed, installed and/or configured by CONSULTANT as a component of the Project, whether in machine readable or printed form, including, but not limited to any applications, modules, subsystems, Interfaces, Configuration Changes, Custom Modifications, Updates and Documentation. 1.4. Custom Modification. The term "Custom Modification" is defined as a modification of the CONSULTANT Application Software Source Code or data base structure, which provides new or improved functions or features to address specific requirements of this Agreement. Professional Services Agreement 1 of 18 Specification No. 5-2013-562BD 1.5. Defect. The term "Defect" is defined as any error, failure, deficiency, or any other unacceptable variance or failure of the System or any component thereof to fully conform to the warranties and requirements described in this Agreement. With respect to the CONSULTANT Application Software, the term "Defect" is defined as any error, failure, or deficiency or any other unacceptable variance from any required, specified, or expected program behaviors as may be required by OCSD or necessary for the CONSULTANT Application Software to operate correctly and in full compliance with the terms of this Agreement. This includes expected program behaviors as described in any C ONSULTANT Application Software Documentation. In the event of a conflict between this Agreement and Documentation provided by CONSULTANT to OCSD, the terms and conditions of this Agreement shall prevail. 1.6. Documentation. The term "Documentation" is defined as all written, electronic, or recorded works including all "As-Built Documentation" that describe the uses, features, functional capabilities, performance standards, and reliability standards of the System, or any subsystem, component, or Interface, and that are published or provided to OCSD by CONSULTANT or its subcontractors, including, without limitation, all end user and system administrator manuals, help files, training aids and manuals, training and support guides, program listings, data models, flow charts, logic diagrams, and other materials related to or for use with the System. 1.7. Final System Acceptance. The term "Final System Acceptance" shall be defined as that date on which all Services under Section 6.3 of the attached Scope of Work have been successfully completed by CONSULTANT and accepted by OCSD. 1.8. Fix Pack. The term "Fix Pack" is defined as a formal release of programming code and documentation that provides corrections to any CONSULTANT Application Software programs including, but not limited to, bug fixes, error corrections and patches. 1.9. Functional, Performance and Reliability Specifications and Requirements. The term "Functional, Performance and Reliability Specifications and Requirements" is defined as all definitions, descriptions, requirements, criteria, warranties, and performance standards relating to the System set forth in: (a) this Agreement; (b) any mutually agreed upon Change Orders pursuant to Section 15.0, Changes in Work; and (c) any functional and/or technical specifications which are published or provided by CONSULTANT or its licensors or suppliers from time to time with respect to the System or any Products. 1.10. Interfaces. The term "Interfaces" is defined as one or more of the specialized software applications developed or sublicensed by CONSULTANT and installed as a part of the Project for the purpose of sharing information (data) between CONSULTANT and/or CONSULTANT Application Software and any other software program or device. Functional requirements for each Interface to be included as a part of the System are provided in the Scope of Work, Exhibit"A". 1.11. Products. The term "Products" is defined as all Software listed in Exhibit C, Pricing Detail and Summary. 1.12. Project. The term "Project" is defined as the totality of CONSULTANT's obligation under this Agreement to develop, supply, install, configure, test, implement and maintain the System. Professional Services Agreement 2 of 18 Specification No. 5-2013-562BD Return to Aaentle Report 1.13. Services. The term "Services" is defined as the implementation, development, training, configuration, loading, testing, project management and other services to be provided by CONSULTANT under this Agreement, including, without limitation, the tasks detailed in Exhibit"A", Statement of Work. 1.14. Software. The term "Software" includes the following components provided and licensed by CONSULTANT under this Agreement: (a) CONSULTANT Application Software; (b)Third-Party Software; (c) Custom Modifications and (d) Interfaces. 1.15. System. The term "System" is defined as the collective whole of all Products and Services to be purchased, developed, licensed, supplied, installed, configured, tested and implemented by CONSULTANT under this Agreement. 1.16. System Administrator Documentation. Is defined as that portion of the Documentation addressing the operation and maintenance functions of the System. 1.17. Third-Party Software. The term "Third-Party Software" is defined as any software to be supplied under this Agreement that is purchased or licensed directly from any source external to CONSULTANT for use with or integration into the System. 1.18. Updates. The term "Updates" is defined as modifications, improvements, additions, and corrections to the Products and/or related Documentation, including functional and/or product enhancements, bug fixes, patches, new releases, new versions, and replacement modules or products that CONSULTANT makes generally available to its customers with or without an additional fee. 1.19. Post Go-Live Support. The term "Post Go-Live Support" is defined as 21-day period (15 working days)following the date of go-live. 1.20. Work Product. The term "Work Product" is defined as the Products and Services and all other programs, algorithms, reports, information, designs, plans and other items developed by CONSULTANT under this Agreement, including all partial, intermediate or preliminary versions thereof. 2. Miscellaneous 2.1. Access to Premises. OCSD shall provide CONSULTANT with reasonable and timely access to the sites and personnel necessary for CONSULTANT to perform its obligations under this Agreement. OCSD shall allow CONSULTANT personnel reasonable access to OCSD site and facilities (telephone, facsimile, parking, etc.) during normal business hours and at other reasonable times as requested by CONSULTANT and pre-approved by OCSD. The assistance or presence of OCSD's personnel will not relieve CONSULTANT of any responsibilities under this Agreement. 2.2. Amendments. No amendment or modification to this Agreement is valid unless it is contained in a writing signed by both parties. 2.3. Approvals in Writing. All approvals or consents required or contemplated by this Agreement must be in writing to be effective. 2.4. Background Checks and Removal of Personnel. Prior to being allowed to perform any work on this Project, all non-OCSD personnel assigned to the Project may be required to submit to and pass a background check by the Fountain Valley, California Police Department. In addition, OCSD shall have the sole and exclusive right to require Professional Services Agreement 3 of 18 Specification No. 5-2013-562BD CONSULTANT to immediately remove any individual from the Project for any reason deemed to be in the best interests of OCSD. CONSULTANT shall replace any employee removed from the project within ten (10) business days of said removal. 2.5. Compliance with Work Rules. CONSULTANT will ensure that, while they are on OCSD premises, CONSULTANT's personnel and subcontractors will comply with OCSD's working rules and policies, including OCSD's security procedures. 2.6. Successors and Assigns. This Agreement is binding on and inures to the benefit of the parties and their respective successors and assigns. 2.7. Advertising. CONSULTANT shall not refer to the existence of this Agreement in any press release, advertising or materials distributed to prospective customers without the prior written consent of OCSD. 2.8. This Agreement and all exhibits hereto (called the "Agreement") is made by OCSD and CONSULTANT. The Terms and Conditions herein exclusively govern the purchase of Services as described in the Scope of Work. 2.9. Exhibits to this Agreement are incorporated by reference and made a part of this Agreement as though fully set forth at length herein. Exhibits to this Agreement are as follows in order of precedence: Exhibit "A" Scope of Work Exhibit "B" Payment Schedule Exhibit "C" OCSD Safety Standards and Human Resources Policies Exhibit "D" Proposal Submitted by CONSULTANT on October 28, 2013 Exhibit "E" Project Cost Summary, Section F, Submitted by CONSULTANT on November 28, 2013 Exhibit "F" Acknowledgement of Insurance Requirements 2.10. In the event of any conflict or inconsistency between the provisions of this Agreement and any of the provisions of the exhibits hereto, the provisions of this Agreement shall in all respects govern and control. 2.11. This Agreement may not be modified, changed or supplemented, nor may any obligations hereunder be waived or extensions of time for performance granted, except by written instrument signed by both Parties. 2.12. The various headings in this Agreement are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or any Paragraph or provision hereof. 2.13.The term "workday". Workdays are defined as all days that are not Saturday, Sunday, or legally observed holidays. Meetings with OCSD staff shall be scheduled from Monday through Thursday between the hours of 8AM and 4PM PT (exception is operations staff who maintain plant operations 24/7 and work a rotated 12-hour shift) and shall conform to OCSD work schedules. OCSD review periods shall not include legally observed holidays. 2.14.The term "days", when used in the Agreement, shall mean calendar days, unless otherwise noted as workdays. Professional Services Agreement 4 of 18 Specification No. 5-2013-562BD Return to Aaenda Report 2.15.Work Hours: The work required under this Agreement may include normal Business hours, evenings, and weekends. 2.16. CONSULTANT shall provide OCSD with all required premiums and/or overtime work at no charge beyond the price provided under"Compensation" below. 2.17. Except as expressly provided otherwise, OCSD accepts no liability for any expenses, losses, or action incurred or undertaken by CONSULTANT as a result of work performed in anticipation of purchases of said services by OCSD. 2.18. Goods and Services, whether stated separately or in conjunction with each other, shall mean Enterprise Asset Management - Planning and Scheduling Software and the services related to the provision of such as described herein and in the Exhibits hereto. 2.19. Construction of Agreement. This Agreement is the product of joint discussions and negotiations at arms' length between the parties, both of whom are sophisticated and knowledgeable in business matters and both of whom have relied on the advice of independent legal counsel. Any rule of law which would require interpretation of this Agreement against the party that drafted it shall have no application to this Agreement. 3. Scope of Work: General requirements for the scope of this Project are listed below. A detailed list of tasks and responsibilities are included in Exhibit"A", Statement of Work. 3.1. Scope of Work Subject to the terms of this Agreement, CONSULTANT shall perform the Services identified in Exhibits "A" and "D". CONSULTANT warrants that all of its Services shall be performed in a competent, professional and satisfactory manner. 3.2. Modifications to Equipment and Facilities. OCSD shall be responsible for making OCSD-approved modifications identified in an OCSD approved, Site Analysis Report. Thereafter, CONSULTANT will be precluded from asserting that it is unable to perform its obligations under this Agreement because of any pre-existing condition. During implementation, any changes to the System or any costs that may be incurred in order to complete the requirements of this Agreement but were not identified in the Site Analysis Report will be the sole and exclusive responsibility of CONSULTANT. In addition, if the System is unable to meet the Functional, Performance and Reliability Specifications and Requirements in this Agreement after the identified upgrades and changes have been made, then CONSULTANT will be responsible, at its own expense, for making any further upgrades or changes necessary to achieve this result. 3.3. User Qualifications. OCSD shall use its best efforts to ensure that persons operating the System will be qualified, supervised, and trained in the use of personal computers and normal operations. CONSULTANT will ensure that all training on the System or System components will be conducted professionally and effectively so that each operator trained by CONSULTANT is proficient in its use. 3.4. Transition. CONSULTANT will work with OCSD to ensure a smooth and efficient transition from OCSD's current systems to the new System and to minimize disruption to current operations, even if it necessitates working late evening, early morning, or weekend hours. Any required disruptions to OCSD's operations shall be scheduled in advance and approved by OCSD. Professional Services Agreement 5 of 18 Specification No. 5-2013-562BD 4. Modifications to Scope of Work: Requests for modifications to the Scope of Work hereunder can be made by OCSD at any time. All modifications must be made in writing and signed by both Parties. A review of the time required for the modification will be made by OCSD and CONSULTANT and the Agreement period adjusted accordingly. S. License 5.1. Grant of License. 5.1.1. CONSULTANT hereby grants to OCSD a perpetual, irrevocable, nonexclusive, and nontransferable license under applicable copyrights and/or trade secrets (either site, node locked or per user as specified in Exhibit "C", Section 6, Pricing Detail and Summary) to use all CONSULTANT Application Software provided under this Agreement for use by OCSD. OCSD shall have the right to use all CONSULTANT Application Software or any portion thereof on any equipment, either locked on a single computer node (as determined by a speck LAN address), as a site license, or concurrently on a number of computer nodes so long as the number of concurrent uses does not exceed the number licensed for the LAN, or on one or more backup computer nodes. OCSD shall permit CONSULTANT reasonable, pre- scheduled access (Monday through Friday, 8:00 to 5:00 PM PST)to OCSD facilities for license administration audit purposes. 5.1.2. OCSD shall have the right to use all CONSULTANT Application Software as may be necessary in order to operate the System purchased under this Agreement. In addition, OCSD shall have the right to use the CONSULTANT Application Software as necessary to (a)operate the System (b) conduct internal training and testing, and (c) perform disaster recovery, backup, archive and restoration testing and implementation as may be required in OCSD's judgment. This license shall apply to all commercially available Updates throughout the term of this Agreement. OCSD shall have the right to use all CONSULTANT Application Software licensed under this Agreement on any equipment at any facility and at any location and may make as many copies of the software as it desires to support its authorized use of the software, provided the copies include CONSULTANT's or the third-party owners copyright or other proprietary notices. 