JOINT REGULAR MEETING OF THE FINANCE AND AUDIT COMMITTEE AND SPECIAL MEETING OF THE BOARD OF DIRECTORS OF THE RANCHO CALIFORNIA WATER DISTRICT

Transcription

1 JOINT REGULAR MEETING OF THE FINANCE AND AUDIT COMMITTEE AND SPECIAL MEETING OF THE BOARD OF DIRECTORS OF THE RANCHO CALIFORNIA WATER DISTRICT ADDITIONS TO AGENDA Board Room Rancho California Water District Winchester Road Temecula, California A G E N D A Thursday, October 1, :30 a.m. Items may be added to the Agenda in accordance with Section (b)(2) of the Government Code (Brown Act), upon a determination by a two-thirds vote of the members of the legislative body present at the meeting, or, if less than two-thirds of the members are present, a unanimous vote of those members present, that there is a need to take immediate action and that the need for action came to the attention of the Rancho California Water District after the Agenda was posted. APPROVAL OF AGENDA PUBLIC COMMENT Any person may address the Committee at this time upon any subject not identified on this Agenda but within the jurisdiction of the Rancho California Water District. Please note that for items not listed on the agenda, the Brown Act imposes limitations on what the Committee may do at this time. The Committee may not take action on the item at this meeting. As to matters on the Agenda, persons will be given an opportunity to address the Committee when the matter is considered. If you wish to speak during public comment, please fill out a "Speaker Request Form" and give it to the Recording Secretary. When the Committee Chairman calls your name, please immediately step to the podium and begin by giving your name and address for the record. Each speaker will be given three (3) minutes to address the Committee.

2 Finance and Audit Committee Meeting Agenda October 1, 2015 Page 2 of Finance Team Review 2. Review of Current Drought Surcharge 3. Consider Alternative Method for Reconsidering Agricultural/Domestic Customer Tier I Allocations 4. Commercial Account Allocation Review 5. Review of Rancho California Water District s Safety Boot Policy 6. Review of Financial Statements August 31, 2015 A. Statement of Net Position B. Statement of Revenues, Expenses and Changes in Net Position C. Statement of Cash Flows 7. Review of Treasurer s Report, Certification of Cash Sufficiency and Related Investment Activity Data, as of August 31, Review of Outside Contracts, Capital Projects, and Purchasing Reports 9. Review of Ratification of the Register of Audited Demands for the Period August 26, 2015 through September 23, Adjournment This Committee meeting is also noticed as a special meeting of the Board of Directors because a quorum of the Board may be present. Members of the Board who are not members of the Committee may attend and participate in the meeting, but only members of the Committee may make, second, or vote on any motion or other action of the Committee. Any actions taken pursuant to this agenda will be actions within the purview of the Committee and shall be approved by an affirmative vote of a majority of the quorum of the Committee. The Committee is not empowered to act for or on behalf of the Board or the District unless exercising delegated authority from the Board. Any actions taken by the Committee shall be deemed recommendations of the Committee for future consideration by the Board at a separately noticed regular or special meeting of the Board of Directors. The Board of Directors retains all powers, privileges, and duties to exercise and perform the business of the District. Upon request, this agenda will be made available in appropriate alternative formats to persons with disabilities, as required by Section 202 of the Americans with Disabilities Act of Any person with a disability who requires a modification or accommodation in order to participate in a meeting should direct such request to the District Secretary at (951) at least 48 hours before the meeting, if possible.

3 Finance and Audit Committee Meeting Agenda October 1, 2015 Page 3 of 3 Any writings or documents provided to a majority of the members of the Board of Directors regarding any item on this agenda will be made available for public inspection at the District s Administrative Headquarters Building located at Winchester Road, Temecula, California, during normal business hours. Board Members of the Rancho California Water District Finance and Audit Committee James Stewart, Chairman Steve Corona, Member Lisa Herman, Member William Plummer, Alternate Member

4 FINANCE AND AUDIT COMMITTEE October 1, 2015 COMMITTEE ACTION Page 1 of 41 ITEM 1: 2016 FINANCE TEAM REVIEW RESPONSIBLE LEAD STAFF MEMBER: Finance Manager, Rick Aragon RECOMMENDATION: Staff requests the Finance and Audit Committee (Committee) review, consider, and provide direction as to staff s proposed plann to perform an informal review on Rancho California Water District s (RCWD/District) Finance Team, in preparation for the 2016 planned bond financing. DISCUSSION: In anticipation of a need to prepare a tax exempt bond financing in the fall of 2016 for scheduledd projects in the 5 year Capitall Improvement Plan, staff believes it prudent to review and confirm the selection of the finance team before the next stages in the related planning efforts of selecting appropriate projects, determining total funding levels, and determining funding strategies as the Finance Team s experience and assistance will be critical in carrying out these tasks. These future planning efforts are projected to be discussed in the January to May 2016 timeframe to be in alignment with other budget efforts. Staff will provide a PowerPoint presentation to address the following topics related to the Finance Team selection for the 2016 planned bond financing: The history, qualifications, and performance of the existing Finance Team; The need for a review of the Finance Team; and Who and how each member of the reviewed. Finance Team is proposed to be Attached, as exhibits, are profiles of each of the majorr members of the Finance Team that outline their credentials and history with the Districtt as noted on the following page:

5 Finance and Audit Committee October 1, 2015 Item 1 Page 2 of 41 Fieldman Rolapp & Associates Financial Advisor (Exhibit A ) Stradling Yocca Carlson & Rauth Bond & Disclosure Counsel (Exhibit B ) Bank of American Merrill Lynch - Underwriter (Exhibit C ) ALTERNATIVES: Staff s analysis includes the following potential alternative: Take no action FISCAL ANALYSIS: Not applicable ENVIRONMENTAL REQUIREMENTS: None EXHIBITS/ATTACHMENTS: Exhibit A Fieldman Rolapp & Associates - Profile Exhibit B Stradling Yocca Carlson & Rauth - Profile Exhibit C Bank of America Merrill Lynch Profile

6 RANCHO CALIFORNIA WATER DISTRICT Financial Advisor Services September 21, MacArthur Blvd., Suite 1100 Irvine, CA phone: fax:

7 September 21, 2015 Mr. Richard Aragon, Finance Manager Rancho California Water District Winchester Road Temecula, CA Dear Mr. Aragon: In response to your request, please accept this as our response and commitment to continue to provide financial advisory services to Rancho California Water District (the District ). Our experience working closely with the District for nearly forty years uniquely qualifies Fieldman, Rolapp & Associates ( FRA ) to be its current financial advisor. Our representation of the District has focused on: 1. Providing the District with appropriate analysis of economic, financial, fiscal, and market conditions to support recommended actions. 2. Developing analysis of funding strategies using our own experience to provide the District with practical, cost-effective solutions. 3. Using our knowledge of credit criteria to assess the impact of any funding strategy to the District s credit ratings. 4. Breaking down complex issues into understandable concepts to allow Staff and policymakers to make informed, timely decisions. 5. Reviewing the District s historical financial results and assisting the District in updating its projections of forward-looking financial results. 6. Analyzing cash flows and financial terms and conditions to make recommendations in support of the District s business and operational matters, e.g. solar energy projects, the acquisition of Vail Lake, etc. 7. Assisting the District to contain costs in connection with its issuance of debt. As financial advisor for more than 46 special districts in California, we offer education, guidance, and recommendations, acting as an extension of staff. Our advisory role begins with a thorough understanding of our clients objectives. It is our duty to provide clients with the clearest, most direct and least costly path to achieve those objectives. We help clients achieve their financial goals by offering multiple options and then applying our expertise to narrow the options to a viable few. Before making a final recommendation, we apply our understanding of market, economic and political conditions to analyze the remaining viable options and assess mitigation strategies where appropriate. Our team, led by Robert Porr, working as an extension of staff, will continue to provide the District with timely, sophisticated, yet practical, financial advice as we have over the past forty years. During our more than forty years as the District s financial advisor we have successfully guided the District through numerous economic cycles. Our advice has helped the District to successfully transform MacArthur Blvd., Suite 1100 Irvine, CA phone: fax:

8 from a primarily undeveloped region of Riverside County to a matured special district with very strong (Aa2/AA+/AA+) credit ratings and an enviable cost of capital near 4.26%. Mr. Rolapp and Mr. Porr have been the only two lead advisors to the District. Since 2005 Mr. Porr has been on the FRA consulting team to Rancho and is always involved at every level of our service to the District. Robert was initially responsible for project and technical support (including performing financial modeling) for the District s revenue bonds and 2007 solar energy project. Mr. Porr is assisted by Lora Carpenter, Associate and a deep bench of other senior consultants that are added to the core team as necessary for each task assigned to FRA. Anna Sarabian, SVP of the Firm has a Doctorate in Economics and more than 12 years of public finance experience; Paul Pender, VP of the Firm, has a Masters Degree in Public Policy and more than 10 years of public finance experience; and Joshua Lentz, VP of the Firm, has 17 years of public finance experience with specialties in the areas of continuing disclosure and land-secured transactions. Our commitment to Rancho has been unwavering over the years as we have guided the District through bond and non-bond related activities that aided the District s financial success. I am available to discuss our services and future commitment to the District at your convenience. Thank you for your continued confidence in us. Sincerely, FIELDMAN, ROLAPP & ASSOCIATES Robert A. Porr Senior Vice President MacArthur Blvd., Suite 1100 Irvine, CA phone: fax:

9 Financial Advisor Services RANCHO CALIFORNIA WATER DISTRICT September 21, 2015 ABOUT THE FIRM Fieldman, Rolapp & Associates ( FRA ) is a full service, independent, financial advisor focused on the public sector in California. Our sole location is at MacArthur Boulevard, Suite 1100, in Irvine, California. We opened our doors in 1966, making us one of California s longest tenured financial advisors. During our more than forty-nine years in business, we have successfully guided our clients through numerous economic cycles. We have a staff of 20 employees (14 financial advisors), all based in Irvine, California. Through our Employee Stock Ownership Program (ESOP), our employees, as beneficial owners of the Firm, participate in an ownership culture; each of us has a strong interest in being efficient and providing responsive service on every assignment. As an independent advisor, the needs of our clients are our priority and, as a fiduciary, we guard their shortterm and long-term interests. FRA is an independent financial advisor and is a registered Municipal Advisor with the Municipal Securities Rulemaking Board (MSRB Registration #K0276) and the U.S. Securities and Exchange Commission (SEC Registration # ). As an independent advisor, FRA neither underwrites bonds nor has a relationship, direct or otherwise, with any municipal bond underwriter, broker/dealer or financial institution. We represent only public sector agencies and non-profit organizations. Mr. Robert Porr, Senior Vice President is the primary contact for the District. In 2009, Mr. Porr, after more than four years of supporting the District as a Project Manager, succeeded Mr. Lawrence Rolapp as the Engagement Manger for the District. Mr. Rolapp was the Engagement Manager to the District for nearly 35 years. Mr. Porr can be reached at the office, (949) or on his cellphone at (949) and is located at MacArthur Boulevard, Suite 1100, in Irvine, California. Mr. Porr is the head of the firm s water and utility sector practice, and with nearly 30 years of relevant experience he has completed more than $6.5 billion in water revenue financings in his career. PAGE 1

