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HomeMy WebLinkAbout10-08-2014 Administration Committee Agenda Orange County Sanitation District SANITATION DISTRICT Wednesday, October 8, 2014 Regular Meeting of the 5:30 P.M. Administration CommitteerM 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 Speakers 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 September 10, 2014, Administration Committee Meeting. NON-CONSENT CALENDAR: 2. Recommend to the Board of Directors to: Approve the selection of Chandler Asset Management as the District's External Investment Portfolio Manager and authorize staff to negotiate a professional service agreement. 101OW14 Administration Committee Agenda Page 1 of 2 3. Recommend to the Board of Directors to: Approve a Purchase Order with PLC LTD, the lowest responsive and responsible bidder, for the purchase of Modicon computer equipment, Specification No. E-2014-626, for an amount of$636,579. INFORMATION ITEMS: 4. Informational Presentation on Wastewater Treatment Operations OTHER BUSINESS AND COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY: ADJOURNMENT: The next Administration Committee meeting is scheduled for Wednesday, November 12, 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 office at (714) 593-7130 at least 72 hours prior to the scheduled meeting. Requests must specify the nature of the disability and the type of accommodation requested. Aoenda 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 kloretrDocsd com For any questions on the agenda,Committee members may contact staff at: General Manager James Herberg (714)593-7300 iherbemfrpomd.com Assistant General Manager Bob Ghirelli (714)593-7400 rohirellita)ocsd.com Director of Finance and Lorenzo Tyner (714)593-7550 Itvner(docsd.wm Administrative Services Director of Human Resources Jeff Reed (714)593-7144 ireed(cbocsd.com 10/0e/14 Administration Committee Agenda Page 2 of 2 ITEM NO. 1 MINUTES OF THE REGULAR MEETING OF THE ADMINISTRATION COMMITTEE Orange County Sanitation District Wednesday, September 10, 2014, at 5:30 P.M. A regular meeting of the Administration Committee of the Orange County Sanitation District was held on September 10, 2014, at 5:31 p.m., in the Sanitation District's Administration Building. Director Withers led the Flag Salute. 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 Joe Carchio Lorenzo Tyner, Director of Finance Steven Choi & Administrative Services Tyler Diep Jeff Reed, Director of Human Resources James Ferryman Rob Thompson, Director of Engineering Peter Kim Ed Torres, Director of Operations and Prakash Narain Maintenance Teresa Smith Kelly Lore, Acting Clerk of the Board Tom Beamish, Board Chair Rich Spencer John Nielsen, Board Vice-Chair Mike White Jeff Armstrong COMMITTEE MEMBERS ABSENT: Wes Bauer David Benavides Sam Choi Gene Hernandez Rich Castillon Janet Nguyen Jim Colston Ron Coss Norbert Gaia Al Garcia Riaz Moinuddin Mike Von Winckelmann OTHERS PRESENT: Brad Hogin, General Counsel Steven Center, Callan Investments PUBLIC COMMENTS: None. 09/10/2014 Administration Committee Minutes Page 1 of 6 REPORT OF COMMITTEE CHAIR: Committee Chair Reese did not provide a report. REPORT OF GENERAL MANAGER: General Manager, Jim Herberg introduced Director of Engineering, Rob Thompson who updated the Committee on the Newport Beach Force Main project and the construction outreach efforts in place. Director Teresa Smith arrived at 5:32 p.m. 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 to: Approve Minutes of the July 9, 2014 Administration Committee Meeting. AYES: Beamish, Carchio, Choi, Diep, Ferryman, Kim, Narain, Nielsen, Reese, Smith and Withers NOES: None ABSTENTIONS: None ABSENT: Benavides, Hernandez and Nguyen 2. MOVED, SECONDED, AND DULY CARRIED to: Recommend to the Board of Directors to: Approve payment in an amount up to $579,000 to the State Water Resources Control Board for annual permit fees for the ocean discharge permit. AYES: Beamish, Carchio, Choi, Diep, Ferryman, Kim, Narain, Nielsen, Reese, Smith and Withers NOES: None ABSTENTIONS: None ABSENT: Benavides, Hernandez and Nguyen 09/10/2014 Administration Committee Minutes Page 2 d 6 3. MOVED, SECONDED, AND DULY CARRIED to: Recommend to the Board of Directors to: Receive and file report of reimbursements to Board Members and Staff per Government Code 53065.5 for the period of July 1, 2013 through June 30, 2014. AYES: Beamish, Carchio, Choi, Diep, Ferryman, Kim, Narain, Nielsen, Reese, Smith and Withers NOES: None ABSTENTIONS: None ABSENT: Benavides, Hernandez and Nguyen 4. MOVED, SECONDED, AND DULY CARRIED to: Recommend to the Board of Directors to: Approve a