HomeMy WebLinkAboutCAPITAL PROJECTS AGENDA 11-14-07
Central Contra Costa Sanitary District
5019 Imlloff PlllCl' Martlnl'z, CA 94553-4392 (925) 228-9500 . wwwcl'ntralsanorg
CAPITAL PROJECTS COMMITTEE
Chair Hockett
Member McGill
Wednesday, November 14, 2007
3:30 p.m.
Third Floor Executive Conference Room
Central Contra Costa Sanitary District
5019 Imhoff Place, Martinez, CA
1. CALL MEETING TO ORDER
*2. REVIEW DRAFT MEMO SUMMARIZING PLANNED EXPENDITURES FOR
FISCAL YEAR 2008-09 - Ann Farrell
3. HIGHLIGHT SEVERAL MAJOR PROJECTS PLANNED FOR 2008-09 - Pilecki
and Staff
a. GDI's role in the TV Inspection/Sewer Renovation Programs
b. Aeration Air Renovations
c. Sludge Loading Facility
d. Other
4. ADJOURNMENT
* Attachment
A
~., Recycled Paper
Central Contra Costa Sanitary District
November 9, 2007
mDRAFT
TO:
FROM:
BOARD CAPITAL PROJECTS COMMITTEE/BOARD OF DIRECTORS
JAMES M. KELLY, GENERAL MANAGER t7~
ANN E. FARRELL, DIRECTOR OF ENGINEERING rJtQr-
FY 2008-09 INITIAL CAPITAL PLANNING WORKSHOP
VIA:
SUBJECT:
INTRODUCTION
In preparation for the Board Capital Projects Committee meeting on November 14,2007 and
the Capital Planning Workshop on November 29,2007, I have summarized the material we
will be covering in this memo. This information, with additional detail, will be reviewed in the
committee meeting and workshop. 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 January Financial Planning Workshop in which the Board this year will be asked to either
confirm or modify the rate that was set last year for fiscal year 2008-09. By fixing the level of
capital expenditures, approximately 40-45 percent of District overall spending, the possible
budgeting scenarios become more limited and understandable. If the scenarios in January
lead to some concerns about capital revenue and expenditures, adjustments can be made at
that time and incorporated into the draft Capital Improvement Budget and Plan, which is
brought to the Board in a second FY 2008-09 Capital Planning Workshop in April.
BASELINE RENEWAL AND REPLACEMENT PROGRAM
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, without a formal condition
assessment and asset management plan, 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 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 amount has been increased for
inflation at 3% per year. This is a modest increase as building costs have increased
significantly more than 3% per year since January 2000. For example, the Engineering
News Record construction cost index, a commonly used index for construction cost
estimating, has increased approximately 3.8% per year over this same time period. This 3%
annual increase brings the recommended reinvestment for renewal and replacement of
existing assets to $27 million for the next fiscal year, year 2008-09. While this approach
continues to provide a reasonable benchmark for planned expenditures, a more detailed and
systematic approach is needed.
Staff has made significant progress iMn. vel . A~etailed Asset Management Inventory
and Plan for the Collection System . '. th~ collection system is estimated to be
approximately 65% of the total Dislct va uJ:'6ur District-wide collection system
closed circuit TV inspection program has been underway for 5 years and 60 % of the
District's sewers have been televised and the condition assessed. We estimate that it will
take another 2 to 3 years to complete this work. As the work has progressed, the lines with
the highest defect scores have been grouped into renovation projects which we construct
each year. Staff is currently developing a reference document with maps to delineate the
progress of the TV program and the renovation projects that are being developed as a result.
This document will serve as our Collection System Asset Management Plan and will be
updated as projects are completed and additional line segments are televised and the
condition assessed.
