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Home My WebLink About1999-09-22DRAFT FILED IM THE OFFICE OF THE SECRETARY ORANGE COUNTY SAN/T. TION DI TRJCT SEP 2 2 1999 MINUTES OF FINANCE. ADMINISTRATION AND /) J/ HUMAN RESOURCES COMMITTEE MEBTING ·-'rA-___ Orange County Sanitation District Wednesday, September 8, 1999, 5 p.m. A meeting of the Finance, Administration and Human Resources Committee of the Orange County Sanitation District was held on July 14, 1999 at 5 p.m., in the District's Administrative Office. (1) The roll was called and a quorum declared present, as follows: (2) FAHR COMMITTEE MEMBERS: Directors Present: Thomas Saltarelli, Chair Mark Leyes, Vice Chair Shawn Boyd John M. Gullixson Shirley McCracken Mark A. Murphy Peer Swan, Board Vice Chair John J. Collins, Past Board Chair Directors Absent: Jan Debay, Board Chair James W. Silva APPOINTMENT OF CHAIR PRO TEM No appointment was necessary. (3) PUBLIC COMMENTS There were no public comments. OTHERS PRESENT: Thomas Woodruff, General Counsel Don Hughes Ryal Wheeler Daniel Cozad, SAWPA Representative STAFF PRESENT: Blake Anderson, Assistant General Manager David Ludwin, Director of Engineering Mike Peterman, Director of Human Resources Gary Streed, Director of Finance Michelle Tuchman, Director of Communications Patrick Miles, Director of Information Technology Bob Ooten, Director of Operations & Maintenance Mike White, Controller Steve Kozak, Financial Manager Lisa Tomko, Human Resources Manager Jim Herberg, Engineering Supervisor John Swindler, IT Manager Jean Tappan, Acting Committee Secretary Minutes of the Finance, Administration and Human Resources Committee Meeting Page 2 September 8, 1999 (4) RECEIVE, FILE AND APPROVE MINUTES OF PREVIOUS MEETING It was moved, seconded and duly carried to approve the minutes of the July 14, 1999 Finance, Administration and Human Resources Committee meeting, as drafted. Director Gullixson abstained. (5) REPORT OF THE COMMITTEE CHAIR The Committee Chair had no report. (6) REPORT OF THE GENERAL MANAGER The General Manager was not present. (7) REPORT OF ASSISTANT GENERAL MANAGER Mr. Blake Anderson provided an update on the beach closure and ongoing activities. A report will be prepared for the Board that addresses both the cost accounting and technical issues, along with recommendations. Mr. Anderson also reported that OCIP member agencies are vigorously opposing the payment of additional fees to the County of Orange litigation firm. Proceeds should be distributed in October. a. Presentation on SAWPA Governance and Water Bond Issue. Daniel Cozad, SAWPA representative, described the existing SAWPA governance structure and proposed alternatives to more clearly represent the various agencies and stakeholders in issues impacting the Santa Ana River watershed. He also described the projects included in the water bond that, if passed by the State legislators, will be presented to the voters next year. The Directors expressed concern about having agreements in place with the various recipients to ensure that the identified funding is forwarded by SAWPA. The issue of representation will be discussed by the Steering Committee. (8) REPORT OF DIRECTOR OF FINANCE Director of Finance Gary Streed reported that property tax and user fee revenues to be received from the County exceed the amounts estimated in the budget. He also reported on the status of the 176 requests from Yorba Linda residents for refunds or credits. There were also 10 requests from residents in other areas of the County. A discussion followed on reconsidering the Board decision at a future meeting. Mr. Streed said that the last account with the County Treasurer has been closed. (9) REPORT OF DIRECTOR OF HUMAN RESOURCES The Director of Human Resources had no report. Minutes of the Finance, Administration and Human Resources Committee Meeting Page 3 September 8, 1999 (10) REPORT OF DIRECTOR OF COMMUNICATIONS The Director of Communications had no report. (11) REPORT OF GENERAL COUNSEL General Counsel had no report. (12) CONSENT CALENDAR ITEMS (Items a-e) a. FAHR99-63: Receive and file Treasurer's Report for the month of August 1999: 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. b. FAHR99-64: Receive and file Employment Status Report as of August 17, 1999. c. F AHR99-65: Receive and file Quarterly Investment Management Program Report for the Period April 1, 1999 through June 30, 1999. d. FAHR99-66: Receive and file Certificate of Participation (COP) Monthly Report. e. FAHR99-67: Receive and file FY 1998/99 End of Year Operational Report. Motion: END OF CONSENT CALENDAR Moved, seconded and duly carried to approve the recommended actions for items specified as 12(a) through 12(e) under Consent Calendar. (13) ACTION ITEMS (Items a-d) a. FAHR99-57: The Delegation of Authority Resolution was pulled from the agenda at the request of staff. b. FAHR99-68: Update on FIS Implementation and Completion Mike White gave a brief report on the history of the project. After discussion, the members approved the recommendation to close out the project. Motion: Moved, seconded and duly carried to accept the J. D. Edwards Financial Information System and close project #5401200. Director Mark Murphy abstained because of a possible conflict of interest. c. FAHR99-69: Approve 401 (a) Plan Maximum Contribution. The General Manager explained that the action pertains only to the General Manager's contract. There is no additional cost to the District. Minutes of the Finance, Administration and Human Resources Committee Meeting Page 4 September 8, 1999 Motion: Move9, seconded and duly carried to approve 401 (a) Plan Maximum Contribution. d. FAHR99-70: Approval of consultant contract with retired employee Gerald Jones re Planning and Implementation of DART Re-engineering Program. Director of Human Resources Mike Peterman explained that the DART reinvention process is in the implementation stage and Mr. Jones' expertise and experience is critical to the success of the program in terms of continuity and vision. No decision has been made on filling the vacant position at this time. The ordinance allows the FAHR Committee to waive the requirement that restricts employing retired employees for one year. Staff was directed to include a statement in the contract that only actual travel expenses would be reimbursed. Director Collins asked that the language in the ordinance be revised to remove reference to the "Joint Chairman." Motion: Moved, seconded and duly carried to approve consultant contract with retired employee Gerald Jones re Planning and Implementation of DART Re- engineering Program. Director Swan opposed. (14) INFORMATION PRESENTATIONS a. FAHR99-61: Data Warehouse Demonstration Information Technology Manager John Swindler demonstrated the data warehouse and how information is collected and retrieved. (15) OTHER BUSINESS, COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY There were no supplemental agenda items. (16) MATTERS WHICH A DIRECTOR WOULD LIKE STAFF TO REPORT ON AT A SUBSEQUENT MEETING There were none. (17) MATTERS WHICH A DIRECTOR MAY WISH TO PLACE ON A FUTURE AGENDA FOR ACTION AND STAFF REPORT Director Gullixson asked that the credit and refund of user fees policy be reconsidered at a future meeting, and that General Counsel provide the statutes that limit refunds beyond four years. (18) CONSIDERATION OF UPCOMING MEETINGS The next FAHR Committee meeting is scheduled for October 13, 1999 at 5 p.m. Minutes of the Finance, Administration and Human Resources Committee Meeting Page 5 September 8, 1999 (19) CLOSED SESSION The Chair reported to the Committee the need for a Closed Session, as authorized by Government Code Section 54957.6, to discuss and consider the items that are specified as Item 19(A)(1) and (2) on the published Agenda. The Committee convened in closed session at 6:50 p.m. Confidential Minutes of the Closed Session held by the Finance, Administration and Human Resources Committee have been prepared in accordance with California Government Code Section 54957.2, and are maintained by the Board Secretary in the Official Book of Confidential Minutes of Board and Committee Closed Meetings. At 7 p.m., the Committee reconvened in regular session. (20) ADJOURNMENT The Chair declared the meeting adjourned at approximately 7:02 p.m. Submitted by: e n Tappan ting FAHR Committee Secretary H:\wp.dla\admin\BS\FAHR\OP0899 FAHR MIN.doc ROLL CALL FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE Meeting Date: September 8. 1999 Time: 5:00 p.m. c: Adjourn: ____ _ COMMITTEE MEMBERS THOMAS R SALTARELLI (Chair)................................................. ✓/ MARK LEYES (Vice Chair) ....••.......•••••••••...•••••.........•.•...............•.. ---;;;r-- SHAWN BOYD............................................................................... V JOHN M. GULLIXSON ................................................................... ;:,;:.------ SHIRLEY MC CRACKEN ............................................................... _;;;/ MARK A. MURPHY .....•.....•.•••••••••...•••.••.....................•..........•........ JAMES W. SILVA .............•..•.•..••••••.......•....................•......•..••••...... JAN DEBAY (Board Chair)............................................................ ~ PEER SWAN (Board Vice Chair)................................................... ~ JOHN J. COLLINS (Past Board Chair) ••.......•.•.•............................ ----r OTHERS e. ~D~AWPA /.;&en:M.~............ ~ £J ~~ TOM WOODRUFF, General Counsel.. ............................................. _L . 0 S~t_;jllo Engineers............................................. ,,/ BON MelNTt RE, General Manager ............................................... . BLAKE ANDERSON, Assistant General Manager .......................... ---;:;::7' ~[) MGDOES;-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 TUC.HMAN, Director of Communications ..................... ~ / /.A(l.,J.~"'KK7f'i.-M."-1;~JJ.1rector of lhformation Technology ................... -~- ~OBERT CHIRElll, Director of Technical Services ...................... ---yC- STEVE KOZAK, Financial Manager ................................................ V MIKE WHITE, Controller .................................................................. ~ GREG MATHEWS, Assistant to the General Manager.................... 1.,/"' LISA TOMKO, Human Resources Manager.................................... ~ BAWN MCKINLEY, Sr. Human Resources Analyst ...................... .. -PENNY KYI E, Committee Secretary............................................... l,.,""'" ~~ :rrYL--,,u,r _,?. Lynda ~ 1 ' . Data Warehouse Demonstration September 8, 1999 I I I • Data warehouse overview • Demonstration • Wastewater treatment • Asset management ·a Warehouse Overview • Information Technology Department's Strategic Plan • Align with business objectives • Business partners 1 2 ~ration Challenge Systems Users 1111 -=--=-:A -Maintenance ~-..,.•::rations ~7 :x;s: 1111 Finance llll ?= ll&llcontrol ~ ~ lnlsource ·a Warehouse Systems Users -Maintenance Operations 3 at is History Useful for? JIV~ • Equipment analysis ~ • Capital equipment, redesign, refurbish • Maintenance cost containment • Re-evaluation of preventative maintenance strategies • Process efficiencies • Central Power Generation System, dewatering, chemical usage tom Line • Better information • Better decisions 4 r . Feel3 FIS Costs for the Area • • Low Pressure Gas Holder Compress.or 1,.4 _ __, Buildhig Compressed Digester Gas to CenGen Sludge From P.S.B.1-5 • • • Sludge from DAFs •• Digested Sludge to Oew~ering .. Dig.10 in service Dig.10 pH [Overflow} Dig. 10 sludge flow in (DAF) Dig.10 sludge flow in (primar~ D ig.11 Alkalinity (0 verflow) D ig.11 Alkalinity Ratio Dig.11 Carbon Dim<ide Dig.11 Detention Time Dig.11 Ferric Flow (Dry) Dig.11 H2S (daily] D ig.11 Methane Dig.11 Nitrogen Dig.11 Oxygen Dig.11 Solids Load Rate Dig.11 TS [Overflow) Dig.11 VS (Overflow} fji 1 Volatile Acidmf verfk , , 11tmrnt:t;m: u,i,• Dig.11 in service Dig.11 pH [Overflow} Dig.11 sludge flow in (OAF) Dig.11 sludge flow in (primar! Dig.12 Alkalinity (Overflow) Dig.12Alkalinity Ratio _ Di~t12 ~!?.2.n Dioxide _d Date Range FromJ611199 Toi 6/30/99 Anet Maha9emenl Meta Data Execute Report Clcne 70 60 so 40 30 20 10 Area 15 Digesters Start Date][ End Datej[ 611199 6130199 ...__. 0 -r---,--.----r----,---,r----r------.-------r-..----,----,----,,---,---y-----,-,---,-------.--,----r---r--.--r---r-------r-.---,---,----,.....-----, m m m m m m m m m m m m m m m m m m m m m m m m m m m m m m ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 0 ~ N M ~ ~ ID ~ 00 m O ~ N M ~ ~ ID ~ 00 m 0 ID ID ID ID ID ID ID ID ID ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ID ID ID ID ID ID ID ID ID ID ID ID ID ID ID ID ID ID ID ID ID [-+ Dig.11 Volatile Reduction% Volatile Reduction: The volatile reduction of a digester is a key performance indicator of the digester's efficiency. It is a ratio that considers the percentage of volatile solids in the matter that enters and exits the digester to determine what percentage was removed during digestion. This calculation is a roll-up of other calculations. The power of the Data Warehouse system is that it can render a valuable piece of information on a daily basis that would have required several manual steps previously. Since there are multiple data points involved, often these types of formulas were previously calculated on a monthly basis. Metadata: (Data about Data) ~rJl Metadata l!!I~ EJ Data Element Number: (:3001:; ListBO)( Description: Loop Tag: ... ,2-2-p-. .,-✓-G-.6-.T_5_2_51_::: ____ _ Reading Type: (Total Ced Per Input Unit Form: f.6.rea 24 Effluent Dicpo'.:al J Plant 1 & 2 Total Cost Per Input Unit Metadata: Source: Formula Units:$ (Plant 1 Area Cost+ Plant 2 Area Cost+ Non Process Cost)/ (Plant 1 Influent+ Plant 2 Influent) Metadata Date: 17/2.:'1 :18~1 J~J..!f"T .. 1.J!!f, Cancel There is an online description of the source of every data point and formula. This type of information is called business metadata. This is very useful for the user to verify the source, unit and calculation of the information being viewed. It is also necessary so that the user understands the context of the information. Asset Management Maintenance Costs for Area 15 Digesters $16,000.00 $14,000.00 $12,000.00 $10 ,000.00 $8,000.00 $6,000.00 $4,000.00 $2,000.00 $0.00 ~ LJ Asset Management: II) C ::l --, m m Ol ..... >-'3 --, ~ LJ 1. Enter St,11t Date 06i08i1999 2. Enter End Date 07.'01 ,'1999 3. Locations 15A 15B 15C 15E CM ( 54.12 % ) PM ( 45 .88 % ) From any Plant Area, the user can get an Asset Management Profile. This chart shows the total Maintenance Costs for the Area during the date range. Note that only the locations in Area 15 that relate to the digesters are profiled. The left graph shows total costs. The right graph is the Preventative versus Corrective Maintenance ratio. Activity Cost Per Month $5,000.00 $4,500.00 $4,000.00 $3,500.00 $3,000.00 $2,500.00 $2,000.00 $1,500.00 ,a $500.0 $0.00 >, .c .... u ·c >, Ill 2 .... ~ al C •CM I al 2 ~ .a 2 -, •PM Ill LL co 0) 0) Preventative Maintenance: >, -s -, .... Ill .a E 4) 1 (I) .... Ill .a ~ 0 z 1. Enter Start Date (Re<I11ired) 2. Enter End Date (Ref111ired) 3. Enter Asset Number (RecIuired) 2 E ~ Q) 0 >->-.c 1:: >, .... .... u al al al .... ~ 2 ~ ~ al C .... 2 al .a -, Ill LL 0) 0) 0) .,... 1/01/98 7/1!99 M06722 Q) C ~ -, Using the Asset Report, the Preventative Maintenance schedule is easily seen. Based on the Corrective versus Preventative Maintenance Ratio, that schedule can be adjusted. Months with no costs do not get graphed. I Plant 2 Waste Water I FROM 06/01/1999 TO 07/01/1999 Average TSS Efficiency 76.95 % Process Cost Per Million Gallon $235.18 Average Daily Influent (MG) 144.36 Average Daily Effluent (MG) 143.76 Total Influent (MG) 4.475.19 !oaily Flows I Readings I 250.00- 200.00-•-----..-.... -. __.,___.,,,...+--._.._......_.,.--.--.-• •---.-,,.... __ ..__...,..,.. .... ~--.. ..... • • • • • 150.00-t: ......... • • ..... =t t • . . . ...__.__... . . • • ·-• • • • • 100.00-• • • • .... • •x • • • • • . ...... .,..._.._.____._ .... . • • • • • • • • • 50.00--. • • .......... ..._.-.------• • • • • . ..... ~ _ _,.__. ___ . • • . ...... • • • • 0.00 m'm'm m'm'm'm'm'm'm'm'm'm'm'm'm'm'm'm'm'm'm'm'm'm'm'm'm 'm'm'm' ~ Q2 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ I;!! I;!! ~ ~ ~ I;!! I;!! ~ I;!! I;!! $ ~ !22 !22 !22 ~ !22 ,c:: C:! ~ la!: IQ ~ I::;: Q2 ~ 0 .... N (") "<t II) (0 ...... (X) 0) 0 .... N (") "<t (0 ...... (X) 0) 0 ,c:: (0 (0 (0 (0 (0 (0 (0 (0 (0 ,c:: ,c:: ,c:: ,c:: ,c:: ,c:: ,c:: ,c:: ,c:: ,c:: C:! C:! C! (::! (::! (::! (::! (::! (::! (::! (':2 ...... (0 (D (0 (0 (0 (0 (0 (0 (0 (0 (0 (0 (0 (0 (0 (0 (0 (0 (0 (0 (D -+ Effluent Flow MGD -+-Effluent TSS -+ Influent Flow MGD -+-Influent TSS -+ TSS Efficiency Summary Report: Summary reports for both Plant 1, Plant 2 and process chemicals are available "On demand." These reports allow staff to fine tune the treatment plants for efficiency and cost reduction. I • Area 24 Effluent Disposal Start Date II 5/1/99 j End Date II 6/31 /99 I 600 500 400 300-l .... --~~ ~= • 4== ..... ~__.. ~ 200 100 0-+----,-~----,---r----r-r---,..----,--,--,---,-----,-----,,-----,-----,.-~--.--r---.-----,,---,-----,.-~---r-.-------.----,-~--.---r--, ~ &l $ $ 'C C:! (2 ~ lJ') lJ') lJ') lJ') al $ g_l al 8:l $ al ltQlf>t::1.J2C!1D~ I.J')I.J')I.J')I.J')I.J')'C,C lJ') lJ') $$~$8:lal~ NMVISltor--CO ~ ~ ~ ~ ~ ~ ~ 0) 0) Q'.l C!1 C!1 122 0) 0) C!1 C!1 al 8:l &l &l g_l a, D ~ N er, -.a.nw,-.....o:,, 'C C:! C:! lJ') lJ') lJ') C:! C:! lJ') lJ') ~ s;: ~ Sl ~ ....-Plant 1 & 2 T ott:11 Cost Per Input Unit $ ...... Plant 1 T olal Cost per Input Unit $ -+-Plant 2 Total Cost per Input Unit$ Plant 1 & 2 Total Cost per Input Unit: 0) 0) 0) C!1 121 121 a, D ~ C:! ~ (2 lJ') lJ') lJ') The total costs for Plant 1 & 2 divided by the total influent to both Plants has been a long standing efficiency number published by the Districts on a monthly basis. The system can calculate the unofficial version of this number on a daily basis. The total costs are a daily 60 day rolling average of all costs in the General Ledger that are associated with a process subledger plus the subledgers for Source Control, Air Quality, or the Lab. The influent flows are based on computerized meter readings on the influent trunk lines. All of these data points can be individually graphed in order to verify accuracy. Note that each plant has a total cost per input unit on the graph. These numbers are calculated similarly except that they exclude costs for Source Control, Air Quality, and the Lab. y "~:a~r;~· •~1~· J~)~•~a~II~\ · ~L1~1L~-~-·~·~1 -~•-~£ 1~· l~~~~~~~~~~~~~~~!!!!!!!!!!!!!!!!!!!!!!!l!!!l!!!l!!!l!!!l!!!I!!~~~~~~ r IRWO ( FIS Costs for the Area rr ,~---==-------... Foster Boost~r I JB1 I rl±J l ~r~~ ~I _J r m 10s I I !ro From Primary AS AS lower 2 ,r--.... Surge Tower 1 l ... , •-•-B_S_P_u_m_p_it_2~R-un-t.-im_e __ _,, 0085 Pump #3 Runtime 008S Pump #4 Runtime 008S Pump #5 Runtime Plant 1 & 2 Influent Plant 1 & 2 Non-Process Costs P'ant 1 & 2 Tota' Cost Plant 2 Efficiency I Plant 2 Effluent Flow Plant 2 Effluent Weighted TS S Plant 2 Total Area Costs i~r.rwi~m1~1mrn Secondary Basins Elf. BOD Secondary Basins Elf. COD Secondary Basins Eff. Flow Secondary Basins Elf. TSS Secondary Basins Elf. VSS Total Cost for Process Area • Dale Range Fromj5/1/99 Toi 5/31 /99 Asset Management Meta Data I [ Ekecl.!leJl~Y.lL.J) I 'r Close J • ' !Resource Cost Per Year I 1. Enter Start Date (Required) 2. Enter Encl Date (Requiled) Percent of Value: 3. Enter Asset Number (Re<1uired) $1,200,000.00;~--------------------------------~ $1,000,000 .. 00-t----------.----~-----------------------; $800,000.00 I az:: $600,000.00 I Ir $400,000.001---+------ $200,000 .00-+------ $0.001---+------ _ PurchasePrice D Net Present Value -Total Cost M06722 Meter Reading 28,661.00 j HOURS 1.:01 ,'!18 7:1:99 M06722 By profiling an Asset, the user can graph a comparison between the value of the Asset and the cost of Maintenance for the Asset. In this example the engine cost $1,000,000., the current depreciated value is $680,000. (based on straight line depreciation from purchase date to the end of the report date range), and the total cost of Maintenance for the report date range is about $15,000. Maintenance costs include Personnel and Equipment from the Maintenance System (CMMS) and Materials and Contractors from the Finance System (FIS). September 2, 1999 DISTRIBUTION FAHR COMMITTEE MEETING PACKAGE Full Agenda Package 45 Committee 13 & Mailing List Donald F. McIntyre 1 Blake P. Anderson 1 (3-hole punched) Dan Dillon 1 Marc Dubois 1 Jeff Esber 1 Ed Hodges 1 Steve Kozak 1 Penny Kyle 2 David Ludwin 1 Greg Mathews 1 Partick Miles 1 (3-hole punched) Bob Ooten 1 Mike Peterman 1 Gary Streed 1 Michelle Tuchman 1 (3-hole punched) Robert Ghirelli 1 Mike White 1 (3-hole punched) Cagle, Brad 1 Lisa Tomko 1 Bob Geggie 1 Jim Herberg 1 Patricia Jonk 1 Lenora Crane 1 File 1 Extras 5 (for meeting hand-out, if necessary) Notices and Agenda Onll£ 12 Posting 1 Jean Tappan 1 Anna Ubaldini 1 Frankie Woodside 1 Patricia Magnante 1 ~n~Gray 1 Security 1 Extras 5 (for meeting hand-out, if necessary) Ron Zenk, Dist. 14 Treasurer's Report Only C H:\WP.DTA\ADMIN\BS\FAHR\DISTRIBUTIONLISTFAHR.DOC phone: 1714] 962-2411 mailing address: P.O. Box B127 Fountain Valley, CA 9272B-B127 street address: 10B44 Ellis Avenue Fountain Valley, CA 9270B-701B Member Agencies • Cities Anaheim Brea Buena Park Cypress Fountain Valley Fullerton Garden Grove Huntington Beach Irvine La Habra La Palma Los Alamitos Newport Beach Orange Placentia Santa Ana Seal Beach Stanton Tustin Villa Park Yorba Linda County of Orange Sanitary Districts Costa Mesa Midway City Water Districts Irvine Ranch ORANGE COUNTY SANITATION DISTRICT NOTICE OF MEETING FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE ORANGE COUNTY SANITATION DISTRICT WEDNESDAY, SEPTEMBER 8, 1999 -5:00 P .M. DISTRICT'S ADMINISTRATIVE OFFICES 10844 ELLIS AVENUE FOUNTAIN VALLEY, CALIFORNIA 92708 A regular meeting of the Finance, Administration and Human Resources Committee of the Board of Directors of the Orange County Sanitation District, will be held at the above location, date and time. "To Protect the Public Health and the Environment through Excellence in Wastewater Systems" FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE MEETING DATES FAHR Committee Meeting Dates September 8, 1999 October 13, 1999 November 10, 1999 December 8, 1999 None Scheduled February 9, 2000 March 8, 2000 April 12, 2000 June 14, 2000 July 12, 2000 No Meeting Scheduled September 13, 2000 Board Meeting Dates September 22, 1999 October 27, 1999 November 17, 1999 December 15, 1999 January 26, 2000 February 23, 2000 March 22, 2000 April 26, 2000 June 28, 2000 July 26, 2000 August23,2000 September 27, 2000 ROLL CALL FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE Meeting Date: September 81 1999 Time: 5:00 p.m. Adjourn: ____ _ COMMITTEE MEMBERS THOMAS R. SALTARELLI (Chair) •••....•......••.••••.•.••..••......••........... MARK LEYES (Vice Chair) ••••••.••••...•••.•...........•..••.••...•••••••.•••••.•.... SHAWN BOYD ..••••••••••.•......................•••••••••....•••...........•...•••••••••••. JOHN M. GULLIXSON ......•.••••.••••••••••••••••...............••••••....•••••.••..... SHIRLEY MC CRACKEN .............................................................. . MARK A. MURPHY .....•..•••••••••••.••.•••...................•••....•••••...•........... JAMES W. SILVA ...........•...••••.•••••.•...•...•.........•.•••..•••••................... JAN DEBAY (Board Chair) .•••..•...........••.....••••.•••......................••.•• PEER SWAN (Board Vice Chair) ........•••••..•.......................•..••••..... JOHN J. COLLINS (Past Board Chair) ••..••.....................•.••••..•.•.••. OTHERS JOSEPH GRINDSTAFF, SAWPA Executive Director ............•...... TOM WOODRUFF, General Counsel .............................................. . TOBY WEISSERT, Carollo Engineers ............................................ . STAFF DON MCINTYRE, General Manager ............................................... . BLAKE ANDERSON, Assistant General Manager ..•..•.................... 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 ................... .. PATRICK MILES, Director of Information Technology .................. . ROBERT GHIRELLI, Director of Technical Services ........•••••••••••••• STEVE KOZAK, Financial Manager ............................................... . MIKE WHITE, Controller ................................................................. . GREG MATHEWS, Assistant to the General Manager ................... . LISA TOMKO, Human Resources Manager ................................... . DAWN MCKINLEY, Sr. Human Resources Analyst ....................... . PENNY KYLE, Committee Secretary .............................................. . c: Lynda Heller I I :l}\~••T.'l'lt(r :! .. ~ . 4»_...i, ~ i~~~l\1 ~::::..:--•t· '"J..... ., ...... ,,, •1:,.,.._-,,l-''. AGENDA REGULAR MEETING OF THE FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE ORANGE COUNTY SANITATION DISTRICT WEDNESDAY, SEPTEMBER 8, 1999, AT 5 P.M. ADMINISTRATIVE OFFICE 10844 Ellis Avenue Fountain Valley, California 92708 In accordance with the requirements of California Government Code Section 54954.2, this agenda has been posted in the main lobby of the District's 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. (1) ROLL CALL (2) AP'POINTMEN:r OF CHAIR PRO TEM, IF NECESSARY (3) 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). September 8, 1999 (4) APPROVE MINUTES OF PREVIOUS MEETING Approve minutes of the July 14, 1999, Finance, Administration and Human Resources Committee meeting. (5) (6) (7) REPORT OF COMMITTEE CHAIR REPORT OF GENERAL MANAGER REPORT OF ASSISTANT GENERAL MANAGER a. Presentation on SAWPA Governance and Water Bond Issue. (Joe Grindstaff, Executive Director-20 minutes) (8) REPORT OF DIRECTOR OF FINANCE (9) REPORT OF DIRECTOR OF HUMAN RESOURCES (10) REPORT OF DIRECTOR OF COMMUNICATIONS (11) REPORT OF GENERAL COUNSEL (12) CONSENT CALENDAR ITEMS (a-e) Consideration of motion to approve all agenda items appearing on the Consent Calendar not specifically removed from same, as follows: All' matters placed on the consent calendar are considered as not requi•nng discussion or further explanation and unless any particular item is requested to be removed from the consent calendar by a Director, staff member or member of the public in attendance, there will be no separate discussion of these items. All items on the consent calendar will be enacted by one action approving all motions, and casting a unanimous ballot for resolutions included on the consent calendar. All items removed from the consent calendar shall be considered in the regular order of business. Members of the public who wish to remove an item from the consent calendar shall, upon recognition by the chair, state their name, address and designate by number the item to be removed from the consent calendar. The Chair will determine if any items are to be deleted from the consent calendar. a. FAHR99-63: Receive and file Treasurer's Report for the month of August 1999. The Treasurer's Report will be distributed at the FAHR Committee meeting in accordance wi~ 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 b. FAHR99-64: c. FAHR99-65: d. FAHR99-66: e. FAHR99-67: September 8, 1999 Receive and file Employment Status Report as of August 17, 1999. Receive and file Quarterly Investment Management Program Report for the Period April 1, 1999 through June 30, 1999. Receive and file Certificate of Participation (COP) Monthly Report. Receive and file FY 1998/99 End of Year Operational Report. END OF CONSENT CALENDAR Consideration of items deleted from Consent Calendar, if any. (13) ACTION ITEMS (a-d) a. FAHR99-57: · b. FAHR99-68: C. FAHR99-69: d. FAHR99-70: Adopt Resolution No. OCSD 99-_, Establishing Policies and Procedures for the Award of Purchase Orders and Contracts; Award of Public Works Project Contracts; Award of Professional Services Contracts; Delegation of Authority to Implement Said Policies and Procedures; and Repealing Resolutions Nos. OCSD 98-8, OCSD 98-12, OCSD 98-22, and OCSD 98-43. (Don McIntyre/Marc Dubois -15 minutes) Update on FIS Implementation and Completion (Mike White -15 minutes) Approve 401 (a) Plan Maximum Contribution (Don McIntyre/Tom Woodruff -5 minutes) Approval of consultant contract with retired employee Gerald Jones re Planning and Implementation of DART Re-engineering Program (Mike Peterman -10 minutes) (14) IN FORMATIONALPRESENTATIONS a. FAHR99-61: Data Warehouse Demonstration (John Swindler-15 minutes) (15) OTHER BUSHI-JESS, COMMUNICATIONS-OR SUPPLEMENTAL AGENDA ITEMS, IF ANY (16) MATTERS WHICH A DIRECTOR WOULD LIKE STAFF TO REPORT ON AT A SUBSEQUENT MEETING (17) MATTERS WHICH A DIRECTOR MAY WISH TO PLACE ON A FUTURE AGENDA FOR ACTION AND STAFF REPORT 3 September 8, 1999 (18) FUTURE MEETING DATES The next Finance, Administration and Human Resources Committee Meeting is scheduled for October 13, 1999, at 5 p.m. (19) CLOSED SESSION During the course of conducting the business set forth on this agenda as a regular meeting of the Committee, the Ohair may convene the Committee in closed session to consider matters of pending real estate negotiations, pending or potential litigation, or personnel matters, pursuant to Government Code Sections 54956.8, 54956.9, 54957 or 54957.6, as noted. Reports relating to (a) purchase and sale of real property; (b) matters of pending or potential litigation; (c) employee actions or negotiations with employee representatives; or which are exempt from public disclosure under the California Public Records Act, may be reviewed by the Committee during a permitted closed session and are not available for public inspection. At such time as final actions are taken by the Committee on any of these isubjects, the minutes will reflect all required disclosures of information. ' ' A. Convene in closed session. 1. Confer with District's Labor Negotiator re Labor Negotiations and Update Labor Relations Resolution (Government Code Section 54957.6). 2. Confer with General Counsel re Claim of Crow-Winthrop Development Limited Partners (Government Code Section 54956.9(b)(1). 