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HomeMy WebLinkAbout17.b. Committee Minutes-Finance 02-03-21 Page 1 of 8 Item 17.b. CENTRALSAN jdf A- hom CENTRAL CONTRA COSTA SANITARY DISTRICT February 18, 2021 TO: HONORABLE BOARD OF DIRECTORS FROM: KATIE YOUNG, SECRETARYOF THE DISTRICT SUBJECT: FEBRUARY3, 2021 - FINANCE COMMITTEE - CHAIR PILECKI AND MEMBER MCGILL Attached are minutes of the above Committee meeting. ATTACHMENTS: 1. Minutes of 02-03-21 meeting February 18, 2021 Regular Board Meeting Agenda Packet- Page 112 of 147 Page 2 of 8 I CENTRAL SAN CONTRACENTRAL •STA SANITARY DISTRICT 5019 IMHOFF SPECIAL MEETING OF THE BOARD OF DIRECTORS: TAD J PILECKI CENTRAL CONTRA COSTA President SANITARY DISTRICT DAVID R. WILLIAMS President Pro Tens FINANCE COMMITTEE BARBARA D.HOCKETT MARIAHN LAURITZEN MICHAEL R.MCGILL MINUTES PHONE: (925)228-9500 Wednesday, February 3, 2021 FAX: (925)372-0192 9:00 a.m. www.centralsan.org (All attendees participated via videoconference) Committee: Chair Tad Pilecki Member Mike McGill Staff. Roger S. Bailey, General Manager Katie Young, Secretary of the District Philip Leiber, Director of Finance and Administration (left during Item 4.b.) Jean-Marc Petit, Director of Engineering and Technical Services Danea Gemmell, Planning and Development Services Division Manager Stephanie King, Purchasing and Materials Manager (left during Item 4.b.) Edgar Lopez, Capital Projects Division Manager (left during Item 4.b.) Kevin Mizuno, Finance Manager (left during Item 4.b.) Thomas Brightbill, Senior Engineer Shari Deutsch, Risk Management Administrator (left after Item 4.a.) Bryan McGloin, Management Analyst 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 Pilecki called the meeting to order at 9:00 a.m. February 18, 2021 Regular Board Meeting Agenda Packet- Page 113 of 147 Page 3 of 8 Finance Committee Minutes February 3, 2021 Page 2 3. Public Comments - None. 4. Agenda Items a. Receive annual update on Strategic Risk Inventory / Enterprise Risk Management (ERM) Program [Continued from January 26, 2021] Mr. Leiber briefly recapped the first half of the presentation given at the January 26 meeting after which he reviewed the second half of the presentation included with the agenda packet. Member McGill said he likes this approach to tracking potential risks and being able to review it twice a year. He asked if the focus of the program was to reduce risk. Mr. Leiber responded yes, which is why a separate mitigation plan for each of the 28 risk areas is a key part of the ERM program. Staff periodically discusses the risk areas, how they are trending, and the status of the mitigation plans for each. This includes the workplan, and resources, and whether additional resources are needed (and budgeted) to mitigate a particular risk area. The risk mitigation plan also addresses other factors such as the leading and lagging indicators as to the onset of a risk. Using the Economic Recession risk area as an example, Mr. Leiber shared its matrix and explained how the mitigation approach for that risk area has evolved since the program's inception. Mr. Bailey added that the purpose of the program is to continually assess the District's risk areas in terms of whether they are improving or getting worse. The whole point of the program is to assure any issues are promptly addressed and mitigated. Member McGill asked if the District's current Strategic Plan had any initiatives or metrics tied directly to the Strategic Risk Inventory to help monitor progress with risk mitigation. Mr. Bailey and Mr. Leiber said the general answer was yes. But to the extent the linkage is not specific at this point, staff will incorporate the suggestion when the Strategic Plan is next updated. Member McGill said, in his oversight position as a Board Member, it was important to understand how the Strategic Risk Inventory/ERM program fits with the Strategic Plan. Member McGill noted that the Contra Costa Local Area Formation Commission (LAFCO) recently reported that cities, on average, are reporting a 30% loss in revenue due to the ongoing COVID-19 pandemic. He noted that Central San is on the Teeter Plan, and its Sewer Service Charge (SSC) is collected on the property tax roll. He asked if that has helped the District's revenues remain relatively constant. Mr. Leiber said that as of last December, County officials indicated there were no defaults on a significant level, and they were confident that they had enough reserves to cover any defaults and honor their obligations through the Teeter Plan. He added that the December installment of the SSC will be reflected in the December 2021 February 18, 2021 Regular Board Meeting Agenda Packet- Page 114 of 147 Page 4 of 8 Finance Committee Minutes February 3, 2021 Page 3 quarterly financials at the next meeting, and that staff had no indication of any shortfalls. Mr. Bailey commented that, unlike Central San, revenue streams for cities are, for the most part, linked to property taxes and sales taxes. Sales tax revenue has declined significantly during the pandemic, placing a burden on city budgets. Chair Pilecki said that concept was noted by the Mayor of Pleasant Hill at yesterday's State of the City Address. While the pandemic has significantly impacted the city, it is doing better than many