HomeMy WebLinkAbout08.a. Reconsider Board action of May 17, 2012 approving CAD Policy exceptions for potential El Toyonal CADCentral Contra Costa Sanitary District
BOARD OF DIRECTORS
1 .Q�
POSITION PAPER
Board Meeting Date: July 19, 2012
Subject: RECONSIDER CONTRACTUAL ASSESSMENT DISTRICT (CAD)
FINANCING POLICY EXCEPTIONS FOR POTENTIAL EL TOYONAL AREA CAD
Submitted By: Initiating Dept. /Div.:
Russell Leavitt, Engineering Assistant III Engineering /Environmental Services
REVIEWED AND RECOMMENDED FOR BOARD ACTION:
R. Leavitt T. Brightbill J. Mi moto -Mills K. Alm Ann E. Farrell
O_ General Manager
ISSUE: On May 17, 2012, the Board approved certain policy exceptions related to
formation of a potential El Toyonal CAD covering 35 properties in Orinda on a three to two
vote with President Nejedly and Member Williams voting against the exceptions. These
exceptions were to allow the Central Contra Costa Sanitary District (District) to cover up to
18 non - participant shares and to provide a longer repayment period for participants. On
June 7, 2012, a group of property owners appeared before the Board and asked that these
exceptions be reconsidered. After hearing testimony from the property owners both
supporting and opposing the exceptions, the Board voted to reconsider its May 17, 2012,
action.
RECOMMENDATION:
1) Rescind approval of CAD Policy exception to pay non - participant cost shares for the
potential El Toyonal CAD.
2) Confirm approval of CAD Policy exception to extend the repayment period available
for participants' assessments from the ten years allowed in the CAD Policy to twenty
years in order to mitigate the high cost of sewering in the El Toyonal area.
FINANCIAL IMPACTS:
1) Rescinding exception for paying non - participant cost shares would reduce the
financial risk to the District.
2) Confirming approval of a twenty -year repayment period would extend the amount of
time for the District to fully recover the funds advanced from ten to twenty years.
ALTERNATIVES /CONSIDERATIONS: The Board can decline to rescind or modify either
of the approved policy exceptions.
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POSITION PAPER
Board Meeting Date: July 19, 2012
subject RECONSIDER CONTRACTUAL ASSESSMENT DISTRICT (CAD)
FINANCING POLICY EXCEPTIONS FOR POTENTIAL EL TOYONAL AREA CAD
BACKGROUND: Proponents of a potential El Toyonal CAD requested that the District
grant exceptions to the current CAD financing policy that would allow the District to cover
some non - participant cost shares and provide a longer repayment period for participants.
On May 17, 2012, the Board approved policy exceptions, on a three to two vote with
President Nejedly and Member Williams voting against the exceptions, which would:
1) Allow the District to cover up to 18 non - participant cost shares for a potential CAD
designated as "Scenario B" comprised of 35 El Toyonal area properties (see
Attachment 1); and
2) Provide a longer repayment period for participants.
On June 7, 2012, the Board voted to reconsider its approval of these exceptions.
On June 21, 2012, the Board opened and continued this agenda item after hearing
testimony from area property owners.
Current CAD financing policy requires that voluntary participants cover the cost of non-
participants. For advancing these costs, participants are eligible to receive
reimbursements from non - participants who connect to the CAD - installed public sewer
within a period of twenty years. A participant may pay off their assessments in a lump sum
once the final assessment is set, or they may finance the assessment on their property tax
bill at six percent annual interest for up to ten years. The financing runs with the property
and may be assumed by future property owners.
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 at all, it
is likely that the District would not be fully reimbursed by non - participants for many years; it
is possible that some reimbursements might never be collected.
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 would be paid during the longer financing period. Extending the financing period
from 10 years to 20 years would reduce participants' annual payment amount by 64 %, but
would increase the total interest paid over the full life of the financing (and earned by the
District) by 112 %.
