HomeMy WebLinkAboutMinutes 1987-07-15 COUNTY SANITATION DISTRICT NO. 3
OF ORANGE COUNTY, CALIFORNIA
MINUTES OF ADJOURN REGULAR MEETING
July 15, 1987 - 7:00 p.m.
10844 Ellis Avenue
Fountain Valley, California
Pursuant to adjournment of the regular meeting of July 8, 1987, the Board of
Directors of County Sanitation District No. 3 of Orange County, California,
met in an adjourned regular meeting at the above hour and date.
The Chairman called the meeting to order at 7:00 p.m. The roll was called and
the Secretary reported a quorum present.
DIRECIORS PRESENT: Richard Polis, Chairman, Ben Bay, A.B.
"Buck" Catlin, Norman E. Culver, Don R.
Griffin, Dan Griset, John Kanel,
William D. Mahoney, James Neal, Carrey
Nelson, Sal Sapien, J.R. "Bob" Siefen,
Roger R. Stanton, Charles Sylvia and
Edna Wilson
DIRECTORS ABSENT: Jack Kelly
STAFF MEMBERS PRESENT: J. Wayne Sylvester, General Manager,
Rita J. Brown, Secretary, William H.
Butler, Thcmas M. Dawes and Gary Streed
Review of long-range financial The General Manager reported that for
projections re capital and many years, as part of the annual
operating requirements budgetary process, the Districts had
forecast revenues and expenditures on a
five-year basis and last year began forecasting on a ten-year horizon. The
purpose of this long-range financial planning is to assure adequate funding to
carry out the Districts' wastewater management program for the benefit of the
communities and the two million citizens which the Districts serve in metropolitan
Orange County.
A major benefit of the long-range cash flaw projections is that they enable a
determination well in advance of when revenue shortfalls will begin to occur
so that the Board of Directors will have adequate time to consider
alternative funding sources and take the necessary corrective action to
ensure the District's financial integrity.
For some time projections have indicated that funding shortfalls in District
No. 3 would begin to occur as soon as 1989 and that the District would have
to consider additional revenue sources to meet the District's long-term
funding requirements for sewerage facilities improvements and expansion, and
ongoing operations and maintenance costs. Property taxes have historically
been the major source of local financing of the District's activities.
However, the costs of providing service continue to rise beyond the ability
of the property tax apportionments to keep pace with the stringent
requirements of the federal and state regulatory agencies for advanced
treatment and the need to provide additional capacity to meet the increasing
demands on the sewerage system.
District No. 3
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07/15/87
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The Director of Finance then reviewed the following options available to
finance the District's facilities improvements and expansion activities and
' ongoing operations and maintenance costs:
' Funding Requirement Source of Funds
9.
-
ongoing collection system and Allo
cated share of 1� ad
�t + 9 g Y valorem
joint treatment/disposal
Pr o
P tY tax levy
°i facility operations - `ac o o and S u lemental user fees: non-industrial
Y Pam' PP
maintenance dischargers
User fees: industrial dischargers
Capital facilities improvements - Debt financing (bonds/certificates of
s ,
and expansion projects participation)
Capital reserve funds (existing)
''I Connection fees on new development
Capital replacement/improvement fees:
non-industrial dischargers
Capital replacement/improvement fees:
n' {° industrial dischargers
i
Mr. Butler further reported that District 3 took an m step to provide
rovide
partial capital financing by issuing long-term debt securities in the form of
certificates of Participation (COP°s) in the amount of $48,000,000 last year a
` and authorized staff to develop a financing plan to meet the District's
long-term funding needs for consideration this year by the Directors.
At an adjourned meeting on May 20, 1987, the Board reviewed a conceptual plan
for financing its capital and O&M costs, and directed the staff to draft a
financial plan and implementation schedule for further consideration by the
Directors at this adjourned meeting.
Mr. Butler then summarized the draft long-range financial program which was
prepared in accordance with the guidelines given by the Board at their
j
a ! May 20th meeting modified as authorized to reflect the experience of other
Districts that have recently modified their long-range financial plans.
The Director of Finance reiterated that, as reported to the Board during
j
budget deliberations over the past two years, the District needs to consider
supplemental user fees in the near future to avoid a projected deficit
beginning as soon as 1989 in the District's Operating Fund. The anticipated
4^i deficit could reach as much as $68 million by 1996-97 unless additional
revenue is generated.
Mr. Butler reviewed a schedule excerpted from the Revenue Program adopted by
t7' the Boards in April 1979 pursuant to federal and state regulations which
identifies various alternative revenue sources available to finance projected
{ shortfalls in a District's Operating Fund when ad valorem tax revenues are
insufficient to pay the District's operations, maintenance and replacement
costs. The most cost-effective method (and the method adopted by Districts 4
1, 5, 6 and 13 which have already implemented supplemental user fees) is to
place the following supplemental user fees as a special assessment on the
; . County of Orange property tax bill and collect it from all property owners in
a the District:
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/ � 41District No. 3
07/15/87
Class of User Basis of Charge July, 1989
Single-Family Annual Charge $26.40
Dwellings/Condominiums per Dwelling
Unit
Multi-Family Annual Charge $15.85
Dwellings/Apartments/ per Dwelling
Mobile Hanes Unit
Cammercial/Industrial/ Annual Charge per $18.90
Other 1,000 Sq. Ft. of
Building
This fee schedule is identical to that in effect in Districts 1 and 5.
District 6 initially adopted the same schedule, but has found it necessary to
increase the rates 10% each of the past two years. District 13, which
receives no ad valorem tax appropriation, has a charge of $70/year.
