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HomeMy WebLinkAbout2003-03-12 MINUTES OF FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE MEETING Orange County Sanitation District Wednesday, March 12, 2003, 5:00 p.m. A meeting of the Finance, Administration and Human Resources Committee of the Orange County Sanitation District was held on March 12, 2003, 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: Directors Present: Brian Brady, Chair Roy Moore, Vice Chair Alberta Christy Mike Duvall Mark Leyes Joy Neugebauer Directors Absent: James W. Silva Shirley McCracken, Board Chair Steve Anderson, Vice Board Chair STAFF PRESENT: Blake P. Anderson, General Manager Gary Streed, Director of Finance/Treasurer Lisa Tomko, Director of Human Resources Greg Mathews, Administrative Services Manager Carol Beekman, Communications Services Manager Mike White, Controller Juanita Skillman John Swindler Sam Mowbray Penny Kyle, Committee Secretary OTHERS PRESENT: Tom Nixon, General Counsel Steve Filarsky, Special Labor Counsel Don Hughes Toby Weissert Randy Fuhrman Ryal Wheeler (2) APPOINTMENT OF CHAIR PRO TEM No appointment was necessary. (3) PUBLIC COMMENTS Randy Fuhrman requested he be allowed to speak prior to the consideration of Item 11(a). (4) REPORT OF THE COMMITTEE CHAIR The Chair had no report. Minutes of the Finance, Administration and Human Resources Committee Meeting Page 2 March 12, 2003 (5) REPORT OF THE GENERAL MANAGER The General Manager reported the special meeting on asset management for the OMTS Committee to be held on March 19 had been postponed. Directors would be advised when it was rescheduled. Mr. Anderson updated the Directors on legislative issues at the federal and state levels. Special districts have not been impacted to date on the state budget cuts, but staff is closely monitoring the situation. Two bills are being sponsored at the state level regarding an amendment to Proposition 218 and urban runoff fees, as well as management of biosolids. Several directors have also recently met with legislators in Washington, DC: Shirley McCracken, Alberta Christy, and Jim Silva. It is important that the District obtain an EPA grant of $3 million/year for the next ten years to help defray costs of additional secondary treatment facilities. (6) REPORT OF DIRECTOR OF FINANCE/TREASURER Gary Streed, Director of Finance/Treasurer, referred the Directors to the Treasurer’s Report distributed to the Directors, and noted that the report included additional information. Additional handouts were provided relating to the user fee schedule and the reserves policy, which would be covered in more detail when those items were considered that evening. (7) REPORT OF DIRECTOR OF HUMAN RESOURCES The Director of Human Resources had no report. (8) REPORT OF COMMUNICATIONS SERVICES MANAGER Carol Beekman, Communications Services Manager, reported that the first three weeks of the advertising program for the Groundwater Replenishment System (GWRS) project were being evaluated. The first segment included television ads and over 700,000 mailers to service area residents. There were only 18 inquiries, of which only three were negative. All of the phone calls were returned by staff at OCWD. The primary objective of the first phase was to inform, not to elicit a response, so the results are right on track. The GWRS website showed a significant increase in visitors, from approximately 300 prior to the ad campaign launch to nearly 1,200 visitors in two weeks. The feedback from community outreach ads in Viet News and Excelsior indicates that minority communities were not aware of the water shortage in Orange County. Some Directors were concerned that the television commercial left the wrong impression on water conservation by showing a man carelessly using water to squirt several children. The message was tested by focus groups prior to showing it on TV. Blake Anderson reaffirmed that intended messages often vary with messages received. Interviews are underway for the Communications Ascertainment RFP. The Ascertainment will evaluate public perceptions about OCSD and then use those findings to help prepare a strategic communications plan. Minutes of the Finance, Administration and Human Resources Committee Meeting Page 3 March 12, 2003 (9) REPORT OF GENERAL COUNSEL General Counsel had no report. (10) CONSENT CALENDAR ITEMS a. The Chair ordered that the February 19, 2003 minutes for the Finance, Administration and Human Resources Committee meeting be deemed approved, as mailed. b. FAHR03-11 Recommend to the Board of Directors to receive and file Treasurer’s Report for the month of February 2003. c. FAHR03-12 Receive and file Certificate of Participation (COP) Monthly Report. d. FAHR03-13 Receive and file Employment Status Report as of February 27, 2003. e. FAHR03-14 Receive and file OSHA Incidence Rates and Workers’ Compensation Claims and Costs Report. f. FAHR03-15 Receive and file report of General Manager approved purchases in amounts exceeding $50,000 in accordance with Board purchasing policies. g. FAHR03-16 Recommend to the Board of Directors to adopt Resolution No. OCSD 03-__, Adopting Policies and Procedures for District’s Records Management Program, Records Retention, and Destruction of Obsolete Records, and Repealing Resolution No. OCSD 02-02. MOTION: It was moved, seconded and duly carried to approve the recommended actions for items specified as 10(a) through (g) under Consent Calendar. END OF CONSENT CALENDAR (11) ACTION ITEMS a. FAHR03-17 Direct staff to revise the 1996 Reserves Policy and to provide the Board with cash flows and sewer user fee projections that incorporate those revisions and the Committee’s preference for a sewer user fee increase program. Gary Streed, Director of Finance/Treasurer, reviewed in depth the District’s current Reserves Policy and various changes that are needed, as well as impacts if the current user rate schedule is raised at a more rapid rate. Minutes of the Finance, Administration and Human Resources Committee Meeting Page 4 March 12, 2003 Randy Fuhrman encouraged Directors to carefully consider escalating the rates more rapidly so that less money would need to be borrowed, and the long-term overall rate would be much less. Directors entered into lengthy discussions of basic philosophies regarding borrowing and reducing the District’s present reserves. Directors requested additional comparisons at various rates be presented the following month. MOTION: It was moved, seconded and duly carried to refer the item back to staff for additional comparisons at various rates. b. FAHR03-18 Recommend to the Board of Directors to: (1) Approve an increase to the Temporary Employment Services contract for an additional $500,000, increasing the total authorized amount from $1,000,000 to an amount not to exceed $1,500,000 for the remainder of FY 02/03; and, (2) Approve an increase to the Temporary Employment Services contract from $1,000,000 to an amount not to exceed $1,750,000 for FY 03/04. Lisa Tomko, Director of Human Resources, briefly reviewed the District’s need for temporary services vs. limited term contract employees. When the program was initially approved, the disinfection of District’s effluent was not known, and regulation changes to industrial waste permits were unknown. Directors requested a comparison of the cost for hiring limited-term employees vs. temporary agencies be included in the future. MOTION: It was moved, seconded and duly carried to recommend approval to the Board of Directors. (12) INFORMATIONAL PRESENTATIONS a. FAHR03-19 Review Director Christy's questions regarding Quarterly Financial Report process from the February Board meeting. Gary Streed, Director of Finance/Treasurer, reviewed the financial reports produced on a quarterly basis by PIMCO and Callan & Associates. The detail not covered in PIMCO’s quarterly report is included in the monthly Treasurer’s Report that the FAHR Committee and the Board of Directors receive monthly. Both Gary Streed and Mike White, Controller, read and closely monitor the monthly reports. Minutes of the Finance, Administration and Human Resources Committee Meeting Page 5 March 12, 2003 (13) CLOSED SESSION The Committee convened in Closed Session at 7:23 p.m. pursuant to Government Code Section 54957.6 to discuss and consider Agenda Item No. 13(a)(1). 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. There was no reportable action taken by the Committee re Agenda Item No. 13(a)(1). RECONVENE IN REGULAR SESSION: At 7:50 p.m., the Committee reconvened in regular session. (14) OTHER BUSINESS, COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY There were none. (15) MATTERS WHICH A DIRECTOR MAY WISH TO PLACE ON A FUTURE AGENDA FOR ACTION AND STAFF REPORT There were none. (16) CONSIDERATION OF UPCOMING MEETINGS The next FAHR Committee meeting is scheduled for April 9, 2003 at 5 p.m. (17) ADJOURNMENT The Chair declared the meeting adjourned at 7:50 p.m. Submitted by: _______________________________ Penny M. Kyle FAHR Committee Secretary G:\wp.dta\agenda\FAHR\FAHR2003\0203\021903 FAHR Minutes.doc March 5, 2003 NOTICE OF MEETING FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE ORANGE COUNTY SANITATION DISTRICT WEDNESDAY, MARCH 12, 2003 - 5:00 P.M. DISTRICT'S ADMINISTRATIVE OFFICES 10844 ELLIS AVENUE FOUNTAIN VALLEY, CALIFORNIA 92708 WWW.OCSD.COM 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. FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE MEETING DATES FAHR Committee Meeting Date Board Meeting Dates March 12, 2003 March 26, 2003 April 9, 2003 April 23, 2003 May 14, 2003 May 28, 2003 June 11, 2003 June 25, 2003 July 9, 2003 July 23, 2003 Dark August 27, 2003 September 10, 2003 September 24, 2003 October 8, 2003 October 22, 2003 November 12, 2003 *November 19, 2003 December 10, 2003 *December 17, 2003 Dark January 28, 2004 February 11, 2004 February 25, 2004 *Meetings being held the third Wednesday of the month. ROLL CALL FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE Meeting Date: March 12 2003 Time: 5:00 p.m. Adjourn: COMMITTEE MEMBERS Brian Brady (Chair) ____ Roy Moore (Vice Chair) ____ Alberta Christy ____ Mike Duvall ____ Mark Leyes ____ Joy L. Neugebauer ____ James W. Silva ____ Shirley McCracken (Board Chair) ____ Steve Anderson (Board Vice Chair) ____ OTHERS Tom Woodruff, General Counsel ____ Steve Filarsky, Special Labor Counsel ____ Don Hughes ____ STAFF Blake Anderson, General Manager ____ David Ludwin, Director of Engineering ____ Bob Ooten, Director of O & M ____ Lisa Tomko, Director of Human Resources ____ Gary Streed, Director of Finance/Treasurer ____ Patrick Miles, Director of Information Technology ____ Robert Ghirelli, Director of Technical Services ____ Carol Beekman, Communications Services Mgr ____ Mike White, Controller ____ Greg Mathews, Administrative Services Manager ____ Jeff Reed, Human Resources Manager ____ Penny Kyle, Committee Secretary ____ c: Lenora Crane AGENDA REGULAR MEETING OF THE FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE ORANGE COUNTY SANITATION DISTRICT WEDNESDAY, MARCH 12, 2003, AT 5:00 P.M. ADMINISTRATIVE OFFICE 10844 Ellis Avenue Fountain Valley, California 92708 www.ocsd.com 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. All current agendas and meeting minutes are also available via Orange County Sanitation District’s Internet site located at www.ocsd.com . Upon entering the District’s web site, please navigate to the Board of Directors section. (1) ROLL CALL (2) APPOINTMENT 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 three 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). March 12, 2003 2 All matters placed on the consent calendar are considered as not requiring discussion or further explanation and unless any particular item is requested to be removed from the consent calendar by a Director or staff member, 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. The Chair will determine if any items are to be deleted from the consent calendar. (4) REPORT OF COMMITTEE CHAIR (5) REPORT OF GENERAL MANAGER (6) REPORT OF DIRECTOR OF FINANCE (7) REPORT OF DIRECTOR OF HUMAN RESOURCES (8) REPORT OF COMMUNICATIONS SERVICES MANAGER (9) REPORT OF GENERAL COUNSEL (10) CONSENT CALENDAR ITEMS Consideration of motion to approve all agenda items appearing on the Consent Calendar not specifically removed from same, as follows: a. Approve minutes of the February 19, 2003 Finance, Administration and Human Resources Committee meeting. b. FAHR03-11 Recommend to the Board of Directors to receive and file Treasurer’s Report for the month of February 2003. The Treasurer’s Report will be distributed 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. c. FAHR03-12 Receive and file Certificate of Participation (COP) Monthly Report. d. FAHR03-13 Receive and file Employment Status Report as of February 27, 2003. e. FAHR03-14 Receive and file OSHA Incidence Rates and Workers’ Compensation Claims and Costs Report. March 12, 2003 3 f. FAHR03-15 Receive and file report of General Manager approved purchases in amounts exceeding $50,000 in accordance with Board purchasing policies. g. FAHR03-16 Recommend to the Board of Directors to adopt Resolution No. OCSD 03-__, Adopting Policies and Procedures for District’s Records Management Program, Records Retention, and Destruction of Obsolete Records, and Repealing Resolution No. OCSD 02-02. END OF CONSENT CALENDAR Consideration of items deleted from Consent Calendar, if any. (11) ACTION ITEMS a. FAHR03-17 Direct staff to revise the 1996 Reserves Policy and to provide the Board with cash flows and sewer user fee projections that incorporate those revisions and the Committee’s preference for a sewer user fee increase program. (Gary Streed – 25 minutes) b. FAHR03-18 Recommend to the Board of Directors to: (1) Approve an increase to the Temporary Employment Services contract for an additional $500,000, increasing the total authorized amount from $1,000,000 to an amount not to exceed $1,500,000 for the remainder of FY 02/03; and, (2) Approve an increase to the Temporary Employment Services contract from $1,000,000 to an amount not to exceed $1,750,000 for FY 03/04. (Jeff Reed – 5 minutes) (12) INFORMATIONAL PRESENTATIONS a. FAHR03-19 Review Director Christy's questions regarding Quarterly Financial Report process from the February Board meeting (Gary Streed - 20 minutes) March 12, 2003 4 (13) CLOSED SESSION During the course of conducting the business set forth on this agenda as a regular meeting of the Committee, the Chair may convene the Committee in closed session to consider matters of pending real estate negotiations, pending or potential litigation, or personnel matters, pursuant to Government Code Sections 54956.8, 54956.9, 54957 or 54957.6, as noted. Reports relating to (a) purchase and sale of real property; (b) matters of pending or potential litigation; (c) employee actions or negotiations with employee representatives; or which are exempt from public disclosure under the California Public Records Act, may be reviewed by the Committee during a permitted closed session and are not available for public inspection. At such time as final actions are taken by the Committee on any of these subjects, the minutes will reflect all required disclosures of information. A. Convene in closed session. 