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10-15-19 Agenda PacketItem 1 . 1 Approval of Reading by Title Only and Waiver of Reading in Full of Ordinances on Agenda. DATE: TO: FROM: CONTACT: City of Poway COUNCIL AGENDA REPORT October 15, 2019 Honorable Mayor and Members of the City Council Aaron Beanan, Director of Finance ·� Stacey Tang, Finance Manager 8f (858)668-4426 or stang@poway.org SUBJECT: Ratification of Warrant Registers for the Periods of September 2, 2019 through September 6, 2019, and September 9, 2019 through September 13, 2019 Summary: The attached warrant register reports for the periods of September 2, 2019 through September 6, 2019, and September 9, 2019 through September 13, 2019, are submitted to the City Council for ratification /approval. Recommended Action: It is recommended that the City Council ratify/approve the attached warrant registers. Discussion: Weekly registers of audited demands are periodically submitted to the City Council by the Finance Director for ratification/approval. Date September 2, 2019 through September 6, 2019 Amount $1,523,974.11 Warrants for amounts in excess of $100,000 for this period include: Warrant I July 2019 Water Purchases Date September 9, 2019 through September 13, 2019 Check Number j 407060 Amount $1,560,817.16 Warrants for amounts in excess of $100,000 for this period include: Warrant Check Number September 2019 Medical Insurance 407121 August 2019 Building Services 407137 Payroll 09/13/19 905275 1 of 20 Amount I $1,191,557.33 Amount $ 215,113.41 $ 113,074.27 $ 550,597.28 October 15, 2019, Item # 1.2 October 15, 2019, Item # 1.2 October 15, 2019, Item # 1.2 October 15, 2019, Item # 1.2 October 15, 2019, Item # 1.2 October 15, 2019, Item # 1.2 October 15, 2019, Item # 1.2 October 15, 2019, Item # 1.2 October 15, 2019, Item # 1.2 October 15, 2019, Item # 1.2 October 15, 2019, Item # 1.2 October 15, 2019, Item # 1.2 October 15, 2019, Item # 1.2 October 15, 2019, Item # 1.2 October 15, 2019, Item # 1.2 October 15, 2019, Item # 1.2 October 15, 2019, Item # 1.2 October 15, 2019, Item # 1.2 October 15, 2019, Item # 1.2 October 15, 2019, Item # 1.2 City of Poway COUNCIL AGENDA REPORT DATE: October 15, 2019 TO: FROM: Honorable Mayor and Members of the City Council Faviola Medina, City Clerk U/\ (858)668-4535 or fmedina@poway.org \ \' \ SUBJECT: Approval of Minutes Summary: The City Council Meeting Minutes submitted hereto for approval are: •September 17, 2019 Regular City Council Meeting Minutes The Poway City Council sits as the Poway Planning Commission, the Poway Housing Authority, the Public Financing Authority, and the Successor Agency to the Poway Redevelopment Agency. Recommended Action: It is recommended that the City Council approve the Minutes as submitted. Public Notification: None. Attachments: A.September 17, 2019 Regular City Council Meeting Minutes Reviewed/ Approved By: Wen�aserman Assistant City Manager 1 of 7 Reviewed By: Alan Fenstermacher City Attorney Approved By: ChrrtJ/k2 City Manager October 15, 2019, Item # 1.3 October 15, 2019, Item # 1.4 October 15, 2019, Item # 1.4 October 15, 2019, Item # 1.4 October 15, 2019, Item # 1.4 October 15, 2019, Item # 1.4 October 15, 2019, Item # 1.4 October 15, 2019, Item # 1.4 October 15, 2019, Item # 1.4 October 15, 2019, Item # 1.4 October 15, 2019, Item # 1.4 October 15, 2019, Item # 1.4 October 15, 2019, Item # 1.4 October 15, 2019, Item # 1.4 October 15, 2019, Item # 1.4 October 15, 2019, Item # 1.4 October 15, 2019, Item # 1.4 October 15, 2019, Item # 1.4 October 15, 2019, Item # 1.4 October 15, 2019, Item # 1.4 October 15, 2019, Item # 1.4 October 15, 2019, Item # 1.4 October 15, 2019, Item # 1.5 DATE: TO: FROM: CONTACT: City of Poway COUNCIL AGENDA REPORT October 15, 2019 Honorable Mayor and Members of the City Counci, A Robert Manis, Director of Development Services f'1'' Brian Banzuelo, Associate Civil Engineer~ (858) 668-4623 or bbanzuelo@poway.org SUBJECT: Award of Contract to L.C. Paving & Sealing, Inc., for the FY 18/19 ADA Barrier Removal -Lake Poway Pat hways Project; Bid No. 20-003 Summary: This item will award a contract for the construction of the FY 18/19 ADA Barrier Removal -Lake Poway Pathways Project to L.C . Paving & Sealing, Inc. Recomme nded Action: It i s recommended that the City Council award the contract for the FY 18/19 ADA Barrier Removal-Lake Poway Pathways Proj ect to L.C. Paving & Sealing , Inc., the lowest responsible bidder, in the amount of $55,265.00. Discussion : The FY 18/19 ADA Barrier Removal -Lake Poway Pathways project is funded through the Community Development Block Grant (CDBG) Program . The County of San Diego manages the program and distributes funds to the City. The project was originally included with the FY 18/19 CDBG program and approved by the City Council on November 21 , 2017 , with the anticipation that funding would be released to the City in July of 2018. The funds were not released to the City until December 5 , 2018. This project consists of rehabi litating the walkway to the existing fishing dock at Lake Poway Park. The project tasks include asphalt restoration to meet ADA accessibility standards. Staff has coordinated the timing of construction for this project w ith Community Services staff in order to minimize disruptions to Lake Poway Park. The contract time for this project is 10 working days with an Engineer's Estimate of $90 ,000.00. Bids were opened on September 25, 2019 . The following five bids were received : Comoa nv Bid Amount Corre cte d Bid Amount L.C . Paving & Sealing , Inc . $55,265.00 AM. Ortega Construction $57,557 .00 $57,64 7.00 Tri-Group Construction $75,895 .00 Blue Pacific Engineering & Construction $95,300.00 Atom Engineering & Construction $103 ,398 .00 1 of 1 1 October 15, 2019, Item # 1.5 A copy of th e Co nstruction Contract is in clu ded as A tt achm ent A . The Contract w ill be executed after the C it y Co un ci l awards th e cont ract as recom mended in t h is re port. Environmental Review: The project is Categorically Exe mpt from the California Env ironment al Quality Act (CEQA) as a Class 1 Cat egorical Exemption , pursuant to Section 15301 of the CEQA Guidelines, in that it inv olv es mino r alterations to existing facilities within an existing City park, pertaining to American with Disabilities Act (ADA) compliance . Fiscal Impact: Funding in the amount of $102 ,637.00 is available in the CDBG FY19 ADA Project-Lake Poway project account (PRK0015) for the award of this contract. Public Notification: None. Attachments: A. Construction Contract Rev iewed/Approved By: -rJ~ l • Wendy ~aserman Assistant City Manager 2 of 11 Reviewed By: A lan Fensterma c her City Attorney Approved By : Ch ~ City Manager October 15, 2019, Item # 1.5 SECTION 8 CONSTRUCTION CONTRACT CITY OF POWAY FY 18/19 ADA BARRIER REMOVAL -LAKE POWAY PATHWAYS PROJECT This Contract made and entered into this 16th day of October 2019, by and between City of Poway, a municipal corporation of the State of California, hereinafter referred to as "City" and L.C. Paving & Sealing, Inc. hereinafter referred to as "Contractor." The City and the Contractor, for the consideration hereinafter named, mutually agree as follows: 1. The complete Contract includes all of the Contract Documents, which are incorporated herein by this reference, and include: a. This Contract b. Contract Addenda c. Contract Change Orders d. Instructions to Bidders, Proposal Requirements and Conditions e. Contract Specifications f. Contract Plans g. General Condition h. Special Conditions i. Standard Specification for Public Works, most current edition 2. The Contract Documents are complementary, and that which is required by one shall be as binding as if required by all. 3. Contractor shall provide and furnish all labor, materials, necessary tools, expendable equipment, and all utility and transportation services required for the following work of improvement: This project includes the construction of Americans with Disabilities Act (ADA) compliant asphalt concrete pathways. The work will include but is not limited to the following: clearing and grubbing, grading, asphalt concrete sidewalk, asphalt concrete berm, and metal handrailing. 4. Contractor agrees to perform all the said work and furnish all the said materials at his own cost and expense that are necessary to construct and complete in strict conformance with Contract Documents and to the satisfaction of the City Engineer, the work hereinafter set forth in accordance with the Contract adopted by the City Council. 3 of 11 ATTAC~rENT A October 15, 2019, Item # 1.5 5. City agrees to pay and Contractor agrees to accept in full payment for performance of this work of improvement as described, the stipulated sum of Fifty-Five Thousand, Two Hundred Sixty Five Dollars ($55,265.00) the "Contract Price." 6. 7. 8. 9. 10. 11. 4 of 11 City agrees to make progress payments and final payment in accordance with the method set forth in the Special Provisions. Contractor agrees to commence construction of the work provided for herein within Fifteen (15) Calendar Days after the date specified in the Notice to Proceed, and to continue diligently in strict conformance with Contract Documents and without interruption, and to complete the construction thereof within Ten (10) Working Days after the date specified in the Notice to Proceed. Time is of the essence of this Contract, and it is agreed that it would be impracticable or extremely difficult to ascertain the extent of actual loss or damage which the City will sustain by reason of any delay in the performance of this Contract. It is, therefore, agreed that Contractor will pay as liquidated damages to the City the following sum: Five Hundred Dollars ($500) per Calendar Day, for each and every Calendar Days delay in finishing the Work in excess of the number of Working Days prescribed above. If liquidated damages are not paid, as assessed by the City, the City may deduct the amount thereof from any money due or that may become due the Contractor under this Contract in addition to any other remedy available to City. By executing this Contract, Contractor agrees that the amount of liquidated damages is reasonable and shall not constitute a penalty. In accordance with State of California Senate Bill No. 854, Contractor will maintain and will require all subcontractors to maintain valid and current Department of Industrial Relations (DIR) Public Works Contractor registration during the term of this project. Contractor shall notify the City in writing immediately, and in no case more than twenty-four (24) hours, after receiving any information that Contractor's or any of its Subcontractor's DIR registration status has been suspended, revoked, expired, or otherwise changed. Contractor will pay, and will require all subcontractors to pay, all employees on said Contract a salary or wage at least equal to the prevailing salary or wage established for such work as set forth in the wage determinations and wage standards applicable to this work, a copy of which is on file in the office of the City Clerk of the City of Poway. Federal prevailing wage rates apply for federally funded· projects. Travel and subsistence pay shall be paid in accordance with Labor Code § 1773.1. Contractor shall be subject to the penalties in accordance with Labor Code of § 1775 for each worker paid (either by him or by any subcontractors under him) less than the prevailing rate described above on the work provided for in this Contract. Contractor and subcontractors shall comply with Labor Code § 1810 and § 1811 which stipulates that eight hours labor constitutes a legal day's work, and § 1812 which stipulates that the Contractor and subcontractors shall keep an accurate record showing the name of and actual hours worked each calendar day and each calendar week by each worker employed by him in connection with the work performed under the terms of the Contract. Failure to comply with these sections of 23 October 15, 2019, Item # 1.5 the Labor Code will subject the Contractor to penalty and forfeiture provisions of the Labor Code§ 1813. 12. Contractor will comply with the provisions of Labor Code§ 1777 .5 pertaining to the employment of apprentices to the extent applicable to this Contract. 13. Contractor, by executing this Contract, hereby certifies: "I am aware of and will comply with the Labor Code § 3700 by securing payment for and maintaining in full force and effect for the duration of the contract, complete Workers' Compensation Insurance, and shall furnish a Certificate of Insurance to the City before execution of the Contract. The City, its officers, or employees, will not be responsible for any claims in law or equity occasioned by failure of the Contractor to comply with this paragraph." Contractor further agrees to require all subcontractors to carry Workers' Compensation Insurance as required by the Labor Code of the State of California. 14. Contractor shall, concurrent with the execution of this Contract, furnish two bonds approved by the City, one in the amount of One Hundred Percent (100%) of the Contract Price, to guarantee the faithful performance of the work ("Performance Bond"), and one in the amount of One Hundred Percent (100%) of the Contract Price to guarantee payment of all claims for labor and materials furnished ("Payment Bond"). This Contract shall not become effective until such bonds are supplied to and approved by the City. 15. a. Contractor shall procure and maintain at its own expense, until completion of 5 of 11 performance, commercial general liability insurance of not less than One Million Dollars ($1,000,000) combined single limit per occurrence, and Two Million Dollars ($2,000,000) in the aggregate, for bodily injury, personal injury, death, loss or damage resulting from the wrongful or negligent acts by the Contractor or its officers, employees, servants, volunteers and agents and independent contractors. Contractor shall provide insurance on an occurrence, not claims-made basis. Contractor acknowledges and agrees that, for purposes of clarification with the intention of avoiding gaps in coverage with any umbrella or excess insurance, personal and advertising injury coverage shall be triggered by an "offense" while bodily injury and property damage coverage shall be triggered by an "occurrence" during the policy period. b. Contractor shall further procure and maintain at its own expense, until completion of performance, commercial vehicle liability insurance covering personal injury and property damage, of not less than One Million Dollars ($1,000,000) combined single limit per occurrence, and Two Million Dollars ($2,000,000) in the aggregate, covering any vehicle utilized by Contractor or its officers, employees, servants, volunteers and agents and independent contractors in performing the services required by this Agreement. c. Contractor shall further procure and maintain at its expense, until completion of performance, workers' compensation insurance providing coverage as required 24 October 15, 2019, Item # 1.5 16. 6 of 11 by the California State Workers' Compensation Law. If any class of employees employed by the Contractor pursuant to this Agreement is not protected by the California State Workers' Compensation Law, Contractor shall provide adequate insurance for the protection of such employees to the satisfaction of the City. This provision shall not apply if Contractor has no employees performing work under this Agreement. Contractor agrees to waive its statutory immunity under any worker's compensation or similar statute, as respecting the City, and to require any and all subcontractors and any other person or entity involved with the Project to do the same. Worker's Compensation Insurance: o Contractor has no employees and is exempt from workers' compensation requirements. o Contractor carries workers' compensation insurance for all employees. d. All policies required by this section shall be secured from insurers authorized to do business in the State of California with an "A" policyholder's rating or better and a financial rating of at least Class VI I, in accordance with the current Best's Ratings. e. Contractor agrees to require that all parties, including but not limited to subcontractors, architects, engineers or others with whom Contractor enters into contracts or whom Contractor hires or retains pursuant to or in any way related to the performance of this Agreement, provide the insurance coverage required herein, at minimum, and, except for worker's compensation coverage, name as additional insureds the parties to this Agreement. Contractor agrees to monitor and review all such coverage and assumes all responsibility for ensuring that such coverage is provided in conformity with the requirements of this Section. f. In the event this Agreement is terminated for any reason prior to the completion of all obligations and requirements of this Agreement, Contractor agrees to maintain all coverages required herein until the City provides written authorization to terminate the coverages following the City's review and determination that all liability posed under this Agreement as to the party providing insurance has been eliminated. g. Contractor agrees and acknowledges that if it fails to obtain all of the insurance required in this Agreement in accordance with the requirements herein, or to obtain and ensure that the coverage required herein is maintained by any subcontractors or others involved in any way with the Project, Contractor shall be responsible for any losses, claims, suits, damages, defense obligations, or liability of any kind or nature attributable to the City, and/or its officers, employees, servants, volunteers, agents and independent contractors, that result from such failure by Contractor. a. Contractor shall provide certificates of insurance with original endorsements to the City as evidence of the insurance coverage required herein. Certificates of such insurance shall be filed with the City on or before commencement of performance of this Agreement. Current certification of insurance shall be kept on 25 October 15, 2019, Item # 1.5 17. 18. 