HomeMy WebLinkAboutSpecial Committee ro Recommend Financing to Implement Dist. 3 Construction Programh
COUNTY SANITATION DISTRICTS
of ORANGE COUNTY, CALIFORNIA
April 6, 1973
REPORT OF
P.O. BOX 8127
10844 ELLIS AVENUE
FOUNTAIN VALLEY, CALIFORNIA 92708
(714) 540-2910
(714) 962-2411
TO RECOMMEND FINANCING TO
At the direction of the Board, the Committee has met with the
staff and financial consultant and reviewed the recommendations
contained in the Report on Financing Major Sewerage Improvements.
The basic data and information developed and presented in the
report was studied. Particular scrutiny has been given the proposed
connection fees for commercial and industrial developments, and
the recommendations for a general obligation bond issue.
Considerable input was obtained from the Committee members,
Director Vanderwaal, staff, and the financial consultant.
Mr. Bodnar of Stone and Youngberg has submitted a supplement to
his report, which is attached herewith.
The Committee concurs with the recommendations contained in
Mr. Bodnar's supplemental report, summarized as follows:
Establish the following recommended connection
fees as soon as practicable:
Residential Units $250
Commercial & Industrial $50/1000 sq. ft.
with $250 minimum
Commercial and industrial establishments having
a high volume of water discharges will continue
to be subject to excess capacity connection
charges as provided in the existing Uniform
Industrial Use Ordinance.
Defer decision re amount of bond issue and timing of
election for up to nine months.
Current cash flow projections indicate that determination of
a general obligation bond issue can be deferred up to the beginning
of 1974, pending a decision by EPA regarding the definition of
secondary treatment.
It should be pointed out that although adoption of the above -
recommended connection charges is a step toward meeting the
requirements of the new Federal Water Pollution Control Act with
respect to user charges, increasesin the schedule of use charges
contained in the existing Uniform Industrial Use Ordinance will,
in all likelihood, have to be adopted to ensure that the user
charges, particularly with respect to the industrial community,
conform to this provision of the Act.
The Environmental Protection Agency has published regulations
which provide, in part, that:
"Prior to award of any grant after March 1, 1973,
for a project which includes the building and
erection of a treatment works, the applicant (a)
has adopted or will adopt a system of charges to
assure that each recipient of waste treatment
service will pay its proportionate share of the
costs of operation and maintenance (including
replacement); (b) has received firm written
commitments satisfactory to the Regional Admiriistrator
for the payment to such applicant by the industrial
users for their proportionate share of the Federal
share of capital costs of the project allocable to
the treatment of such industrial wastes to the extent
attributable to the Federal share of the cost
construction."
The EPA is presently drafting guidelines which will set forth
the manner and method for compliance with these provisions.
The Committee directed the staff to redraft the proposed
Sewer Connection Ordinance, incorporating the above -suggested
fees and other recommendations of the Committee. In the case of
additions to, or alterations of, structures other than residential
dwellings that fall within the minimum square footage charge of
$250, the Committee suggests a credit be allowed equal to the
unused area, up to a period of five years, emanating from the
initial connection permit. For property currently developed,
but not discharging to the sewer, the Committee also recommends
that connection fees be waived for a period of one year. A
schedule comparing the proposed charges with those of the other
Districts is included herewith.
e
Robert Root, Chairman
Donald L. Fox
Jack Green
George B. Scott
Charles Stevens, Jr.
-2-
April 65 1973
SCHEDULE OF CURRET�'
DISTRICT'S CONNECTION CHARGES
Family Dwelling
District
Unit Charge
Other Development*
Remarks
1
NONE
2
$250
$50/1000 sq. ft.
PROPOSED
with $250 minimum
3
$250
$50/1000 sq. ft.
PROPOSED
with $250 minimum
5
$160
$80/1000 sq. ft.
Annually January 1st,
with $80 minimum
family dwelling escalates
$5 and other development
escalates $2.50
6
NONE
7
175 single family
$437.50/acre
Escalates annually on
t250 multiple family
with $175 minimum
July 1st as follows:
Single family dwelling
973 200
1974 225
1250
1975
Other development
7 00.00 w 00 min.
1974 562.50 w/ 225 min.
1625-00
1975 w/ 250 min.
Note: Additional charges
for direct connection to
District trunks based on
'
front footage charge
11
NONE
* Excess capacity connection charges provided for in the Uniform Industrial
Use Ordinance for commercial and industrial establishments having a high
volume of water discharge also apply in all Districts.
f
STONE & YOUNGB E-RG
MUNICIPAL FINANCING CONSULTANTS, INC.
April 3, 1973
Orange County Sanitation District No. 3
Connection Fee and Bond Issue Study Committee
P. O; Box 8127
Fountain Valley, California 92708
Gentlemen:
Per your directions , we have reviewed our report of March 9, 1973 with the
staff as it relates to: (1) suggested connection charges for industrial and com-
mercial users, and (2) the suggested principal amount of the proposed bond
authorization.
From our meeting of March 21 with the Committee, it is our understanding that:
(1) The basic rationale for the setting of connection fees on the basis
of District costs to provide a unit of trunk sewer and sewage treat-
ment -disposal capacity is agreeable to members of the Committee.
These unit costs are $65 per 100 gallons of trunk sewer and sewage
treatment -disposal capacity.
(2) The criteria relative to projected, sewage flows from various types of
land use employed by the consulting engineers in designing the trunk
sewer syst6m have been approved by the District with its adoption
of the master plan trunk sewer program. These projected flows are
1, 550 gpd per acre in low density (1-6 units per acre) residential
uses; an average of 4,850 gpd per acre in medium -high density
(7 or more units per acre) residential uses; and 3,555 gpd per acre
in industrial -commercial uses.
(3) The suggested connection fee of $250 per residential unit appears to
be reasonable and is agreeable to the Committee.
(4) The suggested connection fee of $250 per 5,000 square feet of com-
mercial and industrial facility needs further study. It is felt that
a connection fee for industrial and commercial uses at this level
may have an adverse effect upon future development within the Dis-
trict. Secondly, the Committee desires further information as to
coordination of an industrial -commercial connection charge with
the Districts' Uniform Connection and Use Ordinance.
989 -2300
SUITE 2750 • ONE CALIFORNIA STREET • SAN FRANCISCO. CALIFORNIA 94111 - (415):p1rytip
Orange County Sanitation District No. 3 April 3, 1973
Connection Fee and Bond Issue Study Committee Page 2
(5) The suggested principal amount of the bond issue requirement be recon-
sidered in view of the uncertainty regarding the extent to which secondary
treatment, equivalent to activated sludge, may be required for the
Districts' flows; the amount of connection fee revenue that may be
realized by District No. 3 and the extent to which this amount of
revenue will relieve the District No. 3 projected cash flow defects;
and sewage treatment -disposal improvement implementation schedule.
This report treats points 4 and 5 listed above. The findings.. con; clusions , and
recommendations outlined below are presented as a result of a meeting held on
March 28 with the staff.
EXISTING UNIFORM CONNECTION
AND USE ORDINANCE
In April 1970, the joint Organization adopted a Uniform Connection and Use
Ordinance which requires dischargers, who place an excessive demand on the
Districts' sewerage facilities, to purchase additional capacity. Pertinent
sections of this Ordinance include the following:
Article 6, Paragraph 6: Prior to commencement of use and upon
invoicing by the District, an excess capacity connection charge
shall be payable by a user when, during the 12-month period
after commencement of use, the peak flow rate may be reasonably
expected to exceed 25, 000 gallons per day unless such peak flow rate
is a reasonable use as defined in Article 2 of this ordinance.
Article 2, Paragraph J : For the purpose of computing excess ca-
pacity connection charges, reasonable use is hereby established
at 25,000 gallons per day peak flow rate per $100, 000 of assessed
valuation.
Article 6, Paragraph b: Subject to the provisions hereinabove,
.excess capacity connection charges payable shall be computed at
the rate of $350 per 1,000 gallons per day of peak flow rate.
6
Orange County Sanitation District No. 3 April 3, 1973
Connection Fee and Bond Issue Study Committee Page 3
ILLUSTRATIVE EXAMPLES OF UNIFORM.
CONNECTION AND USE ORDINANCE
Two case examples have been prepared by Robert A. Webber, Chief, Industrial
and Permit Division, to illustrate the application of the Excess Capacity Con-
nection Charge Ordinance. Company A is a government -owned facility which is -:-
not subject to ad valorem taxation. Company A was invoiced in June 1972 for
$9, 240. Company B is an existing carpet manufacturer that is contemplating an
expansion of its operations to include carpet dyeing which would place a very
substantial demand on the sewerage facilities..
Allowable Discharge Actual Discharge
Company Assessed Value Rate of Flow Rate of Flow
A $0.00 0 gallons/day 26,400 gallons/day
Computation of Excess Capacity Connection Charge
Actual Discharge 26,400 gallons/day
Allowable Discharge 0 gallons/day
26,400 gallons/day x $350/1, 000 gallons
$9,240.00
B $450, 000.00 113, 000 gallons/day 500,000 gallons/day
Computation of Excess Capacity Connection Charge
Actual Discharge 500, 000 gallons/day
Allowable Discharge 113 , 000 gallons/day
387,000 gallons/day x $350/1, 000 gallons
_ $135 ,450.00
EVALUATION OF EXISTING PRACTICE
1. Under the existing Uniform Connection and Use Ordinance, reasonable
use is established at 25, 000 gallons per day peak flow rate per $100, 000 'of
assessed valuation.
Orange County Sanitation District No. 3
Connection Fee and Bond Issue Study Committee
April 3, 1973
Page 4
2. Our report of March 9 indicated on page 32 that it is reasonable to as-
sume that a typical dwelling unit in low density residential areas (1-6 units per
acre) contributes approximately 383 gallons per day to the District's sewerage
system. The estimated assessed valuation of typical owner occupied housing
units within the District is assumed to be approximately $7, 000.
3. From the above, the following relationships can be identified with respect
to Companies A and B cited in the previous section of this report.
.
Company A Company B
a.
Actual Discharge
26,400 gpd 500,000 gpd
b.
•Excess Capacity Charge
$ 91240 $135,450
c.
District Cost of Providing
Sewerage Facilities @
$65/100 gals Capacity
$17,160 $325, 000
d.
Actual Discharge in Terms of
Dwelling Unit Equivalents
@ 383 gpd
68.9 1,305.5
e .
Connection Charge Revenue
District Would Realize from
(d) Dwelling Unit Equivalents
@ $250 per unit
$17, 225 $326, 375
f .
Assessed Valuation District
would Realize from (d)
Dwelling Unit Equivalents
@ $7, 000 per unit
$482, 300 $9, 138, 500
g . •
Property Tax Potential of (d)
Dwelling Unit Equivalents @
$7, 000 per unit @ $0.4740
per $100 Assessed Valuation
$ 2,286 $43, 316
h .
Estimated Property Tax
Potential of Company @
Assessed Valuation @ $0.4740
-
per $100 Assessed Valuation
- $ 21133
Orange County- Sanitation District No. 3 April 3, 1973
Connection Fee and Bond Issue Study Committee Page 5
4. From a comparison of b and c, it appears. from the relationship cited
above that the excess capacity charge does not recover the District's cost of
providing sewerage facilities, especially in the case of "wet" type of industry.
5. On the basis of relative demand placed'on District sewerage facilities,
residential land uses provide significantly greater assessed valuation and prop-,
erty ,tax potential compared to industrial uses. Company B, with a discharge of
500,000 gpd, has a relative demand equivalent to 1,305 residential dwelling units.
Company B assessed valuation is $450,000 whereas the potenflal assessed valua-
tion of 1, 305 residential dwelling units is estimated to be $9, 138, 500. In terms
of property tax potential, 1,305 residential dwelling units would provide approxi-
mately $43,300, whereas Company B provides a property tax potential of $2,133.
CONCLUSIONS AND RECOMMENDATIONS
NON-RESIDENTIAL CONNECTION CHARGES
1. In the interest of attempting to achieve optimum equity among potential
residential and non-residential users, it is recommended that the suggested
method of setting connection charges for non-residential users as outlined in
our March 9 report be considered for adoption as a matter of Board policy.
2. The consulting engineers have projected estimated flows from non-
residential users at the rate of 3, 555 gpd per acre. The estimated cost of pro-
viding sewerage system capacity for this amount of flow is about $2, 300 per
acre, or approximately $50 per 1,000 square feet.
3. In administering the suggested non-residential connection charge, it is
recommended that the charge be established at the rate of $50 per 1, 000 square
feet of facility, with a minimum charge of $250, equivalent to a residential
dwelling unit. It is suggested that this charge be applied to non-residential
uses which -do not place an inordinate demand upon sewerage facilities.
4. With respect to "wet industry" which places an inordinate demand on
sewerage facilities, it is recommended that the District continue with the ad-
ministration of the Districts' Uniform Connection and Use Ordinance as adopted
by the Joint Boards in April, 1970. In continuing the use of this Ordinance, it
should be realized, however, that Federal and State revenue program require-
ments may necessitate revision in this Ordinance as a condition for receiving
Federal and State assistance for sewerage projects. In this connection, the
Environmental Protection *,Agency published Rules and Regulations in the
Orange County. Sanitation District No. 3 April 3, 1973
Connection Fee and Bond Issue Study Committee Page 6
February 28, 1973 Federal Register which provide in part as follows:
"#35.925-11 User charge system.
That, prior to award of any grant after March 1, 19 73 , for
a project which includes the building and erection of a treat-
ment works (Step 3) the applicant (a) has adopted or will
adopt a system of charges to assure that each recipient of
waste treatment service will pay its proportionate shard of
the costs of operation and maintenance (including replace-
ment); (b) has received firm written commitments satis-
factory to the Regional Administrator for the payment to such
applicant by the industrial users for their proportionate share
of the Federal share of capital costs of the protect allocable
to the treatment of such industrial wastes to the extent attri-
butable to the Federal share of the cost of construction; and
(c) has legal, institutional, managerial, and financial capa-
bility to insure adequate construction, operation and main-
tenance of treatment works throughout the applicant's juris-
diction. Grants awarded prior to March 2, 1973, are subject
to #35.83 5-5 requirements in lieu of the above."
It is our understanding that detailed Federal guidelines are being drawn to
indicate the manner and method for compliance with these provisions of EPA
Rules and Regulations.
BOND ISSUE REQUIREMENT
At our meeting of March 21 with the District staff, data was presented which
indicated that the potential bond issue requirement could be significantly less
than the $13 million authorization noted in our March 9 report. These data
which took into account anticipated revenues of $2.4 million in connection fees,
indicated it may be possible to fund the anticipated cash flow deficit with a
bond authorization of approximately $9 million.
At this date, we have yet to get an indication of sewage treatment requirements
from Federal and State authorities, although such information may be forthcoming
shortly. In addition, the Director of Finance has indicated that investment
income should exceed original estimates somewhat in view of the dramatic in-
crease in interest rates bn short term intestments that has been experienced in
recent weeks.
