GRAYS HARBOR COUNTY WATER DISTRICT #2

MANAGER'S REPORT

05/11/22

Budget Position Report

Operational revenues for April were $89,836.07. ​​ The Fund Revenues show $98,726.63 but that number includes the interfund transfer from the Capital Asset Replacement Fund to the Regular Maintenance Fund for the purchase of the service truck. ​​ 

Operational expenses were $60, 230.19. ​​ In addition, there was the capital expenditure of $8,890.56. ​​ So total cash outlays were $69,120.75.  ​​​​ We took in $20,715.32 more than we spent.

The percentages shown on the report can be a little confusing. ​​ They represent the portion of the budget that has been spent. ​​ Not, as it could appear, the budget remaining. ​​ So any budget line item over 33% is over budget at this point. ​​ 

The total Water Utilities expenditures (operational expenses) stand at 35.8%, slightly over budget.  ​​​​ Revenues are at 31.1%, so are below the projection by as small amount. ​​ But these numbers are very close to the budget. ​​ I am comfortable with where we are. ​​ But we don’t know the full impact of inflation yet.

I note that there is an anomaly in Interfund Transfers. ​​ We have two line items for USDA Loan Reserve. ​​ There has been some confusion between the district and the county as to which reserve account the payment should be processed through and which account contains the reserved final payment to USDA. ​​ The confusion resulted in two line items for transferring the contribution for reserves. ​​ In actuality, $16,800 has gone into the Debt Service Fund this year. ​​ The balance in that fund is $46,161.09, more than sufficient to cover the $25,197 payment due in May.

We transferred $29,605.88 to reserves:

 USDA Loan Reserve:   $ ​​ 4,200.00

 Capital Replacement Reserve: $ ​​ 5,118.00

 Major Repair Reserve:  $20,287.88

Treasurer’s Report:

Usable fund balances as of the end of April:

 Regular Maintenance Fund:  $ ​​ 81,331.51

 Capital Replacement Fund:  $125,043.69

 Major Repair Reserve Fund:  $493,917.06

 General Facilities Fund:  $156,438.45

 Total Available Funds:  $856,730.71

This is an increase of $16,532.72 over last month and $94,688.64 over last year. ​​ This will all change once the bills start coming in for the projects we have underway.

BARS Changes

The State Auditor has been busy making changes to the BARS (Budgeting, Accounting, Reporting System) ​​ manual. ​​ The BARS Manual is the bible by which we live and stay on the sunny side of the State Auditor. There are always some changes, but they rarely have material affect on the district. ​​ 

There are new changes that do impact the district. ​​ In the past, there were two kinds of funds, Reserved and Non Reserved. ​​ Reserved funds were to be used for designated purposes.  ​​​​ Non Reserved had no stipulations. ​​ The district’s practice has been to keep all funds Non Reserved in order to be as flexible as possible in our responses to financial challenges.  ​​​​ 

That no longer meets the requirements. ​​ There are now five designations with attendant definitions. ​​ 

The “Non-spendable” designation does not apply to the district’s situation.

It is my recommendation that the General Facilities Fund be designated an “Unassigned” fund, and all others except the Revenue Bond Reserve Fund be designated “Assigned”. ​​ The Revenue Bond Reserve (the district’s final payment to the USDA) must ​​ be designated “Restricted” as the requirement to maintain that fund is imposed by USDA.  ​​​​ 

I favor all being “Assigned” because authority can be delegated to the general manager to move money among the funds. ​​ If, for example, the Debt Service Fund were to be designated a Committed fund, a resolution would be required to move money from the General Facilities Fund to the Debt Service Fund, or vice versa. ​​ This would be awkward, time consuming, and unnecessary.

In addition to all of this, we are required to have a much more defined Spending Plan adopted by resolution. We have been using the SAO template plan, which is very generic and non-specific. ​​ The Spending Plan will have to be specific in it’s wording in order to accommodate my proposed approach to fleet management. ​​ See the paragraph on Asset Management.

Currently we have a general understanding of how the money in each fund is to used. ​​ In order to conform to the new classifications the Spending Plan needs to be more specific and more formal.

There is also a need for a Capital Asset policy, which can probably be folded into the Capital Asset Management Plan. ​​ I will be working on that.

I will prepare a Spending Plan for adoption at the June meeting. ​​ ​​ 

Monthly Utility Totals Report.

This is a report I track. ​​ I decided it would be useful information for the commissioners as well. The report summarizes how many services we billed in the May billing, Basic Rate billing, Usage Billing, and total billed. ​​ It also summarizes what the district is owed by Section 1 customers.

Receipt Register

Receipts for the month. ​​ This is the basis for the monthly check to the County Treasurer.

Credit Card Receipts

The transition from Point and Pay to Xpress Bill Pay is under way. ​​ The contract has been signed.

IT Issues

The new SCADA server should be here but isn’t. ​​ Some of the associated pieces are on the way, but no idea when the server itself will arrive.

The security upgrades to both SCADA and the office network have not yet been implemented.

