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HomeMy WebLinkAbout2003-04-09 MINUTES OF FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE MEETING Orange County Sanitation District Wednesday, April 9, 2003, 5:00 p.m. A meeting of the Finance, Administration and Human Resources Committee of the Orange County Sanitation District was held on April 9, 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 James W. Silva Shirley McCracken, Board Chair Steve Anderson, Vice Board Chair Directors Absent: STAFF PRESENT: Blake P. Anderson, General Manager Gary Streed, Director of Finance/Treasurer Lisa Tomko, Director of Human Resources Carol Beekman, Communications Services Manager David Ludwin, Director of Engineering Bob Ooten, Director of Operations & Maintenance Mike White, Controller Jeff Reed, Human Resources Manager Penny Kyle, Committee Secretary Sonya Wassgren OTHERS PRESENT: Thomas L. Woodruff, General Counsel Steve Filarsky, Special Labor Counsel Don Hughes Toby Weissert Randy Fuhrman Ryal Wheeler Mark Conway Mark Mutz Bob Geggie (2) APPOINTMENT OF CHAIR PRO TEM No appointment was necessary. (3) PUBLIC COMMENTS Mark Mutz spoke to the Directors regarding the District’s existing retirement program and its inferiority as compared to other agencies within Orange County. He encouraged the Directors to consider enhancing the retirement program. Minutes of the Finance, Administration and Human Resources Committee Meeting Page 2 April 9, 2003 Randy Fuhrman requested he be allowed to speak prior to the consideration of Item 11(a). (4) REPORT OF THE COMMITTEE CHAIR Chair Brady reminded Directors that a Board Workshop was scheduled for April 16 at 6:00 p.m. to discuss the CIP Validation and the Full Secondary Treatment Implementation Schedule. He stated items would be taken out of order following the consent calendar as follows: Item 12(a), Items 13(a) (1) and (2), Item 11(a) and Item 11(b). (5) REPORT OF THE GENERAL MANAGER The General Manager had no report. (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 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 a letter would be sent out this month to those communities and businesses in Huntington Beach that would be impacted by the construction of the Warner Avenue Sewer Relief project. A neighborhood meeting is scheduled to be held on April 29 to address the concerns of the citizens in the area. In response to questions from the prior month’s meeting by Director Neugebauer on the Groundwater Replenishment System (GWRS) television ad, the committee viewed the commercial. Donna Carter of Johnson/Ukropina, the agency that created the television commercial, reviewed the history of how the ad was created and the screening process used by OCWD and OCSD before the ad was finalized and released. Directors requested the review and input process for additional ads include review by additional Sanitation District Directors to ensure the appropriate message is conveyed. (9) REPORT OF GENERAL COUNSEL Thomas L. Woodruff, General Counsel, provided the Directors with a brief update on the SAWPA issues. A Joint Management Committee meeting is scheduled for April 15. A letter was sent to SAWPA by Chair McCracken requesting SAWPA provide a proposal for resolution to the cost allocation issues by April 8. Chair McCracken received a response from SAWPA via a fax sent to Anaheim City Hall at 4:00 p.m., on April 7. The proposal will be reviewed and a report will be provided to the Board of Directors at the April 23, 2003 meeting. He briefly discussed the attempts to get this issue placed on the JMC agenda for the April 15 meeting. SAWPA agreed to mail a supplemental agenda the following day. Minutes of the Finance, Administration and Human Resources Committee Meeting Page 3 April 9, 2003 (10) CONSENT CALENDAR ITEMS a. The Chair ordered that the March 12, 2003 minutes for the Finance, Administration and Human Resources Committee meeting be deemed approved, as mailed. b. FAHR03-20 Recommend to the Board of Directors to receive and file Treasurer’s Report for the month of March 2003. c. FAHR03-21 Receive and file Certificate of Participation (COP) Monthly Report. d. FAHR03-22 Receive and file Employment Status Report as of March 27, 2003. e. FAHR03-23 Receive and file OSHA Incidence Rates and Workers’ Compensation Claims and Costs Report. f. FAHR03-24 Recommend to the Board of Directors to approve SAFETY-POL-102 – Personal Protective Equipment 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 10(a) through (f) under Consent Calendar. END OF CONSENT CALENDAR (12) INFORMATIONAL PRESENTATIONS a. FAHR03-27 Forecast of Health Insurance Premiums for FY2003/2004 Lisa Tomko introduced Mark Conway, District’s insurance broker, who reviewed projected cost increases of approximately 20% for medical benefits, and escalated prescription costs. District benefit plans have not changed in the past five years, and he suggested that alternatives to existing benefits could assist in reducing premium costs. (13) CLOSED SESSION The Committee convened in Closed Session at 5:32 p.m. pursuant to Government Code Section 54957.6 and 54956.8 to discuss and consider Agenda Item Nos. 13(a)(1) and (2). 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 were no reportable actions taken by the Committee re Agenda Item Nos. 13(a)(1) or (2). RECONVENE IN REGULAR SESSION: At 6:30 p.m., the Committee reconvened in regular session. Minutes of the Finance, Administration and Human Resources Committee Meeting Page 4 April 9, 2003 (11) ACTION ITEMS a. FAHR03-25 Consider Sewer Service User Fee alternatives for FY 03/04, 04/05, 05/06, 06/07, and 07/08 to recommend to the Board of Directors for approval. Randy Fuhrman encouraged the Directors to consider increasing existing sewer service user fees from $87.50 per year to $180 per year. The long-term savings in interest costs would be billions of dollars. Gary Streed, Director of Finance/Treasurer, reviewed the various alternatives of increasing user fees, and the impacts of those alternatives to the debt policy issues and reserves over a 20-year period. Directors entered into discussion regarding rate increases by all levels of government due to the state budget crisis, and the impact of these increases to residents and businesses. Also discussed was the decision to approve full secondary treatment in July 2002, and the costs that must be paid as a result of that decision. A motion was made and seconded