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05-17-120 0 SOUTH TAHOE PUBLIC UTILITY DISTRICT Richard Solbrig, General Manager Paul Sciuto, Assistant General Manager Eric W. Schafer, President BOARD MEMBERS James R. Jones, Vice President Chris Cefalu, Director Randy VovIgesang, Director REGULAR MEETING OF THE BOARD OF DIRECTORS SOUTH TAHOE PUBLIC UTILITY DISTRICT MAY 17, 2012 MINUTES Kelly Sheehan, Director The Board of Directors of the South Tahoe Public Utility District met in a regular session, May 17, 2012, 2:00 p.m., at the District Office, located at 1275 Meadow Crest Drive, South Lake Tahoe, California. BOARD OF DIRECTORS: President Schafer, Directors Cefalu, Jones, Vogelgesang, Sheehan STAFF: Solbrig, Sharp, Sciuto, Hughes, Cocking, Henderson, C. Stanley, Van Gorden, Hussmann, Nolan, Rasmussen, Johnson, Cullen, Thiel, Bartlett, Bledsoe, Attorney Kvistad GUESTS: Kathryn Reed /Lake Tahoe News, Shawn Koorn /HDR Engineering, Andrew Strain /Heavenly Valley Austris Rungis /IEDA, Brenda Estrada /West Yost, Mary Kortge ROLL CALL PROPOSITION 218 MAJORITY PROTEST HEARING The Majority Protest Hearing was opened at 2:05 p.m. Pursuant MAJORITY PROTEST to the requirements of Proposition 218, Tim Bledsoe reported HEARING that on March 13, 2012, notices were issued, and mailed to all property owners on March 26. The simplified notices were mailed a week in advance of the required date, and included a pro- posed sewer rate increase of 5 %, a proposed restructured metered water rate to increase the base charge, decrease the consumptive charge, add a second consumptive tier, and adjustment of all water rates to increase total water service charge revenue by a maximum of 2 %. 0 c REGULAR BOARD MEETING MINUTES - MAY 17, 2012 PAGE - 2 In response, the District received 1374 protests for the water MAJORITY PROTEST rate changes, of which 1245 are valid, accounting for 8.69% HEARING of the water customers. The sewer rate increase received (continued) 1,655 protests, of which 1526 are valid, accounting for 8.42% of the sewer customers. The Majority Protest Hearing was the final opportunity to receive protests and none were received. The hearing was closed at 2:10 p.m. Moved Jones / Second Cefalu / Passed Unanimously to approve CONSENT CALENDAR the Consent Calendar as submitted: a. Liability Insurance Claim Against STPUD Received from Amanda Masellones - Rejected claim in accordance with Government Code Section 913. ITEMS FOR BOARD ACTION Proposition 218 notices were issued and Tess than 9% of District customers protested the proposed increases scheduled for fiscal year 2012/13, including the restructured metered water rates. The restructured metered water rates were developed through a water cost of service study prepared by HDR Engineering, in 2011. The base charge has been increased in an effort to offset a greater percentage of the District's fixed costs, while the consumption charge has been reduced. Also, the addition of an ascending two - tiered structure for residential consumption was proposed. Staff will continue to collect and monitor water consumption data and provide future metered and non - metered water rate recommendations. WATER AND SEWER RATE ORDINANCE NO. 540-12 The 5% sewer rate increase will generate approximately $515,000 and will help offset future debt service payments and costs associated with capital improvements of the District. The District is preparing for several large projects over the next three years, including the Diamond Valley Ranch (DVR) irrigation project ($5.5M), Fallen Leaf Lake sewer improvements ($2.4M) and a Luther Pass Pump Station pump and motor upgrade ($1.3M). The District has budgeted to borrow for the DVR project creating an annual debt service payment of approximately $360,000. The 2% water rate increase will generate approximately $183,000 and will help offset costs associated with capital improvements of the District. REGULAR BOARD MEETING MINUTES - MAY 17, 2012 PAGE - 3 CA lengthy discussion took place that included the following points: WATER AND SEWER RATE • Proposed increases do not keep pace with replacement cost ORDINANCE NO. 540 -12 recommendations, so higher increases will be needed in the (continued) future. • While Board members were in favor of the newly restructured water meter rates included in the Ordinance, some were not in favor of the proposed rate increases included in the Ordinance. • The local economy continues to suffer, and while the need to keep infrastructure in tact is recognized, a rate increase would create hardships for the District's ratepayers. • The results of the District's labor negotiations are unknown at this time. • The District has worked hard to build and protect its financial position over the years, and voting no on rate increases would jeopardize the ability to receive low interest loans. Postponing necessary increases now would be hard to make up for later. • The suggestion to reduce the budget through reductions and belt tightening was included as part of the 2012/2013 budget process. • The rate increase amounts to $2.30 more per month for rate- payers. Customer's individual investment in the system is valuable and it costs to maintain and protect that investment. © • The District's rate increases over the last 10 years have not come close to the increases other utilities such as gas and electric have passed on to their customers. • 93% of the District's customers did not protest the rate increase. • Public works projects create jobs and stimulates the economy. 