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HomeMy WebLinkAboutMINUTES - 08132013 - C.17RECOMMENDATION(S): 1) ADOPT Ordinance No. 2013-19, establishing regulations for granting pipeline franchises in County rights of way. 2) ADOPT Resolution No. 2013/305, establishing pipeline franchise fee amounts. 3) APPROVE form of pipeline franchise performance bond. FISCAL IMPACT: Revenue from pipeline franchises is deposited into the County General Fund. BACKGROUND: On August 6, 2013, the Board of Supervisors took the following actions: 1) Opened the public hearing on Ordinance No. 2013-19 (establishing regulations for granting pipeline franchises in County rights of way) and Resolution No. 2013/305 (establishing pipeline franchise fee amounts), received testimony, and closed the public hearing; and 2) Introduced Ordinance No. APPROVE OTHER RECOMMENDATION OF CNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE Action of Board On: 08/13/2013 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: Carrie Ricci, 925-313-2235 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: August 13, 2013 David Twa, County Administrator and Clerk of the Board of Supervisors By: June McHuen, Deputy cc: C. 17 To:Board of Supervisors From:Julia R. Bueren, Public Works Director/Chief Engineer Date:August 13, 2013 Contra Costa County Subject:Adopt the Pipeline Franchise Ordinance and Fee Resolution BACKGROUND: (CONT'D) 2013-19, establishing regulations for granting pipeline franchises in County rights of way, waived the reading, and fixed August 13, 2013 for adoption of Ordinance 2013-19 and Resolution No. 2013/305. The notice of the public hearing as required by Government Code Section 6062a was published twice during the ten-day period prior to the hearing, with at least two publications separated by five days. Ordinance No. 2013-19 will establish regulations for granting pipeline franchises in County rights of way, and Resolution No. 2013/305 will establish pipeline franchise fee amounts. The County’s pipeline franchise ordinance was originally adopted in 1964, and was last amended in 1992. The County currently has 22 active franchises governed by one of four franchise-granting options. Existing franchises were granted under the existing County pipeline franchise ordinance (Ordinance No. 92-64, which is uncodified) and, for those franchises granted prior to 1964, pursuant to a separate ordinance granted for a specific franchisee. The two other methods used by the County to grant a franchise are pursuant to the California Public Utilities Code. Eleven franchises have expired or require that the Board of Supervisors approve a transfer to the new owner of the pipelines. The franchise owners of the expired franchises have been notified by the County that their franchises will continue under the same terms and conditions as their original franchises, until the County adopts a new franchise ordinance. For the last several years, County staff has looked into the possibility of updating the County’s existing pipeline franchise ordinance. Public Works staff and the County’s franchise consultant, Francisco & Associates, have surveyed several other cities and counties that issue pipeline franchises to determine their current rate structures and franchise requirements. Based on that survey, a draft ordinance was prepared. Below is a summary of some of the key provisions of the County’s proposed pipeline franchise ordinance and franchise fee resolution: 1. Reduce the length of franchise agreements from 20 to 10 years. This will provide the County with more flexibility to ensure that pipeline companies are under the most current franchise ordinance and fees. 2. Require a $5,000 administrative costs deposit that will be used to pay for costs incurred by the County in administering the pipeline franchise, including administrative costs, staff time, legal and consulting fees incurred in connection with processing the franchise application, and to provide non-routine services such as transferring a franchise, replacing surety bonds and insurance, etc. 3. Increase the minimum amount for surety bonds from $15,000 to 100% of the initial annual franchise fee, rounded up to the nearest $1,000 with a minimum surety bond of $25,000. Surety bonds are required to ensure that the franchisee observes and performs each term and condition in the franchise. The Board of Supervisors is to approve a form of pipeline franchise performance bond that franchise grantees will be required to conform to in posting bonds ensuring their performance under their franchises. 4. Require pipeline companies to inspect and test its pipelines as required by the State Fire Marshal, or other state or federal agency with jurisdiction over the pipeline or by any applicable law, and to make the results available for inspection by the Public Works Department. 