HomeMy WebLinkAbout03-09-2011 Administration Committee Agenda
3/9/11 Administration Committee Agenda Page 1 of 3
Orange County Sanitation District
Regular Meeting of the
Administration Committee
Wednesday, March 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:
· Capital Improvement Program (CIP) Update.
CONSENT CALENDAR:
Recommend to the Board of Directors to:
1. Approve Minutes of the February 9, 2011, Administration Committee meeting.
ACTION ITEMS:
Recommend to the Board of Directors to:
2. Adopt Resolution No. OCSD 10-XX, Adopting Procedures for Settlement of
Claims Made Against the Orange County Sanitation District (Sanitation District);
Settlement of Claims Made by the Sanitation District; Collection of Delinquent
Accounts Owing to the Sanitation District; Settlement of Civil or Administrative Actions; and Settlement of Workers’ Compensation Actions; and repealing Resolution No. OCSD 98-23.
3/9/11 Administration Committee Agenda Page 2 of 3
INFORMATIONAL ITEMS:
3. Status of 2011-12 Insurance Renewals
4. FY 2011-12 Budget Update.
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,
April 13, 2011, at 5:30 p.m.
3/9/11 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 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.
Lilia Kovac, Associate Clerk of the Board:
(714) 593-7124 lkovac@ocsd.com
Page 1 of 1
ADMINISTRATION COMMITTEE Meeting Date 03/09/11 To Bd. of Dir. 03/23/11
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: Settlement of Claims, Collection of Delinquent Accounts and Workers’
Compensation Actions
GENERAL MANAGER'S RECOMMENDATION
Adopt Resolution No. OCSD 11-XX, Adopting Procedures for Settlement of Claims
Made Against the Orange County Sanitation District (OCSD); Settlement of Claims
Made by OCSD; Collection of Delinquent Accounts Owing to OCSD; Settlement of Civil or Administrative Actions; and Settlement of Worker’s Compensation Actions; and
repealing Resolution No. OCSD 98-23.
SUMMARY
Resolution No. OCSD 98-23 was adopted on July 1, 1998, and since that time, the
Sanitation District has undergone organizational changes as well as operational
changes that make the current Resolution outdated. The resolution has been updated
to reflect these organizational changes as well as delegation of authority changes with
respect to claims made against and by the Sanitation District, collection of delinquent accounts, civil or administrative actions and workers’ compensation actions.
PRIOR COMMITTEE/BOARD ACTIONS
January 1998: Adopted Resolution No. OCSD 98-23 Adopting Procedures for
Settlement of Claims Made Against the Sanitation District; Settlement of Claims Made
by the Sanitation District; Collection of Delinquent Accounts Owing to the Sanitation
District; Settlement of Civil or Administrative Actions; and Settlement of Worker’s
Compensation Actions
ADDITIONAL INFORMATION
N/A
BUDGET / DELEGATION OF AUTHORITY COMPLIANCE N/A
ATTACHMENTS
Resolution No. OCSD 11-XX
http://sharepoint/gm/board/Agenda Report Form Library/05 Agenda Report - Admin Committee - Settlement of Claims (White 2-17-11).docx
2000-00026 753636.1 1
RESOLUTION NO. OCSD 11-XX
ADOPTING SANITATION DISTRICT’S PROCEDURES
FOR SETTLEMENT OF CLAIMS MADE AGAINST THE
SANITATION DISTRICT; SETTLEMENT OF CLAIMS MADE BY THE SANITATION DISTRICT; COLLECTION OF DELINQUENT ACCOUNTS OWING TO THE SANITATION
DISTRICT; SETTLEMENT OF CIVIL OR ADMINISTRATIVE
ACTIONS; AND SETTLEMENT OF WORKERS’
COMPENSATION ACTIONS A RESOLUTION OF THE BOARD OF DIRECTORS OF ORANGE
COUNTY SANITATION DISTRICT ADOPTING SANITATION DISTRICT
PROCEDURES FOR SETTLEMENT OF CLAIMS MADE AGAINST THE
SANITATION DISTRICT; SETTLEMENT OF CLAIMS MADE BY THE SANITATION DISTRICT; COLLECTION OF DELINQUENT ACCOUNTS OWING TO THE SANITATION DISTRICT; SETTLEMENT OF CIVIL OR
ADMINISTRATIVE ENFORCEMENT ACTIONS; AND SETTLEMENT OF
WORKERS’ COMPENSATION ACTIONS AND REPEALING
RESOLUTION NO. OCSD 98-23
WHEREAS, claims for damages alleging personal injuries, bodily injuries, including
death, and damages to real and personal property, are periodically made against the
Sanitation District; and, WHEREAS, the Sanitation District presently has liability insurance in force with a
significant self-insured retention, having previously been self-insured; and,
WHEREAS, the Sanitation District has the need for the retention of claims administration services and legal counsel who shall be vested with certain limited authority to accomplish a favorable disposition of claims made against the Sanitation
