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Home My WebLink About1997-11-12t 11.t:D In the Office of the Secret-=-· County Sanitation Olstrk:: No(s) ~ R,,B,0 ~ 1,1 2 1~ , . .:fr/}/ DRAFT County Sanitation Districts of Orange County, California P.O. Box 8127 • 10844 Ellis Avenue Fountain Valley, CA 92728-8127 Telephone: (714) 962-2411 By ~~91997 MINUTES OF FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE Wednesday. November 12, 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, November 12, 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 Z. Eckenrode Mark Leyes Thomas R. Saltarelli Mark Schwing William G. Steiner Peer Swan, Vice Joint Chair Committee Directors Absent : Mark A. Murphy Other Directors Present: None APPOINTMENT OF A CHAIR PRO TEM No appointment was necessary. PUBLIC COMMENTS No comments were made. Staff Present: Don McIntyre, General Manager Gary Streed, Director of Finance Bob Ooten, Director of Operations & Maintenance Mike Peterman, Director of Human Resources David Ludwin, Director of Engineering Michelle Tuchman, Director of Communications Nancy Wheatley, Director of Technical Services Greg Mathews, Principal Administrative Analyst Mike White, Controller Steve Kozak, Financial Manager Terri Josway, Safety & Emergency Response Mgr. Lisa Lorey, Human Resources Manager Dan Dillon, Accounting Manager Lenora Crane, Committee Secretary Others Present: Tom Woodruff, General Counsel Ken Harlow, R. W. Beck Mike Moreland, Moreland & Associates Chuck Acocella, Moreland & Associates Greg Giles, Moreland & Associates Patti Gorczyca, Public Financial Management, Inc. Minutes of Finance, Admin. and Human Resources Committee ~---------Page 2 ,,..----._, l November 12, 1997 APPROVAL OF MINUTES The minutes of October 8, 1997 meeting of the Finance, Administration and Human Resources Committee were approved as drafted. REPORT OF THE COMMITTEE CHAIR The Committee Chair had no report. REPORT OF THE GENERAL MANAGER The General Manager had no report. REPORT OF ASSISTANT GENERAL MANAGER The Assistant General Manager had no report. REPORT OF THE DIRECTOR OF FINANCE • Mr. Streed introduced Mike Moreland, Chuck Acocello and Greg Giles of Moreland & Associates who were present to answer any questions regarding the Comprehensive Annual Financial Report (CAFR) and audit. Ken Harlow of R. W. Beck was in attendance to give a presentation on the Replacement Model his company prepared. Patti Gorczyca of Public Financial Management was present to observe the R.W. Beck presentation, since her company will be preparing the Reserves Study and the Districts' replacement policy will be a portion of that study. • The monthly Treasurer's Report was distributed prior to the meeting in accordance with policy. REPORT OF THE DIRECTOR OF HUMAN RESOURCES The Director of Human Resources had no report. REPORT OF THE DIRECTOR OF COMMUNICATIONS The Director of Communications Michelle Tuchman reported on the following: • Updated the Committee on the Districts' consolidation efforts. • Two scoping meetings are being held tomorrow for the EIR process and the Strategic Plan to obtain input from the public and the regulatory agencies. • Updated the Committee on the public outreach program which is a joint venture with the City of Los Angeles and the County of Los Angeles to conserve water during rainstorms. • The Districts are also working with MWDOC and other smaller water districts in our service area to have information placed in their newsletters regarding water conservation. REPORT OF GENERAL COUNSEL General Counsel Tom Woodruff had no report. Minutes of Finance, Admin_. and Human Resources Committee Page 3 November 12, 1997 CONSENT CALENDAR ITEMS {1 -5) 1. FAHR97-70: RECEIVE AND FILE TREASURER'S REPORT FOR THE MONTH OF OCTOBER 1997 AND FORWARD TO THE JOINT BOARDS: The 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. 2. FAHR97-71: RECEIVE AND FILE CERTIFICATES OF PARTICIPATION (COP) REPORT 3. FAHR97-72: RECEIVE AND FILE EMPLOYMENT STATUS REPORT: Total head count at the Districts as of October 23, 1997 4. FAHR97-73: RECEIVE AND FILE QUARTERLY INVESTMENT MANAGEMENT PROGRAM REPORT FOR THE PERIOD JULY 1 THROUGH SEPTEMBER 30, 1997 5. FAHR97-74: RECEIVE AND FILE FIRST QUARTER WORKER'S COMPENSATION AND ACCIDENT STATUS REPORT FOR FY 1997/98 END OF CONSENT CALENDAR MOTION: Moved, seconded and duly carried to approve the recommended actions for items specified as 1 through 5 under "Consent Calendar." Regarding the Monthly COP report, Director Peer Swan requested that staff provide a cumulative report, which will reflect how the different remarketing agents are performing. The report should show what the cumulative differences are in the rates they are charging and receiving. This will give the Committee an opportunity to make future decisions in the selection of remarketing agents. ACTION ITEMS (Nos. 6 -9) The Chair requested that the Action Items be presented out of Agenda order. However, the minutes reflect those items in sequential order for continuity purposes. 6. FAHR97-75: CONSIDERATION OF MOTION TO RECOMMEND AN ORDINANCE OF THE BOARD OF DIRECTORS OF COUNTY SANITATION DISTRICTS NOS. 1, 2, 3, 5, 6, 7, 11 & 13 OF ORANGE COUNTY, CALIFORNIA, AMENDING EXISTING ORDINANCES RELATING TO EXEMPTIONS, REBATES AND REFUNDS OF SANITARY SEWER SERVICE CHARGES COMMITTEE DISCUSSION: The Committee determined from Mr. Streed that approximately 750 adjustments were made during fiscal year 1996-97, most were for the maximum four- year period preceding the refund request. Even though the Districts' rates and rate structure had not changed in several years, the increase in refund requests increased significantly due to an influx of consulting firms mailing letters to businesses in the county proposing they can lower their sewer service fees based upon their understanding and knowledge of our Ordinance. Minutes of Finance, Admin. and Human Resources Committee Page 4 ------ November 12, 1997 General Counsel Tom Woodruff advised he reviewed the applicable Government Code and, in his opinion, there is a distinction between a "rebate" and a "refund." A "refund" is due in the case of a billing error, such as billing a parcel that is not connected to a sewer, they paid taxes twice, they were illegally assessed, or there was a clerical error. A "rebate" is due when the sewer use has been inappropriately determined, such as a large warehouse with only one sink and one toilet; mostly charges based on valuation. The significance of this opinion is that only the "refund" requests are allowed for four-years; rebate requests should be treated as a claim with a one-year statute of limitation. The new Ordinance would allow claims for "rebates" for a one-year period only. General Counsel and staff requested that the ordinances be modified to clearly distinguish between "rebates" and "refunds" and to define the adjustment period for both. In response to the Committee, Mr. Woodruff advised that some law suits may arise from changes to the Districts' Ordinances. Director Swan pointed out that the Districts have given back $7.5 million last year and will continue to do so. This is a permanent loss which will go forward with the Districts losing approximately $2.5 million a year. The Committee discussed various alternatives and agreed that a change in Districts' ordinances is necessary in order to clearly define rebates and refunds. MOTION: It was moved, seconded and duly carried to recommend an Ordinance of the Board of Directors of County Sanitation Districts Nos. 1, 2, 3, 5, 6, 7, 11 & 13 of Orange County, California, amending existing ordinances relating to exemptions, rebates and refunds of Sanitary Sewer Service Charges. 7. FAHR97-76: RECEIVE AND FILE THE 1997-98 FINANCIAL AND OPERATIONAL REPORT FOR THE FIRST QUARTER ENDED SEPTEMBER 30, 1997 COMMITTEE DISCUSSION: Controller Mike White gave a slide presentation on this item. He advised that as of September 30, 1997, 20.38% or $9,564,000 of the 1997-98 net Joint Operating budget has been expended. Net costs have decreased by 18.38% in comparison to the same period last year. The total cost per million gallons at September 30, 1997, is $418, which is $107 (20.38%) below the budgeted cost per million gallons of $525. Mr. White explained that Joint Operating costs are currently under budget by $2.2 million. He reviewed the significant variations in Joint Operating costs and the Capital Outlay Revolving Fund, District expenses and revenues, and the Self-Insurance Funds. Mr. White also reviewed the Operational portion of the report which included Districts-wide Performance Objectives and Work Plan Milestones. In response to the Committee, Greg Mathews and Mike White advised that there are some discrepancies in the numbers because some of the data contained in the report was obtained two weeks ago. Figures are constantly changing and being refined. It was agreed that the benchmark needs to be worked on. A report will be provided at the December FAHR meeting explaining how the benchmark has been adjusted. MOTION: It was moved, seconded and duly carried to receive and file the 1997-98 Financial and Operational Report for the First Quarter Ended September 30, 1997, and forward to the Joint Boards. Minutes of Finance, Admin. and Human Resources Committee Page 5 ~- November 12, 1997 8. FAHR97-77: ADOPT A POLICY FOR FUTURE REFURBISHMENT AND REPLACEMENT OF SEWERAGE SYSTEM FIXED ASSETS FROM A COMBINATION OF ACCUMULATED FUNDS AND BORROWING, AND TO DIRECT STAFF TO INCLUDE A CAPITAL REPLACEMENT RESERVE IN FUTURE RATE AND BUDGET PROPOSALS COMMITTEE DISCUSSION: Gary Streed advised the Committee that this item is a result of requests from the Directors during the user fee and budget processes. He gave a slide presentation and report concerning future replacement needs of the Districts' sewerage system fixed assets. Funding of future replacement needs is expected to come from a combination of accumulated funds, borrowing and user fees. Mr. Streed reviewed the methods used in Systems Replacement Planning, the Needs Analysis Elements, System Replacement Values, and the estimated costs of Capital Improvements, Refurbishments and Replacements. Mr. Streed introduced Ken Harlow of R.W. Beck Company, the consulting firm hired to run a replacement needs model for the Districts. R. W. Beck also prepared a similar model for the Irvine Ranch Water District. Mr. Harlow gave a slide presentation reviewing the System Replacement Needs Analysis prepared by his company, and ran the Replacement Planning Model so the Directors could see how variables could be changed to produce different outcomes. This item will be brought back to the Committee in December along with the Reserves Study which is being prepared by Patti Gorczyca of Public Financial Management, Inc., before a recommendation will be made to the Joint Boards. Since we are supposed to pay for 50% of all capital expansion on a pay-as-you-go basis, the Committee members requested that the PFM report include a smooth distribution of rate increases, and account for the pay-as-you-go portions. MOTION: It was moved, seconded and duly carried to bring this item back to the Committee in December, along with the Reserves Study. 9. FA HR97-78: RECEIVE, FILE AND APPROVE THE DISTRICTS' COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR) FOR THE YEAR ENDED JUNE 30, 1997, PREPARED BY STAFF AND AUDITED BY MORELAND AND ASSOCIATES, CERTIFIED PUBLIC ACCOUNTS COMMITTEE DISCUSSION: Controller Mike White gave a slide presentation and overview of the Districts Comprehensive Annual Financial Report for the Year Ended June 30, 1997 (CAFR). He explained that the CAFR has been prepared for the fourth consecutive year. The previous three CAFRs earned the GFOA award. The purpose of the CAFR is to more fully disclose financing operations of the Districts. He also advised that CAFRs are looked on favorably by bond rating agencies. The Districts' net income increased by $0.5 million over last year to $1 .6 million. The increase in net income is primarily attributed to a $1 .8 million decrease in operating expenses and $5.6 million decrease in other non-operating expenses. Some of these expense decreases are due to reductions in staffing levels and a $5.6 million decrease in the liability claim paid in 1995-96. These positive impacts on net income were somewhat offset by a $6 million decrease in user fee revenues and a $1.1 million decrease in property tax revenues. Total cash and investments decreased by $7.2 million. Joint Operating expenses decreased by $1 .8 million or 2.0% over the prior year. The cost per million gallons of wastewater treated per day decreased to $526 from the previous year's $552. Mike Moreland, of Moreland and Associates advised that his Accounting firm found no material weaknesses in the Districts' financial reporting. His staff has met with Districts' staff and nothing significant was brought up at that meeting. He also advised that financial records are normally retained for two years. Personnel and payroll records may need a longer retention period, according to state laws relating to those types of records. Minutes of Finance, Admin. and Human Resources Committee Page6 ) November 12, 1997 MOTION: It was moved, seconded and duly carried to receive, file and approve the Districts' Comprehensive Annual Financial Report (CAFR) for the year ended June 30, 1997, prepared by staff and audited by Moreland and Associates, Certified Public Accountants, and forward to the Joint Boards. INFORMATIONAL PRESENTATIONS There were none. CLOSED SESSION There was no closed session. OTHER BUSINESS, COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY None. MATTERS WHICH A DIRECTOR WOULD LIKE STAFF TO REPORT ON AT A SUBSEQUENT MEETING None. MATTERS WHICH A DIRECTOR MAY WISH TO PLACE ON A FUTURE AGENDA FOR ACTION AND STAFF REPORT None. FUTURE MEETING DATES The next Finance, Administration and Human Resources Committee Meeting is scheduled for Wednesday, December 10, 1997, at 5:30 p.m. ADJOURNMENT The meeting was adjourned at 7:30 p.m. Submitted by: ~~ Finance, Administration and Human Resources Committee Secretary H:\WP.DTA \FIN\2210\CRANE\FAHR\FAHR.97\NOV\11 MIN-97.DOC STATE OF CALIFORNIA ) ) ss. COUNTY OF ORANGE ) Pursuant to California Government Code Section 54954.2, I hereby certify that the Notice and the Agenda for the Finance, Administration and Human Resources meeting held on November 12, 1997, was duly posted for public inspection in the main lobby of the Districts' offices on November 5, 1997. IN WITNESS WHEREOF, I have hereunto set my hand this 12th day of November 1997. Penny Kyle, Secretar County Sanitation of Orange County, Posted: '7l~ ~ , 1997, /.;l.,'60 By: \~ead\data2\wp.dta\fin\2210\crane\FAHR\FAHR.97\NOV\CERTPO 11-97 .doc the Boards of Directors of 1, 2, 3, 5, 6, 7, 11, 13 & 14 A.M.B) phone: [714) 962-2411 mailing address: P.O. Box 8127 FoLJntciln Veiley, CA, 9272-8-8127 street address; 10844 Ellis Avenue Fol.Jnta rt Valley, CA, 92708-7D1B Member Agencies • Cities J\naheim Br:ea Buena Park- Cyp/!es~ Fountain. Valley Fullerton Huntlngton Beaoh Irvine LB Habra Le PB/ma Los Alsmlt:Ds Ne111por,t Besch Grsng·e P/aaent;Ja &mtB Ana Seel Beach S/lanCQn Tustfn Villa Psrk Y.Ql'lbB Unds County of Qrange Sanitary Districts Odqt.s M~sa Gwdsn Grove Mfrfwsy City Water Districts COUNTY ni1TATION DISTRICTS OF DRtC)E COUNTY, CALIFORNIA November 5, 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 WE:DNESDAY, NOVEMBER 12, 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 FAHR Committee Joint Board Month Meetings Meetings November November 12, 1997 November 19, 1997 December December 10, 1997 December 17, 1997 January None Scheduled January 28, 1998 February February 11, 1998 February 25, 1998 March March 11, 1998 March 25, 1998 April April 8, 1998 April 22, 1998 May May 13, 1998 May 27, 1998 June June 10, 1998 June 24, 1998 July July 8, 1998 July 29, 1998 August None Scheduled August 26, 1998 September September 9, 1998 September 30, 1998 October October 14, 1998 October 28, 1998 November None Scheduled November 18, 1998 -~ ) 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, NOVEMBER 12, 1997 AT, 5:30 P.M. ROLL CALL ADMINISTRATIVE OFFICES 10844 Ellis Avenue Fountain Valley, California 92708 APPOINTMENT OF CHAIR PRO TEM, IF NECESSARY 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). November 12, 1997 RECEIVE, FILE AND APPROVE MINUTES OF PREVIOUS· MEETING Recommended Action: Consideration of motion to receive, file and approve draft minutes of the October 8, 1997, Finance, Administration and Human Resources Committee meeting. REPORT OF COMMITTEE CHAIR REPORT OF GENERAL MANAGER REPORT OF ASSIST.ANT GENERAL MANAGER REPORT .OF DIRl=CTOR OF FINANCE REPORT OF DIRECTOR OF HUMAN RESOURCES REPORT OF DIRECTOR OF COMMUNICATIONS REPORT OF GENERAL COUNSEL CONSENT CALENDAR ITEMS ]All matters placed on the consent calendar are considered as not" requl'ring-discussion or further explanation and I 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. i .! .!The Chair will determine if any items are to be deleted from the consent calendar. '. ........ --.u......~------------------------------~ Consideration of motion to approve all agenda items appearing on the Consent Calendar not specifically removed from same, as follows: 1. FAHR97-70: Receive and file Treasurer's Report for the month of October 1997: The 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. 2. FAHR97-71: Receive and file Certificates of Participation (COP) Monthly Report 3. FAHR97-72: Receive and file Employment Status Report: Total head count at the Districts as of October 23, 1997 -2- November 12, 1997 4. FAHR97-73: Receive and file Quarterly Investment Management Program Report for the period July 1 through September 30, 1997 5. FAHR97-74: Receive and file First Quarter Worker's Compensation and Accident Status Report for FY 1997/98 END OF CONSENT CALENDAR Consideration of items deleted from Consent Calendar, if any. ACTION ITEMS 6. FAHR97-75: Consideration of motion to recommend an ordinance of the Board of Directors of County Sanitation Districts Nos. 1, 2, 3, 5, 6, 7, 11 & 13 of Orange County, California amending existing Ordinances relating to exemptions, rebates and refunds of sanitary sewer service charges (Gary Streedn-om Woodruff-10 minutes) 7. FAHR97-76: Receive and file the 1997-98 Financial and Operational Report for the First Quarter ended September 30, 1997 (Mike White\Greg Mathews-15 minutes) 8. FAHR97-77: Adopt a policy to provide for future refurbishment and replacement of sewerage system fixed assets from a combination of accumulated funds and borrowing, and to direct staff to include a Capital Replacement Reserve in future rate and budget proposals (Gary Streed/Steve Kozak -20 minutes) 9. FAHR97-78: Receive, file and approve the Districts' Comprehensive Annual Financial Report (CAFR) for the year ended June 30, 1997, prepared by staff and audited by Moreland and Associates, Certified Public Accountants (Mike White-10 minutes) -3- November 12, 1997 INFORMATIONAL PRESENTATIONS None CLOSED SESSION j During the course ·of conducting the ... busin-ess set forth on this agenda as a regular meeting ·otthe·eommittee, the LChair may convene the Committee in closed session to consider matters of pending real estate negotiations, pending or potential litigation, or personnel matters, pursuant to Government Code Sections 54956.8, 54956.9, 54957 or 54957.6, as noted. Reports relating to (a) purchase and sale of real property; (b) matters of pending or potential litigation; (c) employee actions or negotiations with employee representatives; or which are exempt from public disclosure under the ·l. California Public Records Act, may be reviewed by the Committee during a permitted closed session ~nd are not available for public inspection. At such time as final actions are taken by the Committee on any of these subjects, the minutes will reflect all required disclosures of inform~.!!.?..!:!:.. .. . 10. Closed Session a. Convene in closed session, if necessary. b. Reconvene in regular session. c. Consideration of action, if any, on matters considered in closed session. d. Report on discussion taken in closed session,· as required. OTHER BUSINESS, COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY MATTERS WHICH A DIRECTOR WOULD LIKE STAFF TO REPORT ON AT A SUBSEQUENT MEETING MATTERS WHICH A DIRECTOR MAY WISH TO PLACE ON A FUTURE AGENDA FOR ACTION AND STAFF REPORT FUTURE MEETING DATES The next Finance, Administration and Human Resources Committee Meeting is scheduled for December 10, 1997. NOTICE TO COMMITTEE MEMBERS 11f you have any questions on the agenda or wish to place any items o~th;agenda, Committee members.should contact the Committee Chair or Secretary ten days in advance of the Committee meeting. Committee Chair: Comm. Secretary: George Brown Lenora Crane (562) 431-2185 (714) 962-2411, Ext. 2501 '----~~~--------------'-7-'-1.,.....4 _962-3954 (FAX) le H:\WP .DTA\FIN\221 0\CRANE\FAHR\FAHR.97\NOV\11 AGENDA.DOC -4- • I ROLL CALL FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE MEETING DATE: November 12, 1997 TIME: 5:30 P.M. ADJOURN: P.M. COMMITTEE MEMBERS GEORGE BROWN {CHAIR} .......................................................... . JOHN J. COLLINS {JC) ................................................................•. JAN DEBAY ................................................................................. .. BARRY DENES ...................................••......................................... NORMAN ECKENRODE .....................••.........•.•............................. MARK LEYES .....................................••....••.•................................. MARK MURPHY ................................•••......................................... THOMAS SALTARELLI .................•............................................... MARK SCHWING ......................................................................... .. WILLIAM STEINER ................•......•.....••......................................... PEER SWAN ................................................................................. . STAFF DON MCINTYRE, General Manager ............................................... . BLAKE ANDERSON, Assistant General Manager ......................... . CHRIS DAHL, Director of Information Technology ........................ . ED HODGES, Director of General Services Administration .......... . DAVID LUDWIN, Director of Engineering •...................................... BOB OOTEN, Director of Operations & Maintenance .................... . MIKE PETERMAN, Director of Human Resources ......................... . GARY STREED, Director of Finance .............................................. . MICHELLE TUCHMAN, Director of Communications .................... . NANCY WHEATLEY, Director of Technical Services .................... . STEVE KOZAK, Financial Manager ....•........................................... MIKE WHITE, Controller .....................•.•.......................................... GREG MATHEWS, Principal Administrative Analyst ..................... . LINDA EISMAN, Training Manager ....•........•................................... TERRI JOSWAY, Safety & Emergency Response Mgr .................. . DAN DILLON, Accounting Manager LISA LOREY, Human Resources Manager .................................... . LENORA CRANE, Committee Secretary ........................................ . OTHERS TOM WOODRUFF, General Counsel .............................................. . KEN HARLOW, R.W. Beck ............................................................. . MIKE MORELAND, Moreland & Associates ................................... . GREG GILES, Moreland & Associates ........................................... . c: Debra Lecuna Penny Kyle \ I J 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. October 81 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, October 8, 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 Z. Eckenrode Mark Leyes Thomas R. Saltarelli Mark Schwing Peer Swan, Vice Joint Chair Committee Directors Absent : Mark A. Murphy William G. Steiner Other Directors Present: None APPOINTMENT OF A CHAIR PRO TEM No appointment was necessary. PUBLIC COMMENTS No comments were made. APPROVAL OF MINUTES Staff Present: Blake Anderson, Assistant General Manager Gary Streed, Director of Finance Mike Peterman, Director of Human Resources Nancy Wheatley, Director of Technical Services Michelle Tuchman, Director of Communications Gregg Mathews, Principal Administrative Analyst Mike White, Controller Marc Dubois, Contracts/Purchasing Manager Nick Arhontes, Maintenance Manager Doug Stewart, Engineering Manager Lisa Lorey, Human Resources Manager Ed Torres, Engineering Supervisor Adriana Renescu, Permit & Enforcement Supervisor Lenora Crane, Committee Secretary Others Present: Tom Woodruff, General Counsel The minutes of the September 10, 1997 meeting of the Finance, Administration and Human Resources Committee were approved as drafted. Minutes of Finance, Admir ,nd Human Resources Committee Page 2 October 8, 1997 REPORT OF THE COMMITTEE CHAIR The Committee Chair had no report. REPORT OF THE GENERAL MANAGER The General Manager had no report. REPORT OF ASSISTANT GENERAL MANAGER • The Assistant General Manager reported that attempts to get funding from the Bureau of Reclamation for the Orange County Regional Reclamation Project for federal fiscal year 97/98 were unsuccessful, despite recent meetings with California political leaders. We were attempting to obtain an initial funding of $500,000. The project is expected to cost up to $200 million. The funds have already been authorized, but it has been difficult to actually get them appropriated. Mr. Anderson advised that he will be working with Nancy Wheatley and the Water Districts to develop a strategy for the next fiscal year. He advised, the good news is that the level of spending currently occurring is relatively minor between the Sanitation Districts and the Water District. • Regarding the Orange County Regional Reclamation Project, Mr. Anderson advised that focus group sessions were conducted Monday and Tuesday of last week and Monday and Tuesday of this week. Mr. Anderson noted that he and several staff members, that included Nancy Wheatley, Michelle Tuchman and Director Swan, attended some of the sessions. The discussion group consisted of 12 people and a facilitator and was observed by staff and Adler Communications over the two-week period to watch the public's reaction to reclaimed water issues. From these sessions, the word "reverse osmosis" was identified as a key word in understanding how this project works. It was also learned that the public must be confident that the technology will work, and in who will make sure it works. They also learned that it is important that the message we send is clear and supersedes any negativity. One of the tapes used in group sessions was a tape made by KFI Radio and is available to anyone wishing to listen to it. • The Rate Advisory Committee will be meeting tomorrow for their ninth and closing meeting. The Directors were invited to attend. REPORT OF THE DIRECTOR OF FINANCE • Mr. Streed advised the Committee that the monthly Treasurer's Report was distributed prior to the meeting in accordance with policy. There was a small decrease in the cash on hand - down to $360 million. • The unrealized loss reported last month has been turned around and we had a small unrealized gain at the end of September. • We expect to receive property tax apportionments the latter part of November and early part of December which will be a combination of user fees and property