LRPC

At the Board of Director’s (BOD) Meeting January 5th, The Long Range Planning Committee (LRPC) presented updated status for the on‐going efforts summarized below. A majority of these efforts will require the continuing collection and analysis of data, and depend on both the engineering and construction contractor’s performance on the USDA Project as we progress through 2019. These results will provide the basis for our discussions and recommendations to the BOD, which will be communicated to the shareholders as decisions are made. As noted last month, the BLSMWC staff has proposed that several prioritized new scope tasks be added to the USDA Construction Project, many of which address safety and liability areas that were not included in the USDA Preliminary Engineering Report (PER). Since then, the LRPC performed a more detailed analysis of the total known USDA estimated eligible costs versus the allocated budget to determine the affordability and risk of adding this scope to the project. This must take into account not only the cost of the added tasks, but also the projected extension in schedule and resulting increased interest costs to our interim loan. Prior to approving and/or authorizing any additional scope items, it has been requested that MC Engineering obtain firm cost estimates from Mozingo Construction, Inc. and identify when in the schedule each new scope task would need to be approved and funded. This will allow us to monitor the cost and schedule performance of the USDA project to make more informed budget decisions as we progress through 2019.

Based on the latest USDA Construction Draw‐Down Schedule (i.e., Spend Plan) revised in Dec 2018, an update to our annual interim loan interest cost has been estimated. In addition, all USDA reimbursable expenses for MC Engineering and BLSMWC incurred through 2018 and estimated for 2019 have been updated and verified. It has been determined that our 2019 budget and cash flow will support (with manageable risk) holding off requesting any further USDA reimbursement of MC Engineering and BLSMWC expenses until January 2020. This will save approx. 27% in total interest on our interim loan. Based on this information, the LRPC recommended to the BOD that we submit only construction cost reimbursements until January 2020, and continue to monitor our financial position monthly as we progress through 2019. If circumstances change, we will have the option to claim a portion or all of the MC Engineering and BLSMWC expenses dating back to 2017.

The revised Asset Management Plan Proposal from MC Engineering was reviewed with BOD at our January 5th Meeting. As mentioned last month, the revised proposal included a new task for GIS Database Development which will augment the Asset Inventory. As presented to the board, the LRPC recommended continuing progression of the plan in phases, with the Asset Inventory Update and GIS Database Development Tasks included in Phase 1 at a not‐to exceed amount of $20K. This approach was approved by the BOD. The LRPC has not yet received the completed product for Phase 1 from MC Engineering. Once Phase 1 is completed, a progress meeting will be held to thoroughly review these products as well as the scope in the remaining tasks. The LRPC recommended position will be presented to the BOD for approval prior to proceeding forward beyond Phase 1.

At the Dec. 7th LRPC Meeting, the Reserves Fund Policy and Reserves Fund Operating Procedure with final recommended changes incorporated were reviewed and approved by the committee. The final recommended changes were presented to the BOD at the Jan. 5th Meeting and accepted. The BOD voted to approve and formally implement both documents. The Policy and Operating Procedure include the following Reserve Funds:

Restricted Reserves
USDA Debt Reserve Fund
USDA Short Term Asset Reserve Fund
Emergency Reserve Fund
Capital Asset Reserves
Capital Asset Replacements/System Improvement Reserve Fund
Operating Reserves
Water Rate Stabilization/Revenue Shortage Reserve