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1997-12-10
, ,._L:tJ ) In the Office of the Secret County Sanitation Oistrict(s) \Jo{s)_ .(,d,3.Jjk,~JI. !3fl'I DEC 171997 DRAFT County Sanitation Districts of Orange County, California P.O. Box 8127 • 10844 Ellis Avenue Fountain Valley, CA 92728-8127 -Telephone: (714) 962-2411 /J ~ MINUTES OF FINANCE, By _.!-,_ .. A~'' ---f,IADrt::HYMtttlN'ltllSTRA TION AND HUMAN RESOURCES COMMITTEE Wednesday, December 10, 1997, 5:30 P.M. A meeting of the Finance, Administration and Human Resources Committee of the County Sanitation Districts Nos. 1, 2, 3, 5, 6, 7, 11, 13 and 14 of Orange County, California was held on Wednesday, December 10, 1997, at 5:30 p.m., at the Districts' Administrative Offices. ROLL CALL The roll was called and a quorum declared present, as follows: Committee Directors Present: George Brown, Chair John J. Collins, Joint Chair Jan Debay Barry Denes Norman Z. Eckenrode Mark Leyes Mark A. Murphy Thomas R. Saltarelli Mark Schwing William G. Steiner Committee Directors Absent : Peer Swan, Vice Joint Chair Other Directors Present: None APPOINTMENT OF A CHAIR PRO TEM No appointment was necessary. PUBLIC COMMENTS No comments were made. APPROVAL OF MINUTES Staff Present: Don McIntyre, General Manager Gary Streed, Director of Finance Mike Peterman, Director of Human Resources David Ludwin, Director of Engineering Michelle Tuchman, Director of Communications Greg Mathews, Principal Administrative Analyst Mike White, Controller Steve Kozak, Financial Manager Jim Herberg, Engineering Supervisor Terri Josway, Safety & Emergency Response Mgr. Lisa Lorey, Human Resources Manager Lenora Crane, Committee Secretary Others Present: Patti Gorczyca, Public Financial Management, Inc. Toby Weissert, Corallo Engineers The minutes of November 12, 1997 meeting of the Finance, Administration and Human Resources Committee were approved as drafted. Minutes of Finance, Admin. and Human Resources Committee Page 2 -) December 10, 1997 REPORT OF THE COMMITTEE CHAIR The Committee Chair had no report. REPORT OF THE GENERAL MANAGER • General Manager Don McIntyre updated the Committee on the LAFCO process regarding consolidation of the Districts. • There will be a meeting of the Ad Hoc Committee Re Strategic Plan on Thursday, December 18, 1997, at 5:30 p.m. Important policy issues will be discussed and the Directors were encouraged to attend. REPORT OF THE DIRECTOR OF FINANCE • As requested by Director Peer Swan, included in the COP Monthly Report is a new schedule which shows performance of the remarketing agents comparing each of our issues to the other, and to a staff-developed composite index. • The monthly Treasurer's Report was distributed prior to the meeting in accordance with policy. • The Districts will be receiving the bulk of our portion of the property taxes and user fees this month which will be approximately $30 million. REPORT OF THE DIRECTOR OF HUMAN RESOURCES • A quarterly report regarding broad banding was supposed to be given at this meeting, however, Mr. Peterman advised that this item is being deferred until the February meeting, depending on the outcome of an upcoming meeting with the union. At present, there is nothing new to report. • Linda Eisman, the Districts' Training Manager, has resigned and is going back to Savannah, Georgia. Internal recruitment for this position is underway. REPORT OF THE DIRECTOR OF COMMUNICATIONS • Director of Communications Michelle Tuchman updated the Committee regarding the water conservation measures taken by the Districts, Los Angeles County and the City of Los Angeles last Friday which included news releases resulting in articles in local newspapers and television news broadcasts. She also reviewed the Districts' fine performance during Saturday's El Nino storm. CBS reported erroneously that there was a sewage spill from our Huntington Beach Plant. Michelle immediately called into the news room and they stopped broadcasting that message, however, they did not correct it. Don McIntyre advised the Committee that we did have a high flow of 503 mgd for about an hour in the afternoon. We handled it very nicely, with just a few minor problems, due to the efforts of a lot of people who came in the help voluntarily. • Information packets on the Groundwater Replenishment System will be distributed to newspapers and the Directors within the next week. Minutes of Finance, Admin. and Human Resources Committee Page3 ) December 10, 1997 REPORT OF GENERAL COUNSEL General Counsel was not present. CONSENT CALENDAR ITEMS (1 -4) 1. FAHR97-79: RECEIVE AND FILE TREASURER'S REPORT FOR THE MONTH OF NOVEMBER 1997 AND FORWARD TO THE JOINT BOARDS: The Treasurer's Report was handed out at the FAHR Committee meeting in accordance with the Board-approved Investment Policy, and in conformance to the Government Code requirement to have monthly reports reviewed within 30 days of month end. 2. FAHR97-80: Receive and file Certificates Of Participation (COP) Report 3. FAHR97-81: Receive and file Employment Status Report 4. FAHR97-82: Receive and file Final Report Regarding Cost Of Workplace Investigation END OF CONSENT CALENDAR MOTION: Moved, seconded and duly carried to approve the recommended actions for items specified as 1 through 4 under "Consent Calendar." ACTION ITEMS (Nos. 5 -7) 5. FAHR97-83: Accept SAWPA's explanation of a sincere difference of interpretation, and waive the interest amounts assessed by staff on the late payments for treatment plant capacity (Financial issues between SAWPA and CSDOC). COMMITTEE DISCUSSION: Mr. Streed gave an overview of the financial issues between the Santa Ana Watershed Project Authority (SAWPA) and CSDOC. Partial payments on the 9th and 10th mgd by SAWPA, based on their interpretation of the ten-year payment option in the agreements, led to the Districts administratively imposing interest on the outstanding invoices. Staff and SAWPA have met on these issues and have agreed upon an interpretation of the payment terms. SAWPA has since paid the full amount of the 9th mgd, and 1/10 of the total due for the 10th mgd, including interest on an amortized basis. Mr. Streed advised the Committee that SAWPA is requesting that the Districts reverse the interest charges which amount to approximately $108,000. There would be no out-of-pocket capital cost losses. General Manager Don McIntyre stated that during meetings with SAWPA, he was impressed by SAWPA's sincerity. Discussion took place regarding the legality of the Districts' imposing interest or penalties in this matter. The Committee also indicated they did not want to damage the good will and positive relationship the Districts and SAWPA are currently experiencing. It was also noted that waiving the interest costs would not constitute a gift of public funds. MOTION: It was moved, seconded and duly carried to approve staff's recommendation to waive the SAWPA interest amounts assessed by staff on the late payments for treatment plant capacity. Minutes of Finance, Admin. and Human Resources Committee Page 4 ~ December 10, 1997 6. FAHR97-84: Adoption of a formal borrowing and lending program by the Boards of Directors of the individual Districts in order to provide for inter-District loans, with interest, while the Strategic Plan is being completed and a long-term financial plan is being prepared. COMMITTEE DISCUSSION: Mr. Streed advised the Committee that borrowing for capital improvements was a part of the rate setting process last year. Most of the Districts agreed to continue with the 50:50 mix of borrowing and pay-as-we-go financing. District 1 wanted to increase the borrowing portion in order to smooth their substantial user fee increases. Due to the number of significant financial issues (e.g., reserves study, capital replacement needs, Strategic Plan capital requirements, participation in and funding for the Orange County Water District Reclamation Project, Groundwater Replenishment Project and Districts' Consolidation) which will be brought before the Committee in the next six months, staff is recommending that a delay in a new COP issue should be considered and that Districts 1 and 11 formally borrow from Districts 2 and 3 until a new COP issue is completed. During discussion, the Committee determined that the Districts must maintain separate rate and interest funds for each District due to differing fee structures, and that they may change after consolidation, which will be effective July 1. MOTION: It was moved, seconded and duly carried to recommend that the Boards of Directors of the individual Districts adopt a formal borrowing and lending program in order to provide for inter-District loans, with interest, while the Strategic Plan is being completed and a long-term financial plan is being prepared. 7. FAHR97-85: Approve Rate Advisory Committee Recommendations as follows: 1. Adopt commercial user categories; 2. Approve the concept of a joint study of flows and strengths; 3. Contact the Orange County Business Council and the Cities for assistance in identifying various commercial users; 4. Conduct a study of flow and wastewater strength from SROs and congregate care facilities; 5. Plan to implement a revised rate structure for 1998-99; and 6. Return to future Committee meetings with recommendations for connection fees and the appeal process for user fees (All Districts). COMMITTEE DISCUSSION Gary Streed introduced Toby Weissert of Corollo Engineers and Jim Herberg, the Districts' Engineering Supervisor. He advised the Committee that this was the first of several reports that would come before the Committee over the next several months. Mr. Streed advised that he was prepared to discuss user fee issues and would return in the next few months to discuss the other issues. He reviewed the recommendations from the Rate Advisory Committee and advised the Committee that it is not our intent to raise SFR rates, just to restructure the commercial and industrial rates. Concerns regarding raising commercial and industrial rates, without doing an economic impact study, were brought up, since this may drive industries out of Orange County. Director Leyes was against any action until all of the other pending Districts' financial issues are resolved. The Committee agreed that the old system of using square footage is grossly inadequate and a move must be made to correct it, however, they wanted a clearer picture of costs in dollars and cents, not ratios. Staff advised that the rate structure is not in place and will be brought back to the Committee for a rate discussion in March or April. Tonight's recommendation is not to approve numbers, but only the concepts. The Committee felt the verbiage for recommendation No. 5 should be changed to read, "Develop a revised rate structure for 1998-99 ... " Minutes of Finance, Admin. and Human Resources Committee Page 5 ~ December 10, 1997 ' MOTION: It was moved, seconded, and duly carried to approve, in concept only, the following Rate Advisory Committee Recommendations with modification to item 5. There were 9 Ayes and 1 Nay. 1. Adopt interim commercial user categories; 2. Approve the concept of a joint study of flows and strengths; 3. Contact the Orange County Business Council and the Cities for assistance in identifying various commercial users; 4. Conduct a study of flow and wastewater strength from SROs and congregate care facilities; 5. Develop a revised rate structure for 1998-99; and 6. Return to future Committee meetings with recommendations for connection fees and the appeal process for user fees (All Districts). INFORMATIONAL PRESENTATIONS 8. FAHR97-86: Revised method of benchmarking Districts' cost of wastewater treatment per million gallons COMMITTEE DISCUSSION: Greg Mathews gave a slide presentation explaining the Districts' revised method of benchmarking the cost of wastewater treatment per million gallons. Mr. Mathews explained that the new proposed Districts' benchmark for treatment costs is $490 per million gallons and is the result of changes in indirect cost allocation. The Districts' method of assigning costs to overhead is now similar to many other Publicly Owned Treatment Plants (POTWs). Mr. Mathew's slide presentation included FY 1997/98 Actual Expenses, Changes in Costs, Changes in Flow, Changes in Cost Allocation, and Changes in Dollars Per Million Gallon Benchmark. The Committee requested that Mr. Mathews provide information on the progression of the historic numbers, using prior actuals, to the new ones. 9. FAHR97-87: Accumulated Funds and Reserves Policy Update. COMMITTEE DISCUSSION: Gary Streed updated the Committee on the status of Districts' accumulated funds and reserves policies. He advised that the existing policy was adopted in 1990 and has been only slightly modified in the interim period. Staff and Public Financial Management (PFM) have been evaluating the Districts' existing policy, options, and policies of other agencies. Public Financial Management prepared a Reserve Study Summary Analysis that was distributed to the Committee at the beginning of the meeting. A telephone survey was conducted of 24 public wastewater, water and utility agencies. Each agency was queried concerning budget levels, annual debt services, value of capital plant, ratings, and use of insurance and levels of discretionary reserves, exclusive of debt, workers' comp and pension requirements, and any cash accumulations for specific pay-as-you-go for near-term capital projects. With regard to identified reserves, the survey included all discretionary cash reserves, excluding bond related reserves and unspent proceeds, pension and worker's comp reserves, and any cash set aside for near term specific capital outlay The Committee requested that staff expand the information relating to the Capital Budget and total amount of debt. It was also requested that all reserve categories be included in the report not just totaled. Minutes of Finance, Admin. and Human Resources Committee Page6 ) December 10, 1997 Mr. Streed advised the Committee that this was an information item with no recommendation tonight. A final report will be brought to the Committee in February. CLOSED SESSION There was no closed session. OTHER BUSINESS, COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS. IF ANY Director William Steiner provided information to the Committee regarding the status of the Orange County bankruptcy pool settlement. He advised that the County has been meeting to iron out a settlement with LeBoeuf, Lamb, Green & MacRae. The firm's malpractice insurance would cover any payment up to $50 million, which is one of the largest damage settlements ever by a law firm. The proposed settlement with LeBoeuf, Lamb, Greene & MacRae, is being held up by the North Orange County Community School District, which is a party to the Orange County lawsuit, and which is suing LeBoeuf, Lamb, Greene & MacRae for $16.5 million. MATTERS WHICH A DIRECTOR WOULD LIKE STAFF TO REPORT ON AT A SUBSEQUENT MEETING None. MATTERS WHICH A DIRECTOR MAY WISH TO PLACE ON A FUTURE AGENDA FOR ACTION AND STAFF REPORT None. FUTURE MEETING DATES There is no meeting scheduled for January. The next Finance, Administration and Human Resources Committee Meeting is scheduled for Wednesday, February 11, 1997, at 5:30 p.m. ADJOURNMENT The meeting was adjourned a 7:14 p.m. Submitted by: ~&~ Finance, Administration and Human Resources Committee Secretary \\LEAD\DAT A2\WP .DTA \Fl N\221 0\CRAN E\F AH R\F AH R.97\DEC\12-97MIN.DOC STATE OF CALIFORNIA ) ) ss. COUNTY OF ORANGE ) Pursuant to California Government Code Section 54954.2, I hereby certify that the Notice and the Agenda for the Finance, Administration and Human Resources meeting held on December 10, 1997, was duly posted for public inspection in the main lobby of the Districts' offices on December 3, 1997. IN WITNESS WHEREOF, I have hereunto set my hand this 10th day of December 1997. Penny Kyle, Secrefarf-1 of e ch of the Boards of Directors of County SanitatioilQJ;tr"cts Nos. 1, 2, 3, 5, 6, 7, 11, 13 & 14 of Orange County, Cali or. ia Posted: ~~ 3 , 1997, By:~L~ \\lead\data2\wp.dta\fin\2210\crane\FAH R\FAHR.97\D EC\CERTPO 12-97 .doc DISTRIBUTION FAHR COMMITTEE MEETING PACKAGE Full Agenda Package Committee 16 & Mailing List Donald F. McIntyre 1 Blake P. Anderson 1 Dan Dillon 1 Marc Dubois 1 Linda Eisman 1 Jeff Esber 1 Ed Hodges 1 Steve Kozak 1 Penny Kyle 2 David Ludwin 1 Greg Mathews 1 Chris Dahl 1 Bob Ooten 1 Mike Peterman 1 Gary Streed 1 Michelle Tuchman 1 Terri Josway 1 Dan Tunnicliff (H.R.) 1 Nancy Wheatley 1 Mike White 1 Ed Torres 1 Laurie Arnold 1 Lisa Lorey 1 Nick Arhontes 1 Gail Cain 1 Bob Geggie 1 Lenora Crane 1 File 1 Extras 3 Notices and Agenda 13 Posting 1 Jean Tappan (include Mins) 1 Angela Holden 1 Frankie Woodside 1 Patricia Magnante 1 Janet Gray 1 Fawn Elizondo 1 Debra Lecuna 1 Guard Shack (Ed Hodges) 1 Extras 3 (3-hole punched) (3-hole punched) (3-hole punched) (3-hole punched) Ron Zenk, Dist. 14 Treasurer"s Report Only le H:\WP.DTA\FIN\2210\CRANE\FAHR\DISTLST.97 phone; 1714) 862-2411 malling address: RO. Bdx 8127 fcuntain Vall~. GA 82728,8127 streell address: 10"844 81fs, A\lamie Four:i~1n Valley, GA 8270S-7016 Member- /Xgencies Cities Anal1eim, Brea S,ue11<1 P,ark Cypress. Founts,n Valley Fulferton Huntlt:lgton Beach. lrvfne Le Habra La Ps/ma Los Alamitos- Nawptma Beach Dr;angB f;l/aeentia SanliB Ana Sf/la/ Beac{I Scenton Tustin VI/le ,Park Yorba lrnda Count y of; Orange Senit-ary Oistnicts Cosr;a Mesa Garden Grove Mldw_a'y Gicy, Water Uistricts- //'lllne Ranch COUNTY [J'11TATION DISTRICTS OF ORA:JE COUNTY, CALIFORNIA December 4, 1997 NOTICE OF MEETING FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE COUNTY SANITATION DISTRICTS NOS. 1, 2, 3, 5, 6, 7, 11, 13 AND 14 OF ORANGE COUNTY, CALIFORNIA WEDNESDAY, DECEM~BER 10, 1997 -5:30 P.M. DISTRICTS' ADMINISTRATIVE OFFICES 10844 ELLIS AVENUE FOUNTAIN VALLEY, CALIFORNIA 92708 A regular meeting of the Finance, Administration and Human Resources Committee of the Joint Boards of Directors of County Sanitation Districts Nos. 1, 2, 3, 5, 6, 7, 11, 13 and 14 of Orange County, California, will be held at the above location, time and date. A Public Wastewater and Environmental Management Agency Committed to Protecting the Environment Since 1954 FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE TENTATIVELY SCHEDULED MEETING DATES FAHR Committee Joint Board Month Meetings Meetings December December 10, 1997 December 17, 1997 January None Scheduled January 28, 1998 February February 11, 1998 February 25, 1998 March March 11, 1998 March 25, 1998 April April 8, 1998 April 22, 1998 May May 13, 1998 May 27, 1998 June June 10, 1998 June 24, 1998 July July 8, 1998 July 29, 1998 August None Scheduled August 26, 1998 September September 9, 1998 September 30, 1998 October October 14, 1998 October 28, 1998 November None Scheduled November 18, 1998 l ) AGENDA REGULAR MEETING OF THE FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE COUNTY SANITATION DISTRICTS NOS. 1, 2, 3, 5, 6, 7, 11, 13AND 14 OF ORANGE COUNTY, CALIFORNIA WEDNESDAY, DECEMBER 10, 1997, AT, 5:30 P.M. ROLL CALL ADMINISTRATIVE OFFICES 10844 Ellis Avenue Fountain Valley, California 92708 APPOINTMENT OF CHAIR PRO TEM, IF NECESSARY AGENDA In accordance with the requirements of California Government Code Section 54954.2, this agenda has been posted in the main lobby of the Districts' Administrative Offices not less than 72 hours prior to the meeting date and time above. All written materials relating to each agenda item are available for public inspection in the Office of the Board Secretary. In the event any matter not listed on this agenda is proposed to be submitted to the Committee for discussion and/or action, it will be done in compliance with Section 54954.2(b) as an emergency item or that there is a need to take immediate action which need came to the attention of the Committee subsequent to the posting of the agenda, or as set forth on a supplemental agenda posted in the manner as above, not less than 72 hours prior to the meeting date. PUBLIC COMMENTS All persons wishing to address the Finance, Administration and Human Resources Committee on specific agenda items or matters of general interest should do so at this time. As determined by the Chair, speakers may be deferred until the specific item is taken for discussion and remarks may be limited to five minutes. Matters of interest addressed by a member of the public and not listed on this agenda cannot have action taken by the Committee except as authorized by Section 54954.2(b). December 10, 1997 RECEIVE, FILE AND APPROVE MINUTES QF PREVIOUS MEETING Recommended Action: Consideration of motion to receive, file and approve draft minutes of the November 12, 1997, Finance, Administration and Human Resources Committee meeting. REPORT OF COMMITTEE CHAIR REPORT OF GENERAL MANAGER REPORT OF DIRECTOR OF FINANCE REPORT OF DIRECTOR OF HUMAN RESOURCES REPORT OF DIRECTOR OF COMMUNICATIONS REPORT OF GENERAL COUNSEL CONSENT CALENDAR ITEMS All matters place·d on the consent calEtndar are considered a~ not requiring discussion or further explanation and unless any particular item is requested to be removed from the consent calendar by a Director, staff member or member of the public in attendance, there will be no separate discussion of these items. All items on the consent calendar will be enacted by one action approving all motions, and casting a unanimous ballot for resolutions included on the consent calendar. All items removed from the consent calendar shall be considered in the regular order of business. Members of the public who wish to remove an item from the consent calendar shall, upon recognition by the chair, state their name, address and designate by number the item to be removed from the consent calendar. !The Chair will determine if any items are to be deleted from the consent calendar. I Consideration of motion to approve all agenda items appearing on the Consent Calendar not specifically removed from same, as follows: 1. FAHR97-79: Receive and file Treasurer's Report for the month of November 1997: The Treasurer's Report will be handed out at the FAHR Committee meeting in accordance with the Board-approved Investment Policy, and in conformance to the Government Code requirement to have monthly reports reviewed within 30 days of month end (All Districts). 