7 of 11 file with the City at all times until completion of performance and acceptance by the City. b. Notwithstanding any inconsistent statement in any required insurance policies or any subsequent endorsements attached thereto, the commercial general liability and commercial vehicle liability policies shall bear endorsements whereby it is provided that the City, and its officers, employees, servants, volunteers, agents and independent contractors are named as additional insureds. Additional insureds shall be entitled to the full benefit of all insurance policies in the same manner and to the same extent as any other insureds and there shall be no limitation to the benefits conferred upon them other than policy limits to coverages. c. Contractor shall require the carriers of all required insurance policies to waive all rights of subrogation against the City, and its officers, employees, servants, volunteers, agents and independent contractors. d. Each policy required herein must be endorsed to provide that the policy shall not be cancelled in coverage or limits (except by paid claims) unless the insurer has provided the City with 30 days prior written notice of cancellation. Contractor agrees to provide the City with 30 days written notice prior to any non-renewal or reduction in coverage or limits. e. All insurance policies required to be provided by Contractor or any other party must be endorsed to provide that the policies shall apply on a primary and noncontributing basis in relation to any insurance or self-insurance, primary or excess, maintained or available to the City, and its officers, employees, servants, volunteers, agents and independent contractors. a. Contractor shall defend, indemnify and hold harmless the City, its officers, officials, agents, employees and volunteers from and against any and all claims, demands, actions, losses, damage, injuries, and liability, direct or indirect (including any and all costs and expenses in connection therewith) to the extent actually caused by the negligence of Contractor, Contractor's employees, subcontractors or independent contractors except for any such claim arising out of the negligence or willful misconduct of the City, or its officers, agents, employees or volunteers. b. The City does not, and shall not, waive any rights that it may have against Contractor under this Section because of the acceptance by the City, or the deposit with the City, of any insurance policy or certificate required pursuant to this Agreement. The hold harmless, indemnification and duty to defend provisions of this Section shall apply regardless of whether or not said insurance policies are determined to be applicable to the claim, demand, action, damage, liability, loss, cost or expense described herein. Any amendments to any of the Contract Documents, including but not limited to Contract Change Orders, must be in writing executed by the Contractor and the City. Any time an approval, time extension, or consent of the City is required under the Contract Documents, such approval, extension, or consent must be in writing in order to be effective. 26 October 15, 2019, Item # 1.5 19. The Contract Documents contain all of the agreements and understandings of the parties and all previous understandings, negotiations, and contracts are integrated into and superseded by this Contract. 20. In the event that any one or more of the phrases, sentences, clauses, paragraphs, or sections contained in this Contract shall be declared invalid or unenforceable by a valid judgment or decree of a court of competent jurisdiction, such invalidity or unenforceability shall not affect any of the remaining phrases, sentences, clauses, paragraphs, or sections of this Contract which are hereby declared as severable and shall be interpreted to carry out the intent of the parties hereunder. 21. The persons executing this Contract on behalf of the parties hereto warrant that they are duly authorized to execute this Contract on behalf of said parties and that, by so executing this Contract, the parties hereto are formally bound to the provisions of this Contract. 22. This Contract shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors, and assigns. 23. 24. 25. 26. 27. 8 of 11 In performing its obligations and duties under this Contract, each party shall comply with all applicable local, state, and federal laws, regulations, rules, standards and ordinances. This Contract may be executed by the parties in counterparts, which counterparts shall be construed together and have the same effect as if all of the parties had executed the same instrument. After completion of the work contemplated by this Contract, Contractor shall file with the City Manager an affidavit stating that all workers and persons employed, all firms supplying materials, and all subcontractors upon the project have been paid in full, and that there are no claims outstanding against the project for either labor or materials, except certain items, if any, to be set forth in an affidavit covering disputed claims or items in connection with a Stop Notice that has been filed under the provision of the laws of the State of California. All work shall be subject to inspection and testing by City and its authorized representatives during manufacture and construction and all other times and places, including, without limitation, the plans of Contractor and any of its suppliers. Contractor shall provide all reasonable facilities and assistance for the safety and convenience of inspectors. All inspections and tests shall be performed in such manner as to not unduly delay the work. The Work shall be subject to final inspection and acceptance notwithstanding any payments or other prior inspections. Such final inspection shall be made with a reasonable time after completion of the work. Whenever Contractor has knowledge that any actual or potential labor dispute is delaying or threatens to delay the timely performance of the Contract, Contractor shall immediately give notice thereof, including all relevant information with respect thereto, to City. 27 October 15, 2019, Item # 1.5 28. Contractor agrees to contact the appropriate regional notification center in accordance with Government Code Section 4216.2. 29. Contractor shall submit its detailed plan for worker protection during the excavation of trenches required by the scope of the work in accordance with Labor Code Section 6705. 30. 31. 32. 9 of 11 a. Contractor shall, without disturbing the condition, notify City, in writing, as soon as Contractor, or any of Contractor's subcontractors, agents, or employees have knowledge and reporting is possible, of the discovery of any of the following conditions: i. The presence of any material that Contractor believes is hazardous waste, as defined in Section 25117 of the Health and Safety Code: ii. Subsurface or latent physical conditions at the site differing from those indicated in the specifications: or iii. Unknown physical conditions at the site of any unusual nature, different materially for those ordinarily encountered and generally recognized as inherent in work of the character provided for in this Contract. b. Pending a determination by City of appropriate action to be taken, Contractor shall provide security measures (e.g., fences) adequate to prevent the hazardous waste or physical conditions from causing bodily injury to any person. c. City shall promptly investigate the reported conditions. If City, through and in the exercise of its sole discretion, determines that the conditions do materially differ or do involve hazardous waste, and will cause a decrease or increase in Contractor's cost of, or time required for, performance of any part of the work, then City shall issue a change order. d. In the event of a dispute between City and Contractor as to whether the conditions materially differ, or involve hazardous waste, or cause a decrease or increase in Contractor's cost of, or time required for, performance of any part of the work, Contractor shall not be excused from any scheduled completion date, and shall proceed with all work to be performed under the contract. Contractor shall retain any and all rights that pertain to the resolution of disputes and protests between the parties. This Contract is to be governed by the laws of the State of California. All work shall be guaranteed for a period of one (1) year from the date of acceptance by the City. Contractor shall promptly make all needed repairs arising out of defective materials, workmanship, and equipment. 28 October 15, 2019, Item # 1.5 City is hereby authorized to make such repairs if within ten (10) days after giving written notice to Contractor, or its agent, Contractor should fail to make or undertake with due diligence the aforesaid repairs; provided, however, that in case of an emergency, where, in the opinion of City, delay would cause serious loss or damage, repairs may be made without notice being sent to Contractor, and Contractor shall pay the costs thereof. (Remainder of page intentionally left blank) 10 of 11 29 October 15, 2019, Item # 1.5 IN WITNESS WHEREOF, the said Contractor and the Director of Public Works, City Manager Mayor and City Clerk of the City have caused the names of said parties to be affixed hereto, the day and year first above written. Contractor's Name: Print Name of Construction Company By: Signature Print Name Contractor information: Address for Notices and Payments Telephone Number: Email: ATTEST: City Clerk APPROVED AS TO FORM: RUTAN & TUCKER, LLP 11 of 11 CITY OF POWAY a Municipal Corporation City Manager of the City of Poway 30 October 15, 2019, Item # 4.1 DATE: TO: FROM: CONTACT: SUBJECT: Summary: City of Poway COUNCIL AGENDA REPORT October 15, 2019 Honorable Mayor and Members of the City Council OJA Robert J. Manis, Director of Development Services F' y Tom Frank, City Engineer 7'F (858) 668-4603 or tfrank@poway.org Aaron Beanan, Director of Finance 11:, (858) 668-4411 or abeanan@poway.org Brenda Sylvia, Director of Community Service~ (858) 668-4585 or bsylvia@poway.org ~ Award of Contract to EC Constructors, Inc. for the Mickey Cafagna Community Center Project; Bid No . 20-004 This item will award a contract for the construction of the Mickey Cafagna Community Center Project to EC Constructors, Inc. Recommended Action: It is recommended that the City Council award the contract to EC Constructors, Inc. for the Mickey Cafagna Community Center Project; Bid No. 20-004 for either 1) the base bid (Hybrid floorplan) in the amount of $8,575 ,595 or 2) the base bid plus additive alternate 1 (Hybrid Plus floorplan), for a total bid amount of $9,859,559. Discussion: On February 19, 2019, the City Council appropriated funds to p rovide sufficient funding for the Mickey Cafagna Community Center Project based upon the construction cost estimates for a new 18,082 square-foot community center (referred to as the Hybrid floorplan as shown i n Attachment A) and directed staff to include the larger 22,587 square-foot building (refe rred to as the Hybrid Plus floorplan as shown in Attachment 8) as an additive option in the bid documents . The Hybrid floorplan is designed so that it could be expanded to the Hybrid Plus floo rp lan in the future. The Mickey Cafagna Community Center w ill be a shared use, multi-generational facility that will serve the community for many years to come. The building 's more efficient, flexible design will allow for diverse programming and use throughout the day, by all ages and all segments of the community. The new community center will continue to house City programming and the Poway Senior Center, though the design of the building is geared toward flexible shared space, as opposed to space dedicated exclusively to specific programming . A notice inviting bids for the project was initially advertised on June 6 and 13, 2019 and one bid was received at the bid opening on July 29, 2019. The bid received was $8,590 ,790 for the Hybrid floorplan and $9 ,743,984 for the Hybrid Plus floorplan . While the bid was below the engineer's estimate, it is prudent to obtain more than one bid on a project of this magn itude to ensure a competitive low bid . For this reason, the City Council rejected the bid and directed staff to re- advertise the project. 1 of 25 October 15, 2019, Item # 4.1 Several contractors who planned to submit on the earlier bid indicated that they did not submit due to a self-performance provision in the bid documents. This provision is commonly used in bid documents for cities in Southern California and requires the general contractor to perform a specified percentage of the contract work through his/her company. This requirement proved to be difficult to meet with this type of construction project. When the project was re-advertised, the bid documents were revised to remove the self-performance provision. A new notice inviting bids was duly advertised on August 29 and September 5, 2019. Ten general contractors attended a mandatory pre-bid meeting on September 10, 2019. Three addendums were issued during the bidding process which addressed questions received from prospective bidders and provided additional specifications. A few of the more significant issues addressed in the addendums included lowering the subcontractor's insurance liability limits to $1,000,000 per occurrence and $2,000,000 aggregate, streamlining subcontractor information required in the bid per California Public Contract Code section 4104, and providing specifications for resilient flooring and accessories. The engineer's estimate is $10,176,527 for the Hybrid floorplan and $11,599,311 for the Hybrid Plus floorplan. The low bid was specified to be based on the base bid. Bids were opened on September 19, 2019. The following eight bids were received: Company Base Bid Additive Alternate 1 Total Bid Amount EC Constructors, Inc. $8,575,595 $1,283,964 $9,859,559 Conan Construction, Inc. $8,602,340 $1,387,000 $9,989,340 Prava Construction $8,649,159 $1,228,162 $9,877,321 Southwest Construction $8,703,129 $1,479,196 $10,182,325 Barnhart-Reese $8,826,847 $1,063,515 $9,890,362 Peter Vander Werff Constr., Inc. $9,100,000 $1,100,000 $10,200,000 Cannon Constructors $9,502,196 $1,455,000 $10,957,196 Fast-Track Construction $12,492,000 $1,600,000 $14,092,000 On September 20, 2019, a letter of protest was submitted by the second lowest bidder, Conan Construction, Inc., regarding the City's determination of the lowest bidder (Attachment C). After review of the protest by the City Attorney, the City has found no reason to find that EC Constructors, Inc. 's (ECC) bid is nonresponsive as outlined in the response letter from the City (Attachment D). The lowest bidder, ECC, is recommended for the award of contract. The project's remaining budget is $11,867,596 and is sufficient to fund either the award of the Hybrid or the Hybrid Plus floorplans. In addition to the construction contract, additional construction costs include furniture, fixtures, equipment, utility connection fees, construction management, special inspections, and a 10% construction contingency. This brings the totals to $10,356,155 for the Hybrid floorplan and $11,768,515 for the Hybrid Plus floorplan. Including all of these items, the current project budget shows an estimated surplus of $1,511,441 if the City Council awards the Hybrid floorplan and $99,081 if the City Council awards the Hybrid Plus floorplan. These unallocated funds are in addition to the 10% construction contingencies included in the total costs. This is illustrated in the table below. The demolition and construction of City building facilities are challenging projects and the total project cost and remaining balance will only be determined when the project construction is complete, and all associated expenditures are logged. 2 of 25 October 15, 2019, Item # 4.1 Hybrid Floorplan Hybrid Plus Floorplan Bid $8,575,595 $9,859,559 Additional Construction Expenditures $871,500 $871,500 Construction Contingency $909,060 $1,037,456 TOTAL $10,356,155 $11,768,515 Remaining Budget $1,511,441 $99,081 The floorplan chosen will have an effect on operations, operating costs and potential revenue. The annual net operating cost (expenditures minus revenue) of the existing facility is approximately $599,000, versus $598,000 for the Hybrid floorplan and $567,000 for the Hybrid Plus floorplan. The future revenue estimates for the Hybrid and Hybrid Plus floorplans are based upon current fees. Prior to the completion of the new community center, staff anticipates presenting revised fees to the City Council that will incorporate a higher level of cost recovery. The operating costs of the Hybrid Plus floorplan are projected to be slightly less than the Hybrid floorplan because with the larger facility there is greater opportunity to generate revenue from programming and facility rentals. There are no additional staff costs associated with selecting either floorplan. From an operations perspective if the Hybrid floorplan were to be selected, some existing City programming and revenue would be compromised to accommodate the Senior Center's high-impact programs, including bingo. The Hybrid Plus floorplan would allow both Senior Center and City programming to be maintained and expanded. As the City Council contemplates which floorplan to select and the potential surplus associated with each option, staff thought it was prudent to include information about the issues on the budget horizon that were discussed during the presentation of the FY 2019-20 budget on June 18, 2019. Many of the projects and issues described during the City Council meeting remain unresolved and have the potential to significantly impact the General Fund. Notable projects include the completion of the Espola Road Safety Improvement Project, the City's share of costs in addressing the Los Periasquitos Watershed Management Area Water Quality Improvement Plan and Comprehensive Load Reduction Plan and potential future expenditures related to the Landscape Maintenance Districts (LMDs). The City is also still in the process of appealing a recent decision by the State to redistribute sales tax dollars received in 2005 in a manner that would adversely impact the City. Because the issue involves a single taxpayer, most details of this are confidential. While it is possible the City's undesignated fund balance could fund some of these items, the total current estimated costs of these items exceed the current projections for undesignated fund balance. In addition to these large pending projects costs, Poway, like all California cities, faces rising pension costs for the foreseeable future that will continue to put more and more pressure on the City's operating budget. At the September 18, 2018 City Council workshop on the California Public Employees' Retirement System (PERS) Actuarial Analysis, the Council expressed an interest in identifying funds to both pay down some of the City's unfunded pension liability, as well as potentially establish an IRS Section 115 trust to help mitigate the impact of rising pension costs on the operating budget. Based on current projects and issues on the horizon, staff has not yet identified funds to pursue either of these options. Aside from the Poway specific projects and issues identified above, the City is anticipating more challenging financial conditions as more than 70% of economists surveyed by the National Association for Business Economics in August expect an end to the longest economic expansion in American history before the end of 2021. These are all factors the City Council may wish to consider in its decision-making process. A copy of the Construction Contract is included as Attachment E. The Contract will be executed after the City Council selects the floorplan and awards the contract as recommended in this report. 