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Minutes - Board - 2021-12-14COSTA MESA SANITARY DISTRICT MINUTES OF BOARD OF DIRECTORS STUDY SESSION DECEMBER 14, 2021 NOTE: THIS HYBRID IN -PERSON AND TELECONFERENCED MEETING WAS CONDUCTED UTILIZING ELECTRONIC MEANS CONSISTENT WITH STATE OF CALIFORNIA ASSEMBLY BILL 361(Gov. CODE 54953(B)(3)). Members present Arlene Schafer, Art Perry, Bob Ooten, Brett Eckles, Mike Scheafer Members absent None Staff present Scott Carroll (General Manager), Alan Burns (District Counsel), Noelani Middenway (District Clerk and Public Information Officer), Kaitlin Tran (Finance Manager), Dyana Bojarski (Administrative Services Manager), Mark Esquer (District Engineer), Gina Terraneo (Management Analyst II), Nabila Guzman (Management Analyst I), David Griffin (Facilities Maintenance Worker & Interim Code Enforcement Officer), Lieu Tran (Accountant), Autumn Alvarez (Accounting Clerk) Others present Mike Balliet, Mike Balliet Consulting Julie Barreda, CR&R Anthony Elowsky, Robert D. Niehaus, Inc. Elodie Katz, Citizens Advisory Committee Char & District resident Ichiko Kido, Robert D. Niehaus, Inc. Jim Mosher, District resident Mike Carey, CR&R Zachary Van Dinther, Robert D. Niehaus, Inc. Meeting called to order at 8:00 A.M. A. OPENING ITEMS COSTA MESA SANITARY DISTRICT PAGE 2 MINUTES OF THE BOARD OF DIRECTORS STUDY SESSION HELD DECEMBER 14, 2021 Procedural: 1. 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.) President Ooten called the meeting to order at 8:00 A.M. District Clerk and Public Information Officer, Noelani Middenway, noted that President Ooten, Vice President Scheafer, Director Perry, and Director Eckles were present at this time while Secretary Schafer was not present. B. PUBLIC COMMENTS Procedural: 1. Public Comments President Ooten opened public comments. District resident, Jim Mosher, asked for an update regarding redistricting voting divisions. He noted that the deadline to redraw District boundaries is April 17, 2022. President Ooten stated that the District is currently reviewing their redistricting requirements. District Counsel, Alan Burns, stated that Deborah Diep, a demographer, is working on a report to determine if the population has changed enough to warrant new District divisions. Hearing no additional members of the public wishing to speak, President Ooten closed public comments. C. ITEMS OF STUDY Action, Receive and File: 1. Receive and File FY 2020-21 CR&R Performance Review Recommendation: That the Board of Directors receives and files CR&Ws Annual Performance Review for FY 2020-21. COSTA MESA SANITARY DISTRICT PAGE 3 MINUTES OF THE BOARD OF DIRECTORS STUDY SESSION HELD DECEMBER 14, 2021 Management Analyst I, Nabila Guzman, presented report details. She stated that CR&R performed satisfactory service for Fiscal Year 2020-21. She noted that CR&R had 425 missed trash pickup complaints. Secretary Schafer entered the meeting at 8:06 a.m. There was no further discussion, and the report was received. Action: 2. Consider Directing the General Manager to Renegotiate the CR&R Environmental Services Contract for SB 1383 Compliance Recommendation: That the Board of Directors directs the General Manager to begin negotiations with CR&R Environmental Services for SB 1383 trash contract compliance. Ms. Guzman stated that District staff and the District's solid waste consultant, Mike Balliet, have been having informal meetings regarding Senate Bill (SB) 1383 with CR&R. She added that they have been reviewing the current gaps in service that are not compliant with SB 1383. She shared that they have discussed transitioning from a two -cart system to a three -cart system. She noted that the staff report includes CR&R's draft proposal for SB 1383 compliance and a three -cart curbside disposal system. She stated that establishing a source separating curbside recycling program would increase the District's diversion rate and allow the District to be in full compliance with State mandates. She added that SB 1383 regulations require agencies that utilize a two -cart system to take their materials to a high -diversion facility for processing. She shared that, over the last three years, all agencies serviced by CR&R have converted to a three -cart system except the District. She noted that it would be too costly for CR&R to upgrade their existing facilities to achieve SB 1383 compliance. She added that, if the District decides to keep its current system, then District ratepayers would be responsible for the costs to update CR&R's Materials Recovery Facility (MRF). She stated that District staff believes that a source separated three -cart system would result in cleaner recyclables, increase diversion, eliminate