2. FAHR97-80: Receive and file Certificates of Participation (COP) Monthly Report (All Districts). 3. FAHR97-81: Receive and file Employment Status Report (All Districts). 4. FAHR97-82: Receive and file final report regarding Cost of Workplace Investigation (All Districts). -2- December 10, 1997 END Of CONSENT CALENDAR Consideration of items deleted from Consent Calendar, if any. ACTION ITEMS 5. FAHR97-83: Accept SAWPA's explanation of a sincere difference of interpretation, and waive the interest amounts assessed by staff on the late payments for treatment plant capacity (Financial issues between SAWPA and CSDOC) (All Districts). (Gary Streed -10 minutes) 6. FAHR97-84: Adoption of a formal borrowing and lending program by the Boards of Directors of the individual Districts in order to provide for inter-District loans, with interest, while the Strategic Plan is being completed and a long-term financial plan is being prepared (All Districts). (Gary Streed -10 minutes) 7. FAHR97-85: Approve Rate Advisory Committee Recommendations as follows: 1. Adopt commercial user categories; 2. Approve the concept of a joint study of flows and strengths; 3. Contact the Orange County Business Council and the Cities for assistance in identifying various commercial users; 4. Conduct a study of flow and wastewater strength from SROs and congregate care facilities; 5. Plan to implement a revised rate structure for 1998-99; and 6. Return to future Committee meetings with recommendations for connection fees and the appeal process for user fees (All Districts). (Gary Streed -10 minutes) INFORMATIONAL PRESENTATIONS 8. FAHR97-86: Revised method of benchmarking Districts' cost of wastewater treatment per million gallons (All Districts). (Greg Mathews -10 minutes) 9. FAHR97-87 Accumulated Funds and Reserves Policy Update (All Districts). (Gary Streed -5 minutes) -3- December 10, 1997 CLOSED SESSION During the course of conducting the business set forth on this agenda as a regular meeting of the Committee, the Chair may convene the Committee in closed session to consider matters of pending real estate negotiations, pending or potential litigation, or personnel matters, pursuant to Government Code Sections 54956.8, 54956.9, 54957 or 54957.6, as noted. Reports relating to (a) purchase and sale of real property; (b) matters of pending or potential litigation; (c) employee actions or negotiations with employee representatives; or which are exempt from public disclosure under the California Public Records Act, may be reviewed by the Committee during a permitted closed session and are not available for public inspection. At such time as final actions are taken by the Committee on any of these subjects, the minutes will reflect all required disclosures of information. 11. Closed Session a. Convene in closed session, if necessary. b. Reconvene in regular session. c. Consideration of action, if any, on matters considered in closed session. d. Report on discussion taken in closed session, as required. OTHER BUSINESS, COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, 11= ANY MATTERS WHICH A DrRECTOR WOULD LIKE STAFF TO REPORT ON AT A SUBSEQUENT MEETING MATTERS WHICH A DIRECTOR MAY WISH TO PLACE ON A FUTURE AGENDA FOR ACTION AND STAFF REPORT FUTURE MEETING DATES The next Finance, Administration and Human Resources Committee Meeting is scheduled for February 11, 1998. No meeting is scheduled for January. NOTICE TO COMMITTEE MEMBERS If you have any questions on the agenda or wish to place any items on the agenda, Committee members should contact the Committee Chair or Secretary ten days in advance of the Committee meeting. Committee Chair: Comm. Secretary: le George Brown Lenora Crane (562) 431-2185 (714)962-2411,Ext.2501 (714) 962-3954 (FAX) \\LEAD\DAT A2.\WP .DTA\FIN\2210\CRANE\FAHR\FAHR.97\DEC\12-97 AGENDA.DOC -4- ROLL CALL FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE MEETING DATE: December 10. 1997 TIME: 5:30 P .M. ADJOURN: --=-P--'-'.M=. COMMITTEE MEMBERS GEORGE BROWN (CHAIR) .......................................................... . JOHN J. COLLINS (JC) ................................................................. . JAN DEBAY .................................................................................. . BARRY DENES ............................................................................. . NORMAN ECKENRODE ............................................................... . MARKLEYES ..••••••.•.••••••••••••••••••••••••.•.....••.•••..••.•••••.••.................•. MARK MURPHY ........................................................................... . THOMAS SALTARELLI ................................................................ . MARK SCHWING .......................................................................... . WILLIAM STEINER ...................................................................... .. PEER SWAN ................................................................................. . STAFF DON MCINTYRE, General Manager ............................................... . BLAKE ANDERSON, Assistant General Manager ......................... . CHRIS DAHL, Director of Information Technology ....................... .. ED HODGES, Director of General Services Administration ..•..•.••.. DAVID LUDWIN, Director of Engineering ...................................... . BOB OOTEN, Director of Operations & Maintenance •.•...••••.•••••••••. MIKE PETERMAN, Director of Human Resources ......................... . GARY STREED, Director of Finance .............................................. . MICHELLE TUCHMAN, Director of Communications •••.•.............••• NANCY WHEATLEY, Director of Technical Services .•......•.....••.•••• STEVE KOZAK, Financial Manager ............................................... . MIKE WHITE, Controller ................................................................. . GREG MATHEWS, Principal Administrative Analyst •••••••••••....•••.•.. LINDA EISMAN, Training Manager ................................................ . TERRI JOSWAY, Safety & Emergency Response Mgr ................. .. DAN DILLON, Accounting Manager LISA LOREY, Human Resources Manager ••••••••••••.••••••....•..•.•..•.•..• LENORA CRANE, Committee Secretary ........................................ . OTHERS TOM WOODRUFF, General Counsel... ..•.•....••.•.•••.••.••....•...........•.... PATTI GORCZYCA, Public Financial Management, Inc .•..•••••••••.•••• == c: Debra Lecuna Penny Kyle DRAFT MINUTES OF FINANCE, County Sanitation Districts of Orange County, California P.O. Box 8127 • 10844 Ellis Avenue Fountain Valley, CA 92728-8127 Telephone: (714) 962-2411 ADMINISTRATION AND HUMAN RESOURCES COMMITTEE Wednesday, November 12, 1997, 5:30 P.M . . A meeting of the Finance, Administration and Human Resources Committee of the County Sanitation Districts Nos. 1, 2, 3, 5, 6, 7, 11, 13 and 14 of Orange County, California was held on Wednesday, November 12, 1997, at 5:30 p.m., at the Districts' Administrative Offices. ROLL CALL The roll was called and a quorum declared present, as follows: Committee Directors Present: George Brown, Chair John J. Collins, Joint Chair Jan Debay Barry Denes Norman Z. Eckenrode Mark Leyes Thomas R. Saltarelli Mark Schwing William G. Steiner Peer Swan, Vice Joint Chair Committee Directors Absent : Mark A. Murphy Other Directors Present: None APPOINTMENT OF A CHAIR PRO TEM No appointment was necessary. PUBLIC COMMENTS No comments were made. Staff Present: Don McIntyre, General Manager Gary Streed, Director of Finance Bob Ooten, Director of Operations & Maintenance Mike Peterman, Director of Human Resources David Ludwin, Director of Engineering Michelle Tuchman, Director of Communications Nancy Wheatley, Director of Technical Services Greg Mathews, Principal Administrative Analyst Mike White, Controller Steve Kozak, Financial Manager Terri Josway, Safety & Emergency Response Mgr. Lisa Lorey, Human Resources Manager Dan Dillon, Accounting Manager Lenora Crane, Committee Secretary Others Present: Tom Woodruff, General Counsel Ken Harlow, R. W. Beck Mike Moreland, Moreland & Associates Chuck Acocella, Moreland & Associates Greg Giles, Moreland & Associates Patti Gorczyca, Public Financial Management, Inc. Minutes of Finance, Admin "Ind Human Resources Committee Page 2 November 12, 1997 APPROVAL OF MINUTES The minutes of October 8, 1997 meeting of the Finance, Administration and Human Resources Committee were approved as drafted. REPORT OF THE COMMITTEE CHAIR The Committee Chair had no report. REPORT OF THE GENERAL MANAGER The General Manager had no report. REPORT OF ASSISTANT GENERAL MANAGER The Assistant General Manager had no report. REPORT OF THE DIRECTOR OF FINANCE • Mr. Streed introduced Mike Moreland, Chuck Acocello and Greg Giles of Moreland & Associates who were present to answer any questions regarding the Comprehensive Annual Financial Report (CAFR) and audit. Ken Harlow of R. W. Beck was in attendance to give a presentation on the Replacement Model his company prepared. Patti Gorczyca of Public Financial Management was present to observe the R.W. Beck presentation, since her company will be preparing the Reserves Study and the Districts' replacement policy will be a portion of that study. • The monthly Treasurer's Report was distributed prior to the meeting in accordance with policy. REPORT OF THE DIRECTOR OF HUMAN RESOURCES The Director of Human Resources had no report. REPORT OF THE DIRECTOR OF COMMUNICATIONS The Director of Communications Michelle Tuchman reported on the following: • Updated the Committee on the Districts' consolidation efforts. • Two scoping meetings are being held tomorrow for the EIR process and the Strategic Plan to obtain input from the public and the regulatory agencies. • Updated the Committee on the public outreach program which is a joint venture with the City of Los Angeles and the County of Los Angeles to conserve water during rainstorms. • The Districts are also working with MWDOC and other smaller water districts in our service area to have information placed in their newsletters regarding water conservation. REPORT OF GENERAL COUNSEL General Counsel Torn Woodruff had no report. Minutes of Finance, Admin. and Human Resources Committee Page 3 ,,......) November 12, 1997 CONSENT CALENDAR ITEMS (1 -5) 1. FAHR97-70: RECEIVE AND FILE TREASURER'S REPORT FOR THE MONTH OF OCTOBER 1997 AND FORWARD TO THE JOINT BOARDS: The Treasurer's Report was handed out at the FAHR Committee meeting in accordance with the Board-approved Investment Policy, and in conformance to the Government Code requirement to have monthly reports reviewed within 30 days of month end. 2. FAHR97-71: RECEIVE AND FILE CERTIFICATES OF PARTICIPATION (COP) REPORT 3. FAHR97-72: RECEIVE AND FILE EMPLOYMENT STATUS REPORT: Total head count at the Districts as of October 23, 1997 4. FAHR97-73: RECEIVE AND FILE QUARTERLY INVESTMENT MANAGEMENT PROGRAM REPORT FOR THE PERIOD JULY 1 THROUGH SEPTEMBER 30, 1997 5. FAHR97-74: RECEIVE AND FILE FIRST QUARTER WORKER'S COMPENSATION AND ACCIDENT STATUS REPORT FOR FY 1997/98 END OF CONSENT CALENDAR MOTION: Moved, seconded and duly carried to approve the recommended actions for items specified as 1 through 5 under "Consent Calendar." Regarding the Monthly COP report, Director Peer Swan requested that staff provide a cumulative report, which will reflect how the different remarketing agents are performing. The report should show what the cumulative differences are in the rates they are charging and receiving. This will give the Committee an opportunity to make future decisions in the selection of remarketing agents. ACTION ITEMS (Nos. 6 -9) The Chair requested that the Action Items be presented out of Agenda order. However, the minutes reflect those items in sequential order for continuity purposes. 6. FAHR97-75: CONSIDERATION OF MOTION TO RECOMMEND AN ORDINANCE OF THE BOARD OF DIRECTORS OF COUNTY SANITATION DISTRICTS NOS. 1, 2, 3, 5, 6, 7, 11 & 13 OF ORANGE COUNTY, CALIFORNIA, AMENDIN.G EXLSTING ORDINANCES RELATING TO EXEMPTIONS, REBATES AND REFUNDS OF SANITARY SEWER SERVICE CHARGES COMMITTEE DISCUSSION: The Committee determined from Mr. Streed that approximately 750 adjustments were made during fiscal year 1996-97, most were for the maximum four- year period preceding the refund request. Even though the Districts' rates and rate structure had not changed in several years, the increase in refund requests increased significantly due to an influx of consulting firms mailing letters to businesses in the county proposing they can lower their sewer service fees based upon their understanding and knowledge of our Ordinance. Minutes of Finance, Admin and Human Resources Committee Page 4 November 12, 1997 General Counsel Tom Woodruff advised he reviewed the applicable Government Code and, in his opinion, there is a distinction between a "rebate" and a "refund." A "refund" is due in the case of a billing error, such as billing a parcel that is not connected to a sewer, they paid taxes twice, they were illegally assessed, or there was a clerical error. A "rebate" is due when the sewer use has been inappropriately determined, such as a large warehouse with only one sink and one toilet; mostly charges based on valuation. The significance of this opinion is that only the "refund" requests are allowed for four-years; rebate requests should be treated as a claim with a one-year statute of limitation. The new Ordinance would allow claims for "rebates" for a one-year period only. General Counsel and staff requested that the ordinances be modified to clearly distinguish between "rebates" and "refunds" and to define the adjustment period for both. In response to the Committee, Mr. Woodruff advised that some law suits may arise from changes to the Districts' Ordinances. Director Swan pointed out that the Districts have given back $7.5 million last year and will continue to do so. This is a permanent loss which will go forward with the Districts losing approximately $2.5 million a year. The Committee discussed various alternatives and agreed that a change in Districts' ordinances is necessary in order to clearly define rebates and refunds. MOTION: It was moved, seconded and duly carried to recommend an Ordinance of the Board of Directors of County Sanitation Districts Nos. 1, 2, 3, 5, 6, 7, 11 & 13 of Orange County, California, amending existing ordinances relating to exemptions, rebates and refunds of Sanitary Sewer Service Charges. 7. FAHR97-76: RECEIVE AND FILE THE 1997-98 FINANCIAL AND OPERATIONAL REPORT FOR THE FIRST QUARTER ENDED SEPTEMBER 30, 1997 COMMITTEE DISCUSSION: Controller Mike White gave a slide presentation on this item. He advised that as of September 30, 1997, 20.38% or $9,564,000 of the 1997-98 net Joint Operating budget has been expended. Net costs have decreased by 18.38% in comparison to the same period last year. The total cost per million gallons at September 30, 1997, is $418, which is $107 (20.38%) below the budgeted cost per million gallons of $525. Mr. White explained that Joint Operating costs are currently under budget by $2.2 million. He reviewed the significant variations in Joint Operating costs and the Capital Outlay Revolving Fund, District expenses and revenues, and the Self-Insurance Funds. Mr. White also reviewed the Operational portion of the report which included Districts-wide Performance Objectives and Work Plan Milestones. In response to the Committee, Greg Mathews and Mike White advised that there are some discrepancies in the numbers because some of the data contained in the report was obtained two weeks ago. Figures are constantly changing and being refined. It was agreed that the benchmark needs to be worked on. A report will be provided at the December FAHR meeting explaining how the benchmark has been adjusted. MOTION: It was moved, seconded and duly carried to receive and file the 1997-98 Financial and Operational Report for the First Quarter Ended September 30, 1997, and forward to the Joint Boards. Minutes of Finance, Admin __ and Human Resources Committee ,' ' Page 5 ,.,,--, \ November 12, 1997 8. FAHR97-77: ADOPT A POLICY FOR FUTURE REFURBISHMENT AND REPLACEMENT OF SEWERAGE SYSTEM FIXED ASSETS FROM A COMBINATION OF ACCUMULATED FUNDS AND BORROWING, AND TO DIRECT STAFF TO INCLUDE A CAPITAL REPLACEMENT RESERVE IN FUTURE RATE AND BUDGET PROPOSALS COMMITTEE DISCUSSION: Gary Streed advised the Committee that this item is a result of requests from the Directors during the user fee and budget processes. He gave a slide presentation and report concerning future replacement needs of the Districts' sewerage system fixed assets. Funding of future replacement needs is expected to come from a combination of accumulated funds, borrowing and user fees. Mr. Streed reviewed the methods used in Systems Replacement Planning, the Needs Analysis Elements, System Replacement Values, and the estimated costs of Capital Improvements, Refurbishments and Replacements. Mr. Streed introduced Ken Harlow of R. W. Beck Company, the consulting firm hired to run a replacement needs model for the Districts. R.W. Beck also prepared a similar model for the Irvine Ranch Water District. Mr. Harlow gave a slide presentation reviewing the System Replacement Needs Analysis prepared by his company, and ran the Replacement Planning Model so the Directors could see how variables could be changed to produce different outcomes. This item will be brought back to the Committee in December along with the Reserves Study which is being prepared by Patti Gorczyca of Public Financial Management, Inc., before a recommendation will be made to the Joint Boards. Since we are supposed to pay for 50% of all capital expansion on a pay-as-you-go basis, the Committee members requested that the PFM report include a smooth distribution of rate increases, and account for the pay-as-you-go portions. MOTION: It was moved, seconded and duly carried to bring this item back to the Committee in December, along with the Reserves Study. 