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HomeMy WebLinkAbout2011-07-14 Packet - Joint UVSDCITY OF UKIAH JOINT CITY COUNCIL/UKIAH VALLEY SANITATION DISTRICT Special Meeting - AGENDA CIVIC CENTER COUNCIL CHAMBERS 300 Seminary Avenue Ukiah, CA 95482 July 14, 2011 6:00 p.m. 1. Roll Call 2. Discussion of Possible Adoption of UVSD Connection Fees 3. Request for Update of Noticing to Property Owners of Delinquent Sewer Charges Associated with Rented Properties 4. Budget Transfer Authority Provided to the City Manager as it Pertains to Joint Sewer Funds 5. Discussion of Disputed Budget Items Relating to Fines, Penalties, Collection System Emergencies, and the Seventh Water/Sewer Attendant Position 6. Public Comment 7. 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 Thursday, 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 81" day of July, 2011. JoAnne Currie, City Clerk Cite nJ 1Zlkiah ITEM NO.: 2 MEETING DATE: AGENDA SUMMARY REPORT July 14, 2011 SUBJECT: DISCUSSION OF THE POSSIBLE ADOPTION OF UVSD CONNECTION FEES Background: On April 27, 2011 City staff organized a meeting with District Staff to discuss a process for working together to arrive at a common connection fee. It was discussed that the first step would be to evaluate the Equivalent Sanitary Sewer Unit (ESSU). After the ESSU value was agreed to the table that was developed by the District Manager could be used to apply the ESSU value. We, the City and the District, could evaluate the impacts of the fees on development and present those impacts to the Board and Council for further direction. On May 5, 2011, the Ukiah Valley Sanitation District Board (Board) agreed to delay their consideration in the adoption of proposed Ordinance 35 pertaining to sewer connection fees. This was a result of City Staff agreeing not to utilize the long standing method of calculating sewer fees using the fixture unit method. City Staff has honored this agreement and calculated three connection fees in the Sanitation District's jurisdiction by considering the presumed quantity and characteristics of the proposed development. This has proved to be a very time consuming effort for City Staff. This effort has been expended in order to preserve the option for the District and the City to ultimately adopt the same connection fees. Discussion: The City staff will pursue an evaluation of the connection fees for the City. City staff would prefer for the District to delay adoption of new connection fees until further work can be accomplished towards arriving at a more uniform set of fees for the entire system. The fees proposed for the District at this time are significantly higher than the City, and this fact is likely to impact development choices throughout the valley area. Continued on Paae 2 Recommended Action(s): Request that the Ukiah Valley Sanitation District work with the City of Ukiah staff to evaluate and present a connection fee to both bodies for consideration. Alternative Council Option(s): Citizens advised: Requested by: Prepared by: Tim Eriksen, Director of Public Works and City Engineer Coordinated with: Jane Chambers, City Manager Attachments: Approved: Jan~hambers, City Manager Fiscal Impact: If the proposed fees had been in place, the following newer developments would have paid increased connection fees in the amount of: Name Actual Proposed Branches $75,557.67 $279,882 Starbucks $18,464.60 $62,682.48 Izzi's $4,616.15 $32,833.68 Laundromat $8,390 $209,491 Budgeted F Y I 0/11 F] New Appropriation 1XI Not Applicable ❑ Budget Amendment Required Amount Budgeted Source of Funds (title and Account Number Addit. Appropriation Requested $ $ ITEM NO.: MEETING DATE: C'iLi~ of`71l~czf AGENDA SUMMARY REPORT 4 7/14/2011 SUBJECT: BUDGET TRANSFER AUTHORITY PROVIDED TO THE CITY MANAGER AS IT PERTAINS TO JOINT SEWER FUNDS Background: At the Joint Budget Meeting of June 27, 2011, members of the District Board asked about the authority of the City Manager to make transfers within the joint sewer funds (Account 612). In the District's staff report for this item, the District Manager acknowledges that the City of Ukiah agreed to notify the District of all transfers as part of agreements made at the FY 2010/2011 Budget adoption process. City staff has followed through on that agreement throughout the last fiscal year. Attached are copies of each notice made to the District. Discussion: The current Participation Agreement under which the City of Ukiah provides services to the District does not specify authority of the District to oversee day to day administrative decisions made by the City of Ukiah in its performance of duties under the Participation Agreement. The day to day administration of the Sewer Enterprise is conducted by City staff, under the oversight of the City Manager and ultimately, the City Council. The ability and resources of city staff to effectively operate the Sewer Enterprise must include the ability by the City Manager, the Director of Finance, and the Director of Public Works to manage the resources for operations of the utility. Those resources are allocated in the budget for the fiscal year, which then serves as a blueprint for use of resources throughout the year. As it does for all of its financial transactions, the City of Ukiah has audited accounting practices in place for administrative authority to conduct the business operations of the utility. The District has expressed concern that the City Manager is able to move funds within a department. Given that the city staff has fully implemented a reporting system to the