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HomeMy WebLinkAbout1996-08-07,. ., r .... By County Sanitation Districts of Orange County, California P.O. Box 8127 • 10844 Ellis Avenue Fountain Valley, CA 92728-8127 Telephone: (714) 962-2411 A~1996 DRAFT MINUTES OF FINANCE, -~ A:DMINISIRATION AND HUMAN RESOURCES COMMITTEE Wednesday. August 7. 1996. 5:30 P.M. A meeting of the Finance, Administration and Human Resources Committee of the County Sanitation Districts Nos. 1, 2, 3, 5, 6, 7, 11, 13 and 14 of Orange County, California was held on August 7, 1996 at 5:30 p.m., at the Districts' Administrative Offices. (1) ROLL CALL The roll was called and a quorum declared present, as follows: Committee Directors Present: George Brown, Chair John J. Collins, Joint Chair Jan Debay John M. Gullixson Wally Linn Thomas Saltarelli Roger R. Stanton, Vice Chair William G. Steiner Peer Swan, Vice Joint Chair Committee Directors .Absent : Burnie Dunlap James Flora Other Directors Present: None Staff Present: Donald F. Mcintyre, General Manager Judith A. Wilson, Assistant General Manager Blake P. Anderson, Assistant General Manager Ed Hodges, Director of General Services Admin. Bob Ooten, Director of Operations & Maintenance Mike Peterman, Director of Human Resources Gary Streed, Director of Finance Nancy J. Wheatley, Director of Technical Services Michelle Tuchman, Director of Communications Steve Kozak, Financial Manager Mike White, Controller Tom Dawes, Engineering Supervisor Lenora Crane, Committee Secretary Others Present: Terry C. Andrus, General Counsel Dan Cassidy, Broadbanding Barry Newton, Broadbanding Consultant Kevin J. Murphy, City Mgr., Newport Beach Steve Conklin, Dir. of Engrg., OCWD Craig Scott, R. Craig Scott & Associates Nancy Whitehead, R. Craig Scott & Associates The Chair called for a motion to change the order of the agenda, because two Committee Members had to leave early to attend another meeting. The Closed Session items listed on the agenda would be split into two sessions. Minutes of Finance, A\ ,·n. and Human Resources Commi\-----,· Page 2 August 7, 1996 I I It was moved, seconded, and unanimously approved to revise the order of the agenda. (2) CLOSED SESSION The Committee convened in closed session at 5:45 p.m. as authorized by Government Code Sections 54956.9, to discuss and consider the item specified as Item (8)(b)(1) on the published Agenda. Confidential Minutes of the closed session held by the Committee have been prepared in accordance with California Government Code Section 54957 .2 and are maintained by the Board Secretary in the Official Book of Confidential Minutes of Board and Committee Closed Meetings. No reportable action was taken re Agenda Item (8)(b)(1 ). At 6:25 p.m., the Committee reconvened in regular session. (3) APPOINTMENT OF A CHAIR PRO TEM No appointment was necessary. (4) PUBLIC COMMENTS No comments were made. (5) REf:>ORTS OF THE COMMITTEE CHAIR. GENERAL MANAGER. ASSISTANT GENERAL MANAGER(S). DIRECTOR OF FINANCE/TREASURER. DIRECTOR OF HUMAN RESOURCES. DIRECTOR OF GENERAL SERVICES ADMINISTRATION. DIRECTOR OF COMMUNICATIONS AND GENERAL COUNSEL (a) Report of the Committee Chair The Chair had no report. (b) Report of the General Manager The General Manager had no report. (c) Report of Assistant General Manager -Administration The Assistant General Manager of Administration had no report. Report of Assistant General Manager -Operations The Assistant General Manager of Operations had no report. ' I Minutes of Finance, Admin. and Human Resources Committee Page 3 August?, 1996 (d) Report of the Director of Finance/Treasurer The Treasurer's Report was included in the Agenda Package. (e) Report of the Director of Human Resources The Director of Human Resources had no report. (f) Report of the Director of General Services Administration The Director of General Services Ed Hodges reported that an offer has been made and accepted by Chris Dahl, who is presently the Director of Information Services at the Orange County Water District, to become the Districts' new Manager of Information Technology. Mr. Dahl will join the Districts later this month. (g) Report of the Director of Communications The Director of Communications had no report. (g) Report of General Counsel General Counsel had no report. (6) APPROVAL OF MINUTES It was moved, seconded and duly carried to approve the draft minutes of the July 10, 1996, meeting of the Finance, Administration and Human Resources Committee. (7) OLD BUSINESS FAHR96-11 Consideration of motion to receive and file Quarterly Investment Management Program Report for the period April 1 through June 30, 1996. Steve Kozak summarized PIMCO's Quarterly Investment Management Program Report. The investment program is in compliance and is tracking with the benchmarks. The long-term fund, based on PIMCO's long-term investing approach, slightly underperformed this quarter. The liquid portfolio performed very well. Annualizing the returns for both portfolios, the liquid portfolio's annualized yield is 5.9% and the long-term fund is 6.2%. Annualizing the income from the investment program, the liquid fund would return an estimated $2.9 million and the long-term fund about $18.6 million. Minutes of Finance, Admin. and Human Resources Committee Page 4 August?, 1996 In response to Chair Brown's questions, Mr. Kozak advised that he is receiving information from PIMCO on a timely basis and is reviewing the information very carefully. Also, Callan Associates, the Districts' investment advisor, does an independent review of the raw data they receive from Mellon Trust, the Districts' custodial bank. The Chair advised Mr. Kozak that the Board wants to insist that he continue to review Districts' investments very carefully and not just accept opinions and recommendations, in order to avoid the same problems the County had. It was moved, seconded and duly carried to receive and file this report. FAHR96-40 Labor Negotiations -Information Only. Mike Peterman, Director of Human Resources, advised that this item will be discussed under closed session. He introduced Mr. Barry Newton, the selected Broadband Consultant. Mr. Newton has done similar work for the cities of Tustin and Newport Beach and some private firms. He is also a broadbanding instructor at the UCI Extension Program. Mike advised that Mr. Newton will be giving a brief description of his proposal in closed session. This was an information-only report and was received and filed. (8) NEW BUSINESS FAHR96-46 Consideration of motion to receive and file Treasurer's Report for the month of June 1996. Short and Long-Term Operating Monies indicated that total investments amount to $385, 129,885. All Investment Policy requirements are being followed and met. It was moved, seconded and duly carried to approve and forward this report to the Joint Boards. FAHR96-47 Consideration of motions relative to the Basic Integrated Reuse Project proposed by OCWD. IRWD and the City of Newport Beach: 1. Modify the existing Agreement between District 14 and the other Districts to provide that the 1996-97 flow excludes up to 3.2 mgd, providing the three-party BIRP is approved. Minutes of Finance, Admin. and Human Resources Committee Page 5 August7, 1996 2. Modify the existing Agreement between all Districts and OCWD for Green Acres Project CGAPl water to include a long-term commitment to purchase and to supply reclaimed water at a mutually agreeable price which reflects potential OCWD savings and which does not exceed the costs of operations and maintenance (currently $89/AF). 3. Maintain the June 30, 1997 equity sale from District 14 to the other Districts calculated on the basis of excluding up to 3.2 mgd for approximately four months as an inter- District payable/receivable of approximately $4.8 million, and transfer the funds in 1999-2000 in order to eliminate the negative cash flow impacts on the other Districts from the accelerated flow reduction. 4. Authorize staff to begin negotiations with parties to the three-party agreement to allow for disposal of excess reclaimed water. Blake Anderson, Assistant General Manager, Operations, introduced Kevin J. Murphy, City Manager of Newport Beach and Steve Conklin, Director of Engineering, Orange County Water District, who were in attendance to answer any questions the Committee may have regarding this item. Blake also advised that Director Swan would answer any questions regarding the Irvine Ranch Water District. Blake gave a slide presentation and an overview of the reclaimed water programs currently in place. The Orange County Water District, Irvine Ranch Water District and the City of Newport Beach are the three parties involved in the proposed reclaimed water project. The water project is called the Basic Integrated Reuse Project (BIRP) and would provide wide use of reclaimed water produced by IRWD, especially in winter months when IRWD demands for reclaimed water are low. Under this proposed MOU agreement, IRWD would pump up to 8 mgd of treated effluent to OCWD's Green Acre Project (GAP) pipelines for reclamation purposes and would pay for the intertie to OCWD. The City of Newport Beach has sponsored and encouraged the development of the BIRP, and will benefit by the expanded use of reclaimed water within the City and by satisfying those opposed to the Wetland Water Supply Project (WWSP). The City will spend about $500,00 for retrofits to OCWD. The CSDOC's agreement with the OCWD to purchase reclaimed GAP water would also need to be renegotiated and amended. The amendment to the Districts' agreement would guarantee reclaimed water supplies and eliminate the need for the Districts to find an alternate source. Minutes of Finance, Admin. and Human Resources Committee Page 6 August?, 1996 Gary Streed reviewed the CORF adjustment required to exclude 3.2 mgd from the equity calculation and eliminate negative cash flow on the other Districts from the accelerated flow reduction. Mr. Murphy of Newport Beach advised that the three parties are attempting to construct the intertie project so that the intertie GAP flow occurs before October 1, 1997. The CORF portion related to CS DOC is required to be in place by October 1, 1996, so that IRWD, which has a permit to discharge into the Bay, does not need to do so. Director Jan Debay, as well as Joint Chair Collins, commended staff for setting such a good example of cooperation between agencies to make reclaimed water use an important issue. After discussion on this matter, it was moved, seconded and duly carried to approve staff's recommendations Director Peer Swan requested that his abstention from discussion and voting be made a matter of record. FAHR96-48 Consideration of Resolution No. 96-, Amending Personnel and Salary Resolution No. 95-105, to adopt a Districts' Firearms and Weapons Policy. Mike Peterman advised that with acts of violence in the workplace becoming increasingly more prevalent in today's society, staff believe it would be prudent to adopt a firearms and weapons policy. The proposed policy would prohibit firearms, explosives, and knives on Districts' premises, in Districts' vehicles, in private vehicles parked on Districts' property, and in the possession of Districts' employees while on duty or performing related business assignments. During discussion on this matter, the Committee felt a more detailed no tolerance policy should be written. Counsel advised a more detailed policy would need to be addressed during the meet-and-confer process. It was moved, seconded and duly carried to approve staff's recommendation with the understanding that staff negotiate a more detailed no tolerance Firearms and Weapons Policy during the meet-and-confer process. Minutes of Finance, Admin. and Human Resources Committee Page 7 August?, 1996 (9) CLOSED SESSION The Committee convened in closed session at 7:05 p.m. as authorized by Government Code Sections 54957.6, to discuss and consider the item specified as Item (8)(b)(2) on the published Agenda. Confidential Minutes of the closed session held by the Committee have been prepared in accordance with California Government Code Section 54957 .2 and are maintained by the Board Secretary in the Official Book of Confidential Minutes of Board and Committee Closed Meetings. No reportable action was taken re Agenda Item (8)(b)(2). At 7:45 p.m., the Committee reconvened in regular session. (10) OTHER BUSINESS. IF ANY None. (11) MATTERS WHICH A DIRECTOR WOULD LIKE STAFF TO REPORT ON AT A SUBSEQUENT MEETING No reports were requested. (12) MATTERS WHICH A DIRECTOR MAY WISH TO PLACE ON A FUTURE AGENDA FOR ACTION AND A STAFF REPORT None. (13) CONSIDERATION OF UPCOMING MEETING DATES AND ITEMS TO BE DISCUSSED AT THOSE MEETINGS The next Committee meeting is scheduled for Wednesday, September 11, 1996. (14) ADJOURNMENT The meeting was adjourned at approximately 7:47 p.m. ~~ Lenora Crane Finance, Administration and Human Resources Committee Secretary J:\WPDOC\FIN\CRANE\FPC.MTG\FAHR.96\1996.MIN\MFAHRB.96 ST ATE OF CALIFORNIA ) ) SS. COUNTY OF ORANGE ) Pursuant to California Government Code Section 54954.2, I hereby certify that the Notice and the Agenda for the Finance, Administration and Human Resources meeting held on August 7, 1996, was duly posted for public inspection in the main lobby of the Districts' offices on July 30, 1996. Posted: By: IN WITNESS WHEREOF, I have hereunto set my hand this 7th day of August, 1996. Penny Kyle, Secretary, r'e 6. of the Boards of Directors of County Sanitation Districts Nos. 1, 2, 3, 5, 6, 7, 11, 13 & 14 of Orange County, California ~I ,1996,~PM ~~ Signature J:\WPDDC\FINICRANEIFPC.MTGIFAHR.96\CERT.PDS\CERTP08.96 I August 7, 1996 AGENDA FINANCE. ADMINISTRATION AND HUMAN RESOURCE$ COMMITTl:E COUNTY SANITATION DISTRICTS NOS. 1, 2, 3, 5, 6, 7, 11, 13 AND 14 OF ORANGE COUNTY, CALIFORNIA DISTRICTS' ADMINISTRATIVE OFFICES 10844 ELLIS AVENUE FOUNTAIN VALLEY, CALIFORNIA 92708 REGULAR MEETING WEDNESDAY, AUGUST 7. 1996 -5:30 P.M. :--·······-···-······ .. --·-··· .. ·······----···-·····'""·····················-·········· .................... :.-............................................................................... , .................. : . . ! In accordance with the requirements of California Government Code Section 54954.2, this i l agenda has been posted in the main lobby of the Districts' Administrative Offices not less than 72 l ~ hours prior to the meeting date and time above. All written materials relating to each agenda item are ! ~ available for public inspection in the Office of the Board Secretary. l In the event any matter not listed on this agenda is proposed to be submitted to the Committee for discussion and/or action, it will be done in compliance with Section 54954.2(b) as an emergency item or that there is a need to take immediate action which need came to the attention of the Committee subsequent to the posting of the agenda, or as set forth on a supplemental agenda posted in the manner as above, not less than 72 hours prior to the meeting date. : ..................... --............................................................................... _ ... _.,.,. ............................................. ..._ ........................................... ..._ ........................ ,.. ...................................... ;· (1) Roll Call (2) Appointment of Chairman pro tern, if necessary. (3) Public Comments: All persons wishing to address the Committee on specific agenda items or matters of general interest should do so at this time. As determined by the Chairman, speakers may be deferred until the specific item is taken for discussion and remarks may be limited to five minutes. Matters of interest addressed by a member of the public and not listed on this agenda cannot have action taken by the Committee except as authorized by Section 54954.2(b ). August?, 1996 (4) The Committee Chairman, General Manager, Assistant General Manager(s), Director of FinancefTreasurer, Director of Human Resources, Director of General Services Administration, Director of Communications, and General Counsel may present verbal and/or written reports on miscellaneous matters of general interest to the Committee Members. These reports are for information only and require no action by the Committee Members. (a) Report of Committee Chair (b) Report of General Manager (c) Report of Assistant General Manager -Administration ( d) Report of Assistant General Manager -Operations (e) Report of Director of FinancefTreasurer (f) Report of Director of Human Resources (g) Report of Director of General Services Administration (h) Report of Director of Communications (i) Report of General Counsel (5) Approval of draft Finance, Administration and Human Resources Committee Minutes for Meeting of July 10, 1996. (6') Old Business. FAHR96-11 Consideration of motion to receive and file Quarterly Investment Management Program Report for the period April 1 through June 30, 1996. (Steve Kozak) FAHR96-40 Labor Negotiations -Information Only (Mike Peterman) (7) New Business. FAHR96-46 Consideration of motion to receive and file Treasurer's Report for the month of June 1996. (Gary Streed) FAHR96-47 Consideration of motions relative to the Basic Integrated Reuse Project proposed by OCWD, IRWD and the City of Newport Beach: 1. Modify the existing Agreement between District 14 and the other Districts to provide that the 1996-97 flow excludes up to 3.2 mgd, providing the three-party BIRP is approved. August?, 1996 2. Modify the existing Agreement between all Districts and OCWD for Green Ac~es Project (GAP) waterito include a long-term eommitment to purchase and to suppl¥ reclafmed w.ater at a mutually agreeable price which reflects potentl~I QCWD savin@s and which dc:>es not exceed the eo~ts of operations and maintenance (currently $89/mg). 3. Maintain the June 30, 1997 equity sale from District 14 to the other Districts calculated on the basis of excluding 3.2 mgd for four months as an inter-District payable/receivable of approximately $4.8 million, and transfer the funds in 1999-2000 'in erder to eliminate the negative cash flow impacts on the other Districts from the accelerated flow reduction. 4. Authorize staff to begin negotiations with parties to the three-party agreement to allow for disposal of excess reclaimed water. (Tom Dawes/Gary Streed) FAHR9648 Consideration of Resolution No. 96-_, Amending Personnel and Salary Resolution No. 95-105, to adopt a Districts' Firearms and Weapons Policy. (Mike Peterman) (8) Closed Session. ~ ••• -.............. ,. .................................................................................................. ,.. ..................................... .l"t.!"'""'"'"