8. Reconvene in regular session. C. Consideration of action, if any, on matters considered in closed session. (20) ADJOURNMENT ·Notice To Committee Members: For any questions on the agenda or to place any items on the agenda, Committee members should contact the Committee Chair or Secretary ten days in advance of the Committee meeting. Committee Chair: Committee Secretary: Thomas Saltarelli Penny Kyle (949) 833-9200 (714) 593-7130 4 September 1 , 1999 October Agency-wide Communications Survey Information October Quarterly Report of General Manager Approved Action Purchases October Update on Labor Negotiations Information/ Action October Update of Human Resources Policies & Purchases Action October Salary Equity Adjustments Action November Update on Labor Negotiations Information/ Action November 1998-99 Comprehensive Annual Report Action November 1999-00 First Quarter Operational & Financial Action Report December Quarterly Investment Program Report Information CSDOC • P.O. Box 8127 • Fountain Valley, CA 92728-8127 • (714) 962-2411 ·~ MINUTES OF FINANCE. ADMINISTRATION AND HUMAN RESOURCES COMMITTEE MEETING Orange County Sanitation District Wednesday, July 14, 1999, 5:00 p.m. A meeting of the Finance, Administration and Human Resources Committee of the Orange County Sanitation District was held on July 14, 1999 at 5:00 p.m., in the District's Administrative Office. (1) The roll was called and a quorum declared present, as follows: FAHR COMMITTEE MEMBERS: OTHERS PRESENT: Directors Present: Thomas Saltarelli, Chair Mark Leyes, Vice Chair Shawn Boyd John M. Gullixson Shirley McCracken Mark A. Murphy James W. Silva Peer Swan, Board Vice Chair John J. Collins, Past Board Chair Directors Absent: Jan Debay, Board Chair (2) APPOINTMENT OF CHAIR PRO TEM No appointment was necessary. Thomas Woodruff, General Counsel Don Hughes Gerald Nichols Arthur Newsham Steve Sheldon Russ Behrens Tom Dawes STAFF PRESENT: Don McIntyre, General Manager Blake Anderson, Assistant General Manager David Ludwin, Director of Engineering Mike Peterman, Director of Human Resources Gary Streed, Director of Finance Michelle Tuchman, Director of Communications Patrick Miles, Director of Information Technology Bob Ooten, Director of Operations & Maintenance Mike White, Controller Steve Kozak, Financial Manager Lisa Tomko, Human Resources Manager Marc Dubois, Purchasing Manager Jim Herberg, Engineering Supervisor John Swindler, IT Manager Penny Kyle, Committee Secretary OCSD • P.O. Box 8127 • Fountain Valley, CA 92728-8127 • (714) 962-2411 Minutes of the Finance, Administration and Human Resources Committee Meeting Page2 July 14, 1999 (3) PUBLIC COMMENTS Russ Behrens spoke to the Directors regarding the on-going issue with Crow Winthrop Development Limited Partnership and the Michelson Pump Station. He stated he was now representing Crow Winthrop and requested that negotiations be reopened for a possible equitable solution instead of costly litigation. (4) RECEIVE, FILE AND APPROVE MINUTES OF PREVIOUS MEETING It was moved, seconded and duly carried to approve the minutes of the June 9, 1999 Finance, Administration and Human Resources Committee meeting, as corrected and revised. (5) REPORT OF THE COMMITTEE CHAIR The Committee Chair had no report. (6) REPORT OF THE GENERAL MANAGER The General Manager reported on the Huntington Beach closure due to high bacterial counts in the water that began on July 1. Staff has discovered a break in one of the State Beach restroom laterals, which is probably the reason for the bacteria problem. Measures are underway to repair the break but further monitoring is continuing to make sure there are no other breaks. (7) REPORT OF ASSISTANT GENERAL MANAGER Mr. Anderson reported on a draft resolution regarding water bond issues that was reviewed by the OMTS Committee and would be going to the full Board for adoption. (8) REPORT OF DIRECTOR OF FINANCE The Director of Finance stated that the rolling agenda incorrectly noted there would be no November 10, 1999 meeting. At this time the FAHR Committee is still scheduled to meet on November 10, 1999. (9) REPORT OF DIRECTOR OF HUMAN RESOURCES The Director of Human Resources had no report. (10) REPORT OF DIRECTOR OF COMMUNICATIONS The Director of Communications, Michelle Tuchman, reported there has been a lot of media activity recently. With regard to the Huntington Beach closure, the Register was first to announce the closure on July 2. The Times, the Huntington Beach Independent, KCAL - Channel 9 News and CNN ran subsequent stories the following week. , Minutes of the Finance, Administration and Human Resources Committee Meeting Page 3 July 14, 1999 It was further reported that ABC had interviewed Charlie McGee, Laboratory Supervisor, regarding a paper he had co-authored on organics in the surf zone. Ms. Tuchman then announced the District's booth at the Orange County Fair had received four first-place blue ribbons for Overall Best of Show, Knowledgeable Friendly Personnel, Most Educational and Most Interactive. (11) REPORT OF GENERAL COUNSEL Mr. Woodruff advised the Committee that Senator Kelly was authoring a bill with regard to Directors' compensation. (12) CONSENT CALENDAR ITEMS (Items A-D) A. FAHR99-51: Receive and file Treasurer's Report for the month of June 1999: The Treasurer's Repc>rt 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. B. FAHR99-52: Receive and file Certificates of Participation (COP) Monthly Report. C. FAHR99-53: Receive and file Employment Status Report as of June 23, 1999. D. FAHR99-54: Receive and file report of General Manager approved purchases in amounts exceeding $50,000 in accordance with District's purchasing policies. Motion: END OF CONSENT CALENDAR Moved, seconded and duly carried to approve the recommended actions for items specified as 12(A) through 12(0) under Consent Calendar. (13) ACTION ITEMS (Items A -F) A. FAHR99-55: Adopt Resolution No. OCSD 99-_, Authorizing the District's Treasurer to Invest and/or Reinvest District's Funds; Adopting District's Investment Policy Statement and Performance Benchmarks; and Repealing Resolution No. OCSD 98-40. Motion: Moved, seconded and duly carried to approve staffs recommendation. Minutes of the Finance, Administration and Human Resources Committee Meeting Page 4 July 14, 1999 B. FAHR99-56: Approve agreement with Irvine Ranch Water District {IRWD) in connection with transferring assets and service responsibility for Park Place {Michelson Station) Service Area to IRWD. This item was removed from the agenda by staff without discussion or action. C. FAHR99-57: Adopt Resolution No. OCSD 99-_, Establishing Policies and Procedures for the Award of Purchase Orders and Contracts; Award of Public Works Project Contracts; Award of Professional Services Contracts; Delegation of Authority to Implement Said Policies and Procedures; and Repealing Resolutions Nos. OCSD 98-8, OCSD 98-12, OCSD 98-22, and OCSD 98-43. Motion: Moved, seconded and duly carried to refer this item to the Planning, Design and Construction Committee for resolution of their concerns and then bring back to the Finance, Administration and Human Resources Committee in September, 1999. D. FAHR99-58: Mr. Art Newsham and Mr. Gerald Nichols addressed the Committee and presented their request and arguments in support of receiving a full waiver of any sewer connection fee for every parcel in the Yorba Linda area that has paid service charges since 1990, even though not connected to the District's system. After considerable discussion among Directors, including a report and opinion from General Counsel, the Committee took the following actions: MOVED, SECONDED AND UNANIMOUSLY ADOPTED to recommend to the Board of Directors that the request of the homeowners for a full waiver of connection charges be denied. FURTHER MOVED, SECONDED AND UNANIMOUSLY ADOPTED to recommend to the Board of Directors that it approve, in concept, the District's refund of monies erroneously paid by property owners that were not connected to the District's system, subject to the specific terms, as approved and as described below. FURTHER MOVED, SECONDED AND UNANIMOUSLY ADOPTED to recommend to the Board of Directors that the District also pay to the qualifying property owners, interest at a rate equal to the U.S. Treasury 90-day rate, on the sums to be refunded. FURTHER MOVED, SECONDED AND UNANIMOUSLY ADOPTED to recommend to the Board of Directors that the District provide written notice of an offer to each affected property owner determined to have erroneously paid sewer service charges to the District; that for a period of four (4) years, ending September 1, 2003, the District will, at the election of the property owner, either: {a) refund in cash, plus interest thereon, the amount paid to the District as sewer service charges by the current property owner for the past four {4) years, or the number of years that the current owner has owned the property and paid the charges, whichever is lesser; or (b) apply an amount equal to the total amount of sewer service charges paid for each parcel, plus interest thereon, by all property owners since 1990-91, as a credit against the amount of sewer capital facilities capacity Minutes of the Finance, Administration and Human Resources Committee Meeting Page 5 July 14, 1999 charges (connection charges) to be paid to the District at the time of connecting to the District's system. FURTHER MOVED, SECONDED AND UNANIMOUSLY ADOPTED that the Staff be directed to: a) Request an updated listing from the Yorba Linda Water District on property addresses not connected to the local sewer system within Revenue Area No. 2; b) Identify those property owners from this listing whose sewer service fee has not already been removed from the County property tax roll, and contact them for verification of information; c) Remove these addresses from the County property tax roll for future sewer service fee billings after receiving confirmation of no connection from the property owners; d) Implement a method to receive connection information from the City so that properties are reinstated to the tax roll when connected; and, FURTHER MOVED, SECONDED AND UNANIMOUSLY ADOPTED that Staff be directed to develop a program for obtaining information on property addresses throughout the rest of the District boundaries, except for Revenue Area 14, that are also not connected to the local sewer service system and attempt to verify this information with the property owner for the purpose of removing these properties from the County property tax roll to eliminate future service fee billings. E. FAHR99-59: Adopt Ordinance No. OCSD-10, Amending Table Band Table C of Ordinance No. OCSD-06, Relating to Industrial Dischargers, Source Control, Non-Compliance Sampling Fees, and Class I and Class II Permittee Charges for Use. Motion: Moved, seconded and duly carried to approve staff's recommendation. F. FAHR99-60: 1) Authorize Contracts/ Purchasing Manager to proceed with a pilot procurement card program with selected staff utilizing the American Express procurement card program for a six-month period effective August 1, 1999; and, 2) Authorize the Contracts / Purchasing Manager to implement a full-scale procurement program if said program suggests benefits of costs savings and staff time. Motion: Moved, seconded and duly carried to approve staffs recommendation. However, staff was directed to bring the pilot program results back to the FAHR Committee before proceeding with implementation of a full-scale program. Minutes of the Finance, Administration and Human Resources Committee Meeting Page6 July 14, 1999 (14) INFORMATION PRESENTATIONS a. FAHR99-61: Data Warehouse Demonstration No presentation was given on this item. b. FAHR99-62: Groundwater Replenishment System Governance Review Blake Anderson, Assistant General Manager, gave a brief report on the development and direction of the Joint Groundwater Replenishment System Cooperative Committee (15) OTHER BUSINESS, COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY Gary Streed, Director of Finance, answered Director Shawn Boyd's questions regarding the District's Letter of Credit for the Series A COP issue. (16) MATTERS WHICH A DIRECTOR MAY WISH TO PLACE ON A FUTURE AGENDA FOR ACTION AND STAFF REPORT Director Swan requested reports be prepared on several issues, including how the District is financed, letters of credit, budgets, special issues related to Revenue Areas 13 and 14, etc. (17) MATTERS WHICH A DIRECTOR WOULD LIKE STAFF TO REPORT ON AT A SUBSEQUENT MEETING There were none. (18) CONSIDERATION OF UPCOMING MEETINGS The next FAHR Committee meeting is scheduled for September 8, 1999 at 5:00 p.m. (19) CLOSED SESSION The Chair reported to the Committee the need for a Closed Session, as authorized by Government Code Section 54957.6, to discuss and consider the items that are specified as Item 19(A)(1), (2), (3) and (4) on the published Agenda. The Committee convened in closed session at 7:53 p.m. Confidential Minutes of the Closed Session held by the Finance, Administration and Human Resources Committee have been prepared in accordance with California Government Code Section 54957.2, and are maintained by the Board Secretary in the Official Book of Confidential Minutes of Board and Committee Closed Meetings. Minutes of the Finance, Administration and Human Resources Committee Meeting Page 7 July 14, 1999 At 8:48 p.m., the Committee reconvened in regular session. (20) ADJOURNMENT The Chair declared the meeting adjourned at approximately 8:48 p.m. Submitted by: /) I , ;2,t?J,~ H:\wp.dle\agende'l'AHR'IFahrllPWPmiM'071400 FAHR MIN.doc FAHR COMMITTEE AGENDA REPORT Orange County Sanitation District FROM: Mike Peterman, Director of Human Resources Originator: Patty Steeves, Human Resources Analyst Meeting Date 9/8/99 Irlt~(,~r SUBJECT: EMPLOYMENT STATUS REPORT AS OF AUGUST 17, 1999 GENERAL MANAGER'S RECOMMENDATION Receive and file the Employment Status Report. SUMMARY Total FTE headcount at the District as of August 17, 1999 was 498.75. PROJECT/CONTRACT COST SUMMARY Not applicable. BUDGET IMPACT D This item has been budgeted. (Line item: ) D This item has been budgeted, but there are insufficient funds. D This item has not been budgeted. [8J Not applicable (information item) ADDITIONAL INFORMATION To Bd. of Dir. Item Number The District had a full-time equivalent (FTE) headcount of 498.75 as of August 17, 1999. The actual number of employees was 512. The annual turnover rate is 5.5%. There were two promotions for the following positions: • From: To: ., From: To: Project Specialist (Information Technology Administration) Information Technology Manager (Customer & Network Support) Intern (Environmental Compliance & Monitoring) Environmental Specialist II (Environmental Compliance & Monitoring) C:ITEMP\Statusrpt9899mtg.dot Revised: 8/20/98 Page 1 There were two reassignments for the following positions: • From: To: Pump Power Operator (Cogeneration) Plant Operator (Operations & Maintenance) • From: To: Collection Facilities Worl<er I (Collection Facilities Maintenance) Operator in Trair.iing (Operations & Maintenance) There were five new employees hired in July/August, 1999: • Training Specialist (Human Resources & Employee Development) • Engineer (Design & Planning Engineering) • Associate Engineer Ill (Design & Planning Engineering) • Engineering Supervisor (Design & Planning Engineering) • Safety Specialist ( Safety & Emergency Response) ALTERNATIVES Not applicable. CEQA FINDINGS Not applicable. ATTACHMENTS August 17, 1999 Employment Status Report. Performance compared to 3-Year Staffing Plan. C:\TEMP\Slatusrpt9899mtg.dot Revised: 6/20198 Page2 8/17/99---4:11 PM Employment Status Report Regular Regular Actual Vacant Budget Poshlons Regular Part-time Part-time FTE Posh/ans FTE FTE FTE FTE wlln Final plan .. Full-time 20hours 30hours Contra.cl Intern LOA Count FY99-00 98-99 99-00 00-01 01-02 IFY01·02J 110 • General Management Admin 4.00 0.00 0.00 0.00 0.00 0.00 4.00 0.00 4.00 4.00 4.00 4.00 0.00 Total General Manaqement 4.00 0.00 0.00 0.00 0.00 0.00 4.00 0.00 4.00 4.00 4.00 4.00 o.oo 21 o -Finance Administration 4.00 0.00 0.00 0.00 0.00 0.00 4.00 0.00 4.00 4.00 4.00 4.00 0.00 220 • Accounting 16.00 0.00 0.00 0.00 0.00 0.00 16.00 0.00 19.00 16.00 16.00 16.00 0.00 230 • Purchasing & Warehousing 13.00 1.00 0.00 0.00 0.00 0.00 14.00 3.50 15.00 17.50 17.50 17.50 3.50 Total Finance 33.00 1.00 0.00 0.00 0.00 0.00 34.00 3.50 38.00 37.50 37.50 37.50 3.50 310 • Communications 8.00 0.00 0.00 0.00 0.00 1.00 9.00 0.00 10.75 9.00 9.00 9.00 0.00 Total Communications 8.00 0.00 0.00 0.00 0.00 1.00 9.00 0.00 10.7S 9.00 9.00 9.00 0.00 410 • General Services Admin 3.00 0.00 0.00 0.00 0.00 1.00 4.00 -3.00 6.00 1.00 0.00 0.00 -4.00 420 -Collection Facilities Mice 16.50 0.00 0.00 0.00 0.00 1.00 17.50 0.00 18.50 17.50 19.50 19.50 2.00 430 -Plant Maintenance 29.50 0.00 0.00 0.00 0.00 0.00 29.50 0.00 38.50 29.50 29.50 28.50 -1.00 Total General Services 49.00 0.00 0.00 0.00 0.00 2.00 51.00 -3.00 63.00 48.00 49.00 48.00 -3.00 510 • HR & Employee Development 9.00 0.50 0.75 0.00 0.00 0.00 10.25 0.00 11.75 10.25 10.25 10.25 0.00 Total Human Resources 9.00 0.50 0.75 0.00 0.00 0.00 10.25 0.00 11.75 10.25 10.25 10.25 0.00 610 -Technical Services Admin 2.00 0.00 0.00 0.00 0.00 0.00 2.00 0.00 4.75 2.00 2.00 2.00 0.00 620 -Environmental Compliance & Moni1 18.00 0.00 0.00 0.00 1.00 0.00 19.00 1.50 18.00 20.50 20.50 20.50 1.50 630 -Environmental Laboratory 28.00 2.50 0.00 0.00 0.50 0.00 31.00 1.00 34.00 32.00 32.00 32.00 1.00 640 • Source Control 33.00 0.00 0.75 0.00 0.00 0.00 33.75 0.00 36.75 33.75 33.75 33.75 0.00 650 -Safety & Emergency Response 6.00 0.00 0.00 0.00 0.50 0.00 6.50 1.00 5.00 7.50 7.50 7.50 1.00 0.00 Total Technical Services 87.00 2.50 0.75 0.00 2,00 0.00 92.25 3.50 98.50 95.75 95.75 95.75 3.50 710 -Engineering Administration 3.00 0.00 0.00 0.00 0.00 0.00 3.00 0.00 3.00 3.00 3.00 3.00 0.00 720 -Planning & Design Engineering 30.00 0.00 0.75 0.00 0.50 0.00 31.25 4.00 27.25 35.25 35.25 35.25 4.00 730 -Construction Management 32.00 0.00 0.00 0.00 0.00 1.00 33.00 3.75 37.00 36.75 36.75 36.75 3.75 Total Engineering 65.00 0.00 0.75 0.00 0.50 1.00 67.25 7.75 67.25 75.00 75.00 75.00 7.75 810 • 0 & M Administration 2.00 0.00 0.00 0.00 0.00 0.00 2.00 0.00 2.00 2.00 2.00 2.00 0.00 820 -0 & M Process Support 8.00 0.00 0.00 0.50 0.50 0.00 9.00 1.00 11.25 10.00 9.25 9.25 0.25 830 -Plant 1 Operations 31.00 0.50 0.00 0.00 0.00 1.00 32.50 0.83 37.00 33.33 34.33 34.33 1.83 840 -Plant 2 Operations 39.00 0.00 0.00 0.00 0.00 0.00 39.00 0.33 43.00 39.33 37.33 37.33 -1.67 850 -Mechanical Mtce 45.50 0.00 0.00 0.00 0.00 0.00 45.50 0.00 52.50 45.50 45.50 45.50 0.00 860 • Electrical & Instrumentation Mice 55.50 0.00 0.00 0.00 0.00 0.00 55.50 0.00 58.50 55.50 55.50 55.50 0.00 870 -Cogeneration 10.00 0.00 0.00 0.00 0.00 0.00 10.00 0.34 11.00 10.34 10.34 10.34 0.34 880 -Air Quality & Special Projects 9.00 0.00 0.00 0.00 0.50 0.00 9.50 0.00 8.00 9.50 9.50 9.50 0.00 Total Operations & Maintenance 200.00 0.50 0.00 0.50 1.00 1.00 203.00 2.50 223.25 205.50 203.75 203.75 0.75 910 • IT Admin 2.00 0.00 0.00 0.00 0.00 0.00 2.00 0.00 2.00 2.00 2.00 2.00 0.00 930 • Customer & Network Support 11.00 0.00 0.00 0.00 0.00 1.00 12.00 3.00 11.00 15.00 15.00 15.00 3.00 940 -Programming & Database Sys 6.00 0.00 0.00 0.00 0.00 0.00 6.00 1.00 6.00 7.00 7.00 7.00 1.00 950 -Process Controls Integration 8.00 0.00 0.00 0.00 0.00 0.00 8.00 1.00 7.00 9.00 9.00 9.00 1.00 Total Information Technoloqy 27.00 0.00 0.00 0.00 0.00 1.00 28.00 5.00 26.00 33.00 33.00 33.00 5.00 Total Staffing 482.001 4.501 2.251 o.5ol 3.501 6.00 498.75 19.25 542.50 518.00 517.25 516.25 17.50 Original 5-Yr Plan Goal 549.00 521.50 515.50 507.50 g:\excel.dta\hr\51 O\steeves\'.3•Year Slaffing Plan Pe rfo rmance to 3-Year Staffing Pl a n --------. . ---.. .. ---. . --. - 550 540 •• ...... ...... 530 ..... ..... -- 520 ...... --. -. -----·---. -·-----·---. -··-· -·-. -. -· -• 510 500 490 480 +--FTE Headcount --• --3 Year Staffing Plan 470 J A SON DJ F MAM J JASON DJ F MAM J I FY 98-99 I FY 99-00 I 1 I j FAHR COMMITTEE Meeting Date 09/08/99 AGENDA REPORT It~ Number '9-,~ Orange County Sanitation District FROM: Gary Streed, Director of Finance Originator: Steve Kozak, Financial Manager SUBJECT: QUARTERLY INVESTMENT MANAGEMENT PROGRAM REPORT FOR THE PERIOD APRIL 1, 1999 THROUGH JUNE 30, 1999 GENERAL MANAGER'S RECOMMENDATION Receive and file the Quarterly Investment Management Program Report for the period April 1, 1999 through June 30, 1999. SUMMARY Section 15.0 of the District's Investment Policy includes monthly and quarterly reporting requirements for the District's two investment portfolios. These two funds, the "Liquid Operating Monies," and the "Long-Term Operating Monies," are managed by PIMCO, the District's external money manager. The ongoing monitoring of the District's investment program by staff and Callan Associates, the District's independent investment advisor, indicates that the District's investments are in compliance with the District's 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 District to meet its operating expenditure requirements for the next six months. The District's portfolios do not include any reverse repurchase agreements or derivative securities. PROJECT/CONTRACT COST SUMMARY NIA BUDGET IMPACT D This item has been budgeted. D This item has been budgeted, but there are insufficient funds. D This item has not been budgeted. ~ Not applicable (information item) H:lwp.dtalfin\210\kozak\Quart8ftylnvMgmtReport9-99.doc Revised: 1 /5/98 Page 1 -To Bd. 09/22/99 Item Number ADDITIONAL INFORMATION Performance Reports The Quarterly Strategy Review, prepared by PIMCO, and the Investment Measurement Quarterly Review, prepared by Callan Associates, are attached for reference. Also attached are four comparative bar charts which depict the sector diversification and credit quality of the District's portfolios, as of March 31, 1999, and June 30, 1999. The Liquid Operating Monies portfolio, with an average maturity of 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 performance summary of the District's portfolios as compared to their benchmarks for the period April 1 through June 30, 1999. Portfolio Performanc~ Summary Quarter Ended June 30, 1999 -Liquid Operating Monies (%) Long-Term Operating Monies(%) Total Rate Total Rate of of Return Benchmark11' Return Benchmark<1> 3 Months 1.2 1.1 0.1 0.2 6 Months 2.3 2.2 0.5 0.6 9 Months 3.7 3.4 1.1 1.2 12 Months 5.2 4.7 5.0 4.9 Since inception 30 Sept. 95 5.5 5.1 6.4 6.1 Market Value per PIMCO 30 June 99 $19.0M $305.9M Average Quality "AA+" ''AAA" Current Yield(%) 5.26 6.21% Estimated Yield to Maturity(%) 5.32 5.90 Quarterly Deposits (Withdrawals) Estimated Annual Income $1 .0M $19.0M (1) Benchmarks: • Liquid Operating Portfolio: 3-Month Treasury Bill Index • Long-Term Operating Portfolio: Merrill Lynch Corp/Govt 1-5 Year Bond Index Market Recap Interest rates rose sharply during the second quarter of 1999 as continued rapid growth in the U.S. economy, and signs of recovery in overseas markets, heightened concern that the Federal Reserve would boost interest rates to prevent a resurgence in inflation. H:\wp dtalfin\21 0\kozak\QuarterlylnvMgmtReport9-99.doc Revised: 1/5/98 Page 2 On the last day of the quarter, the Fed raised the federal funds rate 25 basis points, from 4.75% to 5.00%, in a pre-emptive move to control inflation. Rising interest rates created an unfavorable setting for bonds in the second quarter, affecting all fixed income market sectors. Rates rose across the entire Treasury yield curve, driven largely by the belief of investors that the Fed would raise interest rates. As depicted in the attached comparative graph of the Historical Yield Curve, the yield on the 30-year Treasury benchmark jumped 34 basis points when compared to the end of the first quarter 1999 (5.62%), ending the second quarter at 5.96%. Yields on 10- year Treasury bonds ended the quarter at 5.78%, a climb of 56 basis points from the end of the first quarter (5.23%). Shorter rates showed similar significant increases. The 3-month Treasury rate increased by 31 basis points (from 4.46% to 4.77%); the 6-month rate jumped a full 51 basis points (from 4.52 % to 5.03%); and the 1-year rate rose 36 basis points (from 4.70% to 5.06%). For the Long-Term Operating Monies portfolio, PIMCO maintained a weighted maturity or duration slightly above the duration index (2.4 vs. 2.3 years}, emphasizing holdings in mortgage-backed bonds, investment grade corporate notes, and U.S. Agency securities. The performance of the portfolio lagged its benchmark by ten basis points for the second quarter (0.10% vs. 0.20%). Generally, the slight under-performance of the Long-Term portfolio in the short- term was due to: First, the above-index duration maintained by PIMCO, which detracted from returns on the margin as yields rose, especially in June. Since bond prices and yields move in opposite directions, bond prices fell as yields rose. In June, the price decline was greater than the income earned on the bonds, and total return declined for the quarter. Second, PIMCO's emphasis on mortgage and corporate holdings, as these investment sectors under-performed the index during the month of June. In the long-term, by comparison, PIMCO has outperformed the index by 29 basis points on an annualized basis since inception of the investment program in September 1995. For the Liquid Operating Monies portfolio, PIMCO used a duration posture slightly above index (approximately 130 days vs. 90 days), emphasizing slightly longer short-term U.S. Agency discount notes and high-quality corporate commercial paper than the index. This added returns to the portfolio, which slightly outperformed its benchmark (1.2% vs. 1.1 %) for the second quarter. Market Outlook Forecasts from PIMCO report that economic expansion will continue, though at a slower pace, as higher interest rates begin to slow consumer and investment spending. Moderating growth and relatively low inflation will keep interest rates near their current levels over the coming months, making yield more important than price movement in determining portfolio returns. H:\wp,dta\fin\21 0\kozak\QuarterlylnvMgmtReport9-99.doc Revised: 1/5/98 Page 3 The PIMCO investment strategy targets portfolio duration slightly above index to take advantage of higher yields provided by longer maturity securities. PIMCO indicates that they will emphasize short maturity holdings in investment-grade corporates and adjustable rate mortgage securities, and longer maturity holdings in U.S. Agency debentures and high-quality asset backed and mortgage backed securities. The attached letter from PIMCO provides a more detailed description of second quarter market conditions, portfolio returns, future market outlook, and their recommended investment strategy for the District's Long-Term Operating Monies portfolio. Portfolio Market Values Comparative marked-to-market quarter-end portfolio values are shown in the table below, and in the attached bar chart. ALTERNATIVES N/A CEQA FINDINGS N/A ATTACHMENTS 1. PIMCO Report 2. Callan Report Quarter Ending 30 June 98 30 Sept. 98 31 Dec. 98 31 March 99 30 June 99 Liquid Operating Monies ($M) 18.1 18.4 18.6 18.8 19.0 3. Quarter End Portfolio Market Value Bar Chart 4. Four Comparative Bar Charts 5. Historical Yield Curve Graph 6. PIMCO Letter dated August 26, 1999 SVK:lc H:lwp.dtalfin\21 0lkozak\QuarterlylnvMgmtReport9-99,doc Revised: 1/5/98 Long-Tenn Operating Monies ($M) 311.5 282.8 304.5 305.8 305.9 Page4 Prepared by Finance, 8/17/99, 3:07 PM OCSD Investment Management Program Quarter End Portfolio Values (Marked-to-Market) $350,000,000 1~ft.•=c, -"~--~~ "" -,. ,,., ~ $300,000,000 $250,000,000 $200,000,000 $150,000,000 $100,000,000 $50 I 000 I 000 $0 30 Jun 98 30 Sep 98 31 Dec 98 31 Mar 99 30 Jun 99 I CJ Liquid Operating Monies lfJ Long-Term Operating Monies I G:\excel.dta\fin\2220\geggi\Finance\investmgmtprogram Prepared by Finance, 8/17/99, 2:53 PM OCSD Liquid Operating Monies Portfolio 100 . Investment Diversification 1 100100 90 80 70 .-. ~ 60 I 0 .._. I ~ II• 3/31/99 +-' C 50 I Q.) I ~ II~ 6/30/99 0 s... 40 Q.) 0.. 30 20 10 0 0 0 0 0 0 0 0 0 0 0 Govt Mtg Corp Non US$ Other Net Cash Equivalent G:\excel.dta\fin\2220\geggi\Finance\Portfolio short term Prepared by Finance, 8/17/99, 2:52 PM 100 90 80 ...--... 70 ?ft. 60 ..._.. ~ C 50 Q) u 40 L.. Q) Q. 30 20 I I 10 0 ~ ----· Govt OCSD Long-Term Operating Monies Portfolio Investment Diversification ~ Q 11 -------· ___ _.. 0 0 0 0 Mtg Corp Non US$ Other G:\excel.dta\fin\2220\geggi\Finance\Portfolio long term graph Net Cash Equivalent D 3/31/99 ~ 6/30/99 Prepared by Finance, 8/26/99, 10:17 AM OCSD Liquid Operating Monies Portfol'io Investment Credit Quality 100 90 80 70 ...--.. ?ft. 60 ::: I 11• 3/31/99 C: so I Q) 43 II~ 6/30/99 (.) 39 L.. 40 I ,.,..,. Q) I 32 a. I 30 -------------22 21 .. --------.. ----------20 10 ~ I ~ I ~ 3 3 0 A1/P1 AAA AA A G:\excel.dta\fin\2220\geggi\Finance\Portfolio short term Prepared by Finance, 8/26/99, 10:17 AM OCSD Long-Term Operating Monies Portfolio Investment Credit Quality 100 90 80 70 70 ..-.. ~ 60 ~ I ID 3/31/99 ....., ~ I I~ 6/30/99 C 50 Q) 0 L.. 40 Q) a. 30 ·----· 20 I I r-~~~ ..... 19 20 10 2 2 0 A1/P1 AAA AA A G:\excel.dta\fin\2220\geggi\Finance\Portfolio long term graph Prepared by Finance, 8/5/99, 8:54 AM 6.50 6.25 6.00 5.75 -5.50 ~ C ..I 5.25 w > 5.00 4.75 4.50 4.25 4.00 0 E M 0 E co ... >a 'II"' I HISTORICAL YIELD CURVE I ... >a N ... >a M ... >a '111:t ... >a IO ... >a .... -+-31-Dec-98 -i\-31-Mar-99 -30-Jun-99 G:\excel.dta\fin\2220\geggi\Finance\HistoricalTREASURYyieldcurve ~ 0 'II"' ... >a 0 N ... >a 0 M August 26, 1999 Mr. Gary Streed Director of Finance Orange County Sanitation District 10844 Ellis Avenue Fountain Valley, CA 92728-8127 Dear Gary: PACIFIC INVESTMENT MANAGEMENT COMPANY 840 Newport Center Drive Post Office Box 6430 Newport Beach California 92658-6430 949 · 640-3031 Fax • 949 • 720-1376 I would like to take this opportunity to review events in the bond market during the second quarter and to describe the investment strategy that PIMCO utilized on behalf of the Sanitation District during the period. Finally, I would like to describe PIMCO's current economic outlook and the manner in which our economic outlook, combined with relative value opportunities in the bond market, lead to our investment strategy going forward. Bond Market Review: Concern that the continued health of the U.S. domestic economy would spark inflation and lead the Federal Reserve Board to tighten monetary policy caused interest rates to rise all across the maturity spectrum during the second quarter. U.S. interest rates rose by an average forty basis points in three-month to one-year Treasury bills. Rates rose by an average fifty-three basis points in two-year to ten-year Treasury notes. Rates rose by thirty-four basis points in the longest maturity thirty-year Treasury bond to end the period at 5.96 percent. Not surprisingly, given the dramatic rise in interest rates, the bond market turned in relatively poor performance over the period. The Merrill Lynch Government/Corporate bond index, the index against which PIMCO is measured for the Sanitation District's long-term portfolio, returned 0.22 percent for the quarter. (The 0.22 percent total return is the sum of the price return on the bonds in the index and the coupon return of the bonds in the index.) The increase in yields, which occurred over the period, led to a negative price return for the index of -1.269 percent. The coupon income of 1.497 percent for the index offset the price losses and led to the 0.22 percent total return for the period. As you recall, the Merrill index is made up of all existing Treasury bonds with maturities between one and five years, all agencies bonds with maturities between one and five years, and all investment-grade corporate bonds of the same maturities. The index is created on a market-value weighted basis so that Treasuries represent sixty-one percent of the index, agencies represent approximately fifteen percent of the index, and corporate bonds represent twenty-four percent of the index. Returns vary by security type. In the second quarter, for example, the total return of the Treasury component of the index was 0.26 percent return. The total return of the agency and corporate component of the index were 0.31 and 0.15 percent, respectively. Pacific Investment Management Company is a general partnership whose partners are PIMCO Management Inc. and PIMCQ Advisors LP. Mr. Gary Streed Orange County Sanitation District August 26, 1999 Page Two OCSD 's Second Quarter Return: As an active bond manager, PIMCO has three weapons within its strategic arsenal. The first strategy, duration, is the price sensitivity of the portfolio to changes in interest rates. Because price and yield changes move in opposite directions, we would choose to have an above-index duration posture ifwe forecasted a decline in interest rates. Likewise, we would choose to have a below-index duration posture if we forecasted an increase in interest rates. (Our duration strategy in the OCSD-Long term portfolio is limited to+/-.45 years around the index.) The second strategy, curve or maturity mix, involves investing more heavily in that segment of the yield curve that is expected to outperform. If, for example, PIMCO's outlook called for interest rates to decline more extensively in two-to-five year maturities than in other segments of the yield curve, we would invest more heavily in the intermediate segment of the curve. The final strategy, sector/issue selection, involves overweighting or underweighting a sector of the bond market. If, for example, PIMCO expected investment-grade corporates to outperform Treasuries, we would overweight the corporate sector. The extent of our overweight or underweight is limited by our desire to preclude any single strategy from significantly impacting return in the event that our outlook is wrong. During the second quarter, PIMCO's strategy for the OCSD Long-Term portfolio was to have a slightly longer-than-index duration posture in expectation of a modest decline in yields. Our duration was never more than 0.15 years above the duration of the index so that the cost of this strategy in terms of performance was less than five basis points. Our curve strategy was to have a broader-than-index exposure to maturities across the yield curve. This posture was modestly positive as rates rose the most in one to five year maturities. Finally, our sector strategy was to have greater-than-index exposure to agency debentures, corporate bonds and mortgage securities. For example, we held sixteen percent in agency securities rather than the fifteen percent represented i~ the index. We also held thirty-two percent in corporates securities as opposed to the twenty-four percent represented in the index. Finally, we held eighteen percent of mortgage securities that have no weighting in the Merrill 1-5 government/corporate index. While our decision to overweight agency securities proved positive, our sector strategy detracted from performance overall. The yield advantage to Treasuries available through corporates and mortgages failed to offset the price losses on these securities as credit spreads widened slightly over the period. The net result of our strategies over the quarter was to achieve a .1 percent total return underperforming the index by .1 percent. Clearly, while we strive to outperform the index every quarter, our true value is longer-term in nature. Since inception of our relationship, PIMCO has outperformed the index by 29 basis points on an annualized basis. Outlook and Strategy: During our secular forum that occurred in May, PIMCO shifted our long-term outlook to neutral from our previous bullish stance and expect 30-year Treasury yields to remain within a 5 percent to 6.5 percent band over the next three years. Inflation will remain near 2 percent. PACIFIC INVESTMENT MANAGEMENT COMPANY Mr. Gary Streed Orange County Sanitation District August 26, 1999 Page Three Outlook and Strategy: (Continued) The 17-year bull market in bonds, during which Treasury yields plunged from more than 15 percent in 1981 to below 5 percent last year, occurred within an environment of economic growth, rising productivity and disinflation driven by the spread of capitalism worldwide. There are now fewer countries left to embrace capitalism, and we do not see other major economic, political or social trends that will drive rates much below the bottom of our secular range. Meanwhile, disinflationary forces such as global excess capacity and productivity enhancements created by new technologies will limit rate increases. Our range-bound interest rate forecast is based on the view that forces of deflation and inflation are roughly in balance: • The global economy is safer than last year, when weak Asian economies, currency devaluations and falling commodity prices raised the specter of global deflation. • Fiscal stimulus and more than 300 separate central bank easings calmed financial markets and produced signs of recovery in Japan and several Pacific Rim countries. • Global reflation is unlikely due to excess supply and structural impediments to growth in Europe and Japan. • Inflexible labor markets in Europe will prevent assimilation of growth-producing new technologies, while Japan's high savings rates will frustrate fiscal and monetary stimulus. • The direction and momentum of the U.S. stock market will strongly influence our forecast. If recent gains in stocks continue, enhanced consumer confidence will lead to faster growth. A stronger economy would induce the Fed to tighten and push interest rates toward the top of our range. Economic expansion will continue, though at a slower pace, as higher interest rates reduce growth in consumer and investment spending. While the Fed may tighten further to help cool the economy, the central bank will not embark on a protracted series of rate hikes such as last occurred in 1994. Compared to 1994, real interest rates are higher, inflation is lower and recent monetary stimulus has been less substantial. Inflation will trend upward due to a leveling off of commodity prices after recent declines, but global excess capacity and technology-driven productivity gains will limit these increases. Moderating growth and relatively low inflation will keep interest rates near current levels over the next few months, making yield more important than price movement in determining portfolio returns. Prudent alternatives for generating extra yield include: premiums from written options; securities with embedded options such as mortgages; and higher-quality below-investment grade PACIFIC INVESTMENT MANAGEMENT COMPANY Mr. Gary Streed Orange County Sanitation District August 26, 1999 Page Four Outlook and Strategy: (Continued) and emerging market bonds. (We do not use options, below investment-grade securities or emerging market bonds in the OCSD portfolios.) In terms of the OCSD Long-Term portfolio, we will embark upon a slightly greater-than-index duration posture as opportunities allow. Recent rate moves have pushed yields to near to the top of our secular range. The duration extension will be extremely modest as we anticipate only a modest decline in yields. In terms of our curve strategy, we will maintain our broader-than-index posture as this allows us to minimize exposure to the segment of the curve most impacted by changes in monetary policy. In terms of sector, we will maintain our weighting to the mortgage sector anticipating that the yield enhancement available through these securities will allow us to add to total portfolio return. We will add to short-maturity corporate holdings to take advantage of the yield enhancement potential available in these bonds while avoiding significant price deterioration in the event that corporate spreads widen further. Our minimal overweight of agency debentures will also be maintained given their narrow yield advantage to Treasuries. Gary, I hope this information proves useful. I look forward to chatting with you in the near future. Sincerely, Rita J. Seymour Vice President RJS:ci Copy: Steve Kozak Joseph F oumier PACIFIC INVESTMENT MANAGEMENT COMPANY INVESTMENT MANAGEMENT PROGRAM Orange County Sanitation District STRATEGY REVIEW FOR THE PERIOD . . APRIL 1, 1999 -JUNE 30, 1999 ;\ FINANCE, ADMINISTRATION'& HUMAN RESOURCES COMMITTEE SEPTEMBER 8, 1999 ! 