HomeMy WebLinkAbout03-21-18 F&A Committee Packet 1
OTAY WATER DISTRICT
FINANCE AND ADMINISTRATION
COMMITTEE MEETING
and
SPECIAL MEETING OF THE BOARD OF DIRECTORS
2554 SWEETWATER SPRINGS BOULEVARD
SPRING VALLEY, CALIFORNIA
BOARDROOM
WEDNESDAY
March 21, 2018
11:30 A.M.
This is a District Committee meeting. This meeting is being posted as a special meeting
in order to comply with the Brown Act (Government Code Section §54954.2) in the event that
a quorum of the Board is present. Items will be deliberated, however, no formal board actions
will be taken at this meeting. The committee makes recommendations
to the full board for its consideration and formal action.
AGENDA
1. ROLL CALL
2. PUBLIC PARTICIPATION – OPPORTUNITY FOR MEMBERS OF THE PUBLIC TO
SPEAK TO THE BOARD ON ANY SUBJECT MATTER WITHIN THE BOARD'S JU-
RISDICTION BUT NOT AN ITEM ON TODAY'S AGENDA
DISCUSSION ITEMS
3. AWARD TWO (2) PROFESSIONAL AS-NEEDED ASSET MANAGEMENT SERVICES
CONTRACTS TO HAZEN & SAWYER, INC. AND HDR, INC., EACH IN AN AMOUNT
NOT-TO-EXCEED $175,000; THE TOTAL AMOUNT OF THE TWO (2) CONTRACTS
WILL NOT EXCEED $175,000 DURING FISCAL YEARS 2018, 2019, AND 2020
(ENDING JUNE 30, 2020)
4. ADOPT RESOLUTION NO. 4344 ALLOWING FOR THE REIMBURSEMENT OF
CERTAIN EXPENDITURES FROM THE PROCEEDS OF THE SEWER DEBT
OBLIGATIONS OF THE DISTRICT, WHICH IS ANTICIPATED TO BE ISSUED
DURING 2018 (BELL) [5 minutes]
5. PRESENTATION ON THE ANALYSIS OF THE COST BENEFIT OF KEEPING THE
RALPH W. CHAPMAN WATER RECYCLING FACILITY TREATMENT PLANT OPEN,
COMPARED TO CLOSING THE PLANT AND SENDING ALL SEWER FLOWS TO
SAN DIEGO METROPOLITAN WASTEWATER (BELL) [5 minutes]
6. UPDATE ON CHANGES TO THE AUTOMATED METER READING CHANGE OUT
CAPITAL IMPROVEMENT PROGRAM APPROVED BY THE BOARD IN 2017
(CAREY) [5 minutes]
2
7. ADJOURNMENT
BOARD MEMBERS ATTENDING:
Mark Robak, Chair
Mitch Thompson
All items appearing on this agenda, whether or not expressly listed for action, may be delib-
erated and may be subject to action by the Board.
The Agenda, and any attachments containing written information, are available at the Dis-
trict’s website at www.otaywater.gov. Written changes to any items to be considered at the
open meeting, or to any attachments, will be posted on the District’s website. Copies of the
Agenda and all attachments are also available through the District Secretary by contacting
her at (619) 670-2280.
If you have any disability which would require accommodation in order to enable you to par-
ticipate in this meeting, please call the District Secretary at 670-2280 at least 24 hours prior
to the meeting.
Certification of Posting
I certify that on March 16, 2018 I posted a copy of the foregoing agenda near the regu-
lar meeting place of the Board of Directors of Otay Water District, said time being at least 24
hours in advance of the meeting of the Board of Directors (Government Code Section
§54954.2).
Executed at Spring Valley, California on March 16, 2018.
/s/ Susan Cruz, District Secretary
STAFF REPORT
TYPE MEETING: Regular Board
MEETING DATE: April 4, 2018
SUBMITTED BY:
Kevin Cameron
Associate Civil Engineer
Bob Kennedy
Engineering Manager
PROJECT: P1210-
023000
DIV. NO. All
APPROVED BY:
Rod Posada, Chief, Engineering
Mark Watton, General Manager
SUBJECT: Award of Two (2) As-Needed Asset Management Services Contracts
for Fiscal Years 2018, 2019, and 2020
GENERAL MANAGER’S RECOMMENDATION:
That the Otay Water District (District) Board of Directors (Board)
award two (2) professional As-Needed Asset Management Services
contracts and to authorize the General Manager to execute two
agreements with Hazen & Sawyer, Inc. (Hazen) and HDR, Inc. (HDR),
each in an amount not-to-exceed $175,000. The total amount of the
two contracts will not exceed $175,000 during Fiscal Years 2018,
2019, and 2020 (ending June 30, 2020).
