REVISED AGENDA 3. APPROVAL OF MINUTES OF FEBRUARY 25, 2016 AND MARCH 8, 2016

Transcription

1 SPECIAL MEETING OF THE BUDGET ADVISORY COMMITTEE (BAC) WATER REPLENISHMENT DISTRICT OF SOUTHERN CALIFORNIA 4040 PARAMOUNT BOULEVARD, LAKEWOOD, CALIFORNIA :00 A.M., TUESDAY, MARCH 22, 2016 REVISED AGENDA EACH ITEM ON THE AGENDA, NO MATTER HOW DESCRIBED, SHALL BE DEEMED TO INCLUDE ANY APPROPRIATE MOTION, WHETHER TO ADOPT A MINUTE MOTION, RESOLUTION, PAYMENT OF ANY BILL, APPROVAL OF ANY MATTER OR ACTION, OR ANY OTHER ACTION. ITEMS LISTED AS FOR INFORMATION OR FOR DISCUSSION MAY ALSO BE THE SUBJECT OF AN ACTION TAKEN BY THE BOARD OR A COMMITTEE AT THE SAME MEETING. 1. DETERMINATION OF A QUORUM 2. PUBLIC COMMENT 3. APPROVAL OF MINUTES OF FEBRUARY 25, 2016 AND MARCH 8, DRAFT BUDGET Staff Recommendation: For discussion. 5. BAC RECOMMENDATION TO THE BOARD OF DIRECTORS Staff Recommendation: For discussion and possible action. 6. ADJOURNMENT Agenda posted by Scott M. Ota, Chief Financial Officer on March 21, In compliance with the Americans with Disabilities Act (ADA), if special assistance is needed to participate in the Board meeting, please contact Chief Financial Officer Scott Ota at (562) for assistance to enable the District to make reasonable accommodations. All public records relating to an agenda item on this agenda are available for public inspection at the time the record is distributed to all, or a majority of all, members of the Board. Such records shall be available at the District office located at 4040 Paramount Boulevard, Lakewood, California Agendas and minutes are available at the District s website, EXHAUSTION OF ADMINISTRATIVE REMEDIES If you challenge a District action in court, you may be limited to raising only those issues you or someone else raised at the public hearing described in this notice, or in written correspondence delivered to the Deputy Secretary at, or prior to, the public hearing. Any written correspondence delivered to the Deputy Secretary before the District s final action on a matter will become a part of the administrative record. Budget Advisory Committee (BAC) Meeting Page 1 of 1 March 22, 2016

2 MINUTES OF FEBRUARY 25, 2016 BUDGET ADVISORY COMMITTEE MEETING WATER REPLENISHMENT DISTRICT OF SOUTHERN CALIFORNIA A meeting of the Budget Advisory Committee (BAC) of the Water Replenishment District of Southern California was held on Thursday, February 25, 2016 at 2:10 p.m. in the District Office located at 4040 Paramount Boulevard, Lakewood, California, Vice Chairman Mark Grajeda called the meeting to order. Committee Chair Rob Beste was excused. Chief Financial Officer, Scott M. Ota recorded the minutes. 1. DETERMINATION OF A QUORUM A quorum was present, which included: Mark Grajeda, Pico Water District Jeanne-Marie Bruno, Liberty Utilities (Park Water Company) Dan Armendariz, California Water Service Anatole Falagan, Long Beach Water Department Greg Reed, Los Angeles Department of Water and Power City of Torrance was excused WRD included: President Willard H. Murray, Jr. Director John D. S. Allen Chief Financial Officer Scott Ota Manager of Finance and Administration Jenna Shaunessy Public: Michael Harvey, City of Compton Jason Wen, City of Lakewood 2. PUBLIC COMMENT None. 3. BAC APPOINTMENT TO CATEGORY B Chief Financial Officer Scott Ota stated that ballots for the BAC election were counted at the February 4, 2016 Board meeting. The results of the election were as follows: Category A: Pico Water District and Liberty Utilities Category B: The City of Torrance was the only water producer to express an interest to serve on the BAC Budget Advisory Committee (BAC) Minutes Page 1 of 5 February 25, 2016

