Board Finance Committee Meeting Minutes
Thursday, September 25, 2008

Board: Directors Doug Siden, Ayn Wieskamp, Nancy Skinner

Staff: Pat O’Brien, Dave Collins, Patti Henry, Dave Sumner, Pam Burnor, John Escobar, Neva Dinwiddie, Carol Victor, Cinde Rubaloff, Deborah Spaulding, Davio Santos

Public: Bick Hooper 

Introductions

AGM Dave Collins introduced the new CFO/Controller, Cinde Rubaloff, whose first day of employment with the District will be October 6, 2008, and Deborah Spaulding, the new Assistant Finance Officer, who began work on September 22, 2008.

1. 2008 Midyear Budget Review and

Assistant Finance Officer Patti Henry advised that the Midyear budget was delayed this year because of the extended state budget process. She noted that as of September 19, 2008, the state budget was expected to be signed by the Governor, and there were no serious impacts on the District expected for the 2008 calendar year. She stated that AGM Dave Collins reviewed the property taxes and is projecting that the District will have a savings of about $3 million. She advised that major growth is not anticipated next year.

Ms. Henry discussed charges for services, stating that rents from District residences are slightly behind, and interest will be minimally above what was projected because of higher property taxes. Miscellaneous fees and grants are close to early estimates. She advised that by the end of the year, it is projected that the District will have about $4 million dollars in revenue, and that expenditures are less than what was anticipated. Ms. Henry discussed personnel costs, and noted that when the budget process began, it was assumed that all Full Time Employee (FTE) positions would be filled for the entire year, and would start in January. She noted that 31 FTE’s were added in last year’s budget, but not all of those positions were filled on January 1st. This created savings in staff costs.
Regarding supplies and services, Ms. Henry noted that departments are anticipated to spend less than what was budgeted; however, capital equipment is over budget, so there will be some budget transfer requests in this area. Ms. Henry reiterated the District’s $4 million in savings, resulting in a fund balance increase of about $8 million. She stated that staff is in the process of making some decisions on key issues as to how to spend the funds, either for capital, reserves, or one-time expenditures. She referred to a handout in the written material regarding the recommended minimum mid-year adjustment of $785,000 as follows:

Adjustment to base budget for higher fuel rates $265,000
One-time correction in Public Affairs Budget 185,000
Adjustment to insurance budget for increased rates 280,000
Adjustment to base budget for year round intern program 55,000

Total recommended mid-year adjustment $785,000

Ms. Henry advised that staff will come back at the November Finance Committee meeting with additional recommendations.

AGM Dave Collins noted that projected year-end results are based on an assumption from last year’s results. The projections presuppose that large transfers are not made between funds or accounts that would result in an increased rate of expenditure.

Director Carol Severin brought forward the issue of a $55,000 allotment for the year-round intern program. AGM Collins stated that staff has been speaking with Human Resources, who will begin the program this year. He advised that, due to small proportion of the year remaining, only a small amount will be used to initiate the program in 2008 rather than the full annual amount of $55,000 that was originally proposed. The full annual amount will be included in the 2009 budget.

Director Doug Siden had some concern regarding overtime. He noted that $2 million was budgeted, but that over $2.3 million had been spent. Ms. Henry answered that the District has enough savings in the current budget to absorb the amount needed, and advised that not all temporary and FTE salaries were used. This created savings in benefits and salaries. GM O’Brien further clarified that some overtime is done for out-of-area calls, for which the District is reimbursed.

The Finance Committee recommended, by unanimous vote, to accept the 2008 Midyear Budget Review and Amendments and to forward to the Full Board for favorable consideration.

2. 2009 General Fund Preliminary Budget Summary

AGM Dave Collins noted that this matter appropriately follows the prior item. He discussed the District’s tax and assessment revenue, noting that the challenge is to project these revenues accurately for the coming year. He described when tax information becomes available from the counties, and the process for converting the counties’ fiscal year information to the District’s calendar year budget cycle. He advised that for the 2008 calendar year, updated projections for the District’s tax revenues are approximately $2.8 million ahead of budget. By comparison, last year’s actual tax receipts were nearly $10 million over budget. He noted that, due to the real estate down turn, Contra Costa County is projecting a .06% increase in property taxes for the 2008/2009 tax year and that Alameda County is projecting a 4.6% increase, which equates to an estimated 3% tax revenue increase for the District’s 2009 budget year.

AGM Collins reminded the group that for the 2009 budget, the District’s tax revenue estimate is based on the counties’ billed tax statements for the 2008/09 year and on a projection of what the growth rate will be for the 2009/2010 tax year. Because of the current economic conditions, staff projects that there will be a very low growth rate in assessed valuation, if any, occurring in the 2009/2010 tax year; therefore, staff is not assuming any growth and is keeping the tax revenue estimates for the second half of 2009 the same as for the prior year.