·'""'"'" ......................................................................... ~~::; Clo-sed Session: During the course of conducting the business set forth on this agenda qs·a.regular meeting of the Committee, the Chair may convene the Committee in clased session to consider matters of Rending real eState negotiations, pending or·potenti.al litigation, or personnel matters, pursuant to Government Cocle Se'ctio.ns 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. . : ; ;. ....... ..i ......... --•• -• -...... ~-· -............. ~ ... -• -... ·-......... -............. -.................................... ·-·· -................... --• -........... ----.... ·-· ........ -..... -................ -.... : (a) Convene in closed session. (b) (1) Confer with General Counsel re status of litigation: Louis Sangermano v. County Sanitation Districts of Orange County, California, Orange County Superior Court Case No. 732680 (Government Code Section 54956.9[a]). August 7, 1996 (2) Confer with Districts' Negotiator and broadbanding consultant re meet and confer; and negotiations for the establishment of salaries, compensation or fringe benefit. (Government Code Section 54957.6). (c) Reconvene in regular session. (d) Consideration of action, if any, on matters considered in closed session. (9) Other business, if any. (10) Matters which a Director would like staff to report on at a subsequent meeting. (11) Matters which a Director may wish to place on a future agenda for action and a staff report. (12) Consideration of upcoming meeting dates and items to be discussed at those meetings. (13) Adjourn. Notiee·to Committee Members: If you have any questions regarding the Agenda, or wish to place items on the Finance, Administration and Human Resources Agenda, Committee members should contact the Committee Chair or Secretary ten days in advance of the Committee meeting. Committee Chair: George Brown (310) 431-2185 Secretary: Lenora Crane (714) 962-2411, Ext. 2501 . (714) 962-3954 (FAX) ~ ...... ···--............................................................................................ ······-· .... -.... -·· .. ·-·--.................................... ·-· ..................... ,. .......................... ------· ..... . phone: (7141962-2411 mailing address: P.O. Box 8 127 Fo1Jnta1n Valley, DA 92726-8127 street addres5: 10844 Ellis Avenue Fdunc.aln Valley, CA 9270&7018 Mern~er A!;fencies • Cities Anaheim Brea Buena Park Cypress Fountain Valley Fill/er tan Hunting/ion Besah Irvine Ls Habra Ls Palms Los AIE!mi~os NawpartJ Besch Orange Plscen/Ja Santis Ana · Sea/ Beach Stanton Tustin Villa P-ark Yorba Unda County of Orange Sanitary Districts Cosca Mesa Gard.en Grove Mfi:Jway Oley Water Distr icts /rvme Ranch COUNTY r_)NITATION DISTRICTS OF ORJGE COUNTY, CALIFORNIA July 31, 1996 NOTICE OF MEETING FINANCE. ADMINISTRATION AND HUMAN RESOURCES COMMITTEE COUNTY SANITATION DISTRICTS NOS. 1, 2, 3, 5, 6, 7, 11, 13 AND 14 OF ORANGE COUNTY, CALIFORNIA WEDNESDAY. AUGUST 7, 1996 -5:30 P.M. DISTRICTS' ADMINISTRATIVE OFFICES 10844 ELLIS AVENUE FOUNTAIN VALLEY, CALIFORNIA 92708 A regular meeting of the Finance, Administration and Human Resources Committee of the Joint Boards of Directors of County Sanitation Districts Nos. 1, 2, 3, 5, 6, 7, 11, 13 and 14 of Orange County, California, will be held at the above location, time and date. A Public Wastewater and Environmental Management Agency Committed ta Protecting the Environment Since 1954 July 31, 1996 FINANCE. ADMINISTRATION AND HUMAN RESOURCES COMMITTEE August September October November December January February March April May June July August TENTATIVELY SCHEDULED MEETING DATES Finance, Administration and Human Resources Committee Meetings Joint Board Meetings August?, 1996 August28, 1996 September 11, 1996 September 25, 1996 October 9, 1996 October 23, 1996 None Scheduled November 20, 1996 None Scheduled December 18, 1996 January 8, 1997 January 22, 1997 February 12, 1997 February 26, 1997 March 12, 1997 March 26, 1997 April 9, 1997 April 23, 1997 May 14, 1997 May 28, 1997 June 11, 1997 June 25, 1997 July 9, 1997 July 23, 1997 None Scheduled August27, 1997 CSDOC • P.O. Box 8127 • Fountain Valley, CA 92728-8127 • (714) 962-2411 ROLL CALL SHEET FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE MEETING DATE: AUGUST 7. 1996 COMMITTEE MEMBERS GEORGE BROWN (Chair) ....................... . ROGER R. STANTON (Vice Chair) ............... . JAN DEBAY .................................. . BURNIE DUNLAP ............................. . JAMES H. FLORA ............................. . JOHN M. GULLIXSON ......................... . WALLY LINN ................................. . THOMAS SALTARELLI ......................... . WILLIAM G. STEINER ......................... . PEER A. SWAN (VJC) ......................... . JOHN J. COLLINS (JC) ........................ . STAFF DON MCINTYRE, General Manager .............. . BLAKE ANDERSON, Asst. Gen'I. Mgr. -Ops. . ..... . JUDITH WILSON, Asst. Gen'I. Mgr. -Admin. . ...... . ED HODGES, Director of Gen'I. Srvs. Admin ........ . DAVID LUDWIN, Director of Engineering .......... . BOB OOTEN, Director of Operations & Maintenance .. MIKE PETERMAN, Director of Human Resources .... . GARY STREED, Director of Finance .............. . MICHELLE TUCHMAN, Director of Communications .. NANCY WHEATLEY, Director of Tech. Srvs ........ . STEVE KOZAK, Financial Manager ............... . MIKE WHITE, Controller ........................ . TOM DAWES, Engineering Supervisor ............ . GREG MATHEWS, Principal Administrative Analyst .. . LINDA EISMAN, Training Manager ............... . LENORA CRANE, Committee Secretary. . ......... . -----------............... . OTHERS TOM WOODRUFF. General Counsel ............. . KEVIN J. MURPHY. City Manager. Newport Beach .. . STEVE CONKLIN, Dir. of Engrg .. OCWD c: Penny Kyle L. Crane TIME: 5:30 P .M. ADJOURN: P.M. I ' f Format o Written Report o Overheads o Slides o Flip Charts Originator __ _ Gfni'li-d I Department Head Sign ~~ '\ GafyStreed Anticipated Time 5 min. FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE AGENDA FOR AUGUST 7, 1996 {4)(e): Director of Finance Report Summary Since June 1995, the daily rate COP program remarketing agents have been PaineWebber for the Series "A" and the 1993 Refunding COPs, and J.P. Morgan for the Series "C" COPs. Most fixed rate Series "B" COPs have been refunded and the 1992 Refunding COPs have always been remarketed by PaineWebber in a weekly mode. The attached graphs show the variable interest rates on each of the daily rate COPs since the last report, and the effective fixed rate for the two refunding issues which are covered by an interest rate exchange agreement commonly called a "swap." Variable rates historically rise at the end of each calendar quarter, and especially at year-end, because of business taxes and statements. The rates decline to prior levels immediately in the following month, as they did again this year. Staff will maintain our continuous rate monitoring and ongoing dialog with the remarketing agents and rating agencies to keep the Committee fully informed about developments in the program as they occur and at each meeting. Staff Recommendation Information only. J:IWPOOC\FINICRANEIFPC.MTGIFAHR.961COVERS.96\DOF8.96 (") fj; c -u < )> Ci! 25 -f RATE(%) m "C :;o Ql )> 0 <il -f 0 i::> N w ~ U1 a. rn 0 i::> (J) :I: 0 0 0 0 0 i::> ~ 03-Jan-96 0 0 0 en 0 -n -f 5· (o Ql (J) 10-Jan-96 ::J 0 _CD 0 :::::! 17-Jan-96 ~ -~ ID ID 24-Jan-96 _en ~ 31-Jan-96 07-Feb-96 14-Feb-96 21-Feb-96 + 28-Feb-96 -u Ql 06-Mar-96 5· CD ~ 13-Mar-96 (') CT 0 CT ~ 20-Mar-96 "'tJ + 27-Mar-96 ~ '- -t 'u 03-Apr-96 m s:: ::I: 0 r.O 10-Apr-96 - Ql (/) ::J 17-Apr-96 -t + i 0 24-Apr-96 ::0 )> -< Gi 01-May-96 ::0 en ::E m Ql f "C 08-May-96 "'tJ + 0 15-May-96 ::0 en t -t 0 22-May-96 0 G> CD ::J 29-May-96 en ::E Ql "C 05-Jun-96 12-Jun-96 19-Jun-96 26-Jun-96 03-Jul-96 10-Jul-96 17-Jul-96 24-Jul-96 t 31-Jul-96 FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE AGENDA FOR AUGUST 7, 1996 ( 5): Consideration of motion to approve the draft Finance, Administration and Human Resources Committee Meeting Minutes of July 10, 1996. Summary Attached is a draft of the Finance, Administration and Human Resources Committee meeting Minutes of July 10, 1996, for approval by the Committee. Staff Recommendation It is recommended that the minutes of the July 10, 1996, Finance, Administration and Human Resources Committee meeting be approved. These minutes were submitted to the Joint Boards at their July 24, 1996 meeting, and no further action is required. J:IWPDOCIFINICRAN~PC.MTG\FAHR.96\1996.MINICVRMIN7.96 DRAFT County Sanitation Districts of Orange County, California P.O. Box 8127 • 10844 Ellis Avenue Fountain Valley, CA 92728-8127 Telephone: (714) 962-2411 MINUTES OF FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE Wednesday. July 10. 1996. 5:30 P.M. A meeting of the Finance, Administration and Human Resources Committee of the County Sanitation Districts Nos. 1, 2, 3, 5, 6, 7, 11, 13 and 14 of Orange County, California was held on July 10, 1996 at 5:30 p.m., at the Districts' Administrative Offices. (1) ROLL CALL The roll was called and a quorum declared present, as follows: Committee Directors Present: George Brown, Chair John C. Cox, Jr., Joint Chair Jan Debay John M. Gullixson Wally Linn Thomas Saltarelli William G. Steiner Roger R. Stanton, Vice Chair Peer Swan, Vice Joint Chair Committee Directors Absent : Burnie Dunlap James Flora Other Directors Present: John Collins, PDC Chair Staff Present: Donald F. Mcintyre, General Manager Judith A Wilson, Assistant General Manager Ed Hodges, Director of General Services Admin. Bob Ooten, Director of Operations & Maintenance Mike Peterman, Director of Human Resources Gary Streed, Director of Finance Michelle Tuchman, Director of Communications Steve Kozak, Financial Manager Mike White, Controller Greg Mathews, Principal Administrative Analyst Linda Eisman, Training Manager Frankie Woodside, Assistant Committee Secretary Others Present: Tom Woodruff, General Counsel Nick Nichols, Labor Counsel Janet Houston, League of Cities (2) APPOINTMENT OF A CHAIR PRO TEM No appointment was necessary. (3) PUBLIC COMMENTS No comments were made. (4) REPORTS OF THE COMMITTEE CHAIR. GENERAL MANAGER. ASSISTANT Minutes of Finance, Adi . ,'. and Human Resources Committt. Page 2 July 10, 1996 (4) REPORTS OF THE COMMITIEE CHAIR. GENERAL MANAGER. ASSISTANT GENERAL MANAGER($), DIRECTOR OF FINANCE/TREASURER. DIRECTOR OF HUMAN RESOURCES. DIRECTOR OF GENERAL SERVICES ADMINISTRATION. DIRECTOR OF COMMUNICATIONS AND GENERAL COUNSEL (a) Report of the Committee Chair The Chair introduced Frankie Woodside, who is Executive Assistant to Ed Hodges and the Committee's Assistant Secretary. Frankie was present to take the minutes of this evening's meeting. The Chair had no further report. (b) Report of the General Manager The General Manager had no report. (c) Report of Assistant General Manager -Administration The Assistant General Manager of Administration had no report. Report of Assistant General Manager -Operations The Assistant General Manager of Operations had no report. (d) Report of the Director of Finance/Treasurer Gary Streed reported that the daily COP rates traditionally go up at the end of the month and down at the beginning of the month. When this report was mailed, only the end of the month rates were available. The latest rates indicate they have gone down approximately 1. 7%. Mr. Streed also reported on the status of the preliminary negotiations with J.D. Edwards regarding the Financial Information System. (e) Report of the Director of Human Resources The Director of Human Resources had no report. (f) Report of the Director of General Setvices Administration The Director of General Services updated the Committee on the CNG project. In May, the low bidder on the project was Nova. Their costs were approximately $200,000 higher than our engineer's estimate. In June, Nova filed for bankruptcy and wanted out of their contract. The next apparent low bidder was approximately $300,000 higher than Nova. As a ·\ ) Minutes of Finance, Admin. and Human Resources Committee Page 3 July 10, 1996 result, staff is in the process of bringing this item back to the PDC Committee and recommending that the project be rebid. Staff is working with the Gas Company to bring project costs closer to the original engineer's estimate. Mr. Hodges also reported on discussions currently underway with potential users and advised that the National Renewal Energy Laboratory contacted the Districts with a plan to participate and invest $130,000 into the project. (g) Report of the Director of Communications The Director of Communications had no report. (g) Report of General Counsel General Counsel had no report. (5) APPROVAL OF MINUTES It was moved, seconded and duly carried to approve the draft minutes of the June 12, 1996, meeting of the Finance, Administration and Human Resources Committee. (Please Note: Though the following items may have been acted on in another sequence, the minutes will reflect them in numerical order for tracking purposes.) (6) OLD BUSINESS FAHR96-40 Labor Negotiations -Information-Only. Mike Peterman, Director of Human Resources, reported that this item is an information-only item. Mike advised that under the "closed session" portion of the meeting, he will present draft labor proposals that have been developed by Division management and Department Heads and will review the selection of our negotiator. Mr. Peterman introduced Nick Nichols as the Districts' choice to represent the Districts with the Professional and Supervisory group. (7) NEW BUSINESS FAHR96-41 Consideration of motion to receive and file Treasurer's Report for the month of May 1996. Mr. Streed advised that the Treasurer's report included in the agenda package indicated the cash and investment position at the end of May 1996. There has been a $1.5 million improvement in market value at the end of June. Minutes of Finance, Admin. and Human Resources Committee Page 4 July 10, 1996 Performance Monitoring Reports for Liquid and Long-term Operating Monies indicated that total investments continue to outperform the benchmarks. FAHR96-42 Consideration of motion to authorize the General Manager to enter into a contractual agreement with a commercial broker to lease 4 :!:. acres of land located at Plant.1. and JO! acres of land located at Plant 2 for a period of up to 10 years. Ed Hodges, Director of General Services Administration, advised that the Districts are now at the point where vacant land can be considered for alternative revenue productive uses. In 1966 the City of Fountain Valley approached the Districts with a proposal to lease a portion of Plant 1 for a ten-year period to be used as their city yard. Boznanski and Company was retained to evaluate the market value and fair rental value of the parcels located at Plant 1 and Plant 2. Boznanski and Company's report concluded that the highest and best use of the vacant land would be as a storage yard, nursery, Christmas tree farm, etc. The report concludes that the anticipated yearly annual rental range for the Plant 1 property could be $6.80 to $7.25 per square foot and at Plant 2 could be $5.00 to $5.50 per square foot. This could result in an annual income of $327,000 to $539,000 not including any brokerage fee. Since the time of this evaluation, the City of Fountain Valley has made other arrangements, however, staff feels the land can still be leased for the uses noted above. After discussion on this item, a motion was made to: Authorize staff to prepare a "business opportunity solicitation" and mail to commercial real estate brokers; authorize staff to retain a real estate expert to evaluate the proposals; and directed staff to return to the appropriate Committee with an evaluation, including any costs involved in cleaning up the sites to make them leasable, and any environmental liability that may be involved. The Committee further recommended that staff contact the cities of Fountain Valley and Huntington Beach regarding authorized uses of the land that is to be leased. Commissions will be negotiated. FAHR96-43 Consideration of motion authorizing the Human Resources Department to issue a Request for Proposal (RFPl for professional consultant se1Vices to conduct a study to determine the feasibility of broadbanding. Mike Peterman, Director of Human Resources, gave a report and slide presentation. He advised that the Districts' current classification structure has 146 separate job classifications. There is a different job title for every fourth employee. Management believes this specialization is contrary to the goals of a productive and flexible workforce. Mr. Peterman reviewed the broadbanding salary management system and how job families with up to twelve classifications can be reduced to two or three bands. Minutes of Finance, Admin. and Human Resources Committee Page 5 July 10, 1996 After discussion among the Committee members, it was moved, seconded and duly carried to authorize staff to issue a Request for Proposal (RFP) for professional consultant services to conduct a study to determine the feasibility of broadbanding, and that the consultant will meet with the Committee prior to doing any substantial work as well as presenting the results of the study to the Committee. FAHR96-44 Consideration of motion to adopt Resolution No. 96-68 amending Resolution No. 95-105 re the Districts' Alcohol and Controlled Substances Policy and Testing Program. Human Resources Director Mike Peterman passed out a copy of the County Sanitation Districts' Substance Abuse and Alcohol Misuse Plan. Mr. Peterman advised the Plan has been prepared to comply with the Department of Transportation Omnibus Transportation Employee Testing Act which requires every driver who operates a commercial motor vehicle in interstate or intrastate commerce, and is subject to commercial driver's license requirements, to be subject to an Anti-Drug and Alcohol Program. This program implements federal legislation. After discussion, it was moved, seconded and duly carried to recommend that the Joint Boards approve Resolution No. 96-68, amending Resolution No. 95-105. FAHR96-45 Consideration of motion approving Joint Powers Agreement