District, as evidenced by the attached reports, such changes cannot be made without the District's knowledge. Such transfers may already be addressed by the District throughout the fiscal year, should questions arise as to why transfers are made. Recommended Action(s): Continue current financial oversight practices with regard to the joint operations account in Fund Acct 612 . Direct any further discussion necessary of these practices to Ad/Hoc committee reviewing and making recommendations with regard to the Participation Agreement. Alternative Council Option(s): Citizens advised: Requested by: Jane Chambers, City Manager Prepared by: Jane Chambers, City Manager Coordinated with: Attachments: Budget transfer transmittal reports to UVSD Approved:-_-__ Ja Chambers, City Manager Further, the City Manager offered as part of the June 27, 2011 budget discussions, to restrict fund transfers for accounts currently in dispute with the District ( 612 3510 110) Salary for 7`" employee, Benefits 141-155, 612-3510-639, 612 3580- 639 and 612- 3510- 250. Over the course of the last several years, the City Council and city staff have made a number of changes to operations and accounting in response to District concerns, within the limits of the current Participation agreement. All system workers, including personnel working on the system in the streets, finance, billing, engineering and City Manager, endeavor to provide a cost effective system operated as a whole operation, for all rate payers of the system. 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 $ $ Jan Newell From: Jan Newell Sent: Monday, September 20, 2010 12:31 PM To: Rick Kennedy Cc: Tim Eriksen; Jarod Thiele Subject: Budget Amendments Hi Rick, U 14) v b v""~IpQ The following budget amendments are being made per City Council Approval on September 15, 2010. Agenda Item 10b Award of contract to J.F. Pacific Liners, Inc. in the amount of $545,576.50 for Manhole Rehabilitation and Sewer Pipe Relining 2010, Specification No. 10-11 and Approve Budget Amendment. CITY ADJUSTMENTS: -Move item 614.3510.820.002 $12,500 to 614.3510.810.003 -Add $413,408.41 to item 614.3510.810.003 from fund balance $154,018) SANITATION DISTRICT ADJUSTMENTS: -Move item 614.3510.811.002 $40,129.34 to 614.3510.811.003 $148,000) for a Total of $579,926.41 CITY COSTS (Existing budget for a Total of $188.129.34 UVSD Costs (Existing budget Agenda Item 10c Approve Amendment to FY 2010/2011 Budget and Authorize the City Manager to sign final payment agreement for Ukiah Wastewater Treatment Plant Improvement Project - Specification 06-20 -Add $765.687 from to item 611.7410.800.005 from fund balance Agenda Item 10d Approve Amendment #2 for Professional Services Agreement with Harris & Associates for Construction Management Services for the City of Ukiah Wastewater Treatment Plant Improvement Project for an amount not to exceed $46,000 and Budget Amendment for Amendment #1 and #2. -Add $82,000 and $46,050 to item 611.7410.800.005 from fund balance Please call me if you have any questions or concerns. Thank you, Jan Newell Finance Controller CITY OF UKIAH 300 Seminary Avenue, Ukiah CA 95482 (707) 463-6216 Fax: (707) 463-6204 Jan Newell From: Jan Newell Sent: Monday, November 15, 2010 11:24 AM To: Rick Kennedy Cc: Tim Eriksen; Jarod Thiele Subject: Encumbrances rolled from 2009110 Fiscal Year Attachments: WWTP Budget Adjustments 2010.2011.xlsx Rick, Please find attached the 09/10 Encumbrances that have now been rolled into the 2010/11 Year. These are purchase orders that were approved in the 09/10 Budget Year but were not fully expended, therefore, rolling into the 10/11 Year as a budget adjustment/revision. This is routinely processed annually approximately every October as part of the year- end process. If you have any questions or concerns, feel free to call or email me. 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Thank you, Jan Newell Finance Controller CITY OF UKIAH 300 Seminary Avenue, Ukiah CA 95482 (707) 463-6216 Fax: (707) 463-6204 Jan Newell From: Jan Newell Sent: Friday, June 17, 2011 11:14 AM To: Rick Kennedy Cc: Tim Eriksen; Jarod Thiele Subject: Budget Transfers Attachments: Budget Transfer History Report 2010-11.pdf Hi Rick, Please find attached a preliminary report for the budget transfers for 2010/11. 1 believe you have been included in the emails to the department as these budget transfers have occurred. If you have any questions, please feel free to call me. 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On that same date the Ukiah Valley Sanitation District Board (Board)approved the 612 fund budget excluding appropriations for Fines and Penalties under the accounts 612-3510 and 612-3580, for emergency collection system repairs under account 612-3510, and for a seventh water/sewer attendant position under account612-3510, these proposed appropriations were declared as disputed budget items by the Board. Discussion: Fines, Penalties and Emergency Repairs The City Council addressed the concerns of the Board at the joint meeting. Unfortunately the Board had adjourned and was not present for discussion of the City Council's resolution for these items. The City Council considered placing budget amendment restrictions to the appropriations for for these items if the Board would consider their consent to have these items budgeted within Fund 612. City Staff recommends reporting these items in the 612 budget because the represent the true cost of operations. Staff of a seventh water/sewer attendant This position has been funded for several years. For the past few