1. Confer with Lisa Tomko, Human Resources Director and Steve Filarsky, Special Labor Counsel, re Meet and Confer Update (Government Code Section 54957.6). B. Reconvene in regular session. C. Consideration of action, if any, on matters considered in closed session. (14) OTHER BUSINESS, COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY (15) MATTERS WHICH A DIRECTOR MAY WISH TO PLACE ON A FUTURE AGENDA FOR ACTION AND STAFF REPORT (16) FUTURE MEETING DATES The next Finance, Administration and Human Resources Committee Meeting is scheduled for April 9, 2003, at 5 p.m. (17) ADJOURNMENT March 12, 2003 5 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: Brian Brady (949) 453-5300 Committee Secretary: Penny Kyle (714) 593-7130 pkyle@ocsd.com General Manager Blake Anderson (714) 593-7110 banderson@ocsd.com Director of Finance Gary Streed (714) 593-7550 gstreed@ocsd.com Director of Human Resources Lisa Tomko (714) 593-7145 ltomko@ocsd.com Administrative Services Manager Greg Mathews (714) 593-7104 gmathews@ocsd.com Communication Services Manager Carol Beekman (714) 593-7120 cbeekman@ocsd.com G:\wp.dta\agenda\FAHR\FAHR2003\0303\03.031203 FAHR Agenda.doc In compliance with the Americans with Disabilities Act, if you need special assistance to participate in this meeting, please contact the Board Secretary’s office at (714) 593-7130 at least 48 hours prior to the meeting to allow the District to make reasonable arrangements to ensure accessibility to this meeting. March 5, 2003 FAHR COMMITTEE AGENDA CALENDAR Month Item Action April Safety Policies Action April Meet & Confer Status Information April Consider Preliminary User Fees for 2003/04 Action April Consider Connection Fees for 2003/04 Action April Consider Issuance of COPs Action April Consider Revised Purchasing/Delegation of Authority Resolution Action May Meet & Confer Status Information May Consider Internal Audit Firm Action May Consider Preliminary 2003/04 Budget Information May Consider 9-month Financial Report Action May Consider Quarterly Investment Management Program Report Action June Meet & Confer Status Information June Consider Final 2003/04 Budget Action June General Manager Approved Purchases Action MINUTES OF FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE MEETING Orange County Sanitation District Wednesday, February 19, 2003, 4:30 p.m. A meeting of the Finance, Administration and Human Resources Committee of the Orange County Sanitation District was held on February 19, 2003, at 4:30 p.m., in the District's Administrative Office. (1) The roll was called and a quorum declared present, as follows: FAHR COMMITTEE MEMBERS: Directors Present: Brian Brady, Chair Roy Moore, Vice Chair Alberta Christy Mike Duvall Mark Leyes Joy Neugebauer Shirley McCracken, Board Chair Steve Anderson, Vice Board Chair Directors Absent: James W. Silva STAFF PRESENT: Blake P. Anderson, General Manager Gary Streed, Director of Finance/Treasurer Lisa Tomko, Director of Human Resources Carol Beekman, Communications Services Manager Mike White, Controller Penny Kyle, Committee Secretary OTHERS PRESENT: Thomas L. Woodruff, General Counsel Steve Filarsky, Special Labor Counsel Don Hughes Toby Weissert John Bartel Bob Lockhart Randy Fuhrman Gerhardt Van Drie (2) APPOINTMENT OF CHAIR PRO TEM No appointment was necessary. (3) PUBLIC COMMENTS Gerhardt Van Drie requested the Directors read his letter that he distributed that evening regarding various water issues. Randy Fuhrman requested he be allowed to speak prior to the consideration of Item 12(b). (4) CLOSED SESSION The Committee convened in Closed Session at 4:40 p.m. pursuant to Government Code Sections 54956.9 and 54957.6 to discuss and consider Agenda Item Nos. 4(a)(1), (2) and (3). Confidential Minutes of the Closed Session held by the Finance, Administration and Human Minutes of the Finance, Administration and Human Resources Committee Meeting Page 2 February 19, 2003 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. There were no reportable actions taken by the Committee re Agenda Item Nos. 4(a)(1), (2) and (3). RECONVENE IN REGULAR SESSION: At 6:02 p.m., the Committee reconvened in regular session. (5) REPORT OF THE COMMITTEE CHAIR The Chair had no report. (6) REPORT OF THE GENERAL MANAGER The General Manager had no report. (7) REPORT OF DIRECTOR OF FINANCE The Director of Finance had no report. (8) REPORT OF DIRECTOR OF HUMAN RESOURCES The Director of Human Resources had no report. (9) REPORT OF COMMUNICATIONS SERVICES MANAGER Carol Beekman, Communications Services Manager, reported that the Directors’ Orientation immediately following the FAHR Committee meeting would be held in a game format and encouraged the Directors to attend. Ms. Beekman reported that the advertising program for the Groundwater Replenishment System project has been launched by release of a television commercial to be shown on various channels as well as flyers that were mailed to over 700,000 residences. An update on the community outreach for the Bushard Trunk Sewer Replacement project noted approximately 12,500 invitations were mailed for an open house held at Plant 2 in November. Additional letters will continue to be delivered to the directly impacted businesses and residents as the project progresses. Also noted was the Warner Avenue Relief Sewer Project outreach. Information and an invitation to attend an open house in March in the vicinity of the construction project were scheduled to be mailed by the end of the month. (10) REPORT OF GENERAL COUNSEL General Counsel had no report. Minutes of the Finance, Administration and Human Resources Committee Meeting Page 3 February 19, 2003 (11) CONSENT CALENDAR ITEMS a. The Chair ordered that the December 11, 2002 minutes for the Finance, Administration and Human Resources Committee meeting be deemed approved, as mailed. b. FAHR03-01 Recommend to the Board of Directors to receive and file Treasurer’s Report for the month of January 2003. c. FAHR03-02 Receive and file Certificate of Participation (COP) Monthly Report. d. FAHR03-03 Receive and file Employment Status Report as of January 29, 2003. e. FAHR03-04 Receive and file OSHA Incidence Rates and Workers’ Compensation Claims and Costs Report. f. FAHR03-05 Recommend to the Board of Directors to receive and file the Mid-Year Financial Report for the period ending December 31, 2002. g. FAHR03-06 Recommend to the Board of Directors to receive and file Quarterly Investment Management Program Report for the period October 1, 2002 through December 31, 2002. h. FAHR03-07 Recommend to the Board of Directors to adopt Resolution No. OCSD 03-__, Amending Resolution No. OCSD 98-33, Amending Human Resources and Policies Procedures Manual. i. FAHR03-08 Recommend to the Board of Directors to approve SAFETY-POL-205 – Electrical Safety Policy, as provided for in Resolution No. OCSD 02-5, regarding the District’s Injury and Illness Prevention Program Policy. MOTION: It was moved, seconded and duly carried to approve the recommended actions for items specified as 11(a) through (g) under Consent Calendar. END OF CONSENT CALENDAR (12) ACTION ITEMS a. FAHR03-09 1) Consider a policy regarding issues surrounding Sewer Service User Fee Database adjustments and fee collections; and, 2) Determine if staff will solicit competitive bids or award a sole source contract to Revenue Enhancement Group to review non-residential parcels to provide some or all services related to collecting the appropriate sewer service fees, and to provide corrected sewer service fees for the 2003/04 property tax bills, for $2,500,000 plus or minus performance adjustments. Minutes of the Finance, Administration and Human Resources Committee Meeting Page 4 February 19, 2003 Gary Streed briefly outlined the policy issues that need to be resolved regarding the District’s use of the County Auditor’s database to collect sewer service fees. Bob Lockhart of Revenue Enhancement Group indicated his proposal to review non-residential parcels and all services related to collecting the appropriate sewer service fees was flexible. Directors entered into discussion and expressed concern for the average consumer/business and the impact of imposing/collecting underpayment for the last four years, concern that those users who have been overcharged be treated the same as those who have been undercharged, and concern that there was not a competitive selection process. It was moved and seconded to authorize the consultant’s work but wait until the amount or impact is known to decide about past undercharges, and overcharges, to include negotiation on consultant costs prior to the February 26, 2003 Board of Directors meeting. The motion failed by a 4/4 vote. MOTION: It was moved, seconded and duly carried to refer the item back to staff for additional information to include similar programs in place by other agencies. b. FAHR03-10 Direct staff to revise the 1996 Reserves Policy and to provide the Board with cash flows and sewer user fee projections that incorporate those revisions and the Committee’s preference for a sewer user fee increase program. This item was deferred to the March 12, 2003 meeting due to time constraints. (13) INFORMATIONAL PRESENTATIONS There were none. (14) OTHER BUSINESS, COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY There were none. (15) MATTERS WHICH A DIRECTOR MAY WISH TO PLACE ON A FUTURE AGENDA FOR ACTION AND STAFF REPORT There were none. (16) CONSIDERATION OF UPCOMING MEETINGS The next FAHR Committee meeting is scheduled for March 12, 2003 at 5 p.m. Minutes of the Finance, Administration and Human Resources Committee Meeting Page 5 February 19, 2003 (17) ADJOURNMENT The Chair declared the meeting adjourned at 7:05 p.m. Submitted by: _______________________________ Penny M. Kyle FAHR Committee Secretary G:\wp.dta\agenda\FAHR\FAHR2003\0203\021903 FAHR Minutes.doc \\FILER-1\ocsd\dept\gmo\120\BS\Agenda\Archived-agenda\Archived Committees\FAHR\2003\FAHR2003 drafts\0303\06.03-11.Treasurer Rpt.doc Page 1 FAHR COMMITTEE Meeting Date 03/12/03 To Bd. of Dir. 03/26/03 AGENDA REPORT Item Number FAHR03-11 Item Number Orange County Sanitation District FROM: Gary Streed, Director of Finance Originator: Michael White, Controller SUBJECT: TREASURER’S REPORT FOR THE MONTH OF FEBRUARY 2003 GENERAL MANAGER'S RECOMMENDATION Receive and file Treasurer’s Report for the month of February 2003. SUMMARY Pacific Investment Management Co. (PIMCO), serves as the District’s professional external money manager, and Mellon Trust serves as the District’s third-party custodian bank for the investment program. Some funds are also deposited in the State of California Local Agency Investment Fund for liquidity. The District’s Investment Policy, adopted by the Board, includes reporting requirements as listed down the left most column of the attached PIMCO Monthly Report for the “Liquid Operating Monies” and for the “Long-Term Operating Monies” portfolios. The District’s external money manager is operating in compliance with the requirements of the District’s Investment Policy. The District’s portfolio contains no reverse repurchase agreements. As shown on page 2 of the attached PIMCO’s Performance Monitoring and Reporting Report for of the Long-Term Operating Monies, there is an investment policy compliance issue pertaining to the holding of a security that had an acceptable rating at the time of purchase but have since fallen below the minimum rating allowed by the investment policy. The District’s investment policy requires a minimum rating of A3 by Moody’s or A- by S&P, with at least a BBB rating in the event of a split rating, at the time of purchase. The compliance issue pertains to the holding of a United Airlines (UAL) Asset Backed Security with a par value of $1.6 million, representing 0.5 percent of the portfolio holdings, whose rating from Moody’s has fallen several times, from A3 to BA1, then to BA3, and finally to B3. Likewise, the rating from Standard & Poor’s has also fallen several times, first from A- to BBB, then to BB, then to B+, and finally to B-. Although these ratings are less than what is required at the time of purchase, PIMCO believes, based on the financial strength of UAL and the underlying collateral of the security, that the District would suffer an unwarranted loss if this security was sold. The District’s investment policy does not require any action because of "credit watch" notices or the decline in credit standing. PIMCO will continue to monitor the credit very closely. Historical cost and current market values are shown as estimated by both PIMCO and Mellon Trust. The District’s portfolios are priced to market (“mark-to-market”) as of the last day of each reporting period. The slight differences in value are related to minor variations in pricing assumptions by the valuation sources at the estimate date. \\FILER-1\ocsd\dept\gmo\120\BS\Agenda\Archived-agenda\Archived Committees\FAHR\2003\FAHR2003 drafts\0303\06.03-11.Treasurer Rpt.doc Page 2 BUDGET IMPACT This item has been budgeted. (Line item: ) This item has been budgeted, but there are insufficient funds. This item has not been budgeted. Not applicable (information item) ADDITIONAL INFORMATION Schedules are attached summarizing the detail for both the short-term and long-term investment portfolios for the reporting period. In addition, a consolidated report of posted investment portfolio transactions for the month is attached. The attached yield analysis report is presented as a monitoring and reporting enhancement. In this