others, thanks to solid hotel revenues. Member McGill opined that Central San should do what it can to help businesses that have been particularly impacted, such as restaurants, because doing so will, in turn, help cities. He suggested that consideration be given to doing whatever can be done under the law to assist cities in Central San's service area. Chair Pilecki agreed. Mr. Bailey said an appeal hearing was scheduled for the February 4, 2021 Board meeting at which a new food establishment in Concord will seek assistance with financing its capacity fees. Under the District Code, staff has no authority to authorize installment payment plans for such establishments, even though it would be helpful to customers. The topic of helping restaurants is pertinent to this issue. He suggested that it be raised during the February 4 meeting. COMMITTEE ACTION: Received the update and provided input to staff. b. Review draft Position Paper to consider proposed changes to various sections of the District Code to confirm with external requirements, internal practices, and enable more efficient operations [Continued from January 26, 2021] Ms. Gemmell noted that staff has been planning for quite a while to bring forth a proposal to significantly overhaul portions of the District Code to conform with external requirements, internal practices, and to otherwise enable more efficient management of Central San's operations. The bulk of the proposed changes described in the draft Position Paper have to do with (1) converting the existing Capacity Use Charge Program for sewer capacity fees to a new "Non-Residential Capacity Fee Installment Program,"and (2) updating the Code to agree with recycled water changes in the recently adopted Standard Specifications. If the Board approves these proposed changes, staff intends to bring forth proposed changes to Title 11: Recycled Water in order to ensure consistency with these proposed revisions to the Capacity Use Charge Program and to address changes necessary as a result of the new Standard Specifications. Since the January 26, 2021 meeting, staff met with Chair Pilecki to review his questions about the proposed Code changes. Notes from that meeting were provided to Member McGill, who said he very much appreciated Chair February 18, 2021 Regular Board Meeting Agenda Packet- Page 115 of 147 Page 5 of 8 Finance Committee Minutes February 3, 2021 Page 4 Pilecki taking the time for such a thorough review, noting that he was uniquely qualified because of his familiarity with the District Code. Member McGill also appreciated the summary of changes in the draft Position Paper and seeing the strikeout version of the Code highlighting the changes. Ms. Gemmell noted that District Counsel Kent Alm had also provided extensive review of the proposed changes. Member McGill said he assumed that when Mr. Alm reviewed it, it was from both a legal and enforceability standpoint. Ms. Gemmell said yes. Mr. Brightbill reviewed the proposed changes summarized in the draft Position Paper, during which the following items were discussed: 1) Resolution Process for Any Conflicts in the District Code: Chair Pilecki inquired about the resolution process if different titles/sections of the Code were in conflict. He noted that the District's contract documents for construction projects include language describing the process for resolving such conflicts. He wondered if something similar should be added to the District Code. Mr. Bailey said that was a question for Mr. Alm, and staff would follow up with him. 2) Proposed Changes to Capacity Fee Program: Mr. Brightbill said the focus of the proposed changes to the Capacity Fee chapter were to simplify the existing program for payment of non-residential capacity fees and expand the number of businesses eligible to participate. He said the complexities of the existing program had raised some concerns, including the fact that fees vary annually based on the prior year's water consumption, and calculations can be problematic when businesses share a water meter or when a business wishes to expand. Customers generally have expressed a preference for fixed payments. He noted, however, that one key element being retained is the requirement that the property owner must sign off on the fee agreement and agree to the collection of annual charges on the property tax roll, which keeps payments secure and easy to administer. 3) Community Input on Proposed Changes: Member McGill asked if staff had sought input from local businesses, the homebuilding community, and cities in relation to the proposed changes to the Capacity Fee Program. Mr. Brightbill said a recent applicant suggested that staff reach out to the local Chambers of Commerce about the changes. He said his group would work with the Communications group in this regard. He also said staff has spoken to the Building Industry Association (BIA), but noted their focus is primarily on residential construction. Ms. Gemmell added that part of the impetus for the proposed changes were comments from past and current users of the program. Member McGill said he wanted to be February 18, 2021 Regular Board Meeting Agenda Packet- Page 116 of 147 Page 6 of 8 Finance Committee Minutes February 3, 2021 Page 5 sure there was a mechanism to gauge if these changes, if approved, achieve the intended result. 