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HomeMy WebLinkAbout07-09-2014 Administration Committee Agenda Orange County Sanitation District SANITATION DISTRICT Wednesday, July 9, 2014 Regular Meeting of the 5:30 P.M. Administration Committee Administration Building Board Room 10844 Ellis Avenue AIR Fountain Valley, CA (714) 593-7130 1954-2014 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 June 11, 2014, Administration Committee Meeting. 2. Recommend to the Board of Directors to: Adopt Resolution No. OCSD 14-XX, entitled "A Resolution of the Board of Directors of the Orange County Sanitation District Authorizing the Orange County Sanitation District's Treasurer to Invest and/or Reinvest District's Funds; Adopting District's Investment Policy Statement and Performance Benchmarks for FY 2014-15; and Repealing Resolution No. OCSD 13-13." 07/09/14 Administration Committee Agenda Page 1 of 3 3. Recommend to the Board of Directors to: Authorize the General Manager to issue Revenue Refunding Certificate Anticipation Notes, Series 2014B, as two-year fixed-rate obligations, subject to market conditions, in an amount not to exceed $135.0 million to replace the $129.625 million Revenue Refunding Certificate Anticipation Notes, Series 2013A maturing on October 16, 2014. 4. Recommend to the Board of Directors to: Authorize use of Ordinance No. OCSD-44, Section 2.03:B. Cooperative Purchases for a blanket order agreement to purchase equipment and services for OCSD's Motorola radio systems, for a total amount not to exceed $250,000 to include all tax and freight. 5. Recommend to the Board of Directors to: A. Approve a Purchase Order Agreement with New Tech Solutions, the lowest responsive and responsible bidder, for Purchase of Wireless Cisco Parts, Specification No. FE-12-03, for an amount not to exceed $106,142.49, delivered plus tax; and B. Approve a contingency of$5,307.12 (5%). NON-CONSENT CALENDAR: 6. Recommend to the Board of Directors to: Direct staff to pay down on the District's unfunded actuarial accrued liability with the Orange County Employee's Retirement System (OCERS) in the amount of $125 million. INFORMATION ITEMS: 7. Informational Presentation on Procurement Process CLOSED SESSION: None. 07/09/14 Administration Committee Agenda Page 2 of 3 OTHER BUSINESS AND COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY: ADJOURNMENT: The next Administration Committee meeting is scheduled for Wednesday, September 10, 2014 at 5:30 p.m. 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. Aaenda 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. Kelly A.Lore Acting Clerk of the Board (714)593-7433 klore(doosd.com For any questions on the agenda,Committee members may contact staff at: General Manager James Herberg (714)593-7300 iherbera(docsd.com Assistant General Manager Bob Ghirelli (714)593-7400 rohirellifdocsd.com Director of Finance and Lorenzo Tyner (714)593-7550 ItvneRrdocsd.com Administrative Services Director of Human Resources Jeff Reed (714)593-7144 ireeclamsd.com 07/09/14 Administration Committee Agenda Page 3 of 3 ITEM NO. 1 MINUTES OF THE REGULAR MEETING OF THE ADMINISTRATION COMMITTEE Orange County Sanitation District Wednesday, June 11, 2014, at 5:30 P.M. A regular meeting of the Administration Committee of the Orange County Sanitation District was held on June 11, 2014, at 5:35 p.m., in the Sanitation District's Administration Building. Committee Chair Reese led the Flag Salute. A quorum was declared present, as follows: COMMITTEE MEMBERS PRESENT: STAFF PRESENT: Brad Reese, Chair Jim Herberg, General Manager David Benavides Bob Ghirelli, Assistant General Manager Joe Carchio Lorenzo Tyner, Director of Finance Steven Choi & Administrative Services Tyler Diep Jeff Reed, Director of Human Resources Peter Kim Rob Thompson, Director of Engineering Prakash Narain Ed Torres, Director of Operations and Janet Nguyen Maintenance Robert Ooten (Alternate) Kelly Lore, Administrative Assistant Teresa Smith Rich Castillon Troy Edgar, Board Chair Jim Colston Tom Beamish, Board Vice-Chair Norbert Gaia John Withers, Vice-Chair Al Garcia Ted Gerber COMMITTEE MEMBERS ABSENT: Laurie Klinger Roya Sohanaki Gene Hernandez Rich Spencer Christine Stanford Mary Sue Thompson Mike White OTHERS PRESENT: Brad Hogin, General Counsel Jeff Mosher, NWRI PUBLIC COMMENTS: None. REPORT OF COMMITTEE CHAIR: Committee Chair Reese did rot provide a report. 0&11=4 Adminishation Committee Minutes Page 1 of 6 REPORT OF GENERAL MANAGER: General Manager, Jim Herberg, did not provide a report. REPORT OF DIRECTOR OF FINANCE AND ADMINISTRATIVE SERVICES: Director of Finance and Administrative Services, Lorenzo Tyner did not provide a report. CONSENT CALENDAR: 1. MOVED, SECONDED, AND DULY CARRIED: Approve Minutes of the May 14, 2014 Administration Committee Meeting. AYES: Beamish, Carchio, Choi, Diep, Edgar, Narain, Ooten (Alternate), and Reese NOES: None ABSTENTIONS: Kim ABSENT: Benavides, Hernandez, Nguyen, Smith and Withers 2. MOVED, SECONDED, AND DULY CARRIED: Recommend to the Board of Directors to: Adopt Resolution No. OCSD 14-XX, Establishing Use Charges for the FY 2014- 15 Pursuant to the Wastewater Treatment and Disposal Agreement with the Santa Ana Watershed Project Authority. AYES: Beamish, Carchio, Choi, Diep, Edgar, Kim, Narain, Ooten (Alternate), and Reese NOES: None ABSTENTIONS: None ABSENT: Benavides, Hernandez, Nguyen, Smith and Withers 0&11=4 Atlministmtion Committee Minutes Page 2 of 6 3. MOVED, SECONDED, AND DULY CARRIED: Recommend to the Board of Directors to: Adopt Resolution No. OCSD 14-XX, Establishing the Annual Appropriations Limit for Fiscal Year 2014-15, for the District in accordance with the Provisions of Division 9 of Title 1 of the California Government Code. AYES: Beamish, Carchio, Choi, Diep, Edgar, Ooten (Alternate), Kim, Narain, and Reese NOES: None ABSTENTIONS: None ABSENT: Benavides, Hernandez, Nguyen, Smith and Withers 4. MOVED, SECONDED, AND DULY CARRIED: Recommend to the Board of Directors to: A. Adopt Resolution No. OCSD14-XX, authorizing the execution and delivery by the District of an Installment Purchase Agreement, a Trust Agreement, an Escrow Agreement and a Continuing Disclosure Agreement in connection with the execution and delivery of Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2014A, authorizing the execution and delivery of such Revenue Obligations, evidencing principal in an aggregate amount of not to exceed $225,000,000, approving a Notice of Intention to Sell, authorizing the distribution of an Official Notice Inviting Bids and an Official Statement in connection with the offering and sale of such Revenue Obligations and authorizing the execution of necessary documents and related actions; and B. That the Orange County Sanitation District Financing Corporation approve the documents supporting and authorizing the Revenue Obligations in an aggregate amount not to exceed $225,000,000. AYES: Beamish, Carchio, Choi, Diep, Edgar, Kim, Narain, Ooten (Alternate), and Reese NOES: None ABSTENTIONS: None ABSENT: Benavides, Hernandez, Nguyen, Smith and Withers 1X/11=4 Administration Committee Minutes Page 3 of 6 NON-CONSENT CALENDAR: 5. Lorenzo Tyner, Director of Finance and Administrative Services briefly explained this item to the Committee. MOVED, SECONDED, AND DULY CARRIED: Recommend to the Board of Directors to: A. Reject the apparent low bid submitted by Office Supply Inc. as deemed non-responsive in accordance with specification requirements for Purchase of Cisco Parts, Specification No. E-2014-616BD; and B. Approve a Purchase Order Agreement with Presidio Networked Solutions, the lowest responsible and responsible bidder, for Purchase of Cisco Parts, Specification No. E-2014-6166D, for an amount not to exceed $435,587; and C. Approve a contingency of$21,780 (5%). AYES: Beamish, Carchio, Choi, Diep, Edgar, Kim, Narain, Ooten (Alternate) and Reese NOES: None ABSTENTIONS: None ABSENT: Benavides, Hernandez, Nguyen, Smith and Withers Director Benavides was out of the room and returned at 5:38 p.m. Director Nguyen arrived at 5:38 p.m. Committee Vice-Chair Withers arrived at 5:41 p.m. 6. Lorenzo Tyner, Director of Finance and Administrative Services, gave a brief PowerPoint presentation on the proposed FY 2014-15 and FY 2015-16 Budget. Key points of Mr. Tyner's presentation included: revenues, debt service, cash flows, reduction of liabilities, etc. He responded to questions from the Committee. MOVED, SECONDED, AND DULY CARRIED: Recommend to the Board of Directors to: Approve proposed Operating, Capital, Debt/COP Service and Self-Insurance Budgets for FY 2014-15 and 2015-16. O&11/ 014 Atlministmtion Committee Minutes Page 4 of 6 AYES: Beamish, Benavides, Carchio, Choi, Diep, Edgar, Kim, Narain, Nguyen, Ooten (Alternate), Reese, and Withers NOES: None ABSTENTIONS: None ABSENT: Hernandez and Smith Director Nguyen stated that while she supports the budget, for the record, she does not support the increase to sewer service fee assumptions that are made in the budget of 2014-15 and 2015-16. INFORMATION ITEMS: 7. Collections Systems Nick Arhontes, Director of Facility Support Services Department, gave a PowerPoint presentation on the Sanitation District's Collection Facilities. The presentation included information on: sewer spill statistics, odor complaints, regulatory compliance, sewage conditioning, etc. Director Smith arrived at 5:50 p.m. The Committee had questions regarding: detection of gases, dry weather diversions, food waste digestion, waste contracts, maintenance of manhole covers and storm drain screening. Staff responded accordingly to questions. Director Nguyen left the meeting at 6:20 p.m. 8. Pretreatment Program and Industrial Permitting Rob Thompson, Director of Engineering introduced Roya Sohanaki, Engineering Supervisor who provided a PowerPoint presentation on the Overview of OCSD's Pretreatment Program. The presentation included information on: regulatory and compliance information, managing the sources of pollutants, effectiveness of source control, etc. Director Diep left the meeting at 6:30 p.m. OTHER BUSINESS AND COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY: Director Withers stated he attended a meeting of the Orange County Business Council Infrastructure Committee recently and commended the presentation made by General Manager Jim Herberg and Director of Engineering, Rob Thompson who were there representing the District. 