10 Financial Advisor Services RANCHO CALIFORNIA WATER DISTRICT September 21, 2015 FIRM QUALIFICATIONS AND EXPERIENCE Over the last ten years Fieldman, Rolapp & Associates has completed 173 utility financings for our California utility clients. The combined par amount for these 173 transactions is nearly $4.9 billion. We believe the number of transactions we have completed, and the diversity of our clients, have allowed our people to gain a better understanding of the business side of the municipal water industry. It is this understanding which permits us to approach challenges with practicality and develop effective financial advice. The table on the following page shows Thomson Reuters rankings of the top ten financial advisors experience with California water and wastewater bond issues over the past ten years. TOP 10 CALIFORNIA FINANCIAL ADVISORS Water & Wastewater Financings, * Rank Financial Advisor Transactions Completed (Sole FA) Par Amount (US$ mil) 1 Fieldman Rolapp & Associates 173 $4,857 2 Public Financial Mgmt Inc. 104 $5,290 3 Public Resource Advisory Group 101 $11,194 4 Montague DeRose & Associates 66 $10,151 5 Urban Futures Inc. 31 $490 6 KNN Public Finance 30 $1,945 7 Bartle Wells Associates 29 $1,000 8 Northcross Hill & Ach 24 $281 9 FirstSouthwest 21 $2, Harrell & Company Advisors LLC 18 $211 TOP 10 TOTALS 597 $37,477 * Source: Thomson Reuters on Demand, September 18, 2015 Expertise in Letter of Credit / Bank Facilities In terms of experience with bank facilities and bank agreements, FRA advises ongoing clients on approximately 35 issues backed by bank facilities. Most of these ongoing clients are water agencies. Further, over the past five years, we have advised on 26 new issues variable-rate transactions totaling over $2.2 billion. We advise the City of Irvine on its large variable-rate bond program to finance new infrastructure. The program currently consists of 13 separate variable-rate bond issues outstanding, totaling approximately $400 million, and backed by letter of credit facilities from 7 different banks. One of our duties is to advise on the renewal or substitution of these letters of credit. Since 2010, we have completed 18 separate renewals or substitutions of these facilities, including 11 in 2014 alone, due to improved bank pricing available. PAGE 2

11 Financial Advisor Services RANCHO CALIFORNIA WATER DISTRICT September 21, 2015 In terms of bank facilities, FRA typically takes the lead role in soliciting bank facility proposals and negotiating the terms with the selected bank. Of note, as a firm we have been particularly focused on ensuring that our clients will not pay any early termination fee in the event the bonds start to trade poorly due to the bank s credit. We have similarly pursued terms which reduce the costs and rates of bank bonds in the event such bank bonds are the result of the bank s own deteriorating credit. Technical and Data Resources FRA maintains the most sophisticated software available for structuring municipal bond issues. Our advanced DBC software allows us to develop any bond or loan structure. The project personnel assigned to the District are proficient in the use of the software. An advantage our team brings to every assignment is our overlapping technical abilities; each consultant is capable of using DBC software thus, our clients never wait for the quant-person to complete any structuring analysis. Technical resources include a live Bloomberg terminal and TM3 subscription that provides us with the most up-to-date market events and data. Each of these allows us to gather and analyze the fixed-income markets for use in debt pricing, spread negotiations and forecasting economic conditions. With access to Bloomberg and TM3, we have access to the latest pricing information in the fixed-income markets. While all of our technical resources allow FRA to keep abreast of the markets and trends, we have not allowed this new infrastructure to replace our relationships with underwriting firms. Our strong relationships with multiple underwriting firms gives us the ability to access opinions on proposed pricings from multiple sources to ensure appropriate market pricing of any bond issue. Fieldman Rolapp & Associates has regularly provided the District with municipal market updates as they impact each potential financial transaction through our access to a live Bloomberg terminal and potential scales from multiple underwriting desks. We will assess the markets and confer with the underwriter to evaluate the timing of the sale. We will assist in negotiating the sale of any refunding to the underwriter selected and make appropriate recommendations. These recommendations will include our perception of the appropriateness of the suggested levels of pricing (discount and interest rates), underwriting costs, costs of issuance, and any other financial items. We research similarly rated and structured transactions and provide the pricing and underwriter s compensation of the comparables to the District and the underwriter. PAGE 3

12 Financial Advisor Services RANCHO CALIFORNIA WATER DISTRICT September 21, 2015 EXPERIENCE WITH RCWD We have served as the financial advisor to Rancho California Water District ( RCWD ) since the late 1970 s. Since 1993 we served RCWD as financial advisor on the issuance of twenty-seven (27) transactions that brought $925,755,000 in par amount of bonds to market. In addition to our transaction management, we advised RCWD on: Critical features of its comprehensive debt, swap and reserve policies; Credit ratings strategies resulting in upgrades to Aa2/AA+/AA+; Structuring financial models to support decision-making; Providing financial modeling and guidance on three solar energy projects that at the time of initiation were projected to save a total of nearly $7.2 million; Balance sheet hedging strategy that resulted in significant savings to the District while mitigating risk; and Using interest rate swaps to reduce its exposure to interest rates. Below we have highlighted our service to the District by detailing a few of the successful innovations, and strategies. Debt Related 2005 Refunding Bonds - FRA was engaged to serve as financial advisor on the sale of approximately $71.2 million of revenue bonds. The 2005 revenue bonds were separated into three series; the purpose of the Series C Bonds was to refund the outstanding 1991 revenue bonds. Mr. Porr, (having returned to the Firm only a few weeks prior to being added to the FRA team), recognized that there was an opportunity to maximize savings by using U.S. Treasury securities in the refunding escrow rather than SLGS. The FRA team took the lead in preparing the analysis and managing the structuring and competitive bidding of over $20 million in U.S. Treasury obligations. On the day of pricing we received and analyzed competitive bids for two separate portfolios of various U.S Treasury securities. The most efficient portfolios were selected and this resulted in increased savings by nearly $800,000 in comparison to an escrow using SLGS only. Attached is our letter dated August 5, 2005 to the District documenting and detailing the process. FRA was paid $13,300 for serving as advisor on the $71.2 million of revenue bonds and $20,000 for the escrow structuring portion of our engagement Refunding Bonds - FRA was engaged to serve as financial advisor on the sale of approximately $159.6 million of revenue bonds. At that time the municipal market was first beginning to experience negative impacts from the liquidity shortage prompted by the mortgage crises. The District was focused on reducing its exposure to interest rates and financial institutions. The District sold fixed-rate revenue bonds that were insured by FSA and $44.6 million of variable-rate bonds that were secured by a letter of credit. As part of the 2008 refunding transactions the District terminated six of its interest rate swaps; the termination of the swaps further reduced the District s exposure to the impending financial crises; two interest rate swaps remain outstanding to this day. We were able to manage the team and the structuring of the transaction so that it was priced within sixty days of our engagement. By moving the transaction so quickly to pricing and then closing, the District was able to avoid the negative financial impact experienced by many municipalities who had floating rate debt paired with interest rate swaps outstanding during the most severe part of the liquidity crises. FRA was paid $90, (including expenses) for serving as the District s financial advisor. PAGE 4

13 Financial Advisor Services RANCHO CALIFORNIA WATER DISTRICT September 21, Build America Bonds - We developed a financing model in anticipation and support of the issuance of $100.7 million in Build America Bonds. As part of that assignment, RCWD tasked us with integrating our financing model into its existing 50-year financial plan; we were able to successfully integrate. In October 2010, we represented RCWD in connection with the sale of the Build America Bonds that funded water and wastewater projects as well as reimbursements to RCWD for previous year s capital expenditures. Despite the weak regional economy we successfully developed a credit strategy that demonstrated to the credit rating agencies the strength of the local economy within RCWD s service territory. Consequently, despite weakened demand and lower debt service coverage levels, RCWD s debt was upgraded to AA+ by Standard and Poor s and affirmed by Moody s at Aa2 and Fitch at AA Solar Project - We worked with the District and representatives of SunPower to structure a costeffective transaction that financed the District s purchase of a solar energy system. Our engagement included reviewing the bidders proposals recommending the most cost effective bid and providing financial analysis to support our recommendation. We took the lead in securing allocation from the County of Riverside to issue Qualified Energy Conservation Bonds ( QECB s ): the allocation of QECB s allowed the District to finance the project at an effective interest cost of 1.54%. We agreed to work and charge the District an hourly fee for the analysis leading up to the bond issue for which we were paid and a fee for the bond issue; at closing we agreed to waive a portion of our hourly fee amount of approximately $20,000. In total we were paid approximately $57,000. As a result of the use of QECB s, we estimated at the time, that the District saved approximately $3 million in comparison to a comparable tax-exempt bond issue. The District projected at the time that energy cost savings would be approximately $3 million. Below we have provided an estimate of the weighted average true-interest-cost of the District s currently outstanding revenue bonds. For relative comparative purposes, we have included comparisons of three Bond Buyer Indices. RCWD - Outstanding Debt Series 2005C Fixed Rate Refunding Revenue Bonds Series 2002A Fixed Rate Revenue Bonds (1) Series 2008A Fixed Rate Refunding Revenue Bonds Series 2010A Build America Bonds (3) Series 2008B Adjustable Rate Refunding Revenue Bonds (2) Series 2011 Qualified Energy Conservation Bonds (3) Par Amount Dated Date Average Life (Years) True Interest Cost AA GO Bond Index (20 Yr Term) Bond Buyer Indices AA+ GO Bond Index A1/A+ Rev. Bond Index (25 Yr Term) $18,185,000 8/3/ % 4.30% 4.23% 4.84% $60,200,000 7/18/ % 4.47% 4.41% 4.63% $159,580,000 4/2/ % 4.88% 4.82% 5.17% $100,785,000 11/2/ % 6.01% 5.89% 6.48% $44,625,000 3/23/ % 5.00% 4.75% 5.78% $9,870,000 11/8/ % 4.12% 3.85% 5.10% Total $393,245, Weighted Average TIC of Outstanding Par 4.261% (1) Series 2002A was a reoffering of the Adjustable Rate Refunding Revenue Bonds, Series 2002A dated August 1, (2) Series 2008B was a reoffering of the Adjustable Rate Refunding Revenue Bonds, Series 2008B dated April 2, The TIC reflects net effective swap rate. (3) TIC reflects net effective interest rate and includes adjustments for federal subsidies at the time the issues were priced. PAGE 5