5.1.3. All license rights of Third Party Software shall originate from the manufacturer. All Third Party Software licenses shall be provided to OCSD and become effective at the time the product is used by OCSD in a live environment. 5.1.4. The approval of CONSULTANT to use CONSULTANT Application Software and Third Party Software and OCSD's use of it shall not constitute a waiver of OCSD's right to reject the System, in whole or in part, if the requirements for Final System Acceptance are not met. 5.2. Limitations on License. Except as licensed to OCSD, CONSULTANT retains all of its current rights, title, and interest in the CONSULTANT Application Software, including Derivative Works, Custom Modifications, Configuration Changes and Updates. Unless authorized by CONSULTANT or required by law, OCSD will not: (1) make available or distribute all or part of the Software to any third party by assignment, sublicense or any other means; or (2) disassemble, decompile, or reverse engineer the Software, or allow any third party to do so. 5.3. Security. Certain Software Packages are required to operate in conjunction with a hardware lock device or in conjunction with license administration software and a license authorization key provided by CONSULTANT or its representative. OCSD shall take no Professional Services Agreement 6 of 18 Specification No. 5-2013-562BD Return to Mende Report steps to avoid or defeat the purpose of any required lock device or authorization key. Use of any Software Package without a required lock device or authorization key shall be unlicensed under this Agreement. 5.4. Restricted Access. OCSD shall use every reasonable method to restrict access to the CONSULTANT Application Software, or Documentation related thereto, to persons not authorized to use the CONSULTANT Application Software under the terms of this Agreement. OCSD shall not copy the CONSULTANT Application Software or Documentation except as necessary for use under this Agreement. OCSD shall not decrypt, reverse compile or disassemble the CONSULTANT Application Software. OCSD shall not export or re-export the CONSULTANT Application Software or Documentation. Furthermore, OCSD shall abide by all applicable Federal and State Trademark and Copyright laws. 6. Compensation: Compensation to be paid by OCSD to CONSULTANT for the Services provided under this Agreement shall be a total amount not to exceed One Hundred Forty- seven Thousand Two Hundred Ninety-seven and 00/00 Dollars ($147,297.00). 7. Payment 7.1. CONSULTANT shall be paid by OCSD upon approval of invoices by OCSD Project Manager, Pongsakdi Cady or his designee, for completion of milestone tasks and deliverables as identified in the Payment Schedule, Exhibit'B". 7.2. OCSD, at its sole discretion, shall be the determining party as to whether the tasks and deliverables for each milestone have been satisfactorily completed. 8. Invoices 8.1. OCSD shall pay within 30 days of completion and receipt and approval by OCSD Project Manager of an itemized invoice, in a form acceptable to OCSD to enable audit of the charges thereon. 8.2. Invoices shall be emailed by CONSULTANT to OCSD at APStaff@OCSD.com. The Specification and Purchase Order number shall both be referenced in the subject line. 9. Audit Rights: CONSULTANT agrees that, during the term of this Agreement and for a period of three (3) years after its termination, OCSD shall have access to and the right to examine any directly pertinent books, documents, and records of CONSULTANT relating to the invoices submitted by CONSULTANT pursuant to this Agreement. 10.Performance;Time is of the essence in the performance of the provisions hereof. 11. Term 11.1. The Services to be provided by CONSULTANT under this Agreement shall commence on the date of the Notice to Proceed (Effective Date), and be completed no later than October 2014. Professional Services Agreement 7 of 18 Specification No. 5-2013-562BD 11.2. Effect on Project Schedule. The time periods and requirements set forth in System Acceptance will not excuse CONSULTANT from complying with the completion dates set forth in the Project Schedule. Unless otherwise specked, the completion dates set forth in the Project Schedule constitute the dates by which CONSULTANT must complete the testing required by this Agreement and achieve Final System Acceptance of the System installed. 12. Termination 12.1. 00SD reserves the right to terminate this Agreement for its convenience, with or without cause, in whole or in part, at any time, by written notice from OCSD, (delivered by certified mail, return receipt requested) of intent to terminate. Upon receipt of a termination notice, CONSULTANT shall immediately discontinue all work under this Agreement (unless the notice directs otherwise). OCSD shall thereafter, within thirty (30) days, pay CONSULTANT for work performed (cost and fee) to the date of termination. CONSULTANT expressly waives any claim to receive anticipated profits to be earned during the uncompleted portion of this Agreement. Such notice of termination shall terminate this Agreement and release OCSD from any further fee, cost or claim hereunder by CONSULTANT other than for work performed to the date of termination. 12.2. 00SD reserves the right to terminate this Agreement immediately upon OCSD's determination that CONSULTANT is not meeting specification requirements, if the level of service is inadequate, or any other default of this Agreement. 12.3. OCSD may also immediately cancel for default of this Agreement in whole or in part by written notice to CONSULTANT: • if CONSULTANT becomes insolvent or files a petition under the Bankruptcy Act; or • if CONSULTANT sells its business; or • if CONSULTANT breaches any of the terms of this Agreement; or • if total amount of compensation exceeds the amount authorized under this Agreement. 12.4. All OCSD property in the possession or control of CONSULTANT shall be returned by CONSULTANT to OCSD on demand, or at the termination of this Agreement, whichever occurs first. In addition, CONSULTANT will deliver to OCSD all Work Product currently in existence and for which payment has been made. 12.5. Upon termination or expiration of this Agreement, CONSULTANT will cooperate with OCSD to assist with the orderly transfer of services, functions, and operations provided by CONSULTANT under this Agreement to another provider or to OCSD as determined by OCSD in its sole discretion. Prior to the termination or expiration of this Agreement, OCSD may require CONSULTANT to perform those transition services described below that OCSD deems necessary to migrate CONSULTANT's work to another provider or to OCSD. Transition services may include, but are not limited to the following: 12.5.1.Pre-Migration Services (at the cost of OCSD). 12.5.1.1. Working with OCSD to jointly develop a mutually agreed upon Transition Services Plan to facilitate the termination of the services; 12.5.1.2. Notifying all affected vendors and subcontractors of CONSULTANT; and 12.5.1.3. Freezing all non-critical changes to the System. Professional Services Agreement 8 of 18 Specification No. 5-2013-562BD Return to Mende Report 12.5.2.Migration and Post-Migration. 12.5.2.1. Performing the Transition Services Plan activities. 12.5.2.2. Answering questions regarding the services performed by CONSULTANT or the System on an as-needed basis; 12.5.2.3. Providing such other reasonable services needed to effectuate an orderly transition to a new System. 12.6. OCSD agrees to pay CONSULTANT for transition services at an hourly rate of $150 per hour, plus reasonable out-of-pocket expenses not to exceed ten percent(10%)of the aggregate hourly compensation paid. 13.Indemnification and Hold Harmless Provision: CONSULTANT agrees to save, indemnify, defend and hold harmless OCSD, its officers, employees and agents against any and all liability, claims, judgments, cost and demands, including demands arising from injuries or death of persons and damage to property, arising directly or indirectly out of the negligence or willful misconduct of CONSULTANT, its employees or agents, in relation to the rendition of Services pursuant to this Agreement, except claims or litigations arising through the sole negligence or willful misconduct of OCSD. CONSULTANT agrees to reimburse OCSD for any expenditure, including reasonable attorney's fees, OCSD may incur by reason of such matters, and, if requested by OCSD, will defend any such suits at the cost and expense of CONSULTANT. 14. Warranty 14.1. System Warranty. CONSULTANT warrants that the System will meet the Functional, Performance and Reliability Specifications and Requirements as defined in this Agreement. The System and/or each of its subsystems, components and Interfaces will be capable of operating fully and correctly in conjunction with the System Hardware. CONSULTANT warrants that for the term of this Agreement, the System will perform as described in this Section 10.0 in material and workmanship and will remain in good working order. In the event the System does not meet these warranties, CONSULTANT shall provide, at no charge, the necessary software, hardware, and/or services required to attain the levels or standards contained in these warranties. 14.2. CONSULTANT Application Software Warranties. CONSULTANT warrants that it owns or otherwise has the right to license the CONSULTANT Application Software to OCSD and that it possesses all rights and interests necessary to enter into this Agreement. In addition, CONSULTANT warrants that: 14.2.1.All CONSULTANT Application Software licensed under this Agreement is free of known Defects, viruses, worms and Trojan horses, and any code designed to disable the Software because of the passage of time, alleged failure to make payments due, or otherwise (except for documented security measures such as password expiration functions); 14.2.2. During the term of the Agreement; the CONSULTANT Application Software will meet or exceed the Functional, Performance and Reliability Specifications and Requirements herein; 14.2.3.The CONSULTANT Application Software will: (1) store all date-related information and process all data Interfaces involving dates in a manner that unambiguously identifies the century, for all date values before, during and after the Year 2000; (2) calculate, sort, report and otherwise operate correctly and in a consistent manner for all date information processed, whether before, during or after the Year 2000; (3) calculate, sort, report and otherwise operate correctly, in a consistent manner and Professional Services Agreement 9 of 18 Specification No. 5-2013-562BD without interruption regardless of whether the date on which the Software is operated or executed is before, during or after the Year 2000; (4) report and display all dates with a four-digit date so that the century is unambiguously identified; and (5) handle all leap years correctly; 14.2.4.CONSULTANT Application Software is and will be general release versions that have been fully tested at CONSULTANT's site in accordance with best industry practices, and are not beta or pre-release versions (unless agreed to in writing by OCSD); and, 14.2.5.Custom Modifications and Interfaces have been fully tested in accordance with best industry practices and are free of known Defects. CONSULTANT further agrees that during the term of this Agreement, CONSULTANT will provide OCSD, if OCSD so desires, with any Updates at no additional cost (including any and all costs associated with the installation of those Updates) immediately upon their commercial availability to any other entity. 14.3. Work Quality Warranty. CONSULTANT warrants that all work performed by CONSULTANT and/or its subcontractors under this Agreement will conform to best industry practices and will be performed in a professional and workmanlike manner by staff with the necessary skills, experience and knowledge to do so. 14.4. Regulatory Warranty. CONSULTANT warrants that, for the Term of this Agreement, the System will comply with all processing and reporting requirements for State and Federal laws, and regulations. If the Software requires updating due to a change in a State or Federal law, or regulation, affecting OCSD, CONSULTANT will provide these changes per a mutually agreed to schedule at no additional charge to OCSD. Notwithstanding this provision, in no event shall CONSULTANT provide said update later than the date required by the State or Federal law or regulation affecting OCSD. In the event OCSD is notified of a change in Stale or Federal law or regulations that requires updating the Software, OCSD will notify CONSULTANT of that change as soon as reasonably possible. 14.5. Documentation Warranty. CONSULTANT warrants that, for the Term of this Agreement, the Documentation for all licensed CONSULTANT Application Software will be complete and accurate in all material respects. The Documentation will be revised to reflect all Updates and Interfaces provided by CONSULTANT under this Agreement. This includes documentation on any Custom Modification or Configuration Changes made to the System by CONSULTANT during the installation process. 14.6. Service Warranty. During the term of this Agreement, CONSULTANT warrants that it will remedy any failure, malfunction, Defect or nonconformity in the System, as follows: 14.6.1.Priority One (PI) Defects. For purposes of this Warranty, a P1 Defect includes, but is not limited to, loss of data, data corruption, a System or subsystem abort, any condition where productive use of the System or any component thereof is prohibited and no acceptable workaround is available. Examples of P1 Defects include, but are not limited to: 14.6.1.1. System is down 14.6.1.2. Application, module or Interface is down or non-operational 14.6.1.3. An Interface or application critical to System operation is substantially impaired or problematic Professional Services Agreement 10 of 18 Specification No. 5-2013-562BD Return to Aaenda Report 14.6.1.4. Loss of data or data corruption after data has been entered 14.6.1.5. A subsystem or component thereof is non-functional 14.6.1.6. Productive use is prohibited 14.6.1.7. a Server or workstation goes down 14.6.1.8. two or more workstations or mobile devices lock up or malfunction intermittently 14.6.1.9. a user cannot log onto the System 14.6.2.Priority Two (P2) Defects. For purposes of this Warranty a P2 Defect includes, but is not limited to, compromise of the primary purpose of the System, subsystem or Interface to an external system. Productive use by the end user is substantially impacted and an acceptable workaround is not available. Examples of P2 Defects include, but are not limited to: 14.6.2.1. a software function does not work correctly(enter an example, if possible) 14.6.2.2. The user cannot produce a report with correct calculations 14.6.2.3. System, subsystem or an Interface performance is deemed unacceptable per the Functional, Performance, and Reliability Specifications and Requirements. 