Purchase Order with PLC LTD, the lowest responsive and responsible bidder, for the purchase of Modicon computer equipment, Specification No. E-2014-626, for an amount of$636,579. AYES: Beamish, Carchio, Choi, Diep, Ferryman, Kim, Narain, Nielsen, Reese, Smith and Withers NOES: None ABSTENTIONS: None ABSENT: Benavides, Hernandez and Nguyen 5. MOVED, SECONDED, AND DULY CARRIED to: Recommend to the Board of Directors to: A. Adopt Resolution No. OCSD14-XX, authorizing the execution and delivery by the Sanitation District of an Installment Purchase Agreement, a Trust Agreement and a Continuing Disclosure Agreement in connection with the execution and delivery of Orange County Sanitation District Revenue Refunding Certificate Anticipation Notes, Series 2014B, authorizing the execution and delivery of such Notes evidencing principal in an aggregate amount of not to exceed $135,000,000, 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 Notes and authorizing the execution of necessary documents and related actions; and 09/10/2014 Administration Committee Minutes Page 3 of 6 B. That the Orange County Sanitation District Financing Corporation approve the documents, supporting and authorizing the Notes in an aggregate amount not to exceed $135,000,000. AYES: Beamish, Carchio, Choi, Diep, Ferryman, Kim, Narain, Nielsen, Reese, Smith and Withers NOES: None ABSTENTIONS: None ABSENT: Benavides, Hernandez and Nguyen NON-CONSENT CALENDAR: Lorenzo Tyner, Director of Finance and Administrative Services, briefly explained the necessity of this item. An alternate motion and a copy of the draft Amendment No. 1 was provided by staff and presented in hard copy to the Committee and made available to the public. 6. MOVED, SECONDED, AND DULY CARRIED to: Recommend to the Board of Directors to: Approve an nGrease to the Service Agreement with enn :tas Security Services fn.the nn.:nd of L.L. 9 2014 4Wn..nh I..ne 30 2015 Fn. nn addltiennl Amount ni A. Approve Amendment No. 1, an increase to the Service Agreement with Securitas Security Services USA, Inc. for Plant 1 and Plant 2 Security Services Specification No. S-201048, for the period of July 1, 2014 through June 30, 2015 for an additional amount of $388,002, increasing the total annual amount not to exceed $772,759; and B. Approve the increase under A. above for the fourth and final optional renewal period of July 1, 2015 through June 30, 2016; and C. Approve a 10% contingency ($77,275). AYES: Beamish, Carchio, Choi, Diep, Ferryman, Kim, Narain, Nielsen, Reese, Smith and Withers NOES: None ABSTENTIONS: None ABSENT: Benavides, Hernandez and Nguyen 09/10/2014 Administration Committee Minutes Page 4 d 6 Mr. Tyner, provided a brief presentation and PowerPoint to the Committee. He introduced Steven Center from Callen Associates, the district's investment manager. They both responded to several questions from the Committee regarding PIMCO including; Net fees, Composite numbers, reduction of fees, above/below benchmarks, loss of revenue and their performance in the last two quarters. Mr. Center assured the Committee that PIMCO as a whole is managing more money than any other investment manager and pointed out the various differences between PIMCO and Chandler. He was further asked if the portfolio could be split. Discussion ensued as to the administrative challenges of a split, transaction costs, liquidation costs; competitiveness, diversification, control over funds, and investment policies. The Committee asked staff for more information regarding co-management of funds, fee structures and possible elimination of basis points. 7. MOVED, SECONDED, AND DULY CARRIED to: n the Ill.fnisVs F. PFRAI C)sNG. i I nnnnn. and suthAF07A staff is n Ghats a ".f966* . d69P�'Ge agreement. Continue the Item to the next meeting. AYES: Beamish, Carchio, Choi, Diep, Ferryman, Kim, Narain, Nielsen, Reese, Smith and Withers NOES: None ABSTENTIONS: None ABSENT: Benavides, Hernandez and Nguyen Director Choi and Director Withers left the meeting 6:16 p.m. General Counsel Brad Hogin, provided a brief explanation and answered questions and concerns regarding the Levine Act and the payment process of claims. Director Narain left the meeting at 6:29 p.m. 8. MOVED, SECONDED, AND DULY CARRIED to: 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 Establishing the Policies and Practices for the Payment of Warrants and Demands." 