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HomeMy WebLinkAbout04.c.1) December 16, 2010 Minutesece MINUTES OF THE REGULAR MEETING OF THE DISTRICT BOARD OF THE CENTRAL CONTRA COSTA SANITARY DISTRICT HELD ON DECEMBER 15, 2010 The Board of Directors of the central contra costa Sanitary District convened in a regular meeting in the Board Room, 5019 Imhoff Place, Martinez, county of Contra Costa, State of California, at 2:00 p.m. on Thursday, December 16, 2010. President McGill called the meeting to order and requested that the Secretary call roll. 1. ROLL CALL PRESENT: Members: Hockett, Menesin'i, Nejedly, Williams, McGill ABSENT: Members: None a. PLEDGE OF ALLEGIANCE TO THE FLAG The Board and staff joined in the Pledge of Allegiance. 2. PUBLIC COMMENTS There were no public comments. 3. CONSENT CALENDAR Member Nejedly requested that Item 3.f. be pulled from the Consent calendar for later consideration. It was moved by Member Hockett and seconded by Member Menesini to adopt Items a. through e. of the Consent Calendar as recommended. Motion passed by unanimous vote of the Board. a. Approve expenditures dated December 15, 2010. Reviewed by Budget and Finance Committee. b. Approve minutes of November 18, 2010 Board meeting. C. Accept the contract work for the Treatment Plant Cathodic Protection System Upgrade, District Project 7254, completed by JDH corrosion consultants, Inc., and authorize filing of the Notice of Completion. d. Accept the contract work for the Martinez Sewer Renovations, Phase 3, District Project 5952, completed by Precision Engineering, Inc., and authorize filing of the Notice of Completion. CENTRAL CONTRA COSTA SANITARY DISTRICT Board Minutes of December 16, 2010 e. Authorize the General Manager to execute two technical consulting services agreements: one for right-of-way consulting with Associated Right of Way Services, Inc. and the other with Paragon Partners Ltd. for title research services, with cost ceilings of $226,000 and $50,000, respectively. f. Adopt Resolution 2010 -106 nominating Board President Michael R. McGill as the Special District Representative on the Contra Costa Local Agency Formation Commission to fill an unexpired term ending May 7, 2012. In response to a question from Member Nejedly regarding Item 3.f., District Counsel Kenton Alm confirmed that adoption of the resolution as proposed would simply place Mr. McGill on the ballot and would not bind the Board to future action. In response to a question from Member Williams as to the fiscal impact on the District if Member McGill were to be elected to the Contra Costa Local Agency Formation Commission ( LAFCO), General Manager James Kelly stated that it would be the Board's decision whether or not to pay a stipend for his attendance at LAFCO meetings. Mr. Alm added that the Board's compensation resolution is silent with regard to attendance at LAFCO meetings, and it would become a matter for future Board consideration if Member McGill is elected and requests compensation. It was moved by Member Nejedly and seconded by Member Menesini to adopt item V. of the Consent Calendar as recommended. Motion passed by unanimous vote of the Board. 4. CALL FOR REQUESTS TO CONSIDER ITEMS OUT OF ORDER President McGill requested that Item 7. be taken out of order immediately following the Consent Calendar, followed by Item 11., Closed Session. 5. ITEMS HELD OVER FROM PREVIOUS BOARD MEETINGS a. APPOINT PRESIDENT AND PRESIDENT PRO TEM FOR ONE -YEAR TERMS COMMENCING JANUARY 1, 2011 This matter was continued from December 2, 2010. It was moved by Member Menesini to appoint President McGill as President for another one -year term commencing January 1, 2011. Motion died for lack of a second. It was moved by Member Nejedly and seconded by Member Menesini to appoint President Pro Tern Hockett as President for a one -year term commencing January 1, 2011. Motion passed by unanimous vote of the Board. It was moved by President -Elect Hockett and seconded by Member Williams to appoint Member Nejedly as President Pro Tern for a one -year term commencing January 1, 2011. Motion passed by the following vote of the Board: �J CENTRAL CONTRA COSTA SANITARY DISTRICT Board Minutes of December 16, 2014 AYES: Members: Hockett, McGill, Menesini, Williams NOES: Members: None ABSTAIN: Members: Nejedly 8. REPORTS a. G ENERAL MANAGER 1) Announcements a) Human Resources Analyst Christopher Ko Recognized General Manager James Kelly announced that Human Resources Analyst Christopher Ko was recently recognized at the 35th Annual California Public Employer Labor Relations Association (CALPELRA) Conference for becoming a Certified Master of Labor Relations. Only five individuals statewide received the distinction this year. Mr. Ko's master thesis was on Identifying and Handling the Workplace Bully. In