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HomeMy WebLinkAboutBOARD MINUTES 11-18-93 226 MINUTES OF THE REGULAR BOARD MEETING OF THE DISTRICT BOARD OF THE CENTRAL CONTRA COSTA SANITARY DISTRICT HELD ON NOVEMBER 18, 1993 The District Board of the Central Contra Costa Sanitary District convened in a regular session at its regular place of meeting, 5019 Imhoff Place, Martinez, County of Contra Costa, State of California, at 3 p.m. on November 18, 1993. President Clausen called the meeting to order and requested that the Secretary call roll. 1. ROLL CALL PRESENT: Members: Hockett, Rainey, Clausen ABSENT: Members: Menesini, Dalton Member Menesini had indicated that he would be late for this meeting and had requested that the meeting begin without him. Member Menesini entered the meeting at the hour of 3:53 p.m. Member Dalton had indicated that he would be unable to attend this meeting and had requested that he be excused. 2. PUBLIC COMMENTS None 3. CONSENT CALENDAR It was moved by Member Rainey and seconded by Member Hockett, that the Consent Calendar, consisting of Items a. through c., be approved as presented, resolutions adopted as appropriate, and recordings duly authorized. a. The President of the Board of Directors and the Secretary of the District were authorized to execute Utility Agreement No. 04-UT.840.6 with Caltrans reimbursing the District for the cost of providing an inspector during construction of the Burnett Avenue off and on ramps, and Resolution No. 93-121 was adopted. Motion approved on the following vote: AYES: Members: Rainey, Hockett, Clausen NOES: Members: None ABSENT: Members: Menesini, Dalton b. December 2, 1993, at 3 p.m. was established as the date and time for a public hearing to receive comments on a proposed ordinance to amend District Code Titles 6 and 9 regarding fees, charges, and rebate sewer lines. Motion approved on the following vote: AYES: Members: Rainey, Hockett, Clausen NOES: Members: None ABSENT: Members: Menesini, Dalton c. Resolution No. 93-122 was adopted, concurring with and adopting the Negative Declaration of the Local Agency Formation Commission (LAFCO), certifying that the Board has reviewed and considered the Negative Declaration, ordering the filing of Notice of Determination as a Responsible Agency stating that the District considered the Negative Declaration as 11 18 93 227 prepared by LAFCO as required, and ordering the completion of District Annexation No. 125, Parcels 1, 2, and 4 through 10. Motion approved on the following vote: AYES: Members: Rainey, Hockett, Clausen NOES: Members: None ABSENT: Members: Menesini, Dalton a. 4. HEARINGS HOLD PUBLIC HEARING ON INHABITED DISTRICT ANNEXATION 125. PARCEL 3. AS AMENDED BY THE LOCAL AGENCY FORMATION COMMISSION (LAFCO) AND CONSIDER THE NEGATIVE DECLARATION BY LAFCO At 3:03 p.m., President Clausen opened the public hearing on inhabited District Annexation 125, to receive testimony by affected property owners. There being no comments or written protests, President Clausen closed the public hearing. Following discussion of notification of the affected property owners, it was moved by Member Rainey and seconded by Member Hockett, that Resolution No. 93-123 be adopted, certifying that the Board has reviewed the Negative Declaration, ordering the filing of a Notice of Determination as a responsible agency stating that the Board considered the Negative Declaration, concurring with the adoption of the Negative Declaration by LAFCO, and ordering the annexation of inhabited District Annexation 125, Parcel 3 as amended by LAFCO. Motion approved on the following vote: AYES: Members: Rainey, Hockett, Clausen NOES: Members: None ABSENT: Members: Menesini, Dalton 5. CALL FOR REQUESTS TO CONSIDER ITEMS OUT OF ORDER Items were taken out of order later in the agenda to accommodate interested persons in the audience and Board Members. 6. ENGINEERING a. AUTHORIZE THE GENERAL MANAGER-CHIEF ENGINEER TO EXECUTE AN AGREEMENT WITH EQE INTERNATIONAL FOR CONSULTING SERVICES RELATED TO THE SEISMIC EVALUATION OF TREATMENT PLANT FACILITIES. TREATMENT PLANT SEISMIC UPGRADE PROJECT. DP 7144 (20144) Mr. Roger J. Dolan, General Manager-Chief Engineer, stated that authorization is requested for seismic evaluation of treatment plant facilities to help the treatment plant facilities survive an earthquake and remain in operation to the degree practicable. It was moved by Member Hockett and seconded by Member Rainey, that the General Manager-Chief Engineer be authorized to execute an agreement with EQE International for the seismic evaluation of the treatment plant facilities, Treatment Plant Seismic Upgrade Project, DP 7144 (20144). There being no objection, the motion was approved with Members Menesini and Dalton being absent. 7. CORRESPONDENCE CONSIDER ENDORSEMENT OF THE SAN FRANCISCO BAY COMPREHENSIVE CONSERVATION AND MANAGEMENT PLAN a. Mr. Dolan, General Manager-Chief Engineer, stated that a brief overview of the San Francisco Bay Comprehensive Conservation and Management Plan was presented at the 11 18 93 228 last Board Meeting. Board approval of the draft letter of support to the District's Congressional delegation is requested at this time. It was moved by Member Rainey and seconded by Member Hockett, that the draft letter of support for the San Francisco Bay Comprehensive Conservation and Management Plan be approved for mailing to the District's Congressional delegation, and that copies be sent to Governor Pete Wilson and EPA Administrator Carol Browner. There being no objection, the motion was approved with Members Menesini and Dalton being absent. b. NOTE RECEIPT OF LETTER DATED NOVEMBER 10. 