December 3, 2001
VALLEY CENTER MUNICIPAL WATER DISTRICT
Regular Board Meeting
Monday, December 3, 2001
Time: 2:00 P.M.
Place: Board Room
29300 Valley Center Rd.
Valley Center, CA 92082
The Valley Center Municipal Water District Board of Directors’ meeting was called to order by
President Broomell at 2:00 P.M.
Board members present were: Directors Broomell, Polito, Aleshire, Stone and Haskell. Staff
members present were: General Manager Arant, General Counsel Cowett, District Engineer
Jewell, Director of Finance Jarrell, Director of Operations Dacus, Manager of Accounting Jeffrey,
and Board Secretary Stetson. Spectators present were: Ms. Driver, San Diego County Water
Authority; and Mr. Ross, Valley Roadrunner.
APPROVAL OF AGENDA
1.
Upon motion by Polito, seconded by Stone and unanimously carried, review of the Draft Agricultural Water Management Plan was added to the agenda.
CONSENT CALENDAR
2.
Upon motion by Stone, seconded by Aleshire and unanimously carried, the following consent calendar items were approved:
• Minutes of the Board meeting held November 19, 2001
• Audit demand check numbers 87103 through 87272
PUBLIC HEARING
3. Revised Method for Computation of Annexation Charges:
The public hearing to receive input on the proposed revised method for computing annexation
charges commenced. District Engineer Jewell stated that, at present, properties requesting
to be annexed to the District’s service area to receive water/sewer service currently are
assessed annexation charges based on the property’s actual back taxes or on the current
assessed value and District-wide availability charges since inception of this charge in Fiscal
Year 1980-1981.
Valley Center Municipal Water District
Board of Directors’ Meeting
2 12/3/2001
Inequities in properties’ assessed valuations are prevalent in the wake of Proposition 13
which can result in a wide disparity in annexation charges calculated based on assessed
values though annexation benefits may be similar. Further, all District general obligation
bonds have been retired which eliminated the connection between taxes and District facilities.
Properties requesting annexation to the District must annex into or be in the service areas of
Metropolitan Water District of Southern California and the San Diego County Water Authority.
A revised formula for computing District annexation charges similar to the method of
Metropolitan and the Authority was recommended, which uses infrastructure and asset values
from the audited annual financial statements with an adjustment for inflation using the
Engineering News Record Construction Cost Index, as follows:
Current net book value of District assets, adjusted for inflation, divided by acreage of the
District equals per acre annexation charge
Utilizing the above formula, the District’s annexation charge in Fiscal Year 2001-2002 would
be $1,372 per acre. No comments on this matter were received from the public and the
hearing was closed.
Upon motion by Aleshire, seconded by Stone and unanimously carried, the following
ordinance, entitled:
ORDINANCE NO. 2001-15
ORDINANCE OF THE VALLEY CENTER MUNICIPAL
WATER DISTRICT AMENDING ADMINISTRATIVE
CODE ARTICLE 220 TO ESTABLISH A NEW FORMULA
FOR COMPUTING ANNEXATION CHARGES
was adopted by the following vote, to wit:
AYES: Directors Broomell, Polito, Aleshire, Stone and Haskell
NOES: None
ABSENT: None
4. Annexation Surcharge on Tax-Exempt Private Use Property:
Implementation of an annexation surcharge to be assessed tax-exempt private use property
upon annexation to the District was proposed. This one-time surcharge was proposed to
approximate future property taxes and assessments which would be collected on said
property if it was not exempt from taxation. The public hearing on the proposed adoption of
this surcharge was opened.
Valley Center Municipal Water District
Board of Directors’ Meeting
3 12/3/2001
A proposed formula to compute the annexation surcharge was presented as follows:
Average tax collections per acre (property tax collections for the year
divided by acres in the District) plus special assessments, including
Metropolitan’s assessment towards the District’s share of their readinessto-
serve charge
Using the above formula and applying a present value calculation (District’s average interest
earnings for the year) results in the proposed surcharge, in the current fiscal year, being
$658 per acre.
No comments from the public on this matter were received and the public hearing was closed.
