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HomeMy WebLinkAboutMINUTES - 07102012 - SD.5RECOMMENDATION(S): APPROVE response to Civil Grand Jury Report No. 1203, entitled "Deferred Maintenance, How Much Longer Can It Be Deferred?" in substantially the form set forth below, and DIRECT the Clerk of the Board to forward response to the Superior Court by July 22, 2012. FISCAL IMPACT: None. BACKGROUND: On April 23, 2012, the 2011/12 Civil Grand Jury filed the above-referenced report, which was reviewed by the Board of Supervisors and subsequently referred to the County Administrator who prepared the response set forth below that clearly specifies: Whether a finding or recommendation is accepted or will be implemented; A. If a recommendation is accepted, a statement as to who will be responsible for implementation and by what definite target date; B. A delineation of the constraints if a recommendation is accepted but cannot be implemented within a six-month period; and C. D. APPROVE OTHER RECOMMENDATION OF CNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE Action of Board On: 07/10/2012 APPROVED AS RECOMMENDED OTHER Clerks Notes: VOTE OF SUPERVISORS AYE:John Gioia, District I Supervisor Candace Andersen, District II Supervisor Mary N. Piepho, District III Supervisor Karen Mitchoff, District IV Supervisor Federal D. Glover, District V Supervisor Contact: Lisa Driscoll, County Finance Director (925) 335-1023 I hereby certify that this is a true and correct copy of an action taken and entered on the minutes of the Board of Supervisors on the date shown. ATTESTED: July 10, 2012 David Twa, County Administrator and Clerk of the Board of Supervisors By: June McHuen, Deputy cc: Julia Bueren, Public Works Director SD. 5 To:Board of Supervisors From:David Twa, County Administrator Date:July 10, 2012 Contra Costa County Subject:Response To Grand Jury Report No. 1203, Entitled "Deferred Maintenance, How Much Longer Can It Be Deferred?" BACKGROUND: (CONT'D) The reason for not accepting or adopting a finding or recommendation. BOARD OF SUPERVISORS RESPONSE TO CIVIL GRAND JURY REPORT NO. 1203: Deferred Maintenance, How Much Longer Can It Be Deferred FINDINGS 1. To date, four years after the FLIP report was completed and primarily because of budget constraints, very little progress in program implementation has occurred and the magnitude of the deferred maintenance problem has not been reduced. Response: Agree. Although little progress has been made in reducing the estimated $251 million deferred maintenance and no specific appropriations of general purpose revenues were available for the last several years, significant progress has been made in strategic planning. Additionally, during the last few years of extreme budget constraint, the County was able to complete $7.4 million in projects. Attachment 1 lists projects that have not yet been completed and Attachment 2 lists completed projects, including approximately $147,000 of Priority Class 1, $1.4 million of Class 2, $4.8 million of Class 3, and $1.0 million of Class 4. 2. Most of the actions included in the RAMP document have not been taken and few of the objectives and goals of the plan have been achieved. Response: Agree. As noted by the Grand Jury Report, the FLIP/RAMP planning and reports came out at the beginning of a period of extreme fiscal constraint. The fiscal hardship being faced required significant cuts to the County budget and did not support the additional appropriations needed to begin to address the deferred maintenance issue; however, the County Administrator continued to report on the issue and present an annual public report of funding needs and constraints as part of his Budget Message. The project has not been dropped nor ignored. The planning process, which has very little fiscal cost, has continued. 3. Fewer than half of the health and safety related needs identified in the FLIP report have been addressed. Response: Agree. 4. There is a lack of direction being provided by the Board concerning what actions should be taken to address the lack of progress on completing needed maintenance that has been deferred. Response: Disagree. As noted by the Grand Jury, the initial plan was launched during extreme budget constraint. Annually the Board has received an update as part of the Budget process. Additionally, infrastructure needs has been a topic of discussion during the annual Board Retreat. Other than choosing to reallocate resources by laying-off staff and further reducing public safety and County services to the indigent during the last few years, there has been very little the Board could accomplish in regards to the deferred maintenance problem. Clearly the problem has been a lack of resources, not lack of Board direction. 