LAFCO June 22, 2017 Meeting Transcript
Beaumont City Manager Parton: “40% increase in Sewer Rates from $.32 to about a $.45 rate per 1,000 gallons.” to Pay for New Sewer Plant.
LAFCO June 22, 2017 Meeting Transcript: http://riversidecountyca.iqm2….
On March 5, 2013 the City of Beaumont increased Sewer Fees without allowing the Citizens the Right to Vote: http://www.ci.beaumont.ca.us/DocumentCenter/View/16764
29:30: Warsinski: Kyle Warsinski, I work for the City of Beaumont. [No Job Title] I’m here to speak on behalf of the Project as well as support the Staff’s opinion on the recommendation for approval on all three Items. Some of the items brought up in the Staff Report we want to take care of or at least clarify the items of concern.
30:00 Warsinski: I spoke to the Commission back in November, 2016 on another Annexation and I said; our financial condition isn’t the greatest, but we did make sever budget cuts. We had to lay off employees to get a balanced budget and that got us to a stable level. Since then we’ve made drastic improvements in our financial condition. We had one-time Revenues. [Illegal $5 Million Sewer Transfer] We currently sit with a balanced budget increasing our employees by 26 full-time to add our services back to the city. We’re sitting on $4.6 Million in Revenue, Un-obligated General Fund Revenue, and $1.5 Million on Insurance Revenue. So that’s good news. That’s a better financial condition that we’ve been in in probably five or six years, so we’re excited about that. In terms of the Fire Station; we have a Development Impact Fee for every new house that pays their fair share of a new fire station.
31:00 Warsinski: We currently collected about $2.8 Million so far, so that’s almost enough to build one (1). We’re currently meeting with CalFire fill out a staffing plan as well as identify a perfect location for this West Side Fire Station. And we have a MOU with one of our western land owners that has already agreed to deed over 4 1/2 acres of land to build this fire station. So we’re working proactively on all that to get that fire station built on the west end of the City. As Staff mentioned; this Project would be built with a CFD on it so that would pay for facilities as well as maintenance and public safety. So every new CFD within the City since 2016 has included a pubic safety services portion of the CFD and that’s an Annual Tax Levy that’s based to pay for police and fire services.
32:00 Warsinski: We weren’t doing that previously [Big Lie], but that helps lesson the impact of police and fire on the City’s General Fund. We talked about that $8 Million Liability we are carrying in case we don’t have an ability to get that money pursuant to the WRCOG Judgement; we have a contingency plan for that and that is to set aside Measure A Funds that we’re going to be able to receive now that we’re part of WRCOG again. We’re going to start putting those funds aside starting Fiscal Year 2018/2019 in the event we’re unable to ascertain that $8 Million from the third parties pursuant to that settlement agreement.
Commissioner Jefferies: A point of clarification on your CFD. As I understand it; the three Fire Stations that would serve this Development; the 1st being Cherry Valley #22, the 2nd being Calimesa #21, and then #66. Will the County and Calimesa benefit in any way from shared funding from this CFD while they’re protecting this site, or will you have your new site up before it is built?
Warsinski: That’s a good question. I don’t know if we’ve addressed that with the County as well as Calimesa. I do know that any discussions of CalFire; we’re talking about a Regional Approach in terms of relocating or optimally locating different fire stations. The two that you mentioned in the County and in Calimesa, and then possibly move our station further towards the west. In terms of building the fire station; it’s one of our highest priorities. I can’t say that it’s going to be completed before this Development will be completed, but I know that our community wants it, our City Council has placed it in high priority and it will be included in our Capital Improvement Plan as one of the highest priorities.
34:00 Commissioner Parks: On your sewer; as i recall; by 2020 may be meeting Capacity. Do you have and how are you preparing to pay for either an expansion of that sewer facility or a new sewer facility?
Warsinski: That’s a really good question. Amer Jakher, our Public Works Director and City Engineer is here to talk about sewer and wastewater. We have that mandate to build the expansion by 2020 as well as create a desalinization facility to take the salt out of the water to meet the Regional Board Requirements in terms of ground water quality. So we’re on track to do that. We’re submitting out financing plan to the Regional Board by the end of this year.
35:00 Warsinski: We have a couple different financing mechanisms we believe we will be able to utilize for the Project. The first one is State Revolving Funds. It’s low-interest loans from the State of California. That’s our #1 priority. It saves our taxpayers and our residents the most money because it’s a low-interest loan. We have a pretty good feeling that we’re going to be able to get that. If that falls through and we’re unable to access that financing stream; we’ll be looking at Infrastructure Banks. And then if that doesn’t work we can look at other types of bonding and those types of things. But we’re really pretty confident that the State Revolving Fund is going to come through for us.
Commissioner Parks: Do you have a pretty good bond rating?
Warsinski: I can leave that up to the City Manager, he’s here as well. He’s the guru when it comes to the finances. Bond ratings; that’s outside my control. But he would be willing to answer that for you.
36:00 Parton: Todd Parton, City Manager of Beaumont. With regard to bond rating; as you’re probably aware the City is currently under an active investigation by the S.E.C. pursuant to prior financial actions and decisions. At this point the ability to access the market, as a City, isn’t available to us. We have other avenues to secure financing such a we’re going through our CFD Program right now, through private placements. We haven’t been through a re-rate at this time and we would need to do that after we get a conclusion to the S.E.C. So we don’t have a bond rating that we can report to you and rely on with regard to the City’s utility operation at this time.
37:00 Commissioner Parks: My concern is that I recall, maybe the amount was $6 or $8 Million for this expansion? Or more?
