HomeMy WebLinkAboutAgenda Packet - EVWD Board of Directors - 03/08/2017REGULAR BOARD MEETING
Closed Session Begins at 4:00 PM
March 8, 2017 - 5:30 PM
31111 Greenspot Road, Highland, CA 92346
AGENDA
"In order to comply with legal requirements for posting of agenda, only those items filed
with the District Clerk by 12:00 p.m. on Wednesday prior to the following Wednesday
meeting not requiring departmental investigation, will be considered by the Board of
Directors".
CALL TO ORDER
ROLL CALL OF BOARD MEMBERS
PUBLIC COMMENTS
Any person wishing to speak to the Board of Directors is asked to complete a Speaker
Card and submit it to the District Clerk prior to the start of the meeting. Each speaker is
limited to three (3) minutes, unless waived by the Chairman of the Board. Under the State
of California Brown Act, the Board of Directors is prohibited from discussing or taking
action on any item not listed on the posted agenda. The matter will automatically be
referred to staff for an appropriate response or action and may appear on the agenda at a
future meeting.
AGENDA - This agenda contains a brief general description of each item to be
considered. Except as otherwise provided by law, no action shall be taken on any item not
appearing on the following agenda unless the Board of Directors makes a determination
that an emergency exists or that a need to take immediate action on the item came to the
attention of the District subsequent to the posting of the agenda.
1.Approval of Agenda
RECESS INTO CLOSED SESSION
CLOSED SESSION
2.CONFERENCE WITH LEGAL COUNSEL - EXISTING LITIGATION
[Government Code Section 54956.9(d) (1)]
Name of Case: Socal Environmental Justice Alliance v. San Bernardino Valley
Municipal Water District, et al.,
San Diego Superior Court Case No. 37-2016-00032816-CU-TT-CTL
3.CONFERENCE WITH LEGAL COUNSEL - EXISTING LITIGATION
[Government Code Section 54956.9(d) (1)]
Name of Case: City of San Bernardino v. East Valley Water District, et al.,
San Diego Superior Court Case No. 37-2016-00038119-CU-WM-CTL
4.CONFERENCE WITH LEGAL COUNSEL - EXISTING LITIGATION
[Government Code Section 54956.9(d)(1)]
Name of Case: Carl F. Kovach v. East Valley Water District, CASE No. CIVDS
1603176
5.PUBLIC EMPLOYEE PERFORMANCE EVALUATION
(Government Code Section 54957)
Title: General Manager/CEO
5:30 PM RECONVENE MEETING
PLEDGE OF ALLEGIANCE
ROLL CALL OF BOARD MEMBERS
ANNOUNCEMENT OF CLOSED SESSION ACTIONS ITEMS
PRESENTATIONS AND CEREMONIAL ITEMS
Present Resolution 2017.04 to the family of Lois Hendricksen-Heflin
PUBLIC COMMENTS
6.APPROVAL OF CONSENT CALENDAR
All matters listed under the Consent Calendar are considered by the Board of
Directors to be routine and will be enacted in one motion. There will be no
discussion of these items prior to the time the board considers the motion unless
members of the board, the administrative staff, or the public request specific items to
be discussed and/or removed from the Consent Calendar.
a.January 25, 2017 regular meeting minutes
b.February 22, 2017 regular meeting minutes
c.Directors' fees and expenses for February 2017
d.Approve FY 2016-17 Mid-Year Budget Revisions
7.Review and Approve Debt Management Policy
8.Resolution 2017.05 - Changing the Board of Directors Election Cycle
9.General Manager/CEO Compensation
REPORTS
10.Board of Directors' Reports
11.General Manager/CEO Report
12.Legal Counsel Report
13.Board of Directors' Comments
ADJOURN
PLEASE NOTE:
Materials related to an item on this agenda submitted to the Board after distribution of the agenda packet
are available for public inspection in the District's office located at 31111 Greenspot Rd., Highland, during
normal business hours. Also, such documents are available on the District's website at www.eastvalley.org
subject to staff's ability to post the documents before the meeting.
Pursuant to Government Code Section 54954.2(a), any request for a disability-related modification or
accommodation, including auxiliary aids or services, that is sought in order to participate in the above-
agendized public meeting should be directed to the District Clerk at (909) 885-4900 at least 72 hours prior
to said meeting.
DISCUSSION AND POSSIBLE ACTION ITEMS_________________________________________
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DRAFT PENDING APPROVAL
EAST VALLEY WATER DISTRICT January 25, 2017
REGULAR BOARD MEETING/PUBLIC HEARING
MINUTES
The Chairman of the Board called the meeting to order at 3:00 p.m.
PRESENT: Directors: Carrillo, Coats, Morales, Shelton, Smith
ABSENT: None
STAFF: John Mura, General Manager/CEO; Brian Tompkins, Chief
Financial Officer; Steven Nix, Director of Engineering &
Operations; Justine Hendricksen, District Clerk; Shayla Gerber,
Administrative Assistant
LEGAL COUNSEL: Jean Cihigoyenetche
GUEST(s): Members of the public
PUBLIC COMMENTS
Chairman Coats declared the public participation section of the meeting open at 4:30
p.m.
There being no written or verbal comments, the public participation section was closed.
APPROVAL OF AGENDA
M/S/C (Morales-Carrillo) that the January 25, 2017 agenda be approved as
submitted.
CLOSED SESSION
The Board entered into Closed Session at 3:01 p.m. as provided in the Ralph M. Brown
Act Government Code Sections 54957.6(a) and 54956.9(d)(1) to discuss the item(s)
listed on the agenda.
THE BOARD RECONVENED THE MEETING AT 5:30 P.M.
Ms. Gerber led the flag salute.
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ROLL CALL
PRESENT: Directors: Carrillo, Coats, Morales, Shelton, Smith
ABSENT: None
ANNOUNCEMENT OF CLOSED SESSION ACTIONS
With respect to Item #2: No reportable action taken.
With respect to Item #3: No reportable action taken.
With respect to Item #4: No reportable action taken.
PUBLIC COMMENTS
Chairman Coats declared the public participation section of the meeting open at 5 :31
p.m.
The District Clerk received a letter from Ms. Jody Scott who asked that her letter be
read into record during public comments:
General Manager/CEO and Members of the Board-
I want to apologize for being unable to attend tonight’s meeting, as you know it’s tax
time. I am requesting that the following be read into the record during public
comments.
I am greatly disappointed to learn that the judge did not throw the City of San
Bernardino’s LAFCO lawsuit out of court as a result of it not being timely. I hope the
community realizes that the “timeliness” request EVWD made is rarely granted so the
ruling is not really a surprise.
I want the Board to know that the citizens of this community overwhelmingly support
your efforts to construct the Sterling Natural Resource Center and I for one expect you
to do everything in your power to fight for our independence from the mismanaged
San Bernardino Water Department! For far too many years we have been overcharged
and underrepresented!
All anyone needs to do is look at item #6 of your agenda where we are once again
getting forced to accept a sewer rate increase that is un-justified and that does not
take our community concerns into account.
Please continue to do whatever is necessary to get us out of that one-sided JPA and
secure LOCAL control that respects the people you serve.
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Keep up the great work and know that I strongly support your efforts in this matter.
Sincerely,
Jody Scott
Highland citizen since 1956
Highland Councilmember 1987-1998, 2004-2016
Director Smith asked Legal Counsel for clarification regarding the lawsuit between East
Valley Water District and City of San Bernardino Municipal Water Department. Legal
Counsel clarified that a demurrer was filed in the recent lawsuits between East valley
Water District, San Bernardino Valley Municipal Water District and City of San
Bernardino Municipal Water Departments, he described a demurrer and stated that the
case goes on despite it not being granted; that a demurrer is not based on the merits
of the case.
There being no further written or verbal comments, the public participation section
was closed at 5:36 p.m.
APPROVE THE DECEMBER 14, 2016 REGULAR BOARD MEETING MINUTES
M/S/C (Smith-Shelton) that the Board approve the December 14, 2016 regular
board meeting minutes as submitted.
APPROVE THE DECEMBER 22, 2016 SPECIAL BOARD MEETING MINUTES
M/S/C (Smith-Shelton) that the Board approve the December 22, 2016 special
board meeting minutes as submitted.
APPROVE THE JANUARY 11, 2016 REGULAR BOARD MEETING MINUTES
M/S/C (Smith-Shelton) that the Board approve the January 11, 2016 regular board
meeting minutes as submitted.
DISBURSEMENTS
M/S/C (Smith-Shelton) that the General Fund Disbursements #249171 through
#249346 which were distributed during the period of December 1, 2016 through
December 31, 2016, bank drafts and ACH Payments in the amount of $2,179,803.66 and
$509,120.08 for payroll and benefit contributions, totaling $2,688,923.74 be approved.
ACCEPT AND FILE THE FINANCIAL STATEMENTS AS OF, AND FOR THE PERIOD ENDED,
DECEMBER 31, 2016
M/S/C (Smith-Shelton) that the Board accept and file the financial statements
as of, and for the period ended, December 31, 2016 as submitted.
