The Rancho Murieta Community Services District board continued to move forward on its plan to build a water treatment plant at its November meeting, authorizing negotiations for a $3 million bank loan for the CSD’s portion of the cost. The project would upgrade and expand a water treatment facility that’s been in operation since 1975. Agreements with developers for their share of the cost have yet to be finalized.
Assistant General Manager Darlene Gillum presented financing options based on a $3 million principal loan amount and without considering what amount could come from reserves “until we know for sure what the total plant’s going to cost.”
Ratepayers are already paying $4.64 a month to pre-fund a $1.5 million rehab of the water treatment plant, and Gillum applied this amount to the CSD’s share of financing a new plant. According to the memorandum included in the board packet, this dropped the projected increase in the average monthly residential bill from $8.46 to $3.82 for the non-revolving loan proposed by U.S. Bank that she recommended.
“You’d be able to draw against the $3 million you’re approved for as the principal balance until the end of the construction period,” Gillum told the board. “At the end of the construction period, it would basically be turned into a mortgage-type loan where you’d start paying interest and principal on the total amount borrowed.”
Gillum said the loan term is seven years and the principal payment is amortized over a 15-year period, which reduces the annual payments but results in a $1.6 million balloon payment at the end of the term, which could be paid from reserves.
While ratepayers would be paying more on the water side of their CSD bill for construction of the plant, this could be offset by a reduction in sewer costs if the CSD receives a master reclamation permit next year, Gillum said. With the permit, the district would have the authority to retain above-ground piping for the Van Vleck spray fields instead of paying for a permanent underground installation. This would remove the $3.15 monthly charge on current bills for pre-funding permanent spray fields.
The board approved pre-funding the debt service for both the spray fields and the water treatment plant rehab in the 2011 budget.
In addition to proceeding with financing arrangements for the water treatment plant, the board approved these items for the project at its November meeting: pre-qualifying contractors who will be bidding on the mechanical process and electrical trade packages; spending up to $5,618 for a back-up generator permit from the Sacramento Air Quality Management District and $5,000 for a services application to Sacramento Municipal Utility District for a new transformer, with funding to come from reserves.
Eventually, the costs will be apportioned among the CSD and development entities, General Manager Ed Crouse said.
But no developer agreements are in place yet.
Crouse reported at the meeting that the 670 developer group is “not inclined” to agree with additional language the CSD board suggested for the draft financing and services agreement that the developer group has signed. The financing and services agreement spells out developer responsibilities for water and wastewater costs related to new development, including the water treatment plant expansion. The board has directed staff to renew discussions with the group, Crouse said.
There was no update on a separate services agreement for Murieta Gardens, which includes plans for a hotel, and the property an investor group purchased recently from the Pension Trust Fund for Operating Engineers. The representative for the group is John Sullivan of Cosumnes River Land LLC, who was present at the board meeting. The board agreed in May to provide water for the hotel project in advance of the water treatment plant expansion.
Following the loan discussion, the board voted on a request to transfer funds to reserves. For Director Mike Martel, this triggered the issues of budget increases and year-end excess revenue, which he has brought up often since joining the board a year ago. “You know I’m totally against this,” Martel said before the vote. “... We have all this money sitting there. ... I’d rather protect the district if we’re not giving back the refund to put it in a pot so that we could use it for the expansion of the water plant ... so we may be able to fund it ourselves....”
Gillum said the audited amount of revenue for 2012-13 was $220,000, but not all of it was available for the water treatment plant. “We can only look to the water treatment plant for what excess came out of the water fund,” Gillum said.
President Jerry Pasek said the additional revenue in the water fund was due to water use that exceeded budget projections. Those projections are based on the CSD’s commitment to comply with a state mandate to reduce per-capita water consumption 20 percent by 2020.
General Manager Ed Crouse said he wanted to clarify the use of reserves. “We endeavor for large expenditures to use reserve funds,” Crouse said. “It’s difficult for us to predict when those emergencies occur, and if we try to predict when those emergencies occur, we will be varying our rates dramatically each year to try to guess how much money we need. ... So we try to have a bare bones budget for routine and preventive maintenance, and then for emergency and replacement, we use reserves. So that’s why we try to replenish those on a yearly basis through our reserve programs....”
“The biggest bill that I see looming for us is the new water treatment plant,” Martel responded. “And I see that there’s not enough money that we have now so we’re talking about raising the rates -- it will be for the 10th straight year....”
“You’re raising rates in water to fund the reserves to pay for that replacement,” Crouse said. “So it’s staying in the water fund. You’re correct -- we can’t take from the wastewater side over to the water side.”
Martel cast the sole dissenting vote in the transfer of $50,000 of working capital to the security and drainage funds and $38,380 to admin replacement reserves.
At the October meeting, Martel submitted 20 questions to be answered by staff and the accountant who performed the annual audit. The questions and written responses are available as an attachment file at the end of this story.
- CSD: Developer funding will limit rate hikes (September 13, 2013)
- CSD bets on growth, will build water plant (July 22, 2013)
RMA funding request for North Gate
After discussions with Rancho Murieta Association General Manager Greg Vorster about the RMA request for a contribution of $200,000 for cameras, bar code system components and other items for the North Gate, CSD General Manager Ed Crouse said there was “conceptual” agreement that “the district could be responsible for the electronic equipment, but not necessarily for structure, lanes or any water feature.”
