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HomeMy WebLinkAbout1997-02-19. : , li ,,; v II i<.,;1:1 ot the Secreta, . ,,..--.., :..;ounfy' Sanitatio'(D~str~~~. ;0\S)/,'d/,3,S,i;, ./},/._ t ' FEB 2 61997 By -t s 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. February 19. 1997, 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 Wednesday, February 19, 1997, at 5:30 p.m., at the Districts' Administrative Offices. 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 Barry Denes Norman Eckenrode William G. Steiner Peer Swan, Vice Joint Chair Committee Directors Absent : Mark Murphy Thomas Saltarelli Mark Schwing Other Directors Present: None 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 Nick Arhontes, Maintenance Manager Barbara Collins, Senior Management Analyst Greg Mathews, Principal Management Analyst Lenora Crane, Committee Secretary Ryal Wheeler, Foreman & Citizen Others Present: Tom Woodruff, General Counsel APPOINTMENT OF A CHAIR PRO TEM No appointment was necessary. PUBLIC COMMENTS Ryal Wheeler, 14832 Newland St., Midway City, California, addressed the Committee regarding Action Item FAHR97-14. He stated that in 1996, the General Services Administration Department was formed and one of its duties and responsibilities was to look at opportunities and options of generating revenue for the agency. A report was prepared in October of 1996 which looked at the feasibility of providing line cleaning services to other agencies. This option looked favorable as far as costs and appeared to be competitive. Events at the Districts changed the course and direction of this revenue option. The item on the agenda tonight proposes outsourcing the line cleaning. Mr. Wheeler questioned if the Committee would consider tonight's proposal as an Minutes of Finance, Adm, ;nd Human Resources Committee Page 2 February 19, 1997 interim proposal and, in the future, would they reconsider the feasibility of providing these services through the Districts' Collection Division. He felt it is still a viable option and should not be put to rest. General Manager Don McIntyre responded that he thinks the proposal is still a viable option and has not been put to rest. Nothing on the Agenda tonight will negate this as a future option. In the future, the EPA may hold the Districts liable for any spills in the entire District which will mean the Districts will have to develop standards that other cities and agencies will have to abide by for line cleaning. ' APPROVAL OF MINUTES It was moved, seconded and duly carried to approve the draft minutes of the January 15, 1997, meeting of the Finance, Administration and Human Resources Committee. REPORT OF THE COMMITTEE CHAIR The Chair introduced and welcomed Directors Barry Denes and Norman Eckenrode to the Committee. REPORT OF THE GENERAL MANAGER The General Manager had no report. REPORT OF ASSISTANT GENERAL MANAGER -ADMINISTRATION The Assistant General Manager of Administration stated she was pleased to announce that our budget staff, and the Committee, earned the GFOA Excellence in Budgeting award. A plaque will be forthcoming. This is the third major piece of recognition for our three major financial reports that are put out with the help of the F AHR Committee. We received the GFOA award for the Comprehensive Annual Financial Report, and the Municipal Treasurer's Association award for our Investment Policy. She commended staff and the Committee for this joint effort. REPORT OF ASSISTANT GENERAL MANAGER-OPERATIONS The Assistant General Manager of Operations had no report. REPORT OF THE DIRECTOR OF FINANCE Finance Director Gary Streed advised the Committee that three hand-outs were distributed to them prior to the meeting. The monthly Treasurer's Report is distributed at the meeting, due to the government code requirements that it be reviewed within thirty days of the end of the month. Because of the difficulty in receiving the reports from third-party managers prior to the agenda mailing, the Districts' adopted Investment Policy calls for the report to be handed out at the meeting. The report is then forwarded to the Joint Boards. This is item "A" in the Consent Calendar section of the agenda. Chair Brown advised the Committee to look the report over very carefully and contact Gary Streed, if they have any questions or concerns. Minutes of Finance, Adr~:and Human Resources Committee 1 Page 3 February 19, 1997 Also distributed was a colored chart of Draft Critical Goals which will be discussed under Action Items as item 3. on the agenda. Lastly, a blue book was distributed entitled," An Elected Official's Guide to Investing." This book, prepared by the GFOA, along with the Districts' Investment Policy, will be very helpful to the new Committee members. A quarterly report is also included in the Consent Calendar portion of the agenda, which contains information from two of our outside advisors, PIMCO, the Districts' Investment Manager, and Callan & Associates, the Districts' Independent Advisor. Mr. Streed advised that there is yet another third-party advisor, Mellon Trust, the Districts' custodial bank. Chair Brown advised the new members that this review by staff and the three outside advisors is very important information, due to the recent County bankruptcy. Mr. Streed stated that Item D, under the Consent Calendar, is for renewal of Boiler and Machinery Insurance. There was a proposal for $81,275 contained in the report. Since the report was sent out, the Districts received a firm price for $79,207. There will be no increase in the per unit basis. The unit price is the same as the current year, but the value has increased. REPORT OF THE DIRECTOR OF HUMAN RESOURCES The Director of Human Resources will be reporting under Closed Session. REPORT OF THE DIRECTOR OF GENERAL SERVICES ADMINISTRATION The Director of General Services had no report. REPORT OF THE DIRECTOR OF COMMUNICATIONS The Director of Communications advised that the second half of the New Board Member Orientation will be held this Saturday from 9 a.m. to noon. All Board Members are invited to attend. Spouses or significant others are also welcome to attend. General Manager McIntyre advised that significant time will be spent on the NPDES discharge permit. Also, some time will be spent at the Lab reviewing the Lab operation and the LIM system. There also will be a tour of new the Human Resources building. In response to the Chair's inquiry regarding the fire at Plant 2, Steve Kozak, Financial Manager, provided an update. Staff has been working with the insurance carriers and claims adjuster. Engineering is working on the replacement cost estimates for the trailers. Staff is also working with Purchasing to replace the Xerox equipment. The Xerox equipment is replaceable at no cost to the Districts under our lease agreement with Xerox. By the end of the week, the Districts expect to receive three checks from the three underwriters who carry our insurance coverage. We will receive a $100,000 advance to cover equipment, personal belongings, loses and any other fixed asset needs within the replaceable limits. General Manager McIntyre advised that staff will be seeking direction from the Steering Committee next week regarding permanent housing for those employees affected by the fire. This will open up an old subject concerning the warehouse at Plant 2. Minutes of Finance, Admi, nd Human Resources Committee Page4 February 19, 1997 REPORT OF GENERAL COUNSEL General Counsel had no report. CONSENT CALENDAR ITEMS {A ·E) A. FAHR97-09: B. FAHR97-10: C. FAHR97-11: D. FAHR97-12: E. FAHR97-13: RECEIVE AND FILE TREASURER'S REPORT FOR THE MONTH OF JANUARY 1997 (All Districts): The January Treasurer's Report was handed out at the FAHR Committee meeting in accordance with the Board- approved Investment Policy, and in conformance to the Government Code requirement to have monthly reports reviewed within 30 days of month end. RECOMMENDED ACTION: Receive and file Treasurer's Report for the month of January 1997 and forward to the Joint Boards. CERTIFICATES OF PARTICIPATION (COP) REPORT (All Districts): RECOMMENDED ACTION: Receive and file this information-only item. EMPLOYMENT STATUS REPORT (All Districts): Total head count for January 1997 at the Districts RECOMMENDED ACTION: Receive and file this information-only item. ANNUAL RENEWAL OF BOILER & MACHINERY INSURANCE FOR THE PERIOD MARCH 1, 1997 TO MARCH 1, 1998 (All Districts) RECOMMENDED ACTION: Renew Boiler & Machinery Insurance for the Districts for the period March 1, 1997 to March 1, 1998, with American Manufacturers Mutual Insurance (Kemper Insurance Group), in an amount not to exceed $79,207. QUARTERLY INVESTMENT MANAGEMENT PROGRAM REPORT FOR THE PERIOD SEPTEMBER 1 THROUGH DECEMBER 31,1996 (All Districts): RECOMMENDED ACTION: Receive and file this information-only report. MOTION: A motion was made and unanimously carried to approve items specified as A through E under "Consent Calendar." ACTION ITEMS 1. FAHR97-14: ALTERNATIVE DELIVERY OF COLLECTION SYSTEM O&M SERVICES (All Districts) COMMITTEE DISCUSSION: Ed Hodges introduced Senior Management Analyst Barbara Collins and Maintenance Manager, Nick Arhontes and described their responsibilities within the GSA Department. Both Ed Hodges and Nick Arhontes gave a slide presentation regarding the General Services Department's recommendations to reorganize the Division, out t ~ Minutes of Finance, Adr, 1and Human Resources Committee Page 5 February 19, 1997 2. FAHR97-15: source routine cleaning of small lines, and establishment of a Districts- wide grease mitigation ordinance working with other public agencies. After considerable discussion on the item, the Committee suggested that staff inform Director Saltarelli of Tustin, and talk to the City Manager, so they understand what the Districts is proposing regarding the grease traps, and the impact it will have on the restaurants in their city. The Committee discussed many options. The Committee agreed the feasibility of providing these services through the Districts' Collection Division is still an option for the future. In response to questions from the Committee, it was determined that the Districts has initiated an outreach program with all the cities, and Nancy Wheatley's staff has set up workshops with the restaurant owners. Nancy Wheatley advised the Committee that her staff prepared a brochure in December on how to control grease in restaurants which is being distributed to restaurants across the county. She agreed with Director Swan that there is a need to have partnerships with the communities, as well as the cities. Director Debay expressed an interest in the brochure, stating she would like to take some back to her city's restaurant association. MOTION: 1. Authorize staff to reorganize the Division in accordance with the attached report. This will result in a decrease of 13 positions from our current authorized level; 2. Authorize staff to prepare a Request for Proposal to out source the "routine" cleaning of small lines (12" and below) in the three District 7 areas; 3. In cooperation with the cities and the Districts' Source Control Division, establish a Districts-wide grease mitigation ordinance. REVIEW, APPROVE AND FILE THE 1996-97 MID-YEAR FINANCIAL AND OPERATIONAL REPORT COVERING THE PERIOD ENDED DECEMBER 31, 1996 (All Districts) COMMITTEE DISCUSSION: Mike White and Greg Mathews reported on the Districts' financial and operational status. The Committee requested that future financial reports be presented in a format which will be more meaningful to Committee members using key industry measurements. The Committee agreed that construction costs should be shown in the budget as encumbered funds, even if the projects span several budget years, and should not be brought before the Committee whenever acceleration of a project takes place. Change Orders should continue to be reviewed by the PDC Committee. The Committee requested that an item be brought back next month recommending a change in budgeting policies. MOTION: The Committee approved and forwarded the 1996-97 Mid-Year Financial and Operational Report for the period ended December 31, 1996, to the Joint Boards, and to approve a supplemental appropriation of $6,927,000 within the Capital Outlay Revolving Fund (CORF). Minutes of Finance, Admi, hd Human Resources Committee Page 6 February 19, 1997 3. FAHR97-16: CRITICAL GOALS, FISCAL POLICY STATEMENTS, AND BUDGET ASSUMPTIONS FOR 1997-98 BUDGET PREPARATION (All Districts): The Steering Committee and staff have drafted Critical Goals, Fiscal Policy Statements, and Budget Assumptions for the FAHR Committee to review prior to staffs preparation of the 1997-98 Budget Recommendation COMMITTEE DISCUSSION: Mike White and Judy Wilson gave the presentation. The Committee felt that "reserve" is a bad term and should be renamed "funds" or "restricted funds." Mike White advised that funding levels will decline through 1998, if there are no increases in fees. The Committee discussed the need for rate increases because of the negative cash flow even under the current reduced capital spending plan. The Committee briefly discussed the political implications of raising rates. Staff was directed to bring back a short, concise rate increase report which will include the possible impact of consolidation. The training budget is currently underspent, because of the workplace investigation and the subsequent cancellation of many of the classes. However, training will be close to budget by the end of the year. MOTION: Approve the 1997-98 Draft Critical Goals, Fiscal Policy Statements, and Budget Assumptions, and direct staff to prepare budgets incorporating these parameters. INFORMATIONAL PRESENTATIONS None. CLOSED SESSION The Chair reported to the Committee the need for a closed session, as authorized by Government Code Sections 54957.6 and 54956.9, to discuss and consider the items that are specified under "Closed Session" as Items Nos. 9(a) and 9(b) on the published Agenda. The Committee convened in closed session at 7:35 p.m. The Board did not consider Item 9(b), and no reports were given. At 8:00 p.m., the Committee reconvened in regular session. 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. OTHER BUSINESS, COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS. IF ANY There were none. ' I ~, ~- Minutes of Finance, Adn and Human Resources Committee Page 7 February 19, 1997 MATTERS WHICH A DIRECTOR WOULD LIKE STAFF TO REPORT ON AT A SUBSEQUENT MEETING There were none. MATTERS WHICH A DIRECTOR MAY WISH TO PLACE ON A FUTURI:: AGENDA FOR ACTION AND STAFF REPORT There were none. FUTURE MEETING DATES The next Finance, Administration and Human Resources Committee Meeting is scheduled for Wednesday, March 12, 1997, at 5:30 p.m. ADJOURNMENT The meeting was adjourned at 8:05 p.m. Submitted by: ~~ Lenora Crane Finance, Administration and Human Resources Committee Secretary H :\WP .OT A \FIN\221 O\C RAN E\FPC.MTG\F AH R.97\FEB\2MI N.97 STATE OF CALIFORNIA l ) ss. COUNTY OF ORANGE l 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 February 19, 1997, was duly posted for public inspection in the main lobby of the Districts' offices on February 13, 1997. IN WITNESS WHEREOF, I have hereunto set my hand this 19th day of February 1997. Posted: By: Penny Kyle, Secreta o eac . the Boards of Directors of County Sanitation Districts Nos. 1, 2, 3, 5, 6, 7, 11, 13 & 14 of Orange County, California -~~~~~· ~/3 ___ , 1997,~.M. ~---=---~~-- H :\WP .DT A \FIN\221 OICRAN E\FPC .MTG\FAH R.9 7\FEB\C ERTP002.9 7 phone: {]14) 962-2.:4 1 n,alllng 11~dress: P.O. Bpx 8127 Foumsin Valley, 0A 8272&8127 11treet address; 10844 Ellis Avenue Fountain Valley, 0A 82708'-7018 Mernber Agenc!,es • Anaheim Bre_a Buena /?a,:k o,p,ress FourJQain Valley ftl/Jerton Huncingti;m Beseh Irvine Ls Habra La Palma Los Alamitos Newport f3aaoh Orange Pfacentie 5anr.a Ana Seal Beeeh Stanton rusi;Jn Ville Park Yori;Ja Linda County of Or<1nge Sanitary Districts Co&t:8 Mes'B G;ird"en Grove. MldwayCl_c.y Water •r1?triots Irvine Ranch ,,---.__ --\ COUNTY '-.)NITATION DISTRICTS OF •Rh .• GE COUNTY, CALIFORNIA February 11, 1997 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, FEBRUARY 19, 1997 -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 to Protecting the Environment Since 1954 FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE TENTATIVELY SCHEDULED MEETING DATES Finance, Administration and Human Resources Month Committee Meetings Joint Board Meetings February February 19, 1997 February 26, 1997 March March 12, 1997 Mar~h 26, 1997 April April 9, 1997 April 23, 1997 May May 14, 1997 May 28, 1997 June June 11, 1997 June 25, 1997 July July 9, 1997 July 23, 1997 August August 13, 1997 August 27, 1997 September September 10, 1997 September 24, 1997 October October 8, 1997 October 22, 1997 November November 12, 1997 November 19, 1997 December December 10, 1997 December 17, 1997 January January 14, 1998 January 28, 1998 February February 11, 1998 February 25, 1998 ROLL CALL FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE MEETING DATE: February 19, 1997 COMMITTEE MEMBERS GEORGE BROWN (Chair) JOHN J. COLLINS (JC) JAN DEBAY BARRY DENES NORMAN ECKENRODE MARK MURPHY THOMAS SALTARELLI MARK SCHWING WILLIAM STEINER PEER SWAN (VJC) 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, DirectorofTech. Srvs. STEVE KOZAK, Financial Manager MIKE WHITE, Controller GREG MATHEWS, Principal Administrative Analyst MARC DUBOIS, Contracts/Purchasing Manager LINDA EISMAN, Training Manager CHRIS DAHL, Information Technology Manager NICK ARHONTES, Maintenance Manager TERRI JOSWAY, Safety & Emergency Response Manager LENORA CRANE, Committee Secretary OTHERS TOM WOODRUFF, General Counsel DAN CASSIDY, MOU Consultant RUSS PATTON, MOU Consultant c: Penny Kyle L. Crane TIME: 5:30 P.M. ADJOURN: P.M. , ., ,AGENDA REGULAR MEETING OF THE FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE COUNTY SANITATION DISTRICTS NOS. 1, 2, 3, 5, 6, 7, 11, 13AND 14 OF ORANGE COUNTY, CALIFORNIA WEDNESDAY, FEBRUARY 19, 1997 AT 5:30 P.M. ROLL CALL ADMINISTRATIVE OFFICE'S 10844 Ellis Avenue Fountain Valley, California 92708 APPOINTMENT OF CHAIR P:RO TEM, IF N'ECESSARY AGENDA In accordance with the requirements of California Government Code Section 54954.2, this agenda has been posted in the main lobby of the Districts' Administrative Offices not less than 72 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. 