AGENDA ADMINISTRATION/FINANCE ISSUES COMMITTEE MEETING WITH BOARD OF DIRECTORS* ORANGE COUNTY WATER DISTRICT 18700 Ward Street, Fountain Valley, CA 92708 Thursday, February 15, 2018, 8:00 a.m. - Conference Room C-2 *The OCWD Administration and Finance Issues Committee meeting is noticed as a joint meeting with the Board of Directors for the purpose of strict compliance with the Brown Act and it provides an opportunity for all Directors to hear presentations and participate in discussions. Directors receive no additional compensation or stipend as a result of simultaneously convening this meeting. Items recommended for approval at this meeting will be placed on the February 21, 2018 Board meeting Agenda for approval. ROLL CALL ITEMS RECEIVED TOO LATE TO BE AGENDIZED RECOMMENDATION: Adopt resolution determining need to take immediate action on item(s) and that the need for action came to the attention of the District subsequent to the posting of the Agenda (requires two-thirds vote of the Board members present, or, if less than two-thirds of the members are present, a unanimous vote of those members present). VISITOR PARTICIPATION Time has been reserved at this point in the agenda for persons wishing to comment for up to three minutes to the Board of Directors on any item that is not listed on the agenda, but within the subject matter jurisdiction of the District. By law, the Board of Directors is prohibited from taking action on such public comments. As appropriate, matters raised in these public comments will be referred to District staff or placed on the agenda of an upcoming Board meeting. At this time, members of the public may also offer public comment for up to three minutes on any item on the Consent Calendar. While members of the public may not remove an item from the Consent Calendar for separate discussion, a Director may do so at the request of a member of the public. CONSENT CALENDAR (ITEMS NOS. 1 – 11) All matters on the Consent Calendar are to be approved by one motion, without separate discussion on these items, unless a Board member or District staff request that specific items be removed from the Consent Calendar for separate consideration. 1. MINUTES OF ADMINISTRATION/FINANCE ISSUES COMMITTEE MEETING HELD JANUARY 11, 2018 RECOMMENDATION: Approve minutes as presented 2. MONTHLY CASH CONTROL REPORT RECOMMENDATION: Agendize for February 21 Board meeting: Receive and file Summary Cash and Cash Equivalents Control Reports dated January 31, 2018 3. INVESTMENT PORTFOLIO HOLDINGS REPORTS RECOMMENDATION: Agendize for February 21 Board meeting: Receive and file the Investment Portfolio Holdings Reports dated January 31, 2018
WITH BOARD OF DIRECTORS* ORANGE COUNTY WATER DISTRICT
18700 Ward Street, Fountain Valley, CA 92708 Thursday, February 15, 2018, 8:00 a.m. - Conference Room C-2
*The OCWD Administration and Finance Issues Committee meeting is noticed as a joint meeting with
the Board of Directors for the purpose of strict compliance with the Brown Act and it provides an opportunity for all Directors to hear presentations and participate in discussions. Directors receive no additional compensation or stipend as a result of simultaneously convening this meeting. Items recommended for approval at this meeting will be placed on the February 21, 2018 Board meeting Agenda for approval.
ROLL CALL
ITEMS RECEIVED TOO LATE TO BE AGENDIZED RECOMMENDATION: Adopt resolution determining need to take immediate action on item(s) and
that the need for action came to the attention of the District subsequent to the posting of the Agenda (requires two-thirds vote of the Board members present, or, if less than two-thirds of the members are present, a unanimous vote of those members present).
VISITOR PARTICIPATION Time has been reserved at this point in the agenda for persons wishing to comment for up to three minutes to the Board of Directors on any item that is not listed on the agenda, but within the subject matter jurisdiction of the District. By law, the Board of Directors is prohibited from taking action on such public comments. As appropriate, matters raised in these public comments will be referred to District staff or placed on the agenda of an upcoming Board meeting. At this time, members of the public may also offer public comment for up to three minutes on any item on the Consent Calendar. While members of the public may not remove an item from the Consent Calendar for separate discussion, a Director may do so at the request of a member of the public. CONSENT CALENDAR (ITEMS NOS. 1 – 11) All matters on the Consent Calendar are to be approved by one motion, without separate discussion on these items, unless a Board member or District staff request that specific items be removed from the Consent Calendar for separate consideration.
1. MINUTES OF ADMINISTRATION/FINANCE ISSUES COMMITTEE MEETING HELD JANUARY 11, 2018 RECOMMENDATION: Approve minutes as presented 2. MONTHLY CASH CONTROL REPORT RECOMMENDATION: Agendize for February 21 Board meeting: Receive and file
Summary Cash and Cash Equivalents Control Reports dated January 31, 2018
3. INVESTMENT PORTFOLIO HOLDINGS REPORTS
RECOMMENDATION: Agendize for February 21 Board meeting: Receive and file the
Investment Portfolio Holdings Reports dated January 31, 2018
4. ADD FUNDS FOR GASB ACTUARIAL STUDY RECOMMENDATION: Agendize for the February 21 Board meeting: Authorize the
addition of $13,500 to the Human Resources General Fund budget for GASB Actuarial Study
5. PARTICIPATION IN 2018 ORANGE COUNTY SCIENCE FAIR RECOMMENDATION: Agendize for the February 21 Board meeting: Authorize
participation in an amount of $3,000 for water-related student projects at the 2018 Orange County Science and Engineering Fair
6. AGREEMENT TO WHITE NELSON DIEHL EVANS LLP FOR AGREED-UPON
PROCEDURES IN ADDITION TO THE ANNUAL AUDIT RECOMMENDATION: Agendize for February 21 Board meeting: Authorize execution of
Agreement to White Nelson Diehl Evans, LLP for an amount not to exceed $14,900 plus all out-of-pocket expenditures to provide consulting services for the Agreed Upon Procedures in addition to the annual audit
7. EMERGENCY RESPONSE PLAN UPDATE RECOMMENDATION: Agendize for February 21 Board meeting: Authorize issuance of an
Agreement to Claris Strategy Consulting Services for an amount not to exceed $62,900
8. ON-CALL ENVIRONMENTAL SERVICES AGREEMENT WITH ENVIRONMENTAL
ADVISORS RECOMMENDATION Agendize for February 21 Board meeting: Authorize termination of
Agreement No. 0864 with Environmental Advisors and execution of a new agreement with the same terms and conditions with Sagecrest Planning+Environmental for on-call environmental services
9. PURCHASE JOHN DEERE 300 GLC EXCAVATOR FROM COASTLINE EQUIPMENT RECOMMENDATION: Agendize for February 21 Board Meeting. Authorize issuance of
Purchase Order to Coastline Equipment for $394,460 for purchase of a John Deere 300 GLC Super Long Reach Excavator and placement of TL-32 on the surplus equipment list
10. IBM MAXIMO SOFTWARE SUBSCRIPTION AND SUPPORT RENEWAL RECOMMENDATION: Agendize for February 21 Board meeting: Authorize issuance of
Purchase Order to IBM Maximo Software Subscription and Support renewal in the amount of $59,800 for system updates commencing April 1, 2018 through March 31, 2019
11. APPLICATION RESOLUTION FOR WATER INFRASTRUCTURE FINANCE AND INNOVATION ACT LOAN FOR THE GROUNDWATER REPLENISHMENT SYSTEM FINAL EXPANSION PROJECT
RECOMMENDATION: Agendize for February 21 Board meeting:
1) Adopt resolution to submit an Environmental Protection Agency Water Infrastructure Finance and Innovation Act loan application for the partial funding of the Groundwater Replenishment System Final Expansion Project; and
2) Authorize payment of loan application fee and Environmental Protection Agency consultant costs to the Environmental Protection Agency in the amount not to exceed $450,000; and
3) Authorize payment for District consultants not to exceed $260,000 based on representation of timing of the transaction made by the Environmental Protection Agency
END OF CONSENT CALENDAR MATTERS FOR CONSIDERATION 12. RECENT CALIFORNIA SUPREME COURT RULING, CITY OF VENTURA VS UNITED
WATER CONSERVATION DISTRICT – REPLENISHMENT ASSESSMENT AND ADDITIONAL REPLENISHMENT ASSESSMENT
RECOMMENDATION Agendize for February 21 Board meeting: Beginning with fiscal year
2018-19, establish the Replenishment Assessment at an amount to fund all District activities
13. BUDGET TO ACTUAL REPORT FOR SECOND QUARTER FY 2017–18 RECOMMENDATION: Agendize for the February 21 Board meeting: Receive and file the
Budget to Actual Report for Second Quarter of Fiscal Year 2017-18 ending December 31, 2017
14. RATIO ANALYSIS - SECOND QUARTER FY 2017-2018
RECOMMENDATION: Agendize for February 21 Board meeting: Receive and file the Ratio Analysis Report for FY 2017-18 Second Quarter ending December 31, 2017
INFORMATIONAL ITEMS 15. RISK & SAFETY DEPARTMENT UPDATE 16. MONTHLY CASH DISBURSEMENTS REPORT CHAIR DIRECTION AS TO WHICH ITEMS IF ANY TO BE AGENDIZED AS MATTERS
FOR CONSIDERATION AT THE FEBRUARY 21 BOARD MEETING DIRECTOR’S ANNOUNCEMENTS/REPORTS GENERAL MANAGER’S ANNOUNCEMENT/REPORT ADJOURNMENT
ADMINISTRATION AND FINANCE ISSUES COMMITTEE MEMBERS Shawn Dewane - Chair Bruce Whitaker - Vice Chair Roger Yoh Dina Nguyen Cathy Green Steve Sheldon - Alternate 1 Philip Anthony - Alternate 2 Vicente Sarmiento - Alternate 3 James Vanderbilt - Alternate 4 Denis Bilodeau - Alternate 5
In accordance with the requirements of California Government Code Section 54954.2, this agenda has been posted at the guard shack entrance and in the main lobby of the Orange County Water District, 18700 Ward Street, Fountain Valley, CA and on the OCWD website 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 District Secretary. Backup material for the Agenda is available at the District offices for public review and can be viewed online at the District’s website: www.ocwd.com Pursuant to the Americans with Disabilities Act, persons with a disability who require a disability-related modification or accommodation in order to participate in a meeting, including auxiliary aids or services, may request such modification or accommodation from the District Secretary at (714) 378-3233, by email at [email protected] by fax at (714) 378-3373. Notification 24 hours prior to the meeting will enable District staff to make reasonable arrangements to assure accessibility to the meeting. As a general rule, agenda reports or other written documentation has been prepared or organized with respect to each item of business listed on the agenda, and can be reviewed at www.ocwd.com. Copies of these materials and other disclosable public records distributed to all or a majority of the members of the Board of Directors in connection with an open session agenda item are also on file with and available for inspection at the Office of the District Secretary, 18700 Ward Street, Fountain Valley, California, during regular business hours, 8:00 am to 5:00 pm, Monday through Friday. If such writings are distributed to members of the Board of Directors on the day of a Board meeting, the writings will be available at the entrance to the Board of Directors meeting room at the Orange County Water District office.
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MINUTES OF BOARD OF DIRECTORS MEETING ADMINISTRATION AND FINANCE ISSUES COMMITTEE
ORANGE COUNTY WATER DISTRICT January 11, 2018 @ 8:00 a.m.
Director Dewane called the Administration and Finance Issues Committee to order in Conference Room C-2 in Fountain Valley, CA. The Assistant District Secretary called the roll and reported a quorum of the Committee as follows.
CONSENT CALENDAR The Consent Calendar was approved upon motion by Director Green, seconded by Director Yoh and carried [5-0]. Yes- Dewane, Whitaker, Yoh, Green, Sheldon 1. Minutes of Previous Meeting The minutes of the Administration/Finance Issues Committee meeting held December 14, 2017 were approved as presented. 2. Monthly Cash Control Report Recommended by Committee for approval at January 17 Board meeting: Receive and file Summary Cash and Cash Equivalents Control Reports dated December 31, 2017. 3. Investment Portfolio Holdings Reports
Recommended by Committee for approval at January 17 Board meeting: Receive and File the Investment Portfolio Holdings Reports dated December 31, 2017. MATTER FOR CONSIDERATION 4. Basin Production Percentage and Replenishment Assessment Estimates for Fiscal Year
2018-19 Irvine Ranch Water District (IRWD) General Manager Paul Cook stated that IRWD wishes to reaffirm its interest in restoring groundwater levels in the Orange County Groundwater Basin and to repeat the suggestion that OCWD should adopt a Basin Production Percentage (BPP) lower than 75% to help gradually restore groundwater levels in the basin. He stated while the BPP has remained at 75% for many years now, IRWD suggests that OCWD consider lowering the BPP at its earliest opportunity.
Committee Members Shawn Dewane Bruce Whitaker Roger Yoh Dina Nguyen (Absent) Cathy Green Alternates Steve Sheldon Philip Anthony (Absent) Vicente Sarmiento (Absent) James Vanderbilt (Absent) Denis Bilodeau
OCWD staff Mike Markus - General Manager Randy Fick - CFO/Treasurer Christina Fuller - Assistant District Secretary
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Executive Director John Kennedy reviewed BPP issues and total water demands. He stated that at this time staff recommends that the projected BPP for FY 2018-19 be established at 75%. CFO/Treasurer Randy Fick reviewed the Replenishment Assessment (RA) issues and reported that staff is preparing the FY 2018-19 budget for review at the March 7 Board meeting. He stated that the RA is currently $445/acre-foot and is expected to increase to somewhere between $469 to $486 per acre-foot. IRWD Director Peer Swan requested the Board consider filling the basin with as much water from Metropolitan Water District as possible and increase the RA. Upon motion duly made, seconded and carried [5-0], the Committee recommended that the Board at its January 17 Board meeting: Provide the Fiscal Year 2018-19 Replenishment Assessment and Basin Production Percentage estimates to the Groundwater Producers. Yes- Dewane, Whitaker, Yoh, Green, Sheldon INFORMATIONAL ITEMS 5. Employment Status Report
General Manager Mike Markus reported that staff is interviewing to fill open positions.
