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HomeMy WebLinkAboutBOARD MINUTES 03-17-05 171 MINUTES OF THE REGULAR BOARD MEETING OF THE DISTRICT BOARD OF THE CENTRAL CONTRA COSTA SANITARY DISTRICT HELD ON MARCH 17,2005 I The District Board of the Central Contra Costa Sanitary District convened in regular session at its regular place of meeting, 5019 Imhoff Place, Martinez, County of Contra Costa, State of California, at 2:00 p.m. on March 17, 2005. President Hockett called the meeting to order and requested that the Secretary call roll. 1. ROLL CALL PRESENT: Members: Menesini, Boneysteele, Nejedly, Lucey, Hockett ABSENT: Members: None a. PLEDGE OF ALLEGIANCE TO THE FLAG Board and staff joined in the Pledge of Allegiance to the Flag. b. INTRODUCTIONS RECOGNIZE ANDREW ANTKOWIAK ON HIS PROMOTION TO SENIOR ENGINEER . President Hockett and the Board of Directors congratulated Mr. Andrew Antkowiak on his recent promotion to Senior Engineer. I 2. PUBLIC COMMENTS None 3. AWARDS AND COMMENDATIONS a. RESOLUTION COMMENDING JOYCE E. MURPHY FOR HER SERVICE AS SECRETARY OF THE CENTRAL CONTRA COSTA SANITARY DISTRICT Mr. Charles W. Batts, General Manager, stated that it is with bittersweet pleasure that this resolution is presented for the Board's consideration, commending Ms. Joyce E. Murphy, Secretary of the District, for her public service, her outstanding service to the Board of Directors, her accomplishments as a manager, and her personal impact in making Central Contra Costa Sanitary District a better place to work. It was moved by Member Menesini and seconded by Member Nejedly, that Resolution No. 2005-013 be adopted, commending Joyce E. Murphy for her service as Secretary of the Central Contra Costa Sanitary District. Motion unanimously approved on the following vote: AYES: Members: Menesini, Nejedly, Boneysteele, Lucey, Hockett I NOES: Members: None ABSENT: Members: None Members Lucey and Menesini and the Board of Directors recognized Ms. Murphy for service to the Board of Directors and the District, stating that her presence will be missed. Ms. Murphy thanked the Board and staff for their comments and for their support through the years, stating that it has truly been a pleasure to work with each and every 3-17-05 ------ 172 one. Ms. Murphy stated that the District has an excellent staff and Board, and will only get better. b. PRESENTATION OF AWARD OF EXCELLENCE BY MR. DAVID RICHARDSON OF THE WATEREUSE BOARD. RECOGNIZING THE CONTRIBUTIONS OF MR. JAMES M. KELLY AND CENTRAL CONTRA COSTA SANITARY DISTRICT TO WATEREUSE Mr. Batts, General Manager, stated that Mr. David Richardson, a WateReuse Foundation Board Member, is here as a representative of the Foundation to recognize Mr. James M. Kelly for his extensive service as a WateReuse Foundation Board Member. While Mr. Kelly's term ended last December, his contributions have spanned many years, and he has achieved national recognition for his contributions to the acceptance and use of recycled water. I Mr. David Richardson, WateReuse Foundation Board Member, stated that by presentation of this Award of Excellence, WateReuse wishes to recognize Mr. James M. Kelly and the Central Contra Costa Sanitary District for their support and contributions. What the WateReuse Foundation has been able to do, thanks in large part to Mr. Kelly and others who started the Research Foundation over ten years ago, is to take contributions from consulting firms and agencies such as Central San, and to leverage them with federal and state dollars to promote water recycling research. The WateReuse Foundation uses those funds to do research in public acceptance, public outreach, dealing with emerging contaminants, and bringing water recycling in California, the United States, and internationally to a new level. Mr. Richardson presented the WateReuse Research Foundation Award of Excellence to Mr. James M. Kelly. Mr. Kelly thanked Mr. Richardson and the WateReuse Research Foundation. Mr. Kelly asked that the Board allow a few moments for Mr. Richardson to recount a Central San customer service story. Mr. Richardson reported that a large Central San truck and crew was in his driveway this morning. His children were excited and interested in the truck and crew, and the crew was helpful and informative. It was all service with a smile. Mr. Richardson thanked the Board and the District as a customer and a ratepayer. I President Hockett recognized and commended Mr. Kelly for his quiet expertise and contributions. 4. CONSENT CALENDAR It was moved by President Hockett and seconded by Member Menesini, that the Consent Calendar, consisting of Items a. through d., be approved as recommended, resolutions adopted as appropriate, and recordings duly authorized. a. Public sewer improvements and an Offer of Dedication were accepted from Standard Pacific Corporation for an easement shown on the recorded final map of Subdivision 8624 in the Town of Danville, Job 5707; staff was authorized to record the easement acceptances with the Contra Costa County Recorder; and Resolution No. 2005-014 was adopted to that effect. I Motion unanimously approved on the following vote: Hockett, Menesini, Boneysteele, Nejedly, Lucey AYES: Members: NOES: Members: ABSENT: Members: None None 3-17-05 . ---_. ------. -- --- ----------- --. b. 173 April 21, 2005 at 2:00 p.m. was established as the date and time for a public hearing to receive comments on and to consider adoption of a proposed ordinance to amend District Code Chapter 6.12, Capacity Fee Program. Motion unanimously approved on the following vote: AYES: Members: I NOES: Members: ABSENT: Members: Hockett, Menesini, Boneysteele, Nejedly, Lucey None None April 21, 2005 at 2:00 p.m. was established as the date and time for a public hearing to receive comments on and to consider adoption of a proposed ordinance to amend District Code Chapter 6.30, Schedule of Environmental and Development-Related Rates and Charges. c. Motion unanimously approved on the following vote: AYES: Members: NOES: Members: ABSENT: Members: d. Hockett, Menesini, Boneysteele, Nejedly, Lucey None None A medical leave of absence without pay was authorized for Mr. Steve Plunkett, Utility Worker, through June 3, 2005. Motion unanimously approved on the following vote: I AYES: Members: NOES: Members: ABSENT: Members: Hockett, Menesini, Boneysteele, Nejedly, Lucey None None 5. CALL FOR REQUESTS TO CONSIDER ITEMS OUT OF ORDER Mr. Batts, General Manager, requested that Item 7.a., Engineering, be taken out of order to accommodate interested persons in the audience. Hearing no objection, President Hockett proceeded to Item 7.a., Engineering. 