to increase the rates by 20% and borrow $1.24 billion during the construction period. Following further discussion, a substitute motion was made to increase sewer service user fees by 10%, borrow $2.31 billion, and revisit user fees in one year. The motion failed by lack of a second. A substitute motion was made and seconded to increase sewer service user fees by 15%, and borrow $1.59 billion, and revisit user fees in one year. MOTION: It was moved, seconded and duly carried to recommend approval to the Board of Directors to increase sewer service user fees by 15%, and borrow $1.59 billion, and revisit user fees in one year by a vote of 5 ayes and 4 nays. b. FAHR03-26 Recommend to the Board of Directors to: (1) Direct staff to issue up to $280 million in new fixed-rate Certificates of Participation (COP) debt; (2) Approve Amendment No. 1 to the Consultant Services Agreement with Public Resources Advisory Group, for a two-year period for FY03/04, providing for financial advisory services, for an amount not to exceed $75,000; and, (3) Authorize the General Manager to negotiate and enter into a sole source Consultant Services Agreement with Orrick, Herrington & Sutcliffe to provide bond counsel services in an amount as yet to be determined. Minutes of the Finance, Administration and Human Resources Committee Meeting Page 5 April 9, 2003 Mike White, Controller, reviewed the COP program, and advised the agreement with Orrick, Herrington & Sutcliffe was being recommended in an amount not to exceed $125,000. MOTION: It was moved, seconded and duly carried to recommend approval to the Board of Directors. (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 May 14, 2003 at 5 p.m. (17) ADJOURNMENT The Chair declared the meeting adjourned at 7:37 p.m. Submitted by: _______________________________ Penny M. Kyle FAHR Committee Secretary G:\wp.dta\agenda\FAHR\FAHR2003\0403\040903 FAHR Minutes.doc April 2, 2003 NOTICE OF MEETING FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE ORANGE COUNTY SANITATION DISTRICT WEDNESDAY, APRIL 9, 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 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 March 10, 2004 March 24, 2004 *Meetings being held the third Wednesday of the month. ROLL CALL FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE Meeting Date: April 9, 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, APRIL 9, 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). April 9, 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 March 12, 2003 Finance, Administration and Human Resources Committee meeting. b. FAHR03-20 Recommend to the Board of Directors to receive and file Treasurer’s Report for the month of March 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. FAHR03-21 Receive and file Certificate of Participation (COP) Monthly Report. d. FAHR03-22 Receive and file Employment Status Report as of March 27, 2003. e. FAHR03-23 Receive and file OSHA Incidence Rates and Workers’ Compensation Claims and Costs Report. April 9, 2003 3 f. FAHR03-24 Recommend to the Board of Directors to approve SAFETY-POL-102 – Personal Protective Equipment Policy, as provided for in Resolution No. OCSD 02-5, regarding the District’s Injury and Illness Prevention Program Policy. END OF CONSENT CALENDAR Consideration of items deleted from Consent Calendar, if any. (11) ACTION ITEMS a. FAHR03-25 Consider Sewer Service User Fee alternatives for FY 03/04, 04/05, 05/06, 06/07, and 07/08 to recommend to the Board of Directors to approve. (Gary Streed – 30 minutes) b. FAHR03-26 Recommend to the Board of Directors to: 1) Direct staff to issue up to $280 million in new fixed-rate Certificates of Participation (COP) debt; and, 2) Approve Amendment No. 1 to the Consultant Services Agreement with Public Resources Advisory Group, for a two-year period for FY03/04, providing for financial advisory services, for an amount not to exceed $75,000; 3) Authorize the General Manager to negotiate and enter into a sole source Consultant Services Agreement with Orrick, Herrington & Sutcliffe to provide bond counsel services in an amount as yet to be determined. (Mike White – 15 minutes) (12) INFORMATIONAL PRESENTATIONS a. FAHR03-27 Forecast of Health Insurance Premiums for FY2003/2004 (Lisa Tomko – 10 minutes) April 9, 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). 2. Conference with Real Property Negotiator (Government Code Section 54956.8): Property: 1221 West Coast Highway, Newport Beach, California, 92663 District Negotiator: Thomas L. Woodruff, General Counsel Negotiating Parties: International Bay Clubs, Incorporated Under Negotiation: Instruct for price, terms and conditions for the purchase, sale, exchange, or lease of subject property 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 May 14, 2003, at 5 p.m. (17) ADJOURNMENT April 9, 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. \\FILER-1\ocsd\dept\gmo\120\BS\Agenda\Archived-agenda\Archived Committees\FAHR\2003\FAHR2003 drafts\0403\03-20.Treasurer Report.doc Page 1 FAHR COMMITTEE Meeting Date 04/09/03 To Bd. of Dir. 04/23/03 AGENDA REPORT Item Number FAHR03-20 Item Number Orange County Sanitation District FROM: Gary Streed, Director of Finance Originator: Michael White, Controller SUBJECT: TREASURER’S REPORT FOR THE MONTH OF MARCH 2003 GENERAL MANAGER'S RECOMMENDATION Receive and file Treasurer’s Report for the month of March 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 Investment Policy. The 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 continues to monitor the credit 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. BUDGET IMPACT This item has been budgeted. (Line item: ) Not applicable (information item) \\FILER-1\ocsd\dept\gmo\120\BS\Agenda\Archived-agenda\Archived Committees\FAHR\2003\FAHR2003 drafts\0403\03-20.Treasurer Report.doc Page 2 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. On March 19, 2003, a transfer of $13 million from the PIMCO Short-term Portfolio to LAIF was made to fund current operating expenses. 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 March 31, 2003 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 $ 13,484,844 4,793,778 49,016,216 321,783,364 5,000 $389,083,202 $34,706,388 1.95 (1) 1.16 (1) 1.51 2.64 N/A 4.36 (1) This is the annualized yield for the month of February. The March annualized rate was not available as of the date of this report. 