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BUDGET & FINANCE AGENDA 02-28-11
1, Central Contra Costa Sanitary District Protecting public health and the environment 5019 Imhoff Place, Martinez, CA 94553-4392 REGULAR MEETING OF THE BOARD OF DIRECTORS: CENTRAL CONTRA COSTA BARBARA D. HOCKETT Prexidenr SANITARY DISTRICT JAMES A. NEIEDLY President Pro Tem BUDGET AND FINANCE COMMITTEE MICHAEL R. MCGIL L MARIO M. MENESINI DAVID R. WILLIAMS Chair Nejedly Member Hockett PHONE: (925) 22 FAX: (925)676 -7211 www.centralsan.org Monday, February 28, 2011 3:00 p.m. Executive Conference Room 5019 Imhoff Place Martinez, California INFORMATION FOR THE PUBLIC ADDRESSING THE COMMITTEE ON AN ITEM ON THE AGENDA • Anyone wishing to address the Committee on an item listed on the agenda will be heard when the Committee Chair calls for comments from the audience. The Chair may specify the number of minutes each person will be permitted to speak based on the number of persons wishing to speak and the time available. After the public has commented, the item is closed to further public comment and brought to the Committee for discussion. There is no further comment permitted from the audience unless invited by the Committee. ADDRESSING THE COMMITTEE ON AN ITEM NOT ON THE AGENDA In accordance with state law, the Committee is prohibited from discussing items not calendared on the agenda. You may address the Committee on any items not listed on the agenda, and which are within their jurisdiction, under PUBLIC COMMENTS. Matters brought up which are not on the agenda may he referred to staff for action or calendared on a future agenda. AGENDA REPORTS Supporting materials on Committee agenda items are available for public review at the Reception Desk, 5019 Imhoff Place, Martinez. Reports or information relating to agenda items distributed within 72 hours of the meeting to a majority of the Committee are also available for public inspection at the Reception Desk. During the meeting, information and supporting materials are available in the Conference Room. AMERICANS WITH DISABILITIES ACT In accordance with the Americans With Disabilities Act and state law, it is the policy of the Central Contra Costa Sanitary District to offer its public meetings in a manner that is readily accessible to everyone, including those with disabilities. If you are disabled and require special accommodations to participate, please contact the Secretary of the District at least 48 hours in advance of the meeting at (925) 229 -7303. Budget and Finance Committee February 28, 2011 Page 2 1. Call Meeting to Order 2. Public Comments 3. Risk Management *a. Review Loss Control Report b. Discuss outstanding claims 1) Claim from 4130 Castro Street in Martinez c. Discuss new claims *4. Review draft letter responding to Contra Costa County Employees' Retirement Association (CCCERA) *5. Review proposed Capacity Fee increase and revised Schedule of Environmental and Development - Related Fees and Charges `6. Review request for Installment Payment of Capacity Fees due from Senro Sushi 7. Review Expenditures (Item 3.a. in Board Binder) 8. Review January 2011 Financial Statements and Investment Reports (Item 3.b. in Board Binder) 9. Reports and Announcements 10. Suggestions for future agenda items 11. 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N 0 0 0 0 -J J >- O I co N N ,, O O N N 0I O 3 C cm al � ' ( -- 0 t _ co 0 0 C.ZO 0) r o vmza 0 H Cf) °) 0 00 100000 ( � 7 -1 �I _1 .� m CA �O ( n C J i 1 ((1)U) COcnco�� -I I C7 C7 C7 C7 _ I J H GI g o gIS o c OI g g ° o S QI it 8 1 N CV N N N N N N N N CV ik .- N CO V .01 CCD 1 CO *R1 1- N Cr) .ct *1 *1 ..- 7 N N N 1 N N N C o r N N N o ''' a 0 0 0 0 �' 0 0 0 0 u) U 5 0 ' I 0 0 0 U o 0 0 5 5 U 4 • February 23, 2011 Mr. Jerry Telles Chairperson of the Board Contra Costa County Employees Retirement Association 1355 Willow Way, Suite 221 Concord, CA 94520 \v RE: CCCERA'S ACTIONS ON DE- POOLING Dear Mr. Telles: We received Marilyn Leedom's letter of January 25, 20 r1. We thank you for that response, however the Central Contra Costa SaniittaryDistrict ( "Ditrict) is not satisfied that it fully addressed the issues raised in our letter of December 27, 201 current circumstances facing public agencies. / Initially, we recogne that both �the County Employees Retirement Law ( "CERL ") and the California Constitution as amended by Proposition 162 in 1992, do provide substantial authority to the CCCERAABoar4f0 r,the administration of the retirement system. We accept that CCCERA - the "sole a d e clusive.power t provide for actuarial services in order to `y - J/ assure competency the assets of ‘the public pension or retirement system ", as well as other enumerated responsibilities'(Califoxnia Constitution Article XVI, section 17). However, we do not believe pension board's are e pt' from the scope of judicial review, nor from the careful scrutiny by impacted; member gencies and the constituents that ultimately pay the bills. We do not.accept the implication that CCCERA's authority is essentially unrestricted or not subject toaraditional legal limitations. Separately, we question CCCERA's authority to act in a manner biased on at-`retroactive" approach' when responsible member agencies =� _n' made financial decisions s relying on your prior policies and contribution rates. If this were the case, future CCCERA 7 decisions could create or eliminate additional financial obligations Ms. Leedom's letter of January 25, 2011 attempts to suggest that the effect of de- pooling decision of the Board of Retirement was not retroactive because it only impacts future contribution rates. However, common sense and your actuary recognize your actions in fact adopted a "retroactive" approach. (Segal Company Letter dated August 31, 2010 at pg. 5). Jerry Telles, Chairperson of the Board February 23, 2011 • Page 2 on publically funded agencies without restriction, even when these decisions might offend the basic legal principles such as those related to retroactivity and detrimental reliance. We question if CCCERA's records had been relatively complete for the past 50 years, would CCCERA have no limitation on taking a retroactive approach dating back 50 years? We think not! Notwithstanding the District's substantial concern with CCCERA's contention that it has unchecked authority on retirement policy decisions, including the right to take actions through a retroactive approach, we want to clarify that the District