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HomeMy WebLinkAbout13. Update on DCC Satellite Water Recycling Facility Demonstration Project, and approve project-specific multiplier for labor billing rate Page 1 of 16 Item 13. CENTRAL SAN CENTRAL SAN BOARD OF DIRECTORS POSITION PAPER MEETING DATE: OCTOBER 4, 2018 SUBJECT: RECEIVE UPDATE ON THE DIABLO COUNTRY CLUB SATELLITE WATER RECYCLING FACILITY DEMONSTRATION (PROJECT)ANDAPPROVE THE USE OFASPECIAL PROJECT-SPECIFIC MULTIPLIER FOR CALCULATING THE REIMBURSEMENT BILLING RATE FOR FUTURE CENTRAL SAN LABOR ON THE PROJECT SUBMITTED BY: INITIATING DEPARTMENT: MELODY LABELLA, RESOURCE RECOVERY ENGINEERING AND TECHNICAL SERVICES- PROGRAM MANAGER PDS-RESOURCE RECOVERY REVIEWED BY: JEAN-MARC PETIT, DIRECTOR OF ENGINEERING AND TECHNICAL SERVICES Roger S. Bailey General Manager ISSUE Board approval is needed to establish a special project-specific reimbursement rate to recover the cost of indirect services provided by Central San. BACKGROUND Central San has been working with the Diablo Country Club (DCC), who is interested in developing a Satellite Water Recycling Facility (SWRF) Demonstration Project (Project)that would divert wastewater from Central San's sewer collection system and treat it onsite at the golf course, using a membrane bioreactor and ultraviolet light disinfection, to produce recycled water for irrigating the golf course. Upon successful completion of the environmental review process, in which Central San is the lead agency, the Project will be designed, built and financed by DCC and then turned over to Central San for operation and October 4, 2018 Regular Board Meeting Agenda Packet- Page 144 of 265 Page 2 of 16 maintenance after the successful completion of a one-year demonstration period. As directed by the Board previously, DCC will be responsible for reimbursing Central San for both direct and indirect costs for the Project. Staff provided the attached memo (Attachment 1) and a verbal update at the September 19, 2018, Real Estate, Environmental and Planning (REEP) Committee meeting. Staff has since prepared the attached presentation (Attachment 2) and will provide a similar update at the October 4, 2018, Board meeting. In addition to updating the Board on the Project's status, staff is seeking the Board's guidance on the multiplier for calculating the billing rate for reimbursement of future Central San labor on the Project. On February 1, 2018, the Board adopted by unanimous vote a 219% administrative overhead rate for Fiscal Year 2018-19. (The related Position Paper is provided for informational purposes as Attachment 3.) This results in a multiplier of 319.02%, as reflected on slide 11 of the attached staff presentation, which includes the unfunded actuarial accrued liability(UAAL). The 319.02% multiplier is used for Central San labor billed to the stormwater agencies in Contra Costa County(for stormwater inspection services) and to Mt. View Sanitary District (for wastewater inspection services). At the September REEP Committee meeting, staff proposed a special Project-specific 252.64% multiplier, which omits the UAAL, as reflected on slide 9 of the attached presentation. The reason for recommending a lower special Project-specific rate is that this is a pilot "demonstration" project, and the UAAL overhead factor may not be applicable in this specific case. ALTERNATIVES/CONSIDERATIONS The Board may consider establishing another formula for reimbursement of Central San labor costs. Absent the Board's direction to use the proposed lower Project-specific multiplier of 252.64%, the previously approved multiplier rate of 319.02% will be applied. FINANCIAL IMPACTS Since DCC is financially responsible for the Project, there should be no financial impacts to Central San. COMMITTEE RECOMMENDATION This matter was considered at the September 18, 2018, REEP Committee meeting. President Nejedly supported the 252.64% formula, while Board member Pilecki requested reviewing the rates charged by Central San to other entities for consistency with the formula used for other external rates charged for Central San labor, namely to the public agencies for which Central San provides inspection services. RECOMMENDED BOARD ACTION Receive the update, and approve staff's recommendation to use the special Project-specific 252.64% multiplier for calculating the reimbursement billing rate for Central San labor on the Diablo Country Club Satellite Water Recycling Facility Demonstration Project. Strategic Plan Tie-In GOAL THREE:Be a Fiscally Sound and Effective Water Sector Utility Strategy 2- Manage costs October 4, 