Upon motion by Stone, seconded by Polito and unanimously carried, the following
ordinance, entitled:
ORDINANCE NO. 2001-16
ORDINANCE OF THE VALLEY CENTER MUNICIPAL
WATER DISTRICT ADDING ADMINISTRATIVE CODE
SECTION 220.3 TO ESTABLISH AN ANNEXATION
SURCHARGE IN LIEU OF TAXES FOR TAX-EXEMPT
PRIVATE USE PROPERTY
was adopted by the following vote, to wit:
AYES: Directors Broomell, Polito, Aleshire, Stone and Haskell
NOES: None
ABSENT: None
ACTION AGENDA
5. Review of the District’s Financial Reports – Fiscal Year 2000-2001:
The District’s Financial Reports for the period ended June 30, 2001, including the
Comprehensive Annual Financial Report (CAFR); Appropriations Limit Worksheet; Auditor’s
Management Letter; and Independent Auditor’s Report on the Retirement Plan, were
presented for review.
Director of Finance Jarrell reported that the District’s CAFR has been submitted to the
Government Finance Officers Association for review and consideration of award of the
Valley Center Municipal Water District
Board of Directors’ Meeting
4 12/3/2001
Certificate of Achievement for Excellence in Financial Reporting. The Certificate of
Achievement is awarded if the CAFR meets the highest standards in government accounting
and financial reporting as set by the Government Finance Officers Association which the
District has received for nine consecutive years.
Bill Jeffrey, Manager of Accounting, provided an overview of the Fiscal Year 2000-
2001 CAFR as outlined below:
• A 2.4% growth in new meter installations was experienced (173 new meters totaling
7,458 active meters as of June 30, 2001)
• Total water sales was 42,000 acre feet of which 82% were agricultural water deliveries
• Revenue:
<
Water sales were down 11% with rates down 0.4%
<
$544,000 was refunded to our customers which was a pass-through of the rebate money received in June 2000 from Metropolitan
<
Energy revenue was up 7% and pump zone charges up 72% near the end of the fiscal year
<
Taxes and assessments were up 4% due to increases in assessed values • Expenses:
<
Pumping expenses increased 77% due to large power rate increases
<
Other expenses increased 15% which included increased maintenance, energy deregulation, a new staff position and insurance rates
• General Fund declined approximately $1.5 million due to energy costs
• Reserves - detailed on the attached Exhibit “A”
<
Rate Stabilization Reserve - $2,174,304.46 total which consists of three parts: ~ Rate Stabilization Reserve funded by net revenues from sales in excess of budget
($1,689,816.60):
~ Readiness-to-Serve Charge stabilization reserve funded from net RTS passthroughs
and refunds ($484,487.86):
~ Pumping Rate stabilization reserve funded from net revenues from pumping
charges ($0). A net loss of $1,953,082 in pumping was experienced in Fiscal Year
2000-2001. The deficit of $987,388 in the Pumping Rate Stabilization reserve was
funded by the General Water Fund. A refund of $388,000 has been received from
SDG&E subsequent to the close of FY 2000-01. The remaining deficit is expected
to be recovered over time as utility rates begin to decline.
<
Operating Reserve - $6,427,848. Funded by net revenues
<
Restricted Reserves - $669,588.89. This fund consists of the agricultural rebate, debt service and vehicle replacement reserves
<
Capital Projects Reserves - $10,574,341.52. Fund includes reserves for Continuing Projects, Capital Improvements and Master Plan System Improvements
<
Lower Moosa Sewer Treatment Fund - Experienced a loss of $400,000 which is largely attributed to increases in electrical pumping expenses. Rate increases were
implemented to recover costs
Valley Center Municipal Water District
Board of Directors’ Meeting
5 12/3/2001
<
Skyline Ranch Sewer Treatment Plant - Per agreement, expenses to operate the treatment plant are reimbursed. The balance of the replacement reserve is
$99,071.51
<
Lower Moosa Expansion Project - $453,702.99. Earmarked for budgeted capital projects
<
Woods Valley Ranch - $155,958.65. For capital projects budgeted in prior years. The District’s Appropriations Limit Worksheet for Fiscal Year 2000-2001 and the Retirement
Plan 002 Independent Auditors’ Report were reviewed. Under Article XIIIB of the State
Constitution, the District’s Appropriations Limit was $2,998,026 for the year ended June 30,
2001.
Bill Gilchrist of the audit firm Buechler, Gilchrist & Steen addressed the Board noting that the
audit is conducted in accordance with generally accepted auditing standards. The
Independent Auditors’ Report issued as a result of the audit of the District’s balance sheets
and related financial statement concluded that the financial statements presented the
financial position of the District at June 30, 2001 and 2000, and the results of its operations
and cash flows ended in conformity with generally accepted accounting principles.