3 of 25 October 15, 2019, Item # 4.1 Environmental Review: On May 15, 2018, the City Council determined that this project is categorically exempt from the California Environmental Quality Act (CEQA) as a Class 2 Categorical Exempt ion , pursuant to Section 15302 of the CEQA Guidelines, in that the project involves replacement of an existing building with a smaller building in the same location that will have substantially the same purpose and capacity of the building that will be replaced. A Notice of Exemption was filed with the County Recorder on May 16, 2018. Fiscal I mpact: Funding in the amount of $11,867,596 is available in the CIP Project Account BDG0001 and is sufficient to award either the base bid (Hybrid floorplan) or the base bid plus the additive alternate 1 (Hybrid Plus floorplan). Any funds remaining upon completion of the project will be available to reprogram towards another need. Public Notification: None. Attachments: A. Hybrid Floorplan B. Hybrid Plus Floorplan C. Conan Construction, Inc., Letter of Protest (September 20, 2019) D . City Response Letter (September 26, 2019) E. Construction Contract Reviewed/Approved By: Wendy aserman Assistant City Manager 4 of 25 Reviewed By: Alan Fenstermacher City Attorney Approved By: Ch~ City Manager October 15, 2019, Item # 4.1 D2'.o1 ~~~1~R PtAN-OVERALL q) ~ ~~ ~ Q ~~ ~ ~ , , ' ' I I ' I I I 0----+-------+----------------------------F~f i:=-~~~=~=--=-\------------·-·c=-=-~-~=-i=-}~1-------------------i-------i-------0 ! i : i i i I : i i G>----+------.+----------------------------f--L . . __ 1~--\-------------------\-------\-------0 i i i : ! i i i ! ! i W~~K~M ! ~ ! ! ! ! i ! @IJ ELEC -r·-----------------(---·--r-------© I I . I SENIORSTAFF !Jill . 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I · I I I · Lf----·+·-------·-------·------·-----~---•i-~ I I ' ' ' ! 0 0 0 -~2~ ,J ~~lt;~~•-~:RALL R.OOR PLAN r.o.!:S'ii-;G ~00,.._ ~ oun::.oc-~ PAHO ii Ulill!!.ULJ • y I f::" i f'! ·r·---0 MULTIPURPOSE ROOM ~ l'tUMBING CHASE MEN"S ---+-----H-•11:ESTROOM lillfl ! I i i i ~ I i I I i i 1----·-_c_:;-----0 d0 ~ CONSTRUCTION NOTES NOT FOR CONSTRUCTION NW _o:: :::::, "1-~rn ~!i -, • Project MCl<:EY CAFAGNA COMMUNITY CENTER 13094CivicC&nlerOr. t-------------t P=y,CA92064 NOTES :.1.-.1••lC:.~IEEL CDP• •EP C,LJ~~c,s. ;,p L' L E'~lERIC ... COF'l•f~Qr, 1r1IEMRO 8UllOlrl(; WALL LEGEND ==2':4STU0WALL c:::::::::::::i 2':6STUOWALL -= 2':-4STUO WAU-1 HOUR RATED """""" 2x6 STUD WALL-1 HOUR RATED Description l~~~TIC 06/28/1 ~~l~~~~ 08/'23/1 iSO,, 10/22/l CONSTRUCTION DOCUMENTS NOT FOR CONSTRUCTION BID ALT-OVERALL FLOOR PLAN A2.l October 15, 2019, Item # 4.1 Via Email to Hossein Azar (h~.£!rC@,poway.org) 9/20/19 City of Poway 13325 Civic Center Dr Poway, CA 92064 Re: Bid Protest-Mickey Cafagna Community Center Bid Dear Mr. Azar, This letter serves as Conan Construction Inc.'s ("Conan") bid protest as to EC Contructors Inc. , the respective low bidder for the above-referenced bid. Conan protests the bid as nonresponsive and directs the City of Poway to the details set forth below. Under California Public Contract Code, Division 2. General Provisions, Part I. Chapter 4. Subsection 4106, a prime contractor is responsible to list all subcontractors for the portion of work to be performed under said contract in excess of one-half of 1 percent of the prime contractor's total base bid. EC Contractors Inc. has failed to provide listing for the fo11owing trades. • Food Service Equipment • Access Control • Video Surveillance • Voice & Data • Toilet Partition and Accessories • Ceramic Tile If a prime contractor fails to specify a subcontractor for portion of work to be performed under the contract in excess of one-half of 1 percent of the prime contractor's total bid, the prime contractor agrees that he or she is fully qualified to petform that portion himself or herself, and that the prime contractor shall perform that portion himself or herself However, EC Contractors does not hold specialty contractor licenses (see attached from CSLB web site) to perform above listed trades. Specifically, Food Service Equipment installers should be licensed to install Ansul system as well as the Hood System at Kitchen. Additionally, in order to perform the access control or video surveillance services, contractor needs to hold specialty licenses and be certified 5937 Darwin Ct., Ste. 103, Carlsbad, CA 92008 I Tel: 760.512.1188 • Fax: 619.330.4834 www .ConanConstruction.com 7 of 25 ATTACHMENT C October 15, 2019, Item # 4.1 installer of that specific system. EC Constructors Inc. does only hold License A, B and C-8, not any specialty licenses listed above. (see attached CSLB -Description of Classifications) If after award of contract, the prime contractor subcontracts any such portion of the work, the prime contractor shall be subject to the penalties named in California Public Contract Code, Division 2. General Provisions, Part 1. Chapter 4. Section 4111. Due to the above noted deficiencies, Conan respectfully requests that the City of Poway reject the bid of E C Constructors as nonresponsive. Conan Construction 8 of 25 5937 Darwin Ct., Ste. 103, Carlsbad, CA 920081 Tel: 760.512.1188 • Fax: 619.330.4834 www.ConanConstruction.com October 15, 2019, Item # 4.1 9/20/2019 Law section Home Bill Information California Law Publications Other Resources My Subscriptions My Favorites Code: Select Code ,. Section: Search CD ~ < < Previous ~ PUBLIC CONTRACT CODE • PCC cross-reference chaptered bills W I Add To Mv: Favorites Search Phrase: DIVISION 2. GENERAL PROVISIONS (1100 -22355] ( Division 2 enacted by Stats. 1981, Ch. 306.) I Highlight I PART 1. ADMINISTRATIVE PROVISIONS (1100 • 9203] ( Heading of Part 1 added by Stats. 1982, Ch. 1120, Sec. 2. ) CHAPTER 4. Subletting and Subcontracting (4100 -4114] ( Chapter 4 added by Stats. 1986, Ch. 195, Sec. 42.1.) 4106. If a prime contractor fails to specify a subcontractor or if a prime contractor specifies more than one subcontractor for the same portion of work to be performed under the contract in excess of one-half of 1 percent of the prime contractor's total bid, the prime contractor agrees that he or she is fully qualified to perform that portion himself or herself, and that the prime contractor shall perform that portion himself or herself. If after award of contract, the prime contractor subcontracts, except as provided for in Sections 4107 or 4109, any such portion of the work, the prime contractor shall be subject to the penalties named in Section 4111. (Added by Stats. 1986, Ch_._1_9_5_, _S_ec_._4_2_.1_.) _________ ~- 9 of 25 https://leginfo.legislature .ca .gov/faces/codes_ displaySection.xhtml?sectionNum=4106 .&lawCode=PCC 1/1 October 15, 2019, Item # 4.1 CONTRACTORS STATE LICENSE BOARD California Department of Consumer Affairs 10 of 25 October 15, 2019, Item # 4.111 of 25 DESCRIPTION OF CSLB LICENSE CLASSIFICATIONS The California Contractors State License Board (CSLB) issues licenses to contract in particular trades or fields of the construction profession. Each separate trade is recognized as a "classification." Licensed contractors may add any classification for which they are qualified, upon application and examination. General contractor classification statutes are cited from California Business and Professions Code (BPC) sections 7056-7059. CSLB issues licenses for the following classifications: Class "A" -General Engineering Contractor The principal business is in connection with fixed works requiring specialized engineering knowledge and skill. Class "B" -General Building Contractor The principal business is in connection with any structure built, being built, or to be built, requiring in its construction the use of at least two unrelated building trades or crafts. Class "C" -Specialty Contractor There are 42 separate "C" license classifications for contractors whose construction work requires special skill and whose principal contracting business involves the use of specialized building trades or crafts. GENERAL CONTRACTORS "A" General Engineering A general engineering contractor is a contractor whose principal contracting business is in connection with fixed works requiring specialized engineering knowledge and skill, including the following divisions or subjects: irrigation, drainage, water power, water supply, flood control, inland water ways, harbors, docks and wharves, shipyards and ports, dams and hydroelectric projects, levees, river control and reclamation works, railroads, highways, streets and roads, tunnels, airports and airways, sewers and sewage disposal plants and systems, waste reduction plants, bridges, overpasses, underpasses and other similar works, pipelines and other systems for the transmission of petroleum and other liquids or gaseous substances, parks, playgrounds and other recreational works, refineries, chemical plants and similar industrial plants requiring specialized engineering knowledge and skill, powerhouses, power plants and other utilities plants 1 October 15, 2019, Item # 4.1 CSLB DESCRIPTIOl\l OF CLASSIFICATIONS and installations, mines and metallurgical plants, land leveling and earthmoving projects, excavating, grading, trenching, paving and surfacing work, and cement and concrete works in connection with the above mentioned fixed works. (BPC §7056) 11 B" General Building (a) A general building contractor's principal contracting business is in whole or partial connection with any structure built, being built, or to be built, for the support, shelter and enclosure of persons, animals, chattels, or moveable property of any kind requiring in its construction the use of at least two unrelated building trades or crafts, or to superintend the whole or any part thereof. This does not include anyone who merely furnishes materials or supplies under Section 7045 without fabricating them into, or consuming them in the performance of the work of the general A general building contractor may take a prime contract or a subcontract for a framing or carpentry project. However, a general building contractor shall not take a prime contract for any project involving trades other than framing or carpentry unless the prime contract requires at least two unrelated building trades or crafts other than framing or carpentry, or unless the general building contractor holds the appropriate license classification or subcontracts with an appropriately licensed contractor to perform the work. A general building contractor shall not take a subcontract involving trades other than framing or carpentry, unless the subcontract requires at least two unrelated trades or crafts other than framing or carpentry, or unless the general building contractor holds the appropriate license classification. The general building contractor may not count framing or carpentry in calculating the two unrelated trades necessary in order for the general building contractor to be able to take a prime contract or subcontract for a project involving other trades. Fire Protection classification as provided for in Section 7026.12 or the "C-57" Well Drilling classification as provided for in Section 13750.5 of the Water Code, unless the general building contractor holds the appropriate license classification, or subcontracts with the appropriately licensed contractor. (BPC §7057) 2 CALIFORNIA CONTRACTORS STATE LICENSE BOARD f2 of 25 October 15, 2019, Item # 4.1 1)$'.M®.'fM'f:NW Of (011\tHJMU All1f.4DU CONTRACTOR!l;onsumers Licensees Applicants Online Services Media Resources STATE LICENSE BOARD Home I Online Services I License Details □ Contractor's License Detail for License # 585677 DISCLAIMER: A license status check provides information taken from the CSLB license database. Before relying on this information, you should be aware of the following limitations. (hide/show disclaimer) u CSLB complaint disclosure is restricted by law (B&P 7124.6) If this entity is subject to public complaint disclosure, a link for complaint disclosure will appear below. Click on the link or button to obtain complaint and/or legal action information. Per B&P 7071.17, only construction related civil judgments reported to the CSLB are disclosed. Arbitrations are not listed unless the contractor fails to comply with the terms of the arbitration. Due to workload, there may be relevant information that has not yet been entered onto the Board's license database. - ----Business Info J1'1'1 alien -,-~ - " -- E C CONSTRUCTORS INC 9834 RIVER STREET LAKESIDE, CA 92040 Business Phone Number:(619) 440-7181 Entity Corporation Issue Date O 1/18/1990 Reissue Date 02/0712006 Expire Date 02/29/2020 = : _-: -~ l...i oe n se Stam s ~-~ ---- ------ cc-_ ---__ - This license is current and active. 13 of 25 B October 15, 2019, Item # 4.1 All information below should be reviewed. t - = ----_ ijhissifliatimns -cc --_ -; c;;c= -=---=--_: == ----= ~--- 8 -GENERAL BUILDING CONTRACTOR C-8 -CONCRETE '" A -GENERAL ENGINEERING CONTRACTOR -- _ _ =-~ -cc ~ _ -Bonaing lnf-orr-nalior-f ~ -~~ ~~ _ -_ - -~--" ---- This license filed a Contractor's Bond with AMERICAN CONTRACTORS INDEMNITY COMPANY. Bond Number: 100054961 Bond Amount: $15,000 Effective Date: 01/01/2016 Contractor's Bond History The qualifying individual JAMES JEROME SUMMERS certified that he/she owns 10 percent or more of the voting stock/membership interest of this company; therefore, the Bond of Qualifying Individual is not required. Effective Date: 09/20/2016 BQl's Bond History This license has workers compensation insurance with the REDWOOD FIRE AND CASUAL TY INSURANCE CO Policy Number:ECWC011530 Effective Date: 05/01/2019 Expire Date: 05/01/2020 Workers' Compensation History 14 of 25 October 15, 2019, Item # 4.1 STEVE Vr\US, Mayor DAVE GROSCH, Deputy Mayor CA )1,IN Fllr\NI<, Councilmembcr BARRY LEON,\RD, Councilmcmbcr JOHN MULLIN, Cmmcilmcmbcr September 26, 2019 CITY OF POWAY Pelin Karakas, Vice President Conan Construction 5937 Darwin Ct. Suite 103 Carlsbad, CA. 92008 Subject: Bid Protest-Mickey Cafagna Community Center Bid No. 20-004 Dear Ms. Karakas: This letter is in response to your letter, submitted on behalf of Conan Constructions ("Conan") dated September 20, 2019 regarding the subject project. The City forwarded your letter to EC Constructors, Inc. ("ECC") and reviewed the claims presented in your letter. Based on both the City's independent evaluation of ECC's bid documents and its review of ECC's response (enclosed herewith for you reference), the City has found no reason to find that ECC's bid is nonresponsive, contrary to the position taken in your letter. I also note that th·e bid submitted by Conan was incomplete, as the category "Bid Item No. 1" was not completed, which would potentially justify a determination that Conan's bid is nonresponsive. However, the City has not made that determination. If you have any questions or concerns, please feel free to contact me at (858) 668-4602 or hazar@poway.org. Sincerely, DEVELOPMENT SERVICES DEPARTMENT H~&v-~~-J~&-V Hossein Azar, P.E. l) Construction Project Manager Encl. ECC response letter c: Robert J. Manis, Director of Development Services Alan Fenstermacher, City Attorney Tom Frank, City Engineer C:\Users\2523\AppData\Local\Tcmp\s3gjy4tm\Response to Conan Construction 9-26-19.docx 15 of 25 City Hall Located at 1.33 25 Civic Center Drive Mailing Address: P.O. Box 789, Poway, California 92074,0789 vArtTi~~~TD October 15, 2019, Item # 4.1 B 0 OoNSTRUCTORS I:n.c. LICENSE NO. 158567'7 9834 River Street Lakeside, CA 92040 (619) 440-7181 Fax (619) 440-7180 EOE September 26, 2019 City of Poway SENT VIA EMAIL ONLY 13325 Civic Center Drive Poway, CA 92064 Attn: Hossein Azar Ref: Mickey Cafagna Community Center Subject: Response to Conan Construction Protest Letter Mr. Azar, This letter is written in response to protest letter dated 9/20/19 from Conan Construction to City of Poway. ECC received the letter via email 9/24/19. Below is ECC response to the subcontractor listing issues raised by Conan: • Food Service Equipment will be done by F.S.E with a total subcontract value of $25,000 which is less than½ of 1 % of our bid value and therefore not required by bid documents or Public Contract Code to be listed. • Access Control, Video Surveillance, & Voice Data are all being performed by listed subcontractor, Time & Alarm. This subcontractor was listed as "Structured Cable and Low Voltage 11 to encompass all the various portions of low voltage system work, except Fire Alarm, which we listed separately. Each individual component of the low voltage systems identified by Conan would be valued at less than ½ of 1 % of our bid but collectively, the value required us to list a subcontractor for these low voltage systems. • Toilet Partitions & Accessories work on its own is valued at less than½ of 1 % and therefore would not require listing per PCC. However, ECC listed Caldwell Specialties for "Misc. Specialties" which includes this work and other specialty items to be performed by Caldwell which made their total subcontract value over½ of 1 % of our bid value. • Ceramic Tile will be done by Continental Marble and Tile with a total value of $37,184 which is less than ½ of 1 % of our bid and therefore not required by PCC to be listed. ECC followed the requirements of the Contract Documents and Public Contract Code in the bidding of the project. We have listed all subcontractors with total subcontract values over ½ of 1 % our bid amount as required. Please let us know if you require additional information on this issue. Regards, James J. Summers President 16 of 25 October 15, 2019, Item # 4.1 SECTION 8 CONSTRUCTION CONTRACT CITY OF POWAY MICKEY CAFAGNA COMMUNITY CENTER This Contract made and entered into this 16th day of October, 2019, by and between City of Poway, a municipal corporation of the State of California, hereinafter referred to as "City" and EC Constructors, Inc., hereinafter referred to as "Contractor." The City and the Contractor, for the consideration hereinafter named, mutually agree as follows: 1. The complete Contract includes all of the Contract Documents, which are incorporated herein by this reference, and include: a. This Contract b. Contract Addenda c. Contract Change Orders d. Instructions to Bidders, Proposal Requirements and Conditions e. Contract Specifications f. Contract Plans g. General Condition h. Special Conditions i. Standard Specification for Public Works, most current edition 2. The Contract Documents are complementary, and that which is required by one shall be as binding as if required by all. 3. Contractor shall provide and furnish all labor, materials, necessary tools, expendable equipment, and all utility and transportation services required for the following work of improvement as indicated in the plans and specifications: a. Demolition of existing Community Center and Senior Center buildings. b. Site excavation and grading for utilities. c. Construction of Community Center building. d. Various site improvements including, concrete walkways, handrails, and landscaping 4. Contractor agrees to perform all the said work and furnish all the said materials at his own cost and expense that are necessary to construct and complete in strict 17 of 25 ATTAC~rENT E October 15, 2019, Item # 4.1 conformance with Contract Documents and to the satisfaction of the City Engineer, the work hereinafter set forth in accordance with the Contract adopted by the City Council. 