taxes. We expect to receive about $8 million in November and $32 million in December. • Since the property tax bills have been mailed, over the last couple of weeks we have received over 200 phone calls from taxpayers. This usually occurs when the property tax bills are received and again when the taxpayers make their payments. The number of calls received is not significantly more than we usually receive during this time of year. Minutes of Finance, Admi~nd Human Resources Committee ) Page 3 ) October 8, 1997 REPORT OF THE DIRECTOR OF HUMAN RESOURCES The Director of Human Resources had no report. REPORT OF THE DIRECTOR OF COMMUNICATIONS • The Director of Communications advised the Committee that the first meeting with the City of Los Angeles and the County of Los Angeles on a public outreach program to conserve water during rainstorms resulted in an article in the Times. National Public Radio picked up the story and interviewed someone from the County of LA. Good Morning America did some filming in the City of LA. The message is getting out. We will be meeting again with the two agencies on November 4th to discuss a joint press conference. • The Orange County Water District and the MWDOC have requested the formation of combined water conservation program in Orange County. REPORT OF GENERAL COUNSEL General Counsel Tom Woodruff updated the Committee on the Ventura County court case ruling regarding the California Employee's Retirement System Act of 1937. Mr. Woodruff handed out a memo which he felt would be helpful to the Directors in their respective cities. He advised that those cities with fire and police services would be hardest hit. CONSENT CALENDAR ITEMS (1 -9) 1. FAHR97-64: 2. FAHR97-65: 3. FAHR97-66: RECEIVE AND FILE TREASURER'S REPORT FOR THE MONTH OF SEPTEMBER 1997 AND FORWARD TO THE JOINT BOARDS: The 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. RECEIVE AND FILE CERTIFICATES OF PARTICIPATION (COP) REPORT RECEIVE AND FILE EMPLOYMENT STATUS REPORT: Total head count at the Districts as of September 17, 1997 MOTION: Moved, seconded and carried to approve the recommended actions for items specified as 1 through 3 under "Consent Calendar." ACTION ITEMS (Nos. 10 -11) 4. FAHR97-67: ADOPT RESOLUTION NO. 97-XX, DELEGATING AUTHORITY TO THE GENERAL MANAGER AND STAFF RE EXPENDITURE OF DISTRICTS' FUNDS AND PERSONNEL ISSUES. COMMITTEE DISCUSSION: Assistant General Manager Blake Anderson advised that last year we started looking at delegation of authority as it applies to two areas: Administrative procedures within the agency, which was being addressed tonight; and how we procure contracts and Minutes of Finance, Admi... 1nd Human Resources Committee I Page 4 October 8, 1997 5. FAHR97-68: consultant services for the capital improvement program, which the PDC Committee will address for the first time in November. Doug Stewart, Ed Torres and Marc Dubois were assigned to streamline the administrative procedures. Four areas will be affected by the changes in the delegation of authority: Procurement and Contracts; Travel and Training; Hiring, Promotions, Disciplinary Action and Performance Evaluation; Time Cards and Overtime. Mr. Anderson gave an overview of the history of the Districts' current Delegation of Authority, reviewed some of the limitations of Resolution No. 95-62, the capital project approvals process, the administrative approvals process, the purpose of delegating GM authority, administrative controls, checks and balances in place, the procurement process. He reviewed the current delegation levels and proposed delegation of authority levels for budgeted and unbudgeted procurements and contracts. There will be training for those employees who are given new levels of authority. Marc Dubois reviewed the Purchasing Divisions' reporting process, requisition process for budgeted and unbudgeted items, internal bidding policies, sole sourcing policies and the competitive bid process. He also advised that unbudgeted items require a budget transfer which must be approved by the Department Head and Director of Finance. The Districts does have an inventory control program to protect, monitor and track inventory. Mr. Anderson advised that even when an unbudgeted item is approved by the Department Head, the Department Head must still work within the overall budget approved for his department. Gary Streed advised that whenever there is a request for an unbudgeted item, we have to trade that for other items in the budget to equal out. This is one of the Districts' Budget Assumptions. Mr. Anderson advised that trades between budgets such as personnel and equipment are not allowed. The Committee was concerned about possible areas of abuse, especially unbudgeted procurements, professional contracts and personal service agreements, the number of times a supervisor can tap into his level of authority. There was discussion on whether there should be a column for Committee approvals on items pointed out during the budget process. MOTION: Moved, seconded and approved to direct staff to bring this item back to the Committee next month after reconsidering some of the areas relating to Procurement and Contracts such as: Delegated limits and unbudgeted delegations, especially as they relate to service contracts and professional services; and consideration as to what level Committees should get involved in the process. ADOPT RESOLUTION NO. 97-XX, IMPLEMENTING THE DISTRICT'S HUMAN RESOURCES POLICIES AND PROCEDURES MANUAL. COMMITTEE DISCUSSION: Human Resources Director Mike Peterman advised the Committee that there are currently eight separate policy documents, including Memoranda of Understanding (MOU), Resolution 95-105 -Classification and Other Terms, Conditions, Rules and Regulations of Employment, the employee handbook, and the "Redbook" which is a summary of the Districts' Human Resources Policies and Procedures. The proposed handbook combines all of these documents into one manual, incorporating all Human Resources' policies and Minutes of Finance, Admir4nd Human Resources Committee ,,.,,-----\ Page 5 October 8, 1997 procedures which management can use to consistently implement Districts' policy. He further advised that adoption of the Resolution will not add or significantly change any policies and/or procedures already adopted by the Boards. Mr. Peterman reviewed the benefits of combining all policies and procedures into one manual. He further advised that the document will be distributed to all supervisors and will be placed into an "Intranet" form on their computers. Mr. Peterman stated that the Resolution staff is recommending would authorize the General Manager to make and implement procedural changes to the Human Resources Policies and Procedures Manual without having to change the Resolution each time one is made. The recommended action is to approve the Resolution. The FAHR Committee and Boards of Directors would approve salary ranges, changes affecting assignment of a job classification to a salary range, or any provision within a MOU within the Districts' unions. A semi-annual report will be made to the FAHR Committee in October and April of each year, reflecting the redline/strikeout version of any policy that was changed, edited or added during the previous six months. The Committee pointed out that the language on page 3 of the AIT should be corrected to read, " ... would authorize the General Manager to make and implement procedural changes to the Human Resources Policies ... " Also, on page 1 of Section A, under "Call-Back Pay," the word "Supervisor'' should be inserted on line two after the words, "to work by the ... " MOTION: Moved, seconded and carried to recommend that the Joint Boards adopt Resolution No. 97-XX, implementing the Districts' Human Resources Policies and Procedures Manual. INFORMATIONAL PRESENTATIONS 6. FAHR97-69: COMMUNICATIONS' AUDIT RESULTS AND EXTERNAL COMMUNICATIONS PROGRAM AND STRATEGIES COMMITTEE DISCUSSION: Communications Director Michelle Tuchman reviewed the results of the third Communications audit conducted at the end of May and beginning of June, which primarily targeted the Department's internal customers. There was a 34% response rate with 191 employees responding. Since the department was established in fiscal year 1995-96, emphasis has been given to establishing a strong internal communications program . The employee newsletter has been expanded, a bulletin board program has been established, and the General Manager conducts regular meetings with employee groups. Other special programs have also been established. The results of the current audit reflects continued anxiety over a changing culture, as well as the aftermath of last year's workforce investigation. The rapid pace of change and the workplace investigation were the two most cited events/issues mentioned by employees. It is anticipated that morale will improve over time as the impact of the workforce investigation fades. However, continued anxiety over changes in the organization is expected. Minutes of Finance, Admi,. 1nd Human Resources Committee Page 6 October 8, 1997 Mrs. Tuchman also gave an overview of the Districts' External Communications Program which is one of the critical goals for the agency. Some of the strategies that have begun include such activities as Plant tours, Legislators' Day, presentations to community groups and schools, hosting on-site meetings, RAC, PAC, OCR Project, and working with the news media. 7. OMTS97-015: REGIONAL COLLECTION SYSTEM DISTRICTS-WIDE POLICIES REGARDING SYSTEM MANAGEMENT (ALL DISTRICTS) PROPOSED BY TECHNICAL SERVICES AND GENERAL SERVICES ADMINISTRATION DEPARTMENTS IN COOPERATION WITH THE DISTRICTS' BOARD OF DIRECTORS AND LOCAL AUTHORITIES (CITIES) CLOSED SESSION COMMITTEE DISCUSSION: Maintenance Manager Nick Arhontes gave a slide presentation and overview of the regional collection system, stakeholder issues, and the Districts' Strategic Plan. He and his staff have been visiting all of the cities in the northern and western part of the county to collect information and help them understand the issues. Districts' staff was well received and are getting collaboration on the issues. Permit and Enforcement Supervisor Adriana Renescu reported that for the past two years, a federal advisory committee, sponsored by the US EPA, comprised of members from sewerage agencies, regulatory agencies, municipalities and environmental groups, was formed to review regulatory oversight of sewer spills around the country, and to develop a consistent national policy for abatement. Nancy Wheatley, Director of Technical Services, is on the Committee. The advisory committee has indicated they would like to see better management of collection systems, particularly smaller systems and those which discharge to regional wastewater treatment plants. Ms. Renescu briefly described the purpose of the maintenance and operation program, the policies proposed by the Technical Services and General Services departments in order to comply with expected EPA and state regulatory requirements, and the necessity to form a partnership with local municipalities to resolve regional collection system management issues. There was no closed session. OTHER BUSINESS, COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY None. MATTERS WHICH A DIRECTOR WOULD LIKE STAFF TO REPORT ON AT A SUBSEQUENT MEETING None. MATTERS WHICH A DIRECTOR MAY WISH TO PLACE ON A FUTURE AGENDA FOR ACTION AND STAFF REPORT None. Minutes of Finance, Admi~d Human Resources Committee ,......, Page 7 · ) October 8, 1997 FUTURE MEETING DATES The next Finance, Administration and Human Resources Committee Meeting is scheduled for Wednesday, November 12, 1997, at 5:30 p.m. ADJOURNMENT The meeting was adjourned at 7:25 p.m. Submitted by: ~~ Finance, Administration and Human Resources Committee Secretary \\LEAD\DATA2\WP .OTA \FIN\2210\CRANEIFAHR\FAHR.97\OCT\MIN10-97.DOC CONSENT CALENDAR (· f MEETING DATE OMTS: PDC: FAHR: 11/12/97 EXEC: STEER: JT.BDS: RECOMMENDED ACTION(S): ALL AGENL t ITEM TRANSMITTAL CONTACT FOR INFORMATION (Originator) 210, Gary G. Streed, Ext. 2500 Division No., Name, and Extension 1. RECEIVE AND FILE CERTIFICATES OF PARTICIPATION (COP) MONTHLY 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.: $ 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 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 Signature General Manager (Or Desi :z..2-oer tt '.:l- o ate ~a..oc.--r Cf"f Date Revised 09/03/97 H:\WP.DTAIFIN\2210\CRANEIFAHRIFAHR.97\NOVIFAHR97-71.DOC 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 N/A YEAR-TO-DATE BUDGET BALANCE NIA BUDGET CHANGE THIS AIT NIA AMOUNT REQUESTED THIS AIT NIA REVISED BUDGET TOTAL (Total Budget plus Transfers) N/A REVISED TOTAL PROJECT BUDGET $0.00 AMENDED PROJECT AMOUNT $0.00 REQUIRES BOARD POLICY ACTION? NOT APPLICABLE If YES, explain in ADDITIONAL INFORMATION section ATTACHMENTS TO COMMITTEE AGENDA (List): 1. Graph -COP Daily Rate Histroy Report 2. Graph -Comparative Daily COP Rate Report ATTACHMENTS TO JOINT BOARDS AGENDA (List) Page 1 of 2 I ADDITIONAL INFORMATION (Back~ . ..-und 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. Two graphical reports are attached. The first graph entitled, "CSDOC COP Rate History Report, October 1997," 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." The second bar chart entitled, "Comparative Daily COP Rate History Report, October 1997," shows the performance of the Districts' Daily Rate COPs as compared to a composite index rate, which represents the average rate of six s\milar variable rate daily reset borrowings. 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 continuous rate monitoring and ongoing dialog with the remarketing agents and rating agencies to keep the Committee fully informed about developments in the program as they occur and at each meeting. GGS:lc Attachments c: Department Head General Manager Revised 09/03/97 \\LEAD\DATA2\WP .OTA \FIN\221 O\CRAN E\FAH R\FAHR.97\NOV\FAHR97-71.DOC Page 2 of 2 -0 G) nl -c r C II) fn )> RATE(%) nl a. >< -t C" 0 m '< rn "Tl 6 0 ..Ii,, N !--> .1:1,,. (JI a, 5· 0 0 II) )> 0 0 0 0 0 :::, 0 0 -I 0 0 0 0 0 0 _CTI )> "ii ..... 01-Jan-97 ..... z ~ )> z _--.i 0 15-Jan-97 (.J rn 5:; w U1 0 -0 ~ 29-Jan-97 s:: ~ ::ti )> -I m 12-Feb-97 0 ~ en -I CJ) co 26-Feb-97 --.I C 12-Mar-97 0 0 26-Mar-97 0 0 09-Apr-97 "'C ++ C 23-Apr-97 0 )> )>-U G)~-0 -.--::, 07-May-97 -I Cl)(!) -< ~ ~ 0 !I) (I) $? "O O" O" 21-May-97 tJJ (I) -, m 04-Jun-97 :;a -I m ~ :I: 18-Jun-97 CD ++ CD - ........ CJ) (/)r_ 02-Jul-97 -I o=-c 0 C'). G)~ 16-Jul-97 :;a (1)0 ::, -, -< CJ1fil ~::, 30-Jul-97 !I) ::ti "O m 13-Aug-97 "'C 0 27-Aug-97 ::ti -f 10-Sep-97 24-Sep-97 08-Oct-97 22-Oct-97 Prepared by Finance, 11 /3/97, 3:21 PM COMPARATIVE DAILY COP RATE HISTORY REPORT OCTOBER 1997 6.00 ...-------------------------------------------, 5.00 +----------------------------------------------1 4.00 -~ 0 -~ 3.00 4( a: 2.00 1.00 0.00 DATE r--. r--. r--. r--. r--. r--. r--. r--. r--. r--. O') O') O') O') O') O') O') O') O') en r:: .c ..: ..: >, r:: :j ci C: 'ti (U Q) (U 0. (U :, :, Q) -, LL ~ <( ~ -, -, <( (/J 0 IICSDOC • COMPOSITE INDEX I G:\excel.dta\fin\2220\geggi\Finance\dailycopintrate.xls MEETING DATE OMTS: PDC: FAHR: 11/12/97 EXEC: STEER: JT.BDS: RECOMMENDED ACTION(S): ALL 1. Receive and file the Employment Status Report. CEQA REVIEW: Project is Exempt: YES NO NOT APPLICABLE Date Notice of Exemption Filed: Negative Declaration Approved on Final EIR Approved on_ and Notice of Determination filed on _ CURRENT BUDGET/COST CURRENT YEAR INFORMATION BUDGET AMOUNT TOTAL BUDGETED AMT.:$ SOURCE: CORF JO DISTRICTS N/A Schedule/Line Items: AMOUNT OF TRANSFER: Schedule/Line Item: TOTAL PROJECT BUDGET ORIGINAL BUDGET INFORMATION TOTAL First Year in Budget: Master Plan Estimate: Year of First Costs: THIS AITNENDOR/PROJECT COST ORIGINAL BID, PO, INFORMATION CONTRACT AMOUNT WILL PROJECT REQUIRE ADDITIONAL PERSONNEL? NO If YES, state number: _ Permanent Limited Term Revised 10/21/97 H:\WP .OTA \FIN\221 0\CRANE\FAHRIFAH R.97\NOVIFAHR97-72.DOC AGENL ITEM TRANSMITTAL CONTACT FOR INFORMATION (Originator) 510, Mike Peterman, Ext. 2105 Division No., Name, and Extension DATE OF MOST RECENT BOARD ACTION ON THIS SPECIFIC ITEM: CURRENT YEAR-YEAR-TO-DATE REVISED BUDGET TO-DATE BUDGET BALANCE TOTAL EXPENDITURES (Total Budget plus Transfers) N/A N/A N/A PREVIOUS BUDGET BUDGET CHANGE REVISED TOTAL CHANGES THIS AIT PROJECT BUDGET $0.00 CHANGE ORDERS, AMOUNT AMENDED FUNDS PREV. REQUESTED THIS PROJECT APPROVED AIT AMOUNT $0.00 REQUIRES BOARD POLICY ACTION? NOT APPLICABLE If YES, explain in ADDITIONAL INFORMATION section Page 1 of2 /0-d.3-11 Date CONCURRENCES: Signature Date D~~is){m ,Mf na. ger t(Or' 1 l'. ~v:,.\\,C.J-.).. -· rtr-:-----I.:;., -z. 3 -"17 --,----..::.-;,.___;_-!l"-'-"---1:r"''--'-"-"....;.._------ ~~re ~ Depart _j/4(..c.:-a,~-,L.,/L..Q:.Z..'.:~e:::...._ __ ____:/'.'...:::~~~-ll-?l Signature Date General Manager/Assistant General Manager (Or Designee) ADDITIONAL INFORMATION (Background and/or Summary) ATTACHMENTS T 1MMITTEE AGENDA (List): 1. October 23, 1997 Employment Status Report. 2. Performance to 5-Year Staffing Plan. ATTACHMENTS TO JOINT BOARDS AGENDA (List) 1. The Districts have a full-time Equivalent (FTE) headcount of 546.25 as of October 23, 1997. The actual body count is 557. The current FTE headcount is equivalent to a 2.4% reduction from the budgeted 559.75 positions. The one-month turnover rate for October 1997 was .72%. There were two full-time external hires during the month of October. A Programmer Analyst for Division 470 - Programming, Database & Network Comm., and a Senior Engineer for Division 720 -Design & Planning Engineering. There were also two external hires for a Part-time Secretary for Division 230 -Purchasing & Warehousing and an Intern for Division 530 -Safety & Emergency Response. Internal or external recruitment is in process for five full-time and two part-time positions. The Districts are currently seeking internal or external candidates for the following replacement positions: Programmer Analyst (Programming, DataBase & Comm.), Foreman (Plant Facilities Maintenance), Associate Engineer II (General Services Administration), two Collection Facilities Workers (Collection Facilities Mtce.), Part-time Assistant (Environmental Lab), and Intern (O&M Process) It is projected that after filling these positions, the Districts FTE headcount will be 550. /ps c: Department Head A GM-Operations General Manager Revised 10/21/97 \\LEAD\DATA2\WP.DTA\HR\2520\STEEVES\Aln1197.DOC Page 2 of 2 ""l Employment Status Report Run Date: 23-Oct-97 Regular Regular Total Regular Part-time Part-time FTE Vacant FTE FTE Full-time 20hours 30hours Contract Intern LOA Count Positions 97-98 98-99 11 0 -General Management Administration 4 0 0 0 0 0 4 2 6 5.5 Total General Management 4 0 0 0 0 0 4 2 6 5.5 210 -Finance Administration 4 0 0 0 0 0 4 0 4 4 220 -Accounting 18 0 0 0 0 1 19 0 19 18 230 -Purchasing & Warehousing 12 1 0 0 0 1 14 2 16 16 Total Finance 34 1 0 0 0 2 37 2 39 38 310 -Communications 8 0 0.75 0 0 1 9.75 0 9.75 9.75 Total Communications 8 0 0.75 0 0 1 9.75 0 9.75 9.75 41 0 -General Services Administration 4 0 0 0 0.5 1 5.5 1 4 4 420 -Collection Facilities Maintenance 15.5 0 0 0 0 0 15.5 2 17.5 18.5 430 -Plant Maintenance 39.5 0 0 0 0 0 39.5 1 40.5 38.5 460 -End Users Support 8 0 0 0 0 0 8 1 9 11 470 -Programming, Data Base & Comm. 9 0 0 0 0 0 9 1 10 11 490 -Plant Automation 7 0 0 0 0 0 7 0 7 7 Total General Services Admin. 83 0 0 0 0.5 1 84.5 6 88 90 510 -Human Resources Administration 5 1 0.75 0 0 0 6.75 0 6.75 6.75 520 -Education & Training 5 0 0.75 0 0 0 5.75 0.25 6 6 530 -Safety & Emergency Response 5 0 0 0 0 0 5.5 0 5.5 5.5 Total Human Resources 15 1 1.5 0 0 0 18 0.25 18.25 18.25 610 -Technical Services Administration 3 0 0.75 0 0.5 0 4.25 0.75 5 6 620 -Environmental Compliance & Monitoring 16 0 0.75 1 1 2 20.75 0.5 21.25 21.5 630 -Environmental Sciences Laboratory 31 1 0 0 0.5 1 33.5 1.5 35 30 640 -Source Control 37 0 0.75 0 0 0 37.75 1 38.75 37.75 Total Technical Services 87 1 2.25 1 2 3 96.25 3.75 100 95.25 710 -Engineering Administration 3 0 0 0 0 0 3 0 3 3 720 -Planning & Design Engineering 26 0 1.5 0 0.5 1 29 2 31 31 730 -Construction Management 35 0 0 1 0.5 0 36.5 1 37.5 38 Total Engineering 64 0 1.5 1 1 1 68.5 3 71.5 72 810 -0 & M Administration 2 0 0 0 0 0 2 0 2 2 820 -0 & M Process Support 12 0 0 0.25 0 0 12.25 0.5 12.25 11.25 830 -Plant 1 Operations 38 0 0 0 0 0 38 0 37 37 840 -Plant 2 Operations 43 0 0 0 0 0 43 0 42 40 850 -Mechanical Mice 53.5 0 0 0 0 0 53.5 1 54.5 50.5 860 -Electrical & Instrumentation Mice 58.5 0 0 0 0 0 58.5 0 58.5 58.5 870 -Cogeneration 13 0 0 0 0 0 13 0 13 13 880 -Air Quality & Special Projects 7 0 0 0 1 0 8 0 8 8 Total Operations & Maintenance 227 0 0 0.25 1 0 228.25 1.5 227.25 220.25 Total Staffing 522 3 6 2.25 4.5 8 546.25 18.5 559.75' 549 H:\excel.eta\hr\steeves\empdiva.xls Perf orillanc~~ 1 o 5-Y ear Staffing Plan 640 ------------------=====~=;==== 620= ========~~~~======== 600 a~~~---- sso • -• -• -• -. -• -. ---• -. -• -• -. -• ---• -• -----560 L---•~~A~A~~ -+--FTE Headcount 540 ~====-========= 520L 500 L_ _____ =_,----,----,----,--,-----,-------:'7;-;~~~ 4so L.-----.--,r---,---------.------r~~ J A S O N D J F }-1 A l\.1 J I J A S O N D J F M A M J I FY 96-971 I FY 97-98 I I , MEETING DATE OMTS: PDC: FAHR: 11/12/97 EXEC: STEER: JT.BDS: 11 /19,/97 RECOMMENDED ACTION(S): ALL AGENr-,1• ITEM TRANSMITTAL CONTACT FOR INFORMATION (Originator) 210, Steve Kozak, 2504 Division No., Name, and Extension 1. Receive and file Quarterly Investment Management Program Report for the period July 1 through September 30, 1997 CEQA REVIEW: Project is Exempt: YES NO 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: THIS AITNENDOR/PROJECT cos-r 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 Signature General Manager (Or Desig ee) 2-~ ccr '1r Date 2. 1 oc..T 't -=I- Date ,0-1.&.-~7 Date /tJ -P-7 Date Revised 09/03/97 H:\WP.DTA\FIN\2210\CRANE\FAHR\FAHR.97\NOV\FAHR97-73.DOC 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 9/24/97 YEAR-TO-DATE BUDGET BALANCE N/A BUDGET CHANGE THIS AIT NIA AMOUNT REQUESTED THlS A,T NIA REQUIRES BOARD POLICY ACTION? NO REVISED BUDGET TOTAL (f otal Budget plus Transfers) N/A REVISED TOTAL PROJECT BUDGET $0.00 AMENDED PROJECT AMOUNT $0.00 If YES, explain in ADDITIONAL INFORMATION section ATTACHMENTS TO COMMITTEE AGENDA (List): 1 . Staff Report 2. PIMCO Report 3. Callan Report ATTACHMENTS TO JOINT BOARDS AGENDA (List) 1. Staff Report 2. PIMCO Report 3. Callan Report Page 1 of 2 ) ADDITIONAL INFORMATION (Backgruund 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 in compliance with the Districts' adopted Investment Policy, and the California Government Code. SK:lc c: Department Head A GM-Operations General Manager Revised 09/03/97 H:\WP.DTA\FIN\2210\CRANE\FAHR\FAHR.97\NOV\FAHR97-73.DOC Page 2 of2 November 12, 1997 STAFF REPORT Quarterly Investment Management Program Report for the Period July 1 through September 30, 1997 Background Section 15.0 of the Districts' Investment Policy includes monthly and quarterly reporting requirements 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. The Districts' portfolio contains no reverse repurchase agreements. Performance 'Reports The quarterly strategy review, prepared by PIMCO, and the Investment Measurement Review, prepared by Callan Associates, are attached for your reference. Also attached are two comparative bar charts which depict the sector diversification of the Districts' portfolios, as of June 30, 1997, and September 30, 1997. The Liquid Operating Monies portfolio, with an average maturity of less than 90 days, consists entirely of cash equivalent investments such as U.S. Treasuries, and Corporate Discount Notes Portfolio Performance Summary The following table presents a summary of the performance of the Districts' portfolios r:nanaged by PIMCO for the period July 1 through September 30, 1997. Portfolio Perfonnance Summary Quarter Ended September 30, 1997 Liquid Operating Monies (%) Long-Term Operating Monies(%) Total Rate of Return 3 month 1.4 2.6 6 months 2.8 5.2 9 months 4.2 5.8 Since inception 30 Sept 95 5.6 6.8 Benchmark 3 Month 1.3 2.3 6 Month 2.6 4.8 9 Month 3.9 5.2 Market Value per PIMCO 30 Sept. 97 $17.4M $298.5M Estimated Current Yield 30 Sept. 97 5.7% 5.9% Quarterly Deposits (Withdrawals) ($30.0M) Estimated Annual Income $1.0M $19.5M CSDOC e P.O. Box 8127 e Fountain Valley, CA 92728-8127 e (714) 962-2411 FAHR97-73 Page 2 November 12, 1997 Market Recap For the second straight quarter, fixed income markets registered solid gains in the third quarter of 1997, as investors judged the economy's moderate rate of growth to be balanced and non- inflationary. This view was bolstered by the July appearance of Federal Reserve Chairman Greenspan before Congress, when he suggested that the U.S. economy may have entered an extended period of steady economic expansion, without traditional inflationary consequences. For the Long-Term Operating Monies portfolio, PIMCO maintained a near, to slightly above, duration during the third quarter, emphasizing U.S. Treasury and Agency securities, and high- quality mortgage-backed obligations. This contributed to the portfolio outperforming its benchmark again this quarter (2.6% vs. 2.3%). PIMCO maintained a near-index duration posture for the Liquid Operating Monies portfolio, emphasizing short maturity investment-grade commercial paper, and U.S. Agency securities, which contributed incremental yield to the portfolio, slightly better than its benchmark (1.4% vs. 1.3%). Comparative marked-to-market quarter-end portfolio values are shown in the table below, and in the attached bar chart. During the quarter, $30 million was withdrawn from the Long-Term Operating Monies portfolio to fund semi-annual COP principal and interest payments, and to meet other cash flow requirements. Liquid Operating Monies Quarter Ending ($M) 30 Sept. 96 14.2 31 Dec. 96 14.4 31 Mar. 97 4.5 30 June 97 17.1 30 Sept. 97 17.4 Recommendation Receive and file this information-only report. SK:lc H:\wp.dta\fin\2210\crane\FAHR\FAHR.97\STAFFRPT.97\srfahr97-73.doc Attachments Long-Term Operating Monies ($M) 287.1 311.5 313.2 321.3 298.5 Prepared by Finance, 10/28/97, 2:22 PM CSDOC Liquid Operating Monies Portfolio . Investment Diversification 1 100100 100 90 80 70 .....-... ~ 60 I 0 .._.. I ~ I I • 6/30/97 +J C 50 Q) ~ 1~9/30/97 u ~ 40 Q) a. 30 20 10 0 I 0 0 0 0 0 0 0 0 0 0 Govt Mtg Corp Non US$ Other Net Cash Equivalent G:\excel.dta\fin\2220\geggi\Finance\Portfolio short term Prepared by Finance, 10/28/97, 2:23 PM 100 90 ao I 78 -.. 70 I I 161 '#. 60 ._. +J C 50 Q) ~ 40 Q) a.. 30 20 10 0 Govt CSDOC Long-Term Operating Monies Portfolio Investment Diversification 0 0 0 0 Mtg Corp Non US$ Other G:\excel.dta\fin\2220\geggi\Finance\Portfolio long term graph 23 Net Cash Equivalent D6/30/97 ~ 9/30/97 Prepared by Finance, 10/28/97, 3:34 PM $350,000,000 $300,000,000 $250,000,000 $200 I 000 I 000 $150,000,000 $100,000,000 $50,000,000 $0 CSDOC Investment Management Program Quarter End Portfolio Values (Marked-to-Market) 30 Sep. 96 31 Dec. 96 31 Mar. 97 30 Jun. 97 30 Sep. 97 lo Liquid Operating Monies l!l Long-Term Operating Monies I G:\excel.dta\fin\2220\geggi\Finance\investmgmtprogram JNVE~JMENT MANAGEMENT PRO_GRAM I .County Sanitation Districts of Orange. County STRATEGY REVIEW FOR THE PERIOD JULY 1 -SEPTEMBER 30, 1997 FINANCE, ADMINISTRATION &'HUMAN ·RESOURCES C0Mty11TTEE NOVEMBER 12, 1997 Post Office Box 6430 840 Newport Center Drive Newport Beach , California 92658-6430 714 · 640:3031 i1f-d.;:::, ... =-.--~a · -~·, -, 5·c -; tt 7 • c +n • I 1 -I ••··.· .~ '..