For the District’s 2009 budget, AGM Collins anticipates an increase of approximately 9% in the Charges for Services category. Interest Revenue is expected to increase slightly because the fund balance has been increasing in the past couple of years, and investments are receiving a better return rate than in the past. He advised that miscellaneous revenue includes a variety of items, such as legal judgments and reimbursements from insurance, so these are difficult to predict. He noted that few new staff positions are expected to be proposed in 2009. The ongoing requirements to fund benefits (pensions, OPEB), along with approximately $700,000 of “pipeline project” expenses for new facilities, amounts to about a 9% increase in the budget for wages and benefits in 2009 over the prior year. An amount has been included to accommodate possible CPI-related costs. AGM Collins advised that the supplies and services is based largely on 2008 numbers which were increased by approximately 5% to account for price increases.

Budget Manager Pam Burnor stated that the draft budget numbers include some cost neutral changes to FTEs that were requested by the Operations Department to better align the budget with the operational structure. The AGMs will be meeting soon to continue the review of budget requests that have come forward for 2009, including items that involve regulatory requirements.

Director Nancy Skinner asked for and received clarification on reserves. Dave Collins advised that the District has funds committed to several reserves, one of which is designated for economic uncertainty.

Director Wieskamp had some concern regarding the Peralta Oaks Building and the need to increase space for employees. Staff stated that an office space study is underway, specifically targeted at the Public Safety office building needs. The next phase involves reviewing alternatives for improvement of existing facilities, or expansion to new leased or purchased buildings. AGM Collins advised that there are vacant buildings in the Peralta Oaks area that could be considered, and later this year, in support of this project, he will be recommending appropriation of a significant amount of funding to a capital or reserve account for this purpose.
General Manager Pat O’Brien noted that it is definitely a priority for the District to resolve the space issues and make some decisions about accommodating the growing number of District employees.

Director Doug Siden had some concern about how much is being set aside for the GASB 45 “Other post employee benefit” (OPEB) requirements. Assistant Finance Officer Patti Henry advised that the funding that has been set aside in accordance with GASB 45 is the OPEB Fund, and an actuarial study is being conducted that will reveal, in early 2009, if there will be a change in the recommended contribution rate. She noted that currently 7% of payroll is set aside each pay period to go into the OPEB Fund, but that this amount may change annually based on the actuarial study that takes into account investment returns, changes in benefit costs, and similar factors.

Director Wieskamp asked for an update on the progress at Vargas Plateau and Dumbarton Quarry. GM O’Brien advised that the District did meet with Fremont staff recently; they are working on the water issue at Dumbarton and have made some progress. Staff will bring updates to the committee at a later date.

3. Recommended Changes To Project Personnel Budgets To Satisfy GASB 34 Requirements

AGM Dave Collins advised that this next item is being brought forward in the interest of undertaking continuing improvements in the District’s budget process. Budget Manager Pam Burnor presented the item and stated that the proposed changes will improve the ability to record expenditures associated with capital projects that are “works in progress,” so that when that project is completed, the full cost of the work may more efficiently and accurately be capitalized on the District’s books in accordance with GASB 34 requirements.

In addition, staff proposes to modify the process of establishing project budgets to enable the Design and Construction Department to initiate project budgets up to $25,000 as an administrative act not requiring advance Board action. These individual budgets would be funded through transfers from a single project holding account, approved by the Board as part of the annual budget, that would provide a specific limit on the overall amount of funding to be used for this purpose. She advised that this is similar to the procedure in the Land Division that has been successfully used for a number of years. This process will allow Design & Construction to capture preliminary expenses on projects from inception and to have a budget in place to charge against from the start. Once it is determined that the project will exceed $25,000, the project would come to the Board for appropriation of a more specific budget. Budget Manager Pam Burnor reiterated that the main purpose of setting up this procedure is to be able to track expenses consistent with the provisions of GASB 34 and allow the Design & Construction Department to accurately identify specific project expenses charged.

Director Doug Siden had a concern that this could mean more work for Finance staff. Finance staff expressed that the process of capturing early costs associated with capital projects would be a benefit at year-end because it allows staff to track all expenses that should have been identified as capital projects, thus making it easier for staff to capitalize them. The alternative process currently in use is to identify such expenses at year end and make individual transfers to capture the expenses correctly, a very time consuming process. Assistant CFO Patti Henry advised that it will make budgeting easier by taking the guesswork out of it.

PAC Finance Subcommittee Chair Bick Hooper commented that in his position with the PAC Finance Subcommittee, he enjoys seeing a budget that is clear enough for the average citizen to understand and grasp. He stated that staff has been successful in achieving this task. He urged the Finance Department, as they move into the new procedures, to continue to identify where money is being spent within a particular department, so that it is understood by the average lay person.

4. Public Comments

There were no public comments.

Next Meeting date: TBD

Back to top