1140 Newport CPnter Drive Post Office Bo-. 6430 l'-iewport Beach C.-ilifnrnia 9265R-64J0 949 · b4Cl-30Jl .,..__ • .., .~ --~-.. .•. ,r•~ ~ r::-::,·'!.:I ',;r~_..7:· ,J ----;~,1;, _;1_-.. -9".ir:.~~---:;,~:,.:i!.1'1•j,·,,.·1')~:;;:.1·, ~l~)-1~':".:l ... 1j\1~f~~~·l "~ (', , ~?~\~\ml f.:'.:;.it:,;•,_, ·: .,_. ;:;~:·_.,p:;:,.:.I": .-i,;/:'.,:f~•·:'(r;f .),f >· ·i;:--'+:.".", ,:.::'.··, ·:·•,.'.'·/. <.;;-· :"~V!' :~ •,· ~-'··"':,fr--~·-·,,,.. ;o -•~:7-·: ... 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' • J ,.. .. ~ .. ~:ffl'ti!·i'.'~i:,t•:~1·!r,:,~!·•·."•~, -:, •. ::..i.______.. ~ .1 ,,, , , • • •• • 4 AGENDA BOND MARKET REVIEW II PERFORMANCE / PORTFOLIO REVIEW Ill CURRENT OUTLOOK/ STRATEGY PACIFIC INVESTMENT MANAGEMENT COMPANY' U.S. STRENGTH, INFLATION CONCERNS DROVE RATES HIGHER INTEREST RATES ROSE DRAMATICALLY IN THE SECOND QUARTER • Strong U.S. growth sparked inflation fears • Markets anticipated additional rate hikes by the Federal Reserve INTERMEDIATE RATES ROSE MOST 6.0 5.5 -1··--··---·,. ___ _ :,I! ~ iJ 5.0 > 4.5 4.0 ]Q '98 TRE;AJQl?,'Y ·Y/1f._L'D;'N,JOVEME,N.TS 30-Yr. T-Bond .. '• . " , ' •... .: '-+··, ··-·· 1-Yr. T-Bi/1 4Q '98 lQ '99 CHANGl:lN••TREASURY,•YIEl.D.S 5.97% .•. -·· .. .-· ·., 5.05% ........ ~ . ~ .. 2Q '99 125 ~''~·•-' -------------------------------- 100 V> ~ 75 Q) b0 C: "' 6 so 25 0 3 Mos. 1 Yr. SOURCE: Bloomberg 3 114 2 Yrs. 5 Yrs. 10 Yrs. 30 Yrs. I O 2 Q '99 l1l!I YTD I PACIFIC INVESTMENT MANAGEMENT COMPANY STRATEGY RECAP -SECOND QUARTER LONG-TERM OPERATING FUND Period Ended June 30, 1999 .. , ···-·· - -f ~ :·:-t POR;f F.OU.<;t$.TRtl.if£TJJ RE1c l·:1 " .. DURATION • SLIGHTLY-ABOVE-INDEX MATURITY MIX • BROADER-THAN-INDEX GREATER-THAN-INDEX EXPOSURE TO: • Corporate sector SECTOR/ ISSUE • • Agency securities • Mortgage sector 4 ··~. . .. ,,.. . -~:t:z R.EtAJiLVE1MPACJ I tj:f'' f( SEC.QNJl. QJl.~RI!E&fs. -19,99:; • SLIGHT NEGATIVE • SLIGHT POSITIVE • SLIGHT NEGATIVE PACIFIC INVESTMENT MANAGEMENT COMPANY ' STRATEGY RECAP -SECOND QUARTER LIQUID OPERATING FUND Period Ended June 30, 1998 DURATION • MATURITY MIX • SECTOR / ISSUE • :ri:;;:;;.,,t ·-·••-·1.• .•.. _ PQRT.f.OUQ STRUC:TUR€Uii:;• ' AT INDEX SLIGHTLY BROADER-THAN-INDEX GREATER-THAN-INDEX EXPOSURE TO AGENCY DISCOUNT NOTES AND COMMERCIAL PAPER 5 • • • RELATIYE IMPACT , $:fCO.NO ([V,A.llTEll/i; 1999 - NEUTRAL NEUTRAL SLIGHT POSITIVE PACIFIC INVESTMENT iviANAGEMENT COMPANY REVIEW OF PERFORMANCE Through June 30, 1999 • Long-Term Operating Fund Since* Inception 9/30/95 3 Yrs .* 2 Yrs.* 1 Yr. 6 Mos. 3 Mos. 6/30/99 Market Value Orange County Sanitation District (L-T) (%) 6.4 6.9 6.6 5.0 0.5 0.1 $305,910,619 Merrill 1 -5 Year Gov't. I Corp. Index (%) 6.1 6.4 6.2 4.9 0.6 0.2 • Liquid Operating Fund Since* Inception 9/30/95 3 Yrs.* 2 Yrs .* 1 Yr. 6 Mos. 3 Mos. 6/30/99 Market Value Orange County Sanitation District (Liq-op) (%) 5.5 5.5 5.4 5.2 2.3 1.2 $19,033,020 3 Month T-Bill (%) 5.1 5.1 5.0 4.7 2.2 1.1 • Annualized. 6 PACIFIC INVESTMENT MANAGEMENT COMPANY ' CURRENT OUTLOOK t I, E US; J;CQNQMIC EXPANSIQN,:MODE.RATES. _ CONSUMER SPENDING SLOWS BUSINESS INVESTMENT TRENDS LOWER FOREIGN TRADE DEFICIT CREATES ECONOMIC DRAG i · KANQE-BOUND0#.NTE((Es:f RA1:£S . ADDITIONAL FED TIGHTENING LIKELY GLOBAL INFLATION PRESSURES RELATIVELY MODERATE INTEREST RATE SECTOR ISSUE SELECTION i ,· STRA IEOY-",· • MODESTLY ABOVE-INDEX DURATION • BROADER-THAN-INDEX • PICK UP YIELD THROUGH AGENCY AND CORPORATE SECURITIES. CONTINUE TO LOOK FOR VALUE IN THE MORTGAGE SECTOR. 7 __] PACIFIC INVESTMENT MANAGEMENT COMPANY County Sanitation Districts of Orange County June 30, 1999 Capital Markets Review Active Management Overview Forev.1ord . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Domestic Fixed-Income ..................................................... 10 Asset Class Risk and Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Investment Manager Asset Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \ 2 Investmem Manager Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Manager Analysis PlMCO-Liq uid Operating Monies PIMCO-Liquid Operating Fund Bond Portfolio Characteristics Ponfolio Characteristics Detail ............................................. 14 15 16 ............................................... 17 CAPITAL <ETREVlEW A PL'BLICATION OF'CALLAN ASSOCIATES INC. AND THE CALLAN INVE~TMENTS IN~TITl'TE ---------------1 Second Quarter 19991..-------------- Neglected Toys Return to Favor Like a scene from Disney's Toy Story. equity investors set aside their Buzz Lightyear stocks last quarter and began to play again with th.cir longa.rejected roys of small cap and value. Th.ough still fa.'il:inaicd by the gigantic high ll!ch stocks with cool Intern~ gatlgeL'i. the market players realiud !hi! stocks largely ignored in the previous six quarters now offered more fun. Climbing consumer confidence .and strengthening Pacific markets during the quarter excited the demand for companies making basic widgets. Ncvenhelcss. in the midst of the market's changing mood. trnuble could not be rar away. In May. the sudden appearance of inflmion. the market's familiar Lhug that wantllnly deslruys stock valuations. bric:tly terrorized all or the toys vying fo r .mention. However. with lll!WS of 1ising productivity. sLOcks bounced back qukk.ly on rostun:d conlidem .. -c that Lhis threat hw.l no lasting grip. Covering the tup :?.rnlll larg.csl U.S.-trrukd stocks (exdm.ling AD Rs .mu \llhcr fon:ign shares). the Callan Broad Market Index finished Contents Foreign Stocks .............. . Foreign Bonds ............... . Alternative lnvesttnents .. . Real Estate .................... . the quarter with a 7 .75% gain. including dividends. Getting the most 3 play during the quarter. the Callan Mlcro Cap Index. which h.olds the next 1.000 largest 3 4 4 stocks hcneath the Broad Market (with an average weighted market cap of roughly $:?lKI million). leaped :?2.1141' in the quarter! Representing Lhc bottom I.SIMI stocks of !.he llrnad Markel. the Callan Small Cap Index also jumped an impressive l6.44%. In contrasL the Callan Large Cap Index of the Broad Market's top 150 stocksdn:w a more mndcst 53 5% gain. and the Callan Medlwn Cap Index of the m:xt largeSl 350 stocks w.lvanced 9.791k. While cum:nt ycur-to-<late returns for all nf the cap sectors are a.lmnsr even al about ll'h-. the smaller caps still suffer from "large cap"' envy left over from past years. In 1998. Large Cap's }6.76'« return belittled those of Medium Cap (+ 12.40%). Small Cap con1im1ed on page 2 The Shopping Spree Continues Stronger Economy Weakens Bonds The bond market remained in a slump throughout the sec- ond quarter. Prices 11n most bonds fell. sending their yields, which move in the opposite llin:ction. up sharply. Continued economic gmwth was the culpriL as Lhe U.S. economy remained strong and the revised estimate of lirst-quatter growth failed to ea.sc bond investor concerns that the economy will slow enough to n:stmin inllation. In response. the fed raised the fcdcrJI funds r.ite 25 bps lo 5% during the lasl week of the quarter. The Fed also announced in late June that iL changed iL~ tightening bias. which had been adopted al the end of May. to a neutral hias. The prospect of higher inllalion has sent inves- tors running oul ofhonds; con.~c- quenlly. inLen:st r.ites across the yield curve have risen. The 30- year Treasury bond yie Id reached a .19- month high llf 6. I 9'n-just lWll weeks hcfon: Lhc U.S. Fixed-Income Returns for Quarter Ended June 30, 1999 Last Quarter Lehman Bros LB Aggregate -0.88 LB Govt/Corp -1.10 LB Govt/Corp Inter -0.40 LB Govt/Corp Long -2.67 LB Govt -0.85 LB Corp · 1 .56 LB Mortgage -0.45 Salomon SSB Broad Inv Gr -0.93 SSB Hi Grade LT -3.56 Merrill Lynch ML Treas 1-3 0.57 ML Hi Yld Mstr 0.67 quartt!r-end. ll closed the quarter at 5.97%. n:/lcct.ing a l:?5 bp incn:a.,;e fmm its all-time I\IW lln ()cluher 5'" 111' last year. The rise in yield~ c11ntrihuted to the ncgati ve n:tum~ across all investment grauc sectors. The Lehman Brothers Aggren.,ate Index { -11.l!M'H ) 1~11 for thl! second stcaight quarter. r-cw sectors have suffered as much this year as Tn:iL~uries. The Lehman Brothers Government Bond Index fell 0.85% fo r the quarter and is down 2.27% fur the year. The continued sell-off in Treasuries weighed heavily on other investment gr.idc sectors, comim1ed on Ptlfle 2 The U.S. economy continued to soar in the second quaner of 1999. with consumers spending more than they earned. The savings rate dmppc<l from an already spendthrift 2.4'k in the ftr:;t quarter of l997 lo -1.2'h-in May. the lowest level in post-war history. The consumer makes up roughly two-thirds of the domestic economy. but has accounted for almost all of the recent growth. In 1991!. consumer spending conlributed 3.3% to the overall real GDP growth of J.9%. In lhe first quarter of 1999. a. 4.5% coruribulinn from consumer spending was gruater than Lhe overall 4.3% growth in n:al GDP. Thi: tratlc deticil and inventory accumulation tlr.1ggcd tlown growth in the total economy. With the stock market doing the saving for cnnsumers. this rising wea.lth on paper hiL~ encouraged extravagant hahits.. Aid.ing and abcming the spent.ling binge was a surgi: in mllngage n:financing in 199K. which has since dlied up. Rising wealth is not the only reason for consumers' gitldy mllod. The unemployment rate is hLWl!ring near a generational low. infllll.inn refoses lo rear its ugly ht!ad. the stock market uintinues Lo n:ach new high:;. and n:al incomes are rising. W.:. appear lo be in the mitl<lle of a "goltlcn age" for the U.S. consumer. with seemingly no end in sight Early next yi.:ar the current expansion will become the longest ever. and despite unmistakable hawkishness on lhe part of the Federal Reserve. then: arc relati vcly few imbalances in the domestic economy. Although consumers an: saving loo liule and spending 1011 much (the ratio of non-murtgage debt to income has n:achctl a new high of 2 l.4'fr) and the stock market may be seriously overvalued, these imbalances arc the continued on pt1J:I! ../ SAN FR:\NCt:-CO MORRISTO\~"li ATLANTA DE'.\VEII 71 STEVE.'iSO", ST. Sl'ITE t:llkl SAN f'R..\:'<ICISCO i;_.\l.lt'OH'i(..\ 1),110=> ·l I ,;. 97 ,l.i;Ofill ww~·.r,1lla11.l·•11n Neglected Toys Return to Favor from page I (+4.07%) and Micro Cap (-4.23%). Within each cap sector liL~t quarter, investors focused on what were previously considered "boring" value stocks. Although such stocks do not L ypically offer glamorous stories of fast growth, perceptions of mounting global demand for mundane goods and services enticed investors to pick up these cheaply priced stocks. To isolate value from growth. Callan divides its capitalization indices evenly by price-to-book. creating sub-sectors or growth- and value-oriented stocks. In the latest quarter. the Callan Large/Medium Cap Value Index (+9.37%) easily outpaced the Callan Large/Medium Cap Growth Index ( + 3.33% ). after underperfonning this growth counterpart by 26.25% over the prior five quarters. Within the Small Cap index. however. the Callan Small Cap Value Index ( + 17 .81 % ) only slightly exceeded its growth rival (+15.16%). The strength or value was evident in the performance across the Broad Market's eleven economic sectors. For example. with it~ cominodity-{lliented industries. the Ba.sic Materials sector ( + 19 J)4%) was the star pe1former in the quarter. Within this sector. the particularly attractive industries were al111ni1111m (+40.89%). paper & forest pmduct.1· (+23.99%). and chemicals (+22.3i!%). The Capital Goods sector (+15.05%) was another favorite playground of investors. with strong support from it~ dirersifted ma111!fact111i11g (+22.::?.2'h·) Capitalization Sector Performance Second Quarter 1999 24% ,-----------------------. ~%+-----------------------.1 ~%+----r------------------- 18% ------< 16% t----1...... ____ ...J--------- E -14"4 +------------------ j 12% +------------------~ 10% +--------------!! ~ 8% +-------------- &% 4% 2% CAI large .... --] CAI Sm•II i CAI Medium! I -60'II, Perc1111t al Total Market Capltalizatron Stronger Economy Weakens Bonds __Jmmp11ge I 100% ~~ the Lehman Brothers Corporate Bond b1dex lost l .56<k and the Lehman Brothers Mortgage-Backed Securities Index dropped 0.45%. The corporate -··:::Sector was hu1t inore becausi: or slower tr.lding volumes and a heavy supply of =icw is.~ues ($84.3 billion) in the quarter. Also. after seeing liquidity forcorpomtes -'--=improvi: in the first quarter. the trend reversed itself as Wall Street dealers =111empli:d to rec.Juce their balance sheets. Mortgages outpc1formi:d other ·--::investment grade sectors because rising interest rates reduced pre-payment~ -.:oncems. The long end of the curve endured more pain as evidenced by the -----2.67'7o decrease in the Lehman Brothers Long Government/Corporate Index --versus a 0.40% loss for the Lehman Brothers Intermediate Government/ ~orporate Index. The high yidd sector was the one shining star for domestic fixed income ::=:::m the second q11arter. as the Merrill Lynch High Yield Master Index rose ... l67'7o. Spreads in the high yield market lightened on a relative basis as interest =--ates rose along the curve. Historically. high yield bonds have outperformed ::-:-5.nve~tment gmdc bond~ during periods of rising interest rJtcs. The lowest quality =ssues performed the best as they continue their rebound from a painful 3"1 -.iuarter l 998. One concern for the high yield market is that defaults arc running =11 a pace of 4.5'k,. up from 2% in 1997 and 3.4'k last year. Although the equity markets continue tu steam ahead. the credit markets ..atave taken a much mon: cautious stance. Investor fears of an overheating Economic Sector Performance -CAI Broad Second Quarter 1999 Basic Malerials Capial Goods Communicalion Services Energy Technology UU~ies T ransportalion Consume, Cyclical Financials Consunw Sl~les , !7,77% ::::~:;-'' 6_ 10"'- --'---' 5.10"'- 15.05% 13.18% 12.72% 12-29'11 11.24% 19.04% HeaHh C•e -3.32"1. []111111 t----. ------I--••---+----• ---+· ·5% °"" 5% 10"'. 15'11. 20% 11.11 ... 25% indust1y. In Lileir scr.unble for value stocks. investors tossed aside Health Care (-J.J2'n) iL~ the least appealing st.:ctor for the quarter. Hitting the ground hartlest were it~ ind11stries of major dmgs .-----· --------------. (-11.1!7'« l and himeclmolugy <-U.S. Equity Returns for Quarter 5.49~). Ended June 30, 1999 Notwilnslanding this quarter's revival of Woody the Cowboy. many of the market's Space Rangt.:rs still got to play. Technology (+I 2.29'R·) continued to excite dreams of fast-growing earnings. particularly within its cmnm1111ications equipmem industry (+29.96'h.) where Qualcomm Inc. rocketed Lo a IJ0.75'h gain. Some previously soaring superstars found out. though. thal they could not lly forever. While Microsoft (+ll.63'k) landed with style. the highly celebrated America Online crashed hard. losing 25.17'7r. Perhaps loo much cake and ice cream"! -CMR- Last Quarter Broad Ma[!set CAI Broad 7.75 Large Cap S&P 500 7.05 CAI Large 5.35 DJIA 12.53 Mid/Small Ca1:1 S&P MidCap 400 14.16 CAI Med 9.79 CAI Small 16.44 CAI Micro 22.04 Exchange Indices NYSE 7.79 AMEX 12.76 NASDAQ 9.21 Convertible lnd!i!X CSFB Conv Sec 7.54 economy and resurging inllation have conuihuted Lo a sell-off in the investment grade portion in the fixed-income market. One by-product of this rise in mtcs is that n:al r.i.tes in the U.S. arc now noticeably higher on a global basis. -CMR- U.S. Treasury Yield Curves: Second Quarter 1999 6.5 6.0 -5.5 C ,, • • 5_0 4.5 4.0 0 le -I I I ,.--- 5 ... ---------________ .,.. 10 ---6-Beginning 2nd Quarter --Ir -End 2nd Quarter 15 Maturity (Years) 20 25 30 Callan Associates Inc. 2 Asian Tigers Roar Again Non-U.S. equity markets continued their advance. with lhe MSCI EAFE Index gaining 2.54% in dollar lenns. but once again were overshadowed hy the continued bull run in U.S. equities. What this numhcr dues nm show. however. is the divergence in returns regionally within lhe EAFE markeL~. Europe. which led the charge in 1998. has failed to be a contributor in 1999, losing 0.3 l % and 2.419'c for the quarter aml lhe year, respectively. On the other hand. the Asian markets are re hounding strongly from their plunge last year. as the MSCI Pacific Ind.ex gained 9.55% and 21.R I% for the quaner and year- to~lare. The hl:sl performing developed market was Singapore (+45.49",f, ). while the worst pe,forming market was Ireland (-1 I. 13% ). Europe The European Central Bank eased interest rates 50 basis points c.arly in the quarter in its effort lo stimulate gmwth in the euro zone. The euro continued its slide against the dollar, closing the quarter at 1.0351 euro/dollar. fora loss of 4.5%. While the euro's fall Non-U.S. Equity Returns for Quarter Ended June 30, 1999 EAEE U.S. Dollar Local Currency EAFE Europe U.S. Dollar Local Currency EAFE Pacific U.S. Dollar local Currency Emerging Markets U.S. Dollar Last Quarter 2.54 5.74 -0.31 3.59 9.55 10.91 24.40 may pose political problems for Germany. its decline should help boost expons. which account for approxi- matdy one-third of Germany's GDP. In local cur- rency. the MSCI Gennany Index pustc<l healthy gains of lll5!%. while thi: eum's de- cline n:sulle<l in a still n:specl- ahle dollar return of 5.57%. The Fn:nch market followed suit. with lht: MSCI France (ndex gaining .l25'P. Funherinli:re~t mte cul~ by the Bank of England in Lhe second quaiter failed to spark a rally in the equity market. Thc MSCI United Kingdom Index fell l.62'k in the 4uilrtt!r. Value stocks oulpcrfmmi:d gmwlh stocks. as the U.K. value index gained 2.49'n-while Lht: growth imkx 111st 5.76'k. Pacific Basin Signs of n:newcd ccnnmnk activity spumu signilkant inllows or 1:apitaJ ,nu, Japan in the sccunu quarter. The MSCI Japan Index. following up on strong lirsL 4uaner gains. n:Lurncd 7 .61 'k. Ycar-to-date. Japan has gains or 111.71 %-in dollar terms. In the latest 4uaner. Lhe MSCI Japan Growth Index ro/'.C K.81l'"k versus 6.52% for the value index. us makers nf ch:ctril:,tl compn- m:nts ~w their share priccs surge. With the Bank of Japan'scuntinued suppun. tht: Japant:sc yen moved mo<ll.!slly lower against the dollar. closing the quarter ..u 12 L.1 yen/dollar. Hong Kong. Singuporc Md Malaysia also enjoyed .stmng recoveries. as their market~ jumped :!J.27'7r. 45.49'7r. w,d 67.65%. respectivdy. Emerging Markets After the heating that emerging markets investors have t:iken over the last couple of years. their persever.inec is he ginning to pay off. Emerging markets continued their advance. with the MSCI Emerging Markets Free Index gaining 24.40% for the quarter and almost 40% for the year-to-date. The c:mt:rging mo.rket~ in Asia followed their developed market neighbors. as the MSC( EMF Asia Index gained 39.91%. Elsewhere.the EMFLatincompunent returned a lower. but still hcany. 16. I I 'lr. In Asia. reu.irns greatly differed from cnunuy lo counuy. The China Free Index posted returns of 84.15% while India returnt:d 8.29'7c. The Indonesia Free lndex rose an astounding 121.62% ! -CMR- Foreign Bonds Slapped Twice (twas a dillicuh 4uancr for international honds. In local terms. the Salomon Non-U.S. Government Bond Index (-1.32%) was down inewry market. For unhcc.Jged U.S. investors. a stronger dollar added lo the index's loss (-4.49'h· ). Every market in the Salomon Non-U.S. Government Bnm.1 Im.lex 111st ground in d11Uar 1C1ms. t:xcept Canada and Australia. Japan The hig slory in Japan w:L~ the June release nflhe lu'lil quaitcrGDP number(+ 1.9%). which was well in excess of marxct expectations. Despite indications that much of this jump was attributable lo government fiscal stimulus. it wa.~ the first sign that the spending packages were having an eflcct. The market nilliec.l in the lirsl two months Global Fixed-Income Returns for Quarter Ended June 30, 1999 Last Quarter SSB Non-U.S. Govt U.S. Dollar -4.49 Local Currency -1 .32 SSB World Govt U.S. Dollar -3.45 Local Currency -1.20 or the quancr on perceived continued weakness in the economy and a dcllaliona1y environment (the Bank or Japan still has r..ites at 117.). When the GDP's strength surprised the markcL hunt.ls gave back their gains. ending tht: quancr -11.751¼-in local terms . The weakcr yen exaccrbateJ the loss in dollar terms (-2.K9'7r). Europe Signs of growth and the eurn's continued tumble toward parity with the dullaJ· punisheu Liu: bond maii<et in the second 4uarta. a.~ the Euro Govern- ment Bond Index foll l.54'k in local terms and 5.95% in dollar terms. Ger- many has hl:en an economic laggard within 1he ew11 zone this year. hut a vari- ety of indicaiors. notably manufacturing onll!rs.sh11wed imprnvemcms in June. The U.K. mai"ket faired slightly heller in dollar terms (-4. IO'fr ). :L~ the sterling held iL~ ground hcucr. /\s cxpcct.cd hy th.e market. Lhc Bank of Gng I and cut the base mu: twice duiing the 4uaner. Signs or nnn-inllaLionary growth. nevcnhch:ss. lriggen:d a sell-off in thi: quancr on par with the Coruincnlal markets. Dollar Bloc St.n:nglh in the Canadian and Aussie dollur.; ,iutweighcd slightly n.:gative l11ca.l hund market performancc. leading both markcts to pnsl the only gains in the second 9uaner. Canuda anu /\ustr.tlia Ul.lvanccd l.2!17r anu 2.R7'n-. respec- tively. The Bank of Canada has continued lll lower rates in hopes of matching U.S. GDP growth. but lhe U.S. reu's n:cent tightening may force Canada to eventually raise rates to relieve pressure on its dollar. Au~1rulia showed strong gmwth 1hroughnut most of the quartl!r. tht1ugh n:ccnt economic inilicaLors were mixed. The Aus\rillian centml bank vowed not lo touch r.ucs in the near future. Emerging Markets Emerging debt built on strong gains in Lhe first quarter. as the J.P. Mor- gan EMBI+ atlucd 5.24%. The non-Latin component (+23.47'ff) pummdell the Lalin cumpon.ent (+1.4.1%). The shining star for the quarter was Russia l +87 .O l '7c). while Argentina's continuing financial ditlicullies yieldt:d the worst retum (-Ui9%·). -CMR- Callan Associates Inc. 3 The Shopping Spree Continues from page I n:sult of extremely low inflation and um:mploymenL over the past few years. Can the U.S. economy continue like this forever'! The helter question may be: will consumers ever slop spending? For consumer spending to con- tinue Lo grow like it has over the past year. the savings mte would need to kt.-cp falling. deeper into negative territory. While not impossible. especially if the stock market continues to fuel the surge in wealth. it seems improbahle that households can continue to live that far beyond their current incomes. Accord- ing to the Callan Broad Market Index, the total valuation of the U.S. stock market is now close to $ Ll.5 trillion; since the market ha.~ grown faster than income. a l % market move is a much bigger share of personal income and wealth than it was IO years ago. Consequently. the U.S. economy is mure vul- nemblc to a stock market cr.ish. A sustained 20%-30'k concction would likely cause at least a mild recession. Looking back. the U.S. economy has probably enjoyed a net benefit from the financial and economic turmoil that swept through Asia. Russia. and parts of Latin Ami:rica starting in 1997. Nonetheless. two sectors of the U.S. economy were negatively affected by the glnhal financial crisis: export-oriented manu- facturing and commodities. particularly agriculture. An ahundance of crops and livestock. combined with weak exprnts. has pushed the fann hell into near- uepression; thus far, the agricultural crisis ha.~ yet to spill over into other indus- Lries. The Purchasing Managers Index has remained above 50 -the dividing line hctwecn expansion and contr.11:tion-since Fehruaiy. indicating that manu- facturing demand is helter than anticipated. The export onlers component of the Index has also been above 50 since february. perhaps rctlecting a glimmer of recovery in the glohal economy. -CMR- Real Estate Corner Callan's preliminary rctum for privatc n:al cstate in the latest quart1.:r is 2.115'#. Thi! income component of the return should maintain its momentum. hut the appreciation component should continue Lo weaken and represent a smaller percentage of the total return over the quarters ahead. Though mnsl n:al eslatl! markcL~ remain in equilibrium. the threat of new supply in the Mid-Atlantic and Southern markets i~ real. The cm1.~1al markets of Boston. New York. San Fmncisco and Seattle cnntinuc Lo n:main strong with demand exceeding supply. Southern California has enjoyed thl! most tmns- acliun activity in the la.~t li:w munlh.~ due to stmng growth forecasL~ and very little threat of lll!W supply coming on-line. Pension plans continu1.:d to domi- natl! the acquisition market in the second quarter. but REITs arc gaining mo- mentum and should he a major forcc in late l9Y9. Alter fiv1.: cnnsccutive quarters of negative returns. REITs finally had a "breakout" quarter. Spurred by resurgence in small capitalization stocks and the cntmnce of famcd value investor Warren Bufli:t. the NARElT Index re- turned I0.58% Forthe quarter. The Office and Hotel sectors led the recovery. as they were the two sectors hit the hardest in the previous four quarters. On average REITs arc now trading ahout 0% to 10% below Net Asset Value. Though most REIT stock prices have increa.~ed. their access to equity and deht capital remains lim- ill!d. Following a growing trend in the first quarter of 1999. REITs continue to target the plan sponsor community for Real Estate Returns for Quarter Ended June 30, 1999 Last Quarter joint venture (offbalancc sheet) Callan Real Estate (Mean) 2.os· transactions. It secms many NAREIT Total Return 10.58 REITs rcali1.c that the capilal • Preliminary figure markets will not be an endless supply of funds and therefore arc forming alliances with the plan sponsor community lo ensure access to capital throughout all market cycles. Consolidation in the REIT market contin- ues tu occur. with largcr and better capitali,.cd RElTs targeting smaller REITs and mid-size REITs merging with each other Lo increase their mark1.:l prescnce and gain access to other metmpoliLan markets. -CMR- Alternative In vestments Fund Raising Last quarter yielded $16.9 hillion in new commitments and 89 new part- nerships. a.~ compared to $11.7 hi Ilion and 49 partnerships in first quarter. While la.~L quaner's private equity fund r-.1ising was gaining momentum over the first quarter. 1999 i~ trailing the compamhlc periods for both 1998 and 1997. Capi- tal commitments are down 25% from the prior year's first half. This ycar might mark thc first decline in commitments since 1990. Funds Closed January 1 through June 30, 1999 Strategy # of Funds $ Amt(mil) % Venture Capital 74 9,276 32.5 Acquisition/Buyout 47 15,502 54.3 Subordinated Debt 3 256 0,9 Restructuring 3 725 2.5 Other 4 1,561 5.5 F und-01-F unds 7 1,212 4.2 Totals 138 28,532 100.0 Source: The Private Equity Analyst and Buyouts Market Environment Venture capital partnerships arc clearly a key focus for institutional inves- tors this year. Thi! long-term historical aver.ige for venture capital commit- menL~. a.~ a percent of total private equity market commitments. has hcen ahout 229f . So far in I 99Y. venture capital funds have received a 50'k increa.~ owr lhc norm. Investor dollars are readily availahle to partnerships a.~ many lr.ick rccrn'tls arc looking quite gnu<l. Pannerships an: quickly investing capital in the lntemet and information technology areas. and the initial puhlic offering and merger and acquisitioll~ markeL~ for technology companies arc providing li- quidity. The Buyouts sector saw a slowdown in the numhcr of deals and dollar volume lransactcd in the si:cond quarter. Acconling to Huy,mts newsletter. 63 huyout transactions were reported for a total value of $7.6 hilliun. down from 92 deals valued al $8.8 hillion in the first quarter. First-half total transaction value is down 409f from la.,;L year. Market paiticipanL~ indicated two key causi:s for the slowdown. First. the high yield market was skitti~h. expc1iencing out- lluws due to tear of an interest mte hike . Second. high a.~king prices for larger companies. as puhlic valuations spiked. pul a damper on volume. Securities Data Corpomtion statistics show that the greatest decline in the market was in the large transaction area. with the mid-market to smaller dcals declining only slightly. Venture-hacked lPOs in the first half raised over$7. I hill ion. The average olkring si1.e has gotten larger. incn:a.~ing to $74 million in l1JIJ9 from $49 million in 199K. Ba.,;cd on Securities Data Cnrpmation sources. 93 venture- backed companies in regislr.ition indicate a strung backlog. -CHR- The Capital Markel Review i~ puhlishcd quarterly for mcmht!rs of the instilu- tional investment community. holh domestic and international. Tilt! Capital Ma,-- kcl Review liK.11ses primarily nn the latest quarterly perf'ormancc nf market imli- ces and Callan style groups fnr each nf the lllll.jur asset classes used by institu- tional inves111rs. Capirnl Markel Review contributors are as follows: Janel Beckcr-Wold. Non-U.S. Equity George Varino. U.S. Filled-Income Sean Keene. Real Estate Jay Klnepkr, Economy Jim McKee. U.S. Equity Gary Ruhcrtson. Altem,11ive lnvestmmls Michael Frederii:ks. Non-U.S. Fixcd-lnrnme Mall Mi:Kenzic. Appendix Tanja Eisenhardt. Puhlicatinn Lay11u1 Callan Ass11da1es Im:. is a privately-heh! and l00 pen:enl empl11yee-11wn~d firm whose sole husi~ss is stralegic asset managcllll!nl i:oll~ulling as an imlcpcn-· dell!. ohjcclivc lhird party, HeadquarlcrciJ in San Francisco. Callan also has n:- ginnal offices in Chicago. Morristown. Atlanta and lJcnver. © 1999 Callan Associates Inc. Callan Associates lnc. 4 El CAPITAL MARKET REVIEW APPENDIX A . A PUBUCATION OF CAI.LAN ASSOCIATES lNC. S~:CONDQLARTER LCJIJ() U.S. EQUITY Style Median and Index Returns* for Periods Ended June 30, 1999 Last Last 1/2 Last Last 3 LastS Last 10 Quarter Year Year Years Years Years Large Cap Equity u,rge Cap-Bmad Style 7.18 10.94 18.46 25.17 25.14 18.13 Large Cap-Gmwtll Style 1.74 10.15 22.63 28.48 27.14 19.42 forge Cap-Value Sryle W.24 /().42 JJ.82 22.05 22.25 /6.93 Aggressive Gmwrll Style 12.77 14.24 25.08 16.82 22.60 19.25 Co11rrarian Style 13.75 12.12 ll.61 20.65 21.40 16.()I Core Style 6.73 IU13 21.19 28.41 27.23 /8.64 Yield Style /0.80 9.78 13.64 21.9/ 22.15 16.21 CAI Broad Market Index 7.75 12.15 20.90 26.67 26.11 17.83 CAI Large Cap Index 5.35 12.12 26.82 32.31 30.52 19.76 S&P 500 7.05 12.3k 22.76 29.11 27.87 IK.78 NYSE 7.79 9.60 13.85 23.98 24.07 16.KS Dow Jones Industrials 12.53 20.42 24.64 27.02 27.43 19.39 Mid Cap Equity Mid Cap-Bmad Style 12.21 10.75 J/.39 17.88 21.15 /7.66 Mid Cap-Gmwtll Style 11.76 14.50 17.52 17.88 21.72 /9.33 Mid Cap-Value Style 13.67 8.lW 1.74 17.77 19.40 /6./1 CAI Medium Cap Index 9.79 11.95 14.27 21.91 21.90 16.10 S&I' MidCap 41HI 14.16 6.Kll 17.19 22.49 22.2K 17.87 Small Cap Equity Small Cap-Bmad Style 17.04 6.68 ./. 12 /2.91 17.95 16.04 Small Cap-Gmwth Style 14.92 8.11 3.85 /()_(}6 /9.50 18.22 Small Cap-Value Sry/e 17.84 5.43 ·2.94 N.16 /6./6 /4.96 CAI Small Cap Index 16.44 12.53 K.84 15 .45 IK.34 14.28 CA[ Micro Cap [ndex 22.04 11.46 -0.13 10.211 17.32 13.16 S&l' 6(KI Small Cap Index 15.42 5.03 -2.J I 12.40 16.58 12.39 Russell :woo 15.55 9.29 1.50 11.21 15.40 12.39 NASDAQ 9.21 22.69 42.25 31.K2 31.36 21.16 CAI Broad Market Sectors** Basic Materials 19.04 111.511 3.49 8.66 lll.7K lll.42 Capital Goods 15.05 16.68 19.34 22.67 23.98 15.K9 Communication Services LUii 17.32 54.72 35.92 Consumer Cyclical 6.10 11.70 14.49 23.06 20.11 15.IR Consumer Staples 1.56 -0.12 4.70 19.09 25.39 lll.54 Energy 12.72 18.99 I0.93 17.02 IX.63 IH2 Financials 5. IO 10.83 5.63 31.01 29.09 211.(17 Health Care -3.32 -0.46 13.28 21W9 Utilities 11.24 -0.20 5.76 13.75 15.9!! 