1993 FROM THE CALIFORNIA SPECIAL DISTRICTS ASSOCIATION CONCERNING AUTHORITY GIVEN TO THE LOCAL AGENCY FORMATION COMMISSION (LAFCO) UNDER AB 1335 TO INITIATE ORGANIZATIONAL CHANGES OF SPECIAL DISTRICTS Member Rainey stated that she and Mr. Dolan, General Manager-Chief Engineer, recently attended a meeting on this matter. AB 1335 is very important because this particular bill, effective July 1, 1994, enables LAFCO to initiate consolidations and mergers of special districts. It also allows special districts to have representation on LAFCO. There will be a workshop on Saturday, December 4, 1993, from 9 a.m. to noon to familiarize special districts with the issues. If the majority of special districts in Contra Costa County decide they want representation on LAFCO, the issue will be carried for all special districts in the county and the special districts will give up their latent powers (those powers not currently being exercised). Each special district has been asked to consult with legal counsel with regard to what those latent powers are. After studying the issue and determining what the latent powers are, each special district must decide whether they want a seat on LAFCO and if there is a way to preserve the latent powers. All Board Members are encouraged to attend the December 4, 1993 workshop. Following discussion of latent powers and attendance at the December 4, 1993 workshop, it was the consensus of the Board that the December 2, 1993 Board Meeting be adjourned to the December 4, 1993 workshop to allow all interested Board Members to attend. 8. APPROVAL OF MINUTES MINUTES OF NOVEMBER 4. 1993 a. It was moved by Member Rainey and seconded by Member Hockett, that the minutes of November 4, 1993 be approved as presented. There being no objection, the motion was approved with Members Menesini and Dalton being absent. 9. APPROVAL OF EXPENDITURES EXPENDITURE LIST DATED NOVEMBER 17. 1993 a. Member Hockett, member of the Budget and Finance Committee, stated that she and Member Menesini reviewed the expenditures independently and found them to be satisfactory. Following discussion, it was moved by Member Hockett and seconded by Member Rainey, that the Expenditure List dated November 17, 1993, including Self-Insurance Check Nos. 100763-100767, Running Expense Check Nos. 78716-78944, and Sewer Construction Check Nos. 13391-13427, be approved as recommended. There being no objection, the motion was approved with Members Menesini and Dalton being absent. 10. BUDGET AND FINANCE RECEIVE OCTOBER 1993 FINANCIAL STATEMENTS a. Ms. Deborah Ratcliff, Controller, reviewed the results of operations and maintenance for the month of October 1993, noting that expenditures were $400,000 less than budget, representing an 18.8 percent favorable variance. For the four months ended October 31, 1993, expenditures were $1.5 million less than budget, representing a 16.3 percent 11 18 93 229 favorable variance. Year to date, revenues were $200,000 greater than budget, representing a 9.6 percent favorable variance. Ms. Ratcliff reported that the District's temporary investments were held in Treasury bills and Treasury notes and the District's Local Agency Investment Fund (LAIF) account with interest rates ranging from 3.7 percent to 5.8 percent. The latest interest rate as of May 1993, was 3.8 percent. The average yield for the District's LAIF account was 4.4 percent. President Clausen stated that revenues are improving and expenditures look good as well. Mr. William E. Brennan, Plant Engineering Division Manager, described the Clyde/Fairview/Maltby Pumping Stations Improvement Project, DP 4682, and showed slides of the work completed to date. Mr. Brennan stated that Associate Engineer Munawar Husain, Contract Administrator Ken Clark, and Senior Construction Inspector Bob Collins comprise the project team responsible for this project. They have done a fine job in managing this project. President Clausen thanked Ms. Ratcliff and Mr. Brennan for their presentations and declared that the October 1993 Financial Statements were duly received. 11. EMERGENCY SITUATIONS REQUIRING BOARD ACTION None 12. REPORTS a. GENERAL MANAGER-CHIEF ENGINEER 1) The District Public Information Program Update was held pending the arrival of Member Menesini. 2) The Report on Plant Security was held pending the arrival of Member Menesini. 