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Home My WebLink About17.c. Committee Minutes - Finance 07-21-20 Page 1 of 8 Item 17.c. CENTRALSAN jdf A- hom CENTRAL CONTRA COSTA SANITARY DISTRICT August 6, 2020 TO: HONORABLE BOARD OF DIRECTORS FROM: KATIE YOUNG, SECRETARYOF THE DISTRICT SUBJECT: JULY21, 2020 - FINANCE COMMITTEE - CHAIR CAUSEYAND MEMBER NEJEDLY Attached are minutes of the above Committee meeting. ATTACHMENTS: 1. Minutes of 07-21-20 meeting 2. (Handout) Item 4.b. August 6, 2020 Regular Board Meeting Agenda Packet- Page 100 of 107 Page 2 of 8 ,or76— I CENTRAL SAN CENTRAL • ■ • COSTA . IMHOFF PLACE, MARTINEZ, CA 9AS53-A37 REGULAR MEETING OF THE BOARD OF DIRECTORS: CENTRAL CONTRA COSTA MICHAELMCGILL President SANITARY DISTRICT TAD JPILECKI FINANCE COMMITTEE President Pro Tem PAUL H CAUSEY JAMES A.NEJEDLY M I N U T E S DAVID R, WILLIAMS PHONE: (925)228-9500 Tuesday, July 21, 2020 FAX. (925)372-0192 www.centralsan.org 2:00 p.m. Executive Conference Room 5019 Imhoff Place Martinez, California Committee: Chair Paul Causey Member Jim Nejedly Staff. Roger S. Bailey, General Manager Katie Young, Secretary of the District Ann Sasaki, Deputy General Manager Phil Leiber, Director of Finance and Administration Jean-Marc Petit, Director of Engineering and Technical Services (left after Item 4.c.) Danea Gemmell, Planning and Development Services Division Manager Edgar Lopez, Capital Projects Division Manager (arrived during Item 4.b.; left after Item 4.c.) Kevin Mizuno, Finance Manager Laci Kolc, Risk Management Specialist Donna Anderson, Assistant to the Secretary of the District 1. Notice This meeting was held in accordance with the Brown Act as in effect under the State Emergency Services Act, the Governor's Emergency Declaration related to COVID- 19, and the Governor's Executive Order N-29-20 issued on March 17, 2020 that allowed attendance by Board Members, District staff, and the public to participate and conduct the meeting by teleconference, videoconference, or both. The agenda included instructions for options in which the public could participate in the meeting. 2. Call Meeting to Order Chair Causey called the meeting to order at 2:00 p.m. August 6, 2020 Regular Board Meeting Agenda Packet- Page 101 of 107 Page 3 of 8 Finance Committee Minutes July 21, 2020 Page 2 3. Public Comments None. 4. Items for Committee Recommendation to the Board a. Review and recommend approval of expenditures incurred June 12, 2020 through July 9, 2020 Staff responded to a list of questions posed in advance of the meeting by Chair Causey concerning the expenditures listing. Chair Causey expressed satisfaction with the responses. COMMITTEE ACTION: Recommended Board approval. b.* Review draft Position Paper to authorize the General Manager to submit an updated State Revolving Fund (SRF) Loan Application to the State Water Resources Control Board for the Solids Handling Facility Improvements, District Project 7348 Ms. Gemmell reviewed the presentation included with the agenda material. She said staff was seeking the Committee's recommendation to update the original SRF loan application with the higher amount of$165.4 million. This amount represents the updated estimated project costs and excludes $7.7 million spent on facilities planning and portions of facilities design and administration costs. Once bids have been submitted and actual costs are known, staff will be able to adjust the loan amount. In the meantime, increasing the amount on the loan application will provide the District with flexibility going forward. Chair Causey said he appreciated the additional background information and responses to his questions provided by Mr. Petit and Ms. Gemmell prior to the meeting (see attached). He suggested increasing the SRF loan application amount to incorporate the full project cost estimate of$173.1 million because there was no downside to doing so, and all the costs were justified. He said the useful life of the new solids handling facilities would serve Central San's customers for many years to come and obtaining as much funding as possible through SRF loans helps address issues of intergenerational equity. Member Nejedly agreed with Chair Causey's suggestion. COMMITTEE ACTION: Recommended Board approval of submitting an updated SRF loan application for $173.1 million, representing the full project cost estimate. August 6, 2020 Regular Board Meeting Agenda Packet- Page 102 of 107 Page 4 of 8 Finance Committee Minutes July 21, 2020 