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HomeMy WebLinkAboutMinutes 1988-03-30COUNTY SANITATION DISTRICT NO.1 OF ORANGE COUNTY,CALIFORNIA MINUTES OF ADJOURNED REGULAR MEETING March 30,1988 -4:30 p.m. 10844 Ellis Avenue Fountain Valley,California Pursuant to adjournment of the regular meeting of March 9,1988,the Board of Directors of County Sanitation District No.1 of Orange County,California, met in an adjourned regular meeting at the above hour and date. The Chairman called the meeting to order at 5:10 p.m.The roll was called and the Secretary reported a quorum present. DIRECTORS PRESENT:Ronald B.Hoesterey,Chairman,Dan Griset, Robert Hanson and Roger R.Stanton DIRECTORS ABSENT:None STAFF MEMBERS PRESENT:J.Wayne Sylvester,General Manager, Rita J.Brown,Secretary,Thomas M.Dawes, Gary G.Streed,W.N.Clarke OTHERS PRESENT:Thomas L.Woodruff,General Counsel and Don E.Smith ****************** sewer service charges Update on long—range financial The General Manager reported that in program and consideration of 1984 District No.1 adopted its amendments to existing sanitary long—range financial plan.This plan ___________________________________ established one—time sewer connection fees for new development to finance facilities expansion,and a supplemental user fee to make up a shortfall in ad valorem tax revenues and provide the additional financing necessary for both operations and maintenance as well as major facilities rehabilitation.The financial plan was adopted after considerable study to avoid projected short and long—range funding shortfalls in revenues required to finance the District~s operating and capital expenses,which are escalating due to the rising cost of meeting environmental and public health standards established by state and federal regulatory agencies. Mr.Sylvester advised that the plan has since been modified and he reviewed the current fee schedule,as follows: Single—Family Multi—Family Commercial /Ind/ Fee Type Residential Residential Governmental/Other One—time Connection $1,500 per $1,500 per $300 per 1,000 sq. Fee dwelling unit dwelling unit ft.of building Annual User Fee $26.40 per $15.85 per $18.90 per 1,000 dwelling unit dwelling unit sq.ft.of building P - 03/30/88 District 1 He further reported that in 1986 the Board also elected to issue $24,700,000 in Certificates of Participation (COP’s)in concert with Districts Nos.2 and 3 to finance District l’s share of joint treatment works construction for the next three years and to purchase additional equity in the joint treatment works to reflect the new flow—based joint works equity formula. Although the annual debt service for the COP’s is approximately $2.3 million,last year the Board decided against an increase in the basic user fee rate but did direct staff to budget annual increases of 20%for subsequent years. Mr.Sylvester further advised that the staff’s financial projections continue to reflect funding shortfalls,particularly in the capital accounts.Estimates indicate that District No.1 will exhaust its capital funds as soon as 1990-91,and the Board will have to make a decision on how to best finance the District’s share of the treatment plant construction and the trunk sewer construction. The Acting Director of Finance then reviewed three alternative proposals for the Board’s consideration which could provide funding to finance the District’s needs.Each financial scenario was based on different assumptions.The first reflected the annual 20%increase in supplemental user fees over the next ten years,as previously directed by the Board,and the current connection fee schedule.Although connection fee rates will continue to rise as the cost of constructing sewerage facilities escalates, connection fee revenues will be inadequate for financing all of the District’s capital needs.The annual user fee increase will basically cover only the escalating operating and maintenance costs.This scenario reflects a capital funding deficit in 1990-91 of $5,091,000 and a projected deficit in 1996—97 of $29,658,000. Mr.Streed reported that one source of additional capital funds would be the issuance of $10 million of additional Certificates of Participation.This would be sufficient to fund any contemplated District 1 sewer rehabilitations,as well as the joint works projects for rehabilitation/reconstruction for the next five years,and would be almost sufficient for the 10—year planning period.Retirement of the certificates could be made by further increasing the supplemental user fee by 20%next year,50%in 1989—90 and 1990-91,and 20%thereafter to pay the additional annual debt service of $977,000.The projected capital fund balance in 1997 under this alternative would be a negative $3,939,000.Mr.Streed also reviewed a schedule which provided for an annual 30%increase in the user fee beginning in 1988—89.The 1997 capital fund balance under this alternative would be a positive $2,726,000.It was pointed out that under each of these alternatives,at the end of the 10—year planning period,the outstanding debt service for the new COP issue would be $17,586,000.When added to the outstanding debt service for the 1986 issue,the total outstanding debt in 1997 would be $50,094,000. A third alternative would be to not issue any additional debt certificates but to raise the annual user fee by an amount basically