3) Mr. Dolan, General Manager-Chief Engineer, stated that the Revenue Task Force, made up of employees from the Engineering and Administrative Departments, has been analyzing District records with the objective of making sure that all of the District's customers are paying their fair share. Mr. Dolan introduced Ms. Deborah Ratcliff, Controller, who stated that this task force resembles some of the work redesign efforts currently underway at the District in that it goes across departments and levels of employees, and the employees involved have taken responsibility for the success of the project. Ms. Ratcliff reported that the primary objective of the Revenue Task Force is to identify revenue that the District should legitimately be collecting but for some reason is not. A secondary objective of the task force is to develop the new land system data base which will be used for facility capacity studies. As a result of task force efforts, in October 1992, the Board authorized billing of $123,000 in previously un billed commercial revenues; and in May 1993, billing of $125,000 in previously unbilled residential revenues was authorized. Ms. Ratcliff stated that some of the unbilled charges were the result of clerical error but most were the result of system deficiencies. Work on solutions to these problems is proceeding. Staff is working on designing a new system with the new HTE software. Internal procedures have been modified and an additional person assigned to review reports on a monthly basis as opposed to once a year; residential accounts will be automated, reducing opportunity for clerical error; and a new software will be used to produce discrepancy reports. Ms. Ratcliff stated that key personnel from the Engineering and Administrative Departments, as well as four full-time temporary employees and one part-time employee, are working on this effort. Task force 11 18 93 230 4) members include Permit and Services Technician Leslie Kendrick, Engineering Assistant Harry Vaile, Accounting Supervisor Steve Elsberry, Principal Engineer Jarred Miyamoto-Mills, Deputy Chief Engineer Bob Baker, and Controller Debbie Ratcliff. Unbilled charges identified by the team are reviewed and updated by Accounting, and then transmitted to the county for correction on the county tax roll. To date $330,000 in current unbilled charges has been identified. There may be some prior year charges as well. It is expected that the effort will be concluded by February 1994, since that is the deadline for corrections to the county tax roll. Mr. Dolan commended the members of the task force, stating that they are doing an excellent job. Mr. Dolan introduced Mr. Jarred Miyamoto-Mills, Principal Engineer, who provided a facilities capacity fees update. Mr. Miyamoto-Mills stated that at the last Board Meeting staff recommendations with regard to facilities capacity fees were presented. One of those recommendations was that a new zone, Zone 3, be established which includes those areas in the San Ramon Valley that subsequently connect to the District's sewer system but are outside of the planned growth as described in the San Ramon Valley Trunk Sewer Improvement Project EIR. That recommendation has changed somewhat. Staff now recommends that the Board defer a decision on establishing that zone to allow staff to pursue a feasibility and cost study of this area in conjunction with a Local Agency Formation Commission (LAFCO) study relating to spheres of influence being done for the City of San Ramon. This study will begin in January 1994 and should be completed later in the spring. Staff would make a recommendation to the Board following the study. Mr. Miyamoto-Mills stated that the issue of a Capacity Use Charge Program for future high strength and/or high volume non-residential customers, such as laundromats, restaurants and bakeries, was also discussed. Staff would recommend that the interest rate be approved in the schedule of fees, that a term of 15 years be established, and that the base commercial fee be set at $3 per square foot for the Capacity Use Charge Program. Member Menesini entered the meeting at the hour of 3:53 p.m. Mr. Miyamoto-Mills stated that since the last Board Meeting two workshops have been conducted. City officials, representatives of Chambers of Commerce, and large developers were invited and were present. As would be expected, those present were not happy to see an increase in fees proposed, but they were pleased to see the District's rational approach in developing the fees and the District's openness to input and commitment to provide service. Additional workshops will be held. Discussion followed concerning the Capacity Use Charge Program and change of use during the 15-year period. President Clausen thanked Mr. Miyamoto-Mills for his presentation. Noting Member Menesini's arrival, President Clausen reverted to the order of the agenda. a. 11 18 12. REPORTS GENERAL MANAGER-CHIEF ENGINEER 1 ) Mr. Paul Morsen, Deputy General Manager, provided an update on the District's Public Education Program, reviewing the goals and objectives of the program as follows: . Communicate the importance of reducing problem pollutants entering the treatment plant from both residential and non-residential sources; 93 231 . Inform and educate the District community about Central San's role in protecting the environment and providing quality service; . Target children and adults; and . Implement four cost-effective program components using current staff to accomplish the program goals. Mr. Morsen described each of the components of the Public Education Program as follows: . The Lindsay Museum water environment display whose objective is to provide a highly-visible graphic presentation that communicates the importance of pollution prevention and Central San's commitment to environmental preservation; . On-site student workshops designed to actively engage intermediate school students in learning about Central San, pollution prevention and the importance of wastewater treatment, and to demonstrate the relevancy of school studies to the workplace; . The Central San/Lindsay Museum classroom presentations focused on engaging third and