5. The County has made little progress addressing the issue of deferred maintenance and the citizens have not been clearly informed regarding the status and magnitude of the problem. Response: Disagree. As has been acknowledged, little progress has been made on the issue of deferred maintenance; however, the citizens have been clearly informed regarding the status and magnitude of the problem. The printed/published annual budget message has included a detailed description of not only the issue but the size of the deferred maintenance in the County, the annual presentation during Budget Hearings has included specific attention to the issue, and the annual Board Retreat has also addressed the issue and its magnitude. Not only have all of these reports been presented in open session, but are and have also been available on the County's web-site. RECOMMENDATIONS The 2011-2012 Contra Costa County Grand Jury recommends that the BOS do the following: 1. The County should determine a way to measure progress of the implementation of the RAMP directives and use that measure annually as a quantitative way of advising the citizens of the progress achieved. Response: This recommendation has been implemented. An annual report to the Finance Committee and Board of Supervisors has been prepared with a status of the key objectives of the RAMP program. Measurements of progress is reported as 1) the square footage of County owned vacant office space filled during the year, 2) the square footage of County owned office space vacated during the year, 3) dollars saved through leasing activities during the year, 4) the percent of County owned office space that is vacant (vacancy rate), 5) the cost of deferred maintenance completed, and 6) an estimated cost of deferred maintenance that remains to be done. The information on leased office space will be available in the near future with the completion of the real estate inventory. Each year's numbers will be compared to prior years to show how much progress has been made. The real estate inventory is estimated to be completed at the end of the year, so the first annual report that can include the full information on leased and vacant office space described above would be in January 2013. The first report exclusive of the real estate inventory will be presented at the next meeting of the Finance Committee. 2. The County should consider acknowledging the growing magnitude of the deferred maintenance issue, review the RAMP objectives and actions, and develop a realistic approach. Response: The recommendation has been implemented. The County has acknowledged the magnitude of deferred maintenance and has budgeted $5 million this year, FY 2012-13, to complete much needed repairs and improvements. See recommendation three below for more detailed information on deferred maintenance. The County intends to budget funding each year to reduce the backlog of deferred maintenance projects. In addition, to prevent future deferred maintenance items, the County is looking at establishing an increase in the occupancy costs for County owned buildings that would be set aside to pay for building maintenance as the need arises. This fund will be established by the end of this year and will be implemented in early 2013 when occupancy rates are adjusted each year with the annual budget process. The RAMP objectives and actions have been reviewed and revised to include a more realistic approach to solving this long-term problem. This review of ramp objectives will be reported to the Finance Committee at its next meeting. As a result of this review, modification to some RAMP objectives will be recommended to the Finance Committee. 