14 Financial Advisor Services RANCHO CALIFORNIA WATER DISTRICT September 21, 2015 Non-Debt Related In connection with financial issues facing the District, we have always been prepared to take market information and focus on relevant matters to provide objective quantitative analysis and advice to enhance the decision-making process. When relevant we are exceedingly adept at preparing alternative solutions for the District s consideration so that each decision may be one which is well informed. We provide rigorous and objective quantitative analysis and are astute business people and as a result we ve been tasked by the District with many non-transactional matters. Over the years we have advised RCWD on its hedging techniques to mitigate its exposure to floating rate debt and interest rate swaps. We have also provided advice on critical features of its debt, swap and reserve policies. We developed a sophisticated model to analyze the costs and benefits of various financing alternatives and timing considerations for the expansion of RCWD s wastewater treatment plant. During 2014 and 2015 we worked with the District to analyze the existing wastewater debt and structure multiple refunding alternatives. Our analysis was presented to the Chief Financial Officers of two other agencies and reviewed by their independent consultant (PFM). Our efforts were commended by the CFOs and PFM. We agreed to work hourly and to cap our fee at $49,000 although our time and expenses exceeded $72,000. We continue to support the District in this matter without additional charges. The Current Fieldman, Rolapp Team that Serves the District The team assigned to the District is comprised of two primary advisors and three team members who have been engaged on an as-needed basis. Mr. Porr has completed the vast majority of our utility practice engagements in the past ten years. The firm has served the District as its Financial Advisor for the past 40 years and Robert has been included in every engagement since Our current team is as follows. Mr. Robert A. Porr, Senior Vice President, serves as the day-to-day direct point of contact and coordinates our firm s service delivery as engagement manager. Mr. Porr is the head of the firm s water and utility sector practice, with nearly 30 years of relevant experience. Further, his prior experience as an investment banker makes him especially effective in negotiating underwriter s discounts and bond pricing. Ms. Lora Carpenter, Associate, serves in a quantitative and overall project support role and has worked for almost 18 months on the District s projects. Ms. Carpenter s background in Mathematics will be reflected in the modeling and other quantitative efforts of our team. ROBERT A. PORR CIPMA direct rporr@fieldman.com Mr. Robert A. Porr, Senior Vice President, returned to the firm in May 2005 after spending eight years as a public finance investment banker. Since re-joining the firm, he has focused on serving the firm s utility clients. He has been advisor to Rancho California Water District, Eastern Municipal Water District, Orange County Water District, Western Municipal Water District, Mesa Consolidated Water District, Castaic Lake Water Agency, Azusa Light & Water, and Olivenhain Municipal Water District. Mr. Porr leads the swap advisory practice at the Firm and has served as swap advisor to Rancho California Water District, Riverside County Transportation Commission, Eastern Municipal Water District, Castaic Lake Water Agency, the County of Riverside, Hemet Unified School District, and Western Municipal Water District. Mr. Porr has completed more than $6.5 billion in water revenue financings during his career; approximately $1 billion has been in connection with variable-rate bonds. He has structured commercial paper programs for Castaic Lake Water Agency and assisted the finance team for Riverside County Transportation Commission with that CP Program; he also structured a credit facility for Merced Irrigation District and is currently working on a structured note program that offers the flexibility of CP, but with greater flexibility at a lower cost. Mr. Porr has aided Mr. Porr structured and completed approximately $400 million of GO PAGE 6

15 Financial Advisor Services RANCHO CALIFORNIA WATER DISTRICT September 21, 2015 Bonds for water district clients in his career. His experience as an investment banker includes working with numerous local agencies in connection with the issuance of more than $1.2 billion in debt. Mr. Porr has assisted issuers with the structure and sale of many forms of debt including general obligation, special tax, assessment, revenue and lease backed debt. He structured nearly $100 million of complex taxbacked refunding debt for the County of Riverside and developed a novel lease revenue bond structure for the Alaska Industrial Development and Export Authority. Mr. Porr s experience includes investment banking assignments for Anaheim Public Utilities, the County of Los Angeles and the Cities of Murrieta, Norco, Palmdale and Redlands. During his previous employment with Fieldman, Rolapp & Associates, Mr. Porr worked with Central Coast Water Authority, Coachella Valley Water District, Eastern Municipal Water District, East Valley Water District, Elsinore Valley Municipal Water District, Orange County Water Agency, Palmdale Water District and Santa Margarita Water District. Mr. Porr worked as a finance/marketing representative for Lockheed Martin Finance Corporation. During his time with LMFC, Mr. Porr worked on developing financing structures to support turn-key delivery programs for communication satellites, aircraft and proprietary technology products. Mr. Porr was involved in projects for the People s Republic of China, valued at approximately $1 billion, and for a consortium of Asian telephony entities valued at nearly $500 million. Mr. Porr earned his undergraduate degree in Psychology from Pace University in New York, NY and his Juris Doctorate from New York Law School in New York, NY. Mr. Porr holds the CIPMA designation as a Certified Independent Public Municipal Advisor from the National Association of Municipal Advisors, a registered Investment Advisor Representative (Series 65) and is admitted to practice law in the State of New York. PAGE 7

16 Financial Advisor Services RANCHO CALIFORNIA WATER DISTRICT September 21, 2015 LORA CARPENTER direct Ms. Lora Carpenter, Associate, joined the firm in March Since joining the firm, Ms. Carpenter has been dedicated to the firm s utility clients. Lora provides technical and project support for Rancho California Water District, Azusa Light & Water, (both water and electric), Castaic Lake Water Agency, and its retail division Santa Clarita Water District, Cucamonga Valley Water District, East Valley Water District, El Dorado Irrigation District, Indio Water Authority, Lake Arrowhead Community Services District, Marina Coast Water District, Merced Irrigation District, Mojave Water Agency, Olivenhain Municipal Water District, South Coast Water District, Sacramento Suburban Water District, Vallecitos Water District, West Valley Water District and Zone 7 Water Agency. Lora s current assignments include projects for Rancho California Water District, Marina Coast Water District, Merced Irrigation District, Orange County Water District, Silicon Valley Clean Water and the City of Redlands. For these clients, Ms. Carpenter conducts credit analysis and prepares credit presentations; researches relevant market conditions and events; and prepares quantitative analyses to support transaction structures. Prior to joining the firm, Ms. Carpenter served as an Office Clerk for a Surgeon of St. Joseph s Hospital in Orange and a Teacher s Assistant for the Geology Department at Bucknell University. Lora received her Bachelor of Science degree in Mathematics from Bucknell University. PAUL D. PENDER CIPMA direct ppender@fieldman.com Mr. Paul D. Pender, Vice President, joined the firm in January Since joining the firm, Mr. Pender has completed over one-hundred financing engagements. Mr. Pender specializes in California water finance, with on-going clients including Orange County Water District, Castaic Lake Water Agency, Mesa Water District, Rancho California Water District, Cucamonga Valley Water District, Merced Irrigation District, Mojave Water Agency, Silicon Valley Clean Water, and the water-enterprise funds of the Cities of Tustin and San Juan Capistrano. For these clients, Mr. Pender specializes in analyzing the economics bond structuring alternatives, including variable-rate bonds. He also manages the creation of credit materials and interactions with credit rating agencies. In the case of competitive bond sales, Mr. Pender manages the technical aspects of the process, including drafting the terms of the sale, setting up the electronic bidding platform, and soliciting bids from potential underwriters. Other notable client engagements completed by Mr. Pender include the County of Orange, the City of Long Beach, the County of Los Angeles, the City of Irvine, and the City of Newport Beach. Mr. Pender also provides clients with a wide range of non-transactional financial advisory services, including: long-term capital improvement finance plans, refinancing of existing debt analyses, special district formation, and debt policy analysis. Mr. Pender has a Masters of Public Policy degree from the University of Southern California and a Bachelor's degree in History from Grinnell College (Iowa). He also maintains a Certified Independent Municipal Advisor (CIPMA) designation and a Series 65 uniform investment advisory capability, through Fieldman, Rolapp Financial Services. PAGE 8

17 Financial Advisor Services RANCHO CALIFORNIA WATER DISTRICT September 21, 2015 ANNA V. SARABIAN, PH.D. CIPMA direct Ms. Anna V. Sarabian, Ph.D., Senior Vice President, joined the firm in July Before joining the firm, Ms. Sarabian served as a management analyst, investment banking analyst, and teaching and research assistant. Ms. Sarabian has focused on serving a wide variety of municipal clients in the firm s utility, city and redevelopment agency, transportation, and higher education client sectors. She has completed transactions with the Eastern Municipal Water District, Elsinore Valley Municipal Water District, Rancho California Water District, Mesa Consolidated Water District, Western Municipal Water District, the cities of San Luis Obispo, Aliso Viejo, Dana Point, Mission Viejo, Santa Ana, Temecula, and Merced, the Riverside County Transportation Commission and the North Dakota State University. Since joining the firm, Ms. Sarabian has completed several hundred financing engagements, including a variety of fixed and variable rate negotiated or competitive transactions, such as tax allocation bonds, certificates of participation, lease revenue bonds, commercial paper, general obligation bonds, interest rate swap agreements, and special district formation and financings. Recently, she has completed projects involving a wide range of financial advisory services, including solar feasibility analysis, debt, reserve and budget policy development, capital improvement plans and long-range financial plans, parking fund financial analysis, swap advisory services, debt structuring cash flow utilization and refinancing opportunities, credit analysis, and ad hoc financial analysis. Ms. Sarabian received her Master of Business Administration (concentration in Finance) from the University of California-Riverside and her Ph.D. in Economics from the Center for Economic Research and Graduate Education (CERGE), Prague, the Czech Republic and the State of New York. JOSHUA J. LENTZ CIPMA direct jlentz@fieldman.com Mr. Joshua J. Lentz, Vice President, joined Fieldman, Rolapp & Associates in August Prior to joining the firm, Mr. Lentz was a Public Finance Paralegal for over eight years. Mr. Lentz has been involved in all aspects of public finance issuances, including general obligation bonds, lease revenue obligations, special tax bonds, assessment district bonds, tax allocation bonds, enterprise revenue obligations, multifamily housing revenue bonds and 501(c)(3) revenue obligations. Mr. Lentz specializes in several areas of financial advisory, including debt capacity, rating agency credit metrics and land secured district formation. Mr. Lentz assists a variety of clients with post issuance matters including continuing disclosure and investment of bond proceeds. Mr. Lentz co-manages Applied Best Practices, LLC, a subsidiary of FRA that assists with all aspects of continuing disclosure. He has provided, or currently provides, continuing disclosure services to the following Districts and Authorities: Adelanto Public Utility Authority, Carpinteria Valley Water District, Cucamonga Valley Water District, Delano-Earlimart Irrigation District, East Valley Water District, El Dorado Irrigation District, Goleta Water District, Inland Empire Utilities Agency, Jurua Community Services District, Kings River Conservation District, Lindsay-Strathmore Irrigation District, Montecito Sanitary District, Nevada Irrigation District, North of the River Sanitary District No. 1, Oklahoma Municipal Power Authority, Olivenhain Municipal Water District, Orange County Water District, Padre Dam Municipal Water District, Porterville Irrigation District, Rancho California Water District, Sacramento Suburban Water District, San Bernardino County (Valley) Municipal Water District, San Juan Water District, Santa Margarita Water District, Saucelito Irrigation District, Southern California Public Power Authority, Stockton East Water District, Walnut Valley Water District, West Basin Municipal Water District, West Stanislaus Irrigation District, Western Municipal Water District, Yorba Linda Water District, and Yucaipa Valley Water District Mr. Lentz received his Bachelor of Arts in History with concentrations in Economics, Political Science, Sociology, and Urban Geography from the Arizona State University. Mr. Lentz is a registered Investment Advisor Representative (Series 65). PAGE 9

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32 Rancho California Water District Bank of America Merrill Lynch Credentials September, 2015