addition, Mr. Ko completed his continuing education in Human Resource Management from California State University East Bay and received his certification as a Human Resources professional from the International Personnel Management Association. Mr. Ko will serve as Acting Human Resources Manager at the District effective December 18, 2010, pending a recruitment for the position being vacated by retiring Human Resources Manager Cathryn Freitas. b) San Francisco Bay Region SWAMP Workplan — Monitoring Spring Phvtoplankton Bloom Progression in Suisun Bay General Manager James Kelly announced that District staff met with staff from both of the Regional Water Quality Control Boards (RWQCB) on Wednesday, December 1, 2010. The purpose of the meeting was to discuss the District's comments on the Suisun Bay Nutrient Study. Of concern to the wastewater community is that the Suisun Bay Nutrient Study is currently receiving funding from the water contractors and not from the District or Bay Area Clean Water Agencies (BACWA). All comments were accepted by the RWQCB. RWQCB will accept the District or BACWA funding for an additional sampling location at the mouth of the San Joaquin River, pesticide /herbicide monitoring, other nutrient monitoring, phytoplankton diversity and richness taxonomy work done in a way that is acceptable to scientists, additional quality assurance and quality control to bring the study to standard, and analysis of nitrate reductase enzyme which confirms if nitrate is being utilized by phytoplankton (implicates level of nutrient treatment necessary at wastewater plants). 3 CENTRAL CONTRA COSTA SANITARY DISTRICT Board Minutes of December 16, 2010 As the Board is aware, the Sacramento -San Joaquin Delta and the downstream San Francisco Bay Estuary ecosystem flows into is a very large and complex freshwater - estuarine system with physical, chemical, and biological processes interacting together under highly unnatural conditions. Strong urging from District staff led the RWQCB to take a serious look at expanding already extensive hydraulic modeling on Suisun Bay to include nutrient modeling. While there are multiple factors that together reduce the fish population in the Bay, the contribution or impact of a given stressor is unknown. Staff anticipates that the development of a nutrient model will help the RWQCB coordinate the sound science that has been developed over the years into scientifically -based management decisions. Funding for these studies will come from BACWA and, in some instances, the District directly. c) Sacramento Regional Permit Adopted by Central Valley Regional Water Quality Control Board (RWQCB) General Manager James Kelly announced that, on December 9, 2010, after a twelve -hour meeting, the Central Valley RWQCB adopted a new NPDES permit requiring nutrient removal (nitrification and denitrification) as well as filtration for the Sacramento Regional County Sanitation District. The cost is currently estimated to be approximately $2 billion dollars in upgrades, which translates to annual sewer bills of approximately $720 per year, compared to $240 per year today. Sac Regional has until 2020 to meet the new permit limits. d) CSOD Administration, Crew and Warehouse Facility Construction Progress General Manager James Kelly announced that the construction schedule update for the new Collection System Operations Facility, District Project 8208, for the month of November has not been received yet. Per the last report, the contractor was 30 calendar days behind schedule. As of November 30, 2010, there are 243 calendar days remaining on the contract. The contractor's work continues to progress steadily, with current activities focused on completing work necessary to place concrete for the second floor, erect the exterior walls and manage the site conditions during the wet weather season. Staff will keep the Board updated on the construction progress. e} Recent Testing of Sludge Truck Loading Facility General Manager James Kelly. announced that recent testing of the new sludge truck loading facility has not gone as smoothly as hoped. Consequently, it has been somewhat odorous on the grounds and it is anticipated that the situation will be remedied within 24 hours. FA M, CENTRAL CONTRA COSTA SANITARY DISTRICT Board Minutes of December 16, 2010 fl Retirement of Human Resources Manager General Manager James Kelly reiterated that the District's Human Resources Manager, Cathryn Freitas, who has been with the District for 25 years, is retiring effective this date. He said he has worked with her in different capacities over the course of the years and has always appreciated her counsel and great political sensibilities. Member Menesini said he too wanted to acknowledge Ms. Freitas' significant contributions to the District. Member