14.6.2.4. Incorrect cross streets are displayed on a verified address or location 14.6.2.5. Cannot create a scheduled event 14.6.2.6. A single workstation or mobile device locks up or malfunctions intermittently 14.6.3.Priority Three (P3) Defects. For purposes of this Warranty, a P3 Defect includes, but is not limited to, incomplete operation of a System component which impacts productivity of staff but an acceptable workaround is generally available. Examples of P3 Defects include but are not limited to: 14.6.3.1. Single workstation or mobile device locks up intermittently but infrequently 14.6.3.2. Minor deficiencies occur intermittently in any component of the System 14.6.3.3. A mapping function doesn't work but the failure does not interfere with the user's ability to perform required tasks 14.6.3.4. A report does not function or report provides incorrect results 14.6.3.5. An incorrect message is presented in a dialog box 14.6.4.Priority Four(P4) Defects. For purposes of this Warranty, a P4 Defect consists of those problems deemed by OCSD to be mainly cosmetic. Examples of P4 Defects include, but are not limited to: 14.6.4.1. A misspelled word in the header of a report or in a help file 14.6.4.2. A minor error in output that does not interfere with the correct outputting of statistics from the system 14.6.4.3. Minor printing errors in a report that does not impede OCSD's ability to utilize the report for the required purpose. 14.6.4.4. Minor variances in text where the help file does not match the documentation 14.6.4.5. Minor variances in text where the documentation doesn't match the functionality but the System works properly 14.6.4.6. A print button doesn't work but the user can still print without opening or closing multiple windows or loosing data or rebooting the system. Professional Services Agreement 11 of 18 Specification No. 5-2013-562BD 14.6.5.Multiple Failures. Any situation involving multiple, contemporaneous failures, regardless of their individual priorities, will be regarded as a Priority One Defect if, in OCSD's determination, the situation results in OCSD having essentially no productive use of the System or a major subsystem. 14.6.6.Permanent Cure. If OCSD accepts a workaround or other temporary cure as the remedy for any reported Defect, CONSULTANT shall provide and install at no cost to OCSD a permanent correction or cure within ten (10) days after the permanent cure becomes available. 14.6.7.Third-party Warranty Coverage. Third-party products are provided with a pass- thru-warranty from the original manufacturer. 15. Force Majeure: Neither party shall be liable for delays caused by accident, flood, acts of God, fire, labor trouble, war, acts of government or any other cause beyond its control, but said party shall use reasonable efforts to minimize the extent of the delay. Work affected by a Force Majeure condition may be rescheduled by mutual consent or may be eliminated from the Agreement. 16.Insurance: CONSULTANT and all subcontractors shall purchase and maintain, throughout the life of this Agreement and any periods of warranty or extensions, insurance in amounts equal to the requirements set forth in the signed Acknowledgement of Insurance Requirements, Exhibit "E". CONSULTANT shall not commence work under this Agreement until all required insurance is obtained in a form acceptable to OCSD, nor shall CONSULTANT allow any subcontractor to commence service pursuant to a subcontract until all insurance required of the subcontractor has been obtained. Failure to maintain required insurance coverage shall result in termination of this Agreement. 17. Key Personnel: Personnel, as provided in Exhibit "D", are considered "key" to the work under this Agreement and will be available for the term of the Agreement. No person designated as key under this Agreement shall be removed or replaced without prior written consent of OCSD. 18. Confidentiality and Non-Disclosure 18.1. CONSULTANT acknowledges that in performing the Services hereunder, OCSD may have to disclose to CONSULTANT orally and in writing certain confidential information that OCSD considers proprietary and has developed at great expense and effort. 18.2. CONSULTANT agrees to maintain in confidence and not disclose to any person, firm, or corporation, without OCSD's prior written consent, any trade secret or confidential information, knowledge or data relating to the products, process, or operation of OCSD. 18.3. CONSULTANT further agrees to maintain in confidence and not to disclose to any person, firm, or corporation any data, information, technology, or material developed or obtained by CONSULTANT during the term of this Agreement. 18.4. CONSULTANT agrees as follows: • To use the Confidential Information only for the purposes described herein; to not reproduce the Confidential Information; to hold in confidence and protect the Confidential Information from dissemination to and use by anyone not a party to this Agreement; and to not use the Confidential Information to benefit itself or others. Professional Services Agreement 12 of 18 Specification No. 5-2013-562BD Return to Mende Report • To restrict access to the Confidential Information to its CONSULTANT or personnel of CONSULTANT who (1) have a need to have such access and (2) have been advised of and have agreed in writing to treat such information in accordance with the terms of this Agreement. • To return all Confidential Information in CONSULTANT's possession upon termination of this Agreement or upon OCSD's request, whichever occurs first. • To hold in confidence information and materials, K any, developed pursuant to the Services hereunder. 18.5. The provisions of this Section shall survive termination or expiration of this Agreement and shall continue for so long as the material remains confidential. 19. Ownership of Intellectual Property 19.1. CONSULTANT agrees that all designs, plans, reports, specifications, drawings, schematics, prototypes, models, inventions, and all other information and items made during the course of this Agreement and arising from the Services (hereinafter referred to as "New Developments")shall be and are assigned to OCSD as its sole and exclusive property. 19.2. CONSULTANT agrees to promptly disclose to OCSD all such New Developments. Upon OCSD's request, CONSULTANT agrees to assist OCSD, at OCSD's expense, to obtain patents or copyrights for such New Developments, including the disclosure of all pertinent information and data with respect thereto, the execution of all applications, specifications, assignments, and all other instruments and papers which OCSD shall deem necessary to apply for and to assign or convey to OCSD, its successors and assigns, the sole and exclusive right, title and interest in such New Developments. CONSULTANT agrees to obtain or has obtained written assurances from its employees and contract personnel of their agreement to the terms hereof with regard to New Developments and Confidential Information. 19.3. CONSULTANT warrants that CONSULTANT has good title to any New Developments, and the right to assign New Developments to OCSD free of any proprietary rights of any other party or any other encumbrance whatever. 19.4. The originals of all computations, drawings, designs, graphics, studies, reports, manuals, photographs, videotapes, data, computer files, and other documents prepared or caused to be prepared by CONSULTANT or its subcontractors in connection with these Services shall be delivered to and shall become the exclusive property of OCSD. OCSD may utilize these documents for OCSD applications on other projects or extensions of this project, at its own risk. 20.Infringement Claims: If an infringement claim occurs, CONSULTANT has thirty (30) days after the receipt of OCSD's written notice of the claim or the date on which CONSULTANT first becomes aware of the claim, whichever is sooner, to either: (a) procure for OCSD the right to continue using the affected Product, Service, subsystem, component or Interface and deliver or provide the Product, Service, subsystem, component, or Interface to OCSD; or (b) repair or replace the infringing Product, Service, subsystem, component, or Interface so that it becomes non-infringing, provided the performance of the System or any subsystems, components, or Interfaces is not adversely affected by the replacement or modification. In the event CONSULTANT is unable to comply with either subsection (a) or (b) of this paragraph within thirty (30) days, OCSD may terminate this Agreement without any further obligation to CONSULTANT. In the event of termination, in addition to any other legal remedies available to OCSD, CONSULTANT will refund OCSD within ten (10) days of Professional Services Agreement 13 of 18 Specification No. 5-2013-562BD OCSD's notice of termination, the license fees OCSD paid to CONSULTANT for the Product, Service, subsystem, component or Interface. If the inability to comply with either subsection (a) or (b) of this paragraph causes the System to fail to meet the Functional, Performance and Reliability Specifications and Requirements or to otherwise become ineffective, CONSULTANT will refund OCSD all fees paid to CONSULTANT under this Agreement. 21. No Solicitation of Employees Or Subcontractors 21.1. CONSULTANT agrees that it shall not, during the term of this Agreement and for a period of one (1) year immediately following termination of this Agreement, or any extension hereof, call on, solicit, or take away any of the employees or subcontractors about whom CONSULTANT became aware as a result of CONSULTANT's Services to OCSD. 21.2. CONSULTANT acknowledges that OCSD's employees are critical to its business. CONSULTANT agrees not to employ or otherwise engage OCSD's employees or subcontractors during the term of this Agreement and for a period of one (1) year following termination of this Agreement. Should CONSULTANT violate this provision, CONSULTANT will pay OCSD fifty percent (50%) of the former employee's annual salary which payment is in addition to OCSD's rights and remedies. 22. Independent Contractor Capacity 22.1. The relationship of CONSULTANT to OCSD is that of an independent contractor and nothing herein shall be construed as creating an employment or agency relationship. 22.2. CONSULTANT shall act independently and not as an officer or employee of OCSD. OCSD assumes no liability for CONSULTANT's action and performance, nor assumes responsibility for taxes, funds, payments or other commitments, implied or expressed, by or for CONSULTANT. 22.3. CONSULTANT shall not be considered an agent of OCSD for any purpose whatsoever, nor shall CONSULTANT have the right to, and shall not, commit OCSD to any agreement, contract or undertaking. CONSULTANT shall not use OCSD's name in its promotional material or for any advertising or publicity purposes without expressed written consent. 22.4. CONSULTANT shall not be entitled to any benefits accorded to those individuals listed on OCSD's payroll as regular employees including, without limitation, worker's compensation, disability insurance, vacation, holiday or sick pay. CONSULTANT shall be responsible for providing, at CONSULTANT's expense, disability, worker's compensation or other insurance as well as licenses and permits usual or necessary for conducting the Services hereunder. 22.5. CONSULTANT shall be obligated to pay any and all applicable local, state and federal payroll and other taxes incurred as a result of fees hereunder. CONSULTANT hereby indemnifies OCSD for any claims, losses, costs, fees, liabilities, damages or penalties suffered by OCSD arising out of CONSULTANT's breach of this provision. 22.6. CONSULTANT shall not be eligible to join or participate in any benefit plans offered to those individuals listed on OCSD's payroll as regular employees. CONSULTANT shall remain ineligible for such benefits or participation in such benefit plans even if a court later decides that OCSD misclassified CONSULTANT for tax purposes. Professional Services Agreement 14 of 18 Specification No. 5-2013-562BD Return to Mende Report 23. Licenses and Permits: CONSULTANT represents and warrants to OCSD that it has obtained all licenses, permits, qualifications and approvals of whatever nature that are legally required to engage in this work. Any and all fees required by State, County, City and/or municipal laws, codes and/or tariffs that pertain to work performed under the terms of this Agreement will be paid by CONSULTANT. 24. Governing Law.,This Agreement shall be governed by and interpreted under the laws of the State of California and the Parties submit to jurisdiction in Orange County, in the event any action is brought in connection with this Agreement or the performance thereof. 25.Applicable Laws and Regulations: CONSULTANT shall comply with all applicable federal, state, and local laws, rules, and regulations. CONSULTANT also agrees to indemnify and hold harmless from any and all damages and liabilities assessed against OCSD as a result of CONSULTANT's noncompliance therewith. Any permission required by law to be included herein shall be deemed included as a part of this Agreement whether or not specifically referenced. 26. CONSULTANT's Representations: In the performance of duties under this Agreement, CONSULTANT shall adhere to the highest fiduciary standards, ethical practices and standards of care and competence. 27. Dispute Resolution 27.1. In the event of a dispute as to the construction or interpretation of this Agreement, or any rights or obligations hereunder, the Parties shall first attempt, in good faith, to resolve the dispute by mediation. The Parties shall mutually select a mediator to facilitate the resolution of the dispute. If the Parties are unable to agree on a mediator, the mediation shall be conducted in accordance with the Commercial Mediation Rules of the American Arbitration Agreement, through the alternate dispute resolution procedures of Judicial Arbitration through Mediation Services of Orange County ("JAMS"), or any similar organization or entity conducting an alternate dispute resolution process. 27.2. In the event the Parties are unable to timely resolve the dispute through mediation, the issues in dispute shall be submitted to arbitration pursuant to California Code of Civil Procedure, Part 3, Title 9, Sections 1280 et seq. For such purpose, an agreed arbitrator shall be selected, or in the absence of agreement, each party shall select an arbitrator, and those two arbitrators shall select a third. Discovery may be conducted in connection with the arbitration proceeding pursuant to California Code of Civil Procedure Section 1283.05. The arbitrator, or three arbitrators acting as a board, shall take such evidence and make such investigation as deemed appropriate and shall render a written decision on the matter in question. The arbitrator shall decide each and every dispute in accordance with the laws of the State of California. The arbitrator's decision and award shall be subject to review for errors of fact or law in the Superior Court for the County of Orange, with a right of appeal from any judgment issued therein. 