SLVWD Board Meeting Summary
April 21, 2022
Mark Dolson
Highlights:
Board Vacancy Filled
Budget and Finance Committee Appointment
Initial Review of FY 2022-2023 Budget
WaterSMART Grant Program
SLVWD Financial Obligations
Next Board meeting is at 6:30 PM on May 5th.
Preliminaries
There were no actions to report from Closed Session.
Thirteen members of the public were present. Nobody offered any initial comment.
In her President’s Report, President Mahood said she wanted to call attention to the number of grants that the District has recently received. She characterized this as a major change and a welcome development, and she invited Environmental Programs Manager Carly Blanchard to share further detail. Carly said the District has received $4.5 million of grant funding since 2020, and has applied for $11 million in the past year. Carly briefly listed recent submissions and credited contract Grant Writer Susan Robinson with providing valuable assistance.
New Business
Review of Applications for Board Vacancy
President Mahood reported that three candidates had applied to fill the Board vacancy created by the resignation of Director Lois Henry effective March 1st. Jeff Hill and Alina Layng were present to answer questions from the Board. Elizabeth Paulsen was unable to be present at this evening’s meeting, but her prepared responses were available online. Over the ensuing hour, it became apparent that the Board regarded Jeff and Alina as the two lead candidates.
Each candidate was given three minutes to introduce themselves. Jeff Hill explained that he is not the Jeff Hill who owns a construction and grading business and services septic tanks. He is a retired marketing executive, with extensive experience in Silicon Valley tech start-ups and storage companies, who resides in the Whispering Pines neighborhood of Scotts Valley. Since retiring in 2011, Jeff has been active in a number of different volunteer roles and has been a member of the SLVWD Budget and Finance Committee for the past year and a half.
Alina Layng is a biologist with extensive experience monitoring fisheries. She lives in Boulder Creek and has been a member of SVLWD Environmental Committee (recently combined with the Engineering Committee) for the past year and a half. Alina described herself as caring deeply about affordability of clean drinking water and equity, and as committed to evaluating every issue in a fair fact-based manner.
Jeff and Alina each responded to three previously-shared questions from President Mahood:
Briefly describe the skills or perspectives you bring to the Board and why they are useful.
Jeff cited his Budget and Finance Committee experience. He said he understood budgets and accounting and issues of accruals, cash flow, and top-down forecasting vs. bottom-up budgeting. He cares deeply about community and affordability. As an experienced product manager in tech firms, he has successfully managed multiple complex business processes and become really good at dealing with large, complex projects and at working closely between management and engineering.
Alina referenced her experience with fisheries. She said she has hiked many of the local streams and understands the unique limitations of this watershed. She also has experience with budgets and contracts. She assisted with a grant that the District successfully applied for and would be able to help the District to find additional funding.
Given the short-term nature of this appointment (the seat will be up for election this November), it will be particularly important to be able to hit the ground running. Please describe the relevant experience that will help you to do this.
Alina cited her appointment to the Environmental Committee in 2021 and her reappointment in 2022 to the Engineering and Environmental Committee. She described herself as knowledgeable about District budget issues, other committees, and the Santa Margarita Groundwater Agency (SMGWA). She felt that her experience as a scientist would be valuable as well.
Jeff similarly cited his year and a half on the Budget and Finance Committee. He described himself as quite familiar with the District’s budget and projects. He said he has the expertise, the time, and the interest to make a major contribution.
What do you see as the major challenges facing the District in the next two years?
Jeff said the District is not in a position to simply pursue business as usual. It is dealing with a set of complex simultaneous engineering projects that require a lot of different kinds of expertise and attention. Cash flow will also be a key issue because it will need to be carefully managed. He identified complexity and financial management as the key challenges for the District and the Board.
Alina said the top priority is restoring surface water intakes because recharging groundwater is essential to long-term health of the watershed. She identified another really important task as improving cooperation amongst Board, Staff, and community; she noted that committee meetings have been acrimonious at times. Overall, she said the District is responsible not only for supplying water but for protecting the beneficial use of water.
President Mahood said she was impressed with the thoughtfulness of the candidates’ answers. She opened the floor for further questions from the Board.
