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HomeMy WebLinkAboutBOARD MINUTES 12-02-93 239 MINUTES OF THE REGULAR BOARD MEETING OF THE DISTRICT BOARD OF THE CENTRAL CONTRA COSTA SANITARY DISTRICT HELD ON DECEMBER 2, 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 December 2, 1993. President Clausen called the meeting to order and requested that the Secretary call roll. 1. ROLL CALL PRESENT: Members: Menesini, Dalton, Hockett, Rainey, Clausen ABSENT: Members: None a. ELECTION OF DISTRICT BOARD PRESIDENT AND PRESIDENT PRO TEM Member Hockett nominated Member Rainey to serve as District Board President. Member Dalton nominated Member Hockett to serve as District Board President. Member Menesini seconded Member Hockett's motion that Member Rainey be elected President of the District Board of Directors for 1994. The motion was approved on the following roll call vote: AYES: Members: Hockett, Menesini, Rainey, Clausen NOES: Members: Dalton ABSENT: Members: None It was moved by Member Rainey and seconded by Member Menesini, that Member Dalton be elected President Pro Tem of the District Board of Directors for 1994. Motion approved on the following roll call vote: AYES: Members: Rainey, Menesini, Hockett, Clausen NOES: Members: None ABSENT: Members: None ABSTAIN: Members: Dalton After first withdrawing his name from consideration, Member Dalton agreed to serve as President Pro Tem. President Clausen turned the chair over to newly elected President Rainey. President Rainey thanked the Board for their vote of confidence and indicated that a token of appreciation will be presented to President Clausen at the next meeting commending him for the excellent job he has done in guiding the Board. President Rainey stated that it has been a pleasure to serve this past year with two new Board Members. Their perspectives have been interesting and helpful to the Board. 2. PUBLIC COMMENTS None 12 02 93 240 3. AWARDS AND COMMENDATIONS a. PRESENTATION OF STATE COMPENSATION INSURANCE FUND AWARD BY MR. BOB SCHMITT. DISTRICT MANAGER Mr. Roger J. Dolan, General Manager-Chief Engineer, stated that staff is particularly pleased to have Mr. Bob Schmitt from the State Compensation Insurance Fund present tonight. Mr. Dolan introduced Ms. Bonnie Allen, Risk Manager, who introduced Mr. Schmitt, District Manager of the Oakland Office of State Compensation Insurance Fund. Mr. Schmitt stated that it is a pleasure to acknowledge Ms. Bonnie Allen and her safety team for their efforts including creative plans for prompt rehabilitation and return to work of injured employees; thorough accident investigation; procedures to prevent fraud; communication and coordination between departments, with State Fund and with individual workers; and a sound sense of priorities in identifying and resolving important issues. Mr. Schmitt stated that these efforts have translated safety from an activity to an important program. The conviction and vitality with which this challenging job has been carried out has resulted in a 76 percent experience rating and a premium of $124,000 less per year than a normal sanitary district. Mr. Schmitt stated that this savings, coupled with the program for returning injured employees to work, makes the Central Contra Costa Sanitary District program a model program. On behalf of the District, President Rainey thanked Mr. Schmitt for the award and Ms. Allen for her efforts. As always it is the employees who earned this award. While the fiscal savings are notable, the most important thing is the safety of the District's employees and a safe workplace. Ms. Bonnie Allen, Risk Manager, thanked Mr. Schmitt for the award and introduced the members of the District's safety team, Safety and Loss Control Specialist Tamara Davidson, Plant Operations Department Operations Safety Specialist Dave Albinus, and Collection System Operations Department Operations Safety Specialist Kirby Narcisse. Ms. Allen thanked management and staff for making safety a priority and the Board for their commitment and continued support of the District's safety program. It was moved by Member Menesini and seconded by Member Clausen, that Resolution No. 93-134 be adopted, commending Ms. Allen and the safety staff for their outstanding efforts. There being no objection, the motion was unanimously approved. 4. CONSENT CALENDAR Following discussion of the Notice of Cessation and negotiations with CalTrans and the contractor, it was moved by Member Clausen and seconded by Member Menesini, that the Consent Calendar, consisting of Items a. through I., be approved as recommended, resolutions adopted as appropriate, and recordings duly authorized. a. Resolution No. 93-124 accepting work and Offers of Dedication from Peters Ranch Estates, Job 4868, Parcel 1, was adopted and recording was authorized. Motion unanimously approved on the following vote: AYES: Members: Clausen, Menesini, Dalton, Hockett, Rainey NOES: Members: None ABSENT: Members: None b. Resolution No. 93-1 25 accepting work and Offers of Dedication from Peters Ranch Estates, Job 4868, Parcel 2, was adopted and recording was authorized. Motion unanimously approved on the following vote: 12 02 93 241 AYES: Members: Clausen, Menesini, Dalton, Hockett, Rainey NOES: Members: None ABSENT: Members: None c. Resolution No. 93-126 accepting work and Offers of Dedication from Peters Ranch Estates, Job 4868, Parcel 3, was adopted and recording was authorized. Motion unanimously approved on the following vote: AYES: Members: Clausen, Menesini, Dalton, Hockett, Rainey NOES: Members: None ABSENT: Members: None d. Resolution No. 93-127 accepting work and Offers of Dedication from Peters Ranch Estates, Job 4868, Parcel 