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HomeMy WebLinkAbout2011-01-13 Packet - SpecialCITY OF UKIAH JOINT CITY COUNCIL UKIAH VALLEY SANITATION DISTRICT AGENDA Special Meeting CIVIC CENTER COUNCIL CHAMBERS 300 Seminary Avenue Ukiah, CA 95482 January 13, 2011 6:00 p.m. 1. ROLL CALL 2. UPDATE IN CONNECTION WITH ADMINISTRATIVE CIVIL LIABILITY COMPLAINT NO. R1-2010-0070 As ISSUED BY THE CALIFORNIA REGIONAL WATER QUALITY CONTROL BOARD (TIME LIMIT OF 10 MINUTES) 3. VERBAL STATUS REPORT OF FACILITATION PROCESS ( TIME LIMIT OF 10 MINUTES) 4. DISCUSSION OF BILLING AND COLLECTION OPTIONS AVAILABLE TO THE DISTRICT (TIME LIMIT OF 10 MINUTES) 5. CITY RESIDENT ISSUES RELATED TO DISCUSSION OF BILLING AND COLLECTION OPTIONS AVAILABLE TO THE DISTRICT (TIME LIMIT OF 20 MINUTES) 6. UKIAH VALLEY SANITATION DISTRICT BOARD APPOINTMENT OF DISTRICT ENGINEER OTHER THAN CITY ENGINEER OF THE CITY OF UKIAH (JOINT DISCUSSION OF UVSD BOARD APPOINTMENT OF DISTRICT ENGINEER, REPLACING CITY ENGINEER IN THE POSITION) (TIME LIMIT OF 30 MINUTES) 7. STATUS REPORT OF CITY'S REQUESTED PREVIOUS YEAR ADJUSTMENTS TO UVSD 07/08 AUDIT AND ISSUES RELATED TO CITY OPERATION OF A SINGLE WASTEWATER SYSTEM (TIME LIMIT OF 30 MINUTES) 8. PUBLIC COMMENT 9. ADJOURNMENT Please be advised that the City needs to be notified 72 hours in advance of a meeting if any specific accommodations or interpreter services are needed in order for you to attend. The City complies with ADA requirements and will attempt to reasonably accommodate individuals with disabilities upon request. Materials related to an item on this Agenda submitted to the City Council after distribution of the agenda packet are available for public inspection at the front counter at the Ukiah Civic Center, 300 Seminary Avenue, Ukiah, CA 95482, during normal business hours, Monday through Friday, 7:30 am to 5:00 pm I hereby certify under penalty of perjury under the laws of the State of California that the foregoing agenda was posted on the bulletin board at the main entrance of the City of Ukiah City Hall, located at 300 Seminary Avenue, Ukiah, California, not less than 24 hours prior to the meeting set forth on this agenda. Dated this 7th day of January, 2011. JoAnne Currie, City Clerk ITEM NO.. MEETING DATE: city o-1-- u k,iafr AGENDA SUMMARY REPORT 2 January 13, 2011 SUBJECT: UPDATE IN CONNECTION WITH ADMINISTRATIVE CIVIL LIABILITY COMPLAINT NO. R1-2010-0070 AS ISSUED BY THE CALIFORNIA REGIONAL WATER QUALITY CONTROL BOARD Background: On September 15, 2010 City Staff brought forward the referenced item in order to "Authorize The City Manager To Represent The City Of Ukiah In Connection With Administrative Civil Liability Complaint". The Council was also asked to support the one of four options that the state had offered to proceed and settle this issue. Council supported option 4 (see attachment 1) to waive the hearing requirement with the state board and submit a proposed supplemental environmental project. This item was also presented to the Ukiah Valley Sanitation District (UVSD) on September 16, 2010 and supported by the District Manager as well as the UVSD Board. After receiving the support from the Board and the Council, City Staff had further conversation with State Board Staff regarding two of the items in the fine. These items were both reporting requirements for discharge quality at the sewer treatment plant. One was a reporting requirement for Copper and the other for Nitrate. Both of these substances had been tested for and found to be within limits; however, the reporting required by the State was not submitted in the manner that the State had wanted this information in. It should be mentioned that during the 2010/2011 Budget discussions City staff had reduced two line items regarding Copper and Nitrate, in the joint operation fund (612), from $100,000 each to $10,000 each. This was as a result of these two substances being in compliance of discharge limits. Current city staff believed the reports in question has been filed with the State, and wanted the opportunity to prove that this had occurred. The subject was complicated by the retirement of the former Deputy Director of Public Works for Water and Sewer and inability of staff to contact to her for verification. The State Board Staff recommended that City Council speak with State Counsel regarding how to proceed. It was agreed that the best approach was to change the option 2 (see attachment 1) and defer payment of the fine while City Staff and State Board Staff discussed the two items in dispute. Continued on Paae 2 Recommended Actions: 1. Receive Report. Alternative Council Option(s): Provide staff with direction Citizens advised: Rick Kennedy, District Manager, Ukiah Valley Sanitation District Requested by: Tim Eriksen, Director of Public Works / City Engineer Prepared by: Tim Eriksen, Director of Public Works / City Engineer Coordinated with: Jane Chambers, City Manager Attachments: 1. Waiver Form for Administrative Civil Liability Complaint Approved: Ja Chambers, City Manager Subject: Update In Connection With Administrative Civil Liability Complaint No. R1-2010-0070 As Issued By The California Regional Water Quality Control Board Meeting Date: January 13, 2011 Page 2 of 2 Subsequently, it has become clear that the reporting requirement was not met. City Staff has defined a supplemental environmental project to eliminate a portion of the fine, and is reproducing the checks to make the balance of payment due to the State. Discussion: Staff initially received notice of possible actions by the (RWQCB) several months ago. This started a discussion with RWQCB staff (Board Staff), and City Staff of reviewing many items back to January of 2005. Most of the events were Sanitary Sewer Overflows (SSO) and there were some other reporting requirement questions that Board Staff had felt were not met. After some of these discussions had taken place the RWQCB changed the scope of their investigation to items back to January 2007 as opposed to 2005. This significantly reduced the potential fine amount. Once the period of the violation review was re-established by RWQCB the Board Staff requested any information that the City Staff could provide to show the effort that has been put forward to prevent any violation activities, chiefly SSOs. These efforts were shown in programs that the City has in place as well as expenditures on equipment, staff and capital projects. The RWQCB is concerned that jurisdictions do not prosper at the expense of the environment. That is one of the litmus tests that are used when discussing possible violation activities. City Staff amassed an enormous amount of records and documentation to show all of the activities that had been accomplished by the City in the time period in question. These efforts dramatically reduced the potential fines. Both the staff at the Waste Water Treatment Plant and the staff on the water / sewer maintenance crew expended an extraordinary amount of time providing documentation and doing research. The former Deputy Director of Public Works also expended many hours dealing with Board Staff and defending the City's efforts in order to further reduce fines. As a result of all these efforts both from the City and the Board Staff a final violation