Loading...
HomeMy WebLinkAboutBOARD MINUTES 01-25-01 14 MINUTES OF THE ADJOURNED REGULAR BOARD MEETING OF THE DISTRICT BOARD OF THE CENTRAL CONTRA COSTA SANITARY DISTRICT HELD ON JANUARY 25, 2001 The District Board of the Central Contra Costa Sanitary District convened in an adjourned 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 January 25, 2001. President Hockett called the meeting to order and requested that the Secretary call roll. 1. ROLL CALL PRESENT: Members: Nejedly, Menesini, Lucey, Boneysteele, Hockett ABSENT: Members: None 2. PUBLIC COMMENTS None 3. CALL FOR REQUESTS TO CONSIDER ITEMS OUT OF ORDER None 4. TREATMENT PLANT a. BOARD ACCEPTANCE OF THE YEAR 2000 NATIONAL POLLUTANT DISCHARGE ELIMINATION SYSTEM. COLLECTION SYSTEM OVERFLOW MONITORING PROGRAM. AND RECYCLED WATER QUALITY AND DISTRIBUTION REPORTS Mr. Charles W. Batts, General Manager, stated that the District often does not take time to celebrate its successes, particularly in the core business area of treating wastewater and serving the regulatory agencies, the District's primary indirect customers. The Year 2000 National Pollutant Discharge Elimination System (NPDES) Report reflects the outstanding work of numerous employees, the support of a concerned Board of Directors, and the fulfillment of the contract with the District's ratepayers to protect the environment. The Report before the Board shows no water quality violations, the lowest number of overflow events greater than 1,000 gallons ever reported by the District, and the ability of the District to deliver consistently high quality recycled water. This is the third consecutive year of 100 percent compliance, an exceptional record for Director of Plant Operations Jim Kelly and his staff. Mr. Batts introduced Mr. James M. Kelly, Director of Plant Operations, who stated that the National Pollutant Discharge Elimination System (NPDES), Collection System Overflow Monitoring Program, and Recycled Water Quality and Distribution Reports have been prepared for submission to the California Regional Water Quality Control Board (RWQCB). These annual reports are the District's report card, summarizing the calendar year performance and compiling data from the twelve monthly reports. The report is broken down into four categories: 1) Treatment Plant Waste Characteristics and Loading, 2) Receiving Water Characteristics, 3) Sewer System Overflows, and 4) Recycled Water Report. Mr. Kelly reported that in 2000, the District laboratory conducted about 15,000 analytical tests, involving approximately 11,000 hours of laboratory work. There was 100 percent compliance with NPDES permit requirements for the third year in a row. The District's goal is to achieve 100 percent compliance with NPDES permit requirements for at least five consecutive years, which would make the District eligible for the Association of Metropolitan Sewerage Agencies (AM SA) Platinum Award. The District treated the same flows as last year, 16.7 billion gallons. The average daily flow was 45.9 million gallons, and the peak hourly flow was 200 million gallons and is the highest peak flow in recent years. 01 2 Ç,:" t) 01 15 Mr. Kelly reported that there were 34 small collection system overflows (exceeding 100 gallons in volume), more than the previous year. Of the 34 reportable overflows, three (3) exceeded 1,000 gallons in volume while last year six (6) overflows were greater than 1,000 gallons in volume. The causes of the overflows included pipe failure, root intrusion, wet weather surcharge, grease, and debris. Mr. Kelly reported that the District has 15 recycled water customers, two more than last year, delivering 175.5 millions gallons of recycled water with peak month usage of 33.4 million gallons in June. There was 100 percent compliance with Title 22 requirements. No customer complaints were received. Mr. Kelly stated that there were some changes in the year 2000. Electronic compliance reporting began in January 2000. The new NPDES permit will present additional challenges with more stringent requirements, and the passage of Senate Bill 709 requires mandatory fines for any violations. Because of the significantly more stringent requirements, staff is very concerned about the District's ability to continue its 100 percent compliance record. In closing, Mr. Kelly acknowledged all those who helped achieve the year 2000 outstanding report and compliance record including the operations staff, maintenance staff, process control/maintenance engineering staff, collection system crews, engineering staff, administrative staff, and the Board of Directors. Mr. Kelly recommended that the Board accept the 2000 Regional Water Quality Control Board annual report. It was moved by President Hockett and seconded by Member Menesini, that the 2000 National Pollutant Discharge Elimination System, Collection System Overflow Monitoring Program, and Recycled Water Quality and Distribution Reports be accepted, and that staff be heartily commended on this tremendous accomplishment. There being no objection, the motion was unanimously approved. 5. APPROVAL OF EXPENDITURES a. EXPENDITURE LIST DATED JANUARY 25. 