Southern Marin Service Review and Sphere of Influence Update - July 2011 (pdf)

SOUTHERN MARIN SEWER AGENCIES SERVICE REVIEW AND SPHERE OF INFLUENCE UPDATE Marin Local Agency Formation Commission July 2011 Peter Banning, Executive Officer Candice Bozzard, Clerk to the Commission Paul Causey, Causey Consulting 555 Northgate Drive, Suite 230 San Rafael, California 94903 Southern Marin Sewer Service Review & 2 July 2011 Sphere of Influence Update ACKNOWLEDGEMENT The staff of Marin LAFCO acknowledges the courtesy and cooperation received from the board members and managers of the seven agencies that are the subjects of this study. Their generosity in this regard was extended despite wide differences of opinion on a variety of issues, and is entirely consistent with their long and dedicated public service. LAFCO staff offers its respect and many thanks. Southern Marin Sewer Service Review & 3 July 2011 Sphere of Influence Update SUMMARY & RECOMMENDATION This report covers seven sewer service agencies: one city (Mill Valley), one community services district (Tamalpais CSD), four sanitary districts (Alto, Almonte, Homestead Valley and Richardson Bay) and one joint exercise of powers agency, the Sewerage Authority of Southern Marin (SASM). The entire system serves a population of approximately 29,700, a modest size even among other sewer service organizations in Marin County. However, the diverse and complex service arrangements within the SASM system are unusual as shown in its organization chart. Tam CSD RBSD Alto SD Almonte HVSD Mill Valley Voters Voters Voters Voters Voters Voters Tam CSD RBSD Alto SD Almonte HVSD Mill Valley Board (5) Board (5) Board (5) Board (5) Board (5) Council (5) SASM JPA Board (6) Man Man Man Man General Manager Manager Manager Manager City Manager ager ager ager Manager ager Admin DPW Dir Treatment Admin (0.5) Plant Admin Manager (1.0) Line Crew Line Crew Line Crew Admin 0.1 FTE 3.0 FTE 3.0 FTE (2.0) Treatment Plant O&M (7.5) Roto‐ Roto‐ Roto‐ Roto‐ Roto‐ Roto‐ Rooter Rooter Rooter Rooter Rooter Rooter 0.0 FTE 2.0 FTE 0.4 FTE 1.1 FTE 1.9 FTE 2.0 FTE In 2005, Marin LAFCO performed a municipal services review of sewer service agencies in southern Marin County and adopted new spheres of influence (boundary plans) for those agencies. The study identified significant potential cost savings through consolidation of sewer agencies and adopted “interim” Southern Marin Sewer Service Review & 4 July 2011 Sphere of Influence Update sphere of influence designations encouraging “functional consolidations” of agency operations in the short-term (voluntary collaboration or joint exercise of powers between existing agencies) as transitional steps toward more permanent political consolidation of agencies. The adopted service review determinations were also critical of the management efficiency and political accountability of existing southern Marin sewer agencies, stating “Continued segmentation of sewer service between collection and treatment functions and between very small neighborhood areas no longer adds value to the provision of this (sewer) service.” State law and LAFCO policy require periodic update of adopted sphere of influence designations. Under the Commission’s policy, “Spheres may be restudied where significant changes in land use, planning policy, demand for public service, service capabilities, or relationship to other government agencies have occurred.” In January 2011, LAFCO directed its staff to restudy the services and adopted spheres of influence of sewer service agencies in southern Marin for the following reasons: (cid:137) To assess the effectiveness of functional consolidation efforts undertaken by southern Marin sewer agencies since interim sphere of influence designations were adopted in 2005; (cid:137) To review and update the determinations made by the Commission in its service review and sphere of influence studies in 2005; (cid:137) To re-examine the ability of SASM and its member agencies to provide sewer services in light of significant sewage spills in early 2008; (cid:137) To provide a basis for responding to new legislative authority granted to Marin LAFCO under AB 1232 (Government Code Section 56375.2), which enables consolidation of SASM and its member agencies without protest proceedings; Based on data and observations presented in the body of the report, staff has drawn a series of conclusions upon which to base its recommendations. The Commission’s sphere of influence review should set the stage for addressing infrastructure and operational problems by streamlining the government structure of SASM’s member agencies a way that the previous “interim” sphere of influence designations did not. The language of the 2005 sphere of influence resolutions anticipating political consolidation only after a series of successful contractual collaborations has not produced significant results due to the effort Southern Marin Sewer Service Review & 5 July 2011 Sphere of Influence Update and complexity of six member agencies attempting to work together. The coercive force of the EPA’s Administrative Order following sewage spills of 2008 has imposed some unity of action, but neither leadership nor cohesion has otherwise emerged that integrates the management, service standards or decision making process that could produce the improvements anticipated by the Commission’s 2005 study. LAFCO and the public should recognize the earnest and energetic efforts of SASM and its member agencies in addressing problems in sewer facilities and operations following the spills of 2008. However, recent improvements in performance and reinvigorated efforts to improve facilities do not justify preservation of an obsolete government structure. The EPA’s Administrative Order has required the collection agencies to thoroughly rebuild their systems, requiring a very substantial increase in fee revenue from the public. This would be the time to create some uniformity of approach and accountability for results through the consolidation of four of SASM’s six member agencies. Among the seven agencies, 36 elected and appointed officials and eight managers operating the existing sewer system, no one is responsible or accountable for the spills of 2008. The present structure of SASM and its six member agencies dilutes responsibility and accountability for sewer service to the point of near inconsequence for single purpose sanitary district members. There is no need and no purpose in preserving small political subdivisions of the State of California that operate with no discernable political activity in their meetings, decisions or elections. The public is disinterested in participation in district meetings or standing for election because so little is at stake within each jurisdiction when that jurisdiction is responsible for only a small part of a small sewer system. All of the member agencies are responsible to some undetermined degree, but no agency or board has any overall responsibility for the performance of the system. The political divisions within SASM and its members create an environment that does not allow the public to understand the governance of the sewer services that it receives. Staff believes that the system’s complexity has created confusion, disengagement and apathy with regard to the operations of the agencies and in public participation. With the new authority granted to the Commission under AB 1232, LAFCO is in a position to implement its adopted policies on special district consolidation and its 2005 service review determinations. Implementation of these policies should be pursued if the eventual result increases overall economy, clarifies Southern Marin Sewer Service Review & 6 July 2011 Sphere of Influence Update responsibility for sewer service, enhances public understanding and accountability and provides an equitable outcome for ratepayers and employees. Although AB 1232 authorizes Marin LAFCO to consolidate or reorganize “SASM and its member agencies,” a number of practical and legal obstacles stand in the way of combining all seven existing agencies into a single sanitary or sanitation district. The recommended alternative advanced by this staff report would consolidate the four sanitary district members of SASM, the Alto, Almonte, Homestead Valley and Richardson Bay Sanitary Districts. The proposed consolidation would clarify accountability among the remaining agencies, improve management efficiency by reducing management staff and allow estimated cost savings in operations and maintenance ranging from $228,000 to $269,000. Governance and staffing of this alternative are shown in the following chart: The effect of this alternative would be to reduce the number of member agencies in the SASM joint powers agency from six to three. Subsequent action by the Southern Marin Sewer Service Review & 7 July 2011 Sphere of Influence Update three remaining members of SASM would be likely to reduce membership to two and make other adjustments to the SASM joint-powers agreement. Under proposed terms and conditions of approval, the consolidated sanitary district would be governed by an expanded board of directors composed of members of all four predecessor district boards. The new district would be required to employ regular and contract employees for a minimum period of time and to administer separate rate zones in place of the predecessor district boundaries in order to equitably account for differences in reserves, rates and property tax revenues. Other terms and conditions would address the variety of implementation issues inherent in altering the existing agency structure. Recommended Actions Staff recommends that Marin LAFCO take the following actions: 1. Open the public hearing, continue for at least 60 day for public comment to the Commission’s September 8, 2011 meeting. Request that affected agencies wishing to comment do so in writing by August 26th. 2. Following completion of this public hearing: a. Adopt updated service review determinations required by Government Code 56430 based on the content of Chapter II of this report. b. Amend 2005 sphere of influence determinations for Alto, Almonte, Homestead Valley and Richardson Bay Sanitary Districts in the following manner: Section 1. The sphere of influence designation of the (example) - Almonte Sanitary District is amended as an Interim Sphere of Influence designation, to include all areas currently within the boundaries of the District as of the date of this resolution as shown on Attachment A. The purpose of the Interim designation is to express this Commission’s expectation that Almonte Sanitary District will continue to provide service within its present boundaries as shown on Attachment A while engaged in functional collaboration efforts with neighboring sewer agencies and that political consolidations will be eventually undertaken by southern Marin sewer agencies in the future at a time and in an order yet to Southern Marin Sewer Service Review & 8 July 2011 Sphere of Influence Update be determined. to be a sphere of influence "in common" to include the areas served by Almonte, Alto, Homestead Valley and Richardson Bay Sanitary Districts. This designation is assigned to reflect the Commission’s conclusion that the services provided by Almonte, Alto, Homestead Valley and Richardson Bay Sanitary Districts would be most efficiently provided by a single special district. This designation indicates the Commission's determination that these districts should be combined through consolidation or other reorganization process. 3. Direct staff to publish notice of intent to initiate proceedings for consolidation of Alto, Almonte, Homestead Valley and Richardson Bay Sanitary Districts at a public hearing on a date at least 21 days from the date of the notice; 4. Following completion of the public hearing so noticed, adopt a resolution approving the consolidation of Alto, Almonte, Homestead Valley and Richardson Bay Sanitary Districts, under the special provisions of AB 1232 (Government Code Section 56375.2) subject to the terms and conditions of approval described earlier in this report. It is further recommended that the Commission, prior to taking final action on the proposed consolidation, provide a 30 to 60 day consultation period for the affected agencies to work with the Commission’s staff in the further development of terms and conditions of approval if requested to do so by two or more of the agencies subject to consolidation. Southern Marin Sewer Service Review & 9 July 2011 Sphere of Influence Update CHAPTER 1. INTRODUCTION This report is presented as part of a process mandated by Section 56425 of the Cortese-Knox-Hertzberg Local Government Reorganization Act of 2000. As stated in that section, “In order to carry out its purposes and responsibilities for planning and shaping the logical and orderly development and coordination of local government agencies so as to advantageously provide for the present and future needs of the county and its communities, the Local Agency Formation Commission shall develop and determine the sphere of influence of each local governmental agency within the county.” As used in this section, “sphere of influence” means a plan for the probable physical boundaries and service area of a local government agency. In determining a sphere of influence, the Commission is required to consider and make written findings with respect to the following factors: (cid:137) The present and planned land uses in the area, including agricultural and open space lands. (cid:137) The present and probable need for public facilities and services in the area. (cid:137) The present capacity of public facilities and adequacy of public services which the agency provides or is authorized to provide. (cid:137) The existence of any social or economic communities of interest in the area if the commission determines they are relevant to the agency. Government Code Section 56425(f) requires the Commission to periodically review adopted spheres of influence: (f) Upon determination of a sphere of influence, the commission shall adopt that sphere, and shall review and update, as necessary, the adopted sphere not less than once every 5 years. The Commission’s adopted Policies, Procedures and Guidelines include provisions for compliance with Section 56425 requirements 1. Spheres of influence authorized for restudy will be examined for changes in conditions and policies since adoption or most recent review. Five years have elapsed since the Commission adopted spheres of influence for sewer service agencies in the southern Marin area. Southern Marin Sewer Service Review & 10 July 2011 Sphere of Influence Update Changes to State law effective on January 1, 2001 require LAFCOs to study the service relationships between agencies providing municipal services within different sub-regions in each county prior to the periodic review of adopted spheres of influence. In this report, discussion of service review determinations precedes recommendations for revision of the spheres of influence of four of the member agencies of SASM, including the Alto, Almonte, Homestead Valley and Richardson Bay Sanitary Districts. The actual effect of these or any other adopted spheres of influence will be to provide LAFCO and local communities with policy guidance on matters relating to the boundaries and organization of local government agencies. In short, the purpose of the Commission’s sphere determinations is to answer the question, “What local agencies should provide which services to what geographical area as communities change?” In addition, Marin LAFCO has adopted policies with respect to special district consolidation or reorganization of special districts which are of particular interest in this update. Those policies include the following provisions: CHAPTER III. POLICIES AND PROCEDURES FOR THE EVALUATION OF PROPOSALS Section 1. General Policies & Standards A. Agency Consolidation Policy It is the intent of LAFCO to encourage the rationalization of local government organization through the elimination or consolidation of small, single purpose special districts. Wherever the full range of urban services is required, general-purpose governments are preferred to special districts for the provision of services. It is the intent of LAFCO to strengthen the role of city governments in the provision of urban services. In the city-centered corridor of Marin County as designated in the Marin Countywide Plan, general-purpose governments are preferred over special districts for the provision of services. Where provision of a service by a general purpose local government is not practical, LAFCO favors the consolidation or reorganization of small, single purpose special districts when such consolidation can be shown to reduce aggregate costs of service and/or improve local government accountability. LAFCO discourages the proliferation of local governmental agencies and the existence of overlapping public service responsibilities. LAFCO discourages the formation of new special districts where service can be provided by existing local government agencies. …. Southern Marin Sewer Service Review & 11 July 2011 Sphere of Influence Update Section 5. Polices & Procedures for Specific Application Types A. ….. 