was prepared. The violation total amounts to $130,768. Depending on what option is selected on the waiver form (attachment 1) this fine can be further reduced. Staff is recommending that option 4 be selected. This option requires that the City directly pay $70,634 and submit a supplemental environmental project as a match for the remaining $60,134. In discussions with the Board Staff, it appears that the sewer relining project nearly underway will be acceptable for the in lieu fees. During the last two budget hearings City Staff expressed concerns regarding the high cost of pending fines and the vigilant approach the California Regional Water Quality Control Board (RWQCB) has taken with other jurisdictions in the region. The City Council has recognized and supported these concerns. Evidence of this support is that line items were approved in the Sewer Budget for "fines" in order to resolve these violations. Fiscal Impact: I-XI Budgeted FY 10/11 1-1 New Appropriation I-XI Not Applicable F] Budget Amendment Required Amount Budgeted Source of Funds (title and Account Number Addit. Appropriation Requested $50,000 612-3510 612.3510.639.001 26,250 612-3510 23,750 612-3510 612.3510.639.810 614.3510.639.811 WAIVERFORM' FOR ADMINISTRATIVE CIVIL LIABILITY COMPLAINT By signing this waiver, I affirm and acknowledge the following: 1 am duly authorized to represent the City of Ukiah (hereinafter "Discharger") in connection with Administrative Civil Liability Complaint No. R1-2010-0070 (hereinafter the "Complaint"). I am informed that California Water Code section 13323, subdivision (b), states that, "a hearing before the regional board shall be conducted within 90 days after the party has been served [with the complaint]. The person who has been issued a complaint may waive the right to a hearing." E3 (OPTION 1: Check here if the Discharger waives the hearing requirement and . will pay the liability in full.) a. I hereby waive any right the Discharger may have to a hearing before the Regional Water Board. b: I certify that the Discharger will remit payment for the proposed civil liability in the full amount of one hundred thirty thousand seven hundred sixty-eight. dollars ($130,768) of which an amount of $47,250 by check that references "ACL Complaint No. R1-2010-0070."'made payable to the "Waste Discharge Pepnit Fund" and the remaining amount of $83,518 by check that references "ACL Complaint No. R12010-0070." made payable to the "State Water Pollution Cleanup and AbaiementAccounf Payment must be received by the Regional Water Board by September 2,; 2010 or'"the Regional Water Board may adopt an Administrative Civil Liability Order repuiring.payment. c. I understand the' payment of the above amount constitutes a proposed settlement of the Complaint, and that any settlement will not become final until after the 30-day public notice and comment period. Should the Regional Water Board receive significant new information or comments from any source (excluding the Water Board's Prosecution Team) during this comment period, the Regional Water Board's Assistant Executive Officer may withdraw the complaint, return payment, and issue a new complaint. I understand that this proposed settlement Is subject to approval by the Regional Water Board, and that the Regional Water Board may consider this proposed settlement in a public meeting or hearing. I also understand that approval of the settlement will result in the Discharger having waived the right to contest the allegations in the Complaint and the imposition of civil liability. d: I understand that payment of the above amount is not a substitute for compliance with applicable laws and that continuing violations of the type alleged In the Complaint may subject the Discharger to further enforcement, including additional civil liability. . 2- ❑ (OPTION 2. Check here if the Discharger waives the 90-day hearing requirement In order to engage In settlement discussions.) I hereby waive any right the . Discharger may have to a hearing before the Regional Water Board within 90 days after service of the complaint, but I reserve the ability to request a hearing - in the future. I certify that the Discharger will promptly engage the Regional Water Board Prosecution Team In settlement discussions to attempt to resolve the outstanding violation(s). By checking this box, the Discharger requests that the Regional Water Board delay the hearing so that the Discharger and the Prosecution Team can discuss settlement. It remains within the discretion of the Regional Water Board to agree to delay the hearing. Any proposed settlement is subject to the conditions described above under "Option 1." ❑ (OPTION 3. Check here If the Discharger waives the 90-day hearing requirement in order to extend the hearing date and/or hearing deadlines. Attach a separate sheet with the amount of additional time requested and the rationale.) i hereby waive any right the Discharger may havd to a hearing before the Regional Water Board within 90 days after service of the complaint. By checking this box, the Discharger requests that the Regional Water Board delay the -hearing and/or hearing deadlines so that the Discharger may have additional time to prepare for the hearing. It remains within the discretion of the Regional Water Board to approve the extension. ❑ (OPTION 4. Check here If the Discharger waives the hearing requirement and will submit a proposed supplemental environmental project (SEP) or enhanced compliance abdons (ECAs). If the proposal is rejected, the Discharger will pay the liability in full.) a. I hereby waive any right the Discharger may have to a hearing before the Regional Water Board.- b. 1 certify that the Prosecution Team has authorized the Discharger to submit a proposed SEP/ECAs in lieu of payment"of $60,134 of the proposed civil liability. I agree to. submit the proposal and the remainder of the proposed civil liability ($70,634, of which $23,625 made payable to the "Waste Discharge Permit Fund" and the remaining balance of $47,009 made payable to the State Water Pollution Cleanup and AbatementAccounf) within 60 days of the date of the Complaint. I understand that the proposal must conform to the requirements specified in the State Water Resources Control Board's Water Quality Enforcement Policy. If I receive written notice from the.. Prosecution Team that the Discharger has failed to timely submit a proposal or that the Prosecution Team has rejected the proposal, I certify that the Discharger will remit payment of the proposed civil liability in the amount of sixty thousand one hundred thirty four dollars ($60,134) of which $23,626 made payable to the "Waste Discharge Permit Fund" and the remaining balance of $36,509 by check that references "ACL Complaint No. R12010- 0070." made payable to the "State Water Pollution Cleanup and Abatement Account" within ten days of the notice. If payment is not timely-received, the Regional Water Board may adopt an Administrative Civil Liability Order requiring payment. s _3. c. I understand the acceptance or rejection of the proposed SEP/ECAs and payment of the remainder of the proposed civil liability constitutes a proposed settlement of the Complaint, and that any settlement will not become final until after the 