HOME

governing board

south bay irr. dist.

national city directors

board calendar

latest meeting agenda

meeting minutes 

position statements

minutes
 

Regular  Meeting

Governing Board of Sweetwater Authority

October 24, 2007

The Governing Board of Sweetwater Authority held a regular meeting on Wednesday, October 24, 2007, at the Sweetwater Authority Administrative Office, 505 Garrett Avenue, Chula Vista, California. Chair Beauchamp called the meeting to order at 3:30 p.m.

• ROLL CALL

Directors Present: Alkire, Beauchamp, Doud, Morrison, Pocklington, Thomas, Welsh

Directors Absent: None

Others Present: General Manager/Treasurer Bostad, Operations Manager Rogers, Legal Counsel Cowett*, Treasurer Delegatee Farrow, and Board Secretary Schoonderwoerd. Staff members: Rick Alexander, Kevin Kasner, Scott McClelland, Bill Olson, George Silva, Jim Smyth, and Tom Woodrum.

• PLEDGE OF ALLEGIANCE TO THE FLAG
Director Doud 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.

• CHAIR’S PRESENTATION

A. Employee Service Awards

Operations Manager Rogers introduced, and Chair Beauchamp presented service awards to the following employees: for five years of service – Tom Feathers, Customer Service Leadworker; and Nathan Patterson, Equipment Operator; for ten years of service – Guillermo Agundez, Utility Worker II; Cesar Alcaraz, Habitat Maintenance Crew Supervisor; Jomar DePaz, Customer Service Leadworker; John Rodriguez, Warehouse Worker II; Rudy Sevilla, Utility Worker II; and Tom Woodrum, Administrative Services Director; for 30 years of service – Richard Emerson, Field Crew Supervisor; Dan Floyd, Chief Water Plant Operator; and Patrick Rasco, Principal Engineering Technician. The following employees were not present to receive awards: for five years of service – Leo Campbell, Plant Maintenance Technician I; and David Gallegos, Habitat Maintenance Worker I; for ten years of service – Maury Hill, Utility Leadworker; and for 30 years of service – Don Thomson, Director of Water Quality.

*Note: Legal Counsel Cowett entered the meeting at 3:32 p.m.

B. Introduction of New Employees

Operations Manager Rogers introduced the following new employees hired in the last six months: Adam Johns, Utility Worker I; Cynthia Pino, Customer Service Representative I (Office); Cinthia Quinonez, Customer Service Representative I (Office); and Brent Redd, Watershed Caretaker I.

At 3:47 p.m. Chair Beauchamp called a short recess for coffee and cake with the recognized employees. The meeting was called back to order at 3:59 p.m. with all members of the Board present.

ACTION CALENDAR ITEMS

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

2. AUDIT REPORT BY BARTLETT, PRINGLE, AND WOLF, LLP

Debra Farrow informed the Board that Danna McGrew, Audit Partner with Bartlett, Pringle, and Wolf, LLP was unable to be here in person to present the results of the Authority’s audit for the year ending June 30, 2007 due to health reasons. The Board was supplied with an emailed draft audit report supported by a PowerPoint version presented by Ms. Farrow. Ms. McGrew addressed the Board via teleconference from Santa Barbara. She began by reviewing some required communications from the audit report. She stated that the audit went very well, they had complete cooperation from management, and there were no disagreements regarding any accounting and auditing issues. The significant estimates used in the preparation of this year’s financial statements related to depreciation expense. There were three entries. The first entry related to Engineering studies of approximately $6.2 million, which were a result of projects that were not capitalized; the studies were abandoned, so those needed to be written off. The second journal entry related to the removal of vehicles which were sold during the year and to record a gain of approximately $28,000 on the disposal of these vehicles worth approximately $200,000. The third entry related to moving interest that was capitalized as part of project costs that were completed; these costs needed to be moved with the projects into fixed assets of approximately $1.4 million. Also, a CalTrans settlement of approximately $5 million was recorded during the year. Ms. McGrew stated that, in accordance with Government Auditing Standards, a clean report with no qualifications was issued.