28.Attomey's Fees: If any action at law or inequity or if any proceeding in the form of an Alternative Dispute Resolution (ADR) is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable, attorney's fees, costs and necessary disbursements in addition to any other relief to which he may be entitled. Professional Services Agreement 15 of 18 Specification No. 5-2013-562BD 29. Breach: The waiver of either party of any breach or violation of, or default under, any provision of this Agreement, shall not be deemed a continuing waiver by such party of any other provision or of any subsequent breach or violation of this Agreement or default thereunder. Any breach by CONSULTANT to which OCSD does not object shall not operate as a waiver of OCSD'S rights to seek remedies available to it for any subsequent breach. 27. Survival., All provisions of this Agreement that by their nature would reasonably be expected to continue after the termination of this Agreement will survive the termination of this Agreement, including, without limitation, the following Sections and Paragraphs: • Payment • License • Audit • Independent Contractor • Warranties • Indemnification • Obligations Upon Expiration or Termination • Transition of Services • Confidentiality and Nondisclosure • Forum for Enforcement 30. Right to Review Services, Facilities, and Records 30.1. OCSD reserves the right to review any portion of the Services performed by CONSULTANT under this Agreement, and CONSULTANT agrees to cooperate to the fullest extent possible. 30.2. CONSULTANT shall furnish to OCSD such reports, statistical data, and other information pertaining to CONSULTANT's Services as shall be reasonably required by OCSD to carry out its rights and responsibilities under its agreements with its bondholders or noteholders and any other agreement relating to the development of the project(s) and in connection with the issuance of its official statements and other prospectuses with respect to the offering, sale, and issuance of its bonds and other obligations. 30.3. The right of OCSD to review or approve drawings, specifications, procedures, instructions, reports, test results, calculations, schedules, or other data that are developed by CONSULTANT shall not relieve CONSULTANT of any obligation set forth herein. 31. Severability If any section, subsection, or provision of this Agreement, or any agreement or instrument contemplated hereby, or the application of such section, subsection, or provision is held invalid, the remainder of this Agreement or instrument in the application of such section, subsection or provision to persons or circumstances other than those to which it is held invalid, shall not be affected thereby, unless the effect of such invalidity shall be to substantially frustrate the expectations of the Parties. 32. Safety and Human Resources Policies: CONSULTANT shall adhere to the OCSD Safety and Human Resources Policies in Exhibit "C" hereto. OCSD requires all contractors, service providers and consultants to follow and ensure their employees and all subcontractors follow all State and Federal regulations as well as OCSD requirements while working at OCSD locations. If during the course of a contract it is discovered that OCSD policies, safety Professional Services Agreement 16 of 18 Specification No. 5-2013-562BD Return to Aaende Report manuals, or contracts do not comply with State or Federal regulations then the CONSULTANT is required to follow the most stringent regulatory requirement at no cost to OCSD. CONSULTANT and all their employees and subcontractors, shall adhere to all applicable OCSD Safety and Human Resources Policies found at: OCSD.com, "Doc Central" (bottom of page), under"Safety". 33. Damage to OCSD's Property., Any OCSD property damaged by CONSULTANT will be subject to repair or replacement by CONSULTANT at no cost to OCSD. 34. Freight (F.O.B. Destination): CONSULTANT assumes full responsibility for all transportation, transportation scheduling, packing, handling, insurance, and other services associated with delivery of all products deemed necessary under this Agreement. 35.Assignments: CONSULTANT shall not delegate any duties nor assign any rights under this Agreement without the prior written consent of OCSD. Any such attempted delegation or assignment shall be void. 36. Changes In Control of CONSULTANT 36.1. In the event of a change in Control of CONSULTANT, OCSD shall have the option of terminating this Agreement by written notice to CONSULTANT. CONSULTANT shall notify OCSD within ten (10) days of the occurrence of a change in Control. As used in this Section, "Control" is defined as the possession, direct or indirect, of either: 36.1.1.the ownership or ability to direct the voting of fifty-one percent (51%) or more of the equity interests, value, or voting power in CONSULTANT; or 36.1.2.the power to direct or cause the direction of the management and policies of CONSULTANT, whether through ownership of voting securities, by contract, or otherwise. 37. Third Party Rights: Nothing in this Agreement shall be construed to give any rights or benefits to anyone other than OCSD and CONSULTANT. 38. Conflict of Interest and Reporting 38.1. CONSULTANT shall at all times avoid conflict of interest or appearance of conflict of interest in performance of this Agreement. 38.2. CONSULTANT affirms that to the best of its knowledge there exists no actual or potential conflict between CONSULTANT'S families, business or financial interest or its Services under this Agreement, and in the event of change in either its private interests or Services under this Agreement, it will raise with OCSD any question regarding possible conflict of interest which may arise as a result of such change. 39.Authority to Execute: The persons executing this Agreement on behalf of the Parties warrant that they are duly authorized to execute this Agreement and that by executing this Agreement, the Parties are formally bound. 40. Read and Understood., By signing this Agreement, CONSULTANT represents that he has read and understood the terms and conditions of the Agreement. 41.Entire Agreement. This Agreement constitutes the entire agreement of the Parties and supersedes all prior written or oral and all contemporaneous oral agreements, understandings, and negotiations between the Parties with respect to the subject matter hereof. Professional Services Agreement 17 of 18 Specification No. 5-2013-562BD 42. Notices: All notices under this Agreement must be in writing. Written notice shall be sent by registered or certified mail, postage prepaid, return receipt requested, or by any other overnight delivery service which delivers to the noticed destination and provides proof of delivery to the sender. Any facsimile notice must be followed within three (3) days by written notice. All notices shall be effective when first received at the following addresses: OCSD: Clarice M. Marcin Senior Contracts Administrator Orange County Sanitation District 10844 Ellis Avenue Fountain Valley, CA 92708-7018 CONSULTANT: CM Maintenance, Inc. IN WITNESS WHEREOF, the Parties hereto have hereunto set their hands the day and year indicated below. ORANGE COUNTY SANITATION DISTRICT Dated: By: Chair Administration Committee Dated: By: Clerk of the Board Dated: By: Contracts/Purchasing Manager CiM Maintenance, Inc. Dated: By: Print Name and Title of Officer IRS Employer's I.D. Number Professional Services Agreement 18 of 18 Specification No. 5-2013-562BD ADMINISTRATION COMMITTEE Neetlng Date TOBA.Of Dir. 02/19/14 02/26/14 AGENDA REPORT Item Number Item Number s Orange County Sanitation District FROM: James D. Herberg, General Manager Originators: Nick Arhontes, Director of Facilities Support Services, and Lorenzo Tyner, Director of Finance and Administrative Services SUBJECT: TRANSFER OF LOCAL SEWERS IN SERVICE AREA 7 GENERAL MANAGER'S RECOMMENDATION Authorize the General Manager to: A. Approve agreement with East Orange County Water District (EOCWD), to transfer ownership of local sewers in Service Area 7, and the appropriate reserve balances; and B. Provide EOCWD with technical and financial information to assist with its submittal of a reorganization application to the Orange County Local Area Formation Commission (OC LAFCO) to facilitate the transfer of ownership of the local sewers and agreed assets; and C. Draft and execute a letter of support to OC LAFCO in favor of EOCWD's reorganization application, subject to and contingent upon OC LAFCO's acceptance of the terms and conditions of transfer agreed upon by OCSD and EOCWD; and D. Approve an agreement with EOCWD to reimburse OCSD for staff support requested during an agreed transition period. SUMMARY OCSD currently owns and operates 174 miles of local sewers in Service Area 7, located in the City of Tustin and unincorporated county areas north of Tustin, including the El Modena islands. Our Strategic Plan includes an initiative to transfer these local sewers to a local (retail) agency. In 2013 the City of Tustin asked for and was granted additional time to consider accepting the transfer of all the local sewers in Service Area 7. After the City indicated that it was no longer interested in obtaining local facilities, EOCWD expressed its interest in acquiring 100% of the local sewers from OCSD and requested information on the local sewer system. The proposed transfer of ownership of the local sewers will require an OC LAFCO- approved reorganization because the boundaries of Service Area 7 cover several jurisdictions. EOCWD staff will seek authorization from its Board in February to initiate Page 1 of 3 the OC LAFCO process. OC LAFCO's estimated timeline (attached) shows that the overall process will take approximately nine months to conclude. Assuming a February filing date, the reorganization process should be completed in November 2014. PRIOR COMMITTEE/BOARD ACTIONS November 2013—Five Year Strategic Plan and prior OCSD Strategic Plans support the transfer. ADDITIONAL INFORMATION Retail or local sewer agencies collect wastewater from residential, commercial and industrial properties through local sewer lines. Each city or special district providing local service has established its own local sewer fee depending on its site specific costs to own, manage, operate and maintain its local wastewater collection system. Parts of Tustin and unincorporated areas of the County are owned, operated and serviced entirely by OCSD. The cost of the local sewerage system is apportioned to each property owner based on the amount of the average wastewater discharged from that type of parcel. The Area 7 local sewer service fees currently collected by OCSD are based upon financial and engineering studies and reports. The annual single-family residential (SFR) user rate is $216 and the multi-family residential (MFR) use per apartment unit is $151.20. These fees have been set to support annual operating expenses and to build a reserve for future capital costs. The current reserve balance is $25 million, however; that amount will change depending on the date of recordation of the transfer. OCSD proposes to transfer these reserves to EOCWD following its assumption of ownership for the Area 7 local sewers. The proposed transfer agreement will be essentially cost/revenue neutral to OCSD. The fees currently collected by OCSD for local sewer service will be collected by EOCWD. EOCWD will assume responsibility for all maintenance costs, as well as capital improvement and replacement costs. The assets included in the proposed transfer serve approximately 18,000 parcels. The entire local sewer system is comprised of gravity sewers ranging between 4 and 27 inches in diameter, however the vast majority of the assets are 8-inch Vitrified Clay Pipe (VCP). There are no pumping facilities. CEQA N/A BUDGET / DELEGATION OF AUTHORITY COMPLIANCE This request complies with authority levels of the Sanitation District's Delegation of Authority. Page 2 of 3 ATTACHMENTS The following attachment(s) may be viewed on-line at the OCSD website (www.ocsd.coml with the complete agenda package: • Local Sewer Facilities Transfer Agreement • Letter of Support for EOCWD Reorganization Application • Quitclaim Deed • Transitional Services Agreement • Map of area exhibit • OC LAFCO Estimated Timeline (schedule) Page 3 of 3 Return to Mende Report LOCAL SEWER FACILITIES TRANSFER AGREEMENT THIS LOCAL SEWER FACILITIES TRANSFER AGREEMENT ("Agreement') is made this _ day of , 2014 ("Effective Date") by and between the ORANGE COUNTY SANITATION DISTRICT ("OCSD"), a duly organized County Sanitation District existing pursuant to California Health and Safety Code section 47000 at seq., and the EAST ORANGE COUNTY WATER DISTRICT ("EOCWD"), a duly organized County Water District existing pursuant to California Water Code section 30000 et seq. OCSD and EOCWD are sometimes hereinafter individually referred to as 'Party" and hereinafter collectively referred to as "Parties". RECITALS WHEREAS, OCSD owns and operates regional wastewater collection, conveyance, treatment, and disposal facilities within its 471 square mile service area; WHEREAS, OCSD owns and operates the local wastewater collection and conveyance system, encompassing approximately 170 linear miles of sewer lines and serving more than 18,000 connections, within the area known as Service Area 7, which area is more particularly identified in Exhibit "A" attached hereto and incorporated herein by reference; WHEREAS, OCSD desires to transfer to EOCWD: (a) its ownership of certain local sanitary sewer lines and appurtenant facilities located in Service Area 7 ("Local Sewer Facilities"), which are more particularly described and delineated in attachments 1 and 2 of Exhibit 'B" attached hereto and incorporated herein by reference, and (b) the responsibility for providing local sewer service to Service Area 7; WHEREAS, EOCWD desires to acquire ownership and assume responsibility for the Local Sewer Facilities and to accept responsibility for providing local sewer service to Service Area 7; WHEREAS, the transfer of ownership in and the assumption of responsibility for the Local Sewer Facilities to EOCWD will require the approval of the Orange County Local Agency Formation Commission ("LAFCO"); and WHEREAS, following the transfer to EOCWD of the Local Sewer Facilities, OCSD shall retain its power to provide regional sewer service within the entirety of Service Area 7. Page 1 of 12 972720.3 AGREEMENT NOW, THEREFORE, in consideration of the mutual promises set forth herein, the Parties agree as follows: 1. Recitals. The recitals set forth above are true and correct and are incorporated into this Agreement. 2. Cooperation. a. OCSD and EOCWD shall work cooperatively to complete the successful transfer from OCSD to EOCWD of the Local Sewer Facilities and the assumption of responsibility for ongoing operation and maintenance of the Local Sewer Facilities by EOCWD by no later than December 1, 2014. Both Parties shall execute any further documents consistent with the terms of this Agreement, including documents in recordable form, necessary or appropriate to fulfill the obligations imposed by this Agreement. 