MINUTES

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F. PUBLIC HEARING

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G. PUBLIC COMMENTS

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H. CONSENT CALENDAR

2. REVIEW OF ACCOUNTS PAYABLE REPORT AND AUTHORIZATION TO ISSUE CHECKS

Director Orth provided clarification of the check to the BFA in the amount of $4,987.00 to transfer funds donated for protective clothing into the Grant Account as the required match. Director Horrick moved to approve the report and authorize issuance of checks. The motion was seconded by Director Orth and passed unanimously by the members present.

President Skezas asked that the Board authorize him to approve Accounts Payable for the check run of November 27th. Director Orth stated "So moved." The motion was seconded by Director Horrick and passed unanimously by the members present.

3. RELEASE OF OPINION FROM DISTRICT COUNSEL CONCERNING CDF JURISDICTION OVER BROOKTRAILS PARCELS.

Director Orth moved to release the opinion, seconded by Director Horrick. A vote was taken on the motion, which passed unanimously by the members present.

4. RELEASE OF OPINION FROM DISTRICT COUNSEL CONCERNING FIRE CONTRACTS OUTSIDE OF THE DISTRICT, AND APPROVAL OF ENTERING INTO SUCH AND AGREEMENT.

Director Orth moved to release the opinion, seconded by Director Pohlson. A vote was taken on the motion, which passed unanimously by the members present.

Director Orth asked that the actual agreement be presented for Board authorization, as it is the first such agreement entered into by the District and because it obligates the Fire Department to provide services outside of the District, even though it was with the Sphere of Influence which the District hoped to annex in the future.

Director Pohlson asked that a Board policy be developed regarding such agreements. She asked that the agreement specify that the rate may increase upon passage of a fire tax measure, even though the owners of the property would not have the right to vote on it.

President Skezas confirmed that the General Manager was authorized to respond to the County by its November 20th deadline, to inform them that the Board had approved entering into the agreement.

5. PRESENTATION OF HOOK-UP FEE STUDY BY MARTY MCCLELLAND, OPERATIONS MANAGER, OSCAR LARSON & ASSOCIATES

Director Orth moved to accept the report, seconded by Director Horrick. A vote was taken on the motion, which passed unanimously by the members present.

General Manager Chapman introduced Marty McClelland, Operations Manager for Oscar Larson & Associates, who came forward to answer questions from the Board.

Mr. McClelland provided a summary of the report, explaining in detail the methods used to calculate the hook-up fees. He recommended that the conservative numbers, $6,200 for water and $3,567 for sewer, be used for hook-up fees.

In response to Director Orth, Mr. McClelland explained that an imbalance existed between the District's capacity of wastewater disposal and its projected water supply.

Mr. McClelland also confirmed that he had included the capital payments to the City for its share in the wastewater treatment capacity, although he did not include interest in the calculation, which could be recaptured through the fees.

With regards to the statement that all of the improvements proposed over the next five years for the water system were attributed to upgrades of the existing system, President Skezas pointed out that the clearwell and backwash pond projects had some implication on increased infrastructure for future capacity. Mr. McClelland confirmed that, based upon the design size, a certain amount could be attributed to the future users based upon existing and future capacity. District Council Neary provided guidance on the allowable use of connection charges and capacity fees.

Mr. McClelland confirmed for President Skezas that the denominator used in the hook-up fee calculation is equal to the capacity in EDU's, and that any time there is a significant change in any of the parameters the fee should reviewed. He also confirmed for Director Horrick that the capital improvements amount was based on a five-year span.

Director Pohlson voiced concern that the recommended hook-up fees did not take into account information which would be forthcoming in the hydrology report, or the amount it would take to raise the dam.

Hearing no other questions, President Skezas thanked Mr. McClellend for attending.

6. PRESENTATION OF ANNUAL AUDIT FOR THE FISCAL YEAR ENDED JUNE 30, 2002 BY ROBERT HUBIK, CPA

Director Orth made a motion to accept the audit report, seconded by Director Pohlson. The motion was passed unanimously by the members present.

Beginning with the Combined Balance Sheet, Mr. Hubik noted the improvement in cash and cash equivalents from the previous year, as well as the decrease in liabilities. He commented on the improvement in the General Fund, both in the fund balance and the cash balance, which would allow transfers into some of the other funds. He also reported that the Fire Fund had decreased its deficit by $25,000, from $48,000 to $23,000, and noted the positive trend of the changes.

He reviewed the revenues and expenses in the General and Fire Funds, noting a $93,000 profit in the current year, as opposed to a $13,000 loss in the previous year. He reviewed the comparison between the actual expenditures as opposed to the budget, explaining that the $10,536 miscellaneous income in the Fire Fund was from sale of the water tank truck to the Water Department, as well as reimbursements from various other sources.

Moving on to the Enterprise Funds, he noted a net operating loss of $36,097, although after consideration of the Non-Operating Revenues and Expenses, there was an overall Net Income of $85,690.

He explained that the Accumulative Deficits shown at the bottom of page 6 had to do with operations in the Enterprise Funds since the District was formed, and did not include Capital Contributions. He reviewed pages 27, 28, and 29, the details of the Combining Balance Sheet for the Enterprise Funds, noting that the report contained all of the accounting information required by the State. He recommended reviewing the recently passed Resolution regarding Capital Facility Fees, and to develop a policy on the allocation of hook-up fees to future and current users.

Mr. Hubik answered questions concerning prior adjustments to the depreciation schedules in the water and sewer departments, noting that the rates should have been adjusted in the past, as the systems were wearing out faster than the depreciation schedules reflected.

Mr. Hubik commented on the improvement in the working capital advances, shown on page 23, which went from $113,000 to $48,000.

Referring to the Combined Statement of Cash Flows, pages 7 and 30, Mr. Hubik pointed out an increase in cash and cash equivalents of $432,000 for the fiscal year. General Manager Chapman pointed out that $83,000 had been expended on the acquisition of capital assets.

In response to Supervisor-elect Hal Wagenet, who was present in the audience, Mr. Hubik explained the difference in the accrued sewage treatment expenses between 2001 and 2002.

A break was called to change the tape.

Mr. Hubik provided a brief review of the District's Cash and Investments and Fixed Assets.

Moving on to the Management Letter, Mr. Hubik stressed the need to address cash shortages in the Fire and Golf funds, but noted improvement over the prior year and a complete turnaround in the General Fund. However, he voiced concern about the financial rating of the District and stressed the need to increase revenues and build cash reserves.

He recommended that the District employ expert accounting staff to annually review the books and prepare adjusting journal entries, as he would no longer be able to do so.

Correction of the date by which the District must comply with the new mandatory GASB34 requirements was noted on pages 2 and 3 as June 30, 2004, not 2003. Mr. Hubik summarized the major changes.

He briefly discussed the changes to the payroll allocations, and the adjusting entry required to correct grant activity. He voiced his approval that the Board had adopted policy concerning restricted funds and capital expenditures. He noted that improvement had been made to the internal controls over sales in the golf pro shop, but voiced concern that the cash register tape was not being reconciled to the daily sales information and the money.

As to the reportable conditions, he briefly went over each item. He reiterated his concern about the variance between the sewer flow measurements of the District and the City of Willits, and suggested more detail in the chart of accounts to comply with the State Controller's guidelines.

General Manager Chapman thanked Mr. Hubik for attending, and commended Finance Assistant Pat Wilson for her work.