COMMITTEE ACTION:
Please see Attachment A.
PURPOSE:
To obtain Board authorization for the General Manager to enter into
two (2) professional As-Needed Asset Management Services contracts
with Hazen and HDR, with each contract in an amount not-to-exceed
$175,000 for Fiscal Years 2018, 2019, and 2020. The total amount of
the two contracts will not exceed $175,000 during Fiscal Years 2018,
2019, and 2020.
2
ANALYSIS:
The District will require the services of two professional asset
management consultants on an as-needed basis in support of the
District’s Asset Management Plan (AMP) for Fiscal Years 2018, 2019,
and 2020. It is more efficient and cost effective to issue as-needed
contracts for asset management which will provide the District with
the ability to obtain consulting services in a timely and efficient
manner. This concept has also been used in the past for other
disciplines, such as design engineering, construction management,
geotechnical, electrical, and environmental services.
The District staff will identify tasks and request cost proposals
from the two consultants during the contract period. Each consultant
will prepare a detailed scope of work, schedule, and fee for each
task order, with the District evaluating the proposals based upon
qualifications and cost. The District will enter into negotiations
with the consultants, selecting the proposal that has the best value
for the District. Upon written task order authorization from the
District, the selected consultant shall then proceed with the project
as described in the scope of work.
The possible tasks that the consultants will be working on during
Fiscal Years 2018, 2019, and 2020 are listed below:
DESCRIPTION
COST
ESTIMATE
Develop an improvement plan for the AMP that is consistent
with industry best practices and will complete the tasks to
support the improvement of the AMP.
$15,000
Assist in the update of the AMP vision, mission, objectives,
implementation plan, and outcomes including schedule and costs
of a replacement and renewal program.
$15,000
Review and recommend appropriate validation measures for the
inventory of facilities and closing any data gaps. $20,000
Develop and prepare recommendations for future condition
assessments for the District’s assets including recommend
condition assessment methods that can be used and how the data
will be incorporated into the information management system.
$20,000
Develop and manage the implementation of a replacement and
renewal capital improvement program plan for existing assets
providing a best management framework.
$25,000
Develop a list of facilities that need to be either replaced
or rehabilitated with their respective due date and budget
costs.
$30,000
TOTAL: $125,000
3
Staff believes that a $175,000 cap on each of the As-Needed Asset
Management Services contracts is adequate to support the AMP, while
still providing a buffer for any unforeseen or additional tasks that
come as a result of the analysis.
The As-Needed Asset Management Services contracts do not commit the
District to any expenditure until a task order is approved to perform
the work. The District does not guarantee work to the consultants,
nor does the District guarantee to the consultants that it will
expend all of the funds authorized by the contract on professional
services.
The District solicited asset management services by placing an
advertisement on the District’s website and using BidSync, the
District’s online bid solicitation website, on January 17, 2018. The
advertisement was also placed in the Daily Transcript. Ten (10)
firms submitted a Letter of Interest and a Statement of
Qualifications. The Request for Proposal (RFP) was sent to all ten
(10) firms resulting in four (4) proposals received on February 15,
2018. They are as follows:
• Carollo Engineers, Inc. (San Diego, CA)
• Hazen and Sawyer (San Diego, CA)
• HDR (San Diego, CA)
• Tata & Howard, Inc. (Malborough, MA)
Firms that submitted Letters of Interest, but did not propose, were
Timmons Group, Inc. (Richmond, VA), Duff & Phelps Corp. (Southfield,
MI), EMG Corp. (Owings Mills, MD), NCS Engineers (Phoenix, AZ), and
West Yost Associates (Carlsbad, CA). AMCL (New York, NY) elected to
be a sub to Tata & Howard.
In accordance with the District’s Policy 21, staff evaluated and
scored the written proposals. Hazen and HDR received the highest
scores based on their experience, understanding of the scope of work,
proposed method to accomplish the work, and their composite hourly
rate. Hazen and HDR were the most qualified consultants with the
best overall proposal. Both consultants provide similar services to
other local agencies and are readily available to provide the
services required. A summary of the complete evaluation is shown in
Attachment B.
Hazen and HDR submitted the Company Background Questionnaire, as
required by the RFP, and staff did not find any significant issues.
In addition, staff checked their references and performed an internet
search on the company. Staff found the references to be excellent
and did not find any outstanding issues with the internet search.