Our next initiative is to develop a more formalized approach to condition assessment and
asset management in the treatment plant and at the pumping stations. We have begun an
inventory of the treatment plant to document ages and conditions of major assets and
renovation and replacement work done to date. We will then be developing an approach to
condition assessment and asset management for our treatment plant assets looking to the
future. We are currently developing scopes of work to hire technical assistance with
systematic condition assessments of remaining work needed on treatment plant concrete
structures, piping, coating and electrical systems. Significant renovation work has been done
on our pumping stations over the last ten years and this is being documented in a pumping
station inventory which will serve as the basis for determining what additional condition
assessment work is needed on the pumping stations to develop an overall asset
management plan.
Finally, expenditures for significant projects to increase capacity or address changing
regulations are in addition to the budget for renovation and replacement. For the last several
years, budgeted expenditures for needed capacity and regulatory projects have been
increased to take advantage of increased revenues from a number of sources, principle
among them being capacity fees for new connections. Thus, expenditures have in some
years significantly exceeded those estimated for baseline renewal and replacement.
HISTORICAL PERSPECTIVE
A series of two tables and two figures detailing expenditures and revenues for the last eight
years are attached in the appendix and summarized as follows. Since fiscal year 1999-00,
District capital spending has ranged from a low of $19.8 million in 2002-03 to a high of $39.7
million for fiscal year 2006-07. This wide variation has been due in large part to the
conscious effort to defer needed projects in fiscal years 2001-02 through 2003-04, when the
permanent loss of ad valorem tax was feared. Subsequently, when there were large revenue
increases due to the pace of new home construction in the Dougherty Valley and related
capacity fees, expenditures were increased.
2
On average, capital revenues have closely matched capital expenditures. Over the eight
years shown on the figures, the average annual revenue was $25,100,000 and the average
annual expenditures were $25,700,000, a 2% difference. Average budgeted revenue over
the eight-year period was $23,700,000 compared to average actual revenue of $25,100,000.
Actual revenue exceeded budgeted revenue' for a number of years due to the unanticipated
rapid build out of the Dougherty Valley and because ad valorem taxes were not lost to the
extent budgeted. Thus, the Sewer Construction Fund Balance increased for the three year
period from fiscal years 2002-03 to 2004-05. This increase has been offset in recent years
by increased spending, leading to a net draw down of the Sewer Construction Fund Balance
of approximately $5 million over the eight year period.
The one capital revenue source controlled by the District is the capital component of the
sewer service charge. This charge is adjusted each year as needed to match planned
expenditures or to draw down the Sewer Construction Fund Balance or place additional
revenue in the fund, depending on the goals and strategies of the Capital Budget and Plan in
any given year.
PROJECTED FISCAL YEAR 2007-08 EXPENDITURES/REVENUES
As noted under the historical data discussion, for several years revenues from Dougherty
Valley connections were coming in to District coffers faster than expected, resulting in a
significant increase in the Sewer Construction Fund balance. Over several prior years, there
had been a conscious effort to defer needed projects due to the uncertainty associated with
the ad valorem tax revenue. This also contributed to the increase in the fund balance.
Therefore, two years ago staff recommended increasing capital program expenditures to
levels greater than revenues for several years and funding needed deferred projects as well
as some needed regulatory and capacity driven projects partially from the Sewer
Construction Fund balance. These needed capacity and regulatory driven projects included
the expansion of the ultraviolet disinfection facilities, a wet weather discharge point to
increase the wet weather discharge capacity, a study and implementation of improvements to
increase furnace capacity and reduce mercury in the effluent, the extension of the A-line from
Buchanan Fields Golf Course to the intersection of Meridian Park Boulevard and Galaxy
Way, and the expansion of the Primary Sedimentation Tanks.