Orange County Sanitation District No. 3 April 3, 1973
Connection Fee and Bond Issue Study Committee Page 7
In view of the continued uncertainty regarding level of treatment requirements
and the level of revenue realized from connection fees, it is recommended that
a decision regarding the amount of bond authorization be deferred at this time
until additional information is made available to the Districts. In making a
decision regarding the amount of bond authorization to seek, it should be borne
in mind that an allowance of six to nine months be made for conducting a bond
election and sale of authorized bonds.
We sincerely hope this information is helpful to members of the Committee in' its
deliberations. We are prepared to provide additional information as needed by
the Committee to complete its deliberations.
Very truly yours,
STONE & YOUNGBERG
Municipal Financing Consultants, Inc.
Ernest B. Bodnar
Assistant Vice President
EBB:wlb
FINANCING MAJOR
SEWERAGE IMPROVEMENTS
ORANGE COUNTY
SANITATION DISTRICT NO. 3
STONE & YOUNGBERG MUNICIPAL FINANCING CONSULTANTS, INC.
r FINANCING MAJOR SEWERAGE IMPROVEMENTS
ORANGE COUNTY SANITATION DISTRICT NO. 3
BOARD OF DIRECTORS
Norman E. Culver, Chairman
Garden Grove S.D.
Robert Battin
Unincorporated
Alicita Lewis
Stanton
Jesse Davis
Buena Park
Charles Long
Los Alamitos
Donald L. Fox
Brea
Derek McWhinney
Midway City S . D.
Jack Green
Huntington Beach
Robert E. Root
Fullerton
Wade Herrin
Santa Ana
George B. Scott
Fountain Valley
H. K. Holden
Seal Beach
Mark Stephenson
Anaheim
Otto Lacayo
Cypress
Charles Stevens, Jr.
La Habra
Cor Vanderwaal
La Palma
ADMINISTRATIVE STAFF
Fred A. Harper
General Manager
J. Wayne Sylvester C . Arthur Ni s s on
Director of Finance General Counsel
PROFESSIONAL SERVICES
Boyle Engineering & John Carollo Engineers
Consulting Engineers
Stone & Youngberg Municipal Financing Consultants, Inc.
Financing Consultants
March 9, 1973
STONE & YOUNGBERG
MUNICIPAL FINANCING CONSULTANTS, INC.
March 9, 1973
The Honorable Board of Directors
Orange County Sanitation District #3
P. O. Box 8127
Fountain Valley, California 92708
Gentlemen:
In accordance with your authorization and direction, we have prepared
a recommended financing plan for your consideration to implement
major sewerage improvement programs which are to be carried out over -
the next several years.
We have concluded that the estimated maximum cash flow needs to
implement the programs can be met from the sale of $13, 000, 000 General
Obligation Bonds. This is the amount that would be required should
federal and state standards provide for secondary treatment at an
equivalent to activated sludge for total district flows. Consulting
engineers are of the opinion that federal and state standards will
eventually require this level of treatment. Should federal and state
standards be set at lower levels, the full amount of authorized bonds
need not be sold to implement the program.
The recommended financing plan suggests that the Board .of Directors
initiate a connection charge as an additional source of revenue to
meet district funding. needs and recover the costs of providing excess
capacity in facilities to meet future users. The level suggested for
your consideration is $250 per dwelling unit. Suggestions are also
made regarding commercial and industrial user connection fees.
I would like to take this opportunity to express our appreciation to
Mr. Fred A. Harper, General Manager, J. Wayne Sylvester, Director
of Finance, Mr. Graham Hazlett of the District Staff, Mr. Conrad
Hohner, Boyle Engineering, and Mr. Walter Howard, Carollo -Engineers,
for their assistance in the completion of this study.
989 - 2300
SUITE 2750 • ONE CALIFORNIA STREET • SAN FRANCISCO. CALIFORNIA 94111 • (415)
The Honorable Board of Directors
Orange County Sanitation District #3
March 9, 1973
Page Two
We are available to provide any further information you need to assist
the District in implementing its sewerage program.
Yours very truly,
STONE & YOUNGBERG
Municipal Financing Consultants, Inc.
Ernest B. Bodnar
Assistant Vice President
EBB :ac
enclosure
I
SUMMARY OF FINDINGS AND RECOMMENDATIONS
1. To meet its existing and anticipated future needs, District No. 3 initiated a
seven year trunk sewer improvement program which is estimated to cost more
than $ 2 9 million over the period 19 71/72 through 19 77/78 . In conjunction with
six other Orange County sanitation districts, the District is in the process of
upgrading jointly owned sewage treatment works to meet State water quality con-
trol standards. The estimated cost of upgrading jointly owned primary treatment
t facilities is approximately $21.2 million. The consulting engineers estimate the
I cost of activated sludge secondary treatment which eventually will be required by
Federal and State standards at approximately $100.8 million.
2. On the basis of the consulting engineers' cost estimates and construction
schedules, the Director of Finance has projected funding needs of District
No..3 to implement the master plan trunk sewer program; meet its share of esti-
mated capital costs of the proposed joint treatment works improvement program;
provide for the Dis irict's share of projected operations and maintenance costs;
and debt service costs on District bonds. Projected cash flow deficits range
from approximately, $4.85 million to $12.5 million dependent upon the level of
secondary treatment required of the District to meet Federal and State standards.
3. General obligation bond financing is the most practical and feasible financing
alternative available to District No. 3 to implement the master plan trunk
sewer and joint treatment works improvement program as scheduled. It is recom-
mended that District No. 3 seek authorization of $13 million of general obligation
bonds since the consulting engineers are of the opinion that Federal and State
standards will eventually require secondary treatment equivalent to activated
sludge.
4. Authorization of $13, 000, 000 of general obligation bonds does not mean that
the full amount will be issued. Should Federal and State standards provide
for secondary treatment at an equivalent less than activated sludge for total Dis-
trict flow, facilities could be financed with the issuance of that portion of the
authorization needed to complete the - program .
5. Recent development trends within the area served by the District have in-
dicated the following:
a. A trend toward increased higher density residential types of
development in the District.
' b. The potential property tax base provided by single family
unit land uses tends to be significantly greater than the
potential property tax base provided by a multiple family unit.
c. Engineering data indicate average daily flows per dwelling unit
in single family residential land uses average about 385 gallons
per unit. In high density residential land uses, flows averaged about
256 gallons per day per unit, or approximately two-thirds that of
lower density single family land uses.
d. Within cities served by District No. 3 , there are significant
differences in present users of the District's sewerage facili-
ties. Median value of owner occupied housing units ranges from
$22, 800 to $34, 700. Population per owner occupied housing units
ranges from 2.1 to 4.0.
e. Land values within the District have increased significantly in
recent years. Land suitable for low density residential devel-
opment has increased from approximately $10 , 000 to $12 , 000 per
acre in 1960 to current levels of $28, 000 to $30, 000. Land suitable
for high density residential development is now valued at approxi-
mately $50, 000 per acre. Land suitable for commercial development
is now valued at approximately $100, 000 per acre.
f. The District's property tax base of $1.259 billion consists of
land having an assessed valuation of $480 million (38 percent
of total tax base) and improvements on land which is owned and
occupied by present property owners having an assessed valuation
of $778 million (62 percent of total tax base) .
6. Demands for sewerage services are created by two broad classifications:
(1) present users, and (2) potential users (owners of improved or unimproved
land not connected to the system but adjacent to it) . A system of assessing and
recovering the costs of these benefits must consider the following:
a. Equity among present users.
b. Equity among potential users.
c . Equity between present and potential users.
The distribution of costs in relation to complete equity in all cases is highly
unlikely. What must be attempted is the achievement of optimum equity in rela-
tion to the degree of benefits received by broad categories of present users and
potential users within the constraints posed by statutory provisions and practical
administrative procedures.
7. On the basis of our analyses, evaluations, and consideration to optimize
equity among users and potential users of the District's sewerage system,
it is our recommendation that the governing board of District No. 3 consider the
use of a sewer connection fee as a new source of revenue. The purpose of the
connection fee would be to recover costs of providing facilities in the near future
which will have sufficient built-in capacity to serve future users. We also recom-
mend that the connection fee be made applicable to connections made to a District
owned facility or to any local collector sewer which discharges into the District's
sewerage system.
8. As the basis for formulating connection charges, we suggest unit costs of pro-
viding trunk sewer and sewage treatment -disposal capacity. We estimate
the unit costs of providing such facilities at approximately $645, 000 per million
gallons.
9. As the basis for computing connection charge fees, we recommend that the
governing board of District No. 3 consider using average anticipated sewage
flows from residential land uses which have served as the basis to design master
plan trunk sewer facilities in District No. 3.
10. Based on the estimated capital cost of providing sewerage facilities, pro-
jected flows from residential land uses, and current land use developments
within the District, it is recommended that consideration be given to the estab-
lishment of a residential unit connection charge of $250.
11. Commercial and industrial uses were considered in the same manner as resi-
dential uses. It is anticipated these uses will provide an average flow of
3,555 gallons per day per acre. At a unit capital cost of $65 for providing 100
gallons of sewerage capacity, the charge would be approximately $2 , 300 per
acre. On a square footage basis, the capital cost for sewerage facilities would
be approximately $500 per 10,000 square feet of the facility. This rate is sug-
gested as a general guide in recognition of the wide variation in types of indus-
trial and commercial uses. It is suggested the charge for major types of indus-
trial and commercial facilities be administered on the basis of a close study of
the capacity requirements, type of discharge, number of employees, and other
related factors.
12. Revenue from connection charges under rates suggested in this study could
provide as much as $2.4 million on the basis of the December 1972 study
of near -term development patterns in the District. -
13. Based on the estimated bond service costs for the $13, 000, 000 of proposed
general obligation bonds, estimated connection charge revenues would be
more than sufficient to service the bonds. Connection fee revenues in excess of
actual bond service requirements could be held in reserve to meet future capital
needs, thereby making it possible for the District to reduce the property tax rate
levied for the accumulation of capital reserves.
CONTENTS
Page
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . , 1
EXISTING ORGANIZATION AND FACILITIES . . . . . . . . . . . . . . . 3
Organization and Administration . . . . . . . . . . . . . . . . . . . 3
Existing Sewage Collection Facilities. . . . . . . . . . . . . . . . 3
Existing Sewage Treatment Facilities . . . . . . . . . . . . . . . . . 5
Financing Existing Facilities . . . . . . . . . . . . . . . . . . . . 5
Assessed Valuation and Tax Rates . . . . . . . . . . . . . . . . . . 6
THE PROPOSED SEWERAGE IMPROVEMENT PROGRAM . . . . . . . . . . . 8
Proposed Sewage Collection Facilities . . . . . . . . . . . . 8
Proposed joint Treatment Facilities . . . . . . . . . . . . . . . . . 9
FINANCING ALTERNATIVES AND RECOMMENDED FINANCING PLAN . . .
. . 10
Projected Cash Flow Deficits ... . . . . . . . . . . . . . . . .
. . 10
Financing Capabilities . . . . . . ... . . . . . . . . . . . . .
. . 10
Evaluation of Financing Alternatives . . . . . . . . . . . . . . .
. . 13
Recommended Financing Method . . . . . . . . . . . . . . . . .
. . 14
Recommended Bond Authorization . . . . . . . . . . . . . . . . .
. . 15
Estimated Bond Service Costs . . . . . . . . . . . . . . . . . .
. . 15
SOURCES OF REVENUE TO MEET BOND SERVICE COSTS . . . . . . . .
. . 18
Recent Development Trends . . . . . . . . . . . . . . . . . . .
. . 18
Summary of Findings Relative to Recent Development Trends . . . . .
. ,. 23
Beneficiaries and Achieving Equity in Providing Sewerage Services . .
. . 25
Alternative Sources of Revenue to Finance Sewerage Improvements . .
. . 25
.• Recommended Financing Alternative. . . .. . . . . . , . . . , , .
. . 31
Estimated Level of Connection Charges . . , , . , . , , , . . , ,
, , 34
Estimated Revenue from Connection Charges , , , .
, 35
Table 1. Original Cost of Sewage Collection Facilities. .
. . 4
Table 2. Original Cost of joint Treatment Facilities . . . . . . . .
. . 5
Table 3. Assessed Valuation .. .. ,. .. .. .. .. ti
7
Table 4. Secured Roll Tax Rates . . . . . .
7
. Table 5. Sewage Collection System Elements ...
8
Table 6. Proposed joint Treatment Works .
9
Table 7. Statement of Projected Cash Flow - Assumes Construction of
Phase I (46 mgd) Secondary Treatment Only . . . . . . . .
. . 11
Table 8. Statement of Projected Cash Flow - Assumes Construction of
Three Phases (196 mgd) Secondary Treatment . . . . . . .
. . 12
Table 9. Estimated Bond Service . . . . . . . . . . . . . . . .
. . 17
Table 10. Building Permits Issued for Dwelling Units . . . . . . . .
. . 19
Table 11. 1971 Valuation of Building Permits for Dwelling Units . . .
. . 21
Table 12. Estimated Per Capita Cost for Sanitary Sewerage Service
in Owner Occupied Housing Units . . ... . . . . . . . .
. . .24
Table 13. Connection Charges for Single -Family Units in Various
California Communities . .
.0 30
Table 14. Trunk Sewer System Cost Elements . . . . . .• .
. , 32
Table 15. joint Treatment Works Cost Elements. . . . . . . . . . .
. . 33
INTRODUCTION
Orange County Sanitation District No. 3 provides sewage collection, treat-
ment and disposal service to a rapidly developing area of more than 97 square
miles in northwestern Orange County. The District's service area includes the
Cities of Buena Park, Cypress, La Palma, Los Alamitos, and Stanton; substantial
portions of the Cities of Anaheim, Brea, Fountain Valley, Fullerton, Garden Grove,
Huntington Beach, La Habra, Seal Beach, and Westminster; and unincorporated
areas of Orange County.
The population of the District has increased rapidly in recent years from an
estimated 50, 000 in 1950 to more than 400, 000 in 19 73. Development within the
District has been predominately residential in character; however, a substantial
amount - of commercial and industrial development has also taken place. Over
the past ten years the District's assessed valuation has grown from $488, 729,500
in 1963/64 to $1,258,979,910 in 1972/73, an increase of nearly 160 percent.
It is anticipated that continued growth and development will take place
within the District because of its mild climate; the availability of land suitable
for further residential, commercial, and industrial development; adequate water
supply; excellent highway, air, and rail transportation facilities; and its strat-
egic location in the economically diversified southwestern region of the United
States centering about Los Angeles, and its bordering Counties of Orange, River-
s ide , and Ventura.
To meet its existing and anticipated future needs, the District initiated a
seven-year trunk sewer improvement program which is estimated to cost more
than $29 million over the period 1971/72 through 1977/78. Concurrently, the
District, in conjunction with six other Orange County sanitation districts, is
in the process of upgrading jointly owned sewage treatment works to meet State
water quality control standards. The estimated cost of upgrading jointly owned
primary treatment facilities is approximately $21.2 million. With respect to
secondary treatment facilities, Federal standards have not been finalized
however, indications are that a degree of secondary treatment equivalent to
activated sludge will eventually be required. The consulting engineers estimate
the cost of activated sludge secondary treatment at approximately $100.8 million.