the cost of mixed waste processing, and allow for simpler educational outreach, since a three -cart system is considered standard practice. She added that District staff would like to further explore the option of offering 90-gallon trash carts to customers and the possibility of CR&R processing billing for the District, which may make it possible for a tiered rate system based on cart size. She noted that exemptions for Organic Recycling Carts are not COSTA MESA SANITARY DISTRICT PAGE 4 MINUTES OF THE BOARD OF DIRECTORS STUDY SESSION HELD DECEMBER 14, 2021 allowed under SB 1383. She discussed the benefits of a three -cart system, which would utilize a clean MRF. She stated that CR&R has proposed a fee of $24.08 per month to achieve SB 1383 compliance and transition to a three - cart system. Director Eckles stated that the proposed rate is about a 12% increase to the current rate for Fiscal Year 2021-22. Ms. Guzman stated that District staff needs to review the breakdown of CR&R's proposed fee. She added that the District currently pays a per ton fee for mixed waste, organic waste, and occupancy. She noted that CR&R's proposed fee is a flat rate. Director Eckles asked how the costs to upgrade CR&R's facilities would be passed on to District ratepayers. CR&R representative, Julie Barreda, explained that if the District retains its two -cart system, then CR&R would have to upgrade their sorting system to qualify as a high -diversion facility, which would cost over $100,000. She stated that CR&R can explore using a different facility to process waste, which would include an additional fee for disposal. Director Eckles asked to review the costs for upgrading CR&R's MRF. Ms. Barreda stated that CR&R can provide a quote based on estimated costs. President Ooten inquired whether the existing MRF would still be used if all CR&R customers transition to a three -cart system. Ms. Barreda stated that it would be used to clean recyclables. Director Perry asked if all other CR&R customers are using CR&R's MRF and about the costs for upgrading it to a high -diversion facility. Ms. Barreda confirmed that all other CR&R customers are currently utilizing their MRF to clean recyclables. She stated that CR&R's systems are not set up to sort recyclables from mixed waste and achieve a 75% diversion rate. She noted that, according to the regulations established by CalRecycle, CR&R's MRF is not considered a high -diversion facility to process mixed waste. She COSTA MESA SANITARY DISTRICT PAGE 5 MINUTES OF THE BOARD OF DIRECTORS STUDY SESSION HELD DECEMBER 14, 2021 stated that if the District transitions to a three -cart system, then CR&R is not required to upgrade their MRF. President Ooten inquired about CR&R's pay-as-you-go system. Discussion followed regarding a tiered rate system. President Ooten inquired about the total number of carts within the District's service area. Ms. Barreda stated that, for a pay-as-you-go system, each customer would start with CR&R's basic level of service, then be notified that they can exchange their carts for different sizes and prices. She noted that this system would require a huge educational effort to inform customers of their options. President Ooten stated that the District's current billing system through the County of Orange has been very effective. Discussion followed regarding Organic Recycling Carts. Ms. Barreda stated that SB 1383's food waste regulations require all customers to have an Organic Recycling Cart. President Ooten asked if CR&R's proposed rate includes the pay-as-you-go billing system. General Manager, Scott Carroll, stated that the proposed rate does not include the new billing system. President Ooten inquired about the timeline for negotiations between the District and CR&R. Mr. Carroll stated that the negotiation process will require more than one meeting. Discussion followed regarding trash cart sizes and CR&R's tiered rate system. COSTA MESA SANITARY DISTRICT PAGE 6 MINUTES OF THE BOARD OF DIRECTORS STUDY SESSION HELD DECEMBER 14, 2021 Director Eckles asked if these negotiations require a new contract with CR&R. Mr. Burns stated that the District can issue a new contract or an addendum to the current contract with CR&R. He noted that either format will establish a new contract. Director Eckles asked if the District could put its trash services out to bid to other vendors. Mr. Burns stated that SB 1383 requires the District to amend its current contract and issue changes. He noted that the contract for trash services is considered open since the District is in negotiations with CR&R. Secretary Schafer inquired about hosting a meeting with local gardeners to discuss the Organics Recycling Program. Mr. Carroll