33 1

34 Notice to Recipient Confidential Bank of America Merrill Lynch is the marketing name for the global banking and global markets businesses of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., member FDIC. Securities, strategic advisory, and other investment banking activities are performed globally by investment banking affiliates of Bank of America Corporation ( Investment Banking Affiliates ), including, in the United States, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Merrill Lynch Professional Clearing Corp., which are both registered broker dealers and members of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. Investment products offered by Investment Banking Affiliates: Are Not FDIC Insured * May Lose Value * Are Not Bank Guaranteed. These materials have been prepared by one or more subsidiaries of Bank of America Corporation for the client or potential client to whom such materials are directly addressed and delivered (the Company ) in connection with an actual or potential mandate or engagement and may not be used or relied upon for any purpose other than as specifically contemplated by a written agreement with us. These materials are based on information provided by or on behalf of the Company and/or other potential transaction participants, from public sources or otherwise reviewed by us. We assume no responsibility for independent investigation or verification of such information (including, without limitation, data from third party suppliers) and have relied on such information being complete and accurate in all material respects. To the extent such information includes estimates and forecasts of future financial performance prepared by or reviewed with the managements of the Company and/or other potential transaction participants or obtained from public sources, we have assumed that such estimates and forecasts have been reasonably prepared on bases reflecting the best currently available estimates and judgments of such managements (or, with respect to estimates and forecasts obtained from public sources, represent reasonable estimates). No representation or warranty, express or implied, is made as to the accuracy or completeness of such information and nothing contained herein is, or shall be relied upon as, a representation, whether as to the past, the present or the future. These materials were designed for use by specific persons familiar with the business and affairs of the Company and are being furnished and should be considered only in connection with other information, oral or written, being provided by us in connection herewith. These materials are not intended to provide the sole basis for evaluating, and should not be considered a recommendation with respect to, any transaction or other matter. These materials do not constitute an offer or solicitation to sell or purchase any securities and are not a commitment by Bank of America Corporation or any of its affiliates to provide or arrange any financing for any transaction or to purchase any security in connection therewith. These materials are for discussion purposes only and are subject to our review and assessment from a legal, compliance, accounting policy and risk perspective, as appropriate, following our discussion with the Company. We assume no obligation to update or otherwise revise these materials. These materials have not been prepared with a view toward public disclosure under applicable securities laws or otherwise, are intended for the benefit and use of the Company, and may not be reproduced, disseminated, quoted or referred to, in whole or in part, without our prior written consent. These materials may not reflect information known to other professionals in other business areas of Bank of America Corporation and its affiliates. Bank of America Corporation and its affiliates (collectively, the BAC Group ) comprise a full service securities firm and commercial bank engaged in securities, commodities and derivatives trading, foreign exchange and other brokerage activities, and principal investing as well as providing investment, corporate and private banking, asset and investment management, financing and strategic advisory services and other commercial services and products to a wide range of corporations, governments and individuals, domestically and offshore, from which conflicting interests or duties, or a perception thereof, may arise. In the ordinary course of these activities, parts of the BAC Group at any time may invest on a principal basis or manage funds that invest, make or hold long or short positions, finance positions or trade or otherwise effect transactions, for their own accounts or the accounts of customers, in debt, equity or other securities or financial instruments (including derivatives, bank loans or other obligations) of the Company, potential counterparties or any other company that may be involved in a transaction. Products and services that may be referenced in the accompanying materials may be provided through one or more affiliates of Bank of America Corporation. We have adopted policies and guidelines designed to preserve the independence of our research analysts. The BAC Group prohibits employees from, directly or indirectly, offering a favorable research rating or specific price target, or offering to change a rating or price target to a subject company as consideration or inducement for the receipt of business or for compensation and the BAC Group prohibits research analysts from being directly compensated for involvement in investment banking transactions. We are required to obtain, verify and record certain information that identifies the Company, which information includes the name and address of the Company and other information that will allow us to identify the Company in accordance, as applicable, with the USA Patriot Act (Title III of Pub. L (signed into law October 26, 2001)) and such other laws, rules and regulations as applicable within and outside the United States. We do not provide legal, compliance, tax or accounting advice. Accordingly, any statements contained herein as to tax matters were neither written nor intended by us to be used and cannot be used by any taxpayer for the purpose of avoiding tax penalties that may be imposed on such taxpayer. If any person uses or refers to any such tax statement in promoting, marketing or recommending a partnership or other entity, investment plan or arrangement to any taxpayer, then the statement expressed herein is being delivered to support the promotion or marketing of the transaction or matter addressed and the recipient should seek advice based on its particular circumstances from an independent tax advisor. Notwithstanding anything that may appear herein or in other materials to the contrary, the Company shall be permitted to disclose the tax treatment and tax structure of a transaction (including any materials, opinions or analyses relating to such tax treatment or tax structure, but without disclosure of identifying information or, except to the extent relating to such tax structure or tax treatment, any nonpublic commercial or financial information) on and after the earliest to occur of the date of (i) public announcement of discussions relating to such transaction, (ii) public announcement of such transaction or (iii) execution of a definitive agreement (with or without conditions) to enter into such transaction; provided, however, that if such transaction is not consummated for any reason, the provisions of this sentence shall cease to apply. Copyright 2015 Bank of America Corporation.

35 Table of Contents Bank of America Merrill Lynch Credentials BofAML Team & Credentials 1 BofAML History with RCWD 2 BUSINESS PROMOTIONAL MATERIALS. BofAML IS NOT YOUR MUNICIPAL ADVISOR OR FIDUCIARY. Bank of America Merrill Lynch ( BofAML ) is providing the information contained herein for discussion purposes only in anticipation of being engaged to serve as an underwriter. The information provided herein is not intended to be, and should not be construed as, advice within the meaning of Section 15B of the Securities Exchange Act of 1934, as amended (the Act ), and BofAML is not recommending any action to you. BofAML is not acting as your municipal advisor within the meaning of the Act, and does not owe a fiduciary duty to you pursuant to the Act with respect to the information and material contained in this communication. BofAML is seeking to serve as an underwriter and not as a financial advisor or municipal advisor on a future transaction. The primary role of BofAML, as an underwriter, is to purchase securities with a view to distribution in an arm s-length commercial transaction between you and BofAML and BofAML has financial and other interests that differ from yours. BofAML is acting for its own interests. You should discuss any information and material contained in this communication with any and all of your own internal or external municipal and/or financial, legal, accounting, tax and other advisors and experts, as applicable, to the extent you deem appropriate before acting on this information or material.

36 1. BofAML Team & Credentials

37 BofAML Team & Credentials Team Introduction BofAML offers the District access to a deep bench of banking, credit and marketing resources Public Finance Banking Jeffrey Bower Managing Director (LA) Lead Banker (213) jeffrey.bower@baml.com Frank Lauterbur Managing Director (LA) Resource Manager (213) frank.lauterbur@baml.com Jack Tsang Vice President (LA) Senior Execution Banker (213) jack.tsang@baml.com Geoffrey Sauers Associate (LA) Execution Banker (213) geoffrey.sauers@baml.com Timur Celikel Analyst (LA) Support Banker (213) timur.celikel@baml.com Underwriting CA Trading CA Retail Other Specialists Catherine Crews Director (NY) Lead Underwriter (212) catherine.crews@baml.com Brandi Harkins Vice President (LA) Municipal Trading (213) brandi.jackson@baml.com Bruce Huang Vice President (LA) California Retail Marketing (213) bruce.huang@baml.com Brad Gewehr Director (NY) Municipal Credit Strategist (646) bradley.gewehr@baml.com Brendan Troy Managing Director (NY) Back-Up Underwriter (212) brendan.troy@baml.com Jeff Harris Director (LA) Municipal Trading (213) jeff.harris@baml.com Grace Gaoaen Vice President (SF) California Retail Marketing (415) grace.c.gaoaen@baml.com Grace Barvin Senior Vice President (SF) Credit Products Specialist (415) grace.barvin@baml.com 2

38 BofAML Credentials Municipal Underwriting Credentials 2014 Senior Managed Negotiated Financings 2014 Senior Managed Competitive Financings 257 $30, $14,264 J P Morgan 216 $26,400 J P Morgan 122 $11,208 Citi 243 $22,461 Citi 131 $8,703 Morgan 168 $20,883 Morgan Stanley 126 $6,464 RBC Capital 532 $18,978 Robert W Baird 495 $4,764 Results of our strong banking relationships and willingness to commit capital BofAML is the #1 senior manager of municipal bonds in 2015 YTD #1 Competitive Underwriter 1992 #1 Competitive Underwriter 1993 #1 Competitive Underwriter 1994 #1 Competitive Underwriter 1995 #1 Competitive Underwriter 1996 #1 Competitive Underwriter 1997 BofAML is the #1 underwriter of both negotiated and competitive financings for 2014 #1 Competitive Underwriter 1998 #1 Competitive Underwriter 1999 #1 Competitive Underwriter 2000 #1 Competitive Underwriter 2001 #1 Competitive Underwriter 2002 #1 Competitive Underwriter 2003 BofAML also was the #1 ranked underwriter for negotiated financings in each of 2012 and 2013 #1 Competitive Underwriter 2004 #1 Competitive Underwriter 2005 #1 Competitive Underwriter 2006 #1 Competitive Underwriter 2007 #1 Competitive Underwriter 2008 #1 Competitive Underwriter rd consecutive year as the #1 underwriter of competitive financings #1 Competitive Underwriter 2010 #1 Competitive Underwriter 2011 #1 Competitive Underwriter 2012 #1 Competitive Underwriter 2013 #1 Competitive Underwriter Source: Thomson Reuters as of 12/31/2014. Note: Rankings reflect true economics to lead manager; long-term financings; amounts in millions.

39 $Billions BofAML Credentials Capital and Ratings BofAML is one of the best capitalized broker-dealers in the municipal securities industry enabling us to price bonds approximately, maintain liquidity in the secondary market, and underwrite unsold balances BANK OF AMERICA, N.A. RATINGS Moody s S&P Fitch Long-Term A1 A A+ Short-Term P-1 A-1 F1 EXCESS NET CAPITAL BY FIRM (1) BofAML CAPITAL POSITION Goldman Sachs JP Morgan BofAML Morgan Stanley Citi Barclays Wells Fargo RBC Jefferies Total Capital (1) Equity Capital (1) Net Capital (2) Excess Net Capital (2) June 30, 2015 $217.9 billion billion 9.5 billion 8.0 billion (1) Reflects Bank of America Corporation. (2) Reflects Merrill Lynch, Pierce, Fenner & Smith Incorporated. Excess Net capital reflects the difference between the minimum capital a firm is required to maintain to cover potential market and credit risks and the amount of capital it actually holds. In other words, excess net capital represents the pool of capital a firm has available to underwrite Rancho California Water District s bonds. As illustrated above, BofAML currently maintains the industry s third largest excess net capital position. 4 (1) US Commodities Futures Trading Commission 7/31/2015.

40 BofA Merrill Lynch Credentials Leadership in the Water/Wastewater Industry National Water/Wastewater Experience Our Team s CA Water/Wastewater Clients WATER / WASTEWATER RANKINGS (1) Senior Managed Co-Managed Sacramento Regional County Sanitation District Sacramento Area Flood Control Agency Sacramento County Water Agency Period Par ($MM) # of Deals Rank Par ($MM) # of Deals Santa Clara Valley Water District City of Roseville (Water) California Department of Water Resources 2010 Present $24, $41, , , , , , , , , , , Los Angeles City Sanitation District Los Angeles County Sanitation Districts Las Virgenes Muni Water District Metropolitan Water District of So. California Orange County Sanitation District Orange County Water District Vallecitos Water District Olivenhain Municipal Water District San Diego County Water Authority City of San Diego (Water and Wastewater) East Bay Municipal Utility District City of Fresno (Water & Wastewater) San Luis Obispo County Financing Authority Kern County Water Agency Palmdale Water District Los Angeles DWP Lake Arrowhead Comm. Services District Irvine Ranch Water District Yucaipa Valley Water District City of Riverside Yorba Linda Water District Western Riverside County Wastewater Authority Western Municipal Water District Rancho California Water District Our banking and marketing team have substantial relevant experience with a broad range of California water credits 5 (1) Source: Thomson Reuters as of 9/15/2015.