Cash flow projections of anticipated revenues and expenditures prepared by
the Director of Finance indicate the major portion of the sewerage improvement
program attributable to District No. 3 can be financed from existing revenues,
property tax revenues at existing rates, Federal and State construction grants,
and other miscellaneous revenues; however, a sizable cash flow deficit is ex-
pected to occur in fiscal year 1973/74. The magnitude of the cash flow deficit
to implement the trunk sewer program, the District's share of primary sewage
-1-
treatment facilities, and Stage 1 of secondary sewage treatment facilities is
estimated at $5 million. Should Stages 2 and 3 of secondary sewage treatment
facilities be required as anticipated by the consulting engineers, the magnitude
of the District's cash flow deficit could increase to an estimated $12.5 million.
To assist the District, the firm of Stone & Youngberg Municipal Financing
Consultants, Inc, was engaged to develop a financing plan to enable the District
to complete its program of sewerage system improvements as scheduled through
1977/78. Our findings, conclusions, and recommendations are presented in the
accompanying report.
-2-
EXISTING ORGANIZATION AND FACILITIES
ORGANIZATION* AND
ADMINISTRATION
Orange County Sanitation District No. 3 operates pursuant to provisions of
the State of California Health and Safety Code, Sections 4700 et seq. The Dis-
trict is one of seven county sanitation districts which provide sewerage service
to an area of approximately 320 square miles of northern Orange County. Each
of the seven districts are responsible for the construction, operation, and main-
tenance of their respective portions of approximately 400 miles of trunk sewers
and 27 pumping stations. The seven districts jointly own and provide for the
operation and maintenance of two sewage treatment plants, connecting trunks,
pumping stations, and two ocean outfall s .
The governing board of District No. 3 consists of sixteen members including
the mayors of 13 cities, board members of two sanitary districts, and a member
of the Orange County Board of Supervisors. The governing board of the seven
Orange County Sanitation Districts have formed a Joint Organization pursuant to
a joint exercise of powers agreement. The joint Organization is responsible for
the construction, operation, and maintenance of joint facilities. Share of own-
ership of joint facilities is adjusted among the Districts on an annual basis to
meet the respective needs of each District. Operation and maintenance costs
of joint facilities are prorated among the Districts on the basis of their propor-
tionate share of use.
Day-to-day administration, operation, and maintenance of individual District
and joint facilities is provided by the joint Administrative Organization through a
staff of 165 authorized personnel. Services provided by the Joint Administrative
Organization are distributed among the Districts on a cost -accounting basis.
EXISTING SEWAGE
COLLECTION FACILITIES
Elements of District No. 3 sewage collection system and their respective
costs are shown in Table 1. Cost data are based on District No. 3 proportionate
capacities in the Magnolia and Miller -Holder trunk sewers which are shared
with District No. 2 and District No. 11, respectively.
The area served by District No. 3 consists of three basins: (1) Westside,
(2) Central, and (3) Magnolia. The Westside Basin is served by the Los Alamitos
subtrunk. Sewage collected in the Westside Basin is pumped through a force
main to the Central Basin's main collector, the Miller -Holder trunk. The south-.
western portion of the Central Basin is served by the Newland -Delaware trunk
and force main. The Magnolia Basin is served by the Magnolia trunk..
-3-
Table 1
Orange County Sanitation District No. 3
Original Cost of Sewage Collection Facilities
June 30, 1972
Sewage Collection Facilities:
Miller Holder Trunk . . . . . . . . . .
. . . . . . $ 8 , 5 3 0 , 72 7
Magnolia Trunk . . . . . . . . . . . .
. . . . . . 2,082,663
Los Alamitos Subtrunk . . . . . . . . . .
. . . . . 862,031
Westminster Branch Knott Trunk . . . . . .
.. . . . . 801, 043
Seal Beach Boulevard Interceptor . . . . .
. . . . . 651,314
Hoover -Western Subtrunk . . . . . . . .
. . . . . 650,117
Beach Boulevard Relief . . . . . . . . . .
. . . . . 529 , 062
Orange -Wester Subtrunk . . . . . . . . .
. . . . . 485,429
Newland Delaware Trunk (4 mgd) . . . . .
. . . . . 147,625
Artesia Branch . . . . . . . . . . . . . .
. . . . . 145,093
Bol sa Avenue Trunk . . . . . . . . . . .
. . . . . 84,197
East Imperial Highway Trunk . . . . . . .
. . . . . 79,432
Bushard Relief Trunk . . . . . . . . . . .
. . . . . 47,715
Orangethrope Trunk . . . . . . . . . . .
. . . . . 44,031
Pump Stations and Force Mains:
Westside . . . . . , . . . . , . . . . , . . . . 486,893
Newland Street . . . , , , . . . , . . . . . , , . 35,604
Westminster Avenue . . , , , . . . , . . , . . . . 467,865
Seal Beach Boulevard . . . . . . . . . . . . . . . 428,189
Easements and Rights of Way . . . . . . . . . . . . . 236,105
Total Cost . . . . . . . . . . . . . . . . . . .$161795,140
Average District No. 3
Element Capacity Capacity Rights
Miller --Holder Trunk . . . . . . . . 45.0 mgd 36.8 mgd
Magnolia Trunk . . . . . . . . . . 28.3 mgd 18.3 mgd
Newland -Delaware Trunk . . . . . . 4.0 mgd 4.0 mgd
Total . . . . . . . . . . . . . 7 7.3 mgd 59.1 mgd
-4-
Existing average sewage flows through the Miller -Holder and Magnolia
Trunk sewers are at full capacity, and on frequent occasions, sewage flows
exceed capacity, causing surcharges in sections of the system.
EXISTING SEWAGE
TREATMENT FACILITIES
The joint Treatment Works consist of two sewage treatment plants; two out -
fall booster pumping stations; two outfall sewers and interconnecting sewers,
power transmission lines, communications cables, and digester gas pipe.
Treatment Plant No. 1 has an average primary treatment capacity of 46 mgd
plus 15 mgd of secondary treatment capacity. Treatment Plant No. 2 has an
average primary treatment capacity of 138 mgd plus 2 mgd of secondary treat-
ment facilities. The original cost of joint Treatment Works is shown in Table 2.
Table 2
County Sanitation Districts of Orange County
Original Cost of joint Treatment Facilities
Land and improvements . . . . . . . . . . . . . . . $ 1, 367, 209
Collection facilities . . . . . . . . . . . . . . . 21840,248
Sewage treatment facilities . . . . . . . . . . . . . 16, 326, 049
Sewage disposal facilities . . . . . . . . . . . . . 18, 111,200
General plant and administrative facilities 4, 349 ,111
Other property . 124,071
Work in progre 17,600,000
Estimated Total . . . $60, 717, 888
(i) Includes approximately $12 , 600, 000 under construction
plus an estimated $5, 000, 000 needed to complete- such
construction.
District No. 3 share of joint Treatment Facilities is presently 32.79
percent based on the allocation formula contained in the joint Ownership,
Operation, and Construction Agreement among the seven individual Orange
County Sanitation Districts.
FINANCING EXISTING FACILITIES
Existing sewerage facilities of the Orange County Sanitation Districts have
been financed principally on a pay-as-you-go basis supplemented by general
-5-
obligation bond proceeds as needed, joint sewage treatment facilities have been
financed on a pay-as-you-go basis with the exception of the original facilities
acquired in 1951 through the sale of general obligation bond issues by individual
districts. The District No. 3 share of facilities acquired in 1951 amount to
$925, 000 (sewage treatment and outfall facilities) and $547, 000 (existing trunk
sewers) , or a total of $1, 472 , 000. The sources of District No. 3 funds to ac-
quire the 1951 facilities included: general obligation bond proceeds of $1, 364, 000
and $108, 000 of State aid. Presently, $629, 000 of 1951 bonds are outstanding.
Sewage collection facilities in District No. 3 have been financed since 1959
by cash reserves ($2, 316, 540) , Federal grants ($916, 600) , and general obligation
bond proceeds ($13, 015, 000) , of which $8, 000, 000 are outstanding.
The tabulation below summarizes the sources of capital funds used to finance
existing District No. 3 sewage collection facilities.
Bond proceeds . . .. . . . .$13 , 562 , 000
Cash reserves . . . . . . . 2 , 316 , 540
Federal and State aids . . . . 916,600(i)
Total .$16 , 79 5 , 140
(i) Assumes no State aid for acquisition of
existing trunk sewer• facilities in 1951.
ASSESSED VALUATION
AND TAX RATES
Since the 195 0' s , Orange County has been one of the most rapidly develop-
ing large counties in the nation. Orange County Sanitation District No. 3 has
shared in this development. Since 1959/60 the District's assessed valuation
has increased 334 percent from $289 , 716 , 350 to $1, 258, 9 79 , 910. The percent-
age growth in the District's assessed valuation has moderated in recent years;
however, in absolute terms,, it is anticipated that the District will continue to
experience substantial growth in its assessed valuation. Table 3 shows the
District's assessed valuation over the period 19 68/69 through 19 72/7 3 . The
Director of Finance has conservatively estimated that the District's assessed
valuation will continue to increase over the next five years at the rate of ap-
proximately five percent per year.
Table 3
Orange County Sanitation District No. 3
Assessed Valuations
Fiscal
Year
Secured
Valuation
Unsecured
Valuation
Total
1968/69
$ 831,222,100
$13,561,550
$ 844,783,650
1969/70
892,018,380
14,992,480
9074010,860
1970/71
1,043,354,530
17,580,050
lj06019341580
1971/72
11090,735,990
16,430,330
11107,166,320
1972/73
1,238,7131790
20,266,120
11258,979,910
The Orange County Sanitation Districts collectively, and Orange County
Sanitation District No. 3 individually, have succeeded in financing sizable
sewerage improvements as needed on a pay-as-you-go basis with a minimum
use of bonds. Relatively few public entities can match this achievement. Tax
rate levels, based on the average annual rate of all Districts, have decreased
from slightly less than $0.44 in 1964/65 to less than $0.39 in 1972/73. Over
the same period, the secured tax rate of District No. 3 fluctuated in the range
of $0.3839 to $0.479. In recent- years, the tax rate of District No. 3 has re-
mained relatively stable as shown in Table 4. Over the five year period more
than 70 percent of the average total tax rate was allocated to the accumulation
of reserves for capital outlay with the remainder allocated to operations and
bond service.
Table 4
Orange County Sanitation District No. 3
Secured Roll Tax Rates
Fiscal
Year
Operating
Fund
Bond
Service
Accumulated
Capital
Outlay
Total
1968/69
$0.0652
$0.0881
$0.2661
$0.4194
1969/70
0.0565
0.0791
0.3437
0.4793
1970/71
0.0391
0.0795
0.3555
0.4741
1971/72
0.0773
0.0778
0.3190
0.4741
1972/73
0.0539
0.0631
0.3569
0.4739
Averages $0.0584
$0.0775
$0.3282
$0.4642
Average % of Total 12.6%
16.7%
70.7%
100%
WA:
THE PROPOSED SEWERAGE IMPROVEMENT PROGRAM
The District No. 3 Board has adopted a master plan for trunk sewers prepared
by Boyle Engineering, consulting engineers. John Carollo Engineers has prepared
preliminary cost estimates for needed improvements to joint treatment facilities
over the next five years as part of the development of a master plan. The general
scope of these improvements. and their costs, as estimated by the consulting en-
gineers are described below.
PROPOSED SEWAGE
COLLECTION FACILITIES
The master plan system of trunk sewer facilities is designed to relieve the
presently overloaded Magnolia and Miller -Holder trunk sewers and meet District
No. 3 anticipated needs for sewage collection facilities at ultimate development.
Future flows were estimated by the consulting engineers on the basis of antici-
pated land uses contained in zoning maps and comprehensive general plans of
cities lying within the District's service area, field investigations of wastewater
flows from representative residential areas, and other empirical sources. Work
on the master plan program was begun in 1968/69 and is scheduled for completion
by 1977/78. Upon completion the District No. 3 trunk sewer system will have an
average capacity of 159.1 mgd. Principal elements of the master plan program
needed to complete the system are shown in Table 5.
Table 5
Orange County Sanitation District No. 3
Sewage Collection System Elements (i)
Estimated
Element
Cost (ii)
Knott Trunk
$20, 886, 000
Westside Relief Interceptor . . . . . . . . .
21098,000
Orangethrope Relief Trunk . . . . . . . . . .
1,800, 000
Share of Interplant Interceptor . . . . . . . . . . . .
1,189, 000
Westminster Avenue Force Main . . . . . . . . . . .
660,000
Magnolia Interceptor Enlargement . . . . . . . . . .
216,000
Lampson Interceptor . . . . . . .
32 7, 000
Bolsa, Imperial, Katella, and Crescent Relief Trunk
11275, 000
Other improvements . . . . . . . . . . . . . . . .
558,000
Total . . . . . . . . . . . . . . . . . .
$291009, 000
( i) Needed to complete master plan.
-(ii) Estimated by consulting engineers which includes 15
per-
cent for engineering, contingencies and administrative costs.
PROPOSED JOINT
TREATMENT FACILITIES
The program to increase and upgrade existing joint treatment works provides
for the 36 mgd of additional primary treatment capacity. This would increase
primary treatment capacity of the joint works to 220 mgd. The addition of 196
mgd of secondary treatment facilities equivalent to activated sludge has been
proposed in three stages by the consulting engineers on the assumption that
Federal standards will eventually require this level of secondary treatment.
The estimated costs of the proposed joint treatment works are shown in Table 6.
Table 6
Orange County Sanitation District No. 3
Proposed joint Treatment Works
Element
Estimated
Cost(i)
Primary Treatment - 36 mgd . . . . . . . . . . . . $ 21,2 00, 000
Secondary Treatment
Stage One - 46 mgd. . . . . . . . . . . . . 24, 480, 000
Stage Two - 75 mgd. . . . . . 0 36,720, 000
Stage Three - 75 mgd. . . . . . 0 39,600,000
Total. . . . . . . . . . . . . . . . . . . $122, 000, 000
(1) Includes allowances for engineering and incidental costs
Upon completion of the proposed joint treatment improvements for 1977/78,
the joint treatment works would have a combined primary -secondary capacity of
196 mgd with 24 mgd of primary treatment capacity available for emergency or
standby use.
ME
FINANCING ALTERNATIVES
AND
RECOMMENDED FINANCING PLAN
PROJECTED CASH
FLOW DEFICITS
On the basis of the consulting engineers' cost estimates and construction
schedules, the Director of Finance has projected funding needs of District No. 3
to implement the master plan trunk sewer program; meet its share of estimated
capital costs of the proposed joint treatment works improvement program; provide
for the District's share of projected operations and maintenance costs; and debt
service costs on District bonds.
