MINUTES OF THE BUDGET WORKSHOP
OF THE BOARD OF DIRECTORS OF THE
IRONHOUSE SANITARY DISTRICT
May 16, 2013
The Ironhouse Sanitary
District (ISD) Board of Directors met in Special Session to hold a Budget
Workshop on Thursday, May 16, 2013.
The place of meeting was the
Ironhouse Sanitary District Office at 450 Walnut Meadows Drive, Oakley,
California. The meeting was called to
order by President Lauritzen at 6:04 p.m.
1. Call
to Order
Roll Call:
Pledge of Allegiance Led
by Doug Scheer
Members present: David
Contreras, David Huerta, Chris Lauritzen, Michael Painter and Doug Scheer
Members absent: none
Staff/Consultants present: Tom Williams, General Manager
Joe
Mueller, Environmental / Process Compliance Manager
Susan Walde, District Secretary
Michael Welty, Utonomy, Inc.
Marc Haefke, O & M
Superintendent
Interested
parties present: Josh Roden,
Brookfield Homes
Dave Best, Shea Homes
2. Public
Comment – There were no comments
from the public in attendance.
3. BUSINESS
BEFORE THE BOARD
A.
Reconsideration
of Central Valley Regional Water Quality Control Board Issuance of an
Administrative Civil Liability Complaint.
Mr. Tom
Williams reviewed the Agenda item prepared by Ms. Skrel who was not able to
attend this evening. He reviewed the earlier
distributed email received from the Water board as additional information to
the Board.
Director
Contreras stated that at the last Board meeting he had asked staff to contact
the Water Board regarding the fine amount.
Mr. Williams responded that Ms. Skrel has been in contact with
them. Director Contreras stated that he
is concerned about their interpretation of the water code regarding fines and,
sometimes agencies need to decide if it’s in their interest to challenge the
staff interpretation at the Water Board Level.
While you must always work with the Water Board staff, you can also seek
clarification through the Water Board if you feel strongly enough about the issue.
Regarding this issue, Director Contreras
indicated he is not recommending seeking clarification through the water Board.
M/S D. Contreras,
M. Painter and the Board voted unanimously to authorize the General Manager to
sign the waiver form for Administrative Civil Liability Complaint and issue a
check in the amount of $3,000 to the State Water Pollution Cleanup and
Abatement Account.
4. ISD DRAFT BUDGET WORKSHOP
FOR YEAR 2013-2014
Mr.
Tom Williams welcomed everyone and thanked them for attending the meeting. He introduced Mr. Welty and specified that Mr.
Welty will be working with the budget document on the overhead and can make
interactive changes.
Director
Contreras and Director Huerta stated that this is the 5th rendition on the
budget and it is still a work in progress for the finance committee. He stated the committee would like to meet
again before bringing the budget to the Board for formal approval.
Mr.
Williams stated that working with the finance committee, they have worked to
keep the budget flat at a rate of $618 per Equivalent Dwelling Unit (EDU). The budget does not provide for funding for
any Capital Expenditure Reserve (formally the Replacement Reserve). The district will be able to fund the $650,000
normally received from the annual sewer service charge with carry forward revenue
from the current budget and other funds, including an anticipated payment of a
$240,000 refundable deposit from RD 830 for the purchase of dirt for the Marsh
Creek Enhancement Project.
Mr.
Williams is also working on the Koff study update (Total Compensation Study)
but the proposed budget does not currently allocate any funds to make
adjustments based on the ultimate results of the study update. The proposed budget does allow for a cost of
living adjustment, up to 3 %.
Another
factor considered in the proposed budget is the upcoming reset of the trunkline
and plant capacity fee discounts at the end of September 2013. The fee discount, offered for two years beginning
in September 2011, is set to expire and the additional revenue collected from
the fee discount expiration is needed to help the District 1) keep the sewer
service charge flat at $618 per EDU and 2) meet its funding test criteria for
the State Water Resources Control Board’s state revolving fund loan. Mr. Williams pointed out the anticipated
additional revenue from the expiration of the fee discount is approximately
$149,000. With only $114,000 in net
revenue remaining in the proposed FY 2013/14 budget after expenses, the
District would either have to increase the proposed rate of $618 per EDU, or
decrease expenses additionally to insure it met its mandated funding test
through the State if it extended the fee discounts.
Regarding
current connections at 14,525.8, the anticipated starting EDU’s for the coming
fiscal year has been increased to 14,540 because another month and a half
remain in the current fiscal year and staff anticipates additional new
connections . Also, the proposed budget
anticipates 150 new EDU’s connecting in FY 2013/14.
Discussion
was held with the placement of cattle revenue on the budget.