The audit firm’s Management Letter noted a reportable condition regarding segregation of
duties. The letter states “Due to the limited staff size in the finance department, there is a
lack of segregation of functions.” It was noted, however, that this condition is not uncommon
within organizations of similar size and that it is not of critical concern considering the
functions are monitored and overseen by management staff and the Board of Directors.
Status of the District’s Strategic Plan Specific Goals for Fiscal Years 2000-2001 and 2001-
2002 and the approved Performance Measurement Standards, as of June 30, 2001, were
reviewed as reported in the CAFR, which are attached hereto as Exhibit “B”.
Staff of the Finance Department were commended for their efforts in development of the
District’s CAFR for Fiscal Year 2000-2001.
6. Review of the Draft Agricultural Water Management Plan:
In July of 1997, the District became a signatory to the Memorandum of Understanding (MOU)
Regarding Efficient Water Management Practices (EWMPs) by Agricultural Water Suppliers
in California. Assembly Bill 3616, the Agricultural Efficient Water Management Act of 1990,
required the Department of Water Resources to form an advisory committee of agricultural
interests that developed the Memorandum of Understanding. The effort was to voluntarily
achieve more efficient agricultural water management than currently exists or may be required
by existing law, and it is a CAL-FED water use efficiency component.
The MOU established the Agricultural Water Management Council and requires that
signatories submit a Water Management Plan for implementing all cost-effective EWMPs
Valley Center Municipal Water District
Board of Directors’ Meeting
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applicable to their area. The Department of Water Resources has developed specific
guidelines for the Water Management Plans as well as a net benefit analysis to determine if
an EWMP is cost-effective. The District is a Group 1, Voting, agricultural water supplier in
San Diego County. Throughout the state, there are 50 Group 1 signatories representing
4,749,969 acres. The San Diego County Water Authority became a non-voting, Group 3,
Other Interested Party, signatory in May 2000. Group 2 are environmental interests.
Vickie Driver, Water Resources Specialist of the San Diego County Water Authority,
explained that member agencies of the Authority requested and the Department of Water
Resources recommended a regional Water Management Plan for San Diego County to
provide a more meaningful perspective of agricultural water use in the county. The first
version of the Water Management Plan was submitted in April 1999. This second version of
the Plan is an update and complies with the established Plan Guidelines developed by the
Department of Water Resources.
The Draft Agricultural Water Management Plan prepared by the San Diego County Water
Authority was compiled with assistance from the District, Mission Resources Conservation
District, Natural Resources Conservation Service, University of California Cooperative
Extension, County of San Diego Department of Agriculture, and the San Diego County Farm
Bureau. A summary of the data in the Draft Plan was reviewed as outlined below:
~ Agricultural acreage in Valley Center is 16,161 and within the San Diego County Water
Authority’s service area totals 54,641 acres.
~ Within San Diego County, the direct farm gate value is $1.25 billion, a number derived
from the County’s agricultural report. Agricultural’s indirect economic impact throughout
the county is approximately $4.39 billion which represents 1.5% of the county’s gross
product, ranking 7
th
among counties in the State and 10
th
in the nation. 30% of the county’s agricultural acreage is within the Authority’s service area.
~ Agriculture in the District’s service area has a value of $117 million. Flowers and
nurseries account for 3.2% of acres in the District, but approximately 39% of the ag.
income.
~ Challenges facing agriculture are the high cost of water, labor, land and energy and
competition from foreign markets.
~ Agriculture in the county is expected to remain strong with a gradual shift to residentialagricultural
mix and to flower and nursery crops.
~ Irrigation water requirements (derived from crop coefficients from the U.C. Cooperative
Extension, 10% leaching, 52.6 inches reference evapotranspiration, 80% emission
uniformity and estimated agricultural acres) were calculated to be 69,558 ac. ft. in the
District’s service area and 251,129 ac. ft. within the Authority’s service area. Reported
agricultural water use (including IAWP, M&I ag., private wells, reclaimed water and
effective rainfall) in Valley Center is 55,549 ac. ft. and 180,470 ac. ft. in the Authority’s
service area. The discrepancy in actual agricultural water usage and calculated
irrigation water requirements is due to several factors including irrigation practices, lack
of precise detail about crops, water needs, cropping patterns, acres and classification
of land use and private wells.
