November 21, 2011

 
VALLEY CENTER MUNICIPAL WATER DISTRICT

    Regular Board Meeting
    Monday, November 21, 2011
    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, Acting General Counsel Akins, District Engineer Grabbe, Director of Finance Jeffrey, Director of Operations Hoyle, IT Manager Pilve, Board Secretary Johnson, and Accounting Manager Pugh.  Spectators present were Ms. Jennifer Haley – Best, Best & Krieger, Mr. Dennis Cushman – San Diego County Water Authority, Mr. Milt Davies – Fallbrook Public Utilities District, and Mr. Dave Ross – Valley Roadrunner.

CONSENT CALENDAR

1. Upon motion by Stone, seconded by Polito and unanimously carried, the following consent calendar items were approved:

• Minutes of the Board meeting held October 17, 2011
• Audit demand check numbers 130241 through 130579 for the period September 30 to November 10, 2011 and wire disbursements for October 2011.
• Treasurer’s Report for period ended September 30, 2011
• Board of Director’s request for reimbursement of expenses and report of expenses
• Report of Capital Improvement and Developer Projects completed in FY 2010-11

ACTION AGENDA:

2. Review of San Diego County Water Authority vs. Metropolitan Water District Rate Litigation:

Mr. Dennis Cushman, San Diego County Water Authority (SDCWA) Assistant General Manager, provided a review of the history and the current status of the rate litigation filed against the Metropolitan Water District (MWD).  He reported that the amount of money at stake in the lawsuit, which covers a span of 45 years, is $1.3 to $2.1 billion.

Mr. Cushman reported that the Water Authority annexed to MWD in November 1946.  By 1949, the SDCWA was purchasing half of MWD’s water supply.  In 1990, SDCWA remained MWD’s largest member agency, buying approximately 30% of MWD’s water.  At that time, supplies from MWD accounted for 95% of all water used in San Diego County.  During the 1990-91 drought, MWD imposed a 31% water supply delivery cutback for customers that lasted 16 months.  Since that time, the Water Authority has been working to reduce water purchases from MWD through supply diversification.  Today, the SDCWA receives approximately 47% of its water from MWD yet still remains its largest purchaser; providing more than 25% of MWD’s revenues.

In 2003 the Colorado River Quantification Settlement Agreement was executed.  The Water Authority signed a 45-75 year deal to buy 200,000 AF annually from the Imperial Irrigation District.  They also agreed to line the All American and Coachella canals and receive 80,000 AF annually for 110 years.  This arrangement required transportation to move supplies to San Diego through MWD’s system.  MWD then established a new rate structure out of its uniform water rate to produce the transportation charge.  The Water Authority contends that the new rate structure misallocates water supply costs to the transportation charge, thus overcharging the SDCWA.  Support from other MWD member agencies is not being offered to SDCWA because any corrective changes in the rate structure would cost them more money.

The case has been assigned to the San Francisco Superior Court under Judge Richard Kramer.  A trial court decision is estimated in mid-2012.  The Water Authority was successful in amending the complaint at an October 2011 trial hearing to add five new causes of action which includes breach of contract and preferential rights. 

Mr. Cushman suggested ways the Board could help their cause which included: adopting a resolution supporting the Water Authority in the rate litigation, providing written and oral testimony at the MWD 2013 rate setting hearings (in early 2012), publishing commentaries and letters to the editor supporting the Water Authority’s position, feature the cause in any agency publications, and feature it on the District’s website and in social media activities.

Staff was directed to prepare a resolution of support for the SDCWA litigation case.

3. Ordinance Approving Increases in Water Charges and Rates and Wastewater Service and Pressure Wastewater Collection System Charges:

Director of Finance Jeffrey reviewed that at the October 17th Board meeting the wholesale water rate increases from the Metropolitan Water District (MWD) and the San Diego County Water Authority (SDCWA) to be effective January 1, 2012, were discussed.  Also reviewed were proposed increases in the monthly meter service charge, the SDCWA Infrastructure Access Charge and the Moosa wastewater service charge.

