MINUTES OF MEETING
CORAL SPRINGS IMPROVEMENT DISTRICT
A regular meeting of the Board of Supervisors of the Coral Springs Improvement District was held on Monday, February 22, 2010 at 3:10 p.m. at the District Office, 10300 NW 11th Manor, Coral Springs, Florida.
Present and constituting a quorum were:
Robert Fennell President
Sharon Zich Vice President
Glenn Hanks Secretary
Also present were:
Kenneth Cassel District Manager
Dennis Lyles District Counsel
Jane Early District Engineer
Dan Daly Director of Operations
Kay Woodward District Accountant
Jan Zilmer Human Resources
Randy Frederick Drainage Supervisor
Ed Stover Water Department
David Macintosh Wastewater Department
Cory Johnson CH2M Hill
William G. Benson, CPA Keefe, McCullough & Co.
Mark Grace Keefe, McCullough & Co.
FIRST ORDER OF BUSINESS Roll Call
Mr. Cassel called the meeting to order and called the roll.
SECOND ORDER OF BUSINESS Approval of the Minutes of the January 25, 2010 Meeting
There not being any,
THIRD ORDER OF BUSINESS Supervisors’ Requests and Audience Comments
Mr. Hanks stated I would like to change the formatting on the minutes giving us a wider margin to make notes.
Mr. Cassel stated okay. We will see what we can do.
FOURTH ORDER OF BUSINESS Acceptance of Financial Audit for Fiscal Year 2009
Mr. Benson stated I am a partner in the audit firm Keefe, McCullough & Co., LLP. I also have with me here today Mr. Grace who is the Supervisor of our audit staff. He has been involved in the past three audits for CSID. I would like to take a few minutes to go over the fiscal year 2009 audit report and highlight a few of the items as I have done in the past, which I would want to look at if I were a Board member. This is in no way intended to restrict anything you may want to ask about the audit report. We are here to work for you and answer any questions or concerns you might have before you move to accept the report.
On pages one and two we have our actual audit report where you are hiring us to take a look at and examine the books and records to determine whether the books fairly present the financials as of September 30, 2009. This opinion indicates we have been able to satisfy ourselves throughout the audit. There were no real problems which limited our access to the books or any of the inquiries we made. We were able to satisfy ourselves that the reports behind that opinion are accurately where you were at as a District.
In the past I have looked at some of the areas in the management discussion and analysis and will begin the focus with those. I am going to first point you to page five of the report. About four years ago the accounting profession started having government wide financials that were intended to put all of your successes on the books, all of your infrastructures on the books and give you what is supposed to be a for profit feel so your financial report might be more comparable to what people might see in other industries. If you look at the table that is on the top of page five, the far right column shows you your current and other assets, your restricted assets and capital assets so that at the end of fiscal year 2009 your total assets for the District are $87,203,882. It also shows your liabilities. Your liabilities were paid down approximately $3 Million in the last year. We did have a big debt reduction on one of our bond issues, which contributed to a good portion of that. It then shows your net assets. The net assets at the beginning of the year were at $32,078,926 and when we get to the end of the fiscal year our net assets are $34,809,159.
When you look at the bottom half of that table it shows that our total revenues a year ago were $11,753,243. This year our entity wide revenue is $12,761,804. We are up about $1 Million. Then when you look at our operating expenses; our actual operating expenses to generate that $1 Million went down about $700,000. The change in the assets there went from $901,000 to $2,583,000 year to year. This is a fairly favorable increase.
I also want to point out some areas in the financials where I think it shows how you are doing organizational wise. If you look at the balance sheet on page eight, your accounts receivable are $1,148,295. One of the things we have noticed in the past year, which has been problematic for a lot of Districts and was not a problem in your District, is it appears you are very aggressive with your customers. If they do not pay their bills, you shut them off. You now have turn on fees. There was a big increase of almost 30%. It went from approximately $55,000 to $80,000. Percentage wise we noticed the big increase is due to being aggressive with that. In fact it is keeping you out of a lot of problems that other organizations are experiencing now. It is tough times and some people are picking the liberty of not paying certain bills. You are practicing aggressive management and it is exactly what we think is necessary in these times.
If you look at the bottom of your balance sheet, your total net assets are $34,809,159. If you look at the activity statement on page nine, it shows interesting information. I’m looking at the second column from the right where it says Net (Expense) Revenue and Changes in Net Assets. We are going through the income statement and then we are showing there was a change in net assets. Three lines up from the bottom under Governmental Activities the excess was $1,304,503. The Business-Type Activities were $1,425,730. Entity wide it was $2,730,233 in terms of excess for the past year.
I would like to flip back and show you a table I pointed out a couple of years ago. There is a table we go through. In accounting you can have financial results, but then you have to look at where the results are and if it makes sense. If you have a company and it appears they have made money, but all of that money is either tied up in their receivables or it is tied up in their inventory, you start to wonder if those receivables are going to be realized. In other words; are we ever going to see this profit that we say we are making? In accounting terms you always feel comfortable when a client makes the money and it is sitting in the bank. Then there is no doubt the money was actually made.
I always point to a cash flow statement and I understand the concept of accruals, but do we make money? Do we make cash on a monthly basis? If we make cash on a monthly basis routinely, then we are going to be okay and we are going to be healthy. I’m going to point to two areas. If you look at page 16, there is reconciliation at the top of the page where it says net cash provided by operating activities. It was $4,575,938 for the year. If you look at the next page, page 17, we do a detailed reconciliation of that. We start with the net operating income and then we are adding back depreciation , we are adding amortization and we are looking at the fluctuations on all of the other lines items on our balance sheet to figure out how much cash we make from operations. It is an important statement. You are making $381,000 a month. After I say this I am going to flip you to a table on the bottom of page 27.
