The URL can be used to link to this page

Item 6 - Appointment of Board Member & Alternate to S.D. Area Wastewater Mngt. Dist. �GENDA REPORT - c� W9r CITY OF POWAY �F �w.+...� �.c 4e> C� !N TME COJ? T0: Honorable Mayor and Members of the City Council FROM: James L. Bowersox, City Man� . INITIATED BY: Mark S. Weston, Director of Engineering Service��i''� DATE: December 8, 1992 SUBJECT: The Appointment of the City of Poway's Board Member and Alternate to the San Diego Area Wastewater Management District and a Discussion of Issues Relative to the Transition from Metropolitan Sewerage System to the San Diegb Area Wastewater Management District BACKGROUND San Dieao Area Wastewater Manaaement District On September 22, 199z, SB 1225 was signed by 6overnor Wilson ereating the San Diego Area Wastewater Management District. This District is to be the successor of the Metropolitan Sewerage System and provides all members within the District direct involvement in establishing policy for the management of the wastewater treatment and disposal system for the San Diego area. As stated in Section 1, Article III, the new�D9strict will be governed by a Board of Directors. The City of Poway will appoint one board member and an alternate to serve on the Board of Directors. The District becomes effective on January 3, 1993, by which time the representative from the City of Poway should be designated. DISCUSSION The San Diego Area Wastewater Management District wiil be the successor of the Metropolitan Sewerage System. Under the Metropolitan Sewerage System, participating agencies contracted with Metro and Metro, per the contracts, was operated by the City of San Diego. The new San Diego Area Wastewater Management District will serve all users within the District on an equal basis. The legislation allows for representatives from the various municipalities and sanitation and/or water districts which exist within the Special Act District to have representation on the Board of Directors. The newly-formed District will be one large district serving all users within the area. ACTION: � 1 of 22 �E C S 1992 I'TE1ti7 6 Appointment/Discussion Regarding San Diego Area Wastewater Management District December 8, 1992 Page 2 Transitional Issues Many transitional issues have been defined which arise from the transfer of operation of Metro to the Special Act District. The Governance Advisory Group, which has been a standing committee to the San Diego City Council , has discussed many of the issues over the last two years. The Governance Advisory Group is comprised of•elected afficials from all participating members within Metro. Exhibit A and Exhibit B provide the background for several of the transitional issues previously discussed in the Governance Advisory Group meetings. A memo dated September 27, 1992, from Roger Frauenfelder to the Governance Advisory Group lists many issues which are yet to be resolved. The following general issues have been supported by most of the participating members of Metro: a. The Special Act District should be a full-service district. b. The District organizational staffing strategy will be comprised of a combination of district employees and consultants. c. The City of San Diego will pursue reciprocity with the California and Public , Emplayee Retirement System (PERS) . (This task has been completed by the City of San Diego.) d. The City of San Die9a will adopt th� Clean Water Program Construction . Standards and Guidelines. Exhibit C lists several major issues which need to be discussed among the participating agencies early in the transition period. The numbers listed below will refer to the numbers in the September 22, 1992, memo from the City of San Diego regarding the discussion of issues. The discussion below presents staff's concerns relative to each issue: 1. Presentiv Contracted Caoacitv Conceot Staff does not have a concern with eliminating the concept of contracted capacity with the formation of the Special Act District. Staff agrees that the District will acquire the Metro assets and be the responsible part for the NPDES permit. The District, which is composed of all the member agencies, will serve the individual users and rate payers directly. It will be the District's responsibility to provide capacity within its system to meet all existing and projected user needs for wastewater treatment. Metro agreements requiring the City of San Diego to be the responsible agency will be terminated. 2 of 22 rEC 8 1992 lT�P�7 6 _ Appointment/Discussion Regarding San Diego Area Wastewater Management District December 8, 1992 Page 3 2. Fair Share Distribution of Costs Staff supports the position of calculating the fair share distribution of costs based on flow only to the Special Act District. Staff supports modifications of formulas calculating user rates; however, interim solutions to fair share calculation formulas need to be developed with the Master Interagency Agreements anticipated between the member agencies, the City of San Diego, and the Special Act District. Reclamation, expansion, and oversizing charges need to be clearly identified in the Master Interagency Agreements. Expansion and oversizing charges for new connections must be appropriately calculated so that future connections pay their full share of costs to use the facilities. 