District; and,
WHEREAS, claims for workers’ compensation damages alleging personal injuries, including death, are periodically made against the Sanitation District; and,
WHEREAS, the Sanitation District presently has major stop loss workers’
compensation insurance in force; and,
WHEREAS, the Sanitation District has retained a claims administration service firm and special legal counsel who shall be vested with certain limited authority to
accomplish a favorable disposition of workers’ compensation claims made against the
Sanitation District as provided herein; and,
2000-00026 753636.1 2
WHEREAS, cost efficiency relating to resolution of workers’ compensation claims
can be greatly improved by the adoption of certain policies relating to the resolution of
said claims; and
WHEREAS, Government Code Section 935.4 authorizes the Board of Directors to delegate by resolution the authority to an employee to settle pre-litigation claims
against the Sanitation District up to $50,000; and,
WHEREAS, Government Code section 935.2 authorizes the Board of Directors to delegate by resolution the authority to a committee of at least three members to settle pre-litigation claims; and
WHEREAS, Government Code Section 949 authorizes the Board of Directors to
delegate authority to an employee or its attorney to settle lawsuits; and, WHEREAS, the Sanitation District has occasion to seek recovery against
persons or entities who have caused loss or damage to the Sanitation District, who
have been assessed fines, charges, or special fees relating to their use of Sanitation
District facilities, or who have been the subject of civil or administrative enforcement proceedings for violation of the Sanitation District’s Wastewater Discharge Regulations Ordinance; and,
WHEREAS, in the course of conducting the business affairs of the Sanitation
District, certain accounts receivable or other obligations owing to the Sanitation District become delinquent, and in fact, uncollectible; and,
WHEREAS, cost efficiency relating to collection of delinquent accounts can be
greatly improved by the adoption of certain policies relating to the collection of said
accounts; and WHEREAS, the Board of Directors desires to update, amend, and reestablish
procedures for the administration of claims against and by the Sanitation District.
NOW, THEREFORE, the Board of Directors of Orange County Sanitation District, DOES HEREBY DETERMINE, RESOLVE AND ORDER:
2000-00026 753636.1 3
ARTICLE I
SETTLEMENT OF LIABILITY CLAIMS
MADE AGAINST SANITATION DISTRICT
Section 1.1: A liability reserve has been established for the payment of claims made against the Sanitation District. Said reserve shall continue to be provided in each
annual budget to ensure that sufficient funds are on deposit to provide for payment of
those amounts incurred as a liability loss or expense.
Section 1.2: Each annual budget shall provide, in addition to the reserve established by Section 1.1, for the necessary funds to provide a sufficient balance to
meet projected expenses for loss and payment of claims during the ensuing fiscal year.
Section 1.3: A claims administration firm is authorized to be retained, and said
firm is hereby granted authorization to make payments and settlements of claims made against the Sanitation District in an amount not to exceed $5,000.00 per claimant. Said
firm shall be retained in accordance with the terms and conditions set forth in an
agreement approved by the General Counsel.
Section 1.4: A Committee comprised of the General Manager or his designee and Director of Finance and Administrative Services are authorized to review and make
full settlement of any claims made against the Sanitation District for contract or liability
damages not otherwise covered by insurance by payment of a sum not to exceed
$50,000.00 per claimant. In the event a claim results in litigation, which is being legally
defended by other than the Sanitation District’s General Counsel, this Committee shall review and provide the approval to the Sanitation District’s special legal counsel within
the same limits.
Section 1.5: All claims for damages resulting in a judgment or a recommended
settlement by negotiation in an amount exceeding $50,000.00 per claimant, shall be submitted to and approved by the Board of Directors of the Sanitation District.