equivalent to what the debt service would be and to use those fees directly for capital needs. Staff pointed out that the advantage of this alternative is that at the end -2— 03/30/88 District 1 of the 10—year planning period the capital fund balance is relatively close to the second alternative,but the District is not faced with an additional outstanding debt of $17,586,000 in 1997.The main disadvantage is that the cash is not received “up—front”in the early years when the need is projected for capital funds. The Directors then entered into a discussion of the various alternatives available to them to provide the necessary funding to meet the anticipated needs of the District.Staff pointed out that the user fee rates will have to continue to escalate -and at an accelerated pace -to maintain the District’s financial integrity.However,there are several unknowns that will have a major impact on the District’s cash flow requirements.The General Manager added that the District’s major funding shortfalls are for capital financing.The projections reviewed by staff assume that all construction projects proceed on schedule.Thus,the estimates can be considered “worst case”scenarios.However,the Districts continue to experience delays in major projects such as the Central Power Generating System because of SCAQMD requirements.Further delays in this $53 million project,of which District l’s share is $5.5 million,would also delay,or at least spread out,the need for capital funds.The same is true for other capital projects.The Districts hope to have a decision on the Central Power Generating Project from SCAQMD by July.In addition,by July the consulting engineers will have provided preliminary information on the updated Master Plan for Joint Works that will be incorporated into the new budgets.Because of the major impact of the Joint Works capital projects on the District’s cash flow and overall funding needs,staff recommended that consideration of any major changes to the District’s long—term financial plan be held in abeyance until some of these unknowns are better focused. No change in the connection fee schedule was recommended as the current fee pays the basic cost of sewage system capacity for new development. Mr.Sylvester then reviewed the draft ordinance included with the agenda material which provides for an increase in the supplemental user fees of 20% in 1988—89,as previously directed by the Board,as follows: Single—Family Multi—Family Commercial /Ind/ Fee Type Residential Residential Governmental/Other Annual User Fee $31.68 per $19.02 per $22.68 per 1,000 dwelling unit dwelling unit sq.ft.of building The General Manager observed that the projections clearly indicate that the District would soon have to accelerate the user fee increases and with that in mind,reported that staff had drafted a user fee structure providing for a 30%increase in supplemental user fees for the Board’s consideration as the accelerated schedule would better offset future projects and funding shortfalls.If this schedule were adopted,it would increase the fees beginning in 1988—89 as follows: Single—Family Multi—Family Commercial/Indust. Fee Type Residential Residential Governmental/Other Annual User Fee $34.32 $20.60 $24.57 Following further discussion it was the concensus of the Directors that it was in the District’s best interest to adopt the 30%increase to help maintain the District’s fiscal integrity. —3— 03/30/88 District 1 First reading of proposed It was moved,seconded and duly Ordinance No.111 carried: That Ordinance No.111,An Ordinance of the Board of Directors of County Sanitation District No.1 of Orange County,California,Amending Ordinance No.109 Pertaining to Sanitary Sewer Service Charges,be read by title only;and, FURTHER MOVED:That reading of said entire ordinance be,and is hereby, waived. Following the reading of Ordinance No.111 by title only,it was then moved, seconded and duly carried: That Ordinance No.111,An Ordinance of the Board of Directors of County Sanitation District No.1 of Orange County,California,Amending Ordinance No.109 Pertaining to Sanitary Sewer Service Charges,be introduced,as amended by the Board,and passed to the second reading on April 13,1988, at 7:30 p.m.,at the District’s administrative office. Adiournment Moved,seconded and duly carried: That this meeting of the Board of Directors of County Sanitation District No.1 be adjourned.The Chairman then declared the meeting so adjourned at 5:42 p.m.,March 30,1988. 0 Secretary,Boar of Directors County Sanitation District No.1 of Orange County,California 0 I certify that the minutes of the adjourned regular meeting of County Sanitation District No.1 of Orange County,California,on March 30,1988, reporting the actions of said District,are a true and correct report of said minutes. * Chairman ~— Board of Directors of County Sanitation District No.1 of Orange County,California Secretary,Board of Directors of County Sanitation District No.1 of Orange County,California 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 ~3c~ ,was duly posted for public inspection at the main lobby of the District’s offices on ‘,19~~ IN WITNESS WHEREOF,I have hereunto set my hand this _____ day of ~&)~-c4~. ,19~. cz~z~ Rita 3.Brown,secretary of the Board of Directors of County Sanitation District No. ____ of Orange County,California