The reason why I am pointing you here is to see what you are doing with that profit. If you look at the table on the far right column it shows the debt service maturities over the next 20 years are anticipated to be about $4 Million a year. They have gone through floating your bonds in an attempt to level those maturities. If you stay on your current course and continue the refurbishments on plant expansion, you are currently on track to be able to finish the projects which are in the works. Nothing in business is static, but based on these reports all indications are you had strong cash flow last year from the operations, you are in a strong financial position and those rates, and that expense structure, will be sufficient if we stay like this. I am putting the caveat in there that you always have to look at it because your vendors will charge you more next year. Every bill you have changes so what you need to charge your customers changes as well. Right now it appears that you are on target. This is a strong District and it is doing very well.
The second thing I will point out is in the back. If I were a Supervisor, I would be very interested in the reports on pages 32 and 33, which are internal control and compliance that report to the District management. The last thing you would want is to put all of this hard effort in and then have issues in internal control and/or compliance without knowing about it, which would get you in trouble. I am happy to report that for the second year in a row we feel there are no comments about compliance and internal control. We have had issues in the past. We had issues that were concerning to us about timeliness of reconciliation and the way things were done, but I am happy to report we feel really good that things are going well. This is a tribute to your staff and the people doing the work. They know what is in the accounts and I think it is another reason why we are a month ahead this year.
Ms. Zich stated February is perfect. August is not perfect.
Mr. Benson stated I think we had some issues two years ago. It was very late. I love to get it done as soon as possible. Earlier today I had a long talk with Mr. Grace about what holds it up now. Some of the things we wait on are kind of involved. We are asking your outside engineers to give reports on where they are with the projects and estimates to complete the projects to make sure we are not going to have cost overruns. There are things which are external to us and your accounting staff that do require follow up as well as verification from people. I thought it went particularly well and it should. If you have a District that is going well, you should be able to turn this around. We had an overall good experience and good news to report to the District Supervisors.
Mr. Daly stated I would like to thank Mr. Benson, Mr. Grace and the staff for the crunch time you put in to get this audit done for this month. It is great.
Mr. Cassel stated good job.
Ms. Zich stated I would like to applaud Ms. Woodward and Ms. Michaels. They have done an excellent job. The CPAs did a great job. Everything looks fantastic and February is great timing for an audit ending in September 30th. Everything looks good.
Mr. Benson stated we have been here when things were not as great. We are going to get it done no matter what, but it is nice when people who are there know it and have it tied out. This is the second time in a row with Ms. Woodward at the helm from an accounting standpoint and we have noticed a considerable improvement. It is really at a level that you hope it would be at. It is evident every single month things are being tied out in a timely manner.
Mr. Hanks asked are there any suggestions you have to improve it even further?
Mr. Benson responded not that I am aware of. I read this report again over the weekend and I had Mr. Grace in my office this morning going back over it for this presentation. We noticed from an operational standpoint that Mr. Daly is tough on the turn offs. He is quick at the whip. I am not telling you to get off of that either. Right now you have to run it that way. If you do not, you jeopardize the District for all the other people who are paying. Other than getting more aggressive, and we have noticed a 30% jump in revenue, there is nothing else.
Mr. Fennell stated we had a big bond issue we successfully did a couple of years back. We thought we were going to earn a lot more interest and we are not.
Mr. Benson stated you have had some things go in your favor too such as the costs to do your projects, which have changed drastically.
Mr. Fennell stated yes, but if I am looking at something that could mess this up, that would be the area I would look at. I can see that internally management has been vigilant about getting paid and even more vigilant at looking at costs we have; nevertheless, you can only do so much on cost reductions. I noticed you did a projection out for future debts. What are our risks going out there?
Mr. Benson responded I think you had $29 Million in unexpended bond money left. There is a contingency footnote saying if you completed everything you had contracted going forward, I believe you have $16 Million worth of forward looking commitments at September 30th, if you were to finish off everything. This means you have $13 Million left in bond proceeds that were not allocated for as of the end of September. What I mean it is not yet allocated to a specific project. Because of the dynamic you expressed I suggest you have a realistic look about forward looking projects that may or may not be required by the District. Then if you do not have a use for the money, retire that. Do what you did in the current year, which you retired the 1992 issue. You paid off about $3.5 Million. I suggest looking at the debt and the best use of the fund. If you have $10 Million and you are not going to use it for an extended period of time, I would do an analysis of that. I do not know on a forward looking basis what capital outlay you might require in your infrastructure. I would want to know what the plan is. Is it truly excess funds that you do not anticipate using any time soon and what would be the best use? Are you able to early retire some bonds? I would definitely look at it.
Mr. Fennell stated we will probably sit for a while and see what folds out because given the elaborate plans which were put into place; you have the bonds, increases, expenses and then they have such high variations. Our ability to forecast this is poor.