3. LAFCO Proposal. a. Initiation of Proceedings. EOCWD shall, within one month (30 days) from the Effective Date, initiate proceedings under the Cortese-Knox- Herzberg Local Government Reorganization Act of 2000, as amended, Government Code section 56000, et seq., requesting LAFCO approval of a reorganization proposal (the "Proposal"). The resolution of application enacted by EOCWD and submitted to LAFCO shall propose that LAFCO's approval of the Proposal shall be subject to the terms and conditions of this Agreement. EOCWD shall be solely responsible for the direct costs incurred in connection with the initiation and processing of the Proposal, and LAFCO approval thereof, including without limitation any LAFCO deposits, application or processing fees, and the cost of preparing any legal descriptions, boundary surveys or maps. The Proposal shall consisting of the following: i. The activation of EOCWD's latent powers for the provision of local retail sewer service; ii. A sphere of influence amendment and the annexation of certain territory within Service Area 7 that is not within the current boundaries of EOCWD; and iii. A proposal by EOCWD to provide a new or different service — "local" sewer service—within the entirety of Service Area 7. b. Letter of Support. OCSD shall cooperate with EOCWD and use its best efforts to support the Proposal in accordance with the terms of this Agreement. OCSD shall, within 45 days of EOCWD's filing of the Proposal with LAFCO, file with LAFCO a formal Letter of Support in favor of the Proposal Page 2 of 12 972720.3 Return to Mende Report executed by the General Manager ("Letter of Support"). The Letter of Support shall propose that LAFCO's approval of the Proposal shall be subject to the terms and conditions of this Agreement. OCSD shall execute such documents and take such other actions to support and facilitate the processing of the Proposal as may be reasonably requested by EOCWD, provided such actions shall not result in any cost or expense to OCSD (other than overhead and employee staff time). C. Continuing Support for Proposal. The Parties agree to support and not oppose the Proposal before and after it is initiated. Specifically, OCSD and EOCWD will cooperate and consult with one another in responding to questions and inquiries from LAFCO, the public and the press, appear in support of the Proposal at LAFCO hearings, and cooperate on a joint response in the event that LAFCO or LAFCO staff propose to alter the Proposal. Furthermore, OCSD agrees that, prior to December 1, 2014, or such earlier time as the LAFCO proceedings have been completed or disapproved, it will not engage in negotiations with other entities regarding the transfer of the Local Sewer Facilities. Both Parties shall support the conditioning of LAFCO's approval of the Proposal on the performance of the terms and conditions of this Agreement. If LAFCO or LAFCO staff propose an alteration to the Proposal that diverges from the terms and conditions of this Agreement, either Party may oppose the alteration, and if necessary, withdraw its support, and actively oppose LAFCO's approval of the Proposal. d. Public Outreach. EOCWD desires to proactively inform the ratepayers within Service Area 7, and the general public, of the Proposal and the process for implementing it, including opportunities for public involvement. In furtherance of that desire, OCSD agrees to provide EOCWD with a mailing list of the property owners in Service Area 7 (consistent with the format used for Proposition 218 notifications) in an Excel spreadsheet or an Access compatible (SOL) database format within 30 days of EOCWD's submittal of an application to LAFCO. In the written materials, EOCWD shall accurately and fairly describe the Proposal and may indicate that the Proposal is jointly proposed and supported by EOCWD and OCSD. EOCWD shall provide OCSD an opportunity to review and approve the written material it intends to mail to the property owners in Service Area 7 prior to such mailing. OCSD shall approve, or request changes to, the written materials within ten days of receipt. If OCSD fails to approve or request revisions within 10 days, it shall be deemed to have approved the materials. OCSD shall approve, or request changes to, revised written materials that incorporate or respond to OCSD's requests for changes within 5 days of receipt, or the materials shall be deemed approved. All costs of producing such material and mailing it will be paid by EOCWD. e. Tax Exchange Negotiations and Consultations. The Parties shall cooperate in seeking to have the Board of Supervisors adopt a property tax exchange resolution pursuant to Revenue and Taxation Code section 99 exchanging property tax from OCSD to EOCWD. The Parties agree that in the Page 3 of 12 972720.3 tax exchange negotiation and consultation process they will jointly support and advocate for having all of the property tax associated with the Local Sewer Facilities be exchanged from OCSD to EOCWD. In Fiscal Year 2012/13, the estimated property tax collected for the local sewers was [$_,_.00]. f. Local Sewer Service User Fee. i. OCSD's Annual Local Sewer Service User Fee ("the Fee") shall be continued and following the effective date, to the extent feasible, shall be collected by EOCWD rather than by OCSD. OCSD collects the Fee by including reporting it to the County of Orange, which collects it on the property tax roll, and EOCWD intends to do the same. Should it not be feasible, due to statutory or County requirements, for responsibility for collection of the Fee for the 2014-2015 fiscal year to be transferred to EOCWD, OCSD shall account for and promptly transmit any such revenues it receives from the County that are attributable to the Fee imposed in Service Area 7 for the 2014-2014 fiscal year. OCSD shall rescind the Fee, as it pertains to the Local Sewer Facilities, by no later than July 1, 2015, or at such earlier time as EOCWD may enact its own local sewer service userfees. ii. EOCWD shall indemnify, defend and hold harmless, OCSD, its officers, directors, employees and agents from and against any and all claims, actions, damages, liabilities, and expenses (including attorney's fees and reasonable expenses for litigation or settlement) in connection with or arising out of OCSD's assessment, distribution, and collection of the Fees, including without limitation any such claims asserting that the collection and transfer of the Fee by OCSD to EOCWD violates Proposition 218. 4. Transfer of Local Sewer Facilities. a. Upon the effective date of LAFCO's approval of the Proposal and the requested reorganization ("Date of Reorganization"), EOCWD shall accept ownership of the Local Sewer Facilities and all maintenance responsibilities, as well as the responsibility for all sewer spill notification, reporting, and related regulatory activities. Furthermore, EOCWD shall negotiate, execute and maintain its own contracts with third-party contractors for line- cleaning, CCTV, rehabilitation, repairs and replacement, engineering consultants, and similar services, and directly pay all costs for such contracts. b. Prior to the Date of Reorganization, EOCWD shall fully execute and deliver to OCSD the Quitclaim Deed, attached hereto as Exhibit "B", transferring ownership of the Local Sewer Facilities from OCSD to EOCWD. C. Within five (5) business days following the Date of Reorganization, OCSD shall submit the Quitclaim Deed for recordation in the Official Records, Orange County California. Upon recordation, OCSD shall transmit a conformed copy of the Quitclaim Deed to EOCWD. Page 4 of 12 972720.3 Return to Mende Report d. Within five (5) business days following the Date of Reorganization, OCSD shall transfer to EOCWD $10,000,000.00 (ten million dollars) via wire transfer of the Annual Sewer Service User Fee reserves attributable to the Local Sewer. e. On July 1, 2018, OCSD shall transfer to EOCWD $15,000,000.00 (fifteen million dollars) via wire transfer, representing the remainder of the Annual Sewer Service User Fee reserves attributable to the Local Sewer Facilities. f. Upon the Date of Reorganization, OCSD shall transfer ownership of the following vehicles to EOCWD: (a) a 2000 Sterling Vector (OCSD vehicle 470, California license number 1067492, vehicle identification number (VIN) 2FZ6BJBB81AH61833), and (b) a 1995 FE42 Volvo Hydroflusher truck (OCSD vehicle 396, California license number 356619, vehicle identification number (VIN) 4V52AFHDOSR474402). These vehicles shall be provided to EOCWD "as is" and with no warranties or representations whatsoever as to the condition of the vehicle, or the suitability of the vehicle for any purpose. EOCWD hereby acknowledges that it has/will be granted the opportunity to inspect the vehicles and their maintenance records and has/will do so prior to the Date of Reorganization. g. On or prior to the Date of Reorganization, OCSD shall allow EOCWD to review, reference and utilize OCSD established specifications for line-cleaning, CCTV, rehabilitation, repairs and replacement, and similar services, as mutually agreed by the Parties. 5. Environmental Review. EOCWD shall act as lead agency for purposes of the Proposal, and shall be solely responsible for the preparation of all environmental documentation required pursuant to the California Environmental Quality Act ("CEQA"). 6. Term. This Agreement shall commence on the Effective Date and continue in full force and effect through December 1, 2014. The Parties may mutually agree in writing to extend the term of this Agreement. The Agreement shall automatically terminate if LAFCO disapproves the Proposal. 7. Notices. All notices or other communications required or permitted hereunder shall be in writing and shall be personally delivered, sent by registered or certified mail, postage prepaid, return receipt requested, or delivered or sent by electronic transmission, and shall be deemed received upon the earlier of: (i) the date of delivery to the address of the person to receive such notice if delivered personally or by messenger or overnight courier; (ii) three (3) business days after the date of posting by the United States Post Office if by mail; or (iii) when sent if given by electronic transmission. Any notice, request, demand, direction, or other communication sent by electronic transmission must be Page 5 of 12 972720.3 confirmed within forty-eight (48) hours by letter mailed or delivered. Notices or other communications shall be addressed as follows: To OCSD: Orange County Sanitation District 10844 Ellis Avenue Post Office Box 8127 Fountain Valley, CA 92708-7018 Attn: General Manager To EOCWD: East Orange County Water District 185 North McPherson Road Orange, CA 92869-3720 Attn: General Manager Either Party may from time to time, by written notice to the other, designate a different address and/or person which shall be substituted for the one above specified, and/or specify additional parties to be notified. 8. Jurisdiction. In the event of a dispute regarding performance or interpretation of this Agreement, the venue for any action to enforce or interpret this Agreement shall lie in the Superior Court of California for Orange County. 9. Governing Law. This Agreement shall be governed by the laws of the State of California. 10. Entire Agreement. This Agreement constitutes the entire understanding and agreement between the Parties and supersedes all previous negotiations between the Parties pertaining to the subject matter thereof. 11. Waiver. A waiver of a breach of the covenants, conditions or obligations under this Agreement by either Party shall not be construed as a waiver of any succeeding breach of the same or other covenants, conditions or obligations of this Agreement. 12. Modification. Alteration, change or modification of this Agreement shall be in the form of a written amendment, which shall be signed by each Party. 13. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be invalid under the applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of that provision, or the remaining provisions of this Agreement. 14. No Obligation to Third Parties. Execution and delivery of this Agreement shall not be deemed to confer any rights upon others, directly, indirectly or by way of subrogation, and shall not obligate either of the Parties Page 6 of 12 972720.3 Return to Mende Report hereto to any person or entity other than each other and their respective affiliates. 15. Successors. This Agreement and the provisions contained herein shall be binding upon and inure to the benefit of OCSD, EOCWD, and their respective heirs, executors, administrators, personal representatives, successors and assigns. 16. Indemnification. a. EOCWD shall indemnify, defend and hold harmless OCSD, its officers, directors, employees and agents from and against any and all claims, actions, damages, liabilities and expenses (including attorney's fees and reasonable expenses for litigation or settlement) for any loss or damage, including death, bodily injury or damage to or loss of use of property, caused by negligent acts or omissions or willful misconduct by the EOCWD, its officers, directors, employees and agents in connection with or arising out of the performance of this Agreement. b. OCSD shall indemnify, defend and hold harmless EOCWD, its officers, directors, employees and agents from and against any and all claims, actions, damages, liabilities and expenses (including attorney's fees and reasonable expenses for litigation or settlement) for any loss or damage, including death, bodily injury or damage to or loss of use of property, caused by negligent acts or omissions or willful misconduct by OCSD, its officers, directors, employees and agents in connection with or arising out of the performance of this Agreement. 17. OCSD Board of Directors. The Parties acknowledge that nothing contained herein shall entitle EOCWD to a seat on the OCSD Board of Directors, and that any such change would require an amendment to Health and Safety Code section 4730.65, which governs the composition of the OCSD Board of Directors. 18. No Warranty of Title or Condition. OCSD makes not warranty or representation of any kind regarding its title to the Local Sewer Facilities, the condition of the Local Sewer Facilities, or the suitability of the Local Sewer Facilities for any purpose. EOCWD has been granted an opportunity to fully inspect the Local Sewer Facilities and has done so as of the Effective Date. EOCWD accepts the Local Sewer Facilities "as is". 