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D R A F T
RANCHO PALOS VERDES CITY COUNCIL
FINANCE ADVISORY COMMITTEE JOINT WORKSHOP
ADJOURNED REGULAR MEETING
NOVEMBER 30, 2004
The meeting was called to order at 7:01 P.M. by Mayor Gardiner at Fred Hesse Community Park, 29301 Hawthorne Boulevard, notice having been given with affidavit thereto on file.
Roll call was answered as follows:
PRESENT: Clark, Long, Wolowicz, Mayor Gardiner
Finance Advisory Committee:
PRESENT: Ben Bouey, Gina McLeod, Bill Smith, Richard Wallace,
Lori Zorn, Chair Becky Clark
ABSENT: Mark Grimme
Also present were City Manager Les Evans; City Attorney Carol Lynch; Assistant City Attorney Robin Harris; Director of Public Works Dean Allison; Finance Director Dennis McLean; Accounting Manager Kathryn Downs; Senior Engineer Ron Dragoo; City Clerk/Administrative Services Director Jo Purcell; and Recording Secretary Denise Bothe.
Finance Advisory Committee Chair Clark and Vice-Chair McLeod led the flag salute.
APPROVAL OF AGENDA:
Councilman Wolowicz moved, seconded by Councilman Long, to approve the Agenda as presented. Without objection, Mayor Gardiner so ordered.
Lois Larue, 3136 Barkentine Road, noted her delight in the removal of four orange posts and caution tape that had been lying adjacent to Palos Verdes Drive South in the landslide area. She briefly commented on the passing of Charles Stewart and stated that she would like to get a copy of that notice which was published in the September 17, 2004 newspaper.
CITY MANAGER REPORT:
City Manager Evans commented on recent attempts by the City of Huntington Park to dispose of 80,000 tons of Northridge earthquake debris; noting that a report described the debris as being hazardous to the local residents, primarily from dust particulate matter. He stated that there were plans to haul that debris to the Chandler’s waste facility in Rolling Hills Estates; but that because of an alert citizenry and City of Rolling Hills Estates’ attempts to thwart that transportation, Chandler’s has decided not to accept that debris.
Mayor Gardiner thanked City Manager Evans for investigating what was going on and reporting to Council; advised that the Chandler quarry is not too far from a school; and on behalf of the City and City Council, he commended Chandler’s decision makers for making the decision not to accept that debris, and he thanked Rolling Hills Estates for being alert in dealing with this matter.
REGULAR NEW BUSINESS:
The staff report of November 30, 2004 recommended that Council: (1) Receive and file this staff report, including the Preliminary Financial Model for the Water Quality and Flood Protection Program and the pro-forma calculation of the pro-forma user fee rate, both to be used solely for discussion and not to be considered "final" costs and the proposed user fee;
(2) Authorize staff to continue to develop a Water Quality and Flood Protection Program, including the development of a user fee system and the preparation for a mail ballot measure that would be conducted during Summer 2005 in accordance with Proposition 218 requirements;
(3) Subject to approval of the proposed Water Quality and Flood Protection Program and user fee by property owners, approve the concept of an initial, one-time transfer of $2 million of General Fund Reserves to a new Water Quality and Flood Protection Program enterprise fund in early FY 05-06;
(4) Proceed with the Community Education and Outreach Strategy regarding the proposed Water Quality and Flood Protection Program to be designed by Moore Iacofano Goltsman, Inc. ("MIG"), the City’s Public Information Consultant;
(5) Authorize an additional budget appropriation during FY 04-05 of $200,000 for services to be provided by MIG, Fieldman, Rolapp & Associates and Harris & Associates, as well as postage, printing and other costs, in order to continue the development of the Water Quality and Flood Protection Program and the process to establish a user fee; and,
(6) Defer consideration of establishing a sewer user fee and utilize General Fund Reserves, augmented by County Sewer District funds and services, to complete the cleaning and video inspection of the City’s entire sewer system, as well as any sewer line segment repairs deemed essential over the next five years.
Noting that Councilman Stern was not able to attend this evening’s meeting, Mayor Gardiner suggested that a final decision not be made until a full Council is present. No objection was noted.
City Manager Evans stated that an ambitious effort has been made since 1997 when that City Council first authorized a study to evaluate the City’s storm drain system; advised that a master storm drain plan was presented to community leaders and City Council; and advised that in early 2002, the Finance Advisory Committee (FAC) received an infrastructure financing plan, looked at the City’s storm drain deficiencies, looked at other infrastructure difficulties, and studied various financing alternatives to address those deficiencies. He stated that the FAC made some recommendations on financing in the 5-Year Model; and that a year later, a joint meeting between the FAC and the City Council was conducted, at which time the FAC briefed the City Council on their findings and recommendations. He noted that not long after that joint meeting, the City Council approved a sewer study; advised that the sewer investigation was completed and that a report was presented to City Council recently. He advised that in January 2004, City Council also selected financing alternatives or plans for the infrastructure as one of its four tactical planning objectives for the next 2-year period.
