Loading...
HomeMy WebLinkAbout07.a. Consider amending Contractual Assessment District (CAD) policyCentral Contra Costa Sanitary District ' BOARD OF DIRECTORS • Q . POSITION PAPER Board Meeting Date: April 5, 2012 Subject: CONSIDER REVISING THE DISTRICT'S CONTRACTUAL ASSESSMENT DISTRICT (CAD) POLICY TO ALLOW THE DISTRICT TO FUND THE COST OF NON - PARTICIPANTS IN AREAS, SUCH AS EL TOYONAL, WHERE THE COST OF SEWERING IS COMPARATIVELY HIGH Submitted By: Initiating Dept. /Div.: Russell Leavitt, Engineering Assistant III Engineering /Environmental Services REVIEWED AND RECOMMENDED FOR BOARD ACTION: R. Leavitt T. Godsey J. Miyamoto -Mills K. Alm A E. Farrell General Manager ISSUE: Property owners in the El Toyonal area of Orinda and others areas, where the cost of sewering is comparatively high, have requested a change in the District's Contractual Assessment District (CAD) policy to allow the District to cover the cost of non - participants and receive reimbursements from them as they connect. RECOMMENDATION: Deny the requests for the District to cover some of the non- participant costs, because to do so would be inconsistent with the current CAD policy. FINANCIAL IMPACTS: None at this time. If a policy change is adopted, then as CADs are approved, some portion of the funds the District advances to pay CAD expenses would be paid back over a longer period of time, or possibly never, if the non- participants do not connect. ALTERNATIVES /CONSIDERATIONS: The Board could agree to cover some of the non - participant costs. BACKGROUND: At its December 15, 2011 meeting, the Board received a presentation from staff and several property owners, headed by Mr. Russell Cohn and a representative of Mr. and Mrs. Robert Wander from the El Toyonal area of Orinda, regarding the potential establishment of one or more CADs for public main sewer construction in their area. The presentation (attached) included property owner requests for greater District financial support for CADs than is allowed under the current CAD policy. Specifically, the District (rather than the initial participants) was requested to cover the non - participants' shares of sewer main construction costs, as is done in the AVADs. A special exception was made for AVADs to accelerate the recovery of the District's costs in the Alhambra Valley Trunk Sewer. Greater District support would reduce the cost to initial participants, which would likely increase the chances of forming a successful N: \ENVRSEC \Position Papers \Leavitt\2012 \4 -5 -12 \CAD Policy Regarding Non - participation Cost Coverage Final Rev 4- 5- 12.doc Page 1 of 4 POSITION PAPER Board Meeting Date: April 5, 2012 subiect. CONSIDER REVISING THE DISTRICT'S CONTRACTUAL ASSESSMENT DISTRICT (CAD) POLICY TO ALLOW THE DISTRICT TO FUND THE COST OF NON - PARTICIPANTS IN AREAS, SUCH AS EL TOYONAL, WHERE THE COST OF SEWERING IS COMPARATIVELY HIGH CAD. Before further considering the property owners' request, the Board directed staff to compile additional information, specifically: a) refinement of the actual anticipated participation, and b) options for phasing the CAD at different times. Subsequently, staff and some of the property owners updated the list of sewer supporters. Overall support for sewering has increased from 12 to 16 properties. Most, however, are concentrated at what would be the downstream end of the system. Along the route of a potential project reaching from El Toyonal at Camino del Cielo to Alta Vista and then to the Cohn's property on Dos Osos (see Figure 1), there are 20 properties, 11 of which are currently supportive (55 percent). The estimated cost of such a project would be $393,000 to $731,000. If only 11 property owners were to participate (without District contribution), the cost per property would be $35,000 to $66,000. If the non - participants' costs were covered by the District, as requested by the property owners, the cost per property would be about $20,000 to $37,000. For this to happen, the District would cover about $180,000 to $333,000 of the cost. (The above costs do not include District connection fees, nor contractor costs for private lateral construction and septic tank abandonment, which can range from $20,000 to more than $30,000.) There are no other potential routes where more than 50 percent participation was identified. For example, along the route reaching from El Toyonal at Camino del Cielo to the Wander's property farther up Alta Vista, there are 26 properties, 9 of which are currently supportive (35 percent). Sewer routes on other streets to serve other properties on the hillside had similar levels of support (29 to 42 percent). Establishing CADs for these