Section 1.6: The General Counsel, with concurrence of the General Manager, is
authorized to retain the services of special legal counsel for purposes of representing
the Sanitation District in the defense of any claim or matter of litigation, whenever it is determined that specialized expertise or experience is desirable, a conflict of interest
exists or could arise with the Office of General Counsel, or that the workload of the
Office of General Counsel requires the utilization of special counsel.
2000-00026 753636.1 4
ARTICLE II COLLECTION OF DELINQUENT OBLIGATIONS
OWING TO THE SANITATION DISTRICT
Section 2.1: The Director of Finance and Administrative Services is authorized
to write off as an uncollectible debt any delinquent obligation owing to the Sanitation District in excess of 90 days and not exceeding the sum of $10,000.00.
Section 2.2: The Director of Finance and Administrative Services, in his
discretion, is authorized to assign for collection to a person or firm of his choosing, any
delinquent obligation owing to the Sanitation District in excess of 45 days and not exceeding the sum of $100,000.00. Ninety (90) days after assigning the obligation for
collection, the Director of Finance and Administrative Services is authorized to write off
as an uncollectible debt any portion of the obligation which is still outstanding.
Section 2.3: The Director of Finance and Administrative Services shall forward any delinquent obligation in excess of $100,000.00 to the General Counsel for the
Sanitation District, who shall submit his recommendation to the Board of Directors as to
the method of collection or disposition of said account.
Section 2.4: The Director of Finance and Administrative Services, in his discretion, is authorized to file the necessary proceedings in the small claims court of
the appropriate judicial Sanitation District of the County of Orange, in order to collect
any delinquent obligation owing to the Sanitation District in excess of 45 days and not
exceeding the sum of $5,000.00. Upon obtaining a judgment in favor of the Sanitation
District, the Director of Finance and Administrative Services and General Counsel shall take all legal measures necessary to enforce the terms of the judgment. Ninety (90)
days after receiving a final judgment in favor of the Sanitation District, the Director of
Finance and Administrative Services, with the concurrence of the General Counsel, is
authorized to write off as an uncollectible debt, any portion of the obligation which is still
outstanding.
2000-00026 753636.1 5
Section 2.5: Notwithstanding the authority provided in Sections 2.2 and 2.3 above, any obligation owing to the Sanitation District, not exceeding the sum of
$100,000.00, may be compromised by acceptance of a sum less than the full amount
due or may be written off as uncollectible upon that determination being made, after
investigation by a Committee comprised of the General Manager, or his designee, and the Director of Finance and Administrative Services.
Section 2.6: In addition to the above authorization, the Director of Finance and
Administrative Services is directed to exercise all available lawful methods to ensure
prompt and full recovery of all obligations owing to the Sanitation District. Section 2.7: The Director of Finance and Administrative Services is authorized
to offset against any sums held on deposit by the Sanitation District on behalf of any
person or entity who owes a delinquent obligation to the Sanitation District.
Section 2.8: The Director of Finance and Administrative Services is authorized to withhold the approval of any such permits otherwise to be issued by the Sanitation
District to any person or entity who has an outstanding debt obligation owing to the
Sanitation District until such time as said debt obligation is paid in full.
Section 2.9: Delinquent obligations, as used in this Resolution, shall include any invoice submitted by the Sanitation District for services rendered or for reimbursement
of damages caused to Sanitation District property or personnel, which has not been
paid within:
(a) The time prescribed by the Sanitation District Ordinance or Resolution; or
(b) Forty-five (45) days from the date of invoice,
whichever is later.
ARTICLE III
COLLECTION OF FEES AND CHARGES RELATING
TO INDUSTRIAL WASTE DISCHARGES
Section 3.1: In the event any fees or charges, up to the amount of $100,000.00,
are owed by an Industrial Waste Permittee and are delinquent or in dispute between the Permittee and Sanitation District, a Committee comprised of the Director of Finance and Administrative Services, and Director of Engineering are authorized to negotiate and
enter into, on behalf of the Sanitation District, a settlement agreement relating to the
financial obligation owing to the Sanitation District. This Section shall not apply to
2000-00026 753636.1 6
enforcement actions which are specifically provided for in Article IV below. Said agreement shall be based upon a showing of good cause and a reasonable dispute
between the Sanitation District and the Permittee, and can provide for acceptance of a
sum less than the full amount claimed as due by the Sanitation District. This agreement
may be entered into prior to or during the pendency of any litigation filed by the Sanitation District to collect the amount owed.