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POSITION PAPER
Board Meeting Date. July 19, 2012
subject RECONSIDER CONTRACTUAL ASSESSMENT DISTRICT (CAD)
FINANCING POLICY EXCEPTIONS FOR POTENTIAL EL TOYONAL AREA CAD
The Case for Upholding the CAD Policy Exceptions
Representatives of the proponents cite a number of factors associated with the El Toyonal
area to justify these CAD policy exceptions including:
1) The project is in the EBMUD watershed (San Pablo Reservoir);
2) Existing septic tanks perform poorly due to the El Toyonal hill's clay soil and
steep topography;
3) The Contra Costa Environmental Health Division has imposed a moratorium on
development of new septic tanks in the area since 1970 (only limited 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 advantageous since once an enhanced
system is installed the owner of that property is unlikely to participate in a future
sewer extension project, making it more difficult for remaining property owners to
afford extending the public sewer;
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.
The Case for Rescinding the CAD Policy Exceptions
Property owners opposed to extension of public sewer have requested that the Board
reconsider its approval of the CAD Policy exception to pay for non - participants' costs
asserting that:
1) The approved exception for the District to fund the non - participants' costs will
inappropriately subsidize a few property owners (who could fund a public sewer
extension privately or use the traditional CAD process, covering non-
participant cost shares themselves).
2) It is inappropriate to require non - participants to pay the District's lost investment
opportunity ( "carrying ") costs if they must connect to public sewer in the future.
3) Many property owners with developed properties oppose the extension of a public
sewer.
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POSITION PAPER
Board Meeting Date: July 19, 2012
subject. RECONSIDER CONTRACTUAL ASSESSMENT DISTRICT (CAD)
FINANCING POLICY EXCEPTIONS FOR POTENTIAL EL TOYONAL AREA CAD
The CAD program was established by the District to assist owners of existing homes
to convert from septic tank systems to public sewer service for their wastewater
disposal needs; however, the majority of CAD proponents own undeveloped
property.
Interest surveys conducted by sewer opponents have been received by the District.
Unsewered properties in the "Scenario B" area whose owners oppose the extension of
public sewer are identified with an asterisk ( *) on Attachment 1. These surveys indicate
that owners of 36 properties in the area are currently opposed to extension of a public
sewer, though not all of these properties are adjacent to the potential sewers within the
potential "Scenario B" CAD area discussed above.
The interest surveys discussed above indicate that it is unlikely that a CAD could be
formed within the potential "Scenario B" boundaries since the majority of property owners
in that area have indicated their opposition to a CAD. It is possible, however, that a smaller
CAD could be formed, for example in the "Scenario A" area depicted on Attachment 2.
RECOMMENDED BOARD ACTION:
1) Rescind approval of CAD Policy exception to pay non - participant cost shares for the
potential El Toyonal CAD.
2) Confirm approval of CAD Policy exception to extend the repayment period available
for participants' assessments from the ten years allowed in the CAD Policy to twenty
years in order to mitigate the high cost of sewering in the El Toyonal area.
N: \ENVRSEC \Position Papers \Leavitt\2012 \7- 19 -12 \PP El Toyonal CAD Reconsider Pol Excptns 7 -19 -12 FINAL 5.doc Page 4 of 4
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ATTACHMENT 1: POTENTIAL EL TOYONAL CAD (SCENARIO B)
* OPPOSES OR NOT INTERESTED
IN SEWER EXTENSION
EXISTING SEWERS ARE SHOWN
AS SOLID GREEN LINES; OTHER
CURRENTLY PENDING SEWERS
AER SHOWN AS GREEN DOTS
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ATTACHMENT 2: POTENTIAL EL TOYONAL CAD (SCENARIO A)
* OPPOSES OR NOT INTERESTED
IN SEWER EXTENSION
EXISTING SEWERS ARE SHOWN
AS SOLID GREEN LINES; OTHER
CURRENTLY PENDING SEWERS
AER SHOWN AS GREEN DOTS