4) Potential Expansion of Capacity Fee Financing Program: Chair Pilecki said the current program uses the deli rate as the cut-off for whether a business can participate in the installment payment program. He asked if it would be possible to broaden the program's availability to more customers by basing it on a dollar amount versus a specific business classification. Mr. Brightbill said yes. Chair Pilecki said his desire would be to make it available more broadly so it is equitable for all businesses. 5) Accessory Dwelling Units (ADUs): While not included on the draft Position Paper summary, Ms. Gemmell said that as staff was cleaning up provisions of the District Code, it also updated the language regarding ADUs. • Definition of an ADU: A reference to the applicable section of the Government Code was added to define an ADU. Additional language clarifying what constitutes conversion of an existing space was also added. This is an important distinction because, in general, the collection of sewer capacity fees for ADUs created by conversion of an existing space is not allowed by state law. For new construction ADU projects, state law does allow the collection of sewer capacity fees, albeit at a discounted rate. • Non-Conforming ADUs: Mr. Brightbill said it has become clear that a section needed to be added to address certain accessory structures with sewer connections that do not meet the ADU criteria laid out in state law. The intent is to clarify the attributes of these non-conforming structures. Ms. Gemmell added that customers often debate what constitutes a kitchen. It was decided to remove the word "kitchen"in that portion of the District Code, thus defining these non-conforming structures as having a full bath and "an additional sink located outside of bathroom area." This suggestion was made by Chair Pilecki when he met with staff to go over his questions on the proposed Code changes. Staff was comfortable with the suggested wording because it is very clear. 6) Community Outreach for the Capacity Use Program and ADUs: Member McGill requested that information on ADUs be incorporated when staff reaches out to the Chambers of Commerce about the Capacity Use Program. Ms. Gemmell said she and her staff were in the process of preparing an update for the Board on ADUs and that information could be used for community outreach purposes. February 18, 2021 Regular Board Meeting Agenda Packet- Page 117 of 147 Page 7 of 8 Finance Committee Minutes February 3, 2021 Page 6 7) Fees for New Connections to the Sewer System: Chair Pilecki said it is not just the capacity fee that customers find concerning; it is also that the annual SSC is added to their tax bill. He said the charges can add up very quickly compared to a one-time connection fee. He mentioned that the City of Pleasant Hill's Regional Housing Needs Allocation (RHNA) rose from 448 in 2020 to over 1,200 for 2021 because of the need for affordable housing and homeless issues. Thus, the number of applications for ADUs is likely to increase dramatically over the next five to ten years and staff will be inundated with requests. He said he and Mr. Bailey have discussed this issue and wondered about options to simplify the ADU process. He said the sink outside the bathroom is a good interim solution, but an ADU program that is less complex yet defensible would be desirable. He saw this as an opportune time to make such changes because of the anticipated volume of applications on the horizon. A general discussion took place where Mr. Bailey and Chair Pilecki pointed out that any program would need to address equity issues between existing homes without meters and newer ones with meters. Ultimately, Mr. Brightbill said staff wants to ensure that the District collects appropriate fees from users based on classifications and user groups. A new cost of service study will be helpful in this regard. Mr. Bailey agreed, saying that discussions should take place about the concept of tying capacity fees to meter size. It was agreed that this topic deserves a longer conversation. With regard to the surge in RHNAs, Member McGill said the Contra Costa Chapter of the California Special Districts Association (CCSDA) is asking the Association of Bay Area Governments (ABAG) to investigate the phenomenon. Ms. Gemmell said that next year the District was heading into the fourth and final year of its SSC rate schedule, at which time the cost of service study will be updated. Member Pilecki said he felt obligated to spend a fair amount of time reviewing the proposed changes to the District Code because it was obvious that staff had made a tremendous effort in bringing the matter forth. He commended staff for a job well done, saying it was much appreciated. COMMITTEE ACTION: Recommended Board approval. 5. Announcements - None. 6. Suggestions for Future Agenda Items - None. February 18, 2021 Regular Board Meeting Agenda Packet- Page 118 of 147 Page 8 of 8 Finance Committee Minutes February 3, 2021 Page 7 7. Future Scheduled Meetings Tuesday, February 23, 2021 at 2:00 p.m. Tuesday, March 23, 2021 at 2:00 p.m. Tuesday, April 27, 2021 at 2:00 p.m. 8. Adjournment— at 10:31 a.m. February 18, 2021 Regular Board Meeting Agenda Packet- Page 119 of 147