5. City agrees to pay and Contractor agrees to accept in full payment for performance of this work of improvement as described, the stipulated sum of$ ______ _ the "Contract Price." City agrees to make progress payments and final payment in accordance with the method set forth in the Special Provisions. 6. Contractor agrees to commence construction of the work provided for herein within Fifteen (15) Calendar Days after the date specified in the Notice to Proceed, and to continue diligently in strict conformance with Contract Documents and without interruption, and to complete the construction thereof within Three Hundred (300). Working Days after the date specified in the Notice to Proceed. 7. Time is of the essence of this Contract, and it is agreed that it would be impracticable or extremely difficult to ascertain the extent of actual loss or damage which the City will sustain by reason of any delay in the performance of this Contract. It is, therefore, agreed that Contractor will pay as liquidated damages to the City the following sum: One Thousand Dollars ($1,000) per Calendar Day, for each and every Calendar Days delay in finishing the Work in excess of the number of Working Days prescribed above. If liquidated damages are not paid, as assessed by the City, the City may deduct the amount thereof from any money due or that may become due the Contractor under this Contract in addition to any other remedy available to City. By executing this Contract, Contractor agrees that the amount of liquidated damages is reasonable and shall not constitute a penalty. 8. In accordance with State of California Senate Bill No. 854, Contractor will maintain and will require all subcontractors to maintain valid and current Department of Industrial Relations (DIR) Public Works Contractor registration during the term of this project. Contractor shall notify the City in writing immediately, and in no case more than twenty-four (24) hours, after receiving any information that Contractor's or any of its Subcontractor's DIR registration status has been suspended, revoked, expired, or otherwise changed. 9. Contractor will pay, and will require all subcontractors to pay, all employees on said Contract a salary or wage at least equal to the prevailing salary or wage established for such work as set forth in the wage determinations and wage standards applicable to this work, a copy of which is on file in the office of the City Clerk of the City of Poway. Federal prevailing wage rates apply for federally funded projects. Travel and subsistence pay shall be paid in accordance with Labor Code§ 1773.1. 10. Contractor shall be subject to the penalties in accordance with Labor Code of § 1775 for each worker paid (either by him or by any subcontractors under him) less than the prevailing rate described above on the work provided for in this Contract. 18 of 25 30 October 15, 2019, Item # 4.1 11. Contractor and subcontractors shall comply with Labor Code § 1810 and § 1811 which stipulates that eight hours labor constitutes a legal day's work, and § 1812 which stipulates that the Contractor and subcontractors shall keep an accurate record showing the name of (and actual hours worked each calendar day and each calendar week by each worker employed by him in connection with the work performed under the terms of the Contract. Failure to comply with these sections of the Labor Code will subject the Contractor to penalty and forfeiture provisions of the Labor Code § 1813. 12. Contractor will comply with the provisions of Labor Code§ 1777.5 pertai'ning to the employment of apprentices to the extent applicable to this Contract. 13. Contractor, by executing this Contract, hereby certifies: "I am aware of and will comply with the Labor Code § 3700 by securing payment for and maintaining in full force and effect for the duration of the contract, complete Workers' Compensation Insurance, and shall furnish a Certificate of Insurance to the City before execution of the Contract. The City, its officers, or employees, will not be responsible for any claims in law or equity occasioned by failure of the Contractor to comply with this paragraph." Contractor further agrees to require all subcontractors to carry Workers' Compensation Insurance as required by the Labor Code of the State of California. 14. Contractor shall, concurrent with the execution of this Contract, furnish two bonds approved by the City, one in the amount of One Hundred Percent (100%) of the Contract Price, to guarantee the faithful performance of the work ("Performance Bond"), and one in the amount of One Hundred Percent (100%) of the Contract Price to guarantee payment of all claims for labor and materials furnished ("Payment Bond"). This Contract shall not become effective until such bonds are supplied to and approved by the City. 15. a. Contractor shall procure and maintain at its own expense, until completion of performance, commercial general liability insurance of not less than Five Million Dollars ($5,000,000) combined single limit per occurrence, and Ten Million Dollars ($10,000,000) in the aggregate, for bodily injury, personal injury, death, loss or damage resulting from the wrongful or negligent acts by the Contractor or its officers, employees, servants, volunteers and agents and independent contractors. Contractor shall provide insurance on an occurrence, not claims-made basis. Contractor acknowledges and agrees that, for purposes of clarification with the intention of avoiding gaps in coverage with any umbrella or excess insurance, personal and advertising injury coverage shall be triggered by an "offense" while bodily injury and property damage coverage shall be triggered by an "occurrence" during the policy period. b. Contractor shall further procure and maintain at its own expense, until completion of performance, commercial vehicle liability insurance covering personal 19 of 25 31 October 15, 2019, Item # 4.1 injury and property damage, of not less than Five Million Dollars ($5,000,000) combined single limit per occurrence, and Ten Million Dollars ($10,000,000) in the aggregate, covering any vehicle utilized by Contractor or its officers, employees, servants, volunteers and agents and independent contractors in performing the services required by this Agreement. c. Contractor shall further procure and maintain at its expense, until completion of performance, workers' compensation insurance providing coverage as required by the California State Workers' Compensation Law. If any class of employees employed by the Contractor pursuant to this Agreement is not protected by the California State Workers' Compensation Law, Contractor shall provide adequate insurance for the protection of such employees to the satisfaction of the City. This provision shall not apply if Contractor has no employees performing work under this Agreement. Contractor agrees to waive its statutory immunity under any worker's compensation or similar statute, as respecting the City, and to require any and all subcontractors and any other person or entity involved with the Project to do the same. Worker's Compensation Insurance: o Contractor has no employees and is exempt from workers' compensation requirements. o Contractor carries workers' compensation insurance for all employees. d. All policies required by this section shall be secured from insurers authorized to do business in the State of California with an "A" policyholder's rating or better and a financial rating of at least Class VII, in accordance with the current Best's Ratings. e. Contractor agrees to require that all parties, including but not limited to subcontractors, architects, engineers or others with whom Contractor enters into contracts or whom Contractor hires or retains pursuant to or in any way related to the performance of this Agreement, provide the insurance coverage required herein, at minimum, and, except for worker's compensation coverage, name as additional insureds the parties to this Agreement. Contractor agrees to monitor and review all such coverage and assumes all responsibility for ensuring that such coverage is provided in conformity with the requirements of this Section. f. In the event this Agreement is terminated for any reason prior to the completion of all obligations and requirements of this Agreement, Contractor agrees to maintain all coverages required herein until the City provides written authorization to terminate the coverages following the City's review and determination that all liability posed under this Agreement as to the party providing insurance has been eliminated. g. Contractor agrees and acknowledges that if it fails to obtain all of the insurance required in this Agreement in accordance with the requirements herein, or to obtain and ensure that the coverage required herein is maintained by any subcontractors or others involved in any way with the Project, Contractor shall be 20 of 25 32 October 15, 2019, Item # 4.1 16. 17. responsible for any losses, claims, suits, damages, defense obligations, or liability of any kind or nature attributable to the City, and/or its officers, employees, servants, volunteers, agents and independent contractors, that result from such failure by Contractor. a. Contractor shall provide certificates of insurance with original endorsements to the City as evidence of the insurance coverage required herein. Certificates of such insurance shall be filed with the City on or before commencement of performance of this Agreement. Current certification of insurance shall be kept on file with the City at all times until completion of performance and acceptance by the City. b. Notwithstanding any inconsistent statement in any required insurance policies or any subsequent endorsements attached thereto, the commercial general liability and commercial vehicle liability policies shall bear endorsements whereby it is provided that the City, and its officers, employees, servants, volunteers, agents and independent contractors are named as additional insureds. Additional insureds shall be entitled to the full benefit of all insurance policies in the same manner and to the same extent as any other insureds and there shall be no limitation to the benefits conferred upon them other than policy limits to coverages. c. Contractor shall require the carriers of all required insurance policies to waive all rights of subrogation against the City, and its officers, employees, servants, volunteers, agents and independent contractors. d. Each policy required herein must be endorsed to provide that the policy shall not be cancelled in coverage or limits (except by paid claims) unless the insurer has provided the City with 30 days prior written notice of cancellation. Contractor agrees to provide the City with 30 days written notice prior to any non-renewal or reduction in coverage or limits. e. All insurance policies required to be provided by Contractor or any other party must be endorsed to provide that the policies shall apply on a primary and noncontributing basis in relation to any insurance or self-insurance, primary or excess, maintained or available to the City, and its officers, employees, servants, volunteers, agents and independent contractors. a. Contractor shall defend, indemnify and hold harmless the City, its officers, officials, agents, employees and volunteers from and against any and all claims, demands, actions, losses, damage, injuries, and liability, direct or indirect (including any and all costs and expenses in connection therewith) to the extent actually caused by the negligence of Contractor, Contractor's employees, subcontractors or independent contractors except for any such claim arising out of the negligence or willful misconduct of the City, or its officers, agents, employees or volunteers. b. The City does not, and shall not, waive any rights that it may have against Contractor under this Section because of the acceptance by the City, or the deposit 21 of 25 33 October 15, 2019, Item # 4.1 with the City, of any insurance policy or certificate required pursuant to this Agreement. The hold harmless, indemnification and duty to defend provisions of this Section shall apply regardless of whether or not said insurance policies are determined to be applicable to the claim, demand, action, damage, liability, loss, cost or expense described herein. 18. Any amendments to any of the Contract Documents, including but not limited to Contract Change Orders, must be in writing executed by the Contractor and the City. Any time an approval, time extension, or consent of the City is required under the Contract Documents, such approval, extension, or consent must be in writing in order to be effective. 19. The Contract Documents contain all of the agreements and understandings of the parties and all previous understandings, negotiations, and contracts are integrated into and superseded by this Contract. 20. In the event that any one or more of the phrases, sentences, clauses, paragraphs, or sections contained in this Contract shall be declared invalid or unenforceable by a valid judgment or decree of a court of competent jurisdiction, such invalidity or unenforceability shall not affect any of the remaining phrases, sentences, clauses, paragraphs, or sections of this Contract which are hereby declared as severable and shall be interpreted to carry out the intent of the parties hereunder. 21. The persons executing this Contract on behalf of the parties hereto warrant that they are duly authorized to execute this Contract on behalf of said parties and that, by so executing this Contract, the parties hereto are formally bound to the provisions of this Contract. 22. This Contract shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors, and assigns. 23. In performing its obligations and duties under this Contract, each party shall comply with all applicable local, state, and federal laws, regulations, rules, standards and ordinances. 24. This Contract may be executed by the parties in counterparts, which counterparts shall be construed together and have the same effect as if all of the parties had executed the same instrument. 25. After completion of the work contemplated by this Contract, Contractor shall file with the City Manager an a_ffidavit stating that all workers and persons employed, all firms supplying materials, and all subcontractors upon the project have been paid in full, and that there are no claims outstanding against the project for either labor or materials, except certain items, if any, to be set forth in an affidavit covering disputed claims or items in connection with a Stop Notice that has been filed under the provision of the laws of the State of California. 26. All work shall be subject to inspection and testing by City and its authorized representatives during manufacture and construction and all other times and places, 22 of 25 34 October 15, 2019, Item # 4.1 including, without limitation, the plans of Contractor and any of its suppliers. Contractor shall provide all reasonable facilities and assistance for the safety and convenience of inspectors. All inspections and tests shall be performed in such manner as to not unduly delay the work. The Work shall be subject to final inspection and acceptance notwithstanding any payments or other prior inspections. Such final inspection shall be made with a reasonable time after completion of the work. 27. Whenever Contractor has knowledge that any actual or potential labor dispute is delaying or threatens to delay the timely performance of the Contract, Contractor shall immediately give notice thereof, including all relevant information with respect thereto, to City. 28. Contractor agrees to contact the appropriate regional notification center in accordance with Government Code Section 4216.2. 29. Contractor shall submit its detailed plan for worker protection during the excavation of trenches required by the scope of the work in accordance with Labor Code Section 6705. 