Mr. Benson stated I understand, but waiting costs money. If you have $10 Million you are not going to be using, you can wait, but even at 3% to 4% you are talking about $30,000 a month. I know it does not seem like it is costing you money, but $10 Million not being invested is $300,000 to $400,000 a year in interest costs on those unused funds. Now you are talking about $30,000 a month. I understand what you are saying, but time is money. The answer is if you are not going to use it for an extended period of time, I suggest the Board analyze what the best use is. It is a more involved question than it appears. I would start by looking at if you are really going to need it because if you have to borrow it again, it will cost a lot of money. If you work on the premise of what the needs are going to be within the District, then turn around and say only in this situation we feel we are not going to need the money in the intermediate term, would we then go the step further which is to start with Mr. Lyles and your District manager to evaluate what would be a use for these funds, what the provisions are under which you borrowed and if you could pay down early or retire some debt.
Mr. Fennell stated we will see. I think we should wait a year or two because we have a new type of water plant that we are creating here. There were concerns about how quickly it will come up, how soon it will actually pay off and whether we will have to run some things as back up. Are we done with all of our water cost increases?
Mr. Daly asked do you mean the rates?
Mr. Fennell responded yes.
Mr. Daly stated you are done with what you approved. You approved an increase once every three years. You will have to approve the next batch at the 4% and 5%. I believe that starts next year if you want to look at it.
Mr. Fennell asked are we in compliance at this point with bonds?
Mr. Daly responded to make debt service right now we are. This is due to two reasons. We increased the revenue and we decreased the expense. We have that by just our operations.
Mr. Fennell stated there were some agreements we entered into that we would do rate increases. Are those done?
Mr. Daly responded no. They are not done. That will go along with phase two of this. It does say that regardless of whether we go into phase two or not, we should enact these other rate increases.
Mr. Fennell asked are all the rate increases we need for phase one in place?
Mr. Daly responded no. In the bottom paragraph it says regardless of whether we do a phase two or not these other rate increases will need to be enacted.
Ms. Zich asked what other ones?
Mr. Daly responded I sent it to you.
Mr. Hanks asked are we talking about in 2015?
Mr. Daly responded no. We are talking about 2012.
Mr. Johnson stated I may be speaking out of turn, but if I remember correctly, some of those rate increases were based on the assumption of a certain amount of inflation.
Mr. Fennell stated somebody needs to come back next time and let us really understand that.
Mr. Daly stated there was also the assumption we would be making $250,000 in interest every year, which we are not making either. There were a lot assumptions made at the time. This was three or four years ago.
Mr. Fennell asked can you bring us something next month such as a prognosis of where we are at?
Ms. Woodward responded there is a one page summary in the agenda package this month that reflects projected cash flow on just the capital projects without interest being earned and with the fact we went out to bid and came back at a lower price. There is a projection that $5 Million will remain unspent out of the proceeds.
Mr. Hanks asked what kind of action do you need today on this financial audit?
Mr. Lyles responded a motion to accept.
Mr. Fennell stated a lot of this has to do with Ms. Woodward’s excellent work, but also from a management standpoint. Our whole management staff has been diligent about looking at costs and collecting. We are still in the worst recession since the 1930s and you just heard what these guys just said. There are 400 other independent districts out there that are going bankrupt. It is important for us to be able to maintain services in the community and not have them be degraded.
Mr. Daly stated to give kudos where they belong; we pretty much have a whole new management staff with the exception of Mr. Zilmer and me. Mr. Macintosh took Mr. Adversa’s place in the wastewater and holds overtime down to a minimum. He has done a couple of procedures which are saving us money everyday. Mr. Stover is in charge of the water plant. He was here when Mr. Hyche was here, but was a little handcuffed when Mr. Hyche was around. He has spread his wings a bit and has helped us by doing a lot of inventive thinking to repair things. You do all you can to keep costs down, but there comes a point where you cannot do it anymore. Then you have to think about revenue, which is where we are looking at in other areas. Mr. Frederick has been here forever and is doing a great job out there. Everybody has stepped up. We meet with Mr. Cassel at least once a week.
Mr. Cassel stated staff is doing a good job working together with a lot of good synergy to make sure we are running the District as effectively and efficiently as we can. Good job for everyone who is involved.
FIFTH ORDER OF BUSINESS Consideration of Conveyance Documents for Church by the Glades
Mr. Fennell asked what are we taking on exactly and why would we do this?
Mr. Hanks asked why are we doing this six years after the fact?
Mr. Cassel responded because they came in for the new one and we found out there were other parts which had never been conveyed to the District. We are closing the loop to make sure it is all conveyed to the District. I do not know how some of this fell through the cracks.
Mr. Fennell asked what are we getting and why do we need it?
Ms. Zich asked and why now?
Mr. Cassel responded they came in with a new addition project and we wanted to make sure we had it closed; that our pipes and our easements over that property were in tact. It was discovered we did not have the other ones so we are closing it.
Mr. Hanks stated there are two real philosophies in terms of how you design or manage a water distribution system. You can look at it with a narrow standpoint; okay we are going to provide the mains down the streets and everything coming off that is privately owned and maintained. The other school of thought is you have most everything publicly dedicated so that way if there is an issue at any location, you do not have to worry about trying to find out whose project this is because the water needs to be shut down, etcetera, etcetera. The utilities take care of it. That is the business utilities are in; to take care of water mains and provide the service. That is what is going on as far as why we take these things on; since it is on private property and it was designed as a public system. That is why we are taking it on. We now have the rights to go onto the property if something becomes broken.
Mr. Fennell asked if something becomes broken, who pays for it?
Mr. Hanks asked since it is coming to us now is there a warranty or a bond on this? What are the requirements?
Mr. Cassel responded I am not sure who did the review.
Ms. Early stated we are not involved in this.