other routes can be reconsidered if sewer service interest improves. In the course of examining other potential routes, District staff and the project proponents spoke with a number of neighbors who are not in favor of providing sewers in the El Toyonal area. No formal public notification was done, as there is currently no defined sewering project. However, the Board should be aware, that once a project is proposed and the public notified of the public hearing held to form the CAD, there may be vocal opposition from some neighbors. Other options raised by the interested property owners to lower the annual cost of financing CAD sewer construction costs included lengthening the financing term from 10 to 15 years or longer. Lengthening the financing term would extend the period over which the District recovers the funds advanced for construction of the CAD project. While making the participants' annual payment lower, extending the term would not lower their total costs, as additional interest is paid during the longer financing period. N: \ENVRSEC \Position Papers \Leavitt\2012 \4 -5 -12 \CAD Policy Regarding Non - participation Cost Coverage Final Rev 4- 5- 12.doc Page 2 of 4 POSITION PAPER Board Meeting Date: April 5, 2012 Subject: CONSIDER REVISING THE DISTRICT'S CONTRACTUAL ASSESSMENT DISTRICT (CAD) POLICY TO ALLOW THE DISTRICT TO FUND THE COST OF NON - PARTICIPANTS IN AREAS, SUCH AS EL TOYONAL, WHERE THE COST OF SEWERING IS COMPARATIVELY HIGH Staff recommends denial of such requests, since they are not consistent with the current CAD policy. A copy of the CAD policy is attached to this position paper for the Board's information. RECOMMENDED BOARD ACTION: Deny the requests for the District to cover non- participant costs, because to do so would be inconsistent with the current CAD policy. N: \ENVRSEC \Position Papers \Leavitt \2012 \4 -5 -12 \CAD Policy Regarding Non - participation Cost Coverage Final Rev 4- 5- 12.doc Page 3 of 4 FIGURE 1. POTENTIAL CAD SEWER TO SERVE COHN P5 u_il ' RESIDENCE AND OTEHRS ON DOS OSOS N: \ENVRSEC \Position Papers \Leavitt\2012 \4 -5 -12 \CAD Policy Regarding Non - participation Cost Coverage Final Rev 4- 5- 12.doc Page 4 of 4 Central Contra Costa Sanitary District December 8, 2011 TO: THE HONORABLE BOARD OF DIRECTORS VIA: JAMES M. KELLY, GENERAL MANAGERGj_ ANN FARRELL, WGENERAL MANAG /DIRECTOR OF ENGINEERING JARRED MIYAMOTO- MILLS, PROVISIONAL ENVRIONMENTAL SERVICES DIVISION MANAGERw�� 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 Item No. 6.a.2 Potential El Toyonal -Alta Vista - Dos Osos Contractual Assessment District (CAD) Russell Leavitt December 15, 2011 Central Contra Costa Sanitary District CAD Organizing • Several property owners in the El Toyonal hill area of Orinda have been trying for several years to organize a CAD to construct a public main sewer. • Potential CAD cost per property is high due to the cost of constructing in El Toyonal (steep, narrow, windy, only access road); large properties. • With ail participating, $20,000 - $30,000 per property for street sewer; plus $15,000+ in connection fees and lateral construction costs. S )� ORINDA L TiMSLC ` EAD MCA AL AREA PY O �48L0 LTATE YORAGA ROIfTE it WAY t About El Toyonal • El Toyonal is in an EBMUD drinking watershed. • Area has been under a County Health Dept. Septic Moratorium since 1970: no new septic systems allowed on undeveloped properties; only repairs /replacements on developed properties. • Total unserved properties in this area: 25 developed, 20 vacant. K Current CAD Rules • At least 60% of benefitting properties must already be developed. Initial participants cover the entire project cost, including non- participants' share. • CCCSD charges higher of LAI F + 1 % or minimum 6% in interest on assessments financed on tax roll for up to ten years. • With only 50% participation, starting cost is doubled for initial participants, who then wait for up to 20 years for reimbursement from non - participants; reimbursement not guaranteed. 3 1' N « Y A. M N L M "yy�.�q NTE V t \ //J i�!" r� \ • \ N Y V � S " 1 N « " ice► ' v « y V \y Y v Y 1 N u G � LAND UM Of r POMMAILY HL` MTDAC N aHOUM V - VAQ1H1 I" 3M D QBdIY Current CAD Rules • At least 60% of benefitting properties must already be developed. Initial participants cover the entire project cost, including non- participants' share. • CCCSD charges higher of LAI F + 1 % or minimum 6% in interest on assessments financed on tax roll for up to ten years. • With only 50% participation, starting cost is doubled for initial participants, who then wait for up to 20 years for reimbursement from non - participants; reimbursement not guaranteed. 