6. Monthly Cash Disbursements Report There was no verbal report on this item. ITEMS TO BE AGENDIZED ON CONSENT CALENDAR AT THE JANUARY 17 BOARD MEETING It was agreed that Item Nos. 2-4 be agendized on the Consent Calendar at the January 17 Board meeting. ADJOURNMENT There being no further business, the meeting was adjourned at 8:45 a.m. Shawn Dewane, Chair
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AGENDA ITEM SUBMITTAL
Meeting Date: February 15, 2018 Budgeted: N/A Budgeted Amount: N/A To: Administration/Finance Issues Cte. Cost Estimate: N/A Board of Directors Funding Source: N/A Program/Line Item No.: N/A
From: Mike Markus General Counsel Approval: N/A Engineers Report: N/A Staff Contact: R. Fick/V. Sharma CEQA Compliance: N/A Subject: MONTHLY CASH CONTROL REPORT SUMMARY The following monthly financial information is provided in the staff report. Attachment(s): Summary Cash and Cash Equivalent Control Report Summary of Reserves Summary Sources and Disbursements Sources of Funds Disbursement of Funds
RECOMMENDATION Agendize for February 21 Board meeting: Receive and file Summary Cash and Cash Equivalents Control Reports dated January 31, 2018. PRIOR RELEVANT BOARD ACTION(S) Monthly
ORANGE COUNTY WATER DISTRICT SUMMARY OF CASH AND CASH EQUIVALENTS CONTROL REPORT
FOR THE PERIOD ENDED JANUARY 31,2018
A Petty Cash - held at the District's office (Fountain Valley) B District's Checking Accounts C District's Money Market Accounts D Trust Debt service Accounts E Custodial Investment Accounts- Managed in house
ORANGE COUNTY WATER DISTRICT
RESERVES
For the Year to Date Period Ended January 31, 2018
(Unaudited/Preliminary)
Beginning Ending Balance Reserve Year Balance As of 01/31/2018 Polic~
Operating Reserves Replacement and Refurbishment Fund 53,988,382 56,573,238 92,999,000 (1) Toxic Cleanup Reserve 4,000,000 3,699,119 4,000,000 (2) Contingency Reserve 3,000,000 3,000,000 3,000,000 (3) Water Reserve Fund 0 0 74,100,000 (4) Paygo Fund 26,223,747 30,072,039 30,072,039 (5) SRF Loan Reserve 9,850,000 10,221,000 10,221,000 (6) Operating Reserve (15% of Op. Budget) 25,281,793 25,048,635 25,048,635 (8) Operating Fund 23,203,248 64,294,379 51,021,999 (9)
Total Restricted Reserves 7,660,159 1,837,239 3,528,317
Total Reserves 153,207,329 194,745,649 293,990,990
(1) Per Reserve Policy, projected Replacement & Refurbishment (R&R) cost as defined by District's R&R model.
(2) Established for toxic spills and cleanup with a target of $4 million per Reserve Policy.
(3) Set by the District Act to provide for expenditures that have not been anticipated in the annual budget.
(4) The maximum upper limit is enough funds to purchase 50% of water needed to have an accumulated
basin overdraft of 125,000 a.f. currently projected at $74,100,000 ($760.5/a.f. x 50% x (320,000/a.f.
projected overdraft as of June 30, 2017- 125,000/a.f. optimum overdraft)
(5) Per Paygo budget transfer.
(6) Debt service reserve of $10,221 ,000 or one years payment a requirement for the GWRSIE, Fletcher Basin,
La Palma Basin, and Alamitos SRF loans.
(7) The Environmental Remediation Fund, for Prado shooting range, includes remediation and funding plans
with a 30-year term expiring on April 30, 2047 initially set-up with an amount of $4,000 per month and
increasing $400 per month annually.
(8) The Operating Reserve Fund is established by the District Act and set at 15% of the operating budget.
(9) Per the Reserve Policy, the District shall maintain a minimum of six months of annual General Fund and
Debt Service budgeted appropriations currently $66,093,000 General Fund and $35,950,997 Debt Service.
(1 0) The District is required to post collateral should the Swap value exceed the $15 million threshold.
ORANGE COUNTY WATER DISTRICT SUMMARY SOURCES AND DISBURSEMENTS
Note: Sources and Uses of district funds reflect both operating and capital funds. Operating funds consist of annual operating re\'enues or cash reserves.
YEAR TO DATE AS OF JANUARY
$120,000,000
$100,000,000
$80,000,000
$60,000,000
$40,000,000
$20,000,000
$97,432,484
Orange County Water District Sources of Funds
for the Year to Date Period Ended January 31, 2018
$25,454,846
$5,247,856
~-,-L
Orange County Water District Disbursement of Funds
for the Year to Date Period Ended January 31, 2018 $40,000,000 T
i I
I -- · ,~ 1,o81 $35,000,000 ~---~------
!
$25,000,000 --------------- -------
$20,000,000
$16,966,271
$15,000,000 $12,320,548
$5,000,000
$0 Water Purchase Water Payroll
Production
$1,023,231
Construction (GWRSFE)
$6,985,701
CIP
$6,152,576
$289,701
R&R Projects New Equipment Debt Service COPS
$16,483,082
Debt Service State Loans
$293,090
Commercial Bond All Other Paper Administration General Fund
Cost Disbursements
3
AGENDA ITEM SUBMITTAL
Meeting Date: February 15, 2018 Budgeted: N/A Budgeted Amount: N/A To: Administration/Finance Issues Cte. Cost Estimate: N/A Board of Directors Funding Source: N/A Program/Line Item No: N/A From: Mike Markus General Counsel Approval: N/A Engineers/Feasibility Report: N/A Staff Contact: R. Fick/V. Sharma CEQA Compliance: N/A Subject: INVESTMENT PORTFOLIO HOLDINGS REPORTS SUMMARY The District’s monthly Investment Portfolio Holdings Report is provided for Committee review. Attachment(s): Investment Portfolio Holdings Reports dated January 31, 2018. RECOMMENDATION Agendize for February 21 Board meeting: Receive and file the Investment Portfolio Holdings Reports dated January 31, 2018. BACKGROUND/ANALYSIS The Investment Portfolio Holdings Report is a list of each of the District’s fixed income investments and provides the market value at the end of each month. All securities within the District’s Investment Portfolio are in compliance with the District’s Statement of Investment Policy. The District’s portfolio maturities provide cash liquidity sufficient to meet the District’s projected six-month expenditures (as required by Government Code Section 53646). Highlights of the current and previous report:
Description Prior Month Current Month SWAP Value (in Citi’s favor) $16,750,502 $14,612,575 Required Collateral $1,750,502 $0 Duration/Maturity 545 Days or 1.49years 507 Days or 1.39years Rate of Return/Yield 1.457% 1.505%
The yield on the one-year Treasury note as of the month end is at 1.90%; two-
year at 2.14% and the five-year at 2.52% The last Federal Open Market Committee (FOMC) meeting was held on January
30-31, 2018. The FOMC kept the Federal funds rate in the range of 1.25% to 1.50%. This is the rate prime banks lend to each other.
TRADE PURCHASE NEXT MATURITY INVESTMENT INSTITUTION OR PAR DISC RATE YIELD TO ORIGINAL MARKET VALUE (1) Portfolio CUSIPDATE DATE CALL DATE RATING TYPE ISSUER AMOUNT or COUPON MATURITY COST 1/31/2018 % NUMBER
Investment Pools
Local Agency Invest Fund (LAIF) State of California Treasury $63,260,243 (DEC rate) 1.239% (1) $63,260,243 $63,260,243 32.80%Orange County Invest Pool (OCIP) County of Orange $19,555,300 (DEC rate) 1.070% (1) $19,555,300 $19,555,300 10.14%
11/04/16 11/07/16 cont. 09/30/21 AA+/Aaa FHLB - call on/after 12/31/16 Federal Home Loan Bank $1,100,000 1.500% 1.492% $1,098,625 $1,059,443 3130A9MG307/20/17 07/21/17 cont. 07/13/20 AA+/Aaa FHLB - call on/after 10/13/17 Federal Home Loan Bank $3,000,000 1.750% 1.753% $2,999,700 $2,959,470 3130ABNV408/23/17 08/30/17 02/24/18 02/24/21 AA+/Aaa FHLB - qtrly call on/after 11/24/17 Federal Home Loan Bank $3,000,000 1.800% 1.800% $3,000,000 $2,930,010 3130AC6L310/05/17 10/26/17 04/26/18 10/26/22 AA+/Aaa FHLB - qtrly call on/after 1/26/18 Federal Home Loan Bank - Step $3,000,000 1.625% 2.824% $3,000,000 $2,987,040 3130ACLG710/23/17 10/30/17 04/26/18 10/26/22 AA+/Aaa FHLB - qtrly call on/after 1/26/18 Federal Home Loan Bank - Step $3,000,000 2.000% 2.387% $3,000,000 $2,960,640 3130ACQ6401/18/18 01/25/18 01/25/19 01/25/21 AA+/Aaa FHLB - call on/after 01/25/19 Federal Home Loan Bank $3,000,000 2.280% 2.280% $3,000,000 $2,990,100 3130ADGA401/18/18 01/26/18 04/26/18 01/26/21 AA+/Aaa FHLB - qtrly call on/after 4/26/18 Federal Home Loan Bank $3,000,000 2.300% 2.300% $3,000,000 $2,989,410 3130ADG3001/04/18 01/29/18 01/29/19 01/29/21 AA+/Aaa FHLB - qtrly call on/after 1/29/19 Federal Home Loan Bank $3,000,000 2.200% 2.200% $3,000,000 $2,985,420 3130ADC2601/23/18 01/30/18 01/30/19 07/30/20 AA+/Aaa FHLB - qtrly call on/after 1/30/19 Federal Home Loan Bank $3,000,000 2.170% 2.211% $2,998,500 $2,990,970 12.89% 3130ADF98
07/11/16 07/12/16 cont. 07/12/19 AA+/Aaa FFCB - call on/after 10/12/16 Federal Farm Credit Bank $3,000,000 1.080% 1.121% $2,996,400 $2,951,730 3133EGLC707/11/16 07/18/16 cont. 10/18/19 AA+/Aaa FFCB - call on/after 10/18/16 Federal Farm Credit Bank $3,000,000 1.180% 1.196% $2,998,500 $2,945,340 3133EGLD509/11/17 09/13/17 cont. 12/06/21 AA+/Aaa FFCB - call on/after 12/06/17 Federal Farm Credit Bank $3,000,000 1.930% 1.930% $3,000,000 $2,938,740 3133EHXM004/25/17 04/27/17 04/20/18 04/20/21 AA+/Aaa FFCB - call on/after 4/20/18 Federal Farm Credit Bank $3,000,000 1.930% 1.956% $2,997,000 $2,943,720 3133EHGG208/23/17 08/24/17 cont. 11/01/21 AA+/Aaa FFCB - call on/after 11/01/17 Federal Farm Credit Bank $2,500,000 2.000% 2.000% $2,500,000 $2,432,000 3133EHTE308/30/17 08/30/17 cont. 04/05/22 AA+/Aaa FFCB - call on/after 10/05/17 Federal Farm Credit Bank $3,000,000 2.000% 2.000% $3,000,000 $2,926,560 8.89% 3133EHQG1
Total Federal Agencies $109,683,000 $109,664,594 $108,266,226 56.13%
Sub Totals $194,315,543 1.505% $194,297,136 $192,874,403 100%Restricted / Debt Service Funds:
Certificate Payment Fund Series 2003A/2005B/2013A/2017AB $12 0.760% $12Interest Fund Series 2003A $0 0.000% $0Interest Fund Series 2013A/2017A/2017B $306 0.710% $306
Investment Revenue$194,315,860 $192,874,720 FYTD
Fair Market Value Adj.Unrestricted (985,451) Restricted (8,524)
Investment IncomeOCWD - Petty Cash $2,700 Unrestricted 1,268,356 Bank Balance (unreconciled) Union Bank Gen - Interest 0.010% $1,585,872 Restricted 327 Bank Balance (unreconciled) Wells Fargo - Checking 0.000% $282,357
Total per G/L 274,708 Total $194,745,649
(1) Market value is as of the most recent quarter-end/month-end as reported by LAIF/OCIP/FCB. Security values are provided by Bloomberg Financial Markets and/or Union Bank Investment Services.Note: This Investment Summary Report is in conformity with OCWD's Investment Policy and provides sufficient liquidity to meet the next six months estimated expenditures.
Orange County Water DistrictInvestment Portfolio Holdings Report
01/31/18
LAIF & OC Pool, $82,815,543 , 42%
Working Cash & Debt Service Funds, $1,871,247
, 1%
Swap Value Collateral, $1,792,634 , 1%
Federal Agencies , $108,266,226 , 56%
OCWD - Investment Portfolioas of January 31, 2018
Note: LAIF and Orange County Pool rates are as of December 31, 2017.
1.239%
1.070%
1.505%
1.900%
0.000%
0.200%
0.400%
0.600%
0.800%
1.000%
1.200%
1.400%
1.600%
1.800%
2.000%
LAIF Orange County Pool Total OCWD Investment Return U.S. Treasury 1 Year Note
Per
cent
age/
Ret
urn
Agencies
OCWD - Investment Return Comparision for the Month Ended 01/31/18
$0
$20,000,000
$40,000,000
$60,000,000
$80,000,000
$100,000,000
$120,000,000
0-6 Months 7-12 Months 1-3 Years 3-4 Years 4-5 Years
Inv
estm
ents
Years
OCWD - Inv estment Maturities as of January 31, 2018
Investm ent Mat urit ies Estima ted 6 m ont h Expendit ur es
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AGENDA ITEM SUBMITTAL Meeting Date: February 15, 2018 Budgeted: No Budgeted Amount: $0 To: Board of Directors Cost Estimate: $13,500 Funding Source: 1030.53001 Program/Line Item No. N/A From: Mike Markus General Counsel Approval: N/A Engineers/Feasibility Report: N/A Staff Contact: R. Fick/S. Dosier CEQA Compliance: N/A Subject: ADD FUNDS FOR GASB ACTUARIAL STUDY SUMMARY Staff is recommending the addition of $13,500 to the General Fund budget for a GASB Actuarial Study. The District is required to have an actuarial evaluation of the District’s retiree medical plans done every two years. RECOMMENDATION: Agendize for the February 21 Board meeting: Authorize the addition of $13,500 to the Human Resources General Fund budget for GASB Actuarial Study. DISCUSSION / ANALYSIS: In June of 2015, the GASB approved revised OPEB accounting rules which require additional analysis and reporting for the District’s 2017-2018 fiscal year. The actuarial analysis is now due to be completed; however, there were no funds budgeted to cover the costs. Staff is requesting the addition of $13,500 to the Human Resources General Fund budget to cover the costs of the actuarial analysis. Once complete, the report will be presented to the Committee. Prior Relevant Board Action(s)
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AGENDA ITEM SUBMITTAL Meeting Date: February 15, 2018 Budgeted: No Budgeted Amount: N/A To: Administrative Finance Committee
Board of Directors Cost Estimate: $3,000
Funding Source: General Reserves Program/ Line Item No. 1040
From: Mike Markus General Counsel Approval: N/A Engineers/Feasibility Report: N/A Staff Contact: John Kennedy CEQA Compliance: N/A Subject: PARTICIPATION IN 2018 ORANGE COUNTY SCIENCE FAIR SUMMARY District staff would participate as a special judge in the 2018 Orange County Science and Engineering Fair competition and would provide outstanding water related science projects with a monetary award. RECOMMENDATION Authorize participation in an amount of $3,000 for water-related student projects at the 2018 Orange County Science and Engineering Fair. BACKGROUND/ANALYSIS The Orange County Science and Engineering Fair (OCSEF) is a nonprofit educational organization that has promoted science and engineering in Orange County since 1955. The OCSEF staff volunteer their services and are committed to educating, guiding, and motivating students to engage in project-based learning in all fields of science, technology, engineering, and mathematics (STEM) to be college and career ready in the 21st century. There exist a recognized need to produce science-literate citizens and skilled, knowledgeable workers to meet the demands of high technology industries. OCSEF has witnessed firsthand how effective students can be when challenged to inquire, design, and investigate scientific and engineering concepts through experimentation. Participation in science fair helps students to improve their science skills and literacy while inspiring them to consider careers in science and engineering. The OCSEF works to support these science students in grades 6-12, their teachers, and their families by providing opportunities to experience experimental science. This is accomplished through the OCSEF competition held each spring at the Orange County Fairgrounds. Here the students exhibit their work in the form of posters and discuss their discoveries with volunteer judges who are experts in their field. The students compete for a variety of monetary and special awards. Many of the best presentations are then selected to enter the California State Science Fair, a group of middle school students are
invited to compete in the Broadcom MASTERS competition, and a select number of high school students enter the Intel International Science and Engineering Fair. The OCSEF also supports science projects through outreach activities such as workshops and mentoring for teachers and students. Orange County teachers have limited time and resources; therefore, OCSEF also works with teachers and parents to help facilitate their own school fairs, classroom competitions, and individual sponsorships of students. OCSEF also guides and provides resources for home schooled students into the annual competition. Up to ten (10) students will be awarded in the following general categories: Environmental Science / Environmental Engineering, Microbiology and Cell Biology and Biological Product Science. Staff would participate as a special judge in the Science Fair. Staff would also provide an additional $300 award for up to 10 highly rated projects that were related to the water industry. PRIOR RELEVANT BOARD ACTION(S) N/A
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AGENDA ITEM SUBMITTAL Meeting Date: February 15, 2018 Budgeted: No Budgeted Amount: $0 To: Administration/Finance Issues Cte. Cost Estimate: $14,900 Board of Directors Funding Source: General Fund Program/Line Item No.: 1024.53001 From: Mike Markus General Counsel Approval: N/A Engineers/Feasibility Report: N/A Staff Contact: R. Fick /V. Sharma CEQA Compliance: N/A Subject: AGREEMENT TO WHITE NELSON DIEHL EVANS LLP FOR AGREED-UPON PROCEDURES IN ADDITION TO THE ANNUAL AUDIT SUMMARY At the pre-audit communication meeting in June 2017, the Audit Committee requested the auditors to provide a quote for additional agreed-upon procedure services in addition to the annual audit. White Nelson Diehl Evans, LLP, our auditor, provided a detailed list of the agreed-upon procedure services and cost estimation for your reference. Attachment(s): Agreement from White Nelson Diehl Evans, LLP dated January 2, 2018 RECOMMENDATION Agendize for the February 21 Board meeting: Authorize execution of Agreement to White Nelson Diehl Evans, LLP for an amount not to exceed $14,900 plus all out-of-pocket expenditures to provide consulting services for the Agreed Upon Procedures in addition to the annual audit.