Two projections were made and have been updated. The first, shown in
Table 7, indicates District No. 3 would experience a maximum cash flow deficit
in 1973/74 of approximately $4.85 million. This projection assumes completion
of the master plan trunk sewer program and the first stage (46 mgd) of secondary
treatment improvements to the joint treatment works. The second projection,
shown in Table 8, indicates that District No. 3 would experience a maximum
cash flow deficit in 1974/75 of approximately $12.5 million. This projection
assumes completion of the three stages (19 6 mgd) of secondary treatment im-
provements to the joint treatment works as well as the master plan trunk sewer
program. ,
In both cash flow projections, revenue projections were made on the same
bases, i.e. , property tax revenue on the basis of projected assessed valuations
and maintenance of the property tax rate at the 1972/73 level; Federal and State
grants-in-aid equivalent to 8 7-1/2 percent of eligible joint treatment works
project costs; projected levels of revenue from other sources; and estimated
available cash reserves.
FINANCING CAPABILITIES
A County Sanitation District, pursuant to Section 4700 et seq, of the State
Health and Safety Code, is empowered to:
1. Issue general obligation bonds approved by two-thirds of the
voters at a bond election. There is no statutory limit on the
amount of bonds that may be issued. Such bonds may be payable
over a period of not to exceed 40 years and interest rates may not
exceed seven percent.
-10-
Table 7
COUNTY SANITATION DISTRICT NO. 3
STATEMENT OF PROJECTED CASH FLOW
ASSUMES CONSTRUCTION OF PHASE I (46 mgd) SECONDARY TREATMENT ONLY
FISCAL YEARS 1972/73 THROUGH 1976/77
Description 19 72/73 19 73/74 19 74/75 19 75/76 19 76/77
REVENUE:
Tax Revenue (at current tax
rate of $ . 4 74 0) . . . . . . . .
$ 51661,000
Other Revenue:
Federal and State participation
joint Works projects . . . .
11799,000
District projects
192,000
Sale of capacity rights . . . .
177, 000
Miscellaneous . . . . . . . .
721, 000
Carry over from previous fiscal year 11, 821, 000
TOTAL FUNDS AVAILABLE.
$20, 371, 000
EXPENDITURES:
District construction . . . . . .
$ 41992,000
Share of joint works construction .
31095,000
Bond retirement and interest . . .
858,000
Share of joint operating . . . . .
792,000
District operating and other
expenditures . . . . . . . . .
382,000
TOTAL EXPENDITURES . . . . .
$10 ,119 , 000
Carry over to following fiscal year . . $10 , 252 000
$ 51944,000
31007,000
182,000
1,000
220,000
10,252,000
$19,606,000
$11,111,000
4,449,000
827,000
812,000
299,000
$17,498,000
$ 21108,000
$ 6,211,000
61150,000
1,000
150,000
2,108.000
$14,620,000
$ 51722,000
61021,500
797,000
855,000
319,000
$13,714,500
$ 905,500
Less: Necessary reserve for fol-
lowing year dry period .8,852,000 6,956,250 4,7084500
Fund Balance (or deficit) , $ 1, 400, 000 ($ 4,848,000) ($ 3 , 803 , 000)
$ 61491,000 $ 61783,000
31804,000
566,000
150,000
905,500
$11,916,500
$ 41383,000
21622,000
777,000
11116,000
341,000
$ 9,239,000
$ 21677,500
2,632,500
$ 45,000:
866,000
15,000
1500000
21677,500_
$10 , 491, 500
$ 11675,000
1,002,000
756,000
11158,000
365,000
$ 41956,000
$ 5,535,500
2,908,000
$ 21627,500
Table 8
COUNTY SANITATION DISTRICT NO. 3
STATEMENT OF PROJECTED CASH FLOW
ASSUMES CONSTRUCTION OF THREE PHASES (196 mgd) SECONDARY TREATMENT
FISCAL YEARS 1972/73 THROUGH 1976/77
Description 1972/73 19 73/74 19 74/75 19 75/76 1976/77
REVENUE:
Tax Revenue (at current tax
rate of $.4740) . . . . . . $ 516fi11000
Other Revenue:
Federal and State participation
joint Works projects . . . . 1,799,000
District projects . . . . . . 192 , 000
Sale of capacity rights 177, 000
Miscellaneous . . . . . . . . 721, 000
Carry over from previous fiscal year 11, 821, 000
TOTAL FUNDS AVAILABLE. . . . $20, 371, 000
EXPENDITURES:
District construction • • • • . •
$ 4,992,000
Share of joint works construction •
31095,000
Bond retirement and interest . . .
858,000
Share of joint operating
792,000
District operating and other
expenditures • • . . . . . .
382,000
TOTAL EXPENDITURES • • • . .
$10 ,119 , 000
Carry over to following fiscal year
$10 , 2 52 , 000
Less: Necessary reserve for fol-
lowing year dry period
_81987,500
Fund Balance (or deficit) • . . . $ .1, 264, 500
$ 51944,000 $ 61211,000 $ 6,491,000 $ 6,783,000
31007,000
182,000
1,000
220,000
101252,000
$19,606,000
$11,111,000
41720,000
827,000
812,000
299,000
$17, 769 , 000
$ 11837,000
8,683,500
($ 6,846,500)
6,150,000
1,000
150,000
1,837,000
$14,349,000
$ 5,722,000
9,476,000
79 7, 000
855,000
319,000
$17,169,000
($ 2,820,000)
9,641,250
($12 , 461, 250)
10,460,000
566,000
150,000
(2,820,000)
$14,847,000
$ 4,383,000
12,487,500
777,000
11116,000
341,000
$19,104,500
($ 4,257,500)
7,1891000
($11,446,500)
11,926,000
15,000
150,000
(4,257,500)
$14,616,500
$ 11675,000
10,115,000
756,000
1,158,000
365,000
$14,069,000
$ 54.7,500
_ 4,068,500.;
($ 3,521,000)
2 . Issue revenue bonds pursuant to the Revenue Bond Law of 1941
approved by a majority of the voters at a bond election. There
are no statutory limits as to the amount of revenue bonds that may
be issued; however, from a practical standpoint the amount of rev-
enue bonds that may be issued is limited by the project's netrevenue
producing capabilities from service charges, connection fees, and other
non -property tax revenue. Such bonds may be payable over a period
.not to exceed 40 years and interest rates may not exceed seven percent.
3. Issue special assessment bonds pursuant to the Improvement
Act of 1911 and the Improvement Bond Act of 1915.
4. Issue promissory notes to meet current expenses of mainten-
ance and operation which may mature not later than two years
from the date of issuance. The aggregate amount of notes out-
standing at any one time may not exceed an amount equal to $ 0.0 7
per $100 of the District's assessed valuation.
5. Levy property taxes, unlimited as to rate or amount, to meet
costs of operation, maintenance, bond service, and other
authorized purposes.
EVALUATION OF
FINANCING ALTERNATIVES
The District is severely limited in the sources of revenue it may use to meet
even the minimum projected cash flow deficit of $4.85 million. Senate Bill 90,
adopted by the State Legislature in December 1972 , limits the District's property
tax rate for purposes other than general obligation bond service at $0.4108 per
$100 assessed valuation (the 1972/73 tax rate of $0.4739 less $0.0631 for bond
service) . Senate Bill 90 in effect rules out pay-as-you-go financing as a fi-
nancing alternative.
The short-term borrowing capabilities of the District are substantial because
of its large tax base; however, such short-term borrowing capacity may be used
to meet operating and maintenance costs only. The projected maintenance and
operating expenditures which could be offset by short-term borrowings would not
improve the cash flow position of District No. 3 to the degree needed to meet
the projected minimum cash flow deficit of $4.85 million.
The magnitude of the proposed improvement program; --the general areawide
benefits they provide; and the relatively complex and cumbersome procedures of
special assessment proceedings make this method impractical in this instance.
-13-
Revenue bonds contain the following features: (1) funds for the payment of
the bonds are derived solely from those who use the facilities for which the bonds
are issued, (2) such bonds are payable solely from the revenues of the project
and can never become a lien against real property, and (3) the bonds may be auth-
orized by a simple majority vote.
The disadvantages of revenue -bonds are: (1) revenues to secure their pay-
ment must be at least 25 to 50 percent in excess of actual requirements, (2) a
reserve fund must be created as additional security for their payment, thus in-
creasing capital requirements, (3) owners of property not using the service pay
nothing toward the bonds even though benefit may be received- from the project,
(4) the interest rate is usually higher than general obligation bonds, and (5)
there is relative inflexibility in the management of the funds of the system.
In the absence of a proven record of revenues derived from service charges
and other non -property tax sources, revenue bond financing by District No. 3 is
impractical and not feasible.
RECOMMENDED
FINANCING METHOD
General obligation bond financing is the most practical and feasible financing
alternative available to District No. 3 to implement the master plan trunk sewer
and joint treatment works improvement program as scheduled.
The general obligation bond is the type of bond most often used by public
entities to finance improvements which provide general benefits. This type of
bond is ultimately secured by, and payable from, ad valorem taxes levied on all
taxable property within the issuing entity. If other revenues are available, they
may be applied toward the payment of debt service in lieu of property taxes.
General obligation bonds represent the highest type of credit that a public entity
can issue and as a result they can normally be sold at lower interest rates com-
pared to other types of bonds.
General obligation bond authorizations may be divided into series and sold
separately to coincide with the need for project funds. Authorized but unsold
general obligation bonds create no liability for the District despite the fact that
the authorization to sell the bonds is unlimited as to time. The principal ad-
vantages of financing by the issuance of general obligation bonds are lower
interest costs and greater flexibility in raising funds to meet bond service costs.
The two-thirds vote requirement to authorize general obligation bonds may
be considered a disadvantage compared to authorization requirements of other
types of bonds; however, experience has shown that voters generally approve
general obligation bond authorizations when the needs for the project are clear
and financing costs are recommended and equitably distributed among beneficiaries.
-14-
In the event of the failure of a general obligation bond election, it might be
possible to finance the programs under recently enacted legislation (Chapter 464
of the 1971 Statutes) which permits an authority created through a joint exercise
of powers agreement to finance sewerage facilities with revenue bonds pursuant
to the Revenue Bond Law of 1941, approved by the voters within the geographical
area served by the authority. This legislation further provides that the authority,
to comply with a cease -and -desist order or other action of the appropriate re-
gional water quality control board, may issue revenue bonds by ordinance sub-
ject to referendum to finance the construction of urgently needed sewerage facili-
ties to comply with water quality control plans. The joint authority approach
would require the approval of all Orange County Sanitation Districts due to the
existing joint ownership of facilities.
RECOMMENDED
BOND AUTHORIZATION
As previously noted, the magnitude of the projected cash flow deficit faced
by District No. 3 ranges from $4.85 million to approximately $12.5 million de-
pending on the type of secondary treatment facilities that will be required by
Federal and State standards. In view of this uncertainty, it is recommended
that District No. 3 seek authorization of $13 million of general obligation bonds
since the consulting engineers are of the opinion that Federal and State stand-
ards will eventually require secondary treatment equivalent to activated sludge.
Authorization of this amount of bonds does not mean that the full amount
will be issued. Should Federal and State standards provide for secondary treat-
ment at an equivalent less than activated sludge for total District flow, facilities
could be financed with the issuance of that portion of the authorization needed to
complete the program. Upon completion of the program, any authorized but un-
issued general obligation bonds could be held in reserve to meet future needs or
rescinded by the District No. 3 governing board.
ESTIMATED BOND
SERVICE COSTS
As a fundamental principle, the life of a bond issue should not exceed the
useful life of the improvement. State statutes generally try to reflect this by
setting maximum limits that bonds may run. The maximum limit of a bond is-
sued by the District is 40 years. Generally speaking, the shorter the term of
an issue, the better interest rate it will bring; however, a comparatively short
term issue would .impose an extremely heavy burden on present users to meet
accelerated principal payments. Based 'on the nature of the District No. 3
project, and current conditions in the municipal bond market, it is recommended
that the term of the District's bonds not exceed 20 years.
-15-
To provide the District with maximum flexibility, provision should be made
for early redemption of bonds, at the option of the District, after a period of
ten to fifteen years from the date bonds are sold. To call bonds ahead of ma-
turity, a premium of about one-half of one percent plus one -quarter of one per-
cent for each year or fraction of a year between the maturity date and the date
of redemption is required. The premium is designed to compensate a bondholder
for having his bond called ahead of maturity. If no premium were provided for
call ahead of maturity the interest rate bid on the bonds would be higher. The
call feature has become especially important in recent years because interest
rates on municipal bonds have risen to relatively high levels. By having the
ability to call bonds ahead of maturity, the District will, at some future date,
be in the position to either refinance the project if lower interest rates prevail
or accelerate principal payments if available revenues permit.
The actual maturity schedule and bond terms and conditions should be fin-
alized at the time the bonds are offered for sale in order to take maximum advan-
tage of municipal bond market conditions at that time.
Table 9 shows estimated bond service costs for a $13 million general obli-
gation bond issue maturing over a 20 year period. For illustrative purposes,
these data assume issuance of the bonds in the fall of 1973 and an interest
rate estimated at 5.50 percent. The date of the bonds and provisions regarding
principal and interest payment dates would be finalized at the time the bond
sale was being planned. Estimated annual bond service would average approx-
imately $1, 090 , 000 .
-16-
Table 9
ESTIMATED BOND SERVICE
$13 , 000, 000 PRINCIPAL AMOUNT
GENERAL OBLIGATION BONDS
Year
Amount
Principal
Estimated
Estimated
Ending
Outstanding
Payable
Interest
Bond
October 1
Start of Year
October 1
at 5.50.%
Service
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
$13,000,000
12,625,000
12,235,000
11,820,000
11,380,000
10,915,000
10,430,000
91915,000
91370,000
8,795,000
81195,000
71560,000
61885,000
61180,000
51435,000
41645,000
31810,000
21930,000
21005,000
11030,000
$ 375,000
390,000
415,000
440,000
465,000
485,000
515,000
545,000
575*000
600,000
635,000
675,000
705,000
745,000
790,000
835,000
880,000
925,000
975,000
1,030,000
$13,000,000
$ 715,000
694,375
672,925
650,100
625,900
600,325
573,650
545,325
515,350
483,725
450,725
415,800
378,675
339,900
298,925
255,475
209,550
161,150
110,275
56,650
$8,753,800
$ 11090,000
11084,375
11087,925
11090,100
11090,900
11085,325
11088,650
1,09 0,325
11090,350
11083,725
1,085,725
11090,800
11083,675
11084,900
11088,925
11090,475
11089,550
11086,150
11085, 275
1,086,650
$21,753,800
-17-
SOURCES OF REVENUE TO MEET BOND SERVICE COSTS
Bond service costs on general obligation bonds may be met by any unre-
stricted authorized revenue source available to District No. 3. Traditionally,
District No. 3 has relied on property taxes to meet the bulk of its revenue re-
quirements; however, the governing board of the District is now considering the
adoption of a sewer connection fee as an additional source of revenue. The
sewer connection fee rates being considered are: $50 per single family dwelling;
$12 5 for each unit in a multiple family dwelling building; and $ 5 0 to $ 3 00 for
commercial, industrial and other types of facilities depending on the size of the
building sewer. Stone & Youngberg has been engaged to study these and other
alternative sources of revenue through which the District's sewerage program
may be financed in an equitable and feasible manner.