1. …. B. It is the policy of the Marin Local Agency Formation Commission to prefer, but not require, that proposals be submitted by petition of voters or landowners or by resolution of application by an affected local agency. The Commission will consider initiation of such proposals in instances in which the following conditions apply: (cid:131) A sphere of influence or other governmental study has shown that a proposal may result in lower overall public service costs, greater local government access and accountability, or both. (cid:131) The Commission can complete the necessary review, analysis, and processing with its own staff resources, or funds are available to pay for additional assistance needed to complete the review and processing of the proposal. The Commission reserves its discretion to initiate such proceedings in exceptional circumstances in which there exists a level of public concern about a district's services or governance which, in the Commission's view, warrants initiation of a proposal. More information on LAFCO and on all of Marin County’s local governments, services and boundaries may be found on the Commission’s website at http://lafco.marin.org. I. SASM & Member Agencies This report covers seven sewer service agencies: one city (Mill Valley), one community services district (Tamalpais CSD), four sanitary districts (Alto, Almonte, Homestead Valley and Richardson Bay) and one joint exercise of powers agency, the Sewerage Authority of Southern Marin (SASM). The entire system serves a population of approximately 29,700, a modest size even among other sewer service organizations in Marin County. However, the diverse and complex service arrangements within the SASM system are unusual. A. Collection The six member agencies operate sewage collection systems of varying sizes, all leading to the SASM treatment plant. SASM also operates some collection facilities where collection facilities serve more than one of its member agencies. Figure 1 shows the jurisdictional areas of the six SASM member agencies. Table 1 shows the collection facilities operated by each agency and the relative sizes of the member agencies in terms of equivalent dwelling units (EDUs). The Southern Marin Sewer Service Review & 12 July 2011 Sphere of Influence Update collection agencies are not responsible for sewer laterals that connect private facilities to the public sewer. B. Treatment SASM operates a single sewage treatment plant located in the City of Mill Valley, also shown on Figure 1. The SASM treatment plant is jointly owned by each of the six collection agencies. Their ownership shares are very different as measured in EDUs of the treatment plant’s capacity, as shown in Table 1 (page 13). Figure 1 August 26, 2010 LLaarrkkssppuurr CCoorrttee MMaaddeerraa Marin Local Agency Formation Commission Sewerage Agency of Southern Marin City of Mill Valley (SASM) Member Agencies Alto Sanitary District Richardson Bay Sanitary District Legend Homestead Valley Almonte Sanitary District Sanitary District SASM Treatment Plant Blackie's Pasture Treament Plant Alto Sanitary District Homestead Sanitary District TTiibbuurroonn Richardson Bay Sanitary District Tamalpais Community Services District Almonte Parcel City of Mill Valley Sanitary District City Boundary Treatment Plant Tamalpais Community BBeellvveeddeerree Services District Richardson Bay Golden Gate C Pr O e U pa N r T ed Y b O y F : MARIN C fo O r t M he M : UNITY DEVELOPMENT AGENCY MAPPING/GRAPHICS National SSaauussaalliittoo AT L HU O IGS C U M A SAT L P 2 A 0IS1 G 0R E E P N R C FEIL Y SEE : F N O STAA R STM M IO. A NMAX T LD I O ON N L Y C . O D M AT M A I A S R S E I O NO N T SURVEY ACCURATE. Recreation Area 0 0.25 0.5 1 Miles Table 1 Treatment Plant Line Equivalent Dwelling Units Capacity (EDUs) Percent Miles Alto Sanitary 612 0 .03 3 Almonte Sanitary 936 0 .05 6 Homestead Valley Sanitary 1314 0 .07 10 Richardson Bay Sanitary 6030 0 .34 44 City of Mill Valley 8856 0 .49 59 Tamalpais CSD (SASM only) 252 0 .01 1.2 SASM ---- ---- 9 Total SASM 1 8,000 100% 132.2 C. Governance Each of these six collection agencies is governed by its own independent five- member council or board of directors. Each of these six agencies appoints one member to the governing board of the Sewerage Agency of Southern Marin (SASM), a joint-exercise-of-powers agency. Each appointee has an equal vote on the SASM board regardless of its ownership interest in the SASM treatment plant. D. Management & Staffing Staffing resources are unequally available to the various members of the seven constituent agencies. Two of the six member agencies, City of Mill Valley and Tamalpais CSD, provide services other than sewer service within their jurisdictions. They enjoy full time management and other staff resources to serve their governing boards and the public. Of the four sanitary districts, only Richardson Bay has full time staff and office facilities. Alto, Almonte and Homestead have part time managers only and no visible, physical facilities in their communities above ground. SASM has full time management and line staff to operate the sewage treatment plant and support the SASM board. However, SASM receives its staffing resources through an operations and maintenance agreement with the City of Mill Valley, i.e. the City’s employees provide staff to SASM for operating the treatment plant and serving the SASM board of directors. Staff resources are available to SASM and its members as shown in Table 2. Southern Marin Sewer Service Review & 14 July 2011 Sphere of Influence Update Table 2 Summary Data – SASM & Member Sanitary Service Agencies Full- Date Service Area Time Operating City/District Services Formed Popul. (sq. mi.) Staff Revenue Almonte Sanitary District Sewage collection 1952 2000 0.5 0.3 $.43 mil Solid waste Health & Safety Code 6400 disposal Alto Sanitary District Sewage collection Solid waste Health & Safety Code 6400 disposal 1951 1200 0.2 0.125 $.27 mil Homestead Valley San. Dist. Sewage collection Solid waste Health & Safety Code 6400 disposal 1931 2400 0.75 0.25 $.96 mil Richardson Bay Sanitary Dist. Sewage collection Health & Safety Code 6400 Water reclamation 1946 9522 2.9 4 $2.89 mil Tamalpais Community Sewage collection Solid waste Services District disposal 1955 6859 1.7 2.6 n/a Government Code 61000 (other dist. services) City of Mill Valley Sewage collection Solid waste disposal 1900 15122 4.8 2.5 n/a (other city services) Sewerage Agency of Sewage treatment Southern Marin & disposal 1979 29526 5.3 15 $3.04 mil Government Code 6500 Water reclamation Southern Marin Sewer Service Review & 15 July 2011 Sphere of Influence Update The organization of SASM and its member agencies is shown in the following organization chart: Figure 2 Current Organization of SASM & Member Agencies Tam CSD RBSD Alto SD Almonte HVSD Mill Valley Voters Voters Voters Voters Voters Voters Tam CSD RBSD Alto SD Almonte HVSD Mill Valley Board (5) Board (5) Board (5) Board (5) Board (5) Council (5) SASM JPA Board (6) Man Man Man Man General Manager Manager Manager Manager City Manager ager ager ager Manager ager Admin DPW Dir Treatment Admin (0.5) Plant Admin Manager (1.0) Line Crew Line Crew Line Crew Admin 0.1 FTE 3.0 FTE 3.0 FTE (2.0) Treatment Plant O&M (7.5) Roto‐ Roto‐ Roto‐ Roto‐ Roto‐ Roto‐ Rooter Rooter Rooter Rooter Rooter Rooter 0.0 FTE 2.0 FTE 0.4 FTE 1.1 FTE 1.9 FTE 2.0 FTE Southern Marin Sewer Service Review & 16 July 2011 Sphere of Influence Update This page intentionally left blank Southern Marin Sewer Service Review & 17 July 2011 Sphere of Influence Update CHAPTER 2. MUNICIPAL SERVICE REVIEW I. Background: Synopses of Related Consolidation Studies & Documents A. Southern Marin Sewers – So Many Districts, So Few Users (2003-2004 Marin County Civil Grand Jury, April 2004): The summary of this report reads: The Marin County Civil Grand Jury (Grand Jury) reviewed the operations of the eleven agencies that collect and treat wastewater in Mill Valley, Sausalito, Tiburon, Belvedere, and nearby unincorporated areas. The Grand Jury found that, for the most part, these agencies appear to be operating in a responsible and environmentally sound manner. This unique patchwork quilt of agencies, however, lacks a forum for cooperatively examining issues that transcend district boundaries. This has led to disputes in the past. Moreover, it has meant that one agency can make decisions that can harm another without realizing it. The Grand Jury also concluded that closer collaboration and interaction between the professionals who work for wastewater agencies could lead to improved systems operation and maintenance. The Grand Jury also found that numerous southern Marin residents are unable to vote for the directors of agencies that impose sewer charges on them, a situation that clearly should be corrected. • The Grand Jury recommends that: • A periodic forum for interagency information sharing, discussion, and dispute resolution be established • A facilitator-run meeting of the eleven agencies involved in southern Marin’s wastewater collection be held to identify opportunities for consolidation, collaboration, and cooperation • The opportunities identified in the facilitated meeting become the basis for an in-depth study of consolidation options • The City of Belvedere should explore the advantages of annexation to Sanitation District Number 5 for wastewater collection and treatment services The entire report and the responses of subject agencies are available at: http://www.co.marin.ca.us/depts/GJ/main/cvgrjr/2003gj/SouthernMarinSew ersReport.pdf Southern Marin Sewer Service Review & 18 July 2011 Sphere of Influence Update B. Southern Marin Sewers: Cracks in the System (2008-2009 Marin County Civil Grand Jury, May 2008) Following spills at SASM in January 2008, the Grand Jury focused on the structure of SASM and its member agencies and on the role of private property owners in maintaining sewer laterals. The Grand Jury’s recommendations include consolidation of SASM and its member agencies, but recognize difficulties in that process. The summary of the report is included in this report as Attachment 1. The entire report and agency responses are available at http://www.co.marin.ca.us/depts/GJ/main/cvgrjr/2008gj/index2008.cfm C. Southern Marin Service Review & Sphere of Influence Update (Marin County Local Agency Formation Commission, April 2004) LAFCO adopted spheres of influence for most of the cities and special districts under study, but elected to expand study of southern Marin sewer agencies with the aid of a consultant as described below. D. Southern Marin Sewer Service Alternatives Study (PB Consult, July 2005): The study included 11 sewer agencies in southern Marin, including SASM and its members. The study design aimed to evaluate the potential cost savings from the permanent political consolidation of southern Marin sewer agencies, but also to define short-term actions that could be undertaken by the existing agencies to improve service and save money by working together – in what the study called “functional collaboration.” A key assumption of the study was that functional collaboration was a useful and necessary antecedent to political consolidation of these agencies. The study also separately estimated cost savings under current and future costs bases, accounting for expected costs of new regulatory requirements that have been implemented since 2005. The future basis cost savings for functional consolidation involving all 11 southern Marin sewer agencies was estimated at $1.9 million per year or over 12% of projected budgets. The future cost basis savings from political consolidation of SASM agencies was estimated at $750,000 per year or approximately 10% of total projected costs. The report noted that “These additional savings of future year cost increases will come from the economies of scale gained from implementing a consolidated SSMP/SSO1 1 This acronym refers to new regulatory requirements for sewer system management plans and the management of sanitary sewer overflows implemented by the State Water Resources Control Board since completion of the study. Southern Marin Sewer Service Review & 19 July 2011 Sphere of Influence Update program and pooled capital projects for infrastructure replacement and again, are potentially additive to savings already achieved by working collaboratively.” At the conclusion of the study, LAFCO adopted resolutions for its municipal service review and adopted sphere of influence determinations for the sanitary districts in southern Marin. The sphere of influence determinations for the sanitary districts were “interim” designations. As stated in the text of the resolutions, “The purpose of the Interim designation is to express this Commission’s expectation that Almonte Sanitary District will continue to provide service within its present boundaries …. while engaged in functional collaboration efforts with neighboring sewer agencies and that political consolidations should be evaluated by southern Marin sewer agencies in the future as appropriate.” A separate resolution making determinations for the Commission’s municipal service review requirements incorporates the summary of the study’s analysis of potential cost savings and also addresses the issues of management efficiency and local government political accountability. In those sections, the Commission determined that: 1. The management and staffing resources of the current decentralized sewer services agency are inefficiently deployed. Management, operations and administrative staffing redundancy are inherent in the existing decentralized, multi-agency structure. 2. The level of public participation in matters relating to sewer service in southern Marin is very low…2 And; 3. The local control over a municipal service afforded by a special district board is meaningful if the scope of activities and decisions of that governing board are known to the public and attract participation by constituents. Where this is not the case because the district’s service role is very limited or the budget is small or the governing board’s discretion over spending is very narrow, local control has little practical meaning. The political accountability of agencies of very small size or limited scope of service may be improved if consolidation would create a larger, more capable organization with a more prominent presence in the community and an enhanced ability to communicate effectively with the public. 2 Exceptions were noted for specific efforts of SMCSD, TCSD and HVSD rate review processes. Southern Marin Sewer Service Review & 20 July 2011 Sphere of Influence Update Fewer and larger organizations with full-time staff capabilities would be better able to maintain public awareness, access to information and increased participation at lower cost. Continued segmentation of sewer service between collection and treatment functions and between very small neighborhood areas no longer adds value to the provision of this service. The full text of LAFCO resolution 05-07, including a summary of the sewer alternatives study, is included in this report as Attachment 2. The complete Southern Marin Sewer Service Alternatives Study is available at http://lafco.marin.org/staff_reports/pdf/Sewer%20Services%20Report%20FIN AL_29Jul05.pdf. This study and the resolutions adopted by LAFCO as a result of it represent the information that this report seeks to update. II. Background: Legislative & Regulatory Changes Since 2005 A. Regulatory and Legal Changes Since the original 2005 Consolidation Study, major changes in the regulatory environment in the State of California and the Bay Area have occurred that have a direct affect on the SASM Collection System operations. In May 2006, after many collection system overflow problems across the State, increasing public concern with sewage overflows and closed beaches and due to increasing litigation over these performance failures, the State Water Resources Control Board adopted statewide Waste Discharge Regulations (WDR) for Sanitary Sewer Systems greater than one mile in an order that required all collection system agencies to report to a State Reporting System (CIWQS) and manage their collection systems according to Sanitary Sewer Management Plans (SSMP) containing certain required elements. The stated objective was “to reduce the numbers and volumes of SSOs across the state through the proper operations and maintenance of sanitary sewer systems.” It was the SWRCB’s perspective that many collection system agencies were operating with a diverse set of standards and performance levels that were not consistent with good public policy as most collection systems were not directly permitted by any state or federal agency prior to these new regulations. While the Marin Agencies had already been working under San Francisco Bay Regional Water Quality Control Board rules, the new requirements were intended to create uniform regulations across the state to achieve the stated goals and objectives of the SWRCB and to begin to provide uniform information on the Southern Marin Sewer Service Review & 21 July 2011 Sphere of Influence Update numbers and quantity of sewage escaping from sanitary sewer collection systems. In addition, for the first time these regulations brought uniformity to the regulations that were being applied differently in regional board areas in hopes of assuring enhanced management and information about the systems along with better public access to real time information regarding SSOs. These regulations were broader and demanded more information to be made public in hopes of driving better, more professional system management and operations. At the same time as these regulations were being promulgated, there was a significant increase in statewide litigation over the discharge of untreated sewage from collection systems in violation of the Federal Clean Water Act. Most litigation was brought by environmental groups or “NGOs” who believed that the EPA and the SWRCB were not doing enough to properly implement and enforce the provisions of the Clean Water Act. These lawsuits and legal actions by the environmental community have and are continuing to this date and have resulted in many administrative orders, consent decrees and settlements with large and small agencies across the state including in Marin County and the San Francisco Bay Area where a disproportionately large number and volume of SSOs have been found to occur. As we prepare this report, SASM and its member agencies are currently operating under an Order for Compliance (or “Administrative Order”) from the EPA for the spills and violations of both the SASM Treatment Plant NPDES Permit and the WDR regulations affecting the SASM satellite agencies. These legal challenges have significantly increased the concern with SSOs resulting from infiltration and inflow from both public and private sewer pipes and poor collection system management. This last concern deals with the renewal and replacement of systems that have deteriorated due to multiple factors such as age, under design, poor construction, land movement, tree root damage, grease or other factors that may not have been adequately addressed and which had traditionally been ignored by system managers in the past. In addition, the SWRCB is currently in the process of revising the waste discharge regulations and it is expected that additional requirements will be placed upon collection system agencies to further push agencies to expand and enhance management and oversight of their systems. These new regulations may require reporting of all private sewer lateral SSOs, identification and communications with upstream collection systems, preparation of staffing and operational risk management plans as well as significantly expanding information requested by the SWRCB about each agency’s operations. Finally, the SWRCB has also stated that they will be expanding their audit and enforcement efforts on collection systems that either have not complied with the Southern Marin Sewer Service Review & 22 July 2011 Sphere of Influence Update WDRs or who show performance results that are above or significantly below statewide or local averages for similar systems. These efforts will be pursued by both the SWRCB Enforcement Branch and the local Regional Water Quality Control Board staffs in order to ensure proper compliance with the regulations. B. Assembly Bill 1232 Assembly Bill 1232 was passed by the State Legislature and signed into law in late 2009. The bill’s provisions affect only Marin LAFCO, SASM and its member agencies and results directly from the sewage spills of early 2008. The