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HomeMy WebLinkAboutBOARD MINUTES 01-29-04 136 MINUTES OF THE ADJOURNED REGULAR BOARD MEETING OF THE DISTRICT BOARD OF THE CENTRAL CONTRA COSTA SANITARY DISTRICT HELD ON JANUARY 29, 2004 The District Board of the Central Contra Costa Sanitary District convened in an adjourned regular session in the Multipurpose Room at 5019 Imhoff Place, Martinez, County of Contra Costa, State of California, at 2:00 p.m. on January 29, 2004. President Lucey called the meeting to order and requested that the Secretary call roll. 1. ROLL CALL PRESENT: Members: Menesini, Boneysteele, Nejedly, Hockett, Lucey ABSENT: Members: None a. PLEDGE OF ALLEGIANCE TO THE FLAG Board and staff joined in the Pledge of Allegiance to the Flag. 2. PUBLIC COMMENTS None 3. OPERATIONS a. BOARD ACCEPTANCE OF THE 2003 NATIONAL POLLUTANT DISCHARGE ELIMINATION SYSTEM, COLLECTION SYSTEM OVERFLOW MONITORING PROGRAM. AND THE RECYCLED WATER QUALITY AND DISTRIBUTION REPORTS Mr. Charles W. Batts, General Manager, introduced Mr. Douglas J. Craig, Plant Operations Division Manager, who stated that the Annual National Pollutant Discharge Elimination System (NPDES), Collection System Overflow Monitoring Program, and Recycled Water Quality and Distribution Reports are a summary of the calendar year performance. Data from the twelve monthly reports submitted to the Regional Water Quality Control Board (RWQCB) is compiled into the annual report. In essence this is the District's report card to the RWQCB. The RWQCB Annual Report NPDES section contains information on treatment plant waste characteristics and loading for influent, treated effluent and the receiving water (Suisun Bay near the District's outfall), and sludge disposal practices. The Collection System Overflow Monitoring Program section contains information on the site, volume, and cause of sewer system overflows. The Recycled Water Quality and Distribution section contains information on recycled water usage, water quality, and annual customer connections. Mr. Craig reported that in calendar year 2003, the total flow treated was 16.3 billon gallons. The average daily flow was 44.7 million gallons. The peak hourly flow was 119 million gallons. 5,348 tons (wet weight) of ash was disposed of for soil amendment. Mr. Craig noted that this is exactly the same amount of ash disposal as last year. Approximately 15,300 analytical tests requiring approximately 11,000 hours of laboratory work were completed. The District was in 100 percent compliance with NPDES permit requirements. In calendar year 2003, there were a total of 25 sewer overflows, down from 39 last year. Two overflows were greater than 1,000 gallons. The most common cause of overflows was root intrusion. Grease, debris, and a broken pipe were also causes. In calendar year 2003, the District provided recycled water to 12 major customers, delivering 160 million gallons of recycled water, down from 178 million gallons delivered last year. The peak month usage was 36.6 million gallons in July. Mr. Craig stated that the District's NPDES permit requires certain special studies. Mr. Craig reviewed the status the Ambient Monitoring Study, Cyanide Site-Specific Objectives Study, Dioxins Method Development Study, and the increased emphasis on 01 29 O,t,"f\ /\;,"',1 ! ~\ 'J.: 137 Pollution Prevention and Minimization, Total Maximum Daily Loads (TMDLs), and Copper and Nickel Delisting Effort. In closing, Mr. Craig thanked the Board for the financial resources and their support, and acknowledged the contributions of all the employees that made this possible. In response to questions from Member Menesini, it was agreed that Operations staff will meet separately with Member Menesini to discuss portions of the reports in greater detail. The Board commended staff on the outstanding job that resulted in 100 percent compliance with permit requirements. It was moved by Member Hockett and seconded by Member Menesini, that the 2003 National Pollutant Discharge Elimination System, Collection System Overflow Monitoring Program, and Recycled Water Quality and Distribution Reports be accepted and submitted to the Regional Water Quality Control Board. There being no objection, the motion was unanimously approved. At this time, President Lucey departed from the order of the agenda to consider Item 5., Reports. 5. REPORTS a. GENERAL MANAGER None b. COUNSEL FOR THE DISTRICT None SECRETARY OF THE DISTRICT c. None d. BOARD MEMBERS None At this time, President Lucey returned to the order of the agenda. 4. BUDGET AND FINANCE FINANCIAL PLANNING AND POLICY WORKSHOP a. Mr. Batts, General Manager, thanked staff for providing the timely information that went into the Financial Planning and Policy Workshop document and presentation. Last year the analogy of the perfect storm was used to describe the confluence of events facing the District, including the State of California budget crisis, employee salary and benefits agreement negotiations, and rising retirement and health care costs. The Board passed, for the third year, a fairly large rate increase to get the District through the difficult time and to position the District to meet those challenges. The District, in spite of concerns, retained ad valorem tax revenue and has adequate funds now. There was a general economic upturn. A long-term labor agreement was negotiated that will allow staff to predict