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HomeMy WebLinkAbout11. Adopt resolution establishing a new two-year pilot Septic-to-Sewer Financing Program Page 1 of 11 Item 11. CENTRAL SAN BOARD OF DIRECTORS vie . , Hill. , , . . POSITION PAPER MEETING DATE: MARCH 19, 2020 SUBJECT: ADOPT RESOLUTION NO. 2020-013 ESTABLISHING A NEW TWO-YEAR PILOT SEPTIC-TO-SEWER (S2S) FINANCING PROGRAM EFFECTIVE JULY 1, 2020 TO ENCOURAGE PROPERTY OWNERS TO ABANDON THEIR SEPTIC TANKS AND CONNECT TO THE SEWER SYSTEM TO PROTECT PUBLIC HEALTH AND THE ENVIRONMENT SUBMITTED BY: INITIATING DEPARTMENT: HEATHER RAMAMURTHY MANAGEMENT ENGINEERING AND TECHNICAL SERVICES- ANALYST PDS-RATES AND FEES REVIEWED BY: THOMAS BRIGHTBILL, SENIOR ENGINEER DANEA GEMMELL, PLANNING AND DEVELOPMENT SERVICES DIVISION MANAGER PHILIP LEIBER, DIRECTOR OF FINANCE &ADMINISTRATION JEAN-MARC PETIT, DIRECTOR OF ENGINEERINGAND TECHNICAL SERVICES Roger S. Bailey Kenton L. Alm General Manager District Counsel ISSUE Approval of the Board of Directors is required to change the time of collection of certain fees such as those included in a proposed new installment payment program to expand financing to property owners with nearby sewer mains wishing to convert from septic systems to the public sewer system. March 19, 2020 Regular Board Meeting Agenda Packet- Page 141 of 163 AMENDED AGENDA Page 2 of 11 BACKGROUND On October 15, 2019, the Engineering & Operations Committee received an update on the success of the Contractual Assessment Districts (CAD) and Alhambra Valley Assessment Districts (AVAD) programs. The Committee suggested that staff develop a plan to revise existing programs to encourage more connections to the public sewer system. Staff proposes expanding the current Residential Capacity Fee Installment (Septic Conversion) program, which allows residential property owners to finance capacity fees. The Septic Conversion program currently in place helps parcel owners finance capacity fees at six percent interest for a period of 10 years. This program does not cover the costs of constructing laterals or other costs or fees. Whereas the Septic Conversion program assists homeowners with financing capacity fees, the average estimated total cost of septic-to-sewer conversion is around $40,000 with some projects as high as $90,000. Parcel owners faced with prospective high costs may delay conversions longer than is in the best interest of public health. The CAD and AVAD programs currently assist groups of parcel owners in a neighborhood to construct sewer mains. Financing of sewer construction is similar to the Septic Conversion program with a 15-year term for participating property owners in AVADs and a 10-year term for participating property owners in CADs. All promissory notes are recorded against the property and due upon sale of the parcel. Staff proposes a new S2S Financing Program that would allow residents with existing homes on a septic system to finance the following costs: • construction of the sewer lateral, • septic abandonment costs, • CAD, AVAD, or reimbursement fees to private installers, and • Central San capacity fees, application fees, and inspection fees. Financing would be capped at$50,000 per customer with a 15-year term, an annual adjustable interest rate at Local Agency Investment Fund (LAI F) earnings rate plus one percent, not to exceed six percent and will be secured by a promissory note. The promissory note will be recorded and will authorize Central San to collect the annual payments on the property tax bill thereby ensuring payment. The promissory note will be due on sale if the property is sold. The pilot S2S Financing Program would end in June 2022. Staff will bring the results of the pilot program back to the Board prior to its expiration to determine if it should continue permanently, be revised, or be discontinued. CEQA Staff has concluded that establishing the proposed S2S Financing Program would be categorically exempt from the California Environmental Quality Act (CEQA) pursuant to Section 15273 (a) (1) of Central San's CEQA Guidelines, in that the program applies only to currently developed properties converting from septic tank systems to public sewer service and that the administrative charges proposed will merely reimburse Central San for staff costs and expenses. By adopting the proposed ordinance, the Board of Directors would make the independent finding that the program is exempt from CEQA. ALTERNATIVES/CONSIDERATIONS 1. Direct staff to revise the proposed program. 