30-day public notice and comment period. Should the Regional Water Board receive significant new iriforrnation or comments from any source (excluding the Water Board's Prosecution Team) during this comment period, the Regional Water Board's Assistant Executive Officer may withdraw the complaint, return payment, and Issue a new complaint. I understand that this, proposed settlement is subject to. approval by the Regional Water Board, and that the Regional Water Board may consider this proposed settlement in a public meeting or hearing. I alto understand that approval of the.settlemerit. will result in the Discharger having waived the right to contest the allegations In the Complaint and the imposition of civil liabiiftyy. d. I understand that payment of the, above amount Is not a substitute for compliance with applicable laws and that continuing violations of the type alleged in the Complaint may subject the Discharger to-further enforcement, including additional civil liability. (Print Name and Titte) 1 (Signature) (Date) 100826_Revised_Meadng_Waiver_CNM_Uktah_ACLC UKIAH VALLEY SANITATION DISTRICT Item No. 4 AGENDA SUMMARY REPORT JOINT MEETING BETWEEN THE DISTRICT BOARD AND THE UKIAH CITY COUNCIL JANUARY 13, 2011 DISCUSSION OF BILLING AND COLLECTION OPTIONS AVAILABLE TO THE DISTRICT SUMMARY AND DISCUSSION As a result of the delinquency issue related to sewer service charges within the District territory outside the City limits, the Board has been exploring different means for billing and collecting sewer service charges. At the joint meeting of April 8, 2010 between the District Board and City Council, the Board's desire to pursue the use of the tax roll as a means of collecting the sewer service charges from properties located within the District was presented. The Board believed it was appropriate that the matter be discussed in broad terms between the City Council and the District Board and that further direction to staff be provided. A change in the billing and collection process for the District (1) could impact the City's Billing and Collection Department, (2) would impact the Joint Sewer Fund since the District would no longer be participating in the cost for billing and collection, (3) would probably necessitate an amendment to the 1995 Participation Agreement, and (4) would be a onetime impact to the District's cash flow during the . transition period. No direction was provided to staff. In subsequent board meetings, the Directors have continued to discuss the merits of using the tax roll as a means of billing and collecting sewer service charges and they have explored the merits of contracting with the water purveyors within the District for a combined billing arrangement. Millview County Water District and Willow Water District have indicated an interest in exploring a combined billing arrangement and the Board has discussed utilizing the tax roll to collect the minimum sewer charge. Under the current billing system, the minimum sewer charge is not collected for vacant structures which are connected to the system if a water account is not active for the property; it is the District's position that all properties connected to the system whether or not there are discharges to the sewer, must be assessed at least the minimum sewer service charge. Placing the minimum sewer charge on the tax roll would guarantee that all properties connected to the sewer system are assessed at least the minimum charge. The water consumption component of the sewer charges could be collected through the combined billing arrangement. The multiple method approach would reduce the impact to the District's cash flow during the implementation period. The Board has not selected a set course of action (collection via tax roll vs combination tax roll and combined billing). The District Manager has been authorized to discuss the particulars with the water purveyors for a combined billing arrangement. Whatever approach is decided upon, the Board prefers that it be consistent for all rate payers within the District. The District Manager recommends that a new billing and collection system for the District be in place prior to September 1, 201 lwhen the special assessment are due for submittal to the County Auditor. The Board has learned that the City Council may have authorized city staff at their council meeting of December 15 to issue a request for proposals for the development of a new software system for its finance functions. If the Board's decision to implement a new billing and collection system will impact design decisions in the development of the software, the impacts should be discussed now. As an example, the Board and City Council directed their respective staff to forge solutions for the advance notification to property owners owning properties to which delinquent sewer service charges are accruing; is this feature contemplated for the new software? On a related matter, the definition of "consumption," as it is defined in District Ordinance No 25, was modified from a single month water meter reading to a three-month average of winter water meter readings taken for the billing periods of January, February, and March with the adoption of District Ordinance No 34 on December 16, 2010. District staff will receive the water meter readings for the three months directly from the cooperating water purveyors and they will provide the averages to the City's Billing and Collection Department. FISCAL IMPACT Use of the tax roll for the collection of the sewer service charges from District rate payers will (1) impact the Joint Sewer Fund since the District would no longer be participating in the cost for Billing and Collection, currently budgeted at $151,020 (612.3505.320.000) for FY 09/10 and of which the District pays 47.5% or $71,735 and (2) it would create a savings to the District since Section 5473.9 of the Health and Safety Code of the State of California limits the maximum collection fee for use of the the tax roll to $5.00 per each account or one (1) percent of all money collected, whichever is greater. Projected District revenue from residential and commercial accounts for FY 09/10 is $3,783,954 and a 1% fee for collection would be $37,840. The minimum monthly sewer fee for all rate payers is currently $47.18 which equates to an annual cost of $566.16; the 1% fee exceeds the maximum allowed fee of $5.00 per account. The estimated annual expense to update and submit the annual tax roll assessments to the County Auditor is between $5,000 and $10,000. Use of the tax roll will eliminate the current effort being expended by District Staff in the collection of delinquent sewer charges from closed sewer accounts. RECOMMENDED ACTION Discuss the issue ATTACHMENTS None Rick Kennedy, PE UVSD District Manager/Engineer/Clerk ITEM NO.: MEETING DATE: Citi o-,f T- fah- AGENDA SUMMARY REPORT 5 January 13, 2011 SUBJECT: CITY RESIDENT ISSUES RELATED TO DISCUSSION OF BILLING AND COLLECTION OPTIONS AVAILABLE TO THE DISTRICT Background: The Ukiah Valley Sanitation District Board (UVSD) is discussing what options it has with regards to billing and collection of District accounts. Under current practice, the City of Ukiah provides billing and collection services for the District. All customers of the