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HomeMy WebLinkAbout02-09-2011 Administration Committee Agenda 2/9/11 Administration Committee Agenda Page 1 of 3 Orange County Sanitation District Regular Meeting of the Administration Committee Wednesday, February 9, 2011 5:30 P.M. Administration Building Board Room 10844 Ellis Avenue Fountain Valley, CA (714) 593-7130 AGENDA PLEDGE OF ALLEGIANCE: DECLARATION OF QUORUM: PUBLIC COMMENTS: If you wish to speak, please complete a Speaker’s Form and give it to the Clerk of the Board. Speakers are requested to limit comments to three minutes. REPORTS: The Committee Chair and the General Manager may present verbal reports on miscellaneous matters of general interest to the Committee Members. These reports are for information only and require no action by the Committee. REPORT OF DIRECTOR OF FINANCE AND ADMINISTRATIVE SERVICES: A. Information Technology Division Update. CONSENT CALENDAR: 1. Approve Minutes of the December 8, 2010, Administration Committee meeting. ACTION ITEMS: Recommend to the Board of Directors to: 2. Approve the Budget Assumptions to be used for the presentation of the Fiscal Year (FY 2011-12) budget update. 2/9/11 Administration Committee Agenda Page 2 of 3 CLOSED SESSION: During the course of conducting the business set forth on this agenda as a regular meeting of the Committee, the Chair may convene the Committee in closed session to consider matters of pending real estate negotiations, pending or potential litigation, or personnel matters, pursuant to Government Code Sections 54956.8, 54956.9, 54957 or 54957.6, as noted Reports relating to (a) purchase and sale of real property; (b) matters of pending or potential litigation; (c) employee actions or negotiations with employee representatives; or which are exempt from public disclosure under the California Public Records Act, may be reviewed by the Committee during a permitted closed session and are not available for public inspection. At such time as final actions are taken by the Committee on any of these subjects, the minutes will reflect all required disclosures of information. Convene in closed session. (1) CONFER WITH DISTRICT NEGOTIATORS (Government Code Section 54954.5(f)) · Agency Designated Representatives: James D. Ruth, General Manager; Robert Ghirelli, Assistant General Manager; Jim Herberg, Assistant General Manager, Jeff Reed, Director of Human Resources; and, Richard Spencer, Human Resources Supervisor. · Employee Organizations: International Union of Operating Engineers, Local 501 and Orange County Employees Association (OCEA) Reconvene in regular session. Consideration of action, if any, on matters considered in closed session. OTHER BUSINESS AND COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY: ADJOURNMENT The next Administration Committee meeting is scheduled for Wednesday, March 9, 2011, at 5:30 p.m. 2/9/11 Administration Committee Agenda Page 3 of 3 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. Agenda Posting: In accordance with the requirements of California Government Code Section 54954.2, this agenda has been posted outside the main gate of the Sanitation District’s Administration Building located at 10844 Ellis Avenue, Fountain Valley, California, not less than 72 hours prior to the meeting date and time above. All public records relating to each agenda item, including any public records distributed less than 72 hours prior to the meeting to all, or a m ajority 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. Donna N. Terrones, Clerk of the Board: (714) 593-7130 dterrones@ocsd.com Page 1 of 9 ADMINISTRATION COMMITTEE Meeting Date 02/09/11 To Bd. of Dir. 02/23/11 AGENDA REPORT Item Number 2 Item Number Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Lorenzo Tyner, Director of Finance & Administrative Services SUBJECT: Consideration of Budget Assumptions and Budget Calendar for Preparation of the FY 2011-12 Budget Update. GENERAL MANAGER'S RECOMMENDATION Approve the FY 2011-12 budget assumptions and direct staff to incorporate these parameters in preparing the FY 2011-12 budget update. SUMMARY For the budget update process, the Administration Committee establishes the Budget Assumptions and approves the Budget Calendar. Staff will make a brief presentation at the Committee meeting. PRIOR COMMITTEE/BOARD ACTIONS None. ADDITIONAL INFORMATION Currently, there are no proposed changes to the District Fiscal Policy. The