The URL can be used to link to this page

Home My WebLink AboutCAPITAL PROJECTS AGENDA 10-28-08~l C'entral Contra Costa Sanitary District CAPITAL PROJECTS COMMITTEE Chair Menesini Member Hockett Tuesday, October 28, 2008 3:00 p.m. Third Floor Executive Conference Room Central Contra Costa Sanitary District 5019 Imhoff Place, Martinez, CA INFORMATION FOR THE PUBLIC ADDRESSING THE COMMITTEE ON AN ITEM ON THE AGENDA Anyone wishing to address the Committee on an item listed on the agenda will be heard when the Committee Chair calls for comments from the audience. The Chair may specify the number of minutes each person will be permitted to speak based on the number of persons wishing to speak and the time available. After the public has commented, the item is closed to further public comment and brought to the Committee for discussion. There is no further comment permitted from the audience unless invited by the Committee. ADDRESSING THE COMMITTEE ON AN ITEM NOT ON THE AGENDA In accordance with state law, the Committee is prohibited from discussing items not calendared on the agenda. You may address the Committee on any items not listed on the agenda, and which are within their jurisdiction, under PUBLIC COMMENTS. Matters brought up which are not on the agenda may be referred to staff for action or calendared on a future agenda. AGENDA REPORTS Supporting materials on Committee agenda items are available for public review at the Reception, 5019 Imhoff Place, Martinez. Reports or information relating to agenda items distributed within 72 hours of the meeting to a majority of the Committee are also available for public inspection at the Reception. During the meeting, information and supporting materials are available in the Conference Room. AAIERICAi~1S WITH DISABILITIES ACT In accordance with the Americans With Disabilities Act and California Law, it is the policy of the Central Contra Costa Sanitary District to offer its public meetings in a manner that is readily accessible to everyone, including those with disabilities. If you are disabled and require special accommodations to participate, please contact the Secretary of the District at least 48 hours in advance of the meeting at (925) 229-i303. i~~ Recycled Paper • ~ Capital Projects Committee October 28, 2008 Page 2 1. CALL MEETING TO ORDER 2. REVIEW ADDITIONAL ALLOCATION NEEDS FOR CAPITAL PROGRAM FOR CURRENT FISCAL YEAR (2008-09) --Gail Chester *3. REVIEW MEMO PRESENTING ALTERNATIVE EXPENDITURES SCENARIOS FOR FISCAL YEAR 2009-10 AND RECEIVE INPUT -Ann Farrell 4. HIGHLIGHT SEVERAL MAJOR PROJECTS PLANNED FOR 2009-10 AND BEYOND AND RECEIVE INPUT ON PROJECTS TO BE FEATURED IN CAPITAL PLANNING WORKSHOP -Tad Pilecki and Staff a. Sewer Renovation Program Update -Are we spending enough? b. Treatment Plant Asset Management Planning Development -Are we spending on the right things? c. Solids Handling Improvements -What investments are needed in our incineration process over the next ten years? d. Other 5. ADJOURNMENT * Attachment 3 Central Contra Costa Sanitary District October 24, 2008 TO: BOARD CAPITAL PROJECTS COMMITTEE VIA: JAMES M. KELLY, GENERAL MANAGER FROM: ANN E. FARRELL, DIRECTOR OF ENGINEERIN TAD PILECKI, MANAGER OF CAPITAL PROJECTSfi~ SUBJECT: PRELIMINARY FISCAL YEAR 2009-2010 CAPITAL SPENDING SCENARIOS INTRODUCTION For the seven years prior to 2006-07 spending had been maintained at a level sufficient to replace needed facilities on a 100-year life cycle, or approximately 1 % of the estimated replacement value of all District facilities each year. Beginning in fiscal year 2006-07 the District embarked upon an aggressive capital program to complete needed one time reliability and capacity projects and make use of a significant accumulated reserve, which resulted from a robust economy and the associated revenue from new connections and increased property tax revenues. The ten year Capital Improvement Plan (CIP) the Board approved for 2008-09 included continued significant spending through the year 2010-2011 to complete these needed projects, then tapering down to the 1 % of replacement value baseline level of spending (approximately $28 million per