bill authorizes – but does not require - Marin LAFCO to initiate and approve a reorganization or consolidation of the Sewerage Agency of Southern Marin and its member agencies, without protest hearings beginning January 1, 2011. The year between passage of the bill and the effective date of these provisions was intended to allow SASM member agencies to undertake action to consolidate before Marin LAFCO gained unilateral authority to consolidate those agencies. SASM member agencies took no action. The special provisions of AB 1232 have no expiration date and may be invoked by Marin LAFCO at any time after January 1, 2011. The updates provided in this report are intended to provide the basis for Marin LAFCO’s decisions on how to implement the provisions of AB 1232. The text of AB 1232 is included in this report at Attachment 3. III. Background: Other Events & Related Documents Since 2005 In September 2005, southern Marin sewer agencies, including SASM and its member agencies, all adopted a “Resolution declaring intent to explore and implement opportunities for functional collaboration…..” In the resolution, each agency resolved as follows: The Board of Directors of (e.g. Almonte) Sanitary District of Marin County therefore resolves to explore and implement functional collaboration options as described in the findings of this resolution, and any other opportunities for collaboration which may from time to time be found to be advantageous to Sanitary District No. 5 of Marin County and other public agencies, by: o Participating in the formation of a Steering Committee. o Participating in the development of a list of target activities. o Participating on subcommittees and working groups. o Participating in the development of a decision making process. o Receiving and reviewing progress reports at least twice per year. Southern Marin Sewer Service Review & 23 July 2011 Sphere of Influence Update o Seeking an implementation framework for feasible options. Joint Powers Agreements will be considered. o Establishing an initial time frame of three years to complete the exploration and implementation of feasible collaborative efforts. Southern Marin sewer agencies followed up this resolution by forming a working group of agency managers to identify collaborative actions to improve aggregate operational efficiency. Actions that resulted from this effort will be described later in this report (see Attachment 4). The working group ceased meeting after approximately one year. A. SASM January 2008 Spill Investigation Report (State Water Resources Control Board Office of Enforcement, April 2008) This report’s Background section provides an extensive description of two spill events including the following statements: 1. During January 2008, the Sewerage Agency of Southern Marin (SASM) reported two storm-related spill events from SASM’s Wastewater Treatment Plant (WWTP) located at 450 Sycamore Street, Mill Valley, CA. … 2. Between 18:00 hours and midnight on January 25, 2008, SASM by-passed 2.45 million gallons (MG) of screened sewage influent to the equalization ponds (also referred to as emergency storage ponds) and then to Pickleweed Inlet, which is connected to Richardson Bay … 3. Between 17:30 and 20:30 hours on January 31, 2008, another incident at SASM resulted in a spill of partially treated (screened only) wastewater to Pickleweed Inlet, a near shore, shallow water body adjacent to Richardson Bay. SASM initially reported the volume of the spill as 2.7 MG; however, they revised that estimate on February 23, 2008 to 0.962 MG… The investigation report goes on to examine the interactions of the weather, the actions of the operators of the SASM treatment plant, the actions of Redwood Security Systems, a private alarm company, and the inflow & infiltration received from the six sewage collection agencies that own the SASM plant. The conclusions of the investigation are: Southern Marin Sewer Service Review & 24 July 2011 Sphere of Influence Update (cid:131) The primary cause of the January 25, 2008, overflow was extremely high infiltration and inflow into the sewage collection system. The inflow and infiltration is caused by extremely poor condition of the SASM’s ageing collection system. This is a serious chronic problem that has been neglected for the last 25 years. Similar incidents have occurred in the past and will likely continue in the future during the periods of heavy and prolonged rainfall. (cid:131) The January 31, 2008 spill was caused primarily by operator error. The situation was exacerbated by high flows due to excessive inflow and infiltration and the failure of the alarm company to follow the established alarm response procedures. However, had the operators mad the appropriate decisions, the spill could have been completely avoided. (cid:131) In general, SASM’s standard and emergency operating procedures are deficient and outdated. (cid:131) Staffing levels in both the operation and maintenance departments (of SASM) are lower now than they were a few years ago. There is a significant backlog of maintenance work orders, although most of the major problems at the plant are being taken care of. (cid:131) SASM and its member agencies are not in compliance with the NPDES permit requirements pertaining to the operation and maintenance of the collection system. Currently, there is no incentive to improve the condition of their collection systems because each agency pays its share of treatment costs based on the number of EDUs connected to the system and not the actual flow. The occasional spill, controlled bypass or blending event that occurs periodically during wet weather is typically justified as an event beyond the discharger’s control. (cid:131) Preventive maintenance of the collection system is almost non-existent. With each satellite agency being responsible for the maintenance of its own collection system, there is generally very little attention or resources allocated to preventive maintenance and collection system rehabilitation. In 2003-04, Marin County LAFCO published a report addressing these and other organizational deficiencies and suggested changes for the satellite agencies to improve maintenance and collection system problems. (cid:131) Collection system problems such as spills and blockages are typically handled by contractors like Roto-Rooter. The contractor’s staff generally responds to the spills and estimate and document the volume of the spill. Southern Marin Sewer Service Review & 25 July 2011 Sphere of Influence Update The accuracy of such estimates is highly questionable since the estimates generally assume that the spill starts at the time it is reported or at the time the responders arrive to the site. (cid:131) The NPDES permit appears to be unnecessarily complicated, primarily because of numerous redundancies contained in it. The recommendations in the report are very general and usually defer to enforcement agencies, including the Environmental Protection Agency, which subsequently issued an Administrative Order (Docket No. CWA-309(a)-08-030) applying to both SASM and its member collection agencies as described below. The body of the report (without its appendices) is included in this report as Attachment 5. B. Findings of Violation and Amended Order for Compliance (United States Environmental Protection Agency Region IX, September 2, 2008) Following the results of the Spill Investigation Report, the EPA found SASM and its member agencies in violation of their NPDES permits that required each agency to maintain its collection system, control inflow and infiltration and manage overflows. “… EPA finds that on various occasions, SASM …(and member agencies) have each discharged, or have caused and contributed to the discharge of, pollutants to waters of the U.S. in violation of section 301 (a) of the (Clean Water) Act.” The Order itself requires SASM and each member agency to take actions and file reports in seven different areas within timeframes specified on an accompanying schedule: 1. Elimination of Collection System Spills 2. Spill Response, Recordkeeping, Notification & Reporting 3. Collection System Maintenance & Management 4. Collection System Assessments 5. Capacity Assurance 6. Infrastructure Renewal 7. Implementation Study & Report The full text of the EPA’s administrative order can be found at http://www.epa.gov/region9/water/npdes/compliance.html#marin Southern Marin Sewer Service Review & 26 July 2011 Sphere of Influence Update C. Sewerage Agency of Southern Marin External Audit Report (Larry Walker Associates, August 2008) This study was undertaken by SASM to comply with Item 4 of the EPA’s Administrative Order that required SASM to complete an external audit of its wastewater treatment and collection system facilities. The various components of the system were scored on a three-point scale: Category 1 (current condition or practice is acceptable or complies with established requirements or standard practices), Category 2 (current condition or practice deviates from standard practices, but has been addressed by planned future actions) and Category 3 (current condition or practice deviates from established requirements and has not been addressed). The External Audit examined the adequacy of 86 different operational aspects of SASM and its member agencies. Although it is important to note that not all measured components have equal weight or importance, 41 of the study’s 86 assessments were scored Category 3, meaning that 48% of audited current conditions deviated from established requirements and had not been addressed as of August 2008. Of particular interest here were Category 3 findings relating to the lack of flow monitoring between the member agencies collection systems (imposing difficulty in identifying problem areas and inability to fairly allocate treatment costs among member agencies). Also, the audit scored Category 2 findings relating to member agencies flow contributions and activities impacting peak flows. These findings were later used unsuccessfully to argue (see below) that the poor condition of member agency collection systems and the peak flows from those systems in 2008 remained within the design parameters of the SASM treatment plant and therefore should not be subject to sanction by the EPA. Attachment 6 contains a table summarizing the findings of the report by listing the subjects of the External Audit and the category scores for each subject area. D. Letter of Bonner Beuhler, (Manager, Almonte and Richardson Bay Sanitary Districts, September 2008) Following issuance of the EPA Administrative Order summarized above, Mr. Beuhler submitted a letter of rebuttal to Mr. Ken Greenberg, a compliance officer of the EPA. The letter responds to the above findings that the spill of January 25, 2008 was caused by excessive inflow and infiltration and the spill of January 31, 2008 was caused by operator error exacerbated by excessive inflow and Southern Marin Sewer Service Review & 27 July 2011 Sphere of Influence Update infiltration and a faulty alarm process. Mr. Beuhler asserts (based on the referenced External Audit Report, see above) that inflow and infiltration from SASM member agency collection systems was not the cause of the spills and presents arguments with respect to the first of the two January 2008 spills: The findings of the Regional Water Quality Control Board that SASM reported peak flows from its member agencies of 44 MGD, exceeding the 32 MGD design capacity of the SASM treatment plant were based on a data anomaly (rapid closing and opening of the gate to the influent wet well where measurements are taken) and that actual peak flows to the SASM plant exclusive of the anomalies were approximately equal to the plant’s original 32 MGD design capacity. The member agency collection systems had therefore not deteriorated since construction of the SASM plant. Furthermore, had the SASM plant been operated correctly under its wet- weather operating procedures, the spill would not have occurred. In November 2008, EPA rejected the request to modify the compliance order, stating that although some actions had been taken to improve the Almonte and RBSD collection systems, that other important actions identified by an external audit (such as increasing pumping capacity and capacity of SASM holding ponds) had not been implemented. The compliance order was allowed to stand as the means of assuring that SASM and member agencies carried through on these actions.3 In other communications, Mr. Beuhler has argued that the apparent lack of reinvestment in the SASM member agency collection systems is the product of a rational, intentional and heretofore widely accepted policy. In managing the causes of potential spills, sewer agencies can choose to allocate their resources either to direct repairs to the collection system or to expanding the downstream capacity of the system to transport and treat greater volumes of effluent from inflow and infiltration. The “convey and treat” strategy was often the most cost- effective strategy as opposed to redressing multiple smaller sources of inflow and infiltration in miles of collection sewers and thousands of privately owned sewer laterals. The regulatory agencies have, however more recently applied a strict liability standard on the collection agencies. SASM agencies are now engaged in multiple strategies of expanding the capacity of the SASM plant (larger holding ponds), cleaning and repairing collection facilities and offering homeowners aid in repairing laterals. 3 Letter of Ken Greenberg, Chief, CWA Compliance Office Water Division, U. S. Environmental Protection Agency Region IX, November 2008. Southern Marin Sewer Service Review & 28 July 2011 Sphere of Influence Update The full text of Mr. Beuhler’s letter and Mr. Greenberg’s response are found in Attachment 7. E. AB 1232 – How We Got Here and Where Do We Go From Here (Almonte Sanitary District, March 2011) This document was compiled specifically for communication with Assemblyman Jared Huffman, author of AB 1232. It contains much of the information previously cited above by Bonner Beuhler, Almonte Sanitary District’s General Manager. The major assertions in opposition of consolidation are found in its letter of transmittal: • Successful and continuing compliance with all regulatory orders and waste discharge requirements • Proactive and collaborative actions taken by the various agencies • Independent analysis demonstrates that SASM member agency collections systems have not deteriorated over the past 30 years • Independent analysis shows SASM collection agencies were not at fault for the spills of January 2008 • A lack of evidence that consolidation will decrease SSOs or result in substantial increases in efficiency, effectiveness or cost savings for our ratepayers • A long history of responsive, cost-effective and environmentally responsible local governance IV. Municipal Service Review Determinations The following sections address the Municipal Service Review factors specified in Government Code Section 56430. A. Growth and population projections for the affected area The Commission’s 2005 service review determinations pointed out that southern Marin had little land available for development and that the area’s anticipated growth rate was less than 1% per year. The very small changes since 2005 in demand for service from SASM member agencies as measured in equivalent dwelling units bears out this conclusion. Southern Marin Sewer Service Review & 29 July 2011 Sphere of Influence Update Table 3 Change in Equivalent Dwelling Units, SASM Member Agencies EDUs EDUs Percent District 2005 2011 Change Alto Sanitary District 508 525 3.3% Almonte Sanitary District 789 785 -0.5% Homestead Valley Sanitary District 1,064 1,085 2.0% Richardson Bay Sanitary District 4,664 4,697 0.7% City of Mill Valley 7,204 7,496 4.1% Tamalpais CSD (SASM only) 165 166 0.6% Total SASM 14,394 14,754 2.5% New demand for service from these agencies could occur from amendment to the sphere of influence of HVSD and annexation of Muir Woods Park. The Muir Woods Park Community Association has initiated study of extension of service by HVSD to replace on-site wastewater facilities. Annexation of the entire area would add approximately 287 existing and 15 potential dwelling units to HVSD’s collection system and utilize an equal number of EDUs in SASM’s treatment capacity. However, extension of service from HVSD’s existing system will be costly relative to units to be served and environmental impact analysis has not been performed. Discussions to date have not led to an application to amend the HVSD sphere of influence. Opponents of sewer service have sought to be removed from the boundaries of the annexation area. Proponents expect to again investigate the feasibility of routing waste from limited parts of Muir Woods Park through the facilities of the City of Mill Valley. Each of these eventualities would reduce the scope of expansion of HVSD’s service area. B. Present and planned capacity of public facilities and adequacy of public services, including infrastructure needs or deficiencies Given the low historical and projected rate of growth and the remaining treatment capacity in the SASM plant, the condition and capacity of the member agencies collection systems are the most significant infrastructure issue Southern Marin Sewer Service Review & 30 July 2011 Sphere of Influence Update 1. Overflow data (7/1/2007 to 5/31/2011) a) Appears to be no consistent pipeline cleaning cycle currently in use for three agencies (range 1 to 3 year cycle). Data tables in Attachment 8 show spill data for SASM member collection agencies. The data for all sewer agencies has been tracked as part of SSO/SSMP requirements instituted in 2006. The data for SASM member agencies (not including January 2008 spills at SASM) show: (cid:137) High frequency of spills relative to state averages per 100 line miles per year, City of Mill Valley’s collection system particularly poor; (cid:137) Small spill volume/low incidence of spills reaching waters of the state in gallons per 100 line miles per year; Average spill volume for sanitary districts is approximately 100 gallons/spill, City of Mill Valley almost 200 gallons; (cid:137) Very low percentage of spilled effluent recovered; (cid:137) Apparent improvement by some agencies since 2008. 