3 Greater Involvement by CCCSD? • Would CCCSD cover the non - participants' share of sewer main construction costs? • CCCSD could be reimbursed by non- participants as they connect (as done with Alhambra Valley Assessment Districts — AVADs). • Reimbursement amounts could be adjusted annually to compensate for lost investment opportunity costs. Considerations • Greater involvement could be accomplished with the currently budgeted CAD funds ($500,000 per year for next ten years). • Greater involvement would slow repayment of CAD funds. No time limit on repayments from non - participants. • Other CADs may want a similar arrangement. �1 T. Options • Maintain current policy requiring participants to cover the cost for non - participants. • Grant the El Toyonal group's request that the District cover the cost for non - participants. • Review the CAD policy and consider the Alternate levels of District participation in future CADs. • Other? Questions ... ? 61 RESOLUTION NO. 2001 -008 RESOLUTION REVISING CONTRACTUAL ASSESSMENT DISTRICT POLICY WHEREAS, Central Contra Costa Sanitary District has, over the last several years, identified a prevalent sanitation issue occurring within the District's Service Area, that of the need to replace residential septic systems by connection to the District system; and WHEREAS, this sanitation issue is increasing in importance as a result of the failure of existing septic systems due to age and the increased densification of the Service Area; and WHEREAS, in order to replace failing septic systems with connections to the public sewers, extension of existing public sewer mains is frequently required; and WHEREAS, the cost and complexity of undertaking a sewer main extension may prevent a single homeowner from connecting to the public sewer system thus perpetuating an ongoing health and environmental problem; and WHEREAS, public policy, as well as legal and fiscal constraints, limit the ability of the District to build or extend local street sewers to serve individual or small groups of existing homes; and WHEREAS, the use of small assessment districts can provide the structure and financial assistance required to encourage neighbors to jointly undertake projects to provide sewer service to their properties; and WHEREAS, since 1997 on a demonstration basis and since 1999 on a program basis, the District has made use of the provisions of the Streets and Highways Code Section 5898, et seq. in order to create small Contractual Assessment Districts in order to provide for assessment financing of main extensions for failing septic systems; and WHEREAS, the Board of Directors established a policy for the formation of Contractual Assessment Districts by adopting Resolution No. 99 -010 on January 7, 1999; and WHEREAS, based on experience with individual Contractual Assessment District Projects during the past two years, the Board of Directors believes that revisions to the Contractual Assessment District Policy are appropriate. NOW, THEREFORE, the Board of Directors of the Central Contra Costa Sanitary District adopts the revised Contractual Assessment District Policy Statement, attached as Exhibit A and incorporated herein by reference. The Board of Directors of the Central Contra Costa Sanitary District further finds that this policy shall remain in effect until such further order of the Board; however, the adoption of this policy does not create any vested right or entitlement to any parcel owners within the District's sphere of influence concerning eligibility for this program, nor shall the District be precluded from modifying or terminating this program at any time it deems appropriate. PASSED AND ADOPTED this 1" day of February, 2001 by the Board of Directors of the Central Contra Costa Sanitary District by the following votes: AYES: Members: Boneysteele, Lucey, Menesini, Hockett NOES: Members: None ABSENT: Members: Nejedly Barbara D. Hockett President of the Board of Directors, Central Contra Costa Sanitary District, County of Contra Costa, State of California COUNTERSIGNED: AU Ct- o o e c E. Murphy retary, Central Contra Costa Sanitary District, County of Contra Costa State of California APPROVED AS TO FORM: K oWt on Im, District Counsel EXHIBIT A CONTRACTUAL ASSESSMENT DISTRICT POLICY STATEMENT (REVISED FEBRUARY 1, 2001) Introduction This policy statement for the Contractual Assessment District (CAD) Program establishes the criteria for formation of CAD projects, the process for the CAD program and methodology for allocating costs and assessments among CAD participants. Contractual Assessment Districts (CADs) are small assessment districts formed pursuant to Streets and Highways Code Section 