Josh
Roden of Brookfield Homes and Dave Best of Shea Homes addressed the Board with
information regarding local development:
There
are currently 257 vacant lots in Oakley ready for building homes, however, once
that inventory is gone (1½ to 2 years), developers may have difficulty
investing in new lots and new infrastructure if permitting fees reset to
previous levels. On May 1st
there was a fee summit held with the City of Oakley, CCWD, DWD and the School
District regarding the fees burden to the development community. They stated that it is important for Oakley
to keep their total fees affordable to attract future development in the Oakley
area. Brookfield will be developing the Emerson property and should be starting
in 2014 with a 4-6 year build out for this development. The project will be grading in 2013, pulling
permits in 2014 and will have 500 plus lots to be staged out over years.
They
stated that the City of Oakley made a decision to keep rates low and they are
asking the Board to consider keeping the discounted rate.
Director
Contreras stated that the Board is responsible for looking out for the rate
payers. As a point of reference,
Director Contreras pointed out that every $100,000 in District expenses,
translates to approximately $7 a year impact per ISD ratepayer, and the ISD
Board is very in tune with ratepayer impacts related to ISD expenses.
President
Lauritzen thanked Mr. Roden and Mr. Best for attending and stated that starting
in January 2014 the Board would start their budget review process and would
like to invite them back at that time so the Board could receive an update on
the development outlook.
At
7:15 p.m. President Lauritzen called for a short recess. At 7:20 the Board reconvened.
Mr.
Williams reviewed the concerns of the developers, and the anticipated
developments within the District over the next 3-5 years, including the Delta
Coves project on Bethel Island, and the Oakley Generating Station on the
District’s west end.
Mr.
Williams continued reviewing the Budget with the Board.
President
Lauritzen stated his concern regard the $90,000 in hay sales. He stated there is not a cost basis for the
expense of the hay. Mr. Williams said
hay cost a necessity of application of our treated water, and is directly tied
to the cost of operating the Water Recycling Facility. The WDR permit the
District operates under through the Regional Water Quality Control Board for
our land application process requires the growing and harvesting of a crop.
Mr.
Welty addressed the wages, benefits and administrative expenses and stated it
includes (among other things) 2 new hires in FY 2013/14 (one a replacement
employee, and a new position) and a COLA of up to 3%, for a total increase of
7.7% in salary, benefits, and administration over the previous year.
President
Lauritzen directed staff and stated he would like to have an administration
efficiency evaluation on in-house staff and would like to see that before we
hire new employees. Mr. Williams indicated the proposed budget includes
anticipated costs to perform the efficiency evaluation.
There
was a review of the director pay amount which is an increase. Mr. Williams stated it is increased due to
the increase in committee meetings and conferences/training.
Director
Lauritzen stated, for him, it is wonderful to have medical and dental insurance
and he will combine his meetings whenever possible to save the rate payer. Director Contreras stated that he logs many
meeting and attendances as a no charge to the District and stated other
districts are being paid a higher compensation for meetings. For our District to be leaders in the
industry the Director’s need to be involved.
President Lauritzen asked the Board for continued documentation of work each
Board member is involved in.
Director
Huerta asked about the increase in dental insurance. Mr. Welty stated the District received a
notice this week from the provider and the increase is 6.7% for FY13/14.
Director
Scheer asked for clarification on temporary staffing. Mr. Williams stated that it includes seasonal
work on Jersey Island, for the maintenance staff, at the treatment facility and
for records management.
Mr.
Welty continued with a review of the administrative expenses by detail.
President
Lauritzen asked for comments from the Finance Committee:
Director
Contreras on behalf of the committee commented on the Ad Valorem tax in revenue
of $175,000. The committee would like to
see a good use of the funds and establish a fund for trouble spot repairs. Without these funds, the cost of the repairs
would be charged to the rate payer.
Director
Contreras asked about lab supplies reduction and asked for an explanation. The lab went from certified lab doing many in-house
tests, to certified lab doing minimal testing since the RWQCB significantly
reduced the District’s sampling and testing requirements with the latest WDR
permit renewal. He asked if staff
completed comparisons with companion Wastewater Treatment Plants. Mr. Mueller provided the agencies he reviewed
when considering setting up the in-house laboratory. Mr. Mueller also stated that the lab will be
certified, which will make future request for increased test certification by
the State much more streamlined when the time comes.
Professional
Services are reduced by 33%. Discussion
was held on the increase in accounting services and Mr. Williams stated that the
proposed budget has Mr. Welty at the district approximately 7 days a month, vs.
4-5 days a month in the prior year. Mr.