4
FISCAL IMPACT: Joe Beachem, Chief Financial Officer
These contracts are for professional services based on the District’s
need and schedule, and expenditures will not be made until individual
main tasks or task orders under the as-needed portion of these
contracts are authorized by District staff.
The FY 2018 engineering planning operating budget for Asset
Management is $50,000. The remaining as-needed budget will be funded
by future operating budgets approved by the Board.
The Project Manager anticipates that the FY 2018 and, if approved,
the FY 2019 and 2020 budgets will be sufficient to support the future
professional As-Needed Asset Management Services required.
Finance has determined that, with approval of the future budgets,
funding will be available from the General Fund.
STRATEGIC GOAL:
This Project supports the District’s Mission statement, “To provide
high value water and wastewater services to the customers of the Otay
Water District, in a professional, effective and efficient manner”
and the General Manager’s Vision, "A District that is at the
forefront in innovations to provide water services at affordable
rates, with a reputation for outstanding customer service."
LEGAL IMPACT:
None.
KC/BK:mlc
P:\WORKING\As Needed Services\Asset Management Plan\Staff Report\BD_04-04-18_Staff Report_Award of As-
Needed Asset Management Services (KC-BK).docx
Attachments: Attachment A – Committee Action
Attachment B – Summary of Proposal Rankings
ATTACHMENT A
SUBJECT/PROJECT:
P1210-023000
Award of Two (2) As-Needed Asset Management Services
Contracts for Fiscal Years 2018, 2019, and 2020
COMMITTEE ACTION:
The Finance, Administration, and Communications Committee (Committee)
reviewed this item at a meeting held on March 21, 2018. The
Committee supported staff's recommendation.
NOTE:
The “Committee Action” is written in anticipation of the Committee
moving the item forward for Board approval. This report will be sent
to the Board as a Committee approved item, or modified to reflect any
discussion or changes as directed from the Committee prior to
presentation to the full Board.
Qualifications of
Team
Responsiveness
and Project
Understanding
Technical and
Management
Approach
INDIVIDUAL
SUBTOTAL -
WRITTEN
AVERAGE
SUBTOTAL -
WRITTEN
Proposed Rates*
Consultant's
Commitment to
DBE
TOTAL
SCORE
30 25 30 85 85 15 Y/N 100 Poor/Good/
Excellent
Bob Kennedy 25 22 25 72
Ming Zhao 26 22 27 75
Jake Vaclavek 23 21 25 69
Kevin Koeppen 23 22 23 68
Kevin Cameron 23 22 25 70
Bob Kennedy 27 23 28 78
Ming Zhao 28 23 29 80
Jake Vaclavek 25 21 26 72
Kevin Koeppen 27 24 27 78
Kevin Cameron 27 21 26 74
Bob Kennedy 26 22 25 73
Ming Zhao 23 22 25 70
Jake Vaclavek 27 22 26 75
Kevin Koeppen 24 23 25 72
Kevin Cameron 25 23 24 72
Bob Kennedy 24 21 23 68
Ming Zhao 24 22 24 70
Jake Vaclavek 26 23 27 76
Kevin Koeppen 23 22 23 68
Kevin Cameron 25 22 26 73
Firm Carollo
Hazen and
Sawyer HDR Tata & Howard
Fee $179 $143 $143 $224
Score 9 15 15 1
*Note: Review Panel does not see or consider proposed rate when scoring other categories. The proposed rate is scored by a Staff Member who is not on the Review Panel.
MAXIMUM POINTS
ATTACHMENT B
SUMMARY OF PROPOSAL RANKINGS
As-Needed Asset Management Services
Carollo 80
15
9
Y
Excellent
91
RATES SCORING CHART
WRITTEN
REFERENCES
72
15 Y
Y
71
87
71 1
Y
ExcellentHazen and Sawyer 76
HDR 72
Tata & Howard
P:\WORKING\As Needed Services\Asset Management Plan\Selection\Summary of Proposal Rankings-Asset Mgmt-Scores.xls
STAFF REPORT
TYPE MEETING: Regular Board Meeting MEETING DATE: April 4, 2018
SUBMITTED BY: Rita Bell, Finance Manager
W.O./G.F. NO: DIV. NO. All
APPROVED BY:
Joseph R. Beachem, Chief Financial Officer
Mark Watton, General Manager
SUBJECT: Adopt Resolution No. 4344 Allowing for Reimbursement of
Certain Expenditures from the Proceeds of the Sewer Debt
Obligations of the District, Anticipated to be Issued
During 2018
GENERAL MANAGER’S RECOMMENDATION:
That the Board adopt Resolution No. 4344 allowing for the
reimbursement of certain expenditures from the proceeds of the sewer
debt obligations (the “Obligations”) of the District, anticipated to
be issued during 2018.