2. Withhold or delay approval of the proposed program. FINANCIAL IMPACTS Staff has identified approximately 200 single family residences on septic with an existing sewer main in close proximity. If the S2S Financing Program is extended beyond the pilot phase, total project costs March 19, 2020 Regular Board Meeting Agenda Packet- Page 142 of 163 AMENDED AGENDA Page 3 of 11 would be approximately$6.9 million. Staff has included funding of the S2S Financing Program in the proposed fiscal year 2020-21 Capital I mprovement Budget (C I B)with a $500,000 per year allocation for the first two years. The S2S Financing Program will not result in additional costs to Central San as all loans will be paid by the property owners over the term the loans. It will encourage property owners currently using septic systems to become sewer system participants and pay the annual sewer service charge in addition to the annual debt service which is collected with the property taxes. Currently, the LAI F rate plus one percent is around two percent which would be used to cover administration costs, lost opportunity costs, and ensure that there is no issue of "gift of public funds". COMMITTEE RECOMMENDATION The Engineering and Operations Committee considered this matter at its February 4, 2020 meeting and recommended Board approval. RECOMMENDED BOARD ACTION Adopt proposed resolution authorizing a new two-year pilot Septic-to-Sewer Financing Program effective July 1, 2020 to encourage property owners to abandon their septic tanks and connect to the sewer system. Strategic Plan Tie-In GOAL ONE: Provide Exceptional Customer Service Strategy 1 - Build external customer relationships and awareness ATTACHMENTS: 1. Proposed Resolution 2. Presentation March 19, 2020 Regular Board Meeting Agenda Packet- Page 143 of 163 AMENDED AGENDA Page 4 of 11 Attachment 1 RESOLUTION NO. 2020-013 A RESOLUTION OF THE CENTRAL CONTRA COSTA SANITARY DISTRICT TO ESTABLISH A NEW TWO-YEAR PILOT SEPTIC-TO-SEWER (S2S) FINANCING PROGRAM EFFECTIVE JULY 1, 2020 WHEREAS, Central Contra Costa Sanitary District (Central San) has, over the last several years, identified a prevalent sanitation issue being the need to replace residential septic systems by connection to Central San's collection system; and WHEREAS, it is generally accepted that converting properties in urban and suburban settings from septic tank systems to public sewer service is beneficial to regional water quality; and WHEREAS, this issue is increasing in importance as a result of the failure of existing septic systems due to age of existing septic systems in the area; and WHEREAS, in order to replace failing septic systems with connections to the public sewers, extension of sewer service connections and payment sewer connection fees are required; and WHEREAS, the cost and complexity of undertaking a sewer main extension may prevent a homeowner from connecting to the public sewer system, thus perpetuating an ongoing health and environmental problem; and WHEREAS, a septic-to sewer financing program would further Central San's mission to protect public health and the environment by encouraging the elimination of septic tanks within its boundaries, thus improving regional water quality; and WHEREAS, staff has analyzed the setup and administration costs for such a program, including direct costs, staff labor, overhead and interest; and WHEREAS, the Board of Directors finds that it is necessary to assess administrative charges to those customers who participate in the program for recovery of costs. NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of Central San, as follows: THAT a two-year pilot program called Septic-to-Sewer (S2S) Financing Program for encouraging property owners to abandon their septic tanks and connect to the sewer system is hereby approved; and THAT staff is directed to implement the pilot S2S Financing Program for a two-year period effective July 1, 2020 under the following conditions: March 19, 2020 Regular Board Meeting Agenda Packet- Page 144 of 163 AMENDED AGENDA Page 5 of 11 Central Contra Costa Sanitary District Resolution No. 2020-013 Page 2 of 3 1. Only residential properties being converted from use of private septic tank systems to public sewer service shall be eligible to participate in the program; and 2. As a condition of participation in the program, a user must execute a promissory note and enter into a recordable Memorandum of Agreement; and 3. If a property owner elects to participate in the program, the fees that would otherwise be due at the time of Central San's issuance of a permit to connect to the public sewer will be financed by Central San over a 15-year period at the interest rate established for the S2S Financing Program in the Schedule of Environmental and Development-Related Rates and Charges; and 4. Annual installment payments due under the S2S Financing Program shall be collected on the Contra Costa County Property Tax Roll; and 5. The Board of Directors hereby delegates responsibility for executing and recording program documents to the General Manager or his designee; and 6. Application, inspection, Capacity and Contractual Assessment District (CAD) and Alhambra Valley Assessment District (AVAD) fees, as well as private reimbursement, side sewer construction and septic abandonment costs may be financed over 15 years in annual payments at variable Local Agency Investment Fund plus one percent, with a not-to-exceed rate of six percent. 