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HomeMy WebLinkAboutMINUTES - 12071999 - C157 TCI! BOARD OF SUPERVISORS FROM: FINANCE COMMITTEE DATE: December 7, 1999 SUBJECT: Response to a letter received by the Board Dated January 13, 1998 from the law firm of Miller, Starr and Regalia and Revisions to the Flood Control District Drainage Area Fee Credit and Reimbursement Policy SPECIFIC REQUESTS)OR RECOMMENDATION(S)&BACKGROUND ANIS JUSTIFICATION I. Recommended Action: ACCEPT recommendation from the Finance Committee to extend the Flood Control District's sunset clause for reimbursement agreements from 10 years to a maximum of 20 years, and APPROVE this revision to the Flood Control District credit and reimbursement policy. II. Financial Impact: This issue will have no impact on the General Fund. The recommended change to the District's credit and reimbursement policy will be funded by each respective Flood Control District drainage area. 5d,.r "`may QPJ �� Continued on Attachment: X SIGNATURE: ` `"� RECOMMENDATION OF BOARD COMMITTEE —APPROVE —OTHER SIGNATURE{S): ACTION OF BOARD ON APPROVED AS RECOMMENDED OTHER, DECEMBER 7, 1999 VOTE OF SUPERVISORS I hereby certify that this is a true and correct X UNANIMOUS(ABSENT None ) Copy of an action taken and entered on the minutes of AYES: NOES: the Board of Supervisors on the ABSENT:—ABSTAIN: date shown. G:1Grp➢ata\RdCtltAdminiAmtion\Board Orders11999 SONSO 12-7-99 CAO Items 3&2.doc Only.Div: Public Works Flood Control ��++ ��,,�yy yy'�yy Contact: Tom Williams{313-22$3} DL'CEi'lllEi'l 7,_1999 . CAO ATTESTED:_ ounty Counsel PW A"ounting PHIL BATCHELOR Clerk of the Board PW Accounting , West Coast Builders En&serv3ccs of Supervisors and County Administrator By .- c , Deputy 81 H4ECT: Response to a letter received by the Board Dated January 13, 1998 from the law firm of Miller, Starr and Regalia and Revisions to the Flood Control District Drainage Area Fee Credit and Reimbursement Policy DATE: December 7, 1999 PAGE 2 111. Reasons for Recommendations and Back round: On February 10, 1998,the Board referred a letter dated January 13, 1998 from the law firm of Miller. Starr &Regalia to Public Works. On October 20, 1998, after the Public Works Department analyzed the issues raised in the letter,the Board of Supervisors referred the letter to the Finance Committee for response. A copy of the October 20, 1998 Board Order and the January 13, 1998 letter are attached for reference. The letter outlines four key issues that the developer, West Coast Home Builders,has with the current Flood Control District Credit and Reimbursement Policy. The Policy relates to the collection, credit and reimbursement of drainage area fees within adopted Flood Control District drainage areas. The key issues are as follows: 1. Payment of interest on reimbursement agreements. 2. Amending the current ten-year sunset clause. 3. Repayment of the government loans from the District's revolving fund to drainage areas as well as the business practice of loaning money from a drainage area to the revolving fund. 4. Basing eligible costs for reimbursement agreements on standard unit costs instead of actual costs. On December 14, 1998, March 22, 1999 and May 10, 1999 the Finance Committee met and discussed the issues with District staff and representatives from West Coast Home Builders. (The March and May staff reports are attached for reference.)After consideration,the Committee recommends only one modification to the existing drainage area credit and reimbursement policy. The modification will extend the sunset clause from 10 years to a maximum of 20 years. The specific language will be as follows: Reimbursement agreements shall remain in effect for abase period often years (forty quarters). The first quarter shall be the one following the quarter in which the first reimbursement payment is made. The developer shall forfeit any outstanding balance owed at the end of the ten years if 80 o or more of the money has been reimbursed. If at the end of the ten years, less than 80% of the money has been reimbursed, the agreement shall be extended for five years. If after a period of five years the developer has not been reimbursed 80%of the amount due, the agreement shall be extended for another period of five years. Any remaining balance owed after twenty years shall be forfeited. 1V. Consequences of Nezative Action: Negative action would result in no formal response to the letter of January 13, 1998 and no changes to the District's current drainage area credit and reimbursement policy. Such action may in turn result in West Coast Home Builders filing a lawsuit. MtLE 1331 Norm CALIFORNIA BLVD. STARK P.O.FIFTH FLOOR BOX 8177 OAKLANOUFFICE G11 t1 WALNUT CREEK. CALIFORNIA 94546 Trurean� (510) 465-3800 A P R O F E S S 1 O N A L FACSIMILE ($10) 933-4126 SACRAMENTO OFFICE LAW CORPORATION TELEPHONE (510) 935-9400 TELEraoxE (416) 443-6700 G&otcE s.SPLIK it E I E I Y E D January 13, 1998 JAN 4 ,`.. CLERK BOARD OF SUPERVISORS CONTRA COSTA CO. Contra Costa County Board of Supervisors Attn: Jim Rogers, Chairman 651 Pine Street, Room 106 Martinez, CA 94553--1293 Re : Proposed Flood Control Reimbursement Agreements Between West Coast Home Builders, Inc. and The Centra Costa County Flood Control District for Meadow Glen I & II, Tracts 7704 and 7707 Dear Board Members : This firm represents A.D. Seeno Construction Co. , West Coast Home Builders, and related companies ("Seeno" ) in connection with the development of Meadow Glen I & II, Tracts 7704 and 7707, located in Oakley, California. The purpose of this letter is to apprise you of the fact that the County, acting through the Contra Costa County Flood Control District, is insisting that Seeno enter into reimbursement agreements for these developments which violate Government Code section 65486 . We have requested that the Flood Control District revise the agreements so as to bring them into compliance with section 66486 , but the District has declined to do so. We have brought the issue to the attention of County Counsel, but that office has also declined to make