3. Beginning with the FY 2012-13 Budget Summary, the County should consider providing citizens a complete and accurate update of its progress in addressing deferred maintenance and include disclosure of near-term plans, especially with respect to the critical and highest priority needs. Response: The recommendation has been implemented. It should be noted that the Budget Summary for FY 2012-13 had already been presented to the public and adopted by the Board prior to issuance of the Grand Jury's report. In the FY 2011-2012, Budget Message the County stated that it had accrued substantial deferred maintenance. The County stated that facility maintenance analysis, completed in FY 2007-08, included comprehensive building condition assessments of 93 facilities and a total of 2.9 million square feet of building space, and identified a total of $251.2 million in deferred facilities maintenance needs and capital renewal requirements. The County further stated that due to significant fiscal constraints, the FY 2009-10, FY 2010-11, and FY 2011-12 Recommended Budgets included no appropriations for deferred maintenance or capital improvements/expenditures. In the FY 2012-2013, Budget Message the County provided its citizens an update when it stated that it had accrued substantial deferred maintenance and capital renewal needs totaling $265.4 million and that due to significant fiscal constraints, the FY 2008-09 through 2011-12 fiscal years budgets included no appropriations for deferred facilities maintenance and capital renewal from the general fund. The Message further provided a complete and accurate update of its progress in addressing deferred maintenance when it stated emergency funds were spent as critical equipment failed and needed to be replaced. Further, that in 2009, $1.0 million was appropriated from the Criminal Justice Construction Fund and allocated for Criminal Justice Facilities only; and in FY 2011-12 Land Development funds were used for a large $12 Criminal Justice Facilities only; and in FY 2011-12 Land Development funds were used for a large $12 million dollar renovation of 30 and 40 Muir Road in Martinez; and approximately $5.5 million of identified deferred maintenance were completed during this renovation. The Message went on to disclose near term plans when it stated that for FY 2012-13, $5,000,000 was recommended for appropriation for deferred facilities maintenance and capital renewal and that a new Capital Fund would be established for the administration of the County’s Infrastructure and Facilities Maintenance Program. The Message stated that the objective is to begin to strategically fund deferred facilities maintenance and capital renewal on a yearly basis. Projects identified to be completed for FY 2012-13 were listed and it further stated that there will be an emphasis on priority 1 projects. With the proposed revisions to the policy described above, which will be presented to Finance this summer, the County will be able to track and provide more detail than has been provided in the past and will include these statistics in the Budget Message as well as the annual RAMP report. CONSEQUENCE OF NEGATIVE ACTION: None. CHILDREN'S IMPACT STATEMENT: None. ATTACHMENTS Grand Jury Report 1203 Attachment 1 Attachment 2 A REPORT BY THE 2011-2012 CONTRA COSTA COUNTY GRAND JURY 725 Court Street Martinez, California 94553 Report 1203 DEFERRED MAINTENANCE How Much Longer Can It Be Deferred? APPROVED BY THE GRAND JURY: Date: VMd I 49, -3 a ACCEPTED FOR FILING: Date: /f, 281% / GRAND JURY FOREPERSON LAE?TNER GE OF THE SUPERIOR COURT Contra Costa County 2011‐2012 Grand Jury Report 1203  Page 1  Grand Jury Reports are posted at http://www.cc-courts.org/grandjury Contact: Lloyd Bell Foreperson 925-957-5638 Contra Costa County Grand Jury Report 1203 DEFERRED MAINTENANCE How Much Longer Can it Be Deferred?  TO: Contra Costa County Board of Supervisors SUMMARY Contra Costa County (County) is currently confronted by a large and growing backlog of work needed to properly maintain the condition of its buildings and facilities. This backlog is called deferred maintenance. This work should be completed to ensure the continued safe and efficient utilization of these assets. The County has faced several years of significant financial challenge. The national recession, reduced growth in local property taxes, and the state’s ongoing budget deficit have diminished available resources. At the same time, the County has experienced greater demand by residents for County services, including employment, healthcare and social services. As a result, the County Board of Supervisors (Board) has been required to make difficult decisions regarding which services and programs to fund, and in what amount, and which to defer until economic conditions improve at some unidentified future time. One of the programs that the Board has chosen to defer for the past four years is the normal maintenance and renewal of most of its buildings and facilities. The County needs to adequately maintain its infrastructure to provide high quality and accessible