City Manager Evans stated that this evening, Council will be given a brief recap of the storm drain deficiencies and learn that approximately $29 million is needed to bring that system up to a proper state; noted that staff and the finance team that’s been working on this project is recommending a Storm Drain User Fee be established to provide a revenue source to fund those improvements. He noted the sewer investigation indicated that the problems with the sewer facilities were very modest compared to storm drains; and that staff anticipates needing $3 million to complete a total investigation of the City’s sewer system and to repair the deficiencies that exist. City Manager Evans noted staff’s belief that these corrections can be done without establishing a fee, and that General fund reserves could be used to accomplish the work required.
City Manager Evans noted that finance staff will comment this evening on the 5-year financial model that has been updated to reflect the successful passage of Proposition 1A (protection of local government revenues) and a more predictable source of revenues over the next few years; advised that staff has added back into the 5-year financial model the pavement management program and the NCCP support funds that Council has previously discussed; that staff will point out this evening that the City’s annual revenues are sufficient only to support its existing programs and are not adequate to support a new program for storm drain renewal or even a significant increase in traffic or law enforcement; and stated that staff will address the methodology for developing a Storm Drain User Fee. He advised that staff obtained feedback from the community about what some of the residents know about the infrastructure problems, what they feel would be the right way to address those problems; and noted that some residents were interviewed with a telephonic survey which are not yet ready for reporting purposes. He noted that early indications of those surveys suggest that there is a lot of education that needs to be done throughout the community before the City attempts to put a User Fee or any type of a financing mechanism on a ballot. He noted that tonight, staff will talk about the implementation schedule should City Council want to pursue a Storm Drain User Fee, how a schedule would have to be developed to make sure that the right dates are targeted – noting that state law only gives two dates each year that the City can do its balloting on a User Fee. He added that it would be helpful to set a date for a follow-up meeting, so that this important issue is addressed in a timely fashion.
Councilman Wolowicz noted a sense of urgency in re-addressing the 5-year model in advance of making a conclusive decision on this matter and noted his interest in having the 5-year model in front of him in order to see the impact of all items that will go into this effort.
City Manager Evans noted that Council would be advised of the impact of what these programs might mean to the 5-year financial model and suggested bringing that model back to Council at the follow-on meeting.
Mayor pro tem Clark highlighted the point made in the summary that the City’s annual revenues today are only sufficient to fund existing programs; and programs such as infrastructure renewal, which is something that can’t be ignored, can’t be funded under the City’s existing revenue sources. He alerted Council to the fact that the L.A. County Board of Supervisors had requested that a study/audit be conducted to determine if County Sheriff services for law enforcement are being equitable shared among all cities that are served by the Sheriff’s Department; and noted that the end result of that analysis has indicated that contract cities are reportedly under-contributing and as a consequence, there could be some substantial additional required expenditures on this City’s part just to maintain its existing law enforcement services from the County.
City Manager Evans confirmed that there currently is an audit going on at the County level; and stated that it is very likely the L.A. County Board of Supervisors will be considering passing on more costs to contract cities. He added that a decision has not yet been made on this issue.
Finance Director McLean introduced the Infrastructure Financing Team members present at this evening’s meeting, noting that as many as 15 people have been involved in this process over the last year and a half. He introduced the City’s financial advisor, Feldman, Rolapp & Associates; the City’s engineering consulting firm of Harris & Associates – namely, Joan Cox, who developed a preliminary rate analysis in regard to a Storm Drain User Fee. He advised that the database of approximately 15,000 parcels within RPV was included in the analysis. He introduced the City’s public information consulting firm of Moore, Iacofano & Goltsman, Inc., (MIG) – namely, Joyce Vollmer, who is the project manager; and introduced Attorney Robin Harris, who is Richards, Watson & Gershon’s municipal finance expert. He added that City Manager Evans and City Attorney Lynch have been actively involved in this project; and he commended the efforts of Accounting Manager Kathryn Downs, Senior Administrative Analyst Gary Gyves, and commended the assistance of Public Works Director Dean Allison, Senior Engineer Ron Dragoo and Assistant City Manager Carolynn Petru – pointing out that this group of people worked very well together throughout this process.
Director McLean stated that in January 2004, City Council had set a priority of infrastructure financing, specifically for storm drains, sewers, and streets. With the aid of a Power Point presentation, Director McLean addressed the street portion of the infrastructure financing, highlighting the most recent version of the financial model, which includes the pavement management cost based upon the program that was developed by Harris & Associates and was presented to City Council within the last 12 months by the Public Works Department. He advised that the average annual cost of residential road improvements included approximately $1.2 million annually; stated that when the 5-year financial model was updated in September 2004, the costs associated with the pavement management were included in that model; and advised that based upon the inclusion of streets and roadway costs per the Pavement Management Program, General Fund reserves will probably be decreased by approximately $1 million over the next 5-year period, by the end of fiscal year 08-09 – pointing out that this is before any additional storm drain and sewer project costs are included. He explained that the 5-Year Model for the General Fund does not include law enforcement costs increasing significantly next year as well as in the years thereafter. He pointed out that Line A, fiscal year 04-05, the beginning General Fund reserves are about $14 million; and noted that Line B is identified as the annual change in the General Fund balance.