•·· I It: -, ... = 1• ·,· • • ::1 I PACIFIC INVESTMENT MANAGEMENT COMPANY ... AGENDA BOND MARKET REVIEW II PERFORMANCE/ PORTFOLIO REVIEW Ill CURRENT OUTLOOK/ STRATEGY PACIFIC INVESTMENT MANAGEMENT COMPANY RATES TRENDED DOWN IN THIRD QUARTER 2-YEAR YIELDS FLUCTUATED DRAMATICALLY OVER QUARTER • July: • August: -34 bps +23 bps • September: -22 bps YIELD CURVE FLATTENED AS INFLATION RISK PREMIUM FELL tf!tJ:11::f:{r~f:iJ:F; ........ ; .. :.;;:.:,:,tmM·ait;i,~l&lr~.mti« 7.0 ~ 6.5 -:/2. ~ "'C -a; 30-Yr. T-Bond ;:,-::: 6.0 ~-.. 5.5 -10 c:. 8-20 (].) co c:: _g -30 u -40 ,, \._._ I " 4Q '96 2-Yr. T-Bi/1 , .. ,, '\ ' ' lQ '97 , , , , , I , t , ' ' ' ' I I ' ' 2Q '97 -39 ............. ,, _____ , '~' 3Q '97 -38 -38 -50 30 Yrs. 3 Mos. 1 Yr. 2 Yrs. 3 Yrs. 5 Yrs. 10 Yrs. I Pldl 3RD QTR. 0 YTD SOURCE: Bloomberg 6.40% 5.78% PACIFIC INVESTMENT MANAGEMENT COMPANY STRATEGY RECAP -THIRD QUARTER LIQUID OPERATING FUND Period Ended September 30, 1997 DURATION • MATURITY MIX • SECTOR/ ISSUE • ~~!:!!~~ NEAR INDEX NEAR INDEX EMPHASIZE AGENCY DISCOUNT NOTES AND COMMERCIAL PAPER 2 • NEUTRAL NEUTRAL • NEUTRAL NEUTRAL • POSITIVE POSITIVE PACIFIC INVESTMENT MANAGEMENT COMPANY STRATEGY RECAP -THIRD QUARTER LONG-TERM OPERATING FUND Period Ended September 30, 1997 DURATION • MATURITY MIX • SECTOR/ ISSUE • NEAR INDEX BROADER THAN INDEX EMPHASIZED AGENCY SECURITIES CONTINUED EXPOSURE TO CORPORATE SECURITIES INCREASED MORTGAGE EXPOSURE 3 • SLIGHTLY POSITIVE NEUTRAL • POSITIVE POSITIVE • POSITIVE STRONG POSITIVE PACIFIC INVESTMENT MANAGEMENT COMPANY ~ REVIEW OF PERFORMANCE Through September 30, 1997 • Long-Term Operating Fund 9/30/97 Market Value $298,539,540 • Liquid Operating Fund 9/30/97 Market Value $17,365,741 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 1 Yr. 3 Mos. 6.8 8.2 2.6 6.5 7.4 2.3 Since* Inception 9/30/95 1 Yr. 3 Mos. 5.6 5.6 1.4 5.3 5.2 1 .3 PACIFIC INVESTMENT MANAGEMENT COMPANY - CURRENT OUTLOOK LONG TERM OUTLOOK SHORT TERM OUTLOOK -ilil.iliil {llt~J;lf~11!~11~1~1!\ll\!i:\1i\!iJ;li011111!::1 LONG TREASURY YIELDS TO RANGE BETWEEN 5 -7% INFLATION REMAINS VERY MILD, NEAR 2% + + ECONOMY REMAINS ON A STEADY GROWTH PATH MILD INFLATION DUE TO HEALTHY CONSUMER & BUSINESS SPENDING MODERATE DECLINE IN TREASURY YIELDS 1::;~;:;;;;;~~;~;;f~J;;;::L:;iiijt%ii;i+;;~}b~::,~,);~~:,::':'.~;::,~:' ':"'.''.'.''.'.:I 5 + + SLIGHTLY LONGER-THAN-INDEX BROADER THAN INDEX CONTINUE TO RELY ON CORPORATE AND AGENCY SECURITIES INCREASE FOCUS ON THE MORTGAGE SECTOR PACIFIC INVESTMENT MANAGEMENT COMPANY r i r l CALLAN ASSOCIATES INVESTMENT MEASUREMENT REVIEW County Sanitation Districts of Orange County September 30, 1997 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. r l I l 1 ( r l_ CALLAN ASSOCIATES INVESTMENT MEASUREMENT REVIEW COUNTY SANITATION DISTRICTS OF ORANGE COUNTY SEPTEMBER 30, 1997 Market Perlormance 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 r - COUNTY SANITATION DISTRICTS OF ORANGE COUNTY MEASURES OF MARKET PERFORMANCE Domestic stocks produced further strong gains in the third quarter of 1997, but a change took place in the nature of the rally as the quarter progressed. Large capitalization stocks the market leaders since late 1994, peaked in early August. Smaller capitalization stocks which have trailed the larger issues, kept rising to new highs throughout September. Bonds also gained during the quarter, as the Federal Reserve held its rate policy steady and inflation remained low. With government figures not yet available, most estimates put third quarter growth in real GDP slightly below the 3.3% of the second quarter. Most U.S. stock indices hit new record highs during the quarter. The S&P 500 Stock Index returned 7.52%. Positive performing stocks beat negative performeis by better than 3 to 1 within the Index. Best performers among the eleven stock sectors were the technology and consumer cyclical sectors, with returns of 17 .03% and 12.02%, respectively. The weakest sectors were consumer staples and health care, with returns of -0.19% and -0.66%, respectively. For 1997 through September, the S&P 500 Index returned 29.57%. Among other stock indices, the Dow Jones Industrial Average returned 4.01 % for the quarter and 24.92% for the nine months, while the S&P ''Mid Cap" 400 Stock Index returned 16.11 % and 31.23% and the NASDAQ Index returned 16.99% and 30.94%. Results for the Callan Indices also showed greater strength among stocks with smaller capitalizations in the latest quarter. The Callan Broad 2000 returned 9.17% for the quarter and 28.48% for the nine months, while the Callan Micro 1000 returned 16.88% and 29.40%. Within the Broad 2000, the Large 150 returned 6.27% and 29.59%, while the Medium 350 returned 12.46% and 28.02%, and the Small 1500 returned 13.75% and 26.23%. The Morgan Stanley Capital International EAFE Index, which is composed of representative stock issues from Europe, Australi~ and the Far East, showed a gain despite declines in Japan and several smaller Far East markets. Returns were 2.47% for the quarter and 19.42% for the three quarters on a local currency basis. Returns adjusted for conversion to U.S. dollar-s were -0.70% and 10.43%. This included dollar-based returns of 8.28% and 23.72% for the European component of the Index and returns of -12.41 % and -6.12% for the Pacific Rim component. The Salomon Non-U.S. Government Bond Index returned 3.43% and 8.24% in U.S. dollars hedged against currency fluctuations. On an unhedged basis, the results were 0.21 % and -2.92%, reflecting the rising dollar in 1997. Domestic bond returns were positive last quarter, as interest rates continued to ease .. Rates fell 39 basis points on 30-year Treasuries and 35 basis points on Moody's seasoned AAA corporates. The Lehman Brothers Government/Corporate Bond Index returned 3.50% for the quarter and 6.34% for nine months. Results for the long component of the Index were 5.56% and 8.22% respectively, while the intermediate component earned 2.70% and 5.61 %. Treasury Bills earned 1.29% for the quarter and 3.95% for the nine months. The Consumer Price Index for Urban Wage Earners and Clerical Workers rose at an annual rate of 2.30% during the quarter, up from 1.00% in the previous quarter. Last Quarter ( 6/97-9/CJ7) Technology Consumer Cyclical Financial Energy Transportation Communication Services Raw & Intermediate Materials Industrial Equipment & Services Public Utilities Consumer Staples Health Care S&P500 Last Quarter (6/97-9/CJ7) Services (Facilities & Environmental) Air Freight Computers (Hardware) Equipment (Semiconductors) Gaming, Lottery, & Parimutuel Oil & Gas (Drilling & Equipment) Electronics (Semiconductors) Cellular/Wireless Communications Investment Banking/Brokerage Computers (Peripherals) Last Quarter (6/97-9/CJ7) Tobacco Beverages (Non-Alcoholic) Services (Data Processing) Footware Metals Mining Housewares Personal Care Containers (Metal & Glass) Biotechnology Health Care (Hospital Management) Standard & Poor's 500 Stock Index 17.03% 12.02 11.90 10.89 9.02 5.49 5.03 4.59 4.53 -0.19 -0.66 7.52% 42.44% 38.23 34.62 33.03 29.90 29.02 28.88 28.86 28.44 27.51 -4.84% -5.18 -6.34 -6.91 -8.18 -8.61 -8.72 -10.36 -17.53 -20.21 Sectors Industry Best Worst Last Nine Months (12/96-9/CJ7) Technology Financial Energy Health Care Communication Services Transportation Industrial Equipment & Services Consumer Cyclical Raw & Intermediate Materials Consumer Staples Public Utilities S&P 500 Last Nine Months (12/96-9/CJ7) Equipment (Semiconductors) Trucks & Parts Air Freight Savings & Loan Investment Banking/Brokerage Truckers Computers (Hardware) Oil & Gas (Drilling & Equipment) Household Furniture & Appliances Retail (General Merchandise) Last Nine Months (12/96-9/CJ7) Restaurants Natural Gas Oil & Gas (Exploration & Production) Housewares Metals Mining GoldMin~g Footware Containers (Metal & Glass) Biotechnology Health Care (Hospital Management) 43.76% 38.50 31.47 30.70 29.57 28.47 26.98 20.47 20.35 16.82 6.77 29.57% 162.13% 87.12 79.78 77.51 71.08 69.22 64.86 58.27 56.24 51.62 6.43% 6.35 3.04 2.54 -0.02 -3.17 -6.88 -10.10 -11.84 -17.91 l l COUNTY SANITATION DISTRICTS OF ORANGE COUNTY PERFORMANCE TO DATE Last Periods Ended Last 1/2 September 30, J 997 Quarter Year Liquid Operating Monies 1.34% 2.78% Long Term Operating Fund 2.26 4.77 Total Fund 2.21 4.67 Market Indicators Government/Corporate 1-5 Year Index 2.36% 4.99% 1-3yr Govt/Corp Index 1.97 4.23 Merrill Lynch 1-5yr Govt/Corp 2.27 4.82 Lehman Brothers G/C Int 2.70 5.73 Treasury Bills 1.29 2.61 Median Rates of Return Active Cash Management Database 1.60% 3.33% Defensive Fixed-Income Style 2.04 4.30 Ranking (l=Bes~lOO=Wornt) vs. Active Cash Management Database Liquid Operating Monies 95 94 vs. Defensive Fixed-Income Style Long Term Operating Fund 19 19 Last 3/4 Year 4.10% 5.39 5.32 5.22% 4.95 5.22 5.61 3.95 4.49% 5.04 92 20 For explanation of market indicators and comparable funds see end of report. Rates of return for periods over one year are annualized. Last Last 2 Year Years 5.51% 5.57% 7.71 6.65 7.59 6.59 7.55% 6.52% 6.97 6.33 7.44 6.46 8.20 6.66 5.28 5.29 6.11 % 5.94% 7.18 6.37 91 93 19 30 r COUNTY SANITATION DISTRICTS OF ORANGE COUNTY PERFORMANCE VS. ACTIVE CASH MANAGEMENT DATABASE PERIODS ENDED SEPTEMBER 30, 1997 8% - 7% - 6% - 5% - 4% - 3% - 2% - 1% - ACTIVE CASH MANAGEMENT DATABASE 10th Percentile 25th Percentile Median 75th Percentile 90th Percentile Treasury Bills Liquid Operating Monies A Ranking (l=Best.l<»=Wor.;t) -E]A T-Bls Last Quarter T - 2.14 1.80 1.60 1.45 1.40 1.29 1.34 95 T~ 1------ ,._ _ _.A Last 1/2 Year T 4.18 3.70 3.33 2.92 2.82 2.61 2.78 94 T~ Last 3/4 Year 5.29 4.82 4.49 4.25 4.18 • A 3.95 4.10 92 T~ Last Year • A 7.65 6.65 6.11 5.74 5.60 5.28 5.51 91 T~ t,------ Last 2 Years • A 6.91 6.31 5.94 5.74 5.64 5.29 5.57 93 COUNTY SANITATION DISTRICTS OF ORANGE COUNTY PERFORMANCE VS. DEFENSIVE FIXED-INCOME STYLE PERIODS ENDED SEPTEMBER 30, 1997 9% - 8% - 7% - 6% -~ Int 5% - • A ~§ Int • A ML~ ----- G/C 4% - 3% - ~ Int ~~ • A 2% -G/C ===== 1% - Last Last Last 1/2 3/4 Quarter Year Year DEFENSIVE T T T FIXED-INCOME SfYLE 10th Percentile 2.48 5.15 5.72 25th Percentile 2.16 4.59 5.30 Median 2.04 4.30 5.04 75th Percentile 1.92 4.15 4.88 90th Percentile 1.72 3.79 4.53 Merrill Lynch I-5yr Govt/Corp 2.27 4.82 5.22 Lehman Brothers G/C Int 2.70 5.73 5.61 Long Term Operating Fund A 2.26 4.77 5.39 Ranking 19 19 20 (l=Best.IOO=Worst) ~---Int • A ~/~ ----- Vn~~-----• A -ML15 G/C ----- Last Last 2 Year Years T T 8.17 7.03 7.42 6.79 7.18 6.37 6.88 6.19 6.58 5.89 7.44 6.46 8.20 6.66 7.71 6.65 19 30 r l COUNTY SANITATION DISTRICTS OF ORANGE COUNTY LONG TERM OPERATING FUND PORTFOLIO CHARACTERISTICS SUMMARY SEPTEMBER 30, 1997 ~ Portfolio Structure Comparison The charts below compare the structure of the portfolio to that of the index from the three perspectives that have the greatest influence on return. The first chart compares the two portfolios across the different sectors. The second chart compares the duration distribution (or term structure). The last chart compares the distribution across quality cells. Treasw-ies 44% Sector Allocation .Q j ...... 0 5 8 Cash 9% Mortgages 10% Long Term Operating Fund Duration Distribution 0% <1.0 1.0-1.5 1.5-2.0 Quality Distribution ~ 20% .· 0% Aaa+ Aaa Aal Aa2 2.0-2.5 2.5-3.0 Years Duration Aa3 Moody's Rating Other 1% Agencies 8% Treasuries 75% Cocpocates 15% Lehman Govt/Corp 1-5 Years Al Weighted Average Duration • Long Term Operating Fund: 2.48 D Lehman Govt/Corp 1-5 Years: 2.34 3.0-3.5 3.5-4.0 4.0+ Weighted Average Quality • Long Term Operating Fund: Aaa D Lehman Govt/Corp 1-5 Years: Aaa AZ A3 <A3 * All Statistics shown on the page are dependem 0n the securities in the portfolio being recognized (by their Cusip) and priced. In this case 99% of the secunties in_ the portfolio (by market value) were recognized and priced. r- I r COUNTY SANITATION DISTRICTS OF ORANGE COUNTY LONG TERM OPERATING FUND PORTFOLIO CHARACTERISTICS DETAIL SEPTEMBER 30, 1997 Weighted Average Portfolio Characteristics Total Fund, By Asset Class and By Sector Ending Percent Market of Effective Effective OA OA Sector Value Portfolio Co!!l!on Maturi!J'. Yield Dtn-ation Convexitv QualiJI Total Fund $353,813,730 100.0% 6.71 5.24 5.99 2.48 (0.00) Asa Agencies $91,953,074 26.0% 6.43 2.37 5.93 2.21 (0.36) Aaa+ Corporates $37,044,653 10.5% 7.35 1.52 5.97 1.39 0.03 A2 Mortgages $36,096,664 10.2% 7.00 29.80 7.01 5.09 0.43 Aaa+ Treasuries $155,194,290 43.9% 6.92 3.19 5.90 2.76 0.10 Aaa+ Total Fixed-Income $320,288,681 90.5% 6.84 5.76 6.04 2.71 (0.00) Asa Cash Equivalents $33,525,049 9.5% 5.48 0.25 5.48 0.25 0.00 Asa 5 Largest Holdings Ending Percent Market of Effective OA OA Issuer Name Issur:Name Sector Value Portfolio Yield Duration Convcxi!J: Quali!J'. Federal Home Ln Bies Deb 6.49% 9/13/2000 Agencies $39,722,166 11.2% 5.80 1.07 (0.81) Aaa+ United States Treas Nts Nt 7.75% 11/30/1999 Treasuries $36,181,612 10.2% 5.83 1.93 0.05 Aaa+ United States Treas Nts Nt 6% 08/15/2000 Treasuries $35,114,800 9.9% 5.86 2.59 0.08 Aaa+ United States Treas Nts Nt 6.50% 5/31/2002 Treasuries $29,135,374 8.2% 6.01 3.90 0.19 Aaa+ Federal Home Ln Mtg COIJ> Deb 6. 720%10/02/00 Agencies $25,835,334 7.3% NIA 5 Lowest Rated Holdings (Moody's Rating) Ending Percent Market of Effective OA OA Issuer Name Issue Name Sector Value Portfolio Yield Duration Convexi!J: Qualitv Gen Mtrs Accep Corp #00231 Mtn 8.625% 1/10/2000 Corpocates $3,282,885 0.9% 6.21 2.05 0.05 A3 Gen Mtrs Accep Tr #324 Min 8.375% 2/03/1999 Corpocates $3,971,487 1.1% 5.93 1.25 0.02 A3 Chrysler Fml Min 6.26% 7/20/1998 Corporates $1,004,872 0.3% 5.69 0.76 0.01 A3 Chrysler Fml Min 7.27% 4/13/1998 Corpocates $2,928,858 0.8% 5.60 0.51 0.00 A3 Philip Morris Cos Inc Nt 9.250% 02/15/2000 Corpocates $9,654,745 2.7% 6.36 2.10 0.06 A2 5 Longest Duration Holdings Ending Percent Market of Effective OA OA Issuer Name Issue Name Seder Value Portfolio Yield Duration Conve:d!:J:: Quali~ Commit To Pur Fhlmc Gold 7.000% 11/15/2027 Mortgages $9,975,000 2.8% 7.10 5.99 0.60 Aaa+ Commit To Pm Fhlmc Gold 7.000% 10/01/2027 Mortgages $19,950,000 5.6% 7.10 5.99 0.60 Aaa+ United States Treas Bds Deb 11.125% 08/15/03 Treasuries $6,301,493 1.8% 6.07 4.44 0.25 Aaa+ United States Treas Nts Nt 6.50% 5/31/2002 Treasmies $29,135,374 8.2% 6.01 3.90 0.19 Aaa+ Fnrna Min 6.230 3/1/2002 Agencies $4,541,633 1.3% 6.03 3.80 0.17 Aaa+ 5 Holdings with Highest Effect Yield Ending Percent Market of Effective OA OA Issuer Name TusucNilIDC Sector Value Portfolio Yield Duration Convcldtt Quali!;I Commit To Pur Fhlmc Gold 7.000% 11/15/2027 Mortgages $9,975,000 2.8% 7.10 5.99 0.60 Aaa+ Commit To Pm Fhlmc Gold 7.000% 10/01/2027 Mortgages $19,950,000 5.6% 7.10 5.99 0.60 Aaa+ Gnma Gtd Pass Thru Ctf Mpt 7% 06/20/2027 Mortgages $6,206,782 1.8% 6.57 0.73 (0.41) Aaa+ Philip Morris Cos Inc Nt 9.250% 02/15/2000 Corporates $9,654,745 " 2.7% 6.36 2.10 0.06 A2 Gen Mtrs Accep Corp #00231 Mtn 8.625% 1/10/2000 Corporates $3,282,885 0.9% 6.21 2.05 0.05 A3 * All Statistics shown on the page are dependent on the securities in the portfolio being recognized (by their Cusip) and priced. In this case 99% of the securities in the portfolio (by market value) were recognized and priced. ml ..... FIXED-INCOME MARKEf INDICATORS The market indicators included in this report are regarded as measures of equity or fixed-income performance re.sults. The returns shown reflect both income and capital appreciation. 90-Day U.S. Treasury Bills provide a measure of risk:less 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 l-3yr Government/Corporate Index is a market capitalization weighted index including U.S. Government and fixed-coupon domestic investment grade corporate bonds with a range of maturities between 1-3 years and at least $100 million par amount outstanding. Floaters, Equipment Trost Certificates and Title 11 securities are excluded. The quality range of bonds in this index is BBB3-AAA. Merrill Lynch 1-5 Year Government/Corporate represents bonds with matuntJ.es 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. r r r l. L FIXED-INCOME MANAGEMENT STYLE GROUPS Active Cash-Managers whose objective is to achieve a maximum return on short-term financial instruments through active management. The average portfolio maturity is typically less than one year. Active Duration -Managers who aggressively employ interest rate anticipation in setting portfolio duration. Portfolios are actively managed so that large changes in duration are made in anticipation of interest rate changes in hopes of profiting from downward rate movements and minimizing losses from upward rate movements. Core Bond -Managers who construct portfolios to approximate the investment results of the Lehman Brothers Government/Corporate Bond Index or the Lehman Brothers Aggregate Bond Index with a modest amount of variability in duration around the index. The objective is to achieve value added from sector and/ or issue selection. Defensive-Managers whose objective is to minimize interest rate risk by investing predominantly in short to intermediate term securities. The average portfolio duration is similar to the duration of the Merrill Lynch 1-3 Year Bond Index. Extended Maturity -Managers whose average portfolio duration is greater than that of the Lehman Brothers Government/Corporate Bond Index. These portfolios exhibit risk/return characteristics similar to the long-bond portion of the Lehman Brothers Government/Corporate Index, called the Lehman Brothers Government/Corporate Long Bond Index. Variations in bond portfolio characteristics are made to enhance performance results. This results in an aggressive risk/return profile that embraces interest rate risk in search of both high yields as well as capital gains. High Yield -Managers whose investment objective is to obtain high current income by investing primarily in non-investment grade fixed-income securities. Due to the increased level of default risk security selection focuses on credit-risk analysis. Intermediate -Managers whose objective is to lower interest rate risk while retaining reasonable yield levels by investing primarily in intermediate term securities. The average portfolio duration is similar to that of the duration of the · Lehman Brothers Intermediate Government/Corporate Bond Index. Money Market -Open-end mutual funds that invest in low-risk, highly liquid, short-term financial instruments and whose net asset value is kept stable at $1 per share. The average portfolio maturity is 30 to 60 days. Mortgage -Managers who invest primarily in mortgage-backed securities including agency (FHLMC, GNMA, FNMA) and private issue pass-throughs, asset-backed securities, and mortgage derivatives (REMICS/CMOs, IOs, POs). Funds may also contain a small percentage of U.S. Treasuries. STIF -Bank investment funds in low-risk, highly liquid, short-term financial instruments. The average portfolio maturity is 30 to 60 days. [ I l FIXED-INCOME PORTFOLIO CHARACTERISTICS All Portfolio Characteristics are derived by first calculating the characteristics for each security, and then calculating the market value weighted average of these values for the portfolio. Allocation by Sector -Sector allocation is one of the tools which managers often use to add value without impacting the duration of the portfolio. The sector weights. exhibit can be used to contrast a portfolio's weights with those of the index to identify any significant sector bets. Average Coupon -The average coupon is the market value weighted average coupon of all securities in the portfolio. The total portfolio coupon payments per year are divided by the total portfolio par value. Average Moody's Rating for Total Portfolio -A measure of the credit quality as determined by ·the individual 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 r~e 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 yeats 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. r FIXED-INCOME PORTFOLIO CHARACTERISTICS Average Years to Stated Maturity-The average years to stated maturity is the market value weighted average time to stated maturity for all securities in the portfolio. This measure does not talce 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. --, AGENl ,~,~-..... ·~~ <' For Bd. Sec. Use Only ITEM .. = ~ • COMM. INFO. ITEM /::· " • COMM. ACTION ITEM g~ • JT. BDS. CONSENT TRANSMITTAL . -~-· IC>te, , . • JT. BDS. DISCUSSION t;C., ~ (NON-CONSENT) • PUBLIC HEARING JT. BDS. MEETING DATE JT. BDS. AGENDA ITEM NO. 5. MEETING DATE COM~. ID. NO. DISTRICT NO. CONTACT FOR INFORMATION OMTS: ,0MTS PDC: PDQ f.1--'tJJ. FAHR: 11/12/97 FAl:iF,\ ALL EXEC: EXEC 530, Terri Josway, extension 2140 STEER: STEER JT.BDS: RECOMMENDED ACTION(S): 1. Receive and file the First Quarter Workers' Compensation and Accident Status Report for FY 1997-98. CEQA REVIEW: Project is Exempt: YES NO 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 CURRENT YEAR CURRENT VEAR· VEAR-TO-DATE REVISED BUDGET INFORMATION BUDGET AMOUNT TO-DATE BUDGET BALANCE TOTAL EXPENDITURES (Total Budget plus Transfers) TOTAL BUDGETED AMT.: $719,850 SOURCE:JO $719,850 $71,816 $648,034 $719,850 Schedule/Line Items: AMOUNT OF TRANSFER: Schedule/Line Item: TOTAL PROJECT BUDGET ORIGINAL PREVIOUS BUDGET BUDGET CHANGE REVISED TOTAL INFORMATION BUDGET TOTAL CHANGES THISAIT PROJECT BUDGET First Year in Budget: Master Plan Estimate: $0.00 Year of First Costs: ----· THIS AffNENi.)fXit':!ttOJECT COST OP.IQ.NAL ~lu, PO, t;;;,--.r4GE ORDERS, AMOUNT AMENDED INFORMATION <,;ONTRACT FUNDS PREV. REQUESTED THIS PROJECT AMOUNT APPROVED AIT AMOUNT $0.00 WILL PROJECT REQUIRE ADDITIONAL PERSONNEL? NO REQUIRES BOARD POLICY ACTION? NO If YES, state number: _ Permanent -Limited Term If YES, explain in ADDITIONAL INFORMATION section Revised 09/03/97 Page 1 of 3 H:\WP.DTA\HR\2530\JOSWAY\BOARD INFORMATION\1ST QUARTER 1997-98 WC STATUS REPORT AIT.DOC.DOT Originator ~ Date CONCURRENCES: o •-30-97 Date ADDITIONAL INFORMATION (Background and/or Summary) ATTACHMENTS TO l 1. \ .MITTEE AGENDA (List): ATTACHME_NTS TO JOINT BOARDS AGENDA (List) 1. The primary goal of the Districts' safety program is designed to reduce accidents. The total injury incidence rate, Lost Work Day Incidence Rate, and Workers Compensation Cost factor performance measures are used to help track the effectiveness of the safety program. The Districts' are self-insured for Workers' Compensation and the current Third-Party Administrator is Presidium, Inc. During the 1st quarter for FY 1997-98, the Districts paid $71,816 for Workers' Compensation benefits. This is for open claims that incurred expenses during the 1st quarter. The following table illustrates the cost for Workers' Compensation claims for the past 1 O years. The annual cost for the Third-Party Administrator to process our claims is $25,000. The cost of the Third Party Administrator is not included in these numbers. A service provided by the Third-Party Administrator is review of medical bills to ensure that the costs are reasonable and customary. The medical bills submitted during the 1st quarter totaled $42,066. After the review by HCM Medical Review, the bills were reduced by $21,424 (51 % savings). Fiscal Period Number of Claims Total Incurred 7 /1 /87 -6/30/88 52 $142,933 7 /1 /88 -6/30/89 45 $203,590 7 /1 /89 -6/30/90 58 $172,325 7 /1 /90 -6/30/91 78 < $149,356 7/1/91 -6/30/92 58 $264,411 7 /1 /92 -6/30/93 58 $103,955 7 /1 /93 -6/30/94 43 $96,589 7 /1 /94 -6/30/95 47 $277,287 7 /1 /95 -6/30/96 49 $188,338 7 /1 /96 -6/30/97 35 $211,795 7 /1 /97 -6/30/98 20 $106,410 There were 20 claims during the 1st quarter. This is an increase in the usual number of claims for a quarter. Four of these cases are questionable and have been put on delay status pending investigation by the Third Party Administrator. The investigation should result in denial of all four claims, which will allow us to close the claims and remove the accidents from our OSHA log. Most of the remaining claims this quarter r~sulted from back strains, slipping on the walking surfaces, abrasions, and cuts. Actions have been implemented to provide staff with re-training on proper techniques for lifting, turning valves, wearing personal protective equipment, and hazard recognition. The Workers' Compensation Cost Factor for the 1st quarter is $193. This factor is calculated by dividing the Total Incurred Cost by the number of employees. The Districts goal was $403, which is below the industry average of $576. . Revised 09/03/97 Page 2 of 3 H:\WP.DTA\HR\2530\JOSWAY\BOARD INFORMATION\1ST QUARTER 1997-98 WC STATUS REPORT AIT.DOC.DOT ' /\.t The OSHA Incidence Rates for tt ,' quarter were: Total Injury Incidence Rate: Lost Work Day Case Incidence Rate: OSHA Incidence Rates Lost Work Day Cases 15.3 6.13 i ::~~ l GI n m 1st Qtr g 4.00 ---,----,1------l I----~ 2.00 [-. L 1----• 2nd Qtr ~ o.oo +. _._ ___ __.___._~, __._....