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, March 15, 2010 at 3:05 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
Stephen Bloom Severn Trent Services
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 February 22, 2010 Meeting
Mr. Cassel asked Mr. Hanks, are the margins better for you?
Mr. Hanks responded yes. I like them.
Mr. Fennell stated they seem to be more readable. I do not know why that is.
Ms. Zich stated because the margin is bigger.
Mr. Cassel stated I believe we changed the font style, we reduced it by one point and we moved the margin over.
Mr. Hanks stated there is one thing we should correct on page 15; almost two thirds of the way down. “Mr. Cassel responded I do not think we have had any major allergy blooms or anything like that.” I think it should say “algae blooms.”
THIRD ORDER OF BUSINESS Supervisors’ Requests and Audience Comments
Mr. Fennell stated I was suggesting we have a tour next month.
Mr. Hanks stated that should be fine. Are we still meeting at 3:00 p.m.?
Mr. Fennell stated yes, for about a half an hour.
Ms. Zich asked meet here at 3:00 p.m. for a half an hour tour?
Mr. Fennell responded yes.
Ms. Zich stated okay.
Mr. Hanks stated I have a question for Ms. Woodward. As we are going through budgets and reading last month the auditor’s report; do we have any ideas, or maybe this is a question for Mr. Cassel, how would we cope with a 10% decrease in revenue all of a sudden? I am trying to think under what kind of scenarios that could happen. I was shocked when I drove through some areas in Orlando on the amount of vacancies which occurred.
Mr. Cassel responded there is a base fee regardless of water consumed. Is that correct Mr. Daly?
Mr. Daly responded yes and it has gone up.
Mr. Cassel stated there is a base fee regardless of volume used, which whoever the owner or trustee of the property is would be responsible for paying it. That would give you some benefit. Also, the funds we have put away for worst case scenarios are for this case as well. We have been planning for the worst case scenario catastrophe for a while.
Mr. Hanks stated on the water side we do not have to pump as much water for those services, but on the wastewater side we are still getting a lot of inflow so we still have to treat a fair amount.
Mr. Cassel stated that is correct, but this is why we are continuing to look into fine tuning which ones are the areas we want to hit.
Mr. Hanks stated so we have some fallback on that.
Mr. Daly stated we have a mechanism on record when we went out for the original bond that can be engaged if we desire; two or three more rate increases at 4% and 5% starting in 2010. That is already public knowledge if we choose to do it.
Mr. Hanks stated all of these different locations are having issues. That is why I wanted to make sure we have something.
Mr. Cassel stated we have been looking at it. In the last two years I have been here Mr. Daly, Ms. Woodward and the staff have been looking at our budgets to see how we could fine tune it. Mr. Macintosh is continually looking at modifying the processes and how we can minimize our expenses while we are going through everything we have.
Ms. Zich stated I cannot imagine how we could have 10%.
Mr. Hanks stated I just picked a number.
Ms. Zich stated I know; a big decline.
Mr. Fennell stated there are two or three easy issues which could do that. Number one is the economics, which is what I believe you are referring to.
Ms. Zich stated right. It has been so bad the last year or so.
Mr. Fennell stated in fact there are quite a few houses within the entire area. We do have one benefit, which is we are mostly built out. Even if we are 10% down we still have 90% of our customers. If you live in a new area where they were planning on building out 90%, they have only built out 20% and half of the houses go belly up, they are in deep trouble. I am not sure they can get out of it. That is one thing, economically. Probably the worst and more likely case for us is if we get hit by a hurricane.
Mr. Hanks stated that is true.
Mr. Fennell stated that is what will get us.
Mr. Cassel stated but that is also part of the plan.
Ms. Zich stated we have money squirreled away for that.
Mr. Fennell stated there is the canal issue which hit us for a couple of millions of dollars the last time around. We had to build that back up. Thank God we had some money in there. What could happen to us is what happened to South Dade County. The houses are just not there. If we get hit directly with a hurricane and it takes out any preciable portion, there is no impact because there is no house. There is no one living there and there will not be for several years. That would be the one which would kill us. I do not know how to prepare for that. There are catastrophic things like that which do occur. New Orleans was the same issue. Even when they try to comeback they have an issue because there is nobody living there and how do you pay for utilities when there is nobody there.
Mr. Daly stated if you really want to nail it down and have an answer to it, you should have two years worth of your debt service on hand at all times which is not to be touched. That is $8 Million.
Ms. Zich stated the chances of us having that much of a catastrophe are small.
Mr. Daly responded you are correct, but we are having this discussion.
Ms. Zich stated I have been here 40 years and in 40 years Hurricane Wilma was the only one that really affected us.
Mr. Fennell stated remember we did lose the south part of Dade County. It was more than 100,000 homes that went out there. It was heading right at the Broward and Dade County line. It just went south by about 30 miles. That is the only thing that saved us with that one. The last one that came through here we were right on the edge. If you ever talked to some of your neighbors, you will know it was just at the point where some of the roof portals were starting to lift up. Not many roofs went, but another ten miles per hour and we would have seen significant roof damage. I do not know. Is it worth insurance for us for that?
Mr. Hanks responded no. If we are going to be in a situation, we cannot insure everything. At a certain point you have to take your risks.
Mr. Lyles stated I have just a reminder. Maybe it is simplistic, but I think it bears on the discussion. Most of what the Board is talking about and concerned about would in effect be a delay in payment as opposed to a loss payment. Assessments or utility fees for services provided and not paid will have a lien for that. Eventually when something happens to the property, it will be brought current. It is the ongoing monthly charges for utility services. If the property is vacant, we do not get that back. We get the minimum charge. A lot of what we are talking about, and other entities might consider insurance for, is really not a loss. It is a delay.
If you find yourself in that situation, you would probably find it more economically advantageous to enter into what is a sophisticated bridge loan as opposed to insuring in advance against that type of delay and getting payments or have a reserve to cover it. You will get the money and the increment of assessment debt on parcels in Coral Springs is such a minor part of the value of the property; unlike some of the projects you have seen in the center of the state where the debt got out of whack with the value of the property. We still have very valuable parcels relative to the total amount of the debt on the property for District purposes. I am not going to say it is not something we have to be concerned about, but I think in most cases it would be a matter of some delay as opposed to a loss.
Mr. Fennell stated the stuff under the ground cannot get hurt by a hurricane. The only thing that could happen is the plant gets destroyed. I do not know if you could really pull these down. Have you ever heard of anything like it?
Mr. Hanks asked which one was the one that hit New Orleans?
Ms. Zich responded Hurricane Katrina. The problem with Hurricane Katrina was due to total flooding because it is such a low place. We are not nearly as low as they are.
Mr. Hanks stated if you take an analogy, the closest structure we would see, granted they do have water treatment plants and we did not see any issues with water treatment plants come through on the news. What you did see was some of the empty gasoline and oil storage tanks because they were not adequately tied down. You did have some ruptures in those instances. Here we are not dealing with empty storage tanks.
Ms. Zich stated and the elevation in New Orleans is so low. I took a tour in New Orleans. It was 15 feet below and I wanted to get out just then. I did not even want to stay there. We do not have that here. We used to have seven to ten feet.
Mr. Fennell stated it was stupid to build there in New Orleans.
Mr. Hanks stated yes.
Ms. Zich stated definitely.
Mr. Fennell stated it looks to me like most of our service type buildings could withstand pretty heavy winds. The only thing that would probably go is this building. It has all of this glass in it.
Ms. Zich asked is it mostly hurricane proof glass?
Mr. Hanks responded no.
Mr. Fennell asked and we do not have anything to go over the windows, do we?
Mr. Daly responded no.
Mr. Hanks asked Mr. Daly, where is the computer when we have these storms?
Mr. Daly responded back up tape goes out of state everyday for two to three days before the storm hits. If we ever need to recreate and let us say you have a dial up service at your house and I can get online, we can still process payroll and everything.
Mr. Fennell stated but your computer would be gone. What happens then?
Ms. Zich responded he has all back up.
Mr. Daly stated it is the data that is important.
Mr. Fennell asked will you look into something called cloud computing? There is a new movement which is coming about. You put all of your applications and all of your information online. You can actually call the applications and run them remotely. Suppose we lost this building, the issue for us would be money coming in every month and we would not know what to charge; all of that kind of stuff. It would take us months to actually find a place to put the computer. What would you do then?
I think the auxiliary buildings we have here we could actually operate out of. Those are going to stay. If you have cloud computing, you could actually call up the application online and just run it remotely. This is the up and coming thing. It is not just for us. We do not have all that high information content like pictures and things like that. The ability to download information online is easy for us. The application itself is application software we are renting from somebody.