COMMITTEE ACTION:
Please see Attachment A.
PURPOSE:
To present for the Board’s consideration the adoption of Resolution
No. 4344 declaring the District’s intent to reimburse certain
expenditures from the proceeds of the Obligations.
ANALYSIS:
The District anticipates the issuance of the Obligations during 2018
to finance an amount not to exceed $9 million with issuance costs of
approximately $150,000. The District anticipates a debt issuance of
approximately $8.5 million in 2018 to pay for sewer capital
improvement projects over the next three fiscal years. The
Resolution declares the intent of the District to reimburse itself
from the proceeds of the Obligations for any qualifying expenditures
incurred prior to the issuance of the Obligations. It should be
noted that the U.S. Tax Code allows the District to reimburse itself
for any such expenditures incurred within the 60 days prior to the
adoption of the Resolution.
Between April 5, 2018 and the date of issuance of the Obligations,
the District will spend approximately $9 million on sewer capital
improvements that would qualify for payment from the proceeds of the
Obligations. The staff anticipates applying funds from its General
Fund, from its capital reserves, and other legally available sources,
to pay for expenditures that become due prior to the issuance of the
Obligations. The Resolution will allow the District to replenish its
General Fund and other capital reserves.
This reimbursement Resolution also assists the District in meeting
the arbitrage spend-down requirements.
Treasury and Internal Revenue Code Regulations require adoption of the
Resolution as an “official action”, which then qualifies the District
to reimburse itself upon the issuance of tax exempt debt. The adoption
of the attached Resolution, however, does not irrevocably bind the
District to issue the Obligations. It merely spells out the District’s
current intent to do so at some future date and preserves the District’s
right to reimburse itself for qualified expenditures.
FISCAL IMPACT: Joe Beachem, Chief Financial Officer
The potential reimbursement of $9 million in CIP expenditures will
assist the District in maintaining its operating and capital reserve
levels in accordance with the District’s Reserve Policy.
STRATEGIC GOAL:
The District ensures its continued financial health through long-term
financial planning and debt planning.
LEGAL IMPACT:
None.
General Manager
Attachments:
A) Committee Action Form
B) Resolution No. 4344
ATTACHMENT A
SUBJECT/PROJECT:
Adopt Resolution No. 4344 Allowing for Reimbursement of
Certain Expenditures from the Proceeds of the Sewer Debt
Obligations of the District, Anticipated to be Issued
During 2018
COMMITTEE ACTION:
The Finance, Administration and Communications Committee
supported staff’s recommendation that the Board adopt Resolution
No. 4344 allowing for the reimbursement of certain expenditures
from the proceeds of the sewer debt obligations (the
“Obligations”) of the District, anticipated to be issued during
2018.
NOTE:
The “Committee Action” is written in anticipation of the
Committee moving the item forward for board approval. This
report will be sent to the Board as a committee approved item,
or modified to reflect any discussion or changes as directed
from the committee prior to presentation to the full board.
RESOLUTION NO. 4344
RESOLUTION OF THE BOARD OF DIRECTORS OF THE OTAY
WATER DISTRICT DECLARING ITS INTENTION TO
REIMBURSE EXPENDITURES FROM THE PROCEEDS OF
CERTAIN DEBT OBLIGATIONS TO BE ISSUED
WHEREAS, the Otay Water District (the ‘‘District’’) desires
to finance the construction and acquisition of the public
facilities that constitute the Project (as defined below); and
WHEREAS, the District reasonably expects, as of the date
hereof, to finance expenditures relating to the Project by
authorizing the sale and delivery of one or more series of
Obligations (as defined below); and
WHEREAS, the United States Income Tax Regulations Section
1.150-2 provides generally that proceeds of tax-exempt debt used
to reimburse expenditures paid prior to the date of issuance of
such debt are treated as expended only if certain procedures are
followed, one of which is a requirement that (with certain
exceptions), prior to the payment of any such expenditures, the
issuer declares an intention to reimburse such expenditure; and
WHEREAS, the District reasonably expects to expend some
funds in connection with the Project prior to the issuance of
debt for such purpose; and
WHEREAS, the District reasonably expects, as of the date
hereof, to reimburse such expenditures by allocating a portion of
the proceeds of the Obligations to the reimbursement of such
expenditures; and
WHEREAS, it is in the public interest and for the public
benefit that the District declares its official intent to
reimburse the expenditures referenced herein.
