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10.a. Draft Fiscal Year 2013-14 Capital Improvement Budget (CIB) and 2013 Capital Improvement Plan (Handout)
T-Acot /00.a. clfJAndoat� Item 10.a.) 2013 -14 Capital Improvement Budget and Plan December 20, 2012 Board Meeting Central Contra Costa Sanitary District Kick -off FY 2013 -14 Financial Planning • No Proposition 218 Notice in Place • Significant increase in Capital Component of Sewer Service Charge needed to fund Capital Program • Today's meeting reviews proposed Capital Program Expenditures for FY 2013 -14 and next nine years • Reviewed similar presentation at the Capital Projects Committee meeting on December 11, 2012 • Combined Operation & Maintenance and Capital Planning Ten Year Plan Financial Workshop January 24, 2013 • Board agreement on language for Proposition 218 notice needed by early to mid March to meet printing /mailing timelines Sewer Service Charge is Critical Funding $637,000 Source for Capital Program FY 2012 -13 CAPITAL REVENUES BUDGETED Facility Capacity Fees $4,417,000 Pumped Zone Fees $637,000 Interest Sewer Construction Fund $350,000 Property Taxes (Net after debt paid) $7,534,000 Sewer Service Charge ($27 capital component) $4,430,000 Reimbursements from Others City of Concord $3,833,000 Recycled Water Sales (Net after O &M) $61,000 Developer Fees /Other $525,000 TOTAL 1$21,787,0 00 Current Year Program Sets Beginning SCF Balance for Ten Year Plan FY 2012 -13 CAPITAL PROGRAM BUDGETED Total Expenditures $32.3 million Total Revenue $21.8 million Variance -$10.5 million Beginning SCF Balance 6/30/13 Funds Required for Cash Flow $35.8 million $30 — 35 million 2 Increase in SSC Capital Component is needed to fully fund Capital Program. $500 $450 5433 $.100 Total Charge per RUE 5402 /'- � 5371 $350 $341 5300 5272 S280 5260 $289 5300 S311 $311 S311 �•• S344 $353 S354 5248 _ $300 $302 $250 5224 5200 $200 n s 5150 S 100 S79 -- S79 S58 SS�npltnl Progrom Component 549 $50 S19 511 SO M3-M M-W 2100.1 207VA 207445 270506 2567 2W-M 270D;9 Ma$3 20011 2011.12 2012-13 271114 2014 -15 Capital Program has been deficit spending for many years $700 6E55 13uun..awa , SSO 0 1569 1573 _ m e 155: sew.. Con.3ruee3.n Funb 356 D 1717 $s0o 6n6 8 S400 s351 ass a tu3 102 3 S300 WD nn<,.n�� •gym. 6252 S200 S100 Soo 1:.9-07 ADO( A)td7 20 - 24770( AYCS 2SE•75 277fiOJ AT7-0D 105000 201U :1606( At! -ti 2132 -f7 AI11d 701d•n —4.u4 F.v.wu. 6216 N6.9 111.0 W5 (21.2 1700 WD IM C33 6211 t719 [t5D W1 W9 62d6 295 �Mral E.¢.eu 6203 t162 171d 375d 3176 5255 w7 {79fi 10d M. N 6719 423D 6727 3798 {M7 —�SCF OMmee• M9 NTD W7 W1 {SID 6573 1552 351D W 1656 SSSi Y.21 N47 f35D t307 (27.5 'SFC Balance Is not strictly governed by checkbook accounting and may not strictly represent the sum of prior year balance and current year variance. 3 Preliminary Ten Year Plan Findings - Two -Year -$31 per Year Sewer Service Charge Increase Needed to Fund Capital + O &M Fiscal SSC Ops SSC Cap Total SSC Total Est Year Compnt Compnt Cap Revenue* Current $344 $27 $371 $21.8 2012 -13 million Prelim $353 $49 $402 $24.0 2013 -14 million Prelim $354 $79 $433 $29.5 2014 -15 1 1 1 million -ideal 1 % reinvestment spending rate - $31 million per year. Should bonds be considered as an alternative to raising rates? • Guideline for bonding capacity maximum of 20% of revenue going to debt service. FY 2011 -12 Revenue $85 million therefore suggested debt service < $17 million. • Current debt service $5.6 million per year vs. $17 million per year guideline. • Investigation of benefits of using bonds to pay down CCCERA unfunded pension obligation ongoing. • May be prudent to reserve bonding capacity for large capital requirements for unbudgeted regulatory mandates. El L cu 1 N O CL O L CD 0 L N O m ■ t� U • o z$ ° .9 o 8s$8§ o° o ° 8$8 0 0 0 $8 o p g a, n A �iN N �$ oo tq �� Nt� ,ng,n °otD a cQQ Ov ^ ON �Ip bb A to A a�i 010 CD O O O O O O O O cs a; CD cb N _ cs aD cr O 7 C5 A 106 N W, Im CD b in M M co a01 A N M CD CD O O CD p O pp O p O p O p O pp O S O CD p O CD pp O ® O ° pp O p N O t9 Ob O' OO 8 A � R tp T� {O OO 4) t00 O � tpptQQ Q O b tq r N N cv � A •- Oi 0 0 O O O O O O O O C. op O O O -cl op pO O (off O opO 0 pC pp0 Op0 OoOp O OQj p0 Q11 N NO Cli. 47 t00 t0 {O b �tl Q Q tp N N N t.9 C A r ° CD § CD 1 w 16 O N N I S ppQ o oo�b p N O ' ^ �f WW O N M t!1 °ti �O Cf a, L -16 b _ tfgj V 10 N {app C� G R ap § pp b app N p N C OI CV mopop tq M A {p �C"y M ®p pppp pppp pp OpO S �p op pp op -� C; ui �1dpq �OpOO p • �D N c7 � f� r; (V C+s S pp p pp S p pp pp pq op op p op Ifl N N y w IA LLO'J N _ a! y N M w M `CJ�' N pp °t7 pp� OpSSppg pp pp pp on pp °� t0 L _O a_ _ 9 080 8ANbm�n G1S 000 t4itgiv� C� O N b W 25 ®255 25 °�i ,4 4 b N 7 n O li N is O t O�pp V 10 C a m O N b O O N C6 — r t0 6 §§ o §C g g dip§o ©g o CS g °1�ippi g gN b r Ip A LN to _°§ p.. t� O tN N P Cpp Q_i O O V ��6pp A t9 0 F N O — aJ t► .- C'J a0 00 g H C C � aNp ry (� 1 R a� 12 _ j E � 3 mammy �- $365 Million Ten Year Plan Is a Responsible One That Funds.... • Treatment Plant — Primary Sedimentation Renovation $ 11 M — Cogeneration Replacement/Alternative Energy $ 6 M — Nitrification $ 70 M — Contaminated Soils Remediation $ 20 M — Incinerator /Solids Handling Improvements $ 12.5 M — Screenings Removal $ 7 M • Collection System — Identified Renovation Needs $ 110.1 M — Identified Capacity Needs $ 28.6 M — Pumping Station Renovation $ 11.2 M — CAD's and Developer Sewers $ 12.9 M • General Improvements and Treatment Plant — Seismic Improvements $ 7.1 M • Recycled Water — Concord Landscape Irrigation $ 4.4M Proposed FY 2013 -14 Capital Improvement Budget FY 2013 -14 CIB Program /Project Total Cost Treatment Plant Baseline $ 8.7 million Collection System Baseline $14.9 million General Improvements Baseline" $ 4.1 million Recycled Water Baseline $ 0.4 million Concord Landscape Irrigation $1.5 million Total Baseline $28.1 million Total Baseline + Concord REW $29.6 million `Includes $1.8 million for one time seismic retrofits of HOB FY 2013 -14 TREATMENT PLANT PROGRAM CATEGORY PROJECT ANNUAL EXPENSE One Time Renovation Primary Treatment Renovation $5,000,000 Pump & Blower Building Seismic $ 850,000 Cogeneration Renovation $ 400,000 Recurring Renovation Piping Renovation Phase 8 $ 100,000 All Other $2,364,000 Total Baseline $8,714,000 Treatment Plant Renovation Needs Continue to be Identified with Condition Assessments - Determine the likelihood of failure and /or the remaining life of the asset. Imo_ - Completed Assessments: •Concrete •Asphalt Paving -Protective Coatings -Transformers -Buildings re Seismic ,Presence of Hazardous Materials *Critical Piping (Aeration) -Elevators -Electrical Switchgear -TP replacement value - $660M* *Reinvestment rate ® 1.8% -$12M Not Incl. land value , Gl, CS or RW Asset