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Ord 2016-119 ORDINANCE NO. 119 AN ORDINANCE OF THE BOARD OF DIRECTORS OF THE COSTA MESA SANITARY DISTRICT REVISING THE DISTRICT'S CAPITAL IMPROVEMENTS FUNDING REQUIREMENTS WHEREAS, in 2010, the Board of Directors has deemed it prudent planning and risk management to create an Asset Management Fund; and WHEREAS, the Board consistent with sound management practices desires to establish a reserve at levels sufficient to withstand various contingencies that might occur, and WHEREAS, the Board also desires to not set aside unnecessary surplus as that money has been paid by the ratepayers who are the Board's constituents; and NOW, THEREFORE, the Board of Directors of the Costa Mesa Sanitary District does hereby ORDAIN as follows: Section 1. That Section 4.03.070 of the Costa Mesa Sanitary District Operations Code is amended to read as follows: "Section 4.03.070. Capital Improvements. The District will develop appropriate funding mechanisms for capital improvements. (a) Policy: Major capital improvement projects will be funded using the most financially prudent method available. Such methods include: 1) Traditional long-term financing (bond issues); 2) "Pay As You Go" financing (using recurring revenues only); 3) Combination of debt financing and "Pay As You Go" financing; and, 4) Using accumulated cash reserves in excess of policy requirements. (b) Capital Improvement Funding: The traditional method to obtain funds for major capital improvement projects has been to issue long-term debt instruments such as bonds, Certificates of Participation (CoPs), etc., which mature 15 to 30 years from the date of issuance. In general, a bond issue's maturity should approximate the useful life of the asset being financed. Long-term capital improvement financing needs should be financed, as much as possible, with long-term debt (bonds). Short-term capital improvement financing needs should be financed with short-term debt (short-term lease purchase, revenue anticipation notes, etc.). However, it is also acceptable to use cash which has been accumulated in excess of policy requirements to pay for either long- term and/or short term capital improvements. The actual use of accumulated cash for such projects will be determined by the District Board on a case-by-case basis. Ordinance No. 119 (c) Asset Management Fund: The Asset Management Fund was specifically established to fund capital improvement projects and emergency work. The Board has approved a minimum level of Reserves in the Asset Management Fund of $5 million. Each year, the budget will include a contribution from the Wastewater Fund to the Asset Management Fund for capital improvement projects. The budget may also include a transfer back to the Wastewater Fund to finance current year capital improvement projects or emergency work. All transfers between Funds require Board approval either through the budget adoption process or by direct board action. If a transfer-out reduces the Asset Management Fund balance below the minimum funding level of $5 million, the Finance Manager shall outline a plan to restore the Fund back to the minimum funding level of$5 million and present it to the Board for consideration. (d) Practice; It is the District's practice to use whatever financing mechanism(s) that best meets the goals and objectives of the applicable capital improvement project(s). Specifically, the following general rules will be used in determining what to finance and how: 1. Capital improvement projects of less than $100,000 should be financed out of operating revenues (or accumulated cash). Such projects may be included in the Long Range Capital Improvement Program (CIP). 2. Capital improvement projects in excess of $100,000, or inter-related projects in excess of$100,000, will be made a part of the Long Range CIP, and all such projects should be grouped to allow effective use of financing mechanisms or other funding sources. 3. On-going expenses related to Capital Improvement Program projects (e.g. maintenance and staffing costs) must be identified and the source of on-going revenues to support those costs must be identified. Debt financing will not be used to support on-going operating costs. 4. Prior to commencement of any design or construction work on any project covered in the Capital Improvement Program, the project shall be submitted to the Board of Directors for authorization to proceed." Section 2. Should any part, clause or section of this Ordinance be declared by any Court of competent jurisdiction to be invalid, the remaining provisions of this Ordinance shall nevertheless be and remain in full force and effect and the Board of Directors of the Costa Mesa Sanitary District of Orange County, California, hereby declares that each and every section, clause, provision or part of this Ordinance would have been adopted and made a part of this Ordinance without the adoption of any portion thereof and that the invalidity of any part or provision hereof shall not in any way affect the validity or enforcement of the remaining provisions of this Ordinance that may stand on their own. • Ordinance No. 119 Section 3. Pursuant to Health and Safety Code sections 6490 and 6491.3, the Clerk shall cause this ordinance or a summary thereof to be published in a newspaper of general circulation printed and published in the District according to law PASSED and ADOPTED this 22nd day of June, 2016. ♦ II Secretary Pr-sident APPROVED AS TO FORM: HARPER BURNS LLP District Counsel STATE OF CALIFORNIA ) COUNTY OF ORANGE ) SS CITY OF COSTA MESA ) Ordinance No. 119 I, NOELANI MIDDENWAY, Clerk of the Costa Mesa Sanitary District, hereby certify that the above and foregoing Ordinance No. 119 was duly and regularly passed and adopted by said Board of Directors at a regular meeting thereof, held on the 22nd day of June, 2017 by the following votes: AYES: Scheafer, Ferryman, Schafer, Ooten, Perry NOES: None ABSENT: None { ABSTAIN: None IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the Costa Mesa Sanitary District, this 22nd day of June, 2017. / ladaIkAL CI-rk of he ost-Wa S- itary District