fourth grade students in learning about pollution prevention, building an understanding of what happens to "dirty water," and teaching students about Central San's critical mission of protecting the environment; and . The District's speaker's bureau planned to educate and inform the community about Central San's projects, fees and levels of service to build community understanding. Member Menesini disagreed with the Public Education Program approach in terms of targeting elementary school children, suggesting instead that the District work with high school teachers. Member Menesini stated that high school teachers would be much more effective in getting the message out to the students. Member Menesini stated that the District should work with all the high school teachers in the District, bringing them together in a high school institute where District staff can teach them something to bring to the students who are a year away from the voting booth and a year away from the issues they must vote on. President Clausen requested that staff scope out a program considering Member Menesini's comments and bring the matter back to the Board for consideration. At this time, President Clausen apologized to the public present, but stated that the Board must go into closed session to consider a matter prior to the necessary departure of a Board Member. 14. CLOSED SESSION a. EXISTING LITIGATION The closed session was held to discuss existing litigation pursuant to Government Code Section 54956.9(a). The titles of the litigation discussed were: 1 ) 2) Anne L. McLaurin v. Central Contra Costa Sanitary District No. C93-04225 Acme Landfill v. Althin CD Medical, Inc., et al No. C91-4268 SBA 11 18 93 232 At 4: 16 p.m., President Clausen declared the closed session to discuss litigation pursuant to Government Code Section 54956.9(a). At 4:35 p.m., President Clausen concluded the closed session and reconvened the meeting into open session. At this time, Member Hockett left the meeting. Member Hockett had previously indicated that she had a prior commitment and had requested that she be excused. 15. ACTIONS RESULTING FROM DISCUSSIONS IN CLOSED SESSION Mr. Kenton L. Aim, Counsel for the District, announced that the claim of Anne L. McLaurin was in part denied as filed and in part returned as untimely. No other actions were taken. At this time, President Clausen reverted to. the order of the agenda. a. 11 18 12. REPORTS GENERAL MANAGER-CHIEF ENGINEER 2) Ms. Bonnie Allen, Risk Manager, reported that security is provided by American Protective Services, Inc. (APS) and includes the entire District facilities at the Martinez site and at the District's property at 4737 Imhoff Place. The Collection System Operations (CSO) facility in Walnut Creek is not included in the service, but a Bay Alarm Security system has been installed. APS is headquartered in Oakland and has a branch office on Contra Costa Boulevard. APS was selected following review of four providers. Ms. Allen described the variety of services provided by APS including access control, personal safety and security of employees and visitors, protection of District facilities and property, and numerous other related duties. A Security Sergeant is assigned to the District during the regular work-day shift and is stationed at the entry gate to the treatment plant controlling access and egress during the daytime. The Sergeant serves as lead person for the other security officers assigned to the site, as well as liaison between APS and the Risk Manager for the District. The swing shift, midnight shift, and around-the-clock weekend and holiday shifts conduct security rounds serving as a physical and visible deterrent to trespassing, theft, and vandalism, to provide fire and safety hazards watch, and be available as backup for the Plant Operations crew in the event of an emergency. During security rounds, security officers patrol both on foot and in a vehicle provided by the District using a hand-held computer Guard Control System. Daily activity reports are prepared for each shift, incident reports are completed for any significant incident, and 24-hour management and supervision is provided by the branch office. Last year $ 1 07,000 was the cost for this service and $114,000 was budgeted in 1993-1994. Staff expects to go out for proposals prior to the next budget, not because the District is dissatisfied in any way with APS but because staff wants to assure that the District is receiving comparable services at competitive costs. Member Menesini thanked Ms. Allen for her report and stated that the Board should have knowledge of such services and take a proactive position in areas such as safety and security. Member Menesini asked the basis that will be used in judging the comparative study. Ms. Allen indicated various areas such as availability and costs are important but stated that the quality of the service is dependent on the training and screening of the officers assigned to the District. 3) 4) The Revenue Task Force Update was considered earlier in the agenda. The Facilities Capacity Fees Update was considered earlier in the agenda. 5) The organization of the refuse collection rate-setting workshop and public hearing was discussed. It was agreed that the same format as previous years will be followed. 