Establishing the Orange County Council of Governments. Judy Wilson reported that Orange County Council of Governments (COG) was officially formed in June 1996 when the requisite number of cities approved the Joint Powers Agreement (JPA) establishing this organization. The JPA for the COG provides for an organization of 21 voting members. These include Orange County's 12 delegates to SCAG and one member each from organizations such as Orange County Division of the League of Cities; County of Orange; Orange County Transportation Authority; Independent Special Districts of Orange County/Water Agencies representative; Orange County Cities AQMD representative and County of Orange AQMD representative; an at-large Orange County City; and the County Sanitation Districts of Orange County. Also included are two non-voting members representing the private sector and the universities. Judy introduced Janet Houston of the League of Cities who reviewed some of the issues that would be brought before the COG and the processes that will be set up to review those issues. It's likely there will be amendments to the JPA after all the issues are discussed. The COG is not intended to be another layer of government. Rather, it was intended to replace the Orange County Regional Advisory and Planning Council (RAPC), which has existed since 1991. Minutes of Finance, Admin. and Human Resources Committee Page6 July 10, 1996 There are no membership dues required. The COG will not require new staff and instead will tap into existing staff resources from member entities. The COG's expenses will be covered through funds made available to the Orange County subregion from SCAG. August 15th will be the first meeting of the COG. After discussion on this item it was moved, seconded and duly carried, with 5 aye votes and 2 nay votes, to recommend that the Joint Boards of Directors approve the Joint Powers Agreement establishing the Orange County Council of Governments. (8) CLOSED SESSION. The Chair reported to the Committee the need for a closed session, as authorized by Government Code Sections 54957.6, to discuss and consider the items that are specified as Items (8)(b)(1) and (2) on the published Agenda. The Committee convened in Closed Session at 6:42 p.m. Confidential Minutes of the closed session held by the Committee have been prepared in accordance with California Government Code Section 54957.2 and are maintained by the Board Secretary in the Official Book of Confidential Minutes of Board and Committee Closed Meetings. A report of actions taken will be publicly reported at the time the approved action becomes final re Agenda Items B(b )( 1 ) and (2). At 7:30 p.m., the Committee reconvened in regular session. (9) OTHER BUSINESS. IF ANY None. (10) MATTERS WHICH A DIRECTOR WOULD LIKE STAFF TO REPORT ON AT A SUBSEQUENT MEETING No reports were requested. (11) MATTERS WHICH A DIRECTOR MAY WISH TO PLACE ON A FUTURE AGENDA FOR ACTION AND A STAFF REPORT None. (12) CONSIDERATION OF UPCOMING MEETING DATES AND ITEMS TO BE DISCUSSED AT THOSE MEETINGS The next Committee meeting is scheduled for Wednesday, September 11, 1996. '\ Minutes of Finance, Admin. and Human Resources Committee Page 7 July 10, 1996 (13) ADJOURNMENT The meeting was adjourned at approximately 7:32 p.m. ~~ Lenora Crane Finance, Administration and Human Resources Committee Secretary J:\WPDOC\FIN\CRANE\FPC.MTG\FAHR.96\1996.MIN\MFAHR7.96 I Fonnat o Written Report a Overheads CJ Slides o Flip Charts Originato~ Department Head Sign Off~ . ( GarjStreed Anticipated Time 5 mins. FINANCE, ADMINISTRATION AND HUMAN RESOU.RCES COMMITTEE AGENDA FOR AUGUST 7, 1996 F AH R96-11 : Consideration of motion to receive and file Quarterly Investment Management Program Report for the period April 1 through June 30, 1996 Summary On September 7, 1995, the Districts' Treasury Bill investments matured and funds were wired to PIMCO, the Districts' newly contracted external money manager. The funds were invested to maximize safety, liquidity, diversification, flexibility, and yield. This item transmits the quarterly investment management report for April through June 1996. Staff Recommendation Receive and file this information-only report. J:IWPDOCIFINICRANE\FPC.MTGIFAHR.96\COVERS.96\FAHR96.11 C August 7, 1996 STAFF REPORT FAHR96-11: Consideration of motion to receive and file Quarterly Investment Management Program Report for the period April 1 through June 30, 1996 Background The Districts' Investment Policy, adopted by the Joint Boards on May 24, 1995, includes monthly and quarterly reporting requirements in Section 14.0 for the Districts' two investment portfolios. These two funds, the "Liquid Operating Monies," and the "Long-Term Operating Monies," are managed by PIMCO, the Districts' external money manager. The ongoing monitoring of the Districts' investment program by staff and Callan Associates, the Districts' independent investment advisor, indicates that the Districts' investments are in compliance with the Districts' adopted Investment Policy and the California Government Code, and overall performance has tracked with benchmark indices. In addition, sufficient funds are available for the Districts to meet its operating expenditure requirements for the next six months. Quarterly performance reports prepared by PIMCO and Callan Associates are attached for your reference. Portfolio Performance Summary The following table presents a summary of the performance of both of the Districts' portfolios for the period April 1 through June 30, 1996. '"""" . T.ofut Rateibi Retuhi ---.\ . --. - 1 month 3 months 6 months Since inception 30 Sept 95 ·-·-· ·>:·:-:-·-- Portfolio Performance Summary Second Quarter 1996 Liquid Operating Monies(%) .. :;.:; .. .·. ·,·, 0.5 1.3 2.7 4.2 Long-Term Operating Monies(%) 1.0 0.6 0.4 3.6 :;-';f):;t-_., .. ,.·_ " :v.::·: ,Benchmark 3 Month 6 Month 9 Month Market Value per PIMCO 30 June 96 Estimated Current Yield 30 June 96 I Quarterly Contributions I Estimated Annual Income -·-----:-:-:· 1.3 0.8 2.6 0.7 4.0 3.7 $52,612,904 $281,775,947 5.9% 6.2% -0-$17.0M $2.9M $18.6M CSDOC e P.O. Box 8127 e Fountain Valley, CA 92728-8127 e (714) 962-2411 .. ... FAHR96-11 Page 8 August 7, 1996 Market Recap The focus of the market in the second quarter was on speculation regarding the potential for the Federal Reserve to tighten interest rates. As a result of these investors' fears, together with higher than expected economic growth, interest rates were driven up. The surge in economic growth sent yields on all but the shortest maturity Treasury issues up 20 to 40 basis points, with intermediate rates experiencing the greatest increase. The keystone of PIMCO's fixed-income strategy is their long-term approach to investing. PIMCO continued to maintain a slightly above-index duration1 target for the Long-Term Operating Monies portfolio (2.5 years vs. 2.4 years for the Merrill Lynch 1-5 Year Corporate/Government Bond Index), which reflects their bullish forecast for a downward trend in interest rates over the long run. While the above-index duration detracted from performance in March, the strategy enhanced portfolio returns in the month of June. Overall, this portfolio slightly underperformed the benchmark for the quarter (3.6% vs. 3.7%). PIMCO continued to maintain a below-index duration target for the Liquid Operating Monies portfolio (34 days vs. 90 days for Three-Month Treasuries). With investments in agency discount notes, high-quality commercial paper, and short-term corporate notes, the portfolio slightly outperformed the benchmark for the quarter (4.2% vs. 4.0%). Comparative marked-to-market ending values of the portfolios are shown in the following table: Long-Term Quarter Ending Li~id Operating onies ($M) Operatin~ Monies ($ ) 30 Sept. 95 60.2 234.2 31Dec.95 61.1 263.6 31Mar.96 51.9 262.9 30 Jun. 96 52.6 281.B Annual Review of Investment Policy The first annual review of the Districts' Investment Policy is scheduled for the September 1996 FAHR Committee Meeting pursuant to Section 15 of the Investment Policy and the California Government Code. Recommendation Receive and file this information-only report. SK: le J:\WPDOCIFIN\CRANE\FPC.MTGIFAHR.96\STAFFRPT.96\SRFAHR96.11C 1 Duration is a measure of the timing of the cash flows to be received from a portfolio of fixed Income securities. It is a useful indicator of the market risk or price sensitivity of a portfolio for given changes in interest rates. County Sanitation Districts ·of Orange 'County STRATEGY REVIEW FOR THE PERIOD APRIL 1 -JUNE 30, 1996 FINANCE, ADMINISTRATION ,& HUMAN RES.OURCES COMMITTEE AUGUST 7, 1996 Post Office Box 6430 84_0 Ne\:Vport Center Drive Newport Beach California 92658-6430 714 . 640-3031 'I AGENDA BOND MARKET REVIEW ) II PERFORMANCE I PORTFOLIO REVIEW Ill CURRENT OUTLOOK I STRATEGY _) PACIFIC INVESTMENT MANAGEMENT COMPANY RATES INCREASED ON SIGNS OF GROWTH YIELDS CONTINUED TO INCREASE DURING THE SECOND QUARTER • Surging economic growth led to expectations of Fed tightening HIGHER YIELDS REDUCE BOND PRICES 7 June 30, 19~9~6-------------:r------= 5 Maturity 0 Duration 0 Cl. 100 - 8 OJ 00 c::: ctl ..c u 50 5 4.2 54 10 7.0 96 Mar 31, 1996 I ----------------------------- Dec31, 1995 114 30 12.5 OL__-'="""""'-----'---""=L---'-....,,.....__.._ 3 Mos. 2 Yrs. 3 Yrs. 5 Yrs. 1 O Yrs. 30 Yrs. I D 2ND QTR. ~ 6 MOS.1 SOURCE: Bloomberg PACIFIC INVESTMENT MANAGEMENT COMPANY STRATEGY RECAP - PERFORMANCE RELATIVE TO INDEX Long-Term Operating Fund -Second Quarter 1996 DURATION 1J» MATURITY MIX 1J» SECTOR I ISSUE 1J» ABOVE MARKET SIMILAR TO INDEX GREATER POSITION IN AGENCY BONDS IN PORTFOLIO THAN IN INDEX SHORTER MATURITY CORPORATE EXPOSURE IN PORTFOLIO THAN IN INDEX 2 DETRACTED FROM PERFORMANCE NO IMPACT ON PERFORMANCE POSITIVE IMPACT ON PERFORMANCE • Agency returns better than Treasury returns • Intermediate maturity corporates underperformed Treasury returns PACIFIC INVESTMENT MANAGEMENT COMPANY REVIEW OF PERFORMANCE Through June 30, 1996 Long-Term Operating Fund Since 6/30/96 Inception Market Value 9/30/95 6 Mos . 3 Mos. $281,775,947 Sanitation Districts of _) Orange County (l-T) (%) 3.6 0.4 0.6 Merrill 1 -5 Year Gov't. I Corp. Index (%) 3.7 0.7 0.8 Liquid Operating Fund Since 6/30/96 Inception Market Value 9/30/95 6 Mos. 3 Mos. $52,612,904 Sanitation Districts of Orange County (Liq-op) (%) 4.2 2.7 1.3 3 Month T-Bill (%) 4.0 2.6 1.3 3 PACIFIC INVESTMENT MANAGEMENT COMPANY CURRENT OUTLOOK AND STRATEGY MODERATE GDP GROWTH • Recent surge unsustainable COMPETITION CONTROLS INFLATION • To remain below 3% BOND MARKET OFFERS VALUE • Market expectations too pessimistic • High real rates ABOVE BENCHMARK DURATION TO CAPTURE PRICE GAINS AS RATES FALL MATURITY MIX CONSISTENT WITH INDEX SECTOR CONCENTRATION: • Focus on agencies • Underweight Treasuries • Hold short-term corporates 4 ) PACIFIC INVESTMENT MANAGEMENT COMPANY 1 l l l 1 _J _J _l J J CALLAN AS SOCIA TES INVESTMENT MEASUREMENT REVIEW County Sanitation Districts of Orange County June 30, 1996 The following statistical analysis was prepared by Callan Associates Inc. utilizing secondary data from statements provided by the plan trustee and/or custodian, CAI computer software and selected information in CAI' s database. This report may also contain returns and valuations from outside sow·ces as directed by the client. CAI assumes no responsibility for the accuracy of these valuations or return methodologies. Reasonable care has been taken to assure the accuracy of the CAI computer software and database. CAI disclaims responsibility, financial or otherwise for the accuracy or completeness of this report. Copyright 1996 by Callan Associates Inc. 1 1 l ·1 l CAILAN ASSOCIATES INVESTMENT MEASUREMENT REVIEW COUNTY SANITATION DISTRICTS OF ORANGE COUNTY JUNE 30, 1996 Market Performance Measures of Market Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Fund Performance Performance to Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Performance vs. Active Cash Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Performance vs. Defensive Fixed-Income Style .................................. 5 Fund Profile Portfolio Characteristics Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Portfolio Characteristics Detail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Definitions Market Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Fixed-Income Management Style Groups ....................................... 9 Fixed-Income Portfolio Characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 1 l J COUNTY SANITATION DISTRICTS OF ORANGE COUNTY MEASURES OF MARKET PERFORMANCE JUNE 30, 1996 U.S. stocks rang up another good gain in the second quarter of 1996, with indexes hitting record highs in both April and May before settling back a bit in June. Bonds, however, managed only slightly positive returns as interest income was almost entirely offset by lower prices. Signs that the economy was gaining strength led by vigorous job growth and low unemployment, helped push stocks higher, but accompanying concerns that rising inflation and a tighter monetary policy from the Federal Reserve would soon follow kept bonds under pressure. Forecasters expect annualized GDP growth of 4.0% for the quarter, compared to the previous quarter's 2.2%. Domestic stocks performed well again last quarter, though returns were below those of the preceding five quarters. The return on the S&P 500 stock Index was 4.53%. Of the stocks in the Index, those with positive returns surpassed those with negative returns by about 3 to 2. Leading performers among the ten stock sectors were consumer staples and technology, with returns of 7 .55% and 7 .08%, respectively. The weakest sector, and the only one with a negative return, was raw and intermediate materials at -5.83%. For the first half of 1996, the S&P 500 Index returned 10.24%. Among other stock indices, the Dow Jones Industrial Average returned 1.75% and 11.70% for the quarter and six months, respectively. The S&P "Mid Cap" 400 Stock Index returned 2.82% and 9.25% and the NASDAQ Index returned 7.67% and 12.81 %. Results for the Callan Indices indicated the best average gains among the largest and smallest stocks. The Callan Broad 2000 returned 4.27% and 10.19%, while the Callan Micro 1000 returned 10.05% and 17.83%. Within the Broad 2000, the Large 150 returned 5.26% and 11.02%, while the Medium 350 returned 2.57% and 8.74%, and the Small 1500 returned 3.75% and 9.72%. The Morgan Stanley Capital International EAFE Index, which is composed of representative stock issues from Europe, Australia, and the Far East, returned 3.19% and 8.74% for the quarter and six months on a local currency basis. Returns adjusted for conversion to U.S. dollars were 1.58% and 4.51 %. This included dollar-based returns of 2.62% and 6.43% for the European component of the Index and returns of 0.56% and 2.64% for the Pacific Rim component. The Salomon Non-U.S. Government Bond Index earned 2.58% and 3.55% in U.S. dollars hedged against currency fluctuations. On an unbedged basis, the dollar's 1996 gains hurt results. Returns were 0.40% and -1.28%. Domestic bond returns were narrowly positive, reflecting somewhat higher interest rates. Rates rose 37 basis points on 30-year Treasuries and 27 basis points on Moody's seasoned AAA corporates. Rates on 5-year Treasuries went up 55 basis points. The Lehman Brothers Government/Corporate Bond Index returned 0.47% for the quarter and -1.88% for the six months. Results for the long component were 0.07% and -5.99%, while the intermediate component returned 0.63% and -0.21 %. The Salomon High Yield Bond Index returned 1.37% and 2.93%. Treasury Bills earned 1.29% for the quarter and 2.57% for the six months. The Consumer Price Index for Urban Wage Earners and Clerical Workers rose at an annual rate of 3.16% during the quarter, down from the previous quarter's 5.43%. Standard & Poor's 500 Stock Index Sectors Last Quarter (3/96-6/96) Last Six Months (12/95-6/96) Consumer Sta pies 7.55% Industrial Equipment & Services 14.22% Technology 7.08 Consumer Cyclical 12.39 Industrial Equipment & Services 5.78 Technology 12.23 Public Utilities 5.03 Consumer Staples 11.79 Energy 4.95 Energy 10.59 Consumer Cyclical 3.90 Financial 10.28 Miscellaneous 1.71 Transportation 8.17 Financial 1.53 Raw & Intermediate Materials 7.14 Transportation 1.22 Miscellaneous 7.05 Raw & Intermediate Materials -5.83 Public Utilities 0.11 S&P 500 4.53% S&P 500 10.25% Industry Best Last Quarter (3/96-6/96) Last Six Months (12/95-6/96) Manufactured Housing 26.03% Retail Stores (Apparel) 46.79% Shoes 24.74 Shoes 41.86 Retail Stores (Apparel) 18.28 Oil & Gas Drilling 39.38 Tobacco 17.84 Hotel -Motel 38.98 Beverages (Soft Drinks) 16.76 Beverages (Soft Drinks) 31.19 Oil (Exploration & Production) 15.99 Electronics (Defense) 29.82 Electronics (Semicons & Cmpnts) 15.68 Computer Software & Services 27.35 Communications (Equipment) 15.38 Personal Loans 27.00 Cosmetics 15.34 Communications (Equipment) 23.64 Oil & Gas Drilling 12.72 Manufactured Housing 21.80 Worst J Last Quarter (3/96-6/96) Last Six Months (12/95-6/96) Broadcast Media -5.78% Savings & Loan 0.33% Chemicals (Specialty) -5.89 Telephone -2.50 J Health Care (Miscellaneous) -5.90 Home Furnishings & Appliances -2.83 Containers (Metal & Glass) -7.26 Health Care (Miscellaneous) -3.72 Aluminum -7.54 Machine Tools -5.02 Health Care (HMO's) -7.56 Steel -9.92 Machine Tools -10.52 Broadcast Media -10.22 Steel -11.94 Health Care (HMO's) -11.97 Gold Mining -13.22 Homebuilding -12.26 Truckers -16.30 Truckers -15.86 -1 j 1 J _l J J J COUNTY SANITATION DISTRICTS OF ORANGE COUNTY PERFORMANCE TO DATE Periods Ended Last June 30, 1996 Quarter Liquid Operating Monies 1.37% Long Term Operating Fund 0.80 Total Fund 0.90 Market Indicators Government/Corporate 1-5 Year Index 0.86% 1-3yr Govt/Corp Index 1.03 Merrill Lynch 1-Syr Govt/Corp 0.82 Lehman Brothers G/C Int 0.63 Treasury Bills 1.29 Median Rates of Return Active Cash Management Database 1.31% Defensive Fixed-Income Style 1.01 Ranlring (l=Best,lOO=Worst) vs. Active Cash Management Database Liquid Operating Monies 19 vs. Defensive Fixed-Income Style Long Term Operating Fund 86 Last 112 Year 2.78% 0.59 0.98 0.78% 1.41 0.73 (0.21) 2.57 2.61% 1.38 16 91 For explanation of market indicators and comparable funds see end of report. Last 3/4 Year 4.31% 3.81 3.86 3.72% 3.97 3.73 3.31 3.93 4.25% 3.94 37 69 -1 I l _j l J J COUNTY SANITATION DISTRICTS OF ORANGE COUNTY PERFORMANCE VS. ACTIVE CASH MANAGEMENT DATABASE PERIODS ENDED JUNE 30, 1996 5.5% - 5.0% - 4.5% - 4.0% -T~ 3.5% - 3.0% - • A 2.5% -T.:Jill 2.0% - 1.5% -~· T~ 1.0% - Last Last 1(2 Quarter Year ACTIVE CASH T T .MANAGEMENJ' DATABASE 10th Percentile 1.46 2.8.8 25th Percentile 1.35 2.72 Median 1.31 2.61 75th Percentile 1.26 2.42 90th Percentile 1.14 2.13 Treasury Bills 1.29 2.57 Liquid Operating Monies A 1.37 2.78 Ranking 19 16 (l=Best.lOO=Worst) -----. A Last 3/4 Year T 5.09 4.34 4.25 4.17 4.01 3.93 4.31 37 1 l ' 1 J ... COUNTY SANITATION DISTRICTS OF ORANGE COUNTY PERFORMANCE VS. DEFENSIVE FIXED-INCOME STYLE PERIODS ENDED JUNE 30, 1996 4.5% - 4.0% - 3.5% - 3.0% - 2.5% - 2.0% - 1.5% - 1.0% -~+::::) -+ •A MI:~ Vil G/C • A 0.5% -Int 0.0% - ~ Int -0.5% - Last Last 1/2 Quarter Year DEFENSIVE T T FIXED-INCOME STYLE 10th Percentile 1.26 2.03 25th Percentile 1.13 1.65 Median 1.01 1.38 75th Percentile 0.98 1.22 90th Percentile 0.75 0.71 Merrill Lynch 1-Syr Govt/Corp 0.82 0.73 Lehman Brothers G/C Int 0.63 (0.21) Long Term Operating Fund A 0.80 0.59 Ranking 86 91 (l=Best.lOO=Worst) ~~t:::::.t ~ Last 3/4 Year T 4.38 4.22 3.94 3.77 3.66 3.73 3.31 3.81 69 1 j 1 I 1 l _ j COUNTY SANITATION DISTRICTS OF ORANGE COUNTY LONG TERM OPERATING FUND PORTFOLIO CHARACTERISTICS SUMMARY JUNE 30, 1996 Sector Allocation Treasuries 33% Corporates 12% Long Term Operating Fund Duration Distribution 60% 51.6% 50% 40% 30% 23.6% 20% ------------_IJ! ... 