RECENT DEVELOPMENT TRENDS
Before considering alternative sources of revenue for the implementation of
the District No. 3 sewerage program, it .is advisable to discuss recent develop-
ment trends within the District which have created needs for sewerage facilities.
Table 10 shows the number of building permits issued for dwelling units within
cities served by District No. 3 over two periods: (1) 1964 through 19 67 , and
(2) 1968 through 1971. These data clearly show an almost complete reversal in
building trends. During the period 1964 through 1967, the ratio of single family
permits to multiple family permits was more than 2 to 1. During the period 1968
through 1971, the ratio of single family permits to multiple family permits was
approximately 2 to 3.
The Orange County Planning Commission in its "Progress Report, Volume 8"
indicated the following:
1. The price of new housing has increased considerably beyond that
of consumer income. Fewer and fewer households are now able
to afford new housing than in any other time period since the housing
shortage at the end of World War II.
2. Due to the several factors of increased housing costs, a younger
population and their accompanying higher rates of mobility, and
a general attitude toward fuller utilization of leisure time, the County
has experienced a rapid increase in the number of multiple units built
and rented since 1960.
3. The impact of these factors should have a considerable effect on
future County growth. Increased reliance on multiple units to
ova
Table 10
Building
Permits Issued
For Dwelling
Units
Cities Served By Orange County Sanitation District No. 3
1964 Through
1967
Single
Multiple
Total
Percent Single Percent Multiple
City
Family Permits
Family Permits
Permits
Family Permits
Family Permits
Anaheim . . . .
. . 1,220
2,979
4,199
29.1%
70.9%
Brea . . . . . .
. . 1,082
36
11118
96.8
3.2
Buena Park
182
1,080
1,262
14.4
85.6
Cypress . . . .
. . 2,833
119
2,952
96.0
4.0
Fountain Valley .
. . 4,141
---
4,141
100.0
0.0
Fullerton . . . .
. . 1,249
1,425
2,674
46.7
53.3
Garden Grove . .
. . 892
1,358
2,250
39.6
60.4
Huntington Beach
8,494
1,525
10,019
83.4
16.6
La Habra . . . .
. . 443
897
1,340
33.1
66.9
La Palma . . . .
. . 1,666
3
1,669
99.8
0.2
Los Alamitos
286
251
537
53.3
46.7
Seal Beach . , .
. , 1,037
610
11647
62.9
37.1
Stanton. . . , ,
. . 164
556
720
22.8
77.2
Westminster . .
. . 1,159
433
1,592
72.8
27.2
Totals . , .
. , 24,848
11,272
36,120
68.8%
31.2%
1968 Through__1971 _..
Single
Multiple
Total
Percent Single
Percent Multipl,
City
Family Permits
Family Permits
Permits
Family Permits
Family Permits
Anaheim . . . .
. . 2,967
10,245
13,212
22.5%
77.5%
Brea . .
929
94
1,023
90.8
9.2
Buena Park
224
1,081
1,305
17.2
82.8
Cypress . . . .
. . 2,242
1,308
3,550
63.2
36.8
Fountain Valley .
. . 3,930
1,733
5,663
- 69.4
30.6
Fullerton . . . .
. . 753
3,455
4,208
17.9
82.1
Garden Grove . .
. . 271
2,339
.2, 610
10.4
89.6
Huntington Beach
. . 5,909
70832
13,741
43.0
57.0
La Habra . . . •
. • 146
2,000
2,146
6.8
93.2
La Palma • • • •
• • 1,290
404
1,694
76.2
23.8
Los Alamitos . .
• • 240
228
468
51.3
48.7
Seal Beach
1,201
1,072
2,273
52.8
47.2
Stanton. . . . .
. . 473
1,164
1,637
28.9
71.1
Westminster . .
. . 1,294
607
11901
68.1
31.9
Totals . . .
. . 21, 869
33,562
55,431
39.5%
60.5%
SOURCE: Orange County Progress Reports.
-19-
satisfy housing needs of County residents will have the effect of
considerably raising the County's overall density based on pres-
ent building trends.
A second feature of recent development trends within the District is gained
from data in Table 11. As shown in these data, the value of building permits is-
sued for single family units in cities within District No. 3 averaged $ 24, 071 in
1971 as compared with a value of only $11, 213 for multiple family units. The
potential property tax base provided by the single family unit therefore tends to
be significantly greater than the property tax base provided by a multiple family
unit. The possible reason for this is cited by the Orange County Planning Com-
mission in its "Progress Report, Volume 8":
1. Because of the high monthly cost of home ownership and the de-
clining buyer market, the building trade seems to be responding
by increasing the number of relatively low cost condominium units
being offered for sale. In 197 0, some 674 units in the $ 2 0, 000 -
$ 24, 999 range were offered for sale. While this price range of
$ 20, 000 to $ 24,999 is still relatively low in comparison to the pre-
vailing median of $ 33 , 800 for single family homes and $ 2 8, 900 for
planned unit developments, it is, however, still expensive for many
families with children trying to live on incomes below the County .
average. This group represents a very large proportion of those
seeking shelter.
2. The fact that builders are offering these lower priced condomin-
ium and townhouse units in spite of considerable price increases
in building costs may indicate that they are feeling the push of an
ever -decreasing market for their dwellings and are now producing
lower -priced units in order to accommodate the demand. The "Mar-
ketability by Price Range" data for Planned Unit Developments tends
to confirm that the consumer has been responsive to the availability
of these lower -priced units.
A third feature of recent development trends within the District is gained
from conferences we have conducted with officials of the Orange County
Assessor's office. Land values within the District have increased markedly in
recent years. The County staff has indicated that in 1960, the value of land
suitable for residential and industrial development was approximately $ lb, 000
to $12, 000 per acre. By 1965, the value of similar type land had increased to
the $18, 000 - $ 22 , 000 per acre range. In the intervening years since 19 65 ,
land values have continued to increase to their present levels of approximately
$ 28, 000 - $ 30, 000 per acre. With respect to land suitable for high -density
residential development, current values* range from $1.00 to $1.40 per square
foot, or approximately $50, 000 per acre while land suitable for commercial de-
velopment ranges from $ 2. 00 to $ 3. 00 per square foot, or approximately $100, 000
per acre .
-20-
Table 11
1971 Valuation of Building Permits For Dwelling Units
Issued in Cities Served By Orange County Sanitation District No. 3
City
_
Number
Single Family
Value of
Permits M
Value
Per Unit
Number
Multi -Family
Value of
Permits M
Value
Per Unit
Anaheim . . . .
. . . 950
$ 17,942
$18,886
11346
$14,497
$10,770
Brea. . . . . .
272
6,396
23,515
8
114
14,250
Buena Park . . .
. . . 72
1,994
27,694
252
3,945
15,655
Cypress . . . .
. . . 499
12,043
24,134
655
7,441
ll,360
Fountain Valley .
. . . 1,560
43,610
2 7, 955
48
554
11,542
Fullerton . . . .
. . . 244
7,482
30,664
1,273
14,322
11, 251
Garden Grove . .
. . . 193
4,271
22,130
675
6,883
10,197
Huntington Beach
. . . 1,483
36,363
24,520
2,347
27,504
11,719
La Habra . . . .
. . . 62
2,659
42,887
734
6,939
9,454
La Palma . . . .
. . . 241
5,043
20,925
404
4,221
10,448
Los Alamitos
9
254
28,222
66
876
13,273
Seat Beach . . .
. . . 242
6,566
27,132
60
1, 661
27, 683
Stanton. . . . .
. . . 473
6,866
14,516
540
6,029
11,165
Westminster . .
. . . 222
51502
24,784
370
3,439
9,p295
Total
. 6,522
$156,991
8,778
$98,425
Average . .
. . . . . . .
. .
$24,071
$11,213
M In thousands
of dollars.
A fourth feature relative to recent developments within the District was also
gained from conferences with officials of the Orange County Assessor's office.
The staff indicated that the assessed value of improvements tend to be approxi-
mately twice the assessed valuation of land on improved property, e.g. , im-
proved residential parcels having a total assessed valuation of $7, 000 to $8, 000
had an assessed land value of approximately $2, 500 and an assessed value for
improvements of approximately $ 5, 000.
This general tendency is confirmed further by an examination of the District
No. 3 1972/73 property tax base.
The District's tax base of $1.259 billion
consists of a valuation of land at $480 million (38 percent), and improvements of
$ 778 million (62 percent). It may be concluded from this that the greater portion
of the District's tax base is represented
by improvements on land which is owned
and occupied by present users.
Engineering studies of sewage
flow from selected land use classifications
j within County Sanitation Districts
No. 3 and No. 7 have indicated the following:
Gallons Gallons Dwelling
Flow Per Flow Per Day Units
Acre/Day Dwelling Unit Per Acre
Single -Family Residential
Fullerton (hillside)
216 436 2.0
Garden Grove (level) . . . . .
. 1,364 345 4.0
` Huntington Beach (level) . . .
. 1, 587 380 4.2
La Habra .(rolling) .
1,228 380 4.2
Average. . . .
1,1099 385 3.6 -
High -Density Residential
Tustin (level) . . . . . . . .
. 5,793 277 20.8
Tustin (level) . . . . . . . .
. 4,1571 212 _ 21.6
Garden Grove (level) (i)
(
.
� 10,091 278 35.4
Huntington Beach (level) (i}
6,143 277 22.2
Huntington Beach (level) (i} . . .
. 5,333 212 25.0
Huntington Beach (level) (i) .
6, 942 277 25.0
Average. . . . . . . . ;
6,479 256 25.0
Industrial
Irvine Industrial Complex . . .
. 3 , 336 --- ---
(i) The actual field measurements.
Average flow figures
prorated in Tustin measurements.
-22-
These data indicate: (1) significant differences in the gallons of flow per
acre per day between single family residential, high density residential, and
industrial land uses; (2) average flows per day per dwelling unit in single
family residential areas were approximately 50 percent higher than average flows
per day per dwelling unit in high density residential areas.
Engineering studies of the relationship between assessed valuation and
generated sewage flow of various land use classifications also showed that the
assessed valuation per average flow generated for the low density residential
development is from between 1.4 to 4.5 times that of the high density residen-
tial developments, based on actual measured flow. Using the City of Hunting-
ton Beach average assessed valuation figures, this relationship is between 2.0
and 6.3. In District No. 7, this factor is from 3.7 to 4.5 times, based on
actual measured flow.
When compared with industrial development in District No. 7, the assessed
valuation. per average flow generated from low density residential development
is between 4.0 to 4.9 times greater, based on actual measured flows.
Lastly, data from the 1970 U. S. Census indicate substantial differences in
the median value of owner occupied housing units within the cities served by Dis-
trict No. 3, andpopulation per owner -occupied dwelling unit as shown in Table 12.
SUMMARY OF FINDINGS RELATIVE
TO RECENT DEVELOPMENT TRENDS
Based on the foregoing analyses the following observations may be made:
1. There appears to be a definite trend toward increased higher
density residential types of development in the District.
2, The value of building permits issued in 1971 within cities
served by the District averaged $24, 071 for single family
units compared with $11, 213 for multiple family units. The
potential property tax base provided by single family unit land
therefore tends to be significantly greater than the potential
property tax base provided by a multiple family unit.
3. Engineering data indicate average daily flows per dwelling
unit in single family residential land uses average about 385
gallons per unit. Density of these types of developments aver-
aged 3.6 units per acre. In high density residential land uses,
flows averaged about 256 gallons per day per unit,, or approximately
2/3 that of lower density single family land uses. On the basis of
-23-
Tabl e 12
Estimated Per Capita Cost
For Sanitary Sewerage Service
In Owner Occupied Housing Units
Median Value
Estimated
Population Per
Owner Occupied
Assessed
Owner Occupied
City (i)
Housing Unit
Valuation (ii)
Housing Unit
Anaheim . . . . .
. . $24, 800
$6; 200
3.60
Brea . . . . . . .
. . 28,700
7,175
3.70
Buena Park . . . .
. . 22,800
5,700 j
4.00
Cypress . . . . .
. . 291200
7,300 I
4.00
Fountain Valley .
30,400
7,600
4.00
Fullerton . . . . .
. . 26,300
6,575 !
3.60
Garden Grove . . .
. . 23,900
5,975 I
3.80
Huntington Beach .
. . 28,700
7,175
3.70
La Habra . . . . .
. . 24,900
6,225
3.60
Los Alamitos . . .
. . 29,900
7,475 ii
3.80
Seal Beach . . . .
. . 34,700
8,675 i
2.10
Stanton . . . . .
. . 22,400
5,600 j
3.80
Westminster . . .
. . 24, 200
61050 I
3.80
Average . . .
. . $26, 992
$6, 748
•3.65
( i) La Palma not listed.
(ii) Assumes assessed
valuation based -on 25 percent
of median value.
valuation of building
permits issued in cities served by the District,
the potential property tax base provided
by single family units is
approximately 115
percent greater than the potential property tax
base provided by multiple family higher density developments.
4. Within the cities served by District No. 3, there are signifi-
cant differences in present users of the District's sewerage
facilities. Median value of owner occupied housing units ranges
from $22, 800 to $34, 700. Population per owner occupied housing
units ranges from 2.1 to 4.0..
5. Land values within the District have increased significantly,
in recent years. Land suitable for low density residential
development has increased from approximately $10, 000 - $12, 000
-24-
per acre in 1960 to current levels of $ 28, 000 - $ 30, 000. Land
suitable for high density residential development is now valued at
approximately $50, 000 per acre. Land suitable for commercial de-
velopment is now valued at approximately $100, 000 per acre.
6. The District's property tax base of $1.259 billion consists of
land having an assessed valuation of $480 million (38 per-
cent of total tax base) and improvements on land which is owned
and occupied by present property owners having an assessed valu-
ation of $ 778 million (62 percent of total tax base) .
BENEFICIARIES AND ACHIEVING EQUITY
IN PROVIDING SEWERAGE SERVICES
Demands for sewerage services are created by two broad classifications:
(1) present users, and (2) potential users (owners of improved or unimproved
land not connected to the system but adjacent to it) . A system of assessing
and recovering the costs of these benefits must consider the following:
1. Equity among present users.
2. Equity among potential users.
3. Equity between present and potential users.
.• The distribution of costs in relation to complete equity in all cases is highly
unlikely. What must be attempted is the achievement of optimum equity in
relation to the degree of benefits received by broad categories of present users
and potential users within the constraints posed by statutory provisions and
practical administrative procedures.
ALTERNATIVE SOURCES OF REVENUE
TO FINANCE SEWERAGE IMPROVEMENTS
In their attempts to resolve the problems of achieving optimum equity in
assessing and recovering the costs of sewerage systems from beneficiaries,
special districts and cities have employed four basic sources of revenue:
(1) property taxes, (2) service charges, (3) standby charges, and (4) con-
nection fees. A description and evaluation of each of these sources as they
relate to the circumstances faced in District No. 3 are presented below.
-25-
Property Taxes . Traditionally, ad valorem property taxes have been
used very widely by cities and special districts to finance sewerage services.
This source is a reliable and substantial provider of revenue as well as being
relatively easy to administer and collect. Because of its ad valorem nature,
it is capable of generating revenue from both users and potential users (owners
of improved or unimproved land which are not connected to the system but are
adjacent to it) .