7. ENGINEERING AUTHORIZE THE GENERAL MANAGER TO EXTEND THE AGREEMENT WITH THE CONTRA COSTA CLEAN WATER PROGRAM AUTHORIZING THE SOURCE CONTROL SECTION TO CONTINUE CONDUCTING STORM WATER INSPECTION SERVICES a. Mr. Batts, General Manager, stated that since 1987, the District has provided storm water inspection services to the County's Clean Water Program and the ten cities within the District service area. Staff from the District Source Control Program coordinates the inspections, conducts the site visits, investigates complaints, and provides education related to storm water discharges. Delta Diablo Sanitation District and East Bay Municipal Utility District provide similar services to cities in east and west Contra Costa County respectively. These site visits are conducted concurrently with the District's pretreatment inspections which promotes an efficiency for all parties, the District, the County, the cities, and the businesses. The District is reimbursed for the cost of the storm water inspection portion of the inspection activities. The agreement for providing the storm water services expires on June 30, 2005. The agreement provides for two, two-year extensions. Staff recommends extending the agreement until June 30, 2007. I 3-17-05 174 Mr. Batts introduced Mr. Curtis W. Swanson, Environmental Services Division Manager, who stated that the Contra Costa Clean Water Program was formed to improve water quality in Contra Costa County creeks and ultimately the estuary where the creeks discharge. The Program was formed as a result of the 1987 Clean Water Act amendment that required cities, counties, and municipalities to reduce storm water pollution. National Pollutant Discharge Elimination System (NPDES) permits were to be issued outlining plans and activities to obtain that goal. The Country, through the Flood Control District,is the lead agency for the Clean Water Program and all 19 cities in the County are part of the Program. The ten cities in the District service area make use of and benefit from the joint inspection services. The inspections and other services are offered through an inter-agency agreement between the Flood Control District as the agent for the County and three special districts that provide wastewater services, Central Contra Costa Sanitary District, Delta Diablo Sanitation District, and East Bay Municipal Utility District. The agreement expires on June 30, 2005. There is provision for two, two-year extensions until 2007 and 2009. The District is reimbursed for costs for the storm water portion of the joint inspection services by the cities and the County. In the case of the District, the revenue received covers the costs of two Source Control Inspectors on District staff. The main activity provided by the District is the joint inspections of businesses and industries in the District service area. During 2004, 1,080 inspections were performed at 819 businesses. So far this year, a little over 800 inspections and re-inspections to follow up on problems have been done. These inspections are joint inspections since District inspectors take care of both storm water and wastewater issues and there are obvious benefits to that. The District provides education to business owners and employees on storm water requirements as well as housekeeping things businesses can do to comply with those requirements. The District also does field investigations and follows up on complaints taken in by the cities or the District and does enforcement activities if necessary. Mr. Swanson stated that the benefits of joint inspections are that the businesses deal with the same inspector for storm water and sewer service rather than two; inspections are more efficient since only one visit rather than two visits is required saving time for the businesses; inter-agency cooperation is fostered between the cities, county, and special districts; and state and federal regulators have recognized this inter-agency approach, and cites it as a model for other storm water program. In summary, Mr. Swanson recommended that a two- year extension to the Clean Water Program contract be approved. If the contract is not extended, staff would request that the Board consider providing a one-year grace period for the Clean Water Program to develop an alternative process. Member Menesini asked what kinds of concrete recognition have been received for this program. Mr. Swanson stated much of the recognition is in the form of indirect benefits in terms of good will and cooperation on other types of requirements that are imposed on the District. Informal recognition is also received through public comments at meetings. In addition, the District has received the U.S. Environmental Protection Agency Best Source Control Program twice in the last seven years, and one component among many factors is this inter-agency Clean Water Program. In response to a question from Member Menesini concerning the number of inspectors employed by Central Contra Costa Sanitary District for this purpose compared to the other special districts in the Program, Mr. Swanson stated that the District does more inspections in our service area compared to the number of inspections done by the other two special districts in their service areas and the revenue covers the costs of two inspectors although all the District inspectors are cross trained and do this work. Mr. Swanson stated that he believes that the other two special districts perform the inspections with their existing staff, but Mr. Freitas may be able to provide more information in that regard. Mr. Don Freitas, Manager of the Contra Costa Clean Water Program, stated that it was eight years ago that he came forward to talk about this Program. At that time there was some reluctance because such an inter-agency cooperative program was very new and different. Rather than creating a separate entity, it was felt that special districts have the ability to concentrate and become experts in their particular field. It made sense that the County would join with the special districts and use the inspectors' experience in pretreatment to provide a comprehensive inspection of facilities. One of the things 3-17-05 I I I I I I 175 that businesses dislike is having one inspector after another knocking at the door, and having one inspector with the expertise as the point of contact was felt to be the best approach. The Program has been a tremendous success. It has given the District funding for two inspectors and provided flexibility in staffing. Delta Diablo Sanitation District has about one half-time position and East Bay Municipal Utility District has about one half- to third-time position. Mr. Freitas stated that the District is reimbursed for all its costs and is not in any way subsidizing this Program. All out-of-pocket costs, salaries, benefits, and overhead are reimbursed through the Program. Mr. Freitas stated that the County, the cities, and the regulatory agencies believe that this has been a successful program. Mr. Freitas requested that the Board consider approval of a two- year extension of the Clean Water Program agreement. Member Lucey stated that he voted against approval of the agreement previously and will vote against it again. Member Lucey stated that he believes there are problems with the District's inspectors based on comments from the trucking company. There is an Outreach Committee working to improve the District's image and get the District's message out to the public. Member Lucey stated that he does not believe that this Program helps the District. Member Menesini stated that he believes that there is much that can be done in educating inspectors, although there are times when enforcement is necessary. But when enforcement is necessary, that difficult job can be done without expressing hostility. After considering the benefits set forth in the position paper, Member Menesini requested further discussion or listing of the concrete benefits the District derives from participating in the Clean Water Program, and some evidence of in-service workshops for District inspectors showing that the District is doing inspections with a positive rather than negative approach. Last, Member