7. Unless extended by the Board of Directors, the S2S Financing Program will terminate on June 30, 2022. BE IT FURTHER RESOLVED THAT the Board of Directors finds that the application fees for participation in the S2S Financing Program included in the current Schedule of Environmental and Development-Related Rates and Charges are appropriate and reasonable administrative charges for recovery of Central San's program costs; and THAT the Board of Directors finds that this action is categorically exempt from the California Environmental Quality Act (CEQA) pursuant to Section 15273 (a) (1) of Central San's CEQA Guidelines, in that the program applies only to currently developed properties converting from septic tank systems to public sewer service. March 19, 2020 Regular Board Meeting Agenda Packet- Page 145 of 163 AMENDED AGENDA Page 6 of 11 Central Contra Costa Sanitary District Resolution No. 2020-013 Page 3 of 3 PASSED AND ADOPTED this 19th day of March, 2019, by the Board of Directors of Central San by the following votes: AYES: Members: NOES: Members: ABSENT: Members: Michael R. McGill, P.E. President of the Board of Directors Central Contra Costa Sanitary District County of Contra Costa, State of California COUNTERSIGNED: Katie Young Secretary of the District Central Contra Costa Sanitary District County of Contra Costa, State of California Approved as to form: Kenton L. Alm, Esq. Counsel for the District March 19, 2020 Regular Board Meeting Agenda Packet- Page 146 of 163 AMENDED AGENDA Page 7 of 11 14�• PROPOSED SEPTIC-TO-SEWER �a (S2S) FINANCING PROGRAM � Danea Gemmell Planning & Development Services Division Manager March 19, 2020 Board Meeting I BACKGROUND October 15, 2019 Engineering & Operations Committee "The Committee suggested that staff propose a plan, or look at what is needed, to revise the existing program to protect public health by encouraging I roperty owners to convert their septic tanks and C onnect to the sewer system." Iz March 19, 2020 Regular Board Meeting Agenda Packet- Page 147 of 163 AMENDED AGENDA 1 Page 8 of 11 OUR MISSION : PROTECT HEALTH AND THE ENVIRONMENT Septic systems near creeks and high water table areas can r T T contaminate nearby areas. In times of flooding, toilets may not flush properly and water :_ may back up into floor drains. „a ,, Cou111 all nty ordinance requires connection to sewer mains where: 420-6.402(c)The sanitary sewer or any building or exterior drainage facility connected thereto is located within 200 feet of the structure.(Ords.2018-25§3,81-30 §1,74-67§3,1440§1). ' 3 REVISED SEPTIC CONVERSION PROGRAM PHASING 1. Expanded Financing to property owners with nearby sewer mains • January to June 2020 Proposal to Board • Two-Year Pilot Program would end December 2022 • Initial outreach to gauge response and interest from residents 2. Outreach properties on septic that need a sewer main for service • Relax Contractual Assessment District (CAD)/Alhambra Valley Assessment District(AVAD) guidelines • July to December 2020 Proposal to Board • Proposed changes could include: • Additional Financing • Revise eligibility requirements to include additional participants • Smaller sized CADs • Central San-led voluntary assessment for new mains across Central San (similar to AVAD) ' 4 CFNTPAISAN March 19, 2020 Regular Board Meeting Agenda Packet- Page 148 of 163 AMENDED AGENDA 2 Page 9 of 11 S2S FINACING PROGRAM DETAILS • Approximately 200 Single Family Residences on septic with existing sewer main in close proximity • Total project costs estimated at $6.9 million • Average year of home construction: 1959 • Average project cost: $39,124 • Maximum project cost estimated: $87,132 • Financing secured by property • Propose $0.5 million in fiscal year (FY) 2020-21 in Capital Improvement Budget (CIB) on first come, first served basis with option for additional funds in FY 2021-22 16 S2S ITEMS ELIGIBLE FOR FINANCING Current Proposed • Capacity Fee deferment • Capacity Fee • CAD assessments at time of • CAD and AVAD Fees formation • Application & Inspection Fee • AVAD Fees • Reimbursement Fees • Side Sewer Construction* • Septic Abandonment* E * Paid to third party contractors 16 March 19, 2020 Regular Board Meeting Agenda Packet- Page 149 of 163 AMENDED AGENDA 3 Page 10 of 11 SEPTIC CONVERSION CONSTRUCTION COST EXAMPLE ►. Application Fee&Inspection $2,315 Capacity Fee(Gravity&Pump Zone) $8,175 fF lY` •: AVAD Fee* $22,950 Construct Side Sewer(Lateral) $7,000 Abandonment of Septic Tank $3,000 OptionsTotal Eligible for Financing 0111111�� Financing Example: Payment House Built in 1910 15 Year Term variable @ Local $3,635 FY 2019-20 Property Tax:$5,011 Agency Investment Fund(LAIF)+1% Zillow Estimate:$666,800 (assume current LAIF rate of 2%) Construct 100-foot lateral *Alternately,could be CADS or reimbursement fees 7 RECOMMENDATION • Approve a new Capital Project Program for FY 2020-21 to help finance S2S program • $500,000 funding for first two years of program per year • Financing cap of $50,000 per customer • Financing terms of 15 years with annual rate adjustment for LAIF + 1% to encourage participation; maximum rate of 6% • Customer provides three contractor proposals and signs a promissory note which will be secured by the parcel March 19, 2020 Regular Board Meeting Agenda Packet- Page 150 of 163 AMENDED AGENDA 4 Page 11 of 11 QUESTIONS rGUTIMITIM m. ' 9 March 19, 2020 Regular Board Meeting Agenda Packet- Page 151 of 163 AMENDED AGENDA 5