The management letter comments included recommendations associated with internal controls, which are not uncommon for a large agency with large projects underway. The first recommendation related to the current practice of recording engineering studies as construction in progress, whether the study results in a capital project or not, and later expensing those projects that are deemed to not be capital related. It was noted that in the past this has not been done in a timely manner, which resulted in an adjustment of approximately $6 million to get those items that were capitalized and are not resulting in a large project off the books. In response to Director Pocklington’s inquiry, Ms. McGrew stated that it is recommended that these be written off within a year. Ms. Farrow explained that, for the past 30 years, the cost of studies has been applied and kept on the books. Based on the new auditors’ recommendation, the plan is to annually look at completed studies as capital projects are reviewed and address this issue as capital projects are closed. Projects will initially be reviewed quarterly with the intent to transition to a monthly review process with department heads and project managers. Ms. McGrew continued to comment on the second recommendation related to completed capital asset projects that remain open on the books throughout the fiscal year even after the project had been completed. This causes delays in recording the depreciation expense at the time the asset is placed in service and may affect the calculation of interest expense being capitalized. As noted by Ms. Farrow previously, the implementation of a quarterly project review system will address this issue. Ms. McGrew discussed the third recommendation related to capitalization of Water Revenue Bond interest expense on construction in progress that was being calculated at the end of the year. To insure accurate accounting, Ms. Farrow has implemented monthly procedures to track the interest amounts to be capitalized during the construction period of each project throughout the budget year. The capitalized interest was booked for July, August, and September 2007. The final comment related to disposals of fixed assets and a recommendation to put a procedure in place for reporting the disposals to the Accounting Department in a timely manner. The Authority is moving forward with implementation of the asset management software program, which will address this issue. In response to Director Doud’s inquiry, Ms. McGrew stated that fixed assets include surplus property that is sold. Ms. Farrow noted that these findings are not unusual for a large water agency. She added that, since July, two of the four findings have already been addressed and that by the end of this year procedures will be implemented to address all four issues.

Moving on to the Financial Statements, Ms. McGrew stated that operating revenues were up $1.5 million from the prior year, primarily due to increases in water sales resulting from a rate increase. Operating expenses increased by $10 million primarily due to the engineering studies that were written off this year; an increase in purchased water; increases in labor partially offset by credits from the Metropolitan Water District and San Diego County Water Authority; an increase in legal fees related to the CalTrans settlement; and an increase in employee insurance expenses. Operating income or loss saw an $8.7 million drop. Non-operating revenues (expenses) increased by $4.4 million primarily due to an increase in interest income received; a fair market value adjustment for unrealized gains on government obligations; and the CalTrans settlement, offset by a loss on disposal of assets. Income before contributions was down $4.3 million. The change in total net assets at the end of the year was up $1.7 million. The balance sheet as of June 30, 2007 shows total current assets up by approximately $9 million, primarily due to investments, a rate increase, and the CalTrans settlement. Net long-term assets were down approximately $8 million, resulting in an increase in total assets of approximately $700,000. Total current liabilities increased approximately $1.4 million with the majority of that in accounts payable. Total long-term liabilities decreased $2.5 million. Total net assets increased approximately $1.7 million. Director Doud noted that 16 pages were missing from the draft report. Ms. Farrow apologized and explained that the omissions occurred in an email file that was used since Ms. McGrew was unable to personally bring the formal copies. All directors will receive a bound copy of the report early next week. Ms. McGrew and Ms. Farrow reviewed post-retirement health care benefits, the Authority’s plan for funding the plan under GASB 45, and the costs associated with the PERS defined benefit pension plan. Ms. Farrow noted that the Authority is fully funded in terms of current obligations with PERS.