3. Transfer of Assets Staff does not support the position that the unused Metro sewer capacity has no value to the Participating Agencies and the Later Participating Agencies. The City of Poway is a Later Participating Agency and has a value in the amount of unused Metro capacity. The Technical Advisory Group comprised of representatives from all of the member agencies has developed a model for compensating all members within Metro including Participating Agencies, Later Participating Agencies, and the City of San Diego for unused Metro sewer capacity. The quantity of unused capacity will be sold to future connections, and an appropriate connection fee for the current treatment level will be incorporated into future connection fees. In addition, the Later Participating Agencies and the City of San Diego will be responsible to buildout the Point Loma facility to 234 mgd as required within the current Metro agreements. A method of compensating all members is shown in Attachment D, which staff supports. Staff supports the transfer of all Metro assets to the new Special Act District at no charge to the Special Act District. Staff is concerned about transferring City of San Diego assets to the Special Act District and would strongly support a complete inventory of City of San Diego facilities, estimate of service life, estimate of flow, and an estimate of true value before supporting a transfer of City of San Diego assets to the new Special Act District. 4. Facilities Condition Ins�ection The Governance Advisory Group has requested a facilities condition inspection prior to transfer of assets from Metro to the Special Act District. Staff understands that the current Metro facilities 3 of 22 �EC s ,ss2 �TEr�9 6 Appointment/Discussion Regarding San Diego Area Wastewater Management District December 8, 1992 Page 4 are the responsibilities of all members of Metro and regardless of their condition each member is responsible to pay their fair share of maintenance of those facilities. Completing a facilities condition inspection may identify areas in which future maintenance will be required and needs to be anticipated. However, the costs of the inspection should be kept to a minimum as, regardless of the findings, each participant in the District will be responsible to pay their fair share of those maintenance costs. Transfer of City of San Diego assets or any other city's assets to the Special Act District is a separate and distinct issue. A facilities condition inspection would be required along with an inventory, service life flow, and other necessary conditions to determine the value of that asset. Staff strangly supports a facilities condition inspection for any asset to be transferred from a member agency to the Special Act District. 5. Citv Front-Funded Costs Although some of Lhe member agencies have a concern about the city front- funded costs, Poway staff believes that member agencies will ultimately be responsible for these front-funded planning costs. Some members have a concern about paying for oversizinq and expansion costs above the needs of their city. This issue will be discussed in more detail during the transition to the Special Act District. 6. Organizational Structure Poway staff supports the implementation of a full-service wastewater management district with its own employees. The City of San Diego believes that the transition to a full-service district will take several years. Poway staff supparts a rapid transition from the City of San Diego to a Special Act District to be completed by no longer than one year and, preferably, to be completed within six months. Issues related to the organizational structure of the District and future contracting responsibilities will be determined by the Board as the development of the District proceeds. � 7. Reneaotiation of Contracts e The legislation forming the District wilt become effective January 3, 1993. Staff supports the rapid completian of Master Interagency Agreements which will be the vehicle of transferring responsibility from Metro to Special Act Districts for each member agency. 4 of z2 �7Fc � tss2 aY��!" 6 Appointment/Discussion Regarding San Diego Area Wastewater Management District — December 8, 1992 Page 5 , 8. Legal Resoonsibilities SB 1225 defines many of the legal responsibilities between Metro and the new District relative to the court case filed against the City of San Diego. Staff recognizes that the District will become the legal entity responsible for the NPDES permit as well as all contracts. Contracts between member agencies relating to sewer systems outside of Metro remain untouched. 9. District fees and Charaes Staff supports the development of a uniform system of fees and charges to be charged for District facilities. Each municipality or district will have charges for their own local system which may differ from member to member. New Issues 1. . Financial Statement Review Although not listed, participating members believe there should be a financial statement review from Metro which would include a limited audit of Metro cash assets to assure the appropriate amount of cash is transferred from Metro to the Special Act District. 2. Oversizina and Exoansion Several member agencies are concerned that oversizing and expansion of facilities above current flows should be borne by those users requiring those facilities. Oversizing pipelines will have to be paid by current users and recovered through future connection fees. This issue needs to be resolved during the transition to the Special Act District. ENVIRONMENTAL REVIEVI This report is exempt from C.E.Q.A. requirements. FISCAL IMPACT This report has no fiscal impact. PUBLIC NOTIFICATION AND CORRESPONDENCE Standard distribution, Roger Frauenfelder, City of San Diego, and the Clean Water Program. 