3 Category C: California Water Service Company, City of Long Beach, and Los Angeles Department of Water and Power (LADWP) Mr. Ota stated that the BAC is being requested to fill the remaining one open seat in Category B. He noted that WRD Special Counsel recommended that WRD staff and Board of Directors stay out of the process of appointing the open seat on the BAC. Mr. Ota informed the BAC that both the City of Lakewood and the City of Compton have expressed an interest to serve. Vice Chairman Mark Grajeda asked the representatives from the cities if they have any comments. Michael Harvey from the City of Compton stated that the City is very interested in being seated as a participant of the Budget Advisory Committee. Jason Wen from the City of Lakewood said that the City is the largest pumper in Category B and said they would pleased to be selected by the BAC to represent Category B. Discussion followed. It was moved by Jeanne-Marie Bruno and seconded by Anatole Falagan and unanimously approved that: (1) that nominations be closed as of February 25, 2016 with the nominees being the Cities of Lakewood and Compton (2) that WRD staff proceed with the ballot process and mail ballots to all Category B pumpers for their vote for either the City of Lakewood or the City of Compton to represent them on the Budget Advisory Committee asking for ballots to be returned by March 4, 2016, (3) that the ballots be ed immediately and also mailed via US Mail Service and that ed responses will qualify as a valid ballot. 4. SELECTION OF BAC CHAIR AND VICE CHAIR Ms. Bruno stated that an agency within each of the two Basins be selected as the Chair and Vice-chair. It was unanimously approved upon a motion duly made by Jeanne-Marie Bruno and seconded by Mr. Reed Mark Grajeda, Pico Water District represent the BAC as chairman and Rob Beste, City of Torrance be selected as Vice-Chair. 5. MINUTES OF THE MEETING OF MARCH 13, 2015 The minutes were unanimously approved with Mr. Armendariz, California Water Service abstaining, upon a motion duly made by Mr. Falagan and seconded by Ms. Bruno. Budget Advisory Committee (BAC) Minutes Page 2 of 5 February 25, 2016

4 6. FISCAL YEAR MIDYEAR BUDGET REVIEW AND DRAFT BUDGET Chief Financial Officer Scott Ota presented the following highlights to the fiscal year midyear review: Total revenue shortfall of ($5.21) million primarily due to a shortfall of anticipated pumping from the Basins from an estimated 244,000 acre-feet when the budget was adopted in May 2015 to 230,000 acre-feet at midyear. The District had an offsetting decrease in expenses totaling $6.01 million. One of the major offsets was obtaining more recycled water at the West Coast Barrier than originally expected. This accounted for $3.43 million of the savings. Due to an unanticipated loss of source water from the County Sanitation District, the Leo J. Vander Lans Advanced Water Treatment Facility was under budget $886,000. The Alamitos and Dominguez Gap Barriers were also under budget. The projected budget impact is a net surplus of $800,000 which will be added to the District s general reserve fund balance at the end of the year. For the draft budget, Mr. Ota presented the following: SB 620 established a budget advisory committee (BAC) for purposes of reviewing a replenishment assessment, annual operating budget, and reserve funds. The BAC will make recommendations to the Board related to the annual budget and District reserves. The draft budget presents an increase of 2.8% in the replenishment assessment rate to $ at 244,000 acre-feet of annual pumping. This means the District would be under its five-year projection of 3.5% in fiscal year Budget Advisory Committee (BAC) Minutes Page 3 of 5 February 25, 2016