Director Pocklington made a motion, seconded by Director Welsh, that the Governing Board accept the results of the audit report as presented by Bartlett, Pringle and Wolf, LLP for the fiscal years ended June 30, 2007 and 2006. In view of the fact that the draft audit report contained missing pages, Chair Beauchamp tabled the motion pending receipt and review of the complete report. The Board agreed with Director Alkire’s comment that this confirms the Board’s decision to periodically have new auditors review the Authority’s books. Legal Counsel Cowett commented that the total assets of $202 million reported in this audit are impressive and show that the Authority has invested substantially in its system since it was purchased in 1977. Director Thomas noted that Danna McGrew was named Accountant of the Year by the California Special Districts Association.

3. APPROVAL OF MINUTES

Director Doud made a motion, seconded by Director Welsh, that the Governing Board approve the minutes of the October 10, 2007 Regular Meeting. The motion carried.

Director Pocklington made a motion, seconded by Director Doud, that the Governing Board approve the minutes of the October 16, 2007 Special Meeting. The motion carried with Directors Beauchamp and Morrison abstaining as they did not attend the meeting.

4. APPROVAL OF DEMANDS AND WARRANTS

Director Alkire made a motion, seconded by Director Morrison, that the Governing Board approve Warrants 111618 through 111960 including all voided checks. The motion carried.

5. FINANCE AND PERSONNEL COMMITTEE (Meeting of October 15, 2007)

A. Director Welsh made a motion, seconded by Director Doud, that the Governing Board approve a contribution in the amount of $5,000 from the Expense Contingency Fund to the Association of California Water Agencies for the public education program, “California’s Water: A Crisis We Can’t Ignore.” The motion carried.

B. Director Thomas made a motion, seconded by Director Doud, that the Governing Board approve funding in the amount of $40,000 from the Capital Contingency Fund to retrofit two vehicles per Title 13, California Code of Regulations, Sections 2022 and 2022.1, adopted by the California Air Resources Board to reduce diesel particulate matter emissions from fleets operated (owned or leased) by public agencies and utilities. The motion carried.

C. Director Doud made a motion, seconded by Director Thomas, that the Governing Board approve the renewal of the current agreement for the Cross-Connection Control Specialist half-time position through the end of Fiscal Year 2008-09, predicated on the understanding that the final 12 months of the 18-month contract is subject to inclusion and approval of the 2008-09 budget. The motion carried.

D. Director Welsh made a motion, seconded by Director Alkire, that the Governing Board approve discontinuance of the practice of establishing agreements for master meter water allocation and sub-metering, as recommended by legal counsel. Director Thomas voiced her opposition to this idea and expressed her interest in seeing changes in the law, in light of the impending drought, to call for better assessment of individual water use. The Board agreed that there is a need for this; however, it is outside the Authority’s control. The motion carried with Director Thomas opposing.

E. Review of Quarterly Leak Adjustment Report for the period July through September 2007. This was an information item and no action was required by the Governing Board.

6. OPERATIONS COMMITTEE (Meeting of October 17, 2007)

A. 2007 San Diego Integrated Regional Water Management Plan (IRWMP). General Manager Bostad informed the Board that the CWA Board may be voting tomorrow on authorizing the adoption of this plan and submittal of round two, step two for the Proposition 50 Chapter 8 grant application. This is a beginning effort that will go on into the future for allocation of state and federal grant funds, with direction for this effort provided by CWA, the City of San Diego, and the County of San Diego. They developed a regional advisory committee of about 25 members who have been meeting for about nine months, and with the support of a consultant, they have developed this IRWMP. The first funding effort is coming through on Proposition 50. It will also be used as a tool to allocate funds to projects for Proposition 84 and subsequent funding efforts of the state. Mr. Bostad has been a member of this committee with Rick Alexander as an alternate. This group then picked a 7-member subgroup on which Mr. Bostad represented the retail water agencies. They met to review approximately 150 plus projects that were narrowed down to 25 projects for the first funding round of Proposition 50. Mr. Bostad highlighted some of the projects in the IRWMP and noted that $2 million has been recommended for funding the Carlsbad Desalination Project; $750,000 for the San Diego Region Four-Reservoir Intertie Project Feasibility Study; and $300,000 for the South San Diego County Water Supply Strategy Project. This was an information item and no action was required by the Governing Board.