services to its residents. Continually deferring facility maintenance, renewal, and modernization needs has resulted in a deferred maintenance financial liability to the County estimated to be between $251 million and $265 million at the time of this report. The Board has not followed the recommendations of a study contracted by the County in 2007. The County has not implemented or achieved the specified actions, objectives, and goals called for in its own plan and strategy. The Board has not stated when or how they intend to address the issue. Failure to perform the projects identified in the study and activities outlined in the plan and strategy documents could lead to asset deterioration and ultimately asset impairment. Compounding the monetary implications of the County’s decision is the related health and safety exposure to the public and employees. Some items classified as critical have been deferred. Unlike other financial matters of concern to the citizens, current accounting practices allow the County to choose the amount of detail and in what manner it discloses the seriousness of deferred maintenance. There are very few places in any County documents or presentations that Contra Costa County 2011‐2012 Grand Jury Report 1203  Page 2  Grand Jury Reports are posted at http://www.cc-courts.org/grandjury refer to the deferred maintenance issue and, as a result, the citizens may be unaware of its significance and potential future impact on operations and services. BACKGROUND Maintenance is the activity of keeping buildings and facilities in acceptable condition. It includes preventive maintenance, normal repairs, replacement of parts and structural components, and other activities needed to preserve the asset so that it continues to provide acceptable service and achieve its expected life. Maintenance excludes activities aimed at expanding the capacity of an asset or otherwise upgrading it to serve needs different from, or significantly greater than, those originally intended. Deferred maintenance refers to expenditures for repairs that were not accomplished as a part of preventive maintenance or normal repairs and which have accumulated to the point that facility deterioration is evident and could impair the proper functioning of the facility. Deferred maintenance projects represent catch-up expenses. Failure to perform needed repairs will likely result in higher repair costs when the repairs are finally undertaken. Accumulated deferred maintenance develops for several reasons. Underfunding of routine maintenance can cause neglect that allows minor repair work to evolve into more serious conditions. The problem is further compounded by choices made during austere financial times when routine maintenance is often deferred in order to meet more pressing fiscal requirements. Another cause is the failure to take care of major repair and/or restore facilities or building components that have reached the end of their useful life. In 2007, the General Services Department of the County engaged ISES Corporation to conduct a comprehensive evaluation of the overall condition of 93 County-owned facilities. Facilities inspected included office buildings, detention facilities, hospitals, clinics, homeless shelters, animal shelters, libraries, and maintenance facilities. The resulting Facilities Life Cycle Investment Program (FLIP) report identified deferred maintenance issues and projects that needed to be completed in areas related to accessibility improvements, electrical systems, exterior/structural rehabilitation, fire/life/safety, heating/ventilation/air conditioning systems, interior finishes/systems, plumbing systems, and general site improvements. Projects were ranked from Priority 1 through Priority 4. Priority 1 projects were defined as needing immediate action to return a facility to normal operation, stop accelerated deterioration, or correct a safety hazard. Priority 2 projects were defined as needing correction within a year to avoid intermittent interruptions, rapid deterioration, or potential safety hazards. Priority 3 projects included conditions requiring appropriate attention to prevent predictable deterioration or potential downtime and the associated damage or higher costs if deferred further. Priority 4 projects included items that represented a sensible improvement to existing conditions, enhancing overall usability and/or reducing long-term maintenance. Contra Costa County 2011‐2012 Grand Jury Report 1203  Page 3  Grand Jury Reports