Section 3.2: Upon written request and establishment of good cause by an
Industrial Waste Permittee, the Committee of the General Manager, or his designee, the
Director of Finance and Administrative Services, and Director of Engineering, may negotiate and enter into a deferred payment agreement with the Permittee in accordance with the guidelines established herein. Said agreement may be
incorporated as part of, or separate and in addition to, any enforcement compliance
agreements authorized by the provisions of the Sanitation District’s Wastewater
Discharge Regulations Ordinance. Section 3.2.1: The installment payment agreement shall be for a maximum
term not to exceed 24 months. The agreement shall provide for payment of interest on
the principal amount owing at a rate not exceeding the higher of:
(a) Ten (10%) percent per annum; or
(b) Five (5%) percent per annum, plus the rate prevailing on the 25th
day of the month preceding the earlier of:
(i) The date of execution of the contract to make the loan or forbearance; or
(ii) The date of making the loan or forbearance.
(Established by the Federal Reserve Bank of San Francisco on advances to member banks under Sections 13 and 13(a) of the Federal Reserve Act (commonly referred to as the “discount” rate).
The agreement shall provide for payment of all costs of preparing and
administering the payment agreement, including legal and administrative costs. Section 3.2.2: The agreement shall stipulate the penalties to which the
Permittee shall be subjected in the event of nonpayment of any of the payments
specified in the agreement, including initiation of legal action or permit suspension or
revocation, as recommended by the General Counsel and the Director of Engineering Section 3.3: If the delinquent obligation is greater than $100,000.00, any
compromise settlement or any deferred payment agreement shall be submitted to and
approved by the Board of Directors, who shall prescribe the terms and conditions.
2000-00026 753636.1 7
ARTICLE IV
SETTLEMENT OF CIVIL ADMINISTRATIVE
ENFORCEMENT ACTIONS
Section 4.1: In the event the Sanitation District initiates or intends to initiate any
civil or administrative enforcement actions based upon alleged violations of the
Sanitation District’s Wastewater Discharge Regulations Ordinance, a Committee
comprised of the General Manager, or his designee, the Director of Finance and
Administrative Services, and Director of Engineering are authorized to negotiate and enter into, on behalf of the Sanitation District, a settlement agreement, which may
include both payment to the Sanitation District in an amount up to $100,000.00, and
enforcement compliance orders deemed appropriate to ensure compliance with the
Wastewater Discharge Regulations Ordinance. This agreement may be entered into
prior to or during the pendency of any administrative proceeding or litigation enforcement action.
Section 4.2: The Committee of the General Manager, Director of Finance and
Administrative Services, and Director of Engineering may negotiate and enter into a
settlement agreement which includes a schedule of payments over a period of time not to exceed 24 months, by the person or entity which is the subject of the enforcement
action. The agreement shall provide for payment of interest on the principal amount
owing at a rate not exceeding the higher of:
(a) Ten (10%) percent per annum; or
(b) Five (5%) percent per annum, plus the rate prevailing on the 25th
day of the month preceding the earlier of:
(i) The date of execution of the contract to make the loan or forbearance; or
(ii) The date of making the loan or forbearance.
(Established by the Federal Reserve Bank of San Francisco on advances to member
banks under Sections 13 and 13(a) of the Federal Reserve Act (commonly referred to as the “discount” rate).)
Section 4.3: If the proposed settlement involves the payment of an amount
greater than $100,000.00, the settlement shall be submitted for approval by the Board of Directors of the Sanitation District.
2000-00026 753636.1 8
ARTICLE V SETTLEMENT OF WORKERS’ COMPENSATION
CLAIMS MADE AGAINST THE SANITATION DISTRICT
Section 5.1: A minimum liability reserve has been established in the amount of
$250,000.00 for the payment of claims made against the Sanitation District. Said minimum amount shall continue to be provided for in each annual budget to ensure that
sufficient funds are on deposit to provide for payment of those amounts incurred as a
liability loss or expense.
Section 5.2: Each annual budget shall provide, in addition to the reserve established by Section 5.1, for the sufficient funds to provide a sufficient balance to
meet projected expenses for payment of claims during the ensuing fiscal year.