Mr. Jeffrey reported the wholesale increase on the domestic rate is 10.9% which includes the fixed charges for capacity, customer service, and emergency storage levied by the Water Authority and Metropolitan regardless of how much water is sold.  The SAWR discount is slightly less since they do not pay for emergency storage.  The IAWP increase looks higher because it includes a 50% reduction in the MWD discount from the current rate due to the phase out of the program at the end of 2012.  The District’s proposed water commodity rates per Hundred Cubic Feet (HCF) are:

 

 Ordinance No. 2009-08 adopted on July 20, 2009, after a public hearing in accordance with Proposition 218, provided for a pass through of all wholesale water increases through September 1, 2014, and for increases in the local component and meter service charge of no more than the percentage increase in the wholesale rate, 10.9%.  The resulting dollar increase of $14.86 per acre foot (3.41¢ per HCF) is approximately 1% of the total water rate.

With the decline of agriculture and uncertain water sales for the foreseeable future, meter service charges provide a more stable source of revenue to cover fixed operating costs if water sales fall.  The District’s Strategic Plan provides that fixed revenues should cover 50% of fixed costs.  At the October 17, 2011 board meeting, staff was directed to meet this standard and prepare an ordinance to increase the meter service charge by $3.50 for ¾-inch meters and $4.75 for 1-inch meters.  Mr. Jeffrey reported that this increase would raise an additional $475,000 annually which will restore the intended use of the property tax collected for capital projects instead of using it to meet operating needs.

Annually the SDCWA assesses the District a fixed charge based on the number and size of active meters within the District.  This Infrastructure Access Charge (IAC) is passed through and collected from active customers.  An increase of 4.4% over last year’s IAC is proposed as follows:

 

Meter Size	IAC
3/4”	$2.60
1”	$4.16
1-1/2”	$7.80
2”	$13.52
3”	$24.96

Ordinance No. 2009-08 provided for an increase in wastewater service charges of up to 10% annually.  The Moosa service charge is proposed to increase by $2.25 per month to $48.75/month/EDU, a 4.8% increase, to cover operating and increased regulatory costs.  The low pressure wastewater collection system maintenance fee is proposed to increase $1.85 to $40.25/month/EDU.  There is no wastewater service charge increase proposed for Woods Valley customers at this time.

Upon motion by Stone, seconded by Aleshire and unanimously carried, the following ordinance increasing the water rates, meter service charges, infrastructure access charges and Moosa wastewater charges effective January 1, 2012 was adopted:

ORDINANCE NO. 2011-10

ORDINANCE OF THE BOARD OF DIRECTORS OF
VALLEY CENTER MUNICIPAL WATER DISTRICT ADOPTING
INCREASES IN WATER AND WASTEWATER RATES AND CHARGES

                                                                 was adopted by the following vote, to wit:

                                                         AYES: Directors Broomell, Polito, Aleshire, Stone and Haskell
                                                         NOES: None
                                                         ABSENT: None

4. Ordinance Amending the Temporary Water Service Charges and Construction Water Permit Charges:

Director of Finance Jeffrey presented Ordinance No. 2011-11 for the Board’s adoption to increase the monthly service and rental charge for potable construction service to $114.75 (currently $100.50).  Monthly nonpotable service would increase to $70.00 (currently $60.00) and monthly service jumper charges to $45.00 (currently $40.00).  The daily construction water permit fees would increase as shown below:

 

     Water Truck

                        With a Capacity of:                   Potable                     Nonpotable

 

                        2,500 gal. or less                       $205.00                    $125.00

                        3,000 gallons                             $245.00                    $150.00

                        3,500 gallons                             $285.00                    $175.00

                        4,000 gallons                             $325.00                    $200.00

                        5,000 gal. or more                     $405.00                    $250.00

     These proposed increases are commensurate with the increases in the water rates adopted per Ordinance No. 2011-10 and shall take effect on January 1, 2012.