4'.i'll ----13:0'%" 10% 1.4% 0% <1.0 1.0-1.5 1.5-2.0 2.0-2.5 2.5-3.0 Years Duration Quality Distribution Other 1% Agencies 9% Treasuries 77% Corporates f3% Lehman Govt/Corp 1-5 Years Weighted Average Duration 0 Long Term Operating Fund: 2.74 0 Lehman Govt/Corp 1-5 Years: 2.33 21.8% 12.7% 13.6%12.8% 3.0-3.5 3.5-4.0 4.0+ Weighted Average Quality 100%r-~~-,-~~~-,-~~~.-~~----,,---~~-,-~~-1 0 Long Term Operating Fund: Aal 0 Lehman Govt/Corp 1-5 Years: Aaa 79.0% ---~ ------- 40.5% ----- 7.9% I Aaa ------------------------------------ 0.0% Aal 0.9% 1.8% 1.5% 3.2% 4.0% 2.9% ~ 1.8% 0.4% 2.7% Aa2 Aa3 Moody's Rating Al A2 A3 <A3 * All Statistics shown on the page are dependent on the securities in the portfolio being recognized (by their Cusip) and priced. In this case 97% of the securities in the portfolio (by market value) were recognized and priced. ~ -·1 1 I -, l COUNTY SANITATION DISTRICTS OF ORANGE COUNTY LONG TERM OPERATING FUND PORTFOLIO CHARACfERISTICS DETAIL JUNE 30, 1996 Weighted Average Portfolio Characteristics Total Fund, By Asset Class and By Sector F.nding Pen:ent Maiket of Effective Effective OA OA Sector Vaine Portfolio CouPon Manuitv Yield Duration Convexity Quality Total Fund $270,835,436 100.0% 6.76 3.52 6.(i() 2.74 (0.17) Aaa Agencies $132,850,836 49.1% 6.47 4.25 6.88 3.05 (0.44) Aaa Corporates $31,723,359 11.7% 8.18 2.50 6.59 2.14 0.07 A2 Treasuries $89,813,965 33.2% 6.93 3.40 6.37 2.95 0.11 Aaa+ Total Fixed-Income $254,388,l(j() 93.9% 6.84 3.74 6.67 2.90 (0.18) Aaa Cash Equivalents $16,447 ;J:l6 6.1% 5.52 0.25 5.52 0.25 0.00 Aaa 5 Largest Holdings F.nding Pen:ent Market of Effi:dive OA OA Issuer Name Issue Name Sector Vabre Portfolio Yield Dora ti on Ccovexitv Quality United States Treas Nts Nt 7.125% 9/30/1999 Treasuries $78,503,378 29.0% 6.36 2.82 0.10 Aaa+ Federal Home Ui Bks Deb 6.49% 9/13/2000 Agencies $39,931,848 14.7% 6.91 3.01 (0.34) Aaa+ Federal Natl Mtg Assn Deb 6.850% 5/26/00 Agencies $25,162,493 9.3% 6.88 2.67 (1.15) Aaa Feder3.l Home Ui Mtg Corp Deb 6.720%10/02/00 Agencies $25,251,584 9.3% 7.02 2.84 (0.14) Aaa Federal Natl Mtg Assn Deb 6.375%10/13/00 Agencies $20,001,250 7.4% 6.80 3.18 (0.13) Aaa 5 Lowest Rated Holdings (Moody's Rating) F.nding Pen:eot Market of Effective OA OA Issuer Name Issue Name Sector Value Portfolio Yield Dutatioo Ccovexitv Oualitv Lehman Bros Inc Nt 7.00% 5/15/1997 Corporates $1,014,284 0.4% 6.22 0.82 0.01 Baal Gen Mtrs Accep Corp #00231 Mtn 8.625% 1/10/2000 Corporates $3,240,488 1.2% 6.86 2.96 0.11 A3 Gen Mtrs Accep Tr #324 Mtn 8.375% 2/03/1999 Corporates $3,934,829 1.5% 6.68 2.26 0.07 A3 Chrysler Finl Mtn 6.26% 7 /20/1998 Corporates $1,015,152 0.4% 6.62 1.85 0.04 A3 Chrysler Finl Mtn 7.27% 4/13/1998 Corporates $3,008,333 1.1% 6.52 1.61 0.03 A3 5 Longest Duration Holdings F.nding Pen:ent Market of Effecsive OA OA Issuer Name Issue Name Sector Value Portfolio Y-reld Duration Ccovexi!l'. Quality FnmaMtn 5.640 2/20/2001 Agencies $9,783,334 3.6% 6.74 3.74 (0.06) Aaa United States Treas Nts Nt5.75% 10/31/2000 Treasuries $12,788,718 4.7% 6.44 3.73 0.17 Aaa+ Federal Home Ui Mtg Corp Deb 5.990% 3/06/01 Agencies $14,841,671 5.5% 6.75 3.55 (0.62) Aaa Federal Natl Mtg Assn Deb 6.375%10/13/00 Agencies $20,001,250 7.4% 6.80 3.18 (0.13) Aaa Federal Home Ui Bks Deb 6.49% 9/13/2000 Agencies $39,931,848 14.7% 6.91 3.01 (0.34) Aaa+ 5 Holdings with Highest Effect Yield F.nding Pen:eot Market of Effective OA OA Issuer Name Issue Name Sector Value Portfolio Yield Dutation Ccovexi!X Quality Federal Home Ui Mtg Corp Deb 6.720%10/02/00 Agencies $25,251,584 9.3% 7.02 2.84 (0.14) Aaa Federal Home Ui Bks Deb 6.49% 9/13/2000 Agencies $39,931,848 14.7% 6.91 3.01 (0.34) Aaa+ Federal Natl Mtg Assn Deb 6.850% 5/26/00 Agencies $25,162,493 9.3% 6.88 2.67 (l.15) Aaa Gen Mtrs Accep Corp #00231 Mtn 8.625 % 1/10/2000 Corporates $3,240,488 1.2% 6.86 2.96 0.11 A3 Philip Morris Cos Inc Nt 9.250% 02/15/2000 Corporates $9,964,120 3.7% 6.81 2.97 0.11 A2 *All Statistics shown on the page are dependent on the securities in the portfolio being recognized (by their Cusip) and priced. In this case 97% of the securities in the portfolio (by market value) were recognized and priced. Bl 1 l ) 1 FIXED-INCOME MARKET INDICATORS The market indicators included in this report are regarded as measures of equity or fixed-income performance results. The returns shown reflect both income and capital appreciation. 90-Day U.S. Treasury Bills provide a measure of riskless return. The rate of return is the average interest rate available on the beginning of each month for a Treasury Bill maturing in ninety days. Lehman Brothers Govt/Corp Intermediate Index is one of the components of the Government/Corporate Index which includes only bonds with maturities between one to ten years. Merrill Lynch 1-5 Year Government/Corporate represents bonds with maturities between one and five years that are issued by the U.S. Treasury and U.S. Agencies, and by Corporations with investment grade credit ratings. As of year end 1995, the index covered 2,785 issues. 1 I I '. J J FIXED-INCOME MANAGEMENT STYLE GROUPS Active Cash -Managers whose objective is to achieve a maximum return on short-term financial instruments through active management. The average portfolio maturity is typically less than one year. · Active Duration -Managers who aggressively employ interest rate anticipation in setting portfolio duration. Portfolios are actively managed so that large changes in duration are made in anticipation of interest rate changes in hopes of profiting from downward rate movements and minimizing losses from upward rate movements. Core Bond -Managers who construct portfolios to approximate the investment results of the Lehman Brothers Government/Corporate Bond Index or the Lehman Brothers Aggregate Bond Index with a modest amount of variability in duration around the index. The objective is to achieve value added from sector and/or issue selection. Defensive -Managers whose objective is to minimize interest rate risk by investing predominantly in short to intermediate term securities. The average portfolio duration is similar to the duration of the Merrill Lynch 1-3 Year Bond Index. Extended Maturity -Managers whose average portfolio duration is greater than that of the Lehman Brothers Government/Corporate Bond Index. These portfolios exhibit risk/return characteristics similar to the long-bond portion of the Lehman Brothers Government/Corporate Index, called the Lehman Brothers Government/Corporate Long Bond Index. Variations in bond portfolio characteristics are made to enhance performance results. This results in an aggressive risk/return profile that embraces interest rate risk in search of both high yields as well as capital gains. High Yield -Managers whose investment objective is to obtain high current income by investing primarily in non-investment grade fixed-income securities. Due to the increased level of default risk, security selection focuses on credit-risk analysis. Intermediate -Managers whose objective is to lower interest rate risk while retaining reasonable yield levels by investing primarily in intermediate term securities. The average portfolio duration is similar to that of the duration of the Lehman Brothers Intermediate Government/Corporate Bond Index. Money Market -Open-end mutual funds that invest in low-risk, highly liquid, short-term financial instruments and whose net asset value is kept stable at $1 per share. The average portfolio maturity is 30 to 60 days. Mortgage -Managers who invest primarily in mortgage-backed securities including agency (FHLMC, GNMA, FNMA) and private issue pass-throughs, asset-backed securities, and mortgage derivatives (REMICS/CMOs, IOs, POs). Funds may also contain a small percentage of U.S. Treasuries. STIF -Bank investment funds in low-risk, highly liquid, short-term financial instruments. The average portfolio maturity is 30 to 60 days. 1 I I FIXED-INCOME PORTFOLIO CHARACTERISTICS All Portfolio Characteristics are derived by first calculating the characteristics for each security, and then calculating the market value weighted average of these values for the portfolio. Allocation by Sector -Sector allocation is one of the tools which managers often use to add value without impacting the duration of the portfolio. The sector weights exhibit can be used to contrast a portfolio's weights with those of the index to identify any significant sector bets. Average Coupon -The average coupon is the market value weighted average coupon of all securities in the portfolio. The total portfolio coupon payments per year are divided by the total portfolio par value. Average Moody's Rating for Total Portfolio -A measure of the credit quality as determined by the individual ecurity ratings. The ratings for each security from Moody's Investor Service are compiled into a composite rating for the whole portfolio. Quality symbols range from Aaa+ (highest investment quality -lowest credit risk) to C (lowest investment quality -highest credit risk). Average Option Adjusted (Effective) Convexity-Convexity is a measure of the portfolio's exposure to interest rate risk. It is a measure of how much the duration of the portfolio will change given a change in interest rates. Generally, securities with negative convexities are considered to be risky in that changes in interest rates will result in disadvantageous changes in duration. When a security's duration changes it indicates that the stream of expected future cash-flows has changed, generally having a significant impact on the value of the security. The option adjusted convexity for each security in the portfolio is calculated using models developed by Lehman Brothers and Salomon Brothers which determine the expected stream of cash-flows for the security based on various interest rate scenarios. Expected cash-flows take into account any .put or call options embedded in the security, any expected sinking-fund paydowns or any expected mortgage principal prepayments. Average Option Adjusted (Effective) Duration -Duration is one measure of the portfolio's exposure to interest rate risk. Generally, the higher a portfolio's duration, the more that its value will change in response to interest rate changes. The option adjusted duration for each security in the portfolio is calculated using models developed by Lehman Brothers and Salomon Brothers which determine the expected stream of cash-flows for the security based on various interest rate scenarios. Expected cash-flows take into account any put or call options embedded in the security, any expected sinking-fund paydowns or any expected mortgage principal prepayments. Average Price -The average price is equal to the portfolio market value divided by the number of securities in the portfolio. Portfolios with an average price above par will tend to generate more current income than those with an average price below par. Average Years to Expected Maturity -This is a measure of the market-value-weighted-average of the years to expected maturity across all of the securities in the portfolio. Expected years to maturity takes into account any put or call options embedded in the security, any expected sinking-fund paydowns or any expected mortgage principal prepayments. 1 FIXED-INCOME PORTFOLIO CHARACTERISTICS Average Years to Stated Maturity-The average years to stated maturity is the market value weighted average time to stated maturity for all securities in the portfolio. This measure does not take into account imbedded options, sinking fund paydowns, or prepayments. Current Yield -The current yield is the current annual income generated by the total portfolio market value. It is equal to the total portfolio coupon payments per year divided by the current total portfolio market value. Effective Yield -The effective yield is the actual total annualized return that would be realized if all ecurities in the portfolio were held to their expected maturities. Effective yield is calculated as the internal rate of return, using the current market value and all expected future interest and principal cash flows. This measure incorporates sinking fund paydowns, expected mortgage principal prepayments, and the exercise of any "in-the-money" imbedded put or call options. Weighted Average Life -The weighted average life of a security is the weighted average time to payment of all remaining principal. It is calculated by multiplying each expected future principal payment amount by the time left to the payment. This amount is then divided by the total amount of principal remaining. Weighted average life is commonly used as a measure of the investment life for pass-through security types for comparison to non-pass-through securities. 1 1 l ) 1 1 CALLAN ASSOCIATES APPENDIX REPORT COUNTY SANITATION DISTRICTS OF ORANGE COUNTY JUNE 30, 1996 Fund Assets and Growth Detail Liquid Operating Monies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Long Term Operating Account ............................................... 5 Total Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 1 l 1 j COUNTY SANITATION DISTRICTS OF ORANGE COUNTY LIQUID OPERATING MONIES ASSET ALLOCATION ($000) Quarter Eguities Fixed-Income Ended: Amount Percent Amount Percent 09195 0 0.0% 4661 7.7% 12/95 0 0.0% 4723 7.7% 03/96 0 0.0% 51949 100.0% 06/96 0 0.0% 52659 100.0% Cash & Eguiv. Total Amount Percent Amount 55498 92.3% 60159 56393 92.3% 61116 0 0.0% 51949 0 0.0% 52659 l l l 1 J COUNTY SANITATION DISTRICTS OF ORANGE COUNTY LIQUID OPERATING MONIES ASSET FLOWS ($000) Net New Investment Qu~r Fixed-Cash& Ended: Equities Income :Equiv. 09195 12/95 0 (90) 90 Total Fund 0 03/96 0 (10000) 0 (10000) 06/96 0 0 0 0 Quarterly Turnover (Lower of Pur/Sales Div by: Avg Value) Fixed- Eqyities Income 0.0% 0.0% 0.0% 3.6% 0.0% 0.0% ..., I l l I J j J -j COUNTY SANITATION DISTRICTS OF ORANGE COUNTY LIQUID OPERATING MONIES QUARTERLY FACTORS Quarter Fixed-Total 90-Day Ended: Equities Income Fund T-Bills 09195 12195 1.0197 1.0149 1.0133 03/96 1.0139 1.0139 1.0126 06/96 1.0137 1.0137 1.0129 Ell Merrill 1-5 Merrill 1-3 Govt/Corp Govt/Corp 1.0297 1.0252 0.9991 1.0038 1.0082 1.0103 1 I I l l -1 ·1 ~J 1 ) J 1 COUNfY SANITATION DISTRICTS OF ORANGE COUNfY LIQUID OPERATING MONIES CUMULATIVE RESULTS Quarter Fixed-Total 90-Day Ended: ~uities Income Fund T-Bills 09195 100.00 100.00 100.00 100.00 12/95 100.00 101.97 101.49 101.33 03/96 100.00 103.39 102.90 102.61 06/96 100.00 104.80 ' 104.31 103.93 Ill Merrill 1-5 Merrill 1-3 Govt/Com Govt/Com 100.00 100.00 102.97 102.52 102.88 102.91 103.73 103.97 l I l 1 J COUNTY SANITATION DISTRICTS OF ORANGE COUNTY LONG TERM OPERATING ACCOUNT ASSET ALLOCATION ($000) Quarter muities Fixed-Income Ended: Amount Percent Amount Percent 09195 0 0.0% 193392 82.5% 12/95 0 0.0% 239388 90.8% 03/96 0 0.0% 263155 100.0% 06196 0 0.0% 282434 100.0% Cash&~uiv. Total Amount Percent Amount 40908 17.5% 234300 24328 9.2% 263716 0 0.0% 263155 0 0.0% 282434 l ...., l l -1 I J COUNTY SANITATION DISTRICTS OF ORANGE COUNTY LONG TERM OPERATING ACCOUNT ASSET FLOWS ($000) Net New Investment Quarter Fixed-Cash& Total Ended: Equities Income Equiv. Fund 09195 12/95 0 38982 (17146) 21836 03/96 0 0 0 0 06196 0 17000 0 17000 Quarterly Turnover (Lower of Pur/Sales Div by Avg Value) Fixed- Equities Income 0.0% 10.4% 0.0% 0.0% 0.0% 0.0% l 1 I j l _J l .J J COUNTY SANITATION DISTRICTS OF ORANGE COUNTY LONG TERM OPERATING ACCOUNT QUARTERLY FACTORS Quarter Fixed-Total 90-Day Ended: Equities Income Fund T-Bills 09195 12/95 1.0352 1.0320 1.0133 03/96 0.9979 0.9979 1.0126 06/96 1.0080 1.0080 1.0129 Merrill 1-5 Merrill 1-3 Govt/Corp Govt/Coro 1.0297 1.0252 0.9991 1.0038 1.0082 1.0103 1 l ) J ~ j I j COUNTY SANITATION DISTRICTS OF ORANGE COUNTY LONG TERM OPERATING ACCOUNT CUMULATIVE RESULTS Quarter Fixed-Total 90-Day Ended: J;;guities Income Fund T-Bills 09/95 100.00 100.00 100.00 100.00 12/95 100.00 103.52 103.20 101.33 03/96 100.00 103.30 102.98 102.61 06196 100.00 104.13 103.81 103.93 Merrill 1-5 Merrill 1-3 Govt/Com Govt/Com 100.00 100.00 102.97 102.52 102.88 102.91 103.73 103.97 r 1 l COUNTY SANITATION DISTRICTS OF ORANGE COUNTY TOTAL FUND ASSET ALLOCATION ($000) Quarter ~uities Fixed-Income Ended: A.mount Percent Amount Percent 09195 0 0.0% 198053 67.3% 12/95 0 0.0% 244111 75.2% 03/96 0 0.0% 315104 100.0% 06196 0 0.0% 335092 100.0% Cash & E.guiv. Total Amount Percent A.mount 96406 32.7% 294458 80721 24.8% 324832 0 0.0% 315104 0 0.0% 335092 1 1 1 l ·1 l -1 l 1 COUNfY SANITATION DISTRICTS OF ORANGE COUNfY TOTAL FUND ASSET FLOWS ($000) · Net New Investment Quarter Fixed-Cash& Total Ended: Equities Income Equiv. Fund 09195 12/95 0 38892 (17056) 21836 03/96 0 (10000) 0 (10000) 06/96 0 17000 0 17000 Quarterly Turnover (Lower of Pur/Sales Div b~ Avg Value) Fixed- Equities Income 0.0% 10.2% 0.0% 1.2% 0.0% 0.0% , 1 COUNTY SANITATION DISTRICTS OF ORANGE COUNTY TOTAL FUND QUARTERLY FACTORS Quarter Fixed-Total 90-Day Ended: Egnities Income Fund T-Bills 09195 12/95 1.0348 1.0285 1.0133 03/96 1.0008 1.0008 1.0126 06/96 1.0090 1.0090 1.0129 Merrill 1-5 Merrill 1-3 Govt/Corp Govt/Corp 1.0297 1.0252 0.9991 1.0038 1.0082 1.0103 l 1 j J COUNTY SANITATION DISTRICTS OF ORANGE COUNTY