system inside the City limits receive the same billing and collection services. Customers outside of the City limits (about 25% of all customers) have received the same billing services, but have not been subject to the same collection process as City customers. This is due to the fact that these customers do not participate in City water and electrical services (subject to disconnection) as do residents of the City of Ukiah. For FY 2010/11, the budgeted charges for collection services are $136,972, with the District being charged 47.5% of those costs, or $65,062. The District staff is proposing that this expenditure could be reduced by about half that amount if the District instituted a new collection system through use of Mendocino County Property Tax bill. This assumes elimination of the cost related to billing for the District for customers both inside and outside of the City limits. The cost to achieve this savings would be an additional expenditure of $5,000 to $10,000 to the County Auditor to update and submit the annual tax roll assessments. Since last year, the District Manager has undertook to make collections on delinquent accounts occurring outside of the City limits, and the District has taken action to place some uncollectable accounts on the property tax bill of owners where these uncollected accounts have occurred. Procedural issues have arisen with the participation of the District Manager in direct collection efforts. City billing and collection staff must contact the District Manager on a case by case basis to find out if customers have paid the account or currently have payment arrangements with UVSD. Sufficient measures have not been put into place to avoid poor customer service and account management since the advent of the District's collection efforts. Continued on Page 2 Recommended Action(s): Both City Council and UVSD Board members receive this report. Alternative Council Option(s): Citizens advised: Requested by: Prepared by: Jane Chambers, City Manager Coordinated with: Gordon Elton, Finance Director Attachments: Approveds~~_. 1/ Jane Chambers, City Manager Accounts Outside of the City Limits The total average accounts receivable for the District, outside of the City limits, over the last months of September, October, and November 2010, is $202,721. Of this amount, 78%, or the largest share of the average $158,122, is on current billings, 12% is 31-60 days late, 3% is 61-90 days late, and 7% is over 90 days late. City staff has identified $281,411 of delinquent District accounts, outside of the City limits, referred to the Ukiah Credit Bureau since 1998. During that time, 979 accounts have been referred, with $91,711 collected, or about 33% of the total amount sent to the collection agency. The City has referred an additional $87,440 of December 2009 through September 2010 accounts to the District Manager as requested, and a portion of this amount has been approved for placement on the property tax bill as noted earlier. Of these accounts, 28% of the amount owing is from 2 large commercial accounts including mobile home and apartment units. Although the City's current financial software readily provides data for those accounts outside of the City limits, where District and City accounts are within the City limits, the information as to District delinquency specifically within the City limits is not available. Collection within the City limits is provided to both District and City customers are the same basis. The historic data indicates that about $30,740 per year, in the last 12 years (1998-2010), has been turned over for collection, from the District's portion outside of the City limits. Revenue to the District on an annual basis is currently about $2M. Discussion: The fact that District customers residing outside of the City limits cannot have their services disconnected as an inducement to pay monthly sewer service charges does disadvantage the District's collection of back payments owed. The District Manager has identified savings offsetting County processing costs by reducing the Districts share of City billing and collection charges using the assumption that all of the 47.5% of the District share would be saved. The Participation Agreement provides for sharing of costs on the ESSU ratio, so savings from collection procedures no longer used would need to be applied on that basis. Proposed Savings by District: $65,062 (Actual amount to be determined under Participation Agreement cost sharing) Proposed Expenditures by District: $3,706,251 x 1 % _ Payments to Auditor = Total Cost to District = $37,063 $ 5,000 - $10,000 $42,063 - $52,063 The District could save as much as $23,000 or as little as $13,000 by going to the property tax billing for all of its customers. An alternative would be for the District to reduce its expenditures by imposing the property tax billing only for those customers dwelling outside of the City limits. The impact on city residents who would be included in this new billing process if the District imposed it on all of its customers could be significant. The explanation required by city utility billing clerks to customers of the system, plus the public relations issues attributable to this change, would need to be addressed. For customers living within the City of Ukiah and receiving other city utility services, the reason for this change would be difficult to explain because they are fully aware of the City's ability to disconnect services for unpaid accounts. Fiscal Impact: Depending upon what choices the. District makes about a billing and collection process, City operations and customers will be impacted. Historically, the portion of the UVSD outside of the City limits has had a delinquency rate that represents about 1% of the current revenues to the District. The proposal to change billing and collection for the entire District customers represents a savings in cost to the District of about 1 % This would be achieved only by significant changes in customer service and collection processes currently provided through the City's billing and collection processes, the cost of which could easily exceed the 1 % savings. The practical effect of referring city residents to the UVSD for customer service related to the sewer portion of their currently combined bill is confusion for customers and staff clerks alike. This is already the case with delinquent collection efforts taking place by the District, and could become more difficult when these customers no longer receive a monthly sewer bill. Should billing through the property tax process be imposed on City residents, conflicts in operations for billing and collection would be immediate, time consuming, and difficult to resolve. Staff recommends the District limit its collection through property taxes to only those accounts outside of the City limits. The District could achieve its goal of recovering delinquent funds owed through this process. It could administer an alternative billing and collection process to those customers outside of the City limits without conflicting customer service for customers residing in the City. New Financial Software The City of Ukiah is in the process of obtaining new financial software. The District has asked if that software will