stated that District staff is currently looking into hosting town hall meetings for the public. Secretary Schafer requested for CR&R to attend the town hall meetings. Vice President Scheafer discussed the District's current billing system. Mr. Carroll stated that charges for sewer and trash services appear as separate line items on a customer's property tax bill. Vice President Scheafer expressed support for the current billing system, since property tax bills have a higher rate of being paid on time. He stated that it is harder to collect payments for individual trash bills. Mr. Carroll stated that there are options available to assist with collection of payments, such as collection agencies or placing the charges on a customer's tax roll. He noted that a pay-as-you-go program requires a different billing system. Ms. Barreda stated that for customers who do not pay their bill, CR&R will stop service or place unpaid trash charges on their property tax bill. COSTA MESA SANITARY DISTRICT PAGE 7 MINUTES OF THE BOARD OF DIRECTORS STUDY SESSION HELD DECEMBER 14, 2021 Vice President Scheafer stated that the District needs to be cognizant of all the potential changes to trash services. President Ooten asked if customers would be billed monthly. Ms. Barreda stated that they would be billed quarterly. Vice President Scheafer asked who is responsible for paying for the third cart in a three -cart system. Ms. Barreda stated that the costs for a third cart are built into the proposed fee. Director Perry suggested reviewing the City of Costa Mesa's affordable housing plans before negotiating trash rates. Director Eckles expressed support for Vice President Scheafer's comments regarding billing. He asked if the District can retain its current billing system and transition to a three -cart system. President Ooten stated that the District has the choice of implementing the pay-as-you-go program. Discussion followed regarding negotiating trash rates. President Ooten stated that the proposed rate is about a 5% increase, which is lower than the State estimates for increases in costs due to SB 1383. Ms. Barreda discussed SB 1383 compliance costs. Vice President Scheafer stated that the local media has started reporting on SB 1383. He shared that the City has adopted their SB 1383 ordinance. He asked if CR&R is responsible for delivering an organic waste bin to multi- family properties. Ms. Barreda confirmed that all multi -family properties are required to have an organic waste container. She added the CR&R will be meeting individually with each property to discuss SB 1383 regulations. She discussed City enforcement procedures, which will begin in 2024. COSTA MESA SANITARY DISTRICT PAGE H MINUTES OF THE BOARD OF DIRECTORS STUDY SESSION HELD DECEMBER 14, 2021 Vice President Scheafer asked how multi -family properties will be storing their organic waste containers. Ms. Barreda stated that she is unsure as to how each property will be storing their containers. Discussion followed regarding space issues for additional trash carts. Solid waste consultant, Mike Balliet, stated that the City has been enforcing its trash closure ordinance. He shared that multi -family properties with five or more units can request a space constraint waiver. He discussed rate negotiations, new vehicle schedules, trash cart costs, and landfill rates. Vice President Scheafer requested for the Solid Waste Ad Hoc Committee to discuss this item. Mr. Carroll suggested to begin negotiations with CR&R and present those discussions to the Solid Waste Ad Hoc Committee. He stated that the goal is to determine if a three -cart system is necessary. Vice President Scheafer expressed support for Mr. Carroll's suggestion. Secretary Schafer requested for the entire Board to take part in the negotiations. Director Perry stated that Solid Waste Ad Hoc Committee meetings are public meetings. Director Eckles requested for District staff and CR&R to discuss utilizing their existing MRF and the necessary upgrades for it to be deemed a high - diversion facility and to negotiate with other waste haulers since the contract with CR&R is open. President Ooten clarified that the District would open the contract for bidding rather than negotiations with other waste haulers. Discussion followed regarding accepting bids from other vendors. COSTA MESA SANITARY DISTRICT PAGE 9 MINUTES OF THE BOARD OF DIRECTORS STUDY SESSION HELD DECEMBER 14, 2021 President Ooten and Director Perry advised District staff to retain its current billing system rather than implementing a pay-as-you-go program. Mr. Mosher commented that the CR&R letter that was issued in September 2021 incorrectly stated that the District is the only agency