41 813G: _2.wor Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Santa Rosa (2) Valencia Valencia Valencia Valencia Valencia Valencia Valencia Valencia Valencia Valencia Valencia Valencia Valencia Valencia Valencia Valencia Valencia Valencia Valencia Valencia Valencia Valencia Valencia Valencia Valencia Valencia Valencia Valencia Valencia Valencia Valencia Valencia Valencia Valencia Valencia Valencia Valencia Valencia Valencia Valencia Valencia Valencia Valencia Valencia Valencia Valencia Valencia Valencia Valencia Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) Pasadena (3) San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Palo Alto Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Pleasanton Oakland Oakland Oakland Oakland Oakland Oakland Oakland Oakland Oakland Oakland Oakland Oakland Oakland Oakland Oakland Oakland Oakland Oakland Oakland Oakland Oakland Oakland Oakland Oakland Oakland Oakland Oakland Oakland Oakland Oakland Oakland Oakland Oakland Oakland Oakland Oakland Oakland Oakland Oakland Oakland Oakland Oakland Oakland Oakland Oakland Oakland Oakland Oakland Oakland Berkeley Berkeley Berkeley Berkeley Berkeley Berkeley Berkeley Berkeley Berkeley Berkeley Berkeley Berkeley Berkeley Berkeley Berkeley Berkeley Berkeley Berkeley Berkeley Berkeley Berkeley Berkeley Berkeley Berkeley Berkeley Berkeley Berkeley Berkeley Berkeley Berkeley Berkeley Berkeley Berkeley Berkeley Berkeley Berkeley Berkeley Berkeley Berkeley Berkeley Berkeley Berkeley Berkeley Berkeley Berkeley Berkeley Berkeley Berkeley Berkeley Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Menlo Park Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Walnut Creek (2) Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley Mill Valley San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Francisco (2) San Mateo San Mateo San Mateo San Mateo San Mateo San Mateo San Mateo San Mateo San Mateo San Mateo San Mateo San Mateo San Mateo San Mateo San Mateo San Mateo San Mateo San Mateo San Mateo San Mateo San Mateo San Mateo San Mateo San Mateo San Mateo San Mateo San Mateo San Mateo San Mateo San Mateo San Mateo San Mateo San Mateo San Mateo San Mateo San Mateo San Mateo San Mateo San Mateo San Mateo San Mateo San Mateo San Mateo San Mateo San Mateo San Mateo San Mateo San Mateo San Mateo Napa Napa Napa Napa Napa Napa Napa Napa Napa Napa Napa Napa Napa Napa Napa Napa Napa Napa Napa Napa Napa Napa Napa Napa Napa Napa Napa Napa Napa Napa Napa Napa Napa Napa Napa Napa Napa Napa Napa Napa Napa Napa Napa Napa Napa Napa Napa Napa Napa Sacramento Sacramento Sacramento Sacramento Sacramento Sacramento Sacramento Sacramento Sacramento Sacramento Sacramento Sacramento Sacramento Sacramento Sacramento Sacramento Sacramento Sacramento Sacramento Sacramento Sacramento Sacramento Sacramento Sacramento Sacramento Sacramento Sacramento Sacramento Sacramento Sacramento Sacramento Sacramento Sacramento Sacramento Sacramento Sacramento Sacramento Sacramento Sacramento Sacramento Sacramento Sacramento Sacramento Sacramento Sacramento Sacramento Sacramento Sacramento Sacramento Long Beach Long Beach Long Beach Long Beach Long Beach Long Beach Long Beach Long Beach Long Beach Long Beach Long Beach Long Beach Long Beach Long Beach Long Beach Long Beach Long Beach Long Beach Long Beach Long Beach Long Beach Long Beach Long Beach Long Beach Long Beach Long Beach Long Beach Long Beach Long Beach Long Beach Long Beach Long Beach Long Beach Long Beach Long Beach Long Beach Long Beach Long Beach Long Beach Long Beach Long Beach Long Beach Long Beach Long Beach Long Beach Long Beach Long Beach Long Beach Long Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Seal Beach Costa Mesa Costa Mesa Costa Mesa Costa Mesa Costa Mesa Costa Mesa Costa Mesa Costa Mesa Costa Mesa Costa Mesa Costa Mesa Costa Mesa Costa Mesa Costa Mesa Costa Mesa Costa Mesa Costa Mesa Costa Mesa Costa Mesa Costa Mesa Costa Mesa Costa Mesa Costa Mesa Costa Mesa Costa Mesa Costa Mesa Costa Mesa Costa Mesa Costa Mesa 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Newport Beach (4) Newport Beach (4) Newport Beach (4) Newport Beach (4) Newport Beach (4) Newport Beach (4) Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Woodland Hills Glendale Glendale Glendale Glendale Glendale Glendale Glendale Glendale Glendale Glendale Glendale Glendale Glendale Glendale Glendale Glendale Glendale Glendale Glendale Glendale Glendale Glendale Glendale Glendale Glendale Glendale Glendale Glendale Glendale Glendale Glendale Glendale Glendale Glendale Glendale Glendale Glendale Glendale Glendale Glendale Glendale Glendale Glendale Glendale Glendale Glendale Glendale Glendale Glendale Encino Encino Encino Encino Encino Encino Encino Encino Encino Encino Encino Encino Encino Encino Encino Encino Encino Encino Encino Encino Encino Encino Encino Encino Encino Encino Encino Encino Encino Encino Encino Encino Encino Encino Encino Encino Encino Encino Encino Encino Encino Encino Encino Encino Encino Encino Encino Encino Encino Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Westlake Village (3) Oxnard Oxnard Oxnard Oxnard Oxnard Oxnard Oxnard Oxnard Oxnard Oxnard Oxnard Oxnard Oxnard Oxnard Oxnard Oxnard Oxnard Oxnard Oxnard Oxnard Oxnard Oxnard Oxnard Oxnard Oxnard Oxnard Oxnard Oxnard Oxnard Oxnard Oxnard Oxnard Oxnard Oxnard Oxnard Oxnard Oxnard Oxnard Oxnard Oxnard Oxnard Oxnard Oxnard Oxnard Oxnard Oxnard Oxnard Oxnard Oxnard Montecito Montecito Montecito Montecito Montecito Montecito Montecito Montecito Montecito Montecito Montecito Montecito Montecito Montecito Montecito Montecito Montecito Montecito Montecito Montecito Montecito Montecito Montecito Montecito Montecito Montecito Montecito Montecito Montecito Montecito Montecito Montecito Montecito Montecito Montecito Montecito Montecito Montecito Montecito Montecito Montecito Montecito Montecito Montecito Montecito Montecito Montecito Montecito Montecito Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Santa Barbara (2) Century City Century City Century City Century City Century City Century City Century City Century City Century City Century City Century City Century City Century City Century City Century City Century City Century City Century City Century City Century City Century City Century City Century City Century City Century City Century City Century City Century City Century City Century City Century City Century City Century City Century City Century City Century City Century City Century City Century City Century City Century City Century City Century City Century City Century City Century City Century City Century 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Folsom Folsom Folsom Folsom Folsom Folsom Folsom Folsom Folsom Folsom Folsom Folsom Folsom Roseville Roseville Roseville Roseville Roseville Roseville Roseville Roseville Roseville Roseville Roseville Roseville Roseville Roseville Roseville Roseville Roseville Roseville Roseville Roseville Roseville Roseville Roseville Roseville Roseville Roseville Roseville Roseville Roseville Roseville Roseville Roseville Roseville Roseville Roseville Roseville Roseville Roseville Roseville Roseville Roseville Roseville Roseville Roseville Roseville Roseville Roseville Roseville Roseville Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Bakersfield Modesto Modesto Modesto Modesto Modesto Modesto Modesto Modesto Modesto Modesto Modesto Modesto Modesto Modesto Modesto Modesto Modesto Modesto Modesto Modesto Modesto Modesto Modesto Modesto Modesto Modesto Modesto Modesto Modesto Modesto Modesto Modesto Modesto Modesto Modesto Modesto Modesto Modesto Modesto Modesto Modesto Modesto Modesto Modesto Modesto Modesto Modesto Modesto Modesto Fresno Fresno Fresno Fresno Fresno Fresno Fresno Fresno Fresno Fresno Fresno Fresno Fresno Fresno Fresno Fresno Fresno Fresno Fresno Fresno Fresno Fresno Fresno Fresno Fresno Fresno Fresno Fresno Fresno Fresno Fresno Fresno Fresno Fresno Fresno Fresno Fresno Fresno Fresno Fresno Fresno Fresno Fresno Fresno Fresno Fresno Fresno Fresno Fresno Carmel Carmel Carmel Carmel Carmel Carmel Carmel Carmel Carmel Carmel Carmel Carmel Carmel Carmel 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Redding Redding Redding Redding Redding Redding Redding Redding Redding Redding Redding Redding Redding Redding Redding Redding Redding Redding Redding Redding Redding Redding Redding Redding Redding Redding Redding Redding Redding Redding Redding Redding Redding Redding Redding Redding Redding Redding Redding Redding Redding Institutional Presence 40 Offices Nationwide 381 Sales People 27 Muni Sales People 394,000 Accounts National Retail Presence 670 Offices Nationwide 16,000+ Retail Brokers $2.2 Trillion Retail Assets 13 Million Accounts California Retail Presence 98 Retail Offices 3,429 Retail Brokers $279.1 Billion Retail Assets 617,711 Accounts 6 Leading Municipal Distribution System BofAML Actively Targets All Key Investor Classes Marketing Strategy and Considerations

42 2. BofAML History with RCWD

43 BofAML History with RCWD History of Assisting the District s Financings Our bankers have a long history of successfully working with the District Our team was selected as the District s underwriter through several competitive requests for proposals Our lead bankers have participated in almost all of the District s financings since 1991 Helped develop the rating strategy that enhanced the District s ratings from Baa1 in the 1990s to Aa2/AA+/AA+ We actively participate in each of the District s annual rating agency presentations Worked with the District s FA and Bond Counsel starting in 2000 to design and implement the current master bond legal structure Provided the District with a simpler and more flexible borrowing platform Provide ongoing remarketing services for the District s variable rate obligations Includes assistance in renewing/replacing credit facilities, as needed Keep the District staff and Board apprised of market conditions and financing opportunities Typically includes a debt portfolio review and market update for the Board at least annually Provide periodic refunding updates, as market conditions warrant Provide updates on the credit and financial markets as well as information on water issues nationally Includes feedback from our colleague on the Federal EPA s Advisory Committee 7