provide an opportunity for the District to notify property owners when tenants are accruing late payments. City staff can assure the District that the new software will have capacity for the type of querying/reporting to identify owners of rental units and attach tenant payment information. An extensive RFP for the system has been issued and the City intends to conduct product testing prior to making purchasing recommendations to the City Council. The District Manager is asked to provide the City Manager with a list of all capabilities that impact the District's collection concerns, and the City Manager will assure that these items are addressed throughout the selection process. The type of modern software system that the City contemplates purchasing has tremendous more functionality than the current system, including ability to draw out specific types of data and reports that the District may desire in its collection efforts. Use of 3 Month Averages for Consumption City staff has previously indicated its support to the District Manager for the concept of changing the consumption basis for determining billing from one month to three months. Staff has identified some logistical issues related to this change that must be addressed, but in concept, supports this change for all system customers. City staff recognizes that the District Board took action December 16, 2010 to adopt District Ordinance No 34 relating to this change. Budgeted FY 10/11 F-I New Appropriation FX-1 Not Applicable F-I Budget Amendment Required Amount Budgeted Source of Funds title and Account Number Addit. Appropriation Requested $ $ ITEM NO.. MEETING DATE: City o-l''"kiaFr AGENDA SUMMARY REPORT 6 January 13, 2011 SUBJECT: UKIAH VALLEY SANITATION DISTRICT BOARD APPOINTMENT OF DISTRICT ENGINEER OTHER THAN CITY ENGINEER OF THE CITY OF UKIAH Background: On November 18, 2010 The Ukiah Valley Sanitation District (District) appointed the District Manager (Rick Kennedy) as the District Engineer. In the past this position and the duties associated have been assigned to the City Engineer. The District has made this change as a result of an insurance issue raised by District Staff, outlined in a District staff report at UVSD meeting of November 18th. Some clarification of the insurance issue leading to the District's decision is necessary. Under the provisions of the Participation Agreement, there is an existing Special Liability Insurance Program (SLIP) between the District and the City of Ukiah. This policy covers activities of City employees in the District, but excludes professional errors and admissions. Specifically, excluded under Paragraph (6) the policy does not include that part of any contract or agreement:(b) That indemnifies an architect, engineer or surveyor for injury or damage arising out of: (i) Preparing, approving or failing to prepare or approve maps, drawings, opinions, reports, surveys, change orders, design or specifications; or (ii) Giving directions or instructions, or failing to give them, if that is the primary cause of the injury or damage. The District has concluded the way to resolve this issue is to name the District Manager also as the District Engineer, as opposed to providing the insurance that would cover professional errors and admissions. This appointment raises issues with regard to daily working operations throughout the system, and authority for capital projects inside the city limits that are overlapped by the District boundaries. The City Council does not have authority regarding who the District appoints as the District Engineer. In order to deal with this change, City staff organized a meeting with the District Manager to discuss how the District expects to review and provide comment on projects inside the city limits that are overlapped by the District boundaries, and how the District expects to review and provide comment on projects outside the City Limits. Though the meeting was very amicable it was difficult to determine what the District expects Recommended Actions: 1. Receive this report and provide direction to staff regarding these boundary and jurisdiction conflicts. Alternative Council Option(s): N/A Citizens advised: Requested by: Jane Chambers, City Manager Prepared by: Tim Eriksen, Director of Public Works / City Engineer Coordinated with: Jane Chambers, City Manager Attachments: Approved: a e Chambers, City Manager from the City and City staff. City staff has a concern that this unclear and overlapping authority could lead to further confusion between the two agencies. Issues of Concern 1. Jurisdiction of capital projects inside the city limits that are overlapped by the District boundaries. 2. Review of private development projects inside the city limits that are overlapped by the District boundaries. 3. Engineering decisions and direction to maintenance crews inside the city limits that are overlapped by the District boundaries and outside the City limits 4. Timing on the District to change many of their ordinances that do not define or refer to the District Engineer but only to the City Engineer, Director of Public Works, and Director of Public Utilities, all for the City. 5. District Engineer directing the work of City Employees. UKIAH VALLEY SANITATION DISTRICT Item No. 6 AGENDA SUMMARY REPORT JOINT MEETING BETWEEN THE DISTRICT BOARD AND THE UKIAH CITY COUNCIL JANUARY 13, 2011 DISCUSSION OF UVSD BOARD APPOINTMENT OF DISTRICT ENGINEER SUMMARY AND DISCUSSION With the adoption of District Resolution No. 2010-06 on November 18, 2010, the District Board designated Rick Kennedy, the District Manager, to also be the District Engineer. This designation replaces the role of the City Engineer as the Engineer for the District. City staff has expressed some concerns regarding the change and the City staff seeks direction from the City Council regarding the issues and implementation related to the change. Attached for reference and information as to why the change was necessary is a copy of the Agenda Summary Report that was provided to the Board at their meeting of November 18, 2010. FISCAL IMPACT Not Applicable RECOMMENDED ACTION Discuss the issue and provide answers to the City's questions ATTACHMENTS ASR entitled "Discussion and Possible Adoption of a Resolution Designating the District Manager/Clerk, Rick Kennedy, to Also be the District Engineer" Rick Kennedy, PE UVSD District Manager/Engineer/Clerk Sent: Thursday, January 06, 2011 3:49 PM From: Melody Harris [mailto:mharris@cityofukiah.com] Sent: Friday, July 16, 2010 1:44 PM To: Ukiah Valley Sanitation District Cc: Cliff Paulin; Ross Walker; Jane Chambers; Tim Eriksen Subject: RE: Professional Liability Coverag for City Engineer Rick, I have consulted with Sheryl Fitzgerald, SLIP Account Manager at Alliant, and with Jeff Davis at REMIF in regards to liability coverage of the City Engineer (or any Engineer) while performing professional duties on behalf of UVSD. Engineers are excluded from coverage in the Alliant SLIP policy, and REMIF only covers the City Engineer while performing his duties in the normal course of business on behalf of. the City. Therefore, it is important that the District obtain coverage for work performed for the District by the City Engineer,. in accordance with Paragraph 2 in the Participation Agreement between the UVSD and the City. It is my understanding that you have already requested a quote for adding this coverage, and Sheryl Fitzgerald has confirmed she is in process of putting that together for you. She indicated this will require a separate policy, it cannot be added to the SLIP policy. Thank you for bringing this matter to our attention, and please let me know if I can be of any further assistance. 