5898, et seq. to extend sewer facilities to residential areas currently served by septic tank and leachfield systems. The District Board of Directors first approved a CAD Policy Statement in January 1999. Also, at that time, the Board authorized $ 1,000,000 per fiscal year for three fiscal years beginning July 1998 and ending June 2001. The Board desired to evaluate the effectiveness of the CAD Program toward the end of the third fiscal year. A Board workshop regarding the CAD Program was held November 30, 2000. This revised policy statement is an outcome of that evaluation. CAD Program Purpose The purpose of the CAD Program is to provide financial assistance to small groups of homeowners with inadequate septic tank systems so that they may extend the public sewer system to serve their properties. The intent of the CAD Program is to assist single family homeowners with failing or inadequate septic tanks who might not otherwise have the means to finance the cost of extending the public sewer. The CAD Program is intended for residential properties, primarily owner- occupied, and not commercial properties. CAD Program Funding The District will continue with the policy of a $1,000,000 per year budgetary ceiling for CADs during the fiscal years 2001 -02 and 2002 -03. This ceiling amount is to be calculated based on the total allocation to CAD projects receiving Board approval during each fiscal year. The Board of Directors, in their discretion, may modify this program, including increasing or decreasing the budgetary ceiling, at anytime. Nothing in this policy is intended to bind the District to continue with the program for any predetermined time period, nor does it create any right or entitlement in favor of potential program participants. In the absence of any intervening action of the Board of Directors, it will review the effectiveness of the CAD Program at or near the end of Fiscal Year 2002 -03. Definitions • A Contractual Assessment District (CAD) is a legal entity established pursuant to Streets and Highways Code Chapter 5898 for the purpose of financing the construction of sewers in residential areas currently being served by septic tanks. • Parcel or Property denotes in this Policy a piece of residential real estate, including land and anything permanently affixed to the land including buildings. The terms parcel and property have the same meaning herein and shall refer to the divisions of property as indicated on County Assessor's Parcel maps. • Participants are owners of properties directly tributary to proposed facilities who voluntarily agree to enter into a CAD contract. • Non - participants are owners of properties directly -tributary to the proposed facilities who do not to enter into a CAD contract. Non - participants will not be assessed for their share of the sewer improvement costs until the time of connection. • Participant Parcels are those properties to be served by the proposed facilities owned by Participants. • Non- participants Parcels are properties owned by non - participants, which could directly connect to proposed facilities and are not initially connected to the sewer improvements. • CAD Non - participant Reimbursement Fees are fees collected from owners of Non - participant Parcels at the time of connection to the sewer to reimburse current Participant Parcel owners for the Non - participant Parcel's share of the cost of sewer improvements installed under the CAD. Criteria for Formation In order to be eligible for participation in the District's CAD assessment financing program, the proposed sewer extension project must meet the CAD formation criteria. District staff will make a threshold eligibility determination and will provide proponents with a written determination of eligibility. The criteria are as follows: • A minimum of five properties must be directly tributary to the proposed CAD facilities. • A minimum of 60 percent of the properties directly tributary to the proposed CAD facilities must have existing homes served by septic tank systems. • A Participant Parcel may not have more than two (2) dwellings to participate in a CAD. Notwithstanding the above - listed criteria, the District's decision as to whether to form a CAD will be determined on a case -by -case basis and is at the sole discretion of the Board of Directors. The Board may consider technical, economic, staffing, budgetary, environmental and other factors in its consideration of whether to form a CAD. CAD Formation Process There are several staff level actions and three Board approval steps in the CAD process. The District Board of Directors will consider approval of individual CAD projects which staff has determined meet the formation criteria. The following Board actions are required. • Initiation of a CAD • Approval of the Engineer's Report and assessments; ordering of the improvements; and approval of the CAD election. • Approval and levying of final assessments. 