Menesini requested that the Board receive some feedback from Mr. Freitas or others on the District inspection process. Member Nejedly stated that he has had personal experience with the District inspection process and found it lacking. Member Nejedly stated further that he believes that the District is drawn into this program because it is the biggest and the best. Member Nejedly stated that he believes the storm water inspections are the right thing to do, but he questions why a sanitary sewer district would be inspecting storm drains. Member Nejedly stated that he understands that the District is reimbursed for the work performed for the Clean Water Program, but he would like to see an accounting of the Program, including overhead. Member Nejedly stated that he will vote for the Program because he thinks that it is the right thing to do, but he stated that he hopes that the District will do a better job on these inspections than in the past. Member Boneysteele stated that he appreciates the concerns expressed, but he believes that avoiding duplication of effort and reducing the number of inspections that the businesses must undergo would contribute to the overall needs and desires of the people of the District, especially now when the financing the public services is coming under a strain. Member Boneysteele stated that he believes that the overall scope of the program is in the public interest and therefore in the interest of the District. President Hockett stated that the Clean Water Program has been a very worthwhile partnership. President Hockett stated that she supports building and strengthening partnerships throughout the County in any way that the District can. President Hockett stated that she believes that it is in the District's best interest and within the District's expertise to fulfill the District's commitment to pollution prevention and to utilize District staff to do so. It was moved by Member Menesini and seconded by Member Boneysteele, that the General Manager be authorized to extend the contract with the Contra Costa Clean Water Program for the District's Source Control Section to continue conducting storm water inspections in the central county cities through June 30,2007. The motion was approved with Member Lucey voting no. President Hockett thanked Mr. Freitas for his presentation. 3-17-05 ------.----.--...----. --'.----------'-----------.--'--------------- 176 At this time, President Hockett reverted to the order of the agenda. 6. REPORTS a. GENERAL MANAGER 1) Mr. Batts, General Manager, stated that each February as required by the District's National Pollutant Discharge Elimination System (NPDES) permit, District staff submits a report of the pollution prevention activities for the previous calendar year. Mr. Batts introduced Ms. Melody LaBella, Assistant Engineer, who provided an update on the District's 2004 Pollution Prevention Program. Ms. LaBella stated that the District's Pollution Prevention Program started unofficially in the late 1980's. The District's 1995 NPDES permit required a Pollution Prevention Program and it has been ramped up since that time. Ms. LaBella stated that in 2004, the District did not exceed any of its NPDES permit effluent limits for the seventh consecutive year; the District continued its award-winning public outreach programs and operation of the Household Hazardous Waste (HHW) Collection Facility; and the District began outreach to the dental community in an effort to reduce influent mercury concentrations taking a more collaborative approach than some other neighboring agencies that require amalgam separators. Ms. LaBella stated that the District's Pollution Prevention Program begins with the support and direction of the Board of Directors to go forward with the Program components: household hazardous waste collection, pretreatmentlstormwater inspection, public outreach, and cooperative partnerships. Staff takes this and carries out the efforts and activities that make up the program. The Pipeline newsletter, inspections, integrated pest management, factsheets, student education, dental outreach, HHW collection facility, the District website, tradeshows, and monitoring are current examples. Ms. LaBella stated that the pollutants of concern listed in the District's 2001 NPDES permit include Acrylonitrile, Bis(2-ethylhexyl) pthalate, copper, cyanide, 4,4'-DDE, Dieldrin, lead, 2,3,7,8-TCDD equivalent, Tributyltin, and mercury, the highest priority pollutant. On the front page of today's Contra Costa Times, there was a graphic on the amount of mercury contributed to the San Francisco Bay. About 2,700 pounds were contributed to the Bay. Of that, about 44 pounds were attributed to wastewater, the lowest contribution to the mercury problem. The San Francisco Bay is impaired for mercury. The pending Total Maximum Daily Load (TMDL) for mercury, if passed, will lower the District's effluent mercury limit and place the District in a position of potentially violating that new limit. In order to be proactive, the District has implemented a number of mercury reduction activities, including continuing to accept mercury- containing wastes at the HHW Collection Facility, participation as a control facility in the Association of Metropolitan Sewerage Agencies (AM SA) Amalgam Separator Study, implementation of the Dental Mercury Inventory Program, and joining the Mercury (Hg) Elimination Leadership Program (HELP) Partnership. The HELP Partnership is an effort to eliminate all mercury in hospitals. Ms. LaBella reviewed highlights from the 2004 Pollution Prevention Annual Report previously distributed to the Board. Ms. LaBella described the various program components highlighted in the Report. In 2004 at the HHW Collection Facility, 245 mercury thermometers were exchanged for digital thermometers, over 2,300 mercury thermometers were collected, 26,023 feet of fluorescent lamps were collected, and almost 11,000 pounds of pesticides were collected. The result was that over 100 pounds of elemental mercury was collected at the HHW Collection Facility and kept out of the wastewater stream. As part of the Pretreatment and 3-17-05 I I I I I I 177 Stormwater Programs in 2004, 813 pretreatment inspections were conducted at 639 businesses, 1 ,080 stormwater inspections were performed at 819 businesses, education outreach was done at several different events, and the Dental Mercury Inventory Program was implemented. In 2004, public outreach was done using the Sewer Science Program, Kids in Gardens, the Central San Water Wizards Program, the 13th Annual Pollution Prevention Awards Program, the CCCSD Pipeline newsletter, and the Healthy Gardening Workshops. As a result of those outreach efforts, 2,300 students at 30 schools were reached, 140,000 residences and businesses were reached with the Spring 2004 issue of the CCCSD Pipeline newsletter, HHW magnets were mailed to 20,000 residents in San Ramon resulting in a 25 percent increase in San Ramon participation at the permanent HHW Collection Facility in the two months that followed that mailing, and 15 Healthy Gardening Workshops were held with 253 people in attendance. The last component of the Pollution Prevention Program is cooperative partnerships. In 2004, the District partnered with the Bay Area Clean Water Agencies (BACWA), the Bay Area Stormwater Management Agencies Association (BASMAA), the Bay Area Pollution Prevention