Mr. Cassel stated you did some review on the conveyance documents.
Ms. Early stated all we did was the stormwater. You know the project was certified. Who ever the engineer is they had to certify the project.
Mr. Hanks stated item three says we own their water lines. We own the responsibility for them and as far as I can see we are not getting any money for this. We are taking on the responsibility for those lines. If anything goes wrong with them or if there is anything wrong with them now, we pay. Is that correct?
Mr. Cassel responded that is my understanding of how the policy of the District has been for times past. If we had large mains going into the property to service the facility, the District did manage to take care of those and it was part of its system. The meters are actually located inside the property where they take off for a specific building so basically we have extended our distribution system through the private property up to the meter. Anything beyond the meter is the property owner’s.
Mr. Fennell stated so for $10 we are taking this on.
Mr. Hanks stated I do not have a problem with us taking on responsibility. I think it is what the District is set up for. It is really the proper entity for operating and maintaining large diameter water and sewer mains. There are a couple of questions I have on the conveyance.
Mr. Fennell asked why do we do it? Do we make any money on this? It does not cost us anything until something goes wrong.
Mr. Daly responded we will make money on the water distribution line. I see a positive side.
Mr. Hanks stated it also provides redundancy within the system so if there were any breakage on Lakeview Drive; you shut it down in front of the church instead of through the church. It is a whole spider web of infrastructure.
Mr. Hanks stated I have a couple of questions on clarification. On the Bill of Sale as far as water and sewer facilities and manholes it is referencing a Carnahan Proctor & Cross exhibit. That was not attached. Are we taking on responsibility for service lines?
Mr. Cassel responded no; the mains only.
Mr. Hanks stated it shows the easements are 12 feet wide. Does that provide sufficient room to enter in and maintain these facilities?
Mr. Cassel responded yes. They are typically between 10 feet to 15 feet so 12 feet is fine.
Mr. Hanks stated I am concerned this is a non-exclusive easement agreement, which means within that 12 feet any and everybody can put in their facilities.
Mr. Cassel stated if you have an exclusive agreement and someone wants to put in a power line, telephone line or cable line across the easement, they would have to come and get a grant of encroachment on this easement. What I have typically seen in the past is you get a non-exclusive agreement for something like this so it does not hamper the property owner from doing other things on their property by having to come and ask for permission every time.
Mr. Hanks my concern is if they want to run natural gas, they have this non-exclusive agreement so they take the perspective that they can run a parallel line. Then you have a gas line or an FPL cable sitting practically on top of the water and sewer facility making it more difficult for us to repair in the future. Mr. Lyles, what is your understanding on exclusive and non-exclusive?
Mr. Lyles responded my understanding is partly the result of an issue that is going on right now in NSID where there are lines in a non-exclusive easement and another utility contractor is in there digging and causing problems. Conflicts do occur. There are other technologies which were never anticipated. A lot of these old easements never anticipated high speed fiber optic or telecommunication lines, but they are utilities and they can go in the entire length of this easement. Utility easements are created for this purpose by cities as well as districts. It is not uncommon to have things clustered together. The difficulty is the different utility providers voluntarily working together. They typically do, but once we do this the church is out of it. It is basically our problem.
Mr. Hanks stated 12 feet is a little tight.
Mr. Lyles stated but I have seen them be 10 feet.
Mr. Hanks stated I have also seen them be 20 feet.
Mr. Lyles asked who came up with the 12 feet as opposed to 20 feet?
Mr. Cassel responded it was in the documents from the beginning when Mr. Waypa started it six years ago.
Mr. Hanks stated once there is a 12 foot easement granted and we need to go in there to make a repair, someone is really going to be squawking about it.
Mr. Fennell asked counsel, what do you think about the agreement?
Mr. Lyles responded the problem is if we take a step back, and I will tell you cities are sometimes taking a step back now on issues that used to be run of the mill business, you can make the argument that we go back and implement the other philosophy you described where we just come to the perimeter line of the parcel. We have meters all within this. You can see where all the stubs are in the exhibits. It was probably designed and installed with the anticipation that would be part of the District’s system as other systems are throughout Coral Springs in this way and that the private responsibility would start where the stub outs are; where the meters typically are. It would be a big change to undo this. If this had come through six years ago when it would have been the appropriate timing, it would have undoubtedly sailed right through and we would not be having the self examination we are having today.
This is consistent with what the District has done for many years. They are not being treated any more or less generously than other entities who want developed property. It is an arm’s length transaction. There are some practical considerations we veered out, but there is certainly no legal impediment to going forward with the acceptance of the infrastructure, the execution of the bill of sale and the easement agreement. Does it have to be this way? No. Could we be more stringent in the requirements and put more of the expense as well as the ultimate maintenance responsibility on the landowner? Yes, but we have not done that and it has not been the policy in the past. It gets back to a judgment call on the part of the Board. There are no legal or engineering impediments to this that I think we can advise you about.
Ms. Zich asked is there anybody else that has this same pending arrangement?
Mr. Cassel responded the Honda conveyance package is still lying out there.
Mr. Hanks asked did the Coral Square Mall get resolved?
Mr. Cassel responded that was a litigation issue.
Mr. Lyles stated the issue there was that there is a meter and meter cover there, which are well into the private property next to the building and there was a pedestrian slip and fall that occurred because of a problem with the meter cover not being in place. The same thing could happen here.