years the City has not filled the position to address the concerns of the Board. City Staff now feels the need to fill this position and have discussed several daily tasks that this individual would be useful for both the water and the sewer systems. However, another significant concern is how the elimination of this position would be viewed by the Region Water Quality Board. Water Continued on Page 2 Recommended Action(s): Request that the Ukiah Valley Sanitation District indemnify the City if the Water/Sewer Attendant position is eliminated. Alternative Council Option(s): Citizens advised: Requested by: Prepared by: Tim Eriksen, Director of Public Works and City Engineer .Coordinated with: Jane Chambers, City Manager Attachments: Approved: LIZA, Jf (pe Chambers, City Manager. V Board Staff are very vigilant about follow up after events that may have penalties of fines. The most frequent of these events are Sanitary Sewer Overflows (SSO). City staff is often asked by Water Board staff, during the investigation of these events, if there have been any changes in staffing levels, equipment purchases or any other fiscal impacts that the City/District have financially benefited from at the expense of the environment. If the answer to this question is yes the fines are more extreme. City staff has expressed their concern regarding this issue several times over several years to both Council and Board. This concern does not seem to be shared by the Board. If that is the case City staff recommends that an agreement be drafted and executed. This agreement would have the Board indemnify the City if a fine occurs as a result of this situation. Fiscal Impact: Budgeted FY 10/11 ❑ New Appropriation ❑x Not Applicable F] Budget Amendment Required Amount Budgeted Source of Funds (title and Account Number Ada. Appropriation Requested $ $ JAMES RONCO CHAIR KENT PORTER DIRECTOR KENNETH MARSHALL DIRECTOR THERESA MCNERLIN VICE-CHAIR MICHAEL PALLESEN DIRECTOR UKIAH VALLEY SANITATION DISTRICT SPECIAL MEETING AGENDA JULY 14, 2011- 6:00 P.M. JOINT MEETING BETWEEN THE UKIAH VALLEY SANITATION BOARD AND THE UKIAH CITY COUNCIL CIVIC CENTER COUNCIL CHAMBERS - 300 SEMINARY AVENUE - UKIAH, CA 95482 1. CALL TO ORDER AND ROLL CALL 2. DISCUSSION OF DISTRICT ORDINANCE 35 PERTAINING TO SEWER CONNECTION FEES (DISTRICT). 3. REQUEST FOR UPDATE OF NOTICING TO PROPERTY OWNERS OF DELINQUENT SEWER CHARGES ASSOCIATED WITH RENTED PROPERTIES (DISTRICT). 4. DISCUSSION OF BUDGET TRANSFER AUTHORITY PROVIDED TO THE CITY MANAGER AS IT PERTAINS TO JOINT SEWER FUNDS (DISTRICT). 5. DISCUSSION OF DISPUTED BUDGET ITEMS RELATING TO FINES, PENALTIES, COLLECTION SYSTEM EMERGENCIES AND THE SEVENTH WATER/SEWER ATTENDANT POSITION (DISTRICT). 6. PUBLIC COMMENT 7. ADJOURNMENT PUBLIC EXPRESSION: (PUBLIC COMMENT FOR ITEMS NOT ON THE AGENDA) The Board welcomes participation in the Board meetings. Comments shall be limited so that everyone may be heard. This item is limited to matters under the jurisdiction of the Board which are not on the posted agenda and items which have not already been considered by the Board. The Board limits testimony on matters not on the agenda to 3 minutes per person and not more than 10 minutes for a particular subject at the discretion of the Chair of the Board. No action will be taken. Yr}. s UKIAH VALLEY SANITATION DISTRICT AGENDA SUMMARY REPORT Item No. 2 JOINT MEETING BETWEEN THE DISTRICT BOARD AND THE UKIAH CITY COUNCIL JULY 14, 2011 DISCUSSION OF DISTRICT ORDINANCE 35 PERTAINING TO SEWER CONNECTION FEES SUMMARY AND DISCUSSION At their meeting of May 5, 2011, the Board agreed to delay their consideration in the adoption of proposed Ordinance 35 pertaining to sewer connection fees to afford the City Staff and the District Manager more time to work out apparent differences as to the proposed ESU allocations and the amount of the proposed sewer connection fee. The Board agreed that the matter would be agendized for the joint meeting scheduled for July 14th. No proposed resolution to the differences has been offered by City Staff since their meeting of April 27th with the District Manager. In response to City Staff's exception expressed April 27th to the methods used to calculate the remaining value of those capital assets that new rate payers did not pay for but would benefit from the excess capacity of the capital assets, the District hired John Dickerson, financial consultant, to provide a general overview and opinion as to the appropriateness of the methods used in the Connection Fee Study prepared by the District Manager in determining the remaining value of the specified capital assets. Mr. Dickerson's written opinion is attached and the District Manager is recommending to the Board that the recommendations contained in the written opinion be incorporated into a Revised Sewer Connection Study and the Proposed Ordinance 35 be revised accordingly and that it be submitted to the Board for consideration at their next meeting of July 21, 2011. FISCAL IMPACT The current connection fee does not appropriately retire the debt associated with the expansion of the Wastewater Treatment Plant nor does it contribute sufficient revenue for the buy in of those capital assets having excess capacity that will serve new rate payers. Also, Ordinance 35 establishes an interest surcharge for money borrowed from existing rate payers to make up the revenue shortage in the annual debt service payment associated with expansion. RECOMMENDED ACTION Discuss issue and provide direction to staff ALTERNATIVE ACTION Provide other direction to staff ATTACHMENTS 