BACKGROUND/ANALYSIS At the pre-audit communication meeting in June 2017, the Audit Committee requested the auditors to provide a quote for additional agreed-upon procedure services. The services would include a sampling and review of the following areas in addition to the annual audit:
Purchasing: Internal Controls (Segregation of Duties) Vendor Contracts (Bidding and Total Paid Versus Total Contract Amount) Compensation (Executive Staff)
White Nelson Diehl Evans, LLP, our auditor, provided a detailed list of the agreed-upon procedure services in addition to the annual audit to include the above referenced areas and a cost estimation not to exceed $14,900 plus all out-of-pocket expenditures which is attached for your reference. PRIOR RELEVANT BOARD ACTION(S) 3/16/16 M16-49 Receive and file agreed upon procedures on internal controls prepared by Lance, Soll and Lunghard, LLP
11/18/15 R15-11-164 approving agreement to Lance Soll and Lunghard LLP for agreed-upon procedures in addition to the annual audit 3/19/14 R14-3-40 Authorize agreed upon procedures letter from Adcock-Devlin for audit of SAWA trust fund
4/17/13 M13-60 Receive and file internal controls audit agreed upon procedures 9/19/12- R12-9-115 Approve Agreement to Lance, Soll and Lunghard, LLP for agreed-upon procedures in addition to the annual audit 4/18/12, M12-65 receive and file agreed upon procedures and annual audit prepared by Lance, Soll and Lunghard, LLP 9/21/11- R11-9-140 Authorize issuance of agreement to Lance, Soll and Lunghard, LLP to provide consulting services for the agreed upon procedures in addition to the annual audit
2875 Michelle Drive, Suite 300, Irvine, CA 92606 • Tel: 714.978.1300 • Fax: 714.978.7893
Offices located in Orange and San Diego Counties
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January 2, 2018 Mr. Randy Fick CFO/Treasurer Orange County Water District 18700 Ward Street Fountain Valley, CA 92708 Dear Mr. Fick: We are pleased to confirm our understanding of the terms of our engagement and the nature and limitations of the services we are to provide for the Orange County Water District (District). We will apply the agreed-upon procedures, which the District has specified, listed in the attached Schedule A, for the review of purchasing internal controls, vendor contracts, and executive staff compensation for the time period of January 1, 2017 to December 31, 2017. This engagement is solely to assist the District in regards to assessing the segregation of duties regarding purchasing internal controls, compliance of vendor contracts with competitive bidding requirements, and accuracy of the executive staff compensation. Our engagement to apply agreed-upon procedures will be conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of the procedures performed or to be performed is solely the responsibility of the specified parties and we will require an acknowledgement in writing of that responsibility. Consequently, we make no representation regarding the sufficiency of the procedures described in the attached Schedule A, either for the purpose for which the agreed-upon procedures report has been requested, or for any other purpose. Because the agreed-upon procedures listed in the attached Schedule A do not constitute an examination or review, we will not express an opinion on the segregation of duties regarding purchasing internal controls, compliance of vendor contracts with competitive bidding requirements, or accuracy of the executive staff compensation. In addition, we have no obligation to perform any procedures beyond those listed in the attached Schedule A. We will issue a written report upon completion of our engagement that lists the procedures performed and our findings. Our report will be addressed to the District management and the Board of Directors. If, for any reason, we are unable to complete any of the procedures, we will describe in our report any restrictions on the performance of the procedures, or not issue a report and withdraw from this engagement. If circumstances occur relating to the condition of the District’s records, the availability of evidence, or the existence of a significant risk of material misstatement of the subject matter caused by error or fraud, which in our professional judgment prevent us from completing the engagement or reporting findings on the subject matter or assertion, we retain the right to take any course of action permitted by professional standards, including declining to report findings or issue a report, or withdrawing from the engagement.
Mr. Randy Fick, CFO/Treasurer Orange County Water District January 2, 2018 Page 2 You understand that the report is intended solely for the information and use of District management and the Board of Directors, and should not be used by anyone other than these specified parties. Our report will contain a paragraph indicating that had we performed additional procedures, other matters might have come to our attention that would have been reported to you. An agreed-upon procedures engagement is not designed to detect instances of fraud or noncompliance with laws or regulations; however, we will communicate to you any known and suspected fraud and noncompliance with laws or regulations affecting the analysis of the purchasing internal controls, vendor contracts, and executive staff compensation that come to our attention. In addition, if, in connection with this engagement, matters come to our attention that contradict the analysis of purchasing internal controls, vendor contracts, and executive staff compensation we will disclose those matters in our report. Such disclosures, if any, may not necessarily include all matters that might have come to our attention had we performed additional procedures or an examination or review. You are responsible for the design, implementation, and monitoring of purchasing internal controls, compliance with competitive bidding requirements for vendor contracts, and accuracy of executive staff compensation; and for selecting the criteria and procedures and determining that such criteria and procedures are appropriate for your purposes. In addition, you are responsible for providing us with (1) access to all information for which you are aware that is relevant to the performance of the agreed-upon procedures on the subject matters, (2) additional information that we may request for the purpose of performing the agreed-upon procedures, and (3) unrestricted access to persons within the District from whom we determine it necessary to obtain evidence relating to performing those procedures. Nitin Patel is responsible for supervising the engagement and signing the report or authorizing another individual to sign it. We plan to begin our procedures in March 2018 and, unless unforeseeable problems are encountered, the engagement should be completed by April 2018. At the conclusion of our engagement, we will require certain written representations in the form of a representation letter from management that, among other things, will confirm management’s responsibility for the design, implementation, and monitoring of purchasing internal controls, compliance with competitive bidding requirements for vendor contracts, and accuracy of executive staff compensation. Our fee for these services is estimated at $14,900 based on the hourly rates listed in our contract with the District. The fee is based on anticipated cooperation from District personnel and the assumption that unexpected circumstances will not be encountered during the engagement. If significant additional time is necessary, we will discuss it with you and arrive at a new fee estimate before we incur the additional costs. Our invoices for this fee will be rendered each month as work progresses and are payable on presentation. If we elect to terminate our services for nonpayment, our engagement will be deemed to have been completed upon written notification of termination even if we have not completed our report. You will be obligated to compensate us for all time expended and to reimburse us for all out-of-pocket expenditures through the date of termination.
Mr. Randy Fick, CFO/Treasurer Orange County Water District January 2, 2018 Page 3 We appreciate the opportunity to assist you and believe this letter accurately summarizes the significant terms of our engagement. If you have any questions, please let us know. If you agree with the terms of our engagement as described in this letter, please sign the enclosed copy and return it to us. If the need for additional procedures arises, or the procedures need to be modified, our agreement with you will need to be revised. It is customary for us to enumerate these revisions in an addendum to this letter. If additional specified parties of the report are added, we will require that they acknowledge in writing their agreement with the procedures performed or to be performed and their responsibility for the sufficiency of procedures. Very truly yours, WHITE NELSON DIEHL EVANS LLP Nitin P. Patel, CPA Engagement Partner RESPONSE: This letter correctly sets forth the understanding of the Orange County Water District By: ______________________________________ Title:_______________________________________ Date:_______________________________________
SCHEDULE A
SCHEDULE OF PROCEDURES TO BE PERFORMED FOR THE CALENDAR YEAR JANUARY 1, 2017 THROUGH DECEMBER 31, 2017
Purchasing: Internal Controls (Segregation of Duties) We will obtain an understanding of the District’s internal controls and procedures over cash disbursements. We will perform the procedures set forth below.
1. We will note any employees who perform more than one of the following listed duties and make any overall suggestions based on our review of the cash disbursement policies and procedures:
a. Ordering the goods/services. b. Receiving the goods/services. c. Approving the invoices. d. Submitting payment requests. e. Picking up/mailing out the printed checks. f. Recording in the general ledger. g. Adding or removing vendors from the vendor list, including the process for retaining
the W-9. h. Keeping vendor listing current and up-to-date, including removal of inactive or one-
time vendors. Vendor Contracts (Bidding and Total Paid Versus Total Contract Amount)
1. We will select a sample of 25 cash disbursements from the calendar year 2017, with 15 selected based on the largest disbursements that appear to require competitive bidding. We will perform the following:
a. Verify the cash disbursement was approved in accordance with the District’s procurement policy.
b. Verify the appropriate amount and type of bids were obtained in accordance with the District’s procurement policy (if bidding is applicable).
c. Review the payment history to the vendor for the project/goods/services selected and compare the total amount paid to the purchase order/contract amount to verify the disbursements did not exceed the authorized amount. When change orders occurred, we will verify the change orders were authorized in accordance with the District’s policies.
Compensation (Executive Staff)
1. We will review the 2017 W-2s for the following employees: a. General Manager b. Assistant General Manager c. Executive Director of Engineering and Water Resources d. Executive Director of Operations e. Executive Director of Planning and Natural Resources f. Treasurer/CFO
2. We will compare the compensation per the 2017 W-2s to the employment agreement or personnel action form including the employee’s authorized pay rate and request a reconciliation from the District for variances. We will verify the reconciling items are appropriate given the District’s policies.
3. We will verify the employment agreement has been approved by the Board of Directors or that the rate on the personnel action form is approved by appropriate District personnel.
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AGENDA ITEM SUBMITTAL Meeting Date: February 15, 2018 Budgeted: N/A Budgeted Amount: $10,000 To: Administration/Finance Issues Cte Cost Estimate: $62,900 Board of Directors Funding Source: General Reserves Program/ Line Item No. N/A From: Mike Markus General Counsel Approval: N/A Engineers/Feasibility Report: N/A Staff Contact: P. Bouyounes CEQA Compliance: N/A Subject: EMERGENCY RESPONSE PLAN UPDATE SUMMARY The District’s Emergency Response Plan (ERP) needs to be updated to ensure compliance with Cal/OSHA and the National Incident Management System (NIMS) as required by the Federal Department of Homeland Security. The current ERP was developed 10 years ago. Staff requested quotes from three companies with experience working with public agencies. All proposals included revising the ERP to align with State and Federal requirements, providing training on the new plan and conducting a tabletop drill for designated staff. Staff recommends Claris Strategy since they were the only company to include additional alignment with local emergency plans. RECOMMENDATION Agendize for February 21 Board meeting: Authorize issuance of an Agreement to Claris Strategy Consulting Services for an amount not to exceed $62,900. BACKGROUND Emergency Response Plan Emergencies disrupt normal business routines. Just like daily operations and procedures, having a response plan is the first step to help everyone know what to do when the unexpected happens. Emergency response plans need to cover a wide variety of hazards. They also account for the resources needed for response, as well as the specific actions that will be taken to mitigate various situations that could occur. The District’s current Emergency Response Plan binder includes the following sections:
Emergency Operation Center (EOC) general procedures and forms Disaster specific procedures Incident Command System (ICS) forms ICS Position checklists
All proposals received incorporated compliance with Federal and State requirements which included the following:
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Updating the ERP to the current Federal and State guidelines and standards. Customizing the ERP and applicable forms and checklists to be more user-friendly
by District staff. Providing the District’s EOC staff training on the revised plan and a tabletop drill
using the revised plan and forms.
Three quotes were received from the following consulting companies: Navigating Preparedness Associates, PlaceWorks, and Claris Strategy (See Table 1).
TABLE 1 – SUMMARY OF PROPOSALS
Company Comment Cost
Navigating Preparedness
Associates
Not local (located in Contra Costa County). Will include 4 visits and monthly conference calls. $59,500 No local customization included.
PlaceWorks (withdrew)
Local (located in Ontario). $62,360
No local customization included.
Claris Strategy Local (located in Arcadia).
$62,900 Local customization is included to align with WEROC, County of Orange and Orange County Operational Area.
Staff recommends selecting Claris Strategy to perform the ERP revision, develop and conduct the training and tabletop drill. Claris Strategy is most familiar with local water agencies’ processes and risks and will align the ERP with local Water Emergency Response Organization of Orange County (WEROC), the County of Orange and the Orange County Operational Area (OA) emergency processes. Claris Strategy has extensive knowledge of the local water system and wastewater agencies in Orange County. They understand how the OA and WEROC interact with water districts including WebEOC* and AlertOC*.
*Note: WebEOC is a web-based information management system that provides a single access point for the collection and dissemination of emergency or event-related information.
AlertOC is a mass notification system designed to keep Orange County, California residents and businesses informed of emergencies and certain community events.