does not seek to take legal action to reverse CCCERA's de- pooling decisions. Our reluctance to consider litigation is based on the simple proposition that the District do nse o .seek for any other member agency to subsidize any of the costs of retirement Therefore, the District will pay appropriate amounts to cover all of its costs resulting from de- pooling and the delay of CCCERA to change its "Policy" in respon e`o the cl`artf on final compensation resulting from the In re Retireme r cases (2003) 110 Call:App.4Lh 426. The District, does, however, seek procedural than es to prevent similar unfortunate circumstances from occurring in the future. The District strongly suggests one ofseveral courses of a' c tions should be pure d. The intent is to provide for meaningful inpu from member gencies and minimize the potential . for future decisions that result in unforrtuna instances of "detrimental reliance or missed opportunities to react to favorable changes the l es iaw. The Distriestrongly requests that CCCERA promptly adopt-new new formal bylaws or regulations that < mandate a formal notice 1 and right to commenby memb i er agencies on mportant,po changes materially affecting their finances. Thes r should pro for written responses from CCCERA to member agency com em n stand a realistic avenu- for lodging formal objections, including an administrativ��eappeal pro edure. Vii' Separately, the Distria requests nt meeting of a Board Committee of CCCERA with a District Board Comm t o initia c onsideration of these formal bylaw or regulation chang and address the appropriate roleVof CCCERA vis a vis its member agencies. The subject of u should be add the nature of reforms that may eliminate similar controversies inane future and enhance responsiveness to the financial realities of member agencies and the public. \ \ .. 2 The current financial difficulties of governmental entities throughout California and the nation highlight the need for new approaches, greater transparency and closer attention to the impact of the increasing cost of public services. Taking no action at this time does not appear to be an acceptable alternative. In closing, our December 27, 2010 letter appears to have been handled in a manner intended to deflect public attention or Board level consideration of our concerns. It is the intent of this letter that these issues receive thoughtful public consideration and to that end we are reattaching our letter of December 27, 2010 and providing copies of both to each CCCERA member agency. A PROFESSIONAL LAW CORPORATION OAKLAND LOS ANGELES SACRAMENTO SAN FRANCISCO SANTA ROSA FRESNO • Jerry Telles, Chairperson of the Board February 23, 2011 Page 3 Sincerely, Barbara D. Hockett Board President Attachment Cc: CCCERA Board All CCCERA Member Agencies (with attachment):, Dan Borenstein, Contra Costa Times CCCSD Board • Z.Pi 9': t- 0.6 A PROFESSIONAL LAW CORPORATION OAKLAND L05 ANGELES SACRAMENTO SAN FRANCISCO SANTA ROSA FRESNO • Central Contra Costa Sanitary District Protecting public health and the environment 5019 Imhoff Place, Martinez, C4 94553 -4392 BOARD OF DIRECTORS: AIICHAEEI. 17. MCGILL. December 27, 2010 President BARBARA D. H(XXF7T President 1',,, 7em HAND DELIVERED MAR /D M AIFW JAMhSA NPJB'DLY Honorable Members of the Board DAVID I?. WILLIAMS Contra Costa County Employees' Retirement PHONE: (925) 228 -9500 Association FAX' (925) 676-7211 1355 Willow Way, Suite 221 www.cenrratsan.org Concord, CA 94520 Dear Members of the Board: The Central Contra Costa Sanitary District ( "CCCSD ") Board of Directors thanks CCCERA for the information it has provided and for delaying action on its consideration of retroactive de- pooling to allow CCCSD to review CCCERA's proposed rate adjustments. CCCSD has spent substantial effort in evaluating the retroactive de- pooling decision of CCCERA and the implementation of those decisions through the proposed member rates, to be implemented July 1, 2011. The cumulative impact of CCCERA's actions or inactions and the de- pooling methodology would increase CCCSD's unfunded liability (and hence burden our ratepayers) by $20 million. This potential unfunded liability would result in a substantial increase in CCCSD's cost of operations beginning in July 2011. As part of our review to ensure CCCERA was correctly calculating our liability, CCCSD reviewed our practices of reporting final annual salary (FAS) to CCCERA (following CCCERA Policy "Determine Which Pay Items are "Compensation" for Retirement Purposes" ( "Policy ")). Based on this review we concur with CCCERA's analysis that the vast majority of the pay codes that make up the FAS are being correctly reported (memorandum from Harvey Leiderman to Marilyn Leedom dated September 16, 2010), and hence the retirement benefits comply with CCCERA's "Policy ". The CCCSD Board has significant concerns about decisions CCCERA made that led to the proposed de- pooling action, although we are willing to consider paying our fair share of the de- pooled retirement costs, as appropriately determined. CCCSD rejects the proposition that all of the current circumstances which have led to de- pooling could not have been avoided or ameliorated. We contend it is the CCCERA Board, not the employer, that has the constitutional and statutory duty to manage retirement funds and to determine whether and how much the fund is obligated to pay to individual retirees. Central Contra Costa Sanitary District further contends that subsequent to the July 11, 2003 decision of In re Retirement Cases (2003) 110 Cal.App.4th 426, 457 -460, CCCERA had both the opportunity to and obligation to modify its "Policy" as it ultimately did on March 10, 2010. It is worth noting that CCCERA's lack of action after 2003 led to much of CCCSD's and other employers' accrued de- pooling unfunded liability. We "contract" with you to administer the fund and your failure to either track or consider changes in the law at that time detrimentally impacted CCCSD and other employers. For example, approximately 90 of CCCSD's 250 employees have been hired since January 2004, and could have been covered by the second tier policy adopted ® Regcic1 I', per Letter to CCCERA Board December 27, 2010 Page 2 this year. We would like to know why the decision to set up a second tier was delayed for years and only occurred when "spiking" became a matter of public controversy. • Given the significant public policy change by CCCERA to move from a pooled system