AGENDA REGULAR STUDY SESSION WEDNESDAY, AUGUST 04, 2010 9:00 AM DIRECTORS PRESENT: Guglielmana Lloyd Ryan Wicke Williams PUBLIC COMMENTS DISCUSSION ITEMS 1. 2008B Certificates of Participation Letter of Credit Substitution 2. Restaurant Connection Fees 3. Quail Valley Environmental Coalition 4. A-5 Lift Station Trubutary Area - Sewer Connections 5. One Water One Watershed (OWOW) Program - Project Rating 6. Project Updates 7. Board Committee Updates 8. Other 9. Adjournment To request a disability-related modification or accommodation regarding agendas or attendance, contact Terese Quintanar, at (951)674-3146, extension 8223 at least 48 hours before the meeting. Posted 31315 Chaney Street 7/30/10 8:27 AM Lake Elsinore, CA 92530
STUDY SESSION DISCUSSION OUTLINE Date: August 4, 2010 Originator: Subject: Margie Armstrong - Finance 2008B CERTIFICATES OF PARTICIPATION LETTER ER OF CREDIT SUBSTITUTION BACKGROUND AND RECOMMENDATION The Board of Directors of Elsinore Valley Municipal Water District ( EVMWD ) and the Board of Elsinore Valley Water and Sewer Facilities Corporation (the Corporation ) have previously authorized the Refunding of the Variable Rate Certificates of Participation, Series 2008B (the 2008B Certificates ). As you may recall, the District issued its 2005 Auction Rate Certificates of Participation (the 2005 Certificates ) for the purpose of financing improvements to the District s water and sewer systems. In 2008, the bond insurer for the 2005 Certificates, FGIC, was downgraded and the market evaporated for the 2005 Certificates, which represented interest at weekly rates. The 2008B Certificates were issued to refund the 2005 Certificates. The 2008B Certificates are currently supported by a letter of credit delivered by Allied Irish Banks, PLC ( AIB ). The letter of credit expires in October 2011, however, the current state of the credit markets in Europe has caused the U.S. credit market to penalize the 2008B Certificates because they are supported by AIB. This District is considering the replacement of the letter of credit that will be viewed more favorably in the market, and now proposes to enter into a reimbursement agreement with U.S. Bank National Association to provide a substitute letter of credit. The new Reimbursement Agreement contains provisions which require that certain changes be made to the existing documents for the 2008B Certificates to which District and Corporation are parties. A resolution will be presented on the August 12, 2010 Board meeting which will approve the execution of a First Supplemental Trust Agreement and a First Amendment to Installment Sale Agreement. The EVMWD Board must also approve the Reimbursement Agreement and a Reoffering Circular for the remarketing of the 2008B Certificates with the new letter of credit. All of these documents are necessary for the 2008B Certificates to continue representing interest at variable rates. Item #1. -1-
The earliest termination date for current Letter of Credit with Allied Irish Bank is October 28, 2010. Therefore, although this transaction will terminate the agreement, the District will still have to pay for the cost for Letter of Credit through October, which is estimated to be $68,000. The estimated cost of the Letter of Credit replacement, which will be incurred independent of the timing of the transactions, is as follows: Costs of Issuance Fees & Expenses Special Counsel: Best, Best & Kreiger $ 45,000 Disclosure Counsel: Orrick Herrington Sutcliffe 35,000 Financial Advisor: Fieldman Rolapp & Associates 35,000 LOC Provider's Counsel: 40,000 Trustee: Union Bank 5,000 Rating Agency: Standard & Poor's 5,000 Moody's 5,000 Fitch 5,000 Miscellaneous/Contingency 10,000 Total Estimated Costs $ 185,000 ENVIRONMENTAL WORK STATUS Not applicable. FISCAL IMPACT Within Budget - The interest rate for the 2008B certificates has been 3.0% for the last five weeks. With the substitution of the letter of credit bank, it is anticipated that the interest rate will be approximately 0.3%. At the anticipated interest rate, the payback period for the early termination cost is 17 days, while the payback period for the transaction cost is 47 days. Please note that the District have saved over $2,400,000 in interest cost relative to fixed rates at the time of original issuance of these certificates. Attachments: Not applicable -2- Item #1.