the necessary revisions. Having exhausted our efforts with County staff to resolve this matter, we must request that this matter be set for public hearing so that the Board can approve revised reimbursement agreements which comply with Government Code section 66486 and authorize the Flood Control District to execute them on behalf of the County. Alternatively, the County must reimburse Seeno for oversizing drainage facilities from its general funds, as required by section 66486 . SEEN\36060 Contra Costa County Hoard of Supervisors Attn: Jim Rogers, Chairman January 13, 1998 Page 2 �.. die U'nderlvir�a Facts On January 12, 1993, the Board of Supervisors adopted Conditions of Approval for Final Development Plan 3029-91 in Subdivision 7704, and Conditions of Approval for Final Development Plan 3034-91 in Subdivision 7707. The conditions of approval included installation of drainage facilities by the developer in accordance with Section 92-2 .006 of the County Ordinance Code . Pursuant to the Flood Control District' s Area Credit and Reimbursement Policy and Government Code section 66486, Seeno is entitled to be reimbursed for the cost of constructing these drainage facilities as new development occurs . Seeno has begun construction of these facilities in accordance with the conditions of approval, but has yet to enter into reimbursement agreements with the Flood Control District because the District' s proposed agreements violate section 66486 in at least three respects . First , the agreements do not provide for any interest to be paid to Seeno on monies owed to it, but not yet reimbursed. Second, the agreements arbitrarily terminate Seeno' s right to reimbursement after 10 years. Third, the agreements permit the County to make no reimbursements to Seeno if the County loans or transfers funds from, one drainage area to another. Each of these provisions is legally invalid. Consequently, Seeno requested that the District revise the agreement to eliminate the illegal provisions . On February 5, 1997, Jeanne Pavao, Seeno' s counsel, wrote to Silvano Marchesi, counsel for the Flood Control District, and objected that the District' s standard form reimbursement agreement violated section 66486 in that it did not provide for the reimbursement of interest, and that it Limited the reimbursement period to ten years. On April 22, 1997, Michael Hollingsworth, Assistant Chief Engineer of the Flood Control District, responded to the letter, stating that Government Code section 56486 only applies to "local agencies" and the Flood Control District is not a local agency as defined in the Subdivision Map Act . While Mr. Hollingsworth' s conclusion that the Flood Control District is not bound by the provisions of section 66486 may be technically correct, it is of no benefit to the County. The County is clearly bound by those statutory requirements -- BEEN\36664 '. 167x72,1 Contra Costa County Board of Supervisors 'Attn: Jim Rogers, Chairman January 13 , 1998 Page 3 any other conclusion would lead to an absurd result permitting arms of local agencies to skirt the law -- and Seeno therefore requests this Board' s intervention to ensure that the County does not further violate this law and invite legal action. 2. Lecral Analve i s Government Code section 66485 permits a local agency to require the oversizing of infrastructure improvements as a condition of development. However, if oversizing is required, the local agency must reimburse the developer for the full cast of the oversized portion of the facility, plus interest . Section 66486 provides as follows : in the event of the installation of improvements required by an ordinance adopted pursuant to section 66485, the local agency shall enter into an agreement with the subdivider to reimburse the subdivider for that portion of the cost of those improvements, including an amount attributable to interest, in excess of the construction required for the subdivision. While it may be true that the District is not a "local agency" within the statutory definition, the County is nevertheless bound by section 66486 in this instance. The County is a "local agency" which is obligated to reimburse Seeno for oversizing flood control improvements within its subdivision. Whether the County chooses to have that reimbursement performed through the auspices of the District, or reimbursed from its own general funds, is immaterial to Seeno. In order for the provisions of section 66486 to be applicable, the oversizing must be required by an ordinance . That requirement is met here . Condition 21 .A. (4) of subdivision 7704 , and condition 20 .A. (4) of subdivision 7707, each compel the construction of storm drainage facilities with Drainage Area 29H. These conditions are imposed "in accordance with section 92-2 . 006 of the County Ordinance Code" . That section provides as follows : Under the provisions of Division of Title 7 of the Government Code, State of SEEN\36060 167172.1 Contra Costa County Board of Supervisors Attn: Jim Rogers, Chairman January 13 , 1998 Page 4 California, referred to herein as the Subdivision Map Act, and, in addition to any other regulation provided by law, the regulations contained in this title shall apply to all subdivisions hereafter made entirely or partially within the unincorporated territory of the county (Ord. 78-5) . The County clearly has an obligation to reimburse developers for the costs of oversizing flood control and other required improvements. The fact that the County has chosen to administer these reimbursements through the Flood Control District is .irrelevant; the County still has an obligation to fully reimburse developers. Government Code section 55486 specifically requires, by a 1983 amendment , that the reimbursements must include "an amount attributable to interest" . The County' s refusal to reimburse for interest therefore violates the express provisions of the code . Section 66485 includes no exception which would permit the County to eliminate its obligation to reimburse developers after ten years . The County' s refusal to reimburse