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COSTA MESA SANITARY DISTRICT
MINUTES OF BOARD OF DIRECTORS REGULAR MEETING
DECEMBER 15, 2011
CALL TO ORDER The Board of Directors of the Costa Mesa
Sanitary District met in regular session on
December 15, 2011 at 5:30 p.m. at 628 W.
19th Street, Costa Mesa.
PLEDGE OF Director Fitzpatrick led the Pledge of
ALLEGIANCE Allegiance.
INVOCATION Director Scheafer led the Invocation.
ROLL CALL DIRECTORS PRESENT: Robert Ooten, James Ferryman,
Mike Scheafer, Jim Fitzpatrick, Art Perry
DIRECTORS ABSENT:
STAFF PRESENT: Scott Carroll, General Manager; Joan Revak,
Office Manager/Clerk of the District; Robin B.
Hamers, District Engineer; Alan Bums,
District Counsel; Marc Davis, Treasurer;
Teresa Gonzalez, Accounting Manager
OTHERS PRESENT Dean Ruffridge, CR&R
Steve Mensinger, Resident
John A. Perry, Resident
Chuck Perry, 425 E. Bay Street, Costa Mesa
VICE PRESIDENT FERRYMAN ARRIVED AT 5:40 P.M.
ANNOUNCEMENT OF LATE COMMUNICATIONS
There were no late communications.
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CONSENT CALENDAR
REPORTS
MINUTE APPROVAL
Minutes of Sewer System Committee The Minutes of the Sewer System Committee
Meeting — November 8, 2011 Meeting of November 8, 2011 were approved
as distributed.
Minutes of Recycling Committee The Minutes of the Recycling Committee
Meeting — November 14, 2011 Meeting of November 14, 2011 were
approved as distributed.
Minutes of Regular Board Meeting — President Ooten motioned to continue
November 30, 2011 Approval of the Regular November 30, 2011
Meeting Minutes to the February 2012 Regular
Board of Directors meeting. Vice President
Ferryman seconded the motion. Motion
carried 5-0.
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ENGINEER'S REPORTS
Project Status Report The Project Status Report dated December
2011 was accepted as submitted.
Occupancy Report and Payment of The Trash Occupancy Count documented an
$197,152.38 to Costa Mesa Disposal — increase of one unit for the occupancy report
November 2011 for solid waste collection as of December 1,
2011. Therefore, the total for December is
21,534 and the payment of$197,152.38 was
ratified.
Contract Payment of$159,643.34 to CR The contract payment of$159,643.34 to
Transfer— November 2011 CR Transfer for recycling services and
disposal for the month of November 2011
was ratified as submitted.
Contract Payment of$12,143.76 The contract payment of$12,143.76 to CR
to CR Transfer— Santa Ana Transfer for recycling services and disposal for
C Heights/Newport Beach — November Santa Ana Heights/Newport Beach for the
2011 month of November 2011 was ratified as
submitted.
• COSTA MESA SANITARY DISTRICT PAGE 3
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Warrant Register for the month of Warrant Resolution #CMSD 2012-6 was
November 2011 in the amount of approved, authorizing the President and
$1,250,266.62. Secretary to sign the warrant ratifying the
payment of certain claims and demands, and
specifying the funds out of which the same
were paid in the amount of$1,250,266.62.
Directors Compensation & Director Compensation and Expense
Reimbursement of Expenses for the Reimbursements for the month of November
month of November 2011. 2011 were approved and ratified as follows:
President Ooten: $1,326.00
Vice President Ferryman: $1,326.00 + $2.22
Director Scheafer: $1,326.00 + $17.00
Director Perry: $1,326.00
Director Fitzpatrick: $1,105.00 + $27.47
Investment Report for the month of The Investment Report for the month of
November 2011. November 2011 was approved as submitted.