From the standpoint of achieving optimum equity, this source does .
have several disadvantages. Revenue derived from users varies according
to the assessed valuation of their respective properties. Estimated variances
in the assessed valuation of users are rather wide among typical residential
users within the District as shown in Table 12, as well as potential residential
users based on the average valuation of building permits issued for single-family
dwelling units and higher density residential developments shown in Table 11.
Revenue generated by ad valorem property taxes upon various categories
of land use do not coincide with the demands placed upon the system. Engin-
eering studies completed for the District have shown, based on actual measured
flow, that the assessed valuation per average flow in low density residential
developments is from between 1.4 to 4.5 times that of high density residential
development. In District No. 7 this factor is from 3.7 to 4.5 times based on
actual measured flow.
There is also some question in the ability of ad valorem taxes to gen-
erate appropriate revenue from potential users in amounts sufficient to offset
unused benefits received. As noted earlier, land suitable for residential de-
velopment has increased in value from approximately $10 , 0 0 0 to $ 3 0 , 0 0 0 per
acre in Orange County since 1960. Based on the District's property tax rate,
and assuming such land was assessed at 25 percent of market value, a potential
user would have paid approximately $250 per acre to support unused sewerage
services over the period from 1960 to 1972. It is questionable that this amount
of generated revenue per acre over the twelve --year period .is appropriate in re-
lation to the induced benefits provided since the availability of public utility
services are a major factor in adding value to a property.
Finally, the use of ad valorem property taxes to service the proposed
$13, 000, 000 bond issue needed to complete the District's scheduled improvement
program must be considered. Local funding requirements of District No. 3 for
the proposed sewerage program amount to approximately $ 3 3 , 451, 0 0 0 ($ 2 8 , 451, 0 0 0
to complete the master trunk sewer program and $5, 000, 000 for its prorated share
of joint treatment facility improvements) .
The major portion of District No. 3 "local funding requirements is avail-
able in cash reserves, and anticipated revenues from property taxes to be re-
ceived during the period of construction. The facilities being constructed are
-26-
designed to meet trunk sewer needs based on ultimate development when antici-
pated flows will reach 159.1 mgd. In effect, substantial capacity is being built
into master trunk sewers to meet future needs. With respect to joint treatment
facilities, the same is the case in that considerable excess capacity is being
built into facilities to meet future user needs.
It was previously noted that approximately 62 percent of the District's
property tax base consists of improvements upon land. This portion of the Dis-
trict's tax base is essentially provided by present users of the system which
have provided, and will provide in the immediate future, the major portion of
funding requirements to complete the sewerage program which contains consid-
erable excess capacity to meet needs of potential users (owners of improved or
unimproved land not connected but adjacent to the sewerage system) .
Service Charges. The use of service charges as a major source of funds
to meet costs connected with sewerage services has become so widespread in
recent years that it deserves special discussion. The basic rationale for the
establishment of fair and equitable charges for sewage disposal service has
generally been based on the principle that total annual revenue requirements
should be met by contributions from beneficiaries in amounts that are as directly
proportionate as possible to the cost of providing the service.
In establishing charges for sewage disposal service, distributions
should be made relative to beneficiaries both by type and extent of benefit re-
ceived. Every property in a community receives some measure of benefit from
sewage disposal service. Compared with undeveloped properties (non -users) ,
the benefits to developed property (users) are more direct; nevertheless, values
of undeveloped properties and the potential for property development are en-
hanced by the availability of public sewage disposal service.
Public sewage disposal service provides both individual user and broad
public health benefits. The extent to which costs are to be borne by individual
users and the community at large (which includes users and non -users) is a
fundamental consideration in establishing fair and equitable charges for this
service. Users may make normal or excessive demands on sewage disposal
facilities and operating revenues. Extraordinary volumes and/or strengths of
industrial and commercial wastes affect capital and operating costs of pipe-
lines and treatment facilities.
As recently as 1930, only 24 public entities reported* the use of sewer
charges; however, a dramatic increase occurred following World War II.- A de-
tailed study of the International City Management Association in the 1970 Mu-
nicipal Year Book indicated the large majority (86 percent) of the cities providing
both sanitary sewage collection and treatment use a service charge.
-2 7-
Sewer service charges have proven to be dependable revenue producers
with which to equate the charge for service to benefits received by the user.
Bases used to establish sewer service charges include: (1) flat rates, (2) water
consumption, and (3) metered sewage.
The principal advantage of the flat rate charge is its simplicity and ease
of administration, particularly in a community where water use or sewage discharge
is not metered; however, this approach does not apportion costs equitably to users
who place unequal service demands on the system. Metered water consumption is
a practical and relatively fair basis for establishing sewer service charges.
From the standpoint of administration, ease of collection and reliability
of yield, a service charge based on metered water consumption is highly desirable;
however, it too has inequities, because all metered water used is not discharged
into the sewerage system and no allowance is made to recover costs of processing
high strength sewage discharged by some users into the system. Sewer service
charges based on the quantity and characteristics of sewage handled are the most
accurate and equitable measure of relative demand placed on the system by each
user. Unfortunately, the lack of inexpensive sewage meters is one factor limiting
widespread use of this method throughout a community except in known cases of
individual users who generate extraordinary volumes and strengths of sewage. Of
the three bases, metered water consumption appears to be the most practical basis
on which to establish sewer service charges to users that do not discharge extra-
ordinary volumes and strengths of sewage into the sytem.
The exclusive use of service charges to meet the costs of providing
sewerage service has many desirable features; however, there are problems of
optimizing equity with their use. Service charges are imposed on present users.
Non -users and potential users who may connect to the system contribute nothing
to support the system from which they receive indirect benefits. Accordingly,
many entities use property taxes in combination with service charges. Secondly,
the use of sewer service charges in District No. 3 would be difficult to admin-
ister since the District is not a water supplier. Within the District there are
approximately ten municipal water distributors and more than 200 smaller mutual
distributors according to the Orange County Health Department.
Establishment and administration of an equitable service charge on the
basis of water consumption would be a most difficult problem. Similar problems
would be encountered if a flat rate sewer service charge were to be imposed on
properties within the District. An initial inventory of all parcels to determine
use would be necessary followed by the annual updating of the inventory to as-
sure all properties connected to the system were being charged.
�'O
Standby Charges. This method has been employed by a number of special
districts in California to recover from unimproved land the costs of providing ex-
cess capacity in sewerage systems designed to serve future users. The standby
charge is usually at a flat rate imposed on an acreage basis. Such a method is
one way in which it would be possible to generate revenue to offset the costs of
benefits received by unimproved land. Difficulty of administration and high costs
of initiating a standby charge, similar to those of instituting flat rate sewer ser-
vice charges,would be encountered in the case of District No. 3.
Connection Charges. The previously referred to study of the International
City Management Association as detailed in the 1970 Municipal Year Book cov-
ered the use of connection fees by public sewerage entities. This study indicated:
1. In addition to the sewer service charge, a common source of rev-
enue for sanitary sewer systems is the connection or tap charge.
Of those cities reporting, 972 or 77%, indicated that they levy a
connection (tap) charge. The percentage of cities utilizing such a
charge varied from a low of 63% in cities of 250,000 to 500, 000,
to a high of 86% in cities under 5,000 population.
2. Some of the more common ways in which connection (tap) charges
are computed include a flat charge, actual cost, and lot frontage.
By far the most common method is the flat charge utilized by 70% of
the cities reporting; this method is particularly popular with the
s smaller cities. The actual cost method is utilized by 11% of the re-
porting cities. The frontage method was utilized more frequently by
cities of 100, 000 to 250, 000, cities in the West, and central cities.
3. The median connection (tap) charge for a single-family residence
in those cities reporting use of such a charge varied from $50 in
cities under 5,000 to $100 for cities over 250, 000. With the excep-
tion of cities of 100, 000 to 250, 000 population, the median tap
charge generally decreased as population decreased, .was higher
in the Northeast and West, and was considerably higher in both
central and suburban cities than independent cities.
The data shown in Table 13 indicates the level of single-family
unit connection charges in California cities and entities as reported
in this study. There is .a wide variance in the cost of connection
fees imposed by California cities cited in this study. Minimal charges
of under $50 are usually designed to cover only the cost of inspecting
the connection as it is made; however, in a majority of the areas the
fees run from $100 to several hundred dollars and are designed to re-
cover a major portion of the cost of having provided facilities to serve
future users.
-29-
Table 13
CONNECTION CHARGES FOR SINGLE-FAMILY UNITS
IN VARIOUS CALIFORNIA COMMUNITIES
Per Unit Basis
Single Family Unit
Per Unit Basis
Single Family Unit
Redding. . . . .
. . . $600
Ojai. . . . . . .
. . . $100
Chico . . . . .
. . . 500
Sunnyvale . . . .
. . . 95
San Francisco .
500.
Fullerton. . . . .
. . . 95
Madera . . . . .
. . . 450
Los Altos . . . .
. . . 95
Hanford. . . . .
. . . 375
San Luis Obispo .
. . . 95
Los Angeles .
368
Crescent City
90
Pleasanton . . .
. . . 355
Watsonville • • •
• • • 90
Livermore . . . .
. . . 318
Delano • • • • •
• • • 90
San Jose . . . .
. . . 300
Orange • • • • •
• • • 75
Concord . . . .
. . . 300
Santa Clara CSD #4 . . . 75
Baldwin Park . .
. . . 300
La Verne . . . . .
. . . 75
Barstow. . . . .
. . . 300
Lodi . . . . . .
. . . 75
Valley Community
S.D. .. 300
Needles . . . . .
. . . 75
Arcata . . . . .
. . . 300
Redlands. . . . .
. . . 75
Auburn . . . . .
. . . 300
Selma . . . . . .
. .. . 75
Davis . . . . .
. . . 275
North San Mateo
75
San Diego . . .
. . . 265
Tracy . . . . . .
. . . 75
Monterey . . . .
. . . 250
Hayward . . . . .
. . . 65
Vacaville . . . .
. . . 250
Chino . . . . . .
. . . 65
Redlands . . . .
. . . 225
San Carlos . . . .
. . . 60
Eureka . . . . .
. . . 200
Berkeley . . . . .
. . . 60
Hermosa Beach .
. . . 200
Huntington Beach .
. . . 60
. San Clemente . .
. . . 200
El Cajon . . . . .
. . . 50
Oroville . . . .
. . . 200
Carlsbad. . . . .
. . . 50
Palo Alto . . . .
. . . 200
El Ce ntro . . . .
. . . 50
_
Santa Clara . . .
. . . 195
Sanger. . . . . .
. . . 50
Pacifica . . . .
. . . 185
Brisbane . . . . .
. . . 50
Menlo Park S. D.
163
Hemet . . . . . .
. . . 45
Norwalk •
150
Glendale. . . . .
. . . .38
Fontana . . . .
. . . 150
La Mesa . . . . .
. . . 25
Marysville . . .
. . . 150
Coalinga . . . .
. . . 25
Modesto . . . .
. . . 150
Piedmont . . _ . .
. . . 25
Corte Madera . .
. . . 150
Monterey Park . .
. . . 17
Escondido
-125
Chula Vista
15
Merced . . . .
125
Newport Beach . .
. . . 15
Millbrae . . .
125
Coachella • • . •
• • 15
San Jacinto . . .
. . . 125
Stockton • • • • •
• • • 12
Larkspur . . . .
. . . 125
Los Gatos . . . .
. . . 12
Pinole . . . . .
. . . 125
Montclair . . . .
. . . 11
Sacramento . . .
. . . 120
Culver City . . .
. . . 11
Riverside . . . .
. . . 110
Morro Bay . . . .
. . . 8
Oxnard . . . . .
. . . 10Q
Monrovia . . . .
. . . 7
Mantica . . . .
. . . 100
Glendora.
5
Colton . . . • •
. . . 100
Huntington Park.
5
Signal Hill . . .
. . . 100
Gonzales. . . . .
. . . 5
-30-
RECOMMENDED FINANCING ALTERNATIVE*
On the basis of the foregoing analyses, evaluations, and considerations to
optimize equity among users and potential users of the District's sewerage system,
it is our recommendation that the governing board of District No. 3 consider the
use of a sewer connection fee as a new source of revenue. The purpose of the
connection fee would be to recover costs of providing facilities in the near future
which will have sufficient built-in capacity to serve future users. We further
recommend that the connection fee be made applicable to connections made to a
District owned facility or to any local collector sewer which discharges into the
District's sewerage system.
As the basis for formulating the connection charge, we suggest that it be
based on the unit costs of providing trunk sewer capacity and sewage treatment
and disposal capacity. In this report we have reviewed with the District staff
the extensive cost data relative to existing facilities. We have used these data,
along with the projected costs of providing new facilities to arrive at an esti-
mated unit cost of providing sewerage services. The estimated unit costs de-
rived take into account net cost of facilities, after allowances for Federal and
State aid received, or anticipated to be received. The results of these studies
are shown in Tables 14 and 15. These data indicate that the cost of providing
one million gallons of trunk sewer capacity in the existing and master plan system
that a capital cost of approximately $ 3 79 , 400 is required based on an ultimate
system capacity of 189. 1 mgd. With respect to sewage treatment and disposal,
these- studies indicate a capital cost of approximately $265, 500 per one million
gallons of capacity is required.
As the basis for computing connection charge fees, we recommend that the
governing board of District No. 3 consider using average anticipated sewage
flows from residential and other than residential land uses which have served
as the basis to design master plan trunk sewer facilities in District No. 3.
Criteria for your consideration are as follows:
Low density residential (1-6 units per acre) .1550 gpd per acre
Medium -high density residential (7 or more
units per acre) .
4850 gpd per acre(i)
Other than residential (commercial or in-
dustrial). . . . . . . . . . . . . . .3555 gpd per acre(ii)
( i) Average of medium density and high density residential
land use flows.
(ii) Average of commercial and industrial land use flows.
With respect to establishment of connection charges for low density resi-
dential development, it is believed that 4 units per acre should be used as a
-31-
Table 14
ORANGE COUNTY SANITATION DISTRICT NO. 3
TRUNK SEWER SYSTEM COST ELEMENTS
Cost Element
Cost
Original Cost of existing facilities (Table 1) . . . . . . . . . $16 , 79 5 , 140
Bond Interest
1951 Issue prorated @ 40% of total . . . . . . . . . . . . 257,285
1958 Issue, Series A . . . . . . . . . . . . . . . . . . 6,252,413
1958 Issue, Series B . . . . . . . . . . . . . . . . . . 2,089,613
Estimated Cost to complete master plan facilities (Table 2) 1 28,451,000
Estimated interest on new bonds prorated @ 85% of total
(Table 9) (ii) . . . . . . . . . . . . . . . . . . . . . 7,440, 730
Subtotal . . . . . . . . . . . . . . . . . . . . . $ 61, 2 8 6 , 181
Less: Federal aid received . . . . . . . . . . . . . . . . 916,600
Net Cost . . . . . . . . . . . . . . . . . . . . $60, 369 , 581
Cost Per Million Gallons Average Capacity(iii) . . . . . . . . $ 379,444
( i) $29, 009 , 000 less $558, 000 work in progress included in
Table 1 original cost of trunk sewer system.