1. Minutes of Board's meeting of May 5, 2011 2. Written report from John Dickerson dated June 15, 2011 Rick Kennedy, PE UVSD District Manager/Engineer/Clerk UKIAH VALLEY SANITATION DISTRICT SUMMARY/ACTION MINUTES MAY 5, 2011 BEFORE THE UKIAH VALLEY SANITATION DISTRICT COUNTY OF MENDOCINO - STATE OF CALIFORNIA The Board of Directors of the Ukiah Valley Sanitation District (UVSD) convened for a special meeting on Thursday, May 5, 2011, at 5:00 p.m. at the District Office located at 387 North State Street, Suite 101, Ukiah, CA, with the following members present: Directors Michael Pallesen, Kent Porter, Theresa McNerlin and Jim Ronco; Chair Ronco presiding. Also present: Tim Erikson, City of Ukiah Public Works Director, Mr. Rick Kennedy, District Manager/Clerk, Shannon Riley, Administrative Assistant, and Ross Walker, Deputy County Counsel. 1) CALL TO ORDER AND ROLL CALL Chair Ronco called the meeting to order at 5:00 p.m. and roll call was conducted by Rick Kennedy with Directors Pallesen, Porter, Vice Chair McNerlin and Chair Ronco present. Director Kenneth Marshall was absent by previous arrangement. 2) PUBLIC EXPRESSION ON NON-AGENDIZED ITEMS None. 3) CONTINUATION OF AGENDA ITEM NO. 5A OF THE BOARD'S REGULAR MEETING OF APRIL 21, 2011, "POSSIBLE ADOPTION OF REVISED ORDINANCE NO. 35 AMENDING SECTION 1 OF ORDINANCE NO. 27, REPEALING ORDINANCE NO. 11 AND AMENDING SECTION 6-4 OF ORDINANCE No. 6 PERTAINING TO SEWER CONNECTION FEES" Chair Ronco opened the item for discussion. Presenter(s): Mr. Kennedy explained that he has updated the Finance Committee and the Planning and Technical Committee regarding the April 27 meeting with City staff where the District's connection fee study and proposed ESSU allocation units were discussed. At that meeting he proposed that the District would delay the adoption of Ordinance No. 35 if the City would provide in writing that the City will no longer utilize the plumbing fixture unit count method for ESSU allocation that they currently use. That letter has been received by the District and was provided for the Board's review. By not proceeding with the adoption of Ordinance No. 35 at this time, District and City staff will have more time to work out their differences. Mr. Kennedy expressed that he hopes the issue will move forward in a timely manner, so as to address the District's need for the interest surcharge that is included with the proposed connection fee. Chair Ronco noted a proposed restaurant project and inquired of Public Works Director Tim Eriksen where it would be located. Mr. Erikson responded that it is proposed for the Longs Plaza center, and explained that the owners have applied for a permit but have not yet been charged or promised a figure for their sewer hookups. Director Pallesen expressed his opinion that, while the proposed restaurant should pay their "fair share" of the hookup fee, there may be some latitude for compromise, and part of the fees may not be required up front. Mr. Eriksen stated his preference for a fee schedule that is somewhat flexible. He also wishes to move the process along as quickly as possible. PAGE 164 M UKIAH VALLEY SANITATION DISTRICT -SUMMARY/ACTION MINUTES -MAY 5, 2011 Page 165 A brief discussion occurred regarding the logistics of the City and the District coming to an agreement, and Chair Ronco proposed June 30th for a meeting date. Director McNerlin made a motion to continue the item to July 14, 2011 at the scheduled joint meeting. Director Porter seconded the motion Board Action: Upon motion by Director McNerlin, seconded by Director Porter, and passing unanimously (4-0, Director Marshall absent), IT IS ORDERED that the Ukiah Valley Sanitation District directs staff to continue the possible adoption of Ordinance No. 35 to the joint meeting on July 14, 2011. 4) ADJOURNMENT THERE BEING NOTHING FURTHER TO COME BEFORE THE UKIAH VALLEY SANITATION DISTRICT, THE MEETING WAS ADJOURNED AT 5:21 P.M. ATTEST: JIM RONCO Chair RICK KENNEDY District Manager/Clerk Ukiah Valley Sanitation District BOARD APPROVED MINU'T'ES AS SUBNIITTED ON MAY 19, 20111 Review of Calculations Sewer Connection Fee Study Ukiah Valley Sanitation District 12/21 /10 REVISION Produced by John G Dickerson 6/15/11 1. SCOPE OF PROJECT 1 H. SUMMARY RESULTS 1 III. TWO FINANCIAL MODELS USED IN FEE STUDY 2 IV. ADVANCED WASTEWATER TREATMENT FACILITY 2 V. SEWER MAINTENANCE FLEET 4 John G Dickerson PO Box 301, Redwood Valley, CA 95470 (707) 485 - 0702 JohnD@YourPublicMoney.com Page I 1. SCOPE OF PROJECT Rick Kennedy, RE, the General Manager (GM) of the Ukiah Valley Sanitation District (UVSD), asked me to provide a general financial overview and opinion as to the accuracy and appropriateness of the methods used to determine two components of the proposed changes in charges identified on the first page of the Executive Summary of the Sewer Connection Fee Study (Study) he prepared and revised on 12/31/2010, as quoted below: (2) a fair share contribution of $818 towards the remaining value of the Advanced Wastewater Treatment facility (AWT) that will be available to serve new rate payers, and (3) a fair share contribution of $67 towards the remaining value of the sewer system fleet that will be utilized to service the new rate payers. Several aspects of the overall situation are not within the scope of my project including (but not only) the following. I'm not reviewing the calculation of the "Marginal Portion" of the new Connection Fee that relates to the WTTP Expansion. I'm not looking at legal issues. 