HomeMy WebLinkAboutCAPITAL PROJECTS ACTION SUMMARY 12-08-10
SPECIAL MEETING OF THE
BOARD OF DIRECTORS:
CENTRAL CONTRA COSTA
MICHAEL R. MCGILL
SANITARY DISTRICT
President
BARBARA D. HOCKETT
CAPITAL PROJECTS COMMITTEE
President Pro Tem
MARIO M. MENESINI
JAMES A. NEJEDLY
A C T I O N S U M M A R Y
DAVID R. WILLIAMS
PHONE: (925) 228-9500
Chair McGill
FAX: (925) 676-7211
www.centralsan.org
Member Hockett (Alternate)
Wednesday December 8, 2010
3:00 p.m.
Second Floor Conference Room
5019 Imhoff Place
Martinez, California
PRESENT: Mike McGill, Barbara Hockett, Ann Farrell, Jim Kelly, Randy Musgraves,
Margaret Orr, Tad Pilecki, Curt Swanson, Debbie Ratcliff, Ba Than, Alex Rozul,
Andrew Antkowiak, Gail Chesler
1. Call Meeting to Order
Chair McGill called the meeting to order at 3:00 p.m.
2. Public Comments
None.
*3. Review preliminary 2011 Ten-Year Capital Plan and Fiscal Year 2011-12
Capital Budget
a. Expenditures to meet new regulatory requirements
b. Expenditures to expand recycled water program
c. Expenditures for renovation/renewal/replacement/capacity needs
pipelines, equipment and facilities
d. Estimated current revenues and projected revenue needs to fund
proposed budgeted expenditures
Capital Projects Committee
December 8, 2010
Page 2
Director of Engineering Ann Farrell presented a preliminary version of the
slideshow planned for the December 16, 2010 Board Capital Planning
Workshop.
Ms. Farrell began by noting that this is the time of year when the District
reexamines how the capital program is funded. While many jurisdictions
follow a sinking-fund approach, where they accumulate money in their
Sewer Construction Fund to pay for anticipated future projects, the District
in recent history has managed to adhere to a philosophy of keeping the
Sewer Construction Fund Balance at just enough to fund ongoing cash
flow needs. Ms. Farrell noted that, with several large unfunded regulatory
projects looming ahead, it may be time to reconsider that philosophy.
With that preface, she provided a summary of the proposed workshop
presentation, including the key issues to be faced this year for Capital
Planning:
A planned reduction in capital revenue due to reallocating a
significant portion of the capital component of the sewer service
charge from funding capital to funding operations and maintenance
An unplanned reduction in capital revenue due to new connections
and interest on investments being significantly less than budgeted
A continued need for investment in renovation and renewal of the
District’s sizeable infrastructure with a replacement value estimated
at close to $3 billion. This investment is being quantified using a
condition assessment approach, not a theoretical predictive model
approach. Staff feels this is the most economical way to get real
data on the renovation needs of the District.
Emerging needs for significant investment to meet new regulations.
In particular, an estimated expenditure of $50 million for reducing
furnace air emissions in the next approximately five years and an
estimated expenditure of $70 million in the five to ten year window
to add ammonia removal facilities.
Ms. Farrell explained that all of these factors result in the need for a
significant infusion of new revenue to the capital program. This can be
done either by raising rates significantly, bond financing a portion of the
needs, or a combination of these two methods.
The scenarios presented in the memo attached to the agenda were
discussed, along with several additional scenarios (attached). It was
shown that raising rates significantly in the next several years greatly
reduces the rate increases in future years and results in a much lower
Capital Projects Committee
December 8, 2010
Page 3
overall rate increase than relying on bond financing for a portion of the
needs.
The Committee supported minimizing the use of debt financing and
considering a substantial rate increase, on the order of $50, this next year.
Member Hockett added that she supported allowing additional funds to
accumulate in the Sewer Construction Fund, as these monies are needed
to finance future projects. In response to a question by Chair McGill as to
where these funds could be spent if the future projects did not materialize,
staff discussed the many unfunded liabilities the District currently has on
the books.
It was determined that information on total District liabilities will be
developed for the presentation to the full Board, as well as an estimate of
the District’s available bonding capacity. The Committee suggested that
information also be included on the potential financial penalties of sewer
spills or discharge permit violations if the District does not adequately fund
its capital program.
Ms. Farrell stated that the current scenarios omit the additional operating
and maintenance costs that may result from changes in regulations.
These costs, such as additional costs for activated carbon for the
incinerator air emissions treatment and additional cost of power for
aeration for the nitrification scenario, should be included in the analysis so
that the needed sewer service charge increases are not underestimated.
Chair McGill noted that the City of Concord must be included in these
discussions, as they will pay a significant share (approximately thirty
percent) of all added costs of compliance for the treatment plant. Given
their budget situation, it is important to be certain they are aware of these
potential new obligations.
COMMITTEE ACTION: Received the report and recommended
presentation to the full Board with suggested additions and
modifications.
4. Reports and Announcements
None.
5. Adjournment – at 4:40 p.m.
* Attachment
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