Title
Adopt a Groundwater Monitoring Program Regulatory Fee Stabilization Policy.
Report
RECOMMENDATION:
It is recommended that the Board of Supervisors:
Adopt a Groundwater Monitoring Program Regulatory Fee Stabilization Policy.
SUMMARY/DISCUSSION:
Generally Accepted Accounting Principles (GAAP) recommend that governments establish a formal policy to indicate an appropriate level of reserves to be maintained for rate stability, capital improvement projects, and other operational obligations. The purpose of the Groundwater Monitoring Program (GMP) Regulatory Fee Stabilization Policy (RFSP) is to implement sound financial management practices consistent with the GAAP recommendation, and moderate the potential for fee volatility due to unforeseeable circumstances. The RFSP proposes to establish two reserve funds within the GMP, a Capital Reserve and an Operating Reserve, and to limit the accumulation and replenishment of the reserve within any given fiscal-year to 20% of the reserve target.
Each year, the GMP is reevaluated to ensure regulatory objectives are being met reliably and cost effectively. The annual GMP budget preparation and fee-setting process entails numerous public meetings and two public hearings before final consideration for approval by the Board of Supervisors. The regulatory fees ultimately set are consistent with Gov. Code § 53758(c), which states in part: “…that the amount [of the fee] is no more than necessary to cover the reasonable costs to the local government in providing the specific benefit or specific government service…” While great care is taken to plan for effective implementation of the GMP, not all uncertainty can be eliminated. Because the GMP is in place to meet SGMA regulatory mandates, unforeseen yet necessary actions cannot simply be dismissed or delayed. If an unforeseen action becomes necessary, the Agency has two options: 1) it can amend the GMP budget and fee in the then current fiscal-year if cash is insufficient, or 2) it can rely upon cash in hand and recover the cost of the action in the subsequent fiscal-year. Either alternative results in uncontrolled fee volatility. The purpose of the RFSP is to manage and moderate that potential volatility.
The proposed RFSP was initially presented to the Agency’s Finance & Administration Committee (FAC) on September 9th and the Board of Directors (BOD) on September 21st. The FAC recommended that while the proposed reserve funds are being accumulated, interest earnings be reinvested into the fund to accelerate the accumulation until reserve targets are met. For the Capital Reserve, the target is the sum of the annual depreciation (Annual Depreciation = (Cost of Asset - Salvage Value) ÷ Useful Life) of the GMP’s capital assets held at the time of annual budget preparation. The Capital Reserve target currently is $210,000. The BOD concurred with this recommendation. The proposed target for the Operating Reserve is fifty percent of the total GMP operating expenses, as approved annually by the Board of Supervisors. The BOD recommended capping this amount at $400,000, which is approximately fifty percent of today’s GMP operating expenses, and reevaluate the proposed RFSP policy once the reserve targets are achieved or in five years, whichever comes first.
STRATEGIC PLAN ALIGNMENT:
The Regulatory Fee Stabilization Policy recommendation aligns with the Board of Directors adopted 2020 Strategic Plan Goal A, Strategies 3 & 4; Goal B, Strategies 2 & 7; and Goal D, Strategy 1.
OTHER AGENCY INVOLVEMENT:
Finance & Administration Committee, Board of Directors
FINANCING:
Implementing the recommendation may require a FY27 budget amendment to augment revenues and appropriations by $120,000. If necessary, the budget amendment will be brought before the Board of Supervisors at a future date.
Prepared and Approved by: Ara Azhderian, General Manager, (831) 755-4860
Attached:
FAC Report
BOD Report
Draft Groundwater Monitoring Program Regulatory Fee Stabilization Policy - v.10-09-26