STUDY SESSION DISCUSSION OUTLINE Date: August 4, 2010 Originator: Subject: Margie Armstrong - Finance RESTAURANT CONNECTION N FEES BACKGROUND AND RECOMMENDATION Based on the District's Administrative Code, sewer capacity fees for restaurants are calculated on a per seat basis. As restaurants are ready to connect, they submit their plans to the District and their fee is calculated based on the plans submitted. Over time, it became evident that in some cases, the number of seats that currently exist in some establishments are not consistent with the number of seats originally paid for. In June 2009, staff conducted a study of sewer capacity fees collected for all restaurants within the District. Based on this study, collectively, restaurants owe approximately $4 million to the District when calculated utilizing current fees, and approximately $1.3M if calculated based on the fees effective at time of connection. In early 2010, staff was contacted by several potential restaurant operators regarding the water and sewer capacity fees to open a new restaurant in the area. These particular restaurants fell in to the category of those that still owed additional sewer capacity fees. It should be noted that none of the prospective restaurant operators own their building spaces but are leasing them from a property owner. At the February 17th study session meeting, the board directed staff to investigate the District's methodology of calculating capacity fee units for restaurants. To accomplish this task, staff reviewed comparable calculations for different agencies. Furthermore, staff did some initial sampling of its own restaurants for strength and solids. One sample each was taken for three full service restaurants and four fast food restaurants. Two additional samples were taken of fast food restaurants, but these did not have individual meters, and therefore were not usable for the capacity fee calculation. In order to have a statistically meaningful sample, a larger population of each category of restaurants will be completed, with two days of sampling each. After the sample data is compiled, it can then be used to calculate the capacity fee calculation to see if any adjustments should be made to the current calculation. Item #2. -3-
At that time, staff will also recommend a course of action for the board to consider related to the previously uncollected capacity fees ENVIRONMENTAL WORK STATUS Not Applicable FISCAL IMPACT Within Budget - Unable to determine at this time Attachments: None -4- Item #2.
STUDY SESSION DISCUSSION OUTLINE Date: August 4, 2010 Originator: Subject: Terese Quintanar - Administration QUAIL VALLEY ENVIRONMENTAL COALITION BACKGROUND AND RECOMMENDATION The Quail Valley Environmental Coalition (aka Non Profit) was discussed in April and June 2010 Study Session meetings. Ron Sullivan serves as President, Scott Mann as Vice President, Nancy Horton as Secretary, and Albert Martinez is Treasurer. During previous discussions, the Board and staff asked about the purpose, goal and duration of the Coalition, future indemnification, future grant management, future input as to design or construction of facilities and contributions by other agencies. Director Wicke would like to continue the discussion to determine our agency's interest in making a contribution. Several organizations have pledged to contribute toward the Non Profit, as follows: Eastern MWD $10,000 City of Canyon Lake $10,000 ($5,000 contribution, $5,000 in kind for staffing) County of Riverside $10,000 City of Menifee $10,000 ENVIRONMENTAL WORK STATUS Not applicable. FISCAL IMPACT Within Budget Not applicable Attachments: None Item #3. -5-
STUDY SESSION DISCUSSION OUTLINE Date: August 4, 2010 Originator: Margie Armstrong - Finance Subject: A5 LIFT STATION TRIBUTARY AREA -- SEWER CONNECTIONS BACKGROUND AND RECOMMENDATION EVMWD's A5 Lift Station serves sewer customers in an area generally bounded by Grand Avenue on the west, Bonnie Lea Drive on the north, Ethlene Drive on the south and Lake Elsinore on the east. The former academy site is directly north of the area. The area was formerly served by the City of Lake Elsinore, which constructed the sewers and lift station in 1971. The system was later acquired by EVMWD in 1984. Most of the existing homes in the area were constructed in the mid-1900's, prior to the sewers. As a result, there is a mix of homes that are connected to the sewer system and those that are not. A detailed service review was performed encompassing 82 customers to determine their service status. A summary of the findings are attached, categorized and grouped as appropriate. Letters has been sent to 64 customers, of which 16 includes the initiation of sewer billings to the current water accounts. The 16 new accounts were not assessed the Administrative Code allowable back charge of one year of monthly sewer fees equating to $4,800. During the investigation process, it was found that the construction cost for the A5 lift station, the tributary pipeline, as well as the lateral to the individual homes were paid for by an Assessment District formed by the City of Lake Elsinore in 1970. On June 3rd, staff brought a recommendation to the Engineering and Operations Committee to forego the collection of Sewer Capacity fees for homes that was constructed prior to the construction of the lift station, and that any homes connected in the future will be required to pay Sewer Capacity Fees. The board requested staff to do additional investigation on the Assessment District and bring back the results of the investigation. -6- Item #4.