The RMA has $1.4 million for the project under the terms of the Mutual Benefit Agreement between the RMA and Pension Trust Fund for Operating Engineers.
Crouse said the development team led by John Sullivan has introduced a new concept for the gate “as well as branding of the North Gate to coincide with their vision of the community,” so the RMA was waiting for the revised design and overall budget. “But I believe, and I think RMA believes, that the original $1.4 million was sufficient to build a North Gate with some modest lane improvements as well as electronics,” Crouse said. “But outside branding and other landscape treatments will be the responsibility of the future developer. So until we get a better idea of the cost, we’re holding off discussions on the CSD’s contribution.”
- Is new North Gate about to happen? (November 18, 2013)
Committee change proposed
CSD committees consist of two directors and staff, with open meetings of 30 to 60 minutes where the public can provide input. Directors Paul Gumbinger and Mike Martel, former directors of the Rancho Murieta Association, advocated taking public participation further by having non-director committee members.
In contrast to the CSD, RMA committees typically consist of one director and a group of non-director volunteers, with limited staff presence. While the CSD offers committee agendas and packets on its web site, visitors to RMA committees usually don’t have access to committee materials.
General Manager Ed Crouse cited some of the issues of non-director participation after President Jerry Pasek asked if there were any negatives. Crouse said he’d been told that non-director participation at the RMA has at times brought special interests or a sole-source interest to the committee, which “drove the committee in certain directions.”
Allowing public members on CSD committees would also require re-adoption of the CSD bylaws, which currently limit participation to directors, Crouse said.
During the discussion, audience member John Merchant came to the podium to comment. “I’ve been the president of both of these bodies that we’re talking about, I’ve been on committees at both,” he said. “...The one comparison I would make to you is that, of the two organizations, this one has always run much more efficiently and avoids some of the pitfalls of politics that go on. I mean, all the politics that go on here is when they elect the five of you. ... I don’t understand why you would change something that for all intents and purposes seems to work pretty well.”
Merchant suggested forming an ad hoc committee or recruiting someone with expertise to provide input as alternatives to taking on non-director committee members.
Director Mike Martel had a different view. “I think CSD doesn’t communicate with the community at all. ... Staff prepares every single recommendation, like none of us have any say in where the excess money went, or the budget, it gets managed or manipulated so the politics is there. The politics of staff is dictating and controlling everything that the board votes on,” Martel said. “The Brown Act prevents us from having any discussions ... so having another set of eyes in the public that’s not restrained from the Brown Act I think is a really good idea....”
This prompted President Jerry Pasek to inquire of CSD counsel Jonathan Hobbs, “If a person is formally appointed to the committee, can they run around and talk to anybody and everybody, including all five directors independently?”
“If they are part of the committee, they’d be subject to the Brown Act,” Hobbs replied.
“So if you appoint them to the committee, they’re subject to the Brown Act,” said Pasek. “But if they’re like John Sullivan, who comes rolling into the committee meetings, they’re not.”
Sullivan, representing development interests, typically sits at the conference table and participates in committee discussions when he attends monthly CSD committee meetings.
Crouse responded to Martel’s comments about staff control. “All the agendas are set in conjunction with the committee members themselves,” Crouse said. Staff works on items that are brought to the committee but “ultimately, there’s a recommendation elevated by the committee to the board,” Crouse said. “So they have input. If they don’t like our comments, our direction, our findings, they can tell us to go back and fix it and bring it back later. And we don’t bring things to the board until the committee makes a recommendation.”
“I think we keep on finding ways in a negative manner as to why it won’t work,” Gumbinger said of having non-director committee members. “Why don’t we look at ways to make it work? Let’s ask staff to look into this and see what it would take to appoint one public member to each committee.”
The Communications and Technology Committee will look into what is required.
Surveillance camera plan deferred
Security Chief Greg Remson said a plan to implement, integrate and expand surveillance cameras would provide a viewing system at the gates that entities throughout the district could attach to, and the video feeds could be viewed from other areas.
While the CSD will buy cameras for its facilities and security needs, each private entity will be responsible for providing its own camera system, General Manager Ed Crouse said. “We’re not buying cameras. We’re buying a viewing station. ... The Plaza, the hotel, they’re going to have their own security systems, they’re going to have their own on-site cameras.” Security would be able to respond to an alert from their systems, Crouse said.
“We can’t mandate that they’re going to buy a Panasonic or a Sony or whatever because we’re not paying for it,” Director Bobbi Belton said.
“I think the district needs to develop a spec that if you are in private business, your system hooks up to a system that is going to be shared by everybody,” said Director Mike Martel. “... I don’t believe we are preventing any crime from going on today. ... So security, if it’s not the Number 1 issue in the community, it’s the Number 2 issue. What I don’t see is what’s our master plan, what is our vision as development and commercial property.”
Martel said he wanted to defer action on the plan and expand on it, and the board members agreed.
Later in the meeting, Martel proposed forming an ad hoc committee to develop a security strategy that accommodates growth.
The draft surveillance camera plan is available in the meeting packet.