Fiscal Policy is published in the FY 2010-11 and 2011-12 Budget document (Section 3, Pages 1-8), and is available on the Sanitation District’s website. CEQA N/A BUDGET / DELEGATION OF AUTHORITY COMPLIANCE N/A ATTACHMENTS 1. Preliminary Budget Assumptions Highlights (Pages 2-6) 2. Budget Update Calendar (Pages 7-9) JR:LT:MW:jf FY 2011-12 Preliminary Budget Assumptions Page 2 of 9 Economic Assumptions  Inflation for Orange County in FY 2011-12 is projected to be 2.0 percent based on the 2011 projected percentage change in consumer price index obtained from the December 2010 Economic and Business Review report prepared by Chapman University. This approximates the 1.7 percent inflation factor that was used in the FY 2011-12 budget. Revenue Assumptions  Year 4 of the five-year Sewer Service Fee Rate Schedule has been ratified by the Board.  The district-wide rate for a single-family residence (SFR) will increase 9.4% to $267.00 in FY 2011-12, followed by a 10.1% increase to $294.00 in FY 2012-13.  Note that each $1 increase in the SFR rate generates approximately $900,000 per year.  Notification of a rate increase is not required as the rate increase will not exceed 9.4%, the maximum amount possible for the fourth year of the five-year schedule that was included in the last notification.  The capital facilities capacity charge (CFCC) fee captures only those infrastructure costs that relate to additional capacity. Other infrastructure costs such as improved treatment, rehabilitation, refurbishment, and replacement, will be supported through user fees. Given the new Facilities Master Plan adopted in December 2009, a new rate study was completed in April 2010 to ensure that the CFCC fee methodology remains equitable and to confirm that an appropriate share of system costs would be recovered from new development. Revenues will be budgeted to reflect a decline in Equivalent Dwelling Unit (EDU) connections that have averaged 4,000 EDU’s over the past ten years.  Permit user rates for flow, Biochemical Oxygen Demand (BOD) and Total Suspended Solids (TSS) will follow the most recent Rate Study.  Annexation fees capture both the net current assets and the equivalent property tax allocations totaling $4,235 per acre.  Annexable property in the District’s service area sphere is minimal; consequently, no FY 2011-12 income from annexation fees is anticipated.  Property tax revenues of $60,259,000 in FY 2011-12 are proposed to remain unchanged from FY 2010-11. An annual increase in Assessed Value of 2% or CPI, whichever is less, is authorized by the state constitution and is included in the increases noted above. An offsetting decrease is incorporated, however, due to anticipated reductions in Assessed Value to reflect recent market trends.  Earnings on the investment of the District’s operating cash and reserves will be budgeted at 2.0% of the average cash and investment balance projected for the fiscal year.  A $50 million Certificates of Participation (COP) debt issuance is scheduled for FY 2011-12 in order to assist in the funding of the $119.9 million CIP outlay scheduled for FY 2011-12. FY 2011-12 Preliminary Budget Assumptions Page 3 of 9 Operating Assumptions  Dry weather urban run off up to 4 mgd will continue to be treated at no charge. Above this threshold, there is a charge of $1,440.42 per mgd up to a maximum of 10 mgd permitted.  Secondary treatment facilities will be operated and maintained in accordance with the Levels of Service and the Operational Plan – January 2009 Update.  Interim short-term disinfection facilities will continue to be operated and maintained with estimated decreased costs of 30% at P2 due to new trickling filters coming on-line.  Operating expenses are expected to approximate the adopted FY 2011-12 budget of $156,434,870.  Average daily flow for FY 2011-12 is projected to be 214 mgd. This projection reflects an expected increase of 2% per year based on increased economic activity and the potential for moderate rainfall. The FY 2011-12 flow projection is 17 mgd above the actual for the first 5 months of the current year. The final actual flow for FY 2009-10 was 207 mgd. Employee/Staffing Assumptions  Staffing level is expected to remain flat. The total FY 2011-12 authorization level is 638.0 FTEs.  Vacant positions as of 12/31/09 have been projected and expensed at step 3 for FY 2011- 12. New positions for FY 2010-11 have been projected at 100% of step 2 for FY 2011-12.  