Director McLean noted that as shown through the course of the model, as revised, there are dramatic shifts in the computation of the excess of estimated revenues over expenditures; and reminded those present that a policy reserve level has been defined as 50 percent of annual estimated General Fund revenues, which equates to approximately $7.1 million in the current year. He pointed out that staff has included in Line C throughout the duration of the model the estimated additional costs of the NCCP; that as last reported, the inclusion of street costs pursuant to the Pavement Management Program, this indicates that General Fund reserves will decrease down to approximately $13.2 million and still be in excess of the reserve policy.
Director McLean stated that based on the report by the Public Works Department from the video-inspection of approximately 6 percent of the sewer system, there were few deficiencies and that the overall condition of the sewer system is fair; advised that based upon the 6-percent extrapolation sample, refurbishment of the entire system would require approximately $2.2 million; in addition to that, he noted that staff recommends 100 percent of the system should be cleaned and video-inspected over the next five years at a cost of approximately $1.1 million. He pointed out that the need for sewer improvement seems to be less than storm drain improvements as staff is aware today; but pointed out that because there was only a 6-percent sampling of the sewer system conducted, there remain some unanswered questions as to whether this sampling is enough to assess the entire system; and he questioned how much line segment replacement would be performed by the County. He noted that the City could pay for the entire cost of cleaning, video-inspection and line replacement of the sewer system over the next five years as a worst-case scenario; and stated that staff believes there are sufficient General fund reserves to pay for the cost of approximately $3.3 million for cleaning, video-inspection, and some line segment replacement.
With regard to the Water Quality and Flood Protection Program, Director McLean advised that there are 56 storm drain projects identified that will cost approximately $25 million; in addition, he noted that staff recommended in June 2004 to conduct lining of some of the storm drain systems as a bridge over the long haul; subsequent to that presentation, he noted that staff is suggesting the installation of approximately 600 catch basin filtration devices at a cost of approximately $82,000 a year over five years to reduce pollutants and assist in compliance with the National Pollutant Discharge Elimination System (NPDES). He advised that General fund cash flow end reserves are not sufficient to pay for $25 million of new storm drain projects, $4.6 million of lining over 20 years in today’s dollars, and the installation of catch basin filtration devices of $82,000 over five years.
Director McLean highlighted the team’s recommendations: to continue to develop the Water Quality and Flood Protection Program, including the development of a Storm Drain User Fee system and the preparation of a mail ballot measure that could be conducted during summer of 2005; proceed with a public information process for the benefit of the residents; authorize an initial $2 million General fund transfer to an enterprise fund if the program is approved by the property owners; and to authorize an additional budget adjustment of approximately $200,000 for services to be provided to continue the development of this program and possibly leading to the establishment of a Storm Drain User Fee. Additionally, he advised that the team has realized through the course of its work that the Storm Drain Master Plan needs to be updated about every five years; and noted that when this update is completed, it’s going to lead to the identification of new projects and reprioritization of existing projects. Director McLean advised that the Storm Drain User Fee rate, if there is one, will be reviewed and set annually by City Council in a public hearing forum; explained that a Storm Drain User Fee could be billed using the County Property Tax Rolls beginning in fiscal year 06-07; and that any funds collected would be deposited into a dedicated enterprise fund to enable program accountability and separation from all other financial activities of the City. In addition to that, he noted the enterprise fund would be a part of the audit of the City’s financial statements and internal control procedures.
Director McLean explained that it is necessary to establish a Storm Drain User Fee because the City’s General Fund cash flow and reserves are not sufficient to pay for $29 million of program costs; stated that a dedicated Storm Drain User Fee revenue source will be necessary to collateralize any state financing that’s available and that a dedicated Storm Drain User Fee source will probably be necessary to secure debt. He added that the FAC believes the establishment of a Storm Drain User Fee is the most practical revenue alternative which provides monies to pay for storm drain improvements; and that the staff would not consider financing through a loan program without a dedicated revenue source to be provided for collateral to demonstrate the City’s ability to repay that loan. As part of the proposal for the program, he added that the team recommends transferring from the General fund $2 million to a new enterprise fund to begin this program, which they believe will reduce the Storm Drain User Fee to the property owners by approximately $6 per Equivalent Residential Unit (ERU) per year; and he mentioned this also allows the first project to begin before the Storm Drain User Fee is collected. Director McLean stated that staff would propose to begin this program during the next fiscal year even though the City can’t actually start collecting the money through the tax rolls until fiscal year 06-07. He highlighted the well-known high priority storm drain project for Sunnyside Ridge Road, which is ready to be constructed; and explained that making this $2 million transfer into the enterprise fund would enable the City to begin the program before collecting the Storm Drain User Fee. He mentioned that the team believes current General fund reserves are adequate to make this transfer; and that the City’s financial advisors believe it is prudent and that the City is in a position to make this $2 million transfer that is proposed.