B. Discussion of draft CSDA Conference press release. This was an information item and no action was required by the Governing Board.

7. NEW BUSINESS

Due to scheduling conflicts with the ACWA Fall Conference and the upcoming holidays, the Board discussed the November and December 2007 meeting schedule.

Director Doud made a motion, seconded by Director Welsh, that the Governing Board approve the cancellation of the November 28, 2007 Board meeting. The motion carried.

Director Pocklington made a motion, seconded by Director Thomas, that the Governing Board approve the cancellation of the December 26, 2007 Board meeting. The motion carried.

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

Director Pocklington stated that, due to issues surrounding the wildfires, tomorrow’s CWA Board will consider only essential items. He sees nothing controversial on the agenda, and he believes that he and Director Morrison are prepared for the meeting.

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

A. Director Welsh made a motion, seconded by Director Doud, that the Governing Board approve per diem for Director Beauchamp’s attendance at the South Bay Irrigation District Board of Directors meeting of October 15, 2007 – Program: “San Diego County Water Authority Blueprint for Water Conservation.” The motion carried.

B. Director Doud made a motion, seconded by Director Morrison, that the Governing Board approve per diem for directors who wish to attend the California State Lands Commission meeting considering the Carlsbad Desalination Plant on Tuesday, October 30, 2007 at 10:00 a.m. The motion carried.

C. California Special Districts Association San Diego Chapter Quarterly Meeting – Thursday, November 15, 2007, 6:00 p.m., at the DoubleTree Club Hotel – Program: “2007-08 Legislative Sessions and Governor Schwarzenegger’s Health Care Reform” presented by Tom Vu, CSDA Legislative Specialist and Cameron Durckel, Representative from Governor Schwarzenegger’s Office. Directors wishing to attend this pre-approved event were requested to turn in their sign-up sheet. No action was required by the Governing Board.

D. Water Education Foundation’s Delta Vision Workshop – December 5, 2007, San Jose, CA. Directors wishing to attend this pre-approved event will contact the Secretary. No action was required by the Governing Board.

10. REPORTS BY DIRECTORS ON EVENTS ATTENDED

Director Doud reported on the California Urban Water Conservation Council’s Drought Management Workshop on October 11th. He stated that it was a good meeting and that they showed pictures of how the dry ground in a drought opens and expands, causing sewer and water lines to break. Director Thomas reported that there was a large cross-section in attendance and that she obtained contact information for those who put the program together. She believes that the best management practices need to be revisited to review the impact on drought management and landscape in light of the recent fire tragedy. Some of the solutions discussed related to a healthy San Diego, and now many people are out of their homes and the natural resources destroyed. She would like to see services expanded, such as those offered by the Water Conservation Garden, because of this amplified situation, and to see more collaboration among the landscapers, architects and policy makers. She also believes that traditional entities such as the EPA and its WaterSense label program are not moving forward at the rate they should be. Director Beauchamp said he was impressed with the anti-turf information that is showing up, and particularly impressed by the focused attention by Jim Barrett, Water Department Director at the City of San Diego, regarding the details of getting a drought management program going.

Director Doud reported that the program at the First Friday Meeting of October 12th was hosted by Supervisor Cox and included a very timely presentation by Ron Lake, Director of the San Diego County Office of Emergency Services, on how to prepare for the next wildfire.

Director Beauchamp reported that he attended the Water Conservation Summit on October 12th. Director Thomas stated that she was very pleased to see that there was a lot of interaction going on among many organizations and individuals in a beautifully landscaped setting. The presentation panel was not the usual panel that might be expected. They were representatives of municipalities, landscaping, the social psychology of change, etc. Their responses to questions were not packaged, but were very real and workable. She also participated in an industry-related working group, which was very effective.

