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Tuesday, November 16, 2021
Board of Directors Special Meeting
Time: 8:00 A.M.
IMPORTANT NOTICE REGARDING THE NOVEMBER 16, 2021 SPECIAL MEETING
This meeting is being conducted in person and utilizing teleconferencing and electronic means
consistent with State of California Executive Order N-29-20 dated March 17, 2020, regarding the
COVID-19 pandemic.
***
The livestream of the meeting can be viewed by clicking the "Video" icon on this page (which will be
made available at the start of the meeting) or by visiting www.youtube.com/CostaMesaSanitary. In
accordance with Executive Order N-29-20, the public may only view the meeting online and not in
the District's Board Room.
***
To participate in the meeting by computer:
1. Copy and past the following into your browser - https://us02web.zoom.us/join
2. Enter the Meeting ID number - 823 8351 2128
3. Click "Join."
***
To join the meeting with a mobile device:
1. Download the Zoom app at the Google Play Store (for Android devices) or the App Store (for
Apple devices)
2. Open the Zoom app. Select "Join a Meeting."
3. Enter Zoom Meeting ID. Select "Join Meeting."
***
To join the meeting by phone:
1. Call 1-669-900-6833.
2. You will be asked to enter the Meeting ID number. Dial 823 8351 2128#
3. Lastly, you will be asked to enter your Participant ID. Press the # symbol again to bypass this
step.
***
Public Comments: Members of the public can submit any comments in writing for the Board of
Directors' consideration by sending them to the District Clerk, Noelani Middenway, at
nmiddenway@cmsdca.gov. Those comments will be made part of the official public record of the
meeting.
***
Obtaining Agenda Materials: The public is entitled to copies of all documents that are made part of
the agenda packet. If any document or other writing pertaining to an agenda item is distributed to
all or a majority of the Board after the packet is prepared, a copy of that writing may be obtained
from the District Clerk's Office.
***
In Compliance with ADA: Contact District Clerk, Noelani Middenway, at (949) 645-8400, 48 hours
prior to meeting if assistance is needed (28 CFR 35.102.35.104 ADA Title II).
A. Opening Items
1. Call to Order
2. Roll Call - (If absences occur, consider whether to deem those absences excused based on facts presented for the
absence – such determination shall be the permission required by law.)
B. Public Comments
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1. Public Comments - This time has been set aside for persons in the audience to make the Board of comments on
items within the subject matter jurisdiction of the Costa Mesa Sanitary District that are not listed on this agenda.
Members of the public will have the opportunity to address Directors about all other items on this agenda at the time
those items are considered. Under the provisions of the Brown Act, the Board of Directors is prohibited from taking
action on oral requests but may refer the matter to staff or to a subsequent meeting. The Board of Directors will
respond after public comment has been received. Please state your name. Each speaker will be limited to four (4)
continuous minutes.
C. Discussion Items
1. Provide Staff Direction Regarding 2021 Wastewater Rate Study
D. Closing Items
1. Oral Communications & Director Comments
2. Adjournment
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Tuesday, November 16, 2021
Board of Directors Special Meeting
Time: 8:00 A.M.
IMPORTANT NOTICE REGARDING THE NOVEMBER 16, 2021 SPECIAL MEETING
This meeting is being conducted in person and utilizing teleconferencing and electronic means
consistent with State of California Executive Order N-29-20 dated March 17, 2020, regarding the
COVID-19 pandemic.
***
The livestream of the meeting can be viewed by clicking the "Video" icon on this page (which will be
made available at the start of the meeting) or by visiting www.youtube.com/CostaMesaSanitary. In
accordance with Executive Order N-29-20, the public may only view the meeting online and not in
the District's Board Room.
