OF the BOARD of DIRECTORS of the MUNICIPAL WATER DISTRICT of ORANGE COUNTY Jointly with the ADMINISTRATION & FINANCE COMMITTEE August 14, 2019, 8:30 A.M

MEETING OF THE BOARD OF DIRECTORS OF THE MUNICIPAL WATER DISTRICT OF ORANGE COUNTY Jointly with the ADMINISTRATION & FINANCE COMMITTEE August 14, 2019, 8:30 a.m. Conference Room 101 A&F Committee: Staff: R. Hunter, K. Seckel, J. Berg, J.Thomas, Chair H.De La Torre, K. Davanaugh, C. Harris, J. Finnegan H.Chumpitazi R. McVicker Ex Officio Member: Director Barbre MWDOC Committee meetings are noticed and held as joint meetings of the Committee and the entire Board of Directors and all members of the Board of Directors may attend and participate in the discussion. Each Committee has designated Committee members, and other members of the Board are designated alternate committee members. If less than a quorum of the full Board is in attendance, the Board meeting will be adjourned for lack of a quorum and the meeting will proceed as a meeting of the Committee with those Committee members and alternate members in attendance acting as the Committee. PUBLIC COMMENTS - Public comments on agenda items and items under the jurisdiction of the Committee should be made at this time. ITEMS RECEIVED TOO LATE TO BE AGENDIZED - Determine there is a need to take immediate action on item(s) and that the need for action came to the attention of the District subsequent to the posting of the Agenda. (Requires a unanimous vote of the Committee) ITEMS DISTRIBUTED TO THE BOARD LESS THAN 72 HOURS PRIOR TO MEETING -- Pursuant to Government Code section 54957.5, non-exempt public records that relate to open session agenda items and are distributed to a majority of the Board less than seventy-two (72) hours prior to the meeting will be available for public inspection in the lobby of the District’s business office located at 18700 Ward Street, Fountain Valley, California 92708, during regular business hours. When practical, these public records will also be made available on the District’s Internet Web site, accessible at http://www.mwdoc.com. CLOSED SESSION 1. CONFERENCE WITH LEGAL COUNSEL - ANTICIPATED LITIGATION. Significant exposure to litigation pursuant to paragraph (2) of subdivision (d) of Section 54956.9: One case PRESENTATION 2. OPEB PRE-FUNDING TRUST PROGRAM AND PENSION RATE STABILIZATION PROGRAM CLIENT REVIEW PROPOSED BOARD CONSENT CALENDAR ITEMS 3. TREASURER'S REPORT a. Revenue/Cash Receipt Report – July 2019 1 Page 1 of 268 A&F Committee Meeting August 14, 2019 b. Disbursement Approval Report for the month of August 2019 c. Disbursement Ratification Report for the month of July 2019 d. GM Approved Disbursement Report for the month of July 2019 e. Water Use Efficiency Projects Cash Flow – July 31, 2019 f. Consolidated Summary of Cash and Investment – June 2019 g. OPEB and Pension Trust Fund monthly statement 4. FINANCIAL REPORT a. Draft Combined Financial Statements and Budget Comparative for the Period ending June 30, 2019 b. Quarterly Budget Review (deferred to FY 2018-19 Audited Annual Financials) DISCUSSION ITEMS 5. DISCUSSION RE POLICY RE PRESIDENT CASTING VOTES TO AGENCIES ON BEHALF OF DISTRICT 6. DISCUSSION REGARDING DIRECTOR BARBRE’S REQUEST TO ADD SECTIONS TO ADMINISTRATIVE CODE RE MEMBERSHIPS AND SELF CERTIFICATION OF NO CONFLICT OF INTEREST 7. DISCUSSION REGARDING CALIFORNIA COUNCIL FOR ENVIRONMENTAL AND ECONOMIC BALANCE (CCEEB) MEETING ATTENDANCE 8. DISCUSSION RE COMPLETION OF BUSINESS