Okay, ready when you are. Right. Good to have my mic on. Good afternoon. I'm going to call to order the special meeting of the San Diego Water District at 5 p.m. Wednesday June 26, 2024. And Madam Kirk, will you please take the role? Board member lines here. Board member ailer is not in the room at the moment. Board Member Hensy is not in the room at the moment. Board Member Aillers is present. Vice President Cranes. Here. And President Blackwell. Here. And Board Member Hensy is also present. The record will reflect that all members of the board are present and please note that San DeGito Water District board members receive an independent stipend of $100 for convening water district meetings pursuant to San DeGito Water District Resolution, number 89-07. Okay, thank you. And if you're able, please join me in the Pledge of Allegiance. We can. Please join me in the Pledge of Allegiance. I pledge allegiance to the flag of the United States of America and to the Republic for which it stands, one nation, under God, indivisible, with liberty and justice for all. Okay, we are going to move into the agenda and we actually have a special presentation. So I'm going to, I don't think we have a mic, so maybe I will read it from up here. Is there a presentation that goes with it? Okay. I don't see a mic there. Okay, then I'll come down there. And it's on. Okay, good. Well, it's my honor tonight to present the award for the 2024 Water Smart Landscape Contest. The smart in the Water Smart means sustain and manage America's resources for tomorrow. The it rewards water efficient landscapes created by district customers and it complements existing conservation rebates and incentives and educational outreach programs. We have 12 participating member water agencies that get involved and our winners who are here tonight are Allison and Costa Heramis of Lucadia. Is that microphone on? Is your mic on? It is on. Okay, I have to hold a closer. Okay, so what the Heramis and actually I heard it's really Allison, her amus, who did the work. Her cost gave it to her. But anyway, they removed the turf from the front yard last spring, replaced it with California natives, and other drought tolerant plants. The new landscape design is reduced their water consumption, and lowered their time spent maintaining the yard, leaving more time to enjoy it. Some of the plants they used were Baja Fairy Duster, Dremander, Gravelia Superb, very good, Lantana and Lavender. And these plants are included on the County Water Authorities Nifty 50 list. The district recognizes their water conservation efforts with a $250 gift card to Home Depot and a district swag bag. And photos of their project will also be featured on the water district's website appearing in our quarterly newsletter which drops on July 1st and be highlighted in the city newsletter. All right, are we presenting anything tonight? Okay,ners come on down. Okay. Winners come on down. Okay. Winners come on down. Okay. Winners come on down. Okay. Winners come on down. Okay. Winners come on down. Okay. Winners come on down. Okay. Winners come on down. Okay. Winners come on down. Okay. Winners come on down. Okay. Winners come on down. Okay. So thank you very much. Thanks for being here too and a nice job on your yard. Can I do a photo? All right thanks again. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Okay. Oops. Okay. We will keep moving along. Do we have any oral communications tonight? No, we do not. All right. And moving under S6, a report from closed session, we do not hold one. We'll move to any changes in the agenda. No changes to posted agenda. Okay. And then we'll move to the consent calendar. And are there any items being removed from the consent agenda today? Nothing from the public. I'll move approval of all the items in the consent agenda. I'll second. Second. All right, perfect. Let's take a vote on that. Okay. One moment. Motion carries unanimously. Great. Thank you. I'm going to move to action items. Motion carries unanimously. Great. Thank you. We'll move to action items which we do not have any action items today. But we'll move on to informational item and we do have something there. That's a really important information. So I will turn it over to you, Mary consent? Okay, perfect. This is a report on the San Diego County Water Authority upfront payment discount program. And Finance Manager, Kuzniko, will give the oral report. Thank you, President Blackwell and members of the board. The information, this information item is to update the board on an upfront fixed charge payment program being floated by the San Diego County Water Authority as a way to relieve the challenging rate hikes that are being proposed. As you are aware, the latest communication from the water authority has determined that an 18.15 percent increase is needed for calendar year 2025. Additionally, over the next two years, the authority estimates that a total 39 percent increase in rates and charges will be necessary. The large increases are a result of declines in water sales volumes due to heavy rains experience over the past two winters, rising contractual costs and inflationary price pressures, as well as withdrawals