There might be somebody else or some other location where we could actually have that software there and bring it up if necessary. I do not know what this would cost us as far as backup. As far as the business system, which looks like it would be likely that we would lose, it would be nice to have that backed up. I think it would take you two to three months to get back up. Look at this to see if we are better off having some big network online somewhere.
Mr. Daly stated I know management companies that use ASI software and they rent space on associative systems box in North Carolina. They lease the programs and lease the box. They take care of the entire backup. That can be done and it is pretty much what we are geared towards. We send the back up tape up to them. They have a machine where they can restore our backup and all we have to do is point our computers to their IP address and we are in. We are able to check everything. Accounting is done the same way like if you were here or in your home.
Mr. Fennell stated look into it and see how much it costs. Even when we lost power we were not able to do anything because you could not bill people or do anything.
Mr. Daly stated we do not lose power now. We have generators. The caveat to that is you will have to put your operating system out there. We have an IBM operating system and that is a big gorilla of a system. It is not like a Microsoft system. Otherwise, there is all of this data out there you can access, but you cannot restore anything. This is why we used ASI in Houston along with Severn Trent Services. We chose them to be our go to people. We send them a tape and it just sits there. Chances are it is never going to be used.
Mr. Fennell stated I am just saying that would be the one thing I could see. If we had a loss of computers, we would have a hard time. Why do you not look to see if there is the possibility for us to do this?
Mr. Daly stated sure.
Mr. Fennell stated this is the upcoming trend here. Lots of different kinds of data are going to go online.
Mr. Daly stated kind of like Google. With Google you can do your word, excel and all of that kind of stuff.
Mr. Fennell stated once health records go online; it will be a big deal too. This was a Supervisors’ Requests for next month. We will have a tour the first half an hour. Bring your helmets. Have a little something about disaster back up. We are at that time of year when we start preparing for hurricanes. Next time tell us why you are all prepared for hurricanes and what you have done to check out all of the equipment, check the diesel loadings; whatever you do, reassure us you have done it.
Mr. Fennell stated on is here yet.
Mr. Cassel stated no one from Intrastate Construction. Mr. Johnson can give us a status update at this point of where we are at. What we are doing from the District’s perspective to try to push them forward.
Ms. Zich asked have we seen Mr. Browne?
Mr. Johnson responded he is out there, but it must have slipped his mind again.
Mr. Fennell asked why do you not give him a call?
Mr. Cassel asked do you have his number Mr. Johnson?
Mr. Johnson responded no.
Mr. Hanks stated we have given him the opportunity to present his side of things and he is choosing not to.
Mr. Fennell stated give him a call and ask him if he is coming.
FIFTH ORDER OF BUSINESS Consideration of Permit for City National Bank
Mr. Fennell asked are there any issues with this?
Ms. Early responded no. It is for a surface water permit. They will increase the exfiltration trench to meet the District’s current criteria.
Mr. Hanks asked is this the old Shell?
Ms. Early responded yes.
Mr. Hanks asked what are they doing with the building?
Ms. Early responded I do not know about the inside.
Mr. Hanks asked are they keeping the building?
Ms. Early responded I believe so. Mr. Bohorquez did the review. We briefly talked about the surface water permit. I can call and ask him if you want.
Mr. Fennell asked so do we not know what is going on?
Mr. Johnson responded I do not know.
Ms. Early stated it is a bank, but I do not know if they are gutting the inside.
Ms. Zich stated I cannot imagine they will use that. If you know how much it costs now and days, you are better off demolishing and rebuilding than refurbishing. I cannot imagine they are not totally rebuilding it.
Mr. Fennell stated you realize what will happen during the next hurricane. There is absolutely no gasoline to be bought. Even if the local gasoline station has something, there are going to be so few of them that there will be no gasoline to be had.
Mr. Daly stated there is still a Mobil on Riverside Drive and Atlantic Boulevard.
Mr. Fennell I know, but if you think of how many were there when we first moved in, there must have been fives times the number of gas stations.
Ms. Zich stated it is Ramblewood Drive and Atlantic Boulevard.
Mr. Daly stated you are right.
Ms. Zich stated there used to be one where the auto store is.
Mr. Fennell stated maybe we should put in a tank. Do we still have tanks for two weeks?
Mr. Daly responded we do.
Mr. Cassel stated we have plenty of fuel.
Mr. Hanks stated I do not know enough about this. Can we table it until we find out what is going on with this?
Mr. Fennell responded we already have a recommendation from the engineer on this.
Ms. Early stated this is for water surface. I do not know if they are demolishing the building and building a new one, but it does meet surface water criteria. They have increased the exfiltration trench so it does meet the current criteria.
Mr. Fennell asked are you recommending this?
Ms. Early responded yes.
Mr. Fennell stated we can still get some more information.
Ms. Early stated yes. Tell me what you want.
Mr. Hanks stated I would like to see a copy of what they are presenting on this.
Ms. Early stated okay. I can start sending it to you.
FOURTH ORDER OF BUSINESS Project Report by Intrastate Construction Company (Continued)
Mr. Fennell asked do you have a presentation?
Mr. Cassel responded just a couple of slides. Here is the District. Through Mr. Stover we found someone the District has contracted with directly to fly the site once a month for us so we get updated versions, which we can compare aerials to aerials in order to see the progress of the contract. Mr. Johnson, if you could, please takeover and explain what you see in the photographs.
Mr. Johnson stated sure. As far as the site plan is concerned you can see there is a pipe connecting into the pipe trench. This actually connects with all of your well water well piping. There is a manifold which goes across here. You have your three well to your east. The road is up here as you come into the plant. We have a pipe trench which runs along there. If you can visualize, our membrane equipment will sit on top of that pipe trench and there are interconnects to the system from below. After this had been flown they have actually poured this pad right here for chemical containment. There should be at some point a floor to the building which will come out here and the walls will come up as such. Further up to the north there is a transfer pump station which has been sitting there for while. They are moving forward on it. Off over here there is a pad for the new diesel generator. This is the construction to date.
Mr. Hanks asked what is on the left hand side surrounded by the orange safety fence?
Mr. Johnson responded we included as part of this design are sand strainers. Sand strainers will collect up to 50 micron sand particles. This keeps those out of the cartridge filters and subsequently the membranes. It is an added barrier of protection, but it gets the small silt and sand which come out of the wells. It removes that. Those strains have to be backwashed. Those are backwash basins. It collects the water the sand is able to settle out and then gets pumped out into the disposal line.
Mr. Fennell asked was that the result of the prototype you did?
Mr. Johnson responded this is part of our standard practice now to include these sand strainers. It will cost about $200,000 to run that area. We have seen this go a long way towards the added barrier of protection as well as reduce the amount of cartridge filter, which is the next barrier. It removes the sand and sediment before it gets to the cartridge filters so you are not replacing the cartridge filters as often. You are collecting the sand before it gets to the cartridge filters and into the membrane. That $200,000 insurance policy is well worth it.
Mr. Fennell stated that is the basic concept which has been there since Roman times.
Mr. Johnson stated here you can see Plant F; the outer ring and the inner ring. They are getting ready to grout the floor so there is a collector mechanism that scrapes along the bottom. They are going to grout up to the bottom through that scraper arm that basically funnels everything into the center of this clarifier. Out here you can see the diffusers. You have diffusers which are on the outside. When you pump all of the air through there the diffusers it creates a situation where it micro bubbles so you get efficient oxygen transfer into the wastewater processed water.
Mr. Hanks asked what does that do?
Mr. Johnson responded it keeps the bugs eating. During that process you have aerobic and anaerobic. This is an aerobic step where they require oxygen for respiration and that gets that certain set of bugs to start eating. You can see here there is a catwalk installed. This goes to the other catwalks which go into Plant E and then you will see the steps which are rising up to the catwalk.
Mr. Fennell asked what do we actually have operating right now? The surge tank?
Mr. Johnson responded you have the surge tank over here and Plant E right here. Those are Plant C and D over here.
Ms. Zich asked how long until it gets finished?
Mr. Johnson responded the completion date for that based on the notice to proceed of April 3, 2009 it should be April 3, 2010 because they have 365 days to complete for substantial completion, which means the District can take over beneficial use.
Mr. Fennell stated so when we come back next time we should be able to receive this.
Ms. Zich stated that is two weeks.
Mr. Johnson stated the last schedule from the contractor showed a two week slip. In talking to their electrician it looks like it will be longer than that. We are probably looking at some time in May or June.
Mr. Fennell asked do we run into a capacity problem?
Mr. Johnson responded my understanding is no, but Mr. Macintosh may want to answer.
Mr. Macintosh stated we still have enough capacity to treat all external flows.