2. Dissimilarity of Member Agencies Each member agency has characteristics that they feel they are handling better than the other members, and hence do not wish to be weakened by consolidation with other members. Some members maintain substantial reserves, others virtually no reserve. Some agencies collection systems are in better condition than others and each has thereby adopted a different capital improvement standard to address physical deficiencies. None of the agencies, prior to the Administrative Order, were concerned with long-term renewal and replacement of lines and services. Each agency responded only upon failure of facilities or identification of problem areas resulting from customer complaints or maintenance problems. None of the agencies had a defined standard for the renewal and replacement of their collection systems and regarded private sewer laterals as outside their responsibility or concern. Each agency receives a different proportion of property taxes and this – in combination with other differences – has caused each member agency to adopt a different rate structure. Some agencies enjoy the services of a full time general manager, others only limited part time staff. Some member agencies have a physical presence in their community in the form of office facilities, other member agencies may be contacted only by telephone. Southern Marin Sewer Service Review & 31 July 2011 Sphere of Influence Update Lastly, a joint powers organization such as SASM cannot be directly involved in a consolidation process under State law and the consolidation of single-purpose sanitary districts with multi-purpose agencies such as City of Mill Valley or TCSD would be problematic at best. Table 4 Available Capacity, SASM Treatment Plant Treatment Plant Current Available Percent Equivalent Dwelling Units Capacity (EDUs) Use Capacity Available Alto Sanitary 612 525 87 14% Almonte Sanitary 936 785 151 16% Homestead Valley Sanitary 1314 1,085 229 17% Richardson Bay Sanitary 6030 4,697 1,333 22% City of Mill Valley 8856 7,496 1,360 15% Tamalpais CSD (SASM only) 252 166 86 34% Total SASM 18,000 14,754 3,246 18% 3. Improvements to Operations & Facilities Since 2005 Beginning in 2005, SASM and its member agencies have complied with new regulatory requirements. Each of the seven agencies separately adopted sanitary sewer management plans (SSMP). All agencies comply with requirements for reporting, measuring and remediating sewer system overflows (SSOs). Recently, all agencies adopted uniform contracts with Roto-Rooter for after-hours response to SSOs. Prior to these contracts, each agency handled maintenance and emergency response separately. In response to the spills of 2008, SASM has expanded the capacity of its holding ponds, installed new effluent and recirculation pumps, an electronic pump control and notification systems. In addition, SASM staff organizes monthly meetings of member agency managers, coordinates studies and reporting for compliance with EPA administrative orders and administers the revolving fund for lateral replacement (established as a “supplemental environmental program” utilizing a portion of $1.6 million in fines from the spills). Treatment plant staff and charges to member agencies have been increased. The EPA’s administrative order following the spills also mandated operational changes and improvements to the member agency collection systems. The four Southern Marin Sewer Service Review & 32 July 2011 Sphere of Influence Update independent sanitary district members of SASM report recent improvements that meet or exceed the administrative order as follows: • Richardson Bay Budgeted $600,000 per year for pipeline replacement Replaced 14% of total pipeline miles Rehabilitated 10% of manholes Increased private lateral replacement (x20) Increased education & outreach Decreased general & operating expenses by 3.25% Reduced SSOs by 85% in past four years (from 20/yr to 3/yr) • Homestead Valley Cleans 1/3 of collection lines each year Entire collection system evaluated by TV Replaced 20% of total pipeline miles last 11 years 3.5% of collection lines to be replaced this year Lateral replacement programs being developed Only 1 spill in 2010 • Almonte District committed to replacing 2% pipeline miles each year Replaced/rehabbed 12% of total pipeline miles Cleans 100% pipeline miles each year Entire collection system evaluated by TV Increased private lateral replacement Increased education & outreach, upgraded website Reduced SSOs to average 1/yr last 3 years • Alto Replaced 21% of total pipeline miles in last 10 years Entire collection system evaluated by TV Cleans ½ pipeline miles each year Lateral replacement programs being developed Reduced SSOs to 0 in 2010 Southern Marin Sewer Service Review & 33 July 2011 Sphere of Influence Update 4. Long-Term Management Three agencies with part-time contract employees (Almonte, Alto and Homestead Valley) presently have responsive managers in no small part because they live within their agency’s service area, or in Alto’s case, very nearby. It is unlikely that when these managers need to be replaced, there will be qualified candidates available with the same ability to respond quickly available in such close proximity to these districts’ service areas and willing to work on a part-time basis. 5. Control Measures & Quality Assurance There has been an historical relationship between all of the member agencies and Roto-Rooter, a nationwide firm with a franchise in Novato. Roto-Rooter presently provides all after hours response services to all SASM member agencies and provides all sewer services to three member agencies as well as most routine services to two others. Until recently, no member agencies or SASM had written contracts for services. There has been no competitive bidding for services, primarily because no other firm was willing to provide timely after hours response. This effectively sole-sources Roto-Rooter’s after hours service, giving public agencies no means to fairly negotiate or provide competitive pricing for this service. Other firms can provide contract cleaning, repairs and inspections, and yet there has been little interest in separating routine maintenance and inspection work from trouble calls. However, in July 2010, the City of Mill Valley competitively bid two cleaning and inspection contracts. Total price differences of over 75% were found between the contracting firms, clearly indicating the potential for savings. SASM member agencies generally believe that Roto-Rooter does a good job of providing services that protect the environment from damage. However, the agencies have not been able to recover most spilled sewage and the results in this area are well below the statewide average for recovery. The potential advantage of consolidating agencies in this regard would be to create the possibility of an alternative to over dependence on a single company. None of the SASM agencies is large enough to provide in-house after-hours emergency response. Consolidation would provide an alternative to this lack of competition because a larger agency could realistically consider the benefits of providing in-house services for both normal cleaning and after-hours emergency response. If this change were to take place it would also provide better response times to reported Southern Marin Sewer Service Review & 34 July 2011 Sphere of Influence Update SSOs. Although this is not a new idea, SASM and its members have been unable to agree on a means of evaluating this strategy as a functional consolidation measure identified in 2005 studies. With regard to engineering services, since none of the district managers (except Mill Valley DPW) are licensed civil engineers, there is a great reliance on consultants for engineering decisions. Some managers have a great deal of technical experience, but design services must be performed by a private firm. All SASM agencies except for the City of Mill Valley contract with Nute Engineering. Once again, there appears to have been no consideration given historically to the value of competition between potential providers of this service. Finally, each of the member agency managers has differing abilities and areas of expertise in technical, administrative, communications and other aspects of provision of sewer service. It is not likely that all managers are equally familiar with issues such as risk management, public contracting requirements, the environmental review process or with the wide variety of government statutes that may apply to operating public sewers. This creates uneven levels of support for decisions undertaken by the boards of the different member agencies. Further, most of the current managers do not generally participate in local professional organizations such as the Bay Area Clean Water Associations Collection Systems Committee that meets regularly to discuss and share important information about collection system operations and regulatory requirements. C. Financial ability of agencies to provide services. 1. Rates and Charges Table 5 below shows changes in sewer rates for each subject agency since 2005. The rates per EDU of each SASM agency are shown with property tax proceeds per EDU in order to provide an overall picture of charges for sewer service for each agency. Substantial increases have occurred and are continuing, driven by SASM costs (including $2.8 million in costs of 2008 spills paid from SASM reserves) and regulatory compliance, especially mandated increases in capital spending. The rate charged by the City of Mill Valley has lagged those of member districts, but substantial rate increases have been recently approved. The current total cost per EDU (rate + property tax) ranges from $486 to $711 for sanitary districts. The total cost shown for the City of Mill Valley does not include any portion of the Southern Marin Sewer Service Review & 35 July 2011 Sphere of Influence Update City’s property tax revenue. In six years, rates for sanitary agencies have increased between 120% and 240% Property tax receipts have increased even more, between 43% and 560% due to new development and revaluation of existing properties. There is wide variation in per EDU property tax revenue received by the four sanitary districts, an artifact of property tax rates charged prior to Proposition 13. The City of Mill Valley allocates no property taxes to its sewer fund. The proportion of property tax revenue in total revenue has increased since 2005 from 10% to 20% for the four sanitary districts, thereby increasing reliance on property taxes rather than rates even with the substantial rate increases. It should be pointed out that the continued allocation of property tax revenues to enterprise districts may be subject to legislative action in the future. That is, these revenues may be re- allocated in the future to non-enterprise agencies by the State legislature. Southern Marin Sewer Service Review & 36 July 2011 Sphere of Influence Update Table 5 Change in Sewer Service Rates, 2005 & 2011 Rate/EDU Rate/EDU % District 2005 2011 Increase Alto Sanitary District $ 285 $ 400 40% Almonte Sanitary District 250 400 60% Homestead Valley Sanitary District 250 425 70% Richardson Bay Sanitary District 246 436 77% City of Mill Valley 297 694 134% Tamalpais CSD (SASM only) 301 1,014 237% SASM Treatment Charge 142 200 41% Change in Property Tax/EDU, 2005 & 2011 Prop Tax/ Prop Tax/ % District EDU 2005 EDU 2011 Increase Alto Sanitary District $ 20 $ 132 560% Almonte Sanitary District 60 86 43% Homestead Valley Sanitary District 30 172 473% Richardson Bay Sanitary District 190 275 45% City of Mill Valley n/a n/a n/a Tamalpais CSD (SASM only) n/a n/a n/a Change in Total Cost/EDU, 2005 & 2011 Total Cost Total Cost % District /EDU 2005 /EDU 2011 Increase Alto Sanitary District $ 305 $ 532 74% Almonte Sanitary District 310 486 57% Homestead Valley Sanitary District 280 597 113% Richardson Bay Sanitary District 436 711 63% City of Mill Valley 297 694 134% Tamalpais CSD (SASM only) 301 1,014 237% Southern Marin Sewer Service Review & 37 July 2011 Sphere of Influence Update 2. Budgets SASM treatment costs range from 30 to 33% of total sanitary district budgets. The SASM board reviews is costs and bills its members according to their proportionate share of the EDU count. This process, conducted among members of a joint powers agency, is not subject to Proposition 218 proceeding requirements. Each district sets its own sewer rate to fund its total, anticipated expenditures including treatment costs levied by SASM, in proceedings that are subject to Proposition 218 requirements. Sanitary District budgets have increased 171% to 286% since 2005 reflecting the costs of new regulatory requirements applicable to all sewer service agencies, the additional costs of the 2008 spills and the resulting expansion of capital spending for both treatment and collection facilities. Staffing costs as percentage of collection system operations and maintenance varies widely among the member agencies due to differing mixes of in-house and contract services, ranging from 5.5% to 58.5%. Cost per mile of pipeline operations and maintenance range from $113 to $168 due to dissimilarities in pipeline condition and differences in operational approach by each district. The State owes the four sanitary districts $97,500 or 6% of total agency property taxes, supposedly to be repaid in 2013 with interest. Further financial incursions by the State legislature to limit or remove property tax revenues from enterprise districts are possible. Recommendations by the Little Hoover Commission and others have continued to support the elimination of property tax revenue from enterprise special districts such as the four sanitary districts. All of the agencies have increased their capital investments, as shown in Table 6, in renewed and rehabilitated pipelines since the 2005 Study. These changes have been driven by the results of the agency audits and the findings of the EPA subsequent to the 2008 spill. Most changes have been mandated in the EPA Administrative Order that now requires each agency to project capital and renewal and replacement investments for both short (5 years) and long-term (ten year) periods into the future. These improvements were mandated as stated in the Administrative Order because “various spills from the sewage collection systems … have been caused, and resultant public health and environmental impacts have been exacerbated, by infiltration and inflow into those collection systems and by inadequate control of blockages within those systems.” (Finding 23, Administrative Order CWA-309(a)-08-030). Prior to this requirement, the agencies were not found to be conducting adequate planning or funding for the renewal and replacements of their collection system assets. Southern Marin Sewer Service Review & 38 July 2011 Sphere of Influence Update These new capital plans for the first time are to be driven by extensive reviews and evaluations of the actual infrastructure in place in order to assure that adequate capacity and system blockages are found and managed in a proactive manner to assure a reduction in SSOs as well as assuring that all water that is discharged can safely be transmitted to the SASM treatment plant. In addition, the agencies have also been required to begin the process of understanding and evaluating the significant increases in wet weather flows that may result from either leaking main lines sewers or private sewer laterals. This has lead to one of the projects approved from the SASM fine amount to be used to begin a program of private lateral replacement. It is no longer possible for agencies to assume that because they own substantial unused capacity at the SASM Plant, that they do not need to be concerned about a wet-weather event causing a fifteen times increase in flow over average daily dry weather flows. Table 6 Changes in Capital and Renewal Spending on Pipelines 2005 to 2010 Agency 2005* 2010/2011** Percent Next Five Change Years Almonte SD 35,000 120,000 342% 600,000 Alto SD 75,000 90,000 120% 550,000 Homestead SD 125,000 475,000 380% 1,325,000 Richardson Bay SD 349,350 495,000 142% 2,400,000 City of Mill Valley 450,000 550,000 122% 2,750,000 Tamalpais CSD 620,000 0 0% 0 Totals 1,654,350 1,730,000 7,625,000 Average per year 1,525,000 SASM 25,000 325,000 * Numbers from Appendix J, LAFCO Study 2005 ** Figures from October 2010 Sewage Spill Reduction Action Plan, Volume III In addition to the above outlays and plans, Richardson Bay ($740,000 over six years), the City of Mill Valley ($82,000 – five years) and SASM ($3,485,000 over five years) have capital plans for improvements to pumps stations and treatment systems that are required in addition to the pipeline work identified above. Finally, because only Richardson Bay appears to have a true funding strategy for renewal and replacement, it is expected that the agencies will need to increase Southern Marin Sewer Service Review & 39 July 2011 Sphere of Influence Update their spending levels in the future to account for the legacy unfunded costs for renewal and replacement. These are the costs for the replacement of assets prior to the current round of expenditures for the costs of replacement for the years leading to 2008 as well as new expenses for the future replacement of the newly replaced assets placed in service from the capital programs discussed above. None of the agencies are currently believed to include the full cost of operations, maintenance and replacement in their current rate structures as good asset management philosophy would suggest. All SASM member agencies have raised their rates to pay for new maintenance requirements. Future rate increases will be driven by infrastructure reinvestment requirements, inflation and limited growth of the rate base. These requirements will apply to both the SASM treatment plant, for which each sanitary district has a proportionate share, and to their own the collection system facilities. D. Status of, and opportunities for, shared facilities 1. Collaboration Prior to 2005, SASM and member agencies engaged in some forms of collaborative activity including the SASM joint-powers treatment plant, one general manager common to two districts, use of a common engineering consultant (though the latter two do not necessarily constitute collaboration), and occasional ad hoc cooperative efforts. LAFCO’s 2005 study listed the following areas of potential collaboration that might precede consideration of political consolidation of SASM agencies: a. Sanitary Sewer Overflow Program (cid:131) Common SSMP templates, agency plans, and incident response protocols – A single contract can provide economies of scale and incremental savings for SSMP plan development. Many common elements can be developed as a generic template for customization by each agency. (cid:131) Shared sewer collection maintenance, TV inspection, cleaning, blockages, repairs – Shared sewer collection system maintenance on pipes and pump stations provides potential annualized operational savings on services such as sewer cleaning/inspections, blockages, fully utilized VACTOR/Rodding trucks and crews, blanket contracts for external services (e.g., Roto Rooter). Southern Marin Sewer Service Review & 40 July 2011 Sphere of Influence Update (cid:131) Pooled capital expenditures for replacement and rehabilitation of aging infrastructure using pooled design, construction, construction management and financing. (cid:131) Shared set-up and operation of a regional emergency call center and shared incident