09/10/2014 Administration Committee Minutes Page 5 of 6 AYES: Beamish, Carchio, Ferryman, Nielsen, Reese and Smith NOES: None ABSTENTIONS: Diep and Kim ABSENT: Benavides, Choi, Hernandez, Narain, Nguyen and Withers INFORMATION ITEMS: 9. Cessation of Disinfection of Ocean Discharge. Ron Coss, Environmental Lab and OM Manager provided the Committee an informative PowerPoint presentation regarding the Cessation of Disinfection OTHER BUSINESS AND COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY: None. ADJOURNMENT: Committee Chair Reese declared the meeting adjourned at 6:43 p.m., to the next regularly scheduled meeting of October 8, 2014. Submitted by: Kelly A. Lore Acting Clerk of the Board 09/10/2014 Administration Committee Minutes Page 6 of 6 ADMINISTRATION COMMITTEE Meeting Dare TOBA.Of Dir. 1 0 /0 e/14 to/zz/t4 AGENDA REPORT Item Number Item Number z Orange County Sanitation District FROM: James D. Herberg, General Manager Originator: Lorenzo Tyner, Director of Finance and Administrative Services SUBJECT: SELECTION OF DISTRICT'S EXTERNAL INVESTMENT PORTFOLIO MANAGER GENERAL MANAGER'S RECOMMENDATION Approve the selection of Chandler Asset Management as the District's External Investment Portfolio Manager and authorize staff to negotiate a professional service agreement. SUMMARY The District has completed a search for an investment manager to manage the District's short-term and long-term investment portfolios with a combined total of approximately $520 million as of August 1, 2014. A panel consisting of three staff members and the District's investment advisor, Callan Associates evaluated candidates that were screened from a pool of 300 firms providing investment services. Six firms received more detailed analysis with the four top-rated firms receiving interviews. Staff had previously narrowed the field to two firms from which to choose, Pacific Investment Management Company (PIMCO) and Chandler Asset Management. Staff initially recommended PIMCO as they exceeded the benchmarks the last three, five, and ten year periods, and outperformed representative retums that the other candidates provided. However, PIMCO's most recent two-year performance has declined. Also, significant management reorganizations have occurred resulting in the appearance of firm instability and negative publicity, criteria noted in the selection process. Conversely, Chandler's recent performance has been good and the firm continues to demonstrate stability. Given these factors, staff recommends the selection of Chandler as its investment manager. With the Board's approval, staff will proceed with the transfer of investment authority of District assets from PIMCO to Chandler Asset Management. Page 1 of 5 PRIOR COMMITTEE/BOARD ACTIONS September 2014 The Administration Committee continued the selection of the District's Investment Manager February 2014 — The Administration Committee approved a Request for Proposal for Investment Management. June 1995— The Joint Boards of Directors selected PIMCO as the District's external investment portfolio manager. ADDITIONAL INFORMATION The District has utilized PIMCO to manage the District's investment portfolio since June 1995. Services include making investment decisions, completing investment transactions, and reporting investment results in accordance with the California State Government Code and the District's Investment Policy. As the Sanitation District has used the same investment manager for several years, the Administration Committee deemed it 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 proposal process for these services. The District selected the investment management search services of its current investment advisor, Callan Associates, to assist with the search and selection of the District's investment manager. Over the past five years ending calendar year 2013, Callan has conducted over 1,400 searches representing more than $200 billion. Callan's standard search process uses their proprietary investment manager database as the starting universe, which includes over 300 firms that manage fixed income products and over 1,400 fixed income products. They believe their database is very robust and includes nearly every institutionally viable investment manager and their products. The process began with the creation and approval of a candidate profile. The candidate profile is essentially a job description that lists the preferred and required attributes of the "ideal" manager for each assignment and provides written documentation of the District's fiduciary manager selection process. Callan's Global Manager Research group ("GMR") uses the candidate profile to screen their manager database and identify investment firms that meet the District's stated priorities and objectives. These screens take into consideration numerous quantitative factors that include performance, volatility, assets under management, and risk