Director McLean pointed out that the 5-Year Fiscal Impact Schedule depicts a worst-case scenario, with a beginning General fund reserve of $14 million; explained that if the City were to begin the program and to continue over a 5-year period to perform the sewer cleaning and video-filming completely at the City’s cost, that if the City were to do some sewer re-lining at approximately $432,000 per year also at the City’s cost, staff believes there would be General fund reserves that would exceed the policy reserve level in fiscal year 08-09 and the year after that. He stated that he is not suggesting the City will have to absorb the cost of cleaning, video-filming and line segment replacement, noting that this has not yet been worked out with the County.
Director McLean explained that in the preliminary rate analysis prepared by Harris & Associates each parcel size is defined as having an estimated impervious surface factor per the L.A. County Hydrology Manual, all based on countywide averages; that the manual attempts to depict what areas of a typical parcel are hardscaped, such as a spa, garage, driveway, patio, walkway, tool shed, house, which are areas that cause water to run off and ultimately use the storm drain system versus the rain water soaking into the soil on that lot. Based on the L.A. County Hydrology Manual and based on the preliminary rate analysis that’s been performed by Harris & Associates, he noted that a typical quarter-acre single-family residence has an approximate impervious factor of .42; that the preliminary rate analysis multiplies the impervious factor by the parcel size to arrive at the Equivalent Residential Unit (ERU) for a particular parcel; and that each parcel is assigned an ERU factor to define its proportionate use of the City’s storm drain system.
Director McLean advised that staff has a data base of each RPV parcel; that based upon a lot of a quarter acre with an impervious factor of .42, the drainage unit computation would be .092; that based upon the preliminary rate analysis, 95 percent of the City’s parcels have a drainage unit factor of .092; and, therefore, the factor of .092 drainage units equal 1 ERU. He added that there are a little less than 15,000 ERU’s served by the City’s storm drain system based upon this preliminary rate analysis; that if the City Council chooses to proceed with establishing a Storm Drain User Fee, one step that would be required is for Harris & Associates to do a more thorough examination of some of the parcels, especially commercial, institutional and other large parcels to define more clearly what the ERU factor would be for those parcels; stated that based upon the rate model that has been developed by the team, the average annual cost of maintaining the program would be approximately $2.5 million; and that dividing that number by approximately 15,000 ERU’s, staff arrives at an estimated, preliminary cost per ERU of approximately $168.
In response to Mayor pro tem Clark’s inquiry regarding how various parcels would be affected, Director McLean advised that there are approximately 2,800 parcels within RPV that are not served by the City’s storm drain system, but are served by either a combination of storm drain systems of other cities as well as County storm drain facilities.
Director McLean stated that If Council chooses to move forward with this project, a public information process will be conducted, including development of educational materials, community workshops, development of media materials, preparation of press releases at appropriate times, conducting a mail survey, and preparing information statements for a mail ballot process.
Finance Advisory Committee Chair Clark highlighted a statement in the staff report that indicates a $30,000 a year estimate that the City would pay to cover the School District’s Storm Drain User Fee. Assistant City Attorney Harris explained that it’s traditional, when one public agency levies a fee against another public agency, for the levying public agency to pick up the other’s cost, that the City would pick up the School District’s assessment.
Councilman Long questioned if any thought had been given to incorporating the remnant areas of storm drains owned by the County and the small number of private systems within the City’s management of storm drains. He questioned the history is as to why there is a split in these systems.
Director Allison explained that when the City incorporated, the County did take over the maintenance of some of the storm drains that conformed with certain criteria the County had established, such as size and condition; advised that the private system include the drainage system at Ocean Trails – noting that as part of the City’s agreement with Ocean Trails, Ocean Trails is responsible for maintaining its own system. He stated that no consideration was given to incorporating these systems because the City is not interested in taking over the County’s system and the Ocean Trails system. He stated that the County has to be encouraged to do a thorough job maintaining their drains and added that the City is reluctant to take on that added responsibility unless the City could somehow get the funding from the County to deal with their system.
Mayor pro tem Clark requested clarification on the list of prioritization of the 56 storm drain projects.
Director Allison explained that for Priority 1 projects, staff is basically saying that there will be flooding on private properties during a 50-year storm – pointing out that 12 projects fall into this category; and advised that numerous Priority 1 projects are located on Palos Verdes Drive East (PVDE). He advised that for Priority 2 projects, if there is a strong rain, the water may not go over the right-of-way curbs, but there will be erosion of the bluffs and in the canyons; and that if this continues over time, there will be problems to homes in the area. He noted that Priority 3 projects are low-priority projects, where the street flooding is inconsequential, but does constitute more of a nuisance; and advised that there are about 18 projects in that category totaling $6.7 million.
Mayor pro tem Clark asked staff what they see as the consequence if the City does not take a proactive, systematic approach to renewing its storm drain infrastructure.
Responding to Mayor pro tem Clark’s inquiry, Director Allison advised that in the short term, there will be more inconveniences for RPV’s residents; and that there will be flooding on private properties and a great potential for roadway closures. He explained that it is better to do the jobs now in a proactive manner than in a reactive manner, highlighting the emergency San Ramon Canyon drainage project as the best example of what happens when no action is taken.