year) to cover renovation and replacement over a 100 year period. The projects under the baseline spending are selected based on condition assessment and need in order to ensure that the monies are appropriately spent. Using this approach, the 2008-09 CIP maintained modest rate increases, in the range of $11 to $14 per year, for the next ten years. While the projects included in this higher level of spending are essential projects, the current housing crisis and other unfavorable economic factors are expected to reduce revenues. Thus, it is important that we consider whether these reduced revenues drive the need for reduced capital expenditures. This is discussed in the following memo. A counterpoint to this discussion is a desire that has been expressed at times by different Board members, to increase expenditures on the collection system renovation program and recycled water, in addition to those already planned for. Also, due to the poor economy and lack of building, bid prices for capital projects are coming in significantly less than estimated (20-30% low in many cases). Therefore, there is some logic in continuing an aggressive capital program in order to get the best value and realize the savings from the anticipated low bids. PRELIMINARY CAPITAL REVENUE ASSUMPTIONS November 2008 Board Caaital Workshoa Fiscal Year 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 Interest % 3.75% 4.00% 4.50% 5.00% 5.50% 5.75% 5.75% 6.00% 6.00% 6.00% 6.00% Moderate Assumption Interest Compared to 2008- 09CI6/CIP $ 461,000 $ 259,000 $ 185,000) $ (19,000) $ (45,000) $ (104,000) $ 221,000) $ (280,000 $ (382,000) $ 736,000 $ 52,000 General Inflation % 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% # of New Corrections 1,250 1,250 1,250 1,200 1,200 1,100 900 800 700 700 700 Moderate Assumption Connection Fees Compared to 2008- 09CIB1CIP 31,000 192,000 183,000 171,000 108,000 495,000 417,000 283,000 389,000 387,000 352,340 Ad Valorem Tax Escalation' 0.0% 0.0% 4.0% 4.0% -4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% Moderate Assumption Ad Valorem Tax Corr~ared to 2008- 09CIB/ClP S 19,000 S 540,000 S 551,00 S 584,00 S 568,000 S 590,000 S 814000 S 763,000 S 2,000 S 988.000 5 27,580 11-veartotal E (350,000) ~~-~. cow S (51,860) +~-Ye+- mw S (8,896,560) Total 11-year Deficit compared to 2008-09 CIB/CIP s p,osfi,zzo> EXPENDITURES Three scenarios were developed for the initial scenario runs: the Aggressive spending scenario, the Moderate spending scenario and the Reduced spending scenario. The Aggressive spending scenario represents the spending proposed in 2008-09 with some necessary deletions and some additions which staff is suggesting based on emerging needs. The Moderate spending scenario reduces expenditures in the Aggressive spending scenario by deferring necessary projects and deleting a few projects that are more speculative in nature, thus more closely matching the levels proposed in 2008-09. The Reduced spending scenario deletes additional projects in an effort to offset the projected reduction in capital revenues. The major projects for these scenarios that are different from those discussed with the Board in previous years and approved by the Board in the 2008-09 Capital Plan are as follows: Aggressive Spending Scenario: $17,200,000 > 2008-09 Capital Plan over same ten years. Treatment Plant Program Delete Incinerator Mercury Removal Project - $18,200,000 Add Incinerator Wet Scrubber Project + $ 4,000,000 Add Centrifuge Replacement Project + $ 3,000,000 Add Incinerator Renovation Project + $ 2,000,000 Add Cogeneration Replacement Project + $ 5,200,000 Miscellaneous Additions + $ 500,000 Collection System Program Delay Capacity Projects/Replace with Renovation No Cost Impact Additional Renovation projects + $ 7,000,000 Carry over from FY 07/08 for A-Line Project + $ 4,000,000 General Improvements Program Add additional costs for CSO Improvements + $4,200,000 Add estimated costs of HOB & 4737 Seismic Retrofit + $3,500,000 Carry over from FY 07/08 for ADA, Carpet and Paint + $ 700,000 Recycled Water Program (REW) Added costs for additional REW Planning and Development +$1,300,000 No added costs