HomeMy WebLinkAboutMinutes 1987-08-20COUNTY SANITATION DISTRICT NO.11
OF ORANGE COUNTY,CALIFORNIA
MINUTES OF AIX~OURNED REXULAR MEETING
August 20,1987 —5:00 p.m.
10844 Ellis Avenue
Fountain Valley,California
Pursuant to adjournmant of the regular maeting of August 12,1987,the Board of
Directors of County Sanitation District No.11 of Orange County,California,net in
an adjourned regular neeting at the above hour and date in the District’s
~ministrative Office.
The Chairman called the neeting to order at 5:12 p.m.The roll was called and the
Secretary reported a quorum present.
DIREX’IORS PRESENT:Jack Kelly,Chairman,‘Itirt Mays,
Roger R.Stanton
DIRECIORS ABSENT:None
STAFF MFL’4BERS PRESENT:J.Wayne Sylvester,General Manager,Rita
J.Brown,Secretary,Thomas M.Dawes,
William H.Butler,William N.Clarke,Gary
Streed
OTHERS PRESENT:Thomas L.Woodruff,General Counsel,Bill
Holinan,Catherine 0 ‘Hara
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Review and actions re long—range The General Manager reported that for
financial program for funding many years the Districts,as part of the
capital arid operating requireirents annual budgetary process,have forecast.
revenues and expenditures on a five—year
basis and last year carinenced 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 rnanagenent program for the benefit of the camlunities and
the t~million citizens which the Districts serve in netropolitan Orange County.
A major benefit of the long-range cash flow projections is that they enable a
determination in advance of when revenue shortfalls will begin th occur so that
the Board of Directors will have adequate time to consider alternative funding
sources and take the necessary corrective action to ensure each District’s
financial integrity.
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For sane time projections have indicated that funding shortfalls in District
No.11 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 needed funding brought about by stringent
requirements of the federal and state regulatory agencies for advanced treatment,
inflation and the need to provide additional capacity to meet the increasing
demands on the sewerage system.
The Director of Finance reported that District No.li’s ability to finance
Operation,Maintenance and Replacement (O,M&R)costs has also been iiipacted by
tax revenue diversions resulting fran the tax increment financing employed by the
City of Huntington Beach Redevelopment Agency to generate revenue for the City’s
four existing redevelopment projects.Redevelopment projects typically result in
increased density of development within a project area,and higher flows into a
District’s collection facilities.Thus,redevelopment activities increase
District operating costs while simultaneously freezing the District’s historical
revenue base,forcing the District to establish supplemental user fees sooner
than might otherwise be necessary were a pass—through of tax revenues to be
granted to the District by the redevelopment agency.
Mr.Butler then reviewed the following
District’s facilities improvements and
costs:
Funding Requ~ement
Ongoing collection system and
joint treatment/disposal
facility operations,
maintenance and replacement
Capital facilities improvements
and expansion projects
major options available to finance the
expansion activities and ongoing O,M&R
Source of Funds
-Allocated share of 1%ad valoreni
property tax levy
-Supplemental user fees:non—industrial
dischargers
—User fees:industrial dischargers
—Annexation fees on new territory annexing
to the District
—Connection fees on new development
—Capital reserve funds (existing)
—Debt financing (bonds/certificates of
participation)
-Capital replacement/improvement fees:
non—industrial dischargers
-Capital replacement/improvement fees:
industrial dischargers
0
With regard to financing operating costs,Mr.Butler reported that during budget
deliberations over the past two years and at a recent adjourned meeting held on
april 15,1987,the staff had briefed the Board on the need to consider
supplemental user fees in the near future to avoid a projected deficit beginning
as soon as fiscal year 1988/89 in the District’s operating fund.The anticipated
deficit would reach as much as $24.3 million by 1996—97 unless additional revenue
is generated.
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District ii
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A~L 1~LA~1a ~.I~ii~IL~1~i
08/20/87
District 11
Mr.Butler then reviewed a schedule excerpted from the Revenue Program adopted by
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 irost cost-effective method (and the method adopted by Districts 1,5,6 and
13 which have already implemented supplemental user fees)is to place a
suppl~~ntal user fee as a special assessment on the County of Orange property
tax bill and collect it from all property owners in the District.District No.3
is also proposing to use this method.
Turning to capital financing,the Director of Finance noted 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-exaipt itunicipal bond interest rates prior to an anticipated change in
federal tax law which became effective on September 1,1986.District li’s Board
considered issuing $10.9 million in certificates of participation but ultimately
chose not to participate in this long—range capital financing program with
Districts Nos.1,2 and 3.
The District’s primary ongoing source of capital funds is fran a one—time
connection fee on new develo~z~nt.These fees are used to finance the planning,
design and construction of the expanded facilities necessary to accarm~date the
flow generated by the new develo~*ient.District No.il’s current one-time
connection fees are:
Singiemulti-Famiiy Carrnercial/Industrial/
Dwelling Units Governmental/Other
$1,250 per Dwelling $250 per 1,000 Sq.Ft.
The staff pointed out that additional flows from the 5,700 dwelling units
anticipated for construction in the proposed Bolsa Chica annexation will result
in increased O,M&R and capital costs for both the District 11 collection system
and its share of the joint treatment and disposal facilities .Based on recent
discussions with both the City of Huntington Beach and the developer,only
limited data is available at this time on proposed development phasing and
associated flows from the dwellings to be constructed in the area,although
initial flows are not expected from the annexing territory until at least
1991—92.
