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.
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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
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AGENDA REPORT Item Number Item Number
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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.