914efody Aarris Director, Human Resources & Risk Management City of Ukiah 300 Seminary Avenue Ukiah, CA 95482 PH: 707-463-6244 FX: 707-463-6204 mharrisO,cityofukiah.com From: Ukiah Valley Sanitation District [mailto:ukiahvalleysd@att.net] Sent: Thursday, July 01, 2010 11:03 AM To: Melody Harris Cc: Cliff Paulin; Ross Walker; Jane Chambers; Tim Eriksen Subject: Professional Liability Coverag for City Engineer Melody, Good morning. For some time now the UVSD Board's Standing Planning and Technical Committee has been looking at the pros and cons of designating someone other than the City Engineer as the District Engineer. One of their concerns pertain to professional liability and whether or not the District would be insured under the current SLIP policy. As directed by the committee, I contacted Alliant Insurance (broker) to inquire about the coverage and if the coverage would still apply if the District Engineer was someone other than the City Engineer. I was told that District had its own separate policy and that the current coverage does not include professional liability for Engineering decisions made by the District Engineer (whether it be the City Engineer or someone else) on behalf of the District. However, there is "consultation" coverage which is general advise where suggestions are made (versus engineering decision making such as plan checking engineering plans, design work etc). So this means, that the District is not covered if the City Engineer as the District Engineer makes engineering decisions on behalf of the District. Alliant advised me to verify with the City if the City carried a separate liability policy that covered the District when the City Engineer made engineering decisions on behalf of the District. Does the City have such coverage?? As back up, I have asked Alliant to provide me a quote for professional liability coverage for the District Engineer. Thank you in advance for your attention to this issue. Rick K PS. I have copied the Committee Chair and Ross Walker who was initially involved in the review of the policy and of course Jane and Tim. ITEM NO.. MEETING DATE- city _J," Ukjafi AGENDA SUMMARY REPORT 7 January 13, 2011 SUBJECT: STATUS REPORT OF CITY'S REQUESTED PREVIOUS YEAR ADJUSTMENTS TO UVSD 07/08 AUDIT AND ISSUES RELATED TO CITY OPERATION OF A.SINGLE WASTEWATER SYSTEM Background:. The UVSD General Manager in his Agenda Summary Report for the District's December 16, 2010 meeting has recommended that the Board authorize the District's Auditor to prepare a final District audit for the 07/08 fiscal year with a qualification that the auditor was not able to satisfy itself about the amounts at which investments in joint venture with the City of Ukiah and the amounts at which property, plants, and equipment related depreciation are recorded. For reasons discussed in detail below, the City staff does not believe that the resolution of this issue is solely a function of audit standards, but involves basic policy decisions by both the City Council and the District Board. In all likelihood, it will take some time for the Council and the Board to address and resolve those issues. Accordingly, City staff acknowledges that if the District wants to finalize the 07/08 audit now, it may have to accept the qualified opinion described by the District's General Manager. Basic Facts of Service Delivery Operations and Accounting for System Expenditures The City of Ukiah has provided wastewater treatment facilities in the form of both a collection system and wastewater treatment plant for rate payers located within the City of Ukiah boundaries, and residents of the unincorporated County of Mendocino, for more than 50 years. During that length of time, the city organization has developed expertise in the delivery of wastewater collection and treatment services. The revenues and expenditures for providing wastewater collection and treatment services are accounted for by the City on a stand -alone, enterprise fund basis. These accounts are not co-mingled with other city services, and therefore, represent the true revenues and costs inherent in providing sewer services to the entire system. The City of Ukiah provides the services by employing personnel to maintain the collection system and operate the wastewater treatment plant. These personnel are trained and certificated to meet State of Continued on Page 2 Recommended Action(s): Receive report and provide additional direction to staff as necessary Alternative Council Option(s): Citizens advised: Requested by: Prepared by: Jane Chambers, City Manager Coordinated with: Gordon Elton, Finance Director Attachments: 1. Steps by City Staff to Make Changes Requested by UVSD/Suggestions by City Staff re Rate Stabilization Funds Approved: t,oambers, City Manager California requirements. Collection system personnel also perform duties for water system delivery. This allows the city to provide both water and sewer services with fewer employees and less administration than would be required if separate personnel were hired for each service. All administrative, financial, legal, billing, planning, oversight, and engineering services are provided to the collection and wastewater treatment plant by city employees who perform these functions as a portion of their other job duties. Through cross training and joint use of employees for both water and sewer collection system operations, use of city facilities such as the corporation yard, combined with use of engineering, accounting, and management personnel who perform wastewater duties as a portion of their total duties, an economy of scale has been provided to all rate payers of the sewer system. Any other method of providing the service must duplicate these provisions in one way or another. The system has been operated as one system, by the City of Ukiah, although the territory and customers served by the system is comprised of two entities. - These entities are the City of Ukiah and the Ukiah Valley Sanitation District (UVSD). The City and UVSD entered a participation agreement in 1958 which provided for UVSD to participate with the City, in the wastewater system. At that time, and at subsequent amendments to the original agreement, parties to the agreement did not provide for the correction of overlapping territory which has occurred throughout the history of the agreement. The participation agreement provides for a sharing of costs to operate the system based on ESSU units. As of October, 2010, the City of Ukiah was 52.5% of the entire system. UVSD was 23.3% of the system which is inside the City boundaries (overlap area) and 24.2% of the system outside of the city limits. Although the UVSD territory consists of unincorporated area outside of the boundaries of the City of Ukiah and territory within the City of Ukiah, the City of Ukiah proper