TOTAL FUND CUMULATIVE RESULTS Quarter Fixed-Total 90-Day Ended: Equities Income Fund T-Bills 09195 100.00 100.00 100.00 100.00 12/95 100.00 103.48 102.85 101.33 03/96 100.00 103.56 102.93 102.61 06/96 100.00 104.49 103.86 103.93 Merrill 1-5 Merrill 1-3 Govt/Com Govt/Corp 100.00 100.00 102.97 102.52 102.88 102.91 103.73 103.97 CIATES., .. Atlanta Consulting Office Six Concourse Parkway, Suite 2900 Atlanta, Georgia 30328 Phone: (770) 804-5585 Chicago Consulting Office 123 N. Wacker Drive, Suite 970 Chicago, lllinois 60606 Phone: (312) 346-3536 Denver Consulting Office 550 East 8th Avenue Denver, Colorado 80203 Phone: (303) 861-1900 New York Consulting Office 163 Madison Avenue Morristown, New Jersey 07960 Phone: (201) 993-9595 San Francisco Consulting Office 71 Stevenson Street, Suite 1300 San Francisco, California 94105 Phone: (415) 974-5060 Format o Written Report o Overheads o Slides o Flip Charts Originator .... ~ Department Head Sign Off " t ' Anticipated Time IS-Wli"'" FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE AGENDA FOR AUGUST 7, 1996 FAHR96-40: Labor Negotiations -Information Only Summary Through the end of our labor contract period that ends with Local 501 and OCEA in November and the Professional and Supervisory Groups in January, staff will provide the FAHR Committee with monthly updates on the negotiation progress. At the last FAHR Committee, staff presented its plans to hire a broadbanding consultant to conduct a study of the Districts' compensation structure. The objectives of the study will be to identify methods of increasing workforce flexibility while shifting from a "step" or seniority system to a merit and skill based system. The results of this study will provide useful for the labor negotiating team during this year's negotiations. The Committee agreed to do the study but asked that the consultant meet with the them before the study was conducted. The broadbanding consultant and our labor negotiator, Dan Cassidy, will be at the meeting to answer questions during closed session. Staff Recommendation No recommendation -information only. A:\LABORNEG.FAH Fonnat o Written Report o Overheads DSlides o Flip Charts Originator __ _ Department Head Sign J~7 A --~ Anticipated Time 5 min. FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE AGENDA FOR AUGUST 7, 1996 FAHR96-46: Consideration of motion to receive and file Treasurer's Report for the month of June 1996. Summary Both Pacific Investment Management Co., PIMCO, and Mellon Trust began their professional external management of our funds in September 1995. In order to give the Directors an opportunity to review the month-end reports available from PIMCO, and to avoid distribution at the meeting, reports from the prior month are included with the agenda. Immediate post-month reports are available from the Treasurer. Quarterly presentations are made to the Committee by PIMCO and our third-party independent consultant, Callan Associates. The Investment Policy adopted by the Joint Boards on May 24, 1995, includes reporting requirements as listed down the left most column of the PIMCO Monthly Report for the uliquid Operating Monies" and for the ulong-Term Operating Monies.• All of the Investment Policy requirements are being complied with and performance to date exceeds the index rates. Historical cost and the current market values, umark-to-market,• are shown as estimated by both PIMCO and Mellon Trust. The slight differences are caused by differing assumptions regarding marketability at the estimate date. Attached are schedules showing the detail and summary for both the short-term and long-term portfolio investments. Balances csooc June 30, 1996 State of Calif. LAIF $ 14,209,049 Bank of America 3,639,897 PIMCO -Short-term Portfolio 52,326,660 PIMCO -Long-term Portfolio 281,426,635 District 11 GO Bond Fund 9,721 Debt Service Reserves @ Trustees 33,517,923 $385, 129,885 Staff Recommendation Staff recommends the Committee receive, approve and forward this report to the Joint Boards. J:IWPDOC\FINICRANE\FPC.MTGIFAHR.96\COVERS.96\FAHR96.46 August 7, 1996 400 350 300 r? .!! 250 0 c '0200 .,, c ~150 :E 100 50 CS DOC TOTAL CASH & INVESTMENTS 1995 -1996 July 31 Aug. 31 Sept. 30 Oct. 30 Nov. 30 Dec. 31 Jan. 31 Feb. 29 Mar. 31 Apr. 30 May 31 June 30 J:\WPDOCIFINICRANEIFPC.MTGIFAHR.96\COVERS,96\FAHR96,46 MONTHLY REPORT COUNTY SANITATION DISTRICTS OF ORANGE COUNTY INVESTMENT MANAGEMENT PROGRAM PIMCO'S PERFORMANCE MONITORING & REPORTING (for the month ending June 30, I 996) Liquid Operati11g Mo11ies 14.1.1 PORTFOLIO COST AND MARKET VALUE Current Market Value Estimate: • PIM CO • Mellon Historical Cost: 14.1.2 MODIFIED DURATION Of Portfolio: Oflndex: 14.1.3 1 % INTEREST RATE CHANGE Dollar Impact (gain/loss) of 1 % Change: 14.1.4 REVERSE REPOS % of Portfolio in Reverse Repos: (see attached schedule) 14.1.5 PORTFOLIO MATURITY % of Portfolio Maturing within 90 days: 14.1.6 PORTFOLIO QUALITY Average Portfolio Credit Quality: 14.1.7 SECURITIES BELOW "A" RATING % of Portfolio Below "A": 14.1.8 INVESTMENT POLICY COMPLIANCE "In Compliance" 14.1.9 PORTFOLIO PERFORMANCE Portfolio Total Rate of Return: 1 Month: 3 Months: 12 Months: Year-to-Date: Index Total Rate of Return: 1 Month: C:IOFFICF.\lfPll'IMll'l'VOCSJ'IMCORPTV.(!IJJUN. WP[) $52,612,904 $52,65 8,612 $52, 708,614 - .11 .25 $57,874 (.11%) 0% 99% AAA 0% ),. .45 1.34 ------ 2.68 .42 MONTHLY REPORT COUNTY SANITATION DISTRICTS OF ORANGE COUNTY INVESTMENT MANAGEMENT PROGRAM PIMCO'S PERFORMANCE MONITORING & REPORTING (for the month ending June 30, 1996) Long Term Operati11g Monies 14.1.1 PORTFOLIO COST AND MARKET VALUE Current Market Value Estimate: • PIM CO • Mellon Historical Cost: 14.1.2 MODIFIED DURATION Of Portfolio: Oflndex: 14.1.3 1 % INTEREST RA TE CHANGE Dollar Impact (gain/loss) of 1 % Change: 14.1.4 REVERSE REPOS % of Portfolio in Reverse Repos: (see attached schedule) 14.1.5 PORTFOLIO MATURITY % of Portfolio Maturing within 90 days: 14.1.6 PORTFOLIO QUALITY Average Portfolio Credit Quality: 14.1.7 SECURITIES BELOW "A" RA TING % of Portfolio Below "A": 14.1.8 INVESTMENT POLICY COMPLIANCE "In Compliance" 14.1.9 PORTFOLIO PERFORMANCE Portfolio Total Rate of Return: 1 Month: 3 Months: 12 Months: Year-to-Date: Index Total Rate of Return: 1 Month: C:IOFF ICE\WPWIN\\\ PDOC.5\PLMCO!lPTILT Jilli. W PD $281,775,947 $282,433,488 $285,929,711 _j 2.5 2.4 $7,044,399 (2.5%) 0% NA AAA 0% ~ .96 .64 ------- .37 .86 v..._.._......,.vvu.1..vv CSDOC-CONSOLIDATED SHARES/PAR SECURITY DESCRIPTION CASH & CASH EQUIVALENTS CASH 0 CASH SUBTOTAL CASH COMMERCIAL PAPER -DISCOUNT 500,000 AMERICAN TEL & TL DISC 08/16/1996 5,800,000 AMERICAN TEL & TL DISC 08/22/1996 1,800,000 AMERICAN TEL & TL DISC 08/09/1996 1,200,000 CANADIAN WHEAT BD DISC 07/10/1996 1,100,000 CANADIAN WHEAT BD DISC 08/09/1996 2,100,000 COMWLTH BK AUST A DISC 08/20/1996 300,000 ELEC FRANCE SVC DISC 08/23/1996 1,700,000 FORD MTR CR CO DISC 08/29/1996 900,000 GENERAL ELEC CAP DISC 07/02/1996 1,300,000 GENERAL ELEC CAP DISC 08/06/1996 1,100,000 HEWLITT PACKARD DISC 08/20/1996 600,000 KFW INTL FIN INC DISC 08/06/1996 2,500,000 ONTARIO HYDRO DISC 09/09/1996 1,000,000 PITNEY BOWES CC DISC 07/22/1996 500,000 PITNEY BOWES CC DISC 07/23/1996 500,000 SOUTHWSTN PUB SVC DISC 07/19/1996 MELLON TRUST PORTFOLIO DETAIL BY SECTOR 30-JUN-1996 MARKET PRICE 1.000 98.775 98.656 98.469 98.640 98.633 98.653 98.668 98.580 99.514 98.336 98.673 98.601 98.675 98.787 98.990 99.684 MARKET VALUE 1. 58 1. 58 493,875.00 5,722,035.11 1,772,437.50 1,183,685.33 1,084,967.59 2,071,717.67 296,003.58 1,675,860.48 895,627.50 1,278,373.06 1,085,402.08 591,608.34 2,466,877.78 987,872.78 494,949.58 498,419.17 % OF TOTAL 0.00 0.00 0.15 1. 71 0.53 0.35 0.32 0.62 0.09 0.50 0.27 0.38 0.32 0.18 0.74 0.29 0.15 0.15 COST 1.58 1. 58 493,875.00 5,722,035.11 1,772,437.50 1,183,685.33 1,084,967.59 2,071,717.67 296,003.58 1,675,860.48 895,627.50 1,278,373.06 1,085,402.08 591,608.34 2,466,877.78 987,872.78 4 9 4 I .9 4 9 • 5 8 498,419.17 Page 1 BASE: USO HBllOO UNREALIZED ESTIMATED CURR YLD GAIN/LOSS ANNUAL INCOME 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 I 0.00 0 . 00 ~-.'00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0 .00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 10 I 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0 .00 0.00 0.00 0.00 0.00 0 .00 0.00 0.00 0.00 0.00 MELLON TRUST JCSGOOOlOO ~SDOC-CONSOLIDATED PORTFOLIO DETAIL BY SECTOR SHARES/PAR SECURITY DESCRIPTION 3,500,000 WAL MART STORES DISC 07/03/1996 MARKET PRICE 99.809 SUBTOTAL COMMERCIAL PAPER -DISCOUNT TREASURY BILLS -LESS THN lYR 5,000,000 US TREASURY BILLS 06/26/1997 DD 06/27/96 94.393 SUBTOTAL TREASURY BILLS -LESS THN 1 FEDERAL HOME LOAN MORTGAGE -LESS THAN 1 YR 5,000,000 FED HOME LN MTG CORP DISC NTS MAT 07/24/1996 2,100,000 FEDERAL HOME LN MTG CORP DISC MAT 09/05/1996 99.617 98.644 SUBTOTAL FEDERAL HOME LOAN MORTGAGE FNMA ISSUES -LESS THN lYR 700,000 FED HOME LN MTG CORP DISC NTS 08/12/1996 10,000,000 FEDERAL NATL MTG ASSN DISC 08/23/1996 99.310 98.536 SUBTOTAL FNMA ISSUES -LESS THN lYR FED HM LOAN BNK -LESS THN lYR 3,100,000 FEDERAL HOME LN BK CONS DISC 98.435 MAT 08/12/1996 3,100,000 FEDERAL HOME LN BK CONS DISC 98.698 MAT 08/14/1996 500,000 FEDERAL HOME LN BK CONS DISC 97.662 MATURES 11/12/1996 2,500,000 FEDERAL HOME LN BK CONS DISC 98.671 MAT 08/28/1996 SUBTOTAL FED HM LOAN BNK -LESS THN REPURCHASE AGREEMENTS 30-JUN-1996 % OF MARKET VALUE TOTAL 3,493,301.40 1.04 26,093,013.95 7.79 4,719,669.45 1. 41 4,719,669.45 1.41 4,980,861.ll 1. 49 2,071,518.75 0.62 7,052,379.86 2.10 695,170.10 0.21 9,853,550.00 2.94 10,548,720.10 3.15 3,051,473.81 0.91 3,059,622.50 0.91 488,311.ll 0.15 2,466,777.78 0.74 9,066,185.20 2.71 .. BASE: USD HBllOO UNREALIZED ESTIMATED CURR COST GAIN/LOSS ANNUAL INCOME YLD 3,493,301.40 0.00 0.00 0.00 26,093,013.95 0.00 0 .00 0.00 4,719,669.45 0.00 0.00 0.00 4,719,669.45 0.00 0.00 0 4,980,861.ll 0.00 0.00 0.00 2,071,518.75 0.00 0.00 0.00 7,052,379.86 0.00 0.00 0.00 695,170.10 0.00 0.00 0.00 9,853,550.00 0 .00 0.00 0.00 10,548,720.10 0.00 0.00 0.00 3,051,473.81 0.00 0.00 0.00 3,059,622.50 0.00 0.00 0.00 488, 311.11 0.00 0.00 0.00 2,466,777.78 0.00 0.00 0.00 9,066,185.20 0.00 0.00 0.00 Page 2 MELLON TRUST •t..::::iGU U U 1.U U 'SDOC-CONSOLIDATED PORTFOLIO DETAIL BY SECTOR MARKET SHARES/PAR SECURITY DESCRIPTION PRICE 6,200,000 GOLDMAN SACHS LP REPO 100.000 05.300% 07/01/1996 DD 06/28/96 SUBTOTAL REPURCHASE AGREEMENTS BSDT RESERVE DEPOSIT ACCOUNTS 489,516 BSDT RESERVE DEPOSIT ACCOUNT- PUBLIC II 100.000 SUBTOTAL BSDT RESERVE DEPOSIT ACCOUN TOTAL CASH & CASH EQUIVALENTS IXED INCOME SECURITIES U.S. GOVERNMENTS 75,500,000 US TREASURY NOTES 07.125% 09/30/1999 DD 09/30/94 13,000,000 US TREASURY NOTES 05.750% 10/31/2000 DD 10/31/95 SUBTOTAL U.S. GOVERNMENTS U.S. AGENCIES 10,000,000 FED NATL MTG ASSN MTN 5.640% 02/20/2001 DD 02/20/96 39,600,000 FEDERAL HOME LN BK CONS BDS 6.490% 09/13/2000 DD 09/13/95 15,000,000 FEDERAL HOME LN MTG CORP DEBS 5.990% 03/06/2001 DD 03/06/96 25,000,000 FEDERAL HOME LN MTG DEB 6.720% 10/02/2000 DD 10/02/95 25,000,000 FEDERAL NATL MTG ASSN DEB 6.850% 05/26/2000 DD 05/26/95 20,000,000 FEDERAL NTAL MTG ASSN 6.375% 10/13/2000 DD 10/10/95 SUBTOTAL U.S. AGENCIES 102.187 97.406 95.781 98.891 97.031 99.345 99.984 98.625 30-JUN-1996 % OF MARKET VALUE TOTAL 6,200,000.00 1. 85 6,200,000.00 1. 85 489,516.00 0.15 489,516.00 0.15 64,169,486.14 19.15 77,151,185.00 23.02 12,662,780.00 3.78 89,813,965.00 26.80 9,578,100.00 2.86 39,160,836.00 11.69 14,554,650.00 4.34 24,836,250.00 7.41 24,996,000.00 7.46 19,725,000.00 5.89 132,850,836.00 39.65 BASE: USD HBllOO UNREALIZED ESTIMATED CURR COST GAIN/LOSS ANNUAL INCOME YLD 6, 200, ooo. ·oo 0.00 328,600.00 5.30 6,200,000.00 0.00 328,600.00 5.30 489,516.00 0.00 18,356.85 3.75 489,516.00 0.00 18,356.85 7 ) 64,169,486.14 0.00 346,956.85 0.54 78,223,618.72 -1,072,433.72 5,379,375.00 6.97 13,102,578.13 -439,798.13 747,500.00 5.90 91,326,196.85 -1,512,231.85 6,126,875.00 6.82 9,593,750.00 -15,650.00 564,000.00 5 .89 39,890,500.00 -729,664.00 2,570,040.00 l ~ 14,554,687.50 -37.50 898,500.00 6 .17 25,000,000.00 -163,750.00 1,680,000.00 6 .76 25,351,562.50 -355,562.50 1,712,500.00 6.85 20,128,125.00 -403,125.00 1,275,000.00 6.46 134,518,625.00 -1,667,789.00 8,700,040.00 6.55 Page 3 •CSGOOOlOO 'SDOC-CONSOLIDATED SHARES/PAR SECURITY DESCRIPTION BANKING & FINANCE 1,500,000 CHRYSLER FINL MTN TR# 00201 8.160% 01/31/1997 DD 01/11/95 465,000 CHRYSLER FINL MTN TR # 00224 8.080% 01/31/1997 DD 01/31/95 1,500,000 CHRYSLER FINL MTN TR # 00258 7.380% 03/17/1997 DD 03/03/95 2,900,000 CHRYSLER FINL MTN TR# 00306 7.270% 04/13/1998 DD 04/13/95 1,000,000 CHRYSLER FINL MTN TR # 00335 6.260% 07/20/1998 DD 07/18/95 7,100,000 FORD MOTOR CR MTN TR# 00177 VAR/RT 03/30/1999 DD 03/30/94 4,000,000 FORD MTR CR MTN TRANCHE #TR 96 FLTG/RT 11/09/1998 DD 11/08/93 3,000,000 GMAC MED TERM NTS 8.625% 1/10/2000 DD 1/10/95 3,700,000 GENERAL MTRS ACCEP MTN TR00324 8.375% 02/03/1999 DD 0/03/95 1,000,000 LEHMAN BROS INC SR SUB NTS 7.000% 5/15/1997 DD 5/27/94 2,000,000 SEARS DC CORP MTN SER II 9.000% 08/01/1996 DD 08/01/91 1,000,000 SEARS ROEBUCK MTN# TR 00491 7.690% 02/27/1998 DD 02/28/95 SUBTOTAL BANKING & FINANCE INDUSTRIAL 1,500,000 CHRYSLER CORP DEB 10.400% 08/01/1999 9,000,000 PHILIP MORRIS COS NT 9.250% 02/15/2000 2,500,000 SEARS ROEBUCK & CO NT 8.550% 08/01/1996 SUBTOTAL INDUSTRIAL MELLON TRUST PORTFOLIO DETAIL BY SECTOR 30-JUN-1996 MARKET PRICE 101.088 101.133 100.894 101.595 99.672 99.875 100.145 105.860 104.253 100.534 102.520 102.210 104.291 107.218 100.180 % OF MARKET VALUE TOTAL 1,516,320.00 0.45 470,268.45 0.14 1,513,410.00 0.45 2,946,255.00 0.88 996,720.00 0.30 7,091,125.00 2.12 4,005,800.00 1. 20 3,175,800.00 0.95 3,857,361.00 1.15 1,005,340.00 0.30 2,050,400.00 0.61 1,022,100.00 0. 31 29,650,899.45 8.85 1,564,365.00 0.47 9,649,620.00 2.88 2,504,500.00 0.75 13,718,485.00 4.09 TOTAL FIXED INCOME SECURITIES 266,034,185.45 79.39 COST 1,534,950.00 475,972.61 1,522,140.00 2,952,896.00 993,160.00 6,999,748.00 3,970,480.00 3,227,070.00 3,911,640.00 1,007,520.00 2,050,400.00 1,031,860.00 29,677,836.61 1,603,320.00 9,903,780.00 2,554,050.00 14,061,150.00 BASE: USD HBllOO UNREALIZED ESTIMATED CURR YLD GAIN/LOSS ANNUAL INCOME -18,630.00 122,400.00 8 .07 -5,704.16 37,572.00 7 .99 -8,730.00 110,700.00 7 .31 -6,641.00 210,830.00 7.16 3,560.00 62,600.00 ? 91,377.00 402,570.00 5 .68 35,320.00 243,200.00 6.07 -51,270.00 258,750.00 8.15 -54,279.00 309,875.00 8.03 -2,180.00 70,000.00 6 .96 0.00 180,000.00 8.78 -9,760.00 76,900.00 7.52 -26,937.16 2,085,397.00 7 -38,955.00 156,000.00 9.97 -254,160.00 832,500.00 8.63 -49,550.00 213,750 .00 8 .53 -342,665.00 i,202,250.00 8.76 269,583,808.46 -3,549,623.01 18,114,562.00 6.81 Page 4 'C.SGOOOlOU 'SDOC-CONSOLIDATED SHARES/PAR SECURITY DESCRIPTION )THER PORTFOLIO ASSETS PAYABLES/RECEIVABLES 0 INTEREST RECEIVABLE SUBTOTAL PAYABLES/RECEIVABLES TOTAL OTHER PORTFOLIO ASSETS NET PORTFOLIO ASSETS MELLON TRUST PORTFOLIO DETAIL BY SECTOR 30-JUN-1996 MARKET ~ OF PRICE MARKET VALUE TOTAL 1.000 4,888,428.01 1. 46 4,888,428.01 1. 46 4,888,428.01 1.46 335,092,099.60 100.00 BASE: USD HBllOO UNREALIZED ESTIMATED CURR COST GAIN/LOSS ANNUAL INCOME YLD 4,888,428.01 0.00 0.00 0.00 4,888,428.01 0.00 0.00 0 .00 4,888,428.01 0.00 o.oo r 'l 338,641,722.61 -3,549,623.01 18,461,518.BS 5.51 Page 5 Fonnat o Written Report o Overheads o Slides o Flip Charts ~A{) Originators __ _ Tom Dawes, Gary Streed Asst.. Genl. Mgr. Sign Off __ _ Judy Wilson Anticipated Time 15 Mins. FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE AGENDA FOR AUGUST 7, 1996 F AH R96-4 7: Consideration of motions relative to the Basic Integrated Reuse Project proposed by OCWD, IRWD and the City of Newport Beach: 1. Modify the existing Agreement between District 14 and the other Districts to provide that the 1996-97 flow excludes up to 3.2 mgd, providing the three-party BIRP is approved. 2. Modify the existing Agreement between all Districts and OCWD for Green Acres Project (GAP) water to include a long-term commitment to purchase and to supply reclaimed water at a mutually agreeable price which reflects potential OCWD savings and which does not exceed the costs of operations and maintenance (currently $89/mg). 3. Maintain the June 30, 1997 equity sale from District 14 to the other Districts calculated on the basis of excluding 3.2 mgd for four months as an inter-District payable/receivable of approximately $4.8 million, and transfer the funds in 1999- 2000 in order to eliminate the negative cash flow impacts on the other Districts from the accelerated flow reduction. 4. Authorize staff to begin negotiations with parties to the three-party agreement to allow for disposal of excess reclaimed water. Summary At the July 24, 1996 Joint Boards meeting, the Directors referred a request from the City of Newport Beach to the F AHR Committee. The request is for temporary flow accommodations for District No. 14, exempting flows of 3.2 mgd from the calculations determining the Districts' contributions to CORF and the annual Joint Works equity sale. The Orange County Water District, Irvine Ranch Water District, and the City of Newport Beach have a tentative agreement for reclaimed water reuse which is contingent upon several actions by the Sanitation Districts. The actions and the tentative agreement are fully discussed in the attached staff report. Staff Recommendation Staff recommends that the Committee approve three actions for consideration by the Joint Boards in August: 1. Modify the existing Agreement between District 14 and the other Districts to provide that the 1996-97 flow excludes up to 3.2 mgd, providing the three-party BIRP is approved. 2. Modify the existing Agreement between all Districts and OCWD for Green Acres Project (GAP) water to include a long-term commitment to purchase and to supply reclaimed water at a mutually agreeable price which reflects potential OCWD savings and which does not exceed the costs of operations and maintenance (currently $89/mg). 3. Maintain the June 30, 1997 equity sale from District 14 to the other Districts calculated on the basis of excluding 3.2 mgd for four months as an inter-District payable/receivable of approximately $4.8 million, and transfer the funds in 1999-2000 in order to eliminate the negative cash flow impacts on the other Districts from the accelerated flow reduction. 