Mr. Hanks stated it could happen with any of our facilities. This is really no different than any of the other utility easements that are running through, whether it is Eagle Trace or Maplewood Isles; any private community where you have multiple services going to a single situation. Now this goes with permitting considerations as to what gets changed in the future. I guess the church is comfortable with the plan so they could not just go and wipe it out without our approval.
SIXTH ORDER OF BUSINESS Staff Reports
· Stormwater Nutrient Requirements Update
Mr. Cassel stated I put a package in front of you based upon where we are and on some of the information which has been coming in over the last week. I attended the EPA hearing last week on behalf of the District as well as other districts I represent as the manager. The first email indicates there were over 181 people that spoke against the proposed nutrient regulations as proposed by the EPA at this point in time. Total nitrogen is .56 and ours averages around 1 or better. It would require extensive treatment for the District. There are cost estimates from the EPA and others which go anywhere from $50,000 to the state to a couple of $1 Billion; depending on whose numbers you use and how much you need to treat it.
There was consensus by most of the people there that if there is a numeric standard, the numeric standard should be site specific or area specific and not just in general over the entire region. This is some back up as to where they are. I will be preparing some written comments to go along with my verbal comments I gave at the meeting and will be sending those in. They are due by the end of March. We will see what happens from there.
Mr. Fennell stated you also sent us something else. I printed it out and looked at the data. The proper way to analyze this data is to first due a statistical analysis, which means you take all of the samples over the different years and you do a three sigma analysis to find out what the likelihood is that 3 out of 100 cases would exceed that. Using averages is just suicide, which means half of the time you are out of compliance. It has to be at, at least, a three sigma point. It is where we want the specifications to be as a minimum. Then if it is a question of negotiating the specifications, we can actually go higher than that; a five sigma level perhaps. If we exceed that, for whatever reason, then what happens? Are we going to remedy billions of gallons of water? I do not see how that is possible or even desirable as far as the area goes. I have some real contentions, but I would like to see what that figure would be by the next meeting and I would like to see that as what our recommendations are. I do not know how this meshes with other groups or other areas around us. I think we should probably coordinate with them also.
Mr. Cassel stated we have been working with FASD on this as well and they were at the meeting. They have been at all the meetings and they are representing all of the association. They have their own engineers on it. They have their own attorneys on it that the association is putting forward on all of this. They are asking individual districts to speak up as well. If you have the association it is one thing, but when you have the districts all coming in with similar points of views and perspectives on why the issues create hardship on the residents, it is a good thing. One of the individuals who spoke the other night said either the water is going to be so bad that no one will be able to live here or nobody is going to be able to afford to live here because of the costs associated with treating the water. Does something need to be done? Yes, because the water needs to be looked at; however, what they are proposing in the extremes does not make sense. A lot of this comes out of a lawsuit against the EPA and an agreement when they settled that lawsuit. The pushback of those who have to live with potential results of it is what is occurring at this point in time.
Mr. Fennell stated I think excess data establishes reasonable levels. We have done due diligence looking at the levels we have had for the last four years. I think we should establish a specification based upon that we could live with. As far as I know; has there ever been a case anywhere where we have had some kind of problem within the water with high nitrogen concentration?
Mr. Cassel responded I do not think we have had any major algae blooms or anything like that.
Mr. Fennell stated so these are reasonable numbers.
Mr. Frederick stated we have not had anything to deal with it lately. We have had them in the past, but none in the last couple of years that I know of.
Mr. Fennell asked is this also a function of the temperature? The activity in the water?
Mr. Frederick responded there are a lot of things which would cause allergy blooms.
Mr. Hanks asked is it within our purview and do we have areas within the District that are still on septic or are we entirely 100% city sewer?
Mr. Daly responded we have 15 homes on 105th Avenue in Maplewood Isles.
Mr. Hanks stated if you have a question about source of nitrogen; that is probably a good contributor there.
Mr. Cassel stated the other issue is a lot of the nitrogen comes from runoff from fertilizers in the grass. Since we do not have regulatory authority to control how much, who puts on or who can sell what type of fertilizer product, part of our perspective is if we do not have any control over what can be put on, but we are responsible for what we receive, it is putting the burden on the wrong place.
Mr. Fennell stated I am not sure the argument is being real logical at this point. I think there is a logical argument for what our specification should be so that is what we should look at unless there is some other reason we know about where we think we have issues as far as water quality right now, but I have not heard of any issues.
Mr. Hanks stated our canals are drainage canals.
Mr. Cassel stated that is all I have on the stormwater nutrient requirements update. Before I move onto the monthly water and sewer charts we are going to show you a brief video. We were initially going to have the I&I report back this month, but we are doing some extra data collection and data research that we are giving to CH2M Hill for them to look at as far as when the report comes back in. We have gone out and put flow meters as well as pressure meters on a number of the lift stations. We have given that information to CH2M Hill. We have also gone out with our camera and this is a couple the…
Mr. Fennell asked what was that?
Mr. Cassel responded that is your lateral.
Mr. Hanks stated you are in the Y right now. Was that through a cleanout?
Mr. Cassel responded yes.
The record will reflect a video was shown to the Board.
Mr. Hanks asked is this PVC?
Mr. Cassel responded yes.
Mr. Fennell stated so we are going from a house to the main.
Mr. Cassel stated now you are in the clay pipe. You can see some of the joints.
Mr. Hanks stated there is not a whole lot of flow there.
Mr. Cassel stated no, but you can see up the sides where your flows are from time to time.
Mr. Fennell asked so did we start from somebody’s house?