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The budgeted amount for emergency management was $10,000. Staff utilized $3,600 to comply with the new January 2018 Cal EPA (California Environmental Protection Agency) regulations. The remaining budgeted amount will be used towards the ERP revision process. PRIOR BOARD ACTION(S) 6/15/2005 R05-6-69, Establish the National Incident Management System (NIMS) as the district standard for incident management and adopting revised emergency response plan
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AGENDA ITEM SUBMITTAL Meeting Date: February 15, 2018 Budgeted: N/A Budgeted Amount: N/A To: Administration/Finance Issues Cte. Funding Source: N/A Board of Directors Cost Estimate: N/A Program/Line Item No: N/A From: Mike Markus General Counsel Approval: N/A Engineers/Feasibility Report: N/A Staff Contact: G. Woodside CEQA Compliance: N/A Subject: ON-CALL ENVIRONMENTAL SERVICES AGREEMENT WITH
ENVIRONMENTAL ADVISORS
SUMMARY The District has agreements with three firms for on-call environmental analysis services. One of these firms, Environmental Advisors, has incorporated as a new firm. The same staff that have provided services at Environmental Advisors are with the new firm, Sagecrest Planning+Environmental. RECOMMENDATION Agendize for February 21 Board meeting: Authorize termination of Agreement No. 0864 with Environmental Advisors and execution of a new agreement with the same terms and conditions with Sagecrest Planning+Environmental for on-call environmental services. BACKGROUND/ANALYSIS The District uses three on-call environmental firms to provide as needed environmental analysis services, such as air quality or noise studies for environmental impact reports. One of these firms, Environmental Advisors, has incorporated as a new firm. Environmental Advisors has provided good quality work for the District. The same staff that have provided services at Environmental Advisors are with the new firm, Sagecrest Planning+Environmental. Staff recommends the District authorize termination of Agreement No. 0864 with Environmental Advisors and execution of a new agreement with the same terms and conditions with Sagecrest Planning+Environmental. PRIOR RELEVANT BOARD ACTION(S):
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8/1/12 R12-8-97 - Authorize issuance of agreement to environmental advisors and inclusion on the district’s list of pre-qualified on-call environmental consulting firms
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AGENDA ITEM SUBMITTAL Meeting Date: February 15, 2018 Budgeted: Yes Budgeted Amount: $400,000 To: Administration and Finance Issues Cte Cost Estimate: $394,400 Board of Directors Funding Source: R&R Program/ Line Item No. R17018 From: Mike Markus General Counsel Approval: N/A Engineers/Feasibility Report: N/A Staff Contact: S. Nygren/B. Dunivin CEQA Compliance: N/A
Subject: PURCHASE JOHN DEERE 300 GLC EXCAVATOR FROM COASTLINE EQUIPMENT
The District’s fleet of heavy equipment has been scheduled for replacement over the next several years for two reasons; first they are aging and several have 10,000+ operating hours; and second because California Air Resources Control Board (CARB) regulations require the District’s existing Tier-0 equipment to be systematically phased out and replaced (between now and 2020) with new Tier 4 certified equipment. In keeping with the District’s replacement purchase schedule it is recommended that Excavator TL-32, which is Tier-1 status and 21 years old with over 7,000 hours, be declared surplus and a John Deere 300 GLC Excavator with a Tier 4 engine from Coastline Equipment. RECOMMENDATION Agendize for February 21 Board Meeting. Authorize issuance of Purchase Order to Coastline Equipment for $394,460 for purchase of a John Deere 300 GLC Super Long Reach Excavator and placement of TL-32 on the surplus equipment list. BACKGROUND/ANALYSIS An existing long-reach excavator, TL-32, is frequently used at the Prado Wetlands for various functions such as; removing vegetation from channels and slopes, trenching and pipe placement, and removing sediment and re-shaping slopes. The long reach boom allows equipment operators access to places other, shorter boom excavators cannot reach. Because of the age, high operating hours, and non-compliant engine emissions, TL-32 needs to be replaced. In addition to its age and operating hours, increasing maintenance costs support replacement. The excavator recommended for purchase has a Tier 4 engine, which is a clean burning diesel engine, which is fuel-efficient and fulfills CARB requirements. The purchase price includes a smooth bucket for cleaning slopes, a second bucket for digging, tilt/ articulating coupler for side slope excavation, and includes a warranty for 84 months.
The excavator price is discounted by $106,375 or 34% through a combination of a National Joint Powers Association (NJPA) Member Discount and a dealer discount. Quotes from three vendors were evaluated for cost, warranty, included equipment list, parts availability, and dealer support. Each vendor is ranked to determine the best-qualified supplier. See Table 1
* Separate warranty for boom, use of HELAC coupler may void warranty
PRIOR RELEVANT BOARD ACTION(S) N/A
Figure 1
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AGENDA ITEM SUBMITTAL
Meeting Date: February 15, 2018 Budgeted: Yes Budgeted Amount: $61,500 To: Administration/Finance Issues Cte Cost Estimate: $59,800 Board of Directors Funding Source: General Fund Program/ Line Item No.: 1016.57004 From: Mike Markus General Counsel Approval: N/A Engineers/Feasibility Report: N/A Staff Contact: B. Dosier / V. Nguyen CEQA Compliance: N/A SUBJECT: IBM MAXIMO SOFTWARE SUBSCRIPTION AND SUPPORT RENEWAL SUMMARY The District uses the IBM Maximo Computerized Maintenance and Asset Management System (Maximo) to support the District’s Water Production group to manage the assets of the Groundwater Replenishment System (GWRS) Advanced Water Purification Facility (AWPF) and Field Headquarters. The annual Software Subscription and Support for these IBM Maximo products is due for renewal on April 1, 2018 in the amount of $59,800. Attachment(s): IBM Software Subscription and Support Renewal Quotation RECOMMENDATION Agendize for February 21 Board meeting: Authorize issuance of Purchase Order to IBM Maximo Software Subscription and Support renewal in the amount of $59,800 for system updates commencing April 1, 2018 through March 31, 2019. BACKGROUND/ANALYSIS District staff utilizes IBM Maximo to support the District’s Water Production group to manage the assets of the Groundwater Replenishment System (GWRS) Advanced Water Purification Facility (AWPF) and Groundwater Recharge Operations at Forebay in Anaheim. Maximo is used to plan, schedule and manage work orders and to track and monitor maintenance related issues. The district has consistently maintained and kept current with the IBM Software Subscription and Support since acquiring Maximo in 2005. The twelve month Software Subscription and Support for these IBM Maximo products is due for renewal on April 1, 2018. IBM increases the support fee by approximately 10% each year automatically for yearly renewals. However, this year staff has negotiated to reduce the 10% increase to 7% over last year’s price to $59,800. Public sector organizations can file for tax exemption status if product delivery is completed exclusively by electronic methods. The district does not pay sales tax on this renewal.
IBM Software Subscription and Support available through IBM Passport Advantage consists of the following: Program updates and fixes
Support includes software fixes, security patches, feature packs, incremental enhancements which IBM made available to the supported customers for download at no additional license fee. The fixes and patches can be required for a variety of reasons, including system errors and upgrades in the database management system, the operating system or the hardware server architecture. Major product and technology releases
Support includes minor and major releases of software including general maintenance releases, selected functionality releases and documentation updates. This allows the District to upgrade the Maximo Computerized Maintenance system as new versions become available without additional cost for the software, as appropriate, allowing the District to take advantage of enhanced functionality designed into newer versions. In January 2018, staff downloaded, and upgraded IBM Maximo from version 7.6 to the latest version 7.6.0.9 at no charge under the IBM Subscription and Support agreement, and is still in testing phase. Technical support
IBM Software Subscription and Support includes technical support for assistance with the IBM Maximo software issues, new deployment, migration, troubleshooting, and code questions. Staff entitled access to Service Requests and Problem Management Report (PMRs) for rapid response to severity 1 issues - 24 hours per day, 7 days a week. Access to web-based support IBM Software Subscription and Support includes access to the on-line knowledgebase via Knowledge Centers, forums, Redbooks, Technotes, and tools that contains fixes and solutions in a searchable format 24 x 7. Staff uses this tool to search for solutions without always contacting support directly, or to search for documentation that is not available elsewhere. Staff is recommending issuance of a Purchase Order to IBM Maximo Software Subscription and Support renewal in the amount of $59,800 for system updates commencing April 1, 2018 through March 31, 2019 and 2 additional annual renewals (for a total of 3 years), not to exceed 10% increase per year PRIOR RELEVANT BOARD ACTION (S)
March 15, 2017, R017-3-39 Authorize issuance of Agreement to IBM Maximo Software Subscription and Support in the amount of $55,889 for system updates commencing April 1, 2017 through March 31, 2018 May 20, 2015, R015-5-69 Authorize issuance of Agreement to Interloc Solutions for an amount not to exceed $497,100 for Programming Services for the Maximo Computerized Maintenance Management System Upgrade February 20, 2008, R08-2-25 Authorize execution of Professional Services Agreement with Synoptek in the amount of $399,450 for Programming Services for the integration of Maximo Computerized Maintenance Management System with JD Edwards Financial Information System October 17, 2007, M07-145 Authorize issuance of Request for Proposals for Programming Services for the Integration of the Maximo Computerized Maintenance Management System with the JD Edwards Financial Information System to assist staff with the development of the Integrated Information System. July 18, 2007, R07-7-94 Authorize execution of agreement with Datamatics Consultants, Inc. for an amount not to exceed $333,080 for Programming Services for the Integration of the Maximo Computerized Maintenance Management System with the JD Edwards Financial Information System to assist staff with the development of the Integrated Information System. July 20, 2005 , R05-7-78 Authorize issuance of a purchase order to Key Information Systems Inc. for $128,229 for Integrated Information System hardware and support services to support the Computerized Maintenance Management System. March 2, 2005, M05-25 Authorize the issuance of a Purchase Order to MRO Software for $365,460 for Computerized Maintenance Management Software; and Authorize issuance of a Professional Service Agreement to MRO Software for a lump sum not to exceed $850,000 for Software Support Services.
Dear Customer:
Thank you for your inquiry regarding IBM Software.
Any and all prices herein are suggested prices only and are subject to change at IBM's sole discretion. Products listed herein aresubject to withdrawal or modification by IBM at any time at IBM's sole discretion. Final coverage dates for new license, SoftwareSubscription and Support reinstatement, and Software Subscription and Support renewal part numbers will be based upon IBM'sacceptance of the order, and as specified in the applicable agreements, irrespective of the dates which may appear in this quote.
This quotation is valid from 24-Jan-2018 and will expire on 30-Mar-2018.
Your order will be governed by and is subject to the terms of your Passport Advantage Agreement or the Passport AdvantageExpress Agreement, as applicable, against which this transaction will be placed.
To place your order, please go to the Passport Advantage Online Web sitehttps://www-112.ibm.com/software/howtobuy/passportadvantage/paocustomer/eorder/Quote?P0=Q2"e=0017898213. A username and passcode arerequired to access this secure Web site. If you do not have this information, contact eCustomer Care. The eCustomer Care contactinformation for your location can be found athttp://www.ibm.com/software/howtobuy/passportadvantage/paocustomer/docs/en_US/ecare.html.
If you need assistance with placing your order or wish to discuss your quotation, please contact the IBM Representative notedbelow.
Yours sincerely,
Jennifer A. DociliPhone Number: 1-972-906-4467Fax Number:E-mail Address: [email protected]
Attn: Vickie NguyenCA Orange County Water District18700 Ward StreetFOUNTAIN VALLEY CA 92708-6930UNITED STATES
24-Jan-2018
International Business Machines CorporationInternational Business Machines Corporation, PO Box 643600, Pittsburgh, PA 15264-3600
Passport Advantage Site Number: 7396857Anniversary: 01-AprQuotation SVP Level: GV
Customer:Attn: Vickie NguyenCA Orange County Water District18700 Ward StreetFOUNTAIN VALLEY CA 92708-6930UNITED STATES
Useful/Important Web resources:
Passport Advantage information, customer secure site access, training, etc.: ibm.com/software/passportadvantage
IBM's International Program License Agreement and product License Information documents: ibm.com/software/sla
IBM Software Support web site: ibm.com/software/support
IBM Customer Number: 6771530
International Business Machines CorporationInternational Business Machines Corporation, PO Box 643600, Pittsburgh, PA 15264-3600
Quotation Number: 17898213IBM Contact: Jennifer A. DociliPhone Number: 1-972-906-4467
Item Part Number Quantity Points Unit SVP Price Discounted Price Extended Amount
Page 2 of 3
Applicable tax will be recalculated at the time of order processing.
Total Points: 395.52 Subtotal in USD: 59,800.88
Total in USD: 59,800.88
Your order is governed by and subject to the terms of your Passport Advantage Agreement or the Passport Advantage ExpressAgreement, as applicable, against which this transaction will be placed.
Useful/Important Web resources:
Passport Advantage information, customer secure site access, training, etc.: ibm.com/software/passportadvantage
IBM's International Program License Agreement and product License Information documents: ibm.com/software/sla
IBM Software Support web site: ibm.com/software/support
IBM Customer Number: 6771530
International Business Machines CorporationInternational Business Machines Corporation, PO Box 643600, Pittsburgh, PA 15264-3600
Item Part Number Quantity Points Unit SVP Price Discounted Price Extended Amount
Page 3 of 3
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AGENDA ITEM SUBMITTAL
Meeting Date: February 15, 2018 Budgeted: Yes Budgeted Amount: $710,000 To: Administration/Finance Issues Cte. Cost Estimate: $710,000 Board of Directors Funding Source: Capital Project Program/Line Item No.: N/A From: Mike Markus General Counsel Approval: N/A Engineers/Feasibility Report: N/A Staff Contact: R. Fick/J. Kennedy CEQA Compliance: N/A Subject: APPLICATION RESOLUTION FOR WATER INFRASTRUCTURE FINANCE
AND INNOVATION ACT LOAN FOR THE GROUNDWATER REPLENISHMENT SYSTEM FINAL EXPANSION PROJECT
SUMMARY Staff is preparing an Environmental Protection Agency (EPA) Water Infrastructure Finance and Innovation Act (WIFIA) loan application which would be used to partially fund the design and construction of the Groundwater Replenishment System Final Expansion (GWRSFE) Project. Attached is a resolution for Board consideration that is required by the EPA as part of the District’s WIFIA loan application. The District is also required to submit a $100,000 non-refundable EPA WIFIA application fee with the submission of the WIFIA loan application in March. This payment is part of the total WIFIA loan fees which are estimated at $300,000 - $450,000.
Attachment(s): Resolution to submit an Environmental Protection Agency Water Infrastructure Finance
and Innovation Act application for the Groundwater Replenishment System Final Expansion Project
EPA Fee Collection Letter RECOMMENDATION Agendize for February 21 Board meeting: 1. Adopt resolution to submit an Environmental Protection Agency Water Infrastructure
Finance and Innovation Act loan application for the partial funding of the Groundwater Replenishment System Final Expansion Project; and
2. Authorize payment of loan application fee and Environmental Protection Agency
consultant costs to the Environmental Protection Agency in the amount not to exceed $450,000; and
3. Authorize payment for District consultants not to exceed $260,000 based on
representation of timing of the transaction made by the Environmental Protection Agency.
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BACKGROUND/ANALYSIS Staff is applying for a financial assistance program with the Environmental Protection Agency (EPA) Water Infrastructure Finance and Innovation Act (WIFIA) for an estimated $123,872,000 loan for partial funding of the GWRS Final Expansion (GWRSFE) Project. The financial program the District is applying for is a low-interest rate WIFIA loan for an amount of approximately $123,872,000 million or 49% of the estimated total project cost. The interest rate on the WIFIA loan is no less than the yield on a United States Treasury security of a similar maturity to that of the WIFIA loan on the date of execution of the WIFIA loan agreement. For example, the rate for a 30 year WIFIA loan was estimated at 2.84% as of January 9, 2018. The attached resolution must be adopted by the Board as part of the loan application package. In addition, an application fee of $100,000 is due with the submission of a loan application to the EPA as an upfront payment towards the third-party advisory (financial, engineering, and legal) costs. The EPA estimates advisor costs to land in the realm of $300,000 to $450,000 (this includes the initial $100,000 fee at application submission). A summary of the benefits of the WIFIA loan include:
WIFIA offers repayment deferral periods (interest capitalization) during construction and up to 5 years post construction completion to borrowers that need to manage high capital expenditures, phase in rate increases over time, manage higher operations and maintenance costs post construction, or want to payoff other more expensive project debt.
