MINUTES OF MEETING
The regular meeting of the
Board of Supervisors of the Coral Springs Improvement District was held on
Present and constituting a quorum were:
Bob Fennell President
Sharon Zich Vice President
Glen Hanks Secretary
Also present were:
Dan Daly Interim Manager
Ed Goscicki Co-Manager –
Dennis Lyles District Counsel
Sean Skehan CH2MHill
Jane Early CH2MHill
Jim Aversa CSID
John McKune District Capital Improvement Coordinator
Doug Hyche CSID Utilities Director
Randy Frederick CSID Drainage Supervisor
Kay Woodward CSID Accountant
Jan Zilmer CSID Human Resources
Steve Trescott SunTrust Bank
FIRST ORDER OF BUSINESS Roll Call
Mr. Goscicki called the meeting to order and called the roll.
SECOND ORDER OF BUSINESS Approval of the Minutes of the December 17, 2007 Meeting
Mr. Fennell stated each Board member
received a copy of the minutes of the
Mr. Fennell stated on page 29 not sure should not insured.
Mr. Hanks stated the numbers of page five, third paragraph lis10 should be list 10.
Mr. Daly stated page 31 at the end Padgett should be PGIT.
Mr. Fennell asked is there anything we have to actually pass or vote on today?
Mr. Goscicki responded yes, item four. On item three it is important that we get buy in from the Board to ensure where we have your funds is where you are happy with.
Mr. Fennell stated there are no time sensitive things such as contracts or construction.
Mr. Daly stated item five for the pension plan we have had on the agenda for awhile.
Mr. Goscicki stated item six is not a time sensitive issue but is a dollar issue.
THIRD ORDER OF BUSINESS Discussion of SBA Funds and Bond Proceeds Investment Options
Mr. Goscicki stated I will turn this over to Ms. Pam Rower and Mr. Stephen Bloom. Ms. Rower you know from previous meetings. She has been out for a bit of time convalescing. Ms. Rower’s role has changed within the organization from Accounting Manager to more Fiscal Analysis helping on these types of investment issues. Mr. Bloom has taken over as the Accounting Manager.
Mr. Fennell asked what is happening with the SBA?
Ms. Rower responded I spoke with Ms. Woodward today and we do have some options where we can go ahead and withdraw approximately $927,000 out of the SBA fund, it has come available based on the new requirements. This will leave approximately $571,000 in the fund that we will not be able to release. I anticipate in the next few months that they will loosen their requirements.
Mr. Hanks stated the state has not done anything to address the concerns about the integrity of these investments.
Ms. Rower stated they have in a sense that they have created two funds and any new monies that are going into the fund, to make sure that they are in a better account, they have separated them so they have an A account and B account. They are looking at the riskier investments they had and there is nothing in the market for them to get rid of these. Those are separated and any new monies are going into the A Fund, which is a much better portfolio in terms of risk.
Mr. Goscicki stated since the last meeting the SBA did loosen up the percentages that we can move. These are additional funds we can now withdraw.
Mr. Bloom responded it was originally 15% or up to $2 million and now it is 37% or up to $4 million.
Ms. Zich asked how can you trust A versus B? What is the definition of A and B?
Ms. Rower responded it is the type of investments they are investing in compared to government securities, compared to commercial paper, and different investments of that criterion so they are graded.
Ms. Zich stated I am concerned because I do not think anyone was aware of how risky the other ones were.
Ms. Rower stated many people assumed
the SBA was a bank account just as other bank accounts, and was federally
insured, as such. I do not think people
understood it was investment pool created by the state to help cities and
smaller municipalities manage their funds.
Unfortunately, it is like anything, we just read about a bank in
Mr. Goscicki stated the SBA is not a bank account; it is not government insured in that regard but the sale of this service fund has always been it was a safe, secure, conservative investment. The sale to local governments is, you do not have to worry about having your own investment managers you can put your money here, we are going to invest it, we are going to be conservative with what we do and clearly some of their investments were not.
Mr. Hanks asked is there still the need to move our money out of the SBA?
Mr. Goscicki responded it is still our recommendation we maximize the amount of withdrawal. I think their credibility has been severely damaged in terms of where they are and their rulemaking is completely arbitrary. We are still recommending the Board authorize the withdrawal of the maximum amount.
Mr. Hanks stated I would like our people to talk about what we are doing with the money.
Mr. Fennell stated let’s talk a little about the SBA. Have you looked at their accounts and what they were doing with them?
Mr. Trescott responded yield is a very strong indication of what they are investing in. A typical Money Market fund return is 3.75%. They are still paying 4.70% on the A Fund. The A Fund was the original fund and supposedly had all of the good investments. The B Fund has the sub-prime mortgage backed securities which is commercial paper and things like that. It will probably be quite awhile before you get any money out of there, it depends on if they can sell it. I saw the original portfolio before they closed.
Mr. Fennell stated I looked at it a couple of months ago and it is not that they have not been fairly forthcoming. I looked at the different possibilities including commercial paper, T-bills or any kind of bonds and it was less than 1%. My thought was, I have junk bonds which are safer than that. How did they get to this? I would not think they paid us that well, most of the time we had out money in there, it was 2% or 3%.
Mr. Trescott stated they were paying 5.70%.
Mr. Fennell stated I do not think they had security debt funds. What I think is they invested in Countrywide or some kind of funds like that which were the people who set up the funds and did not even have the mortgages backed.
Mr. Trescott stated they had a lot of Countrywide CD’s.
Mr. Fennell stated with Countrywide you do not even have a mortgage at that point. Countrywide is now being bought out by Bank of America at probably dimes on the dollar.
Mr. Trescott stated it is interesting how they got into this stuff and why they went into it. They are analyzing that and so forth. The sub-prime mortgage backed securities was $980 billion around the world.
Ms. Rower stated ,it is as any other fund, their goal is to create assets and get more assets, so obviously they were looking for returns and most municipalities are looking for returns. We looked at the banks and your investment options and said this is a higher paying yield and until this happened they have paid higher rates for quite some time.
Mr. Fennell stated in our budget we were ever only getting 2% or 3%. Did we really get that money?
Ms. Rower responded yes.
Mr. Fennell stated our budget was low but we were getting more. On the other hand we were supposedly almost forced to go there.
Mr. Goscicki stated you were not forced. It is one of those investment opportunities imparted to us as a convenient safe investment. It was not a forced issue but a safe investment option for local governments to use.
Mr. Fennell asked was it supposed to be like a cash money market fund with monies going in and out? It was not meant to be as a CD is to tie up your funds.
Ms. Rower responded it is an investment pool so actually it was like having an investment advisor who was managing the pool so each smaller municipality was not hiring their own. You would assume that type of investment management or advisory service would yield you better rates but not riskier investments. Unfortunately, it is like anything, they are in a business and people have a drive to create more return and who knew how bad the bubble was going to burst when it burst.
Mr. Fennell stated several banks did.
Ms. Rower stated Citibank is the largest bank out there and they had problems with this.
Mr. Fennell stated the bonds get passed around. Is the Fed still going to back the bond insurers?
Mr. Trescott responded it fell through.
Mr. Fennell stated it held the market for a day or two.
Mr. Trescott stated the bond insurers are struggling because they insured a lot of the different pools of the sub-prime mortgage backed securities. There could be 10 or 15 different layers or slices of that same mortgage backed security, some would be AAA and those would be insured. If they fall below a certain price there is an automatic kick out, you have to liquidate and there is no market out there for them so you take a loss and that brings the insurance factor in. They are struggling with paying those off.
Mr. Fennell stated I am trying to understand if it was just one of those things that happened or if there was a shift in policy and changing to take on a lot of risky investments. I can point to half a dozen things which have a better track record than the SBA fund, not only from a matter of stability, but from a standpoint of yield.
Mr. Trescott stated remember the SBA fund was considered a money market fund you could go in and out of it daily.
Mr. Fennell stated that is what I thought.
Mr. Trescott stated you could go in and out of it daily.
Mr. Fennell stated as I understand money market funds, the objective of any person in the money market fund is to maintain the daily value and second get the best deal you can by doing that.
Mr. Trescott stated they did not run their money market fund like a money market fund ,more like a 287 fund, which is by the SEC. It has a longer maturity, longer duration, a different quality of securities. This is why the money market funds were yielding 5% and they were yielding 5.7%.
Mr. Hanks asked with the investments we are looking at what is the relativeness to where we are now?
Ms. Rower responded we are looking at several different options. We have the operating funds we have to look at because obviously we have bond funds, we have operating funds. We recommend we keep the daily operating accounts with Wachovia. Ms. Woodward brought up the fact that we have a lot of customers who get direct billed money taken out, lock boxes, and that type of thing so from an operational standpoint we would like to recommend we stay with Wachovia. However, we have negotiated with Wachovia to get a rate that is their Government Advantage Interest checking account. The interest rate is based on a 90 day T-Bill and is considered a government account so we end up with $100,000 of the FDIC insurance and after that we are backed by the state and we have the backup of the Qualified Public Depository (“QPD”). The daily billing for the water and sewer will remain in Wachovia, it is a very safe, interest type checking account, it is a money market fund and they do pay you based on the T-Bill. They do have a minimum requirement of $100,000, which stays in the account and will not earn any interest. The remaining is put in a Government Advantage Money Market fund. This is what we recommend for Wachovia.