__ __ ~, • 3rd Otr 96-97 97-98 •4th Qtr Fiscal Year Cl) -l'CI a: Cl) u C: Cl) "C i3 .5 Industry Average: 13.9 7.6 Industry Average: OSHA Incidence Rates Total Injuries 20.00 ~rn ~.n 0.00 96-97 97-98 Fiscal Year I Iii 1st Otr •2nd Qtr •3rd Otr •4th Qtr There were 1 O Near-Miss Accidents reported during the quarter and 2 vehicle accidents also occurred. One employee was involved in both vehicle accidents and there was minimal damage to the vehicles. No other vehicles were involved in the accidents. Steps were taken with the employee to minimize the potential for accident recurrence. Near Miss Accidents :l bru -Ill 0 -.. C: I Cl) Cl) .a "C E u ::I u z <C 96-97 tj c: Department Head AGM-Operations General Manager Revised 09/03/97 Fiscal Year 97-98 I Ill 1st Qtr •2nd Qtr •3rd Qtr •4th Otr 0 J!! .. C: Cl) Cl) .a "C E i3 i ~ 2 0 Vehicle Accidents 96-97 97-98 Fiscal Year H:\WP.OTA\HR\2530\JOSWAY\BOARD INFORMATION\1ST QUARTER 1997-98 WC STATUS REPORT AIT.OOC.DOT Iii 1st Qtr •2nd Otr •3rd Qtr •4th Qtr Page 3 of 3 !HECK LIST 1 (Attach completed check list to the front of AIT when submitting to Committee,ooard Secretary) (This form to be hand-written) ral (State Yes, No, NIA) All boxes (except shaded boxes) are filled in, including budget information, using computer Originator and/or typist's initials are typed on last page of AIT above c: Document spell checked (remember to spell check each section separately) Originator's name typed in as "Contact" Originator signs above Division, Department Head and AGM original signatures in "Concurrences" section All attachments included. Attachments that go to Committee/Boards are listed in applicable "Attachments" sectio AIT. (These can be different than those required by Bd. Secretary.) AIT package copied to disk and disk slipped into envelope and attached to AIT package Three (3) copies of AIT package and disk submitted to Committee/Board Secretary Estimated Discussion/Presentation time: __ minutes hments (for Board Secretary's official files) --Check all that apply 1 complete listing of items to be attached to an AITand the Agenda, refer to the Library in the Agenda Procedures Manual. ired backup information has not changed.) Staff Report for detailed, technical information only. Otherwise, include in AIT form Original correspondence/documents/reports to be received and filed Copy of approved Job Plan for new construction, repair, or maintenance projects CEQA documentation, if applicable (attach Notice of Exemption, if appropriate) Copy of Agreement/Addendum/Contract with exhibits, approved and signed by Contracts-Purchasing Manager/General Counsel Certification Letter for professional services agreements and addenda executed by appropriate Directors and stal Districts projects only Memo re Consultant's Errors and Omissions insurance coverage signed by Department Head for design projects Construction Specifications (Plans not required to be submitted) and fully executed memo re review of Plans and Specifications (formerly BIDDOC13) Notice Inviting Bids All proposals for professional services, purchase specification contracts for chemicals and services, and construe projects to be received and filed, if appropriate Signed Bid Tabulation and Staff Recommendation (include original bid packages) Signed Purchase Requisition Contract/Signed Change Order/Closeout Agreements with Contracts-Purchasing Manager's/General Counsel's concurrence (Approval memo or signature on document) Other supporting documentation Resolutions and ordinances nation for Committee/Board Meeting (State Yes, No, NIA) Originator notified Committee Secretary of his/her attendance at meeting Originator notified Committee Secretary of name(s) of guest(s) in attendance at meeting Originator notified Communications Department of special audio/visual needs for presentation Request completed for Graphic Services for presentation materials (allow five working days minimum)(form avaih from Communications) Originator scheduled meeting to review presentation with Communications Director Originator notified Committee Secretary that there would be handouts at meeting (Originator makes copies and NP.DTA\HR\2530\JOSWAY\BOARD INFORMATION\1ST QUARTER 1997-9B WC STATUS f&PORT AIT.DOC.DOT AGENL_ ~ ITEM TRANS MITT AL CONTACT FOR INFORMATION (Originator) FAHR: 11-12-97 EXEC: 1,2,3,5,6,7, 11, 13 210, Gary G. Streed, ext. 2500 Division No., Name, and Extension STEER: JT.BDS: 11-19-97 RECOMMENDED ACTION(S): 1. Consideration of a motion to recommend to each District an ordinance to amend the current ordinance governing sewer service user fees in order to distinguish between rebates and refunds of annual sewer service user fees collected as a separate line item on the annual property tax bill. CEQA REVIEW: Project is Exempt NOT APPLICABLE Dale Notice of Exemption Filed: Negative Declaration Approved on Final EIR Approved on_ and Notice of Determination filed on_ CURRENTBUDGETICOST CURRENT YEAR INFORMATION BUDGET AMOUNT TOTAL BUDGETED AMT.: $ SOURCE: CORF JO DISTRICTS N/A Schedule/Line Items: AMOUNT OF TRANSFER: Schedule/Line Item: TOTAL PROJECT BUDGET ORIGINAL BUDGET INFORMATION TOTAL First Year in Budget: Master Plan Estimate: Year of First Costs: THIS AITNENDOR/PROJECT COST ORIGINAL BID, PO, INFORMATION CONTRACT AMOUNT WILL PROJECT REQUIRE ADDITIONAL PERSONNEL? NO If YES, state number: _ Permanent _ Limited Term Originator Date CONCURRENCES: Date //-Y-77 Signature Date General Manager/Assistant General Manager (Or Designee) Revised 10121197 H:\WP.DTA\FIN\2210\CRANE\FAHR\FAHR.97\NOV\FAHR97-75.DOC DATE OF MOST RECENT BOARD ACTION ON THIS SPECIFIC ITEM: CURRENT YEAR-YEAR-TO-DATE REVISED BUDGET TO-DATE BUDGET BALANCE TOTAL EXPENDITURES (Total Budget plus Transfers) N/A N/A N/A PREVIOUS BUDGET BUDGET CHANGE REVISED TOTAL CHANGES THIS AIT PROJECT BUDGET $0.00 CHANGE ORDERS, AMOUNT AMENDED FUNDS PREV. REQUESTED THIS PROJECT APPROVED AIT AMOUNT $0.00 REQUIRES BOARD POLICY ACTION? YES If YES, explain in ADDITIONAL INFORMATION section ATTACHMENTS TO COMMITTEE AGENDA (List): 1. ATTACHMENTS TO JOINT BOARDS AGENDA (List) 1. Page 1 of 3 ADDITIONAL INFORMATION (Back\ ind and/or Summary) The Sanitation District's annual sewer service fees are assessed to each user connected to the sewerage system and are collected as a separate line item on the property tax bill. The fees are calculated for each connected parcel based upon information available from the County Assessors' database. Within a District, all single family residences are charged a uniform fee, and multifamily residences are charged a lesser fee for each unit. Non-residential users are assessed a fee based upon the square footage of the developed building area on each parcel. The actual type or amount of sewerage system use at a commercial/industrial building is not a factor in the annual fee collected as a separate line item on the property tax bill. This fee is the same per 1,000 square feet of development for every non-residential user in the District. However, there are approximately 1,000 users who are issued a permit by our Source Control Division, whose fees are established based upon actual quantities and strength of flow discharged to the sewerage system. These users are commonly termed Class I and Class II users in reference to the type of permit issued. Class I users are generally those who are subject to Federal Categorical Pretreatment Standards, and have a daily discharge exceeding 25,000 gallons. Class II users are high volume users whose discharge includes other than sanitary waste, but who are not subject to a Class I permit. It should also be noted that one of the recommendations coming forward from the Rate Advisory Committee, formed as a part of the Strategic Plan effort, will be a change to more than 20 categories of non-residential users. This increase in categories is expected to result in assumed quantity and strength by category that more closely approximates the actual, and in charges that are more appropriate for each category of user. In the meantime, the current District fee ordinances each provide for adjustments to the calculated fees in the event the property owner/user can prove an inequity exists between the fee assessed and the amount of wastewater discharged. Such inequities may in~lude, but are not limited to, the following instances: A. The owner's parcel is not connected to a sewer; 8. The use of the parcel differs from the indicated use; C. The principal water use is agricultural; D. Any other use, wherein the am0unt of wastewater discharged to the District's system is significantly less on a regular basis than the amount that would normally be expected to be discharged by the class of property in question. Determination of any adjustments, rebates or refunds is vested in the General Manager of the District, or his designee. The Finance Director and staff have been administering this program with the guidance of the General Counsel. Because the fees are collected on the property tax bill, the Government Code specifies that refunds must be granted for up to the four-year period preceding the refund request. Even though the Districts' rates and rate structure had not changed in several years, the Districts experienced a significant increase in the number and amount of adjustment requests during 1996-97. This increase can be primarily attributed to an influx of consultants. The consulting firms mail a letter to businesses in the county proposing they can lower their sewer service fees based upon their understanding and knowledge of our Ordinance. Typically, the consultant is paid a percentage of the reductions. A table showing the adjustments granted during each of the-past four years follows. The amounts indicated for each fiscal year are the total adjustments and may include amounts charged in the prior four years. Als-o reported is the percentage 0f adjustments granted during the year to the total assessm~nt for the year. Fiscal Year 1993-94 1994-95 1995-96 1996-97 Adjustment $ 170,011 59,039 364,741 7,514,456 Revised 10'21/97 H:\WP.DTA\FIN\2210\CRANE\FAHR\FAHR.97\NOV\FAHR97-75.DOC Percentage .3% .1% .6% 12.4% Page 2 of 3 ~ \ There were approximately 750 aa, ,ments made during fiscal 1996-97, m~ .1of them were for the maximum four- year period. One might expect that the adjustment per user would decline in the future as those with the most to request should have been the earliest to be processed and their four year window has been adjusted. Not surprisingly, not one user or consultant has notified staff that the average cost charged on their property tax bill was below the proper charge for their discharge. In response to staffs concerns and requests, General Counsel has re-reviewed the applicable Government Code. This month, General Counsel has issued an opinion that distinguishes between a "rebate" and a "refund". In essence, the difference is that a "refund" is due in the case of a billing error, such as billing a parcel that had no sewer service, while a "rebate" is due when the sewer use has been inappropriately determined. The significance of this opinion is that only the refund requests are allowed for four-years; rebate requests are allowed only during whatever time period is specified in the Districts' enabling ordinance. General Counsel has ruled that a sewer service user fee assessed in accordance with the adopted ordinance based upon the building square footage carried in the County Assessor's database is only a billing error if the square footage is incorrect, if the parcel is undeveloped or unsewered or if the use is not non-residential. This means that sewer service user fee adjustments requested on the basis of water use are not required for the four-year period, but rather for the shorter period established by District Ordinance. Because this ruling results in a change in the past practices, General Counsel and staff are requesting that the ordinances be modified to clearly distinguish between rebates and refunds and to define the adjustment period for both. Because this revision is in the form of an ordinance, it will require two readings and a published public notice. The revised adjustment period will be effective for all requests received after January 1, 1998, the effective date of the revised ordinance. Recommended Actions: Consideration of a motion to recommend to each District an ordinance to amend the current ordinance governing sewer service user fees in order to distinguish between rebates and refunds of annual sewer service user fees collected as a separate line item on the annual property tax bill. c: Department Head AGM General Manager Revised 10/21197 H:\WP.DTA\FIN\2210\CRANE\FAHR\FAHR.97\NOV\FAHR97-75.DOC Page 3 of3 ORDINANCE NO. __ AN ORDINANCE OF THE BOARD OF DIRECTORS OF COUNTY . SANITATION DISTRICT NO. 1 OF ORANGE COUNTY, CALIFORNIA AMENDING ORDINANCE NO. 133 RELATING TO EXEMPTIONS, REBATES AND REFUNDS OF SANITARY SEWER SERVICE CHARGES The Board of Directors of County Sanitation District No. 1 of Orange County, California, does hereby ORDAIN as follows: Section 1: Section 5 of Ordinance No. 133 is hereby amended to read as follows: "Section 5: A Exemptions. It is the intent of the District that the legal owner(s) of parcels of real property, otherwise subject to the levy and payment of the sewer use charges as prescribed herein, be exempted from the payment of said charges in certain circumstances and under proscribed conditions; or if paid in error, be entitled to a rebate or refund, as more specifically set forth in Subparagraphs Band C below, provided a billing error is proven or an inequity is established based upon: ( 1) The property has not been classified in the proper land use category; (2) The principal water use is agricultural or horticultural; (3) The property is devoted to any other 1 use, wherein the amount of wastewater discharged to the District's system is significantly less on a regular basis than the amount that would normally be expected to be discharged by the class of property in question. B. Application for Rebate. Any property owner may apply to the District for a rebate of sewer use charges paid to the District by establishing that an unfair valuation of the property has been made by the District. An applicant for a rebate must establish, by satisfactory proof, that an inequity exists between the amount of the charge paid and the amount of wastewater discharged to the District's system resulting in an unfair valuation of the property. Satisfactory proof shall establish at least one of the three facts set forth in Subparagraph A above, and shall include, but not be limited to, documentation showing actual water usage for the entire period of the rebate in question. An application for a rebate shall be deemed a claim and be governed by the provisions of California Government Code Sections 935 et seq., and shall be presented to the District, as provided in the Government Tort Claims Act, Government Code Sections 915 et seq., not later than one (1} year after the mailing of the property tax bill. A claim for rebate under this Subparagraph is 2 not deemed a claim for refund, and California Revenue & Taxation Code Section 5097 is not applicable. C. Application for Refund. Any property owner may apply to the District for a refund of sewer use charges paid to the District by establishing that the amount paid was pursuant to an error in the amount billed or the amount paid. The applicant for a refund must submit satisfactory proof that a billing error has been made by the District, or the County Tax Collector. Such proof shall include, but not be limited to proof that: (1) The owner's parcel of property is not connected to the District's system; or (2) The use of the parcel differs from the use indicated by the charge; or (3) A clerical error has been made. Applications for refunds are governed by the provisions of California Tax & Revenue Code Sections 5096 and 5097, allowing for refunds for a period of four ( 4) years from the date of payment of the second installment of the bill claimed to be incorrect. D. All applications for rebates or refunds of the sewer use charge will be determined by the General Manager of the District, or his designee, who, based on the submitted proof, may grant a full or partial rebate or refund." 3 ,,.. Section 2: Section 7 of Ordinance No. 133 is hereby amended to read as follows: "Section 7. Method of Collection. Pursuant to the authority granted by California Health & Safety Code Section 5473, all charges established herein shall be collected on the County Tax Roll in the same manner, by the same persons, and at the same time as, together with, and not separately from, its general taxes. The County Tax Collector is authorized and hereby ordered to make said collections in accordance with the terms and conditions of agreements between the County of Orange and this District. In the event District determines that an error in the amount paid or the amount billed exists in the amount of sewer use charges collected by the County Tax Collector, or that an inequity exists because (a) the property has not been classified in the proper land use category; or (b) the property is devoted to a use wherein the amount of wastewater discharged to the District's system is significantly greater on a regular basis than the amount that would normally be expected to be discharged by the class of property in question, District may submit a bill for any deficiency directly to the property owner. Said invoiced amount shall be due and payable within thirty (30) days of invoice date." Section 3: This Ordinance shall become effective ______ , 199 . 4 Section 4: The Secretary of the Board shall certify to the adoption of this Ordinance and shall cause a summary of the same to be published in a newspaper of general circulation in the District, as required by law. PASSED AND ADOPTED by the Board of Directors of County Sanitation District No. 1 of Orange County, California, at a regular meeting held ___ _ ATTEST: Chairman of the Board of Directors County Sanitation District No. 1 of Orange County, California Secretary of the Board of Directors County Sanitation District No. 1 of Orange County, California (8.pj} 5 )> 0 -I -.o z --I m s: CJ) MEETING DATE OMTS: PDC: FAHR: 11-12-97 EXEC: STEER: JT.BDS: 11-19-97 RECOMMENDED ACTION(S): AGENCl ITEM. TRANSMITTAL CONTACT FOR INFORMATION (Originator) 220, Michael D. White, 7570 Division No., Name, and Extension 1. Receive and file the 1997-98 Financial and Operational Report for the First Quarter ended September 30, 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 CURRENT YEAR INFORMATION BUDGET AMOUNT 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 N/A ORIGINAL BUDGET TOTAL ORIGINAL BID, PO, CONTRACT AMOUNT WILL PROJECT REQUIRE ADDITIONAL PERSONNEL? NO If YES, state number: _ Permanent Limited Term u/7~.:7 Date I/ ? Y7 Date Signature Date General Manager/Assistant General Manager (Or Designee) Revised 10/21/97 H:\WP.DTA\FIN\2210\CRANE\FAHR\FAHR.97\NOV\FAHR97-76.DOC 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 THIS AIT AMOUNT REQUESTED THIS AIT REQUIRES BOARD POLICY ACTION? NO 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 ATTACHMENTS TO COMMITTEE AGENDA (List): 1. 1997-98 Financial and Operational Report for the First Quarter Ended September 30, 1997 ATTACHMENTS TO JOINT BOARDS AGENDA (List) 1. 1997-98 Financial and Operational Report for the First Quarter Ended September 30, 1997 Page 1 of2 ADDITIONAL INFORMATION (Backl )nd and/or Summary) Attached, in a separately bound document, is the Districts' First Quarter Financial and Operational Report for the Quarter Ended June 30, 1997. This report is a consolidation of both the financial and operational accomplishments of the Districts' as ofthe end of the first quarter of fiscal year 1997-98. 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 1997-98 Approved Budget. As indicated within the Overview Section of this report, 20.38 percent or $9,564,000 of the 1997-98 net joint operating budget of $46.9 million has been expended. Net costs have decreased 18.38 percent in comparison with the same period last year. The total cost per million gallons at September 30, 199, is $417.7 based on flows of22,897 million gallons. This is $107, or 20.38 percent, below the budgeted cost per million gallons of $525. · c: Department Head AGM-Operations General Manager Revised 10/21/97 H:\WP.DTA\FIN\2210\CRANE\FAHR\FAHR.97\NOV\FAHR97-76.DOC Page 2 of 2 MEETING DATE OMTS: PDC: FAHR 11-12-97 STEER: ALL AGENl ITEM TRANS MITT AL 2. CONTACT FOR INFORMATION (Originator) 210, Gary G. Streed, ext. 2500 Division No., Name, and Extension 1. Adopt a policy to provide for future replacement of sewerage system fixed assets from a combination of accumulated funds and borrowing, and to direct staff to include a Capital Replacement Reserve in future rate and budget proposals. CEQA REVIEW: Project is Exempt: NOT APPLICABLE Date Notice of Exemption Filed: Negative Declaration Approved on Final EIR Approved on_ and Notice of Determination filed on_ CURRENTBUDGETICOST CURRENT YEAR INFORMATION BUDGET AMOUNT TOTAL BUDGETED AMT.:$ SOURCE: CORF JO DISTRICTS N/A Schedule/Line Items: AMOUNT OF TRANSFER: Schedule/Line Item: TOTAL PROJECT BUDGET ORIGINAL BUDGET INFORMATION TOTAL First Year in Budget: Master Plan Estimate: Year of First Costs: THIS AITNENDOR/PROJECT COST ORIGINAL BID, PO, INFORMATION CONTRACT AMOUNT WILL PROJECT REQUIRE ADDITIONAL PERSONNEL? NO If YES, state number: _ Permanent _ Limited Term Originator Date CONCURRENCES: Date ~ i(-1/·f? Signature Date General Manager/Assistant General Manager (Or Designee) Re\llsed , 0121197 DATE OF MOST RECENT BOARD ACTION ON THIS SPECIFIC ITEM: CURRENT YEAR-YEAR-TO-DATE REVISED BUDGET TO-DATE BUDGET BALANCE TOTAL EXPENDITURES [Total Budget plus Transfers) N/A N/A N/A PREVIOUS BUDGET BUDGET CHANGE REVISED TOT AL CHANGES THIS AIT PROJECT BUDGET $0.00 CHANGE ORDERS, AMOUNT AMENDED FUNDS PREV. REQUESTED THIS PROJECT APPROVED AIT AMOUNT $0.00 REQUIRES BOARD POLICY ACTION? YES If YES, explain in ADDITIONAL INFORMATION section ATTACHMENTS TO COMMITTEE AGENDA (List): 1. System Replacement Needs Analysis Report ATTACHMENTS TO JOINT BOARDS AGENDA (List) 1. System Replacement Needs Analysis Report Page 1 of 2 \\LEAD\DATA2\WP .OTA \FIN\221 O\CRANE\FAH R\FAH R.97\NOV\FAHR97-77.DOC ' ADDITIONAL INFORMATION (Backt '-nd and/or Summary) ' ) During the 1997-98 sewer service fee rate setting process, the Directors requested the opportunity to evaluate the need and size 0f a Capital Replacement Reserve to provide for the future replacement of collection, treatment and disposal facilities. Inasmuch as the Districts have been in a fairly consistent and rapi~ growth mode since inception, the focus heretofore had been on providing funds for new facilities, but a. capital replacement policy had not been adopted. · A combination of borrowing, property taxes, user fees, federal and state grants and connection fees has b·een used to provide facilities funding in the past. If current facilities are t0 be replaced with facilities which are again funded from these sour,ces, there may need to be significant increases in annual user fees in the future. The consulting firm of R. W. Beck was retained in July 1997 to create a computer model ·of the Districts' fixed assets in order tg allow the Directors to evaluate options for a Capital Replacement Fund and Policy for future needs. That model has been built and will be shared with the Committee at the meeting. Enclosed with this agenda package is a report from the consultants ('1System Replacement Needs Analysis") which explains th•eir evaluation and planning methods, tl:ie workings of the computer model, and c_ontains the results of a sample of alternatives. The goal of each alternative included in the report was to accumulate syfficient funds t0 refurbish and/or replace aging fixed assets when needed and to avoid significant user fee in~reases at that time. There are ari infinite number 0f other alt'ernative:is that could be c0nsidered, and certainly s0me will be explored at the me~ting. There are four major issues that the model can be used to better understand: • Initial funding level • Annual funding level • Percentage of replacements to come from fund • Percentage of refurbishment to come from fund All of these issues need to IDe considered as a part of the comprehensiv.e, long-range financial plan. If the Committee elects to include a Capital Replacement Reserve and Poli·cy in the Districts' financial plan, each of these issues will be revisited and recommendations maqe as a part of future budget and rate setting processes. Recommended Action: Consideration of a m0tion to adopt a policy tQ provide for future replacement of sewerage system fixed assets from a combination of accumulated funds and borrowing, and to direct staff to include a Capital Replacement Reserve in future rate and budget prop0sals. c: Department Head AGM General Manager Revised 10/21197 \\LEAD\DATA2\WP.DTA\FIN\2210\CRANE\FAHR\FAHR.97\NOV\FAHR97-77.DOC Page 2 of2 7 7 7 7 I · 1 ) I J J ' -1 J J COUNTY SANITATION DISTRICTS OF ORANGE COUNTY SYSTEM REPLACEMENT NEEDS ANALYSIS TABLE OF CONTENTS LIST OF EXHIBITS EXECUTIVE SUMMARY Section 1 INTRODUCTION AND METHODOLOGY Section 2 DATABASE DEVELOPMENT DRAFT RE PORT TABLE OF CONTENTS INTRODUCTION .............................................................................................. 2-1 SYSTEM INVENTORIES ..................................................................................... 2-2 FUTURE INVENTORIES .................................................................................... 2-5 USEFUL LIVES ................................................................................................... 2-6 REPLACEMENT COSTS ..................................................................................... 2-8 REFURBISHMENT PROGRAMS ...................................................................... 2-12 COST ESCALATION ........................................................................................ 2-15 0TH ER KEY ASSUMPTIONS ........................................................................... 2-16 SUMMARY OF EXPECTED EXPENDITURES .................................................... 2-17 Section 3 REPLACEMENT PLANNING MODEL GENERAL DESCRIPTION .................................................................................. 3-1 STARTING THE RPM ........................................................................................ 3-2 ENTERING PARAMETERS .................................................................................. 3-3 RUNNING THE MODEL ........................................... : ....................................... 3-8 UNDERSTANDING THE CHARTS ................................................................... 3-11 UPDATING THE MODEL ................................................................................ 3-13 11-00272-10101-0101 TABLE OF CONTENTS Section 4 EVALUATION OF POLICY ALTERNATIVES SCENARIO 1-BASE CASE ................................................................................ 4-1 SCENARIO 2-INCLUSION OF REFURBISHMENT FUNDING ......................... 4-3 SCENARIO 3-INCLUSION OF "MISCELLANEOUS" REPLACEMENT FUNDING ................................................................................................... 4-5 SCENARIO 4-INCLUSION OF "MISCELLANEOUS" COSTS PLUS REFURBISHMENT ....................................................................................... 4-7 SCENARIO 5-"MISCELLANEOUS" REPLACEMENT COSTS, REFURBISHMENT FUNDING, AND INCREASED OPERATIONAL FUNDING ................................................................................................... 4-9 SCENARIO 6-SCENARIO 5 WITH INFLATION ............................................. 4-11 This report has been prepared for the use of the client fo r the specific purposes identified in the report. The conclusions, observations, and recommendations contained herein attributed to R. W. Beck, Inc. (R. W. Beck) constitute the opinions of R. W. Beck. To the extent that statements, information, and opinions provided by the client or others have been used in the preparation of this report, R. W. Beck has relied upon the same to be accurate, and for which no assurances are intended and no representations or warranties are made. R. W. Beck makes no certification and gives no assurances except as explicitly set forth in this report. Copyright 1997, R. W. Beck, Inc. All ri hts reserved. Page ii 11-00272-10101-0101 7 l 7 1 _j J J .J J COUNTY SANITATION DISTRICTS OF ORANGE COUNTY LIST OF EXHIBITS Exhibit EX-1: Summary of system replacement values, 1997 dollars ........................... 2 Exhibit 2-2: Summary of expected useful lives ....................................................... 2-8 Exhibit 2-3: Original costs of ocean outfalls .......................................................... 2-10 Exhibit 2-4: Estimated replacement costs, plants 1 and 2 and interplant facilities .......................................................................................... 2-10 Exhibit 2-5: Sewer pipe replacement costs, 1997 dollars ...................................... 2-11 Exhibit 2-6: Estimated replacement costs, pipelines and pumping stations ............ 2-12 Exhibit 2-7: Refurbishment program for treatment plant process components ................................................................................... 2-1 3 Exhibit 2-8: Summary of refurbishment programs ................................................ 2-14 Exhibit 2-9: Handy Whitman indices, various years ............................................. 2-16 Exhibit 2-10: Expected replacement and refurbishment costs, 1997 dollars ......... 2-18 Exhibit 4-1: RPM Introduction Screen .................................................................... 3-2 Exhibit 4-2: RPM Control Panel ............................................................................. 3-3 Exhibit 4-3: Special Control Panel Parameters ........................................................ 3-5 Exhibit 4-4: Pipe Life Sub-screen ........................................................................... 3-7 Exhibit 4-5: Bullet Notes Sub-screen ...................................................................... 3-8 Exhibit 4-6: View Model Results Sub-screen .......................................................... 3-9 Exhibit 4-7: Fund Balance Chart (typical, partial image) ....................................... 3-10 Exhibit 4-8: RPM Fund Balance Table (typical, partial table) ................................. 