Loading...
HomeMy WebLinkAboutBOARD MINUTES 11-14-02 57 MINUTES OF THE ADJOURNED REGULAR BOARD MEETING OF THE DISTRICT BOARD OF THE CENTRAL CONTRA COSTA SANITARY DISTRICT HELD ON NOVEMBER 14, 2002 The District Board of the Central Contra Costa Sanitary District convened in an adjourned regular session in the Second Floor Conference Room at the District Offices at 5019 Imhoff Place, Martinez, County of Contra Costa, State of California, at 2:04 p.m. on November 14, 2002. Member Boneysteele called the meeting to order and President Menesini requested that the Secretary call roll. 1. ROLL CALL PRESENT: Members: Nejedly, Lucey, Boneysteele, Menesini ABSENT: Members: Hockett Member Hockett had advised staff that she would be unable to attend this meeting and had requested to be excused. a. PLEDGE OF ALLEGIANCE TO THE FLAG Board and staff joined in the Pledge of Allegiance to the Flag. 2. PUBLIC COMMENTS None 3. CAPITAL PROJECTS COMMITTEE MEETING/BOARD WORKSHOP a. RECEIVE PRESENTATION AND DISCUSS DEVELOPMENT OF DRAFT 2003- 2005 CAPITAL IMPROVEMENT BUDGET AND 2003 CAPITAL IMPROVEMENT PLAN b. RECEIVE PRESENTATION AND CONSIDER RECOMMENDATIONS RELATING TO THE CONTINUATION OF THE CONTRACTUAL ASSESSMENT DISTRICT (CAD) PROGRAM Mr. Charles W. Batts, General Manager, stated that this workshop is to begin the process of getting Board direction and input for incorporation into the Draft 2003- 2005 Capital Improvement Budget (CIB) and 2003 Capital Improvement Plan (CIP). Mr. Batts introduced Ms. Ann E. Farrell, Director of Engineering, who stated that we are here today to review the purpose and need for the Capital Program, to assess the current level of revenue and expense, to review new data on priorities and needs, and to set direction for the ten-year capital planning effort. Ms. Farrell reviewed current commitments to the Board, stating that the baseline Capital Program was set at $21 million in January 2000. Staff has used that figure in planning since that time. With inflation, the baseline is now almost $23 million. San Ramon projects have been considered additive to the $23 million. San Ramon projects were either paid for by the developer or bond financed. A portion of those projects would have had to be done within the ten-year period in any case, but a portion of that capital spending represents an increase such as beautification of the pumping station which was required in the settlement agreement with the City of San Ramon. Ms. Farrell reviewed a chart of recent Capital Program activity highlighting expenditures and revenue for the current year and three preceding years. For the past three years the Capital Program has operated in a deficit mode with expenditures exceeding revenues. In 1999-2000, total expenditures without Dougherty Valley were 11 14 02 58 $21.3 million compared to budget of $28.3 million; total revenue was $21.6 million less bond principal repayment of $1.2 million, for net revenue of $20.4 million. In 2000-2001, total expenditures without Dougherty Valley were $28 million compared to budget of $24.8 million; total revenue was $18.9 million less bond principal repayment of $1.25 million for net revenue of $17.7 million. In 2001-2002, total expenditures without Dougherty Valley were $20.5 million compared to budget of $27.3 million; total revenue was $17 million less bond principal repayment of $1.3 million for net revenue of $15.7 million. In 2002-2003, projected expenditures without Dougherty Valley are $18.5 million compared to budget of $19.7 million; total projected revenue is $20.9 million less bond principal repayment of $2 million for projected net revenue of $18.9 million. Ms. Farrell noted that in addition to Capital Program bond principal repayment, there is a line item in the O&M Budget for repayment of the interest these on bonds. With the addition of the bond financing that was done in 2002-2003, the payments for bond principal and interest will go up to more than $3 million per year. Ms. Farrell stated that many times capital projects come in under budget since the majority of projects that go to construction include a 20 percent contingency. The District has a good completion record in that about 85 percent of the capital budget is expended in most years. Ms. Farrell stated that current capital revenue comes from a number of sources including ad valorem tax, capacity fees, and the City of Concord who pays 30 percent of treatment plant expenses. However, most of the District's capital needs going forward are in the collection system. Ad valorem tax is listed, but staff is concerned it is in grave danger because of the State budget situation. If the District were to lose ad valorem tax revenue, it would equate to about $46 on the Sewer Service Charge. Staff is