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HomeMy WebLinkAbout1987-06-24 Min - Board ,ll"-. SPECIAL STING June 24, 1987 The special meeting of the Board of Directors of the Truckee Donner Public Utility District was called to order by President Corbett at 3:08 P.M. in the Truckee Donner Recreation and Park District meeting room. ROLL CALL: Directors Aguera, Cooley and Corbett were present. Directors Maass and Sutton were absent. EMPLOYEES PRESENT: Paul Colburn, Peter Holzmeister and Susan Macdonald. CONSULTANTS PRESENT: Rick Blumenfeld, Keith Fukui and Jill Meyer. AUDIT WORKSHOP, DISCUSSION AND POSSIBLE DIRECTION Review of audit Mr. Fukui noted that , with the cooperation of District staff , Arthur Andersen and Company was able to have the preliminary financial statements to the District by May 11 , 1987. Copies are attached to these minutes for reference. Mssrs. Fukui and Blumenfeld reviewed with the Board the electric statements of revenues in excess of expenses , balance sheets , and statements of sources and uses of cash. Mr. Fukui stated that the Board's policy decision not to shut off delinquent customers during the Christmas holidays accounted for the notable increase in outstanding receivables and corresponding bad debts. Mr. Fukui advised that , to the extent possible, assets , liabilities , equity, revenues and expenses have been specifically identified as electric or water operations. Amounts not specifically identified have been allocated 85% electric and 15% water, reflecting the District's most recent study on the allocated use of shared or common facilities or functions. Regarding the pension plan, Mr. Fukui said the actuarial present value of accumulated plan benefits (vested and non-vested) was $217 ,402 as of December 31 , 1986; the net assets available for benefits as of the same date was $481 ,372, Restricted funds for facilities fees, loan principal and interest fund, reserve for future storm damage, building fund, cash proceeds from the building loan and consumer deposits totaled $3,005,458 at the end of 1986. Mr. Fukui noted $678,557 is available, but must be taken out of restricted funds by Board resolution. Mr. Fukui made note of the lawsuit filed by a former general manager alleging wrongful termination of employment and defamation and seeking damages of $600 ,000. The case was settled in January of 1987. Thesettlement was made entirely from insurance proceeds, and most of the legal fees were reimbursed by the PUD's insurance carrier, -1- Mr. Fukui reviewed with the Board the water statements of revenues in excess of expenses , balance sheets and statements of sources and uses of cash. Dote was made of the District's continued failure to meet certain of the FmHA indenture covenants. Because of this, the total amount of the Farmers Home Administration obligations has been classified as a current liability in the financial statements. Mr. Holzmeister noted that resolution of the FmHA indenture conflict is an agenda item. Miscellaneous questions posed by the Board were answered. RBA management letter requirement In a letter dated April 7 , 1987 , copy attached, Arthur Andersen and Company suggested reasons why the District should consider requesting an exemption from the REA audit requirements. If the PUD does not request an exemption, the Board will need to authorize them to do the additional work at an approximate cost of $1 ,500 (for 1985 and 1986). This matter was discussed at the last meeting but no decision was made. Manager Holzmeister noted that since the TDPUD is not an active borrower, REA may waive the management letter requirement. Mr. Blumenfeld of Arthur Andersen stated that the District does not get any value out of this $1 ,500 expenditure other than satisfying the REA requirement; the worst thing REA could do is to call in the loan, and they would probably give the District 60 days to comply before doing so. After some discussion, Director Cooley moved that the Board authorize Arthur Andersen to prepare the management letters for the 1985 audit and the current 1986 audit at a cost of $1 ,500; seconded by Director Aguera. ROLL CALL: Maass and Sutton, absent; all other Directors, aye. SO MOVED. FnHA indenture conflict As a result of the bond indenture conflicts, the District's long term FmHA loans have been classified as current liabilities in the audit. Technically, the PUD could be required to pay these loans in full upon request. Bond Counsel Sperry has promised to rewrite the bond covenants to resolve the issue. Another alternative would be to purchase the loans as offered by the Farmers Home Administration. At the present time, the District owes FmHA $534,430. Based upon FmHA's preliminary estimates, the loans could be purchased for about $391 ,000, which is based upon an average discount rate of 7.75%. Actual pricing of the loan would be based upon the Treasury rates being paid on July 10, 1987. The District has approximately $332,000 available in restricted funds which could be used towards the purchase of these loans. The funds are currently being invested in LAIF at a return of approximately 7.18%. If the District decides that a purchase is in order, it must send a letter indicating interest and a payment of 5% of the outstanding loans to Farmers Home by July 10, 1987. �"'' Mr. Blumenfeld stated he thinks the proposal from FmHA is a good deal for the District. He explained that Farmers Home will sell the loan if it is not purchased by the District , and the new owner will definitely call it in -2- since it is in default. After some discussion, the matter was tabled to the next regular meeting so the entire Board may participate in making a decision. New complex capitalization Mr. Holzmeister explained that, as discussed at the June 15 meeting, the new office complex will be recorded in the electric fund, and the Water Department will pay rent for use of a portion of the building. Since the lease was signed as a District, Arthur Andersen and Company feels that a reclassifying entry should be made recognizing a portion of the asset and liability in the water fund financials for audit purposes. Consolidation of financial reporting The Finance Supervisor has suggested that, as an alternative to two sets of audited financials, next year the Board consider a consolidated report using a balance sheet and income statement format. Mr. Blumenfeld said that this would lower the auditors' fees. He also noted that separate financial statements could be maintained by the Finance Supervisor. The Chairman tabled this matter to the next regular meeting. Investments Mr. Colburn provided the Board with a summary of the District's investments and their sources as of June 15, 1987 , and the detail of what comprises each of the restricted funds. Currently, the District invests all its funds in the State Local Agency Investment Fund (LAIF). Mr. Colburn provided a copy of the most recent annual report from LAIF, which summarizes the results of the fund for the fiscal year ended June 30, 1986. Manager Holzmeister suggested that the Board prepare a clear investment policy. Director Cooley said he is surprised that LAIF has foreign investments, and asked if CMUA could assist in restricting them to American investments only. Mr. Holzmeister advised that he thinks the CMUA is trying to go for broader investments. Mr. Blumenfeld noted LAIF has made very solid investments. The benefits of commingled funds are a much higher rate of return for the small local Districts. There was some discussion, but no action was taken or direction given. "w RESOLUTION APPROVING SPECIFICATIONS AND ISSUING A CALL FOR BIDS FOR ELECTRONIC MULTI-BUTTON KEY TELEPHONE SETS -3- eft, Manager Holzmeister explained that the District operates an Ultracom CKIII telephone system manufactured by TIE Communications , Inc. Staff has determined the need for approximately 12 additional sets for use in the new complex. The telephone sets must be compatible with the TIE system. He said the cost of each set is about $500, and payment will come out of the materials portion of the budget. There was some discussion, and Director Cooley indicated he is not in favor of going out to bid for the telephone sets. Since only three members were present, the Chairman put this matter over to the next regular meeting. ADJOURIMNT There being no further business on the special meeting agenda, Director Aguera moved that the meeting be adjourned; seconded by Director Cooley. All Directors , aye, by voice vote. SO MOVED at 4:46 P.M. TR CKE , DONNER P7LIC UTILITY DISTRICT 7J h L. Corbett, P sident epared b Susan Macdona-la, Deputy District Clerk sm/d5b.17 —4—