4, was adopted and recording was authorized. Motion unanimously approved on the following vote: AYES: Members: Clausen, Menesini, Dalton, Hockett, Rainey NOES: Members: None ABSENT: Members: None e. Resolution No. 93-128 accepting work and Offers of Dedication from David K. Denton and Sue M. Denton, Job 4893, Parcel 2, was adopted and recording was authorized. Motion unanimously approved on the following vote: AYES: Members: Clausen, Menesini, Dalton, Hockett, Rainey NOES: Members: None ABSENT: Members: None f. Resolution No. 93-1 29 accepting work and Offers of Dedication from David K. Denton, et ai, Job 4893, Parcel 3, was adopted and recording was authorized. Motion unanimously approved on the following vote: AYES: Members: Clausen, Menesini, Dalton, Hockett, Rainey NOES: Members: None ABSENT: Members: None g. Resolution No. 93-130 accepting work and Offers of Dedication from Richard E. Goodspeed and Sandra J. Goodspeed, Job 4893, Parcel 4, was adopted and recording was authorized. Motion unanimously approved on the following vote: 12 02 93 242 12 AYES: Members: Clausen, Menesini, Dalton, Hockett, Rainey NOES: Members: None ABSENT: Members: None h. Resolution No. 93-131 accepting work and Offers of Dedication from Daniel J. Doud, Job 4893, Parcel 5, was adopted and recording was authorized. Motion unanimously approved on the following vote: AYES: Members: Clausen, Menesini, Dalton, Hockett, Rainey NOES: Members: None ABSENT: Members: None i. Resolution No. 93-132 accepting work and Offers of Dedication from Daniel J. Doud, Job 4893, Parcel 6, was adopted and recording was authorized. Motion unanimously approved on the following vote: AYES: Members: Clausen, Menesini, Dalton, Hockett, Rainey NOES: Members: None ABSENT: Members: None j. Authorization was given for P.A. 93-18 (Alamo) to be included in a future formal annexation to the District. Motion unanimously approved on the following vote: AYES: Members: Clausen, Menesini, Dalton, Hockett, Rainey NOES: Members: None ABSENT: Members: None k. The General Manager-Chief Engineer was authorized to file and record a Notice of Cessation on the 1680/SR24 Sewer Relocation Project, Phase iliA, DP 4782, and Resolution No. 93-133 was adopted to that effect. Motion unanimously approved on the following vote: AYES: Members: Clausen, Menesini, Dalton, Hockett, Rainey NOES: Members: None ABSENT: Members: None I. Staff was directed to secure the services of an arbitrator in accordance with the appropriate disciplinary appeal procedures for suspension of employees in the matter of Vehicle and Equipment Mechanic Ron Freitas. Motion unanimously approved on the following vote: AYES: Members: Clausen, Menesini, Dalton, Hockett, Rainey NOES: Members: None ABSENT: Members: None 02 93 243 a. 5. HEARINGS CONDUCT A PUBLIC HEARING ON A PROPOSED ORDINANCE TO AMEND DISTRICT CODE TITLES 6 AND 9 REGARDING FEES. CHARGES. AND REBATE SEWER LINES By way of introduction, Mr. Dolan, General Manager-Chief Engineer, stated that the District has a series of rates and charges for connecting to the sewer system. This item relates to the analysis and revision of those fees. Mr. Dolan introduced Mr. Jarred Miyamoto-Mills, Principal Engineer, who stated that the purpose of this item is to present changes to the capital fee system. As the Board is aware, this has been a long process including discussions with both the Board Budget and Finance Committee and the full Board. The Capital Improvement Fee System is important because future customers will contribute 35 percent of the ultimate future dry weather flow of 52 mgd. Federal and state regulations and District policy require that fees be "fair and equitable." The current fee system was established in 1989, and staff periodically conducts a comprehensive review of the system. Mr. Miyamoto-Mills reviewed the goals of the Capital Improvement Fee System as follows: . To adequately fund needed facilities expansion; . To comply with applicable laws and regulations; . To continue the District's commitment to equity in rates and charges between current and future customers; . To simplify and streamline administration and collection of fees; and . To ensure that the fee system does not impose an unnecessary impediment to business formation or expansion. Mr. Miyamoto-Mills stated that changes are being proposed to the current system because changes in the District's Capital Improvement Program must be addressed, because current fees will not generate adequate revenue to fund needed facilities, and because property taxes no longer provide reliable funding for upgrade and replacement. In addition, changes are being proposed: 1) so that future customers will contribute to all existing capital assets; 2) so that these fees will not be a constraint on business formation and expansion; and 3) to reduce administrative effort by collecting fees prior to building permit issuance. Mr. Miyamoto-Mills stated that it is proposed that new users be charged for existing facilities and programs. The proposed system would include an existing assets component ("buy-in") and a future facilities component. Mr. Miyamoto- Mills reviewed the proposed fees and showed a comparison of existing and proposed District fees to the fees of other agencies for similar services in the Bay Area. Mr. Miyamoto-Mills reviewed the proposed optional Capacity Use Charge Program. The Capacity Use Charge Program was proposed to mitigate the initial impact of capacity fees on nonresidential customers. It is proposed that this program be applied to use categories with "high" flow and/or strength. The optional program would require a lower "initial payment" prior to building permit issuance and an