12.09 Technology 12.29 25.29 64.22 42.78 39.86 23 .90 Transponation 7.77 11.90 3.43 13.56 15.56 12.KK • Rclum.; less lhan one year ;uc nnl annuali7.eil. •• The economic sectors were rcorganii.eil 10 t:liminalc lhi: Miscellaneous seclor in performance measuremenls after June ]0. I '.I%. As par! of lhis reorganiza1ion. 1wo new sei.:lors. Communic:alion Services anll Hcallh Care Services. were created. Con~cqucnlly. sector comparisum ur lime period~ llcginning prior 111 June ]O. I IJlJ6. wilh lime period~ beginning aflcr thal dale may nol he valid. U.S. Equity Index Characteristics as of June 30, 1999 Callan Callan Callan Callan Callan S&P Broad Large Medium Small Micro S00 Cap Range ($MM) 46-460.304 9.658-460.304 1.919-26.453 46---21.618 11-932 560-460.304 # L~sues 2.000 150 350 1,500 1.000 500 'ff of Callan nroad IIK1% 65% 20% 15% N/A N/A Wtd Avg Mkt Cap $86.9Jl $129.lll $10.08 $2.58 $0JB $104.913 Price/Book Ratio 885% 1017% 648% 59l'k 322'ir 894'7r PIE Ratio (forecaslcd) 28.2 30.6 23.5 23.3 19.0 29. I Dividend Yield l.1% 1.1% 1.4% 1.0% 0.8% 1.2'« 5-Yr Earnings (forecasted) 16.8% 16.5% 15.11% 19.2% 18.!Vk. l5.6'7n B CAPITAL MARKEf REVIEW -APUBLICATION OFCAlLAN ASSOCIATES INC. U.S. FIXED lNCOME Style Median and Index Returns* for Periods Ended June 30. 1999 Last Last 1/2 Last Last3 Quarter Year Year Years Broad Fixed-lncome Acrive D11mrio11 Sryle -1.09 -2.17 2.80 7.30 Core 8011d Sryle -I.OJ -1.50 2.89 7.36 LB Aggregate -0.88 -l.3R 3.15 7.23 LB Govt/Corp -1.10 -2.28 2.69 7.18 LB Corp -1.56 -2.26 l.90 7.29 LB Govt -0.85 -2.27 3.05 7.18 SSB Broad Investment Grade -0.93 -1.39 3.13 7.25 Long Term Exre11ded Man11·iry Sryle -2.45 -5.42 0./5 8.92 LB Gov/Corp Long -2.67 -5.95 -0.58 R.64 LB Gov Long -2.50 -6.61 -0.32 K.93 LB Corp Long -2.95 -4.115 -1.06 7.119 SSB High Grade -3.56 -6.27 -1.25 7.65 lntennediate Term l11te11nediate Style -0.52 -0.49 4.00 6.80 LB Gov/Corp lntermediate -0.40 -0.59 4.18 6.64 LB Gov Inl\:1mediate -0.20 -0.47 4.44 6.51! LB Corp Inh:nm:diate -0.81 -0.80 3.59 6.89 Short Term Defe11sive Style 0.56 1.40 5.14 6.27 Active Cash Style l.(}7 2.30 5.19 5.7X Mo11ey Marker F1111ds (11et ojfees) J.(}7 2./8 4.68 4.94 ML Treasury 1-3 Year 0.57 1.17 5.08 6.14 90-day Treasury Bills 1.17 2.24 4.117 5.16 High Yield CAI HiRlr Yield Style 0.06 3.12 1.25 /0./6 LB Corp High Yield 0.34 2.20 -0.311 8.11 ML High Yield Master 0.67 1.76 0.93 8.72 CSFB High Yield 1.16 2.113 -0.85 8.05 Mortgage/ Asset-Backed CAI Mongages Style -0.42 0.52 3.95 7.55 LB Mortgage-Backed Sccuritit:s -0.45 0.54 4.02 733 Lil Asset-Backed Securities -0.27 0.42 4.44 6.66 lnnation Consumer Price Index (All Urban) 0.73 1.40 1.96 1.98 Pnxiucer Price Index I.R7 1.95 0.24 -0.76 U.S. Fixed-Income Index Characteristics as of June 30, 1999 Yield Modified Adj. Average % of Lehman Brothers lndices To Worst Duration Maturity LBG/C LB Aggn:gate** 6.55 % 4.RR 8.9X Yrs. 1110.UO 'hi LB Govt/Corp 6.29 5.47 10.03 100.00 Intermediate 6.10 3.45 4.35 69.35 Long Term 6.73 10.04 22.89 30.65 LB Govt 5.91 5.26 8.98 67.72 LB Corp 7.09 5.92 12.35 32.28 LB Mortgage 7.()4 UI 7.25 LB Asset-Backed Securities 6.44 3.02 3.64 LB CMBS 6.94 5.55 7.JX LB Corp High Yield 10.96 4.110 8.07 * Returns h:ss than om: year art: not annualit.cd. ** Reflects Lehman revisiolL~ effective 7/1/lJ':J. APPENDIXB SECOND Ql A°lrn:1t IIJIJ<J Lasts Last 10 Years Years 7.81 8.35 7.8X 8.39 7.82 8.15 7.76 8.12 8.37 8.65 7.60 7.96 7.82 8.20 9.98 9.62 9.61! 9.:n 9.79 9.32 9.37 9.23 8.90 11.93 7.16 7.83 7.05 7.65 6.87 7.48 7.75 8.29 6.46 7.18 5.9/ 6.11 5.01 5.02 6.32 6.84 5.25 5.27 /0.96 /1.67 9.55 111.26 10.05 10.65 9.31 I0.47 lU7 8.70 7.98 8.24 6.92 2.35 2.96 0.77 I.OJ % of LB Aggregate IOO.lMI 'h- 64.05 44.42 19.63 43.37 20.67 .H.J6 1.32 l.2R m CAPITAL MARKEf REVIEW -APUBUCATION OFCAUAN ASSOCIATES lNC. APPENDIXC Sl-:CONI> QL ARTER 11)99 INTERNATIONAL EQUITY Style Median and Index Returns* for Periods Ended June 30. 1999 Last Last 1/2 Last Last3 Last S Last 10 Quarter Year Year Years Years Years International Equity Global Style 7.24 /0./3 12.17 16.59 16.22 /3.67 N1m-U.S. Style 5.44 7.27 6.89 11 .97 11 .68 JJ.00 Core Style 5.54 7.51 7.9/ 11.85 ll.19 JO. 99 Top Down Sryle 3.61 6.32 6.78 11.8/ /0.98 1().7] Bottom Up Style 5.91J 9.9/ 7.6/ 12.(}6 11.88 /1.6/ MSCt EAFE-Unhedged 2.54 3.97 7.62 8.82 8.21 6.60 MSCI EAFE-Local 5.74 13.43 IUl6 13.95 11.67 6.14 MSCI EAFE ex. Japan-U nhedged 1.02 -0.43 1.92 17.33 16.69 1.l81 MSCI EAFE ex Japan-Local 4.45 9.15 6.56 23.02 19.11 14.04 MSCI World-Unhedgcd 4.77 8.51 15.66 IK.29 16.75 11.41! MSCI World-Local 6.22 12.91 15 .81 21.11 IK.62 I I.Ill Pacific Equity Pacific Basin Style UUIJ 29./2 4/.9() -1.20 0.40 5.63 Japa11 Style /6.•N 3(}.l/0 43.7(} .().52 -2.60 J.66 Pacific Rim Style J2.51J ]7./9 5R.82 -6JJ7 0.49 11.2] MSCI Padfic-Unhedged 9.55 21 .KI .n.64 -6.09 -3.74 -ll.9ll MSCI Pacilk-Local lll.9ll 27.87 IK.52 -2.67 -11.16 -2.19 MSCI Japan-Unhcdgcd 7.61 20.72 311.20 -6.RJ -5.ll -2.JK MSCI Japan-Local 9.98 29.53 13.57 -3.72 -1.14 -4.0.~ Europe Equity E11mpe S~•le 0.5] -l.J5 -0.9] /9.l/2 19.54 15.07 MSCI Europe-Unhedged -11.31 -2.41 -11.85 20.KK 19.20 14.41 MSCI Europe-Local 3.59 K.05 4.22 26.69 2l.62 14.58 Emerging Markets Eme1:,i11g Mtfrkets Databa:,·e 23.6/J ]5.27 18.76 -0.37 1.80 13.96 MSC( Emerging Market Free 24.411 39.88 28.71 -4.01 -11.lO 12.31 * Rclum~ less 1h,u1 one ye,tr arc nol ,mnualizc<l. Return Attribution for EAFE Countries Country Weights-EAFE for Quarter Ended June 30, 1999 For Quarter Ended June 30, 1999 Country (by weight) Total Local Currency New Zeal.ind 0.2% Austria 0.3% Japan 7.61% 9.98'7c -2.15% Norway 0.4'k United Kingdom -l.62 0.75 -2.35 Ireland 0.4'1- Gennany 5.57 10.52 -4.48 Prntugal 0.5% Fr.mce 3.25 8.(19 -4.48 Di:nmark ll.8'k Switzerland -6.86 -2.17 -4.79 Singapore 1.0% Netherlands IJ.5ll 5.30 -4.4K Belgium l,3'7r UK Italy -10.32 -6.11 -4.48 Finland I .9'li 22.39, Spain 0.61 5.32 -4.47 Sweden 2.3% Australia 6.20 1.33 4.81 Hong Kong 2.5'k-Honk Kong 23.27 23.42 -0.12 Sweden 13.36 17.20 -3.28 Australia 2.9% Finland 8.95 14.06 -4.48 Belgium -7.53 -3.20 -4.47 Singapore 45.49 43.30 1.53 Denmark 5.43 111.14 -4.28 Portugal -9.33 -5.08 -4.4K Ireland -11.13 -6.96 -4.48 Norway 0.22 :?.OK -l.82 Austria -4.71 -11.25 -4.47 New Zealand -0.32 0.32 -0.64 Switzerland 6.8% France 9.7'k 111 CAPITAL MARKET REVIEW -A PUBLICATION OF CALLAN ASSOCIATES INC. APPENDIXD SECONIH)LAllTEll llJ99 INTERNATlONAL FTXED INCOME Style Median and Index Returns* for Periods Ended June 30, 1999 Last Last 1/2 Last Last3 Last 5 Last 10 Quarter Year Year Years Years Years Global Fixed G/ol,a/ Style -3.20 -7.10 3.85 5.30 7.10 9.15 SSH World Govt-Unhedged -3.45 -7.IK 4.13 4.11 6.11 R.33 SSl3 World Govt-Local -1 .20 -11.79 4.11 7.89 K.52 8.66 Non-U.S. Fixed No11-U.S. Sryle -4.16 -9.46 J.64 J.80 6.25 9.82 SSO Non-U.S. Govt-Unhedged -4.49 -9.11 4.87 2.63 5.45 8.92 SSB Non-U.S. Govt-Local -1.32 -0.08 4.53 K.18 8.97 8.94 Emerging Markets Fixed JPM Emerg Mkts Bond Index 5.14 10.57 -4.27 8.32 13.57 SSH Bmdy Bond Index 0.99 6.511 -1.74 10.9K 15.68 Return Attribution for Non-U.S. Government Country Weights-SSB Non-U.S. Govt Indices for Quarter Ended June 30, 1999 Country (by weight) Total Local Currency•• Japan -1.89% -0.75'« -2.15'k Germany -5.8ll -1.39 -4.48 Italy -5.87 -1.46 -4.48 France -6.11 -1.71 -4.48 United Kingdom -4.111 -1.79 -2.35 Spain -5.99 -1.59 -4.47 Canada 1.18 -11.91 1.21 Netherland.~ -5.93 -1.52 -4.48 Belgium -6.07 -1.67 -4.47 Denmark -5.25 -I.Ill -4.28 Sweden -5.71 -2.52 -3.2R Austria -6.27 -I.KY -4.47 Australia 1.87 -1.85 4.81 Finland -5.61 -1.19 -4.48 Switzerland -6.44 -1.74 -4.79 Portugal -6.05 -1.65 -4.48 Ireland -6.06 -l.67 -4.48 In:land 0.5% Portugal 0.6% Swit1.crland 0.6'¼ Finland I.II¼ Australia 1.0% Ausllia I .2'k Sweden I .IVif Denmark 2.1 '7c Belgium 3.8'h· Netherland~ 4.ll'k For Quarter Ended June 30, 1999 FrJnce 11.5% Japan :W.1% OTHER ASSET CLASSES Style Median and Index Returns* for Periods Ended June 30, 1999 Last Last 1/2 Last Last3 Last 5 Quarter Year Year Years Years Balanced Accounts Asser Allocator Style 3.70 6.66 /4.63 19.79 19.22 Dmne.vtic Balanced Datahase 4.55 5.98 11.75 17.20 17.29 Glohal Bal,mced Datahase 3.40 4.13 8.50 13.76 13.53 60% S&P 500 + 40% LB G/C 3.79 6.40 15.26 20.35 19.75 Convertibles Cmn·erribles Daral,ase 6.70 9./J 9.59 15.19 16.65 CSFB Convertible Securities 7.54 11.71 11.69 13.59 14.60 Real Estate Cal/a11 Real E.1·rare*** (mean; 11et of fees) 2.05 4.05 11 .24 12.85 /0.50 Ct1/la11 REIT Daralw.re 12.52 6.54 -5.44 /135 IVW NARElT Torn I Return I0.5K 4.94 -I0.19 8.67 9.51! * Returns less 1han one year arc not annuali1.ed. ** Derived l'i:om MSCI EAFE dala *** Preliminary return Last 10 Years 14.46 IJ.62 12.76 14.63 IJ.82 12.38 4.66 11.51 K.75 Germany 11.119, Active Management Overview i\tARKET OYERVIE\\ ACTIVE ~VJA,AGE\lE:'\T VS INDEX RETLR'.\S / i '.\larket O\'ervie\\ ,,::..._____. The chart" b~low illu;n·;u'", th-: range 0fre1um~ ,H.:r,.-,, rn,:magi.:r~ 1n C:illan', S~pJrJ,i! \.::coum ,fo.L.1ba~c c1,er the must r<.!Cl!nl 1.m.: quani.:r ,rnd one )'L':U time penod;. 1"11c d:iu.ha,c ,s br0ki:r1 d,,wn by a~sct .::la» ro illus1r.1re the d1ttercni:c 111 returns a,:ro.,, thos.; a.;sct clas,es Ali .1pprnpriatc inde.\. i; alsu ~h<•v.11 t'.,r ca.:h a;;:;cr cl.is; for compari:;011 purp0~e~. A, :tr, cx.lmple. the fir:it bar in the upper ch..lli illumaLe~ the r~,:;c ..1f return~ for d'-1me;tic .;quity manager, o,·er the last quani..:r. lbc triangle n:pre:;cnrs rhe S&P 500 reLurn. The numb,;r :ll."..\t t~l th..: tri angl,: rL'pi"csents the r,rnking ,11' the S&P Vlll in thi.: dvmesl ii.: cqui t) managcr datab.1se. Range of Separate Account :\-lan.1gcr Returns by Asset Class · One Quarter Ended June 30, 1999 25(;. 1t ;r·~ l ~<( ~ 10', .:: ::l '..I ~·· :.:: O'. - .,,,d Dunlt:'~lll.'. E4nil~ ,s S&l'.51111 lllcc·1 I\:rc;1,uk ;,J _,1 25th />-,;.;~nil '~ .4 :,__l \1L"dl 1Ut I ().JJ ·75~n l:\::rLt."rHtl: 6.~.t:, ',•,l:r:. ~)L·:\.:cntd.: ~ "'i"S L-lci.\ A 1 0~ I : 1--I I:~-I I --I \'·. : l'l•·~---- 1 . '51 L.-::=;;:I i\un-Li~ Equll~ v~ ,,su E.-\rl-. \.) 1,·1 77~ ~ +i .\ ~-) 2.(!l ~ 5 ... I ' U1t11n;:Hic F,,.cd-1 nrnm, ,~ L~ Ag_~r 13-J U.57 ll . , ' . t\0111-l ·:-, G,..-,t 11.-nJ ,·s C.-\1 lnt1. fl -: :, ' -,-~.1:i ", ' "-- Rc~l Ca,h ~:stat~ E4ui,-~1~111~ ,, ,., l'iCRf.lf lndell 3 fllon T-Hills 5 1.• ' 26 ?-o:i 2J \_'J.,; ' 1-i 0.-.;2 l) 117 ~(> U.~J 2 o--t I II Range of Separate Ac.coullt Manager Returns by Asset Class One Ye:1r Ended June 30. 1999 ~~:·1 1-· "-" l 1:, ·• ;1.1_,·. -1 '.,-,: ~ j ,,, ~ ' ··r------- I 1,L ::U-..:.d, ..! .. ,. , } ;.__-_ 1,l: .. ~~·.1-tJ, ..Ul • ; ;',_-..\.',Ill.! 'J., I(.,,., I 1). n. \1r-~ •· I•,, 1·,_1 ~' 1"' -• j \.,n-! ' ~~'JLI•l.\ \'~ M~Cl t \!'!' -' . ' I~ .: ll I) ,-n .. ~r, 1-i C !-I l."••l!lC .. I.II .!\!-I II .: 1&1& ~ --:_:., ~ •11 ·•--:-=1 '"' __ _ '"n-L." 1-k.tl CllSh G,l\; H,111d EstL1t~ f111t1\akn1, v~ ' \',! ( \l In•,! n I\CRUl· lndu, 3 ·\'l.,n T-1\a\l, -< . .!:-5, : 'I I' ~..., < -,_ 'r i :: :.J . ~ 'J ,I .. ' .. I !.: • ., ·'•k . 1 ~·, ~ : .... ~~ '---------~ ;, 1n.: I '· D01\lESTIC FlXED-l!\CO'.\lE ..\clive Management Overvie,\. Acthc ,tan~cmcnt vs the Index The b.Jnd m,t!'""et rern.:iincd in a slump 1hr,1uglh1u1 thl! b.;.::,1nd ~u;mer of l 999 . il ·ic-Lim uf continu.;:d c(;un,lmi.: i;rd wth and fours mat the e.::onom~· wouldn' l ~luw i:noug.h tc res1rain intlari0n . A.::Uvl! Cush managers po;tcd. the hes: re um 01 thL: quaner with a. U)7r,;; mark, outp.:rfonn:ng the L.:hrn,.in 1\ggr gJW Index rel !11 of \U.3~'7c ). The in! 8 01\J ~tyk', rctum of\! .030;;) un..:!crpcrtum\i:ct 1hG Aggrl.!g:.11e by 15 basis points but ou Lperfonncd the Lehman Ou \'u l,urp lnJ.!:>. re turn 01 \ 1.10•~,;,). Fur th~ 0ne-y<!ur p(;n J. ,,\....11,1.: C;i,h r~11a1 11ed J.t th~ t'orefrom \\Ith :i .::. (')Ci~ return. cu1r..:n\111111ng rhe Lehman Ag,greg:H<.!. rdu I of J.J -~,. ~or~ 13,Jnd~ undi!rpcrfurn ~d the Ag ~ri:gate hy 2c h:i.-ts µ01111) but OLJt()<!rt°om1eJ. tbl! G1n·1,'C1.1111 lndc-y 20 lla ;,-· points. fa.tended .\1:nucity b.:md" were th-: wor.,1 pt:rfom1c~ for bolh limt!-pcril"ll'.h. undcrpl!n·,1rn1tng bot 1 indtc<.!.s. Short Duration ,1s Lon;.. Shun D rJt ivn onJ~ farcJ rda11, cly ,,,ell Ju ri ng tlP se.::ollj qu;lfter a~ the Detensiw sectm posteJ a retun: ot' 0.56%. , t.\lended .\'larnrit) b,)nJ .. on 111<! ut 11r hand were : e poorest perfonner;. t'vr the quaner. returning l2.45'} > ,h thcy su i'tcred m \1:1 from incrca: J in i nt eresL r,:llcs Th.! on-'-ye remms are c\'iJcnce 0f a tr<!lld, a; the Dcfonsi ve ;e.cror h;i, o l{ll!tfom,-.d rhc Extcnde.d ~hturitr style b) -l..9~'K. :\1ortgages and Corpora k s ' ~hmg::igc,. wnh us ~0nd. q,u n.;r r~:um 0f lV .4 l '-, . .:iut~rl°ormcd otber m'1~sunem gr:we ~.!.: 0rs bc.:.:.iusc ri ing 1111~1-.!H r-J.Lc' rvJu.:cd rm:-puym. •:,rs c0r.cs!1m . for th.! ye1r. n"'J,;es ha\e ))1:11° m1d well 'lllnp;ucd tv their peer,;. p:ning · 3.':15C;, r..:1um. Th..: C1..,rporJre :e.:1.:ir w;-.s hun b) IO\ver tr;.,Jin0 volu1n.::s as the L,13 (\1rpor:1ts! Bond lnde:-.. r~curn~d 11.56<:,} for th..! qu arter. u d~rp.:n'o rn · g the U B Gov~mm.!m B,md Ind.::x r.::tum of \0.S5t;~ l. High Y1elct bonds. trnditi,; Jlly more su..::-:e,sful tlun imernnclll grade bvnds during p-:riods of rising im..::resr rJlcs. prove..:! hislOry corr~.:, 1 v. ith a r~:urn of O .06';{ .. Separate Account Style GrouJl :Median Relurns for Quarter E nded June 30, 1999 2'>, -------------..,_ ,_ ' -__ . i' ,-+ '----------------------------------------- :,. ,- I I ti'.,, ~ -4 ' 2;. .1· I' ,\..:t,,~ lkt,;n, .. 1.~ tn,,;rm-:J c~~h 1~."'1 .. ::\J~·u j \..:u,\.:' Mrnt:!~!!\! liLc:;!: ~l~lll[ll)' Dur;,\l,li\ t~.1,:f:-.:0 '\ 1,;IJ Separate Al'.count Style Group :\ledian Returns for One Year Ended June 30, 1999 \ l .d1r,1"11 .\,_\;re·~.,:,. ~ i 5', I )~:1\n;.u, (_icl\ dl··:,,,...,.: .'. 1.)•;c I -. ··----··------:... ______ ·y ____ _, • ~ I'!'' ' I~•' ) ~~·. ''· 15: \....,;:,.i L.,:.:nd .!:L _,\._· \\,'. \,~,.ri_.L •· 1-t;::~:. \Ja,.u,n:, lluc 1111• i-;,,'.,,_-.J Y ~-" Asset Class Risk and Return /l The charts below show the three and three-quarter year annualized risk and return for each asset class component of the Total Fund. The first graph contrasts these values with those of the appropriate index for each asset class. The second chart contrasts them with the risk and return of the median portfolio in each of the CAI Total Asset Class Databases. In each case, the crosshairs on the chart represent the return and risk of the Total Fund. "' j "' e ::I ...... II) i:i::: Three And Three-Quarter Year Annualized Risk vs Return Asset Classes vs Benchmark Indices 6.5%------------------........ ------- 6.0% 5.5% 5.0% +-....... ..____...,..........:..:: ....... _....,.... ___ .....,.... ___ .....,..__._ __ ........,.. ___ __. 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% Standard Deviation Three And Three-Quarter Year Annualized Risk vs Return Asset Classes vs Asset Class Median 6.6% ,--------------------------- 6.2% 6.0% 5.8% 5.6% 5.4% 5.2% 5.0% I ti - Mone Market Median .~ , I ,., ,r jf°;1 If· 4.8% ---------........ ----........ -........ -........ ----,----........ --0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0% 2.2% 2.4% Standard Deviation County Sanitation Districts Of Orange County Ill Investment Manager Asset Allocation /I The table below contrasts the distribution of assets across the Fund's investment managers as of June 30, 1999, with the distribution as of March 31, 1999. Asset Distribution Across Investment Managers Domestic Fixed Income Long Term Operating Fund Liguid Operating Monies Total Fund County Sanitation Districts Of Orange County June 30, 1999 Market Value Percent $324,824,076 100.0% 305,788,150 94.1 % 19,035.926 5.9% $324,824,076 100.0% March 31, 1999 Market Value Percent $324,436,789 100.0% 305,619,574 94.2% 18,817.215 5.8% $324,436,789 100.0% a Investment Manager Returns The table below details the rates of return for the plan's investment managers over various time periods ended June 30, 1999. Negative returns are shown in red positive returns in black. Returns for one year or greater are annualized. The first set of returns for each asset class represents the composite returns for all the fund's accounts for that asset class. Returns for Periods Ended June 30, 1999 Last Last Last Last Last 2 3 3-3/4 Quarter Year Years Years Years Domestic Fixed Income 0.12% 5.10% 6.42% 6.62% 6.33% Long Term Operating Fund 0.06% 5.10% 6.47% 6.70% 6.38% Liquid Operating Monies 1.16% 5.22% 5.43% 5.43% 5.50% Liquid Operating Monies (1) 1.12% 5.06% 5.27% 5.27% 5.34% Market Indicators LB 1-Syr Govt/Corp 0.17% 4.83% 6.28% 6.48% 6.18% ML 1-3yr Govt/Corp 0.59% 5.18% 6.01% 6.22% 6.04% ML 1-5yr Govt/Corp 0.23% 4.97% 6.24% 6.44% 6.15% Treasury Bills 1.17% 4.87% 5.09% 5.16% 5.18% Total Fund 0.12% 5.10% 6.42% 6.62% 6.33% (1) Net of Fees. County Sanitation Districts Of Orange County 11 13 Manager Analysis PIMCO-LJQt:ID OPERATL\G I\JO~E\' [•:ii PERIOD El\DED ,JC:XE 30, 1999 , , I lnYestmcut. Philosophy /... __ The M,me~ MJrk.et Fund, D:.1t:1has..: ..:on~i:;1, J! . .icli\ ~I) ma:rngo:! &lwrL term fun,L fh.:.,.: fund::-im..:q in lv\\ -ri~k. high:y liquid. ~h0n-lcnn 11na11L1;1.l in~t rum.;nts. I Quarterl) Summar) and Highlights • PJ~tCO-Liquid Opcr,llilli-\foncy', p,xtfolio pl)Stc.:1 .3. l. 169c n:1um for th.: quan.::r pla.:ing, it 1n tile 11 pcr..:.:ntih: of the Mani!)' ~farler Database group for th~ quaita and in the 2 p.!rcenrilc for the last year. • Pn1CO-Liqnid Operating 1V1onc} ·s [lt)t11L)li1, un1krpcrformcd the T-Bls b) 0.,) I 'ii for the quanc.;r :md ,1utpcrt'ormcd rbc T-Bls for the ~car by \)J50i:. Quarterly As~et Growth B.:ginning \IJrb;t \'alu!! '.\ct l\.:w lnvc: ,;uncm Investment G:11n~1(L11.,:..~.; \ Endin;;_: Market Value il~.~ l7.2.l 5 S-6 S218.7 l; $19.035.9'.!6 Performance vs l\Ione3 1\Iarb:.et Database ,,-f .( -,, ~ ' ,23:l~'li}'.·IJ ' -f \, I ,_J I _!_4 l1) O'' ...___-:-1,-.. _.-_.,1...,,Q"'"u-,-r-tc_r ___ ._..,.L-.1-s1....,,\'..,.._ ,:-,.-r ----1,-... -.,-1..,..?...,.,,.._c-ur-~----=-1,..-, ,-1..,..'..,.,.,.._~-1t-rs----L,-,,-t ..,.J""'.:,1-,....,,,..., ,;_<1_n__, I 0th I' c,..: .-nl1k 2),.l", P-::·..:.!·H,I: .\kJ:an 1"5lt1 l'er,~1:uk •XJ1h Pc:r-:.!nn k r,;:-.,1,:.:\ l-L.4u.a Or,.;r.11I ~ "'1':1.:y e ., '\l.1 ell h:-.s • (} I lfr, * .. IQ . 12 l i RelatiH· Return ,-~ T-Bls ;i.25'.-,· i _,, ,: • I ' \h,nc, \·lukd Dalaba~c Annu.11izcd Thrct: .\1HJ°Threc-Quarter \'t!ar Risi.. ,s Return _1;1, ,..- -~.:' 71. ~ ~ 1 -i ; ; a = -.• · ,-... --•: \1,•n,• ] .\ --~ )' • -'----,.-----,.----.---.------.---,-, --.---I .I j )<, :: _ .:I ~~ ,;,1' ;_-,, _:.,• (1-l~ ,, ", Si;mdJrJ Ue1-1~,1.1..:\n PDlCO·LO~G TERYI OPER.-\ Tl~G IT~D PERIOD £1\DED JL~E 30, 1999 ,/ r Jn,estment Philosophy Dct.:1h11·.: Sryk ll1di1i1gl!rs aim 1,) il1!1limit.c imcrc;L r:11c n;" b> ill\Cstir:g pr'"jominan:\y m short w 10Lcm1-:d!.tlc tGrn · ~ccuri Ii.:\,. The av..:r:1Jc p0nfol io ma tun ty i·, l) pi call) \VI ;i \l\ 1i,..: y.;a1-s. Quarter)) Summary and Highlights • PL~ICO-L, ll:!, lcrm Opcrntmg, Fund's pon folio po5h.:d .:i O.,:ifr,;:;. return t Jr Lh • l.lu:ml!r pla...:i ng it in 1h CJ; perccnuk oi' the Di!l~ns1ve Fi:1..-.!J-ln-:,ime Sryh: grul p r0 r 1hc qu:incr :rnd in L c 6tJ [>\!r-:..:milt f r he.: last yc:1r. • P[l-.lCO-L,1r1g l <!l"!ll Opcr:itin.; Fund"s-pom'ulio underpcnonlli!d m~ ~ 1Ll ~ G/C l;y 0. n •·.· fo1 the _11.1rtcr Jlld ~,utperlllnnl!d the ML! 5 G1C for rhc y~ar y O_ 13 •;"<-. Quarterly Asset Growth l}cginning Marh~t Valu.; l\c1 !\cw lmestml!m ln\'~.Slll11!11l Ciainslt_LJSScS l Ending .\-1arkel Value $305.61957~ S-15 S 168.5~ l $~05.78~.150 Performance ,,s Dcfcnsiw Fixed-Income Style xc,;, ..----------------------------------------, 7' ~ . <• - 3't 11' hJlh P ~-...:i• Ills ::!.'th 1>~:,~m1k \kJ•:tll -~ltl P..:r1:~:lllk ~:~'LI· l\!t'...'.1.'m l.! l'I IL\H ,,m,: T,rm Op<r!ltmt,t l'un,1 • . ,. J - ~ \.-' X .. l I :-1 _,< (;JC • .. ,. l...1Sl \,.!ullrltr lJ l 4 t) ~,l 0.51: (i 4:' 1_\ - i.l.dri -. 'I ' d _"i L. ,· i", l 1 .. 1 • D:~ ·i.._ > \ ;i \ ,f._j'_.;~·---'-~ ,·1~•/f>·., 5 I, I' 1.a.,t .1 \ t-ars ti "t, 6 41 6.21 6 : ~ : ~J6 L;,s1 .\-31~ \'eat":, 6.15 Dd'ensi,e Fi~ed-lncome Snk Annualized Three And Threc-Quarkr \ car Risk ,•s Return (l,I;\(:. ~------------------, t_\~(4 .: J L ,I 1 -f =- :... ..;. ~ S1.1a,~...:-J DI..'\ 1,tt ,-.. -, ~. J l ' .. ·----·------------~-----------,.------------------...., , ,/ LO!\G TER!Vl OPERA lTl'iG FL1'D PORTFOLIO CltUlACTERISTlCS SU:\l'.\:lARY .JCl'\E 30, 1999 Portfolio Structure Comparbon 1ne cr.1ns b~l,m: -::0mpJrl.'. th~ .,trucrnre o!' the pc)nf..:1liu to Lh:it ot' the irrdcx frdrn th~ tt:rcc 1:k:r;pecti\cS th::H ha\e the greatest 1n11ut:nl.'.I! on r.:111m. The first .:hm .:ompa.re~ me mo p0n:ul10:; ~~ro~s tht: diif-::rem ~e.::tors. The ~e.;ond dian compares the dur.11ion dismbution (or t~nn ;m.1cture). The Llsl chm Cl)ntrarc~ thl.'. disuibu1i0n across quality cells. Trl!a...,w·l~, 42'; Long Term Operating Fund Duration Distribution "\.•j l .i.v. -------------------- _11.~;~ ---------- ..!O•., :-------·--- l)"":1·; li1'i. __ _:_ ------ <: u 1.J-,5 I '-2 I l Quality Distribution I ... , Sector Allocation Tr~J .. :--w1i:• 6L(i, Lehman Gm·ernmenUCorporate l-5 \\ eight<!d Averng<.! Duration ~-------~ • Long Tem1 Operacing Fund: 2.96 1 C L.:h man Go\•emment1Corp.:irate 1-5: 2.41 -.. -:i;e-1.;r------• -.. --~---.----------------- ' --------------t---------• ~ -1.~·'t. --- I~ ll' r 12 -I', 11 Ir; 1.:: :'', 1.l 1'~ ~ ··--, --, '! ,l'; ·-. I --,___ -• ~~, L ~1 "':--~-----; 2 ~-3.ll Year~ DurJLiun 3 \l-_l .5 4.0+ \V..:ighL.:J .-\ vcrag.o Qu.:il ny II Lrn,; Term 01~r.1ung Fund: .\.al D Lehman Cim-:mmcn[IC0rporatl.'. 1-5· .-\aa • i,. l ---·• ., -~;.,I' , -• ------------------------·--------------------- 2 -i '· '..) !--------------------~ ... .. . .. .. -... -. ----· -.. --------, ----. -.... --- J I" \-. :+ .\.!. -----------rr ,;-,~ ---. , • -t~ . .J ,i .tf-' -~ I', ~~Jr·, .i1,i, :..1 I o,, •.., '_j•IC=:.......::..:__==..:___.B:l~ --1. --· ' ' ,,l .. \.:. ~ I " . ~------...I... ' .\ii \. ~ t.;: i.::, ;h,,-.. n c1: .. •~ ,n:-:: .:t1 e j<:lkflG~r;· u,-, tL: ,cd, rll,c . 1 r. : ~,..: 1,: :'.fo111' 'Jei;L •·e2,Jc.mL~Li . I)\ 1:1..:tr ('." ,tr,· J:Lt ::n.J•.~ ; '.ftp,,; .. •-'1;: .. :(1"·1,! ~c~•uri·.,,,:., :n I.he-p~i:-.:L:] ,'. :f;~ L-. ..1r1,;_;, \,i]1,,.,.:· \\(:!"•~ ("~.CC',cn.:ccC .;_)le] ['..!lc\~•.i. I '_•_.•.,_,_1_),_.J_,_,_._'-~_. __ ,_·,\_) -----------------------··-----------~'~ ; LONG TERM OPERATING FUND PORTFOLIO CHARACTERISTICS DETAlL JL'NE30, 1999 \\'eighled A, eragc Portfolio Cha ractcristk!-i Total Fund. B~· Ai>~ct Class and By Sector inding P1crl'clll '.\l1trk"t ,)\ f:ff<!1.1i~·c Et'fntl\, 1'1Jl1tl ~und ,\,,~I tlJ~k:,i Al..!n,.:11:-, ~:~1(), lrf'1r: ~• '11~':'l;:tt~..:., Tr<'. •\:ITT.: Tutal Fi,.1.cl•lrw1111'1 C:i..sh E11ui,alent:. '1tl11r• :i>:4lti,::16.Ml-l ~5.v71U:II ¼:'-.li2~.4il} ~.t\}tl.7'14 ~:,J.~.h~.7~'.'. ~ 12,i 1-i.7•1] ~127.T:.~ %i '!-~~'.1.ll\oJl21 :i, 7.330.7')3 P11rtfuli., C,rnn"n ~la1,irit1 \idct lOILtl'•i 6.-l\l s_,s s.s., l 7(; 5 16 l.l~ '.'.ol 15.li', ll.; 1 4.5il ll_i:_i I (1'1 6.1~ 12 ,7 fi.~~ ,, l', c)_:;:1 ~. J 7 ,_i 12 \'.I 7',, 051.~ 20.12 h :,,~ -11.7' 6.1: .~.45 5 ~~ '>1.(,', 6.52 5.4? S.90 2A~c 5.l~ 0.25 5.W 5 Largest Holdings Ending Pcr~cnt I\lurl.d .,r Elft'l1i1·t I ... l 11i •~J St:i.~, Tr,u·~ ~L' l'cJs.J . ,u. ML! ,\,,,. ~kJt L':111cJ :1· ,:., 'l't:u., :0-L, 1·,·.!.·:;,i \/a:. Mi.: A,,n M~d Un1 . .:11 S . .1-~s f1~;.L..: :\t~ ~'. ll . .';-'i5c,; (~H~ltJ1 ]V\.,; I) D:J JJ/Tll'J'.'1 Stl::•>1;< 1,il5,2.) 1 5.•1,i' l'.'.l'.~.'::'.v-J:\ ,)JI >.,;16.5Ll',, •.J5.'.1 [.';:_,\,2 Tr.: ... ·'I-~• .'\g<:ll\;i\;S 'I ·rL';.J..)Une~ .\.!!..:a.;11!- I ,~:i.:-un,·s \'ulut ~ .:.: .:1 .6 .j ~l'1.~~2.5lti ~] ~ _._,·,, .21,I', ~l :.~;-,::.,51~ Sl3At ~ •i(,, l •"J.t.'i(~ {\.4({ ~ ...,. ' •L'', 44',i S Lowest Rated Holding~ lMood1 ·s Rating) lssu,cr '\atllL l,._sut '\amr I 1,1.:.l,l.11.J 1.1~1.·,, 1;.;t,;1 .!,I', ]ll.'l.:,1.:.1 Ld~'.11-1 U1 ,,1h-t, H,J ... •, !f\t.. \.c>t:,~,i. l 1~~1S/21_i-.).},q l.."!1 11\,111 Br,1Ll'Ja, If.JI!.., I \, h.-1', S 311/lll,, ,J (.\,um \\,.JI.' H 1,1., 1.7,.1n, :,,.::-·6.~51.; ~·.51\1-l 1 .,•', •• , l·rn1 In,. ,"1-:J. 111 T:r Tr.illdl<: Ii fr ,)12-Vi V.i l, t'"!·l\ tiil;,;, C, 1I""p lf;i[.;_•~ L ur,-1f1fJIC'\ ~~ ,__1rpprai ;.~ Ldrl)(.•fJi.,!:} F.nd.ing \,Jarkrl \ ul c s:.Lii..,,. 2·. ~) 1'2J..,)! s:.5l'i~.O<l4:1 :S2.5t.!J -~5~ ~~.\i !11.21~ Pt:rn·nl uf P'11t u,,li,1 \, i ' I 7r; U.h'.( ,:.x·:. ],i,;•:, 5 Longcsl Ouralion Holdings !'~ er.~ lhHll;:i I :..-11;:Co:])~ l r .. \ :J. ~l .tl,.;, i. ;\..'J'"' r'il~ l 11:t,J :it.a•> 'l';L,'1, ILi, ! •. ,. ~ ;-,la,;.1. I .I,: Cn 1·,:l:~·r J, ~j~! ~,1t: .\:-,;1 \,:!,L • ~r 1·~.!, -l ,,.,;t,-/1-,; (i '-.i : : 7"' I II < ".-1-. ),~c 13~~•' I ~ I~>, iX~ ~ 20·., ~,J ~ i ~ 23 ~ :111•·, Jl;· 51:\,1)~ D.J, C IG, Tr~.L,w 1.:, I r·...:J'-u:-·...::-, C11_7:"1-;11~:l.::- A.g1:n ... ·1~, Endini,: .\-tttrl-tr '1110, ~-.LI-! .. 22 ~! d .• ~, ~ .. ~-: '.'l.,.,,:ih -:~1 ::-,2 ,u..-.~~•. -1' i ~.7;i2.~ ~ l'erct'.nl or t•itrtfoli,, d -,. l l l l,, \t."":°". ,j _< ' 5 llnldin~~ with Highest El'fccl Yield Pl.."r..;,:nr \'i,·,1 Etlt-c-1h·.: \ lt'lll I);,,; 6 5~ il-1-'7 6.~,6 ~ h~ EITe,·ti,~ YidJ El\d:n,I? l\larl-d , alu,· <.>!' r.frcL1.ilc h.:J,·r.J Ii •Ill~! .n . lid 1·, ·p ,I ~c1 • ,,~ l' 11:_.1-.~1 , : Fui.:;1--.J 11 '1·:1.: l .iL \11. 1.~ T\, J (+ ... '\~1• .. .:.•,~ •• ·i• ~ 11 :.u, le:-·,.\,, l.t .!\h..! ( , :.I'--•\'': t·,...;ntf"".\..,l_ ~t·.d1~ I ~ .• 1:·,-... jl ·t"1.l5lJ .~ '~1~, li::;!·:t.1..,.t ;t;L, .. , ;)-~ri~.::,:1 ,L~.~~1~~3 011:,. CJ.IC, Llii"'h: . .:.'..!- ~~ li 1'•• ; ;;, '~ t_ 1 :Ti-; ul~ ~ · .: .. J.J I :22 I~ •,-r• ·•~ ,hl' ~-l:-.[ ), 2 .. , ,.-5. 1-• I <. \: ,.d . .:· \ J. JO.:: ~t-,,•\1·· ,:_ ~s ,i,:-1 .11c\.J:; 1;.1;\l.:. ,,n,J :-..:,:_,· .. ~,.-:6 l •,. -·,,; n• r :~ '·'~•I (),\ Duratllm 2.w, (l.L' ~.ii5 o.56 1.J.\ 4 . ~ ! ; 2.1.J--: J.t)) II.!:' OA l)un 11,11n 0 ,\ l}u1·,11inrt t ]Y l,26 t t,., 4 17 j 11 (),\ C11n\cXIII IJ.02 (.,1).) ' 1) •4 G.l~7 II [ ~I t"\ 1:. 0.112 1).00 OA '11nw:-.1l1 u u.:: ti,0' ~ I.Ji) I ~ .,.\J \ Ji'\ OA ."ul\\~ll.il) , .. 1.1.\12 l}.1..12 0.2, 1I :.\ OA OA Ourutinu C h fl\t!ll.tl\ 1 , .. 1 ,;n f, :., u ~),. t l:, ll.~-l (', ., J •,_I. \)I: 5 l, 7 I .• •~1 I OA Ou11,l11111 ',\•.= -· : -,. __ :, 0,\ 0Pn\~~iq (}u;,l11 \ Aul .\;,a ,\..1 ... \.w- ,\, A ... a+ \,J;,+ A .. J A:rn Ouallt, • .l.Jt ,-\.u ,\~IJ"!" .·\J:l \JJ.,. !,)uuli11 ll.1al H;i:.I Ba;;.1 \~ ' -,\J O u:.ht, ,\ .. ,,:+ ,\J.ut- •\,til+ H.u,3 :'\jd (,l uulit, ,\,i,r- ;">:, k .,.:. \ l ll..c..' j\.'i .":\rt : .. 1.::: ~-:C·\,•t. •J:· ·.::,.: !J .. i;: ..... 1r·~ ~--~,.,r.: ·:1~.:.i\1 ( ·. LLL ~\..;.:u~-.I;~~. ,ll ~h..; p~:'J~,:'.1( :1~:.t·= r1~~,")~l~1:'.L,J 1\;,~ tbcirCu j,lp ,....;·~1: ·t-1 · ... ··-~. 1 •· , :, i , .; 1.. i.:.. ~:a·. c (< ~:· c ·· ..:~u.1·.11 .... _.. , -r · 1., ~j,: n rub,) 1 Ct n:l:irt ~:. \ ;~ l 1.t .. ..: \~ ~r..: c: ~'.1J~.n~L...:J J:-.•-~-~: n .... ~j ) .. --------···----------------------------·------'---------------J m 25 Years CAILAN A is·•· S· J· "'"']-A 11,1:::c l!u I ( L _[\ __ J__.J'1-)1NC Atlanta Consulting Office Six Concourse Parkway, Suite 2900 Atlanta, Georgia 30328 Phone: (770) 804-5585 Chicago Consulting Office 120 North LaSalle Street, Suite 2100 Chicago, Illinois 60602 Phone: (312) 346-3536 Denver Consulting Office 550 East 8th Avenue Denver, Colorado 80203 Phone: (303) 861-1900 New York Consulting Office 163 Madison Avenue Monistown, New Jersey 07960 Phone: (973) 993-9595 San Francisco Consulting Office 71 Stevenson Street, Suite 1300 San Francisco, California 94105 Phone: (415) 974-5060 FAHR COMMITTEE Meeting Date ToBd. 09/08/99 N/A AGENDA REPORT Item Number Item Number 'r<?'-h {p Orange County Sanitation District FROM: Gary Streed, Director of Finance Originator: Steve Kozak, Financial Manager SUBJECT: CERTIFICATES OF PARTICIPATION (COP) MONTHLY REPORT - JULY AND AUGUST 1999 GENERAL MANAGER'S RECOMMENDATION Receive and file Certificates of Participation (COP) Monthly Report for the months of July and August 1999. 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. PROJECT/CONTRACT COST SUMMARY None. BUDGET IMPACT D This item has been budgeted. D This item has been budgeted, but there are insufficient funds. D This item has not been budgeted. C8] Not applicable (information item) ADDITIONAL INFORMATION For the months of July and August 1999, graphical and tabular reports are attached. The first graph entitled, "OCSD COP Rate History Report," 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." \lradon\dala1'wvp.dtalfin\210'crane\FAHR\Fahr99\Sepl\COPR9-99.dac R9'11Md: 1 /5198 Page 1 The second bar chart entitled, "Comparative Daily COP Rate History Report," shows . the performance of the District's Daily Rate COPs as compared to a composite index rate, which represents the average rate of six similar variable rate daily reset borrowings. The third bar chart entitled, "COP Rate History, Comparison of Highest & Lowest Rates," compares the performance (monthly average interest rate) of the District's Daily Rate COPs with the highest and lowest monthly average rates from among six similar variable rate daily reset COPs. The table entitled, "COP Rate History, Comparison of Monthly Averages," shows the monthly variable interest rate performance of the District's Daily Rate COPs as compared to the composite index. Estimated annual interest payments calculated for a standard $100 million par amount, are also shown. Variable rates historically rise at the end of each calendar quarter, and especially at year-end, because of business taxes and liquidity requirements. The rates decline to prior levels immediately in the following month. Staff maintains continuous rate monitoring and ongoing dialog with the remarketing agents to keep the Committee fully informed about developments in the program as . they occur and at each meeting. ALTERNATIVES None. CEQA FINDINGS None. ATTACHMENTS 1. Graph -OCSD COP Daily Rate History Report (July & Aug.) 2. Graph-Comparative Daily COP Rate History Report (July & Aug.) 3. Graph -COP Rate History, Comparison of Highest & lowest Rates (July & Aug.) 4. Tabular -COP Rate History, Comparison of Monthly Averages (July & Aug.) GGS:SK:lc \lnldonldata1 wp.dlalfin\2101cranelFAHRIFahl99\Sept\COPR9--99.dac R..-.cl: 16'98 Page2 G) "ti ii! iii" C "C ~ )> DI !!. -I RATE(%) [ SI: m C'" DI '< :ii c.., .,:a. en en "Tl ::I 0 ..a. N :r F3 0 0 0 0 0 0 0 DI I\) ::I 0 0 0 0 0 0 0 C, I\) _RI 0 r6 02-Sep-98 ~ i3 (C _fg -;:; 16-Sep-98 :5· I\) DI ::I N C, I\) $ 30-Sep-98 "ti s:: )> -i m 14-Oct-98 ::i:: en -i (0 I 28-Oct-98 T I -----r-I 't I T I I 0 ..... 11-Nov-98 + I I ~ I * I • I I 0 en 25-Nov-98 + I I ~ * I • I I C 09-Dec-98 + I I ~I * I • I I 0 0 23-Dec-98 + I I I b.-__ * I ' I I "'C 06-Jan-99 C ++ )> 20-Jan-99 )> -c• )>"U G') -< -m 03-Feb-99 G)-· :::::, (1)<1> c~ ~~ 17-Feb-99 ll) CD i::, 0-en -I 0-CD 03-Mar-99 .. --1 m -, 17-Mar-99 + I <9' I I * I • I I ~ :C CD - 31-Mar-99 CD en t+ CD -I 14-Apr-99 0 (l)C.... ~ o· C') :-0 28-Apr-99 (j)s: CDC ::c :::, .., ~ 12-May-99 ~:::::, m ll,) -a 26-May-99 -0 09-Jun-99 + I I ~I I * I • I I ::c -~ -I 23-Jun-99 07-Jul-99 21-Jul-99 04-Aug-99 18-Aug-99 Prepared by Finance, 8/31 /99, 2:25 PM COMPARATIVE DAILY COP RATE HISTORY REPORT AUGUST, 1999 6.00-..--~======~============~- 5.00 +--------------------------------------------1 4.00 -~ ~ ~ 3.00 ~ 2.00 1.00 0.00 DATE co co co co a, a, a, a, a, a, a, a, a, a, a, a, a, a, a, en a, a, a, a, a. 'ti" >-u-C: .0 ..: ... -~ r:E "S ci a, 0 a, co a, co a. co ::J ::J Cl) 0 z 0 -, LL ~ <{ ~ -, -, <{ EI OCSD • COMPOSITE INDEX G:\excel.dta\fin\2220\geggi\Finance\dailycopintrate.xls -~ ~ UJ I-~ 3.50 3.40 3.30 3.20 3.10 3.00 2.90 2.80 2.70 2.60 2.50 2.40 2.30 2.20 HIGH LOW JPIIRWD,OCSO COP RATE HISTORY COMPARISON OF HIGHEST & LOWEST RATES [LEHISCE 1senRwo ILEH/SCE BT/IRWO ❖:❖:• f\j ::::::::: ::::::::: \\~\~\~ ::::::::: ❖:•:❖ ff! i!il\l\!