2001 Member Menesini, Chair of the Budget and Finance Committee, stated that he and Member Boneysteele reviewed the expenditures and found them to be satisfactory. Member Menesini stated that several interesting items were noted. The Rossmoor Sewer Improvement Project is about 75 percent complete, and it would be interesting to have feedback on the project as it nears completion. The District's share of the payment for the joint project with the City of Lafayette appeared in the expenditures. Member Menesini stated that it would be appropriate to have some sort of outreach program to let the residents of Lafayette know the investment the District has made on their behalf. Another milestone has been reached on the Laboratory Project. Member Menesini stated that he would be interested in a report when major milestones are reached on District projects. A field trip to look at effluent toxicity testing has been scheduled to Aqua Science Laboratory in Davis. Member Menesini noted that District employees participate in Water Environment Federal (WEF) meetings where information on cutting edge technology is exchanged, and feedback would be interesting. Member Menesini also suggested that explanation and review of legal expenses be scheduled at a committee meeting or Board workshop. Member Boneysteele stated that such reviews have been held in the past and it would be appropriate to have a general review of legal expenses now at the end of the calendar year. It was moved by Member Menesini and seconded by Member Boneysteele, that the Expenditure List dated January 25, 2001, including Self Insurance Check Nos. 101683- 101688, Running Expense Check Nos. 129566-129968, Sewer Construction Check Nos. 22927-22987, Payroll Manual Check Nos. 48742-48749, and Payroll Regular Check Nos. 53459-53501, be approved as recommended. There being no objection, the motion was unanimously approved. 01 25 01 16 BREAK At 2: 18 p.m., President Hockett declared a recess to set up for the workshop, reconvening at the hour of 2:22 p.m. with all parties present as previously designated. 6. BUDGET AND FINANCE a. FINANCIAL PLANNING AND POLICY WORKSHOP Mr. Batts, General Manager, stated that this workshop is an evolution of the process, building on what was started in January last year. The purpose of this workshop is to provide the information the Board needs and stimulate dialogue on the District's rate setting process. The Board is asked to consider future rates and provide direction to staff with regard to additional information needed and actions to be taken to assist the Board in setting the Sewer Service Charge rates and to meet the goals of the District in future years. Staff is looking at the District goals for future years and the means of financing those goals. Mr. Batts stated that just as last year, there is a need to maintain the balance between costs and the District goals. Central Contra Costa Sanitary District is an agency that prides itself on: . . Exceptional Customer Service Full Regulatory Compliance Responsible Rates High Performance Organization . . Mr. Batts stated that there is also continued need for focus on effectiveness and efficiency. Areas of particular concern that the District is facing now and in the future are additional positions, energy usage, and maintenance and repair of aging infrastructure. Until last year the District had gone eight years without a rate increase for Operations and Maintenance (O&M). This was accomplished by controlling expenses, reducing staff, combining jobs where appropriate, identifying and implementing more efficient ways of working, and installing more efficient equipment. Mr. Batts stated that the Sewer Service Charge makes up about 50 percent of District revenue and finances almost all of District O&M expenses. There was a $12 Sewer Service Charge rate increase in the year 2000. In 11 of the last 12 years there was a deficit in cash flow, and District reserves have been steadily dropping down from $74 million in 1986 to $36 million. This drop in reserves was intentional on the part of the Board and staff, but it is now time to look carefully at the funds available versus funds required for District operations. There is no cushion against future impacts, and outside financing such as TRANS (Taxation and Revenue Anticipation Notes) is not the best method of addressing this need in the long term and such a practice could affect the District's bond rating over time. District expenditures exceed revenues for the first five and one-half months of each fiscal year, until the first installment of the District's primary revenue, Sewer Service Charges and property taxes, is received from the County in mid-December. This deficit amounts to approximately 30 percent of total annual expenses. The District needs to begin each fiscal year with enough cash and investments to pay its bills until these revenues are received. The funds required at June 30 each year is determined by taking 30 percent of the year's budgeted O&M and Capital Improvement projected expenses to cover the deficit amount, plus approximately 15 percent