report, yield calculations based on book values and market values are shown for individual holdings, as well as for each portfolio. Mellon Trust, the District’s custodian bank, is the source for these reports. Transactions that were pending settlement at month end may not be reflected. Also provided is a summary of monthly investment balances and transactions within the State of California Local Agency Investment Fund (LAIF). These reports accurately reflect all District investments and are in compliance with California Government Code Section 53646 and the District’s Investment Policy. Sufficient liquidity and anticipated revenues are available to meet budgeted expenditures for the next six months. The following table details the book balances of the District’s investment accounts at month-end. A graphical representation of month-end balances is shown on the attached bar chart. Investment Accounts Book Balances February 28, 2002 Estimated Yield (%) State of Calif. LAIF Union Bank Checking Account PIMCO – Short-term Portfolio PIMCO - Long-term Portfolio Petty Cash TOTAL Debt Service Reserves w/Trustees $ 8,984,844 1,482,212 64,024,663 321,784,096 5,000 $396,280,815 $34,705,244 1.95 1.19 1.61 2.43 N/A 2.27 4.34 ATTACHMENTS 1. Graph of Monthly Investment Balances by Type – Last Six Months 2. Investment Transactions and Balances in the State Local Agency Investment Fund 3. PIMCO Monthly Investment Recap & Yield Analysis Report 4. PIMCO Performance Monitoring Report – Liquid Operating Monies 5. PIMCO Performance Monitoring Report – Long-Term Operating Monies 6. Mellon Trust Net Asset Sector Summary – Liquid Operating Monies 7. Mellon Trust Net Asset Sector Summary – Long-Term Operating Monies 8. Mellon Trust Yield Analysis Report 9. Mellon Trust Portfolio Detail - Consolidated MW FAHR COMMITTEE Meeting Date 03/12/03 To Bd. of Dir. AGENDA REPORT Item Number FAHR03-12 Item Number Orange County Sanitation District FROM: Gary G. Streed, Director of Finance Originator: Michael D. White, Controller SUBJECT: CERTIFICATES OF PARTICIPATION (COP) MONTHLY REPORT – FEBRUARY 2003 GENERAL MANAGER'S RECOMMENDATION Receive and file Certificates of Participation (COP) Monthly Report for the month of February 2003. SUMMARY The District began issuing Certificates of Participation (COPs) on a variable interest rate basis in 1990. These variable rate COPs were a part of our long-term financing plan which also included some more traditional fixed rate borrowing. In 1992 and 1993, some of the fixed rate COPs were refunded and replaced with synthetic-fixed rate COPs. These are variable interest rate COPs that are also subject to a long-term fixed-rate interest exchange agreement (SWAP). The SWAP provides the maximum interest rate to be paid by the District, and is less costly than traditional fixed rate borrowing. In August 2000, the entire financing program was restructured and modernized to incorporate and take advantage of the consolidation of District books of account and revenue structure. This process has reduced the number of COP issues from five to three; 1992 Refunding COPs, 1993 Refunding COPs and 2000 Refunding COPs. The 2000 COPs can be divided into Series A and Series B, if additional remarketing agents are desired. Variable interest rate COPs can be put back on the market by the buyer each day. When this happens, they must be remarketed or sold to another buyer. This process, called remarketing, is generally provided by a municipal bond underwriter. The remarketing agent sets the interest rate they believe is required to sell the COPs. Some issuers believe that having more than one remarketing agent promotes competition and results in lower interest costs. Staff has monitored variable interest rate issues of other agencies since the inception of our program. The attached charts are described in the "Additional Information" section of this agenda report. They are provided monthly to compare our actual interest rates to a composite index, and to other selected issuers of similar credit quality, and with COP issues of similar amounts. Many variables affect interest rates, but staff expects our rates to be among the lowest. PROJECT/CONTRACT COST SUMMARY N/A \\FILER-1\ocsd\dept\gmo\120\BS\Agenda\Archived-agenda\Archived Committees\FAHR\2003\FAHR2003 drafts\0303\07.03-12.COP.DOC Revised: 8/20/01 Page 2 BUDGET IMPACT This item has been budgeted. (Line item: ) This item has been budgeted, but there are insufficient funds. This item has not been budgeted. Not applicable (information item) ADDITIONAL INFORMATION The first graph entitled, "OCSD COP Rate History Report,” shows the actual variable interest rates paid 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 "swap." 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 tend to 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 may occur. ALTERNATIVES N/A CEQA FINDINGS N/A ATTACHMENTS 1. Graph - OCSD COP Daily Rate History Report 2. Graph - Comparative Daily COP Rate History Report 3. Graph - COP Rate History, Comparison of Highest & Lowest Rates 4. Tabular - COP Rate History, Comparison of Monthly Averages GGS:MW:lc OCSD COP DAILY RATE HISTORY REPORT FEBRUARY 2003 0 1 2 3 4 5 6 6- M a r - 0 2 20 - M a r - 0 2 3- A p r - 0 2 17 - A p r - 0 2 1- M a y - 0 2 15 - M a y - 0 2 29 - M a y - 0 2 12 - J u n - 0 2 26 - J u n - 0 2 10 - J u l - 0 2 24 - J u l - 0 2 7- A u g - 0 2 21 - A u g - 0 2 4- S e p - 0 2 18 - S e p - 0 2 2- O c t - 0 2 16 - O c t - 0 2 30 - O c t - 0 2 13 - N o v - 0 2 27 - N o v - 0 2 11 - D e c - 0 2 25 - D e c - 0 2 8- J a n - 0 3 22 - J a n - 0 3 5- F e b - 0 3 19 - F e b - 0 3 DATE RA T E ( % ) PaineWebber 93 PW 2000AIG Swap SocGen Swap \\FILER-1\ocsd\dept\gmo\120\BS\Agenda\Archived-agenda\Archived Committees\FAHR\2003\FAHR2003 drafts\0303\07.03-12.COP.DOC Revised: 8/20/01 Page 4 \\FILER-1\ocsd\dept\gmo\120\BS\Agenda\Archived-agenda\Archived Committees\FAHR\2003\FAHR2003 drafts\0303\07.03-12.COP.DOC Revised: 8/20/01 Page 5 COP RATE HISTORYCOMPARISON OF HIGHEST & LOWEST RATES 0.75 1 1.25 1.5 Sep, 02 Oct, 02 Nov, 02 Dec, 02 Jan, 03 Feb, 03HIGHLOW RATE ( % ) Highest rate OCSD/PW 2000 OCSD/PaineWebber Lowest rate \\FILER-1\ocsd\dept\gmo\120\BS\Agenda\Archived-agenda\Archived Committees\FAHR\2003\FAHR2003 drafts\0303\07.03-12.COP.DOC Revised: 8/20/01 Page 6 OCSD $218.6M $46M Series 2000 Series 93 Ref Composite PaineWebber PaineWebber Index * Mar-02 1.24 1.24 1.25 Apr-02 1.31 1.31 1.31 May-02 1.47 1.47 1.45 Jun-02 1.34 1.34 1.36 Jul-02 1.20 1.20 1.19 Aug-02 1.24 1.24 1.23 Sep-02 1.39 1.39 1.40 Oct-02 1.61 1.61 1.60 Nov-02 1.33 1.33 1.32 Dec-02 1.05 1.05 1.04 Jan-03 0.85 0.85 0.85 Feb-03 1.05 1.05 1.04 AVERAGE 1.26%1.26%1.25% ESTIMATED ANNUAL INTEREST PAYMENTS PER $100M PAR AMOUNT 1,256,667$ 1,256,667$ 1,253,333$ * FOOTNOTE Composite index consists of the following COP transactions: .IRWD, Series 86-COP, 88, 95, $106.1M, Solomon Smith Barney .IRWD, Series C-Ref 93-B, 85-B, $62.1M, Lehman Brothers .IRWD, Series 91, 93, 85, $93.0M, PaineWebber .IRWD, Series 89, C-Ref 93-A, C-Ref 95, $70.9M, Merrill Lynch .Western Riverside Co. Reg. Wastewater Auth., Series 96, $25.4M, PaineWebber .Orange Co., Irvine Coast Asst. Dist. 88-1, $94.5M, J.P. Morgan \\FILER-1\ocsd\dept\gmo\120\BS\Agenda\Archived-agenda\Archived Committees\FAHR\2003\FAHR2003 drafts\0303\08.03-13.Employment Status.doc Revised: 8/20/98 Page 1 FAHR COMMITTEE Meeting Date 3/12/03 To Bd. of Dir. AGENDA REPORT Item Number FAHR03-13 Item Number Orange County Sanitation District FROM: Lisa Tomko, Director of Human Resources & Employee Development Originator: John Weingarden, Human Resources Analyst SUBJECT: EMPLOYMENT STATUS REPORT AS OF FEBRUARY 27, 2003. GENERAL MANAGER'S RECOMMENDATION Receive and file the Employment Status Report. SUMMARY Total FTE headcount at the District as of FEBRUARY 27, 2003 was 535.5. PROJECT/CONTRACT COST SUMMARY Not applicable. BUDGET IMPACT This item has been budgeted. (Line item: ) This item has been budgeted, but there are insufficient funds. This item has not been budgeted. Not applicable (information item) ADDITIONAL INFORMATION The District had a full-time equivalent (FTE) headcount of 535.5 as of FEBRUARY 27, 2003. The actual number of employees was 545. There were no promotions during the month of February. There were four new employees hired during the month of February. • Associate Engineer III (Planning) • Maintenance Worker (Collection Facilities Maintenance) • Intern (Air Quality and Special Projects) • Intern (Environmental Sciences Lab) \\FILER-1\ocsd\dept\gmo\120\BS\Agenda\Archived-agenda\Archived Committees\FAHR\2003\FAHR2003 drafts\0303\08.03-13.Employment Status.doc Revised: 8/20/98 Page 2 ALTERNATIVES Not applicable. CEQA FINDINGS Not applicable. ATTACHMENTS February 27, 2003 Employment Status Report. Performance compared to 02-03 Budget FTE’s. Commented [JT1]: List attachments that are going "To the (which) Committee." Separately, under the heading "To the Joint Boards" notethose documents that will be sent to the Directors. \\FILER-1\ocsd\dept\gmo\120\BS\Agenda\Archived-agenda\Archived Committees\FAHR\2003\FAHR2003 drafts\0303\08.03-13.Employment Status.doc Revised: 8/20/98 Page 3 2/27/2003 A B C D E F G H I J K L M N ORegularRegularActualBudgetLimitedContractInternsActualBudgetActualRegularPart-time Part-time Reg FTE Reg FTE Term Workers Total Contingent Description + Full-time 20 hours 30 hours LOA Count 01-02 Other 02-03 of Changes Budget Description No.Recrtmnts∑ (∪A : D )∑ (∪G : I )E + J + N 110 - General Management Admin 2.00 0.00 0.00 0.00 2.00 2.00 0.00 0.00 0.00 0.00 0.00 2.00 120 - Administrative Services 7.00 0.50 0.00 1.00 8.50 9.00 0.00 0.00 0.00 0.00 0.00 8.50 130 - Communications Services 6.00 0.00 0.00 0.00 6.00 6.00 0.00 0.00 0.00 0.00 0.00 6.00 General Management Totals 15.00 0.50 0.00 1.00 16.50 17.00 0.00 0.00 0.00 0.00 0.00 0.00 16.50 210 - Finance Administration 2.00 0.00 0.00 0.00 2.00 2.00 0.00 0.00 0.00 0.00 0.00 2.00 220 - Accounting 16.00 0.00 0.75 0.00 16.75 17.00 0.00 0.00 0.00 0.00 0.00Position Downgrade 16.75 230 - Purchasing & Warehousing 17.00 1.00 0.00 0.00 18.00 19.50 0.00 0.00 0.00 0.00 0.00 Ctrct Admin, Strkpr Assist 2.00 20.00Finance Totals 35.00 1.00 0.75 0.00 36.75 38.50 0.00 0.00 0.00 0.00 0.00 2.00 38.75 510 - HR Department Administration 3.00 0.00 0.00 0.00 3.00 2.00 0.00 0.00 3.50 3.50 7.60Realloc Manager 1.00 Sr HR Analyst 1.00 7.50 520 - Employee Development 1.00 0.00 0.00 0.00 1.00 5.05 0.00 0.00 0.00 0.00 0.00Realloc Mgr to 510 -0.30 Training Spvsr 1.00 2.00 530 - Safety & Health 7.00 0.00 0.00 0.00 7.00 7.30 0.00 0.00 0.00 0.00 0.00Realloc Mgr to 510 -0.30 7.00 540 - Human Resources 6.00 0.00 0.00 0.00 6.00 6.40 0.00 0.00 0.00 0.00 0.00Realloc Mgr to 510 -0.40HR Assist, P/T Office Assist 1.75 7.75 Human Resources Totals 17.00 0.00 0.00 0.00 17.00 20.75 0.00 0.00 3.50 3.50 7.60 0.00 3.75 24.25 610 - Technical Services Admin 2.00 0.00 0.00 0.00 2.00 2.00 0.00 0.00 0.00 0.00 0.00 2.00 620 - Environmental Compl. & Monit.18.00 0.00 0.00 0.00 18.00 22.00 0.00 0.00 0.00 0.00 0.20Reg Spec to 640 (7/26)-1.00 Sr. Env. Spec.1.00 19.00 630 - Environmental Laboratory 32.00 2.00 0.00 0.00 34.00 34.00 0.00 0.00 0.00 0.00 0.00 34.00 640 - Source Control 35.00 0.00 0.00 0.00 35.00 36.00 0.00 0.00 0.00 0.00 0.00Reg Spec from 620 (7/26)1.00 Source Control Sprvsr 1.00 36.00 Technical Services Totals 87.00 2.00 0.00 0.00 89.00 94.00 0.00 0.00 0.00 0.00 0.20 0.00 2.00 91.00 710 - Engineering Administration 3.00 0.00 0.00 0.00 3.00 3.00 0.00 0.00 0.00 0.00 0.00 3.00 740 - Planning 12.00 0.00 0.00 0.00 12.00 14.00 0.00 0.00 0.00 0.00 0.00 Engineer 1.00 13.00 750 - Project Management Office 11.00 0.00 1.50 0.00 12.50 15.75 0.00 0.00 0.00 0.00 0.00J. Harris to 760 / see 620 -1.00 12.50 760 - Engineering & Construction 41.00 0.00 0.00 2.00 43.00 44.00 2.00 0.00 0.00 2.00 2.00J. Harris from 750 1.00 Eng (2), Assoc. Eng III 3.00 48.00 Engineering Totals 67.00 0.00 1.50 2.00 70.50 76.75 2.00 0.00 0.00 2.00 2.00 4.00 76.50 810 - O & M Administration 2.00 0.00 0.00 0.00 2.00 2.00 0.00 0.00 0.00 0.00 0.00 2.00 420 - Collection Facilities Mtce 23.00 0.00 0.00 0.00 23.00 24.00 0.00 0.00 0.00 0.00 0.00 Maint. Worker 1.00 24.00 430 - Facilities Maintenance 27.00 0.00 0.00 1.00 28.00 30.00 0.00 0.00 0.00 0.00 0.00 Lead & Mech, Ld. Fac. Wrkr 3.00 31.00 820 - O & M Process Support 10.00 0.00 0.00 0.00 10.00 10.00 0.00 0.50 0.00 0.50 2.50 Engineer 1.00 11.50 830 - Plant 1 Operations 35.00 0.00 0.75 0.00 35.75 37.50 0.00 0.00 0.00 0.00 0.00 35.75 840 - Plant 2 Operations 47.00 0.00 0.00 0.00 47.00 44.50 0.00 0.00 0.00 0.00 0.00 47.00 850 - Mechanical Mtce 55.00 0.00 0.00 0.00 55.00 55.50 0.00 0.00 0.00 0.00 0.00 Lead PPO 1.00 56.00 860 - Electrical & Instrumentation Mtce 53.00 0.00 0.00 0.00 53.00 54.50 0.00 0.00 0.00 0.00 0.00 Elect. Tech II 1.00 54.00 880 - Air Quality & Special Projects 10.00 0.00 0.00 0.00 10.00 10.00 0.00 0.00 0.00 0.00 0.00 10.00 Operations & Maintenance Totals 262.00 0.00 0.75 1.00 263.75 268.00 0.00 0.50 0.00 0.50 2.50 7.00 271.25 910 - IT Admin 2.00 0.00 0.00 0.00 2.00 2.00 0.00 0.00 0.00 0.00 0.00 2.00 930 - Customer & Network Support 13.00 0.00 0.00 1.00 14.00 15.00 0.00 0.00 0.00 0.00 0.00 Sr. IT Analyst 1.00 15.00 940 - Programming & Database Sys 10.00 0.00 0.00 0.00 10.00 12.00 0.00 0.00 0.00 0.00 0.00 10.00 950 - Process Controls Integration 10.00 0.00 0.00 0.00 10.00 11.00 0.00 0.00 0.00 0.00 0.00 10.00 Information Technology Totals 35.00 0.00 0.00 1.00 36.00 40.00 0.00 0.00 0.00 0.00 0.00 1.00 37.00 Staffing Totals 518.00 3.50 3.00 5.00 529.50 555.00 2.00 0.50 3.50 6.00 12.30 19.75 555.25*Detail on "Recruitments pending, but not offered" shown under Current Recruitments / Description.* *Detail on "Offers Outstanding" shown bold/shaded under Current Recruitments / Number.* * *Temporary employees from outside agencies not included.