developers after ten years is therefore arbitrary and capricious and further violates section 66486 . Finally, the County' s refusal to pay any reimbursements if funds otherwise collected from a drainage area have been transferred to other drainage areas is also arbitrary and capricious . Although the County' s provisions in its reimbursement policy that it has the right to decline reimbursements if to do so would pay more than 80% of the monies collected, or reduce the fund to below $5, 000, might be construed as reasonable on its face, it could well be capricious in its application if the County loans money from one drainage area to another in order to fund improvements required elsewhere, leaving the developer who has advanced funds without any timely means of reimbursement -- or without any reimbursement at all if the 10- year period lapses. In that instance, the developer would be funding not only its own oversizing, but that of other projects as well . This goes far beyond the developer' s obligation to fund oversized facilities within its own developments . SEEN\36060 167172.1 Contra Costa County Board of Supervisors `Attn: Jim Rogers, Chairman January 13, 1998 Page 5 3. Qonglunians it is our opinion, from the foregoing, that the drainage area reimbursement fee is legally invalid in the following three respects: (1) The County must pay interest on the amounts required to be reimbursed; (2) The County may not place a ten-year time limit on the period during which reimbursements are to be made; and (3) The County may not avoid paying reimbursements on the basis that insufficient funds are available, if the shortfall is caused by the County having transferred funds from one drainage area account to another. We have attempted to work with both the Flood Control District and County Counsel to resolve these issues and make the necessary changes to the reimbursement agreements. Despite the legal analysis which supports Seeno' s proposed revisions, the Flood Control District and County Counsel have refused to revise the agreements and have instead directed us to bring this matter directly to the Board. We regret the need to involve the Board, but we have been left with no choice given the intransigence of County personnel . We have been advised that the District and counsel are relying on the County' s reimbursement policy; if the policy indeed permits the County to enter into agreements which violate the law, any legal challenge that Seeno might be forced to bring would include a challenge to the policy. However, we hope and expect that a legal challenge will not be necessary. We therefore request that the Board consider the matters raised herein and place the matter on the earliest available agenda for public hearing and a vote so that the Board may adopt a revised reimbursement policy, or revised reimbursement agreements, and direct the District to execute them on behalf of the County. $M\36060 147.172.1 Contra Costa County Board of Supervisors Attn: Jim Rogers, Chairman January 13, 1998 Page 6 Thank you for your consideration of this very important matter. Should you have any questions, please contact the undersigned. Very truly yours, MI LE STARR & REGALIA r GBS:clk CC: Albert D. Seeno Robert J. Rossi SEEN\36060 167172.1 Centra Costa County Mood Control and Water Conservation District TO: Finance Committee DATE: March 17, 1999 FROM: J. Michael Walford, Chief Engineer SUBJECT: MARCH 22, 1999 FINANCE COMMITTEE MEETING; CONSIDER POSSIBLE POLICY REVISIONS TO EXISTING DRAINAGE AREA CREDIT AND REIMBURSEMENT POLICY. I. Introduction A. Background On December 14, 1998 the Finance Committee met and discussed issues relative to the Drainage Area Credit and Reimbursement Policy. The discussion was prompted by a letter received by the Contra Costa County Board of Supervisors on January 14, 1998 from the law firm of Miller, Starr & Regalia regarding the proposed reimbursement agreements for Subdivisions 7704 and 7707 (West Coast Home Builders) in Drainage Area 29H, Oakley area. The Board referred this item to the Public Works Department for the response, which was received by the Finance Committee at the December 14th meeting. Subsequent to that meeting, Contra Costa County Flood Control and Water Conservation District staff met with representatives of Seeno Construction (West Coast Homebuilders) to discuss the issues raised in the meeting and attempt to reach an understanding. The following report outlines the issues and provides staff recommendations to the questions raised by the Finance Committee on the meeting of December 14, 1998. B. Existing Polio _ The existing Drainage Area Credit and Reimbursement Policy was adopted by the Board of Supervisors in June of 1989. The reimbursement policy is a tool used in conjunction with each drainage area ordinance to ensure funding of drainage infrastructure with equitable financial participation from all neve development. The drainage fees in each of the drainage areas fund the major drainage infrastructure for the new development within the watershed based on the area of impervious surface created. Drainage facilities are vital to the community and the individual projects in order to provide flood protection and ensure public safety. This current system of fees, credits, and reimbursements enables properties to develop when it may otherwise not be feasible. Reimbursement agreements in conjunction with the revolving fund offer a funding mechanism for construction of the drainage infrastructure. 97028 1 G:\GrpData\FldCtl\ghuisingh\Reimb.Policy Staff Report2.doc 3118/99 C. Original Issues Raised There are four issues that were raised by the original letter submitted to the Board of Supervisors regarding the current fee credit and reimbursement policy. They are as follows: 1. Payment of interest on reimbursement agreements. 2. Amending the current ten year sunset clause. 3. Repayment of the government loans from the District's revolving fund to drainage areas as well as the business practice of loaning money from a drainage area to the revolving fund. 4. Basing eligible costs for reimbursement agreements on standard unit costs instead of actual costs. 