ITEM:		CONSENT CALENDAR
4.	CONSIDER ESTABLISHMENT OF PERIODIC REVIEW OF UTILIZATION OF LEGAL SERVICES
Meeting Date:			October 17, 2011	Budgeted:	N/A
From:			David J. Stoldt,	Program/	N/A
			General Manager	Line Item No.:
Prepared By:			David J. Stoldt	Cost Estimate:	N/A
General Counsel Review: N/A
Committee Recommendation: The Administrative Committee reviewed this item on October 10, 2011 and recommended that the Board adopt the quarterly review process by the Committee.
CEQA Compliance: N/A

SUMMARY: The District’s legal services comprise a significant portion of its annual budget and span a wide variety of activities. Legal counsel reports directly to the Board, not the General Manager. The Board would be benefitted to have better tools to assess the activities and expenses related to legal services, as well as would benefit from regular periodic reviews of those activities as they may relate to the Board’s strategic goals. In the recommendation below, a vehicle to fulfill this need is identified.

DISCUSSION: The District has two traditional contracts for legal services, DeLay & Laredo serves as outside counsel on the day-to-day business of the District and JEA & Associates is on annual retainer for lobbying work. From time to time, additional firms are hired, for example Goodin MacBride is assisting with the Petition to Modify at the California Public Utilities Commission (CPUC) related to the User Fee.

Most of the legal work is in reaction to events or activities that occur during the course of a year. Additional work is generated through meetings regularly attended by Counsel which include Chair/Vice Chair, Water Supply Planning Committee, Rules & Regulations Review Committee, Legislative Advocacy Committee, Technical and Policy Advisory Committees, Watermaster, the Team Supply staff meeting, as well as when requested for Water Demand Committee or other staff meetings as needed.

Legal services are one of the largest budgetary expenditures each year. Last year expenditures on legal services comprised 5% of budget (7% of actual revenues received), and 6% of budget in FY 2010. Further, in the past two fiscal years, actual expenditures on legal services exceeded budgeted amounts by 10% and 26% respectively. This information is shown in the table below. The 2011 variance was caused by unexpected events such as the denial of the user fee in a CPUC proceeding and the subsequent filings related to reinstatement.

Fiscal Year	Legal Services Budget	Legal Services Actual	Variance	Annual Total Budget	Percent Of Total Budget
2010	$450,000	$495,352	+ 45,352	$8,424,200	6%
2011	$400,000	$504,926	+104,926	$10,337,000	5%

Due to the continuing concerns over reinstatement of the user fee and budgetary pressures, as well as the significant portion of the budget represented by legal services, the District would benefit from greater oversight. This is especially true if there are new initiatives or problems that occur during the year where additional legal work may be required. Further, going forward we may be able to rely on our experienced staff to better manage the use of Counsel in ongoing activities.

Activities are reported at monthly Board closed sessions. However, there currently does not appear to be regular reporting at the Board level of actual expenses vis-a-vis budget, the allocation of time or activities by purpose, or strategic discussion about redirecting efforts or upcoming special needs that might have an impact on the legal services budget. Outside Counsel reports directly to the Board, not the General Manager, hence such additional reporting or strategic actions should occur at the Board level.

RECOMMENDATION: The Administrative Committee recommends that the Board direct the Administrative Committee to meet quarterly to discuss legal services, evaluate expenditures relative to budget, and discuss upcoming needs and strategies. It is recommended that the General Manger be included in such discussion. Staff also recommends that you direct the Administrative Services Division Manager to prepare a quarterly summary of legal services expenditures compared to budget, as well as by category of activity. Such quarterly review would be done as part of a regular Administrative Committee meeting, beginning with the November 2011 meeting.

IMPACT ON STAFF/RESOURCES: N/A

EXHIBITS

None

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