minutes

Regular Meeting

Governing Board of Sweetwater Authority

September 22, 2004

The Governing Board of Sweetwater Authority held a regular meeting on Wednesday, September 22, 2004, at the Sweetwater Authority Administrative Office, 505 Garrett Avenue, Chula Vista, California. Chair Doud called the meeting to order at 3:30 p.m.

· ROLL CALL

Directors Present: Alkire, Beauchamp, Doud, Inzunza, Pocklington, Reynolds, and Welsh.

Directors Absent: None.

Others Present: General Manager Bostad, Operations Manager Rogers, Legal Counsel de Sousa, Treasurer Avery, and Board Secretary Farpón. Staff members, Michael Garrod, Hank Gaus, Mary Ann Mann, Bill Olson, George Silva, Don Thomson, and Tom Woodrum.

· PLEDGE OF ALLEGIANCE TO THE FLAG
Director Pocklington conducted the pledge of allegiance to the flag.

· OPPORTUNITY FOR PUBLIC COMMENT (Government Code Section (54954.3)
There were no members of the public present for comment.

· CHAIR 'S PRESENTATION
There was no presentation.

ACTION CALENDAR ITEMS

1. ITEMS TO BE ADDED, WITHDRAWN, OR REORDERED IN THE AGENDA
There were none.

2. AUDIT REPORT BY ORTEGA & KONRAD, LLP

Operations Manager Rogers introduced Mario Ortega and Gene Konrad, the partners in the new firm Ortega & Konrad, LLP that was selected to do the Authority's audits for the next two years. Mr. Ortega thanked the board and said that he would be presenting the auditor's report and highlighting the key points that Management considered important.

He said that there was an increase of $2.1 million in the net assets for the year. Also, the Operating Expenses increased by $2.2 million, which was a combination of $800,000 more in the cost of water and about $1.4 million increase in liability insurance, employee wages, and benefit expenses.

Mr. Ortega stated that as a result of the Surface Storage Operating Agreement, Sweetwater consumed 1,269 acre-feet of water at a discount savings of $103,000. Also, as a result of reviewing their levels of reserve requirements, MWD and CWA issued a refund for a total of $662,000. At the end of the year there was an adjustment to the PERS program, and the employer contribution changed to 12.037 and the employee's portion went from 7 to 8 percent.

As for the net assets, Sweetwater's net investment was $141 million at the end of the year. Mr. Ortega referred to the related debt, which decreased by $4.2 million. This represents that Sweetwater invested $2.8 million into the system, with the rate of depreciation taken into consideration. However, the 2002 bonds decreased the net value of that particular section as they were used. In summary, $7 million of debt was transferred over and overall it ended up decreasing the investment and net assets by $4.2 million. He added that, as the principal of the bonds starts getting paid down, the number would be going up.

The Unrestricted Net Assets increased by $5.5 million, mainly as a result of the $1.2 million increase in income plus depreciation of $4.7 million, which is being charged back to the net assets. The revenues during the year increased by $1.6 million. This was the result of a 6.9 percent rate increase in September and $662,262 worth of refunds from MWD and CWA. The operating expenses increased by about $2.5 million.

Mr. Ortega talked about the Capital Assets. Some of the major items are $1.2 million for the Shoreline Fishing Program, $3.5 million for the replacement of metallic mains and improvements, $533,000 for the vehicle and equipment replacement programs, and $1.7 million for the water monitoring studies. Out of the $1.2 million for the fishing program, $838,750 came from grants. There was no activity during the year under the long-term debt other than the pay down, which was approximately $920,000. There was an increase of about $3.3 million under Cash Flow Investments.

Mr. Ortega mentioned the increase in the PERS contribution. He pointed out that for years Sweetwater was not required to make any contributions to PERS because of the fantastic return of the stock market. The Funded Status was 130.5 percent in 1998, 128.6 percent in 1999, 126.1 percent in 2001, 117.4 percent in 2001, and 100.7 percent in 2002. Sweetwater's funding is now at 100 percent and, from now on, Sweetwater will be funding its share of contribution into the program.

Mr. Ortega then answered some questions from the members of the board.