Hockett left the meeting. b. COUNSEL FOR THE DISTRICT No reports. C. SECRETARY OF THE DISTRICT No reports. d. BOARD MEMBERS 1) Board Member reports on future meetings or conferences for which they will receive the stipend or for which the District will pay their expenses; recent meetings for which they received the sti end; and meetings or conferences for which the District paid their expenses. Member Neied ly Member Nejedly and Member Hockett reported on the December 13, 2010 Budget and Finance Committee meeting and summarized the Action Summary. Member Nejedly reported that the recent billing from Bob Murray and Associates for executive performance evaluations was excessive, calculating out to roughly $714 per hour. He said it was the Committee's conclusion that while Mr. Murray has consistently done a good job, his rates are excessive for the tasks performed. Therefore, the committee recommended that the District obtain bids for future executive recruitments and executive performance reviews, and Mr. Murray may bid as well. The Board received the report without comments. President McGill President McGill and Member Hockett reported on the December 0, 2010 Outreach Committee meeting and summarized the Action Summary. The Board received the report without comments. 5 CENTRAL CONTRA COSTA SANITARY DISTRICT Board Minutes of December 16, 2010 2) President McGill and Member Hockett also reported on the December 8, 2010 Capital Projects Committee meeting and summarized the Action Summary. The Board received the report without comments. President McGill reported that he recently attended the reorganization meeting for the City of Walnut Greek, at which time he delivered a letter thanking outgoing Mayor Sue Rainey for all her years of service and for the work she did as a past Board Member of the District. He said the letter was very well received. Announcements a) President McGill provided a written report covering Announcements and other meetings. 7. ADMINISTRATIVE a. RECEIVE REPORT ON CONTRA COSTA COUNTY EMPLOYEES' RETIREMENT ASSOCIATION (CCCERA) DE- POOLING AND 2009 RATE CALCULATIONS AND PROVIDE DIRECTION TO ACCEPT OR REJECT CCCERA'S POSITION Director of Administration Randall Musgraves and the District's actuary, John Bartel, presented a report addressing some of the questions raised by the Board at the last meeting concerning CCCERA's decision to (1) de -pool the retirement system's assets at the employer level, and (2) implement de- pooling on a retroactive basis. Their report also assessed how those decisions will impact the District's 2009 retirement contribution rates effective July 1, 2011. Mr. Musgraves noted that John Bartel has concluded his actuarial review of the financial data recently received from CCCERA's actuary, the Segal Company (Segal), as of December 31, 2009, the results of which were included in the Position Paper contained in the Agenda packet. He said the Board is being asked to either accept or oppose the following three items: (1) the de- pooling methodology and calculations; (2) the retroactive de- pooling implementation as of December 31, 2002; and (3) the 2009 retirement contribution rates. Mr. Musgraves noted that legal review of these issues will take place in closed session immediately following this report. Mr. Musgraves confirmed that Mr. Bartel has concluded that the methodology and assumptions used by Segal are actuarially sound. Despite assurances from the actuary, Mr. Musgraves said there does exist the possibility that the data could contain errors, but he said any such errors would only occur in pieces of the data, not the whole data collection. Therefore, he said the data provided by Segal is considered accurate and usable. Member Nejedly asked Mr. Bartel if he supported that statement, and he acknowledged that he did. Mr. Musgraves said that after reviewing all the data presented, staff and Mr. Bartel have come to the following conclusions: r� L� CENTRAL CONTRA COSTA SANITARY DISTRICT Board Minutes of December 16, 2010 ■ The methodology and assumptions used by Segal are actuarially sound and provide a reasonable allocation of pooled assets to the District. ■ The methodology and assumptions used accurately and fairly address the use of Pension obligation Bonds by the County and some fire districts. ■ The methodology and assumptions used reasonably address the implementation and implications of the Paulsen settlement. ■ The calculations and allocation methodology for de- pooled assets as of December 31 2002 are actuarially sound and acceptable from a purely actuarial standpoint. Mr. Musgraves noted that this conclusion is separate from any legal or other authority CCCERA may have relied upon in its decision to seek retroactive implementation of de- pooling. A question raised at the previous Board