Attendees:

President Susan Warnstrom called the meeting to order at 6:30 p.m. The attendees were introduced. All present participated in the Pledge of Allegiance to the flag of the United States.

Approval of Minutes: Motion, second, unanimous, to approve the Minutes of March 27, 2006.

Treasurer’s Report: Chuck Arnold reported the checking account has $3,871.30 and the savings account has $4,388.18 for a total of $8,259.48.

LAFCo Report: Larry Wilson reported he is reviewing the Burton Ranch EIR for the Wye area annexation in the Lompoc Valley. Cathy Schlottmann noted the MSRs for the Solvang, Buellton, Santa Ynez, and New Cuyama areas are completed with the exception of the Santa Ynez River Water Conservation District ID #1. The public workshop on the area between the cities of Santa Barbara and Goleta will be held in September or October 2006. Bob Braitman will be a speaker at the Special District Institute scheduled June 2^nd in San Diego.

Legislative Report: A report from Geoffrey Neill of CSDA was distributed detailing several pending bills of interest.

County Split Proposition H: Charlie Blair announced a forum on this proposition will be held May 3^rd at the Vandenberg Village Country Club.

Chapter Website: Larry Meyer asked for news articles from districts for posting on the chapter website.

CSDA Government Affairs Day: John Fox said this was held last week. Ethics training was a part of the program.

Guest Speaker: Jeanette Hahn, Regional Manager of FCS Group: Ms. Hahn discussed financial reserves, policies, and practices for utility systems. Types of reserves include operational, capital, and special purpose. She noted a district’s reserve requirements can evolve over time. The relationship between rates and the cost of providing a service was emphasized. Operational funds should be segregated from capital funds. Working Capital is a district’s ability to handle the fluctuations in revenues and expenditures in both the short term and long term. Working Capital can be expressed in terms of Total Annual Operating Expenses divided by 365 day per year, resulting in dollars per day, times a given number of days. Ms. Hahn suggested an Operating Contingency be a percentage of the operations budget, perhaps 5% or 10%. Thus, there is logic for the amount of the Contingency. An Operating Contingency is in addition to a Working Capital Reserve. A Plant Emergency Reserve equal to 1-2% of the total utility assets was suggested to supplement a major repair.

Capital Reserves fund system upgrade, expansion, and future replacement of system components. System expansion can be funded through Connection Fees in a sinking fund. Ms. Hahn noted that system repair and replacement is a huge need within California. A repair and replacement reserve provides for a smoother transition. At a minimum, it should be the amount of depreciation expense. A Capital Contingency reserve is a cushion for unexpected cost increases in the capital program.

Special Reserve examples include debt reserves and rate stabilization reserves (accompanied by a financial forecast and rate strategy). The advantages of reserves and a reserve policy is that undesignated cash balances are reduced. If you have a reserve, Ms. Hahn urged a district use it for the purpose for which it was intended. Proper reserves provide financial stability and link rate and revenue programs to their reasonable cost of service.

Next Meeting: Susan Warnstrom said the speaker at our May meeting will be Bob Geis, Santa Barbara County Auditor-Controller. He will speak on district finances and financial reporting requirements.

Old Business: None.

New Business: None.

Adjournment President Warnstrom adjourned the meeting at 8:20 p.m. The next meeting will be Monday, May 22, 2006 at this location.

Cathy Schlottmann