19. Authorization. Each of the undersigned represents and warrants that he or she is duly authorized to execute and deliver this Agreement and that such execution is binding upon the entity for which he or she is executing this document. [SIGNATURES ON FOLLOWING PAGEI Page 7 of 12 972720.3 IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the dates set forth below. ORANGE COUNTY SANITATION DISTRICT By Date James D. Herberg, General Manager ATTEST: Maria Ayala Clerk of the Board APPROVED AS TO FORM: Brad Hogin General Counsel EAST ORANGE COUNTY WATER DISTRICT By Date William VanderWerff President of the Board of Directors ATTEST: APPROVED AS TO FORM: Joan Arneson General Counsel Page 8 of 12 972720.3 Return to Aaenda Reoorl EXHIBIT "A" SERVICE AREA 7 1 ` Page 9 of 12 9727M.3 EXHIBIT "B" QUITCLAIM DEED 1 ` Page 10 of 12 9]27N.3 Return to Mende Report Attachment 1 of Exhibit B Page 11 of 12 9]27M.3 Attachment 2 of Exhibit Page 12 of 12 9]27M.3 Return to Mende Report [On OCSD Letterheadl [Date] Ms. Susan Wilson,Chair Orange County LAFCO 12 Civic Center Plaza Room 235 Santa Ana, CA. 92701 RE: Letter in Support of East Orange County Water District Reorganization Application Dear Chair Wilson, On behalf of the Orange County Sanitation District ("OCSD"), I am sending this letter to you, with copies to the CC LAFCO commissioners, to express OCSD's support of the East Orange County Water District("EOCWD")Reorganization Application. The OCSD Five-Year Strategic establishes as a goal the transfer back to cities and sanitary districts local sewer assets that are not serving a true regional purpose. In furtherance of this goal, OCSD has negotiated an agreement to transfer its ownership of local sewer lines and appurtenant facilities located in OCSD Service Area 7 to EOCWD. The terms and conditions applicable to the proposed transfer are memorialized in the Local Sewer Facilities Transfer Agreement ("Transfer Agreement") entered into between OCSD and EOCWD on 2014. Again, on behalf of OCSD, I urge CC LAFCO to approve the EOCWD Reorganization Application, and ask that such approval incorporate the Transfer Agreement terms and conditions. Very truly yours, James D. Herberg, General Manager cc: CC LAFCO Commissioners 981017.1 Return to Mende Report RECORDING REQUESTED BY: Orange County Sanitation District Attn: Clerk to the Board 10844 Ellis Avenue Fountain Valley, CA 92708 Exempt from recortling tee per Govemment Code§§6103 and 27363 (SPACE ABOVE THIS LINE FOR RECORDER'S USE) Documentary Trensfer Tax Exempt per Rev 6 Tax Code§11922 QUITCLAIM DEED FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which is hereby acknowledged, the ORANGE COUNTY SANITATION DISTRICT, a County Sanitation District organized under the laws of the State of California ("GRANTOR"), does hereby release, remise, and quitclaim to the EAST ORANGE COUNTY WATER DISTRICT, a County Water District organized under the laws of the State of California ("GRANTEE"), all its right, title and interest in the real property, sewer lines and appurtenant sewer facilities described and depicted in Attachment "1" and shown visually in Attachment "2", appended hereto and made a part hereof (collectively, "Local Sewer Facilities") SUBJECT TO THE FOLLOWING DISCLAIMER: No Warranty of Title or Condition Grantor makes no warranty or representation of any kind regarding its title to the Local Sewer Facilities, the condition of the Local Sewer Facilities or the suitability of the Local Sewer Facilities for any purpose. Grantee has been granted an opportunity to fully inspect the Local Sewer Facilities and has done so. Grantee accepts the Facilities "as is". IN WITNESS WHEREOF, this Quitclaim Deed has been executed by the Parties hereto. [Signatures on the following page.] 953408.2 EAST ORANGE COUNTY WATER DISTRICT By: Printed Name: William VanderWerff Title: President of the Board of Directors Date: EAST ORANGE COUNTY WATER DISTRICT By: Printed Name: Joan Arneson Title: Secretary Date: ORANGE COUNTY SANITATION DISTRICT By: Printed Name: Troy Edgar Title: Chair of the Board of Directors Date: ORANGE COUNTY SANITATION DISTRICT By: Printed Name: Maria E. Ayala Title: Clerk of the Board Date: 953408.2 Return to Mende Report ATTACHMENT "1rr Description of Local Sewer Facilities 953408.2 ATTACHMENT "2" Visual Depiction of Local Sewer Facilities 953408.2 Return to Mende Report LOCAL SEWER FACILITIES TRANSITIONAL SERVICES AGREEMENT THIS LOCAL SEWER FACILITIES TRANSITIONAL SERVICES AGREEMENT ("Agreement') is made this _ day of , 2014 ("Effective Date") by and between the ORANGE COUNTY SANITATION DISTRICT ("OCSD"), a duly organized County Sanitation District existing pursuant to California Health and Safety Code section 47000 et seq., and the EAST ORANGE COUNTY WATER DISTRICT ("EOCWD"), a duly organized County Water District existing pursuant to California Water Code section 30000 at seq. OCSD and EOCWD are sometimes hereinafter individually referred to as "Party" and hereinafter collectively referred to as "Parties". RECITALS WHEREAS, Pursuant to the Local Sewer Facilities Transfer Agreement by and between the Parties dated 2014, OCSD agreed to transfer to EOCWD its ownership of certain local sanitary sewer lines and appurtenant facilities located in Service Area 7 ("Local Sewer Facilities"), which are more particularly described and delineated in Exhibit"A" attached hereto and incorporated herein by reference; WHEREAS, EOCWD has agreed to acquire ownership and assume responsibility for the ongoing operation and maintenance of the Local Sewer Facilities; WHEREAS, Orange County Local Agency Formation Commission approval of a reorganization proposal is necessary to perfect the transfer of the Local Sewer Facilities ("LAFCO Approval'); WHEREAS, upon transfer of the Local Sewer Facilities to EOCWD, OCSD is willing to provide EOCWD, on a fee for service basis, technical assistance and other staff resources to assist EOCWD assume responsibility for the ongoing operation and maintenance of the Local Sewer Facilities ("Transitional Services"); and WHEREAS, EOCWD is willing to reimburse OCSD, on a fee for service basis, for the provision of such Transitional Services. AGREEMENT NOW, THEREFORE, in consideration of the mutual promises set forth herein, the Parties agree as follows: 1. Recitals. The recitals set forth above are true and correct and are incorporated into this Agreement. Page 1 of 7 967209.1 2. Provision of Transitional Services by OCSD. Upon the effective date of the LAFCO Approval, and the successful transfer of the Local Sewer Facilities, OCSD shall provide Transitional Services to EOCWD as follows: a. As may be requested by EOCWD, OCSD shall assist EOCWD in developing a maintenance schedule for the Local Sewer Facilities or relinquish OCSD's current schedule. b. As may be requested by EOCWD, OCSD shall provide its expertise and training for the EOCWD's evaluation of current "trouble spots" in the sanitary sewer collection system and clean them until _, 20_, or until such earlier time as the EOCWD will have established its own crew. C. OCSD shall provide emergency "call-out" response services and training, as needed, to EOCWD employees for first response during a possible SSO until January 1, 2015, or until such earlier time as the EOCWD will have established its own crew. d. OCSD shall provide Fats, Oils and Grease (FOG) program oversight and enforcement until _, 20_, or until such earlier time as the EOCWD can acquisition staff for the program. 3. EOCWD's Specific Obligations. a. EOCWD shall assign no less than one EOCWD employee to respond to call-outs and join in first response with OCSD during a possible SSO for training purposes. b. EOCWD shall assign no less than one EOCWD employee to accompany OCSD during cleaning of sanitary sewer collection "trouble spots." C. EOCWD shall reimburse OCSD per the Fee Schedule, as may be amended annually by OCSD, attached hereto at Exhibit "A", and incorporated herein, for the provision of any Transitional Services provided by OCSD to EOCWD pursuant to this Agreement. 4. Timing of Reimbursement. OCSD shall perform quarterly accountings to determine the amount owed by EOCWD pursuant to this Agreement on the W of July and October 20, and January _. Upon completion of each accounting, an invoice, along with the accounting or a summary thereof, shall be submitted to EOCWD for the amount due, which amount shall be paid within forty-five (45) days of receipt of billing. All such amounts are delinquent if unpaid sixty (60) days after the date of invoice. Any charge that becomes delinquent shall have added to it a penalty in accordance with the following: Page 2 of 7 967209.1 Return to Mende Report a) Sixty-one (61) days after date of invoice, a basic penalty of ten percent (10%) of the base invoice amount, not to exceed a maximum of$1,000.00; and b) A penalty of one and one-half percent (1.5%) per month of the base invoice amount and basic penalty shall accrue from and after the sixty-first (61 st) day after date of invoice. Notwithstanding the foregoing, in the event EOCWD disputes any of the charges upon inspection of the quarterly OCSD invoice, EOCWD shall promptly notify OCSD in writing and shall pay the undisputed charges in accordance with this Section 5. No penalty shall be imposed on the disputed amounts until the Parties have resolved the dispute. 5. Independent Contractors. The Parties' relationship to each other in the performance of this Agreement is that of independent contractors. OCSD's personnel performing services under this Agreement shall at all times be under OCSD's exclusive direction and control and shall be employees of OCSD and not employees of EOCWD. EOCWD's personnel performing services under this Agreement shall at all times be under EOCWD's exclusive direction and control and shall be employees of EOCWD and not employees of OCSD. 6. Agents. Any contractor or subcontractor performing work in connection with the work described herein on behalf of either Party shall be conclusively deemed to be the servant and agent of each respective Party for whom the work is being performed. 7. Notices. All notices or other communications required or permitted hereunder shall be in writing and shall be personally delivered, sent by registered or certified mail, postage prepaid, return receipt requested, or delivered or sent by electronic transmission, and shall be deemed received upon the earlier of: (1) the date of delivery to the address of the person to receive such notice if delivered personally or by messenger or overnight courier; (ii) three (3) business days after the date of posting by the United States Post Office if by mail; or (iii) when sent if given by electronic transmission. Any notice, request, demand, direction, or other communication sent by electronic transmission must be confirmed within forty-eight (48) hours by letter mailed or delivered. Notices or other communications shall be addressed as follows: Page 3 of 7 %7209.1 To OCSD: Orange County Sanitation District 10844 Ellis Avenue Post Office Box 8127 Fountain Valley, CA 92708-7018 Attn: General Manager To EOCWD: East Orange County Water District 185 North McPherson Road Orange, CA 92869-3720 Attn: General Manager Either Party may from time to time, by written notice to the other, designate a different address and/or person which shall be substituted for the one above specified, and/or specify additional parties to be notified. 8. Jurisdiction. In the event of a dispute regarding performance or interpretation of this Agreement, the venue for any action to enforce or interpret this Agreement shall lie in the Superior Court of California for Orange County. 9. Term and Termination. This Agreement shall expire _, 20_ unless earlier terminated. The Parties may mutually agree in writing to extend the term of this Agreement. Either Party may terminate this agreement for any reason by providing thirty (30) days written notice to the other Party. 10. Governing Law. This Agreement shall be governed by the laws of the State of California. 11. Entire Agreement. This Agreement constitutes the entire understanding and agreement between the Parties and supersedes all previous negotiations between the Parties pertaining to the subject matter thereof. 12. Waiver. A waiver of a breach of the covenants, conditions or obligations under this Agreement by either Party shall not be construed as a waiver of any succeeding breach of the same or other covenants, conditions or obligations of this Agreement. 13. Modification. Alteration, change or modification of this Agreement shall be in the form of a written amendment, which shall be signed by each Party. 14. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be invalid under the applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of that provision, or the remaining provisions of this Agreement. 15. No Obligation to Third Parties. Execution and delivery of this Agreement shall not be deemed to confer any rights upon others, directly, indirectly or by way of Page 4 of 7 967209.1 Return to Mende Report subrogation, and shall not obligate either of the Parties hereto to any person or entity other than each other and their respective affiliates. 16. Successors. This Agreement and the provisions contained herein shall be binding upon and inure to the benefit of OCSD, EOCWD, and their respective heirs, executors, administrators, personal representatives, successors and assigns. 17. Indemnification. a. EOCWD shall indemnify, defend and hold harmless OCSD, its officers, directors, employees and agents from and against any and all claims, actions, damages, liabilities and expenses (including attorneys fees and reasonable expenses for litigation or settlement) for any loss or damage, including death, bodily injury or damage to or loss of use of property, caused by negligent acts or omissions or willful misconduct by the EOCWD, its officers, directors, employees and agents in connection with or arising out of the performance of this Agreement. b. OCSD shall indemnify, defend and hold harmless EOCWD, its officers, directors, employees and agents from and against any and all claims, actions, damages, liabilities and expenses (including attorney's fees and reasonable expenses for litigation or settlement) for any loss or damage, including death, bodily injury or damage to or loss of use of property, caused by negligent acts or omissions or willful misconduct by OCSD, its officers, directors, employees and agents in connection with or arising out of the performance of this Agreement. 