annual "Capacity Use Charge" proportional to actual use billed to the customer for a 1 5 year period. Discussion followed concerning the notice, location, and attendance at the workshops, and the formula applied in changing from a calculation of loading to concentration. At 3:35 p.m., President Rainey opened the public hearing to receive public comments on the proposed changes to the District Code provisions relating to Facility Capacity Fees, Annexation Charges, Rebate Sewer Lines, and Sewer Service Charges. Mr. Guy Bjerke, Executive Director of Building Industry Association (BIA), distributed a letter from BIA. Mr. Bjerke stated that BIA and its membership appreciated the workshops and the notification provided by the District. Mr. Bjerke stated that BIA has three concerns with the proposed program as detailed in the letter he distributed. Mr. Bjerke stated that BIA recommends the following: 12 02 93 244 1 ) That the District charge either an existing assets fee or a future facilities fee, but not both; 2) That the District re-calculate the existing assets component of the fee to account for prior property taxes contributed to the District by future connections; and 3) That the District retain the current fee collection procedures with regard to time of collection of fees and instruct staff to review the penalties imposed on connection customers who fail to follow District regulations. Mr. Bjerke thanked the Board for the opportunity to speak and for the superb job done by District staff in calculating the fees and providing notice and workshops. Discussion followed concerning the magnitude of property taxes which unconnected property owners have paid. Mr. Kenton L. Aim, Counsel for the District, stated that the amount is small and would not have a substantial impact on these fees. Mr. Miyamoto- Mills concurred. Mr. Thomas P. Krehbigi, representing HCV-Wiedemann Ranch, addressed the Board. Mr. Krehbigi stated that he attended a workshop on this subject and would echo Mr. Bjerke's comments with regard to the staff calculation. Mr. Krehbigi expressed opposition to higher fees but stated that he would rather pay fees and have the service. With regard to the timing of collection of the fees, Mr. Krehbigi stated that he would prefer that the fee be related to the individual building of the units. Mr. Krehbigi thanked the Board for their consideration. Mr. Dennis Razzari, representing Davidon Homes, stated that Davidon Homes is primarily a Contra Costa County developer and currently has seven areas serviced by Central Contra Costa Sanitary District. Mr. Razzari expressed opposition for collection of the fees prior to the building permit stage. Mr. Razzari stated that these fees are a substantial amount of money that would require financing and additional interest costs. In addition, the $600 increase per lot is a substantial increase. Mr. Razzari stated that he attended the workshops and applauds the work of District staff and the notification of the community. In closing, Mr. Razzari urged the Board to continue to collect the fees at the time of connection not at the time of building permit. Mr. Aim, Counsel for the District, stated that one of the reasons for suggesting the change in the time of collection is administrative streamlining. The other issue is that over the last several years, it has been discovered that people have not paid proper fees. One of the reasons for people not paying these proper fees is that they came in and got their plans stamped but when it was time to come back and pay their fees they did not do so. It would seem that would be easy to police, but because of a variety of reasons, it is difficult. When the failure to pay is identified, many times it is not the current owner, but is the developer or a previous owner which has not paid fees. It has been a problem to the District as to how to assess the fee after the fact. Mr. Bjerke suggested that further analysis of the problem outlined by District Counsel is needed. It is impossible to know the magnitude of the problem from the staff report so the public cannot respond. If there is a problem, it is an administrative problem of the District and new homeowners should not be penalized for that. Mr. Bjerke requested further analysis before the proposed change in the time of collection of fees is made. With regard to the magnitude of the issue, Mr. Dolan stated that staff has reviewed files and found some 700 customers that have not paid all of their obligations for service. Of those, there were over 200 where deliberate wrong-doing was suspected. Mr. Dolan did not question the integrity of those who addressed the Board and stated that BIA has in the past been an outstanding organization to work with. It is true that this is an administrative issue of the District and that is the purpose of this hearing today. The District needs to implement changes that will ensure that service obligations are paid for without creating an expensive administrative burden. The District considered that by changing the time of collection, the costs could be lowered to everyone in the future. 