0&11/ 014 Administmtion Committee Minutes Page 5 of 6 Director Kim asked if there was an update on labor negotiations; to which Jeff Reed, Director of Human Resources, stated that there is intent to agendize the item at the June Board meeting. Director Choi informed the Committee that he had been in Spain for a week with the Energy Coalition. ADJOURNMENT: Committee Chair Reese declared the meeting adjourned at 6:40 p.m., to the next regularly scheduled meeting of July 9, 2014. Submitted by: Kelly A. Lore Acting Clerk of the Board 0&11=4 Atlministmtion Committee Minutes Page 6 of 6 ADMINISTRATION COMMITTEE Meeting Date TOBd.of Dir. 07/09/14 07/23/14 AGENDA REPORT em 2mM1e Item Number Orange County Sanitation District FROM: James D. Herberg, General Manager Originator: Lorenzo Tyner, Director of Finance and Administrative Services SUBJECT: INVEST AND/OR REINVEST DISTRICT'S FUNDS GENERAL MANAGER'S RECOMMENDATION Adopt Resolution No. OCSD 14-XX, entitled "A Resolution of the Board of Directors of the Orange County Sanitation District, Authorizing the Orange County Sanitation District's Treasurer to Invest and/or Reinvest District's Funds; Adopting District's Investment Policy Statement and Performance Benchmarks for FY 2014-15; and Repealing Resolution No. OCSD 13-13." SUMMARY This agenda item presents the annual review of the Orange County Sanitation District's Investment Policy Statement to the Administration Committee for consideration in the Committee's capacity as the oversight committee for the Investment Policy (Section 16.2). With adoption of the Resolution, the Board of Directors would readopt the Sanitation District's current Investment Policy Statement, portfolio performance benchmarks, and monitoring and reporting requirements for FY 2014-15. The Sanitation District's Investment Policy Statement is recommended for adoption for FY 2014-15 with no changes made to the State Government Code relevant to the District's investment program since the adoption of the FY 2013-14 Investment Policy. Staff will continue to monitor pending legislative and regulatory proposals in the public finance area for their potential impact on the Sanitation District's existing financial programs. Also, the District has engaged its investment advisor to conduct an investment management search for the day-to-day management of the investments included in its investment portfolios. Based on the ultimate selection, the future investment management firm may have recommendations on changes to the investment policy for Board consideration prior to the next investment policy update a year from now. The Sanitation District's Investment Policy Statement has received the Investment Policy Certification of Excellence Award from the California Municipal Treasurers Association. Page 1 of 3 PRIOR COMMITTEE/BOARD ACTIONS July 2013 — Board adopted Resolution No. OCSD 13-13, Authorizing the Orange County Sanitation District's Treasurer to Invest and/or Reinvest District's Funds; Adopting District's Investment Policy Statement and Performance Benchmarks for FY 2013-14; and, Repealing Resolution No. OCSD 12-11. ADDITIONAL INFORMATION Background The Investment Policy governs the investment activities of Pacific Investment Management Company (PIMCO), the Sanitation District's external money manager, on behalf of the District. On December 11, 2012, the Sanitation District's Investment Policy Statement received the Investment Policy Certification of Excellence Award from the California Municipal Treasurer's Association. A copy of the letter of certification is included each year in the annual Investment Policy document. The Sanitation District received its first Award of Excellence for the Investment Policy Statement in December 1996. The Investment Policy document itself consists of the Investment Policy Statement and the following eight appendices: A. Summary of Investment Authorization B. Treasury Management Procedures C. Investment Manager Certification D. Investment Pool Questionnaire (LAIF) E. Board Resolution No. OCSD-13-13 F. Sample Monthly & Quarterly Investment Program Monitoring Reports G. Sections of the California Government Code Pertinent to Investing Public Funds H. Glossary of Investment Terms This document will be updated and delivered to Administration Committee members following the adoption of the Sanitation District's investment policy statement. Annual Review of Investment Policy The Investment Policy includes the requirement that the Sanitation District shall review its Investment Policy annually (Sections 1.2 and 16.1). Annual Delegation of Investment Authority Effective January 1, 1997, Section 53607 of the Code states that governing boards of local agencies may only delegate authority to invest and/or reinvest agency funds to the agency's Treasurer for a one-year period. With adoption of the Resolution, the Board of Directors would renew its delegation of investment authority to the Director of Finance/Treasurer for a one-year period in Page 2 of 3 compliance with the requirements of Section 53607. Each year, the Board of Directors will consider similar actions along with the annual reconsideration of the Sanitation District's Investment Policy. CEQA N/A BUDGET / PURCHASING ORDINANCE COMPLIANCE N/A ATTACHMENTS • Exhibit A - OCSD FY 2014-15 Investment Policy Statement • Exhibit B - Performance Monitoring & Reporting Summary • Proposed Resolution No. OCSD 14-XX Page 3 of 3 Return to Aaenda Reoorl 4�p4V BXXI,X W 9 �� [X AXE E8� ORANGE COUNTY SANITATION DISTRICT INVESTMENT POLICY STATEMENT Proposed for Review and Approval By Administration Committee On July 9, 2014 And for Adoption By Board of Directors On July 23, 2014 Return to Mende Report TABLE OF CONTENTS Section TODIC Page 1.0 Policy ......................................................................................1 2.0 Scope......................................................................................1 3.0 Standard of Prudence .............................................................1 4.0 Investment Objectives.............................................................2 5.0 Delegation of Authority............................................................2 6.0 Ethics and Conflicts of Interest................................................3 7.0 Authorized Financial Dealers and Institutions.........................4 8.0 Authorized and Suitable Investments......................................5 9.0 Collateralization.......................................................................9 10.0 Safekeeping and Custody.......................................................9 11.0 Diversification..........................................................................9 12.0 Maximum Maturities.............................................................. 11 13.0 Internal Control...................................................................... 12 14.0 Performance Objectives and Benchmarks............................ 12 15.0 Reporting .............................................................................. 12 16.0 Investment Policy Adoption and Revision ............................. 13 Appendix A. Summary of Investment Authorization B. Treasury Management Procedures C. Investment Manager Certification D. Investment Pool Questionnaire (LAIF) E. Board Resolution No. OCSD-I4-XX, Authorizing the District's Treasurer to Invest and/or Reinvest District Funds, and Adopting Investment Policy and Performance Benchmarks F. Quarterly Investment Program Monitoring Reports G. Sections of the California Government Code Pertinent to Investing Public Funds H. Glossary of Investment Terms Return to Mende Report ORANGE COUNTY SANITATION DISTRICT INVESTMENT POLICY STATEMENT 1.0 Policy: It is the policy of the Orange County Sanitation District (OCSD)to invest public funds in a manner which ensures the safety and preservation of capital while meeting reasonably anticipated operating expenditure needs, achieving a reasonable rate of return and conforming to all state and local statutes governing the investment of public funds. 1.1. This Investment Policy is set forth by OCSD for the following purposes: 1.1.1. To establish a clear understanding for the Board of Directors, OCSD management, responsible employees and third parties of the objectives, policies and guidelines for the investment of the OCSD's idle and surplus funds. 1.1.2. To offer guidance to investment staff and any external investment advisors on the investment of OCSD funds (see Appendix "A"). 1.1.3. To establish a basis for evaluating investment results. 1.2. OCSD establishes investment policies which meet its current investment goals. OCSD shall review this policy annually, and may change its policies as its investment objectives change. 2.0 Scope: This Investment Policy applies to all financial assets of OCSD; except for the proceeds of OCSD's capital projects financing program, which are invested in accordance with provisions of their specific bond indentures; and such other funds excluded by law or other Board-approved covenant or agreement. These funds are accounted for by OCSD as Enterprise Funds as represented in OCSD's Comprehensive Annual Financial Report. 3.0 Standard of Prudence: The standard of prudence to be used by OCSD internal staff, and any authorized investment advisor(s), shall be as described in Section 53600.3 of the California Government Code as follows: Except as provided in subdivision (a) of Section 27000.3, all governing bodies of local agencies or persons authorized to make investment decisions on behalf of those local agencies investing public funds Page 1 of 13 Return to Mende Report pursuant to this chapter are trustees and therefore fiduciaries subject to the prudent investor standard. When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a trustee shall act with care, skill, prudence, and diligence under the circumstances then prevailing, including, but not limited to, the general economic conditions and the anticipated needs of the agency, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the agency. Within the limitations of this section and considering individual investments as part of an overall strategy, investments may be acquired as authorized by law. 4.0 Investment Objectives: The primary objectives of OCSDs investment activities, in priority order, and as described in Section 53600.5 of the California Government Code, shall be: 4.1 Safety: The safety and preservation of principal is the foremost objective of the investment program of OCSD. Investments shall be selected in a manner that seeks to ensure the preservation of capital in OCSD's overall portfolio. This will be accomplished through a program of diversification, more fully described in Section 11.0, and maturity limitations, more fully described in Section 12.0, in order that potential losses on individual securities do not exceed the income generated from the remainder of the portfolio. 