labor costs in the future. Staff conscientiously worked to achieve $1 million in near term savings in 2003-2004, but actually was able to save closer to $3 million. Staff was also able to save $6 million in project savings and deferrals in the Capital Improvement Budget. All in all, 2003-2004 was a remarkable year for the District. Mr. Batts stated that the purpose of today's workshop is to quickly review the methodology used, provide updated financial information, review the impacts of 01 29 04 138 workshop scenarios, and receive Board direction with regard to maintaining 2004-2005 Capital Improvement Budget, maintaining near-term operational expense controls, anticipation of an approximate 10 percent loss of ad valorem tax revenue, and the recommended 2004-2005 Sewer Service Charge increase of 3 percent ($8). The proposed future actions by staff with Board agreement would include implementation of the 3 percent per year Sewer Service Charge rate increase for the next three fiscal years; completion of the District budgeting process, finalizing the District O&M and Capital Improvement Budgets, continuing near term actions to control costs, and providing timely budget information to the City of Concord; proceeding with the District rate setting process by mailing notice to property owners by postcard and providing notice for public input and hearing; and considering future impacts of loss of tax revenue in the 2005-2006 budget process. Mr. Batts stated that the methodology that has been used is the funds available/funds required model. The District began using this conceptual model at the 1999 Board Financial Planning and Policy Workshop. It has been staffs approach to create a "soft landing" keeping the amount of funds available greater than funds required but at a relatively modest amount. In 2003-2004, retention of ad valorem tax revenue and bond funding for the San Ramon projects augmented the Sewer Construction Fund, putting the District in a favorable condition. The Sewer Construction Fund will allow for future rate adjustments as needed. Mr. Batts reviewed a chart showing funds required if funds available start at $30 million, the approximate amount needed for cash flow through the year until the Sewer Service Charge revenue is received in December. Mr. Batts stated that staff has made certain assumptions for this year's scenario. It was assumed that the State will take part of the ad valorem tax revenue from the District. It is unlikely that the full extent of the loss will be known before the time that the notice must be mailed to property owners. It was assumed that the Board does not want to increase Sewer Service Charge rates before need is evident. It was assumed that the current fund balances will carry the District through next fiscal year even if the ad valorem tax revenue is lost. Mr. Batts reviewed the change in funds available beginning in the year 2000 with a beginning fund balance of approximately $40 million to the current fund balance of approximately $55 million. The increase in the fund balance is due to $15 million in bond funding for the San Ramon projects, the fact that the District did not lose ad valorem tax revenue in 2003/2004, Capital Improvement Budget savings and deferrals, and near term O&M Budget savings. Mr. Batts stated that there are a number of unknowns that may impact the fund balance, including political uncertainty (State budget, fees), economic uncertainty (benefits costs, connections, utility costs, inflation), infrastructure replacement (third party lawsuits, facility assessments, etc.), regulatory uncertainty (Total Maximum Daily Loads, solids handling, etc.), and acts of God (fire, floods, earthquake, slides). Mr. Batts provided a comparison of District expenses by category from 2000 through 2004, noting that labor and benefits have increased, but other categories with the exception of a slight increase in utilities have remained fairly constant. With regard to District revenue, Mr. Batts stated that as an overall percentage of District revenue, property tax revenue has increased in 2002-2003 even faster than the Sewer Service Charge has increased. This is the first year in some time that there has been a deposit to District reserves. Mr. Batts stated that a Capital Improvement Budget (CIB) Board Workshop was held in October 2003, the second CIB Workshop will be held in April. At the October workshop it was recommended that the baseline of $21 million per year (January 2000 dollars at 3 percent inflation) be maintained, and that the CIB follow the "no loss of revenue" projections. The 2003-2004 CIB will be underspent because spending was curtailed and the loss of ad valorem tax revenue was anticipated. In 2004-2005 the CIB is budgeted at $26.6 million. The Sewer Construction Fund can act as short-term relief if ad valorem tax revenue is lost. Mr. Batts reviewed scenarios for future years as set forth in the binder provided to the Board, describing the impact for fiscal years beyond 2004-2005. Scenario 1 (prior year) contains last year's assumptions of immediate loss of ad valorem tax revenue, modest increase in Operations and Maintenance (O&M) spending, curtailment in Capital spending, and an approximate $32 Sewer Service Charge increase required for three years. There would be a "soft landing" in 2007-2008, then reserves would be equal to funds required and major rate