- Authorize staff to initiate Proposition 218 proceedings in accordance with applicable legal requirements for new charges related to landscaping, street lighting and stormwater for the North Davis Meadows CSA in order to continue providing those services;
- Consider an additional loan of County general fund to the CSA of up to $250,000, for a total amount borrowed of $680,000, in order to pay bills related to water, landscaping, street lighting and stormwater services for the remainder of 2018-19; and
- Authorize the County Administrator, or his/her designee, and the Chief Financial Officer to execute a loan agreement of up to $250,000 with terms similar to the previous loan.
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Background (further detail provided in Attachment A)
Since 2010, due to various Compliance Orders, the CSA has been working toward a permanent solution to mitigate the community water system’s water quality issues related to nitrate, aluminum and iron in excess of maximum contaminant levels (MCL), and hexavalent chromium prior to the court’s rescinding of the MCL. After evaluating a variety of options for providing a potable water supply that meets all drinking water standards, the CSA concluded consolidating with the City of Davis public water system was the most reliable and cost-effective method to comply with California drinking water regulations and to ensure the health and safety of the residents of North Davis Meadows.
On May 31, 2016, a Proposition 218 hearing was held, resulting in an increase in the CSA's water fee in an amount necessary to repay an anticipated 20-year State Revolving Fund (SRF) planning loan to cover the cost of design of the water consolidation project for just indoor uses (irrigation and fire suppression were to remain on the community's wells). While design commenced in December of 2016, it was discovered that SRF planning loans must be repaid within 5 years. As such, the revenue collection over 20 years from the May 2016 fee increase would be inadequate to repay an SRF loan. On behalf of the CSA, staff changed course and proceeded with applying for a low-interest 30-year SRF loan to cover all expenses related to the project, and obtained an interim loan from the County of $430,000 for the design work which was already under way.
The design of the project is now complete with costs expended to date of approximately $650,000. Besides staff and consultant time to facilitate the design and apply for the SRF loan, design costs increased due to a change in course to connect all water uses to the City of Davis to ensure fire suppression capability, per a recommendation of the Fire Chief which was also supported by the community. Subsequently, additional design was conducted following an agreement with the City that allowed North Davis Meadows to have reduced fire flow capacity. This additional design change resulted in significantly lower construction cost estimates.
Meanwhile, staff and consultants made progress in obtaining the low-interest SRF loan to allow for construction to begin this year. Regrettably, the State chose to hold off consideration of the community's application while there is pending litigation (Wolstoncroft v. County of Yolo). Wolstoncroft v. County of Yolo seeks to invalidate the March 20, 2018 water fee increase which has been pledged to repay a 30-year SRF loan which was planned to pay for all upfront water connection project costs.
On February 19, the CSA Advisory Committee met and was notified that the CSA no longer collects enough revenue to provide the current services related to water, landscaping, street lighting and stormwater. This was further outlined in a letter sent to all property owners on February 21. The revenue necessary to provide these services has not been revised since fiscal year 2008-09. This shortfall was expected to be resolved with fund balance that was available at the time, and ultimately by this summer with the connection to the City of Davis water system as it would eliminate the bulk of the costs which are associated with operating the community’s wells. As the project is now stalled due a lack of financing options, the County can no longer provide all of these services without additional funds.
Proposition 218 Proceedings
At this time, current revenue is only sufficient to provide water service, which costs have increased over the years in large part due to failing wells. The revenue collected is no longer sufficient to also fund landscaping, street lighting and stormwater services where costs have also increased over the years. In order for the North Davis Meadows community to continue to receive these services, Proposition 218 proceedings should be initiated for the CSA to support or oppose new landscape, street lighting and stormwater fees. Prop. 218 imposes certain requirements before local entities can impose fees, such as the requirement of public notice of proposed new charges and how a property owner can support or oppose the charges.
On April 30, a letter was sent to all property owners notifying them of this recommended action and next steps (Attachment B). With the initiation of Prop. 218 proceedings, by May 24, a mailing will go to all property owners outlining the new fees and providing the process and timeline for the Prop. 218 proceedings. If the Prop. 218 proceedings for a given new fee are successful, that service will resume. If the Prop. 218 for any of these new property-related fees is not successful, those services will no longer be provided as the County cannot provide services for which the CSA does not have the means to fund.
Additionally, discussion of the new fees will be on the agenda for the next meeting of the CSA Advisory Committee, scheduled for June 18. The proposed new annual fees, per parcel, are: $436 for landscaping service; $119 for street lighting service; and $142 for stormwater service.
Additional Loan of County General Fund
The attached letter from the Yolo County Chief Financial Officer (Attachment C), received May 9, notifies the CSA administrator that it no longer has sufficient unrestricted cash to pay its operational expenses and has exceeded its borrowing authority from other County funds. Further, the letter notes the County Treasurer (part of Chief Financial Officer duties) is required by Government Code 29806 not to pay warrants (checks) if funds are insufficient to pay warrants, and as such, the Chief Financial Officer has instructed staff to hold all payments related to the CSA’s water fund until additional deposits are made or additional borrowing capacity is authorized.
It is estimated that to pay all the bills in 2018-19 related to the water connection project and the services of landscaping, street lighting and stormwater, an additional $250,000 will need to be borrowed. While services could be discontinued at this time, most of the services have already been rendered and the savings in discontinuing services before the end of the fiscal year, as was the plan relayed to the community, would be minimal. Staff does, however, intend to discontinue landscaping, street lighting and stormwater services at the beginning of the fiscal year (July 1, 2019) as there is no budget for these services in 2019-20. Should the community approve the new fees, the services will resume.
In the meantime, staff recommends the Board of Supervisors consider an additional loan of County general fund to the CSA of up to $250,000 in order to pay bills related to water, landscaping, street lighting and stormwater services for the remainder of 2018-19. This action would increase the CSA’s borrowing from the County general fund of up to $680,000. |