Since that time, the pace of building has slowed and the Dougherty Valley connections are
expected to take place over a longer period of time. Revenue projections have been
adjusted downward, but there is still a significant balance in the Sewer Construction Fund
that will support running a deficit in the capital program in order to stay on course with the
completion of needed projects. For the current fiscal year 2007-08, both expenditures and
revenues are now projected to be about 4% less than budgeted, resulting in no net change to
the Sewer Construction Fund balance as budgeted at the end of the current fiscal year.
ram
Bud eted Activit
$43.1 million
$40.5 million
-$2.6 million
$50.2 million
Pro' ected Activit
$41.6 million
$39.0 million
-$2.6 million
$50.2 million
3
As discussed in previous years, the Sewer Construction Fund balance acts as the bank to
fund all District operations. This is necessary because SSC revenue and property tax
revenue are collected by the County on the tax rolls twice per year. For the intervening six
months, the District draws on these reserves 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 in the neighborhood of $30 million.
RECOMMENDED 2008 CAPITAL IMPROVEMENT PLAN
FY 2008-09 TO FY 2017-18
Staff has developed a ten-year capital expenditure plan which budgets for a baseline of $27
million per year to fund renovation, renewal and replacement projects for a ten-year total of
$270 million in June 2008 dollars. Staff has supplemented this baseline with approximately
$45 million in needed capacity and regulatory expenditures between fiscal years 2008-09
and 2010-11 and an additional expenditure of approximately $22 million in the outlying years
to fund the primary expansion. While the timing of the remainder of the Dougherty Valley
capacity fee revenues is difficult to predict given the existing housing climate, it is expected
these revenues will come in within the early part of the ten year plan and will offset a large
portion of the supplementary $45 million in needed projects recommended for the near term.
If the housing slump is prolonged, some adjustments in expenditures or funds from another
source may be necessary to fund the supplementary projects. It is likely that large
expenditures in outlying years, such as the $22 million primary expansion, may need to be
bond financed unless another large development, such as the Concord Naval Weapons
Station, is approved and begins generating significant capacity fee revenue.
This year projects to meet known near term regulatory requirements are budgeted to the best
of our ability. Our understanding of our potential new permit limits has improved over the last
several months in numerous discussions with the Regional Water Quality Control Board
(RWQCB). It appears less likely that a project to remove mercury from the incinerator air
scrubber water will be required to allow compliance with effluent limits for mercury. However,
staff is continuing to evaluate possible treatment options and has included a budget of $1
million in the treatment plant program expenditures for fiscal year 2008-09 to complete pilot
testing and preliminary planning and design. An additional $15 million has been budgeted
over the subsequent three years to fund possible needed improvements to remove mercury.
Should these expenditures for mercury control in outlying years not be needed, these funds
can be allocated to other needed projects in a future capital plan.
Projects for possible long-term regulatory requirements, such as nutrient removal, are not
budgeted. There is more and more discussion at the Federal level about implementing
nutrient standards for all dischargers. Currently the District does not remove nutrients and it
would require an expensive retrofit to do so. Staff will be including a planning project in the
2008-09 budget to examine possible long-term regulatory requirements, such as nutrient
removal, and develop alternative compliance strategies and budgets. It is anticipated that
some pilot work will be desirable to evaluate different technologies and compliance
strategies.
In conclusion, the District is in a very sound financial position with respect to its ten year
capital plan, and should be able to fund needed baseline renewal and replacement as well as
4
known needed capacity and regulatory projects minimum rate impacts. District staff will be
working on two important planning initiatives in 2008-09: one, to better document our
condition assessment and asset management strategies for the collection system, treatment
plant and pumping stations, and two, to examine long term regulatory trends and identify
studies that should be done to develop compliance alternatives and budgets.
RECOMMENDED FISCAL YEAR 2008-09 CAPITAL IMPROVEMENT BUDGET
The recommended fiscal year 2008-09 Capital Improvement Budget includes $27 million for
baseline renewal and replacement projects and an additional $11.2 million for needed
capacity and regulatory projects for a total recommended expenditure of $38.2 million. The
allocation of the recommended $38.2 million among the four programs is as follows:
FY 2008-09 Capital Baseline Capacity/Regulatory Total
Improvement Budget
Treatment Plant $7,500,000 $4,000,000 $11,500,000
Collection System $17,000,000 $4,300,000 $21,300,000
General Improvements $2,200,000 $800,000 $3,000,000
Recycled Water $300,000 $2,100,000 $2,400,000
Total $27,000,000 $11,200,000 $38,200,000
Staff will be working to develop the detailed budget document using the above preliminary
figures as modified by the November 2007 and January 2008 Board Workshops. Many of
the projects have already been defined. Others will evolve and emerge as we prepare the
budget document over the next six months in anticipation of the second Board Capital
Workshop in April 2008, when the detailed draft Capital Improvement Budget is reviewed
with the Board.