EXPENSE REPORTS 9. PERSONNEL MANUAL CHANGES ACTION ITEMS 10. AUTHORIZE THE GENERAL MANAGER TO ENTER INTO METROPOLITAN AGREEMENTS FOR CYCLIC IN-LIEU DELIVERIES 11. ASSOCIATION OF CALIFORNIA WATER AGENCIES (ACWA) COMMITTEE CONSIDERATION FOR 2020/2021 12. ACWA REGION 10 ELECTION 13. VEHICLE PURCHASE FOR WATER LOSS CONTROL STAFF 14. AUTHORIZATION FOR STAFF TO ATTEND PUBLIC RELATIONS SOCIETY OF AMERICA INTERNATIONAL CONFERENCE OCTOBER 20-22, 2019 INFORMATION ITEMS – (THE FOLLOWING ITEMS ARE FOR INFORMATIONAL PURPOSES ONLY – BACKGROUND INFORMATION IS INCLUDED IN THE PACKET. DISCUSSION IS NOT NECESSARY UNLESS REQUESTED BY A DIRECTOR.) 15. SEMI-ANNUAL OVERTIME REPORT 2 Page 2 of 268 A&F Committee Meeting August 14, 2019 16. DIRECTORS ACTIVITIES REPORT 17. DEPARTMENT ACTIVITIES REPORTS a. Administration b. Finance and Information Technology 18. MONTHLY WATER USAGE DATA, TIER 2 PROJECTION, AND WATER SUPPLY INFORMATION OTHER ITEMS 19. REVIEW ISSUES REGARDING DISTRICT ORGANIZATION, PERSONNEL MATTERS, EMPLOYEE BENEFITS FINANCE AND INSURANCE ADJOURNMENT NOTE: At the discretion of the Committee, all items appearing on this agenda, whether or not expressly listed for action, may be deliberated, and may be subject to action by the Committee. On those items designated for Board action, the Committee reviews the items and makes a recommendation for final action to the full Board of Directors; final action will be taken by the Board of Directors. Agendas for Committee and Board meetings may be obtained from the District Secretary. Members of the public are advised that the Board consideration process includes consideration of each agenda item by one or more Committees indicated on the Board Action Sheet. Attendance at Committee meetings and the Board meeting considering an item consequently is advised. Accommodations for the Disabled. Any person may make a request for a disability-related modification or accommodation needed for that person to be able to participate in the public meeting by telephoning Maribeth Goldsby, District Secretary, at (714) 963-3058, or writing to Municipal Water District of Orange County at P.O. Box 20895, Fountain Valley, CA 92728. Requests must specify the nature of the disability and the type of accommodation requested. A telephone number or other contact information should be included so that District staff may discuss appropriate arrangements. Persons requesting a disability-related accommodation should make the request with adequate time before the meeting for the District to provide the requested accommodation. 3 Page 3 of 268 Item No. 2 INFORMATION ITEM August 14, 2019 TO: Administration & Finance Committee (Directors Thomas, Finnegan, McVicker) FROM: Robert Hunter, General Manager Staff Contact: Hilary Chumpitazi SUBJECT: OPEB Pre-Funding Trust Program and Pension Rate Stabilization Program Client Review STAFF RECOMMENDATION Staff recommends the Administration & Finance Committee receive and file the attached information. COMMITTEE RECOMMENDATION Committee recommends (To be determined at Committee Meeting) DETAILED REPORT The following is an annual review of MWDOC’s OPEB Pre-Funding Trust Program and Pension Rate Stabilization Program (PRSP) and is accompanied by a presentation from PARS and Highmark Capital Management. In summary: OPEB ending balance as of 06/30/19 is $2,212,236.86; a gain of $136,998.79 or 6% PRSP ending balance as of 06/30/19 is $217,414.37; a gain of $10,414.37 or 5% Highmark continues to manage