response and reporting of SSO events. An integrated call center and incident response capability can be achieved through some combination of shared staff resources and outsourced services. b. Capital Improvement Program Collaboration (cid:131) Contracts for pooled engineering/design services. (cid:131) Contracts for pooled construction management services. (cid:131) Contracts for pooled construction services. (cid:131) Issuance of debt/revenue bonds to finance member agency capital projects. c. Shared Services/Resources Benchmarking comparisons show that Southern Marin sewer agencies have substantially higher staffing levels than other consolidated agencies with similar demographic profiles (e.g., EDUs, miles of sewer pipe, daily wastewater treatment volume). There are also redundancies in facilities and equipment in addition to the staff personnel. Examples of potential shared resources and staffing consolidations include: (cid:131) Shared Administrative Resources including insurance, worker pool and training [Worker Pool – Collection (TCMS, RBSD, MV, SD5); Worker Pool (cid:131) Mechanical and Electrical/Instrumentation Maintenance (cid:131) Monitoring and Laboratory analytical services (cid:131) Consolidation/shared General Manager/Management Resources (cid:131) Vehicle/Fleet Maintenance (cid:131) Human resource management (benefits, grievances, training, certification, promotional criteria, job descriptions and classifications, etc) (cid:131) Shared human resources services (hiring, contract negotiations, payroll and taxes, retirement, benefits) All the above measures were identified by the Commission’s consultants as methods of reducing cost under the current government structure and without political consolidation. All sewer service agencies in southern Marin Southern Marin Sewer Service Review & 41 July 2011 Sphere of Influence Update adopted resolutions agreeing to pursue such cost savings. The committee set up for this purpose met for approximately one year, then discontinued meeting. Following the spills of 2008, the managers of the SASM agencies resumed meeting to collaborate on response to federal and state regulatory agencies. Of the measures identified in the 2005 study, only a few have been pursued by SASM and its members, including: • Common SSMP templates (agency plans and incident response protocols were developed individually, but following the 2008 spills, all were supplanted by sewer spill reduction action plans prepared by a single consultant and required by EPA and RWQCB); • Contracts for pooled engineering/design services (a single engineering company prepared all agencies sewage spill reduction action plans and an external audit report covering both treatment and collection systems following the spills of 2008); • Contracts for pooled construction services (in two instances, small projects of two districts were jointly contracted. Project scale remained small, no cost savings were identified); • Laboratory analytical services. These test are now available to the member agencies at the SASM treatment plant laboratory and do not require outside testing. In addition, SASM provides all of the sampling kits required for collection system SSO analysis. SASM and its member agencies report a wide variety of other collaborative efforts that were not mentioned as cost-saving measures in the 2005 study and not previously mentioned in this report. These measures include most prominently: • Monthly meetings of SASM and member agency managers; • Engineering services related to spills of 2008; • Written, uniform contract with Roto-Rooter; • Standardized geographic information system; • Financing program for private lateral replacement (replacement programs themselves remain the individual responsibilities of the separate agencies); • SSO sampling kit. The full listing of collaborative measures reported by SASM and its member agencies for this study is shown in Attachment 9. Southern Marin Sewer Service Review & 42 July 2011 Sphere of Influence Update Discussions of more far-reaching strategies for collaboration and cost saving measures have been on-going among the member agencies during SASM’s strategic planning process and on other occasions in the past five years. However, comparison of the measures identified in LAFCO’s 2005 study and measures actually implemented by SASM and its member agencies since the study was published shows that the agencies have successfully worked together on small projects and/or under regulatory duress, but that they remain operationally autonomous, without acting on the main proposals of the 2005 study. 2. Duplication of Services Under the current agency structure, any changes to ordinances (e.g. lateral replacement program) must be done by all agencies not just one – each has separate operating ordinances and standards for the regulation and operation of these ordinances. SASM and its six member agencies are operated with 30 elected officials and 8 general managers (including both independent contractors, managers of single- purpose and multi-function agencies), providing one service to a population the size of a single small city. Each agency maintains a variety of distinctly separate services, each of which has startup and ongoing effort that has duplicative aspects, such as: (cid:137) Independent financing and accounting systems (cid:137) Independent websites, other public communications (cid:137) Separate office facilities (except for Alto, Almonte & Homestead) (cid:137) Independent engineering services contracts (cid:137) Independent legal support services either with the County of Marin or separate outside counsel. (cid:137) Independent maintenance services (cid:137) Separate maintenance management and GIS databases (cid:137) Individual ordinances, policies and rate structures (cid:137) Independent financial and rate evaluation professional assistance (cid:137) Separate lateral replacement programs (cid:137) Separate purchasing procedures (cid:137) Separate capital improvement programs (cid:137) Separate Sanitary Sewer Management Plans (cid:137) Separate EPA Compliance Order Action Plans (prepared by the same contractor) Southern Marin Sewer Service Review & 43 July 2011 Sphere of Influence Update Redundancy in these service activities is rarely of assistance to, or mutually reinforcing as backup capability from one member agency to another except in the case of multiple general managers’ ability to cover for each other during illness and vacation. 3. Detrimental Independence of Actions within SASM The 2004 Civil Grand Jury Report found, “this unique patchwork of agencies, however, lacks a forum for cooperatively examining issues that transcend district boundaries. This has led to disputes in the past. Moreover, it has meant that one agency can make decisions that can harm another without realizing it.” Each agency acts completely independently, even if it is to the detriment of its fellow member agency. Although cooperation and partnership among the general managers is now much improved through regular meetings of agency managers, this is in no small part due to and directly related to the EPA’s Administrative Order. For example, SASM has never taken any position toward the member agencies for making inflow and infiltration control reduction a priority. SASM’s charges to its member agencies are based on their share in ownership of the SASM facility, not on flow to the plant from each agency’s collection system. The individual performance of each agency’s collection system as measured by flow is only measured once annually, and only because it is required in the EPA’s Administrative Order. Consequently, member agencies have focused on system repairs that benefit their system, such as sags, root intrusion and insufficient pipe size, not necessarily measures that would improve the integrity of the collection system in wet weather. SASM wet weather capacity issues can be addressed by either increasing capacity or reducing flow. Historically SASM has worked to expand capacity while, prior to the Administrative Order, the member agencies were inconsistent, at best, in their efforts to control I&I. Since payment of fines and other costs of the spills in 2008 was distributed on the basis ownership share in SASM (from SASM reserves) rather than on flow or peaking performance, agencies that had done a better job maintaining their collection system were unfairly penalized by the poorer performance of those that did not. Southern Marin Sewer Service Review & 44 July 2011 Sphere of Influence Update E. Accountability for community service needs, including government structure and operational efficiencies 1. Local Control Small agencies consider themselves to be more responsive to individuals than what might be seen as a larger, less approachable or neighborly organization. Board members tout longstanding relationships with their constituents and consider themselves to be highly accessible and accountable. The detailed collection system knowledge of managers and board members of smaller jurisdictions is presumed to increase responsiveness and quality of service. However, none of the member agencies, with one vote each, can be held accountable for any aspect of the sewage treatment function and each must allocate approximately 30% of its budget to SASM to pay for the treatment function outside of its control. The appointed SASM board is accountable only to its member agencies, not the public and is, in this sense, not under “local control.” In addition, three of the member agencies (Alto, Almonte & Homestead) rely entirely on Roto-Rooter or other contractors to provide their services. The services provided are under the company’s control, not directly under the control of the three member districts. Finally, attendance at Board meetings is basically non-existent, further indicating a lack of public knowledge and interest in sewer related issues at the local level. 2. Elections There appears to be little community opposition to the status quo. Board meetings are not well attended, if at all. Elections for special district boards are rarely required, as incumbents run unopposed. In theory, if citizens were dissatisfied with their sewer service, board meetings would be more lively events and other candidates would stand for election. In the cases of some unincorporated areas served by SASM and its member agencies, a special district boundary is the only clear means of physically defining that community as was the case when these agencies were originally formed in the middle of the 1940s and 1950’s. Citizens often feel strongly positive about being a part of their community having a place name and a boundary and their own local government organization and their own elected representatives. LAFCO’s 2005 study found different rates of contested elections between cities, community service districts and sanitary districts with high rates of contested elections for cities and CSDs and much lower rates for sanitary district board Southern Marin Sewer Service Review & 45 July 2011 Sphere of Influence Update membership. Updated research on SASM member agency elections shows that in possible elections in the eleven years since 2000, elections were contested in all TCSD elections and all but one election for Mill Valley City Council. In 20 possible elections for sanitary district board seats, only one was contested (HVSD in 2001). During that period, incumbent sanitary district board members have continued their service, being unopposed at election. When mid-term vacancies have occurred, the remaining members of the district board have 60 days to recruit, interview and appoint a replacement. There were twelve mid-term appointments by the boards of the four sanitary districts (see Attachment 10). None of the board members of the four SASM member sanitary districts have been elected by voters in the last ten years. 3. Public Meetings & Participation Within the SASM agencies, there is a significant disparity between public participation in the affairs of the two multi-purpose agencies (City of Mill Valley and TCSD), the four sanitary districts and the SASM joint powers governing board. Public attendance is steady at meetings of the City and TCSD, agencies with diverse agendas and business activity. Slightly more than half of the meetings of the SASM board are attended by members of the public. Public attendance at the meetings of the four sanitary district boards is extremely rare as shown on the table below. Table 7 SASM Member Agency Meetings – Public Attendance Alto HVSD Almonte RBSD SASM Number of Meetings ‐ Jan 2008 to March 2011 39 40 38 44 40 Meetings w/ Public in attendance* 1 3 1 2 22 Source: agency meeting minutes. Data excludes attendance by agency consultants, contractors or officials of other SASM member agencies. Southern Marin Sewer Service Review & 46 July 2011 Sphere of Influence Update 4. Public Outreach & Communication SASM and its member agencies vary widely with respect to their capabilities in public outreach and communication. Websites for the seven agencies can be found at the following locations: SASM: www.cityofmillvalley.org/Index.aspx?page=449 City of Mill Valley: www. cityofmillvalley.org Tamalpais CSD: http://tcsd.us Alto Sanitary: (none) Almonte Sanitary: http://www.almontesd.org/ Homestead Sanitary: http://communitypartners.marin.org/HVSD/ Richardson Bay: http://richardsonbaysd.org/index.html The websites of the City, TCSD, SASM (included on the City’s website) and Almonte and RBSD are extensive in their information and regularly updated. The Homestead Valley Sanitary District maintains a rudimentary website. As of the date of this report, Alto Sanitary District does not operate a website. In addition, the City (including content relating to SASM) and TCSD regularly publish extensive newsletters mailed to their residents. Almonte Sanitary annually publishes and distributes a calendar which includes public information on sewer and solid waste services. All four SASM member sanitary districts produce and distribute mailers to residents on an as-needed basis. The quality and information value of mailed communications varies widely, from the regularly distributed newsletter of TCSD to the “opinion survey” distributed by Alto Sanitary District (see Attachment 11). SASM member agency managers and board members hold themselves personally accountable to their respective constituents for day to day sewer issues and are accessible should there be a question or need for assistance. Three agencies contract with Roto-Rooter for all the services their agency provides except management. Only TCSD, Mill Valley and SASM publish agendas and minutes on-line. Only the City of Mill Valley publishes its budget online. This budget does include both the SASM budget and the City collection system budget. None of the agencies provide copies of their Sewer System Management Plans required by the waste discharge regulations on their websites. As a result the public is not able to access the document that would provide background information for their local systems. Only by knowing that these documents were required to be prepared would a citizen know to request copies. Southern Marin Sewer Service Review & 47 July 2011 Sphere of Influence Update Three agencies (Alto, Almonte and Homestead Valley) have no office or staff availability except by phone message or e-mail. These agencies direct citizens to contact Roto-Rooter when overflows occur, bypassing the agency entirely until Roto-Rooter either determines the need for an agency representative to get involved or sends an invoice for services incurred by the citizen’s call. Callers to the telephone of the Alto, Almonte and Homestead Valley Sanitary Districts are greeted by an answering machine with a recording such as: “This is the Alto Sanitary District. If you are calling to report a stoppage or overflow of a district sewer, please call our maintenance contractor Roto- Rooter at 892-___. If you would like to leave a message, you may do so after the beep.” Generally, district managers quickly respond to left messages. It is also likely that the citizens of member agencies (excluding the City and TCSD) are unaware of how much they pay for sewer service in total. The four independent sanitary districts charge users a sewer service charge, but also receive widely varying property tax revenues that affect how those sewer rates are set. This information does not appear on property tax statements and sewer service bills nor is furnished by the member agencies. 