A review of the preliminary 2008-09 Capital Improvement Budget for major projects and
areas of emphasis follows.
Treatment Plant Program
Preliminary estimates of expenditures for the fiscal year 2008-09 Treatment Plant Program
can be grouped into three major categories: renovation, reliability and regulatory. The major
projects are as follows:
Cate 0
Renovation
Reliabili
Annual Ex ense
$1,000,000
$1,500,000
$1,000,000
$1,500,000
$1,200,000
$1,200,000
$1,000,000
Regulatory
All Other
Total
$3,100,000
$11,500,000
5
The projects listed under renovation have been identified and developed with input from plant
operations staff. They address urgent needs. For example, the piping renovation project will
begin the process of replacing ash piping which has been eroded down to paper thin walls
due to the abrasive nature of the ash. The site improvements will replace failing paving and
will incorporate the improvements needed to meet ADA requirements in the various parking
areas. Going forward, staff will be developing a more formal asset management approach to
developing renovation projects for the treatment plant, in addition to addressing urgent needs
identified by plant operations staff.
The aeration air renovation project is one that was discussed with the Board several years
ago. The aeration tanks, due to the way they were originally designed and constructed, have
developed leakage that has gotten progressively worse over the years. A similar facility in
Australia solved this problem by filling in the air plenums at the bottom of the aeration tanks
with concrete and adding a complete new diffused air system. The District could do the
same thing for an estimated cost of $8 to $10 million. Staff has been investigating other
options for several years in the hopes of avoiding this large expenditure. In the summer,
when flows are lower and tanks can be taken out of service, pilot studies have been
conducted on different methods for sealing the leaks in place and retaining the existing air
plenum and diffuser design. Staff has identified at least two and possibly three systems that
can effectively seal the leaks. These systems can be bid against each other and it is
estimated that a complete fix will cost in the neighborhood of $1 - $2 million. This is a
fraction of the cost of filling in the leaking plenums and adding a new aeration system. Staff
will present some photos and details of this study at the workshop on November 29,2007.
The other large category of projects budgeted for 2008-09 is reliability. There are three
critical projects budgeted. The first has to do with the sludge handling system. Currently, if
the operating incinerator or ash handling system goes down for any reason, the District has
no reliable means of sludge disposal until the other incinerator can be brought on line or the
ash handling problem corrected. Bringing the second incinerator on line takes weeks, and
there is not enough storage for this period of time. There is an old and very rudimentary
system available for dewatered sludge hauling, but it has no storage or odor control and is
considered to be unreliable. The Sludge Loading project will construct a reliable sludge
loading facility that can load trucks with dewatered sludge and hold enough sludge to get
through a long weekend so that sludge can be taken to landfill if the incinerators cannot
process sludge for any reason.
Second, the standby power improvements will replace the two existing engine-generator
sets, which have had significant reliability problems, with two new engine-generator sets.
And third, the wet weather bypass project will provide a more effective means of overflowing
to Walnut Creek if the capacity of the plant and the wet weather storage ponds are exceeded
than the current limited capacity flow over the adjacent Conco property. All three of these
projects have been discussed with the Board at previous workshops and meetings. Finally,
the major regulatory project addresses controlling mercury in the plant effluent and potentially
in the air emissions from the incinerator as well. District staff is conducting two different pilot
studies and working with an expert in incineration to develop an innovative approach to
control mercury in both the plant effluent and the incinerator emissions.