Section 5.3: A claims administration firm is authorized to be retained, and said
firm is hereby granted authorization to make payments and settlements of claims made against the Sanitation District in an amount not to exceed $5,000.00 per claimant. Said
firm shall be retained in accordance with the terms and conditions set forth in an
agreement approved by the General Counsel.
Section 5.4: In addition to special legal counsel selected by the Sanitation District’s Workers’ Compensation Administrator, the General Counsel is authorized to
retain the services of special legal counsel for purposes of representing the Sanitation
District in the defense of any workers’ compensation claim, wherein the General
Counsel determines that specialized expertise is desirable or that the workload requires
the utilization of outside counsel.
Section 5.5: A Committee comprised of the General Manager, or his designee,
Director of Finance and Administrative Services, and the Sanitation District’s Risk
Manager are authorized to review and make full settlement of any workers’
compensation claim made against the Sanitation District by payment of a sum not to exceed $50,000.00, in addition to the actual medical expenses and temporary disability
payments per claimant. In the event a claim results in litigation, which is being legally
defended by other than the Sanitation District’s General Counsel, this Committee shall
review and provide the approval to the Sanitation District’s special legal counsel within
the same limits.
Section 5.6: All claims resulting in a recommended settlement by negotiation or
stipulation in an amount exceeding $50,000.00, in addition to the actual medical
expenses and temporary disability payments per claimant, shall be submitted to and
approved by the Board of Directors.
2000-00026 753636.1 9
Section 6.1: This Resolution supersedes Resolution No. 98-23, which shall be repealed in its entirety as of the date this Resolution becomes effective. In the event
this Resolution does not become effective, Resolution No. 98-23 shall remain in full
force and effect.
Section 6.2: This Resolution is effective immediately upon adoption.
PASSED AND ADOPTED at a Regular Meeting held March 23, 2011.
______________________________
Chair
ATTEST:
______________________________
Clerk of the Board
Page 1 of 4
ADMINISTRATION COMMITTEE Meeting Date 03/09/11 To Bd. of Dir.
AGENDA REPORT Item Number 3 Item Number
Orange County Sanitation District FROM: James D. Ruth, General Manager
Originator: Lorenzo Tyner, Director of Finance & Administrative Services
SUBJECT: Status of 2011-12 Insurance Renewals
GENERAL MANAGER'S RECOMMENDATION
Informational only
SUMMARY
Historically, the Administration Committee has asked for status updates regarding the renewals of major insurance policies each year. The Risk Management Division and
OCSD’s (Sanitation District) operational insurance broker begin the process of renewal
each January, and final quotes are typically received in June shortly before the
beginning of the new fiscal year. The Sanitation District budget provides funds for the renewal of the following four major
insurances for the operations:
1) Excess General Liability Insurance 2) Excess Workers’ Compensation 3) All-Risk Property and Flood insurance
4) Boiler & Machinery insurance
PRIOR COMMITTEE/BOARD ACTIONS
June 2010 - The Board approved renewal of the above four policies for the period
July 1, 2010 through June 30, 2011. ADDITIONAL INFORMATION
1) Excess General Liability Insurance Program
The Sanitation District’s Excess General Liability Insurance Program is currently provided through the California Municipal Excess Liability Program (CAMEL) and its
sister program, the Alliant National Municipal Liability Program (ANML). The
Sanitation District has participated in the CAMEL program since FY 1996-97.
Page 2 of 4
ADDITIONAL INFORMATION (cont’d)
This program currently provides the Sanitation District with a $30 million policy of
comprehensive coverage for municipal liability, bodily injury and property damage,
and personal injury. The program was structured to also include Employment Practices, and Public Officials Errors & Omissions coverage. The $30 million
coverage is per occurrence, with a self-insured deductible of $250,000 per
occurrence and $500,000 deductible for employment practices claims. Since 1997,
the Employment Practices portion of coverage has been enhanced from a $2 million
sub-limit to the full $30 million policy limit.
The actual insurance coverage currently consists of two separate layers. The first
layer is the “Basic” $10 million program with self-insured retention of $250,000. The
second layer consists of $20 million of coverage in excess of the first layer of $10
million.
The premium for 2010-11 was $348,394, a decrease of about 3% from the previous
year.
