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HomeMy WebLinkAbout08.a. Consider request for reconsideration of the May 17, 2012 Board action granting Contractual Assessment District (CAD) financing policy exceptionsCentral Contra Costa Sanitary District ' BOARD OF DIRECTORS • POSITION PAPER Board Meeting Date: June 7, 2012 subject: CONSIDER REQUEST FOR RECONSIDERATION OF THE BOARD'S MAY 17, 2012 GRANTING OF CONTRACTUAL ASSESSMENT DISTRICT (CAD) FINANCING POLICY EXCEPTIONS Submitted By: Initiating Dept. /Div.: Jarred Miyamoto - Mills, Provisional Engineering /Environmental Services Environmental Services Division Manager REVIEWED AND RECOMMENDED FOR BOARD ACTION: ` t J. Miyt3 oto -Mills . Alm Ann ' Farrell General Manager ISSUE: At its May 17, 2012 regular meeting, the Board approved exceptions to its current CAD Policy. A member of the public has requested that the Board reconsider its May 17, 2012 action approving CAD Policy exceptions for the potential El Toyonal CAD in Orinda (see letter included as Attachment 1). RECOMMENDATION: Consider request for reconsideration of CAD Policy exceptions for a potential El Toyonal area CAD in Orinda. If the Board decides to reconsider the El Toyonal action, direct staff to calendar the reconsideration for the June 21, 2012 regular meeting and notify the interested parties that the matter will be reconsidered. Also, if the Board decides to reconsider the El Toyonal action, it may wish to consider whether its action regarding CAD Policy exceptions for the St. Mary's Road CAD should also be reconsidered. If the Board decides to reconsider the St. Mary's action, direct staff to calendar as above and postpone or continue the public hearing on the CAD that appears on today's agenda to the June 21, 2012 regular meeting. FINANCIAL IMPACTS: If the Board denies the request for reconsideration and allows the approved CAD Policy exceptions to stand, the District will be obligated to cover the following costs: 1. Up to 51% of the total CAD cost for 18 reimbursable non - participant shares totaling approximately $310,000 to $476,000 for a potential El Toyonal area CAD in Orinda; and /or N: \ENVRSEC \Position Papers \Miyamoto- Mills\2012 \6- 7- 12 \PP- Reconsider CAD Except 6 -7 -12 FINAL4.doc Page 1 of 3 POSITION PAPER Board Meeting Date: June 7, 2012 subject. CONSIDER REQUEST FOR RECONSIDERATION OF THE BOARD'S MAY 17, 2012 GRANTING OF CONTRACTUAL ASSESSMENT DISTRICT (CAD) FINANCING POLICY EXCEPTIONS 2. Up to 25% of the total CAD cost for 3.5 reimbursable non - participant shares totaling approximately $94,000 for the St. Mary's Road CAD No. 2011 -1 in Lafayette. If the Board were to grant the request for reconsideration and subsequently voted to rescind its approved CAD Policy exceptions, these District financial obligations for non- participants would be eliminated. ALTERNATIVES /CONSIDERATIONS: The Board could deny the request for reconsideration and allow the approved CAD Policy exceptions to stand. It should be noted, however, that if the Board grants the request for reconsideration and subsequently decides to rescind or modify its approval, the current CAD Policy will still provide a program for facilitating extension of public main sewers to properties in need of service through its financing of the total project cost of these extensions over 10 years at a minimum of six percent annual interest. This financing program is designed to make the cost of public main sewer extension more affordable by mitigating the burden borne by the participants who are paying the non - participants' shares. Historically this financing program has been adequate to enable participants to successfully form CADs and fund the non - participants' share without the financial participation of the District. BACKGROUND: At its May 17, 2012 regular meeting the Board approved the following exceptions to the current CAD Policy (See Attachment 2), both actions on 3 -2 votes: 1. For a potential El Toyonal area CAD in Orinda: The District will cover up to 18 reimbursable non - participant cost shares at an approximate cost of $310,000- $476,000 (i.e., for 51 % of the 35 properties that would benefit from the project referred to as Scenario "B " - -- see Attachment 3); and a longer period (up to 20 years) for participants to repay their assessments will be provided. 2. For the St. Mary's Road CAD No. 2011 -1 in Lafayette: The District will cover up to 3.5 reimbursable non - participant cost shares out of 14 total shares or 25% of the total cost at an approximate cost of $94,000, with the remaining 10.5 shares to be funded by participating property owners and the City of Lafayette. In order to mitigate the unfavorable cash -flow impacts of the approved policy exceptions, the Board approvals required that the agreements for these CADs include the following provisions: N: \ENVRSEC \Position Papers \Miyamoto- Mills\2012 \6- 7- 12 \PP- Reconsider CAD Except 6 -7 -12 FINAL4.doc Page 2 of 3 POSITION PAPER Board Meeting Date: June 7, 2012 subiect CONSIDER REQUEST FOR RECONSIDERATION OF THE BOARD'S MAY 17, 2012 GRANTING OF CONTRACTUAL ASSESSMENT DISTRICT (CAD) FINANCING POLICY EXCEPTIONS • Vacant properties that are unlikely to be developed shall be excluded from CAD boundaries; • Participants' remaining assessment balances shall be due -on -sale; • Non - participant reimbursement fees shall be adjusted annually so that the District would recoup its lost investment opportunity cost when non - participants ultimately connect to the CAD public main sewer; and • Assessment of non - participant reimbursement fees shall continue until all District funds are recovered. Attachment 3 is a table that presents the compliance status of the potential El Toyonal area CAD and the St. Mary's Road CAD with the current CAD Policy's eligibility criteria