6
Collection System Program
The major 2008-09 projects planned for the proposed $21,300,000 collection system
program can be grouped into four categories, renovations to existing sewers, developer
related services, the A-line phase 2A capacity project and the Alhambra Valley main line
extensions, which are being funded by the District through an assessment district process.
Estimated expenditures are shown as follows.
Category Annual expense % Collection System
Program
Renovation proQram $7,500,000 35%
Developer services $1,200,000 6%
A-line Phase 2A $8,100,000 38%
Alhambra Valley Main Lines $1,000,000 5%
All others $3,500,000 16%
Total $21,300,000 100%
As you can see, the major drivers of the Collection System Program for 2008-09 will be the
renovation program and the A-line Phase 2A. The A-line project is a joint project with the
City of Concord. Approximately 30% of the approximate $22 million project cost is for an
intertie to the Concord pumping station, which will allow the abandonment of the station.
This portion of the project will be funded 100% by the City of Concord. Of the remainder of
the project, after the Concord flows enter the A-line, approximately 30% of the flows will be
from Concord and therefore they will fund 30% of the remaining 70% of the project cost. Of
the total $8,100,000 A-line Phase 2A cost to be expended in fiscal year 2008-09, $7,000,000
is estimated to be reimbursed by Concord during fiscal year 2008-09 because it is assumed
that the majority of the work being constructed next fiscal year will be the Concord intertie.
The Concord intertie costs will be reimbursed monthly due to the large impact on our cash
flow. The typical Concord capital reimbursements occur once per year, at the close of the
fiscal year.
The ongoing renovation program will take us to South Orinda, Walnut Creek, Lafayette and
Martinez in 2008-09. The renovation projects continue to be challenging, with many
backyard easements and difficult field conditions. Impacts to the community are sometimes
difficult to mitigate. Staff is doing an excellent job implementing these difficult projects. We
are beginning to see some positive impacts. Sewer system overflows are trending
downward. Staff believes this is due both to improved cleaning and to the renewal of
problem sewers through the renovation program.
One concern we are just beginning to track and document is the increasing time and cost
required to obtain and perfect easements and rights of entry needed for renovation projects
on private property. These costs are now being tracked separately and listed as a line item
when renovation construction projects are awarded. Initial data suggests that the cost can
range from 2 to 4 percent of total project cost for perfection of property rights to as much as
17 percent for sites that require new easements. For the recent North Orinda Phase 2.1
project, which consisted of 3700 feet of pipe almost entirely in back yard easements, the right
of way costs totaled approximately $432,000 or 17.3 percent of the $2.5 million total project
7
--...'-......------.-.--..-_.._....____._._..__.....M''.n_._.~_.,~.~..,,,..,,'____'''_.,...~
cost. Staff will continue to monitor and control these costs as much as practical, but they
must be recognized as the cost of doing business on private property.
General Improvements Program
General improvements in fiscal year 2008-09 are proposed at a modest $3,000,000 and will
include the traditional equipment budget, information technology budget and items
associated with miscellaneous District facilities. In addition, expenditures will continue on the
permitting, environmental review and design of the proposed new Collection System
Operations Building. Due to the lengthy plan review process, construction of the new
Collection Systems Operations Building is not budgeted until fiscal years 2009-10 and
2010-2011.
Recycled Water Program
The recycled water program may see a larger than usual expenditure in 2008-09 associated
with the A-line Phase 2A extension. As part of this project, a recycled water distribution line
may be extended to serve 18 new customers in the Diamond Boulevard and Meridian Park
Boulevard area of Concord. The estimated expenditures for this extension are $2,000,000, of
which Concord will reimburse the District approximately 30% or $600,000. District staff is
engaged in ongoing discussions with the Contra Costa Water District staff in an effort to
make this project a reality. If the project is not constructed, the budgeted $2,000,000 will not
be spent and will be available for other projects or will remain in the Sewer Construction
Fund. Also in 2008-09, staff will be updating previous master planning efforts for recycled
water to identify any new opportunities and ensure that we are focusing our energy on the
projects that recycle the greatest amount of water. Chief among these are industrial
recycling projects, such as taking recycled waters to nearby existing refineries or to proposed
new power plants. The potential for Concord Naval Weapons Station development to use
recycled water also needs to be integrated into our recycled water master planning effort.