Group (BAPPG), the Our Water Our World integrated pest management strategy started by the District, and the Contra Costa Green Business Program. As a result of these cooperative partnerships, 44 pollution prevention story placements via print articles, radio and the we~ were made, 30 new businesses were certified by the Green Business Program in the District's service area, and 174 stores participated in the Our Water Our World pesticide-reduction campaign throughout the Bay Area. Ms. LaBella stated that in 2005, the District's Pollution Prevention Program efforts will focus on continuing existing outreach programs and operation of the HHW Collection Facility, continuing implementation of the Dental Mercury Inventory Program, and continuing partnerships with the Department of Toxic Substances Control HELP Program for pollution prevention in hospitals. Ms. LaBella stated that in conclusion, the District is doing a great job meeting its NPDES permit pollution prevention requirements and will continue to do so in 2005. Following discussion of the HELP Program, President Hockett stated that Mt. Diablo Hospital recently received a Pollution Prevention Award and could perhaps serve in a leadership role in this program. Ms. LaBella agreed that she would look into that. 2) Mr. Batts, General Manager, stated that in response to several inquiries after the Board Financial Planning and Policy Workshop, a discussion and staff assessment dealing with the present District reserves is being presented. In June 2004, the Board adopted an ordinance setting a three- year Sewer Service Charge rate. The issue of reserves is a Board policy question, and staff wishes are only to provide the information needed for Board deliberation. Mr. Batts stated that the purpose of this presentation is to review information presented at the Board Financial Planning and Policy Workshop, to discuss District reserves and respond to Board questions, to review the Capital Program and its long-term requirements, to discuss the politics of reserves, to review the proposed Sewer Service Charge, and to receive Board direction concerning the 2005.;2006 Sewer Service Charge and the District Reserve Policy. Mr. Batts stated that the District goal has been to have responsible rates. The District is a cost effective organization, doing the right things to manage District finances including modest annual rate increases. It has been the Board decisions and actions over the last five years that have changed the financial situation of this District immeasurably. The District has implemented modest annual increases, has reliable infrastructure, has mainly used a "pay as you go" approach, and has adequate reserves. 3-17-05 178 Through prudent financial management, the Board has put the District in a position to be able to consider options for the Sewer Service Charge. A conceptual model of "funds required" and "funds available" was introduced at the 1999 Board workshop. The basis of the model is that "funds available" should never be less than the "funds required" to pay the District's bills. The purpose of this model was to ensure that the District had sufficient funds to pay its bills between receipt of revenue collected on the tax roll in April and December. The model is just a snapshot in time and does not account for the source of funds or limitations on their use. As with any other model, the assumptions are important. At the end of the Board workshop in January, staff recommended that the Board implement the 3 percent Sewer Service Charge rate increase for 2005-2006 that was adopted in June 2004, that annual rate adjustments to District fees and charges be considered, that a District Reserve Policy be considered, that the current Capital Improvement Budget (CIB) based on the long-term Capital Improvement Plan (CIP) be implemented, and that the District position itself for the possible loss of future ad valorem tax revenues. Going back to the model, Mr. Batts stated that the question is what should "funds required" be. "Funds required" in the rate scenarios has been roughly $30 to $35 million. Recently "funds available" have been augmented by near-term savings both by a reduction in Operations and Maintenance (O&M) expenditures of approximately $3 million last year and deferred capital projects of approximately $12 million. "Funds available" were also augmented by receipt of ad valorem tax for two years that the District did not expect, increased connection fees from the housing boom, and bond financing of the San Ramon projects. "Funds available" are now $65 million. With regard to the question of whether the District has an existing Reserve Policy, Mr. Batts stated that for many years the Capital Improvement Budget documents contained a Reserve Policy that called for a reserve of 10 percent of the total O&M Budget, 100 percent of the next year's debt service, 75 percent of the next year's Capital Improvement Budget, and the annual Self Insurance Fund contribution. That total is approximately $30 million, very close to the "funds required" figure. There may be business reasons to consider having reserves higher than the "funds required" figure, including concern about the level of the O&M reserve and O&M expenses, prepayment of retiree benefits, self insurance liability, large future capital expenditures, and anticipated future debt service. Currently the District's unfunded liability in the Contra Costa County Employees Retirement Association is $27 million. That is something that is paid off over the long term. The other major issue is needed large future capital projects. The District has a conservative Capital Program that currently meets the District's needs, but as the District infrastructure ages and regulations require more of an asset management mode, those expenses will go up. Mr. Batts described the revenue received by the District including ad valorem taxes, the City of Concord contract for both O&M and capital, Sewer Service Charges, connection fees, and the split of those revenues between capital and O&M. All this money goes into District reserves. Reserves are currently $65 million, which is basically $30 million for cash flow, $30 million for reserves, and $5 million that will be used next year for the retiree benefits trust funds as required by the Government Accounting Standards Board. The Board has committed ad valorem tax revenue in part toward District debt service in an effort to protect that revenue from taking by the State for the Education Relief Augmentation Fund (ERAF). Connection fees are a one-time charge committed to the Sewer Construction Fund. The policy of special districts defined by the California Special Districts Association is that one time revenue should be used for 3-17-05 I I I 179 I one time expenses, and the law with regard to connection fees is that they must be used for sewer construction purposes. The City of Concord reimbursement for capital projects goes back to the Sewer Construction Fund, and the fee paid by the City of Concord for treating Concord's wastewater goes to O&M costs. The Sewer Service Charge revenue is currently split between O&M expenses and the Sewer Construction Fund. As the District service area gets closer to build out and connection fee revenue dries up, the District must look more and more to the Sewer Service Charge as a way to augment the Sewer Construction Fund. Mr. Batts stated that