adjusted returns. Screens for performance are conducted using multiple time period and statistical analysis to identify those managers with good, consistent historical performance. Multiple time periods and market cycles are used to identify consistency of returns and avoid performance bias. Page 2 of 5 Qualitative screening further reduces the initial list of candidates that pass the quantitative screens. Several of the qualitative factors considered include manager type, organizational history, depth and experience of investment personnel, investment process and style, client servicing capabilities, and resource allocation. Based upon approximately 1,500 manager visits conducted annually within Callan offices and approximately 150 on-site visits every 12 months in the managers' offices, Callan applied in-depth research to formulate a unique list of investment managers specifically selected for the District. The result of this step was to narrow the universe to 10 — 12 qualified semi-finalists for further review by Callan. The next step in the search was a fiduciary review of the search process and semi- finalist candidates by Callan's Manager Search Committee ("Committee'), an oversight body that is comprised of senior consultants within the firm. The consultants that sit on the Committee are responsible for approximately 100 of their ongoing clients and bring seasoned consulting experience and knowledge of the investment managers to the discussion. The Committee meets weekly via conference call to review every search that is undertaken. The Committee is responsible for ensuring that each search meets the specified criteria outlined by the client and for collectively selecting the most appropriate candidates to be presented to the client. Following the Committee meeting, a formal "Client Book" was created. The Client Book contains detailed information on six candidates. District financial management staff and Callan Associates narrowed this list and interviewed the following four firms: Firm Annual All-in Fees (assuming $490M Portfolio) Chandler Asset Management 04.8 basis points or$235,200 J.P. Morgan Asset Management 11.0 basis points or$539,000 PFM Asset Management 07.0 basis points or$343,000 PIMCO 15.0 basis points or$735,000 (when producing +15.0 basis points above the index); 10.0 basis points or$490,000 when producing less than +15 basis pts above the index. Additionally, the Board requested information regarding proposed fees if the District's portfolio was bifurcated, as shown below. However, the staff recommendation is to select Chandler to manage all of the District's investments. SCENARIO 1: $250 million in Gov/Credit Assets Under Management Annual Asset Management Fee Chandler Assets PIMCO First$100 M 6 basis points 15 basis points Next$150 M 5 basis points 15 basis points Page 3 of 5 SCENARIO 2: $100 million in the Cash Strategy Assets Under Management Annual Asset Management Fee Chandler Assets PIMCO All Assets 8 basis points 15 basis points SCENARIO 3: $350 million Mandate with $250 million in Gov/Credit and $100 million in the Cash Strategy Assets Under Management Annual Asset Management Fee Chandler Assets PIMCO First$100 M 6 basis points 15 basis points Next$150 M 5 basis points 15 basis points Next$100 M 4 basis points 15 basis points SCENARIO 4: $600 million Mandate with $500 million in Gov/Credit and $100 million in the Cash Strategy Assets Under Management Annual Asset Management Fee Chandler Assets PIMCO First$100 M (Chandler); First $400 M (PIMCO) 6 basis points 14.5 basis points Next$150 M (Chandler) 5 basis points Next$250 M (Chandler); Next$300 M (PIMCO) 4 basis points 12.5 basis points Assets in Excess of$500 M (Chandler) 3 basis points Assets in Excess of$700 M (PIMCO) 10.0 basis points Note that PIMCO has offered an overall temporary reduction in their fees until (1) their performance improves and (2)the Fed Funds rate reaches 2.0 percent, as follows: 1. Fees will be reduced to 10 bps flat until performance recovers as defined in PIMCO'S original proposal, and will apply at any asset level. 