Upon motion by Stone, seconded by Haskell and unanimously carried, the following ordinance, entitled:

ORDINANCE NO. 2011-11

ORDINANCE OF THE BOARD OF DIRECTORS OF
VALLEY CENTER MUNICIPAL WATER DISTRICT AMENDING
THE ADMINISTRATIVE CODE TO PROVIDE FOR CHANGES IN
CONSTRUCTION WATER PERMIT FEES

                                                         was adopted by the following vote, to wit:

                                                         AYES: Directors Broomell, Polito, Aleshire, Stone and Haskell
                                                         NOES: None
                                                         ABSENT: None

GENERAL MANAGER’S AGENDA:

5. Approval to Extend Water Service Agreement with San Pasqual Band of Diegueño Mission Indians:

 General Manager Arant presented Resolution No. 2011-33 which, if approved, would extend the water service agreement with the San Pasqual Band of Diegueño Indians to September 30, 2012.  Mr. Arant reported that a letter from Metropolitan authorizing the delivery of water outside the Met service area was received in October.  Staff recommended approval of an extension to the previous agreement.

Upon motion by Polito, seconded by Haskell and unanimously carried, the following resolution, entitled:

RESOLUTION NO. 2011-33

RESOLUTION OF THE BOARD OF DIRECTORS OF
VALLEY CENTER MUNICIPAL WATER DISTRICT APPROVING A
THIRD ONE-YEAR EXTENSION TO THE THIRD AGREEMENT BETWEEN
THE DISTRICT AND SAN PASQUAL BAND OF MISSION INDIANS
REGARDING WATER SUPPLY

                                                         was adopted by the following vote, to wit:

                                                               AYES: Directors Broomell, Polito, Aleshire, Stone and Haskell
                                                               NOES: None
                                                               ABSENT: None

6. Functional Consolidation Project Status Report and Proposed Initial Actions:

 General Manager Arant reported that the Functional Consolidation project work groups continue to move forward.  However, the recent power outage has changed the focus of the effort to add system reliability and redundancy to the desire for cost reductions.  There is also a greater understanding that the effort will require up front investments to obtain long-term benefits.

 The Finance/Administration group has been looking into the integration of billing systems.  Because of the variability in rate structures and policies, the systems will remain unique.  However, it may be possible to unify common data screens where the information and history are stored.  This would facilitate migrating to a more common system in the future.  An alternative, if adopted by all four agencies, would be a new system to accomplish the desired commonality.  The group proposes to seek a cost estimate from Data Stream for a billing software modification to implement common data screens.

 Currently, three of the four agencies have their water bills printed, processed and mailed by an outside vendor.  A joint bill processing RFP is proposed to be developed by the group, combining all three agencies into one service, in an effort to lower costs.

 The SCADA/IT group is working on an integrated wireless communications system concept.  This system would increase reliability for all individual SCADA and voice systems and would be the foundation for other forms of integration such as data transfer, storage and IT support, phone systems and call routing.  The estimated hardware cost of a fully integrated system is less than $20K.  Board approval of developing an integrated wireless system project description and cost estimate is being sought.

 The integrated IT support concept is being evaluated by viewing the IT staff and infra-structure of all four agencies as independent, integrated subunits, managed by VCMWD.  Development of a conceptual business plan is proposed to determine if an overall savings can be achieved through integration.  The subject of interagency agreements will be addressed after development of a business plan.

 Keith Lewinger has been coordinating the efforts of the work groups and has been paid for from a consulting agreement with Fallbrook PUD, which has expired.  For his ability to focus on the task and coming from a neutral perspective, the agencies agree that Mr. Lewinger should be retained as the process convener for at least the balance of FY 2011-12.  His fee is proposed to be split evenly between the participating agencies for a total not to exceed amount of $15,000.