30. a. Contractor shall, without disturbing the condition, notify City, in writing, as soon as Contractor, or any of Contractor's subcontractors, agents, or employees have knowledge and reporting is possible, of the discovery of any of the following conditions: i. The presence of any material that Contractor believes is hazardous waste, as defined in Section 25117 of the Health and Safety Code: ii. Subsurface or latent physical conditions at the site differing from those indicated in the specifications: or iii. Unknown physical conditions at the site of any unusual nature, different materially for those ordinarily encountered and generally recognized as inherent in work of the character provided for in this Contract. b. Pending a determination by City of appropriate action to be take, Contractor shall provide security measures (e.g., fences) adequate to prevent the hazardous waste or physical conditions from causing bodily injury to any person. c. City shall promptly investigate the reported conditions. If City, through and in the exercise of its sole discretion, determines that the conditions do materially differ or do involve hazardous waste, and will cause a decrease or increase in Contractor's cost of, or time required for, performance of any part of the work, then City shall issue a change order. d. In the event of a dispute between City and Contractor as to whether the conditions materially differ, or involve hazardous waste, or cause a decrease or increase in Contractor's cost of, or time required for, performance of any part of the 23 of 25 35 October 15, 2019, Item # 4.1 work, Contractor shall not be excused from any scheduled completion date, and shall proceed with all work to be performed under the contract. Contractor shall retain any and all rights that pertain to the resolution of disputes and protests between the parties. 31. This Contract is to be governed by the laws of the State of California. 32. All work shall be guaranteed for a period of one (1) year from the date of acceptance by the City. Contractor shall promptly make all needed repairs arising out of defective materials, workmanship, and equipment. City is hereby authorized to make such repairs if within ten (10) days after giving written notice to Contractor, or its agent, Contractor should fail to make or undertake with due diligence the aforesaid repairs; provided, however, that in case of an emergency, where, in the opinion of City, delay would cause serious loss or damage, repairs may be made without notice being sent to Contractor, and Contractor shall pay the costs thereof. (Remainder of page intentionally left blank) 24 of 25 36 October 15, 2019, Item # 4.1 IN WITNESS WHEREOF, the said Contractor and the Director of Public Works, City Manager Mayor and City Clerk of the City have caused the names of said parties to be affixed hereto, the day and year first above written. Contractor's Name: Print Name of Construction Company By: Signature Print Name Contractor information: Address for Notices and Payments Telephone Number: Email: ------------ ATTEST: City Clerk APPROVED AS TO FORM: RUTAN & TUCKER, LLP CITY OF POWAY a Municipal Corporation City Manager of the City of Poway END OF SECTION 25 of 25 37 po,, City of Pit COUNCIL AGENDA REPORT 1A' THS C°t DATE: October 15, 2019 TO: Honorable Mayor and Members of the City Council FROM: Aaron Beanan, Director of Finance CONTACT: Aaron Beanan, Director of Finance 858) 668-4411 or abeanan(c poway.orq SUBJECT: Water and Wastewater Rate Study and Public Workshop Summary: On March 19, 2019 the City Council directed staff to have Raftelis Financial Consultants, Inc. RFC) conduct a comprehensive cost of service study (COSS), evaluate the city's current water and wastewater rates, and develop several rate structures for consideration at a public workshop. The goals of these actions were to help ensure compliance with the law, ensure each rate payer class was paying their proportionate share of the water and wastewater costs, and ensure financial sustainability of both the water and wastewater enterprise funds. This staff report outlines the outcomes of these efforts for consideration by the City Council and the public during the first of two public workshops. Recommended Action: It is recommended that the City Council receive and file this report as an informational item. Discussion: During the City Council discussion at the January 8, 2019 Water and Sewer Rate workshop, the Council expressed interest in conducting a new water and sewer rate study prior to the 2020 rate setting process, as it had been many years since a COSS had been conducted. During the discussion the City Council also indicated the consultant and staff should evaluate different rate structures and how they impact different classes of rate payers. After issuing a Request for Proposal (RFP) on February 4, 2019 to conduct a comprehensive COSS, investigate and evaluate different rate structures and their impacts to rate payers, ensure financial sustainability, and ensure compliance with the law, the city hired RFC. A contract with RFC was recommended to the City Council for approval on March 19, 2019 based on their industry expertise, their extensive experience performing similar studies throughout California, and their familiarity with the city. As the goal of the workshops is to provide several different rate structures and information about how each structure impacts rate payers, multiple options are presented in this staff report. A total of nine different rate design options are presented for water along with four different rate design options for wastewater. Additionally, all rate design options reflect the proposed revenue increases for 2020 and 2021 to fully describe the impacts. The proposed revenue increases are independent of the rate design options and will be more fully discussed in January's Council meeting. The proposed revenue increases are determined by the costs to operate the water and wastewater systems while the rate design options represent different ways to allocate those costs of 30 October 15, 2019, Item #5.1 amongst rate payers. It was very important to Council that multiple rate designs were presented along with the associated impacts to ratepayers so that each potential option's impacts were easily understood. As a result, this staff report is substantially longer, more complex and more technical than normal staff reports. All information described in this report will be presented by staff at the workshops. Through the COSS process, RFC accounts for the costs of providing water and wastewater services and allocates these costs amongst the rate payer classes based on their current proportional use of the systems. This rebalancing of customer classes' impacts on the system means there will be uneven impacts to rates in year 1. The rebalancing occurs whenever a cost of service study is updated. The costs of providing services include the costs of importing water into Poway's water system, treating and testing the water, distributing the water to its customers, and transporting any resulting wastewater to San Diego for treatment along with the associated rehabilitation and repair costs for this infrastructure. This information is combined with the financial plans for water and wastewater to develop proposed rates and rate designs. The formal COSS report that outlines this information (i.e. the methodology, cost of service, financial plan, and rate design) is not part of this workshop. This report will be prepared once a water and wastewater rate structure has been selected, from either workshop one or workshop two. This is due to the amount of work that would go into compiling a report for the nine different options for water and four different options for wastewater that are presented in this report. This workshop represents the first step in a proposed two-year rate setting process. A two-year rate setting process strikes a balance between flexibility and efficiency. A two-year period is short enough to allow rate changes if future projections are different than anticipated while also reducing the costs of adopting new rates. The following graphic shows the proposed timeline for the first two-year cycle. Workshop 1: Workshop 2: Set Public Mail 218 Oct. 15, 2019 Nov. 19, 2019 Hearing: Notice: Jan. 7, 2020 By Jan. 17, 2020 Public Year 1 Rates Year 2 Rates Hearing: Effective: Effective: Mar. 3,2020 Mar. 3, 2020 Jan. 1, 2021 Legal Compliance Water and wastewater utilities are governed by numerous laws. Perhaps the most important, and well known, law governing water and wastewater came about with the passage of the Proposition 218 Omnibus Implementation Act in 1996. This proposition added Articles 13C and 13D to the California State Constitution. The following are some of the substantive provisions governing a property-related fee under Article 130: 1. Revenues derived from the fee or charge must not exceed the cost to provide the services, 2. Revenues derived from the fee or charge must not be used for any purpose other than that for which the fee was imposed, 3. The amount of the fee or charge imposed upon any parcel or person as an incident of property ownership must not exceed the proportional cost of the service attributable to the parcel, and 4. The fee or charge may not be imposed for a service unless the service is actually used by, or immediately available to, the owner of the property subject to the fee or charge. 2 of 30 October 15, 2019, Item #5.1 The COSS is the most common way for a local agency to determine what it costs to provide water and wastewater service, including the short and long-term operations, maintenance, financial, and capital expenditures of the systems. The COSS also helps ensure the proportional costs of the water and wastewater services are reasonably allocated to the city's rate payer classes based on the cost differentials required to serve each rate payer class. RFC's COSS analysis helps ensure the city is compliant with these laws. Cost of Service Through the COSS process, RFC accounts for the costs of providing water and wastewater services and allocates these costs amongst the rate payer classes based on their proportional use of the systems. The City of Poway's water and wastewater systems include $100's of millions in infrastructure necessary to provide associated services. This infrastructure includes water assets to transport water from the San Diego County Water Authority's (SDCWA) system to the city's system, assets to treat the water to safe drinking levels, and assets to deliver safe, reliable water on demand to each rate payer's property. The following are some facts about the water system: 294 miles of transmission and distribution pipelines 5,044 water valves, 21 pressure reducing stations and 14 pump stations (designed to raise water to higher elevations) 19 reservoirs (Lake Poway holds ~one billion gallons of water) One 24 million gallon/day water treatment plant, 2,435 fire hydrants Approximately 45,000 tests to ensure Poway water meets or exceeds the State and Federal standards for water quality This also includes infrastructure to transport wastewater from the city to various treatment plants within the County of San Diego in a safe and reliable manner including over 186 miles of wastewater pipes, five lift stations (designed to raise wastewater material to a higher elevation), and over 4,000 maintenance covers. To help ensure the city continues to provide safe, reliable, and affordable water and wastewater services, the city proactively invests in rehabilitation and repair of its infrastructure. For example, the city is proactively investing millions of dollars into the water system's Clearwell reservoir and its associated valves, originally constructed in 1964, to help ensure safe and reliable water continues to be delivered to rate payers while also helping reduce water loss. When a utility experiences water loss in its distribution system, the losses increase production costs and force the utility to buy more water than a rate payer requires. Therefore, reducing water loss helps reduce costs to rate payers. Another example is the city's proactive multi-million-dollar investment into upsizing a wastewater pipe on Martincoit Road. This will help ensure the health and safety of Poway's residents while reducing the risk of clean-up costs and fines that could result from a wastewater spill. A more detailed explanation of current water and wastewater infrastructure investment is discussed in the city's Fiscal Year 2019-20 Comprehensive Financial Plan. All this physical infrastructure requires highly trained and state-certified city staff to monitor, test, maintain, and repair the water and wastewater systems in an efficient and effective manner along with prudent long-term financial management to help ensure the sustainability of the systems. The city helps maximize the value to rate payers while minimizing the impacts to rate payers by sharing resources such as financial, human resources, information technology, legal, and executive staff with the city's General Fund that would normally be solely the responsibility of rate payers in standalone districts. In Poway, because these resources are shared, rate payers pay a 3 of 30 October 15, 2019, Item #5.1 fraction of the cost for these services helping save money each year. Staff is planning to ask Council for funding before fiscal year end to update the city's cost allocation plan during Fiscal Year 2020-21. The cost allocation plan identifies, documents, and allocates costs incurred by the General Fund that are the responsibility of other funds. Additionally, the city's long-term approach to prudent financial management allows the city to minimize the impacts of capital rehabilitation and renewal, changes in usage, and unplanned emergencies with advanced planning and appropriate reserve levels. As discussed in the legal compliance section, the proportional costs of the water and wastewater services need to be reasonably allocated to the city's rate payer classes based on the cost differentials required to serve each rate payer class. Part of this allocation is based on how a rate payer class uses the system. Factors such as number of rate payers in each class and the demand associated with each class are some examples of how their proportional use of the system is reasonably determined. The following chart shows how each class of water rate payer's use of the system has changed since the last comprehensive study was done in 2007, based on RFC's analysis. Cost of Service by Customer Class (Water) 10% IL MI0% r Sngle Famiy M1ut array Landscape City Potable Residentel Residential Irrigation Non-ResidentialUsage Recycled Water a 2007 70.0% 4.4% 1.8% 17.5% 1.0% 5.2% 2019 72.5% 3.7% 2.2% 15.9% 1.9% 3.7% Since 2007, the single-family residential rate payer class has increased its use of the water system, relative to some of the other rate payer classes. Based on cost of service principles, and to ensure compliance with the law, this means the single-family rate payer class bears a slightly larger share of the overall water system costs, relative to 2007, while the non-residential rate payer bears slightly less. This shift in cost of service between customer classes means some rates will increase while others may decrease, all else being equal. 4 of 30 October 15, 2019, Item #5.1 The chart below shows how each class of wastewater rate payer's use of the system has changed since 2007, based on RFC's analysis. Cost of Service by Customer Class (Wastewater) 60% 50% 40"- 30% 2036 10% 096 Single Family Residential Muti-Farnity Residential Non-Residentei Churches&Sch.: 2007 68.4% 9.2% 20.1% 2.3% 2019 66.4% 11.0% 20.0% 2. 6% Since 2007, the single-family residential rate payer class has used proportionally less of the wastewater system than, for example, the multi-family residential rate payer class. This means the single-family residential rate payer class bears a slightly smaller share of the overall wastewater system costs, relative to 2007, while the multi-family residential rate payer class bears slightly more. This shift in cost of service between customer classes means some rates will increase while others may decrease, all else being equal. Water Rate Design The rate design process develops rates and rate structures that generate revenue from, and within, the various rate payer classes and is completed once the cost of service has been determined and these costs have been allocated to the rate payer classes based on their proportional use of the system. Multiple rate design options may be developed; each compliant with the law. This is possible because each rate design option is balancing different pricing objectives within a broader legal framework. For example, one rate design option may favor sustainability over affordability by increasing the revenue generated from fixed charges. This is legally compliant as long as fixed charges were reasonably allocated to the city's rate payers based on the cost differentials required to serve each rate payer class. Based on City Council direction, RFC has developed several rate design options for Council consideration and public input. It was very important to Council that multiple rate designs were presented along with the associated impacts to ratepayers so that each potential option's impacts were easily understood. As discussed in the Cost of Service section above, the rebalancing of customer classes' impacts on the system means there will be uneven impacts to rates in year 1. This occurs whenever a cost of service study is updated. Subsequent years rate increases will be consistent across rate payer classes. Each option presented is compliant with the law. 5 of 30 October 15, 2019, Item #5.1 Water Residential Rate Payer Class Rate Design Options: RFC has developed several rate design options for the residential rate payer class. The other rate payer classes, such as non-residential, were not given multiple rate design options because their use of the system doesn't lend itself to multiple rate designs. As discussed in the legal compliance section, any rate designs must be based on how a rate payer class is served by the system. A total of nine residential rate design options have been provided for discussion purposes. There are three tier structures: a two tier, three tier, and four tier structure.Within each tier, three different fixed/variable ratios have been provided. The options are as follows: Option Residential Tiers Fixed (%) Variable (%) 1a 2 17% 83% 1 b 2 20% 80% lc 2 25% 75% Option Residential Tiers Fixed (%) Variable (%) 2a 3 1 83% 2b 3 20% 80% 2c 3 25% 75% Option Residential Tiers Fixed (%) Variable (%) 3a 4 17% 83% 3b 4 20% 80% 3c 4 25% 75% Tiers are related to the volumetric, or variable, revenue collected from rate payers and reflect the increasing costs of supplying more water to residential rate payers who use higher amounts of water. Only three total tier structure options are being presented because they most reasonably reflect an appropriate distribution of expenses. In Poway's case, a tier structure with five tiers, for example, would less reasonably reflect an appropriate distribution of expenses. The fixed/variable ratio reflects the amount of revenue collected between fixed charges which are not dependent on water usage and volumetric, or variable, charges which are dependent on water usage. This ratio is important for understanding the level of revenue stability. The more revenue is collected via a fixed charge, the less likely the water system will be impacted by changes in rate payer usage. For example, the more revenue is collected via fixed charges, the less likely a water system will be to increase rates in times of conservation as less of its revenue is affected by decreased demand, all else being equal. The first chart on the following page shows water is currently collecting 16 percent of its revenue from fixed charges, and 84 percent of its revenue from variable charges. However, as the second chart shows, the revenue being recovered via fixed charges does not align with water's fixed costs. As shown in the second chart on the following page, 53 percent of water's expenses are fixed costs. When the revenue collected from fixed charges does not match the level of fixed expenses, the water utility is susceptible to revenue volatility (i.e. less revenue stability). The greater the revenue volatility, the more likely rate increases will be required to ensure sufficient funding for operations. 