9. FAHR97-78: RECEIVE, FILE AND APPROVE THE DISTRICTS' COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR) FOR THE YEAR ENDED JUNE 30, 1997, PREPARED BY STAFF AND AUDITED BY MORELAND AND ASSOCIATES, CERTIFIED PUBLIC ACCOUNTS COMMITTEE DISCUSSION: Controller Mike White gave a slide presentation and overview of the Districts Comprehensive Annual Financial Report for the Year Ended June 30, 1997 (CAFR). He explained that the CAFR has been prepared for the fourth consecutive year. The previous three CAFRs earned the GFOA award. The purpose of the CAFR is to more fully disclose financing operations of the Districts. He also advised that CAFRs are looked on favorably by bond rating agencies. The Districts' net income increased by $0.5 million over last year to $1.6 million. The increase in net income is primarily attributed to a $1.8 million decrease in operating expenses and $5.6 million decrease in other non-operating expenses. Some of these expense decreases are due to reductions in staffing levels and a $5.6 million decrease in the liability claim paid in 1995-96. These positive impacts on net income were somewhat offset by a $6 million decrease in user fee revenues and a $1.1 million decrease in property tax revenues. Total cash and investments decreased by $7.2 million. Joint Operating expenses decreased by $1.8 million or 2.0% over the prior year. The cost per million gallons of wastewater treated per day decreased to $526 from the previous year's $552. Mike Moreland, of Moreland and Associates advised that his Accounting firm found no material weaknesses in the Districts' financial reporting. His staff has met with Districts' staff and nothing significant was brought up at that meeting. He also advised that financial records are normally retained for two years. Personnel and payroll records may need a longer retention period, according to state laws relating to those types of records. Minutes of Finance, Admi11 ..,nd Human Resources Committee Page 6 November 12, 1997 MOTION: It was moved, seconded and duly carried to receive, file and approve the Districts' Comprehensive Annual Financial Report (CAFR) for the year ended June 30, 1997, prepared by staff and audited by Moreland and Associates, Certified Public Accountants, and forward to the Joint Boards. INFORMATIONAL PRESENTATIONS There were none. CLOSED SESSION There was no closed session. OTHER BUSINESS, COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY None. MATTERS WHICH A DIRECTOR WOULD LIKE STAFF TO REPORT ON AT A SUBSEQUENT MEETING None. MATTERS WHICH A DIRECTOR MAY WISH TO PLACE ON A FUTURE AGENDA FOR ACTION AND STAFF REPORT None. FUTURE MEETING DATES The next Finance, Administration and Human Resources Committee Meeting is scheduled for Wednesday, December 10, 1997, at 5:30 p.m. ADJOURNMENT The meeting was adjourned at 7:30 p.m. Submitted by: ~!2~! ~IUU.J Finance, Administration and Human Resources Committee Secretary H:\WP .OTA \FIN\221 0\CRANE\FAHR\FAHR.97\NOV\11 MIN-97.DOC 0 0 z en m z --1 0 )> r-m z C )> :;o FAHR COMMITTEE Meeting Date ToJt. Bds. 12/10/97 AGENDA REPORT It.em~umber It.em Number County Sanitation Districts of Orange County, california FROM: Gaiy Streed, Director of Finance Originator: Steve Kozak, Financial ManagerJJ/L- SUBJECT: Certificates of Participation (COP) Monthly Report (All Districts) (FAHR97-80) GENERAL MANAGER'S RECOMMENDATION Receive and file Certificates of Participation (COP) Monthly Report SUMMARY Since June 1995, the daily rate COP program remarketing agents have been PaineWebber for the Series "An and the 1993 Refunding COPs, and J.P. Morgan for the Series "C" COPs. Most fixed rate Series "8" COPs have been refunded and the 1992 Refunding COPs have always been remarketed by PaineWebber in a weekly mode. PROJECT/CONTRACT COST SUMMARY None. BUDGET IMPACT D This item has been budgeted. (Line item: ) D This item has been budgeted, but there are insufficient funds. D This item has not been budgeted. C8l Not applicable (information item) ADDITIONAL INFORMATION Two graphical reports are attached. The first graph entitled, "CSDOC COP Rate History Report, October 1997," shows the variable interest rates on each of the daily rate COPs since the last report, and the effective fixed rate for the two \lleadldata2w,op.dlalfin\2210\c:rane\FAHRIFAHR.971DEC\FAHR97-80.doc Rll\llsed: 10117197 Page 1 refunding issues which are covered by an interest rate exchange agreement commonly called a "swap." The second bar chart entitled, "Comparative Daily COP Rate History Report, October 1997 ," shows the performance of the Districts' Daily Rate COPs as compared to a composite index rate, which represents the average rate of six similar variable rate daily reset borrowings. Variable rates historically rise at the end of each calendar quarter, and especially at year-end, because of business taxes and statements. The rates decline to prior levels immediately in the following month. Staff will maintain our continuous rate monitoring and ongoing dialog with the remarketing agents and rating agencies to keep the Committee fully informed about developments in the program as they occur and at each meeting. ALTERNATIVES None. CEQA FINDINGS None. ATTACHMENTS 1. Graph -Comparative Daily COP Rate History Report 2. Graph -CSDOC COP Daily Rate History Report 3. Table -Daily COP Rate Comparisons -Jan. -Nov. 1997 GGS:SK:lc llleadldata2'1Np.dlalfin\2210\c,ane\FAHR\FAHR.971DECIFAHR97-80.doc RlllliMd: 10117197 Page2 Prepared by Finance, 12/3/97, 8:38 AM COMPARATIVE DAILY COP RATE HISTORY REPORT NOVEMBER 1997 6.00 -r--------------------------------------------, 5.00 -t-----------------------------------------------1 4.00 -~ ~ ~ 3.00 ct Q: 2.00 1.00 0.00 DATE r--r--r--r--r--r--r--r--r--r--r--CJ) CJ) CJ) CJ) C') CJ) C') CJ) CJ) CJ) CJ) C: .J:J ..: ..: > C: :i ci ci +: >-m Q) m c.. m :::::, :::::, Q) u 0 -, u. ~ <( ~ -, -, <( en 0 z IIICSDOC •COMPOSITE INDEX G :\excel .dta\fi n\2220\geggi\Finance\dailycopi ntrate .xis ~ .) .-;.' G) " iii" C ii, "C X )> m 0 RATE(%) ii, !!!.. --t a. != m ~ m :ii 0 ..a. N w ~ en a, "Tl :::, :i" 1\3 0 0 0 0 0 0 0 m I\) :::, I\) 0 0 0 0 0 0 0 0 0 _CD c6 01-Jan-97 ~ CD t:::! IC IC t:::! ~ co s· 15-Jan-97 _ _. m co :::, w 0 $ UI 29-Jan-97 )> )> ~ -I m :I: I 12-Feb-97 cii -I 26-Feb-97 i I ~ I i I ; I I co 0 -I en 12-Mar-97 + ~ I * • I I C 0 26-Mar-97 t I ~ I f ' I I 0 09-Apr-97 t I ~ I * • I I 0 0 23-Apr-97 "'tJ ++ zC )>-U 07-May-97 0~ -m G>-· ~ <• (n(1) 21-May-97 :e ~ m -< n> (1) C' ~ ~ C' 04-Jun-97 (1) .., 18-Jun-97 + I ~I * • I I m -I :::c m 02-Jul-97 ..J., :J:: t+ (0 -16-Jul-97 <D en (nC- """ -I 0~ C'), 0 G)~ 30-Jul-97 CDC ~ ~.., ~ 13-Aug-97 :e~ II) 27-Aug-97 ::a m 10-Sep-97 t I '\ I T I T I I "'tJ 0 24-Sep-97 t I I~ ; I ; I I ::a -I 08-Oct-97 22-Oct-97 05-Nov-97 19-Nov-97 l...t /< Prepared by Finance, 12/3/97, 2:10 PM Jan-97 Feb-97 Mar-97 Apr-97 May-97 Jun-97 Jul-97 Aug-97 Sep-97 Oct-97 Nov-97 AVERAGE DAILY COP RATE COMPARISONS(%) JAN -NOV, 1997 CSDOC $100M $98.5M $46M Series"A" Series"C" Series 93 Ref PaineWebber J.P. Morgan PaineWebber 3.37 3.36 3.37 2.85 2.90 2.85 2.79 2.84 2.79 3.55 3.62 3.55 3.79 3.86 3.79 3.80 3.82 3.80 3.17 3.12 3.17 3.17 3.20 3.17 3.53 3.63 3.53 3.46 3.51 3.46 3.68 3.69 3.68 3.38% 3.41% 3.38% ESTIMATED ANNUAL REMARKETING FEES PER $100M PAR AMOUNT $ 3,378,184 $ 3,413,636 $ 3,378,182 * FOOTNOTE Composite index consists of the following COP transactions: . IRWD, Series 86, $60M, Smith Barney . IRWD, Series 93 "A" Refunding, $87.6M, Bankers Trust . IRWD, Series 93 "B" Refunding, $41.8M, J.P. Morgan . IRWD, Series 95 Refunding, $117.8M, PaineWebber Composite Index* 3.27 3.08 2.70 3.59 3.71 3.79 3.10 3.05 3.60 3.38 3.68 3.36% $ 3,359,091 . Western Riverside Co. Reg. Wastewater Auth., Series 96, $25.4M, PaineWebber . Orange Co., Irvine Coast Asst. Dist. 88-1, $94.5M, J.P. Morgan G:\excel.dta\fin\2220\geggi\Finance\COPdaily$rate comparison FAHR COMMITTE~ AGENDA REPORT County Sanitation Districts of Orange County, california FROM: Mike Peterman, Director of Human Resources fi\1»@ Prepared by: Patty Steeves, Human Resources Analyst SUBJECT: Employment Status Report. CF AHR 9 7 -8 1 ) GENERAL MANAGER'S RECOMMENDATION Receive and file the Employment Status Report. SUMMARY Meeting Date 12/10/97 Item Number 3. See Attachments: Employment Status Report and 5-Year Staffing Plan Chart. PROJECT/CONTRACT COST SUMMARY BUDGET IMPACT D This item has been budgeted. (Line item: ) D This item has been budgeted, but there are insufficient funds. D This item has not been budgeted. C8J Not applicable (information item) ADDITIONAL INFORMATION The Districts have a full-time Equivalent (FTE) headcount of 544.25 as of November 24, 1997. The actual body count is 555. The current FTE headcount is equivalent to a 2.8% reduction from the budgeted 559.75 positions. The one-month turnover rate for November 1997 was .18%. There was one external hire during the month of November. A part-time Secretary for Division 230, Purchasing & Warehousing. Internal or external recruitment is in process for ten full-time and one part-time postions. The Districts are currently seeking internal or external candidates for the foHowing replacement postitions: Storeskeeper and Storeskeeper Assistant (Purchasing & Warehousing), Programmer Analyst (Programming, DataBase & Comm.) IT Technician II (End User Support), Two H:lwp.dta\hr\2520\steeves\AlnRevised Agenda Report Form-1017971 .dot Revised: 10/17197 Page 1 Engineers and Secretar·--1oesign & Planning Engineering), ('bi-ef Scientist (Environmental CompliL .,k & Monitoring), Two Operator in .lning/Plant Operator (Plant 1 Operations), and Intern (O&M Process). It is projeccted that after filling these positions, the Districts FTE headcount will be 550. ALTERNATIVES CEQA FINDINGS ATTACHMENTS November 24, 1997 Employment Status Report. Performance to 5-Year Staffing Plan. Ps H:\wp.dlalhr\2520\steeves\All\Revised Agenda Report Form-1017971.dot Revised: 10/17/97 Page2 Employment Status Report Run Date: 1-Dec-97 -Regular Regul.-r Total F Regular Part-time Part-time FTE Vacant FTE FTE ' I Full-time 20hours 30hours Contract lntem LOA Count Positions 97-98 98-99 110 -General Management Administration 4 0 0 0 0 0 4 2 6 5.5 Total General Management 4 0 0 0 0 0 4 2 6 5.5 210 -Finance Administration 4 0 0 0 0 0 4 0 4 4 220 -Accounting 18 0 0 0 0 1 19 0 19 18 230 -Purchasing & Warehousing 12 1 0 0 0 1 14 2 16 16 Total Finance 34 1 0 0 0 2 37 2 39 38 310 -Communications 9 0 0.75 0 0 0 9.75 0 9.75 9.75 Total Communications 9 0 0.75 0 0 0 9.75 0 9.75 9.75 410 -General Services Administration 5 0 0 0 1 6 0 4 4 420 -Collection Facilities Maintenance 15.5 0 0 0 0 0 15.5 2 17.5 18.5 430 -Plant Maintenance 39.5 0 0 0 0 0 39.5 1 40.5 38.5 Total General Services 60 0 0 0 0 1 61 3 62 61 460 -End Users Support 9 0 0 0 0 0 9 0 9 11 470 -Programming, Data Base & Comm. 9 0 0 0 0 0 9 1 10 11 490 -Plant Automation 7 0 0 0 0 0 7 0 7 7 Total Information Technology 25 0 0 0 0 0 25 1 26 29 510 -Human Resources Administration 5 1 0.75 0 0 0 6.75 0 6.75 6.75 520 -Education & Training 5 0 0.75 0 0 0 5.75 0.25 6 6 530 -Safety & Emergency Response 5 0 0 0 0.5 0 5.5 0 5.5 5.5 Total Human Resources 15 1 1.5 0 0.5 0 18 0.25 18.25 18.25 610 -Technical Services Administration 3 0 0.75 0 0.5 0 4.25 0.75 5 6 620 -Environmental Compliance & Monitoring 15 0 0 0.5 1 3 19.5 1.75 21.25 21 .5 630 -Environmental Sciences Laboratory 30 1 0 0 0.5 2 33.5 1.5 35 30 640 -Source Control 36 0 0.75 0 0 0 36.75 2 38.75 37.75 Total Technical Services 84 1 1.5 0.5 2 5 94 6 100 95.25 710 -Engineering Administration 3 0 0 0 0 0 3 0 3 3 720 -Planning & Design Engineering 27 0 0.75 0 0.5 0 28.25 2.75 31 31 730 -Construction Management 36 0 0 1 0 0 37 0.5 37.5 38 Total Engineering 66 0 0.75 1 0.5 0 68.25 3.25 71.5 72 810 -0 & M Administration 2 0 0 0 0 0 2 0 2 2 820 -0 & M Process Support 12 0 0 0.25 0 0 12.25 0.5 12.25 11.25 830 -Plant 1 Operations 36 0 0 0 0 1 37 2 37 37 840 -Plant 2 Operations 43 0 0 0 0 0 43 0 42 40 850 -Mechanical Mice 54.5 0 0 0 0 0 54.5 0 54.5 50.5 860 -Electrical & Instrumentation Mtce 58.5 0 0 0 0 0 58.5 0 58.5 58.5 870 -Cogeneralion 12 0 0 0 0 0 12 1 13 13 880 -Air Quality & Special Projects 7 0 0 0 1 0 8 0 8 8 Total Operations & Maintenance 225 0 0 0.25 1 1 227.25 3.5 227.25 220.25 Total Staffing 5221 . 31 4.51 1.751 41 9 544.25 21 559.75 549 .. H:lexcel.etalhr\steeveslempdiva.xls Performance to 5-Y ear Staffmg Plan 640 -------------===:::~~;;=== 620 1::~======----1:===~~======1 600 1 ........ ! ~--... ----+-FTE Headcount 520t= +--==~~~~~~~~ sooL- 480 JASON DJ FM AM J1J AS ON DJ FM AM J I FY 96-97 [ I FY 97-98 I .• j J _) I :J , FAHR COMMITTEE Meeting Date 12/10/97 AGENDA REPORT Item ~mber County Sanitation Districts of Orange County, California FROM: Gary Streed, Director of Finance Originator: Gary G. Streed, Director of Finance SUBJECT: Costs of Workplace Investigation (All Districts) (FAHR97-82) GENERAL MANAGER'S RECOMMENDATION Receive and file final staff report regarding Costs of Workplace Investigation. SUMMARY Last year the Districts conducted a workplace investigation in order to determine the extent of activities taking place during working hours in the workplace that were contrary to policy and could have been detrimental to productivity and safety. On the anniversary of that investigation, it is appropriate to recap the results and attempt to put the incident behind us as soon as possible. PROJECT/CONTRACT COST SUMMARY BUDGET IMPACT D This item has been budgeted. (Line item: ) D This item has been budgeted, but there are insufficient funds. D This item has not been budgeted. D Not applicable (information item) ADDITIONAL INFORMATION As reported in the memorandum from General Counsel which was distributed to the Directors in the November Board letter, there were 55 employees who were subject to the procedural enforcement by the Districts. The process resulted in 14 resignations, 19 suspensions and 22 terminations. The original decisions of the Districts have been upheld through the formal outside review process in 49 of the 55 cases. Of the remaining 6 cases, a negotiated and modified discipline agreement was reached in 5 cases, and 1 case decision was modified by the l\leadld;,ta2'1Np.dtallin\2210\crane\FAHRIFAHR.971DECIFAHR97.a2.dac Revised: 10117197 Page 1 ToJt. Bds. Item Number Hearing Officer and the discipline was reduced. As of this writing, the statute of limitations in which legal proceedings could be filed against the Districts has expired for all but 5 cases. To date, only 1 case for improper discipline has been filed. This was a suspension case, not a termination. We hope to have more to report at the Committee meeting. It is impossible to report the total costs and benefits of this process, since many of them are intangible. However, we can report the out of pocket costs and the payroll savings that have resulted from not refilling the vacated positions through the end of October, 1997: Investigation & Discipline Phase Confidential Management Services Woodruff, Spradlin & Smart Staff Time & Administrative Leave Subtotal Uaemployment & Evidentiary Hearing Phase Confidential Management Services Woodruff, Spradlin & Smart Rutan & Tucker, Independent Hearing Master Four Hearing Officers Court Reporters Staff Time Subtotal Total Costs Total Payroll Savings, including benefits Net Sayings to October 31, 1997 $263,930 51,238 373,355 $688,523 $67,052 281,022 44,037 87,982 27,372 38,153 $545,618 $1,234,141 1,350,814 $116,673 The Directors may be interested to know that the Executive Management Team will be meeting with all of the Hearing Officers and the Hearing Master in December to review the investigation process and practice, as well as the discipline and hearing process and results. Even though nearly all of the management decisions were upheld, we know that we can learn from our experience and improve the process. Additionally, there will be some costs in the next few months, as one case has been filed in the judicial system and it will require costs to defend. The first contract has recently been let for a contractor to clean some of the sewers formerly cleaned by staff, and a staff person has been reassigned to oversee these contractors. However, estimated salary savings continue at approximately $144,000 each month, or$, 1,728,000 per year, as the remaining positions are not filled. \lleadldata2\Np.dtalfinl2210\ctane\FAHRIFAHR.971DECIFAHR97-a2.doc RMed: 10/17197 Page2 I I ALTERNATIVES CEQA FINDINGS N/A ATTACHMENTS Memo from General Counsel to Don McIntyre GGS:lc \~eadldala2'wp.dtalfinl2210lcnlnelFAHRIFAHR.1171DECIFAHRll7-82.doc RIii/Md: 10/171117 Page3 ' •' LAW OFFICES OF WOODRUFF, SPRADLIN & SMA A PROFESSIONAi. CollPOIIATION TO: FROM: DATE: RE: MEMORANDUM Mr. Donald F. McIntyre General Manager General Counsel November 6, 1997 Districts' Drug Investigation Final Report I am pleased to submit to you this final report concerning the drug investigation undertaken by your Staff with the assistance of Confidential Management Services, Inc. While this was a particularly difficult series of events for the Districts to encounter, I will restate, as I have told you previously, that I think the overall manner in which the investigation was undertaken was exemplary, particularly in terms of the Management and Supervisory level of involvement of your employees, in that they approached it from a purely professional and impersonal perspective. As a result of the investigative portions of this proceeding, there were 55 employees who were subject to the procedural enforcement by the Districts, which resulted in 14 resignations, 19 suspensions, and 22 terminations. The original decision of the Districts' Management has been implemented without change in 49 of the 55 cases. Of the remaining 6, 5 resulted in a negotiated settlement in which some form of modified discipline was imposed, and 1 appellate hearing was likewise modified but resulted in the imposition of some discipline upon the individual employee. All but 6 cases have now passed the statute of limitations in which legal proceedings could be filed against the Districts, and all indications would point to the fact that the other 6 are not likely to initiate litigation. It is our opinion that those results are virtually unheard of and would far exceed the best expectations of any Management. You and your Staff are to be highly commended in the manner in which they processed each of the individual cases. Following is a condensed summary of the actual disciplinary actions involving the 55 employees: Total Employees Subject to Discipline - Employees Resigned with Action Pending - Employees Suspended - Employees Terminated - Number of Appeals Filed - 55 14 19 22 26 (21 Terminations; 5 Suspensions) Mr. Donald F. McIntyre General Manager November 6, 1997 Page 2 Cases Settled by Negotiation - Appeals Withdrawn Without Hearing - Appeals Heard by Independent Hearing Officers - Number of Management Decisions Affirmed - Number of Management Decisions Modified - 5 (1 Termination; 4 Suspensions) 1 20 19 1 Lastly, I think it is particularly noteworthy to highlight the dedicated effort made by each of the 4 Hearing Officers in the preparation for the hearings; the conduct of the hearings; and the thoughtful, detailed, written decisions that they rendered in each case. I also believe our decision to engage independent special counsel to provide advice to the Hearing Officers was excellent. Mr. Ski Hanison ·of Rotan & Tucker, provided exemplary service to the Hearing Officers, and in helping to insure an orderly and legally correct process during the course of the 20 hearings. Absent the initiation of litigation by the 6 employees who still have time to do so, we can consider this matter closed, although we do look forward to the meeting with the Hearing Officers on December 3, 1997 for a de-briefing and receipt of their perspective of the process. TLW:pj cc: Mr. 8.P. Anderson/ Mr. M. Peterman )> 0 -I -0 z --I m s: en FAHR COMMITTEE Meeting Date 12/10/97 AGENDA REPORT Item Number s: County Sanitation Districts of Orange County, California FROM: Gary Streed, Director of Finance Originator: Gary Streed, Director of Finance SUBJECT: Financial Issues between SAWPA and CSDOC (All Districts) (FAHR97-83) GENERAL MANAGER'S RECOMMENDATION To Jt. Bds. 12/17/97 Item Number Accept SAWPA's explanation of a sincere difference of interpretation, and waive the interest amounts assessed by staff on the late payments for treatment plant capacity. SUMMARY In 1997, after considerable discussion at both staff and Board levels, a