5 Mr. Ota stated that the midyear projections show pumping to be approximately 230,000 acre-feet due to the unprecedented conservation mandate to decrease water usage by 25%. Due to conservation, the District is not expecting the pumping to be at the five-year projection of 244,000 acre-feet but closer to 230,000 and could go as low as 220,000 acre-feet. The increase to the replenishment assessment assuming 230,000 acre-feet of pumping is estimated to be 8.8% or $ per acre-foot. The worst case scenario of 220,000 acre-feet of pumping would cause the replenishment assessment to go as high as 13.78% or $ per acre-foot. Mr. Ota explained the draft budget includes $47.51 million in water purchases with water supply purchases of $42,035,000 for 103,300 acre-feet of both spreading and injection water into the Basins. He discussed each project and program in detail and summarized by stating the total projects and program budgets remained relatively flat when compared to the midyear projected balance as of June 30, Due to the conclusion of the Proposition 218 litigation, there is a decrease of over $4.04 million in Other Supportive Costs while Capital Improvement/Other increased $2.75 million because of the District s 2015 Revenue Bonds to fund the five-year capital improvement plan. Discussion followed. The following recommendations were presented by the Committee for discussion at the next BAC meeting: A more in depth discussion on the Disadvantaged Communities (DAC) program related to the Safe Drinking Water program. Additional details on the programs in Water Quality Improvement, Hydrogeology, Water Education and Water Conservation. 6. NEXT MEETING FRIDAY, MARCH 8, 2016 AT 10:00AM Budget Advisory Committee (BAC) Minutes Page 4 of 5 February 25, 2016

6 7. ADJOURNMENT With no further business to come before the Committee, the meeting was adjourned at 3:56 p.m. ATTEST: Mark Grajeda, Chairman Rob Beste, Vice Chairman Budget Advisory Committee (BAC) Minutes Page 5 of 5 February 25, 2016

7 MINUTES OF MARCH 8, 2016 BUDGET ADVISORY COMMITTEE MEETING WATER REPLENISHMENT DISTRICT OF SOUTHERN CALIFORNIA A meeting of the Budget Advisory Committee (BAC) of the Water Replenishment District of Southern California was held on Thursday, February 25, 2016 at 10:05 a.m. in the District Office located at 4040 Paramount Boulevard, Lakewood, California, Chairman Mark Grajeda called the meeting to order. Chief Financial Officer, Scott M. Ota recorded the minutes. 1. DETERMINATION OF A QUORUM A quorum was present, which included: Mark Grajeda, Pico Water District Jeanne-Marie Bruno, Liberty Utilities (Park Water Company) Jason Wen, City of Lakewood Rob Beste, City of Torrance Dan Armendariz, California Water Service Anatole Falagan, Long Beach Water Department Greg Reed, Los Angeles Department of Water and Power WRD included: Director John D. S. Allen General Manager Robb Whitaker Assistant General Manager Ken Ortega Chief Financial Officer Scott Ota Manager of Finance and Administration Jenna Shaunessy 2. PUBLIC COMMENT None. 3. RESULTS OF ELECTION FOR CATEGORY B Chief Financial Officer Scott Ota stated that ballots for the BAC election for Category B were counted and the results of the election were as follows: Category B: The City of Lakewood 4. MIDYEAR BUDGET REVIEW/ DRAFT BUDGET Mr. Ota stated that the Midyear Review was completed at the last meeting of the Budget Advisory Committee. Mr. Ota provided the following important dates: Budget Advisory Committee (BAC) Minutes Page 1 of 3 March 8, 2016