44 BofAML History with RCWD History of Assisting the District s Financings Our bankers have assisted the District on 19 bond issuances, with a total par of $ millions Dated Date Issue Par ($mm) Tax Status Team s Role 09/04/1991 Revenue Bonds, Series Exempt Co Senior 09/04/1991 Revenue Bonds, Series Exempt Co Senior 02/01/1992 Refunding Revenue Bonds, Series Exempt Co Manager 10/01/1993 Refunding Revenue Bonds, Series Exempt Co Senior 01/01/1994 Refunding Revenue Bonds, Series Exempt Lead Manager 08/03/1995 Refunding Revenue Bonds, Series Exempt Lead Manager 11/24/1998 Weekly Adjusted Rate Revenue Bonds, Series 1998A Exempt Sole Manager 05/03/2001 Refunding Revenue Bonds, Series 2001A Exempt Sole Manager 11/01/2001 Adjusted Rate Revenue Bonds, Series Exempt Sole Manager 08/01/2002 Adj Rate Refunding Rev Bonds, Series 2002A Exempt Sole Manager 06/23/2004 Adjustable Rate Revenue Bonds, Series 2004A Exempt Sole Manager 06/23/2004 Adjustable Rate Rev Ref Bonds, Series 2004B Exempt Lead Manager 08/03/2005 Refunding Revenue Bonds, Series 2005C Exempt Lead Manager 08/03/2005 Auction Rte Ref Revenue Bonds, Series 2005A Exempt Sole Manager 04/02/2008 Refunding Revenue Bonds, Series 2008A Exempt Lead Manager 04/02/2008 Refunding Revenue Bonds, Series 2008B Exempt Sole Manager 11/02/2010 Revenue Bonds, Series 2010A Exempt Lead Manager 11/08/2011 Revenue Bonds, Series 2011A Exempt Sole Manager 08/12/2015 Special Tax Rev Refunding Bonds, Series Exempt Sole Manager 8

45 FINANCE AND AUDIT COMMITTEE October 1, 2015 COMMITTEE ACTION Page 1 of 6 ITEM 2: REVIEW OF CURRENT DROUGHT SURCHARGE RESPONSIBLE LEAD STAFF MEMBER: Finance Manager, Rick Aragon RECOMMENDATION: Staff requests the Finance and Audit Committee (Committee) recommend the Board of Directors (Board) adopt the surcharge resolution, as attached, and hereby reduce the Drought Surcharge to $3.40 per hundred cubic feet (HCF) for customers exceeding their efficient water budget effective for bills issued after November 1, DISCUSSION: BACKGROUND On March 12, 2015 the Board adopted a revised Water Shortage Contingency Plan (WSCP) to enable Rancho California Water District ( RCWD/District) to reduce water demands to align with restricted water supplies during times of shortage. This plan includes a range of escalating demand reduction measures such as voluntary and mandatory conservation actions, reduced water budgets, and violation assessments/surcharges for non-compliance. These demandd reduction measuress are assigned as appropriate to the each of the five stages (1-5) designated under the WSCP. The stagess indicate the severity of the water shortage with Stage 1 being the least severe and Stage 5 being the most severe. The Board declared a Stage 4a ( Extreme Water Supply Warning) shortage level effectivee June 1, 2015 in consideration of the Governor s mandate that RCWD reduce its overall water demand 36 percent from June 2015 to February 2016, as well as Metropolitan Water District of Southern California s (MWD) declaration of a stage 3 water supply condition under its Water Supply Allocation Plan (WSAP) that limits RCWD and other MWD customers access to imported water before drastic surchargess are imposed to approximately 85 percent of recent levels. MWD s declaration was effective July 1, 2015.

46 Finance and Audit Committee October 1, 2015 Item 2 Page 2 of 6 Allocation Surcharges (Drought Surcharge), as authorized under the WSCP, are considered as volumetric penalties under Water Code Section 377(i) for water use in violation of the conservation policies set forth in the plan. The WSCP outlined that RCWD should impose surcharges in alignment with MWD s WSAP surcharges in an effort to be regionally consistent both in rates and approach to assessing such surcharges, as well as to protect the financial health of the District against potential liability of incurring material amounts in surcharges assessed by MWD in fiscal year (FY) 2017 from water use from customers exceeding their water budgets in FY All District customers were directly mailed a notice of the upcoming surcharges at the end of May. Additionally, those customers whose water use in June would indicate that they would be assessed a surcharge were warned by direct mailers in July that they were at risk of incurring penalties if their water use practices continued. The District began assessing drought surcharges for bills issued in August for water usage in July to provide as much advanced notice that could be afforded to customers as possible, yet still be in place soon enough to reduce overall usage during the crucial summer months when water demand is the highest. Two escalating levels of surcharges have been assessed for those customers exceeding their efficient budgets at the same rates and thresholds as those under MWD s. This equated to $3.40 per HCF for water use between percent and $6.80 per HCF for any usage above 115 percent of a customer s efficient water budget. For domestic, multi-family, and landscape accounts the efficient water budget is considered the sum of the water budgets calculated for Tiers 1 and 2. For Agricultural, Ag-Domestic, and Commercial/Industrial/Institutional (CII), the efficient water budget is the amount calculated for Tier 1 water use. CURRENT CONDITION Cumulative reduction in water use from 2013 levels for the District is at 30 percent from June through August, as calculated according to the State Water Resource Control Board s (SWRCB) compliance. September s preliminary data indicates an extremely strong likelihood that the District will achieve a minimum of a 36 percent for the month and thereby increase the savings to at least 31 percent. This will also have meant that the District will have met or exceeded the 36 percent in July and

47 Finance and Audit Committee October 1, 2015 Item 2 Page 3 of 6 September which are two of the highest demand months of the year. This is a strong indication that meeting the cumulative 36 percent required by February can be achieved as strong performance has already been demonstrated before customers have had a chance to fully adapt their water use habits from the measures imposed by Stage 4a. Furthermore, any material amounts of rain from an El Nino winter season would only increasee the probability of meeting this target shouldd it materialize. RECOMMENDED CHANGE In light of the strong performancee in September, now that customers have had a chance to react the measuress in Stage 4a, and thee cumulative performance at over 31 percent, staff recommends the reduction of the drought surcharge to only $3.40 per HCF for water use above a customer s efficient budget. This would effectively reduce assessed surcharges by an estimated 41 percent going forward from where they would otherwise be but still keep maximum rates at a level conducive to water reductions sufficient to continue to meet the 36 percent mandated target and be within the limits of MWD s WSAP reduced imported supply. Such a reduction would put the District s maximum water rate per HCF at $9.72 which is within $1 of maximumm rates for both Eastern Municipal Water District and Elsinore Valleyy Municipal Water District. Drought Rates per HCF att $3.40 Surcharge Only per HCF $12.00 $10.00 $8.00 $6.00 $4.00 $2.00 $ $6.32 $3.40 Rancho $6.266 $1.98 $2.09 Elsinore $5.31 $ Western $10.76 $ Eastern Maximum Penalty Maximum Surcharge (HCF) Maximum Tiered Rate This change is recommended to be effective for bills issued November 1 and after, so as to allow the required noticing time and equitably affect the customers between each of the billing cycles.

48 Finance and Audit Committee October 1, 2015 Item 2 Page 4 of 6 ALTERNATIVES: Staff s analysis includes the following potential alternatives: Keep the Drought Surcharge at the current level. o Staff believes this level exceeds the amount necessary to achieve the remaining savings for the conservation mandate especially when compared to the degree of customer bill impacts. Eliminate the Drought Surcharge altogether. o The complete removal of the surcharge may significantly jeopardize continued strong performance in demand reductions. Should the District not meet its mandated 36 percent goal, the SWRCB is likely to require the District to enact the same or similarly severe conservation actions in a conservation order. FISCAL ANALYSIS: The proposed change in Drought Surcharge level is estimated to reduce future assessments by 41 percent or more. All revenue from Drought Surcharges are not budgeted and are not used for District operations. ENVIRONMENTAL REQUIREMENTS: None EXHIBITS/ATTACHMENTS: Draft Resolution

49 RESOLUTION NO Draft RESOLUTION OF THE BOARD OF DIRECTORS OF THE RANCHO CALIFORNIA WATER DISTRICT, RIVERSIDE COUNTY, CALIFORNIA, REVISING DROUGHT SURCHARGE WHEREAS, on March 12, 2015, the Rancho California Water District (District) Board of Directors adopted Ordinance which adopted the proposed revised Water Shortage Contingency Plan (WSCP); and WHEREAS, the revised WSCP adopted on March 12, 2015, authorizes the implementation of Allocation Surcharges (Drought Surcharge) in periods where water shortages stages three through five are declared; and WHEREAS, the Drought Surcharges are volumetric penalties authorized pursuant to Water Code section 377(i); and WHEREAS, on January 17, 2014, Governor Jerry Brown issued a drought state of emergency declaration in response to record-low water levels in California s rivers and reservoirs as well as an abnormally low snowpack, and on April 1, 2015, Governor Brown issued an Executive Order calling for statewide mandatory water reductions of up to 25 percent; and WHEREAS, on May 5, 2015, the State Water Resources Control Board (State Water Board) approved regulations, based on Governor Brown s Executive Order, mandating the District to reduce its water consumption by 36 percent percent for June 2015 through February 2016, as compared to the same months in 2013; and WHEREAS, on May 14, 2015, the District Board of Directors declared a Stage 4a Extreme Water Supply Warning, effective June 1, 2015, with a 30 percent reduction of Tier 2 water budgets and elimination of Tier 3 water budgets for residential and landscape customers and a 10 percent reduction of Tier 1 budgets for commercial and agricultural customers; and WHEREAS, the declaration of a Stage 4a water shortage was necessitated by the Continued State of Emergency declaration by California Governor Brown on April 25, 2015 and a reduction in imported water the District receives from the Metropolitan Water District of Southern California (MWD); and WHEREAS, the District considers the cumulative reduction in water consumption during the critical high water demand months of June through September of 2015 by over 31 percent a strong indicator that it may achieve the overall required 36 percent by February of 2016; and

50 WHEREAS, the District s Board of Directors has determined to reduce the rate of the Drought Surcharge. NOW THEREFORE, it is hereby resolved by the Board of Directors of the Rancho California Water District as follows: Section 1. The Board of Directors hereby establishes the Drought Surcharge at the rate of $3.40 per one hundred-cubic feet (HCF). Any District water customer shall be subject to a Drought Surcharge for each HCF of water, or portion thereof, used in excess of his or her Efficient Water Budget then in effect for the specific water shortage stage and billed by the District on or after November 1, Section 2. An Efficient Water Budget for domestic, multifamily, and landscape customers is the combined total of Tier 1 and Tier 2 water budgets, and is the Tier 1 water budget for agricultural, ag-domestic, and commercial/industrial/institutional customers. Section 3. If any section, subsection, subdivision, sentence, clause, or phrase in this Resolution or any part thereof is for any reason held to be unconstitutional, invalid, or ineffective by any court of competent jurisdiction, such decision shall not affect the validity or effectiveness of the remaining portions of this Resolution or any part thereof. The Board of Directors hereby declares that it would have adopted each section irrespective of the fact that any one or more subsections, subdivisions, sentences, clauses, or phrases be declared unconstitutional, invalid, or ineffective. ADOPTED, SIGNED, AND APPROVED this 8 th day of October ATTEST: John E. Hoagland, President of the Board of Directors of the Rancho California Water District Kelli E. Garcia, Secretary of the Board of Directors of the Rancho California Water District [Resolution No X] 2

51 FINANCE AND COMMITTEE October 1, 2015 COMMITTEE ACTION Page 1 of 5 ITEM 3: CONSIDER ALTERNATIVE METHOD M FOR RECONSIDERING AGRICULTURAL/ DOMESTIC CUSTOMER TIER 1 ALLOCATIONS RESPONSIBLE/LEAD STAFF MEMBER: Finance Manager, Rick Aragon RECOMMENDATION: Staff requests the Finance and Audit Committee (Committee) recommend the Board of Directors (Board) direct staff to proceed with the necessary steps to implement the recommended policy change of limiting the landscape area used to determine Agriculture (Ag) Tier 1 water allocations to 10 percent of the amount of agricultural- planted area with a maximumm cap of 75,000 square feet, so as to be in alignment with the domestic customer allocation cap for landscapee area. DISCUSSION: Background - Board Actions At the Board s direction, staff presented Rancho California Water District s (District) current policy on requiring a minimum of 1 acre of agricultural-plantestructure for discussion at area to qualify as an Ag account under the two-tier of February 19, This was then brought back in agricultural rates the Committee s regular meeting April to discuss potential alternative rate structures, and other options out of concern from the Board that a change was necessary to prevent agriculture/domestic (Ag/Domestic) accounts with large portions of landscaping and minimal portions of agricultural-planted area from receiving the benefit of the lower Ag Tier 1 water rates, as they are designed to incentivize agricultural production. At the recommendation of the Committee, the Board voted in May to change the threshold from 1 acre to 3.5 acres for an account to qualify as agricultural. Upon review of the necessary resolution to enact the threshold change, the Committee chose, at their June 4,, 2015 regular meeting, to postpone the adoption of the resolution and directed staff to review and bring back alternatives that would accomplish the same goal.