0 The Ordinance was broken down into two components, and separate votes were taken on each: Moved Jones/ Second Vogelgesang / Passed Unanimously to enact he proposed restructured meter rates section of Ordinance 540 -12. Moved Jones / Second Schafer / Cefalu and Vogelgesang Voted No 1 Passed to enact the proposed 5% sewer and 2% water rate Increases sections of Ordinance No. 540 -12. The Fiscal Year 2012/13 budget in the amount of $20,813,022 is fully FISCAL YEAR 2012/13 funded and includes a 5% increase in sewer rates. The proposed SEWER ENTERPRISE FUND rate increase will allow the District to move forward with the top BUDGET priority DVR irrigation project. As part of this rate increase, the Board discussed conducting a customer satisfaction survey to ask questions that will help make decisions for the future. It was the consensus of the Board to direct staff to post a customer satisfaction survey on the District's web site, and to bring back information regarding obtaining a telephone 0 REGULAR BOARD MEETING MINUTES - MAY 17, 2012 PAGE - 4 survey proposal, that will ask specific questions to determine if spending a portion of the rate increase to broadcast /stream Board meetings on the internet is desired. Moved Jones / Second Sheehan / Passed Unanimously to adopt Resolution No. 2908 -12 adopting the Fiscal Year 2012/13 Sewer Enterprise Fund Budget. The Fiscal Year 2012/13 budget in the amount of $14,255,873 is fully funded and includes a 2% increase to water service charge rates. In addition to the 2% rate increase, the metered rate is being restructured to increase the base charge and reduce the consumptive charge. The increased base charge will provide the District a larger guaranteed revenue stream to cover its fixed costs which account for 80 -90% of the District's operating budget. The consumptive charge has been lowered in an attempt to create more fairness between metered and non - metered customers. Moved Cefalu / Second Sheehan / Passed Unanimously to adopt Resolution No. 2909 -12 adopting the Fiscal Year 2012/13 Water Enterprise Fund Budget. This project includes coatings work on the Cold Creek, Gardner Mountain No. 2, and Christmas Valley tanks. The coatings on all tanks were recently assessed and these three tanks had some of the highest priorities for recoating work due to delamination, rust- ing, and other coating failures. The bid documents included a base bid and two additive alternates for additional exterior coatings work. The lowest bid was based on the base bid amount only. John Thiel reported nine bids were received at the May 16 bid opening. Upon review of the three lowest bids, irregularities were found and summarized. The two irregularities in the apparent low bid received from Crosno Construction were determined to be minor, and are considered inconsequential and immaterial. Moved Jones / Second Cefalu / Passed Unanimously to waive the minor bid irregularities, and award the bid to the lowest responsive, responsible bidder, Crosno Construction, in the amount of $341,500. FISCAL YEAR 2012/13 SEWER ENTERPRISE FUND BUDGET (continued) FISCAL YEAR 2012/13 WATER ENTERPRISE FUND BUDGET 2012 WATER TANK RECOATING PROJECT The District was contacted by Andrew Strain, a representative of ELECTRICAL RATE Heavenly and Northstar resorts, to discuss Liberty Energy's pro- INTERVENTION 0 posed rate increase. He inquired if the District would be interested in participating in an intervention with other organizations in the 0 REGULAR BOARD MEETING MINUTES - MAY 17, 2012 PAGE - 5 same A -3 customer class in an effort to ensure that costs ELECTRICAL RATE associated with other customer classes are not being passed INTERVENTION through to the A -3 customer class. (continued) Heavenly participated in a similar intervention a few years ago with Sierra Pacific Power, and the District benefited from the realized savings. Participation include sharing the costs for services of an outside consultant to represent the interveners. A formula was developed to ensure fees are divided equally among the number of inter- veners. The estimated budget for the current intervention is $67,000 - $100,000 of which $16,750 - $25,000 would be the District's estimated share. Andrew Strain addressed the Board and relayed the successful interventions he has been involved with. The goal is to ensure the overall rate Liberty Energy is proposing is justified. The Board discussed the proposal, and noted it is an unbudgeted item. It was the consensus of the Board to participate in the intervention. Staff will prepare an agenda item seeking approval of costs at a future Board meeting. 