4.2 Liquidity: The investment program will be administered in a manner that will ensure that sufficient funds are available for OCSD to meet its reasonably anticipated operating expenditure needs. 4.3 Return on Investments: The OCSD investment portfolio will be structured and managed with the objective of achieving a rate of return throughout budgetary and economic cycles, commensurate with legal, safety, and liquidity considerations. 5.0 Delegation of Authority: 5.1 Authority to manage OCSD's investment program is derived from the California Government Code Sections 53600 et seq. and Sections 53635 et seq. The Board of Directors hereby delegates management responsibility for the OCSD investment program to its Director of Finance and Administrative Services/Treasurer, who shall establish written procedures for the operation of the investment program, consistent with this Policy. The Controller/Assistant Treasurer shall be responsible for day-to-day administration, monitoring, and the development of written administrative procedures for the operation of the investment program, consistent with this Policy. The current treasury management procedures Page 2 of 13 Return to Mende Rom are presented in Appendix "B." No person may engage in an investment transaction except as provided under the terms of this Policy and the procedures established by the Treasurer. The Treasurer shall be responsible for all transactions undertaken by OCSD internal staff, and shall establish a system of controls to regulate the activities of internal staff and external investment advisors engaged in accordance with Section 5.3. 5.2 The administrative procedures for the operation of OCSD's investment program will provide for, but not be limited to, the following: 5.2.1 Formats for monthly and quarterly reports to the Administration Committee, and the Board of Directors. 5.2.2 Compliance with generally accepted accounting principles of the Government Accounting Standards Board. 5.2.3 Establishment of benchmarks for performance measurement. 5.2.4 Establishment of a system of written internal controls. 5.2.5 Establishment of written procedures for competitive bids and offerings of securities that may be purchased or sold by internal OCSD staff. 5.2.6 Establishment of a Desk Procedures Manual for treasury operations and management. 5.3 The Board of Directors of OCSD may, in its discretion, engage the services of one or more registered investment advisors to assist in the management of OCSD's investment portfolio in a manner consistent with OCSD's objectives. Such external investment advisors, which shall be selected through a competitive process, shall be granted discretion to purchase and sell investment securities in accordance with this Investment Policy. Such advisors must be registered under the Investment Advisers Act of 1940, or be exempt from such registration. 6.0 Ethics and Conflicts of Interest: 6.1 Officers and employees of OCSD involved in the investment process shall refrain from personal business activities that could conflict with proper execution of OCSD's investment program, or which could impair their ability to make impartial investment decisions. Employees and investment officials shall disclose to the General Manager any material financial interests in financial institutions that conduct business within OCSD's boundaries, and they shall further disclose any large personal financial/investment positions, the performance of which could be related to the performance of positions in OCSD's portfolio. Page 3 of 13 Return to Mende Report Page 4 of 13 Return to Mende Report 7.0 Authorized Financial Dealers and Institutions: 7.1 For investment transactions conducted by OCSD internal staff, the Treasurer will maintain a list of financial institutions authorized to provide investment services to OCSD, including "primary" or regional dealers that qualify under Securities and Exchange Commission Rule 15C3-1 (Uniform Net Capital rule), and Federal or State of California chartered banks. No public deposit shall be made except in a qualified public depository as established by State law. All financial institutions which desire to become qualified bidders for investment transactions with OCSD must supply the following for evaluation by the Treasurer: 7.1.1. Audited financial statements for the institution's three (3) most recent fiscal years. 7.1.2. A statement, in the format prescribed by the Government Finance Officers Association (GFOA), certifying that the institution has reviewed OCSD's Investment Policy and that all securities offered to the Districts shall comply fully and in every instance with all provisions of the California Government Code and with this Investment Policy. The current statement is presented in Appendix "C." 7.1.3. A statement describing the regulatory status of the dealer, and the background and expertise of the dealer's representatives. Selection of financial institutions, broker/dealers, and banks authorized to engage in transactions with OCSD shall be made through a competitive process. An annual review of the financial condition of qualified institutions will be conducted by the Treasurer. 7.2 Selection of broker/dealers used by external investment advisors retained by OCSD, shall be in compliance with contract provisions between OCSD and any external investment advisors, and shall be in substantially the following form: Use of Securities Brokers: Neither the Investment Advisor nor any parent, subsidiary or related firm shall act as a securities broker with respect to any purchases or sales of securities which may be made on behalf of OCSD, provided that this limitation shall not prevent the Investment Advisor from utilizing the services of a securities broker which is a parent, subsidiary or related firm, provided such broker effects transactions on a "cost only" or"nonprofit" basis to itself and provides competitive execution. The Investment Advisor shall provide the Districts with a list of suitable independent brokerage firms (including names and addresses) meeting the requirements of Government Code Section 53601.5, and, unless otherwise directed by OCSD, the Investment Advisor may utilize the Page 5 of 13 Return to Mende Report service of any of such independent securities brokerage firms it deems appropriate to the extent that such firms are competitive with respect to price of services and execution. 8.0 Authorized and Suitable Investments: All investments shall be made in accordance with the California Government Code including Sections 16429.1 at seq., 53600 at seq., and 53684, and as described within this Investment Policy. Permitted investments under this Policy shall include: 8.1 Securities, obligations, participations, or other instruments of, or issued by, or fully guaranteed as to principal and interest by the US Government, a federal agency, or a US Government-sponsored enterprise pursuant to Section 53601 (a) of the California Government Code. Investment in mortgage-backed bonds and CMOs is not governed by this Section 8.1, even if such bonds are issued by agencies of the US Government. See Section 8.2 for conditions of purchase of mortgage- backed securities. See Section 8.12 for conditions of purchase of CMOs. 8.2 Mortgage-backed securities issued by an agency of the US Government, which are backed by pools of mortgages guaranteed by the full faith and credit of the U.S. Government, or an agency thereof. Purchase of mortgage derivatives, which include interest-only payments (IOs) and principal-only payments (POs); inverse floaters, and RE- REMICs (Real Estate Mortgage Investment Conduits), is hereby prohibited. 8.3 Commercial paper of"prime" quality and rated TV by Moody's Investor Services (Moody's), and rated "At" by Standard & Poor's Corporation (S&P), and issued by a domestic corporation organized and operating in the United States with assets in excess of$500 million and having a rating of"A" or better on its long-term debt as provided by Moody's or S&P. Purchases of eligible commercial paper may not exceed 270 days to maturity from the date of purchase. Purchases of commercial paper shall not exceed 15% of the market value of the portfolio, except that a maximum of 25% of the market value of the portfolio may be invested in commercial paper, so long as the average maturity of all commercial paper in the portfolio does not exceed 31 days. No more than 5% of the market value of the portfolio, or 10% of the issuer's outstanding paper, may be invested in commercial paper issued by any one (1) eligible corporation. 