to a de- pooled system by employer and to do so retroactively, and the resultant unanticipated liability and costs to CCCSD and several other employers, we, as Board members of CCCSD, request that: (1) the CCCERA Board respond to our questions set forth on Attachment A as an agenda item for the CCCERA January 12, 2011 Board meeting, and (2) the CCCERA Board make this letter available for distribution at the meeting as part of the public record. The purpose of our letter is to seek a statement and understanding from the CCCERA Board as to its perceived authority for certain decisions and the process used to make those decisions so we can perform our due diligence as a Board and to ensure this is a lawful change in public policy. We hope that your response to this request will satisfy our concerns and make CCCERA's decision - making process more transparent to CCCSD as an employer member, to other employer members, as well as to the public. It is critical that future decisions which affect CCCSD's financial and policy status allow for our timely input prior to becoming final. Notwithstanding these comments and the questions set forth in the attachment, the professional mariner in which you and your staff have dealt with our inquiries and concerns on this matter is appreciated. We look forward to CCCERA's response to this letter and the questions presented in the attachment. If the Board has any questions or needs further clarification, please contact James M. Kelly, General Manager, at (925) 229 -7386. Sincer Michael R. McGIII, P.E. President of the Board of Directors _ Central Contra Costa Sanitary District • cc: Ms. Marilyn Leedom, Executive Director Attachment A: Questions to CCCERA Board of Directors regarding de- pooling • • ATTACHMENT A I. October 13, 2009 "De- pooling" Decision 1. Please identify the authority CCCERA relied upon to unilaterally implement its October 14, 2009 "de- pooling" decision. To prevent any confusion, our question seeks the following: a. .Did CCCERA rely on any California constitutional authority? If so, please specify. b. Did CCCERA rely on any California statutory authority? If so, please specify. c. Did CCCERA rely on its own regulations, bylaws or other authority? If so, please specify. d. Is there any authority CCCERA relied upon other than the above? e. Does CCCERA believe that its Board has unfettered authority to make policy decisions, without seeking input and /or approval from its employer members? If so, what authority does the Board rely upon for this • conclusion? 2. Is it CCCERA's position that its "de- pooling" decision did not require consent or other form of approval from its employer members? If so, what is the authority for that conclusion? 3. When did the CCCERA Board commence its discussion of adopting a "de- pooling" policy? Please provide a list of dates when this issue was discussed by the Board, including publicly noticed open and closed session meetings. 11. Retroactive Effect of "De- pooling" Decision 1. Please identify the authority CCCERA relied upon to unilaterally decide to effectuate the "de- pooling" decision retroactively to 2002. a. Did CCCERA rely on any California constitutional authority? If so, please specify. b. Did CCCERA rely on any California statutory authority? If so, please specify. c. Did CCCERA rely on its own regulations, bylaws or other authority? If so, please specify. d. Is there any authority CCCERA relied upon other than the above? e. Do you assert that the CCCERA Board has unfettered authority to make policy decisions, without seeking input and /or approval from its employer members? If so, what authority does the Board rely upon for this conclusion? 2. Under the County Employees Retirement Law, Government Code Sec. 31453.6 provides statutory authority to, on a one -time basis, amortize unfunded accrued actuarial obligations for 30 years, for the purpose of determining employer contribution rates. In making its decision to apply "de- pooling" retroactively to 2002, did the Board consider exercising its authority under Government Code • (� Sec. 31453.6? If so, did the Board decide that this section was irrelevant or not necessary? To the extent that the Board responds that no request was forthcoming from the Board of Supervisors, please advise whether, as part of the Board's "de- pooling" decision - making, any discussions have taken place with respect to the Board's powers afforded by the above statute. III. Implementation of "In re Retirement Cases" Limitations on Reportable Compensation 1. Please identify and list any and all documents, including but not limited to settlement agreements, policy directives, etc. by which CCCERA decided to implement the compensation benefits as identified in the Supreme Court's decision Ventura County Deputy Sheriffs' Assn. v. Board of Retirement (1997) 16 Ca1.4' 483, 66 Cal.Rptr.2d 304. 2. Please identify and list any and all non - attorney client privileged documents which the Board considered with respect to whether the Board should adopt, or refrain from adopting, the compensation limitations approved by the Court of Appeal in In re Retirement Cases (2003) 110 Cal.App.4'" 426, 1 Cal.Rptr.3d 790. 3. Please identify and list any Board decision to refrain from adopting the compensation limitations set forth the In re Retirement Cases decision. If none is identified and listed, what was the Board's decision - making procedure, if any, for evaluating the legal impact of the above 2003 Court of Appeal decision? Is it accurate to conclude that the CCCERA Board has voluntarily applied the Ventura decision to all then and currently active employee members since that 1997 decision, without imposing the limitations approved by the In re Retirement Cases Court? 4. . We understand that the Board received a legal opinion on or about October 21, 2009 related to CCCERA's treatment of final compensation and retirement benefits. • Please describe the decision- making process resulting in the Board's policy to implement the Court of Appeal limits on compensation, effective in 2011. IV. Future Decision - making Process Please identify the decision- making protocols under which CCCERA currently operates. Further, we assume that the CCCERA Board will have future policy decisions to consider; these decisions, similar to the those above, may potentially involve significant financial impact on members, including, but not limited to, contribution rates and addressing unfunded liabilities. 