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Home My WebLink About05. Conduct public hearing to consider previously adopted FY 2020-21 Sewer Service Charge Page 1 of 19 Item 5. CENTRAL SAN BOARD OF DIRECTORS POSITION PAPER MEETING DATE: APRIL 16, 2020 SUBJECT: CONDUCTA PUBLIC HEARING INACCORDANCE WITH ORDINANCE NO. 304 TO CONSIDER THE FINANCIAL CONDITION OF CENTRAL SAN WITH RESPECT TO THE CURRENT NEED FOR THE PREVIOUSLYADOPTED 5.25% SEWER SERVICE CHARGE (SSC) RATE INCREASE FOR FISCAL YEAR (FY) 2020-21 SUBMITTED BY: INITIATING DEPARTMENT: THOMAS BRIGHTBILL, SENIOR ENGINEER ENGINEERING AND TECHNICAL SERVICES- PDS-RATES AND FEES REVIEWED BY: DANEA GEMMELL, PLANNING AND DEVELOPMENT SERVICES DIVISION MANAGER JEAN-MARC PETIT, DIRECTOR OF ENGINEERING AND TECHNICAL SERVICES PHILIP R. LEIBER, DIRECTOR OF FINANCE AND ADMINISTRATION Roger S. Bailey General Manager ISSUE Ordinance No. 304 requires that the Board of Directors hold a public hearing to consider Central San's current financial condition prior to imposing the previously approved 5.25% SSC rate increase for FY 2020-21. BACKGROUND On April 18, 2019, the Board of Directors adopted Ordinance No. 304 which approved rate increases to the annual SSC effective July 1, 2019; July 1, 2020; July 1, 2021; and July 1, 2022. The approved SSC rate increase for July 1, 2020 increases the SSC by an average of 5.25%. The rate for single family homes is increased by$31 to $629 per year(residential rates are rounded to the nearest whole dollar.) April 16, 2020 Regular Board Meeting Agenda Packet- Page 57 of 208 Page 2 of 19 Ordinance No. 304 requires that prior to imposing the rate increase: "The Board of Directors shall consider, at a noticed public hearing each year prior to June 30, Central San's proposed budget, its financial condition, projected capital and operations and maintenance costs, as well as other factors which bear on Central San's revenue requirements to determine whether the increased amounts set forth herein for each fiscal year are still necessary. If the Board concludes by a majority vote that sewer service charges for less than the amount set forth in this ordinance for that fiscal year will produce adequate revenues for the fiscal year, the Board may, by resolution, fix the sewer service charges for that fiscal year to be imposed at appropriate amounts up to the maximum of the rates set forth herein without an amendment of this ordinance. In such case, the resolution shall clearly set forth such lesser charges that are to be imposed and those charges shall remain in place until further action of the Board. If the Board determines the rates set forth in the table are appropriate for imposition in that fiscal year, no further action of the Board shall be required." On March 12, 2020, a Financial Planning Workshop was held with staff and the Board of Directors which reviewed Central San's current financial position, the updated 10-year Capital Improvement Plan (Cl P), and various options for financing the increased spending associated with the Cl P. The Board of Directors gave direction to staff that Scenario 2B from the workshop was their preferred approach. This