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END OF CONSENT CALENDAR
Director Ooten moved to accept the Consent Calendar with the exception of the
Regular Board of Directors meeting held on November 30, 2011 and to continue it to
the February 2012 regular meeting with verbatim minutes for the
Compatibility/Incompatibility of office issue.. Director Ferryman seconded the motion.
Motion carried 5-0.
WRITTEN COMMUNICATIONS
Ms. Revak provided a letter from the California Special Districts Association
appointing Director Scheafer to the 2012 CSDA Education and Membership
Committees.
PUBLIC COMMENTS
President Ooten invited public comments. There were no public comments.
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GENERAL MANAGER'S REPORTS
AUDITED FINANCIAL STATEMENTS FOR FISCAL YEAR ENDED JUNE 30, 2011
Ms. Gonzalez addressed the Board and presented Financial Statements for Fiscal
Year ended June 30, 2011, audited by White Nelson Diehl Evans LLP, along with the
auditor communications as required by Statement on Auditing Standards (SAS)
Number 114. Ms. Gonzalez introduced Mr. Nitin Patel of White Nelson Diehl Evans,
LLP presented the audited Financial Statements for Fiscal Year Ended June 30, 2011
ANNUAL COMPLIANCE REPORT FOR REQUIREMENTS OF GOVERNMENT CODE SECTION
66013 FOR CAPACITY CHARGES
Ms. Gonzalez provided the Annual Compliance Report to fulfill the information and
reporting requirements of Government Code Section 66013 for capacity charges.
On May 27, 2010 the Board adopted Ordinance No. 76, revising the charges
collected by the District and establishing that fixture fees are capacity charges and
making related clarifying changes. Fixture fees are capacity charges for public
facilities in existence at the time a charge is imposed or charges for new public
facilities to be acquired or constructed in the future that are of proportional benefit to
the person or property being charged, including supply or capacity contracts for rights
or entitlements, real property interests, and entitlements and other rights of the local
agency involving capital expense relating to its use of existing or new public facilities.
Upon payment of the fees, the money shall be deposited in a separate capital
facilities account maintained in accordance with Government Code Section 66013(d).
For each such separate account, the District shall, within one hundred eighty (180)
days of the close of the fiscal year, make available to the public the following
information:
(1) A description of the charges deposited in the fund.
(2) The beginning and ending fund balance of the fund and the interest earned
from investment of moneys in the fund.
(3) The amount of charges collected in that fiscal year.
(4) An identification of all of the following:
(A) Each public improvement on which charges were expended and the
amount of the expenditure for each improvement, including the percentage of
the total cost of the public improvement that was funded with those charges if
more than one source of funding was used.
(B) Each public improvement on which charges were expended that was
completed during that fiscal year.
(C) Each public improvement that is anticipated to be undertaken in the
following fiscal year.
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(5) A description of each interfund transfer or loan made from the capital
facilities fund. The information provided, in the case of an interfund transfer,
shall identify the public improvements on which the transferred moneys are,
or will be, expended. The information, in the case of an interfund loan, shall
include the date on which the loan will be repaid, and the rate of interest that
the fund will receive on the loan.
The Board of Directors received and filed the report.
ROAD TO ZERO WASTE CONFERENCE-AUSTIN, TX—FEBRUARY 7-9, 2012
Mr. Carroll reported on a Conference sponsored by the Solid Waste Association of
North America (SWANA) on "The Road to Zero Waste" on February 7-9, 2012 in
Austin, TX, and stated the Recycling Committee recommends the Board of Directors
approve sending at least one CMSD official to attend the conference and one staff
member. Director Fitzpatrick requested authority to attend the conference. Director
Perry asked which Staff member will attend and Mr. Carroll stated it would be AJ
Cully; however, Ms. Cully had foot surgery and may not be able to attend in which
case Mr. Carroll would appoint another Staff member.
Mr. Carroll reported the cost to send one person to the Conference for one day only
amounts to $890. President Ooten moved to send Director Fitzpatrick and one Staff
member to the conference for one day. Director Scheafer seconded the motion.