continuing to look at capacity fees and will have more information for the Board at the January 2003 Financial Planning Workshop. The primary discretionary source of revenue for the Capital Program is the Sewer Service Charge. At the $23 million baseline, the Capital Program is running at a deficit. This deficit and staff's recommendation that it be made up over the next three or more years has been discussed previously with the Board. Ms. Farrell stated that the purpose and need for the Capital Program focuses on three primary areas, to: . Provide system capacity; . Response to changing regulations; and . Renovate and replace aging pipes and equipment. System capacity and changing regulations are on a defined schedule. Renovation and replacement of aging pipes and equipment is on an elective schedule. In the Treatment Plant, capacity projects are limited due to the recent permit capacity increase to 53.8 MGD. Unless there are regulatory changes, it is not anticipated that there will be many capacity projects in the Treatment Plant over the next ten years. The District recently completed a Collection System Master Plan which identified $37 million in Collection System capacity projects over the next ten years based on a five year storm with 1997 rainfall. The Pumping Stations Master Plan identified $17 million in Pumping Station capacity improvement projects over the next ten years primarily at Lower Orinda and Concord Industrial, and some force mains are also included in this budget area. Ms. Farrell stated that regulatory driven projects are likely in the next ten to 20 years. No funds have been budgeted for potential regulatory projects. If one occurs, staff has assumed that there will be a compliance time line and the District will have to plan and budget for it or do bond financing. Potential regulatory driven projects include filtration of all effluent to reduce metals such as mercury, nitrification of all effluent to meet ammonia standards, and/or replacement of furnaces due to air regulations. 11 14 02 59 Ms. Farrell stated that renovation and replacement projects are really the only place where the District has discretion. Renovation and replacement projects are prioritized as follows. Priority One is equipment/pipirigwith high risk of failure. Priority Two is equipment/piping with Operations and Maintenance (O&M) costs greater than annualized Capital costs. The lowest priority projects are those with low risk of failure and where O&M costs are not excessive. Condition assessments are a proactive approach to identifying problems and planning capital projects. The condition assessment of Pumping Stations is complete. The Pumping Stations Master Plan was done in March 1999 and the Pumping Stations Inventory was done in July 2000. Condition assessment work on the Collection System is just beginning. The Large Sewer Corrosion Study was done in Fall 2002, and the seven-year Small Sewer Condition Assessment began in Fall 2001 and will be completed in 2008. A Formal Treatment Plant Asset Inventory and Assessment will be conducted in the future. Ms. Farrell stated that the District has been in a reactive mode in identifying projects as needs arise. Staff is looking at condition assessments as a way to approach this in a more proactive mode. Ms. Farrell stated that using a more proactive approach will identify more projects and needs. Ms. Farrell provided an update on Pumping Stations renovations, noting that replacement of Martinez is complete; renovations at the Fairview and Maltby are complete; renovations at Moraga and Orinda Crossroads are being completed; the San Ramon improvements will be completed in 2003, construction is scheduled to start on Lower Orinda in fiscal year 2003-2004; and Concord Industrial replacement is scheduled to be completed in fiscal year 2007-2008. Then the District will be essentially done with Pumping Stations renovations. Ms. Farrell stated that the Large Sewer Corrosion Study was begun in 2001. An engineering assessment pinpointed areas of likely corrosion. Suspect lines were televised in 2002. Significant corrosion was identified in numerous locations. Manned entry was used to further quantify corrosion. Corrosion sites were prioritized and the renovation program was developed. The Large Sewer Corrosion investigation focused primarily on very large pipelines. There are a total of 72 miles of reinforced concrete pipe (RCP) in the system. Seven (7) miles fit the criteria and were televised. Ms. Farrell stated that investigation results indicate that 39 percent of the pipe televised appears to be in good condition, 35 percent appears to have moderate to severe corrosion or severe corrosion, 12 percent appears to have light corrosion indicating that the