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. PUBLIC COMMENTS All persons wishing to address the Finance, Administration and Human Resources Committee on specific agenda items or matters of general interest should do so at this time. As determined by the Chair, 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). February 19, 1997 RECEIVE. FILE AND APPROVE MINUTES OF PREVIOl:JS MEETiNG Recommended Actien: Receive, file and approve draft minutes of the January 15, 1997, Finance, Administration and Human Resources Committee meeting. REPORT OF C0MMIITEE CHAIR R6RORT OF GENERAL MANAGER REPORT OF ASSISTANT GENERAL MANAGER-ADMINISTRATION REPORT OF ASSISTANT G~NERAL MANAG~R -OPERATIONS REPORT OF DIR'ECrOR OE" FINANCE REPORT OF DIRECTOR OF HUMAN RESDURCES REPORT OF 1Jl.lR6CTOR OF GENERAL SERVICES ADMINISTRATION REPORT OF DIRECTOR OF COMMUNICATIONS REPORT OF GENERAL COUNSEL CONSENT CALENDAR ITEMS All matters placed on the consent calendar are considered as not requiring discussion or further explanation and unless any particular item is requested to be removed from the consent calendar by a Director, staff member or member of the public in attendance, there will be no separate discussion of these items. All items on the consent calendar will be enacted by one action approving all motions, and casting a unanimous ballot for resolutions Included on the consent calendar. All items removed from the consent calendar shall be considered in the regular order of business. Members of the public who wish to remove an item from the consent calendar shall, upon recognition by the chair, state their name, address and designate by number the item to be removed from the consent calendar. The Chair will determine if any items are to be deleted from the consent calendar. A. FAHR97-09: RECEIVE AND FILE TREASURER'S REPORT FOR THE MONTH OF JANUARY 1997 (All Districts}: The January Treasurer's Report will be handed out at the FAHR Committee meeting in accordance with the Board-approved Investment Policy, and in conformance to the Government Code requirement to have monthly reports reviewed within 30 days of month end. RECOMMENDED ACTION: Receive and file Treasurer's Report for the month of January 1997 and forward to the Joint Boards. 2 February 19, 1997 CONSENT CALENDAR ITEMS CONTD. B. FAHR97-10: CERTIFICATES OF PARTICIPATION (COP) REPORT (All Districts): RECOMMENDED ACTION: Receive and file this information-only item. C. FAHR97-11: EMPLOYMENT STATUS REPORT (All Districts): Total head count for January 1997 at the Districts RECOMMENDED ACTION: Receive and file this information-only item. D. FAHR97-12: ANNUAL RENEWAL OF BOILER & MACHINERY INSURANCE FOR THE PERIOD MARCH 1, 1997 TO MARCH 1, 1998 (All Districts) RECOMMENDED ACTION: Renew Boiler & Machinery Insurance for the Districts for the period March 1, 1997 to March 1, 1998, with American Manufacturers Mutual Insurance (Kemper Insurance Group), in an amount not to exceed $81,275. E. FAHR97-13: QUARTERLY INVESTMENT MANAGEMENT PROGRAM REPORT FOR THE PERIOD SEPTEMBER 1 THROUGH DECEMBER 31,1996 (All Districts): RECOMMENDED ACTION: Receive and file this information-only report. END OF CONSENT CALENDAR Consideration of items deleted from Consent Calendar, if any. Consideration of one motion to approve all agenda items appearing on the Consent Calendar not specifically removed from same. ACTION ITEMS 1. FAHR97-14: ALTERNATIVE DELIVERY OF COLLECTION SYSTEM O&M SERVICES (All Districts) RECOMMENDED ACTION: 1) Authorize staff to reorganize the Division in accordance with the attached report. This will result in a decrease of 13 positions from our current authorized level; 2) Authorize staff to prepare a Request for Proposal to out source the "routine" cleaning of small lines (12" and below) in the three District 7 areas; 3) In cooperation with the cities and the Districts' Source Control Division, establish a Districts-wide grease mitigation ordinance. (Ed Hodges/Nick Arhontes -15 minutes) 3 February 19, 1997 2. FAHR97-15: REVIEW, APPROVE AND FILE THE 1996-97 MID-YEAR FINANCIAL AND OPERATIONAL REPORT COVERING THE PERIOD ENDED DECEMBER 31, 1996 (All Districts) RECOMMENDED ACTION: That the Committee review, approve and forward the 1996-97 Mid-Year Financial and Operational Report for the period ended .December 31, 1996,, to the J.oint Boards, and to appro'te ~ supplemental appropriation of $6,927,000 within the Capital Ouday Revolving Fund (CORF)."' (Mike White -10 minutes) 3. FAHR97-16: CRITICAL GOALS, FISCAL POLICY STATEMENTS, AND BUDGET ASSUMPTIONS FOR 19.97-98 BUDGET PREPARATION (All Districts); The Steering Cammittee.aand staff have drafted Critical Goals, Fiscal Policy Statements·, and Budget Assumptions for tt:le F.AHR Committee to review prior to statrs preparatiqn of the 1997-9.8 Budget Recommendation RECOMMENDED ACTION: Approve the 1997-98_ Critical Goals, Fjscal Policy Statements, and Budget AssumptiornsJ and direct staff to prepare bud~ets incorporating these parameters. - (Judy Wilson/Mike White -30 minutes) :INFORMATIONAL PRESENTATIONS None. CLOSED SESSION ! During the course of conducting the business set forth on this agenda as a regular meeting of the 1 j Committee, the Chair may convene the Committee in closed session to consider matters of j l pending real estate negotiations, pending or potential litigation, or personnel matters, pursuant to l !Government Code Sections 54956.8, 54956.9, 54957 or 54957.6, as noted. : 1 ; l Reports relating to (a) purchase and sale of real property; (b) matters of pending or potential l litigation; (c) employee actions or negotiations with employee representatives; or which are 1 exempt from public disclo~ure under the California Public Recard_s Act, may be reviewe<:I by the 1 Cammittee during a permitted clas·ed session and are not available for public inspection. At such j l time as ,finaj · actions are taken by the Committe.e on any of these subjects, the minutes will reflect l 1 all required disclosures of information ............................................................................................................ 1 9. Convene in closed session. (a) Confer with Districts' Negotiator re pending MOU Labor Negotiations (Government Code Section 54957.6). (b) Confer with Districts' Management and General Counsel re appeals of termination of employees from investigation (Government Code Section 54956.9(b)(1)(2). 1 O. Reconvene in regular session. 11. Consideration of action, if any, on matters considered in closed session. 4 February 19, 1997 OTHERBUSINESS. COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS. IF ANY MA Tl:ERS WHIC~ A DIRECTOR WOULD UKE STAFF TO REPORT ON AT A SUBSEQUENT MEETING MATTERS WHICH A DIRECTOR MAY WISH TO Pl.ACE ON A FUTURE AGENDA FOR ACTION_AND STAFF REPORT ,FiUTURE MEETING DATES The next Finance, Administration and Human Resources Committee Meeting is scheduled for March 12, 1997. NOTICE TO COMMITTEE MEMBERS ................................................ -····•··•··········· ............................................................................................................................................ _ .. _ ........... . j If you have any questions on the agenda or wish to place any items on the agenda, Committee \ j members should contact the Committee Chair or Secretary ten days in advance of the j : Committee meeting. i Committee Chair: George Brown (310) 431-2185 i Comm. Secretary: Lenora Crane (714) 962-2411, Ext. 2501 : (714) 962-3954 (FAX) : • Asst. .comm .. Secretary: ........... Frankie Woodside ...... J714}. 962-241.1,_ Ext .. 3001 .................................. .J le H:\WP .DTA\FIN\221 0\CRANE\FPC.MTG\FAHR.97\FEB\AGENDA2.97 5 APPROVAL .. OF· MINUTES • PDC: FAHR: 02/19197 EXEC: STEER: JT.BDS: ALL AGENDA WORDING AND RECOMMENDED ACTION(S): Agenda Wording: AGEN1o.. t ITEM TRANSMITTAL CONTACT FOR INFORMATION 2210, Gary G. Streed, Ext. 2500 Division No., Name, and Extension RECEIVE AND FILE DRAFT FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE MINUTES FOR THE MEETING HELD JANUARY 15, 1997 (All Districts) Recommended Action(s): 1. Receive and file draft Finance, Administration and Human Resources Committee minutes for the meeting held January 15, 1997. CEQA REVIEW: Project is Exempt: NOT APPLICABLE Date Notice of Exemption Filed: Negative Declaration Approved on Final EIR Approved on _ and Notice of Determination filed on _ CURRENT BUDGET/COST INFORMATION TOTAL BUDGETED AMT.: $ SOURCE: CORF JO DISTRICTS Schedule/Line Items: AMOUNT OF TRANSFER: Schedule/Line Item: TOTAL PROJECT BUDGET INFORMATION First Year in Budget: Master Plan Estimate: Year of First Costs: THIS AITNENDOR/PROJECT COST INFORMATION CURRENT YEAR BUDGET AMOUNT NIA ORIGINAL BUDGET TOTAL N/A ORIGINAL BID, PO, CONTRACT AMOUNT NIA WILL PROJECT REQUIRE ADDITIONAL PERSONNEL? NO If YES, state number: _ Permanent _ Limited Term Revised 01/14197 H:\WP .DTA \FIN\221 0\CRANE\FPC.MTG\F AH R.97\FEB\AITMI N01.97 DATE OF MOST RECENT BOARD ACTION ON THIS SPECIFIC ITEM: NIA CURRENT YEAR- TO-DATE EXPENDITURES NIA PREVIOUS BUDGET CHANGES NIA CHANGE ORDERS, FUNDS PREV. APPROVED NIA YEAR-TO-DATE BUDGET BALANCE NIA BUDGET CHANGE THISAIT N/A AMOUNT REQUESTED THIS AIT NIA REVISED BUDGET TOTAL (Total Budget plus Transfers) NIA REVISED TOTAL PROJECT BUDGET $0.00 AMENDED PROJECT AMOUNT $0.00 REQUIRES BOARD POLICY ACTION? NOT APPLICABLE If YES, explain in ADDITIONAL INFORMATION section Page 1 of2 CONCURRENCES: ATTACHMENTS TO ,NDA (List) To Committee: 1. Draft Minutes of FAHR Committee held 1 /15/97. Date ature To JI. Bds.: 1. partment Head (Or Designee) ~-ui~IA 1/:,...r-/t:r) · ature Date Assistant General Manager (Or Designee) ADDITIONAL INFORMATION (Background and/or Summary) Attached is a draft of the Finance, Administration and Human Resources meeting minutes of January 15, 1997. These minutes were submitted to the Joint Boards at their January 22, 1997 meeting. GGS:lc c: Department Head AGM-Administration AGM-Operations General Manager Revised 01/141117 H:\WP .OTA \FIN\221 O\CRAN E\FPC.MTG\F AH R.97\FEB\AITMIN01.97 Page 2 of2 l I REVISED DRAFT MINUTES OF FINANCE, County Sanitation Districts of Orange County, California P.O. Box 8127 • 10844 Ellis Avenue Fountain Valley, CA 92728-8127 Telephone: (714) 962-2411 ADMINISTRATION AND HUMAN RESOURCES COMMITTEE Wednesday, January 15, 1997, 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 Wednesday, January 15, 1997, at 5:30 p.m., at the Districts' Administrative Offices. 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 Thomas Saltarelli William G. Steiner Committee Directors Absent : Burnie Dunlap Peer Swan, Vice Joint Chair Other Directors Present: None Staff Present: Donald F. McIntyre, General Manager Judith A Wilson, Assistant General Manager Ed Hodges, Director of General Services 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 Steve Kozak, Financial Manager Mike White, Controller Marc Dubois, Contracts/Purchasing Manager Chris Dahl, Information Technology Manager Mark Esquer, Engineering Supervisor Terri Josway, Safety & Emergency Response Manager Lenora Crane, Committee Secretary Others Present: Tom Woodruff, General Counsel Russ Patton, MOU Consultant APPOINTMENT OF A CHAIR PRO TEM No appointment was necessary. PUBLIC COMMENTS No comments were made. Minutes of Finance, Admh hd Human Resources Committee Page 2 January 15, 1997 APPROVAL OF MINUTES It was moved, seconded and duly carried to approve the draft minutes of the December 11, 1996 meeting of the Finance, Administration and Human Resources Committee. REPORT OF THE COMMITTEE CHAIR The Chair had no report. REPORT OF THE GENERAL MANAGER The General Manager reported that as a result of Chair Collins' coaxing, we will have a good turnout for the New Directors' Orientation on Saturday. Eight new members are expected to attend, as well as the Chairs of each Committee who will be making individual presentations regarding their Committees. District 6 Chair Jan Debay will also be in attendance to introduce her new members. Some of the Directors' spouses are also expected to be in attendance. REPORT OF ASSISTANT GENERAL MANAGER -ADMINISTRATION The Assistant General Manager of Administration reported on the fire which occurred on Sunday night, at 1 :30 a.m., in the Construction Inspectors' trailers. Terri Josway passed around four sets of photos taken by the Emergency Response staff of the fire damage. As a follow-up to her Fax to the Committee, Judy Wilson advised that no one was injured in the fire, and that the Fire Department's Arson Squad is investigating the incident. Their report is expected by next week. There is speculation that the fire was caused by a short in the refrigerator. The insurance adjuster is scheduled to meet with staff on Thursday, the 16th. The Districts' policy includes a deductible of $25,000. To replace the trailers with like kind, would cost approximately $400,000. This may not be the appropriate solution, since we lost As-Built drawings in the fire and a fire- safe place for storage and more suitable office quarters for staff would be desirable. The trailers were approximately 20 years old and were originally installed as temporary facilities in the mid- 1970's. Some of the issues that must be resolved with the insurance company are: Will employees' personal effects be covered; is leased equipment covered; is the cost to replace business records which were destroyed or damaged covered. REPORT OF ASSISTANT GENERAL MANAGER-OPERATIONS The Assistant General Manager of Operations had no report. REPORT OF THE DIRECTOR OF FINANCE Gary Streed advised the Committee that their Agenda is in a new format this month. A "Consent Calendar" has been added to allow the Committee to move quickly through the items, and two additional sections have been added, "Action Items" and "Informational Presentations," to allow the Agenda to be more efficient. Mr. Streed also reported that next month's meeting will be held on February 19th, the third Wednesday of the month. In March, the Committee meeting will return to being held on the second Wednesday of the month. The deviation from the Committee's normal schedule has been due to holidays which have fallen on Wednesday for the past two months. Minutes of Finance, Admir~d Human Resources Committee ) Page 3 January 15, 1997 REPORT OF THE DIRECTOR OF HUMAN RESOURCES The Director of Human Resources had no report. REPORT OF THE DIRECTOR OF GENERAL SERVICES ADMINISTRATION The Director of General Services had no report. REPORT OF THE DIRECTOR OF COMMUNICATIONS The Director of Communications reported that OCN and K-CAL had some coverage of the Districts' fire. The K-CAL news report was broadcast at 1 :30 p.m. on Monday. REPORT OF GENERAL COUNSEL General Counsel had no report. CONSENT CALENDAR ITEMS (1 -4) 1. FAHR97-01 : 2. FAHR97-08: 3. FAHR97-03: 4. FAHR97-02: RECEIVE AND FILE TREASURER'S REPORT FOR THE MONTH OF DECEMBER 1996 {All Districts) RECOMMENDED ACTION: Receive and file Treasurer's Report for the month of December 1996. CERTIFICATES OF PARTICIPATION {COP) REPORT {All Districts) RECOMMENDED ACTION: Receive and file this information-only item. REPORT OF REMOVAL OF OBSOLETE INVENTORY {All Districts): RECOMMENDED ACTION: Receive and file this information-only item. EMPLOYMENT STATUS REPORT {All Districts): Total head count for December 1996 at the Districts RECOMMENDED ACTION: Receive and file this information-only item. MOTION: A motion was made and unanimously carried to approve items specified as 1 through 4 under "Consent Calendar." ACTION ITEMS 1. FAHR97-04: AMENDMENT NO. 1 TO THE CONTRACT WITH PANENERGY TRADING AND MARKET SERVICES, L.L.C., FOR PURCHASE OF NATURAL GAS, SPECIFICATION NO. P-170 {All Districts): The Operations and Maintenance Department requests that the Director of Finance be authorized to negotiate a change order and amendments to the original agreement in order to reduce projected natural gas expenses for 1996-97. Minutes of Finance, Admh .nd Human Resources Committee Page4 January 15, 1997 3. FAHR97-05: 3. FAHR97-06: COMMITTEE DISCUSSION: Mr. Ooten advised the Committee that staff has looked at the cost to sell and the cost to buy natural gas. Though we are losing money in the exports, the actual specs of the engines require that we cannot use all of the energy produced, so we have to sell. General Manager Don McIntyre noted that the utility budget was recommended higher, however it had to be cut during the budget process. The general consensus of the Committee was that the Districts would be better off negotiating a floating rate agreement, and not enter into a fixed contract when the market is high. MOTION: 1. Authorize the Director of Finance or his designee to renegotiate, within guidelines from the FAHR Committee, the contract amount and conditions, and to execute a negotiated amendment to the original agreement with PanEnergy Trading and Market Services, L.L.C., if appropriate. 