6 of 30 October 15, 2019, Item #5.1 FYE 2019 Calculated Rate Revenue Fixed/Variable Split(Water) Fixed 4.2M,16% Variable 21.5M,84% xed Revenue Varabe Rerenue FYE 2019 Expenses Fixed/Variable Split(Water) 0.9M,4% 0.4M,1% 4.1M,17% 10.2M,42% 8.6M,36% xed SOC WA Costs(17%)Faed PcwW Ccs:s 36%) Varabe SDCWA Costs(42%) Varabe City of San Dego Costs(1%) e ayCosts(4:_. Fixed costs do not fluctuate with the amount of water purchased or used and represent 53 percent of all costs to Poway. The SDCWA portion of the fixed costs include all their charges to member agencies that do not fluctuate with water purchases including the Metropolitan Water District MWD) Readiness-to-Serve Charge, the MWD Capacity Charge, the Supply Reliability Charge, the Rate payer Service Charge, the Storage Charge, and the Infrastructure Access Charge. Poway's fixed costs include expenses such as salaries and benefits, maintenance costs and professional services, among others. Variable costs fluctuate with the amount of water purchased or used represent 47 percent of Poway water's expenses. The SDCWA portion the variable costs include the Untreated Supply Rate and Transportation Charge. Poway's variable costs include electricity and water purchases. The variable City of San Diego costs represent the recycled water purchases. Previous industry best practice guidance suggested a fixed/variable ratio of 30/70. However, this is being moved away from because, as the chart above shows, fixed costs often exceed the previously recommended 30 percent. Instead, best practices suggest balancing revenue stability with other pricing objectives like affordability. For this reason, three different fixed/variable ratios are presented to show the different impacts associated with increasing the amount of revenue collected from fixed charges. 7 of 30 October 15, 2019, Item #5.1 Water Rate Design Option 1a (2-Tier Structure; 17% fixed, 83% variable) Water rate design Option 1 a is most like the city's existing two-tier rate structure. The only difference is increasing the revenue collected via fixed charges from 16 to 17 percent. The table below summarizes the information for this option. Tier Tier Breakpoints (Units) % of Water Use of Bills 1 199 94% 98% 2 199 6% 2% Average Usage: j 37 units Fixed: 1 17% Average Summer Usage: j 56 units Variable: 83% A 3/ 4" meter is used for analysis purposes throughout the water analysis as it represents over 88 percent of residential meters. It should also be noted that 37 bi-monthly units represents average residential usage while 56 bi-monthly units represents average summer residential usage. A unit of water is —748 gallons which translates to roughly two hot tubs full of water or almost 50 loads of laundry with a high efficiency washing machine. The chart below shows the impacts across various usage levels for this option. SFR Impacts at Different Usage Levels: 3/4" Meter; 2-Tiered; 17%/83% F/V(Option la) 1,400 1,200 1,000 800 600 400 5200 95.88 $149.48 5240.60 $342.44 $578.28 $846.28 $1,116.57 10 units 20 units 37 units 56 units 100 unts 150 unts 200 units Current BiI 595.88 5149.48 5240.60 $342.44 5578.28 $846.28 51,116.57 Proposed BiI $105.06 5160.96 5255.99 $362.20 $608.16 $887.66 51,171.87 mpact(5)9.18 511.48 515.39 519.76 29.88 41.38 555.30 mpact(%)9.6% 7.7%0 64% 5.8% 5.2% 4.9% 5.0% Given that 94 percent of water usage and 98 percent of all bills fall within Tier 1, residential rate payers falling across all levels of usage see a similar increase and experience a uniform rate per unit of water used. A two-tier structure provides good revenue stability because of this. While similar increases occur across usage levels, lower volume users do see greater impacts which reduces affordability for them. When looking at the impacts to rate payers in a two-tier structure a fixed charge recapturing 17 percent of revenue increases financial sustainability while decreasing affordability for lower volume users. Also, in times of state mandated conservation, a two-tier structure makes it harder for a utility to encourage conservation because there is less pricing incentive to do so. 8 of 30 October 15, 2019, Item #5.1 Water Rate Design Option lb (2-Tier Structure; 20% fixed, 80% variable) In this option, the amount of revenue collected via fixed charges is increased to 20 percent. Tier Tier Breakpoints (Units) % of Water Use of Bills 1 199 94% 98% 2 199 6% 2% Average Usage: 37 units Foced:20% Average Summer Usage: 56 units Variable: 80% Increasing the fixed charges to represent 20 percent of revenue impacts the low volume users more than the high-volume users. This occurs because the amount collected regardless of water use (i.e. fixed charge) increases while the amount collected based on water use (i.e. variable charge) decreases. The chart below shows the impacts across various usage levels for this option. SFR Impacts at Different Usage Levels: 3/4" Meter; 2-Tiered; 20%/80% F/V(Option 1b) 1,200 1,000 800 600 400 200 -. 0 $ 95.88 $149.48 $240.60 $342.44 $578.28 $846.28 $1,116.57 10 units 20 units 37 units 56 units 100 unts 150 unts 200 unts Current Bii $95.88 $149.48 $240.60 $342.44 $578.28 $846.28 $1,116.57 Proposed Bil $111. 29 $ 165.19 5256.82 $359.23 5596.39 $865.89 51,139.49 impact($)15.41 15.71 16.22 16.79 18.11 19.61 22.92 impact(%)16.1% 10.5% 6.7% 4.9% 3.1% 2.3% 2.1% Option 1 b differs from Option 1 a in that it further increases financial sustainability while further decreasing affordability for low volume users. Similar to Option 1 a, this rate option variation does not send a strong conservation signal which makes conservation efforts more difficult in times of mandated conservation. 9 of 30 October 15, 2019, Item #5.1 Water Rate Design Option lc (2-Tier Structure; 25% fixed 75% variable) In this option, the amount of revenue collected via fixed charges is increased to 25 percent. Tier Tier Breakpoints (Units) % of Water Use of Bills 1 199 94% 98% 2 199 6% 2% Avow Usage: 37 units IFoxed:25% Average Summer Usage: , 56 units i Variable: 75% Increasing the fixed charges to represent 25 percent of revenue impacts the low volume users even more than the high-volume users who see a reduction in their bill. The chart below shows the impacts across various usage levels for this option. SFR Impacts at Different Usage Levels: 3/4" Meter; 2-Tiered; 25%/75% F/V(Option 1c) 1,200 1,000 800 56 0y0 400 200111 II IIIIIII 595.88 $149.48 $240.60 $342.44 5578.28 $846.28 $1,116.57 10 units 20 units 37 units 56 units 100 unts 150 unts 200 units Current BE $95.88 5149.48 $240.60 5342.44 $578.28 $846.28 $1,116.57 Proposed Bal $121.72 5172.32 $258.34 5354.48 $577.12 $830.12 51,086.20 impact($)25.84 22.84 517.74 512.04 51.16 516.16 -530.37 impact(96)27.0% 15.3=- 7.4' 3.5% 0.2% 1.9% 2.7% Between all Option 1 variations, this option creates the greatest financial sustainability for water, though it is also the least affordable option for low volume users. Affordability is decreased for low volume users because the amount of the bill they can control (i.e. that portion based on water usage) decreases significantly. As with the other Option 1 variations, this rate option variation does not send a strong conservation signal which makes conservation efforts more difficult in times of mandated conservation. 10 of 30 October 15, 2019, Item #5.1 Water Rate Design Option 2a (3-Tier Structure; 17% fixed, 83% variable) Water rate design Option 2a creates a three-tier rate structure as shown in the table below. Tier Tier Breakpoints (Units) % of Water Use of Bills 1 20 42% _49% 2 56 29% 35% 3 16% Average Usage: 37 units Fixed:17% Average Summer Usage: 56 units Variable: 83% In a three-tier rate structure, the tiers more appropriately reflect the costs of providing water based on how the water is being used. If residential rate payers had consistent water usage throughout the year, the entire water system (e.g. pipes, pump stations, treatment plant, reservoirs, etc.) would be sized a certain way. However, residential rate payers do not use water consistently. Average usage is 37 units of water while average summer usage is 56 units of water. As a result, the entire system size must be increased to accommodate this higher level of usage, even though the usage is inconsistent. The costs associated with the increased system size are proportionally allocated to the higher tiers of water creating a nexus between cost and use. Conservation measures are supported with a three-tier structure. Tier 1 corresponds to —60 gallons per capita per day (GPCD) for a 4-person average household. The 20 units of water represents the amount related to the cost of basic indoor water use, such as for drinking, cooking, and washing. Tier 2 represents the progressively higher cost of providing more water to rate payers for less essential uses, such as watering landscapes, and is reflective of average residential summer usage. Tier 3 represents high water usage and the costs associated with providing water for this type of use. The chart below shows the impacts across various usage levels for this option. SFR Impacts at Different Usage Levels: 3/4" Meter;3-Tiered; 17%/83% F/V(Option 2a) 1,600 1,400 1,200 1,000 800 600 400 200 Ell0 .$ 95.88 $149.48 $ 240.60 $342.44 S578.28 $846.28 $1,116.57 10 units 20 units 37 units 56 units 100 unts 150 unts 200 unts Current Bil S95.88 $149.48 5240.60 $342.44 $578.28 $846.28 $1,116.57 Proposed Bit $95.86 $142.56 $236.74 $342.00 $692.24 $1,090.24 $1,488.24 Impact(5)0.02 6.92 3.86 50.44 113.96 $243.96 $371.67 Impact 1%)0.0% 4.6% 1.6% 0.1% 19.7% 28.8% 33.3% Lower volume users see small reductions in their bill while higher volume users see increases in their bills. This occurs because the costs of larger system capacity are more closely aligned with the rate payer usage patterns that created the need for it. 11 of 30 October 15, 2019, Item #5.1 Water Rate Design Option 2b (3-Tier Structure; 20% fixed, 80% variable) In this option, the amount of revenue collected via fixed charges is increased to 20 percent. Tier Tier Breakpoints (Units) % of Water Use of Bills 1 20 42% 49% 2 56 29% 35% 3 56 29% 16% Average Usage: 37 units Fixed:20% _ AverageSummer 56 units Variable: 80% Because fixed charges are increasing, the lowest volume users see a moderate increased impact while the highest volume users see a reduced impact when compared to Option 2a. Low (users falling into the essential water use category) and average users effectively have no impact. The chart below shows the impacts across various usage levels for this option. SFR Impacts at Different Usage Levels: 3/4" Meter; 3-Tiered; 20%/80% F/V (Option 2b) 1,600 1,400 1,200 1,000 800 S600 S400 200 all i I IISO $ 95. 88 $149.48 $240.60 $342.44 $578.28 $846.28 51,116.5 10 units 20 units 37 units 56 units 100 unts 150 unts 200 unts Current Bin $95.88 $149.48 $240.60 $342.44 $578.28 $846.28 $1,116.57 Proposed Bill $103.29 $149.19 $240.14 $341.79 $669.59 $1,042.09 $1,414.59 _ Impact($)7.41 0.29 0.46 0.65 91.31 $195.81 $298.02 Impact(%)7.7% 0.2% 0.2% 0.2% 15.8% 23.1% 26.7% ' When looking at the impacts to rate payers in a three-tier structure, a fixed charge recapturing 20 percent of water's fixed costs helps provide an equitable balance between revenue stability, which helps support financial sustainability, and affordability. While a higher fixed charge would provide more revenue stability, increasing the fixed charge all at once instead of incrementally over time increases the impacts to rate payers. This option, like Option 2a, makes it easier to support conservation during periods of mandated conservation because higher water use is easily discernable through the rate structure tiers (i.e. consumption levels) and pricing. However, there is some risk of demand hardening. Demand hardening is a phenomenon generally described as the reduction in the ability of a rate payer to further reduce demand because the more cost-effective water reductions (e.g. low-flow appliances) have already been implemented. It is believed to occur as a result of long-term conservation measure such as education, water restrictions, rebate programs, and price structure changes (e.g. tiers) which make it harder to induce further water use reductions during drought/mandated conservation periods. 12 of 30 October 15, 2019, Item #5.1 Water Rate Design Option 2c (3-Tier Structure; 25% fixed, 75% variable) In this option, the amount of revenue collected via fixed charges is increased to 25 percent. Tier Tier Breakpoints (Units) % of Water Use of Bills 1 20 42% 49% 2 56 29% 35% 3 56 29% 16% Average Usage: 37 units Fixed:25% Average Summer Usage: 56 units Variable: 75% Because fixed charges are increasing, the lowest volume users see an increased impact while the highest volume users see a reduced impact when compared to Option 2b. Low (users falling into the essential water use category) have a moderate impact while average users have a small impact. The chart below shows the impacts across various usage levels for this option. SFR impacts at Different Usage Levels: 3/4" Meter;3-Tiered; 25%/75% F/V(Option 2c) 1,400 1,200 1,000 800 600 400 20 11111111 . 0111 95.88 $149.48 $240.60 $342.44 $578.28 $846.28 $1,116.5 7 10 units 20 units 37 units 56 units 100 unts 150 unts 200 unts Current BII $95.88 $149.48 $240.60 $342.44 $578.28 $846.28 $1,116.57 Proposed Bdl $115.62 $160.12 $245.46 5340.84 $631.24 $961.24 $1,291.24 Impact(5)19.74 510.64 4.86 1.60 52.96 $114.96 $174.67 Impact(%)20.6% 7.1% 2.0% 0.5% 9.2% 13.6% 15.6% While increasing the revenue collected from fixed charges helps increase the financial sustainability of the utility, it also impacts low volume users more significantly than Option 2b. Compared to Option 1 c (2-tier structure; 25% fixed, 75% variable), it does impact low volume users less. This option also supports conservation though it could lead to demand hardening as described in Option 2b. 13 of 30 October 15, 2019, Item #5.1 Water Rate Design Option 3a (4-Tier Structure; 17% fixed, 83% variable) This option is like a three-tier rate structure with the nexus for Tiers 1 and 2 being the same as a three-tier rate structure. In a four-tier structure, higher water use is broken out into two tiers instead of only one. An additional high water use category has been added to account for just under 10 percent of residential water use. This four-tier rate structure further aligns the costs associated with the increased system size to higher water use, further aligning the nexus between cost and use. Staff and RFC agreed looking at a tier structure with five or more tiers would be unwise given the challenges and data required to legally create tier structures greater than four tiers. The chart below shows the impacts across various usage levels for this option. Tier Tier Breakpoints (Units) % of Water Use of Bills 1 20 42% 49% 2 56 29% 35% 3 150 20% 13% 4 150 9% 3% Ave 37 unitsFixed:17% Average Summer Usage: 56 units i Variable: 83% In a four-tier structure, the impacts at lower water usage levels (i.e. 56 bi-monthly units or less) will mirror the three-tier structure. As the consumption increases in a four-tier structure beyond 56 bi-monthly units, the impacts to the higher volume users will slowly shift because the per unit cost of water, or volumetric rate, increases. SFR Impacts at Different Usage Levels: 3/4" Meter;4-Tiered; 17%/83% F/V(Option 3a) 1,600 1,400 1,200 1,000 800 600 400 200 i ION 0 $ 95. 88 $149.48 $240.60 S342.44 $578.28 $846.28 51,116.3 10 units 20 units 37 units 56 units 100 unts 150 unts 200 unts in Current Brei $95.88 $149.48 $240.60 $342.44 $578.28 $846.28 $1,116.57 Proposed Br( $95.96 $142.76 $237.62 $343.64 $651.64 $1,001.64 $1,486.64 impact($)0.08 6.72 52.98 1.20 73. 36 $155.36 $370.07 impact(%)0.1% 4.5% 1.2% 0.4% 12.7% 18.4% 33.1% A four-tier structure does not offer materially greater benefits than a three-tier structure. Option 2a and Option 3a share very similar impacts across the various usage levels. One risk in a four- tier structure as compared to a three-tier structure is there is a greater risk of demand hardening. A higher chance of demand hardening increases the potential to see reduced revenue which would put upward pressure on rates. This could occur if the amount of anticipated revenue is not realized due to self-selected conservation. 