5. Management Efficiency SASM and its member agencies are responsible for a sewer system composed of six collection areas and a single sewage treatment plant, governed by 30 elected and 6 appointed officials, managed with the involvement of 8 general managers and operated by a variety of full and part-time staff plus contract personnel (see Figure 2, page 15). Considering the complexity of SASM and its member agencies, the constituent organizations have demonstrated a solid ability to work together to provide service under normal circumstances. LAFCO’s report of 2005 and other parts of this report document the relatively smooth functioning of the existing agencies under normal circumstances. Unfortunately, the aftermath of the spills of 2008 exposed significant costs, inherent conflicts and other inadequacies in these service arrangements. Financial liability for the costs of the 2008 spills was assumed – from the outset - by SASM. Members of the SASM board were immediately aware of costs that would be associated with the spills for expected fines, legal and engineering services. The SASM board, composed of 1 member of each constituent organization, authorized use of SASM’s reserves for purposes relating to the Southern Marin Sewer Service Review & 48 July 2011 Sphere of Influence Update spills. The question of actual or legal liability for the costs of the spills was never directly addressed despite Section 10 of SASM’s operations and maintenance agreement with the City of Mill Valley: Section 10. Hold Harmless CITY shall hold harmless, defend and indemnify AGENCY (SASM) and all AGENCY Member Agencies including the Almonte, Alto, Homestead Valley and Richardson Bay Sanitary Districts and the Tamalpais Community Services District for any loss or damage to real or personal property, or any injury or death to any person, or any expense, including litigation expense and attorney’s fees, fine, or forfeiture which is directly or proximately caused by City’s failure to perform its obligations as set forth in this Agreement…. Several problems were exposed in the structure of SASM and its member agencies following the spills of 2008. It may clearly be argued that the City of Mill Valley – not SASM - was liable for at least $2.8 million in costs under the terms of the O&M Agreement. However, there is no record of the question of liability for the spills being addressed by the SASM board or the boards of any of the constituent organizations and hence no public awareness of any kind that this issue existed. With the exceptions of the City of Mill Valley and RBSD, there is no indication that the boards of the SASM member agencies ever agendized this issue for discussion (in public or executive session), received a written staff report, or sought legal advice to guide their decisions or to instruct their representatives on the SASM board with respect to the use of SASM’s reserves or the possibility that the City alone would be liable under the agreement. It is unclear whether or not all members of the SASM board were aware or were made aware of the hold-harmless indemnification language in the agreement between SASM and the City. When the spills occurred, communication and lines of authority between the SASM board and staff at the treatment plant became immediately problematic. In the days and weeks following the spill, the SASM General Manager could clearly communicate only with his supervisor, the Mill Valley City Manager. The SASM General Manager could not effectively communicate with the members of the SASM board or with the boards of member agencies without the possibility that his statements could invoke the City’s liability under the O&M Agreement or that the accuracy of his statements could be thought to be affected, by his employer’s potential liability. Responsibility for public communications was assigned to an officer of the City’s Police Department.4 4 The criticism here is directed at the structure that would allow these questions and uncertainties to arise, not toward the actions of the SASM General Manager in 2008 of which LAFCO staff has no direct Southern Marin Sewer Service Review & 49 July 2011 Sphere of Influence Update In 2009, RBSD directed its legal counsel to examine the question of the City’s liability for costs of the spills under the terms of the O&M Agreement with SASM. The District drafted a letter to the SASM board, requesting that SASM seek relief from the City under the hold-harmless clause. The letter was not transmitted to SASM until late, 2010 (see Attachment 12). Asserting that the City is liable under the terms of the O&M agreement would require action by the SASM board, which has just revised and extended its O&M agreement with the City. RBSD may be the only one of the member agencies that has enough at stake (compared to the cost of litigation) to vote to undertake legal action in this circumstance. Alto, Almonte and Homestead sanitary districts and TCSD have little to recover due to the small sizes of their shares/contributions to SASM expenses. Without four votes at SASM to seek relief from City of Mill Valley, it is unclear if or how RBSD would take such action as an individual member of SASM, though RBSD is clearly a “real party in interest.” The following table shows the $2.8 million paid from SASM reserves as allocated to SASM members contributing to that reserve. Table 8 Spill District EDUs Liability Alto Sanitary District 525 $ 99,614 Almonte Sanitary District 785 $ 148,976 Homestead Valley Sanitary District 1,085 $ 205,947 Richardson Bay Sanitary District 4,697 $ 891,387 City of Mill Valley 7,496 $ 1,422,576 Tamalpais CSD (SASM only) 166 $ 31,503 Total 14,754 $ 2,800,004 As of June 2011, SASM’s reserves are depleted and member agencies are now faced with a significant increase in charges from SASM to restore to reserve funds that were spent on spill-related costs. The SASM board has requested loans from its member agencies to fund its capital improvement program and a short- term revenue anticipation loan from the County of Marin to temporarily fund its operations until new member assessments are received. knowledge. Southern Marin Sewer Service Review & 50 July 2011 Sphere of Influence Update The use of SASM reserves to fund costs related to the spills of 2008 may or may not have been appropriate. The point of this discussion is that the SASM governing board never critically evaluated for its own purposes the question of fault for the spills of 2008 and did not evaluate the possible liability of the City of Mill Valley under the terms of O&M Agreement. Among all of the constituent agencies, none sought legal advice on this issue except for RBSD. Other than RBSD’s recent action to seek relief under the terms of the O&M agreement between SASM and the City, the public has never been informed that the issue ever existed because it has never appeared on the agenda or been the subject of a written staff analysis, web-posting or newsletter article of any of the constituent agencies. The $2.8 million total direct cost of the spills in 2008 is equivalent to approximately $190 per EDU. 6. Government Structure Alternatives a. Status Quo Existing service arrangements are described above beginning on page 11. The existing agency structure would continue in the absence of action by one or more affected agencies, petition by affected registered voters or property owners. Special authority granted to LAFCO under provisions of AB 1232 enables LAFCO to complete consolidation of SASM member agencies, but does not require this action to be taken at any specific time. The current institutional arrangements that define the status quo in the SASM study area were developed at a time when the service areas of the six member agencies were more widely separated, when there were no other available organizational alternatives to provide sewer service and when there existed no restraint on the formation of new agencies by LAFCO or other similar governmental oversight mechanism. Provision of sewer service to a small service area (approximately 29,700 population total) by six independent agencies and a joint powers agency is widely recognized as obsolete. The arguments over organization center around the proposition that changes to the status quo would not generate sufficient advantage to justify consolidation or reorganization or that certain features of the existing service arrangements are actually beneficial. It can be argued that small sanitary districts have acted efficiently and in the best interests of rate payers, despite the EPA Administrative Order finding overflows and inflow/infiltration to be excessive. Some of the agencies can be said to have reasonable rates, healthy reserves and active cleaning, inspection and repair programs. Southern Marin Sewer Service Review & 51 July 2011 Sphere of Influence Update There is a belief among some SASM officials that there is no cost benefit to political consolidation. Findings of the Civil Grand Jury asserting cost inefficiencies and duplication of service were contested by some member agencies on the premise that there is no redundancy. Earlier Grand Jury findings (prior to studies in 2005) have noted that the small sanitary districts appear to be very cost effective, and that there are no identified large scale economies that could arise from combined management. The organization chart for the existing agencies is shown at the beginning of this report as Figure 1. Table 9 below summarizes advantages and disadvantages of this alternative. Southern Marin Sewer Service Review & 52 July 2011 Sphere of Influence Update Table 9 Alternative 1: Status Quo – No Change to Existing Political Organization Advantages/Incentives Disadvantages/Obstacles Duplication of effort/activity in governing boards, meetings, meeting prep; record-keeping, training, regulatory Service Level, Current operations of SASM & response/reporting, emergency staff Operations, or member agencies provide service in response; inconsistent service standards, Operational compliance with requirements of policies/procedures; Fragmented, Efficiency EPA Administrative Orders inconsistent lateral rehab. Programs, dependence on sole-source contractor services. Overlapping/duplicative appropriations for governing boards, managers, meeting Avoidance of short-term costs preparation,, audits, regulatory reporting, Cost Savings associated with change in established permits, insurance, SSMP audits, office methods. expense, communications, document & permit preparation, capital project management, design & administration; Difficulty in resolving issues across political boundaries; continued local control on a very small scale; small scale, inefficient public communications; Political Approachable, neighbor-to-neighbor treatment charges by ownership rather Accountability, scale. than flow (no treatment cost incentive for Management Institutional knowledge preserved by collection system improvement); Efficiency many elected officials and managers. divisions in agency governance dilute accountability and create public disengagement - uncontested elections; SASM manager not accountable to SASM governing board. Southern Marin Sewer Service Review & 53 July 2011 Sphere of Influence Update b. Functional Consolidation The 2005 study concluded that many of the cost efficiencies of consolidation of SASM agencies could be attained through “functional consolidation” or collaboration of existing agencies prior to their political consolidation. All SASM agencies formally agreed to pursue this strategy. The managers of the agencies met regularly to pursue collaborative activities, but ceased meeting one year after adopting their resolutions. Member agencies worked together on a variety of projects in the past six years as described above, but did not approach the more substantial cost savings envisioned by the 2005 study which involved a new or expanded joint-powers agency that would allow integrated collection system operations. New or expanded joint powers operations were intermittently discussed and continue to be discussed, but not attempted. Cost savings through collaborative activity have been minimal. Multiple agencies working together is simply more difficult than a single agency determining its own course of action. Generally, the SASM agencies continue to have difficulty in agreeing on what collaborative activities to pursue as shown by a survey conducted during SASM’s strategic planning process in late 2010 (see Attachment 13). The strategic planning process undertaken by SASM in 2010 required several months to complete. c. Consolidation/Reorganization of SASM & All Member Agencies Under the provisions of AB 1232, Marin LAFCO “…. shall have the authority to require consolidation of SASM and its member districts into one new district.” Complete consolidation of SASM and its member districts would mean the combining of four sanitary districts, one city, one community services district and a joint exercise of powers agency into a single successor agency. The full extent of this consolidation raises two difficulties. First, the City of Mill Valley and Tamalpais Community Services District are multi- purpose local government agencies: there is neither a sensible way to combine such dissimilar agencies nor an obvious way to separate the sewer service function (its facilities, employees etc.) from the City and TCSD and transfer responsibility for that function to another agency. Secondly, joint-powers agencies such as SASM are contractual arrangements between local government agencies. Government Code Section 56121 lists the following prohibition on the scope of LAFCO decisions: Southern Marin Sewer Service Review & 54 July 2011 Sphere of Influence Update 56121. No change of organization or reorganization, or any term or condition of a change of organization or reorganization, shall impair the rights of any bondholder or other creditor of any county, city, or district. Nor shall any change of organization or reorganization, or any term or condition of a change of organization or reorganization, impair the contract rights, or contracts entered into by a public entity created by a joint exercise of powers agreement established pursuant to Article 1 (commencing with Section 6500) of Chapter 5 of Division 7 of Title 1 of the Government Code. (emphasis added) These facts tend to legally circumscribe the scope of LAFCO’s action under AB 1232, limiting action to consolidation or reorganization of the four independent sanitary district members of SASM. The primary advantage of this alternative is that it unites collection and treatment functions of sewer service in a single agency. The organization chart for this alternative represents the simplest means of governing and managing a single-purpose sewer service agency. Figure 3 Alternative: Consolidation of SASM and Member Agencies into a Single Sanitary District Southern Marin Sewer Service Review & 55 July 2011 Sphere of Influence Update d. County Sanitation District: SASM and its member agencies could be reorganized as a county sanitation district under Health and Safety Code. However, such a district is composed of other underlying local agencies empowered to provide sewer service and is governed by an appointed board with one member from each underlying agency. In this case, the governing board of a county sanitation district, with its members appointed by each of the existing SASM member agencies, would only replace the SASM joint-powers board, appointed in exactly the same way. No consolidation of agencies would take place. The conceivable advantage of this alternative is that it would allow the member agencies to transfer all operational responsibility for sewer service to the new sanitation district, thereby integrating collection and treatment functions under a single entity. However, this course of action is already available through expansion of the scope of the SASM agreement and, if implemented, the continuing roles of the remaining and underlying member agencies would be even further diminished. Therefore, this alternative offers no substantive change from the status quo. Southern Marin Sewer Service Review & 56 July 2011 Sphere of Influence Update Figure 4 County Sanitation District e. Re-Organization of RBSD and Other Sanitary Districts: Under this alternative, the jurisdictional areas of Alto, Almonte and Homestead Valley sanitary districts would be annexed to the Richardson Bay Sanitary District (RBSD) and the Alto, Almonte and Homestead Valley sanitary districts would be dissolved. All existing functions of the three dissolved predecessor districts would be provided by the newly expanded RBSD, unless subsequently altered by its board of directors. Southern Marin Sewer Service Review & 57 July 2011 Sphere of Influence Update The five-member RBSD governing board would remain in place and become responsible for service in the expanded service area. Board members of the three dissolved sanitary districts could be retained in an informal, advisory capacity for a period of transition if mutually agreed by RBSD and other district boards. Because RBSD is the only affected district that owns and operates physical facilities, it is presumed that operations of the consolidated district would be based at those facilities. Table 10 below summarizes advantages and disadvantages of this alternative. Southern Marin Sewer Service Review & 58 July 2011 Sphere of Influence Update Table 10 Alternative 2: Reorganization of Four SASM Member Sanitary Districts, Including Annexations to Richardson Bay Sanitary District and Dissolution of Alto, Almonte, & Homestead Valley Sanitary Districts Advantages/Incentives Disadvantages/Obstacles Fewer meetings, meeting prep; reduced reporting, greater uniformity/consistency in regulatory Need for new public information reporting; broader emergency staff initiatives; Service Level, response; consistent Separate rate zone administration Operations, or financial/reserve policies & requirements; Operational practices; business office hours with Reconciliation of differences in system Efficiency live response; ability to consider condition, service standards; expansion of in-house maintenance functions/reduction of dependence on contractors; Elimination of three agencies’ overlapping boards/stipends, Short-term costs of consolidation (e.g. managers, meeting preparation, new public communications efforts); audits, regulatory reporting, permits, Potential loss of operational information insurance, SSMP audits, office from current employees & board Cost Savings expense, communications, document members; & permit preparation, possible Increased probability of election reductions in capital project expense; Cost savings not realized management, design & immediately without staff administration. Approximate total attrition/realignment cost savings: $228 - 269,000 Fairness of new Board representation prior to first election; Potential perception of use of Increased probability of contested funds/reserves for areas other than Political elections; reduced number of where funds were generated; Accountability, managers & elected officials – Varying property tax revenues among Management simplified decision-making process; rate zones; Efficiency larger scale, more effective public Customer recognition of the change in communications; governance; Transition of EPA Administrative Order to new agency Southern Marin Sewer Service Review & 59 July 2011 Sphere of Influence Update f. Consolidation of SASM Member Sanitary Districts: This alternative would consist of consolidation of all of the four sanitary district members of SASM under the provisions of the Cortese-Knox Hertzberg Act, with or without special provisions of AB 1232. All existing functions of all four predecessor districts would be provided by the consolidated district. A new name for this district would need to be designated and used. The governing board of the consolidated district could be temporarily expanded to as many as eleven members and could provide for appointment of members of each of the predecessor district boards. The expanded governing board would be reduced to five members as terms expire. (see terms and conditions in sample resolution, Attachment 14). LAFCO may consider a variety of possibilities for the size and composition of the consolidated governing board for inclusion in the specific wording of its terms and conditions. Because RBSD is the only affected district that owns and operates physical facilities, it is presumed that operations of the consolidated district would be based in those facilities. Terms and conditions of approval should act to protect existing employees at their present rates of compensation and benefits for a minimum period, perhaps two years. RBSD is the only district of the four that currently has permanent employees. The presumption is therefore that the contract managers of the other three districts would either continue to be retained on a contractual basis or join the existing personnel structure established under RBSD. These positions would be eliminated at the end of a specified period or upon voluntary departure, termination for cause or retirement. After attrition, only one general manager position would be required for the consolidated district, resulting in reduction of .7 FTE general manager level positions. The consolidated district’s