1 assume the methods proposed by the GM conform to law. I am also not considering into which District Funds the fees should be deposited. I'm not reviewing how the number of "ESSU's" provided by the expansion of the Wastewater Treatment Plant (WWTP) was calculated nor how they are allocated to UVSD and the City of Ukiah (City). II. SUMMARY RESULTS I proposed to the GM that the method used to calculate the AWT Buy-In Fee be based on the same financial logic as used for the WTTP Expansion Connection Fee. The GM accepted this recommendation. The Fee proposed in the Study was based on an estimate made by the GM of the amortization schedule of the State Loan that financed the AWT. UVSD didn't have a copy of the loan documents. However, the GM was able to obtain a copy of the "real" loan papers from the City of Ukiah which allowed a more accurate calculation. Proposed Fee in Study $818 Proposed Herein -"Full Cost" $621 Proposed Herein - 30% useful life elapsed $435 It is "fair" to charge a Buy-In Fee for the Fleet. However, any rational method of calculating a "fair" fee will produce a very small - immaterial portion of the overall Connection Fee. I can be argued that an "inflation" adjustment shouldn't be made to the value of the Fleet. But the difference is only about $20 - immaterial in a total Connection Fee that will be in the range of $12,240 per ESSU. Proposed Fee in Study $67.34 Corrected for Minor Math Errors $66.95 Without Inflation Factor $47.47 John G Dickerson PO Box 301, Redwood Valley, CA 95470 (707) 485 - 0702 JohnD@YourPublicMoney.com Page 2 III. TWO FINANCIAL MODELS USED IN FEE STUDY The Fee Study proposes three components of new system customer Connection Fees: 1. "Marginal Portion" - a share of the "expansion" costs of the WTTP Project 2. "Buy In Portion" - two components a. Advanced Wastewater Treatment facility (AWT) b. Sewer System Maintenance Fleet (Fleet) The GM used two different models to calculate these fees: 1. Based on Financing 2. Based on "Remaining Value" The Financing model was used to calculate the WTTP Expansion part of the Connection Fee. The total Upgrade and Expansion WTTP project was financed by bonds. Twenty percent of the costs of the entire project were assigned to the "Expansion" part of the project. Table I on page 8 of the Study shows the amortization schedule for the 20% of the total bonded indebtedness assigned to the WTTP Expansion. A description of how the GM calculated the "per ESSU" charge for the part of the appropriate part of the bonded debt payments is on page 7 of the Study. The GM recommends the charge for the Expansion of the WTTP be set at $11,552. The GM used a different conceptual model to calculate the "Buy-In Portion" of the Connection Fees - with a slight variation between the AWT and Fleet. Both started by estimating a "current value" of the asset by modifying the "Acquisition Cost" by an inflation assumption. Then accumulated depreciation to date was subtracted. An average value for the upcoming five years was calculated. Then in the case of AWT an amount expected to be paid on average by new customers on the remaining balance of the AWT loan was subtracted to determine the Buy-In Fee. (There were more steps than these but this captures the main aspects of the method.) No such "remaining loan payment" allowance was made for the Fleet. IV. ADVANCED WASTEWATER TREATMENT FACILITY Table 2 on page I I of the Study shows the GM's estimate of the amortization schedule for the loan from the State Water Resources Control Board (SWRCB) that financed the construction of the AWT. The total payments (principal and interest) were used as the acquisition cost in 1996. Other calculations and adjustments produced an AWT Buy-in portion of the Connection Fee of $817.68. However, the District did not have a copy of the loan papers for this loan; that's why the GM had to estimate the amortization schedule. The GM made another request of the City for a copy of the amortization schedule for this current project and finally obtained the actual payment schedule (attached hereto). The original value of the loan was shown on this document (at the top) as $6,205,138. However, the highest principal balance shown in the schedule was $6,338,392 as of the end of December 1996. Total payments are scheduled to be $8.5 million. The amortization schedule was divided into two parts. First was a history of the withdrawals to pay costs of developing and constructing the AWT. Then after the project was finished (and probably put into use) the payment schedule was shown. There was a "correcting entry" dated 11/21/02 that shows that UVSD was overcharged for interest during the first 6 years of repayments. I produced a corrected version of the amortization schedule (also attached). At first I worked through the GM's method of calculating the AWT portion of the Buy-In Fee. But then I observed that the final five years of the amortization schedule happens to coincide with the five years that is the time period for the Study. John G Dickerson PO Box 301, Redwood Valley, CA 95470 (707) 485 - 0702 JohnD@YourPublicMoney.com Page 3 recommended to the GM and he accepted the recommendation to use the same "financing-based" model used for calculate the Buy-In fee for the WTTP Expansion project for the AWT instead of the "remaining value" approach. He accepted the recommendation. Therefore I'm not commenting directly on the calculations made by the GM in the Study (although I did review them). Principal Interest Ttl Pmts Payments Made on Financing Paid Up Through 2011 4,387,467 2,002,711 6,390,178 1/2 2012 - 2016 975,463 89,521 1,064,984 Payments 