much of the detail is in the assumptions used. At the January 2005 workshop the following assumptions were used: . That the State will take most of the ad valorem tax revenue from the District for two years; . That the three-year Board approved Sewer Service Charge is still appropriate; . That the prudent use of District reserves is preserved; . That future capital funding needs are anticipated; and . That the Board does not want large increases in the Sewer Service Charge unless there is an evident need that would require that. I The recommended scenario presented to the Board was a 3 percent Sewer Service Charge rate increase for two years, that the District would lose 65 percent ($5.7 million) in ad valorem tax revenue for two years, and O&M spending was projected to be fairly close to the current year. One impact the Board will see is a $5 million retiree benefits trust fund discussed earlier. I In response to a question from Member Lucey, Mr. Batts stated that the District did in fact lose $5.7 million in ad valorem tax revenue; but the good news is that even with losing $5.7 million in ad valorem tax revenue this year and next year, the District is in a very solid financial position. Mr. Batts stated that the recommended scenario takes in account the acceleration of development, and connection fee revenue estimates were increased and are reflected in the ten-year model used this year. With regard to future expenses, benefits have been climbing and are projected to continue to increase, and energy costs are expected to lead to a general inflation increase. Some of that increase is being seen this year in increased utility expenses. The Capital Improvement Budget discussed at the November 2004 workshop, discussed future costs of regulatory compliance and needed capital projects that were deferred in previous years in an effort to save money anticipating the loss of ad valorem tax revenue. The good news is that based on these assumptions, modest Sewer Service Charge rate increases are projected even beyond the three years covered by the ordinance adopted by the Board in June 2004. Mr. Batts stated that it is projected that modest Sewer Service Charge rate increases will be adequate up until fiscal year 2012-2013. Using a graph, Mr. Batts described the District revenues and expenses, the loss of ad valorem tax revenue, and the gradual spending down of reserves out to the fiscal year 2012-2013. In response to questions by Member Lucey concerning the level of reserves at 2012-2013, Mr. Batts stated that there will be "funds available" of approximately $40 million that that time. Currently the District has approximately $65 million. 3-17-05 180 Mr. Batts showed a chart to comparing the District's Sewer Service Charge and connection fees to that of other local agencies, noting that the District is below the median. When looking at the history of total District revenue and expenses, the only time that revenues exceeded expenses was in the last couple years. This is the direct result of the District budgeting to receive no ad valorem tax revenue which was later received, and the implementation of near term savings. The ad valorem tax revenue received was approximately $9 million per year. Earlier this year, it was reported that the District would go back to its normal spending patterns. The other factor was the accelerated rate of development in Dougherty Valley. Also, on the revenue side, the District received $9 million in ad valorem tax revenue that was not part of the model in previous years. In response to questions from President Hockett, Mr. Batts stated that the dip in expenses occurred when capital projects were deferred and approximately $3 million was saved by not filling budgeted positions, by deferring some maintenance projects, and other O&M savings. The dip in expenses is a combination of savings in both capital and O&M. In response to a question from Member Lucey, Mr. Batts stated that the additional un budgeted revenue received and funds resulting from the near term savings were added to reserves. Mr. Batts stated that the Sewer Service Charge is approximately 59 percent of District income and is split between O&M and capital; ad valorem tax revenue has been about 12 percent, but the future of ad valorem tax is unclear; capital fees account for about 9 percent and are one time fees principally from the Dougherty Valley construction and will be shrinking in the future as build out continues; and income from the City of Concord contract is about 13 percent, but will be dropping in the future as the Capital Improvement Program becomes more regulation driven with a focus on the District collection system. Other factors with regard to expenses, are that O&M expenses for energy, benefits, and chemicals will be most impacted; and the Capital Improvement Budget is a fairly conservative document. The dynamics of this is that it is expected that approximately 7 percent will be drawn from reserves this year. One of the things that makes modest rate increases into the future work is that over the next ten years, the reserves are expected to drop from about $65 million to approximately $40 million. Mr. Batts introduced Ms. Ann E. Farrell, Director of Engineering, to discuss proposed capital expenditures and the level of reserves anticipated to be needed into the future. Ms. Farrell stated that $55 million of the $65 million that is currently in the bank, was collected to pay for capital projects. The District's Capital Program at the present time is a very basic program based on 1 percent of the District's asset value, which means that the District is replacing its assets once every 100 years. That is a modest program, amounting to about $250 million over the next ten years. In addition there are other possible capital expenses that have not been discussed in any detail. There are projects that could be required due to regulations and there are projects that are outside the ten-year window that don't show up in the Ten-Year Capital Improvement Plan given to the Board. Some of the potential unfunded capital projects over the next ten years include the nitrification process ($54 million), metal/organics side stream removal ($10 million), effluent filtration ($135 million), air emissions control ($15 million), solids handling ($30 million), and escalation of the collection system renovation program ($130 million) for total unfunded potential projects of $374 million. What the District is currently funding is not an aggressive Capital Program. Ms. Farrell stated that large capital projects outside the Ten-Year Capital Improvement Plan window include primary treatment expansion ($10 million), the four-phase A-Line project ($55 million), and the Lamorinda intertie ($25 million) for a 3-17-05 I I I -----.-.-----.-----.------------- --- -- ------'------'-'-------.-.------------------.-----------------.. 