for CAD formation. RECOMMENDED BOARD ACTION: Consider request for reconsideration of CAD Policy exceptions for a potential El Toyonal area CAD in Orinda. If reconsideration for the El Toyonal CAD is granted, consider whether CAD Policy exceptions granted for the St. Mary's Road CAD No. 2011 -1 in Lafayette should also be reconsidered. If the Board decides to reconsider one or both of these actions, direct staff to calendar its reconsideration for the June 21, 2012 regular meeting and to notify the interested parties that the matter will be reconsidered. If the Board decides to reconsider its action regarding St. Mary's Road CAD, postpone or continue the public hearing on the CAD that appears on today's agenda to the June 21, 2012 regular meeting. N: \ENVRSEC \Position Papers \Miyamoto- Mills\2012 \6- 7- 12 \PP- Reconsider CAD Except 6 -7 -12 FINAL4.doc Page 3 of 3 ATTACHMENT 1 May 29, 2012 TO: Board President Jim Nejedly Central Contra Costa Sanitary District 5019 Imhoff Place Martinez, CA 94553 Dear President Nejedly and Members of the Board: This letter is to formally request an appeal of the May 17, 2012 Board decision to adopt exceptions to the rules of the CAD policy, in favor of forming a CAD for the extension of the sewer on El Toyonal to Alta Vista, Dos Osos, Camino del Monte, and Los Norrabos areas of Orinda, Contra Costa County, California. The community requested an appeal of the decision by way of an email on May 21" and was advised to send a letter. The reasons for the appeal are as follows: 1. Notice to the affected community of this important decision was insufficient. The residents of the area were first notified of the May 17th Board Meeting on May 14th, which was not timely. As background, the community understood there was a consideration before the Board to grant an exception to form an Assessment District. I inquired about the date the Board would consider this item, and was guided to check the CCCSD website, to locate the posted meeting agenda, and to confirm if this item was scheduled. As of May 11th, there was no agenda posted on the CCCSD website. An email announcing the Board's plans to consider this item was sent to me on May 14. This late notice left inadequate time to formalize objections to the proposal and the content of the map, and for concerned parties to change schedules or obtain clearance to take time off from work. Owing to this late notice, many participants were unable to attend. 2. The position paper 8.a. provided by CCCSD staff to the Board was factually incorrect and incomplete. The map attached to the position paper 8.a. has significant errors. At least seven parcels are labeled with 7, indicating the CCCSD has not completed the task of gathering all the important data. Some of the' ?' are on parcels whose owners oppose the Assessment District. At least five other parcels are not marked as opposing, but these owners are on record as opposed. Furthermore, there are uphill parcels on Tres Mesas which have rights -of -way to Alta Vista and Dos Osos that are not delineated on the map. These parcels would be affected by the Board's decision, and should be included for consideration. None of these owners were notified of the intended Assessment District. Placing this matter before the Board with incomplete and inaccurate information was premature. 3. Project proponents have significantly distorted the evidentiary record with unsubstantiated, inaccurate assertions. Many of the incorrect or unsubstantiated assertions made by the project proponents were rebutted in a May 16, 2012 letter provided to the Board at its May 17, 2012 meeting. The May 16 letter is cited in support of our appeal of the Board's May 17, 2012 decision. 4. The Board based its decision on a comparison to Alhambra Valley, but failed to draw any clear parallel between the Orinda location and the Alhambra Valley. In addition, Board member Williams pointed out that the two cases are fundamentally different on a number of counts. This point was articulated in the discussion of the Board's action, and is included in the recorded record. 5. The Board's decision, if upheld, constitutes an irrational and indefensible subsidization of a few, well - funded property developers, not a rational promotion of a beneficial sanitary system. record. This point was articulated in the discussion of the Board's action, and is included in the recorded By this appeal, the goal of the majority of property owners is to have CCCSD prepare and distribute a complete and accurate map, and to include all participants. In this manner, The Board can make an informed decision based on facts. Please advise the date the appeal will be heard. The community trusts a corrected map, a complete evidentiary record, and completed list of participants will be delivered at least a week before the scheduled hearing date. Thank you in advance for your kind consideration in this important matter. Sincerely, -11�1 yo-t�- Louise Benvenue Contact information: Address: 25 Alta Vista Drive, Orinda CA 94563 Day time telephone: 510 - 495 -2506 Evening phone: 925 - 253 -1325 Email address: Louise.Benvenue @comcast.net Number: BP 010 Authority: Board of Directors Effective: January 7, 1999 Revised: February 1, 2001, September 5, 2002 Reviewed: Initiating Dept. /Div.: Engineering /Env. Services BOARD POLICY CONTRACTUAL ASSESSMENT DISTRICT POLICY STATEMENT PURPOSE The purpose of the Contractual Assessment District (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. POLICY Introduction This policy statement for the 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. 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 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 ATTACHMENT 2 BP 010 Page 2 of 8 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 the 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. • 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: 1. A minimum of five properties must be directly tributary to the proposed CAD facilities. 