from the rate stabilization fund of the water authority to provide rate relief to member agencies over the past few years. Staff is presenting this as an information item because the Water Authority Board will be voting on the rate increase tomorrow's meeting. On May 30th, the Water Authority Center Memo to Member Agencies offering a discount on pre-paying fixed charges in advance rather than monthly as has been the norm. The opt-in pilot program would allow agencies to make a single payment by January 3rd of 2025 to cover fixed costs for a year rather than paying in 12 equal installments. Upfront payments would benefit the water authority and the region by enhancing their ability to float debt and provides flexibility for funding of its CIP in order to improve regional supply reliability. The water authority would also invest the upfront payments at about the same or higher rate than the discount. The upfront payment program would decrease the average effective rate from the proposed 18% to 16.7%. The three discount options that were outlined in the water authority memo include a July 2024 prepayment of the fiscal year fixed charge for a 4% discount, a January 2025 prepayment of the calendar year fixed charge, also for a 4% discount, and a third option of a July 2024 prepayment of calendar year 25 fixed charges for a 6% discount. So what are the fixed charges? Every agency in the authority pays a portion of its costs as fixed costs on a monthly basis regardless of how much water the agency purchases. Separately, each agency also pays its variable costs based on its water demand for the month. Fix charges listed are those listed on this slide which shows the district's current and the water authorities fiscal year 25 proposed and the now just adopted district fiscal year budgeted. This slide shows the upfront payments that would be required under each of the three options and it also shows the potential savings to be derived and the opportunity costs in relation to the districts and pooled current investments and keep in mind that the district investments are pooled with the city's investments as well. Based on the recently concluded water rate study, staff had factored increases of about 8.5% in the rates and charges from the water authority. The increases are now expected to be over 18%. Well, the upfront payment would essentially be revenue neutral since the fixed costs would still have to be paid. There would be an upfront payment of approximately 2.8 million versus the monthly payments of about $200,000 that the district would typically make depending on the options on offer. In terms of cash flow impact, the impact is anticipated to be minimal since the district has a cash balance of approximately $22 million in its operating and CIP funds. Early in the fiscal year, many CIPs require very little outflow of payments to vendors as they are still either in the beginning or in the design phase. It's also what mentioning that raising rates to absorb the rate increase would require a lengthy prop-218 process that could not be accomplished in time to opt in for the upfront payment program. In terms of the impact on the city or the district investment strategy, a 2.8 million upfront payment would not be significant enough to impact the safety, liquidity and yield return objectives that are outlined in the city and the district's investment policy. The discounts offered in the options represent a higher average rate of return that what is currently being earned by the City District Board for you. Making the upfront payment would require a dip into the reserves early in the fiscal year but would then be replenished as water sales occur during the year. That concludes my presentation and staff is available to answer questions. Board member lions. Thank you, President Blackwell. So I have a couple things I want to share from my perspective on the San Diego County Water Authority. And also I have, this is really important that this come forward to us so that I can understand where we stand as a water district in evaluating what the options are that are before us right now. This isn't an action item but it's a good opportunity for us to share the information we know and what our thoughts are. So we have our board meeting tomorrow and it has been streamlined so that we can address spend a good amount of time addressing this question. It was brought forward at our last board meeting last month that there might be the possibility of the member agencies advancing or prepaying this upfront payment for fixed charges, but it wasn't really articulated in much detail. It was brought forward as a option for discussion. And what we decided at the last meeting was, we would schedule our rate discussion this month. But we weren't gonna take any action on any kinds of things like this because it wasn't enough information. So in the meantime, I think all of the member agencies have taken these ideas back to talk about and to present and to do some numbers and to see if really there's any advantage to our water district to advancing this money in a prepayment. If there is, we see we're seeing so far anyway, there's not a downside to doing it if there's