5. Require pipeline companies to provide the County with a pipeline emergency plan as required by applicable laws, to be updated whenever it acquires, constructs, lays, removes or abandons any facilities under a franchise. 6. Require single limit liability insurance in the amount of $10,000,000. 7. The annual franchise fees are based on the following categories: (a) Public Utility Not Transmitting Oil or Oil Products. If a grantee is a public utility and is not transmitting oil or oil products, the grantee shall pay to the County two percent of the grantee’s gross annual receipts that arise from the use, operation or possession of the franchise. This payment shall in no event be less than one percent of the grantee’s gross annual receipts derived from sales within the County, in accordance with California Public Utilities Code Section 6231. (b) Public Utility Transmitting Oil or Oil Products. If a grantee is determined by the Public Utilities Commission to be a public utility transmitting oil or oil products, the grantee will be charged an annual fee, based on the internal diameter of the pipeline, in an amount calculated pursuant to California Public Utilities Code Section 6231.5. (c) Non-Public Utility Franchises Transmitting Industrial Gas, Oil or Oil Products. If a grantee is a non-public utility operating a pipeline system transmitting industrial gas, oil or oil products, the County will establish on an individual basis in the resolution granting the franchise the annual franchise payment for the pipeline franchise, including the extension, renewal, or continuation of a previously granted franchise. The annual franchise payment will be: (1) an amount equal to a specified percentage agreed to by the applicant and the County of the gross annual receipts of the applicant arising from the use, operation, or possession of the franchise; or (2) an amount agreed to by the applicant and the County; or (3) an amount computed by multiplying the sum of one-half of the nominal internal diameter of the pipe, expressed in inches, by the number of lineal feet of the pipe within the public streets, ways, alleys, or other public places within the unincorporated portion of the County. (d) Other Pipeline Franchises. If a grantee is awarded a pipeline franchise for any pipeline other than those specified in subsections (a), (b), or (c), or for the extension, renewal, or continuation of a previously granted franchise, the grantee shall pay to the County two percent of the grantee’s gross annual receipts that arise from the use, operation or possession of the franchise. This payment shall in no event be less than one percent of the grantee’s gross annual receipts derived from sales within the County, in accordance with California Public Utilities Code Section 6231. PG&E franchises that are calculated based on 2% of gross annual receipts will remain the same because they are franchises granted under the Broughton Act (now Public Utilities Code sections 6001-6017), which continue until surrendered or forfeited for violation of their terms. The County General Fund received fees totaling $4,018,985 for fiscal year 2011-2012 from all franchisees. The amount varies from year to year because the PG&E franchise fees are based on gross annual receipts and gas and electric surcharges. The annual franchise fees will increase by approximately $60,000 annually as a result of the proposed new ordinance. Approximately $40,000 in franchise fees are used each year to pay for administrative costs, which include staff costs for Public Works, County Counsel, and franchise consultant fees. 8. In addition to the administrative deposit and the annual franchise payment, a grantee shall also pay an abandonment fee in order to abandon in place all or part of its facilities upon approval by the Board of Supervisors. 9. The proposed ordinance includes modified provisions for franchisees that use their facilities to transport only potable water, including (i) instead of filing a pipeline emergency plan with the Public Works Department, the franchisee may file a certification annually declaring that it has prepared and filed the required pipeline emergency plan with the Public Utilities Commission, (ii) a liability insurance minimum of $5,000,000 instead of $10,000,000, (iii) a reduced bond amount requirement, and (iv) not requiring the franchisee to pay a pipeline abandonment fee. These exceptions are based on the lower risk presented by the product being transported in the pipes compared to products transported by pipeline franchisees, and the potential for rate increases to the franchisees end customers. On September 4, 2012, and January 2, 2013, Public Works staff sent drafts of the proposed ordinance to all companies that have a current franchise agreement and/or pay the County an annual franchise fee. The companies have had an opportunity to provide comments in writing or meet with Public Works staff to discuss their comments and concerns. The Public Works Department