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ACCEPT AND FILE THE INVESTMENT REPORT FOR THE QUARTER ENDED DECEMBER
31, 2016
M/S/C (Smith-Shelton) that the Board accept and file the investment report for
the quarter ended December 31, 2016.
RESOLUTION 2017.03 EMPLOYER-EMPLOYEE RELATIONS RESOLUTION
M/S/C (Smith-Shelton) that the Board adopt Resolution 2017.03.
RESOLUTION 2017.04 RECOGNIZING LOIS HENDRICKSEN-HEFLIN’S 30 YEARS OF
SERVICE
M/S/C (Smith-Shelton) that the Board adopt Resolution 2017.04.
STAFF PRESENTATION REGARDING CITY OF SAN BERNARDINO’S WASTEWATER
TREATMENT RATE INCREASE AND PROPOSED RESOLUTION 2017.01
The Chief Financial Officer reviewed the City of San Bernardino’s Wastewater
treatment rate increase and the reasons why the District is asking the Board to grant
the increase; he explained that if the rates were not adopted that the District would
have a monthly operating deficit of $21,000 per month; that the reason for the public
hearing is that the final phase of rate increases does not fall within the 5-year pass
through period adopted in 2011.
Information only.
ADJOURN TO PUBLIC HEARING AT 5:45 P.M.
PUBLIC COMMENTS
Chairman Coats declared the public participation section of the meeting open at 5 :45
p.m.
Mr. Anthony Serrano cited newspaper articles pertaining to the City of San Bernardino’s
wastewater rate increase and how it effects East valley Water District ratepayers; he
questioned how the Sterling Natural Resource Center would give local control to District
ratepayers. Mr. Serrano asked why there was not a policy and procedure on the
District’s website for complaints against board members or management.
The General Manager/CEO briefly responded to Mr. Serrano’s comments; he reviewed
the obligations that are set forth in the Joint Powers Agreement between the District
and the City of San Bernardino Municipal Water Department; explained Prop 218
requirements; and stated that all customers of East Valley Water District are counted
as one single vote in regards to protests to the City of San Bernardino for wastewater
treatment rate increases.
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There being no further written or verbal comments, the public participation section
was closed.
ADJOURN TO REGULAR BOARD MEETING AT 5:52 P.M.
BOARD DISCUSSION
Director Morales thanked the General Manager/CEO for the clarification of votes East
Valley Water District ratepayers receive in regards to protests toward the wastewater
treatment rate increase proposed by the City of San Bernardino and he asked for him
to explain the bifurcated costs that Loma Linda and East Valley Water District
ratepayers receive.
The General Manager/CEO explained that after due diligence by District staff, it was
determined that the City of San Bernardino Municipal Water Department was charging
more than the cost of service to treat wastewater for Loma Linda and East Valley Water
District ratepayers versus ratepayers of the City of San Bernardino; that it is a violation
of Prop 218 and now Loma Linda and East Valley Water District ratepayers receive a
bifurcated rate. The General Manager/CEO stated that there is a 90-day termination
clause written in the rate resolution that states that the City of San Bernardino
Municipal Water Department can eliminate services provided outside of their service
boundaries; that this is one of the factors why the District is working in coordination
with the San Bernardino Valley Municipal Water District on the Sterling Natural Resource
Center; and these efforts will provide more control over District services and at the
same time be more sensitive to the needs of our community.
Chairman Coats expressed that he is anxious to move forward with the Sterling Natural
Resource Center in order to gain control over wastewater treatment and no longer be
under the control of the City of San Bernardino Municipal Water Department.
ADOPT RESOLUTION 2017.01 UPDATING THE DISTRICT’S SCHEDULE OF WATER AND
WASTEWATER RATES AND CHARGES TO REFLECT THE CITY OF SAN BERNARDINO
WASTEWATER TREATMENT RATE INCREASES EFFECTIVE JULY 1, 2017
M/S/C (Carrillo-Morales) that the Board adopt Resolution 2017.01.
Roll call vote:
Director Morales - Yes
Vice Chairman Carrillo - Yes
Director Shelton - Yes
Director Smith – Yes
Chairman Coats - Yes
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REFER CONTRACT AMENDMENTS FOR THE STERLING NATURAL RESOURCE CENTER TO
SAN BERNARDINO VALLEY MUNICIPAL WATER DISTRICT
The Director of Engineering and Operations provided information to the Board regarding
the request for additional funds to complete the environmental support, permitting
activities and geotechnical investigations for the Sterling Natural Resource Center
program. He stated that there were items that were not in the original contracts
because they were not originally anticipated to be needed; that in order to continue
facilitating the acquisition of the 1211 discharge permit, staff is requesting additional
funds; and staff is also asking for additional funding to complete geotechnical services
that will be needed for the contract documents once the contract is put out to bid.
The General Manager/CEO reiterated comments of the Director of Engineering and
Operations; he stated that this will allow the District to continue to obtain several
permits that the District will need for the project once it nears completion; that there
is offsite infrastructure included in the loading documents to go from the RFQ to the
RFP stage that are addressed in the contract.
M/S/C (Carrillo-Smith) that the Board approve the contract amendment requests
from ESA, RMC, and Group Delta Consultants respectively and refer action to San
Bernardino Valley Municipal Water District as it relates to the Sterling Natural Resource
Center.
BOARD OF DIRECTORS’ REPORTS
Director Smith reported that on January 24th he attended all of the following: he met
with the General Manager/CEO for their regular meeting; he attended the Highland
Chamber of Commerce meeting where the topic was on 2016 tax preparation; and he
attended the Finance & Policy Committee meeting where they discussed items on the
regular board meeting agenda.
Director Shelton reported on the following: on January 19th she attended the Highland
Chamber of Commerce Installation Dinner; on January 23rd she attended the Association
of San Bernardino County Special Districts (ASBCSD) meeting where they discussed tax
increases; on January 23rd she attended the Engineering & Operations Committee
meeting where they discussed field operations; and on January 24th she attended the
Local Agency Formation Commission (LAFCO) meeting where they reviewed basic LAFCO
review processes.
Director Morales reported on the following: on January 12th he met with the General
Manager/CEO for their regular meeting; on January 17th he attended the San Bernardino
Board of Water Commissioners meeting; on January 19th he attended the Association of
California Water Agencies (ACWA) Region 9 meeting; and on January 24th he attended
the Finance & Policy Committee meeting.
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Vice Chairman Carrillo reported on the following: on January 18th he met with the
General Manager/CEO, Chairman Coats and consultants regarding the General
Manager/CEO evaluation and reviewed the agenda; and on January 19th he attended the
Highland Chamber of Commerce Installation Dinner.
Chairman Coats reported on the following: on January 17th he attended the San
Bernardino Valley Municipal Water District (SBVMWD) board meeting where they
discussed district business; on January 23rd he attended the Association of San
Bernardino County Special Districts (ASBCSD) meeting where San Bernardino County
Recorder Bob Dutton spoke; and on January 24th he attended the Local Agency Formation
Commission (LAFCO) meeting.
Information only.
GENERAL MANAGER/CEO REPORT
The General Manager/CEO congratulated Susan Longville and Gil Navarro who were
recently voted in as President and Vice President of San Bernardino Valley Municipal
Water District’s Board of Directors.
The General Manager/CEO reported on the following: on January 18th the District’s
Public Affairs/Conservation Manager attended a State Water Resource Control Board
meeting to discuss 2017 drought regulations; on January 20th he traveled with the
general manager of San Bernardino Valley Municipal Water District, Doug Headrick, to
Sacramento where they met with staff from the State Water Board to discuss funding
and permitting for the Sterling Natural Resource Center; and on January 24th he met
with District staff for his monthly employee meeting where he stated that staff
expressed their appreciation to the Board for shutting down the District during the
holidays and allowing them to spend time with family.
The General Manager/CEO informed the Board of upcoming events:
• January 26th – Anaheim Water Sustainability Tour
• January 30th @ 1:30 p.m. special meeting
The General Manager/CEO informed the Board that he will be on vacation from February
3rd through the 13th and will return on February 14th.
Information only.
LEGAL COUNSEL REPORT
Legal Counsel clarified that the 1211 Petition for the Sterling Natural Resource Center
was considered by the planning team early on, but at the time was not deemed as
necessary; the State Water Resources Control Board requested that the petition be filed
in order to err on the side of caution.
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BOARD OF DIRECTORS’ COMMENTS
Director Shelton complimented staff on their hard work during the recent severe storms
and staying ahead of the problems.
Director Morales stated that he noticed new faces in the audience and thanked them
for attending. He informed them that they may contact him or staff with any questions
and encouraged them to attend a facility tour of the District.
Chairman Coats thanked newcomers for attending the board meeting and encouraged
them to attend in the future. He welcomed receptionist, Shiela Boyd, back to the
District after a leave of absence. He adjourned the meeting with the following
statement: “Help insure your water future by supporting the Sterling Natural Resource
Center”.
Information only.
ADJOURN
The meeting adjourned at 6:20 p.m.