3-11 Exhibit 5-1: Summary of Sensitivity Analysis, Base Case .......................................... 4-2 Exhibit 5-2: Summary of Sensitivity Analysis, Base Case With Refurbishments ................................................................................ 4-4 Exhibit 5-3: Summary of Sensitivity Analysis, Base Case with Miscellaneous Replacement Funding ...................................................................... 4-6 Exhibit 5-4: Summary of Sensitivity Analysis, Base Case with "Miscellaneous" Replacements and Refurbishments ......................... 4-8 Exhibit 5-5: Summary of Sensitivity Analysis, Base Case with "Miscellaneous" Replacements and Refurbishments plus Increased Operations Funding ....................................................... 4-10 Exhibit 5-6: Summary of Sensitivity Analysis, Scenario 5 with Inflation .................. 4-12 11-00272-10101-0101 Page iii 7 7 J 7 7 I I _j ] ' _J -! ,_J J. J EXECUTIVE SUMMARY 7 7 7 l l J J l J DRAFT EXECUTIVE SUMMARY The County Sanitation Districts of Orange County (CSDOC) maintains several reserves at this time but it does not maintain a reserve for replacement of system assets. Because replacement needs may be a major source of expenditure in the future, the Board of the Districts has requested that an analysis be performed of future replacement needs and that a computer program be prepared to help evaluate alternative methods of funding replacements. The methods to be tested include establishment of a replacement fund. Accomplishment of the objectives of this study required two parallel efforts- compilation of a system inventory and development of an analytical model. • System inventory-This effort involved identifying, describing, and valuing system assets both existing and expected to be built in the future, on a year- by-year basis. Replacement costs of all identified assets were developed, along with reasonably expectable useful lives. Because refurbishments can potentially be included in a replacement funding program, reasonable refurbishment programs were developed for various asset classes including specific activities, costs, and frequencies. • Analytical model-The Replacement Planning Model (RPM), supplied separately to CSDOC, uses the system inventory database to generate year- by-year estimates of replacement and refurbishment expenditures. The RPM can also be used to estimate future balances in the Replacement Fund, and to estimate the potential of future user fees and bond issues to augment the fund in periods when replacement expenditures are high. The RPM was used to generate estimates of future Replacement Fund balances under a variety of scenarios, providing a "first cut" analysis of the long-term impact of various replacement funding policy decisions. These estimates are included in Section 4 of this report. The analysis found that near-term replacement needs are likely to be limited when compared with needs after the first decade of the next century. Pre- funding these needs is likely to require a relatively modest replacement fund and limited annual contributions. If major capital refurbishments of system assets are to be included in the fund's purpose, however, a larger fund and more significant annual contributions will be required. This is because capital asset refurbishments will be more costly than asset replacements for quite a few years. 11-00272-10101-0101 EXECUTIVE SUMMARY Analysis of CSDOC's system inventory found that the current replacement value, undepreciated, of the assets considered is a shown in the following exhibit. Note that land, rolling stock, furniture and fixtures, and certain other assets are excluded. Plant 1 facilities Plant 2 facilities I nterplant facilities Subtotal District pipelines lnterplant pipelines Pumping stations Subtotal Total Asset Value at current replacement cost $589 million 659 million 99 million $1 ,347 million $843 million 44 million li million $902 million $2,249 million Exhibit EX-1: Summary of system replacement values, 199 7 dollars Page 2 County Sanitation Districts of Orange County 11-00272-10101-0101 7 7 7 7 -J Section 1 INTRODUCTION AND METHODOLOGY 7 7 j ~l 1 I } I J .J j I ,:.,_J J I .:J DRAFT SECTION 1 INTRODUCTION AND METHODOLOGY To perform the study, we first inventoried the District's system and estimated likely replacement costs, useful lives, and a number of other parameters. To do this, we performed the following activities: • Existing system inventory-Working with District staff, we identified essentially all the capital assets of the District that are likely to qualify for replacement funding from a replacement fund. These assets included pipelines, pumping stations, process-related components and structures at Plant 1 and 2, non-process buildings at both plants, supervisory control and data acquisition (SCADA) systems, and the ocean outfalls and related structures. We then categorized these assets in ways that ensured that groups of like assets would have similar expected lives and replacement costs. • Future system inventory-Using planning information supplied by the District, we estimated system inventory additions on a year-by-year basis through the year 2020. These additions were grouped into the same categories as those of the existing system inventory. • Useful life estimation-For each class of asset, we determined the reasonably expectable useful life prior to replacement. To do this, we drew upon industry standards and our own experience with other water and wastewater systems. • Replacement cost development-We developed approximate replacement costs in 1997 dollars for all assets. • Refurbishment cost development-Many assets require refurbishment one or more times before the entire asset is replaced, and CSDOC may determine that such refurbishments qualify for funding from the Replacement Fund. Working with staff, we developed hypothetical refurbishment programs for each class of asset that required periodic refurbishment. These programs defined the interval of time between refurbishments, often with different intervals depending on the type of refurbishment. • Cost escalation estimation-We estimated the long-term cost escalation rate for equipment and plant of the type in use at CSDOC. To do this, we analyzed historical data generally available in the industry. Both the ENR index and the Handy Whitman indices were used. The former is applicable to the construction industry in general; the latter more specifically tracks the costs of new facilities and construction in the water resources industry. 11-00272-10101-0101 SECTION 1 The data developed through these steps were sufficient to support analysis of future replacement needs. To perform the analysis, we constructed a computer model that performed mathematical operations on the data, which were included as a database for automated analysis. This model was named the Replacement Planning Model (RPM). The RPM calculated annual replacement and refurbishment needs and the potential impact on Replacement Fund balances. The District supplied values for several important variables likely to affect future Replacement Fund balances and performance. These variables, which were included in design of the RPM, were: • Initial Replacement Fund balance • Fund earning rate • Fund borrowing rate • Initial annual contribution to the fund from operations. Because the District intended to use this model in the future, the RPM included extensive reporting capabilities as well as several key input variables to help evaluate the financial effects of various types of potential policy decisions: • Percentage of replacements to be funded by the Replacement Fund • Eligibility of refurbishments for funding from the Replacement Fund • Optional inclusion of local pipelines in District 7 for replacement at CSDOC expense • Changes in the expected useful lives of various classes of pipe • Simulation of the issuance of bonds in any year • Simulation of future contributions to the Replacement Fund from sewer customers. The RPM was used to perform a limited sensitivity analysis, mainly as a demonstration of its capabilities and of how its results might be interpreted. While it was beyond the scope of this study for R. W. Beck to recommend replacement policy, we include in this report some observations concerning the apparent adequacy of the Replacement Fund under conditions that can be foreseen now. The remainder of this report further describes the work performed: • Section 2 describes the development of the system inventories, useful lives, replacement costs, refurbishment programs, and escalation rate. • Section 3 describes the RPM and its use. • Section 4 describes the results of an analysis of possible replacement funding policy scenarios. 1-2 County Sanitation Districts of Orange County 11-00272-10101-0101 7 7 l J J Section 2 DATABASE DEVELOPMENT 7 l l 7 7 J I -j J l .J J l J I d J DRAFT INTRODUCTION SECTION 2 DATABASE DEVELOPMENT In order to estimate future replacement expenditures at CSDOC, we had to build a database to support calculations by the Replacement Planning Model (RPM). This database consisted of several parts: • System inventories-We constructed an inventory of essentially all fixed assets owned by CSDOC that might require replacement. This excluded land. The inventory was conducted in the following parts: • Process-related facilities at Plants 1 and 2 and interplant • Non-process buildings at Plants 1 and 2 Ii Sewer pipe, siphons, and force mains in all districts and interplant • Pumping stations in all districts • Ocean outfalls. • Future inventories-CSDOC continues to add facilities due to increased flows, new secondary treatment capacity, and changes in regulations. Future plant will have to be replaced, potentially within the analysis period of the RPM. Therefore, we included future plant in our inventories. • Useful lives-For each category of asset identified in the system inventories, we established a characteristic useful life. Additionally, we applied a life extension factor (within the RPM) to reflect the fact that assets that survive longer have extended useful lives. • Replacement costs-For each identified asset, we estimated the likely replacement cost in 1997 dollars. • Refurbishment programs-For most assets we prepared hypothetical refurbishment programs. This was to allow CSDOC to explore the potential effects of including refurbishments within a financial policy relating to asset replacement. Pipe was excluded because the periodic cleaning programs for collection pipe are ordinarily considered routine maintenance rather than refurbishment. • Cost escalation-The RPM calculates replacement needs at then-current costs. Accordingly, we prepared an estimate of the future cost escalation rate. 11-00272-10101-0101 Section 2 These elements of the database, all of which are necessary to estimate future replacement costs, are discussed in turn below. SYSTEM INVENTORIES We prepared inventories of existing and planned future facilities at CSDOC in order to provide a database for the Replacement Planning Model (RPM). The goals of the inventory were to: • Identify the sources of information CSDOC had available to list and describe the characteristics of the system facilities. • As necessary, disaggregate the facilities into units or features for purposes of estimating costs, useful lives, etc. • Establish a costing methodology for estimating replacement costs. • Select an approach to the inventory and costing that would apply both to existing and future facilities. • Develop the inventory so that it can be updated in the future as new facilities are added or existing ones replaced. This sub-section describes the approach used to develop the inventory for use as the database of the Replacement Planning Model. TREATMENT PLANT FACILITIES, PLANTS 1 AND 2 This discussion relates to the treatment-related facilities and equipment at the plants. It excludes buildings, the collection system, and the ocean outfalls, which are discussed separately. Plant inventories were created as follows: • We toured and observed the physical facilities at both plants. They reviewed descriptions of the plants and the treatment processes. The also reviewed various documents identifying the dates, scopes, and costs of various contracts for constructing and upgrading plant facilities. • We then reviewed site plans for each plant. Every identifiable facility at each plant as was signed an index number which was cross-referenced to the related construction contracts. Staff reviewed the results of this step and helped correct assignment errors. • The 1989 Master Plan (2020 Vision) was reviewed to further identify various plant components. Further analyses prepared earlier by staff helped to clarify original costs and capacities of various process items. At this point, we had compiled a fairly reliable listing of the assets at each plant, the capacities of the various components of each treatment process, and original costs in many cases. 2-2 County Sanitation Districts of Orange County 11-00272-10101-0101 7 7 ~l l -1 ] -] J . j J J l :J • The components were grouped into several classes: • Preliminary primary treatment facilities • Secondary treatment facilities • Solids handling facilities • Odor control facilities DATABASE DEVELOPMENT • Electrical facilities (including the co•generation plants) • Miscellaneous facilities. Several of these classes were further divided, e.g., secondary treatment facilities were subdivided into aeration, clarifiers, trickling filters, etc. Because we intended to include the costs of some associated assets in the cost of each facility, these associated facilities were not specifically identified for inclusion on the asset list. Such items included site piping, structures associated with treatment processes, minor electrical facilities, and site roads and parking areas. The methodology to be used in replacement planning required that each asset be assigned a year placed in service. In some cases, the year placed in service was obvious. In others, the situation was more complex. Many if not most of the process-related assets at plants 1 and 2 have undergone extensive modifications, improvements, changes in configuration, rehabilitation, and so forth. In some cases, the current facilities have little relationship with the original ones. In others, changes have been less dramatic. The reason that this is important is that the original year in service for many facilities is not meaningful when planning replacement. It became obvious that only a full-scale study (and preferably a physical condition assessment) would yield reliable estimates of the "effective age" of many facilities. Because of these factors, we deci~ed to adopt the following decision rule: If a facility had only one associated contract, the date of termination of that contract was taken to be the date the asset was placed in service. If a facility had two or more associated contracts, an arithmetic average of the contract termination dates was calculated and used as the effective year in service. The results were then reviewed by staff for reasonableness. Besides facilities related to treatment processes, we also inventoried buildings at both plants. The term "buildings" here means those structures that are not primarily used to house treatment or related processes. Thus, the term encompasses warehouses, shops, administration buildings, laboratories, and similar facilities. We identified buildings by reviewing the site drawings. Staff helped identify each building's purpose. We then reviewed the associated contract descriptions and CSDOC's insurance records to find square footage, number of stories, year in service, etc. Staff assisted in this work. 11-00272-10101-0101 R. W. Beck 2-3 Section 2 Altogether we identified sixteen buildings at Plant 1 with a total square footage of 236,270 square feet and seven buildings at Plant 2 with a square footage of 84,455 square feet. COLLECTION SYSTEM The collection system piping inventory was prepared in two parts-regional pipe in all districts, and local pipe in District 7 for which CSDOC has O&M responsibility and which CSDOC may be responsible to replace. The inventory in both cases was built from databases supplied by the Strategic Plan Update consultant to CSDOC. • Regional pipe-Based on the database supplied, there are 3,919 pipe segments in totaling 378.1 miles. These pipe segments exist in Districts 1, 2, 3, 5, 6, 7, 11, and 14, as well as in the interplant category. There are 29 pipe diameters ranging from eight inches to 96 inches. The pipes include gravity sewers, force mains, and siphons. Although pipe material was not included in the database, we followed the decision rule used by CSDOC, which is that all gravity sewers smaller than 42 inches are composed of vitrified clay (VCP), while those 42 inches and larger are reinforced concrete (RCP). Since the 1950's, these larger pipes have been of the "T-lock" type and include a plastic lining to inhibit hydrogen sulfide damage. We classified siphons as the same material as the connecting pipes and force mains as ductile iron (DIP). Ten pipe segments were excluded from the inventory because of bad data; in each case, either the year in service or the length was missing. These exclusions should not materially affect the results of the analysis. • Local pipe-The local pipe exists exclusively in District 7 and includes 4,022 pipe segments. Of these, 255 (6.34%) were excluded because of missing data. The remainder include 13 diameters ranging from 4 inches to 42 inches. These segments total about 186 miles. The pipe was installed between 1953 and 1996, with about 60 percent by length installed in the three-year period ~rom 1962 to 1964. 81 percent of the pipe is 8-inch diameter vitrified clay. There are a few small-diameter segments listed as ductile iron, cast iron, or PVC. We reclassified those segments as vitrified clay to reflect their likely replacement material. The inventory of CSDOC's 22 pumping stations included the number and size of pumps, heads for each pump, presence or absence of an emergency generator, capacity, status (dry or submerged), and firm capacity. This inventory was compiled with the help of staff. 2-4 County Sanitation Districts of Orange County 11-00272-10101-0101 7 7 7 l 7 l \ -j j _J 1 I .J J DATABASE DEVELOPMENT FUTURE INVENTORIES The RPM can estimate system replacement needs as far as 100 years in the future. It is likely that many if not most new assets planned by CSDOC will reach the end of their expected useful lives within that period. Accordingly, for the RPM to accurately reflect replacement needs over a long period of time, the system inventory must include assets that are planned or expected but that do not yet exist. For this reason, the asset database supporting the RPM must include future plant. CSDOC requested that future plant be estimated through the year 2020. It was anticipated that futur_e plant components would be supplied by another contractor, currently preparing the Strategic Plan Update for CSDOC that will provide a master plan for development of the physical system based on demographic changes, population growth, etc. To the extent that the Strategic Plan Update was not complete, we were to depend on the 1989 Master Plan for future plant estimates. Unfortunately, the Strategic Plan Update could not provide any future plant information for this study. Furthermore, plant growth estimates in the 1989 Master Plan were based on flow projections that did not materialize and similarly could not be used for this study. Therefore, future plant inventory data were prepared in other ways, as described below. TREATMENT PLANT FACILITIES, PLANTS 1 AND 2 Staff provided a financial analysis titled 2020 Vision Projects Rescheduled per Current Flow Estimates. This analysis detailed capital expenditures through 2020 for plant additions and improvements. We reviewed this document and translated the cost estimates into plant components on a year-by-year basis from 1998 through 2020. Primary areas of expansion included: • Headworks (preliminary treatment) • Primary treatment • Secondary treatment • Solids handling • Effluent handling • Odor control. The schedule of individual future plant components was transmitted to staff for review. There were no new assets relating directly to the outfalls or non-process buildings, except for one building scheduled for replacement in 1999, which was included in future plant. Estimated future plant additions (1997 dollars) through the year 2020 at Plants 1 and 2 total about $294 million. 11-00272-10101-0101 R. W. Beck 2-5 Section 2 COLLECTION SYSTEM Determination of changes in the collection system is a prime objective of the current Strategic Plan Update. These changes will be identified through the use of refined flow projections and hydraulic modeling. At this time, the Strategic Plan Update is not at a point where it can supply any information on growth or changes in the collection system. Therefore, we decided to assume that new pipe would be added in each district at the rate experienced in recent years. We built separate databases for each district's pipe additions from 1987 through 1996 and calculated the average length of each type and diameter of pipe that had been added annually. We then assumed that a set of pipes of similar length for each type and diameter would be added annually for the years 1998 through 2020. The exercise was repeated for local pipe in District 7. We did not assume that any pumping stations would be added to the collection system prior to 2020. USEFUL LIVES There is limited published information available on the expected lives of various types of wastewater system facilities. Most systems establish lives for depreciation purposes, but these are not necessarily the same as the expected useful lives of the facilities. A previous survey of eleven water and sewer systems to determine experiences with useful lives revealed the following: • Estimated useful lives of facilities varied widely and, for pipes, were influenced most frequently by soil and groundwater conditions. • Several systems reported shortened lives with certain types of pipe due to improper installation. • External corrosion of ductile iron pipe (such as CSDOC uses for force mains) has shortened its life in a number of instances. Most systems now specify cement mortar-lined pipe with an external coating or polyethylene wrap. Some systems are specifying double cement mortar-lined pipe to give more thickness and durability to the mortar. • The lives for structures are for the buildings, reservoirs, and pump stations themselves, recognizing that the mechanicaVelectrical equipment may be renewed several times during this life. Data from this survey, along with our own engineering and estimating experience, has been used in formulating the useful lives discussed below. 2-6 County Sanitation Districts of Orange County 11-00272-10101-0101 7 7 7 l l -1 l l _J -J J 1 J 1 _j 1 _j J l J DATABASE DEVELOPMENT TREATMENT PLANT FACILITIES, PLANTS 1 AND 2 Essentially all of the process-related assets identified at Plants 1 and 2 were defined by their structures as noted above. Because the determining factor in asset lives was structural in all cases, SO-year lives were assigned to these assets based on structural life. Replacements of sub-components (pumps, motors, control panels, and so forth) were considered refurbishments and handled separately, as described further on. Similar to plant components, non-process buildings were assigned useful lives of 50 years. The two outfalls were divided into land and marine portions. Land portions were assigned 70-year lives based on the expected lives of reinforced concrete pipes (see below). Marine portions were assigned 60-year lives to reflect a possibly more hostile environment, possible structural problems caused by tides and currents, corrosion of cast iron appurtenances, etc. COLLECTION SYSTEM The collection system consists of pipes and pumping stations. Pipe lives are assigned based on materials and reflect local conditions and use for sewerage as opposed to water conveyance: • Vitrified clay (gravity sewers and siphons)-75 years • Reinforced concrete (including T-lock)-70 years • Ductile iron (force mains)-75 years. Assignment of a useful life to vitrified clay pipe is difficult. Properly installed, in dry soils, vitrified clay pipe may last a very long time. On the other hand, it is susceptible to root invasion and cracking from earth settlement. Because it is so brittle, earthquakes may cause extensive damage. Therefore, deterioration may be far more rapid in some locations than others, even within a single system, and catastrophic failure from earth movement is always possible. Therefore, the 75- year life assigned to vitrified clay pipe must be viewed with caution. Lives of the pumping stations were set at 40 years, somewhat less than the SO-year lives we assigned to water pumping stations in a previous study. This reflects the relatively heterogeneous and corrosive nature of the environment. 11-00272-10101-0101 R. W. Beck 2-7 Section 2 The following exhibit summarizes the expected useful lives used in the replacement needs analysis. Expected useful lives Treatment facilities so years SCADA 10 years Buildings so years 0 utfalls (land portion) 70 years Outfalls (marine portion) 60 years Pumping stations 40 years Pipe-vitrified clay 75 years Pipe-Concrete 70 years Force mains-ductile iron 75 years Exhibit 2-2: Summary of expected useful lives REPLACEMENT COSTS Replacement costs for all facilities were estimated at 1997 price levels and were specific to the Southern California economic environment. Costs were estimated using various indices, cost estimating programs, and costs of similar projects as discussed in the following sections for each of the systems and types of facilities. In most instances, it was assumed that replacement facilities would be functionally similar to and of equal capacity to the originals. Historical costs were reviewed but not exclusively relied upon because of extensive alterations that have taken place. The replacement costs for all facilities include allowances for site restoration, engineering, and administrative costs unless otherwise stated. Costs were estimated using five major sources of information. The weight given to any source was determined by the particular situation. • Water Cost, a proprietary estimating program developed by Culp-Wesner- Culp for EPA, generated base construction costs for many facilities. Water Cost selects unit processes from a database within the program to match the processes in the treatment plant as the basis for developing the construction cost estimate. Water Cost was run using design criteria from CSDOC's 1989 Master Plan. To these costs were added: • 25 percent for site work and interface piping • 10 percent for subsurface considerations (a type of contingency allowance) • 15 percent for contractor profit and overhead 2-8 County Sanitation Districts of Orange County 11-00272-10101-0101 7 l 7 l 1 ] -] 1 I • J _J J 1 j 1 J 1 j DATABASE DEVELOPMENT • 20 percent for internal CSDOC activities including planning, engineering design, procurement, contract management, inspection, legal, fiscal, and administrative expenses. This last cost category was agreed during discussions with staff. CSDOC has historically used a 15 percent factor for these costs, but 20 percent was felt to be more reasonable. • CSDOC staff has compiled generic cost data from time to time. We reviewed several of these compilations and used some of the data. • We have prepared cost estimates in previous studies for several classes of assets in use at CSDOC. These cost estimates were updated to the 1997 base year and used in some cases. • In our routine engineering work we review bid costs for many types of facilities. In some cases, our replacement cost estimates were influenced by recent bids submitted to our clients by other firms. • In some cases, we conducted interviews with suppliers of certain types of process equipment to determine current costs. In all cases, we depended on our professional judgment and on our extensive experience with water and wastewater systems. TREATMENT PLANT FACILITIES, PLANTS 1 AND 2 Replacement costs for process-related facilities at Plants 1 and 2 were prepared on an item-by-item basis using all of the methods described above. These costs, which are too voluminous to list here, are documented completely in the RPM, which accompanies this report. Buildings serving administrative, laboratory, or various operation and maintenance functions other than housing equipment were estimated separately according to building type and square footage. Unit costs were estimated using the Means estimating guide . In reviewing the buildings, all could be assigned to one of two types of construction: • Concrete tilt-up or equivalent, typically used for warehouses, shops, and similar facilities. 