5 of 22 �EC 8 1992 1TEi�9 b � Appointment/Discussion Regarding San Diego Area Wastewater Management District December 8, 1992 Page 6 RECOMMENDATION It is recommended that the City Council take the following actions: 1. Appoint a representative and an alternate for the Board of Directors to the San Diego Area Wastewater Management District; 2. Direct staff to develop a method of compensation of inember agencies for unused Metro sewer capacity as being developed by the Technical Advisory Committee.; and, 3. Continue to resolve transitional issues which arise with the implementation of the San Diego Area Wastewater Management District and develop a Master Interagency Agreement to be approved by City Council at a later date. JLB:MSW:dew Attachments: Exhibit A - July 11, 1991 City of San Diego Manager's Report Exhibit B - Octaber 9, 1992 Citq of San Diego Memo Exhibit C - September 22, 1992 City of San Diego Memo Exhibit D - Method of Compensation for Unused Metro Sewer Capacity 6 of 22 ��C s 1992 ITEM 6 , ° •T��a9}Y � �''�'o� The City of San Diego 10493f, • o�' � � ,� � � ! � F � � NA ER _ ._ � ^ MA �� - �� -a� � ��~ EPORT r R �'�PER V[��V� ' DATE ISSUED: July 11 , 1991 REPORT N0. 91-334 ATTENTION: Public Services & Safety Committee Agenda of July 17 , 1991 SUBJECT: Development of a Transition Plan for the Metropolitan Sewerage System and the Clean Water Program to the San Diego Area Wastewater Management District REFERENCE: Manager' s Report No. 90-512, November 29 , 1990 Manager's Report No. 91-274, June 13, 1991 SiJDIISARY Issues - 1) Should the City Council accept the ,`� recommendations of the Metropolitan Sewerage System Governance Advisory Group for operational guidelines and policies for the proposed San Diego Area Wastewater Management District? 2) Should the City Manager continue to develop a transition plan to transfer the Water Utilities Metro Division and the Clean Water Program to the District? Manaaer's Recommendations - 1) Accept the recommendations made by the Metropolitan Sewerage System Governance Advisory Group for operational guidelines and policies for the proposed San Diego Area Wastewater Management District. 2) Direct the City Manager to continue development of a transition plan to the District for the Water Utilities Metro Division and the Clean Water Program. 3) Direct the City Auditor and City Manager to • study the cost impact and policy issues of transferring the Clean Water Program and Metro Division to the proposed Special Act District. Other Recommendations - None F� scal ImDact - Will be determined at a later date. �CKGROUND After careful examination of all options, the Metropolitan Sewerage - System Governance Advisory Group (Advisory Group) unanimously recommended on September 21, 1990 pursuit of a special act district -- as the future governance structure for the Metropolitan Sewerage 'F of 22 - EXHIBIT A (�� 8 �992 ��9 6 � 10493G System. On Octobe� 15, 1990, the City Council adopted Resolution � No. R-276715 adopting the Advisory Group's recommendation. On - December 11, 1990, the City Council adopted Resolution No. R-277078 , stating that the Advisory Group "is requested to formulate appropriate language for a special act district, shall forward the recommended language for the special act district to the City' s Public Services and Safety Committee and the City Council, and continue to serve and " provide appropriate recommendations on the structure of the Clean Water Program until the Board of Directors of the special act district is formed or until further direction of the San Diego City Council. " This report contains the recommendations made by the Advisory Group for - the period of January 1991 through May 1991. ' DISCUSSION In parallel to SB-1225 passing unanimously through the Senate of the State Legislature, the Advisory Group has been analyzing policy options for the San Diego Area Wastewater Management District in the areas of Finance; Management; and Engineering, Contracts and Operations, and submits the following unanimous recommendations to the City Council: 1. That the special act district be a full-service district. (See Attachment A for a detailed list of functions, powers, and responsibilities to be performed by the District and its � individual member agencies) 2 . That the City of Saa Dieqo and the pazticipatinq member aqencies complete a valuation of all Metro physical assets and liabilities as well as all riqhts and obliqations existinq under the Sewaqe Disposal Aqreements of 1960. This will allov negotiation of a Joint Administrative Agreement by all member aqencies includinq Saa Dieqo prior to the formation of the neW District. (Attachment B) 3 . A District orqanizational staffinq strategy be comprised of a combination of District (City) employees and consultants. (Attachment C) 4 . That the City of San Dieqo pursue raciprocity with the California Public Employees Retirement System (PERS) in order � to enhance the City and District' s ability to recruit employees from a wide sector of public aqencies. 5. That the City of 8an Dieqo adopt. the Cleaa Water Program Coastructioa 8tandards and Guidelines. This will endble the District to standardize the entire system planned in Alternative IV, including design specifications, material specifications, construction specifications and equipment specifications. This will provide uniformity throughout the District and enable the District to achieve significant capital savings as a result of economies of scale purchasing. 