NOW, THEREFORE, BE IT RESOLVED by the BOARD OF DIRECTORS of the
OTAY WATER DISTRICT as follows:
Section 1. The District intends to issue one or more series
of obligations (the ‘‘Obligations’’) the proceeds of which will
be used for the acquisition, construction, repair, improvement,
delivery, design, installation, furnishing and equipping of
certain capital facilities of the District’s sewer system (the
‘‘Project’’).
Section 2. The District hereby declares that it reasonably
expects to (i) pay certain costs of the Project prior to the date
of issuance of the Obligations; and (ii) use a portion of the
proceeds of the Obligations for reimbursement of expenditures for
the Project that are paid prior to the issuance of the
Obligations.
Attachment B
Section 3. The aggregate maximum principal amount of the
Obligations to be issued is expected not to exceed $9,000,000.
Section 4. In addition to reimbursing the District, the
proceeds from the Obligations are anticipated to be used for
costs and expenses related to the Project, funding a reserve fund
and paying certain costs of issuance related thereto.
Section 5. The reimbursement allocation to be made with
respect to an expenditure will occur not later than eighteen (18)
months after the later of (i) the date on which the expenditure
is paid, or (ii) the date on which the Project is placed in
service, but in no event more than three years after the
expenditure is paid.
Section 6. This Resolution expresses the District’s
expectations as of this date with respect to the financing of the
construction and acquisition of the Project. Future events or
extraordinary circumstances beyond the control of the District
may result in the Project being financed in a manner other than
as described in this Resolution, and nothing contained herein
constitutes an irrevocable commitment by the District to issue
the Obligations.
Section 7. All actions heretofore taken by the officers, or
their respective designees, employees and agents of the Board of
Directors of the District in connection with the financing of the
Project are hereby ratified and confirmed.
Section 8. This Resolution shall take effect immediately
upon its adoption.
Section 9. The District Secretary shall certify to the
adoption of this Resolution.
APPROVED AND ADOPTED this 4th day of April, 2018.
Ayes:
Noes:
Abstain:
Absent:
President
ATTEST:
District Secretary
APPROVED AS TO FORM:
District Counsel
I HEREBY CERTIFY that the foregoing Resolution No. 4344 was duly
adopted by the BOARD OF DIRECTORS of the OTAY WATER DISTRICT at a
regular meeting thereof held on the 4th day of April, 2018 by the
following vote:
Ayes:
Noes:
Abstain:
Absent:
District Secretary
STAFF REPORT
TYPE MEETING: Regular Board MEETING DATE: April 4, 2018
SUBMITTED BY:
Rita Bell, Finance Manager
PROJECT: DIV. NO. All
APPROVED BY:
Joe Beachem, Chief Financial Officer
Mark Watton, General Manager
SUBJECT: Cost Benefit of the Treatment Plant Shutdown vs. Status Quo
GENERAL MANAGER’S RECOMMENDATION:
This is an informational item only.
COMMITTEE ACTION:
See Attachment A.
PURPOSE:
To present the Board an analysis of the cost benefit of keeping the
Ralph W. Chapman Water Recycling Facility (RWCWRF) treatment plant
open, compared to closing the plant and sending all sewer flows to
San Diego Metropolitan Wastewater (Metro).
BACKGROUND:
The Board asked to see the analysis that shows that it is most cost
effective to have the RWCWRF running at full capacity as opposed to
shutting down the treatment plant and sending flows to Metro. Below
is the discussion of all of the factors that were included in this
analysis.
2
A significant amount of the sewer operation costs is for sewer
service charges from the Metro which is budgeted at $820,700 for
FY 2018. Additionally, the District is budgeted to pay the County
$190,000 for its share of the operation and maintenance cost of the
Rancho San Diego Outfall and the Spring Valley Outfall, to transport
sewage to Metro for FY 2018.
Also, the District has an agreement with the City of San Diego to
purchase up to six million gallons a day of recycled water from their
South Bay Water Reclamation Plant (SBWRP). In 2007, the District
began taking water from SBWRP under a contract that has a take-or-pay
provision, whereby the District must pay for a minimum amount of
water whether the District uses it or not. The term of the agreement
was for twenty (20) years commencing January 1, 2007.