* * * *Additional Detail on Mid-year changes shown only on electronic version of report. Bold recruitments Regular Staff Contingent Workers Mid-year Changes Recruitments below have been offered All Current Recruitments \\FILER-1\ocsd\dept\gmo\120\BS\Agenda\Archived-agenda\Archived Committees\FAHR\2003\FAHR2003 drafts\0303\08.03-13.Employment Status.doc Revised: 8/20/98 Page 4 Performance to Staffing Plan 460 480 500 520 540 560 580 J A S O N D J F M A M J J A S O N D J F M A M J J FTE Headcount Staffing Plan Safety Division DART Cases District-Wide There have been no DART Cases in January 2003. (DART – Days Away, Restricted or Transfer; replaces Lost Work Day.) DART Cases 05 1015 2025 1999 2000 2001 2002 2003 Calendar Year Nu m b e r o f C a s e s OSHA Incidence Rates District-Wide The industry average is 6.4 and the DART Incidence Rate for the district is 0.00 for January 2003. The OSHA rate is calculated by multiplying the number of injuries by 200,000 and dividing the sum by total hours worked. The rate is also based on the data for the calendar year so the rate will change as the number of hours worked increases. OSHA Incidence Rates DART Cases 0.00 1.00 2.00 3.004.00 5.00 1999 2000 2001 2002 2003 Calendar Year In c i d e n c e R a t e Total Injuries District-Wide There have been two OSHA Recordable Accidents for January 2003. Total OSHA Recordable Accidents 0 20 40 60 1999 2000 2001 2002 2003 Calendar Year N u m b e r o f Ac c i d e n t s OSHA Incidence Rates District-Wide The Total Injury Frequency Rate is a combination of the DART Cases and the cases that require Other Medical Treatment. The industry average for Total Injury Frequency rate is 9.9 and the district rate is 4.62 for January 2003. First Aid cases are not included in the calculation of this rate. OSHA Incidence Rate Total Injuries 0.00 2.00 4.00 6.00 8.00 10.00 1999 2000 2001 2002 2003 Calendar Year In c i d e n c e R a t e Workers Compensation Claims and Costs The Workers Compensation Claims and Cost are reported by fiscal year. The DART and Total Injury graphs shown above are calendar year rates as required for OSHA recordkeeping. All claims and medical invoices are reviewed by a third party to ensure that proper medical treatment is provided for injured employees and the costs for the treatment are within established guidelines. The medical bills reviewed July 2002 - January 2003 totaled $173,550.66. Medical treatment costs are charged to the fiscal year in which the injury occurred. All open claims have the potential to incur additional cost. After the medical review process, the amount was reduced to $93,501.03, which resulted in savings of $80,049.63 for the current fiscal year. Workers Compensation Claims and Costs Fiscal Period Claim Count Open Claims Total Incurred 7/1/85 - 6/30/86 38 0 $270,712 7/1/86 - 6/30/87 53 0 $99,933 7/1/87 - 6/30/88 51 0 $173,583 7/1/88 - 6/30/89 41 0 $153,481 7/1/89 - 6/30/90 61 1 $292,151 7/1/90 - 6/30/91 76 0 $121,978 7/1/91 - 6/30/92 58 1 $205,094 7/1/92 - 6/30/93 58 0 $93,198 7/1/93 - 6/30/94 47 0 $217,922 7/1/94 - 6/30/95 46 0 $276,359 7/1/95 - 6/30/96 46 1 $191,323 7/1/96 - 6/30/97 36 1 $377,924 7/1/97 - 6/30/98 45 1 $818,839 7/1/98 - 6/30/99 38 3 $542,359 7/1/99 - 6/30/00 43 5 $359,310 7/1/00 – 6/30/01 32 5 $327,635 7/1/01 – 6/30/02 30 9 $179,595 7/1/02 – 6/30/03 11 5 YTD $29,736 “Total Incurred” includes medical bills, temporary disability payments to employees, legal costs, and a claim reserve account. FAHR COMMITTEE Meeting Date 03/12/03 To Bd. of Dir. AGENDA REPORT Item Number FAHR03-14 Item Number Orange County Sanitation District FROM: Lisa Tomko, Director of Human Resources & Employee Development Originator: Karen Turnbaugh, Human Resources Assistant SUBJECT: OSHA Incidence Rates and Workers’ Compensation Claims and Costs Report GENERAL MANAGER'S RECOMMENDATION Receive and file the OSHA Incidence Rates and Workers’ Compensation Claims and Costs Report. SUMMARY Safety and Health Division staff track OSHA Incidence Rates for DART * Cases (DART Incidence Rate) and Total Accidents (Total Injury Frequency Rate). There were no DART Cases District-wide for the period of January 2003. The industry average is 6.4 for the DART Case Incidence Rate while the District Incident Rate is 0.00 for the period of January 2003. There have been two OSHA Recordable Accidents District-wide for the period of January 2003. The industry average is 9.9 for the Total Injury Frequency Rate while the District Incident Rate is 4.62 for the period of January 2003. * DART is an acronym that stands for Days Away, Restricted, or Transfer and replaces the phrase Lost Workday. The Division also tracks the District’s Workers’ Compensation Claims and Costs. The District’s claim count for Fiscal Year 2002-2003 is 11. Five of these claims are still open. The costs associated with these claims for year-to-date is $29,736.88, which includes medical bills, temporary disability payments, legal costs and a claim reserve account. PROJECT/CONTRACT COST SUMMARY Not applicable. BUDGET IMPACT This item has been budgeted. (Line item: ) This item has been budgeted, but there are insufficient funds. This item has not been budgeted. Not applicable (information item) \\FILER-1\ocsd\dept\gmo\120\BS\Agenda\Archived-agenda\Archived Committees\FAHR\2003\FAHR2003 drafts\0303\09.03-14.OSHA Report.doc Revised: 8/20/01 Page 2 ADDITIONAL INFORMATION The District had no DART cases and two other injuries that required medical treatment for the period of January 2003. The reporting period is for 45 days prior to committee meeting. ALTERNATIVES Not applicable. CEQA FINDINGS Not applicable. ATTACHMENTS OSHA Incidence Rates Reports for DART Cases and Total Injuries. Worker’s Compensation Claims and Costs. \\FILER-1\ocsd\dept\gmo\120\BS\Agenda\Archived-agenda\Archived Committees\FAHR\2003\FAHR2003 drafts\0303\10.03-15.GM Purchases.doc Revised: 8/20/01 Page 1 FAHR COMMITTEE Meeting Date 3/12/03 To Bd. of Dir. AGENDA REPORT Item Number FAHR03-15 Item Number Orange County Sanitation District FROM: Marc Dubois, Contracts / Purchasing Manager SUBJECT: GENERAL MANAGER APPROVED PURCHASES FOR THE QUARTER ENDED DECEMBER 31, 2002 GENERAL MANAGER'S RECOMMENDATION Receive and file report of General Manager approved purchases in amounts exceeding $50,000 in accordance with Board purchasing policies. SUMMARY In May 1998, the FAHR Committee and the Board approved changes to the staff purchasing authority. One of the changes was to increase the dollar threshold before Board authority was required for purchases of goods or services, excluding public works purchases, to $100,000. When approving this change, the Committee asked for periodic reports showing purchases approved by the General Manager for amounts between $50,000 and $100,000. Subsequent to receiving the initial report, the Committee requested that future reports be placed on the Consent Calendar. The following table includes the reportable purchases for the quarter ended December 31, 2002. Vendor Name Amount Description/Discussion The Lewis Group $98,300 Consulting services for Phase 3 of CPMP South Coast Environmental Co. $95,000 Air quality monitoring services Southern Counties Oil Co. $75,000 Blanket order for diesel fuel #2 Precision Industrial Tooling Co. $86,920 Purchase of Clausing lathe, drill, and vertical saw Ark Technologies $60,000 Provide hosting of OCSD’s portion of the County of Orange tax assessment system. Section 2.03 A.1 of Resolution 99-23, the District’s Delegation of Authority Resolution, authorizes the General Manager to purchase items that have been previously authorized by the Board as identified in the annual District budget. During the budget adoption process, the lists of these items were highlighted for the Directors. For these reasons, purchases that fell into these categories are not included in this report. PROJECT/CONTRACT COST SUMMARY N/A \\FILER-1\ocsd\dept\gmo\120\BS\Agenda\Archived-agenda\Archived Committees\FAHR\2003\FAHR2003 drafts\0303\10.03-15.GM Purchases.doc Revised: 8/20/01 Page 2 BUDGET IMPACT This item has been budgeted. (Line item: ) This item has been budgeted, but there are insufficient funds. This item has not been budgeted. Not applicable (information item) ADDITIONAL INFORMATION N/A ALTERNATIVES N/A CEQA FINDINGS N/A ATTACHMENTS None. MD \\FILER-1\ocsd\dept\gmo\120\BS\Agenda\Archived-agenda\Archived Committees\FAHR\2003\FAHR2003 drafts\0303\11.03-16.Records Management.doc Revised: 8/10/98 Page 1 FAHR COMMITTEE Meeting Date 03/12/03 To Bd. of Dir. 03/26/03 AGENDA REPORT Item Number FAHR03-16 Item Number Orange County Sanitation District FROM: Juanita Skillman, CRM Records Manager SUBJECT: UPDATE OF THE DISTRICT RECORDS MANAGEMENT POLICY AND PROCEDURES GENERAL MANAGER'S RECOMMENDATION Adopt Resolution 03-__, Adopting Policies and Procedures for the District’s Records Management Program, Records Retention, and Destruction of Obsolete Records, and Repealing Resolution No. OCSD 02-02. SUMMARY The District’s Records Management Program, has been updated to better serve the operational needs of the District. This update will incorporate the Policy on Release and Reproduction of District Records into the Records Management Procedure Manual. It also adds two record series to the retention schedule: Series 245 – Public Comment Files, and Series 246 – IT Backup Tapes. PROJECT/CONTRACT COST SUMMARY N/A BUDGET IMPACT This item has been budgeted. (Line item: ) This item has been budgeted, but there are insufficient funds. This item has not been budgeted. Not applicable (information item) ADDITIONAL INFORMATION The District’s Records Management Program is a dynamic document and the attachment reflects proposed additions and/or changes in BOLD/ITALICS. These changes have been worked out and reviewed with and approved by General Counsel’s office. Commented [JT1]: Named individuals shall initial Agenda Report before submitting to Committee/Board Secretary. Commented [JT2]: Insert originator's name and title. Commented [JT3]: Type subject in all caps. Commented [JT4]: List action(s) as it/they will appear on the agenda, each action numbered separately. Start with action verb—Approve, Authorize, Receive and file, Adopt. Refer to Agenda Report Procedures Manual for suggested wording. Commented [JT5]: (Type in overview of the issues, including when, who, what, where, why, and for how much. Provide enough information so that a Director does not have to read the entire ADDITIONAL INFORMATION section to understand all of the issues.) Commented [JT6]: (Summary includes detailed cost information for the project including: original contract amount, previously authorized changes, amount of this request, total revised contract amount, percent complete, percent over/under original budget amount. This can be presented in table form, either in this section or on an attachment; however, if on a separate sheet, indicate by typing "See attached (name of) Table.) Commented [JT7]: (Include a paragraph that identifies budget category (compliance, increased capacity, rehabilitation, etc.) and the cost impacts of a proposed action on the fiscal year budget. If there are insufficient funds to cover the cost, or it the item or project wasn't budgeted, address in this section. Additional items to be discussed are original approved budget amount and date; current year approved budget amount, funds authorized to date, amount of this request, proposed total authorized funds, estimated expenditures to date, estimated percent complete, and remaining budget amount. This can be presented in table format and may be attached separately. If the item is an informational item, check the "Not applicable (information item)" box.) Commented [JT8]: (Include additional wording that provides additional information not included in the SUMMARY section. Put the issue in historical perspective (How did we get to this point? What previous action/s/ has the Boards or staff taken on this?). Ensure that it is written so that a layman can understand. Avoid technical-eze. In instances where lengthy attachments are important but not attached to the report, indicate what they are, who should be contacted for information or copies, and where those documents can be reviewed.) \\FILER-1\ocsd\dept\gmo\120\BS\Agenda\Archived-agenda\Archived Committees\FAHR\2003\FAHR2003 drafts\0303\11.03-16.Records Management.doc Revised: 8/10/98 Page 2 ALTERNATIVES N/A CEQA FINDINGS N/A ATTACHMENTS Proposed Resolution Commented [JT9]: (A discussion of reasonable alternatives, including "No action" if this is reasonable. Each alternative shall conclude with an explanation as to why the alternative is not recommended. If this is a change order to a construction contract, state "None. Ratification of staff's actions.") Commented [JT10]: (Include a statement that the requirements of CEQA have been reviewed and indicate the findings.) Commented [JT11]: List attachments that are going "To the (which) Committee." Separately, under the heading "To the Joint Boards" note those documents that will be sent to the Directors. \\FILER-1\ocsd\dept\gmo\120\BS\Agenda\Archived-agenda\Archived Committees\FAHR\2003\FAHR2003 drafts\0303\11.03-16.Records Management.doc Revised: 8/10/98 Page 3 RESOLUTION NO. OCSD 03-__ ADOPTING POLICIES AND PROCEDURES FOR DISTRICT’S RECORDS MANAGEMENT PROGRAM, RECORDS RETENTION, AND DESTRUCTION OF OBSOLETE RECORDS A RESOLUTION OF THE BOARD OF DIRECTORS OF ORANGE COUNTY SANITATION DISTRICT ADOPTING POLICIES AND PROCEDURES FOR DISTRICT’S RECORDS MANAGEMENT PROGRAM, RECORDS RETENTION, AND DESTRUCTION OF OBSOLETE RECORDS, AND REPEALING RESOLUTION NO. OCSD 02-02 WHEREAS, it is necessary to establish a policy to maintain a Records Management Program (“Program”) that provides for the identification, access, and protection of all records generated or received by the District; and WHEREAS, said Program ensures that all District records are created, received, maintained, and destroyed in a cost-effective manner, in accordance with operating requirements for District business and applicable statutes and regulations; and WHEREAS, the Board of Directors of District is authorized, by the provisions of California Government Code Sections 60200 through 60204, inclusive to destroy records under certain conditions; and WHEREAS, it is desirable and appropriate to authorize the destruction of records on a routine basis that have been retained for a certain period of time, that are copies of originals on file with the District, or that have been preserved in conformance with all applicable statutes. NOW, THEREFORE, the Board of Directors of Orange County Sanitation District, DOES HEREBY RESOLVE, DETERMINE, AND ORDER: Section 1: Adoption of Policy and Establishment of Program. The Board of Directors of District hereby adopts an addition to Section 300 of the Records Management Procedure Manual, set forth on Exhibit “A”, attached hereto and incorporated herein by reference. Section 2: Adoption of Records Retention Schedule. The Board of Directors of District hereby adopts