Mr. Hanks stated I have been seeing signs like at the Church by the Glades for a new school in there. We are not getting so much change in structures, but changes in usages which have the potential to increase the flows into the District. Are we keeping tabs on these changes in usage to ensure we do not get hit down the road with a problem with the capacity?
Mr. Cassel asked how much does this add to our capacity?
Mr. Johnson responded I would not be able to speak to that. Mr. Macintosh?
Mr. Macintosh responded all capacity will not change by putting in Plant F because we have taken out Plant A and B. We are only treating around 5 MGD so we have excess capacity.
Mr. Hanks asked is our choke point the injection wells right now?
Mr. Macintosh responded we have a lot of capacity on the big injection well. We do not really use the second one. If something were to happen to Injection Well #2, then we would have a problem. Injection Well #2 is rated for 14.7. Injection Well #1 is rated for 4.87. Right now we are only getting about 3.5. We have a study CH2M Hill is doing for us to try and see what is causing that and help us resolve it.
Mr. Johnson stated as far as the water plant’s concerns with respect to schedule, the last schedule was submitted on February 15, 2010. The next schedule should have been in today. We have not seen it yet. That being said, there are nine days on that for substantial completion. They have shown a 20 day slip on substantial completion for the other plant. They compressed the time between the substantial completion and final completion. Substantial completion is when you take over beneficial use. Final completion is when all of the punch list items have been taken care of, you get your warranty and all is right in the world after that. Right now with this their latest schedule showed them being 20 days behind on substantial completion, but still having a long time before final completion. We have requested some additional documentation and back up to make sure that schedule is believable. In our experience there is a little bit of myopic approach to the schedule in the contract department.
Mr. Fennell stated if I were, for argument sake, to take the side of the contractor I would say; what are you so excited about? Stuff is getting built, stuff is getting done, there are people working out there, we have machines moving. What are you so worried about?
Mr. Cassel responded I have a lot of money I am paying interest on.
Mr. Fennell stated I am sure you would say it exactly that way too.
Mr. Johnson stated it is pretty accurate.
Mr. Hanks stated we have a lot of money we are paying interest on whether he completes it in a year or completes it in a year and three months.
Mr. Fennell stated I am beginning to think 20 days, 30 days or 60 days are immaterial to them.
Mr. Daly stated they were not when they charged us; the difference being approximately $80,000.
Mr. Fennell asked so what is your counter to my argument? I see substantial work being done. If I saw a blank something out there, I would really be getting nervous; but I see them actually doing work. They do not get paid until they get stuff done. Is that right?
Mr. Johnson responded that is right. What is at issue here is we have a schedule to maintain and right now if you are looking between now and November 24, 2010 which is when I believe substantial completion is supposed to happen, there is a good amount of work to get done. We are looking at this and we do not have walls going up out of the ground. It is one of those things which need to happen after the building is put together. If you are actually starting to look at activities and how things come together, the coordination to get everybody in synchronization so this can move forward seamlessly to meet that substantial completion deadline would be in our estimation pretty difficult. The contractor says they are up to the task. We have a pretty good bit of skepticism in it being completed by the substantial completion date.
We wrote letters to the contactor asking for additional back up; delivery dates, how they intend to sequence activities and so far we have not gotten any response back from the contractor. Our next step is going to be sending a letter to the contractor saying we have not received any back up on this letter asking for this clarification and we are going to copy the bond company. The bond company is going to be aware of it. They are going to step in and try to figure out what is going on. We are going to request a response within seven days. If we do not see the response within seven days the District is going to send a letter with a notice to terminate within ten days if they do not correct their actions.
Mr. Fennell stated I hear you, but I am having trouble getting excited when I see work being done. I need something more than this.
Mr. Johnson stated it is the rate at which it is being done. It is moving at a relatively slow pace.
Mr. Fennell stated your argument is not too convincing yet; especially when you bring a nice photograph of work being done.
Mr. Daly stated we have a contract. The contract has provisions for guidelines for time. As a professional organization as the contractor is, they should have known what they were entering into when they signed the contract and we should hold them accountable for more than one reason. Here is a reason which has not come to light yet; although we have talked about it in the past. CSID is spending a bundle of money repairing the old water plants right now. The slaker is about to go. There are so many things that make sure the timing is so important that we cannot afford an extra week.
Mr. Fennell asked do you have definite examples of when they agreed to get certain things done?
Mr. Johnson responded we have a baseline schedule.
Mr. Fennell asked was it their schedule or your schedule?
Mr. Johnson responded their schedule. They are held to that baseline schedule. If they have items which slip past milestones or duration speeds, then they have to figure out how to get back on schedule.
Mr. Fennell asked has anything happened that they missed those milestones?
Mr. Cassel responded ultimately the District has liquidated damages in the contract.
Mr. Hanks asked translation?
Mr. Cassel responded everyday they do not deliver it costs them money.
Ms. Zich asked how much?
Mr. Johnson responded I believe it was $500 a day.
Mr. Fennell stated $500 a day on a $10 Million contract.
Mr. Cassel asked was it $500 or was it $1,000?
Mr. Johnson responded I thought it was $500 for this and $500 for the waste water plant. I can go back and check.
Mr. Fennell asked do you have something Ms. Woodward?
Ms. Woodward responded yes, if you want something to try to speed this along. One of the initial discussions was because when we went out to bid on this contract we were able to come in under what we originally anticipated in the original engineer’s report. We have roughly $5 Million which is sitting in your construction account. The anticipation today is when the plants are built out, that $5 Million will continue to be there. One of your options is to take it and to pay down the existing debt service. To the extent that you take an extra week to pay that $5 Million back, you are paying an extra $5,000 in interest every week. That is a cost to the District if we do not get done on time.
Mr. Fennell stated I do not think he is highly incentivized at $500 a day.
Mr. Hanks stated if that is what is in the contract.
Ms. Early asked if it is $500 a day, but the District might incur additional costs; for example, engineering has to continue to inspect this project, if there are additional costs, does that go to the contractor as well?
Mr. Lyles responded you are talking about CH2M Hill’s contract.
Ms. Early stated that is right.
Mr. Lyles stated liquidated damages is generally an attempt by parties to agree on an amount ahead of time that is a fair reimbursement for the extra time and effort to the party who is late in receiving the project. It is not a penalty. It is a contractual measure. If we had a penalty provision, the courts have to throw those out. You cannot have penalties in contracts for being late. It has to be a fairly, arms length, equitable good faith attempt to give a number that approximates what it means to the District to receive the project late. If you are wondering why it is not higher, I think it is within the standard kind of engineering set of documents for a project. I always see $500. I seldom see more than that on projects like this. I think it is something engineers and contractors have gotten comfortable with over the years. I mean many years.
If they intentionally refrain from having people on the site and we end up incurring additional costs over and above the inconvenience of just having a delay, we would quantify that and make a claim for it. We will have to go back and look at those documents to see what it says about additional engineering costs. There are also papers in the file with letters complaining about the turnaround on payments with regard to pay requests, all of the paperwork they have to do and why are we being so particular. They are getting set up for the day of reckoning themselves. Hopefully the notice that goes to the surety lights a fire under the relevant people at the contractor, we all sit down and get the schedule on track with the assistance, hopefully, of a representative from the surety. They do not want to run afoul of their surety. That is the path I believe your engineering staff and your management staff have chosen to try to get this on track.
Mr. Hanks stated if we go ahead with additional wastewater treatment plant or reclaimed and reused water improvements in the future, it is certainly putting a bad taste in our mouths over this contractor.
Mr. Daly stated you may recall years ago when this contract was coming up. Mr. Skehan was here from CH2M Hill and I personally had a discussion with him at an open forum such as this regarding engineering fees and if they should not abide by the time limit. I asked him why CSID would be on the hook for that and he told me we could go back to them and get our money. I told him I thought the contract should be written so if they cause the error they should owe the money. We are on the hook for it. It is the way it is.
Mr. Hanks stated I do not see too many city projects going on schedule; whether it is here or other locations. It just seems like every time you turn around somebody is having an issue and there are change orders and other things like that.
Mr. Fennell stated the only real leverage you have here is them just getting paid as we go through.
Mr. Hanks asked as far as paying them?
Mr. Fennell responded yes.
Mr. Cassel stated which we have.
Mr. Fennell stated that is for leverage; because if they do some work they want to get paid. I do not know if you are going to get better leverage than that. You have to understand if you try to go in and try to revise their schedules and how you do things, then you set yourself up for all kinds of issues.
Mr. Lyles stated it is called owner interference with the progress of the work. That is a huge problem. We do not even want to touch that.
Mr. Cassel stated at this point we are not suggesting anything of how they do it. We are asking them, “You are behind schedule, tell me how you are going to catch up.”