8 March 25, 2016 is the last day the BAC can meet in order to provide a recommendation to the Board of Directors based on the California Water Code 60233(3)(c). This is 10 days prior to opening the public hearing on the ensuing year s replenishment assessment scheduled to be on April 7, Thursday, April 28, 2016 is the date scheduled to continue the public hearing on the replenishment assessment, open the public hearing for Proposition 218, close the public hearings on both the replenishment assessment and Proposition 218, set the replenishment assessment and adopt the budget. Mr. Ota stated that the current draft budget presents a 2.8% increase to the replenishment assessment when based on a pumping amount of 244,000 acre-feet. This is below the 3.5% increase in the District s 5-year projection presented last year as part of the budget process. General Manager Robb Whitaker started discussion on the Safe Drinking Water program that includes the Disadvantaged Communities program (DAC). The program was changed for two reasons: (1) WRD found that some cities with volatile organic compounds (VOC) contamination did not have the resources to take advantage of the District s Safe Drinking Water grant program so the District wanted to find a way to become more involved and (2) Proposition 1 included funding for VOC removal and WRD will assist the cities to apply for Proposition 1 funding eliminating the need for WRD to provide funding. He also stated that expenses in Water Education was due to the outreach for the Groundwater Reliability Improvement Project (GRIP) as well as completing four educational outreach newsletters in the ensuing fiscal year. Some of the costs are related to specific outreach to the City of Pico Rivera related to GRIP. Mr. Ota discussed the questions the BAC members had at the last meeting related to the Hydrogeology and Water Quality Improvement programs. Mr. Whitaker stated that the scenarios that were presented at the last BAC meeting have changed due to the Metropolitan Water District s (MWD) proposed price increase of 14% to untreated Tier 1 spreading water. To offset this increase, he stated that we would work on determining whether the District could change the Central and West Basins (Basins) water demands due to conservation. This could potentially decreasing the amount of imported water needs at the Montebello Forebay during the unprecedented state-wide water conservation mandate. He stated that he would discuss this issue with the Hydrogeology Department and would report back at the next BAC meeting. Budget Advisory Committee (BAC) Minutes Page 2 of 3 March 8, 2016

9 Chairman Grajeda stated that the 13.78% that the Board of Directors approved on March 3, 2016 for the District s Proposition 218 notices related to the worst case scenario of 220,000 acre-feet of pumping was specifically stated for the Proposition 218 notice. 5. NEXT MEETING FRIDAY, MARCH 22, 2016 AT 09:00AM 6. ADJOURNMENT With no further business to come before the Committee, the meeting was adjourned at 11:15 a.m. ATTEST: Mark Grajeda, Chairman Rob Beste, Vice Chairman Budget Advisory Committee (BAC) Minutes Page 3 of 3 March 8, 2016

10 Water Replenishment District Fiscal Year Draft Budget Presentation Budget Advisory Committee Meeting March 22, :00 a.m.

11 2015/ /17 16/17 Budget Proj. Projected/Midyear Proposed compared to # Description Budget Budget 15/16 Projection Operating Expenditures Water Supply Purchases $ 37,808,000 $ 42,589,000 $ 4,781,000 EAC Water Conservation $ 775,000 $ 664,000 $ (111,000) 001 Water Supply Production - Vander Lans $ 3,645,000 $ 4,807,000 $ 1,162, Goldsworthy Desalter $ 990,000 $ 982,000 $ (8,000) 004 Montebello Forebay Recycled Water $ 507,000 $ 654,000 $ 147, Groundwater Resource Planning $ 321,000 $ 318,000 $ (3,000) 006 Water Quality Improvement Program $ 601,000 $ 756,000 $ 155, Geographic Information Systems (GIS) $ 359,000 $ 353,000 $ (6,000) 011 Groundwater Monitoring $ 1,218,000 $ 1,283,000 $ 65, Safe Drinking Water Program $ 282,000 $ 570,000 $ 288, Dominguez Gap Barrier Recycled Water $ 253,000 $ 304,000 $ 51, Replenishment Operations $ 340,000 $ 363,000 $ 23, Hydrogeology Program $ 878,000 $ 1,102,000 $ 224, Groundwater Reliability Improvement Prog (GRIP) $ 421,000 $ 258,000 $ (163,000) EAE Water Education $ 731,000 $ 784,000 $ 53,000 Board of Directors $ 349,000 $ 359,000 $ 10,000 Administration $ 3,755,000 $ 3,770,000 $ 15,000 GASB 45 (Required Retirement Funding) $ 638,000 $ 628,000 $ (10,000) Total Project, Program & Administrative Costs $ 53,871,000 $ 60,544,000 $ 6,673,000 Other Special Programs & Supportive Costs Litigation $ 4,169,000 $ 150,000 $ (4,019,000) Proportionality Study, Public Notices & Hearings, SB620 $ 50,000 $ 25,000 $ (25,000) Election Expense $ 600,000 $ 600,000 $ - Total Other Special Programs & Supportive Costs $ 4,819,000 $ 775,000 $ (4,044,000) Capital and Other Non-Operating Capital Expenses (RA Share) - Non Recurring $ - $ - $ - Revenue Bond Debt Service Payments $ 10,482,000 $ 13,232,000 $ 2,750,000 Total Capital and Non Operating 10,482,000 13,232,000 $ 2,750,000 Prior Year Deficit $ 10,619,000 $ - $ (10,619,000) Water Code $ (13,080,000) $ (1,800,000) $ 11,280,000 Total Revenue Requirements $ 66,711,000 $ 72,751,000 $ 6,040,000 Income Replenishment Assessment $ 65,090,000 $ - $ - Vander Lans Income/MWD Subsidy/OCWD 1,077,000 1,910,000 (833,000) Goldsworthy Desalter Income/MWD Subsidy 1,170, , ,000 Other Income and Expense 156, ,000 (294,000) Subtotal $ 67,493,000 $ 3,080,000 $ (677,000) Cost to Provide Service $ 69,671,000 2