Mayor pro tem Clark questioned if the City took that approach, is there a realistic possibility of some parallel or multiple catastrophic failures could hit the City at one time. Director Allison answered in the affirmative.
Councilman Wolowicz questioned if the $2 million set-aside would be refunded to the General fund.
Director McLean noted that the $2 million would be characterized as seed money and not refunded.
Councilman Wolowicz expressed his preference that the $2 million seed money should somehow find its way back into the General fund; he questioned if the City is going to be adequately covered for maintenance and repairs or will the City be setting some funds aside in some type of sinking fund manner to preclude this large, catastrophic amount from recurring. He stated that he does not want to see this Council’s successors dealing with a similar storm drain problem in the future.
Director McLean explained that when the team went through the process of developing the financial model, they took 56 projects and spread them over 20 years; that this was a starting point, with a clear recognition by the team that what the City knows today will be very different once the City updates the Master Drainage Plan in five years, that there will be new projects that the City does not know about today. With regard to the City’s revenue sources, he pointed out that the City has one of the lowest costs of operations per population in the State; that based upon what the team knows, it believes that it’s best the City start this program off and be designed to continue in perpetuity, knowing that as the City goes through and completes the 56 known projects, there may be more that will be identified. He added that this Storm Drain User Fee is intended and the Storm Drain User Fee model was designed such that, perhaps 30 years out, the user fee will be sufficient to simply maintain the system.
Councilman Wolowicz questioned if the entire $168 per ERU is not used immediately, would those funds be segregated in some fashion so that as new items are discovered, those funds would be available.
Director McLean answered in the affirmative; explained that the team developed a model to occur over 20 years; and that they also recognized there will be an accounting performed annually of what’s been spent, what’s expected to be spent, as a part of the projects or maintenance, to assist staff in making a recommendation to the City Council each year as part of the public hearing to decide what the user fee rate should be. He pointed out that the team made a good faith effort to establish a system where the user fee will pretty much be the same for a long period of time.
Mayor Gardiner thanked staff, the finance team, and FAC for all their hard work. Mayor Gardiner stated that he would find it useful to see a comparison, to see what it would look like if Council were to choose the route of no user fee and simply advance the same $2 million, or possibly $3 million, to fix some of the projects and spread out the Priority 1 projects; and he questioned how long the $3 million would last and questioned at what point do revenues from the Trump National Golf Course and the Long Point Resort come into the funding stream.
Director McLean explained that it would not be prudent to factor a prospective future revenue stream from a development, such as the Long Point Resort project, into the financing of these projects; noted that in the preparation of the 5-year financial model, the revenue streams for the Long Point Resort project are not included because the timing is unknown as well as the rate in which any kind of tax revenue would grow to a sustainable level.
Mayor Gardiner stated that he would find it useful to see that alternative put out, analyzed and presented so that he can compare it to the other options.
Director McLean stated that if Council so desires, staff will prepare that type of financial model; but noted that as a long-time financial professional, it is his belief it’s prudent not to include a revenue stream that is unknown and uncertain at this time as a potential financing source for infrastructure improvements.
Mayor Gardiner stated that he would like the opportunity to explore all options/ alternatives prior to supporting a user fee; stated that a $3 million transfer to the General fund might buy the City four to five years; and by that time, the City will have better knowledge about what revenues might be coming in from the Long Point project.
City Manager Evans stated that staff would explore both Long Point and Ocean Trails as possible revenue sources to fund the infrastructure improvements.
Mayor Gardiner asked that staff show how many Priority 1 projects can be done with the $3 million and over what time frame; and that it would be useful to show a differential equation as to how fast the money is coming in versus how fast it is going out and whether the City is likely to see any other revenues. He stated that going to the public for user fee should be the last resort after proving it couldn’t be done any other way.
Director McLean noted his belief that if the City does not proceed with the program for storm drain financing, if it uses $7 million or some amount of General fund reserves for storm drains -- something larger than the $2 million -- there’s a clear presumption there would be nothing left over to spend or it would preclude spending monies for sewer cleaning, video-filming or any sewer relining and that the General fund reserve would sink below the policy level earlier unless it had additional funds coming in from Ocean Trails or Long Point. He noted that the City could reduce a user fee at any point in the future if other revenue sources become available.
Councilman Long questioned the time it takes to get a user fee on line.
Director McLean stated it would take approximately one year.
Vice-Chair McLeod explained that if the City did not have a user fee in place, it would not have ample collateral to apply for loans in the event of a catastrophic event.
Councilman Long questioned if the City could, as an alternative, use a hotel tax or golf fees as collateral.
Director McLean stated that the City could not use those fees as collateral because the hotel and golf tax are General fund monies.
City Manager Evans added that those fees would be far too volatile to be a reliable source of funding.
Councilman Long stated that the Council has to consider not only the best-case scenario, but that it also has to consider the possibility, as it has existed up to now, that the City has seen little revenue from Long Point or Ocean Trails to date.
Mayor pro tem Clark noted his support for exploring alternative options; stated that he would like to see as part of that exploration an updated list/survey of California cities that have a user fee for storm drain infrastructure renewal and which ones, if any, have used developmental project revenue streams as a funding source for infrastructure renewal.