2. Once performance recovers as described in PIMCO'S original proposal, a second temporary fee reduction is being offered, in recognition of the current low-yield environment, that would remain in place until the Fed Funds rate reaches 2.00%: 1'$200mm @ 12.5 bps Thereafter @ 10 bps This schedule would apply regardless of the choice between the two current strategies — 1-5 yr Gov/Corp or 3m TBill — and all OCSD assets would be aggregated in applying to the scaled schedule in the event assets are split among these two strategies. Page 4 of 5 BUDGET/PURCHASING ORDINANCE COMPLIANCE N/A ATTACHMENTS The following attachment(s) are included in hard copy and may be viewed on-line at the OCSD website (www.ocsd.coml with the complete agenda package: • Orange County Sanitation District Fixed Income Interview Finalists Summary Report from the District's Investment Advisor, Callan Associates • Investment Manager Candidate Profile Page 5 of 5 Return to Agenda Rem Callan Associates Inc. Callan 1880 Wynkoop Btraet suite 950 Main 303.861.1900 Denver,CO 80202 Fex 303.832.8230 wrvw.cellan.com Memorandum To: Mike White, Bob Gaggle&Lorenzo Tyner From: Gordis Weightman Date: August 14,2014 Subject: Orange County Sanitation District Fixed Income Interview Finalists Summary On August 12, 2014 four investment managers presented to District Staff for a 1-5 Year Government/Corporate Mandate and short term cash portfolio. The four finalist candidates were the result of an extensive evaluation of viable investment managers and products believed to be suitable to manage assets for the District. After the interview process, two investment managers are being advanced to the Board for consideration. The two managers have different philosophies on how to run money for the District and include the incumbent manager, Pacific Investment Management Company, and Chandler Asset Management. The primary investment objective stated in the District's investment policy statement is capital preservation and both PIMCO and Chandler propose strategies to meet this goal. Pacific Investment Management Company PIMCO is a large investment management firm with nearly $2.0 trillion in assets under management. They have managed assets for the District since September of 1995 and over that period exceeded the return of their respective benchmarks. PIMCO uses a total return approach to investment management with the objective of beating their benchmark with a reasonable amount of volatility. Their greater emphasis on adding alpha can result in periods of relative underpertormance similar to what was seen in 2013. PIMCO's time horizon to preserve capital for the District is longer-term in nature and due to this the possibility of underperforming their stated objectives during a shorter, 12-month period is higher than the other finalist candidates interviewed. PIMCO has an annual secular and cyclical forum where they determine broad outlooks on macro indicators and fixed income markets. This forum is particularly important because it drives the underlying positioning of the District's portfolio. The result is, based on the outcome of the forum and subject to the District's investment guidelines, the sector exposure of the District's portfolio may change meaningfully. PIMCO makes these sector changes based on their total return philosophy and realizes that in any one year period the portfolio may trail the benchmark because they have a longer time horizon. Chandler Asset Management Chandler is a boutique investment management firm that has $7.9 billion in assets under management with a large focus on short duration fixed income strategies. Their investment strategy is focused on four key elements: 1. Portfolio duration—drives the majority of return overtime.Tends to be similar to the benchmark 2. Sector Allocation—determine relative attractiveness of sectors to help position client portfolios Return to Aaenda Report Callan 3. Term structure—determine attractive points on the yield curve 4. Security selection—buying undervalued high quality bonds Chandler has several Committees that oversee their four elements and have experienced portfolio managers who have been working at Chandler within the context of this investment management process. The result is a high quality, diversified portfolio that seeks to outperform the index in negative or low returning fixed income markets. One could argue that Chandler needs down markets in order to outperform the index due to their focus on protecting capital. In a strong fixed income market, Chandler is often challenged to keep up with the benchmark. Chandler Asset Management is 100% employee-owned. The following five employees are owners of the firm: Kay Chandler, President and Founder-68% Martin Cassell, CEO and Chief Investment Officer-25% Jayson Schmitt, Senior Vice President, Portfolio Manager-3% Ted Piorkowski, Senior Vice President, Portfolio Manager-2% Nicole Dragoo, COO and Chief Compliance Officer-2% Kay Chandler, Founder and primary shareholder, continues to be actively involved in firm management and strategic planning. Investment management has been transitioned to Martin Cassell, CEO and Chief Investment Officer, and his team. Mr. Cassell took