Mr. Lyles stated you are behind your own schedule.
Mr. Cassel stated your own schedule; tell me how you are going to catch up.
Mr. Fennell asked do you have anything else to show us?
Mr. Johnson responded no. I was looking at this thinking it is maybe just the white balance, but it looks like we got some snow here recently. It looks like a site in Colorado somewhere.
Mr. Hanks stated or it could have been in January.
Mr. Fennell stated let us continue on. Thank you very much.
SIXTH ORDER OF BUSINESS Staff Reports
· State of the District
In your package is my written report on the state of the District. Where we have come over the last year and where we are at. As I stated in the memorandum, onsite staff have all continued to improve on how they are running the operation and how they are looking at things. They are gaining the understanding and taking ownership of every section they are responsible for. It is a good feeling to see this happening within the District. I am very pleased and we are going forward in some good areas.
Mr. Fennell asked there have not been any complaints from the neighbors on odors?
Mr. Cassel responded we had one neighbor complain a couple of times. They have been in contact with Mr. Macintosh. We have been checking it. Since then we have no issues with odors. It is part of the operational changes which have been made from when we had the issue a number of years ago. They have improved on the operations. Mr. Macintosh is keenly aware of the operations and stays on top of it.
Mr. Fennell asked do we still have the emergency system we spray and cut down odors with?
Mr. Cassel responded no.
Mr. Hanks stated they have supplemented and entered into contract with Yankee Candle and distributed to all the neighbors.
Mr. Daly stated no. We do not use that odor control system any longer.
Mr. Fennell asked is it still there?
Mr. Daly responded pretty much no. I know the piping still is, but for the most part no.
Mr. Fennell asked so you are doing it better?
Mr. Macintosh responded yes. I am cheaper.
Mr. Fennell stated good for you. I appreciate this report.
Mr. Hanks stated there is something you referenced under wastewater about reducing sludge disposal volumes with a new digester and coming back with a savings. When we realize we are saving money on operational changes, do we ever go back to take a look and ask if this change really makes sense for us to put in a new piece of equipment?
Mr. Cassel responded Mr. Macintosh correct me if I am wrong, this is a change from the last plant that was put online. Am I right? The last digester?
Mr. Macintosh responded yes. This is a reduction since the last digester was put online. It is partially due to extra digestion capacity and also due to some operational changes we made; adding another chemical to adjust the PH to get better digestion. I think the new digestion capacity has a lot to do with it.
Mr. Hanks asked but do you know what I am saying? When we go ahead and make these decisions here as a Board such as pursuing the nanofiltration because it is going to allow us to reduce our chemicals or whatever decision we make, we are constantly trying to balance out the cost we have right now, the need for new equipment and what the operational changes will be.
Mr. Cassel responded that is correct. Correct me if I am wrong Mr. Macintosh. They added this one because of a capacity issue.
Mr. Macintosh stated yes.
Mr. Cassel stated we had the capacity issue, but with that and the effectiveness of it we are actually saving money. It is a combination. It cost us because we needed to have it for capacity, but we are still doing things which end up bringing our price down.
Mr. Hanks stated I just wanted to know this so we can assess our internal decision making; as we are making the decisions, whether they turn out to be valid assumptions.
Mr. Cassel stated understood.
Mr. Fennell asked are there any other questions on this? So we are going to be scanning historic personnel documents into the database.
Mr. Cassel stated Mr. Zilmer is working on that. We have to keep them for so long. Instead of having the papers we will get them scanned in to a system.
Mr. Fennell stated this is another thing where you could also have back ups online somewhere. We will call it somewhere in the cloud. Obviously you need a secure location for all this information, but those are coming about now. It is not a bad thing for us to have those kinds of things. You essentially have the second records depository online. We have some of our stuff by paper, is that right? All of our records and stuff like that? What about these things and all of this type of stuff?
Mr. Cassel responded all of these are scanned in as part of Severn Trent Services’ records depository as well. There is also a hard copy which is at the agency. We have agency mailings that certain agencies have copies of the minutes and back up as well, but we have all of it in our system as well.
Mr. Hanks asked do we as Board members need to hold on to all of these things?
Mr. Lyles responded no.
Mr. Fennell stated my point is we are in a whole new world of online data and data storage. We probably should look at it from an overall viewpoint. There are ways to do redundancy and back up that are pretty good. This requires a high speed data line.
Mr. Daly stated we have cable modem. We also have a network back up drive. Everyone just drops everything into an icon on their desktops and the back up is in my office. It leaves here during a hurricane. All of the data, word documents, excel and etcetera would be offsite.
Mr. Cassel stated all of the Severn Trent Services’ items are backed up in two locations, Colmar, Pennsylvania and Houston, Texas, nightly.
Mr. Fennell stated okay. We were talking earlier about disaster preparation. This is probably the biggest thing. This is what I saw during the last hurricane we had. Once we had power out our businesses stopped. The business part of bringing in money and the normal stuff we needed to keep going. I know we are going to have the power back up, but if we lost the records somehow, that could also do that. The ability would be the biggest deal for us. If it is not a huge catastrophe, getting back in business will be the real issue; people getting paid and all kinds of stuff.
· Monthly Water & Sewer Charts
Mr. Cassel stated the next item is your distribution water billed and loss chart.
Mr. Fennell stated you were kind of hot and heavy on how much water we are putting out and whether we are getting paid for it; I like that kind of thinking.
Mr. Hanks asked did the installation of those additional meters onsite change our perspective at all?
Mr. Daly responded that is un-metered water.
Mr. Stover stated it is metered going around.
Mr. Hanks asked so now we have a meter on it to establish where it is used within the plant itself?
Mr. Cassel responded that is correct.
Mr. Fennell asked are there any surprises there? Are we using more or less?
Mr. Daly responded we are using 409,000 gallons on average per day.
Mr. Hanks stated wow.
Mr. Stover stated that is plant internal use over everything.
Mr. Daly stated it will keep this a lot closer; billed versus what was actually made.
Mr. Fennell stated it gives us some place to look at some efficiency.
Mr. Daly stated we may not have a problem and if we do, then we know it is not in here.
Mr. Fennell stated still it is 409,000 gallons a day. What percentage is that? Is it 10%? The city is 5%, is that right?
Mr. Stover responded you have to base that on your influent water and not your effluent water. It is about 2% maybe 2.5%. We can take it even further by actually finding a point in wastewater where we can meter that as well and where it will connect down the line.
Mr. Fennell stated okay. That would be a good idea. Are there any new ideas of where the money is for the water we are shipping out?
Mr. Cassel responded we are still…
Mr. Hanks stated so this 12% or 11.8% average may not be that because now we have a meter from the plant side that may be changing.
Mr. Cassel stated that is correct. Again; it is making sure we know what is actually out in the system, what losses are out there and what is part of making the water and part of our internal costs.
Mr. Hanks stated if it is distributed I would say once it leaves the plant out of the perimeter fence, which is restrictive.
Mr. Cassel stated that is correct.
Mr. Hanks stated not what goes in the pipe and then comes back immediately out.
Mr. Cassel stated that is correct. On your other question, we are still internally working on fine tuning some of the data on the wastewater infiltration; checking the pressures, checking the flows during rainfall events, after the rain when it is dry and trying to make sure we understand where those issues are.
· Utility Billing Work Orders
This item is for informational purposes only.
· I&I Report
Mr. Fennell stated we have the evaluation of infiltration in there.
Mr. Cassel stated yes and there is a hard copy in front of you.
Mr. Fennell stated I am walking away with this thing that there are many places we could be losing water from, or gain water.
Mr. Cassel stated even with the additional data the bottom line is if you look at page 16, although we have supplied additional data and looked at some additional information to see if we can fine tune how much infiltration was there, the conclusions are still basically the same. We still need to fine tune it further, which is what we are already doing in-house. Mr. Daly and I have been talking. We have been thinking about looking at Lift Station #4. It is one of the small ones, but it has issues. We are focusing on that one and concentrating on it to see what we can do to go in and fix it and see what kind of an impact it really has. If there is no real impact to it, then we will not look at the rest of them. If there is a significant impact, then we will start looking at the other ones.
Mr. Hanks stated did this fix work in this situation.
Mr. Cassel stated exactly; what fixes we tried with it.
Mr. Hanks stated are we chasing our own tail or not.
Mr. Cassel stated that gives us a better feeling for what the return might be for the dollars invested to get rid of the I&I.
Mr. Fennell stated we were looking at run time on these pumps as trying to gage the amount of water flowing through. I am looking at page 10. I do not know if I saw a correlation. There is a pump curve and a lot of dots which are not on it. If I was reading this right, I get the impression you know how long the pump is running, but you really do not know how much has really gone through that. Am I reading that right?