2018 Regular Board Meeting Agenda Packet- Page 145 of 265 Page 3 of 16 GOAL SIX: Embrace Technology, Innovation and Environmental Sustainability Strategy 1 -Augment the region's water supply ATTACHMENTS: 1. REEP Committee Memo on 9/19/18 2. Presentation 3. Position Paper on Administrative Overhead Rate on 2/1/18 October 4, 2018 Regular Board Meeting Agenda Packet- Page 146 of 265 Page 4 of 16 Attachment 1 CENTRAL SAN i September 19, 2018 TO: REAL ESTATE, ENVIRONMENTAL AND PLANNING COMMITTEE FROM: MELODY LABELLA, RESOURCE RECOVERY PROGRAM MANAGER REVIEWED BY: JEAN-MARC PETIT, DIRECTOR OF ENGINEERING AND TECHNICAL SERVICES ROGER S. BAILEY, GENERAL MANAGER SUBJECT: RECEIVE UPDATE ON THE DIABLO COUNTRY CLUB SATELLITE WATER RECYCLING FACILITY DEMONSTRATION PROJECT Staff would like to share the following updates with the Committee on the various elements of the Diablo Country Club (DCC) Satellite Water Recycling Facility (SW RF) Demonstration Project (Project): Environmental Review • Two Community Input Open House sessions were held in June 2017 at DCC to receive public input on the Project as part of the environmental review process under the California Environmental Quality Act (CEQA). • Many questions were answered by the Central San and DCC staff present. • There was no apparent opposition to the Project and nearby neighbors in attendance were supportive of the proposed location of the SWRF facility in the middle of DCC's golf course. • Comment letters were received from the Town of Danville and Contra Costa County's Environmental Health Department. The Town of Danville was particularly interested in obtaining more project design details. • The Initial Study was completed based on a diversion force main alignment in Diablo Road in the Town of Danville. • Since certain Project details need to be known in order to adequately mitigate environmental impacts, the schedule for completion of CEQA is dependent on the timing of DCC hiring their Design-Build (DB) Team. Having the DB Team weigh in on the mitigation measures will result in a better environmental review process. • Updating the Initial Study will likely be required due to selection of an alternative force main route, at DCC's request. • Following the update of the Initial Study and DCC's hiring of the DB Team, the next step will be to complete the Environmental Impact Report (E I R). DCC's Program Manager • Bert Michalczyk, retired Dublin San Ramon Services District General Manager, was hired as DCC's Program Manager in September 2017 and continues to facilitate the Project on their behalf. 6epdb r2M( 2"IREfEb@ah` titia4A ino�PRS a4b9ib2l Bof 46 REVISED (Time changed from 2pm to 11� Page .9 of 26 DCC's DB Procurement Process • After issuing a Request for Qualifications earlier this year, DCC has qualified four DB Teams to receive a Request for Proposal (RFP). • DCC's issuance of the DB RFP has been delayed due to the finalization of the right-of-way needed to secure the alternate force main alignment. • DCC is currently evaluating the best timing to call for proposals. Central San Activities Staff has been working closely with District Counsel to draft the following documents: • Long-Term Operations Agreement • Agreement to cover the roles, responsibilities, and Central San cost reimbursement during the timeframe between Planning and ultimate Project acceptance by Central San, including progressive design, permitting, construction, and commissioning • Long-Term Land Lease (for the land occupied by the Project facilities) Staff has also been working on the following: • Procuring As-Needed Technical Services to support Central San's oversight of the Project during the DB phase, including plan review and inspection • Coordinating with Ascent (DCC's environmental consultant) in support of the development of the EIR • Participating in progress and coordination meetings with DCC and their consultants • Developing a proposed formula for calculating the billing rate for reimbursement of Central San's future labor on the Project, as follows: Item Multiplier* Direct Labor (at posted classification rate) 100.00% Employee Benefits 41.62% Non-work Hours 18.02% Subtotal Multiplier 159.64% Administrative Overhead (without UAAL) 93.00% Total Multiplier 252.64% *These figures are based on the current fiscal year (2018-2019). Staff looks forward to reviewing these updates and answering any questions at the September 19, 2018 REEP Committee meeting. GOAL THREE: Be a Fiscally Sound and Effective Water Sector Utility Strategy 2- Manage costs GOAL SIX: Embrace Technology, Innovation and Environmental Sustainability Strategy 1 -Augment the region's water supply 6epOb r2M( 2"IREfFt@noh titia*Peg6mo�PRS aftgib2l(E5of 46 REVISED (Time changed from 2pm to 11� Page 6 of 16 . Attachment 2 / UPDATE ON DIABLO COUNTRY CLUB SATELLITE WATER RECYCLING FACILITY DEMONSTRATION PROJECT Melody LaBella, P.E. Resource Recovery Program Manager Board Meeting ' October 4, 2018 ANN PRESENTATION OVERVIEW This presentation will provide updates on the following Project elements: • Environmental Review • Design-Build Procurement Process by Diablo Country Club (DCC) • Central San Activities • Board Direction Needed • Questions & Board Input CENTRAL SAN � z 1 October 4, 2018 Regular Board Meeting Agenda Packet- Page 149 of 265 Page 7 of 16 LEGEND soaure w,uunawrnun rnnsi swif w.mwn.�m •�} S. ensincra'o .1 � -, rmvnu,mua,n rvosoxui .rtN. ��' Ir r , – Y lu :s orrn.oe — 3 CENTRALSAN ENVIRONMENTAL REVIEW • Two Community Input Open House sessions were held in June 2017 at DCC to receive public input on the Project as part of the environmental review process under the California Environmental Quality Act (CEQA). •There was no apparent opposition to the Project and nearby neighbors in attendance were supportive of the proposed location of the Satellite Water Recycling Facility (SWRF) in the middle of DCC's golf course and away from neighbors. • Comment letters were received from the Town of Danville and Contra Costa County's Environmental Health DepaLalignment •The Idy was completed based on a diversion force main in Diablo Road in the Town of Danville. 2 October 4, 2018 Regular Board Meeting Agenda Packet- Page 150 of 265 Page 8 of 16 ENVIRONMENTAL REVIEW (CONT'D) • Since certain Project details need to be known in order to adequately mitigate environmental impacts, the schedule for completion of CEQA is dependent on the timing of DCC hiring their Design-Build (DB) Team. Having the DB Team weigh in on the mitigation measures will result in a better environmental review process. • Updating the Initial Study will likely be required due to selection of an alternative forcemain route, at DCC's request. • Following the update of the Initial Study and DCC's hiring of the DB Team, the next step will be to complete the 30% design and the Environmental Impact Report. ` 5 DCC's DESIGN-BUILD TEAM PROCUREMENT PROCESS • Issued a Request for Letters of Interest on 1/17/18 • Issued Request for Qualifications on 3/15/18 • DCC has qualified four DB Teams to receive a Request for Proposal (RFP) • DCC's issuance of the RFP has been delayed due to the finalization of the right-of-way needed to secure the alternate forcemain alignment • DCC is currently evaluating the best timing to call for proposals • Drafting long-term Ground Lease (for the land occupied by the Project facilities) 3 October 4, 2018 Regular Board Meeting Agenda Packet- Page 151 of 265 Page 9 of 16 CENTRAL SAN'S ACTIVITIES Staff has been working closely with District Counsel to draft the following documents: • Long-Term Operations Agreement • Multi-Phased Agreements to cover the roles, responsibilities, and Central San cost reimbursement during the Planning, Progressive Design, Construction, Commissioning and ultimate acceptance of the Project by Central San: • Phase 1: Planning, Environmental Review and DCC to Obtain Guaranteed Maximum Price from DB team on the 30% Design • Phase 2: Design-Build and Commissioning of the SWRF • Phase 3: One-Year Demonstration • Phase 4: Long-Term Operations Agreement and Ground Lease CENTRAL SAN'S ACTIVITIES (CONT'D) Staff has also been working on: • Procuring As-Needed Professional Engineering Services to support Central San's oversight of the Project during the progressive design and the construction • Main tasks are plan review and inspection • Developing a special project-specific formula for calculating the billing rate for reimbursement of future Central San labor on the Project 1 4 October 4, 2018 Regular Board Meeting Agenda Packet- Page 152 of 265 Page 10 of 16 AS-PRESENTED TO THE REAL ESTATE, ENVIRONMENTAL & PLANNING (REEP) COMMITTEE ON 9/19/2018 Item Multiplier* Direct Labor (at posted classification rate) 100.00% Employee Benefits' 41.62% Non-work Hours 18.02% Subtotal Multiplier 159.64% Administrative Overhead (without unfunded 93.00% accrued actuarial liability (UAAL)) Total Multiplier 252.64% *These figures are based on the current fiscal year(2018-2019). **This figure is also without URAL. 9 CENTRALSAN FEEDBACK FROM RESP COMMITTEE • Review and consider consistency with the other rates Central San charges for services performed for external agencies • Stormwater agencies • Mt. View Sanitary District ILk1 5 October 4, 2018 