1. Initial Actions • Small groups of property owners may be eligible for a CAD if (1) they occupy houses served by septic tanks, and (2) they seek a sewer main extension to provide for connection to the District system. District staff will work with the owners to explain the CAD process. If a sufficient number of property owners and the District remain interested in proceeding with a CAD and the criteria for CAD formation appears to be met, the District will consider initiation of a CAD. Property owners will be requested to submit letters indicating their interest in formation of a CAD. Property owners will also be requested to submit annexation petitions if their properties are not already part of the District. Staff will issue a letter setting forth its initial determination of eligibility for the CAD program. • If District staff determines that a proposed CAD does not meet the formation criteria, staff will notify the property owners in the proposed CAD of the staff decision in writing. Property owners may appeal this staff decision to the District Board of Directors in accordance with Chapter 1.16 of the District Code except as modified by this policy. This policy allows property owners 30 days to request an appeal of a staff decision. The Secretary of the District will schedule the matter for a hearing before the Board of Directors and provide written notice of the time and place of that hearing to the affected property owners. 2. Creation of Assessment District • Participants are required to retain an engineer to design and solicit bids for the private work (the sewer facilities). • An Engineer's Report estimating project costs and assessment levels will be prepared by the District in accordance with state law. Residents will have 18 months from when the District initiates formation of a CAD to submit sewer plans, construction bids and other information necessary for the District to prepare an Engineer's Report. • The District will distribute Notices of Proposed Assessment and conduct and election in accordance with state law by which property owners may indicate their approval of or opposition to the proposed assessment. • The Board of Directors will conduct a public hearing to announce the outcome of the election and receive public comment about the proposed assessment. In addition, the public hearing will be to receive comments on annexation of properties in a CAD if a public hearing is required as part of the annexation process. • Following the public hearing, the Board of Directors will determine the election results and consider approval of the Engineer's Report, preliminary assessments, and the CAD improvements. • If the proponent property owners do not provide all necessary information, including approved plans and construction bids, within 18 months of District's initiation of CAD proceedings, the CAD process will be terminated. 3. Assessment Contract and Construction • Following approval by the Board of Directors of the Engineer's Report and CAD improvements, the Participants must enter into a written contract with the District which describes the responsibilities of the parties, the work, and the provisions for payments. • The District will undertake the procedural requirements to form the CAD, and will review the plans for compliance with District standards, finance the work, and establish the assessments. • Participants are required to hire a contractor and to supervise the construction of the private works CAD facilities. The District will have no contractual relationship with the contractor and will not provide construction management or site supervision; however, the District will inspect the project consistent with prevailing District inspection procedures. • The District will accept the work if the work is done in accordance with District standards. • Participants shall be required to provide all project cost records and related information. District staff will review project costs, evaluate eligible project costs, and determine the proposed final assessments. The Board of Directors will then consider approval and levying of the final assessments. Payments and Assessments • Unless limited by other provisions of this policy, each Participant shall have the option to pay for his share of CAD expenses after the work is completed by either 1) lump sum cash payment or 2) by contractually subjecting his property to an annual