WIFIA debt may be prepaid without penalty. If the District were to find a cheaper source of financing, the WIFIA loan may be taken out at no additional cost.
WIFIA offers a very competitive interest rate. A WIFIA loan’s interest rate is equal to the interest rate of a treasury security of a similar maturity.
WIFIA loan proceeds may be disbursed as often as monthly during the construction period at no additional cost to the borrower. This allows the borrower to disburse funds only as needed and to prevent interest from accruing on undisbursed funding.
WIFIA may offer an interest only period to borrowers that would like to reduce total WIFIA debt service during times of high expenses.
WIFIA’s final maturity date may be 35 years post construction completion of the project. Therefore, a project with a 5-year construction period may have a total of 40 years from first disbursement to final maturity to repay the WIFIA debt.
Debt service payments for a WIFIA loan may be customized. Expected District costs in an amount not to exceed $260,000 for assistance in preparing loan documents, negotiating terms, rating agency presentation for ratings on debt, etc., based on current representation by the EPA are shown below: $ 40,000 – District’s Legal Counsel (Stradling Yocca Carlson & Rauth) $ 83,870 – Financial Advisor (Fieldman, Rolapp & Associates, Inc.) $131,000 – Rating Agency Fees
$ 5,130 – Contingency for Unanticipated Costs $260,000 Total
3
Any increases in legal or financial advisor fees resulting from change in timeframe or scope by EPA will be brought to Board for approval. PRIOR RELEVANT BOARD ACTION(S) N/A
RESOLUTION OF THE BOARD OF DIRECTORS OF THE ORANGE COUNTY WATER DISTRICT
TO SUBMIT AN ENVIRONMENTAL PROTECTION AGENCY WATER INFRASTRUCTURE FINANCE AND INNOVATION ACT
APPLICATION FOR THE GROUNDWATER REPLENISHMENT SYSTEM FINAL
EXPANSION PROJECT RESOLVED, by the Board of Directors of the Orange County Water District that the General Manager is hereby authorized and directed to submit on behalf of the Orange County Water District, an Environmental Protection Agency (EPA) Water Infrastructure Finance and Innovation Act (WIFIA) $123,872,000 loan application which will be used to partially fund the design and construction of the Groundwater Replenishment System Final Expansion Project. RESOLVED, by the Board of Directors of the Orange County Water District that the General Manager is hereby authorized and directed to submit a $100,000 non-refundable EPA WIFIA application fee. RESOLVED FURTHER, that the Orange County Water District hereby agrees and further does authorize the General Manager to provide the assurances, certifications, and commitments required for any such financial assistance application, and the execution of a financial assistance loan agreement from the EPA and any amendments or changes thereto. RESOLVED FURTHER, that the General Manager is designated to represent the Orange County Water District in carrying out the Orange County Water District’s responsibilities under the financing agreement, including certifying disbursement requests on behalf of the Orange County Water District and compliance with applicable federal laws.
CERTIFICATION I DO HEREBY CERTIFY that the foregoing is a full, true, and correct copy of a resolution duly and regularly adopted at a meeting of the Orange County Water District held on February 21, 2018. Janice Durant District Secretary
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY WIFIA Program
Notice of Non-Refundable Application Fee N17116CA-FEE01
February 1, 2018
Randy Fick Chief Financial Officer Orange County Water District 18700 Ward Street Fountain Valley, CA 92708
Subject: FY2017 Groundwater Replenishment System Final Expansion project (WIFIA ID: N17116CA)
Dear Mr. Fick,
Thank you for submitting your Water Infrastructure Finance and Innovation Act (WIFIA) letter of interest for the Groundwater Replenishment System Final Expansion project. As noted in a July 17, 20171etter from EPA informing you that the projects have been selected to submit an application for credit assistance, you must submit a non- refundable Application Fee of $100,000 for your application to be considered. This payment must be received prior to or concurrently with submission of your application.
You will only receive this Notice that the $100,000 Application Fee is due. Failure to submit the required Application Fee will mean that your WIFIA application will not be considered or considered withdrawn.
For initiating and transmitting the required Fee payment, the attached document, "HOW TO MAKE A PAYMENT TO EPA- WIFIA Program" identifies the payment methods we accept as well as the office to contact if there are questions. Please note the reference number of N17116CA-FEE01 in your payment submission.
We look forward to working with you on this project.
Acceptable Payment Methods for WIFIA payments to EPA
1. FEDWIRE – Wire transfers made through Fedwire are an alternative electronic wire transfer
initiated between you and your organization’s Financial Institution (bank):
a. Fedwire is typically used to initiate financial institution (bank) generated “Same Day”
electronic payments, or as alternative to using Pay.Gov or sending funds by check through
the mail.
b. Agency customers must work within the processing guidelines established by their bank.
Bank guidelines may include processing cutoffs, transaction fees, and other bank
requirements.
c. Requests for transmitting funds electronically to EPA normally are initiated by the EPA
customer or vendor to its bank’s funds transfer department. Banks that do not maintain an
account at a Federal Reserve Bank (FRB) must use the services of correspondent banks
2
that do have an FRB account. Send Fedwire deposits as early as possible and no later than
5 p.m. ET on the desired “EPA” receipt date.
d. The FEDWIRE payment initiated by your bank MUST contain all details below:*
TO (ABA) 021030004
RECEIVER** TREAS NYC/(68011233)EPA
THIRD
PARTY
INFORMATI
ON
Details provided in the Third Party Information fields on the
form must include the details identified in the Payment Tips
shown above.
*Important: Failure to initiate the FEDWIRE electronic wire transaction properly
with the above fields included, will result in untimely or non‐receipt of funds at
EPA.
e. The Employee Identification Number is 520852695. W-9 form – Request for Taxpayer –
Identification Number and Certificate for EPA is attaching in the following page.
2. CHECK PAYMENTS – Send to address below:
U.S. EPA
Las Vegas Finance Center
4220 S. Maryland Pkwy, Bldg C, Ste
503 Las Vegas NV 89119
Check payments must include the details identified in the Payment Tips above.
NOTE: When checks are provided as payment, you authorize the EPA to use information from
your check to make a one‐time electronic fund transfer from your account or to process the
payment as a check transaction. When the EPA uses information from your check to make an
electronic fund transfer, funds may be withdrawn from your account as soon as the same day we
receive your payment, and you will not receive your check back from your financial institution.
Form W-9 Request for Taxpayer Give Fonn to the (Rev. December 2014) Identification Number and Certification requester. Do not Department ot the Treasury send to the IRS. Internal Revenue Service
1 Name (as shown on your income ta)( return). Name is required on this line; do not leave this line blank.
U.S. ENVIRONMENTAL PROTECTION AGENCY
c-i 2 Business name/disregarded entity name, if different from above
ID
~ a. 3 Check appropriate box for federal tax classification; check only one of the following seven boxes: 4 El<emptions (codes apply only to t:: certain entities, not individuals; see 0 0 Individual/sole proprietor or 0 C Corporation 0 S Corporation 0 Partnership 0 Trust/estate
G) Ill slngle·member LLC instructions on page 3):
a.c Exempt payee code 6f any) 2 ~~ 0 Umited liabWity company. Enter the tax classification (C=C corporation. S=S corporation, P=partnership).,. ... u
Note. For a single-member LLC that Is disregarded, do not check LLC; check the appropriate box in the line above for Exemption from FATCA reporting 0 2 c:u the tax classification of the single-member owner. code (if any) '1: .5 0 Other (see instructions).,. FEDERAL GOVERNMENT (Applies to occount• nvlnloined out_ !he U.SJ O.u
:e 5 Address (number, street, and apt. or suite no.) Requester's name and address (optional) () Cll 4220 S. MARYLAND PKWV, BLDG C, ROOM 503 c.. (I)
8 City, state, and ZIP code Q) Q)
LAS VEGAS NV 89119 fiJ
7 Ust account number(s) here (optionaQ
.:F.1 i •• Taxpayer Identification Number (TIN) Enter your TIN in the appropriate box. The TIN provided must match the name given on line 1 to avoid I Social security number I
• • • • • • 0 •
backup wrthholdrng. For lndrv1duals, th1s 1s generally your socral securrty number (SSN). However, for a resident alien, sole proprietor, or disregarded entity, see the Part I instructions on page 3. For other entities, it is your employer identification number (EIN). If you do not have a number, see How to get a TIN on page 3.
ITO -[IJ -1 I I I I Note. If the account is in more than one name, see the instructions for line 1 and the chart on page 4 for guidelines on whose number to enter.
1. The number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued to me); and
2. I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service ~RS) that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding; and
3 . I am a U .S. citizen or other U.S. person (defined below); and
4. The FATCA code(s) entered on this form (if any) indicating that I am exempt from FATCA reporting is correct.
Certification instructions. You must cross out item 2 above if you have been notified by the IRS that you are currently subject to backup withholding because you have failed to report all interest and dividends on your tax return. For real estate transactions, item 2 does not apply. For mortgage interest paid, acquisition or abandonment of secured property, cancellation of debt, contributions to an individual retirement arrangement (IRA), and generally, payments other than interest and dividends, you are not required to sign the certification, but you must p vide your correct TIN. See the instructions on page 3.
General Instruction Section references are to the Internal Revenue Code unless otherwise noted.
Future developments. Information about developments affecting Form W-9 (such as legislation enacted after we release it) is at www.irs.gov/fw9.
Purpose of Form An individual or entity (Form W-9 requester) who Is required to file an information return with the IRS must obtain your correct taxpayer identification number (TIN) which may be your social security number (SSN), Individual taxpayer Identification number (rTIN), adoption taxpayer identification number (A TIN), or employer Identification number (EIN), to report on an information return the amount paid to you, or other amount reportable on an Information return. Examples of information retums Include, but are not limited to, the following:
• Form 1 099-INT ~nterest earned or paid)
• Form 1099-DIV (dividends, including those from stocks or mutual funds)
• Form 1 099-M ISC (various types of income, prizes, awards, or gross proceeds)
• Form 1 099-B (stock or mutual fund sales and certain other transactions by brokers)
• Form 1 099-S (proceeds from real estate transactions)
• Form 1 099-K (merchant card and third party network transactions)
• Form 1 099-A (acquisition or abandonment of secured property)
Use Form W-9 only if you are a U.S. person (including a resident alien), to provide your correct TIN.
If you do not return Form W-9 to the requester with a TIN, you might be subject to backup withholding. See What is backup withholding? on page 2.
By signing the fi lled-out form, you:
1. Certify that the TIN you are giving is correct (or you are waiting for a number to be issued),
2. Certify that you are not subject to backup withholding, or
3. Claim exemption from backup withholding if you are a U.S. exempt payee. If applicable, you are also certifying that as a U.S. person, your allocable share of any partnership income from a U.S. trade or business is not subject to the withholding tax on foreign partners' share of effectively connected Income, and
4. Certify that FATCA code(s) entered on this form Qf any) indicating that you am exempt from the FATCA reporting, is correct. See What is FATCA reporting? on page 2 for further Information.
Cat. No. 1 0231 X Form W-9 (Rev. 12-2014)
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1
AGENDA ITEM SUBMITTAL Meeting Date: February 15, 2018 Budgeted: N/A Budgeted Amount: N/A To: Administration/Finance Issues Cte. Cost Estimate: N/A Board of Directors Funding Source: N/A Program/Line Item No.: N/A From: Mike Markus General Counsel Approval: N/A Engineers/Feasibility Report: N/A Staff Contact: J. Kennedy CEQA Compliance: N/A Subject: RECENT CALIFORNIA SUPREME COURT RULING, CITY OF VENTURA vs
UNITED WATER CONSERVATION DISTRICT – REPLENISHMENT ASSESSMENT AND ADDITIONAL REPLENISHMENT ASSESSMENT
SUMMARY A recent California Supreme Court ruling regarding the setting of groundwater pumping rates in a dispute between the City of Ventura and the United Water Conservation District has clarified that groundwater rates such as the District’s Replenishment Assessment and Additional Replenishment Assessment must comply with Proposition 26, but not Proposition 218. Staff recommends modifying the District’s rate structure to insure compliance with Proposition 26. Attachment(s):
CA Supreme Court City of Ventura vs United Water Conservation District Ruling Presentation
RECOMMENDATION Agendize for February 21 Board meeting: Beginning with fiscal year 2018-19, establish the Replenishment Assessment at an amount to fund all District activities. BACKGROUND/ANALYSIS Replenishment Assessment and Additional Replenishment Assessment History
The District established the RA in 1954 via State legislation that amended the District Act (Section 27) to provide a funding source to purchase large blocks of imported water. Additional water was needed to recharge the groundwater basin due to increasing groundwater production and a growing basin accumulated overdraft. Establishing the RA was a significant accomplishment for the region and required well owners for the first time to register their wells with the District, report their groundwater usage semi-annually and pay a groundwater production fee. All groundwater production must pay the RA. The RA revenues were originally only to be used to buy imported water.
The fiscal year 2017-18 RA is $222.5/acre-foot. A majority vote of six members of the Board is required to set the RA, which must and can only occur annually in the month of April.
2
To impose the RA the OCWD Board must first find that the groundwater basin suffers from an annual or an accumulated overdraft.
In 1961, the District Act was amended to authorize the Board to impose the ARA. All groundwater production must pay this additional pumping fee except for irrigation/agricultural users, who are excluded (Per Section 27.1 of the District Act “irrigation” means the act of first using water to place it on lands by any means for the commercial production of agricultural, horticultural, or floricultural crops and for pasture grown for commercial purposes). The ARA revenues were originally only to be used to develop capital projects and purchase land. A super-majority of eight of ten District board members must approve the ARA; but, unlike the RA, the ARA can be imposed without regard to an overdraft condition. Like the RA, the ARA must be set in the month of April and cannot be changed during the year. The fiscal year 2017-18 ARA is also $222.5/acre-foot. Thus any non-agricultural Producer pumping groundwater would pay a total of $445/acre-foot.
$222.5
$222.5
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
$ pe
r Acre‐foot
Total of $445/af
FY 2017‐18 RA and Additional RA
Additional ReplenishmentAssessment ‐ requires 8votes ‐ Paid by allnonagriculturalgroundwater production
Replenishment Assessment‐ requires 6 votes ‐ Paid byall groundwater production
Since 1986 the RA and ARA have been set at the same amount but there is no requirement to do so nor is there any justification for such. The Board will consider setting the FY2018-19 RA and ARA on April 18, 2018.
The RA and ARA combined will generate approximately $134 million of revenue for the District in FY2017-18. Total revenues for the District in FY2017-18 will be approximately $176 million.
With subsequent changes to the District Act (Section 23) over the years, the revenues from both of these assessments can be used for “completing any of the powers, projects and purposes for which this District is organized”.