Both the RWCWRF plant and the SBWRP plant supply the District’s
recycled distribution system. The District operates the largest
recycled water distribution system in San Diego County and will
supply approximately 3,660 acre-feet (1,000 from RWCWRF plant and
2,660 from the SBWRP plant) of recycled water to 719 customers in
Fiscal Year 2018. Additionally, the District has budgeted to pay the
City of San Diego for 2,234 acre-feet of recycled water that the
District cannot use because of the take-or-pay provision of the
contract.
Staff performed an analysis of sewer and recycled water cost last
year based on Fiscal Year 2016 actual cost, to determine the cost
benefit of whether the District should keep RWCWRF plant open (status
quo) or to shut down the plant and send 100% of the flow through the
County to Metro for treatment. Based on this analysis, the cost of
water produced at the District’s RWCWRF is $982.47 per acre-foot.
The cost to purchase recycled water from the SBWRP at the current
rate is $756 per acre-foot, but when the meter fee and the take-or-
pay contractual amount is included, the effective rate is $1,396.87
per acre-foot.
ANALYSIS:
The costs are divided between the sewer customer group and the
recycled customer group based on cost of service to these customers.
Sewer costs consists of collection, primary treatment, and secondary
treatment. Other District costs include salary and benefits,
materials and maintenance, power, annual depreciation, Metro costs,
and the County transportation costs.
3
Recycled water costs consist of tertiary treatment, water purchase
cost, salary and benefits, materials and maintenance, power, and
annual depreciation. In addition, there is the recycled water
purchase cost which is considered a fixed cost in all scenarios
because of the take-or-pay contract with the City of San Diego.
Occasionally, there is also the cost of supplementing with potable
water.
RWCWRF Remains Open (Status Quo)
Sewer Costs Recycled Water Cost
District Metro(1) County Total District Water(2) Total
$891,038 $432,536 $197,786 $1,521,361 $991,312 $3,747,362 $4,738,674
RWCWRF Closure (send 100% flows to Metro)
Sewer Costs Recycled Water Cost
District Metro(1) County Total District Water(2) Total
$585,835 $1,180,024 $347,786 $2,113,645 $908,147 $3,808,686 $4,716,833
Cost Differential between Status Quo and Closure
Sewer Costs Recycled Water Cost
District Metro County Total District Water Total
($305,203) $747,488 $150,000 $592,284 ($83,166)$61,324 ($21,842)
(1) In the “Status Quo” scenario, it is assumed there is a $380,000
true-up due to the District, based on the City’s estimated true-up
for Fiscal Year 2016. This true-up varies due to the District’s
actual flow being less than estimated or because the strength of
sewer is different than budgeted. In the “Close RWCWRF” scenario,
there is no true-up as wastewater would be raw (as opposed to being a
by-product of treatment) and the assumption that 100% of the flow
would go to Metro, which is easier to estimate.
(2) There is a minor difference in the amount of potable water
supplement needed between the “Remains Open” scenario and the “Close”
scenario because without the District’s recycled water, it is assumed
that more potable water is needed to supplement the recycled,
especially in the summer months when the SBWRP cannot keep up with
high demands.
This analysis shows that for sewer customers it is far more cost
effective to treat sewage at the RWCWRF as the savings is $592,284.
For recycled customers it is almost cost neutral due to the fixed
nature of the contract to purchase water from the City of San Diego.
4
It should be noted that this is a snapshot of the current status and
does not consider future events.
FUTURE ANALYSIS:
The 2018-2022 Strategic Plan will consider various aspects of the
future of sewer and recycled water on a short-term and long-term
basis. The analysis presented in this staff report is short-term and
does not consider future events, such as what the cost of the City’s
Pure Water will do to the Metro costs or how Metro may propose
changes to their rate structure.
Some options that will be considered in the strategic plan are to
perform an analysis to have the RWCWRF plant only treat sewage on a
seasonal basis, or have the County of San Diego take over the
collection system and lease out the plant. Additionally, the
strategic plan will look at the future of recycled water such as
receiving supply from the International Boundary and Water Commission
(IBWC) should the City not renew the contract for recycled water at
SBWRP.
FISCAL IMPACT: Joe Beachem, Chief Financial Officer
None.
STRATEGIC GOAL:
This analysis supports the District’s Mission Statement, “To provide
high value water and wastewater services to the customers of the Otay
Water District, in a professional, effective and efficient manner”
along with the General Manager’s Vision, “A District that is at the
forefront in innovations to provide water services at affordable
rates, with a reputation for outstanding customer service.”
LEGAL IMPACT:
None.
Attachments:
A) Committee Action
B) Presentation
ATTACHMENT A
SUBJECT/PROJECT:
Cost Benefit of the Treatment Plant Shutdown vs. Status Quo
COMMITTEE ACTION:
This is an informational item only.