1564067.6 • Central Contra Costa Sanitary District February 24, 2011 TO: BUDGET AND FINANCE COMMITTEE VIA: JAMES M. KELLY, GENERAL MANAGER ANN FARRELL, DIRECTOR OF ENGINEE5ING CURT SWANSON, ENVIRONMENTAL SERVICES DIVISION MANAGER 0, Off' FROM: JARRED MIYAMOTO- MILLS, PRINCIPAL ENGINEER 1u'It SUBJECT: PROPOSAL FOR REVISED CAPACITY FEES AND ENVIRONMENTAL AND DEVELOPMENT - RELATED RATES AND CHARGES At the committee's meeting on February 28t I will present a proposal for revised Capacity Fees and Environmental and Development - Related Rates and Charges. If the committee concurs, I will place an item on the Board's April 7th meeting agenda requesting that May 5, 2011 be set as the date for a public hearing to receive comments and to consider adopting the proposed fees. If the Board decides to consider the staff proposal and sets a hearing date, an outreach program will be conducted to contact and engage customers with an interest in the fees, rates and charges. Notices of the public hearing will be posted on the bulletin board in the Headquarters Office Building Lobby and published in the Contra Costa Times. In addition, about 300 letters with detailed information about each proposal will be mailed to those companies and individuals who have specifically requested notice of fee increases, the Home Builder's Association of Northern California, the Engineering and Underground Contractors' Association, the Associated Building Contractors Golden Gate Chapter, and contractors, engineers and developers who regularly work in the District. An informal meeting to discuss the fee proposal will be held about one week before the public hearing. In the past, few customers have attended these informal meetings since our fee setting methodology has been generally accepted and proposed changes in fees, rates and charges have been relatively modest. Copies of a draft letter and two reports comprising the proposed outreach mailing are attached for your information, review and comment. After incorporating any review comments you may have, we plan to mail out these letters after the Board sets the hearing date. If you have any questions or would like to make comments on the outreach materials, please bring them up at the committee meeting, at the April 7th Board Meeting, or call Jarred Miyamoto -Mills at (925) 229 -7335. JM2: Attachments cc: Board of Directors DRAFT - 02/24/2011 - jm2 PHONE: (925) 228 -9500 FAX: (925) 228 -4624 www.centralsan.org JAMES M. KELLY General Manager KEENTON 1,. ALAI ' Counsel for the Disericr (510) 808 -1000 April 11, 2011 ELAINE R. BOEHME Secre ary rfhe /)Lir Dear Interested Customer: PROPOSED REVISIONS FOR CAPACITY FEES, AND ENVIRONMENTAL AND DEVELOPMENT - RELATED RATES AND CHARGES Central Contra Costa Sanitary District (CCCSD) staff has recommended to its Board of Directors that capacity fees, and development - related rates and charges be revised to recover the current cost of providing facilities and services. These fees were last revised on July 1, 2010. Reports discussing each of the two proposals are enclosed for your information. If approved, the new capacity fees, and development - related rates and charges will be effective on July 5, 2011. Capacity Fees: The fees have been calculated so that new customers "buy in" to the current value of all CCCSD assets. This approach was first adopted in 2001, and was used in 2010, when the fees were last increased. Using this approach, each new customer's share in the current value of CCCSD facilities, equipment, land and fund balances is "equalized" with existing CCCSD customers at the time of connection. This is done by dividing the current value of all CCCSD assets by the current number of "Residential Unit Equivalents" (RUE) and charging this amount for new connections. The current and proposed capacity fees for each new residential unit and RUE are: Current Proposed Fee (before July 1, 2010) (effective July 5, 20111 Change • Gravity Service $5,451 per RUE $5,465 per RUE 0.3% Pumped Service $7,092 per RUE $7,071 per RUE -0.3% Capacity fees for nonresidential (commercial, industrial and institutional) projects are also based on "Residential Unit Equivalents," so they will also increase by the same percentages if the proposal is adopted. • • Capacity Fees, and Environmental and Development - Related Rates and Charges Page 2 April 11, 2011 Environmental and Development - Related Rates and Charges: Chapter 6.30 of the CCCSD Code establishes environmental rates and charges to recover the costs for permitting of industrial users and for regulating septage /grease hauling and disposal, and development - related rates and charges to recover costs to provide services including: • Permit Issuance • Plan and easement review for main sewer extension projects • Inspection of main sewer extensions and side sewers • Processing of quitclaims and real property agreements • Administering the reimbursement and capacity use charge programs • Surveying and review of geotechnical engineering • Preparing development - related record drawings and adding new development information to CCCSD's maps After a review of the rates and charges in effect since July 1, 2010, CCCSD staff recommended to the Board of Directors that most environmental and development - related fees (50 fee categories) be increased between 1.4 and 2.3 percent, that six fees affecting a small number of customers be increased between 6.2 and 15.8 percent, and that fees for industrial user permits and septage /grease disposal remain unchanged. Outreach Program: CCCSD staff will hold an informal meeting to discuss the proposed change in capacity fees, and development - related rates and charges with interested customers. The meeting will be held in CCCSD's Board of Directors Meeting Room at 5019 Imhoff Place, Martinez, California, and is scheduled for Wednesday, April 27, 2011 at 10:00 a.m. A public hearing to receive comments on the capacity fee, and rates and charges proposals is scheduled for Thursday, May 5, 2011 at 2:00 p.m. in CCCSD's Board of Directors Meeting Room. The draft ordinances to be considered by the Board, and the data and documents on which the fee proposal is based will be available for review ten (10) days prior to the public hearing, as required. If you have questions or would like any additional information, please contact me at (925) 229 -7335, or via e-mail to jm2centralsan.orq, or call Engineering Assistant Earlene Millier at (925) 229 -7359. Sincerely, n' e, ;I'1 Jarred Miyamoto -Mills Principal Engineer JM2: Enclosures CENTRAL CONTRA COSTA SANITARY DISTRICT Report Regarding the Capacity Fee Proposal March 2011 INTRODUCTION In September 1998, the state enacted SB1760 that requires sewer connection fees to be based on one of two methods: 1) a buy -in to existing assets, or 2) the cost of future facilities expansion. This bill was enthusiastically endorsed and supported by home builders' associations statewide. In 2001, Central Contra Costa Sanitary District's (CCCSD) method for determination of Capacity Fees was changed to a "buy -in -to -all assets" approach. This was done to provide a rational, practical, equitable and defensible method to calculate the financial burden of new connections. The buy -in -to -all- assets approach is preferred primarily due to the "facilities- mature" status of CCCSD. In this context, facilities- mature means that the value of existing assets (about $1.64 billion) is many times the value of future facilities expansion needed to accommodate future customers. Stated differently, most of the facilities needed to serve new customers have already been built and paid for by current customers. As a consequence, most of the work envisioned in CCCSD's Capital Improvement Plan is for renovation, replacement or upgrading of facilities to maintain capacity for both current and prospective customers. Charging a Capacity Fee based on the customer buying -in -to -all- assets at the time of connection to the public sewer system equalizes the unit investment of each customer as they move from being a "future" to "current" customer. The following sections discuss CCCSD's Capacity Fee approach and staff - proposed fee adjustments for 2011 -12. CCCSD'S APPROACH TO CALCULATING CAPACITY FEES CCCSD's current method of calculation for Capacity Fees is based on a buy- in- to -all- assets approach. The calculation estimates the "current value" of real property (land), facilities, equipment and the balances in the Sewer Construction, Running Expense, Debt Service and Self Insurance Funds. In the calculation, the current value of each asset category is determined as follows: • Land: The "current value" of investments in real property is estimated based on the opportunity value of like cash investments deposited in CCCSD's temporary investments at the time of each purchase and held at interest to the present, rather than by attempting to determine actual market value. • Capacity Fee Proposal March 2011 Page 2 of 3 • • Facilities: The current value of investments in physical facilities is estimated by both, 1) escalating each year's facilities expenditures based on the change in the Engineering News Record Construction Cost Index for the San Francisco Bay Area (ENR- CCI -SF), and 2) applying straight -line depreciation using the following life cycles with no salvage value. Please note that a category for "Mains (Renovation Program)" has been included again this year in the current value of facilities for determination of Capacity Fees. This category accounts for CCCSD's significant investment since 1988 in life -cycle replacement and renovation of sewers 10- inches in diameter and smaller. This work renews capacity in these smaller sewers for the benefit of both existing and new connectors and reduces future maintenance costs. • Average Useful Life: Gravity Sewers Interceptors 150 years Trunks 100 years Mains (Renovated by District) 75 years - Treatment Plant & Pumping Station Facilities Tanks /Foundations 100 years Buildings 75 years Mechanical, Electrical & Control Equipment 30 years - Recycled Water Facilities Pipelines 50 years Mechanical, Electrical & Control 30 years - General Improvements Buildings 50 years Mechanical /Electrical Equipment and Furnishings 25 years Vehicles and other Equipment 10 years - Major Repairs /Replacements 10 years • Capacity Fee Proposal March 2011 Page3of3 • Fund Balances: Prior fiscal year -end balances for the Sewer Construction, Running Expense, Debt Service and Self Insurance Funds are used. The Sewer Construction Fund Balance is reduced by the principal value of CCCSD's outstanding debt. After estimating the "current value" for an asset category, the component of the Capacity Fee attributable to that category is calculated by dividing current value by the current number of customers (number of Residential Unit Equivalents: "RUE "): Value of Assets Buy -in Fee = Number of Customers (RUE) RECOMMENDED CAPACITY FEE INCREASES Staff recommends that the Board consider adopting Capacity Fees for the 2011 -12 fiscal year by applying the valuation approach and facilities life cycles described above. The proposed fees are: Fee Category Current Proposed % Change Gravity Service $5,451 per RUE $5,465 per RUE 0.3% Pumping Service $7,092 per RUE $7,071 per RUE -0.3% The calculation of the proposed fees is shown in Table 1. If the recommended Capacity Fees are adopted by the Board of Directors, higher revenue generated in the gravity zone will be nearly equal to the reduction in revenue in the pumped zone (based on staffs estimate of 450 Residential Unit Equivalents [RUE] to be connected in the gravity zone and 350 RUE in the pumped zone). The recommended fee calculation approach is a rational, practical, equitable and defensible method to determine the financial burden of new connections. A comparison of the proposed Capacity Fees to the fees charged by neighboring agencies is presented in Table 2. EM:JM2 • e e e e el e e e e e (0 y , Q m 01 m O 10 1n Q n M N C O O Q h N A v 00 N O O O C1 C V 10 0- • C.) w m o N w Q ._ O C w 4 w w w w Nw w w w • c E a- w CO >• D L w 7 o K U U 0 — o c 0 N 00 O1 N O N CO 10 N N A M '0 IL CO 0 CO CO C N O Q N Q N (0 1 j 7 y 04 w W. O A Co N w w w 44 Q 0 _ Q m _ N c N 167 Q w w w w w W 4 Q 11 c N U 7 m LL c re 0 0 a o O 7 CC CC N 0 Q 00 A W o 'e m Q CO 01 0,000 10 0 D N A N 04 01 N O O 010001, 0 N 0 00 00 Q Q m co CO M 40 O A 10 A 07 A N M A - A _ 00 D O Q N N OD h H Q N A i0 co d y _ CO Q 10 Q Q A co M al N N M 0) (0 10 ~ O N N 10 Q N N o N N m CO Q1 N N - U M A r N or 10 arc N A C'f Q r (0 U LL Q Q 1A CO N N A Q w M w 44 Q CO CO C w 0, w N CO w w . w (0 CO 01 . Cr) O w w w w . w w Z Z. V 7 A E U 8 a m T V) d o T CO ra 01 C CD 10 aU -c C b 0! e C C H T . N CO O N o © Z • y C C 7 1 d@ a o N n v C O LL e A �` - >. w N p a 10 + V C O 130 f.) r rn N + � ' T ° E @ + T C ✓ 7 1 i O A N e N d tN L T T 1-� E aU ` c N o u) v T e T W + G7 o 0 LL o © © e r. .. co o cs a e CO d 0 U _ C m V ^ M V c ,. 