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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 d 07/15/87 I I 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: -2- I : / � 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. -3- 3 District No. 3 o ; , 07/15/87 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. y, I -A- ,—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 -5- 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 - � - - • iq�}h . r 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