received comments from Chevron, Calpine, Phillips66, Praxair, Kinder Morgan, and Golden State Water. Staff has had conference calls and/or meetings with Calpine, Chevron, Kinder Morgan, and Golden State Water. Based on the comments, meetings and conference calls, some revisions were made to the proposed ordinance to address their concerns. The draft pipeline franchise ordinance and fee resolution were presented to the Transportation, Water and Infrastructure Committee (TWIC) on May 2, 2013 and June 12, 2013. At the June 12, 2013 TWIC meeting, the committee recommended moving this item to a public hearing at a Board of Supervisors meeting. Attached hereto as Exhibit A are calculations showing that the administrative deposit required under the ordinance and fee resolution, and the abandonment fees are necessary to recover County staff costs to administer franchises and remove abandoned pipes. When a franchise grantee’s administrative deposit is depleted, the franchise grantee will make an additional administrative deposit. County staff will provide an itemized accounting of County’s costs upon request. The fee charged for the administration of a pipeline franchise and removal of abandoned pipelines will not exceed the amount required to administer a franchise or remove abandoned pipelines. The fees set forth in attached Ordinance 2013-19 and Resolution 2013/305 will become effective 30 days after adoption of Ordinance 2013-19 and Resolution 2013/305. CONSEQUENCE OF NEGATIVE ACTION: County staff will continue to use an outdated pipeline ordinance that lacks appropriate provisions to protect the County from risks, and miss an opportunity to increase revenue by increasing franchise fees. CHILDREN'S IMPACT STATEMENT: Not applicable. ATTACHMENTS Resolution No. 2013/305 Pipeline Ordinance Exhibit A Bond Form EXHIBIT A CONTRA COSTA COUNTY PUBLIC WORKS DEPARTMENT PIPELINE FRANCHISE FEES $5,000 Deposit for Security/Administration Deposit Each franchisee’s $5,000 administrative deposit will be used to pay costs incurred by the County in connection with administering pipeline franchises, which costs include, without limitation, staff time spent processing pipeline franchise applications, fees incurred verifying acceptances, issuing required encroachment and drainage permits, collecting and verifying payments, maintaining accurate records that document the type and location of the franchise property, and providing non-routine services such as transferring a franchise, replacing surety bonds, and any other administrative tasks associated with franchises. Several different staff positions may be involved in the administration of pipeline franchises based on the level of work. As shown below, the Public Works Customer Services Coordinator currently administers pipeline franchises, with assistance from the following classifications: Administrative Services Assistant II, Senior Real Property Technical Assistant, and Clerical - Senior. The amount of time spent on administration of pipeline franchises is dependent on the task required, such as establishment of a new franchise, transfer of a franchise, replacement of surety bonds, etc. The current hourly costs including benefits and indirect costs for staff personnel administering pipeline franchises are set forth below. Position Rate per hour Customer Services Coordinator: $180.44 Administrative Services Assistant II: $113.57 Sr. Real Property Technical Asst: $ 93.87 Clerical – Senior Level: $ 85.97 Estimated Costs Associated with Franchise Administration: Hourly Number Rate of Hours Total Application of a new franchise: Customer Services Coordinator $180.44 x 5 = $ 902.20 Administrative Services Asst. II $113.57 x 15 = $1,703.55 Sr. Real Property Technical Asst. $ 93.87 x 4 = $ 375.48 Clerical – Senior Level $ 85.97 x 4 = $ 343.88 Estimated Total $3,325.11 Transfer of a franchise: Customer Services Coordinator $180.44 x 5 = $ 902.20 Administrative Services Asst. II $113.57 x 15 = $1,703.55 Sr. Real Property Technical Asst. $ 93.87 x 4 = $ 375.48 Clerical – Senior Level $ 85.97 x 4 = $ 343.88 Estimated Total $3,325.11 Replacement of surety bonds: Customer Services Coordinator $180.44 x 1 = $ 180.44 Administrative Services Asst. II $113.57 x 8 = $ 908.56 Sr. Real Property Technical Asst. $ 93.87 x 5 = $ 469.35 Estimated Total $ 1,558.35 Estimated Costs Associated with Franchise Administration: (cont.) Hourly Number Rate of Hours Total Verification of insurance: Customer Services Coordinator $180.44 x 1 = $180.44 Administrative Services Asst. II $113.57 x 5 = $567.85 Sr. Real Property Technical Asst. $ 93.87 x 2 = $187.74 Estimated Total $936.03 Annual Franchise Fee Payments: The majority of pipeline franchise fees are established by statute. The Board of Supervisors has discretion to set the fees for non-public utility franchises transmitting industrial gas, oil or oil products. If a grantee is a non- public utility operating