___________________________
Ronald L. Coats, Board President
__________________________
John Mura, Secretary
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Subject to Approval
EAST VALLEY WATER DISTRICT February 22, 2017
REGULAR BOARD MEETING
MINUTES
The Chairman of the Board called the meeting to order at 4:30 p.m.
PRESENT: Directors: Carrillo, Coats, Morales, Shelton, Smith
ABSENT: None
STAFF: John Mura, General Manager/CEO; Brian Tompkins, Chief
Financial Officer; Steven Nix, Director of Engineering &
Operations; Justine Hendricksen, District Clerk; Shayla Gerber,
Administrative Assistant
LEGAL COUNSEL: Jean Cihigoyenetche
GUEST(s): Members of the public
PUBLIC COMMENTS
Chairman Coats declared the public participation section of the meeting open at 4:30
p.m.
There being no written or verbal comments, the public participation section was closed.
APPROVAL OF AGENDA
M/S/C (Carrillo-Shelton) that the February 22, 2017 agenda be approved as
submitted.
CLOSED SESSION
The Board entered into Closed Session at 4:31 p.m. as provided in the Ralph M. Brown
Act Government Code Sections 54956.9(d)(1) to discuss the item(s) listed on the
agenda.
THE BOARD RECONVENED THE MEETING AT 5:30 P.M.
Ms. Bryan led the flag salute.
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ROLL CALL
PRESENT: Directors: Carrillo, Coats, Morales, Shelton, Smith
ABSENT: None
ANNOUNCEMENT OF CLOSED SESSION ACTIONS
With respect to Item #2: No reportable action taken.
With respect to Item #3: No reportable action taken.
PRESENTATIONS AND CEREMONIAL ITEMS
The District Clerk requested that the item be reagendized for a future meeting due to
the family of Lois Hendricksen-Heflin being unable to attend the meeting.
PUBLIC COMMENTS
Chairman Coats declared the public participation section of the meeting open at 5 :32
p.m.
There being no written or verbal comments, the public participation section was closed.
APPROVE THE JANUARY 30, 2017 SPECIAL BOARD MEETING MINUTES
M/S/C (Shelton-Smith) that the Board approve the January 30, 2017 special board
meeting minutes as submitted.
DISBURSEMENTS
M/S/C (Shelton-Smith) that the General Fund Disbursements #249347 through
#249530 which were distributed during the period of January 1, 2017 through January
31, 2017, bank drafts and ACH Payments in the amount of $2,901,792.66 and
$336,515.50 for payroll and benefit contributions, totaling $3,238,308.16 be approved.
ACCEPT AND FILE THE FINANCIAL STATEMENTS AS OF, AND FOR THE PERIOD ENDED,
JANUARY 31, 2017
M/S/C (Shelton-Smith) that the Board accept and file the financial statements
as of, and for the period ended, January 31, 2017 as submitted.
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FY 2016-17 MID-YEAR BUDGET REVIEW
The Chief Financial Officer presented a mid-year budget review with proposed changes
to revenue assumptions, a water sales analysis, funding requests for additional capital
items, a summary of the Water and Wastewater Fund, and updates on program goals
and objectives. He described measures the District has taken to enhance District
identity, and examples of how the District is committed to public service.
The Director of Engineering and Operations reviewed Capital Improvement Plan
projects related to the engineering and operations departments.
The General Manager/CEO reiterated accomplishments of the District and awards it has
received.
The General Manager/CEO responded to a question from Director Smith and confirmed
that it is necessary for District customers who receive rebates of a specific dollar
amount to receive a 1099 tax form.
Information only.
BOARD OF DIRECTORS’ REPORTS
Director Morales reported on the following: on February 14th he met with Mr. Bill Kelly
to review the General Manager/CEO’s annual evaluation and he attended the Association
of California Water Agencies (ACWA) Region 9 meeting where they finalized the survey
for a work plan for 2017; and on February 16th he attended a meeting with Legal Counsel.
Director Shelton reported on the following: on February 16th she met with Mr. Bill Kelly
to review the General Manager/CEO’s annual evaluation.
Director Smith reported on the following: on February 14th he met with Mr. Bill Kelly to
review the General Manager/CEO’s annual evaluation.
Vice Chairman Carrillo reported on the following: on February 14th he attended the
Highland City Council Board meeting where they discussed how to allocate their
Community Development Block Grant (CDBG) funding; and on February 20th he discussed
the General Manger/CEO’s evaluation with Mr. Bill Kelly.
Chairman Coats reported on the following: on February 14th he met with Mr. Bill Kelly
to review the General Manager/CEO’s annual evaluation; and on February 21st he
attended the San Bernardino Valley Municipal Water District (SBVMWD) Board meeting
where they approved adjustments to the budget for the ICF International Contract for
the Upper Santa Ana River Habitat Conservation Plan and approved contract
amendments for the Sterling Natural Resource Center.
Information only.
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GENERAL MANAGER/CEO REPORT
The General Manager/CEO reported that he, along with staff, met with the City of Chino
and provided information on the District’s budget based rate implementation process.
The General Manager/CEO informed the Board of upcoming events:
• February 24th – 2X2 Recycled Water Ad-Hoc Committee meeting at District
Headquarters
• March 1st – The General Manager/CEO will present a District update to the Rotary
Club at the San Bernardino Golf Club
• March 1st – The General Manager/CEO will mentor students from Arroyo Valley
High School
• March 3rd @ 3:00 p.m. – Legislative & Public Outreach Committee meeting
LEGAL COUNSEL REPORT
No reports at this time.
BOARD OF DIRECTORS’ COMMENTS
Director Morales invited the Board to attend a local series on water infrastructure at
Western Municipal Water District on February 24th at 7:30 a.m.; and he asked the
General Manager/CEO to clarify permitting issues that were brought to the public’s
attention.
The General Manager/CEO stated that he received a Google alert during the meeting
regarding an article that was posted on the Highland Community News’ website relating
the Sterling Natural Resource Center; he directed his attention to the editor of the
article, Mr. Charles Roberts, and informed him of his displeasure for the misinformation
included in the article; he read the article to the public and Board, pointing out factual
inaccuracies and corrected the items line by line. He asked Mr. Roberts to retract the
article.
Chairman Coats adjourned the meeting with the following statement: “Help insure your
water future by supporting the Sterling Natural Resource Center”.
Information only.
ADJOURN
The meeting adjourned at 7:27 p.m.
___________________________
Ronald L. Coats, Board President
__________________________
John Mura, Secretary
Recommended by:
Jo hn Mura
General Manager/CEO
Res p ec tfully s ub mitted :
Justine Hendric ks en
Dis tric t Clerk
BOARD AGENDA STAFF REPORT
Agenda Item #6.c.
Meeting Date: March 8, 2017
Co nsent Item
To: Governing Bo ard Memb ers
From: General Manager/CEO
Subject: Direc tors ' fees and exp ens es for Feb ruary 2017
RECOMMENDATION:
Ap p ro ve the Governing Board Memb ers ’ fees and expens es fo r February 2017.
BACKGROUND / ANALYSIS:
T he Board has instruc ted staff to lis t all d irec tor fees and exp ens es as a s ep arate agenda item to s how full fisc al
transparenc y. O nly after Board review and ap p ro val will the c o mpens ation and exp ens es be p aid.
AGENCY IDEALS AND ENDEAVORS:
Ideals and Endeavor II - Maintain An Enviro nment Committed To Elevated P ublic Servic e
(E) – Practice transparent & acc o untab le fis cal management
REVIEW BY OTHERS:
T his agend a items has been reviewed b y the Ad minis tratio n department.
FISCAL IMPACT :
T he fis c al imp ac t as s o c iated with this agenda item is $6,852.82 whic h is inc luded in the c urrent fisc al b udget.
ATTACHMENTS:
Description Type
Directors' Fees and Expense February 2 017 Backup Material
BOARD AGENDA STAFF REPORT
Agend a Item #6.d.
Meeting Date: March 8, 2017
Co nsent Item
To: Governing Bo ard Memb ers
From: General Manager/CEO
Subject: Ap prove F Y 2016-17 Mid-Year Budget Revis io ns
RECOMMENDATION:
Staff rec o mmend s that the Bo ard of Direc tors (Bo ard ) review and ap prove amend ments to the FY 2016-17
Operating and Cap ital Bud get.
BACKGROUND / ANALYSIS:
At the February 22, 2017 regular b o ard meeting, s taff p res ented a mid -year b udget review with propo s ed
c hanges to revenue as sump tions, funding req ues ts fo r additio nal cap ital items , and up d ates o n p ro gram go als
and o bjec tives and C apital Improvement Plan projects . Staff did not reques t Bo ard ac tio n o n pro p o s ed revisions
at the meeting in o rder to give the Board a chanc e to further review p ro p o s ed changes to bud get line items
s ub s eq uent to the meeting.