***
To participate in the meeting by computer:
1. Copy and past the following into your browser - https://us02web.zoom.us/join
2. Enter the Meeting ID number - 823 8351 2128
3. Click "Join."
***
To join the meeting with a mobile device:
1. Download the Zoom app at the Google Play Store (for Android devices) or the App Store (for
Apple devices)
2. Open the Zoom app. Select "Join a Meeting."
3. Enter Zoom Meeting ID. Select "Join Meeting."
***
To join the meeting by phone:
1. Call 1-669-900-6833.
2. You will be asked to enter the Meeting ID number. Dial 823 8351 2128#
3. Lastly, you will be asked to enter your Participant ID. Press the # symbol again to bypass this
step.
***
Public Comments: Members of the public can submit any comments in writing for the Board of
Directors' consideration by sending them to the District Clerk, Noelani Middenway, at
nmiddenway@cmsdca.gov. Those comments will be made part of the official public record of the
meeting.
***
Obtaining Agenda Materials: The public is entitled to copies of all documents that are made part of
the agenda packet. If any document or other writing pertaining to an agenda item is distributed to
all or a majority of the Board after the packet is prepared, a copy of that writing may be obtained
from the District Clerk's Office.
***
In Compliance with ADA: Contact District Clerk, Noelani Middenway, at (949) 645-8400, 48 hours
prior to meeting if assistance is needed (28 CFR 35.102.35.104 ADA Title II).
A. Opening Items
Subject 1. Call to Order
Meeting Nov 16, 2021 - Board of Directors Special Meeting
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A. Opening Items
Robert Ooten, President
Michael Scheafer, Vice President
Arlene Schafer, Secretary
Arthur Perry, Director
Brett Eckles, Director
Subject 2. Roll Call - (If absences occur, consider whether to deem those absences excused
based on facts presented for the absence – such determination shall be the
permission required by law.)
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B. Public Comments
Subject 1. Public Comments - This time has been set aside for persons in the audience to
make the Board of comments on items within the subject matter jurisdiction of the
Costa Mesa Sanitary District that are not listed on this agenda. Members of the
public will have the opportunity to address Directors about all other items on this
agenda at the time those items are considered. Under the provisions of the Brown
Act, the Board of Directors is prohibited from taking action on oral requests but
may refer the matter to staff or to a subsequent meeting. The Board of Directors
will respond after public comment has been received. Please state your name. Each
speaker will be limited to four (4) continuous minutes.
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C. Discussion Items
To: Board of Directors
From: Scott Carroll, General Manager
Date: November 16, 2021
Subject: Provide Staff Direction Regarding 2021 Wastewater Rate Study
Summary
Approximately 97.4% of the District's wastewater revenues are from assessment rates that are applied to the property tax roll.
Periodically, the District will evaluate the rates to ensure revenues are covering expenditures. The last wastewater rate study was done
in 2012 and the last wastewater rate increase was in 2017.
On July 1, 2021 the District solicited proposals from qualified professional consultants to prepare a wastewater rate study that describes
the justification and calculations for annual wastewater charges. When proposals were due on August 5, the District received three
proposals that ranged in cost from $29,500 to $67,569. The consulting firm, Robert D. Niehaus, Inc. (RDN), submitted a proposal that is
considered "Best Value" to the District and was awarded a contract for $29,500.
Recommendation
That the Board of Directors:
1. Provide staff direction regarding the 2021 Wastewater Rate Study; and
2. Direct staff to bring this item back to the December 20, 2021 Board of Directors meeting to adopt the study and set a public hearing
date to comply with Proposition 218
Analysis
The District is responsible for providing a wastewater collection system to residents and businesses throughout Costa Mesa and a portion
of Newport Beach and the County of Orange. Proper maintenance and capital improvements of the system is necessary to ensure good
operations and avoid sanitary sewer overflows (SSOs). The last time the District adjusted the wastewater rates was in 2017. In the past
four and a half years, expenditures have steadily increased while revenues remained constant. In fact, wastewater reserve funds were
used to balance the FY 2021-22 & 2022-23 Budget because expenditures are exceeding revenues. Current revenues are not
sustainable to District operations, so adjustments are required, but how much of the adjustments is determined by the study.