Information I Assat Name: Report Primary Sedimentation Tank 1 owar.0 w.,e nvnaro or.. -w.ed war rrra xe.i c.e.r.ru..ne u.a�wn.s ,omrr. w.. -ra.o eeee. se.,wen me..r ee.. w..ae..w awz we.r �e Photo 13: Say 1 . Detail of Exposed Aggregate Above Water Line (Typical) 2 $11.0 M Primary Sedimentation Tank Renovations Incorporates Condition Assessment Findings and Improves Efficiency • Proposed Renovations — Replace Scum Collection System — Replace Chain Drives t , — Rehabilitate Concrete — Replace water and air supply piping — Replace Scum Skimmers and Thickener — Construct New Grit Handling Facilities — Upgrade /Renovate Electrical Conduits /Equipment Scum Spray System Requires Renovation to Improve Performance 3 Drive Shafts & Bearings need to be replaced I,_+l Grit Handling Facilities are Odorous and Reaching End of Useful Life 0 Cogeneration Upgrades • Repaired existing cogeneration unit • Evaluated options for upgrading • Concluded that the existing cogeneration unit should be maintained until plant energy demands increase significantly (i.e. nitrification) Cogeneration Upgrades • Negotiating five years maintenance contract with Solar Turbines • Required cogeneration unit upgrades —upgrade to electronic fuel valves — new controls —new fuel manifold /injectors for natural gas —other • Proceeding with recommended improvements 5 Renewable Energy • CCCSD is participating in the regional renewable energy procurement (R -REP), led by Alameda County. • Solar assessments have been performed on most District properties: — Solar power purchase agreement recommended for HHW, CSO and CSO Vehicle Shop (no capital expense) • Regional RFP will be issued in mid -2013 to procure a bid on solar energy for more than 20 agencies. • Position Paper in January for CCCSD Board to authorize signing of R -REP MOU Piping Renovation Ongoing program to identify and replace deteriorated piping and equipment throughout the treatment plant. 6 NPDES Permit Adopted April 1, 2012 • Requires participation in collaborative studies to evaluate the role of ammonia and ammonium in inhibiting primary productivity (phyto and zoo plankton) in Suisun Bay. Final report due 11 -1 -2014. • Requires development of facilities plan to evaluate alternative treatment technologies to remove ammonia and site characterization for contaminated soil site. Final report due 2 -28 -2014. • Requires total ammonia effluent load limit 5500 kg /day monthly average. Permit "relook "....April 1, 2015..... reassess the appropriateness of the total ammonia load limit. What could Ammonia Removal look like? (Basis of $70 million capital cost estimate in CIP) - t. '+ , �Conventional Nitrification 7 Cost of Contaminated Soil Remediation is a Consideration in Choosing Future Treatment Cost depends on Waste Class (estimated 150,000 cy) - Non Hazardous — landfill - $18.9 Million (Haul to Keller Canyon Landfill) - Non- RCRA — Hazardous - $18.5 - 27.6 Million (Rail transport to Utah) - RCRA Hazardous - $42.7 - $145.8 Million (Rail transport to Idaho) - On -site treatment - $27 — 39.5 Million (Stabilization /Solidification) Characterization study underway Assume $20 Million for planning purposes in year 2019 Model Compares Integrated Fuel /GHG /Solids Handling Methods 0 . aIOJE E% FA WE f.d pv+e Ut fF.. F ?d*. Ipb apFpa+a . - e J.d J-1 1L A•, .1 •1 n tx - -111 aRu I it'll . :.J . M, fJ - .- j 8®el G2 R 1 2 MULTIPLE REAM FURNACE 3 Pa•4tliClwp.Mlf1/r! 11nb i ! Haenq Vaal I" dry b TS 9 Gaa HUng Raqunmma MMBTWby I.. Q 21 +T6 6 Brou�a /7 7 Gaa Haemq Raqunmar, Gaa H-9 Rkq —mmta Mh1BTIN y- MMBIWday — B La 50 1 Td Bp U," MMSCFIday 9 NMVat Q. -- — . "Oh Ma.fa LFG9ega. n qpa pply- 10 mpm Hae T—f—d MMBRIIdy 11 Ludff Gaa —• — fsnap Slum Gpnprecn lPonanq b"e/G 1., TSkay t2 and 7 ® NMI .m 9. �vepg .1d t3 Al L—M Gaa lhaa I! MHFA MMSCF .'.p IS Gnpnhana MHF e2 WASCF..p 16 gasu UMhla Z Sum W.SCF LGIp t7 V.- MHF Sum IF G.. MMMY, I6 WaN. •pi 279 Natne Gu lNaea 19 b— Wf L- HG, A Fa.d W 14 kd My Y Bladann MW S. hp.N MW Sum Na G.. MMSCF NGIp mmoup 23 FeadnMa Haalig b Wean p♦, hae pa qpm mA.pwa 24 If Fud wear F-nW, TankI C.e—A. Rene C.".... &v.dpon uduuMa n.am duuNa man 79 NNraa ttlum $0u[a male W .... h. Y 20 25 0 Solids Handling Alternatives Analysis Solids Capital Cost O &M Cost Present Worth of Handling $ 10,601,000 20 -yr Life Cycle Alternative ($ /y ear) Cost' Anaerobic $40,090,000 Mi $5,708,000 $125,000,000 Digestion $ 1,600,000 Pleasant Hill Anaerobic Pumping Stations Moraga Pumping Station $ 600,000 Digestion w/ $58,664,000 $3,418,000 $109,530,000 Food Wastes " Developer services Developer Services Fluidized Bed $60,000,000 $2,620,000 $98,985,000 Incineration Lane, Willow Drive All others Multiple Hearth $16,702,000 " "" $4,940,000 " "" $90,196,000 " "" Furnace ($7,800,000) "" ($4,940,000) "" ($81,295,000) "" "Assumes discount rate of 3 %, $6 /MMBTU NG, $0.13 /kWh "" Includes costs for side - stream ammonia treatment 'Includes solids building seismic improvements " "Includes only scrubber replacement and burner improvements FY 2013 -14 COLLECTION SYSTEM PROGRAM CATEGORY PROJECT ANNUAL EXPENSE Renovation program North Orinda 5, Lafayette 8, $ 10,601,000 Diablo 2, Walnut Creek 10, Concrete & CM Pipe, TV inspection and others Capacity /Renovations Grayson Creek Trunk in $ 1,600,000 Pleasant Hill Pumping Stations Moraga Pumping Station $ 600,000 Grinder, Buchanan South Removal Developer services Developer Services $ 681,000 Contractual Current CADs — Harper $ 500,000 Assessment Districts Lane, Willow Drive All others $ 2,137,000 Total $14,919,000 9 Pipe Renovated to Date The following table reflects the miles of pipe (6, 8 &10 Inch) renovated to date. FISCAL YEAR PIPE RENOVATED 2005/07 8.1 Miles 2007/08 5.6 Miles 2008/09 6.3 Miles 2009/10 7.5 Miles 2010/11 2.6 Miles 2011/12 6.8 Miles 2012/13 5.3 Miles TOTAL Completed Renovation 42.2 Miles 10 Renovation Program (6, 8 & 10 inch) Achieves 100% Completion of all known defects by FY 19/20 Total miles of pipe to be renovated - 82.8 miles* Miles of pipe renovated to date - 42.2 miles Remaining miles to renovate - 40.6 miles 10 Yr Budget Miles of Percent of for Pipe Known Renovation Renov. in Defects (millions) ** Next 10 Renov. in Yrs * ** 10 Yrs $110.1 1 74.4 100 %+ * Based on TV inspection of 99 percent of 6, 8 and 10 inch mains ** Provides $22.1 million in FY 18119 to 22123 for lines currently not identified by TV program * ** Estimated at $280/ft SSO Downward Trend Has Been Significant Since Start of Renovation Program Running 12 -Month Overflow Totals 1999 to present zoo F.Lr ur 150 100 50 E 0 w0 N H No NS $ S N N r0 r0 r0 r0 NO 12 -Month Total at Month -End 11 SSO Downward Trend Has Been Significant Since Start of Renovation Proaram PI....., Hill - Pleaaent HIIIN3rayson wa_ Capacity Program C1, ! C4P Lalayatta- Plaaaant Hill Roatl w In FY 1011/121 Pae eaw �Fa —�a7 r a'd- pa Way -r - 10 year plan includes e-o .we. $18M for high priority 0 �,+ ". e.Lc © �a - capacity projects p.11 Cap —Ity gallcl,ncy a ! } ea-w 1' WalnutCreak- Walnut Blvd P0, 1 12 • ® oa-w w♦ lagantl w Cap —Ity gallcl,ncy Gm,p --t Pull Plpa Capacity Sam Ramon - San Rn Sehatlub C Q 1 J=" O.