T he tab les b elo w summarize the p ro posed adjus tments to Distric t revenues and expenditures :
REVENUES
Description
FY 2016-17
Budget YTD Activity
FY 2016-17
Projected Difference
Water Sales -Tier 1 $ 5,915,000 $ 3,012,960 $ 5,715,000 $ (200,000)
Water Sales -Tier 2 4,878,000 3,616,890 5,278,000 400,000
Water Sales -Tier 3 2,707,000 1,846,948 2,807,000 100,000
Meter Charges 8,960,000 4,430,661 8,910,000 (50,000)
Was tewater C ollec tion 4,460,000 2,423,520 4,460,000 -
Was tewater Treatment 7,610,000 4,121,854 7,610,000 -
Other Charges 1,045,000 841,717 1,225,000 180,000
Inves tment Inc o me 97,000 42,952 97,000 -
Mis cellaneous Revenue 45,000 35,180 45,000 -
Total $ 35,717,000 $ 20,372,682 $ 36,147,000 $ 430,000
Recommended by:
Jo hn Mura
General Manager/CEO
Res p ec tfully s ub mitted :
Brian To mpkins
Chief Financial Offic er
EXPENDITURES
Description
FY 2016-17
Budget YTD Activity
FY 2016-17
Projected Difference
Labor & Benefits $ 8,484,000 $ 4,472,236 $ 8,565,000 $ 81,000
Water Supply 1,245,000 461,966 937,000 (308,000)
Elec tric ity 1,814,000 863,775 1,814,000 -
Treatment Servic es 7,610,000 4,121,875 7,610,000 -
Other Op erating Exp.7,537,000 3,054,359 7,334,000 (203,000)
Capital Exp ens es 4,168,000 2,850,510 7,327,000 3,159,000
Debt S ervice 4,324,000 2,788,012 4,324,000 -
Water Res erve Co ntrib.435,100 521,100 86,000
Was tewater R eserve
Contrib. (Bo rrowing)99,900 (2,285,100)(2,385,000)
Total $ 35,717,000 $ 18,612,733 $ 36,147,000 $ 430,000
Staff has rec eived no Bo ard inquiries ab o ut p ro p o s ed revis io ns to the 2016-17 bud get o ther than tho se as ked at
the February 22, 2017 meeting.
AGENCY IDEALS AND ENDEAVORS:
Ideals and Endeavor II - Maintain An Enviro nment Committed To Elevated P ublic Servic e
(E) - Practice transparent & acc o untab le fis cal management
REVIEW BY OTHERS:
T his agend a item was presented to the Board of Directo rs in o p en sess ion o n Feb ruary 22, 2017.
FISCAL IMPACT :
After a c o mp lete evaluation o f the Op erating and C apital Budgets thro ugh Dec emb er 2016, the net imp act o f
rec o mmend ed c hanges will res ult in an additio nal c o ntrib ution to Water Fund reserves of $86,000 at year end,
and a balanc ed Was tewater fund b udget with the exceptio n that $2,385,000 will b e b o rrowed fro m Was tewater
reserves to fac ilitate the ongo ing effo rts fo r the Sterling Natural Res o urc e Center until permanent fund ing can b e
s ec ured.
BOARD AGENDA STAFF REPORT
Agend a Item #7.
Meeting Date: March 8, 2017
Dis cus s io n Item
To: Governing Bo ard Memb ers
From: General Manager/CEO
Subject: Review and Appro ve Deb t Management P o lic y
RECOMMENDATION:
Staff rec o mmend s that the Board of Directo rs review and approve the attached Debt Management Policy.
BACKGROUND / ANALYSIS:
On Sep tember 12, 2016, Governo r Brown s igned SB 1029 into law, amending Califo rnia G overnment Co d e
(CGC) §8855 and the reporting req uirements on iss uers o f pub lic debt in California. For many years , CGC
§8855 has required that agenc ies report o n p ub lic debt is s uanc e to the California Deb t and Inves tment Advisory
Co uncil (CDIAC ), b ut effec tive January 1, 2017, is suers mus t c ertify that they have ad o p ted local debt p o lic ies
c o nc erning the us e of debt and that new d ebt issues are c ons is tent with tho s e po licies .
In offering guidanc e on the new req uirements , CDIAC has stip ulated that d ebt polic ies must inc lude the
following:
The p urpo s e for whic h debt pro ceeds may be us ed
The typ es o f deb t that may be issued
The integration of the new d eb t with the iss uers capital imp rovement p ro gram or bud get
P olic y goals related to the is s uers planning goals and objec tives
Internal c o ntro ls that will ens ure that deb t p roc eed s will b e d irected to the intended us e
EVWD’s Debt Management P o lic y was las t updated in August o f 2010 and d o es not s ucc inc tly add res s some o f
the areas s pec ific ally lis ted in CDIAC guidelines . F o r that reas o n, and b ec aus e p o lic ies mus t b e c o mp liant befo re
an agenc y issues new deb t, s taff has made up d ating the Dis tric t’s Deb t Management P olic y a p rio rity.
AGENCY IDEALS AND ENDEAVORS:
Ideals and Endeavor II - Maintain An Enviro nment Committed To Elevated P ublic Servic e
(E) – Practice transparent & acc o untab le fis cal management
Recommended by:
Jo hn Mura
General Manager/CEO
Res p ec tfully s ub mitted :
Brian To mpkins
Chief Financial Offic er
REVIEW BY OTHERS:
T his agend a item has b een reviewed b y the Financ e and Po licy S tanding Co mmittee.
FISCAL IMPACT :
T here is no fis c al imp ac t as s o c iated with this agenda item.
ATTACHMENTS:
Description Type
7.3 Debt Management P olicy Cover Memo
CDIAC Guidance Backup Material
EAST VALLEY WATER DISTRICT
Administrative Policies & Programs
Policy Title: Debt Management Policy
Original Approval Date:
August 10, 2010
Last Revised:
March 8, 2017
Policy No: 7.3 Page
1 of 10
Purpose
The purpose of this Debt Management Policy is to establish guidelines for the issuance and
management of District debt, and to provide guidance for decision makers with respect to
options available for financing infrastructure, and other capital projects, so that the most
prudent, equitable, and cost effective financing can be chosen.
This policy documents the objectives to be achieved by staff both prior to, and subseque nt
to, issuance of debt, and is designed to promote objectivity in the decision making process,
and to facilitate the financing process by establishing important policy decisions in
advance.
Goals
It is a goal of the District to provide for the infrastruct ure and capital project needs of its
ratepayers, financing those capital project needs from a combination of current revenues,
available reserves, and prudently issued debt.
Debt is an equitable means of financing projects and represents an important mean s of
providing for the infrastructure and project needs of the District's customers. Debt will be
used to finance projects if:
Debt is issued and managed prudently;
Debt enables the District to maintains a sound fiscal position;
Issuing the debt will not negatively impact the District’s credit rating;
The District's goal of equitable treatment of all customers, both current and future,
would be met;
It is the most cost-effective means available to the District; and
It is fiscally responsible under the prevailing economic conditions.
EAST VALLEY WATER DISTRICT
Administrative Policies & Programs
Policy Title: Debt Management Policy
Original Approval Date:
August 10, 2010
Last Revised:
March 8, 2017
Policy No: 7.3 Page
2 of 10
Budget Integration
Issuance of debt may only be utilized to finance a capital project(s). Debt proceeds are
not to be used to fund operating expenses. The decision to incur new indebtedness should
be integrated with the Board-adopted annual Operating Budget and Capital Improvement
Program (CIP) Budget. Issuance of debt for a capital project will not be considered unless
such project has been incorporated into the District’s CIP, or is otherwise approved by the
Board.
Annual debt service payments shall be included in the Operating Budget.
Standards for Use of Debt Financing
When appropriate, the District will use long-term debt financing to:
Achieve an equitable allocation of capital costs / charges between current and
future system users
Provide more manageable rates in the near and medium term
Minimize rate volatility
For growth-related projects, debt financing will be utilized, as needed, to better match
the cost of anticipated facility needs with timing of expected new connections to the
system and spread the costs evenly over time. Capacity / Connection Fees will be
maintained at a level sufficient to finance a portion of growth -related capital costs and
cover related annual debt service requirements.
The District shall not construct or acquire a facility if it is unable to adequately provide
for the subsequent annual operation and maintenance costs of the facility throughout its
expected life.
Capital projects financed through debt issuance will not be financed for a term longer than
the expected useful life of the project.
EAST VALLEY WATER DISTRICT
Administrative Policies & Programs
Policy Title: Debt Management Policy
Original Approval Date:
August 10, 2010
Last Revised:
March 8, 2017
Policy No: 7.3 Page
3 of 10
Methods of Financing
The Finance Department will investigate all possible project financing alternatives
including, but not limited to, annual operating revenue, reserves, bonds, loans, and grant s.
When applicable, capacity fees collected from developers will be used to pay for increased
capital costs resulting from new development.
The District may legally issue both short term and long term financing using the debt
instruments described below.
1. Cash Funding – The District funds a significant portion of capital improvements on
a pay-as-you-go basis. Sources for pay-as-you-go may include appropriations from
annual operating revenue, reserves, and grants.