contingency to cover uncertainties in cash flow particulary contract payments on capital improvement projects, plus 100 percent of the principal payment on the 1998 Revenue Bonds due September 1 of each year. Funds available are calculated by adding total unrestricted cash and temporary investments in the O&M and Capital Funds. In addition, the inter-fund balance of the Self Insurance Fund, which represents cash owed to O&M and Capital from Self Insurance, is also included. This balance is calculated each year using the June 30 audited financial statements. Member Boneysteele expressed concern about lumping Capital and O&M and calling it all reserves since the combined total is larger and therefore a more attractive target for 01 25 01 17 outside interests. The District has a ten-year Capital Improvement Plan and Program that requires those reserve funds. Mr. Batts agreed. Mr. Batts stated that based on initial projections, funds required in 2001-2002 are estimated to be $29.3 million and funds available are projected to be $38.9 million. In looking at the cash flow from 1993-1994 forward, with the exception of 1996-1997 when some major capital projects had been completed, expenses have exceeded revenues each year. If no action is taken and expenses continue to exceed revenues, in the year 2004-2005 reserves would be exhausted and there would be insufficient funds available to meet the District's expenses. Mr. Batts stated that an $18 Sewer Service Charge increase was recommended in the information that was distributed to the Board; however, because of a number of issues which will be reviewed later in the presentation, including the volatile energy situation, staff now recommends a $24 increase in order to generate a soft landing and ensure that the funds required are available. A $24 increase would provide the funds needed for the O&M Budget, allow reallocation of $5 of the $16 diverted from the Capital Improvement Program last year, and help generate a soft landing in future years balancing out funds available against funds required. Mr. Batts reviewed slides showing a $24 increase and an $18 increase. Mr. Batts showed a slide depicting the $12 Sewer Service Charge increase approved by the Board last year. That scenario projected no increase in 2001-2002, a $12 increase in 2002-2003, an $11 increase in 2003-2004, and a $12 increase in 2004-2005. Mr. Batts stated that a number of things have changed since last year. Capital revenue decreased slightly and O&M expenses have increased. In addition, last year's scenario did not assume the increase in staffing approved by the Board to enhance customer service. Three Collection System Operations Department employees, two Inspectors, one Permit Counter employee, one Communication Services employee, and one Household Hazardous Waste Collection Facility employee were added during the past year. Last year's scenario did not assume the full extent of labor and benefits increased costs which were agreed to during labor negotiations during the past year. And last year's scenario did not assume the significant increase in energy costs that the State of California is now facing. The decrease in Connection Fee revenue was offset by delay in certain capital projects. Mr. Batts reviewed proposed scenarios to create a soft landing showing the impacts of an $18 increase, a $24 increase, and a $36 increase in 2001-2002. A potential Connection Fee increase for new connections buying into the District's capacity was discussed at the January 11, 2001 Board Meeting. Recent legislation prompted review of the District's Capital Fees. Connection Fees make up 5 to 10 percent of total District revenue. Revenue from Connection Fees is directly dependent on the number of connections. Based on 1,830 new units and a proposed Connection Fee increase from $2,572 per connection for gravity service to a proposed Connection Fee of $3,360 per connection for gravity service, $1 million in increased revenue could be generated. Mr. Batts showed a comparison of Connection Fees of nearby agencies and including both the current and proposed Central Contra Costa Sanitary District (CCCSD) Connection Fees for gravity service and pumped zone. Current and proposed CCCSD Connection Fees fall in the middle and lower half of the fees now charged by nearby agencies. Mr. Batts stated that these are 1999-2000 rates. Mr. Batts stated that he has spoken with representatives of several agencies and they anticipate rate increases for the coming year. President Lucey requested a breakdown of the West County Wastewater District's Sewer Service Charge and Connection Fees, noting that they are the lowest. Mr. Batts stated that the $18 scenario described in the information provided to the Board attempts to create a soft landing over time. In developing this scenario, staff made moderate assumptions in a number of potentially uncertain areas. Only moderate energy increases were assumed after this year; and as the Board is aware, this is currently an area of considerable uncertainty. It was assumed that there would be no major economic slowdown. No drop in unit