2. Authorize the appropriate budget transfers within the Operations and Maintenance budget to cover the natural gas line item. AMENDED DEFERRED COMPENSATION PLAN FOR DIRECTORS AND EMPLOYEES (All Districts): The Director of Finance and General Counsel request that they be authorized to develop an amended deferred compensation plan which will comply with the changes resulting from P.L. 104-108, the Small Business Job Protection Act, and to take the amended plan to the Joint Boards for consideration and adoption. COMMITTEE DISCUSSION: Upon inquiry from the Committee, Mr. Streed advised that our current Plan is an annuity plan which already satisfies the trustee requirement of the new legislation, and that there will be no financial impact on the Districts to place it in trust. The Districts already fund the Plan and no additional contributions are required. The only cost to the Districts to make the four required changes would be for staffs time to develop an amended Plan. MOTION: Authorize the Director of Finance and General Counsel to complete an Amended Deferred Compensation Plan for Directors and Employees in order to comply with new provisions of P.L. 104-108, and to present the Amended Plan to the Joint Boards of Directors for consideration and approval. REVISION TO MATURITY CONSTRAINT FOR THE DISTRICTS' LONG-TERM MONIES INVESTMENT PORTFOLIO (All Districts) COMMITTEE DISCUSSION: In response to the Committee, Steve Kozak advised that our money managers are following the Districts' investment guidelines and there are no deviations. PIMCO follows a very sophisticated set of internal controls and check points to make sure the purchase of any securities are done by strictly following the guidelines of the Districts' Investment Policy . He stated that staff has been to their offices to review the steps that they take. Staff and our third-party advisor, Callan Associates, also monitor their daily transactions. •, -~ Minutes of Finance, Adm ind Human Resources Committee Page 5 January 15, 1997 Director Steiner stated that we cannot assume from the asset managers we contract with, no matter how big they are, no matter how credible they are, are following our guidelines strictly. He wants to make sure, from staffs perspective as professionals, that the money mananger's strategies make sense and we are not blindly following PIMCO's recommendations. He also wants to be sure that staff, through their professional knowledge and expertise, know that this is the right thing to do, not from the Committee's viewpoint as laymen. Assistant General Manager Judy Wilson advised the Committee that in addition to Callan's role as a independent third-party advisor, part of their responsibility is to monitor PIMCO's adherence to the District's investment guidelines. Since the Districts are monitoring PIMCO in-house, as well as with an independent third-party review, the Committee can have a high level of confidence in our recommendations. MOTION: Staff recommends that pursuant to Section 16.1 of the Districts' Investment Policy, the Committee adopt a motion to recommend that the Joint Boards of Directors approve the following recommended actions. Pursuant to the requirements of California Government Code Section 53601, the Districts' external money managers may implement securities purchase authority no sooner than three months following the date of this Board action. 1. Revise Section 8.2 of the Districts' Investment Policy to read: "Mortgage-backed securities issued by an agency of the U.S. Government which are backed by pools of mortgages guaranteed by the full faith and credit of the U.S. Government, or an agency thereof. Selection of mortgage derivatives, which include interest-only payments (IOs) and principal-only payments (POs); inverse floaters, and re-remics, is hereby prohibited." 2. Revise Section 8.11 of the Districts' Investment Policy to read: "Collateralized mortgage obligations (CMOs) issued by agencies of the U.S. Government which are backed by pools of mortgages guaranteed by the full faith and credit of the U.S. Government, or an agency thereof, and asset-backed securities rated "Aaa" by Moody's and "AAA" by S&P. Selection of mortgage derivatives, which include interest-only payments (IOs) and principal-only payments (POs); inverse floaters, and re-remics, is hereby prohibited. Securities eligible for purchase under this Section 8.11 shall be issued by an issuer having a rating on its unsecured long-term debt of "A" or higher. Combined purchases of mortgage-backed securities, CMOs, and asset-backed securities, as authorized under this Section 8.11 may not exceed 20% of the total Long Term Operating Monies portfolio." 3. Revise Section 11.11 of the Districts' Investment Policy to read: "No more than 20% of the Long Term Operating Monies portfolio may be invested in a combination of mortgage-backed securities, CMOs, and asset-backed securities. Mortgage-backed securities, CMOs, and asset-backed securities may only be purchased by the Districts' external money managers with prior Board approval, and may not be purchased by the Districts' staff." Minutes of Finance, Admir. . 1d Human Resources Committee Page 6 January 15, 1997 4. Authorize the Districts' external money managers to purchase mortgage-backed securities, CMOs, and asset-backed securities for the Long Term Operating Monies portfolio, pursuant to the requirements of Section 11.11 of the Districts' Investment Policy. 5. Authorize the Districts' external money managers to purchase individual securities, providing the securities are permitted under Section 8.0 of the Policy, which may have a final stated maturity of more than five (5) years from the date of their purchase, pursuant to the requirements of Section 12.2.1 of the Districts' Investment Policy. INFORMATIONAL PRESENTATIONS 1. FAHR97-07: CLOSED SESSION PRELIMINARY DISCUSSION RE SEWER SERVICE FEES FOR 1997-98 (All Districts) COMMITTEE DISCUSSION: The Committee discussed the possibility of a multi-year fee schedule and Mr. Streed advised it is a consideration. Assistant General Manager Judy Wilson advised she will be attending a seminar on Proposition 218 at UCLA tomorrow to learn more about it. She stated that this item was brought before the Committee for their information and will be discussed in detail at the Board Workshop on February 1, 1997, when budget guidelines are established for next year. MOTION: Consideration of staff proposal to maintain 1996-97 Sewer Service Fees for 1997-98. The Chair reported to the Committee the need for a closed session, as authorized by Government Code Sections 54957 .6 and 54956.9, to discuss and consider the items that are specified under "Closed Session" as Items Nos. (a)(1), (a)(2), (a)(3) on the published Agenda. The Committee convened in closed session at 6:30 p.m. A report of actions taken will be publicly reported at the time the approved action becomes final re Agenda Item No. (a)(1). No action was taken re Agenda Item (a)(3). At 7:20 p.m., the Committee reconvened in regular session. Re Item No. (a)(2), it was moved, seconded and duly carried that no legal action be initiated against Merrill Lynch per verbal report and recommendation of General Counsel. 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. '\ r'\' Minutes of Finance, Adm, lnd Human Resources Committee J Page 7 January 15, 1997 OTHER BUSINESS, COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY There were none. MATTERS WHICH A DIRECTOR WOULD LIKE STAFF TO REPORT ON AT A SUBSEQUENT MEETING There were none. MATTERS WHICH A DIRECTOR MAY WISH TO PLACE ON A FUTURE AGENDA FOR ACTION AND STAFF REPORT There were none. FUTURE MEETING DATES The next Finance, Administration and Human Resources Committee Meeting is scheduled for Wednesday, February 19, 199, at 5:30 p.m. A tour of the new Human Resources Building will take place promptly at 5:30 p.m., prior to the meeting. Dinner will be served at 5:45 p.m. ADJOURNMENT The meeting was adjourned at 7:23 p.m. Submitted by: ~~ Lenora Crane Finance, Administration and Human Resources Committee Secretary H:\WP .OTA \FIN\221 0\CRANE\FPC.MTG\F AHR.97\JAN\MINS 1.97 0 0 z en m z -I (") l> 1 ' m z C )> :::c OMTS: PDC: FAHR: 02/19/97 EXEC: STEER: JT.BDS: ALL AGENDA WORDING AND RECOMMENDED ACTION(S): Agenda Wording: AGEN. ~ ITEM TRANSMITTAL CONTACT FOR INFORMATION 2210, Gary G. Streed, Ext. 2500 Division No., Name, and Extension RECEIVE AND FILE CERTIFICATES OF PARTICIPATION (COP) REPORT (All Districts) Recommended Action(s}: 1. Receive and file this information-only COP Report of the Director of Finance. CEQA REVIEW: Project is Exempt: NOT APPLICABLE Date Notice of Exemption Filed: Negative Declaration Approved on Final EIR Approved on_ and Notice of Determination filed on_ CURRENTBUDGETICOST INFORMATION TOTAL BUDGETED AMT.: $ SOURCE: CORF JO DISTRICTS Schedule/Line Items: AMOUNT OF TRANSFER: Schedule/Line Item: TOTAL PROJECT BUDGET INFORMATION First Year In Budget: Master Plan Estimate: Year of First Costs: Il:i!§ AITNENDOR/PROJECT COST INFORMATION CURRENT YEAR BUDGET AMOUNT N/A ORIGINAL BUDGET TOTAL N/A ORIGINAL BID, PO, CONTRACT AMOUNT N/A WILL PROJECT REQUIRE ADDITIONAL PERSONNEL? NO If YES, state number: _ Permanent _ Limited Term Revised 01/14197 H:\WP .DTA\FIN\2210\CRANE\FPC.MTG\FAHR.97\FEB\FAHR97.10 DATE OF MOST RECENT BOARD ACTION ON THIS SPECIFIC ITEM: CURRENT YEAR- TO-DATE EXPENDITURES N/A PREVIOUS BUDGET CHANGES N/A CHANGE ORDERS, FUNDS PREV. APPROVED N/A NIA YEAR-TO-DATE BUDGET BALANCE N/A BUDGET CHANGE THISAIT N/A AMOUNT REQUESTED THIS AIT N/A REVISED BUDGET TOTAL [Total Budget plus Transfers) NIA REVISED TOTAL PROJECT BUDGET $0.00 AMENDED PROJECT AMOUNT $0.00 REQUIRES BOARD POLICY ACTION? NOT APPLICABLE If YES, explain in ADDITIONAL INFORMATION section Page 1 of2 -~ CONCURRENCES: ATTACHMENTS TC ~NDA (List) To Committee: 1. Graph -COP Rate History Report. Date I 1.1/~7 a ure Date ToJt. Bds.: 1. epartme ead (Or Designee) ~/4)~ Si~ Assistant General Manager (Or Designee) • Date ADDITIONAL INFORMATION (Background and/or 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 graph shows 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. Staff will maintain our conti nuous 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. GGS:lc c: Department Head AGM-Administration AGM-Operations General Manager Revised 01/14197 H:\WP.DTA\FIN\2210\CRANE\FPC.MTG\FAHR.97\FEB\FAHR97.10 Page 2 of2 ~ "C C m :-> "C Ill "Tl -I RATE(%) m z m C. > 0 ...... I\) c:.,, -I>-t.n Cl CT z i::::, i::::, i::::, i::::, i::::, i::::, i::::, '< (") 0 0 0 0 0 0 0 "Tl m 3-Apr-96 :;· "' Ill ~ :::, 0 10-Apr-96 _@ ~ I I\) 0 17-Apr-96 $ ~ 24-Apr-96 ~ I _--.i ...... ~ 1-May-96 ...... ...... m 8-May-96 c:o :c > cii 15-May-96 s: :-I c:o 22-May-96 Cl r? 29-May-96 -.......... 5-Jun-96 12-Jun-96 19-Jun-96 + 26-Jun-96 3-Jul-96 --0 "C \ Ill 0 :;· 1 0-Jul-96 CD :E 17-Jul-96 --"tJ CD CT ~ CT 24-Jul-96 ~ + 31-Jul-96 -I 7-Aug-96 m c... :-0 14-Aug-96 :::c s: 21-Aug-96 -0 i en ca Ill 28-Aug-96 : -I :::, + 4-Sep-96 0 11-Sep-96 ::0 > -< c5 18-Sep-96 ::0 en 25-Sep-96 ::E m Ill "C 2-Oct-96 "tJ f 9-Oct-96 0 en 16-Oct-96 ::0 0 -I 0 -G') 23-Oct-96 CD :::, 30-Oct-96 en ::E 6-Nov-96 Ill "C 13-Nov-96 ·•· 20-Nov-96 27-Nov-96 •· 4-Dec-96 11-Dec-96 - 18-Dec-96 25-Dec-96 -•· 2-Jan-97 ·•· 8-Jan-97 15-Jan-97 22-Jan-97 •· 29-Jan-97 . l' For Bd. Sec. u-~~ AGEN~-\ • COMM. INFO. ITEM ITEM • COMM. ACTION ITEM • JT. BDS. CONSENT TRANSMITTAL • JT. BDS. DISCUSSION (NON-CONSENT) • PUBLIC HEARING JT. BDS. MEETING DATE ' ' !' JT. BDS. AGENDA ITEM NO. -- MEETING DATE COMM. ID. NO. DISTRICT NO. CONTACT FOR INFORMATION ~ (Initials of Originator) ' OMTS: OMTS PDC: PDC FAHR: 2119197 FAHR -rJ..z-u All 2520, Mike Peterman, Ext. 2105 EXEC: EXEC STEER: STEER Division No., Name, and Extension JT.BDS: AGENDA WORDING AND RECOMMENDED ACTION(S): Agenda Wording: EMPLOYEMENT STATUS REPORT: Total headcount at the Districts as of January 27, 1997. Recommended Action(s): Receive and file the Employment Status Report. CEQA REVIEW: Project is Exempt: NOT APPLICABLE Date Notice of Exemption Filed: Negative Declaration Approved on Final EIR Approved on_ and Notice of Determination filed on_ CURRENT BUDGET/COST CURRENT YEAR INFORMATION BUDGET AMOUNT TOTAL BUDGETED AMT.: $ NIA SOURCE: CORF JO DISTRICTS Schedule/Line Items: AMOUNT OF TRANSFER: Schedule/Line Item: TOTAL PROJECT BUDGET ORIGINAL INFORMATION BUDGET TOTAL First Year in Budget: NIA Master Plan Estimate: Year of First Costs: THIS AITNENDOR/PROJECT COST ORIGINAL BID, INFORMATION PO, CONTRACT AMOUNT NIA WILL PROJECT REQUIRE ADDITIONAL PERSONNEL? NO If YES, state number: _ Revised 01 /14/97 A:\AIT.JAN Permanent Limited Term - DATE OF MOST RECENT BOARD ACTION ON THIS SPECIFIC ITEM: NIA CURRENT YEAR· YEAR-TO-DATE REVISED BUDGET TO-DATE BUDGET BALANCE TOTAL EXPENDITURES (Total Budget plus Transfers) NIA NIA NIA PREVIOUS BUDGET BUDGET CHANGE REVISED TOTAL CHANGES THISAIT PROJECT BUDGET N/A N/A $0.00 CHANGE ORDERS, AMOUNT AMENDED PROJECT FUNDS PREV. REQUESTED THIS AMOUNT APPROVED AIT N/A NIA $0.00 REQUIRES BOARD POLICY ACTION? NOT APPLICABLE If YES, explain in ADDITIONAL INFORMATION section Page 1 of2 CONCURRENCES: ATTACHMENTS TO AqENDA (List) To Committee: , ,~nuary 27, 1997 Employment Status Report Signature Date Division Ma ager Or Design 1 . , . l-i.c-97 __,,__..;;___,_ _ ___,.____.,..___----C"-=___;;____;;_ _ _:....;;,____;__ Signature Date To Jt. Bds.: 1. Department Head (Or Designee) /4~ u.J,~ /-2.2..--<t, -S+-i~-tu_r_e _____________ D-ate Assistant General Manager (Or Designee) ADDITIONAL INFORMATION (Background and/or Summary) The Districts have ~ Full-Time Equivalent (FTE) headcount of 553 as of January 27, 1997. The actual body count is 563. The current FTE headcount is equivalent to a 11.4% reduction from the budgeted 624 positions. The one- month turnover rate for January, 1997 was .4%. One replacement Intern (.5 FTE) was hired in Construction Management in January. Total external hires this fisca: YTD has been 7 (5.5 FTEs). The Districts are currently recruiting for the following positions: A LIMS Project Specialist in the Laboratory; and, an Electrical Engineer in Operations and Maintenance Administration. c: Department Head AGM-Administration AGM-Operations General Manager Revised 01/14/97 A:\AIT.JAN Page 2 of2 Employment Status Report Run Date: 10-Feb-97 ;. ½ ·-,, .. ,ic·,· ,. 7 . .-· T. Regular· Regular . '~ ,. Total ,.- Regular Part-time Part-time Actual Vacant Total -~ -,,--~".-~ ,., ~Full-time 20hours 30 hours eontract tntem LOA Headcount ,eositlons l'osltlons 2150 -General Management Administration 6 0 0 0 0 0 6 0 6 2160 -Board Secretary 1 0 0 0 0 0 1 1 2 2190 -Communications 9 0 0 0 0 0 9 0 9 Total General Management 16 0 0 0 0 0 16 1 17 2210 -Finance Administration 4 0 0 0 0 0 4 0 4 2220 -Accounting 20 0 0 0 0 0 20 0 20 2230 -Purchasing & Warehousing 14 0 1 0 0 1 16 1 17 Total Finance 38 0 0.75 0 0 1 40 1 41 2410 -General Services Administration 6 0 0 0 1 0 7 0 7 2420 -IT Hardware Support 4 0 0 1 0 0 5 0 5 2430 -IT Software Support 9 0 0 1 0 0 10 0 10 2440 -Plant Automation Support 6 0 0 0 0 0 6 0 6 2450 -Collection Facilities Maintenance 13 0 0 0 0 0 13 18 31 2460 -Plant Facilities 38 0 0 0 0 3 41 5 46 Total General Services Admin. 76 0 0 2 0.5 3 82 23 105 2520 -Human Resources 6 2 0 0 0 0 8 0 8 2530 -Safety & Emergency Response 5 0 0 0 1 0 6 0 6 2540 -Education & Training 6 0 0 0 0 0 6 0 6 Total Human Resources 17 1 0 0 0.5 0 20 0 20 3410 -Operations & Maintenance Admin. 13 0 0 1 4 1 19 1 20 3420 -0 & M Scheduling 6 0 0 0 0 0 6 0 6 3430 -Plant Operations 1 35 0 0 0 0 1 36 5 41 3440 -Plant Operations 2 46 0 0 0 0 0 46 10 56 3450 -Mechanical O & M 53 0 0 0 0 0 53 10 63 3460 -Electrical O & M 26 0 0 0 0 0 26 1 27 3470 -Instrumentation O & M 33 0 0 0 0 0 33 0 33 3490 -Central Generation Operations 13 0 0 0 0 0 13 0 13 Total Operations & Maintenance 225 0 0 1 2 2 232 27 259 3510 -Technical Services Administration 3 0 0 0 4 0 7 1 8 3550 -Environmental Compliance & Monitoring 17 0 1 2 0 1 21 2 23 3580 -Environmental Sciences Laboratory 32 1 2 0 0 0 35 2 37 3590 -Source Control 38 0 0 0 0 1 39 1 40 Total Technical Services 90 0.5 2.25 2 2 2 102 6 108 3710 -Engineering Administration 2 0 0 0 0 0 2 0 2 3720 -Design Engineering 24 0 0 0 2 0 26 0 26 3730 -Engineering Planning 5 0 0 0 0 0 5 1 6 3790 -Construction Management 32 0 0 4 1 0 37 3 40 Total Engineering 63 0 0 4 1.5 0 70 4 74 Total Stiffln§ ' .,, -•• .:.:{!~•J,.. p • -525 . ~\I 11:& ',:J'f 3 .. 