Proposition 26 Proposition 26 was passed in 2010 as a constitutional amendment that established a definition of what constitutes a local tax. This was important from the standpoint that local taxes require approval of the voters. The recent California Supreme Court ruling regarding
3
the setting of groundwater pumping rates between the City of Ventura and the United Water Conservation District has clarified that the District needs to comply with Proposition 26 when setting the RA and ARA. To avoid the RA and ARA being considered a tax and subject to a vote of the electorate, they must meet the following three requirements:
– The groundwater management services covered by the RA and ARA must be provided directly to the Producer, and cannot be provided to those not charged,
– The RA and ARA cannot exceed the reasonable cost of providing the groundwater management services, and
– The manner in which District costs are allocated to the Producers must bear “a fair or reasonable relationship” to the Producer’s burden on, or benefits received from, OCWD.
Agricultural Groundwater Production Agricultural use within OCWD has steadily decreased over the decades as economic forces have urbanized the area. As shown on the following figure, annual agricultural groundwater production within OCWD declined to 1,500 acre-feet in FY2016-17 which is less than 1% of total groundwater basin production. The Irvine Ranch Water District serves the largest number of agricultural users and accounts for 49% of the agricultural pumping within OCWD over the past ten years.
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Acre‐fe
et per year
Historical Agricultural Groundwater Production
Staff has spoken to the Orange County Farm Bureau regarding the recommended action. Representatives from the agricultural industry may attend the Committee meeting.
4
Staff Recommendation By setting the RA and ARA at the same amount, agricultural groundwater production is effectively paying half the cost for groundwater as compared to the Groundwater Producers. Given the District needs to comply with Proposition 26, staff now recommends setting the RA at an amount to fully fund the District’s activities, and not imposing the ARA, beginning in FY2018-19. With this rate structure, all District customers would pay the same amount for groundwater.
IRWD49%
OC Produce31%
Village Nurseries
5%
Roy Pursche5%
Ito‐Ozawa Farms2%
YLWD2%13 other
remaining users6%
Agricultural Groundwater Production over past 10 years
PRIOR RELEVANT BOARD ACTION(S): N/A
SEE CONCURRING OPINION
Filed 12/4/17
IN THE SUPREME COURT OF CALIFORNIA
CITY OF SAN BUENAVENTURA, )
)
Plaintiff, Cross-defendant )
and Appellant, )
) S226036
v. )
) Ct.App. 2/6 B251810
UNITED WATER CONSERVATION )
DISTRICT et al., )
) Santa Barbara County
Defendants, Cross-complainants )
and Appellants. ) Super. Ct. Nos. VENCI 00401714,
) VENCI 1414739
____________________________________)
The California Constitution, as amended by a series of voter initiatives,
places limitations on the authority of state and local governments to collect
revenue through taxes, fees, charges, and other types of levies. (Cal. Const., arts.
XIII A, XIII C, XIII D.) This case concerns the application of these constitutional
limitations to a particular kind of local government charge: a statutorily
authorized “ground water charge” imposed on well operators by a local water
conservation district to fund conservation activities such as replenishing
groundwater stores and preventing degradation of the water supply. (See
Wat. Code, § 75522.) By statute, charges for pumping groundwater for
nonagricultural uses generally must be at least three times the charges for pumping
water for agricultural uses. (Id., § 75594.)
2
The City of San Buenaventura (more commonly known as the City of
Ventura) (City), which pumps large quantities of groundwater for delivery to
residential customers, contends that the groundwater pumping charges it pays to
its local water conservation district, United Water Conservation District (District),
are disproportionate to the benefits it receives from the District’s conservation
activities. It also contends that it pays a disproportionate share of the costs of
those activities by virtue of the three-to-one ratio in Water Code section 75594.
The City argues that the charges therefore violate article XIII D of the California
Constitution (Prop. 218, as approved by voters, Gen. Elec. (Nov. 5, 1996)), which
provides that a charge imposed “as an incident of property ownership,” including a
“charge for a property related service,” may not “exceed the proportional cost” of
the service that is “attributable to the parcel” on which the charge is imposed.
(Cal. Const., art. XIII D, §§ 2, subd. (e), 6, subd. (b)(3).) In the alternative, the
City argues that the charges violate article XIII C of the California Constitution (as
amended by Prop. 26, as approved by voters, Gen. Elec. (Nov. 2, 2010)), which
provides that local government charges are taxes that generally must be approved
by voters, but exempts from this category those charges that are limited to the
reasonable costs of providing a special benefit or service and that bear a “fair or
reasonable” relationship to the benefit to the payor of, or the payor’s burden on,
the government activity (Cal. Const., art. XIII C, § 1, subd. (e)(1) & (2)). The City
argues that the groundwater pumping charges do not satisfy the criteria for exempt
charges, and therefore should be considered unapproved taxes imposed in
violation of the Constitution.
The Court of Appeal rejected both arguments. We conclude, as did the
Court of Appeal, that article XIII C, as amended by Proposition 26, rather than
article XIII D, supplies the proper framework for evaluating the constitutionality
of the groundwater pumping charges at issue in this case. But because the Court
3
of Appeal did not address the City’s argument that the charges do not bear a fair or
reasonable relationship to the payor’s burdens on or benefits from the District’s
conservation activities, as article XIII C requires, we affirm in part, reverse in part,
and remand for consideration of that question.
I.
A.
The District is a water conservation district formed under the Water
Conservation District Law of 1931 (Wat. Code, § 74000 et seq.), to “ ‘manage,
protect, conserve and enhance the water resources of the Santa Clara River, its
tributaries and associated aquifers, in the most cost effective and environmentally
balanced manner.’ ” The District’s territory, which covers approximately 214,000
acres in central Ventura County, encompasses all or part of eight groundwater basins.1
Like many groundwater basins throughout California, basins in the
District’s territory have suffered from what is known as “overdraft”—meaning
that more water is being taken out than is replaced by natural processes, including
rainfall and river and stream flow. Overdraft can result in saltwater intrusion into
the fresh groundwater supply and can reduce the basin’s capacity for groundwater
storage. (See Wat. Code, § 75505.) To counteract overdraft and its effects, the
District artificially “recharges,” or replenishes, the groundwater supply by
diverting water from other sources and spreading it over the ground covering
certain basins within district boundaries. To reduce the demand for groundwater
1 A groundwater basin is “[a]n alluvial aquifer or a stacked series of alluvial
aquifers with reasonably well-defined boundaries in a lateral direction and having
a definable bottom.” (Dept. of Water Resources, California’s Groundwater,
Bulletin 118 (2003) p. 216.) An aquifer is “[a] body of rock or sediment that is
sufficiently porous and permeable to store, transmit, and yield significant or
economic quantities of groundwater to wells and springs.” (Id. at p. 214.)
4
extraction, the District also provides pipeline deliveries of water derived from
other sources.
The Water Code authorizes water conservation districts to finance their
activities by imposing a “ground water charge[]” on “the production of ground water
from all water-producing facilities” within the district (or within certain zones in the
district). (Wat. Code, § 75522.)2 Under the code, a district may establish different
zones for rate-setting purposes. (Id., § 75591.) Within each zone, the district must
charge a uniform rate for all water pumped for agricultural use, and a uniform rate for
all water pumped for nonagricultural use. (Id., §§ 75591, 75593.) Subject to an
exception not relevant here (id., § 75595), the rate for nonagricultural use must be
between three and five times the rate for agricultural use. (Id., § 75594.) Consistent
with these provisions, the District imposes a volume-based charge on groundwater
pumping within its territory. As required by section 75594 of the Water Code, the
District’s rates for pumping for nonagricultural use are three times those for pumping
for agricultural use.
B.
Under the California Constitution, as amended by a series of voter
initiatives, local government taxes, fees, charges, and other exactions are subject
to several requirements and restrictions. The first of these initiatives,
Proposition 13, added article XIII A to the Constitution. Passed in 1978, the
purpose of the initiative “was to assure effective real property tax relief by means
of an ‘interlocking “package” ’ consisting of a real property tax rate limitation
(art. XIII A, § 1), a real property assessment limitation (art. XIII A, § 2), a
2 For the purposes of the statute, “ ‘groundwater’ means all water beneath the
earth’s surface,” with certain exceptions not applicable here, as well as “water
produced from artesian wells.” (Wat. Code, § 75502.5.)
5
restriction on state taxes (art. XIII A, § 3), and a restriction on local taxes
(art. XIII A, § 4).” (Sinclair Paint Co. v. State Bd. of Equalization (1997) 15
Cal.4th 866, 872 (Sinclair Paint).) The “ ‘principal provisions’ ” of the initiative
“ ‘limited ad valorem property taxes to 1 percent of a property’s assessed
valuation and limited increases in the assessed valuation to 2 percent per year
unless and until the property changed hands. (Cal. Const., art. XIII A, §§ 1, 2.)’ ”
(Apartment Assn. of Los Angeles County, Inc. v. City of Los Angeles (2001) 24
Cal.4th 830, 836 (Apartment Association), quoting Howard Jarvis Taxpayers
Assn. v. City of Riverside (1999) 73 Cal.App.4th 679, 681 (Howard Jarvis).) “ ‘To
prevent local governments from subverting its limitations, Proposition 13 also
prohibited counties, cities, and special districts from enacting any special tax
without a two-thirds vote of the electorate. [Citations.]’ ” (Apartment
Association, at p. 836; see Cal. Const., art. XIII A, § 4.)
Courts uniformly held, however, that article XIII A did not restrict local
governments’ ability to impose “legitimate special assessments”—that is, charges
levied on owners of real property directly benefited by a local improvement to
defray its costs. (Knox v. City of Orland (1992) 4 Cal.4th 132, 141.) In part to
close this perceived loophole, voters in 1996 passed Proposition 218, which,
among other things, “ ‘buttresse[d] Proposition 13’s limitations on ad valorem
property taxes and special taxes by placing analogous restrictions on assessments,
fees, and charges.’ ” (Apartment Association, supra, 24 Cal.4th at p. 837, quoting
Howard Jarvis, supra, 73 Cal.App.4th at p. 682.) Article XIII D, added by
Proposition 218, imposes certain substantive and procedural restrictions on taxes,
assessments, fees, and charges “assessed by any agency upon any parcel of
property or upon any person as an incident of property ownership.” (Cal. Const.,
art. XIII D, § 3, subd. (a).) Among other things, article XIII D instructs that the
amount of a “fee or charge imposed upon any parcel or person as an incident of
6
property ownership shall not exceed the proportional cost of the service
attributable to the parcel.” (Id., § 6, subd. (b)(3).)
Proposition 218 also added article XIII C, which restricts the authority of
local governments to impose taxes by, among other things, requiring voter
approval of all taxes imposed by local governments.3 In 2010, voters passed
Proposition 26, which further expanded the reach of article XIII C’s voter
approval requirement by broadening the definition of “ ‘tax’ ” to include “any
levy, charge, or exaction of any kind imposed by a local government.” (Cal.
Const., art. XIII C, § 1, subd. (e).) The definition contains numerous exceptions
for certain types of exactions, including for “property-related fees imposed in
accordance with the provisions of Article XIII D” (id., § 1, subd. (e)(7)), as well as
for charges for “a specific benefit conferred or privilege granted,” or “a specific
government service or product” that is provided, “directly to the payor that is not
provided to those not charged, and which does not exceed the reasonable costs to
the local government” (id., § 1, subd. (e)(1) & (2)). To fall within one of these
exemptions, the amount of the charge may be “no more than necessary to cover
the reasonable costs of the governmental activity,” and “the manner in which those
costs are allocated to a payor” must “bear a fair or reasonable relationship to the
payor’s burdens on, or benefits received from, the governmental activity.” (Id.,
§ 1, subd. (e).)
3 Article XIII C provides that all taxes imposed by local governments are
either general taxes or special taxes (art. XIII C, § 2, subd. (a)), and requires all
general taxes to be approved by a majority vote (art. XIII C, § 2, subd. (b)) and all
special taxes to be approved by a two-thirds vote (art. XIII C, § 2, subd. (d)). The
special taxes covered by article XIII C are not to be confused with the special
taxes covered by article XIII A, section 4. The latter category is limited to those
special taxes that are assessed upon property or upon a person as an incident of
property ownership. (See Cal. Const., art. XIII D, § 3, subd. (a)(2).)
7
C.
This case arises from a long-running controversy between the City and the
District about the District’s groundwater pumping charges. In the 1980s, the
District planned a major improvement project to divert water from the Santa Clara
River for recharge purposes. The District proposed to finance the diversion
project by imposing new pumping charges on users within a newly established rate
zone comprising areas that would benefit from the project. The City protested,
arguing that the proposed zone included a basin on which City wells operated that
would not benefit from the project, and filed several lawsuits challenging the
District’s proposal. In 1987, the parties entered a settlement agreement in which
the District agreed to create a second zone for project-related charges in which the
rate for nonagricultural use would be set at one-third of the previously announced
rate for the first zone—that is, a rate equal to the rate imposed on agricultural users
within the first zone. When the settlement agreement expired at the end of 2011,
the District eliminated the special zone, resulting in substantially higher pumping
rates for groundwater extractors in the affected territory, including the City. After
providing notice and inviting comment, the District also increased the general rate
for groundwater pumping throughout the district.
The City again filed suit to challenge the pumping charges, contending that
the charges violate either article XIII D or, in the alternative, article XIII C of the
California Constitution. In support of its contention, the City alleged that it pays
more than its fair share of the costs of the District’s conservation efforts, both
relative to agricultural users by virtue of the three-to-one ratio required under
section 75594 of the Water Code, and relative to other users in the district that
pump from basins that receive greater benefit from the District’s recharge efforts.
The City petitioned the court for a writ of mandate under Code of Civil Procedure
section 1085 and for a writ of administrative mandate under Code of Civil
8
Procedure section 1094.5, and sought declaratory relief as well as a determination
of invalidity under Code of Civil Procedure section 860 et seq. (commonly known
as a reverse validation action (McLeod v. Vista Unified School Dist. (2008) 158
Cal.App.4th 1156, 1165-1166)). The City challenged the 2011–2012 rates and the
2012–2013 rates in separate actions, which were consolidated in the trial court.
The trial court ruled in the City’s favor. Relying on Pajaro Valley Water
Management Agency v. Amrhein (2007) 150 Cal.App.4th 1364 (Amrhein), the trial
court concluded that the pumping charges are “imposed on persons as an incident
of property ownership” and thus subject to the requirements and restrictions of
article XIII D. The trial court concluded, however, that the District’s general
practice of charging a uniform fee across an area comported with article XIII D’s
requirement that a property-related fee or charge “not exceed the proportional cost
of the service attributable to the parcel” (Cal. Const., art. XIII D, § 6, subd. (b)(3))
because it would be infeasible for the District to attribute the costs of its
conservation activities on a parcel-by-parcel basis, and because the charges in the
aggregate did not exceed the reasonable costs of the District’s conservation
activities. But the trial court concluded that the three-to-one ratio mandated by
Water Code section 75594 did violate article XIII D’s proportionality requirement
because the District failed to demonstrate that “the costs relating to agricultural
water as compared with non-agricultural water support [the] differential.” The
trial court entered a declaratory judgment and issued the writs of mandate,
ordering the District to refund the City $548,296.22 for charges for the 2011–2012
water year and $794,815.57 for the 2012–2013 water year, plus interest. These
represent the amounts the City paid in excess of the District’s average costs for all
types of water usage.