2. Inter-fund Borrowing - The District may borrow internally from other funds with
temporarily surplus cash to meet short term needs in lieu of issuing debt. Purposes
for such could include short term cash flow imbalances due to grant terms (i.e., the
need to incur costs prior to reimbursement) and int erim financing pending the
issuance of long term debt. The District funds from which the money is borrowed
shall be repaid with interest, accruing quarterly based upon the apportionment rate
set by the State of California Local Agency Investment Fund (LAIF ). To the extent
any inter-fund borrowing is undertaken in anticipation of long-term financing, the
District shall adopt a Resolution of its intention to repay such funds out of tax -
exempt debt proceeds so as to meet the requirement of federal tax law for such
borrowing.
3. Line of Credit – The District may consider a line of credit as a short-term borrowing
option. The Chief Financial Officer (CFO) shall determine when it is prudent to
recommend that the District enter into an agreement with a commercial bank or
other financial institution, for the purpose of acquiring a line of letter of credit.
4. Capital Lease Debt – A lease purchase obligation placed with a lender without the
issuance of securities may be used to finance certain equipment purchases if the
aggregate cost of the equipment exceeds $50,000 and the terms of financing are
cost-effective. The term of a capital lease must be at least five years, and shall not
exceed the useful life of the equipment or ten years, whichever is shorter.
EAST VALLEY WATER DISTRICT
Administrative Policies & Programs
Policy Title: Debt Management Policy
Original Approval Date:
August 10, 2010
Last Revised:
March 8, 2017
Policy No: 7.3 Page
4 of 10
5. State Revolving Fund Loans - The State Revolving Fund (SRF) is a low or zero
interest loan program generally for the construction of water and wastewater
infrastructure projects. The SRF loan interest rate is typically calculated by taking
half of the True Interest Cost (TIC) of th e most recent State of California General
Obligation Bonds sale. The repayment term of the loans ranges from 20 to 30 years .
6. Certificates of Participation – The District may issue Certificates of Participation
(COP) which provide financing through a lease, installment sale agreement, or
contract of indebtedness and typically do not require voter approval. Board action
is legally sufficient to authorize a COP issue, and District revenues are pledged for
repayment of COPs under terms specified in the indenture.
7. JPA Revenue Bonds – The District may obtain financing through the issuance of debt
under a joint exercise of powers agreement (East Valley Water Distri ct Financing
Authority) with such debt payable from amounts paid by the District under a lease,
installment sale agreement, or contract of indebtedness.
8. Refunding Revenue Bonds – The District may issue refunding revenue bonds to
refund District indebtedness pursuant to the State of California local agency
refunding revenue bond law (Title 5 of the California Government Code)
Financing Team – Roles and Responsibilities
The primary responsibility for developing debt financing recommendations rests with the
CFO. In developing such recommendations, the CFO shall consider the need for debt
financing and assess progress on the current capital improvement program (CIP). The CFO
will present all proposed debt financings to the Board , which has sole authority to approve
the issuance of debt.
1. Bond Counsel - The District will retain external bond counsel for all debt issues.
Bond counsel will prepare the necessary authorizing resolutions, agreements and
other documents necessary to execute the financing. All debt issued by the District
will include a written opinion by bond counsel affirming that the District is
authorized to issue the debt, stating that the District has met all state constitutional
and statutory requirements necessary for issuance, and determining the d ebt's
federal income tax status.
EAST VALLEY WATER DISTRICT
Administrative Policies & Programs
Policy Title: Debt Management Policy
Original Approval Date:
August 10, 2010
Last Revised:
March 8, 2017
Policy No: 7.3 Page
5 of 10
2. Financial Advisors - The District will utilize the services of independent financial
advisors when deemed prudent by the CFO. Services and compensation caps shall
be defined by contract. The primary responsibilities of the financial advisor are to
advise and assist on bond document negotiations, transaction structuring including
advising on call provision options and timing of issuance, running debt service cash
flow analysis’, assistance in obtaining ratings on the propose d issuance, and
generally acting as an independent financial consultant and economic market
expert.
3. Underwriters - For negotiated sales, the District will generally select or pre -qualify
underwriters through a competitive process. This process may include a request for
proposal or qualifications to firms considered appropriate for the underwriting of a
particular issue or type of bonds. The Chief Financial Officer, with the concurrence
of the General Manager/CEO, will determine the appropriate method to eva luate
the underwriter submittals and then select or qualify firms on that basis. The District
will not be bound by the terms and conditions of any underwriting agreements; oral
or written, to which it was not a party.
Structure and Term
1. Term of Debt – Debt will be structured for the shortest period possible, consistent
with a fair allocation of costs to current and future users. The standard term of long -
term debt borrowing is 10 to 30 years. Consistent with its philosophy of keeping
capital facilities and infrastructure systems in good condition and maximizing a
capital assets useful life, the District will budget to set aside operating revenue to
finance ongoing maintenance and to provide reserves for rehabilitation and
replacement. No debt will be issued for periods exceeding the useful life of projects
to be financed.
2. Debt Repayment – In structuring a bond issue, the District will manage the
amortization of the debt and, to the extent possible, match its cash flow to the
anticipated debt service payments. In addition, the District will seek to structure
debt with aggregate level debt service payment over the life of the debt.
A non-level debt service structure will be considered if it is beneficial to the
District’s overall debt payment schedule, or if such structuring will allow debt
service to more closely match project revenues during the early years of a project’s
operation.
EAST VALLEY WATER DISTRICT
Administrative Policies & Programs
Policy Title: Debt Management Policy
Original Approval Date:
August 10, 2010
Last Revised:
March 8, 2017
Policy No: 7.3 Page
6 of 10
3. Interest Rate Structure – The District currently issues long-term debt on a fixed
interest rate basis only. Fixed rate securities ensure budget certainty through the
life of the issue and avoid the volatility of variable rates.
4. Credit Enhancement - The District will consider the use of credit enhancement on
a case-by-case basis. Types of credit enhancement include letters of credit, bond
insurance, and surety policies. Only when clearly demonstrable savings can be
realized shall credit enhancement be utilized.
5. Debt Service Reserve Funds – Debt service reserve funds are held by the Trustee
to make principal and interest payments to bondholders in the event that pledged
revenues are insufficient to do so. The District will fund debt service reserve funds
when it is in the District’s overall best financial interest.
In lieu of holding a cash funded reserve, the District may su bstitute a surety bond
or other credit instrument in its place. Additionally, the District may decide not to
utilize a reserve fund if the District’s financing team determines there would be no
adverse impact to the District credit rating or interest rates .
6. Call Provisions - In general, the District's securities should include optional call
provisions. The District will avoid the sale of non-callable, long-term fixed rate
bonds, absent careful evaluation of the value of the call option.
7. Debt Limits - There is no specific provision within the California Government Code
that limits the amount of debt that may be issued by the District. The District’s
borrowing capability is limited by the additional bonds test and debt coverage ratio
required by the existing bond covenants. The District will be mindful of its overall
debt burden in the context of its revenues, expenses, reserves, and overall financial
health.
8. Refunding - Current and advance refunding are important debt management tools
for the District. They are commonly used to achieve debt service (interest cost)
savings, remove or change bond covenants, or restructure debt service obligations.
Since the Federal Tax law allows only one advance refunding after the initial
issuance, careful planning and timing must be used.
To the extent that debt having fixed interest rates originally structured with a long -
term amortization structure (ten years or greater) is refunded with fixed rate debt,
EAST VALLEY WATER DISTRICT
Administrative Policies & Programs
Policy Title: Debt Management Policy
Original Approval Date:
August 10, 2010
Last Revised:
March 8, 2017
Policy No: 7.3 Page
7 of 10
the District will not generally issue refunding debt which extends beyond the final
maturity of the refinanced debt. Extending the final maturity may occur when
warranted, such as restructuring of debt to match debt amortization with the useful
life of the financed assets.
Method of Issuance and Sale
The District will select the method of sale, which best fits the type of bonds being sold,
market conditions, and the desire to structure bond maturities to enhance the overall
performance of the entire debt portfolio. Three general methods exist for the sale of
municipal bonds:
1. Competitive Sale - Bonds will be marketed to a wide audience of investment
banking (underwriting) firms. The underwriter is selected based on its best bid for
its securities. The District will award the sale of the competitively sold bonds on a
true interest cost (TIC) basis. Pursuant to this policy, the General Manager /CEO, is
hereby authorized to sign the bid form on behalf of the District, fixing the interest
rates on bonds sold on a competitive basis.
2. Negotiated Sale – In a negotiated sale, the underwriter or underwriting syndicate is
selected through a Request for Proposal (RFP) process. The interest rate and the
underwriter’s fee are negotiated prior to the sale, based on market conditions. The
underwriter will actively assist the District in structuring the financing and
marketing of bonds including providing assistance in preparing the bond offering
circular.
3. Private Placement - The District may elect to issue debt on a private placement
basis. Such method may be considered if it is demonstrated to result in cost savi ngs
or provide other advantages relative to other methods of debt issuance, or if it is
determined that access to the public market is unavailable and timing
considerations require that financing be completed.