increases would be needed. Capital spending and the 01 29 041 139 Capital Improvement Plan would not recover from the ad valorem tax revenue loss. This scenario is no longer being carried forward. Scenario 2 (no ad valorem tax loss) uses the 2003 Board Workshop Sewer Service Charge rates, the current O&M projected spending including the $1.6 million Paulsen settlement payment, the current Capital Improvement Plan outlined at the October Board Workshop, and never creates a "soft landing" with funds available, since ad valorem tax is not lost, continuing to grow dramatically reaching $100 million in 2007- 2008. This scenario is no longer being carried forward. Scenario 3 (no loss of ad valorem tax revenue and a 3 percent Sewer Service Charge rate increase) slowly brings funds available down to the funds required level. President Lucey stated that funds available do not reach funds required until 2008-2009 and there are excess funds available until then. Mr. Batts stated that is correct. In Scenario 3, the staff recommended scenario, the District does not lose ad valorem tax revenue, and a 3 percent Sewer Service Charge rate increase is recommended for three years. Scenario 3 uses the current O&M projected spending, and the current Capital Improvement Plan outlined with the Board at the October workshop. This scenario could absorb a 10 percent loss of ad valorem tax revenue, could project a 3 percent Sewer Service Charge rate increase even beyond three years allowing for rate stabilization, and creates a "soft landing" in 2009- 2010, after which substantial rate increases would be needed. Scenario 4 (tax loss in 2005-2006) uses the current O&M projected spending, uses the Capital Improvement Plan from the October Board Workshop, projects loss of ad valorem tax revenue in 2005-2006, projects a one-time $59 Sewer Service Charge rate increase in 2006-2007 to balance revenue with modest rate increases for the next three years and major rate increases after that time, and creates a "soft landing" in 2008- 2009. Scenario 5 (tax loss in 2004-2005) uses projected O&M and Capital Improvement Plan spending, ad valorem tax loss one year earlier in 2004-2005, requires a Sewer Service Charge rate increase of $30 annually for three years to balance revenue and large Sewer Service Charge rate increases after the three-year period, and creates a "soft landing for the District through substantial rate increases and brings funds available toward funds required fairly quickly requiring greater increase in rates. Mr. Batts reviewed the current ad valorem tax proposal by the State of California, noting that the District's 2004-2005 projected ad valorem tax revenue is $9 million. The State is on record that enterprise districts should not receive tax funding. If the ad valorem tax revenue is lost, equivalent to a $59 Sewer Service Charge rate increase would be needed. The current State proposal is a $1.3 billion shift of local government property taxes to the Education Relief Augmentation Fund (ERAF), or a decrease of about 10 percent to local government. Mr. Batts presented the staff recommendation that the District implement a 3 percent Sewer Service Charge increase annually for three years (2004-2005, 2005-2006, and 2006-2007), that notice be mailed to District ratepayers by postcard, that the current Capital Improvement Budget be implemented based on continued receipt of ad valorem tax revenue, that many of the near term cost control measures in the O&M Budget be continued with the hope of saving $1 million in 2004-2005, and anticipating loss of future ad valorem tax revenues. Mr. Batts provided a comparison of the District's annual Sewer Service Charge of $272 with other agencies' annual charges ranging from $133 to $451; noting that if the recommended 3 percent ($8) increase were implemented, the District would still be below the median. President Lucey noted, as he has in the past, that the District receives ad valorem tax revenue and many of the other agencies do not. This consideration must be factored into any rate comparison. Mr. Batts acknowledged this fact but added that the methodology is neutral as to the revenue source. 01 29 04 140 Mr. Batts stated that future actions would be for staff to proceed with development of District budgets based on Board input, update the Board on State budget developments that impact the District, develop and mail public notices of proposed Sewer Service Charge increase, provide rate and budget information in the spring issue of the Pipeline newsletter to District ratepayers, and develop appropriate rate setting process. In closing, Mr. Batts quoted Thomas Fuller, stating that CIA danger foreseen is half avoided," and various news articles expressing shock at the loss of property tax revenue by local government. Mr. Batts stated that with the Board's help, the District has done a good job of preparing to look at the dangers and challenges that lie ahead. Mr. Batts stated that he would be happy to answer any questions. In response to a question from Member Menesini concerning the options presented and the potential loss of ad valorem tax revenue, Mr. Batts stated that based on the likelihood that the District will lose at least part of its ad valorem tax revenue in the next year, and because the District is in a good financial position, staff believes that a 3 percent increase in the Sewer Service Charge