The Court of Appeal reversed. It held that the pumping charges are not
property-related charges or fees within the meaning of article XIII D. The court
9
distinguished Amrhein, on which the trial court had relied, as involving “a unique
set of facts” not present here. But the court went on to conclude that regardless of
the factual setting, “a pump fee is better characterized as a charge on the activity
of pumping than a charge imposed by reason of property ownership.” (Citing
Orange County Water Dist. v. Farnsworth (1956) 138 Cal.App.2d 518.)
Moreover, the Court of Appeal held that even if the charges were
“property-related charges” for purposes of article XIII D, they would not violate
article XIII D’s requirement that the fee “not exceed the proportional cost of the
service attributable to the parcel” by virtue of the three-to-one ratio in Water Code
section 75594. (Cal. Const., art. XIII D, § 6, subd. (b)(3).) The court reasoned:
“Section 75594 does not discriminate between persons or parcels. It discriminates
between types of use. [Citation.] If the City chooses to use its groundwater for
agricultural purposes, it too can benefit from the lower rates.”
The Court of Appeal further held that the pumping charges are not taxes
subject to the requirements of article XIII C. The court concluded that the charges
fall within the exception for payor-specific benefits and privileges. The court
reasoned that the operative question, for purposes of this exception, is whether the
charges in the aggregate exceed the District’s costs of providing groundwater
management services. The court held that this question was effectively answered
by the trial court’s finding that the pumping charges in the aggregate do not
exceed the District’s reasonable costs.
II.
We begin by considering the City’s argument that the District’s
groundwater pumping charges violate article XIII D, added by Proposition 218.
The threshold question for our determination is whether the pumping charges are
“imposed . . . upon a parcel or upon a person as an incident of property
ownership” within the meaning of article XIII D. (Cal. Const., art. XIII D, § 2,
10
subd. (e).) We conclude that they are not, and that they therefore fall outside the
reach of article XIII D.
A.
Article XIII D was passed as part of Proposition 218, an initiative designed
to buttress Proposition 13’s limitation on property taxes. (Apartment Association,
supra, 24 Cal.4th at p. 837.) To that end, article XIII D “ ‘allows only four types
of local property taxes: (1) an ad valorem property tax; (2) a special tax; (3) an
assessment; and (4) a fee or charge,’ ” and places certain restrictions on each kind
of exaction. (Apartment Association, at p. 837, quoting Howard Jarvis, supra, 73
Cal.App.4th 679, 682.) The provisions governing fees and charges command that
no fee or charge “shall be assessed . . . upon any parcel of property or upon any
person as an incident of property ownership” except “[f]ees or charges for
property related services” that satisfy the requirements of article XIII D. (Cal.
Const., art. XIII D, § 3, subd. (a)(4).) Article XIII D defines “ ‘fee’ or ‘charge’ ”
to mean “any levy other than an ad valorem tax, a special tax, or an assessment,
imposed by an agency upon a parcel or upon a person as an incident of property
ownership, including a user fee or charge for a property related service.” (Id., § 2,
subd. (e).)4 A “ ‘property-related service,’ ” in turn, is defined as a “public service
having a direct relationship to property ownership.” (Id., § 2, subd. (h).)
A “[p]roperty [r]elated” fee or charge within the meaning of these
provisions is subject to several procedural requirements. (Cal. Const., art. XIII D,
§ 6.) Among other things, an agency that proposes to impose such a fee or charge
4 Because article XIII D includes a single definition for a “ ‘fee’ or
‘charge,’ ” we use those terms interchangeably here. (Cal. Const., art. XIII D, § 2,
subd. (e); see Bighorn-Desert View Water Agency v. Verjil (2006) 39 Cal.4th 205,
214, fn. 4.)
11
must notify “the record owner of each identified parcel upon which the fee or
charge is proposed for imposition” and conduct a public hearing on the proposal.
(Id., § 6, subd. (a)(1); id., § 6, subd. (a)(2).) “If written protests against the
proposed fee or charge are presented by a majority of owners of the identified
parcels, the agency shall not impose the fee or charge.” (Id., § 6, subd. (a)(2).)
“Except for fees or charges for sewer, water, and refuse collection services, no
property related fee or charge” may be “imposed or increased” unless it is
“approved by a majority vote of the property owners of the property subject to the
fee or charge or, at the option of the agency, by a two-thirds vote of the electorate
residing in the affected area.” (Id., § 6, subd. (c).)
A covered fee or charge is also subject to a series of substantive limitations.
The revenues derived from the fee or charge may not exceed the funds required to
provide the property-related service, nor may they be used for any purpose other
than that for which the fee or charge was imposed. (Cal. Const., art. XIII D, § 6,
subd. (b)(1) & (2).) And in a provision central to the City’s challenge in this case,
article XIII D provides that the amount of the charge may not “exceed the
proportional cost of the service attributable to the parcel.” (Id., § 6, subd. (b)(3).)
Whether an exaction is a property-related charge for purposes of
article XIII D “is a question of law for the appellate courts to decide on independent
review of the facts.” (Sinclair Paint, supra, 15 Cal.4th at p. 874.) We construe the
provisions of article XIII D liberally, “ ‘to effectuate its purposes of limiting local
government revenue and enhancing taxpayer consent.’ ” (Silicon Valley Taxpayers’
Assn., Inc. v. Santa Clara County Open Space Authority (2008) 44 Cal.4th 431,
448.) The relevant government agency—here, the District—bears the burden of
FY2016-17 Replenishment Assessment and Additional Replenishment Assessment
222.5
222.5
$0
$100
$200
$300
$400
$500
$/af
Additional ReplenishmentAssessment - Paid bynon-Ag production (8votes)
ReplenishmentAssessment - Paid by allproduction (6 votes)
$445/af
RA and ARA History• 1954 - RA was established to provide revenue to
purchase imported water to replenish the basin (Paid by All – requires six votes)– Board must find an overdraft exist– Over time District Act was amended to allow RA revenue for any expense
• 1961 – Additional RA was established (Excludes Ag – requires 8 votes)– Revenue initially only used for capital projects and land purchases– Over time District Act was amended to allow Additional RA revenue for any
expense
Information
• RA and ARA have to be set annually in April per District Act
• Since 1986 the RA and ARA have been set at the same amount
– Agricultural users paying 50% of Groundwater Producers
• RA and ARA could be set at different amounts at Board’s discretion
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Acre‐fe
et per year
Historical Agricultural Groundwater Production
Agricultural Groundwater Production Over the Past 10 Years
IRWD, 49%
OC Produce, 31%
Village Nurseries, 5%
Roy Pursche, 5%
Ito‐Ozawa Farms, 2%
YLWD, 2% 13 others, 6%
6
Agricultural users who operate their own well and grow a commercial crop
Groundwater Producers who sell water to agricultural users1. IRWD, 2. YLWD, 3. Mesa Water, 4. City of Fullerton
Proposition 218 & Groundwater Charges
• City of Ventura vs United Water Conservation District
• UWCD has a similar groundwater charge to OCWD
• CA Supreme court ruled UWCD charge not subject to Prop 218 but was subject to Prop 26
Proposition 26
• Proposition 26 was passed in 2010• Established a definition of what constitutes a local tax • Important as local taxes require approval of the voters • To avoid being a Prop 26 tax (subject to vote of
electorate), RA and ARA must meet three requirements for a government service charge
9
Three Proposition 26 Requirements
• The groundwater management services covered by the RA and ARA must be provided directly to the Producer, and cannot be provided to those not charged
• RA and ARA cannot exceed the reasonable cost of providing the GW management services
• Manner in which costs are allocated to a Producer must bear “a fair or reasonable relationship” to Producer’s burden on, or benefits received from, OCWD.
10
Replenishment Assessment and Additional Replenishment Assessment
$222.5
$444.0
$222.5
$0
$100
$200
$300
$400
$500
Current Recommendation
$/af
AdditionalReplenishmentAssessment - Paid bynon-Ag production (8votes)ReplenishmentAssessment - Paid byall production (6 votes)
$445/af
Recommendation
• Agendize for February 21, 2018 Board meeting: Beginning with fiscal year 2018-19, establish the Replenishment Assessment at an amount to fund all District activities.
Additional Information
Historical Ag Production
Ag User 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Ten Year
Meeting Date: February 15, 2018 Budgeted: N/A Budgeted Amount: N/A To: Administration/Finance Issues Cte. Cost Estimate: N/A Board of Directors Funding Source: N/A Program/Line Item No.: N/A From: Mike Markus General Counsel Approval: N/A Engineers/Feasibility Report: N/A Staff Contact: R. Fick /M. Ochoa CEQA Compliance: N/A Subject: BUDGET TO ACTUAL REPORT FOR SECOND QUARTER FY 2017–18 SUMMARY Attached is a copy of the Budget to Actual Report for the second quarter year-to-date fiscal year 2017–18. General Fund operations expenditures are $819,000 under budget. Refurbishment and Replacement costs are $2.3 less than planned and Water Purchases are more than budget by $23.3 million.
Attachment(s): Attachment A – Operating Costs Budget to Actual Attachment B – Cost Center Budget to Actual Summary Attachment C – Cost Center Budget to Actual Details Attachment D – Revenue Budget to Actual Summary
RECOMMENDATION Agendize for the February 21 Board meeting: Receive and file the Budget to Actual Report for Second Quarter of Fiscal Year 2017-18 ending December 31, 2017. BACKGROUND/ANALYSIS Attachment A provides an overall summary of the District’s various operating costs for the first quarter. Attachment B provides a budget to actual summary of the 21 cost centers that comprise the general fund and attachment C provides the details of these 21 cost centers. The District’s revenue performance is summarized in attachment D. General Fund General Fund costs are $819,000 under budget due primarily to lower costs for Recharge Operations and Water Production offset by increases in Hydrogeology. Specific details on the expense categories that make up this variance can be found in the footnotes to the reports in attachments B and C.
2
Water Purchases Water purchases are $23.3 million more than budget. The District purchased approximately 40,000 acre-feet of the 65,000 acre-feet of untreated non-interruptible MWD water budgeted for the year. The District also purchased approximately 58,400 acre-feet of the 100,000 acre-fee of the In-Lieu water from MWD through December 31, 2017 to take advantage of the lower costs of water. Debt Service Debt service is under budget by $859,000 due to lower than planned interest rates on variable rate debt. Refurbishment and Replacement Fund R&R costs are tracking less than planned primarily due the delays of GWRS Pipe Lining and the slow start of the Replacement of Reverse Osmosis membrane elements in three RO subunits for the six months of fiscal year 2018. Revenue Summary Revenues overall were $12.3 million more than budget. This variance represents a 14% increase from the original annual budget as shown in attachment D. The majority of this variance is due to the Replenishment Assessment revenue being more than budget by $4.9 million for the first six months of fiscal year 2018 and the District received a $4.8 million legal settlement. Budgeted pumping was 156,290 acre-feet in the first six months of fiscal year 2017-18 and actual pumping and In-Lieu was 160,819 acre-feet. PRIOR RELEVANT BOARD ACTION(S): Quarterly
Budget Items Annual Budget YTD Budget YTD Actual Difference
General Fund 68,173,198$ 34,086,599$ 33,267,241$ 819,358$ 1
Small Equipment 340,912 170,456 238,281 (67,825)
Debt Service 35,985,967 15,517,465 14,658,621 858,844 2
1.) Lower than planned expenses in Recharge Operations and Water Production costs, offset with increases to professional service expenses in Hydrogeology.
2.) Lower interest expense on variable certificates of participation than planned.
3.) Replacement & Refurbishment Projects are lower than planned primarily due to the RO membrane elements not yet purchased for three RO subunit replacements and delays of the GWRS Pipe Lining.
4.) The District purchased approximately 40,000 acre-feet of water and budget the year at 65,000 acre-feet. The District also purchased approximately 58,400 acre-feet of In-Lieu water from MWD.
1. Lab sample analysis costs were lower than planned. 5. Lower than planned seasonal electrical costs than planned, due to lower2. Lab supplies costs were lower than planned. rainfall this season. 3. Less than planned professional service expenses for Prado basin and watershed management. 6. Litigation settlement expenses related to the North/South Basin were more4. Lower than planned Chemicals for GWRS RO cleaning costs. than planned.
ORANGE COUNTY WATER DISTRICT
For the Second Quarter Ending December 31, 2017Attachment B
Attachment B
1
GENERAL MANAGER'S OFFICE
Original Budget
A
Revised Budget
BYTD Budget
CYTD Actual
D Difference
C - D
ACTUAL REG WAGES 751,734 798,342 399,171 472,846 (73,675)
ACTUAL REG OT WAGES 1,000 1,000 500 251 249
RETIREMENT 125,330 128,332 64,166 58,261 5,905
HEALTH INSURANCE 96,591 102,891 51,446 48,175 3,271
2.) The District received a $4.8 million legal settlement.
ORANGE COUNTY WATER DISTRICTAttachment D
OPERATING BUDGET TO ACTUALFOR THE SECOND QUARTER ENDING DECEMBER 31, 2017
1.) Replenishment Assessment increase is higher than planned. Actual pumping is 160,819 acre-fee and budget is 156,290 acre-feet for the six months ending.
2/7/2018 3:23 PM
14
1
AGENDA ITEM SUBMITTAL
Meeting Date: February 15, 2018 Budgeted: N/A Budgeted Amount: N/A To: Administration/Finance Issues Cte. Cost Estimate: N/A Board of Directors Funding Source: N/A Program/Line Item No.: N/A From: Mike Markus General Counsel Approval: N/A Engineers/Feasibility Report: N/A Staff Contact: R. Fick CEQA Compliance: N/A Subject: RATIO ANALYSIS - SECOND QUARTER FY 2017-2018 SUMMARY The Administration and Finance Issues Committee recommended at its October 11, 2012 meeting that staff present a ratio analysis of the District’s financial results. The Committee recommended the analysis be presented on a semiannual basis. Attached is the Ratio Analysis report of the District’s financial results for the fiscal year ended 2018 (projected) with three prior years actual results.
Attachment(s): Ratios for Financial Analysis [June 30, 2014 – June 30, 2018] Presentation
RECOMMENDATION Agendize for February 21 Board meeting: Receive and file the Ratio Analysis Report for FY 2017-18 Second Quarter ending December 31, 2017. BACKGROUND/ANALYSIS The District tracks the following six performance metrics that provide a look into the Districts financial health and its ability to run its operation and pay its annual debt service payments. Current Ratio The current ratio, also called the working capital ratio, is a measure of an organization’s ability to meet current obligations from current assets. The higher the ratio the more liquid the organization is. The current ratio is calculated by taking current assets divided by current liabilities. The Fitch 2018 current ratio median for AAA rated water and sewer agencies is 5.5. The District current ratio for the 2nd quarter ended December 31, 2017, is 2.6.