Ms. Zich asked what is the current rate?
Ms. Rower responded at this time it is 3.39% based on the 90-day T-Bill.
Ms. Zich asked, is that what the funds at Wachovia have been in?
Ms. Rower responded no.
Ms. Zich asked what kind of interest have we been getting?
Ms. Rower responded we have not gotten interest. They did what is called interest earnings credit. Because rates have been typically so low the year before they would credit our fees against the interest so it was a wash and no interest. We anticipate the interest will be more based on the rates.
We also have Wachovia accounts we would like to invest that are the reserves. They have a special program Fed funds minus 25 basis points and that is on balances over $1 million. This will give us somewhat of a better return and we think it will serve our purposes. We are only allowed six transactions a month so this would be used only for our reserves. Then we have what we consider our bond proceeds and is why we brought in Mr. Trescott of SunTrust, portfolio manager. We would like to look at agencies for the monies which will not be used until 2009. The bond money is sitting currently in US Bank and they are currently paying 4.4%, so the bond money has been earning interest the whole time with the trustee, US Bank.
Mr. Goscicki stated the way the bond fund is set up right now it is all sitting in this account and you can take as much as you need anytime you need it. The goal is to develop more of a managed program looking at projected cash flow of the capital program to try to optimize the investment. There is a piece of it we are saying whatever we anticipate using in fiscal year 2008/2009, leave it with US Bank to have as working capital for the Capital Improvement Program and the balance invested to see if it can earn a little higher yield.
Mr. Fennell asked did you say the $40 million is currently in SunTrust or US Bank?
Ms. Rower responded US Bank.
Mr. Fennell stated US Bank had something to do with the bond issue.
Ms. Rower stated US Bank bought out SunTrust Trust Department.
Ms. Zich stated I am looking at the cash transaction and cash flow charts Ms. Woodward gives us under Section A., there is a lot of cash sitting there. Is it not earning any interest now or is it in Wachovia earning some type of interest? The money from SBA came out of there and went into the checking account.
Ms. Rower responded that is what we discussed at the last meeting that it was not an interest bearing account and the Board made a decision for 30-days it would be fine so we could get the money out of the SBA. However, we have spoken with Wachovia and we will be receiving the GAIC at this point which in November was 4.25% and we will be moving it to that account as soon as we have approval from the Board.
Ms. Zich stated there was a lot of cash sitting there before we got the SBA. Do you mean we were not getting any interest on any of that? There is $1 million sitting there.
Ms. Rower stated it was an Interest Credit Account so you would not have fees charged.
Ms. Zich stated you are talking $1 million in an account.
Mr. Goscicki stated this is exactly why we have this item here. We need to move this money to get an investment portfolio.
Ms. Zich stated that is a lot of money sitting there.
Mr. Fennell stated obviously we need to handle our money better. How do we decide which bank?
Ms. Rower responded one of the issues, especially when it comes to the operating account because of the items which are in place – to change all of that when it comes to our billing would be quite cumbersome and I do not think it would be in our best interest.
Mr. Hanks stated I am set up on automatic withdrawals or whatever it is so at billing time Mr. Daly puts in an amount for my account and it takes my money out of my bank, and it is directly transmitted to Wachovia, so for the 10,000 or however many customers we have, we would have to change each and everyone of those.
Ms. Zich stated I am not suggesting you change it. I am suggesting there is over and above an awful lot of money there we are not using on a monthly basis.
Ms. Rower stated this is why we are saying we will keep our operating account with Wachovia, but in another account that allows for better returns when you have over $1 million. The money on an operating, daily basis will stay in one account with Wachovia that allows as many transactions as needed. The other account with Wachovia you are only allowed so many transactions but you get a much better rate and it has a minimum balance requirement of $1 million.
Mr. Hanks stated given the terms of our operations right now we have just gotten our tax rolls and we are in a good position in terms of what we have available. When we get to July or August toward the end of the season where do we stand on that account balance? Are we going to be down close to that minimum threshold?
Ms. Rower responded we can do a transfer because it is all within Wachovia. You are only earning a few basis points additional so if it comes to that account they will work with us to move it into the other Wachovia account. Because of the fact we want to keep all of the operating accounts together, it is just working with them on an approach that gives us a better return without having to pull it out and investing elsewhere.
Mr. Hanks stated it is still easily accessible.
Ms. Rower stated Ms. Woodward can pick up the phone to transfer it from one fund to the other.
Mr. Bloom stated having those accounts within Wachovia gives you that flexibility to be able to move them back and forth. As far as the Wachovia accounts, they will work with us and in not difficult to move.
Mr. Fennell asked how does this work with the US Bank account?
Ms. Rower responded it is separate because this is our operating account. If you want to work with US Bank and have SunTrust to work with our bond proceeds, which is a different issue because that money is more of a scheduled timeframe, and we are looking at the investments with SunTrust for those monies which will not be used in this fiscal year, 2008.
Mr. Bloom stated the minimum is the differential between what we are paying on the bonds and what we are able to get for the unused monies.
Ms. Rower stated what we are looking at is when we look at the rates we have available and the yield curve is nonexistent. You think you go out two years and that is not the case because they think rates are going to be dropping significantly. We have to look at what we think the market is going to do and also protect ourselves. If the interest rates do not drop and we go out long term and then they do not we are getting a lesser rate than we would on Money Markets and is why in the current year keeping the money in a Money Market account will offset it so we have some money liquid through the bonds so we do not have to make withdrawals and we will not be caught in that scenario. We are looking at investing monies that are not projected on the capital expenditures until next fiscal year.
Mr. Fennell asked are we fully insured now on our accounts?
Mr. Bloom responded Wachovia is.
Mr. Fennell asked up to how much?
Mr. Bloom responded $100,000 FDIC and after they put into a pool to which everybody puts in a certain percentage to cover all of the losses.
Mr. Fennell asked what about the money we have at US Bank?
Mr. Bloom responded it is safe in a very liquid, risk free type of investment.
Mr. Fennell stated you have this wild trader guy come in and trades away $20 million of it. Now what happens?
Mr. Bloom responded the bond documents have very specific guidelines as to what they can invest in.
Mr. Lyles stated it is in a trust account. It is fundamentally different than the funds staff has been speaking to you about. Those funds are about as safe as funds can be. They are held in trust and dedicated to a single purpose.
Ms. Zich stated we really thought that is what SBA was.
Mr. Lyles stated it is not set up that way and it never really was. These funds are in a trust account.
Mr. Fennell stated it is a safer account but is it insured?
Ms. Rower responded no.
Mr. Goscicki stated our goal is to move a good portion of the money out of the account to accounts which will be safe and also meet the requirements.
Mr. Lyles stated they are still trust accounts. There is a different level of scrutiny and a lower level of flexibility of what can be done with those funds, when they are held in trust it is for a specific purpose.
Ms. Rower stated this is why we are saying for the current operating cycle, the capital expenditures we anticipate this year are the minimum amount we are keeping in this type of trust. The rest will be invested in governmental agency investments.
Mr. Fennell stated Ms. Woodward you deal with our funds day to day; do you have a take on this?
Ms. Woodward responded I would be interested to see what US Bank is able to do for us. We just went through a closing in September and chose them to be the trustee.
Mr. Trescott stated the money is in a Money Market fund at US Bank called a First American Money Market fund again that would be a AAA rated fund, regulated, certain limitations and the average life is 90-days. It is very secure so you do not have anything to worry about with that.
Mr. Fennell stated it is actually paying out pretty good.
Mr. Trescott stated Friday it was paying 3.43%; it changes everyday. If it went under it is backed by the securities you actually own a share of. The $40 million is spread out through all the different investments. It would be hard for someone to run off with that type of money. As to do the investing if you were to go with what Ms. Rower is saying the money does not actually go to us if you were to choose investing. For example if you were to buy some securities from us what we do is deliver the securities to US Trust versus our bank.
Mr. Fennell asked what other restrictions do we have on the $40 million? Obviously, we are not planning on using all $40 million dollars in the next six months.
Ms. Rower responded I know you look for security and is why we are saying the current year’s capital expenditures can stay in the Money Market. All we are saying is we should take some of the funds that we project not to need until 2009 and 2010 to buy some agencies or have some protection. This volatility with the rates and if rates start dropping as they did two or three years ago and we go down to again with FED funds in the 1% range, obviously you do not get as good as a return as if we purchased agencies now. I think this gives us the best of both worlds in the fact that if rates do not drop and we purchased an agency at today’s rates and they start going up it allows us the flexibility ro have some of our money invested.
Ms. Zich asked what agencies are we talking about?
Mr. Trescott responded it would primarily be Agencies and Federal Home Loan Bank.
Mr. Fennell asked are they trying to get more?
