HomeMy WebLinkAbout08.b. Consider exception to CAD Policy re proposed St. Mary's Road CADCentral Contra Costa Sanitary District 3.6
BOARD OF DIRECTORS .
POSITION PAPER
Board Meeting Date: May 17, 2012
subject: CONSIDER CONTRACTUAL ASSESSMENT DISTRICT (CAD) FINANCING
POLICY EXCEPTIONS FOR THE PROPOSED ST. MARY'S ROAD CAD NO. 2011 -1
Submitted By: Initiating Dept. /Div,:
Russell Leavitt, Engineering Assistant III Engineering /Environmental Services
REVIEWED AND RECOMMENDED FOR BOARD ACTION:
ixv
R. Leavitt Godsey J. Miy oto -Mills K. Alm Ann E. Farrell
General Manager
ISSUE: A request has been made for the District to cover some non - participant costs
of the proposed St. Mary's Road CAD.
RECOMMENDATION: Approve financing policy exceptions for St. Mary's Road CAD
No. 2011 -1 regarding District coverage of up to 3.5 shares of non - participant costs and
changes in repayment rules to accelerate District reimbursement.
FINANCIAL IMPACTS: None at this time. On June 7, 2012, the Board will be asked to
authorize formation of the CAD for a sewer construction project estimated to cost
$375,000. If the policy exceptions are approved, reimbursement of District funds
invested in the CAD likely would be extended beyond the customary 10 -year period,
however, non - participant reimbursement fees could be adjusted to compensate for lost
investment opportunity cost and participants' assessment balances could be made due -
on -sale. It is possible that one or more non - participant's properties will never be
connected, in which case the District would not be reimbursed for monies advanced to
cover those properties' shares.
ALTERNATIVES /CONSIDERATIONS: The Board can reject the policy exceptions.
The Board could also defer making a decision; this is not recommended as the
proponents need a decision in order to decide how to move forward.
BACKGROUND: Current CAD financing policy requires the voluntary participants to
cover the cost of the non - participants. For advancing these costs, participants are
eligible to receive reimbursements from non - participants, if they connect to the sewer
project within a period of twenty years. Participants may pay off their assessment in its
entirety once the final assessment is set, or they may finance the assessment on their
property tax bill at 6.0 percent annual interest for up to ten years. The financing runs
with the property and may be assumed by future property owners.
At its April 5, 2012 meeting, the Board revised the St. Mary's Road CAD boundary to
reduce the number of benefiting properties from 17 to 13. This was done to remove
uninterested property owners and reduce project costs by shortening the proposed
sewer length. In response to a request from property owners that the District assist in
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POSITION PAPER
Board Meeting Date: May 17, 2012
subject. CONSIDER CONTRACTUAL ASSESSMENT DISTRICT (CAD) FINANCING
POLICY EXCEPTIONS FOR THE PROPOSED ST. MARY'S ROAD CAD NO. 2011 -1
covering the cost of non - participants, the Board directed staff to identify project
circumstances that would warrant CAD financing policy exceptions and develop
possible exceptions that would allow for greater District participation in the St. Mary's
Road CAD specifically, while accelerating collection of some reimbursements and
protecting ratepayer funds.
Table 1 shows the number of verbal participation commitments obtained or being
considered to date. The 13 benefiting properties comprise 14 payment shares, since
the City of Lafayette has agreed to pay two, non - reimbursable shares for two
connections at its large ball field property. Since the last Board meeting where this
CAD was discussed, City of Lafayette staff has agreed to seek approval for the City to
cover two reimbursable non - participant shares (for a total of four shares).
TABLE 1. PROJECTED PARTICIPATION IN THE ST. MARY'S ROAD CAD
POTENTIAL
PARTICIPANTS
NON -
REIMBURSABLE
SHARES
REIMBURSABLE
SHARES
TOTALS
Three property owners
3
0
3
Two property owners
2
1.5
3.5
City of Lafayette
2
2 (pending)
4
SUBTOTAL SHARES
7
3.5
10.5 (a)
Shares left to be covered
CCCSD?
0
3.5 (pending)
3.5
TOTAL SHARES
7
7
14
(a) 10.5 share out of 14 shares = 75 percent participation of property owners
The property owners coordinating the CAD have requested that the District cover the
remaining 3.5 shares due to the relatively high cost of constructing a sewer project at
this location, the extra costs of each connection needing a residential pumping system,
and the proximity of Las Trampas Creek, which is vulnerable to being impacted by
septic system failures.
Greater District participation would reduce the cost to initial participants, which would
increase the likelihood that a CAD would be formed. Since some properties adjacent to
proposed CAD sewer routes may not connect to the public sewer for many years if
ever, it is likely that the District would not be fully reimbursed by non - participants within
the customary 10 year CAD repayment period. At about $26,800 per share, the 3.5
shares that the District has been requested to cover represents about $94,000 that may
not be reimbursed in the first 10 years or ever. To compensate for lost investment
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POSITION PAPER
Board Meeting Date: May 17, 2012
Subject. CONSIDER CONTRACTUAL ASSESSMENT DISTRICT (CAD) FINANCING
POLICY EXCEPTIONS FOR THE PROPOSED ST. MARY'S ROAD CAD NO. 2011 -1
opportunity costs, the District could annually adjust 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 (consistent with the AVAD policy).
Additionally, the District could require participants to pay off their remaining assessment
balance upon sale of the property. This requirement would not affect reimbursements
from non - participants, which would only be due upon connection, but would accelerate
repayment of that portion of the funds advanced by the District for participants. Thus, if
all of the non - participants eventually connected, costs plus interest would be recovered.
At its April 3, 2012 meeting, the Board's Capital Projects Committee considered the
issue of District coverage of some of the non - participant costs. The committee
recommended developing exceptions to the CAD policy, in special cases where
warranted due to cost and other factors, rather than changing the overall CAD policy.
RECOMMENDED BOARD ACTION: Consider approving financing policy exceptions
for St. Mary's Road CAD No. 2011 -1 to allow District coverage of up to 3.5 shares of
non - participant costs and to provide revised repayment and reimbursement rules
ensuring that the District will ultimately be made financially whole with regard to the
funds advanced for the CAD.
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CAD AREA PROPOSED CAD SEWER
* POTENTIAL PARTICIPANT
EXISTING
SEWER O REMOVED PARCEL/SHARE
Central Contra Costa Figure
Sanitary District APPROVED BOUNDARY
ST. MARY'S ROAD CAD 2011 -01
(13 PROPERTIES)
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