Motion carried 5-0.
FIRST AMENDMENT TO AGREEMENT-CR&R, INC.- REVISION
Mr. Carroll presented a revision to the First Amendment to Agreement with CR&R
dated October 27, 2011. An error was discovered in calculating the annual payment
to be received from CR&R. On October 27, 2011, the Board was informed the
District would receive an annual payment from CR&R in the amount of $17.171, the
total amount of white good credits the District received in 2008, 2009 and 2010. Staff
made an error in this calculation in that the annual payment was to be the average
white good credit received in 2008, 2009 and 2010 which is $5,723.
Mr. Carroll reported CR&R has graciously agreed to pay the District an average
annual payment for which goods collected in the last ten years of the program (2000-
10) which is $9,537.00 per year. Director Perry moved for approval of the revised
payment. Vice President Ferryman seconded the motion. Motion carried 5-0.
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RECYCLING COMMITTEE
The Recycling Committee meeting met on December 12, 2011. Director Fitzpatrick
attended and gave a report on the meeting.
ENGINEER'S REPORTS
PROJECT#189-REHABILITATION OF SIX SEWERS TRANSFERRED TO CMSD-
ACCEPTANCE OF IMPROVEMENTS
Mr. Hamers reported construction of improvement on Project#189 Rehabilitation of
Six Sewers Transferred to CMSD was completed on November 24, 2011 and it is
appropriate for the District to accept the improvements and file a notice of completion.
Director Perry moved to accept improvements as completed and file a Notice of
Completion; to authorize payment of 5% retention 35 days after Notice of Completion
is recorded and to exonerate Labor and Material Bond after Notice of Completion is
recorded and exonerate Faithful Performance Bond one year after Notice of
Completion is recorded. Director Scheafer seconded the motion. Motion carried 5-0
SEWER SYSTEM COMMITTEE
President Ooten reported on the Sewer System Committee meeting held on
December 6, 2011.
An update on all CMSD projects was provided.
TREASURER'S REPORTS
Mr. Davis had nothing to report.
ATTORNEY'S REPORTS
COVENANT FOR FUEL DISPENSER AT DISTRICT YARD
Mr. Burns presented a Covenant by and between the Costa Mesa Sanitary District
and the City of Costa Mesa. The Covenant states that the District constructed an
above-ground fuel tank on said property after submitting plans to the City showing its
location and believing it had approval to so construct the tank.
Mr. Burns continued that, sometime thereafter, the parties realized that the
appropriate setbacks for the tank had not been properly provided for and that the tank
installed was properly characterized as a tank with dispenser, necessitating a 15-foot
setback from any adjoining structure instead of the 7.5 feet the District originally
believed.
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In consideration of the above, should the adjoining property owner desire to build on
its property and have a legal right to do so but for District's fuel tank and dispenser
being located too close to that structure, upon reasonable notice District will cause
the removal of its fuel tank and dispenser within a reasonable time thereafter and not
to exceed ninety(90) days.
A copy of this covenant shall be recorded by District after it is signed by the parties.
Director Perry moved to approve the Covenant for Fuel Dispenser at the District
Yard. Vice President Ferryman seconded the motion.
CLERK OF THE DISTRICT REPORTS
Ms. Revak had nothing to report.
LOCAL MEETINGS
ORANGE COUNTY SANITATION DISTRICT(OCSD)
Director Ferryman attended an OCSD Committee meeting held on December
14, 2011 and reported the OCSD is going out for an RFP on insurance. They
do so every five years.
SANTA ANA RIVER FLOOD PROTECTION AGENCY(SARFPA)
Director Perry reported a meeting of the Santa Ana River Flood Protection
Agency was not held this month..
INDEPENDENT SPECIAL DISTRICTS OF ORANGE COUNTY(ISDOC)
President Ooten reported on ISDOC and one of the most significant item to
report on is "shared" services of Districts with benefits to benefit each other.