8 of 22 Z �F..0 S 1992 1Ti:�� 5 � � °� � � - - 10493�6 . �1 The City Manager recommends approval in concept of the Advisory Group's recommendations to the City Council. _ At the June 19, 1991 meeting of the Public Services and Safety Committee, Chairman Pratt requested information on a transition plan for the time period between now and July 1, 1992 when the San Diego Area Wastewater Management District could become operational. Information regarding that transition plan, in its preliminary stage of development, is presented here. In liqht of the recommendations for a full-service special act district, the City has recently organized a District implementation team in order to clearly identify and address areas of concern to both the City of San Diego and the agencies comprising the Metropolitan Sewerage System Governance Advisory Group. The District implementation team will be led by the Deputy Director of Suppart Services for the Clean Water Program, and will consist of representatives from the Water Utilities Metro Division, Clean Water Program, City Attorney' s office, and the Financial Management Department and Auditor and Comptroller. The ongoing focus of the implementation team will be to analyze and formulate policy, practice and procedures for provisions of a wide range of administrative, financial and technical services that will be required by the District, and to present the results to the Advisory Group for review. The services identified for analysis ,at this time are: - = - Property services (land acquisition, right-of-way acquisition, lease negotiations, appraisals, etc. ) - Data processing , - Accounting and financial management services - Legal services � - Purchasing (supplies, equipment, etc. ) - Telecommunications - Personnel - Development of a proposed FY 93 CWP/Metro O&M and long- range CIP budget: - Development and presentation of all the necessary ordinances, resolutions and associated procedural materials for operation of the District upon its establishment. There are still many issues to be resolved prior to having a final � recommendation to the City Council to implement the Special Act District. In order to assure that these issues are addressed in •a timely manner, Deputy City Manager Roger Frauenfelder will direct 3 9 of 22 _ )F.S 8 1992 1T_T� 6 � � "�' � � � 104936 :__ the transition team, which is comprised of representatives from the � following City Departments/Programs: Water Utilities ' Clean Water Program Personnel Risk Management Retirement Administrator Labor Relations Administrator City Attorney Financial Management General Services Property ' Equal Opportunity Contracting City Auditor Program , Under the concept of the Special Act District all ratepayers in the San Diego Metropolitan Area will pay equally for service provided by the new District. Under the concept of the new Special Act District all wastewater treatment contracts between the City of San Diego and the member agencies joining the new District are subsumed by the new District. The City Manager will report back to the Public Services and Safety Committee and the City Council on at least a quarterly basis on the progress made by SB-1225, the Advisory Group, the District implementation team, and the City transition team. ALTERNATIVE(S) 1. Analyze and accept or modify each of the recommendations made by the Advisory Gr-oup on a singular basis. For example, the City of San Diego may choose to consider the alternative having the District contract back with the City for work force elements and/or specified support services. Respectfully submitted, � JACK MCGROR'Y [/ City Manager FRAUENFELDER/FDS/GJB ATTACHMENTS 'II� WLL2AE OF � ATl�(.I3�Ni5 Pf�S (��,L DLSTRIHTiZQJ- CDPIE_5 Al� AVI�anr.F �yt VIISTIPG aI TTHE QTY Q.EFdC'S OFFICF,, 10 of 22 4 �._C 8 199� I ��tA.. � ��G � �� q r _ - 104936 CITY OF SAN DIEGO MEMORANDUM DATE: October 9, 1992 TO: Clean Water Program Govemance Advisory Group FROM: . Clean Water Program Director SUBJECT: Summarion of Advisory Group's Prior Recommendations for Operational Guidelines and Policies for the San Diego Area Wastewater Management District At the September 25, 1992 meeting of the Governance Advisory Group, Deputy City Manager Roger Frauenfelder recommended that the group review old meeting minutes to determine specific recommendations made by the group related to operational guidelines and policies for the San Diego Area Wastewater Management District. A review of the Clean Water Program files has produced the foIlowing information. On July 11, 1991, Manager's Report No. 91-334, summarizing the Advisory Group's � recommendations to the San Diego City Council from January through May, 1991, was issued. The following unanimous recommendations were made: - That the Special Act District be a full-service district. - That the City of San Diego and the participating member agencies complete a valuation of all Metro physical assets and liabilities as well as all rights and obligarions existing under the Sewage Disposal Agreements of 1960. - A district organizational staffing strategy be comprised of a combination of District (City) employees and consultants. - That the City of San Diego pursue reciprocity with the California Public Employees Rerirement System (PERS). - That the City of San Diego adopt the Clean Water Program Construction Standards and Guidelines. In direct relation to these recommendations, two things have occurred: the City has approved reciprocity with PERS, and the Advisory Group, at its March 20, 1992 meeting received a report from the Fiscal Policy Committee (FPC) recommending against an independent engineering valuation audit of Metro because it would be of litfle value to all agencies, while being coslly to ail to perform. Since June 1991, two additional recommendations have been made by the Advisory Group: - Levels of District procurement authority. - An outline for MBE/WBE contracting policy. 