meeting was the frequency with which other organizations have implemented de- pooling and/or retroactive de- pooling. Mr. Musgraves noted that Mr. Bartel represents a large number of California agencies and he has indicated that such a decision appears unique to CCCERA, as he has never dealt with it before. Mr. Musgraves then presented a chart showing the impact to the District of the unfunded liability as of December 31, 2002, 2008 and 2009. If CCCERA implements retroactive de- pooling as of December 31, 2002, the District will have an added unfunded liability of slightly more than $20 million. De- pooling as of December 31, 2008 would result in added unfunded liability of $5.5 million. However, there would be no additional unfunded liability with an implementation date of December 31, 2009. Finally, Mr. Musgraves related how the unfunded liability due to retroactive implementation of de- pooling will impact the District's sewer service rates: De-Pooling Effective Date Sewer Service Rate December 31, 2002 $11 increase per household December 31, 2008 3 increase per household December 31, 2009 0 no impact Mr. Musgraves summarized the impact CCCERA's de-- pooling will have on the District's annual retirement contributions as presented in the Position Paper. Ultimately, the District will have to make a $1.8 million annual payment over the next 18 years if de- pooling is implemented retroactively to December 31, 2002. Noting that in the position paper and at other times the term "fair" was used on occasion in relation to whether Segal's methodologies were acceptable from an actuarial standpoint, Mr. Alm asked Mr. Bartel if, from his perspective, the term "fair" as used in that context is intended to imply whether CCCERA's decision to (1) de -pool or (2) de- 1 CENTRAL CONTRA COSTA SANITARY DISTRICT Board Minutes of December 16, 2010 pool using retroactive calculations was appropriate. Mr. Bartel said no, clarifying that if the Board were to decide to accept CCCERA's decision to de -pool retroactively, the methodologies used by CCC ERA will result in a reasonable and fair allocation of assets. He added that use of the term "fair" in this context does not speak to whether retroactive de- pooling is or is not fair. In follow -up, Mr. Alm asked if the opinions expressed by Mr. Bartel were intended to state or imply whether CCCERA's decision to either de -pool or de -pool using retroactive data back to December 31, 2002 is legally permissible. Mr. Bartel said no, not at all; he is an actuary, not an attorney and can make no representation as to what is legally permissible. President McGill said the Board would proceed to closed session to cover Agenda Items 11.a. and 11.b. Mr. Alm said that Item 11.a., which concerns the initiation of litigation or potential to determine whether to do so, relates to the CCCERA matter on which Mr. Musgraves and Mr. Bartel just reported and also relates to de- pooling and the possible retroactivity of that de- pooling. He stated that Item 11.b. concerns providing direction to District negotiators. Member Williams then stated that, given the fact that he had previously been employed by the District, he conferred with counsel as to any potential conflict in terms of his participation in I Item 11.a. Mr. Alm responded that he did not consider that a conflict of interest exists concerning the items being discussed today, but potential conflicts will be reviewed on a case -by -case basis as they arise. 8. CAPITAL IMPROVEMENT BUDGET PLANNING WORKSHOP a. RECEIVE PRESENTATION AND DISCUSS DEVELOPMENT OF DRAFT 2011 -12 CAPITAL IMPROVEMENT BUDGET (CIB) AND 2011 CAPITAL IMPROVEMENT PLAN (CIP) Director of Engineering Ann Farrell stated that staff recently met with the Capital Projects Committee to present a preliminary version of this material. After that meeting, she made several additions to the presentation based on the Committee Members' comments. Ms. Farrell began by noting that this is the time of year when the District reexamines how the capital program is funded. Because of declining revenues, Ms. Farrell said the District has been deficit spending on its capital program since 2007. An $11 million deficit is projected at the end of the current fiscal year (FY 2010 -11), which will bring the Sewer Construction Fund balance down to $54 million. For the benefit of newly- elected Member Williams, she explained the Sewer construction Fund is the source of funds for the District's capital projects, and the minimum balance requirement for that fund is $35 million. While the District was able to supplement its funding with a $30 million bond sale in 2009 (to take advantage of a favorable bid climate), she said it is imperative that the sewer service charge be increased to support the capital program. In short, the capital program