12 02 93 245 There being no further comments, President Rainey closed the public hearing at the hour of 4:06 p.m. In response to a question from President Rainey, Mr. Mark Cornelius, Associate Counsel for the District, responded that he has reviewed the Contra Costa Water District lawsuit. The section cited by Mr. Bjerke questioning the legality of both an existing assets fee and a future facilities charge is a definitional section of the Government Code. A more important section is the operational section which requires relating estimated costs of facilities to fees. There is properly an existing facilities component for all future users. Future users are incurring a portion of expenses for upgrade, improvement, and replacement of existing facilities as well as costs for new facilities. The important thing is to relate all the fees that are charged to the estimated cost of the facilities. There are no cases that clarify the definition section. Discussion followed concerning the recently discovered unpaid connections and the implementation of a new computer system that might make this situation easier to police. Member Menesini stated that the District must protect the interests of the ratepayers, the vast majority of whom built the plant. Member Hockett suggested that it may be appropriate to take a period of time to study this issue considering the use of the new computer system to determine if there is a problem that warrants a change in the time of collection of fees or whether the unpaid connections are just an accumulation of all those that were unpaid in the past. Following discussion, Mr. Dolan stated that the staff could conduct a study on the magnitude of the problem and the cost of enforcement. Member Hockett cautioned staff that in conducting the study they keep in mind the gaps in the system that have now been closed. It was moved by Member Clausen and seconded by Member Hockett, that the Board declare its intent to adopt the proposed ordinance revising Title 6 and 9 of the District Code while leaving the time of payment of Capital Improvement Fees to the time of connection, as is the current District practice. Motion approved on the following roll call vote: AYES: Members: Clausen, Hockett, Dalton, Rainey NOES: Members: Menesini ABSENT: Members: None President Rainey thanked those present for taking the time to come and testify on this matter. 6. CALL FOR REQUESTS TO CONSIDER ITEMS OUT OF ORDER Mr. Dolan, General Manager-Chief Engineer, requested that Item 15, Closed Session, be taken out of order. President Rainey apologized to the members of the public present for other items but indicated that it is necessary to take the closed session out of order at this time. 15. CLOSED SESSION a. LABOR NEGOTIATIONS With respect to labor negotiations, the closed session was held pursuant to Government Code Section 54957.6, to meet with the Board's designated representatives prior to and during consultations and discussions with the representatives of employee organizations regarding the salaries, salary schedules or compensation paid in the form of fringe benefits of employees in order to review its position and instruct its designated representatives. 12 02 93 246 b. EXISTING LITIGATION The closed session was held to discuss existing litigation pursuant to Government Code Section 54956.9(a). The title of the litigation discussed was Anne L. McLaurin v. Central Contra Costa Sanitary District, No. C93-04225. At 4:25 p.m., President Rainey declared the closed session to discuss labor negotiations pursuant to Government Code Section 54957.6 and existing litigation pursuant to Government Code Section 54956.9(a). At 5:04 p.m., President Rainey concluded the closed session and reconvened the meeting into open session. 16. ACTIONS RESULTING FROM DISCUSSIONS IN CLOSED SESSION None At this time, President Rainey reverted to the order of the agenda. 7. SOLID WASTE a. RECEIVE STAFF ANALYSES OF REFUSE COLLECTION RATE APPLICATIONS SUBMITTED BY VALLEY WASTE MANAGEMENT AND ORINDA-MORAGA DISPOSAL SERVICE. INC. AT A BOARD WORKSHOP Mr. Dolan, General Manager-Chief Engineer, stated that this workshop has been advertised. The public and the franchise garbage collectors may speak. Also, at the next meeting there will be a formal public hearing where public input will be invited. Mr. Dolan introduced Mr. Robert D. Hilton, of Hilton Farnkopf & Hobson (HFH). Mr. Hilton stated that in doing the rate review, HFH tried to follow the procedures used by the District in the past. Mr. Hilton discussed rates in various areas, noting that the rates vary for a number of reasons, the primary reason being low disposal rates in some areas. Mr. Hilton reviewed the issues common to both the Valley Waste Management (VWM) and Orinda- Moraga Disposal Service, Inc. (O-M) rate applications; namely, revenue shortfall, labor contract negotiations, disposal expense, closure and post-closure cost assessment, revenue and expense balancing account, and revision to profit calculation. Mr. Hilton stated that both companies did not achieve the level of revenues projected in the last rate review process. Last year, the revenue shortfall in the VWM Lafayette service area was $368,000, $576,000 in the VWM non-Lafayette service area, and $437,000 in the O-M service area. Revenues were less than anticipated because the volume of waste decreased because of decrease in business, resulting in less disposal of waste and other factors. Mr. Hilton stated that one of the factors that is unknown at this time is labor costs. Labor expense is on average approximately 25 percent of the total expense. Current labor agreements expire December 31, 1993 and negotiations have not yet been concluded. HFH looked at recent adjustments in current contracts and other current industry contracts in the Bay Area and made an estimate for purposes of the rate analyses. An estimate of 2 percent for wages and 5 percent for benefits for both companies was used. Should the actual results of negotiations materially differ, the Board should consider adjusting the recommended rates. Mr. Hilton stated that another unknown factor that may change during the year is disposal expense. Disposal expense is approximately 30 percent of the total operating expense. VWM