11. Discussion of Issues, Summary of Facts, Recommendations A. Impact of Interest Payment 1. Discussion The District is being requested by some of the development community to include interest in the payments for reimbursement agreements. The current reimbursement policy does not reimburse the developers with interest. Flood Control District staff is able to add an interest component to the current policy and increase the drainage area fees to cover the added cost if that is the decision, but there are considerations to be made. In order to add an interest component to the reimbursement policy, the drainage fees would need to be increased to cover the interest payments and associated administrative costs. There are many issues to consider if the fees were to accommodate an interest component. First, it would be difficult to quantify the necessary fee increase. For example, the interest component would be based on an assumed average interest rate. The duration period of the reimbursement agreement would have to be for an assumed number of years and an average reimbursement amount would also have to be assumed. The factors used to calculate an interest component in the fee will vary from drainage area to drainage area. In addition, each of the individual developer reimbursement agreements would vary from the assumptions used in establishing the fee. Please see the attached spreadsheet showing a matrix of some of the possibilities. The administration involved in revising the drainage areas would be costly and time consuming. Currently, the District has approximately 42 formed drainage areas. The drainage area fees are periodically revised for cost of living adjustments, but revisions would be needed more often if reimbursement 97028 2 G:\GrpData\F1dCtl\ghuisingh\Reimb,Policy Staff ReportIdoc 3/18/99 agreements included interest. Staff feels that the interest fee component of each drainage area would need to be reviewed at least every five years and, if necessary, amended. The California Water Act (chapter 1656, section 29) requires the District to pay interest on loans between the revolving fund and the drainageareas. When loans are made from a drainage area to the revolving fund, the principal amount is paid back to the drainage area with interest based on the rate that the money would have made if invested by the District. Discussions with our Accounting Department indicate that this rate is based upon the U.S. Treasury Percentage Rate, which currently falls between 4% and 5%. When asked what rate should be used to calculate an interest component for a fee increase, it was suggested to use a rate of 5%. If an interest component were added to the fees, this is the rate staff would suggest using. 2. Recommendation Staff recommended that an interest component not be added to the credit and reimbursement policy at the Finance Committee meeting of December 14, 1998. We have since spoken to other developers besides Seeno who have indicated a preference to continue reimbursements without interest (see later discussion on inequities between large and small developers). Staff also recommends that if an interest component is added to the current policy, that the fee increase be based on an interest rate of 5%. 3. Questions to Committee + Does the Finance Committee want staff to reconfigure each of the drainage area fees to incorporate an interest component, which will require adopting new fee ordinances for each drainage area and revising the current fee credit and reimbursement policy? • If an interest component is to be added to the policy and reimbursement procedure, what should be the rate? Is the increased fee to be based on the rate at which the monies would have accrued interest if invested within the individual drainage area accounts (5% as our Accounting Department suggested)? B. Ten Year Sunset Clause 1. Discussion The existing golicy has a sunset clause of ten years. It was suggested at the December 14t meeting of the Finance Committee that the policy be revised in 97028 3 G:\GrpData\FldCtl\ghuisingh\Reimb.Policy Staff ReportIdoc 3/18/99 order for the developer to fully realize more reimbursement if the ten-year period is not enough. 2. Recommendation Staff recommended that the current policy be revised as follows: Reimbursement agreements shall remain in effect for a base period of ten years (forty quarters). The first quarter shall be the one following the quarter in which the first reimbursement payment is made. The developer shall forfeit any outstanding balance owed at the end of the ten years if 80% or more of the money has been reimbursed. If at the end of the ten years, less than 80% of the money has been reimbursed, the agreement shall be extended for five years. If after a period of five years the developer has not been reimbursed 80% of the amount due, the agreement shall be extended for another period of five years. Any remaining balance owed after twenty years shall be forfeited. 3. Question to Committee Does the committee agree with this proposed policy revision? C. Impact of Revolving Fund and Possible Policy Changes 1. Discussion Current Business Practice: The Flood Control District revolving fund was established in June of 1983 in accordance with Section 29 of the Flood Control District Act. Some drainage areas are located in portions of the County where there is a tremendous amount of population growth and development. Drainage areas have, in the past, received loans from the revolving fiend in order to install major drainage improvements. Conversely, drainage areas have loaned monies to the revolving fund in order to aid other drainage areas in need. The revolving fund plays a vital role in funding drainage improvements projects throughout the County by maximizing the financial resources of the District, while maintaining a nexus between watersheds. Use of the revolving fund by the District helps developers to fund large projects when they, working individually, would not otherwise be able