approach included the previously approved 5.25% SSC rate increase for FY 2020-21 and used a 20-year term for funds obtained through the State Revolving Fund (SRF). ALTERNATIVES/CONSIDERATIONS After reviewing Central San's current financial condition and receiving any public input, the Board of Directors could: • take no action, thereby imposing the previously approved 5.25% rate increase to the annual SSC, • impose a rate increase in amount less than 5.25%, or • take some other action. FINANCIAL IMPACTS Unless other action is taken by the Board of Directors, the previously approved rate increase will provide an estimated $5.32 million in additional revenue for FY 2020-21. COMMITTEE RECOMMENDATION The matter was not reviewed by a Board Committee. The entire Board of Directors provided comments at the March 12, 2020 Financial Planning Workshop. RECOMMENDED BOARD ACTION Review Central San's current financial condition. Hold the public hearing. Receive any public input. Take no additional action and thereby impose the 5.25% SSC rate increase. Strategic Plan re-In GOAL THREE: Be a Fiscally Sound and Effective Water Sector Utility April 16, 2020 Regular Board Meeting Agenda Packet- Page 58 of 208 Page 3 of 19 Strategy 1 - Conduct long-range financial planning, Strategy 2- Manage costs ATTACHMENTS: 1. Presentation April 16, 2020 Regular Board Meeting Agenda Packet- Page 59 of 208 Item 5. (Updated Presentation FISCAL YEAR 2020-21 SEWER SERVICE CHARGE 4_ Public Hearing April 16, 2020 .,`. Board Meeting 1 CENTRAL SAN'S SEWER SERVICE CHARGE IS COLLECTED ON THE PROPERTY TAx ROLL WHAT IF THERE IS A PROPERTY TAX DEFERRAL? CONSIDERATION OF IMPACTS CENTRALSAN I' 1 BACKGROUND The fallout from the COVID-19 pandemic has prompted widespread discussion about deferring various payment due dates, waiving penalties, or deferring enforcement(mortgage, rents, taxes, etc.) • 3/13/2020 and 3/18/2020: Federal and State tax filing deadline postponed 90 days • 3/21/2020: California Special Districts Association (CSDA)and other groups representing local interests (cities, schools, etc.)sent letter to Governor Newsom urging retention of the 4/10/20 property tax due date • 4/2/2020: Governor Newsom acknowledged homeowners'anxiety over property taxes but said he would defer to county officials and their concerns about the long-term health of their budgets. "The assessors and the counties make that determination. This is not the state's money." ' 3 3 BACKGROUND (CONTINUED • 4/3/2020: CSDA asked members for implications of moving the 4/10/20 due date • 4/4/2020: Statement of California Association of Counties: oAny delay in payments beyond the 4/10/20 property tax deadline, for individuals or businesses that can pay, will tip local governments intc insolvency at a time when our residents need us the most. oCounties will use all existing authority to cancel penalties and other charges for homeowners, small businesses, and other property owners that are unable to pay their property taxes due to circumstances caused by COVID-19 on a case-by-case basis • 4/6/2020: San Francisco County and San Mateo County moved property tax due date to 5/4/20 • 4/8/2020: Central San