9 06.6 8 ,;: :,5~2 ll',f-' 82 624 H:lexcel.etalhr\openlempdiv.xls Tota F.:TE 553 '1 OMTS: PDC: AGENl ITEM TRANSMITTAL CONTACT FOR INFORMATION FAHR: 2-19-97 EXEC: ALL 2210, Steve Kozak, 2504 STEER: Division No., Name, and Extension JT.BDS: 2-26-97 AGENDA WORDING AND RECOMMENDED ACTION(S): Agenda Wording: ANNUAL RENEWAL OF BOILER & MACHINERY INSURANCE FOR THE PERIOD MARCH 1, 1997 TO MARCH 1, 1998 (All Districts) Recommended Action(s): 1. Renew Boiler & Machinery Insurance for the Districts for the period March 1, 1997 to March 1, 1998, with American Manufacturers Mutual Insurance (Kemper Insurance Group), in an amount not to exceed $81,275. CEQA REVIEW: Project is Exempt: NO DATE OF MOST RECENT BOARD ACTION ON THIS SPECIFIC ITEM: Dale Notice of Exemption Filed: Negative Declaration Approved on Final EIR Approved on_ and Notice of Determination filed on_ February 21, 1996 CURRENT BUDGET/COST INFORMATION TOTAL BUDGETED AMT.: $79,698 SOURCE: JO Schedule/Line Items: AMOUNT OF TRANSFER: Schedule/Line Item: TOTAL PROJECT BUDGET INFORMATION First Year in Budget: Master Plan Estimate: Year of First Costs: THIS AITNENDOR/PROJECT COST INFORMATION CURRENT YEAR CURRENT YEAR- BUDGET AMOUNT TO-DATE EXPENDITURES $79,698 N/A ORIGINAL BUDGET PREVIOUS BUDGET TOTAL CHANGES ORIGINAL BID, PO, CONTRACT AMOUNT $81,275.00 CHANGE ORDERS, FUNDS PREV. APPROVED YEAR-TO-DATE BUDGET BALANCE N/A BUDGET CHANGE THISAIT AMOUNT REQUESTED THIS AIT REQUIRES BOARD POLICY ACTION? YES REVISED BUDGET TOTAL (Total Budget plus Transfers) N/A REVISED TOTAL PROJECT BUDGET $0.00 AMENDED PROJECT AMOUNT $0.00 WILL PROJECT REQUIRE ADDITIONAL PERSONNEL? NO If YES, state number: _ Permanent _ Limited Term If YES, explain in ADDITIONAL INFORMATION section Revised 01 /14197 Page 1 of2 H:\WP .DTA\FIN\221 0\CRANE\FPC.MTG\FAHR.97\FEB\INS.RNL ATTACHMENTS TC' 'rNDA (List) To Committee: 1. Broker of Record Letter ToJt. Bds.: 1. Broker of Record Letter Signature Date Assistant General Manager (Or Designee) ADDITIONAL INFORMATION (Background and/or Summary) This agenda item recommends the annual renewal of Boiler & Machinery insurance coverage for the Districts for the period March 1, 1997 through March 1, 1998. During the 1995 renewal process, the Districts' Broker of Record, Robert F. Driver Company, submitted the Districts' Boiler & Machinery insurance requirements to six (6) insurance carriers. Three (3) proposals were received. i Upon the Committee's review of the proposals and recommendation, the Joint Boards of Directors approved placement of Boiler & Machinery insurance coverage with American Manufacturers Mutual Insurance (Kemper Insurance Group). Kemper's overall superior policy terms, their knowledge of the Districts' facilities and programs, and the fact that theirs was the lowest cost proposal, were cited as factors in the recommendation to select Kemper. In 1996, the Joint Boards approved renewal of the Districts' Boiler & Machinery insurance with Kemper. Robert F. Driver Company has surveyed the current Boiler & Machinery insurance market, and recommends (see attached letter) that the Districts renew Boiler & Machinery insurance with Kemper for 1997. Kemper remains one of the few insurance companies to offer coverage for operations as large and complex as the Districts. Kemper will renew coverage for the Districts with only a premium adjustment to allow for the increase in the Districts' property values. Staff concurs with Driver's findings and recommendations. Sufficient funds are contained in the current budget to cover the premium costs ($81,275). SK:lc c: Department Head AGM-Administration AGM-Operations General Manager Revised 01 /14/97 H:\WP.DTA\FIN\2210\CRANE\FPC.MTG\FAHR.97\FEB\INS.RNL Page 2 of2 ROBERT F. DRIVER ASSOCIATES • COMPLETE INSURANCE/BOND SERVICE • ASSOCIATES February 5, 1997 Mr. Steve Kozak a Division of Robert F. Driver Co., Inc. County Sanitation Districts of Orange County P.O. Box 8127 Fountain Valley, CA 92728-8127 RE: Boiler and Machinery Insurance Policy Period March 1, 1997 to March 1, 1998 Dear Mr. Kozak: In anticipation of the March 1, 1997 inception date of the captioned insurance program, we began to informally survey the marketplace several months ago in order to determine the viability and competitiveness of other insurers' programs. We find that Kemper continues to offer the most competitively priced and broadly based coverage program. At this time, we are finalizing our rate and premium negotiation with Kemper and are confident in maintaining current policy rates at a $81,275 annual premium. We shall, keep you apprised of our progress as we anticipate concluding the process within the next several days. Kemper has a Jong history of providing excellent coverage in this area and remains one of the few insurance companies to offer coverage for as large and complex a risk as the Districts. We recommend the renewal of subject coverage with Kemper Insurance Company. Sincerely, Diana J. Kiehl, ARM Vice President 3636 BIRCH STREET. SUITE 230, NEWPORT BEACH. CALIFORNIA 92660-2619 (714) 756-0271 • FAX (714) 756-2713 OMTS: PDC: FAHR: 02/19/97 EXEC: STEER: JT.BDS: 02/26/97 ALL AGENDA WORDING AND RECOMMENDED ACTION(S): Agenda Wording: AGEN[ -, ITEM TRANSMITTAL CONTACT FOR INFORMATION 2210, Steve Kozak, 2504 Division No., Name, and Extension RECEIVE AND FILE QUARTERLY INVESTMENT MANAGEMENT PROGRAM REPORT FOR THE PERIOD SEPTEMBER 1 THROUGH DECEMBER 31, 1996 (All Districts) Recommended Action(s}: 1. Receive and file this information-only report. CEQA REVIEW: Project ls Exempt: NOT APPLICABLE Date Notice of Exemption Flied: Negative Declaration Approved on Final EIR Approved on_ and Notice of Determination filed on_ CURRENT BUDGET/COST INFORMATION TOTAL BUDGETED AMT.: $ N/A SOURCE: DISTRICTS Schedule/Line Items: AMOUNT OF TRANSFER: Schedule/Line Item: TOTAL PROJECT BUDGET INFORMATION First Year in Budget: Master Plan Estimate: Year of First Costs: THIS AITNENDOR/PROJECT COST INFORMATION CURRENT YEAR BUDGET AMOUNT N/A ORIGINAL BUDGET TOTAL N/A ORIGINAL BID, PO, CONTRACT AMOUNT N/A WILL PROJECT REQUIRE ADDITIONAL PERSONNEL? NO If YES, state number: _ Permanent _ Limited Term Revised 01 /14197 H:IWP.DTAIFIN\2210\CRANEIFPC.MTGIFAHR.97\FEB\QIMPR.AIT DATE OF MOST RECENT BOARD ACTION ON THIS SPECIFIC ITEM: CURRENT YEAR- TO-OATE EXPENDITURES N/A PREVIOUS BUDGET CHANGES N/A CHANGE ORDERS, FUNDS PREV. APPROVED NIA 01/22/97 YEAR-TO-DATE BUDGET BALANCE N/A BUDGET CHANGE THISAIT N/A AMOUNT REQUESTED THIS AIT N/A REQUIRES BOARD POLICY ACTION? YES Board Resolution No. 96-79 REVISED BUDGET TOTAL (Total Budget plus Transfers) N/A REVISED TOTAL PROJECT BUDGET $0.00 AMENDED PROJECT AMOUNT $0.00 Page 1 of2 ATTACHMENTS TO 1NDA (List) To Committee: 1 . Staff Report Date ,-3? _q Date ToJt. Bds.: 1. Staff Report Date ADDITIONAL INFORMATION (Background and/or Summary) On September 7, 1995, the Districts' Treasury Bill investments matured and funds were wired to PIMCO, the Districts' external money manager. The Districts' funds are invested to maximize safety, liquidity, diversification, flexibility, and yield. SK:lc c: Department Head A GM-Administration A GM-Operations General Manager Revised 01/14197 H:\WP .OTA \FIN\2210\CRANE\FPC.MTG\FAHR.97\FEB\FAHR97.11 Page 2 of2 ,~ ,, I February 19, 1997 STAFF REPORT FAHR97-11: Consideration of motion to receive and file Quarterly Investment Management Program Report for the period September 1 through December 31, 1996 Background The Districts' Investment Policy, adopted by the Joint Boards on September 25, 1996, includes monthly and quarterly reporting requirements in Section 15.0 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 that 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 the Districts' portfolios managed by PIMCO for the period September 1 through December 31, 1996. 3 month 6 months 9 months Since inception 30 Sept 95 -:!I L ... 3 Month 6 Month 9 Month Market Value per PIMCO 31 December 96 Estimated Current Yield 31 December 96 I Quarterly Deposits I Estimated Annual Income -J := Portfolio Performance Summary Quarter Ended December 31, 1996 Liquid Operating Monies(%) 1.4 2.7 4.1 5.6 1.3 2.6 3.9 $14,350,080 5.6 $0.8M Long-Term Operating Monies(%) 2.3 4.2 4.8 6.3 2.1 3.9 4.7 $311,495,470 6.3% $18.0 M $20.3M .!ll:! I" -~~ ... : .. ·l:t: ·••· "!._r,Jn•·· ·-"' ... -.·,."· "'.'. CSDOC e P.O. Box 8127 e Fountain Valley, CA 92728-8127 e (714) 962-2411 FAHR97-11 Page 2 February 19, 1997 Market Recap With the summer of 1996 marked by little net change in interest rates, the latter part of 1996 saw renewed attention to the bond market, as earlier fears of economic overheating subsided. Financial markets reacted favorably to the results of the November elections, viewing the continuance of the exisiting balance of political power as protection against fiscally irresponsible moves by either political party. While the bond market's fourth quarter was somewhat stronger than prior periods, the overall single-digit results for 1996 were below those posted for 1995. The shifting markets in 1996 highlighted the importance of PIMCO's diversified and long-term approach to managing fixed income portfolios. PIMCO continued to maintain a slightly above- index duration1 target for the Long-Term Operating Monies portfolio (2.3 years vs. 2.2 years for the Merrill Lynch 1-5 Year Corporate/Government Bond Index), which captured some additional investment return as interest rates fell during October and November. The above-index strategy contributed to the portfolio performing better than its benchmark again this quarter (2.3% vs. 2.1 %), which enhanced overall portfolio returns for 1996. PIMCO continued to maintain a below-index duration target for the Liquid Operating Monies portfolio (36 days vs. 90 days for the Salomon Three-Month Treasury Bill Index). With investments in high-quality commercial paper and government securities, the portfolio performed better than its benchmark for the quarter (1.4% vs. 1.3%). Comparative marked-to-market ending values of the portfolios are shown in the following table: Long-Term Quarter Ending Lif id Operating onies ($M) Operatin~ Monies ($ ) 30 Sept. 95 60.2 234.2 31 Dec. 95 61.1 263.6 31 Mar. 96 51.9 262.9 30Jun. 96 52.6 281.8 30Sept. 96 14.2 287.1 31 Dec. 96 14.4 311.5 Investment Policy On January 22, 1997, the Joint Boards approved technical revisions to the Districts' Investment Policy, as recommended by the FAHR Committee. Staff is preparing a new spiral-bound edition of the Districts' Investment Policy which will include the recent revisions and a copy of the California Government Code governing investment of public funds. Recommendation Receive and file this information-only report. SK:lc H:\WP .OTA\FIN\2210\CRANE\FPC.MTG\FAHR.97\STAFFRPT.97\SRFAHR97.11 ATTACHMENT 1Duration 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. t County 'Sanitation District~ / of Orange County I STRATEGY {HVl~W FOR TH~·PERIOD OCTOBER 1 -DECEMBER J 1, 1996 FINANCE~ ApMINISTR,ATION & .HUMAN RESOURCES COMMffTEE FEBRUARY · 19, 1997 IJ Post Office Box 6430 840 Newport Center Drive · Newport ~.ich California 92658-6430 714 : 640p031 PACIFIC INVESTMENT MANAGEMENT COMPANY AGENDA BOND MARKET REVIEW J II PERFORMANCE/ PORTFOLIO REVIEW Ill CURRENT OUTLOOK/ STRATEGY _) PACIFIC INVESTMENT MANAGEMENT COMPANY RATES DECLINED IN FOURTH QUARTER FOLLOWING EARLIER RISE • U.S. TREASURY YIELDS DECLINED IN THE FOURTH QUARTER • Earlier this year, the market sold off on strong employment reports • Rates retreat in fall, as economy slows to moderate growth ~ Fears of economic overheating faded • POSITIVE BOND MARKET RETURNS RESULT FROM PRICE APPRECIATION • Yield curve flattens, following earlier steepening • Fed policy remains steady • Fed tightening fears fade , 1!".l~;L;. : ,': '..: ·: :·.· .. · tciE,J¥!• ~t ,,, __ .;~7,·~::( ;g- ,'._. -c 6 ~ ;;::: ?---- ·--·-·-·········· ,.,-" + ... -r--····· -..,. 5 ~·-----------------------------' Maturity O 5 Duration O 4.2 10 7.1 30 12.9 125 ~i~!ll~l\lilllllr·••11r1r1,.r11 Q. ..0 100 75 50 BO 85 ~ (I) 00 C ro 25 ,_ 1J I ..c u 0 I I'.¼' .--, -25 -25 -25 -28 -28 -50 .__ _ _,_ ____ _._ ____ ..__ ___ __. ____ _._ ____ _,__ ____ L.._ _ _,J 3 Mos. 1 Yr. 2 Yrs. 3 Yrs. 5 Yrs. 10 Yrs. 30 Yrs. I • 4TH QTR. !rd! FULL YEAR I SOURCE: Bloomberg _) PACIFIC INVESTMENT MANAGEMENT COMPANY STRATEGY RECAP - PERFORMANCE RELATIVE TO INDEX • Long-Term Operating Fund -Fourth Quarter 1996 DURATION • MATURITY MIX • SECTOR / ISSUE • ABOVE MARKET SIMILAR TO INDEX • GREATER POSITION IN AGENCY BONDS IN PORTFOLIO THAN IN INDEX • GREATER POSITION IN CORPORATE BONDS IN PORTFOLIO THAN IN INDEX 2 • • • 1:,:,:,::,;:,:JJ\;;;,:;ii![i:t,ii,i,[:~~. ·. POSITIVE NEUTRAL POSITIVE IMPACT ON PERFORMANCE • Agency returns better than Treasury returns • Corporate returns better than Treasury returns _) PACIFIC INVESTMENT MANAGEMENT COMPANY STRATEGY RECAP - PERFORMANCE RELATIVE TO INDEX • Liquid Operating Fund -Fourth Quarter 1996 DURATION • MATURITY MIX • SECTOR/ ISSUE • BELOW MARKET SIMILAR TO INDEX • GREATER POSITION IN AGENCY NOTES IN PORTFOLIO THAN IN INDEX • GREATER POSITION IN COMMERCIAL PAPER IN PORTFOLIO THAN IN INDEX 3 • • • NEUTRAL NEUTRAL POSITIVE IMPACT ON PERFORMANCE • Agency returns better than Treasury returns • Commercial paper enhances portfolio yield _) PACIFIC INVESTMENT MANAGEMENT COMPANY .. REVIEW OF PERFORMANCE Through December 31, 1996 • Long-Term Operating Fund 12/31 /96 Market Value $311,495,470 • Liquid Operating Fund 12/31 /96 Market Value $14,350,080 Sanitation Districts of Orange County (L-T) (%) Merrill 1 -5 Year Gov't. I Corp. Index (%) Sanitation Districts of Orange County (Liq-op) (%) 3 Month T-Bill (%) • Annualized. 4 Since* Inception 9/30/95 6.3 6.1 Since* Inception 9/30/95 5.6 5.3 YTD 12 Mos . 4.6 4.6 YTD 12 Mos . 5.5 5.3 3 Mos. 2.3 2.1 3 Mos . 1.4 1.3 PACIFIC INVESTMENT MANAGEMENT COMPANY .. CURRENT OUTLOOK AND STRATEGY • SLOWER, NON-INFLATIONARY GROWTH • INFLATION KEPT IN CHECK BY COMPETITION • BOND MARKET ATTRACTIVE • Steady Fed policy, with eventual easing • Long rates trend lower "' • ABOVE BENCHMARK DURATION TO CAPTURE PRICE GAINS AS RATES FALL • MATURITY MIX CONSISTENT WITH INDEX • SECTOR CONCENTRATION: • Focus on agencies • Underweight Treasuries • Utilize mortgage sector 5 \ _j ) PACIFIC INVESTMENT MANAGEMENT COMPANY 7 l _I _j J CALLAN ASSOCIATES INVESTMENT MEASUREMENT REVIEW County Sanitation Districts of Orange County December 31, 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 sources 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 1997 by Callan Associates Inc. 7 j CALLAN ASSOCIATES INVESTMENf MEASUREMENT REVIEW COUNTY SANITATION DISTRICTS OF ORANGE COUNTY DECEMBER 31, 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 7 l l l I _j j COUNTY SANITATION DISTRICTS OF ORANGE COUNTY MEASURES OF MARKET PERFORMANCE DECEMBER 31, 1996 A powerful November rally carried domestic stocks to another big gain in the fourth quarter of 1996. Major market indexes all reached new record highs as stocks posted their best quarterly advance since the second quarter of 1995. Moderate economic growth, low inflation and stable interest rates continued to provide an ideal environment for investors in both stocks and bonds. Bond returns, while also positive, were restrained by fears of stronger growth in 1997 accompanied by higher inflation and interest rates. Some early estimates of fourth quarter GDP project growth at an annualized rate of 2.7%, up from 2.1 % in the third quarter. Domestic stock indices generally ended 1996 near historic highs with the market sitting atop a ten quarter uptrend. The return on the S&P 500 Stock Index was 8.35%. Issues with positive returns out-numbered those with negative returns by more than 7 to 3 within the Index. Leaders among the ten stock sectors were the financial and technology sectors with returns of 13.63% and 13.14%, respectively. The weakest sectors were consumer cyclicals and raw and intermediate materials with returns of 1.02% and 2.94%, respectively. For the year, the S&P 500 returned 23.14%. Among other stock indices, the Dow Jones Industrial Average returned 10.22% and 28.84% for the quarter and year, while the S&P "Mid Cap" 400 Stock Index returned 6.02% and 19.29% and the NASDAQ Index returned 5.28% and 23.14%. Results for the Callan Indices indicate better returns for larger capitalization stocks for the quarter. For the fourth quarter and full year, the Callan Broad 2000 returned 7.40% and 21.91 %, while the Callan Micro 1000 returned 3.79% and 21.34%. Within the Broad 2000, the Large 150 returned 8.61 % and 24.75%, while the Medium 350 returned 7.06% and 19.33%, and the Small 1500 returned 4.74% and 17.80%. The Morgan Stanley Capital International EAFE Index, which is composed of representative stock issues from Europe, Australia, and the Far East, produced returns of 2.04% and 11.31 % for the quarter and year on a local currency basis. Returns adjusted for conversion to U.S. dollars were 1.59% and 6.05%. This included dollar-based returns of 9.59% and 21.08% for the European component and -7.14% and -8.57% for the Pacific Rim component. Returns for the Salomon Non-U.S. Government Bond Index for the same periods were 3.64% and 11.75% in U.S. dollars hedged against currency fluctuations. The same Index produced returns of 2.12% and 4.08% on an unhedged basis. Domestic bond returns improved relative to last quarter, but 1996 was a difficult year overall. Rates on 30-year Treasuries fell 28 basis points in the quarter. Rates on Moody's seasoned AAA corporates were down 27 basis points. The Lehman Brothers Govt/Corp Bond Index returned 3.06% for the quarter and 2.90% for the year. Results for the long component of the Index were 4.72% and 0.15%, respectively. The intermediate component earned 2.45% and 4.06%. The Salomon Composite High Yield Index returned 4.64% and 11.25%. Treasury Bills earned 1.28% for the quarter and 5.24% for the year. The Consumer Price Index for Urban Wage Earners and Clerical Workers rose at an annual rate of 2.10% during the quarter, down from the previous quarter's 2.63%. The rate for all of 1996 was 3.32%. l Last Quarter (9/%-12196) Financial Technology Communication Services Energy Industrial Equipment & Services Public Utilities Consumer Staples Transportation Health Care Raw & Intermediate Materials Consumer Cyclicals S&P 500 Last Quarter (9/%-12196) Computers (Peripherals) Electronics (Semiconductors) Equipment (Semiconductors) Tobacco Trucks & Parts Building Materials Containers (Metal & Glass) Investment Banking/Brokerage Agricultural Products Oil & Gas (Drilling & Equipment) Last Quarter (9/%-12196) Retail (Department Stores) Retail (Computers & Electronics) Services (Commercial & Consumer) Retail (Building Supplies) Cellular/Wireless Communications Services (Data Processing) Electronics (Defense) Services (Computer Systems) Biotechnology Hardware & Tools Standard & Poor's 500 Stock Index 13.63% 13.14 12.70 11.52 8.37 6.69 6.46 5.92 4.85 2.94 1.02 8.35% 44.11 % 32.18 30.09 25.46 20.90 17.96 17.30 17.07 16.07 15.99 -5.78% -6.07 -6.70 -8.53 -8.60 -10.52 -13.16 -13.23 -13.86 -17.49 Sectors Industry Best Worst Last Twelve Months (12195-12196) Technology Financial Industrial Equipment & Services Energy Consumer Staples Raw & Intermediate Materials Transportation Consumer Cyclicals Public Utilities S&P 500 Last Twelve Months (12195-12196) Ele_ctronics (Semiconductors) Footwear Consumer Finance Computers (Software & Services) Banks (Money Center) Personal Care Retail (Apparel) Investment Banking/Brokerage Oil & Gas (Drilling & Equipment) Textiles (Apparel) Last Twelve Months (12195-12196) Distributors (Food & Health) Specialty Printing Hardware & Tools Engineering & Construction Household Furniture & Appliances Health Care (Managed Care) Homebuilding Iron & Steel Truckers Broadcasting (TV, Radio & Cable) 38.91% 35.61 30.54 25.71 20.48 16.18 14.76 12.65 3.17 23.14% 80.13% 66.42 64.09 55.55 50.23 47.44 42.80 41.92 41.48 37.79 -1.28% -3.18 -6.10 -7.11 -7.64 -7.96 -9.32 -10.68 -18.43 -22.99 7 ] J l _j COUNTY SANITATION DISTRICTS OF ORANGE COUNTY PERFORMANCE TO DATE Last Periods Ended Last 1/2 December 31, J 996 Quarter Year Liquid Operating Monies 1.35% 2.63% Long Term Operating Fund 2.20 3.95 Total Fund 2.15 3.87 Market Indicators Government/Corporate 1-5 Year Index 2.21% 3.96% 1-3yr Govt/Corp Index 1.92 3.61 Merrill Lynch 1-5yr Govt/Corp 2.11 3.85 Lehman Brothers G/C Int 2.45 4.27 Treasury Bills 1.28 2.61 Median Rates of Return Active Cash Management Database 1.50% 3.02% Defensive Fixed-Income Style 2.00 3.73 Ranking (l=Best,IOO=Worst) vs. Active Cash Management Database Liquid Operating Monies 90 90 vs. Defensive Fixed-Income Style Long Term Operating Fund 15 18 Last 3/4 Year 4.03% 4.79 4.80 4.85% 4.68 4.70 4.93 3.93 4.28% 4.73 89 42 For explanation of market indicators and comparable funds see end of report. Rates of return for periods over one year are annualized. Last Last 1-1/4 Year Years 5.48% 5.60% 4.57 6.28 4.89 6.25 4.77% 6.21% 5.08 6.13 4.61 6.13 4.06 6.13 5.24 5.28 5.62% 5.78% 5.05 6.15 74 87 92 35 ...... l l l ] ] j j J COUNTY SANITATION DISTRICTS OF ORANGE COUNTY PERFORMANCE VS. ACTIVE CASH MANAGEMENT DATABASE PERIODS ENDED DECEMBER 31, 1996 7% - 6% - 5% - 4% -• A T~ 3% - T~ A 2% -~ ~ A T-Bls 1% - Last Last Last 1/2 3/4 Quarter Year Year ACTIVECASH T T T MANAGEMENT DATABASE 10th Percentile 2.04 3.98 5.42 25th Percentile 1.70 3.33 4.65 Median 1.50 3.02 4.28 75th Percentile 1.38 2.79 4.18 90th Percentile 1.34 2.63 3.81 Treasury Bills 1.28 2.61 3.93 Liquid Operating Monies A 1.35 2.63 4.03 Ranking 90 90 89 (l=Best,IOO=Worst) • A ____ _. A -T-Bls T~ Last Last 1-1/4 Year Years T T 6.45 6.88 5.80 6.18 5.62 5.78 5.46 5.68 4.81 5.55 5.24 5.28 5.48 5.60 74 87 7 7 7 l j COUNTY SANITATION DISTRICTS OF ORANGE COUNTY PERFORMANCE VS. DEFENSIVE FIXED-INCOME STYLE PERIODS ENDED DECEMBER 31, 1996 7% - 6% - ~tj 5% - • A MW -----G/C ~Ej 4% -M~ -----• A G/C 3% - ~ M~53A 2% -G/C ===== 1% - Last Last Last 1/2 3/4 Quarter Year Year DEFENSIVE T T T FIXED-INCOME STYLE 10th Percentile 2.33 4.22 5.17 25th Percentile 2.08 3.90 5.00 Median 2.00 3.73 4.73 75th Percentile 1.88 3.56 4.57 90th Percentile 1.72 3.36 4.38 Merrill Lynch 1-Syr Govt/Corp 2.11 3.85 4.70 Lehman Brothers G/C Int 2.45 4.27 4.93 Long Term Operating.Fund A 2.20 3.95 4.79 Ranking 15 18 42 (l=Best,IOO=Worst) fl U B • A ~ MLl:i G/C M~ G/C • A ~ Int Last Last 1-1/4 Year Years T T 5.75 6.71 5.37 6.57 5.05 6.15 4.73 5.94 4.64 5.64 4.61 6.13 4.06 6.13 4.57 6.28 92 35 l l l COUNTY SANITATION DISTRICTS OF ORANGE COUNTY LONG TERM OPERATING FUND PORTFOLIO CHARACTERISTICS SUMMARY DECEMBER 31, 1996 Treasuries 35% Sector Allocation Corporates 13% Long Term Operating Fund Duration Distribution Other 1% Treasuries 78% Agencies CMOs 9% 0% Corporates 13% Lehman Govt/Corp 1-5 Years Weighted Average Duration 70% ,------.