MINUTES OF THE ADMINISTRATIVE AND FINANCE COMMITTEE MEETING
MARCH 31, 2005
CALL TO ORDER / ROLL CALL
Chair Dixon called the Administrative and Finance Committee meeting to order
at 2:02 p.m. Committee members present were Chair Dixon, Vice Chairs Dailey
and Tu, Directors Johnson, Knutson, Muir, Price, Steiner, Watton, and Williams.
Committee members absent were Directors Bowersox, Brammell, Parker, and Slater-Price.
At that time, there was a quorum of the Committee. Also present were Directors
Lewinger, Pocklington, and Thompson. Staff present was General Manager Stapleton,
General Counsel Hentschke, Deputy General Manager Lanspery, Director of Water
Resources Weinberg, Director of Engineering Economides, Rate and Debt Administrator
Delin and Sr. Water Resource Specialist Willett. Also present was Mr. Ken Mellor,
Consultant, RW Beck.
ADDITIONS TO AGENDA
There were no additions to the agenda.
PUBLIC COMMENT
There were no members of the public who wished to address the Committee regarding
agenda items for this meeting.
PRESENTATION
Mr. Weinberg began the presentation of the results on the Fixed Revenue Study:
Infrastructure Access Charge (IAC) and Capacity Charge Recommendations, introduced
the other presenters, and provided an outline of the presentation. He noted
that there were some participants from the member agencies who were members
of the Technical Advisory Committee (TAC) that were also in attendance. Questions
were encouraged. Mr. Weinberg stated that there is a link between reliability
planning and how facilities are paid for as well as the planning process that
is the foundation for revenue needs; the plan transfers to Facilities and facilitates
transfers to a Revenue Requirement, thus creating a foundation. The purpose
of the Fixed Revenue Study was to address two specific recommendations that
were generated by the MARIRC process: 1) review the IAC (per-equivalent-meter
charge for member agencies every month), and 2) review the Capacity Charge which
is the method that the Water Authority Board has chosen for new development
to pay its fair share of future facilities. Twenty-two of the 23 Member Agencies
participated on the TAC, and staff also communicated with the Building Industry
Association (BIA), a primary representative of the builders that pay these charges.
Mr. Mellor presented the section entitled, “Revenue Study Approach”,
and served as the facilitator of this process with the TAC. Following the formation
of the TAC, a series of five facilitated meetings were conducted. The facilitator
employed a strawman process to quickly define issues and frame discussions allowing
consensus in the group to be identified. Areas requiring further exploration
were also identified. Committee members were each allowed an opportunity to
help further define the issue during roundtable discussion to understand what
is going on in the industry, what other agencies are doing, and examine the
importance of each issue. A matrix summarizing each issue and related discussion
was prepared for review at subsequent meetings and further discussion if necessary.
Actual votes were not taken, but consensus was reached on most issues.
During the five meetings, the TAC made the following recommendations:
· Retain existing IAC methodology;
· Adopt System Capacity Charge using hybrid methodology;
· Adopt New Supply Charge starting with capital cost for supply development
and meter equivalents added after 2004; and
· Present both facets of the discussion of whether to include a Water
Treatment Capacity Charge. This was the only item for which a consensus opinion
was not achieved.
Mr. Willett presented the section entitled, “Proposed Methodology”.
He stated that the current $3.02 billion CIP Budget includes not just System
related facility costs, but also costs for Water Treatment (Twin Oaks) and New
Supply (desalination at Encina) facilities. Recognition of the additional service
categories with different beneficiaries lead to a consensus recommendation for
developing individual capacity charges for each service.
The staff was in concurrence with the findings of the TAC that a System Capacity
Charge should be adopted using the hybrid methodology. The System Charge is
$3,985 that corresponds to all services except water treatment and new supply.
A separate New Supply Charge to recover growth’s share of capital facility
construction for new water supply facilities was recommended. Prior to adoption,
a Facility Allocation Study will identify new customers’ shares of future
fixed asset cost (since 2004) for new water supply development.
Mr. Willett detailed both facets of the Water Treatment Capacity Charge issue
that was unresolved by the TAC. He described staff’s continuing efforts
to recognize the merits found in both approaches to capital recovery for water
treatment facilities. Staff recommended the adoption of a Water Treatment Capacity
Charge using hybrid methodology with pump-back crediting. Agencies that do not
have an existing or planned connection to the treated water system would be
exempt from the Water Treatment Capacity Charge. The proposed Water Treatment
Capacity Charge is $153 per meter equivalent. The rationale behind the pump-back
credit was then described. A discussion and question-and-answer session regarding
the calculation of pump-back credits followed.
Three formulas were proposed for calculation of charges as follows:
System: (Replacement Cost Existing + PV Future CIP)
(Existing Meters + Future Meters)
Water Treatment: (PV Future Treatment CIP)
(Existing Meters + Future Meters)
New Supply: (PV Future CIP + Growth Allocation %)
Future Meters (after 2004)
Staff outlined a schedule of Next Steps as follows:
· Present this information to the Builders’ Industry Association
(already presented to Water Committee; Legislative Committee meeting being scheduled)
and other stakeholders; and
· Conduct Facility Allocation Study of desalination facilities (ongoing);
and
· Set time and place for a public hearing on the System Capacity Charge
component and Water Treatment Capacity Charge at the April Board meeting; and
· Hold public hearing on methodology and proposed charges, and adopt
System Capacity Charge and Water Treatment Capacity Charge at the May Board
meeting.
After discussion, Director Steiner motioned, seconded by Director Knutson,
that staff proceed with presenting the results of the Fixed Revenue Study and
the companion item of setting the time and place for the public hearing on the
System Capacity Charge and the Water Treatment Capacity Charge for the Board
meeting in April. It was also recommended that the staff proceed with continued
communications with the BIA and other appropriate parties.
IV. ADJOURNMENT
There being no further business to come before the Administrative and Finance
Committee, Chair Dixon adjourned the meeting at 3:08 p.m.
_______________________________
Jesse Dixon
Chair
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