Director Smolley asked Jeff how his current responsibilities as Treasurer of the Scotts Valley Sportsman’s Club would affect his availability. Jeff said, being retired, he has plenty of time available. The Sportsman’s Club takes less than a quarter of his time, and he is resigning from being Treasurer of the Michigan State Alumni Club.
Director Smolley asked Alina whether she would be open to serving as a Board member on committees other than Engineering and Environmental. Alina said this would be fine. She likes learning new things and gaining new insights.
Director Ackemann thanked both Jeff and Alina and said she saw them as very equal candidates in terms of their District involvement and commitment to our community. She asked a rather lengthy question centering on how they would best serve the District in partnerships. Alina said she had a lot of experience assuming diverse responsibilities and could appreciate different points of view. Jeff said there were different constituencies to consider including the public, ratepayers, employees, and government agencies, and he had experience with pretty much all of these. He said he had experience with pretty much all of these, and he described an experience facilitating negotiations between two separate engineering teams. He said he thought a lot about how to be good with employees and was still in touch with most of his former employees. He said he gained experience with governmental regulations both from serving in the Army and from working on behalf of the Sportsman’s Club. He also said he gained a first-hand knowledge of a forest ecosystem from spending his summers in the woods of Wisconsin in his youth.
President Mahood next opened the floor for Board discussion.
Director Ackemann said she appreciated the high quality of both Jeff and Alina as candidates. She said she viewed this appointment as a replacement for the function that former Director Lois Henry provided. She also said she had concerns about how the District was proceeding with its capital and construction outreach and was looking for someone who could help her as a good advocate. Lastly, she said she cared about environmental issues.
Director Fultz said he echoed many of these same comments. He described the Director position as a very serious obligation to the community, and he encouraged Elizabeth to perhaps get more involved with the District as a public committee member. He said her background had applicability, but he thought Jeff and Alina had a valuable depth of experience with the District as well as particular relevant skills.
Director Smolley said he had had the opportunity to participate with Alina over the past year and a half on the Engineering and Environmental Committee, and he similarly appreciated Jeff’s year and a half of service on the Budget and Finance Committee. He was pleased to be faced with a difficult choice between the two.
President Mahood echoed Director Fultz’s comment to Elizabeth about serving on a committee. She said he gave her the same advice a few years ago. President Mahood said that Jeff’s and Alina’s recent level of engagement with the District was important because the Board really needed someone who can hit the ground running. She said she favored Jeff because of her experience with him on the Budget and Finance Committee. She saw his experience dealing with financial issues and with Staff (which is a major component of the District’s budget) as a real positive (though she understood that other people could view this differently). She also felt that Jeff had the most experience serving on advisory groups. Lastly, she said it would be great to have someone from Scotts Valley, which hasn’t been the case in decades.
Six members of the public provided comment.
Katie from Boulder Creek said it was pretty clear that Alina is the obvious choice because of her scientific background.
Jim Mosher from Felton said he was pleased with all three applicants, but Jeff would be his choice because of his knowledge and experience relating to the budget.
Elaine Fresco from Felton said she was impressed with both Jeff and Alina. She liked Alina's environmental background, and liked Jeff's ability to deal with complicated projects and budget issues. She said the latter took precedence for her today, but she would support Alina's candidacy if she runs for office in November.
Larry Ford from Felton said he appreciated everything he had heard. He noted that serving on the Board is a lot of work and is challenging. He said he would have to agree today on Jeff as the preferable replacement for Lois Henry, but he also said he would support both Jeff and Alina in November.
Lee Summers from Boulder Creek described both candidates as excellent and encouraged both to run in November. She felt that it would be helpful to have someone like Alina on the Board to provide further support on the environmental front.
·Elizabeth Zampogna from Boulder Creek said she was a neighbor of Alina and couldn’t say enough about her work and her environmental background. She supported her.
Director Smolley said he felt the financial issues facing the District at present were the most critical consideration. He therefore moved to appoint Jeff Hill. Director Ackemann seconded.
Director Fultz commented that no one person will have expertise in all relevant areas and that Board members need to function as generalists who can contribute both skepticism and questioning. He appreciated Alina’s specific background but felt that the District’s financial challenges were paramount.