--------.--------~----.-----l 0 Long Term Operating Fund: 2.12 0 Lehman Govt/Corp 1-5 Years: 2.37 60% .9 ;:§ 50% t:: ~ 40% 10% 23.5% 10.6% <1.0 1.0-1.5 Quality Distribution 19.4% 10.7% 1.5-2.0 54.2% 2.0-2.5 Years Duration ------1'.lMo- 10.7% 12.4% 2.5-3.0 3.0-3.5 3.5+ Weighted Average Quality 100%,-------......-----..------r-------.----------,rl 0 Long Term Operating Fund: Aaa D Lehman Govt/Corp 1-5 Years: Aaa 79.4% -------------------------------------------- 60% -----------------------------------------~-~------------------ 47.9'?l -39.4% 40% -..---------------------------~------------------ 20% ------------- 0% 0.1% 0.5% 1.9% 3.6% 3.1% 3.5% 2.7% 5.6% 4.5% I I I Aaa+ Aaa Aal Aa2 Aa3 Al A2 <A2 Moody's Rating * All Statistics shown on the page are dependent on the securities in the portfolio being recognized (by their Cusip) and priced. In this case 100% oftbe securities in the portfolio (by market value) were recogmzed and priced. -· 7 l l I I J J COUNTY SANITATION DISTRICTS OF ORANGE COUNTY LONG TERM OPERATING FUND PORTFOLIO CHARACTERISTICS DETAIL DECEMBER 31, 1996 Weighted Average Portfolio Characteristics Total Fund, By Asset Class and By Sector Ending Percent Market of Effective Effective Sector Value Portfolio COU(?2D Maturit.1: Yield Total Fund $306,805,141 100.0% 6.72 2.52 6.16 Agencies $133,967,450 43.7% 6.47 2.81 6.40 Corporates $38,766,873 12.6% 7.69 2.05 6.17 Treasuries $107,372,080 35.0% 6.96 2.88 6.00 Total Fixed-Income $280,106,403 91.3% 6.83 2.73 6.22 Cash Equivalents $26,698,738 8.7% 5.63 0.25 5.63 5 Largest Holdings Ending Percent Market of Effective Issuer Name Issue Name Sector Value Portfolio Yield United States Treas Nts Nt 7.125% 9/30/1999 Treasuries $96,219,486 31.4% 5.99 Federal Home Ln Bks Deb 6.49% 9/13/2000 Agencies $40,222,512 13.1% 6.50 Federal Natl Mtg Assn Deb 6.850% 5/26/00 Agencies $25,299,243 8.2% 6.36 Federal Home Ln Mtg Corp Deb 6. 720% 10/02/00 Agencies $25,489,084 8.3% 6.25 Federal Natl Mtg Assn Deb 6.375%10/13/00 Agencies $20, 170,0SQ 6.6% 6.43 5 Lowest Rated Holdings (Moody's Rating) Ending Percent Market of Effective Issuer Name Issue Name Sector Value Portfolio Yield Lehman Bros Inc Nt 7.00% 5/15/1997 Corporates $1,012,704 0.3% 5.77 Gen Mtrs Accep Corp #00231 Mtn 8.625% 1/10/2000 Corporates $3,242,828 1.1% 6.53 Gen Mtrs Accep Tr #324 Mtn 8.375% 2/03/1999 Corporates $3,928,798 1.3% 6.34 Chrysler Finl Mtn 6.26% 7/20/1998 Corporates $1,022,222 0.3% 6.11 Chrysler Finl Mtn 7.27% 4113/1998 Corporates $3,010,392 1.0% 6.01 5 Longest Duration Holdings Ending Percent Market of Effective Issuer Name Issue Name Se.ctor Value Portfolio Yield United States Treas Nts Nt5.75% 10/31/2000 Treasuries $12,955,385 4.2% 6.13 FnmaMtn 5.640 2/20/2001 Agencies $9,902,134 3.2% 6.39 Federal Home Ln Mtg Corp Deb 5.990% 3/06/01 Agencies $15,005,770 4.9% 6.42 Philip Morris Cos Inc Nt 9.250% 02/15/2000 Corporates $9,973,840 3.3% 6.69 Gen Mtrs Accep Corp #00231 Mtn 8.625% 1/10/2000 Corporates $3,242,828 1.1% 6.53 5 Holdings with Highest Effect Yield Ending Percent Market of Effective Issuer Name J~eName Sector Value Portfolio Yield Philip Morris Cos Inc Nt 9.250% 02/15/2000 Corporates $9,973,840 3.3% 6.69 Gen Mtrs Accep Corp #00231 Mtn 8.625% 1/10/2000 Corporates $3,242,828 1.1% 6.53 Federal Home Ln Bks Deb 6.49% 9/13/2000 Agencies $40,222,512 13.1% 6.50 Federal Natl Mtg Assn Deb 6.375%10/13/00 Agencies $20,170,050 6.6% 6.43 Federal Home Ln Mtg Corp Deb 5.990% 3/06/01 Agencies $15,005,770 4.9% 6.42 OA OA Duration Convexity Quality 2.12 (0.12) Aaa 2.25 (0.36) Aaa 1.79 0.05 A2 2.54 0.08 Aaa+ 2.29 (0.13) Aaa 0.25 0.00 Aaa OA OA Duration Convexitv Qualitv 2.42 0.07 Aaa+ 2.02 (0.04) Aaa+ 2.02 (0.07) Aaa 1.69 0.00 Aaa 2.58 (1.37) Aaa OA OA Duration Convexit:t: Qualitv 0.34 0.00 Baal 2.58 0.08 A3 1.85 0.05 A3 1.41 0.03 A3 1.17 0.02 A3 OA OA Duration Convexitv Qualitv 3.35 0.14 Aaa+ 3.26 (0.70) Aaa 3.07 (0.73) Aaa 2.61 0.09 A2 2.58 0.08 A3 OA OA Du.ration Convexitv Quality 2.61 0.09 A2 2.58 0.08 A3 2.02 (0.04) Aaa+ 2.58 (1.37) Aaa 3.07 (0.73) Aaa * All Statistics shown on the page are dependent on the securities in the portfolio being recognized (by their Cusip) and priced. In this case 100% of the securities in the portfolio (by market value) were recognized and priced. Ill l 7 l l l ) 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. 7 7 l l 1 l l _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 ant.J.c1pation 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-tbroughs, 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. Ell 7 J FIXED-INCOME PORTFOLIO CHARACfERISTICS 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 security 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. 7 I 1 l l J FIXED-INCOME PORTFOLIO CHARACfERISTICS 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 securities 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. Ell • .n D MEETING DATE OMTS: PDC: FAHR: 2/19/97 EXEC: STEER: JT.BDS: l t:OMML ID. NO. ©MTS,_ __ _ ~:-~ --,-9-7--,-y-· EXEC _____ , STEE;R: ___ _ DISTRICT NO. All AGEN~ ITEM TRANSMITTAL CONTACT FOR INFORMATION •·NlJ\ (Initials of Originator) 2450, Nick Arhontes, 3011 Division No., Name, and Extension AGENDA WORDING AND RECOMMENDED ACTION(S): Agenda Wording: Alternative Delivery of Collection System O&M Services. Recommended Action(s): Based upon staffs investigation and the information contained in this report, we are making the following recommendations: 1. Authorize staff to reorganize the Division in accordance with the attached report. This will result in a decrease of 13 positions from our current authorized level. 2. Authorize staff to prepare a Request for Proposal to out source the "routine" cleaning of small lines (12" and below) in the three District 7 areas. 3. In cooperation with the cities and the Districts Source Control division, establish a Districts-wide grease mitigation ordinance. CEQA REVIEW: Project is Exempt: NOT APPLICABLE DATE OF MOST RECENT BOARD ACTION ON THIS SPECIFIC ITEM: Date Notice of Exemption Filed: Negative Declaration Approved on Final EIR Approved on _ and Notice of Determination filed on _ CURRENT BUDGET/COST INFORMATION TOTAL BUDGETED AMT.: $ SOURCE: DISTRICTS Schedule/Line Items: AMOUNT OF TRANSFER: Schedule/Line Item: TOTAL PROJECT BUDGET INFORMATION First Year in Budget: Master Plan Estimate: Year of First Costs: Revised 01/14/97 H:\WP.DTA\GSA\2410\HODGES\FAHR\FEB97.FAH CURRENT YEAR CURRENT YEAR-YEAR-TO-DATE REVISED BUDGET BUDGET AMOUNT TO-DATE BUDGET BALANCE TOTAL EXPENDITURES (Total Budget plus Transfers) $2,257,000 $860,000 $1,397,000 $2,257,000 ORIGINAL PREVIOUS BUDGET BUDGET CHANGE REVISED TOTAL BUDGET TOTAL CHANGES THIS AIT PROJECT BUDGET $0.00 Page 1 of 4 THIS AITNENDOR/PROJECT co~ INFORMATION ORIGINAL BID, PO,CONTRACT AMOUNT WILL PROJECT REQUIRE ADDITIONAL PERSONNEL? NO If YES, state number: _ Permanent Limited Term CONCURRENCES: Signature Date Division Manager (Or Desi 2 CHANGE ORDERS, FUNDS PREV. APPROVED \ AMOUNT REQUESTED THIS AIT ($312,800.00) AMENDED PROJECT I AMOUNT $0.00 REQUIRES BOARD POLICY ACTION? NO lfYES,-explain in ADDITIONAL INFORMATION section ATTACHMENTS TO AGENDA (List) To Committee: 1. Managers Report ate To Jl Bds.: 1. Managers Report Head (~r D signee) ) A,Ql._c,t_ , j pct (Q)' (>'~ ', LI Ids) Si§na'ture•' · Date Assistant General Manager (Or Designee) ADDITIONAL INFORMATION (Background and/or Summary) The Districts' Wastewater Collection Facilities Operation and Maintenance Division is responsible for operating and maintaining the Districts' 650 miles of trunk line sewers and 22 sewerage lift stations. The division has 18 vacant positions; 15 employees were terminated or resigned as a result of the recent investigation conducted by Confidential Management Services, Inc. and 3 positions were vacant before the investigation was concluded. This has generated an opportunity for GSA to assess the way that business is conducted in the Division. Staff believes that there is an opportunity to reduce the cost of operating this division by eliminating policies and procedures that no longer add value, flattening the organization, and empowering the remaining staff and allowing them to be more efficient and effective. Staff proposed to outsource the routine cleaning of small sewer lines (12" and below) in District 7. Because of the potential for overflows in the smaller lines, staff has set cleaning these lines on a 2 year cycle. On average, staff has reported cleaning 610,100 linear feet per year, of lines 12" and below at a cost of $152,525.00 per year. Staff believes that outsourcing this task will save District 7 approximately $0.05 -$0.10/linear foot in cleaning costs, approximately $30,500.00 to $61,010.00 per year. As a result of restructuring and outsourcing, a net 13 FTE staff reduction will occur. This will result in an additional savings of $625,663 to the Districts in salaries and benefits. Total savings on an annual basis will be between $656,168.00 to $686,673.00. Additionally, staff will be transferring the responsibility for sulfide testing and the caustic soda dosing program (testing and ordering of caustic soda) to the Operations Division. Attached for your guidance and information, is a report outlining the restructuring of the Collections division. Nick Arhontes, the Collection Facilities Manager, will be presenting a brief overview of the Division and a planned approach for how to conduct future business in the Collection Facilities Division. Budget Information The implementation of these recommendations will have save the Districts approximately $312,800 in salary and benefit impact in this year's budget. EEH:fw Revised 01 /14/97 Page 2 of 4 H:\WP.DTA\GSA\241 0\HODGES\FAHR\FEB97.FAH . • ALTERNATIVE DELIVERY OF COLLECTION SYSTEM O&M SERVICES Executive Summary The Districts' Wastewater Collection Facilities-operation and Maintenance Division is responsible for operating and maintaining the Districts' 650 miles of trunk line sewers and 22 sewerage lift stations. The division has 18 vacant positions; 15 employees were terminated or resigned as a result of the recent investigation conducted by Confidential Management Services, Inc. and 3 positions were vacant before the investigation was concluded. This has opened up an opportunity for General Services Administration (GSA) to assess the way that business is conducted in the Division. Staff believes that there is an opportunity to reduce the cost of operating this division by eliminating policies and procedures that no longer add value, flattening out the organization, empowering the remaining staff and allowing them to be more efficient and effective. Staff will outsource the routine cleaning of small sewer lines (12" and below) in District 7. Because of the potential for overflows in the smaller lines, staff has established a benchmark of cleaning these lines on a 2 year cycle. On average, staff has reported cleaning 610,100 linear feet per year, of lines 12" and below at a cost of $0.25/ linear foot or $152,525.00 per year. Staff believes that outsourcing this task will save District 7 approximately $0.05 -$0.10/linear foot in cleaning costs i.e. approximately $30,505.00 to $61,010.00. Additionally, staff will be transferring the responsibility for sulfide testing and the caustic soda dosing program (testing and ordering of caustic soda) to the Operations Division. As a result of restructuring and outsourcing, a net 13 FTE staff reduction will occur. This will result in an additional savings of $625,663.00 to the Districts in salaries and benefits. Total savings on an annual basis will be between $656,168.00 to $686,673.00. Overview This report is submitted for review and discussion regarding one of the Districts' core businesses, the collection and transportation of wastewater. In the past two years, the Collection Facilities O&M Division has lost 177 years of field experience due to retirements, staff resignations, and attrition due to the recent investigation of staff malfeasance. This has necessitated GSA to rethink this operation. A major study of the Collections Division was initiated in July 1996, and involved analyzing the way business is done in the division, reevaluating the historic policies, procedures and practices of the division, and reviewing the organizational structure and eliminating those policies, procedures, practices, and standards that are no longer appropriate or added little or no value. The significant staffing reductions following the investigation have resulted in expediting this effort and reevaluating of service delivery. The re-tooling effort will involve equipping the staff with the tools, training and equipment necessary to further success. Included in this effort will be: (1) the retraining of some staff as project managers to oversee the performance of contracted firms in sewer cleaning; (2) the continuation of work teams authorized to adequately plan and schedule work; (3) the establishment of performance based specifications and benchmarks to properly manage contractors; and (4) the continued implementation of state-of-the-art technology in the collection system. 1 The mobilization effort will direct the Division's supervision from the more routine command and control structure and focus them towards planning, fiscal management and the "long range" goals of the division. District 7 -Small Line History On February 15, 1961, the Orange County Board of Supervisors passed Resolution No. 61-177 and formed the 7th Sewer Maintenance District under the provisions of Chapter 4, Article 2, Section 4870 et seq. of the Health and Safety Code of the State of California. The district was formed to provide "sewer maintenance service for the local sewering system installed in this unincorporated territories within the boundaries of County Sanitation District No. 7 of Orange County, California." Beginning in 1962, the County of Orange began annexing areas in the unincorporated territory in the Tustin area to the Seventh Sewer Maintenance District. Additional annexations continued through the years as tracts in that area were developed. In 1964, District 7 proposed the formation of the 70th Sewer Maintenance District for annexing areas which required pumping facilities to discharge into the trunk sewers. The Districts' Directors felt that it would not be equitable to spread the pumping costs to citizens of District 7 who did not require the service. The pump stations in the 70th SMD served the east side of Tustin Hills and pumped wastewater from this area over the hills to the gravity sewers in the 7th SMD. The Irvine Industrial Complex was annexed in 1967. In June of 1982, the Orange County Grand Jury of 1981-1982 issued a report on special districts in Orange County. A specific issue in the report was the management of the Sewer Maintenance Districts. As previously stated, the 7th and 70th Sewer Maintenance Districts (SM D's) were formed in the early 1960's to provide sewer services to areas within County Sanitation District No. 7 that did not have collection systems. The Orange County Board of Supervisors was the governing authority of the two SM D's. The Grand Jury determined that the County's governance of the SMD's was inefficient. The County had neither the staff expertise nor equipment suitable for maintenance of the SM D's. The County had the responsibilities for the sewer infrastructure, but had contracted the maintenance work for the two SMD's to the Districts since 1963 and 1964. The Grand Jury felt that the expertise in sewer services resided with the Districts, and that economic benefits would result in the formal consolidation of multiple districts into a single district. The County Board of Supervisors authorized the Environmental Management Agency (EMA) to negotiate with the Districts concerning the transfer of responsibility for the SM D's to the sewage treatment agency. According to this resolutions passed in 1986 by the Boards of Directors, the SMD's had certain responsibilities • Provide right-of-way maps for easements before June 30, 1986. • Provide documents to transfer all ownership rights in easements to CSDOC which were held by the County until the dissolution of the SM D's. • Transfer all assets (including fund balances and property rights) and liabilities (including payments to the County Road fund for manhole adjustments) to CSDOC District 7. • Transfer all property tax revenues allocated to the SMD's to CSDOC District 7, including amounts diverted to the Special District Augmentation Fund. • Close out all funds to CS DOC District 7, including fund balances, by October 30, 1986. • Initiate the dissolution proceedings which will coincide with CSDOC District 7 assuming responsibilities. 