93 b. 233 6) Mr. Dolan, General Manager-Chief Engineer, reported that staff has given some thought to encouraging the holding of a workshop on the future of recycled water. The workshop would be held in the February/March 1994 timeframe. Invitees could include Sanitation and Water Agencies membership, representatives of city and county government, key environmental groups, members of the business and industrial communities, and regulators. If the Board concurs, staff will proceed with development of such a workshop on the economic and environmental impacts of recycled water and bring it back to the Board for a decision. The Board agreed. 7) Mr. Dolan announced that the District is currently advertising for bids for construction of the 1993-1994 Sewer Renovation Project. This project will correct sewer deficiencies in 16 different locations. The engineer's estimate for the project is $1.5 million. COUNSEL FOR THE DISTRICT 1) Mr. Kenton L. Aim, Counsel for the District, stated that this issue before the Board deals solely with the question of pass through of defense litigation costs in the Acme litigation. Mr. Aim stated that for purposes of the discussion today, his comments are not intended to reflect his or the District's positions with regard to the District's liability, the collectors' liability, or Mrs. Fiorentino's liability in the subject litigation. The comments deal solely with the issue of whether or not under the rate-setting methodology, the District is required to or should pass through any of the defense costs of the three. Mr. Aim stated that if anything he says implies an admission of liability in the underlying Acme lawsuit, he has either misspoken or his comments have been misinterpreted. Mr. Aim stated that last December, certain costs were requested by Valley Waste Management (VWM) and Orinda-Moraga Disposal Service, Inc. (O-M) to be included in the rate base for their costs for defending themselves in the Acme litigation. The District agreed to include their estimate in the rate base with the proviso that the District was not agreeing to pass through costs, but rather that it was a significant issue and that pass through would be considered at a later date. That is where the matter stands at this time. Mr. Aim stated that there is a difference in the position of Valley Disposal Service, Inc. (VDS) and Mrs. Francise Fiorentino in that they did not make a request that their costs be included in the 1993 revenue computation. Mr. Aim stated that he takes their November 3, 1993 letter from Mr. Brian C. Bunger, of Folger & Levin, to be a request that their defense costs be included in the 1994 revenue computation. Mr. Aim stated that he has communicated with the affected parties and there have been numerous discussions as to the merits of the parties' respective positions; however, no agreement between CCCSD staff and the parties has been reached. Mr. Aim stated that with regard to VWM and O-M, the staff position is that defense costs should be shared between the ratepayers and the company on a 50/50 basis. Fifty percent of their reasonable defense costs should be included in the rate calculation and reimbursed to them. The remaining 50 percent of the costs would be borne by the company and their shareholders. It will be necessary to reach an agreement that such an allocation of fees and payment of fees is not an admission as to liability of either of the parties but for rate-setting purposes it is an allocation used to allow the process to move forward so the companies are treated fairly and the interests of the public are protected. Mr. Aim stated that this would not be a final agreement as to the respective responsibilities of either party. Each would have their right to reassert their positions. The agreement would be for 1993 and 1994. This position was presented to the parties before the discussion this evening as a proposed compromise based on the lack of clarity of the law and the need for fairness in how costs should be handled in order to jointly move forward in the 11 18 93 234 11 litigation. Mr. Aim stated that staff's position is not shared by at least some of the collectors. Mr. Aim provided background for discussion, stating that in 1993 $130,000 all~cated to legal fees was collected by O-M and $186,000 was collected by VWM. To date, no payments have been made from the fund and both companies have made contributions as required up to this date. From a Board perspective, the Board must determine if this is their position or whether to pass through some or all or none of the defense costs. The legal issue is whether the District is compelled by current law or contract provisions to pass these through as normal recoverable costs. Mr. Aim stated that he cannot conclude that there is binding legal authority to compel the to Board pass through all of these legal costs. That does not mean that the Board cannot or should not decide to pass through these defense costs. This merely means that District Counsel's analysis based on current law dealing with rate setting by public agencies (that are not Public Utility Commission (PUC) controlled rate-setting public agencies) does not necessarily require pass through. Mr. Aim stated that he has reviewed both the District's franchise and general law in reaching this opinion. With regard to the applicable general law, legal costs which are ordinarily included in the operations and activities under franchise are eligible to be recovered by