VALLEY CENTER MUNICIPAL WATER DISTRICT
Regular Board Meeting
Monday, June 18, 2007
Time: 2:00 P.M.
Place: Board Room
29300 Valley Center Road
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.
ROLL CALL
Board members present were: Directors Broomell, Polito, Aleshire, Stone and Haskell. Staff members present were: General Manager Arant, General Counsel Cowett, Director of Finance Jeffrey, District Engineer Grabbe, Director of Operations Hoyle, Board Secretary Stetson, IT Specialist Rivard, Manager of Accounting Pugh and Project Manager Williams. Spectators present were¨ Peter MacLaggan, Poseidon Resources and Dave Ross, Valley Roadrunner Newspaper.
CONSENT CALENDAR
1. Upon motion by Aleshire, seconded by Stone and unanimously carried, the following consent calendar items were approved:
• Minutes of the Board meeting held June 4, 2007
• Audit demand check numbers 113793 through 113961
• Board of Director’s request for per diem compensation and reimbursement of expenses
• Treasurer’s Report and Financial Statements for the period ended April 30, 2007
ACTION AGENDA
2. Update on the Poseidon Resources–Carlsbad Seawater Desalination Project:
Peter MacLaggan of Poseidon Resources provided an update on the Poseidon Resources-Carlsbad Seawater Desalination project noting that the project’s Environmental Impact Report has been finalized and the permits obtained from the Regional Water Quality Control Board (RWQCB) and the California Department of Health. The discharge permit issued by the RWQCB was challenged and the issuance of the permit was successfully defended and the challenge has been dismissed. Permits that are currently being pursued are from the California Coastal Commission and the State Lands Commission.
The California Coastal Commission is currently reviewing the Coastal Development Permit application for the desalination project. Issues raised by the Commission have been addressed and it is hoped that the current application will be deemed complete to be set for a hearing on its completeness followed by a hearing on the merits of the project anticipated for November 2007. Wide public support of the proposed Poseidon Resources-Carlsbad desalination project has been communicated to the Coastal Commission from State Legislators, water agencies, environmental and business organizations and property owners’ associations. Mr. MacLaggan stated that continuing to communicate support of the desalination project will be beneficial as well as a presence of support on the date of the hearing.
Mr. MacLaggan reviewed that water agencies that have executed water purchase agreements with Poseidon Resources are: Carlsbad M.W.D. (22,000 ac. ft.), Valley Center M.W.D. (7,500 ac. ft.), Rincon del Diablo M.W.D. (4,000 ac. ft.) and the Sweetwater Authority (2,400 ac. ft.). Poseidon has also entered into negotiations with Olivenhain M.W.D,, Santa Fe Irrigation District, Rainbow M.W.D., Vallecitos Water District, City of Oceanside and the Vista Irrigation District for water purchase agreements. The Poseidon Resources-Carlsbad desalination facility will produce 56,000 acre feet per year of potable water. Mr. MacLaggan stated that by the end of 2007, all of the water from the plant should be fully subscribed.
San Diego Desal. Partners, a group of water agencies collaborating to make seawater desalination a reality in San Diego, which is chaired by General Manager Arant, has facilitated advancing the sale of the treated water through the purchase agreements, the San Diego County Water Authority’s indication of support, and promoting the overall benefit of the desal. project to the San Diego region. The San Diego County Water Authority Board will consider a resolution at its next meeting to support the desalination project. Through the San Diego Desal. Partners group, the San Diego County Water Authority is developing various policies and programs to facilitate and assist in moving desalted seawater from the Carlsbad plant to and between member agencies.
3. Resolution Supporting Water Supply Aspects of the Governor’s Strategic Growth Plan:
Resolution No. 2007-31, expressing the District’s support for Governor Schwarzenegger’s comprehensive water supply package contained within the Strategic Growth Plan for California, was presented for the Board’s approval. The Governor’s water package includes funds for additional water storage, a comprehensive delta solution, water conveyance and water use efficiency improvements. The proposed comprehensive water package of the Governor’s Strategic Growth Plan addresses many of ACWA’s water policy recommendations.