Chlorine

Not an issue at the moment. ​​ But supplies are not yet as stable as they need to be. ​​ The engineer has not had much time to devote to the question of On Site Generation (OSG). ​​ So I did a bit of my own research. ​​ I found a system that looks attractive and is in use locally. ​​ I am in discussions with that water system.

Capital Asset Management

The new SCADA server comes in at $6,049.96, which includes the server, the operating system, multiple back up provisions, and security provisions. ​​ 

The Asset Management Program budgeted $6,000 for replacement SCADA computers in this budget year.

In other Capital Asset Management news, I am proposing to modify the approach to vehicles. ​​ My recent deep dive into the world of service vehicles has caused me to do some thinking about the approach to managing our small fleet of trucks.

In a private business vehicles are acquired based on their contribution to revenues and profits. ​​ Managing a private business fleet is focused on using the vehicles to maximize revenues and contribute to non-cash expenses thereby decreasing tax liability without diminishing the cash asset.

A private businesses primary mission is to earn a profit.

In a public agency, especially one that is required to work on a cash basis, all assets are strictly expenses. ​​ There are no profits, and the only taxes are Business & Occupation taxes and revenues are driven by expenses, not markets.

A public agency’s primary mission is the successful completion of it’s assigned mission.

I am proposing that rather than basing asset management planning on a vehicle replacement timeline, base it on a time to major overhaul timeline with contributions to the Capital Replacement Fund to include repairs and upgrades to the vehicles. ​​ My proposed approach is to establish replacement cost, but use the contributions to the Capital Replacement Fund to fund repairs (to the extent of complete overhauls) and upgrades (not routine maintenance) rather than full on vehicle replacement. ​​ For a public agency, residual value and depreciation, in practical terms, are irrelevant. ​​ 

If a vehicle is suited to it’s mission, and repair/overhaul costs are less than new replacement cost then repair/overhaul is preferable to replacement irrespective of residual value. ​​ This places the fix or replace question into the realm of replacement cost rather than current value. ​​ 

The short version is that a truck can be completely overhauled, even including body and interior work, for a lot less cash than a replacement. ​​ The only caveat being that a vehicle be suited to the required mission.

As an example, if a truck’s current value is $10,000, it needs $20,000 in repairs to bring it to “like new” condition, and replacement cost is $60,000, then the decision would be to repair. ​​ 

Some of this thinking is being influenced by changes to fund designations resulting from revisions to the BARS manual, which is discussed above. ​​ With the changes outlined above, more care needs to be taken in how funds are assigned.

The primary issue in terms of Asset Management is to ensure that sufficient money is available for repair/overhaul when that time comes.  ​​​​ That can be managed by intending repair/overhaul, but planning for replacement.

Request for Public Information

Our process needs updating. ​​ I will be looking at this after dealing with the Risk & Resilience Certification. ​​ 

No action in March.

Small Parts Shed

The next step is to collect all the small parts and get them inventoried and into their proper bins.

Payroll Report

Very routine this period.

Isolation Valves

See comments on as-builts

Production Data

See the Summary sheet. ​​ 

Past Due Accounts 

I have included a statement of past due accounts for Section 2 in your packets.

Active Projects

Several projects are in process, but seem to be going slowly as preliminary work is moving forward.

HOLBROOK LANE/SCHRADER LANE MAIN REPLACEMENT

Awaiting the engineering proposal/contract. ​​ I have received the geotechnical report. ​​ My reading of the report indicates no major surprises, but the final word on that will come from the driller. ​​ There is a fairly dense clay layer through which the new main will have to be installed. ​​ 

NORTH BANK RE-COAT

Contract awarded to Rognlins, Inc. ​​ Execution will await more suitable weather.

REYNVAAN BOOSTER STATION

As of this writing. The pump house is up insulated, and painted inside and out. ​​ The electrical conduit has been installed from the power pole to the pumphouse and power has been brought to the pumphouse. ​​ ​​ Internal wiring is not complete.

Currently, the pumps are scheduled to arrive about June 5th.

AS-BUILTS

Mike Schmidt, of Berglund-Schmidt, and myself are trying to hash out an approach. ​​ Most districts are incorporating their as-built information into asset management with systems based on GIS information. ​​ It is not practical for a district our size to have our own GIS program. ​​ Mike is in communication with Mike Trish in the County’s GIS department on ways they may be able to help us.

WELL #5 SOURCE METER

It is still on back order.

SMALL PARTS SHED

The shed is complete. ​​ The bins are ready. ​​ We need to find the time to get inventory into the bins.

I am working on getting some power into the shed, primarily for lights. ​​ Everyone is busy.

Gutters/Downspouts

The downspouts on the pump house have corroded to junk and the gutters and downspouts on the office are, likewise, ready for replacement.

I have signed contracts for just under $1,000 for both.

Ashley & Kayla

No Action in March

Hydrant Maintenance

We will be catching up on this item with the addition of the seasonal help.