to afford them. The question that has been raised is should we continue the practice of loaning to and from the revolving fund. A primary charge of the District is to provide flood protection to the public. What must be debated is if flood protection should develop systematically and perhaps more slowly than the development community would like, or should there be a system that facilitates growth and development by providing a funding mechanism that might build drainage 97428 4 G:\GrpData\FldCti\ghuisingh\Reimb.Policy staff ReportIdoc 3/18/99 infrastructure out ahead of orderly development. The revolving fund is the mechanism to do this if that is the desire. The question remaining is what is more important; logical and contiguous development of the watershed or rapidly serving approved development and growth in order to allow construction of those approved developments. This is really a regional policy question the Board of Supervisors may need to address when considering the need and demand for new housing within the county. Purpose and Benefit to the Public: The revolving fund makes "government" loans to drainage areas to assist in the funding of infrastructure, which helps in the development of the drainage area and provide flood protection. It is rarely the case that parcels develop orderly from the bottom of the watershed towards the top. The revolving fund can serve to allow drainage facilities to be constructed early on as developments begin receiving approvals. This adds to community growth as it can address trends in development activity. Rapid growth in the community can be viewed as a public benefit,but it can also encourage development to occur in a less orderly fashion. An additional benefit of the revolving fund is its ability to help solve existing drainage problems. The revolving fund is a mechanism to 'help secure federal funds and grants to alleviate existing drainage problems. This mechanism allows the District to leverage its resources to provide required matching funds from lenders or grantors in order to receive the funds for the necessary improvements. Developer Issues: A policy question has been raised by certain developers regarding government loans between drainage areas and the revolving fund. The current reimbursement policy requires that government loans made to a drainage area be reimbursed to the revolving fund prior to reimbursing developer agreements that are subsequent to the government loan. Some developers disagree with the current policy in which government loans are reimbursed prior to their agreements. It has been suggested that money not be loaned from drainage areas to the revolving fund in the first place. This would assure that the money collected in one area would stay in the account for that area and be available for reimbursement agreements and improvements in that area only. As a consequence, that would mean that the revolving fund would have no money to loan to other drainage areas in need. While gaining some benefit in one area, there would be some benefit lost in another area that could use the loan to fund improvements. Developers should not discount the benefit they receive when developing in a drainage area that needs the loan from the revolving fund. Impact on Budget from Revolving Fund: 97028 5 G:\GrpData\FldCtl\ghuisingh\Reinib.Policy Staff ReportIdoc 3/18/99 ............. As of December 31, 1998 there were 55 existing loans from drainage areas to the revolving fund and 81 loans received by drainage areas from the revolving fund. Approximately $12,000,000 in loans has been made either to or from the revolving fund. • As of the I" Quarter of Fiscal Year 98/99 (1/5/99), there were 23 drainage areas in debt, according to the Accounting Department. Of those 23 drainage areas, 18 of them have received loans from the revolving fund. The total amount of those loans is $8,127,000, * There are 3 drainage areas that received loans from the revolving fund that are not in debt only because of those loans received. Pros,Cons and Consequences: The District could take the position that no more loans would be allowed to the revolving fund, but there would be consequences. One consequence would be that if improvements were required in advance of a development in order to provide drainage, it would be the sole responsibility of the developer to build the infrastructure. The District could not loan money to a drainage area in order to fund the needed facilities. This would, in a sense, force orderly development unless an upstream developer had the capital to fund extensive drainage improvements in advance. Without the aid of the District's revolving fund, development may not be possible in areas that require advanced improvements. There would be some benefit to the developer if the policy were revised. His reimbursement agreement would be paid off sooner because there would be no government loans that would need to be paid back. The drawback, again, is that the developer in another drainage area that might have received the loan may not be able to fund the improvements alone and would receive no help from the revolving fund. 2. Reeornmendation • Continue using the revolving fund system because it allows for flexibility in funding of drainage facilities in various drainage areas and the ability to leverage grant monies. This means that government loans will still be made to and from the drainage areas and the revolving fund, however,we propose to establish new guidelines and procedures for evaluating potential loans. These guidelines would take into consideration the Board of Supervisor's concerns/position on how development should occur with the county as well as the developers' concerns regarding our current loan practices. • Regarding the contiguity of development issue, staff recommends that the committee make a decision on how proactive the District should be in the 97028 6 G:\GrpData\FldCtl\ghuisingh\Reirnb.Policy Staff Report2.doc 3/18/99 growth and development of drainage facilities in the county. Either we continue with a policy that provides a