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SLVWD Board Meeting Summary

January 21, 2021

Mark Dolson

Highlights:

  • Loan analysis.

  • Board Policy Manual update.

  • Next Board meeting is at 6:30 PM on February 2.

Preliminaries:

There were no actions to report from closed session.  There were no non-agenda-related public oral communications (and there were only two public members in attendance for most of the meeting).  District Manager Rick Rogers requested removal of the agenda item concerning the proposed Fire Recovery Surcharge; this item will be discussed at a Special Board Meeting Tuesday January 26th.  President Mahood explained that this postponement was intended to improve the public’s ability to comment by allowing time for valley residents to recover from this week’s widespread power outages.  Rick Rogers also requested that the order of items on the agenda be revised to accommodate a guest speaker.

 

New Business

Loan Analysis

Finance Manager Stephanie Hill introduced Chris Perlitz of Municipal Capital Markets Group (MCM).  Chris is working as a Municipal Advisor for a minimal fee.  He was the underwriter on the District’s most recent financing and is now providing the District with advice and analysis on the complex question of how to optimally finance imminent and upcoming District expenses.

There are three different kinds of pending expenditures that will ultimately require the District to obtain one or more loans:

  • The District’s 2020 cash reserves were sufficient to cover the initial $1 million in fire-related emergency expenses, but an unanticipated surge of over $2 million in additional expenses has created an immediate need to secure new financing by March of 2021.  The District expects to continue incurring fire-recovery expenses (potentially totaling $20 million) over the next three years, and even though many of these expenses will ultimately be reimbursed by FEMA, the District will require a significant cash reserve to manage its payments.

  • FEMA will ultimately cover only 75% of the District’s fire-recovery expenses, so there is an estimated $5 million for which the District will need to secure a loan (independent of the cash-flow management issue above).  The District will need to devise a strategy for repaying this loan at a subsequent Board meeting.

  • The District has a long list of pending infrastructure projects that have nothing to do with the CZU Fire.  The District will ultimately require a loan to pursue these projects as well, but these projects will not qualify for the tax-exempt status of the fire-recovery projects.  Consequently, this loan will be more expensive and will be considered separately (at a later date) unless the District discovers some special benefit to incorporating this agenda into the current loan discussion.

The District received four loan proposals offering a variety of options; it also (as previously planned) secured legal counsel to get a tax-exempt opinion to achieve more favorable interest rates (which should save the District between $65K and $500K).  The offers from CoBank and Western Alliance were judged to be the most promising, but Director Fultz suggested that it would be worth further analyzing the First Foundation scenario as well.

The bulk of the discussion was too detailed and nuanced to be accurately and/or usefully conveyed in this summary.   All five Directors offered relevant questions and/or comments, but Director Fultz clearly had the most applicable expertise and was most actively engaged.  There are multiple ways in which the District is currently in a favorable position (including both low current interest rates and the District’s projected ratio of debt service to income), and there are a number of different strategies to consider (e.g., amount to borrow on a fixed loan, amount to borrow on a revolving loan, when to seek financing from capital markets, etc.).  Some of these questions also depend upon having a rough estimate of the dollar amounts and time frames for the upcoming repairs so that trade-offs between different combinations of fixed and revolving loans can be better assessed (most of the pending projects are likely to start construction in the spring of 2022).

The Board agreed that Chris and Stephanie will model scenarios for all three banks of interest.  They will present their analysis at the upcoming Special Board meeting on January 26th.

Old Business

Board Policy Manual Update

District Counsel Gina Nicholls introduced this item.  Board members individually submitted recommended revisions to the Board Policy Manual in December of 2020, resulting in 53 distinct proposed changes that now needed to be approved or rejected (in addition to a few other minor changes that are still pending).   Director Fultz suggested that it would be most efficient for each Director to vote yes or no on each of the 53 changes via email.   If three Directors approve a given item, this item will be included in a red-line draft (after any conflicts between overlapping revisions are resolved).  The other directors concurred, and Gina asked that all Board responses be received by January 28th.

Director Fultz read a lengthy and eloquent personal statement that will be included verbatim in the official meeting minutes.  He said he wanted to share his vision for Board meetings with the community.  He noted that he was a longstanding proponent of maximal transparency and that he believed it was critical for all viewpoints, especially minority or unpopular ones, to be heard.  Ensuring an adequate hearing of such viewpoints might well conflict with the Board’s desire to maximize meeting efficiency, but the Board’s priority should lie with promoting a full airing of dissenting perspectives.  Director Fultz described this as a vital component of the Board’s deliberative process and one that is consistent both with the Brown Act and with a previous Grand Jury report.  He said he will not support any policy or procedure that attempts to roll back any of the improvements made in recent years in this regard.  He will, however, support process changes that promote increased efficiency without negatively impacting this objective.

 

Reports

Director Fultz asked Environmental Planner Carly Blanchard to list her top 3-5 priorities for things to accomplish by the end of the current Fiscal Year (i.e., the end of June, 2021).  Carly said that her priorities will be confirmed in the upcoming Environmental Committee meeting at 11:00 AM on Wednesday January 27th.  She cited: (a) completing construction on the Fall Creek Fish Ladder (which has been in progress of many years), (b) making progress on the Urban Water Management Plan, (c) multiple tank projects, (d) work on fire management (e.g., infrastructure hardening), and (e) removal of broom in Olympia (the District is currently working on permitting).  President Mahood noted that the fishery work is particularly relevant to the Santa Margarita Groundwater Agency.

Director Fultz complimented Finance Manager Stephanie Hill on her recent clear and helpful report; he asked when she can provide a rough estimate of the District’s financial status as of the end of December.  Stephanie promised to email this information to the Board in the next week.  There was also some discussion about customers whose bills are more than 30 days past due, and Stephanie promised to email a related list that she inadvertently neglected to include.  Director To asked if there would be a benefit to billing every two months instead of monthly (e.g., to reduce costs).  Stephanie explained that this was the District’s practice until 2014 and that there are both plusses and minuses to consider.  Director To also asked about the potential to get more customers exclusively on electronic billing (which saves mailing costs).   This was identified as a topic for future discussion.

Director Fultz noted that the meeting minutes for the Lompico Assessment District Oversight Committee (LADOC) stated that all assessment district funds have been spent.  He asked if there is something that now needs to be done.  Stephanie said that pending projects will exceed the assessment district revenues and that Rick Rogers and Gina Nicholls need to provide further guidance.  Director Fultz asked that this issue be placed on the agenda of a future Board meeting.

There was no public input.  The Board confirmed that the upcoming Special Meeting will be held Tuesday January 26th at 6:30 PM.

The meeting was adjourned at 8:10 PM.