2 Current Responsibilities Sanitary sewers are enclosed, underground systems that convey domestic and industrial wastewater to treatment facilities for processing and appropriate disposal. They are an essential part of the wastewater treatment system that protects the environment and the health of the citizens of Orange County. The operation and maintenance of the main sewer lines and some smaller and subsidiary lines are the responsibility of the Collections Facilities Division of the Districts. The current NPDES permit states in general that facilities should be properly maintained, sufficiently staffed and trained, and properly operated. Operations and Maintenance (O&M) methods are continually modified based on industry best practice. There are many maintenance functions which the Collection Facilities Division performs to keep the sewer system operating efficiently. Staff is re-engineering the division to focus on its core competencies such as: large line cleaning, pump station maintenance, traffic control, flow monitoring, odor control, CCTV inspections, manhole inspections, frame and cover maintenance, spill response, trouble spot maintenance, preventative maintenance program development and vapor rooting. The division performs this work using crews of various sizes and skills to perform maintenance on pump stations which lift wastewater from one sewer line to a higher level or pump across flat areas. One crew adds caustic soda to alleviate odor problems in the system. Another crew checks manholes, flows, and gas flaps; it also helps other crews with traffic control when necessary. The maintenance work of all crews prevents odors and corrosion in the sewer lines, and promotes the reliable efficient flow of wastewater through the system. Potential problems are frequently found during routine maintenance and eliminated before a crisis occurs. In July 1996, there were five sewer cleaning crews at the Districts; three were two-man hydro crews performing maintenance on smaller diameter sewer lines and two were four-man cable crews cleaning the larger trunk lines. Sewer line cleaning can be categorized into two functional areas: • Large Line Cleaning -15" Diameter and Above Large line cleaning, generally those with a 15" diameter and above, consists of various routine tasks. The interceptors and trunk lines are cleaned mechanically. The cable crews scrape, cut, pull or push material from large diameter pipe. Automobile tires of different diameters are very effective line cleaners when pulled through sewer lines in addition to other specialized tools, such as mechanical bucketing. The Districts have developed expertise in cleaning large lines. • Small Line Cleaning -12" Diameter and Below In the vast majority of the Districts' service areas, the cities are responsible for maintaining the small local lines. There is one exception to this, however. Because of prior agreements with the County and the City of Tustin, the Districts maintains small lines in District 7. The Districts' hydraulic cleaning crews provide local "retail" sewer services to three distinct service areas in District 7 (i.e., the County unincorporated areas, the City of Tustin, and the Irvine Industrial Complex). Detailed sewer mapping of these areas is not yet available; however, this issue was addressed during the January 1997 Planning and Design Committee meeting. As a result, the PDC recommended that a contract be issued to Camp Dresser and McKee to do this mapping which was approved at the January 1997 Joint Board meeting. This mapping will provide accurate information to outside firms which would be necessary to properly bid on and maintain sewer lines in District 7. 3 The Collection Facilities Division's preventive maintenance on the smaller diameter sewer lines is primarily responsible for minimizing stoppages and the potential for overflows. Stoppages may be cal!JSed by roots, grease, sticks, rags, collapsed pipes, sand, grit and a variety of other small obstructions. Organizational Structure The field staff of the Collection Operations and Maintenance Division was originally comprised of 31 employees. The work performed by this division included: • Cleaning of large diameter sewer lines -2 four-man cable rig crews. • Cleaning of small diameter sewer lines -3 two-man hydraulic crews. • Odor control with caustic soda treatment, CTTV, CMMS -1 two-man crew. • Light construction and repair, manhole inspections -1 four-man crew. • Caustic Soda, Closed Circuit TV (CCTV) and Computerized Maintenance Management System (CMMS) oversight -1 two man crew. • Station runner for checking and exercising pump stations -one man crew. • Pump station maintenance and repair-2 four-man crews. • Supervision -1 Field Supervisor and 2 Foreman The staffing and the organization of the division as defined and approved in the fiscal year 1996/97 budget are depicted in Chart 1, on the following page. Shown in grey are the positions that are currently vacant. Staffing was decreased in the Collection Facilities Operations and Maintenance Division from 31 employees before retirements and terminations/resignations to 13 current divisional employees. These employees are responsible for the same amount of work with only 40% of the previous staffing. Currently, the remaining staff are concentrating on pump station maintenance, trouble spot line cleaning, and large diameter line cleaning. Backlogs on other activities are higher. The reorganization of the division and the redistribution of work is necessary to fulfill the short and long-term divisional responsibilities of protecting the health and environment of the citizens of Orange County. The most important aspect of the reorganization is the elimination of one of the pump station crews and two hydro flush cleaning crews predominately dedicated to small diameter sewer line maintenance; the majority of this work is performed in the County unincorporated areas, the City of Tustin, and the Irvine Industrial Complex. In order to arrive at this new staffing level, management is proposing the outsourcing some of the routine small line cleaning, adjusting intervals between performing preventative maintenance services, implementing more technology in the monitoring of pump station services and more cross training of the existing staff. Reducing and eliminating services is also being considered. The net staff reduction may include: the elimination of two full time hydraulic cleaning crews performing maintenance on small diameter line (4 FTE's); the decrease in construction/repair crew staff from two to one (1 FTE); the transfer of odor control to Operations Division (1 FTE); the decrease in cable crew staff from eight to four (4 FTE's); and the elimination of one pump station maintenance three (3 FTE's). The hiring of five Level 1 Workers for this reorganization will provide staffing for the performance of Collection Facilities Operations and Maintenance Division's responsibilities. Staff 4 Foreman •c..-y\/aconl Senior Worker Hydro-Vaporooter V-396 5 .5FTE Manager Field Supervisor Planner Senior Worker CausUcSode CCTV CMMS Senior Worker Worker I (Floater) Lead Worker Pump Ste. Mice. Worker I (Floater) G:IVISIO.DTAIGSAIARHONTES\2450-0RG.VSD NJA:MMC:pel 7/24196 Chart 1 -Current Organization County Sanitation Districts of Orange County Manager Lead Worker Cable Rig Senior Worker ~ -··" ; I Lead Work.er Hydro Fluah Crew Worker II Planner Senior Worker Frame• & Cover Mtce_ Traffic Control G•• Flap• Flow Monllortng Worker II Worker II Field Supervisor Foreman Senior Worker Cau•tlc Soda CCTV CMMS Warkerll Slo.!lon Rvnnor Chart 2 -Proposed Reorganization 6 Collection Facilities O & M Division 2450 Contract Admlnl•trator Le•dmWorker Pump Station Maintenance S•nlor Y'v'orker Wc.rbrl (Flo.t•rJ Worker I (Floater) G:\VISIO.DTA\GSA\ARHONTES\2450-0RG.VSD NJA:MMC:pel 7/24196 has analyzed this approach and determined that this projected reorganization and redistribution of work will save the Districts approximately $625,663 per year in salaries and benefits. The Division's field staff will now be responsible for the following: • Cleaning of large diameter sewer lines above 12" in diameter • Trouble spot and emergency maintenance • CCTV, CMMS oversight • Light Construction/Repairs • Contract Administration • Pump Station O&M • Pump Station checking and exercising Spill History Under the terms of the NPDES permit, the Districts are required to report all spills of wastewater in the Collection system to the Regional Water Quality Control Board. Between the period of January 1, 1990 to December 31, 1996, the Districts have reported a total of 89 spills. These 89 spills have resulted in a total reported gallonage of 1,704,211. The chart below shows that District 7 has accounted for 67.4% of all reported spills. However, it should be noted that the reported spillage in District 7 has been 134,140 gallons, or 8.01 % of the total reported. Gause ot Spitl Total District 7 Percentage in Distict 7 Grease 19 18 94.7 Roots 10 6 60.0 Vandalism 3 2 66.7 Rocks and Dirt 4 4 100.0 Contractor 13 5 38.5 Districts 7 1 14.3 Misc. (UK/Stoooage) 26 21 80.8 Rains 7 3 42.9 Total 89 60 67.4 In 1995, the Districts developed a containment strategy that allows most of the sewage to be capatured and returned to the system. This lessens the impact to the watershed. It should be noted from the above chart that staff has identified a total of 19 spills that can be attributed to grease. Of those 19, 18 have been in District 7. Three years ago the City of San Diego was under a consent decree to minimize sewer overflows. As a result , they enacted a grease inteceptor ordinance that mandated that all resturants and facilities install a grease inteceptor that keeps the grease from entering the sewer. Staff believes that this program is proving to be successful and should be considered for the Orange County region. Financial impacts to the resturants, if any, are not being considered for this report. Current Financial Information Of the total 652 miles of sewers owned by all of the Districts, 31.8%, or 207 miles are 12" diameter or below. These lines are located in the Unincorporated Area, District 7 and the Irvine Industrial 7 Complex. The following chart shows the actual costs that District No. 7 has incurred maintaining the lines, pump stations and miscellaneous maintenance in that area. . ··-,-~ ' '• ~ ' ;: ·~;: •. , ·<· ' -,. '.;.:·--. • a-,. -~~1-- ... '-·L.....•~--_,. -:._ -Ci _ -.. . .. FiscalYear -·,LI~.;;_ ~ ,. ._,;_;_,__ :, ,;,: -_,. •:· ,,.. --,-.. ,. --, ~ ,} ,., ,_ ---... ... ! •· 5Year ·:; I• •• :i I•• 1991•92 1992::S3· j :.t993-94::~ · 1994;9~'l 1.99~-S&~:-~ i,.• Aver.age "i ~ -.. ,, -'l ., .-,;,__. ,·- Revenues 7oth SMD $209,375.00 $162,089.00 $156,588.00 $152,031.00 $147,086.00 $165,433.80 7th SMD 465,613.00 349,417.00 355,607.00 334,714.00 358,809.00 $372,832.00 Total $674,988.00 $511,506.00 $512, 195.00 $486,745.00 $505,895.00 $538,265.80 Expenses Maintaining $254,081.00 $359,187.00 $356,209.00 $242,229.00 $351,695.00 $312,680.00 Lines Maintaining $168,388.00 $196,373.00 $161,660.00 $140,764.00 $92,361.00 $151,909.00 Pump Sta. Misc. Expenses $30,638.00 $23,363.00 $268.00 $23,426.00 $2,040.00 $15,947.00 Total $453,107.00 $578,923.00 $518,137.00 $406,419.00 $446,096.00 $480,536.00 Net $221,881.00 $(67,417.00) $(5,942.00) $80,326.00 $59,799.00 $57,729.00 lncome/(loss) District 7 Revenues and Costs Sewer Line Maintenance In District 7 Staff has broken down the cost to maintain lines in District 7 into three major categories: "routine" small line cleaning, trunk line cleaning and the cleaning of trouble spots. For purposes of this report, a trouble spot is a portion of line that has been identified as a spot requiring cleaning on a more frequent basis. This could be due to an excessive amounts of roots, a history of grease blockages or a siphon. A siphon is a gravity pipe that crosses under an existing facility such as a storm drain, creek or river. In our total area, staff has identified approximately 100 trouble spots. These trouble spots are cleaned on either a monthly or quarterly basis. Also, for purposes of this report, it was decided that the cleaning of trunk lines and trouble spots should remain with the Districts. The chart below shows the total footage of routine cleaning of small lines cleaned by District crews in District 7 for the period of FY 93-94, 94-95 and 95-96. This time coincides with the keeping of accurate records on the Computerized Maintenance Management System. 8 Footage Cleaned "Routine" footage 1, 112,866 119,948 597,485 610,100 Total annual footage cleaned In addition, Districts crews also clean on average, 500,000 linear feet annually, in "trouble" spots and trunk lines, in District 7. Districts staff would continue to perform this work in-house. This approach will be discussed further on in the report. Competition and Comparisons There are private companies whose primary business includes the cleaning of sewer lines, similar to work the Districts' crews perform. The contract firms vary in quality and cost. Some cities in the Districts service area use these contractors. In preparing this report, staff contacted those cities to ascertain their level of satisfaction. The cities evaluate the success of the contract line cleaning by the number of stoppages and spills. Some cities require televising sections of lines cleaned for proof of quality. The table on the following page shows the contractors and their cost estimates to clean 12" and below lines for the Districts. ~ -F.irm/Agency --Est Cost per Linear Foot ., -· ' R. L. Walker $0.07-$0.14 Empire Pipe Cleaning $0.175 CPI $0.14 National Plant Services $0.25-$0.35 Districts $0.25 Line Cleaning Costs Summary Quality of Work Quality work, safety, and expertise are three important points to consider when looking to out- source. The contractor must understand the long term importance of quality preventive maintenance. Quality preventive maintenance does minimize the chance of stoppages and spills, and reduce odors. Quality preventive maintenance does prolong the useful life of the collection systems. Quality preventive maintenance does minimize rehabilitation costs. Quality preventive maintenance may reduce rewards in damage claims against public agencies regarding stoppages and spills. Quality maintenance of collection systems protects the health of citizens; a healthy environment should be of primary importance to city officials. The Districts are in the process of writing a detailed performance based specification that will include a check of references and a requirement that the Contractor televise a random 10% section of cleaned line that the Districts will specify, after we are notified that the Contractor has completed the work specified. 