8.4 Banker's acceptances issued by institutions, the short-term obligations of which are rated a minimum of TV by Moody's, or"A1" by S&P provided that: (a) the acceptance is eligible for purchase by the Federal Reserve System; (b)the maturity does not exceed 180 days; (c) no more than 40% of the total portfolio may be invested in banker's acceptances; and (d) no more than 30% of the total portfolio may be invested in the banker's acceptances of any one (1) commercial bank. Page 6 of 13 Return to Mende Report 8.5 Medium term (or corporate) notes of a maximum of five (5) years maturity issued by corporations organized and operating within the United States, or issued by depository institutions licensed by the United States, or any state, and operating within the United States with assets in excess of$500 million, and which is rated in a rating category of"A" or better on its long-term debt as provided by Moody's or S&P. Notes eligible for investment under this section shall be rated at least "A3" or better by Moody's, or "A-"or better by S&P. If, at the time of purchase, an eligible note is rated in a rating category of"A" or better by only one rating agency, the note shall also be rated at least "BBB" by the other rating agency. If, after purchase, the rating of an eligible note in a rating category of"A" or better, is downgraded to "BBB," the external investment advisor shall notify the District of the downgrade, and shall present an analysis and recommendations as to the disposition of the note consistent with the investment objectives of this Investment Policy. The above restrictions pertain to the "direct issuer' and do not extend to the parent corporation of the direct issuer. No more than 35% of the portfolio may be invested in both medium term notes, as described here in 8.5, and notes, bonds, or other obligations, as described in 8.6. 8.6 Notes, bonds, or other obligations that are at all times secured by a valid first priority security interest in securities of the types listed by California Government Code Section 53651 as eligible securities for the purpose of securing local agency deposits having a market value at least equal to that required by California Government Code Section 53652 for the purpose of securing local agency deposits. The securities serving as collateral shall be placed by delivery or book entry into the custody of a trust company or the trust department of a bank that is not affiliated with the issuer of the secured obligation, and the security interest shall be perfected in accordance with the requirements of the Uniform Commercial Code or federal regulations applicable to the types of securities in which the security interest is granted. No more than 35% of the portfolio may be invested in securities described in 8.5 and 8.6. 8.7 Shares of mutual funds investing in securities permitted under this policy and under Section 53601 (k) of the California Government Code. Such funds must either: (1) attain the highest ranking, or the highest letter and numerical rating, provided by not less than two of the three largest nationally recognized rating services; or (2) have an Investment Advisor registered with the Securities and Exchange Commission with not less than five (5) years of experience investing in the securities and obligations authorized under this Policy and under California Government Code Section 53601, and with assets under management in excess of$500 million. The purchase price of shares of beneficial interest purchased pursuant to this policy, and the California Government Code may not include any commission that the companies may charge, and shall not exceed 15% of the District's surplus money that may be invested pursuant Page 7 of 13 Return to Mende Report to this section. However, no more than 10% of the District's surplus funds may be invested in shares of beneficial interest of any one (1) mutual fund pursuant to this section. 8.8 Certificates of deposit: 8.8.1 Secured (collateralized) time deposits issued by a nationally or state-chartered bank or state or federal savings and loan association, as defined by Section 5102 of the California Financial Code, and having a net operating profit in the two (2) most recently completed fiscal years. Collateral must comply with Chapter 4, Bank Deposit Law, Section 16500 et seq., and Chapter 4.5, Savings and Loan Association and Credit Union Deposit Law, Section 16600 et seq., of the California Government Code. 8.8.2 Negotiable certificates of deposit (NCDs) issued by a nationally or state-chartered bank or state of federal savings and loan association, as defined by Section 5102 of the California Financial Code; and which shall have a rating of"A" or better on its long-term debt as provided by Moody's or S&P; or which shall have the following minimum short-term ratings by at least two (2) rating services: "P1" for deposits by Moody's, "Al" for deposits by S&P, or comparably rated by a nationally recognized rating agency which rates such securities; or as otherwise approved by the District's Board of Directors. 8.8.3 To be eligible to receive local agency money, a bank, savings association, federal association, or federally insured individual loan company shall have received an overall rating of not less than "satisfactory" in its most recent evaluation by the appropriate federal financial supervisorial agency of its record of meeting the credit needs of California's communities, including low and moderate income neighborhoods, pursuant to Section 2906 of Title 12 of the United States Code. 8.9 Taxable or tax-exempt municipal bonds issued by any of the 50 United States. Such securities must be rated "AY or higher by Moody's, or "A-" or higher by S&P; or as otherwise approved by the Districts' Board of Directors. 8.10 The State of California Local Agency Investment Fund (LAIF). The LAIF is an investment alternative for California's local governments and special districts managed by the State Treasurer's Office. LAIF is more fully described in the Glossary (See Appendix "H.") The District shall use LAIF as a short-term cash management facility. Investment of District funds in LAIF shall be subject to investigation and due diligence prior to investing, and on a continual basis to a level of review pursuant to Section 3.0, Standard of Prudence, of this Policy. See Appendix "D" for investment pool questionnaire. Page 8 of 13 Return to Mende Report 8.11 The Orange County Treasurer's Money Market Commingled Investment Pool (OCCIP). The OCCIP is a money market investment pool managed by the Orange County Treasurer's Office. OCCIP is more fully described in the Glossary. (See Appendix "H.") The District has no funds invested in OCCIP at this time. Investment of District funds in OCCIP would be subject to investigation and due diligence prior to investing, and on a continual basis to a level of review pursuant to Section 3.0, Standard of Prudence, of this Policy. 8.12 Collateralized mortgage obligations (CMOs) issued by agencies of the US Government which are backed by pools of mortgages guaranteed by the full faith and credit of the U.S. Government, or an agency thereof, and asset-backed securities rated "Aaa" by Moody's and "AAA" by S&P. Selection of mortgage derivatives, which include interest-only payments (IOs) and principal-only payments (POs); inverse floaters, and RE- REMICS (Real Estate Mortgage Investment Conduits), is hereby prohibited. Securities eligible for purchase under this Section 8.11 shall be issued by an issuer having a rating on its unsecured long-term debt of "A" or higher. Combined purchases of mortgage-backed securities, CMOs and asset-backed securities as authorized under within Section 8.0, may not exceed 20% of the total Long-Term Operating Monies portfolio. 8.13 Repurchase agreements provided that: 8.13.1 All repurchase agreements shall be collateralized with securities eligible for purchase under this Policy. In order to anticipate market changes and to provide a level of security for all repurchase agreement transactions, collateralization shall be maintained at a level of at least 102% of the market value of the repurchase agreements, and shall be adjusted no less than weekly. 8.13.2 All repurchase agreements must be the subject of a Master Repurchase Agreement between OCSD and the provider of the repurchase agreement. The Master Repurchase Agreement shall be substantially in the form developed by The Bond Market Association. 8.14 Reverse repurchase agreements provided that: 8.14.1 No more than five percent (5%) of OCSD's portfolio shall be invested in reverse repurchase agreements, and there shall be no long- term reverse repurchase agreements unless otherwise authorized by the Districts' Board of Directors. 8.14.2 The maximum maturity of reverse repurchase agreements shall be ninety (90) days. 8.14.3 Reverse repurchase agreements shall mature on the exact date of a known cash flow which will be unconditionally available to repay the maturing reverse repurchase agreement. Page 9 of 13 Return b Mende Report 8.14.4 Proceeds of reverse repurchase agreements shall be used solely to supplement portfolio income or to provide portfolio liquidity, and shall not be used to speculate on market movements. 8.14.5 All reverse repurchase agreements must be the subject of a Master Repurchase Agreement between OCSD and the provider of the reverse repurchase agreement. The Master Repurchase Agreement shall be substantially in the form developed by The Bond Market Association. 8.15 Sales of OCSD-owned securities in the secondary market may incur losses in order to improve the risk or return characteristics of the portfolio, to prevent anticipated further erosion of principal, or when trading for securities that result in an expected net economic gain to OCSD. 8.16 If securities owned by the OCSD are downgraded by either Moody's or S&P to a level below the quality required by this Investment Policy, it shall be OCSD's policy to review the credit situation and make a determination as to whether to sell or retain such securities in the portfolio. If a decision is made to retain the downgraded securities in the portfolio, their presence in the portfolio will be monitored and reported monthly to the OCSD General Manager, the Administration Committee and Board of Directors. 9.0 Collateralization: Generally, the value to secure deposits under this Policy shall comply with Section 53652 of the California Government Code. Collateralization will be required for secured time deposits, as more fully described in Section 8.8.1; and repurchase agreements, as more fully described in Section 8.13.1. Collateral will always be held by an independent third-party, as more fully described in Section 10.1. The right of collateral substitution is granted. 10.0 Safekeeping and Custody: 10.1 All securities transactions, including collateral for repurchase agreements, entered into by, or on behalf of OCSD, shall be conducted on a delivery-versus-payment (I)VP) basis. Securities will be held by OCSD's third-party custodian bank, which shall be selected through a competitive process, or that agent's representative, or in the agent's account at the Federal Reserve Bank, or within clearing corporations in the U.S., and evidenced by book entry statements. 