Mr. Cassel responded yes. We have taken a section from the lift station #4 area. We started in some of the deeper ones and we are working down the streets. If you are going to have an issue, you are going to have it in your deeper ones first before you get into your shallower connections. We are trying to get a baseline. This was done in fairly dry weather. We are waiting for a good rain to run back out and do the same thing to see where the potential distance is before we start getting any infiltration if we have infiltration in there.
Mr. Hanks asked what is the white stuff on either side?
Mr. Cassel responded grease, soap and those kinds of build ups.
Ms. Zich asked does it ever get cleaned out or is it always there?
Mr. Cassel responded it is there.
Mr. Hanks stated that is not bad.
Mr. Cassel stated you can run cleaning stuff down it, but when you start doing that it comes back here and we have to deal with it. The amount that is in this pipe is insignificant.
Mr. Hanks asked can we go back there Mr. Daly? Is there infiltration in that joint there?
Mr. Daly responded I was looking at that.
Mr. Hanks stated Ms. Early look on the left side and the black stuff coming off. What are your thoughts?
Mr. Stover responded it could be some glue that they used or some tar that they maybe used to put the pipe together.
Mr. Cassel stated it could be.
Mr. Fennell asked how do they put the pipes together?
Mr. Cassel responded usually it is a gasket or a seal that is put on it. Some of them are rubber, but then they had one that was kind of like an impregnated fiber; kind of a black seal you lay around it and shove the pipe together.
Ms. Zich asked how big is this pipe?
Mr. Cassel responded this is six inches.
Mr. Fennell asked is this the main going down the street now?
Mr. Cassel responded no. We have not reached the main yet. This is your lateral still going out to the street.
Ms. Zich asked has this pipe been there maybe 30 years?
Mr. Cassel responded yes. This is the original pipe installed when the area was constructed.
Mr. Fennell stated I do not see any roots or anything.
Mr. Cassel stated no. That is a good thing. Now you are into the main.
Mr. Fennell stated the point where we join the main is where we are saying there would be a problem, but I did not really see one there.
Mr. Daly stated it could be there or any of the joints that come along.
Mr. Cassel stated this is during a dry period. We run these before and make sure we know which ones they are so when we get a heavy rain we will go back out and recheck them to see a before and after comparison. If it is all in the laterals, then we have to figure out another way to attack the problem.
Mr. Fennell asked have you found a problem?
Mr. Cassel responded so far from what we have seen there is nothing really major to worry about.
Mr. Fennell asked how many have you looked at so far?
Mr. Daly responded I think we have a half a dozen on this and then they went out and did some more.
Ms. Zich stated for 30 years that is a lot better than I thought it would be.
Mr. Hanks asked on the I&I report there were some pretty generous assumptions to water consumption; have those been addressed?
Mr. Cassel responded that is one of the items I went back with CH2M Hill and looked at them. I had them go back and look at it. We also supplied them with pump curves. That is why we are doing the pressure test and flow on the different pump stations so they can get an accurate reading, we have been doing some pump times where the pump might be readied at 500 gallons a minute and when it kicks on it is running at 500 gallons a minute, but by the end of six minutes it is only running at 350 gallons a minute, but the head pressure is building up. We are looking at pumps, pump curves, head pressures and all of those kinds of issues to make sure we account for all of those as we put the totality of numbers together to give us a view of what is really there based upon some solid information.
Mr. Hanks asked Mr. Frederick, what is our groundwater at these days?
Mr. Frederick responded on the east basin I believe we were at 6.6 feet, 6.5 feet is within normal elevation.
Mr. Hanks stated in the summertime it will fluctuate to 6.7 feet. Have we gotten any 24 hour flow meters done on any of these coming into the lift station?
Mr. Cassel responded not coming in.
Mr. Hanks stated not dealing with the pumps. Take the pumps out of the equation.
Mr. Cassel stated no. We have not done any.
Mr. Hanks stated coming into the lift station is where you will know how much. You measure the flow in.
Mr. Cassel stated we do not have any portable flow meters to drop into to take care of that.
Mr. Johnson asked as far as going into the lift stations are those force mains or are they gravity?
Mr. Cassel responded they are gravity into these lift stations.
Mr. Johnson stated if you do not have full pipe flow, then one way you can back into the calculations is to look at the balance between the flow coming out and level going up in the tank.
Mr. Cassel stated we have done some graphing in the fact that looking at the pump duration run times and the off time between pump cycles. We do have that information as part of our 24 hours flow. You can definitely see between the hours of 2:00 a.m. and 6:00 a.m. the time between the pumps gets longer, which is in the market of what you would think.
Mr. Hanks stated even in this dry season they are not much different from our wet season water table. If we were to go ahead and say that not many people are going to be using the facilities, you have a flow measurement at that time and compare it. That will be your baseline if you want to want to figure out where your infiltration is at that time. Then you will be able to track if it is a storm event specifically where we are looking at surface water entering or if someone has an illegal connection.
Mr. Fennell stated well keep looking. If you do 200 samples, it will give you a good indication of whether it is a widespread problem or not. We know the severity, but we do not know how widespread this is. It would be nice if it was not widespread, but then that means it is going to be in a few distinct spots. You still have to find it. Is there a reason you came from that house?
Mr. Cassel responded we cannot run our camera down the main because it does not work under water. You cannot see anything. To run it down the main you need a larger camera. You need to block off the main from point to point, flush it out and then run the camera down so you can see what you have. Most of these were already lined on the mains. That liner can walk some, potentially creating an issue. Some of the seals where the hole was cut in for the lateral could be leaking. These are things we need to look at when we do a main inspection. We are trying to see as much as we can from the laterals at this point in time since we have that equipment.