52 Finance and Audit Committee October 1, 2015 Item 3 Page 2 of 5 Current Practice and Potential Alternative In response, staff performed an in-depth analysis of Ag and Ag/Domestic account data along with a review of existing policy and practices to determine viable alternative options. The analysis produced an option that accomplishes addressing the Board s rate equity concern in relation to significant non-ag-related water use at agricultural rates. Additionally, this alternative would minimize the impact on small growers with agricultural-planted areas between 1 and 3.5 acres who would otherwise be reclassified to a Domestic account under the previous action but whose primary use for water is Ag. Current Practice Currently both the Ag and Ag/Domestic accounts are charged under the same two-tier rate structure. These accounts are given an overall annual allocation where water use in that year is charged at the Ag Tier 1 rate and any use in excess of that amount is charged at the Ag Tier 2 rate. The Ag Tier 1 rate is lower, as it is a blended cost mix of groundwater and imported water, whereas the Ag Tier 2 rate is comprised of solely the more costly imported water with a conservation program operating cost component as well. However, the Ag Tier 2 rate does not include the additional cost component for capital costs for conservation and additional water supply that are included in the Domestic Tier 4 rate. This limits Ag or Ag/Domestic accounts rate exposure to $2.88 per hundred cubic feet (HCF) as compared to $6.32 per HCF for a Domestic account. Current Ag and Domestic rates are shown below. FY 2016 Water Rates per HCF Ag Rates Domestic Rates Divisions Tier 1 Tier 2 Tier 1 Tier 2 Tier 3 Tier 4 Rancho $ 1.23 $ 2.88 $ 0.66 $ 1.50 $ 2.49 $ 6.32 Santa Rosa $ 1.67 $ 2.85 $ 1.01 $ 1.99 $ 2.48 $ 6.32 The Ag and Ag/Domestic allocations are comprised of separate budgets for different purposes added together for the overall annual allocation. Specifically, Ag/Domestic accounts have three separately calculated budgets. The primary component is for Ag land use and is based on crop type, weather, and total planted acreage. The second component is for irrigated landscaping where a customer receives an allocation of water for the total amount of irrigated landscape area, as modified by weather and an efficiency factor in similar manner as Domestic accounts. The other major difference from the District practice for allocating water for landscape for

53 Finance and Audit Committee October 1, 2015 Item 3 Page 3 of 5 Domestic accounts is that a Domestic account is limited to receive a budget for efficient water use (Domestic Tier 2) based on up to 75,000 square feet of irrigated landscape, whereas an Ag or Ag/Domestic account does not have such a limit. Lastly, an Ag/Domestic account receives a flat allocation for indoor water use at a base of 16 HCF per account, as consideration for Domestic usage. Ag accounts are comprised of both the agriculture and landscape allocations but without an indoor allocation. Potential Alternative Based on the current practice as detailed above, staff believes that the same goal can be accomplished by altering the method that an Ag or Ag/Domestic account is allocated in an irrigated landscape budget to receive the Ag Tier 1 rate. Specifically, staff would recommend limiting the irrigated landscape area component of the landscape allocation to 10 percent of the agricultural-planted area with a maximum cap of 75,000 square feet to be on par with Domestic accounts. This is in alignment with the review that the average portion of landscape area to total landscape and agriculture area on a property for all Ag/Domestic accounts in the District is 12 percent. This change would allow a reasonable portion of incidental landscape area proportionate to the amount of agricultural-planted area to receive the benefit of the Ag Tier 1 rate. This is in alignment with the policy concept that the Ag Tier 1 rate is reserved for accounts whose primary land purpose is for Ag. Any other water use in excess of the primary agricultural purpose with consideration for some incidental landscaping would be charged at the full import water rate and be contributed to the conservation program. However, such an account would not be penalized at the Domestic Tier 4 rate. Analysis of Customer Impact Staff performed an account-by-account analysis for Ag and Ag/Domestic customers on the potential bill impacts from the proposal, as compared to the current practice. Agricultural-planted area and landscape area, along with 2014 water usage data was used from all accounts having already undergone the recertification process this year so as to ensure the most accurate and recent data be utilized. This resulted in 350 of the 709 (49 percent) of the Ag/Domestic accounts and 539 of the 873 (62 percent) of the accounts being individually reviewed. A breakdown by degree of bill impact is shown on the following page for Ag/Domestic and Ag accounts.

54 Finance and Audit Committee October 1, 2015 Item 3 Page 4 of 5 Annual Bill % Increase Ag/Domestic Bill Impact Change Accounts Ag Accounts Greater Than Less Than % of Accounts % of Accounts 0% 5% 8% 2% 5% 10% 5% 1% 10% 20% 5% 0% 20% 30% 2% 0% 30% 40% 1% 0% 40% 50% 1% 0% 50% 75% 1% 0% % Increase 78% 97% Total 100% 100% Annual Bill $ Increase Ag/Domestic Bill Impact Change Accounts Ag Accounts Greater Than Less Than % of Accounts % of Accounts $ 0 $ 250 6% 1% $ 250 $ 500 5% 1% $ 500 $ 1,000 5% 0% $ 1,000 $ 2,500 4% 1% $ 2,500 $ 5,000 1% 0% $ 5,000 $ 7,500 1% 0% $ 7,500 $ 10,000 0% 0% $ Increase 78% 97% Total 100% 100% Key Facts from Analysis 1. Affected Ag/Domestic accounts use 67 percent more water per acre than unaffected accounts (3.7 AF to 2.2 AF). 2. Affected Ag accounts use 70 percent more water per acre than unaffected accounts (4.2 AF to 2.5 AF). 3. Affected Ag/Domestic accounts have an average ratio of only 2.2 agriculturalplanted acres for every landscaped irrigated acre, as compared to 12.1 for unaffected accounts. 4. Affected Ag/Domestic accounts have an average ratio of only 3.5 agriculturalplanted acres for every landscaped irrigated acre, as compared to 86.3 for unaffected accounts.

55 Finance and Audit Committee October 1, 2015 Item 3 Page 5 of 5 Summary The analysis revealed two clear themes of information. The first is that the vast majority of accounts would be unaffected by this change if adopted (78 percent for Ag/Domestic and 97 percent for Ag). Only approximately 10 percent of Ag/Domestic customers would see an annual bill increase of over 10 percent and almost 0 percent of Ag customers would see a similar increase. The second theme is those that see a bill impact appear to be those accounts using significantly more water per acre than the District average (approximately percent), because of their landscaping water use. As expected, these accounts proportionally have very large amounts of landscaping area. Such a change also has the additional benefit of being relatively easy to implement, as it does not require any changes to the District s billing software or billing practices and utilizes existing available information. It is also a policy change that could be easily understood by customers and is in alignment with the District s other drought efforts, messaging, and conservation policy. Staff recommends that this or a similar change to policy be enacted as of January 1, 2016, to allow for proper Proposition 218 advance noticing to affected customers. Additionally, this would allow Ag customers to finish the calendar year with water allocations they had previously been communicated and had planned appropriate water use on. ALTERNATIVES: Staff s analysis includes the following potential alternative: Do not recommend a change in Ag Tier 1 water allocation policy to the Board. FISCAL ANALYSIS: Increased Ag Tier 2 revenue of approximately $200,000 to $250,000 is estimated in the first year after implementation but is anticipated to decrease in future years as the change in water use mix is incorporated into future rate modeling during the budget cycles and water demand declines due to increased costs for affected customers. ENVIRONMENTAL REQUIREMENTS: None EXHIBITS/ATTACHMENTS: None

56 COMMITTEE INFORMATION FINANCE AND AUDIT COMMITTEE October 1, 2015 Page 1 of 2 ITEM 4: COMMERCIAL ACCOUNT ALLOCATION REVIEW RESPONSIBLE/LEAD STAFF MEMBER: IT/Customer Service Manager, Jason Martin RECOMMENDATION: This item is being presented for the Financee and Audit review and information. DISCUSSION: Committee s (Committee) In 2004, Rancho California Water District (RCWD/District) established annual water budgets based on a 2 tier system. Duringg the development of the new tiered system, the District used meter size as the criteriaa to determine water budgets for all customer classes. Since that time, the Districtt has made significant progress in updating its water budget methodologi es for residential, landscape, multi-family and agricultural accounts. However, commercial account water budgets are still based on meter size and use the criteria below: Meter Size (inches) 3/ /2 2 2 (turbine) *HCF- Hundred Cubic Feet Annual HCF* Lot Sizee Variances Annual HCF* acre acre 1,134 1, acres 1,569 2,784 over 1.5 acres 2,005 5,253 8,772 17,492 27,998 40,274 Staff completed a detailed review for all 1,667 commercial accounts and compared their current allocations to their average use over the last three years. In total, the annual allocation for all commercial accounts is 4,152,724 HCF. Total annual

57 Finance and Audit Committee October 1, 2015 Item 4 Page 2 of 2 average use for all accounts is 1,716,166 HCF, or 41 percent of the total allocation. The table below outlines commercial account usage compared to annual allocations in more detail: Full Allocation With a 10% Allocation Reduction* Usage Level # of Customers % of Customers # of Customers % of Customers Less than 50% 1,214 73% 1,154 69% Between 50% 100% % % More than 100% 134 8% % * per Stage 4a of the District s Water Shortage Contingency Plan The District is currently exploring alternatives to the current method used to determine commercial account water budgets. Options that are currently being considered include but are not limited to historical monthly use, average winter use, using meter size with revised allocation numbers, and commercial use type. Staff is seeking the Committee s input on the best potential options moving forward with review and analysis. Staff is working toward having the new methodology developed by early This will allow for budgeting, planning, and Proposition 218 noticing during the Fiscal Year budget process. ALTERNATIVES: Not applicable FISCAL ANALYSIS: Not applicable ENVIRONMENTAL REQUIREMENTS: None EXHIBITS/ATTACHMENTS: None