11.0 Diversification: OCSD will diversify its investments by security type, issuer, and financial institution in accordance with the following: Page 10 of 13 Return to Mende Rom 11.1 There is no limit on investment in securities issued by or guaranteed by the full faith and credit of the U.S. government. 11.2 No more than 20% of the portfolio may be invested in securities of a single agency of the U.S. government, which does not provide the full faith and credit of the U.S. government. 11.3 No more than 5% of the portfolio may be invested in securities of any one issuer, other than the U.S. government or its agencies. Investment in mutual funds is not governed by this Section 11.3. See Section 11.8 for conditions of purchase of mutual funds. 11.4 No individual holding shall constitute more than 5% of the total debt outstanding of any issuer. 11.5 No more than 40% of the portfolio may be invested in banker's acceptances. 11.6 No more than 15% of the portfolio may be invested in commercial paper, except that 25% of the portfolio may be so invested so long as the average maturity of all commercial paper in the portfolio does not exceed 31 days. 11.7 No more than 30% of the portfolio may be invested in medium-term (corporate) notes. 11.8 No more than 15% of the portfolio may be invested in mutual funds. However, no more than 10% of the District's portfolio may be invested in shares of beneficial interest of any one (1) mutual fund. 11.9 No more than 30% of the portfolio may be invested in negotiable certificates of deposit. 11.10 No more than 10% of the portfolio may be invested in eligible municipal bonds. 11.11 No more than 20% of the Long Term Operating Monies portfolio may be invested in a combination of mortgage-backed securities, CMOs and asset-backed securities. Mortgage-backed securities, CMOs and asset- backed securities may only be purchased by the Districts' external money managers, Pacific Investment Management Company (PIMCO), with prior Board approval (authorized by Board Minute Order, January 22, 1997), and may not be purchased by the District's staff. 11.12 No more than the lesser of 15% of the portfolio or the statutory maximum may be invested in LAIF. 11.13 No more than 15% of the portfolio may be invested in the Orange County Investment Pool. Page 11 of 13 Return to Mende Report 11.14 No more than 20% of the portfolio may be invested in repurchase agreements. 11.15 No more than 5% of the portfolio may be invested in reverse repurchase agreements. 12.0 Maximum Maturities: To the extent possible, OCSD will attempt to match its investments with reasonably anticipated cash flow requirements. The Treasurer shall develop a five-year cash flow forecast, which shall be updated quarterly. Based on this forecast, the Treasurer shall designate, from time-to-time, the amounts to be allocated to the investment portfolio. OCSD monies invested in accordance with this Policy are divided into two (2) categories: 12.1 Liquid Operating Monies. Funds needed for current operating and capital expenditures are known as Liquid Operating Monies. 12.1.1 The maximum final stated maturity of individual securities in the Liquid Operating Monies account portfolio shall be one (1) year from the date of purchase. 12.1.2 The average duration of the Liquid Operating Monies account portfolio shall be recommended by the Treasurer based on the Districts' cash flow requirements, but may never exceed 180 days. 12.2 Long Term Operating Monies. Funds needed for longer term purposes are known as the Long Term Operating Monies. 12.2.1 Except for the purchase of securities by the District's external money manager, PIMCO, the maximum final stated maturity of individual securities in the Long Term Operating Monies account portfolio shall be five (5) years from the date of purchase. PIMCO may purchase any security that is permitted under Section 8.0 of this policy, including those which may have a stated maturity of more than five (5) years from the date of purchase when, in the opinion of PIMCO, such an investment meets the investment objectives of this portfolio and the duration requirements are met below. 12.2.2 The duration of the Long Term Operating Monies account portfolio shall be recommended by the Treasurer based on the Districts' five-year cash flow forecast, but may never exceed 60 months. 12.2.3 The duration of the Long Term Operating Monies account portfolio shall never exceed 120% of the duration as established in accordance with Section 12.2.2. 12.2.4 The duration of the Long Term Operating Monies account portfolio shall never be less than 80% of the duration as established in accordance with Section 12.2.2 Page 12 of 13 Return to Mende Report 13.0 Internal Control: 13.1 The Treasurer shall establish an annual process of independent review by an external auditor. This review will provide internal control by assuring compliance with policies and procedures. The current treasury management procedures are presented in Appendix "B." 14.0 Performance Objectives and Benchmarks: 14.1 Overall objective. The investment portfolio of OCSD shall be designed with the overall objective of obtaining a rate of return throughout budgetary and economic cycles, commensurate with investment risk constraints and reasonably anticipated cash flow needs. 14.2 The Liquid Operating Monies. The investment performance objective for the Liquid Operating Monies shall be to earn a total rate of return over a market cycle which exceeds the return on a market index approved by the Administration Committee, and by the District's Board of Directors, when the duration of the portfolio is established. This market index is more fully described in Board Resolution No. OCSD-00-16 (see Appendix"E"). 14.3 The Long Term Operating Monies. The investment performance objective for the Long Term Operating Monies shall be to earn a total rate of return over a market cycle which exceeds the return on a market index selected by the Administration Committee and approved by the Districts' Board of Directors, when the duration of the portfolio is established. This market index is more fully described in Board Resolution No. OCSD-00-16 (See Appendix "E"). 15.0 Reporting: 15.1 Quarterly investment reports shall be submitted by the Treasurer to the Administration Committee which shall forward the reports to the District's Board of Directors. The quarterly reports shall be submitted to the Administration Committee within 30 days of the end of the month in accordance with California Government Code Sections 53607, 53646, and this Investment Policy. The quarterly reports shall provide clear and concise status information on the District's portfolios at the end of each reporting period, including performance measures using the benchmarks described in Section 14.0 of this Investment Policy. Sample quarterly reports are presented in Appendix "F." These reports shall contain listings of individual securities held at the end of each reporting period, and shall disclose, at a minimum, the following information about the risk characteristics of OCSD's portfolio: 15.1.1 Cost and accurate and complete market value of the portfolio. 15.1.2 Modified duration of the portfolio compared to Benchmark. Page 13 of 13 Return to Mende Report 15.1.3 Dollar change in value of the portfolio for a one-percent (1%) change in interest rates. 15.1.4 Percent of portfolio invested in reverse repurchase agreements, and a schedule which matches the maturity of such reverse repurchase agreements with the cash flows which are available to repay them at maturity. 15.1.5 For the Liquid Operating Monies account only, the percent of portfolio maturing within 90 days. 15.1.6 Average portfolio credit quality. 15.1.7 Percent of portfolio with credit ratings below "A" by any rating agency, and a description of such securities. 15.1.8 State that all investments are in compliance with this policy and the California Government Code, or provide a listing of any transactions or holdings which do not comply with this policy or with the California Government Code. 15.1.9 Time-weighted total rate of return for the portfolio for the prior three months, twelve months, year to date, and since inception compared to the Benchmark returns for the same periods. 15.1.10 State that sufficient funds are available for OCSD to meet its operating expenditure requirements for the next six months, or if not, state the reasons for the shortfall. 15.2 OCSD's Treasurer shall meet quarterly with the Administration Committee to review investment performance, proposed strategies and compliance with this Investment Policy. External investment advisors may be required to attend said meetings at the discretion of the Chairman of the Administration Committee. 16.0 Investment Policy Adoption and Revision: 16.1 The Investment Policy of OCSD shall be reviewed by the Administration Committee and shall be adopted by resolution of the Board of Directors of OCSD. The Policy shall be reviewed on an annual basis in accordance with California Government Code Section 53646, and this Investment Policy, by the Administration Committee, which shall recommend revisions, as appropriate, to the Board of Directors. Any modifications made thereto shall be approved by the Board of Directors. 16.2 The Administration Committee shall serve as the oversight committee for the District's Investment program and shall adopt guidelines for the ongoing review of duration, quality and liquidity of the District's portfolio. Page 14 of 13 Return to ADenda Report APPENDIX "A" SUMMARY OF INVESTMENT AUTHORIZATION INTERNAL AND EXTERNAL MANAGERS SHORT TERM OPERATING FUND INVESTMENT INTERNAL EXTERNAL U.S. Treasuries OK OK Federal Agencies Fixed coupon, fixed mat. OK Mortgage-backed NO NO Commercial paper OK OK Banker's Accept. OK OK Medium Term Notes Fixed coupon, fixed mat.* OK Mutual Funds Money Market Only** Money Market Only Negotiable CDs Fixed coupon, fixed mat.* OK Municipal Bonds OK* NO LAIF OK NO OCIP OK NO CMOs NO NO Asset-backed NO NO Repurchase Agree. OK OK Reverse Repos OK* OK LONG TERM OPERATING PORTFOLIO INVESTMENT INTERNAL EXTERNAL U.S. Treasuries OK OK Federal Agencies Fixed coupon, fixed mat. OK Mortgage-backed NO OK Mutual Funds Money Market Only** OK Negotiable CDs Fixed coupon, fixed mat.