LOCAL AGENCY FORMATION COMMISSION (LAFCO)
President Ooten there will be a workshop in January 2012 with date to be
determined, that will highlight various agencies case histories of shared
services. Director Scheafer is the alternate and he has a schedule of meeting
and will provide a schedule to Ms. Revak, as well.
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CALIFORNIA ASSOCIATION OF SANITATION AGENCIES(CASA)
Vice President Ferryman moved to approve 2012 Membership Dues to CASA
in the amount of$8,000. Director Perry seconded the motion. Motion carried
5-0.
WACO MEETING
Board Member attended the WACO meeting. Director Scheafer requested
from Ms. Gonzalez an explanation of the teeter plan and non-teeter plan. Ms.
Gonzalez reported the County has two different methods of paying property
taxes to agencies. The CMSD is a non-teeter plan and the County pays the
District as they are collected. The teeter plan is where the County pays the
agencies 100% of the assessments but the agencies are not entitled to
penalties and interest.
Director Scheafer questioned if the CMSD is invested in the OCIP (Orange
County Investment Pool). Mr. Davis reported the District is not invested in the
OCIP.
Director Fitzpatrick another speaker at WACO is a teacher at Santiago Canyon
College who presented his training and stated he is seeking intemships within
the industry.
Director Fitzpatrick reported he has been taking opportunities to tour various
facilities and recently visited a waste hauler in Fontana and he toured the
MRF. All of the facilities he has visited are making significant investments in
their infrastructure to increase their capacity and achieve higher diversion
rates. He visited Athens about a month ago and this facility was not quite as
high tech. Director Fitzpatrick was fascinated they had staging areas for every
type of commodity—they grounded to a certain level or size as that the
international domestic market wanted. They do the largest recycling of
Styrofoam —they remove the air, stack on a pallet and ship overseas.
OLD BUSINESS
DISCUSS DISTRICT COUNSEL'S MEMO DATED DECEMBER 2010 AND REVIEW
POTENTIAL COSTS TO PROCEED WITH A QUO WARRANTO ACTION
Mr. Burns discussed his December 30, 2010 memo to the CMSD Board of
Directors on Incompatibility of Offices and the question of whether there is
incompatibility of offices of a Sanitary District Director and a City of Costa
Mesa Planning Commissioner. As stated in Mr. Burns memo, it was meant to
provide guidance without coming to conclusions and stated the Attorney
General has provided some guidance but only a quo warranto decision would
actually decide these matters.
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Director Perry stated his belief that Mr. Burns memo was given to provide a
heads-up to Mr. Fitzpatrick that there could be a potential problem in holding
both offices. Director Perry stated in the best interests of the District, the
Board should go forward with a Quo Warranto Action in his opinion.
Mr. Burns provided potential costs to proceed with a Quo Warranto Action as
follows:
To confirm legal opinion $1,500
To proceed and file application for an Undertaking (Bond) $ 500
Cost to Prepare the Application (Pleadings) $10-15,000
Estimated Cost if Determined by Summary Judgment $25-35,000
Estimated Cost if it Proceeds through a Full Trial $35-50,000
Director Perry proposed the District go ahead and obtain a second opinion
from an attorney and if the opinion is the same as that of Mr. Burns, that the
District proceed with appropriate action.
Director Fitzpatrick said he is prepared to deliver a presentation on how his
fellow Directors understand this issue and how he made the decisions he
previously made.
Director Fitzpatrick stated he has a lot of respect for the District's legal counsel
and some of the statements he will make are a professional difference of
opinion. In running for office, Director Fitzpatrick stated he spent money and
asked the voters to vote for him and he decided not to run for the Water
District office as he found there was a clear statutory direction and he did not
find that in running for the Sanitary District. He stated he has found that no
one has talked about is that people who have challenged this have used it as a
tool to "un-seat" an elected official. The only one who can take out an elected
official is a judge. He has asked and no one has told him what the harm is.