\ ··•·•···· ill l!I Highest rate OOCSD/J.P. Morgan • OCSD/PaineWebber 0 Lowest rate G:\excel.dta\fin\2220~eggi\Finance\RA TEHIST _HI LO _bargraph Prepared by Finance, 8/31 /99, 2:28 PM .. Prepared by Finance, 8/31/99, 2:26 PM Sep-98 Oct-98 Nov-98 Dec-98 Jan-99 Feb-99 Mar-99 Apr-99 May-99 Jun-99 Jul-99 AUA-99 AVERAGE DAILY COP RA TE HISTORY COMPARISON OF MONTHLY AVERAGES SEPTEMBER, 1998 -AUGUST, 1999 OCSD $100M $98.SM $46M Series"A" Series"C" Series 93 Ref PaineWebber J.P. Morgan Paine Webber 3.27 3.33 3.27 3.06 3.00 3.06 2.94 2.91 2.94 3.11 3.07 3.11 2.84 2.87 2.84 2.30 2.28 2.30 2.72 2.66 2.72 2.88 2.83 2.88 3.34 3.33 3.34 3.30 3.25 3.30 2.35 2.36 2.35 2.82 2.82 2.82 2.91% 2.89% 2.91% ESTIMATED ANNUAL INTEREST PAYMENTS PER $100M PAR AMOUNT $ 2,910,833 $ 2,892,500 $ 2,910,833 * FOOTNOTE Composite index consists of the following COP transactions: • IRWD, Series 86, $60M, Smith Barney • IRWD, Series 93 "A" Refunding, $87.6M, Bankers Trust • IRWD, Series 93 "B" Refunding, $41.SM, J.P. Morgan . IRWD, Series 95 Refunding, $117.SM, PaineWebber Composite Index• 3.24 3.02 2.96 3.09 2.87 2.32 2.70 2.86 3.34 3.28 2.36 2.83 2.91% $ 2,905,833 • Western Riverside Co. Reg. Wastewater Auth., Series 96, $25.4M, PaineWebber • Orange Co., Irvine Coast Asst. Dist. 88-1, $94.SM, J.P. Morgan • SCE, $192M, Lehman G:\excel.dta\fin\2220\geggi\Finance\COPdaily$rate comparison .. , ; FA HR CO MMI TTEE Meeting Date 09/8/99 AGENDA REPORT I~m Number 9-61 Orange County Sanitation District FROM: Don McIntyre, General Manager Originator: Greg Mathews, Assistant to the General Manager SUBJECT: FY 1998/99 END-OF-YEAR OPERATIONAL REPORT GENERAL MANAGER'S RECOMMENDATION This is an information item only. SUMMARY The Strategic Goals Workplan and budgetary Performance Objectives are annual planning tools designed to assist staff in reaching best-in-class status. Staff and District-wide performance is compared to pre-set benchmark standards or milestone targets as reflected in these tools. This comparison is designed to show how well we have completed duties and responsibilities compared to our expectations. The FY 1998/99 Workplan, developed as a separate product and distributed to the Committee at the beginning of last fiscal year, details projects, programs, objectives and tasks designed to achieve District-wide Strategic Goals. Milestones were identified that represented successful completion of a major task. Completion of these task milestones was identified as important to the success of the agency. The budgetary performance objectives identify division-wide specific and measurable functions that staff are expected to perform. These objectives, detailed in the 1998/99 Budget, are indicative of major day-to-day or special project functions. Actual performance is measured against established benchmarks, and staff are held accountable for the results achieved. The FAHR Committee and Board have been kept apprised of quarterly progress regarding the workplan and performance objectives in the Financial & Operational Reports. At the end of the fiscal year, the Finance Department _ prepares a Comprehensive Annual Financial Report (CAFR) that is presented to the FAHR Committee in November. As the CAFR replaces the financial component of the Financial & Operational Report, a stand-alone, end-of-year operational report is provided for the Committee's review. C:\GMATHEWS\99PERFl4th Quarter\FAHR99-66.doc Revised: 1/5/98 Page 1 To Jt. Bds. Item Number PROJECT/CONTRACT COST SUMMARY Not Applicable. BUDGET IMPACT D This item has been budgeted. D This item has been budgeted, but there are insufficient funds. D This item has not been budgeted. IZl Not applicable (information item) ADDITIONAL INFORMATION Divisions and departments overall achieved 78% of their year-end budgetary performance objectives; a 3% improvement over la.st year. Although this is slightly below the 80% benchmark expected, it represents significant accomplishments. During a Board Budget Workshop in FY 97/98, several Directors urged staff to elevate many departmenUdivision performance objectives to best-ir:i-class status. Staff c0mplied with this request. As a result, however, some objectives have been missed as little room for error was provided. Regardless of our collective inability to achieve the 80% overall benchmark, staff believe we have generally performed very well, given the best-in-class performance expectations. Through FY 1998/99, we have completed 280 of 389 Strategic Goal Workplan tasks--72%. There are several caveat~ associated with this percentage. First, although we were behind schedule on many tasks throughout the year as reflected in our Quarterly Financial and Operational Reports, we were able to complete many delayed projects before the close of the 4th quarter. Second, we did not properly anticipate or plan for the huge amount of resources that would be dedicated to the Y2K compliance efforts. This project delayed many other lower priority projects to subsequent quarters and fiscal year 99/00. Third, one of the unfortunate outcomes of accelerated downsizing is the need for remaining staff to focus on core business as oppos,sd to Strategic Goals. In many instances staff resources were not available to dedicate to Workplan tasks as they were committed to core business functions. Fourth, based on the prior factors the General Manager reserved the authority to delay projects until the next fiscal year if circumstances warranted such delays. The 72% figure reflects ALL tasks that were originally planned, including those approved for deferral. If those deferred tasks are eliminated then District staff actually completed 280 of 327 remaining "non-deferred" projects. This represents an 86% completion rate. C:IGMATHEWS\99PERF\4lh Quarter\FAHR99-66.doc Revised: 1/5/98 Page 2 ... The attached report provides details related to performance objectives and workplan tasks. Staff will be available to answer questions regarding the content of this report. ALTERNATIVES Not Applicable. CEQA FINDINGS Not Applicable. ATTACHMENTS 1. End-of-Year Operational Report GM C:IGMATH8NS\99PERF\4th Quarter\FAHRSS-66.doc Revised: 1/5198 Page 3 I' FAHR CO MMITTEE Meeting Date 09/8/99 AGENDA REPORT I~m Number <j-61 Orange County Sanitation District FROM: Don McIntyre, General Manager Originator: Greg Mathews, Assistant to the General Manager SUBJECT: FY 1998/99 END-OF-YEAR OPERATIONAL REPORT GENERAL MANAGER'S RECOMMENDATION This is an information item only. SUMMARY The Strategic Goals Workplan and budgetary Performance Objectives are annual planning tools designed to assist staff in reaching best-in-class status. Staff and District-wide performance is compared to pre-set benchmark standards or milestone targets as reflected in these tools. This comparison is designed to show how well we have completed duties and responsibilities compared to our expectations. The FY 1998/99 Workplan, developed as a separate product and distributed to the Committee at the beginning of last fiscal year, details projects, programs, objectives and tasks designed to achieve District-wide Strategic Goals. Milestones were identified that represented successful completion of a major task. Completion of these task milestones was identified as important to the success of the agency. The budgetary performance objectives identify division-wide specific and measurable functions that staff are expected to perform. These objectives, detailed in the 1998/99 Budget, are indicative of major day-to-day or special project functions. Actual performance is measured against established benchmarks, and staff are held accountable for the results achieved. The FAHR Committee and Board have been kept apprised of quarterly progress regarding the workplan and performance objectives in the Financial & Operational Reports. At the end of the fiscal year, the Finance Department prepares a Comprehensive Annual Financial Report (CAFR) that is presented to the FAHR Committee in November. As the CAFR replaces the financial component of the Financial & Operational Report, a stand-alone, end-of-year operational report is provided for the Committee's review. C:IGMA THEWS199PERF\4lh Quarter\F AHR99-66.doc Revised: 1/5198 Page 1 To Jt. Bds. Item Number PROJECT/CONTRACT COST SUMMARY Not Applicable. BUDGET IMPACT D This item has been budgeted. D This item has been budgeted, but there are insufficient funds. D This item has not been budgeted. [XI Not applicable (information item) ADDITIONAL INFORMATION Divisions and departments overall achieved 78% of their year-end budgetary performance objectives; a 3% improvement over last year. Although this is slightly below the 80% benchmark expected, it represents significant accomplishments. During a Board Budget Workshop in FY 97/98, several Directors urged staff to elevate many department/division performance objectives to best-in-class status. Staff complied with this request. As a result, however, some objectives have been missed as little room for error was provided. Regardless of our collective inability to achieve the 80% overall benchmark, staff believe we have generally performed very well, given the best-in-class performance expectations. Through FY 1998/99, we have completed 280 of 389 Strategic Goal Workplan tasks--72%. There are several caveats associated with this percentage. First, although we were behind schedule on many tasks throughout the year as reflected in our Quarterly Financial and Operational Reports, we were able to complete many delayed projects before the close of the 4th quarter. Second, we did not properly anticipate or plan for the huge amount of resources that would be dedicated to the Y2K compliance efforts. This project delayed many other lower priority projects to subsequent quarters and fiscal year 99/00. Third, one of the unfortunate outcomes of accelerated downsizing is the need for remaining staff to focus on core business as opposed to Strategic Goals. In many instances staff resources were not available to dedicate to Workplan tasks as they were committed to core business functions. Fourth, based on the prior factors the General Manager reserved the authority to delay projects until the next fiscal year if circumstances warranted such delays. The 72% figure reflects ALL tasks that were originally planned, including those approved for deferral. If those deferred tasks are eliminated then District staff actually completed 280 of 327 remaining "non-deferred" projects. This represents an 86% completion rate. C:\GMATHEWS\99PERFl41h Quarter\FAHR99-66.doc Revised: 1/5198 Page 2 The attached report provides details related to performance objectives and workplan tasks. Staff will be available to answer questions regarding the content of this report. ALTERNATIVES Not Applicable. CEQA FINDINGS Not Applicable. ATTACHMENTS 1. End-of-Year Operational Report GM C:\GMATHEWS199PERF\4Ih Quarter\FAHR99-66.doc Revised: 115/98 Page 3 1 FAHlt COMMITTEE Meeting Date 09/08/99 AGENDA REPORT Item Number 9q-57 County Sanitation Districts of Orange County, california FROM: Donald F. McIntyre, General Manager Originator: Marc Dubois, Contracts and Purchasing Manager; Doug Stewart, Engineering Manager; Ed Torres, Air Quality Control Manager; Mike White, Controller To Bd. of Dir. 09/22/99 Item Number SUBJECT: PURCHASING RESOLUTION AND DELEGATION OF AUTHORITY GENERAL MANAGER'S RECOMMENDATION Adopt Resolution No. OCSD 99-XX, Establishing Policies and Procedures for the Award of Purchase Orders and Contracts; Award of Public Works Project Contracts; Award of Professional Services Contracts; and Delegation of Authority to Implement said Policies and Procedures; and Repeal Resolution Nos. OCSD 98-8, OCSD 98-12, OCSD 98-22, and OCSD 98-43. This item was considered by the PDC Committee in July and September. SUMMARY This item has been before the FAHR Committee in July, but was not acted upon pending further review by the PDC Committee. The July staff report is attached. Most of the significant changes proposed deal with Professional Service Agreements and staff and Committee approval levels. The PDC Committee is scheduled to review and act upon this item on Thursday, September 2, 1999. Their staff report is also attached. Staff will present the PDC recommendations at the Committee meeting, and review the proposed changes in policy and procedure. BUDGET IMPACT D This item has been budgeted. D This item has been budgeted, but there are insufficient funds. D This item has not been budgeted. C8l Not applicable ADDITIONAL INFORMATION Please see attached July 14, 1999 FAHR report and September 2, 1999 PDC report. \lradonldata1'1Np.dtallin\21D'crane\FAHR\Fah~ d Authority,-0999.doc R..tMd: 115198 Page 1 ALTERNATIVES Maintain existing policy, or adopt revised new policy. CEQA FINDINGS N/A ATTACHMENTS 1. July 14, 1999 FAHR Committee Staff Report 2. September 2, 1999 PDC Committee Staff Report 3. Proposed Resolution No. OCSD 99-XX \lladonldala1\wp.dtalfin\210\c111ne\FAHRIFahr9II\Sepl\Delegtion of Authority-0999.cloc RIMMd: 115198 Page2 .. PDC COMMITTEE Meeting Date To Bd. of Dir. 9/2/99 9/'22/99 AGENDA REPORT ~mNumber Item Number t,9(;._j,S Orange County Sanitation District FROM: Donald F. McIntyre, General Manager Originator: Delegation of Authority Committee (Marc Dubois, Contracts and Purchasing Manager; Doug Stewart, Engineering Manager; Ed Torres, Air Quality Control Manager; and Michael White, Controller) SUBJECT: PURCHASING RESOLUTION AND DELEGATION OF AUTHORITY (DOA) GENERAL MANAGER'S RECOMMENDATION Adopt Resolution No. OCSD 99-XX, Establishing Policies and Procedures fo~ the Award of Purchase Orders and Contrijcts; Award of Public Works Project Contracts; Award of Professional Services Contracts; and Delegation of Authority to Implement said Policies and Procedures; and Repeal Resolution Nos. OCSD 98-8, OCSD 98-12, OCSD 98-22, and OCSD 98-43. · SUMMARY In May 1999, the Steering Committee and the FAHR Committee reviewed this item. In July 1999, the PDC Committee reviewed this item and approved the item on a 5-4 vote . with the recommendation that the item be further discussed at the September PDC Committee meeting. The PDC Committee requested that specific examples be brought to them to show how the proposed Delegation of Authority would affect workflow. This information is contained in the Additional Information section of this Agenda Report. The prior Agenda Report discussing the proposed Delegation of Authority is attached for reference. PROJECT/CONTRACT COST SUMMARY Not Applicable. BUDGET IMPACT D This item has been budgeted. (1999-00 Budget, Sedion _, page__) 0 This item has been budgeted, but there are insufficient funds. D This item has not been budgeted. [81 Not applicable (information item) Page 1 ADDITIONAL INFORMATION Table I in the attached Agenda Report is a summary of the changes to financial approval levels proposed in the Resolution. The requested changes affect the roles of staff, the PDC Committee, and the Board with respect to approving Professional Services Agreements (PSAs) and Public Works Contracts, including addenda and change orders. The intent of the requested changes is to gain consistency among the various departments with respect to approval authorities, and to provide a faster, easier process to the Engineering staff on small PSAs and Public Works Contracts. An analysis of the PSAs and Public Works Contracts that were approved by either staff, the PDC Committee, or the Board from January 1998 to July 1999 was undertaken for this report. The analysis compared the number of items that were approved by each group under the current DOA and the proposed DOA. The results are: Approved By: Approved By: Number of (Existing DOA) (Proposed DOA) Projects 1. Board PDC 10 2. Board General Manager 5 3. PDC General Manager 2 1. For each item that is proposed to be approved at the PDC Committee level rather than the Board, there is a 3-week timesavings resulting in 30-weeks of timesavings in the past 18 months. 2. For each item that is proposed to be approved by the General Manager rather than the Board, there is a two-month timesaving resulting in 10 months of timesavings within the past 18 months. 3. For each item that is proposed to be approved by the General Manager rather than the PDC Committee, there is a five-week timesaving resulting in 1 O weeks of timesavings within the past 18 months. The total time that could have been saved in the past 18 months with the proposed Delegation of Authority is 80 weeks. Along with the timesavings, project costs would have been reduced since staff support and associated costs would have been reduced proportional to the timesavings. For those items that are proposed to be approved by the General Manager, a substantial amount of staff effort will be reduced since formal Agenda Reports will not have to be prepared for presentation to the PDC Committee and Board of Directors. As the number of capital projects increase over the next four to six years, the number of items requiring Board action will also increase. With the proposed delegated levels of authority, staff will be more efficient, projects will be completed on shorter schedules and project costs will be reduced. Page2 The reporting mechanism for all· delegated approvals under the proposed DOA remains unchanged. Any PSA approved by the General Manager is reported on a quarterly basis to the PDC Committee for their review and comment. Any construction contract or change order approved by the General Manager is reported to the PDC Committee on a monthly basis and summarized quarterly. ALTERNATIVES Maintain the existing Delegation of Authority levels and separate purchasing resolutions. CEQA FINDINGS Not applicable. ATTACHMENTS PDC 99-35 Agenda Report with attachments DMS:jak G:\ntglobal\Agenda Draft Reports\PDC\DOA AR 090299.dot Page3 FAHR COMMITTEE Meeting Date To Bd. of Dir. 07/14/99 09/22/99 AGENDA REPORT Item Number Item Number FAHR99-57 Orange County Sanitation District FROM: Donald F. McIntyre, General Manager Originator: Delegation of Authority Committee (Marc Dubois," Contracts/Purchasing Manager, Doug Stewart, Engineering Manager, Ed Torres, Air Quality Control Manager, Michael D. White, Controller) SUBJECT: PURCHASING RESOLUTION AND DELEGATION OF AUTHORllY (DOA) GENERAL MANAGER'S RECOMMENDATION Adopt Resolution No. OCSD 99-XX, Establishing Policies and Procedures For The Award of Purchase Orders and Contracts; Award of Public Works Project Contracts; Award of Professional Services Contracts; and Delegation of Authority to Implement Said Policies and Procedures; and Repeal Resolution Nos. OCSD 98-8, OCSD 98-12, OCSD 98-22, and OCSD 98-43. SUMMARY In July 1998, the Board of Directors adopted Resolution Nos. OCSD 98-8, OCSD 98-12, OCSD 98-22, and OCSD 98-43 establishing policies and procedures for the award of purchase orders and contracts, award of public works contracts, award of professional services agreements, and delegation of authority to implement said policies and procedures. Proposed Resolution OCSD 99-XX is to consolidate these previously approved Resolutions into one compact resolution and Repeal Resolutions OCSD 98-8, OCSD 98-12, OCSD 98-22, and OCSD 98-43. A committee comprised of division managers was formed to review and recommend changes to existing policies and procedures related to delegation of authority. The work of this committee resulted in the passage of several independent Board Resolutions in FY 1997 -98 related to delegated authority from the Board. The directives in these resolutions ranged from contracts and purchasing to construction contract change orders. In conjunction with the consolidation of the Districts in July 1998, General Counsel recommended adoption of Resolutions OCSD 98-8, OCSD 98-12, OCSD 98-22, and OCSD 98-43 to replace these earlier Resolutions. General Counsel and the Delegation of Authority Committee (DOA Committee) have since been asked to revisit these resolutions and consolidate them into one compact resolution related to the entire spectrum of delegated authority from the Board to Board Committees and staff. The \lradonldata1'twp.dta\agendalFAHR\Fahr99\99ar\FAHRll9-57.dot R9'1iud: ll/'2Ql98 Page 1 DOA Committee and General Counsel have collaborated and are requesting approval of the attached resolution. Combining the four resolutions, removing inconsistencies created within the in the original documents, and changing the levels of delegated authority will gain consistency across the organization. The details are discussed in the Additional Information section of this Agenda Report. This item was reviewed by the Steering Committee in May, and referred to the PDC and FAHR Committees. The PDC Committee reviewed and approved the recommendations by a split vote on July 1, 1999. They will re~ive additional information at their September meeting. This item is tentatively scheduled for the September 22, 1999 Board meeting. · PROJECT/CONTRACT COST SUMMARY Not Applicable. BUDGET IMPACT D This item has been budgeted. D This item has been budgeted, but there are insufficient funds. D This item has not been budgeted. ~ Not applicable (information item) ADDITIONAL INFORMATION Resolution OCSD 98-8 deals primarily with the award of professional service agreements, the selection of consultants, and the ratification of construdion contract change orders. The DOA committee compared the delegated approval levels for professional service agreements and construction contract change orders with the delegated approval levels for all other.service type contracts and found a disparity across the organization. Under the Delegation of Authority Resolution, OCSD 98-12, the General Manager is delegated up to $100,000 of authority for approval of service contracts and purchase orders. Under Resolution OCSD 98-8, however, the General Manager is delegated up to $50,000 for approval of professional service agreements and construction contract change orders. Staff is requesting a change in the delegated authority to achieve consistency with the General Manager's authority and to provide flexibility aaoss the organization. The increase in the General Manager's authority and the additional flexibility provided to staff will save the District time in getting projects approved, lessen the workload submitted to the Board and Committees, and provide more time for the Directors to focus on the •bigger picture• projects. Table 1 on the following page shows a summary of the existing levels of delegated authority and the requested new levels. \lradon..,...1_,,.dla~AHRIF•110INIIIMFAHR8e-57.dal R..-.11121WN Page2 Table 1 Summary of Changes to Financial Approval Levels Deleaated Area Current Delegation General Manager authority Up to $25,000 per for PSA's and addenda original agreement and up to $25,000 additional per each addendum, NTE $50,000 total for all addenda. Director of Engineering Up to $50,000 per authority for small project each task order, no task orders and addenda authority for addenda. only. This provision applies only to Sections 4.03-4.06 General Manager authority Up to $25,000 per for Public Works Contract original contract and and Change Orders up to $50,000 (additions only) per each additional change order. In no case may change order total exceed 5%, or $100,000, whichever is less, of total contract. Board Committee's Up to $50,000 per authority for PSA's and original agreement Addenda and up $50,000 per each addenda, NTE $100,000 total additional. Board Committee's Up to $50,000 per authority for Public Works original contract and Contract and Change Up to $100,000 Orders (additions only) per each additional change order. In no case may change order total exceed 10% or $200,000, whichever is less, of total contract. Board Over $50,000 on original and over $200,000, or 10%, whichever is less, on change orders. \lladonldata1\Np.dta\aganda\FAHR\Fahr91N19ar\FAHR99-57.dot RIMMCI: lll20IIIII Proposed Delegation Justification Up to $100,000 total Maintain consistency with GM's for PSA , including all authority for services, equipment addenda. and materials. Non-PSA purchases between $50,000 and $100,000 are reported to FAHR each quarter. PSA actions by GM reported to PDC monthly. Up to $50,000 per Maintain consistency with GM's each task order and authority for services, equipment up to $50,000 each and materials. addendum with a total not to exceed Director of Engineering reports all $100,000, including all task orders to PDC each quarter. addenda. Up to $100,000 for Maintain consistency with GM's total of original authority for services, equipment contract and all and materials. change orders (additions only). In no Public Works bidding and contract case may change requirements would continue to be order total exceed 5% met. Change orders reported or $100,000, which-each month to PDC with quarter ever is less, of total to date update. contract. Up. to $200,000 total Consistency with Board for PSA, including all Committee's current delegated addenda. authority of 2x the GM's authority. Primarily affects PDC Committee. Up to $200,000 for Consistency with Board total of original Committee's current delegated contract and all authority of 2x the GM's authority. change orders (additions only). In no Affects PDC Committee only. case may change order total exceed 10% or $200,000, whichever is less, of total contract. Over $200,000 on Time savings due to the reduction original and over in the volume of small projects $200,000, or 10%, that would have to be reviewed by whichever is less, on the Board. change orders. Page3 PSA, or Professional Service Agreement, as used in Table 1 on the preceding page, and in Table 2 below, is limited to firms providing engineering, architecture, environmental, land surveying, construction iranagement services and related services. Table 2 provides for three additional changes that are being requested by staff. Table 2 Changes to Policy and Administrative Issues Descriotion Change Justification Professional Services Allow General Manager to Reduces administrative Agreements for small extend agreement period for burden on Engineering and capital projeds only, refer two additional years. Purchasing Departments to to Sedion 4.03 solicit interest from finns and establish contracts. Travel associated with Include Mexico along with Likely incidence of travel to meetings and training Canada (already approved by Mexico as a result of NAFT A Board) as Board-approved and consideration of North destination for out-of-country America as a whole. travel. Delegated authorities Allow General Manager and Varying levels of authority for within Departments for Department Heads authority to purchasing required by purchases less than establish purchasing authority individual departments varying $10,000 within organizational structure. strudures and position classifications. Staff has had one year of experience with the small capital projects consultant contracts. Eighteen task orders were issued under this program, saving an average of 2.5 months on each task order, compared with obtaining Board approval of a separate contract for each project. This delegated authority has been key in alleviating a backlog of projects that had built up over several years. At the end of the contract period, each of the consultants was asked if they would extend this year's rates for an additional year. All agreed to extend the contract terms for an additional year. Eliminating an entire RFP and consultant selection process on an annual basis would save staff about 350 hours per year, or 0.17 full time equivalent staffing effort, and allow the District. to lock in favorable consulting rates for a three year period. In order to be effective, purchasing authority must be delegated into the organization. Prior attempts to delineate this authority were accomplished by the use of position classifications, i.e. Foreman. However, the various Departments and Divisions are organized and structured differently, and these classification delegations were not practical throughout the entire agency. Allowing each Department Head the ability to establish separate authority levels for purchases under $10,000 will provide the organization with the ability to manage more efficiently and effectively in the future. ALTERNATIVES Maintain the existing delegation of authority levels and separate purchasing resolutions. \lladonldata1'wp.dtalagenda\FAHR\Fahr99\99ar\FAHR99-57.dat Rwised: 8/20l98 Page4 ARTICLE I: ARTICLE II: ARTICLE Ill: RESOLUTION NO. OCSD 99-_ A RESOLUTION OF THE BOARD OF DIRECTORS OF ORANGE COUNTY SANITATION DISTRICT ESTABLISHING POLICIES AND PROCEDURES FOR THE AWARD OF PURCHASING ORDERS AND CONTRACTS; AWARD OF PUBLIC WORKS PROJECT CONTRACTS; AWARD OF PROFESSIONAL SERVICES CONTRACTS; AND DELEGATION OF AUTHORITY TO IMPLEMENT SAID POLICIES AND PROCEDURES; AND REPEALING RESOLUTIONS NOS. OCSD 98-8, OCSD 98-12, OCSD 98- 22, AND OCSD 98-43 TABLE OF CONTENTS RECITAL OF FINDINGS Section 1.01 Findings -Declaration of Intent. DELEGATION OF AUTHORITY Section 2.01 Purpose and Scope. Section 2.02 Authorizing General Manager to Establish Rules and Guidelines. Section 2.03 Procedure for Delegation of Authority. PURCHASING SYSTEMS RE SUPPLIES, EQUIPMENT AND SERVICES Section 3.01 Purpose and Scope. Section 3.02 Purchasing System Adoption. Section 3.03 Purchasing Division Delegated Authority. Section 3.04 Requisitions. Section 3.05 Cooperative Procurement. Section 3.06 Purchases: Bidding Requirements. Section 3.07 Purchases: Emergency. TLW Draft No. 12:05/19/99:#103185 1 ARTICLE IV: Section 3.08 Purchases: Standardized Prices and Specialized Seivices. Section 3.09 Purchase Orders. Section 3.10 Purchases: Encumbrances of Funds. Section 3.11 Blanket Purchase Orders. Section 3.12 Bidding Procedure: Purchases Greater Than $50,000.00. Section 3.13 Purchases Between $50,000.00 and $100,000.00. Section 3.14 Bidding Procedure: Purchases Less Than $50,000.00. Section 3.15 Bidding Procedure: Purchases Less Than $5,000.00. Section 3.16 Inspection and Testing. Section 3.17 Purchases: Negotiated Contracts. Section 3.18 Surplus Supplies, Materials, and Equipment. Section 3.19 Sale of Real Property. Section 3.20 Recordkeeping. PROFESSIONAL SERVICES CONTRACTS Section 4.01 Purpose and Scope. Section 4.02 Retention of Professional Technical Consultants. Section 4.03 Small Capital Project -Defined. Section 4.04 Small Capital Project: Approval of Plans and Specifications. Section 4.05 Small Capital Project: Annual Budget Approval. Section 4.06 Small Capital Project: Selection of Consultants - Procedure. TLW Draft No. 12:05/19/99:#103185 2 ARTICLE V: ARTICLE VI: ARTICLE VII: Section 4.07 Major Capital Project: Defined. Section 4.08 Major Capital Project: Scope of Work. Section 4.09 Major Capital Project: Selection of Consultants - Procedure. Section 4.1 O Major Capital Project: Award of Professional Services Agreements. Section 4.11 Major Capital Project: Approval of Plans and Specifications. PUBLIC WORKS CONTRACTS Section 5.01 Purpose and Scope. Section 5.02 Public Works: Bidding Required. Section 5.03 Bidding Procedure: Public Works Construction Greater Than $35,000.00. Section 5.04 Approval of Change Orders to Construction Agreements. MEETINGS (AND RELATED TRAVEL) AND TRAINING (AND RELATED TRAVEL) EXPENDITURES Section 6.01 Purpose and Scope. Section 6.02 General. Section 6.03 Policies and Procedures. MISCELLANEOUS Section 7.01 Noncompliance. Section 7.02 Severability. Section 7.03 Effective Date. Section 7.04 Repeal of Prior Resolutions. ARTICLE I RECITAL OF FINDINGS TLW Draft No. 12:05/19/99:#103185 3 Section 1.01: Findings -Declaration of Intent. A. California Government Code Section 54202 requires that every local agency shall adopt policies and procedures, including bidding regulations, governing purchases of supplies, services, and equipment, and that purchases of supplies, services, and equipment by the local agency shall be in accordance with said duly adopted policies. 8. California Government Code Section 54204 requires that if the local agency is other than a city, county, or city and county, policies provided for in Section 54202 of said Code shall be adopted by means of a written rule or regulation, copies of which shall be available for public distribution. C. In order to establish efficient procedures for the purchase of supplies, services, and equipment, and the letting of public works contracts at the best possible cost commensurate with quality and delivery needs, together with other relevant factors, to exercise positive financial control over purchases, to clearly define authority for the purchasing function, and to establish bidding procedures, a purchasing system for the District, beyond what is required by said Sections of the Government Code, is desirable and in the best public interest. D. An effective, comprehensive organization needs an administrative structure with support procedures that are logical, efficient, well-documented, are understood by the organization's employees and members of the public, and that enable timely and responsive administrative acquisition of materials, supplies, and services. The organization should also appropriately delegate authority to those persons and units having responsibility for these activities. E. The Board of Directors has determined that a delegation of authority structure provides for better training of employees which will result in improved efficiency and effectiveness of the District's operations. ARTICLE II DELEGATION OF AUTHORITY Section 2.01: Purpose and Scope. In an effort to remove barriers that prevent District employees from performing their jobs at the highest level of efficiency, a delegation of authority structure will appropriately train the employees, and by providing increased responsibility and ownership, will contribute to the improved efficiency and effectiveness of the District. Section 2.02: Authorizing General Manager to Establish Rules and Guidelines. The General Manager of the District is hereby authorized to establish rules TLW Draft No. 12:05/19/99:#103185 4 and guidelines to implement Board policies and to delegate to Staff signature authority to initiate and execute contracts or purchase orders to acquire services, including professional services, supplies, and materials, and public works project contracts, all as more particularly specified in Articles Ill through VI. Section 2.03: Procedure for Delegation of Authority. The following provisions establish delegated signature authority for contracts and purchase orders for the acquisition of supplies, services, materials, equipment, and professional services. The delegated authority for each functional management level will be established one level higher in the absence of specifically identified authority. The General Manager's authority is delegated to the Assistant General Manager ("AGM") in the General Manager's absence. These procedures establish the framework and boundaries within which a delegates can operate, and also provide Management with a mechanism to evaluate implementation and hold the delegatee accountable for his/her actions. Upon delegation of authority by the General Manager, each Department shall be authorized to further delegate to respective employees within the Department. The delegation shall be effective upon the Department Head setting forth, in writing, the name of the delegated employee, his/her job position, and specific level of delegated authority designated as Level A, 8, or C, respectively, and filing it with the Contracts/Purchasing Manager. The General Manager shall establish procedures to implement further delegated authority into the organization. For contracts and purchase orders for the acquisition of supplies, materials, equipment, and services (excluding public works contracts governed by State law and professional services agreements), the following signature authority is hereby established. The functional authority level listed describes the highest level of signature approval needed. Intermediate management approval between the initiator/requester and listed approval level must also be obtained. A. Approval Levels All items above $100,000.00 are to be approved by the Board prior to purchase, with the exception of emergency items, pursuant to Section 3.13. All items between $50,000.00 and $100,000.00 are reviewed and approved by the General Manager prior to purchase, and reported to the Board of Directors on a quarterly basis. All items below $50,000.00 are approved pursuant to the following delegation of authority: 1. Items exceeding $100,000 require Board of Directors approval, unless previously authorized by the Board for items identified in the annual District budget. TLW Draft No. 12:05/19/99:#103185 5 B. 2. Items $50,000 to $99,999 require General Manager or Assistant General Manager approval. 3. Items $25,000 to $49,999 require Department Director approval. 4. Items $10,000 to $24,999 require Division Manager approval. 5. Items $5,000 to $9,999 require Level A approval. 6. Items $2,000 to $4,999 require Level B approval. 7. Items less than $2,000 require Level C approval. Co-Signatures. In addition to the signature of the Delegated Authority: 1. To ensure that all policies and procedures governing purchase orders and contracts are followed, all contracts or purchase orders will be signed by the Contracts/Purchasing Manager, or his designee. 