Regular Board Meeting Agenda Packet- Page 153 of 265 Page 11 of 16 MULTIPLIER CHARGED FOR OTHER ENTITIES AND AGENCIES (E.G.; STORMWATER AND WASTEWATER INSPECTION SERVICES) Item Multiplier* Direct Labor (at posted classification rate) 100.00% Employee Benefits** 95.00% Non-work Hours 18.02% Subtotal Multiplier 213.02% Administrative Overhead (with unfunded 106.00% accrued actuarial liability UAAL Total Multiplier 319.02% *These figures are based on the current fiscal year(2018/2019). **This figure also includes URAL. CENTRALSAN STAFF'S RECOMMENDATION • Receive the update • Confirm and approve staff's recommendation to use the special project-specific 252.64% multiplier, in lieu of the full 319.02% multiplier, for calculating the reimbursement billing rate for Central San labor on the Diablo Country Club Satellite Water Recycling Facility Demonstration Project 1 a. CENTRALSAN 6 October 4, 2018 Regular Board Meeting Agenda Packet- Page 154 of 265 Page 12 of 16 QUESTIONS AND BOARD INPUT CENTRALSAN 7 October 4, 2018 Regular Board Meeting Agenda Packet- Page 155 of 265 Page 13 of 16 Attachment 3 CENTRAL SAN BOARD OF DIRECTORS ' POSITION PAPER '0000 MEETING DATE: FEBRUARY 1, 2018 SUBJECT: APPROVE UPDATED ADMINISTRATIVE OVERHEAD PERCENTAGE OF 219% FOR FISCAL YEAR 2018-19. APPROVAL RECOMMENDED BY FINANCE COMMITTEE. SUBMITTED BY: INITIATING DEPARTMENT: THEAVASSALLO, FINANCE MANAGER ADMINISTRATION-FINANCE REVIEWED BY: CHRIS THOMAS, FINANCE ADMINISTRATOR PHILIP R. LEIBER, DIRECTOR OF FINANCEAND ADMINISTRATI ON ANN SASAKI, DEPUTY GENERAL MANAGER ROGER S. BAILEY, GENERAL MANAGER Ann Sasaki Deputy General Manager ISSUE Board approval is needed to revise the annually updated administrative overhead percentage in order to recover the full cost of the indirect services provided by Central San. This overhead rate is used for several purposes including billing outside agencies, calculating certain customer rates and charges, and for internal use in charging overhead to capital projects. BACKGROUND In prior years, the purpose of calculating administrative overhead, employee benefits, and non-work hours rates was to follow the Board's direction for Central San to recover the full cost of the indirect services it provides. I n an effort to set the rate early enough to be used for calculating rates and charges and the DElbmbary4l 2W ifiggAtjgekit e156®f 2613 Page 2zb6416 negotiation of the Clean Water Program contract, staff brings the annual updated percentage to the Board every January. Administrative overhead consists of all administrative indirect costs for Central San that are incurred for a common purpose benefiting more than one task. This rate includes Administration Department staff salaries, retirement costs, administration portion of Other Post-Employment Benefits (OPEB)trust contributions for active and retired employees, and any additional Unfunded Actuarial Accrued Liability (UAAL) payments allocated to administration. Employee benefits consist of costs associated with retirement pension payments, medical premiums, deferred compensation contribution in lieu of social security, and other similar benefits expressed as a percent of salaries. Non-work hours consist of the value of vacation, sick leave, administrative leave, birthday holiday, and earned overtime expressed as a percentage of annual work hours. During 2013, Central San's staff, in conjunction with Matrix Consulting Group (Matrix), reviewed the methodology used by Central San and analyzed other allowable methods used to calculate overhead. Matrix issued its report in March 2014, which stated that the methodology that Central San previously used was compliant with State and Federal guidelines, and was generally consistent with other agencies and jurisdictions, so there was no immediate need for change. It was suggested by several Board members that staff conduct further analysis as to Central San's methodology for calculating the administrative overhead percentage prior to presenting the matter for consideration for Fiscal Year(FY) 2014-15. Consequently, Central San staff, with the help of Matrix, had proposed and recommended a slightly different methodology for calculating the administrative overhead percentage for FY 2014-15 and beyond. The four main items addressed by Central San staff and the consultant included the treatment of the following: • Use of audited or budgeted benefit amounts for the employee benefits component • OPEB contributions for active employees and retirees • Retiree premiums • Additional UAAL payments On April 3, 2014 the Board approved the following: 1. A change/clarification in