received a maximum sewer service charge in 2000 -07 of $70 per household, but that figure has been consistently eroded in order to avoid raising rates, to 8 CENTRAL CONTRA COSTA SANITARY DISTRICT Board Minutes of December 16, 2010 the point where it now stands at $11 per household. Essentially, this erosion has shifted approximately $10 million per year from the District's capital programs to operations and maintenance. Ms. Farrell explained the while the total sewer service charge has remained constant for three years, the cost of operations and maintenance has increased, resulting in a significant reduction in funding for capital projects. Furthermore, revenues are declining because facility capacity fees will be less than estimated and interest on the Sewer Construction Fund balance has been less than planned. Additionally, property taxes are slightly lower, of which a good portion ($0 million) is going to fund the District's debt service. Finally, a rough calculation of what it would take to fund the $28.2 million the District expects to spend this year would result in an $84 per household capital component to the sewer service charge versus the $11 per household projected at present. This illustrates the magnitude of the rate increase needed to make up the difference. She said it is important for the Board to consider the District's future rate structure in terms of how to fund the capital program. In taking a glance at the next ten years, Ms. Farrell said staff is anticipating spending approximately $29 million per year for basic renovation and replacement of the District's sizeable infrastructure. Added to that are emerging needs for significant investment to meet new regulatory requirements, including an estimated expenditure of $50 million in the next approximately five years for enhanced incinerator treatment to reduce furnace air emissions, and an estimated expenditure of $70 million in the next five- to ten -year window to add a nitrification project for ammonia removal. She noted that the incinerator air emissions improvement system will also add another $1 million annually to the operations and maintenance budget. Finally, the District has been reviewing the proposed cap and Trade regulations with regard to greenhouse gasses. When the District exceeds the 25,000 tons -per -year carbon dioxide cap, anticipated in 2012, it will be necessary to pay an estimated $250,000 to $1 million per year in allowances to keep operating the District's existing cogeneration facility. In summary, 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. Ms. Farrell presented several different capital budget scenarios over the next ten years and their respective effects on the capital component of the sewer service charge and the needed sewer service charge increase. In terms of rate increases, Ms. Farrell presented a slide projecting how much the sewer service charge (per household) would need to increase under the different capital budget scenarios. Under the first scenario funding basic renovations only, the rate increase would be $21 for each of the first three years, tapering off gradually to $14 in the tenth year. Under the second scenario, which includes the $50 million incinerator project with no bond funding, the rate increase needed would be approximately $50 for the first three years. She noted there also would be some additional operations and maintenance costs that would require a rate increase in the fourth year and after the fourth year no rate increase would be necessary through the ten -year period of the plan. If bond financing were used for the incinerators, the rate increase is projected to be $24 in each of the first three years, gradually tapering 9 CENTRAL CONTRA COSTA SANITARY DISTRICT Board Minutes . of December 16, 2414 off to $15 in year ten, for a total ten -year rate increase of $210 as compared to $145 if no bond funding is used. In short, by raising the rates and paying for the incinerators in the first four years, the District could go the remaining six years without a rate increase. Ms. Farrell then focused on the third scenario, which includes both the $50 million incinerator project and the $70 million nitrification project. Without bond funding, she said this scenario follows a similar path to the second scenario, with rate increases as high as $50 in the first few years, but also would be followed by several years of rate increases in years six through eight of up to $28 per year. With bond financing, the rate increase would be roughly $25 in the first seven years, tapering off to roughly $10 in years eight to ten, and the rate increase over the life of the bonds would be significantly more than would be needed under the pay -as- you -go scenario. Ms. Farrell noted that under all scenarios, another $2 -5 could be