Loading...
HomeMy WebLinkAbout06.a.2) Report on potential El Toyonal-Alta Vista-Dos Osos CAD(P .a.z) Central Contra Costa Sanitary District December 8, 2011 TO: THE HONORABLE BOARD OF DIRECTORS VIA: JAMES M. KELLY, GENERAL MANAGER ANN FARRELL, W GENERAL MANAG /DIRECTOR OF ENGINEERING JARRED MIYAMOTO- MILLS, PROVISIONAL ENVRIONMENTAL SERVICES DIVISION MANAGER r a wt% FROM: RUSSELL B. LEAVITT, ENGINEERING ASSISTANT III SUBJECT: POTENTIAL EL TOYONAL -ALTA VISTA -DOS OSOS CONTRACTUAL ASSESSMENT DISTRICT NOTE: This memo was reviewed by the Capital Projects Committee at its December 6, 2011 meeting. SUMMARY: Mr. Russell Cohn, a coordinating property owner for a potential CAD in the El Toyonal area of the City of Orinda, asked that the Board consider providing greater District financial support for the CAD than is allowed under the current CAD policy. Specifically, Mr. Cohn requests that the District (rather than the initial participants) cover the non - participants' shares of sewer main construction costs, as is done in the Alhambra Valley Assessment Districts (AVADs). Greater District support would reduce the cost to initial participants, which would likely increase the chances of forming a successful CAD. Consideration of this request is scheduled for the December 15, 2011 Board meeting. BACKGROUND: The potential CAD to serve the El Toyonal -Alta- Vista -Dos Osos neighborhood in Orinda currently has about four to six potential Initial Participants. The CAD would install 1,600 to 2,300 feet of new sewer in El Toyonal, Alta Vista and Dos Osos (on the El Toyonal hill). Staff has been working with this group since before 2005. Mr. Cohn recently requested the District cover CAD non - participants' shares (as we did for AVADs) to improve the likelihood that a CAD could be formed and that sewers could be installed next year. Mr. Cohn has stated that those willing to initially participate cannot afford the $60,000 to $100,000 per owner that it would cost for them to pay for the non - participants' share. Staff informed Mr. Cohn that the AVADs were a special case; the District extended a trunk sewer into the valley and covered non- participants' shares in tributary AVADs to encourage a more rapid rate of connection and reimbursement of the District's trunk sewer costs. Potential El Toyonal -Alta Vista -Dos Osos CAD December 8, 2011 Page 2 of 6 Depending how far up the hill a project extended, costs are estimated to range between $312,000 to $533,000 (to reach the Cohn property and the 10 -12 intervening properties between the existing public sewer and the Cohn's property), and $540,000 to $825,000 (to reach the last property on Alta Vista and the 20 -25 intervening properties, including those owned by the Cohn's group). With the addition of more side streets, the total cost to serve the 25 developed and 20 vacant properties identified on Figure 1 would be about $1.4 million. While Section 6520.5 of the Sanitary District Act of 1923 states: "...(District) Revenues may be used for any purpose except the acquisition or construction of additional local street sewers or laterals which are an augmentation to an existing sewer system ", Section 6.20.400 District Code addresses this issue by requiring reimbursement of any District funds used to "...design and construct public sewage facilities for an existing or proposed development" (including local street sewers). It states: In certain cases, the public interest and public safety may require the District itself to design and construct public sewage facilities for an existing or proposed development. In order to comply with applicable law concerning use of District revenues, the District shall adopt a reimbursement fee structure to provide for full reimbursement of any and all costs associated with installation of local street sewers. Reimbursement fees to reimburse the District for other sewer facilities may also be imposed. Reimbursement fees for District costs shall be calculated in the same or similar manner set forth in this chapter for installers in order to provide for full recapture of District costs. Such costs shall be placed in reimbursement accounts, pursuant to the same provisions and requirements for installers. (emphasis added) Mr. Cohn's group believes that the El Toyonal -Alta Vista -Dos Osos CAD can be considered a "special" case because: 1) The project is in the EBMUD drinking watershed (San Pablo Reservoir); 2) Existing septic tanks perform poorly due to the El Toyonal hill's clay soil and steep topography; 3) Contra Costa Environmental Health has had a moratorium on development of new septic tanks in the area since 1970 (repair and replacement of existing septic systems is allowed); 4) Extending public sewers before property owners replace old septic