Wastewater rates pay for District operations, which include personnel (salaries & benefits), maintenance (pipe cleaning, pump stations,
fleet, buildings), and capital improvements (pipe replacement/rehabilitation, pump station improvements/rehabilitation). The wastewater
rate study takes into account existing expenditures as well as future expenses. Attached is a list of future expenditures staff is requesting
to perform in the next five years. The attached expenditures are included in the rate study.
Wastewater rates are applied to the following property classes:
Single Family Residential
Multi-Family Residential (e.g. apartments, condominiums)
Commercial Average Strength (businesses without on-site food preparation)
Subject 1. Provide Staff Direction Regarding 2021 Wastewater Rate Study
Meeting Nov 16, 2021 - Board of Directors Special Meeting
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Recommended Action That the Board of Directors:
1. Provide staff direction regarding the 2021 Wastewater Rate Study; and
2. Direct staff to bring this item back to the December 20, 2021 Board of Directors meeting
to adopt the study and set a public hearing date to comply with Proposition 218
Goals 1.0 Sewer Infrastructure
8.0 Finance
8.3 Finance - Forecast revenues and expenditures
8.4 Finance - Maintain appropriate reserve levels
8.7 Finance - Ensure rates are not among the highest in the County
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Commercial Average Strength (businesses without on-site food preparation)
Commercial High Strength (businesses with on site food preparation)
Industrial (e.g. manufacturing)
Trailer
Accessory Dwelling Units (ADUs)
Below are the proposed annual rates for all the property class for the next five years. RDN will give a presentation to the Board of
Directors describing the methodology and justification for the proposed rate adjustments.
Table 1
Customer Class Current Rate FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-2
Single Family Residential 92.38 95.18 104.60 114.96 126.34 138.85
Multi-Family Residential 54.21 72.04 79.17 87.01 95.62 105.09
Commercial - Ave Strength 41.09 41.50 45.61 50.12 55.09 60.54
Commercial - High Strength 44.81 46.21 50.78 55.81 61.34 67.41
Industrial 105.48 106.87 117.45 129.08 141.86 155.90
Trailer 54.21 67.18 73.83 81.14 89.17 98.00
ADU 0.00 34.99 38.45 42.26 46.44 51.04
Commercial and Industrial classes are charged per 1,000 square feet of building
Staff believes the proposed rate adjustments will ensure adequate revenues are available for expenditures and help the District
achieve zero sanitary sewer overflows on a consistent basis. Experiencing zero SSOs on a consistent basis will avoid potential fines from
regulatory agencies and/or potential legal costs from non-governmental agencies who file lawsuits for violating the federal Clean Water
Act. Staff is seeking feedback and direction from the Board regarding the proposed five-year rate structure. If the Board believes the
proposed rates are too high, then staff is seeking direction from the Board on items to cut from the list of future expenditures.
On November 9, 2021, the Board reviewed and commented on the study and proposed rates. The Board directed staff to bring this item
back to today's meeting for further discussion and provide additional information. Specifically, the Board requested information on how the
proposed rates correlate with inflation. The graph below is an attempt to address the Board's request. The blue line represents
single family resident current rate that is escalating annually to FY 2027 using CPI. The gray line is RDN proposed rates and the orange
line represents rates based on the Housing Element’s data. RDN will provide more information regarding the graph below at this
morning's meeting.
Figure 1
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In addition, the Board requested total percentage of wastewater rate increases from other agencies. This information is provided below in
the bar chart.
Figure 2
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Staff provided links to the City of Costa Mesa's Planning Commission and the City's Housing Element to RDN to ensure the study is
accurate to projecting future growth within the community. Finally, the Board inquired staff's capability to completing capital improvement
projects scheduled for the next five years. In February 2021, the District hired Mark Esquer as the District Engineer. Since then the
District has completed or began (design and/or construction) the following capital projects totaling over $3 million.