2) Excess Workers’ Compensation Insurance
The Excess Workers’ Compensation insurance coverage is with the California State
Association of Counties Excess Insurance Authority (CSAC EIA). The Sanitation
District has participated in this program or its predecessor since 2003. Excess
Workers’ Compensation Program currently provides so-called “Statutory” (unlimited) coverage with a self-insured retention (SIR), or deductible, of $500,000.
The use of Excess Workers’ Compensation Insurance dates back to the late 1980’s.
At that time, the Fiscal Policy Committee approved a SIR, or deductible, of
$250,000, for such coverage.
Due to the hardening of the workers’ compensation market, this deductible was
raised to $500,000 beginning in FY 2002-03 through a policy with Employers
Reinsurance Corporation (ERC) that provided coverage at the time of $25 million
with a self-insured retention (SIR), or deductible of $500,000.
Some additional risk may be associated with the CSAC EIA joint powers authority in
that a premium surcharge can be assessed to individual members if an unusually
large number of losses were to occur outside of the actuarial evaluation estimates.
However, historically the CSAC EIA premiums for excess workers compensation have been so much less than competing quotes available to the Sanitation District
that if even there were a surcharge, the cost might still continue to be cheaper.
The renewal of the Excess Workers’ Compensation Insurance for the period July 1,
2010 through June 30, 2011 was at a rate of .002763 (close to the previous year’s rate of .002658). This premium rate generated an estimated premium of $175,419
based on the estimated 2010-11 payroll. Since the premium itself is based on final
Page 3 of 4
ADDITIONAL INFORMATION (cont’d)
payroll, the Sanitation District will not know the exact final premium until the year is
over.
3) All-Risk Property and Flood Insurance
All-Risk Property and Flood Insurance Program (Property Insurance) provides for
comprehensive coverage for most of the Sanitation District’s real and personal
property regarding virtually all perils including fire, flood, and business interruption.
The Sanitation District previously carried earthquake insurance as part of its
Property Insurance, but in the last few years earthquake insurance has been
impossible to obtain or not cost-effective. Currently, the Sanitation District has
earthquake insurance only in connection with some of its buildings under construction.
Current Property Insurance limits are $1 billion for most perils other than flood and
earthquakes, and $300 million for flood, with many sub-limits for various situations.
In order to reach $1 billion in limits, the broker had to arrange for nearly a dozen different layers of insurers. The SIR is $250,000 per occurrence for most types of
losses.
Since the late 1990’s, the Property Insurance has been with a nationwide joint
purchase property insurance program called Public Entity Property Insurance Program (PEPIP), one of the world’s largest property programs. It is important to
note that this joint purchase property insurance program offers the purchasing power
of numerous large public entities without the pooling or sharing of coverage or
losses.
The renewal of All-Risk Property and Flood Insurance for the period July 1, 2010
through June 30, 2011 was at a premium of $436,740, a decrease of 5.8 percent
from the previous year.
4) Boiler & Machinery Insurance
The Boiler & Machinery insurance program provides comprehensive coverage for
loss caused by machinery breakdown and explosion of steam boilers or other
covered process equipment, including damage to the equipment itself and damage
to other property caused by covered accident.
The current Boiler & Machinery insurance program provides coverage ($100 million
per occurrence/ with deductibles ranging from $25,000 to $350,000) for losses
caused by covered machinery breakdown (e.g., motors, steam turbines, digesters,
co-gen engines). Damages to the equipment, as well as damages to other property and improvements caused by the machinery breakdown, are covered by the boiler &
Page 4 of 4
ADDITIONAL INFORMATION (cont’d)
machinery insurance. This program augments the Sanitation District’s all-risk
property insurance that covers perils such as fire and flood.
The renewal of the Boiler & Machinery Insurance Program for the period July 1, 2010 through June 30, 2011 was at $15,578, a decrease of about 9 percent from the
prior year.
CEQA
N/A
BUDGET/DELEGATION OF AUTHORITY COMPLIANCE
N/A
JR:LT:RK:jf http://sharepoint/gm/board/Agenda Report Form Library/07.Insurance Renewal.docx
Page 1 of 5
ADMINISTRATION COMMITTEE Meeting Date 03/09/11 To Bd. of Dir.