'O N E '0 CO 0 C 0 4) C a an N V - N 10 0 T C (n 0 C c (n V R` O N O o m f (0 © ,e lL c m T N O. ' 2 « e 7 '_' Q C.) • C.) 0 0 us 21 C c 0 in C e O LL c E IC ' O m r m m • 0 + o 40 m 7 - 7 o U dc 2o' dto ° U LL (7 a N to 0 0/ '0 13 c� 0 T t- 0 0 1.11 1 1 0 0 < Ir a CO 1/ 0 5 c rn a m N X C J 0 G LL —_ N 3 c o c E© a C W CO Q LL LL r T a RI N w DO o c C E Toe R V CO C 1 , ._ T + w J 111 3 E d v U c CO CO ° a) 1 H CO CO I— U C? < J LL CO cc' (1) 1- 0 0 Table 2 COMPARISON OF CAPACITY FEES Agency Capacity Fee Dublin San Ramon Services District $15,477 Mountain View Sanitary District $8,745 Proposed CCCSD Pumped Zone $7,071 Current CCCSD Pumped Zone $7,092 Antioch (Delta Diablo Sanitation District for Treatment) $6,756 Proposed CCCSD Gravity Zone $5,465 Current CCCSD Gravity Zone $5,451 Concord $4,776 Pittsburg (Delta Diablo Sanitation District for Treatment) $4,358 Bay Point (Delta Diablo Sanitation District for Treatment) $3,940 West County Wastewater District $2,613 CENTRAL CONTRA COSTA SANITARY DISTRICT Report Regarding Environmental and Development - Related Rates and Charges Proposal March 2011 OVERVIEW The Central Contra Costa Sanitary District (CCCSD) Board of Directors will soon consider adopting an ordinance to revise Chapter 6.30, Schedule of Rates and Charges, for various environmental and development - related services. If the proposed 2011 -12 fees are adopted, estimated revenue in the fee categories where increased fees are recommended will be modest. BACKGROUND Chapter 6.30 of the CCCSD Code includes a schedule of rates and charges for environmental and development - related services provided to property owners, contractors, developers, septic and grease waste haulers, and permitted industrial users. These services include permitting, plan review, inspection of construction for side sewers and main line extensions, addition of new sewers, parcels, and permit information to CCCSD maps, source control permits and inspections, and septic and grease hauler sampling and treatment. These rates and charges are intended to recover CCCSD's direct and indirect labor costs, other operating expenses, and administrative overhead incurred in providing each service. These rates and charges were last revised in 2010. CCCSD staff annually reviews the rates and charges to assess whether changes are appropriate. This year, as in the past, CCCSD has re- evaluated the rates and charges for the categories of Development Plan Review, Construction Inspection, Collection System, Right -of -Way, and Miscellaneous services. The recommended rates and charges are explained in the following pages. CCCSD staff has proposed that environmental rates and charges for industrial user permits and septage /grease disposal remain unchanged. PROPOSED RATES AND CHARGES The State of California mandates that revenues from fees, rates and charges not exceed the cost of providing services. Following its review, CCCSD staff recommended that rates and charges be revised to include: 1) adjustment for increased salaries, benefits and overhead; and 2) adjustment of the mileage rate for those charges that include a mileage factor. Table 1 presents a comparison of the current and proposed rates and charges. Proposal to Revise Development - Related Rates and Charges March 2011 Page 2 For 2011 -12, staff is recommending changes to the Schedule of Rates and Charges based on a 2.0% cost of living adjustment to staff salaries, an administrative overhead percentage of 173% of direct salary cost (5% lower than in 2010), and a vehicle mileage rate of $0.29 per mile. Proposed Changes Fees, rates and charges calculated based on the criteria cited above results in recommended increases between 1.4% and 2.3% for most fees (fifty fee categories). Approval of the second and third increments of a three -year phase in of larger increases for six fees that affect only a few customers is also recommended, as discussed below: Application Fee for new parcel — new sewer service: This is the second year a three -year increase of $13 per year (6.2 %) approved in 2010. The recommended increase will bring the fee in line with the actual cost of administrative work associated with setting up new parcels in the land, mapping and the Sewer Service Charge file systems. Application Fee — Capacity Use Program: This is the third year of a three -year increase of $34 per year (13.8 %) approved in 2009. The Capacity Use Charge program mitigates high capacity fees for customers with high- strength sewage (such as restaurants and bakeries). Setting up new customer accounts in the program requires significant staff time. This fee typically is applied to three or four customers each year. Reimbursement Account Set -Up Fee: This is the third year of a three -year increase of $70 per year (8.0 %) approved in 2009 to recover the actual labor cost incurred to setup program accounts. This fee is charged to installers of mainline extension projects who elect to participate in the Reimbursement Program. There were no new reimbursement accounts established in 2010 -11 due to the lack of new mainline extension projects. Source Control Review: This is the second year of a three -year increase of $30 per year (13.6 %) approved in 2010. This increase will result in a fee that recovers the actual labor cost incurred to conduct a typical Source Control review for new business. Site Collector Plan Check: This is the third year of a three -year increase of $32 per year (12.7 %) approved in 2009 to phase -in to recover the actual labor cost incurred to review a typical site collector sewer. This fee applies to three to five commercial site - collector sewer projects each year. Right of Entry / Encroachment Permit Fee: This is the third year of a three -year increase of $23 per year (15.8 %) approved in 2009 to recover the actual labor cost to process right -of -entry and encroachment permits. N:IENVRSRVIFees & Charges - Capacity, Environmental & Development12011 ReviewlEnv & Devt Related1DRAFT 2011 Staff Report - Dev Rates and Charges 02- 16- 2011.doc Proposal to Revise Development - Related Rates and Charges March 2011 Page 3 Summary If the staff- proposed revisions to the Environmental and Development - Related Rates and Charge are adopted by the CCCSD Board of Directors, fifty -six fees would increase, no fees would decrease, and twenty -six fees would remain unchanged. Staff • estimates that increased