Parton: Right. This Plant Expansion is to take us to 6 MGD Capacity from 4 MGD. So the preliminary estimates for construction for the Plant and the Brine Line and related costs is really about $100 Million. It’s a very significant cost and investment to do this. As part of the preliminary analysis we did look at a rate analysis to look at what rate adjustments would be needed in order to fund bond funding for the project. Again; private placements are some additional options. We don’t necessarily have to do a typical debt like a CR or GO potentially. In talking with our bond Counsel; they’ve assured us that we would still be able to access the market through those other instruments.
38:00 Parton: Those would be considered ‘non-rated’ instruments, which means that you don’t go through that process to get a bond rating. That means you pay a little more interest with regard to that, yet we’re hoping to try to minimize as much of that additional debt as we can. If you look at that model; we were looking at about a 40% increase in Sewer Rates to be able to do that, which would take us from about a $.32 to about a $.45 rate per 1,000 gallons, which would be consistent with what rates look like for providers of the region.
Commissioner Parks: The only reason I bring this up is because there is definitely a need for the water [sewer] capacity by the time this development is completed. I wanted to make sure that you have the financial capability to put that in.
39:00 Commissioner Wright: All of the Infrastructure would have to be settled before the Project would be able to go forward anyway, correct?
Parton: That’s correct. We Federal and State Mandates to update the Plant that are consistent with any utility sewer operator. You’ve got the 75% thresholds for design then 90% threshold for construction of the Plant. So we have impact fees. One of the other potential alternatives sources of funding for the Plant Expansion, for Design, and Engineering also comes from payments coming from Developers.
40:00 Parton: So as we look at developing CFDs we have a policy in place that refunding back to the Developers really are there to cover Capital Cost that needs to incurred to provide developments. Infrastructure needs to be developed. It needs to be coincided with the development as it occurs and then our infrastructure needs to be able to accommodate that development once those lots are coming online and that demand is being realized.
Commissioner Wright: It’s a very ambitious plan that you have and it’s going to take quite a while. I’m on a Water District Board and we’re basically doing the same thing with sewers and going through the SRF Funding and that sort of thing and it takes quite a long period of time to do that. I just wanted to iterate that; that has to be all settled before the Project can even move forward.
Parton: Right. And as we approve segments those lots are delivered and they’re tied into the system the Capacity has to be there.
Commissioner Wright: Once you’re at 80% the law says you have to start your expansion.
Commissioner Williams: If and in the event you don’t receive any of the options you proposed the financing; the simple conclusion is that the development wouldn’t be allowed to develop because you wouldn’t be able to issue permits if you have no Capacity. So you wouldn’t be putting people in a bad position because they’re not there.
Parton: Those effects have to be mitigated before those impacts are felt.
52:00 Mike White, Developer of Sunny Cal: I think it’s important to note that a lot of the issues talked about tonight and all the letters that have been written have already been resolved by the Appellate Court and by the State Supreme Court. All the issues. All the CEQA points that were made back in 2007 were addressed; specifically water, loss of agriculture, statement of overriding considerations. These issues continue to be brought up over and over again, but in our mind and I think in the City’s mind and others that it’s kind of a settled issue with regards to those impacts. As far as Cherry Valley; there’s one discussion about the interchange and the traffic. Our project is a very very small contributor to that interchange. That interchange is going to happen; it’s on the WROCG Facility List, it’s going to be planned. Our Project will make an advance donation or payment that we get a credit back from WRCOG, but $1 Million will help pay for the design and acquisition of land needed for the interchange.
53:00 White: That was a negotiation we did several years ago with Calimesa, long before the City has resolved their issue with WRCOG, we always going to be paying out TUMF Fees, that’s just an obligation we had to do. If I recall; we wrote the first direct payment agreement with WRCOG, with the County. We were not going to go do the City, we were going to do go directly to WRCOG to pay our TUMF Fees. There’s a lot of discussion about residents of Beaumont will be paying additional taxes, the implication is that they’ll be paying taxes for our project. That’s not true. Our Project will be part of the CFD for fire and police and emergency services, and for maintenance. Then our own Project; we’re going to have private streets. So we’re going to be self-sufficient in a lot of ways. So the burden to the City of Beaumont is not going to be that great.
54:00 Mike White: In addition, when you talk about the sewage fee, we pay a lot of other fees plus the $25 Million that will be generated to the City through building permits, through mitigation fees, through inspection fees. All that is important for the City, so we are paying, in my opinion, way way more than our fair share. We’re not asking for anything from anybody.
55:30 Commissioner Jefferies: I was not aware that this was in the Unincorporated Community Designation. Frankly; I didn’t know they still existed even though when I was on LAFCO previously it was incredibly important to try to protect those communities when they did exist. I guess my question is; are we still protecting, as a matter of Public Policy, are we still attempting to hold them together or is Staff recommending breaking portions of them down?
56:00 Spilitios: The Policy was discontinued in terms of creating new ones. They are still active designations on the two that still exist. As far as modifying the boundaries; that’s always been a part of the process. There’s always been an ability to modify boundaries. In the case of Cherry Valley, you see there’s been I think a total of three (3) modifications. The two significant ones had to do with school sites that were removed from U.C. boundaries and ultimately annexed into the City of Beaumont to receive services necessary to support those school facilities. The third one was a very small annexation on the east side, the southeast corner of the U.C.
57:00 Spilitios: In this case the factors we looked at in recommending that Area be modified were two: geographically it’s not part of the core – it’s an extension on the very western side; and additionally the justification for placing that in the COI and UC in the first place was that the land owner at the time was in favor of putting that in and that has now changed.