12 Adjustments to Draft Budget 1. At the last BAC meeting, the 14% Metropolitan Water District increase was estimated to be $979, New ESR estimate shows an increase of $554,500; a decrease of ($424,800) from the previous estimate 3. All other expenses remained the same 4. Pumping estimate increased from 230,000AF to 231,000AF based on further internal discussion and to be consistent with ESR 5. Use of $800,000 projected as of June 30, 2016 (midyear estimate) with an additional $1,000,000 from general operating reserves 6. Projected June 30, 2016 general operating reserves drop from $8.71M to $6.91M due to rate relief (see 5 above) 3

13 Pumping Estimate Comparison MWD 14% INCREASE TO UNTREATED TIER 1 WATER Draft Budget (in millions of dollars) 5-Year Projection 244,000 AF Pumping Estimate 230,000AF Worst Case 220,000 AF Water Costs $48.49 $48.49 $48.49 Projects, Programs, Admin Other Supportive Costs Capital Improvement/Other Less: Income (3.08) (3.08) (3.08) Cost to Provide Service RA at Different Pumping Estimates $ $ $ Dollar Increase $12.00 $30.00 $44.00 Percentage Increase (Based on 14%) 4.2% 10.5% 15.4% Percentage Increase (Based on 4%) 2.8% 8.8% 13.8% 4.0% TO 14.0% MWD rate increased water costs $979,200 4

14 Pumping Estimate Comparison MWD 14% INCREASE TO UNTREATED TIER 1 WATER Draft Budget (in millions of dollars) 5-Year Projection (based on 244,000 AF) Pumping Estimate 231,000AF Use of $1.8M of General Reserve 231,000AF Water Costs $48.06 $48.06 $48.06 Projects, Programs, Admin Other Supportive Costs Capital Improvement/Other Less: Income (3.08) (3.08) (3.08) Use of General Reserves (1.80) Cost to Provide Service RA at Different Pumping Estimates $ $ $ Dollar Increase $10.00 $26.00 $19.00 Percentage Increase (Based on 14%) 3.5% 9.1% 6.7% 4.0% TO 14.0% MWD rate increased water costs $554,500 5

15 Five Year Forecast Revenue Assumptions Use of general reserves of $1.8M in Increase pumping from 231,000 to 244,000 over a five-year period Expense Assumptions Water costs from WRD supply sources increase 5% per year starting next year Untreated Tier 1 Imported Spreading Water no longer purchased after fiscal year GRIP AWTF operating costs start in fiscal year Other expenses increase 2% per year Reserve Assumptions Return to $10M over the five year period 6

16 Five Year Forecast % Increase 6.7% 3.6% 3.8% 3.7% 3.6% Pumping 231, , , , ,000 Reserve Level $6.9M $7.7M $8.0M $9.0M $10.1M 7

17 Five Year Forecast with General Operating Reserve Balances Repl Assessment ($/AF) % $ %, $ %, $ %, $ %, $ Reserve Level ($M) Fiscal Year $6.9 $7.7 $8.0 $9.0 $ /17 17/18 18/19 19/20 20/ Reserve Level ($M) RA Necessary ($/AF) - Red Line RA Plan ($/AF) - Green Line Pumping Est (AF) - Blue Line 8