AGENDA REPORT Item Number 4 Item Number
Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Lorenzo Tyner, Director of Finance and Administrative Services
SUBJECT: Information Only
GENERAL MANAGER'S RECOMMENDATION
FY 2011-12 Budget Update.
SUMMARY
For continued discussion on the development of the proposed update to the FY 2011-12
Budget, detail of the Orange County Sanitation District’s revenues has been provided
below.
The Proposed Budget Update will be presented for adoption at the June 22, 2011 Board
of Directors meeting.
PRIOR COMMITTEE/BOARD ACTIONS
N/A
ADDITIONAL INFORMATION
N/A
CEQA
N/A
BUDGET / DELEGATION OF AUTHORITY COMPLIANCE
N/A
ATTACHMENTS
FY 2011-12 Budget Development Revenue Detail
JDR:LT:MW:jf http://sharepoint/gm/board/Agenda Report Form Library/06.Budget Revenue Detail.docx
Page 2 of 5
FY 2011-12 Budget Development Detail
Revenue Summary (in millions)
Category 2009-10
Actual
2010-11
Adopted
2011-12
Adopted
Beginning Reserves $534.3 $448.4 $488.4
Revenues:
Service Fees 200.2 226.5 251.0
Permit User Fees 11.1 11.6 12.7
CFCC 10.3 6.4 6.8
Property Taxes 64.8 60.3 60.3
Interest 19.2 9.3 9.8
Other Revenue 25.8 27.8 31.6
Debt Proceeds 80.0 157.0 50.0
Total Revenue $411.4 $498.9 $422.2
Total Available $945.7 $947.3 $910.6
The Sanitation District has a variety of revenue sources available for operating and
capital expenses. The major revenue sources are as follows:
• Beginning Balances
• General Sewer Service Fees and Industrial Waste Permit User Fees
• Capital Facilities Capacity Charges (CFCC)
• Property Taxes • Interest Earnings and Other Miscellaneous Revenue
• Debt Proceeds
2010-11 2011-12
Beginning Balances – As result of its Reserve and Investment Policies, the Sanitation
District will begin the year with an estimated balance carried
forward from the previous year.
$448.4M $488.4M
General Service Fees –
User fees are ongoing fees for service paid by customers
connected to the sewer system. A property owner, or user, does not pay user fees until connected to the sewer system and
receiving services. Once connected, a user is responsible for his
share of the system’s costs, both fixed and variable, in proportion to his demand on the system. These fees are for both Single
Family Residences (SFR) and Multiple Family Residences (MFR).
$226.5M $251.0M
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2010-11 2011-12
Sewer Service Fee Increases –
The Board of Directors approved 2010-11 and 2011-12 single
family residential rates (the underlying basis for all sewer rates) are $244 and $267, respectively. These rates are still well below the
average annual sewer rate of $406 currently being charged
throughout the state according to a 2008 survey of 920 agencies encompassing all counties within California.
Industrial Waste Permit User Fees –
Fees paid by large industrial and commercial properties owners connected to the sewer system. These fees are for the owner’s
share of the system’s costs, both fixed and variable, in proportion
to his demand on the system.
Since the inception of the Permit User Fee program in 1970, users
of the Sanitation District’s system that discharge high volumes or high strength wastewater have been required to obtain a discharge
permit and pay extra fees for the costs of service.
$11.6M $12.7M
Capital Facilities Capacity Charges (CFCC) – Capital Facilities Capacity Charge is a one-time, non-discriminatory
charge imposed at the time a building or structure is newly
connected to the Sanitation District’s system, directly or indirectly, or an existing structure or category of use is expanded or
increased. This charge pays for Sanitation District facilities in
existence at the time the charge is imposed, or to pay for new facilities to be constructed in the future, that are of benefit to the
property being charged.
$6.4M $6.8M
Property Taxes – The County is permitted by State law (Proposition 13) to levy taxes
at 1% of full market value (at time of purchase) and can increase
the assessed value no more than 2% per year. The Sanitation District receives a share of the basic levy proportionate to what
was received in the 1976 to 1978 period less $3.5 million, the
amount that represents the State’s permanent annual diversion from special districts to school districts that began in 1992-93. The
Sanitation District’s share of this revenue is dedicated for the
payment of debt service.
$60.3M $60.3M
Interest Earnings –
Interest earnings are generated from investment of accumulated
reserves consisting of a cash flow/contingency, a capital improvement, a renewal/replacement and a self-insurance reserve.