Creditworthiness Objectives
Ratings are a reflection of the fiscal soundness of the District and the capabilities of its
management. Typically, the higher the credit ratings are, the lower the interest cost on
the District’s debt issues. To enhance creditworthiness, the District is c ommitted to
EAST VALLEY WATER DISTRICT
Administrative Policies & Programs
Policy Title: Debt Management Policy
Original Approval Date:
August 10, 2010
Last Revised:
March 8, 2017
Policy No: 7.3 Page
8 of 10
prudent financial management, systematic capital planning, and long -term financial
planning. The District recognizes that external economic, natural, and other events may
affect the creditworthiness of its debt.
The District’s most recent bond issues have been assessed by the nationally recognized
rating agencies Standard and Poor’s, and Fitch Ratings. When issuing a credit rating, rating
agencies consider various factors including but not limited to:
District’s fiscal status
District management capabilities
Economic conditions that may impact the stability and reliability of debt repayment
sources
District reserve levels
District debt history and current debt structure
Projects being financed
Post Issuance Administration / Internal Control
1. Investment of Proceeds - The proceeds of bond sales will be invested until used for
the intended project(s) in order to maximize utilization of the public funds. The
investments will be made to obtain the highest level of 1) safety, 2) liquidity, and
3) yield, and may be held as cash. The District’s investment guidelines and bond
indentures will govern objectives and criteria for investment of bond proceeds. The
Finance Department will oversee the investment of bond proceeds in a manner to
avoid, if possible, and minimize any potential negative arbitrage over the life of the
bond issuance, while complying with arbitrage and tax provisions.
2. Use of Proceeds - Bond proceeds will be deposited and recorded in separate
accounts to ensure funds are not comingled with ot her District funds. The District’s
Trustee will administer the disbursement of bond proceeds pursuant to each certain
Indenture of Trust or Fiscal Agent Agreement, respectively. To ensure proceeds from
bond sales are used in accordance with legal and tax requirements, invoices are
submitted by the Engineering Department and approved by the Finance Department
EAST VALLEY WATER DISTRICT
Administrative Policies & Programs
Policy Title: Debt Management Policy
Original Approval Date:
August 10, 2010
Last Revised:
March 8, 2017
Policy No: 7.3 Page
9 of 10
and General Manager/CEO for payment. Requisition for the disbursement of bond
funds will be approved by the District’s CFO.
The Finance Department will be tasked with monitoring the expenditure of bond
proceeds to ensure they are used only for the purpose and authority for which the
bonds were issued and exercising best efforts to spend bond proceeds in such a
manner that the District will meet one of the spend-down exemptions from arbitrage
rebate. Tax-exempt bonds will not be issued unless it can be demonstrated that 85%
of the proceeds can reasonably be expected to be expended within the three -year
temporary period.
3. Arbitrage Compliance - The use of bond proceeds and their investments must be
monitored to ensure compliance with all Internal Revenue Code Arbitrage Rebate
Requirements. The CFO shall ensure that all bond proceeds and investments are
tracked in a manner which facilitates accurate calculation; and, if a rebate payment
is due, such payment is made in a timely manner.
4. Compliance with Bond Covenants – The District is responsible for verifying
compliance with all undertakings, covenants, and agreements of each debt issue on
an ongoing basis. This typically includes ensuring:
Annual appropriations of revenues to meet debt service payments
Timely transfer of debt service payments to the Trustee
Compliance with insurance requirements
Compliance with rate covenants
The District shall comply with all covenants and conditions contained in the
governing law and any legal documents entered into at the time of the bond offering
or signing of agreements. The CFO or designee will coordinate verification and
monitoring of covenant compliance.
5. Rating Agency Communication - The CFO shall be responsible for maintaining the
District's relationships with Standard & Poor's Ratings Services, Fitch Ratings and/or
Moody's Investment Service. In addition to general communication, the CFO shall
EAST VALLEY WATER DISTRICT
Administrative Policies & Programs
Policy Title: Debt Management Policy
Original Approval Date:
August 10, 2010
Last Revised:
March 8, 2017
Policy No: 7.3 Page
10 of 10
meet with credit analysts prior to each competitive sale and offer conference calls
with the District financing team in connection with the planned sale.
6. Board Communication - The CFO will report to the Board of Directors any feedback
from rating agencies and/or investors regarding the District's financial strengths and
weaknesses and recommendations for addressing any weaknesses.
7. Continuing Disclosure - The District shall remain in compliance with Rule 15c2-12
by filing its annual financial statements and other fina ncial and operating data for
the benefit of its bondholders by December 31 st of each year. The CFO will ensure
the District's timely filing with each Nationally Recognized Municipal Securities
Information Repository.
8. Record Retention - A copy of all debt-related records shall be retained at the
District's offices. At minimum, these records shall include all official statements,
bid documents, bond documents / transcripts, resolutions, trustee statements,
leases, and title reports for each District financing (to the extent available).
Electronic copies - preferably in pdf or CD-ROM format – shall also be retained.
Board Discretion
This policy was drafted with the intent of providing East Valley Water District’s Board -
approved guidelines to management and staff for decisions and recommendations related
to capital financing by the District, and to support the District’s debt obligations to present
and future generations of ratepayers.
This policy is ultimately intended to serve as a guide and it in no way restri cts the ability
of the East Valley Water District Board to review proposed rate actions, debt issuances, or
other actions of substance to the District. The Board maintains authorization to waive
elements of the policy in connection with individual financin gs at its discretion. This policy
shall be reviewed during the third quarter of each odd fiscal year.
Revised: March 8, 2017
CALIFORNIA DEBT AND INVESTMENT ADVISORY COMMISSION
Guidance on Complying with SB 1029
Release Date: December 28, 2016
On October 26, 2016, the California Debt and Investment Advisory Commission (CDIAC) issued a
Request for Comment on the implementation of Chapter 307, Statutes of 2016 (Senate Bill
1029, Hertzberg). The comments received have helped CDIAC develop guidance for issuers of
public debt seeking to comply with the requirements of SB 1029.
The guidance offered in this letter dated December 28, 2016 is based upon CDIAC’s current
understanding of the information required and its ability to receive that information from
issuers. It is likely that CDIAC will offer additional guidance and ultimately adopt regulations in
the future as both it and issuers adapt to the requirements of SB 1029.
CDIAC is making every effort to provide intuitive, on-line processes that will minimize the
efforts of issuers while maximizing compliance and the quality of the information provided. It is
committed to working with issuers and members of the public finance community to achieve
these outcomes.
Guidance on Government Code section 8855(i)
Government Code section 8855(i) requires any issuer of public debt to provide to CDIAC no
later than 30 days prior to the sale of any debt issue a report of the proposed issuance. CDIAC
provides issuers the ability to submit this Report of Proposed Debt Issuance electronically.
Effective January 1, 2017, issuers must certify on the Report of Proposed Debt Issuance that
they have adopted local debt policies concerning the use of debt and that the proposed debt
issuance is consistent with those policies. The issuer’s local debt policies must include (A)
through (E), below. If the issuer has received certification from another governmental entity
that will use the proceeds of the debt issue, then the issuer may rely on a certification by that
other governmental entity that it has adopted local debt policies that include (C), (D) and (E),
below.
A) The purposes for which the debt proceeds may be used.
B) The types of debt that may be issued.
C) The relationship of the debt to, and integration with, the issuer’s capital improvement
program or budget, if applicable.
D) Policy goals related to the issuer’s planning goals and objectives.
E) The internal control procedures that the issuer has implements, or will implement, to
ensure that the proceeds of the proposed debt issuance will be directed to the intended
use.
1
Section 8855(i) reads “The report of proposed debt issuance shall include a certification by the
issuer that it has adopted local debt policies…” For the purposes of applying this section issuers
should understand the term “local debt” as being debt issued for the benefit of a local agency.
As a result, section 8855(i), as it specifically relates to debt policies, does not apply to state
agencies, instrumentalities of the state, or to non-governmental entities such as for-profit or
not-for-profit organizations that may issue or receive proceeds from a debt issuance. Similarly,
the term “other governmental entity” in section 8855(i)(2) means an entity of local
government.
Issuers should interpret the meaning of the term “adopted” in section 8855(i) to mean by act of
the governing body. If the issuer’s governing body has taken an action to delegate the authority
to “adopt” local debt policies to administrative staff, the actions of these staff may meet the
requirements of section 8855(i)(1). An issuer’s local debt policies may be contained within a
single document or be the composite of more than one documents. Irrespective of the form,
the local debt policies must be adopted by the issuer.
In order to comply with section 8855(i)(1), then, the issuer must certify on the Report of
Proposed Debt Issuance that it has adopted local debt policies concerning the use of debt and
that the contemplated debt issuance is consistent with those local debt policies. Issuers will be
able to make this certification after January 1, 2017 using the Report of Proposed Debt
Issuance. The new form will include the following statement followed by three acceptable
responses in the form checkboxes.