* OK Municipal Bonds OK* OK LAIF OK NO OCIP OK NO CMOs NO With Board Approval Asset-backed NO With Board Approval Repurchase Agree. OK OK Reverse Repos OK* OK *With prior approval of the Administration Committee. **Using financial institutions approved by the Administration Committee. H Weptlaetl lO1 a neNdminCommADMINID141JULY1ln a n"iry 130011314 d x Return to Mende Report EXHIBIT "B" FY 2014-15 Performance Monitoring & Reporting Schedule For the Administration Committee The Quarterly Investment and Board of Directors meetings of: Management Program Report to be resented for the period of: July 2014 August Board only) September Aril —June 2014 October November Jul — Set 2014 December January '15 Board only) February Oct— Dec 2014 March April May Jan — March 2015 June EXHIBIT "B" Return W Aaenda Reo., ORANGE COUNTY SANTIATION DISTRICT PERFORMANCE MONITORING R REPORTING SUMMARY FOR THE DISTRICT'S INVESTMENT PROGRAM POLICY REFERENCE PERFORMANCE CHARACTERISTIC REPORTING PARTY* PIMCO MELLON CALLAN 15.1.1 Cost and market value of the portfolio (monthly mark-to-market). M, Q M, Q Q 15.1.2 Modified duration of the portfolio compared to benchmark. M, Q Q 15.1.3 Dollar change in value of the portfolio for a 1%change in interest rate. M, Q Q 15.1.4 Percent of portfolio invested in reverse repurchase agreements, and a schedule which M, Q matches the maturity of such reverse repurchase agreements with the cash flows which are available to repay them at maturity. 15.1.5 For the Liquid Operating Monies account only,the percent of portfolio maturing within 90 M, Q Q days. 15.1.6 Average portfolio credit quality. M, Q Q 15.1.7 Percent of portfolio with credit ratings below "A" by any rating agency, and a description M, Q Q Of such securities. 15.1.8 Listing of any transaction or holdings which do not comply with this policy or with the M, Q California Government Code. 15.1.9 Time-weighted total rate of return for the portfolio for the prior three months,twelve M, Q Q months, year-to-date, and since inception compared to the benchmark returns for the same periods. ADDL* Comparison of portfolio performance to market index benchmark. M, Q Q ADDL** Comparison of Manager's performance to peer group benchmark. Q ADDL** Monitoring of organizational and structural changes of investment management firm. Q ADDL** Audit portfolios for compliance with investment policy guidelines. Q 15.1.10 OCSD will report if sufficient funds are available for it to meet operating expenditure requirements for the next six months, or if not, state the reason for the shortfall. Notes *M = Monthly *Q = Quarterly **ADDL= Monitoring of Additional Performance Characteristics Return to Mende Report RESOLUTION NO. OCSD 14-XX A RESOLUTION OF THE BOARD OF DIRECTORS OF THE ORANGE COUNTY SANITATION DISTRICT, AUTHORIZING THE DISTRICT'S TREASURER TO INVEST AND/OR REINVEST DISTRICT'S FUNDS, AND ADOPTING DISTRICT'S INVESTMENT POLICY STATEMENT AND PERFORMANCE BENCHMARKS; AND REPEALING RESOLUTION NO. OCSD 13-13 WHEREAS, on July 24, 2013, the Board of Directors adopted Resolution No. 13-13, readopting the District's Investment Policy Statement, and establishing specific performance benchmarks and objectives, together with a schedule of frequency of investment performance reports; and WHEREAS, pursuant to California Government Code Section 53607, the Board of Directors may delegate authority to invest and/or reinvest District's funds to the Treasurer for a one-year period; and WHEREAS, pursuant to California Government Code Section 53646, the District is required to review its Investment Policy annually and readopt its Policy at a public meeting, which Policy will establish specific performance benchmarks and objectives, and specific monitoring and reports. NOW, THEREFORE, the Board of Directors of the Orange County Sanitation District, DOES HEREBY RESOLVE, DETERMINE AND ORDER: Section 1: That the authority of the Board of Directors to invest or reinvest District's surplus funds, or to sell or exchange securities so purchased, or to deposit for safekeeping the funds and investments of the Districts with depositories, as provided for in California Government Code Sections 53608 and 53630, is hereby delegated to the District's Treasurer for a one-year period commencing on the date this Resolution is adopted, as authorized by California Government Code Section 53607. OCSD 14-XX-1 Return to Mende Report Section 2: That the Board of Directors hereby adopts the Investment Policy Statement of the Orange County Sanitation District, as set forth in Exhibit "A", attached hereto and incorporated herein by reference. Section 3: That the Board of Directors hereby adopts the following specific performance benchmarks for their two investment funds in accordance with Section 14.0 of the District's Investment Policy: LIQUID OPERATING MONIES: The Short-Term Operating Fund will be compared to the three-month T-Bill rate, and the Callan Active Cash Flow Income Style Group. The Callan Active Cash Flow Income Style Group represents a peer group of managers who operate with a maximum maturity of one year. LONG-TERM OPERATING MONIES: The Long-Term Operating Fund will be compared to the Merrill Lynch Government and Corporate One-to-Five Year Maturity Index and to the Callan Defensive Fixed Income Style Group. Section 4: That the Board of Directors hereby adopts a performance monitoring and reporting schedule, as required by Section 15.0 of the District's Investment Policy, which schedule is attached hereto as Exhibit "B", and incorporated herein by reference. OCSD 14-XX-2 Return to Mende Report Section 5: That Resolution No. OCSD 13-13 is hereby repealed. PASSED AND ADOPTED at regular meeting of the Board of Directors, Orange County Sanitation District held July 23, 2014. Tom Beamish Board Chair ATTEST: Maria E. Ayala Clerk of the Board OCSD 14-XX-3 ADMINISTRATION COMMITTEE r4eeting Date TOBd.of Dir. 07/09/14 07/23/14 AGENDA REPORT Item 3 bar Hem Number 3 Orange County Sanitation District FROM: James D. Herberg, General Manager Originator: Lorenzo Tyner, Director of Finance and Administrative Services SUBJECT: REVENUE REFUNDING CERTIFICATE ANTICIPATION NOTES, SERIES 2014B GENERAL MANAGER'S RECOMMENDATION Authorize the General Manager to issue Revenue Refunding Certificate Anticipation Notes, Series 2014B, as two-year fixed-rate obligations, subject to market conditions, in an amount not to exceed $135.0 million to replace the $129.625 million Revenue Refunding Certificate Anticipation Notes, Series 2013A maturing on October 16, 2014. SUMMARY In March 2006, the Sanitation District issued $200 million of variable rate Certificates of Participation (COP), Series 2006 (2006 COPs). Alternatively, the Sanitation District could have issued debt at an estimated cost of 4.54% on a fixed rate basis in 2006. From inception through August 2008, the average variable rate on the 2006 COPs was 2.95% or 0.22% less than the SIFMA index (weekly market index of tax-exempt variable rate obligations). As the global financial crisis took hold in the late summer of 2008, there was a significant increase in the variable rate borrowing cost of the Sanitation District, including all municipal borrowers, as the 2006 COPs averaged 4.29% (or 1.56% above the SIFMA index) for the period between September 2008 and December 2008. The amount of the increase in variable rate cost above the SIFMA index can be attributed to the weakened financial strength of the bank, DEPFA Bank plc, that was providing liquidity support on the 2006 COPs. In December 2008, the Sanitation District proactively refunded the 2006 COPS with the Refunding COP Series 2008C Certificate Anticipation Notes (2008C CANS) to reduce its exposure to then higher and more volatile variable rate costs. The yield on the 2008C CANs was 0.98% for a one-year period. The issuance of the 2008C CANs allowed the Sanitation District to redeem the 2006 COPS at an all-in cost of less than 1.25% and avoid paying a bank rate of 4.75% which would have been effective starting a month later. Since the 2008C CANs issuance, the Sanitation District completed five additional one-year refinancings at yields at progressively lower yields as summarized below: 2009E $ 165,865,000 0.370% 0.559% 2010B 154,665,000 0.360 0.525 2011B 143,205,000 0.225 0.399 2012C 131,700,000 0.210 0.410 2013A 129,625,000 0.170 0.390 Page 1 of 6 The interest rate on the currently outstanding Revenue Refunding Certificate Anticipation Notes Series 2013A (2013A CANS) was fixed for only one year and the entire $129.625 million plus interest becomes due and payable on October 16, 2014. The Sanitation District is responsible for the total repayment, including interest, of $132.218 million or the Sanitation District could choose to refinance the 2013A CANS. Due to the expected low tax-exempt cost of refinancing CANS and the ability to generate higher taxable earnings on reserves, staff does not recommend the use of $130 million of reserves to repay the 2013A CANS; therefore, there are a number of refinancing options for consideration of the Sanitation District. PRIOR COMMITTEE/BOARD ACTIONS June 2014 — The Board adopted Resolution No. OCSD14-xx, authorizing the execution and delivery by the District of an Installment Purchase Agreement, a Trust Agreement, an Escrow Agreement and a Continuing Disclosure Agreement in connection with the execution and delivery of Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2014A, authorizing the execution and delivery of such Revenue Obligations, evidencing principal in an aggregate amount of not to exceed $225,000,000, approving a Notice of Intention to Sell, authorizing the distribution of an Official Notice Inviting Bids and an Official Statement in connection with the offering and sale of such Revenue Obligations and authorizing the execution of other necessary documents and related actions. ADDITIONAL INFORMATION Financing Options Available to the Sanitation District 1. Refund the Maturing 2013A CANS with Fixed Rate Debt The issuance of long-term fixed rate debt to refund the 2013A CANS will eliminate any future market