15 - CIP Elements of the Asset Management Program Costa Mesa Sanitary District …an Independent Special District Protecting our community’s health and the environment by providing solid waste and sewer collection services. www.cmsdca.gov Memorandum To: Operations Committee From: Scott Carroll, General Manager Date: October 16, 2012 Subject: CIP Elements of the Asset Management Program Summary The following is one of my performance goals established by the Board: “Summarize the var ious program CIP elements of the Asset Management Program.” Below is a summary on how staff distinguishes the difference between maintenance, capital outlay, asset replacement and capital improvement projects and describes how each program is funded. Sta ff Recommendation That the Board of Directors receive and file this report. Analysis To determine the difference between maintenance and capital improvement projects, staff refers to the California’s Public Contract Code (CPCC), which makes distinctions based on whether work is a “public project” or whether it is “maintenance work.” Public project means “reconstruction” and “repair work” involving a public facility (Public Contract Code § 22002.). To determine if the work is maintenance work, reference to the CPCC must be made as that term is defined in that statute, and the statute is incorporated by reference in the District’s Operations Code. CPCC Section 22002, subsection (d) provides as follows:
Operations Committee October 16, 2012 Page 2 of 5 “Public project” does not include maintenance work. For purposes of this section, "maintenance work" includes all of the following: (1) Routine, recurring, and usual work for the preservation or protection of any publicly owned or publicly ope rated facility for its intended purposes. (2) Minor repainting. (3) Resurfacing of streets and highways at less than one inch. (4) Landscape maintenance, including mowing, watering, trimming, pruning, planting, replacement of plants, and servicing of irri gation and sprinkler systems. (5) Work performed to keep, operate, and maintain publicly owned water, power, or waste disposal systems, including, but not limited to, dams, reservoirs, power plants, and electrical transmission lines of 230,000 volts and hi gher.” Most importantly, staff has to ask the question, “Is the work routine, recurring and usual work (for the) preservation or protection (of a facility)?” Much of this has to do with timing and money. If this is done annually or semi -annually and the cost is relatively minor, that would lend itself to an interpretation that this was maintenance. On the other hand, if this is a major overhaul of the key component of a system and it is done every 10 -13 years at a cost of tens of thousands of dollars at the end of the life of that major component of a system, it is less likely to be routine, recurring, or usual maintenance. The following are some sample maintenance projects performed by the District. These projects are funded out of the District’s ope rating budget (e.g. Liquid Waste Fund). Maintenance Projects • Sewer mainline cleaning • Hot spot maintenance • Wet well cleaning • Replacing pump station parts (e.g. starters, breakers, heaters, relays, fuses, floats, transducers and pumps) • Removing the motors to examine the impellers for wear. Replace impellers if necessary. • Changing the oil, checking the motor windings and general condition of the pumps. • Re -installing the pumps and testing the system. • Replacing check valves at pump stations
Operations Committ ee October 16, 2012 Page 3 of 5 • De -ragging of pumps In the 2010 -11 Budget, staff removed Project No. 164, Miscellaneous Sewer Repairs, from the District’s CIP Program because this line item was budgeted for unforeseen and unexpected minor maint enance repairs such as repairing door wet well door hinges, replacing valve boxes, bearings and seals, and coating issues. Miscellaneous sewer repairs are now budgeted in the District’s operations budget. The District also has a Capital Outlay budget. C apital outlay, which is also referred to as capital expenditures will sometimes meet the requirement of the California’s Public Contract Code (CPCC) for a “public project”, but these expenditures are typically less than $100,000. Even though these project s are less than $100,000 they are usually performed once every 5+ years and does not occur annually. The following are some sample capital outlay projects performed by the District. These projects are funded out of the District’s operating b udget (e.g. Li quid Waste Fund). Capital Outlay Projects • Headquarters building shutters • Headquarters building patio expansion • SCADA system • Stainless Steel Enclosures • Spare pump • Manhole rings/covers In addition, the District has an asset replacement program to pay for agi ng assets such as vehicles and office equipment. These type assets are charged an internal fee over a period of years (e.g. 8 to 10 years) so that when the asset is ready for replacement, funds are available for the purchase. The following are some sampl e asset replacement projects performed by the District. These projects are funded out of the Dis trict’s Asset Replacement Fund. Asset Replacement Projects • Vactor truck • Computers • Laptops • Fax machines • Televisions
Operations Committee October 16, 2012 Page 4 of 5 Capital Improvement Projects (CIP) are considered major projects and they will cost at least $100,000 and more. These projects are typically performed once every 20+ years and some CIPs are one time projects (e.g. Westside Pump Station A bandonment). The Asset Management Fund (AMF) was specifically established to fund capital improvement projects that will cost greater than $100,000. The Board established a minimum balance of $5 million in the AMF to fund budgeted projects and to fund e mergency work like the 23 rd Street and Santa Ana Avenue force mains. Every year, staff will analyze the asse t management model’s replacement funding calculations in order to budget the annual contribution transfer to the AMF from the Sewer Operations Fund (operational revenues). Currently, the Asset Management Fund has $5.3 million. The following are some sample capital improvement projects performed by the District. These projects are funded out of the Di strict’s Asset Management Fund. Capital Improvemen t Projects • Project #101 – Westside Pump Station Abandonment • Project #164 – Tree Root Abatement Program • Project #171 – Irvine Force Main Rehabilitation • Project #190 - Canyon Force Main Rehabilitation • Project #192 - System Wide Sewer Reconstruction – Phase II • Project #193 – Pump Station Seismic Refurbish • Project #196 - Installation of Backup Power and Pumping Capability – Phase I • Project #197 - System Wide Sewer Reconstruction – Phase III Strategic Element & Goal This item will achieve the objective and st rategy of CMSD’s Strategic Plan Element 5.0, Administrative Management, which states: Objective: “To create, maintain and implement policies and procedures to ensure sound management of the District” Strategy: “We will conduct periodic reviews, refine an d implement policies and procedures, and assure the General Manager has the direction and tools necessary for successful District operations”
Operations Committee October 16, 2012 Page 5 of 5 Legal Review Not applicable Financial Review Not applicable. This is a receive and file report . Public Notice Process Copies of this report are on file and will be included with the entire agenda packet for the October 16, 2012 Operations Committee meeting at District Headquarters and on District ’s website. Alternative Actions 1. Direct staff for additional information. Reviewed by: Teresa Gonzalez Accounting Manager