Mr. Fennell asked is there something we should be doing now such as putting different things in place that would give us an A/B comparison? Flow meters or things like that?
Mr. Daly responded those are still out there.
Mr. Cassel stated we have the flow meters out there and we have set up pits at each one so we can move from location to location fairly quickly to get the flows.
Mr. Hanks asked do we have staff available at 2:00 a.m. that can go out there and get those measurements or are you short on staff?
Mr. Daly responded our field crew is on call. We can schedule them if necessary.
· Monthly Water & Sewer Charts
· Utility Billing Work Orders
There being no report, the next item followed.
· Project Status Report
Mr. Fennell stated I saw some steel framework looking like they were going to put a column up out there.
Mr. Johnson stated yes. I wish I could be more optimistic about the contractor’s progress so far, but between now and the last couple of months there has not been a lot of progress to date. They are still moving forward and making things happen out in the field, but we are not seeing the type of progress we should expect to see on this project. Their latest schedule was submitted last night. I forwarded it to my scheduler this morning to start her review. She will have comments by tomorrow. In speaking with her she said that the substantial completion has slipped by a month from November 24th to December 23rd. If they were to hit substantial, you guys would have a Christmas present. The final completion I do not believe has moved so they can press the durations between substantial and final completion. Because they are showing a one month lag in their schedule we are going to write a letter to them to ask for corrective actions to get back on schedule.
As it stands right now we are nine months away from where they should be at substantial completion. The activity on site does not give us a lot of hope for them to finish on time. I am looking at their pay application. I have a handful of things we are using as CH2M Hill outside of the contractor’s scheduling to gage where they should be and where they are going to land. We are looking at a current payment application and to date they have completed $4 Million out of $18 Million. They are about 25% spent. Most of the $4 Million is in the wastewater plant. They are 6% spent on the water plant. They have a long way to go. We have done a number of these projects here and to look at nine months for substantial completion is a stretch.
Mr. Fennell asked are they going to come in and talk to us next month?
Mr. Johnson responded they were actually supposed to be here today. Mr. Brown forgot about it. When I asked him today he said he was not going to be able to make it. I imagine he will make it to the next one.
Mr. Fennell stated please ask him to come to the next one and we would like to concentrate on the original schedule.
Mr. Hanks asked is the amount that we have paid out so far comparable or in agreement with the amount of work that has been completed so far?
Mr. Johnson responded yes. We have not overpaid anything. I am confident we have not overpaid them for any portion of the work during the duration of this project while I am involved.
Ms. Zich asked have all the subcontractors signed off?
Mr. Johnson asked as far as?
Ms. Zich responded them getting paid.
Mr. Johnson stated no.
Mr. Cassel stated we have had some issues with that.
Ms. Zich stated that is a real important thing. If they are not paying their subcontractors, we need to know they are not paying their subcontractors.
Mr. Johnson stated the District was contacted by three different suppliers, vendors and subcontractors. They are slow to get paid. There was some validity to an argument where they cannot pay them until they get paid. They have been paid current up to January 15, 2010. We just recently got a supplier calling and asking when they are going to get paid. It is for a small amount of money. It is $7,000. If you are looking at the cut off, there is a 30 day lag. They probably should have been paid, but you can make the argument that it may be taking some time to get through the system. What is significant about the $7,000 is that the next invoice they have is for $45,000. The invoice after that is for $400,000. They are nervous to release that equipment if they are not going to get paid. The $400,000 invoice represents the roof to your membrane building. It is not critical yet because we do not have the walls up to put a roof on, but we hope to be there in a couple of months. We are planning to have an administrative meeting between all parties and then we are going to notify Lazlo’s bonding company that there are issues and concerns with the project. That being said, we are still moving along and making some progress. They have subcontractors doing the concrete. They have an electric subcontractor onsite who is doing work. The concrete subcontractors are anxious to get in and get out. They have the typical contractor mentality that time is money and the faster they can get in and out; the faster they can get to the next project.
Mr. Hanks asked counsel, do you have any advice or any thoughts on pitfalls we should be aware of or on the lookout for?
Mr. Lyles responded I think we just touched upon the one that occurred to me. There were some emails and communications back and forth regarding Lanzo not getting timely payment from us; our response being they have to give us paperwork that meets the requirements of the contract so we can process the payment request. This seems to have now been resolved. That was a couple of months ago. We are going to be looking at a delay issue at the end of this thing apparently and they are going to do everything they can on the paperwork side to set it up so they demonstrate their entitlement to extra time. One of the things they will look to is what they allege is a slow turnaround on pay requests from us. We have that under control at this point and have had it under control. They are continuing to slip on their completions and artificially compressing the time between substantial completion and handing us the keys which is not going to work. At this point they have not done anything that I have heard of which would allow us to say they have constructively abandoned the project. We cannot go to the surety and get them involved.
Mr. Johnson stated our feeling is by notifying the surety there are issues and we are receiving complaints of subcontractors not getting paid demonstrates a certain behavior. Our attorneys internally have advised us to notify the surety so they are at least aware of what is going on and they can send out their reviewers or investigators to take a look at what is going on.