— 'Op a•y��r ev.ntl No Slopp or Irnerl Elav Xt1 A L .1 >13a% 12 MY►ai!�N . • a p K Lpt LEGENIM •(!Q'• \ �� ( ,T_ - LLJ , oueaao�aexrmvEn amywmc EE T.f CPZM _I 1.__ PIEMM f NRL ROAD WR EOai i . t J t I.► w. ° - - i I '�, ll PLEASANT HILL JI GRAYSON CREEK CAPACITY PROJECT FY 2013 -14 GENERAL IMPROVEMENTS PROGRAM PROJECT ANNUAL EXPENSE Vehicles and Equipment $500,000 Information Technology $500,000 Seismic Improvements HOB $1,800,000 GDI Treatment Plant and SMMS Replacement $600,000 All Other $691,000 Total $4,091,000 13 GDI & SMMS Replacement SMMS 11ORNFLGW SEE ADDfrMALDIAGRAM SOL Server 20[15 1 ISM ASA. Server SGL Sarver 2185 SDL Saver 20[15 ES L l ESCr&QL IGIS WYEB GIS QlSede CSO.02 SQL -0t FMa — _J IatMbutasl ESG Data ESG Dam HTE Attila CCCSDLF8 Q (LaaeMChe) 2 R• �Mi o 'dr a District and Developer Jobs ColdFusion(Reports) - Mapping MapGuide (Spatial) GeoMedia Collection system GDI plan and profile drawings AutoCAD GDI Web Server (VAM30Wa 2003 ServanlS60) Seismic Retrofit Program – Concord Fault a �• operty Line t Fault , .13 miles or 09 It = Bldg •dNmip F Blower 13 to F-lt �Sohds Bliig to fault �� , , jullesor 4 OS 11 0 bt miles or - 31354 R iOB to Fault #� 4 SO miles or - 4,214 ft n rl. tol 4 Ir V All Concord Fault Proximity to District Facilities 1 j 14 Seismic Retrofit Program Project 201310 -YR CIP CONSTRUCTION HOB $ 1,800,000 FY 2013 -14 Pump & Blower $ 2,850,000 FY 2013 -14 POB Office Area $ 1,176,000 FY 2015 -16 TP Warehouse $ 895,000 FY 2016 -17 Laboratory $ 192,000 FY 2016 -17 SCB1 $ 200,000 FY 2022 -23 Total $ 7,113,000 1 Seismic Retrofit of SCB is estimated at $7 -8 Million for construction; does not include bracing furnaces. Budgeted outside 10 year plan in anticipation of potential change in solids handling method. Pump and Blower Building Houses Critical Plant Equipment 03 so 2011 06:23 J 15 PBB Retrofit Can Be Accomplished Keeping Plant in Service West *Buttress West Side Shear Walls all Sides south FY 2013 -14 RECYCLED WATER PROGRAM PROJECT ANNUAL EXPENSE Baseline - Pleasant Hill Zone 1, Martinez Refineries and other REW Planning $ 356,000 Total Baseline $ 356,000 Concord Landscape Irrigation $1,500,000 Total $1,856,000 16 Concord Landscape Irrigation Project t Approx. 190 AFY ......�.w.� Over 34 New —ft 01 Customers $4.4 million total cost - - - $1 million s :g State Prop 84 _ - Grant .:.� . Bid in February 2013 17 Board Role in Capital Program is Ongoing • Set Initial Capital Funding Levels in Nov /December • Confirm Capital Funding Levels in Jan /February as part of overall District Ten Year Financial Plan • Agree upon wording for Prop 218 notice March • Board Workshop Focused on CIB /CIP Projects April • Authorize CIB /Program Budgets and O &M Budget and set Rates in June • Authorize Supplemental Program Funds when needed • Award Construction Projects > $100,000 • Authorize Construction Change Orders >$1.00,000 • Authorize Consultant Contracts > $100,000 What do we need from the Board today? • Concurrence that proposed preliminary expenditure figures for FY 2013 -14 and the subsequent 9 years are acceptable for inclusion in financial planning documents to be reviewed by Board in January 2013 • Concurrence that relative emphasis and allocation of expenditures between the four programs is acceptable for development of the detailed FY 2013 -14 Capital Improvement Budget and Ten -Year Capital Plan • Acknowledgement that a significant increase in the capital component of the Sewer Service Charge will be needed in FY 2013 -14 and FY 2014 -15 to fund the recommended 2013 Ten Year Capital Plan W. 3 Central Contra Costa Sanitary District December 6, 2012 TO: BOARD OF DIRECTORS VIA: ANN E. FARRELL, GENEA4L MANAGER FROM: ANDREW ANTKOWIA4&APITAL PROJECTS DIVISION MANAGER SUBJECT: REVIEW PRELIMINARY 2013 TEN -YEAR CAPITAL PLAN AND FISCAL YEAR 2013 -14 CAPITAL BUDGET RECOMMENDATION Staff recommends that the Board support the preliminary expenditures for the Capital Budget and Plan as proposed in this memo. Setting a conceptual budget for capital expenditures resolves one variable and simplifies the financial planning process. These figures are then used as District staff more fully develop and refine financial planning scenarios based on current information on operations and maintenance costs. The content of the Capital Budget and Plan will be discussed at the Capital Planning Workshop on December 20, 2012. Due to the substantial capital funding deficit we are currently experiencing, the calculated rate increases for the next several years are on the order of 8% per year to allow for a capital component of the sewer service charge that will bring capital revenue back in line with planned capital expenditures. Rates will be examined in more detail as part of the Financial Planning Workshop on January 24 which will incorporate all District expenses and revenues and make ten -year rate setting projections for Board consideration. The goal of this two phase financial planning process is to inform the Board of the District financial situation and reach Board consensus on the language for a Proposition 218 notice regarding a rate increase, ideally by the first meeting in March (March 7, 2013) in order to meet the noticing deadlines. BACKGROUND In preparation for the first fiscal year (FY) 2013 -14 Capital Planning Workshop on December 20, 2012, staff has summarized the material we will be covering in this memo. Much of this information, with additional detail, will be reviewed with the Board Capital Projects Committee on December 11, 2012. We routinely hold a Capital Planning Workshop in the fall to set an estimated dollar amount for our capital program for the following ten years. We have found this approach to be very helpful in narrowing the scenarios and considerations for the winter Financial Planning Workshop (to be held January 24, 2013). By fixing the level of capital expenditures, which comprise approximately 30 - 35 percent of District overall spending, depending on the size of the Capital Budget that year, the possible budgeting scenarios become more refined and understandable. If the scenarios in January lead to some concerns about capital revenue and expenditures, adjustments can be made at that time and can be incorporated into the draft Capital Improvement Budget and Plan, which is brought to the Board in a second FY 2013 -14 Capital Planning Workshop in April. Page 1 HISTORICAL PERSPECTIVE