“The issuer certifies that it has complied with GC section 8855(i) with respect to local
debt policies. YES NO NA ”
For issuers that issue debt for their own purposes that respond to this statement with a YES
response are confirming that they certify that they have adopted local debt policies in
compliance with section 8855(i). A response of NO indicates that they cannot certify that they
have adopted local debt policies in compliance with section 8855(i)(1). Issuers that are not
issuing local debt, such as the state or instrumentality of the state, may respond NA because
they do not issue local debt.
If the issuer is a conduit issuer, a YES response means that the issuer certifies that it has
adopted local debt policies in compliance with section 8855(i)(1). Furthermore, the local debt
policies include (A) through (E) of section 8855(i)(1) OR the issuer is certifying that it has
adopted local debt policies in compliance with section 8855(i)(1) and the policies include (A)
and (B) AND they have relied upon a certification from the other governmental entity that it has
adopted local debt policies in compliance with section 8855(i)(1) and the local debt policies of
the other government entity includes (C), (D) and (E). A NO response means that it does not
certify that it has adopted local debt policies in compliance with section 8855(i) or it has not
received a certification from the other governmental entity that it has. An NA response
indicates that the entity that will use the proceeds of the sale of debt is a non-governmental
entity (e.g., a private non-profit) or the conduit is not itself an issuer of local debt (e.g. state
instrumentality).
2
It is incumbent upon the issuer to interpret and apply subparts (A) through (E) to their local
debt policies as it is for the governmental entity that may use proceeds from the sale of debt to
interpret and apply subparts (C), (D) and (E) to their local debt policies.
Guidance on Government Code section 8855(k)
Effective January 1, 2017, state and local issuers will be required to submit an annual debt
transparency report for any issue of debt for which they have submitted a Report of Final Sale
during the reporting period. The annual debt transparency report is due to CDIAC within seven
(7) months of the close of the reporting period, defined as July 1st to June 30th. This provision
makes January 31st the effective deadline for submittal of the annual debt transparency report.
Issuers will continue to submit an annual debt transparency report to CDIAC on or before
January 31st each year until the later date on which the debt is no longer outstanding or the
proceeds have been fully spent. Debt issued between January 1, 2017 and June 30, 2017, and
reported to CDIAC on or after January 21, 2017 will be required to submit an annual debt
transparency report no later than January 31, 2018.
CDIAC will provide an online form to enable issuers to submit information to CDIAC in
compliance with section 8855(k). CDIAC is in the process of both creating the form and
developing the underlying functional applications to support data submission and reporting. It
is very likely that the form and the process for complying with SB 1029 using the form will
evolve over time as CDIAC and issuers adapt to this new reporting requirement.
At a minimum, the annual debt transparency report will require issuers to include:
A) Debt authorized during the reporting period, which shall include:
a. Debt authorized at the beginning of the reporting period.
b. Debt authorized and issued during the reporting period.
c. Debt authorized but not issued at the end of the reporting period.
d. Debt authority that has lapsed during the reporting period.
B) Debt outstanding during the reporting period, which shall include the following:
a. Principal balance at the beginning of the reporting period.
b. Principal paid during the reporting period.
c. Principal outstanding at the end of the reporting period.
C) The use of proceeds of issued debt during the reporting period, which shall include the
following:
a. Debt proceeds available at the beginning of the reporting period.
b. Proceeds spent during the reporting and the purposes for which it was spent.
c. Debt proceeds remaining at the end of the reporting period.
In compliance with section 8855(k)(1)(A), issuers must provide in their annual debt
transparency report to CDIAC the “debt authorized during the reporting period”. Issuers should
understand the term “authorized” to mean a formal action of the governing body or a vote of
the electorate or taxpayers establishing a maximum amount to be borrowed. In the case of
certain loans, commercial paper programs, and some refunding programs, this action may be a
3
resolution of the governing body establishing a maximum limit that the issuer may borrow. For
debt issued in more than one sale or transaction that will generate more than one Report of
Final Sale, the “debt authorized” should be understood to mean to total amount approved by
the voters or taxpayers or by act of the governing body. For debt issued in a single sale or
transactions, the “debt authorized” is expected to equal the amount of the debt reported on
the Report of Final Sale.
Issuers submitting a Report of Final Sale between January 21, 2017 and June 30, 2017, must
include in their annual debt transparency report, due on or before January 31, 2018, the
following information:
1) The total amount of debt authorized as of January 1, 2017;
2a) The amount of additional debt authorized during the reporting period;
2b) The amount issued between January 1, 2017 and June 30, 2017 from the authority
available in 1) and 2a), combined;
3) The amount of debt authorized that was not issued between January 1, 2017 and June
30, 2017 (logically, the result of (1 plus 2a) minus 2b); and,
4) The amount of debt authority (represented by (1 plus 2a)) that has lapsed between
January 1, 2017 and June 30, 2017.
The term “authority that has lapsed” will mean authority that is no longer valid and, therefore,
does not provide a legal basis to issue debt, including authority that has expired or that the
issuer has taken an action to revoke.
In subsequent years, the amount of debt authorized at the beginning of the period will be
equivalent to the amount of debt authorized but not issued at the end of the prior reporting
period less any authority that has lapsed.
An issuer that has received authority during the reporting period, but has not issued debt based
upon that authority and has not, therefore, submitted a Report of Final Sale is not required to
submit an annual debt transparency report with respect to that authority. Once it does issue
debt and submits a Report of Final Sale it will be obligated to submit an annual debt
transparency report within seven (7) months of the close of the reporting period during which it
issued the debt. There may be circumstances in which an issuer has available authority based
upon a ballot measure or act of the governing body even though it has paid off or fully
refunded the debt previously issued under that authority. In this case, the issuer would not be
required to submit an annual debt transparency report.
Issuers must provide on the annual debt transparency report the debt outstanding during the
reporting period. Issuers should understand the term “debt outstanding” to mean the original
principal received from the sale of debt that has not been fully repaid to debtholders.
In the case of a zero-coupon bond or capital appreciation structure, issuers should consider the
original principal to be the full accreted value of the bonds at the end of the reporting period.
Because of the nature of capital appreciation structure an issuer’s annual debt transparency
report is likely to report an increase in the “debt outstanding” year over year.
4
Issuers submitting a Report of Final Sale between January 1, 2017 and June 30, 2017, must
include in their annual debt transparency report, due on or before January 31, 2018, the
following information:
1) The original principal received on the date of sale.
2) The amount of the principal paid off between January 1, 2017 and June 30, 2017.
3) The amount of principal remaining as of June 30, 2017.
Issuers must provide on the annual debt transparency report the use of debt proceeds during
the reporting period. Issuers should understand the term “proceeds” to mean all funds received
from the sale of debt inclusive of premium and discount.
Issuers submitting a Report of Final Sale between January 21, 2017 and June 30, 2017, must
include in their annual debt transparency report, due on or before January 31, 2018, the
following information:
1) Debt proceeds available upon the date of settlement.
2) The amount of proceeds spent between the date of settlement and June 30, 2017 and
the purposes for which these proceeds were spent.
3) The amount of proceeds remaining as of June 30, 2017.
CDIAC does not anticipate defining or categorizing “purposes” for which the proceeds were
spent. Instead, CDIAC will provide a reporting form that will enable issuers to self-identify
categories of “purpose” on their annual debt transparency report.
Issuers must continue to submit annual debt transparency reports until the debt has been paid
off or the bond proceeds have fully spent.
There are special considerations issuers of refunding debt must take into account. If the issuer
fully refunds a debt with a refunding debt, the issuer must submit an annual debt transparency
report on both the refunding debt and a final annual report on the refunded debt. If there are
any proceeds left in the refunded debt, the issuer must continue to report on the refunded
debt until the proceeds have been spent. If the issuer partially refunds a debt with a refunding
debt, the issuer must report on the refunded debt and the refunding debt until either the
debtholders are full repaid or the proceeds have been fully spent, whichever is later. In other
words, even though the proceeds of the refunding debt were used to pay off the refunded
debt, the issuer must take the approach that the purpose of the annual debt transparency
report is to account for the use of proceeds received from the original debt issuance.
If the refunding debt includes new money, the issuer must report the use of proceeds of the
portion of refunding debt used to refund the refunded debt as “refunding <debt identifier>”
AND the use of new money proceeds for their intended uses. If the refunding debt includes no
new money, the issuer must report the use of proceeds of the refunding debt as “refunding
<debt identifier>”. The debt identifier is currently the CDIAC Issue Number.
5
In reporting on the use of proceeds that are received from the sale of debt but are comingled
with other funds not received from the sale of debt, the issuer should report on the proceeds
from the sale of debt only.
Issuers of conduit bonds must report on the use of proceeds as used by the borrower. Conduit
issuers should not report that the proceeds were “lent to a borrower”, but for the purposes to
which the borrower used the proceeds. The issuer may wish to assign responsibility to the
borrower to report on the use of proceeds. Conduit issuers issuing lease revenue bonds must
also comply with section 8855(k).
6
BOARD AGENDA STAFF REPORT
Agend a Item #8.