assessment, including interest, over the term of the CAD. Regardless of the payment option chosen, Participants pay all costs of the sewer main extension and other appurtenant facilities required to bring service to the Participants' Parcels. The existence, or non - existence of potential Non- participant connectors shall not affect the obligation of the Participants to pay for all costs associated with the project. • The term of the Participant's assessment (payback period) shall be ten years. The interest rate shall be fixed when the contract between the Participants and the District is signed for the District by the General Manager. The annual interest rate for assessments shall be 1 percent above the then current average interest rate on CCCSD temporary investments. • Participants are limited to use of the ten -year annual assessment payment option for a single parcel at any given time. If a person(s) owns two or more parcels in the same CAD or different CADs, that person(s) may be a Participant for more than one parcel, but will be eligible for the annual assessment option for a single parcel. The shares of the CAD expenses for the other parcels must be paid by the lump sum payment option. • In the event a Participant is not eligible for the CAD assessment financing option, the Participant shall make a full lump sum payment prior to initiation of contract based on the preliminary assessment figures set forth in the Engineer's Report. Return of any excess payment or additional required payment shall be made at the time of fixing of final assessments. • The assessments shall be equal for each Participant's Parcel unless otherwise provided for in the contract and documents creating the CAD. If an existing Participant's Parcel can be legally subdivided, there are two dwellings currently existing on a single parcel, or other cost of service related factors justifying differing assessments are present, said Parcel may be assigned more than one assessment. • The costs of the work associated with sanitary sewer mains, manholes, rodding inlets and private sewer laterals within public streets or right of way may be included as eligible costs of the CAD. Eligible CAD costs may also include costs for other appurtenances within public streets or rights of way necessary to bring the sewer service to the Participants. The cost of septic tank abandonment, installation of the private sewer laterals (not within a public street or public right of way), and District fees and charges customarily due upon connection to the public sewer shall be excluded from CAD financing. For purposes of this paragraph, "rights of way" shall include public or private roads providing legal ingress and egress to multiple parcels. • The CAD assessments will be imposed on each Participant's Parcel and recorded as a lien against the Parcel. The assessment will include the principal and interest and will be collected on the property tax bill as an assessment along with taxes and other assessments and charges on the subject parcel. CAD Non - participant Reimbursement Fees • CAD Non - participant Reimbursement Fees will be established by the District Board of Directors in accordance with District practice and the CAD contract if District staff determines that there are Non - participant Parcels which could connect to the CAD facility. The District will collect CAD Non - participant Reimbursement Fees for a period of 20 years from the date of the CAD formation. The obligation of a Non - participant Parcel owner to pay a reimbursement fee upon connection to a CAD sewer will expire after the 20- year period. • CAD Non - Participant Reimbursement Fees will be established by the Board after a public hearing and after final assessments have been established. • For purposes of calculating the amount of a CAD Non - participant Reimbursement Fee to the applied to a subsequently connecting parcel, a Non- participant Parcel will be treated as a Participant Parcel for the purposes of calculation and distribution of subsequently collected Reimbursement Fees. • CAD Non - participant Reimbursement Fees will be calculated by dividing the total CAD cost by the current number of Participants. The number of Participants for this purpose shall include the total of the original and subsequent connectors, and the current Non - participant Reimbursement Fee payor. The following example illustrates this calculation process. Assume: Total assessments to be paid = $80,000; there are 4 original Participants, and there are 4 Non - participants. Each of the 4 original Participants assumes a $20,000 assessment. REIMBURSEMENT FEE CALCULATION Non- Credit to each Net Cost to