the rates. However, Mr. Aim stated that in his view, litigation costs mayor may not fall into that category depending on circumstances attendant to the litigation. Since there was no allegation of wrong doing or negligence on the part of the companies, that would militate towards the conclusion that these are the type of fees that should be passed through. However, under the Comprehensive Environmental Response Compensation and Liabiity Act (CERCLA), independent liability for generators, transporters, and operators is created. One could then argue this law intends that more than one party is to be responsible, namely both the customers as "generators" and collectors as "transporters." The second issue that could serve to militate against these costs being fully recoverable is the franchise agreement. This, of course, is subject to more than one interpretation. The franchise contains certain provisions that indicate the District has discretion in ratemaking, and that the collectors are required to provide indemnity and assume some of the risks in carrying out the franchise. Mr. Aim stated that because there is substantial room for interpretation as to what the indemnity provision in the franchise agreement means, the lack of clarity in the law as to what a public agency should do in this regulatory setting, and because there have been substantial cooperative efforts between the District and the collectors in pursuing the best ultimate resolution for the ratepayers, he has proposed that certain of the costs should be passed through on a 50/50 basis given the uncertainties outlined. President Clausen suggested that the people in the audience that have a vital stake in this matter are entitled to a full Board. President Clausen suggested that this matter be rescheduled for a meeting when all Board Members are present. Following discussion and input from the interested parties in the audience, it was agreed to proceed at this time. Mr. Aim stated that his comments thus far, in a general sense, apply to all three of the applicants, but before the Board proceeds with the presentation from VDS, he would like to make one additional comment because VDS is not a current franchisee. Mr. Ronald Proto, General Manager of Valley Waste Management, thanked the Board for the opportunity to speak. Mr. Proto stated that correspondence has been exchanged between the District's counsel and the attorney for VWM. Mr. Proto stated that if this matter is left to the attorneys, this issue will not be resolved for a very long time. Mr. Proto 18 93 235 stated that he is convinced this is not purely a legal issue. This is a business decision between the District and VWM. Historically, the District has passed through legal fees just as they pass through the cost of tires and fuel. There is no reason to think these legal fees would not be passed through. It is a little disconcerting that VWM has gone through with a joint defense and has taken a leadership role in that joint defense. VWM has done the largest share of the work on the legal aspects. In addition, VWM's inhouse corporate counsel Ms. Lynn Walker, has provided unique technical experience on this subject that was probably not available otherwise. When this major share or larger burden is considered, the cost for the defense is accelerated for VWM. VWM has had a significant positive impact with regard to resolution of the litigation. For that reason along, the Board should pass through 100 percent of the legal fees. It is estimated that costs for final cover, leachate treatment, and contractor overhead have been reduced from $23 million to $15 million. There is an additional savings of $4 million to $7 million in long-term post closure costs. Mr. Proto stated that there is no question in his mind that VWM is spending much more because they have taken this leadership role. Then to be told the costs will not be passed through seems grossly unfair. Mr. Proto pointed out that in his judgment this is not a legal issue. Mr. Proto stated that this is a business issue between the Board and VWM. VWM has put in all the programs the Board has requested quickly and with flair. Then to have this just does not seem right. Mr. Proto stated that he does not understand why the District would encourage VWM to take a leadership role and then not pass through the costs. If there is not 100 percent pass through, VWM must decide whether to continue in this leadership role. Mr. Proto stated that as a business person, he would cut out any program that is losing money, but he is not able to cut the recycling program. The second thing he would consider is raising revenue, but he is unable to do that. Inclosing, Mr. Proto asked if it would be in the District's best interest for VWM to continue taking a lead role in the joint defense of this case. Mr. Aim, Counsel for the District, answered that it would be. Mr. Proto stated that he rests his case. President Clausen declared a recess at the hour of 5:27 p.m., reconvening at the hour of 5:31 p.m. with all parties present as previously designated. Mr. Aim distributed a letter dated November 18, 1993 from Mr. Randall D. Morrison, of Crosby, Heafey, Roach & May, attorneys for VWM. Mr. John Matheny, Controller of Orinda-Moraga Disposal Service, Inc. (O- M), addressed the Board, stating that O-M is a small company and does not feel it can afford to pay 100 percent of the