5,362,929 2,092,232 7,455,161 Expansion 20% 20% 20% Expansion Payments 1,072,586 418,446 1,491,032 District Share 65% 65% 65% District Payments 697,181 271,990 969,171 District ESSU's (65% of 2400 ESSU's) 1560 1560 1560 Marginal "Buy-In" for AWT 447 174 621 This shows the calculation of the proposed AWT Buy-In fee. Fifteen of the twenty scheduled payments have been made (the "Paid Up Through 201 1" line). I then calculated half of what the payments will be for the five years of the Study period. This provided the "average" amount that will have been paid on the loan during the next five years. I then assumed that since the AWT had enough capacity built-in during its construction to accommodate the additional ESSU's provided by the Expansion part of the WTTP project, then that additional capacity had been financed by previous rate payers even though they didn't need that capacity. In effect they paid for that additional capacity so that when the WTTP Expansion investment occurred no further investment in the AWT was needed. It seems "fair" to assign some of that investment made by previous rate payers to new customers over the last five years of the loan payments for the AWT. I applied the same 20% ratio the GM attributed to the WTTP Expansion (as shown on page 7 in the "Proposed Marginal Portion of New Connection Fee" section). Then since the District is responsible for 65% of the expansion portion, I calculated the total the District is expected to pay. That was then divided by the District's share of the additional ESSU's to produce a proposed Buy-In Fee of $621 per ESSU. This is 25% less than the $818 calculated by the GM. There were two main mathematical sources of the difference. First, the GM estimated the total payments on the loan would be $27.7 million whereas the actual amortization that was finally obtained from the City indicates total payments will be $8.5 million. Second, the GM used the estimated total payment of $27.7 million as the total invested cost of the AWT then assumed it would be depreciated over 50 years of which 15 years of depreciation had already occurred. John G Dickerson PO Box 301, Redwood Valley, CA 95470 (707) 485 - 0702 JohnD@YourPublicMoney.com Page 4 One "co-incidental" advantage of this method is that it "side-steps" the concern City financial officials expressed about the appropriateness of the method used by the GM by using the same model as used for the WTTP Expansion Buy-in Fee. Conceptually the method used here for the AWT and that used for the WTTP Expansion rests more on "Financial Accounting" methods whereas the "remaining value" method used by the GM moves into the realm of "Cost" or "Management Accounting". Cost (Management) Accounting is completely valid, but it introduces (among other things) efforts to estimate more "realistic current asset values" as opposed to the more mathematically determined "historical cost" basis used in Financial Accounting. This is completely justifiable, but it also introduces more assumptions that can be legitimate points of dispute. This dispute is avoided by using the same method used to calculate the WTTP Expansion Buy-In Fee. However, there is a further modification of the method used above that could be considered. If indeed the AWT has a 50-year useable life, 15 years or 30% has already elapsed. One could argue new hook-ups should get a bit of a reduction based on the fact that they are "buying in" after 30% of the asset has "wasted away". A 30% reduction of the $621 Fee would be $435. However - it's easy to get "bogged down" in debates about the "true" nature of "real economic" deterioration and value. On the one had physical system assets such as the AWT are usually in pretty good shape in their earlier years but in their later years deterioration occurs at a faster rate. You could therefore argue that there should be less depreciation applied in the earlier years. However, one could also argue that the greater rate of deterioration in later years will force far higher repair and maintenance expenses and therefore in order to show a more steady yearly total cost of the physical system asset depreciation would be considered to be higher in earlier years and lower in later years - the opposite of what repair and maintenance expenses are doing. The difference between an AWT Buy-In Fee of $621 and $435 is about I''/% of the total Connection Fee when the much larger Marginal Fee related to the WTTP Expansion is considered. I tend to favor recommending the lower fee of $435 to recognize that the AWT asset has been in use for some time and is closer to having to incur major repair and maintenance and even replacement. However, it isn't a very material difference compared to the total Connection Fee. V. SEWER MAINTENANCE FLEET The amount of the Fleet Buy-In Fee recommended by the GM is $67. This is a very small part of the total Connection Fee- 1/200th or one-half percent - using the GM's proposed WTTP Expansion Fee and either the AWT calculated by the GM or the calculation herein. While the goal of charging new customers their "fair share" of existing capacity that was paid by past rate payers is laudable, differences in methods to determine the Buy-In Fee for the value of the Fleet will not have a material effect on what new customers will pay. 1 made two adjustments to the calculations reported in the study. The Study calculations didn't add the assumed salvage value back into the current value. And there was a slight error in the calculations of the current value of one of the pieces of equipment. The difference is completely immaterial. The Fleet Buy-In shown in the Study is $67.34. 