1997 replacement cost is estimated at $50 per square foot. • Office-type, a more expensive construction with higher-value tenant improvements typically found in administrative or office buildings, laboratories, etc. 1997 replacement cost is estimated at $140 per square foot. Replacement costs for the two ocean outfalls (classified as interplant) were based entirely on original installed cost, escalated to 1997. Alternative approaches to 11-00272-10101-0101 Section 2 costing were not used because of the very site-specific costs of the outfalls. Original costs are summarized in the following exhibit: Description 120" outfall Land section Marine section 78" outfall Land section Marine section Diffuser Replace 78" portion with 120" Replace 78" portion with 120" I I Completion I Final contract I Job number date amount J-9 J ul-67 $1,118,000 J-10 Aug-71 $8,938,396 J-1 Jul-55 $359,632 J-2 Jul-55 $2,214,116 J-2-1 Sep-65 $333,573 J-22-1 Dec-91 $1,976,460 J-22-2 Dec-93 $1,350,525 Exhibit 2-3: Original costs of ocean outfalls All costs for facilities at plants 1 and 2 exclude land. Costs for interplant facilities include the ocean outfall booster pump station, the surge towers, and the outfalls themselves. Interplant pipe is not accounted for here, but is included below with the collection system. A summary of the estimated replacement costs is shown in the following exhibit. Plant 1 facilities Plant 2 facilities lnterplant facilities Total Asset Value at current replacement cost $589 million 659 million 99 million $1,347 million Exhibit 2-4: Estimated replacement costs, plants 1 and 2 and interplant facilities COLLECTION SYSTEM Costs for replacement pipe were partially derived from estimates recently developed by R. W. Beck in estimating the value of the water and wastewater systems owned by the City of Houston, Texas, and the Irvine Ranch Water District, California. These unit costs were originally estimated using the EPA computer program titled "Standardized Costs for Water Supply Distribution Systems" dated January 1992. The costs were also compared with unit prices for recent projects designed by R. W. Beck. They were then adjusted to the Southern California area and 1997 price levels using the Handy-Whitman water cost indices. The pipeline estimates include costs or allowances for all materials, excavation, dewatering, customer service connections, installation, bedding and backfill, traffic control, repaving and restoration, pipeline thrust blocks or 2-10 County Sanitation Districts of Orange County 11-00272-10101-0101 l 7 . l . I . J I J J DATABASE DEVELOPMENT anchoring, valves and appurtenances such as mainline meters and hydrants, testing, and miscellaneous costs. Per-foot costs for all types and sizes of pipe currently used at CSDOC are listed in the exhibit below. Cf] DIP I RCP RCP VCP VCP Force Main Gravity Siphon Gravity Siphon 4 a-i,--·: . -; :· ,: -<r $35.70 ~-Ir. 6 llf': 11.l"Y. C -a,-..... $41.51 JI, .. .· '"'- 8 $60.20 ir ~ .c-c, $56.81 $66.41 .,. 10 $70.90 ~. :,_ r<'·.-.:. $73.75 $85.75 12 $82.55 r;_ -, ·1 $91.19 $105.59 15 $101 .23 ,__ -t• $109.65 $127.65 16 $111.04 Iii-;!j $144.13 $163.33 18 $128.36 Ill' .. -~--$169.52 $191.12 20 $159.60 ~="'· .. ''· ' i, $195.84 $219.84 21 $159.60 ~-a. -$195.84 $221.04 24 $187.30 .,_ '...i:: -:-$222.36 $251.16 27 $216.54 l-J;, $248.57 $280.97 30 $247.05 r,= •. -• . ·::: $276.73 $312.73 - 32 $266.25 ~,;,,. -=..:-E· $297.02 $335.42 33 $277.20 ~ -• ;;.:~ $306.31 $345.91 36 $305.30 lF.''. ~ ·if:. $367.20 $410.40 39 $333.06 ~-.. $417.69 $464.49 42 $36625 $503,62 $547.72 "' I'--· 45 ;:,,, $542.30 $589.55 - 48 ., $580.80 $631.20 ~-.ii 'j 51 '? .~·, $619.85 $673.40 ·'-'i .. 54 ',. ':f, $660.21 $716.91 '" -. !!'.•-. ..)...,,u._ ·- 60 " I'.!:; $735.42 $798.42 ;/ -.-~ 63 ;: · -.~ $773.81 $839.96 ~ 'le ; 66 ~ $812.36 $881.66 it, .. I( 69 :;._--~ $851.06 $923.51 ~-.. -I = 72 ~ $889.92 $965.52 .. --· ~ ·"' :· 0 .. . 78 ~-.t1 $968.10 $1 050.00 t: :..1I ~" 84 ,., J 1,·, $1 046.89 $1 135.09 t... ·-· ., ~~: 90 ~--$1 093.50 $1 188.00 ~: "" 96 :tr-$1 206.34 $1 307.14 ~ Exhibit 2-5: Sewer pipe replacement costs, 1997 dollars Based on the assumptions described above, 1997 replacement cost for pipe in all districts and interplant is about $887 million. The same EPA document referenced above for sewers was used as the source of costs for sewer pumping stations. The cost information was derived analyzing actual construction costs for 1,165 stations. The Handy Whitman cost index, mentioned earlier, was used to update these costs to 1997 price levels and to translate them to Southern California. The replacement costs of pumping stations were adjusted on a case-by-case basis and took into account the following: • Firm capacity • Number, capacities, and heads of pumps 11-00272-10101-0101 R. W. Beck 2-11 Section 2 • Type (dry or submerged) • Presence or absence of an emergency generator. Replacement costs ranged from about $22,000 for one very small pumping station to about $2.2 million for CSDOC's largest pumping station, at Seal Beach. All replacement costs are documented in the RPM that accompanies this report. Total 1997 replacement costs for all pump stations is about $15 million. A summary of collection system replacement costs, including pumping stations and interplant pipe, is shown in the following exhibit. District pipe lines I nterplant pipelines Pumping stations Total Asset Value at current I replacement cost $843 million 44 million ll million $902 million Exhibit 2-6: Estimated replacement costs, pipelines and pumping stations REFURBISHMENT PROGRAMS While the primary purpose of this study was to determine how best to finance future system replacements, refurbishment programs were also of interest. In this context, a "refurbishment" project is defined as: • A significant effort at rehabilitating, restoring, upgrading, or improving a capital asset; • Work that is normally undertaken only at long intervals; and • Work that would normally be considered a capital expense. This definition specifically excludes both routine and corrective maintenance. The RPM assumes that any class of asset may have an associated refurbishment program. The refurbishment program may include up to three distinct activities, each with an associated frequency and cost. A user of the RPM may elect to include refurbishment costs within future replacement needs. Examples of refurbishment are given in the following discussion. TREATMENT PLANT FACILITIES, PLANTS 1 AND 2 We conducted several interviews with staff concerning refurbishment of these facilities. CSDOC has no formal or defined refurbishment programs. Staff conducted some research and uncovered specific examples of work that could be considered refurbishment for primary clarifiers and digesters. These examples, however, were too sketchy to serve as the basis for a program. 2-12 County Sanitation Districts of Orange County 11-00272-10101-0101 . \ -,i l 7 , ] I 1 _ __, l l l I I _J I Ir . J ! _j J J DATABASE DEVELOPMENT After further discussion, we determined that potential refurbishment activities were similar across many classes of plant facilities in that they would cover the following types of equipment: • Pumps • Motors • Electrical controls • Instrumentation • Structures • Associated mechanical and electrical equipment and appurtenances. It further appeared that, if CSDOC were to conduct refurbishments in a programmatic fashion, there would be two basic types, each with an associated cost: • Minor mechanical/electrical refurbishment-Conducted every 12.5 years (one- fourth of asset life). Includes rebuilds and upgrades of most pumps, motors, controls, instruments, etc. Cost is 10 percent of original asset cost, adjusted for inflation. • Major mechanical/electrical refurbishment-Conducted every 25 years (one-half of asset life). Includes upgrades or replacements of pumps, motors, controls, instruments, etc., and minor to medium structural repair and modification. Cost is 40 percent of original asset cost. Schematically, the refurbishment program for process-related plant components can be shown as follows: New Minor Major Minor Facility facility refurb refurb refurb replaced •------<O>------•>------•>------o Year O Year 12.5 Year 25 Year 37.5 Year 50 Exhibit 2-7: Refurbishment program for treatment plant process components Refurbishment programs for non-process buildings are defined as follows: • Every 10 years, new roof at $12 per square foot of roof space (1997 dollars, calculated from total square footage and number of stories) • Every 25 years, major refurbishment of tenant improvements at $25 per square foot for office-type buildings and $10 per square foot for warehouse- type and similar buildings • Every 25 years, HV AC overhaul/replacement and related mechanical and electrical work at $15 per square foot. The ocean outfalls also require some refurbishment activities. We have defined a refurbishment program that does not necessarily reflect past CSDOC practice but that should be considered in light of recent experience at the County Sanitation Districts of Los Angeles County, which found that the condition of its outfalls 11-00272-10101-0101 R. W. Beck 2-13 Section 2 changed dramatically over a very short period of time. This refurbishment program, based on a five-year program, is costed to include: • Two to three submarine inspections of the outfalls. • Minor ballast addition and redistribution, with major work expected from time to time. • Ongoing repair and replacement of cast iron manholes and appurtenances and, infrequently, some structural repair to the pipe. COLLECTION SYSTEM Pipelines require no refurbishment under normal circumstances, merely periodic cleaning which is considered a maintenance activity. Pumping stations are more complex and typically require refurbishment. We have identified three probable refurbishment cycles: • Pump reconditioning at 5-year intervals, including rebuild of the impellers, replacement of seals, etc. • Electrical controls upgrades at 10-year intervals • Major mechanical/electrical rehabilitation at 20-year intervals to replace pumps, overhaul motors, replace controls, and conduct minor structural rehabilitation. The expected costs of these rehabilitations is estimated separately for each pumping station and is documented in the RPM accompanying this report. A summary of all refurbishment programs considered is shown in the following exhibit. Asset category Treatment facilities: I Refurbishment type Minor mechanical and electrical rehab Major mechanical and electrical rehab, minor structural SCADA : Minor mechanical and electrical rehab Major mechanical and electrical rehab Buildings : Repair and replacement of roof Refurbishment of tenant improvements Major mechanical and electrical rehab, replace HVAC Outfalls, marine portion:IPe riodic inspections, ballast, cast iron repair Pumping stations: Pump reconditioning Upgrade/replacement of electrical controls Major mechanical and electrical rehab, minor structural I interval I Approximate cost I 12.5 yrs -10% of repl. cost 25 yrs -40% of repl. cost 5 yrs -10% of repl. cost 10 yrs -40% of repl. cost 10 yrs $12 per roof SF 25 yrs $10-25 per floor SF 25 yrs $15 per floor SF I 5 yrs I -5% of repl. cost I 5 yrs -5% of repl. cost 10 yrs -1.2% of repl. cost 20 yrs -40% of repl. cost Exhibit 2-8: Summary of refurbishment programs 2-14 County Sanitation Districts of Orange County 11-00272-10101-0101 7 1 --r I l l ) J I -j I --' 1 J l _j l l ,.,, J DATABASE DEVELOPMENT COST ESCALATION The pipelines and facilities in CSDOC's systems were priced at current 1997 estimated construction costs. In order to project replacement costs for these assets in the future, it was necessary to estimate the escalation rate for similar construction. A number of sources were considered to best predict future escalation, including: • Engineering News Record (ENR) • Environmental Protection Agency (EPA) • Bureau of Reclamation • Consumer Price Index • Handy Whitman Index To project future costs, the applicability of the index to sewer facilities and the longevity of the indices were deemed most important. The Handy Whitman indices were most applicable to sewer systems. These indices have both excellent longevity and widespread use, having been published for more than 75 years. The ENR index is also widely used but the cost factors that make up the index are more closely related to the building industry and general construction than to sewer systems. The Handy Whitman index was created specifically for water and wastewater systems and has traced the costs of various types of such facilities, including geographical differences in costs for various regions of the United States. Handy Whitman was therefore selected for indexing future costs to account for escalation. The exhibit on the next page shows historical trends for the various Handy Whitman water system indices. 11-00272-10101-0101 R. W. Beck 2-15 Section 2 Handy-Whitman Jndeces Annual Rates over Time Item Pumping Plant 1922 1947 1967 1977 1967 1997 10 rs 20 yrs 30 yrs 50 yrs 75 yrs Structures & Improvements Elect. Pumping Equip Treatment Plant Structures & Improvements Large Treatment Equip Small Treatment Equip Transmission Plant Cast Iron Mains Steel Mains Cone Cyl Mains Distribution Plant Cast Iron Mains A-C Mains Steel Mains PVC Mains Miscellaneous Items Flocculating Equip Claririer Equip Filter Gallery Piping 17 29 21 39 17 29 16 35 20 36 21 38 22 42 52 16 28 26 40 39 21 35 64 145 254 61 177 265 64 145 254 72 156 293 73 164 306 76 152 255 71 144 252 74 143 253 80 163 266 83 167 266 86 169 260 73 154 266 107 151 71 210 601 70 193 465 75 154 272 330 2.65% 4.20% 5.62% 4.98')/, 4.03% 454 4.77% 4.82% 5.91% 5.03% 4.18% 330 2.65% 4.20% 5.62% 4.98% 4,03% 378 2.58% 4.46% 5.68% 4.87% 4.14,- 365 2.26% 4.36% 5.70% 4.85% 4.02% 323 2.39% 3.84% 4.94% 342 3.10% 4.42% 5.38% 335 2.85% 4.35% 5.16% 326 2.12% 3.56% 4.82% 4.41% 3.73% 331 2.21% 3.46% 4.72% 4.22% 3.66% 314 1.91% 3.15% 4.41% 3.66% 328 2.12% 3.85% 5.14% 5.04% 4.11% 209 3.30% 3.40% 597 -0.07% 5.36% 7.36% 5.55'}! 4.27% 555 1.79% 5.42% 7.15% 5.45% 340 2.26% 4.04% 5.17% 4.65% 3.78" Average Annual Increase I 2.43%! 4.16%1 5.52%1 4.61'l'j 4.00%1 Exhibit 2-9: Handy Whitman indices, various years About 40 percent of CSDOC's installed plant replacement value is pipelines with the balance consisting of various non-pipe facilities. This approximates the weighting implied in the table (equal weighting between pipelines and plant facilities, including pumping stations). Therefore, it was decided that establishing a weighting system to establish a single escalation rate for the District's systems was unnecessary and that an average of the escalation rates for the various items in the table could be used. The applicable escalation rates are shown in the row titled" Average Annual Increase" near the bottom of the table. We decided to use a SO-year period for the Replacement Fund to give a long-term perspective, which resulted in an escalation factor of 4.81 percent. As a point of reference, the ENR construction cost index shows an average annual increase of 5.41 % over the same period of time. The Replacement Planning Model, described in Section 3, allows assumptions regarding interest rates for earnings on Replacement Fund balances and borr~wings on behalf of the fund. The relationships between these interest rates and the escalation factor described above should be considered carefully. Any analysis must ensure that interest rates used are consistent with long-term escalation assumptions. OTHER KEY ASSUMPTIONS Aside from the above, several other assumptions or estimates had to be made to provide input for the replacement cost and fund balance calculations. CSDOC staff assisted us in all cases, either through review or by direct generations of estimates. The assumptions included: 2-16 County Sanitation Districts of Orange County 11-00272-10101-0101 l 1 j . l j J J -J I ..J i ' .J DATABASE DEVELOPMENT • Unspecified plant-Due to the extent and complexity of the plants, there are undoubtedly some fixed assets that were not considered in creating the inventory and whose costs were not rolled into the estimated replacement costs of major plant components. Although their value is not known, these assets will need to be replaced from time to time. We have estimated the annual outlays for replacing these assets as $3.5 million, including both plants and interplant facilities. This is based on the assumptions that ten percent (10%) of plant value is not represented in the formal inventory, and that these assets will require replacement every 35 years on the average. These assumptions have been reviewed by staff for reasonableness. • Accounts and account growth-Because the RPM has the capability of simulating special user surcharges for replacement funding, it was necessary to estimate the number of retail accounts served by CSDOC facilities and future growth in these accounts. Staff estimates that CSDOC currently serves about 850,000 accounts. The number of accounts is expected to grow at 1.86 percent annually, based on CSDOC's current flow growth projections. The RPM assumes that this account growth will cease no later than 2050, when CSDOC's service area is likely to be built out to maximum density. • Fund earning and borrowing rate-Staff estimates that the long-term internal earning rate of the Replacement Fund will be about six percent. The borrowing rate, if bonds are issued or other methods are used to advance money to the fund, should be about 4.5 percent. These estimates are based on recent experience and are, of course, subject to change. SUMMARY OF EXPECTED EXPENDITURES Based on the inventories, useful lives, cost estimates, and refurbishment programs and costs described above, CSDOC can make a reasonable estimate of future expenditures for replacement and refurbishment. The exhibit below shows these expenditures in 1997 dollars 11-00272-10101-0101 R. W. Beck 2-17 Section 2 $180,000,000 _,, $160,000,000 _,, $140,000,000 _v $120,000,000 _v $100,000,000 _ v $80,000,000 _v $60,000,000 -"' $40,000,000 _v $20,000,000 -"' $0 .If """' I 1~ ~ M 0 0 N I I Ill Refurbishments I I • Replacements I U"I ,.... 0 0 0 0 N N I "' 0 0 N ~ - 1 ~ M U"I 0 0 N N - , I I ,.... "' 0 0 N N I ,. ,, Ml f'. I ~ N 0 N I I M U"I N N O 0 N N ~ ,.... N 0 N ,-- "' N 0 N ,- " ~ M 0 N I " I I- ,- " M M 0 N I 1 ,, - , _ ,-_, -~ ~ l ~ ~ I I I U"I M 0 N Exhibit 2-10: Expected replacement and refurbishment costs, 1997 dollars For quite a few years, replacement costs are expected to be minor compared with costs of refurbishing plant already in place. Replacement expenditures can be expected to become increasingly important in about 2025, soon exceeding refurbishment costs in many years. 2-18 County Sanitation Districts of Orange County 11-00272-10101-0101 I \ ;' J ) ' l _J ' J _j j .J 1 ' ,J Section 3 REPLACEMENT PLANNING MODEL 7 I' } 1 ) ) -j __ , I .J \ _j ' \ ._J I j DRAFT Section 3 REPLACEMENT PLANNING MODEL GENERAL DESCRIPTION The Replacement Planning Model (RPM) is an automated model that manipulates the system inventory database to create various types of reports. The model has the capability of accepting a wide range of input parameters and displaying the effects that varying these parameters might have on future replacement funding requirements of CSDOC. Several reports and graphs are available that show either replacement funding requirements or plant value over future periods, all based on scenarios input by the user. The RPM requires Microsoft Excel version 5.0 or later. Automated routines are written in Visual Basic for Applications (VBA). The RPM is a single file. A database of the District's field inventory is built into the RPM (see previous sections for a description of the inventory and related assumptions). 11-00272-10101-0101 Section 3 STARTING THE RPM The RPM is started by loading the model into Excel. No additional actions are necessary because the RPM does not need access to other files. The first screen will appear, showing the name and version of the model and a Continue button: Continue Exhibit 4-1: RPM Introduction Screen Pressing the Continue button brings up the Control Panel. This is the screen where most user input is entered. 3-2 County Sanitation Districts of Orange County 11-00272-10101-0101 7 1 } l j 1 _l J REPLACEMENT PLANNING MODEL ENTERING PARAMETERS The Control Panel includes all RPM direct user inputs or, in two cases, provides access to secondary screens where more detailed parameters may be entered. It appears as follows: C S D O C -Replacement Fund Model Control Panel 1997 !Initial Annual Transfer $100.0001 50 4.81% Initial Fund Balance $100,000,000 Earninqs Rate (%) 6.00% Customer Accounts Borrowinq Rate 4.50% Initial Sewer Accounts 850,000 --Growth Rate 1.86% Initial Misc. Repl. Cost $3,500,000 --Build-Out Year 2050 % Replacements Funded 30% Annual Contribution $20 Include Refurbishments? TRUE --Start Year 2020 -=include Local Pipe? FALSE --Escalation 4.70% "=Run Simulation View Model Results Click "Run Simulation" to process the data. Click ''View Model Results" to go to view graphs and tables of the model results. Exhibit 4-2: RPM Control Panel Basic Parameters-Briefly, the types of information that the user can enter on the Control Panel are: • Initial Study Year-Defines the starting year of the analysis; for instance, the user might want to look at Replacement Reserve Fund performance beginning in the year 2010. • Length of Study (Years)-Defines the number of years in the analysis, starting with the Initial Study Year. The maximum study period is 104 years. Entering a shorter period of time in this field, however, will usually give a clearer presentation of near-term results when viewing the model's graphs. • Cost Escalation Rate (%)-The expected general rate of cost inflation expected over the period of analysis. The rate should be that applicable to the types of assets that predominate in the physical system (excluding land, which need not be replaced). • Initial Fund Balance-The cash balance of the Replacement Fund at the beginning of the Initial Study Year. • Earnings rate (%)-The assumed rate of interest accrued by positive balances in the fund over the period of analysis. 11-00272-10101-0101 R. W. Beck 3-3 Section 3 • Borrowing Rate-The assumed cost of borrowing money, if necessary, to replenish the fund. • Initial Misc. Repl. Cost-The initial annual amount assumed to be needed to replace minor plant items that have not been included in the system inventory. • % Replacements Funded-The policy position of CSDOC regarding the percentage of assets that, as they become due for replacement, will be funded from the Replacement Fund as opposed to other sources. • Include Refurbishments?-This is a two-state button that toggles between "True" and "False" each time it is clicked. If "True," disbursements from the Replacement Reserve Fund will include amounts for refurbishment of system assets (see previous sections of this report for discussion). The percentage of refurbishments funded will be the same as that specified for replacements. If "False," the Replacement Reserve Fund will not fund refurbishments. • Include Local Pipe?-Another two-state button. If true, disbursements from the Replacement Fund will reflect replacement needs of local pipe in the districts. If false, replacement of local pipe will not bet funded by the Replacement Fund. • Initial Annual Transfer-The RPM allows evaluation of the effects of ongoing external funding of the Replacement Fund from other sources, for instance, operations. The user may specify the initial annual amount here. Future transfers will grow at the rate specified under Cost Escalation, above. • Set Pipe Life by Type-This button brings up a secondary screen for adjusting expected pipe lives, discussed below. • Set Bonds-This button brings up a secondary screen for issuing bonds, discussed below. • Initial Sewer Accounts-The average number of sewer accounts expected during the Initial Study Year. • -Growth Rate-The annual percentage rate at which the number of sewer accounts serviced is expected to grow. • -Build-out Year-The year in which growth in the number of sewer accounts is expected to cease, for instance, when the service area is completely built out. • Annual Contribution-The dollar amount of each sewer customer's annual payment to CSDOC that will be dedicated to funding the replacement reserve fund starting in the Contribution Start Year (see below). The amount must be specified in then-year dollars. • -Start Year-The first year in which sewer customers will pay a charge dedicated to funding the Replacement Fund. - 3-4 County Sanitation Districts of Orange County 11-00272-10101-0101 7 I l l } l 1 J . I _j _J l J REPLACEMENT PLANNING MODEL • -Escalation-The rate at which the each sewer customer's contribution to the Replacement Fund is expected to grow, starting in the Start Year. Note that several of the input field names are preceded by asterisks on the Control Panel. If the values in any of these fields are changed, the model will not yield correct results until the "Run Simulation" button at the bottom of the screen is clicked. For all other changes, model recalculation is automatic. Other Control Panel Parameters-Pressing the "Page Down" key twice while viewing the Control Panel reveals further controls. These controls are not normally visible and should be changed only when required: Run Alter Current System Status: j"'Year of Price Data Asset Re lacement Factors Factor A Factor B These two buttons change the model from RUN to ALTER modes. Normal operation is in RUN mode. Run 1997 I 0. 