Director Beauchamp reported that the Council of Water Utilities Meeting of October 16th featured Senator Kehoe and that she received some very tough questions. Director Pocklington stated he is very concerned with what is going on in Sacramento, and that the politicians do not comprehend the importance of the conveyance system through the Delta. He believes one dam should be built, south of the Delta, and made a flood dam if that is what is needed. Director Alkire added that he was glad to hear Mr. Bostad’s statement that Sweetwater Authority is looking out for itself by doing projects on its own and not counting on someone else in Sacramento or Washington to get them done.

Director Morrison stated that there were two presentations at the National City Chamber of Commerce meeting of October 17th. One was on current issues of homeland security and disaster preparedness, and the other was on the topic of identity theft.

Director Pocklington reported that Dr. Tim Quinn gave a very good report at the Water Agencies Association Quarterly Meeting on October 18th. He learned that we have 29 state and 37 federal contractors, and that they have offered to pay for the conveyance system. He suggested to Dr. Quinn that perhaps MWD could work with the contractors and move ahead with the system. He also wondered what would happen if MWD stopped approving any more annexations, and Dr. Quinn indicated that that may start moving people. Director Pocklington stated that he would start talking to some people to move in that direction, because he is concerned about waiting until the big disaster happens and everyone suffers. Director Thomas added that Dr. Quinn also indicated that the Department of Water Resources is not moving forward on this.

The Chula Vista Interagency Water Task Force meeting of October 22nd was cancelled due to the wildfires, and Director Thomas did not attend the Bonita Business and Professional Association meeting of October 23rd for the same reason.

11. BUDGET REPORT – DIRECTOR OF FINANCE FARROW
Report as of September 30, 2007

Director of Finance Farrow reported that Water Revenue for September was $478,000, or 4.5 percent, under budget. She stated that we are still experiencing some reduction in consumption, and she reminded the Board that the consumption numbers are prepared from a three-year rolling average. She noted that our service area is still under the 1989 base year mark from the first drought, indicating that consumers are still conserving from 1989. Operating Expenses show that we are compensating for water sales by being $423,000, or 4.5 percent, under budget. She added that capacity fees were budgeted at $300,000 and we have already received $416,000. Workers’ compensation, health and liability insurance payments are also under budget. In response to Director Morrison’s question, Ms. Farrow stated that capacity fees go into the general fund. Director Morrison also inquired how capacity fees paid for large developments coming in are used for operating expenses versus capacity. Legal Counsel Cowett stated that capacity fees were implemented to pay for existing capacity only. New developments are buying into existing capacity, not paying for new capacity. General Manager Bostad clarified that there are actually two capacity charges. The local capacity charges are collected for buying into the Authority’s existing capacity. The Authority also collects a capacity charge as the retailer and passes that through to CWA for its capacity charge. General Bostad stated that the capacity fee is related to the size of the project and the demand of the project. Operations Manager Rogers added that one of the things that the capacity fee looks at is only the projects that improve or expand the system.

12. QUARTERLY REPORT OF DIRECTORS’ EXPENSES – 1ST QUARTER FY 2007-08

This spreadsheet report was provided to the Board for information purposes and there were no comments from the Board.

13. MANAGEMENT REPORT

A. Report of Operations Manager Rogers: Mr. Rogers reported on the effects of the wildfire crisis on the Authority and stated that by the end of the day on Monday, 24 employees were out as a result of personal impacts. Kevin Kasner assisted in getting the Emergency Operations Center (EOC) ready to go down at the Reynolds Plant on Monday afternoon. Around midnight that night Mr. Rogers received a call from the operator at the Filter Plant that neighboring homes had received a mandatory evacuation notice, which meant that the fire now threatened our service area. He called Mr. Bostad, and at approximately 1:30 a.m. the EOC was activated. On his way in from Rancho San Diego, Mr. Rogers noticed the fire surrounding Mt. Miguel. The fears were that power would be lost at the Perdue Plant and we would not be able to produce water, and also that we would get a mandatory evacuation notice for the Perdue Plant. We cannot remotely run the treatment of water from the reservoir from the Reynolds Plant. CWA was notified, and we began to take treated water, which meant the Perdue Plant could be run remotely. Staff began filling up the tanks just in case Perdue was lost. By about 10:15 a.m. on Tuesday, the immediate threat was over and the EOC was shut down. The Board viewed some photos of the fire at various stages and the extinguishing efforts conducted using military and state helicopters. Director Beauchamp added that staff went above and beyond in their jobs while their own homes were at risk. Mr. Rogers commended staff on their commitment and performance during this crisis. He noted that many employees were in mandatory evacuation areas but, thankfully, none suffered fire damage.