1 calculated $66.95. However, I calculated the Fee without adjusting the asset values by an assumed inflation factor (calculations attached). Under this assumption the Fee would be $47.48 - $19.47 less than my adjusted fee of $66.95. This would be a reduction of the total Connection Fee of less than 2/ 10 of I % - a very immaterial amount. I believe it is legitimate to estimate a current value of the fleet with a method that would include some sort of "inflation" factor. But the difference between an inflated buy-in fee v. simple historical cost based fee is not worth any debate from a financial point of view. John G Dickerson PO Box 301, Redwood Valley, CA 95470 (707) 485 - 0702 JohnD@YourPublicMoney.com 91TON it Item No. 3 UKIAH VALLEY SANITATION DISTRICT AGENDA SUMMARY REPORT JOINT MEETING BETWEEN THE DISTRICT BOARD AND THE UKIAH CITY COUNCIL July 14, 2011 REQUEST FOR UPDATE OF NOTICING TO PROPERTY OWNERS OF DELINQUENT SEWER CHARGES ASSOCIATED WITH RENTED PROPERTIES SUMMARY This matter was discussed at the Joint Meeting of January 13, 2011 with the discussion of a larger matter pertaining to the options available to the District in regards to the collection of monthly sewer service charges. The District has received and continues to receive rate payer complaints concerning what they believe to be untimely noticing of delinquent sewer charges accruing against their property. Although the merits of the future financial billing software and its long range implementation were discussed, the Board left the meeting with the impression that efforts would be continued to effectuate timelier noticing to property owners as to delinquent sewer service charges associated with their property. The Board requests an update of efforts made or a timeline for improvements to the noticing. DISCUSSION Under the current billing service program, property owners owning properties where they are not the sewer account holder do not receive notice of delinquent sewer service charges accruing against their property until the account is closed, referred to the District, and are noticed by the District that delinquent sewer service charges are due; this noticing is provided at the time the closed accounts are referred to the District and it might be 3 to 4 months after the accounts are closed. It is acknowledged that billing staff have provided to property owners limited access to information pertaining to sewer accounts associated with their property which has helped but the Board still requests that improvements to noticing be explored and implemented. FISCAL IMPACT NA RECOMMENDED ACTION NA ATTACHMENTS None Rick Kennedy, PE UVSD District Manager/Engineer/Clerk UKIAH VALLEY SANITATION DISTRICT Item No. 4 AGENDA SUMMARY REPORT JOINT MEETING BETWEEN THE DISTRICT BOARD AND THE UKIAH CITY COUNCIL JULY 14, 2011 DISCUSSION OF BUDGET TRANSFER AUTHORITY PROVIDED TO THE CITY MANAGER AS IT PERTAINS TO JOINT SEWER FUNDS SUMMARY AND DISCUSSION As discussed before, the UVSD Board takes exception to the budget transfer authority provided to the City Manager as it pertains to joint sewer funds; the Board opines that budget transfers authorized by the City Manager circumvents the Board's budget approval authority provided in the Participation Agreement and, although City rules grants unlimited budget transfer authority within individual funds, the Board believes this authority should not be extended to joint sewer funds. This issue was raised during last year's budget process and City staff agreed to notify the District Manager of budget transfers when they are made to the joint sewer funds. The notices have varied in detail as to the reasons for the transfers but the history report of budget transfers that was provided recently contains superior information. It is noted that most budget transfers made by the City Manager correct deficit spending in some subaccounts and, although these budget adjustments appear to be insignificant administrative adjustments, there are members on the Board who believe that an explanation to the Board and City Council are appropriate to insure transparency and to provide an incentive to staff to be more diligent in their expenditure of resources. FISCAL IMPACT The budget transfer authority provided to the City Manager only allows the transfer of budget appropriations within a fund and the authority does not authorize the City Manager to obligate fund balance without City Council and Board approval. RECOMMENDED ACTION Discuss issue and provide direction to staff ALTERNATIVE ACTION Provide other direction to staff ATTACHMENTS Notices of Budget Transfers Rick Kennedy, PE UVSD District Manager/Engineer/Clerk Mm ##-x## # Y 4L # x G7 # ~ OO U # # H N # # n, H H # # [p >i r # # n, o x # N U C)a # # HO C) (D o u5 # ri a # # cn ~ o m C7 (7 Q) "o x W # # G, O O # # Cn M # # L # # ko S # # O H O # # F CL o (D # # E Sa S4 S•1 ~-i N 54 }4 a # # W ) C C G # # 0 .u U 4J .U 4- 4-3 .u .t7 .u .U a.l N 7 # # q U N # # ~ o z ism O # # m H R, iJ # O Cf5 m # # F N •.i # # U \ 25 x H `-I ri # # a O O>+ O -xa•k### H ~ x to # # U) r ri # # # # # H O k1 as h k Q 4j w U # E+El EEl # r•nl # # H 11 in -r{ 15 # # H r-1 N 54 t55 # # 14 d # # yJ r= W E i G 5`+Q n W # # W OH W -k # 03 .rS o> # -i-1 • N O z \o # # H •.u to U U H M -x # C. w o to cD 13 RS z N N O x O # # u o r. 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F w U~ a ~ a F F zQz a H~D 0 F mU ul ryMWOEH WWaZ M-i > Q H w saw>1< ~a Haar z U),D QQ U) >1w zzr El U) oow fl au fal 9qC W U~ V]OaaUUI Q w Uco C .N. 0 H "J.. 0-1 w O o rl H M 11 0 0 o 0 0 h m • m N coo0000co ,TAO i Ln(nin NL i r~ ONWNNNO H H xH 0LnC;0ooo .DH Ei No.