Minutes 07/20/2011 Productivity Committee's
Subcommittee
Public Utilities Capital Projects Review
Public Utilities Administration Building
July 20, 2011
10:30am
1. Call to Order-Janet Vasey
Subcommittee members present:
Janet Vasey, Vlad Ryziw, Jim Gibson, and Doug Fee
Not Present: Gina Downs and Leslie Prizant
Collier County staff present:
Tom Wides, Operations Director
Bala Sridhar, Sr. Budget Analyst
Pam Libby, Manager, Water Operations
Steve Messner, Interim Wastewater Director
Sheree Mediavilla, Administrative Assistant
A. Introductions
Tom Wides introduced the county staff and the Subcommittee
members introduced themselves.
2. Discuss the Objectives of the Subcommittee
During the budget workshops, the Board requested the Productivity
Committee review proposed capital improvement (CIP) expenditures
and reserves in the proposed FY12 budgets. The objective of the
Subcommittee meeting with County staff was to develop a plan of
action to present to the Productivity Committee at today's 2:00 p.m.
meeting.
Ms. Vasey: Stated she was surprised that the Board did not have any
hard questions in the areas of CIP expenditures and reserves for the
Public Utilities Division. Are we going somewhere nobody wants us to
go? Are we on the road to Abelene? Ms. Vasey reviewed the Public
Utilities GovMax documents in a variety of areas and stated maybe we
should be interested. Start with - what should we be doing and why.
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Mr. Ryziw: I reviewed the BCC meeting minutes. The workshop was
efficient and went well. Staff made presentations and answered
questions presented to them by the Board. Commissioner Coyle gave
the County Manager direction and the emphasis was on Capital
Improvement Expenditures. The Subcommittee submitted a
memorandum as an initial start. The Productivity Committee and
Subcommittee submitted general recommendations to the Board of
County Commissioners. Those recommendations were not discussed
during the budget workshops. The Subcommittee, at large, will need
to make decisions. The Subcommittee reviewed documents presented
to the Board at the June 16th workshop. As a committee, we were to
specifically look at expenditures, and Ms. Vasey has done a great job
on that.
Ms. Vasey: This is an open discussion of what we will take to the
Productivity Committee this afternoon.
Mr. Ryziw: Were there any substantial changes in the numbers
between the June 8th and June 16th meetings?
Bala Sridhar: No changes.
Tom Wides: The Budget Office is looking at the Forecast and
Carryforward for FY12 and will be adjusting these numbers between
June and September. You will see change sheets.
Mr. Fee: Guidance was 3% for operating budgets.
Mr. Ryziw: Will there be changes in the proposed expenditures?
Tom Wides: The expenditures won't change. They were reviewed by
the County Manager in May and the Board in June. From February to
March, we review the capital projects and Forecast what will be spent
this year, and what will Carryforward on a project. Projects that are
not complete by October 1st will move into the next year's Amended
Budget. That is why you will see change.
Mr. Ryziw: A clean approach to the utility budget is important. There
are a lot of hot issues. I have reviewed Ms. Vasey's write up and she
did a very thorough review. Her comments queried staff from several
different perspectives. Facilities did not fail, but anticipate failure -
this was a core of Ms. Vasey's comments. I have a technical
background, current day knowledge, and understand the practices.
There are millions of dollars involved here and a lot of projects that
need to be done. Some are regulatory and some statutory.
Ms. Vasey: How do we justify replacement or preventative
maintenance opposed to failure? The penalties are great and I would
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not want to take the risk. This is not true with ever expenditure. We
need a more expanded review. I would like to visit the plants in order
to obtain a better understanding. Show what the big dollar items are
on a preventative basis and follow through with a visual tour. I need
a better feel on what the impacts are for.
3. Next Steps in the Process
Mr. Fee: Remember when Jim Gibson showed us the Sarasota project
worksheet? It had pictures and a synopsis. This would be a good
tool. Get a summary list that would show us where this is located and
details of the projects.
Tom Chmelik: We like the summary sheet approach also, and have
developed an internal Excel spreadsheet that repeats the purpose,
method, and end state in the GovMax documents. This spreadsheet
defines the projects and defines the years. Some have pictures and
more detail than others. Asset alignment identifies various areas.
Sarasota also did this and added a project charter document. This is
what we have right now.