a pipeline system transmitting industrial gas, oil or oil products, the County will establish, on an individual basis in the resolution granting the franchise, the annual franchise payment for the pipeline franchise, including the extension, renewal, or continuation of a previously granted franchise. The annual franchise payment will be: (1) an amount equal to a specified percentage agreed to by the applicant and the County of the gross annual receipts of the applicant arising from the use, operation, or possession of the franchise; or (2) an amount agreed to by the applicant and the County; or (3) an amount computed by multiplying the sum of one-half of the nominal internal diameter of the pipe, expressed in inches, by the number of lineal feet of the pipe within the public streets, ways, alleys, or other public places within the unincorporated portion of the County. Abandonment Fees In addition to the administrative costs deposit and the annual franchise payment, a grantee shall also pay an abandonment fee in order to abandon in place all or part of its facilities upon approval by the Board of Supervisors. The abandonment fees set forth in the resolution are as follows: Pipelines With An Internal Diameter of (in inches): Amount Per Lineal Foot 0-12 $15.00 14-18 $22.00 20-30 $28.00 Upon an application by a franchisee to abandon pipes in place, the road commissioner, in his or her sole discretion, shall determine whether a pipeline company may abandon pipelines in place or whether removal of the abandoned pipe is necessary. If the road commissioner recommends permitting abandonment of pipes in place and the Board of Supervisors authorizes abandonment, the franchisee shall pay the related abandonment fee. If a pipeline company has paid the abandonment fee and the County later requires removal of the abandoned pipeline but is no longer a franchisee or available to pay for the cost of removal, the amount abandonment fee is designed to cover the County’s costs of removal. If the pipeline company is still a franchisee and is available to remove previously abandoned pipelines, the amount of its abandonment fee paid will be credited against its cost of removal. County costs to remove abandoned pipelines vary based on the type, size and depth of pipe. The fees listed above are a reasonable estimate of costs for County staff to perform the work or contract with a company to remove abandoned pipe if the company that installed the pipe is no longer in business and able to fulfill its obligations to remove the abandoned pipelines. Contra Costa County Form of Franchise Performance Bond Bond No.: Premium: Any claim under this Bond should be sent to the following address: [Surety Name and Address] KNOW ALL BY THESE PRESENTS: That we, [insert legal name of franchise grantee], a [corporation, limited liability company] organized and existing under the laws of the State of [insert state of formation] (“Principal”), and [insert name of surety / bonding company], a [corporation, limited liability company] organized and existing under the laws of the State of [insert state of formation] (“Surety”), and authorized to transact surety business in the State of California, are held and firmly bound unto Contra Costa County (“Obligee”), in the sum Dollars ($ ) lawful money of the United States of America, for the payment of which sum well and truly to be made, we bind ourselves, our heirs, executors, administrators, successor and assigns, jointly and severally, firmly by these presents. WHEREAS, The Board of Supervisors of Contra Costa County, California, pursuant to County Ordinance No. 2013-19, adopted August 13, 2013 (the “Ordinance”), and County Resolution No. 20__/__, adopted _____, 20__, (the “Resolution”), has granted a franchise to Principal, giving it the right from time to time to construct, maintain, operate, repair, renew, and remove or abandon in place, certain pipelines, as more particularly described in the Ordinance and the Resolution. NOW THEREFORE, THE CONDITION of the above obligation of the Principal and the Surety is such that, if the Principal shall well and truly observe, fulfill, and perform each term and condition of the franchise required to be performed by it, at the times and in the manner specified therein, then the above obligation of the Principal and the Surety shall be null and void, otherwise it shall remain in full force and effect. PROVIDED, that if any action is commenced on this bond by the Obligee, in addition to the sum specified above, the Principal and Surety, their heirs, executors, administrators, successors and assigns, jointly and severally, shall be obligated to pay to the Obligee all costs, attorney’s fees and other litigation expenses incurred by the Obligee in collecting moneys due under the terms of this bond. SIGNED AND SEALED, this day of , 20__. (SEAL) By: By: (Name of Principal) (Name of Surety) By: By: Name: Name: Title: Title: