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FINANCE
AND ADMINISTRATION COMMITTEE |
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ITEM: |
ACTION
ITEM |
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CONSIDER
RECOMMENDATION TO ADOPT PROPOSED FINANCIAL POLICIES |
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Meeting
Date: |
October 13, 2025 |
Budgeted: |
N/A |
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From: |
David J.
Stoldt, |
Program/ |
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General
Manager |
Line Item No.: |
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Prepared
By: |
Nishil
Bali |
Cost Estimate: |
N/A |
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General Counsel Review: August 28, 2025 |
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Committee Recommendation: The Finance and Administration Committee reviewed this item on October 13, 2025 and recommended _______________. |
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CEQA Compliance: This action
does not constitute a project as defined by the California Environmental
Quality Act Guidelines Section 15378. |
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SUMMARY: On February 28, 2025, the Board adopted the District’s annual strategic objectives. As part of Goal #5, the Board prioritized the development of a formal reserve policy and the implementation of strategies to address the District’s Pension and Other Post-Employment Benefits (OPEB) liabilities.
This staff report responds to those priorities and presents additional, related policy recommendations aimed at strengthening the District’s financial stability and long-term sustainability. These policies are designed to help the District proactively manage its future obligations, address financial risks, and meet anticipated liabilities.
The following policies support the District’s strategic objectives, align with financial operating best practices, and reflect recent updates to the California Government Code (GC).
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Policy
Name |
Description |
Reason |
Exhibit |
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Reserves |
Proposes types and prudent levels of financial reserves for anticipated liabilities and risks. |
Meet strategic goal |
Exhibit 8-B |
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Pension and OPEB |
Provides strategies to reduce the District’s long-term liabilities related to Pension and OPEB liabilities. |
Meet strategic goal |
Exhibit 8-C |
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Unclaimed Monies |
Establishes escheatment guidelines and policies to reclaim Unclaimed Monies following State requirements. |
Finalize prior financial reconciliations |
Exhibit 8-D |
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Budget |
Formalizes/clarifies elements of the budget strategy adopted by the Board in 2005. Defines levels of budgetary control. |
Formalize prior Board direction |
Exhibit 8-E |
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Debt Management |
Provides guidelines for managing the District’s debt obligations. |
Comply with GC 8855 |
Exhibit 8-F |
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RECOMMENDATION: Staff recommends that the Finance and Administration Committee recommend that the Board adopt the proposed Financial Policy, subject to any approved modifications.
BACKGROUND: The California Special District Association recognizes that District Reserves are the foundation of the sustainable delivery of core services. The District has limited ability to raise funds by increasing tax rates or raising fees in the short term. Through prudent reserves, the District offers taxpayers and ratepayers significant benefits, including savings to balance budgets, prepare for emergencies, stabilize rates, maintain well-maintained infrastructure, and invest in the future. Further, the rating agencies associate the level of ratings with reserve levels. For example, Moody’s associates an "AAA" rating with fund balances in excess of 35% of revenues, the “Aa” rating with fund balances between 35% and 25% and the “A” rating with 25% to 15%; although factors other than fund balance, such as economic conditions, debt management policies, management quality, and financial performance also contribute to ratings.
The District is proposing a reserve policy to promulgate a shared understanding of the proper level and use of reserves, increase objectivity in the use of reserves, promote long-term planning, and keep the public informed. In the same vein, a policy on pension and OPEB strategies proposes guidelines to manage long-term liabilities for the District’s pension and OPEB plans. While the District’s pension plan is administered by the California Public Employees’ Retirement System as a cost-sharing multiple-employer defined benefit pension plan, the District self-administers its OPEB liabilities arising from healthcare retiree expenses using a pay-as-you-go basis. At less than 15% of projected liabilities, the District’s current OPEB reserves are insufficient to manage its future healthcare liabilities. The proposed Pension/OPEB strategies will assist in reducing Pension/OPEB liabilities over time.
The Unclaimed Monies Policy establishes escheatment guidelines for outstanding payments for District vendors and rebate payees. The District has recorded unclaimed payments since 2012, which may be potentially reclaimed after the adoption of this policy.
The Budget Policy formalizes budget strategies adopted earlier and clarifies key elements, including proposing balanced budgets, establishing the level of budgetary control, and general guidelines for developing District budgets, among other areas.
The Debt Management Policy is being proposed as a precursor to the District’s potential acquisition of the local water distribution system, which would require the use of substantial Debt funding. California Government Code Section 8855 was amended by Senate Bill 1029, effective January 1, 2017, and requires California public agencies that issue debt to adopt debt management policies that meet certain criteria. The proposed policy is designed to meet those criteria. The Debt Policy will be crucial in determining the District’s credit rating, which will influence the cost of borrowing.
The proposed policies will be reviewed periodically and updated, as necessary, to reflect any changing requirements.
8-A Cover page & Statement of Policy
8-B Reserves Policy
8-C Pension and OPEB Benefit Policy
8-D Unclaimed Monies Policy
8-E Budget Policy
8-F Debt Management Policy
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