pipe is generally in good condition, 11 percent appears to have light to moderate corrosion indicating that crown spraying is recommended, and 4 percent appears to have moderate corrosion throughout indicating that crown spraying may be recommended. Four projects need to be done in the next eight years: Contra Costa Boulevard (9,550 feet), Bancroft Avenue (3,600 feet), St. Mary's Road (2,850 feet), and Martinez Transmission Lines (15,000 feet). These projects need to be done, otherwise serious property damage could result. Ms. Farrell used a map and photographs to describe the project needs. Ms. Farrell stated that it is recommended that $25 million over approximately an eight-year period ($3 million per year) be invested in the Large Sewer Corrosion Program. The most severe areas would be addressed immediately and crown spray will be used each year in the less severe areas to try to prolong the useful life. Ms. Farrell stated that staff is reviewing the current Capital Program to attempt to find $3 million per year in cost savings, deferrals, and revenue to offset the cost of the Large Sewer Corrosion Program. Ms. Farrell stated that significant work has already been completed on small sewers ($11 million in Martinez, $12 million in Orinda, $9 million in Lafayette, and $6 million in Walnut Creek). Small sewer work in 2003-2004 will be done in Lafayette and Walnut Creek. In following years, small sewer work will be done primarily in Walnut Creek and Orinda. Additional work is being identified by the Small Sewer Condition Assessment, where small sewers are being televised and more needed projects are being identified. It is planned that 1,450 miles of 4-inch to 24-inch sewer will be televised over the next seven plus years. This work was started this year in Orinda and 30 miles have been completed. It is planned to follow with Walnut Creek, Lafayette, and Pleasant Hill as indicated in the overflow crescent previously discussed 11 14 02 60 with the Board. This work will be required by CMOM (Capacity, Management, Operations and Maintenance). Ms. Farrell reviewed the initial findings of the Small Sewer Condition Assessment. Thirty (30) miles of pipe has been televised in Orinda, with a large percentage of that pipe being clay pipe. Fifty-eight (58) point repairs, 400 sags, and 1,250 roots at joints were identified. It was found that 80 percent of the problems occur in clay pipe (6-inch), and that 20 percent of the problems are in other pipe materials. The long-term replacement cost is $260 million to renovate 1.6 million feet of 6-inch clay pipe, and $490 million to renovate 3 million feet of 6-inch, 8-inch, and 10-inch clay pipe. Ms. Farrell stated that it is obvious that the District will be faced with how to prioritize spending over the next ten or 15 years. The current Ten- Year Capital Improvement Plan includes $45 million for renovation. It would take 58 years to replace all the 6-inch clay pipe and 108 years to replace all the 6-inch, 8-inch, and 10-inch clay pipe. If the District wished to consider adding $3 million per year to the renovation budget starting in the future, it would take 35 years to replace all the 6-inch clay pipe and it would take 65 years to replace all the 6-inch, a-inch, and 10- inch clay pipe. This would be very difficult to do and would require adding about $24 to the Sewer Service Charge rate increase. In two years, this will be reevaluated with additional TV data. President Menesini asked if there is a categorization of the risks. Ms. Farrell stated that when the TV work is done, there is a system of rating the pipe from 1 to 5 to assign the severity of the findings. With regard to current Treatment Plant issues, Ms. Farrell stated that there is an on- going need for replacement and renovation. Currently, issues are dealt with as they are discovered. Special needs, such as the steam turbine, create large expenditures. The current issue is aeration leaks and the extent of the problem. A presentation will be made at a future Board Meeting when the evaluation is completed and a recommended approach has been developed. Ms. Farrell stated that as part of the 53.8 MGD plant capacity approval, the Regional Water Quality Control Board (RWQCB) has required that the Recycled Water Program be continued. Staff continues to seek out cost effective new users. A limited Recycled Water Program budget is recommended for the next ten years. Within the next ten years, the Lamorinda and/or the Industrial Project may be considered if promoted by East Bay Municipal Utility District (EBMUD) or Contra Costa Water District (CCWD). Financial impacts will be addressed at that time. Ms. Farrell stated that it does not seem prudent to commit to doing Recycled Water Projects when major