As our District assets age, renovation and replacement is necessary to keep them functioning properly. For budgeting purposes, the amount of annual investment in renovation and replacement must be estimated. In January 2000, staff developed and recommended a baseline for investment in our capital facilities which assumed replacement of all assets every one hundred years. This equates to a reinvestment rate of 1 % of the estimated replacement value. At that time, the total replacement value of our facilities was estimated at $2.1 billion and therefore the annual investment was set at $21 million. This target amount has been increased for inflation at 3% per year and has reached approximately $31 million in 2013 dollars for FY 2013 -14. Since January 2000, staff has invested significant resources in developing more sophisticated asset management programs for the collection system and treatment plant to provide the data for a more rigorous assessment of the appropriate baseline budgetary figure for asset renovation and replacement. These investigations support an annual investment of approximately 1 % of replacement value as a reasonable amount for the collection system. In fact, due to the relatively good condition of our system and limited number of line segments needing capacity upgrades, we have been able to include the known renovation and capacity needs for the collection system in the 1 % target budget amount as well as selected collection system capacity improvements. The annual investment rate for mechanical equipment/pressure piping systems /electrical equipment at the treatment plan and pumping stations is more difficult to estimate. Staff continues to better define this reinvestment rate. Work to date suggests a renovation budget rate of 1 % of replacement value for the treatment plant and pumping stations is an appropriate minimum funding levels for the Ten -Year Capital Improvement Plan. The historical District philosophy for funding ongoing renewal and replacement has been to do so out of ongoing capital revenues sources rather than bond financing. Bond financing has been limited and has been reserved for large one -time projects which benefit all rate payers, existing and future, and can logically be funded by spreading the payments over current and future rate payers. Using this philosophy, the ongoing renewal and replacement targeted expenditures of $31 million per year in 2013 dollars should be funded from annual revenue receipts and this should be the minimum level of funding for the capital program. As introduced above, expenditures for significant projects to increase capacity or address changing regulations or construct recycled water projects should be viewed as in addition to the budget for renovation, renewal and replacement. For several years in the recent past, budgeted expenditures for needed capacity and regulatory projects were increased to take advantage of increased revenues from a number of sources, principal among them being capacity fees for new connections. However, more recently, revenues have significantly decreased and the size of the capital program has been reduced. A number of the projects that had been initiated when revenues were higher were ready for construction. These projects targeted needed reliability, capacity and building improvements that had been contemplated for many years. They included the Solids Handling Improvements to allow hauling of sludge in the event of incinerators being out of service, and Dry/Wet Weather Improvements to allow bypass to Walnut Creek when the outfall is being inspected and when outfall capacity is exceeded and the wet storage ponds are full. Page 2 Also included were Standby Power Improvements to replace the old engine generators that were unreliable and finally a new Collection System Operations Department Administration, Crew and Warehouse facility. In early 2009, staff recommended and the Board concurred that bonds netting $30 million should be sold to enable completion of these needed projects. Staff is happy to report that these needed projects have been essentially completed at this time and very cost effectively, given the extremely competitive bid climate over the last several years. The following Figure 1 shows historical District capital expenditures since 1990 -91. Annual capital spending has ranged from a low of $17 million in FY 1996 -97 to a high of $40 million in FY 2006 -07 (in actual dollars). This wide variation has been due to the conscious effort to defer needed projects in the late 1990's during a period of no rate increases and in FYs 2001 -02 through 2003 -04, when the permanent loss of ad valorem tax was feared, and then escalate projects when the revenue picture improved with rapid build -out of the Dougherty Valley and associated capacity fees. In 2002, bonds were issued for approximately $16.5 million to supplement capital revenue and fund construction of some capacity improvements needed to serve the Dougherty Valley area of San Ramon in advance of receiving the capacity fees generated upon connection of the completed homes and businesses. Those fees peaked in FY 2004 -05 when there were almost 2000 new connections in the Dougherty Valley alone. The Ten -Year Capital Plan was developed based partially on anticipated revenues from the Dougherty Valley. The following property tax and capacity fee trend, Figure 2, shows the extreme variability of these two sources of capital revenue over the years. As development slowed and the economy deteriorated, anticipated revenues did not materialize. Capital revenues are collected and held in the Sewer Construction Fund (SCF). The SCF balance is an important tool in funding daily District operations. In addition to funding the capital program, the SCF balance is used to meet the cash flow needs of the District. The District receives its sewer service charge and property tax revenue from the County two times per year. In between the two revenue receipts, the District must pay its bills from the funds on hand. Based on the current District operating and maintenance and capital budgets, a SCF balance of approximately $30 to $35 million is necessary to pay the bills between revenue receipts. The SCF balance was projected to fall below the needed level in early 2009 if we continued the capital program at its budgeted level. Therefore, as noted above, a net $30 million in bonds were sold to allow continuing with construction of needed projects in the very favorable bidding climate. The only capital revenue source completely within the control of the District is the capital component of the sewer service charge. The capital component of the sewer service charge had been sharply reduced in recent years to reduce increases