NOTE:
The “Committee Action” is written in anticipation of the Committee
moving the item forward for board approval. This report will be sent
to the Board as a committee approved item, or modified to reflect any
discussion or changes as directed from the committee prior to
presentation to the full board.
Cost Benefit of
Treatment Plant
Shutdown vs. Status Quo
April 4, 2018
Purpose
To present to the Board the cost benefit analysis
Status Quo - Keep Ralph W. Chapman Water Recycling Facility
(RWCWRF) Treatment Plant open and operating as is.
Or
Close RWCWRF - Send 100% of sewer flows to San Diego
Metropolitan Wastewater (Metro).
2
Background
•The District provides sewer service to 15,200 customers through
4,700 accounts within the Jamacha Sewer Basin.
•The District operates the RWCWRF plant, which treats wastewater
for the purpose of producing recycled water.
•The District pays the County of San Diego to transport wastewater
and pays Metro to transport and treat wastewater (both by-
product of recycling and raw wastewater that is not treated).
3
Background (cont.)
•The District has an agreement with City of San Diego to buy
recycled water from the South Bay Water Reclamation Plant
(SBWRP).
•The agreement has a take-or-pay provision and is for 20 years
commencing in January 2007.
•Both the RWCWRF (1,000 AF) and the SBWRP (2,660 AF) supply
recycled water to the District’s distribution system with 719
customers.
•The budgeted take-or-pay is 2,234 AF for FY2018.
4
Analysis
Sewer Cost
•Collection, primary treatment, and secondary treatment
costs
•Internal costs include: salaries and benefits, materials
and maintenance, power, and annual depreciation
•External costs include: Metro and County of San Diego
5
Analysis (cont.)
Recycled Cost
•Tertiary treatment cost and water purchases
•Internal costs include: salaries and benefits, materials
and maintenance, power, and annual depreciation
•External costs include: recycled purchases (for water
used and the take-or-pay volume) and portable water
purchases (when the recycled water system needs a
potable supplement)
6
Cost – Status Quo
Status Quo (RWCWRF remains open)
Sewer Costs Recycled Water Cost
District Metro County Total District Water Total
$891,038 $432,536 $197,786 $1,521,361 $991,312 $3,747,362 $4,738,674
7
Cost – Shutdown
Shutdown RWCWRF (send 100% flows to Metro)
Sewer Costs Recycled Water Cost
District Metro County Total District Water Total
$585,835 $1,180,024 $347,786 $2,113,645 $908,147 $3,808,686 $4,716,833
8
Cost - Differential
Cost Differential between Status Quo and Shutdown
Sewer Costs Recycled Water Cost
District Metro County Total District Water Total
($305,203) $747,488 $150,000 $592,284 ($83,166) $61,324 ($21,841)
The cost to produce recycled water from the RWCWRF is $982.47 per
AF.
The all-in cost to purchase recycled water from the City’s SBWRP is
$1,396.87 per AF based on the FY 2018 take-or-pay contract.
9
Future Analysis
This analysis is a snapshot in time and does not include
future events such as:
•The City of San Diego’s Pure Water Program future cost
allocation.
•Metro changing it’s cost sharing allocation using a fixed
component such as system capacity to charge customers.
10
Future Analysis (cont.)
The 2018-2022 Strategic Plan will consider some of the
following options which are not part of this current
analysis:
•Run the RWCWRF on a seasonal basis.
•Sell the sewer assets to the County of San Diego and contract
out the running of the RWCWRF.
•The District purchasing recycled water from the International
Boundary and Water Commission should the City not renew the
contract.
11
Questions?12
STAFF REPORT
TYPE MEETING: Regular Board
MEETING DATE: April 4, 2018
SUBMITTED BY:
Andrea Carey,
Customer Service Manager
PROJECT: DIV. NO. All
APPROVED BY:
Joseph R. Beachem, Chief Financial Officer
Mark Watton, General Manager
SUBJECT: Automated Meter Reading Change Out Capital Improvement Program
Update
GENERAL MANAGER’S RECOMMENDATION:
This is an informational item only.
COMMITTEE ACTION:
See Attachment A.
PURPOSE:
To update the Board on changes to the Automated Meter Reading (AMR)
change out Capital Improvement Program (CIP) approved by the Board in
2017.