11 of 22 EXHIBIT B DEC S 1992 B"�� 6 1o4s3s The Manager's Report referenced above, as well as minutes from the Advisory Group meedngs - containing the FPC's recommendation and the additional two recommendations, aze attached. If you need additional information on this subject, please contact Clean Water Program Deputy Director Charles E. Mueller, Jr., at 533-5360. �� C ESINGER CRS/GJB Attachments l. Manager's Report No. 91-334, July 11, 1991 2. Governance Advisory Group Minutes, July 12, 1991 3. Fiscal Policy Committee Minutes, March 16, 1992 4. Memorandum to the Governance Advisory Group, Mazch 17, 1992 5. Governance Advisory Group Minutes, March 20, 1992 cc: All City/Agency Managers, Metropolitan Sewerage System Participating Agencies All Public Works Directors, Metropolitan Sewerage System Participadng Agencies Deputy City Manager Fnuenfeldez, MS 9B CWP Deputy D'uectors City Attomey, MS 3A 12 of 22 D�C 8 1992 I�'�P:7 5 - ' ATTACHMENT B � � City of &an Dieqo ' M E M O R A N D II M DATE: September 22, 1992 TO: Members of Governance Advisory Group FROK: Roger Frauenfelder, Deputy City Manager SIIBJECT: Discussion Issues for District Formation As you may be aware, the Governor signed Senate Bill 1225 on September 22, 1992 . The legislation forming the San Diego Area Wastewater Management District ("District") therefore will become effective on January 3 , 1993 , assuming the Failure Analysis Report has been issued. We are advised by the City Attorney that the District may thereafter proceed immediately to take such action as is necessary to constitute a Board of Directors, adopt ° procedural rules, and commence business. � Obviously, the first order of business for member agencies will J be to appoint representatives to the Board. That should be an action item for consideration of each member agency in the relatively near future. We will be making a report to the San Diego City Council to consider these appointments in 1993 . However, before all of that occurs, there are certain discussion issues which we believe need to be addressed. We have listed these issues on Enclosure 1 to this report and would appreciate your review and consideration at the Governance Advisory Group meeting on September 25, 1992. Finally, we note that the issues identified by CWP staff in no way represent a City Council approved program but are put forth to generate discussion by the Governance Advisory Group members. Your input is required on these issues prior to the City Manager formulating an official recommendation to the City Council of San Diego. /Y• � � H.R. FRAUENFELD 13 of 22 EXHIBIT C oFC 8 1992 ��r.9 6 � ENCLOSIIRE (1) - TO CITY MANAGER'S MEMORANDIIM OF SEPTEMBER 22� 1992 DISCIISSION ISSIIES 1. Presentiv Contracted Capacity Concept Presently, the Participating Agencies ("PA's") and Later Participating Agencies ("LPA's") have contracted with The City of San Diego for capacity in the existing Metropolitan System ("Metro") . In our view, when the District acquires the Metro assets and the National Pollution Discharge Elimination System ("NPDES") permits, this arrangement will no longer be either applicable or relevant. This District, which is composed of all of us as member agencies, will serve the individual users'/rate payers directiv. It will be the District's responsibility to provide capacity within its system to meet all existing and projected user needs for wastewater treatment and disposal. Then this will no longer be the responsibility of The City of San Diego and the agreements providing for this responsibility will be terminated. . 2 . Fair Share Distribution of Costs - = Under the existing agreements participating agency costs in - the system are determined on the basis of contracted capacity. � Inasmuch as each member agency will have a proportionate interest in the newly formed District, the current method of distributing costs will have to be altered. As an interim solution, it will be necessary for the members of the District to pay their fair share of the costs associated with the expansion of the system beyond 234 million gallons per day and the cost of water reclamation. Until the District is able to recover costs from ratepayers directly, one alternative for determining cost distribution would be on the basis of each member's proportionate flow of wastewater being treated within the system. Following full implementation of the district, costs will be distributed among the ratepayers. 3 . Transfer of Assets The legislation forming the District does not provide a mechanism by which the District will acquire the City's Metro assets or other participating agencies' assets. How those assets are transferred and what, if any, compensation will be paid will have to be negotiated. It is contemplated, however, that no reimbursement will be provided to PA's and LPA's for existing contract capacity whether it is currently utilized or not. Moreover, it is � anticipated that certain assets which are not currently 14 of 22 -PAGE 1 OF _3- !]F� $ 1992 �i�:��J 5 / � defined as Metro assets in existing contracts also will be transferred to the District if mutually acceptable to all agencies within the District. After the transfer of the City's and other agencies� assets has been completed, the District will be responsible for the operation, maintenance, and repair of all the newly defined District assets. 4 . Facilities Condition Insoection The issue has been raised at several meetings of the Governance Advisory Group that a facilities condition inspection of Metro assets be conducted prior to the transfer of these assets to the District. Inasmuch as all District members will be responsible, as they are now, for their proportionate share of repair/replacement costs for these assets such an inspection would be a needless expense for member agencies. 