governing board would be in a position to consider replacement or alteration of its contractual services in three districts with an additional in-house collection system crew. The current budgets for collection system emergency response and regular collection system maintenance for the four sanitary districts identifies expenditures of approximately $412,000 per year for these services. It is not completely clear exactly what these budget expenditures require in the way of services. One available option for these services may be to evaluate moving this service in- house as part of the consolidation and providing this service utilizing full in- Southern Marin Sewer Service Review & 60 July 2011 Sphere of Influence Update house staffing. Utilizing the current middle of the salary range for a neighboring sanitary district in Marin County suggests that the in-house burdened employee annual compensation (salary plus 50% for benefits) would cost approximately $285,000 per year. This crew would be composed of the following three full time employees: Crew Leader Collection System Worker II Collection System Worker I It is further anticipated that the service would require materials and supplies estimated at an additional $50,000 to $75,000 per year for a total annual budget of $335,000 or $360,000. It is possible that the crew could be composed of just two employees depending upon many factors related to worker safety and leave requirements but this would need to be determined as part of a thorough evaluation of this alternative by the board of the consolidated sanitary district. The estimated annual total cost for this smaller crew size would be approximately $250,000. These figures clearly indicate that an evaluation of this alternative is warranted given the savings that might result. The evaluation would need to review the current expenditures by each of the four sanitary districts, discuss the annual performance results of the work now being provided by the outside contractor over the last several years and project the future service requirements based upon the agencies service plans submitted in compliance with the Administrative Order. In addition, it would be necessary to evaluate the appropriateness of either a two or three man crew size based upon several variables and also to establish the operating procedures for a two-crew operation with the current Richardson Bay staffing. Finally, the evaluation would establish the projected budget for this service expansion including the identification of materials, supplies and equipment necessary to support the new maintenance crew and provide the advantages and disadvantages from a change in service. The anticipated operational analysis of this change may or may not find enhanced service to customers, more timely responses to overflows, enhanced cleaning results in the system and savings to the customers. Table 11 below shows a range of potential annual cost savings for this alternative from simplified contract administration due to one agency instead of four to expansion of in-house staffing (10–20% of cleaning, emergency response costs) and other areas of overlapping budget appropriation. Southern Marin Sewer Service Review & 61 July 2011 Sphere of Influence Update Table 11 Anticipated Costs Savings: Consolidation of SASM Member Sanitary Districts Annual Ongoing Savings Board meeting and travel 7 ,400 7,500 6 ,100 10,000 31,000 21,000 costs General Manager 5 4,072 15,600 2 2,200 131,789 223,661 91,872 Waste Discharge Permit 1 ,226 1,226 1,226 1,000 4,678 3,678 Annual Fees Insurance Premiums 3 ,500 700 3 ,000 35,000 42,200 7,200 Annual Audit Costs 7 ,000 6,000 6,000 9,250 28,250 19,000 Compliance Reporting 2 0,000 7,000 1 ,000 28,774 56,774 28,000 Office Expenses 1 ,500 1,500 1 ,700 27,150 31,850 4,700 Bookkeeping 2 ,400 2,400 2,400 CCTV 6 ,500 5,000 3 0,000 41,500 4,500 Sewer Cleaning and 9 7,000 70,000 7 5,000 170,000 412,000 41-82,000 Emergency Response Administration and 5 ,000 5,000 Memberships 5,000 Total $228,000 - $269,000 In addition to savings in annual operating costs, consolidation under this alternative can be expected to generate cost savings in implementation of capital improvement plans. The new consolidated sanitary district will become responsible for the capital projects that are currently included in the 5 and 10 year capital programs reported to the EPA of the four former districts. It is expected that the average annual project cost over the first five years following consolidation will be $1,525,000 or a total project value of $7,625,000. Southern Marin Sewer Service Review & 62 July 2011 Sphere of Influence Update If management of these projects is unified under a single agency, it can be anticipated that one time cost savings will result throughout the project duration from single contracts as opposed to four separate contracts for design, bidding, construction, inspection and testing of separate projects. These efforts are likely to: (cid:137) Reduce the number of plans and specification documents to be prepared by design engineers; (cid:137) Save on mobilization and demobilization expenses for the contractor which can be as high as 10% of the constructed value of any project; (cid:137) Establish uniform construction standards thereby reducing contractor concerns during construction; (cid:137) Reduce constriction inspection and testing costs for the single project; (cid:137) May reduce billing, invoicing and overhead costs for consultants and contractors; (cid:137) Reduce the testing and inspection needs as the inspectors are familiar with the engineers and contractors requirements for quality construction assurance; (cid:137) Reduce overall project management staff requirements for single projects versus multiple projects; (cid:137) Increase both design engineering and contractor interest in larger valued projects resulting in more competitive proposals and a larger number of bidders. These one time savings are anticipated to be a minimum of 10% of the annual and total project value or $152,000 per year or $760,000 over the five year capital budget. Any funds saved from these consolidated projects can then be used to increase the final footage of renewal and replacements of the collection system assets as well as reduce the final total project cost to customers and rate payers over the life of the capital programs. Previous attempts by the some SASM member agencies to combine project activity was said to have resulted in no significant savings from their joint efforts. However, these efforts remained small in project value, significantly less than the sizes currently anticipated in the SSROP capital programs, especially for pipeline replacements. It is believed that by consolidating the four agency projects that the size and scope of these consolidated projects will result in cost savings. In addition, the increased interest in these projects from contractors and engineers (whose operations are generally running on very thin profit margins in the current economic conditions) should make for much more competitive prices for these services. Southern Marin Sewer Service Review & 63 July 2011 Sphere of Influence Update While these savings maybe hard to identify and quantify, there is little question that the portfolio of planned projects of the four agencies consolidating under this alternative would benefit financially from unified effort. In order to initiate proceedings for consolidation, LAFCO would be required to prepare all standard proposal documents, including an application, plan for services and resolution initiating proceedings. No map and legal description would be required (waived by State Board of Equalization). Consolidation of the four sanitary districts would be exempt from CEQA under Guidelines Section 15320. Figure 5 It should be noted in this context that SASM member agencies receive different property tax allocations and charge different sewer service rates. In addition, some agencies maintain adequate reserves and utilize those reserves Southern Marin Sewer Service Review & 64 July 2011 Sphere of Influence Update according to adopted policy and others do not. And member agencies have adopted different capital improvement plans, as previously noted. These differences would necessitate the use of rate zones following political consolidation. This means that present boundaries of the member agencies would continue within the consolidated district for financial and equity purposes unless and until the rates, taxes, reserves and capital needs of the predecessor agencies could be made more equal in the long term. Table 12 below summarizes advantages and disadvantages of this alternative. Southern Marin Sewer Service Review & 65 July 2011 Sphere of Influence Update Table 12 Alternative 3: Consolidation of Four SASM Member Sanitary Districts (Richardson Bay, Alto, Almonte, & Homestead Valley Sanitary Districts) Advantages/Incentives Disadvantages/Obstacles Fewer meetings, meeting prep; reduced reporting, greater uniformity/consistency in Need for new public information regulatory reporting; broader initiatives; Service Level, emergency staff response; Separate rate zone administration Operations, or consistent financial/reserve requirements; Operational policies & practices; business Reconciliation of differences in Efficiency office hours with live response; system condition, service standards; ability to consider expansion of in-house maintenance functions/reduction of dependence on contractors; Elimination of three agencies’ overlapping boards/stipends, Short-term costs of consolidation (e.g. managers, meeting preparation, new public communications efforts); audits, regulatory reporting, Potential loss of operational permits, insurance, SSMP audits, information from current employees office expense, communications, Cost Savings & board members; document & permit preparation, Increased probability of election possible reductions in capital expense; Cost savings not realized project management, design & immediately without staff administration. Approximate attrition/realignment annual cost savings: $228 - 269,000 plus one-time capital cost savings. Potential perception of use of Increased public interest & funds/reserves for areas other than probability of contested elections; Political where funds were generated; reduced number of managers & Accountability, Varying property tax revenues elected officials – simplified Management among rate zones; decision-making process; larger Efficiency Customer recognition of the change scale, more effective public in governance; communications; Transition of EPA Administrative Order to new agency. Southern Marin Sewer Service Review & 66 July 2011 Sphere of Influence Update This page intentionally left blank Southern Marin Sewer Service Review & 67 July 2011 Sphere of Influence Update CHAPTER 3. SPHERE OF INFLUENCE REVIEW AND UPDATE I. Current Sphere of Influence Because of the special circumstances created by AB 1232 and its applicability only to SASM and its member agencies, this study has focused on only those agencies. LAFCO reviewed and reaffirmed sphere of influence designations for the City of Mill Valley and TCSD in 2010. As multi-function agencies, their boundary plans would not be affected by recommendations for reorganization of the single service that is the subject of this study. Also s discussed elsewhere in this report, consolidation of unlike, multi-function agencies with single purpose sanitary districts and/or action to directly affect a joint powers agency would be problematic. As stated above, LAFCO adopted resolutions making sphere of influence determinations for the sanitary districts in southern Marin in 2005. The sphere of influence determinations for the sanitary districts were all “interim” designations. As stated in the text of the resolutions, “The purpose of the Interim designation is to express this Commission’s expectation that _____ Sanitary District will continue to provide service within its present boundaries …. while engaged in functional collaboration efforts with neighboring sewer agencies and that political consolidations should be evaluated by southern Marin sewer agencies in the future as appropriate.” Experience since 2005, both in attempts at collaboration and the response to the spills of 2008, shows that more focused action may be desirable. II. Problems with the Status Quo The sewage spills of 2008 revealed a sewer system with significant problems in its structure, facilities and its operations. In the past, SASM and its member agencies have pursued a strategy of allowing persistent problems in the collection systems to go unaddressed in favor of taking action downstream to expand pumping, emergency storage and treatment capacity in order to contain wet weather flows. While it has been argued by some of the SASM member agencies that the SASM plant design was sufficient to handle the 2008 peak wet weather flow, the EPA clearly does not accept (or no longer accepts) this “down streaming” strategy. The statements in each of the agencies’ audits subsequent to the spills regarding high inflow and infiltration rates show high rates of inflow and infiltration. In the Southern Marin Sewer Service Review & 68 July 2011 Sphere of Influence Update measurements of temporary flow meters, 31 of 38 meters show flows of greater than 10 times dry weather flow. The EPA is clearly very concerned with these high rates (typically any over 3 to 5 times average daily flows) and have been requiring agencies to deal with these concerns through administrative orders, consent decrees or Orders of Compliance such as SASM and its members operate under now. The EPA’s administrative orders and other demands of regulatory agencies now require very significant increases in capital spending to improve the performance of both the member agency collection systems and the SASM treatment plant. As pointed out in earlier portions of this report, the SASM member agencies are assessed for the cost of treatment on the basis of ownership, not on the basis of flow. Under this method, there has been no incentive to improve performance and there continues to be no ability to measure the inflow and the infiltration from their collection systems in storm events except on a temporary basis. Within SASM, the member agencies have no way to be accountable to each other for excellent or poor performance. The possibility of further sanctions and/or third- party lawsuits brought against one or all members under a general lack of management control make the divisions between the various constituent parts of the system a continuing problem that could be reduced by a simpler form of organization. A single sewer system with separate responsibility for seven component parts defeats accountability for major system failures, as shown by spills in 2008. Reports of the regulatory agencies on those spills showed a system with preventable failures in all component organizations. Yet there were no management or electoral consequences. Who is in charge? What public board was responsible for the spills? What hearings were held? What public outreach was undertaken to explain the spills or the follow-up decisions? What public officials could dissatisfied customers logically seek to replace? These questions have no satisfactory answers under the current structure. An examination of special district election records shows that there has been no contested election for any of the twenty board positions of the four sanitary districts in the past decade. At the same time, there have been 12 mid-term appointments by sanitary district boards to replace resigning or deceased members. The four sanitary district boards have, to that extent, become self- selecting rather than publicly elected. An examination of the minutes of the four sanitary district’s board meeting activity shows that each of the four agencies holds at least twelve meetings per year. Each of those meetings requires between 10 and 32 hours of staff Southern Marin Sewer Service Review & 69 July 2011 Sphere of Influence Update preparation time and board stipends of between $420 and $625 for each meeting with a total annual cost of approximately $80,000 (see Table 13 below). Table 13 SASM & Member Agencies Governing Board & Meeting Costs Meetings Prep Avg Time Staff Board Cost/ Annual Per Year Time Hrs Meeting Rate/Hr Cost Stipends Meeting Cost Alto 12 $ 1,055 $ 12,660 Manager 10 0.6 $ 50 $ 530 Board $ 525 Almonte 12 $ 1,200 $ 14,399 Manager 10 1.7 $ 67 $ 780 Board $ 420 Homestead 12 $ 2,253 $ 27,036 Manager 25 1.2 $ 65 $ 1,703 Board $ 550 Richardson Bay 12 $ 2,197 $ 26,363 Manager 4 1.1 $ 63 $ 323 Clerk 28 $ 45 $ 1,249 Board $ 625 TCSD ‐‐‐ (comparison not applied to multi‐function agencies) Mill Valley (comparison not applied to multi‐function agencies) SASM 12 $ 2,794 $ 33,528 Manager 30 1.4 $ 75 $ 2,355 Admin Aide 8 $ 40 $ 320 Chief Ops 1 $ 66 $ 66 Lab Analyst 1 $ 53 $ 53 $ ‐ Public participation in the meetings of the four sanitary districts is extremely rare: in a total of 161 sanitary district board meetings between January 2008 and March 2011, seven were attended by members of the public other than officials of the other districts or district contractors. In 67 of those 161 meetings, no action was taken by the board beyond routine internal administrative matters. Over the total 161 sanitary district board meetings in that time period, an average of 1.04 votes of the district board were taken at each meeting.5 5 The count of actions taken by the sanitary district boards excludes votes to approve agendas, minutes, warrants, election of officers & routine financial reports. Southern Marin Sewer Service Review & 70 July 2011 Sphere of Influence Update The pattern of governing board activity as portrayed in the minutes is one of very low workload, spread over many meetings of different agencies, with a large fraction of meeting time devoted to reports on the activities of the other SASM members. Each collection agency handles such a small fraction of the total business of the sewer system that the role of each is severely circumscribed. Over and above the costs of conducing separate business, the number of personnel and person-hours involved in the governance of the four sanitary districts is unreasonable given the modest number of substantive votes that have been required even during a period of unusual activity from 2008 to 2010. These efforts can be handled just as efficiently and more economically with a single board rather than four separate boards. Finally, the chances for conflicting and inconsistent decision making of these systems from a regulatory and water quality perspective are great when four separate managers and boards deal with the same issues confronting this very small service area. All decisions required for the best interest of this area can and should be handled with a minimum of opportunity for inconsistent direction and approach. Having