B. Report of General Manager Bostad: Mr. Bostad expressed his appreciation to staff for the job they did during the fire crisis and thanked Mr. Rogers and other involved staff for their work in organizing the EOC. He asked Rick Alexander, Environmental and Governmental Services Director, to address the habitat concerns after the disaster. Mr. Alexander shared some photos taken of areas of concern when he and Pete Famolaro toured the habitat management area and other environmental areas to assess their status. In total, about 90 of 120 acres in the HMP area were destroyed; about 75 percent of the habitat that the Authority has been restoring over the last 12 years. The Skelton Ranch mitigation bank was burned over completely. The URDS II mitigation area was not burned, but about 100 yards along the road was bulldozed to help create a fire break. The vernal pool and owl colony were not damaged. Mr. Alexander said there is a bright side to starting over. There is an opportunity to better address the hydrology and to create a more successional riparian habitat. They are looking at the positive opportunities that it presents. Updates will follow as options are investigated. Director Pocklington inquired about the effects of future rains washing this material into the reservoir Mr. Bostad responded that the nitrogen acts as a fertilizer and it may very well create an algae bloom next summer. Mr. Alexander noted that this area still has to be treated as a protected habitat forever. However, the wildlife agencies hopefully should agree to allow us to go in to remove the non-native invasives from the area. Director Beauchamp noted that, from a biological standpoint, the loss of the gnatcatcher’s habitat is terrible, but there is also the opportunity for a rebirth of the area.

General Manager Bostad provided the Board members with formal letters of notification and announced that he will be retiring from Sweetwater Authority on May 9, 2008.

14. DIRECTORS’ COMMENTS

Director Welsh expressed her pride in this organization and the way she knew it was handling the fire emergency.

Director Pocklington stated that the Authority has a very dedicated staff and that this is a very unique organization with great leadership. He is sorry to see Dennis go. He has provided strong leadership with his 30 years of experience in this organization. He added that he is very proud to be a member of the team that comprises this Board.

Director Thomas requested that eucalyptus trees not be used when replacing trees due to the fires because of their flammability. She reiterated that we have a great team with great leadership and vision and we are very fortunate. She added that the prime goal of our directors is to create an environment where good people can work together and be able to carry out their role.

Director Alkire gave a “Bravo Zulu” to staff, which is a Naval signal meaning “well done,” for their efforts during the wildfires.

Director Morrison commented that the National City Week schedule of events has been toned down due to the fires, but they are moving forward with the dedication of Morgan Square Plaza on Tuesday, October 30th and the State of the City Address on Thursday, November 1st. Sycuan has not yet made a decision on the Marina Gateway Plaza groundbreaking on Tuesday.

Director Beauchamp noted that, due to the fire issues, the Conservation Garden’s California Friendly Gardening Festival has been moved to November 10th. He also thanked staff for their efforts during the potential disaster faced with the wildfires. He added that with General Manager Bostad’s announcement of his retirement, we can now focus on the transition that has been put in place. He thanked Mr. Bostad for his leadership and he looks forward to hearing about his plans after retirement.

15. CLOSED SESSION
There was none.

16. ADJOURNMENT

With no further business before the Board, Chair Beauchamp adjourned the meeting at 6:24 p.m.