connections was projected. General 3 percent inflation adjustments were made except in areas like salaries where actual adjustments are known. Mr. Batts reported that the District just received word that the actual increase in the Consumer Price Index for our area was 5.5 percent in 2000. Only minor energy-related 01 25 01 18 increases were assumed in areas such as chemicals. No major staffing increase was projected. No change was assumed in future benefits and retirement costs. It was assumed that the County will continue its present course with regard to funding for the Ventura decision. No assumption was made for significant changes in regulatory requirements. Capital Improvement Program projections presented to the Board at the October 12, 2000 workshop were used. It was assumed that the District would not lose any ad valorem tax revenue. Because of the uncertainty in these areas and the potentially significant impact of increases in these areas, "what if" scenarios were developed. Mr. Batts reviewed the following scenarios which could result in an additional $30 Sewer Service Charge increase over and above the recommended $18 increase: . A 50% increase in energy would cost about $2.5 million, or $17 on the Sewer Service Charge. . A 50% drop in unit connections would generate $3 million less in revenue, equating to $ 21 on the Sewer Service Charge. . A 30% increase in chemicals would cost about $300,000, or $2 on the Sewer Service Charge. . 6% general inflation represents about $500,000, or $4 on the Sewer Service Charge. Mr. Batts stated that other future concerns include loss of ad valorem tax revenue equating to $45 on the Sewer Service Charge, added retirement costs potentially costing $4 on the Sewer Service Charge, and other unknown energy-related increases. This year because of projected District staff vacancies during the year, approximately $800,000 in avoided costs was used in the expense projections. Mr. Batts introduced Mr. James M. Kelly, Director of Plant Operations, who briefly reviewed assumptions with regard to power consumption and energy costs. Mr. Kelly stated that a more detailed presentation will be made at the next Board Meeting as requested by Member Nejedly. Mr. Kelly stated that it is presumed that the increase in electrical power costs will all happen within the next few months and that electrical power costs would remain fairly flat thereafter. A 10 percent increase in electrical consumption is projected immediately and a 30 percent increase in cost to $.08-$.09 per kilowatt hour is projected in year one for electricity. No change in natural gas consumption is projected but costs are projected to increase 2 % times to $8.00 per decatherm. No change in landfill gas consumption is projected. Mr. Kelly stated that District staff were informed by NEO on January 23, 2001, that the existing contract for landfill gas has been assigned from Acme Landfill Corporation to NEO Corporation. The District has received nothing in writing with regard to this assignment; NEO Corporation had also informed staff on January 23, 2001, that they probably would not execute the new contract for landfill gas. Member Lucey stated that the Board was told there was a final landfill gas contract three months ago. Mr. Kelly stated that the Board approved the contract elements for landfill gas in September 2000 and staff had been working to finalize the details. Mr. Kelly stated that staff believed that a new landfill gas contract was in place effective August 1, 2000, but has just learned that NEO is backing out of the agreement. The District has not been billed for this period, but the company has indicated they will bill at the old contract amount of $6.20 per decatherm rather than the new lesser contract amount of $5.00 per decatherm. Mr. Kenton L. Aim, Counsel for the District, stated that the District had pursued NEO to execute the contract; NEO repeatedly assured staff that the remaining contract details were very minor and related to issues between Acme and NEO and did not relate to price, and that the contract would be executed. Mr. Aim stated that he and District staff tried 01 25 (f)~ -~ l~ ~ íj V J,,- 19 to get the final contract, but the other party has recently changed management staff and their position on the contract. Member Lucey stated that for the last three months the Board thought there was a new contract with this company at the lower agreed upon rate. Now the Board is being told we do not have such a contract. Mr. Aim stated that is correct. NEO wants to negotiate our price again. There is a question as to how much it will cost NEO to back out of their agreement with Acme. NEO stated that they would provide landfill gas under the old contract for the foreseeable future and they would give 90 days notice to back out. Member Nejedly stated that we do not really know as a public agency what they will be charging us. Member Nejedly suggested that there is a game being played with the District as a puppet and that is why he requested this report. The District should be taking the landfill gas because it is the right thing to do, but