9 Proposed Approach The Districts are in the process of re-engineering the Collection Division to focus on our core competencies. Staff knows that there are certain aspects of the business that the Districts do exceptionally well. Some of the areas the Districts do better than its competition are: large line cleaning, pump station maintenance, traffic control, flow monitoring, odor control, CCTV inspections, manhole inspections, frame and cover maintenance, spill response, preventative maintenance program development and vapor rooting. However, based on the prior analysis, our new approach will be to outsource the "routine" cleaning of all lines 12" and below in District 7; the unincorporated area; the City of Tustin and the Irvine Industrial Complex. Staff will put together bidding documents and competitively bid this work to one or more of the commercially available firms and interested public agencies. The Districts role will be of a Project Manager overseeing the work of the Contractor. The contractor will be responsible for identifying potential trouble spots. Districts' crews will respond to all trouble spots, overflows and emergencies. Immediately after the CMS investigation, staff worked with the Compliance Division to have them assist with odor control mitigation in the districts. This involves testing for sulfide levels in the wastewater using a Pomeroy test kit and the overseeing of the caustic drops into the trunk lines by the Contractor. In addition to the out sourcing opportunity listed above, staff will transfer the responsibilities of the caustic dosing program including the ordering of caustic soda to the Operations Division on a permanent basis. Staffing Needs Currently, the division has 18 vacancies. To compensate for these vacancies, staff is extending as much as possible, the interval between maintenance on pump station equipment (pumps, valves, etc.). The Districts' crews are not maintaining lines to the same standard they were prior to the investigation, but with a contractor doing routine cleaning, staff expects this to change. Instead, staff is focusing on maintaining the pump stations, the siphons and trouble spots (all sizes), and cleaning of some of the larger lines. Staff is not able to maintain the smaller lines with the remaining crews that are available. Staff has worked out a short term arrangement with the Compliance Division to take over the odor control monitoring and ordering of chemicals. Staff is assuming that this role will be taken over by the Operations Division on a permanent basis. As previously detailed, elimination of two full time hydraulic cleaning crews (6), cutbacks in staffing of the cable rig and construction/ repair crews (3), and the elimination of a pump station maintenance crew (4) will eliminate other employee positions. The five new Level 1 Workers required for performance are the lowest paid positions in the Collection Facilities Division. The reorganization increases cost savings by replacing five higher paid positions with lower paid staff. This will result in: • Net decrease of 13 staff positions. • Net operating cost savings of between $656,000.00 and $686,000.00. • Somewhat higher backlogs. Additionally, aside from the staffing needs, the Source Control Division should work with the cities to 10 implement a grease ordinance into all of our discharger permits. Staff believes that keeping the grease out of the lines will extend the length of time between cleaning, decrease the total number of spills and ultimately lower the costs to District 7, as well as reducing grease problems in the member cities. Recommendations Based upon staffs investigation and the information contained in this report, we are making the following recommendations: 1. Focus on our core business of large line cleaning, pump station maintenance, traffic control, flow monitoring, odor control, CCTV inspections, manhole inspections, frame and cover maintenance, spill response, Preventative Maintenance program development, trouble spot maintenance and vapor rooting. 2. Authorize staff to reorganize the Division in accordance with the attached report. This will result in a decrease of 13 positions from our current authorized level. 3. Authorize staff to prepare a Request for Proposal to outsource the "routine" cleaning of small lines (12" and below) in the three District 7 areas. 4. Continue to outsource Closed Circuit TV and minor repairs and rehabilitations as long as it remains cost effective to do so. 5. Improve data management including sewer mapping and bar coding. 6. Continue internal cross-training. 7. Transfer the responsibility of sulfide monitoring, ordering of chemicals, and dosing program to the Operations division on a permanent basis. 8. More closely monitor city Preventative Maintenance programs and trends in the EPA actions. Staff believes that this recommendation will have the most significant impact on our future staffing needs. 9. Investigate mutual aid themes with all city Maintenance crews. 10. In cooperation with the cities and the Distncts· Source Control Division, establish a Districts- wide grease mitigation ordinance. NJA:fw H:\WP.DTA\GSA\2450\ARHONTES\7SWRSVC.WPD 11 .• Gi:fJvl~. INF0. ITI:.M !:Et G0-,;,M. ~ 0N ~ 01 JT, B~S.\C©NSE}lff Pl JT. BlllS. llllSCUSSl©N (NOti-OONSENl) IEl PUBUI:: HEARING ____ JT, B0S. MEETING DA"TE ____ J1; BOS. A!;JEND~ ~ Nd, 'MEETING DATE OMTS: PDC: FAHR: 2119197 EXEC: STEER: JT.BDS: GGMM, ID. NO. 0MTS,_ ___ _ POC _ __,,,,~....,...-~~ FAHR i1--J5' EXEO ___ _ STEER ___ _ DISTRICT NO. ALL AGENDA WORDING AND RECOMMENDED ACTION(S): Agenda Wording: j,_ AGENr , ITEM TRANSMITTAL CONTACT FOR INFORMATION 2220, Michael D. White, 2520 Division No., Name, and Extension Consideration of motion to review, approve and file the 1996-97 Mid-Year Financial and Operational Report covering the period ended December 31, 1996. Recommended Action(s): Staff recommends that the Committee review, approve and forward the 1996-97 Mid-Year Financial and Operational Report for the period ended December 31, 1996 to the Joint Boards, and to approve a supplemental appropriation of $6,927,000 within the Capital Outlay Revolving Fund (CORF). CEQA REVIEW: Project is Exempt: NOT APPLICABLE Date Notice of Exemption Filed: Negative Declaration Approved on Final EIR Approved on_ and Notice of Determination filed on_ BUDGET INFORMATION TOTAL BUDGETED AMT.: $44,895,000 SOURCE: CORF Schedule/Line Item: SUPPLEMENTAL APPROPRIATION: $6,927,000 Schedule/Line Item: AIT/PROJECT COST INFORMATION CURRENT YEAR BUDGET AMOUNT $44,895,000 ORIGINAL BID, PO,CONTRACT AMOUNT NIA WILL PROJECT REQUIRE ADDITIONAL PERSONNEL? NO If YES, state number: _ Permanent _ Limited Term DATE OF MOST RECENT BOARD ACTION ON THIS SPECIFIC ITEM: June 26, 1996-Adoption of the 1996-97 CORF Budget. CURRENT YEAR- TO-DATE EXPENDITURES $22,288,000 CHANGE ORDERS, FUNDS PREV. APPROVED NIA YEAR-TO-DATE BUDGET BALANCE $22,607,000 AMOUNT REQUESTED THIS AIT NIA REVISED BUDGET TOTAL (Total Budget plus Transfers) $51,822,000 AMENDED PROJECT AMOUNT NIA REQUIRES BOARD POLICY ACTION? NOT APPLICABLE If YES, explain in ADDITIONAL INFORMATION section 1 2-/, Date Date Signatur Date Assistant General Manager (Or Designee) ATTACHMENTS )AGENDA (List) To Committee: 1. Mid-Year Financial and Operational Report for the period ended December 31, 1996. To Jt. Bds.: 1. Mid-Year Financial and Operational Report for the period ended December 31, 1996. OMTSCOMM. POCCOMM. F.AHR COMP;,, JOJNT BOARDS Meeting Date: Approved: ··Amenl::led: Foiwarded te: Attached, in a separately bound document, is the Districts' Mid-Year Financial and Operational Report for the period ended December 31 , 1996. This report is a consolidation of both the financial and operational accomplishments of the Districts' through December 31, 1996. Contained within this report are budget summary reviews of the Joint Operating, the Capital Outlay Revolving Fund, individual District Funds, and the Self-Insurance Funds. Also contained within this report is the status of the divisional performance objectives and workplan milestones identified in the 1996-97 Approved Budget. As indicated within the Overview Section of this report, 49.81 percent, or $24,259,000 of the 1996-97 net joint operating budget of $48. 7 million has been expended. This is a net decrease of 2.12 percent, or $526,000 from the same period last year. The total cost per million gallons at December 31, 1996 is $544 based on flows of 44,632 million gallons. This is $12, or 2.24 percent below the budgeted cost per million gallons of $556. As part of the mid-year report, staff is requesting a supplemental appropriation to the CORF Fund of $6,927,000 so that the acceleration of several major projects can continue on until their completion, including: • Secondary Treatment expansion to 80 MGD at Plant No. 1 • Seismic Retrofitting • Fire Protection and Water System Modifications at both Plant No. 1 and 2 • Primary Clarifier Rehabilitation at Plant No. 2 • Primary Clarifier Rehabilitation at Plant No. 2 • Chemical and Plant Water Modifications at Plant No. 2 • Maintenance Building at Plant No. 2 For more detailed project by project information, please refer to the "Summary of Joint Works Construction Requirements" beginning on Section 3 -Page 2 of the Mid-Year Report. c: Department Head AGM-Administration AGM-Operations General Manager C:\WPDATA\FAHR\2NDQTRPT.AIT Revision: 8/28/96 Page 2 of 2 OMTS: PDC: FAHR: 2-19-97 EXEC: STEER: JT.BDS: 2-26-97 ALL AGENDA WORDING AND RECOMMENDED ACTION(S): Agenda Wording: ,~ AGENl ITEM TRANSMITTAL 3. CONTACT FOR INFORMATION 2210, Gary G. Streed, 2500 Division No., Name, and Extension CONSIDERATION OF CRITICAL GOALS, FISCAL POLICY STATEMENTS, AND BUDGET ASSUMPTIONS FOR 1997-98 BUDGET PREPARATION (All Districts): The Steering Committee and staff have drafted Critical Goals, Fiscal Policy Statements, and Budget Assumptions for the FAHR Committee to review prior to staffs preparation of the 1997-98 Budget Recommendations. Recommended Action(s): 1. Approve the 1997-98 Critical Goals, Fiscal Policy Statements, and Budget Assumptions, and direct staff to prepare budgets incorporating these parameters. CEQA REVIEW: Project is Exempt: NO Date Notice of Exemption Filed: Negative Declaration Approved on Final EIR Approved on_ and Notice of Determination filed on_ CURRENT BUDGET/COST INFORMATION TOTAL BUDGETED AMT.: $ N/A SOURCE: CORF JO DISTRICTS Schedule/Line Items: AMOUNT OF TRANSFER: Schedule/Line Item: TOTAL PROJECT BUDGET INFORMATION First Year In Budget: Master Plan Estimate: Year of First Costs: THIS AITNENDOR/PROJECT COST INFORMATION CURRENT YEAR BUDGET AMOUNT N/A ORIGINAL BUDGET TOTAL ORIGINAL BID, PO, CONTRACT AMOUNT WILL PROJECT REQUIRE ADDITIONAL PERSONNEL? NO If YES, state number: _ Permanent _ Limited Term Revised 01/14197 H:\WP.DTA\FIN\2210\CRANE\FPC.MTG\FAHR.97\FEB\BUDGET DATE OF MOST RECENT BOARD ACTION ON THIS SPECIFIC ITEM: CURRENT YEAR- TO-DATE EXPENDITURES N/A PREVIOUS BUDGET CHANGES CHANGE ORDERS, FUNDS PREV. APPROVED YEAR-TO-DATE BUDGET BALANCE N/A BUDGET CHANGE THISAIT AMOUNT REQUESTED THIS AIT REQUIRES BOARD POLICY ACTION? YES REVISED BUDGET TOTAL (Total Budget plus Transfers) N/A REVISED TOTAL PROJECT BUDGET $0.00 AMENDED PROJECT AMOUNT $0.00 If YES, explain in ADDITIONAL INFORMATION section Page 1 of2 CONCURRENCES: Date Date ')_Is/ q, Sign u Date Assis nt General Manager (Or Designee) ADDITIONAL INFORMATION (Background and/or Summary) ATTACHMENTS TO )NOA (List) To Committee: ToJt. Bds.: 1. Draft -Critical Goals Draft -Fiscal Policy Statements Draft -Budget Assumptions 1. Draft -Critical Goals Draft -Fiscal Policy Statements Draft -Budget Assumptions Each year the FAHR Committee established the Fiscal Policy Statements and Budget Assumptions that staff incorporates and publishes in the annual budget. This year, the Steering Committee and staff met to discuss these and the Critical Goals that drive them in preparation for the presentation to the FAHR Committee. Enclosed with this AIT are a full-size draft of the Critical Goals, the draft Fiscal Policy Statements and comments, the draft Budget Assumptions for 1996-97, and a one-page summary for your review. Staff will make a brief presentation at the Committee meeting. GGS:lc c: Department Head AGM-Administration A GM-Operations General Manager Revised 01/14/97 H:\WP.DTA\FIN\2210\CRANE\FPC.MTG\FAHR.97\FEB\BUDGET Page 2 of2 _-. , Districts' if-,. • :.;;, Re~nventlart- Implement O&M's Districts Assessment and Reinvention Team Recommendations j Consolidate Districts] Address Engineering Dept. Organizational Issues Complete and I Monitor Five-year Staffing Plans Implement Adaptive Work Force Strategies Districts' -wide Restructure I Collections Program Review Laboratory I Processes (LIMS) Evaluate Outsourcing and lnsourcing Opportunities for GSA, Technical Services and Communications Implement Delegation of Authority Task Force Recommendations DRAFT -Critical Goals For Fiscal Year 1997-98 Environmental Monitoring and Compliance Provide Technical Support for Amendment to Basin Plan Secure NPOES I Permit and 301 (h) Waiver Restructure Ocean Monitoring Program Provide Focused Research for Improved Productivity Review and Cost-effectively Implement New Title 5 Air Quality Regs. -- Investigate Water Repurification/ Conservation Provide Staff Support lo OCWO/CSDOC Board Committee Establish Financial Strategy Establish Governance Structure Complete Initial Technical Studies Develop Water Conservation Cooperative Funding and Programs New Continuing Strategic Plan Complete Rate I Study with RAC and Implement New Financial Program Work with PAC to Develop Flow Management Options and to Define Options for Enhanced Capacity Complete Evaluation of Treatment Strategies Complete Environmental Impact Report for Strategic Plan Provide Board with Results of Stakeholder I Evaluations Using COM Decision Model Application of Technology I Complete IT Strategic Plan Complete Implementation of FIS Complete Implementation of LIMS Initiate Records Management and Document Controls Programs in Engineering and Board Secretary's Office Complete Plant Automation Master Plan Convert Existing Engineering Drawings to I Electroriic Format I Upgrade CMMS Evaluate Internet/Intranet I I External Communications I Establish Ongoing Programs with County, City, COG Provide Support for OCR Outreach Support RAC/PAC Strategic Plan Establish Legislative Outreach Program Support Consolidation Establish lndustriaV Commercial Technical Center I Management Performance I Implement Broad Banding Program Improve Performance Evaluation Program for Non•exempt Employees Implement Adaptive Work Force Strategies Regarding Training I Conduct Internal Audit Team Studies I Refine Bench-marking Program Provide Revised HR Policies and Procedures Manual Training I Initiate Performance-based Budget Studies Establish Quantifiable Standards for Quality and Reliability GOALSHT.COA 1129197 csooc 1997-98 Major Budget Policies and Issues Summary Budget Steering Committee Recommendation to FAHR Committee 1. Total staffing, based upon full time equivalents, is projected to be 560 at July 1, 1997. This is a decrease of 56 or 9.1 % from July 1, 1996. Another 5% reduction is anticipated during 1997-98. 560 allows some regrowth from the current attrition and early retirement reductions. 2. Total flow for 1997-98 is projected to approximate 245 mgd, up 2.1 % from the 1996-97 budget of 240 mgd. Flows for the first 6 months of 1996-97 have averaged 243 mgd. Silverado Constructors is estimated to discharge 1. 7 mgd for 1997-98. 3. Total joint works operating, maintenance and administration costs are proposed to be $47,000,000 for 1997-98, a decrease of 3.5% or $1,700,000 from the 1996-97 budget and $700,000 below the estimated actual for 1996-97. 4. Based on the projected flows and proposed joint works budget above, the cost to treat and dispose of 1 million gallons equals $525.00, down 5.5% from the 1996-97 budget of $555.94/mg. 5. The joint works capital improvement budget (CORF) is proposed not to exceed $50 million. Improvements for 1997-98 will emphasize plant automation, local computerization networks, electrical reliability, seismic safety and regional water repurification and recycling through cooperation with the OCWD. 6. No sewer service fee increase is being proposed for 1997-98. However, a recommendation for a sewer service fee increase for 1998-99 is expected from the Rate Advisory Committee. 7. The interest rate assumed for budgeting interest earnings on the District investments will be 6.3%, per PIMCO. 8. Inflation for Orange County in 1997-98 is projected to be 2.6% based on the percentage of change in the consumer price index obtained from the December 1996 Economic and Business Review report prepared by Chapman University. 9. The interest rate assumed for payback analysis of projects will be 6% for 1997-98, and will only be reviewed by the FAHR for the second half if a change of 50% or greater is proposed 10. Total "reserves" will be allowed to decline approximately $33 million since liability insurance has been purchased and sewer service fees are not increased pending completion of the Strategic Plan. 11. The "reserve policy" will be reviewed by FAHR and the Joint Boards during 1997-98. 12. An amount equal to 2% of salaries and wages will be budgeted for staff training & meetings. 13. An amount equal to 1 % each will be budgeted in joint works salaries, joint works materials and services and joint works capital improvements as a budgeted contingency for the General Manager to administer and allocate in accordance with current Board authorization and policy. 14. Department Heads may reallocate budgeted funds within Divisions or Departments in accordance with provisions of Resolutions 96-87 and Districts policies as long as the total budget for the Department is not increased. 15. The General Manager may reallocate budgeted funds between Departments as long as the total fund budget is not increased. 16. The Board of Directors may increase a fund budget as long as funds are available. 