changes to the Records Retention Schedule, set forth on Exhibit “B”, attached hereto and incorporated herein by reference. Section 3: Authorization for Destruction of Records. The destruction of certain records, papers, and documents is hereby authorized, pursuant to California Government Code Sections 60200 et seq., after such records have been retained for the minimum time set forth on the Records Retention Schedule. \\FILER-1\ocsd\dept\gmo\120\BS\Agenda\Archived-agenda\Archived Committees\FAHR\2003\FAHR2003 drafts\0303\11.03-16.Records Management.doc Revised: 8/10/98 Page 4 Section 4: Destruction of Records After Preservation. Any record not expressly required by law to be filed and preserved, may be destroyed at any time after it is preserved in conformance with the requirements of California Government Code Section 60203. Section 5: Destruction of Duplicates. Pursuant to California Government Code Section 60200, any duplicate record, paper, or document, the original or a permanent photographic copy of which is in the files of any office or Department of the District, may be destroyed after confirmation with the Records Manager that such original or permanent photographic copy remains on file in the District. Section 6: Retention of Records Not Mentioned. All records, papers, and documents not mentioned in this Resolution shall be retained indefinitely. Section 7: Resolution No. OCSD 02-02 is hereby repealed. PASSED AND ADOPTED at a regular meeting held March 26, 2003 ___________________________ Chair ATTEST: ____________________________ Board Secretary OCSD P.O. Box 8127 Fountain Valley, CA 92728-8127 (714) 962-2411 February 19, 2003 STAFF REPORT OC Sanitation District Financial Plan BACKGROUND The Sanitation District has five principal sources of revenue: user fees collected on the property tax bill, user fees collected from significant (permit) users, a share of the property tax, connection fees and interest earnings. Over time some of these revenues have been accumulated and are commonly called reserves. These reserves can also used to fund current needs. While not considered income, a sixth source of funds is borrowing. Since 1986, the District has issued tax-exempt certificates of participation (COPs) to partially fund the capital improvement program. The District has not borrowed to fund operating requirements. Property Taxes For fiscal 2002-03, the District expects to receive about $39 million as our historical share of the county-wide 1% property tax basic levy. We do not control this amount; it is controlled by the State Legislature and the County. In fact, in 1992-93 the State did reallocate about 11% of District property taxes to other State-wide uses. All of the property taxes received by the District are dedicated first to debt service, the repayment of COPs and interest. Property taxes are essentially received twice a year; in November and April. Increasing property tax rates requires a two-thirds vote of our service area. User Fees Collected on the Property Tax Bill For fiscal 2002-03, the District expects to receive about $78 million of sewer service user fees collected as a separate line item on the property tax bill. These fees are used for operational and maintenance needs in the collection system and in the treatment plants as well as for a portion of the capital improvement program. They could also be used for COP service in the event that our share of property taxes was insufficient. Because these fees are collected on the property tax bill, they are also received primarily in November and April. The Directors have control over the user fee rates as well as the structure of the assessment program. The current structure was adopted subsequent to an extensive public outreach, participation and consultation program as a part of the 1999 Strategic Plan process. This structure charges every parcel in our service area based upon the size of the building and the use of building on that parcel. The County Assessor’s database is the initial source of property data and we pay a fee for the use of that data. Sewer service user fees are specifically exempted from some of the requirements of Proposition 218. Most notably, they are exempt from the election requirements, but not the requirement that fees cannot exceed the reasonable cost of service. The Board has agreed with staff, however Financial Plan Page 2 of 8 February 19, 2003 that we will comply with all of the rest of the requirements, in a spirit of good governance. A notice of rate changes is mailed to every property owner whenever the rates are proposed to increase. The rates are adopted through the ordinance process, and that requires two Board meetings and a public hearing. Typically, we refer to the annual single-family residential (SFR) rate as the benchmark for the user fees. Separate rates are charged for multi-family residential (MFR) units, and the rates for non-residential users are various percentages of the SFR rate depending upon the use of the property. The current SFR rate is $87.50 per year and it was adopted for 2002-03. Permit User Fees For fiscal 2002-03, the District expects to receive about $5 million of permit user fees. These are fees from some non-residential users that have, or could have, a significant impact on the wastewater treatment process. This impact could be from the volume of wastewater or from the constituents, or strength, of the wastewater. About 500 of these firms have been issued permits by the District’s Source Control Division. The discharge from these firms is monitored and the firms are invoiced directly based upon the actual quantity and strength of their wastewater. Connection Fees For fiscal 2002-03 the District expects to receive about $6 million of connection fees, more accurately called capital facility capacity charges (CFCC). These fees are collected for new development or remodeling that results in facilities that create a demand for sewer service. These fees are collected on our behalf by the local agency that issues building permits. The connection fee rate structure was adopted as a result of the same public participation program for the 1999 Strategic Plan that changed the user fee structure. The current structure provides separate SFR and MFR rates based upon the number of bedrooms and three non-residential rates (low demand, average demand and high demand), based upon the type and size of non-residential development. The benchmark CFCC is for a three-bedroom SFR and that fee is currently $1,820. The connection fee rates are revised whenever a new Master Plan or Strategic Plan is adopted as these are the times that we revise our planning parameters related to flow, development and the capital improvement program. Interest Income For fiscal 2002-03, the District expects to earn about $30 million of interest income. This is interest earned on our invested “reserve funds” in accordance with the Board-adopted Investment Policy. Each year the Board reconsiders the Investment Policy and every three years it is submitted to a national organization for review. The policy has earned a national award every time it has been submitted since 1996. The policy stresses liquidity and safety over yield. Some short-term operating funds are deposited with the State Local Agency Investment Fund (LAIF), but the bulk of our investments are managed by an independent money manager, Pacific Investment Management Corporation (PIMCO). Investments are held by a third-party custodian, Mellon Bank. Interest income for this year is the equivalent of approximately a $33 reduction in the annual SFR user fee. Because of limitations imposed on the money manager by our investment policy Financial Plan Page 3 of 8 February 19, 2003 and the Government Code, the major determinant of interest income is the size of the portfolio. Portfolio size is a result of the District’s reserve policy or “savings accounts”. Borrowing For fiscal 2002-03 the District budgeted to borrow $280 million for the capital improvement program. These funds would reimburse our “savings” accounts for some projects we have already started and would partially fund new projects during 2002-03 and 2003-04. The District has a Board-adopted debt policy for promoting consistency and continuity, for rationalizing the decision making process, for showing commitment to long-term financial planning, for enhancing the quality of decisions and for promoting credit quality to the rating agencies. Approximately 60% of our current COPs are variable rate borrowing. This means that interest rate can change everyday. Over the last 12 months, this interest rate has averaged about 1.5%. Nonetheless, the interest rates could rise, perhaps even rapidly, so the District maintains an investment fund equal to, or greater than, the outstanding principal so that interest income would rise to compensate for additional costs in that event. This compensating balance is one of the limiting factors to a variable rate borrowing program. The outstanding principal at December 31, 2002 was $365 million. CURRENT CONSIDERATIONS One thing that should be inferred from the above is how interrelated the components of our revenue program are. A change in any component will have an impact on many others. Another important fact is that there are not many chances in a year to make changes to the program that will have an effect in the short term. These last six months of each fiscal year are the window for changes for the next fiscal year. User Fees Rates for the fiscal year must be submitted to the Auditor-Controller by July in order for them to be included on the property tax bills that are mailed in September or October. These rates cannot be changed during the year. The 2002-03 rates were adopted for one year with the intent to revise them subsequent to the Interim Strategic Plan Update completion, and the Board’s determination of the amount of secondary treatment to provide in future years. Those conditions have been met, but the timing of additional capital projects is still being considered. Nonetheless, certain decisions related to user fee rates can and should be made now. Historically the District has preferred and adopted user fee schedules that included moderate and somewhat even annual increases. This type of schedule has been seen as more desirable than maintaining constant rates and experiencing significant increases in a stair-step trend. This type of schedule is appropriate when annual funding requirements are mostly stable with a slight upward trend. A five-year rate schedule was adopted from 1997-98 through 2001-02 that included average annual increases of approximately 5%. The increase for 2002-03 was just over 9%. The cash flow projections in the 2002-03 budget indicated potential increases of 9-10% for the next five years. The capital improvement program and the borrowing program each have significant impacts on the user fee rates, but they must be considered together because their impacts are in opposite directions. Our 20-year capital improvement program is very much front-loaded, with one-half of Financial Plan Page 4 of 8 February 19, 2003 the total funding requirements in the first five years. User fees could be raised sharply and quickly to meet much of this need. A program that uses mainly user fees to fund the capital improvement program is generally referred to as a “pay-as-you-go” program. On the other hand, user fees could be raised less sharply and funds could be borrowed to meet this need. In this case, the user fees initially need to pay for a smaller piece of the capital needs and the debt service costs. The annual debt service is less than that additional capital program, so annual user fees are lower. However, the total cost is higher because interest must also be paid. A program that uses a lot of borrowing generally claims to use “future dollars to pay for facilities that are used in the future”. As an example, the historical approach to user fees results in annual 10% increases (approximately $9/yr) for each of the next ten years, an annual rate of $220 from 2012-13 through 2020 and $1 billion of new borrowing. A much more rapid increase of 40% (approximately $35/yr) for the next two years results in an annual rate of $180 from 2005-06 through 2020 and new borrowing of only $475 million. Over the 17 year period, the total user fees paid by the average SFR user would be about 5% lower with the rapid rate increase model. Non-financial factors that are sometimes considered to impact rate setting include the state of the local, state and national economies, the historical and projected rate of inflation, the local election cycle and the relative or comparative cost of other services. It is important to keep in mind that user fees cannot exceed the reasonable cost of service. Connection Fees Connection fees have not been increased since the 1999 Strategic Plan. The Interim Strategic Plan Update provided an estimated capital improvement program for additional secondary treatment, but the Board’s decision to apply for a secondary equivalent discharge permit and to reach that level of treatment as soon as possible has changed that program. Today a team of staff and consultants are working diligently to devise the proper construction schedule that is being reviewed by an independent panel of experts. That work will be completed within the next month. At that time it will be appropriate to recalculate the connection fee, or CFCC. Very preliminary estimates show that the fee schedule that will be proposed to the Board could include an average increase from $1,820 to about $2,850 for a three-bedroom SFR. This could be a substantial increase on a percentage basis. It is important to note that connection fees are paid by and for new development, not by current users. Interest Income and Savings As mentioned above, interest income is largely a factor of the size of the portfolio or savings. The District has a comprehensive and very inclusive reserve policy that was developed in 1996 with the help of an independent financial advisor after a very thorough survey of many large agencies. During the past year, staff has worked closely with Public Resources Advisory Group (PRAG), another independent financial advisor to review our current policy for improvements or changes. Changes that would increase the funding level would also increase future interest earnings. Increased interest earnings tend to reduce user fee increases. The reverse is also true, decreased interest earnings lead to faster rate increases and higher rates. That leads to one of the paradoxes of public finance. Agencies that have relatively high cash and investment balances are sometimes criticized by legislators and ratepayers even though Financial Plan Page 5 of 8 February 19, 2003 the immediate effect of those balances is reduced rates for users. Staff and PRAG have evaluated several changes to the reserve policy that could result in either increases or decreases to the level of cash and investments. RESERVE POLICY The current reserve policy designates accumulated funds for several purposes. The current and proposed designations, descriptions and funding levels will be described individually below. Cash Flow Reserve Cash flow reserves are currently in place to make operations and maintenance and debt service payments during the first five months of the year, before property taxes and user fees are received through the property tax collection process. One-half of the annual operating expenses and all of the debt service requirements are currently reserved. Staff proposes to maintain the operations and maintenance portion of this category, but to decrease the debt service portion. All of our COP interest payments are made either monthly or semi-annually, while the principal payments are made in August. Principal payments account for less than half of our annual debt service requirements. Future COP issues will have principal payments due in February. Staff proposes to reduce the debt service to one half of the annual requirements. Funds from other reserve categories will be available to meet any cash flow needs that are not covered by this reduced level. Operating Contingencies An operating contingency reserve was established to provide immediate access to cash to meet changing regulations or other emergencies that could not have been anticipated during the rate setting process. A goal of 10% of the operating budget was established for this category. Staff proposes to delete this category of reserves. Funds from other reserve categories, or from budget savings or adjustments, will be available to meet any sudden requirements that may occur. Short-term Specific Capital Projects A short–term specific capital projects reserve was established primarily for the District’s share of the original GWRS project. When the reserves policy was adopted, the plan was to fund the GWRS project from cash on hand. Subsequently, the capital improvement program expanded dramatically and the cost of the GWRS project also increased so that it has become impractical to expect to pay for this water supply project from “savings.” This project has been put into the capital improvement program with the rest of the projects in the Interim Strategic Plan Update and will be paid for from a mix of borrowing, user fees, connection fees and savings. Staff is proposing to eliminate this category of reserves. It would phase out with the completion of the GWRS in any case. Capital Improvement Program The capital improvement reserve was established to partially fund annual increments of the long-term capital improvement program. The long-term program funding target was for one-half of the program to be funded by borrowing and one half from other revenues and savings. With that funding program in mind, the goal for this reserve was one half of the average annual Financial Plan Page 6 of 8 February 19, 2003 capital improvement program through 2020. This strategy is based upon the long-term borrowing program a relatively stable annual capital improvement program. Both of those bases are currently being challenged and re-evaluated. As noted above, over one-half of the 20-year capital improvement program is now scheduled for the next five years. This front-loading results in an average that is well below one-half of the requirements for each of the next five years. At the end of this fiscal year the average annual reserve would be $51 million while one-half of next year’s capital improvement program would require $129 million, over twice as much! Clearly the “average to 2020 method” does not result in adequate immediate funding for a front-loaded program like ours. Staff is proposing to shorten the planning and averaging period. We have a high degree of confidence in our capital planning for a 10-year period and an acceptable level of confidence for a 10-year period. Staff proposes to shorten the averaging period to ten years. This will result in a capital improvement reserve of $74 million at the end of this year assuming 50% of the 10-year average. Shortening the planning period to five years would increase the required reserve by $31 million. Capital Replacement and Refurbishment The current estimated replacement value of the combined collection, treatment and disposal systems is over $2 billion. Infrastructure deterioration and replacement is everywhere in the news today, but the District established a fund to provide for this future need in 1996. The fund started with a balance of $50 million and a plan to be able to pay for 30% of the annual replacement, rehabilitation and refurbishment (RRR) needs through 2030. RRR needs that are not included within the Interim Strategic Plan Update through 2030 are estimated to be $769 million while the total to 2050, just another 20 years, is $2.8 billion; nearly three times as much in a much shorter period. Staff is proposing to modify this policy. It seems to be too high in these early years as much of the RRR need is included within the capital improvement program and too low in the later years when the requirements are greater. Staff proposes to model the RRR reserve after the capital improvement program reserve above and to use 30% of the average annual funding needs for the following 10-year period. This would reduce the year-end requirement from $50 million to $3 million this year. Catastrophe and Self-Insurance When the catastrophic loss reserve was established, the District was purchasing liability, property and earthquake insurance. Today we do not purchase any earthquake insurance. The reserve level was established to fund a potential loss from a magnitude 7.5 earthquake on the Newport-Inglewood fault, after FEMA participation and insurance. The loss was estimated to be approximately 30% of the replacement value of facilities and FEMA participation was estimated at 75% of the loss. Other losses, self-insurance retentions or deductibles for boiler & machinery, excess workers’ comp, faithful performance, general liability and property insurance combined with the major earthquake reserve for a total of $57 million. Staff is proposing to continue this category of reserve and to continue using the same logic that originally established the funding level. However, the loss of earthquake insurance and the addition of facilities over the past eight years combine to increase the requirement at the end of Financial Plan Page 7 of 8 February 19, 2003 this year to $93 million. This amount will increase each year as additional facilities are placed into service. Debt Service Reserve A condition of many certificates of participation sales is that the borrower establish a debt service reserve. These reserves give the lender a sense of security that the annual payment will be made even if the borrower gets into financial difficulty and does not have the cash available. Use of these reserves starts a series of remedies that would be completed by the next payment date and would ensure the lender is repaid. These funds are not under the control of the District and cannot be used for other purposes. The amounts are established by the COP documents and indentures. SUMMARY The purpose of this report was to provide the reader with an understanding of the funding side of the Sanitation District, the interrelations of the various sources and the reasons or rationale for the assorted reserves, accumulated funds or savings, and a high-level overview of proposed changes. These can perhaps best be summarized by the following table: Description Basis Current Proposed Cash Flow Operating Tax & fee allocation 43,280,000$ 43,280,000$ Annual COP Service Tax & fee allocation 50,250,000 23,925,000 Contingency 8,656,000 Short-term Capital Projects 93,066,000 - Capital Improvement Program Avg annual cost 51,434,000 73,700,000 Replacement, Rehabilitation, Refurbishment Avg annual cost 52,000,000 3,000,000 Catastrophe & Self-Insurance Expected loss 57,000,000 93,000,000 Debt (COP) Service Indentures 63,997,000 61,000,000 419,683,000$ 297,905,000$ Requirement @ 6/30/03 Reserve Policy Funding Changes The overall impact of these changes is to reduce the required reserves at this year-end by $122 million. This reduction will provide funds for the immediate capital program that would otherwise have come from borrowing. Reducing borrowing also reduces total costs and user fees over the term of the debt repayment because less interest expense is incurred. Reducing the required or targeted reserve levels also reduces short-term pressure to increase rates for future replacement, rehabilitation and refurbishment needs that are not well defined today because they will not occur for many years. Financial Plan Page 8 of 8 February 19, 2003 Staff recommends modifying the reserve policy in accordance with the proposals in this report. GGS G:\wp.dta\fin\210\crane\FAHR\FAHR2003\MAR\Staff Report financial plan Mar03.doc Attachments: 1. Capital Improvement Program Graphic 2. Summary Cash Flow Through 2020, Current Policy 3. Summary Cash Flow Through 2020, Proposed Policy, 10% Rate Increases 4. Summary Cash Flow Through 2020, Proposed Policy, 40% Rate Increases Preliminary Preliminary Preliminary Preliminary Preliminary Preliminary Preliminary Preliminary Preliminary Preliminary 10 Year Ref Description 2002-03 03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12 Total Revenues: 1 General User Fees 77,884,000 85,757,000 94,133,000 103,466,000 113,765,000 125,042,000 137,304,000 151,475,000 166,439,000 183,540,000 1,238,805,000 2 Permitted User Fees 6,329,000 6,329,000 6,329,000 6,329,000 6,329,000 6,329,000 6,329,000 6,329,000 6,329,000 6,329,000 63,290,000 3 Property Taxes 38,153,000 38,916,000 39,694,000 40,488,000 41,298,000 42,124,000 42,966,000 43,826,000 44,702,000 45,596,000 417,763,000 4 New COP Issues 280,000,000 - 340,000,000 - 230,000,000 - 160,000,000 - 126,000,000 - 1,136,000,000 5 Interest Revenues 30,335,000 29,502,000 28,278,000 26,533,000 22,727,000 23,038,000 23,708,000 24,781,000 24,831,000 25,098,000 258,831,000 6 Connection Fees 5,824,000 5,824,000 5,824,000 5,824,000 5,824,000 5,824,000 5,824,000 5,824,000 5,824,000 5,824,000 58,240,000 7 Other Revenues 23,528,000 37,428,000 62,628,000 16,228,000 21,528,000 14,928,000 14,528,000 11,828,000 11,628,000 11,528,000 225,780,000 8 Revenues 462,053,000 203,756,000 576,886,000 198,868,000 441,471,000 217,285,000 390,659,000 244,063,000 385,753,000 277,915,000 3,398,709,000 Requirements: 9 Oper & Mtce Exp 84,060,000 86,560,000 89,160,000 93,060,000 93,860,000 94,360,000 94,960,000 95,560,000 96,060,000 96,660,000 924,300,000 10 Capital Improvement Program 163,930,000 257,540,000 246,669,000 246,770,000 170,020,000 103,680,000 84,939,000 89,121,000 89,440,000 99,461,000 1,551,570,000 Repl, Rehab & Refurb 27,000,000 38,800,000 65,800,000 11 COP Service 6.0%, 30 yrs 38,995,000 50,250,000 63,696,000 77,465,000 86,707,000 96,039,000 102,384,000 109,014,000 114,107,000 118,689,000 857,346,000 12 Other Requirements 2,333,000 2,333,000 2,333,000 2,333,000 2,333,000 2,333,000 2,333,000 2,333,000 2,333,000 2,333,000 23,330,000 13 Requirements 289,318,000 396,683,000 401,858,000 419,628,000 352,920,000 296,412,000 284,616,000 296,028,000 328,940,000 355,943,000 3,422,346,000 14 Revenues-Requirements 172,735,000 (192,927,000) 175,028,000 (220,760,000) 88,551,000 (79,127,000) 106,043,000 (51,965,000) 56,813,000 (78,028,000) (23,637,000) Accumulated Funds: 15 Beginning of Year 437,757,000 610,492,000 417,565,000 592,593,000 371,833,000 460,384,000 381,257,000 487,300,000 435,335,000 492,148,000 437,757,000 16 End of Year 610,492,000 417,565,000 592,593,000 371,833,000 460,384,000 381,257,000 487,300,000 435,335,000 492,148,000 414,120,000 414,120,000 17 Reserve Policy 419,703,000 336,930,400 381,229,608 384,080,040 411,794,121 415,310,283 435,293,969 437,099,628 436,779,721 435,854,715 435,854,715 Sewer Service User Fees: 18 Avg SFR Annual User Fee $87.50 $96.00 $105.00 $115.00 $126.00 $138.00 $151.00 $166.00 $182.00 $200.00 19 Percentage Change 9.38%9.71%9.38%9.52%9.57%9.52%9.42%9.93%9.64%9.89% 20 Equivalent Dwelling Units 890,100 893,300 896,500 899,700 902,900 906,100 909,300 912,500 914,500 917,700 21 SFR Connection Fee $1,820 $1,820 $1,820 $1,820 $1,820 $1,820 $1,820 $1,820 $1,820 $1,820 22 Outstanding COPs $639,975,000 $624,924,000 $953,229,000 $932,194,000 $1,139,953,000 $1,113,475,000 $1,245,369,000 $1,213,513,000 $1,113,475,000 $1,245,369,000 COP Ratios 23 Sr Lien Coverge, Min 1.25 2.51 2.33 2.32 1.37 1.36 1.28 1.33 1.36 1.43 1.53 25 Additional Bonds, 1.25 2.51 2.33 2.32 1.37 1.36 1.28 1.33 1.36 1.43 1.53 Net Revenues for ratios 97,993,000 117,196,000 147,726,000 105,808,000 117,611,000 122,925,000 135,699,000 148,503,000 163,693,000 181,255,000 Jr lien @ 7.5%- - - - - - - - - - Sr lien service 38,995,000 50,250,000 63,696,000 77,465,000 86,707,000 96,039,000 102,384,000 109,014,000 114,107,000 118,689,000 Orange County Sanitation District Summary Cash Flow Projections, Entire Collection System Secondary Effluent SPU & Existing Reserve Policy Ref Description Revenues: 1 General User Fees 2 Permitted User Fees 3 Property Taxes 4 New COP Issues 5 Interest Revenues 6 Connection Fees 7 Other Revenues 8 Revenues Requirements: 9 Oper & Mtce Exp 10 Capital Improvement Program Repl, Rehab & Refurb 11 COP Service 6.0%, 30 yrs 12 Other Requirements 13 Requirements 14 Revenues-Requirements Accumulated Funds: 15 Beginning of Year16End of Year 17 Reserve Policy Sewer Service User Fees: 18 Avg SFR Annual User Fee 19 Percentage Change 20 Equivalent Dwelling Units 21 SFR Connection Fee 22 Outstanding COPs COP Ratios 23 Sr Lien Coverge, Min 1.25 25 Additional Bonds, 1.25 Net Revenues for ratiosJr lien @ 7.5%Sr lien service Orange County Sanitation District Summary Cash Flow Projections, Entire Collections System