14 of 30 October 15, 2019, Item #5.1 Water Rate Design Option 3b (4-Tier Structure; 20% fixed, 80% variable) In this option, the amount of revenue collected via fixed charges is increased to 20 percent. Tier Tier Breakpoints (Units) % of Water Use of Bills 1 20 42% 49% 2 56 29% 35% 3 150 20% 13% 4 150 ----- - 9% 3% Average Usage: 37 units Faced:20% Average Summer Usage: j 56 units Variable: 80% Similar to a three-tier structure, and because fixed charges are increasing, the lowest volume users see a moderate increased impact while the highest volume users see a reduced impact when compared to Option 3a. Low (users falling into the essential water use category) and average users effectively have no impact. This option does increase revenue stability due to higher fixed charges which increases the financial sustainability of the utility. The chart below shows the impacts across various usage levels for this option. SFR Impacts at Different Usage Levels: 3/4" Meter; 4-Tiered; 20%/80% F/V(Option 3b) 1,600 1,400 1,200 1,000 800 600 400 200 NM. II 95.88 $149.48 $240.60 $342.44 $578.28 $846.28 $1,116.57 10 units 20 units 37 units 56 units 100 unts 150 unts 200 units Current Bil $95. 88 $149.48 $240.60 $342.44 $578.28 $846.28 $1,116.57 Proposed Bil $103.29 $149.19 $240.65 S342.87 $634.15 $965.15 $1,413.65 mpact(S)7.41 0.29 0.05 0.43 55.87 $118.87 $297.08 Tact(%)7.7% 0.2% 0.0% 0.1% 9.7% 14.0% 26.6% Similar to Option 2b, a fixed charge recapturing 20 percent of water's fixed costs helps provide an equitable balance between revenue stability, which helps support financial sustainability, and affordability. While a higher fixed charge percentage would provide more revenue stability, increasing the fixed charge all at once instead of incrementally over time increases the impacts to rate payers. However, a four-tier structure has increased potential to create demand hardening when compared to a three-tier structure. As discussed in Option 3a, a higher chance of demand hardening increases the potential to see reduced revenue which would put upward pressure on rates. This could occur if the amount of anticipated revenue is not realized due to self-selected conservation. 15 of 30 October 15, 2019, Item #5.1 Water Rate Design Option 3c (4-Tier Structure; 25% fixed, 75% variable) In this option, the amount of revenue collected via fixed charges is increased to 25 percent. Tier Tier Breakpoints (Units) % of Water Use of Bills 1 20 42% 49% 2 56 29% 35% 0315020/o -a 13% 4 150 9% 3% Usage: uiAverage37 s Fixed:25% 1 Average Summer Usage: 56 units Variable: _75% Similar to a three-tier structure, and because fixed charges are increasing, the lowest volume users see an increased impact while the highest volume users see a reduced impact when compared to Option 3b. Low (users falling into the essential water use category) have a moderate impact while average users have a small impact. Revenue stability and financial sustainability is increased as compared to the previous four-tier options. The chart below shows the impacts across various usage levels for this option. SFR Impacts at Different Usage Levels: 3/4" Meter;4-Tiered; 25%/75% F/V (Option 3c) 1,400 1,200 1,000 III I800 600 5400 200 II11111$ 95.88 $149.48 $240.60 $342.44 $578.28 $846.28 51,116.57 10 units 20 units 37 units 56 units 100 units 150 unts 200 unts Current 811 595.88 $149.48 $240.60 $342.44 5578.28 $846.28 $1,116.57 Proposed Bal $115.62 $160.12 $245.97 $341.92 $605.04 $904.04 $1,291.54 impact(5)19.74 10.64 5.37 0.52 26.76 57.76 $174.97 moa:t 1%)20.6% 7.1% 2.2% 0.2% 4.6% 6.8% 15.7% While increasing the revenue collected from fixed charges helps increase the financial sustainability of the utility, it also impacts low volume users more significantly than Option 3b. Compared to Option 1 c (2-tier structure; 25% fixed, 75% variable), it does impact low volume users less. Further, a four-tier structure has increased potential to create demand hardening when compared to a three-tier structure. As discussed in Option 3a, a higher chance of demand hardening increases the potential to see reduced revenue which would put upward pressure on rates. This could occur if the amount of anticipated revenue is not realized due to self-selected conservation. 16 of 30 October 15, 2019, Item #5.1 Water Financial Plan The financial plan for providing water services is an important component of the COSS process. It looks at the financial policies for providing water service, such as how reserve levels are determined or when debt issuance is appropriate. The financial plan also looks at the current and projected level of expenses and examines the amount of revenue required to meet the operational goals of providing water service. The amount of revenue required influences the proposed revenue, or rate, adjustments needed over time. Financial Policies: According to the Government Finance Officers Association (GFOA), financial policies provide guidelines for financial decision making and set the strategic intent for financial management and are central to a strategic long-term approach to financial management. As the water utility has no existing debt and no immediate plans to issue debt, only the reserve policies were examined. Based on the American Water Works Association 2018 Cash Reserve Policy Guidelines, the level of reserves maintained by a utility is an important component of short and long-term financial management and is a key consideration in the rate-setting process. Defining appropriate reserve levels is important because reserves have the potential to impact rates or tie up current rate payer dollars that could otherwise be used towards current expenditures. The current reserve policy for water is to maintain a minimum working capital balance equal to 20 percent of operating expenditures. However, the Water Environment Federation recommends three months of operating costs, or 90 days, as a minimum reserve for water utilities. They also indicate higher levels of reserves may be needed based on the actual operational experiences of water utilities. Therefore, 90 days of operating costs is the recommended minimum for Poway's water utility. However, setting a reserve target of six months, or 180 days, is prudent given Poway's bi-monthly billing cycle. Having a higher target equal to twice the recommended minimum helps moderate the cash flow associated with a bi-monthly billing process. Capital reserves generally have less defined guidelines given capital investment varies so much between utilities. The variation occurs because factors such as the age of the system can vary greatly. RFC analyzed the water utility's near-term capital plan to find a reserve target appropriate for Poway. Based on this analysis, a minimum reserve is being recommended at 10 percent of net capital assets. The following chart shows the estimated operating and capital reserves over the next 5 years. Operating&Capital Reserves(Water) 20 0 18 2 $ 16 S14 12 S10 8 6 4 52 SO FYE 2020 FYE 2021 FYE 2022 FIE 2023 FIE 2024 Total Reserves — Minimum Reserve Target Reserve 17 of 30 October 15, 2019, Item #5.1 These reserves will help mitigate potential risks, mitigate revenue fluctuations, and smooth rates. They are also important to mitigate emergencies such as emergency repairs, droughts, natural disasters, and unforeseen economic influences. Revenue Adjustments: Costs to operate a water utility increase over time. San Diego County has a semi-arid climate. Before 1947, the San Diego region relied on rainfall and groundwater to meets its water needs SDCWA, Urban Water Management Plan 2010). As the economy and population grew, local water resources became insufficient to meet the region's water supply needs and required imported water from hundreds of miles away to support the growth. Importing water is very energy intensive. Over-time, the cost to transport this water increases as factors like energy prices increase. Investment by SDCWA into regional water supply and infrastructure projects to reduce reliance on imported water and mitigate the effects of natural disasters, such as earthquakes, is also expensive. For example, SDCWA's investment into the Claude "Bud" Lewis Desalination Plant cost close to $1 billion, but it gave the region a new drought-proof, locally controlled supply of water. General inflation and commensurate wage growth also tend to increase over time. The 20-year rolling average increase in the CPI All Urban Consumers — Los Angeles index was over 2.5 percent annually. As such, revenue adjustments are needed to cover the increasing costs of providing safe, reliable water on demand to a rate payer. These estimated increases are necessary to fund the costs of imported water, operational expenses, capital expenses, and appropriate reserve levels and will be discussed in more detail with the operating financial plan later in this report. The chart below shows the current estimated increases over the next five fiscal years. Revenue Adjustments(Water) 6.0 140% 5.0% 120% 10096 E4.090 m 0 ` u t 3.0% 60% 1; 2.0% 40% 1.0% 20'c 0.0% 0% FYE 2020 FYE 2021 FYE 2022 FYE 2023 FYE 2024 MINIM Revenue Adjustments(Water)— — Debt Coverage n Required Cc.erage Coverage Alert A two-year rate setting process is being recommended. For the first two years, 4.5% revenue increases are being recommended. These increases are being recommended regardless of which rate design option is chosen. The rate design options discussed previously determine how the costs are apportioned and, thus, how the revenue is collected. The revenue, or rate, increases are based on the funds required to cover anticipated expenses. Based on the financial/operational performance of the water utility during the first two-year period, the rate increases proposed for the next two-year period (2022 and 2023) could increase or decrease; currently estimated at 5.25 percent. 18 of 30 October 15, 2019, Item #5.1 Staff would only return to Council for rate approval if the second-year rates were too low to sufficiently fund operations. Under the law, any increases beyond the previously approved maximum rate increases require a new public hearing process. If the required second-year rate increase was lower than the approved rate increase, staff could administratively reduce the rate increase. If this were to occur, staff would notify Council and rate payers of the change. Setting two-year rates is more cost-effective. It costs upwards of $10,000 to set rates based on the printing costs associated with the Proposition 218 notice, the postage costs of mailing the notice, the staff time involved in administering the process, among other reasons. Moving to a two-year rate setting process strikes a balance between flexibility and efficiency. A two-year period is short enough to allow rate changes if future projections are different than anticipated while also reducing the costs of adopting new rates. The chart below shows the projected expenses over the next five fiscal years, along with the current revenue, and the projected revenue based on the proposed increases: Operating Financial Plan(Water) 40 35 30 25 20 15 S10 5111SO 5 FYE 2020 FYE 2021 FYE 2022 FYE 2023 FYE 2024 Mall Operating Expenses Water Purchases mow Rate Funded Capital Nola Debt Service Net Cashflow rent Revenue D'oposed Reve^ue Several factors are currently driving the need for revenue increases over the next several years. First, the costs of imported water continue to increase. Imported water costs represent approximately 60 percent of operating expenditures for Poway's water utility. The SDCWA untreated water rate is increasing 4.8 percent even though SDCWA is using reserves to mitigate the rate increase necessary. Had they not used reserves, the rate increase for untreated water would have been greater. Some drivers in SDCWA's rate increase are Metropolitan Water District rate increases and Quantification Settlement Agreement (QSA) increases of 6.4 percent. The QSA was part of SDCWA's supply diversification strategy and will provide up to 200,000 acre- feet of water to the San Diego County region not previously available. Second, rate funded capital is increasing over the next five years as the city proactively invests in rehabilitation and repair of its water infrastructure to ensure is continues to provide safe, reliable, and affordable water. A more detailed description of current infrastructure investment is discussed on the city's Fiscal Year 2019-20 Comprehensive Financial Plan. 19 of 30 October 15, 2019, Item #5.1 The chart below shows the cost of the anticipated capital expenditures over the next five years. Capital Funding Sources(Water) 3.5 53 22 0 53.0 2.81 2-5 52.07 2.0 51.44 51.5 1. 011150.5 50. 0 FYE 2020 FYE 2021 FYE 2022 FYE 2023 FYE 202 Debt Funded Rates/Reserves Funded •Total CIP Continued investment into operations and system rehabilitation and renewal, along with long- range prudent financial management, will help ensure the City of Poway continues to provide safe, reliable, and affordable water on demand to its rate payers. Wastewater Rate Design The rate design process develops rates and rate structures that generate revenue from, and within, the various rate payer classes and is completed once the cost of service has been determined and these costs have been allocated to the rate payer classes based on their proportional use of the system. Based on City Council direction, RFC has developed several rate design options for Council consideration and public input. Each option presented is compliant with the law. Wastewater Residential Rate Payer Class Rate Design Options: RFC has developed several rate design options for the residential rate payer class. The other rate payer classes, such as non-residential, were not given multiple rate design options because their use of the system doesn't lend itself to multiple rate designs. As discussed in the legal compliance section, any rate designs must be based on how a rate payer class is served by the system. A total of four residential rate design options have been provided for discussion purposes. There are two different structures: a fixed residential rate and a fixed plus variable residential rate. Within the fixed plus variable structure, three different fixed/variable ratios have been provided. The options are as follows: Option Structure Fixed (%) Variable (%) 1 Fixed N/A N/A 2a Fixed + Variable 20% 80% 2b Fixed +Variable 25% 75% 2c Fixed + Variable 30% j 70% A fixed, or uniform, residential rate is independent of winter water usage; all residential rate payers are charged the same bi-monthly rate. In the fixed plus variable rate structure, all rate payers are billed a fixed charge, similar to water, and have a variable component tied to their winter water usage. This information will be discussed in more detail on the following page. 20 of 30 October 15, 2019, Item #5.1 Three different fixed/variable ratios are provided because, similar to water, this is an important component of rate design. The fixed/variable ratio reflects the amount of revenue collected between fixed charges which are not dependent on wastewater flow and volumetric, or variable, charges which are dependent on wastewater flow. This ratio is important for understanding the level of revenue stability. The more revenue is collected via a fixed charge, the less likely the wastewater system will be to changes in usage by its rate payers. For example, the more revenue is collected via fixed charges, the less likely a wastewater system will be to increase rates in times of conservation as less of its revenue is affected by decreased demand, all else being equal. The chart below shows wastewater is currently collecting 20 percent of its revenue from fixed charges, and 80 percent of its revenue from variable charges. FYE 2019 Calculated Rate Revenue Fixed/Variable Split(Wastewater) Fixed 1.7M,20% Variable 6.7M,80% Fxed Revenue Varabe Revenue Similar to water, the revenue being recovered via fixed charges does not align with wastewater's variable and fixed costs. The variable costs, such as chemicals and treatment, vary based on how much wastewater is produced. As shown in the chart below, approximately 50 percent of wastewater's expenses are fixed costs. Fixed costs include expenses such as salaries and benefits, maintenance costs and professional services, among others. FYE 2019 Expenses Fixed/Variable Split Wastewater) Variable Fixed 4.2M,49.8% 4.3M,50.2% Fred •Var 8 Similar to water, best practices suggest balancing the various pricing objectives versus having a set fixed/variable ratio. As such, three different fixed/variable ratios are presented showing the different impacts associated with increasing the amount of revenue collected from fixed charges. 