A 3% vacancy factor has been budgeted for FY 2011-12 for authorized positions to account for time spent for recruitment and turnover. The actual vacancy factor for 2009-10 was 7.65% (measured at year-end during hiring freeze.)  The Memorandum of Understanding (MOU) for the Supervisor and Professional (SPMT) group was completed in FY 2010-11 and will be considered in the FY 2011-12 budget update. An adjustment will be made to reflect the 0.5% range adjustment that will be effective for all employees in this bargaining group as of the first pay period beginning in July.  The MOUs for both OCEA and Local 501 will expire June 30, 2011. Pending the completion of the negotiation process, no salary adjustments will be included in the budget (neither for COLA nor for step increases) for periods beyond expiration of current MOUs.  The Employer required Orange County Employees Retirement System (OCERS) contribution is estimated at 29.2%. (28.6% was included for FY 2011-12 in the adopted FY 2010-12 budget) This $18,495,000 includes the OCSD pickup of 3.5% of the employee’s required contribution (current level of benefit). The benefit has been discontinued for new Supervisors and Professional bargaining unit members.  Medical and dental insurances will be budgeted at $6,973,100 and $682,000 for increases of 12% and 5.5% respectively based on insurance industry trends. Vision, life, and disability insurances will be budgeted with a 6% increase for FY 2011-12. FY 2011-12 Preliminary Budget Assumptions Page 4 of 9 Materials, Supplies, & Services Assumptions  The proposed operating budget will continue to reflect an emphasis on safety, technical, and management training. The FY 2011-12 budget will include a budget for training that is equal to 1.5% of regular salaries and wages.  An amount equal to half of one percent of the Operating materials and supplies budget will be a contingency for prior year re-appropriations. Since the current year’s budget lapses on June 30, a contingency is needed in the succeeding budget year for goods or services ordered at the end of one budget year but not delivered until the following year.  An amount equal to one half of one percent of the Operating materials and supplies budget will be the General Manager’s contingency budget. These funds will be allocated to appropriate line items during the year after requests and justifications for unanticipated needs are approved by the General Manager. Use of monies from the General Manager’s contingency budget requires an approved Operating Budget Transfer Form.  Resource needs for strategic initiatives will be included in the budget. Capital Improvement Program Assumptions  The FY 2011-12 cash flow budget is based on the Validated Capital Improvement Program (CIP) is the target.  The baseline CIP cash flow for FY 2011-12 is $119.9 million.  The FY 2011-12 CIP budget will only increase for critical projects which were not previously identified in the Strategic Plan Update.  It is anticipated that 85% of the FY 2010-11 CIP budget will be expended by June 30, 2010. Debt Financing  The District will issue new debt in the form of Certificates of Participation (COP) as needed to fund the CIP and to maintain reserves.  A $50 million COP debt issuance is scheduled for FY 2011-12 in order to assist in the funding of the $119.9 million CIP outlay scheduled for FY 2011-12.  Debt will only be used for CIP and capital expenses, not for operating expenses.  Capital financing plans which include fewer future borrowings after FY 2011-12 will be considered.  Borrowing is proposed only for facilities which do not add capacity and that are funded by all users for replacement, rehabilitation, and improved treatment. FY 2011-12 Preliminary Budget Assumptions Page 5 of 9 Reserve Assumptions  The current reserve policy was reviewed by Public Resources Advisory Group and the Board during FY 2003-04. No changes were proposed and direction was given to continue to maintain reserve levels at a level that is adequate to offset exposure to variable rate COPs due to interest rate increases.  