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HomeMy WebLinkAbout06. Debrief of recent effort to collect commercial capacity fees4CD .....mmom Central Contra Costa Sanitary District September 22, 2016 TO: FINANCE COMMITTEE VIA: ROGER S. BAILEY, GENERAL MANAGER JEAN MARC PETIT, DIRECTOR OF ENGINEERING AND TECHNICAL SERVICES ,cri r FROM: DANEA GEMMELL, PLANNLNG AND DEVELOPMENT SERVICES DIVISION MANAGER SUBJECT: DEBRIEF OF A RECENT EFFORT TO COLLECT COMMERCIAL CAPACITY FEES On February 4, 2016, the District conducted an appeal hearing for $114,970.47 placed on the Contra Costa County property tax roll for the property located at 2500 Annalisa Drive in Concord. The appeal by the property owner who had been the former business owner of ice cream manufacturer, "Caffe Classico," was denied. This delinquency represented a complex situation that existed for several years and was handled by both Source Control (now known as Environmental Compliance) and the Rates and Fees workgroups over that period. As part of the District's commitment to continuous improvement, staff was asked to summarize the lessons learned, to describe the procedural and operational changes implemented since this event, and to provide opportunities for further improvement that will reduce the likelihood of a future occurrence. Background The building at 2500 Annalisa Drive was built and connected to the sanitary sewer in 1983. The District issued a sewer permit and collected $1,515 in capacity fees which, in accordance with the District Code at the time, were based on a plumbing fixture count. Notes on the permit reference a total of 6,000 square feet; 3,000 square feet of office space and 3,000 square feet of light industrial space. In 2000, Mr. Thomas Heffernan purchased the property and relocated his food processing business, Caffe Classico, onto the parcel. A number of improvements were made to the building to facilitate the food processing but no building permits were obtained from Contra Costa County, no plans were submitted to the District for review and, therefore, no sewer fees were or could be collected at that time. • Finance Committee September 22, 2016 Page 2 of 5 In 2003, District Source Control Inspectors became aware that an ice cream manufacturer, "Caffe Classico", was operating on the premises and was not in compliance with District discharge regulations. Source Control took enforcement action and had over 30 interactions with Caffe Classico between 2003 and 2013, and eventually reached a settlement agreement for the discharge violations in January 2010 and again for subsequent violations in January 2013. Mr. Heffernan sold the business to an investment group in 2007, yet retained ownership of the property. In September 2011, Caffe Classico management notified the District that the testing for p Source Control strength data had been intentionally manipulated to reduce wastewater strength readings. District staff then started investigating whether an added burden had been placed on the sanitary sewer and, in the course of that investigation, discovered in the next few months that no capacity fees had been paid for the change in use or the subsequent expansion from 6,000 square feet to over 12,000 square feet. In December 2012, the District notified the property owner that capacity fees were due based on the property's change of use and increased burden. In February 2013, Caffe Classico converted and achieved zero process discharge status as specified in the January 2013 formal enforcement settlement agreement with Source Control. On May 3, 2013, after multiple meetings with the property owner, the District notified the property owner that $114,970.47 in capacity fees were due, which were comprised of a p Y capacity fee down payment of $102,974.00, an additional 10% delinquent charge of p Y $10,297.40, and penalties at 1.5% per month totaling $1,699.07. The District delayed puttingthe delinquency on the property tax bill until August 6, 2015 in order to allow the property owner time to resolve third party litigation that allegedly was to clarify ambiguous facts in the case. Permitting Process For new construction or changes of use where tenant improvements are constructed, the District relies on the local building department to route plans to District staff for review. Capacity Fee Calculation Capacity fees for non-residential users are calculated based on the anticipated burden p Y as determined from the estimated flow and strength of their wastewater discharge. For most users, a standard factor based on their business type is multiplied by the building area to determine the burden. A credit is given for any capacity fees that had previously been paid for the parcel. District Code section 6.12.050 describes the basis for non- residential capacity fees including the calculation of the wastewater burden based on flow and strength. District Code section 6.12.080 describes the Schedule of Capacity Fees which includes the various business types and corresponding burden factors. Finance Committee September 22, 2016 Page 3 of 5 Some businesses use a special study to calculate the appropriate capacityfee. The special study reviews site-specific wastewater flow and strength for a period of time up to five years. As provided for in District Code, the Special Study frequently includes a review period of up to five years during which the strength and flow from thep