0 No Board action. 0 Moved Cefalu / Second Vogelgesang / Passed Unanimously PAYMENT OF CLAIMS to approve payment in the amount of $754,673.10. Capital Improvement Program Ad Hoc Committee: The BOARD MEMBER AD HOC committee met May 14 to discuss projections and identify water & STANDING COMMITTEE and sewer project needs for the next ten years. The needs are REPORTS prioritized based on a risk analysis prepared by staff. They also discussed the opportunities for revenue generation including hydro - electric generation from the C -line, etc. The committee will meet again after July 1 to determine project costs to include in the 2013/2014 budget. Water and Wastewater Operations Committee: The committee met May 14. Minutes of the meeting are available upon request. Director Schafer received clarification from Director Vogelgesang BOARD MEMBER REPORTS regarding the duties expected as part of representing the District on the South Tahoe Redevelopment Successor Agency. Director Jones reported on his attendance at the recent ACWA (Association of California Water Agencies) conference. He attended various sessions, including those on water quality, ethics training, infrastructure replacement, and cap and trade. He also attended a meeting at the Bureau of Reclamation. REGULAR BOARD MEETING MINUTES - MAY 17, 2012 PAGE - 6 0 The last meeting was held May 2, and the next meeting will be EL DORADO COUNTY on June 13. The September 12 meeting will be held at the District. WATER AGENCY REPORT Grants Coordinator: Lynn Nolan reported the District will apply for STAFF REPORTS a grant from the California Department of Public Health for $17M for water meters. This grant is awarded based on a percentage of disadvantaged in the community, and an income survey will be necessary. This unbudgeted item, estimated to cost $30,000, will be brought to the June 7 Board meeting for approval to issue request for proposals to perform the survey. Assistant General Manager /Engineer: Paul Sciuto reported the conditions of the manhole and exposed sewer line off Country Club near Upper Truckee River is worsening. The river bank has eroded by three more feet, which leaves only one foot before the manhole is undermined. If the situation becomes more dire, it may be necessary to take immediate action to implement repairs, which are not budgeted for as this was an unexpected occurrence. 3:50 P.M. ADJOURNMENT TO CLOSED SESSION ACTION / REPORT ON ITEM DISCUSSED DURING CLOSED SESSION a. Pursuant to Government Code Section 54956.9(b) /Liability Claim Against STPUD received from Amanda Masellones No reportable Board action was taken. b. Pursuant to Government Code Section 54956.9(a) /Conference with Legal Counsel- Existing Litigation re: False Claims Act Case: United States, the States of California, Delaware, Florida, Nevada, and Tennessee and the Commonwealths of Massachusetts and Virginia ex ret. John Hendrix v. J -M Manufacturing Company, Inc. and Formosa Plastics Corporation, U.S.A., Civil Action No. ED CV06- 0055 -GW, United States District Court for the Central District of California No reportable Board action was taken. c. Pursuant to Government Code Section 54956.9(a) /Conference with Legal Counsel- Existing Litigation re: Los Angeles County Superior Court Case No. BC459943, State of Nevada, et al. v. J -M Manufacturing, et al. No reportable Board action was taken. 0 0 0 REGULAR BOARD MEETING MINUTES - MAY 17, 2012 PAGE - 7 d. Pursuant to Government Code Section 54957(a) /Conference with Labor Negotiators Agency Negotiators: Austris Rungis /IEDA, Richard Solbrig /General Manager, Nancy Hussmann /Human Resources Director, Paul Hughes /Chief Financial Officer Employee Organization: Management Unit No reportable Board action was taken. e. Pursuant to Government Code Section 54957(a) /Conference with Labor Negotiators Agency Negotiators: Austris Rungis /IEDA, Richard Solbrig /General Manager, Nancy Hussmann /Human Resources Director, Paul Hughes /Chief Financial Officer Employee Organization: Stationary Engineers, Local 39 No reportable Board action was taken. 4:25 P.M. ATTEST: r ♦ 4 Eric W. Schaf -r, B. (Pd President RECONVENED TO OPEN SESSION AND MEETING ADJOURNMENT South Tahoe Public Utility District Kathy Sharp erk of the B rd South Tahoe 'ublic Utility District DATE: .-S - I - I `" \ BOARD OF DIRECTORS MEETING GUEST SIGN -IN SHEET IN ACCORDANCE WITH THE BROWN ACT: COMPLETION OF THIS INFORMATION IS VOLUNTARY, NOT MANDATORY, AND IS NOT A PRECONDITION FOR ATTENDANCE.