revised agreement was reached with the Santa Ana Watershed Project Authority (SAWPA}. Principally, this agreement changed the terms of additional treatment plant capacity purchases. As of November, SAWPA has paid for its additional capacity in accordance with the agreement. In the meantime, staff assessed interest on our due amounts in an attempt to speed resolution of differences. Staff and General Counsel are now requesting authority to waive that interest assessment which was not clearly required by the agreement. PROJECT/CONTRACT COST SUMMARY None. BUDGET IMPACT D This item has been budgeted. {Line item: } D This item has been budgeted, but there are insufficient funds. D This item has not been budgeted. ~ Not applicable {information item} H:\wp.cltaVin\2210\cfanelFAHRIFAHR.97\0EC\FAHR97-a3.dac RaviNd: 10/17197 Page 1 ADDITIONAL INFORMATION In 1972, the Districts· entered into a SO-year agreement with the Chino Basin Municipal Water District to provide transmission, treatment and disposal for up to 30 mgd of waste brine water from their wastewater treatment facilities. The purpose of this agreement was to provide a means to dispose of the brine waters without impacting the groundwater supply for Orange County. Terms of the agreement included construction of the Santa Ana River Interceptor, a Clean Water Grant funded sewer, and the purchase of capacity in the Joint Works Treatment Facilities. This agreement was later assigned to the Santa Ana Watershed Project Authority (SAWPA). After several years of discussion and debate at various levels, the agreements were rewritten, simplified in 1996 and approved by all parties in early 1997. Most of the changes in the new agreement relate to the need and process for SAWPA to acquire additional capacity in the Joint Works Treatment Facilities. At the time of the new agreement, they had paid for only 8 mgd of their potential 30 mgd capacity rights. The agreement required SAWPA to purchase a 9th mgd of capacity concurrent with execution of the agreement, and to purchase additional capacity in 1 mgd increments as required. Invoices were issued in March 1997 for the 9th mgd in the amount of $4,542,847 and for the 10th mgd in the amount of $5,084,942. In April 1997, SAWPA made a payment of approximately 1/10 of the amounts due for each purchase, based upon their interpretation of a 1 O year payment option in the agreement. In response to staff's discussion and explanation, SAWPA remitted the balance due on the 9th mgd in August. District and SAWPA staff have met several times since and have agreed upon an interpretation of the payment terms. As of November 3, 1997, SAWPA has paid the full amount of the invoice for the 9th mgd and has paid an amount equal to 1/10 of the total due for the 10th mgd, including interest on an amortized basis. The issue before the Committee is whether or not interest must, or should, be charged for the period between the due date of the invoices and their ultimate payment. The agreement is silent on the issue and does not address how or whether to assess penalties or interest for late payments. Staff did, however, invoice SAWPA for interest in the amount of $899.99 per day for the late payment of the total due for the 9th mgd. SAWPA reports that they have never charged interest to their customers, that they did not cause us to incur any out-of- pocket costs, and that they had a sincere misunderstanding of the payment terms, but that they now have the same understanding as District staff and General Counsel regarding the 10-year payment provisions. In a letter, attached, from the Chairman of the SAWPA Commission, they have acknowledged their new understanding, have apologized for the delay and the misunderstanding and have requested relief from the late payment charge. \llead\data2\Np.dlallin\2210\cnlne\FAHR\FAHR.97\0EC\FAHR97-a:3.doc R..tsed: 101171117 Page2 Also attached is a memo from General Counsel that indicates in the last paragraph that the Directors could waive the administratively-imposed interest, which is not a term of the agreement, if they so desired without running contrary to the agreement, State law or the State Constitution. Staff recommends that the Directors accept SAWPA's explanation of a sincere difference of interpretation and waive the interest amounts assessed by staff on the late payments. ALTERNATIVES None. CEQA FINDINGS None. ATTACHMENTS 1. Letter from Chairman of SAWPA Commission 2. Memo from General Counsel 3 SAWPA Agreement. GGS:lc \\leadldaba2'wYp.dtallin\2210\crane\FAHRIFAHR97\0EC\FAHR97-83.doc RBYised: 10/17197 Page3 ~ ·') Attachment No. 1 Santa A~ J. Watershed Proic~c Authority November 6, 1997 Mr. John Collins, Joint Chair County Sanitation Districts of Orange County 10844 Ellis Avenue Fountain Valley, California 92728 Dear John, MMISSION FOR THE PROJECT AUTHORITY INO BASIN MUNICIPAL WATER DISTRICT 3TERN MUNICIPAL WATER DISTRICT ANGE COUNTY WATER DISTRICT .~ BERNARDINO VAL.LEY MUNICIPAL WATER DISTRICT .STERN MUNICIPAL WATER DISTRICT NERAL MANAGER IL M. CLINE It was a pleasure meeting with you earlier this week to discuss the financial issues between SA WP A and CSDOC. On behalf of the SA WP A Commission I wish to thank you, Peer Swan and Don McIntyre for arranging your schedules to enable Dick Hall and I to proceed with the resolution of this matter. As was discusse'a, SA WP A has re-examined the provisions of the "new" agreement between our agencies and concurs with your understanding of the terms and conditions involved in the acquisition of additional treatment capacity. Accordingly, we have submitted a check in the amount of $209,104 to account for the difference in the interest payment due to CSDOC for the first year installment of the 10-year plan to acquire the 10th MGD of capacity. SA WP A will immediately remit the second annual installment payment for the 10th MGD upon receipt of the invoice from CSDOC, anticipated to be on or about April 17, 1998. It is our hope that the initial difference of opinion in the method to calculate the cost of purchasing additional capaqity has not harmed the spirit of cooperation we have enjoyed during the effort to produce the "new" agreement. Inasmuch as there was a sincere difference of interpretation of the agreement terms, which resulted in the delay, it is our additional hope that your Board will consider waiving the late payment charge associated with this transaction. If you require additional information or wish to discuss this request, please do not hesitate to contact the SA WP A office. 11?1~ Ste~Hng A venue, Riverside, CA 92503 • (909) 785-5411 Adm1mstralion FAX (909) 785-7076 • Planning FAX (909) 352-3422 LAW OFFICES OF WOODRUFF, SPRADLIN & SMr.....,T A PIIOFESSIOIW. CoRPORATJON TO: FROM: DATE: RE : MEMORANDUM Joint Chairman and Members of Boards of Directors County Sanitation Districts General Counsel November 26, 1997 Capacity Purchases -SAWPA At tachrnent No. 2 I submit this Memorandum in response to your recent inquiry concerning the remaining outstanding balance of $108,578.78, which was the amount of interest invoiced by the Districts to SAWPA for the purchase of the 9th MGD as of April 19, 1997, and which bore interest at the rate of 8. 016% per annum for 122 days through August 19, 1997. Similarly, interest in the amount of $9,184.00 was assessed for the 200 late days through November 3, 1997, on the outstanding installment payment for the 10th MGD. The imposition of this interest charge was done administratively, and at the rate identical to the terms of the Agreement between SAWPA and the Districts dated July 24, 1996, as it relates to the purchase of the 10th MGD, providing for 10-year deferred annual payments. The 1996 Agreement does not expressly provide for the District to impose or obligate SAWPA to pay interest on any amounts that are due and owing. Section 2(A)(3) simply says that the Districts will provide to SAWPA an invoice stating the amount due, and that failure to provide a timely invoice does not negate SAWPA's obligation to pay any amounts owed to the Districts. It is therefore my opinion that without running contrary to the mandates of either the State Constitution, State law, or the terms of this Agreement, the Districts could elect to waive the requirement of SAWPA to pay the administratively-imposed interest. I do believe the Districts could legally enforce the collection, but the waiver would be permissible. TLW:pj cc: Mr. D.F. McIntyre Mr. G.G. Streed THOMAS L. OODRUFF GENERAL COUNSEL Attachment No. 3 WASTEWATER TREATMENT AND DISPOSAL AGREEMENT THIS AGREEMENT is made and entered into, to be effective the 24th day of July 1996, by and between COUNTY SANITATION DISTRICTS NOS. 1, 2, 3, 5, 6, 7, 11, 13 and 14 OF ORANGE COUNTY, CALIFORNIA (collectively "Districts"), each of which is a county sanitation district organized and existing pursuant to California Health & Safety Code section 4700 et seq., and the SANTA ANA WATERSHED PROJECT A UTIIORITY (" SA WP A"), a joint powers agency organized and existing pursuant to California Government Code section 6500 et seq. A. DEFINITIONS As used in this Agreement, the following terms shall have the meanings herein set forth: (1) "Adjusted Capital Facilities Connection Charge" ("Adjusted CFCC"): Shall mean District No. 2's charge for connection of a dwelling unit to District's sewerage system, less the component amount in this charge for construction and rehabilitation of District's collection facilities. Currently, the Capital Facilities Connection Charge is $2,350.00 and the Adjusted Capital Facilities Connection Charge is $1,690.00. (2) "Biochemical Oxygen Demand" ("BOD"): The measure of biodegradable organic material in Wastewater as represented by the quantity of oxygen utilized over a period of five days at 20 degrees centigrade and as determined by testing methods approved by the United States Environmental Protection Agency ("EPA"), as set forth in 40 CFR Part 136, or subsequent amendments thereto. (3) "Chino Basin Municipal Water District" ("CBMWD"): CBMWD is a municipal water district organized and existing pursuant to California Water Code section 71000 et seq. (4) "Class I User": Any user who discharges Wastewater that: (a) Is subject to Federal Categorical Pretreatment Standards; (b) averages 25,000 gallons per day or more of regulated process Wastewater; (c) is determined by the Districts' General Manager to have a reasonable potential for adversely affecting the Districts' operations or for violating any pretreatment standard, local limit, or discharge requirement; or (d) may cause, as determined by the Districts' General Manager, pass through or interference with the Districts' sewerage facilities. WOODRUFF, SPRADLIN & SMART 32319_1 1 July 11, 1996 (5) "Disposal Costs": An amount which includes all costs incurred, directly or indirectly, for treatment and disposal of Wastewater discharged from SA WPA's SARI Service Area to Districts' facilities. These costs shall be calculated in the same manner as Districts' charges for use for Class I Users less District No. 2's (1) operations and maintenance charge for flow; and (2) debt service for flow, BOD and Suspended Solids. The parties acknowledge that (1) the remaining BOD component of the Disposal Costs may ultimately be changed to a Chemical Oxygen Demand component; and (2) the Disposal Costs may be adjusted annually by the District No. 2 Board of Directors to reflect increases or decreases in the costs incurred by District No.· 2. (6) "Districts": Collectively, County Sanitation Districts Nos. 1, 2, 3, 5, 6, 7, 11, 13 and 14 of Orange County, California, which are parties to this Agreement and to the Joint Ownership Operation and Construction Agreement dated March 10, 1971, superseded by.-.-. a revised Joint Agreem~nt effective July 1, 1985 ("Joint Agreement"), and/or any amendmen~·~:.: . , or supplements thereto, and any Sanitation Districts that are formed after the effective date oL:-: this Agreement and which become a party to the Joint Agreement, or if an agency reorganizatioti_ '· should occur, the successor agency/agencies to these County Sanitation Districts. Any ac~, .. __ decision or forbearance by Districts shall be evidenced by action of a majority of the nine.:..:: Sanitation Districts. The term includes plural and/or possessive where appropriate. (7) "District No. 2": County Sanitation District No. 2 of Orange County, California, or if an agency reorganization should occur, the successor agency to District No. Z-: ~ : (8) "Districts' Ordinance": The Districts' ordinance entitled "Wastewater Discharge Regulations", effective February 7, 1992, including any subsequent amendments:1.: thereof or successor ordinances thereto. _ ._., . (9) "Reclaimable Wastewater": Shall mean the liquid and solid waterborne wastes of such character as to permit satisfactory disposal, within the Santa Ana River.:,_ Watershed. (10) "MGD": Shall mean million gallons per 24 hour day. (11) "Monthly Average Flow": The average rate of Wastewater flow which passes through a flow meter during any calendar month, expressed in MGD. (12) "Person": Shall mean any individual, partnership, firm, association, corporation or public agency, including the State of California and the United States of America. (13) "Santa Ana River Interceptor" ("SARI"): The interceptor sewer of District No. 2, as shown on Exhibit "B" attached to the Waste Water Interceptor Capacity Agreement. (14) "Santa Ana Watershed Prqject Authority (SA WPA)": The agency which is responsible for developing and implementing long-range plans and projects for managing, preserving, and protecting the quality of water .supplies in the Santa Ana River Watershed. The WOODRUFF, SPRADLIN & SMART 32319_ 1 2 July 11, 1996 member agencies of SAWPA are presently CBMWD, Eastern Municipal Water District, Orange County Water District, San Bernardino Valley Municipal Water District, and Western Municipal Water District. (15) "SAWPA's SARI Service Area": The total area within the jurisdictional boundaries of SA WP A's member agencies, excluding any area within the County of Orange. (16) "Suspended Solids": Any insoluble material contained as a component of Wastewater and capable of separation from the liquid portion of the waste by filtration as determined by EPA approved testing methods. Suspended solids are sometimes denoted herein by "SS". (17) "Treatment and Disposal Right": A right of SAWPA to deliver (through the SARI to Districts' facilities) and an obligation of Districts to receive, treat and dispose of a stated flow of Wastewater, expressed in terms of Monthly Average Flow. _ · (18) "Treatment and Disposal Right Charge" (hereinaner "Treatment Right Charge"): Shall mean the charge applicable to the purchase of a 1 MGD increment of the Treatment and Disposal Right. The Treatment Right Charge applicable upon execution of this Agreement shall be as follows: (Flow, gpd 1)/399 gpd x Adjusted CFCC x 42% + (BOD, lbs/day)/0.83 lbs/day x Adjusted CFCC x 26% + (SS, lbs/day)/0.83 lbs/day x Adjusted CFCC x 32 % Current application of the Treatment Right Charge provides the following acquisition charge for 1 MGD increment of the Treatment and Disposal Right: Flow (1 mgd) - BOD (320 mg/L = 2,669 lbs/day) - SS (270 mg/L = 2,253 lbs/day) = TOTAL: $1,778,947.00 $1,412,961.00 $1,467,299.00 $4,659,207.00 The Treatment Right Charge formula may be periodically adjusted by District No. 2 to reflect (1) changes in the District No. 2 Capital Facilities Connection Charge; (2) adjustments in the allocations for District No. 2 costs for collection facilities; and (3) adjustments in the treatment cost allocations for Flow, BOD and Suspended Solids discharged from SA WP A's SARI Service Area to Districts' facilities; and (4) the actual BOD and Suspended Solids concentrations discharged from SA WP A's SARI Service Area to Districts' facilities, to appropriately reflect the Districts' treatment costs for these discharges. 1 gpd -gallons per day WOODRUFF, SPRADLIN & SMART 32319_1 3 July11,1996 (19) "Wastewater": Shall mean all liquid-carried wastes and wastewater of the community, and shall include all wastewater from any producing, manufacturing, processing, agricultural, or other similar operations. (20) "Waste Water Interceptor Capacity Agreement": An agreement between CBMWD and District No. 2, effective on April 12, 1972, and providing for the acquisition by CBMWD of a 30 MGD interceptor capacity right in the existing and expanded interceptor facilities of District No. 2. B. RECITALS 1. Districts are authorized by statute to contract with any district or governmental agency for the handling, treatment and/or disposal of Wastewater originating within or without their boundaries, if, in the judgment of the Districts' Boards of Directors, it is for _ the best interest of Districts to do so. 2. SA WP A is authorized by law to acquire, construct and operate facilities for the collection, treatment and disposal of sewage and Wastewater, and is authorized to join with one or more public agencies, private corporations, or other persons for the purpose of carrying out any of its powers. 3. On April 12, 1972, Districts and CBMWD entered into the Waste Water Treatment and Disposal Agreement (" 1972 Agreement") through which CBMWD acquired the right to acquire an ultimate Treatment and Disposal Right for 30 MGD of Wastewater flow to Districts' facilities. 4. On November 13, 1974, CBMWD assigned and transferred to SAWPA all of CBMWD's right, title and interest in the 1972 Agreement. To date, SA WP A has acquired a Treatment and Disposal Right of 8 MGD. 5. The parties aclmowledge that this Agreement provides a right to have Wastewater flows, identified herein, treated and disposed of at Districts' facilities. As set forth in the definition of "Treatment and Disposal Right", the parties contemplate that delivery of Wastewater to Districts' treatment and disposal facilities will occur through the SARI. This Agreement does not, however, provide SA WP A with any capacity rights for discharge of Wastewater through the SARI. Except as set forth in Section 27 herein, capacity rights in the SARI are governed solely by the Waste Water Interceptor Capacity Agreement. 