Mr. Trescott responded they are not allowed to buy sub-prime but they had excess earnings. They were taking the excess earnings and investing in sub-prime mortgage backed securities for their own portfolio. The yield would indicate there is not much of a spread between the four agencies so it is not perceived as a risk but yield is a definite indication of the risk factor.
Mr. Fennell stated I think you made the comment earlier that right now it is an inverted yield curve which usually means recession and it also usually means you are smarter to keep your money in short-term money markets.
Mr. Trescott stated we can get 3.40% right now.
Mr. Fennell stated that is not bad in this type of market.
Mr. Trescott stated 30-year loans are 4.27%. If you look at the sheet I developed and if you go out two years you only get around 2.90% to 3% but that is a guarantee for that length of time where as what is a money market going to do. I think long-term wise they will go down probably to 2.5%.
Mr. Fennell stated where are we getting $300,000 a month in interest off the bonds.
Mr. Goscicki stated the interest is anticipated in the capital improvement program; it is not found money.
Ms. Woodward stated we sized the bond issue at $36.5 million but if you look to the schedule in the document the expectation is the interest is also going to be used to pay for this project.
Mr. Fennell stated we are reporting it with our revenues.
Ms. Woodward stated one of the things you will notice under the water sewer fund this month is I have split out the interest because with interest income we have a situation where on December 1 the first interest payment is going to be made and so you do not think we did not budget for this and have to pay $400,000 we did not anticipate you will notice it for the next calendar year. Any difference will go to capitalized interest and it is a money in money out type situation.
Mr. Fennell asked what is the question to us?
Mr. Goscicki responded the question is twofold – one is your operating budget when we want to move forward against your current state. There are two accounts at Wachovia, a checking and a savings account even though they are both really checking accounts. One is offering a higher yield than the other allowing us to move from one to the other to maximize the return on those investments. The second portion is looking at the $40 million bond proceeds and what we are asking for there is to have us go forward to look at can we achieve a better return on funds we do not need for this upcoming fiscal year by looking at a more aggressive investment program with SunTrust rather leaving in US Bank.
Ms. Rower stated it does stay with US Bank it is just that will be our broker that will be purchasing these investments for us, it will be Robinson Humphrey, which is part of SunTrust. They will purchase but the money stays in US Bank.
Mr. Fennell stated it was also suggested about keeping those in one bank or two banks.
Ms. Rower stated we really think we should keep Wachovia as it would be beneficial from an operating standpoint to the District with the billing process; leaving the operating fund at Wachovia allowing it to be in a different type of account. Keep all of our trust funds at US Bank; however, we purchase some agency instruments through Robinson Humphrey even though the money will stay with US Bank.
Ms. Zich stated I am concerned about the SBA because all of the money we put over to Wachovia is just going to be sitting there.
Ms. Rower stated it is going to be earning interest.
Ms. Woodward stated everything in the operating account at Wachovia will now earn interest.
Ms. Rower stated when we used the SBA the accountant would pull out money as needed to fund operations for that month.
Mr. Fennell stated we are not there yet but I think we are getting to a good cash flow forecast. Obviously cash flow means more than monthly budgets. Give me something specific to say aye or nay on.
Mr. Goscicki stated on the first issue I am not sure there is a course of action for the Board; it is part of our responsibility to manage the money. We are looking at the current direction from the Board such as to stay with Wachovia, split the funds between the funds to be able to maximize returns. Obviously they will be managed closely between Ms. Woodward and Ms. Rower in terms of the overall fiscal oversight and day to day accounting.
Mr. Fennell stated that is the day to day money. What you are looking for is the money market account and six month T-Bills.
Ms. Rower stated it is all in going to be in the Trust Department of US Bank trust but we are looking to purchase different instruments.
Mr. Goscicki asked are you talking about the $40 million bonds?
Ms. Zich responded I am talking about the Wachovia part because it is bothering me more than the other. I am used to working with the construction company and if we had excess funds we would put them in a Money Market.
Ms. Rower stated we used the SBA to do that for years and now because of the situation with the SBA we have pulled our money out and now we are going to put it in Wachovia.
Ms. Zich asked have we gone to see if Wachovia is the best one?
Ms. Rower responded we need to keep it with Wachovia because of our operating funds because with the SBA it allowed us the ease of moving money in and out. We want to make sure we do not have investments tied up because obviously with construction you can project out we know we are going to do so much with this capital project for these three months. When it comes to operating we do not have as much of a luxury. We want to make sure we do not take that money and invest it; we want to keep it in an operating account which earns interest. You are not investing in a T-Bill but it pays you the same as a 30-day T-Bill.
Mr. Goscicki stated we are not locked into this long term. It is a current investment strategy based on the SBA situation. It is an approved way to optimize the investments we have; as the situation shapes up and we get more confident of the fund we will be updating you.
Mr. Daly asked what is the suggestion to do with the $40 million?
Mr. Goscicki responded I would like to get through the one issue because they are totally separate. One deals with the operating funds which has a certain set of criteria and the other deals with the bond funds.
Ms. Rower stated what we are looking for from the Board is for the movement of the bond money.
Mr. Goscicki stated I do not want to talk about the bond money; I want to resolve the one issue before we confuse it with the bond issue. What we are looking for from the Board is did what we just described make sense and move forward.
Mr. Fennell stated you could take our excess funds from Wachovia and invest them with US Bank.
Ms. Rower stated we are not, everything for the operating the water and sewer fund and operating the billing will still be with Wachovia. Then depending on needs and cash flow we will get a rate based on where the money is.
Mr. Fennell stated all of the operating funds are going to stay at Wachovia in the two different accounts – one being sort of a money market with checking privileges and the second being a higher yield account.
Ms. Rower stated with six transactions allowed.
Ms. Zich stated you do not want to move it anyway.
Mr. Fennell asked what is the difference in the interest rates?
Mr. Bloom responded the regular one will yield FED minus 10 basis points and the money market deposit account FED minus 25 basis points but 100% earns interest. As far as Wachovia we did look at several other banks. SunTrust and Wachovia have very close rates.
Ms. Zich stated that was my question of whether we had checked out other banks.
Ms. Rower stated we have a spreadsheet. For the few basis points that you are going to make it is not worth investing for three years.
Ms. Woodward stated I thought we asked Wachovia to match the offer of the other bank.
Ms. Rower stated we talked with them and they came back with the only difference being the minimum requirement.
Mr. Goscicki stated the second issue is the US Bank bond proceeds and what we are recommending to the Board is we take on a more active investment role through SunTrust, again the monies all stay within US Bank but we will be directing investment terms based upon the draw down schedule to try to optimize the return to the Board instead of just leaving it there and saying it is what it is.
Mr. Hanks asked have you looked at what the brokerage fees are going to be? Has it been part of the consideration?
Ms. Rower responded they are calculated in the returns as net returns.
Mr. Fennell stated on the $40 million we already have a planned rate of return built into this.
Mr. Goscicki stated there is a rate of return that went into the bond issue.
Mr. Fennell stated we felt we are getting these bonds and they are going to sit here for awhile but we are going to make $300,000 for a couple of years and it is going to fund additional services.
Ms. Woodward stated it is going to fund the balance of the capital projects.
Mr. Fennell stated there is actually a goal there we better meet. What is the return we have to have?
Ms. Woodward responded I do not recall.
Mr. Goscicki stated I do not remember off the top of my head either.
Mr. Skehan stated over the three years it is supposed to go from $36.5 million up to $39.6.
Mr. Fennell stated I see a schedule from engineering which is sort of germane to this because you have finance trying to do a cash flow analysis and engineering spending money, somewhere there has to be a connection.
Mr. Goscicki stated absolutely.
Mr. Fennell asked how do we get all of it together?
Ms. Woodward responded Mr. Skehan and I have already started to pull together the dollar amounts and what you are looking at now is a timeline. We are going back to the original engineers report and projecting out the projects and the timeframes anticipated. We will re-address and analyze to see if the timelines are accurate. This page includes only the items, which are the responsibility of CH2MHill.
Mr. Skehan stated there is a gross table similar to this with a little less detail included in the bond report on which the distribution of the funds was based from the beginning.
Ms. Woodward stated I am going to be taking that information and producing a similar schedule which will encompass all of the costs associated.
Mr. Fennell stated that is what I want to see every month.
Mr. Goscicki stated it is matching the engineer’s progress with where they are, where they stand with regard to the work authorization.
Mr. Hanks stated it needs to be layered on top of the contractors schedule as well.
Mr. Goscicki stated this is a piece of the overall schedule.
Mr. Fennell stated I want to see a monthly schedule on it. There is nothing more important to us and this supersedes our budget if you think about it. Spending this money wisely is important to us. Obviously you do freeze your original amounts and ideas and this is an ongoing thing. We need this because six months from now somebody is going to come from the bank and say okay you have not spent as much as you thought or you spent more than you thought.
Ms. Woodward stated the expectation is the operating and projection cash flows for capital funding will be updated monthly so you will be able to track progress.