2. All purchases for computer hardware, software, and communication equipment will be pre-approved by the Information Technology Director, or his designee. C. Procedural Requirements. All policies and procedures adopted by the Board of Directors or promulgated by the General Manager governing the procurement of services, equipment, or supplies will apply, and shall be complied with. Budgeted funds must be available prior to the acquisition of goods or services. Upon the identification of goods or services needed that are not originally budgetea, either a budget transfer request form must be completed demonstrating that adequate funds are available to cover the acquisition, or the Board of Directors must authorize a budget amendment, at which time, -the item being acquired would fall into the budgeted category. Section 3.01: ARTICLE Ill PURCHASING SYSTEM RE SUPPLIES, SERVICES, EQUIPMENT, AND MATERIALS TLW Draft No. 12:05/19/99:#103185 Purpose and Scope. In order to establish efficient 6 procedures for the purchase of supplies, services, materials and equipment, and the letting of public works contracts at the best possible cost commensurate with quality and delivery needs and other relevant factors; to exercise positive financial control over purchases; to clearly define authority for the purchasing function; to establish bidding procedures, pursuant to Section 54202 of the Government Code of the State of California, a purchasing system is deemed necessary. Section 3.02: Purchasing System Adoption. The procedures and authority set forth in this Resolution are intended to operate in concert with and supplemental to the delegation of authority granted by the governing Board of Directors in the adoption of this Resolution. Full compliance with the provisions of all Articles in this Resolution is required. Section 3.03: Purchasing Division Delegated Authority. There is hereby vested in the Purchasing Division (hereinafter referred to as "Purchasing"), under the general supervision and direction of the Director of Finance, the authority for the purchase of supplies, services, materials, and equipment, letting of public works contracts and establishment of rules, procedures and administrative policies relative thereto. The Director of Finance may delegate or assign any or all of the following duties to the Contracts/Purchasing Manager: A. To purchase or contract for supplies, services, materials, and equipment required by any Department or Division, in accordance with purchasing procedures prescribed by this Resolution; such administrative regulations as Purchasing shall adopt for the internal management and operation of Purchasing; and such other rules and regulations as shall be adopted by the Board of Directors. 8. To negotiate and recommend execution of contracts for the purchase of supplies, services, materials, and equipment; for construction of public works projects; and for the disposition of surplus property and by-products of the sewage treatment process. C. To submit to General Counsel for review or approval, as necessary, all contracts, purchase orders, and other related documents, the original executed copies of which shall be delivered to the Board Secretary for custodianship. D. To prepare for the District, the needed standards and specifications of quality in supplies, services, materials, equipment, and construction at the best cost and under the most favorable conditions, with due consideration to delivery and other relevant factors. E. To discourage uniform bidding and endeavor to obtain as full and open competition as possible on all purchases and sales. TLW Draft No. 12:05/19/99:#103185 7 F. To prepare rules, regulations, procedures, and administrative policies, and revisions thereto, governing the purchase of supplies, services, materials, and equipment; for the letting of public works construction contracts in accordance with the provisions of state law; and disposition of surplus property and by-products. G. To prepare rules, regulations, procedures, and administrative policies, and revisions thereto, governing the warehousing of inventories. H. To keep informed of current developments in the field of purchasing, including but not limited to prices, market conditions and new products. I. To prescribe and maintain such forms as reasonably necessary to the implementation of this Resolution and other rules and regulations of the District. J. To develop specifications to establish minimum standards for all purchases. K. To supervise the inspection of all supplies, services, materials, and equipment purchases to insure conformance with specifications. L. To provide for transfer of surplus or unused supplies and equipment between Departments, as needed. M. To have custodianship and control of all inventories and surplus property. N. To maintain a bidders' list, vendors' catalog file, and records needed for efficient operation of the Purchasing Division. 0. To review, approve, and maintain active insurance documents for all District procurements. P. To undertake such other and future duties as, in the Director's discretion, are incidental and necessary to the conduct of the Division. Q. To revise all records to reflect the sale, transfer, or reorganization of a supplier's business, or a change in the supplier's name for doing business, so long as all other terms and conditions of the original agreement remain the same. In such event of an assignment of the purchase order or contract by the supplier, the District shall not be bound until it has given its consent in writing, which consent shall not be unreasonably withheld. An amendment to the original agreement shall be prepared authorizing and consenting to the assignment and shall be executed by the General Manager, or his designee, on the District's behalf. TLW Draft No. 12:05/19/99:#103185 8 Section 3.04: Requisitions. All employees of the District who need or require supplies, services, materials, or equipment to carry out the defined duties of their positions, shall submit requisitions for purchases or warehouse requisitions to Purchasing, in accordance with the adopted rules, regulations, procedures, and policies of the Purchasing Division. Usage of the District's procurement cards shall be exempt from this requirement. Section 3.05: Cooperative Procurement. A. The District, through Purchasing, may participate in or sponsor, conduct and/or administer a Cooperative Procurement Agreement for the acquisition of procured items or services with any other public agency purchasing unit, in accordance with an agreement between the District and the other public agency. B. The District, through Purchasing, may sell to, acquire from, or use any property belonging to another public agency, including the cooperative use of supplies or services. C. Participation in the County of Orange Cooperative Purchasing Program has been expressly authorized by adoption of Board of Directors Resolution No. OCSD 98-22. Section 3.06: Purchases: Bidding Requirements. Except as hereinafter provided, purchasing of supplies, services, materials, or equipment shall be by bid procedures as set forth in this Article 111, when the purchase is estimated to have a value greater than Five Thousand ($5,000.00) Dollars; the commodities or services may be obtained from more than one vendor; or are not standardized as to price; and no emergency exists. Section 3.07: Purchases: Emergency. Whenever an emergency arises which is, or may be a threat to the continued required operations of the wastewater treatment plants and facilities owned by the Districts, or when purchases are immediately necessary for the preservation of life or property, or to avoid a threat to the public health or safety, the Division may purchase supplies, services, materials, or equipment required for immediate use, in an amount greater than One Hundred Thousand $100,000.00) Dollars without observing the procedures set forth in this Resolution. The General Manager or his designee shall advise the District Chair and/or Vice Chair, as appropriate, of the action taken, and such action shall be ratified by the Board of Directors at its next regular meeting. Section 3.08: Purchases: Standardized Prices and Specialized Services. In the purchases of supplies, services, materials, or equipment in which the items to be purchased have a demonstrated uniformity in price, or it is determined that there is a sole source, or the provider of services is determined to be uniquely qualified to perform TLW Draft No. 12:05/19/99:#103185 9 specialized seivices, Purchasing may make such purchases without observing the bidding procedures of Section 3.12 below. Section 3.09: Purchase Orders. Purchases of all supplies, seivices, materials, or equipment shall be made by purchase order and may also require a formal written contract, when determined necessary or appropriate by the Contracts/Purchasing Manager. To ensure that all policies and procedures governing purchase orders and contracts are followed, all contracts or purchase orders will be executed by the Contracts/Purchasing Manager, or as· delegated by the Contracts/Purchasing Manager. Purchasing and employees requisitioning supplies and equipment shall be responsible that purchase orders and requisitions are in conformity with the spirit and intent of this Resolution and that no purchase has been broken into smaller units to evade any requirement of this Resolution. Purchasing shall retain, in its files, one copy of all purchase orders issued during two (2) years preceding, on which copy of the purchase order, there shall be a list of bidders and prices bid for the materials or equipment purchased, or if no bids or quotations were taken or received, a full statement as to the reason therefor. Section 3.1 O: Purchases: Encumbrances of Funds. Except in cases of emergency, no purchase order shall be issued for any supplies, seivices, materials, or equipment, unless there exists an unencumbered appropriation balance in the fund against which said purchase is to be charged. Section 3.11: Blanket Purchase Orders. The Purchasing Division may issue annual blanket purchase orders for recurring purchases of miscellaneous supplies that: A. Because of economic considerations, the items are not carried in stock in the District's warehouse; B. Are stock items that have been designated as appropriate sole source acquisitions; C. Purchasing determines it is in the best interests of the District to competitively bid a blanket order for inventory items; or D. Are for miscellaneous supplies, services, materials and equipment where such purchase of supplies, services, materials, and equipment may be procured from a single vendor during the budget year, without observing the procedures prescribed in Section 3.12 below, when, in its discretion, it is determined that such blanket purchase orders are at a cost favorable to the District and will result in more efficient procurement of such items. Blanket purchase orders shall be in conformity with the spirit and intent of this Resolution. The Purchasing Division shall, at the beginning of each budget year, file a list of such purchase orders and the estimated annual amount with the Director of Finance. TLW Draft No. 12:05/19/99:#103185 10 Section 3.12: Biddihg Procedure: Purchases Greater Than $50,000.00. A. Award to Lowest Bidder. Except as otherwise provided in this Article 111, purchases of supplies, services, materials, and equipment of estimated value greater than Fifty Thousand ($50,000.00) Dollars shall be by written contract or purchase order with the lowest responsive and responsible bidder (unless a Request for Proposal {"RFP") solicitation instrument is utilized), pursuant to the procedures prescribed herein. B. Award Approval. Purchases of supplies, services, materials, and equipment that have appropriate budgetary approvals shall be bid and awarded directly by the Contracts/Purchasing Manager, or as delegated by the Contracts/Purchasing Manager. Supplies, services, materials, and equipment that exceed the budgeted amount, or effect policy recommendations or ratifications, or are sole source contracts exceeding $100,000.00, and all public works contracts, shall require Board of Directors' approval prior to issuance or award of a purchase order or contract. C. Notice Inviting Bids. The notice inviting bids shall include a general description of the articles or services to be purchased or sold, shaU state where bid forms and specifications may be secured, and the time and place for opening bids. 1 . Published Notice. The notice inviting bids shall set a date for the opening of bids. The notice shall be published one (1) time at least ten (10) days before the date for the opening of the bids. Notice shall be published in a newspaper of general circulation, printed and published within the District's jurisdiction, or by electronic bulletin board procedures designed to reach the industry or market of supply. 2. Bidders List. Purchasing may also solicit sealed bids, or receive bids electronically, from all qualified, responsible prospective suppliers whose names are on the Bidders List maintained by the District, or who have requested their names to be added thereto. 3 . Bulletin Boards. Purchasing may also advertise pending purchases or sales by a notice posted on a public bulletin board in the Purchasing Division Office, and by electronic bulletin board, as deemed appropriate by the Contracts/Purchasing Manager. D. Bidder's Security. When deemed necessary by Purchasing, bidder's security may be prescribed in the contract specifications or in the public notice inviting bids. Bidders shall be entitled to the return of bid security upon the full execution of an awarded contract or issuance of a purchase order, by the successful bidder. A successful bidder shall forfeit his bid security upon refusal or failure to execute the contract within the prescribed time after the notice of award of contract has TLW Draft No. 12:05/19/99:#103185 11 been delivered to bidder, unless the District is responsible for a delay in the prescribed time. The Board of Directors may, on refusal or failure of the successful bidder to execute the contract, award it to the next lowest responsive, responsible bidder. If the Board of Directors awards the contract to the next lowest bidder, an amount of the lowest bidder's security equal to the difference between the low bid and the awarded bid, shall be forfeited to the District, and the surplus, if any, shall be returned to the lowest bidder. E. Bid Opening Procedure. Sealed or electronically received bids shall be submitted to the Contracts/Purchasing Manager and/or Secretary of the Board of Directors, and shall be identified as a bid on the envelope or the electronic bulletin board. Bids shall be opened in public by the Contracts/Purchasing Manager, or his designated representative, at the time and place stated in the public notices. A tabulation of all bids received shall be open for public inspection during regular business hours for a period of not less than thirty (30) calendar days after the bid opening. In cases wherein the Request for Proposal ("RFP") instrument is utilized, all RFP's will be opened, and only the name of the Proposer shall be read aloud at the time and place set forth herein. F. Rejection of Bids. In its discretion, the Board of Directors may reject any and all bids presented and readvertise for bids. If all bids are rejected, the Board of Directors, by majority vote, may declare that the materials or supplies may be acquired at a lower cost by negotiation in the open market and authorize the purchase in that manner. G. Tie Bids. If two or more bids received are for the same total amount or unit price, (with quality and service being equal), and if the public interest will not be best served by a delay of readvertising for bids, the Board of Directors may accept the one it chooses or accept the lowest bid made by negotiation with the tie bidders at the time of the award. H. Performance Bonds. Purchasing shall have authority to require a faithful performance bond, a labor and materials bond and/or a warranty bond, before entering into a contract in an amount as it shall find reasonably necessary to protect the best interests of the District. If the Purchasing Division requires any of these bonds, the form and amount of the bond shall be described in the notice inviting bids and in the contract specifications. Section 3.13: Purchases between $50,000.00 and $100,000.00. Notwithstanding the provisions of Subsections 3.12(A) through 3.12(H) above, Purchasing may award a contract to purchase supplies, services, materials, or equipment in an amount greater than Fifty Thousand ($50,000.00) and less than One Hundred Thousand ($100,000.00) Dollars, without obtaining bids and following the TLW Draft No. 12:05/19/99:#103185 12 procedures set forth above when the Contracts/Purchasing Manager determines that: A. By purchasing immediately, it can avoid an imminent price increase or realize a substantial price discount that is available on a short term basis only; or 8. It can obtain supply, services, materials, or equipment immediately that might not otherwise be available at such time as purchasing procedures could be completed; or C. Said contract for supplies, services, materials, or equipment has Board of Directors' approval for multiple one (1) year renewal periods. All such contract renewals shall require the Contracts Administrator/Purchasing Manager approval; or D. The supplies, services, materials, or equipment are only available from a sole source. E. Whenever an emergency arises which is, or may cause a threat to the continued required operations of the treatment plants, or when purchases are immediately necessary for preservation of life or property, or to avoid a threat to the public health or safety. All purchases between $50,000.00 and $100,000.00 shall be reviewed and pre- approved by the General Manager and reported to the Board of Directors on a quarterly basis. Section 3.14: Bidding Procedure: Purchases Less Than $50,000.00. Purchases of supplies, services, materials, or equipment, of an estimated value in the amount of Fifty Thousand ($50,000.00) Dollars or less on which bidding is not required by state law, may be made by Purchasing in the open market without observing the same procedures as prescribed by Section 3.12 above. The procedures to be used for these purchases are as follows: A. Minimum Number of Bids. Open market purchase shall, whenever possible, be based on at least three (3) bids and shall be awarded to the lowest responsive and responsible bidder, and shall be by written contract or purchase order. 8. Solicitation of Bids. Bids shall be solicited by written requests to prospective vendors or purchasers and/or by telephone, facsimile transmission, electronic bulletin board, and/or by public notice posted on a public bulletin board in the Purchasing Division Offices. C. Receipt of Bids. Bids shall be submitted to Purchasing, which shall keep a public record of all open market orders and bids for a period of two (2) years after the submission of bids or the placing of orders. TLW Draft No. 12:05/19/99:#103185 13 D. Exceptions. Purchasing may purchase supplies, services, materials, or equipment without observing the procedures prescribed in Subparagraphs A, 8, and C above, if supplies, services, materials, or equipment are only available from a sole source. All such purchases shall be approved by the Director of Finance, the requesting Department Head, and the Contracts/ Purchasing Manager. Section 3.15. Bidding Procedure: Purchases Less Than $5,000.00. Purchasing may purchase supplies, services, materials, or equipment of a value in the amount of Five Thousand ($5,000.00) Dollars or less per purchase order, without observing the procedures prescribed in this Section when, in the Contracts/Purchasing Manager's discretion, it is determined that observing such procedures would not result in a lower overall cost to the District. Record of such decision shall be fully stated in the purchase order file as to the reason therefor. Section 3.16: Inspection and Testing. The supplies, services, materials, and equipment delivered, and contractual services performed, shall be inspected to determine their conformance with the specifications set forth in the purchase order or contract. Purchasing shall have authority to request professional services, or to require chemical and physical tests of samples submitted with bids and samples of deliveries which are necessary to determine their quality and conformance with specifications. Section 3.17: Purchases: Negotiated Contracts. Notwithstanding other provisions of this Resolution, the Board of Directors may, when it appears in the best interests of the District, authorize the Staff to negotiate and award a contract for purchase of supplies, services, materials and equipment without observing the procedures prescribed in Sections 3.12 and 3.14 above. A. When such authorization has been granted for purchase of supplies, services, materials, and equipment of an estimated value in the amount of One Hundred Thousand ($100,000.00) Dollars or greater, the Staff shall obtain the concurrence of the District Chair and/or Vice Chair, as appropriate, prior to awarding such purchase. 8. Whenever any contract for supplies, services, materials, or equipment has been entered into between the District and a person or entity providing such supplies, services, materials, or equipment, and Purchasing determines that it is in the best interest of the District to continue said contract with such person or entity, Purchasing may, in its discretion, negotiate an extension of such contract without observing the bidding procedures prescribed in Sections 3.12 and 3.14 above; provided, the contract contains provisions for subsequent extension periods; has been approved and awarded by the Board of Directors; and/or has prior budget approval, as provided in Section 3.12. TLW Draft No. 12:05/19/99:#103185 14 C. This Section shall not apply to the letting of public works construction contracts in excess of Thirty-Five Thousand ($35,000.00) Dollars. Said contracts shall be governed by the provisions set forth in Article V of this Resolution. Section 3.18: Surplus Supplies, Materials, and Equipment. All Departments and/or Divisions shall submit to Purchasing, at such times and in such form as Purchasing shall prescribe, reports showing all supplies, materials, and/or equipment which are no longer used or which have become obsolete or worn out. Purchasing shall have authority, as deemed appropriate by the Contracts/Purchasing Manager, to sell, exchange for, or trade in on new supplies, materials, and equipment, or dispose or, as deemed appropriate, all supplies, materials, and equipment which cannot be used by any other Department or Division, or which have become unsuitable for District's use. Section 3.19: Sale of Real Property. No real property of the District may be sold, or any negotiations leading to such sale may be made, without prior approval of the Board of Directors. Section 3.20: Recordkeeping: A record of all sales or surplus property and by-products shall also be maintained by Purchasing upon or in which is maintained the record of the bids received for the property or by-products sold, or if bids were not taken or received, a full explanation thereof. Such records shall be maintained for two (2) years after the sale. ARTICLE IV PROFESSIONAL SERVICES CONTRACTS Section 4.01: Purpose and Scope. The Orange County Sanitation District, in the interest of uniformity, fairness and cost effectiveness desires to establish policies and procedures for the selection and procurement of professional engineering, architectural, environmental, land surveying and construction management services. Section 4.02: Retention of Professional Technical Consultants. This Resolution establishes a procedure to be followed in the selection and retention of Professional Technical Consultants in the areas of engineering, architecture, environmental, land surveying, construction management services and related services. Professional Technical Consultants are those individuals or firms providing engineering, architectural, environmental or land surveying services which are those TLW Draft No. 12:05/19/99:#103185 15 professional services associated with research, development, design and construction, alteration, or repair of real property, as well as incidental services that members of these professions and those in their employ may logically or justifiably perform, including studies, investigations, surveys, evaluations, consultations, planning, programming, conceptual designs, plans and specifications, cost estimates, inspections, shop drawing reviews, sample recommendations, preparation of operation and maintenance manuals, and other related services. Services for product testing are excluded. It is recognized that no two individuals or firms have equal skills, training, or experience and that the qualities of such persons vary. Accordingly, Professional Technical Consultants shall be selected based upon the District's discretion and opinion as to which particular consultant is best qualified to perform the work (hereinafter referred to as "projects") in question. For purposes of this Resolution, ''firm" shall mean any individual, firm, partnership, corporation, association, or other legal entity permitted by law to practice the profession of architecture, engineering, environmental services, land surveying, or construction project management. Evaluation and selection of a consultant firm will include but not be limited to the following: A. The firm shall be of high ethical and professional standing, its members being of good moral character, and it shall be prepared to submit references from persons of known repute. 8. The principal and other responsible members of the firm must be registered in the State of California, as required by law. C. A principal member of the firm's staff must have at least ten years' recent experience in responsible charge of work of the type involved in the project. D. At least two additional members of the firm's staff must have at least five years' experience in responsible charge in the field, or fields, required by the project. E. The firm shall be capable of performing the work within the prescribed time limitations considering the current and planned work loads of the firm. F. If all other factors are equal, preference shall be given to a local based firm when more than one firm is being considered. G. If the project is funded, either in whole or in part, by federal funds that require, as a condition of establishing or maintaining eligibility for federal funds, that firms working on the project maintain an affirmative action employment program, then the firm selected for the project must certify to having such a program. TLW Draft No. 12:05/19/99:#103185 16 The District also recognizes that the scope of services and the qualifications of consultants can differ significantly between major capital facilities projects and small capital projects. The criteria set forth in Paragraphs C and D above may be waived by District for small capital projects. The procedures set forth in this Resolution shall govern the retention of such professional consultants. Section 4.03: Small Capital Project: Defined. "Small capital project" is defined as a miscellaneous capital improvement or facility modification, replacement, or repair project, related to plant safety, reliability and efficiency enhancements where professional consulting services are estimated to be in an amount not to exceed $50,000.00 for each project. Section 4.04: Small Capital Proiect: Approval of Plans and Specifications. The Board of Directors delegates to the Director of Engineering, as Professional Registered Engineer, the authority to approve the design, plans, and specifications for construction of new or modified District facilities that is deemed a small capital project, as defined in Section 4.03 above. Section 4.05: Small Capital Project: Annual Budget Approval. Upon approval by the Board of Directors of an annual budget, the District's Staff shall be authorized to solicit contract proposals from professional engineering, architectural, environmental, land surveying and construction management firms to perform the required services for the approved small capital projects, as defined and prescribed herein. Section 4.06: Small Capital Project: Selection of Consultants -Procedure. A. District's staff shall compile a master pre-approved list of 5-10 firms having the required expertise to perform the required professional service for a small project. The master list of firms will be selected based upon a solicitation, review of qualifications, and Board approval. The original term of the agreement shall be for one (1) year. Thereafter, the Department Director shall be authorized to recommend to the General Manager, an extension of the professional consulting services agreement for up to two (2) additional one (1 )-year renewal periods, for a total of three (3) years, with each of the parties designated on the approved master list. The professional consulting services agreement for each party on the master list shall be forwarded to the purchasing office. The Engineering Department Staff shall prepare the appropriate requisition documentation to insure future payment to the consultant. B. As a need for an individual specific project arises, the District will implement the Agreement by issuing a task order identifying the specific project by name and number and including the approved scope of work required of the consultant for the project. The scope of work for any individual task order, shall not entail a cost in TLW Draft No. 12:05/19/99:#103185 17 excess of $50,000.00. There is a maximum annual limitation of $200,000.00 for each individual consultant purchase order under the provisions of this Section 4.06. C. The Department Director shall first obtain at least two (2) price proposals from consultants before the task order is awarded to a consultant. This requirement may be waived at the discretion of the Department Director where a determination is made that the subject work is unique such that only one (1) consultant is available to perform the work, or where significant time constraints or emergency conditions dictate that one (1) consultant be solicited for a price proposal. The Department Director, or his designee, shall review the proposals specifically addressing cost and ability to meet District schedule requirements. Based on the evaluations, the Department Director is authorized to award the task order. D. Once the consultant is selected for the award of a small capital project and the task order is executed by the District, the Department Director shall issue the notice to proceed. E. Addenda to a particular task order shall be approved by the Department Director. However, the amount for each addendum may not exceed $50,000.00, and the cumulative total for all addenda may not exceed $50,000.00. The Department Director shall issue the task order addendum in letter form. Section 4.07: Major Capital Proiect: Defined. "Major capital project" means the construction, repair, modification, or rehabilitation of the District's Capital Facilities, including treatment plants, trunk sewers, pump stations, ocean outfall, administrative and support facilities, and other facilities related to District operations, where the cost of professional technical consulting services are estimated to be in an amount in excess of $50,000.00 for any project. These projects may require Selection Committee or Board approvals. Minor or specialty-item capital projects are defined as projects, where the cost of professional technical consulting services are estimated to be in an amount more than $50,000.00, and less than or equal to $100,000.00 and require only General Manager approval. Requirements for Scope of Work, Proposal, Procurement and Negotiation Agreement Continuation of Services, Agreement of Services, and Conflict of Interest apply for both Major Capital Projects and Minor or Specialty-Item Capital Projects, with deviation only in authorization levels. Section 4.08: Major Capital Project: Scope of Work. A. For every project approved by the Board of Directors and for which outside services are required, the District staff shall develop a comprehensive scope of work. TlW Draft No. 12:05/19/99:#103185 18 B. The scope shall define the extent of the services and the time required. Section 4.09: Major Capital Project: Selection of Consultants -Procedure. For the employment of any professional consulting services for major capital projects, the following procedures shall apply: A. Proposals -Notice Requesting. Staff shall prepare a Request for Proposal ("RFP") or a Request for Qualifications ("RFQ") for the scope of work which shall include a request for the firm's qualifications, personnel capability, demonstration of firm's capabilities, identification of personnel assigned to the project, estimate of number of hours tor each aspect of the project, fee proposals and conflict of interest disclaimer. The Request for Qualifications' process may be used, at Staff's discretion, to narrow the field of firms submitting proposals on the project. District shall maintain a comprehensive list of professional consultants' demonstrated competence. Notice shall be mailed to all firms requesting notice of any RFP or RFQ issued by the District. Optionally, notice may be given by publication in professional journals or publications of general circulation. B. Staff Screening Committee. A screening committee of at least two (2) staff members as chosen by the Department Director shall review all submitted proposals and prepare a recommendation for selection of the best qualified consultant to the Selection Committee, as described in Paragraph D below. C. Proposals -Contents. Proposals submitted shall: 1. Acknowledge the scope of the project and extent of the services required. 2. Include a description of the firm's qualifications for performing the proposed work. 3. In the case of a proposal for construction management services, each firm shall provide evidence that its personnel that will carry .out on- site responsibilities have expertise and experience in construction project design review and evaluation, construction mobilization and supervision, bid evaluation, project scheduling, cost-benefit analysis, claims review and negotiation, and general management and administration of a construction project. 