As he understands it, none of the decisions are overturnable, there is no cost,
there is no fine, and he has not been able to see the harm. If anyone is
recommending it, a Director at the last meeting stated he would be willing to
spend whatever it takes and Director Fitzpatrick cannot see what the harm is
because it seems like a lot of money to spend. Lawyers he sees looking at
this is what they do is seek incompatibility; they don't seek compatibility. One
of the things he is going to hinge on is that when you look at Meyers Nave, it is
a peer review; and would not clear up anything and he would bet his farm that
no further insights would be gleaned by that effort.
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When you look at the confidential memo the Board decided to make public, it
attempts to equate that a School Board trustee or Water Board member and
Sanitary District Board member are the same. The Water District or School
Board trustee have clear case law that says specifically you can't do it. The
Sanitary District Board is governed by the Sanitary District Act of 1923; they
are not the same offices and they are not analogous. Here is a little bit of
insight— Gary Monahan sat in these seats for four years and Gary Monahan
never had any issues. A Planning Commissioner is appointed by Council and
serves at the pleasure of Council and can be removed at any time by Council.
They act as an advisory board and all actions are reviewable and appealable
by Council. The CMSD is governed by The Sanitary District Act of 1923 and it
does not handle water and does not handle the school Board.
Director Fitzpatrick is of the opinion Mr. Burns should have stopped at "Health
and Safety Code 64A—the one that reviews the SD Act of 1923. However,
the memo, in its rush to seek incompatibility, it rushes to the Water District and
the School Board. In 1962, the Attorney General said that what is occurring
right now in front of you is incompatible. They went on and actually
contemplated compatibility. In 1973, an urgency action, the State Legislature
said that a City legislative body can serve on a Sanitary District and that is
what we are looking at here; and that action right there is extraordinary.
They deemed there was valuable knowledge from serving on bodies of
legislative bodies and the sanitary district and that is why in an urgency action
they modified the Sanitary District Act of 1923, specifically amending by a
legislative action to allow the cities legislative governing body to serve on both.
There is specific statutory carve-out relating to this; there is not one for the
school board and there is not one for water. When Mayor Monahan served on
the CMSD Board as well, Mr. Fitzpatrick stated there was tremendous value
and an asset to this District and Mr. Fitzpatrick stated he believes he has
demonstrated that in facilitating things Mayor Monahan has started. What the
memo doesn't do is go into what the legislature meant when they had this
specific carve-out. Meyers Nave is not going to deliver that to you. They will
do a peer-review and reference things outside of the District's sphere of
influence.
The intent of the legislature, in Mr. Fitzpatrick's opinion is that they felt there
are good, knowledgeable people that could serve on the Sanitary District.
Everything Mr. Fitzpatrick has heard is that there have been territorial issues,
personality issues, lots of different things between CMSD and the City. Since
Mayor Monahan has come over and in my tenure I think we have develop a
relationship with trust, and that allows for a platform for us to discuss with the
City that was unheard of when I was running for office.
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So, is the cost $1,500? That funding only seeks to answer is that a Director
went up to a CSDA conference and said yep, let's go lawyer shopping —finally
somebody got a yes from a lawyer. Remember this issue had not been
previously addressed. You are going down a path to extract a Board member
then you are going to vote anyway. I do intend to challenge this and I do
intend to ask the Board to fund the alternative path of compatibility.
So what are the real costs? I have talked to lawyers who say my logic is
sound. If funded, they will deliver a piece of paper to you that validates what I
have just taken you through, but not for$1,500. I don't know the exact bill but
it's higher. Any number you hear now, will be doubled because it will be equal
and opposite reaction, and I would be disappointed if the Board chooses today
to take one course of action. That does not ever get to the intent of the law.