in the overall sewer service charge amount and still fund needed operation and maintenance activities. Last year the Board approved a two -year rate increase of $30 each year, a portion of which was designated to renew the funding of the capital program. Unfortunately, the majority of the two -year $30 per year rate increase was allocated to operations and maintenance costs to avoid deficit spending in that budget and the capital program continued to be significantly underfunded. A table showing the sewer service charge components for the last thirteen years follows. Page 3 U_M I.V U U G W >. Q N h Q W CM a C CL N J Cl) E o P W G Q CL >- C _j O Q c/) U Z ti J Z Q Q cc I— Z W U id LL N L w� W uL W R fl. U is L C Cl C� C� 0 C C Ct Ct C Ct C n cp lLo � M N O E9 EA G} EA E9 to Ga N O M Cl Cl CD Cb O n 01 I- O (D ` ca co 9 1 Cl LO s O o a 8 CD M U3 0 O Q 0 O i0 CD 0 Q Ca � I Q II V co CD rn co Q C n Irn co cn co 01 tn cn tn rn M ,I 01 C7 m cn cn N N 01 cn c d m rn m a n n N < v N N Fop N m b N 109 m of tD of N N n O N m Obi $f O N Oi N O q u7 n n m o C. m n N un Nm N N O O n c7 N cli O O N n m EEL m 4�={ N N � O N N t0 �g a� m n [D N N tri � S N tai v m [V � LO M qq pp p N C N a� C, 9 & < a C or of r N 9 q n N Cl O ^ C N f7 �moC Lq Qf tp C7 O CV N CM F4 o Pi m m N N StD t7_ j C. cft m n N a N n N tt') ONE n �i N m CM tp N t7 N QQ w ° tD c%) to t� g t� q� cd ci c3 c7i N tD N m cli cn m o v m to c� 12 cS � G N Obi � Cmy m -pp C N Cl) C� t Qt C7 � O � N Of , Cd m ci m N m n m to c2 N N C d E E � l0 m r � N C o F= 0 C7 2 5 Q N L w� W uL W R fl. U is L C Cl C� C� 0 C C Ct Ct C Ct C n cp lLo � M N O E9 EA G} EA E9 to Ga N O M Cl Cl CD Cb O n 01 I- O (D ` ca co 9 1 Cl LO s O o a 8 CD M U3 0 O Q 0 O i0 CD 0 Q Ca � I Q II V co CD rn co Q C n Irn co cn co 01 tn cn tn rn M ,I 01 C7 m cn cn N N 01 cn c d m rn m a N V L a c� 13 c x A d O L a NI L 3 2 00 0 00 0 0 00 0 0 0 0 0 0 0 0 0 0 0 0 N 0 co to 3 n 3 i 1 - c 0 U � m 3 C D C 0 _ U C °o 0 00 0 N W). i z� -�GOz WWoz 01 -6002 60-8002 80 -LOOz LO-900Z 90-SOOZ SO-b00z bo -£OOz £0-z00z zo- Woz W -0002 00-6661 66-866 G 86 -L66 L L6-966 G 96-566 G S6-tP661 ti6-£66l f £6 -2661 I Z6 -1661 64 y N m LL c O CD U c C c O CD CL 0 CL I Ln m a ANNUAL SERVICE CHARGE PER RUE Fiscal Year Operations Component Capital Component Total Sewer Service Charge per RUE 2000 -01 $185 $15 $200 2001 -02 $204 $20 $224 2002 -03 $207 $41 $248 2003 -04 $218 $54 $272 2004 -05 $204 $76 $280 2005 -06 $234 $46 $280 2006 -07 $213 $76 $289 2007 -08 $242 $58 $300 2008 -09 $260 $51 $311 2009 -10 $292 $19 $311 2010 -11 $300 $11 $311 2011 -12 $302 $39 $341 2012 -13 $344 $27 $371 PROJECTED FISCAL YEAR 2012 -13 EXPENDITURES /REVENUES /SCF BALANCE For the current FY 2012 -13, expenditures were budgeted to significantly exceed revenue. This was a conscious decision to deficit spend and utilize the $30 million in bond funds that had been deposited in the Sewer Construction Fund to complete specific projects, such as Standby Power Improvements, Sludge Hauling Improvements, Dry/Wet Weather Bypass Improvements and the Collection System Operations Department Facility, when the bid climate was favorable. The following tables show the budgeted expenditures and revenues for FY 2012 -13 and the resultant cash flow and sewer construction fund balance. 2012 -13 CAPITAL PROGRAM EXPENDITURES BUDGETED Treatment Plant Program $7.4 million Collection System Program $13.7 million General Improvements Program $7.3 million Recycled Water Program $3.9 million Total Expenditures $32.3 million 2012 -13 CAPITAL PROGRAM REVENUE BUDGETED Facilities Capacity Fees $4.5 million Pumped Zone Fees $.6 million Interest $.4 million Sewer Service Charges $4.4 million Property Taxes $7.5 million Reimbursements from Concord $3.8 million Reimbursements from others $.6 million Total Revenues $21.8 million Page 6 2012 -13 CAPITAL PROGRAM CASH FLOW BUDGETED Total expenditures $32.3 million Total revenue $21.8 million Variance -$10.5 million SCF Balance 6/30/13 $35.8 million As part of past debt financing, the District has pledged revenues to first pay debt obligations. Second, revenue is assigned to operations and maintenance costs, including the self insurance fund. Lastly, revenues are available for the Capital Improvement Program. As discussed above, the District draws on the SCF balance to fund its operation and maintenance functions as well as the capital program. The cash flow needs for this self - funding dictate that the Sewer Construction Fund balance be maintained between $30 -$35 million. FY 2013 -14 will start with an estimated balance of $35.8 million, only slightly greater than the minimum funds required to meet District cash flow needs. Thus, a significant sewer service charge increase will be needed to continue to fund the capital program at the historical and recommended level of 1 % of asset value or approximately $31 million per year. DISCUSSION OF PROJECTED SEWER SERVICE CHARGE INCREASES NEEDED TO FUND RECOMMENDED 2013 CAPITAL IMPROVEMENT PLAN The sewer service charge was increased significantly over the last year two years. Unfortunately, increases in the unfunded liability for pensions have resulted in higher operating costs and the majority of the two year increase went to fund operating expenses. Thus, limited funds were available to allocate to the capital component of the sewer service charge and the capital funding deficit remains. The following two figures demonstrate 1) the deficit spending that has occurred in the capital program and the resultant spending down of the sewer construction fund - Figure 3, and 2) the increasing operations and maintenance component of the sewer service charge while the capital component has remained flat - Figure 4. Page 7 Y / O 1 N AL ^W ia• ■//� V/ m cm fill LO C A� /W/� ,,iAi V / V W M� W 2 0 L a U O O M) 7 TO W to 0 C gto �-. N Z N I ? I -- -� O O O O O Gq % d 4 % � N co fa 2 'A N I IA m C 0 m N U0 EO � f g ca N of E > v ch E O U O to N L ca Q of ! cm N r C o U N. m �pC,3 U N c f0 r1l: CJ c N EA C Cd fa O N to EA ONND V3 N 6aI tr r- cn L O 'C o o � Li n a N . o Of O -�t r O. CC C 7 co 0 N to Ma (m6 2 to fA i O N CL O [o tD tD m O N Fo U Ol O m r + i N r (l7 �+ O N N 6% N to tp C cm — ca o o � r E 0 N o N fo to C ca — C1 a N tb m } o N w CM m (" LO C O --t U o ,q v U (O NO N N N R Y fo Eo Ffl O 1 Y o i o r m m N to E» U Q OD N afl o O N EN F' o L m m r O O EO > 07 vi ffl cli LO Wo } I - -- -- t U O O m m c Y } O m! a� C Eo Q w y c c U- m U Q Q C-) C ca ca U LL T m tD O t0 CL 1� cyj L- 0)70 O CLO CL ca •_N 0-0- UCE E O .� o 0 7� \V Z 0 N ccn` 0) W Co co O O U " 'L— CZ +- -U) 00 CD U_ U •� cz CD �Ca7� 0 W L rWn V d'I L 7 qt 60 It CV) ia rn 60 Cti 69 ch 0% co co �} t+ cm O a W cm co co 0 0D U co Q. co co 69 613, = 0. E T a L z U T co 69 O v to CD a ii 69 R Ur O T co O i 69 O O co CL 0 co LO rn m N U3. co il- 69 O Co CM 0 00 N 69 N r- cm Co q* N 'r N Ea O O N 69 O O O O O O O O O O O U) It q* c� c0 r) N N - O 6 69 69 U3. 