revenue in the fee categories where fee increases are recommended will be modest. JM2:EM Attachments N:IENVRSRV1Fees & Charges - Capacity, Environmental & Development12011 ReviewlEnv & Devt Related\ORAFT 2011 Staff Report - Dev Rates and Charges 02- 16- 2011.doc TABLE 1 CENTRAL CONTRA COSTA SANITARY DISTRICT COMPARISON OF CURRENT & PROPOSED RATES & CHARGES FOR 2011 -12 February 16, 2011 Fee Category Current Fee Proposed Fee % Change (A) DEVELOPMENT AND PLAN REVIEW Review of new sewer plans and related documents; review of plans for and processing of residential and commercial permit applications; installer reimbursement of sewer construction costs from subsequent connectors; identification of right -of -way conflicts. (A -1) Development Review: Mainline Plan Review (actual cost): Base Fee (minimum charge) $2,179 $2,222 2.0% Each additional hour in excess of base fee $132 $134 1.5% Special Cut Sheet Review $208 $212 1.9% Manhole only design & plan review $886 $904 2.0% Right of Way Document Review - 100 / Sub Map (each): $594 $606 2.0% Right of Way Document Review - No Changes Required $390 $398 2.1% Right of Way document review - Appurtenance (initial): $539 $542 0.6% Appurtenance (each additional) $206 $210 1.9% (A -2) Application Fees Overflow Protection Device Installation (OPD only) no charge no charge no change Side Sewer Cleanout installation (to facilitate installation of OPD only; permit $25 $25 no change not upgradable) Basic Application (side sewer work, easement staking, permit renewal) $95 $97 2.1% Existing parcel - new sewer service $130 $132 1.5% New parcel - new sewer service ($13 increase each year for 3 years - 2 year $209 $222 6.2% Commercial Application $200 $200 no change Capacity Use Program ;S34 increase each year for three years - 3' year $246 $280 13.8% Capacity Fee Installment Program and Promissory Note Program $246 $280 13.8% (A -3) Reimbursement Accounts: Set -up fee ($70 increase eacn year for three yea's - _ " v ::. $876 $946 8.0% Transaction fee $147 $149 1.4% (A-4) Commercial Business Plan Review (change in RUE value) $128 $131 2.3% Special Studies Base fee (4 hours plus misc. costs) $522 $533 2.1% Each additional hour $113 $115 1.8% Source Control Review ($30 increase each year for three years - 2 " year) $220 $250 13.6% Grease Variance Review (includes site visit) $296 $301 1.7% Site Collector Plan Check - formerly "Commercial Development Plan Check" $251 $283 12.7% 1332 increase each year for 3 years - 3 year) (A -5) Private pumping system plan check $373 $380 1.9% Additional Review $147 $149 1.4% Pre - approved Pump Systems $147 $149 1.4% Annexation Fee $392 $400 2.0% (A -7) Special Approvals $216 $220 1.9% Revised: 2/24/2011 Proposed Fee Comparison - 2011 Page 1 TABLE 1 CENTRAL CONTRA COSTA SANITARY DISTRICT COMPARISON OF CURRENT & PROPOSED RATES & CHARGES FOR 2011 -12 February 16, 2011 Fee Category Current Fee Proposed Fee % Change (B) CONSTRUCTION INSPECTION Inspection of new sewer main construction and new connections and other sewer work on private property (includes TV inspection when appropriate). (B -1) Mainline Inspection (contributed assets): Base Fee $626 $637 1.8% Per Foot Charge (in street) $9.98 $10.18 2.0% Per Foot Charge (in undeveloped land) $6.87 $7.00 2.0% New Manhole, Rodding Inlet $621 $633 1.9% (B -2) Inspections by type: Overflow Protection Device installation (OPD only) no charge no charge no change Side Sewer Cleanout installation (to facilitate installation of OPD only) $50 $50 no change Side Sewer Installation / Repair per 100 feet: $149 $152 2.0% Single Inspection Charge (e.g. sewer connection; encroachment verification; side sewer cap on property; tap and lateral (new or replacement); air test; reinspection; $149 $152 2.0% homeowner preconstruction inspection) Manhole tap; lateral abandonment at main; pipe bursting; trash enclosure $298 $304 2.0% w/o trap; side sewer CIPP repair: outdoor grease trap only Manhole Alteration; trash enclosure with trap; grease interceptor abandonment $447 $456 2.0% Outside pump installation $447 $456 2.0% New Manhole or Rodding Inlet (private) $596 $608 2.0% Grease / Sand / Oil Interceptor $894 $912 2.0% (B -3) Overtime inspection: First Hour (if responding from off -site) $91 $93 2.2% Every hour thereafter $61 $62 1.6% Weekend /Holiday (New Year's Day, Martin Luther King, President's Day, Memorial Day, July 4th, Labor Day, Veteran's Day, Thanksgiving, Christmas) - 4 hr. 5274 $279 1.8% minimum (B -4) Inspection of non - permitted work (+ avoided charge) $298 $304 2.0% Revised: 2/24/2011 Proposed Fee Comparison - 2011 Page 2 TABLE 1 CENTRAL CONTRA COSTA SANITARY DISTRICT COMPARISON OF CURRENT & PROPOSED RATES & CHARGES FOR 2011 -12 February 16, 2011 Fee Category Current Fee Proposed Fee % Change (C) COLLECTION SYSTEM SERVICES TV inspection of sewers conducted separate from a construction inspection activity: verification of sewer location and sewer service connection. (C -1) TV Inspection: Weekday, hourly rate $196 5200 2.0% Minimum Charge (2 hr min) 5392 5400 2.0% Overtime - First Hour $134 5137 2.2% Overtime - Each Additional Hour 5108 5110 1.9% Overtime - Weekend / Holiday (4 hr min) $458 5467 2.0% (C -2) Dye test $257 5257 no change (C -3) Collection system repair Actual Expense Actual Expense no change (C -4) Cancelled TV Inspection without prior notice 5345 5352 2.0% (C -5) Sewer locating and marking $222 $227 2.3% (D) RIGHT -OF -WAY Establishing right -of -way agreements and resolving conflicts. (D -1) Process Quitclaim Deeds 5945 $947 0.2% Process Quitclaim Deed - plat and legal by others 5571 5572 0.2% (D -2) Process Real Property Agreement, License, or Easement Base Fee (minimum charge) $776 5778 0.3% Each Additional Hour (after 2 hours) $122 5122 0.0% (D -3) Right -of -way Research / Encroachment Resolution Fee Actual Expense Actual Expense no change (D -4) Right of Entry / Encroachment Permit Fee (523 each year for three years - 3` yr) 5146 5169 15.8% (E) MISCELLANEOUS District services provided for private sewer projects; interest rates for CCCSD programs; copying fees. (E -1) Engineering - private sewer projects Actual Expense Actual Expense no change (E -2) Soil evaluation - private sewer projects Actual Expense Actual Expense no change (E -3) Surveying Actual Expense Actual Expense no change (E-4) Minimum annual interest rate for CADs and Capacity Use Program 6.00% 6.00% no change (E -5) Document / Plan Copying Fees 8 1/2" x 11 "; 8 1/2" x 14 "; 11" x 17" (per sheet) 50.15 50.15 no change 24" x 36" Plan (per sheet) 53.00 $3.00 no change CCCSD Standard Specifications 520.00 520.00 no change Connection Fee Deferral Program (Resos. 