1. #311 Manhole Cover Repairs
2. #318 President Pump Station Reconstruction
3. #322 Iowa Force Main Replacement
4. #324 Brick Manhole Rehabilitation
5. #326 19th Street Force Main Replacement
6. #327 Calcium Removal Phase 1
7. #328 Ductile Iron Pipe Rehabilitation Phase 1
8. #328 Ductile Iron Pipe Rehabilitation Phase 2
9. #329 Aviemore Force Main Replacement
10. #330 Westbluff Pump Station Rehabilitation
11. #333 Elden Force Main Air Release Valve Removal
12. #334 Gisler Force Main Replacement
13. #335 Sewer Siphon Lining
14. #336 Grade 4 Sewer Segment Rehabilitation
15. #337 Air Vac Rehabilitation and Removal
On November 10, 2021 the Citizens Advisory Committee (CAC) reviewed and discussed the proposed rates. The CAC suggested staff
provide bullet points describing the causes for the rate adjustments so that the public can better understand the justifications. Staff
provided bullet points below.
What's causing the proposed rate adjustments?
Stabilized Rates. Wastewater rates have remained stabilized and have not been adjusted for five years (2017-22).
Liability Insurance. Insurance costs have increased over 100% from $85,000 in FY 2017-18 to $171,000 in FY 2020-21. The
District budgeted $175,000 for insurance in FY 2021-22 and $192,000 in FY 2022-23.
Labor Costs. Labor costs have increased 20% from $1.4 million in FY 2017-18 to $1.8 million in FY 2020-21. The District
budgeted $2.3 million in FY 2022-23 for new positions such as the District Engineer, which was hired in February 2021, and two
additional wastewater maintenance workers that if hired, will enhance the frequency to cleaning the entire system from eighteen
months to twelve months. The enhanced cleaning frequency will reduce the likelihood of sanitary sewer overflows and avoid
regulatory fines and/or potential lawsuits from non-governmental organizations.
Equipment. The two new wastewater maintenance workers will need to operate a sewer cleaning unit. The District budgeted
nearly $500,000 to purchase a new unit in FY 2022-23. An existing cleaning unit is scheduled for replacement in 2024-25 at cost
of nearly $500,000. District safety protocols requires a pickup truck be parked behind the cleaning unit when staff is in the street
cleaning the sewer system. The pickup truck gives staff added visibility and protection from oncoming traffic. A new pickup truck
for the new wastewater maintenance workers is budgeted in FY 2022-23 for $77,500. Two existing pickup trucks are scheduled
for replacement in 2024-25 and 2025-26 for a total amount of $136,000. The existing forklift at the District Yard is 20 years old and
no longer useful. The District budgeted $46,000 to acquire a new forklift in FY 2022-23.
Diesel Fuel. Diesel fuel for the Wastewater fleet has increased over 46% from $3.06 per gallon in 2017 to $4.48 per gallon in
2021. Staff believes diesel fuel will continue to rise in the next five years.
Capital Improvements. The District is planning to spend nearly $12 million on capital improvements for the next five years.
Replacing infrastructure before failure is the best method to ensure optimum performance of the sewer system and avoids
sanitary sewer overflows.
Computer Licenses & Maintenance. The District is expanding its technology usage to improve efficiencies and better serve the
public.Due to the continual threat of cyber-attacks,increased IT security maintenance and monitoring is required.Computer
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public. Due to the continual threat of cyber attacks, increased IT security maintenance and monitoring is required. Computer
licenses and maintenance costs have increased 83% from $95,690 in FY 2017-18 to $175,400 in FY 2022-23.
Inflation. As shown in the Figure 1 above, District costs have not kept up with inflation. If the District adjusted rates annually
based on inflation (consumer price index), the annual wastewater rate by 2027 would be $130.03, which is less than $1.00
($0.735) a month difference than staff and RDN's recommendation of $138.85.
The CAC also suggested staff provide brief bullet points describing what caused other agencies to adjust their wastewater rates as
shown in Figure 2 above.