Mr. Fee: Do you have the account/amount where I am to assume the
funding source is coming from?
Tom Chmelik: 411 Impact and 412 User Fees
Tom Wides: The funding sources are:
• Fund 408 is Water/Sewer Operating. All revenue / user fees go
into 408 and then are moved, as needed, to debt funding or
capital projects.
• 412 - Water User Fees
• 414 - Wastewater User Fees
• 411 - Water Impact Fees
• 413 - Wastewater Impact Fees
Bala Sridhar passed out the Sources and Uses Fees
spreadsheet.
Mr. Ryziw: I did not see the yellow document - the TIP worksheet. In
the memo of June 10th, there is an attachment of that worksheet. This
information is what we talked about. If the county adopts this at
large, from the public's perspective, it would be good.
Tom Chmelik: We started with GovMax and populated the old form
from last year. FY12 going forward, we updated the changes in the
programs and updated the out years.
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Mr. Fee: The sheet is Excel? Does it link?
Tom Wides: No, it is not linking. We are using Protools in the
organization, but would prefer GovMax where you put the number in
once and it feeds the other spreadsheets. We are not there yet.
Mr. Gibson: More multi-year financing is required. We want to see
the longer term capital layout. What follows large capital expenditures
- these roll forward. It is important to visualize this going forward.
Mr. Fee: The spreadsheet gave me all the information I needed. I
used the data from the spreadsheet and wrote comments on the
GovMax document.
Tom Chmelik: This is an internal document and the Commissioners do
not get this. It is also used for the Master Plan.
Mr. Gibson: I didn't have time to look at the Master Plan.
Mr. Ryziw: Does every project have a backup sheet? One sheet per
project?
Tom Wides: We have to do it for the Master Plan.
Mr. Ryziw: The current county budget - the tentative budget - I
would not know anything about anything. It only shows a dollar
amount for the project. How would the Commissioners understand
what the expenditure is for? The backup information is all there on
the spreadsheet. This is in-house information, principles, and
practices, and the processes are good. How is the information
disseminated to the BCC? It appears that from the tentative budget to
the final budget, less and less information is provided. We have to
respond to the stakeholders. The more information we can provide
the stakeholder, and have them understand the program, the more
support the BCC will receive.
Opening statement:
• Reason for being here
• Excellent procedures in the utilities
• Expenditure part of the Productivity Committee meeting
• BCC charged us with looking at all capital projects and
expenditures
How many dollars are proposed for replacement? Unknowns?
$10 million approved by the BCC and we don't know if we have to
replace the system. So we don't have a lot of premature
replacements. What concerns me is that we don't want to prematurely
replace a system. Or, failure arises.
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Mr. Gibson: The Water/Sewer District addresses the issue of when to
replace items.
Mr. Ryziw: We can look for management control, unknowns, for
instance. The county has 800 miles of pipes and we don't know when
they will fail or when we should replace pipelines.
Tom Wides: We do have indicators of possible failures.
Mr. Ryziw: Unknown expenses. The Commissioners could decide to
support if there is an internal management control. Expenditure is
being made for the right reason and the right time. Have an asset
management system up and running. More control. With backup
information, we could identify those projects.
Ms. Vasey: Scope out what we are going to look at and time frames.
Tom Chmelik: Internal control questions are divided by level of risk
and compliance. 1) Stay in Compliance - no leaks, no consent order.
2) Reasonable Risk - deferring things - we started this concept three
years ago. 3) Risk Compliance - getting consent orders for property
damage, sewage leaking.
Tom Wides: We had Greeley and Hansen, an independent consultant;
review our Capital Improvement Program for Water, Wastewater, and
Irrigation Quality Water FY12 - FY16 and FY17 - FY20. Their
assessment is that the CIP program has a realistic basis for the
estimated costs and consistent with previous Master Plan Updates.
Mr. Ryziw: Appreciate that - outstanding.
Tom Chmelik: We do have duplicate systems, as necessary. A deep
injection well already failed; we were able to use the other well. We
had to replace it the second year. That is how close we ride it.
Ms. Vasey: The risk level is excellent (we don't need a fire station on
every corner - it is not necessary). We need to find the right balance,
less risk, and not overspending. This is an area to take a look at.