6. SA WP A, including the Orange County Water District, and Districts are concerned with the continuing development of a regional water quality management program for SA WP A's SARI Service Area, consistent with Federal and State policies. The operation of the SARI for the disposal of Wastewater is a significant component of this program. WOODRUFF, SPRADLIN & SMART 32319_ 1 4 July 11, 1996 7. The parties acknowledge that the discharge of Reclaimable Wastewater to the SARI has occurred over time. It is the intent of the parties hereto that SA WPA will, in good faith, make all reasonable efforts to minimize Reclaimable Wastewater discharges to the SARI. 8. It is in the best interests of Districts and SA WP A to enter into an agreement whereby Wastewater originating in SA WP A's SARI Service Area upstream from Districts may be disposed of through existing and expanded facilities of Districts. C.COVENANTS IN CONSIDERATION of the premises and of the covenants, rights and obligations herein, the parties hereto covenant and agree as follows: 1. Treatment and Disposal Right. (a) . Grant of Right. Districts hereby grant and convey to SA WP A a Treatment and Disposal Right, as hereinafter provided, effective at the times provided in subparagraphs (c) and ( d) hereof. (b) Nature of Treatment and Diswsal Right. The right of SA WP A to deliver Wastewater under the Treatment and Disposal Right shall not be deemed a right to use any particular existing or expanded facility of Districts. Districts shall have sole discretion, as between Districts and SA WPA, with regard to the manner of treatment and disposal of such Wastewater. (c) Quantity of Treatment and Disposal Right. An ultimate_ Treatment and Disposal Right of 30 MOD Monthly Average Flow may be acquired by SA WP A in increments as herein specified. It is acknowledged that SA WP A has previously acquired a Treatment and Disposal Right of 8 MOD Monthly Average Flow. Concurrently with the execution of this Agreement, SA WP A shall pay Districts, at the current Treatment Right Charge rate, for the acquisition of an additional Treatment and Disposal Right of 1 MGD. Upon payment of these funds to Districts, SA WP A shall have a total Treatment and Disposal Right of 9 MGD. (1) The Districts' acknowledge that their connection charges are presently the subject of an internal review which may lead to an adjustment of these connection charges. If an adjustment of Districts' connection charges occurs which would have resulted in a reduced charge for the initial Treatment and Disposal Right to be acquired by SA WPA pursuant to Section l(c), the Districts shall credit SAWPA for the difference in the actual and reduced charge and shall apply the difference against the then-current obligations of SA WP A to Districts under this Agreement. (d) Effective Date and Term of Right. The effective date of the acquisition of the subsequent increment(s) of the Treatment and Disposal Right acquired herein by SA WP A shall be upon final payment of the sum herein specified therefor. The Treatment and Disposal Right, including the existing right and any increased increment thereof, shall continue in effect WOODRUl=F, SPRADLIN & SMART 32319_1 5 July 1 1, 1996 until April 12, 2046. The Parties acknowledge that it is possible that, within the term of this Agreement, consolidation or other fundamental changes may occur in the structural organization of Districts and/or SA WPA. It is the intent of the Parties that the rights and obligations of this contract will be binding on such changed organizations. It is contemplated that, at the end of the term of this Agreement, on April 12, 2046, SA WPA will, based upon the Districts' then current governance structure, join the Districts as a co-equal participant in the Districts' Joint Ownership Operation and Construction Agreement or any agreement which shall supersede or replace it. . Negotiations to this end shall be undertaken in good faith during the 45th year (2041) of this Agreement. In consideration of the capital costs paid by SA WP A, there shall be no additional initial capital cost to SA WPA for such joinder. In the event the Parties are not able to negotiate appropriate joinder of SA WP A wi.th the Districts on or before the end of the term of this Agreement and SA WPA's perpetual right is not otherwise confirmed by contract extension, for reasons other than the decision of SAWP A to abandon such right, the Districts shall repay to SA WP A an amount equal to the then current value of SA WP A's owned Treatment and Disposal Right in Districts' treatment and disposal system as defined by the formula in Definition (18) "Treatment Right Charge" at page 3 of this Agreement. 2. Capital Payments. In order to grant SA WP A a Treatment and Disposal Right, Districts have invested capital in treatment and ocean dis_posal facilities. In lieu of making its own capital investment in these physical facilities, SA WP A shall make the following payments for the Treatment and Disposal Right: (a) Capacity Increments. Additional Treatment and Disposal Rights may be acquired in increments of 1 MGD Monthly Average Flow. The purchase price therefor shall be payable as follows: (1) For F.ach 1 MGD Monthlv Average Flow Increment: SAWPA shall pay a sum equal to Districts' then existing Treatment Right Charge for each 1 MGD Monthly Average Flow increment of the Treatment and Disposal Right. SA WP A shall acquire additional increments of the Treatment and Disposal Right as follows: (A) Whenever SAWPA's Monthly Average Flow discharged to Districts' facilities exceeds SA WP A's then existing Treatment and Disposal Right, SA WPA shall acquire sufficient additional increments of the Treatment and Disposal Right so that SA WPA's total Treatment and Disposal Right exceeds that Monthly Average Flow. (For example, assuming SAWPA's existing Treatment and Disposal Right is 8 MGD and the Monthly Average Flow from March 1 through March 31 is 10.001 MGD, SA WPA shall acquire three additional 1 MGD increments of the Treatment and Disposal Right). (2) SAWPA may elect to pay for an additional increment(s) of the Treatment and Disposal Right over a 10 year period. If SA WP A so elects, the payments shall be made in 10 equal annual installments, which installments shall include a fixed rate of interest at the rate for ten-year United States Treasury Bills plus 1 % . This fixed rate of interest shall be determined by reference to the interest rate established at the auction of ten-year United States Treasury Bills occurring most recently b~fore SA WP A's exceedence of its Monthly Average WOODRUFF, SPRADLIN & SMART 32319_ 1 6 July 11, 1996 Flow. The first installment shall be paid within 45 days of the date of Districts' invoice to SA WP A. Each of the nine subsequent annual installments shall be paid no later than 45 days following the anniversary date of the exceedence. (A) If SA VIP A elects to proceed by installment acquisition, Districts shall recalculate the payment amount due for each annual installment using the average BOD and Suspended Solids loadings for the one year period immediately preceding the date each installment payment is due. The interest rate on each installment shall remain at the rate originally fixed pursuant to Section 2(a)(2). No credit shall be provided to SAWPA on an installment acquisition for any adjustment of Districts' connection charges except as specified in Section l(c)(l). (B) Upon SA WPA's written notice received by Districts at least 15 days in advance of the anniversary date of the initial exceedence, SA WP A may discontinue the acquisition of the increment(s) of the Treatment and Disposal Right as of that anniversary date. An acquisition may not be discontinued at any time otheir than on an anniversary date. Upon discontinuance in accordance with this Section, SA WP A shall have no further obligation to pay Districts for additional installments for the affected increment(s) of the Treatment and Disposal Right and no further right to discharge in accordance therewith. (C) If, following discontinuance of the acqms1non of an increment(s) of the Treatment and Disposal Right, SA WP A acquires an additional increment(s) of the Treatment and Disposal Right pursuant to Sections 2(a)(l) or 2(a)(2), SAWPA shall receive a credit toward the acquisition cost of the additional increment(s). The credit shall be equal to 75 % of the amount, excluding interest, previously paid by SA WP A pursuant to Section 2(a)(2) toward the earlier acquisition of the discontinued increment(s) of. the_ Treatment and Disposal Right. If the subsequent acquisition is an installment acquisition made pursuant to Section 2(a)(2), the credit shall be applied to the first installment(s) to be paid by SA WPA for the subsequent acquisition. The cost of the subsequent acquisition shall be at the Treatment Right Charge rate applicable at the time of the initial payment for the subsequent acquisition, plus interest as set forth in Section 2(a)(2). (3) Districts shall provide to SA WPA an invoice stating the amount due from SA WP A for the required capacity increment(s) and for any other amounts due pursuant to this Agreement. Failure to provide a timely invoice does not negate SA WPA's obligation to pay any amounts owed to the Districts. 3. Emergency Discharge. Notwithstanding the provisions of Section 2(a)(l)(A), if due to an operational emergency SA WP A seeks to discharge in excess of its then-existing Treatment and Disposal Right, SA WPA may do so for a period not to exceed ninety (90) days, without incurring the obligation to acquire an additional increment(s) of the Treatment and Disposal Right, provided that SA WP A fully complies with the provisions of this Section and all other provisions of this Agreement. WOODRUFF, SPRADLIN & SMART 32319_1 7 July 1 1, 1996 (a) Prior to or by the next business day following the commencement of the emergency discharge SA WP A shall provide written notice to Districts identifying the ( 1) nature of the emergency requiring the excess discharge; (2) the anticipated duration of excess discharge; and (3) the name of tne SA WPA employee whom the Districts may contact for further information. (b) The Districts may impose on SAWPA such conditions on the excess discharge as reasonably appropriate to protect the Districts' collection and treatment facilities. (c) In addition to the payment of Disposal Costs for the entire daily flow, SA WP A shall pay a surcharge on the flow exceeding SA WP A's then-existing Treatment and Disposal Right. The surcharge shall be calculated applying the same rate which the Districts are then applying to Districts' Class I Users for capacity purchases. (d) If, upon expiration of the ninety (90) day period, SAWPA's Monthly Average Flow continues to exceed SA WP A's then-existing Treatment and Disposal Right, SA WP A shall immediately acquire additional increments of the Treatment and Disposal Right sufficient to exceed SA WP A's Monthly Average Flow. (e) As used in this Section 3, "operational emergency" shall mean an equipment breakdown or other malfunction which necessitates SA WP A's discharge in excess of its then-existing Treatment and Disposal Right. 4. Payment of Disposal Costs. SAWPA shall pay Disposal Costs quarterly for the measured and sampled flow of Wastewater discharged from SA WP A's SARI Service Area to Districts' facilities. For purposes of such payment, the Districts will dettrmiJ)e quarterly an estimate of projected Wastewater discharges to Districts in the succeeding calendar quarter, and shall invoice the Disposal Costs accordingly. Annual adjustments, based on actual flow, BOD and Suspended Solids shall be made by appropriate payment or refund after the close of each of Districts' fiscal years. Disposal Costs shall be calculated at the same rate for all Treatment and Disposal Rights, regardless of the acquisition date. 5. Quality Criteria. The quality of Wastewater discharged from SA WP A's SARI Service Area into the Districts' facilities shall comply with all prohibitions and limits on discharges and all other requirements set forth in the Districts' Ordinance, and any amendments thereof or successor ordinances thereto. Except as hereinafter set forth in this Section 5(a),· compliance by SA WP A with all discharge limits contained in Districts' Ordinance shall be measured at the Green River Metering Station near the point of connection between SA WP A and Districts' facilities. Nothing herein shall alter the requirement that all users who discharge, directly or indirectly, to the SARI shall comply with all discharge limits at their original point of discharge to the sewerage system or that SA WP A, to ensure such compliance, is obligated to act in accordance with the .1991 Memorandum of Understanding between Districts and SA WPA, and any amendments thereof or successor Memorandum of Understanding thereto. WOODRUFF, SPRADLIN & SMART 32319_1 8 July 11, 1996 (a) The Parties hereto acknowledge that the Districts are not presently requiring SA WP A to meet any discharge limits measured in pounds per day, including but not limited to the BOD discharge limit which is set forth in Districts' Ordinance. Districts reserve the right to impose reasonable discharge limits measured in pounds per day on SAWPA, measured at the location(s) acceptable to both Parties. (b) SA WPA shall, upon Districts' request, furnish and periodically update a list of all persons discharging Wastewater into SA WP A's system, together with a statement of the approximate volume and quality of such discharges. It is not intended that this Agreement will furnish SA WP A a competitive advantage in the location of industrial plants within SA WP A's SARI Service Area or at a location tributary to the SARI. Accordingly, SA WP A shall not without prior written consent of Districts, make capacity in its system available to any person who was declined Wastewater service from Districts by reason of that person's inability to meet the Districts' Ordinance requirements, prohibitions or discharge limits. ( c) A quality monitoring program for Wastewater discharged from SA WP A's SARI Service Area to Districts, which program is acceptable to all parties shall be established and maintained and all costs thereof shall be borne by SA WPA. (d) Should the EPA, California Environmental Protection Agency, Regional Water Quality Control Board or any other regulatory agency with authority over Districts lawfully direct that the Districts further regulate SA WP A's discharge and/ or activities, SA WP A shall comply with such additional discharge limits and/or directives. (e) SA WPA shall not discharge or allow the discharge of any sludge to the SARI. (f) The Districts may authorize the discharge to the SARI of certain side stream flows from water treatment facilities located in SA WP A's SARI Service Area. No discharge of side stream flows shall commence unless SA WP A has first obtained written authorization, which shall not be unreasonably withheld, from Districts for the discharge, which authorization may contain conditions and requirements acceptable to both Parties. 6. Quality Violations. SA WPA shall comply with all requirements, prohibitions and discharge limits set forth in Districts' Ordinance. In the event the Wastewater delivered by SA WP A into the Districts' fac:ilities fails to comply with the requirements, prohibitions or discharge limits of Districts' Ordinance, Districts reserve the right, upon twenty-four (24) hours' notice, to suspend all or part of SA WPA' s use of the Districts' facilities and to suspend the exercise by SA WP A of all or part of its Treatment and Disposal Right until such time as the Wastewater complies with Districts' Ordinance. WOODRUFF. SPRADLIN & SMART 32319_1 9 July 11, 1996 (a) In the event that SA WP A fails to comply with any requirements set forth in Districts' Ordinance, including but not limited to all discharge prohibitions or limits, SA WP A shall be subject to enforcement actions pursuant to all applicable federal, state and local laws, including but not limited to California Government Code section 54739 et seq. and Districts' Ordinance, Article 6, Section 615, and any subsequent or successor section thereto. In addition, SA WP A shall pay to Districts all reasonable costs of any damage to Districts' facilities caused by the discharge of Wastewater from SAWPA's SARI Service Area to Districts' facilities. These costs shall include but not be limited to any costs of repair, investigation and Districts' administrative overhead. 7. Reclaimable Wastewater. SA WP A shall, in good faith, make reasonable efforts to minimize direct or indirect Reclaimable Wastewater discharges to the SARI, which discharges originate in SA WP A's SARI Service Area. 8. Metering. SA WPA shall pay all costs, including but not limited to, equipment costs, employee time and administrative overhead associated with maintaining, calibrating, reading, testing, repairing, adjusting and, if it becomes necessary, replacing the recording and totalizing flow meter at the Green River Metering Station. SA WP A shall also reimburse the Districts for all costs associated with the installation, maintenance and repair of electronic/ telemetry equipment which allows the Districts to monitor flow through the Green River Metering Station from other District facilities. Should the meter malfunction, flows shall be estimated using the average flows of the three previous months until such time as the meter is repaired. All repairs to the flow meter shall be accomplished by SA WP A within a reasonable time. 9. Assignment. This Agreement shall not be transferred or assigned by SA WP A without the prior written consent of Districts, which consent shall not be unreasonably withheld; provided, however, that nothing herein contained shall prevent SAWPA from designating for, or allocating to, public agencies or other users within SA WP A's SARI Service Area upstream from Districts, a portion of the Treatment and Disposal Right provided for herein, so long as such action does not affect SA WP A's liabilities and obligations to Districts. SA WP A shall be the public entity having primary responsibility for regional reallocation, in the area upstream from Districts, of this Treatment and Disposal Right. 10. Fees/Charges. To the extent that Districts establish any fee for capital assessments or any other fees adopted pursuant to California Health and Safety Code section 5470 et seq., or other legislative authorization, which fees are not duplicative of the fees herein and which are applicable to dischargers within Districts' service area, SA WP A shall be obligated to pay such fees in the same manner as the dischargers within Districts' service area. For purposes of this section, the term "fees" shall be synonymous with "charges". I 1. Protection of Districts Facilities. SA WP A acknowledges that Districts' policy provides for the Wastewater flow from SA WP A's SARI Service Area to be sent to Districts' Plant No. 2 treatment works in Huntington Beach due to the high levels of Total Dissolved Solids in the Wastewater and the discharge from the Stringfellow Treatment Facility. WOODRUFF, SPRADLIN & SMART 32319_1 10 Julyll,1996 Furthermore, SA WPA aclmowledges that when water reclamation occurs at Districts' Plant No. 1, Districts cannot accept the wastewater discharge from the Stringfellow Treatment Facility at Plant No. 1. If Districts determine to repair or replace Districts' facilities or need to divert, on a temporary basis, the flow received from SAWPA's SARI Service Area to Districts' Plant No. 1, Districts shall provide written notice to SA WP A of this determination to divert to Plant No. 1 as soon as reasonably practicable. In accordance with this notice, SA WPA shall, at its sole expense, prevent the discharge of Wastewater to the SARI from the Stringfellow Treatment Facility, or such other source of Wastewater within SA WP A's SARI Service Area that Districts determine may adversely affect the operation of Districts' facilities during the diversion by Districts of SA WPA flow to Districts' Plant No. 1. Nothing in this Section 11 is intended to preclude the discharge from SA WP A's SARI Service Area of discharges consisting solely of other wastewater brines. While the parties are presently unable to predict events which may lead to diversions of the Wastewater flow from SA WPA's SARI Service Area to Districts' Plant No. 1, it is the parties' estimate that such diversions will not average more than ten (10) business days annually. During such diversions, the Districts will provide a temporary discharge location within the County of Orange for the discharge by SA WP A of the wastewater discharge from the Stringfellow Treatment Facility to Districts' facilities. 12. Acts of God. Neither party hereto shall be liable for failure to comply with any term or condition of this Agreement by reason of flood, fire, earthquake or act of God; provided, that due diligence is exercised to repair or replace facilities damaged and to perform hereunder following such occurrence. Districts and SA WP A shall each pay their proportional share of the net cost of such replacement, based upon the capacity held and used by each at such time. 13. Arbitration. In the event of a dispute as to the construction, interpretation or implementation of this Agreement or any rights or obligations hereunder, the issues in dispute shall be submitted to arbitration. (California Code of Civil Procedure, Part 3, Title 9, §1280 et seq.) For such purpose, an agreed arbitrator shall be selected, or in the absence of agreement, each party shall select an arbitrator and those two arbitrators shall select a third. Discovery may be conducted in connection with the arbitration proceeding pursuant to California Code of Civil Procedure, §1283.05. The arbitrator, or three arbitrators acting as a board, shall take such evidence and make such investigation as deemed appropriate and shall render a written decision on the matter in question. The arbitrator shall decide each and every dispute in accordance with the laws of the State of California. The arbitrator's decision and award shall be subject to judicial review for errors of fact or law in the Superior Court for the County of Orange, with a right of appeal from any judgment issued therein. 