$9.3M $9.8M
Other Revenue –
Revenue includes $20.5 million and $14.0 from the Irvine Ranch Water District (IRWD) for capital and equity charges and $5.2
million and $5.7 million for sewer services provided to the Santa
Ana Watershed Protection Authority (SAWPA) and the Sunset Beach Sanitary District for FY 2010-11 and 2011-12, respectively.
$27.8M $31.6M
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Debt Proceeds –
Certificates of Participation (COPs) are the Sanitation District’s primary mechanism for financing capital projects. COPs are
repayment obligations based on a lease or installment sale
agreement. COPs are not viewed as “debt” by the State of California, but rather a share in an installment arrangement where
the Sanitation District serves as the purchaser.
$157.0M $50.0M
Debt Financing
Due to the magnitude of identified future annual capital and operations and
maintenance expenditures, it is necessary that the Sanitation District utilize debt
financing to meet its total obligations. Debt financing allows the Sanitation District to
meet projected construction schedules while achieving the lowest possible user fees, as well as long-term stability for the user fees.
Financing
The Sanitation District uses long-term borrowing Certificates of Participation (COPs) for
capital improvements that cannot be financed from current revenue. Before any new debt is issued, the impact of debt service payments on total annual fixed costs is
analyzed. Under the America Recovery Act of 2009, $157 million in Build America
Bonds COPs (35 percent Federal interest subsidy through the life of the debt) was
issued by the Sanitation District in December 2010. Additional debt financing of $360
million is forecasted over the next seven years to assist in the funding of the $2 billion in capital improvements required over the next ten years. A new debt issuance of $50
million is planned for FY 2011-12.
Certificate of Participation (COP)
The primary debt mechanism used is Certificate of Participation (COP). COPs are repayment obligations based on a lease or installment sale agreement. The COP
structure was selected over other structures because COPs are not viewed as debt by
the State of California, as the purchaser does not actually receive a "bond," but rather a
share in an installment sale arrangement where the Sanitation District serves as the
purchaser. COPs can be issued with fixed or variable interest rates.
Fixed-rate debt can be either traditional or synthetic in form:
• Fixed-Rate Debt traditionally has a final maturity between 20 and 30 years from the
date of issuance. Generally, principal is amortized annually. Principal maturing in early years typically has a lower interest rate ("coupon") than later maturities. This
structure typically produces a level debt service.
• Synthetic Fixed-Rate Debt: Long-term, variable-rate debt can be issued and then the
interest component can be swapped to a fixed rate. This form of fixed-rate debt
achieves a balance between short and long-term interest costs and is frequently a less expensive form of debt. In some markets, this form of fixed-rate debt is less
expensive to issue than the more traditional form of fixed-rate debt described above.
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Variable-rate debt can be traditional or synthetic:
• Variable-Rate Debt traditionally has either a long or short nominal maturity, but the
interest rate resets periodically. Typically, the intervals for interest rate resets are
daily, weekly or monthly, but any period is possible. • Synthetic Variable-Rate Debt as described above for fixed-rate debt, variable-rate
debt can be created from a fixed-rate issue by means of a floating-rate swap.
The maximum level of variable rate obligations incurred by any District should not exceed the level of invested reserves available to that District.
The Sanitation District currently has no outstanding synthetic fixed-rate. The total fixed-
rate COPs and variable-rate COPs outstanding is $1.213 billion and $194.0 million,
respectively, for an approximate ratio of 86:14. The Sanitation District Maintains its AAA Rating
The Sanitation District maintains ratings of “AAA” from Standards and Poor and “AA”
from Fitch. A triple A rating is the highest obtainable for any governmental agency. In
order to maintain this rating, the Sanitation District adheres to its 2001 Debt Policy and coverage ratios requirements. This Board-adopted policy serves as the agency’s guide in the management of existing debt and in the issuance of future debt.
The Sanitation District Has No Legal Debt Limits.
The Sanitation District does have contractual covenants within the existing COP agreements which require minimum coverage ratios of 1.25. The minimum coverage ratio is the ratio of net annual revenues available for debt service requirements to total
annual debt service requirements for all senior lien COP debt. The coverage ratio for
senior lien COP debt was approved at 2.07 and 2.16 for FY 2010-11 and 2011-12,
respectively.