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:lc April 2, 2003 FAHR COMMITTEE AGENDA CALENDAR Month Item Action May Meet & Confer Status Information May Consider contract for Bond Counsel Action May Consider Preliminary 2003/04 Budget Information May Consider 9-month Financial Report Action May Consider Quarterly Investment Management Program Report Action May Temporary Services Cost Comparison Report Information May HR Policies & Procedures Update Action May Safety Policies Action May 457 Plan Document Amendment Report Action June Revised Delegation of Authority Resolution Action June Meet & Confer Status Information June Consider Final 2003/04 Budget Action June General Manager Approved Purchases Action June Consider Internal Audit Firm Action June Consider 2003/04 Connection Fees Action June Consider Bids for new COPs Action July Review Insurance Renewals Information July Consider Revised Investment Policy Action 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 \\FILER-1\ocsd\dept\gmo\120\BS\Agenda\Archived-agenda\Archived Committees\FAHR\2003\FAHR2003 drafts\0403\06.03-21.COP.doc Revised: 8/20/01 Page 1 FAHR COMMITTEE Meeting Date 03/12/03 To Bd. of Dir. AGENDA REPORT Item Number FAHR03-21 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 – MARCH 2003 GENERAL MANAGER'S RECOMMENDATION Receive and file Certificates of Participation (COP) Monthly Report for the month of March 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. \\FILER-1\ocsd\dept\gmo\120\BS\Agenda\Archived-agenda\Archived Committees\FAHR\2003\FAHR2003 drafts\0403\06.03-21.COP.doc Revised: 8/20/01 Page 2 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 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 \\FILER-1\ocsd\dept\gmo\120\BS\Agenda\Archived-agenda\Archived Committees\FAHR\2003\FAHR2003 drafts\0403\06.03-21.COP.doc Revised: 8/20/01 Page 3 OCSD COP DAILY RATE HISTORY REPORT MARCH 2003 0 1 2 3 4 5 6 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 5- M a r - 0 3 19 - M a r - 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\0403\06.03-21.COP.doc Revised: 8/20/01 Page 4 \\FILER-1\ocsd\dept\gmo\120\BS\Agenda\Archived-agenda\Archived Committees\FAHR\2003\FAHR2003 drafts\0403\06.03-21.COP.doc Revised: 8/20/01 Page 5 COP RATE HISTORY COMPARISON OF HIGHEST & LOWEST RATES 0.75 1 1.25 1.5 Oct, 02 Nov, 02 Dec, 02 Jan, 03 Feb, 03 Mar, 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\0403\06.03-21.COP.doc Revised: 8/20/01 Page 6 DAILY COP RATE HISTORY COMPARISON OF MONTHLY AVERAGES APR 2002 - MAR 2003 OCSD $218.6M $46M Series 2000 Series 93 Ref Composite PaineWebber PaineWebber Index * 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 1.40Oct-02 1.61 1.61 1.60Nov-02 1.33 1.33 1.32Dec-02 1.05 1.05 1.04Jan-03 0.85 0.85 0.85Feb-03 1.05 1.05 1.04Mar-03 1.05 1.05 1.05 AVERAGE 1.24%1.24%1.24% ESTIMATED ANNUAL INTERESTPAYMENTS PER $100M PAR AMOUNT 1,240,833$ 1,240,833$ 1,236,667$ * 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\0403\07.03-22.Employment Status.doc 3/28/03 Page 1 FAHR COMMITTEE Meeting Date 4/9/03 To Bd. of Dir. AGENDA REPORT Item Number FAHR03-22 Item Number Orange County Sanitation District FROM: Lisa Tomko, Director of Human Resources & Employee Development Originator: Denise Martinez, Human Resources Analyst SUBJECT: EMPLOYMENT STATUS REPORT AS OF MARCH 27, 2003. GENERAL MANAGER'S RECOMMENDATION Receive and file the Employment Status Report. SUMMARY Total FTE headcount at the District as of MARCH 27, 2003 was 540. 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 540 as of MARCH 27, 2003. The actual number of employees was 549. There were three promotions during the month of March. • Bobby Unsell, Automotive/Heavy Equipment Technician to Lead Mechanic (O & M Plant Facilities Maintenance) • Kelly Christensen, Principal Environmental Specialist to Source Control Supervisor (Source Control) • Tim Laughlin, Facilities Worker/Painter to Lead Facilities Worker (O & M Plant Facilities Maintenance) \\FILER-1\ocsd\dept\gmo\120\BS\Agenda\Archived-agenda\Archived Committees\FAHR\2003\FAHR2003 drafts\0403\07.03-22.Employment Status.doc 3/28/03 Page 2 There were five new employees hired during the month of March. • Engineer (O & M Process Engineering) • Engineer (Engineering & Construction Management) • Engineer (Engineering & Construction Management) • Senior Environmental Specialist (Environmental Compliance & Monitoring) • Senior Information Technology Analyst (Customer & Network Support) ALTERNATIVES Not applicable. CEQA FINDINGS Not applicable. ATTACHMENTS March 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\0403\07.03-22.Employment Status.doc 3/28/03 Page 3 3/27/2003 A B C D E F G H I J K L M N O P QRegularRegularActualBudgetLimitedContractInternsActualBudgetActualBudget"Vacant"Regular Part-time Part-time Reg FTE Reg FTE Term Workers Total Contingent Description + Total PosititionsFull-time 20 hours 30 hours LOA Count 02-03 Other 02-03 of Changes Budget Description No.Recrtmnts 02-03 02-03∑ ( A : D )∑ ( G : I )E + J + N F + K ( P - O ) 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 2.00 0.00 120 - 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 9.00 0.50 130 - 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 6.00 0.00 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 17.00 0.50 210 - 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 2.00 0.00 220 - 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 17.00 0.25 230 - 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 20.00 19.50 (0.50) Finance 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 38.50 (0.25) 510 - HR Department Administration 3.00 0.00 0.00 0.00 3.00 2.00 0.00 0.00 3.00 3.00 7.60Realloc Mgr frm 520,530,540 1.00 Intern (220/880), Sr HR Analyst 2.00 8.00 9.60 1.60 520 - Employee Development 1.00 0.00 0.00 0.00 1.00 3.30 0.00 0.00 0.00 0.00 0.00Realloc Mgr (.3) to 510; 1.75 to 540 -2.05 Training Spvsr 1.00 2.00 3.30 1.30 530 - 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 (.3) to 510 -0.30 7.00 7.30 0.30 540 - Human Resources 5.00 0.00 0.00 0.00 5.00 8.15 0.00 0.00 0.00 0.00 0.00Realloc Mgr(.4) to 510; 1.75 from 520 1.35 HR Asst, P/T Ofc Asst, HR Analyst 2.75 7.75 8.15 0.40 Human Resources Totals 16.00 0.00 0.00 0.00 16.00 20.75 0.00 0.00 3.00 3.00 7.60 0.00 5.75 24.75 28.35 3.60 610 - 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 2.00 0.00 620 - Environmental Compl. & Monit.19.00 0.00 0.00 1.00 20.00 22.00 0.00 0.00 0.00 0.00 0.20Reg Spec to 640 (7/26)-1.00 