Mr. Fennell stated after the bank loans you the money they kind of step back but now it is our money and we are going to take care of it well. The only issue is with the $40 million and you are thinking can I get it to do a little better than that but obviously they have to be safe investments.
Ms. Rower stated US Bank will have the funds and we will purchase through our broker dealer, Robinson Humphrey, will have to go to the open market to purchase instruments. Because of the fact we are looking at the years after this fiscal year we are not going to invest any of the monies coming due in the next three to six months.
Mr. Hanks asked what about the pumps? Have you some kind of contingency because some of these capital improvements are related to the pump improvements?
Mr. Goscicki responded bond funds are dedicated to certain capital improvements as supported in the bond documents. If a pump breaks it comes to the R&R fund and there are monies there at Wachovia earning interest. It is not intended to deal with those types of issues.
Ms. Woodward stated the R&R funds are in fact at US Bank. They are not at Wachovia.
Mr. Goscicki stated not the R&R reserves; what I am talking about is within the operating account we have funds called renewal and replacement funds we have in reserve we can use in emergencies.
Mr. Fennell asked what more do we have to talk about with the $40 million?
Mr. Goscicki responded I think it requires a motion of the Board.
Mr. Fennell asked how much are the R&R reserves at US Bank?
Ms. Woodward responded I think we are funding $307,000.
Mr. Goscicki stated we are required to put a certain amount of dollars toward renewal and replacement each year and it creates a renewal and replacement reserve fund. Anything we fund in excess of that rolls into a general reserve fund we can then use for any legitimate purpose.
Mr. Hanks stated if a catwalk breaks we can replace it.
Mr. Fennell asked how are those funds invested?
Ms. Rower responded those funds at US Bank are similarly invested to the 2007 bonds. The other reserves for the SBA have now been moved backed into the operating account which is why we are now trying to find a way of generating not just this income on the current but for funds you do not have a need for like R&R. If we have the funds available we want to get the higher interest rate.
Mr. Fennell asked are those funds at US Bank?
Ms. Rower responded Wachovia.
Mr. Fennell stated R&R funds are at US Bank or Wachovia?
Ms. Rower responded in both places. If they were created with the bonds they are with the trustee at US Bank. We put aside money each year through the budget process in the operating account.
Mr. Hanks stated we are talking about water and sewer.
Mr. Goscicki stated the first discussion on the Wachovia account was for all of your funds.
Mr. Hanks stated Enterprise and the general fund. The discussion on bonds is strictly water and sewer.
Mr. Goscicki stated correct.
Mr. Fennell stated the R&R funds at Wachovia are also going to be invested. How do make that choice? Do you do 50/50?
Ms. Rower responded at Wachovia it is our regular checking/operating account. We are going to keep it all with Wachovia. It is totally separate and all we asked for was approval to take the new bond proceeds for future years and invest those in an agency type instrument because of the security and we think rates are going to be going down.
Mr. Fennell stated we spoke the last time about sending a letter to Senator Ring.
Mr. Goscicki stated it is in your agenda package.
Mr. Fennell stated it was sent and basically what we are doing is asking him to investigate why these funds got invested the way they did. How did they reach that kind of philosophy for something that was essentially supposed to be a money market fund for small governments. Obviously the funds were mishandled and the question is why and how. What I do not particularly like is part of the same people who mishandled funds are the same people investigating. Senator Ring is out to make sure the government spends well and does the honorable thing and we need it.
FOURTH ORDER OF BUSINESS Review of Severn Trent Scope of Services
Mr. Goscicki stated to recap for the Board where we are with this issue we provided you a scope of service a couple of meetings ago. The Board reviewed it and provided some comments on specific areas with direction Mr. Daly and I get together and come back to the Board with a scope we thought reflected a good path forward in terms of getting the synergies of what Severn Trent brings to the table and optimizing the existing resources of the staff of the District.
We provided a revised scope of services to the Board at the last meeting. One of the questions asked of us the last time was what does this fee cover. We took the liberty of reviewing our current fee structure and costed out the new structure based upon this scope. We are please to tell the Board with the revised scope we are prepared to reduce our fee some $50,000 from our current annual fee. Our current annual fee to the Board is approximately $185,000 year which is split 50/50 between the water and sewer fund and the general fund. We have looked at the scope and how we can provide these services effectively and are prepared to drop the fee to $132,580 which would be split 60/40 with 60% to the water and sewer fund and 40% to the general fund. The split could have been more except for all of the assessment services are strictly on the general fund. The reason we can do this is some of the services we were providing we carry as overhead within the operating services. We made the policy decision you are an important client and have been for about 30 years between ourselves and the succession companies, and we want to keep this client for another 30 years. Where we can carry things and absorb them as overhead we made the decision not to allocate those costs to you and allowed us to drop our fee. With the cost analysis I only bill for an hour of my time in this model. The plan is I will continue going forward in the immediate future as the District Manager, and as we move forward in that transition I will stay involved as the CSID administrator. Also, the Board asked for a lot of operational oversight activities from safety audits to an annual risk assessment. We think we are qualified to do that.
Mr. Fennell asked those costs are included?
Mr. Goscicki responded yes.
Mr. Fennell asked comments?
Mr. Daly responded I think this scope of services Mr. Goscicki and I reviewed easily manages this District, not working parallel.
Mr. Fennell stated we actually do have staff in place with Ms. Woodward and others who are pulling a lot more weight. On the other hand we still get the advantage of larger more experienced base draw when we need it which I think makes everybody pretty comfortable.
Mr. Goscicki stated it provides some of the checks and balances you want in the organization. Ms. Woodward does a fantastic job on the accounting side, she was hired originally as a Severn Trent employee, but she has checks and balances built into the system, we are providing services with Mr. Bloom and Ms. Rower going forward with fiscal oversight, perspective. Again it is just good business practice so that you do not end up with one investment banker making $7 billion worth of bad investments.
Ms. Zich stated I just wanted to say I agree Ms. Woodward is doing a great job and I think Mr. Daly is doing a great job. I am happy to see the price has gone down but you are doing such a good job for us and then we have your expertise on top of that.
Mr. Goscicki stated we think it is a good split of bringing the expertise we bring in optimizing the skills. Mr. Daly does an excellent job on the day to day administration and we think we bring some policy reviews and fiscal management reviews, and some policy intergovernmental experience we bring from having done this for 30-years.
Mr. Hanks stated the one thing I would like a clarification on and I think we need going forward as evidenced by the recent discussions we have had with Senator Ring, et cetera, we need to have additional involvement in the local, county, regional political scene or governmental agency coordination. How do you see this going forward? What goals do you see Severn Trent taking on? Where do you see districts taking on responsibility? But right now we need to move a little more into that arena so that our concerns whether it be modeling of the water supply and the implications or whether it be additional water quality requirements for storm water; we need to have somebody involved in the regional area of water, sewer and stormwater.
Mr. Goscicki stated we see that moving forward on both levels. Severn Trent will certainly be involved, I will certainly be involved. I am meeting tomorrow with the Broward County Environmental Protection Department to review their request for their entire stormwater management program. Mr. Skehan is setting up a meeting for himself, his team and me to meet with the Water Management District to talk about the consumptive use permitting strategy. Certainly, Mr. Hyche has been involved on a day to day basis with the Everglades group, Mr. McKune has been involved and the engineer is obviously involved. It is a matter of keeping those contacts going and our role is to make sure we are coordinating all of that.
Mr. Hanks stated Severn Trent is going to be the entity that will make sure we have the various bases covered.
Mr. Goscicki stated yes.
Mr. Fennell stated they have a hard time actually becoming political in this and I can see a lot different reasons for them. They really cannot be political; from a corporate standpoint they really cannot take positions. They can be implementers of our policies but cannot be a policymaker.
Mr. Goscicki stated we advocate the policies the Board establishes but we are not lobbyists. We are not out there lobbying the legislature; we are geared within the scope to take on a lobbying perspective. In terms of advocating your agenda – absolutely – we are your managers and we are here to advocate policies.
Mr. Hanks stated you participate in a different arena than I do or Ms. Early or Mr. Hyche or Mr. McKune. What I am saying is if you get wind of something coming down the pike we need to make sure that gets translated to the appropriate parties. If Severn Trent Services is not going to be doing the politicking and saying this is not a good policy going forward this has additional implications, this needs to be communicated to someone within this group. It is one layer we need to have and maybe periodically have it as a discussion item so we can have the coordination to say here is where we are and what are you hearing on that side. We have all of these people in these different areas but what we are lacking is bringing everything together and being able to formulate a whole picture.
Mr. Goscicki stated one of the unique advantages Severn Trent brings to the management services is we are also water company and we are in the state actively engaged at various levels of working with the various professional organizations so we are attune with what is going on. I am attuned to what is going on and have and will continue to bring those issues forward. I attended the water policy conference in December in Broward County.
Mr. Hanks stated I just want to make sure it is something intended to go forward as well.
Mr. Fennell stated I think we said before every year we will review the scope of services.
Mr. Goscicki stated to clean this all up what we would like to do is have the Board accept the scope and associated fee and then direct me to work with your attorney to come back with an amended contract.