represents about 75% of all ESSU's within the system and the UVSD outside of the City boundaries is about 25% of the system. City staff is charged with operating the entire system, and it has operated as one entity for the entire course of the participation agreement history. Personnel, funding appropriations, and expenditures, have been made under the practices and authority of the City Council, delegated through the City Manager. All of the funds for the system have been accounted for in the Wastewater Enterprise Funds. The assets of the system, the revenues and expenditures are contained in these accounts. Cost/Benefits of City Delivery of Service The City of Ukiah/UVSD collection system, in benchmarking data prepared by City staff, ranked 6th lowest in cost when compared to 12 other systems. When compared, during the rate setting hearings, against 8 other systems in the region, the City of Ukiah/UVSD wastewater rates ranked 4th lowest. Monthly charges in the sewer system have increased dramatically since 2005. Half of the current monthly rate is attributable to repayment of bond debt necessary to fund the wastewater treatment plant expansion and rehabilitation project. The bond debt requires $4.9 M annually; in addition to the $4.1 M it takes to operate the system. Without the bond debt, monthly service fees could be half of the current amount. The bond debt was necessary in order to finance improvements to the treatment plant required to continue operations in accordance with California State law. City employee costs, benefits, collection system costs, and administration costs are factors in the monthly rate, but clearly, are not driving the substantial rate increase necessary to cover the system debt for the treatment facility improvements. In fact, the system rate payers have all benefited from significant expenditure reductions made throughout City operations since 2008, as these cost reductions are figured into allocation costs made to the system. The City charges the enterprise fund for administrative services, covering system operations. These charges total $141,963 for FY 2010/2011, or about 3% of the $4.1 M Wastewater System budget. This amount includes the cost of services received by the system for the City Council, City Clerk, City Manager, Finance, City Attorney, Personnel, Administrative support, Treasurer, and Information Technology. Again, these service charges are directly related to operations of the system. City Staff Response to UVSD Requests City staff has endeavored to answer questions, work with UVSD staff, and respond to issues since the inception of the UVSD District Manager position and establishment of a five member elected Board of Directors in 2008. These requests and concerns were never part of the staffing requirements of the system prior to 2008. No additional staff at the City has been procured to meet this need. In fact, city staff has been reduced over the course of the last two years significantly. Staff members have absorbed new work assignments including the work load required to research and respond to UVSD information requests and proposals. Where the staff has had the administrative authority to alter accounts, initiate record keeping for employee assignments, provide information and data to UVSD, conduct audits, prepare budgets, and prepare fee schedules, the City staff has done its best to respond and complete UVSD requests that have been received either through e-mail, letters, or meetings. Attachment #1 outlines steps taken by staff to make changes requested by UVSD, or in the case of establishing the rate stabilization funds, suggestions by City staff to address District concerns. City staff must look to the Participation Agreement as its guide, and cannot allow for incremental changes requested by UVSD to put in place provisions that are not addressed or covered by the Participation Agreement. The City Finance Director has done his best to review and study the requests made by the UVSD Auditor. He and the City Manager do not assume authority to alter the basic relationship between the City and UVSD to the point that the system is no longer operated as one system. The net result of making changes now being requested by UVSD could benefit one series of rate payers over another. City staff has an obligation to bring this type of change to the attention of policy makers. The issues of concern to city staff include: 1) Revenue and Expenditure allocations 2) City/District Engineer responsibilities 3) Proposed changes to billing and collection processes, collection by property tax, for District ratepayers Governance Issues verses system Operations and Management Issues In February 2008, the City Council and UVSD Board in place at that time, appointed an Ad Hoc Committee. The purpose of the Committee was to examine and make recommendations regarding sewer system governance. The Committee adopted a mission statement which included the sentence "The mission of the Committee will be to research and develop recommendations for the best sewer service organization to serve the citizens of the community." In an August, 2008 final report, the Committee stated that it had discussed several options to the delivery of this service, but concluded that it was best to revise the July 1995 Participation Agreement to add language altering the agreement and outlined specific suggestions by section. The final report outlines a mixture of operations, management and governance concerns that the group discussed. There was no data provided or comparative analysis indicating what improvements were needed to benefit rate payers, nor any that indicated one set of rate payers had been disadvantaged by the single system approach. Clearly, there was concern about how the two entities could govern the system, and ultimately, the Ad Hoc focused on recommendations to change the Participation Agreement. Although the City Council and UVSD did not engage in formal discussions of the Ad Hoc recommendations, over the course of the past 2.5 years, many of the concerns raised in the Ad Hoc discussions and some of the recommendations, have been addressed as follows: • Establishment of a capital improvement program for the system's infrastructure • City re-organization of the sewer and water enterprise operations under the leadership of the Public Works Director/City Engineer • Establishment of Deputy Director responsibilities for water and sewer operations • Completion of re-lining and man-hole replacement projects • Completion of camera inspection of the entire system • Conducting infiltration and flow studies • Tracking of staff work hours in water and sewer operations • Work begun to develop an asset management program • Completion, on time and on budget, of $56 M Wastewater Treatment Plant Project • Completion and Adoption by City of new five year fee schedule • Negotiations and Resolution of Outstanding State Fines Limits of Staff Authorit It is not the prerogative of staff members of either the City or UVSD to decide how one group of rate payers benefits over another. Rate payers have paid the same rates since 1994, and received the same services. City staff has reached the limits of its ability to make further changes requested by UVSD without policy