Director Welsh made a motion, seconded by Director Beauchamp, that the Governing Board approve the Audit Report as presented by Ortega & Konrad LLP for the year ended June 30, 2004 and 2003. The motion carried.

3. APPROVAL OF MINUTES

Director Pocklington made a motion, seconded by Director Beauchamp, that the Board approve the minutes of September 8, 2004. The motion carried.

4. APPROVAL OF DEMANDS AND WARRANTS

Director Pocklington made a motion, seconded by Director Alkire, that the Governing Board approve Warrants 96211 through 96462 including all voided checks. The motion carried.

5. OPERATIONS COMMITTEE (Meeting of September 16, 2004)

Presentation of Greywater Reuse System by Rewater Systems, Inc., concerning property at 4th Avenue and C Street, Chula Vista. This was an information item and no action was required by the Governing Board.

Director Beauchamp made a motion, seconded by Director Welsh, that the Governing Board approve the water pressure increase request by Mr. Prouty on East Queen Anne Drive, Chula Vista and that $30,000 be allocated from the Repair and Replacement Reserve Fund to complete the work. The motion carried.

6. FINANCE AND PERSONNEL COMMITTEE (Meeting of September 20, 2004)

Director Welsh made a motion, seconded by Director Pocklington, that the Governing Board waive the repair fee of $275.29 for an illegal connection and damage to the angle meter stop at 52 Palomar Street, Chula Vista, and direct staff to document the incident in the customer's file for future reference. The motion carried.

Director Welsh made a motion, seconded by Director Doud, that the Governing Board approve a one-time payment of $125 to Mr. and Mrs. Cheney as a gesture of good will in lieu of a voucher rebate. The motion carried.

7. NEW BUSINESS

Upon a motion made by Director Beauchamp, seconded by Director Pocklington, the following Resolution:

RESOLUTION 04-15
A RESOLUTION OF THE GOVERNING BOARD OF SWEETWATER AUTHORITY SUPPORTING PROPOSITION 1A

was passed and adopted by the following vote, to wit:

Ayes: Directors Alkire, Beauchamp, Doud, Inzunza, Pocklington, Reynolds and Welsh
Noes: None
Absent: None
Abstain: None

8. REPORT OF THE SOUTH BAY IRRIGATION DISTRICT REPRESENTATIVE AND THE CITY OF NATIONAL CITY REPRESENTATIVE TO THE SAN DIEGO COUNTY WATER AUTHORITY

Mr. Valderrama gave his report on issues to be discussed under the Administrative and Legal, Public Affairs, and Planning and Environmental Committees. Some of the items to be discussed are the amendment to an agreement with Sedona Staffing Services for temporary staffing, an increase in the operating budget for Fiscal-Year 2005 for a total of $1,668,375 to accommodate proposition funding, and the award of a professional service agreement to Public Financial Management to prepare a financial study for the Binational Desalination Program. The Carlsbad Desalination Plant will be discussed in closed session.

Director Pocklington reviewed items under the Water Policy, Fiscal Policy, and Engineering and Operation Committees. One of these items was the increase in the contribution to the Colorado River Board from three percent to eight percent. They will also discuss a position to take on HR 4791 (Hunter). He reported that $425 million worth of bonds had been sold last week at an interest rate of 4.78 percent, and that the rating went from AA- to AA. He discussed the increase in the cost of water. He said that the CWA is proposing a melding untreated municipal and industrial supply rate of $349 per acre-foot effective January 1, 2005, which is an increase of $18 per acre foot as compared to the calendar year 2005 MWD Tier I rate. He added that staff has proposed to recoup the incurred cost over a five-year period. He commented that he had spent all day yesterday visiting four desalination sites from Los Angeles to West Basin to Long Beach. There were presentations from South Orange County and from San Diego County. He noted that the plant that will be built in Los Angeles will produce 12 million gallons per day to up to 25 million, but they would have to do many changes to their distribution system to be able to absorb 50 or 100 million gallons per day.