access risks (ability to issue debt to refinance maturing debt) and interest rate risk (additional costs if rates reset higher or are higher upon a future refinancing). After the issuance of fixed rate debt, the Sanitation District will no longer be exposed to changing market conditions. The issuance of long-term fixed rate debt in the current market would result in an average borrowing yield of approximately 3.70%. Fixed rate debt would also remove the interest rate hedge originally desired by the Sanitation District (in 2006) which was intended to insulate the District from changes in the District's Fluctuating investment portfolio earnings as the variable rates on the 2006 COPS were expected to move in tandem with changes in short-term interest rates. The following is a current market cost summary (subject to changing market conditions) of Option 1. (Fixed Rate Debt) over the next year. 3.650% Assumed Average Fixed Rate 0.021 Costs of Issuance (amortized over life of COPS) 0.031 Underwriter Costs (amortized over life of COPS) 3.701% Fixed Rate Cost Page 2 of 6 2. Refund the Maturing 2013A CANs with Variable Rate Debt Current variable rates for highly-rated California municipal borrowers (such as the District) are extremely low at approximately 0.05% for traditional variable rate debt supported by a commercial bank. However, the availability of bank support continues to be relatively expensive at approximately seven times the cost of current variable rates. The terms and conditions currently demanded by banks are also more onerous than during the period prior to the global financial crisis. Recently, alternative variable rate products have been developed that do not require bank support, but these products are generally used by issuers to diversify among a portfolio containing many different variable rate products, unlike the Sanitation District's single issuance of short-term interest rate exposure (2013A CANs). In addition, there are limited investors for these alternative products. The following is a current market cost comparison (subject to changing market conditions) of traditional variable rate debt versus Option 1. (Fixed Rate Debt) over the next year. Variable% Average Variable Rate 0.354 Bank Liquidity Fee 0.075 Remarketing Fee 0.026 Costs of Issuance (amortized over life of COPS) 0.037 Annual Variable Rate fees (ratings and bank renewal) 0.006 Underwriter Costs (amortized over life of COPs) 0.498% + Variable% (current total of approximately 0.55%) or If compared to Option 1, average break-even variable rate of 3.15% 3. Refund the Maturing 2013A CANs with a New One-Year CANs issue Since the issuance of the 2013A CANs, short-term interest rates have continue to remain low as the current market yield for a one-year CANs is slightly lower than last year's levels and presently about 0.12%. The issuance of refunding CANs will continue to allow the Sanitation District to accrue savings at a rate that is fixed while insulating the District from the possibility of short-term rates increasing over the fixed rate period. The CANs structure will avoid the payment of high fees to liquidity banks and eliminate the risk of interest rates resetting higher from historic low levels during the course of the next year. Although current variable rates are low at 0.05% (see Option 2. above), there is almost no room for rates to go lower. Page 3 of 6 The following is a current market cost summary (subject to changing market conditions) of Option 3. (one-year CANs) over the next year. 0.120% Assumed One-Year Rate 0.220 Costs of Issuance (amortized over one year) 0.008 Underwriter Costs (amortized over one year) 0.347% or 3.35% less than Option 1. (equal to $3.1 million of cash flow savings) A comparison of the one-year CANS refinancing structure to Option 2. above (Variable Rate Debt) shows that future unknown variable rates must be less than zero for variable rate debt to generate a better economic result. 4. Refund the Maturing 2013A CANS with a New Two-Year CANS issue In the current market, the difference between a one-year CAN and a two-year CAN is smaller than in previous years. Last year, when the Sanitation District was considering the refinancing options of the then outstanding Series 2012C CANS, the difference in all-in-costs between one-year CANs and two-year CANs was approximately 0.33% (33 bps (or basis points)). The following is a current market cost summary (subject to changing market conditions) of Option 4. (two-year CANs) over the next year. 0.260% Assumed Two-Year Rate 0.110 Costs of Issuance 0.025 Underwriter Costs 0.395% or 3.31% less than Option 1. (equal to $3.1 million of cash flow savings) A comparison of a two-year CANs refinancing structure to Option 3. above (one-year CANs) shows only a five bps difference in the all-in costs which is much lower than the 33 bps differential last year. A two-year CANs issuance will allow the Sanitation District to lock-in a two-year fixed rate at a cost that is only slightly greater than a one-year CAN. The major risk with any CANs structure occurs if the Sanitation District does not have market access to remarket the CANs at maturity (in 2016 for two-year CANs). However, the Sanitation District (1) has successfully issued one-year CANs in each of the last six years, (2) is a AAA/AAA-rated entity, and (3) holds a substantial amount of reserves that could (if the Board chooses) be used to redeem CANs if market access is not available. Staff intends to build in safeguards to avoid the use of Sanitation District reserves unless absolutely necessary: for example, beginning the process of refinancing well in advance of the maturity date of the CANs [and structuring the two-year CANS with a short optional call right which will allow the Sanitation District to redeem the CANs in advance of the maturity date]. Page 4 of 6 To further reduce interest rate risk (additional costs if rates reset higher or are higher upon a future refinancing) the Sanitation District could reinstate the Accelerated Rate Management (ARM) program with a CANs refinancing debt issuance. Between 2006 and 2012, the ARM program used accrued savings (e.g., 0.41% cost on 2012C CANS) compared to a fixed rate assumption (e.g., fixed rate of 4.54% available in 2006) to reduce the outstanding amount of debt on a yearly basis. As less debt is outstanding, the Sanitation District significantly reduces its interest rate risk (if higher interest rates occur, the negative effect is mitigated as the higher interest cost is calculated on a smaller principal amount). The implementation of the ARM program since the issuance of the 2006 COPS has (1) reduced the outstanding principal by over$70 million and (2) decreased the interest rate risk to the Sanitation District as the break-even rate (the average future interest rate for the remaining debt from the 2006 COPS issuance) is now over 10.8%. The original variable rate structure of the 2006 COPs and the six past CANs refinancings have already saved the District over $35.7 million compared to the alternative of the District issuing fixed rate debt in 2006. However, staff does not believe it is the appropriate time to reinstate the ARM program as the break-even rate is so high that it is extremely unlikely that any future debt costs will negate the already accrued savings. If the Sanitation District refinances the 2013A CANs with two-year CANs at current market conditions and does not reinstate the ARM Program, the break-even rate will still increase to over 12.70% (in 2016). In addition, the Sanitation District is currently earning xx% on its investment portfolio which hedges the short-term rate of the CANs; therefore, the Sanitation District benefits from not using its higher yielding cash to repay principal on lower costing debt. In addition, the ARM program has already reduced the outstanding prinicipal amount by $39 million more than the amount that would have been amortized if the bonds were originally issued as fixed rate bonds. The Sanitation District could also extend beyond two years with a CANs refunding issuance to lock in rates for a longer period of time; however the costs of extending each additional year of 29-37 bps is much greater than the five bps for extending from one to two years. The following table presents the current market results for 3- 5 year CANs periods: e Years Rate 0.580% 0.96% 1.300% Costs of Issuance 0.073 0.063 0.050 Underwriter Costs 0.033 0.038 0.040 Total over next ear : 0.687% 1.060% 1.390% Even as long-term interest rates have been volatile, short-term debt continues to remain low and attractive, especially rates within one and two years. In addition, short-term rates act as a hedge on the Sanitation District's cash reserves. Therefore, staff is recommending Option 4., the refunding of the 2013A CANs with a new two-year CAN that will enable the Sanitation District to lock-in a low rate for two years without (a) encumbering cash reserves; (b) exposing the District to relatively high bank liquidity costs associated with variable rate debt; and, (c) avoiding higher fixed rates which would increase near-term debt costs by approximately $3.1 million per year. Page 5 of 6 Assuming that the staff receives approval to pursue a refinancing, staff will return to the Administration Committee in September with financing documents to complete the refinancing. There is the possibility that interest rates may change before September and, at the time of approval of the financing documents and based on market conditions at that time, staff may recommend a different refinancing term (e.g. one-year CANs). If the Sanitation District pursues Options 1., 3., or 4. (fixed rate options), the refunding CANS can be sold on a competitive basis in order to obtain the lowest financing cost possible. [Staff and consultants will be available to make a brief presentation and provide an overview of the financing schedule at the Administration Committee meeting.] Following is a chart listing the remaining steps to be completed for the issuance of the Revenue Refunding Certificate Anticipation Notes, Series 2014B debt issuance: ➢ Board approval of legal and disclosure documents September ➢ Financing Corporation approval of legal and disclosure documents ➢ Receive