75 to-adjust useful life for early failures 0.20 to estimate remainin life for ver old assets Exhibit 4-3: Special Control Panel Parameters • Run-Puts the model in Run mode, which is the mode in which it normally starts up. This is the normal mode in which the RPM is used. It does not allow any work "behind the scenes," as might be required when changing inventory data. • Alter-Clicking the Alter button will halt program execution and turn on the row and column headings, tabs, and gridlines. This facilitates modifications to the model and its database. Clicking the Run button restores the original state. • Current System Status-This is an informational field that tells the user whether the model is currently in Run or Alter mode. • Year of Price Data-All inventory replacement and refurbishment costs in the model are priced in 1997 dollars. If CSDOC later updates these prices, the year in this field should be changed from 1997 to the year applicable to the updated price information. Note that this applies only to the year in whose dollars price information is expressed; the model will yield appropriate results 11-00272-10101-0101 R. W. Beck 3-5 Section 3 regardless of the Initial Study Year, so long as it knows to which year the prices belong. • Asset Replacement Factors A and B-These two factors control how the RPM handles the first replacement years of assets already in place. Since asset mortality curves typically show some early failures, it can be assumed that the expected useful lives of assets are extended as they continue to survive. Factor A reflects this by providing a number that is divided into the years in service to yield a new number that is added to the initial expected useful life for replacement purposes. We will set Factor a at 0.8 as an example. Say that a piece of pipe initially has a SO-year expected life. It was installed 30 years ago. Dividing 30 by 0.8 yields 37.5. The difference, 7.5 years, is added to the original life expectancy to yield 57.5 years. So, rather than having a remaining expected useful life of 20 years (50 years minus 30 years), the pipe now has a remaining expected useful life of 27.5 years (57.5 years minus 30 years). Factor B is used to determine the remaining life of assets that have been in place longer than their expected lives, even as adjusted by Factor A. We will set Factor B at 0.2 as an example. Say that a piece of pipe with an expected useful life of 50 years was installed 75 years ago. It has obviously passed its life expectancy. In this case, the original expected useful life (50 years) is multiplied by factor B (0.2) to yield 10 years. The remaining expected useful life of this piece of pipe is then assumed to be 10 years. 3-6 County Sanitation Districts of Orange County 11-00272-10101-0101 l I l l l J -J J J J J J . J REPLACEMENT PLANNING MODEL Secondary Screens-As noted above, two of the buttons on the main Control Panel bring up secondary screens. They are: • Set Pipe Life by Type-The model includes replacement periods for the various types of pipe that CSDOC is assumed to use for replacement. If the user wants to see how changing these pipe life assumptions will affect future replacement needs or Replacement Fund performance, he or she can click this button to bring up this secondary parameter screen: Pipe Life by Material Type El PIPE TYPE PIPE LIFE DIP ~ J .!J 75 RCP ~ J .!J 70 RCP-S ~ J .!J 70 VCP ~ ,J ~ 75 VCP-S ~ j .!J 75 lf" .. Done ..... , Cancel Defaults 'I 1 11 Exhibit 4-4: Pipe Life Sub-screen Moving the sliders will change the assumed replacement periods for each type of pipe. Clicking the Defaults button will restore the estimates recommended in this report. Clicking Cancel will return the user to the main Control Panel without making any changes. Clicking Done will modify the expected lives used by the model (current session only). 11-00272-10101-0101 R. W. Beck 3-7 Section 3 • Set Bonds-CSDOC may wish to issue bonds from time to time in order to help fund the Replacement Fund. Clicking the button marked Bonds that follows the "Set Bonds ... " label allows the model to include bond issues, bringing up the following screen: Control I 20 Year Bonds Amount Year ($000) 1997 1998 1999 2000 2001 $ 5,000 2002 2003 2004 2005 2006 2007 2008 Exhibit 4-5: Bullet Notes Sub-screen The entry table continues vertically for the entire 104-year period of the model; it can be easily scrolled vertically from the keyboard. The user may enter the bond issue amount (in thousands of dollars) in any or all rows. Wherever an amount is entered, the model will generate a cash infusion to the Replacement Fund during that year equal to the issue amount, followed by 20 years of levelized cash outflows representing the amortization of principal plus interest. The interest rate is as specified in the Control Panel. The model does not attempt to simulate semi-annual coupon payments, nor does it take issuance costs into account. After entering the required information for any bond or note sales, the user may return to the Control Panel by clicking the Control button. RUNNING THE MODEL At the bottom of the Control Panel are two large buttons that actually operate the RPM, Run Simulation and View Model Results. The Run Simulation button forces a total recalculation of the model. It must be clicked to update the model whenever a value has changed in an input field whose name is preceded by an asterisk: • Whenever the Initial Study Year value is changed 3-8 County Sanitation Districts of Orange County 11-00272-10101-0101 (· 1 : 7 l I l l j J l J I J REPLACEMENT PLANNING MODEL • Whenever the Length of Study value is changed • Whenever the Cost Escalation Rate has been changed • Whenever the status of Include Local Pipe has been changed • Whenever the user has altered pipe lives using the Pipe Life by Material sub- screen • Whenever the user has entered or modified price data and set the Year of Price Data field to a different year • Whenever any inventory data on succeeding pages of the model have been manually altered. If the calculations are not updated in these cases by clicking the Run Simulation button, the model may yield inaccurate results. The View Model Results Menu button brings up another sub-screen that allows the user to view major RPM outputs in graphical form. Choices are clearly indicated on the menu: View Model Results f3 Fund Balance Fund Expenditures by by Year Pipe vs. Other Fund Expenditures Fund Expenditures by Year by District Cash Flow from System Value Financing Activities by District Fund Expenditures by User-defined Categories Exhibit 4-6: View Model Results Sub-screen The user has the following choices: • Clicking the Control button returns to the Control Panel and closes the View Model Results sub-screen. • Clicking the Close button closes the View Model Results sub-screen without returning the user to the Control Panel. • Clicking any button numbered 1 through 7 or its associated label brings up the associated chart and closes the View Model Results sub-screen. 11-00272-10101-0101 R. W. Beck 3-9 Section 3 As an example, clicking the first choice, Fund Balance by Year, brings that chart into view. The picture below shows only the left-most portion of the chart: Menu I Fund Balance by Year ($000) $1,200,000 ~------------------- $1,000,000 -------------------- $800,000 --------------------- $600,000 +-------------------,J,:;._"""""c:,_ $400,000 +-------------==--.,c;.... ___ _ $200 ,DOD t=::::::::;:;:::;:::;::::;;:::~-~=---------- $0 +-1-+--+-+-+-+-+-t-+--+-i-+--+-t-t--+-+-+-+-+-t-+--+-,1--t--+-+-+-+- -$200 ,ODO ---------=-=.--..,...,...,_,;...,---.......--.,......... ......... -+-.-.-.--+-+- -$400 ,000 +-------------------- -$600,000 -+-------------------- -$800,000 -'-------~------------- Exhibit 4-7: Fund Balance Chart (typical, partial image) This chart, like almost all others, includes two buttons in its upper-left corner: • The Menu button brings back the View Model Results sub-screen for further navigation. • The Table button displays the tabular data underlying the chart for further inspection. 3-10 County Sanitation Districts of Orange County 11-00272-10101-0101 7 7 7 7 l j 1 j j _j J J J REPLACEMENT PLANNING MODEL In the example above, clicking the Table button shows the data for the chart. Again, only the left-most part of the schedule is shown: ~ Fund Balance by Year Year 1997 1998 1999 Begin Balance $ 100,000,000 $ 101 ,500 ,000 $ 1 09 , 117 , 150 Additions Contributions $ $ $ Gen Fund.Tran sfer $ 5,000,000 $ 5,240,500 $ 5,492,568 Bonds $ $ $ Earnin s $ $ 6,045,000 $ 6,318,515 Total $ 5,000,000 $ 11,285,500 $ 11,811,083 Disbursements Replacements $ $ $ Refurbishments $ $ $ Miscellaneous $ 3,500,000 $ 3,668,350 $ 3,844,798 Total $ 3,500,000 $ 3,668,350 $ 3,844,798 Ending Balance $ 101 ,500 ,ODO $ 1 09 , 117 I 150 $ 117 ,083 ,435 Exhibit 4-8: RPM Fund Balance Table (typical, partial table) All tables have only one control button, marked Menu. This button brings back the View Model Results sub-screen for further navigation. UNDERSTANDING THE CHARTS This part of the report explains the charts and associated tables in the order in which they appear on the View Model Results sub-screen. Fund Balance by Year-The chart shows the expected Replacement Reserve Fund balance over the projection period, including all cash inflows and outflows. Logic is as follows: • Beginning balance is as of the Initial Study Year as specified in the Control Panel. • Inflows include: • Transfers from operations, based on the Initial Annual Transfer amount from the Control Panel, escalated by the Cost Escalation Rate. • Interest accrued in each year based on the previous year's balance and the Earnings Rate from the Control Panel. • Customer contributions based on the Annual Contribution and the Initial Sewer Accounts numbers from the Control Panel, escalating by both the number of accounts (internally calculated) and by the Annual Contribution Escalation entries on the Control Panel. 11-00272-10101-0101 R. W. Beck 3-11 Section 3 • Proceeds from the bond sales assumed in the 20-Year Bonds sub-screen, accessed from the Control Panel. • Outflows include: • Replacements or refurbishments due in any year based on costs included in the system inventory pages (see below), the Cost Escalation Rate, the % Replacements Funded, the inclusion or exclusion of refurbishment funding, and the inclusion or exclusion of local pipe, all from the Control Panel. • Miscellaneous replacement costs, defined as the amount entered in the Initial Misc. Repl. Cost field in the Control Panel, escalated by the Cost Escalation Rate(%). • Level amortized payments on the bond sales assumed in the 20-Year Bonds sub-screen, accessed from the Control Panel. • Interest paid by the fund on implied borrowings when the fund balance is negative, based on the beginning fund balance for the year and the Borrowing Rate from the Control Panel. Calculation of the fund balance proceeds year-by-year. Each year's ending balance becomes the next year's beginning balance. Fund Expenditures by Year-This chart shows only the programmatic expenditures from the fund. Replacement, refurbishment, and miscellaneous categories are presented separately. Cash Flow from Financing Activities-This chart shows cash flows resulting from the bonds or notes issued from time to time by CSDOC to support the Replacement Reserve Fund. Those bonds or notes are entered on the 20-Year Bonds sub-screen, accessed from the Control Panel. Fund Expenditures by Pipe vs. Other-This chart shows expected replacement costs by plant type. Plant types are defined as pipe and non-pipe facilities. This chart gives a good idea of the relative importance of pipe versus other facilities in replacement funding. Refurbishment costs are included if so specified in the Control Panel. Fund Expenditures by District-This option brings up a sub-menu that allows the user to select individual views of replacement needs by District, or for Plant 1 or Plant 2, or interplant. Each individual view includes both pipe and facilities. Refurbishment costs are included if so specified in the Control Panel. System Value by District-This chart shows the replacement cost of the system at any point in time by District. Since future plant is defined only until 2020, any increase in system replacement value beyond that point is due solely to inflation as defined by the Cost Escalation Rate on the Control Panel. Fund Expenditures by User-defined Categories-This chart shows total replacement and refurbishment expenditures by year for multiple user-defined categories. The user defines the categories by entering labels directly into fields in 3-12 County Sanitation Districts of Orange County 11-00272-10101-0101 7 l 7 7 7 } J ) j _J J \ _ _j _J I J J J REPLACEMENT PLANNING MODEL the columns titled RU Category of facility-related inventory data pages. Pipe cannot be included in a user-defined category. For instance, a user might want to aggregate the replacement costs of all collection system pumping stations. He or she would enter the label "Pump Stations" (without the quotes) into the cell in the RU Category column of each district facility inventory tab opposite a pumping station entry. These tabs are: • Faci1Dist2 • Faci1Dist3 • FacilDistS • Faci1Dist6 • Faci1Dist7 • FacilDistll • FacilDistl 4 Other user-defined categories would likely be selected from the tabs relating to plants 1 and 2. These tabs are: • FacilPiantl • FacilPlant2 • Facillnterplant The model consolidates all replacement costs by category and reports them graphically on the chart. Refurbishment costs are included if so specified on the Control Panel. Note that: • Fields for the user-defined descriptions on the pages listed above may be left blank, in which case the replacement and refurbishment costs associated with these lines will not be reported. This may be desirable in some cases, but it should be carefully noted that the reported replacement costs will not include all facilities. • Labels used to define categories must be identical if they are to be grouped properly. It is best to copy and paste labels rather than re-typing for this reason. • If there are more than fifty unique labels, some will not be charted. UPDATING THE MODEL Modifying the model's functionality is beyond the scope of this report, but the model's logic is clear and the linkages are well-defined. In addition, the code is internally documented. 11-00272-10101-0101 R. W. Beck 3-13 Section 3 It may be necessary for CSDOC to update the inventory data from time to time to re-examine replacement funding needs. To do this, the following entries may need to be updated: • Any or all entries on the Control Panel • The Year of Price Data and the two Asset Replacement Factors on the same tab as the Control Panel but down one page • The per-foot pipe replacement costs on the PipeCosts tab • The default expected useful lives of pipe on the PipeLife tab Any changes should be made with care and with a view to consistency. For instance, if pipe costs are updated to (say) 1999 dollars, the Year of Price Data entry should be changed to 1999 and all facility costs on the relevant tabs should be updated as well. The user may want to completely update the model to account for actual changes in plant. This might be necessary when for instance, a two-year review cycle comes around. To do this, the inventory pages must be updated in detail. A suggested approach follows, assuming an update in 1999: • General: • Update all price data to 1999 dollars, using the ENR construction cost index or the Handy Whitman composite index. • Make appropriate changes on the PipeCosts tab. • Change the Year of Price Data entry and the Initial Study Year in the Control Panel to 1999. • Facilities inventory tabs: • Remove entries for facilities taken out of service. • Add entries for facilities added since the last update; be sure to include refurbishment data if relevant. • Update costs to 1999 dollars in the Cost column and each Refurbishment Cost column on each line of all facility inventory tabs. • Change the Year in Service entries for any planned facilities whose estimated year in service has changed. • Review all entries for correctness based on current best knowledge. • For all new entries, make sure that the formula in the First Replacement Year column (column R) is copied onto the row. • To ensure that all records are processed, note that the program proceeds row-by-row. It first looks in the Year in Service column for a number and, if it finds it, assumes the row represents an asset and proceeds accordingly. Otherwise, it looks in the RU Description column for a label 3-14 County Sanitation Districts of Orange County 11-00272-10101-0101 7 } I l -1 . l 1 _J l _J J t .J J REPLACEMENT PLANNING MODEL and, if it finds it, assumes that the row is a segment heading and proceeds to the next row. If it does not find a label in the RU Description column, it assumes that the row is blank and that the list is done. This is important because the program interprets any blank row in a facilities tab as signifying the end of the list. Records below the blank row will not be processed. • Pipe inventory tabs • Remove entries for pipe taken out of service. • Add entries for pipe added since the last update. • Change the Year in Service entries for any planned pipe whose estimated year in service has changed. • Review all entries for correctness based on current best knowledge. • For all new entries, enter the appropriate Type Index in column D: + 1 = Ductile iron (force mains) + 2 = Reinforced concrete, including T-lock + 3 = Reinforced concrete siphons • 4 = Vitrified clay + 5 = Vitrified clay siphons. • For all new entries, in the District column (column E) enter "Yes" if the pipe is CSDOC primary collection system pipe, and "No" if the pipe is associated with a local District collection system. • For all new entries, make sure that the formulas in columns F through K (the yellow portion of the tab) are copied onto the rows. • As in the facilities tabs, a blank row indicates the end of the list and terminated processing of that tab. Be sure not to leave any blank rows on any pipe inventory tab. • Other update notes: • On facility inventory tabs, refurbishment intervals must in all cases be integer divisors of the associated asset's useful life. This ensures refurbishments will not be scheduled to coincide with replacements. • When changing or updating price data, all prices in the model must be adjusted to the same base year. That base year must then be entered in the Year of Price Data field below the Control Panel. Failure to accurately and consistently deal with pricing will impair the usefulness of model results. • Pipes may be assigned an Escalation Adjustment by material on the PipeMaterial tab. This is a factor that is additive to the Cost Escalation Rate entered in the Control Panel. For instance, if the Cost Escalation Rate is specified at 4.81 % , then the user may enter 0.1 % in the Escalation 11-00272-10101-0101 R. W. Beck 3-15 Section 3 Adjustment field after VCP to cause replacement costs of vitrified clay pipe to escalate at 4.91 % . A negative entry will reduce the escalation rate from that specified in the Control Panel. • Similarly, every asset listed in the facility inventory tabs may be assigned both a Replacement Escalation Adjustment and a Refurbishment Escalation Adjustment. These are specified in columns O and P, respectively, and work the same way as the Escalation Adjustment described above for pipes. We have not specified any escalation adjustments for the analysis in this report. -3-16 County Sanitation Districts of Orange County 11-00272-10101-0101 7 7 7 l i i .i I ,.J . l I ' c...J l J J J Section 4 EVALUATION OF POLICY ALTERNATIVES 7 l 7 7 } J ] ( l -' -1 } J l l 0 J 1 J J DRAFT SECTION 4 EVALUATION OF POLICY ALTERNATIVES The RPM was used to perform a brief sensitivity analysis, both to suggest potential replacement policy and to demonstrate how the model might be used. A "base case" was defined, and then one or more assumptions was varied to see how the future Replacement Fund balances changed and what types of extra financing (if any) might be required. SCENARIO 1-BASE CASE To begin the sensitivity analysis, the "base case" was defined by CSDOC staff: • Initial study year, 1997 • Cost escalation rate, 0.00 percent (this means that all results are expressed in 1997 dollars) • Initial Replacement Fund balance, $100 million • Fund earnings rate, two percent (increment above the inflation rate) • Fund borrowing rate, 0.00 percent • Initial miscellaneous replacement costs, none • Percentage of replacement costs funded, 100 percent • Refurbishment funding included, no • Local pipe replacement funding included, no • Annual transfer to Replacement Fund from operations, $2.5 million • Pipe lives, as specified in Section 2 of this report • Bond issues, none • Initial sewer accounts, 850,000 • Account growth rate, 1.69 percent through 2050, 0.00 percent thereafter • Annual contributions per account to the Replacement Fund from customers, $20, starting in 2020 A summary of the financial results of the base case is given on the next page. Under these circumstances, the Replacement Fund appears adequate to serve the District's needs for 50 years. No bond issues are needed during this period to fund replacement needs. 11-00272-10101-0101 Section 4 County Sanitation Districts of Orange County Replacement Planning Model Assumptions: Initial fund balance (000s): Annual transfer (000s): Annual misc. repl. cost (000s): Fund earnings rate: Fund borrowing rate: Replacement funding: Base Case $100,000 $2,500 Refurbishments included: $0 2.00% 0.00% 100% Local pipe included : Sewer surcharge starts: Annual charge per cust: Equiv. in 1997 dollars: Fund expenditures and balances ($000s): 1997-2001 2002-2006 2007-2011 2012-2016 2017-2021 Average Exoend. - 1,360 - 1,460 1,414 Fund balances by year: Ending Average Balance Ex end. 121,086 2022-2026 12,814 139,572 2027-2031 2,852 166,830 2032-2036 54,399 189,532 2037-2041 96,728 265,808 2042-2046 116,852 No No 2020 $20 $20 Ending Balance 390,264 607,700 618,455 454,682 219,497 $700,000,000 ....----------------------------, $600,000,000 $500,000,000 $400,000,000 -• -------• • -• -------• ---------------• ------• -• -------• $300,000,000 --• • -• • -------• • • -• -----• • -• ---• -• --------• -• ----• -• -- $100,000,000 --------• • • • ------• -• • ----• • • • -.. ----• • ---• ---• -----• -• $0 .... 0 (') <O a, N It) a, ;;; ... .... 0 (') CD a, N IO a, 0 0 0 0 0 N N "' (') (') "' ... ... ~ 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 N N N N N N N N N N N N N N N N Notes: Under these assumptions, the Replacement Fund increases from its initial $100 million to between $600 and $700 million in 2034, at which point it begins to decline. No bond issues are required to maintain the fund's positive balance within the limits of the period of analysis. Exhibit 5-1: Summary of Sensitivity Analysis, Base Case 4-2 County Sanitation Districts of Orange County 11-00272-10101-0101 7 7 7 l 7 7 l I J ] 1 J J J J I ..... EVALUATION OF POLICY ALTERNATIVES SCENARIO 2-INCLUSION OF REFURBISHMENT FUNDING As a policy alternative, the District might choose to include financing of asset refurbishments within the scope of the Replacement Fund. Analysis of this scenario using the RPM indicates that inclusion of refurbishments will cause the Replacement Fund to be drawn down faster in the near term, requiring that the "base case" annual account surcharge of $20 in 2020 be moved forward to 2003 and increased to $30. A summary of this scenario is shown on the next page. 11-00272-10101-0101 R. W. Beck 4-3 Section 4 County Sanitation Districts of Orange County Replacement Planning Model Refurbishment Costs Included Assumptions: Initial fund balance (000s): Annual transfer (000s): Annual misc. repl. cost (000s): Fund earnings rate: Fund borrowing rate: Replacement funding: $100,000 $2,500 $0 2 .00% 0.00% 100% Fund expenditures and balances ($000s): 1997-2001 2002-2006 2007-2011 2012-2016 2017-2021 Average Exoend. 11,003 32,631 27,518 35 ,661 44,406 Fund balances by year: Ending Balance 64,598 37,716 92,162 147,940 203,242 Refurbishments included: Local pipe included: Sewer surcharge starts: Annual charge per cust: Equiv. in 1997 dollars: Average Ex end . 2022-2026 32,142 2027-2031 39,107 2032-2036 84,747 2037-2041 144,260 2042-2046 161 ,701 Yes No 2003 $30 $30 Ending Balance 386,033 611 ,590 701,524 586,052 470,175 $800,000,000 ,------------------------------, $700,000,000 $600,000,000 --------• -• • -----• -----------• • -• ------ $500,000,000 • -• --------• • ---• ----------• -----• • • • ---• • • ------• • • - $400,000,000 • -------• -• • • ------• • --• ---• • • • • • ---• • -• -• • -----• --• -- $300,000,000 • • • ------• ---• • -------• -• -----------• ---•• -------•• --- $200,000,000 ----• • • -• • -----• ---• ------• • • -------• -------• --• ------- $0 +-++-+-+-1-+-+-++-+-+-t-+-t-t-+-++-+-+-t-+-1-+-+-+-+-+-t-lt-r-;-t--++-+-t-t-rl-;-t--++-t-1-.-H Notes: l'-Ol Ol 0 0 0 N M CD Ol 0 0 0 0 0 0 N N N N Lil CD 0 0 0 N N N N 0 N ..,. N 0 N l'-N 0 N 0 M 0 N "' "' M M 0 0 N N Ol M 0 N N ..,. 0 N Lil ..,. 0 N If refurbishment costs are added to the "base case," early-year fund expenditures are much higher. An annual user surcharge of $30 per account imposed in 2003 serves to keep the fund balance positive, with no bond issues required. This compares with a $20 surcharge imposed in the year 2020 in the "base case." Exhibit 5-2: Summary of Sensitivity Analysis, Base Case With Refurbishments 4-4 County Sanitation Districts of Orange County 11-00272-10101-0101 7 7 7 7 I J l J j J l J J J J J J EVALUATION OF POLICY ALTERNATIVES SCENARIO 3-INCLUSION OF "MISCELLANEOUS" REPLACEMENT FUNDING The two scenarios above assume that all replacement funding needs have been identified. It is likely, however, that some components of Plants 1 and 2, not identified in the system inventory, will need replacement. We have estimated the annual replacement needs of these components at $3.5 million annually, as described further in Section 2 of this report. If these "miscellaneous" replacement costs are considered (and refurbishment costs excluded), the fund balance is essentially stable for the next twenty years, after which it first rises, and then declines rather rapidly starting in 2034. This pattern is shown in the exhibit on the next page. 11-00272-10101-0101 R. W. Beck 4-5 Section 4 County Sanitation Districts of Orange County Replacement Planning Model "Miscellaneous" Replacement Costs Included Assumptions: Initial fund balance (000s): Annual transfer (000s): Annual misc. repl. cost (000s): Fund earnings rate: Fund borrowing rate: Replacement funding: $100,000 $2,500 $3,500 2 .00% 0.00% 100% Fund expenditures and balances ($000s): 1997-2001 2002-2006 2007-2011 2012-2016 201 7-2021 Average Exoend . 3,500 4,860 3,500 4,960 4 914 Fund balances by year: Ending Balance 103,019 101,614 106,931 105,431 155,012 Refurbishments included: Local pipe included: Sewer surcharge starts: Annual charge per cust: Equiv. in 1997 dollars: Average Ex end. 2022-2026 16,314 2027-2031 6,352 2032-2036 57,899 2037-2041 100,228 2042-2046 120,352 No No 2020 $20 $20 Ending Balance 250,022 434,978 409,908 206,618 67,284 $500,000,000 ~--------------------------~ $450,000,000 $400,000,000 $350,000,000 $300,000,000 $250,000,000 $200,000,000 $150,000,000 ---• • ---• -· · • • • • -• -· ---• • ---· · -• • • -· --• • • • • --· • • • -• • -- $100,000,000 ---· · -• ---· ----• ------• ----------• ----• - $50,000,000 • -• -• • • ---· -• • • • -------• • • -----------• ---------• ------• $0 +.-+-+-+-lf-+-+-+-+-+-+-+-+-11-+-+-+-++-+-1--+-,1-+-+-++-+-+-i-+-1-+-+-+-+-+-+-1-+-i-+-+-+--+-+-+-II-H Notes: .... "' CJ) 0 0 0 N M 0 0 N "' "' 0 0 0 0 N N N IO 0 0 N N CD 0 N N 0 N ..,. .... 0 (") (D ,0) N N M M M M 0 0 0 0 0 0 N N N N N N N ..,. 0 N "' ..,. 