multiple boards decide issues affecting the service area can create unnecessary efforts to reach consensus on important operating and water quality concerns. III. Conclusions & Recommendations The Commission’s sphere of influence review should set the stage for addressing infrastructure and operational problems by streamlining the government structure of SASM’s member agencies a way that the previous “interim” sphere of influence designations did not. The language of the 2005 sphere of influence resolutions anticipating political consolidation only after a series of successful contractual collaborations has not produced significant results due to the effort and complexity of six member agencies attempting to work together. The coercion of the EPA’s Administrative order has imposed some unity of response, but neither leadership nor cohesion has otherwise emerged that integrates the management, service standards or decision making process that could produce the improvements anticipated by the Commission’s 2005 study. With the new authority granted to the Commission under AB 1232, LAFCO is in a position to implement its adopted policies on special district consolidation and its 2005 service review determinations. Implementation of these policies should be pursued if the eventual result increases overall economy, clarifies responsibility for sewer service, enhances public understanding and accountability and provides an equitable outcome for ratepayers and employees. Southern Marin Sewer Service Review & 71 July 2011 Sphere of Influence Update Other consolidations in southern Marin have been successfully processed by LAFCO and implemented by successor agencies. Most recently, the Alto- Richardson Bay Fire Protection District consolidated with the Tamalpais Fire Protection District to form the Southern Marin Fire Protection District (SMFPD). SMFPD reported significant cost savings and service improvements in the first year following consolidation in 2000. There have been no assertions of loss of local control from areas served by the two predecessor fire protection districts.6 The City of Belvedere transferred responsibility for sewer service to the Tiburon Sanitary District through annexation in 2006, which combined responsibility for collection and treatment under the control of a single governing board. A separate rate zone for Belvedere has been successfully utilized to set differential rates for service, accounting for higher costs of service and lack of property tax contribution in Belvedere. Residents of the City of Belvedere have been elected to the Tiburon Sanitary District governing board. LAFCO and the public should recognize the earnest and energetic efforts of SASM and its member agencies in addressing problems in sewer facilities following the spills of 2008. However, recent improvements in performance and reinvigorated efforts to improve facilities do not justify preservation of an obsolete government structure. The EPAs administrative order has required the collection agencies to thoroughly rebuild their systems, requiring a very substantial increase in fee revenue from the public. This would be the time to create some uniformity of approach and accountability for results. The present structure of SASM and its six member agencies dilutes responsibility and accountability for sewer service to the point of near inconsequence for single purpose sanitary district members. There is no need and no purpose in preserving small political subdivisions of the state that operate with no discernable political activity in their meetings, decisions or elections. The public is disinterested in participation in district meetings or standing for election because so little is at stake within each jurisdiction when that jurisdiction is responsible for only a small segment of a small sewer system. Among the seven agencies, 36 elected and appointed officials and eight managers, no one is responsible or accountable for the spills of 2008. All of the member agencies are responsible to some undetermined degree, but no agency or board has any overall responsibility for the performance of the system. The political divisions within SASM and its members create an environment that 6 Consolidation of fire districts in 1999 affected all residents of sanitary districts that are the subjects of this study (Alto, Almonte, Homestead Valley and Richardson Bay Sanitary Districts and Tamalpais CSD, except for RBSD residents east of Trestle Glen). Southern Marin Sewer Service Review & 72 July 2011 Sphere of Influence Update does not allow the public to understand the governance of the sewer services that it receives. Staff believes that the system’s complexity has created confusion, disengagement and apathy with regard to the operations of the agencies and in public participation. IV. Alternative Courses of Action LAFCO has wide discretion to act in response to this study. The Commission may choose any of the organizational alternatives described above in Chapter 2, IV, E, section 6 including the status quo or no-action alternative. In so doing, the actions that the Commission would take would be to: (cid:137) Amend or reaffirm municipal service review determinations of 2005; (cid:137) Amend or reaffirm sphere of influence determinations of 2005; (cid:137) Initiate or refrain from initiating proceedings for consolidation of SASM member agencies under special provisions of AB 1232 (Government Code Section 56375.2). V. Recommended Alternative Staff recommends that the Commission utilize the special authority granted to it under AB 1232 to initiate and complete Alternative 2, consolidation of Alto, Almonte, Homestead Valley and Richardson Bay Sanitary districts. The resulting consolidated sanitary district would have the boundaries shown on Figure 6 and the organizational structure shown in Figure 5. This alternative offers modest potential for direct cost savings of $228 – 269,000 and the prospect of further cost savings by a more unified organization that can simply do its work rather than work at working together with many others. In addition, consolidation should result in cost saving to the County of Marin, regulatory agencies and outside vendors from reduced administrative demand, sewer service charge and tax processing, invoicing and account reductions to a single agency rather than four separate agencies. Consolidation of four of the six member agencies of SASM would yield simplified governance of the system, composed of the City of Mill Valley and a single sanitary district, each owning a 49% share of the SASM treatment plant, and TCSD with a less than 2% share. SASM would remain unaltered as a joint powers agency, except for having a three member governing board. Although LAFCO’s action to consolidate the four sanitary districts could not directly affect Southern Marin Sewer Service Review & 73 July 2011 Sphere of Influence Update the composition of SASM (other than by reducing the number of members), the three remaining members of the SASM JPA would be likely to act to correct the disproportionate and inappropriate voting power of TCSD as an equal member. Effectively, consolidation of the sanitary districts would result in a two member joint powers organization, each with similar population, collection system line mileage and jurisdictional area. Lines of authority and responsibility would be simplified and clarified as shown in Figure 5. The consolidated district would operate approximately 61 miles of sewer in an area of approximately 5 square miles with a service population of approximately 15,000 - similar in these aspects of scale to the City of Mill Valley. Figure 6 ! ( July 2011 LLaarrkkssppuurr ¡¢101 CCoorrttee MMaaddeerraa Marin Local Agency Formation Commission Recommended Consolidation of City of Mill Valley SASM Member Agencies Alto Richardson Bay SASM Treatment Plant Legend Homestead Valley TTiibbuurroonn Tamalpais Community Services District City of Mill Valley Parcel Almonte City Boundary ! Tamalpais Community ¡¢101 BBeellvveeddeerree Services District Richardson Bay ÄÆ 1 Golden Gate C Pr O e U pa N r T ed Y b O y F : MARIN C fo O r t M he M : UNITY DEVELOPMENT AGENCY MAPPING/GRAPHICS National SSaauussaalliittoo AT L HU O IGS C U M A SAT L P 2 A 0IS1 G 0R E E P N R C FEIL Y SEE : F N O STAA R ST M MIO_ A NCA T OL I N ± O OSN N OLL Y C ID. O A DT M AIOT M AN I .AM S RX S ED I O NO N T SURVEY ACCURATE. Recreation Area 0 0.25 0.5 1 Miles ( Recommended Consolidation of Sanitary Districts Treatment Plant Consolidation of the four sanitary district members of SASM would be a relatively simple change of organization (compared with consolidation of fire service agencies), greatly aided by the lack of permanent employees, labor contracts, pension systems and Southern Marin Sewer Service Review & 74 July 2011 Sphere of Influence Update debt. In order to assure a positive outcome without inappropriately constraining the actions of the consolidated sanitary district, the Commission would need to attach terms and conditions of approval addressing the following issues: 1. The name of the consolidated sanitary district; 2. The effective date of consolidation; 3. The composition of the governing board of the consolidated sanitary district (the Commission may expand the size of the governing board temporarily to a maximum of 11 members and provide for inclusion of representatives of each of the predecessor district boards); 4. The appropriation limit of the consolidated district; 5. The applicability of existing laws, ordinances, contracts, policies etc; 6. The sphere of influence of the consolidated district; 7. A requirement that the successor district establish separate rate zones equal to the boundaries of the four predecessor districts in order to provide for the establishment of equitable rates and use of accumulated reserves for a minimum period of time; 8. Transfer of predecessor district assets and liabilities to consolidated sanitary district; 9. Protection of the rights of bondholders and creditors; 10. Retention of current regular and contract employees at current rates of compensation for a minimum period of time; 11. Transfer of ad valorem property tax and all other revenues to the consolidated sanitary district. It is possible to view the recommended alternative as a combining of the four existing governing boards into one board with only the minimal constraints imposed by the above terms and conditions. There would be fewer board members. Existing staff members would remain in place for the near-term. The existing rates, contracts, assets, liabilities and service arrangements would remain in place until the board of the consolidated district made the changes it deemed necessary and useful. Attachment 14 contains a draft resolution initiating consolidation proceedings including example terms and conditions of approval. A similar draft resolution has been circulated to the four sanitary districts for their comment and input, but the districts have, to date, declined to participate in its development. If the Commission initiates consolidation proceedings as recommended in this staff report, the districts should be afforded a further opportunity to become involved in the effective implementation of consolidation through the mechanism of terms and conditions of approval. Southern Marin Sewer Service Review & 75 July 2011 Sphere of Influence Update If approved and implemented, the recommended alternative – consolidation of four of the six SASM member agencies - would generate two types of benefit: cost savings and improved political accountability. Although consolidation of member agencies could not directly change the terms of the SASM joint powers agreement, the remaining three members of SASM could be expected to make logical modifications to that agreement to improve its functioning, beginning with adjusting voting power on the JPA board from three to two voting members. With a two member JPA board, SASM would be able to function as a partnership, with clear and equal responsibility for each of its members. Neither member would be in a position to claim that the actions of the SASM board were anything other than its own responsibility. In this way, the recommended alternative approximates integration of collection and treatment functions, by reducing the number of involved managers and board members. The recommended alternative would not achieve the full extent of consolidation envisioned by AB 1232. It would “set the table” for a larger sanitary district about the same size and configuration as Las Gallinas Valley Sanitary District to serve the City of Mill Valley as well as the unincorporated areas now served by the four sanitary districts. This would become logical and possible if the collection-only district formed from Alto, Almonte, Homestead Valley and Richardson Bay Sanitary Districts establishes its standards and methods of operation to the extent that the City of Mill Valley can transfer its present responsibility for sewer service to the consolidated sanitary district. The transfer of sewer service from Mill Valley to the consolidated sanitary district would be similar to the annexation of the City of Belvedere to Tiburon Sanitary District in 2005. If this eventually occurs – and if the very small interest of TCSD in SASM is also resolved – SASM can be dissolved and all sewer service functions can be united under the control of a single sanitary district board of directors. The recommended alternative is an appropriate, manageable evolutionary step in this direction. The use of rate zones would be an important part of the functioning of a consolidated sanitary district. Rate zones reflecting the boundaries of the four predecessor districts would allow for the equitable use of revenues and reserves in the areas that accumulated them. This concept is especially important with respect to the large reserve fund accumulated by Richardson Bay Sanitary District and the lack of similar reserves in Alto, Almonte, and Homestead Valley Sanitary Districts. Over time, as the new district establishes uniform standards and methods of operation, the need for four separate rate zones may diminish, but terms and conditions of consolidation approval should set a minimum period requiring their use. Southern Marin Sewer Service Review & 76 July 2011 Sphere of Influence Update There is an obvious relationship between the size of sanitary districts and their level of political participation. The consolidation of the four small sanitary district members of SASM – and the accompanying increase in budget and scale of operations can be expected to increase public interest in service on its board of directors and hence the likelihood of contested elections (see Attachment 15). The electoral process can in turn be expected to clarify the responsibility of that board for sewer service to unincorporated areas of southern Marin. VI. Recommended Actions Staff recommends that the Commission take the following actions: 1. Open the public hearing, continue for at least 60 day for public comment to the Commission’s September 8, 2011 meeting. Request that affected agencies wishing to comment do so in writing by August 26th. Following completion of this public hearing: a. Adopt updated service review determinations required by Government Code 56430 based on the content of Chapter II of this report. b. Amend 2005 sphere of influence determinations for Alto, Almonte, Homestead Valley and Richardson Bay Sanitary Districts in the following manner: Section 1. The sphere of influence designation of the (example) - Almonte Sanitary District is amended as an Interim Sphere of Influence designation, to include all areas currently within the boundaries of the District as of the date of this resolution as shown on Attachment A. The purpose of the Interim designation is to express this Commission’s expectation that Almonte Sanitary District will continue to provide service within its present boundaries as shown on Attachment A while engaged in functional collaboration efforts with neighboring sewer agencies and that political consolidations will be eventually undertaken by southern Marin sewer agencies in the future at a time and in an order yet to be determined. to be a sphere of influence "in common" to include the areas served by Almonte, Alto, Homestead Valley and Richardson Bay Sanitary Districts. This designation is assigned to reflect the Commission’s conclusion that the services provided by Almonte, Alto, Homestead Valley and Richardson Bay Sanitary Districts would be most efficiently provided Southern Marin Sewer Service Review & 77 July 2011 Sphere of Influence Update by a single special district. This designation indicates the Commission's determination that these districts should be combined through consolidation or other reorganization process. 2. Direct staff to publish notice of intent to initiate proceedings for consolidation of Alto, Almonte, Homestead Valley and Richardson Bay Sanitary Districts and prepare standard application materials for the Commission’s consideration. 3. Following completion of the public hearing so noticed, adopt a resolution approving the consolidation of Alto, Almonte, Homestead Valley and Richardson Bay Sanitary Districts, under the special provisions of AB 1232 (Government Code Section 56375.2) subject to the terms and conditions of approval described earlier in this report. It is further recommended that the Commission, prior to taking final action on the proposed consolidation, provide a 30 to 60 day consultation period for the affected agencies to work with the Commission’s staff in the further development of terms and conditions of approval if requested to do so by two or more of the agencies subject to consolidation. Southern Marin Sewer Service Review & 78 July 2011 Sphere of Influence Update Attachments: Attachment 1: Southern Marin Sewers: Cracks in the System (2008-2009 Marin County Grand Jury, May 2008) – Summary only Attachment 2: LAFCO Resolution 05-07 with Exhibit A Attachment 3: Assembly Bill 1232 Attachment 4: Resolution for Collaboration Adopted by Southern Marin Sewer Agencies Attachment 5: SASM January 2008 Spill Investigation Report (State Water Resources Control Board Office of Enforcement, April 2008) - without appendices Attachment 6: Table summarizing the findings of the External Audit Attachment 7: Letter of Bonner Beuhler, Richardson Bay Sanitary District to Ken Greenberg, USEPA (October 2008) Attachment 8: Spill data tables Attachment 9: Listing of collaborative measures reported by SASM and its member agencies Attachment 10: Table of Contested Elections and Mid-Term Appointments Attachment 11: TCSD Newsletter, Alto Sanitary District Opinion Poll Attachment 12: RBSD correspondence to SASM (2010) Attachment 13: SASM member survey on collaborative measures Attachment 14: Draft resolution initiating consolidation Attachment 15: Frequency of contested elections, Marin County Sanitary Districts