20.00 21.20 1.20 630 - Environmental Laboratory 32.00 1.50 0.00 0.50 34.00 34.00 0.00 0.00 0.00 0.00 0.00 34.00 34.00 0.00 640 - Source Control 34.00 0.00 0.00 1.00 35.00 36.00 0.00 0.00 0.00 0.00 0.00Reg Spec from 620 (7/26)1.00 35.00 37.00 2.00 Technical Services Totals 87.00 1.50 0.00 2.50 91.00 94.00 0.00 0.00 0.00 0.00 0.20 0.00 0.00 91.00 94.20 3.20 710 - 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 3.00 0.00 740 - 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 14.00 1.00 750 - 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 15.75 3.25 760 - Engineering & Construction 44.00 0.00 0.00 1.00 45.00 44.00 2.00 0.00 0.00 2.00 2.00J. Harris from 750 1.00 Assoc. Eng III 1.00 48.00 46.00 (2.00) Engineering Totals 70.00 0.00 1.50 1.00 72.50 76.75 2.00 0.00 0.00 2.00 2.00 2.00 76.50 78.75 2.25 810 - 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 2.00 0.00 420 - 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 Admin Asst, Sr Mechanic 2.00 25.00 24.00 (1.00) 430 - Facilities Maintenance 28.00 0.00 0.00 0.00 28.00 30.00 0.00 0.00 0.00 0.00 0.00 Fac Worker, Lead Mech, Mech 3.00 31.00 30.00 (1.00) 820 - O & M Process Support 11.00 0.00 0.00 0.00 11.00 10.00 0.00 0.50 0.00 0.50 2.50 11.50 12.50 1.00 830 - 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 37.50 1.75 840 - Plant 2 Operations 46.00 0.00 0.00 1.00 47.00 44.50 0.00 0.00 0.00 0.00 0.00 47.00 44.50 (2.50) 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, Sr Mech/Mech 2.00 57.00 55.50 (1.50) 860 - Electrical & Instrumentation Mtce 52.00 0.00 0.00 1.00 53.00 54.50 0.00 0.00 0.00 0.00 0.00 Elect. Tech II 1.00 54.00 54.50 0.50 880 - 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 10.00 0.00 Operations & Maintenance Totals 262.00 0.00 0.75 2.00 264.75 268.00 0.00 0.50 0.00 0.50 2.50 8.00 273.25 270.50 -2.75 910 - 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 2.00 0.00 930 - Customer & Network Support 14.00 0.00 0.00 1.00 15.00 15.00 0.00 0.00 0.00 0.00 0.00 IT Analyst I 1.00 16.00 15.00 (1.00) 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 12.00 2.00 950 - Process Controls Integration 10.00 0.00 0.00 0.00 10.00 11.00 0.00 0.00 0.00 0.00 0.00Position Downgrade Sr IT Analyst 1.00 11.00 11.00 0.00Information Technology Totals 36.00 0.00 0.00 1.00 37.00 40.00 0.00 0.00 0.00 0.00 0.00 2.00 39.00 40.00 1.00 Staffing Totals 521.00 3.00 3.00 7.50 534.50 555.00 2.00 0.50 3.00 5.50 12.30 19.75 559.75 567.30 7.55*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 Totals All Current Recruitments \\FILER-1\ocsd\dept\gmo\120\BS\Agenda\Archived-agenda\Archived Committees\FAHR\2003\FAHR2003 drafts\0403\07.03-22.Employment Status.doc 3/28/03 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 has been one DART Case in 2003 (January - February) (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 1.15 for 2003 (January – February). 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 2003 (January – February) 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 2.30 for 2003 (January – February). 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 – February 2003 totaled $197,041.17. 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 $104,788.82, which resulted in savings of $92,252.35 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 $331,769 7/1/01 – 6/30/02 30 9 $181,113 7/1/02 – 6/30/03 12 2 YTD $20,662 “Total Incurred” includes medical bills, temporary disability payments to employees, legal costs, and a claim reserve account. FAHR COMMITTEE Meeting Date 04/09/03 To Bd. of Dir. AGENDA REPORT Item Number FAHR03-23 Item Number Orange County Sanitation District FROM: Lisa Tomko, Director of Human Resources 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 was one DART Case District-wide for the period of January-February 2003. The industry average is 6.4 for the DART Case Incidence Rate while the District Incident Rate is 1.50 for the period of January-February 2003. There have been two OSHA Recordable Accidents District-wide for the period of January-February 2003. The industry average is 9.9 for the Total Injury Frequency Rate while the District Incident Rate is 2.30 for the period of January-Februrary 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 12. Two of these claims are still open. The costs associated with these claims for year-to-date is $20,662, 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\0403\08.03-23.OSHA Report.doc Revised: 8/20/01 Page 2 ADDITIONAL INFORMATION The District had one DART case and one other injury that required medical treatment for the period of January-February 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. ORANGE COUNTY SANITATION DISTRICT Safety and Health Division SAFETY-POL-102 Personal Protective Equipment Program APPROVALS Approved by: Date:________ Director of Human Resources Approved by: Date:________ Manager, Human Resources Approved by: Date:________ Safety and Health Supervisor PROCEDURE REVISION HISTORY Rev. Date Approval This document is controlled when viewed online. When downloaded and printed, this document becomes UNCONTROLLED, and users should check the Safety and Health public folder to ensure that they have the latest version. Personal Protective Equipment Program SAFETY-POL-102 2 of 6 Contents 1. Purpose ............................................................................................... 3 2. Definitions ........................................................................................... 3 3. Requirements ...................................................................................... 4 3.1 Minimum Requirements for Personal Protective Equipment .................... 4 4. Responsibilities .................................................................................. 4 4.1 Safety and Health Division ....................................................................... 4 4.2 Employee Development Division ............................................................. 5 4.3 Purchasing ............................................................................................... 5 4.4 Warehouse .............................................................................................. 5 4.5 District Management and Supervision ..................................................... 6 4.6 Employees, Contractors, Consultants, Visitors and Volunteers ............... 6 5. References .......................................................................................... 