The current reserve policy is summarized as follows: ► A cash flow reserve will be established to fund operations, maintenance and certificates of participation expenses for the first half of the fiscal year, prior to receipt of the first installment of the property tax allocation and sewer service user fees which are collected as a separate line item on the property tax bill. The level of this reserve will be established as the sum of an amount equal to six months operations and maintenance expenses and the total of the annual debt (COP) service payments due in August each year. ► An operating contingency reserve will be established to provide for non-recurring expenditures that were not anticipated when the annual budget and sewer service fees were considered and adopted. The level of this reserve will be established at an amount equal to ten percent of the annual operating budget. ► A capital improvement reserve will be maintained to fund annual increments of the capital improvement program. The long-term target is for one half of the capital improvement program to be funded from borrowing and for one half to be funded from current revenues and reserves. With this program in mind, the target level of this reserve has been established at one half of the average annual capital improvement program through the year 2020. ► Catastrophic loss, or self-insurance, reserves will be maintained for property damage including fire, flood and earthquake, for general liability and for workers' compensation. These reserves are intended to work with purchased insurance policies, FEMA disaster reimbursements and State disaster reimbursements. The potential infrastructure loss from a major earthquake has been estimated at $1.3 billion. The level of this reserve has been set to fund the District's non-reimbursed costs, estimated to be $57 million. ► Accumulated capital funds will be set aside for certain specific, short-term capital improvements as the need and availability arise. ► A capital replacement/renewal reserve policy has been established to provide thirty percent of the funding to replace or refurbish the current collection, treatment and disposal facilities at the end of their useful economic lives. The current replacement value of these facilities as of 2009 is estimated to be $3.46 billion for the collection facilities and $3.45 billion for the treatment and disposal facilities. The initial reserve level has been established at $50 million, which will be augmented by interest earnings and a small portion of the annual sewer user fee, in order to meet projected needs through the year 2030. FY 2011-12 Preliminary Budget Assumptions Page 6 of 9 ► Provisions of the various certificate of participation (COP) issues require debt service reserves to be under the control of the Trustee for that issue. These reserve funds are not available for the general needs of the District and must be maintained at specified levels. The current level of required COP service reserves is projected to be $246.1 million. ► Accumulated funds exceeding the levels specified by District policy will be maintained in a rate stabilization fund. These funds will be applied to future years' needs in order to maintain rates or to moderate annual fluctuations. There is no established target for this reserve. FY 2011-12 Budget Update Calendar Page 7 of 9 Tasks Responsibility Event/Due Date PHASE I – BUDGET PREPARATION CIP – Call for Projects Issued Engineering 10/06/10 CIP – Project Description/Justification and CLR Forms Submitted to Engineering Planning CIP Budget Coordinators 10/28/10 CIP – Training for FY 2011-12 CIP Business Case Preparation (as needed) Jim Burror Week of 11/01/10 CIP – Business Cases Submitted to Engineering Planning CIP Budget Coordinators 11/18/10 CIP – New Project Presentations to Managers CIP Budget Coordinators 12/06/10 CIP – New Project Recommendations to EMT Managers 12/16/10 CIP – Database, Forms & Instruction Manual Developed CIP Process Team 01/10/11 CIP – New Project Presentations to EMT CIP Budget Coordinators 01/10/11 CIP – CIP Database Opened for Input Financial Planning 01/17/11 CIP - Budget Preparation Training (CIP Database) Financial Planning As needed CIP – New Project “Go/No Go” Decisions EMT 01/20/11 Preliminary Budget Assumptions Identified Financial Planning 01/17/11 Preliminary Budget Assumptions Presented to EMT Financial Planning 01/24/11 Draft Budget Calendar Presented to EMT Financial Planning 01/24/11 Preparation for Budget Kickoff / Training Session:  Develop line item worksheets with adopted FY11/12 budget revised to reflect Beyond 2012 regorganization  Prepare/update budget instruction manual Financial Planning 01/21/11 Budget Kickoff / Training Session:  Distribute budget manual update  Conduct budget training session  Describe