Upon further research, it was found that the Assessment District funded the construction of the sewer pipeline starting from the Sewer treatment plant through the entire length of Riverside Drive, to Grand Avenue at approximately the intersection of Bonnie Lea Dr. Additionally, project consisted of 5 lift stations (A1 - A5), waste stabilization lagoons, and laterals to homes in the neighborhood around Pepper Drive as well as Lincoln and Joy streets. Staff has retained David Taussig and Associates (DTA) to assist in finding additional information on the Asessment District. They searched records for the City of Lake Elsinore and the County of Riverside, and were able to find the City of Lake Elsinore's resolution which authorized the formation of the Assessment District. They have also contacted both the legal and underwriter firms that worked on the Assessment District and currently waiting on a response. Without specific information showing which parcels were included in the boundary Assessment District and the basis of the assessment, (i.e., front footage, EDU, per parcel, etc) it is difficult to ascertain how much capacity fees, if any, has already been paid through the assessment, as there seem to be some indication that owners had the ability to not opt in to the Assessment District. Additionally, consideration has to be made as to the quality of the facilities what were paid for in 1971 as opposed to the upgraded facilities that future customers will be connecting to, not having having paid for their share of the replacement or upgrade of the facilities through the monthly fees. The monthly fee replacement share for the sewer system is currently $1,771,960 per year, A few options for determining how much capacity fees would now be due are as follows: 1. Parcels which were not shown to be a sewer customer at the time of service transfer from the City of Elsinore (1984) are responsible for full capacity fees. 2. Parcels which are built prior to the formation of the Assessment District (1971) will be considered to have been paid in full for 1 EDU. 3. Parcels that are shown on the as built drawings as having laterals built to their property will be considered to have paid in full for 1 EDU. 4. All parcels fronting the project that have not connected will receive credit for 1 (one) EDU of capacity fees when they are ready to connect. 5. All parcels fronting the project that have not connected will receive credit for the transmission component of the capacity fee, and will be responsible for the current treatment component. 6. All parcels fronting the project are considered to have paid their capacity fees in full regardless of parcel size or zoning. Item #4. -7-
As reference, the current sewer capacity fee per EDU is: Collection $4,520 Treatment 2,370 Total $6,890 Any additional information, if available, will be provided at the meeting. ENVIRONMENTAL WORK STATUS Not Applicable FISCAL IMPACT Within Budget - Unable to determine at this time Attachments: A5 Lift Station Service Area - Status -8- Item #4.
A5 Lift Station Service Area Status A5 Lift station as-builts completed 1971. Construction paid for by an Assessment District. # 1 EVMWD took over the sewer system from the City of Lake Elsinore in 1984 Category No. of Customers Situation Action Effected I 1 Constructed after 1984 (circa 2008); currently unoccupied Note placed on GIS that all fees, including water/sewer connection fees required. IIA 2 No individual water connection to house Need water lateral and meter to the house (payment required). Sewer lateral to home. IIB 1 No individual water connection to house Need water lateral and meter to the house (payment required). Sewer lateral to home. Same owner as property next door, possibly connected for water and sewer IIC 1 Water customer, multi unit Add sewer to billing and change account to multiunit Letter sent IID 1 No individual water connection to house 2 lots with same address (A&B). Front lot is a customer III 8 Sewer connection confirmed; Add sewer to billing Letters sent (7) currently billed for water. IV 7 Sewer Lateral in place; no access Add sewer to billing Letters sent for inspection/testing, currently billed for water V 2 Need to locate lateral or install new lateral, currently billed for Need sewer lateral to the house - Add sewer to bill Need to draft letter water. VI 1 Multiple dwellings on property; Change account to multiunit Need to draft letter current water & sewer customer VII 6 Currently billed for water; Invite customer to connect to sewer Need to draft confirmed no sewer connection VIIIA 1 Current closed water and sewer account; appears to be a vacant dwelling, sewer lateral to property. VIIIB 1 Current closed water and sewer account; appears to be a vacant dwelling, sewer lateral to property. VIIIC 1 Current closed water account only; appears to be a vacant dwelling, sewer lateral to letter Investigate account further. If account correct, need no action required letter Need no action required letter Add sewer to billing Need to draft letter to owner of property that sewer will be billed when account is reactivated Item #4. -9-
Category No. of Customers Effected Situation Action property. IX 1 Active water & sewer customer No action for this lot, but same owner as IIB with lateral, but possibly the source of connection for IIB X 1 Water only customer, sewer was Mrs. Grey s neighbor, letter sent cross connected to neighbor, but has been severed All Others 47 Water and sewer customers No action required, letter sent -10- Item #4.