expenditures are required in the Collection System Large and Small Sewers. Member Lucey agreed with the staff recommendation, but indicated that he has asked staff to report back on the status of the Industrial Recycled Water Project. Ms. Farrell agreed and stated further that all potential significant customers along the pipeline are being approached. BREAK At 3:08 p.m., President Menesini declared a recess, reconvening at the hour of 3: 15 p.m., with all parties present as previously designated. Mr. Curtis W. Swanson, Environmental Services Division Manager, stated that one of the aspects of the Capital Program is the Contractual Assessment District (CAD) Program. Mr. Swanson stated that the CAD Program is somewhat different because it is essentially a financing program. In the five-year history of the District's CAD Program there have been 14 CAD projects completed or under construction with $2,436,257 authorized since 1997; seven (7) CAD projects with an estimated cost of $877,000 are in design; four (4) CAD projects with an estimated cost of $705,000 are awaiting formation approval; and sixteen (16) neighborhoods have expressed interest in CAD projects. Over time, the District gets back the money fronted for CAD projects plus interest. The current annual CAD allocation of $1 million will fund CAD projects serving about 80 homes. The District will receive $270,000 the first year in 11 14 02 61 connection fees. This is paid directly to the District and not financed. Also in the first year, the District will receive about $250,000 for up front assessments. Mr. Swanson stated that about one-quarter of the CAD participants pay up front rather than financing. The District will also received $101,000 per year for ten years from annual assessments ($750,000 + $258,000 interest). This is collected on the tax roll. Mr. Swanson stated that the Board has authorized $1 million per year for CAD projects. Actual allocations have averaged about $560,000 per year. If all the pending CAD projects go forward, it would total about $900,000; but it is unlikely that all will proceed this year. More probably, about $500,000 will be expended in 2002-2003. Mr. Swanson presented the following CAD funding alternatives: . Continue with $1,000,000 per year funding authorization (no change in current program); . Discontinue the CAD Program at the end of fiscal year 2002-2003; . Establish a lower funding limit and a date when the CAD Program will sunset; or . Consider an alternate source of funds (funds other than from the Sewer Construction Fund such as Local Improvement District funding or bonds). Mr. Swanson stated that staff recommends that the CAD funding be reduced to $500,000 per year and that the CAD Program sunset after three years. Following discussion of the income to the District from additional connections, and the lower interest rates now available to homeowners, Member Lucey recommended that the CAD funding be reduced to $500,000 per year and that the CAD Program be re- examined in three years rather than sunsetting in three years. Member Boneysteele agreed, stating that the District provides the organization. The only alternative to a CAD is a Local Improvement District which is much more difficult and costly. Mr. Batts thanked the Board for their input and indicated that this will be discussed further at the Financial Planning Workshop in January and during the budget process. At this time, Mr. Batts requested that Ms. Farrell continue with her presentation on development of the Capital Improvement Budget and Plan. Ms. Farrell stated that if the District were to address what has been identified, an additional $3 million would be needed for large sewer work over the next eight years, and an additional $3 million would be needed for small sewer work in years nine and ten and ongoing. Ms. Farrell stated that the financial reality is that the Capital Program is still in a deficit situation. Revenues lag expenditures by $4 million to $5 million, with expenditures at $23 million per year. There is limited cushion available from excess bond proceeds, under spending, and O&M reserves. This cushion could be used to partially fund the large sewer needs for the next several years. Ms. Farrell presented the following staff recommendations: . Attempt to defer projects to stay within the $23 million baseline; . Look at impact of spending an additional $1-2 million in next two years to expedite large sewer rehabilitation. Member Lucey stated that he does not believe that the Board agreed to the $23 million baseline. Ms. Farrell indicated that the $23 million baseline is the $21 million 2000 Capital Budget baseline plus 3 percent inflation that was discussed with the Board and included in the 2001-2002 and 