arcel is monitored. If the strength and flow differs significantly from the initial Special Study results, the capacity fee is adjusted and additional fees are imposed or an appropriate refund is issued. Special Studies are used for: • All Permitted Industries, such as food manufacturers; • Businesses that do not fit neatly into the business types listed in the Schedule of Capacity Fees; and • Individual users that make the request because they believe the applicable capacity fee is unreasonably high based on the user's anticipated site-specific wastewater flow and strength. For Caffe Classico, a special study was performed. However, based on the questionable wastewater strength data and the complication of the business adopting a zero discharge method of operation, a capacity fee settlement based on the Capacity Use Charge Program down payment was calculated from the building square footage g and the Capacity Use Charge Program factor. Communication District staff diligently worked with Caffe Classico to achieve compliance with Title 10 of the District Code (Source Control ordinance) between 2003 and 2013 on more than 34 occasions. Staff's primary focus during this time was geared toward compliance. Making this information available to other workgroups at the District and breaking down silos between work groups in the District is the key to improving and fostering better communication and more effective coordination. Caffe Classico had not pulled permits for their change of use to ice cream manufacturing, so the Development staff had not focused on outstanding capacity fees during this period. As a result of this incident, the Planning and Development Services Division has implemented new internal processes to improve communication with the Source Control group. Copies of Notice of Violations (NOVs) and Warning Notices are now sent to the Permit Counter for review to determine if all fees have been paid for those businesses. Additionally, the Quarterly Report of Environmental Compliance Inspections is being forwarded to Permit Counter staff who check for new businesses. Both groups have p begun regularly meeting to coordinate work. Future plans include linking databases and software to make information more accessible to both groups. Finance Committee September 22, 2016 Page 4 of 5 Education/Training Cross -training teams means improving employees' proficiency levels in roles outside their current responsibilities. Each Permit Counter technician has already cross -trained in the field for two days with Source Control inspectors. As time allows, Source Control inspectors will shadow Permit Counter staff to develop an awareness of Permit Counter processes, including capacity fee determination and collection and the development review processes. While not a factor in the Caffe Classico collection effort, coordination with the partner cities and Contra Costa County is critical to identify new businesses and change of use of existing businesses. The Planning and Development Services Division recently hosted its second annual Sewer Summit to foster customer engagement and awareness of the District's role in the development process. This year staff focused on commercial development and capacity fees for the municipalities that the District services on both the March 24 and April 26, 2016 sessions. The Summit has yielded immediate improvements to our relationships with the agencies. For example, agencies are now requiring contractors to obtain the District's signoff on job cards, prior to the building permits being finalized. Inspection requests have risen as a result. Next year's event is currently scheduled for March and April 2017. Internal Processes Planning and Development Services staff has begun a review of non-residential parcels. Approximately 200 multi -use parcels are currently being field reviewed. A new student co-op position has been added to undertake this review. For parcels where a change in use is discovered which results in a capacity fee being owed, a letter and invoice is sent to the property owner. The remaining non-residential parcels have been categorized and prioritized; review of those parcels will begin upon completion of the multi -use review. District staff is proposing a simplification of the Capacity Use Charge Program which will update the District Code in calendar year 2017. A simplified program may offer benefits for parcels where the increased code enforcement efforts identify additional capacity fees. In summary, District staff has implemented the following new procedures/processes: • Improved internal communications between the Source Control, Permit Counter, and Rates and Fees workgroups; • Source Control now forwards copies of NOVs and Warning Notices directly to the Permit Counter to check for outstanding fees; Finance Committee September 22, 2016 Page 5 of 5 • The Quarterly Report of Environmental Compliance Inspections is reviewed by Permit Counter staff to identify new businesses; • Permit Counter staff has crosstrained with Source Control staff; • Partner agencies have been engaged to enhance coordination by holding an annual two-day Sewer Summit; and • A review and audit of business categories, including mixed use, is conducted annually. Identified improvements that have not yet been implemented include: • Linking databases and software to make information more accessible; and • Updating the District Code.