14. Attorney Fees. Each party will pay its own costs and attorney fees associated with any litigation or other proceeding concerning the provisions of this Agreement. 15. 1~72 Agreement. The 8 MGD Treatment and Disposal Right previously acquired by SA WPA pursuant to the 1972 Agreement shall, upon the effective date of this Agreement, be deemed to have been acquired by SA WP A pursuant to the terms of this Agreement. This present Agreement supersedes all terms and conditions of the 1972 Agreement between WOODRUFF. SPRADLIN & SMART 32319_1 11 July 11, 1996 CBMWD and Districts, the rights and obligations of which Agreement were assigned by CBMWD to SA WPA in 1974. The 1972 Agreement shall have no further effect as of the effective date of this Agreement. 16. Integration. This Agreement represents the entire understanding of the parties as to those matters contained herein. No prior or contemporaneous oral or written understandings shall be of any force or effect with respect to those matters covered by this Agreement, except that nothing herein shall affect the terms of the April 1, 1991 Memorandum of Understanding between Districts and SA WP A. 17. Modifications. This Agreement shall not be changed, modified or supplemented except in a writing signed by the parties hereto. 18. No Waiver. No delay or omission in the exercise of any right or remedy available hereunder shall impair such right or remedy or be construed as a waiver. Any waiver of any default or condition hereunder must be in writing and shall not be construed as a waiver of any other default concerning the same ot any other provision of this Agreement. 19. Headings. Headings of the Sections of this Agreement are inserted for convenience only and shall not be deemed to constitute a part hereof. 20. Severability. If any provision of this Agreement is determined to be invalid, illegal or unenforceable, such provision shall be severable from the rest of this Agreement and the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired by such determination. 21. Notices. All notices and other communications given hereunder· shall be in writing and shall be personally delivered or mailed by registered or certified mail, return receipt requested, and postage prepaid, addressed as follows: If to SAWPA: If to Districts: Santa Ana Watershed Project Authority Attention: General Manager 11615 Sterling Avenue Riverside, California 92503 County Sanitation Districts of Orange County Attention: General Manager P. 0. Box 8127 10844 Ellis A venue Fountain Valley, California 92728-8127 22. Interpretation of Governing Law. This Agreement shall be construed as if prepared by all parties hereto. The provisions of this Agreement shall be construed and enforced in accordance with the laws of the State of California. WOODRUFF, SPRADLIN & SMART 32319_1 12 July 11, 1996 23. Counterparts and Execution. This Agreement may be executed in multiple counterparts, and each of which shall be deemed an original Agreement, and all of which constitute one Agreement. 24. Limitation on Discharge. Except to the extent connections presently exist, SA WPA shall not allow, directly or indirectly, the discharge to the SARI of any Wastewater originating outside SA WP A's SARI Service Area, unless SA WP A first obtains Districts' written approval of such discharge. 25 . Termination. The terms of this Agreement shall expire on April 12, 2046. 26. Third Party Beneficiaries. No benefit to any third party is intended by this Agreement. 27. SARI Capacity Rights. Nothing in this Agreement shall be deemed to create any right of SA WP A to capacity in the SARI, nor any obligation of Districts to provide such capacity. Capacity rights for the SARI are set forth in the Waste Water Interceptor Capacity Agreement, except that the second sentence in Section 8 (pages 6-7) of that Agreement shall be amended to read as follows: "The flow level from SA WPA's SARI Service Area shall not exceed SA WP A's then-current Treatment and Disposal Right acquired pursuant to the 1996 Wastewater Treatment and Disposal Agreement between SA WP A and the Districts and, in no event, shall exceed the capacity right acquired pursuant to this Waste Water Interceptor Capacity Agreement." 28. Stonnwater Discharges. The parties hereto acknowledge that the discharge of stormwater to the SARI is not authorized. SA WP A shall take all reasonable steps necessary to ensure that neither public agencies nor private persons or entities discharge· storrnwater directly or indirectly to the SARI. 29. Interest. In the event that SA WPA fails to make payment within forty-five (45) days from the date of any of Districts' invoices, SA WP A shall, pursuant to California Health and Safety Code section 54 73 .10, pay interest at the rate of one and one half percent ( 1 ½ % ) per month on charges and fees owed to Districts or District No. 2. · 30. Changes in Fees/Charges. The parties aclmowledge that Districts may adopt fundamental changes in the formulas used for assessing fees and charges to Districts' users. If such fundamental changes are adopted, the parties agree to negotiate in good faith to establish new equitable fees and charges applicable to the discharge from SA WP A's SARI Service Area to Districts' facilities. 31. Meet and Confer. The parties shall meet and confer within one (1) year following the effective date of this Agreement to determine whether the provisions of this. Agreement are functioning as anticipated and to attempt, in good faith, to resolve any issues arising during the implementation of this Agreement. The parties may meet at any other time during the term of this Agreement toward the same end. WOODRUFF, SPRADLIN & SMART 32319_1 13 July 11, 1996 32. Notice Re Continuing Guaranty, On or before July 1 of each year during the term of this Agreement, SA WP A shall provide written notice to the Distr:icts allocating among SA WP A's members the respective percentages of SA WP A's total liability to Districts for which each SA WP A member agency is guaranteeing payment pursuant to the attached Continuing Guaranty of Wastewater Treatment and Disposal Agreement. Each percentage allocated shall be deemed that member agency's pro rata share of SAWPA's financial obligations to the Districts during the immediately succeeding year (July 1 -June 30). In no event shall the combined percentages allocated in the written notice be less than 100% of SA WPA's total liability to the Districts. SA WP A's timely delivery to the Districts of notice in compliance with this Section is a material term of this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. APPROVED AS TO FORM: THOMAS L. WOODRUFF, ' ,' ' SANTA ANA WATERSHED PROJECT AUTHORITY By: ~~t¥~ COUNTY SANITATION District NO. 1 OF ORANGE COUNTY, CALIFORNIA1 for itself and on behalf of County Sanitation Districts Nos. 2, 3, 5, 6, 7, 11, 13 and 14 of Orange County, California Districts' founsel ) . l '! ,-.(__.; .,, / u1r: fu/' }( ,u~/ f · WOODRUFF, SPRADLIN & SMART 32319_1 14 July 1 1 , 1996 FAHR COMMITTEE Meeting Date To Jt. Bds. 12/10/97 12/17/97 AGENDA REPORT Item Number Item Number "· County Sanitation Districts of Orange County, california FROM: Gary Streed, Director of Finance Originator: Gary Streed, Director of Finance SUBJECT: 1997-98 Financing Plan (All Districts) (FAHR97-84) GENERAL MANAGER'S RECOMMENDATION That the Boards of Directors of the individual Districts adopt a formal borrowing and lending program in order to provide for inter-District loans, with interest, while the Strategic Plan is being completed and a long-term financial plan is being prepared. SUMMARY The 1997-98 budget includes a COP issue of $32,300,000 to fund all or part of the budgeted capital improvement program in six of the Districts. Staff now believes there are so many significant financial issues that the Directors will be resolving within the next six months that it would be wise to delay a new COP issue, and for Districts Nos. 1 and 11 to formally borrow from Districts Nos. 2 and 3 until the next COP issue. PROJECT/CONTRACT COST SUMMARY None. BUDGET IMPACT [8J This item has been budgeted. (Line item: ) D This item has been budgeted, but there are insufficient funds. C8] This item has not been budgeted. (Borrowing loan to Districts 1 & 11) D Not applicable (information item) H:\wp.cltaVin\2210lcnlne\FAHRIFAHR.971DECIFAHR97-&4.doc Revised: 10/17/97 Page 1 ADDITIONAL INFORMATION The 1997-98 budget includes a COP issue of $32,300,000 to fund all or part of the budgeted capital improvement program in six of the Districts as follows: 1 2 3 6 7 11 Total $ $ 6,300,000 9,000,000 8,000,000 2,000,000 3,000,000 4,000,000 32,300,000 The bar.rowing was budgeted based upon the cash flow projections considered by the-Directors during the 1997 Sewer Service User Fee deliberations, and a desire to·comply with the existing "reserves" policy over the next few years without sharp increases and erratic changes in fees. Staff now believes there are so many significant financial issues that the Directors will be resolving within the next six months that it would be wise to delay a new COP issue and for Districts Nos. 1 and 11 to borrow from Districts Nos. 2 and 3. Cash needs during the year will be somewhat less than expected when the budget was prepared. Joint Works capital improvements for the first quarter of the fiscal year are approximately 25% of the annual budget, while the Districts' programs are running at approximately 7%. Operations and maintenance costs for the Districts and the Joint Works are approximately 20% of budget, and expected to rise over the remainder of the year. The Strategic Plan effort is expected to develop preliminary future capital needs in February 1998, and the decision to officially proceed with the Orange Cownty Reclamation Project (now known as the Groundwater Replenishment System [GRS]) will not be made until summer of 1998. These two projects need to be completed before we can make a certain budget for capital projects and identify our needs for funds. As you know, he FAHR Committee has begun a study of our Accumulated Funds or "reserves" policy to determine the· proper level of funds to have on hand. As a part of this study, Public Financial Management, an independent governmental financial advisor, has conducted a survey of other large public agencies to determine a kind of benchmark for this effort. Additionally, R. W. Beck, an engineering consultant, has developed a computer model to project future capital program requirements for refurbishments and replacements. The Committee saw a preview of the model last month. The PFM report and recommendations will be ready for the Committee to review at their February meeting. This report and other analyses by the Directors could result either in increased funding \\lead\data2\Np.cltallinl2210\crane\FAHRIFAHR.97IOECIFAHR97-84.doc R8'1iHd: 10/17197 Page2 becoming available for current projects, or increased targets for accumulated funds. The Rate Advisory Committee (RAC) has completed most of their work to recommend a revised structure for our Sewer Service User Fees. The FAHR Committee will consider the RAC recommendations as a separate agenda item in December. There are a few remaining items to be resolved regarding the structure, and the rate adoption process needs to be completed. Time needs to be provided for Directors' workshops, for public notification to comply with Proposition 218 requirements, and for the ordinance adoption process. Similarly, the RAC has made recommendations to revise the Districts' connection fee calculations which will impact future cash flow projections. Perhaps some of the funds currently collected as a part of the connection fee will become components of future sewer service user fees. The consolidation of the Districts is currently being reviewed by LAFCO with a goal of implementation on July 1, 1998. This consolidation will have an impact on our existing borrowings, and Bond Counsel has been retained to guide us through the consolidation process. We will be ready to make appropriate changes and to take appropriate action when LAFCO has acted, but do not know all of the issues today, even though we are satisfied that we will be able to comply. While the impacts of consolidation are anticipated to be mainly administrative and housekeeping issues, the nervous investor community will need to be informed and educated. In short, there are many unknowns that remain at this time. In order to go forward with a COP borrowing, we must subject ourselves to the strict evaluations of the Bond Rating Agencies, liquidity providers and financial institutional investors. Staff believes that the significant number of uncertainties and the financial magnitude of these uncertainties would be detrimental to a successful financial review by these parties and could even result in a decreased market for our existing COPs, many of which are resold daily. An alternative method for Districts Nos. 1 and 11 to meet their current cash needs and to maintain prudent reserves would be for those two Districts to borrow in-house from another District. Precedence for such an arrangement is longstanding among the Districts. The Joint Ownership and Construction Agreement which governs the inter-District financial relationships and the annual purchase and sale of Joint Works Facilities provides for payment over a five-year period. A District that implements the long-term payment provisions is required to pay interest to the other Districts. Districts Nos. 2 and 3 currently have sufficient funds on hand to make a short- term loan to Districts Nos. 1 and 11, if the Directors should so desire. If the Directors want to proceed, staff will prepare agreements for each of the Districts that would include interest at the rate paid by LAIF or earned on our portfolio, and 1\lead\dala2\Np.dla\fin\2210\cn,ne\FAHRIFAHR.971DECIFAHR97-&l.doc R8"ised: 10.'17197 Page3 would contemplate payment in the next two years from the proceeds of a future COP issue. Such an inter-District arrangement would allow each of the Districts to meet their financial needs for 1997-98 and 1998-99, while all of the uncertainties identified above are resolved. Recommended Action: The FAHR Committee recommend to the Boards of Directors of the individual Districts that a formal borrowing and lending program be adopted in order to provide for inter-District loans, with interest, while the Strategic Plan is being completed and a long-term financial plan is being prepared. ALTERNATIVES None. CEQA FINDINGS None. ATTACHMENTS GGS:lc \llead\data2\wp.dtalfin\2210\crane1FAHRIFAHR.971DECIFAHR97-84.doc Rtlllised: 111117/97 Page4 FAHR COMMITTEE Meeting Date 12/10/97 AGENDA REPORT Item Number 7. County Sanitation Districts of Orange County, california FROM: Gary Streed, Director of Finance Originator: Gary Streed, Director of Finance SUBJECT: Rate Advisory Committee Recommendations (RAC) (All Districts) (FAHR97-85) GENERAL MANAGER'S RECOMMENDATION The General Manager recommends: 1. Adopt commercial user categories; 2. Approve the concept of a joint study of flows and strengths; 3. Contact the Orange County Business Council and the Cities for assistance in identifying various commercial users; 4. Conduct a study of flow and wastewater strength from SROs and congregate care facilities; 5. Plan to implement a revised rate structure for 1998-99; and 6. Return to future Committee meetings with recommendations for connection fees and the appeal process for user fees. SUMMARY To Jt. Bds. 12/17/97 Item Number The Rate Advisory Committee (RAC) was formed as a part of the public participation process for the Strategic Plan effort. The RAC met nine times between September 1996 and October 1997. Members of the RAC were from the industrial, commercial, governmental and residential user groups and considered the structure of the sewer service user fees and connection fees assessed by the Districts. The committee recommended changes in the structure of these fees in order to make the fees paid more closely match the use of and demands on the sewerage system. A copy of their report, which was described in detail at the November 1, 1997, Strategic Plan Workshop for Directors is attached. This staff report summarizes the progress to date, discusses some of the outstanding issues, and recommends a course of action. PROJECT/CONTRACT COST SUMMARY None. H:\wp.dlllVinl2210\clanelFAHR\FAHR.97\0ECIFAHR97~.doc RIIViMd: 10117197 Page 1 BUDGET IMPACT D This item has been budgeted. (Line item: ) D This item has been budgeted, but there are insufficient funds. D This item has not been budgeted. ~ Not applicable (information item) ADDITIONAL INFORMATION Staff anticipates the FAHR Committee will want to review the proposed fee structures over the course of several meetings in order to become comfortable with the changes, and to provide staff with guidance for the implementation of the changes. This is the first Standing Committee to review the RAC recommendations and will be the Committee that takes the recommendations or modified recommendations forward to the Boards of Directors. The RAC confirmed the Districts' longstanding philosophy of uses and sources of funds as shown below: CSDOC Wastewater Rate Structure Overall Philosophy of Sources and Uses of Funds Use of Funds Source of Funds Operations and Maintenance of Existing Facilities Existing users Capital Replacement of Existing Facilities Existina Users Capital Construction of New Facilities to Accommodate Growth New Users Capital Construction to Improve Level of Treatment Both New and Existing Users The RAC recommendations and minority viewpoints regarding sewer service user fees are discussed in detail in the enclosed RAC Report, but can be summarized as follows: • 80% of the RAC members agreed that the existing system should be changed. • 100% of the members agreed that commercial user categories needed to be expanded. • 75% percent of the RAC members wanted more than 19 commercial categories. • All but one member agreed that multi-family units should be charged less than single family units as supported by field measurements. • 73% percent of the RAC members agreed that user fees should be based upon the same average cost to treat flow and strength for all categories of users \lleadldata2wip.dlllllin\2210\cnlne\FAHR\FAHR.97\DEC\FAHR97-85.doc Revised: 10117/Q7 Page2 The five majority recommendations regarding connection fees are summarized as follows: • 90% of the members agreed that the existing connection fee should be changed to make it more equitable • 90% percent of the members believed that the residential connection fee should be tiered to reflect the different sewerage facility impacts of different types of residences. • 76% percent of the members agreed that there should be some incentive built into the connection fee to help keep and attract good jobs to Orange County. 