STUDY SESSION DISCUSSION OUTLINE Date: August 4, 2010 Originator: Subject: Norris Brandt - Administration ONE WATER ONE WATERSHED (OWOW) PROGRAM -- PROJECT RATING BACKGROUND AND RECOMMENDATION The OWOW program, overseen by SAWPA staff, has completed its "call for projects" to be funded by Proposition 84 proceeds. While the current Prop 84 funding available is only $11 million, the projects proposed throughout the Santa Ana River watershed are valued over $3 billion. The OWOW Steering Committee is in the process of reviewing and rating all the projects in order to identify which projects to propose to the state Department of Water Resources for funding later in Fall 2010. The attached slides describe the review/rating process. Staff will provide a discussion of the slides at the meeting. ENVIRONMENTAL WORK STATUS This is not a project under CEQA. FISCAL IMPACT Within Budget - No fiscal impact identified at this time. Attachments: OWOW Project Rating Process -- Slideshow Item #5. -11-
One Water One Watershed Steering Committee Meeting July 22, 2010 OWOW Update -12- Item #5.
Revised Prop 84 schedule Release of Prop 84 Guidelines and PSP early August 1 st PSP planning grant due late September/early October 2 nd PSP implementation due January 2011 3 rd PSP stormwater grant March 2011 OWOW and 1 st round of funding schedule Call for projects Evaluate and rank projects Finalize OWOW Plan Public review Adopt OWOW Plan Rank projects for funding Prepare grant application July August September October November December January Item #5. -13-
Summary of received applications We received 297 applications from 64 sponsors: Total cost $3.6B; funding request $1.7B -14- Item #5.
40% of projects offer benefits besides water supply 6% 17% Water supply Water quality 18% 59% Restoration/ flood control Recreation in a variety of areas Summation exceeds number of applications due to multi-benefit projects Item #5. -15-
Nearly 70% of applications benefit more than one municipality or sub-watershed 40% of projects benefit a disadvantaged community, and 14% a Tribal community -16- Item #5.
20% of applications have final design or are shovel-ready 120 100 105 80 78 60 57 40 20 26 31 0 Planning Conceptual design Preliminary design Final design Shovelready Project ranking Item #5. -17-
Components of Ideal Project Multi Jurisdictional Watershed Approach Multiple Benefits Env. Justice/ DAC Sustainable Ready to Implement Adaptability to Climate Change Project Ranking Method: Multi Attribute Rating (MAR) Structured process for comparing projects that meet multiple objectives. Specifically MAR: Common methodology in ranking Shows explicit trade-offs among alternatives Is transparent in displaying results Easily incorporates sensitivity in weightings -18- Item #5.
Ranking Criteria for OWOW Projects Benefits Criteria Are there quantifiable water supply benefits? Are there quantifiable water quality or salt management benefits? Are there quantifiable restoration or flood management benefits? Are there quantifiable watershed- focused recreation benefits? Item #5. -19-
Project Readiness How soon can the project be implemented? Planning studies completed Conceptual design (15%) completed Preliminary design (30%) completed Final design (100%) completed Project ready for construction bids Cost Match Is the required non-state match funding secure? Yes/No (Yes preferred) What percent of the funding is secured? (Higher % is better) -20- Item #5.