181 total of $90 million. When the flow monitoring data currently being gathered is available, some of these projects may move into the ten-year window and could make beneficial use of the reserves accumulated for capital projects. I Member Menesini stated that he sometimes hears that the District has a large reserve. The projects just described are needed and it would be helpful to encapsulate that information for use by the Board and staff in responding to such questions and comments. Ms. Farrell stated that can be discussed in more detail at the April Capital Improvement Budget workshop. Mr. Batts stated that in the past, the Capital Improvement Budget and Plan budgeted funds for parturient projects but when reserves, "funds available," were insufficient to meet monthly bills, these types of projects were removed from the Capital Improvement Budget. I President Hockett stated that it may be appropriate to use a different term than reserves since that money has been allocated for specific purposes. It serves as a cushion until revenue comes in and as work proceeds on projects, but it is allocated for specific purposes and projects that are on the books in the future. Mr. Batts stated that the money that is being referred to falls into three categories as previously discussed: "funds required" to meet the District's annual billing cycle, and the $5 million retired employees benefits trust, leaving about $30 million that is for future capital work. Some of that amount is already designated for the Capital Program and can only be spent for future capital work; some of it could be used to meet other needs of the District as directed by the Board. The Board's policy has been that the District be a pay-as-you-go agency to the extent possible. That does not preclude the District from using bond financing in the future; and in fact, that may be required. President Hockett stated that she believes the fact that the District has been a pay- as-you-go agency has made the District shine in the past. Mr. Batts agreed that affected the District's bond rating, allowing the District to get the best possible interest rating. Member Lucey stated that the District has $65 million in the bank. President Hockett stated that the District can leverage that when necessary for needed projects. Member Lucey stated that an alternative would be to give some of it back to the taxpayers. Mr. Batts stated that the District does have reserves in the bank. The question raised at a previous Board Meeting was what could happen to that money. One of the questions was whether there was any way the State could attach the District's funds. The State Treasurer, following the provisions of the law, has stated that the State cannot take State pension money, and the State cannot take money from the Local Agency Investment Fund where a large portion of the District funds are invested. So staff believes that the District funds are safe where they are invested. The California State Constitution Article 16, Section 6, deals with public funds. It says that public funds can only be used for the purpose for which they are collected. Based on the law and court decisions, staff believes that the funds collected for the District's sewer capital work can only be spent for capital projects in the District's sewer system. Another question that was raised was are there ways the County could absorb the District and take over its reserves. Staff believes that the laws and court decisions discussed above relating to use of public funds for the purpose collected would apply in this case as well. The District's monies are with the County but are held in trust for the District in the District's name. The County could make this District a part of a county sanitation district. That would require the District Board's approval by 4/5 vote, and again the use of the funds collected would be limited as indicated before to the purpose for which they were collected. The County or another agency could petition the Local Agency Formation Commission (LAFCO) and LAFCO I 3-17-05 182 could recommend that the District combine with another agency or public entity, but again that would require a vote of the constituents of this District and probably the constituents of the agency to which the District would be annexed. Of course, there is always the possibility of special legislation which could affect this District. Normally, special legislation would require a purpose that would be in the public good. One of the public goods could be efficiency. Again, the limitation on the use of public funds would still apply. Member Menesini stated that is the reason he requested staff to encapsulate what the monies collected are earmarked for. That would also be helpful in identifying something concrete for which the reserves were accumulated. Mr. Batts agreed. Mr. Batts stated that Member Lucey is correct. Many other local governments are suffering because they have no reserves to fall back on. Using a chart, Mr. Batts discussed the levels of reserves of other local special districts and the ratios of reserves compared to the annual O&M and capital expenditures of the agencies. Those reserves range from high of $111 million to a low of $45.3 million. --" Mr. Batts stated that with regard to the State's ad valorem tax proposal, the District anticipates getting its ad valorem tax revenue back in two years. But given the State's financial condition, the future of ad valorem tax revenue is uncertain if the State is required to reallocate funds. To make up for the loss of District ad valorem tax revenue would require a $60 Sewer Service Charge increase. The future actions that the Board may wish to discuss include options relating to the Sewer Service Charge. The philosophy has been for modest rate increases in the future. The 3 percent Sewer Service Charge increase already passed by the Board can be maintained or the Board can reduce or repeal the approved Sewer Service Charge increase. The "funds required" amount of $30 million should be continued to enable the District to pay its bills during the year. The Board may wish to look at a Reserve Policy and try to determine what the Board feels is a prudent level of reserves. What staff has tried to do is to show the Board the requirements of the District's Ten-Year Capital Improvement Plan, and to explain the advantages of remaining a pay-as- you-go agency rather than using debt financing. In addition, a write up on asset management was presented to the Board at the January workshop. As discussed earlier, the District is currently funding the Capital Program at 1 percent, which assumes that every asset of the District will last 100 years. Finally, the potential need for other long-term capital projects was discussed. Mr. Batts stated, that as the Board can see, there are arguments that can be made both for lowering the current District reserves and for continuing the current level of District reserves. Mr. Batts asked that the Board discuss the issue and provide direction to staff. Member Lucey stated that he wishes to address the Board. The facts provided are fine, but become less reliable when projections are made out ten or more years into the future and beyond. Member Lucey stated that judging from the information provided hv staff at recent Board Meetings, the $8 Sewer Service Charge increasR will generate $1.5 million. The District has a $65 million reserve. Member Lucey stated that he requested the Finance Department to send him the lowest reserve on a monthly basis for the last three years. Member Lucey stated that for the last three years, the balance has never been below $17 million. All five of the Board Members have said that the Board will raise the Sewer Service Charge rate if necessary to get the job done. Member Lucey stated that it would seem that with the pressure from the County, the school districts. and the cities, that it might be judicious for