Upon motion by Aleshire, seconded by Polito and unanimously carried, the following resolution, entitled:
RESOLUTION NO. 2007-31
A RESOLUTION OF THE BOARD OF DIRECTORS OF
VALLEY CENTER MUNICIPAL WATER DISTRICT
SUPPORTING THE COMPREHENSIVE WATER SUPPLY
PACKAGE CONTAINED WITHIN THE GOVERNOR’S
STRATEGIC GROWTH PLAN FOR CALIFORNIA
was adopted by the following vote, to wit:
AYES: Directors Broomell, Polito, Aleshire, Stone and Haskell
NOES: None
ABSENT: None
4. Request for Design Contract Change Order for the Rodriguez Road Pipeline Replacement Project:
Adoption of Resolution No. 2007-33 approving a contract change order in the amount of $22,810 to the contract with Kennedy/Jenks Consultants for the design of the Rodriguez Road Pipeline Relocation project was requested. The change order is necessitated due to a change in the project’s scope to separate the project into two phases (developer project and the District’s CIP project) and to provide additional work associated with obtaining approvals from San Diego Gas & Electric and the San Diego County Water Authority to access and work within their easements. This work will allow for the preparation of final drawings and securing approvals needed for final construction of the pipeline relocation project.
Upon motion by Aleshire, seconded by Stone and unanimously carried, the following resolution, entitled:
RESOLUTION NO. 2007-33
RESOLUTION OF THE BOARD OF DIRECTORS OF
VALLEY CENTER MUNICIPAL WATER DISTRICT
APPROVING AMENDMENT NO. 4 TO THE CONTRACT
WITH KENNEDY/JENKS CONSULTANTS FOR THE
DESIGN OF THE RODRIGUEZ ROAD PIPELINE
REPLACEMENT AND MAKING A DECLARATION OF
OFFICIAL INTENT TO REIMBURSE EXPENDITURES
FROM PROCEEDS OF INDEBTNESS
was adopted by the following vote, to wit:
AYES: Directors Broomell, Polito, Aleshire, Stone and Haskell
NOES: None
ABSENT: None
5. Mid-Term Review of the Two-Year Budget for Fiscal Years 2006-07 and 2007-08:
Manager of Accounting Pugh presented a mid-term review of the two-year budget for Fiscal Years 2006-07 and 2007-08 summarizing significant changes and adjustments needed since adoption of the budget in June of 2006, as follows:
• Total operations and maintenance expenses are estimated to be $582,640 under budget for Fiscal Year 2006-07.
• Total revenues for FY 2006-07 are estimated to be $1,534,260 under budget, as outlined below:
Water Sales ($109,300)
Meter and Wastewater Service Charge ($238,700)
New Connection and Capacity Charges ($931,260)
Investment Income ($255,000)
• Pumping charge revenues are expected to be approximately $323,500 higher than budgeted due to the volume of water sold.
• Debt issuance proceeds of approximately $8 million was deferred due to the potential impact from the January 2007 freeze.
• Water purchases for 2006-07 are projected at 50,251 acre feet (47,350 acre feet had been estimated). Total source of supply expenses is estimated to increase $1,318,000.
Budget projections for FY 2007-08 were reviewed, as follows:
• Total operations and maintenance expenses are estimated at $458,564 below the approved budget estimate. This is primarily due to a reduction in the number of filled staff positions.
• Total net revenues are estimated at $1,607,600 under budget which includes net water sales revenue of $1,358,000 under budget. It was noted that the wholesale water rate increases of $892,900 were unknown during preparation of the budget.
• Water purchases for FY 2007-08 were budgeted at 48,300 acre feet. There will be an additional wholesale water cost increase of $15 per acre foot above what had been budgeted which will increase the source of supply costs by $295,650.
For the Fiscal Years 2006-07 and 2007-08, the operations and maintenance expenses will be met assuming 2007-08 will be a normal year, wholesale cost increases from Metropolitan Water District and the San Diego County Water Authority will be passed through, that a rate offset for local costs increases will be assessed, and capital improvement projects continue to be deferred. Accounting Manager Pugh noted that when the District does go to the debt market, an additional $4 million will be needed for a total debt issuance of $12 million to offset the over estimated net water sales revenue.