21 of 30 October 15, 2019, Item #5.1 Wastewater Rate Design Option 1 (Fixed residential rate) Wastewater rate design Option 1 is a fixed residential rate. All residential wastewater rate payers would pay the same bi-monthly amount for wastewater services regardless of winter water use, which is different from the City's current tiered structure. A fixed residential rate structure is easy for the city to administer helping reduce costs. Revenue stability is increased with this structure because of the uniform rate. However, this structure does not account for variation in wastewater flow which can raise questions of fairness and equity. The chart below shows how this structure visually compares to the current structure. Bi-Monthly SFR Bills (Wastewater) 5160 5140 5120 60 40 s—Current e—Proposed-New Structure 520 SO 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 Bi-MonthlvWinter Water Use (units) Under a fixed residential wastewater rate structure, low volume users will see a significant increase in their bill and higher volume users will see a significant decrease in their bill. These impacts are shown in the chart below at various usage levels. The usage levels shown represent the tier breakpoints in the current wastewater rate structure. SFR Impacts at Different Usage Levels: Option 1 160 140 120 MO 5100 580 560 540 20 50 5 units 12 units 19 units 26 units 37 units 50 units 60 u Current BiI $50.88 573.46 599.79 $107.33 $122.38 5137.43 $148.73 Proposed BiI $88.76 88.76 88.76 88.76 88.76 88.76 88.76 Impact(5)37.88 15.30 11.03 -518.57 -$33.62 -$48.67 -$59.97 Impact(%)744% 20.8% 11.1%17.3%27.5%35.4%40.3% 22 of 30 October 15, 2019, Item #5.1 Wastewater Rate Design Option 2a (Fixed + variable rate structure; 20% fixed, 80% variable) This wastewater rate design option includes a fixed plus variable component and mirrors the existing wastewater structure. In the fixed plus variable rate structure, all rate payers are billed a fixed charge, similar to water, and have a variable component tied to their winter water usage. The chart below shows how this structure visually compares to the current structure. Bi-Monthly SFR Bills (Wastewater) 5140 5120 5100 580 560 Sao t Proposed-Netr Structure 520 53 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 Si-Monthly Winter Water Use (un `sl Based on an analysis of winter water use by RFC during this COSS, the average residential rate payer's wastewater flow is 15 units bi-monthly. Further, they found that residential wastewater flows should be capped at 24 units bi-monthly. Capping water consumption when determining wastewater use provides a reasonable estimate of indoor water use that actually enters the wastewater system and is ultimately processed at the treatment plant. This helps minimize the impacts of outdoor irrigation-related water use and is a more fair and equitable approach to rate payers. To calculate winter water usage on an ongoing basis, the City uses a three-year rolling average of winter water use data for a residential property covering the November through April bi-monthly billing periods. This approach provides a less volatile change in annual rates to the property year over year. The lowest winter billing period for each of the three most recent years is selected and averaged together. This amount represents the winter water use, or essential water use, for the property. To reflect that not all indoor water use is returned to the wastewater system, a factor of 85 percent is used. This factors in water use for cooking, cleaning, and other activities that don't put water down the drain. To calculate the wastewater rate applicable to a rate payer in this type of structure, the winter water use for the property is multiplied by the variable rate to provide the variable component of the wastewater bill. The variable component is then added to the fixed component to provide the bi-monthly wastewater charge for the rate payer. While this process mirrors the existing wastewater rate calculation process, it differs in an important way. Previously, when a rate payer moved into a house, they were placed in Tier 3 because they did not have an individual winter water use history. The rate payer was placed in Tier 3 because that represented the average usage of all residential customers based on the last analysis of usage. As shown in the chart above, that could lead to over-charging or under-charging an individual in many cases. As the new rate payer established winter water use history, their 23 of 30 October 15, 2019, Item #5.1 actual wastewater bill would slowly adjust to their usage patterns. In many cases, this could take up to three years to mirror their usage patterns. Based on feedback surrounding the existing residential wastewater rate calculation process, staff look for a more fair and equitable way to determine a rate payers winter water usage without significantly increasing the administrative process, and thus cost to rate payers, of doing so. As such, the calculation of winter water use, which is foundational to determining a rate payer's wastewater rate, will now focus on the property and not the individual rate payer. This approach places more value on wastewater flow patterns being a function of the property characteristics than the rate payers occupying the property. For example, a rate payer moving into a one-bedroom house is more likely to mirror the wastewater flow pattern of the previous occupant in that one-bedroom house than a rate payer in a four-bedroom house. The ratepayer in this example will start at the winter water usage associated with that one-bedroom property under the new approach. While there will still be fluctuations in wastewater flow patterns, this is a more fair and equitable approach because it reduces the likelihood of an individual rate payer paying more or less than they should. The chart below shows the impacts across various usage levels for this option. SFR Impacts at Different Usage Levels:20%/80% F/V (Option 2a) 160 140 120 100 S80 560 540 01 ik 520 SO 5 units 12 units 19 units 26 units 37 units 50 units 60 units n Current Bits $50.88 73.46 99.79 $107.33 5122.38 $137.43 5148.73 Proposed BaI $42.75 77.74 112.74 $137.73 $137.73 $137.73 $137.73 Impact(S)8.13 4.28 12.95 30.40 15.35 0.30 511.00 Impact(%) -16.0% 5.8% 13.0% 28.3% 12.5% 0.2% 7.4% This option collects 20 percent of the revenue through fixed charges which is consistent with the city's existing tiered wastewater rate structure. Lower volume users and higher volume users will see decreases in their bill, while users in the middle will see increased impacts. This is a function of how a tiered wastewater structure operates compared to a fixed plus variable structure. The chart on the previous page can help visually explain this phenomenon. The revenue stability is good under this option and the affordability for the lowest volume customers is high. 24 of 30 October 15, 2019, Item #5.1 Wastewater Rate Design Option 2b (Fixed + variable rate structure; 25% fixed, 75% variable) In this option, the amount of revenue collected via fixed charges is increased to 25 percent. Increasing the revenue collected from fixed charges helps increase the financial sustainability of the utility. The chart below shows the impacts across various usage levels for this option. SFR Impacts at Different Usage Levels:25%/75%F/V (Option 2b) 160 140 5120 100 580 560 5401 1 II 11 II II520II111SO 5 units 12 units 19 units 26 units 37 units 50 units 60 units Current BSI $50.88 73.46 99.79 $107.33 $122.38 $137.43 $148.73 Proposed BaI $45.62 78.43 111.24 $134.67 $134.67 $134.67 $134.67 Impact($)5.26 4.97 11.45 27.34 12.29 2.76 14.06 Impact(%) -10.3% 6.8% 11.5% 25.5% 10.0% 2.0% 9.5% This option increases the revenue stability over Option 2a by increasing the amount of revenue collected via fixed charges while still offering good affordability to the lowest volume rate payer. Users with usage in the middle will start to see some reduced impacts as compared to the impacts in Option 2a. This occurs because the variable rate per unit decreases as the fixed charges increase. The more usage occurs, when compared to Option 2a, the lower the per unit cost. 25 of 30 October 15, 2019, Item #5.1 Wastewater Rate Design Option 2c (Fixed + variable rate structure; 30% fixed, 70% variable) In this option, the amount of revenue collected via fixed charges is increased to 30 percent. Increasing the revenue collected from fixed charges helps increase the financial sustainability of the utility. The chart below shows the impacts across various usage levels for this option. SFR Impacts at Different Usage Levels: 30%/70%F/V (Option 2c) 160 5140 120 100 580 5: iiiIIISO 5 units 12 units 19 units 26 units 37 units 50 units 60 units Current 5 I $50.88 73.46 99.79 $107.33 $122.38 5137.43 $148.73 Proposed Bill $48.50 79.12 109.74 $131.61 $131.61 5131.61 5131.61 Impact(5)2.38 5.66 S9.95 524.28 9.23 5.82 17.12 Impact(96)4.7% 7.7% 10.0% 22.6% 7.5% 4.2% 11.5% In Option 2c, the lowest volume users still see a reduced impact when compared to the city's current wastewater structure which helps increase affordability. Almost all users in the middle usage areas see decreased impacts from either Option 2a or 2b while high volume users see more of a reduction in impact. As discussed earlier, for high volume users this is driven by the new cap in usage to recognize water beyond 24 units is more likely than not to be related to outdoor water usage which does not impact the wastewater system. When looking at the impacts to rate payers across all wastewater options, a fixed charge recapturing 30 percent of wastewater's fixed costs helps provide an equitable balance between revenue stability, which helps support financial sustainability, and affordability. Wastewater Financial Plan Similar to the discussion for water, the financial plan for providing wastewater services is an important component of the COSS process. It looks at the financial policies for providing wastewater service, such as how reserve levels are determined or when debt issuance is appropriate. The financial plan also looks at the current and projected level of expenses and examines the amount of revenue required to meet the operational goals of providing wastewater service. The amount of revenue required influences the proposed revenue, or rate, adjustments needed over time. Wastewater Collection Method: Staff looked at how wastewater revenue could be collected for residential rate payers. This analysis was done given upcoming legislation relating to the discontinuation of residential water service titled Senate Bill No. 998 (SB 998). It was contemplated that collecting residential wastewater bills on the property tax rolls could help reduce the impact to a rate payer's monthly 26 of 30 October 15, 2019, Item #5.1 bill. The idea was an individual may be more likely to pay their water bill and avoid discontinuation of service if their bill did not include the wastewater portion (i.e. it was lower). There are several challenges associated with collecting wastewater bills via the tax rolls. It would be administratively challenging because a full year's worth of bills must be calculated and submitted to the County Auditor Controller by August 10th of each year. This would increase the staff resources needed to administer such a collection method increasing costs to rate payers. It would be financially challenging because residential wastewater revenue represents 77 percent of total wastewater revenue and the cash received is generally in two large installments, after the December 10 and April 10 property tax delinquency dates. Higher reserve levels would need to be maintained to deal with the cash flow timing issues under this collection method increasing costs to rate payers. Upon completion of this analysis, staff does not recommend collecting residential wastewater bills via the property tax roll. Financial Policies: Similar to water, the current reserve policy for wastewater is to maintain a minimum working capital balance equal to 20 percent of operating expenditures. Consistent with the newly proposed water operating reserve levels, and for the same reasons, the recommended minimum operating reserves are 90 days of operating costs with a target reserve of 180 days. As discussed in the financial policies section for water, capital reserve levels generally vary based on conditions specific to each utility. In the case of wastewater, a minimum reserve based on the 5-year average capital improvement program (CIP) is recommended because it more closely matches the estimated debt service payments for the San Diego Pure Water program, a large portion of wastewater's overall CIP. San Diego's Pure Water project is a multi-year project that is projected to supply one-third of San Diego's water supply locally by 2035. The following chart shows the estimated operating and capital reserves over the next 5 years. Operating&Capital Reserves(Wastewater) 51L 0 512 510 58 55 52 S0 FYE 2020 FYE 2021 FYE 2022 FYE 2023 ctai Reserves — — M numum Reserve —Target Reserve Reserve levels are well in excess of the newly established targets. This was a strategic financial management decision in preparation for San Diego Pure Water. Funds to help cover Poway's estimated share of this regional project have slowly been set aside to mitigate impacts to rate payers. As the chart shows, the reserves are going to be drawn down over the near-term to help pay Poway's share of the Pure Water project. 27 of 30 October 15, 2019, Item #5.1 Similar to water, wastewater reserves will also help mitigate potential risks, mitigate revenue fluctuations, and smooth rates. They are also important to mitigate emergencies such as emergency repairs, droughts, natural disasters, and unforeseen economic influences. Revenue Adjustments: As with water, the costs to operate a wastewater system increase over time. Part of the upward pressure on costs relate to general inflation and aging infrastructure, like water. However, the cost to treat wastewater is also increasing. A wastewater treatment plant is designed to treat certain types of waste. As people dispose of pharmaceuticals, food waste, cooking oil, industrial chemicals, etc. down the wastewater system, the treatment process gets extended which increases costs. It also increases the maintenance of the system driving operating costs higher. Revenue adjustments are needed to cover the increasing costs of providing safe and reliable wastewater services to rate payers. The chart below shows the current estimated increases over the next five fiscal years. Revenue Adjustments(Wastewater) 7.0% 140% 6.0% Emim 120% 5.0% 100% 111 a+ 3 4.0% 80% l a 3.0% 60% „ s 2.0% 40% 1.0% 20': 0.0% 0% FYE 2020 FYE 2021 FYE 2022 FYE 2023 FYE 2024 Revenue Adjustments(Wastewater)— — Debt Coverwe Peau,ed Cevera e CoverageA'ert These estimated increases are necessary to fund the costs of wastewater treatment, operational expenses, capital expenses, and appropriate reserve levels. Increases are being proposed even though reserves are being drawn down. This is a long-range financial management approach to mitigating impacts to rate payers of the Pure Water project. If reserves were used until they were below recommended minimum levels, multi-year double digit rate increases would be required to fund Poway's share of the Pure Water project and replenish reserves. Using a combination of reserves and rate increases reduces the overall rate increases needed to fund operations which reduces costs to rate payers. Similar to water, a two-year rate setting process is also being recommended for wastewater. This approach will help save wastewater rate payers money while still providing flexibility in the financial management of the utility. 28 of 30 October 15, 2019, Item #5.1 The chart below shows the projected expenses over the next five years, along with the current revenue and projected revenue based on the projected increases. Operating Financial Plan(Wastewater) 514 C 512 510 5s 56 54 52 SO 52 54 FYE 2020 FYE 2021 FYE 2022 FYE 2023 PIE 2024 Operatire Expenses mom Rae Funded Capital MIMI Debt Service Net Cashflow —Current Revenue — — Proposed Revenue As the chart shows, even with the recommended rate increases, revenues are not sufficient to fund operations and capital investment. As discussed previously, reserves are being drawn down to help cover the shortfalls shown in the chart. Several factors are currently driving the need for revenue increases over the near term. First, San Diego's Pure Water project is a multi-year project that is projected to supply one-third of San Diego's water supply locally by 2035. Based on projections from April 2019, Poway's estimated share of the project is over $4 million annually for the next five years. Second, rate funded capital is being proactively invested in the rehabilitation and repair of the wastewater infrastructure to ensure Poway continues to provide safe, reliable, and affordable wastewater services. A more detailed description of current infrastructure investment is discussed in the City's Fiscal Year 2019-20 Comprehensive Financial Plan. The chart below shows the anticipated capital expenditures over the next five years. Capital Funding Sources(Wastewater) Sl E S1.70 51.e 51.4 51.29 51.2 S1 CC 51.0 SO.8 50. 61 50.6 50.45 50.4 50. 211150.0 FYE 2020 PIE 2021 FYE 2022 FYE 2023 FYE 2024 Debt Funded I Raes/Reserves Funded •Total C IP Continued investment into operations and system rehabilitation and renewal, along with long- range prudent financial management, will help ensure the City of Poway continues to provide safe, reliable, and affordable wastewater services to its rate payers. 29 of 30 October 15, 2019, Item #5.1 Environmental Review: This action is not subject to review under the California Environmental Quality Act (CEQA). Fiscal Impact: There is no direct fiscal impact associated with this staff report because it only contains information related to the workshop. However, based on the information contained in this staff report, sufficient revenues to fund operations, investment in capital infrastructure, and appropriate reserve levels will be generated from the recommended water and wastewater revenue increases staff will present to the City Council on January 7, 2020 when it is anticipated the City Council will set the public hearing for rate adoption on March 3, 2020. The proposed revenue increases are independent of what rate design Council ultimately pursues. The revenue increases are determined by the costs to operate the water and wastewater systems while the rate designs deal with how those costs are allocated amongst rate payers. Over the next two-year period, it is estimated approximately $2 million in additional water revenues will be generated while approximately $900 thousand in additional wastewater revenues will be generated. Safe reliable water delivered on demand to an average residential rate payer costs less than nine- tenths of one penny per gallon. Treating the average residential rate payer's wastewater in a safe and reliable fashion also costs less than nine-tenths of one penny per gallon. Public Notification: None. Attachments: None. Reviewed/Approved By: Reviewed By: Approved By: l‘ff/4 Wend Kaserman Alan Fenstermacher Ch s H_'-Itine Assistant City Manager City Attorney City Manager 30 of 30 October 15, 2019, Item #5.1 Item 8.1 Conference with Legal Counsel – Anticipated Litigation Government Code § 54956.9(d)(2) – one (1) case Item 8.2 Conference with Real Property Negotiator (Gov. Code 54956.8) Property: APN 278-450-2700 City Negotiator: City Manager Chris Hazeltine Persons with whom the City Negotiator May Negotiate: Best Best & Krieger; Ron Little Under Negotiation: Price and Terms of Payment