4. Authorize staff to begin negotiations with parties to the three-party agreement to allow for disposal of excess reclaimed water. J:\WPDOCIFINICRANE\FPC.MTGIFAHR,96\COVERS.96\FAHR96.47 August 7, 1996 STAFF REPORT FAHR96-47: Consideration of actions relative to the Basic Integrated Reuse Project proposed by OCWD, IRWD and the City of Newport Beach I. SUMMARY The Orange County Water District (OCWD), the Irvine Ranch Water District (IRWD), and the City of Newport Beach (City), are proposing to implement a reclaimed water project called the Basic Integrated Reuse Project (BIRP). The goal of the BIRP is to provide wide use of reclaimed water produced by JRWD, especially in winter months when IRWD demands for reclaimed water are low. II. BACKGROUND In winter months, IRWD cannot use or store all the reclaimed water the agency is capable of producing at its Michelson Water Reclamation Plant. Therefore, historic practice has been to send higher amounts of untreated wastewater to CSDOC for treatment and disposal, since IRWD could not discharge treated wastewater to San Diego Creek. IRWD recently developed a plan to discharge approximately 5 mgd of treated wastewater into nearby duck ponds and water fowl habitat, with subsequent discharge to San Diego Creek and the Upper Newport Back Bay. IRWD has received from the Santa Ana Regional Water Quality Control Board an NPDES permit for both a demonstration phase (2 years) and, if successful, a subsequent permanent phase. This project, called the Wetland Water Supply Project (WWSP), met opposition from the City and several groups including "Defend the Bay." As an alternative to the WWSP, the BIRP has been proposed by IRWD, OCWD and the City. Instead of discharging the treated effluent to the duck ponds, wildlife habitat, San Diego Creek, and Upper Newport Back Bay, IRWD would pump up to 8 mgd of treated effluent to OCWD's Green Acre Project (GAP) pipelines for reclamation purposes. In order for that to happen, IRWD, OCWD and the City are proposing execution of a Memorandum of Understanding and subsequent agreement which binds each agency to require certain actions and expend certain funds. The BIRP, if enacted, will also require CSDOC to amend an agreement with OCWD. CSDOC e P.O. Box 8127 e Fountain Valley, CA 92728-8127 e (714) 962-2411 FAHR96-47 Page2 August?, 1996 Ill. DESCRIPTION OF THE BASIC INTEGRATED REUSE PROJECT The BIRP is an alternative to WWSP. IRWD projects up to 8 mgd may be surplus reclaimed water within the next five years, particularly during winter months when irrigation demands for reclaimed water are lowest. CSDOC is OCWD's highest use GAP customer. CSDOC uses on average approximately 4.2 mgd of reclaimed water year-round, with single-pass cooling of equipment as the largest use of reclaimed water. Under the BIRP, IRWD reclaimed water would be substituted for OCWD-produced GAP water. This would allow OCWD to reduce production during winter months and, in fact, it appears that the GAP water treatment plant can be removed from service each winter for approximately four months. The IRWD reclaimed water is higher quality than GAP water due to a lower dissolved mineral content. IV. EFFECTS ON CSDOC Under an agreement dated June 1993, CSDOC agreed to purchase reclaimed GAP water from OCWD "at cost," and to provide OCWD with secondary effluent at no charge. "At cost" has meant the cost to OCWD to operate and maintain the facilities to convert our secondary effluent to reclaimed water. For fiscal year 1995-96, CSDOC was charged $89.00 per acre-foot, with an annual cost of approximately $472,000. The agreement also provides that OCWD can terminate delivery of water to CS DOC upon 24-months notice. This clause was included to allow OCWD the opportunity to sell reclaimed water for other purposes at a higher cost at OCWD's discretion. The clause would require CSDOC to find an alternate water source or reduce water requirements for reclaimed water, if other OCWD customers were found. CSDOC uses reclaimed water for a variety of treatment plant processes and for site irrigation. The largest use is for cooling various pieces of equipment most associated with our Central Generation projects. However, as noted above, CSDOC faces the possible future loss of GAP water. In anticipation of that possibility, CSDOC has studied two alternate courses of action, both of which would require significant capital funding. The first course of action is to reduce the use of reclaimed water by eliminating all or some single pass cooling. This could be accomplished by installing closed loop cooling systems with either air cooling or heat exchangers. The second alternative is to build and operate our own reclaimed water system using our secondary water as a source. Both of these alternatives, either separately or together, would be costly and would add extra equipment and operations and maintenance activities not directly associated with the Districts' core business of wastewater treatment . Under the BIRP, reclaimed water supplies would be guaranteed and the need for reducing our use or finding an alternate source eliminated. The cost of the future CSDOC alternatives have not been refined, but a capital cost projection estimate FAHR96-47 Page 3 August?, 1996 in the range of $2 million is probably reasonable. One condition of the three- party BIRP Agreement is that CSDOC agrees to purchase 4.2 mgd from October through March at "a rate per acre foot equal to OCWD's cost to treat secondary water to tertiary standard." Although the three-party BIRP Agreement does not include the Districts, the price of water must be agreed upon. V. TERMS OF THE DRAFT THREE PARTY MEMORANDUM OF UNDERSTANDING (MOU) The MOU that staff has reviewed provides schedules for the accomplishment of certain tasks which will lead to an agreement to implement the BIRP. The three parties, IRWD, OCWD, and City agree in the MOU to: 1) develop agreements and permits which will provide for an intertie between IRWD's Michelson Water Reclamation Plant and GAP lines which currently terminate in MacArthur Boulevard, just southeasterly of Red Hill Avenue; 2) the construction of a proposed GAP extension into Newport Beach, to be paid for by OCWD; and 3) an IRWD intertie within University Avenue which will link to the new GAP extension at Jamboree Road and University Drive. The GAP extension will provide outlets within Newport Beach as far south as Fashion Island for future customers. The City will guarantee that certain city customers now utilizing city potable water will switch to reclaimed water. These two projects, the IRWD intertie, and the GAP extension, constitute the majority of the physical work necessary for the BIRP. The MOU also provides that OCWD will accept from 4.6 mgd up to 7.8 mgd of reclaimed water, up to 3.2 mgd more than it now delivers to customers during the winter months. OCWD will pay IRWD fifty-percent of the price that CSDOC pays OCWD for the reclaimed water. Currently, this is OCWD's operations and maintenance cost to produce the water; $89.00 per acre foot although OCWD has proposed $112 for 1996-97. A separate agreement between OCWD and CSDOC specifies the formula that determines operating costs. If OCWD can sell additional water, it will pay IRWD for the additional water at the fifty-percent rate, otherwise it will accept the added water from IRWD at no additional cost. Separately, plans are being developed for the disposal of any added water (discussed below). The estimated cost to OCWD is about $6 million for the GAP Extension. The estimated capital cost to IRWD for the intertie segment is about $2.1 million. IRWD will also incur the additional costs to treat up to 7.8 mgd to reclaimed water standards rather than to have the Districts treat to ocean discharge standards. (This would reduce District 14's operating costs and revenues.) There is an unknown added cost, probably to OCWD, for disposal of excess reclaimed water. The City of Newport Beach may pay about $1 million of retrofits. There are no capital requirements for CSDOC under the BIRP. FAHR96-47 Page 4 August?, 1996 The method for disposal of reclaimed water that cannot be utilized by OCWD in winter months has not been finalized. One option is to discharge the water into the Santa Ana River. A second option, which appears to be gaining favor, is to discharge the excess water to CSDOC's ocean disposal system. Since the water would already be pressurized by OCWD and at Plant No. 2, it could be directly injected to the outfall pipeline and not require pumping by CSDOC. However, an intertie costing OCWD and/or IRWD about $250,000 would be required to make the necessary connection. The capacity of the GAP transmission line to Plant No. 2 and into the outfall would be approximately 2.5 mgd. Operating costs to CSDOC would be minimal. Discharge to the Santa Ana River would require a permit to be issued by the Regional Water Quality Control Board to the discharger, either OCWD or IRWD. The reclaimed water could be discharged through the Districts' ocean outfall under two different scenarios. If it is put into the Districts' system upstream of the Districts' outfall sampling location, the Districts would request a modification of its ocean discharge permit and assume responsibility for the discharge. Under these conditions, the Districts must have a permit with IRWD, just as it does with large industrial dischargers, to control the quality of the reclaimed water. If the reclaimed water is discharged into the outfall system downstream of the Districts' effluent sampling location, the discharger, IRWD, would apply for a separate ocean discharge permit through the Districts' outfall system. In either case, impact of the additional flow through the ocean discharge system must be evaluated. However, the volume is small enough that its impact is likely to be minimal and, because of the quality, positive to the extent it is evident at all. Compliance with CEQA requirements for the connection to the outfall would be the responsibility of either IRWD or OCWD. VI. A DISCUSSION OF PROS AND CONS OF BIRP From staffs' perspective, the Basic Integrated Reuse Project appears beneficial to the three implementing parties and to CSDOC, presuming that a favorable rate is negotiated with OCWD. Following is a brief discussion of some of the benefits and downside of the proposed BIRP that staff has identified: 1. Irvine Ranch Water District IRWD will benefit by minimizing the opposition of various parties to the Wetland Water Supply Project. Additionally, the high quality IRWD reclaimed water will generally be used in a reclamation project that has the potential for expansion. IRWD is arguably the public agency with the most impressive water reclamation record in the state. This project would certainly advance their mission. IRWD would need to treat wastewater for OCWD at a higher cost than they pay to have us treat it. FAHR96-47 Page 5 August?, 1996 IRWD will incur certain capital charges that may not occur under the WWSP for the intertie. The BIRP will not change IRWD's ultimate CORF contribution because it is an alternative to surface disposal as a part of the WWSP. 2. Orange Countv Water District The Orange County Water District will save money if its GAP Water Treatment Plant is not operated during the winter months. An OCWD staff report estimates annual savings of $152,000. During these same months, a higher quality reclaimed water source will be provided by IRWD. OCWD will benefit by the expansion of the GAP distribution system, and with the subsidies provided, actually enjoy a marginal cost benefit for the expansion. OCWD operating costs will not increase because of BIRP and, thus, GAP water costs to the Districts should remain constant, or even decrease as a result of OCWD savings, priced in accordance with the 1993 GAP Agreement between OCWD and the Districts. 3. City of Newport Beach The City has sponsored and encouraged the development of the BIRP, and will benefit by the expanded use of reclaimed water within the City and by satisfying those opposed to the WWSP. The City will spend about $500,000 for retrofits. 4. Countv Sanitation Districts of Orange Cauntv CSDOC will benefit by lower wastewater treatment costs in the range of $200,000 per year primarily for avoided chemical and energy costs, since not as much effluent will have to be treated to secondary treatment levels for water reclamation. However, the greatest benefit will be the avoidance of future capital requirements for water reclamation and/or water reduction. OCWD's request that we commit for a 15 or 20-year term to our present water usage will negate the requirements for these future capital expenditures. CSDOC will also benefit by the use of the higher quality reclaimed water, and may enjoy additional savings by expanded use of this reclaimed water in chemical systems that currently cannot use the lower quality GAP water. Operational savings realized from less wastewater treatment will be partially offset by a higher cost to the remaining Districts, since the administrative portion and other fixed costs of the treatment costs will be spread over a smaller flow base. FAHR96-47 Page 6 August?, 1996 The CSDOC unit cost for GAP water purchased from OCWD could decrease to reflect the $152,000 annual savings that result from shutting down the GAP treatment plant. This would need to be negotiated. Diversion of IRWD flows to either the WWSP or the BIRP will result in reduced capital contributions from District No. 14, and in increased purchases of Joint Works Treatment Facilities from District No. 14. Assuming the capital improvement program set forth in the 1996-97 Budget (which will be revised by the Strategic Plan), the reallocation of capital improvement costs through 2020 will be: District No. Reallocation @ 4.6 mgd 1 $2,413,366 2 7,009,107 3 7,278,596 5 919,148 6 1,046,674 7 2,165,533 11 1,607,306 13 247,833 14 {22 ,687,563) Total $ 0 The proposed three-party agreement provides that IRWD will not discharge to the WWSP during 1996-97 while the additional GAPll facilities are being constructed, if the Districts will modify our agreement to calculate the District No. 14 capital contribution method for one year. The three-party agreement requires the Districts to agree to treat 3.2 mgd during the six winter months, but to exclude those gallons from the calculations (operations, maintenance and treatment costs would be paid). The capital contribution calculation is based upon a three-year moving average of flows from each of the Districts. The District 14 flow is specially calculated to be three times the actual flow for the four highest months of the year. The impacts of reducing these flows for water that would otherwise have been diverted are limited to the four years that it takes the moving average to catch up. FAHR96-47 Page 7 August?, 1996 During this period, the net capital contributions to JWTF and the annual equity sale/purchase amount to $7,413,451 for District No. 14, whether the other Districts agree to adjust the 1996-97 flow or not. The difference is the timing of the contributions. Cost to Other Include All Flow Adj. 96-97 Flow Districts 1996-97 $ 118,184 $(4,683,315) $ 4,801 ,499 1997-98 (4,289,652 (4,756,246) 466,594 1998-99 674,572 539,278 135,294 1999-00 (3.916,555) 1.486,832 (5,403,387) Total $(7,413,451) ~(7,413,451) $ o Clearly, over the four-year period the additional costs to the other Districts to adjust the 1996-97 flow net to zero. There is, however, the time value of money to consider as the costs shift to the first year. The costs are primarily made up of the annual JWTF equity purchase from District 14, because of the advanced reduction in flows. District No. 14 should carry a receivable from the other Districts for the period, and the other Districts should retain possession of, and interest earnings on, those funds in order to adjust for the time value of first year's equity sale. VII. STAFF RECOMMENDATION As noted above, the Districts are not a party to the proposed three-party agreement, but execution of the agreement depends upon some actions by the Districts. Staff recommends that the Districts agree, in concept, to take the following actions: 1. Modify the existing Agreement between District 14 and the other Districts to provide that the 1996-97 flow excludes up to 3.2 mgd, providing the three-party BIRP is approved. 2. Modify the existing Agreement between all Districts and OCWD for Green Acres Project (GAP) water to include a long-term commitment to purchase and to supply reclaimed water at a mutually agreeable price which reflects potential OCWD savings and which does not exceed the costs of operations and maintenance (currently $89/mg). FAHR96-47 Page 8 August?, 1996 3. Maintain the June 30, 1997 equity sale from District 14 to the other Districts calculated on the basis of excluding 3.2 mgd for four months as an inter-District payable/receivable of approximately $4.8 million, and transfer the funds in 1999-2000 in order to eliminate the negative cash flow impacts on the other Districts from the accelerated flow reduction. 