Mr. Lyles stated with a scope of services and a fee structure.
Mr. Hanks stated on page two you identify you will assist the District with the identification of significant policies and analyze their administrative and financial impacts. Who has the primary responsibility for identification of policies?
Mr. Goscicki responded it is our primary issue on policy implementation. Research current and likely future trends impacting the District is item one. We are telling you it is our obligation to look at what is going on out there.
Mr. Hanks stated stormwater and water and sewer.
Mr. Goscicki stated financial and anything else.
Mr. Hanks asked with regard to the five-year fiscal plan for funding the implementation of approved capital improvement program should we be looking at longer horizons? The life expectancy of many of our plant components well exceeds five years. Should we be looking at something longer than five years?
Mr. Goscicki responded I think with the five year planning we are talking about five year fiscal plans looking at what we have identified and what the Board has approved as part of the construction programs for the next five years – how are we going to fund or finance that.
Mr. Hanks stated to clarify the District is performing the accounting; Severn Trent is providing the checks to make sure we are doing it correctly. When you mention obtain financing if necessary and maintain proper fund accounting procedures what do you mean by that?
Mr. Goscicki responded such as in situations with some districts we had to implement short term financing. It is our responsibility with the bond issuance you have bond counsel, attorneys, and bankers onboard.
Mr. Hanks stated so the coordination is under the basic scope.
Mr. Goscicki stated if we got out for another bond issue it would be an additional $15,000 fee per bond issue. If you go to Wachovia or SunTrust for a $500,000 short term line of credit it is part of the scope. Bond issues have become a whole other level.
Mr. Hanks asked is this applicable to all of our consultants or service providers in terms of administrative, managerial, engineering type of role when we get additional services requests like the $15,000 or via a change order or some engineering services? I would like to see hourly back-up to justify those additional costs. Is this the appropriate time to introduce that into the scope of services or would that be part of the direction?
Mr. Lyles responded I think that is something they are telling you – you are not going to get with this scope of services but in terms of asking this management entity that is going to be providing that sort of oversight direct to Severn Trent and have them provide it to you as what the Board now needs in order to have a comfort level with those types of submissions that are coming to you as part of your monthly packages.
Mr. Hanks stated we have a number of contracts out there that are hourly service items. I would like to make sure we are getting the right allocations to it.
Mr. Lyles asked is that included in your base fee structure?
Mr. Goscicki responded the engineer’s contract and other professional services are part of our responsibility with this contract. We will be reviewing the invoices, verifying the work has been done, make sure the billing rates are consistent with what is in the work authorizations.
Ms. Zich asked can you put it in your contract?
Mr. Goscicki responded I believe it is in here.
Mr. Hanks stated I do not think we have to have it specifically spelled out here.
Ms. Zich stated it would not hurt just in case it came up later.
Mr. Hanks stated if we provide direction to our manager that is what we would like to see or is our expectation for future hourly work orders.
Mr. Lyles stated it might not come from them; it might come from your accounting staff directly with oversight by the manager. I think what you would rather have is some feedback as to how Severn Trent proposes to accomplish the task.
Mr. Hanks stated we are on the same page for such as the stormwater study, where it was authorized for hourly or so many hours per month. When we do not have a fixed lump sum contract when we get invoiced for those hourly work orders I want to see the hourly backup and person X, Y or Z worked on it for this many hours and this is what they did. We have to be able to marry it up to a tangible result.
Ms. Early stated I can provide that.
Mr. Hanks stated I want to make sure that is the expectation going forward. This would apply to Mr. McKune as well as a surveyor doing hourly services.
Mr. Fennell stated congratulations to working out a good scope of services.
Mr. Hanks asked where do we stand with having someone else onboard? You said last month you were getting close.
Mr. Goscicki responded we are interviewing somebody next week.
FIFTH ORDER OF BUSINESS Discussion of Pension Plan
Mr. Daly stated this is the City of Coral Springs.
Mr. Hanks stated I cannot get away from it; I had a meeting with a potential client and he brings up of all things the City of Coral Springs.
Mr. Daly stated I should have got this to you to look at earlier. The first page shows what the other cities nearby are doing.
Mr. Hanks asked what is a 401A, an FRS and a 457?
Mr. Zilmer responded the FRS is the Florida Retirement System, it is defined benefits.
Mr. Hanks asked when we say defined benefits that means?
Mr. Zilmer responded it means you are going to get “X” amount of your salary for the rest of your life.
Mr. Goscicki stated you are going to get 1.6% of your salary for every year you put into the system up to a maximum of 30 years.
Mr. Hanks stated as long as the SBA remains solvent.
Mr. Daly stated in last year’s budget earmarked for this was 6%, which is in the pension plan but after a second or third look at it; we increased it.
Mr. Fennel asked is it inflation adjusted?
Mr. Zilmer responded after you retire.
Mr. Goscicki stated the benefit depending on the class of service the employees here if they put in ten years would get 16% of their base pay upon retiring. After six years you are vested and it is a percentage of the number of years you worked times 1.6% and multiplied against the average highest five years of salary is your retirement benefit. Once you retire the benefit is indexed against inflation.
Mr. Fennell asked what is it that we have now?
Mr. Daly responded we currently have 6%.
Mr. Fennell asked are we FRS?
Mr. Goscicki responded defined contributions instead defined benefit. The District is contributing 6% of an employees pay to a retirement fund and the amount of the benefit they get is whatever their fund accumulates up to.
Mr. Hanks asked what do the employees want to do?
Mr. Zilmer responded the employee’s would like the FRS. The problem with that is it is expensive. My understanding is if we went into the FRS we are locked in. We can get out of it but for all of those existing employees were enrolled in it at the time we have to continue the contribution.
Mr. Goscicki stated the challenge with the state retirement system is it is an expensive system. You will find very few municipalities who join. Counties are apparently required to join because of the way they are incorporated. The reason your contribution per employee is the same regardless of the benefit to the employee. You are putting in a fixed percentage, your unit of government is going to have to contribute based on the number of employees but you are also contributing for elected officials that are fully vested after eight years and are getting 2.5% to 4% of every year of elected service. Police and fire are getting 2.5% for every year of service. It is a big pool and there a lot of other categories retiring at better benefits. For a District it is not a good choice. You could wind up contributing as high as 12% to 13%.
Ms. Rower stated because of the fact it is a benefit you are guaranteeing depending on how it is funded and what it is doing you have to guarantee the municipalities what the benefit will be and is why it fluctuates.
Mr. Hanks stated there is also a voluntary 457.
Mr. Zilmer stated it is completely contributed by the employee.
Mr. Daly stated it is almost identical to a 401K.
Mr. Hanks asked how does a city do a 401K?
Mr. Goscicki responded it is probably a 457.
Mr. Daly stated I do find they have a lot of plans.
Mr. Zilmer stated the 457 we have now is something that is not shared by the employer. I try to encourage the employees to make contributions of their own.
Mr. Hanks asked are we able to encourage employees to put in own their own by providing a match?
Mr. Zilmer responded we can do that.
Mr. Hanks stated the City of Sunrise has people who have been there; good people who have been there working and then they get close to retirement age and then they get on the program and all of a sudden one day the good people who have the experience are no longer there. From a consumer side it just does not seem like that is the way we want to go.
Mr. Daly stated I think the plan we have right now is good and has had good returns in the last years.
Mr. Zilmer stated one of the challenges we face particularly with the wastewater plant is the retirement. When you try a training program or bring the young people in to go through the whole process of the internship and before you know it they are applying at Sunrise or Pembroke Pines because they have a great retirement system and we lose them.
Mr. Hanks asked do you think they are drawn to these other programs because it is not perceived as being taken out of their pockets to contribute to the retirement plans?
Mr. Hyche responded it is just a better pension.
Ms. Zich asked how many people a year are we talking about?
Mr. Daly responded everybody is looking for a job.
Mr. Hyche stated with operators it is almost a domino effect. When one moves a position opens somewhere, then that one goes, and that one goes.
Mr. Hanks stated it is a case of the grass is always greener.
Ms. Zich stated so right now we are not having a problem with that.
Mr. Daly stated right now I know of two employees who are looking.
Ms. Zich stated with as many employees as you have you will always have two or three people who are looking elsewhere.
Mr. Zilmer stated finding a water/wastewater operator is very difficult. There is the time it takes to get them up to speed.
Mr. Hanks stated it looks like we are well below Coral Springs or the City of Tamarac. Am I reading this correctly?
Mr. Daly responded I believe you are.
Mr. Fennell stated you hire somebody at $30,000, there is a 3% CPI but there is a 6% accumulation at the age of 65 so there is $206,000 in their retirement fund.
Mr. Hanks asked is that contributions into it?
Mr. Goscicki responded it is contributions with incentives.
Mr. Daly stated Mr. Goscicki’s office put this together for us.
Mr. Goscicki stated no finance people have looked at this.
Mr. Fennell stated what you are saying is an annuity of some type with them paying $16,000 over the year and 19% of the annuity payment.
Mr. Goscicki stated the annuity payment is 19%.