disposes of waste at Acme Transfer Station at a cost of $76 per ton. HFH assumed that for rate analysis purposes that the current rate of $76 per ton will be maintained, even though the County will evaluate this rate in Janaury. O-M disposes of waste at the West Contra Costa Landfill at a cost of $63 per ton. That figure has been assumed in the rate analysis. The companies have not requested and HFH is not recommending, an adjustment to these rates. Should a significant adjustment be implemented, the Board can consider adjusting the recommended rates upward or downward. With regard to the Acme Landfill closure and post-closure cost assessment, the County program to assess costs has not been implemented. A lawsuit was filed by Acme in 12 02 93 247 1991 against the refuse collectors and others to close the hazardous waste section of the landfill. Legal expenses related to the lawsuit in the amount of $460,000 for VWM and $218,000 for O-M are included in the rate applications. The revenue and expense balancing account was implemented in 1991. The difference between the actual and forecasted net operating income is carried forward in setting the following year's rates, and final adjustment is made to the balancing account based on audited financial statements in the year following. Significant revenue shortfalls in 1993 have produced large deficits in the balancing accounts for both collectors. In response to a question from President Rainey, Mr. Hilton stated that the legal costs of responding to the Acme lawsuit were included in the revenue shortfall and as allowable expenses, but stated that this matter will be reviewed in more detail before the next Board meeting. Mr. Hilton stated that both collectors have requested that the rates be calculated using a 93 percent Operating Ratio. This is different than the methodology used by the District. Mr. Hilton explained historical profits of the companies using both the Operating Ratio methodology and the Capital Use Charge methodology. Profits were also calculated as a Return on Net Tangible Fixed Assets. Mr. Hilton stated that neither company has been harmed in any way by the District's methodology. Mr. Hilton proceeded to review of the VWM rate application. VWM has requested a 12.19 percent increase in the Lafayette service area and an 16.50 percent increase in the non-Lafayette service area. Mr. Hilton stated that based on the HFH analysis, it is recommended that an increase of 12.25 percent be considered for the Lafayette service area and that an increase of 14.59 percent be considered for the non-Lafayette service area. These adjustments are due primarily to the profit methodology requested by the company and to the balancing account amount due to VWM. Mr. Hilton stated that VWM has requested compensation for intercompany charges in the amount of $150,000. This is the same amount as was awarded by the Board last year; however, last year the Board had information relating to the savings resulting from the affiliation with the parent company. The information relative to this year was only recently received with insufficient time for analysis. Mr. Hilton stated that last year the yard waste processing costs were projected at $9.90 per ton, the processing cost at the Waste Fibre Recovery facility. The facility was unable to accept all the yard waste and some was processed at the higher rate of $38 per ton. Mr. Hilton stated that one of the issues VWM raised in its rate application was the concern that commercial rates were getting so high they are negatively impacting commercial customer subscription levels. If residential revenues are increased to the amount necessary to fund expenses and profit related to residential customers, an additional increase of 6 percent would be required in the Lafayette service area and an additional increase of 12 percent would be required in the non-Lafayette service area. The HFH review found that the shortfall amount is approximately 18 percent in the Lafayette service area and approximately 27 percent in the non-Lafayette service area. This is similar to other Bay Area jurisdictions, where shortfalls range from 0 percent to 44 percent. Mr. Hilton reviewed the HFH recommendations based on the analysis of the VWM rate application as follows: 1 ) With regard to labor contract negotiations, accept VWM's projected increase to wages and benefits; if actual differs, adjust as necessary. 2) With regard to disposal expense, calculate rates based on the current rate of $76 per ton; adjust as necessary if rate changes significantly in 1994. 3) Retain the present Customer Equivalent Units profit calculation methodology, denying the request to return to the Operating Ratio methodology. 12 02 93 248 4) Determine whether the quality of service modification factor of 1 .00 is appropriate. 5) Determine whether the cost of service modification factor of 1 .00 is appropriate. 