2
Quick Ratio Quick ratio, also called the acid-test ratio, is an indicator of the District’s short-term liquidity. The quick ratio measures the District’s ability to meet its short-term obligations with its most liquid assets usually convertible to cash within 30 days. The quick ratio is equal to cash plus investments plus current receivables divided by current liabilities. The Quick ratio indicates financial flexibility to pay near-term obligations. The higher the quick ratio is, the better the financial position of the District. The Fitch 2018 quick ratio median for AAA rated water and sewer agencies is 5.3. The District quick ratio for the 2nd quarter ended December 31, 2017, is 2.5. Debt to Equity Ratio The debt to equity ratio measures the District’s financial leverage calculated by dividing its total long term debt by total unrestricted net assets. It indicates existing debt leverage relative to system equity. The lower the ratio is the better. The Fitch 2018 debt to equity ratio median for AAA rated water and sewer agencies is 1.4. The District debt to equity ratio for the 2nd quarter ended December 31, 2017, is 3.4. Operating Margin (%) Operating margin indicates financial margin to pay operating expenses. A healthy operating margin is required for the District to be able to pay for its operating expenses, such as interest on debt. This metric is calculated by taking operating revenues minus operating expenditures plus depreciation, divided by operating revenues. A higher margin means less financial risk. The Fitch 2018 operating margin median for AAA rated water and sewer agencies is 39%. The District operating margin for the 2nd quarter ended December 31, 2017, is 60%. Days Cash on Hand Days cash on hand indicates financial flexibility to pay near-term obligations with its unrestricted cash and investments. Days cash on hand is calculated by taking current unrestricted cash and investments plus any restricted cash and investments (if available for general system purposes), divided by operating expenditures plus annual debt service minus depreciation. Generally, a higher number of days represents stronger a financial position. The Fitch 2018 days cash on hand median for AAA rated water and sewer agencies are 692 days. The District days cash on hand for the 2nd quarter ended December 31, 2017, is 589. Debt Coverage Ratio Debt coverage ratio measures the District’s ability to pay debt payments from the income generated from the District’s operating and non operating activities. Debt coverage ratio is calculated by taking operating and non-operating revenues minus basin equity assessment, less operating expenses net of depreciation divided by annual debt service costs. Rating agencies use this ratio as a guide to help them understand whether the District will generate enough cash to pay its debt service costs. The Fitch 2018 debt
3
coverage ratio median for AAA rated water and sewer agencies is 2.8. The District debt coverage ratio for the 2nd quarter ended December 31, 2017, is 3.6. PRIOR RELEVANT BOARD ACTION(S) None
2015 2016 2017 2018 (Annualized)
RATIO # 1
UNRESTRICTED CURRENT ASSETS 209,429,624$ 201,582,239$ 217,972,926$ 228,950,309$
UNRESTRICTED CURRENT LIABILITIES 48,091,126 56,872,849 57,298,436 88,147,506
CURRENT RATIO 4.4 3.5 3.8 2.6
RATIO # 2
UNRESTRICTED CASH & CASH EQUIVALENTS PLUS 35,548,414$ 55,763,167$ 55,214,256$ 68,517,984$ UNRESTRICTED INVESTMENTS PLUS 116,444,084 78,866,443 90,332,914 92,274,979 UNRESTRICTED RECEIVABLES DUE WITHIN 30 DAYS 52,385,095 58,774,616 65,808,775 61,791,817
UNRESTRICTED CURRENT LIABILITIES 48,091,126 56,872,849 57,298,436 88,147,506
QUICK RATIO 4.2 3.4 3.7 2.5
RATIO # 3
TOTAL LONG-TERM DEBT 572,557,414$ 578,778,119$ 558,467,733$ 553,385,390$
TOTAL UNRESTRICTED NET ASSETS 188,235,626 173,374,582 186,797,842 164,018,227
DEBT TO EQUITY RATIO 3.0 3.3 3.0 3.4
RATIO # 4
OPERATING REVENUES PLUS TAX REVENUE 126,058,332$ 126,447,636$ 156,201,112$ 168,587,529$
OPERATING EXPENSES LESS DEPRECIATION 62,260,205 65,811,722 68,672,269 67,508,386
OPERATING MARGIN % 51% 48% 56% 60%
RATIO # 5TOTAL CASH AND INVESTMENTS (UNRESTRICTED) 151,992,498$ 134,629,610$ 145,547,170$ 160,792,963$
TOTAL OPERATING EXP. AND DEBT SVE FROM BELOW 86,525,901 86,441,969 99,752,609 99,559,383 DAYS CASH RATIO 641 568 533 589
operating expenditures minus depreciation.
Current cash plus current receivables divided by current liabilities. Indicates financial flexibility to pay near-term obligations.
Current assets divided by current liabilities. Indicates financial flexibility to pay near-term obligations.
ORANGE COUNTY WATER DISTRICT
RATIOS FOR FINANCIAL ANALYSIS
JUNE 30, 2014 THROUGH JUNE 30, 2018
Current unrestricted cash and investments plus any restricted cash and investments (if available for general system purposes), divided by
Total amount of utility long-term debt divided by unrestricted net assets. Indicates existing debt leverage relative to system equity.
Operating revenues minus operating expenditure less depreication, divided by operating revenue. Indicates financial margin to pay operating expenses.(For purposes of this calculation, the District considers property tax revenues as operating revenues and water purchases to be a nonoperating expense)
2015 2016 2017 2018 (Annualized)
ORANGE COUNTY WATER DISTRICT
RATIOS FOR FINANCIAL ANALYSIS
JUNE 30, 2014 THROUGH JUNE 30, 2018
RATIO # 6Replenishment assessments 89,137,337$ 88,464,250$ 120,120,803$ 72,080,567$ CUP revenue 3,340,270 3,085,226 41,500 - Reclaimed water revenue 10,656,131 10,699,470 10,606,006 6,131,075 Property tax 22,924,595 24,198,690 25,432,803 12,654,187 Legal settlement revenue 4,222,585 700,000 691,036 4,845,143 Rental income, net of expenses 1,214,630 985,796 1,153,435 744,396 Investment revenue 1,745,947 1,524,348 1,402,267 1,065,583 Other revenues 1,442,484 2,448,558 2,978,286 2,202,509
Total YTD revenues 134,683,978 132,106,337 162,426,136 99,723,459 Budgeted annual revenue less YTD revenue - - - 81,708,981
Operating expenses including litigation expenses 62,260,205$ 65,811,722 68,672,269 34,131,217 Operating expenses budgeted for the rest of the FY - - - 33,377,168
Total Expenditures 62,260,205 65,811,722 68,672,269 67,508,386
Net revenues 72,423,773 66,294,615 93,753,867 113,924,054
Annual debt service 24,265,696 20,630,247 31,080,340 32,050,997
ALL-IN ADS COVERAGE RATIO 3.0 3.2 3.0 3.6
Current year revenues available for debt service divided by cureent-year total debt service. Indicates the financial margin to meet current total ADS with current revenues available for debt service.
Current Ratio is an indicator of an organizations ability to meet current obligations from current assets Calculated by taking current assets divided by current liabilities
Current Ratio
Quick Ratio
0
1
2
3
4
5
6
FYE 2015 FYE 2016 FYE 2017 FYE 2018
RATI
O
OCWD Fitch AAA Median Fitch AA Median
Quick ratio measures an organizations ability to meet short-term obligations with current assets convertible to cash within 30 days Calculated by taking cash, investments and accounts receivable divided by current
liabilities
Debt to Equity Ratio
00.5
11.5
22.5
33.5
4
FYE 2015 FYE 2016 FYE 2017 FYE 2018
RATI
O
OCWD Fitch AAA Median Fitch AA Median
Debt to equity ratio measures an organizations debt leverage relative to unrestricted net assets Calculated by taking long-term debt divided by unrestricted net assets
Operating Margin (%)
0%
10%
20%
30%
40%
50%
60%
70%
FYE 2015 FYE 2016 FYE 2017 FYE 2018
OCWD Fitch AAA Median Fitch AA Median
Operating margin indicates the organizations ability to pay operating expenses Calculated by taking operating revenue minus operating expenses less
depreciation divided by operating revenue
Days Cash on Hand
0100200300400500600700800900
FYE 2015 FYE 2016 FYE 2017 FYE 2018
DAYS
OCWD Fitch AAA Median Fitch AA Median
Days cash on hand indicates financial flexibility to pay near-term obligations with its unrestricted cash and investments Calculated by taking unrestricted cash and investments divided by operating
expenditures less depreciation plus debt service costs
Debt Service Coverage Ratio
00.5
11.5
22.5
33.5
4
FYE 2015 FYE 2016 FYE 2017 FYE 2018
RATI
O
OCWD Fitch AAA Median Fitch AA Median
Debt service coverage ratio measures an organizations ability to pay annual debt service costs from net revenues Calculated by taking annual operating and non-operating revenues less operating expenses (excluding depreciation & water) divided by annual debt service
END OF PRESENTATION
15
AGENDA ITEM SUBMITTAL
Meeting Date: February 15, 2018 Budgeted: N/A Budgeted Amount: N/A To: Administration/Finance Issues Committee
Board of Directors Cost Estimate: N/A
Funding Source: N/A Program/ Line Item No.: N/A From: Mike Markus General Counsel Approval: N/A Engineers/Feasibility Report: N/A Staff Contact: Paula Bouyounes CEQA Compliance: N/A Subject: RISK & SAFETY DEPARTMENT UPDATE SUMMARY At its December 20, 2017 Board meeting, staff was requested to provide a report on the District’s safety program and lost time injuries. Staff will begin providing a semi-annually update on the OCWD safety program including a summary of work injuries. Attachment(s): Risk & Safety Department Update Presentation RECOMMENDATION Informational
OCWD has unique health and safety challenges including but not limited to the following:
─ Three distinct locations with different environmental and occupational risks
─ Homeless & other issues (e.g. marijuana growers, wildlife)
─ Unique groups - Barrier, Hydrogeology, Biologist, Heavy Equipment, R&D
3
OCWD Risk & Safety
OCWD’s safety management system includes:
─ Conducting audits to identify gaps and ensure compliance
─ Providing written procedures and SOPs
─ Evaluating injuries
─ Providing recommendations to reduce risks
─ Implementing programs and providing training
Cal OSHA Cal EPASCAQMD CUPA DWC
Employee Safety
Stationery Sources
Environment Hazardous Materials & Waste
Claims
• Generators• Compressors
CA Occupational
Safety & Health Agency
South Coast Air Quality
Management District
CA Environmental
Protection Agency
Certified Unified
Program Agency
Division of Worker’s
Compensation
• Safety Programs• Inspection/audits• Corrective actions• Training
• Emergency Business Plan
• Hazardous Waste• Underground
Storage Tanks• Above Ground
Petroleum Storage
• Air Resources • Pesticides• Toxic Substances
• Monitors Claims• Administrative
Services• Judicial Services
Risk & Safety Department
Safety Programs Include:
Injury Illness Prevention Program (IIPP)
Safety Inspections
Personal Protective Equipment (PPE)
Heat Illness Prevention
Hazard Communication
Machine Safety
Respiratory protection
Confined Space
Fire Prevention Plan
Hot Work
Power Hand Tools
Incident Investigation
Lockout / Tagout
Cranes and Lifting Equipment
Forklift Safety
Biosafety/Exposure Control
Heavy equipment
Excavation & Trenching
Electrical Safety
Traffic Control
Ergonomics
Fall Protection
Contractor Safety
6
ONGOING TRAINING
Training is required for:
New Employees. Refresher training as needed New job assignments for which training has not
previously been received New hazard associated with changes in materials,
equipment, processes and procedures New hazard identified Supervisors to familiarize them with the hazard their
employees face.
6
Recent Initiatives Implemented• Fall Assessment▫ Railings on top of the GAP building▫ Competent Person Training
• Machine Shop Assessment (FHQ & FV)• Electrical Safety Certification for I&E• Workplace Violence/Active Shooter• Internal Safety website • Confined Space (C.S.)▫ Completed nearly 300 evaluations▫ Organized & trained a C.S. Rescue Team
Recent Initiatives Continued• Access Control System updated• FHQ camera network diagram & IP addresses
updated• Security services at Fountain Valley & FHQ• Contractor safety program• Emergency Action Plan▫ Emergency stickers for office phones▫ Internal emergency number (x3300) implemented▫ Emergency panic button at the front desk &
Boardroom▫ Emergency badge inserts
OCWD FIELD EMERGENCY RESPONSE
Incident Commander (IC)
OPERATIONS *Planning *Logistics *Finance
Outside Agency
SafetyPublic Information
Officer (PIO)
ERT
HAZMAT
Confined Space Rescue
(Note: * These sections are not established in the field; they’re supported if
EOC is activated)
Six Year OSHA Recordable Injuries
0
5
10
15
20
25
2012 2013 2014 2015 2016 2017
55% decrease 2012 to 2017
2/9/2018
DAYS AWAY FROM WORK
1
0
3
1 1 [VALUE]
2012 2013 2014 2015 2016 2017
Nu
mb
er o
f Cas
es
Years
2/9/2018
2017 - Injuries by Type
Slips, Trips, Falls
Struck By/Against
Overexertion
1 Caught Between Objects
Repetitive Motion
3
1
2
2
At OCWD, the focus is on activities that produce a safer work environment (Leading Indicators):
Rear View Mirror Statistics - Valuable, but Limiting
► ELIMINATE at risk acts and behaviors.
► PREVENTE injuries by risk assessment, corrective actions and training
► REINFORCE organizational support for safety and documented progressive discipline.
► RECOGNIZE motivate and encourage safe behavior & practices
Recognize & Reward what you want repeated
OCWD’sGoal
Forward
Management Commitment & Support
• Ongoing management support and commitment for the Risk & Safety programs
• Proactive management & Board support in implementing the following:▫ Contractor Safety Program▫ Security Services (access control, security at
FHQ and at Fountain Valley)▫ ACWA/JPIA Commitment to Excellence
16
AGENDA ITEM SUBMITTAL Meeting Date: February 15, 2018 Budgeted: Yes Budgeted Amount: N/A To: Administration/Finance Issues Cte. Cost Estimate: N/A Board of Directors Funding Source: All Program/Line Item No. N/A From: Mike Markus General Counsel Approval: N/A Engineers/Feasibility Report: N/A Staff Contact: R. Fick/M. Ochoa CEQA Compliance: N/A Subject: MONTHLY CASH DISBURSEMENTS REPORT SUMMARY The Committee requested that staff provide information related to the District’s cash disbursements and that it be included for review at Administration/Finance Issues Committee meetings. Attachment(s): Cash Disbursements Reports for the period December 28, 2017 – January 31, 2018 RECOMMENDATION Informational BACKGROUND/ANALYSIS At the request of the Committee, the Cash Disbursements reports are included in detail for review at Administration/Finance Issues Committee meeting. They are also included in the Board packet to be ratified. Checks numbered with a series beginning with a 7 represent normal automated system vendor check payments, checks numbered with an 8 represent vendor payments via single use account, and checks numbered with a series beginning with a 9 are manual checks or wire transfer disbursements PRIOR RELEVANT BOARD ACTION(S): Monthly
Check No. Vendor Name Invoice # Invoice Amount Check Amount
Accounts Payable Cash Disbursements Presented for Board Ratification and/or Approval
1Begin Date:
Cash Disbursements
Orange County Water District
Page
:
End Date: 01/31/201812/28/2017
Date FYTDPurpose
($22.47)Inv# JANUARY 2017 TRAVEL Jan17 OCWD Various