Remember the City has looked at this and have said that is a pretty good thing
to see someone doing this—we see it of value. The City could take this
action. If the Board goes down this, I will renew my request to seek support on
the compatibility approach and logic. The next thing and what hasn't been
talked about. I've heard a Director say "we've got to get this done cause an
election is coming up, I think demonstrating clear intent. We are way past the
election —this is two years to achieve this. I just want to put some perspective
on the time line. My conclusion is the CMSD and the Planning Commission
are compatible and should be encouraged.
The next step I recommend is to assume it is compatible, go back to working
hard for the ratepayers. I was elected and wasn't elected to spend $50,000 to
identify some marginal, gray area and use it as a tactic to extract a Director
and to save considerable budget expense
Director Ferryman asked if Director Fitzpatrick ever got an opinion from the City on
the compatibility. Director Fitzpatrick stated it was discussed at City Council. Wendy
Leece challenged this but I don't know what was provided City Council, however, it
must have led them to the decision that this was a good deal for them.
Director Ferryman stated the memo written by Mr. Burns states there is a very good
likelihood that there would be incompatibility and that gets my attention. I don't know
all the ramifications would be but it doesn't sound to me like a pleasant path to follow.
You may have issues with this other law firm and you can buy whatever opinion you
want. We have our own attorney who has represented the District for 15 years and I
trust him explicitly; and we should listen to what our attorney advises.
Director Scheafer stated he wished to bring up a matter he and President Ooten have
discussed previously regarding President Ooten's daughter who is an elected official
in Chino Basin Water Conservation District and had entertained notions of becoming
a planning commissioner in her town and was told she could not do it because of
incompatibility of office.
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Director Scheafer addressed Director Fitzpatrick's statement that there has been no
harm to the District— so far there has been no harm. Based on what our Counsel
has provided, Director Scheafer stated there is potential harm and I do not want to
see that happen to the District. Director Scheafer stated he is going to take the
opinion of the District's Counsel that states his opinion that the Attorney General
might find that the two offices are incompatible, rather than the opinions of Director
Fitzpatrick.
Director Perry moved to authorize the CMSD to hire Meyers Nave to provide a legal
opinion on the incompatibility or compatibility of office between Sanitary District and
the Planning Commission, not to exceed $5,000. Director Ferryman seconded the
motion. Director Fitzpatrick asked "what is the Board is going to get for$5,000 —
what is the expected or desired outcome. What I am hearing is the Board of
Directors does not even want to pursue the possibility of compatibility and I am really
concerned about that; and I will have to spend my own money to get second
opinions."
Mr. Burns was questioned on his opinion on the presentation by Director Fitzpatrick.
Mr. Burns stated he prepared his opinion without any ax to grind. Each side can get
any opinion they wish. Mr. Burns gave his opinion so the Board would have advice
so they could act appropriately.
Director Scheafer asked Director Fitzpatrick if he read Mr. Burns memo of December
30, 2010 and chose to ignore it. Director Scheafer stated his opinion that Director
Fitzpatrick created this situation by ignoring the opinion of CMSD Counsel. Director
Fitzpatrick stated that was a flawed opinion and that other very-well educated law
firms will validate his opinion.
President Ooten stated it is in public's best interest to understand whether holding the
offices of City of Costa Mesa Planning Commission and Director of the Costa Mesa
Sanitary District are compatible or non-compatible.
The Board directed the General Manager to contact the law firm Meyers Nave to
request a legal second opinion regarding the incompatibility or compatibility of office
between Sanitary District Directors and Planning Commissioners, and the firm should
not read District Counsel's memo regarding this issue. The fee is not to exceed
$5,000.
NEW BUSINESS
There was no new business.
ORAL COMMUNICATIONS AND DIRECTOR COMMENTS
The meeting did not adjourn to Closed Session. The General Manager evaluation
will be conducted at a future date.
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ADJOURNMENT
President Ooten adjourned the meeting at 7:25 p.m.
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Secre .ry President
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