Mr. Fennell asked what is the annuity payment at $20,000?
Mr. Goscicki responded your consultant did a similar analysis and I thought their numbers looked a little high so you have two different analyses here. The intent of the analysis is to show the difference between the top set of numbers and the bottom set of numbers, a 6% contribution versus a 20% and to give the Board some perspective of how much retirement benefit is this – is it 70% of the persons salary when they retire versus 20%. You can see in your current situation depending on the numbers and what the rate of return is, what the CPI is and what the return is. You are in the order of the employee’s benefit starting at age 30 and putting 30 or 35 years of service they can retire with a benefit of about 20% to 25% of their then base pay.
Mr. Fennell stated we also pay social security.
Mr. Goscicki stated correct, they would also be getting social security and whatever they put into a 401.
Mr. Fennell asked do they pay into this fund?
Mr. Goscicki responded no, it is 100% the District.
Mr. Fennell stated with social security it will probably be an additional $20,000 so at that time they are really up to about $40,000.
Mr. Lyles stated hopefully, they have other retirement.
Ms. Zich stated this would not be the majority of their income, I would not think.
Mr. Fennell stated some maybe. With the Florida program do the employees contribute to that?
Mr. Zilmer responded no, they do have an alternative plan.
Mr. Hanks stated I know we are going to be faced with turnover and a 401K they can take wherever they are going.
Mr. Zilmer stated if it is another qualified plan.
Mr. Fennell stated if they leave after 20 years they take the amount of money in the plan with them.
Mr. Zilmer stated the plan we are in right now calls for a five year vesting and that point they can actually keep the plan or roll it into another plan or after a one year break in service they can stop contributing.
Ms. Zich asked if they take it when they retire, how old?
Mr. Zilmer responded 57˝.
Ms. Zich stated they are all about 59.
Mr. Fennell asked what is it you are proposing?
Mr. Daly responded a 2% increase.
Mr. Fennell asked which would do what?
Mr. Goscicki responded essentially increase the contribution by the District to the retirement benefit from 5% to 8%. The existing plan gives them about 20% to 25% of their base pay and if we bumped it up it would be 25% to 33%.
Mr. Daly stated these are the raw numbers on the salaries.
Ms. Zich stated it went in at 8% tentatively.
Mr. Hanks stated it looks like Tamarac and Coral Springs have it staggered, so if you are there for seven years you get the lower rate and if you are there over a certain period it increases. Have you been able to establish increasing the contribution has improved City of Tamarac and City of Coral Springs ability to retain operators? It would bring us in line to the first seven years and first five years with the other cities except for Tamarac they are at 11%.
Mr. Fennell asked how come we do not match?
Mr. Daly responded this plan has been here as long as I have been here.
Mr. Hanks stated with the voluntary 457 there is no authority to match if they are putting in as well.
Mr. Daly stated the only problem is that it is difficult to budget because you do not what someone is going to contribute.
Mr. Zilmer stated years ago Ms. Archer thought about changing the plan so the employees choose their own electives.
Mr. Hanks asked what do you mean with choose their own electives?
Mr. Zilmer responded do you want a risk.
Mr. Hanks stated with the plan now you are safe and secure and not making a choice so a person coming in at 30 years old gets the same investment as Mr. Fredericks or Mr. Hyche.
Mr. Daly stated exactly.
Mr. Zilmer stated we have a responsibility and they are safe.
Ms. Rower asked is this a defined benefit plan?
Mr. Zilmer responded a defined contribution.
Mr. Fennell stated I can see where this came from; at one point this was a start up entrepreneurial thing and different people into this fund and some of the original owners as well as a few other people were able to sell out for a fair amount of money. Right now the people actually doing the work are still here and they did not get any benefits. As a small business owner they did not get a part of the entrepreneurial spirit. Consequently I do not think something is a benefit that is going to pay you 24% in 30 years is not very good at all.
Mr. Hanks stated from the other standpoint I am a small business person just as you are and whatever I put away is what I put away for the future.
Mr. Fennell stated if this was a real corporation we would have stock options and other kinds of stuff so they could actually make money. In my opinion I do think we need to do something and would like to look at a couple of the alternatives. I would like to look at matching – they put in 2% we put in 2%. I would like to look at a matching plan and to see what it would actually cost if we went to the Florida defined benefits.
Ms. Zich asked do you mean the Florida Retirement System?
Mr. Fennell responded yes, it is a defined benefit as opposed to a defined contribution. From their standpoint it is much better.
Ms. Zich stated it is going to cost us a lot more money.
Mr. Goscicki stated the Florida Retirement System is only good if you retire through that system. If you put in 10 years between the ages of 25 and 35 and then leave, your retirement benefit is based on the actual dollars you earned. It is a system designed to reward people who stay for 30 years.
Mr. Fennell stated my thought is a person should be able to retire at 80% of their high five years. Take the 80% and subtract social security and that is the net we should be trying to figure out.
Mr. Hanks stated we have to recognize we have a finite resource here which is our revenues coming in and we are just cutting it up different ways. I would feel much better approaching it from the standpoint of lets provide additional support to the employees by increasing the 457 contribution and keeping down the administrative costs which we would encounter under the Florida Retirement System.
Mr. Fennell stated I want to see it spelled out in numbers. They need to be contributing more and we need to get up to a point that looks like there is a retirement.
Mr. Hanks stated I also think we are harming the younger people coming in we are trying to retain by not giving them the flexibility to make other investment choices.
Mr. Fennell stated whatever the plan is we end up with has to give them some better choices as to what they can actually do with the money in there. Typically the type of plans with a number of choices -how much time do I have left and there is appropriate bond mix investment types of programs for that. My opinion is we need to look at this again and we need to substantially increase our benefits. I think the employees need to substantially increase the amount they are putting in. If we went with Florida it would be a defined benefit and that is great. If we go with the other type of plan it is a portable pension.
Mr. Hanks stated if they stayed five or six years they would get a benefit out of that.
Mr. Fennell stated I think we should do something.
Mr. Daly stated we will put it on the agenda for next meeting.
Mr. Fennell stated they need to contribute to it. My goals are 80% minus social security is what we should be looking at.
Mr. Goscicki stated 80% is pretty high.
Mr. Fennell stated in the 50’s and 60’s before the 401K and what was sold is we would all be richer with 401K.
Mr. Hanks stated you can go back to 80% or whatever but no microwave, no flat screen TV, no cable, B&W with only 13 channels.
Mr. Fennell stated a TV costs $300 or $400 in the 60’s and today is probably $3,000. Part of it has to do with the value of a dollar which unfortunately the US has never taken a good advantage of and other countries actually do look and say the dollar is a dollar is a dollar and we are going to maintain it. Unfortunately in the US and other businesses we have taken advantage of the inflation rate. We need to look at ways we can strengthen this and do something about it.
Mr. Hanks stated the numbers in the analysis was $30,000. How on earth does anyone live in South Florida on $30,000.
Mr. Fennell asked anymore comments on this?
Ms. Zich responded I think it sounds great.
Mr. Fennell stated it needs to go both ways.
Mr. Goscicki stated the benefit of a 457, I have talked with a number employees, they assume their retirement plans is giving a lot more. They have not done a sinking fund analysis to see what it is going to be in 20 years and a lot of them do not understand that they need to do some of their own. They will not do it by themselves and creating a matching fund encourages that personal responsibility.
Mr. Fennell stated unless we go to a defined plan I think that is the best we can do. After going through this second recession we have gone through in the last eight years seeing them go up and down is not a pleasant thing.
SIXTH ORDER OF BUSINESS Discussion of Five-Year Storm Water Permit Renewal Program
Mr. Daly stated this is for culverts.
Mr. Hanks stated these are for the private developments.
Mr. Fennell stated the county came to us and practically forced us to do this.
Mr. Daly stated I am under the impression the county is actually charging $1,000 per permit, per five year review. We spent $12,000 on this project last year. The decision was made to take it in-house. Take it in-house do some of our own administration - sending letters, attorney’s request, et cetera.
Mr. Fennell stated at the time I think we asked the question of how much it costs us to do that and think that is how we came up with that.
Mr. Daly stated it would self-funded.
Mr. Goscicki stated the challenge that has come out of it is we have no clout as a District to enforce the five-year permit. If the property owners do not respond we do not have a lot of clout in terms of what we can do. This permit is really a construction permit to allow them to tie to the system. The intent of the five year renewal was to make sure, from understanding, they were maintaining the infrastructure on their side so when they did it and it flooded and we get the call saying why did my property flood we can point to why have you not been maintaining your culvert to keep from flooding. It is a program that was set up to really provide for a five year period to go back and review what they were doing and make sure they were maintaining the infrastructure they put in place so the system would work. It is really taking on their responsibility, what we have seen is very little response at CSID. NSID has a much better response rate, it is different demographics.
Mr. Fennell stated the object is still to make sure it will not flood somebody’s property. The county was pushing it because I think they found a lot of areas had not been looked at for years and the drainage systems were not responding like they were designed to. In reality, the way we do this is we tax everybody a certain amount per household every year. What if we went and said you were supposed to renew your contract, give this to us by a certain time we will do it and if you do not we will add it to your tax bill. Can we do that?