it should be at a reasonable cost since we are the only takers. That is a substantial amount of money that affects the ratepayers of the District. If the District does not really have a contract and NEO is not being responsive and we cannot get a contract or a bill, we should just shut the valve. Mr. Aim cautioned that discontinuing acceptance of landfill gas is not specifically listed on the agenda but could be added as an urgency item since it came up after the deadline for posting the agenda. Following discussion, Mr. Kelly reviewed power consumption and cost projections through fiscal year 2003-2004. These projections are equivalent to a $15 increase in the Sewer Service Charge in 2002-2003. Mr. Kelly displayed a copy of the District's December 2000 PG&E bill. The December electrical bill shows that PG&E lost $231,388.66 on the electric energy provided to the District in December. The energy costs used in the rate setting scenarios discussed by Mr. Batts, project a 30 percent increase in electric power costs but do not include any debt or loss recovery by PG&E for their energy charge. Mr. Batts stated that the question is why the District budget numbers are climbing. Mr. Batts reviewed a bar chart of projected annual increases and the percent increase projected over the five-year period from 2000-2001 to 2005-2006 in the areas of labor, benefits, utilities, repairs and maintenance, all other O&M costs, and capital. In summary, Mr. Batts recommended that the Board consider: . Raising Connection Fees as recommended; . Providing ratepayer notice for a Sewer Service Charge increase of up to $ 24 annually for three years using the District's Pipeline Newsletter with a supplemental mailing; and . Raising the Sewer Service Charge between $18 and $24 annually for the next three years to close the gap between funds required and funds available with the stated goal of bringing District revenues to equal expenses within the next five years by continuing to control costs and enhance revenue. Mr. Batts displayed a comparison of Sewer Service Charge rates of with nearby agencies, showing the current CCCSD Sewer Service Charge of $200 and increases of $18, $24, and $36. In each of these scenarios, the CCCSD Sewer Service Charge is in the lower third. As noted earlier, the rates shown are from fiscal year 1999-2000 and several of the agencies have indicated they anticipate substantial Sewer Service Charge rate increases this year and many of them are based on rising energy costs. Mr. Batts reviewed the next steps in the Sewer Service Charge rate setting process, calling for input from the Board with regard to any further information needed by the Board to assist in the rate setting process, presentation of possible Sewer Service Charge rate scenarios, authorization of public notice on the rate hearing by the March 15, 2001 Board Meeting, and finally establishment of the Sewer Service Charge rate and adoption of the District 01 25 01 20 budgets with a Board Workshop on May 24, 2001 and Board approval at the meeting of June 21, 2001. President Hockett stated that there is a need for further information on the Acme landfill gas issue. Mr. Batts stated that staff will update the Board at the next Board Meeting. Member Boneysteele stated that this energy crisis is an unprecedented event. Member Boneysteele stated that the agenda should be sufficiently broad to allow the Board to discuss and take necessary action until this situation is resolved. Mr. Batts stated that at the February 1, 2001 Board Meeting, staff will provide a more detailed energy report. The District treatment plant is very energy intensive compared to many other plants. The District has a variety of energy processes and many options. With all of those energy options, staff believes the District is in a good place as far as operating our facility, the issue is the cost. Member Boneysteele stated that this is not a natural crisis. It is brought on by the utilities themselves. The whole system has gone through wars, droughts, depression, massive inflation, and weathered it. This is manmade and must be solved by man. The District must be flexible enough to weather it. Member Boneysteele requested that the Board be kept informed of the landfill gas situation at each Board Meeting. Member Boneysteele stated that he blames no one. The District and its staff deal with people in good faith and expect the other party to be dealing in good faith as well. There being no further comments, President Hockett declared a recess at the hour of 3:45 p.m., reconvening at the hour of 3:58 p.m. with all parties present as previously designated. a. 01 7. REPORTS GENERAL MANAGER 1 ) Mr. Batts, General Manager, asked Mr. Kenton L. Aim, Counsel for the District, to advise the Board concerning rate setting and notification issues. Mr. Aim stated that he has been asked to advise the Board with regard to public notification of a proposed Sewer Service Charge increase and setting rates for multiple years. Mr. Aim stated that there have been two significant cases relating to Proposition 218, but he does not believe they have