6) Consider the recommended rate increases of 14.59 percent for the non- Lafayette service area and 12.25 percent for the Lafayette service area. Mr. Hilton reviewed the computation of allowable profit, the rate adjustment calculation, and the impact on residential collection rates for the Lafayette service area and the non- Lafayette service area. At this time, Mr. Hilton proceeded to the HFH analysis of the Orinda-Moraga Disposal Service, Inc. (O-M) rate application. Mr. Hilton stated that O-M has requested a 4.2 percent decrease in rates. Based on the analysis, HFH recommends a 10.73 percent decrease in rates resulting mainly from adjustment to the profit calculation and updating of balancing account projections. Mr. Hilton reviewed the unique issues relating to the O-M rate application, including affiliated entities' transactions, implementation of a yard waste program in 1994, and implementation of a mini-can rate. Certain expenses to intercompany transactions were appropriately not included in the rate application. One adjustment was made involving an increase in compensation to an officer/owner that was greater than provided in the rate request and approved last year. Since duties had not changed, no adjustment was made. Mr. Hilton stated that O-M has agreed to try to site two yard waste drop-off centers in Moraga and Orinda at a cost of $54,000 per year. It is unlikely that the Orinda site will be located, so the cost without the Orinda site is only about $2,000 net impact on the rates this year. Mr. Hilton stated that the company has proposed a 20-gallon mini-can rate of $16.00, a 38 percent reduction from a single 32-gallon can rate. The company assumed that 40 percent of the one-can customers would subscribe to the mini-can service. The company projects an increase of $2.65 per can to other customers would be required. Mr. Hilton summarized the HFH recommendations with regard to the O-M rate application as follows: 12 1 ) With regard to labor contract expiration, use the 1994 wage and benefit increases of 2 percent and 5 percent respectively, as opposed to O-M's projection of 7 percent; if actual differs, adjust as necessary. 2) No adjustment has been made to the projected 1994 disposal rate of $62.77 per ton. Adjust as necessary if the rate changes significantly. 3) With regard to yard waste drop-off, assume that the Orinda site is unlikely to be located and allow a net cost of $2,000, the projected cost excluding the Orinda site. 4) 5) Eliminate the increase to officer/owner compensation. Retain the present customer equivalent units profit calculation methodology, denying the request to return to the operating ratio methodology. 6) Determine whether the quality of service modification factor of 1.00 is appropriate. 7) Determine whether the cost of service modification factor of 1 .00 is appropriate. 8) Consider the recommended rate decrease of 10.73 percent. 02 93 249 Mr. Hilton stated that implementation of a mini-can rate was not factored into the analysis. However, for the Board's information, Walnut Creek currently has 6 percent of all residential customers subscribing to mini-can service. Assuming Walnut Creek's experience and a mini-can rate discounted 10 percent from the 32-gallon rate, other rates would decrease approximately $0.12 less than recommended. Mr. Hilton reviewed the computation of allowable profit, the rate adjustment calculation, and the impact on residential collection rates for the Orinda and Moraga service areas. In response to a question from President Rainey, Mr. Hilton stated that the benefits for the haulers were reviewed and compared to the industry. No unusual issues were identified. Discussion followed concerning requests for and the costs of handling mini-cans. In response to a question from Member Menesini, Mr. Hilton described his interactions with the companies during review of the rate applications. Mr. Paul Stewart, Executive Director of the Rental Housing Association, requested further information concerning the impact of proposed rates on residents of townhomes, condominiums, and apartments. Mr. Paul Morsen, Deputy General Manager, indicated that the information would be mailed. Mr. Ronald Proto, General Manager of Valley Waste Management, addressed the Board with regard to the methodology used for calculation of profit, requesting that the Board consider returning to the operating ratio methodology. Secondly, Mr. Proto took exception to the use of the one-year Treasury bill for computing the interest rate on the balancing account, stating that the cost of borrowing money is not even recouped. Mr. Proto requested that he be given the calculation used in computation of Customer Equivalent Units. Member Menesini stated that in order for this Board to make an intelligent assessment, the Board must have some information from the collectors in advance. Mr. Proto stated that he would meet with District staff and provide the requested information for inclusion in the Board agenda packet for the December 16, 1993 Board meeting. b. CONSIDER THE ISSUE OF REIMBURSEMENT OF VALLEY WASTE MANAGEMENT AND ORINDA-MORAGA DISPOSAL SERVICE. INC. ACME LITIGATION DEFENSE COSTS AND CONSIDER THE ISSUE OF REIMBURSEMENT OF ACME LITIGATION DEFENSE COSTS FOR MRS. FRANCISE FIORENTINO AND VALLEY DISPOSAL SERVICE. INC. Mr. Kenton L. Aim, Counsel for the District, stated that this matter was discussed briefly on. November 4, 1993 and in more detail on November 18, 1993. There are two separate issues before the Board. One issue is the requests with regard to reimbursement and inclusion of the Acme litigation defense costs in the rate base from the current franchisees, Valley Waste Management (VWM) and Orinda-Moraga Disposal Service, Inc. (O-M). A letter has been received from Valley Waste Management summarizing their position. A copy of that letter was provided to the Board. Mr. Aim distributed copies of a letter from O-M addressing some of these issues. Mr. Aim stated that the second issue before the Board is the request from Ms. Francise Fiorentino and Valley Disposal Service, Inc. (VDS) requesting that their Acme litigation defense costs be included in the 1994 revenue computation. Mr. Aim stated that the issues before the Board are whether the Board wishes to make the ultimate decision with regard to how much, if anything, should be included in the rate calculation and how much, if any, of the legal fees paid by the companies in the Acme litigation