with a two -cart system. He noted that the City of Newport Beach essentially has a one -cart system in that a recycling cart is optional. He shared that the City passed a vague ordinance regarding trash services and that CR&R will be presenting a new contract to the Newport Beach City Council in January 2022. He inquired if the District and CR&R are confident in their understanding of SB 1383's requirement for high -diversion MRFs. He noted that SB 1383 specifically requires a 75% diversion rate for organic waste. He stated that if 75% of organic waste is being sorted into customer's Organics Recycling Carts, then the District is in compliance with SB 1383. He commented that the Cities of Newport Beach and San Diego have regarded trash services like street sweeping services in that the charges for both services are included in the customer's property tax bill. He stated that Newport Beach residents pay a small recycling fee for CR&R to sort their recyclables. However, he added that these residents will soon be required to sort their own waste, but are being asked to pay a higher recycling fee. He proposed that trash rates should be reduced since customers are required to sort their own waste. He stated that if the District implements a three -cart system, then it will need to amend its current SB 1383 ordinance. He discussed CalRecycle's two models: standard or performance -based ordinance. He noted that a performance - based ordinance promises that 90% of the customers will use a three -cart system, which does not include regulatory requirements such as enforcement and inspections. He asked if the District is considering a performance -based ordinance. Mr. Carroll confirmed that the majority of the Board is not opposed to directing the General Manager to begin negotiations with CR&R for SB 1383 trash contract compliance. Director Eckles stated that he opposes, but the majority carries. Vice President Scheafer asked if a compliance officer is required. Mr. Burns stated that the District has an inspection program to ensure that compliance is achieved. He added that a high -diversion facility is required if COSTA MESA SANITARY DISTRICT PAGE 10 MINUTES OF THE BOARD OF DIRECTORS STUDY SESSION HELD DECEMBER 14, 2021 the District retains its two -cart system and that a new ordinance must be adopted if the District decides to transition to a three -cart system. There was no further discussion. Action, Receive and File: 3. Receive and File November 2021 Code Enforcement Officer Report Recommendation: That the Board of Directors receive and file this report. Interim Code Enforcement Officer, David Griffin, presented report details. He reported that he caught eight scavengers and issued 110 notices for trash carts in public view. He noted that there were no cases of graffiti. He stated that he has seen some organic waste carts that belong to restaurants in public view. President Ooten stated that the District cannot enforce its regulations on commercial properties. Vice President Scheafer recommended informing the City of Costa Mesa regarding this issue. President Ooten asked about courtesy notices. Mr. Griffin stated that courtesy notices are issued for trash carts left in the street. Secretary Schafer stated that CR&R drivers are not closing the trash cart lids after servicing them in the College Park neighborhood. Mr. Griffin discussed missed trash pickups. He suggested for CR&R to inform the District of any service delays as soon as possible to prevent erroneous code enforcement notices. Secretary Schafer requested for CR&R to inform their drivers about closing trash cart lids. Discussion followed regarding CR&R communications. COSTA MESA SANITARY DISTRICT PAGE 11 MINUTES OF THE BOARD OF DIRECTORS STUDY SESSION HELD DECEMBER 14, 2021 Mr. Carroll stated that District staff needs to improve their communications internally. Citizens Advisory Committee (CAC) Chair and District resident, Elodie Katz, commented that her Organics Recycling Cart was missed last Friday. She shared that she submitted an online service request, and that CR&R serviced her cart on the following Monday. CR&R representative, Mike Carey, stated that CR&R was notified late Friday evening that the trash truck broke down but was not given a specific location. He noted that he saw CAC Chair Katz's online service request and deployed a trash truck to her residence on Monday. CAC Chair Katz stated that sometimes CR&R will service missed pickups on Saturdays. She commented that it is challenging to wait until Monday for a Friday missed pickup. She asked if CR&R can notify customers when their missed pickup will be serviced. Mr. Carey stated that he will coordinate with CR&R operations to receive