There was no public comment on the motion. The motion passed 4-0. Director Hill was immediately sworn in and seated.
Membership of Budget and Finance Committee
President Mahood recommended that Jeff Hill be appointed to the Budget & Finance Committee and that all other committee assignments remain unchanged. Director Ackemann made a motion to this effect, and Director Smolley seconded it.
There was no public comment. The motion passed 5-0.
Fiscal Year 2022-2023 Budget Review and Adjustment
Finance Manager Kendra Reed shared the preliminary adjustments that are being proposed to the FY22-23 budget adopted a year ago as part of the District’s transition from single-year to multi-year budgeting:
Revenue
o The Basic Water revenue projection was reduced from $3,536,400 to $3,533,950 (a decrease of $2,450) because it is now projected that only 75 (as opposed to 100) CZU-destroyed homes will be rebuilt and reconnected by the end of 2022.
o Projected revenue from water consumption was reduced from $8,231,131 to $7,949,595 (a 3% decrease) to reflect the decreased water use seen in FY21-22.
o Projected revenue from grants was increased from $0 to $200,000 to account for the Coastal Conservancy Grant that the District received.
Expenses
o Administration. Salaries and Benefits were reduced by $88,000 due to revisions in staffing. Contracts and Professional Services increased by $289,000 due to the delay in implementing the required rate study ($100,000), addition of an unanticipated previously unbudgeted item for the District’s share of SMGWA administrative expenses ($139,000), and a requested (not yet approved) increase of $15,000 for improved outreach. (This adds up to only $254,000.) There was also a $25,000 increase for recruitment of a new Water Quality and Treatment Manager.
o Finance and Business Services. Salaries and Benefits were reduced by $145,000 due to rearrangement of staffing, including an in-house promotion which ultimately filled the Director of Finance position. This also includes $85,000 for a proposed (not yet approved) temp agency fill-in for the Director of Finance while she is out on maternity leave. Contracts and Professional Services increased by $2500 to cover the Paychex electronic time-keeping system.
o Engineering. Salaries and Benefits increased by $98,000 to reflect the difference between the budgeted GIS/CAD specialist position and the new hire and also to allow for the hiring of a construction inspector (not yet approved). Contract and Professional Services decreased by $10,000 due to the early completion of the Master Plan.
o Operations and Distribution. Salaries and Benefits decreased by $99,000 due to revised staffing and reduced overtime. Operating Expenses decreased by $20,000.
o Environmental. Salaries and Benefits increased by $38,000 due to a revised staffing proposal (not yet approved), which involved an in-house promotion to fill the vacant Planner position combined with hiring a lower-level environmental specialist.
o Supply and Water Treatment. Salaries and Benefits decreased by $326,000 due to revised staffing and reduced overtime. Contract and Professional Services decreased by $10,000, and Operating Expenses decreased by $5000.
o Sewer Fund. Operating Supplies decreased by $2000, and Facilities decreased by $2500.
There were also major adjustments to the Capital Expenditures portion of the budget due to delays in construction and to increases in FEMA reimbursement.
President Mahood congratulated Kendra and Staff for combing through the budget and finding ways to save money on expenses and staff salaries. She said it was to their credit that this resulted in a decrease despite the previously unbudgeted SMGWA expense.
Director Hill asked District Manager Rick Rogers if the District had the physical capacity to get this much more work done. Rick said that Engineering Staff has increased to three people and that most project will be hired out, though there will still be internal review. He said he believed the District had sufficient staffing to accommodate the big jump in projects.
Director Fultz echoed President Mahood’s comments. He described growth in operating expenses as a key area to focus on, and he commended Staff for addressing this. He asked a few brief questions to clarify headcount (currently 34, headed toward 35), the temporary finance position (Kendra will be on leave), and the District’s ability to fund non-CZU projects with its recent loan (which Kendra confirmed).
Director Smolley asked for more detail on the process of filling the temporary Finance Manager position. Rick said this will be a high-level management position; the District has been reaching out to temp firms for information as to what's available, and Kendra has been training staff. This will be brought to the Budget and Finance Committee. Director Smolley also sought further clarification on budgeting for the $4-5 million associated with the $3.2 million grant for connecting to Bracken Brae and Forest Springs. Rick said the District would be submitting again to the Department of Water Resources for an increase in funding to reflect the new estimate of costs.