a return to us that's a positive number. So if there's some information I can kind of glean today about that, I want to do that. And also what I've learned is that some member agencies have done their numbers and it doesn't work for them. So it really depends on the agencies and we'll have that conversation tomorrow. So I could probably guarantee for everyone there'll be new information tomorrow that is not in front of us today that we'll be considering as we try to decide as a water authority what the rate increase will be. Also, what is known and I can count on is that the rate increase is gonna be larger than what we thought it would be. Just based on the numbers that have been presented, it looks like it's gonna be 16 to 18%. And if I remember right, I don't have my note here in front of me, but I think we were counting, we predicted that it would be 9%. Yes? Yes. It's either half of a sudden in the VA study. Eight and a half. Eight and a half is what was in the budget for the next fiscal year. That's what I thought. Thank you for clarifying. So either way, we're gonna have to go through the Prop 218 process again. And so that's a question for staff. Is that true? Either... If the board makes the decision to pass this on to customers in their bills, then we would be required to begin a whole new prop to 18 process. Would that then be a decision we would make at a future meeting date? Whether we decide to pass this along to customers immediately before. I believe it would be something that would have to be done at a future meeting. It could not be done at this meeting because it hasn't been noticed. It's not aware of it, but I can also differ to the city of turdies. So it's not a for sure thing that we would have to revise our proper 18 process. It's I guess that's what I'm looking for sure thing that we would have to revise our proper 18 process. It's I guess that's what I'm looking for is clarification. It would be our choice whether we want to pass that additional rate percentage on to our customers during this cycle. Just just to add to that this increase is actually starting January 1st. So the first six months of the year based on our fiscal year, there's no impact to our rates. So that's something that we have to look in. And the six months will give us enough time to evaluate the amount of water that's been used, lake hudges, issues, and all that kind of stuff so that we will have a better idea if we need to increase the rates more during the second half of the year, and maybe you have it start in July, first of next year. But usually the 2.18 process, it's minimum of about six months, between hiring consultant, doing the rate study and doing everything. Okay, so for me then, and Tarkoan, if you were gonna add anything there, it'll look like you might wanna speak. I was, Port Member L, board member lines. I was just going to emphasize that the City Council so the board cannot take action on this tonight. It's just the information only on the item. Okay. Uh, so I guess those are the two questions I had one. What has this effect our prop 18 and I understand the answer now. And the second is this is just a proposal, I just wanted to tell everyone this is a proposal that's out there right now. It may change tomorrow at our board meeting and we'll bring that updated information back after the water authority takes action. Other, those are my questions and comments. Good, thank you. Board Member Aillars. Yeah, question for Mary. The $2.8 million pre-payment, you said, I think it's a snapshot. We had $22 million in cash reserves. What about through the year? Does that cash decline or does it stay roughly flat throughout the year? Depending on expenditures that are happening within the district, including operating expenditures and the CAP expenditures, that balance does drop and then it's replenished as customers have paid their bills and receive revenue in that sense. But in general month to month, it doesn't have a downward trend that the big payment comes in at the end of the year and then it's generally oscillating around 22 and then just to make sure with the 2.8 million pre-payment it would impact any of our reserves policy reserves that we have in place. We would probably have to dip into the rate stabilization immediately to make the upfront payment amount and then Usually at the end of the fiscal year in which case this fiscal year ends next week next week then When we do the year and close we re-evaluate what the net position is and then reset the three reserves that the district has. So at that point, we would see what the year end closed at to determine what's remaining so that we can then reset the reserves based on board policy. So the operating reserve plus the rate stabilization reserve, how big is that compared to that 22 million that we have in cash? Our operating reserve is usually a percentage of the following years, expenditures, expected expenditures, and the rate stabilization reserve is set at about 15% of our rates and charges revenue only. Can you put it for this fiscal year a dollar amount on that? I'm trying to understand why we're having to dip into the rate stabilization because 22 million sounds