The Director of Finance then reviewed the Operating Fund 10-year, cash flow
estimates and provided a brief overview of the projected cash position of
District No. 3's Operating Fund if the recommended supplemental user fees are
implemented. Based on a July 1989 implementation date, the District's
operating Fund would have a positive fund balance of $5.9 million at the end
of the next five-year forecast period, as opposed to a $13.5 million deficit
if the supplemental user fee program is not implemented. This balance would
serve as the required contingency fund for the Districts.
The implementation date is tentative at this time because the Operating Fund
requirements (which are financed on an annual basis, whereas the capital
funds must be financed in advance of requirements because of the lead time
needed for construction projects) should be evaluated again in 1988 to
determine if any major changes have occurred that will affect the annual
funding requirements that could allow a delay in implementation.
The Director of Finance advised that the Board will need to consider
increasing fees after 1992 because the cash flow projections for the
1992/93-1996/97 period indicate further shortfalls. Thus, once implemented,
the user fee amounts should be evaluated annually to make sure that the
program provides adequate revenues to meet the District's funding needs.
Mr. Butler then reviewed the Preliminary Implementation Schedule which
reflected the procedures and calendar necessary to implement a supplemental
user fee program to be collected on the annual property tax bill beginning in
July 1989.
Mr. Butler reiterated that last spring the Board engaged financial and legal
consultants to assist the Directors in evaluating the potential benefits and
costs associated with issuance of long-term debt financing to take advantage
of then-favorable tax law provisions and low, tax-exempt municipal bond
interest rates prior to anticipated change in federal tax law which became
effective on September 1, 1986.
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3 District No. 3
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An existing source of capital funds is from a one-time connection fee on new
development. These fees are used to finance the planning, design and
construction of the expanded facilities necessary to accommodate the flows
generated by the new development. District No. 3's current one-tip O
connection fees are as follows:
Single/Multi-Family Commercial/Industrial/ y,
Dwelling Units Governmental/Other
Rz ' $250 per Dwelling $50 per 1,000 Sq. Ft.
•w. r l
The Director of Finance reviewed the projected 10-year cash flow schedule
I „I „ relative to the District's anticipated financial position over the next ten
ryears assuming no changes in the Districts existing connection fee
j; '' a structure. The expected revenue to be generated from current connection fee
rates over the next ten years is $6,000,000.
Mr. Butler also reviewed the Districts anticipated financial position over
the next ten years based on implementation of the following phased connection
# fee increases:
October July July
f t Basis of Charge 1987 1988 1989
Single/Multi-Family Charge per $500 $1,000 $1,500
1 ,1 Dwelling Units Dwelling Unit
r
Ccarnnercial/Industrial/ Charge per $100 $ 200 $ 300 O
Governmental/Other $1,000 Sq. Ft
These proposed fees would generate an additional $26,250,000 in connection
fees, as well as an additional interest income over the next ten years.
These additional revenues could then be employed to partially finance both
the District's share of the cost of construction of the expanded collection
a and treatment facilities and its ongoing
payments for retirement of the
Certificates of Participation issued last summer.
f
Staff also recairnended that connection fees be evaluated annually and fixed
in an amount that assured that new development pays the current capital cost
of providing sewerage services. F
Mr. Butler noted that the projected capital requirements assume that the
Districts' 301(h) NPDES Permit will be renewed by EPA and the RWQCB in 1990.
If it is not, treatment plant construction requests will increase by
$285 million (District No. 3's share - $89 million) for the 1991-1996 period.
( 1
The Board members then entered into a discussion relative to the timetable
s, for establishing a supplemental user fee program. They also further reviewed
the various inccane, expenditures and reserve/carryover elements of the cash
' flow schedules and financial projections based on implementation of various
long-range financing alternates to meet the financi obligations of the
1' District. The purpose of connection fees to pay the full cost of providing
I ; sewerage capacity for new development; the need for a periodic review of both
F the" supplemental user fee and connection fee schedules; and the provisions of E
i the Certificates of Participation issue were also clarified during the
discussion.
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,—istrict No. 3
07/15/87
It was then moved, seconded and duly carried:
That the staff be, and is hereby, directed to proceed with planning for
implementation of a supplemental user fee program to be collected on the
property tax bill beginning in 1989-90 in accordance with the proposed
implementation schedule; and,
FURTHER MOVED: That staff be, and is hereby, directed to draft an ordinance
increasing connection fees from $250/dwelling unit and $50/1,000 sq. ft. to
$500/dwelling unit and $100/1,000 sq. ft. to beccme effective October 9,
1987, to be presented to the Board for first reading at the August 12, 1987
Joint Board meeting.
Adjournment Moved, seconded and duly carried:
That this meeting of the Board of Directors of County Sanitation District
No. 3 be adjourned. The Chairman then declared the meeting so adjourned at
7:38 p.m., July 15, 1987.
T
Secretary, Board of Directors
County Sanitation District No. 3 of
Orange County, California
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I certify that the minutes of the adjourned regular meeting of County
Sanitation District No. 3 of Orange County, California, on July 15, 1987,
reporting the actions of said District, are a true and correct report of said
minutes.
Chairman pro tem
Board of birectors of County
Sanitation District No. 3
of Orange County, California
•
Secretary, Boa d of Directors of
County Sanitation District No. 3
of Orange County, California
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iq�}h
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STATE OF CALIFORNIA)
) SS.
COUNTY OF ORANGE )
Pursuant to California Government Code Section 54954 . 2 ,
I hereby certify that the Agenda for the Adjourned Regular Board
Meeting of District No. held on , 1987 was
duly posted for public inspection at the main lobby of the
District' s offices on 1987 .
IN WITNESS WHEREOF, I have hereunto set my hand this
day of , 1987 .
Rita J. Brown, Secretary of the
Board of Directors of County
Sanitation District No.
of Orange County, California