5. Citv Front-Funded Costs The City of San Diego has been front-funding costs on behalf of PA's and LPA's for Metro over-sizing and water reclamation. As has been discussed at numerous Governance Advisory Group meetings, it is the City's contention that it be reimbursed for front-funded costs associated with capital improvement projects as well as any debt incurred to finance these projects. Member agencies have been provided • " estimates for these costs. It therefore will be necessary to establish a procedure to determine how the costs will be reimbursed. - 6. Oraanizational Structure When fully established, the District could contract for services with the City, be a full service wastewater management district with its own employees, or contract for only a portion of its services. Initially there will be a transition period of several years before the District can assume full responsibility for Metro management. Several scenarios are suggested during this transition period. For instance, a management team could be selected to administer the District or the District could .rely on City administration during the interim period. To this end it would be appropriate for the District members to commence the decision process regarding its initial management team; to determine whether the District will contract with the City for interim services as required; and ultimately to determine which additional services will be transferred from the City to the District. � -PAGE 2 OF 3- �- 15 of 22 �FC 8 1992 i�.=�: �' /_` 7 . Reneaotiation of Contracts In January 1993, the legislation forming the District will become effective. However, under the existing agreements the City will continue to be responsible for Metro wastewater management during the transition period. We propose that any contract the City has with a PA or LPA which chooses not to recognize and be an active member of the District be assigned to the District. In that case, any renegotiation of existing contracts therefore would be done by the District. 8 . Leaal Resnonsibilities Along with the transfer of Metro assets to the District, there will be a concomitant transfer of legal responsibility , for the assets. Specifically, this will mean a proportionate share of the costs associated with compliance with the Clean Water Act and any related litigation will have to be borne by each member agency during the transition period and ultimately by the ratepayers. The City, however, recognizes that it shall remain responsible for any penalties imposed relative to the City's Municipal � Wastewater System or any penaltie$ imposed prior to the formation of the District. 9. District Fees and Charaes A uniform system of fees and charges will need to be established for the District, as well as a mechanism for billing and collection. When the district will assume responsibility for billing and collection will also have to be determined. KJS: jrl:mrh: 400 09/22/92 -PAGE 3 OF 3- � �. 16 of 22 - ��Fr, s �ssz �T��:� � — MEMORANDUb_ - —' �,SY �F ��y. CITY OF POWAY _ `� '�, .-. _ D � �„'� � I� - .,._�te.. T0: Metro Sewer Advisors Subcommittee l FROM: Mark S. Weston, Director of Engineering Services ,,�� City of Poway DATE: November 2, 1992 SUBJECT: Compensation for Unused Metro Sewer Capacity ------------------------------------------------------------------------------ PURPOS The purpose of this report is to present a method to compensate Participating Agencies (PAs) , City of San Diego (San Diego) , and Later Participating Agencies (LPAs) for unused Metro sewer capacity with the formation of the Special Act District. In addition, the responsibility of the City of San Diego and the Later Participating Agencies (LPAs) to buildout Metro I will be presented. The goal of this report is to develop a method to establish parity among all members of Metro. Agencies which choose not to join the Special Act District will also be discussed within this repart. DEFINITIONS Definition of terms is necessary prior to presenting the methodology in this report. Terms used in this report will be defined as follows: Member Agency - A Member Agency is one of the following: Participating Agency (PA) , San Diego, or Later Participating Agency (lPA) as defined within the Metro agreements. Contract Capacity - Contract capacity is that capacity which was purchased by a Member Agency through the various Metro sewer agreements. Member Agency Unused Capacity - This term describes the amount of capacity that is unused by a Member Agency. For the purposes of this report, this is defined as the remaining Metro contract capacity for which sewer connection fees have not been collected by the Member Agency. Member Agencies may collect sewer connection fees at various points of processing, i .e. tentative map approval , final map approval , building permit issuance, occupancy, etc. The one common event among all Member Agencies is when money has been received far a connection fee and a commitment of capacity has been made by the Member Agency. Unused capacity is the balance of each Member's contract capacity minus all capacity sold by a Member through either connection fees or commitments. The unused capacity will be the capacity that will be returned to the Special Act District and will be sold at a later date through future connection fees. 17 of 22 EXHIBIT D � .