Tom Chmelik: We have 20 master pump stations and they are not
new anymore. They corrode from the bottom up and the salt/brackish
environment does not help.
Mr. Ryziw: Is it common practice not to list the individual projects
when the tentative budget is prepared?
Tom Wides: For the June workshop, we always list the individual
projects with a written recap of the project. There wasn't a lot of
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discussion at the budget workshop in June, and I assume we will have
more in September. We are not changing the budget.
Ms. Vasey: The project listing in the back - it gets thinner. I asked
Mike Sheffield to provide us all the documents that were handed out in
the meeting. Now, we have to zero in on our own particular areas.
Tom Wides: The Commissioners got all the detail at the June 16th
workshop.
Mr. Gibson: Regarding reserves and multi-year financing, we want an
understanding of the base rates, operating terms and capital. Were
there any changes? What are the external capital requirements?
What are the current base rates?
Tom Wides: We are prepared to go through all the out years given the
current water/sewer rates. We had a surveillance telephone
conference with Fitch on June 30th and have their feedback. We have
the Fitch Ratings dated July 7th that reaffirms our AA+ rating.
Mr. Gibson: Good comparisons.
Ms. Vasey: Are we the best?
Bala Sridhar: The City of Naples is AAA; Palm Beach County is AAA;
other utilities in the state are AAA. Ours stayed stable, at AA+.
Ms. Fee: What is the difference between AAA and AAA+?
Tom Wides: Fitch establishes various benchmarks of financial and
operational performance; the utilities are based on their performance
to the medians of the benchmarks. If we drop below the AA rating, we
start to see interest penalties in the external borrowing marketplace.
Once you lose your market position, it is hard to get it back. We will
have to borrow in the future - 2013 to 2015, we may be out there.
Mr. Fee: We have a huge maintenance program, how are we going to
do that?
Tom Wides: As an example, we have 750+ lift stations that need
maintenance every three to five years. We can never catch up.
Mr. Gibson: We hit the ones that are critical.
Tom Wides: It a water main breaks, it takes out the road, the repair is
more expensive, and the treated water in the pipeline is not
recoverable; basically non-revenue producing lost water.
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Pam Libby: The Isle of Capri project cost three million dollars and the
Vanderbilt Beach Road project cost five million because the mains
were larger.
Tom Wides: Our reserves are not too high. They are based on a 5 to
10 year program. We have $74 million in reserves (correction from
$100 million stated in the meeting) and $250 million in debt.
Ms. Vasey: Walk us through reserves.
Tom Wides:
$11 million in Impact Fee Reserves
$17 million in Impact Fees Debt Service
$18.5 in Statutory Reservews$16.7 million in project reserves,
representing 50% of annual depreciation expense$1 million hedge
against commodity inflation
These reserves need to fund an approximate $6 million per year
shortfall in Impact Fee debt service.
Ms. Vasey: Another area to look at is User Fees supporting Impact
Fees on a temporary basis. One change that was discussed is the
relocates fees. Relocates are not Impact Fees. What is an Impact Fee
and what is a User Fee? Things I thought were User Fees are now
Impact Fees. What debt are we holding for User Fees supporting
Impact Fees? What are the total dollars?
Mr. Ryziw: How do you determine a specific expense is operations
maintenance instead of capital? I don't know the policy here.
Tom Wides: If we know there is no question we can capitalize it, we
can amortize it over approximately 27 years. Other projects - not of
emergency nature - end up on the operating side.
We don't put the Master Plan projects in the operating budget. We put
the capital budget in the Master Plan.
Mr. Ryziw: Operational and maintenance work - repair and
maintenance work, what determines what side you are on. The
$1,000 threshold?
Tom Wides: Not every time.
Tom Chmelik: It will be on the capital side if you increase capacity.
Tom Wides: Take the Wiggins Pass valve project - that would be
capital and depreciated in 27 years.
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If you look at the operating budget, labor, contractual services,
chemical, routine maintenance, electricity, equipment are not part of
the process. If the stucco on a water tank starts breaking down, it is
a structural repair and it can be a capital expense.
Ms. Vasey: Are they any other areas we want to add to the list?
Mr. Ryziw: 1) Implementation of an asset management program. 2)
Collaboration with other departments. 3) If one agency does it, can it
benefit all the agencies?