systems with new "enhanced" (high cost) systems is an advantage to all (property owners and the District). Once an enhanced system is installed the owner of that property is unlikely to participate in a future sewer extension project, making it even more difficult for remaining property owners to afford extending the public sewer; Potential El Toyonal -Alta Vista -Dos Osos CAD December 8, 2011 Page 3 of 6 5) Sewer installation in El Toyonal is exceptionally expensive since the road is steep, narrow and windy, and City encroachment permits require severely limited working hours as it is the only practical route up and down the hill for upslope residents. Note: In this area, El Toyonal is a public (City of Orinda) road and the other roads (Alta Vista, Camino Del Monte and Dos Osos) are private. Generally, we rely on the participants "appurtenant" access and utility easement rights for installation and maintenance of District sewers. Participants are required to sign a road maintenance agreement that ensures that the road will be adequately maintained for sewer maintenance access. While pavement restoration in the area of the sewer trench is considered an allowable CAD project cost, any extraordinary road reconstruction undertaken at the time of sewer installation are paid for by those property owners with access and utility rights in the road. County Environmental Health, the City of Orinda, EBMUD and District staff agree that elimination of septic tanks on the hill would be beneficial to public health and the environment. CONSIDERATIONS Fiscal Impact — If the District were to cover the non - participants' share of project costs, as requested and as it has done under the AVAD Financing Program, the financial impact would be one of extended cash flow, rather than one of initial funds needed for project construction. The total amount needed for an El Toyonal CAD (if approved) would be the same, regardless of the Board action on Mr. Cohn's request. Under the current CAD policy, the District's investment in the CAD would be reimbursed to the District by the initial participants within ten years. (The Initial Participants then would receive reimbursement from any non - participant that connects within twenty years.) If the District were to cover the non- participants' share, however, each participant's share would be reduced to the lowest possible amount. It is possible that a lower cost would encourage more property owners to participate. As is generally the case with CADs, some participants would pay off their assessment upfront and some would finance over ten years. There would be no predetermined end -date for reimbursement to the District from non - participants; that is, reimbursements to the District would continue until all non - participating properties had connected to the public sewer. Since some properties adjacent to proposed CAD sewer routes may not connect to the public sewer for many years (or ever), it is possible that the District would not be fully reimbursed by non - participants unless the number of properties assumed to benefit from the project are limited and the calculation of the "project- cost - share - per - property" includes only those lots that are reasonably likely to connect in the next 10 -20 years. Potential El Toyonal -Alta Vista -Dos Osos CAD December 8, 2011 Page 4 of 6 To compensate for lost investment opportunity costs, the District could annually increase the non - participants' reimbursement fee by the annual yield (interest rate) earned by funds placed in the Local Agency Investment Fund (LAIF), plus one percent (the same approach that is used for AVADs). The District could consider increasing the rate of reimbursement by requiring payment in full upon sale of participating properties, and offering financing to non - participants beyond the initial signup period for the CAD (as was also done with AVADs). It would also be possible to reduce the cost of annual assessments for those participants who finance their share of project costs by extending the financing period beyond the 10 -years allowed under the existing CAD policy. For example, AVADs are financed over 15 years. As an example, a $30,000 assessment at 6 percent interest, would cost $4,033 per year over 10 years, $3,061 per year over 15 years, and $2,596 per year over 20 years. A longer repayment period might encourage more property owners to participate, but would also extend the period for repayment of the initial participants' share of project costs. Extending the CAD repayment period could be offered instead of, or in addition to, Mr. Cohn's requested District coverage of non- participants' share of project costs. Financial Status of CAD and AVAD Programs — By the end of this fiscal year, the District will be