6 6. Attachments ........................................................................................ 6 Orange County Sanitation District Number: SAFETY-POL-102 Revision Number: 0 Personal Protective Equipment Program Date: April 23, 2003 Approved by: Lisa Tomko 3 of 6 1. Purpose The purpose of the Personal Protective Equipment (PPE) Policy is to establish the: • Requirements for the selection, use, storage, care and maintenance of personal protective equipment. • Training requirements for personnel using personal protective equipment. The District shall provide required personal protective equipment to all employees at no expense to the employee. Exceptions to this policy are for personal preferences for upgrades of equipment issued by the District’s Warehouse or other personal protective equipment such as prescription safety glasses or protective footwear District provided personal protective equipment is to be used only on District business. This policy applies to all District employees, volunteers and visitors. Contractors, consultants, and service representatives must wear the appropriate personal protective equipment as specified in District related contracts and/or purchase orders. 2. Definitions Personal Protective Equipment (PPE) Equipment that is distributed to and worn by employees to protect them from work place physical, chemical, and/or environmental hazards. Personal Protective Equipment Program SAFETY-POL-102 4 of 6 3. Requirements 3.1 Minimum Requirements for Personal Protective Equipment All personal protective equipment shall meet or exceed the requirements set forth in national consensus standards for personal protective equipment or applicable California Occupational Safety and Health Requirements. 4. Responsibilities 4.1 Safety and Health Division The Safety and Health Division shall be responsible for the following: 1. Develop a written Personal Protective Equipment Program that includes the following elements: a. Hazard Assessments for personal protective equipment for use by for District employees. b. Personal Protective Equipment use areas. c. Signage and labeling. d. Care, maintenance and inspection of personal protective equipment. e. Provisions for discarding used, damaged or obsolete personal protective equipment. f. Medical surveillance requirements when applicable. g. Training and education. h. Program administration. 2. Maintain a list of District approved personal protective equipment. 3. Initiate annual program reviews in accordance with the requirements of SAFETY-SP-102.1 Personal Protective Equipment Program. Personal Protective Equipment Program SAFETY-POL-102 5 of 6 4.2 Employee Development Division The Employee Development Division shall be responsible for the following: 1. Document employee training in the Training Records Management System database. 4.3 Purchasing The Purchasing Division shall be responsible for: 1. Select vendors and establish contracts or purchase orders to procure personal protective equipment. 2. Procure only personal protective equipment listed on the “Approved personal protective equipment” list maintained by the Safety and Health Division. a. Equivalent equipment substitutions shall not be allowed. 3. Notify the Warehouse and the Safety and Health Division when identical equipment is not available. 4.4 Warehouse The Warehouse shall be responsible to: 1. Ensure stocks of personal protective equipment meet anticipated needs to ensure that employees have the necessary tools and equipment to safely perform their jobs. 2. Track usage of personal protective equipment. a. Notify the Safety and Health Division regarding personal protective equipment that is not being used. 3. Issue personal protective equipment to employees as requested. a. Respiratory Protective equipment and fall protection equipment shall be issued only with the written approval of Safety and Health. Personal Protective Equipment Program SAFETY-POL-102 6 of 6 4.5 District Management and Supervision 1. Procure and make available appropriate personal protective equipment for employees. 2. Enforce personal protective use requirements as outlined in SAFETY-SP-102.1 Personal Equipment Program. 4.6 Employees, Contractors, Consultants, Visitors and Volunteers 1. Employees, visitors and volunteers are responsible for wearing appropriate personal protective equipment while at district facilities. 2. It is the responsibility of the District representative to ensure that contractors, visitors, consultants and volunteers wear the appropriate personal protective equipment. a. The District representative may provide District issued personal protective equipment if applicable. 5. References SAFETY-POL-101 Injury and Illness Prevention Program SAFETY-SP-102.1 Personal Protective Equipment Program 6. Attachments None FAHR COMMITTEE Meeting Date 04/09/03 To Bd. of Dir. 04/23/03 AGENDA REPORT Item Number FAHR03-24 Item Number Orange County Sanitation District FROM: Lisa Tomko, Director of Human Resources ORIGINATOR: James Matte, Safety and Health Supervisor SUBJECT: Safety Policy, Personal Protective Equipment Policy GENERAL MANAGER'S RECOMMENDATION Approve SAFETY-POL-102 – Personal Protective Equipment, as provided for in Resolution No. OCSD 02-5, regarding the District’s Injury and Illness Prevention Program Policy. SUMMARY The District is implementing a written policy to adopt portions of the General Industry Safety Orders, found in Title 8 of the California Code of Regulations that require specific personal protective equipment be worn when performing work in which hazards cannot be eliminated by the use of engineering controls. This new policy requires that personal protective equipment is worn in certain areas of the plant and where posted. The document presented for your review and adoption represents the districts written Personal Protective Equipment Policy that conforms to the elements defined in the General Industry Safety Orders, Title 8 of the California Code of Regulations. 