Mr. Cassel responded my interpretation of this in looking at it is we are not really running on the curve of the pump.
Mr. Hanks stated looking at this I would say this pump is broken because you are not anywhere close of being on the curve. Each time you turn it on it appears that it is starting in a different location and you are not getting the same performance repetitively. The whole idea of a pump curve is at different pressures you are suppose to expect different flows. This does not seem to be giving us that same information. How did we figure out the flow?
Mr. Cassel responded I believe this is the information we supplied them based upon our Doppler meter and the pressures we were taking to record and send to them.
Mr. Fennell stated that is because you have a constant flow. It does not have anything to do with the pressure of the pump.
Mr. Cassel stated no. It is saying that with 40 pounds of head pressure we should be pumping, I believe the pumps are 550 GPM pumps, so we should be in the 500 to 600 range on the pump curve with the pressures.
Mr. Hanks stated if your pressure is 40 PSI you can run across on that 40 PSI line until it hits that line, then it drops down and that is what your pump is or expected flow rate is. You are maybe at half.
Mr. Cassel stated that is correct. When I first data my impression was that we first come online, we are hitting what the rating of the pump is. If it is 550 or 600 GPM, we are hitting that, but then as soon as we start getting some pressure in the system we start drumping in two to three minutes to almost half.
Mr. Hanks asked do we know what the configuration is coming out of there?
Mr. Cassel responded we will start checking into some of the pumping.
Mr. Hanks asked who at CH2M Hill is handling or taking the charge on this report?
Mr. Cassel responded on this report it was Mr. Schwarz and I cannot remember the other gentleman.
Mr. Hanks stated it was referencing that they suspect suspended solids were a bit low on our wastewater side of things. Could that be influencing the Doppler meter? From what I recall you could not use the Doppler meter on our water distribution because it did not have any solids in it.
Mr. Cassel responded it could be.
Mr. Hanks asked has this been calibrated at all?
Mr. Cassel responded I believe it has. It came brand new. It came calibrated.
Mr. Fennell asked what, this new pump?
Mr. Cassel responded no. The meter we have, but potentially it could have some affect from our readings.
Mr. Hanks stated it is calibrated for some use, but is the material we are attempting to measure within their calibrations that are acceptable for that specific meter?
Mr. Cassel responded we can double check that.
Mr. Hanks stated okay.
Mr. Fennell stated tell me how this pump curve works. I see a line going down there. I see pressure, PSI on the left and flow on the right. I would have thought it would have gone the other way. The higher the pressure the more the flow there is.
Mr. Hanks stated this is not measuring the pressure on the pump. This curve is the pressure you are pumping up against.
Mr. Cassel stated head pressure.
Mr. Hanks stated the head pressure. So when you are pumping at 80 PSI that means you have a certain amount of elevation head on the pipes, a certain amount of pressure within the pipes, outside of the lift station. There are friction losses you have to figure in. That comes up with the total head. Then from that you drop down and figure out, well okay we are predicated to run it at about 125 GPM or whatever it happens to be.
Mr. Fennell stated it looks like no matter what ever was happening you were getting the same flow out, right at around 500 GPM.
Mr. Hanks stated I would question the data. If you were really along a pump curve, your data point should have been clustered along that line.
Mr. Cassel stated above and below.
Mr. Hanks stated there are two things that could have happened. Were both pumps kicking out at some point in there to throw the results off and did you have the right pump curve?
Mr. Fennell responded and the conclusion we are trying to draw from this was there was some kind of correlation between flow and pressure.
Mr. Cassel stated part of it was a lot of the analysis was done simply on run time of the pumps and the extrapolating run time and so many GPIs should be producing X. What we are trying to do is drill down and say, are we really pumping that much fluid with that run time.
Mr. Fennell asked what would it cost us to put real flow meters out there?
Mr. Stover responded flow meters are expensive.
Mr. Hanks stated you do not have to measure it on the downstream side of the pump. You can measure it in the lift station itself fairly low technical; stop watch and a staff rod.
Mr. Fennell asked to see how fast before it goes down?
Mr. Hanks responded to see how fast it comes up.
Mr. Fennell asked before the pump starts?
Mr. Hanks stated you let it go ahead and you have the pumps kick on. You get it until the pumps are off, record the level and start the timer. After a set amount of time record the level and the volume within that lift station as well as the duration of time. Right there you have your flow into the lift station. This way here you are adding an extra component after a set of unknowns. We really have not solved anything.
Mr. Fennell asked was the recorded data you have in here with a temporary flow meter?
Mr. Cassel responded yes.
Mr. Fennell stated so you have a lot of data there. Do you think that data is accurate? I do not care about the pressure. Were you actually getting the flow amount?
Mr. Cassel responded that is Mr. Hank’s point. We will have to go back and make sure our recording device, our meter device, was for the potential amounts of solids in this to make sure the two parameters match.
Mr. Fennell asked how far off are we here? What do we think our accuracy is?
Mr. Hanks responded zero.
Mr. Fennell stated if that is true, it sounds like we are better off going out there with a stop watch.
Mr. Cassel stated we will dive into this further.
Mr. Fennell stated this tells me you have to do something. If you do not believe the pump times, you do not believe your other meters and the data here is all over the map, the accuracy here is looking like plus or minus 50%.
Mr. Hanks stated we are chasing a high technical solution on something which can be solved simply and quickly. Let the record show this Board member is frustrated that a low technical solution has not been pursued to get a quick and simple answer out of this. If you need me to meet with our field staff, I will. I will meet them out at the lift station to go over how we are going to get this thing solved.
Mr. Cassel stated it sounds like a good deal.
Mr. Fennell asked are there any other comments here about this? There are serious doubts about the data. I do not think we can go forward if we do not believe the flows. You have got to come back with some real flow data so we can get something we can believe. What kind of flow meter do we have for the stuff coming into the plant?
Mr. Macintosh responded we have flow meters to read the flow coming into the plant.
Mr. Fennell asked so we really know how much we actually have coming into the plant?
Mr. Macintosh responded yes we do know.
Mr. Fennell stated but where there is doubt is….
Mr. Cassel stated where it is coming from.
Mr. Hanks asked that flow meter is not measuring that 400,000 gallons per day coming back in, is it?
Mr. Macintosh responded no.
Mr. Fennell stated so next time we are going to have some real flow numbers. Is that right?
Mr. Cassel responded much better flow numbers.
Mr. Lyles stated I do not have any separate reports this month.
Mr. Fennell stated the only thing I have is I noticed people were sending me some information about some law we are going through.
Mr. Lyles asked the Florida Association of Special Districts?
Mr. Fennell responded yes and there were a couple of comments about reforming districts or some kind of deal. I did not know whether to be concerned or not.
Mr. Lyles stated there is a bill which has been filed; it has not been passed, which I think you may be referring to. It calls for a special district such as this one, if it is going to be dissolved; it adds a requirement to be a referendum by the people within the district. Is that the one?
Mr. Fennell responded I believe so. I think there is that one and then there was another one; except, our District already has that kind of thing.
Mr. Lyles stated you can be technically involuntarily dissolved. The manager and I discussed it briefly just to keep an eye on it and we will as it goes through the session, but we do not see that it works to the detriment of CSID in any way, shape or form. There are a lot of bills which are up there. Only some of them and not all of them are going to get to the point where it looks like they are going to pass. The idea is they get monitored and watched. Our interests, I think, coincide with those of the Florida Association of Special Districts. If it was going to impair the ability to do business efficiently and the way we have been doing things, we would be jumping all over it; including if we needed an emergency meeting to deal with it and to send representatives to speak against it. We do not see any of that kind of thing realistically going to happen.
C. Engineer (Continued)
Mr. Fennell stated we basically covered the I&I report. What we are saying is we cannot believe it if we cannot believe the flows. Do you believe the flows?
Mr. Hanks responded Ms. Early is putting her strong order and sight development hat on. One thing for the stormwater side of things, I was advised this last week by SFWMD that on their new applications they are requiring modeling of the nitrogen on safe loading. We may want to have some discussions with them as to how that is going to be impacting our permitting.
Mr. Fennell stated speaking of that, you were going to go back and look at some data from a statistical point.
Mr. Cassel stated I have not had a chance to finish that. I have been chasing some other items.
Mr. Fennell stated okay. Email it to us when you get a chance.
Mr. Cassel stated okay.
Mr. Fennell stated we are asking for the data, not just as an average, but I want to know statistically what the worst case you can expect is; that we would normally see. Not the average because the average automatically makes sure you are 50% out of specification. That is a poor choice to use as any kind of criteria. The other criteria would be what we actually think the harmful levels are to our systems.