Warren Sweetnam, 7 Top Rail Lane, representing the Rocking Horse Homeowner’s Association, pointed out that there’s no mention of residents having septic tanks on their properties; and he suggested that these residents should be considered as part of the overall view of what’s happening in the City. With regard to storm drains, he stated that there are no City storm drains on Rocking Horse Road; advised that the City storm drains do dump water into the canyons; stated that water runoff comes from Rolling Hills and across PVDE, flooding the storm drains on PVDE and dumping water into the backyards of residents on Rocking Horse Road. He asked that this area be considered as part of the analysis.
Director Allison explained that RPV is not able to impose fees on other cities for their water runoff onto RPV properties.
City Attorney Lynch explained that as a basic principle of California Water Law, properties downstream are obliged to accept runoff from properties upstream.
City Manager Evans explained that one of the problems with Mr. Sweetnam’s neighborhood is that the water does come from other areas; advised that staff wants to try to intercept that water probably along PVDE and keep it from entering his neighborhood, which would provide a benefit to his neighborhood – stating that Mr. Sweetnam’s neighborhood should participate in supporting the funding of facilities even though they don’t have storm drains in their particular neighborhood.
Director Allison noted that the Water Board has advised staff that there are going to be fees imposed on residents who have septic tanks, noting that he does not know the amount of those fees or whether those fees will be imposed by the County or the Regional Water Quality Control Board. He noted that staff is still working with the County on that aspect, believing the City can negotiate a better deal with the County than the septic tank owners themselves.
City Manager Evans added that those septic tanks will ultimately have to be regularly inspected; that if they are upgraded, they will have to include a monitoring system; and concluded that owning and operating a septic system will be very expensive. He noted that an alternative might be to connect to a sewer. He stated that Mr. Sweetnam’s homeowner’s association was advised if they decide to do some kind of sewer district, they would most likely have to fund that themselves; and he added that these rules are being imposed by the State.
RECESS AND RECONVENE
Mayor Gardiner recessed the meeting at 8:52 P.M. and reconvened the meeting at 9:10 P.M.
Councilman Wolowicz stated that staff should make sure the City is funding storm drain maintenance as it goes along.
Director Allison stated that the model looks out for the next 20 years, not only to rebuild, but to preserve what the City has; advised that staff is not proposing to establish a sinking fund for the things that have yet to be identified with the sewers; and advised that staff believes the City can economically and efficiently address the identified needs for the next five years -- $3.3 million for sewer repairs as well as maintenance. He stated that the County has been advised of the City’s study of 6 percent of its sewer system and the identified and prioritized repairs; stated that the County is going to look at the sewer system and come back to the City with its own list of priorities for the maintenance of the City’s sewers; noted that staff may have to come back to Council to take a more proactive position with the County’s repair efforts; and he stated that a proactive investigation is necessary both with the City and the County; and that the City will be more proactive with its sewer video-taping.
City Manager Evans stated that staff believes there is an urgent problem with storm drains that need to be addressed within the next five years; and he explained that in trying to plan beyond five years, the numbers tend to become wild guesses and that it is necessary to stay within a five-year window. He stated that staff is confident the City has no problem with the sewers within the next five years; that staff has described what might be the worst-case scenario for sewers, which is to use $3 million in General funds to finish the cleaning, inspection and do some repairs – assuming the County does virtually nothing; and advised that feedback from the County is that they are doing a much better job than staff originally thought; mentioned that the County will clean and monitor the City’s sewers on a 10-year program; that they will maintain them; and that this is the reason staff is recommending, at least for the next five years, that this item be tabled.
Councilman Long stated that the additional information the Mayor has asked for probably will not be helpful to him, but noted that he respects the Mayor’s right to ask for that additional analysis. In looking at the alternatives, he stated that he agrees with the FAC’s report of March 4, 2003, which indicates that they don’t believe it is prudent to rely on potential tax revenue from the proposed Long Point Resort; that if Council looks at that additional information, Council should look at whatever the modeling is, not only for what projected revenues conceivably can come in, but for what alternate things might happen. He stated that if Council is going to look at impacts that make assumptions about increasing revenue coming in, and assuming the City gets to keep it all, Council should consider all alternatives, not just Long Point’s projection of $4.6 million in a good year, but also its off years, what will the City have left after everyone puts their hands in the till and what might the City have if the properties develop differently than anticipated. If staff is to do the sensitivity analysis, he stated that staff should look at the full parameter of things to consider, questioning if this parameter of $5.7 million in deficit spending is necessarily the worst-case scenario. He stated that this is a conservative model that’s appropriate and prudent for Council to use for planning; that he believes the FAC and staff have given good guidance in pointing Council in this direction, but added that he is not opposed to the Council looking at other models.
Mayor Gardiner noted that the sense he gets from this Council is that it is not enthusiastic about spending one-time money for on-going projects; with respect to the infrastructure; that Council wants to do the repairs, wants to be able to operate and maintain them, and wants to be able to set aside funds so that when repairs come up next, there will be funds available that Council could then tap into to do the repairs. He stated that he does not see any negatives to pushing this out in the next five years; and asked that staff provide the information also in a spreadsheet format.