over the role of CEO in 2008. So far, ownership has been offered to select key employees, a process Chandler stated they fully expect to continue and expand in the future. They are currently exploring means of transitioning Ms. Chandler's ownership to a minority position and increase employee ownership throughout the firm over the next few years. Callan is comfortable with Chandlers ownership structure and importantly their stated goal to remain employee owned and transition ownership to other key employees at the firm. Conclusion The decision to select PIMCO or Chandler is based upon the time horizon to protect capital. PIMCO focuses on longer term results and Chandler wants to protect capital from year-to-year. To protect capital over 12-month periods, Chandler will sacrifice upside potential over the longer term and it is expected that PIMCO would outperform Chandler over longer time periods. Investment management fees are a consideration with Chandler offering a 4.8 bps asset based fee, the lowest of finalist candidates. PIMCO has also offered a reduced fee schedule of 10 bps, which is lower than the 15 bps currently paid to PIMCO. The 10 bps has a finite fife though and will increase closer to the 15 bps range as performance improves. Performance track records of both fines have exceeded the stated benchmark after fees. 2 Return to Mende Report Orange County Sanitation District Callan U.S. 1.5 Year Government/Credit & Short Term Money Market Candidate Profile June 2014 Manager Orientation: The Orange County Sanitation District ("OCSD") is seeking one manager to run two strategies: a "Long Tenn Operating Fund" benchmarked to the Merrill Lynch 1-5 year Government/Corporate index and a "Liquid Operating Money" portfolio investing in cash and cash like securities. Manager Type: Only qualified investment counselors or organizations registered under the Investment Advisors Act of 1940 will be considered. This includes investment counselors and investment counseling subsidiaries of banks, brokerage houses and insurance companies. The prospective manager shall be deemed a fiduciary by OCSD with respect to services rendered. Investment Vehicle: Separate Account Investment Style: Candidate firms should have expertise in managing portfolios in short duration U.S. fixed income. The benchmark will be the Merrill Lynch 1-5 year GovernmenUCorporate Index for the Long Term Operating Fund and the Citigroup 3-month Treasury Bill for the Liquid Operating Money. The proposed portfolio will have risk and return characteristics similar to the benchmark. Each portfolio will be governed by the investment guidelines in OCSD's investment policy statement. In-house Research In-house research capability is preferred although limited outsourcing is Capability: acceptable. Track Record: Candidate firms must have a minimum five-year track record in subject product. Assets Under Firms must have a minimum of $3 billion under management in fixed income Management: assets and at least $1.5 billion in the strategies considered, including separate accounts, commingled funds and mutual funds. Size of Professional Firm must have a minimum of three investment professionals dedicated to the Staff: management of fixed income portfolios. Years Experience in It is essential that candidates exhibit organizational stability and have Managing: compensation and ownership programs that provide reasonable assurance of their ability to retain key investment professionals. Key members of the team should have been managing portfolios in this style for at least five years and have at least three years tenure at the candidate firm. Experience gained at another firm is permissible as long as the track record is directly attributable to the investment team. Geographic Location: No restrictions. Page 1 of 3 Return to Mende Report Orange County Sanitation District Callan U.S. 1-5 Year Government/Credit& Short Term Money Market Candidate Profile June 2014 Involvement with Each case will be judged on its individual merits, but obvious conflicts of other businesses: interest must be avoided. The organization must have a focus on investment management. Full disclosure of any other business is required. Historic Performance Historical performance criteria will be scored based on the following: Criteria: Long-Term Operating Fund • Cumulative 4, 5, and 7 year data relative to the Merrill Lynch 1-5 Government/Corporate index and the Callan Defensive Fixed Income Style Group. • Rolling three-year periods based on quarterly data compared to the Merrill Lynch 1-5 Government/Corporate index and the Callan Defensive Fixed Income Style Group. Liquid