budget worksheet data required for each division Financial Planning 01/25/11 Budget Assumptions Presented to Admin Committee Admin Services Dept. 02/09/11 Mid-Year Financial Report to Admin Committee Admin Services Dept. 02/09/11 Operating Divisional Budgets: New Position/Additional Employee Decision Packages Due to Financial Planning (Edith Smith, Ext. 7568) Divisional Budget Coordinators 02/10/11 Operating Divisional Budgets: Equity Adjustment & Position Reclassification Decision Packages Due to Human Resources (Ann Sullivan, Ext. 7143) Divisional Budget Coordinators 02/10/11 FY 2011-12 Budget Update Calendar Page 8 of 9 Tasks Responsibility Event/Due Date Capital Equipment Budget: Vehicle Capital Equipment Decision Packages Due to Fleet Services (Chuck Forman, Ext. 7647) Divisional Budget Coordinators 02/10/11 Computer Equipment Decision Packages Due to Information Technology (Rich Castillon, Ext. 7283) Divisional Budget Coordinators 02/10/11 Division Budget Update Packages Due to Finance:  Update 2010-11 projected costs  Proposed operating costs for 2011-12  Operating Budget Expense Detail  Preliminary Contractual Material & Services Form  Capital equipment decision Packages (other than computer and vehicle decision packages which were due on 02/10/11)  New program decision packages (Financial Planning will compile this information into packages for use during the budget review process.) Divisional Budget Coordinators 02/18/11 Mid-Year Financial Report to Board Administrative Svcs. 02/23/11 Complete the Compilation of the Preliminary Division Budget Update Packages Financial Planning 02/23/11 CIP – Project Request with Project Information Entered in CIP Database Completed CIP Budget Coordinators 02/25/11 CIP – New Project Numbers Assigned Eng. Planning Division 03/04/11 CIP – Completed CIP Budget Delivered to Finance CIP Budget Coordinators 03/11/11  Department Budgets – Update the department text from the Executive Summary: o General Manager, pages 20 – 21 o Administrative Services, pages 22-23 o Facilities Support Services, new o Engineering, pages 26-27 o O&M, pages 28-30 Department Budget Coordinator 03/11/11 PHASE II - BUDGET REVIEW CIP - Review Workshop Financial Planning & Department Heads 01/14/11 CIP - Resource Availability Review Engineering & O&M 01/31/11 Divisional Budgets - Distribution of Preliminary Line Item Requested Budget Updates to Department Heads and Managers along with Analysis/Questions for Review Financial Planning 03/02/11 FY 2011-12 Budget Update Calendar Page 9 of 9 TASKS Responsibility Event/Due Date CIP – Committee Review Operations Committee 03/02/11 Operating Budget - Budget Review Meetings with Finance and Department Representatives Financial Planning & Department Representatives 03/03/11-03/09/11 Operating Budget – Information on Position Upgrades & Reclassifications Submitted to the General Manager Human Resources 03/11/11 Operating Budget – Recommendations to General Manager Financial Planning 03/14/11 Final Operating Budget – General Manager Review of Budget Update Recommendations Financial Planning, GM, & Department Heads 03/17/11-03/23/11 CIP – General Manager and Designee(s) Approval General Manager 03/24/11 CIP Schedules Through 2020 Completed Financial Planning 04/07/11 PHASE III - BUDGET PRESENTATION Operating Budget – Presentation of Preliminary Budget Update by Division/Department to EMT Financial Planning 04/11/11 CIP – Operations Committee Review of FY 2011-12 Budget Engineering 04/06/11 Operating Budget Update – Overview to Administration Committee Financial Planning 04/13/11 CIP - Final CIP Budget Document Preparation and Incorporation into Final Budget Document Financial Planning 04/18/11 Initial - Proposed Budget Update Finalized Financial Planning 04/25/11 Initial – Proposed 2011-12 Budget Update Presented to Committees CIP – Engineering Operating – Finance Ops – 05/04/11 Admin – 05/11/11 General Manager’s Budget Message Completed GM / Financial Planning 05/04/11 Approval of General Manager’s Budget Message General Manager 05/09/11 Final - Proposed Budget Update to Printer Financial Planning 05/11/11 PHASE IV - BUDGET DELIBERATIONS Final Draft - Proposed 2011-12 Budget Update Presented to Committees Financial Planning Ops – 06/01/11 Admin – 06/08/11 Public Hearing & Board Adoption Board of Directors 06/22/11 PHASE V – DISTRIBUTION OF BUDGET Final line item budget and equipment budgets posted in H:\ntglobal Financial Planning 07/08/11