trash route updates. He shared that if the information is provided by 5:00 p.m., then CR&R can notify its customers in a timely manner and arrange for Saturday pickups. Director Perry suggested for CR&R to have a standby driver available for Saturdays. Mr. Carey stated that CR&R has had standby drivers available in the past. CAC Chair Katz asked if her complaint was logged as a single complaint, even though each property in her neighborhood was missed. Mr. Carroll stated that is it difficult to estimate how many homes were missed when a customer reports that a "whole" neighborhood was not serviced. He noted that the District needs specific information for tracking complaints. CAC Chair Katz asked if she should include the exact number of properties that were not serviced in her request and if she should post this information on the Nextdoor app. COSTA MESA SANITARY DISTRICT PAGE 12 MINUTES OF THE BOARD OF DIRECTORS STUDY SESSION HELD DECEMBER 14, 2021 Mr. Carroll confirmed that customers should include the exact number of properties that experienced a missed pickup and encouraged CAC Chair Katz to utilize the Nextdoor app to assist other customers. There was no further discussion, and the report was received. Action: 4. Provide Staff Direction Regarding 2021 Wastewater Rate Study Recommendation: That the Board of Directors: 1. Provide staff direction regarding the 2021 Wastewater Rate Study 2. Direct staff to bring this item back to the December 20, 2021 Board of Directors meeting to receive and file the preliminary report regarding the 2021 Wastewater Rate Study and approve setting a public hearing date to be on February 28, 2022 to consider adopting wastewater rates effective July 1, 2022. Mr. Carroll provided report details. He introduced the District's wastewater consultant, Robert D. Niehaus (RDN). RDN's Project Manager, Ichiko Kido, shared presentation slides. She stated that the 2022 Wastewater Rate Study's escalation factors have not changed. She reviewed the District's total revenue and expenses for Fiscal Years 2020- 2021 through 2026-2027. She discussed District expenses for operations and Capital Improvement Projects (CIPs) and revenue requirements. She explained RDN's proposed revenue adjustments, which involve a 9.6% rate increase per year from Fiscal Years 2022-2023 to 2026-2027. She presented a graph showing the cost -of -service analysis for each property type. She discussed accessory dwelling units (ADUs) and population growth projections. She shared an alternative capital plan proposed by District Engineer, Mark Esquer. She presented RDN's five rate adjustment options (A - E) and explained the implications of each option. She discussed the District's monthly rate and the percentages of rate increases compared to other local agencies. Director Eckles asked to review Option E. Ms. Kido stated that Option E proposes a revenue adjustment of 9.5% for the first year. She noted that a cost -of -service analysis determines cost allocation for each customer type. COSTA MESA SANITARY DISTRICT PAGE 13 MINUTES OF THE BOARD OF DIRECTORS STUDY SESSION HELD DECEMBER 14, 2021 Vice President Scheafer asked if the study is based on the Southern California Association of Governments' (SCAG) population growth projections. Ms. Kido stated that RDN did not apply SCAG's projections because they do not account for ADU growth. Vice President Scheafer commented that SCAG's housing proposal is currently experiencing opposition and scrutiny. Ms. Kido stated that the study utilizes RDN's population growth projections. Vice President Scheafer stated that the proposed rates are based on the proposed housing element. Ms. Kido recommended creating a rate schedule based on RDN's projections, which include historical growth data and known growth data. Discussion followed regarding a two-year rate schedule rather than a five- year rate schedule. Director Perry expressed support for Option C, which proposes two 17% rate increases over two years. Vice President Scheafer stated that the housing element has yet to be determined. He proposed substantial growth in ADUs. He added that multi- family residences may have the biggest impact in Costa Mesa. He expressed concern for a five-year rate schedule. Mr. Carroll recommended Option C if the Board prefers to implement a two- year rate schedule. He noted that, under this option, the District can lower its wastewater rates in Fiscal Year 2024-2025, if necessary. Ms. Kido discussed the main implications regarding Option C. Discussion followed regarding CIPs. Mr. Esquer discussed the options as they relate to CIPs. COSTA MESA SANITARY DISTRICT PAGE 14 MINUTES OF THE BOARD OF DIRECTORS STUDY SESSION HELD DECEMBER 14, 2021 