18 Five Year Forecast with General Operating Reserve Balances Prior Year s Estimates 18 Repl Assessment ($/AF) % $ %, $ %, $ %, $ %, $302 n/a 3.5% 3.3% 3.4% 3.5% Reserve Level ($M) Fiscal Year $6.9 $7.7 $8.0 $9.0 $ /17 17/18 18/19 19/20 20/ Reserve Level ($M) RA Necessary ($/AF) - Red Line RA Plan ($/AF) - Green Line Pumping Est (AF) - Blue Line 9

19 Cash Reserves California Water Code The district may establish an annual reserve fund in an amount not to exceed ten million dollars ($10,000,000) commencing with the fiscal year. The maximum allowable reserve fund may be adjusted annually commencing with the fiscal year to reflect the percentage increases or decreases in the blended cost of water from district supply sources Based on a percentage increase in the blended cost of water for fiscal year from District supply sources, the maximum allowable reserve in accordance with of the California State Water Code is $25.9 M. After the use of $1.80M for rate relief in fiscal , the District general reserves are estimated to be $6.91M at June 30,

20 Cash Reserves California Water Code The limitation on the reserve established in does not apply to the unexpended balance of any appropriated funds in a capital improvement project construction account established to pay the cost of a project or projects under construction Funds committed to the Safe Drinking Water Loan Program or set aside for long term capital replacement costs at the Leo J. Vander Lans AWTF and the Goldsworthy Desalter on June 30, 2016 are estimated to be $4.88M 11

21 Cash Reserves 2015 Revenue Bond Covenants Pursuant to the District s Master Agreement, the net revenues less payments made for purchase and delivery of water is equal to a minimum of 120% of the Debt Service on senior obligations for the fiscal year. This fund is restricted for debt service covenants. On August 1, 2016, the District has a payment due to the bond trustee for $5.8M. After accounting for principle and interest payment, the District s estimated amount reserved for capital projects as of June 30, 2016 is $10.15M which is reserved for debt service payments. 12

22 Estimated Reserves as of June 30, 2016 $50,000,000 Capital Projects, $4,879,000 $40,000,000 $30,000,000 Water Purchase Carryover, $30,820,000 $20,000,000 $10,000,000 $0 Restricted Unrestricted, $6,908,000 Unrestricted * 2015 Revenue Bond Payment of $5.8M due on 8/1/16 13

23 16-17 Draft Budget Water Purchase Carryover (in acre-feet) Year Beginning Carryover Average Actual Purchased Special In-Lieu Credit Carryover Balance 07/08 (12,013.3) 21, , /09 8, , , /10 29, ,000.0 (26,286.0) - 24, /11 24, ,000.0 (37,315.0) - 8, /12 8, , , /13 29, , (2,180.0) 48, /14 48, , (4,371.0) 64, /15 64, ,000.0 (18,515.0) (12,723.0) 49, /16 49, ,000.0 (23,970.0)* - 41,626.7 * - Estimated 14

24 16-17 Draft Budget Water Purchase Carryover (in acre-feet) Total Quantity owed to the Basins (in acre-feet) 41,626 Blended Cost of Untreated Tier-1 Imported Spreading Water $ 730 Total Cost $ 30,387,000 Amount in Water Purchase Carryover Fund $30,820,000 Each year, water costs from District supply sources increase causing the value held in the water purchase carryover fund to lose value each year 15

25 What s Next? BAC recommendation to the Board of Directors March 25, 2016 In accordance with Water Code 60233(3)(c) the BAC must provide their recommendation to WRD Board of Directors no later than 10 days prior to the opening of the Replenishment Assessment (RA) public hearing (currently scheduled on April 7, 2016). April 7, 2016 Board Meeting Open RA Public Hearing April 28, 2016 Board Meeting Continue RA Public Hearing Open Proposition 218 Public Hearing Close RA and Prop 218 Public Hearing Set RA Adopt Budget 16