6% 69 fd% 69 U3. 69 64 ca b 'm N IL C N m d N O N 0 N 0 N O 0 0 N or 0 o N to 0 0 N t` 0 co N to 0 ui CD C0 N 0 v C0 N 0 Cl) 0 N Cl) 0 N O N N 0 00 N 0 tD 0 0 N LA m Of to d Based on expenditures of approximately $31 million per year for renovation, renewal, replacement and known capacity projects; approximately 166,000 residential unit equivalents paying sewer service charge; and revenue from other sources of approximately $17 million; the capital component would need to be $84 to fully fund the capital program as compared to the current capital component of $27. Thus, an increase of approximately $57 is needed in sewer service charges just to bring the capital program out of the deficit spending mode. Assuming a two year increase, this is approximately $29 per year. Preliminary calculations using the Districts rate - setting model inclusive of operating and maintenance costs and with capital expenditures less than $31 million in the first two years of the plan, indicate rate increases of approximately $31 per year for the next several years will be needed. Based on this very preliminary information, rates would need to increase from the current $371 per year to $402 per year in FY 2013 -14 and $433 in FY 2014 -15. The District would remain substantially below the FY 2012 -13 median of agencies surveyed of $492 even with these increases. A Proposition 218 notice for two consecutive rate increases of approximately $31 each year would need to be sent out by mid April to notice such a proposed increase. In order to prepare the mailer in time, a Board decision on a two year rate increase will be needed at the March 7, 2013 Board meeting if possible or the March 21, 2013 Board meeting at the latest. ANNUAL SERVICE CHARGE PER RUE Fiscal Year Operations Component Capital Component Total Sewer Service Charge per RUE 2006 -07 $213 $76 $289 2007 -08 $242 $58 $300 2008 -09 $260 $51 $311 2009 -10 $292 $19 $311 2010 -11 $300 $11 $311 2011 -12 $302 $39 $341 2012 -13 $344 $27 $371 Prelim 2013 -14 $353 $49 $402 $31 increase Prelim 2014 -15 $354 $79 $433 $31 increase These sewer service charge increase figures are preliminary and will be refined for the January 24, 2013 Financial Planning Workshop. The FY 2013 Capital Plan and FY 2013 -14 Capital Budget are described in the following pages and are based on the recommended continued level of funding and assume a rate increase of the magnitude discussed above. Page 10 RECOMMENDED 2013 CAPITAL IMPROVEMENT PLAN FY 2013 -14 TO FY 2022 -23 The proposed 2013 Ten -Year Capital Improvement Plan is summarized in the following, Table 5. It contains a moderate baseline plan of $253 million in improvements over the next ten years. The baseline program addresses needed reliability, capacity and building improvement projects, including renovating 100% of the high priority defective sewers identified to date, and provides $11.8 million to address needed seismic improvements and $12.5 million for improvements to the sludge dewatering equipment and multiple hearth incinerators. Recent studies of our solids handling technology have concluded that it is a good investment to improve our current facilities and extend their life by 10 to 20 years before deciding upon a new solids handling technology. However, no money has been budgeted for seismic retrofit of the existing solids conditioning building. Because it is likely that we will convert to another solids handling technology, such as fluidized bed incinerators, in 10 to 20 years, a significant investment in seismic retrofit of the existing incinerator building is not recommended. In addition to the $253 million baseline, the total $365 million Ten -Year Capital Plan includes $20 million to remediate contaminated soils in the area where new nitrification facilities would be located and $70 million to construct nitrification facilities. It also includes $7 million for removal of screenings from the wastewater stream to reduce downstream operational issues and a $6 million allowance for alternative energy to either replace our existing cogeneration system or convert to solar energy. Finally, in the tenth year of the plan, $4 million is budgeted to begin permitting /pre- design of a new fluidized bed incinerator and $5 million to begin planning/pre- design to replace our ultraviolet disinfection system with ozone, to better treat for contaminants of emerging concern. Funding for the $365 million Ten -Year Capital Plan is from traditional sources of capital revenue, including property taxes, capacity fees and contributions from the City of Concord. Any funding deficit must be made up by increasing the sewer service charge capital component or by selling bonds. As noted previously in the memo, significant rate increases are needed over the next several years to restore the capital component of the sewer service charge to a sustainable level. Projections of the needed increases in the sewer service charge capital component to fund the recommended Ten -Year Capital Plan will be further discussed with the Capital Projects Committee on December 11 and with the full Board at the December 20, 2012 Capital Budget Workshop. Page 11 C lO a C N E CD O C. E .Q R V to CD N L C d N O Q O CL :C g CD 0) td CL O O O O O O O O O O O O O O O O p O O O O O O O p O 0 0 O pp 0 0 0 0 O O O O O O O O O O O O O O O O OO P O N O co N O CO r LO O LO O CO O M N .�. N V3 e* ct Ict m LO O Cl O U') C7 CA CO O co N O M P N O N CO LO N LO O CO O tO O CA C> e! ~ O � N �r CA Li CF LK N ti V- T Ch O O O O O O O O O O O O O O O O pp O O O O O O p O O O O O pp pp Cl) O O O O O O O O O O O O Cl O O O O N C7 C) O O O Cj CO LO �' O O Lf) LO O ti t0 CVO M CA CO N O CA A 00 T Cl LO 'ct P r N M CD C� 1� O LO O LO LO C7 LO M N CO O m N 1� tp a0 CV N t0 vi C\ P- T N r Itf C> T r M O O O O O O O O O O O O O O O O O ® O O O O O O p O O O O CNV O O O O O O O O O O O O O O O O LO C7 C7 O O O O LO O O C7 O C O O T T � 0o LO O P 00 P LO r O O CO aD LO U2 N Cr CO � *- O r P � CA t0 LO 1-cr -cr LO LO T CV N N C7 C\ r T T cr �V O O O O O O O O O O O O O O O o O O O O O O O o O O O O o O 0op N O O O O O O O CCC»> O O O 000 O 000 O 0000 d O P C7 co C� LO p O O P Ln LO P O C7 O O C O 1� CVO C+a co CO r r CO t+3 CO to O LO O LO co v C$ et LO LO Lgi La Lh m CV N CV N C7 M T O O O O O O O O O O O O O O O O O O O O O O O pp O O O pp pp N O O O O O 0 0 0 O O O O O O O CA Lo C7 O LO C=) Ltj O O O o O O N O c0 00 LO 131 CA r CO O P N Lf) N C7 CO co T O LO O LO CO aO et LO LO LA LO V- et N N N r r O CT7 LO O 0 O 0 O 0 O O O O O O O O O O O O O O O O O O O O O 0 0 0 O 0 C o O CO Ltj O O U2 