Valley Center Municipal Water District
Board of Directors’ Meeting
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Ms. Driver stated that all demonstrably appropriate Efficient Water Management Practices
have been fully implemented and, therefore, no net benefit analysis was required. Comments
on the Draft Agricultural Water Management Plan document were requested. It will be
presented to the San Diego County Water Authority Board at the December 6
th
meeting. Pending the Authority’s approval, the draft report will be released for additional public review
and submitted to the Agricultural Water Management Council for approval. It was reiterated
that participation in the MOU for Efficient Water Management Practices is voluntary to assist
agricultural water suppliers in planning, implementing and evaluating irrigation practices as
well as it being a water use efficiency component in the Cal-FED process.
7. Request for Budget Adjustment and Award of Contract for the V.C. #8 Standby Chlorination
Facility:
District Engineer Jewell reported that the San Diego County Water Authority is constructing
the Valley Center #8 aqueduct connection. District improvements consist of the V.C. #8
chlorination building, piping from the new aqueduct connection to the District’s existing
pipeline and three 20" valves.
Bids were received for the V.C. #8 Standby Chlorination Facility project on November 15
th
with the lowest acceptable bid submitted by Atlas-Allied Inc. at $155,800. Appropriation of
an additional $40,000 was requested as the bid contained increased costs for the piping and
valves over amounts listed in the Engineer’s estimate, and award of contract to Atlas-Allied
Inc. was recommended.
Upon motion by Aleshire, seconded by Stone and unanimously carried, the following
resolution, entitled:
RESOLUTION NO. 2001-15
RESOLUTION OF THE BOARD OF DIRECTORS OF
VALLEY CENTER MUNICIPAL WATER DISTRICT
AMENDING THE 2001-02 BUDGET BY APPROPRIATING
AN ADDITIONAL $40,000 INTO ACCOUNT 01-5678.78
AND AWARDING CONTRACT FOR THE
V.C. #8 STANDBY CHLORINATION FACILITY
was adopted by the following vote, to wit:
AYES: Directors Broomell, Polito, Aleshire, Stone and Haskell
NOES: None
ABSENT: None
Valley Center Municipal Water District
Board of Directors’ Meeting
8 12/3/2001
8. Amendment to the Administrative Code to Provide for Health Benefits to Employees Eligible
for CalPERS Disability Retirement:
As previously approved and set forth in the District’s Administrative Code, disabled
employees are provided medical, dental and life insurance benefits for a term based upon
years of service, up to a maximum of 12 months. An addition to the Administrative Code
(Sec. 2.10) was requested by Manager of Human Resources Hale to clarify the provision of
health benefits to employees eligible for CalPERS disability retirement, subject to the term
limitations as specified in the Code. In this manner, benefits provided employees on leave
for medical disability and those eligible for disability retirement will be the same.
Upon motion by Aleshire, seconded by Haskell and unanimously carried, the following
ordinance, entitled:
ORDINANCE NO. 2001-17
ORDINANCE OF THE VALLEY CENTER MUNICIPAL
WATER DISTRICT AMENDING THE ADMINISTRATIVE
CODE TO PROVIDE FOR EMPLOYEE HEALTH BENEFITS
TO EMPLOYEES ELIGIBLE FOR DISABILITY RETIREMENT
was adopted by the following vote, to wit:
AYES: Directors Broomell, Polito, Aleshire, Stone and Haskell
NOES: None
ABSENT: None
9. Report on the Selection of Consulting Engineering Firms to Provide As-Needed Professional
and Consulting Services:
District Engineer Jewell informed the Board that following interviews of six engineering firms,
three firms were selected as District consultants for as-needed engineering services. When
a District approved project requires engineering services, staff will negotiate with one of the
consultants to accomplish the work. The three selected firms are:
Boyle Engineering Corporation
Powell/PBS&J
R. W. Beck (formerly McDonald-Stevens Engineering)
Valley Center Municipal Water District
Board of Directors’ Meeting
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CLOSED SESSION
10. A Closed Session was called by President Broomell at 4:21 p.m. pursuant to:
• Government Code §54956.9(a), Conference with Legal Counsel - Existing Litigation
Name of case: Sweetwater Authority, et al. v. Dynegy, Inc., et al.
Superior Court Case GIC 760743
• Government Code §54956.9(c), Conference with Legal Counsel - Anticipated
Litigation. Number of potential cases: 1
The Regular Board meeting was reconvened at 4:45 p.m. No action was reported.
ADJOURNMENT
11.
Upon motion by Aleshire, seconded by Stone and unanimously carried, the meeting was adjourned at 4:46 p.m.
ATTEST: ATTEST:
______________________________ _______________________________
Secretary President