are posted at http://www.cc-courts.org/grandjury The FLIP report further classified the projects into categories, estimated costs per project, and provided the following summary table: Table 1: FLIP Report Summary Table PRIORITIES 2008-2017 Description 1 2 3 4 Estimated Cost ACCESSIBILITY $362,029 $2,388,206 $5,704,842 $449,994 $8,905,073 ELECTRICAL 0 464,506 27,618,416 7,178,716 35,261,638 EXTERIOR  STRUCTURE  82,351 3,274,020 22,306,486 10,802,040 36,464,896 FIRE/LIFE/SAFETY  825,187 7,944,612 3,463,937 598,433 12,832,168 HEALTH  60,489 44,526 1,843,978 2,154,759 4,103,752 HEAT/AIR/  VENTILATION 0 59,878 57,844,995 14,627,824 72,532,697 INTERIOR FINISHES/  SYSTEMS  729,856 10,535,049 40,048,391 9,744,041 61,057,338 PLUMBING 0 86,189 12,339,773 1,988,541 14,414,503 SITE ISSUES 0 201,027 1,513,385 221,926 1,936,337 VERTICAL  TRANSPORTATION 0 883,865 2,367,969 414,294 366,128 Totals $2,059,913 $25,881,877 $175,052,172 $48,180,568 $251,174,530 In 2007, the total deferred facility maintenance liability exposure was estimated to be $251 million. The FLIP report further advised that “many high cost systems would be due for replacement within the next ten years and that the County would be wise to prepare itself for these expenditures since the aging systems would not provide reliable and efficient service much further beyond their statistical life cycles.” The report also recommended that in order to maintain the condition status of the facilities at that time, an investment of approximately $24.6 million annually for the next ten years would be necessary. The report called attention to the fact that allowing the overall condition to degrade over that period would create an undesirable scenario for the County, given the expenditure projection for the subsequent ten-year period. In recognition of the importance of this issue, the County Budget Policy adopted in November, 2006 includes two requirements with respect to facility maintenance, as follows:  “The annual budget process will include funding decisions for maintaining the County’s facility assets, allowing the Board of Supervisors to weigh competing funding decisions using credible information.”  “Beginning in FY 2008-09, the annual budget process will include a strategic planning and financing process for facilities renewal…and establishment of a comprehensive management program for the County’s general government real estate assets relative to acquisition, use, disposition, and maintenance.” Contra Costa County 2011‐2012 Grand Jury Report 1203  Page 4  Grand Jury Reports are posted at http://www.cc-courts.org/grandjury The Board directed County personnel to prepare and implement the referenced management program by FY 2008-09. After receiving the FLIP report and its recommendations, the County included a special section in the FY 2008-09 Budget Summary publicly acknowledging the report and referencing the $251 million exposure. The Summary states that a plan to address the issue was being implemented. In August of FY 2009-10, the plan, containing 13 objectives and 11 specific actions, was completed and submitted for approval and adoption, first to the Board Finance Committee and then to the full Board. The Board adopted the program, the Real Estate Asset Management Program (RAMP), and directed County personnel to implement the program. The Board noted at that time, “If the proposed RAMP goals and objectives are not implemented, there will be less coordinated and efficient opportunities to optimize the use, preservation and value of the County’s real estate assets.” Beginning with the Budget Summary Report for FY 2008-09, and each year thereafter through FY 2011-12, the County has stated that the issue is being addressed and referenced the amount of $251 million from the 2007 consultant report as an indicator of the magnitude of the deferred maintenance problem, even though it may have changed during the four-year period due to few projects being completed, projects being added to the list, and the impact of inflation on costs. Due to significant budget constraints, the County budget for fiscal years 2009-10, 2010-11, and 2011-12 did not include appropriations for deferred maintenance. In FY 2008-09, $1 million was used from the Criminal Justice Construction Fund to address issues in Sheriff, Probation, and Public Defender facilities. The County also received some small grants from the federal government that were used on specific projects from the 2007 list. In total, it is estimated that $3 million