Meeting Date: March 8, 2017
Dis cus s io n Item
To: Governing Bo ard Memb ers
From: General Manager/CEO
Subject: Res olution 2017.05 - Changing the Bo ard o f Direc tors Election Cyc le
RECOMMENDATION:
Staff is rec ommending the that Bo ard of Directo rs ad o p t Res o lution 2017.05 ap p ro ving a change in the regular
elec tion for the Board o f Direc tors fro m Novemb er of o dd-numb ered years to the s tatewid e general elec tion in
No vember of even-numb ered years .
BACKGROUND / ANALYSIS:
On September 1, 2015 Go vernor Brown s igned SB Bill 415 (C alifornia Vo ter P articipatio n R ights Act), which
s eeks to ad d ress an issue that has bec o me a freq uent point of contentio n: low turnout due to o ff-cyc le elec tio ns.
T he Bill as ap p roved is attac hed . The Legis lative Co uns el Diges t of the Bill is s ho wn belo w:
“Existing law genera lly req u ires all sta te, county, municip a l, district, an d sch ool d istrict
elections be held on an estab lished election d ate. Existin g law a lso esta b lishes certain d a tes
for statewide elections. Existin g la w requires any state, cou n ty, municip a l, district, a nd school
district election held on a sta tew id e election d a te to be consolida ted with a sta tewid e election ,
except as p rovided. T h is bill, commen cing Ja n u ary 1 , 2 0 1 8 , wou ld p rohibit a p olitica l
su b d ivision , as d efined, from holding an election oth er than on a sta tewid e election date if
holdin g an election on a n on concurrent d ate h a s previou sly resu lted in voter turnou t for a
regula rly schedu led election in tha t p olitica l subdivision bein g at least 2 5 % less th a n the
avera g e voter turnou t with in the political subdivision for th e p revious 4 sta tew id e g en era l
elections, excep t as sp ecified . T h is b ill wou ld req u ire a court to imp lemen t app ropria te
remedies u p on a violation of this prohib ition. Th e bill would auth orize a voter wh o resid es in
a p olitica l sub d ivision wh ere a violation is alleg ed to file a n action in su p erior court to
enforce this p rohibition, and it would allow a p revailing plain tiff other th a n th e state or
politica l sub d ivision to collect a reason a b le a ttorney’s fee and litig ation expenses, a s
provided .”
While this bill go es into effect in January of 2018, the Clerk o f the Bo ard has no tified the Distric t that at leas t half
o f the Sp ecial Dis tricts in San Bernardino County with c urrent od d -year electio ns have p etitio ned to c hange to
even-year elections . A deadline fo r req uesting changes in ac cordanc e with exis ting law is Marc h 10, 2017.
T he effec t o f many special dis tric ts c hanging to even-year elec tio ns wo uld p lace the District in a smaller p o o l o f
s pec ial Districts with o dd-year elections potentially greatly increas ing electio n c os ts.
Recommended by:
Jo hn Mura
General Manager/CEO
T he Dis trict c urrently holds its elec tio ns at the general elec tio n in o d d years. T he next elec tion cycle is this year,
2017. SB 415 amended the Califo rnia Vo ter Rights Ac t requiring a juris dictio n that holds its regular electio ns o n a
d ate other than June o r No vemb er of even years can b e sued to force a c hange of the jurisdic tion’s election date
if turnout among eligib le vo ters at one of its regular elec tions was at least 25% lo wer than the average turno ut in
that jurisdic tion at the prior four s tatewide elec tio ns. Dep end ing o n ac tual voter turnout the Dis trict may b e
forc ed to mo ve to even-year elec tio ns o r ris k p otential voter litigation to forc e the c hange. This p o tential liab ility
to the Dis trict is no t unfo unded as o dd-year elec tio ns o ften have lo wer p artic ipatio n that the general even-year
elec tions , espec ially in gub ernatorial and pres id ential election c yc les.
Should the Board c hoos e to c hange to the even year elections s everal ac tions would occ ur:
C ons id eratio n of Res olution 2017.05 req ues ting the Bo ard o f Sup ervis o rs approve the change to even
year elec tions ;
C irc ulation by the Clerk of the Bo ard o f the propos al and Resolutio n to other d istricts ; and
Upon Approval of the Board o f S upervisors , c urrent terms exp iring in 2017 would be extend ed to exp ire
in 2018. Terms whic h exp ire in 2019 would b e extended to exp ire in 2020.
AGENCY IDEALS AND ENDEAVORS:
Ideals and Endeavor II - Maintain An Enviro nment Committed To Elevated P ublic Servic e
(E) - Practice transparent & acc o untab le fis cal management
FISCAL IMPACT :
T here is limited fis cal impac t to pas s ing the resolutio n and requesting the Board of Supervisors approved the
c hange. S ho uld the Board d etermine to no t mo ve to the even year c ycle the ac tual increas e in cost is unkno wn
and c annot be determined until all other ac tual changes are mad e. Cos ts would likely do uble and potentially
increas e as muc h as 400% ac c o rd ing to the registrar, but no es timated have been p ro vid ed . F isc al imp acts
c anno t b e d etermined related to legal liability.
ATTACHMENTS:
Description Type
Resolution 20 17.05 Resolution Lette r
East Valley Water District
Resolution 2017.05
Page 1 of 2
RESOLUTION NO. 2017.05
RESOLUTION OF THE BOARD OF DIRECTORS OF THE EAST VALLEY WATER
DISTRICT RECOMMENDING CONSOLIDATED ELECTION FOR GOVERNING
BOARD MEMBERS WITH STATEWIDE GENERAL ELECTIONS AND APPROVING
THE RESCHEDULING OF SUCH ELECTION FROM ODD-YEAR TO EVEN-YEAR
ELECTIONS COMMENCING WITH THE 2018 ELECTION
WHEREAS, the East Valley Water District (hereinafter referred to as District) is a
special district organized and operating within the county of San Bernardino pursuant to
California Water Code Section 30000 et seq.; and
WHEREAS, The California Voter Participation Rights Act (“SB 415”), effective
January 1, 2018, provides that a public agency, including a County Water District (“District”),
cannot hold its regular election on any date other than a statewide primary or general election
date in even-numbered years, if holding a regular election on a non-statewide election date has
previously resulted in a “significant decrease in voter turnout”, which is defined as at least 25%
less voter turnout than the average voter turnout within the District for the previous four
statewide general elections; and
WHEREAS, the District’s regular election date is currently not a statewide election date
but held on the first Tuesday following the first Monday in November in odd-numbered years;
and
WHEREAS, in order to change its regular election date to comply with SB 415,
Elections Code Section 10505(d) authorizes the District to adopt a resolution changing its regular
election date from November of odd-numbered years to the statewide general election in
November of even-numbered years; and
WHEREAS, the resolution must be submitted to the Board of Supervisors of the County
of San Bernardino at least 240 Days before the next District regular election, and the resolution
must be approved by the Board of Supervisors in order to change the District’s election date; and
WHEREAS, state law allows the District to extend the terms of current Directors until
their successors are elected and qualified in order to match their terms with a changed regular
election date (Elections Code Section 10404(i));
WHEREAS, it is also the intent of the District’s Governing Board of Directors to extend
the terms of office of current Directors by one year (to November 2018 and November 2020
respectively) in order to match their terms with the changed regular election dates.
NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the East
Valley Water District as follows:
Section 1. Pursuant to Elections Code Sections 10505(d) and 10404(b), hereby adopts
this Resolution of the East Valley Water District, to authorize and change its regular election for
the Board of Directors from the first Tuesday after the first Monday in November of odd-
East Valley Water District
Resolution 2017.05
Page 2 of 2
numbered years to the statewide general election on the first Tuesday after the first Monday in
November of even-numbered years going forward.
Section 2. Special elections called for the purpose of filling Board vacancies, recall of
Directors, District initiative or referendum measure, are not affected by the Resolution, and may
be called at any time authorized by applicable law.
Section 3. The Board of Directors of the East Valley Water District requests approval
from the San Bernardino County Board of Supervisors to consolidate all future District regular
election with the statewide general election to be held in November of even-numbered years. The
President of the Board or General Manager is hereby authorized to take any and all actions, and
execute any documents necessary to assist the San Bernardino County Board of Supervisors in
its review and approval of this Resolution.
Section 4. If consolidation of the election is approved, the term of office of current
members expiring in 2017 will be extended to 2018 and the term of Board members expiring in
2019 will be extended to 2020.
Section 5. The Clerk of the Board of Directors for the East Valley Water District shall
transmit certified copies of this Resolution to the Clerk of the Board of Supervisors and to the
Office of the Registrar of Voters for the County of San Bernardino.
This Resolution shall become operative upon approval by the San Bernardino County Board of
Supervisors
ADOPTED this 8th day of March 2017.
ROLL CALL:
AYES:
NOES:
ABSTAIN:
ABSENT:
_____________________________
Ronald L. Coats,
Board President
March 8, 2017
I HEREBY CERTIFY that the foregoing is a full, true and correct copy of Resolution No.
2017.05 adopted by the Board of Directors of East Valley Water District at its Regular Meeting
held March 8, 2017.
ATTEST:
_____________________________
John Mura
Board Secretary