2. A minimum of 60 percent of the properties directly tributary to the proposed CAD facilities must have existing homes served by the septic tank systems. BP 010 Page 3 of 8 3. 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: (1) initiation of a CAD; (2) approval of the Engineer's Report and assessments, ordering of the improvements, and approval of the CAD election; and (3) approval and levying of final assessments. Initial Actions 1. 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. 2. 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. Creation of Assessment District Participants are required to retain an engineer to design and solicit bids for the private work (the sewer facilities). BP 010 Page 4 of 8 2. 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. 3. The District will distribute Notices of Proposed Assessment and conduct an election in accordance with state law by which property owners may indicate their approval of or opposition to the proposed assessment. 4. 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. 5. Following the public hearing, Board of Directors will determine the election results and consider approval of the Engineer's Report, preliminary assessments, and the CAD improvements. 6. 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. Assessment Contract and Construction 1. 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. 2. 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. 3. 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. 4. The District will accept the work if the work is done in accordance with District standards. 5. Participants shall be required to provide all project cost records and related information. District staff will review project costs, evaluate eligible project costs, BP 010 Page 5 of 8 and determine the proposed final assessments. The Board of Directors will then consider approval and levying of the final assessments. Payments and Assessments 1. 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. 2. The term of the participants' 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 one percent (1 %) above the current average interest rate on District temporary investments or an interest rate of six percent (6 %), whichever is greater.' 3. 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. 4. 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 payments shall be made at the time of fixing of final assessments. 5. 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 language regarding the minimum 6% interest resulted from an amendment adopted September 5, 2002 via Resolution No. 2002 -071. BP 010 Page 6 of 8 6. The costs of the work associated with sanitary sewer mains, manholes, rodding inlets and private sewer laterals within public streets or rights 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. 7. 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. 2. CAD non - participant reimbursement fees will be established by the Board after a public hearing and after final assessments have been established. 3. For purposes of calculating the amount of a CAD non - participant reimbursement fee to be 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. 4. 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. BP 010 Page 7 of 8 Assume: Total assessments to be paid = $80,000; there are 4 original participants and 4 non- participants. Each of the 4 original participants assumes a $20,000 assessment. REIMBURSEMENT FEE CALCULATION Non - Participant Fee Credit to Each Prior Net Cost to All Connection Participant Participants First $80,000 - 5 = $16,000 - 4 = $20,000 - 4,000 $16,000 $4,000 $16,000 Second $80,000 _ 6 = $13,333 - 5 = $16,000 - 2,667 $13,333 $2,667 $13,333 Third $80,000 - 7 = $11,429 - 6 = $13,333 - 1,904 $11,429 $1,904 $11,429 Fourth $80,000 - 8 = $10,000 - 7 = 11,,4 9 $1 $10,000 $1,429 $10,000 6. As non - participating owners connect their homes to the sewer extension, District 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. 7. 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 C 2 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. : 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. ATTACHMENT 3: COMPLIANCE OF EL TOYONAL SCENARIO B AND ST. MARY'S ROAD CAD WITH CCCSD'S 2001 CAD POLICY CAD CRITERION I EL TOYONAL SCENARIO B I ST. MARY' ROAD CAD "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." "The term of the Participant's assessment (pavback period) shall be ten vears." "Participants are limited to use of the ten -year annual assessment payment option for a single parcel at any given time "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 proiect." Thirty -five (35) properties could be served Forty -nine (49) percent of the properties (17 of 35) are developed with existing homes served by septic systems; No parcel has more than two (2) dwellings. Proponents have requested a pavback period of uo to 20 vears Some property owners own more than one parcel. No exception from this policy has been reauested. Proponents have requested the District cover the cost shares of up to 18 non - participants ($310K- $476K); 51% of the properties. Thirteen (13) properties could be served. Ninety -two (92) percent of the properties are developed; all of those with existing homes on septic systems, except for the Citv ball fields. No parcel has more than two (2) dwellings. Payback period would be ten vears. No property owner owns more than one property. Proponents have requested the District cover the cost of up to 3.5 non - participants ($94K); 25% of the properties. "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."