( ii) Total District No. 3 funding to complete master trunk sewer
plan ($28,451,000) and its prorata share of joinir treatment
works ($5,000,900) is approximately $33,451,900. Of total
funding requirements, some 85 percent, or $28, 451, 000 is
attributable to the trunk sewer program.
(iii) Based on average capacity (159 mgd) of system.
guide. This is based on data which indicates the overall average population per
owner -occupied housing unit in cities served by the District is 3.65 per unit.
Consulting engineers have indicated that flows into- the joint treatment works are
at the rate of approximately 105 gallons per capita per day. On this basis, it is
reasonable to assume that a typical dwelling unit contributes approximately 383
gallons per day to the system. At this rate, the design parameter of 1550 gpd
per acre provides for 4 units.
1550 gpd per acre
= 4.047 units
383 gpd per unit
-32-
Table 15
ORANGE COUNTY SANITATION DISTRICTS
JOINT TREATMENT WORKS COST ELEMENTS
Cost Per
Cost Element Cost Capacity MGD Capacity
Land and improvements (Table 2) . . . . . . . . . . $ 1,367,209 410 mgd
Outfall facilities (Table 2) . . . . . . . . . . . . . 18 ,111, 2 00 410 mgd
Subtotal . . . . ... . . . . . . . . . . $19,478,409
Less Federal -State aid . . . . . . . . . . . . . . 3,218,033
Net Cost . . . . . . . . . . ... . . . . . $16,260,376 $ 39,664
Existing and proposed primary treatment
Existing primary treatment facilities (Table 2) . . $41, 2 39 , 479 184 mgd
Proposed primary treatment facilities (Table 6) . . . 21., 2001000 36 mgd
Subtotal . . . . . . . . . . . . . . . . . $ 62 , 439 , 479 220 mgd
Less Federal -State aid for existing facilities . . 16, 661, 967
Less Federal -State aid for proposed facilities . . . . 18,550,000
Net Cost Primary Treatment Facilities $2 7 , 22 7, 512 220 mgd $12 3 , 761
Proposed secondary treatment facilities (Table 6) . $100,800,000 196 mgd
Interest on proposed bonds @ 15% of total (Table 9) 1,313,030
Subtotal . . . . . . . . . . . . . . . . . . $102 ,113 , 030
Less anticipated Federal -State aid . . . . . . . . 88r200,000
Net Cost Secondary Treatment . . . . . . . . $ 13, 913, 030 196 mgd $ 70,984
State revenue program depreciation accrual. . $ 6 , 09 0 , 000 196 mgd $ 31,071
Total Net Cost Per MGD Capacity. . . . . . . . . . . . . . . . . . . . .$265,480
is
With reference to medium high density residential uses, we noted that med-
ium density parameters used allowed for 7-16 residential units per acre, while
the high density parameter allowed for 17 or more units per acre. Engineering
studies of flows for high density residential land uses indicated average densi-
ties of approximately 25 units. It is suggested that the medium between 7 .and
25 units, or 16 units per acre be used for these categories. It is suggested that
uses other than residential be based on area of facility.
ESTIMATED LEVEL OF CONNECTION CHARGES
Previously cited unit costs for one million gallons capacity of sewerage fa-
cilities totaled approximately $644, 900. On the basis of 100 gallons, unit costs
for providing sewerage facilities would be approximately $65. Estimated flows
per residential unit average approximately 383 gallons per day. On this basis,
it is recommended that consideration be given to the establishment of the sewer
connection fee for residential units at the rate of $250.
We noted engineering studies indicated lower per unit flows in higher den-
sity residential uses. Flows from these units were approximately two-thirds
those of low density. areas. We have considered the question of whether or not
a rate lower than $250 per unit should be applied to medium high density resid-
ential uses. We also were cognizant of the fact that higher density residential
uses do not provide as great a potential tax base as low density residential uses.
fi On these bases, we recommend that the proposed $250 connection fee for resid-
ential uses apply to all units.
Commercial and industrial uses were considered in the same manner as res-
idential uses. It is anticipated these uses will provide an average flow of 3555
gallons per day per acre. At a unit capital cost of $ 65 for providing 100 gallons
of sewerage capacity, the charge would be approximately $2, 300 per acre. On
a square footage basis, the capital cost for sewerage facilities would be ap-
proximately $500 per 10,000 square feet of the facility. This rate is suggested
as a general guide in recognition of the wide variation in types of industrial
and commercial uses. It is suggested the charge for major types of industrial
and commercial facilities be administered on the basis of a close study of the
capacity requirements, type of discharge, number of employees, and other re-
lated factors.
-34-
ESTIMATED REVENUE FROM
CONNECTION CHARGES
In December 1972, studies were completed relative to the possible
revenue which ' may be derived from connection charges at various levels.
That study concluded that revenue from connection charges at the rate of
$ 50 for a single family dwelling unit and $125 for a multiple family dwelling
unit would average about $740,000,. based on 12-year average building per-
mits data. On the same bases used in the December 1972 study, it is
estimated that revenue from connection charges under the rates suggested in
this study would be approximately $ 2 ,10 0 , 00 0 . From industrial and commer-
cial users, it is estimated that connection charge revenue may be approxi-
mately $330, 000 assuming 337 units at the rate of $1, 000 per 20,000 square
feet of building area.
Based on the estimated bond service costs for the $13,000,000 of proposed
general obligation bonds, estimated connection charge revenues would be
more than sufficient to service the bonds. Connection fee revenues in
excess of actual bond service requirements could be held in reserve to meet
future capital needs, thereby making it possible for the District to reduce
the property tax rate levied for the accumulation of capital reserves.
-35-
COUNTY SANITATION DISTRICTS
of ORANGE COUNTY, CALIFORNIA
March 30, 1973
TO: SPECIAL COMMITTEE TO
Robert Root, Chairman
✓Charles Stevens, Jr.
-15'onald L. Fox
hack Green
/George B. Scott
RE: Meeting - 5:00 p.m., Wednesday, April 4
P.O. BOX 8127
10844 ELLIS AVENUE
FOUNTAIN VALLEY, CALIFORNIA 92708
(714) 540-2910
(714) 962-2411
Chairman Root has asked us to advise you that the next
meeting of the Committee will be at the above hour and date.
A light dinner will be served during the course of the meetin
The staff has met with Mr. Ernest Bodnar of Stone and
Youngberg, the Districts' Financial Consultant, and reviewed
the basic data and information developed with regard to the
recommended connection fees for commercial and industrial
developments, and the anticipated cash flows in connection
with the feasibility of a general obligation bond issue.
Mr. Bodnar will review his recommendations at the April 4th
meeting, which are summarized as follows:
Establish the following recommended
connection fees as soon as practicable:
Residential Units $250
Commercial & Industrial $50/1000 sq. ft.
with $250 minimum
Commercial and industrial establishments
having a high volume of water discharges
will continue to be subject to excess
capacity connection charges as provided
in the existing Uniform Industrial Use
Ordinance.
Defer decision re amount of bond issue and
timing of election for up to nine months,
pending determination by EPA regarding
joint works treatment requirements.
Chairman Root has asked Director Vanderwaal to attend
the meeting, who has developed several detailed connection
charge revenue funding projections that will be of interest
to the Committee.
Fred A. Harper
General Manager
FAH:j
cc: Director Vanderwaal
Chairman Culver, District No. 3
Chairman Smith, District No. 2,/
March 28, 1973
Mr. Erne;A D. BoOnar,
Aes+,i tant Cite President
Stone •,°; "ounEberva
One Cali.fornla Street,
Suite ^75C
San "-rancisco, California 94111
Aq per our meeting on March 27, 1973, I am forwardlnL7, the
material on Exce.— Capacity Connection Chargee which y.)u may
incorporate into your recommenlations to the Special Committee
stulyin;, connection ehar�,es.
Plea,e feel free to mo•'ify the encloned material a: you leter-
mine nece•:a.aary for greater continuity in your report.
Should you have any ad(litional question:; on the material
enciooe-!, plea--e Io not hesitate to call.
Robert A. Webber
Chief of In°uatrial
an,4 Permit Division
RAW: Im
fine..', o,-3ure
COUNTY SANITATION DISTRICTS
. of ORANGE COUNTY, CALIFORNIA
P.O. BOX 8127
10844 ELLIS AVENUE
FOUNTAIN VALLEY, CALIFORNIA 92708
(714) 540-2910
(714) 962-2411
EXCESS CAPACITY CONNECTION CHARGES
AS PER DISTRICTS' UNIFORM CONNECTION AND USE ORDINANCE
To assure that dischargers exerting an 'excessive demand on the
Districts' sewerage facilities pay their proportional share,
the Districts' Uniform Connection and Use Ordinance adopted by
the Joint Boards in April, 1970, requires such dischargers to
purchase that additional trunk and plant capacity. These
charges are referred to as Excess Capacity Connection Charges
and are defined in the Uniform Connection and Use Ordinance
as such.
Article 6, Paragraph 6: Prior to commencement
of use and upon invoicing by -the District, an
excess capacity connection charge shall be pay-
able bya user when, during the 12-month period
after commencement of use, the peak flow rate
may be reasonably expected to exceed 25,000
gallons per day unless such peak flow rate is a
reasonable use as defined in Article 2 of this
ordinance.
Article 2, Paragraph j: For the purpose of
computing excess capacity connection charges,
reasonable use is hereby established at 25,)00
gallons per day peak flow rate per $100,OCu of
assessed valuation.
Article 6, Paragraph b: Subject to the provi-
sions hereina ove, excess capacity connection
charges payable shall be computed at the rate
of $350 per 1,000 gallons per day of peak flow
rate.
The following are examples of the application of Excess
Capacity Connection Charges on two operations within the
Districts. Company A, invoiced in June,*1972, for $9,240.00,
is a government owned facility and is not subject to ad valorem
taxation. Company B. an existing carpet manufacturer contem-
plating expanding their operation to include carpet dyeing with
a substantial demand on the Districts' facilities.
4 -
COMPANY
A
ASSESSED VALUE
$0.00
ALLOWABLE DISCHARGE ACTUAL DISCHARGE
RATE OF FLOW
0 gallons/day
RATE OF FLOW
26,400 gallons/day
Computation of Excess Capacity Connection Charge
Actual Discharge 26,400 gallons/day
Allowable Discharge 0 gallons/day
26,400 gallons/day x $350/1,000 gallons
_ $9;240.00
B $450,000.00 1132000 gallons/day 5002000 gallons/day
Computation of Excess Capacity Connection Charge
Actual Discharge 500,000 gallons/day
Allowable Discharge 113,000 gallons day
387,000 gallons/day x $350/1,000 gallons
$1352450.00.
���
■emu
i
i
me
�
1 P11,44 i �IS
, ;
_en span
NINE
R -
oil
11
milli
I
mill -IN
1p1m1jmI I I
I
I INS
I
11 m Ell in
�i�
IIIE
iO"�Se m i
■
COUNTY SANITATION DISTRICTS
of ORANGE COUNTY. CALIFORNIA
i
March 16, 1973
TO: SPECIAL
TO RECOMMEND
Robert Root, Chairman
Charles Stevens, Jr.
Donald L. Fox
Jack Green
George B. Scott
RE: Meeting - 5:00 p.m., Wednesday, March 21st
P.O. BOX 8127
10844 ELLIS AVENUE
FOUNTAIN VALLEY, CALIFORNIA 92708
(714) 540-2910
(714) 962-241I
Chairman Root has asked us to advise you that he has
scheduled the first meeting of the committee at the above
hour and date immediately preceding the 7:00 p.m., District
No. 2 meeting. A light dinner will be served during the
course of the committee meeting.
The committee will meet with the Districts' staff and
Mr. Bodnar, of Stone and Youngberg, to develop an effective
construction financing program in accordance with the March
15th instructions to the committee from the Board,_
C../?:,447 41 �t
Fred A. Harper i
General Manager
FAH:j
Enclosures
COUNTY SANITATION DISTRICTS
of ORANGE COUNTY, CALIFORNIA
P.O. BOX 8127
10844 ELLIS AVENUE
FOUNTAIN VALLEY, CALIFORNIA 92708
(714) 540-2910
(714) 962-2411 '
SPECIAL COMMITTEE TO RECOMMEND
FINANCING TO
IMPLEMENT THE
DISTRICT NO. 3 CONSTRUCTION PROGRAM Appoin
ed 3-15-73
Home Phone Business Phone
Robert Root, Chairman
3230 Santa Monica Avenue
Fullerton
871-2761
525-0231
Charles Stevens, Jr.
1420 Rockinghorse Lane
La Habra
691--6004
*588-8223
Donald L. Fox
.
806 Alder Street
Brea
.529-2497
632-3051
Jack Green
6812 Auburn Drive
Huntington Beach
842-8276
325-5519 Palm Springs
ueorge B. Scott
16675 Spruce Circle
Fountain valley
839-1675
532-7559
•
a -
/ & Y0UN(-.'x1-]3ERG- Agenda Item NoSTONE
3
MUNICIPAL FINANCING CO-KISULTANTS. INC.
March 9, 1973
The Honorable Board of Directors
Orange County Sanitation District 101r-3
P. O. Box'8127
Fountain Valley, California 92708
Gentlemen: .
In accordance with your authorization and direction, we have prepared
a recommended financing plan for your consideration to implement
major sewerage improvement programs which are to be carried out over
the next several years .
We have concluded that the estimated maximum cash flow needs to
implement -the programs can be met from the sale of $13 , 000 , 000 General
Obligation Bonds. This is the amount that would be required should
federal and state standards provide for secondary treatment at an
equivalent to activated sludge for total district flows. Consulting
engineers are of the opinion that federal and state standards will
eventually require this level of treatment. Should federal and state
standards be set at lower levels, the full 'amount of authorized bonds
need not be sold to implement the program.
• The recommended financing plan suggests that the Board of Directors
initiate a connection charge as an additional source of revenue to
meet district funding needs and recover the costs of providing excess
capacity in facilities to meet future users. The level suggested for
your consideration is $250 per dwelling unit. Suggestions are also
made regarding commercial and industrial user connection fees.
I would like to take this opportunity to express our appreciation to
Mr. Fred A. Harper, General Manager, J. Wayne Sylvester, Director
of. Finance, Mr. Graham Hazlett of the District Staff, Mr. Conrad
Hohner, Boyle Engineering, and Mr. Walter Howard, Carollo Engineers,
for their assistance in the completion of this study.
9S9 - 23�0
SUITE 2750 - ONE CALIFORNIA STREET - SAN FRANCISCO. CALIFORNIA 94111 - (415);p
i
t '
•
The Honorable Board of Directors March 9, 1973
Orange County Sanitation District 3 Page Two
• We are available to provide any further information you need to assist
the District in implementing its sewerage program.