-iW00wN O \U)MInMM-- WN .-iMMMMMc-i I, U \NNNNN\ F\ r.G o~owwwwo H l0 ~ 1 U o t7 C7 Rick H Kennedy eeeeeeeeeeee~~e~e~e~~ From: Jan Newell Unewell@CityofUkiah.comj Sent: Friday, June 10, 2011 4:40 PM To: Tim Eriksen Cc: Jarod Thiele; Rick Kennedy Subject: Budget Transfer - Fund 612 The following budget transf er has been processed: From 612.3580.250.005 $15,000 612.3580.250.014 $50,000 612.3580.250.016 $ 5,000 612.3580.302.001 $ 2,000 To: 612.3580.210.000 $38,600 612.3580.250.001 $11,800 612,3580.250.008 $ 8,000 612.3580.280.000 $ 1,100 612.3580.520.000 $ 4,000 612.3580.630.000 $ 3,000 612.3580.690.000 $ 3,500 6123580.302.000 $ 2,000 All transfers are within the same fund and department. Thank you, Jan Newell Finance Controller CITY OF 171K,IAH 300 Seminary Avenue, Ukiah CA 95482 (707) 463-6216 Fax: (707) 463-6204 1 Ukiah Valley Sanitation District From: Rick & Nora Kennedy [ricknora@comcast.net] Sent: Tuesday, April 12, 2011 5:46 PM To: ukiahvalleysd@att.net Subject: FW: Budget Transfers From: Jan Newell [ma lto: jrewell a CityofUkiah.coml Sent: Friday, April 08, 2011 3:44 PM To: Andrew Luke Cc: Tim Eriksen; ]arod Thiele; Rick Kennedy Subject: Budget Transfers The following budget transfers have been processed: $1,800 from 612.3580.250.005 to 612.3580.280.000 Repair of Alarrn System $29,500 from 612.3580.800.000 to: 612.3580.214.000 $2,500 612.3580.450.000 $2,000 612.3580.520.000 $25,000 Increased Generator Fuel cost, Increased Natural gas for digester heating, increased chemicals to meet high flows. Jan Newell Finance Controller CITY OF UIlUAI-I 300 Seminary Avenue, Ukiah CA 95482 (707) 463-6216 fat: (707) 463-6204 Ukiah Valley Sanitation District From: Rick & Nora Kennedy [ricknora@comcast.net] Sent: Tuesday, April 12, 2011 6:01 PM To: ukiahvalleysd@att.net Subject: FW: Budget Transfer From: Jan Newell [mailto:jnewell(OCiWofUkiah.coml Sent: Friday, April 08, 2011 3:47 PM To: Tim Eriksen Cc: Jarod Thiele; Rick Kennedy Subject: Budget Transfer The following budget transfer has been processed: $4,000 from 612.3510.690.000 to 612.3510.302.000 Emergency purchase of pump for lift station at Ford Rd./Orchard Ave. Jan Newell Finance Controller CITY OF UNIAH 300 Seminary Avenue. Ukiah CA 95,182 (707) 463-6216 Fax: (707) 463-6201 AV 97io21 p~ UKIAH VALLEY SANITATION DISTRICT Item No. 5 AGENDA SUMMARY REPORT JOINT MEETING BETWEEN THE DISTRICT BOARD AND THE UKIAH CITY COUNCIL JULY 14, 2011 DISCUSSION OF DISPUTED BUDGET ITEMS RELATING TO FINES, PENALTIES, COLLECTION SYSTEM EMERGENCIES AND THE SEVETH WATER/SEWER ATTENDANT POSITION SUMMARY At the Budget Hearing of June 27th, the UVSD Board approved the budgets for the joint funds excluding appropriations for Fines and Penalties under the accounts 612-3510 and 612-3580, for emergency collection system repairs under account 612-3510, and for a seventh water/sewer attendant position under account612-3510; these proposed appropriations were declared as disputed budget items. Regarding fines and penalties ($100,000) and the emergency system repairs ($20,000) repairs, the reasons for the Board's objections to these proposed appropriations are two fold. First, there is fund balance within funds 614-3510-800-005 and 006 and 614.3510- 811-005 and 006 to cover potential expenses for these items and additional appropriations within Fund 612 are not needed. Secondly, if funded within Fund 612, the appropriations can be moved to other accounts within Fund 612 without the approval of the Board and City Council through the budget amendment authority provided to the City Manager under City rules; the Board is of the opinion that the budget transfer authority provided to the City Manager circumvents the Boards budget approval authority. After the adjournment of the Joint Budget Hearing, the City Council considered placing budget amendment restrictions to the appropriations for Fines and Penalties and Emergency System Repairs if the Board would consider their consent to have these items budgeted within Fund 612. In regards to funding for the seventh water/sewer attendant, the Board has been advised that this position is not needed given the current sewer maintenance programs. This position was budgeted last year but it remained unfilled as requested by the Board. City staff has claimed that both agencies have a high risk of being assessed fines by Regional Water Quality Control Board if this position is cut from the budget under the concept of financial gain trumping adequate staffing for spill response. This claim is misplaced; the position has never been filled and, for several years now, the water/sewer crew has adequately responded to sewer overflows. The rate payers do not need the additional expense for a seventh water/sewer attendant; public employee costs are becoming unsustainable. FISCAL IMPACT The proposed appropriations for Fines and Penalties and for Emergency System Repairs total $120,000. The fund balance within Fund 614 under the accounts for System Maintenance and Emergency/Contingency total $969,540. The potential expense for the seventh water/sewer attendant is approximately $80,000 RECOMMENDED ACTION Discuss issue and consider City Council's proposal for budget transfer restrictions to the appropriations for Fines and Penalties and for Emergency System Repairs. Do not approve funding for the seventh water/sewer attendant. ALTERNATIVE ACTION Provide other direction to staff ATTACHMENTS None Rick Kennedy, PE UVSD District Manager/Engineer/Clerk