C; CO C7 P O O O o O O N C CA M LO CA "Cr C> LO P N CO O CO CA M O LO O LO co CD LO t0 LO LO ti m CV O CV C. C") C7 1z T Cb r T Ch O O O O O O O O O O O O O O O O O O O O O O O p O O O p pp O O_ O_ O O_ O_ O O O O O O O O O O O O OO r 1� LO O O LA -;t O CO LO LC7 O LO t0 O O t0 C CO P N � LO tO M 1l r P N CO LO C7 CO to LO O LO O LO LO 0 LO CO LO LO LO LO CA t0 Cy CV t0 CV T CV v r ti T T T T C.) O O O O O O O O O O O O O O O O O O O O pp O O pp pp ti O O O O O O O O O O O at O 0 O O O O O T t0 O Lf) t7 LA O O Ln P O O LO t0 C C N C7 P it M Q> O LO P N e7 LO N N !r LO O LO co � 00 et CC? LO CO LA Cl) CM CV C\ mi C\ C7 CD T Ch r T Ch O O O O O O O O O O O O O O O O O O O O O O pQ O O pQ pQ O O O O O O O O O O 0 O 0 O O O O O Cr N O C O LO C- O C7 T O O T r O P LO O r N LO CA r O CO P N U') r C7 r LO r O LO O LO P Nr P mr LO LO LO LO P CJ N LO N CO O � LO r LO T CV 0 0 0 0 p O 0 pp 0 pp 0 0 O O O O 0 0 O LO O O O O O O O O O O O O COOS O 0000 O GO r LO Cj t0 O r O N O O r O O CA C 00 I-t co N P L1') r P N O P � t0 LO O LO LO LO t0 � T LO LO LO LO LO w t0 CV CO O O CV Ch T LO T T CV O O O O O O O O O 0 O 0 O 0 O O O O pp O O pp pp O_ O O O O O O O O O O O O O O O O O r A LO O P N N CO O O N CD a O O T Cli t0 CO CO T to N LO CA P O O r CD O LO O r CT Q� O LO co LO co LO P CD C7 CV r d' N �' T Q; T CV R O O O O fn ca C m o CA co CD E cm C3 C3 CL R C N C C N C CU ;:+ O C CU w `� d d CC ,� 2 CL LU r+ m w0+ E y o c o C o U) E — L,a E 3 c o c . o :. c cm L% c = Lc° a—�i c c c c CD a� eCa o► cu E ~T cic a O acw V �Qa Wa W>.M a Q� c g CD 0) td CL RECOMMENDED FISCAL YEAR 2013 -14 CAPITAL IMPROVEMENT BUDGET The recommended FY 2013 -14 Capital Improvement Budget totals $29.6 million of which $28.1 million is for renewal and replacement and routine capacity improvements. This amount is close to the $31.0 million annual investment recommended to accomplish a once - per -100 year replacement of all District assets. In addition, an expenditure of $1.5 million ($4.4 million total project cost) is budgeted for the Concord Recycled Water Landscape Irrigation Project. Approximately $1 million of this will be reimbursed through a State Proposition 84 grant. The following table breaks down the expenditures by program. FY 2013 -14 CAPITAL IMPROVEMENT BUDGET TOTAL Treatment Plant Baseline $ 8.7 million Collection System Baseline $14.9 million General Improvements Baseline* $ 4.1 million Recycled Water Baseline $ 0.4 million Concord Landscape Irrigation $1.5 million Total Baseline $28.1 million Total Baseline + Concord Recycled Water $29.6 million *Includes $1.8 million for one time seismic retrofit projects which are considered renovation and so have been considered baseline but will not be recurring. Staff will be working to develop the detailed budget document using the above preliminary figures as modified by the December 2012 Capital and January 2013 Financial Board Workshops. Many of the projects have already been defined. Others will evolve and emerge as we prepare the budget document over the next few months in anticipation of the second Board Capital Workshop in April 2013, when the detailed draft Capital Improvement Budget is reviewed with the Board. A review of the preliminary 2013 -14 Capital Improvement Budget for major projects and areas of emphasis follows. TREATMENT PLANT PROGRAM Preliminary estimates of baseline expenditures for the FY 2013 -14 Treatment Plant Program can be grouped into two major categories: one time renovation and recurring renovation. Each of the major projects is described briefly after the table. FY 2013 -14 TREATMENT PLANT PROGRAM CATEGORY PROJECT ANNUAL EXPENSE One Time Renovation Primary Treatment Renovation $ 5,000,000 Pump & Blower Building Seismic Imp. $ 850,000 Cogeneration Renovation $ 400,000 Recurring Renovation Piping Renovation Phase 8 $ 100,000 All Other $ 2,364,000 Total Baseline $ 8,714,000 Page 13 Primary Treatment Renovations: Most of the piping and equipment in the Primary Treatment area was installed in the early to mid 1970's and is more than 30 years old. Much of the piping has shown signs of corrosion and some of the process equipment is reaching the end of its service life. This project will replace water and air supply piping, grit handling equipment, scum and grease removal and thickening systems, the electrical system and the sludge collectors /piping/pumping. Pump and Blower Seismic Improvements: The recently completed seismic analysis of treatment plant structures indicated that the Pump and Blower Building (PBB) would sustain significant damage /potential collapse during a major quake on the Concord fault. The PBB houses critical equipment such as the primary and final effluent pumps, aeration air blowers and service air compressors. Treatment plant operations would cease with the loss of any of this equipment. This project will develop a final design /cost to upgrade the building to withstand a major seismic event. Board approval will be sought prior to award of a construction contract for the proposed improvements. Piping Renovations Phase 8: A significant portion of the piping systems on the plant site are over 30 years old and some have already begun to fail. The Piping Renovations Program is systematically evaluating the piping systems and addressing problem areas before pipe failures adversely affect the treatment processes. The Piping Phase 8 project will evaluate and design the next round of piping replacement throughout the treatment plant. COLLECTION SYSTEM PROGRAM The major 2013 -14 projects planned for the proposed $14,919,000 collection system program can be grouped into five categories: renovations to existing sewers, pumping stations, developer services, capacity /renovation driven projects, and Contractual Assessment Districts (CAD's). A description of the major programs /projects follows the table of estimated expenditures. FY 2013 -14 COLLECTION SYSTEM PROGRAM CATEGORY PROJECT ANNUAL EXPENSE Renovation program North Orinda Ph 5, Lafayette Ph 8, $ 10,601,000 Diablo Renovation Ph 2, Walnut Creek Ph 10, Concrete and Corrugated Pipe Renovation, TV ins ection and others Capacity /Renovations Grayson Creek Trunk in Pleasant $ 1,600,000 Hill Pumping Stations Moraga Pumping Station Grinder, $ 600,000 Buchanan South Pumping Station Removal Developer services Developer Services $ 681,000 Contractual Current CADs — Harper Lane, Assessment Districts Willow Drive $ 500,000 All others $ 2,137,000 Total $14,919,000 Page 14 Renovation Program: The renovation program continues the District's efforts to renovate /replace sewers identified by the TV Program as being in poor condition. This year's renovation program focuses on North Orinda, Diablo, Walnut Creek, and Lafayette where approximately 35,000 feet of sewer mains