17. Only the Board of Directors may reallocate budgeted funds between salaries & benefits and other budget categories. A:\BUDG97-3.WPD CSDOC e P.O. Box 8127 e Fountain Valley, CA 92728-8127 e (714) 962-2411 / Issuance of Budget Training and Instructions I Districts' Budget Development I Integration \ Compilation/ Analysis of Districts' Requests by Financial/Planning \ General Manager's Review and Preparation of Executive Budget ~ Budget Process: 1997-98 Budget Process Preparation/Planning Passage Financial Review of Performance \ Administration of Finance/Policy\ Budget Execution/Feedback ! Executive Board Enactment I Consideration of Budget by Districts' Board and Committee ~ The Districts' annual budget preparation process begins in January of each year and concludes in June upon its adoption. However, the entire budget process extends beyond one year and overlaps with the preceding budget and the subsequent budget. As shown in the chart above, the budget process consists of four major parts. These parts occur at various stages throughout the year as follows: • Preparation/Planning-takes place from January through March. Integration-runs from March through May . Passage-adoption of the budget usually occurs in June of each year. Execution-starts from the first day of the budget year, July 1, through the entire budget year and beyond into November with the presentation of the annual audit report. Page 1 of 3 Team Approach As identified by one of the fiscal policies, the budget preparation process is prepared at the division level, the level at which accountability and control will be held. Budget coordinators are established to represent each division within the Joint Operating Fund. A comprehensive budget manual is prepared and used as the training manual during a one-half day training session with the budget coordinators. After the initial divisional budgets are prepared, budget review sessions are scheduled for each division with the General Manager. It is during these sessions that all proposed staffing levels, programs, and line item expenses are justified. Next senior management representatives from each department analyze opportunities for consolidating programs and eliminating unnecessary requests. Guidance is also sought and utilized from Districts' committees on various operational issues that affect the budget development. The Process The budget preparation process begins in February with the distribution of the budget manual, budget preparation training, and issuance of personnel budget and justification forms, capital project request forms and equipment budget forms to all of the Divisions. In March, the Finance Department develops divisional level budgets based on the request forms received from the various departments. These divisional budgets are then reviewed in mid-March by the General Manager along with the Department and Divisional managers for each program request, for new, additional, or reduced services, positions and capital outlay. The Capital Improvement Program requests are also prepared in March and reviewed by Engineering prior to being submitted to the General Manager for review and evaluation as part of the budget process. In determining recommended allocation levels, the 1997-98 Budget Process General Manager takes into consideration the projected amount of available resources, direction provided by the Directors, the Districts' fiscal policies, and how to best provide the most cost- effective and efficient service levels to the public. After a final review of the operating budgets by the General Manager, the proposed annual budgets are finalized in late May and then distributed to the Directors for consideration. The General Manager will present the proposed budget to the various Districts' Committees for deliberations throughout the month of June. The proposed budget will be scheduled for adoption, along with any revisions by the Board, at the Board of Directors meeting in June. Level of Control and Amendments To The Budget Budgetary control, the level of expenses which cannot legally exceed the appropriated amount, is exercised at the individual Department level. Administrative policies provide guidelines on budget transfers and the authorization necessary to implement transfers. Generally, there are two types of budget transfers: 1. Budget Adjustment This 1s a transfer which does not change the total appropnated amount within in a District and does not reQuire Board action. Depending on the budget category affected by the transfer, approval may be granted at the General Manager or Department Head level as follows: • Department Heads have the discretion to reapportion funds between certain line items within a division but may not exceed total appropriated amounts for each department. They also may transfer staff across d1v1s1onal lines. Additional expenses for capital outlay items must be approved by the General Manager and Boards of Directors. Funds appropriated for salaries and benefits may not be expended for any other purpose unless approved by the Joint Boards. Page 2 of 3 • The General Manager may. transfer funds within and between divisions -and - departments (with the exception of additional capital outlay expenditures, which require Board approvals). The General Manager may also transfer staff positions between departments. 2. Budget Amendment: This is an adjustment to the total appropriated amount within a District which was not included in the original budget. These supplemental appropriations require formal action by the Boards of Directors. Types of modifications can be categorized as follows: • Prior year reserves or fund balances may be appropriated to fund items not previously included in the adopted budget. Reserves/fund balances exceeding minimum amount required by fiscal policy may be appropriated if it is determined to be in the best interest of the Districts. Directors may also appropriate reserves in case of emergencies or unusual circumstances. • Transfers between Districts require formal action by Boards of Directors. • Unexpended appropriations automatically lapse at the end of the fiscal year and are included in the ending fund balance calculations within each District. Page 3 of 3 1997-98 Budget '.Process Fiscal Policy Statement Status General Financial Goals To maintain financially viable Sanitation Districts that can maintain an adequate level of wastewater treatment services. ..f To maintain financial flexibility to be able to continually adapt to local and regional economic changes. ..[ To maintain and enhance the sound fiscal condition of the Districts. ..f To ensure that the value added of every program and activity within the Districts' is proportional to its cost; and eliminate those programs and activities that do not contribute to the Districts' mission. ..f To provide training opportunities for available jobs within the organization for those employees working in programs or activities that have been reduced or eliminated to the greatest extent possible. ..f To provide employees with cross-training opportunities in order to achieve multi-tasking capabilities. ..[ Operating Budget Policies The Districts will adopt a balanced budget by June 30 of each ~r. ..[ The budget will be used as a fiscal control device as well as a financial plan. ..f Budget preparation and monitoring will be performed by each division within the Districts, the level at which accountability and control will be held. ..f The Director of Finance will prepare a budget calendar no later than January of each year. ..f An annual operating budget will be developed by verifying or conservatively projecting revenues and expenditures for the current and forthcoming fiscal year. ..f During the annual budget development process, the existing programs will be thoroughly examined to assure removal or reduction of any services or programs that could be eliminated or reduced in cost. ..f Current operating revenues will be sufficient to support current operating expenditures. ..f Page 1 of 5 Fiscal Policy Comments Fiscal Policy Statement Annual budgets including reserves will provide for adequate design, construction, maintenance and replacement of Status Districts' capital plant and equipment. ./ The Districts will maintain all physical assets at a level adequate to protect the Districts' capital investment and to minimize future maintenance and replacement costs. ./ The Districts will project equipment replacement and maintenance needs for the next five years and will update this projection each year. From this projection a maintenance and replacement schedule will be developed and followed. ./ The Districts will avoid budgetary and accounting procedures which balance the current budget at the expense of future budgets. ./ The Districts will forecast its Joint Works' expenditures and revenues for each of the next five years and will update this forecast at least annually. ./ Revenue Policies Because revenues are sensitive to both local and regional economic conditions, revenue estimates adopted by the Districts' Board must be conservative. ./ Staff will estimate annual revenues by an objective, analytical process utilizing trend, judgmental, and statistical analysis as appropriate. ./ Ad valorem property tax revenues of the Districts will be dedicated to debt service. ./ Expenditure Policies The Districts will maintain a level of expenditures which will provide for the health, safety and welfare of the residents of the community. ./ The Districts will set fees and user charges at a level that fully supports the total direct and indirect costs of operations, capital improvements, and debt service requirements not ~~~re~~-.f Sewer Service User Fees will be projected for each of the next five years and this projection will be updated annually. Page 2 of 5 .[ Fiscal Policy Comments Will need to be updated upon completion of the Strategic Plan Update. 'I Fiscal Policy Statement Capital Improvement Budget Policies The Districts will make all capital improvements in accordance with an adopted and funded capital improvement program. The adopted capital improvement program will be based on need. The Districts will develop an annual five-year plan for capital improvements, including design, development, Status implementation, and operating and maintenance costs. ../ Staff will identify the estimated costs, potential funding sources and project schedule for each capital project proposal before it is submitted to the Joint Boards for approval. ../ The Districts will use intergovernmental assistance to finance only those capital improvements that are consistent with the Capital Improvement Plan and Districts' priorities, and whose operating and maintenance costs have been included in the ~-..[ Staff will coordinate development of the capital improvement budget with the development of the operating budget. All costs for internal professional services needed to implement the CIP will be included in the operating budget for the year the CIP is to be implemented. ../ The Districts will use intergovernmental assistance and other outside resources whenever possible. ../ Cost tracking for components of the capital improvement program will be updated quarterly to ensure project completion against budget and established time lines. ../ Vehicle Replacement Policy In order to provide safe, reliable transportation appropriate to the work to be performed, the following policies have been established: ../ • The newest vehicles will be used for those purposes requiring the highest annual mileage. • Vehicles will be replaced when they are 1 0 years old or have accumulated 100,000 miles. ../ • A vehicle may be replaced in advance of the above criteria, if it can be reallocated to a low mileage use between the ../ plants. Page 3 of 5 Fiscal Policy Comments Fiscal Policy Statement Status • Electric vehicles are to be purchased for all in-plant only uses. ..f Short-Term Debt Policies The Districts may use short-term debt to cover temporary or emergency cash flow shortages. All short-term borrowing will be subject to Board approval by resolution. ..[ The Districts may utilize Board approved inter-District loans rather than outside debt instruments to meet short-term cash needs. Inter-District loans will be permitted only if an analysis of the affected Districts indicates excess funds are available and the use of these funds will not impact the District's current operations. The principal, along with interest at the prevailing rate as established by the Districts' Treasurer, will be paid to the lending District. ..[ Long-Term Debt Policies The Districts will confine long-term borrowing to capital improvements that cannot be financed from current revenue. In accordance with the 1989 Master Plan, one-half of all future long-term capital improvements will be funded from long-term debt with the remaining cost funded from capital improvement reserves and current revenues. Proceeds from long-term debt will not be used for current on- ..[ going operations. ../ Before any new debt is issued, the impact of debt service payments on total annual fixed costs will be analyzed. ../ Reserve Policies An operations contingency reserve will be established to provide for non-recurring, unanticipated expenditures or to set aside funds to cover known contingencies with unknown costs. The level of this reserve will be established as needed but will not be less than 20% of the annual operating ..f expenses. A dry-period operations reserve will be established to fund operations and maintenance expenses for the first half of the fiscal year prior to receipt of taxes and user fees. The level of this reserve will be established as needed, but will not be less than 50% of annual operating expenses. ..f Page 4 of 5 Fiscal Policy Comments Policy will be re-evaluated as part of the Strategic Plan Update to be done in 1996-97. Fiscal Policy Statement Reserve balances will be accumulated and maintained to fund approximately one years worth of the total cost of future capital improvements. Self-insurance reserves for property (fire, flood, and earthquake), general liability, and workers' compensation will be maintained at a level which, together with purchased insurance policies, adequately protect the Districts. The Status Districts will maintain a reserve of $100,000,000. ./ Board approval is required before expending contingency reserve funds. ./ Investment Policies The Districts' Treasurer will annually submit an investment policy to the Districts' Board for review and adoption. ./ The investment policy will emphasize safety and liquidity before yield. ./ Accounting, Auditing, and Financial Reporting The Districts' accounting and financial reporting systems will be maintained in conformance with generally accepted accounting principles and standards promulgated by the Governmental Accounting Standards Board. ./ A fixed asset system will be maintained to identify all Districts· assets, their condition, historical cost, replacement value and useful life. ./ Quarterly financial reports will be submitted to the Districts· Board and will be made available to the public. ./ Full disclosure will be provided in the general financial statements and bond representations. ./ The Districts' will maintain a good credit rating in the f1nanc1al community. ./ An annual audit will be performed by an independent pubhc accounting firm with the subsequent issue of an official Comprehensive Annual Financial Report, including an audit opinion and a management letter. ./ Page 5 of 5 Fiscal Policy Comments -' 1997-98 Pro posed Bu dget Ass umptions 1997-98 Proposed Budget Assumptions Economic Assumptions • Inflation for Orange County in 1996-97 is projected to be 2.6 percent based on the percentage of change in the consumer price index obtained from the December 1996 Economic and Business Review report prepared by Chapman University. Revenue Assumptions • User fees will remain at the same rates for the sixth consecutive year. However, staff is projecting that the Strategic Plan will be recommending rate increases in 1997-98. Connection fees, or capital facilities connection charges, and annexation fees will remain at the same rates as adopted in 1996- 97. • Property tax revenues are projected to remain constant as the increases from new development are expected to be offset by a general decline in overall property valuation. • After discussions with the Districts' External Investment Manager, PIMCO, earnings on the investment of the Districts idle operating cash and reserves will budgeted at 6.3 percent. • The interest rate assumed for payback analysis of projects will be six percent for 1997-98. Operating Assumptions • The cost to treat and dispose of 1 million gallons is proposed at $525/mg, a decrease of 5.5 percent from the prior year. Total flows for 1997-98 are projected to increase to 245 mgd, a 2.1 percent increase from the 240 mgd budgeted in 1996-97. • Total staffing, based upon full time equivalents (FTE), is projected to be 560 at July 1, 1997. This is a decrease of 56 FTE's, or 10%, from July 1, 1996. Another 5% reduction is anticipated during 1997-98. Step increases will be budgeted for all non-exempt employees not currently at the top of their salary range. • The proposed joint operating budget will continue to reflect an improvement in safety, technical, and management training as the Districts moves towards national standards in the percentage of training costs to total salaries. The proposed 1996-97 will include a budget for training and meetings equal to two percent of salaries and wages. • An amount equal to one percent each will be budgeted in joint works salaries, joint works materials and services and joint works capital improvements as a budgeted contingency for the General Manager to administer and allocate. Reserve Assumptions • The lack of any rate increases will result in the further reduction of the Districts' total reserves. However, reserves will still remain at a sufficient level in order to maintain compliance with debt service covenants. • The reserve policy is currently being reviewed in conjunction with the Strategic Plan and will probably be revised for 1997- 98. Capital Improvement Program Assumptions • The joint works capital improvement budget (CORF) will be limited to $50 million so that only the most critical projects, including plant automation, local computerization networks, electrical reliability and seismic safety, will be proposed until after the completion of the Strategic Plan update. .,, )> :I: :x:, 0 )> r-m z C )> :::c February 19, 1997 .;,tiRCH Consideration of Report on Implementation of Risk Management Task Force Information 1i Consideration of Land Lease at Plant No. 2 Action -·=· I -/-------------------------------------11 Consideration of Presentation on the Status of Plant Automation ' u Consideration of Santa Ana River Interceptor/Improvement Funding Options APRIL Consideration of 1997-98 User Fees, Connection Fees, Annexation Fees Consideration of Revised "Reserve" Policy Consideration of Fiscal Year 97-98 Districts-wide Training Program • Consideration of Report on Integrated Emergency Response Plan MAY ' Consideration of Results of Broadbanding Study Consideration of Districts' Capital Improvement Program (CORF) , Consideration of Third Quarter Update of Budget & Performance Measures 1 Consideration of Third Quarter Training Update Consideration of Third Quarter Treasury Report H:IWP.DTAIFIN\2210\CRANEIFPC.MTGIFAHR.97\FEBICAL2-97.DRF CSOOC • P.O.Box8127 • FounlainValley,CA92728-8127 • (714)962-2411 Information Action Action Information Information Information Information Action Information Information Action