Secretary Schafer expressed support for a two-year rate increase under Option C. Director Eckles inquired about the 3% rate increase mentioned in the staff report. Ms. Kido stated that financial planning involves a 10-year period rather than a 5-year period. However, she added that a Proposition 218 hearing only allows for a 5-year period rate adjustment. She noted that the 3% rate increase refers to the period following the proposed 5-year rate schedule (Fiscal Years 2028 to 2032). Mr. Esquer stated that the goal of this rate increase is to be neutrally funded at the end of a five-year period. Director Eckles expressed support for a two-year rate increase. He asked if the District has ever approved a rate increase and then decided to lower rates later. Mr. Carroll stated that the District has lowered its solid waste rates twice after being approved. He noted that the District has never lowered wastewater rates after approval. Director Eckles expressed support for Option E. He noted that Option C and Option E have similar effects on single family properties. President Ooten discussed the differences between increases in percentages and actual dollar amounts. Director Perry discussed the City of Costa Mesa's Planning Commission meeting. He stated that, in two years, the City will have a better outlook on their housing element. Mr. Carroll asked if the Board would like for District staff to present Option C for approval at the December Board meeting. Director Perry expressed support for discussing Option C at the Board meeting. COSTA MESA SANITARY DISTRICT PAGE 15 MINUTES OF THE BOARD OF DIRECTORS STUDY SESSION HELD DECEMBER 14, 2021 Director Eckles asked to review Options C and E at the December Board meeting. President Ooten stated that, based on the uncertainty with the City's housing element, he prefers Option E. Vice President Scheafer expressed support for Option C. Secretary Schafer made a motion to present Option C at the December Board meeting for approval. Director Eckles asked to hear public comments. Mr. Mosher commented that he was unable to fully follow the Board's discussion regarding the proposed rates and that the connection between the population projections and its effect on the rate increases is vague. He noted that more rate payers will generate more revenue but also generate extra operating costs. He stated that he is unsure about the proposed rate for ADUs and how it is calculated. He added that the City of Newport Beach had a vast increase due to deferring increases for many years. He asked if RDN has factored in the housing elements for the Cities of Newport Beach and Costa Mesa. He noted that the District's service area in Newport Beach is mainly zoned as R1 for residential. He shared that the City of Newport Beach's housing element is anticipating more growth from converting commercial properties into residential properties. He discussed the rate increases under Option C for single family and multi -family customers. Secretary Schafer reiterated her motion for Option C. Director Perry seconded the motion. Director Eckles asked if the District can pause its rate increase schedule after the first two years under Option E. Mr. Esquer explained that, after two years, the District can lower the proposed rates for the remaining five-year period, but it will likely result in a deficit from a fee perspective. COSTA MESA SANITARY DISTRICT PAGE 16 MINUTES OF THE BOARD OF DIRECTORS STUDY SESSION HELD DECEMBER 14, 2021 Director Eckles commented that Option C is too aggressive and that he prefers Option E. President Ooten asked for a roll call vote. Motion: To select Option C, as presented, and direct staff to bring this item back to the December 20, 2021 Board of Directors meeting to receive and file the preliminary report regarding the 2021 Wastewater Rate Study and approve setting a public hearing date to be on February 28, 2022 to consider adopting wastewater rates to be effective on July 1, 2022. Motion by Arlene Schafer, second by Art Perry. Final Resolution: Motion Carries 3-2 Aye: Arlene Schafer, Art Perry, Mike Scheafer No: Bob Ooten, Brett Eckles Mr. Carroll stated that District staff will present Option C to the Board on December 20, 2021 and set a public hearing for February 28, 2022. Mr. Burns left the meeting at 10:08 a.m. There was no further discussion. Procedural: 1.Oral Communications and Director Comments Director Perry commented that the City of Costa Mesa is looking at converting the Fairview Developmental Center and motels into low-cost housing. There were no additional comments by the Board. Procedural: 2. Adjournment President Ooten adjourned the meeting at 10:10 A.M. Arlene Schafer Secretary Bob Ooten President