24% percent were undecided, while no members opposed the concept outright. • 80% percent of the RAC members agreed that certain connection fees should be paid over time rather than being a one time payment at development. • 85% percent of the members agreed that industrial and commercial connection fees should be based upon different costs and facilities than those included in residential connection fees, and most of them favored an allocation that resulted in the lowest increase for residential users. There are a number of issues on which the RAC gave staff general direction but left the specifics to be determined later, such as the number of commercial user categories. For this initial briefing, staff has developed proposals for a few of the user fee changes that have been recommended by the RAC. Complete proposals, including connection fee issues, will be developed over the next few months based upon the issues that have been resolved as we go along and on new information that is to be gathered by staff and consultants. Number of Commercial Categories The sewer service user fee is collected as a separate line item on the property tax bill. The basis for the charge must be some data element that already exists within the Orange County Assessor's data base multiplied by an appropriate rate determined by the Directors. Currently all commercial and industrial users are charged on the basis of square feet of developed building; no provision is made for use unless the user is a Class I or II permit user or has requested an adjustment based upon equitable use. The Assessor maintains approximately 100 land use codes that identify the nature of the property use. The RAC and staff agree that 100 categories of users is too many. The Los Angeles County Sanitation Districts use 30 commercial categories and Sacramento County Regional Sanitation Districts_ use 31 commercial categories. Both of these agencies have monitored the flow and strength of the various users in these categories and developed a fee based upon "equivalent single family dwelling units" per 1,000 square feet. Some of the categories used by these agencies are \lleadldata2\#p.dlallin\2210lcnlne\FAHRIFAHR97\DECIFAHR97.a5.doc R8\lised: 10117197 Page3 not identifiable in the Assessor's data base, therefore, staff recommends we not use those categories immediately. The attached table shows the proposed categories of commercial users for Orange County, along with the Assessor's land use categories, and the relative user fees per 1,000 square feet compared to a typical single-family house. The ratios are the same as those currently in use at either Los Angeles County Sanitation or Sacramento Regional County Sanitation Districts. The expansion of commercial categories is expected to greatly reduce the appeals for inequitable charges that resulted in the significant rebates granted during the last year. Of course, there will still be a need to provide a mechanism to correct errors and to adjust fees. That process will be a topic of a future report to the Committee. Staff is exploring a joint study to be funded by the Districts, Sacramento County Regional Sanitation and East Bay Municipal Utility District to review appropriate user categories and to develop the correct or more accurate usage parameters for each. The Committee will be advised of costs, level of effort and progress on this proposed study. Method to Identify Categories not on the Tax Bill Los Angeles County Sanitation has been able to identify some users that are not identified by a special code in our Assessor's data base, for example, car wash- recycle and Laundromat. It may be desirable for us to be able to identify these users and to properly categorize and charge them. Implementing a recycle program at a car wash is probably an action we would want to encourage through the fee structure, while laundromats are a high water discharger we would like to identify. There may be other groups that we would like to identify, like restaurants with grease traps, in order to offer them an incentive to take some action that sets them apart from the routine user in their category for steps they have taken to reduce environmental impacts. Besides not having an Assessor's land use code, many or most of these users share an Assessor's parcel and do not receive an individual property tax bill. So long as we are offering an incentive, it may be possible to work with a trade association for these types of businesses, but we have not been successful in the past when we were attempting to identify high volume users. Another approach would be to work with the Orange County Business Council, the economic development, or the business license departments of the various cities. A third option would be a direct mail piece to all commercial parcels in the County indicating the various user categories and their respective rates and asking for responses from those who believe they should be in another category. Finally, we could simply allow the marketplace to identify the special categories through the various private firms that currently search for refund and rebate opportunities \\lead\data2wi,p.dtallin\221D\cnine\FAHRIFAHR.971DEC\FAHR97-35.doc Revised: 10l17197 Page4 on a contingency basis. Staff recommends we contact the Cities and the Orange County Business Council for assistance and if that is unproductive, then we institute a direct mail informational and data gathering campaign. Tiered Residential User Fee There are currently two rates for the residential user, one for single-family residences and one for multi-family residential units. Two additional categories that routinely cause inquiries are SROs ("single-resident-only" or "single-room- occupancy") and congregate care facilities. Neither of these categories can be identified from the Assessor's data base. Although there are no current field flow measurements for these categories, it seems reasonable to assume that the per dwelling unit flows will be less than those from a typical single-family residence, and perhaps even less than a multi-family unit. The Directors may wish to consider conducting a study to develop accurate flow data for these categories. Such a study would require locating and metering a sample user group and developing flows per residential unit. Another option is to consider these as multi-family users and to use that rate, proposed at 70% of the single-family residential rate per unit. A third option is to consider these as commercial users and to assign an appropriate category rate, perhaps the same as hotel, motels and rooming houses, proposed at 47% of the SFR rate per 1000 square feet of building. Use of any of these options would still leave the issue of identification on the property tax system to be resolved. Staff recommends we conduct a sample study to determine accurate flow and strength for SROs and congregate care facilities and establish a separate residential rate for this category of users. Effective Date of New Rate Structure As the Directors know, there are a number of financial and organizational issues that the Boards are currently evaluating. These range from the Strategic Plan, consolidation and the Groundwater Replenishment System to the accumulated funds and reserves policy. Although it may seem attractive to hold a revised sewer service user fee structure in abeyance until all or most of these issues are resolved, staff recommends that we move forward with the plan to adopt the proposed restructuring in time for the 1998-99 fiscal year. Moving forward with the plan will maintain the momentum of the RAC and the Strategic Plan effort, reduce the future requests for fee adjustments and will result in a more equitable and understandable fee system. Recommended Actions The staff recommended actions are included in the paragraphs above, but can be summarized as: Adopt commercial user categories, approve the concept of a joint study of flows and strengths, contact the Orange County Business Council l\lead',dala2w,p.dta\fin\2210\crane\FAHRIFAHR.971DEC\FAHR97-85.doc Revised: 10117197 Pages and the Cities for assistance in identifying various commercial users, conduct a study of flow and wastewater strength from SR Os and congregate care facilities, plan to implement a revised structure for 1998-99 and return to future Committee meetings with recommendations for connection fees and the appeal process for user fees. ALTERNATIVES Hold adoption of a new rate structure in abeyance while other studies are completed. Discontinue efforts to revise and improve the rate structure and continue with the existing structure. CEQA FINDINGS None required. ATTACHMENTS 1. Proposed rate categories. 2. RAC report to CSDOC Boards 3. Unresolved RAC Issues Status Repor GGS:lc H:lwp.cltaWin\2210\cranelFAHRIFAHR.97\DECIFAHR97.a5.doc Revised: 10117197 Page6 December 10, 1997 Proposed Sewer Service User Categories Residential User Categories Single Family Residence Detached Homes Attached Homes Condominiums Town Homes Multi-Family Residential Units Apartments Mobile-Homes Duplex Triplex Fourplex Reduced Residential Units Single Resident Only Congregate Care Facilities Senior Care Facilities Commercial User Categories Infrequent or Irregular Use Drive-in Theater Church Parking Garage RV Storage Nursery/Greenery Warehouse Mortuary Funeral Home Light Commercial/Retail Lumber Yard Motorcycle/Small Vehicle Service Station Marine Service Station Automobile Dealership Auto Repair Auto Service Used Car Lot Truck Terminal Office and Professional Buildings Single Office Building Small Office Center Office Complex High Rise Office Financial Buildings Proposed Ratio of SFR Rate 1.00 1.00 1.00 1.00 1.00 .70 .70 .70 .70 .70 .60 .60 .60 Proposed Ratio of SFR per 1,000 SF .08 .15 .15 .15 .15 .15 .75 .75 .15 .38 .38 .38 .38 .38 .38 .38 .38 .75 .75 .75 .75 1.12 -1 - Existing Ratio of SFR Rate 1.00 1.00 1.00 1.00 1.00 .60 .60 .60 .60 .60 1.00 1.00 1.00 Existing Ratio of SFR per 1,000 SF .72 .72 .72 .72 .72 .72 .72 .72 .72 .72 .72 .72 .72 .72 .72 .72 .72 .72 .72 .72 .72 .72 Proposed Existing Commercial User Categories Ratio of SFR j;!er 1,000 SF Ratio of SFR per 1,000 SF Educational Buildings Private School .75 .72 Preschool, Nursery, Childcare .75 .72 Public Schools-K-12 rate per ada rate per ada Universities rate per ada rate per ada Recreational Users Golf Course .38 .72 Marina .38 .72 Skating Rinks .99 .72 Bowling Alleys .99 .72 Medical Buildings Single Medical Buildings 1.12 .72 Small Medical Buildings 1.12 .72 Medical Center Complex 1.12 .72 High-Rise Medical 1.12 .72 Converted SFR to Medical 1.12 .72 Industrial and Manufacturing Dry Manufacturing .15 .72 Cold storage Plant .15 .72 Research & Development .15 .72 Factory 1.17 .72 Light Industrial-Single Tenant 1.17 .72 Light Industrial-Multi Tenant 1.17 .72 Chemical Tank and Bulk storage 1.17 .72 Food Processing 1.17 .72 Industrial Park 1.17 .72 Shopping Opportunities Store .38 .72 Department Store .38 .72 Discount Store .38 .72 Strip store .38 .72 Wholesale Outlet .38 .72 Community Shopping Center 1.22 .72 Regional Shopping Center 1.22 .72 Convenience Shopping Center 1.22 .72 Shopping Center with Restaurant 1.92 .72 Entertainment Night Club 1.22 .72 Amusement Park 1.22 .72 Entertainment Center 1.22 .72 Recreation Center 1.22 .72 Airport & Related Buildings 1.30 .72 Food Markets Supermarket Only 1.34 .72 Convenience Market Only 1.34 .72 Health Spa Only 2.24 .72 -2- Commercial User Categories CarWash Wand Type Car Wash Coin Operated Car Wash Recycled Water Car Wash Conventional Car Wash Restaurants Take Out Restaurant Coffee Shop Dinner House Laundromats Only Proposed Ratio of SFR per 1,000 SF 2.61 2.61 10.51 13.78 8.80 8.80 8.80 14.24 Existing Ratio of SFR per 1,000 SF .72 .72 .72 .72 .72 .72 .72 .72 *High strength, high volume "significant industrial users," and certain other users affected by categorical pretreatment standards are also subject to separate Industrial/Commercial Discharge Permits and charges. -3- 12/3/97 Ref Issue Description 1 Tiered Residential Connection Fees 2 Tiered Residential User Fees 3. Number Of Multi-Family Units 4 Method to Identify Categories Not On 5 6 7 8 9 10 Tax Roll: Laundromats, Car Wash, Restaurants Number of Commercial Categories: 19 vs 1 05 No Connection Fee, but Include Conn Fee in Annual User Fee Document Buy-in Costs Included in Conn Fee Calculate Wet Weather Flow Costs & Allocation Develop Method to Assess Add'I Capital Charges to Users Who Increase Use Develop Replacement Costs and Impact On User Fees & Conn Fee Unresolved RAC Issues Status Report 7:53AM Responsible Parties Status Staff Staff Staff Staff Staff Staff Staff COM, JCE, Staff Considering Bathrooms or sqare feet. Reviewing LACSD Other issues are apt, granny units, senior care facilities Conn fees historically based on potential peak use. Approx 85% of parcels are SFR: 412,000 / 483,000 Suggest rates for SFR, MFR, SRO and congregate care. Info requested from Cal State to include address, census tract and other info for units, report being run on Assessor's info to provide same info. Staff will reconcile and update Assessor's data. Most laundromats and restuarants are in strip malls, not on separate parcels that get separate tax bills. Propose we consider development of a commercial rate for malls with restaurant, malls without restaurant. Malls with more than one would be increased by a per restaurant charge. Attempt will be made to id these users from TRW. Consider incentive fees for grease traps & recyclers. Use Cities & Assn Drawback to having many categories is cost to develop and maintain monitoring program. Joint study with Sacto & EBMUD may help. See LACSD. Consider incentive rates for grease traps & recyclers. Consider partial, minimal charge up front. Issue is how to deal with existing users so they don't pay twice. Solution will be related to Item 9 below. Done in draft, can be put into publishable form Current alternatives have assigned a % to total facilities. Need to assign facilities and % of each. Should include current and future facilities. Staff, to be reviewed Consider a separate subroutine for Class I & II users. by RAC Committee If total use fee increased 25% over prior year, including flow, BOD volunteers and SS, then go to a separate subroutine that calculates a portion of the connection fee based on the parameters. Some time value must be assumed to spread the base conn fee to parameters. RW Beck, Staff Model developed for replacement and refurbishment costs by year. Asset lives are grouped, thus needs are grouped. Should inflated values be used, or current values? Assume 35 yrs for plant facilities. 11 Finalize Flow per Equivalent CDM, JCE, Staff 2020 Vision used 399 gpd, JCE proposes 260 gpd. Impacts number of new connections and users for flow projections and fees. Dwelling Unit 12 Document Appeals Process General Counsel For User & Conn Fees Staff 13 Obtain SWRCB Approval Staff, JCE of User Fee Program 14 Develop User Manual JCE For Financial Model G:\excel.dta\fin\221 O\streed\RAC. issues. matrix.xis Ordinance being revised, procedures manual to follow State staff already notified of efforts. They are interested in user flow and strength study in 5 above. JCE work in progress. Major assumption in caluclations is 11 above. SUMMARY OF THE RATE ADVISORY COMMITTEE PROCESS AND A REPORT BACK TO THE CSDOC BOARD ON RATE STRUCTURE RECOMMENDATIONS October 9, 1997 EXECUTIVE SUMMARY INTRODUCTION The purpose of this document is to summarize the views and recommendations of the Rate Advisory Committee (RAC) following their year-long review of the overall rate structure of the County Sanitation Districts of Orange County (CSDOC). BACKGROUND CSDOC raises funds for operating, maintaining, replacing/improving and expanding wastewater treatment and major conveyance facilities primarily through three funding sources: 1. A share of the 1 % Ad Valorem taxes; 2. User Charges; and, 3. Connection Fees. Operation, maintenance and replacement/improvement costs are primarily funded through ad valorem tax allocations and user charges. Connection fees are intended to pay for expansion of facilities needed to accommodate growth. The methodology for determining how costs are allocated to residential, commercial and industrial users is termed the "rate structure." There are a number of assumptions and considerations involved in developing the methodology for tracking costs back to the residential, commercial and industrial users. This study consisted of a review of the existing rate structure, and an evaluation of these assumptions and considerations. RATE ADVISORY COMMITTEE PROCESS As part of the CSDOC Strategic Plan process, a Rate Advisory Committee (RAC) was formed to obtain input from each of the major user categories (residential, commercial and industrial). The RAC was designed to be a collaborative process involving all the major stakeholders potentially impacted by a new rate structure. The opportunity was offered at each of the workshops to allow for feedback, as well as dialogue among the RAC members so resolution could be reached on key rate structure issues. The RAC process involved 9 workshops which were held over a period of 13 months. While the RAC reached substantial agreement on most issues, minority views were expressed and advocated strongly. These minority views can be found in the following section on Detailed Analysis of Key Issues. This document will be presented to the CSDOC Boards of Directors, who will consider RAC recommendations in making policy decisions and possible changes to the current rate structure. OVERALL PHILOSOPHY In general, RAC members agreed with the governing philosophy of sources and uses of funds as H:ENG\ENG\STRATPLN\1401&2\RAC&PAC\OPINREV 1 shown in Table 1. Operations and Maintenance of Existing Facilities Capital Replacement of Existing Facilities Capital Construction of New Facilities to Accommodate Growth Capital Construction to Improve Level of Treatment SEWER USER CHARGES Existing Users Existing Users New Users Both New and Existing Users It is important to note that the recommendations made by the RAC address the rate structure (how the costs are allocated back to each user) only, and not the level of funding. A revenue neutral evaluation was conducted during the comparison of alternative sewer user charge methodologies. However, there was broad agreement that the rate structure should shift from charging commercial users on the basis of square feet of improved property to charging based on wastewater flow and strength of discharge. This recommendation to move to a wastewater flow and strength basis significantly changes the user charges for some commercial businesses. It raises the rates for some businesses, and lowers it for others, while raising approximately the same total amount of revenue from the commercial user group or category. For example, restaurants, carwashes and supermarkets would see a relatively significant increase in their annual user charges. Whereas warehouses, churches and theaters would see a significant reduction in their annual user charges. CONNECTION FEES Connection fees are paid by new users when they connect to the system to cover the costs of the new facilities required to convey, treat and dispose of the expected wastewater. Similar to sewer user charges, the RAC recommended a flow and strength basis in determining connection fees. This recommendation was based on the conclusion that wastewater flow and strength is a better measure of the cost impact of a user on the system than is square footage. In general, the RAC thought it was appropriate to assign most of the costs for wet weather facilities to residential users. This is, in part, because residential lateral systems are the primary source of infiltration which contributes to peak wet weather flows. H:ENG\ENGISTRATPLN\J401&2\RAC&PAC\OPINREV 2 This recommended change in methodologies would increase the percentage of total connection fee costs allocated to the new residential user category from 61 % up to as high as 70%, with proportionate reductions in new commercial and new industrial categories. Because actual total costs are not yet finalized, it is not known if this increased percentage will result in higher or lower residential connection fees. RECOMMENDED ACTION/NEXT STEPS It is recommended by the RAC that the CSDOC Boards of Directors review and consider these recommended methodologies for the development of a rate structure for sewer user charges and connection fees. This will allow CSDOC staff to move forward with the calculation of sewer user charges and connection fees as the new Strategic Plan and the associated Capital Improvement Plan and the estimated construction and operation and maintenance costs become better defined. This will also allow the staff to proceed with the development of rate structure evaluations such as tiered residential connection fees and the number and type of commercial user charge categories. Following this consideration of the methodologies for the development of a new structure, the preliminary user charges and connection fees are anticipated to be completed in draft form by early spring 1998, in coordination with the development of the overall Strategic Plan. H:ENG\ENG\STRATPLN\1401&2\RAC&PAC\OPINREV 3 DETAILED ANALYSIS OF KEY ISSUES CHANGES TO USER CHARGE SYSTEM The following major user charge issues were reviewed and associated opinion statements were developed by the RAC members. 