the District to lower its reserves. If the District lowered its Sewer Service Charge $8 it would only take $1.5 3-17-05 I I I 7) 183 million from reserves and the District would be letting its taxpayers keep that money. It was moved by Member Lucey, that the District not implement the $8 Sewer Service Charge rate increase in 2005-2006. Mr. Kenton L. Aim, Counsel for the District, stated that reduction of the Sewer Service Charge or not implementing the approved Sewer Service Charge increase has not been calendared for a vote at this meeting. Mr. Aim stated that the agenda topic is broad but he does not believe that it fairly suggests to someone who might read the agenda that the Board was going to modify the Sewer Service Charge. It could be more appropriately agendized for the next Board Meeting for consideration of either not increasing or reducing the Sewer Service Charge. Following discussion, Member Lucey deferred to Counsel and requested the Secretary of the District to agenda this matter at the next Board Meeting for a vote by the Board, stating that another presentation by staff will not be necessary. 3) Mr. Batts, General Manager, stated that the next issue of the Pipeline newsletter is being prepared for printing and distribution. The Board Outreach Committee reviewed a draft at its last meeting and the Committee Members' comments were incorporated into the draft now before the Board for consideration. Comments from the Board are requested. Member Lucey stated that this discussion is premature in light of the previous discussion, as the feature article deals with the Sewer Service Charge rates. Ms. Harriette Heibel, Communication Services Manager, stated that the feature article will await further discussion and direction from the Board. Ms. Heibel requested any Board comments on the remaining articles. The Board provided no additional input other than what was provided by the Board Outreach Committee. 4) Mr. Batts, General Manager, stated that the District will be sending ten employees to the California Water Environment Association Annual Conference in Palm Springs from April 12 through 15, 2005. The attendees are from the Operations and Engineering Departments. Funds were included in the 2004-2005 training budget. 5) Mr. Batts, General Manager, reported that Land Surveyor Liz Charlton and Assistant Land Surveyor Kevin Collins will be attending a conference and technology exhibition in Las Vegas from March 18 to 23, 2005. This is a national event, jointly sponsored by the American Conference on Surveying and Mapping, the California Land Surveyors Association, the Nevada Association of Land Surveyors, and the Western Federation of Professional Surveyors. Funds for attendance at this conference were included in the 2004-2005 Engineering Department training budget. 6) Mr. Batts, General Manager, reported that Senior Engineer Randy Schmidt will be traveling to Nashville, Tennessee to attend the Water Environment Federation Residuals and Biosolids Conference from April 17 to 20,2005. Mr. Schmidt is the project manager for the District's Solids Handling Facilities Plan. This conference was included in the 2004-2005 Engineering Department training budget. Mr. Batts, General Manager, announced that on March 15, 2005 he and Capital Projects Division Manager Bill Brennan, Director of Engineering Ann Farrell, Principal Engineer Tad Pilecki attended the Orinda City 3-17-05 --------- .-------------.----- 184 b. c. Council meeting. The Orinda City Council was very complimentary, referencing the District's concern for replacement of infrastructure, work on paving in the streets of Orinda, traffic control, and public notice on construction projects. Mr. Brennan made a presentation on future District capital projects in the Orinda area. A copy of the handout provided to the Orinda City Council was distributed to the Board. Council member Laura Abrams spoke very highly of the District and her interactions with District staff. 8) Mr. Batts, General Manager, announced that the District is advertising for the Treatment Plant Protective Coating and Piping Renovations Project, Phase 3, DP 7233. Phases 1 and 2 identified and rehabilitated several major and minor structures. Phase 3 will complete the protective coating work on the last clarifiers and aeration piping, apply protective coatings at several substations, complete pressure grouting on the A/N tanks, replace boiler blowdown pipelines in the Solids Conditioning Building, and carry out miscellaneous piping renovations through the plant. The work will be coordinated with Operations and will not impact operation of the treatment plant. The engineer's estimate for the construction of this project is $1 million. 9) Mr. Batts, General Manager, announced that the District is advertising for the Collection System Operations (CSO) Underground Storage Tank Removal, DP 8208. The tanks must be removed before September 2005 because the temporary closure permit extension will expire at that time. This project will remove both the underground fuel storage tanks and will repave the removal area. This work is included in the 2004-2005 Capital Improvement Budget. This work is required to meet existing regulations. The work was part of a project that went to the Board earlier when the Board asked that staff go back and look at a Facilities Plan for CSO. The initial work on the Facilities Plan has been completed. A presentation on the need for future upgrades and facilities for CSO will be presented to the Board in April or May. COUNSEL FOR THE DISTRICT 1) Mr. Kenton L. Aim, Counsel for the District, stated that he would like to thank and commend Secretary of the District Joyce Murphy for her help to him personally during the nearly 20 years he has worked with the District. Over that period of time he has referred a number of clients and individuals with questions or problems to Ms. Murphy, and always received appreciation and thanks for her helping other public entities and officials find their way. SECRETARY OF THE DISTRICT 1) Ms. Joyce E. Murphy, Secretary of the District, thanked the Board and staff for their support through the years, stating that it has truly been a pleasure to work with each and every one. BREAK At 3:52 p.m., President Hockett declared a recess, reconvening at the hour of 4:07 p.m., with all parties present as previously designated. d. BOARD MEMBERS 1) Member Lucey, Chair of the Budget and Finance Committee, stated that he and President Hockett reviewed the expenditures. It was moved by Member Lucey and seconded by President Hockett, that the Expenditure List dated March 17, 2005, including Self Insurance 3-17-05 I . I "----'-------...------. ---.----.-------.... I I I 185 Check Nos. 102198-102209, Running Expense Check Nos. 154540- 154726, Sewer Construction Check Nos. 27485-27515, Payroll Manual Check Nos. 49027-49030, and Payroll Regular Check Nos. 55352-55381, be approved as recommended. There being no objection, the motion was unanimously approved. 