Minutes - Board - 2011-01-19P
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COSTA MESA SANITARY DISTRICT
MINUTES OF BOARD OF DIRECTORS SPECIAL MEETING
JANUARY 19, 2011
Directors Present: Robert Ooten, James Ferryman, Mike Scheafer,
Jim Fitzpatrick, Art Perry
Staff Present: Scott Carroll, General Manager
Sherry Kallab, Administrative Manager
Robin B. Hamers, District Engineer
Teresa Gonzalez, Accountant
Others Present: James R. Fisler
Ken Harlow, Brown and Caldwell
The Board of Directors of the Costa Mesa Sanitary District met on Wednesday, January 19,
2011 at 10:00 a.m., in the Board Conference Room at the Costa Mesa Sanitary District,
628 W. 19th Street, Costa Mesa, California to consider the following:
I. Endorsement of James R. Fisler for the OC LAFCO
Special District Alternate Seat
Mr. James R. Fisler requested the Board give consideration to endorsing him as
Alternate LAFCO Commissioner in the event Charley Wilson, the current Alternate,
becomes the regular Special District Member.
Director Perry moved to reverse the motion of December 20, 2010 supporting Ms.
Cheryl Brothers for the Alternate seat and to support Mr. James Fisler for the
Alternate LAFCO Commissioner seat in the event Mr. Wilson becomes the Regular
Special District Member to LAFCO and to authorize President Robert Ooten to vote
on behalf of the Costa Mesa Sanitary District. Director Ferryman seconded the
motion. Motion carried 5 -0.
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Costa Mesa Sanitary District Page 2
Minutes of Special Meeting Held January 19, 2011
• II. Asset Management
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President Ooten turned the meeting over to Mr. Carroll to speak on asset
management. Mr. Carroll introduced Mr. Ken Harlow from Brown and Caldwell,
an expert in asset management, who was hired to develop an , asset
management program for the District. The plan involved assessing the
District's assets and coming up with a plan to fund the future replacement of
the District's assets. The asset management plan will require a new policy
direction from the Board.
Mr. Harlow introduced his presentation on asset management by explaining
that the concepts of asset management are becoming increasingly recognized
among utilities in the United States. Asset management is a structured
program to minimize the life -cycle costs of asset ownership while maintaining
required service levels and sustaining the infrastructure. His presentation titled
"Funding Future Infrastructure Renewal Needs" included the following:
Summary of the District's Infrastructure Assets
• 224 miles of gravity sewer pipe, mostly laid before 1961.
• 3 miles of force mains.
• 4,782 manholes and lampholes.
20 below -grade pump stations (14 are included in the analysis —
remainder will not be replaced).
• The District administrative building and the new District yard building.
• Total replacement cost of the District's infrastructure assets is about
• $460 million.
• 98% of the $460 million is represented by pipes and manholes.
• Buildings and pump stations represent only a minor portion of
• total value.
• 58% of assets by value are over 50 years old.
Current Renewal Costs and Trends
• Recent closed- circuit TV survey of the system suggets an increasing
rate of deterioration.
• Renewal costs are currently about $1 million annually — indications are
that these costs will increase.
• Forecasts produced by the Replacement Planning Model (RPM) match
current experience closely and also forecast future renewal costs
increases.
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Costa Mesa Sanitary District Page 3
Minutes of Special Meeting Held January 19, 2011
A Potential Renewal Funding Strategy
• One funding approach is to accumulate a renewal reserve.
• Orderly annual contributions can be made to such a reserve, which services
the varying renewal costs incurred each year.
• Such reserves are maintained by several Orange County water and sewer
agencies.
• Staff has discussed such a reserve which would serve for both renewals and,
if necessary, emergencies.
• The reserve would be gradually accumulated and later kept at a minimum
balance of $5 million, based on potential emergency needs.
• The initial 2011 fund balance would be $3 million, from combining the funds
available now.
• Annual contributions would be $1.6 million initially, increasing with inflation.
• The fund balance would reach $5 million in 2014.
• Increasing renewal costs will reduce the fund balance below $5 million in
2023.
• At that time, contributions will need to be further increased or the overall
renewal funding strategy revisited.
• A reserve approach, properly used, will avoid unpleasant rate shocks from
unexpected events, as well as, the need to issue debt.
• Other renewal funding strategies and approaches are possible and should be
evaluated in light of the District's business objectives.
The Board agreed to the $5 million renewal reserve. With the $5 million in reserves
being the goal, the Board instructed staff to present an implementation plan outlining
several alternatives to achieve this goal. With the annual contribution defined, a multi-
year budget plan should be presented to detail out the shortfall in funds available, if
any, and the mechanisms available to fund the entire annual contribution such as,
rate increases and /or the issuance of debt.
III. Public Comments
No members of the public were present.
ADJOURNMENT
President Ooten adjourned the meeting at 11:34 a.m.
Approved by:
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President
(Protecting our community's heafth and the environment 6y provifing sofid waste and sewer collection services.
costamesasanitarydutrict. org