� :.1 b Metro Sewer Subcommittee November 2, 1992 Page 2 Value of Unused Capacity — This will equal the current replacement value of Metro sewer capacity minus the balance of the remaining payments for the unused capacity. Through recent purchases of Metro sewer capacity, the approximate value is 52,100,000 minus the remaining balance of the fixed capacity charge which is approximately 5100,000 per million gallons for the duration of the contracts. for discussion purposes, the current value of unused Metro 'capacity will equal b2 million per million gallons. METHODOLOGY This report on compensating Member Agencies for unused sewer capacity is based on the following theory: 1. Theorv All Member Agencies who participate in the Special Act District will be eligible to receive compensation for fair market value of their unused Metro sewer capacity within the system. To date each Member Agency has a known contract sewer capacity and is able to determine the amount of used contract capacity through flowing connections and commitments. Member Agencies would be compensated for the value of the remaining unused sewer capacity. Further, the LPAs and San Diego are obligated to pay for the facilities which would buildout Metro I to its design capacity of 234 million gallons per day (MGD) as envisioned in the original contracts. The LPAs and San Diego would be eligible to receive compensation for their unused capacity similar to the PAs. The value of the unused capacity existing today is approximately 576.7 million. The repayment of the value of the unused sewer capacity will be reimbursed ta each Member Agency by a preset formula and collected through future connection fees. The reimbursement formula to the Member Agencies will not require bonding by the Special Act District. San Diego and the LPAs have an obligation of approximately 368 million to buildout the facility to 234 MGD. The-facility will be built out to 234 MGD. All of the current members using the facility will have paid their fair share based on actual usage. Future connections will pay their fair share of the remaining capacity of the facility. Agencies which choose not to join the Special Act District but rather contract with the Special Act District would maintain ownership of their contract capacity and would not be compensated for any unused capacity. They would not be involved in any reimbursement formulation. 18 of 22 �,F.,C S 1992 �,:+�t:� � — Metro Sewer Subcommittee November 2, 1992 Page 3 2. Discussion The magnitude of the value of compensation of unused, Metro sewer capacity to the Member Agencies is relatively small compared to the total obligation of capital improvements under the Special Act District. The reimbursement of uncommitted capacity is on the order of b76.7 million. The abligation of the IPAs and San Diego to buildout the facility to 234 M6D is estimated at about b68 million. The attached spreadsheet breaks down the components of the reimbursement theory for unused Metro capacity. The attached spreadsheet is for discussion purposes only. Many of the numbers are estimated at this time and would have to be better defined by the staffs af Metro and each Member Agency. The spreadsheet includes the situation of a current Member Agency who chooses not to be a member of the Special Act District but rather contracts with the Special Act District. A column-by-column discussion of the spreadsheet presents a system for compensating all Member Agencies for unused Metro capacity. Column A - Member Aaencies This column lists each one of the Member Agencies currently in the Metropolitan Sewerage System. Column B - Contract Ca�acitv This column lists each Member Agency's contract capacity within Metro as defined in each member's agreement. Column C - Flow Each member discharges wastewater to the Metropolitan Sewerage System. The flows presented in this repart are the 1991 flows which were established prior to water conservation efforts by each Member Agency. Using higher flow rates is a conservative approach. An agency was using at least this portion of their cantract capacity described hy the higher flow rate. Column D - Committed Caoacitv Committed capacity will be defined differently by each agency and would represent the connection fees received but are not flowing sewage to Metro. This column is shaded to highlight it as an estimate for discussion and will be determined by each agency. The key element to set this number will be the collection of a connection fee or a commitment fee establishing that commitment by the Member Agency to - provide capacity to Metro. 19 of 22 �Fr, � 1992 I��r� � Metro Sewer Subcommittee November 2, 1992 Page 4 Column E - Total Caoacitv Used The total capacity used is described as the summation of flowing sewage plus unconnected but committed connections. These numbers will have to be developed by each Member Agency to determine the total amount of their current contract capacity used in the Metro Sewerage System. Column F - Uncommitted Caoacitv This column is described as uncommitted or unused capacity in Metro and would be the basis of reimbursement of Metro capacity back to the Member Agencies. Column G - Ultimate Unused Caoacitv Compensation This column is the ultimate unused capacity compensation to a Member Agency. As presented earlier in the report, the approximate value of unused capacity is 52 million per million gallons. The ultimate unused capacity compensation is calculated by multiplying the uncommitted capacity times the value of the uncommitted capacity which is estimated at 52 million per million gallons. The summation of Column G is 576,660. . Column H - Percentage of Total Reimbursement The percentage of total reimbursement would be distributed to each Member Agency. At $2 million per million gallons, an estimated EDU charge for the current capacity in Metro at the treatment level constructed by the members is approximately 5500 per EDU. Each future connection to the Special Act District would be shared according to the percentage in Column H. Annually a reimbursement to each one of the Member Agencies would be calculated for the connection fees received that year. Future connection fees will include a component for each Member Agency's municipal system, existing Metro I treatment facilities, and lastly, upgraded and expanded facilities. A modification to Column H might include early pay-off to agencies with relatively small reimbursements. This would simplify the number of agencies that would be participating in the long term reimbursement program. Column I - Financial Obliaation to Buildout Metro This column is the current financial obligation to buildout Metro I as described by the Clean Water Program, October 16, 1992, memo. The LPAs and the City of San Diego have the obligation to complete the necessary facilities to buildout Metro. 20 of 22 DFC 8 1992 IT�P.9 6 Metro Sewer Subcommittee November 2, 1992 Page 5 FIXED ASSETS All of the fixed assets of Metro would be transferred to the Special Act District with no additional compensation for the existing constructed facilities to any member within the original Metro. CAPACITY GUARANTEE Member Agencies may have a concern regarding a guarantee of capacity by the Special Act District in the future. To avoid this issue, the method would include a guarantee that any City or District located within the Special Act District, and who is a full member of the District, would at a minimum be guaranteed capacity totaling their previously owned contract Metro sewer capacity. This guarantee would eliminate the palitical concern that the Special Act District could govern growth within existing districts and cities by denying capacity connections below the limits of the existing contracts. This guarantee would be at no cost to the districts or to any members and would eliminate that concern as an issue of resolving the compensation of existing Metro sewer capacity. Member Agencies expect the District to be a service-providing entity (i .e. wastewater treatment) with the facilities planned, designed, and constructed to meet the needs of the District. CONCLUSION � The Master Interagency agreements are needed to bridge the transition from Metro I to the Special Act District. This agreement would include the formula as presented in this report to equitably compensate all Member Agencies who choose to be members of the Special Act District for existing unused Metro sewer capacity. In addition San Diego and the LPAs would be obligated to buildout Metro I facilities to the full contract 234 MGD as established in the original Metro agreements. Compensation for unused Metro sewer capacity would be through a component of future connection fees distributed to each Member Agency by a set formula as established by the amount of uncommitted capacity returned to the District. The vehicle to establish this method of compensation would be through the Master Interagency agreements to be developed to transition from Metro I to the new Special Act District. dew Attachment � 21 of 22 '�F C 8 1992 Tii�."i 6 O O O O�' O O N O O O M b w N � N T � m O T � T � O V .�_. � ti N � � ; Y C q � O �0 d q � � L m N C ' m W O N � � H H N J V O J < P N �O' < 1� Ill 1� �O N f0 L O O t0 m O �O'- N O 40 0 O Q �O O C� Yl O y O O O �.d�.: N N Q � tO �+ O O N n O O q � N O O N M S y � Y � X u � � � ~ E d d s 0 0 o d� o 0 0 0 0 0 0 0 0 0 0 0 N m V \" N V O N N N N O tD C W t0 C �..� m �G .Z.. 1� N V1 < N m C N N O Of �O N T O � � .� .ti nl .r �O � � �G ^ Yq V ^ V H E � q � N {i N � J N C y Y C G N � � 'V � O � V L U � Q N t(f" b 1� Vf .ti .�1 .r N m N ^ 0 O� M O ��0� c0 1� 1� 1� e 1� N N O T a ° � o o ..» o o -+ o �n o -. o y �n o o+ • « rn y T .-. C „ � ^ a U a V o c � � = U 6 � T U1 N 2 W 01 t0 m ��ILI V 1'9 N 01 T T N � m N C Y d N tD 'R1 �D N I� O O� 1� V1 1� �O O T � N ti S . . . . . . . . . . . . . N C � T � N O 'm'. N l0 N N n'f O O Y N � [O � <"� �„� � ^1 y 01 N G � o-y W Y N V � 6 � L U O G a = � d 1� A N G d 1] d U � L O Q C a+ V � N O O H W tll N 'O H �G 'Ip::�O O'. m.. N N�. O �O �G .y N N. O) �O b U L i� � 01. Q O R)�.. � f0� N�.. � P'1 O t0'�. T� ��O �� O 10� N 0 N z . . '". ^. . . . -c � a �..� o'..o.. o o"o':� o o..o...o .o o.'�o � o' o m. O 3 �.�. O. . O U N f � �.. Y Y f.7 Y� C L N � CT q N OI V � .Q.) N � N N N � U L C L W � q 4 E N V L W U 6 �+f..�. m IA. .�0. ..�-i O N t7 �+l O O N VI �C m OI U �� 3 �+f N m' O N V] T tp I� N p� N T N C N 41 L U L Y t O N O n N Vl N .ti t7 O Y t+1 1� 1� O 3 � C � � OJ O N L � O W 1 VE V� aT+ U � � O L E aT+ r LL C Y O � 3] W U U ��- M Y I N N L O 6 C O� a O � N O 7 U d Q d N O O O O O O 1� O O O N O N O N L L a+ O N N O tO O Vf n] Q m .ti N N O Q 1� N O� 9 j C y 1' N Y � M O O �+I t0 < N n .+ �G �(1 N O �+I L 'a � O � _ V .ti N d U N Y O N '� p] � q U' v L V N 01 � �[/ C 6 E .� C C N ^ p q O� VI T C J � U U W O C 0 . T N W U � �-7 N V� c O �: � c E � c a�+ y� � r � o � � � v :� v v � v = � a• �+ Y v E � Q V W V a T — H � � N C Y W ^ m ~ N O N N U � N T A � E � n n U 1 C E 9 T N U O � a c w m v�i a A W Fa OO Q L O t C 01 O. M � � S N 6 Y ^ C O ^ p U y W m w a m t E V E .+ m ¢ > c� a a �u c� E c W G1 N \ O E O N L W N N N O d C E O .0 N L N OI S N N 2 N O Y � U t- O N N � tJ N G ' W T N N O C N 22 Of 22 m � E �m �w ai �w c a m �. c c `a m " V � � � O U N Y N O T � N J L p Y E Y N V T C L C L O N �- E m m N �a �+ N O F 2 ' � N m V N U U � W J J J 2 O 1 1 VI N 3 v �..� � �..