determinations that belong to the City Council and UVSD elected officials to make. City staff is not in the position to agree or assist with the District's Auditor who is proposing changes to accounting for fund balance in the joint account 612. The Participation Agreement does not provide guidance to the Finance Director or City Manager from which to make interpretations as to use of revenues that the UVSD Auditor now requests. City staff acknowledges that there are issues raised by UVSD about funds that UVSD proposes should have been accounted for in a different manner than was done by the City, but the fact remains that regardless of errors or entries that may need adjusting, funds remain in the enterprise accounts and have not been removed to the City's benefit in any way. Until policy and Participation Agreement changes are determined by the City Council in conjunction with the UVSD Board, City staff cannot make changes affecting the basic equity of all rate payers, including those of the City and the District. With 75% of the rate payers residing within the boundaries of the City of Ukiah, the City Council has to be concerned that City residents receive the same services for the same value. Proposals to change the way revenues and expenditures are allocated within the system, the role of the City Engineer in overseeing and managing the system, and how rate payers are billed, are all areas that will impact City operations and services to City residents. Citv Staff Recommendations City staff suggests an emphasis on benefits and impacts to rate payers as changes to the existing system are discussed. Without clarity of purpose, that is, a statement as to the objectives to be achieved by making changes to the existing system and existing Participation Agreement, and how these changes improve delivery of service for rate payers, or lower costs to rate payers, it is unclear why changes would be made to the current system that alter the value of the system for one rate payer over another. City staff recommends that UVSD complete and close out its audit process for the 07/08 and 08/09 by determining on its own how much to attribute value to the joint fund balance. The audits can be completed, by including a statement (footnotes) acknowledging the City does not agree with the District calculation. This will allow the District to move ahead and complete its work without further delay from the City. Going Forward Current Wastewater System services are being rendered by City of Ukiah employees on a day to day basis, meeting and/or exceeding, State of California regulatory requirements. As compared with similar systems, these services are being delivered within reasonable cost parameters. There clearly are governance issues that must be addressed and worked out by the two agencies. City staff does not question the authority and jurisdiction of UVSD staff and Board members. However, City staff must point out where that authority and jurisdiction collides with City jurisdiction and City Council authority. Cost impacts of future governance decisions will be borne by the rate payers of each system. The elected officials of each system must determine how best to serve the rate payers, in particular, nearly'/4 of the rate payers now governed in duplicate, by the Ukiah City Council and UVSD Board. Fiscal Impact: Budgeted FY 10/11 ❑ New Appropriation ❑X Not Applicable Budget Amendment Required Amount Budgeted Source of Funds title and # Account Number Addit. Appropriation Requested $ $ ATTACHMENT / Accounting manual - In 2007 the UVSD Board of Directors contracted with their audit firm, RJ Riccardi, to prepare an accounting manual for the Sewer enterprise. City staff worked with the auditor to provide information and documentation of procedures as the basis of the manual. The draft manual, prepared by the auditor, contained many inaccuracies and errors, and had omissions of various procedures. City staff ended up rewriting virtually the entire manual for the auditor. When the manual was presented to the UVSD Board by the auditor, it was not adopted. The reasons for the Board's lack of action were not entirely clear, however one member of the public told the Board that the document presented to them was not what they had requested and recommended they not adopt it as presented. Result: No action was taken and no follow-up work was performed. Apartment and Mobile Home Park Maximum Fees - The UVSD Board of Directors requested statistics on the charges to and the water usage of apartment and mobile home park customers. After review of the information provided by City staff, the UVSD Board determined that mobile home park and apartment customers should have a maximum monthly sewer charge per dwelling unit not to exceed the average residential use as established during the 2005 rate setting process. This rate was 8.5 units of water. The result of this action reduced the bills for some customers and reduced the overall UVSD revenue by a small amount each month. Delinquent Account Collections: City practice for collection of delinquent accounts was to work through the past due notice procedures, including phone calls, mailed notices and termination of other utility services as applicable. If these actions were unsuccessful in collecting the past due amounts, the account was referred to a collection agency for additional collection activities. At the request of the UVSD, delinquent UVSD accounts are routinely referred to UVSD for collection actions instead of being referred to a collection agency. District Manager pursued collections separate from City staff. Change the Water usage period for determining Sewer Charges: In 2005 all customers' charges included a variable fee component which was based on the water usage during the month of January. As customers began to understand the impact of water usage during January on the entire year's sewer charges, it appeared, at least anecdotally, that customers were able to artificially manipulate their water usage for the one month to lower their apparent impact on the system and thereby underpay the appropriate monthly fees. UVSD proposed conversion of the base to a three month average water use as basis for establishing fees. The cost of and the procedures for implementing this change need to be established. With fiscal year 2009/2010 the City began recording UVSD customer revenue in the District Special Fund #641 instead of the Sewer Enterprise Fund #612. The City must also record, as revenue, the UVSD payment for its share of expenses, in the Sewer Enterprise Fund #612. This apparent duplication was a source of consternation and discussion during the budget approval processes. Rate Stabilization Funds for the City and for UVSD were created in June 2009. City staff pursued this activity without direction from either governing body because the bond documents permitted their creation and staff identified a benefit for both entities from their creation. Both entities approved their creation after lengthy public discussion. City staff routinely sends budget transfer information to UVSD District Manager. In July, 2008, city staff began issuing UVSD disbursements from the District Special Fund #641 City staff provides monthly financial reports to UVSD.