added beginning in the second year due to the need to purchase greenhouse gas allowances. In summary, Ms. Farrell stated that while bond financing would allow the District to smooth out the rates over the ten -year period, carrying them out for 20 -30 years would result in paying two to three times the total amount of the projects due to financing costs. Raising rates significantly in the next several years greatly reduces the need for rate increases in future years and results in a much lower overall rate increase than relying on bond financing for a portion of the needs. A lengthy discussion took place in which Ms. Farrell responded to a number of questions from the Board members. They discussed the merits of paying for the projects with rates increases versus bond financing, which basically spreads the costs of these projects to future rate payers. They also discussed the District's bonding capacity, the inevitability of fines in the face of not funding capital projects, anticipated recycled water projects, the affordability to rate payers of any projected rate increase, and what methods District staff uses to prioritize asset management work. In terms of the latter, Ms. Farrell noted that the District's most critical asset is the outfall, which was last inspected in 2003. Efforts are underway to bypass the outfall so it can be inspected in the summer of 2011. Ms. Farrell concluded by stating that this presentation was the first in a series of workshops that will culminate in the Board's voting in June to set the capital budget for Fiscal Year 2011 -12 and beyond. An in -depth workshop will take place in the next couple of months, which will also include the operations and maintenance component. Consideration of a rate increase would require a decision to mail a Proposition 218 notice in late March or early April. A workshop in April will focus more on the specifics of each capital project. Then, sometime in mid -June, the Board will be asked to authorize the capital budget program and the operations and maintenance program and vote on a rate increase. At this time, she said the Board is being asked to concur that the proposed preliminary capital expenditure figures for FY 2011 -12 and the subsequent nine years are acceptable for inclusion in financial planning documents to be reviewed by the Board at its upcoming workshop. She added that this will allow staff to have a starting point on which to layer the operations and maintenance component of the budget as well. 10 CENTRAL CONTRA COSTA SANITARY DISTRICT Board Minutes of December 16, 2010 The Board thanked Ms. Farrell for her comprehensive presentation and concurred with the preliminary recommendations as proposed. 9. EMERGENCY SITUATIONS REQUIRING BOARD ACTION None. 10. SUGGESTIONS FOR FUTURE AGENDA ITEMS None. General Manager Jim Kelly stated that this was retiring Human Resources Manager Cathryn Freitas' last Board meeting as an employee of the District. Because she had opted against a retirement party, there had been no previous opportunity to officially thank her for her service. He presented her with an obelisk from the District and stated that she will be truly missed. Ms. Freitas thanked the Board for their support and said she had enjoyed the past 26 years working for the District. 11. CLOSED SESSION The Board recessed at 2:34 p.m. to reconvene in closed session in the Caucus Room regarding the following matters: a. Conference with Legal Counsel regarding anticipated litigation - initiation of litigation pursuant to Government Code Section 54956.9 (c) -one potential case. b. Conference with labor negotiators pursuant to Government Code Section 54957.6: District Negotiators: General Manager James Kelly; Director of Administration Randall Musgraves; and Secretary of the District Elaine Boehme. Employee Organizations: Employees' Association, Public Employees' Union, Local One; CCCSD Management Support/Confidential Group (MS/CG); and CCCSD Management Group. The Board recessed at 4:09 p.m. to reconvene in open session in the Board Room. 12. REPORT OUT OF CLOSED SESSION District Counsel Kent Alm reported with regard to Agenda Item 11.a. stating that instructions were given to Counsel. 11 CENTRAL CONTRA COSTA SANITARY DISTRICT Board Minutes of December 16, 2410 District Labor Counsel Daniel Clinton reported that the Board provided direction to its negotiators regarding Agenda Item 11.b. 13. ADJOURNMENT There being no further business to come before the Board, President McGill adjourned the meeting at 4:55 p.m. Barbara D. Hockett President of the Board of Directors Central Contra Costa Sanitary District County of Contra Costa, State of California COUNTERSIGNED: Elaine R. Boehme, CIVIC Secretary of the Central Contra Costa Sanitary District, County of Contra Costa, State of California 12