Operating Money • Cumulative 4, 5, and 7 year data relative to the Citigroup 3-month Treasury Bill index and the Callan Money Market Funds Database Group. • Rolling three-year periods based on quarterly data compared to the Citigroup 3-month Treasury Bill index and the Callan Money Market Funds Database Group. Performance will be evaluated relative to each criterion for each period. There will be a maximum of 40 data points possible (17 rolling three-year periods and 3 other cumulative periods and two benchmarks for each period). Risk: Returns generated by the portfolio will be evaluated in light of the portfolio risk. Risk will be evaluated relative to the benchmark and peer group through quantitative measures such as Sharpe Ratio, Information Ratio, Standard Deviation, Tracking Error, Correlation, and R-Squared. Page 2 of 3 Return to Mende Report Orange County Sanitation District Callan U.S. 1-5 Year Government/Credit& Short Term Money Market Candidate Profile June 2014 Qualities specifically Positive risk-adjusted returns sought: Low turnover of personnel Well diversified portfolios Attentive, investment-knowledgeable client service personnel Ability to build, implement, and monitor a portfolio within client guidelines Qualities to be Firms with current negative publicity avoided: Significant performance attributable to short periods of excess return Excessive recent growth in assets Concentrated portfolio structures Investment Mgmt Should be competitive. Fees: Client Request: OCSD has asked that PIMCO be considered in this search. PREPARED JUNE 18, 2014 GORDON WEIGHTMAN Page 3 of 3 ADMINISTRATION COMMITTEE Meeting Dare TOBA.Of Dir. 1 0 /0 8114 to/zz/t4 AGENDA REPORT Item Number Item Number 3 Orange County Sanitation District FROM: James D. Herberg, General Manager Originator: Lorenzo Tyner, Director of Finance and Administrative Services SUBJECT: PURCHASE OF COMPUTER EQUIPMENT GENERAL MANAGER'S RECOMMENDATION Approve a Purchase Order with PLC LTD, the lowest responsive and responsible bidder, for the purchase of Modicon computer equipment, Specification No. E-2014-626, for an amount of$636,579. SUMMARY Since 1994, the Orange County Sanitation District (OCSD), as part of an effort to automate and efficiently operate the treatment and collection processes, has standardized the use of Modicon Quantum programmable logic controllers (controllers) as an integral part of the supervisory control and data acquisition systems. These controllers are used throughout the facilities to control and monitor treatment systems, pumps, valves and process equipment within the treatment plants and outlying pump stations. Approximately 180 controller modules are installed throughout the facilities. Schneider Electric, the parent company of the Modicon Quantum line of controllers, has recently announced an end of life date for these controllers, tentatively scheduled for mid-2015. Given the criticality of these controllers and the large quantities of software developed on these controllers for all the CIP projects over the last eighteen years, staff will increase the current warehouse inventory by purchasing additional Modicon Quantum controllers to stock and serve as replacements to ensure reliability of the treatment processes are always running. The controllers will also be used for Project No. P2-92-Sludge Dewatering and Odor Control at Plant 2. Staff has started the process of researching and developing standards and a several year migration path forward to service and replace these controllers with newer models. Two types of components are impacted by the recently announced end of life date by Schneider Electric, the programmable logic controller and associated hot stand by module. Page 1 of 3 This procurement was competitively bid with six bid packages received. PLC provided the lowest responsive and responsible bid, approximately $85K less than the next lowest bid. The responsive bids and the bid amounts are listed below. Purchase of Modican Computer Equipment Bid Date —August 14, 2014 @ 2:00 PM (Pacific) E-2014-626 Bidder Amount of Bid Curley Wholesale Electric, Inc. $736,631.77 Graybar Electric Company Inc. $720,991.80 Royal Wholesale Santa Ana $728,751.60 B&K Electric Wholesale $730,727.95 George T. Hall Co., Inc. $755,390.22 PLC LTD $636,579.00 PRIOR COMMITTEE/BOARD ACTIONS September - 1994: All Districts approved the acquisition and use of standardized Programmable Logic Computers manufactured by Modicon, for use throughout the treatment plant and collection system facilities for computerized automation. ADDITIONAL INFORMATION During the September Board meeting, the Board had questions