Participant' Fee prior Participant Participants Connection First $80,000 = $16,000 $16,000 = $4,000 $20,000 -4,00 5 4 $16,000 Second $80,000 = $13,333 $13,333 = $2,667 $16,000 -2,667 6 5 $13,333 Third $80,000 = $11,429 $11,429 = $1,904 $13,333 - 1,904 7 6 $11,429 Fourth $80,000 = $10,000 $10,000 = $1,429 $11,429 - 1,429 8 7 1 $10,000 'After a Non - participant Parcel owner pays their reimbursement fee, the Non - participant Parcel owner becomes a Participant for the purpose of further reimbursement fee calculations. • As non - participating owners connect their homes to the sewer extension, CCCSD staff will collect a CAD Non- participant Reimbursement Fee from each newly connecting Non - participant Parcel owner. Each newly received CAD Non- participant Reimbursement Fee will be divided uniformly among the current owners of Participant Parcels. The owner(s) of the Participant Parcel at the time of the distribution shall receive any excess amount of a reimbursement share over that needed to extinguish any remaining CAD assessment, such amount to be limited to the total amount of CAD assessments or lump sum payment paid by the then current parcel owner(s), reduced by other excess reimbursement amounts previously paid to this same parcel owner(s). The District will forward a notification of available funds and a verification form to the current Participant Parcel owner(s) at the address reflected in the then current Assessor's records. Upon receipt of a properly completed verification form by the District, the District will forward a check to the then current Participant Parcel owner in the amount of the Participant Parcel owner's share as determined herein. • The District shall have no affirmative responsibility to locate the eligible Participant Parcel owner(s), other than to mail notice to the Assessor's address for the parcel owner; nor shall the District be required to attempt to contact an eligible owner's estate, or heirs, nor to locate or protect other potential interest holders. Any proceeds from collections of CAD Non - participant Reimbursement Fees which are held by the District for over three years due to inaction on the part of an eligible owner, or excess proceeds from CAD Non - participant Reimbursement Fees accumulated pursuant to the procedures set forth herein, will become the property of the District. RESOLUTION NO. 2002 -071 RESOLUTION REVISING CONTRACTUAL ASSESSMENT DISTRICT POLICY TO ESTABLISH A MINIMUM ASSESSMENT INTEREST RATE WHEREAS, since 1997 on a demonstration basis and since 1999 on a program basis, the District has made use of the provision of the Streets and Highways Code Section 5898, et seq. in order to create small Contractual Assessment Districts in order to provide for assessment financing of main extensions for failing septic systems; and to provide for assessment financing of main extensions for failing septic systems; and WHEREAS, the Board of Directors established a policy for the formation of Contractual Assessment Districts by adopting Resolution No. 99 -010 on January 7, 1999; - and WHEREAS, the Board of Directors revised the Contractual Assessment District Policy by adopting Resolution No. 2001 -008 on February 1, 2001; and WHEREAS, the assessment interest rate for prospective Contractual Assessment Districts as provided for by the current Contractual Assessment District Policy would be at a rate that the Board of Directors considers to be fiscally inappropriate NOW THEREFORE, the District Board of Directors of the Central Contra Costa Sanitary District adopts a minimum assessment interest rate of six percent (6 %) for Contractual Assessment Districts. UAPosition Papers\Bertera \CAD. InterestRateResolution.wpd Resolution No. 2002 -071 Page 2 The Board revises the Contractual Assessment District Policy such that the assessment rate for future Contractual Assessment Districts be either one percent (1 %) above the then current average interest rate on District temporary investments or an interest rate of six percent (6 %), whichever is greater. PASSED AND ADOPTED this 51h day of September, 2002 by the Board of Directors of the Central Contra Costa Sanitary District by the following votes: AYES: Members: Boneysteele, Hockett, Lucey, Nejedly, Menesini NOES: Members: None ABSENT: Members: None Mario Menesini President of the Board of Directors, Central Contra Costa Sanitary District , County of Contra Costa, State of California COUNTERSIGNED: — � L U�- I Joy E Murphy Secretary, Central Contra Costa Sanitary District, County of Contra Costa, State of California APPROVED AS TO FORM: Kenton L. Alm, District Counsel UAPosition Papers\Bertera \CAD. InterestRateResoiution.wpd