 Staff recommended conceptual approval of the following:

1) Seeking a cost estimate from Data Stream for billing software modifications to create common data screens;
2) Developing a joint RFP for outside bill processing services;
3) Developing a project description and cost estimate for implementation of a wireless communications system between all participating agencies;
4) Developing a business plan for full integration of IT system operations, management and support to be overseen by VCMWD; and
5) Enter into a joint consulting agreement with Keith Lewinger to function as project convener for the balance of FY 2011-12 at a total not to exceed amount of $15,000 for the group.

Upon motion by Aleshire, seconded by Haskell and unanimously carried, the above listed recommendations by staff concerning the Functional Consolidation Project were approved.

 Mr. Milt Davies, Fallbrook Public Utilities District Director, addressed the board to thank them for allowing the consolidation discussions to continue.  He expressed that these efforts are long overdue and whatever comes out of it will be good.

7. San Diego County Water Authority’s Board of Directors’ Meeting:

 General Manager Arant reported on the following items from the October 27, 2011 SDCWA Board of Directors’ meeting:

• Litigation case against Metropolitan, which was previously discussed.

• Contract negotiations between Poseidon and the Water Authority have begun and are scheduled to be complete by April/May 2012.

• A report by the per diem work group resulted in a reduction in the number of meetings available for automatic per diem.  Permission from the board chair will be required to attend other meetings.

8. Miscellaneous Information Items:

General Manager Arant reported on the following miscellaneous items:

• The October status report shows a slight increase in water sales compared to 2010.  However, sales for the full fiscal year are projected to be under budget.
• Three of the County’s critical communication generators failed during the power outage in September.  The reason for the failure has been attributed to the ARB regulations that limit the amount of hours you can run a generator for testing.  The ability of a generator to start does not test the reliability of other components such as cooling hoses or thermostats.  There will be a meeting in December with Supervisor Dianne Jacob and the San Diego Air Resources Board to discuss their regulations regarding stationary portable generators.

• The proposed Lilac floating solar reservoir cover project has been shelved pending the outcome of the SDG&E Phase II rate case. 

• The first public meeting on the South Village Wastewater Expansion project was held in November.  The meeting was well attended.  There will be a second meeting in December at the Community Hall, followed by one in January to be held at the District.

BOARD OF DIRECTORS’ AGENDA AND REPORTS ON MEETINGS ATTENDED

9. Director Aleshire reported that he had attended the ACWA Region 8, 9 & 10 fall event and gave a brief overview of the topics covered.  He will also be attending the upcoming ACWA conference in Anaheim where the HBA will be interviewing candidates for the open Executive Director position. 

10. Concurring Nomination of Steve Ruettgers for the ACWA HBA Board of Directors:

 Due to a recent resignation, there is an open position on the ACWA HBA Board for a South Region Member.

Upon motion by Aleshire, seconded by Stone and unanimously carried, the following resolution, entitled:

RESOLUTION NO. 2011-34

RESOLUTION OF THE BOARD OF DIRECTORS OF
VALLEY CENTER MUNICIPAL WATER DISTRICT CONCURRING IN
NOMINATION OF STEVE RUETTGERS TO THE BOARD OF DIRECTORS
OF THE ASSOCIATION OF CALIFORNIA WATER AGENCIES
HEALTH BENEFITS AUTHORITY

                                                         was adopted by the following vote, to wit:

                                                     AYES: Directors Broomell, Polito, Aleshire, Stone and Haskell
                                                     NOES: None
                                                     ABSENT: None

CLOSED SESSIONS

11. A Closed session was called by President Broomell at 3:45 pm pursuant to:
• Government Code §54956.9(a), Conference with Legal Counsel – Existing Litigation
 Name of Case:  SDG&E Application 11-10-002

RECONVENE

The regular board meeting reconvened at 4:35 p.m.  There was no reportable action.

ADJOURNMENT

12. Upon motion by Aleshire, seconded by Haskell and unanimously carried, the meeting was adjourned at 4:35 p.m.

ATTEST:                                                                                              ATTEST:

____________________________                                      _______________________________         

       President                                                                                        Secretary