2) President Hockett, Chair of the Household Hazardous Waste Committee reported that she and Member Boneysteele met with staff on March 8, 2005. President Hockett distributed and reviewed notes from that Household Hazardous Waste Committee meeting. Topics of discussion included a staff audit of Philip Services Corporation (PSC) facilities, and a newspaper article concerning potential safety issues associated with PSC operations. After reviewing and considering the costs, performance, and audit of PSC facilities, and after consideration of the recent news article and potential impacts, the Committee endorses extension of the PSC contract for one year through September 2006. A position paper will be presented for the full Board's consideration at the April 7, 2005 Board Meeting. President Hockett reported that it was the consensus of the Committee that funds be budgeted in 2005-2006 for one household hazardous waste only (no electronic waste) mobile collection event in San Ramon. Funding for future mobile collection events will be considered each year after the participation levels in San Ramon are known. The Committee also received updates on improvements to the Household Hazardous Waste Collection Facility, the Household Hazardous Waste Collection Facility Operations Report, and the proposed survey for small businesses. 3) Member Menesini reported on the March 10, 2005 Local Agency Formation Commission (LAFCO) election at which Discovery Bay Community Services District Director David Piepho was elected to serve as the special districts representative to LAFCO. 4) Member Lucey, Chair of the Real Estate Committee, reported on the March 15, 2005 Real Estate Committee at which topics of discussion included an update on the Town of Danville purchase of District property at the Danville Town Service Center, the Kiewit property fill plan and schedule and direction to staff to proceed with the Request for Proposals (RFP) process, the status of Conco Cement Company development, the inquiry concerning sale of property located at 3881 Los Arabis in Lafayette, and negotiations with Verizon for use of the tower on the hill at the CSO property in Walnut Creek. 5) Member Menesini announced that Contra Costa Water District Director John Burgh will be the featured speaker at the March 21, 2005 Environmental Alliance Discussion Series. The topic of discussion will be Options for Preserving Low-Salinity Water for Users of Delta Water. All those interested are invited to attend the meeting at noon at the John Muir National Historic Site at 4202 Alhambra Avenue in Martinez. 7. ENGINEERING AUTHORIZE THE GENERAL MANAGER TO EXTEND THE AGREEMENT WITH THE CONTRA COSTA CLEAN WATER PROGRAM AUTHORIZING THE SOURCE CONTROL SECTION TO CONTINUE CONDUCTING STORM WATER INSPECTION SERVICES a. This item was taken out of order earlier in the agenda. 3-17-05 186 8. APPROVAL OF MINUTES a. MINUTES OF REGULAR MEETING OF FEBRUARY 17. 2005 MINUTES OF ADJOURNED REGULAR MEETING OF FEBRUARY 22. 2005 b. It was moved by Member Lucey and seconded by Member Menesini, that the minutes of the Regular Meeting of February 17, 2005 be approved as corrected, adding the sentence "Mr. Bredbenner stated that the individuals he dealt with from the District were confrontational and arrogant" to the first paragraph on page 2, and deleting and replacing the phrase "why the District has garbage haulers under permit if they do not haul hazardous waste" with "what other haulers are under permit" in the last full paragraph on page 2; and that the minutes of the Adjourned Regular Meeting of February 22,2005 be approved as presented. There being no objection, the motion was unanimously approved. . I 9. BUDGET AND FINANCE a. RECEIVE THE 2004 ANNUAL REPORT OF THE DEFERRED COMPENSATION PLAN ADVISORY COMMITTEE Mr. Batts, General Manager, stated that the Deferred Compensation Plan Advisory Committee is submitting its 2004 Annual Report to the Board. The Committee was established by the Board to administer the Deferred Compensation Plan. In that role, the Committee reviews accountability regarding the three Deferred Compensation Program Administrators, issues a handbook, reviews emergency withdrawal requests and makes recommendations to the Board, and reviews the investment performance of the Plan annually. The Annual Report includes detailed results of all the investment funds. There being no questions, President Hockett declared that the Annual Report of the Deferred Compensation Plan Advisory Committee for 2004 was duly received. I a. 10. EMERGENCY SITUATIONS REQUIRING BOARD ACTION CONFIRM EMERGENCY REPAIR OF THE SEWER LINE IN DEL OCEANO DRIVE IN THE UNINCORPORATED AREA OF THE COUNTY Mr. Batts, General Manager, stated that as he announced at the last Board Meeting, the Collection System Operations (CSO) Division discovered a sewer main that requires emergency replacement. Work is scheduled to begin tomorrow with a directional drilling contractor. A 4/5 Board vote is required to continue this work as an emergency project. The estimated cost of the repair is $50,000. Following discussion, it was moved by Member Menesini and seconded by President Hockett, that the Board finds that emergency repair of the sewer line beginning in Del Oceano Drive and ending in Withers Avenue in the unincorporated area of Contra Costa County will not permit a delay resulting from a competitive solicitation for bids and that the immediate repair or replacement work is necessary to respond to the emergency, and that the General Manager be authorized to continue with completion of the emergency repair. Motion unanimously approved on the following vote: AYES: Members: NOES: Members: ABSENT: Members: Menesini, Hockett, Boneysteele, Nejedly, Lucey I None None 11. ANNOUNCEMENTS/SUGGESTIONS FOR FUTURE AGENDA ITEMS Member Lucey requested that a vote on the Sewer Service Charge be placed on the next agenda. 3-17-05 --.-.--------.---... 187 Member Lucey also requested that the budgets be delivered to the Board two weeks in advance rather than one week. Member Nejedly requested a status report on Collection System Operations (CSO) Division staffing, workloads, and overflows. Member Menesini requested that an update on the Lower Orinda Pumping Station Renovation Project be presented at a future Board Meeting. I 12. CLOSED SESSION PERSONNEL MA TIERS a. The closed session was held pursuant to Government Code Section 54957 to discuss personnel matters - public employment. The title of the position to be discussed is Secretary of the District. Mr. Kenton L. Aim, Counsel for the District, noted that since the agenda was posted the District was served with a complaint in the potential litigation item that was to be discussed. The title of the matter is Suzanne Renee Brown v. Central Contra Costa Sanitary District, Contra Costa County Superior Court Case No. CO5-00416. 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 to be discussed is Suzanne Renee Brown v. Central Contra Costa Sanitary District, Contra Costa County Superior court Case No. CO5-00416. I At 4:22 p.m., President Hockett declared the closed session to discuss personnel matters and litigation as noted above. At 4:52 p.m., President Hockett concluded the closed session and reconvened the meeting into open session. 13. REPORT OF DISCUSSIONS IN CLOSED SESSION No decisions were made or votes taken in closed session which require reporting at this time. 14. ADJOURNMENT There being no further business to come before the Board, President Hockett adjourned the meeting at the hour of 4:52 p.m. I COUNTERSIGNED: &!~ J j~~ resident of the Board of Directors, Central Contra Costa Sanitary District, County of Contra Costa, State of California æ&~ Secretary of the Central Contra Costa Sanitary District, County of Contra Costa, State of California 3-17-05 --...---------------