HomeMy WebLinkAbout2011-10-13 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
October 13, 2011
6:00 p.m.
1. Roll Call
2. Presentation from Honeywell regarding the WWTP Renewable Energy Project
Proposal
3. Discussion of District Ordinance 35 Pertaining to Sewer Connection Fees
4. Request for Update of Noticing to Property Owners of Delinquent Sewer Charges
Associated with Rented Properties
5. Budget Transfer Authority Provided to the City Manager as it Pertains to Joint
Sewer Funds
6. Discussion of Disputed Budget Items Relating to Fines, Penalties, Collection
System Emergencies, and the Seventh Water/Sewer Attendant Position
7. Public Comment
8. 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 6th day of October, 2011.
JoAnne Currie, City Clerk
ITEM NO.: 3
MEETING DATE:
AGENDA SUMMARY REPORT
October 13, 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 Page 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:
Jane chambers, 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 FY 10/11 F-1 New Appropriation X❑ Not Applicable ❑ Budget Amendment Required
city a>_ Uklah
ITEM NO.: 5
MEETING DATE:
AGENDA SUMMARY REPORT
10/13/2011
SUBJECT: BUDGET TRANSFER AUTHORITY PROVIDED TO THE CITY MANAGER AS IT
PERTAINS TO JOINT SEWER FUNDS (DISTRICT)
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:
is je 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 7th 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 F-1 New Appropriation ❑X Not Applicable Budget Amendment Required
Amount Budgeted
Source of Funds (title and
Account Number
Addit. Appropriation Requested
$
$
ATTACHMENT it
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,
& 14) /~'Vll:we
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 2009/10 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 20/11 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.
Jan Newell
Finance Controller
CITY OF UKIAH
300 Seminary Avenue, Ukiah CA 95482
(707) 463-6216 Fax: (707) 463-6204
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Jan Newell
From:
Jan Newell
Sent:
Monday, January 31, 2011 10:01 AM
To:
Tim Eriksen; Rick Kennedy
Cc:
Jarod Thiele
Subject:
Budget Transfer - Change Order with Balance Hydrologics
Good Morning,
The following budget transfer has been processed:
Additional Appropriation 612.3580.250.003 $17,445.69
Council Approved, Item 7j January 19, 2011
Change Order #1 with Balance Hydrologics for Completion of Percolation Pond Study
Thank you,
Jan Newel/
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, April 08, 20113:47 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 Newel/
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, May 06, 2011 1:04 PM
To:
Tim Eriksen
Cc:
Rick Kennedy; Jarod Thiele; Andrew Luke
Subject:
budget transfer
The following budget transfer has been processed:
$4,500 from 612.3580.250.005 to 612.3580.450.000
Unanticipated costs of lubricating oil for WWTP Air Compressors.
Thank you,
✓an 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.
Thank you,
Jan Newell
Finance Controller
CITY OF UKIAH
300 Seminary Avenue, Ukiah CA 95482
(707) 463-6216 Fax: (707) 463-6204
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City aJ-TJkiafi
ITEM NO.: 6
MEETING DATE:
AGENDA SUMMARY REPORT
10/13/11
SUBJECT: DISCUSSION OF DISPUTED BUDGET ITEMS RELATING TO FINES, PENALTIES,
COLLECTION SYSTEM EMERGENCIES AND THE SEVETH WATER/SEWER
ATTENDANT POSITION
Background
On June 27, 2011 the City Council approved the budgets for fund 612, sewer operations fund. 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:.
Ja e'Chambers, City Manager
(
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 Fx-l Not Applicable 1-1 Budget Amendment Required
JAMES RONCO THERESA MCNERLIN
CHAIR VICE-CHAIR
KENT PORTER KENNETH MARSHALL MICHAEL PALLESEN
DIRECTOR DIRECTOR DIRECTOR
UKIAH VALLEY SANITATION DISTRICT
SPECIAL MEETING AGENDA
OCTOBER 13,2011 - 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. PRESENTATION FROM HONEYWELL REGARDING THE WWTP RENEWABLE ENERGY PROJECT
PROPOSAL
3. DISCUSSION OF DISTRICT ORDINANCE 35 PERTAINING TO SEWER CONNECTION FEES
(DISTRICT).
4. REQUEST FOR UPDATE OF NOTICING TO PROPERTY OWNERS OF DELINQUENT SEWER
CHARGES ASSOCIATED WITH RENTED PROPERTIES (DISTRICT).
5. DISCUSSION OF BUDGET TRANSFER AUTHORITY PROVIDED TO THE CITY MANAGER AS IT
PERTAINS TO JOINT SEWER FUNDS (DISTRICT).
6. DISCUSSION OF DISPUTED BUDGET ITEMS RELATING TO FINES, PENALTIES, COLLECTION
SYSTEM EMERGENCIES AND THE SEVENTH WATER/SEWER ATTENDANT POSITION
(DISTRICT).
7. PUBLIC COMMENT
8. 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.
~V
UKIAH VALLEY SANITATION DISTRICT
Item No. 3
AGENDA SUMMARY REPORT
JOINT MEETING BETWEEN THE DISTRICT BOARD AND THE UKIAH CITY COUNCIL
OCTOBER 13, 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. The Joint meeting scheduled for July
14th was not held because of a lack of quorum for the Board. On July 21, 2011, the Board
adopted Ordinance No 35 which implemented the new connection fees.
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 detei7nining the remaining value of the specified capital assets. Mr.
Dickerson's written opinion is attached and the proposed connection fee was modified to
address the comments provided by Mr. Dickerson.
FISCAL IMPACT
The previous connection fee did not appropriately retire the debt associated with the
expansion of the Wastewater Treatment Plant nor did 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
r~?16N v~
UKIAH VALLEY SANITATION DISTRICT
Item No. 4
AGENDA SUMMARY REPORT
JOINT MEETING BETWEEN THE DISTRICT BOARD AND THE UKIAH CITY COUNCIL
OCTOBER 13, 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
,7ior; v~
UKIAH VALLEY SANITATION DISTRICT
Item No. 5
AGENDA SUMMARY REPORT
JOINT MEETING BETWEEN THE DISTRICT BOARD AND THE UKIAH CITY COUNCIL
OCTOBER 13, 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
None
Rick Kennedy, PE
UVSD District Manager/Engineer/Clerk
Y" Y4 l
Ei`S;~ t 6'`r
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UKIAH VALLEY SANITATION DISTRICT
Item No. 6
AGENDA SUMMARY REPORT
JOINT MEETING BETWEEN THE DISTRICT BOARD AND THE UKIAH CITY COUNCIL
OCTOBER 13, 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
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
II. SUMMARY RESULTS 1
Ill. 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. I 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. T WO 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 $1 1,552.
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.S 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 11/21102 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
I 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" forAWT
447
174
621
This shows the calculation of the proposed AN/VT 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''/z% 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.
I 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