discussed status of 4/10/20 collections with County officials 4 2 IMPLICATIONS FOR CENTRAL SAN Central San's Fiscal Year 2019-20 monthly cash receipts forecast anticipates 31.7% ($50.5 million) of total annual receipts of$160.7 million are to be received in April from the County for Sewer Service Charge and Ad Valorem Tax. • A complete delay would, over time, stress reserves. A partial delay would not be a significant issue, if for a limited time: oCash and investment balances at 3/31/20 were $88.9million. oExpenditures (Running Expense and Sewer Construction) are projected at about $13 million per month for the next several months. Iftorld 1\ CENTRALSAN 5 CASH FLOW FORECAST 20 JUL AI N v CASH IN: ODNC ORD CAM BILL 15.M5.T 022 S1C PORTION OF SSC '.?710 092 PROPERTY TAA'a 61C o,'lea 102 2.982 415 CONCORD CAPITAL 7 973 516 RE LAIF INTICOUPONS 81C-AIF IN=uPONS +PIENPEFFTE40 1:15 OTHER PIE RECEIPTS 5743.&50 439-747 51-317.475 2.-0IM.471 5490.787 779-009 669 P 1.11W I I I 1.WP3 1, 279.154 TOTAL DEBT SVC 2,982.415 TOTAL WE ]JS fli9 M1.lM1'97 1C 5??7F.] 2dOd 461 4902,47 ]R iiS.?S' I DIAL S'C bb1,yE1 'JVti``-��h J+htl.e11 f,IN1,IVN +.1,n J&1 R,i 3» TOTAL RIE A SfC CASH IN 1,405,721 741,855 891,391 ,105,5]9 2,196,269 8,699,]99 202 JAN IFE8 IMAK JAWK IMY JUN AL CASH IN' CC]NCORO CLAM BILL $15.205.292 S0, S1C PORTION OF SSC 14,OM.000 P519.120 32,229.2?? ROPERTY TAA- 6,560,000 1,052,OW 14,$2241,mL A%.SfC EI rc a15 CONCORD CAPITAL PIE LAIF INTICCUPCNS $78.789 5300.000 331.000 700-76, 31C LAIF INiICOUF`ON8 140322 249 000 5294Sr OTHER RE RECEIPTS 576-905 490.593 400.000 900.000 3350.000 468.500 8.589-75L H 1 2[11..6 4.. 5 600, BBB 675.000 800. OTAL BE BY SVC 2,982,41.`. OTAL RI[ •25 =.:.1 400 OOd 204M1 BBB 150 Of1[I 19103]0 93807]', TOTAL SIC :•2S:L3- = 21,1 W,Wi] ti]S,WI 1,:f 11.1;x] tip,Vll�h' TOTAL RE A S!C CASH IR L,969 f999,29fl 1,]00,000 51,749,600 1,625,000 ,281,500 160,078,11] I 6 3 WHAT WILL HAPPEN IN CONTRA COSTA COUNTY? (1)What if the due date for property tax was deferred or penalties suspended by the State....(2)would the County still be able to remit the full amount to agencies like Central San (as if the Teeter Plan continued),or(3)would Central San need to make its own financing arrangements through lenders? Responses: Treasurer-Tax Collector Russell Watts: "Fortunately, the April 10 deadline will not be extended. Tax collections appear to be close to normal. " Auditor-Controller Bob Campbell: 'At this time we are not expecting the delinquency rate to impact the county's ability to facilitate the Teeter advances for this fiscal year. A 100%apportionment is expected for June. The April apportionment, in a couple of weeks, may by adjusted to reflect collections if the delinquencies are too high." "The question of pushing out the delinquency date at the State level doesn't appear to be likely as of today(4/8/20). If something was to occur at this point 1 think my response to question 1 applies." CENTRALSAN 7 CONTRA COSTA COUNTY HAS CREATED A PROCESS FOR REQUESTING CANCELLATION OF LATE PAYMENT PENALTIES Com CSA C ft.Catl.0 My Trc.uu[i•Tax Cai W iNEA 111,—CD-C-5CKiICFCLO D OMW �h'��+r wu.+c.00-�nrr.