changed the prudence of sending written notification of a proposed Sewer Service Charge rate increase to all homeowners. Both of the cases are out of Los Angeles and neither are precisely on point with regard to the District's situation. With regard to setting rates for multiple years, Mr. Aim stated that it is his opinion and that of many other agencies having done this in the past, that rates may be set for multiple years. An increase may be set for year one and separate rate may be set for year two and a separate rate for year three and so on. Alternatively, the rates may be set as maximum rates. That is, notification would be sent to homeowners indicating the maximum amount of the rate proposed for the current year and each subsequent year. The rate could then be set in the first year and each subsequent year without additional written notice as long as the rate was under the maximum amount set forth in the original notice. The notice must contain a specific rate such as $218 or $235 or the specific amount of the increase such as $5, $5, and $5. It becomes more problematic to apply an escalation factor. Mr. Aim stated that notification could be done in bills, newsletters as long as it is in a prominent place, or by separate mailing or insert. Mr. Batts stated that last year over 110,000 notices were sent out advising that the Board would consider a $24 Sewer Service Charge rate increase; 17 responses in opposition to the proposed Sewer Service Charge increase of up to $24 were received; 17 responses were received requesting 25 rrVh "'ID; \J~ JL 21 differential rates, and 112 responses were received requesting information about the District and its services. /¡ ');) Mr. Batts, General Manager, thanked District staff, particularly Accounting Supervisor Colette Curtis-Brown, for their assistance in putting the information together for the Financial Planning and Policy Workshop. ,11;) Mr. Batts, General Manager, stated that as Mr. Kelly announced earlier in the meeting, attorneys for Acme Fill Corporation have informed the District via telephone conversation that Acme has assigned the existing landfill gas contract to NEO Corporation. NEO confirmed that in a telephone conversation with District staff on Tuesday, January 23, 2001. NEO informed District staff that NEO had not signed the contract that the District Board of Directors authorized on September 7, 2001. NEO indicated that it is reevaluating the economics of the Acme projects in light of items that NEO learned during the discovery period of its gas purchase agreement with Acme. The District has also learned that Acme has been sold to Nick Farros. The District has received no written documentation of the assignment of the contract or the sale of Acme. Staff will provide additional information to the Board at the February 1, 2001 Board Meeting. b. COUNSEL FOR THE DISTRICT None c. SECRETARY OF THE DISTRICT None d. BOARD MEMBERS 1 ) 2) 3) 4) None Member Menesini reported on the January 22, 2001 Contra Costa Special Districts Association meeting at which he made a presentation on curriculum and public education and outreach programs. Mr. Batts stated that Member Menesini made an excellent presentation and several agencies indicated that they needed to do more in the area of public outreach. Mr. Batts reported that recent legislation requires that special districts share, with the County and cities, in the costs of the Local Agency Formation Commission (LAFCO). The District's assessment for the coming year is estimated at $15,000. Member Lucey stated that he has listened to the Association of Metropolitan Sewerage Agencies/American Water Works Association (AMSA/AWWA) tapes provided by District Counsel Kent Aim. Member Lucey stated that the tapes are interesting and informative and other Board Members may be interested in hearing them. Member Lucey requested that the energy situation be a standing agenda item until the issues are resolved and that the agenda for the February 1, 2001 Board Meeting be broad enough to allow the Board to take action relative to the Acme landfill gas contract if they desire to do so. Member Menesini thanked all those who attended the January 22, 2001 Environmental Alliance Discussion Series on Watershed Management. 8. EMERGENCY SITUATIONS REQUIRING BOARD ACTION 01 01 25 22 9. ANNOUNCEMENTS/SUGGESTIONS FOR FUTURE AGENDA ITEMS A standing item on the California energy situation and issues relating to District power sources and suppliers was requested to be on future Board Meeting agenda. Mr. Batts stated that other topics requested for future Board Meeting agenda included an update on the Rossmoor and Laboratory Projects, new technology from the Water Environment Research Federation, and committee or Board workshop review of general legal activities and costs. 10. ADJOURNMENT There being no further business to come before the Board, President Hockett adjourned the meeting at the hour of 4: 15 p.m. ¿4/i#1 ~J~ President of the Board of Directors, Central Contra Costa Sanitary District, County of Contra Costa, State of California COUNTERSIGNED: 01 25 (1". -'~.' ~.~ f"i ~ } -'- .?