methodology for calculating Central San's administrative overhead percentage, commencing with FY 2014-15 as follows: • Use audited cost of benefits for the benefits component of the calculation • Allocate the OPEB contribution for active employees and retirees to their respective departments, and include only the administrative portion in the administrative component • Continue to treat retiree premiums as indirect, and include them in the administrative overhead component • Allocate any additional UAAL payments to their respective departments, and include only the administrative portion in the administrative overhead component 2. A single administrative overhead percentage is to be used for billing outside agencies, calculating the annual Environmental and Development Rates and Charges, and for internal use in charging to capital projects (administrative and non-work hours percentages used); and 3. A three-year smoothing methodology going forward to adjust for volatility in the rate, using FY 2014-15 as the base year. The rate for FY 2015-16 would be based on two years and it would not be until FY 2016-17 that an actual three-year smoothing would be able to be utilized. Beltmbary41= t&EBaadd\&&edhg~ddJRakkDbt X157 of 26Z Page 3506416 For FY 2018-19, the largest contributors to the net change in the total administrative overhead rate (three- year smoothed)were: • Employee benefits retirement costs decreased (numerator), and salaries increased due to Memorandum of Understanding (MOU) - specified cost of living (COLA) and other salary changes (denominator), resulting in a net decrease • Administrative overhead expenses were relatively flat the last 2 years (numerator), and salaries increased (denominator), resulting in a net decrease • The effects of three-year smoothing results in an overall net decrease Central San's rate for FY 2018-19 decreased to 219% from 225% in FY 2017-18. See Attachment 1 for a summary of the rates for FYs 2018-19, 2017-18, and 2016-17. ALTERNATIVES/CONSIDERATIONS The administrative overhead calculation methodology could be modified resulting in an increased or reduced percentage. It is not recommended to modify the method again as the new method was approved by the Board in April 2014. FINANCIAL IMPACTS The administrative overhead percentage is calculated annually for the purpose of recovering administrative overhead and employee benefit costs when charging to capital projects, recovering full costs for services provided to another agency, company or developer, and for customer billings involving labor costs. COMMITTEE RECOMMENDATION The proposed three-year smoothed administrative overhead percentage of 219% for FY 2018-19 was reviewed by the Finance Committee at its January 23, 2018 meeting. The Committee recommended Board approval. RECOMMENDED BOARD ACTION Approve the use of the administrative overhead percentage of 219% for Fiscal Year 2018-19. GOAL THREE: Be a Fiscally Sound and Effective Water Sector Utility Strategy 1 - Conduct Long-Range Financial Planning, Strategy 2- Manage Costs ATTACHMENTS: 1. Administrative Overhead Calculation Summary for Fiscal Year 2018-19 DElbmbary412W itis kkkt el53 of 2613 ATTACHMENT 1 Central Contra Costa Sanitary District Administrative Overhead Summary For the 2018-19 Budget - Calculated using 2016-2017 Audited Financial Statements Current Year 3 Year Calculation Last Year's Two Years ago Smoothed Unsmoothed Unsmoothed Unsmoothed Year 2018-2019 2018-2019 2017-2018 2016-2017 Employee Benefits 95.21% 80.63% 91.52% 113.04% Administrative Overhead 106.10% 102.29% 109.37% 106.63% Non-work Hours 18.02% 18.06% 18.04% 18.12% 219.33% 200.98% 218.93% 237.79% Smoothed Rate 219% 219% 225% 216% Years in Smooth Rate 3 yr 3 yr 3 yr 3 yr Comparison of Rate Before Smoothing 2017-2018 2016-2017 Decrease Employee Benefits 81% 92% -11% Administrative Overhead Page 4fo6416 102% 109% -7% Non-work Hours 18% 18% 0% Total 201% 219% -18% Summary of Increases (Decreases) Employee Benefits: Total adjusted benefits (numerator) decreased by 6.3%, and total salaries (denominator) increased by 6.4%, causing -11% the overall decrease FY 2016-17 FY 2015-16 Difference Benefits (numerator) $28.0 $29.9 ($1.9) Salaries (denominator) 34.7 32.6 2.1 Admin Overhead: Total adjusted indirect costs (numerator) decreased by less than 1%, but total direct salaries (denominator) increased by 6.2%, causing the overall decrease -7% FY 2016-17 FY 2015-16 Difference Indirect costs (numerator) $29.0 $29.2 ($0.2) Direct salaries (denominator) 28.4 26.7 1.7 01/16/18 11:57 AM Summary 1819 Page 1 Dslbmbsry412W WRgqt&EBaadd46e4ifiggV@addd9MkWt P&W154)of 2W