fully reimbursed for 12 of the 23 CADs approved by the Board between 1997 and 2004. The remaining principal owed from the other 11 CADs is $757,000, which will be completely reimbursed to the District by the end of fiscal year (FY) 2014- 15. The District has also funded six AVADs, which have a 15 -year financing period, compared to the 10 -year financing period for CADs. Of the approximately $5 million the District has funded in AVAD expenses (including the Alhambra Valley Trunk Sewer), the District has been reimbursed about $700,000. The remaining principal owed from current AVAD participants is about $1.7 million, which will be completely reimbursed to the District by the end of FY 2025 -26. The balance of $2.6 million will be paid by AVAD non - participants and future, indirect connectors to the Trunk Sewer beyond the boundaries of existing AVADs, as they connect over time. Going forward, the District has identified the potential for about $5 million of future CAD projects and those funds are included in the District's 10 -Year Capital Improvement Plan. Changing the CAD policy as discussed in this memo would not change the total cost of future CADs, only the rate at which the District is reimbursed for the CAD funds expended. Precedent — If the Board chooses to cover the non - participants' share of project costs in this case, other future CAD participants could request a similar consideration. These requests could be handled on a case -by -case basis, though the Board may want to Potential El Toyonal -Alta Vista -Dos Osos CAD December 8, 2011 Page 5 of 6 establish criteria for evaluating these requests. These criteria could include proximity to a drinking watershed, elimination of septic systems, Environmental Health septic system moratorium areas, high sewer construction costs, high cost - per - property, necessity for individual residential pumps (added property owner expense), and /or urgency of project implementation. CEQA — Historically, District CADs have been exempt from the California Environmental Quality Act (CEQA) due largely to the relatively short distances involved and required compliance with District mitigating construction specifications. The method of CAD financing would not affect its CEQA status. OPTIONS Maintain the existing CAD policy that requires participants to cover the cost of non - participants. 2. Grant the Cohn group's request that the District cover the non - participants' share for an El Toyonal -Alta- Vista -Dos Osos CAD only. 3. Review the CAD policy to identify criteria under which the requested level of District participation would be acceptable for other future CADs. RBL:JM2:sdh Attachments: Figure 1 November 17, 2011 Letter from Russell Cohn, Orinda Property Owner Potential El Toyonal -Alta Vista -Dos Osos CAD December 8, 2011 Page 6 of 6 FIGURE 1. LAND USE OF POTENTIALLY BENEFITING PROPERTIES OF AN EL TOYONAL -ALTA VISTA - DOS OSOS CONTRACTUAL ASSESSMENT DISTRICT November 17, 2011 RE: Agenda item for December 15, 2011 meeting — El Toyonal Area Update Dear CCCSD Board Members, We are asking for your consideration to provide financial assistance in building the long- overdue sanitary sewer system for the El Toyonal area in Orinda. This area is unique in that a septic moratorium was imposed in 1970 due to concerns about failing septic systems fouling the drinking water held in the local reservoirs. However, since 1970 many pre - existing septic systems continue to operate in the area. Furthermore, the existing home owners with septic systems have opposed bringing a sewer system into the area due to their opposition to developing the relatively few remaining open lots. The financial burden of building a sewer system in the area has therefore been placed largely on the backs of the owners of vacant lots. This situation has led to a 40 -year period of gridlock with regard to moving ahead with the public health issue of providing a sanitary sewer to the northwest section of Orinda. We, the pro -sewer homeowners in the area, have just now culminated another two -year cycle of meetings with CCCSD, organizing property owners and the examination of multiple CAD's to try to piece together a sewer system to serve the area. The final result of this effort, as the many that have come before, is that the financial burden to build the system is too prohibitive for the initial subscribers. After examining the options, we are asking the Board to consider a financing structure that has previously been used in the Alhambra area where the CCCSD provided financing for the property owners who chose to delay their participation in the sewer project. We greatly need your leadership to complete this project and thank you for your consideration. Sincerely, Russell Cohn, Orinda Property Owner