Mr. Hanks stated what added benefit would be incurred to the population if we were to cut the levels in half.
Mr. Fennell stated or double them. This all comes about that we need to establish a specification which is reasonable and has some rationale behind it.
· Nano Plant Update
· Project Status Report
Mr. Fennell stated I think we already hit the project status report.
Mr. Cassel stated yes. We already covered the nano plant. What is in your agenda package is…
Mr. Fennell stated there are pretty detailed charts in there, but I had a hard time reading them.
Ms. Zich stated yes.
Mr. Fennell stated I loved seeing them.
Mr. Cassel stated we will have larger prints for you next month.
Mr. Hanks asked do we really gain anything out of this information?
Mr. Cassel responded being able to look at it and say, “yes he is behind the schedule.”
Mr. Hanks stated that is why we have Mr. Johnson in here providing us those reports.
Mr. Fennell asked what did it basically say he was down by?
Mr. Cassel responded approximately 20 days on Plant F according to the contractor, but according to CH2M Hill’s review of their schedules they have questions on their schedule. They have something which will take two days when in reality it is not a two day item. It is a ten day item. As you look at their schedule and the times they are calling out to do certain things, it just does not meet the rational thought process. CH2M Hill is looking at it saying, “Yes you are saying your 20 days, but we believe your further than that along. How are you going to get back on schedule?”
Mr. Fennell stated let us move on.
Mr. Lyles stated before you leave project status, in general connection with this subject an issue has arisen since the last meeting regarding certain types of filings and applications for things. I think it specifically came up with the FDEP where your District manager, Mr. Cassel, signed a document as the District manager and the question arose at the staff level of how would they know if he is the District manager since you do not have an employee, you have a contractor.
To resolve all of this I will remind you as we try to remind them that we have a provision in your management services agreement with Severn Trent Services that only one individual can serve as the primary responsible manager. In this case it is Mr. Cassel. I will ask so that we do not have this problem in the future that in accordance with the provisions of the agreement with Severn Trent Services you take up a motion at this time formally designating Mr. Cassel as the District manager of CSID until such time as you choose to change that designation to another individual.
Mr. Cassel stated the issue came up as we sent in the wastewater application for the permit renewal.
Mr. Fennell asked do I need to sign something to that affect?
Mr. Lyles responded just the motion. It is part of your record and it is all that is necessary in my opinion.
Mr. Cassel stated when we put in the wastewater permit renewal we had Mr. Macintosh sign it as the Chief Operator. They asked who Mr. Macintosh was. As the District manager I told them he was authorized to sign as the Chief Operator. They asked me who I was to authorize Mr. Macintosh to sign it.
Mr. Hanks stated one item I picked up recently was a backflow prevention program the city was conducting. Is CSID on a similar program?
Mr. Daly responded letters go out next week.
Mr. Fennell asked are there not backflow items on all the houses? At my house it has been there forever.
Mr. Daly responded it has been mandated that they be checked, verified for accuracy. We have that program. We have been building the database, which came before you approximately four months ago to get approval on the program.
Mr. Hanks stated over the years the level at which you have to go ahead, at least on new construction, is to put in backflow has been racketed down from let us say apartment buildings with ten units, down to five, down to three down to now if you have a duplex, you have to put them in. Are we in compliance or are we in violation if we are not requiring those apartment complexes with units of 15 or more to have them?
Mr. Daly responded no. We always require them to. I actually had a contractor who had to sign a piece of paper when they got the original meter that there would be a backflow installed. The point is the District has never checked as to whether the backflow was broken or if it was operating. So now with this program, along with the city and NSID, we will be checking. The letter will be sent out. They must be certified and licensed. There is a whole form they have to fill out and it will be kept here on file.
Mr. Fennell asked how much will it cost to check this out?
Mr. Daly responded it will cost them whatever the plumber charges. The city is entertaining the idea of charging a fee for this, but they have not yet done so.
Mr. Fennell asked what exact backflow parts are they going to check?
Mr. Daly responded they have to check the actual pipes.
Mr. Fennell stated there are different things around the house. Where is the backflow?
Mr. Daly responded outside.
Mr. Cassel stated it is at the meter.
Mr. Fennell stated so there is a backflow at the meter.
Mr. Daly stated right now we are only checking commercial, multi-family and irrigation. Those are the three we have started on. Then that will only leave residential.
Mr. Fennell stated what is the concern about this? What is the issue at this particular point?
Mr. Cassel responded there has been an issue for years. When water pressure goes down to a certain level in a system the flow can be picking up bad water and sucking it back to the system without some way of stopping that backflow. In other words someone can have a hose bib. That is why you have vacuum breakers on your hose bibs now. You have a hose, you have different things which could be possibly contaminated back into the distribution system and then distributed.
Mr. Fennell stated this has been a concern all along. It is not a new concept.
Mr. Cassel stated no, but there was not any real push by the regulatory agencies to press it home. It was there. Some municipalities, some water systems and some areas were tighter on it while others were not. They are coming out pushing it across the Board and moving it down.
Mr. Fennell asked when we replace the meters, which is not all that often, at that point do we not…
Mr. Hanks responded that is a separate matter. The backflows are privately owned.
Mr. Cassel stated backflows are privately owned and maintained.
Mr. Hanks stated along that same line other utilities, which I have been dealing with, have been changing their requirements on fire hydrants to improve public safety. Some of them are requiring check valves on new installations. Others are requiring security caps on the hydrant themselves in lieu of putting in check valves. Have we had any discussion or are we under any obligation or requirements to improve the safety of these components?
Mr. Cassel responded I have not seen anything come across yet, but we will look into it.
Mr. Daly stated we just came off of a fire hydrant maintenance and update where we painted them all and checked to make sure everything was working. It was done according to what the city had required.
Mr. Hanks stated it is just something I have been noticing. Broward County Utilities requires the check valves. Palm Beach County Utilities requires locking safety caps. I do not know what Dade County is doing right now, but two of the biggest utilities around have measures which would prevent the introduction of foreign substances.
Mr. Daly stated I was told part of the backflow issue is terrorist related.
SEVENTH ORDER OF BUSINESS Approval of February Financials and Check Registers
· Summary of Cast Transactions
· Projected Cash Flows
· Engineering Projects
Mr. Cassel stated Mr. Bloom is here today to fill you in on where we are at with the investments and rollover of the CDs.
Mr. Bloom stated just to quickly recap, in November or December of 2008 we invested in five CDs in local banks. Each CD was in the approximate amount of $250,000, which was the new FDIC insurance limit. Through the next year and however many months we kept reinvesting these five CDs in the same banks. In January three of the CDs matured and two of them we did not reinvest because the rates were so bad at those particular banks. It did not make sense to tie them up for 12 months and get .18% compared to 1% when we originally had it.
The initial plan was to move that money back into Wachovia and then to immediately find another local bank to satisfy the Board’s criteria and invest the money back in. We have been trying this for weeks and there is nothing any better at the other local banks. We are not suggesting we do not need those emergency CDs. We are coming to you to notify you that we are going to put those CDs in, but they will not earn a lot.
Mr. Fennell asked what are T-Bills getting?
Mr. Bloom responded a two year T-Bill was .97% the last time I checked.
Ms. Zich stated this is terrible.
Mr. Hanks asked have you talked with City National Bank? I heard they are looking for customers.
Mr. Bloom responded we work with about 10 to 15 different banks. We start with a list of QPDs which is a statutory requirement. Then we try to establish relationships everywhere possible to find something better or to leverage what we are doing. I am still looking for local banks. Most of them will give you low rates. Some of them will say give me all of your money and then maybe I can give you something better. That does not work out. We are stuck with the local banks we are at.
The plan you have in front of you will still have those emergency CDs. They will be earning next to nothing. The piece of paper you have is a strategy on reinvesting the five CDs, but I also included a second option for some of the money to be invested in CDARS, which is a certificate of deposit for account registry service. CDARS is a program that a lot of the governmental entities are using now because it allows you to get FDIC insured. Every dime you put in is FDIC insured versus if you just went to a bank you would only get insurance up to $250,000. With CDARS there are several network banks which participate in it. Most of them are smaller banks because the larger banks are not interested in a CDARS program. What you do is find a QPD bank that also does CDARS and you put the money into that. They find other network banks and they split out all of the money into multiples of $100,000 so that both your principle and your interest is covered with the FDIC insurance. That is the benefit of using that particular program; so you are not concerned about putting in more of the money and having to worry about anything else.
Mr. Fennell asked what amounts are we talking about?
Mr. Bloom responded if you look at this the very first line is the cash balance as of March 10, 2010.
Mr. Fennell asked $38 Million, right?