4. Include past performance records of the firm. TLW Draft No. 12:05/19/99:#103185 19 5. Demonstrate the firm's capabilities to complete the work within the time allotted. 6. Identify the specific key personnel to be assigned to the project. 7. Provide an estimate of the number of hours involved in each aspect of the scope of work for such personnel. 8. Be accompanied by a sealed fee proposal estimate which shall not be opened until the firm is selected as being qualified. Thereafter, it shall be the basis, for procurement negotiations. The form of the fee proposal shall be as described in Subsections F2 and F3 below. 9. Contain a conflict of interest disclaimer. 10. Provide any other information required to properly evaluate the firm's qualifications and familiarity with the types of problems applicable to the project. D. Selection Committee -Membership. 1 . The members of the Board of Directors Standing Committee principally responsible for the project and contract under consideration for approval shall constitute the Selection Committee for District projects. 2. At the discretion of the District Chair, additional Directors may be appointed to the Committee to assist in the consideration of proposals for specific projects. E. Review of Proposals by Staff Committee and Selection Committee. 1. The Staff Committee shall review each proposal and the qualifications of each firm with due consideration of office location, reputation in the professional community, experience, both generally and specifically on similar-type projects, the project approach, understanding of the scope of work, financial standing, number of qualified personnel and their availability for the project, quality of references, work load and other factors relevant to the project being considered. 2. The Staff Committee, upon completion of their evaluation of all proposals, shall determine those firms deemed to be fully qualified to provide the services sought by the District based on their demonstrated competence and qualifications. TLW Draft No. 12:05/19/99:#103185 20 3. The Staff Committee, upon making a determination of the fully qualified finns, shall rank the firms considered, in order of preference, based upon the qualification of each, as described in Subparagraph E{1) above. Thereafter the Committee shall open the sealed fee proposal of the qualified firms. Based upon the fee proposal, the committee may recommend to the Selection Committee or the Board of Directors an individual or firm for award of the contract. The recommended individual or firm can be ranked lower than firms with higher fee proposals. 4. The Selection Committee shall receive and review the recommendation of the Staff Committee and either award or recommend to the Board of Directors, either the approval or disapproval of the Staff recommendation to award a contract, as authorized in Section 7 below. F. Procurement and Negotiation of Agreement. To determine the firm to be selected and the compensation for the services sought, the following procedures will be strictly adhered to: 1. The Staff Committee will, at its discretion, invite the firm that is considered to be the best qualified to appear before the Staff Committee. 2. The proposal for fees associated with the services as submitted by the selected firm shall be presented in sufficient detail to enable the Staff Committee to adequately ascertain the level of effort associated with the scope of work and to determine whether the firm has thoroughly identified the efforts associated with the services and thoroughly understands the work required. 3. The basis of the fee shall be: Cost plus a fixed fee with a maximum amount, a per diem rate{s) with a maximum amount, or a lump sum {fixed) fee. 4. If it is the decision of the Staff Committee to use methods for compensation other than the lump sum or cost plus a fixed fee with a maximum, or the per diem rates with a maximum, justifications for this decision shall be made by the Staff Committee in its recommendation to the Selection Committee and the Board of Directors. 5. The Staff Committee shall review the compensation requested by the firm which shall be compared with the maximum fee as previously established. 6. The final negotiated fee, as recommended to the Selection Committee and Board of Directors, shall be certified by the Staff Committee as TLW Draft No. 12:05/19/99:#103185 21 reasonable for the services requested and not resulting in excessive profits for the firm. 7. If agreement is not reached, the negotiations should be terminated and similar interviews should then follow with the next-ranked firm. 8. All such negotiations shall be on a strictly confidential basis, and in no case shall the compensation discussed with one firm be discussed with another. G. Continuation of Services. 1. In some instances where a qualified firm has satisfactorily completed one phase in the development of a project and the Board determines that it is in the best interests of the District to retain the same firm for subsequent phases of related work, the Staff Committee or the Selection Committee may be authorized to proceed directly with negotiations with that firm for the additional work. 2. Continuation of services may arise when a firm has completed a feasibility report or a preliminary engineering report and the services for said work are satisfactory to the Board and the procedure of examining other firms for subsequent phases is not deemed necessary or cost effective. 3. In the event that satisfactory negotiations for price cannot be concluded under these circumstances, negotiations should be terminated and the provisions set forth hereinabove for selection of a firm would apply. H. Specialized Services. 1. In the event that specialized services are required where it is determined that only one qualified firm can best perform the services for a specific project in an amount greater than $50,000.00, the Staff Committee, in the case where the fees are greater than $50,000.00, will report to the Selection Committee said findings and request authority to negotiate directly with the particular specialized firm. 2. The basis of selection of the specialized firm or individual under Subparagraph H(1) above, along with the negotiated fee, shall be presented to the Board of Directors for consideration. I. Agreement for Services. TLW Draft No. 12:05/19/99:#103185 22 1. Upon approval by the Board of a negotiated agreement for professional services, a contract shall be executed in a form approved by the General Counsel. terms: 2. The contract shall include, but not be limited to the following (a) A statement of the scope of the project. (b) The basis and individual elements of the fees. (c) The basis for payment to the firm. (d) The time limits in which the services must be performed. (e) Provisions for fee adjustments should there be changes in the scope of work. (f) If it is determined by the Selection Committee that the District may be caused to incur a penalty or liability, or suffer a loss because of the failure of the firm to perform the work within specified time limits, the contract shall include a clause setting forth penalties for such nonperformance or delayed performance, in amounts to be determined by the Committee. (g) For projects exceeding $50,000.00 in fees or in other cases as determined by the District, errors and omissions insurance in an amount recommended by the General Counsel (based upon engineering data from the Department Director) shall be required, unless the Standing Committee or Board of Directors, as the case may be, waives said insurance. For projects that involve small engineering studies where a consultant is asked to provide a report not related or leading directly to a design project, the General Manager (based upon engineering data from the Department Director), in his discretion, may waive the requirement for the consultant to provide errors and omissions/professional liability insurance. J. Conflict of Interest. 1 . The District maintains a Conflict of Interest Code, pursuant to California Government Code Section 87100 et seq., which governs the activities and performance of duties of its officers, employees, or agents in the conduct of project work for the District. TI.W Draft No. 12:05/19/99:#103185 23 2. No Director, officer, employee or agent shall solicit or accept rebates, kickbacks, favors or other unlawful consideration from any individual or finn on behalf of any firm that may be potentially selected as a qualified firm to provide professional consulting services to the District. Acceptance of food and refreshments of nominal value on infrequent occasions and acceptance of gratuities or gifts shall not be deemed a violation of this provision, provided that if said items exceed $290.00, or the amount as fixed by Government Code Section 89503, or California Code of Regulations, Title 2, Section 18940.1, in a calendar year, the Director, officer, employee or agent may be disqualified from participating in the decision pursuant to Article Ill of the District's Conflict of Interest Code; and provided further, that any Director, officer, employee or agent, as a designated employee under the District's Conflict of Interest Code, shall report any amount of gifts on his/her annual Statement of Economic Interest as required by said Code. 3. Any firm seeking selection under these procedures that violates the District's Conflict of Interest Code shall be automatically disqualified. Section 4.1 0: Major Capital Project: Award of Professional Services Agreements. A. Professional Consulting Se.rvices. The award and execution of an agreement for professional consulting services on behalf of the District shall be made in accordance with the following delegations of authority: 1. 2. 3. Authorizing Authority Department Heads General Manager OMTS, PDC, or FAHR Committee ( or Standing (Committees) TLW Draft No. 12:05/19/99:#103185 24 Authorized Action Solicitation of Requests for Qualifications ("RFQ") and Requests for Proposals (RFP"). Authorization to evaluate proposals and to execute contracts up to $100,000. Receive recommendations of Staff and General Manager, and approve Profes- sional Services Agreements of over $100,000.00 up to $200,000.00. 4. Board of Directors Receive recommendations of Staff, General Manager and Committee, and approve Professional Services Agreements for over $200,000.00. 8. Professional Consulting Services Agreement Addenda. The award and execution of an addendum to an agreement for professional consulting services on behalf of the District shall be made in accordance with the following: Authorizing Authority Authorized Action 1. Department Head Authority to negotiate addenda. 2. General Manager Receive recommendation of Staff and approve contract changes up to $100,000.00 per addendum on previously-awarded Board contracts. The additive value of the total of the General Manager-approved contracts, and all addenda, shall not exceed $100,000.00. 3. OMTS, PDC, or FAHR Receive recommendations of Staff and Committee ( or Standing General Manager, and approve contract Committee) changes between $100,000.00 and $200,000.00 on Board-awarded contracts, and between $0.00 and $200,000.00 on General Manager- awarded contracts. The additive value of the changes shall not exceed $200,000.00. 4. Board of Directors Receive recommendations of Staff, General Manager and Committee and approve contract changes for over $200,000.00. Section 4.11: Major Capital Project: Approval of Plans and Specifications. The procedure and authority for the approval of the design plans and specifications for construction of new or modified District's major capital projects is as follows: A. For any project with approved budget authority, the Director of Engineering is authorized to advertise for construction bids, set a bid date, and receive all bids. 11..W Draft No. 12:05/19/99:#103185 25 8. For any project, if the engineer's estimate for the construction contract, as provided by the Director of Engineering or the District's consulting design engineer is equal to or less than the approved construction budget for the project, the Director of Engineering may advertise for bids, and upon receipt, the lowest responsive bid of a responsible bidder will be submitted to the Board of Directors for approval. C. For any project, if the engineer's estimate for the construction contract, as provided by the Director of Engineering or the District's consulting design engineer, is greater than the approved construction budget for the project, the Director of Engineering shall submit the project to the Standing Committee for recommendation, and based thereon, to the Board of Directors for approval. D. For any project, upon receipt of bids for the construction, if the lowest responsive bid of a responsible bidder is equal to or less than the approved construction budget for the project, the bid will be submitted to the Board of Directors. The Board of Directors, upon receipt of the bid, shall approve the plans and specifications of the project and may award a contract. E. For any project, upon receipt of bids for the construction, if the lowest responsive bid of a responsible bidder is greater than the approved construction budget for the project, Staff shall present the bid and a recommendation to the Standing Committee for review and recommendation to the Board of Directors. ARTICLE V PUBLIC WORKS CONSTRUCTION CONTRACTS Section 5.01 Purpose and Scope. Public works contracts are herein defined as contracts with duly licensed contractors in the State of California for the furnishing of labor, materials, equipment and permits, as deemed necessary, for the erection, construction, alteration, repair, or improvement of wastewater collection, treatment and disposal facilities, and any other public building, structure or improvement necessary to the operation of the District, in an amount greater than Thirty-Five Thousand ($35,000.00) Dollars, as per California Public Contracts Code Sections 20783 et seq. Section 5.02: Public Works: Bidding Required. When the expenditure required for a public works construction project exceeds Thirty-Five Thousand ($35,000.00) Dollars, it shall be contracted for and let to the lowest responsible bidder, in accordance with the provisions of California Public Contracts Code Section 20783. Section 5.03: Bidding Procedure: Public Works Construction Greater Than $35,000.00. Procedures for soliciting bids and awarding contracts for public works TlW Draft No. 12:05/19/99:#103185 26 projects for more than Thirty-Five Thousand ($35,000.00) Dollars, shall be by written contract with the lowest responsible bidder, pursuant to the procedures prescribed herein and in accordance with applicable provisions of California Public Contracts Code Section 20783. A. Notice Inviting Bids. The Notice Inviting Bids shall specifically describe the work to be performed, shall state where bid forms, Specifications, and General and Special Provisions may be secured, and the time and place for receiving and opening sealed bids. 1. Published Notice. The Notice Inviting Bids shall set a date for the opening of bids. The first publication or posting of the Notice shall be at least ten (10) calendar days before the date for the opening of the bids. The Notice shall be published at least two (2) times, not less than five (5) days apart, in a newspaper of general circulation, printed and published within the District. 2. Mailed Notice. Unless the work to be done is proprietary, the Notice Inviting Bids shall be published in a public newspaper which carries Orange County public works bid notices, not less than twenty-one (21) calendar days before the date of opening of bids. 3. Bidders List. The Engineering Department may also solicit sealed bids from all qualified, responsible, prospective suppliers whose names are on a Bidders List that may be maintained by District. B. Bidder's Security. When deemed necessary by the Purchasing Division, bidder's security may be prescribed in the contract Specifications and in the public Notice Inviting Bids. Bidders shall be entitled to return of bid security, upon full execution by the successful bidder of an awarded contract by the District. A successful bidder shall forfeit its bid security upon refusal or failure to execute the contract within the prescribed time after the Notice of Award of Contract has been delivered to the bidder, unless the District is responsible for the delay in the prescribed time. The Board of Directors may, on refusal or failure of the successful bidder to execute the contract, award it to the next lowest responsive, responsible bidder. If the Board of Directors awards the contract to the next lowest bidder, an amount of the lowest bidder's security equal to the difference in an amount between the low bid and the awarded bid, shall be forfeited to the District, and the surplus, if any, shall be returned to the lowest bidder. C. Bid Opening Procedure. Sealed bids shall be submitted to the Director of Engineering or Contracts/Purchasing Manager, or their designees, and Secretary of the Board of Directors, and shall be identified as a bid, on the envelope. Bids shall be opened by the Director of Engineering or Contracts/Purchasing Manager, or their designee, in public, at the time and place stated in the public notice. A tabulation of all bids received shall be open for public inspection during regular business hours for a period of not less than thirty (30) calendar days after the bid TLW Draft No. 12:05/19/99:#103185 27 opening. D. Rejection of Bids. In its discretion, the Board of Directors may reject any and all bids presented and readvertise for bids. If, after the opening of bids, all bids are rejected, the Board of Directors, on a Resolution adopted by a four-fifths (4/5) vote, may declare that the work can be performed more economically by force account, or the materials or supplies furnished at a lower price in the open market and may have the work done in a manner stated in the Resolution in order to take advantage of this lower cost. E. Tie Bids. If two or more bids received are for the same total amount or unit price (with quality and service being equal) and if the public interest will not be best served by a delay or readvertising for bids, the Board of Directors may accept the one it chooses, or accept the lowest bid made by negotiation with the tie bidders at the time of the award. F. No Bids. If no bids are received, the District may have the work done by force account; may readvertise for bids pursuant to the procedures herein; or may select a contractor by negotiation. G. Emergencies. Whenever an emergency arises which is, or may be, a threat to the continued operation of the wastewater facilities, support facilities and/or administrative facilities operated by the District, a contract for the repair or replacement of the public facility may be ordered by the General Manager without complying with the provisions of this Resolution or the California Public Contracts Code. This authority is hereby delegated to the General Manager, or his designee, by the Board of Directors pursuant to the authority of California Public Contracts Code Section 22050. In such event, the General Manager shall advise the District Chair and/or Vice Chair, as appropriate, of the action taken, and such action shall be confirmed by a four- fifths (4/5) vote of the Board of Directors at its next regular meeting. H. Surety Bonds. The Purchasing Division shall require a Faithful Performance Bond and a Labor and Materials Bond. A Warranty Bond may be required before entering into a contract in an amount up to one hundred (100%) percent of the amount of the contract, as it shall find reasonably necessary to protect the best interests of the District. The form and amount of the bond shall be described in the Notice Inviting Bids, or in the contract Specifications. I. Cost Records. Cost records shall be kept in the manner provided in Sections 4000 to 4007, inclusive, of the California Government Code. Section 5.04: Approval of Change Orders to Construction Agreements. The procedure and authority for the approval of change orders to construction agreements is as follows: TLW Draft No. 12:05/19/99:#103185 28 A. General Manager. The General Manager is authorized to approve any single change order with a total amount of additions to the agreement (not the net amount of the change order), not to exceed $100,000.00, and a total cumulative amount for all change order additions to the agreement not to exceed 5% of the original agreement amount, or $100,000.00, whichever is less. 8. Planning. Design & Construction Committee. The Planning, Design & Construction Committee is authorized to approve any single change order with a total amount of additions to the agreement (not the net amount of the change order), not to exceed $200,000.00, and a total cumulative1 amount for all change order additions to the agreement not to exceed 10% of the original agreement amount, or $200,000.00. whichever is less. C. Management and Staff. At such time as the Staff becomes aware of a fact or circumstance that will likely result in total additive change orders exceeding 5% percent of the original contract amount, it shall be presented to the Planning, Design & Construction Committee at its next regular meeting for review, consideration, arid possible action. ARTICLE VI MEETINGS (AND RELATED TRAVEL) AND TRAINING (AND RELATED TRAVEL) EXPENDITURES Section 6.01: Purpose and Scope. This Article sets forth the procedures and scope of delegated authority by which District employees are authorized to incur expenses for budget-approved meetings and training in furtherance of District business. Section 6.02: General. A. Meetings or training exceeding $500.00 will be itemized, as well as possible, in the approved budget. It is recognized that some meetings and training cannot be preplanned. 8. All out-of-country travel (excluding Canada and Mexico) requires approval by the Board of Directors. C. Meetings or training requests exceeding $2,000.00 will be approved by the Department Director. D. Meetings or training requests less than $2,000.00 will be approved by the Division Manager. E. Established approvals must be received prior to arrangements tor TLW Draft No. 12:05/19/99:#103185 29 meetings or training being made. Section 6.03: Policies and Procedures. All policies and procedures governing meetings and training, such as the use of District forms and justification, will be followed. ARTICLE VII MISCELLANEOUS Section 7.01: Noncompliance. Any transaction failing to comply with this Resolution in any respect is voidable in the discretion of the Board of Directors, and any employee willfully and knowingly violating any provision of this Resolution may be subject to disciplinary action. Section 7.02: Severability. If any section, subsection, subdivision, sentence, clause or phrase of this Resolution is for any reason held to be unconstitutional or otherwise invalid, such invalidity shall not affect the validity of the entire Resolution or any of the remaining portions thereof. The Board of Directors hereby declares that it would have passed this Resolution, and each section, subsection, subdivision, sentence, clause and phrase thereof, irrespective of the fact that any one or more sections, subsections, subdivisions, sentences, clauses or phrases be declared unconstitutional or otherwise invalid. Section 7.03: Effective Date. This Resolution shall take effect immediately upon adoption by the Board of Directors. Section 7 .04: Repeal of Prior Resolutions. Resolutions Nos. OCSD 98-8, OCSD 98-12, OCSD 98-22, and OCSD 98-43 are hereby repealed in their entirety. PASSED AND ADOPTED at a regular meeting of the Board of Directors held _____ _, 1999. Chair ATTEST: Board Secretary TLW Draft No. 12:05/19/99:#103185 30 "' I FAHR COMMITTEE AGENDA REPORT Orange County Sanitation District FROM: Gary G. Streed, Director of Finance Prepared by: Michael D. White, Controller Meeting Date 09/08/99 I~m Number 9-6~ SUBJECT: COMPLETION OF J. D. EDWARDS FINANCIAL INFORMATION SYSTEM IMPLEMENTATION GENERAL MANAGER'S RECOMMENDATION To Bd. of Dir. Item Number Accept the J. D. Edwards Financial Information System and close project #5401200. SUMMARY Staff has implemented the following applications from the J. D. Edwards World classic proprietary software: general ledger, accounts payable, accounts receivable and cash receipts, fixed assets, job cost, budgeting, payroll, human resources, purchasing, inventory and warehousing, sales order, and address book. All of the functionality required of these applications as specified within the original request for proposals has been provided. After further analysis of the software, the contract management application was not implemented due to the relatively low value of benefits expected to be received. Implementation costs to date are within the original contract award to J. D. Edwards, IBM, and Enterprise Technologies of $1 .485 million. Migration to the J. D. Edwards OneWorld client/server software has not been completed. To date, approximately $152,000 has been incurred in Enterprise Technology consulting services for OneWorld migration out of a total budget of $163,000 with few productive benefits being obtained. These costs are primarily due to addressing OneWorld software shortcomings and are amounts paid to Enterprise Technology while attempting to make the software operational. PROJECT/CONTRACT COST SUMMARY Total Board approval for the purchase of the hardware, software and implementation of the financial information system through IBM, J. D. Edwards, and Enterprise Technology was $1,485,000. No additional funds are being requested with this action. BUDGET IMPACT cg] This item has been budgeted. D This item has been budgeted, but there are insufficient funds. D This item has not been budgeted. D Not applicable (information item) \lradonldata1\wp.dtalfinl21 O\cranelFAHR\Fahr99\SeptlARJDECompletion.doc Revised: 10/3/97 Page 1 I, ADDITIONAL INFORMATION At the July 24, 1996 meeting, the Joint Board of Directors authorized the General Manager to execute a contract for a new financial information system with J. D. Edwards and approved the purchase of the hardware from the California Multiple Awards Schedule (CMAS) for a combined amount not to exceed $1,485,000. At the February 11, 1998 FAHR Committee Meeting, the Committee approved the assignment of the implementation portion of the financial information system contract for the remaining software applications consisting of fixed assets, contract management, and inventory management, and for the conversion to the J. D. Edwards OneWorld Gperating platform to Enterprise Technologies, because J. D. Edwards could no longer provide ~ local client implementati0n proj,ect manager and implementation team. This assignment was made without increasing the original $1,485,000 approved by the Boa.i:d for the pu rchase of the hardware, software, and implementation of the financial information system through IBM and J. D. -Edwards. To date, hardware, software, and implementation costs have totaled $1,479,000. Implementation of the various applications were completed as follows: Projected Completion Date Actual Phase Applications As of October 1996 Completion Date Phase I Payroll/H.R. Benefits January 1, 1997 January 3, 1997 Budgeting February 1, 1997 February 1, 1997 Phase II General Ledger July 1, 1997 July 1, 1997 Accounts Payable If If Cash Receipts/Accounts Receivable " II Fixed Assets 11 February 1, 1998 Phase Ill Purchasing September 30, 1997 November 1, 1997 Inventory Management-Phase I-Ad min. If " Inventory Management-Phase II-O&M Not Originally Identified March 1, 1998 Job Cost If July1,1997 Contract Management If Not Completed Phase IV One World Conversion/Migration June 30, 1998 Not Completed The assignment of the implementation services to Enterprise Technologies resulted in a consulting service agreement with Enterprise Technologies, for time and materials, in an amount not to exceed $276,000 that expired on August 1, 1999. Through July 31, $274,383 had been expended against this service agreement, as follows: \\radonldata11wp.dta\fin\210\crane\FAHR\Fahr99\Sept\ARJDEComplelion.doc Revised: 10/3197 Page 2 Enterprise Technologies Estimated Project Costs Incurred Budget Budget To Date World Installation: Inventory $ 3,000 $ 5,500 Purchasing 10,375 15,875 Sales Order 23,000 28,198 Fixed Assets 14,000 16,388 Contract Management 10,000 - GL/AR/AP Support 4,000 15,015 Project Management 18,520 29,890 Data Conversion 11,719 11,800 Project Contingency 19,000 - Total World 113,614 122,666 OneWorld Installation: Specific Consulting 123,543 151,717 Project Contingency 39,500 - Total OneWorld 163,043 151,717 Grand Total $276,657 $274,383 Implementation of the Contract Management module was not completed because the functionality of the J. D. Edwards World system was developed to meet the needs of the private sector. The module lacked the functionality to properly monitor contracts in accordance with the purchasing requirements of the State of California Government and Public Contract Codes, as well as the District's internal purchasing policies. Instead, Purchasing staff has developed a computer program within Microsoft Access that monitors contracts, insurance, and procurement bond requirements with internal resources. Migration to the J. D. Edwards OneWorld client/server software has not been completed because the software has not matured to the point that it can be installed efficiently while retaining all of the functionality currently available in the installed World classic software applications. To date, approximately $152,000 has been incurred in Enterprise Technology consulting services for OneWorld migration, out of a total budget of $163,000, with only the OneWorld Accounts Receivable module being placed into production. These costs are primarily due to addressing OneWorld software shortcomings and are amounts paid to Enterprise Technology for attempting to make the software operational. In our agreement with J. D. Edwards, we purchased the World classic software, all of the functionality required within our original request for proposal, and the right to migrate to the OneWorld software. At the time we negotiated the software license agreement, J. D. Edwards was making no assurances as to functionality of the OneWorld software. Staff recommended J. D. Edwards because of their established World product, the cost difference to the second proposal, and the urgent need to upgrade the District's outmoded 1979 system. We advised the Board that no governmental OneWorld \lradonldata 1 lwp.dtalfin\21 O\crane\F AH RIF ahr99\Sept\ARJDECompletion.doc Revised: 1013197 Page 3 installations were complete, and that there was some uncertainty about the ultimate development of the project. Excerpts from the recommendation presentation are attached. Enterprise Technologies has submitted a proposal to complete the migration of the Financial Suite of applications (General Ledger, Accounts Payable, Fixed Assets, Job Cost, and Budget) to OneWorld at an estimated additional cost of $96,000. However, this proposal is based on time and materials without any assurances that additional funds won't be needed. No firm dollar estimate can be provided at this time for completing the OneWorld Distribution Suite (Purchasing, Warehousing and Inventory, and Sales Order) or the OneWorld Human Resource/Payroll Suite. The benefits lost by not completing the migration to OneWorld include: • The OneWorld software is more user-friendly, especially to those users outside of the Finance Department. The OneWorld software resembles a Microsoft product with its point and click, drop down menus, and graphical interface. The World classic software requires IBM keyboard knowledge and the use of function keys. • The OneWorld software provides the District with more alternatives when selecting a hardware platform and an operating platform since the product virtually runs on any hardware platform and will run on an Oracle operating system. • Information within the OneWorld software can more easily be uploaded/downloaded into Microsoft personal computer applications such as Excel and Access. • The OneWorld Software is designed to support e-commerce and will ultimately support web browser access. E-commerce could provide us the opportunity to pay our vendors electronically. A web browser access would allow employees to complete timesheets on-line that would automatically feed into the payroll module. • Ultimately, J. D. Edwards will be discontinuing support of the World classic software and we may be forced to implement OneWorld or a whole new financial information software package from another vendor. ALTERNATIVES 1) Extend the consulting services agreement with Enterprise Technologies through December 31, 1999, to complete the implementation of the One World Financial Suite applications for time and materials, in an amount not to exceed $96,000. Direct staff to solicit additional consulting service proposals for the implementation of the OneWorld Distribution Suite and Payroll/Human Resource Suite following the completion of the OneWorld Financial Suite implementation. 