for three years would give the Board time to react to the loss of ad valorem tax when that occurs. At the Capital Improvement Plan Board Workshop held in October 2003, two scenarios were presented to the Board, one where the District retained ad valorem tax revenue and one where the District lost ad valorem tax revenue. It was recommended that the District proceed with the capital program until property tax is actually lost. On the Operations and Maintenance (O&M) side, staff will continue near-term savings in many areas, and it is hoped that $1 million in savings can be achieved in 2003-2004. Last year, approximately $3 million in near-term savings were achieved. President Lucey referred to page D31 of the notebook provided to the Board which shows projected funds available in 2003-2004 of $57 million. President Lucey stated that at most the District needs only $30 million in funds available in December, so he would question why the District would increase the Sewer Service Charge by $8. President Lucey stated that it appears that the District has sufficient funds available. President Lucey stated further that he will raise the Sewer Service Charge whatever is needed after the District finds out there is some catastrophic taking by the State. Mr. Batts stated that last year a significant amount was spent on San Ramon projects that were reimbursed by the developers. That is now ending. The capital work planned for the coming year, Fiscal Year 2004-2005, is about $6 million more than last year. If you look at the District as a $70 million business and the Board's prudent O&M reserve, that is only about 5 percent in the bank. A 3 percent increase long-term allows the District to stabilize rates. Page D31 shows the rate stabilization scenario and coming to a soft landing. If the Board decided not to have a Sewer Service Charge rate increase this year or in subsequent years, it could put the District in the position of having to do a hefty rate increase in the future. Member Nejedly stated that if the District loses its ad valorem tax revenue, he would have no problem approving a rate increase to make the District whole. Member Nejedly stated that he does not think it is fair to the ratepayers to do it before it is needed. Member Nejedly stated however, that he does worry about having enough money in the bank to operate the District until the necessary notices can be mailed to the public and a rate increase implemented if something catastrophic should happen. Mr. Batts stated that staff could report back at a March Board Meeting with additional rate increase scenarios to show these impacts. Member Menesini agreed that would be helpful. Member Menesini stated that he believes in being proactive; but at the same time after considering President Lucey's comments, he questions whether a rate increase is necessary at this time. Mr. Batts stated that part of staff's job as managers, is to try to project what will happen in the future. The scenarios presented are staff's best guesses. Member Hockett requested that the required funds available to pay District bills be included in the no rate increase scenario versus how much time is needed to give public notice and implement a rate increase. 01 29 O'i'l i~¡ " ,'" I..; i 'x 141 President Lucey requested that a scenario with no rate increase for one year only be presented. Member Nejedly stated that he would rather have cost-of-living increases or whatever is needed to run the District, but he does not want those increases to be based on the possibility of losing ad valorem tax revenue. Because the District has money in the bank does not mean that the District must spend it. Member Nejedly asked that staff provide information on what is needed to run the District and how much cushion (funds in the bank) is needed. Member Nejedly stated that he would support a rate increase to replace ad valorem tax revenue, if it is taken by the State. Member Hockett agreed. Member Hockett stated that at the California Association of Sanitation Agencies (CASA) meeting that she recently attended, one of the presentations focused on the premise that agencies should not be afraid to have ratepayers pay for the services that they receive. Member Hockett stated that the District should not be reluctant to charge the ratepayers for the service that the District provides. Mr. Batts stated that staff will come back to the Board in March with the scenarios requested and a time line for public notice and rate increase implementation requirements. President Lucey and the Board of Directors commended staff on the excellent presentation and the work that went into preparing the informational material distributed in advance of the workshop. In response to questions from President Lucey, Mr. Qamar Khan, Public Works Director of the City of Concord, stated that the City of Concord also uses different scenarios to try to predict impacts of various unknowns. 5. REPORTS This item was taken out of order earlier in the agenda. 6. EMERGENCY SITUATIONS REQUIRING BOARD ACTION None 7. ANNOUNCEMENTS/SUGGESTIONS FOR FUTURE AGENDA ITEMS None 8. ADJOURNMENT There being no further business to come before the Board, President Lucey adjourned the meeting at the hour of 3:08 p.m. ~4-d~ PRO TEM resident of the Board of Directors, Central Contra Costa Sanitary District, County of Contra Costa, State of California COUNTERSIGNED: 01 29 04