ANALYSIS:
Background
Beginning in late 2016, there was a noticeable increase in
transponder failures of the AMR registers purchased in 2006. These
registers had reached an 11-year life and were no longer covered by
Master Meter’s 100% replacement warranty. A seven-year Capital
Improvement Project was created to replace the aging registers with
brand new Master Meter AMR registers at the 11-year mark.
While tracking AMR failures by year, staff noticed an unusually high
increase in failures of 2009 transponders beginning in early 2017.
Staff reached out to Master Meter, who began investigating the reason
for these premature failures. By mid-2017, 2010 transponders were
also seeing a large increase in failures. Still unable to determine
the reason for failure but understanding the inconvenience these
unexpected failures cause Otay, Master Meter began sending their
staff out to assist with warranty register replacements in June 2017.
Master Meter has continued to send one staff member out for at least
one week per month to replace registers currently under warranty.
In February 2018, Master Meter identified the root cause of the
failures. They found that a manufacturing change in 2009 resulted in
a faulty electrical board component. This causes the transponder to
transmit data more frequently than it should, thus causing premature
battery failure. Registers manufactured between 2009 and early 2013
were identified as having this defect and will require replacement in
the next two years. As of January 2018, there were approximately
17,000 of these registers installed throughout the District.
CIP Program Changes
Due to this new development, staff evaluated the existing AMR change
out plan. The original plan to change out registers at the 11-year
mark was no longer feasible as most of the remaining 3G registers
will not last to the 11-year mark. Master Meter presented Otay with
three options to replace these registers:
1) A new 3G register at no cost, with only the remaining warranty.
2) A new 3G register at a cost of $35.46 with a new 20-year
warranty (10-year at 100% and 10-year prorated)
3) A new Allegro register at a cost of $103.45, a reduction of
$34.48 from the current reduced District price.
In order to determine the best option, staff had to look at the
overall program. First, staff revised the timeline of the current
change outs, reducing the time to change out all old registers from 7
years to only 4 years, a necessity due to the failing registers.
Second, meters have a useful life of approximately 20 years. Staff
needed to consider the shorter life of the failing registers and how
that would impact the timing of the next round of change outs, which
would include both meters and registers.
This next round of change outs would begin in FY 2025 and end in
FY 2032. To minimize material costs, staff looked at maximizing the
useful life of both the meters and registers. Staff also considered
the costs that are created by overextending the useful life of the
meters and registers, which can include underperforming meters and
manually reading failing registers. In evaluating all these factors,
staff determined that meters purchased between 2005 and 2009 (with
registers changed out between 2017 and 2019) will only have had a
register for 6 to 10 years, at the point when the meters will need to
be changed out. These meters would be best matched with registers
that have a shorter useful life. However, meters purchased between
2010 and 2012 (with registers changed out between 2018 and 2020) will
have had a register for 10 to 14 years, at the point when the meters
will need to be changed out. These meters are better matched with
registers with a longer useful life.
Based on Master Meter’s assurance that all new 3G registers
manufactured after 2013 should operate just as those prior to 2009,
staff estimates the life expectancy of the replacement 3G units at
11 years. Additionally, based on laboratory tests, Master Meter
estimates the life expectancy of the Allegro registers to be 15.4
years.
Given the life expectancy of each style of register and the
requirements for length of use going forward, staff determined the
best course of action was to change routes with meters purchased in
2009 or earlier with the no-cost 3G registers and routes with meters
purchased in 2010 or later with Allegro registers. When the current
replacements conclude in FY 2020, the District will have
approximately 19,000 3G registers and 30,000 Allegro registers
installed. By maximizing the warranty on the faulty registers, the
overall AMR change out CIP budget has been reduced by $3.3 million.
Future Assurances
In light of this manufacturing defect, Master Meter is currently
having a third party engineering consultant test the various Allegro
versions that have been manufactured to date to ensure those
registers are performing as expected.
Finance staff is currently working with Master Meter to evaluate
their financial strength given this major warranty liability and will
have an update next month.
FISCAL IMPACT: Joe Beachem, Chief Financial Officer
The AMR change out CIP budget has been reduced by $3.3 million.
STRATEGIC GOAL:
Improve and streamline meter related processes.
LEGAL IMPACT:
None.
Attachments:
Attachment A - Committee Action
ATTACHMENT A
SUBJECT/PROJECT:
Automated Meter Reading Change Out Capital Improvement
Program Update
COMMITTEE ACTION:
This is an informational item only.
NOTE:
The “Committee Action” is written in anticipation of the Committee
moving the item forward for board approval. This report will be sent
to the Board as a committee approved item, or modified to reflect any
discussion or changes as directed from the committee prior to
presentation to the full board.