regarding this procurement and requested additional information regarding the need for the components and any warranty requirements. See below: 1) Rationale for purchasing components and the quantities Currently, there are 180 controllers installed within the treatment plants and pump stations that control critical treatment plant processes and equipment. Some near-term CIP projects will add to this count. These controllers are crucial to keeping the plant processes up and online with as little as down-time as possible. Currently, the District maintains small quantities of spare controllers. However, as a result of the controller product line being discontinued in early 2015, it is necessary to maintain a larger number of spares to mitigate the risk of the product availability in and installations in new projects. Maintaining spare controller modules will, allow staff to mitigate any future risk and allow for the expeditious replacement (less than an hour). Normally, these components have been very robust but do fail due mostly to unanticipated electrical system power blips and transients that damage the modules. Based on past experience staff is anticipating a two percent failure rate on these components. The increased warehoused quantities will accommodate approximately 7-8 years of spare capacity. Staff has started the process of researching and developing new software for the replacement of these components and a several year migration path forward to replace these controllers with newer models. Page 2 of 3 Additionally, a number of these components (50%) will be slated for use by the P2-92 project (Sludge Dewatering and Odor Control at Plant 2) as the design for this project has been completed based on these controllers and contractor bids are scheduled to be received in October 2014. 2) Warranty Requirements As stated in the Notice Inviting Bids, the District requires that the parts be warranted. Bidders may include a warranty by which any defective part could be returned during the warranty period and directly replaced. The successful bidder provided a warranty whereby any defective part could be directly replaced, repaired or returned to the manufacturer. These are not gray market parts, but component directly from the manufacturers supply chain. Staff will test all the components upon receipt to ensure that the devices are functioning properly prior to warehousing the components. If any are found to be defective during the warranty period, they will be returned and replaced by the vendor prior to warehousing. As all bidders provided a mechanism for warranting the parts, all were considered responsive and eligible for consideration. The successful low bidder's warranty has been reviewed by staff and appears to be in accordance to specification requirements. 3) Bidder Protests Although a representative from the unsuccessful bidders spoke at the Board meeting and distributing a letter of concern, there were no protests filed during the prescribed protest period. There was a representation that the successful bidder was not a real company and could not guarantee its components. However, the District has purchased parts from this bidder in the past without issue. Additionally, the District has vetted this procurement and the bidder and found no irregularities or advantages given to any bidder. Staff believes that, as stated in their bid, any part that does not meet OCSD specification or does not pass initial tests will be replaced by the successful bidder. CEQA N/A BUDGET/PURCHASING ORDINANCE COMPLIANCE This request complies with authority levels of the Sanitation District's Purchasing Ordinance. About 48 percent of the budget will be charged to P2-92 (Sludge Dewatering and Odor Control at Plant 2) and the remainder identified as inventory items. ATTACHMENT N/A Page 3 of 3 ADMINISTRATION COMMITTEE Meeting Dare To ad.of Dir. 10,08,14 -- AGENDA REPORT Item Number Item Number a Orange County Sanitation District FROM: James D. Herberg, General Manager Originator: Ed Torres, Director of Operations and Maintenance SUBJECT: INFORMATIONAL PRESENTATION ON WASTEWATER TREATMENT OPERATIONS 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 general overview of the wastewater treatment operations at the Sanitation Districts two treatment facilities. PRIOR COMMITTEE/BOARD ACTIONS N/A ADDITIONAL INFORMATION N/A CEQA N/A BUDGET/PURCHASING ORDINANCE COMPLIANCE N/A ATTACHMENT: The following attachment(s) are included in hard copy and may also be viewed on-line at the OCSD website(www.ocsd.coml with the complete agenda package and attachments: 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.