4. Authorize staff to begin negotiations with parties to the three-party agreement to allow for disposal of excess reclaimed water. TMD:GGS:lc J:\WPDOC\FIN\CRANE\FPC.MTG\FAHR.96\STAFFRPT.96\SRFAHR96.47 JOINT BOARDS OF DIRECTORS REGULAR MEETING JULY 24, 1996 ALL DISTRICTS: Agenda Item (21 ): Consideration of motion to receive and file letter request dated July 15, 1996 from City of Newport Beach for temporary flow accommodations for County Sanitation District No. 14, exempting certain excess flows from Capital Outlay Revolving Fund charges, and refer request to Finance, Administration and Human Resources Committee for evaluation and recommendation. Summary The City of Newport Beach has requested that the County Sanitation Districts of Orange County (CSDOC) approve an accommodation whereby the Joint Works Treatment and Disposal Facilities accept temporary flows from County Sanitation District No. 14 without charging the normal contribution to the Capital Outlay Revolving Fund. The City of Newport Beach (City) is making this request as part of a three-way agreement among the City, the Orange County Water District (OCWD), and the Irvine Ranch Water District (IRWD) which will eliminate discharges of treated wastewater to the Newport Back Bay via implementation of a reuse water project called the Basic Integrated Reuse Project (BIRP). The goal of BIRP is to provide beneficial use of reclaimed water produced by IRWD and eliminate discharge of reclaimed water to the Back Bay. Background The Directors will recall that last year the flow agreement between CSD 14 and the Joint Works was modified to include a provision whereby CSD 14's share of the Capital Outlay Revolving Fund (CORF) would be based on the highest four months of recorded use. Separately IRWD, which pays all of CSD 14 charges, has proposed and received approval for a project to discharge treated wastewater into nearby duck ponds and ultimately to the Newport Back Bay. This would allow IRWD to maximize reclamation during winter months when land disposal options are limited and reduce flows treated to the CSDOC Joint Works. The net result to CSDOC will be less flow from IRWD during the winter months; the period which would most likely determine IRWD's share of the CORF Budget. The BIRP is an alternative to the disposal of reclaimed water to the marshes and the Newport Back Bay. The City of Newport Beach and others have not supported the disposal of reclaimed water to the Newport Back Bay and have together with OCWD proposed an alternative project, the BIRP. Under the BIRP, surplus reclaimed water will be sold to OCWD for use in their Green Acres Project (GAP) Reclaimed Water Distribution System. OCWD distributes reclaimed water for irrigation and other purposes. By placing IRWD's surplus reclaimed water into this distribution system, discharges to the duck ponds, San Diego Creek and the Newport Back Bay would be eliminated. IRWD will agree to this under certain conditions, one of which affects CSDOC. This condition is the acceptance by CSDOC of additional wastewater on a temporary basis without including the wastewater in the calculations which determine CSD 14's share of CORF. IRWD will pay the operational charges associated with the collection treatment and disposal of the surplus wastewater. Temporary acceptance of excess wastewater is requested because the BIRP cannot be implemented prior to the coming winter season. Affect on CSDOC Staff has identified two ways in which this proposal affects CSDOC. First, the short-term accommodation of excess IRWD flows will have little effect on District financing. IRWD will either discharge reclaimed water to the Newport Back Bay, or alternatively, send an equal amount of wastewater to CSDOC. If it goes to the Newport Back Bay, CSDOC would not receive a CORF funding; therefore, IRWD is requesting the same funding formula if wastewater is temporarily diverted to CSDOC. IRWD will pay operational charges (which has the effect of lowering cost for the remaining Districts since operational charges include fixed costs). CSDOC has available capacity to accept these additional flows and the addition of these flows will have no material effect on CSDOC's wastewater collection, treatment and disposal facilities. The second way in which the BIRP affects CSDOC is the availability of a long-term, secure reclaimed water source. Reclaimed water is the largest water supply used in the Districts' operations, with an average daily usage of approximately 4.2 mgd. This water is used for a variety of industrial purposes including irrigation, equipment cooling, washdowns, and chemical make-up. Currently, CSDOC supply secondary treated water to OCWD, which provides tertiary treatment and distribution through the GAP system. Our current agreement provides that OCWD can terminate delivery of reclaimed water to CSDOC upon 24 months notice. This clause was included to allow OCWD the opportunity to sell reclaimed water for other purposes at a higher cost, at OCWD's discretion. CSDOC pays only an operating cost for the GAP water, currently $89 per acre-foot (annual charges are about $650,000). If the BIRP is approved, OCWD has requested that CSDOC enter into a long-term supply agreement, of at least 15 years, under which we would be guaranteed the reclaimed water source. Our long-term plans have anticipated that we would someday lose the GAP water source and would, therefore, be forced to either build and operate a costly reclaimed water system of our own and/or reduce reclaimed water usage by constructing expensive, closed-loop water cooling systems to reduce water usage. Under this proposal we will not have to spend those capital funds (probably in the range of $2 million dollars), nor operate a water reclamation system. Therefore, the staff believes that the BIRP has long-term benefits to CSDOC. Recommendation Refer item to Finance and Human Resources Committee for an evaluation and recommendation. TMD:dl J:\WPDOC\BS\AG961JUL96\7.21 July 15, 1996 Mr. Donald F. Mcintyre General Manager Orange County Sanitation Districts 10844 Ellis Fountain Valley, CA 92728 Dear Mr. Mcintyre: CITY OF NEWPORT BEACH (714) 644-3000 Thank you for meeting with City representatives last week to discuss the status of our negotiations with the Irvine Ranch Water District (IRWD) and the Orange County Water District (OCWD) regarding the implementation of an alternative to the Wetlands Water Supply Project (WWSP). As you know, the Santa Ana Regional Water Quality Control Board (SARWQCB) on July 1st approved the WWSP two year demonstration permit which would permit the discharge of reclaimed water into San Diego Creek and Newport Bay beginning October 1, 1996. The parties are close to reaching agreement on the alternative and there is a key provision which will require your Board's approval prior to implementation of the alternative. We would respectively ask that you agendize this matter at your earliest convenience. The details of the request follow in the paragraphs below. The alternative project which we have discussed with you and your staff would construct a pipeline that would permit the transmission of reclaimed water from IRWD's facilities to the OCWD facilitie:s in Fountain Valley. Today the total OCWD demand for the reclaimed water is 4.6 mgd while the excess winter IRWD flow is 7.8 mgd. Today there is an excess flow of 3.2 mgd and in the future it is anticipated that an increased demand for reclaimed water would gradually dissipate the 3.2 excess flow. In the interim the parties have discussed with your staff the construction of a intertie to allow the discharge of the 3.2 mgd into the CSDOC outfall facilities. We will need approval by your Board once design details are developed and as our three party agreement requires obtaining the necessary governmental permits prior to this discharge into the outfall. I've attached the latest draft of the agreement which has been negotiated between the parties for your review and I City Hall• 3300 Newport Boulevard •Newport Beach, California 92663-3884 anticipate that the individual entities will act on the document in the next few days in order to meet the rigorous timetable in the document. One factor that can assist in deferring the discharge of reclaimed water into San Diego Creek while the implementation of the alternate project is pursued is to neutralize capital costs associated with the transmission of IRWD's excess flows to CSDOC. In late 1995 IRWD and CSDOC reached a new agreement on how to calculate the Capital Outlay Revolving Fund (CORF) charges. The new agreement provides that the annual flow is calculated by multiplying the actual flow for the highest four months by three to determine a twelve month flow. Naturally, if IRWD were discharging into San Diego Creek and the Upper Newport Bay during the wintertime peak excess flow, then the CORF charges would be substantially reduced. In our agreement in Section 5 you'll note in Subsection A that it requires in the initial period of the agreement, prior to the construction of the permanent pipeline transmitting the reclaimed water to OCWD, that CSDOC calculate the CORF charges as though IRWD were discharging in San Diego Creek and the Upper Newport Bay, which they would legally be entitled to do through permit of the SARWQCB. It is my understanding that IRWD will pay operational charges for these excess flows. In the second wintertime season of October 1 , 1997 to March 31, 1998 the pipeline connecting IRWD to OCWD, plus the outfall facility for excess flows, are anticipated to be in place and the calculation could transition as flow in the alternate project occur. We would appreciate your consideration of this request expeditiously by your Board to implement our agreement on a timely basis. If you have any questions please, don't hesitate to contact my office at 644-3000. Thank you for your assistance. Sincerely, DATE: TO: FROM: SUBJECT: INTER-OFFICE MEMORANDUM July 15, 1996 Board of Directors William R. Mills Jr. AGREEMENT AMONG IRWD, OCWD AND CITY OF NEWPORT BEACH FOR THE GREEN ACRES PHASE 2 INTERTIE PROJECT As indicated in Agenda Item 6 forthe July 17, 1996 Board Meeting, an agreement was reached at staff level on July 15 for the above. A copy of the agreement is attached for your review and consideration. I have been informed that the IRWD Board and the Newport Beach City Council are expected to meet and take action regarding the agreement prior to the OCWD Board Meeting on July 17. If the two governing bodies do not approve the agreement prior to our board meeting, I will present the item for information only. I have also been informed that the City has scheduled a media briefing at 11 :00 a.m., July 16. Mr. Kevin Murphy, Newport Beach City Manager has asked that I and representatives from IRWD attend that presentation. Mr. Murphy has indicated that he wishes to announce that the three parties have reached tentative agreement, subject to approval by the governing bodies of each party. He will then provide details of the agreement. Details of the agreement (that impact OCWD), as attached, are as follows: Project Commitments 1. City obtains end-user agreements. 2. OCWD obtains commitment from CSDOC to take 4.2 mgd for a period of 15 years. 3. OCWD designs and constructs Green Acres Project in Newport Beach (paid for with State low-interest loan). 4. IRWD designs and funds lntertie pipeline . 5. OCWD is construction manager for construction of Green Acres and lntertie pipelines. 6. City funds $500,000 worth of user hook-up costs. OCWD funds the balance (estimated at $600,000). To: Board 1.. .Jirectors Subject: Agreement Among IRWD, OCWD and City of Newport Beach for the Green Acres Phase 2 lntertie Project July 15, 1996 Page 2 7. City or IRWD will obtain a connection from Green Acres pipeline to CSDOC outfall, paying all costs. 8. All three parties will share cost of retaining a project consultant to manage and expedite project through permitting and design as necessary. Total cost of consultant shall not exceed $90,000. 9. If winter reclaimed water demands change significantly to impact OCWD or IRWD's ability to meet their obligations, both parties will meet to identify a mutually beneficial resolution. Basic Flow Commitments 1. OCWD will take 4.6 mgd of reclaimed water from IRWD from October 1 to March 31 each year for 15 years, subject to receipt of commitment from CSDOC. 2. IRWD will supply 4.6 mgd on a continuous basis for 15 years. If IRWD cannot provide 4.6 mgd, IRWD will pay OCWD 50% of CSDOC price for shortage. Additional Flow Commitments 1. OCWD will accept an additional 3.2 mgd during same time frame subject to City or IRWD obtaining pipeline connection to CSDOC for disposal of excess flows. 2. IRWD will provide an additional 3.2 mgd (beyond the basic 4.6 mgd) to meet OCWD's peak commitments for up to 15% of any 24-hour period. Pricing Commitment 1. OCWD will pay IRWD 50% of the price paid by CSDOC for water purchased, up to 4.6 mgd. (Current CSDOC price is $89/AF.) 2. IRWD receives no payment for water provided to OCWD in excess of 4.6 mgd unless OCWD receives payment for that water. If OCWD receives payment, then IRWD and OCWD determine the cost sharing. Impact on OCWD Finances The project as currently structured has a benefit-cost ratio of 1.5. This equates to a positive impact on the RA; that is, a potential reduction. At the OCWD Board Meeting, I will apprise the Board of the latest developments regarding the project. I will also make a presentation on the project economics and other aspects of the project. AGENDA ITEM SUBMITTAL MEETING DATE: July 17, 1996 TO: Board of Directors FROM: William R. Mills Jr. Staff Contact: S. Conklin/J. Kennedy Budgeted: No Program/Line Item No.: 901-5042-720. 70-01 / GAP2NB Cost Estimate: $ 0 (FY1996-97) $5,600,000 (FY1997-98) General Counsel Approval: Required Engineers/Feasibility Report Approved: Addressed herein CEOA Compliance: R91-5-116 5/1/91 Approved Negative Declaration SUBJECT: GREEN ACRES PHASE 2 INTERTIE PROJECT AGREEMENT WITH IRWD AND CITY OF NEWPORT BEACH SUMMARY It is anticipated that an agreement between OCWD, Irvine Ranch Water District (IRWD), and the City of Newport Beach (City), will be reached by Monday July 15 regarding the Green Acres Phase 2 lntertie Project. In anticipation of that, the City has requested that OCWD staff bring the agreement to the Board on July 17 for consideration. A copy of the proposed agreement will be hand delivered to Board members on July 15 for review. A presentation on the projects economics and on key elements of the agreement will be made at the Board meeting. RECOMMENDATION 1. Approve and execute the lntertie agreement with IRWD and City. 2. Authorize staff to proceed with the Green Acres Phase 2 Newport Beach Project. DISCUSSION/ANALYSIS On May 15, 1996 the Board reviewed the· proposed agreement regarding the Green Acres Phase 2 Newport Beach lntertie project. The Board approved the project in concept however specific questions were asked which are provided in Section 1 of this report along with the corresponding answer. Section 2 of this report provides specific economic data for the project before and after the intertie agreement. Section 1 Previous Board Meeting The following questions were asked at the May 15, 1996 Board meeting. 1. What is the impact of this project on our 1996-97 budget? The project will have no impact to the 1996-97 budget because it will take several months to prepare engineering drawings and award a construction contract. Funds for this work were previously approved in this years budget. Construction funds of approximately $5.6 million ($6. 1 million minus IRWD or City $0.5 million contribution) will need to be budgeted for fiscal year 1997-98. Six hundred thousand dollars ($600,000) of this money will need to come from our reserves next fiscal year. The remainder will come from the state in the form of a low-interest loan. 2. What is the impact of the project on the Replenishment Assessment? The benefit cost ratio of this project is greater than 1 .0 thus the project will have a net savings to the District. Table 3 of Attachment A indicates a benefit cost ratio of 1 .56. Attachment B indicates that the net savings to the District are approximately $104,000 annually, or equivalent to an RA reduction of about $0.33 per AF. 3. How does the project affect our annual debt payments ? This project will qualify for a state loan at 2.8% interest. The annual debt payment will be $328,000 annually. Our current total annual debt payment for all previous capital work is approximately $17 .5 million. Thus if this agreement is approved our annual debt obligation will increase 1.9%. Alternately, the Board could choose to retire an amount of our long term debt equivalent to the new state loan. The retired debt would be at a much higher interest rate than the state loan interest rate. 4. Is IRWD required or committed to provide us water ? Per the proposed agreement IRWD is required to provide water to us or pay an equivalent amount of money for any lost savings. Section 2 Project Economic Analysis Original Project (without lntertie} The original Phase 2 expansion of the Green Acres Project into the Cities of Newport Beach and Huntington Beach has been part of the District's long-range goals to increase the use of reclaimed water, especially along the coastal areas. Such a project would: 1. Increase local supplies 2. Reduce our dependency on MWD 3. Decrease coastal pumping 4. Reduce the demands on the potable system. However in the current economic climate the overall financial benefits of the project are not quite significant enough to justify proceeding with the work. Table 2 of Attachment A indicates that the projects benefit/cost ratio is currently calculated at under 1 .0. As shown on Table 2 the District would borrow approximately $4.2 million from the State at 2.8% interest over 20 years. The annual payment on these funds is $328,258. The current total annual debt payment for all previous District projects is approximately $17. 5 million. In addition to this borrowed money the District would need to lower reserves next fiscal year by $0.6 million to fund the end user retrofitting cost. Project wit h lntertje Agreement The proposed lntertie agreement with IRWD and the City would change the original project's economics to have a positive effect upon the District. Those changes include: 1. The City will contribute $500,000 towards the necessary end user hook-up retrofitting cost; thus the District would only lower reserves by $600,000. 2. The City would obtain the six end user agreements which will save significant OCWD staff time. 3. IRWD will provide the District with water that costs 50% of what it normally costs our Green Acres Plant to produce over each winter period. 4. The Green Acres Plant will be shut down four months every winter saving the District approximately $152,000 annually. These financial arrangements increase the projects benefit/cost ratio to 1.56 as shown on Table 3 of Attachment A. A benefit/cost ratio over 1.0 by definition indicates that the District will save money by proceeding with the project. Savings of approximately $104,000 annually have been calculated as shown on Attachment B. Due to the likely scheduling of the project, it is probable that no adjustments are necessary to this years current budget. The necessary funds to proceed ahead with the project would be budgeted in fiscal year 1997-98. A secondary benefit of proceeding with only the Newport Beach segment of Phase 2 is that the project is smaller and will now qualify for a different State loan program with significantly less project hurdles and requirements. The amount of time and paperwork to receive the funds will be greatly reduced. In addition there will be less construction contract requirements which may lead to receiving lower bids. Attachment A was discussed with the Orange County Ground Water Producers Technical Advisory Committee on May 28, 1996 and they are in support of the project. Phase 2 H1mtingtoo Beach Project Table 4 of Attachment A includes the current marginal economic analysis of expanding the Green Acres system into Huntington Beach. Under current assumptions and on its own (Huntington Beach work only) the benefit cost ratio of this project is less than 1 .0 thus the project is not economically justified. The significant assumptions for this project are (1) the amount of ultimate users which is currently estimated on Table 1 of Attachment A, (2) how much previous pipeline work, which totals $1 .9 million and was funded by the City and a developer, should be included in the marginal analysis and not considered sunk cost, and (3) the amount of funds that the City can commit to assisting with end user retrofit cost. These assumptions significantly affect the economics of the project. District and City of Huntington Beach staffs have met and reviewed the project's economics. Both agree and recommend that the Huntington Beach project not proceed until such uncertainties as the amount of firm water demands, etc., can be determined. 