2009 -034, 2010 -033) - processing fee for (E -6) each separate Memorandum of Agreement (program and fee expire 6/30/2011, 5450.00 5459.00 2.0% unless program is extended.) Ord. 260 Connection Fee Deferral Program - in addition to fee E -6 above, participation fee for (E -7) each separate property (program and fee expire 6/30/2011, unless program is $110.00 $112.00 1.8% extended.) Ord. 260 Multiplier to be applied to Alhambra Valley Assessment District (AVAD) 2009 Parcel (E -8) Assessment Amount listed in Ordinance 257 - Exhibit B to determine AVAD 1.03185 1.03889 0.7% Reimbursement Fee amounts applicable to connections in 2011 -12. Revised: 2/24/2011 Proposed Fee Comparison - 2011 Page 3 TABLE 1 CENTRAL CONTRA COSTA SANITARY DISTRICT COMPARISON OF CURRENT & PROPOSED RATES & CHARGES FOR 2011 -12 February 16, 2011 Fee Category Current Fee Proposed Fee % Change (F) INDUSTRIAL PERMIT FEES Permitting and inspection of industries and other commercial dischargers to ensure availability and use of pretreatment processes. Base permit fee of Base permit fee of (F -1) Class I Fees $3,256 + cost of $3,256 + cost of no change District's lab District s lab analysis analysis Base permit fee of Base permit fee of (F -2) Class II Fees $3,256 + cost of $3,256 + cost of no change District's lab District s lab analysis analysis (F -3) Class III Fees 0 $0 no change (F-4) Industrial user permit application fee 0 $0 no change (F -5) Special discharge permit application fee ( *) No on -site inspection $65 each $65 each no change On -site inspection Base fee of $345 Base fee of $345 no change (G) SEPTAGE DISPOSAL ( * *) Sampling and disposal of septic waste and grease. (G -1) Annual permit fee $1,650 $1,650 no change (G -2) Residential septic /toilet waste < 2,000 gallons $18 + $0.14 /gal $18 + $0.14 /gal no change > 2,000 gallons $58 + $0.14 /gal $58 + $0.14 /gal no change (G -3) Restaurant grease waste < 2,000 gallons $18 + $0.02 /gal $18 + $0.02 /gal no change > 2,000 gallons $58 + $0.02 /gal $58 + $0.02 /gal no change ( *) Additional charges to be billed separately if staff time incurred is above that included in the base fee. ( * *) Other approved waste will be charged at the residential septic and portable toilet waste rate unless actual strength characteristics are provided. Revised: 2/24/2011 Proposed Fee Comparison - 2011 Page 4 Central Contra Costa Sanitary District February 24, 2011 TO: BUDGET AND FINANCE COMMITTEE • VIA: JAMES M. KELLY, GENERAL MANAGER ANN E. FARRELL, DIRECTOR OF ENGIN RIN 1Y CURTIS W. SWANSON, ENVIRONMENTAL SERVICES DIVISION i MANAGER FROM: JARRED MIYAMOTO- MILLS, PRINCIPAL ENGINEER w lc" SUBJECT: SENRO SUSHI CAPACITY FEES In keeping with general Board direction to work with distressed customers to mitigate the impact of capacity and other commercial connection fees during the economic recession and recovery; staff is requesting guidance on responding to a customer's request for a payment plan for capacity fees. The business owners, Vincent and Kathy Li, intend to open a new sushi restaurant, Senro Sushi, at 2475 San Ramon Valley Boulevard, Suite 107, in San Ramon. They have signed a lease on the space, which formerly housed a sandwich shop and paid capacity fees at the "Deli" rate factor. The new restaurant fits the District's definition of a restaurant. The net capacity fees due are $31,784.78. The business owners have stated that the capacity fees exceed the amount budgeted for the restaurant opening by the business owners, that they did not anticipate this fee and do not have the funds to pay this amount at this time. They are already obligated under their lease, have spent significant funds on permitting, designing, decorating, and outfitting the space to suit their restaurant. Mr. and Mrs. Li have stated that the location was specifically chosen because it was a former restaurant, it was laid out and equipped as a restaurant, and they assumed that all utilities in place were appropriate for a restaurant. They were unaware of the District's distinction between "deli" and "restaurant" uses, and the resulting much higher fees for a restaurant. Staff felt that this business was a good candidate for a Capacity Use Agreement, and offered this option, which would allow payment of the capacity fees over a 15 -year period. The Capacity Use Agreement is a three -way agreement between the District, the business owners, and the property owner. The property owner, in this case, declined to sign the Capacity Use Agreement. Commercial property owners are frequently reluctant to sign Capacity Use Agreements, although doing so does not N: \ENVRSECVadmin \Miyamoto- Mills \Memos\Memo to Board Finance Corn - Senro Sushi Capacity Fees 2- 24- 11.doc • Budget and Finance Committee Senro Sushi Capacity Fees Page 2 February 24, 2011 • obligate them to pay the annual Capacity Use Charges if the business closes or moves because the agreement would be suspended under those circumstances. The business owners have requested that the District provide a payment plan that would not require the property owner's signature, and have proposed an installment payment plan that does not include any interest with the following payment schedule: Down payment: $3,000 upon issuance of the permit Monthly payments: $1,200 (approximately) for 24 months (principal only) The business owners would like to sign a promissory note /installment payment agreement for the above payment schedule. Other fees due, including sewer service charge and inspection fees, would be paid at the time of permit issuance. • Staff is seeking guidance from the Board on the following issues: • 1. Is the proposed payment plan acceptable to the District? 2. Other types of agreements, such as CADs and Capacity Fee Installment Payment Plans for Septic Tank Conversion, typically include the provision for interest to be charged at 6 %. Should interest at this rate be included for this type of installment payment agreement? Adding interest at 6% would increase the monthly payments to $1,275.74. Staff feels that it would be appropriate to charge interest to cover the administrative costs of dealing with a stream of payments. JM2:EM /nap cc: Board of Directors • N:\ ENVRSEC Wdmin \Miyamoto- MillsWemos \Memo to Board Finance Com - Senro Sushi Capacity Fees 2- 24- 11.doc