Director Ackemann explained that the Administration Committee recommendation for an increase in the Outreach budget was due to the large amount of work coming up and the need to explain these complicated issues and choices to the public. The District will need to invest in a consultant or community outreach organization to help with this. Rick said the Administration Committee recommendation would be brought to the full Board at the first meeting in May.
There was no public comment. No motion was needed, as this agenda item was purely advisory.
WaterSMART Grant Program
Environmental Programs Manager Carly Blanchard introduced this agenda item. She explained that the District is seeking $100,000 in funding from the U.S. Bureau of Reclamation’s WaterSMART Small-Scale Water Efficiency Projects and needs to designate someone (i.e., the District Manager) as the official signatory. The District will match this $100,000 with $100,000 of its own, and this external funding will partly offset the $236,250 budgeted in FY22-23 for upgrading the District’s water meters to AMI water meter technology, allowing for efficient leak detection and tracking.
Director Smolley confirmed that these are the “Badger” meters. Director Ackemann asked how many meters this would pay for, and Carly said it would cover about 600 meters.
There was no public comment. Director Ackemann moved to appoint the District Manager as signatory, and Director Smolley seconded. The motion passed 5-0.
SLVWD Financial Obligations
Director Fultz introduced this agenda item, as is customary when an individual Director asks to place an item on the agenda for discussion by the Board. He explained that his goal was to help the SLVWD community reach a better understanding of the District’s current and future financial obligations and how this relates to the District’s allocation and use of operating and nonoperating margins. To this end, he shared a set of preliminary calculations and proposed that this analysis could be referred to a committee for further refinement and more in-depth discussion.
As an illustrative exercise, Director Fultz combined open-source information with tank replacement and maintenance information provided by District Staff and used this data to generate a top-down, macro-view model of the District’s long-term financial obligations. This is in contrast to the recent Water Master Plan which was built from the bottom up, focusing on those items most in need of immediate repair. Director Fultz showed how two different long-term infrastructure investment models might generate the required resources. The model in which the District steadily expended the necessary funds over the lifetime of the infrastructure implied some combination of a substantial increase in the District’s annual revenue and a substantial decrease in the District’s operating expenses.
Director Hill described this as an impressive analysis. He said he agreed with being transparent and making long-term estimates, and he thought it could be worthwhile to experiment further with this approach. He advised against burdening Staff (particularly with the Finance Manager about to leave on several months of maternity leave) and recommended instead that this be sent to the Finance and Budget Committee.
Director Smolley agreed that this was an impressive analysis that took a lot of work. He asked about next steps, and Director Fultz suggested taking the actual existing data (as opposed to his initial estimates) and rolling it into the model. Director Smolley agreed that this would be useful, but he asked whether this follow-up was within the capabilities of the current Finance and Budget Committee or whether it would need to be farmed out in some other way.
President Mahood said actualizing Director Fultz’s models would be a huge amount of work and wouldn’t strictly fall within the purview of the Budget and Finance Committee because it also involves Engineering. Director Fultz agreed that it would be a significant undertaking, but he argued that it would actually be pretty straightforward and wouldn’t take a lot of time. He said he had done this before.
President Mahood said she would like to first take a step back and ask what the District would learn from this exercise and how it would act on this (because it would only make sense to do the work if there was a clear payoff). She said most government agencies now are depending on large grants for a lot of their infrastructure and that raising the District’s annual revenue to the level implied by the model would require huge increases in rates. She argued that, since there isn’t room within the District’s budget to substantially lower expenses (because the district is already painfully lean in terms of staff), the District’s expenditures will be necessarily controlled by available grant funding. Given this reality, she asked why the District should spend time on an analysis that it would be unable to act on.
Director Fultz said this was a good question. He argued that a clearer picture of the District’s long-term financial obligations was essential to enable the community (and the Board) to make informed funding decisions (with respect to rates and possible bonds). He argued that Board timelines need to be very long term (as opposed to simply developing annual budgets year to year), and he didn’t think this analysis would be a heavy lift if the necessary data is available. He argued that grant funding is ephemeral and that the District and the community need to organize to sustain its water system over the long term without depending on others.