The Director of Finance then reviewed the 10—year cash flow estimates and
provided a brief overview of the projected cash position of both the operating
and capital funds based on the current financial program,and the affect of
implementing a supplemental user fee program for O,M&R financing similar to
Districts 1,5 and 6,as well as an increase in the one—time connection fee for
capital financing.Estimates also included the possible impact on facilities,
expenses and revenues of the Bolsa Chica if it annexes,including the need for
capital facilities advanced funding by developers.
To provide the necessary revenues for District operating costs (including capital
replacement),staff recoim~nded that a supplemental user fee program be
implemented as follows:
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08/20/87
District 11
Recorrunended Supplemental User Fee Program
Annual Charge
Effective Q
Class of User Basis of Charge July,1988
Single—Family Annual Charge $26.40
Dwellings/Condominiums per Dwelling
Unit
Multi—Family Annual Charge $15.85
Dwell ings/Apartnents per Dwelling
~bile Hates Unit
Carimercial/Industrial Annual Charge per $18.90
Other 1,000 Sq.Ft.of
Building
Based on a July,1988 implementation date,the District’s operating fund would
remain solvent through 1991—92 with the initial rates in place,although the
contingency reserve would be reduced below an acceptable level if the recoinnended
supplemental user fee program is implemented.Staff advised that the Board will
need to evaluate the fees on an annual basis because the cash flow projections
for the 1992/93—1996/97 period indicate further shortfalls.Once implemented,
the user fee amounts should be evaluated annually to make sure that the program
provides adeaj.iate revenues to meet the District’s funding needs.O.irrent
estimates the base user fee may have to be increased to $45.00/single family
residence by 1992—93.It was noted,however,that District il’s financial
position,in the final,analysis,will be significantly affected by the amount of
ad valorem tax revenue apportioned to the District from the proposed Bolsa Chica
Annexation.
Mr.Butler then reviewed a Preliminary Implementation Schedule which reflected
the procedures and schedule necessary to implement a supplemental user fee
program to be collected on the annual property tax bill beginning in July,1988.
Staff further recamiended that the Board consider increasing its connection fee
as follows:
Effective
November
Basis of Charge E~cisting 1987
Single/Multi—Family Charge per $1,250 $1,500
Dwelling Units Dwelling Unit
Caninercial/Industrial Charge per $250 $300
Governmrental/Other $1,000 Sq.Ft.
The additional revenues generated by the fee increase would be employed to
partially finance the District’s share of the cost of construction of the
expanded collection and treatment facilities and would reduce the projected
deficit from $5 .2 million to $3.9 million.Staff further recommended that
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•District 11
connection fe.es be evaluated annually and fixed in an anDunt which assures,that
new development pays the current capital cost of providing sewerage services.
This practice s~ou1d further reduce the projected capital financing deficits.
However,staff pointed out that the Board may have to reconsider debt financing
for capital projects in the future.Staff also pointed out that the projected
capital requirements assume that the Districts’301(h)NPDES Discharge Permit
will be renewed by EPA and the RI~QCB in 1990.If it is not,treatment plant
construction requirements will increase by $285 million (District No.il’s share
—$20 million)for the 1991/1996 period.
The Board members then entered into a discussion relative to the timetable for
establishing a supplemental user fee program.They also further reviewed the
various income,expenditures and reserve/carryover elements of the cash flow
schedules and financial projections based on implementation of various long-range
financing alternatives to meet the financial obligations of the District.The
purpose of connection fees to pay the full cost of providing sewerage capacity
for new development;the need for a periodic review of both the supplemental user
fee and connection fee schedules;and impact of the proposed Bolsa Chica
Annexation were also discussed.
It was also pointed out that many economic factors could affect the District’s
funding requirements over the next several years.The staff advised that it
~uld continue to,evaluate the District’s financial position each year to
determine the impact of changing conditions and brief the Board to seek direction
regarding ncdifications to the District’s long-range financial plan,as needed.
It was then noved,seconded and duly carried:
That staff be,and is hereby,directed to proceed with planning for
implementation of the reca’mtended supplemental user fee program to be collected
on the property tax bill beginning in 1988—89 in accordance with the proposed
implementation schedule;and,
FURTHER MOVED:That the staff be,and is hereby,directed to draft an ordinance
increasing connection fees from $1,250/dwelling unit and $250/l,000 sq.ft.to
$1,500/dwelling unit and $300/l,000 sq.ft.for first reading at the
September 9th Board meeting,to become effective in November,1987.
~diournnent Moved,seconded and duly carried:
That this meeting of the Board of Directors of County Sanitation District No.11
be adjourned.The Chairman then declared the meeting so adjourned at 5:48 p.m.,
August 20,1987.
Secretary,Board of Directors
County Sanitation District No.11 of
Orange County,California
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I certify that the minutes of the adjourned regular meeting of County
Sanitation District No.11 of Orange County,California,on August 20,1987,
reporting the actions of said District,are a true and correct report of said
minutes.
Chairman pro tern
Board of Directors of County
Sanitation District No.11
of Orange County,California
c~c~
Secretary,d of Directors of
County Sanitation District No.11
of Orange County,California
1
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
Districtts 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