2) Direct the Information Technology Department to continue to monitor the development of the J. D. Edwards OneWorld software. At some time in the future when the Information Technology Department believes that the software has matured sufficiently to be implemented with few modifications, direct staff to solicit proposals for implementation of the J. D. Edwards OneWorld software. \\radonldata 1 lwp,dtalfin\21 O\crane\F AH RIF ahr99\Sept\ARJD ECompletion doc Revised: 10/3/97 Page4 CEQA FINDINGS N/A ATTACHMENTS Excerpts from FIS selection presentation to FAHR Committee GGS:MWD:lc \lradonldata1 lwp dlallin\21 Olcrane\FAH RIF ahr99\Sepl\ARJDEComplelion_doc Revised: 10/3/97 Page 5 mitting Vendors • Bi-Tech (Chico, CA) • JD Edwards (Denver, CO) • Pentamation (Bethlehem, PA) • PeopleSoft (Walnut Creek, CA) • SCT (Lexington, KY) • BiTech is a vendor going through a platform migration from HP3000/lmage to UNIX/lnformix. Also going thru an acquisition. Having problems adapting a higher ed product to local gov't- particularly Orange County Transit. • JD Edwards has the largest local gov't installed base of the five. A long standing IBM/AS-400 product now moving to new Client/Server version off of AS400. • Pentamation has no West Coast offices, very casual marketing in this area. Did not aggressively pursue this account, possibly a timing issue, possibly strategic. • PeopleSoft is a fast growing Human Resource system specialist with a relatively new Financial system product suite. They have a large number of commercial (private sector) installations, but are just beginning to penetrate the local government market with no currently operating California sites. • SCT is a consulting company, systems integrator, and software developer with a long history in college/university but with a checkered history in local government. It is an Oracle-based product but targets mostly small to medium accounts. mary: JD Edwards • IBM AS/400 based solution called 'World Vision' • Offered to migrate to their new Client/Server version called 'One World' • Good references, high 'RESPONSIBILITY' score • Conservative on contractual issues • Carefully studied CSDOC prior to submitting proposal • The IBM AS/400 is the largest installed midrange system in the world • Because AS/400 is considered by most to be a proprietary platform, they have decided to move to an open-system, client/server version of their product called One World. • The question is whether they can tranfer all of their well-developed functional knowledge to a new platform and what the impact of trying to support a huge installed base on the legacy AS/400 platform while migrating the product to an new platform and replicating all of the mature AS/400 features. • Their legal conservatism will mean tough contract negotiations because they do not want to commit to specific contract deliverables. ~hical Comparison Flexibility • The JOE and PeopleSoft potential solutions are both spec·ulative at this point. • Properly implemented, PS could surpass JOE in functionality, but it would depend on CSDOC's level of effort and commitment of resources. 21) FAHR CO MM ITTEE AGENDA REPO RT Orange County Sanitation District FROM: Gary G. Streed, Director of Finance SUBJECT: 401 (a) PENSION PLAN MAXIMUM CONTRIBUTION GENERAL MANAGER'S RECOMMENDATION · Meeting Date To Bd. ef Dir. 09/08/99 09/22/99 Item Number Approve Resolution No. 99-XX increasing the annual contribution to this plan. SUMMARY Effective January 1, 1998, the Board of Directors has approved an "Executive's Money Purchase Pension Plan and Trust," more commonly called a 401 (a) Plan. The only executive who is eligible to participate in this plan is the General Manager, Don McIntyre. All amounts deposited into this plan are offset by an equal reduction of the General Manager's salary. ' The Internal Revenue Code has established limits for financial participation in these plans. In this case, the maximum participation is established by the IRC as $30,000 per calendar year. The IRC also requires the amount of participation to be expressed as a percentage of "Participant's Compensation for the Plan Year." Because the plan was finalized well into 1998, and because the General Manager had a specific participation level in mind, the participation percentage was established at 7 .55% for 1998. Now that the General Manager's performance review for 1999 has been completed, and his 1999 compensation can be determined, it is appropriate to revise the participation percentage in order to allow the maximum participation. The attached resolution, prepared by General Counsel, modifies the participation percentage to reflect the request of the General Manager. Participation amounts are offset by equal reductions in the salary of the General Manager.· PROJECT/CONTRACT COST SUMMARY BUDGET IMPACT IZI This item has been budgeted. (Line item: ) D This item has been budgeted, but there are insufficient funds. D This item has not been budgeted. D Not applicable (information item) \lradonldata1\wp.dlalfin\210\crane\FAHR\Fahr99\Sept\AR401(a) Pension Plan_doc Revised: B/20/98 Page 1 ADDITIONAL INFORMATION NIA ALTERNATIVES Do not approve the change. CEQA FINDINGS NIA ATTACHMENTS 1. Resolution No. 99-XX GGS:lc \lradonldata1\wp.dtalfinl210\crane\FAHR\Fahr99\Sept\AR401(a) Pension Plan.doc Revised: B/20/98 Page2 RESOLUTION NO. OCSD 99- AMENDING DISTRICT'S EXECUTIVE MONEY PURCHASE PENSION PLAN AND TRUST A RESOLUTION OF THE BOARD OF DIRECTORS OF ORANGE COUNTY SANITATION DISTRICT AMENDING THE DISTRICT'S EXECUTIVE MONEY PURCHASE PENSION PLAN AND TRUST WHEREAS, the Board of Directors of District, on October 29, 1998, adopted an Executive Money Purchase Pension Plan and Trust, as authorized by United States Internal Revenue Code Section 401 (a); and WHEREAS, Article 4, Section 4.1 of said Plan provides for the District, as Employer, to contribute a fixed percentage of the Participating Employee's compensation to the Plan; and WHEREAS, District desires to change the percentage of its contribution for the current Plan Year. NOW, THEREFORE, the Board of Directors of Orange County Sanitation District, DOES HEREBY RESOLVE, DETERMINE AND ORDER: Section 1: Section 4.1 of Article 4 of the District's Executive Money Purchase Pension Plan and Trust is hereby amended to read: "4.1 Employer Contributions -The Employer shall contribute 21.2% of the Participant's Compensation for the Plan Year to the Plan. For this purpose, 'Compensation' shall mean 'Compensation' as defined in Section 2.6 hereof, provided, however, any elective deferrals (as defined in Section 402(g)(3) of the Code), or amounts which are not includible in the gross income of the Employee by reason of Section 125 or 457 of the Code shall not be included in Compensation. Employer contributions shall be paid to the Trustee following the end of the Plan Year for which the contributions are made." PASSED AND ADOPTED at a regular meeting held ____ , 1999. Chair ATTEST: Board Secretary FAHR COM MITTEE Meeting Date 9/8/99 AGENDA REPO RT Item Number C?9-?0 Ora nge CoLJnty Sanitation District FROM: Mike Peterman, Director of Human Resources SUBJECT: CONSUL TANT AGREEMENT FOR FORMER EMPLOYEE, GERALD JONES GENERAL MANAGER'S RECOMMENDATION 1) Approve waiver to Human Resources Policies and Procedure Manual to retain Gerald Jones, retired maintenance manager, as a professional consultant; 2) Approve a Professional Services Agreement with Gerald Jones in the amount of $67.50 per hour plus travel expenses, not to exceed two years in duration. SUMMARY For several years, the District has been implementing programs aimed at reinventing the way operations are managed. Gerald Jones has been a leader in many critical areas of the reinvention effort including reconciliation of the maintenance database with the asset and tagging information developed by the Reinvention Automation Project, and the planning and scheduling interface with the warehouse, purchasing, maintenance database and the financial database. These projects are at the core of our reinvention efforts as they pertain to running the plants at optimal efficiency. The District has completed one phase of the reinvention program, but there are still at least two years to go until completion. Mr. Jones has decided to retire and move to Las Vegas, however he is willing to continue to work as a professional consultant to help us complete the reinvention work. In Mr. Jones' proposal he would travel to the District every other week and work a four-day workweek (a copy of his proposal is attached). He has proposed an hourly rate of $67.50 plus travel expenses of $700 per week. Mr. Jones' current hourly rate plus benefits is $53.85. It is essential that we maintain Mr. Jones' involvement with the project to ensure the project's continuity and schedule are maintained. The alternative would be to use outside consultants at a $140 hourly rate. This recommendation is being brought forward to the Finance and Human Resources Committee because District policy prohibits hiring former employees as consultants for a period of one year from the termination date (see attached policy B80.5.2). However, the FAHR Committee on a case-by-case basis may -To Bd. of Dir. 9/22/99 Item Number H:\wp.dla\hr\51 O\Pelerman\Fahr\JerryJone9Proposal.doc Revised: 8120/98 Page 1 waive the prohibitions of this policy if it is determined to be in the District's best - interests (880.5.5). PROJECT/CONTRACT COST SUMMARY Contract cost approximately $123,500 per year including expenses. BUDGET IMPACT D This item has been budgeted. (Line item: ) 181 This item has not been budgeted, but there are sufficient funds.· D This item has not been budgeted. D Not applicable (information item) ADDITIONAL INFORMATION NIA ALTERNATIVES 1. Use outside consultants at a $140 hourly rate. 2. Use existing staff to manage the project. CEQA FINDINGS NIA ATTACHMENTS Exhibits A through C H:\wp.dla\hr\51 O\Pelerman\Fahr\JerryJonesProposal.doc Revised: 8/20/98 Page 2 Orange County Sanitation District Subject: EMPLOYMENT OF FORMER EMPLOYEES 1.0 PURPOSE Policy Number: B80.00 Effective Date: October 22, 1997 Supersedes: Approved by: 1.1 The purpose of this policy is to establish uniform guidelines and procedures for employing former employees. 2.0 ORGANIZATIONAL UNITS AFFECTED 2.1 This policy applies to all former employees. 3.0 DEFINITIONS 4.0 POLICY 4.1 It is the District's policy to employ former employees in accordance with the procedures, provisions and conditions of this policy. 5.0 PROCEDURE 5.1 The General Manager may, with the written approval of the Joint Chairman, employ on a part-time, as-needed basis, a retired staff member when such person possesses knowledge and expertise of unique and particular benefit to the Districts and when the services are required. The length of service performed in any one year shall be limited in accordance with the provisions prescribed by the Orange County Employees' Retirement System (currently 120- day maximum). 5.1.1 Such part-time service shall be compensated at the same current hourly rate of the retired employee's position classification, or if no such classification exists, at a rate not to exceed that paid for the most comparable classification. The retired employee shall not be entitled to receive any benefits otherwise payable to the District employees. In the event any employment under this provision involves work assignments outside of Orange County, the current expense reimbursement policy established for regular employees will apply. Page 1 5.2 If any former employee commences doing business wherein the employee, his/her spouse, or members of his/her immediate family are sole proprietors, or majority or controlling shareholders or owners of a corporation, partnership or other business entity, such business shall not be retained as an independent contractor or consultant to provide service directly to the Districts for a period of one year after leaving Districts' employment. Thereafter, said business entity shall be allowed to contract with the Districts upon compliance with all resolutions and regulations of the Districts then in effect, relating to the procurement of services. 5.3 If any former employee becomes employed by any firm or business entity in which the former employee, his/her spouse or members of his/her immediate family own less than the majority or controlling interest in said entity, said entity shall not be prohibited from contracting with the Districts. However, the former employee shall not perform work on Districts' projects for a period of one year after leaving Districts' employment; nor shall such tanner employee contact Districts' officers or employees for the purpose of attempting to influence any Districts' decision, including but not limited to, the award of contract, issuance of permits , or compromise of administrative civil penalties, for a like period of one year. Said services shall be obtained only in accordance with all rules and procedures of the Districts relating to procurement. 5.4 Any Districts' employee who receives an offer of employment or a request to discuss potential employment from any person or business entity performing services for the Districts shall report such contact to his or her immediate supervisor, who shall decide whether any change in assignment is necessary or appropriate while the offer or discussions are pending. 5.5 The prohibitions of this policy may be waived by the Finance, Administration and Human Resources Committee of the Boards of Directors if, on a case-by-case basis, it is determined to be in the best interests of the Districts to do so. 6.0 EXCEPTIONS 7.0 PROVISIONS AND CONDITIONS 8.0 RELATED DOCUMENTS Page 2 August 23, 1999 MEMORANDUM TO: Bob Ooten Director of Operations & Maintenance FROM: Gerald Jones /J} 0 & M Maintenance Manager SUBJECT: Reinvention Project Work Items and Proposed Rates Bob, I have reviewed reinvention work in progress and identified the following projects that have goals and objects associated with them for fiscal year 1999-2000. The goals and objectives have been assigned to the project specialists and supervisory staff in the maintenance divisions. The goals and objectives are subject to change based on schedule changes and have been provided as an attachment to this memorandum. The reinvention projects are an out growth of the work that was completed last fiscal year. A list of the projects follows: • Reconciliation of the CMMS database with the asset and tagging information developed by the Reinvention Automation Project (J-42). • Task analysis on assets in the CMMS database (post reconciliation) • Activity Code and Parts List development for. Identified equipment (post task analysis). • O&M support for equipment tagging project to be implemented through the Reinvention Automation Project (procedures, methods and QA-QC for project). • Planning & Scheduling and Warehouse & Purchasing business interface development. • Planning & Scheduling and CMMS & Financial Information System Integration project (continued development). • Expansion of existing Performance Measurement and Standards reporting. The majority of the projects listed above are in some way dependent on the Reinvention Automation Project schedule. It is also true that O&M support and completion of reinvention work must also stay on schedule to accommodate the work being performed by the Reinvention Automation Project. These interdependencies can be discussed at your convenience. OCSD • P.O. Box 8127 • Fountain Valley, CA 9:.0728-8127 • (714) 962-2411 Page 2 August 23, 1999 Schedules and milestones for these projects can be provided as required to assist with determining the resource requirements and the duration of each of the work efforts. The schedules and task lists developed to date have been the basis of the attached goals and objectives. I have assigned O&M resources to each of the projects. The resources may have to be reallocated between the projects based on core business and reinvention project priorities. I expect the reinvention process to be completed in approximately three more years. Additional resources will be required in specialty areas of the projects. I have identified five areas that will require these resources. • Mark Esquer will have to contribute some O&M technical support staff time to assist me with looking at the life cycle replacement program. • Nick Arhontes will have to provide support for flow-charting and policy and procedure development required to complete the equipment rebuild reinvention process. • O&M field personnel to perform task analysis and provide raw data and task information for activity codes and parts lists development. • Consultant Support for formalizing the policy and procedure for the new business practices. • Doug Stewart and the individual that replaces me as the O&M Maintenance Manager must work together to insure that the Reinvention Automation Project and the O&M Reinvention efforts stay on track. The information in this memorandum provides a general overview of the work to be completed. After reviewing the project management requirement and the resources available (eight project specialists) for the project I believe it will take a minimum of half time commitment on my oart tn effectively manage the proce::s;:,. I would recommend a four day ten hour per day work schedule. The four-day schedule would be Monday through Thursday. I would travel to the Orange County Sanitation District plant sight every other week or as scheduled work activities require my presence. This schedule is consistent with the project specialists assigned to the project and will reduce my travel expenses. I would charge an hourly rate of $67.50 for all on site and off site hours worked. This rate would not include trave~f:-fn~~~s:{he travel expenses for the proposed four-day workweek are approximate!.,~~~~-/ week. - Bob; if you need any additional information let me know. Attachment GRJ:jmf H:\wp.dta\om\860~ones\MEMOS\RCMOOTEN.doc c: Don McIntyre Blake Anderson ... Maintenance Division Goals FY 1999-2000 Objective 1 Measurement Standards for Reconcile instrumentation equipment and tagging information from the Reinvention Automation Project (J-42) with CMMS information for preliminary, primary and secondary treatment plant processes. The reconciled CMMS databases must contain all equipment records for the process area and have all records identified for deletion removed from the database (use defined reconciliation procedures). Meets Expectations: Complete the reconciliation of the CMMS database with the J-42 database for the identified process areas and deliver the databases in a spreadsheet format to Maintenance supervision by December 31, 1999. Measurement Standards for Exceeds Expectations: Resources needed: Complete the reconciliation of the CMMS database with the J-42 database for the identified process areas and deliver the databases in a spreadsheet format to Maintenance supervision by November 30, 1999. The assistance of the Asset Management Group #1 personnel and the CMMS Support Group. Objective 2 Reconcile instrumentation equipment and tagging information from the Reinvention Automation Project (J-42) with CMMS information for digestion process areas at both plant facilities and the effluent pumping process at plant 2. The reconciled CMMS databases must contain all equipment records for the process area and have all records identified for deletion removed from the database (use defined reconciliation procedures). Measurement Standards for Meets Expectations: Measurement Standards for Exceeds Expectations: Resources needed: Complete the reconciliation of the CMMS database with the J-42 database for the process areas which have been identified and deliver the databases in a spreadsheet format to Maintenance supervision by March 31, 2000. Complete the reconciliation of the CMMS database with the J-42 database for the identified process areas and deliver the databases in a spreadsheet format to Maintenance supervision by February 28, 2000. The reconciled CMMS databases must contain all equipment records for the process area and have all records identified for deletion removed from the database (use defined reconciliation procedures). The assistance of the Asset Management Group #1 personnel and the CMMS Support Group. Continued Section 5. Future Performance Objectives (Continued) Objective 3 Reconcile instrumentation equipment and tagging information from the Reinvention Automation Project (J-42) with CMMS information for the Central-Generation facilities and plant utilities at both plant facilities. Measurement Standards for Meets Expectations: Measurement Standards for Exceeds Expectations: Resources needed: Complete the reconciliation of the CMMS database with the J-42 database for the identified process areas and deliver the databases in a spreadsheet format to Maintenance supervision by June 30, 2000. Complete the reconciliation of the CMMS database with the J-42 database for the identified process areas and deliver the databases in a spreadsheet format to Maintenance supervision by May 31, 2000. The assistance of the Asset Management Group #1 personnel and the CMMS Support Group. Objective 4 Provide QA/QC for the Equipment Tagging Project associated with the Reinvention Automation Project. Duties will include verification of the installation of tags for the equipment in each process area of the plant facilities. Measurement Standards for Meets Expectations: Measurement Standards for Exceeds Expectations: Resources needed: Complete the QA/QC of the instrumentation equipment for each of the plant process areas within 45 days after the last tags have been installed. To verify QA/QC has been completed provide a spreadsheet that identifies.the process area equipment and the date the field installation of the tags was verified. Complete the QA/QC of the instrumentation equipment for each of the plant process areas within 15 days after the last tags have been installed. To verify QA/QC has been completed provide a spreadsheet that identifies the process area equipment and the date the field installation of the tags was verified. The assistance with project oversight by Dale Brooks and the other members of the Asset Management Group #1. Continued -objective 5 Measurement Standards for Working with the Planning & Scheduling and Warehouse & Purchasing Users Group expand the existing project plan to define the tasks required and approach to be taken to reclassify inventory, standardize nomenclature and determine where equipment and parts d-oss• referencing information should reside. Meets Expectations: Complete the task definition and the approach to be taken to reclassify inventory, standardize nomenclature and determine where equipment and parts cross•referencing will reside by September 30, 1999. Measurement Standards for Exceeds Expectations: Resources needed: Complete the task definition and the approach to be taken to reclassify inventory, standardize nomenclature and determine where equipment and parts cross•referenclng will reside by August 31, 1999. Assistance of assigned project specialists, maintenance supervisors, purchasing personnel and warehouse personnel in completing the planning process. Objective 6 Working with the P&S and W&P Users Group, develop a process that defines how the O&M planning and scheduling process will function with warehouse and purchasing. Measurement Standards for Meets Expectations: Measurement Standards for Exceeds Expectations: Complete development of a process flow chart and responsibility table defining the required steps and responsible party for each step in the process by December 31, 1999. Complete development of a process flow chart and responsibility table defining the required steps and responsible party for each step in the process by November 30, 1999. Resources needed: Assistance of assigned project specialists, maintenance supervisors, purchasing personnel and warehouse personnel in completing the planning process. Continued Section 5. Future Performance Objectives (Continued) Objective 7 Complete the testing of the planning and scheduling module for functionality. Measurement Standards for Meets Expectations: Measurement Standards for Exceeds Expectations: Resources needed: Complete the testing of the planning and scheduling module in the CMMS by September 30, 1999. Complete the testing of the planning and scheduling module in the CMMS by August31,1999. · Assistance of the CMMS Support Group and I.T. Department as required to review the module. Objective 8 As a member of the Asset Management Group #2 develop the maintenance planning and scheduling program. The development will be under the direction of the Maintenance Division supervision and subject to their review. Measurement Standards for Meets Expectations: Measurement Standards for Exceeds Expectations: Resources needed: Complete the development of the planning and scheduling program for fourth quarter implementation by March 31, 2000. Complete the development of the planning and scheduling program for fourth quarter implementation by February 28, 2000. Asset Management Group #2 will provide timely development for review by maintenance supervision. Maintenance supervision will provide prompt review in support of the development process. .., Section 5. Future Performance Objectives (Continued) ObjectivEf 9 Implement the planning and scheduling prcgram for the preliminary and primary treatment plant process areas at both plant facilities. Measurement Standards for Meets Expectations: Implement the planning and scheduling program as defined by June 30, 2000. Measurement Standards for Exceeds Expectations: Implement the planning and scheduling program as defined by May 31, 2000. Resources needed: The maintenance divisions must complete the detailed task analysis and develop the parts list for the preliminary treatment and primary treatment process areas to facilitate the program implementation. Objective 10 Setup a file system that will accommodate approximately three thousand (3000) O&M manual data forms, with the associated tables of contents, with a total sheet count of approximately ten thousand (10,000). Arrange data forms by the engineering project job number and in the proper sequence. Measurement Standards for Meets Expectations: Measurement Standards for Exceeds Expectations: Resources needed: Complete the project by June 30, 2000. Complete the project by March 31, 2000. Assistance of the Office Technician (Moira Sullivan) and the assigned project specialist (Dale Brooks). Continued Section 5. Future Performance Objectives (Continued) Objective 11 Write a policy and procedure handbook for the O&M Library system. The policy and procedure handbook will Include criteria for book placement, book appearance, proper database operation and proper database use. Also integrate the equipment tag data collection procedure into the handbook. Measurement Standards for Meets Expectations: Measurement Standards for Complete the policy and procedure handbook for the O&M Library system by June 30, 2000. Exceeds Expectations: Complete the policy and procedure handbook for the O&M Library system by March 31, 2000. Resources needed: Assistance of consultant with writing draft handbook. Objective 12 Develop and implement the O&M Library database system. Support the Information Technology group in the development of the Web based client interface for check in and check out capabilities. Increase the repository of data entries to 2700 during fiscal year 1999-2000, with a minimum of 500 data entries being completed in the first quarter. Measurement Standards for Meets Expectations: Measurement Standards for Exceeds Expectations: Complete the 2700 data entries by June 30, 2000 Complete the 2700 data entries by March 31, 2000. Resources needed: Assistance of the Office Specialist (Moira Sullivan) Project Specialist (Dale Brooks) and the assigned Information Technology group personnel. Objective 13 Perform a detailed analysis of the equipment level maintenance tasks for the instrumentation and electrical equipment in the preliminary, primary and secondary treatment plant processes. The evaluation will be subject to following the criteria established for the managed maiRtenance program. The work will include verifying codes, verifying maintenance strategy, determining maintenance interval, establishing task time and identifying the need for activity codes and parts lists. Equipment requiring maintenance will then be scheduled Into the annual maintenance program Measurement Standards for Meets Expectations: Measurement Standards for Exceeds Expectations: Resources needed: Complete the analysis of the identified equipment for preliminary treatment by September 30, 1999, analysis of primary treatment by December 31, 1999 and secondary treatment by March 31, 2000. Provide a spreadsheet listing the equipment, results of the analysis and the maintenance schedule determined. Complete the analysis of the identified equipment for preliminary treatment by August 31, 1999, analysis of primary treatment by November 30, 1999 and secondary treatment by February 28, 2000. Provide a spreadsheet listing the equipment, results of the analysis and the maintenance schedule determined. Joe Tucker and Asset Management Group #1 will deliver reconciled databases for each process area identified at the beginning of the fiscal year quarter that they are due for analysis. Any deviation of the schedule will result in shifting due dates by the appropriate time frame. Objective 14 Develop or modify the activity codes and parts lists for the instrumentation and electrical equipment in the preliminary and primary treatment processes that were identified during the maintenance task analysis. Measurement Standards for Meets Expectations: Measurement Standards for Exceeds Expectations: Resources needed: Complete the activity codes and parts lists for the subject equipment and enter them into the CMMS by June 30, 2000. Complete the activity codes and parts lists for the subject equipment and enter them into the CMMS by April 30, 2000. Joe Tucker and Asset Management Group #1 will deliver reconciled databases for each process area identified at the beginning of the fiscal year quarter that they are due for analysis and the analysis must be completed on schedule. Any deviation of the schedule will result in shifting due dates by the appropriate time frame. Continued ,. Objective 15 Complete the field walk-down with the J-42 consultants and review loop drawings for the preliminary, primary, secondary, digestion, effluent pumping, central generation and utilities at both plant facilities. Measurement Standards for Meets Expectations: Measurement Standards for Exceeds Expectations: Resources needed: Complete the walk-down and loop drawing reviews for the preliminary, primary and secondary facilities at both plants by September 30, 1999. Complete the walk-down and loop drawing reviews for digestion at both plant facilities and effluent pumping at plant 2 by March 31, 2000. Complete the walk down and loop drawing reviews for the central generation facilities and utilities at both plant facilities by June 30, 2000. Complete the walk-down and loop drawing reviews for the preliminary, primary and secondary facilities at both plants by August 31, 1999. Complete the walk-down and loop drawing reviews for digestion at both plant facilities and effluent pumping at plant 2 by February 28, 2000. Complete the walk down and loop drawing reviews for the central generation facilities and utilities at both plant facilities by May 31, 2000. The engineering department and Reinvention Automation Project (J-42) consultant must stay on schedule or the time frames to provide assistance will be adjusted as required to support the new project schedule. Objective 16 Provide personnel to support the Y2K effort. The support will include personnel for contingency planning, re-mediation, work-around and testing of imbedded systems and continuous evaluation of newly purchased equipment to ensure Y2K compliance. Measurement Standards for Meets Expectations: Measurement Standards for Exceeds Expectations: Resources needed: Complete contingency planning support by September 30, 1999. Complete imbedded systems work and testing for the plant process and pump station equipment by December 31, 1999. Complete the evaluation and documentation of newly purchased equipment to determine if it is Y2K compliant by March 31, 2000. Complete contingency planning support by August 31, 1999. Complete imbedded systems work and testing for the plant process and pump station equipment by November 30, 1999. Complete the evaluation and documentation of newly purchased equipment to determine if it is Y2K compliant by February 28, 2000. Direction and support of Y2K O&M project manager and Y2K consultant. Continued Section 5. Future Performance Objectives (Continued) Objective 17 Assist Safety and Emergency Response Division with the Hazardous Energy Control procedure development. Measurement Standards for Meets Expectations: Measurement Standards for Exceeds Expectations: Resources needed: Assist Safety and Emergency Response personnel and the consultant with development of lockout and tagout procedures. Complete 75 procedures each quarter in the Mechanical division. Work with the CMMS Support Group to ensure procedures are properly entered into CMMS each quarter. Assist Safety and Emergency Response personnel and the consultant with development of lockout and tagout procedures. Complete 100 procedures each quarter in the Mechanical division. Work with the CMMS Support Group to ensure procedures are properly entered into CMMS each quarter. Division personnel under the direction of front line supervision will provide necessary technical input to the lockout and tagout procedures. Safety and Emergency Response and consultant · will develop final draft documents. The CMMS Support Group will provide resources to enter the templates into the CMMS database. Objective 18 Provide the oversight necessary to ensure that the Instrumentation/Electrical Division Budget remains within projected limits for fiscal year 1998/99. Measurement Standards for Meets Expectations: Measurement Standards for Exceeds Expectations: Resources needed: The Instrumentation/Electrical Division overall budget will fall within the fiscal year 1998/99 bottom line number. No more than two single line items of the Instrumentation/Electrical Division budget with a total budget amount in excess of $2,000 for fiscal year 1998/99 shall exceed the budgeted amount by more than ten percent while maintaining overall bud.get within fiscal year 1998/99 limits. The Instrumentation/Electrical Division Supervision must work together to ensure line item expenditures are properly posted and review of line item status must be completed on a regular basis to ensure errors are not included when costs are posted by finance. \\radon\data1\wp.dta\om\860\jones\PRIVATE\FY1999-2000 Goals\Maint. Goals 1999-2000.doc