mechanism to help developers fund infrastructure or we let them make it on their own without relying on any funding from the revolving fund. 3. Question to Committee • Should the existing policy remain where the drainage areas make loans to the revolving fund and vice versa? This decision will affect the District's policies, the developers, and in essence the contiguity of growth in the county. D. Reimbursing Actual Costs or Standard Unit Costs 1. Discussion The cost of work eligible for credit/reimbursement under the current policy is based upon prices from construction bids. This procedure allows the District to review the bids and use the unit prices from the lowest bid in order to get the most value from the fees collected. Using bid prices also helps to maintain a competitive bidding environment. As stated in our last meeting with the Finance Committee, some developers have requested that the District reimburse based on standardized unit costs. This would limit the District by forcing reimbursement of costs at a set price and eliminate a system of flexibility and checks and balances. Developers would be in a position to make money at the expense of the drainage areas if they were to get bids below the estimated unit costs used to determine the fees and credits. On the other hand, developers would lose money if their costs exceeded the drainage area unit costs. Because the drainage area plans are general in nature, the unit costs in the original engineer's reports used to calculate the fees are conservative and also general in nature. This allows for flexibility in the reimbursement process. There are items that the District has reimbursed developers for that were not in the drainage area plan but meet the intent of the plan. The flexibility in the current system is a benefit to the reimbursement process and allows some leeway in determining items eligible for credit. One benefit to standardizing unit costs in reimbursements would be the elimination of discussions between a developer and the District as to the value of certain items. If revised, the new system would reimburse the exact amount for an item as was collected. The fees would need to be revised to account for the new unit costs. All of the administration costs that are currently absorbed by the 97028 7 G:\GrpData\F1dCti\ghuisingh\Reimb.Policy Staff ReportIdoc 3/18/99 current unit costs would have to be separated out and identified in separate line items in each of the revised engineer's reports. The engineer's report for each of the drainage areas would need to be revised. One could argue that the fees would need to be revised every year in order to keep them up to date due to changes in the unit costs as well as adjusting administration costs. The effort to complete this task would be substantial as the District has 42 drainage areas. A question was raised using the following example. If fees are collected for a certain size pipe at an amount of$70 per foot and the developer pays a bid price of$50 per foot and the District gives credit/reimbursement on $50, where does the $20 go. The unit costs used in the current fee calculation are general and conservative in nature as mentioned previously. Sometimes the developer may get a better deal and sometimes he may not when reimbursed based on bid prices. The money that is collected by the District and is not reimbursed to the developer is used to pay for administration of the drainage area, advanced planning of the drainage area facilities, interest payback required for government loans, etc. The unit costs used for the fees are general estimates designed to work throughout the life of drainage area development. 2. Recommendation Staff's recommendation at the December 14th Finance Committee meeting was to continue basing developer credits and reimbursements on the actual bid prices they receive from the contractors. Our position remains the same on this issue. In order for the District to maintain the flexibility in the credit/reimbursement process for developers, it is necessary to collect fees based on unit prices that are general in nature. We need the flexibility to reimburse developers for items that meet the intent of the drainage area plan, even if certain items are not specifically called out in the engineer's report or on the plan. It is not fair to the developer if they construct a facility that meets the intent of the plan and are not compensated for the necessary items. The process would become too cumbersome if each estimate in each engineer's report was to be so detailed as to account for every item. More than likely some small item or detail would be neglected in the estimate or drainage area plans and would be constructed with no way for us to reimburse for it if our fee structure did not have the flexibility. 3. Question to Committee • Does the current policy fairly give credits and reimbursements to the developers, while still providing a funding mechanism for drainage area administration? 97028 8 G:\GrpData\FldCtl\ghuisingh\Reimb.Policy Staff ReportIdoc 3/18/99 _ _ __ • Should the policy be revised to reimburse the developers based on standardized unit costs and revise the fees and engineer's reports accordingly? III. Responses to Previous Committee Discussion and Questions A. Impact of Reimbursing only on Oversizing of Facilities 1. Discussion Under the Subdivision Map Act guidelines the developer is required to install, without reimbursement, storm drain facilities needed to serve runoff from their development as well as existing runoff from areas tributary to their site. Reimbursement is allowed when the developer is required to oversize a facility to serve runoff from future development upstream. Under the existing Credit and Reimbursement Policy, a developer is financially obligated only to the extent of his calculated drainage area fee. Any eligible drainage area facility installed by the developer, whether oversized or not, whether on or off site, is eligible for credit against their fee obligation. If the cost to install an eligible facility exceeds the developer's