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 Policy required under the General Industry Safety Orders, found in Title 8 of the California Code of Regulations. \\FILER-1\ocsd\dept\gmo\120\BS\Agenda\Archived-agenda\Archived Committees\FAHR\2003\FAHR2003 drafts\0403\09.03-24.Safety Policy.doc Revised: 8/20/01 Page 2 ALTERNATIVES Not Applicable CEQA FINDINGS Not Applicable ATTACHMENTS Attachment 1- Personal Protective Equipment Policy (SAFETY-POL-102) OCSD P.O. Box 8127 Fountain Valley, CA 92728-8127 (714) 962-2411 April 3, 2003 STAFF REPORT Annual Sewer Service User Fee Alternatives BACKGROUND Portions of the District have been collecting an annual sewer service user fee as a separate line item on the property tax bill since 1982. The current fee was adopted for one year only, pending the Board’s decision regarding the level of treatment in July 2002; well after the deadline to adopt a fee for the fiscal year. Because these fees are collected on the property tax bill, they are received primarily in November and April. For fiscal 2002-03, we expect to receive about $78 million of sewer service user fees. 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 principal and interest payments on certificates of participation (COPs) in the event that our share of the property tax becomes insufficient. 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, 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 type of use of the property. The current SFR rate is $87.50 per year and it was adopted for 2002-03. OVERVIEW Historically, the District has increased the overall sewer user fees in fairly small increments using debt financing to smooth the impact of the capital improvement program. Rates have been adopted for periods ranging from 1-year to as long as 10-years. With the public interest in improved effluent quality and the Board’s decision to meet secondary treatment discharge standards rapidly, now may be an appropriate time to change from a constant rate of increase to a plan that increases the rates more on the front-end of the capital improvement program in order to match the program itself and to reduce the long-term impacts of debt financing. Annual Sewer Service User Fee Alternative Page 2 of 3 April 3, 2003 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 reduced borrowing is higher fees in the immediate future. The recently completed Engineering CIP Validation Study, FY 2003-04, and the Secondary Treatment Peer Review have developed a capital improvement program that meets the Board’s direction to meet secondary treatment standards as quickly as possible while providing for increased flows and rehabilitation and refurbishment of existing facilities. Over the next seven years, the CIP cash flow needs will be $1.8 billion; an annual average of nearly $260 million. When the current user fee schedule was adopted pending the Board’s treatment level decision in July 2002, the anticipated CIP was $1.2 billion for the same period. How much of the CIP is funded by borrowing has a significant impact on the user fee rates. A graphical representation of the various CIPs is attached. This report presents alternatives ranging from nearly 100% debt financing to 37% over the 2020 planning period. ALTERNATIVE DISCUSSION Cash flow projections were completed for 5 user fee increase scenarios. All of these projections used the same capital improvement program, the same property tax growth, the same operations and maintenance costs, etc. The only changes were the rate of the annual increase in sewer user fees and the amount of borrowing. Of course these variables cause the interest income and the annual debt service expense to vary by alternative. For purposes of the model, rates were never decreased. In some cases this restriction resulted in very large cash and investment balances at the end of the planning period. If this were to happen, staff would expect to either reduce the rates or to retire some of the outstanding debt. These decisions will need to be made when and if those balances materialize, but are not reflected in the presentation in order to reduce the number of variables being compared. A one page summary of the impacts of the various scenarios is included as the first of several attachments. 10% Rate Increases In most recent years the annual sewer user fee has increased by 10% or less per year. This historical rate of increase is reflected in the first alternative. This is the lowest initial increase and results in the most new borrowing. In the first 10 years, the annual SFR rate increases from $87.50 to $205.00. Rates continue to increase through 2015-16 when they reach $297.00, where they remain through 2020. The total amount of fees paid by an SFR would be $3,616.00 and there would be $708 of reserves per equivalent dwelling unit at 2020. New certificates of participation amounting to $2.31 billion are issued to fund the $2.49 billion capital improvement program. The maximum amount of debt outstanding is $2.01 billion in 2008-09. 15% Rate Increases In order to issue less debt and to finance a smaller percentage of the capital improvement program, annual rate increases were evaluated in 5% increments. A 15% initial increase is the second cash flow presented. Annual 15% increases are required each of the next 9 years, through 2011-12. At that time the annual SFR rate would be $295 and no additional increases Annual Sewer Service User Fee Alternative Page 3 of 3 April 3, 2003 are projected through 2020. The total amount of fees paid by an SFR would be $4,124.00 and there would be $907 of reserves per equivalent dwelling unit at 2020. New certificates of participation amounting to $1.59 billion are issued to fund the $2.49 billion capital improvement program. The maximum amount of debt outstanding is $1.73 billion in 2008-09. 20% Rate Increases A 20% initial increase is the next cash flow presented. Annual 20% increases are required each of the next 6 years, through 2008-09. At that time the annual SFR rate would be $260. A 12% increase, to $290, is needed in 2009-10 and no additional increases are projected through 2020. The total amount of fees paid by an SFR would be $4,317.50 and there would be $1,088 of reserves per equivalent dwelling unit at 2020. New certificates of participation amounting to $1.24 billion are issued to fund the $2.49 billion capital improvement program. The maximum amount of debt outstanding is $1.42 billion in 2008-09. 