Preliminary Preliminary Preliminary Preliminary Preliminary Preliminary Preliminary Preliminary Grand 12-13 13-14 14-15 15-16 16-17 17-18 18-19 19-20 Total 202,598,000 223,632,000 231,825,000 232,625,000 233,425,000 234,225,000 235,025,000 235,825,000 3,067,985,000 6,329,000 6,329,000 6,329,000 6,329,000 6,329,000 6,329,000 6,329,000 6,329,000 113,922,000 46,508,000 47,439,000 48,387,000 49,355,000 50,342,000 51,349,000 52,376,000 53,424,000 816,943,000 - - - - - - - - 1,136,000,000 22,270,000 21,507,000 22,667,000 23,594,000 23,904,000 23,413,000 23,590,000 25,598,000 445,374,000 5,824,000 5,824,000 5,824,000 5,824,000 5,824,000 5,824,000 5,824,000 5,824,000 104,832,000 11,428,000 11,428,000 11,728,000 12,128,000 12,528,000 12,428,000 11,828,000 11,628,000 320,904,000 294,957,000 316,159,000 326,760,000 329,855,000 332,352,000 333,568,000 334,972,000 338,628,000 6,005,960,000 103,760,000 104,260,000 104,960,000 105,560,000 106,360,000 107,360,000 108,260,000 109,060,000 1,773,880,000 80,700,000 21,369,000 24,179,000 50,949,000 50,340,000 84,260,000 27,518,000 16,800,000 1,907,685,000 33,800,000 46,000,000 14,900,000 34,700,000 93,400,000 76,100,000 33,100,000 13,600,000 411,400,000 118,767,000 132,516,000 118,037,000 117,983,000 119,395,000 117,811,000 117,772,000 117,752,000 1,817,379,000 2,333,000 2,333,000 2,333,000 2,333,000 2,333,000 2,333,000 2,333,000 2,333,000 41,994,000 339,360,000 306,478,000 264,409,000 311,525,000 371,828,000 387,864,000 288,983,000 259,545,000 5,952,338,000 (44,403,000) 9,681,000 62,351,000 18,330,000 (39,476,000) (54,296,000) 45,989,000 79,083,000 53,622,000 414,120,000 369,717,000 379,398,000 441,749,000 460,079,000 420,603,000 366,307,000 412,296,000 437,757,000 369,717,000 379,398,000 441,749,000 460,079,000 420,603,000 366,307,000 412,296,000 491,379,000 491,379,000 444,640,090 428,126,332 427,363,938 425,110,417 418,949,285 405,564,071 399,585,312 403,881,559 $220.00 $242.00 $250.00 $250.00 $250.00 $250.00 $250.00 $250.00 $3,328.50 10.00%10.00%3.31%0.00%0.00%0.00%0.00%0.00% 920,900 924,100 927,300 930,500 933,700 936,900 940,100 943,300 $1,820 $1,820 $1,820 $1,820 $1,820 $1,820 $1,820 $1,820 $1,094,846,000 $1,042,627,000 $1,000,855,000 $952,419,000 $896,543,000 $847,446,000 $795,843,000 $741,645,000 1.61 1.60 1.88 1.90 1.89 1.92 1.93 1.95 1.61 1.60 1.88 1.90 1.89 1.92 1.93 1.95 191,197,000 211,899,000 221,800,000 224,295,000 225,992,000 226,208,000 226,712,000 229,568,000 - - - - - - - - 118,767,000 132,516,000 118,037,000 117,983,000 119,395,000 117,811,000 117,772,000 117,752,000 Adjusted Preliminary Preliminary Preliminary Preliminary Preliminary Preliminary Preliminary Preliminary Preliminary Ref Description 2002-03 03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12 Revenues: 1 General User Fees 77,884,000 85,757,000 94,581,000 104,365,000 115,571,000 127,307,000 140,487,000 154,669,000 170,554,000 188,129,000 2 Permitted User Fees 6,329,000 6,329,000 6,329,000 6,329,000 6,329,000 6,329,000 6,329,000 6,329,000 6,329,000 6,329,000 3 Property Taxes 38,153,000 38,916,000 39,694,000 40,488,000 41,298,000 42,124,000 42,966,000 43,826,000 44,702,000 45,596,000 4 New COP Issues 250,000,000 - 300,000,000 - 230,000,000 - 120,000,000 - 100,000,000 - 5 Interest Revenues 30,335,000 29,502,000 28,278,000 26,533,000 22,727,000 23,038,000 23,708,000 24,781,000 24,831,000 25,098,000 6 Connection Fees 5,824,000 9,120,000 9,120,000 9,120,000 9,120,000 9,120,000 9,120,000 9,120,000 9,120,000 9,120,000 7 Other Revenues 23,528,000 37,428,000 62,628,000 16,228,000 21,528,000 14,928,000 14,528,000 11,828,000 11,628,000 11,528,000 8 Revenues 432,053,000 207,052,000 540,630,000 203,063,000 446,573,000 222,846,000 357,138,000 250,553,000 367,164,000 285,800,000 Requirements: 9 Oper & Mtce Exp 84,060,000 86,560,000 89,160,000 93,060,000 93,860,000 94,360,000 94,960,000 95,560,000 96,060,000 96,660,000 10 Capital Improvement Program 163,930,000 257,540,000 246,669,000 246,770,000 170,020,000 103,680,000 84,939,000 89,121,000 89,440,000 99,461,000 Repl, Rehab & Refurb 27,000,000 38,800,000 11 COP Service 6.0%, 30 yrs 37,795,000 47,850,000 59,696,000 71,865,000 81,107,000 90,439,000 95,184,000 100,214,000 104,267,000 107,809,000 12 Other Requirements 2,333,000 2,333,000 2,333,000 2,333,000 2,333,000 2,333,000 2,333,000 2,333,000 2,333,000 2,333,000 13 Requirements 288,118,000 394,283,000 397,858,000 414,028,000 347,320,000 290,812,000 277,416,000 287,228,000 319,100,000 345,063,000 14 Revenues-Requirements 143,935,000 (187,231,000) 142,772,000 (210,965,000) 99,253,000 (67,966,000) 79,722,000 (36,675,000) 48,064,000 (59,263,000) Accumulated Funds: 15 Beginning of Year 437,757,000 581,692,000 394,461,000 537,233,000 326,268,000 425,521,000 357,555,000 437,277,000 400,602,000 448,666,000 16 End of Year 581,692,000 394,461,000 537,233,000 326,268,000 425,521,000 357,555,000 437,277,000 400,602,000 448,666,000 389,403,000 17 Reserve Policy 297,857,000 293,185,000 352,290,236 355,518,500 387,099,500 394,721,000 408,480,000 407,619,500 405,175,500 406,084,500 Sewer Service User Fees: 18 Avg SFR Annual User Fee $87.50 $96.00 $105.50 $116.00 $128.00 $140.50 $154.50 $169.50 $186.50 $205.00 19 Percentage Change 9.38%9.71%9.90%9.95%10.34%9.77%9.96%9.71%10.03%9.92% 20 Equivalent Dwelling Units 890,100 893,300 896,500 899,700 902,900 906,100 909,300 912,500 914,500 917,700 21 SFR Connection Fee $1,820 $2,850 $2,850 $2,850 $2,850 $2,850 $2,850 $2,850 $2,850 $2,850 22 Outstanding COPs $609,975,000 $595,303,000 $884,010,000 $863,908,000 $1,072,654,000 $1,047,224,000 $1,140,229,000 $1,110,056,000 $1,047,224,000 $1,140,229,000 COP Ratios 23 Sr Lien Coverge, Min 1.25 2.59 2.52 2.54 1.53 1.51 1.42 1.49 1.55 1.64 1.75 25 Additional Bonds, 1.25 2.59 2.52 2.54 1.53 1.51 1.42 1.49 1.55 1.64 1.75 Net Revenues for ratios 97,993,000 120,492,000 151,470,000 110,003,000 122,713,000 128,486,000 142,178,000 154,993,000 171,104,000 189,140,000 Jr lien @ 7.5%- - - - - - - - - - Sr lien service 37,795,000 47,850,000 59,696,000 71,865,000 81,107,000 90,439,000 95,184,000 100,214,000 104,267,000 107,809,000 Orange County Sanitation District Summary Cash Flow Projections, Entire Collection System Secondary Effluent SPU & Proposed Reserve Policy 10% Rate Increase Limitation Ref Description Revenues: 1 General User Fees 2 Permitted User Fees 3 Property Taxes 4 New COP Issues 5 Interest Revenues 6 Connection Fees 7 Other Revenues 8 Revenues Requirements: 9 Oper & Mtce Exp 10 Capital Improvement Program Repl, Rehab & Refurb 11 COP Service 6.0%, 30 yrs 12 Other Requirements 13 Requirements 14 Revenues-Requirements Accumulated Funds: 15 Beginning of Year 16 End of Year 17 Reserve Policy Sewer Service User Fees: 18 Avg SFR Annual User Fee 19 Percentage Change 20 Equivalent Dwelling Units 21 SFR Connection Fee 22 Outstanding COPs COP Ratios 23 Sr Lien Coverge, Min 1.25 25 Additional Bonds, 1.25 Net Revenues for ratiosJr lien @ 7.5%Sr lien service Orange County Sanitation District Summary Cash Flow Projections, Entire Collections System Preliminary Preliminary Preliminary Preliminary Preliminary Preliminary Preliminary Preliminary Grand 12-13 13-14 14-15 15-16 16-17 17-18 18-19 19-20 Total 202,598,000 203,302,000 204,006,000 204,710,000 205,414,000 206,118,000 206,822,000 207,526,000 2,899,800,000 6,329,000 6,329,000 6,329,000 6,329,000 6,329,000 6,329,000 6,329,000 6,329,000 113,922,000 46,508,000 47,439,000 48,387,000 49,355,000 50,342,000 51,349,000 52,376,000 53,424,000 816,943,000 - - - - - - - - 1,000,000,000 22,270,000 21,507,000 22,667,000 23,594,000 23,904,000 23,413,000 23,590,000 25,598,000 445,374,000 9,120,000 9,120,000 9,120,000 9,120,000 9,120,000 9,120,000 9,120,000 9,120,000 160,864,000 11,428,000 11,428,000 11,728,000 12,128,000 12,528,000 12,428,000 11,828,000 11,628,000 320,904,000 298,253,000 299,125,000 302,237,000 305,236,000 307,637,000 308,757,000 310,065,000 313,625,000 5,757,807,000 103,760,000 104,260,000 104,960,000 105,560,000 106,360,000 107,360,000 108,260,000 109,060,000 1,773,880,000 80,700,000 21,369,000 24,179,000 50,949,000 50,340,000 84,260,000 27,518,000 16,800,000 1,907,685,000 33,800,000 46,000,000 14,900,000 34,700,000 93,400,000 76,100,000 33,100,000 13,600,000 411,400,000 107,887,000 121,636,000 107,157,000 107,103,000 108,515,000 106,931,000 106,892,000 106,872,000 1,669,219,000 2,333,000 2,333,000 2,333,000 2,333,000 2,333,000 2,333,000 2,333,000 2,333,000 41,994,000 328,480,000 295,598,000 253,529,000 300,645,000 360,948,000 376,984,000 278,103,000 248,665,000 5,804,178,000 (30,227,000) 3,527,000 48,708,000 4,591,000 (53,311,000) (68,227,000) 31,962,000 64,960,000 (46,371,000) 389,403,000 359,176,000 362,703,000 411,411,000 416,002,000 362,691,000 294,464,000 326,426,000 437,757,000 359,176,000 362,703,000 411,411,000 416,002,000 362,691,000 294,464,000 326,426,000 391,386,000 391,386,000 416,477,000 408,815,500 410,027,500 410,012,500 408,301,500 408,495,000 407,245,000 409,174,000 $220.00 $220.00 $220.00 $220.00 $220.00 $220.00 $220.00 $220.00 $3,149.00 7.32%0.00%0.00%0.00%0.00%0.00%0.00%0.00% 920,900 924,100 927,300 930,500 933,700 936,900 940,100 943,300 $2,850 $2,850 $2,850 $2,850 $2,850 $2,850 $2,850 $2,850 $997,068,000 $946,974,000 $907,455,000 $861,406,000 $808,060,000 $761,646,000 $712,887,000 $661,702,000 1.80 1.60 1.84 1.86 1.85 1.88 1.89 1.91 1.80 1.60 1.84 1.86 1.85 1.88 1.89 1.91 194,493,000 194,865,000 197,277,000 199,676,000 201,277,000 201,397,000 201,805,000 204,565,000 - - - - - - - - 107,887,000 121,636,000 107,157,000 107,103,000 108,515,000 106,931,000 106,892,000 106,872,000 Adjusted Preliminary Preliminary Preliminary Preliminary Preliminary Preliminary Preliminary Preliminary Preliminary Ref Description 2002-03 03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12 Revenues: 1 General User Fees 77,884,000 109,429,000 153,750,000 161,946,000 171,551,000 172,159,000 172,767,000 173,375,000 173,755,000 174,363,000 2 Permitted User Fees 6,329,000 6,329,000 6,329,000 6,329,000 6,329,000 6,329,000 6,329,000 6,329,000 6,329,000 6,329,000 3 Property Taxes 38,153,000 38,916,000 39,694,000 40,488,000 41,298,000 42,124,000 42,966,000 43,826,000 44,702,000 45,596,000 4 New COP Issues 250,000,000 - 150,000,000 - 75,000,000 - - - 5 Interest Revenues 30,335,000 29,502,000 28,278,000 26,533,000 22,727,000 23,038,000 23,708,000 24,781,000 24,831,000 25,098,000 6 Connection Fees 5,824,000 9,120,000 9,120,000 9,120,000 9,120,000 9,120,000 9,120,000 9,120,000 9,120,000 9,120,000 7 Other Revenues 23,528,000 37,428,000 62,628,000 16,228,000 21,528,000 14,928,000 14,528,000 11,828,000 11,628,000 11,528,000 8 Revenues 432,053,000 230,724,000 449,799,000 260,644,000 347,553,000 267,698,000 269,418,000 269,259,000 270,365,000 272,034,000 Requirements: 9 Oper & Mtce Exp 84,060,000 86,560,000 89,160,000 93,060,000 93,860,000 94,360,000 94,960,000 95,560,000 96,060,000 96,660,000 10 Capital Improvement Program 163,930,000 257,540,000 246,669,000 246,770,000 170,020,000 103,680,000 84,939,000 89,121,000 89,440,000 99,461,000 Repl, Rehab & Refurb 27,000,000 38,800,000 11 COP Service 6.0%, 30 yrs 37,795,000 47,850,000 53,696,000 59,865,000 62,907,000 66,039,000 65,984,000 66,214,000 66,267,000 65,809,000 12 Other Requirements 2,333,000 2,333,000 2,333,000 2,333,000 2,333,000 2,333,000 2,333,000 2,333,000 2,333,000 2,333,000 13 Requirements 288,118,000 394,283,000 391,858,000 402,028,000 329,120,000 266,412,000 248,216,000 253,228,000 281,100,000 303,063,000 14 Revenues-Requirements 143,935,000 (163,559,000) 57,941,000 (141,384,000) 18,433,000 1,286,000 21,202,000 16,031,000 (10,735,000) (31,029,000) Accumulated Funds: 15 Beginning of Year 437,757,000 581,692,000 418,133,000 476,074,000 334,690,000 353,123,000 354,409,000 375,611,000 391,642,000 380,907,000 16 End of Year 581,692,000 418,133,000 476,074,000 334,690,000 353,123,000 354,409,000 375,611,000 391,642,000 380,907,000 349,878,000 17 Reserve Policy 297,857,000 290,185,000 331,290,236 331,608,500 344,789,500 350,422,000 350,214,000 347,964,500 344,168,500 345,765,500 Sewer Service User Fees: 18 Avg SFR Annual User Fee $87.50 $122.50 $171.50 $180.00 $190.00 $190.00 $190.00 $190.00 $190.00 $190.00 19 Percentage Change 9.38%40.00%40.00%4.96%5.56%0.00%0.00%0.00%0.00%0.00% 20 Equivalent Dwelling Units 890,100 893,300 896,500 899,700 902,900 906,100 909,300 912,500 914,500 917,700 21 SFR Connection Fee $1,820 $2,850 $2,850 $2,850 $2,850 $2,850 $2,850 $2,850 $2,850 $2,850 22 Outstanding COPs $609,975,000 $595,303,000 $734,011,000 $715,806,000 $771,563,000 $750,225,000 $727,568,000 $703,511,000 $750,225,000 $727,568,000 COP Ratios 23 Sr Lien Coverge, Min 1.25 2.59 3.01 3.92 2.80 2.84 2.62 2.64 2.62 2.63 2.66 25 Additional Bonds, 1.25 2.59 3.01 3.92 2.80 2.84 2.62 2.64 2.62 2.63 2.66 Net Revenues for ratios 97,993,000 144,164,000 210,639,000 167,584,000 178,693,000 173,338,000 174,458,000 173,699,000 174,305,000 175,374,000 Jr lien @ 7.5%- - - - - - - - - - Sr lien service 37,795,000 47,850,000 53,696,000 59,865,000 62,907,000 66,039,000 65,984,000 66,214,000 66,267,000 65,809,000 ` Summary Cash Flow Projections, Entire Collection System Secondary Effluent SPU & Proposed Reserve Policy Rapid Rate Increase, 40% per Year Ref Description Revenues: 1 General User Fees 2 Permitted User Fees 3 Property Taxes 4 New COP Issues 5 Interest Revenues 6 Connection Fees 7 Other Revenues 8 Revenues Requirements: 9 Oper & Mtce Exp 10 Capital Improvement Program Repl, Rehab & Refurb 11 COP Service 6.0%, 30 yrs 12 Other Requirements 13 Requirements 14 Revenues-Requirements Accumulated Funds: 15 Beginning of Year 16 End of Year 17 Reserve Policy Sewer Service User Fees: 18 Avg SFR Annual User Fee 19 Percentage Change 20 Equivalent Dwelling Units 21 SFR Connection Fee 22 Outstanding COPs COP Ratios 23 Sr Lien Coverge, Min 1.25 25 Additional Bonds, 1.25 Net Revenues for ratiosJr lien @ 7.5%Sr lien service Orange County Sanitation District Summary Cash Flow Projections, Entire Collections System Preliminary Preliminary Preliminary Preliminary Preliminary Preliminary Preliminary Preliminary Grand 12-13 13-14 14-15 15-16 16-17 17-18 18-19 19-20 Total 174,971,000 175,579,000 176,187,000 176,795,000 177,403,000 178,011,000 178,619,000 179,227,000 2,957,771,000 6,329,000 6,329,000 6,329,000 6,329,000 6,329,000 6,329,000 6,329,000 6,329,000 113,922,000 46,508,000 47,439,000 48,387,000 49,355,000 50,342,000 51,349,000 52,376,000 53,424,000 816,943,000 - - - - - - - - 475,000,000 