Newport Beach. Wastewater rates were first adjusted in 2018. The last time the City raised its wastewater rates was in 2006.
Revenue estimates were insufficient to meet the operational expenditure requirements. Fund Reserve balance was being used to
cover the shortfall. Without an increase to the wastewater rate, the projected Sewer Enterprise Fund balance would drop below
the City Council Reserve Policy in one year and will be completely depleted in two years. The City approved a five-year rate
adjustment.
Placentia. Wastewater rates were first adjusted in 2021. The last time the city raised its wastewater rate was in 2005. Since 2005,
the cumulative annual price change increased by a factor of 37.2% and revenues did not keep pace with the capital needs of the
system. Current rates were insufficient to fund ongoing services and necessary capital improvements. Without a sanitary sewer
system fee adjustment, the City’s Sewer Enterprise Fund will not have adequate revenues to cover operations and maintenance
of the sewer system and conduct necessary capital improvements and repairs. The City approved a five-year rate adjustment.
La Palma - Wastewater rates were first adjusted in 2016. The last time the City raised its wastewater rates was in 2010. Sewer
fund balance was projected to be depleted by 2019. Revenues did not keep pace with operations, maintenance and capital
needs. The City approved a five-year rate adjustment.
South Coast Water District - Wastewater rates were first adjusted in 2021. The primary factor for considering wastewater
revenue increases is the need to maintain debt service coverage consistent with the projections provided in 2020 when
SCWD credit rating was reviewed. SCWD was placed on watch status by its rating agency, Fitch, when SCWD issued its 2020
bonds. Dropping below the debt service coverage shown in the official statement to the bonds could adversely affect the
SCWD credit rating, which could increase the cost of borrowing. In addition, SCWD integrated pass-through adjustments from
South Orange County Wastewater Authority (SOCWA) for unforeseen variations in the cost of treatment. SCWD approved a two-
year wastewater rate adjustment. Adjustments would be considered again after the two years.
The CAC unanimously approved recommending the Board of Directors consider approving the proposed rate adjustments presented by
RDN and staff as shown in Table 1 above.
Legal Review
Not applicable at this time. District Counsel will assist with the Proposition 218 hearing, which is required by state law before
implementing utility rate adjustments.
Environmental Review
Subject activity is exempt from the requirements of the California Environmental Quality Act (CEQA) (Public Resources Code Section
21000 et. seq.). Section 15300.4 of CEQA allows an agency while establishing its own procedures “to list those specific activities which
fall within each of the exempt classes”, and the District has adopted “CEQA Guidelines and Implementing Procedures” that state on page
6 “”Projects” does not include …. C. Continuing administrative or maintenance activities.”
Financial Review
Currently, the District receives $5,668,987 annually from wastewater rate charges. The proposed rates mentioned above would adjust
annual revenues as follows:
Revenue FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-27 TOTAL
With Adjustment 6,265,570 6,916,438 7,635,007 8,427,725 9,302,871
Without Adjustment 5,701,155 5,726,472 5,751,967 5,777,229 5,802,679
Difference 564,414 1,189,967 1,883,040 2,650,496 3,500,192 9,788,109
The District would receive additional revenues in the amount of $9,788,109 over the course of five years. If the District does not adopt the
rate adjustments for the next five years, the District will have to continue to use the wastewater reserve funds to balance the budget and
by FY 2026-27 the reserve funds will be depleted.
Public Notice Process
Copies of this report are on file and will be included with the entire agenda packet for the November 16, 2021 Board of Directors
special meeting at District Headquarters and on District website at www.cmsdca.gov
Alternative Actions
1. Direct staff to report back on November 22, 2021 regular Board of Directors meeting with more information.
2. Direct staff to report back on December 14, 2021 study session with more information.
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File Attachments
Wastewater Rate Study Presentation.pptx (18,518 KB)
Future Wastewater Expenditures.xlsx (12 KB)
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D. Closing Items
Subject 1. Oral Communications & Director Comments
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D. Closing Items
Subject 2. Adjournment
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