9. APPROVAL OF DIRECTORS' ATTENDANCE AT MEETINGS AND FUTURE AGENDA ITEMS

A. American Water Works Association - The Water/Sewer Commissioner and Public Officials Summit - October 16-18, 2004 - Embassy Suites Downtown Hotel, Denver, Colorado. None of the directors were interested in attending this event. No action was required by the Governing Board.

East Valley Water District & AWWA Research Foundation - 2004 Water Quality Conference - October 27-29, 2004 - Doubletree Hotel, Ontario. None of the directors were interested in attending this event. No action was required by the Governing Board.

CLE - California Water Law & Policy - October 28-29, 2004 - Marriott Coronado Island Resort, San Diego. Directors Doud and Welsh will attend this event. Director Pocklington made a motion, seconded by Director Alkire, that the Governing Board approve per diem for directors who wish to attend this event. The motion carried.

10. REPORT OF TREASURER - WANDA AVERY

Ms. Avery reported that interest rates went up another quarter percent with a promise that they will go up again.

11. BUDGET REPORT - DIRECTOR OF FINANCE GAUS
Report as of August 31, 2004

Director of Finance Gaus said that this report would cover the months of July and August. The water sales were $179,904, or about 200 acre-feet more water sold than what we anticipated for the first two months. The Other Income was $6,000 less than we had estimated. The Interest Income was $30,000 higher than expected. Operating Expenses are exactly what we anticipated. In summary, we anticipated cash flow from Operating Revenue Expenses at $1.5 million and we have $1.8 million.

NOTE: Director Inzunza left the meeting at 4:34 p.m.

12. MANAGEMENT REPORT

B. Report of Operations Manager Rogers: Operations Manager Rogers reported that yesterday at the Council of Water Utilities breakfast he had the fortune of sitting next to Marilyn Dailey who is the Escondido representative to the CWA. She gave him a hard time about the fact that they had taken our Director of Water Quality. This will be Mary Ann Mann's last board meeting and he wanted to wish her very good success at the City of Escondido. He welcomed Don Thomson as the Interim Director of Water Quality. He added that Don has been with Sweetwater for 28 years.

Report of General Manager Bostad: Mr. Bostad said he wished Mary Ann Mann well. He informed the Board that he met with Senator Bill Morrow at a Water Issues Advisory Committee, which had allowed him to provide some input to some of the committee issues for Sacramento. Some items discussed were the Quantification Settlement Agreement and trying to get a better understanding of what he can do to help support water supply and water treatment issues. It was a very interesting forum. He also wanted to pass on to the CWA representatives that Maureen Stapleton had been informed of our concerns with regards to the construction schedule of Pipeline 3. The CWA is looking at potentially shutting down the raw water aqueduct to Sweetwater Authority during the wintertime next year, which would have severe impacts on the Seasonal Storage Operating Agreement. He referred to the Monthly Report of Activities included in the agenda packet and offered to answer any questions that directors might have.

13. DIRECTORS' COMMENTS

Director Reynolds wished Mary Ann Mann good luck and said that he enjoyed having her as a member of the Sweetwater staff.

Director Alkire wished her the same.

Director Welsh said that she wanted to say more than good luck and goodbye. She added, thank you.

Director Pocklington said that he would not be able to have coffee with Mary Ann tomorrow because he has meetings at the CWA all day. He also said that he talked to Marilyn Dailey about Mary Ann, and she knows that she got a good, good person. He thanked Mary Ann for her service.

Director Beauchamp said that he appreciates the brief time that he has been able to see the quality of work that Mary Ann does. He thinks it is a wonderful opportunity for her to expand professionally. He said that even though she will be at the City of Escondido as a resource to Sweetwater, he hopes that she sees Sweetwater too as a resource.

Director Doud said that Marilyn Dailey was sitting between he and Operations Manager Rogers and she kept sticking the needle in both of them. He knows that Mary Ann will do a good job there and he wished her well. He gave an unknown quote: "Silent and listen are spelled with the same letters."

14. CLOSED SESSION

There was no need for one.

15. ADJOURNMENT

With no further business before the Board, Chair Doud adjourned the meeting at 4:40 p.m., to the hour of 6:00 p.m. on October 13, 2004.