has been spent on deferred maintenance projects during the past three to four years. The FLIP report called for expenditures of over $70 million during that period. In the last status update to the Board Finance Committee in February, 2011, the General Services Department acknowledged the lack of progress being made and the growing magnitude of the deferred maintenance issue. This update estimated that the cost of the problem had increased to $265 million as follows in table 2A below: Contra Costa County 2011‐2012 Grand Jury Report 1203  Page 5  Grand Jury Reports are posted at http://www.cc-courts.org/grandjury Table 2A: General Services Department Status Update Summary Table TOTAL DEFERRED MAINTENANCE/CAPITAL RENEWAL FOR COUNTY FACILITIES PRIORITIES 2008 - 2017 System Description 1 2 3 4 Estimated Cost ACCESSIBILITY $343,232 $1,785,650 $5,703,867 $480,672 $8,313,421 ELECTRICAL 0 241,212 29,173,520 7,722,510 37,137,242 EXTERIOR STRUCTURE 77,723 3,020,957 23,456,546 11,392,813 37,948,039 FIRE/LIFE/SAFETY 853,746 7,756,226 3,621,202 643,741 12,874,915 HEALTH 65,071 25,922 1,969,028 2,317,753 4,377,774 HEAT/AIR/ VENTILATION 0 4,563 60,687,883 15,565,453 76,257,899 INTERIOR FINISHES/ SYSTEMS 785,142 11,237,154 42,234,803 10,888,087 65,145,186 PLUMBING 0 86,005 12,938,395 2,106,645 15,131,045 SITE ISSUES 0 154,482 1,553,842 221,859 1,930,183 SECURITY SYSTEMS 100,690 0 0 0 100,690 VERTICAL TRANSPORTATION 0 2,272,032 2,551,268 914,640 5,737,940 Totals $2,225,604 $26,584,203 $183,890,354 $52,254,173 $264,954,334 In that same status update to the Board Finance Committee, special emphasis was given to the need to complete Priority 1 and Priority 2 projects, as shown below in table 2B: Table 2B: General Services Department Table of High Priorities PRIORITY 1 AND 2 DEFICIENCIES WHICH SHOULD BE COMPLETED AND ASSOCIATED COSTS PRIORITIES System Description 1 2 ESTIMATED COST ACCESSIBILITY $343,232 $1,785,650 $2,128,882 ELECTRICAL 0 241,212 241,212 EXTERIOR STRUCTURE 77,723 3,020,957 3,098,690 FIRE/LIFE/SAFETY 853,746 7,756,226 8,609,972 HEALTH 65,071 25,922 90,993 HEAT/AC/VENTILLATION 0 4,563 4,563 INTERIOR FINISHES/ SYSTEMS 785,142 11,237,154 12,022,296 PLUMBING 0 86,005 86,005 SITE ISSUES 0 154,482 154,482 SECURITY SYSTEMS 100,690 0 100,690 VERTICAL TRANSPORTATION 0 2,272,032 2,272,032 TOTALS $ 2,225,604 $ 26,584,203 $ 28,809,807 Contra Costa County 2011‐2012 Grand Jury Report 1203  Page 6  Grand Jury Reports are posted at http://www.cc-courts.org/grandjury In response, the Committee offered no advice or direction regarding what specific actions should be taken to address the lack of progress. Despite being several years behind schedule in terms of implementing their plan and the recommendations from the study, the most recent guidance being given by the Board to county staff is to “stay on schedule.” FINDINGS 1. To date, four years after the FLIP report was completed and primarily because of budget constraints, very little progress in program implementation has occurred and the magnitude of the deferred maintenance problem has not been reduced. 2. Most of the actions included in the RAMP document have not been taken and few of the objectives and goals of the plan have been achieved. 3. Fewer than half of the health and safety related needs identified in the FLIP report have been addressed. 4. There is a lack of direction being provided by the Board concerning what actions should be taken to address the lack of progress on completing needed maintenance that has been deferred. 5. The County has made little progress addressing the issue of deferred maintenance and the citizens have not been clearly informed regarding the status and magnitude of the problem. RECOMMENDATIONS 1. The County should determine a way to measure progress of the implementation of the RAMP directives and use that measure annually as a quantitative way of advising the citizens of the progress achieved. 2. The County should consider acknowledging the growing magnitude of the deferred maintenance issue, review the RAMP objectives and actions, and develop a realistic approach. 3. Beginning with the FY 2012-13 Budget Summary, the County should consider providing citizens a complete and accurate update of its progress in addressing deferred maintenance and include disclosure of near-term plans, especially with respect to the critical and highest priority needs. REQUIRED RESPONSES Findings Contra Costa County Board of Supervisors 1-5 Recommendations Contra Costa County Board of Supervisors 1-3