0 N If the likely need for replacing assets not specifically identified in the system inventory is considered as an addition to the "base case," Replacement Fund balances are essentially stable until about 2020, when then begin to increase. After peaking at close to $500 million in 2034, the balance declines rapidly and goes negative during 2044. A bond issue of $150 million (assumed in the above graph) keeps the balance positive through the end of the period of analysis. Exhibit 5-3: Summary of Sensitivity Analysis, Base Case with Miscellaneous Replacement Funding 4-6 County Sanitation Districts of Orange County 11-00272-10101-0101 7 7 7 7 l ~1 l J J l J J l _J .J J J I J EVALUATION OF POLICY ALTERNATIVES SCENARIO 4-INCLUSION OF "MISCELLANEOUS" COSTS PLUS REFURBISHMENT This scenario considers fund performance if the conditions shown in the preceding two scenarios are both included-that is, if miscellaneous replacement costs and refurbishments are both included within the scope of the Replacement Fund. In this case, the fund balance needs bolstering from an account surcharge quite early, in about 2003, but the surcharge could be reduced within a few years since the fund balance grows rapidly after about 2010. The RPM could easily be used to explore alternatives for these "difficult" years, for instance: • Setting the annual transfer from operations to a figure higher than $2.5 million • Delaying and reducing the surcharge, and depending instead on some small bond issues between 2003 and 2010 to maintain the fund balance. A summary of this scenario is shown on the next page. 11-00272-10101-0101 R. W. Beck 4-7 Section 4 County Sanitation Districts of Orange County Replacement Planning Model "Miscellaneous" Replacement and Refurbishment Costs Included Assumptions: Initial fund balance (OOOs): Annual transfer (OOOs): Annual misc. repl. cost (OOOs): Fund earnings rate: Fund borrowing rate: Replacement funding: $100,000 $2,500 $3,500 2.00% 0.00% 100% Fund expenditures and balances ($000s): 1997-2001 2002-2006 2007-2011 2012-2016 2017-2021 Average Expend. 14,503 36,131 31,018 39,161 47 906 Fund balances by year: Ending Balance 46,532 40,376 137,377 252,194 387,140 Refurbishments included: Local pipe included : Sewer surcharge starts: Annual charge per cust: Equiv. in 1997 dollars: Average Ex end. 2022-2026 35,642 2027-2031 42,607 2032-2036 88,247 2037-2041 147,760 2042-2046 165,201 Yes No 2003 $40 $40 Ending Balance 675,218 1,037,845 1,304,105 1,413,303 1,581,472 $1,600,000,000 ...-----------------------------, $1,400,000,000 $1,200,000,000 $1,000,000,000 ---..... "' ... -------.. -----.. --------• -----... • .. ---------• -------• $800,000,000 ----------------------------------------------------- $600,000,000 ------------------• ---------------------------------- $400,000,000 · · ----------• -• • • • -----• • • -• ----• ---------------------- $200,000,000 ---• ---• • • • --------• • ----• --• -----• • -------• -------- Notes: ,-. Ol Ol 0 0 0 N (") "' 0 0 0 0 N N "" 0 0 N N 0 N LI') 0 N "' 0 N N 0 N ... N 0 N ,-. 0 N M 0 0 N N (") (") 0 N "' (") 0 N Ol (") 0 N N ..,. 0 N "' ..,. 0 N This scenario includes both "miscellaneous" replacement costs and refurbishments. The fund would go negative at about 2004 if account surcharges were not imposed; this run assumes that a $40 surcharge is imposed in 2003. The fund remains positive thereafter and increases to a very high balance. Beyond about 2012, it appears that either the surcharge or the operations transfer could be reduced. Exhibit 5-4: Summary of Sensitivity Analysis, Base Case with "Miscellaneous" Replacements and Refurbishments 4-8 County Sanitation Districts of Orange County 11-00272-10101-0101 7 7 7 l l J 1 _ _J _j J J J J J EVALUATION OF POLICY ALTERNATIVES SCENARIO 5-"MISCELLANEOUS" REPLACEMENT COSTS, REFURBISHMENT FUNDING, AND INCREASED OPERATIONAL FUNDING This scenario adds three elements to the "base case": • Miscellaneous replacement costs are included at $3.5 million annually • Refurbishment costs are included within the scope of the Replacement Fund • Annual transfers from operations are increased from $2.5 million to $25 million. As the exhibit on the following page shows, the fund balance remains positive through about 2017. There are then four or five "difficult" years, when bond issues may be required. The fund is healthy again until about 2037, when it goes strongly negative. Bond issues, a substantially increased surcharge, or both may be required at this time. 11-00272-10101-0101 R. W. Beck 4-9 Section 4 County Sanitation Districts of Orange County Replacement Planning Model "Miscellaneous" Replacement and Refurbishment Costs Included, Plus Increased Operations Funding Assumptions: Initial fund balance (OOOs}: $100,000 Annual transfer (OOOs}: $25,000 Annual misc. repl. cost (OOOs}: $3,500 Fund earnings rate: 2.00% Fund borrowing rate: 0.00% Replacement funding: 100% Fund expenditures and balances ($000s}: 1997-2001 2002-2006 2007-2011 2012-2016 2017-2021 Average Expend. 14,503 36,131 31,018 39,161 47,906 Ending Balance 162,675 121,920 101,985 39,426 (23,094) Fund balances by year: $100,000,000 0 M CD a, N LO 0 0 0 0 -...--$100,000,000 -_ o __ ..o. __ o __ o ___ o. __ o __ ..c.. • N N N N N N ~ -$200,000,000 -$300,000,000 -$400,000,000 -$500,000,000 -$600,000,000 -$700,000,000 -$800,000,000 Refurbishments included: Local pipe included : Sewer surcharge starts : Annual charge per cust: Equiv. in 1997 dollars: Average Ex end. 2022-2026 35,642 2027-2031 42,607 2032-2036 88,247 2037-2041 147,760 2042-2046 165,201 Yes No 2020 $20 $20 Ending Balance 71,270 165,336 70,728 (290,105) (690,168) -$900,000,000 ..,___ ________________________ ___, Notes: This scenario includes both "miscellaneous" replacement costs and refurbishments. However, the operational transfer of funds is increased to $25 million annually. The fund goes negative between 2018 and 2022 if no bonds are issued to prevent this. It is positive again until about 2038, when it goes strongly negative. The RPM could be used to explore higher user surcharges or further bond issues at this point. Exhibit 5-5: Summary of Sensitivity Analysis, Base Case with "Miscellaneous" Replacements and Refurbishments plus Increased Operations Funding 4-10 County Sanitation Districts of Orange County 11-00272-10101-0101 7 l l l 1 J j J J J .J J J J EVALUATION OF POLICY ALTERNATIVES SCENARIO 6-SCENARIO 5 WITH INFLATION All previous scenarios have been evaluated without inflation. Inclusion of inflation, while realistic, may make results difficult to assess. For instance, in this case the fund balance has a peak of $990 million in 2041. At the assumed cost escalation rate of 4.81 percent, this is equivalent to about $143 million in 1997 dollars-only about 43 percent higher, in real terms, than the initial fund balance of $100 million. · Aside from the inclusion of inflation, most factors in this scenario are the same as in Scenario 5: Inclusion of "miscellaneous" replacement costs, inclusion of refurbishment costs, and increased operations funding. Additionally, the annual account surcharge has been removed to limit the growth of fund balances, and the annual operations funding has been reduced from $25 million to $18 million. Under this scenario, the fund balance is quite stable, remaining under $200 million even in inflated dollars until 2021. It then begins to increase and approaches $1 billion by 2040. A summary of the scenario is shown on the next page. 11-00272-10101-0101 R. W. Beck 4-11 Section 4 County Sanitation Districts of Orange County Replacement Planning Model "Miscellaneous" Replacement and Refurbishment Costs Included Assumptions: Initial fund balance (000s): Annual transfer (000s): Annual misc. repl. cost (000s): Fund earnings rate: Fund borrowing rate: Replacement funding: $100,000 $18,000 $3,500 6.00% 4.00o/o 100% Fund expenditures and balances ($000s): 1997-2001 2002-2006 2007-2011 2012-2016 2017-2021 Average Exoend. 14,856 37,504 33,682 43,457 54,266 Fund balances by year: Ending Balance 153,504 134,865 163,001 196,983 226,139 Refurbishments included : Local pipe included: Sewer surcharge starts: Annual charge per cust: Equiv. in 1997 dollars: Average Ex end. 2022-2026 44,613 2027-2031 54,880 2032-2036 104,696 2037-2041 169,491 2042-2046 193,613 Yes No 2020 $0 $0 Ending Balance 410,258 681,841 889,771 963,961 1,095 715 $1,200,000,000 ,----------------------------, $1 ,000,000,000 -• ----------• --• --------------------• --------• - $800,000,000 $600,000,000 --------• • --• • ----• -• -• • ------------------• ---• • -• • -- $400,000,000 -----• ---• • -• ---------• • ------• -· ------•• -• ---------- $0 .... 0 "' "' "' N "' <D ;;; ... .... 0 "' "' . "' N "' 0) 0 0 0 0 0 N N "' "' "' "' ... ..,. ~ 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 N N N N N N N N N N N N N N N N Notes: This scenario is similar to Scenario 5 but includes the effects of inflation. Note also that the account surcharge has been removed and operations funding reduced to $18 million. The fund is stable for over 20 years but then begins to increase sharply. Much of the increase is illusory, however; the $990 million balance reached in 2041 is still equivalent to only $143 million in 1997 dollars. Exhibit 5-6: Summary of Sensitivity Analysis, Scenario 5 with Inflation 4-12 County Sanitation Districts of Orange County 11-00272-10101-0101 AGENl ITEM TRANSMITTAL q_ CONTACT FOR INFORMATION (Originator) 220, Michael D. White, 7570 Division No., Name, and Extension 1. Receive, file and approve the Districts' Comprehensive Annual Financial Report (CAFR) for the year ended June 30, 1997, prepared by staff and audited by Moreland and Associates, Certified Public Accountants CEQA REVIEW: Project is Exempt NOT APPLICABLE Date Notice of Exemption Filed: Negative Declaration Approved on Final EIR Approved on _ and Notice of Determination filed on _ CURRENTBUDGETICOST CURRENT YEAR INFORMATION BUDGET AMOUNT TOTAL BUDGETED AMT.:$ SOURCE: CORF JO DISTRICTS N/A Schedule/Line Items: AMOUNT OF TkA.f'!•~~f::P; Schedule/Line Item: TOTAL PROJECT BUDGET ORIGINAL BUDGET INFORMATION TOTAL First Year in Budget: Master Plan Estimate: Year of First Costs: THIS AITNENDOR/PROJECT COST ORIGINAL BID, PO, INFORMATION CONTRACT AMOUNT WILL PROJECT REQUIRE ADDITIONAL PERSONNEL? NO ©r1g1nator Date ir /f/2 / Date Signature Date General Manager/Assistant General Manager (Or Designee) Revised 10/21/97 H:\WP.OTA\FIN\2210\CRANE\FAHR\FAHR.97\NOV\FAHR97-78.DOC DATE OF MOST RECENT BOARD ACTION ON THIS SPECIFIC ITEM: CURRENT YEAR-YEAR-TO-DATE REVISED BUDGET TO-DATE BUDGET BALANCE TOTAL EXPENDITURES (Total Budget plus Transfers) N/A N/A N/A PREVIOUS BUDGET BUDGET CHANGE REVISED TOTAL CHANGES THIS AIT PROJECT BUDGET $0.00 CHANGE ORDERS, AMOUNT AMENDED FUNDS PREV. REQUESTED THIS PROJECT APPROVED AIT AMOUNT $0.00 REQUIRES BOARD POLICY ACTION? NO ATTACHMENTS TO COMMITTEE AGENDA (List): 1. Comprehensive Annual Financial Report for the year ended June 30, 1997. 2. Auditor's Report on Compliance and on Internal Control Over Financial Reporting. 3. Auditor's Report to the F.A.H.R. Committee. 4. Appropriations Limit Report. ATTACHMENTS TO JOINT BOARDS AGENDA (List) 1. Comprehensive Annual Financial Report for the year ended June 30, 1997. 2. Auditor's Report on Compliance and on Internal Control Over Financial Reporting. Page 1 of 2 ADDITIONAL INFORMATION (Background and/or Summary) The Districts' independent auditors, Moreland & Associates, have completed their examination of the Districts' financial statements for the year ended June 30, 1997, and have again issued an unqualified opinion on the Districts' financial statements. Each year, the FAHR Committee reviews the results of the audit and the corresponding Auditor's report to the Committee. Michael Moreland, Partner, will attend the meeting to respond to any questions of Directors. This year, staff has again prepared the a Comprehensive Annual Financial Report that incorporates the audited financial statements. This report, including the audited financial statements, were completely prepared in-house. For the last three years, the Districts has earned the Certificate of Achievement for Excellence in Financial Reporting from the Government Finance Officers Association (GFOA). This year"s report will again be submitted to GFOA for their review in anticipation of another award. The Comprehensive Annual Financial Report, including ttie Auditor's opinion letter, the Auditor's Repo_rtto the Committee, the Auditor'$ Report on Compliance and on Internal Control Over Fihancia.1 Reporting, and the Auditors Appropriations Limit Report are attached. If yo!J should have any questions prior to the meeting, ple_ase call Gary Streed at (714) 593-7550 or Mike White, (714) 593-7570. Staff and the auditors will make a brief presentation at the meeting. Staff Recommendation: Staff recommends the Committee receive, approve and file the Comprehensive Annual Financial Report for the year ended June 30, 1997, and forward it to the Joint Boards. c: Department Head AGM-Operations General Manager Revised 10/21/97 H:\WP.DTA\FIN\2210\CRANE\FAHR\FAHR.97\NOV\FAHR97-78.DOC Page 2 of 2 September 19, 1997 The Boards of Directors of the County Sanitation Districts of Orange County 120, ,.,()VE STREET, SUITE 680 NEWPORT BEACH, CALIFORNIA 92660 (714) 221-0025 570 RANCHEROS DRIVE, SUITE 260 SAN MARCOS, CA 92069 (760) 752-3390 Report on Compliance and on Internal Control Over Financial Reporting Based on an Audit of Financial Statements Perfonned in Accordance With Government Auditing StandaTds We have audited the combined financial statements of the County Sanitation Districts of Orange County, California (Districts) as of and for the year ended June 30, 1997, and have issued our report thereon dated September 19, 1997. We conducted our audit in accordance with generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Compliance As part of obtaining reasonable assurance about whether the Districts' combined financial statements are free of material misstatement, we performed tests of the Districts' compliance with certain provisions of laws, regulations and contracts, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards. Internal Control Over Financial Reporting In planning and performing our audit, we considered the Districts' internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control over financial reporting that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the combined financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over financial reporting and its operation that we consider to be material weaknesses. This report is intended for the information of the Boards of Directors and management of the Districts. However, this report is a matter of public record and its distribution is not limited. September 19, 1997 The Finance, Administration and Human Resources Committee of the County Sanitation Districts of Orange County 1201 DOVE STREET, SUITE 680 NEWPORT BEACH, CALIFORNIA 92660 (714) 221-0025 570 RANCHEROS DRIVE, SUITE 260 SAN MARCOS, CA 92069 (760) 752-3390 We have audited the combined financial statements of the County Sanitation Districts of Orange County (Districts) for the year ended June 30, 1997, and have issued our report thereon dated September 19, 1997. Under generally accepted auditing standards, we are providing you the attached information related to our audit. Our responsibility under generally accepted auditing standards is to plan and perform our audit to obtain reasonable, but not absolute, assurance that the financial statements are free of material misstatement and are fairly presented in accordance with generally accepted accounting principles. Because of the concept of reasonable assurance and because we did not perform a detailed examination of all transactions, there is a risk that material errors, irregularities, or illegal acts, including fraud and defalcations, may exist and not be detected by us. In addition, we considered the internal control over financial reporting of the Districts. Such considerations were solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control structure. Significant Accounting Policies The significant accounting policies of the Districts are described in Note 1 to the combined financial statements. No new accounting policies were adopted and the application of existing policies was not changed during the year. We noted no significant, unusual transactions during the year, or transactions for which there is a lack of authoritative guidance or consensus. Management Judgments and Accounting Estimates Accounting estimates are an integral part of the financial statements prepared by management and are based upon management's current judgments. Those judgments are normally based on knowledge and experience about past and current events and assumptions about future events. The judgments and estimates which may significantly The Finance, Administration and Human Resources Committee of the County Sanitation Districts of Orange County September 19, 1997 Page 2 affect the District's combined financial statements include establishing appropriate liabilities associated with general liability and workers' compensation claims. During our audit of the combined financial statements, we performed procedures to determine the reasonableness of the estimates used by management. These procedures included, but were not limited to, reviewing a third party administrator's report summarizing the estimated liability needed for claims against the Districts' and inquiries of the Districts' Attorney. Based on these and other procedures performed, we were able to conclude that the liabilities associated with general liability and workers' compensation claims recorded by management were reasonable. Significant Audit Adjustments As a result of our audit related testwork, we proposed no corrections of the financial statements that, in our judgment, either individually or in the aggregate, had a significant effect on the Districts' financ~al reporting process. Other Information in Documents Containing Audited Financial Statements Our responsibility for other information in documents containing the Districts' combined financial statements and our report thereon does not extend beyond financial information identified in our report, and we have no obligation to perform any procedures to corroborate other information contained in these documents. We have, however, read the other information included in the Districts' comprehensive annual financial report; and no matters came to our attention that cause us to believe that such information, or its manner of presentation, is materially inconsistent with the information, or its manner of presentation, appearing in the financial statements. Disagreements With Management There were no disagreements with management on financial accounting and reporting matters that, if not satisfactorily resolved, would have caused a modification to our report on the Districts' 1997 financial statements. Consultation With Other Accountants We are not aware of any instances where management has consulted with or obtained opinions, written or oral, from other independent accountants during the past year that were subject to the requirements of Statement on Auditing Standards No. 50, Reports on the Application of Accounting Principles. The Finance, Administration and Human Resources Committee of the County Sanitation Districts of Orange County September 19, 1997 Page3 Major Issues Discussed With Management Prior to Retention We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the Districts' auditors. These discussions occurred in the nonnal course of our professional relationship. This infonnation is intended solely for the use of the Finance, Administration and Human Resources Committee, and should not be used for any other purpose. However, we understand that this document may be public information. September 19, 1997 The Finance, Administration and Human Resources Committee of the County Sanitation Districts of Orange County 1201 DOVE STREET, SUITE 680 NEWPORT BEACH, CALIFORNIA 92660 (714) 221-0025 570 RANCHEROS DRIVE, SUITE 260 SAN MARCOS, CA 92069 (760) 752-3390 Independent Accountants' Report on Agreed-Upon Procedures Applied to Appropriations Limit Worksheets We have applied the procedures enumerated below to the accompanying Appropriations Limit worksheet No. 6 (or other alternative computation) for each of the County Sanitation District #1, 2, 3, 5, 6, 7, and 11 of Orange County (Districts) for the year ended June 30, 1997. These procedures, which were agreed to by the Districts and the League of California Cities ( as presented in the League publication entitled Article XIIIB Appropriations Limitation Uniform Guidelines), were performed solely to assist the Districts, in meeting the requirements of Section 1.5 of Article XIIIB of the California Constitution. This engagement to apply agreed-upon procedures was performed in accordance with standards established by the American Institute of Certified Public Accountants. The sufficiency of the procedures is solely the responsibility of the specified users of the report. Consequently, we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose. The procedures performed and our findings were as follows: 1. We obtained the completed worksheets No. 1 through No. 7 (or other alternative computations) and compared the limit and annual adjustment factors included in those worksheets to the limit and annual adjustment factors that were adopted by resolution of the Board of Directors. We also compared the population and inflation options included in the aforementioned worksheets to those that were selected by a recorded vote of the Board of Directors. Finding: No exceptions were noted as a result of our procedures. The Finance, Administration and Human Resources Committee of the County Sanitation District of Orange County September 19, 1997 Page2 2. For the accompanying Appropriations Limit worksheet No. 6, we added line A, last year's limit, to line E, total adjustments, and compared the resulting amount to line F, this year's limit. Finding: No exceptions were noted as a result of our procedures. 3. We compared the current year information presented in the accompanying Appropriations Limit worksheet No. 6 to the other worksheets described in No. 1 above. Finding: No exceptions were noted as a result of our procedures. 4. We compared the prior year appropriations limit presented in the accompanying Appropriations Limit worksheet No. 6 to the prior year appropriations limit adopted by the Board of Directors during the prior year. No procedures have been performed with respect to the determination of the appropriation limit for the base year, as defined by the League publication entitled Article XIIIB Appropriations Limitation Uniform Guidelines. Finding: No exceptions were noted as a result of our procedures. We were not engaged to, and did not, perform an audit, the objective of which would be the expression of an opinion on the accompanying Appropriations Limit worksheet No. 6 ( or other alternative computation). Accordingly, we do not express such an opinion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. This report is intended solely for the use of the Districts and should not be used by those who have not agreed to the procedures and taken responsibility for the sufficiency of the procedures for their purposes. However, this report is a matter of public record and its distribution is not limited. A. B. C. D. E. F. COUNTY SANITATION DISTRICTS OF ORANGE COUNTY, DISTRICT #1 APPROPRIATIONS LIMIT WORKSHEET #6 FY 1996-97 BUDGET AMOUNT LAST YEAR'S LIMIT 1 $2,760,000 1 ADJUSTMENT FACTORS 1. Population % (.17)% 2. Inflation% 4.67% Total Adjustment% 4.49%1 ANNUAL ADJUSTMENT $124,000 1 OTHER ADJUSTMENTS: Assumed Responsibility (Lost Responsibility) (Transfer to Private) (Transfer to Fees) Sub-total TOT AL ADJUSTMENTS $124,000 1 CURRENT YEAR LIMIT 1 $2,ss4,ooo 1 A. B. C. D. E. F. COUNTY SANITATION DISTRICTS OF ORANGE COUNTY, DISTRICT #2 APPROPRIATIONS LIMIT WORKSHEET #6 FY 1996-97 BUDGET AMOUNT LAST YEAR'S LIMIT 1 $10.s4s,ooo I ADWSTMENT FACTORS 1. Population % 0.35% 2. Inflation% 4.67% Total Adjustment % 5.03%! ANNUAL ADWSTMENT $531,000 1 OIBER ADJUSTMENTS: Assumed Responsibility (Lost Responsibility) (Transfer to Private) (Transfer to Fees) Sub-total TOTAL ADJUSTMENTS $531,000 1 CURRENT YEAR LIMIT I $11,019,000 1 A. B. C. D. E. F. COUNTY SANITATION DISTRICTS OF ORANGE COUNTY, DISTRICT #3 APPROPRIATIONS LIMIT WORKSHEET #6 FY 1996-97 BUDGET AMOUNT LAST YEAR'S LIMIT 1 $14,s21,ooo 1 ADJUSTMENT FACTORS 1. Population % 0.59% 2. Inflation% 4.67% Total Adjustment % 5.29%1 ANNUAL ADJUSTMENT $76s.ooo 1 OTHER ADJUSTMENTS: Assumed Responsibility (Lost Responsibility) (Transfer to Private) (Transfer to Fees) Sub-total TOTAL ADJUSTMENTS $76s,ooo 1 CURRENT YEAR LIMIT 1 $1s.2s9.ooo 1 A. B. C. D. E. F. COUNTY SANITATION DISTRICTS OF ORANGE COUNTY, DISTRICT #5 APPROPRIATIONS LIMIT WORKSHEET #6 FY 1996-97 BUDGET AMOUNT LAST YEAR'S LIMIT 1 $2,604,000 1 ADJUSTMENT FACTORS 1. Population % 0.22% 2. Inflation% 4.67% Total Adjustment % 4.90%j ANNUAL ADJUSTMENT $128,000 1 OTHER ADJUSTMENTS: Assumed Responsibility (Lost Responsibility) (Transfer to Private) (Transfer to Fees) Sub-total TOTAL 'ADJUSTMENTS $128.000 1 CURRENT YEAR LIMIT 1 $2.132,000 1 A. B. C. D. E. F. COUNTY SANITATION DISTRICTS OF ORANGE COUNTY, DISTRICT #6 APPROPRIATIONS LIMIT WORKSHEET #6 FY 1996-97 BUDGET AMOUNT LAST YEAR'S LIMIT 1 $1,689,ooo 1 ADJUSTMENT FACTORS 1. Population % 0.11% 2. Inflation% 4.67% Total Adjustment % 4.79%1 ANNUAL ADJUSTMENT $81,000 1 OTHER ADJUSTMENTS: Assumed Responsibility (Lost Responsibility) (Transfer to Private) (Transfer to Fees) Sub-total TOTAL ADJUSTMENTS $81,000 1 CURRENT YEAR LIMIT 1 $1,110.000 I A. B. C. D. E. F. COUNTY SANITATION DISTRICTS OF ORANGE COUNTY, DISTRICT #7 APPROPRIATIONS LIMIT WORKSHEET #6 FY 1996-97 BUDGET AMOUNT LAST YEAR'S LIMIT 1 $4.sos.ooo 1 ADJUSTMENT FACTORS l. Population % 3.73% 2. Inflation% 4.67% Total Adjustment % 8.57%1 ANNUAL ADJUSTMENT $412,000 1 OTHER ADJUSTMENTS: Assumed Responsibility (Lost Responsibility) (Transfer to Private) (Transfer to Fees) Sub-total TOTAL ADJUSTMENTS $412.000 1 CURRENT YEAR LIMIT 1 $s,211,ooo 1 A. B. C. D. E. F. COUNTY SANITATION DISTRICTS OF ORANGE COUNTY, DISTRICT #11 APPROPRIATIONS LIMIT WORKSHEET #6 FY 1996-97 BUDGET AMOUNT LAST YEAR'S LIMIT 1 $3,142.000 1 ADJUSTMENT FACTORS 1. Population % 0.32% 2. Inflation% 4.67% Total Adjustment % 5.00%1 ANNUAL ADJUSTMENT s1s1,ooo 1 OTHER ADJUSTMENTS: Assumed Responsibility (Lost Responsibility) (Transfer to Private) (Transfer to Fees) Sub-total TOTAL ADJUSTMENTS s1s1.ooo 1 CURRENT YEAR LIMIT 1 $3,299.ooo I 1~ ... FAH.R CO.MMITTEE. CALENDAR ~ , November 12, 1997 1,:: .. ~ 'FAH'R• · .. -~ 1 , r·· 1: ' u CO'M:MI TT1$,,AGEND~~CALENDAR' ::: l ! c ,r ,q ,. -1 ... .. l ... ;::: '"iif -.. "·" ,. ... . Month ... lte.m Action Geographical Information System Action Deferred Compensation Plans Action Rate Advisory Committee Recommendations Action Dec. Accumulated Funds Policy Action 1998-99 Joint Works Capital Budget Preview Information 1997-98 Financing Program Information Jan. NO MEETING SCHEDULED Consideration of Performance-Based Budget Action 1998-99 Budget Assumptions & Fiscal Policies Action CORF Budget Recommendation Action Selection of Financing Team Action Feb. Delegation of Authority Action Rate Advisory Committee Recommendations Action Annual Renewal of Boiler & Machinery Insurance Action Second-Quarter Financial & Performance Report Information Financial Strategy for OCR Action Strategic Plan/Financial Plan and Revised Rate Structure Part 1 Information DART -Update on Cross-Training Program for Three Pilot Information Projects Mar. Status Report -Meetings with Rating Agencies Information Worker's Comp Report -2nd Quarter Information Status Report on Implementation of Broadbanding Information Report on Audit Findings for 23 Cities Sewer Connection Fees Information CSDOC e P.O. Box 8127 e Fountain Valley, CA 92728-8127 e (714) 962-2411