our balances with a Moderate HM Plus investment objective. Asset allocation is 52.3% stocks, 46.5% bonds and 1.2% cash. The investment portfolio changed the small cap growth from T Rowe Price New Horizons Fund to Victory Small Cap Growth. Performance since inception of our OPEB plan (11/2012) is 7.04% The 2019 Outlook is a modest GDP growth Budgeted (Y/N): Budgeted amount: Core __ Choice __ Action item amount: Line item: Fiscal Impact (explain if unbudgeted): Page 4 of 268 Municipal Water District of Orange County OPEB Pre-Funding Trust Program & Pension Rate Stabilization Program (PRSP) Client Review August 14, 2019 Page 5 of 268 Contacts Jennifer Meza Keith Stribling Manager, Consulting Senior Portfolio Manager [email protected] [email protected] (800) 540-6369 x141 (949) 553-2591 Angela Tang Client Services Coordinator [email protected] (800) 540-6369 x159 Page 6 of 268Municipal Water District of Orange County ▎ 2 Pars Trust Team Trust Administrator & Consultant Trustee Investment Manager • Recordkeeping/sub-trust accounting • Safeguard plan assets • Investment sub-advisor to U.S. Bank • Actuarial coordination • Oversight protection • Open architecture • Monitor contributions/process • Plan fiduciary • Investment strategy and asset disbursements • Custodian of assets allocation development • Monitor plan compliance • Investment policy assistance • Ongoing client liaison Corporate Experience 35 years (1984 – 2019) 156 years (1863 – 2019) 100 years (1919 – 2019) Plans Under Administration 2,000+ plans, 850+ public agencies, 400,000+ participants Dollars under Administration Over $3.6 billion Over $5.0 trillion Over $16.0 billion under management Page 7 of 268Municipal Water District of Orange County ▎ 3 Summary of Agency’s OPEB Plan Plan Type: IRC Section 115 Irrevocable Exclusive Benefit Trust Trustee Approach: Discretionary Plan Effective Date: July 20, 2011 Plan Administrator: General Manager Current Investment Strategy: Moderate HighMark Plus (Active) Strategy; Pooled Account AS OF JUNE 30, 2019: Initial Contribution: October 2011: $500,000 Additional Contributions: $1,287,656 Total Contributions: $1,787,656 Disbursements: $0 Net Investment Earnings: $641,995 Account Balance: $2,429,651 Page 8 of Municipal268 Water District of Orange County ▎ 4 Summary of Agency’s OPEB Plan CONTRIBUTIONS, DISBURSEMENTS, AND TOTAL ASSETS AS OF JUNE 30, 2019: $3,000,000 Year Contributions Disbursements Total Assets Contributions Disbursements $2,500,000 Jun-12* $585,572 $0 $613,547 Total Assets Jun-13 $114,630 $0 $787,265 $2,000,000 Jun-14 $229,436 $0 $1,116,390 $1,500,000 Jun-15 $143,687 $0 $1,286,254 Jun-16 $107,332 $0 $1,393,327 $1,000,000 Jun-17 $400,000 $0 $1,960,367 $500,000 Jun-18 $0 $0 $2,077,720 Jun-19 $207,000 $0 $2,429,651 $0 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 Jun-19 Plan Year Ending *Plan Year Ending June 2011 is based on 9 months of activity. Page 9 of 268Municipal Water District of Orange County ▎ 5 OPEB Actuarial Results From the Annual Audit Report June 30, 2018 Valuation for FYE June 30, 2018 6.00% Discount Rate Total OPEB Liability (TOL) $2,374,867 Plan Fiduciary Net Position $2,077,720 Net OPEB Liability (NOL) $297,147 Actuarially Determined Contribution (ADC) $48,878 for FY 2017-18 Annual Benefit Payments (Pay-as-you-Go) $50,092 for FY 2017-18 Rule of thumb: For every one percent increase in the discount rate, the unfunded liability is lowered by 10-12%.

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