18. Authorization. Each of the undersigned represents and warrants that he or she is duly authorized to execute and deliver this Agreement and that such execution is binding upon the entity for which he or she is executing this document. [SIGNATURES ON FOLLOWING PAGE] Page 5 of 7 %7209.1 IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the dates set forth below. ORANGE COUNTY SANITATION DISTRICT By Date James D. Herberg, General Manager ATTEST: Maria Ayala Clerk of the Board APPROVED AS TO FORM: Brad Hogin General Counsel EAST ORANGE COUNTY WATER DISTRICT By Date William VanderWerff President of the Board of Directors ATTEST: APPROVED AS TO FORM: Joan Arneson General Counsel Page 6 of 7 967209.1 Return to Mende Report EXHIBIT "A" FEE SCHEDULE OCSD Employee Title or Functional Unit* Billing Rate Monthly FOG Program Costs $9,350/month Hourly Sewer Linef'Trouble Spot" Cleaning Crew Cost— Regular $200/hr. Time Hourly Emergency Call-Out* 2-Man Crew Cost —Overtime $300/hr. *OCSD shall be under no obligation to provide the above-referenced services to EOCWD beyond _, 20_. **Emergency Call-Out requires a minimum of three Overtime Hours per Emergency Response to Sanitary Sewer Overflows or other Emergency Responses(3 X$300= $900). Page 7 of 7 967209.1 3143 3144 L45 3146 3147....E 3148 3149 3150 3151 152 J. 3243 3244 3246 3246 3247, ' 2448 3249 3250 3251 3262 a OF 4+1•ai�i'aia�s• F OORA WOE `� � 3343 3344 3345 3346 3347 � 3348" 3349 3310 3351 3352 �:3443 3444 3115 3446�n 3447 3448 3449 3450 �3451 3452 GOp ,� 35,15 3546 3547 3548 3549 3550 3551 3552 �aa a GL - o r 3643 3644 36,15 3146 7G17 1;1H 36,19 3650 3651 3652 3743 3741 3745 r� J 3118 3749 3750 3751 3752 � r -3 43 3644 3845——LJ84fi_ 38,18 3849 3850 3851 3852 rcMyv 3943 39a4 "3945 3946 '�P�: /3949 3950 3951 3952 4043 —404a A04s a046 4047 4048 doss 4050 4051 4052 /� a143 4144 4145 '1146 4147 4148 Local Service Area 7 Sewer Transfers - 42,43 A244> 4245 4246 �Q�� qg Key Map pc���ac ff4343 ,1344 4345 1 a346 4347 4348 5 EXHIBIT B Return to Mende Report Estimated Timeline (prepared 1211212013) East Orange County Water District Reorganization TASK RESPONSIBLE PARTY COMPLETION DATE Submit LAFCO Application • District resolutions(EOCWD and OCSD) Applicant 1/22/2013 • Application and filing fees • Plan of Services • CEOA:timeline assumes a NOE; if ND or Mitigated ND used,timeline may be extended Application Status Letter,AB 8 Letter and Preliminary LAFCO 2/11/2014 Staff Report(PSR)issued EOCWD submits Map and Legal Description to LAFCO Applicant Mid-March 2014 (includes review and approval by County Surveyor) Assessor issues report to Auditor identifying TRAs and Assessor 3/30/2014 AV Auditor issues report identifying amount of negotiable Auditor Mid-May 2014 property tax County adopts property tax resolution on behalf of both County 6/17/2014 EOCWD and OCSD If application complete, EO issues Certificate of Filing LAFCO 6/30/2014 and sets a hearing date Preparation of staff report, resolution LAFCO June 2014 Public hearing notice LAFCO June 6,2014 LAFCO hearing LAFCO July 9,2014 Request for reconsideration LAFCO July 10,2014— August 11, 2014 Period of protest (assumes 45-day protest period) LAFCO August 14,2014— September 29, 2014 Protest hearing date LAFCO September 29, 2014 Tabulate protest(if any) LAFCO September 29— October3, 2014 Recordation' LAFCO October 6,2014 'Timeline can be delayed If:(1)a competing application is filed, (2)an interested party files a request for reconsideration(requiring a second LAFCO hearing date);(3)sufficient protest is filed to push the proposal to an election. ADMINISTRATION COMMITTEE Neeting Date T1.1 IDir. 02/19/14 2/26/14 AGENDA REPORT Item Number Item Number 6 Orange County Sanitation District FROM: James D. Herberg, General Manager Originator: Lorenzo Tyner, Director of Finance and Administrative Services SUBJECT: REQUEST FOR PROPOSAL FOR INVESTMENT MANAGEMENT GENERAL MANAGER'S RECOMMENDATION A. Advertise a request for proposal for managing the District's Investment Program that includes making the investment decisions and execution of the investment transactions; and B. Advertise a request for proposal for an investment advisor to assist with the selection process of an investment management firm in an amount not to exceed $40,000. SUMMARY The District has utilized Pacific Investment Management Company (PIMCO) to manage the District's investment portfolio since September 1995. Services include making investment decisions, completing investment transactions, and reporting investment results in accordance with the District's investment policy. As the Sanitation District has used the same investment manager for several years, staff believes that it would be prudent to re-evaluate the availability of these services in today's open market, from both a cost and a performance basis, and to conduct a competitive request for proposal process for these services. PRIOR COMMITTEE/BOARD ACTIONS September 1995— The Board awarded PIMCO to serve as the District's Investment Manager. ADDITIONAL INFORMATION PIMCO fees for service are equal to 15 basis points (0.15%) of the annual average investment balance, calculated and billed quarterly. These fees average approximately $645,000 a year for the current portfolio size of $430 million and are recorded by the District as a reduction of interest revenue. Page 1 of 2 CEQA N/A BUDGET/DELEGATION OF AUTHORITY COMPLIANCE N/A ATTACHMENT N/A Page 2 of 2 ADMINISTRATION COMMITTEE Meeting Date T1.1 Of Dir. 02/19/14 2/26/14 AGENDA REPORTItem Number Item Number Orange County Sanitation District FROM: James D. Herberg, General Manager Originator: Lorenzo Tyner, Director of Finance and Administrative Services SUBJECT: BUDGET ASSUMPTIONS GENERAL MANAGER'S RECOMMENDATION Approve the budget assumptions to be used for the preparation of the FY 2014-15 and FY 2015-16 two-year budget. SUMMARY The Administration Committee establishes the Budget Assumptions and approves the Budget Calendar in the development of the District's two-year budget. Staff will make a brief presentation at the Committee meeting. PRIOR COMMITTEE/BOARD ACTIONS None. ADDITIONAL INFORMATION Currently, there are no proposed changes to the Sanitation District Fiscal Policy. The Fiscal Policy is published in the FY 2012-13 and 2013-14 Budget document (Section 3, Pages 1-8), and is available on the Sanitation District's website. ATTACHMENTS The following attachment(s) am attached in hard copy and may be viewed on-line at the OCSD website (mm w.ocsd.coml with the complete agenda package and attachments: • Preliminary Budget Assumptions (Page 2-6) • Budget Update Calendar (Pages 7-10) Page 1 of 10 FY 2013-14 & 2014-15 Preliminary Budget Assumptions Economic Assumptions • Inflation for Orange County in FY 2014-15 is projected to be 2.3 percent based on the 2014 projected percentage change in consumer price index obtained from the November 2013 Economic and Business Review report prepared by Chapman University. A 2.3 percent inflation factor will also be used for 2015-16. Revenue Assumptions • A five-year Sewer Service Fee Rate Schedule was approved by the Board in March 2013. • The single-family residence (SFR) rate will increase 2.6% to $316 in FY 2014- 15. For FY 2015-16, the single-family residence (SFR) rate will increase an additional 2.2% to $323. • Note that each $1 increase in the SFR rate generates approximately $900,000 per year. • The capital facilities capacity charge (CFCC) fee captures only those infrastructure costs that relate to additional capacity. Other infrastructure costs such as improved treatment, rehabilitation, refurbishment, and replacement, will be supported through user fees. • Given the new Facilities Master Plan adopted in December 2009, a new rate study was completed in April 2010 to ensure that the CFCC fee methodology remains equitable and to confirm that an appropriate share of system costs would be recovered from new development. • Revenues will be budgeted to reflect little growth in Equivalent Dwelling Unit (EDU) connections that have remained flat over the past five years. • Permit user rates for flow, Biochemical Oxygen Demand (BOD) and Total Suspended Solids (TSS)will follow the most recent Rate Study. • Annexation fees capture both the net current assets and the equivalent property tax allocations totaling $4,235 per acre. • Annexable property in the District's service area sphere is minimal; consequently, no FY 2014-15 income from annexation fees is anticipated. • Property tax revenues of $64,025,000 are preliminarily estimated to increase by approximately 5%from FY 2013-14. A 2% annual increase in Assessed Value is authorized by the state constitution and is included in the increases noted above. The additional increase in assessed value is from authorized increases to market value when property is sold at a higher value. Page 2 FY 2013-14 & 2014-15 Preliminary Budget Assumptions • Earnings on the investment of the District's operating cash and reserves will be budgeted at 1.0% of the average cash and investment balance projected for the fiscal year. • No additional debt issuance is scheduled for FY 2014-15 or FY 2015-16. Operating Assumptions • Dry weather urban run off up to 10 mgd will continue to be treated at no charge. Above this threshold, there is a charge of$1,440.42 per mgd. • Operating expenses are expected to approximate the adopted FY 2013-14 budget of$153.4 million. • All secondary treatment facilities are completed and fully operational. • Average daily flows are projected to remain steady at 200 mgd for FY 2014-15 and FY 2015-16. This projection reflects an expectation that increased economic activity and urban runoff will be offset by effects of conservation and minimal rainfall, resulting in no overall increase in the average daily flow. The FY 2014-15 flow projection of 200 mgd reflects no change from the actual for the first 5 months of the current year and the final actual flow for FY 2012-13. Employee/Staffing Assumptions • Staffing level is expected to remain flat. The total FY 2013-14 authorization level is 626.00 FTEs. • Vacant positions as of 12/31/13 are budgeted at 50% of step 1 for the remainder of FY 2013-14 and at 100% of step 2 for FY 2014-15. • New positions will be projected at 100% of step 1 for FY 2014-15. • A 3% vacancy factor on authorized positions has been budgeted for FY 2014- 15. The actual vacancy factor for 2012-13 was 5.6%. This vacancy factor accounts for time spent for recruitment and turnover. • The Memorandum of Understanding (MOU) for the Supervisor and Professional (SPMT) group expired June 30, 2013. Pending the completion of the negotiation process, no salary adjustments will be included in the budget for COLA for periods beyond the expiration of the current MOU. • The MOUs for both OCEA and Local 501 will expire June 30, 2014. Pending the completion of the negotiation process, no salary adjustments Page 3 FY 2013-14 & 2014-15 Preliminary Budget Assumptions will be included in the budget for COLA for periods beyond the expiration of the current MOUs. • Retirement costs for employees enrolled in OCERS Plans G and H are estimated at a rate of 41.98% of the employee's base salary for FY 2014- 15 and FY 2015-16, up from 35.45% in FY 2013-14. The rates for Plans G and H include the District's pickup of 3.5% of employees' required contributions. Employees enrolled in OCERS Plan B are estimated at a rate of 36.62% of the employee's base salary for FY 2014-15 and FY 2015-16, up from 30.77% in FY 2013-14. All employees hired on or after January 1, 2013 are enrolled in OCERS Plan U and are estimated at a rate of 34.98% for FY 2014-15 and FY 2015-16, up from 29.36% in FY 2013-14. Interns are not enrolled in OCERS so their retirement benefits are calculated at 6.2% (FICA rate). • Other employee benefits and insurances will be budgeted to increase each year by moderate but yet to be determined amounts. Materials, Supplies, & Services Assumptions • The proposed operating budget will continue to reflect an emphasis on safety, technical, and management training. The proposed FY 2014-15 budget will include a budget for training based on recent actual costs and identified needs rather than on a percentage of regular salaries and wages. • An amount equal to half of one percent of the Operating materials and services budget will be a contingency for prior year re-appropriations. Since the current year's budget lapses on June 30, a contingency is needed in the succeeding budget year for goods or services ordered at the end of one budget year but not delivered until the following year. • An amount equal to one half of one percent of the Operating materials and services budget will be the General Manager's contingency budget. These funds will be allocated to appropriate line items during the year after requests and justifications for unanticipated needs are approved by the General Manager. • Resource needs for strategic initiatives will be included in the budget. Capital Improvement Program Assumptions • The FY 2014-15 and 2015-16 cash flow budgets, based on the most current Validated Capital Improvement Program (CIP), is the target. • The baseline CIP cash flow for FY 2014-15 is $205 million and for FY 2015- 16 is $183 million. Page 4 FY 2013-14 & 2014-15 Preliminary Budget Assumptions • Continual evaluation of the CIP by the Asset Management Team may result in deferral or reduction of some projects and a resultant increase in O&M repair costs for materials and services, if the net cash flow impact is a decrease. • The FY 2014-15 and 2015-16 CIP budget will only increase for critical projects which were not previously identified in the Strategic Plan Update. • For the first five months of FY 2013-14, $36.2 million of the $141.6 million CIP budget, approximately 25.6%, was expended. Debt Financing • The District will issue new debt in the form of Certificates of Participation (COP) as needed to fund the CIP and to maintain reserves. • No additional debt issuance is scheduled for FY 2014-15 and FY 2015-16. • Debt will only be used for CIP and capital expenses, not for operating expenses. • Capital financing plans which include fewer future borrowings and higher user fees after FY 2015-16 will be considered. • Borrowing is proposed only for facilities which do not add capacity and that are funded by all users for replacement, rehabilitation, and improved treatment. Reserve Assumptions • The current reserve policy was reviewed by Public Resources Advisory Group and the Board during FY 2003-04. No changes were proposed and direction was given to continue to maintain reserve levels at a level that is adequate to offset exposure to variable rate COPS due to interest rate increases. • The current reserve policy is summarized as follows: ► A cash flow reserve will be established to fund operations, maintenance and certificates of participation expenses for the first half of the fiscal year, prior to receipt of the first installment of the property tax allocation and sewer service user fees which are collected as a separate line item on the property tax bill. The level of this reserve will be established as the sum of an amount equal to six months operations and maintenance expenses and the total of the annual debt (COP) service payments due in August each year. ► An operating contingency reserve will be established to provide for non- recurring expenditures that were not anticipated when the annual budget and sewer service fees were considered and adopted. The level of this Page 5 FY 2013-14 & 2014-15 Preliminary Budget Assumptions reserve will be established at an amount equal to ten percent of the annual operating budget. ► A capital improvement reserve will be maintained to fund annual increments of the capital improvement program. The long-term target is for one half of the capital improvement program to be funded from borrowing and for one half to be funded from current revenues and reserves. With this program in mind, the target level of this reserve has been established at one-half of the average annual capital improvement program through the year 2020. ► Catastrophic loss, or self-insurance, reserves will be maintained for property damage including fire, flood and earthquake, for general liability and for workers' compensation. These reserves are intended to work with purchased insurance policies, FEMA disaster reimbursements and State disaster reimbursements. The potential infrastructure loss from a major earthquake, of which the District currently has no outside insurance coverage, has been estimated to be as high as $1.3 