22,270,000 21,507,000 22,667,000 23,594,000 23,904,000 23,413,000 23,590,000 25,598,000 445,374,000 9,120,000 9,120,000 9,120,000 9,120,000 9,120,000 9,120,000 9,120,000 9,120,000 160,864,000 11,428,000 11,428,000 11,728,000 12,128,000 12,528,000 12,428,000 11,828,000 11,628,000 320,904,000 270,626,000 271,402,000 274,418,000 277,321,000 279,626,000 280,650,000 281,862,000 285,326,000 5,290,778,000 103,760,000 104,260,000 104,960,000 105,560,000 106,360,000 107,360,000 108,260,000 109,060,000 1,773,880,000 80,700,000 21,369,000 24,179,000 50,949,000 50,340,000 84,260,000 27,518,000 16,800,000 1,907,685,000 33,800,000 46,000,000 14,900,000 34,700,000 93,400,000 76,100,000 33,100,000 13,600,000 411,400,000 65,887,000 79,636,000 65,157,000 65,103,000 66,515,000 64,931,000 64,892,000 64,872,000 1,129,419,000 2,333,000 2,333,000 2,333,000 2,333,000 2,333,000 2,333,000 2,333,000 2,333,000 41,994,000 286,480,000 253,598,000 211,529,000 258,645,000 318,948,000 334,984,000 236,103,000 206,665,000 5,264,378,000 (15,854,000) 17,804,000 62,889,000 18,676,000 (39,322,000) (54,334,000) 45,759,000 78,661,000 26,400,000 349,878,000 334,024,000 351,828,000 414,717,000 433,393,000 394,071,000 339,737,000 385,496,000 437,757,000 334,024,000 351,828,000 414,717,000 433,393,000 394,071,000 339,737,000 385,496,000 464,157,000 464,157,000 356,886,000 349,997,500 352,027,500 352,880,500 352,089,500 353,258,000 353,040,000 355,066,000 $190.00 $190.00 $190.00 $190.00 $190.00 $190.00 $190.00 $190.00 $3,221.50 0.00%0.00%0.00%0.00%0.00%0.00%0.00%0.00% 920,900 924,100 927,300 930,500 933,700 936,900 940,100 943,300 $2,850 $2,850 $2,850 $2,850 $2,850 $2,850 $2,850 $2,850 $611,163,000 $568,790,000 $537,456,000 $500,083,000 $455,933,000 $419,268,000 $380,841,000 $340,610,000 2.53 2.10 2.60 2.64 2.60 2.67 2.68 2.72 2.53 2.10 2.60 2.64 2.60 2.67 2.68 2.72 166,866,000 167,142,000 169,458,000 171,761,000 173,266,000 173,290,000 173,602,000 176,266,000 - - - - - - - - 65,887,000 79,636,000 65,157,000 65,103,000 66,515,000 64,931,000 64,892,000 64,872,000 FAHR COMMITTEE Meeting Date 03-12-03 To Bd. of Dir. 03-26-03 AGENDA REPORT Item Number FAHR03-17 Item Number Orange County Sanitation District FROM: Gary G. Streed, Director of Finance SUBJECT: FINANCIAL PLAN INCLUDING USER FEE AND RESERVE POLICIES GENERAL MANAGER'S RECOMMENDATION Direct staff to revise the 1996 Reserves Policy and to provide the Board with cash flows and sewer user fee projections that incorporate those revisions and the Committee’s preference for a sewer user fee increase program. SUMMARY The Board of Directors adopted a Reserves Policy in 1996. Since then the capital improvement program has increased, the Board has decided to discharge effluent that meets secondary treatment standards and to disinfect that influent. These changes suggest that the Reserves Policy could be revised. This policy and the changes noted above have significant impacts on our sewer service user fees. Historically we have increased our overall user fees in fairly small annual increments, using debt financing to smooth the impact of the capital improvement program. With the public interest in improved effluent quality now may be a good time to increase the rates more on the front-end of the capital improvement program to match the program itself and to reduce the long-term impacts of debt financing. PROJECT/CONTRACT COST SUMMARY Reducing the reserve requirements, increasing user fees more quickly and reducing borrowing can be shown to reduce the total fees paid by users over the long term. The cost of this reduction is higher fees in the immediate future. The potential savings to a residential user could be approximately $150 over the next 20 years. BUDGET IMPACT This item has been budgeted. (Line item: ) This item has been budgeted, but there are insufficient funds. This item has not been budgeted. Not applicable (information item) ADDITIONAL INFORMATION The attached Staff Report explains the District’s revenue sources and reserves policy and discusses alternative rate increase philosophies. Staff is proposing a change in the reserve policy that relieves some of the need for rate increases and borrowing. \\FILER-1\ocsd\dept\gmo\120\BS\Agenda\Archived-agenda\Archived Committees\FAHR\2003\FAHR2003 drafts\0303\12.03-17.Reserves Policy.doc Revised: 8/20/01 Page 2 ALTERNATIVES Maintain the existing reserves policy Adopt other changes to the policy Propose other, middle of the road, user fee increase schedules CEQA FINDINGS N/A ATTACHMENTS 1. Staff Report 2. CIP Chart 3. Cash Flow Secondary SPU & Existing Reserve Policy 4. Cash Flow Secondary SPU & Proposed Reserve Policy - 10% Rate Increase Limitation 5. Cash Flow Secondary SPU & Proposed Reserve Policy - Rapid Rate Increase, 40%/Yr. GGS:lc Page 1 FAHR COMMITTEE Meeting Date 03/12/03 To Bd. of Dir. 03/26/03 AGENDA REPORT Item Number FAHR03-18 Item Number Orange County Sanitation District FROM: Lisa Tomko, Director of Human Resources Originator: Jeff Reed, Human Resources Manager SUBJECT: TEMPORARY EMPLOYMENT SERVICES GENERAL MANAGER'S RECOMMENDATION 1. Approve an increase to the Temporary Employment Services contract for an additional $500,000, increasing the total authorized amount from $1,000,000 to an amount not to exceed $1,500,000 for the remainder of FY02/03; and, 2. Approve an increase to the Temporary Employment Services contract from $1,000,000 to an amount not to exceed $1,750,000 for FY 03/04. SUMMARY The District contracts for temporary services to support both capital and non-capital projects. Temporary staffing has been utilized beyond projected levels for FY 02-03 as a result of an increase in capital improvement projects within the Information Technology (IT) Department. Temporary services charges associated with IT contract Programmers currently working on capital projects for the Technical Services and Engineering Departments through December 31, 2002 were $297,507. This amount equals 30% of FY 02-03 total temporary services charges of $978,415. This charge will create a budget shortfall to the authorized $1,000,000 Temporary Services purchase order (PO). Additionally, temporary staffing funds were reduced during the first half of FY 02/03 by $225,000 due to the District’s commitment to the Disinfection Project. As of December 31, 2002, the temporary services allocated to the Disinfection Project reduced the total temporary services budget by 25%. District staff has determined the temporary services support for the Disinfection Project will be ongoing for approximately the next six (6) to nine (9) months. It is anticipated that the total cost to support the Disinfection Project with temporary services for this year will be approximately $450,000, or 50% of the total temporary services blanket PO. The unforeseen expense associated with the Disinfection Project impacted the amount originally budgeted for administrative temporary staffing and will contribute to the premature depletion of the original $1,000,000 authorized by the blanket PO. Based on the IT Department’s temporary services contract worker usage in FY 01-02 and the reduction in the Engineering Department’s contract labor paid through the Temporary Services PO in FY 02-03, the $1,000,000 blanket PO was anticipated to be adequate to cover the non-capital temporary labor costs, which would remain relatively constant. However, as the IT department increased the number of projects and the Technical Services Department implemented the chlorine residual testing and Page 2 monitoring for the Disinfection Project, it became apparent that the temporary services costs would exceed the forecasted and approved blanket PO amount. As of December 31, 2002, $732,000 had been spent for temporary labor. IT related capital projects and the Disinfection Project accounted for 52% of this expenditure. Therefore, a deficiency of $500,000 is anticipated based on the additional temporary services costs absorbed by the existing temporary services blanket PO. Aside from the capital projects and Disinfection Project, temporary resources will continue to be required to support Customer and Network Support, Process Control Integration, and administrative services. BUDGET IMPACT This item has been budgeted. This item has been budgeted, but there are insufficient funds. This item has not been budgeted. Not applicable (information item) ADDITIONAL INFORMATION The Board approved Temporary Employment Services Agenda Report (AR) dated June 26, 1999 estimated a maximum of $1,000,000 per year of expenditures for total temporary employment services for the District, which included capital as well as non-capital related temporary services. Projected costs for FY 02-03, which were provided as information only in the Board approved Temporary Employment Services AR dated May 24, 2002 were $3,870,000. Based on current projections, the District will need an additional $500,000 in temporary employment services for FY 02-03. This projection assumes the continued use of temporary staffing for the IT capital projects. The total amount for FY 02-03 of $1,500,000, or 39% of the projected $3,870,000, will provide for non-capital as well as IT capital related temporary services workers to be utilized during the remainder of FY 02-03. On June 26, 1999, the Board approved a request for $1,000,000 in funding for temporary employment services, which included the IT capital improvement contract staff. Due to the fact that the staff recommendation did not forecast the use of the temporary services blanket PO for capital-related programs, the $1,000,000 did not accurately reflect the needs of the District. Therefore, a request for additional funding was presented to the Board on May 24, 2000 to cover the FY 00-01 deficiency for temporary services supporting the Capital Improvement Program (CIP). It was also intended to provide a forecast for additional funds for the following three years; however, the forecasted funds are subject to approval by the board when the budget for each of those three years is adopted each June. The $297,507 cost of the IT supported capital-related temporary services is paid by the capital project budget. These costs do not impact the cost per million gallons of wastewater treated; however, these costs are booked against the $1,000,000 temporary services budget as a method of ensuring the appropriate use of temporary staffing. Page 3 ALTERNATIVES 1) Do not authorize the increase and suspend the use of temporary services. 2) Hire full time regular employees on Limited Term Contracts to support a Division through a peak period. Limited term employees are regular full time employees placed on contracts with a specific end date. These employees, during the duration of their contracts, would be entitled to all benefits and provisions of regular full time employees. CEQA FINDINGS Not applicable. ATTACHMENTS Temporary Service Totals FY02/03 (Total temporary services expenditures by agency against the PO through February 2003) \\FILER-1\ocsd\dept\gmo\120\BS\Agenda\Archived-agenda\Archived Committees\FAHR\2003\FAHR2003 drafts\0303\14.03-19.Financial Report Questions.doc Revised: 8/20/98 Page 1 FAHR COMMITTEE Meeting Date 03/12/03 To Bd. of Dir. AGENDA REPORT Item Number FAHR03-19 Item Number Orange County Sanitation District FROM: Gary G. Streed, Director of Finance Originator: Michael D. White, Controller SUBJECT: QUARTERLY INVESTMENT MANAGEMENT PROGRAM REPORT FOR THE PERIOD OCTOBER 1, 2002 THROUGH DECEMBER 31, 2002 GENERAL MANAGER'S RECOMMENDATION Information item only – review of Director Christy’s questions from the February Board of Directors’ meeting. Receive and file the Quarterly Investment Management Program Report for the period October 1, 2002 through December 31, 2002. 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 liquidity and anticipated revenues are available for the District to meet budgeted expenditures for the next six months. The District's portfolios do not include any reverse repurchase agreements or derivative securities. PROJECT/CONTRACT COST SUMMARY N/A BUDGET IMPACT This item has been budgeted. (Line item: ) This item has been budgeted, but there are insufficient funds. This item has not been budgeted. Not applicable (information item) \\FILER-1\ocsd\dept\gmo\120\BS\Agenda\Archived-agenda\Archived Committees\FAHR\2003\FAHR2003 drafts\0303\14.03-19.Financial Report Questions.doc Revised: 8/20/98 Page 2 ADDITIONAL INFORMATION Performance Reports The Quarterly Strategy Review, prepared by PIMCO, and the Investment Measurement Service Quarterly Review, prepared by Callan Associates, are attached for reference. Also attached are Long-Term and Liquid Operating Monies Summary of Performance Data and Portfolio Statistics charts that depict the performance results, estimated yield and duration, credit quality, and sector diversification of the District's portfolios, as of September 30, 2002 and December 31, 2002. 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 October 1 through December 31, 2002. Portfolio Performance Summary Quarter Ended December 31, 2002 Liquid Operating Monies (%) Long-Term Operating Monies (%) Total Rate of Return Benchmark(1) Total Rate of Return Benchmark(1) 3 Months 0.48 0.39 1.03 1.35 6 Months 0.91 0.82 4.50 4.83 9 Months 1.53 1.26 7.50 8.02 12 Months 2.03 1.70 7.92 7.91 Since inception 30 Sept. 95 4.78 4.60 6.83 6.93 Market Value $64.3M $321.2M Average Quality “AAA” “AAA” Current Yield (%) 2.6 5.5 Estimated Yield to Maturity (%) 1.6 2.5 Quarterly Deposits (Withdrawals) $20.0M $0.0M Estimated Annual Income $1.7M $16.0M (1) Benchmarks:  Liquid Operating Portfolio: 3-Month Treasury Bill Index  Long-Term Operating Portfolio: Merrill Lynch Corp/Govt. 1-5 Year Bond Index \\FILER-1\ocsd\dept\gmo\120\BS\Agenda\Archived-agenda\Archived Committees\FAHR\2003\FAHR2003 drafts\0303\14.03-19.Financial Report Questions.doc Revised: 8/20/98 Page 3 Portfolio Market Values Comparative marked-to-market quarter-end portfolio values are shown in the following table, and in the attached bar chart. Quarter Ending Liquid Operating Monies ($M) Long-Term Operating Monies ($M) 31 Mar. 02 43.6 355.8 30 June 02 43.9 366.1 30 Sept. 02 44.1 317.8 31 Dec. 02 64.3 321.2 ALTERNATIVES N/A CEQA FINDINGS N/A ATTACHMENTS 1. PIMCO Report 2. Callan Report 3. Quarter End Portfolio Market Value Bar Chart 4. Long-Term and Liquid Operating Monies Portfolio Characteristics Charts (2) 5. Historical Yield Curve Graph