Special Districts Revenues and Reserves Reason for Investigation The Nevada County Grand Jury, in accordance with*

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of the Grand Jury was that each of the Special Districts listed should develop written guidelines governing The accumulation of retained earnings, and justify to its constituency that the amount maintained is reasonably prudent. The policy of this District is that if the income exceeds the budget by 10% the tax rate will be reduced. The amount shown in the 2000-2001 budget and through the 2003-2004 budgets show or will show a figure higher than 10%. This is due to grants received but not yet expended. The money is committed and will be expended in the current fiscal year. Respectfully submitted by John V. Taylor President . REC'D BY SUPERIOR COURT DATE:BY: 6-5 Follow ays

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- Because the Truckee Cemetery District is not an enterprise district, it cannot respond to this recommendation.

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- Because this recommendation does not apply to Truckee Cemetery District, it obviously cannot act on that recommendation.

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- Because this recommendation does not apply to Truckee Cemetery District, it obviously cannot act on that recommendation.

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- Because the Truckee Cemetery District has no authority over the auditor-controller, it does not respond to this recommendation.

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- Because the Truckee Cemetery District has no authority over the auditor-controller, it does not respond to this recommendation.

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- This recommendation is being implemented and a copy of the Resolution to the Board of Supervisors is enclosed with this letter. We trust that this response complies with and satisfies the provisions of the Penal Code regarding responses to the Grand Jury's findings and recommendations. Yours truly, I P. COLLINSON BPC:caw Enclosure Truckee Cemetery District cc: BEFORE THE BOARD OF TRUSTEES OF THE TRUCKEE CEMETERY DISTRICT RESOLUTION WHEREAS, the Truckee Cemetery District is a public cemetery district organized and operating pursuant to California Health and Safety Code Sections 8890 et seq., and WHEREAS, the Civil Grand Jury of Nevada County published its report and recommendations on April 23, 2003, and WHEREAS that report recommended that certain districts "consider taking advantage of the provision in California Government Code Section 2690(f) enabling the replacement of annual audits with biennial audits in order to lower their audit expense", and WHEREAS the Board of Trustees of the Truckee Cemetery District is desirous of reducing the District's expenses, NOW, THEREFORE, BE IT RESOLVED the Board of Trustees of the Truckee Cemetery District hereby unanimously requests the unanimous approval of the Board of Supervisors of Nevada County to replace the annual audit of the Truckee Cemetery District with a biennial audit covering a two-year period. BE IT FURTHER RESOLVED that this unanimous request shall be forwarded to the Board of Supervisors of Nevada County so that they may act on this request. PASSED AND ADOPTED at the regularly scheduled meeting of the Board of Trustees of the Truckee Cemetery District by the following vote: AYES NOES: ABSENT: harow/šale/N ABSTAIN: Attest: 1/0 tole Kon Secretary/Clerk of the Board Dated: June 9, 2003 RESOLUTION Hem Spen du Truckee Donner Public Utility District Board of Directors Joseph R. Aguera J. Ronald Hemig FAX (530) 587-505 Jamos A. Maass (530) 587-3896 Business Office Patricia S. Sutton Nelson Van Gundy General Manager Peter L. Holzmeister # of Date ( 7671 Post-It® Fax Note June 20, 2003 From of must To υ Co. The Honorable Ersel L. Edwards co. posivada (aint 7-3896 Phone Nevada County Superior Court Superier and 201 Church Street Fax # Nevada City, CA 95959 Dear Judge Edwards; This letter is Truckee Donner Public Utility District's response to the Report of the Civil Grand Jury of Nevada County on the subject of Special Districts Revenues and Reserves. Respondent Truckee Donner PUD disagrees wholly with the findings contained in Table 1 in the column entitled "Reserves (a)". The Grand Jury Report finds that Truckee Donner PUD has $22,175,137 in reserves. On the bottom of the third page of the document sent by the Grand Jury, there is a reference to note "2" which states " For purposes of this report, the terms reserves, retained earnings, and fund balances are used interchangeably." The report preparer used the District's Retained Earnings balance of $22,175,137 as the amount of reserves held by the District. For the District, retained earnings represents something very different than reserves or fund SUPERIOR COURT balances. Retained earnings is an accumulation over time of the investment in the District's water and electric system assets paid for by our customers. These assets include pipelines, wells, storage tanks, pump stations, pole lines, substation transformers and the like. The only way to turn these assets into cash would be to sell the District's assets. Part of the confusion may come from the fact that the District had asked our auditors to call "Retained Earnings " "Customers' funds". 3 8 There are two sections to the CONCLUSIONS that we wish to address in our response. The ₻ Grand Jury Report states "The apparent reason enterprise district reserves are so high is that in ECD addition to receiving revenue from the county tax roles, these districts charge fees for their ₽¥. services. In many cases the customer base is of considerable size, diverse, and unable to obtain Œ comparable services from a competitive source. These conditions allow the fee structure to remain high with little recourse from the population served." Response: The Truckee Donner PUD does not receive any property tax or sales tax revenue from the county tax roles. The Counties (Placer and Nevada) do, however, collect standby revenue and Donner Lake Assessment District revenue for the District. The Counties also charge the District a fee for this service. The District holds public hearings for customer input when it is considering adoption of its annual operating and capital budgets and when considering increasing its rates. The Grand Jury Report goes on to state "A number of the Special Districts have reserves that appear to be excessive. Two enterprise districts stand out. Nevada Irrigation District with $167,327,953 which is over eight times its annual operating revenue, and Truckee Sanitary District with $10,765,946 which is almost five times its annual operating revenue." Response: As stated before, the Grand Jury report refers to the District's retained earnings as our reserves. As of December 31, 2001, the Truckee Donner PUD had a General Fund balance of $225,829 and a restricted funds balance of $7,534,072. $1,487,497 of this amount is required to be on reserve by our debt covenants. The balance is restricted for specific projects and purposes. It would be helpful to have a definition of Reserves in order to categorize our restricted funds properly. The report of the Grand Jury makes several recommendations that we now wish to respond to.