Mr. Bloom responded that is correct. We are obviously not putting that much in there. What we are going to put in first is your five CDs, which is $1.25 Million. Then if the Board would like, we can put in an additional $3 Million; $1 Million from the general fund and $2 Million from the water and sewer fund, which would be reserves. We would put that in the CDARS program. Line three is related to your construction fund and that is the money at the back end which you want to try to get a little bit of interest out so we can spread it out and put it out to 12 and 24 months.
Mr. Hanks asked were there not some restrictions as to having the bond funds at one particular bank or another?
Mr. Bloom responded this would not move the money out of US Bank. US Bank does have an investment department which can get us T-Bills, T-Bonds, CDs, so everything would still be within that bank. Those are kind of a phase one strategy. It is not the whole piece. It is only kind of a start. The last three columns I have on this page I wanted to show what the new strategy would earn for the next 12 months; the current strategy is Wachovia and US Bank and what the additional variance would be. What the additional interest would be that the District would earn by moving to this new strategy.
Ms. Zich stated we can earn $55,000 in 12 months.
Mr. Bloom stated we are not talking about huge dollar amounts here. We are just talking about trying to maximize what we are getting in the current economic condition.
Mr. Hanks asked how does this impact the availability of those funds for our beneficial use?
Mr. Bloom responded the emergency CDs would be available when they mature. We would stagger them out 3, 6 and 12 months so they would keep rolling, but there would be emergency funds available. The CDARS would be the same thing. We would set up a CD ladder so that you set them up in 3, 6, 9 and 12 months. If you keep rolling them over, you basically start another ring of the ladder. Eventually the goal would be that every month a portion of your investment would mature and then you make the decision of whether it can be reinvested.
Mr. Hanks stated so it would give us ready to access 1/12 of our funds.
Mr. Bloom stated depending upon how you split it out, yes.
Ms. Woodward stated the money in line two and line three on that is actually only committing $1 Million out of the general fund and $2 Million out of water and sewer, which actually represents only half of what is currently set aside in those funds. We are not deciding what to do with the other half until we go through the budget process; the basic budget steps they have taken and all the managers get with Mr. Cassel and Mr. Daly to discuss what the plans are to finish out this fiscal year plus what is needed for next year.
Mr. Hanks stated my concern is tying something up with the rates the way they are. It does not make sense.
Mr. Bloom stated you are tying a small portion of a small portion of your reserve.
Mr. Fennell stated I know a highly rated utility that pays 5% to 6%.
Mr. Hanks asked is that us?
Mr. Fennell responded yes. The reason I bring this up is because I just went through episode with GM and Ford buying back their debt. I wish we were able to buy back at $.30 on the $1.00. Ford went out and bought back their very own debt at $.30 on the $1.00.
Mr. Daly asked they took money from the government?
Mr. Fennell responded they actually went out, cleaned up their own debt and actually de-leveraged their own company by having their sales group that actually sold money for cars; unlike GM, Ford kept that and had them buy their own debt back. Ford is now sitting there with ⅓ of the debt it had two years ago and is in great financial condition. The only reason I bring that up; is there any way we can buy back our own bonds and just hold them?
Ms. Woodward responded I cannot answer that. I do not know.
Mr. Lyles stated we do not buy our own bonds and hold them. We pay them down.
Mr. Fennell stated I know, but we would just be paying ourselves.
Mr. Hanks stated once you pay down the bond it is not something you can sell back.
Mr. Fennell stated there was an issue where we could not bring them back and get rid of them, but what if we bought our own bond in the open market?
Mr. Lyles responded I think you are going to hit arbitrage regulations.
Mr. Bloom stated you have to see what the covenants say.
Mr. Fennell stated I am not actually forcing anybody out. I assume it gets traded on the open market like other non profit organizations. There is some kind of value. If we bought them back or parts of them, we could always sell them again.
Mr. Lyles stated let us check into it. This takes an expert to respond.
Mr. Fennell stated what I am saying is have just seen it happening.
Mr. Lyles stated those are corporate bonds by a private entity. They are not tax exempt. Those are all taxable debt bonds. There is a whole different set of regulations which would apply to us, but I will take it upon myself to get bond counsel to brief us on how that may or may not be done by a public agency.
Mr. Fennell stated yes because I am sitting here with approximately $17 Million. I have bonds and a lot of them. That is a lot of money. Some of this money I am not paying out anything on, but the construction site I am and I still have $50 Million worth of bonds out there. If I bought back $5 Million of my own, not that I had to actually clear the bonds, but I just held them, which means I would actually be paying myself interest.
Ms. Zich asked do you really think there are that many bonds out there for us to buy?
Mr. Fennell responded I do not know. I do not even know how these are actually structured. I just know that we have a lot of debt out there. If we actually recall the bonds, that is another issue. What I actually saw happen is companies actually buy their own bonds. Ford has a non recallable bond that was not recallable until 2047, yet they still bought them back. They did not recall them. They just bought them. If I do not recall it, but I just buy it, what are the restrictions?
Mr. Cassel responded good question.
Mr. Lyles stated next meeting.
Mr. Hanks asked when do we start getting budgets for next fiscal year?
Ms. Woodward responded it will probably be in two months. When we get into the first week of April we finalize all of the March transactions and the general ledgers. Then we have reports available to various managers so they can start the process of pulling together the new numbers for the next fiscal year.
Ms. Zich stated so in the meantime we are just going to keep everything as it is for another month.
Mr. Bloom stated again, you do not have to approve all three. You can just approve pieces of it.
Ms. Zich stated the rates now are so low, but if we can get at least, you know.
Mr. Bloom stated it depends upon if you want to try and get out as much as you can get. It is kind of like a sponge; trying to squeeze out as much interest as you can.
Mr. Fennell stated at this point safety is the issue.
Ms. Zich stated these CDARS, which I was not aware of before, they are all FDIC insured.
Mr. Fennell stated safety is the primary concern.
Ms. Zich stated safety and you put it out over time so you can get some of the money back gradually. It is not like we are putting it all in for ten years and you cannot get it back.
Mr. Fennell stated I would like more information on this. I would like to delay a decision on this for a month.
Ms. Zich stated we went over it a couple of days ago. I am kind of familiar with this, but I was very interested in these CDARS. I was not familiar with the fact they are FDIC insured. That makes them a lot better than just regular CDs.
Mr. Fennell stated I think safety is the first issue, after that it is interest and then it is a question of…We are in a unique position here.
Ms. Zich stated that we have money.
Mr. Fennell stated yes. This is why I was talking about our own bonds. It is the right thing to invest in.
Ms. Zich stated I think investing $3 million in CDARS is a good thing. Ms. Woodward, what do you think?
Ms. Woodward responded I think it is good. I cannot answer to what the response is going to be whether or not we can take the advantage of buying our own bonds back; however, at a minimum I think we should at least address the five CDs we originally talked about when we started this over a year ago. Even if it does not earn anything, we want to basically have locally available, sort of like money under the mattress. God forbid there is an emergency and Wachovia is flattened in a storm, we can go to a local branch of one of five banks and pull out sufficient funds to keep us operational until things can be cleared up. At a minimum right now I think yay or nay on whether you want to continue that or not. If you want to continue it, we can go ahead and make sure we are back to the five CDs at local banks.
Mr. Bloom stated right now three of the five are set to mature.
Mr. Fennell stated which means we have a decision to make. We can either keep the cash or we have to go out and get the CDs.
Ms. Woodward stated yes. I think that particular layer you would want to address.
Mr. Bloom stated at least row one would be bare minimum for now.
Ms. Zich stated at First Southern we can get 1.6% for at least 12 months. Wachovia is .05%. It is nothing.
Mr. Bloom stated we would not use Wachovia because you already have it.
Ms. Zich stated we should use one we are getting at least something out of.
Mr. Bloom stated First Southern already has a CD in there right now. It will mature in September, 2010. We are already getting that rate. That is part of the calculation that is in there.
Ms. Zich asked what are the other banks we are at right now?
Mr. Bloom responded another example would be BB&T, which has a CD maturing on March 22nd. To reinvest that for 12 months would be .38%. Regent Bank is another one we currently have one in. The rates are really bad in that one.
Ms. Zich stated .15%. SunTrust is .39%
Mr. Bloom stated SunTrust is one which is an option.
Mr. Fennell stated by the way, I read the State now has a different money fund.
Mr. Bloom stated there are now other investment pools available.
Mr. Fennell stated they have a new one. It is not the old one; it is a safer one they say.
Mr. Bloom stated these investment pools are only going to be as safe as actual investment instruments they purchase. Unless the State is going to guarantee it, which they did not with the SBA and they have not shown they are going to.