legal fees for defense of the Acme litigation. O-M is willing to compromise with a 50/50 split. However, if the Board is willing to pass through 100 percent of the legal fees for VWM, O-M requests pass through of 1 00 percent as well. Mr. Aim stated that Valley Disposal Service, Inc.'s (VDS) request is not on the theory that they are a current franchisee and therefore would ordinarily recoup these costs as ongoing operating costs. No money was impounded when they were a franchisee. Mr. Aim requested that VDS make the theory as to why the District would now owe those monies or be obligated after the disolution of the VDS corporation. That is a separate issue that needs clarification. Mr. Marshall Grodin, owner and General Manager of Valley Disposal Service, Inc. (VDS), thanked the Board for the opportunity to speak on behalf of Mrs. Francise Fiorentino who, like the District, finds herself a defendant in the Acme lawsuit. Mr. Grodin stated that his father-in-law, Angelo Fiorentino, with his partners, founded VDS in Walnut Creek nearly 40 years ago. Mrs. Fiorentino left her job at the telephone company, Anne Grodin, her daughter, left law school, and Mr. Grodin left his job as a newspaper editor, to help in the business when Mr. Fiorentino became ill and later died. 11 18 93 236 11 Approximately six years, Mrs. Fiorentino and the Grodins sold VDS to Waste Management. Mr. Grodin stated that while he and his family operated VDS, . they did what they were asked to do and what they were expected to do. They picked up garbage from customers and hauled it to Acme Fill. VDS was not an industrial waste hauler. . VDS prided itself on their customer satisfaction and relationship with the District. The District set rates during that time based on a 95 percent Operating Ratio. The 95 percent Operating Ratio did not includes taxes or interest, so the company actually operated on a two to three percent Operating Ratio. VDS management took no money from the business other than salaries and all profits were returned to the business. Mrs. Fiorentino certainly never took any money from the business that would pay for these legal fees. Mr. Grodin stated that Mrs. Fiorentino and VDS have remained allies with the District during this two-year litigation and participated in the joint defense. There is one key difference between Mrs. Fiorentino and the other defendants. The municipalities and the District can and do turn to the ratepayers. To the big industrial defendants with billions in sales, the legal costs do not amount to much. For VWM and O-M the District is considering releasing to them amounts that have been collected and impounded that will be returned to the companies for some portion of their defense costs. So of the 44 defendants, there is only one who writes a check for defense each month in the lawsuit. Mr. Grodin questioned whether that is the way it should be. The issue here is public policy for public closure of an aging landfill. It is in society's best interest that the environmental problems be addressed. The problem Mrs. Fiorentino faces today is the same problem faced by the District and the other franchisees. That is no one could ever have envisioned the changes in technology and the costs involved in closing a landfill. Mr. Grodin asked that as the District pays its own legal fees and as the District distributes proceeds of impound accounts to O-M and VWM, that the District remember that there are other legal costs in this litigation. Mr. Grodin stated that the District today is facing expenses related to that earlier timeframe just as Mrs. Fiorentino and VDS is. The District is able to raise its franchise fee to pay for those costs. It would be fair for Mrs. Fiorentino's defense costs to be covered as well. Mrs. Fiorentino is looking only for costs related to the District franchise area and not the Walnut Creek and San Ramon franchise areas. Mr. Grodin asked that the Board give serious consideration to Mrs. Fiorentino's request, that District Counsel be requested to consult with Mrs. Fiorentino and VDS's attorney to prepare a report, that the Board give it their serious consideration, and that it be considered with the requests from VWM and O-M. In the discussion that followed, Member Menesini requested more information from the applicants in terms of what they feel their responsibilities might be in the wide spectrum and what they have put into the litigation. Mr. Aim expressed concern about getting into a debate or offering an opinion to the Board in open session on District's potential liability vis a vis the collectors. If the Board seeks guidance as to his views on the District's proportional share of the responsibility, if any, Mr. Aim stated that would need to be discussed in closed session. Member Rainey asked if it would be possible to ascertain from the attorney hours and billings, the amount that is applicable to this matter. Mr. Aim stated that if the Board wishes to verify these costs and their reasonableness, some mechanism could be set up. President Clausen stated that the costs must be verified and it must be determined that the collectors did not "over litigate." Mr. Aim stated that based on the amount of effort he has seen, he would assume that VWM has probably spent all or most of the amount impounded and he would expect that O-M has not spent that. Mr. Aim stated that there is no question that