SUMMARY
The proposed 2008 Ten Year Capital Improvement Plan includes baseline renewal and
replacement projects of $270 million ($27 million per year) as well as $45 million in capacity
and regulatory projects funded directly by rates and a potential $22 million bond funded
project in outlying years. A preliminary financial analysis indicates, with the spending of the
accumulated balance in the Sewer Construction Fund to a minimum balance of $30 million
and the use of bond funding for large projects in outlying years, the proposed Ten Year
Capital Plan can be funded with a minimal impact on rates. Therefore, staff recommends
incorporating the recommended preliminary budgetary figures for the 2008-09 fiscal year
Capital Improvement Budget and 2008 Capital Improvement Plan contained in this memo
into the ten year planning document that will be considered at the January 2008 Financial
Planning Workshop.
8
APPENDIX
9
Historical Perspective
1999/00 2000/01 2001/02 2002103 2003/04 2004/05 2005/06 2006/07
Total
budgeted $26.7 M $24.4 M $25.1 M $28.2 M $25.9 M $26.6 M $27.7 M $34.7 M
expenditures
Total actual $21.3 M $28 M $20.5 M $22.4 M $19.8 M $26.5 M $27.7 M $39.7 M
expenditures
Total actual $21.6 M $18.9 M $17 M $23.5 M $28.2 M $30.0 M $24.8 M $36.6 M
revenue
Variance + $.3 M - $9.1 M - $3.5 M + $1.1 M + $8.4 M + $3.5 M - $2.9 M - $3.1 M
SCF Balance $55.9 M $52.8 M
- June 30
Capital Revenue Discussion
CATEGORY 2001/02 2002103 2003/04 2004/05 2005/06 2006/07
SSC CAPITAL $20 $41 $54 $76 $46 $76
COMPONENT
SEWER SERVICE $3,100,000 $6,300,000 $8,400,000 $12,100,000 $7,400,000 $12,510,00
CHARGE
AD VALOREM TAX $6,400,000 $7,700,000 $7,900,000 $200,000 $1,100,000 $8,111,000
CAPACITY FEES $4,400,000 $6,100,000 $7,600,000 $12,700,000 $10,400,000 $8,784,000
ALL OTHER $3,100,000 $3,400,000 $4,300,000 $5,000,000 $5,900,000 $6,895,000
TOTAL ACTUAL $17,000,000 $23,500,000 $28,200,000 $30,000,000 $24,800,000 $36,300,000
CAPITAL REVENUE
10
CCCSD Actual Capital Revenue vs. Actual Capital Expenditures
$40,000,000
$35,000,000
$30,000,000
$25,000,000
$20,000,000
$15,000,000
$10,000,000
$5,000,000
39.7
36.3
Average Actual Revenue $25.1 million
Average Actual Expenditures $25.7 million
Difference = $5 million more expended than revenue over 8
year period. Sewer Construction Fund Balance drawn down
$0
1999/00 2000/01 2001/02 2002103 2003104 2004/05 2005106 2006/07
] ---Total Actual Capital Revenue ~ Total Actual Capital Expenditures I
CCCSD Actual capital Revenue vs. Budgeted Capital Revenue
$40,000,000
$35,000,000
$30,000,000
$25,000,000
$20,000,000
$15,000,000
$10,000,000
$5,000,000
38.8
Average Actual Revenue $25.1 million
Average Budgeted Revenue $23.7 million
Difference: $11 million more revenue than budgeted
over 8 year period.
$0
1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07
---Total Actual Capital Revenue -+-Total Budgeted Capital Revenue
11