Tom Chmelik: We started this effort in FY06 and the RFP award to
CDM in FY07 for a three phases of implementation. We further
started tightening our belts, and deferred what we could and could not
as a go forward with asset management. We have a "to do list" and
efforts are underway to sharpen that from lessons learned from the
past.
We are building a SCADA system by gathering data from the field. The
GIS systems identify assets, and we learned a lot about the scope of
the projects, and the state of the assets.
The final phase is the cost of SAP implementation and benchmarking.
FY12 has two phases planned and FY16, $2 million for Water and
Wastewater. The SAP integration cost is the big ticket item. We are
going forward with consultants and other county departments are
involved to cover all the needs of all divisions. An enterprise asset
system would ultimately drive all the yellow sheets we discussed
earlier today.
Mr. Fee: Is that system available to the public?
Tom Chmelik: You can see the easements, but not the pipelines.
Pam Libby: The pipes are protected for security reason.
Mr. Ryziw: Implement and activate a new system, would that serve
the needs on the O&M side?
Tom Wides: Yes, it should be both. The asset is identified. Take a
plant - what level of detail you put in the asset management system -
to get there is a big deal. You must identify the right level of detail
and maintain the data. It is a time and money factor. A balance sheet
containing fixed asset information would satisfy the needs of the Clerk
of Courts.
Steve Messner: This will also house a preventative maintenance
program and will create a asset life cycle.
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Tom Chmelik: The Water/Sewer District has a billion dollars in gross
assets; that is a tremendous amount to rationalize and maintain.
Mr. Ryziw: Is the Asset Management RFP for countywide or stand
alone? Will other agencies use it? They may have costs of their own.
It is all collaborated through protocols.
Tom Chmelik: Public Utilities in the pilot; however, other agencies will
be consulted as the project moves forward. Project management
protocols are not asset management.
Mr. Ryziw: Asset management program or implemented through SAP.
Tom Chmelik: SAP integration is the big ticket item.
The discussion turned to the Fitch Rating and Bond Issues.
Tom Wides: The County Water-Sewer District has approximaelt $255
million in outstanding debt. Theres isapproximately $149 million in
water and sewer revenue bonds at AA+. The balance of
approximately $106 million is low interest State Revolving Fund loans.
We also have no borrowing plans for the foreseeable future. FDEP has
revolving fund surpluses, and wants us to borrow money.
Bala Sridhar: Stimulus dollars are competing with SRF loans.
Tom Wides showed the committee Bala's 20 year and 10 year financial
model and how we go through our processes. It is the way we do our
business.
Mr. Fee: A new growth management law passed. How does it affect
the utilities? Are there major changes?
Tom Wides: It is too early to tell. Based on what I see, I don't see a
big significant change. It will not affect the FY12 budget.
Ms. Vasey: OK, I think we have what we need. Let's recap what we
discussed.
The timeline is not a huge rush. We do not have a large workload
now, and can devote time to this. The Subcommittee meets the third
Wednesday of the month at 10:30 a.m. Work with Mike Sheffield and
set something up with him. Mid-August time frame.
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Mr. Gibson: We will meet early in September, and twice before the
September Productivity Committee meeting. That is the overall time
frame.
4. Next Steps in the Process
Ms. Vasey:
• Issue: Run to failure or replacing within a preventative time frame
in the budget.
• CIP worksheets and make recommendation that they need to be
included
• Reserves multi-year total picture.
• Asset management system: Concentrate on how that will feed into
question #1.
• User verses impact fee policy and project funding.
• What is the level of support user fees and projected into the future.
If we do not get to use impact fees. What the legislature will do.
Documents Requested by Email
• One Pager Yellow Sheets - project sheets
• CI P's
• Lift Station #302 Pictures
• Fitch Rating Study - July 7, 2011
• Adequacy of Reserves
• Commissioner Henning's request to see our multi-year plan;
Master Plan taking it out to 2020.
• Executive Summary referencing a letter to the County Manager in
EMA and provide a scope of work.
5. Public Comment
This meeting was advertised in the newspaper and no one from the
public attended this meeting.
6. Adjourn
Prior to the adjournment of the meeting, photographs were shown of
the #302 lift station construction at Livingston and Rattlesnake
Hammock Road.
The meeting was adjourned at 12:37 P.M.
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