the counsel for VWM is a well-known big firm and accordingly spends a great deal of effort 18 93 237 making sure their work is a very high quality. They have been very active on this litigation. Their role has been major and they brought a great deal to the table. Mr. Aim stated that other issues include the fact that all of the companies potentially have some insurance coverage and the District is required to be named as an additional insured on their policies. If they are fortunate enough to collect, the District as an additional insured should receive the same coverage that the collectors receive. Those issues have not been fully resolved. If the District decides to pass through these monies and some time later, through a Court decision or by other means there is some insurance recovery, the fees would have to be recouped from the companies in favor of the ratepayers. The parties would have to be willing to enter into an agreement in that regard. Mr. Dolan stated that another issue is the language in the purchase agreements. Mr. Aim stated that is a complicated issue. O-M's position is that the sale of the company was a share purchase and not an asset purchase. Staff has not been provided copies of their purchase agreement to independently confirm this. The sale of VDS to Waste Management was an asset purchase. Mr. Aim stated that he has reviewed that document and talked with the respective attorneys about the implications of the purchase terms and thinks that it is fair to say that a dispute exists between the former and the new company as to the allocation of the liability as between them. Mr. Aim stated that the Board may want to preserve that issue and take it into account, but he does not believe it is an issue on which he can offer a legal opinion at this time. Mr. Randall Morrison, attorney for VWM, stated that the unresolved issues relating to insurance and VDS can be resolved in the future with 100 percent pass through of the legal fees. Member Menesini stated that understanding the issues is critical to his making a decision. Member Menesini stated that he needs more backup information on the spectrum of responsibility and involvement. Member Rainey stated that the defense coalition was formed hopefully to eliminate some of the redundancy in defense costs. Member Rainey asked if there is any way to judge whether there is still redundancy. Mr. Aim stated that there is still redundancy but substantially less than if the joint defense group did not exist. Following discussion, President Clausen requested that this matter be calendared for further discussion after the refuse collection rate-setting workshop at the December 2, 1993 Board meeting. At that time more input from the applicants will be received and there will be an opportunity for more discussion from the Board and District Counsel. To recap, Mr. Dolan stated that this matter will be calendared for discussion after the refuse collection rate-setting workshop on December 2, 1993; the rate calculation done by Hilton Farnkopf & Hobson will be based on 100 percent pass through of legal fees using an impound account; after the workshop, the issue of how much, if any, should be paid from the impound account will be addressed; Member Rainey has requested more information on the actual hours and dollars spent compared to the amount of money in the impound account; the pro rating of VWM legal fees among the franchising jurisdictions will be reviewed; Member Menesini has requested an overview of the legal issues; and the collectors may have more information and positions to present. Member Rainey requested information from the VWM/VDS purchase agreement as to whether they was any additional insured or indemnity. Mr. Aim stated that perhaps the parties could provide a report as to where they are in terms of pursuing insurance and what sort of recoupment there would be for the District in the future. Mr. Dolan requested that the collectors fax copies of the insurance policies or declaration sheets to the District. 11 18 93 238 c. SECRETARY OF THE DISTRICT None d. BOARD MEMBERS 1) Members Rainey and Menesini reported on the November 8, 1993 meeting of the Regional Efficiency Committee. A mission statement was drafted and provided for the Board's consideration. The Committee recommends that a meeting of the Sanitation and Water Agencies representatives in the central county corridor be convened to discuss issues of mutual concern and ways to work together on consolidations and mergers. It was the consensus of the Board that the draft mission statement of the Regional Efficiency Committee be approved and that the recommendation of the Committee to convene a meeting of representatives of Sanitation and Water Agencies representatives in the central county corridor be approved. 13. ANNOUNCEMENTS None 14. CLOSED SESSION This item was taken out of order earlier in the agenda. 15. ACTIONS RESULTING FROM DISCUSSIONS IN CLOSED SESSION This item was taken out of order earlier in the agenda. 16. ADJOURNMENT There being no further business to come before the Board, President Clausen adjourned the meeting at the hour of 6: 12 p.m. \ President of the Board of Directors, Central Contra Costa Sanitary District, County of Contra Costa, State of California COUNTERSIGNED: e et ry of the Central C tra C(¡sta Sanitary District, County of Contra Costa, State of California 11 18 '93