Mr. Goscicki responded I do not believe we can. This is a special assessment we are doing on the drainage side, I have to look long and hard and want Mr. Lyles to have the opportunity to look at that differential assessment.
Mr. Lyles stated it is unlike our water and sewer where we have a rate structure and we can provide a penalty or accelerated charge, an efficiency benefit if you use less water or a penalty if you use more water. We can do that through the adoption of a rate schedule at a public hearing. This is not really a service as such this is an assessment against properties for the benefit they receive for drainage. Where are our clout would come in is if you are not in compliance with providing the necessary certification your drainage structure/culvert – if you do not comply with the county’s requirement to recertify every five years and you are no longer in compliance we are going to close it off and we will notify regulatory authorities you have no drainage. This is the kind of thing we may have not a financial penalty to impose because we do not have that authority.
Mr. Fennell stated check on that.
Mr. Lyles stated I will bring it back for the next meeting.
Mr. Fennell stated if we are looking for clout someway we either need to charge them for it or charge them for it and attach it to their property and make it a question if they go to sell.
Mr. Hanks stated you do not want to start getting into that side of things because each drainage depending on how involved it is we are talking probably $1,000 minimum for the engineering certification and then who knows how much on of these other companies is who goes out and cleans it. Do we have other opportunities to team up with some other regulatory body, be it the county or the city, which has the ability to impose fines?
Mr. Lyles responded I think the obligation the county has imposed on the District not on the individual properties and is where we have a bit of a disconnect. You are the ones who have to comply with this regulation and we are looking for a way to pass on the cost of compliance to the property owners who actually benefit from it.
Mr. Hanks stated you are referring to the cost to the client being the cost it takes us to go ahead to review the paperwork that comes in from the property owners selected consultant.
Mr. Lyles stated we need to do a bit of homework and get back to you in terms of what our options are.
Mr. Hanks stated if the storm water renewal is taking place across the C-14 in Tamarac and Broward County has regulations in place where they can impose fines. I am saying maybe there is some way we can work with them in a cooperative basis to obtain better compliance.
Mr. Lyles stated I will be honest with you; I have not given it a lot of thought in pretty much five years. Let me revisit the actual regulation and what our responsibilities are.
Mr. Fennell stated you are saying we need something different here.
Mr. Daly stated it is more of an information item.
Mr. Fennell stated the idea was a good one today. Otherwise the county just pushed down on to us something they could not do themselves. We still have the last issue with the city, which we still need to go after.
Ms. Zich stated they are going to be doing construction on University, coming into Coral Springs where the white sign is by Shadowood. They put sandbags to block it and then it poured rain.
Ms. Early stated they have to do that.
Ms. Zich stated that is okay when they are constructed but they have not started constructing whatever they are doing there.
Mr. Hanks stated the same reason we have to do the five-year renewal is the same reason they have to put those bags there. It is a national legislation called NPDES. The EPA put it out there and it is designed to improve water quality throughout the country.
Ms. Early stated by backing up the water the sediments are not getting into the catch basins.
NINTH ORDER OF BUSINESS Approval of December Financials and Check Registers
Mr. Hanks asked is there anything that should be brought to our attention on this? Anything unusual?
Mr. Goscicki responded your revenues are up and your expenditures are down. It is early in the fiscal year.
A. Cash Flow Summary Report
There being no questions or comments, the next item followed.
SEVENTH ORDER OF BUSINESS Staff Reports
iv. Discussion of Boil Water Order
Mr. Hanks asked did anyone else get a call on the reverse 911 call?
Ms. Rower responded my neighbor did.
Ms. Zich stated I did not.
Mr. Daly asked do you have a private number?
Ms. Zich responded no.
Mr. Hanks stated none of the Board members got calls.
Mr. Daly stated on our website it says register for the city code red.
Mr. Fennell stated I would like you to put on our monthly bill how to register for a code red to see if we can get compliance up high in our area.
Ms. Zich stated I did not know it existed.
Mr. Hanks stated it is always a challenge remembering a website.
Mr. Fennell stated first the code red has to be fixed so let us find a way to do it. Let’s try to get 95%. Second thing is when the power goes down this building goes down and when this building goes down, our telephones go down and that is a huge issue.
Mr. Hanks asked within any of our improvement plans do we have any provisions?
Mr. Hyche responded there is another which goes directly to the water plant. I had already sent it to the City of Coral Springs for the contact information in case Mr. Daly or I cannot be reached at this building.
Mr. Fennell stated we need a way, whether it is an answering service or something, that if we do get cut off where we have a message for people calling in about what happened. I am not even sure if we have power at this building if 500 of them called in at one time it would flood the system. I am looking for something for an emergency type situation and I do not know what it is. When you people are calling in you can automatically put up something so they can understand what happened. You also do not want it to block out normal communications in case we have to get in and out. I know we have back up cell phones but once you get inundated like that it takes down your phone system and you cannot call out either.
Mr. Hanks stated you called me at the office.
Mr. Fennell stated we would like to be noticed of this.
Ms. Zich stated I had people ask me also what was going on.
Mr. Fennell stated obviously we have a problem with communications that we have still not fixed. I would like you to look at calls coming in, how do we get emergency messages every place and we still need a phone system. We have an electrician on staff, why don’t you immediately figure out how to take one of our portable generators and put in bypass switching gears so you can get the building up and going.
Mr. Hanks stated for essential components.
Mr. Fennell stated this our electrician can do within a week. We have portable generators so let’s take care of ourselves right away. What other things should we do for communication?
Mr. Goscicki responded I think the internal communication worked pretty well. We need to update the emergency call list to make sure we have current phone numbers for everyone including the Board members and staff. We did miss a few people we did not have phone numbers available for. They were available on the computer but no one could get on the computer.
Mr. Fennell stated look at the phone system again, get emergency power here. I know you could contact each other with radios and such but we did not have good information to the general public and we need to have that happen.
Mr. Daly stated the city did help.
Mr. Fennell stated but unfortunately they took off the scrolling message for awhile and we had to call them again to get it going.
Mr. Daly stated we contacted the paper and news media.
Ms. Zich asked how bad was the water?
Mr. Hyche responded there was nothing wrong with it. Our pressure was there but below the standards for compliance. 22 PSI is a mandate for boil water in case of filtration into the pipes and connections.
Mr. Fennell stated we thought we had a backup system.
Mr. Hyche stated the backup system did work, however, because of the feedback it moved the breaker in front of the plant and caused another feedback through the leg into our transfer switch. Our transfer switch is very old, it is not a smart switch and it was reading three FP&L legs coming in. As soon as it switched back to FP&L it realized it did not have the power and slammed back the generator power.
Mr. Fennell stated that can happen again.
Mr. Hyche stated for $1,500 I can have a company put a monitor on the system.
Mr. Fennell asked have you gotten a definite something from FP&L saying what the problem was?
Mr. Hyche responded no, I have not and I probably will not.
Mr. Fennell stated I would like to send them a letter requesting it. I do not really need them to take the blame I want to make sure we get to the cause of the problem and that it has been solved. We have an automatic backup system and we spent a lot of money inspecting and to have it flip flop back and forth. I certainly do not want to try to turn on and off 100 horsepower engines three or four times a second.
Mr. Hyche stated when it was running on FP&L they were running two legs.
Mr. Fennell stated they were missing a phase.
Mr. Hyche stated one leg blew at the transformer.
Mr. Fennell stated when I asked that guy about the transformer he said the voltage was off.
Mr. Hyche stated it was by the gate.
Mr. Fennell stated what blew their fuse – you have to find out why the fuse blew and why.
Mr. Hanks asked are any of our components damaged as a result?
Mr. Daly responded we have a damaged air conditioner as a result.
Mr. Hyche stated two compressors.
Mr. Hanks asked generator wise are we still okay?
Mr. Hyche responded yes.
Mr. Fennell asked how did your computer systems do?
Mr. Daly responded I had taken the computer system down the day before.
Mr. Hanks asked do we need to go ahead until FP&L figures out what the problem is shut it down and go with generators?
Mr. Skehan responded there will be another when the transformer is being replaced.
Mr. Fennell asked are they replacing the transformer?
Mr. Skehan responded they will be.
Mr. Fennell asked why?
Mr. Skehan responded because of the amount of power and the age of the transformer.
Mr. Fennell stated I want the letter sent; I will sign it if you want me to or it can come from any member of staff. We need to know exactly why that happened. We obviously know a symptom of the problem which is stuttering supply coming in. When you three phase electricity it is very tricky, you lose one you still have two.
Let’s get the transfer switch in, the monitor here and you said we can do something if they turn on and off.
Mr. Hyche stated a phase monitor.
Mr. Daly stated we would like to do a computer program for the website. We need licenses for user’s offsite.