2002-2003 Capital Improvement Plan. Ms. Farrell continued with the staff recommendations. . Allow the CAD Program to sunset (the Board suggests that it be re- examined in three years); 11 14 02 62 . Minimize investment in Recycled Water; . Use bond proceeds to cushion for essential added projects (such as funding a portion of the Contra Costa Boulevard Large Sewer Corrosion Project) ; . Raise the Sewer Service Charge from the current $41 capital component and allocate to Capital Improvement Budget to bring revenues in line with expenditures; and . At the January 2002 Board workshop, a Sewer Service Charge capital component reaching $59 over a several year time frame was shown to be needed to reach equilibrium then continuing at 3 percent increase per year. This will be revisited at the January 2003 Board workshop. Member Lucey expressed concern that the Sewer Service Charge will likely be needed to cover increases in salaries and benefits costs, and suggested that staff examine getting the funds needed for the Capital Program from another source. Member Nejedly excused himself and left the meeting at the hour of 3:40 p.m. Ms. Farrell stated that the District has its own infrastructure funding gap. Staff is concerned that: . Rate reality does not provide for "proactive" budgets; . Condition assessment identifies problems beyond the current Capital Improvement Plan; . As projects are deferred, the risk of failure increases; and . Any unbudgeted projects may need to be funded through bond sales but such funding has a significant long-term impact due to the high cost of paying back principal and interest. Ms. Farrell stated that at a previous Board Meeting Member Lucey questioned whether there is an inequality in funding, and asked staff to look into whether individual communities should be assessed for their renovation costs. Ms. Farrell stated that much has already been invested in communities in the District's service area ($11 million in Martinez, $12 million in Orinda, $9 million in Lafayette, and $6 million in Walnut Creek). Older parts of the District would be the most impacted by this; they have been paying into the Sewer Construction Fund for the longest time; and now they are spending their investment. Staff questioned whether it is fair to further assess ratepayers in the oldest parts of the District and recommends continuing with the current approach. Member Boneysteele stated that he is opposed to assessing individual communities. When these areas were annexed, the District was aware of the condition of the sewer systems. Member Boneysteele requested that a legal opinion to obtained before the District considers this matter further. Member Lucey stated that he does not think that this is politically viable, but he wanted to know what the costs were. Member Lucey stated that staff has spent enough time on this, and he agrees with the staff recommendation. Ms. Farrell reviewed the Capital Planning Workshop staff conclusions. . 11 14 Capital Program is still operating in deficit; O. 6") kJ 63 . Must close the gap between Capital revenues and baseline expenditures of $23 million with future increased Sewer Service Charge rates; . Staff's position is that increases over $23 million are justifiable based on recent findings, but the rate reality makes that problematic; . Staff will attempt to reprioritize and defer projects to stay within the $23 million guideline and bring that back for Board consideration at the January 2003 Financial Planning Workshop; . Staff may identify essential projects such as the highest priority large sewer projects to utilize excess bond proceeds and O&M reserves in the next several years; . Staff recommends reduced spending on nonessential programs such as the CAD and Recycled Water Programs; and . Staff will review other revenue sources such as connection fees. President Menesini questioned how nonessential programs are defined, and asked whether Household Hazardous Waste is considered nonessential. Ms. Farrell stated that is a good point, but Household Hazardous Waste is an O&M expense and not part of the Capital Program. Member Lucey emphasized that the minutes of a meeting should speak for the Board. Member Lucey stated that he does not remember or feel that the Board agreed to the baseline expenditures presented by staff. Staff should not put words in the mouth of the Board. Mr. Batts stated that the Capital Improvement Plan approved by the Board was the source of the numbers. The purpose of the workshop today is to advise the Board that the findings of the Large Sewer Corrosion Study and the Small Sewer Condition Assessment indicate that we must prioritize and put projects off. Member Boneysteele stated that more discussion of figures and assumptions