7-17-10.BOD GREEN ACRES PROJECT -PHASE 11 YEAR 2001 MARGINAL COST ANALYSIS The attached tables calculate the marginal benefits of proceeding forward with the Green Acres Phase II Project (GAP2) into the Cities of Newport Beach and Huntington Beach from this point in time. In addition the benefits of proceeding forward with the Newport Beach segment as they are effected by the Irvine Ranch/Newport Beach intertie MOU are calculated. The basic assumption for this analysis is that certain cost and expenses have already been committed via contract or paid for and are thus sunk cost and should not be included in the marginal calculations. These funds will not be recovered if the District chose not to go forward with the GAP2 projects. Examples of these sunk cost include the design cost for the phase II pipelines which have already been committed and the $ 5 million paid for the Santa Ana reservoir. The figures used in this analysis have been inflated 4 percent annually or projected to the year 2001 since that is the estimated time that the complete amount of demands will come on line. Thus the analysis is an estimate of the projects benefit cost ratio in the year 2001 A summary of the tables provided is shown below: TABLE DESCRIPTION 1 Planned Users of Reclaimed Water 2 GAP2 -Newport Beach 3 GAP2 -Newport Beach with MOU benefits 4 GAP2 -Huntington Beach Table 1 provides the estimated total demands and users for GAP2. A total of 1,911 afy of demands are expected by the year 2001. Table 2 calculates the marginal benefits for constructing the GAP2 -Newport Beach project. In Section I the estimated capital cost for GAP2 is divided into two parts. The first part is those capital costs that are eligible for a state loan which total approximately $4. 98 million. The Santa Ana reservoir and pump station retrofitting costs are estimated at $1.9 million. Attachment A This cost is allocated to two sets of end users of which approximately 41 % is attributed to GAP2 -Newport Beach as shown in the following table. The remainder of this expense is allocated to remaining GAP phase I night time users. Cost of Retrofit work $1,900,000 Project Acre-feet Percentage Total Cost Newport Beach Phase II 827 40.8 $775, 185 Phase I Night Infill Users 1200 59.2 $1, 124,815 2027 100 $1,900,000 All of the reservoir retrofit cost could be allocated to the 1200 acre-feet of Phase I infill users since this work was originally contemplated to bring them on line. However now that the Newport Beach work may occur before or at the same time as the infill users and to be more conservative in the Phase II analysis, the retrofit cost has also been spread over the Newport Beach user category. The remaining capital costs or second part of Section I which totals $1 . 1 million are related to Newport Beach end user retrofitting expenses. These items are not eligible for the state loan and thus would be financed using District reserves or traditional Certificates of Participation. The total annual debt service or loss in interest income is estimated at $418,437. Section II of Table 2 estimates the annual operation and maintenance cost for GAP2. These costs include maintenance on the new pipelines, maintenance of the Santa Ana reservoir, the cost of producing and pumping the GAP2 water from the Fountain Valley plant, and the cost of pumping the water from the Santa Ana reservoir. The line item "Project Plant & Reservoir pumping" includes the estimated cost of $90/af to make GAP2 water and the estimated cost of $25/af to pump it from the Santa Ana reservoir. These costs were also inflated by 4% annually to obtain estimated year 2001 cost. The annual maintenance cost is approximately $119, 196. Section Ill of Table 2 predicts probable project revenues. The GAP2 water is estimated to be sold for 80% of the cost of producing groundwater to the two cities which is currently $192.88/af. This unit price was inflated at 4% to the year 2001 and multiplied by the estimated 827 at of Newport Beach demands. The project will also be eligible for the MWD LAP program. In spite of the marginal cost analysis approach the project would likely be eligible for the entire $250 MWD subsidy because the overall estimated unit cost for GAP2 water is expected to be relatively high after past capital cost are included in the Attachment A calculations as allowed by MWD. Section IV of Table 2 quantifies the two District year 2001 savings by implementing GAP2 which are as follows: This new water will reduce the amount of water that the District needs to import. Using the 75% Basin Production Percentage, 75% of the cost of importing water will be saved. The cost of this water is the MWD Seasonal Storage rate minus the replenishment assessment received by the District. The GAP water will also reduce the amount of pumping along the coastline where seawater intrusion is a problem. Therefore less Water Factory 21 (WF21) water will be needed tor injection. The estimated unit cost of WF21 water is $600 per at. It is estimated that on average 20% of WF21 water is eventually used as a potable supply which reduces the purchase of necessary imported water. A savings of 20% of WF21 water cost minus the replenishment assessment received will be realized. Both of these savings have been adjusted down to account f~r the effects of each other so that savings were not double counted. Table 3 provides a marginal cost analysis for constructing the GAP2 Newport Beach portion after the effects of the potential Irvine Ranch/Newport Beach MOU are considered. The MOU causes three changes to Table 2 which are: 1. The Newport Beach Retrofit cost is reduced to $600,000 because IRWD will pay $500,000 of this estimated expense. In addition the City of Newport Beach will take the lead in securing the six necessary end user agreements which will save significant amounts of District staff time. · 2. Water Sales have been reduced by the amount of money that will be paid to IRWD when their water is being used which is $45 per acre-foot. 3. Savings of approximately $152,760 will be realized by OCWD by shutting down the GAP plant for a portion of thE! year when IRWD water is being taken. Table 4 estimates the benefits of constructing the Huntington Beach portion of GAP2. Attachment A TABLE 1 GREEN ACRES PROJECT (PHASE 2) Green Acres Project -Phase 2 Planned Users Huntington Beach 1. Seacliff Golf Course 2. Meadowlark Golf Course 3. Huntington Central Park 4. Holly Seacliff Development 4. Langenbeck Park 5. Murdy Park Subtotal Future Undeveloped Sites: 7. Bolsa Chica Development (Yr. 2000) 8. Harriett M. Wieder Regional Park (Yr. 2002) Subtotal Newport Beach 1. Big Canyon Golf Course 2. Newport Beach Country Club '3. Eastbluff Community Greenbelt 4. COM High School Field 5. Bonita Creek Park 6. Eastbluff City Park Subtotal Huntington Beach Total Newport Beach Total Phase 2 Total Ultimate Demand (AFNr.) 338 ·222 157 99 37 --1fL 872 107 105 212 300 288 155 39 27 ~ 827 1,084 827 1,911 • Day time user (i.e .• receives all water between 6 a.m. and 9 p.m.). (5121196) Attachment A TABLE2 GREEN ACRES -PHASE II -NEWPORT BEACH YEAR 2001 MARGINAL UNIT COST ESTIMATE Total Year 2001 Water Demands I. ESTIMATED 1997 CAPITAL COST Huntington Beach Pipeline Newport Beach Pipeline Santa Ana Reservoir & Pumpstation Sub total 827 afy $0 $4,200,000 $775,185 $4,975,185 Amortized annual state loan payments ......................... ... . ... . $328,258 at 2.8% over 20 years OCWD's Huntington Beach Retrofits Newport Beach Retrofits Sub Total $0 $1, 100,000 $1,100,000 Amortized annual debt payments ......................................... $90,180 at 6.5% over 25 years Total Capital Cost $6,075, 185 Total Annual Debt Payments ................................................ $418,437 II. ESTIMATED YEAR 2001 ANNUAL OPERATION & MAINTENANCE COST 11> Huntington Beach Pipeline Newport Beach Pipeline Santa Ana Reservoir Project Plant & Reservoir pumping Subtotal Annual O&M cost $0 $9,921 $2,295 $106,980 $119,196 ANNUAL PROJECT COST ANNUAL UNIT COST Ill. PROJECT REVENUES Water Sales 12> 827 x $217 MWD Subsidy 827 x $250 Revenues Subtotal $179,429 $206.750 $386, 179 ANNUAL PROJECT COST ANNUAL UNIT COST IV. PROJECT COST SAVINGS Decreased purchase of import recharge water Decreased injection of water factor 21 water (3) (4) $537,633 $650 $151,454 $183 $96 /af $71 /af $167 /af !TOTAL ANNUAL NET UNIT COST $17 !UNIT COST B/C RATIO 0.91 (1) Inflation factor 4.0% (2) Gap water sold at 80% of groundwater rate, inflated to year 2001 (3) 60°.(, of year 2001 estimated recharge cost to OCWD -.60 x ($290 SS rate -$130 R.A.) (4) 15% of Water Factory 21 Injection water -.15 x ($600/af -$130 R.A.) Attachment A 07/12/96 TABLE 3 GREEN ACRES -PHASE II -NEWPORT BEACH YEAR 2001 MARGINAL UNIT COST ESTIMATE Total Year 2001 Water Demands I. ESTIMATED 1997 CAPITAL COST Huntington Beach Pipeline Newport Beach Pipeline Santa Ana Reservoir & Pumpstation Sub total 827 afy $0 $4,200,000 $775,185 $4,975, 185 Amortized annual state loan payments .................................. . at 2.8% over 20 years OCWD's Huntington Beach Retrofits Newport Beach Retrofits Newport Beach Contribution Sub Total $0 $1, 100,000 {$500,000) $600,000 Amortized annual debt payments ........................................... . at 6.5% over 25 years Total Capital Cost $5,575, 185 Total Annual Debt Payments ................................................. . II. ESTIMATED YEAR 2001 ANNUAL OPERATION & MAINTENANCE COST (1) Huntington Beach Pipeline Newport Beach Pipeline Santa Ana Reservoir Project Plant to Produce Water Subtotal Annual O&M cost $0 $9,921 $2,295 $106,980 $119,196 ANNUAL PROJECT COST Ill. PROJECT REVENUES Water Sales (2) Lost Water Sales (3) MWD Subsidy ANNUAL UNIT COST 827 x 1,694 x 827 x Revenues Subtotal $217 ($45) $250 $179,429 ($76,226) $206,750 $309,953 ANNUAL PROJECT COST ANNUAL UNIT COST IV. PROJECT COST SAVINGS Decreased purchase of import recharge water (4) Decreased injection of water factor 21 water (5) $96 /af $71 /af $328,258 $49,189 $377,447 $496,643 $601 $186,690 $226 $167 /af which ='s $137,696 Shut down of GAP for 4 months savings late RATIO (1) Inflation fac4.0% (2) Gap water sold at 80% of groundwater rate, inflated to year 2001 (3) Water sales to IRWD during the winter for their water per MOU (4) so•.4 of year 2001 estimated recharge cost to OCWD -.60 x ($290 SS rate -$130 R.A.) (5) 15% of Water Factory 21 Injection water-.15 x ($600faf -$130 R.A.) Attachment A $152,760 1.56 07/12/96 TABLE4 GREEN ACRES -PHASE II -HUNTINGTON BEACH YEAR 2000 MARGINAL UNIT COST ESTIMATE Total Year 2001 Water Demands I. ESTIMATED 1997 CAPITAL COST Huntington Beach Pipeline Newport Beach Pipeline Santa Ana Reservoir & Pumpstation Sub total 1,084 afy $5,360,000 $0 $0 $5,360,000 Amortized annual state loan payments ................................... $353,647 at 2.8% over 20 years OCWD's Huntington Beach Retrofits Previous Huntington Beach pipeline work Newport Beach Retrofits Sub Total $350,000 (1) $1,900,000 $0 $2,250,000 Amortized annual debt payments ........................................... $184,458 at 6.5% over 25 years Total Capital Cost $7,610,000 Total Annual Debt Payments ························-·-······················ $538, 106 II. ESTIMATED YEAR 2001 ANNUAL OPERATION & MAINTENANCE COST l2l Huntington Beach Pipeline Newport Beach Pipeline Santa Ana Reservoir Project Plant & Reservoir pumping Subtotal Annual O&M cost $29, 156 $0 $0 $140,226 $169,382 ANNUAL PROJECT COST ANNUAL UNIT COST Ill. PROJECT REVENUES Water Sales (3) MWD Subsidy IV. PROJECT COST SAVINGS 1,084 x 1,084 x Revenues Subtotal $217 $250 $235,189 $271,000 $506,189 ANNUAL PROJECT COST ANNUAL UNIT COST Decreased purchase of import recharge water <•> Decreased injection of water factor 21 water (SJ $707,488 $653 $201,299 $186 $96 lat $71 /af $167 /af !TOTAL ANNUAL NET UNIT COST $19 !UNIT COST B/C RATIO 0.90 (1) Assumes HB will pay 50% of estimated retrofit cost of $700,000 (2) Inflation factor 4.0% (3) Gap water sold al 80% of groundwater rate, Inflated to year 2001 (4) 75°.4 of year 2001 estimated recharge cost to OCWD -.60 x ($290 SS rate -$130 R.A.) (5) 20% of Water Fa.ctory 21 Injection water -.15 x ($600/af-$130 R.A.) Attachment A 07/12/96 ~ )> 0 :t s: m z -f m BUDGET EFFECTS OF IRWD INTERTIE MOU AND CONSTRUCTION OF GAP PHASE II INTO NB Item Capital Improvement Program (funds borrowed from State) Debt Service on State Loan OCWD Capital Cost Annual Maintenance .... . ....... _.. ~ Project Revenues (water sales & MWD Subsidy) Project Savings {less water purchase & WF21 injection) GAP Shutdown Savings This Year (1996-97) Next Year (19.97-98) $0 $5,575,185 ~--,,. l"'#'lo • ... .. .... • .... $0 $0 $0 ,.,,.. •• , ....... /'.A ......... ~ ~~ ............. $0 $0 $0 •••••••••••••·-~•••••••••••••• •• ' ••••••• •••••••~•••••••••••••••••••••••••••••••• •••••••••••••••••••••••••••••••·•••••••••·•••u•••••••••••••••••••••••••••••••••••••••••••t•••••••••••••••••••••••• Net Effect to District Potential RA Reduction Future Years Annual ($328,258) ($49,189) ($119,196) $309,953 $137,696 $152,760 $103,766 $0.33 ~ > 0 :c 3: m z -t m BUDGET EFFECTS OF CONSTRUCTING GAP PHASE II INTO HB Item Capital Improvement Program (funds borrowed from State) Debt Service on State Loan OCWD Capital Cost Annual Maintenance Project Revenues (water sales & MWD Subsidy) Project Savings (less water purchase & WF21 injection) Net Effect to District Potential RA Increase This Year (1996-97) $0 $0 $0 $0 $0 $0 Next Year (1997-98) $7,610,000 Future Years Annual ($353,647) ($184,458) ($169,382) $506,189 $181,028 ($20,270) $0.07 CJ Written Report CJ Overheads CJ Slides CJ Flip Charts Originator~ Department Head Sign Off Anticipated Time ; r-.. FINANCE, ADMIN ISTRATION AND HUMAN RESOURCES COMMITTEE FAHR96-48: Summary AGENDA FOR AUGUST 7, 1996 Firearms and Weapons Policy With acts of violence in the workplace becoming increasingly more prevalent in today's society, staff believes it would be prudent to adopt a firearms and weapons policy. The proposed policy would prohibit firearms, explosives, and knives on Districts' premises, in Districts' vehicles, in private vehicles parked on Districts' property and in the possession of Districts' employees while on duty or performing related business assignments. The exact text of the policy would read as follows: The Sanitation Districts are firmly committed to providing a workplace that is safe, secure and free from threats or acts of violence. In keeping with this commitment, the Districts prohibit weapons such as firearms, explosives, and knives on Districts' premises, in Districts' vehicles, in private vehicles parked on Districts' properly and in the possession of Districts' employees while on duty or performing related business assignments. Knives traditionally used as tools, are only considered weapons when used in a threatening manner. Knives not reasonably or traditionally used as tools for Districts' work are considered weapons. Employees are required to report any incident involving weapons to their supervisor. An investigation of the matter will immediately occur and Districts' management will take appropriate action, which will include having the weapon removed, removing the employee from Districts' premises and imposing disciplinary action up to and including termination against any employee who violates this policy. Recommendation Approve Resolution No. 96-_ amending Resolution No. 95-105. J:\WPDOC\FIN\CRANE\FPC.MTG\FAHR.96\COVERS.96\FAHR96.48 Format o Written Report o Overheads o Slides o Flip Charts (12): Summary Department Head Sign Anticipated Time -1..Mi!h._ FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE AGENDA FOR AUGUST 7, 1996 Consideration of upcoming meetings and items to be discussed at those meetings. The calendar of future meetings is on the back of the Notice of Meeting each month. The next Finance, Administration and Human Resources Committee meeting is scheduled for Wednesday, September 11, 1996. Some of the potential major non-routine items the Committee will be reviewing, considering, and acting on over the next few months follow. Some items will carry forward to future months, but are listed only once at the start of a process. -:-:-_-_ .. -·:-:-:-:-:-·-· ··NOVEMBER Consideration of Annual Review of the Districts' Investment Policy Consideration of RFP for Classification Studies Consideration of Staff Report on Early Retirement Incentives· : =: Consideration of Revisions to Purchasing Resolution Consideration of Staff Report on ABC Inventory System Consideration of Meet-and-Confer Process and Status Consideration of Purchase of LAN Server for Communication ~-· ... Consideration of Revised Personal Responsibility In Daily Effort (PRIDE) Program Consideration of Policy to Implement Cost Recovery for Information Requests Consideration of Employee Recognition and Wellness Program Consideration of Broker-of-record for Property and Personnel Insurances Consideration of Meet-and-Confer Process and Status Consideration of Commercial Bank Selection Consideration of First Quarter Investment Program Update Consideration of First Quarter Training Program Update Consideration of First Quarter Budget & Performance Review Consideration of Annual Financial Report (CAFR) Consideration of Results of Broadbanding Study Consideration of Meet-and-Confer Process and Status .. . . Staff Recommendation Information only item. J:IWPDOCIFIN\CRANE\FPC.MTG\FAHR.96\COVERS.96\CALEN8.96