�w a0u0 ...wa•ca.m Rvit"fw Nulty CrmvllAm fa COVIOAVOMM armr' •"'•-d"lv+w r.p'a — 0 0 0 0irr newnrc�ewwn wr ccno ssrnrrq rr.w-recw °x� IEit Slxr hrec frlkYld IrilwiM4gw cr L�P'rr.urer�re u.rorr w..n Grkr 4M. lar. i•rIo vain enFwllr ISI 4 STAFF WILL CONTINUE TO MONITOR COLLECTIONS AND REPORT TO THE BOARD ON ANY UNUSUAL DEVELOPMENTS Ron— CENTRALSAN SEWER SERVICE CHARGE FINANCIAL WORKSHOP RECAP CENTRALSAN 5 PROPOSED IMPROVEMENT 2020-21: • 1 • ❖ 3. New Total extended to FY 2029-30 (Rolling 10 Years&escalated 3%) with Updated Cash Flow m minion zozo 000an; Ten Year CIP 1 2 3 4 5 6 7 8 9t$F5TOTAL FY20-21 FY21-22 FY22-23 FY23-24 FY24-25 FY25-26 FY26-27 FY27-28 FY28 ColleclionS tem $40.2 $40.8 $36.0 $39.2 $35.3 $29.6 $34.8 $27.3 $27 $32.3 $52.8 $57.3 $62.7 $55.3 $45.5 $37.6 $43.0 $36 $3.9 $2.5 $2.1 $2.1 $2.0 $1.9 $1.8 $1.8 $1. Re led Water $9.1 $11.7 $11.5 $0.3 $5.3 $11.3 $13.3 $1.3 $0. Contingency $2.5 $2.5 $2.5 $2.5 $2.5 $2.5 $2.5 $2.5 $2. ALFY 2020.21 $88.0 $110.4 $109.5 $106.8 $100A $90.8 $90.1 $75.9 $68 .5 Proposed CIP su€o sena - srs.o --. Sw.o 560 FYF9lM neo/[. ztlee rrtnllb ]51]4 h)b/]a rS./m Fi1Nx9 rra�lx ..rweme rea rye i rnm Sn�em ' 11 Presented at March 12.2020 Financial WorkshoD CENTRALSAN 11 CENTRAL SAN'S FINANCIAL PLAN (BUILDING RESERVES NOW FOR FUTURE EXPENDITURES) BASED ON SCENARIO 2B Total Funds f 5w ..... ----- __... SN FY 2000 FT MI FYQOQ4 F IM 111. 1•Ending8ala... -Reserve Target Inflated Capital Improvement Plan Spending(in millions) „sua $120 $114 $116 $117 9113 $105 $108 Sao $88 $93 $87 Seo $66 sw $a0 Sm Sn i FY 20]0 FY 2@2 fYS024 FY2026 FY 2025 ISI ''r Presentedh 12.2020 • •• CENTRALSAN 12 6 SUMMARY OF PROPOSED SCENARIOS • Baseline—fund with $154 million in bonds (30 years @ 3.25%) • Scenario 1A—$141 million debt; fund $99 million of Solids Project with SRF, remainder of requirement with $42 million in bonds • SRF:30 years @ 1.4% • Bonds:30 years @ 3.25% • Scenario 1 B—$138 million debt; fund $120 million of Solids Project with SRF; remainder of requirement with $18 million in bonds • SRF:30 years @ 1.4% • Bonds:30 years @ 3.25% • Scenario 2A—$136 million debt; fund $120 million of Solids Project and $16 million of Filter Plant 1 B Project with SRF • Solids SRF:30 years @ 1.4% • Filter Plant SRF:30 years @ 1.85% $141 million debt; fund $120 million of Solids Project and $21 million of Filter Plant 1 B Project with SRF • Solids SRF:20 years @ 1.15% • Filter Plant SRF:20 years @ 1.6% AN ' 13 Presented at March 12,2020 Financial Workshop CENTRALSAN 13 COMPARISON OF FINANCING COSTS At March 12,2020 Financial Workshop,Central San Board favored Scenario 2B for lowest debt cost Tot., Ann..I Interest& Tct.11�FinScenario Bonds SRF Deed Service Fees Cost bt$154 $0 $154 $8.0 $87.6 $241.6 Scenario 1A $42 $99 $141 $6.2 $46.8 $187.8 Solids SRF Scenario 16 $18 $120 $138 $5.9 $38 $176.0 Solids SRF Scenario 2A Solids SRF $0 $136 $136 $5.6 $32.8 $168.8 Filter SRF Scenario 26 Solids SRF $0 $141 $141 $8.0 $18.7 $159.7 Filter SRF (In million dollars) CENTRAL AN I1 7 SUMMARY OF PROPOSED SCENARIOS IN2,2 23 24 2' 26 27 28 29 30 Total FY 2019-20 CAPITAL IMPROVEMENT PROGRAM REVENUE REQUIRE MENT&FUNDING CIP($mil) 66.2 96.7 106.2 106.3 90.2 83.6 92.2 71.2 80.4 74.2 867.2 Sewer Service Charge Rate Increase 5.25% 4.75% 4.75% 4.0% 4.0% 4.0% 4.0% 3.0% 3.0% 3.0% 47.6% Bond Issuance($mil) 77 77 154 FY 2020-21 CAPITAL IMPROVEMENT PROGRAM REVENUE REQUIREMENT CIP($mill 1 1 88.0 1 110.4 1 109.5 1 . I100.4 90.8 90.1 75.9 68.4 67.3 907.5 Sewer Service Charge Rate Increase 5.25% 4.75% 4.75% 4.0% 4.0% 4.0% 4.0% 3.0% 3.0% 3.0% PROPOSED Bond Issuance($mil) IS 15 42 141 SRF($mi1J 31 31 31 6 99 .