Yours very truly,
STONE & YOUNGBERG
Municipal Financing Consultants, Inc.
iiJ�Ci�/� �J r�/ ✓1'VI Ri'✓
Ernest B . Bodnar
Assistant Vice President
EBB:ac
enclosure
SUMMARY OF FINDINGS AND RECOMMENDATIONS
1. To- meet its existing and anticipated future .needs, District No. 3
initiated a seven-year trunk sewer improvement program which is estimated
to cost more than $29 million over the period 1971/72 through 1977/78.
In conjunction with sir. other Orange County sanitation districts, the Dis-
trict in the process of upgrading jointly owned sewage treatment works to
meet State water .quality control standards. Tize estimated cost of up-
grading jointly ov. ned primary treatment facilities is approximately
$ 21.2 million. The consulting engineers estimate the cost of activated
sludge secondary treatment which eventually will be required by Federal
. and State standards at approximately $100.8 million.
2. On the basis of the consulting engineers` cost estimates 'and construction
schedules, the Director of Finance has projected funding needs of Dis-
trict No. 3 to implement the master plan trunk sewer program; meet its
share of estimated capital costs of the proposed joint treatment works im-
provement program; provide for the District's share of projected operations
and maintenance costs; and debt service costs on- District bonds. Projec-
ted cash flow Deficits range from approximately $4.85 million to $12.5
million dependent upon the level of secondary treatment required of the
District to meet Federal and State standards.
3: General obligation bond financing is the most practical and feasible finan--
sing alternative available to District No. 3 to implement the master plan
trunk sewer and joint treatment works improvement program as scheduled.
It is recommended that District No. 3 seek authorization of $13 million
of general obligation bonds since the consulting engineers are of the
opinion that Federal and State standards will eventually require secondary
treatment equivalent to activated sludge.
4. Authorization of $13, 000, 000 of general obligation, bonds does not mean
that -the full amount will be issued. Should Federal and State standards
provide for secondary treatment at an equivalent less than activated
sludge for total District flow, facilities could be financed with the issu-
ance of that portion of the authorization needed to complete the program.
5.' Recent development trends within the area served by the District have
indicated the following:
A trend toward increased higher density residential types of
development in the District.
The potential property tax base provided by single family unit
land uses tends to be significantly greater than the potential
property tax base provided by a multiple family unit.
Engineering data indicate average daily flows per dwelling unit in
single family residential land uses average about 385 gallons per
unit. In high density residential lard uses, flows averaged about
256 gallons per day per unit, or approximately 2/3 that of lower
density single family land uses.
Within cities served by District No. 3, there are significant
differences in present users of the District's sewerage facilities.
median value of owner occupied housing units ranges from $22, 800
to $34, 700 . Population per owner occupied housing units ranges
from 2.1 to 4.0 .
Land values within the District have increased significantly in
recent years. Land suitable for low density residential develop-
ment has increased from approximately $10 , 000 - $12, 000 per acre
in 1960 to current levels of $28, 000 - $30 j,000. . Land suitable
for high density residential development is now valued at approxi-
mately $ 50 , 000 per acre.. Land * suitable for commercial develop-
ment is, now valued at approxi�iately $100, 000 per acre.
The District's property tax base of $1.259 billion consists of land
having ail a55essed valUdLion of $480 million (38 percent of total
tax base) and improvements on land which is owned and occupied
by present property owners having an assessed valuation of $778
million (f 2 percent of total tax base) .
6. Demands for sewerage services are created by two broad classifications:
(1) present users, and (2) potential users (owners of improved or unim-
proved land not connected to the system but adjacent to it) . A system of
assessing and recovering the costs of these benefits .must consider the
following:
1. Equity among present users
2. Equity among potential users.
3. Equity between present and potential users.
r
The -distribution of costs in relation to complete equity in all cases is
highly unlikely. What must be attempted is the achievement of optimum
equity in relation to the degree of benefits received by broad categories
of present users and potential users within the constraints posed by
statutory provisions and practical administrative procedures.
7. On the basis of our analyses,. --evaluations, and considerations to -
optimize equity among users and potential users of the District's sewer-
age system, it is .our recommendation that the governing board of Dis-
trict No. 3 consider the use of a server connection fee as a new source
of -revenue. The purpose of the connection fee would be to recover costs
of providing facilities in the near future which will have sufficient built-
in capacity to serve future users. We also recommend that the connection
fee be made applicable to connections made to a District owned facility
or to any local collecto sewer which discharges into the District's sewer-
age system.
8. As the basis for formulating connection charges, we suggest: unit costs of
providing trunk sewer and sewage treatment -disposal capacity. We esti-
mate . the unit costs of providing such facilities at approximately $ 645 , 000
per million gallons. -
9. As the basis for computing connection charge fees, we recommend that the
governing board of District No. 3 consider using average 'anticipated sew-
age flows from residential land uses which have served 'as the basis to
design master plan trunk sewer facilities in District No. 3.
10. Based on the estimated capital cost of providing sewerage facilities, pro-
jected flows from residential land uses, and current land use develop-
ments within the Mstrict, if is recommended that consideration by g?ven
to the establishment of a residential unit. connection charge of $250.
11. -Commercial and industrial uses were considered in the same manner as
residential. uses. It is anticipated these uses will provide an average
flow of 3555 gallons per day per acre. At a unit, capital lost of $65
for providing 100 gallons of sewerage capacity, the charge would be
approximately 4 2, 300 per acr,�. On a square footage basis, the capital
cost for sewerage facilities would be approximately $500 per 10,000 square
feet of the facility. This rate is suggested as a general guide in recog-
nition of the wide variation in types of industrial ,and commercial uses.
It iD suggested the charge for major types of industrial and commercial
facilities be administered on the basis of a close study of the capacity
requirements., type of. discharge, number of employees, and other related
factors. -
12. Revenue from connection charges under rates suggested in this study could
provide 'as much as $2.4. million on the basis of the December 1972
study.of near -term development patterns in the District.
13. Based on the estimated bond service costs for the $13, 000, 000 of pro-
posed general. obligation bonds, estimated connection charge revenues
would be more than sufficient to service the bonds. . Connection fee
0
d •
revenues in excess of actual bond service requ?remmts could be held in
reserve to meet future capital needs', thereby making it possible for the
District to reduce the property tajx rate levied for the accumulation of
capital reserves.
r
COUNTY SANITATION DISTRICTS
of ORANGE COUNTY, CALIFORNIA
P.O. BOX 8127
10844 ELLIS AVENUE
FOUNTAIN VALLEY, CALIFORNIA 92708
(714) 540-2910
(714) 962-2411
SPECIAL COMMITTEE TO RECOMMEND
FINANCING TO IMPLEMENT
THE
DISTRICT NO. 3 CONSTRUCTION PROGRAM (—Appointed
3- 5-73
Home Phone
Business Phone
Robert Root, Chairman
3230 Santa Monica Avenue
Fullerton
871-2761
525-0231
Charles Stevens, Jr.
14-20 Rockinghorse Lane
La Habra
691-6004
*588-8223
Donald L. Fox
.
806 Alder Street
Brea
529-2497
. 632-3051
Jack Green
6812 Auburn Drive
Huntington Beach
842-8276
325-5519 Palm Springs
ueorge B. bcozz
16675 Spruce Circle
Fountain valley
839-i675
532-7559
Table 7
COUNTY SANITATION DISTRICT NO. 3
STATEMENT OF PROJ 7%'TED CASH FLOW
A.S,SUMES CONSTRUCTION OF PHASE I 46 mgd) SECONDARY TREATMENT ONLY
FISCAL YEARS 1972/73 THROUGH 1976/77
Description 1972/73 1973/74 1974/75 1975/76 1976/77
REVENUE:
Tax Revenue (at current tax
rate of $.47e0). . . . . . . . $ 5,661,000
Other Rovenue:
Federal and State participation
Joint Works projects . . . . 1,799,000
District projects . . . . . . 192,000
Sale of capacity rights . . 177,000
Miscellaneous . . . . 721,000
Carry over from previous fiscal year 11, 821, 000
TOTAL FUNDS AVAILABLE. . . . $20,371,000
EXPENDITURES:
Disirict construction, . . . . . . $ 4;992,000
Snare of joint works construction . 3,095,000
Bond retirement and interest 858,000
Share of joint operating . . 792,000
District operating and other
expenditures. . . . . . . . . 382,000
TOTAL EXPENDITURES . . . . . $10 , 119 , 000
Carry over to following fiscal year $10 , 252, 000
Less: Necessary reserve for fol- .
lowing year dry period . . . 8,852,000
$ 5,944,000
3,007,000
182,000
1,000 .
220,000
1_0,252,000
$19,606,000
$11,111,000
4,449,000
827,000
812,000
299,000
$17,498,000
$ 2,108,000
6,956,250
$ 6,211,000
6,150,000
1,000
150,000
2,108,000
$14,620,000
$ 5,722,000
6,021,500
797,000
855,000
319,000
$13,714,500
$ 6,491,000
3,804,000
566,000
150,000
905,500
$11,916,500
$ 4,383,000
2,622,000
777,000
1,116,000
341,000
$ 9,239,000
$ 905,500 $ 2,677,500
4,708,500
2,632,500
$ 6,783,000
866,000
15,000
-150,000
2.677,500
$10,491,500
$ 1,675,000
1,002,000
756,000
1,158,000
•365,000
$ 4,956,000,
$ 5,535,500
2,908,000
Fund Balance (or deficit) . . . . $ 1,400,000 ($ 4,848,000) ($ 3,803,000) $ 45,000 $ 2,627,500
Table 8
COUNTY SANITATION DISTRICT NO. 3
STATEMENT OF PROTECTED CASH FLOW
ASSUMES CONSTRUCTION OF THREE PHASES (196 mgd) SECONDARY TREATMENT
FISCAL YEARS 1972/73 THROUGH 1976/77
Description 1972/73 1973/74 1974/75 1975/76 1976/77
REVENUE: '
Tax Revenue (at current tax
rate of$.4740). • • • • • • •
$ 5,661,000
$ 5,944,000
$ 6,211,000
Other Revenue:
Federal and State participation
Joint Works projects . . . .
1,799,000
3,007,000
6,150,000
District projects . . . • . .
192,000
182,000
---
Sale of capacity rights • . . •
177,000
1,000
1,000
Miscellaneous. .
721,000
220,000
150,000
Carry over from previous fiscal year
11, 821, 000
10,252,000
1,837,000
$ 6,491,000
10,460,000
566,000
150,000
(2,820,000)
TOTAL FUNDS AVAILABLE. . . • $20,371,000 $19,606,000 $14,349,000 $14,847,000
EXPENDITURES:
District construction . . . . . . $ 4,992,000
Share of joint works construction . 3,095,000
Bond retirement and interest . . . 858,000
Share of joint operating . . . . • 792,000
District operating and other
expenditures• • • • • • • • • 382,000
TOTAL EXPENDITURES • • • • • $10,119,000
Carry over to following fiscal year . . $10,252,000
Less: Necessary reserve for fol-
lowing year dry period . . .
Fund Balance (or deficit). . .
8,987,500
$11,111,000
4,720,000
827,000
1312,000
299,000
$17,769,000
$ 1,1337,000
8,1383,500
$ 1,264,500 ($ 6,346,500)
$ 5,722,000
9,4.76,000
797,000
855;000
319,000
$17,169,000
($ 2,820,000)
9,641,250
($12,461,250)
$ 4,383,000
12,487,500
777,000
1,116,000
341,000
$19,104,500
($ 4,257,500)
7,189,000
($1,1, 446 , 500)
$ 6,783,000
11,926,000
15,000
150,000
(4,257,500)
$14,616,500
$ 1,675,000
10,115,000
756,000
1,158,000
365,000
$14,069,000
$ 547,500
4,068,500
($ 3,521,000)
COUNTY SANITATION DISTRICT NO. 3
REVISED -SCHEDULE OF DISTRICT CONSTRUCTION PROJECTS.
Project Total 1972/73 . 1973/74 1974/75 1975/76 1976/77 1977/7a
Convert Westside Pump Sta. to Lift Sta,
$ 15.3,000
$ 152000
Additional Pumps at Seal Beach Blvd.
Pump Station
32S2000
5,000
$ 115,000
$ 2054,.,000
Contribution to Interplant Interceptor.
101892000
101890000
Knott Interceptor - Reaches 1, 2 & 3
60128,000
323000000
20828,000
Bolsa Relief Trunk
393,000
2910000
102,000
Imperial Relief Interceptor
SS00000
S500000
Rehabilitation of Waste Water Disposal
Sewer & Pump Station
1500000
15,000
13S,000
Westside Relief Interceptor - Reaches 27,
'
28, and 29
10160,000
-
1;160,000
.
Knott Interceptor - Reach 4
327620000
1350000
326272000
Westside Relief Interceptor - Reaches 2S
and 26
938,000
4690000
$ 4691,000
Knott Interceptor - Reaches 5 and 6
422000000
2;100,000
20100,000
Katella Relief Interceptor
1560000
78,000
$ 780000
Knott Interceptor - Reaches 7 and 8
6,100,000
300S00000
300500000
Orangethorpe Relief Trunk - Reaches 1S,
16, and 16A
12800,000
900,000
9000000
Westminster Ave. Force Main (2nd Unit)
660,000
3300000
3302000
Crescent Relief Trunk - Reach 14
215'000
21SO000
Magnolia Inter. Englargement - Reach 30
216:000
$216,000
Lampson Inter. - Reaches 11 and 12
3270000
•
327,000
Other Small Projects
16,7,00�
429000
25,000
252000
_,25,000
25,000 25,000
$28,4S1,000 $4,9920000 $11,111,000 $5,722,000 $4,3830000- $1,675,000 $568,000
m
_�. ±
� I;�,
1
I
� I '
I I
1 � I -'
AOL1 ►J (&+
r
/.
W
PI ppk I p FeM P'j F- 1, 04 1 1 1 q� p lo� b P4 01"' 1 IM', P. le
1p I v Ar AO L- Ar I A 4F
girl pill IfFAA I I'' M, I" IVRI66 I Ain, 1,
ffilo Pin��If6,'ifJ� 4 0 pi, Ir I. $n'o,
M- I PA, 0
Wj A$ P
NQN
42-383 `
I M! �-1ON' 'o ON D I SSLJ F.
`"l 65 4 250 &W EC-7-14DW FEES
Q to
Im
J��
.`. M+ir1 r i�13'3/l��l---r►`�l:l:��� l .r. W.1m r-11TIT
AO I" pi P1 � pjplt,,-1 P 4-jol
f�'j -, - OF
1 * p4t:v pi . . . . . . . pm PIRO; -1
/A �■ ��AS
IMI�i
xs
_ _
��A�I�NT
I_AVERI,.�E
I
DERV
�
- LNl�C4N
SCE F2Al£
1,-D_88
.57A
. ga9
�
E iT
�
�
.2.DC-
- -..
.JJ2��.
_
---.
__�l�Q_
13.0II,
�200
'•T.8'�
io.ol
quo
Ire
i _ I-zn'
t•-s�o it
b—Zot W,—
-- 40-
r•2ab--
YY
L-21 -- —.—
I�
All A40'
p4o4ms
►O
tubN
A
N42-383
�-
u-
Au
.soZ 2
-
-
-
. 17
-
I 4
a.
R�1 � �� I