ratings from Bond Rating Agencies October ➢ Receive competitive bids ➢ Closing CEQA N/A BUDGET / PURCHASING ORDINANCE COMPLIANCE N/A Page 6 of 6 ADMINISTRATION COMMITTEE Meeting Date TO 12.of Dir. 07/Og/1a 7/23/14 AGENDA REPORT em 4mbe Item Number a Orange County Sanitation District FROM: James Herberg, General Manager Originator: Lorenzo Tyner, Director, Finance and Administrative Services SUBJECT: COMMUNICATION RADIO SYSTEM REPLACEMENT AND UPDATE GENERAL MANAGER'S RECOMMENDATION Authorize use of Ordinance No. OCSD-44, Section 2.03:13. Cooperative Purchases for a blanket order agreement to purchase equipment and services for OCSD's Motorola radio systems, for a total amount not to exceed $250,000 to include all tax and freight. SUMMARY OCSD currently operates a Motorola two-way radio system to communicate with staff in support of the normal and emergency operations of the treatment plants and collection system. The existing Motorola radio system was updated in December 2011 however, and is capable of operating in a digital mode provided all of the handsets are digital capable. Existing "digital-ready" handheld, vehicle radios, and two transmitters operating in analog mode will be programed to digital and approximately 100 handheld radios will be purchased to replace existing analog handheld radios that are not digital capable. After the conversion, current radio reception will be evaluated to address and increase coverage at critical areas of both plants and to mitigate low-to-no reception issues as identified in the SP-145 Facility-wide Safety Assessment study. This authorization will allow OCSD to utilize the County of Orange Cooperative Agreement, No. MA-060-10012594 and procure from accredited vendors and service providers for Motorola. OCSD will use this agreement to procure parts and services. This capital requirement is included as SP-165, Communication Radio System Replacement. PRIOR COMMITTEE/BOARD ACTIONS December—2010: Authorized the General Manager to permanently establish Motorola radio system equipment as OCSD's standard for the licensed, privately operated, mobile radio system; and, Page 1 of 2 Authorized use of Resolution No. OCSD 07-04, Section 3.08: Cooperative Procurement, for purchases of equipment and services of Motorola radio systems, for a total amount not to exceed $250,000, to include all tax and freight. ADDITIONAL INFORMATION In 2010, the Federal Communications Commission (FCC) mandated the conversion of existing systems to technology that will allow more channels to operate in the existing licensed frequency spectrum, otherwise known as "narrowbanding." The previous Motorola radio system was replaced and upgraded by 2012 to comply with this FCC mandate. The majority of the existing components can be reprogrammed to meet the new standards. CEQA N/A BUDGET / PURCHASING ORDINANCE COMPLIANCE This request complies with authority levels of OCSD Ordinance No. OCSD-44. This item has been budgeted under the Capital Improvement Project SP-165. Project contingency funds will not be used for this project. Page 2 of 2 ADMINISTRATION COMMITTEE Meeting Date TOBd.of Dir. 07/09/14 07/23/14 AGENDA REPORT Item Number Item Number s Orange County Sanitation District FROM: James D. Herberg, General Manager Originator: Lorenzo Tyner, Director, Finance and Administrative Services SUBJECT: PURCHASE OF COMPUTER WIRELESS NETWORK PARTS GENERAL MANAGER'S RECOMMENDATION A. Approve a Purchase Order Agreement with New Tech Solutions, the lowest responsive and responsible bidder, for Purchase of Wireless Cisco Parts, Specification No. FE-12-03, for an amount not to exceed $106,142.49, delivered plus tax; and B. Approve a contingency of$5,307.12 (5%). SUMMARY This procurement provides information technology networking equipment required to complete the Plant No. 2 outdoor Wi-Fi access system. This system was designed to provide field staff wireless access to online corporate resources such as CMMS, Maximo, e-mails, and electronic manuals while working in the process areas using portable tablet computers. This purchase is in conjuction with Engineering project FE12-03 (Wi-Fi Installation P2) that will provide the installation of computer wireless network parts in this Specification No. FE-12-03, PRIOR COMMITTEE/BOARD ACTIONS N/A ADDITIONAL INFORMATION This procurement was competitively bid with seven bid packages received. All bid prices include sales tax and freight. The results are as follows: Purchase of Wireless Cisco Parts Bid Date —June 23, 2014 @ 2:00 PM (Pacific) FE-12-03 Bidder Amount of Bid New Tech Solutions $106,142.49 NetExperts, Inc. $109,465.90 Page 1 of 2 Presidio Networked $109,545.18 OM Office Supply Inc. $110,078.80 Aprisa Technology $110,328.82 Micro Trends $126,991.28 E.I. Computer Systems $127,116.64 Staff recommends New Tech Solutions be awarded a purchase order for the Purchase of Cisco Parts as the lowest responsible and responsive bidder. CEQA N/A BUDGET/PURCHASING ORDINANCE COMPLIANCE This request complies with authority levels of the OCSD's Purchasing Ordinance. This item has been budgeted in Capital Improvement Project SP-03 (Strategic Information Architecture). Project contingency funds will be used for this bid. Date of Approval Contract Amount Contingency 7/9/2014 $ 106,142.49 $5,307.12 ATTACHMENT N/A Page 2 of 2 ADMINISTRATION COMMITTEE Meeting fate Toed.of M. 07/09/14 07/23/14 AGENDA REPORT Item 6mbe Item Number 6 Orange County Sanitation District FROM: James D. Herberg, General Manager Originator: Lorenzo Tyner, Director of Finance and Administrative Services SUBJECT: REDUCTION IN LONG-TERM LIABILITIES GENERAL MANAGER'S RECOMMENDATION Direct staff to pay down on the District's unfunded actuarial accrued liability with the Orange County Employee's Retirement System (OCERS) in the amount of$125 million. SUMMARY During the budget development process, staff informed the Board that projected reserves would exceed the amount required by fiscal policy. Additionally, it was determined that the District could prudently use these excess funds to reduce the District's long-term liabilities. As a result, the Adopted FY 2014-15 Budget includes $125 million to reduce its long-term liabilities. The two available options to reduce long-term liabilities include paying down a portion of the District's $195 million unfunded actuarial accrued liability (UAAL) administered by OCERS or paying down the District's $1.2 billion outstanding bonded debt. The District requested OCERS to provide a UAAL contribution rate for every 1 million of additional contributions made against the UAAL. Last month, OCERS informed staff that their actuary had determined that the UAAL rate would be reduced by 0.11% for each $1 million of additional contributions made by the District towards the UAAL. A $125 million pay down on the UAAL would result in a decline of the current UAAL rate by 13.75% (125 X .11%), or from 25.60% to 11.85%. The following compares the two options of reducing long-term liabilities: $125 MILLION EARLY PAYMENT OPTIONS(in millions) Current Status Option 1 Option 2 Payment Categories (No Payment) Pay Down Pay Down OCERS UAAL Debt Debt Service(5%) ($ 6.25) ($ 6.25) $ 0.00 Interest Revenue (2%) $ 2.50 $ 0.00 $ 0.00 Normal (OCERS Non-Unay ($ 6.43) ($ 6.43) ($ 6.43) UAAL Paid to OCERS ($15.85) ($ 7.34) ($15.85) Total Annual Payment ($26.03) ($20.02) ($22.28) Annual Savings I (current vs option) 1 $ 6.02 $ 3.75 Page 1 of 2 Based on the comparison above, paying down the OCERS UAAL by $125 million would yield an annual savings of $6.01 million ($26.03 - $20.02) as opposed to paying down on bonded debt which would yield an annual savings of$3.75 million ($26.03 - $22.28). Therefore, staff recommends making a $125 million payment to OCERS paying and reducing the UAAL. PRIOR COMMITTEE/BOARD ACTIONS N/A BUDGET/PURCHASING ORDINANCE COMPLIANCE This item has been budgeted. ATTACHMENT N/A Page 2 of 2 ADMINISTRATION COMMITTEE Meebnl ting Date TO Bd.of Dir. 0 4 — AGENDA REPORT Item Numbe Item Number Orange County Sanitation District FROM: James D. Herberg, General Manager Originator: Lorenzo Tyner, Director of Finance and Administrative Services SUBJECT: INFORMATIONAL PRESENTATION ON PROCUREMENT PROCESS GENERAL MANAGER'S RECOMMENDATION Information Only. SUMMARY As part of the ongoing Board Member Orientation effort, OCSD staff will provide a general presentation on specific topics that the Board of Directors requested via a survey conducted in October 2013. Each month a different topic will be presented to both the Operations Committee and Administration Committee. This presentation will provide a brief and general overview of the Procurement Process. PRIOR COMMITTEE/BOARD ACTIONS N/A ADDITIONAL INFORMATION The following informational presentations have been provided to both Operations and Administration Committees: • February - OCSD Budget and Finances • March - Water Quality and OCSD's Disinfection Program • April - Community Outreach Program • May- Reserves, Investments and Financial Policies • June - Collections CEQA N/A BUDGET/PURCHASING ORDINANCE COMPLIANCE N/A Page 1 of 1 ORANGE COUNTY SANITATION DISTRICT Agenda Terminology Glossary Glossary of Terms and Abbreviations AQMD Air Quality Management District ASCE American Society of Civil Engineers BOD 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) ICS Incident Command System IERP Integrated Emergency Control Plan 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 GOBS 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 Glossary of Terms and Abbreviations 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. Benthos— The community of organisms, such as sea stars, worms and shrimp, which live on, in, or near the seabed, also know as the benthic zone. 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. Glossary of Terms and Abbreviations Contaminants of Potential Concern (CPC) — Pharmaceuticals, hormones, and other organic wastewater contaminants. Dilution to Threshold (D!f) — the dilution at which the majority of the people detect the odor becomes the DrT 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. NDMA— 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. Glossary of Terms and Abbreviations 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.