Considering the uncertainties concerning the water supply because of the Delta pump issues, the dry weather conditions and possible mandatory reductions in agricultural water sales, it is planned to:
Continue the deferral of filling unfilled staff positions, and
Shift discretionary capital projects from the current two-year budget
It was recommended to continue to move forward with the automated meter reading (AMR) program and a scaled down SCADA program. The capital projects and equipment purchases, which have been identified and approved for deferral or reduction in scope, result in a total savings of $5,598,000. The net reduction in capital expenses is $4,650,000 considering a cost of $948,000 to implement the accelerated AMR program. Staff is evaluating the financial impacts to the budget should the mandatory reductions in agricultural water sales go into effect. This situation will continue to be monitored and any new developments will be reported to the Board.
The District’s reserves balances were reviewed. At the end of June 30, 2007, a total reserve balance of $15.2 million is anticipated. The operating reserve balance is estimated at $698,780 which equates to <1 month of O&M expenses. Operating reserves had been reduced to fund capital projects. With adoption of the 2006-08 two-year budget, it had been anticipated to fund the operating reserve at the adopted performance measurement standard level of 6 months’ operations and maintenance budget through the issuance of debt, which has since been deferred. Also, many of the capital projects have been deferred or reduced in scope.
Staff recommended adoption of Resolution No. 2007-30 to adjust the 2006-08 budget as set forth below, and adopt Ordinance No. 2007-09 to incorporate a 4% salary adjustment per the MOU with employees: (Staff noted that water and sewer rate increases will be presented at a later date for implementation on January 1, 2008).
Budget Adjustments:
Revenues:
Water Sales ($1,467,300)
Meter and wastewater service charges (447,300)
New connection and capacity charges (931,260)
Other income 43,000
Investment Income (339,000)
Total Revenue ($3,141,860)
Expenses:
Source of supply $1,613,650
OPEB 647,660
Debt Service (718,200)
O&M meter exchange program allocated
to AMR project (136,000)
Total Expenses $1,407,110)
Capital projections $4,650,000
Total Expenditures Including Capital ($3,242,890)
Increased Cash $101,030
Upon motion by Aleshire, seconded by Polito and unanimously carried, the following resolution, entitled:
RESOLUTION NO. 2007-30
RESOLUTION OF THE BOARD OF DIRECTORS OF
VALLEY CENTER MUNICIPAL WATER DISTRICT
ADOPTING CHANGES TO THE TWO-YEAR
OPERATING AND CAPITAL BUDGET FOR THE
FISCAL YEARS 2006-07 AND 2007-08
was adopted by the following vote, to wit:
AYES: Directors Broomell, Polito, Aleshire, Stone and Haskell
NOES: None
ABSENT: None
Upon motion by Haskell, seconded by Stone and unanimously carried, the following ordinance, entitled:
ORDINANCE NO. 2007-09
ORDINANCE OF THE VALLEY CENTER MUNICIPAL WATER
DISTRICT AMENDING THE ADMINISTRATIVE CODE TO
INCORPORATE CHANGES PER THE APPROVED
MEMORANDUM OF UNDERSTANDING WITH EMPLOYEES
was adopted by the following vote, to wit:
AYES: Directors Broomell, Polito, Aleshire, Stone and Haskell
NOES: None
ABSENT: None
CLOSED SESSION
6. A Closed Session was called by President Broomell at 4:10 p.m.
● Government Code §54957(b)(1) – Public Employee Performance Evaluation: General Manager, and
Government Code §54957.6 – Conference with Labor Negotiator,
Unrepresented Employee: General Manager
● Government Code §54956.8 - Real Property Transaction, Conference
with Negotiator
Property: 11580 Betsworth Road, Valley Center
Agency Negotiator: Gary T. Arant, General Manager
Negotiating Party: WorldWater & Solar Technologies
Under Negotiation: Terms of Lease
The regular Board meeting was reconvened at 4:50 p.m., and the following action was reported:
7. Approval of Amended Employment Agreement, District General Manager:
Upon motion by Aleshire, seconded by Polito and unanimously carried, an “Amended Employment Agreement Between Valley Center Municipal Water District and Gary T. Arant”, General Manager, was approved to be effective July 1, 2007.
ADJOURNMENT
8. Upon motion by Aleshire, seconded by Stone and unanimously carried, the meeting was adjourned at 4:53 p.m.
ATTEST: ATTEST:
____________________________ _______________________________
President Secretary