Mr. Fennell stated we certainly need to have it for the command bunker. You have to be able to give them that type of mass communication output so if you need another license, website or computer over there. The only other thing I would suggest along that line if there is a way for you to feed in pre-arranged things or videos that will automatically go to Coral Springs. You hit a button and it pops in what to do for a boil water order. Otherwise there has to be somebody there who knows how to put them in.
Mr. Hyche stated I do not know if the city will allow us to tap in.
Mr. Fennell stated if not then we can at least send them files they can put in. We need a list of prearranged public relations memos that covers every emergency and a list of all media contacts, and all the emergency numbers for audio, paper and video.
i. Monthly Water & Sewer Charts
There being no questions or comments, the next item followed.
ii. Utility Billing Work Orders
There being no questions or comments, the next item followed.
iii. Customer Satisfaction
Mr. Fennell stated I saw a nice memo.
Mr. Daly stated she has been here25 years.
Ms. Zich stated and she is still positive, good.
Mr. Fennell stated thank you, Dottie.
B. Attorney – Status of Special District Bill
Mr. Fennell stated we discussed the letter to Senator Ring.
Mr. Lyles stated the first half of that item just to close the loop on this and make it a matter of record. The bill I had told the Board about previously at the public hearing to adopt the bill it was withdrawn by Senator Ring. He did make comments that he say its problems/uses with some special districts and how they function and handle their finances, it was not directed to anyone in particular but he did at the end of his comments withdraw the bill so there is nothing happening in Tallahassee by the delegation with respect to special districts for this session. This is the first time in a long time that I think we do not have to watch what is happening in Tallahassee. Of course we will keep an eye on what is happening generally but we do not have a particular piece of legislation aimed at us or by us this year to be concerned about.
Mr. Fennell stated I keep wondering if we should put our bill back in.
Mr. Lyles stated it really is not timely to do it after the public hearings have occurred but that is not to say we could not go back next fall or in eight or nine months when local bills are to be pre-filed with the delegation. It is going to require in the governor’s estimation some type of referendum mechanism. We may want to have some discussions at the Board level going forward in this calendar year as to whether or not there is some way to accomplish it.
Mr. Fennell stated there is – we have to get 20% of the signatures.
Mr. Lyles stated no, through the legislation itself. We can look at a different kind of bill if you would like to have us remold and reshape it both locally and with our special counsel in Tallahassee to have a better chance of getting past the governors’ veto.
Mr. Fennell stated we need to do something still, I think, to take some positive action toward making ourselves more democratic whether it is updating to a 191 or something like that or whatever the newer district is.
Mr. Lyles stated Chapter 190 CDD is another thing you might want to have a workshop session on. Special districts that already exist can file a petition to convert to a Chapter 190 Community Development District. It is a five member board, elected by the voters and the normal statutory bidding thresholds.
Mr. Fennell stated that might be a better approach. I still think it is something we should do.
Mr. Goscicki stated a workshop.
Mr. Lyles stated I think a question and answer sort of discussion as opposed to an outline which would raise more questions than it would answer.
C. Engineer – Projects Status Report
Mr. Skehan stated this is all of the capital improvement projects and you will see there are four of them – the nano filtration plant, wastewater plant A & B, monitoring well project and the Sullivan’s Handling construction is taking place right now. Working from the top down on the nano filtration plant we have just finished with the 30% deliverable, you will see a schematic of the 30% design report. Our plan is to meet with staff next week to go through and collect comments. This is the point where we fix the project and approach how we will act on the rest of the project. If there are any changes we need to take in the course of design or switch directions this is the time before we move on to the 60%. As you can see from the schedule to have this complete in the next six months or so.
Mr. Fennell stated you will have the design complete.
Mr. Skehan stated yes. We will be at a significant point by this time next month – we will want to have the design approach, what the building will look like from the exterior, and we have suggestions and 3D model as to how and what it would look like. One of the suggestions Mr. Goscicki made today when we were chatting about this was to provide an executive summary for this document. We will work to get it provided and it will be part of the record so the Board will not have to try to go through the whole document. The rest of the project this time next year will be in construction at that point it will be a two year construction project. As we talked earlier it ties into how funds will be expended throughout the course of the project. The smaller percentage of the spending will be taking place up front this first year and thereafter when the construction begins the more significant spending will begin to take place.
The second project Replacement of A & B, this is actually Plant F also. We are in early stages of our design. We had some people out who met with staff also a week or so ago to walk through the plant confirming flows and loads, the effluent coming into the plant so that the design phases we are looking at which is plan P substantiating that to make sure everything moving forward is going to be on a good basis and on sound assumptions based on what we have.
The one we have going on right now is #4 the solid handling construction, it is the ongoing project.
Mr. Fennell stated that is coming pretty quick.
Mr. Skehan stated the project was originally scheduled to be completed right about this time. If you recall some of the early permitting issues with the site drainage played a part in the contractor not being able to start construction in a timely fashion. We will have some delay related to the blower issue we discussed at the last meeting. We are waiting to get an updated schedule from the contractor which will come with their next pay request, but in discussions with them it is probably July or August. We have just finished reviewing the blower submittal, and from what I understand it was not exactly up to par so the contractor and sub-contractor need to tighten things up a bit. Once we get that resolved we have 10 to 12 weeks delivery time once the blowers are released. If we release next week the blowers will be here the beginning of May, two months installation and substantial completion would be July to August timeframe.
One of the things we discussed earlier today with Mr. Daly and Mr. Goscicki was up until this time they had done a fair piece of preliminary work evaluating what the situation was with the monitoring well, the dry zone monitor well associated with the injection well. There is a leak in the tubing into the lower zone and up until this time the preliminary work we had done was to try to construct a single zone monitor well. The cost of that was around $800,000 approximately. However, what we have found in the last couple of months in and around the South Florida region there are two other monitor wells similar to this that are ending up with some problems and our recommendation is going to be to move forward with a brand new dual zone monitoring well rather than a single zone well. With the three zone well there is a small tubing, a 2’, a 6’ and a 12”. We know the 2” has gone bad, it has holes in it. We do not know the condition of the 6”; we cannot test it right now. The recommendation is rather than leaving anything to speculation as to what may take place in the future, the best way to protect the District’s future with this money and what we are going to invest in the capital for replacing this well is constructing a dual zone well, instead of a single zone well. It will cost about $1 million to construct a dual zone well. It is a requirement the DEP has and if you recall this goes back a little bit in time. Some of this was discovered when we were doing the mechanical integrity testing. Right now the best approach, we feel, for long term is a dual zone well. We are working forward right now and suggested to staff we would be bringing forward an amendment to the existing one for finishing up this work, having a meeting with the DEP next week to make sure they are onboard before we go any further with how this work should take place and to make sure we have their concurrence and be able to draft a work authorization amendment to move forward with the rest of the work. Some of this is becoming a compliance issue with DEP and Mr. Hyche had the DEP visit a couple of weeks ago and they are anxious to see something moving forward.
Mr. Fennell stated $1 million for a monitoring well that does not do anything but monitor our other well. There is a logic here I am having a hard time with. We are a $10 million company spending $1 million on monitoring.
Mr. Goscicki stated it is a part of wastewater treatment.
Mr. Skehan stated the general concept of the monitor well is to demonstrate your ejection interval for your effluent. What the regulations want you to do is monitor so there is no vertical migration of effluent up from 3,000 feet to 1,800 feet where the underground source of drinking water is.
Mr. Fennell asked how many millions of dollars would it cost us to clean up the water to dump it in the canal?
Mr. Skehan responded you would be building another filtration plant that is the equivalent to the cost of the nano filtration plant, which another $20 million.
Mr. Goscicki stated you would have to bring it to better than drinking water quality.
Mr. Skehan stated you would be talking about a membrane plant and probably carbon filtration at the tail end of the plant. It is being done in a number of different places – California, Nevada, Arizona and a lot of places.
Mr. Fennell stated we have a limit of money. $1 million is a lot of money to spend on monitoring.
Mr. Goscicki stated because of these kinds of issues where they are saying you cannot get your cheap water anymore you have to go to alternate water supplies. One of those alternate water supplies is reclaimed water. Current treatment costs you about $5 per gallon; it would be roughly be $10 to $15. We are fortunate that we need very little additional capacity. NSID are in a serious situation where they may have to even though they have a treatment plant that is permitted for seven million gallons per day they have been only using 3˝ million gallons and the Water District is telling them that is all you are getting off this until you figure out where you want to put the other 3˝.
Mr. Daly stated the sewer brings in about 3.9 million.
Mr. Fennell stated it does not make a whole lot of sense. What are they going to do?
Mr. Skehan responded deep injection wells. The cost of an injection well system is averaging around $6 million now.
Mr. Fennell stated the smart thing to do would be to let some natural filtration go.
Mr. Skehan stated then it has to meet certain nutrient levels. It is certainly something that has been tossed around.
Mr. Fennell stated we are committed to where we are going.
EIGHTH ORDER OF BUSINESS Supervisor Requests and Audience Comments
There not being any, the next item followed.
TENTH ORDER OF BUSINESS Adjournment
There being no further business,
Glen Hanks Robert Fennell