will be renovated/replaced. In addition, design and right -of -way acquisition efforts for next year's program will commence. The Concrete and Corrugated Metal (CM) Pipe Renovation Project (2013 CIPP Lining project) will install approximately 6,300 feet of cured in place pipe in concrete and CM pipe ranging in size from 18 to 42 inches. The majority of the concrete pipe to be renovated is downstream of force mains that comprise the Martinez Pump system. The CM pipe was installed in the 1950's in Walnut Creek and recent CCTV work has shown extensive corrosion. Capacity /Renovations: In May 2010, the update of the Collection System Master Plan was completed and a list of priority capacity replacement projects was developed. The first of the identified projects, the new trunk sewer in Pleasant Hill Road near Acalanes High School in Lafayette, was completed in fiscal year 2011 -12. The design of the Pleasant Hill Grayson Creek Trunk project started in fiscal year 2012 -13 and will continue in the 2013 -14 with construction in fiscal year 2014 -15. The Pleasant Hill Grayson Creek Trunk project will install approximately 5600 feet of 18 to 24 inch line in Pleasant Hill between the intersection of Pleasant Hill Road and Mercury Way to the Pleasant Hill Relief Interceptor in Ardith Drive. Pumping Stations: The focus of this program for FY 2013 -14 is implementing minor improvements at District's pumping stations. The Moraga Pumping Station has consistent problems with ragging. To improve the maintenance and operation of this station a project to add grinders and/or other equipment needed to alleviate the ragging problem will be designed and constructed during this fiscal year. The decommissioning of the Buchanan South pumping station is also planned. With some rerouting of sewers, this small pumping station can be eliminated. Developer Services: This project provides for appropriate capitalization of District force account labor and other expenses for planning, design, and construction of developer installed and contributed main sewer facilities in FY 2013 -14. Contractual Assessment Districts (CAD): The CAD program provides a financing mechanism for property owners to extend public sewers into areas which are currently served by septic systems. The program requires participating property owners to fund the cost for the non - participating property owners. The participating property owners can elect to have the District finance their costs and pay them back over a ten -year period with interest. The District has funded 24 CAD's using this approach over the years and has already been paid back the majority of the funds, with interest. Based on staff's knowledge of potential CAD's in the service area, a budget of $500,000 per year or $5 million over the ten -year plan has been suggested. Page 15 GENERAL IMPROVEMENTS PROGRAM General Improvements in FY 2013 -14 are proposed at $ 4,091,000 and will include the traditional equipment budget, information technology budget and items associated with miscellaneous District facilities. The largest proposed expenditure is the $1.8 million budgeted for construction of seismic retrofit of the District Headquarters Office Building (HOB). In order to facilitate construction staff will be relocated to other buildings at the treatment plant site in Martinez, and a leased office building in Concord. Staff will use the opportunity of an empty building to construct general improvements. These general improvements include new carpet, painting, installing recycled water to the restrooms and other minor upgrades. The General Improvements Program also recommends significant investment in Information Technology (IT) next year. $500,000 has been budgeted for general IT development. Staff will be seeking Board input on the types of improvements they would like to see as we assess the state of the industry and where the District needs to go to be a leader in the use of technology. Staff is also planning to upgrade and modernize the existing geographic data integration (GDI) system which is used to display our collection system maps and link them to a variety of databases within the District. As part of this project, staff is researching a replacement for our collection system maintenance scheduling software. The goal is to have a real -time scheduling system which will support wireless field applications and real -time workflow routing for collection system operations crews. A budget of $600,000 is recommended for the GDI /maintenance scheduling modernization project. RECYCLED WATER PROGRAM Recycled Water Program spending includes the baseline budget needed for recycled water planning and continued implementation of cost - effective Pleasant Hill Zone 1 connections. This planning includes funds for staff time and consultant and lobbying efforts to continue to pursue Title 16 funding for the Concord Landscape Irrigation project construction as well as pursue partners and support for a large -scale recycled water project to serve the Martinez refineries. The baseline also includes $100,000 for the District share of the Feasibility Study for the Martinez Refinery Project, for which we recently received Title 16 funding. In addition to the baseline, $1.5 million ($4.4 million total project cost) is budgeted for construction of the Concord Landscape Irrigation project. The District will receive a reimbursement of approximately $1 million from State Proposition 84 funds to construct this project. Page 16 RECOMMENDATION Staff recommends that the Board support the preliminary expenditures for the Capital Budget and Plan as proposed in this memo. Setting a conceptual budget for capital expenditures resolves one variable of the financial planning process. These figures are then used as District staff more fully develops and refines financial planning scenarios as they gather current information on operations and benefits costs. Finally, a comprehensive rate planning document is prepared for distribution to the Board in mid January and will be discussed at a workshop on January 24, 2013. This year's financial planning process is particularly important as there is no Proposition 218 notice in place and the Board will need to make a decision regarding future rate increases by early to mid March to allow for proper Proposition 218 noticing to occur. The December Capital Budget Workshop discussion is the first step in this process. Following the January Financial Planning Board Workshop and after a determination on funding levels and future rate increases is made, the Capital Budget and Plan expenditure figures can be finalized and the comprehensive Capital Budget and Plan developed for Capital Projects Committee and full Board consideration in April. Page 17