25% Rate Increases A 25% initial increase is the fourth cash flow presented. Annual 25% increases are required each of the next 3 years through 2005-06, followed by annual increases of 20%, 19% and 14% through 2008-09. At that time the annual SFR rate would be $280, and no additional increases are projected through 2020. The total amount of fees paid by an SFR would be $4,317.00 and there would be $1,066 of reserves per equivalent dwelling unit at 2020. New certificates of participation amounting to $1.08 billion are issued to fund the $2.49 billion capital improvement program. The maximum amount of debt outstanding is $1.32 billion in 2008-09. Rapid Rate Increases Finally, the rapid rate of increase scenario that the Committee reviewed last month is presented. Annual 40% increases are proposed each of the next 2 years through 2004-05, followed by annual increases of 22%, 19% and 4% through 2007-08. At that time the annual SFR rate would be $260, and no additional increases are projected through 2020. The total amount of fees paid by an SFR would be $4,221.50 and there would be $953 of reserves per equivalent dwelling unit at 2020. New certificates of participation amounting to $.94 billion are issued to fund the $2.49 billion capital improvement program. The maximum amount of debt outstanding is $1.18 billion in 2008-09. GGS G:\wp.dta\fin\210\CRANE\FAHR\FAHR2003\APR\Staff rpt user fees 4-03.doc Attachments FAHR COMMITTEE Meeting Date 04-09-03 To Bd. of Dir. 04-23-03 AGENDA REPORT Item Number FAHR03-25 Item Number Orange County Sanitation District FROM: Gary G. Streed, Director of Finance SUBJECT: SEWER SERVICE USER FEE ALTERNATIVES GENERAL MANAGER'S RECOMMENDATION Recommend to the Board of Directors a sanitary sewer service user fee schedule for fiscal years 2003-04, 2004-05, 2005-06, 2006-07 and 2007-08. SUMMARY Historically the District has increased our overall sewer 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 and the Board’s decision to meet secondary treatment discharge standards rapidly, now may be an appropriate time to increase the rates more on the front-end of the capital improvement program in order to match the program itself and to reduce the long-term impacts of debt financing. 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. PROJECT/CONTRACT COST SUMMARY The recently completed Engineering CIP Validation Study, FY 2003-04, and the Secondary Treatment Peer Review have developed a capital improvement program that meets the Board’s direction to meet secondary treatment standards as quickly as possible while providing for increased flows and rehabilitation and refurbishment of existing facilities. Over the next seven years, the CIP cash flow needs will be $1.8 billion; an annual average of nearly $260 million. When the current user fee schedule was adopted, pending the Board’s treatment level decision in July 2002, the anticipated CIP was $1.2 billion for the same period. How much of the CIP is funded by borrowing has a significant impact on the user fee rates. This report presents alternatives ranging from nearly 100% debt financing to 37% over the 2020 planning period. 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\0403\10.03-25.Sewer Service Fees.doc Revised: 8/20/01 Page 2 ADDITIONAL INFORMATION The attached Staff Report and cash flow summaries explain the impacts of alternative debt financing and rate increase philosophies. Staff has removed the consideration of alternative reserve policies because the overall impact on rates and total reserves was insignificant. Cash flow analyses have shown that the rate of sewer user fee increase has much more impact and that the discussion should be focused there. ALTERNATIVES 1. Alternatives considered in the staff report include:  Initial rate increases of 10% and borrowing of $2.31 billion  Initial rate increases of 15% and borrowing of $1.59 billion  Initial rate increases of 20% and borrowing of $1.24 billion  Initial rate increases of 25% and borrowing of $1.08 billion  Initial rate increases of 40% and borrowing of $0.94 billion. 2. Adopt rates for a shorter or longer period than the 5-years proposed. 3. Conduct an election to increase the property tax for facilities construction. 4. Reduce or reprioritize the annual capital improvement program. CEQA FINDINGS N/A ATTACHMENTS 1. Staff Report 2. Comparison of Various Rate and Reserve Policies 3. Summary Cash Flow Projects, Entire Collection System 4. Graph of Capital Improvement Programs GGS:lc \\FILER-1\ocsd\dept\gmo\120\BS\Agenda\Archived-agenda\Archived Committees\FAHR\2003\FAHR2003 drafts\0403\11.03-26.New Issue COP.doc Revised: 8/20/98 Page 1 FAHR COMMITTEE Meeting Date 04/09/03 To Bd. of Dir. 04/23/03 AGENDA REPORT Item Number FAHR03-26 Item Number Orange County Sanitation District FROM: Gary Streed, Director of Finance Originator: Michael D. White, Controller SUBJECT: PROPOSAL FOR ISSUING UP TO $280 MILLION IN NEW CERTIFICATES OF PARTICIPATION GENERAL MANAGER'S RECOMMENDATION 1. Direct staff to issue up to $280 million in new fixed-rate Certificates of Participation (COP) debt; 2. Approve Amendment No. 1 to the Consultant Services Agreement with Public Resources Advisory Group, for a two-year period for FY03/04, providing for financial advisory services, for an amount not to exceed $75,000; and, 3. Authorize the General Manager to negotiate and enter into a sole source Consultant Services Agreement with Orrick, Herrington & Sutcliffe to provide bond counsel services in an amount as yet to be determined. SUMMARY In support of the District’s Strategic Plan capital improvement program, the Board-approved the issuance of $280 million of new Certificates of Participation (COP) debt within the 2002-03 Adopted Budget. Approval of the recommended actions above will direct staff to begin the $280 million fixed rate debt issuance process and will authorize staff to retain the financial advising firm of Public Resources Advisory Group, and the bond counsel firm of Orrick, Herrington & Sutcliffe to assist in the debt issuance. PROJECT/CONTRACT COST SUMMARY In accordance with the District’s Board-adopted Debt Policy, the District will restrict long-term borrowing to capital improvements that cannot be financed from current revenue. In accordance with the 1989 Master Plan, one-half of all future long-term capital improvements will be funded from long-term debt with the remaining cost funded from capital improvement reserves and current revenues. This policy will assist in the leveling out of user fee rates over time and avoid any spiked increases in the short term. BUDGET IMPACT This item has been budgeted. This item has been budgeted, but there are insufficient funds. This item has not been budgeted. However, professional services fees would be reimbursed by cost savings. Not applicable (information item) \\FILER-1\ocsd\dept\gmo\120\BS\Agenda\Archived-agenda\Archived