like a huge number. But if the operation reserve and then the rate stabilization is 20 million, then I understand. No, the operating reserve, like I said, is usually a percentage of the following years expenditures and I believe that is about, I think I want to say about five million. Okay. Yeah, about between five and six million. And then the CIP reserve is usually about, at this current time stand that about a little of a three million, almost four million. And the rate stabilization fund, is that separate from the operating fund? Yes, the operating reserve and the straight stabilization and the CIP reserves are all separate and those are required by board policy. Yeah, and how much cash is currently in the rate stabilization? Roughly. The rate stabilization is set at about 3.8 million, obviously. Yes. So, but you would take the money out of that, even though we have plenty of other cash reserves well beyond that, based on the numbers you just gave. Yes, we would take it out of the rate stabilization because it is designed for, that's what it's such as that. That's what it's such as that. Okay, great. And we'd just be paying that this year, as opposed to, because the prepayment would occur this year, I'm going to say that. I'm going to say that. I'm going to say that. I'm going to say that. I'm going to say that. I'm going to say that. I'm going to say that. I'm going to say that. I'm going to say that. I'm going to say that. I'm going to say that. I'm going to say that. I'm going to say that. I'm going to say that. I had a question and it is really what would be the next step. So if tomorrow the county water authority approves an 18% rate increase and they also say they like this upfront payment program. What would that mean for us if we wanted to explore it? How quickly would we have to do it? We're about to have some summer resource coming some summer resource coming up. So can you explain that, Ms. Mary? Well, the initial memo from the Water Authority said that if they do, if the Board approves this upfront payment program, the payments will be required by January of 2025. So that gives us sufficient time to come back in either August or September to bring an item to this board to get your direction on how to proceed and send us enough time to either make the prepayment in January or continue with operations as usual. Okay, perfect. Just to follow on that, this is one option of the three. The six percent, which is if it's due in July, we'll most probably not be able to make it. So we'll most probably be going with recommending 4%. Because in July, we will not be able to pay the pavement. Unless the CWA has some other options available for us, because I would guess most water agencies will not be able to pay in the month of July anyway because they need their border approval. So if that's the case, we come back in August and request authorization from the board and give the different options that are available. So if they design a program that has some flexibility in that first payment, for example, we would okay, perfect. All right. okay, I think I understand that. Are there any other questions? Okay, I'll thank you very much for that informational item. Certainly on our minds now, so I'd appreciate that. Okay, moving forward to agenda item 12, is the Board Member Reports pursuant to AB1234? And does, go down the row, board member lions? Nothing to report. Nothing to report. Nothing to report. And I have nothing to report. And so with that, we'll turn to the last agenda item, which is general information or staff status reports. I just wanted to bring to your attention that during the August meeting we're asked to join facilities engineering manager to come and give a presentation about the CIP projects that, and I think that was also requested by some of the board members here. So, Mary-Sah. I think that was you, Vice President Kranz, that asked to hear about the joint CIP projects. And that would be coming in August, assuming everything was well, and she meets the timeline. Other than that, have a good July, and we'll see you back in August. Yeah, we will see you. Question for the general manager. There was a project out on NCES Boulevard, just east of El Camino Real. Are there any updates on that? We are in the process of working with the contractor. We're having some issue with the competency of the contractor in that area. And the contractor is taking its sweet time for them to do the work that is included in the contract. I don't know how much of it can go into the details but we're hoping. Thank you, Darkwyn, so we're not going to be able to go into details at this point. I'm, we're hoping that this will be completed by maybe the first or second week of July. Sorry, councilmember or board member, ailer's just to ask is that the same contractor working long ranch of Santa Fe in front of the 711? Mm hmm. Yeah, it is. Yeah, and then causing all sorts of traffic problems. Everybody just associates it with goods and so, but it's not. Oh, yeah. Yeah. I'm going to throw free. Yeah. OK, with that, I'll thanks thanks to the staff members for today's meeting and thanks to the board members and we will adjourn. And happy July.