is needed to ensure mutual understanding and agreement. Member Boneysteele stated that he supports the $23 million baseline figure at this point. Member Lucey stated that he is very happy with the beneficial information staff has given the Board, but he does not want the result of this meeting to be that the Board agreed to$23 million in expenditures and an $18 increase in the Sewer Service Charge for capital. Member Boneysteele stated that the Board is authorizing staff to go ahead with the proposal embodying the $23 million baseline, but the Board is not authorizing $23 million in expenditures at this time. Member Lucey agreed. President Menesini stated the information on projects has been helpful, but all decisions must be made in the context of the total requirements of the District, not just the Capital portion. President Menesini commended staff on the effort that went into the informative presentations. Member Lucey stated that he supports reviewing connection fees. District fees are currently lower than neighboring agencies. Member Lucey asked Mr. Mike Vogan, Public Works Director for the City of Concord, how much Concord spends on pipe renovation. 11 14 02 64 Mr. Vogan stated that currently Concord is not spending much on pipe renovation, but Concord will be starting a $50 million, 20-year renovation program. With regard to other Capital Improvement Budget/Capital Improvement Plan issues, Ms. Farrell stated that an error was made and needs to be corrected. Staff will be coming to the Board requesting additional authorization for General Improvements. The Animal Control Facility Board authorization was added into the budget twice; therefore, the carryover of funds from one fiscal year to the next was overestimated. The two-year Capital Improvement Budget process complicates this issue. Ms. Farrell stated that an additional $1 million authorization to General Improvements will be requested at the next Board Meeting. Ms. Farrell stated further that the two-year Capital Improvement Budget caused some confusion. Staff would recommend that the District go back to a one-year Capital Improvement Budget. Data entry has been streamlined and essentially the same work is done for the mid-year addendum so it should not increase staff effort. Returning to a one-year Capital Improvement Budget would increase budget control and provide more flexibility for changes. Ms. Farrell stated that the next steps in the developing the Capital Improvement Budget/Capital Improvement Plan (CIB/CIP) are as follows: . Present projected revenues and expenditures at the January 2003 Financial Planning Workshop; . Highlight for Board consideration the portion of the Sewer Service Charge needed to support the CIB/CIP; . Receive and incorporate Board feedback (staff has received the Board's feedback that the Board has not authorized a $23 million CIB, but that it is satisfactory to use $23 million baseline as a starting point); . Produce CIB/CIP with detailed project information for Board review in April 2003; and . Report back to the Board on individual projects/programs: ~ Aeration Basins Recycled Water (Industrial) Prioritization of TV Work on Small Sewers Any other projects on which the Board wishes more information. ~ ~ ~ Member Boneysteele stated that he does not think it is appropriate for the Board to decide expenditure level now. If the Board finally rejects the $23 million baseline, it is not a reflection on staff. Development of alternative scenarios should be a managerial decision. Member Lucey stated that this is one of the best meetings he has attended in terms of information presented. The information was concise and helpful. Ms. Farrell stated that staff appreciates the Board's feedback. That was the purpose of this workshop. President Menesini stated that staff should not hesitate when proposing an item to the Board to recount the history of that item reflecting some of the things Board and staff have discussed. President Menesini thanked staff for their informative presentations. Mr. Mike Vogan, Public Works Director of the City of Concord, stated that with regard to the question posed by the Board earlier, Concord's pipe renovation efforts have averaged $500,000 to $1 million annually. Concord will be starting a $50 million, 20- year program to renovate its 400 miles of sewer. 11 14 02 4. REPORTS/ANNOUNCEMENTS None ADJOURNMENT There being no further business to come before the Board, Member Boneysteele adjourned the meeting at the hour of 4: 18 p.m. COUNTERSIGNED: Secretar 0 e Central Contra sta Sanitary' trict, County of Contra Costa, State of California ~ C ~/~ Pre' ent of the Board of . ectors, Central Contra Costa Sanitary District, County of Contra Costa, State of California 11 14 65 02