58 FINANCE AND AUDIT COMMITTEE October 1, 2015 COMMITTEE INFORMATION Page 1 of 3 ITEM 5: REVIEW OF RANCHO CALIFORNIA WATERR DISTRICT SS SAFETY BOOT POLICY RESPONSIBLE/LEAD STAFF MEMBER: Accounting Manager, Kathy Naylor RECOMMENDATION: This item is presented for the Finance and Audit review. Committee s (Committee) DISCUSSION: Staff is presenting this item for the Committee s review as a follow-up from the September Committee meeting. Rancho California Water District s (RCWD/District) Employee Policy and Procedure Manual Sectionn 3.9 addresses safety boots. The current policy reads as follows: The District will provide safety boots to field employees designatedd below: Construction Inspection Warehouse Workers Corrosion Control Technicians Wastewater Operators Customer Services Field Workers Plantt Maintenance Technicians Electrical Services Collections Department Engineering g (Field) Water Quality Operators Field Services Safety Officer A maximum dollar amount of $ everyy 12 months has been established for the safety boot allowance. The pair limit will be set by the department requirements and approved by the department head. Safety boots purchased over the maximum will be the responsibility of the employee to make up thee differencee between the actual cost and the maximum amount established in this policy. Type and style of safety boots will be determined by the duties of the employee and in accordance with the Safety Footwear Selection Guide (policy#3-01a of the District Health and Safety Manual). Boots may be replaced sooner with the authorization of the supervisor and/or manager,

59 Finance and Audit Committee October 1, 2015 Item 5 Page 2 of 3 depending on the condition of the boots and will be handled on an as needed, case-bycase basis. ALTERNATIVES: Not applicable FISCAL ANALYSIS: Not applicable ENVIRONMENTAL REQUIREMENTS: None EXHIBITS/ATTACHMENTS: Safety Footwear Selection Guide (policy #3-01A)

60 SAFETY FOOTWEAR SELECTION GUIDE #3-01A Revision Date 03/09/10 Revision Number 1 The purpose of this guide is to assist management and supervisors in determining employee operations or tasks that require foot protection. Operation or Task Air Conditioning Carpentry / Construction Control Systems Crane & Hoisting Operations Damage Assessment Street Footwear ANSI Z Safety Footwear X X X X Metatarsal Protection Electrical Hazard Protection Electrical Installation & Maintenance X X Electrical (Construction, Installation, Maintenance, High Voltage, Transmission, and Telephones) Emergency Response Equipment Maintenance X X Field Engineering and Surveys Hazardous Materials/Waste Handling Heavy Equipment Operation and Maintenance Laboratory Operations X (2) Machine Shop Operations X (3) Maintenance (Area, Building, Landscape, Mechanical, Pipeline, Valve Repair, Vehicle/Garages) Managerial and Administrative X (1) Material Handling X (3) Meter and Chlorine Operations Painting Pesticide Applications Pump Plant Operation Traffic Control Treatment Plant Operations Welding and Cutting X X X X X X X X X X X X X X X Attachable Foot Guards (for stationary work only) (1) Where danger of foot injury exists, appropriate footwear is required. (2) Some lab operation, i.e. chemical mixing/transfer, requires foot protection. (3) Some job tasks may require metatarsal protection.

61 FINANCE AND AUDIT COMMITTEE October 1, 2015 COMMITTEE ACTION Page 1 of 20 ITEM 6: REVIEW OF FINANCIAL STATE EMENTS AUGUST 31, 2015 RESPONSIBLE LEAD STAFF MEMBER: Accounting Manager, Kathy Naylor RECOMMENDATION: This item is presented for the review, acceptance e, and recommendation to the Board of Directors for approval. DISCUSSION: Included herewith for financial results as of August 31, ALTERNATIVES: Take no action FISCAL ANALYSIS: A Not applicable ENVIRONMENTAL REQUIREMENTS: None EXHIBITS/ATTACHMENTS: A. B. C. STATEMENTT OF NET POSITION STATEMENTT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION STATEMENTT OF CASH FLOWS F Finance and Audit Committee s (Committee) the Committee s review is a summary of the District s Financial Statements Monthly Review Statement of Net Position Statement of Revenues, Expenses and Changes in Net Position Statement of Cash Flows

62 Financial Statements August 31, 2015

63 Rancho California Water District Financial Statements Monthly Review FINANCE AND AUDIT COMMITTEE Following is a highlight summary of the District s financial results as of August 31, Operating Revenues Actual water revenue is under budget by $644,445 or 12.9 percent and energy revenue is under budget by $77,885 or 20.2 percent. Water Sales quantities are 2,387 acre-feet, or 26.0 percent less than budgeted amounts. Demand is under budget in all categories except Ag. This is reflected in the Sales Mix chart. Thousands $20,000 $15,000 $10,000 $5,000 $0 Rancho Water Division Actual Prior Year Budget Sales Mix (AF) - Rancho Division Budget to Date Actual to Date AUGUST 31, 2015 Water Revenue - Rancho Jul Sep Nov Jan Mar May Over/ (Under) Budget Ag Ag/Dom (155) Domestic 4,925 3,291 (1,634) Other 2,351 1,727 (624) Recycled (159) Total 9,164 6,777 (2,387) ENERGY REVENUE represents percent of booster energy costs allocated to the Rancho Division. SOURCE OF SUPPLY COSTS: Purchased Water-Joint Facility costs are under budget by $1,982,155 or 37.1 percent reflecting import quantities that are under budget by 56.7 percent and total production quantities that are under budget by 27.6 percent for the Rancho Division. Booster Pumping Costs: Energy costs are under budget by $82,754 or 23.9 percent. Customer Service Costs are $229,969 or 40.1 percent over budget from increased customer inquiries and drought related response efforts. Engineering Costs are $99,303 or 75.0 percent over budget from the Resource Division allocation of costs.

64 Rancho California Water District - Rancho Division (continued) Page 2 AUGUST 31, 2015 NET OPERATING REVENUE/(DEFICIT): The Rancho Division has a net-operating revenue of $723,595 compared to a budgeted deficit amount of $296,981 reflecting savings from decreased import water quantities as well as $640,000 in drought surcharge penalties. Thousands $800 Net-Operating Revenue/(Deficit) - Rancho Division $600 $400 $200 Actual Budget $0 ($200) Jul Sep Nov Jan Mar May ($400) NON-OPERATING: Total non-operating revenue is $974,081 or 19.0 percent over budget from Tier IV non-operating revenue and increased tax revenue. Non-operating expense is $37,763 or 1.2 percent under budget. NET INCOME for the Rancho Division is $3,627,802 compared to a budgeted net revenue of $1,595,383. In accordance with GASB 33, capacity fees and capital contributions are being shown as increases to net assets, separate from operating revenue. $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 Thousands Net Income - Rancho Division Actual Budget Jul Sep Nov Jan Mar May

65 Rancho California Water District - Santa Rosa Division Page 3 AUGUST 31, 2015 Operating Revenues: Actual water revenue is under budget by $385,544 or 8.9 percent and energy revenue is under budget by $67,827 or Water sales quantities are 942 acre-feet, or 15.4 percent less than budgeted amounts. Demand is under budget in all categories. This is reflected in the Sales Mix chart. Thousands $20,000 $18,000 $16,000 $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 Santa Rosa Water Division Water Revenue - Santa Rosa Actual Prior Year Budget Jul Sep Nov Jan Mar May Sales Mix (AF) - Santa Rosa Over / Budget Actual (Under) to Date to Date Budget Ag 3,247 2,914 (333) Ag/Dom (138) Domestic 1, (304) Other (105) Recycled (62) Total 6,059 5,117 (942) ENERGY REVENUE represents percent of total energy costs allocated to the Santa Rosa Division. SOURCE OF SUPPLY COSTS: Purchased Water-Joint Facility costs are under budget by $1,162,504 or 24.5 percent reflecting import quantities that are under budget by 24.8 percent and total production quantities that are under budget by 12.0 percent for the Santa Rosa Division. Booster Pumping Costs: Booster Pumping energy costs are $140,182 or 38.4 percent under budget. Transmission & Distribution Costs are $63,947 or 10.8 percent over budget. Customer Service Costs are $33,559 or 18.6 percent under budget. Engineering Costs are $76,181 or percent over budget from the Resource Division allocation of costs.

66 Rancho California Water District - Santa Rosa Division (continued) Page 4 AUGUST 31, 2015 NET OPERATING REVENUE/DEFICIT: The Santa Rosa Division s net-operating revenue is $56,254 compared to a budgeted net-operating deficit of $430,276 from decreased import water quantities as well as $286,000 in drought surcharge penalties. $100 Thousands Net Operating Revenue Santa Rosa Division $0 ($100) Jul Sep Nov Jan Mar May ($200) ($300) Actual Budget ($400) ($500) NON-OPERATING: Total non-operating revenue is $403,989 or, 16.6 percent over budget from Tier IV non-operating revenue and increased tax revenue. Non-operating expense is 0.7 percent under budget. NET REVENUE/(DEFICIT): The Santa Rosa Division has a net deficit of $24,966 compared to a budget net deficit of $935,325. In accordance with GASB 33, capacity fees, special items, and capital contributions are being shown as increases to net assets, separate from operating revenue. Thousands $0 ($100) ($200) Jul Sep Nov Jan Mar May ($300) ($400) Actual ($500) ($600) ($700) ($800) ($900) ($1,000) Budget Net Income - Santa Rosa Division

67 Rancho California Water District - Resource Division Page 5 AUGUST 31, 2015 Resource Division SOURCE OF SUPPLY COSTS: Total water production was 3,227 acre-feet under budget and actual water sales were 3,329 acre-feet under budget. This was due to the purchase of 3,279 acre-feet less of import water versus budgeted amounts, production of 207 acre-feet of well water over budgeted amounts, and the production of 155 acre-feet of recycled water under budgeted amounts. Water Production Mix (AF) Budget Actual Over/(Under) to Date to Date Budget Native Well 5,218 5,018 (200) Other Well 1,813 2, Import 7,554 4,275 (3,279) Recycled 1, (155) Total 15,692 12,465 (3,227) RESOURCE Sales, Production & Water Loss Budget Actual Over/(Under) to Date to Date Budget Sales 15,223 11,894 (3,329) Production 15,692 12,465 (3,227) Unaccounted Water Loss 3.0% 4.6% 1.6%

68 Rancho California Water District - Wastewater Division Page 6 AUGUST 31, 2015 Wastewater Division (SRWRF) OPERATING REVENUES: Wastewater service charges are over budget by $30,595 or 4.4 percent. TREATMENT COSTS: Wastewater treatment costs are over budget by $47,295 or 18.7 percent. NET OPERATING REVENUE: The SRWRF net operating revenue is $18,031 compared to a budgeted net operating revenue of $45,755. Thousands $5,000 $4,000 $3,000 $2,000 Wastewater Service Revenue Actual Prior Year Budget $1,000 $0 Jul Sep Nov Jan Mar May Wastewater Treatment Cost Per Million Gallons Budget Actual Over/(Under) to Date to Date Budget Primary & Secondary $ 685,942 $ 745,962 $ 60,020 Tertiary 275, ,223 (17,607) Total $ 961,772 $ 1,004,185 $ 42,413 MG Treated To Date Cost Per MG $ 3,435 $ 3,586 $ 151 NET INCOME/(DEFICIT): The SRWRF had a net deficit of $405,096 compared to a budgeted deficit of $313,767. In accordance with GASB 33, connection fees and capital contributions are being reported as an increase to net assets, separate from operating revenue. $0 ($50,000) ($100,000) ($150,000) ($200,000) ($250,000) ($300,000) ($350,000) ($400,000) ($450,000) NET INCOME/(DEFICIT) SRWRF Actual Budget Jul Sep Nov Jan Mar May