should be reimbursed. The Board could decide, as has been assumed in the Hilton Farnkopf & Hobson rate analyses, that 100 percent of the defense costs be included in the rate calculation for the 1994 rate year and that the decision as to disbursement be deferred to a later time. Mr. Aim stated that this approach is proposed because at the last Board meeting there was discussion indicating that this issue may be too complex to resolve before the rates are set. 12 02 93 250 Mr. Aim recommended that the Board go forward with allowance of 100 percent of the proposed costs in the rate calculation for 1994 but defer the ultimate decision on reimbursement to the franchisees. The reason for including 100 percent is that if the Board does not include 100 percent, but later decided to pass through 100 percent, there might be no money available to do so. Also, the reserves that were accumulated would be available to pay District legal and closure expenses. Mr. Aim stated that there is exposure so putting away a reserve is prudent, especially given the fact that the franchises will be up in a few years and the issue may not be resolved by that time. Mr. Aim stated that from a prudent business standpoint, to establish a reserve seems wise, whatever the ultimate decision. Mr. Aim stated that one reason for deferring the decision is that during the last week a California Supreme Court case came down dealing with a Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) liability case, the Montrose Chemical case from Los Angeles. This case is very favorable to insureds with regard to requiring insurance companies to pay defense costs, pending a decision being made on liability. Mr. Aim stated that having said that, it seems that deferring the reimbursement decision until after the first of the year for further decisions would be appropriate. It may be that some of these costs will be reimbursed by the insurance carriers. That being the case, the Board should consider including an allowance in the rate calculation equivalent to the franchisees projection of their defense costs and set a date early in 1994 for resolution of this issue. Mr. Aim stated that with regard to VWM, the insurance issue may be somewhat different because VWM is a multinational organization and is involved with numerous insurance matters that have been consolidated into one case. In response to a question from Member Clausen, Mr. Aim stated that the companies have tendered to all the insurance companies that they are aware of. Member Clausen stated that the Acme litigation defense costs should be included in the rate calculation, and he recommended that the Board make a decision with regard to disbursement at the first meeting in February. Mr. Aim stated that he has contacted the Cities of San Ramon and Walnut Creek with regard to this issue. The City of San Ramon has not addressed this issue and will not until the rate-setting process in January 1994. The City of Walnut Creek passed through 100 percent of the costs last year. The City of Walnut Creek will conduct a rate-setting process in January 1994. None of the people he spoke to at the City of Walnut Creek nor the City of San Ramon were aware that Valley Disposal Service and Mrs. Fiorentino would be making a request. Following discussion, it was moved by Member Clausen and seconded by Member Hockett, that 100 percent of the Acme litigation defense costs for both Valley Waste Management and Orinda-Moraga Disposal Service, Inc. be included in the rate-setting process and collected in an impound account. Motion unanimously approved on the following roll call vote: AYES: Members: Clausen, Hockett, Menesini, Dalton, Rainey NOES: Members: None ABSENT: Members: None Mr. Dolan stated that the figures can be included in the draft rate calculation and the final decision will be made at the next Board meeting. The Board concurred. President Rainey asked if there was any obligation in the purchase contract between Valley Disposal Service (VDS) and Waste Management that would protect VDS in this situation. Mr. Aim stated that is an issue. It is not clear and not agreed to between VWM and VDS and Mrs. Fiorentino. Mr. Scott Bowen, representing VDS and Mrs. Fiorentino, stated that the parties differ on this issue. Mr. Bowen stated that he believes the issue is addressed and provided for. 12 02 93 251 Waste Management takes a different view. Mr. Bowen stated that he believes very strongly that VDS is a municipal waste company, not an industrial hauler. VDS and Mrs. Fiorentino have cooperated in the defense. In any event, the costs would be appropriately passed through to the District under either scenario. Mr. Dolan stated that the issue of liability and who owned the Acme stock was a pivotal issue in the Waste Management/Valley Disposal deal. Mr. Aim stated that there is language in the agreement that may reserve certain liability and risks for environmental issues to the former company. There is an issue as to what that is or if it applies in this case. Member Clausen questioned whether there is a legal way of collecting this money and holding it in an impound account pending determination of liability. Mr. Aim stated that he believes with the appropriate Board findings that may be done. Mr. Aim stated that he was doubtful whether a case could be found which would tell whether a rate-setting body is obliged to pass through these costs or not. One of the Board issues is whether these are the kinds of costs that should be passed through now; and whether several years ago when setting rates, these kinds of risks were envisioned. Member Clausen expressed concern that the money be impounded in the event the District and