Rate Study

I have made progress in updating the study. ​​ It does not look pretty. ​​ I won’t have a clear picture of our expenditures for 2022 for some time. ​​ But the multiple hits of the Holbrook/Schrader main replacement, Reynvaan Booster Station upgrade, and the North Bank roof coating all coupled with the underlying inflation does not bode well for 2022. ​​ 

All that makes anything like a responsible prediction for 2023 a major challenge. ​​ The picture will clear up somewhat as we progress through the year, I hope. ​​ One element that is clear is that we will need to budget for replenishment of our Major Repair Fund.

New Regulations

We have been tapped for Unregulated Contaminants again by the EPA. There will be no cost to the district.

The Lead & Copper rule has seen some modifications. ​​ Most of the modifications relate to water systems that have lead pipe in their service laterals. ​​ Few systems west of the Mississippi have the feature (bug). ​​ Certainly GHCWD#2 has no lead in it’s service laterals.

But there are some changes regarding date of construction of the residences from which the samples need to be taken. ​​ We have to review what information we have and make sure we are sampling in accordance with the regulations.

We are due for a large round of lead & copper sampling later this year.

Personnel

Phillip Reige is now with us for the Summer.

Maintenance Activity:

Kenny and Mick have been working full days. ​​ We have had some sick days. ​​ Aside from those it is steady hard work every day, often with overtime worked in.

We continue to be behind in addressing all the work orders. ​​ One item that is piling up is small “handyman” type projects. ​​ In the past, we took care of those as a part of regular maintenance using district staff. ​​ But now they just keep getting shoved aside by higher priority projects. ​​ It seems the more we do, the more needs to be done.

Examples of these small projects include replacing the power panel steps at the pump house, fixing the sticking door on the Gavett Lane booster station pump house, Installing a proper roof hatch over Well #6, and other small tasks of a similar nature.

I am considering handing those out to small local contractors. ​​ I just haven’t figured out how to work it into the contracting and prevailing wage regulations. ​​ If all projects can be done by one person acting as an independent contractor it is pretty easy. ​​ But as soon as a second person may be needed it appears we get into the whole prevailing wage process which small contractors are not set up to manage.

I need ideas on this.

Contractor Repairs/Assistance

Working with Brumfield is going well. Most of their involvement has been the provision of a vac truck. ​​ They also assisted in the service lateral replacement on Sunset Road. ​​ 

Shop Organization

We still have not managed to find the time to do an inventory of the cast iron pipe fittings that need to be surplused.

We are also finding it difficult to find the time to work on other aspects of getting the shop organized. The big circle problem. ​​ Having the shop better organized would save time, but we can’t find the time to organize the shop.

We contracted with Brumfield, as a maintenance item, to install some ecology blocks in order to organize the piles of materials. ​​ Currently the various sizes of rock that we use have just been piled wherever they fit on the shop site. The blocks will go a long way to cleaning up the shop site and easing the task of monitoring inventory.  ​​​​ 

Training/Certifications

Updated First Aid training and Flagger renewal certification has been (by the time you read this) completed by all staff, including Phillip Reige.

Safety

We have a mini safety meeting every morning. ​​ No incidents to report. ​​ 

Vehicles

Service Truck #1:  The intermittent slow starting is still with us. ​​ B&B couldn’t make it do it.

Pickup Truck 1: ​​  No Issues

Pickup Truck 2:  ​​​​  I managed to break a taillight lens. ​​ It was fixed during routine maintenance.

Backhoe: ​​   No issues.

Service Truck #2: No sooner had the truck arrived at the district than it threw a code and flashed

   a “Check Engine” light. ​​ It is due to go into B&B on 5/5. I am requesting that     they do a more complete evaluation than I was able to do. ​​ I should have some     answers by the time of the meeting.

I was pretty confident it could have issues that did not surface in the pre-buy inspection (performed by Sun Auto Sales mechanic and myself. I found the truck too far away to get it to B&B). ​​ I have funded the purchase of this truck from the Capital Asset Replacement Fund. ​​ Any repairs will also be drawn from that fund. ​​ So the acquisition and any necessary repairs will not impact operational expenses. ​​ Service Truck #1 (I have to come up with a better way to designate vehicles) is due for replacement, according to the plan, next year. ​​ I have no intention of replacing it, but the Asset Management Plan has to account for the possibility of some kind of unforeseen major failure. ​​ For accounting purposes I am calling Service Truck #2 a replacement for Service Truck #1. ​​ 

See my discussions on the BARS Manual addenda and my proposal on handling the vehicle fleet.

Web Site

The February Manager's Report is posted, along with a link to the financial statement. ​​ 

New Connections

6820 Grange Road

Disaster Management Planning

No action in March. ​​ I will be making a presentation on this subject at the WASWD Fall Conference.

Long Distance Service Laterals

We have a new, possibly developing issue on Sunset Road. ​​ A Sunset Road resident, whose meter is on Grange Road, is mapping out another person’s service lateral across his (the first person) property. ​​ We are not sure why.

Respectfully Submitted:

Reg Hearn

General Manager