billion. The level of this reserve has been set at $57 million should such a catastrophic event occur. This reserve amount will assist the District with any short-term funding needs until Federal and State assistance becomes available. ► Accumulated capital funds will be set aside for certain specific, short-term capital improvements as the need and availability arise. ► A capital replacement/renewal reserve policy has been established to provide thirty percent of the funding to replace or refurbish the current collection, treatment and disposal facilities at the end of their useful economic lives. Based on the FY 2011-12 Asset Management Plan, the current replacement value of these facilities is estimated to be $3.14 billion for the collection facilities and $3.12 billion for the treatment and disposal facilities. The initial reserve level has been established at $50 million, which will be augmented by interest earnings and a small portion of the annual sewer user fee, in order to meet projected needs through the year 2030. ► Provisions of the various certificates of participation (COP) issues require debt service reserves to be under the control of the Trustee for that issue. These reserve funds are not available for the general needs of the District and must be maintained at specified levels. The current level of required COP service reserves is projected to be $214.5 million. ► Accumulated funds exceeding the levels specified by District policy will be maintained in a rate stabilization fund. These funds will be applied to future years' needs in order to maintain rates or to moderate annual fluctuations. There is no established target for this reserve. Page 6 FY 2013-14 & 2014-15 Budget Calendar Tasks Responsibility Event/Due Date PHASE I-BUDGET PREPARATION Preliminary Budget Assumptions Identified Financial Planning 12/12/13 CIP— Project Attributes Reviewed and Updated Engineering Planning 12/23/13 Preliminary Budget Assumptions Presented to MT Financial Planning 1/16/14 Draft Budget Calendar Presented to MT Financial Planning 1/16/14 Preliminary Budget Assumptions Presented to EMT Financial Management 1/13/14 Draft Budget Calendar Presented to EMT Financial Management 1/13/14 Update to Strategic Initiatives Finalized MT & EMT 1/14/14 Preparation for Budget Kickoff/Training Session: Financial Planning 1/16/14 • Salary and benefits downloaded to Excel worksheets • Develop line item worksheets with mid-year actual expense • Prepare/update budget instruction manual Budget Kickoff/Training Session: Financial Planning 1/22/14 • Distribute budget instruction manual update • Conduct budget training session • Review submission deadlines CIP—Engineering Validation Inputs Complete Engineering Project 1/24/14 Managers Operating Divisional Budgets: New Position, Equity Divisional Budget 2/3/14 Adjustment& Position Reclassification Decision Coordinators Packages Due to Human Resources (Richard Spencer, Ext. 7164)with copies to Financial Planning (John Ralston, Ext. 7568) Operating Budget: Promotional Items Request Forms Divisional Budget 2/3/14 Due to Dr. Robert Ghirelli (Division 110) Coordinators Capital Equipment Budget: Vehicle Capital Equipment Divisional Budget 2/3/14 Decision Packages Due to Fleet Services (Chuck Coordinators Forman, Ext. 7867) Capital Equipment Budget: Computer Capital Divisional Budget 2/3/14 Equipment Decision Packages Due to Information Coordinators Technology(Rich Castillon, Ext. 7283) Page 7 FY 2013-14 & 2014-15 Budget Calendar Tasks Responsibility Event/Due Date CIP— New Project Numbers Assigned Engineering PMO 2/11/14 Division Budget Packages Due to Financial Planning: Divisional Budget 2/18/14 • Projection of current year actual operating costs Coordinators • Proposed operating costs for 2014-15 &2015-16 • Operating Budget Expense Detail • Meetings, Memberships and Training Requests • Capital Equipment Decision Packages (other than computer and vehicle decision packages which were due on 2/3/14) • New program decision packages (Financial Planning will collate and bind these items— along with salary information -into the Preliminary Division Budget Document for use during the budget review process.) Budget Assumptions Presented to Administration Financial Management 2/19/14 Committee Mid-Year Financial Report to Administration Committee Financial Management 2/19/14 CIP— Non-engineering CIP project validation forms Non-engineering 2/20/14 completed & approved Project Managers CIP— Preliminary capital equipment request estimates Financial Planning 2/21/14 delivered to PMO Complete the Compilation of the Preliminary Division Financial Planning 2/21/14 Budget Document Critical Goals, Strategic Planning and Five Year EMT 2/26/14 Staffing Plan—Steering Committee Meeting Mid-Year Financial Report to Board Financial Management 2/26/14 CIP— Unified Proposed CIP Budgets & Equipment Engineering PMO 2/27/14 Request Reports and Analysis Created CIP—Validated CIP budgets delivered to IT Engineering PMO 3/25/14 CIP— Project Requests with Project Information IT 3/26/14 Entered in CIP Database CIP—Completed CIP Budget Delivered to Finance IT 3/27/14 Departmental Narrative Updates for Budget Executive EMT 4/10/14 Summary Due to Financial Planning Page 8 FY 2013-14 & 2014-15 Budget Calendar PHASE 11 -BUDGET REVIEW Tasks Responsibility Event/Due Date CIP— Planning Presentations to Clearinghouse Engineering Planning 1/23/14 (Proposed CIP changes) Divisional Budgets- Distribution of Preliminary Line Financial Planning 2/26/14 Item Requested Budgets to Department Heads and Managers along with Analysis/Questions for Review Operating Budget- Budget Review Meetings with Financial Planning & 3/3/14—3/6/14 Finance and Department Representatives Department Representatives CIP— Review/Adjust Preliminary CIP Budget Engineering 3/7/14 CIP—Engineering/Finance Budget Review Workshop Engineering/Financial 3/12/14 Management Operating Budget— Recommendations to General Financial Planning 3/11/14 Manager Final Operating Budget—General Manager Review of Financial Planning, 3/13/14—3/18/14 Budget Recommendations GM, & Department Heads Capital Equipment Budget— Requests Reviewed & Financial Planning, 3/13/14—3/18/14 Approved GM, & Department Heads Divisional Budgets— Performance Budget Documents Divisional Budget 3/14/14 Due to Financial Planning (John Ralston): Coordinators • Organization Charts • Performance Results (2012-13) • Performance Measures (2014-15& 2015-16) CIP— Final Adjustments Engineering/Financial 3/17/14 Management CIP—Confirm 20 Year Cash Flow Schedules Engineering/Financial 3/17/14 Management CIP— Final capital equipment requests delivered to Financial Planning 3/21/14 PMO Divisional Budgets- Completion of Preliminary Budget Financial Planning 3/21/14 and Compilation into Departmental Budgets CIP—Approve Proposed CIP Budget EMT 3/24/14 CIP- Committee Review Operations Committee 4/2/14 Page 9 FY 2013-14 & 2014-15 Budget Calendar PHASE III -BUDGET PRESENTATION CIP- Final CIP Budget Document Preparation and Financial Planning 4/10/14 Incorporation into Final Budget Document Tasks Responsibility Event/Due Date CIP— Review draft of Final Budget Document pages Financial Planning 4/10/14 with Engineering Planning & PMO Initial - Proposed Budget finalized Financial Planning 4/30/14 Initial - Proposed 2014-15 &2015-16 Budget Financial Management Ops—5/7/14 Presented to Committees Admin—5/14/14 General Manager's Budget Message Completed General Manager/ 5/5/14 Financial Planning Approval of General Manager's Budget Message General Manager 5/9/14 Final - Proposed Budget to Printer Financial Planning 5/12/14 PHASE IV-BUDGET DELIBERATIONS Final Draft- Proposed 2014-15 & 2015-16 Budget Financial Management Ops—6/4/14 Presented to Committees Admin—6/11/14 Public Hearing & Board Adoption Board of Directors 6/26/14 PHASE V—DISTRIBUTION OF BUDGET Final line item budget and equipment budgets posted Financial Planning 7/7/14 in H:\ntglobal PHASE VI -BUDGET DEBRIEFING Budget Debriefing E-mail Message Financial Planning 7/11/14 • Global changes that occurred in this year's budget. • Changes since the Departments' original submittal. • Changes that occurred as a result of Board action. • Results of Budget Survey. • Overview of Budget Monitoring with Oracle (JD Edwards) One World Xe Software and review of Budget Coordinator's Responsibility. • Overview of CIP Budget Monitoring. • Suggestions for Budget Process Improvements. Page 10 ORANGE COUNTY SANITATION DISTRICT Agenda Terminology Glossary AQMD Air Quality Management District ASCE American Society of Civil Engineers BOO Biochemical Oxygen Demand CARB California Air Resources Board CASA California Association of Sanitation Agencies CCTV Closed Circuit Television CEQA California Environmental Quality Act CRWQCB California Regional Water Quality Control Board CWA Clean Water Act CWEA California Water Environment Association EIR Environmental Impact Report EMT Executive Management Team EPA U.S. Environmental Protection Agency FOG Fats, Oils, and Grease FSSD Facilities Support Services Department gpd Gallons per day GWR System Groundwater Replenishment System (also called GWRS) LOS Level of Service MGD Million gallons per day NACWA National Association of Clean Water Agencies NPDES National Pollutant Discharge Elimination System NWRI National Water Research Institute O&M Operations and Maintenance OCCOG Orange County Council of Governments OCHCA Orange County Health Care Agency OCSD Orange County Sanitation District OCWD Orange County Water District OOBS Ocean Outfall Booster Station OSHA Occupational Safety and Health Administration POTW Publicly Owned Treatment Works ppm Parts per million RFP Request For Proposal RWQCB Regional Water Quality Control Board SARFPA Santa Ana River Flood Protection Agency SARI Santa Ana River Inceptor SARWQCB Santa Ana Regional Water Quality Control Board SAWPA Santa Ana Watershed Project Authority SCADA Supervisory Control and Data Acquisition system SCAP Southern California Alliance of Publicly Owned Treatment Works SCAQMD South Coast Air Quality Management District SOCWA South Orange County Wastewater Authority SSMP Sanitary Sewer Management Plan SSO Sanitary Sewer Overflow SWRCB State Water Resources Control Board TDS Total Dissolved Solids TMDL Total Maximum Daily Load TSS Total Suspended Solids WDR Waste Discharge Requirements WEF Water Environment Federation WERF Water Environment Research Foundation Activated-sludge process — A secondary biological wastewater treatment process where bacteria reproduce at a high rate with the introduction of excess air or oxygen, and consume dissolved nutrients in the wastewater. Biochemical Oxygen Demand (BOD)—The amount of oxygen used when organic matter undergoes decomposition by microorganisms. Testing for BOD is done to assess the amount of organic matter in water. Biosolids — Biosolids are nutrient rich organic and highly treated solid materials produced by the wastewater treatment process. This high-quality product can be recycled as a soil amendment on farm land or further processed as an earth-like product for commercial and home gardens to improve and maintain fertile soil and stimulate plant growth. Capital Improvement Program (CIP) — Projects for repair, rehabilitation, and replacement of assets. Also includes treatment improvements, additional capacity, and projects for the support facilities. Coliform bacteria—A group of bacteria found in the intestines of humans and other animals, but also occasionally found elsewhere used as indicators of sewage pollution. E. coli are the most common bacteria in wastewater. Collections system — In wastewater, it is the system of typically underground pipes that receive and convey sanitary wastewater or storm water. Certificate of Participation (COP) — A type of financing where an investor purchases a share of the lease revenues of a program rather than the bond being secured by those revenues. Contaminants of Potential Concern (CPC) — Pharmaceuticals, hormones, and other organic wastewater contaminants. Dilution to Threshold (DIT) — the dilution at which the majority of the people detect the odor becomes the D(f for that air sample. Greenhouse gases — In the order of relative abundance water vapor, carbon dioxide, methane, nitrous oxide, and ozone gases that are considered the cause of global warming ("greenhouse effect'). Groundwater Replenishment (GWR) System — A joint water reclamation project that proactively responds to Southern California's current and future water needs. This joint project between the Orange County Water District and the Orange County Sanitation District provides 70 million gallons a day of drinking quality water to replenish the local groundwater supply. Levels of Service (LOS)—Goals to support environmental and public expectations for performance. NOMA— N-Nitrosodimethylamine is an N-nitrosoamine suspected cancer-causing agent. It has been found in the Groundwater Replenishment System process and is eliminated using hydrogen peroxide with extra ultra-violet treatment. National Biosolids Partnership (NBP) — An alliance of the National Association of Clean Water Agencies (NACWA) and Water Environment Federation (WEF), with advisory support from the U.S. Environmental Protection Agency (EPA). NBP is committed to developing and advancing environmentally sound and sustainable biosolids management practices that go beyond regulatory compliance and promote public participation in order to enhance the credibility of local agency biosolids programs and improved communications that lead to public acceptance. Plume—A visible or measurable concentration of discharge from a stationary source or fixed facility. Publicly-owned Treatment Works (POTW)— Municipal wastewater treatment plant. Santa Ana River Interceptor (SARI) Line — A regional brine line designed to convey 30 million gallons per day (MGD) of non-reclaimable wastewater from the upper Santa Ana River basin to the ocean for disposal, after treatment. Sanitary sewer — Separate sewer systems specifically for the carrying of domestic and industrial wastewater. Combined sewers carry both wastewater and urban run-off. South Coast Air Quality Management District (SCAQMD) — Regional regulatory agency that develops plans and regulations designed to achieve public health standards by reducing emissions from business and industry. Secondary treatment — Biological wastewater treatment, particularly the activated-sludge process, where bacteria and other microorganisms consume dissolved nutrients in wastewater. Sludge—Untreated solid material created by the treatment of wastewater. Total suspended solids (TSS)—The amount of solids floating and in suspension in wastewater. Trickling filter — A biological secondary treatment process in which bacteria and other microorganisms, growing as slime on the surface of rocks or plastic media, consume nutrients in wastewater as it trickles over them. Urban runoff — Water from city streets and domestic properties that carry pollutants into the storm drains, rivers, lakes, and oceans. Wastewater—Any water that enters the sanitary sewer. Watershed —A land area from which water drains to a particular water body. OCSD's service area is in the Santa Ana River Watershed.