its customers are ultimately found to be liable. Member Menesini stated that the Board is lacking in understanding of the whole proposition. More in-depth information is needed. Member Menesini agreed with Member Clausen's suggestion that the money be impounded as a safety net. However, more information is needed. President Rainey stated that the legal costs under discussion with regard to VDS and Mrs. Fiorentino would be limited to costs for defense in the Acme litigation and not for deciding ultimate liability between VDS and Mrs. Fiorentino and VWM. Mr. Aim agreed. Mr. Aim stated that he would provide a recommendation at the December 16, 1993 Board meeting with regard to methodology for collecting defense costs for VDS and Mrs. Fiorentino and with an estimate of those costs. The decision with regard to payment of the fees will be calendared at the first Board meeting in February 1994. Member Menesini requested that VDS provide a history of what occurred including the kinds of things they feel they are responsible for and those that they are not. Mr. Aim stated that he would meet with Members Hockett and Menesini to provide some background information. 8. ENGINEERING a. AUTHORIZE EXECUTION OF AN AGREEMENT WITH G. S. DODSON AND ASSOCIATES FOR REVISION OF THE FINAL DESIGN OF THE MARTINEZ PUMPING STATION IMPROVEMENTS. DP 4922 Mr. Dolan, General Manager-Chief Engineer, stated that this item has been discussed with the Board previously. The Martinez Pumping Station design has been subject to some modifications that will reduce operating costs and improve reliability. Increased pressure is being exerted in California on pumping station operations. Approval of an agreement for revision of the final design of the Martinez Pumping Stations is recommended at this time. It was moved by Member Clausen and seconded by Member Hockett, that the General Manager-Chief Engineer be authorized to execute a cost reimbursement agreement with a cost ceiling of $137,000 with G. S. Dodson and Associates for revision of the final design of the Martinez Pumping Station Improvement Project, DP 4922. There being no objection, the motion was unanimously approved. 12 02 93 252 9. CORRESPONDENCE a. CONSIDER REQUEST OF CONTRA COSTA SOLID WASTE AUTHORITY FOR SUPPORT FOR HOLDING AB 939/HOUSEHOLD HAZARDOUS WASTE MOBILE COLLECTION TIPPING FEES COLLECTION AND DISTRIBUTION RESOLUTION WORKSHOP Receipt of the letter from the Contra Costa Solid Waste Authority for support for holding an AB 939/Household Hazardous Waste Mobile Collection Tipping Fees Collection and Distribution Resolution Workshop was noted and support was voiced. Mr. Dolan, General Manager-Chief Engineer, indicated that he and perhaps Deputy General Manager Paul Morsen planned to attend the workshop. 10: APPROVAL OF MINUTES a. MINUTES OF NOVEMBER 18, 1993 It was moved by Member Dalton and seconded by Member Menesini, that the minutes of November 18, 1993, be approved as presented. There being no objection, the motion was unanimously approved. 11. APPROVAL OF EXPENDITURES a. EXPENDITURE LIST DATED DECEMBER 2. 1993 Following discussion, it was moved by Member Hockett and seconded by Member Dalton, that the Expenditure List dated December 2, 1993, including Running Expense Fund Check Nos. 78945-79083, Sewer Construction Fund Check Nos. 13428-13462, and Payroll Fund Check Nos. 33043-33318, be approved as recommended. There being no objection, the motion was unanimously approved. In response to a request from Member Menesini, it was agreed that a report on the status of certain projects will be provided to the Board as an informational item with the next agenda packet. Member Dalton left the meeting at the hour of 7: 12 p.m. 12. EMERGENCY SITUATIONS REQUIRING BOARD ACTION None 13. REPORTS GENERAL MANAGER-CHIEF ENGINEER a. 1 ) Mr. Dolan, General Manager-Chief Engineer, announced that the Frontage Road has been opened to provide additional parking during Board meetings. b. COUNSEL FOR THE DISTRICT None c. SECRETARY OF THE DISTRICT None d. BOARD MEMBERS 1) President Rainey reported that the Central Contra Costa Solid Waste Authority will meet at 3 p.m. on Monday, December 6, 1993, to consider the report from Hilton Farnkopf & Hobson on Franchising Solid Waste and Recycling Services - Post 1996. 12 02 93 253 2) President Rainey reported that there will be a workshop at 9 a.m. on Saturday, December 4, 1993, on AB 1335, giving Local Agency Formation Commission (LAFCO) authority to initiate organizational changes of special districts. 3) President Rainey reported on her meeting with Supervisors McPeak and Bishop concerning reductions in solid waste transfer and disposal rates. A subcommittee of the Contra Costa Solid Waste Authority will meet on Saturday, January 8, 1994, to discuss this matter. 14. ANNOUNCEMENTS None 15. CLOSED SESSION This item was taken out of order earlier in the agenda. 16. ACTIONS RESULTING FROM DISCUSSIONS IN CLOSED SESSION This item was taken out of order earlier in the agenda. 17. ADJOURNMENT There being no further business to come before the Board, President Rainey adjourned the meeting at the hour of 7:22 p.m. to reconvene at 9 a.m. on Saturday, December 4, 1993, at the Pleasant Hill Community Center, 320 Civic Drive, Pleasant Hill, for a workshop on AB 1335, giving LAFCO authority to initiate organizational changes of special districts, and at 2 p.m. on Thursday, December 16, 1993, for a regular Board meeting. President of the Board of Dire ors, Central Contra Costa Sanitary District, County of Contra Costa, State of California COUNTERSIGNED: !) ( U-- ¿ ~I S~c ta. of the Central Con a C. a Sanitary District, County of Contra Costa, State of California 12 02 93