Ms. Zich stated I would be very weary of these. These are pools. They are not FDIC insured. That is the problem we had with SBA. Unless it is FDIC insured, I am voting not to put it in. We have lost too much money. It better be FDIC insured for me. The CDARS are very interesting to me and anything else that can earn any kind of money.
Mr. Hanks asked what is the down side on the CDARS?
Mr. Bloom responded there is a down side in which you cannot decide which bank it goes into. It is a network of banks, but it is FDIC insured.
Mr. Fennell asked all of it?
Mr. Bloom responded all of it.
Ms. Zich stated that is what is good about the CDARS.
Mr. Bloom stated so if you put in $1 million, are they going to find ten banks and deposit it into 10 different banks.
Mr. Fennell asked what about the interest rate?
Mr. Bloom responded the interest rate will depend upon what the term is. Right now one year is 1.35%, six months is about .8% and three months is .65%. In that circumstance Wachovia is currently offering .4% just to give you an example of where it is at. Every week we go back to the banks and see where they are at. This is one of the tables I put together to help make some of our investment decisions.
Mr. Fennell stated let us make sure I understand. CDARS is a certificate of deposit account registry services.
Mr. Bloom stated that is correct.
Mr. Fennell asked who actually are they?
Mr. Bloom responded it is an organization. It is a service. It is a Board.
Ms. Zich stated it is FDIC insured. Keep remembering that.
Mr. Bloom stated it is a network of banks.
Mr. Fennell asked to what amount are they FDIC insured?
Mr. Bloom responded up to $250,000; the same as any bank.
Mr. Fennell stated so if we put more than $250,000 in there.
Mr. Bloom stated we do not. They do not put more than $250,000 in each account. They actually put in less than that. They actually put in $100,000.
Ms. Woodward stated they do all of the footwork so you do not have to run around.
Mr. Bloom stated I do not have to go to 10 or 15 different banks.
Mr. Hanks asked what kind of fees would we be paying them?
Mr. Bloom responded there is margin difference. The bank we put it into, I am sure there is a margin difference in what the rate is, but there is no per se fee for the District.
Mr. Fennell asked who do we actually turn our money over to?
Mr. Bloom responded either of the participating banks. It is the same thing as we talked about QPD banks. Within that list I try to match up who is doing CDARS and who is not, who is a QPD and who is not. The rates you have there is for a bank in the Orlando area called CenterState Bank, but First Southern also does CDARS, which is a local bank. The only reason I put those rates on there is because those are the best rates we have gotten.
Mr. Fennell asked so does are money get physically moved?
Mr. Bloom responded the money actually gets moved to CenterState Bank. They hold it and because they are QPD, they are allowed to hold it. That is the only reason. They have to have the money.
Mr. Fennell asked who is watching them?
Ms. Zich responded it is FDIC insured.
Mr. Fennell stated I keep wanting to make sure.
Ms. Zich stated that is the whole thing about CDARS. They are FDIC insured.
Mr. Fennell asked how do we know they are FDIC insured?
Mr. Bloom responded it is a function of how the money is put in.
Mr. Fennell asked why do you believe they actually have this insurance?
Mr. Bloom responded because they are only allowed to put money into FDIC qualified banks. If I go to a bank, as long they are a real bank, FDIC coverage is implied.
Ms. Zich asked are you familiar with CDARS?
Mr. Lyles responded not at all.
Mr. Bloom stated I can get additional information before a decision is made on this piece.
Mr. Fennell asked Ms. Woodward, do you know about this?
Ms. Woodward responded not first hand. I know of districts which are involved in it. It is basically the best of a worst situation. The economy is so bad there is really no way you could go out and safely get 4% to 6% interest. All you are really going to do here is keep it safe, which is critical, and number two you are going to eat out a very marginally greater interest rate. Marginally greater, if it is going to get you $50,000 a year and it is 100% safe, is good.
Mr. Hanks stated but the risk we are not recognizing in here is what happens if someone messes up at that CDARS deposit and says, “oops, I put a $1 Million into that bank and that one went down”, what happens?
Mr. Bloom responded you are going to see that with your statements. They will show you exactly which banks every dime is in. You will get monthly statements so you are going to see that.
Ms. Zich asked have you used these before?
Mr. Bloom responded yes; quite a bit.
Mr. Fennell asked so what are you proposing here? Are you proposing we put in $3 Million to that?
Mr. Bloom responded yes, about $3 Million. It can be less. It is wherever your comfort level is. If you need additional information, that is fine. We can provide that.
Mr. Hanks asked when a bank gets bought out or taken over by the Feds, have there actually been instances where depositors of excess of $1 Million have not gotten their money back in this latest round of things?
Ms. Woodward responded I cannot answer that, but you are asking a question that does not apply to this. The $1 Million you would put into CenterState Bank is not going to be a deposit at CenterState Bank. It is going to be in ten different $100,000 certificates; all of which are insured.
Mr. Hanks stated I understand that standpoint, but I am just asking that kind of question. If you have a lot of money in Wachovia, Wachovia was just taken over by Wells Fargo. It was a purchase and not dissolution. In some circumstances the Feds will dissolve the bank.
Ms. Woodward stated they cannot take away FDIC insured money. There will be paperwork involved in order for you to clear it, but the money is not going to be lost.
Mr. Bloom stated if one of the banks you had $100,000 in…
Mr. Hanks stated that is not my question.
Mr. Cassel stated he is thinking of CenterState.
Mr. Hanks stated no. I am just asking a hypothetical question and I am just trying to get an idea. We all have perceived risk. I do not know what bank has actually been put on the chopping block. Forget about being absorbed into another bank. I am saying chopped; that bank is no more.
Ms. Woodward stated 26 of them since the beginning of this year.
Mr. Hanks asked do you know any of the circumstances for the large depositors on any of those 26 banks?
Ms. Woodward responded no.
Mr. Hanks asked did they get nothing or did they get something else?
Ms. Woodward responded I do not know.
Mr. Bloom stated the FDIC has boasted that no one has lost a dollar. Now whether or not that can be proved out is a completely different scenario. We are talking about different programs here. There was a short term program which occurred while all of the huge bank issues were going on where every dime you put in was FDIC insured for a time period. The $250,000 FDIC insurance will be in effect until the end of 2013.
Mr. Fennell asked do we have enough information to make a decision or should we delay?
Mr. Hanks responded I think we need to make a decision if they are saying some of these CDs are coming due, or have come due.
Ms. Zich stated they have already come due in January.
Mr. Bloom stated two of them were due and one additional one comes due this week.
Mr. Hanks stated from that standpoint if we put $3 Million into the CDARS and take care of those emergency CDs on those local banks, part of what I was asking on that is we have perceived risk and actual risk.
Ms. Woodward stated if you are trying to determine whether or not you are in a position to go ahead and buy back your own bonds, then you most likely will not want to choose to take that second level, which is the $1 Million in the general fund and the $2 Million in the water and sewer fund; depending on where you would want take funds in order to do that. A one month delay if you want more information so you can decide or determine whether it is an available choice for you to make.
Mr. Fennell asked where is the money right now for item one?
Ms. Zich responded just in the bank.
Ms. Woodward stated it is in Wachovia.
Ms. Zich stated it is earning .04%.
Mr. Fennell asked is it good for another month?
Ms. Woodward responded yes.
Mr. Hanks asked if we had to do something with some slip lining or reconstruction of our sewage system, would that be something coming out of bond funds or where would be looking to pull that money from? If we lock it up, then we do not have access to it.
Mr. Cassel responded it would potentially be out of the bonds. What we need to do is modify our five year CRP program. The way the bond is written, from talking to bond counsel in the past three or four months, is that the Board adopts the CRP program from time to time as modified from what was initially issued. It would be a matter of modifying our CRP program.
Mr. Fennell stated let us delay it a month so we can get more information.
Mr. Hanks stated I am fine with that.
Mr. Fennell stated get more information about the bonds and I would also like more information about CDARS.
Ms. Woodward asked do you want to address the first line or do you want to wait?
Mr. Hanks responded just wait.
Mr. Fennell stated I think we are just talking about a few $100 in interest. This money is safe right?
Ms. Woodward responded yes.
Mr. Hanks stated if the money is safe, then yes.
Mr. Bloom stated line one was more in terms of an emergency situation. If anything happened to Wells Fargo, you had another outside source that you could go put money and continue operations. Line one is not really about interest. Line one is not going to make you much in interest because the local banks are just not offering anything.
Mr. Fennell stated let us just wait a month. Thank you for your time and effort. We appreciate it. Look at buying back the bonds. Is there anything else we need to do here?
Mr. Daly responded approve the financial transactions?
EIGHTH ORDER OF BUSINESS Adjournment
Glen Hanks Robert D. Fennell