•• e e 0:111IM1,1101 MEW=- Bond Issuance($mil) 10 8 18 SRF($mil) 138 F 3 33.5 33.5 33.5 16.5 120 ••• • Bond Issuance($mil) 0 SRF$mi1J( 136 3 33.5 33.5 33.5 16.5 8 8 136 Bond Issuance($mi1J 0 SRF($mil) 141 3 33.5 33.5 33.5 16.5 8 13 141 15 Presented at March 12,2020 Financial Workshop CENTRALSAN 15 OUR RATES CONTINUE TO BE BELOW THE AVERAGE SFPUC Berkeley(EBMUD for treatment) Santa Rosa Petaluma Rodeo Sanitary District Ben' Richm nd Crockett Sanitary Department Oakland(EBMUD for treatment) San Leandro(EBMUD for... Average of Agencies Surveyed Napa Sanitation DistriR Livermore Vallejo Sanitation and Flood... West County Wastewater... cncord(CCCSD for treatment) Brentwood Novato Sanitary District Sunnyvale Mt View Sanitary District Central San Stege SD(EBMUD for treatment) Pittsburg(Delta Diablo for... Antioch(Delta Diablo for... Bay Point(Delta Diablo for... Pleasanton(DSRSD for... ■FY 2019-20 Sewer Service Charge Fairfield(Esso) san iose Dublin San Ramon Services... Castro Valley Sanitary District Union Sanitary District Hayward One Loma Sanitary District $0 $zoo $nae $600 $800 $1,000 $1,200 $1,400 $1,60, Annual Charge per Single Family Home Ebuffig • 1 1 • •• 16 8 RATE COMPARISON INCLUDING PROPERTY TAX SFPUC Berkeley(EBMUD for treatment) Santa Rosa Petaluma Rodeo Sanitary District Crockett Sanitary Department Ben Richmo d Oakland(EBMUD for treatment) San Leandro(EBMUD for... Average of Agencies Surveyed Novato Sanitary Dirtrict Napa Sanitation District Central San Vallejo Sanitation and Flood... Livermore Wert County Wastewater... Mt Vi' District Stege SO(EBMUD for treatment) Concord(CCCSD for treatment) Brenn ood Pittsburg(Delta Diablo for... Sunnyvale Antioch(Delta Diablo for... Bay Point(Delta Diablo for... Pleasanton(DSRSD for... Fairfield(FSSD) Castro Valley Sanitary Dimict 'an 10:e Dublin San Ramon services... 0F 2019-20 Sewer Sorviro Char- 7 cetimatcrl ornnorty tax Union Sanitary Dirtrict T Hayward Oro Loma Sanitary Dirtrict $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 Annual Charge per Single Family Home ' 17 Presented at March 12. 2020 Financial Workshoo CENTRALSAN 17 SSC RATE RECOMMENDATION • Conduct a public hearing in accordance with Ordinance No. 304 to consider the financial condition of Central San with respect to the current need for the previously adopted 5.25% Sewer Service Charge (SSC) rate increase for FY 2020-21. • Staff Recommendation (Motion Required): Leave unchanged the 5.25% SSC rate previously approved for FY 2020-21. $1,000 10.0% $799 $823 $848 $776 $660 $690 $717 $746 $598 $u29 $500 - __ ___ ___ __ ___ __ __ _ 5.0% $0 0.0% 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27 2027-28 2028-29 Single Family Rate -Rate Increase EL_ CENTRALSANI 18 9 QUESTIONS CENTRALSAN 10