Mayor pro tem Clark stated that the sensitivity analysis should also include the impacts of other initiatives that Council might want to pursue, such as opportunities for other potential revenue streams, and new projects, such as recreational facilities and a new Civic Center.
Mayor pro tem Clark pointed out that the residents will have the final say with infrastructure financing proposal; that it will take a majority of the affected property owners to affirmatively support the Storm Drain User Fee in a mail vote in order for it to proceed. He requested that staff walk through the 14-step process to establish a user fee for storm drains.
Assistant City Attorney Harris explained that the storm drain fee is a two-step process that the City Council would need to go through in order to establish the fee; advised that the first step would be to send out a public hearing notice to all property owners; stated that that notice would inform the property owners of the nature of the fee, the reason for the fee, and the amount of the fee per parcel. She added that the notice would have to be sent out no less than 45 days prior to holding a public hearing on the proposed fee. She stated that at that public hearing, Council would take public testimony and determine whether or not a majority protest existed; and pointed out that a majority protest would be based on those property owners who submitted in writing a protest to Council. She noted that Council would then go to Step 2, which is to send out another mail notice to all property owners, which would now include a ballot. She stated the mailed ballot election would occur at least 45 days after the mailing of the second notice, which would be to determine whether the fee passed based on a majority vote. She pointed out that it is a lengthy process to establish a Storm Drain User Fee, taking into consideration the time it takes for the engineering studies and the rate analysis. She added that what complicates this a bit more is that there is a new law that gives three different election dates within the year that a City can do its balloting; noted her anticipation that that law will be changed so that it will no longer apply to this type of an election, a Proposition 218 fee; that these three different dates on which to hold the election are then meshed with what the County’s deadline is for getting the fee onto the property tax rolls, which is early August. She noted that this is why this schedule doesn’t propose to have the fee collected until the following fiscal year, 06-07, because the dates don’t work out to begin collection in August 2005. She highlighted the following steps:
Councilman Long questioned if parcels not drained by City storm drains would be subject to the assessment. Ms. Harris stated they would not.
Councilman Long questioned if there’s any way to assess those parcels some figure using the rationale that they benefit from having upstream drains gather the water which would have ultimately flowed onto their properties.
Director Allison explained that the fee would be imposed on any parcel as long as there is water runoff coming from that particular lot that is captured by a City drain.
Ms. Harris explained that this is not a benefit assessment, that it is a user fee; and that if one’s property does not use the City’s storm drain, it is not assessed this fee.
Ms. Harris stated that Steps 5 and 6, in addition to the mailed notice within that same 45-day period preceding the hearing, there would be a published notice of the hearing in the newspaper, noting the time, date, place and nature of the hearing.
Ms. Harris clarified that it would take a majority of those returning ballots; advised if the fee is approved, then every year around June or July, Council would hold a public hearing to put the fee on the tax roll for the upcoming year. She explained that this long 2-step election process would only need to be repeated if the City decided to propose an increase to the fee; otherwise, if the City is at or below the fee that had been approved by the property owners, there would be an abbreviated process each year that would involve a public hearing, followed by submittal to the County. She noted that the City could decrease or eliminate the fee without the property owners’ consent one year and that it could be raised back to the maximum voted on by the property owners the next year.
Mayor pro tem Clark suggested that this process be extracted and placed on the City’s website for the benefit of the residents; and reiterated that the residents have the final say in the implementation of a user fee.
City Attorney Lynch suggested that nothing be placed on the website at this point since staff is still in the information gathering stage, stating that she does not want to have the public think that the City has jumped the gun. She noted at some point it would be appropriate to place this type of information on the City’s website.
Councilman Wolowicz questioned when the funds would be available to the City.
City Manager Evans stated that money could potentially start to come in December 2006.
Councilman Wolowicz suggested that that information be part of the cash flow table.
Councilman Long asked to include in the sensitivity analysis the possibility of paying the $2 million back to the General fund or at least having the ability to be paid back by setting the user fee sufficient to pay back to the General fund.
Director McLean mentioned that when staff did the financial modeling, they did it based on two scenarios: debt financing and pay-as-you-go. He noted that one of the key elements that effects debt financing is the cost of borrowing, which includes interest. He advised that based upon the model that was developed, what staff determined was inclusive of the 56 projects, the lining, the catch basin filtration devices and maintenance, that using the pay-as-you-go methodology, the total cost over 20 years would be approximately $47 million versus $78 million for debt financing over 20 years.
City Manager Evans noted that there are several ways to apply a user fee: 1) to divide the City into zones and attempt to determine how much each zone should pay to fund the projects in that zone; the other method is to establish a more uniform rate over the entire City with the understanding that if a fee is established in perpetuity, everybody will eventually have projects in their zone; that with establishing a fee in perpetuity, staff decided to make the fee uniform Citywide; in addition, staff conducted some stakeholder interviews, interviewing at least 30 residents who staff felt represented the community in some fashion; that these residents were asked about zones versus a uniform fee; and that for the most part, those residents felt that establishing a uniform fee throughout the City in perpetuity was a much more reasonable way to go.