1. Should the Existing System of User Charges be Changed? This question is fundamental to the issue of whether or not there are outstanding concerns over the equity of the existing rate structure. A "yes" vote signifies that some improvements can be made. A "no" signifies a desire to remain with the existing rate structure. Voting Results Yes 16 No 4 Majority Opinion • Most RAC members felt that the existing system of user charges should be improved. Minority Opinion • Even the minority agreed that there needs to be a more accurate measure of all users on the system. 2. Do We Change Commercial Categories? This question addresses the desire to shift from charging commercial users based only on square footage to charging them based on wastewater flow and strength. Currently, all commercial users are charged the same cost per square foot of improved property, regardless of whether the commercial user is an office building or a restaurant. Voting Results Yes 20 No 0 Use 19 Categories as proposed 5 Use staff-determined number of Categories 15 H:ENG\ENG\STRATPLN\1401&2\RAC&PAC\OPINREV 4 Majority Opinion • All RAC members felt commercial categories need to be revised to more accurately reflect the actual wastewater flows and pollutant loads of the users. The majority (15 members) felt that the 19 categories of the 105 available that had been developed as part of the workshop process needed to be further evaluated. Most RAC members agreed that they would feel comfortable with the Districts' staff and Board determining the final commercial category breakdown as long as it was equitable. Minority Opinion • No minority opinion, as none of the RAC members voted to keep the existing system of commercial categories for user charges. 3. Should Multi-Family User Charges be Proportional to Single-Family? Multi-family residential units typically discharge less than single-family residential units. This question asks whether it is appropriate to continue to recognize this difference by charging multi- family units less than single-family units, based on actual field measurements. Voting Results Yes 21 No 1 Majority Opinion • A majority of the RAC members feel that the measured difference in wastewater flows and loadings between multi-family versus single-family homes justifies establishing a pro-rata reduced rate for multi-family homes. Minority Opinion • One member of the RAC did not want to continue with a difference in rates for single versus multi-family homes because of the increasing number of people living in multi-family homes, more closely resembling occupancy of single-family homes. 4. Should Different Cost Allocations be Applied to User Rates? Currently, existing user charges are based on the average cost for total residential, commercial and industrial contributions. This question addresses whether residential users should pay a user charge that is higher than the average cost to treat a gallon of flow and a pound of pollutant loading in order to have commercial and industrial customers pay a user charge that is lower than the average cost. The purpose of the lower charge for commercial and industrial users would be to provide an incentive for commercial and industrial users, and their associated jobs and other economic benefits, to locate in Orange County. H:ENG\ENG\STRATPLN\J401&2\RAC&PAC\OPINREV 5 Voting Results Yes 6 No 16 Majority Opinion • The majority feels that the "Same Average Cost" approach for user charges is a fair allocation, resulting in a cost charged to each user based on the average cost to treat a gallon of flow and a pound of pollutant loading. • Residential users should not subsidize commercial and industrial users. • There are other means in existence for encouraging and keeping industry in the community. • Commercial, industrial, and residential users should all be treated the same. • A different allocation would result in an unfair burden on residential users. • It could also adversely affect those on a limited income. • Any other approach may not satisfy the fair, equitable, proportional charge requirements of Proposition 218. • User charges may not be as big a concern as connection fees in attracting industry. Minority Opinion • Some RAC members expressed a desire to provide a user charge structure which would encourage industries (and jobs) to locate and remain in Orange County. • Industry is not impacting the fixed costs of operation. • Replacement/improvement may shift to residential users in the future anyway if industry leaves. • The different cost allocations may result in a better allocation of fixed and variable costs to the residential, commercial, and industrial categories. • The number of residential units far exceeds commercial/industry. To give back a small percentage to attract and keep business seems reasonable. This is only one arrow in the quiver that may be used to attract business but it is important all the same. H:ENG\ENG\STRATPLN\1401&2\RAC&PAC\OPINREV 6 5. Although a majority of RAC members felt that Different Cost Allocation should not be adopted: if Different Cost Allocations are Adopted What is the Preferred Method? If it is a good idea to provide a user charge for commercial and industrial users that is lower than the average cost, then which of the methods should be applied? Each different method results in a different contribution from residential users to commercial and industrial users. Voting Results Constant O&M (residential only) 5 Replacement and Improvement (residential only) 15 Both Constant O&M and Replacement and Improvement (residential only) O Other Methods 1 Majority Opinion • The majority of RAC members voted for the method that provides the least cost impact to residential users. Minority Opinion • Some members of the RAC felt that a greater incentive was warranted for industrial and commercial users. • Because there are so many residential users, a substantial break can be provided to industrial and commercial users with just a slight increase in residential rates. CHANGES TO THE CONNECTION FEE SYSTEM The following major connection fee issues were reviewed and associated opinion statements were developed by the RAC members. 1. Should the existing system of Connection Fees be changed? This question is fundamental to the issue of whether or not the existing connection fee system is equitable. A "yes" vote indicates that some improvements can be made. A "no" indicates that the existing connection fee system is preferred over the alternatives that have been discussed in the RAC process. Voting Results Yes 20 No 2 H:ENG\ENGISTRATPLN\1401&2\RAC&PAC\OPINREV 7 Majority Opinion • Most RAC members felt that the existing connection fee system needs to be improved. • Although in the aggregate, commercial users contribute their share of connection fees, many new commercial users are not charged in accordance with their impact on the system. • One member thought that CSDOC should not even have a connection fee. Minority Opinion • Some members felt that increases in administrative, field monitoring and laboratory costs for a new connection fee system may outweigh the benefits. 2. Should CSDOC have Tiered Residential Connection Fee Categories? This question addresses the fact that different types of residences have different impacts on the system and whether the connection fees should be tailored to account for these impacts. Currently all residential units are charged the same connection fee. Voting Results Yes 20 No 2 Majority Opinion • Most RAC members felt that residential connection fees should be tiered for different residences. They felt that a tiered fee would accurately reflect the impacts of household size, water use characteristics, and other factors. • Some members questioned whether the number of bedrooms is the best way to characterize the impacts that residences can have on the system. Minority Opinion • Some members felt that the improved accuracy from a tiered connection fee was not worth the probable extra administrative costs that would be incurred to implement such a system. H:ENG\ENG\STRATPLN\1401&2\RAC&PAC\OPINREV 8 3. Should We Provide Industrial Incentives for Connection Fees? This issue addresses the desire to provide connection fee "incentives" for new commercial and industrial users to help keep and attract new jobs to Orange County. The incentives would be provided from new residential users to new commercial and industrial users. Currently, there are no "incentives" provided for commercial and industrial users. Voting Results Yes 16 Maybe 5 No 0 Majority Opinion • Nearly 75% of the RAC members felt that there is merit in providing connection fee incentives for new industries. • Incentives may help provide Orange County with a competitive edge over other communities that are also competing for industries and associated jobs. • The indirect economic benefit to the residential sector resulting from industrial incentives may make it worthwhile for new residential users to pay more to provide the incentives. Minority Opinion • Some members were not convinced that connection fee incentives would be a significant factor in luring industry to the area, especially when compared to the other economic considerations which may be more important in deciding where to locate an industry. • New residential users would have to pay a higher connection fee to provide this incentive. • The process for establishing who receives the incentives may be controversial. 4. Should Connection Fees be Payable Over Time? The purpose of providing the ability to pay connection fees over time is an attempt to help make the cost of locating commercial and industrial users in Orange County more affordable. Currently, connection fees are collected as a one-time. up-front payment. Voting Results Yes 12 No 3 Majority Opinion H:ENG\ENG\STRATPLN\1401&2\RAC&PAC\OPINREV 9 • Most RAC members felt that it is a good idea to allow flexibility in the rate structure for industries and large commercial establishments to pay connection fees over time. • To qualify for payment over time, a minimum connection fee should be established by CSDOC. This would limit the number of users that would qualify for this payment option. Otherwise, the administrative and financial burden may be too great. • The terms of the payment option should be established by CSDOC staff so that they are reasonable to industry, to serve as an incentive. Minority Opinion • A few members felt that CSDOC should not be providing private banking services. If a business wants to pay over time, then it should obtain financing. • The members were also concerned that if an industry defaults on their payment that the other users would be responsible for the unpaid portion. 5. Should Different Cost Allocations be Applied? This question addresses whether residential users should pay a connection fee that is higher than the average cost to expand the treatment plant in order to have commercial and industrial customers pay a connection fee that is lower than the average cost. The purpose of the lower connection fee for commercial and industrial users would be to provide an incentive for commercial and industry, and their associated jobs, to locate to Orange County. Voting Results Yes 12 No 2 Majority Opinion • Most RAC members felt that connection fee incentives should be provided for industry. • It is worthwhile for new residential users to pay a slightly higher connection fee to help attract good jobs into the community. H:ENG\ENG\STRATPLN\1401&2\RAC&PACIOPINREV 10 Minority Opinion • Some RAC members felt that all classes of users (residential, commercial and industrial) should pay a connection fee based on their average loading on the system and that no user class (residential) should pay to provide an incentive for another user class. 6. If Different Cost Allocations are Applied, Which Method Should Be Applied? If it is a good idea to provide a connection fee for commercial and industrial that is lower than the average cost, then which of the methods should be applied? Each different method results in a different contribution from residential users to commercial and industrial users. Voting Results • The group felt that this question could not be answered directly with a vote for one method, so a range of responses was solicited. The percentage for each response corresponds to the percentage of the total connection fee burden that the members felt should be paid for by residential. Residential % 87% 76% 70% Description "Incremental" Method Between "Incremental" and "Buy-In" "Buy-In" "Wet Weather" Method Vote 0 3 0 3 Between "Wet Weather and "All Pay the Same" 6 61% "All Pay the Same" Method Below "All Pay the Same" Method H:ENG\ENG\STRATPLN\1401&2\RAC&PAC\OPINREV 11 1 1 14 Majority Opinion • • Many of the RAC members felt that some incentive should be available to industry but that it should be applied so that residential should pay between 61 and 70 percent of the total connection fee burden, or slightly more than an allocation based on "all users pay the same average cost." Many of the members specifically support the "Wet Weather" allocation method . Minority Opinion • A few members think that it is important to provide an incentive to business/industry. These members feel that residential should provide a sizable incentive (a residential share of the connection fee burden corresponding to the range bounded by the "incremental" and "buy-in" methods) for industry because this would help attract jobs into Orange County. H:ENG\ENGISTRATPLN\1401&2\RAC&PAC\OPINREV 12 INF10RMAT1l,ONAL PRESENTATl1ONS ' ·i J FAHR COMMITTEE Meeting Date ToJt. Bds. 12/10/97 AGENDA REPORT Item~~mber Item Number County Sanitation Districts of Orange County, california FROM: Donald F. McIntyre, General Manager Originator: Greg Mathews, Principal Administrative Analyst SUBJECT: MG CALCULATIONS OVERVIEW (All Districts) (FAHR97-86) GENERAL MANAGER'S RECOMMENDATION Approve revised method of benchmarking Districts' cost of wastewater treatment per million gallons SUMMARY Benchmarking with outside agencies determined that many other POTWs overhead costs were included in the plant process treatment costs reported at the Districts. Several other agencies did not calculate telephone, management training, plant facilities maintenance, and safety costs into wastewater treatment costs; they assigned these costs to overhead. The decrease in the Districts' benchmark for treatment costs from $525 to $490 per million gallons is the result of changes in cost allocations. The Districts' method of assigning costs to overhead is now similar to many other Publicly Owned Treatment Works. PROJECT/CONTRACT COST SUMMARY The reallocation caused no net change in the budget. BUDGET IMPACT D This item has been budgeted. (Line item: ) D This item has been budgeted, but there are insufficient funds. D This item has not been budgeted. ~ Not applicable (information item) \\leadlda~.dtalfin\2210\crane\FAHR\FAHR.97\DEC\FAHR97~.doc Revised; 10/17197 Page 1 ADDITIONAL INFORMATION N/A ALTERNATIVES Do not approve revised benchmar1c due to overhead cost calculations. This would result in no changes financially. However, benchmar1cing with several outside agencies is more difficult because of calculations necessary to structure costs in a similar manner. CEQA FINDINGS NIA ATTACHMENTS Graphics Report BAC 111Nd\data2'1Np.dtalfin\2210\cnme\FAHRIFAHR.97\0ECIFAHR97-a6.dac RMed: 1M7197 Page2 FIRST QUARTER FISCAL YEAR 1997 / 98 ACTUAL EXPENSES $525 /MG • $418 / MG Changes ih Cost ' · Allocation . · · ; · .-$24.12 (22.5%) -:, Ch~nges in Flo -$10.12 Changes in Costs -$72.72 (68%) "' Page 1 of 5 CHANGES IN COSTS BREAKDOWN <D -$19.95 Labor and Benefits Costs <ID -$11.15 Contractual Services Costs @ -$10.66 Research and Monitoring Costs © -$ 7.47 Chemicals Costs @ -$17.97 Increase in Revenues @ -$ 5.52 Other Costs -$72.72 (68%) Page 2 of 5 ~ -$10.12 (9.5%) CHANGES IN FLOW EXPLANATIONS (D Flow Increased 2.42°/4 vs. FY 1997 / 98 Budget Estimate ® First Quarter Flows Treated = 22,897 Million Gallons vs. 22,356 Million Gallons Estimate Page 3 of 5 CHANGES IN COST ALLOCATION EXPLANATIONS <D Through FIS Implementation, Revisited and Redefined Cost Allocation Process ® Through Benchmarking Studies, Reviewed How Other POTWS Allocate Costs and Redefined Some Allocation Methods ® Costs Previously Considered Joint Treatment Plant Process Operating Costs (J.O.) Are Now Overhead. Examples include: • Telephone • Management Training • Safety Supplies • Adminstrative Facilities Maintenance • Groundskeeping -$24.12 (22.5%) ) Page 4 of 5 ... CHANGES IN DOLLARS PER MILLION GALLON BENCHMARK OLD COST ALLOCATION MODEL NEW COST ALLOCATION MODEL $ 655.80 / MG (J.O. Costs) $ 655.80 / MG (J.O. Costs) -$ 121.88 / MG (Labor Charge -$ 141.28 / MG (Labor Charge Out Allocations) Out Allocations) -$ 9.19 / MG (Materials Charge -$ 23.56 / MG (Materials Charge Out Allocations) Out Allocations) $ 524.73 / MG BENCHMARK $ 490.96 I MG BENCHMARK NEW PROPOSED BENCHMARK = $ 490 / MG Page 5 of 5 FAHR COMMITTEE AGENDA REPORT County Sanitation Districts of Orange County, california FROM: SUBJECT: Gary Streed, Director of Finance Originator: Gary Streed, Director of Finance Accumulated Funds and Reserves Policy Update (All Districts) FAHR97-87 GENERAL MANAGER'S RECOMMENDATION Receive and file the second status report. SUMMARY Meeting Date ToJt. Bds. 12/10/97 Item ~umber Item Number As a part of the 1997-98 sewer service fee rate setting and budget adoption process, the Directors requested a review of the Districts' accumulated funds and reserves policies. The existing policy was adopted in 1990 and has been only slightly modified in the interim. Staff and consultants have been evaluating the existing policy, options and policies of other agencies. A brief status report will be given at the meeting. PROJECT/CONTRACT COST SUMMARY None. BUDGET IMPACT D This item has been budgeted. (Line item: ) D This item has been budgeted, but there are insufficient funds. D This item has not been budgeted. cgi Not applicable (information item) ADDITIONAL INFORMATION Currently reserve funds are accumulated in each of the Districts' seven categories: • Cash flow needs prior to property tax and user fee allocations • Unforeseen and unbudgeted contingency needs • Capital improvement program needs \\lead\data2'tNp.dtallin\2210\cranelFAHRIFAHR.97\DECIFAHR97-87.doc Revised: 10'17197 Page 1 • Debt or certificate of participation reserve requirements • Unforeseen environmental law and facility requirements • Insurance deductible and catastrophic losses • Rate stabilization from year to year The municipal financial advisory firm of Public Financial Management was requested to accelerate a portion of their work that was included in the Strategic Plan effort, but scheduled for a later date. They reviewed the Districts' existing policy and funding levels and conducted a survey of other agencies. The debt rating agencies were also contacted by PFM to discuss the importance and the role of cash reserves on debt ratings, marketability and potential interest costs. The results of the survey and interviews are will be distributed at the Committee meeting. Staff and PFM will review the results of the survey and other benchmark data. This is the second in a series of discussions that could lead to a revised reserves and accumulated funds policy, including provisions for future replacement of existing fixed assets. ALTERNATIVES None. CEQA FINDINGS None. ATTACHMENTS Survey results will be distributed at the Committee meeting. GGS:lc \\lead\data2\Np.dtallin\2210\crane\FAHRIFAHR.971DECIFAHR97~7.doc RIIYiAd: 10117197 Page2 F1AHR COMMITTEE' CALENDAR December 10, 1997 NO MEETING SCHEDULED Consideration of Performance-Based Budget 1998-99 Budget Assumptions & Fiscal Policies CORF Budget Recommendation Delegation of Authority and Purchasing Resolution Rate Advisory Committee Recommendations Status Annual Renewal of Boiler & Machinery Insurance Second-Quarter Financial & Performance Report Financial Strategy for OCR/GRS Project Strategic Plan/Financial Plan and Revised Rate Structure Part 1 DART -Update on Cross-Training Program for Three Pilot Projects Worker's Comp Report -2nd Quarter Status Report on Implementation of Broadbanding Report on Audit Findings for 23 Cities Sewer Connection Fees CSDOC e P.O. Box 8127 e Fountain Valley, CA 92728-8127 e (714) 962-2411 Action Action Action Action Action Action Information Action Action Information Information Information Information