Williams is increasing the expense in this category to have Mr. Welty continue
to assist, at a higher level, in the financial aspects of the District,
including policy development and efficiency improvements. An example of some of the efficiencies Mr.
Welty will be reviewing/developing is implementing ADP Easy Labor Management process
which is a web based timesheet system. The employees will input their timesheet
information electronically which will reduce duplicate payroll entries (and the
potential for data entry errors), as well as allow for better real-time
monitoring by the supervisors of time off requests vs. time available for each
employee to utilize.
Utilities
are reduced by 13.2 percent. Staff has
made significant efficiencies at the plant and the upcoming solar project will
be in place in the later part of October 2013.
Other
Operating Income -President Lauritzen asked how many acres of Jersey Island we
allocate to the cattle operation. Mr. Williams stated approximately 3,000 acres.
President
Lauritzen stated the cost of feed is charged to the cattle operation, but we
don’t charge a rental to the cattle operation for the land. The cattle operation is a push at best.
Mr.
Welty stated we could charge rental for the land but, ISD owns the land and
this would not be normal business practice.
In addition, charging the cattle operation land rental would increase
overall District revenue, but, it would also equally reduce net revenue from
the cattle operation, simply offsetting one another. Mr. Welty indicated a greater expense vs.
revenue financial analysis of the cattle operation could be undertaken; simply,
he would need time, and a clear understanding from the Board what they were
looking for.
Capital
Expenditures – Mr. Welty detailed the capital expenditures with the Board.
Director
Contreras asked if we are to receive a report on the Bethel Island bridge
expansion joint replacement. Mr.
Williams stated that the draft report from Brown and Caldwell is currently
being reviewed and, once finalized, will be presented to the Board.
Director
Contreras addressed the income from Ad Valorem and asked where the line item
would show and would there be a specific line item for the expenditure.
Director
Scheer wanted to clarify the proposed budget does not direct any revenue from
rates toward the capital expenditure reserve, and asked how the needed revenue
of $650,000 per year for future expenditures would be funded. Mr. Welty stated that the plan for FY 2013/14
was to move royalty reserves (approximately $460,000) into the capital expenditures
reserve and any future income from the gas wells would go there as well. In addition, Mr. Williams pointed out that in
FY 2013/14, 4 additional years into the future, the RD 830 Marsh Creek
Enhancement Project, and the purchase of up to 600,000 cubic yards of dirt for
approximately $2.5 million, is also a key component of funding the capital
expenditure reserve for the next 4 years.
President
Lauritzen reminded the Board that they transferred funds from the Royalty
Reserves in years past to help fund the building of the Treatment plant to reduce
overall borrowing for the project, resulting in lower loan payments for the
rate payers.
President
Lauritzen thanked the Finance Committee for their hard work and asked for
finishing comments.
Director
Contreras stated that at the last CSDA session on pension reform they were
advised to watch for future increases in both the District’s contribution
amounts for CalPERS costs, and CalPERS OPEB (Other Post Employment Benefits;
medical benefits in retirement) costs starting in fiscal year 2015/16. There will be changes in the GASB (Governmental
Accounting Standards Board) criteria for accounting methodologies for unfunded liabilities and, how
the new standards for accounting will differ from what the District actually
pays CalPERS. He stated the District’s CalPERS rates will go
up 5-10% in 5 years, starting in FY 2015/16.
He wanted staff to be aware there will be training available in November
2013 on these changes.
The
“classic” members in the CalPERS retirement program (existing employees prior
to January 2013) will remain the same, but new members’ without reciprocity from
another agency will be 2% at 62 and the new employee will be responsible for 4%
of employee share of contribution into CalPERS.
President
Lauritzen thanked everyone for working so hard on the budget. He thanked Mr. Welty and stated he did a
great job of presenting the document and how it is broken out into individual areas
of operation. He did state that he is nervous about Jersey Island. He is concerned that the Island costs the
rate payer $100 per year to operate.
The
salaries to operate the Island are over $1 million, with reimbursement from
RD830, and the revenue from cattle sales, it is still over a $2 million budget
with a $145 cost to the rate payer. This
is a concern to him and he wants the Board to be aware of.
Mr.
Williams stated that the Jersey Island Management Plan is in the budget to work
on this coming fiscal year. He will
review starting this process with the J.I. Management Committee. He also wanted to remind the Board that the
permit with the RWQCB is based on utilizing the island for recycled water
application.
5. Adjournment
President Lauritzen adjourned
the Workshop meeting at 9:05 p.m. to Tuesday, June 2, 2013 at 7:00 p.m. for the
next scheduled regular meeting, in the Ironhouse Sanitary District offices at
450 Walnut Meadows Drive, Oakley, California.
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