Cost Effectiveness Depending on the type of project, a cost per unit of benefit can be estimated: $/Acre-Foot of supply created $/Acre of restored habitat $/Tons of salt removed Normalize cost effectiveness within a project category, then compare Active Participation Are there active partners for the project? No or limited partnership Coordination with others Cost-share share or in-kind funding partner Item #5. -21-
Resource Efficient Land Use & Impacts to Natural Hydrology Does the project use resource-efficient efficient land use (e.g., LID)? Yes/No (Yes Preferred) Are there impacts or changes to natural hydrology (positive, neutral, or negative)? Greenhouse Gas Emissions Does the project reduce GHG emissions? Narrative description only Quantitative estimates without specifying mitigation actions Quantitative estimates with specific mitigation actions identified -22- Item #5.
Environmental Justice and Tribal Communities Does the project benefit disadvantaged communities? Yes/No (Yes Preferred) Does the project benefit Native American tribal communities? Yes/No (Yes Preferred) Criteria adopted by Steering Committee EJ and Tribe Benefits 4% Climate Change 2% Natural Hydrology & Land Use 8% Project Readiness 9% Cost Match 7% Watershed Focused Recreation Benefits 5% Active Partnerships 9% Restoration/Flood Management Benefits 10% Water Quality/Salt Management Benefits 12% Water Supply Benefits 22% Cost Effectivness 12% Item #5. -23-
Project Ranking Method: Multi Attribute Rating (MAR) Step 1. Criteria are Defined Cost Sharing Readiness Goals Achieved Step 3. Decision Scores Created 30% A B C D 65% Step 2. Criteria are Weighted 5% Step 5. Projects Are Ranked Projects A B C D Rank 3 4 1 2 Example Three Projects Project 1: stormwater management and wetlands enhancement Provides water quality, restoration and some water supply benefits A 30% match has been secured Partnerships between flood management, Bureau of Reclamation, NGO Preliminary design completed -24- Item #5.
Example Three Projects Project 2: water recycling project Provides new water supply A 50% match has been secured through local cost share GHG mitigation Funding partnership between two cities Final design completed Example Three Projects Project 3: Program to address water infrastructure needs in DAC communities Provides water quality and supply benefits 10% funding has been secured Coordinating partnerships only GHG mitigation Project ready for construction Item #5. -25-
Example Three Projects Allocation of Proposition 84 Funds -26- Item #5.
Request for State grants amounts to nearly half of total projects cost and greatly exceeds anticipated fund availability Nearly one third of applicants are requesting the maximum grant contribution of 75% Item #5. -27-
An approach to allocate funds needs to be developed in light of large number of projects and limited funding Anticipated first-round of funding is $10 MM to $20 MM Average project request is $5.7 MM Should we fund a few projects entirely, or provide less funding to more projects? Can smaller funding still make projects financially feasible? What is the impact on administrative costs? Anticipated first-round How to balance project readiness for funding ($10-12 M) first round vs project merit? Fund allocation challenges are exacerbated by high variability in amount of funding requested, from $34,000 to $100MM -28- Item #5.
Next steps Project evaluation and ranking timeline Preliminary review and request of missing information Review for inclusion in Plan Prioritize for funding Deep-dive review Document OWOW Plan Identify projects for first round of funding Timeline: 2 weeks 2 weeks 2 weeks 4 weeks 2 weeks 2 weeks July 12 July 26 Aug 9 Aug 23 Sept 20 Oct 4 Oct 15 How: Identify missing information applying automated filter Request missing information; provide short response period (e.g. 3 business days); use generic email Finalize criteria for inclusion in Plan: Sponsor is eligible Located in watershed Provides at least one of the four benefits: supply, quality, restoration/ flood, recreation Apply criteria to determine inclusion in Plan Apply CDP to projects included in Plan based on pre-established criteria and performance measures Rank all 297 projects based on performance against all criteria Conduct sensitivity analysis Conduct more thorough review of 30-50 shovel ready and final design projects Reality check Interviews with sponsors Identify projects with potential misinformation and reconsider ranking Complete report of OWOW Plan, including ranking of all projects Plan does not prioritize projects for funding Define amount of State funding available for first round (~10 to 20 million) Policy decision needed to determine how to allocate funds Stakeholder Involvement (SteerCo and applicants) Communicate projects to be included in Plan Present results and detailed rationale Allow for individual review of scoring Provide additional information in support of project Publish Plan for adoption Present results and detailed rationale Allow for individual review of scoring Item #5. -29-