Vice-Chair McLeod questioned if funds from a user fee could refund the $2 million in seed money from the General fund.
City Attorney Lynch expressed her belief that there could be a loan by the City to the enterprise fund that arguably could be paid back.
Councilman Long thanked staff, FAC, and the consultants for all their hard work thus far. He stated that the City ought to be able to avoid a borrowing alternative, which would be very expensive in terms of borrowing costs; and stated that it is not a path he would like to go down because the City does not need to have all the projects done immediately. He stated that the City can take advantage of stretching projects out over time, questioning how much the City can take advantage of that situation and whether the City can stretch things far enough such that it doesn’t have to seek out any other sources of increased revenue. He reiterated that both staff and the FAC have given some realistic models to consider that Council can work with towards evaluating that and evaluating the possibility of the user fee and what that can do for the City in terms of revenue. He noted his hope to proceed to the next meeting on this issue as soon as reasonably possible; stated that he does not like spending windfall monies on on-going expenses and that he wants to make sure the City’s regular expenses are matched by its regular revenues and that it avoids deficit spending. He reiterated a comment that RPV is one of the lowest cost cities on a per capita basis, but noted that this is not a City where it’s going to be able to wring out of the budget the large sums of money needed to deal with the problems that have been described. He noted that there is some belief that there is waste in government, but pointed out that in the time he’s been involved with RPV, he has not seen the massive amounts of waste that people believe are in government; and that he believes staff, in recognition of that, has looked at these issues and come up with very credible ways of addressing the problems. He stated that the City needed to continue to explore all possible alternatives before making a final decision.
Mayor Gardiner expressed his belief that the 5-year model reflects a large variability of revenues and expenses and questioned if this is due to the street program.
City Manager Evans stated that because the City’s Pavement Management Program doesn’t show $1.1 million a year, what is reflected is the average; advised that some years the Pavement Management Program might only cost $300,000 and the next year, it may go up to $2 million; and, therefore, it has been evened out for accounting purposes. He stated that it looks like there are large swings, but advised that the City’s revenues are very consistent.
Mayor Gardiner stated that the model appears to be running down hill because of the Pavement Management Program; and stated that at some point, the City will need to focus on the Pavement Management Program and how it’s going to provide for that so that the City does not run down the General fund.
City Manager Evans explained that the City is in the part of the Pavement Management Program where it’s on a continuous maintenance program; advised that this program was started in 1995, a point where the City was spending large sums of money, virtually all of the City’s Utility User’s Tax just doing pavement management; and he noted that the City is now spending about half as much and that the amount of annual maintenance required has leveled out.
Director McLean stated that it’s important to understand the 5-year model is a model and not the budget; the fact there were several years where nothing was spent on pavement management; that as a result of the budget crisis, Council refrained from making those expenditures when Vehicle License Fee revenues were uncertain; and that in his opinion, it’s likely that, as the Pavement Management Program is updated each year, ultimately those expenditures will start to decline because the pavement system will be in stable condition.
Mayor Gardiner noted that the downward trend is apparent and that the focus needs to be placed on that downhill trend before getting to fiscal year 08-09.
Director McLean stated that the estimated General fund reserves are somewhere in the neighborhood of $14 million to date; and that based upon the inclusion of the Pavement Management Program over the next five years, if nothing else were done in the way of storm drains and sewers, the model indicates that General fund reserves would go from $14 million to $13 million, not $8 million.
Mayor pro tem Clark echoed the commendations to staff, FAC and the consultants for their work on this project; stated that the Council is, hopefully with the support of the community, attempting to proactively deal with the issue of infrastructure renewal, which is an issue that wasn’t adequately dealt with over the last 30 years of RPV’s incorporation.
Councilman Wolowicz requested that the follow-up meeting be conducted in two parts: the first part being devoted to the 5-year plan and the second part addressing the user fee issue.
Staff noted the likelihood of presenting this topic at the January 4, 2005 meeting.
Councilman Wolowicz stated that the finance team is an excellent assemblage of very qualified people and he thanked everyone for their time and hard work thus far.
Councilman Long questioned the feasibility of bringing members of FAC to the January 4 meeting.
Mayor Gardiner asked that that decision be left to staff and FAC to decide how many FAC members should attend the meeting on January 4th.
Finance Advisory Committee Member Bouey stated that he was impressed with Council’s questions this evening; and noted that he would like the FAC to explore some of the alternatives/options suggested by Mayor Gardiner in the sensitivity analysis.
Councilman Wolowicz asked that the 5-year model revisions be distributed to Council as soon as possible.
City Manager Evans stated that Council should get that information by the 22nd or the 23rd of December.
On behalf of Council and the City, Mayor Gardiner thanked everyone for their hard work and input that evening.
At 10:35 P.M., the meeting was adjourned to December 4th, 10:00 A.M., Saturday, for a workshop on the Forrestal Management Plan at the Ladera Linda Community Center, 32201 Forrestal Drive.