Page 3 5. Other Items a. Review Risk Management Loss Control Report as of July 2, 2020 In the absence of Risk Management Administrator Shari Deutsch, Ms. Kolc reviewed the Loss Control Report with the Committee. During the discussion, the topic of manhole maintenance was discussed. Member Nejedly encouraged staff to continue to be highly proactive in this regard. COMMITTEE ACTION: Received the report. b. Receive update on reporting impacts from implementation of new enterprise resource planning (ERP) system and new chart of accounts Chair Causey thanked Mr. Mizuno for the overview and excellent memorandum in the agenda packet. For this reason, it was agreed to forego the presentation at this meeting. However, it was suggested that the presentation be given to the full Board, but without some of the more detailed attachments included with the agenda material for this meeting. Chair Causey said he looked forward to the flexibility that the new ERP affords and was impressed by the work that has been done by staff during the transition. COMMITTEE ACTION: Received the update. 6. Announcements None. 7. Suggestions for Future Agenda Items a. Receive list of upcoming agenda items and provide suggestions for any other future agenda items COMMITTEE ACTION: Received the list and provided input to staff. 8. Future Scheduled Meetings Tuesday, August 25, 2020 at 2:00 p.m. Tuesday, September 22, 2020 at 2:00 p.m. Tuesday, October 20, 2020 at 2:00 p.m. 9. Adjournment— at 2:56 p.m. * See attached. August 6, 2020 Regular Board Meeting Agenda Packet- Page 103 of 107 Page 5 of 8 ATTACHMENT 2 Committee Item 4.b. From:Jean-Marc Petit<impetit@centralsan.org> (Handout) Sent:Tuesday,July 21, 2020 10:15 AM To: Paul Causey<pcausey@centralsan.org> Cc: Philip Leiber<pleiber@centralsan.org>; Roger Bailey<rbailey@centralsan.org>; Danea Gemmell <dgemmell@centralsan.org>; Edgar Lopez<ELopez@centralsan.org>; Katie Young <KYoung@centralsan.org> Subject: SRF For Finance DRAFT Good morning Paul, I received your question via Phil requesting explanation on why the cost of the Solids Project is apparently rising. While we still have uncertainties regarding the project cost at bid time scheduled for later this year, staff has been actively working with the Water Board Financial Assistance Funding-Grants and Loans—CWSRF. As indicated at the April Financial workshop, we are intending to submit an update application to increase the amount of the SRF loan from $89.6M to $120 M. So staff was already planning to request authorization to submit an application for the$120M. Recently, we have held several teleconference meetings with our SRF loan officer and she has indicated that there would be a possibility of funding reimbursement for moneys already spent such as the design. These reimbursement total over$8 M. While the money has already been paid with pay as you go money,there are several benefits of requesting a loan for a higher amount that originally requested. In addition, the$165.4M request is not assured, but she encouraged Central San to make a higher request and asked if we were willing to take a partial funding amount if the Water Board could not loan the full amount. The position paper is requesting the authorization for the GM to submit an updated application for an SRF loan for the higher amount. Our approach in requesting a higher amount (more than ($120 M) $165 M for the SRF is based on the following premises: 1. This SRF application will be, in essence, a line of credit to cover possible additional cost including reimbursement of design cost if so desired 2. Money will not be drawn from line of credit if not needed. Only reimburse for actual amount borrowed and the final amount will be submitted after the bid and is part of the normal SRF process. 3. SRF loan is over multi years 4-5 years starting FY 20-21 4. Reimbursement do not start until one year after first draw 5. Interest rate is very low at 1.4% may even be lower by 0.25% if 20 years instead of$30 years 6. District financial plan had two SRF loans identified: $141 -$154 M a. Loan 1:for the Solids project: $120 M-$154 b. Loan 2: for the Filter Improvements Phase 113: $21-34 M C. This higher amount would negate need for a second loan 7. Places the District in best position to respond to financial changes if needed especially since FY 20-21 SCC was not implemented. Page 1 of 4 August 6, 2020 Regular Board Meeting Agenda Packet- Page 104 of 107 Page 6 of 8 Original basis for the$89.6M SRF application