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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 ************* 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. L....._....J....J..~——— ..-..,..‘.-1 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. —2— 08/20/87 District ii 0 I 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: —3— 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 —4— •~68/20/87 •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 —5— •1.---e 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