for new REW projects, if Board directs addition of projects as result of Board Recycled Water Workshop on October 29, 2008, any additional costs will need to be factored into scenarios. Moderate Spending Scenario; $1,400,000 > 2008-09 Capital Plan over same ten years. Shifting of some planned projects to outlying years. The following projects were delayed/deleted from the Aggressive spending scenario. Treatment Plant Program Delay Nitrification Modifications - $1,000,000 Delete Cogeneration Replacement - $5,000,000 Delete New Electric Blower - $1,000,000 Delete Miscellaneous Equipment Replacement - $1,000,000 Collection System Program Delete Renovation Projects - $7,000,000 Reduced Spending Scenario: $3,700,000 < 2008-09 Capital Plan over same ten years. Shifting of some projects to outlying years. The following projects were deleted from the Moderate spending scenario. Treatment Plant Program Delete funds from ongoing equipment replacement - $1,700,000 Collection System Program Delete funds from the capacity program - $3,400,000 RATE IMPACTS OF SCENARIOS Using the revised revenue assumptions, each of the three potential expenditure scenarios have been run through the District financial model. In addition to the revenue assumptions, a number of assumptions with respect to Operations and Maintenance expenditures and revenues have also been made; therefore this analysis is very preliminary. However, it will be useful in setting preliminary capital expenditure target levels for use in this year's financial planning process which culminates in the Financial Planning Workshop in January. Using all of this very preliminary revenue and expenditure information, the following sewer service charge impacts were projected under the three spending scenarios. All three scenarios also assume some bond financing in outlying years, as noted. SSC Increases Spending Scenario 2009/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18 18/19 A ressive* $24 $24 $12 $12 $12 $12 $12 $12 $12 $12 Moderate** $13 $13 $13 $13 $13 $13 $13 $17 $17 $17 Reduced**~` $12 $12 $12 $13 $14 $14 $14 $14 $14 $14 Debt issuance in 2016-17 of $27.5 million ** Debt issuance in 2016-17 of $35 million *** Debt issuance in 2016-17 of $27.5 million RECOMMENDATION Based on the preliminary information and assumptions noted above, staff recommends that we proceed with planning the November Capital Workshop utilizing the spending proposed under the Moderate spending scenario. This scenario reduces spending to eliminate some increases that had occurred since the 2008-09 plan and closely matches that plan with no allowance for inflation. This allows us to mitigate the impact of the reduced capital revenues on the needed increases to the sewer service charge. The moderate spending scenario maintains, in large part, the critical projects that have been initiated, including the Sludge Hauling Facility, Emergency Bypass Facility, Aeration Basin Renovation Phase 2, Seismic Retrofit and Collection System Operations Facility such that these projects can benefit from the current competitive bidding climate. Staff will discuss the proposed fiscal year 2009-10 Capital Planning Scenarios in more detail with the Capital Projects Committee on October 28, 2008 and looks forward to receiving their input prior to initiating preparation for the Capital Planning Workshop on November 13, 2008 and continuing the financial planning process into the January 2009 Financial Planning Workshop. Staff acknowledges that this is a very volatile financial climate for long range planning. The Board will be updated on significant changes in operation or capital costs as they occur and any associated policy issues. Based on the Board input received at the workshops, and the evolving national financial situation, appropriate changes will be made to the budgets before their adoption at the end of fiscal year 2008-09. Going beyond the fiscal year 2009-10 CIB/CIP, course corrections can be made each fiscal year, such that if the economic conditions worsen by this time next year and revenues are further reduced, capital expenditures could also be further reduced to mitigate any rate impacts.