DecemberCentral San Cash Requested SRF Funding MIER Funding I A Facilities Planning $2,415,000 $2,415,000 B Facilities Design $9,000,000 $9,000,000 C Construction Management $8,626,542 $8,626,542 D Value Engineering $500,000 $500,000 E Administration-Central San $3,500,000 $3,500,000 F Facilities Construction Total $77,070,305 $77,070,305 G Contingency $3,928,515 $3,928,515 H Pre-Purchase Materials I Land and Right-of-Way J Other Costs-Shop Drawings $500,000 $89,625,362 $105,040,362 As we presented during the finance workshop in April 2020 and as stated in the FY 2020-21 Budget, the Solids project estimate have increased. Therefore,we are already planning to request an increase for a loan of up to $120M. We have been working both with B&V the design engineer and then with MWH Constructors to develop more detailed estimate of the project cost. While the scope of the project has not changed since the final design started over 18 months ago,the complexity of the construction has been highlighted by MWH. The project sequencing as outlined by B&V is very linear and has many constraints on the contractor to keep the building in operation for an estimated 42-48 months construction. A long construction period has the benefit of doing work while the building remains in operation but the longer duration has the impact of having overhead (staff, contractor, B&V and MWH)for that long period of time also. A wide range in cost estimate of$15M-$18 M was provided by MWH depending on the construction approach. We have worked diligently to further refine the best approach to construct the project. Page 2 of 4 August 6, 2020 Regular Board Meeting Agenda Packet- Page 105 of 107 Page 7 of 8 Updated Not Eligible for Eligible for SRF SRF Funding Updated N1 EReimbursement* Reimbursement* Request a Project Costs Total A Facilities Planning $2,040,000 $0 $2,040,000 B Facilities Design $3,000,000 $5,605,000 $350,000 $8,955,000 C1 Construction Management $12,400,000 $12,400,000 Construction Management- C2 ESDC $5,200,000 $5,200,000 D Value Engineering $500,000 $0 $500,000 E Administration-Central San $2,700,000 $1,500,000 $5,800,000 $10,000,000 F Facilities Construction** $107,000,000 $107,000,000 G Contingency $16,050,000 $16,050,000 H Pre-Purchase Materials I Land and Right-of-Way J1 Other Costs-Shop Drawings $460,000 $460,000 J2 Other Costs-Sludge Hauling $10,000,000 $10,000,000 J3 Other Costs-Air Permit Testing ' $500,000 $500,000 While we still have uncertainties regarding the project bid scheduled for later this year, staff has been actively working with the Water Board Financial Assistance Funding-Grants and Loans—CWSRF. As indicated at the April Financial workshop,we are already intending to submit an update application to increase the amount of the SRF loan from $89.6M to $120 M. Changes in Project Cost: Facilities Construction +/-$15M to $30.0 (depending on construction sequence) From 5%- 15%Contingency increase of over$12 M to have $16 M in contingency as discussed at Board meeting in April Sludge Hauling during Construction $5-10.0 M (We recently issued an RFP for a 5-year sludge hauling contract schedule for 8/4/20 E&O) we extrapolated potential cost for 6 to 12 months of hauling and disposal if we shut down the furnaces. Construction Management $9.0 added both design engineer and CM) Administration $6.5 Total Potential Increase $47.5-$67.5 M So, as stated above, our approach in requesting a higher amount of$165 M for the SRF is based on the requesting a line of credit to cover possible additional cost including reimbursement of design cost if so desired and places the District in best position to respond to financial changes if needed especially since FY 20-21 SCC was not implemented. Page 3 of 4 August 6, 2020 Regular Board Meeting Agenda Packet- Page 106 of 107 Page 8 of 8 Staff will be providing an update on the Solids project at the August 4 E&0 and August 20 Board meeting. Staff is requesting that the GM be authorized to submit an application for a higher amount. It should be noted that there is no guarantee we would be able to secure the entire amount. Hope this helps framing our reasons for the request.Thank you. Jean-Marc H. Petit, P.E. Director of Engineering and Technical Services Central Contra Costa Sanitary District 5019 Imhoff Place Martinez, CA 94553 Direct: (925)229-7112 Main: (925) 228-9500 Cell: (925)-708-9364 jmpetit@centralsan.org Page 4 of 4 August 6, 2020 Regular Board Meeting Agenda Packet- Page 107 of 107