Director Ackemann said she appreciated Director Hill’s recommendation about referring this to the Budget and Finance Committee. She also appreciated the lens that Director Fultz was seeking to employ, but she wondered if this might amount to trying to fit a round peg into a square hole. She thought that there were unique factors making the District’s situation different from that of a private-sector business, and she suggested first learning about the practices of other water districts. She argued that the District is already being transparent: it is in a no-growth environment with a heavily burdened staff and without access to fresh capital. She suggested having the Finance and Budget Committee first look at the practices of comparable districts.
Director Fultz said Director Ackemann made good points, and he wasn’t proposing any solutions. He just valued understanding the full financial picture so that decisions can be made fully, rather than partially, informed. He argued that this ultimately involved a generational compact.
Director Hill agreed that top-down modeling is appropriate for long-term planning (as opposed to near-term budgeting, which is bottom-up). He cautioned that the District would need to guard against the possibility that people could misinterpret the resulting model as a near-term road map. He felt that this kind of modeling was a good idea and that it would be possible to build in a series of variable assumptions, but he also thought a lot of work would still be required to produce a useful model.
Director Fultz agreed that this would be a long-term planning tool and not the only mechanism for building a budget. He said he focused a lot on operating margins because this affects the District’s ability to borrow money and tells the District what kind of capital obligations it can meet.
One member of the public offered input. Beth Thomas said the public does pay attention to what happens on a long-term basis (sometimes in retrospect), and a long-term plan would provide valuable structure as the Board composition changed over time.
Director Fultz thanked the Board for its attention to this issue and for an excellent discussion of this topic. Director Smolley said Director Hill had pointed to benefits of having this model, and Director Fultz had argued that producing the model wouldn’t be much work if the data is available. Director Smolley didn’t know whether the data is available, so he proposed that the Budget and Finance Committee assess what it would take to assemble the data and incorporate it into this kind of model. He restated this as a motion, and Director Fultz seconded.
There was no further public comment. The motion passed 5-0.
Unfinished Business
Long Service Line Agreement for APN 077-032-25
District Manager Rick Rogers explained that this agenda item was brought to the Board at the previous meeting, but the actual agreement was inadvertently omitted from the Board packet.
Director Fultz said the agreement was different from the agreement that the Board had agreed to adopt at its December 16th meeting in 2020. The revised agreement eliminated some ambiguity and restrictions that Director Fultz had objected to.
This observation led to some confusion as Rick and District Counsel Gina Nicholls tried to determine what happened here. They speculated that District Engineer Josh Wolff might have inadvertently accessed an outdated version of the agreement.
District Secretary Holly Hossack noted that approval for this item was now very urgent because the property owner was running out of water. Director Smolley moved to approve the resolution with the addendum that the District revise the agreement so that it matches the most recent approved agreement. President Mahood seconded.
There was no public comment. The motion passed 5-0.
Remote Meeting Authorization Under AB 361
District Counsel Gina Nicholls introduced this routine recurring agenda item without further comment. President Mahood moved to ratify and adopt the attached resolution, and Director Fultz seconded.
There was no public comment. The motion passed 5-0.
District Reports
Environmental: Director Smolley asked about the status of the Conjunctive Use draft report originally to be presented to the Engineering and Environmental Committee in April. Environmental Programs Manager Carly Blanchard said there was a lot of ongoing discussion, and the presentation would now probably happen in June.
Environmental: Director Fultz asked if he could take a look at the completed PG&E work in the Olympia Watershed. Carly said he could, and she would send him a map.
Engineering: Director Fultz asked if the community meeting concerning the Felton Heights Tank Project had taken place. Rick said Staff have been working with the community and with the property owner offering the easement. There is concern with the proposed tank site, and the property owner has asked the District to look at an alternative location further up on his property and out of sight of the neighborhood. Staff is looking at this to see if it will work.
Finance: Director Fultz had several requests for clarification.
Operations: Director Fultz had several requests for clarification.
The meeting was adjourned at 9:00 PM.