Committees\FAHR\2003\FAHR2003 drafts\0403\11.03-26.New Issue COP.doc Revised: 8/20/98 Page 2 ADDITIONAL INFORMATION The District currently has three series of COPs outstanding comprising a total par amount of $365.0 million. The following table describes each COP in detail. EXISTING COP FINANCING PROGRAM Outstanding Par Amount* Debt Structure Interest Rate Mode Series 2000 Refunding (1) $208,900,000 Subordinate Daily Variable Rate Series 1993 Refunding (2) 42,900,000 Open Senior Synthetic Fixed Rate (3) Series 1992 Refunding (2) 113,175,000 Open Senior Synthetic Fixed Rate (3) Total $364,975,000 *As of April 1, 2003. (1) Series 2000 COPs refunded the Series A, B, and C issued between 1990 and 1992. (2) Series 1992 and 1993 COPs refunded the Series 1986 and a portion of the Series “B” COPs. (3) Variable rate debt swapped to a fixed rate through maturity. The Series 2000 refunded the $179.7 million outstanding principal balance of the 1990-92 Series “A,” “B” and “C” COPs, and reimbursed the District for improvements made to the wastewater treatment system. The 1993 Refunding COPs was issued to refund $39.7 million of the Series “B” COPs. The Series 1992 Refunding COPs refunded the 1986 COPs ($107 million) issued on behalf of District Nos. 1, 2, and 3. The 1992 Refunding COPs also refunded approximately $38.4 million of the Series “B” COPs, issued in 1991. The District’s three outstanding COPs are organized into a two-tier lien structure; meaning that there are two different claims on the revenues pledged to fund debt service payments on the COPs. The following table displays the combined gross debt service cash flows for the District’s five COPs through final maturity in FY 2030-31. DEBT SERVICE STRUCTURE \\FILER-1\ocsd\dept\gmo\120\BS\Agenda\Archived-agenda\Archived Committees\FAHR\2003\FAHR2003 drafts\0403\11.03-26.New Issue COP.doc Revised: 8/20/98 Page 3 05101520253035404550 200 3 200 4 200 5 200 6 200 7 200 8 200 9 201 0 201 1 201 2 201 3 201 4 201 5 201 6 201 7 201 8 201 9 202 0 202 1 202 2 202 3 202 4 202 5 202 6 202 7 202 8 202 9 203 0 203 1 Fiscal Year End Mi l l i o n s $ Open Sr. Lien (Series '92 & '93) Subordinate Lien Strategy The newly revised Strategic Plan capital improvement program requiring approximately $2.2 billion over the next ten years, of which one-half the cost, or $1.1 billion, is to be financed through long-term borrowings in accordance with the District’s long-term debt fiscal policy. The issuance of $280 million of COP debt this fiscal year has been slated for the reimbursement of capital improvements constructed over the past three years, and a share of those to be constructed over the next two years. A total of up to $1.1 billion in COP debt issuance is being proposed over the next ten years with a new issuance scheduled for every other year. These financings are needed early in the 20-year capital improvement program because the bulk of the construction is scheduled during the next ten years. Due to interest rates currently being at the lowest level than in any other point in time over the last thirty-years, staff is proposing that this new COP issue be a fixed rate debt issuance. In addition to the low rate environment, a fixed rate issuance will minimize the amount of reserves required to be on hand to support variable rate debt while maintaining the District’s Aa credit ratings from the three credit rating agencies. Finance Team and Timeline It is proposed that financial advisory and bond counsel services be retained to more fully develop and implement the restructuring proposals discussed above. It is requested that the Finance, Administration and Human Resources Committee authorize staff to engage Public Resources Advisory Group (PRAG) and Orrick, Herrington & Sutcliffe for this project. Both firms have developed an extensive knowledge base about the financial and legal structures of the District’s existing COP issues; together with a working knowledge of completing similar restructurings. In recent months, PRAG has demonstrated their expertise in developing and analyzing opportunities to modernize the District’s existing reserve policy. They have been instrumental in developing the proposals discussed in this report. Compensation for \\FILER-1\ocsd\dept\gmo\120\BS\Agenda\Archived-agenda\Archived Committees\FAHR\2003\FAHR2003 drafts\0403\11.03-26.New Issue COP.doc Revised: 8/20/98 Page 4 PRAG has been negotiated through an RFP process conducted in December 2001 as a transaction based fee in the amount of $75,000 for the issuance of fixed rate debt. With the assistance of PRAG, staff is proposing to issue the new $280 million COP debt through a competitive sale as opposed to a negotiated sale. Due to the fact that this is a proposed fixed rate debt issuance, and not a large, irregular, and difficult-to-place issue, both staff and PRAG believe that the debt can be issued at a lower interest rate and at lower issuance costs than what could be obtained through a competitive sale. Orrick, Herrington & Sutcliffe has provided legal services on various matters related to the District’s existing COP financing program, and is therefore, intimately familiar with the legal documents and structures of the District’s COP issues. Most recently, they have assisted staff efforts related to the issuance of the Series 2000 COPs. Costs for legal services would be reimbursed through cost savings upon successful completion of the issuance. Given the knowledge and experience that both firms can contribute to the proposed issuance, it is estimated that it can be accomplished in approximately 120 days, as illustrated by the following timeline. Staff would implement the negotiated professional services agreement with PRAG and negotiate a professional services agreement Orrick, Herrington & Sutciffe, for execution by the General Manager. May  Negotiate professional services agreement with bond counsel  Finalize debt service and cash flow modeling  Develop legal documents June  Develop rating agency presentation  Develop disclosure documents (Official Statement) July  Marketing the Sale of the COPs  Conduct rating agency presentations  Conduct institutional investor presentations  Finalize legal and disclosure documents August  Sale of the COPs through an Open Bid Process  Execute $280 million Fixed-Rate COP issue  Investment of Bond Proceeds  Debt Administration ALTERNATIVES N/A CEQA FINDINGS N/A ATTACHMENTS None