drainage area fee obligation, the developer is eligible to enter into a reimbursement agreement with the District for 100'/0 of the off-site improvements and 50% of the on-site improvements. Staff used an example in the last presentation to the Finance Committee to illustrate the above scenario. Seeno argued that the example was flawed. We have requested a copy of their version of the same example, but have not yet received it. The example shows that if the developer were to be credited only for the oversizing of the facility per the Subdivision Map Act that he would receive less credit/reimbursement than if the project were processed under the existing policy. Pro and Cons of an Oversizing-Only Process: If credits/reimbursements were only based on oversizing, the fees would have to be revised. The fees would probably be reduced because oversizing costs are less than the total drainage costs, which the fees are currently based on. This is where our current policy differs from the Subdivision Map Act. If our policy were strictly set up per the Subdivision Map Act, the District would not base the fees on the cost of the entire facility but would base the fees on the oversized portion. The difficulty in structuring the fees on an oversizing scenario is that the oversizing required of each development is unknown. The oversizing would 97428 9 G:\GrpData\FidCtl\ghuisingh\Reimb.Policy Staff ReportUoc 3/18/99 vary depending on the size of the pipes required for each development itself, which would be the baseline of comparison. The amount to oversize would depend on the size of the drainage area upstream from the site being developed. Essentially, the facilities for each future developable site would have to be designed and sized in order to come up with the oversized amount, which a new fee would then be based upon. Since it would be next to impossible to guess the size of pipes for future developments and where the future developments might be, it would be difficult to base a fee on oversizing. 2. Recommendation Staff recommends that the system continue to be based upon collecting fees for the full construction of the drainage facilities as shown on the drainage area plans. There are two main reasons for recommending that we not collect fees based on oversizing only. First, our inability to guess the order and time of development for each property in a drainage area, as well as the difficulty involved in calculating the size of drain lines required of each development would prevent us from basing the fees on the oversizing. Second, the current fee structure funds complete drainage improvements as shown on the drainage area plans. Typically, enough fees can be collected so that the District could construct major sections of facilities itself, if need be. If the system were revised to collect and reimburse only on the oversized portion of the facilities, then construction of a facility by the District would not be possible. The District would be at a stand still and unable to construct drainage improvements on its own unless a developer was in the area and made the improvements in conjunction with their conditioned improvements. 3. 0 estion to Committee • Should the existing policy remain in place where the developer is eligible for credit/reimbursement on any drainage area facility built in accordance with the adopted plan or should the developer only be eligible for reimbursement on oversizing? If the policy is changed to the latter, the fees and engineer's reports would have to be amended,but the fees would probably be reduced. B. Administration Costs and District Services Provided 1. Discussion If the decision is made to base the credits/reimbursements on standardized unit costs as discussed above, then the drainage area/District administrative costs will have to be pulled out of the current unit prices. Administration of each drainage area is necessary whether the costs are covered by the unit prices in the fee 97028 10 G:\GrpData\FldCtl\ghuisingh\Reimb.Policy Staff ReportUoc 3/18/99 calculations or separated out as administration line items in the engineer's reports. Either way, the administration costs will be figured into the fee that the developer is paying. These are some of the services we provide that are paid for, in part,by the current unit prices: • Advanced planning of the drainage area and associated drainage facilities • Coordination with cities for developer's projects • Review of plans, studies and calculations • Correspondence with agencies and the public regarding developer projects • Processing developer reimbursement agreements 2. Recommendation Staff's recommendation here depends on the decision made in the above section on actual or standard unit costs. If it is decided to go with standardized unit costs, then the administrative costs will have to be pulled out and identified separately. If this is the case, staff recommends the following: • We should set up deposit accounts and charge the developers for the processing of their reimbursement agreements. • We should bill developers and/or cities for development review time that staff spends on localized projects that are not benefiting the whole of the drainage area. This would especially hold for review of specialty items where staff s drainage expertise is used by the cities on development projects. More than likely, the developer is paying for this time anyway, since most cities set up deposit accounts for review of developer plans or a fee is collected. 