In a move that ends a minor, months-long dispute, the Tomales Village Community Services District’s board voted unanimously to drop a bill for new depreciation costs that it previously charged to its largest client, Shoreline Unified School District. The school district has been wary to accrue additional costs in light of a debilitating structural budget deficit; with the board’s decision, Shoreline will no longer have to pay $25,000 in depreciation expenses for this year and last.
“We want to reestablish a working relationship with the school district,” said Bill Bonini, the president of the service district. “It’s not just about handing them a bill.”
A conversation over that bill began in December, when Shoreline’s trustees agreed to pay for all charges contained in the district’s annual sewer bill except for depreciation. As a result, the districts have struggled for months to resolve whether depreciation—a budgetary term that refers to future costs for aging and failed equipment—should be charged as an operating expense or simply represented as a line item on the annual budget. Shoreline has held firm in the belief that charging depreciation as a separate expense would constitute a “double charge,” considering depreciation is also figured into the Tomales district’s operating budget.
The issue, which has been brought up regularly at the service district’s monthly meetings since winter, has called into question whether the two districts should change their longstanding contract agreement. The districts have been contractual partners since 1998, when the service district acquired the Tomales sewer system from North Marin Water District; since then, Shoreline—which runs elementary and high schools and has its district office in Tomales—has paid a fixed 34-percent share of the service district’s yearly operational expenses and capital improvements, and contributes an equivalent share to a “sinking fund” for the repayment of an old construction loan.
Shoreline trustee Jim Lino, who has attended Tomales’s meetings since January, has suggested revising the contract to clarify how Tomales might establish a more equitable annual rate for Shoreline to pay.
“I don’t know how we get to a revised agreement,” said Mr. Lino. “But it probably should be considered.”
So far, both Shoreline and Tomales boards have discussed installing flow meters to calculate the amount of usage that Shoreline properties actually contribute to the entire sewer system. In March, the service district’s administrator Karl Drexel informed his board and Mr. Lino that flow meters would cost around $15,000 per year, and that two total would be needed to monitor Shoreline’s output.
Flow meters might also reveal Shoreline’s usage to be higher than the one-third share the school district now pays. Tomales trustee Patty Oku has said that a small population combined with an increasing amount of rentals in Tomales could show disproportional usage between the town and the school district.
“This may be more expensive for the school district than it is now,” she said of a revised agreement. “Would the school district be happy if the percentage was more than it is right now?”
Mr. Bonini noted at a meeting last Wednesday that discussions on the agreement and any future depreciation charges would not take place for a few months—or at least until after Shoreline resolves current changes to its administration. Last month, the school board accepted the resignation of the superintendent Tom Stubbs, and has yet to indicate how the district will go about filling that position.
Similarly, the service district is in the process of reforming the terms of its administrator position, which encompasses both general manager and bookkeeping responsibilities. Locals for years have worked to redefine the role of the administrator, which represents the only regular employee and eats up about one-third of the district’s overall expenditures.
“They’re going through some organizational change and we’re going through some organizational change,” said Bruce Abbott, Shoreline’s business manager. “In a few months from now, after the dust settles, we’re going to get back together and take a look at the contract.”
Last week, Gary Goelitz of Matrix Consulting Group presented the final draft of an efficiency study that recommended Tomales reduce the administrator’s position from 40 hours a week to 16 hours, and to split the management and financial responsibilities into separate positions. Mr. Goelitz suggested that Tomales should outsource its bookkeeping to an outside agency and partner with service districts in other areas, such as San Rafael, to tap into lower-cost marketplaces for management and financial services.
The report also advised Tomales to drop the depreciation bill. “You’re in such excellent financial condition that there is no need to charge the school district for depreciation,” Mr. Goelitz said. “You’ve got a simple system. Simple to treat, simple to collect.”
The Tomales district’s vice-president, Deborah Parrish, praised the decision to drop depreciation as an act of good faith that will help the two districts move forward with other issues. Last month, Ms. Parrish made a motion to end the administrator’s contract, an action that Mr. Drexel alleged was in violation of California’s Brown Act because the motion had not been announced as an official item on the meeting’s agenda. (The service district’s board rescinded that action last week, while at the same time announcing that it plans to reintroduce the contract termination item on the agenda for an unspecified, future meeting.)
Mr. Drexel has said he tacked on depreciation last year at the behest of the service district’s auditor, Robert Johnson, whom Mr. Drexel claims cited new regulations set forth by the state Controller’s Office as the impetus for charging depreciation.
To help the two sides clear up any confusion about depreciation, Mr. Johnson attended a board meeting in March and used an example of a similar district—which he referred to as being located “on the mountain”—to illustrate how depreciation in small communities can act as an operational and economic hindrance, even though he reaffirmed that “depreciation is a mandated operating expense.”
“You don’t want to get tied up in depreciation,” Mr. Johnson said. “The folks on the mountain simply don’t. It is an operating expense for profit-loss computation.
At the time, Mr. Johnson added that the “folks on the mountain” also use flow meters to calculate usage.
Kristain Heston, a fiscal analyst for the state controller, clarified in a March email to Mr. Drexel that there is no specific law that requires local districts to report depreciation as an operating expense.