Mr. Lyles stated that is probably the very best way to get the attention of a contractor. What I was suggesting is I do not think we have a way of calling on the surety to perform under the surety incident that we have construction abandonment because they are moving so slowly that they are not legally progressing with the job. They are right on the edge of something along those lines. Notifying the surety is reasonable and sensible. If that does not get their attention, we will have to see what happens at this upcoming meeting. It will be very important to hear what they have to say at your March meeting.
Mr. Johnson stated there are some issues I am hoping are subjective items within the contract which could allow us to issue a ten day notice to the surety that the contractor is not providing adequate staffing to complete the project. We can say they do not have adequate staffing onsite to get the project done. The current man load they have onsite is insufficient to complete the work in a timely manner, but a lot of these are subjective items. We cannot say they have abandoned the job. That is cut and dry.
Ms. Zich stated I am disappointed he is not here. We requested it and he said he was going to be here every other month.
Mr. Lyles stated that is a voluntary undertaking on his part. It is not a contract provision, but it would be something that will be contained in our records which are retained as part of our public records, and be potentially part of the whole picture of inattention to the project if we do get into a dispute a year from now. It is not a breach of his agreement, but it demonstrates their approach.
SEVENTH ORDER OF BUSINESS Approval of January Financials and Check Registers
Mr. Fennell asked are there any questions or comments?
Ms. Zich responded I have looked over it and have gone over it with Ms. Woodward. It is in good shape. Did you notice your note in here that you wanted about the interest expense? She put a little note there for you. It is under the water and sewer fund explaining the interest.
Mr. Fennell stated interest expense budgeted on the 2007 Series Bonds is being capitalized to construction in progress until construction on the nano plant and plant F is complete. What does that mean?
Ms. Woodward responded that means until your construction is completed the cost of carrying those bond funds to pay for construction is considered to include the cost of construction, the cost of engineering and the cost of the money to pay for the project. This means the interest on those bonds is capitalized as a fixed asset until such time as we have completed construction. At that point any future interest we pay on the bonds is under interest expense and it will show in your operating statement as interest expense.
Mr. Fennell stated I heard her say it, but I still do not understand it.
Mr. Hanks asked is it important for us to understand?
Ms. Woodward responded it is important in the sense that at the last meeting the question arose as to why we were budgeting for the interest expense, but the interest expense was not showing as an operating expense. I removed both the budget side of it and the interest expense side of it because the interest that was paid was added into the balance sheet, into your fixed asset section, as construction in process. It gives you a better opportunity to compare your budget to actual on the operational side and not panic because there was such a large number under the interest expense.
Ms. Zich stated our collections on the general are incredible. We have almost all of our money already. That is great. The check register looks pretty normal. The cash transactions, I want to make sure, all of our certificates of deposits that we had before have all rolled over now and we do not have to make any additional ones?
Ms. Woodward responded we do have two we need to follow up on. The first were sent the week of January. Two of those CDs matured and the funds were then transferred back into operating cash. We are waiting for that to be reinvested.
Ms. Zich asked do they not just rollover?
Ms. Woodward responded no. You have to take certain steps. You can choose to roll it over for a different period or in a different amount. Mr. Bloom had talked to me back in January about this. He was going to be working on getting it reinvested. I have not heard back from him. Hopefully we will get something soon on this.
Ms. Zich asked do we need to have any more certificates of deposits or do you think we are at the right place?
Ms. Woodward responded I think it would not hurt for us to look back at it.
Ms. Zich stated there is still quite a bit of cash sitting there that we do not really use. We are not getting a lot of interest on it, but anything is better than absolutely nothing. I think we should look at it because we still have an awful lot of cash just sitting there.
EIGHTH ORDER OF BUSINESS Adjournment
Mr. Fennell asked are there any other issues or comments?
Mr. Daly responded the next meeting is three weeks from now. It is the third week of next month.
Mr. Hanks stated I have a couple of questions that relate to some issues we had last month about the un-metered water here in the plant.
Mr. Daly stated we bought meters. They should be installed by the end of this month. We will be able to account for every drop of water.
Mr. Fennell asked is there any progress on finding more water revenue sources?
Mr. Cassel responded we are still looking at those.
Mr. Daly stated we are still looking. We are going out there and testing the meters.
Mr. Cassel stated also Mr. Macintosh has looked at his operations as far as water used internally. He is looking at some operational issues and modified some of his operations to consume less water internally in the plant as well. He is gauging that and working on fine tuning. He is doing a good job. Mr. Stover is doing a good job looking to make sure which valves are open and where the water is going as well inside.
Mr. Fennell stated okay. It sounds good. I want to give the two of you a warning coming up for the next budget, which is still a long ways away.
Ms. Woodward stated it is not that long.
Mr. Fennell stated you want to make sure you take an active part in managing your departments and how you think money should be spent or should not be spent. If you see some opportunities where you can actually make some cost reductions by using capital investments, that is the right time to do it; before budget time comes around.
Mr. Hanks stated along that same line there are two other issues. If there are any multi-year permits which need to be renewed, are we going to need engineering services for that? Are there physical improvements you are going to need to make on different components of the plant or infrastructure that are not figured into our repair and restoration budget?
Mr. Fennell stated safety is always an issue too.
Mr. Daly stated Mr. Zilmer has been working with our workers’ compensation provider. We are going to put up a learning station over there. We are putting some old computers over there so they can log onto the website and learn a lesson. They will get some type of accreditation for it. It is all about safety. That has been provided to us by the insurer. We happen to have a spare office over there where Mr. Hyche was sitting that we will use.
Mr. Fennell asked are there any other comments?
There not being any,
Glen Hanks Robert D. Fennell