3. Question to Committee • Should the engineer's reports be revised and show the administration of each drainage area by separate line items (this will be decided when the decision is made whether or not to change from actual costs to standard unit costs)? • What are the Committee's views on charging the developers and the cities separately for review that should not be paid for out of the drainage area accounts? C. Phasing or Transition Period for Policy Changes 1. Discussion A transition period from the existing policy to a new policy may help both the District and the developers, assuming that a new policy is adopted. The details 97028 11 G:\GrpData\F1dCtl\ghuisingh\Reimb.Policy Staff ReportIdoc 3/18/99 of the transition period are important and should be discussed. It was suggested at the December 14'h meeting that a 10-year phase out plan could be implemented with an option to convert to the new plan. While a phase out period would work during the time that the current fee structure is being converted to a new set of fees, the developers should not be given an option to convert. If new fees are adopted, all new developments should be required to pay the new fees (after the 60-day waiting period). The District should not put itself in the position of administering two sets of fees and two credit and reimbursement policies. .During a conversion between systems there may be an overlap of some reimbursement agreements being paid off under the old system, while new ones are paid off under the new system. 2. Recommendation • There should be no phase out period. The fees simply change on a certain date. • The cutoff time for changing policies will be 60 days from the date of any new fee adoption or policy change. • The transition period where developers will be under the old policy will only be as long as the duration of the last reimbursement agreement under the old system. • Essentially, all new developments after 60 days from the policy change will pay the new fees and any existing agreements will finish out their term under the old policy. 3. Question to Committee • Should there be an option to convert? • Should there be a phase out period or would the old fees go out as the new fees come in? • If a phase out period with an option to convert was the chosen system, how long should the phase out period be? D. Inequities between Large and Small Developers 1. Discussion The report to the Finance Committee last December brought up the issue of inequity between the large and small developers. Staff s report suggested that an inequity might exist when the smaller developers pay the higher fees to support an interest component and they do not see any reimbursement of that interest portion of the fee. Based on initial discussions with some of the smaller developers in the County, they tend to support staff s initial position that there would be an inequity and 97028 12 G:\CrspData\FtdCtl\ghuisingh\Reimb.Policy Staff ReportUoc 3/18199 that they would be at a disadvantage. They felt that the existing system was fair to the development community and suggested that the District not pay interest in the reimbursement agreements. In regards to the sunset clause on the reimbursement agreements, they agreed with staff that extending it beyond 10 years to 20 years would be appropriate. The smaller developers also felt that it is fair to reimburse on actual costs from the contractor's bid estimates and not base the credits/reimbursements on standardized unit costs. 2. Recommendation Staff recommends that the views of other developers be taken into account before any policy decisions are made. Most of these discussions stem from issues that have been raised by a single developer. It seems that some of the other developers in the county are more in agreement with the District's way of thinking on each of the above topics. 3. 9uestions asked of County Counsel A number of legal questions were brought up at the December 101 Finance Committee meeting. As of this date we have not received recommendations or comments. If we do not receive a response by the meeting date, we will report back to the Finance Committee on these issues once County Counsel has had a chance to complete their review. ATTACHMENTS: • Interest Scenario Spreadsheet 97028 13 G:\GrpData\FldCti\ghuisingh\Reimb.Policy StafReport2.doc 3/18/99 d n B. 6 :E .�.. .: •. v v ® p p iD C. C1 a* ai tD CD co N yi ro N J ro a C 0 a Q b9 64 49 69 4A I 'O a N 0 "J N C7 Ltl t0 Ul n m !� ro m CS d C7 tL _ O O 0 O C) 7 4-�jn m C7 CJ d C7 d N iD {7 1C p 00 os o `�° m 3 Cd) O Cas d p �' _^ � � ro c o 0 0 0 o C <D@ y t �/h/� X X ? C tD y \V rn 3 ro s3ir z w 69 tt3 t 3 bA t� f6 o rn d O w N W p ; CD �a y a 3W C) G7 Op O t9 CD CD " rn CD d cs o a W as � A o m o 0 0 0 a lD #fl m Cob4 b9 Eah to O Sv N c N (D ' C) GJ tvrn w co 3 to x A O C) 0) m 03 Co N d O 0 � 41 co " CD m 4A 4A 4A 0 3c El 0 j tC`i <. C o c a Os W N d G CO N a O. CD (M h) co C) .Q�.. _•w io C) C7 C) C) . O 3 O CD O d d O rn c?o 3 v d C3 d C) C7 7' o 0) cn rn 0) r`o c to cn vs Ln cr, o (D rt N " r'; o 0 rn rn a PQ d Ut .,( -Ce "n N rn _ 3 tSt O O d O tD O rn m ro N o O � O O O •► C7 N rn = y 0 � 3CD m < O j �to N j CD v N {L1 ' N RS Z +�, O N N O0 d Ut C7 C Y� Lb rn c U! r N - iia N O CIS CD 69 t) me O c 69 (a4 40 to CD o 5 co — O p ro n ro ry O �D .► O c 3 Oz's d t g m Ln O C7 to7 C cD p O c° � O O O O d h tC4 m ro o - W C f n N 0) A tS7 d7 O) O 'O O o C m m O dc` O00 O O x a v ro O O C7 C7 O 3 C) O C) O O VS O O O O CD N b9 1fl 4A 64 EH W N2, OCD LSIA 0) 4" -n Contra Costa County Fl 4 a 5. Recommendation • Consistent with our March 2.2, 1999 staff report, we recommend adhering to the policy as it exists. That is, we should continue to.establish eligible costs based on bid prices and not estimated unit prices. a Independent of a decision on the recommendation above, District staff work with our accounting division to develop recommendations for improving the tracking system of interim drainage area "savings" and "losses." Cance these improvements are identified, we could report back to the committee in three months with further recommendations. JMW:DHE✓W—jlg G:1fld cthtwilliamsVeimb.Policy staff report3.doc C:M,Avalon,Deputy 5 REQUEST TO PEAK Foy (THREE(3)MINUTE LIMIT) Complete this form and place it in the box near the speakers'rostmm before addressing the Beard Name: '< Phone Address: -1- t City: .. c I am speaking for myself or organization: r 6 ( of ..gym) CHECK ONE; �. .. .� wf Date: t X �" �. I wish to speak on Agenda Item# � , My comments will be: general for_against _ I wish to speak on the subject of I do not wish to speak but leave these comments for the Board to Consider: