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Home My WebLink About09 QUITCLAIM SEWER TRANSFER AGREEMENT• A ends Item 9 AGENDA REPORT Reviewed: City Manager Finance Director N/A MEETING DATE: OCTOBER 5, 2010 TO: WILLIAM A. HUSTON, CITY MANAGER FROM: DOUGLAS S. STACK, DIRECTOR OF PUBLIC WORKS/CITY ENGINEER SUBJECT: AUTHORIZATION TO FINALIZE QUITCLAIM SEWER TRANSFER AGREEMENT BETWEEN ORANGE COUNTY SANITATION DISTRICT AND THE CITY OF TUSTIN FOR THE TRANSFER OF LOCAL OWNERSHIP SUMMARY City staff has completed an extensive due diligence process and the review of all the information presented by Orange County Sanitation District (OCSD) for the transfer of ownership and all associated property rights~of the local sewers within the OCSD Service Area 7. RECOMMENDATION It is recommended that City Council authorize staff, in consultation with the City Attorney, to finalize a quitclaim sewer transfer agreement between Orange County Sanitation District and the City of Tustin for the transfer of local sewer ownership, subject to final Council approval. FISCAL IMPACT Orange County Sanitation District has established a local sewer user fee for the maintenance, capital improvement and reserve necessary for a comprehensive local sanitary sewer operation and maintenance program. After the transfer of ownership is complete, these fees (less any OCSD expenses) collected through the twice annual property tax payment to the County of Orange for OCSD will be assigned to the City. It is estimated that these fees will be sufficient to support expenditures and offset city overhead expenses. Any new position necessary to provide wastewater maintenance services and/or customer service will be entirely offset by this enterprise fund and presented to City Council for approval and authorization accordingly. Considering existing staff levels and the added maintenance requirements, and that the city has no extra personnel currently; Council should expect the addition of 4 to 6 personnel to support this program adequately. Projected revenue, expenditure and designated reserve are annualized below: • Revenue :.............................................................. $5.80 million • Expenditure : ........................................................ $3.00 million • Designated Reserve :........................................... $2.80 million BACKGROUND Orange County Sanitation District (OCSD) collects, treats, disposes of, and/or reclaims the wastewater generated in its regional service area. As part of the collection process, regional trunk lines collect and convey wastewater from local agencies to one of two treatment plants. OCSD Service Area 7 includes unincorporated areas of Orange County and a portion of the city of Tustin. Unlike other local agencies, these local sewer lines have been owned and maintained by OCSD. In December of 2009, OCSD adopted a strategic plan that identified the Board's directive to transfer local assets back to the cities that are not serving a regional purpose. Local Sewer Transfer of Ownership October 5, 2010 Page 2 In January of 2010, OCSD contacted the City to discuss a possible transfer of ownership of local sewers. This area consists only of gravity lines. The area includes approximately 120 miles of pipes ranging in size from 6" to 18" diameters with no forcemains or lift stations within the Service Area. In this detailed due diligence process, the Public Works Operations and Engineering staff reviewed data such as closed circuit television inspection (CCTVI) videos, maintenance records, and conducted site visits to identify the condition of the sewers. Staff also reviewed historical data on revenue and capital expenditures. In addition, staff met with OCSD operational staff on several occasions to discuss transitional planning, facility management support, spill response, data acquisition and geographical information system (GIS) mapping and integration. The Finance Department assisted in the financial and technical due diligence process as well, analyzing the local sewer user fee analysis and methodology used to establish the local fee program. Their efforts entailed reviewing operations and maintenance expenses, offsetting revenues, capital replacement, debt service, growth rate, and customer base. DISCUSSION The fee associated with the maintenance, operations and capital improvement of the local sewer has been established by OCSD. The current approved local sewer user fee program is a five year incremental approach that will allow the local sewers to be self-supporting, generating estimated annual average revenue of approximately $6.0 million. The revenue for fiscal year 2010/2011 is projected at $5.8 million. OCSD has agreed to assist the City on a part-time basis, in a fee-based transitional phase, as the program is blended into the City's maintenance services division. Once fully absorbed, the program will be a blend of contract services and in-house support services similar to OCSD's current approach. The program will consist of basic sewer activities that are outlined below with estimated annual cost associated with each: 1. Recommended Staffing Level (5 additional in-house personnel) $870,000 2. Maintenance & Operation (cleaning, root cutting, inspection, etc.) $840,000 3. CIP (Pipe rehab/replace and manhole rehab/replace) $1,300,000 4. Designated Reserve (cash flow, capital & catastrophic failure) $2,790,000 The transitional period of up to three years will be established in this process to ensure a seamless transition and provision of services for those affected by this course of action. The transitional period will allow for services currently provided by OCSD's contractors to be transferred to the City's leadership to assure continuance of services. OCSD will be reimbursed for staff time utilized while the City ramps up and outfits its services to oversee and complete duties associated with wastewater operations and maintenance. Terms and conditions will be developed to allow the City ample time to deal with the appurtenances linked to wastewater regulatory compliance and equipment needs. Under this project, OCSD will make available resources to the City, on an as needed basis, to assist the City with its maintenance, rehabilitation and repair specifications, pipeline inspections and evaluations, odor program development, spill response, fats, oil, and grease program monitoring, training support, development support of short and long term capital improvement, advise on budget requirements, and other assistance as appropriate and as requested by City staff for a smooth transition. Currently there are 17,334 active parcels within the boundaries of the transfer. Once fully absorbed, the program will be a blend of contract services and in-house personnel, offset entirely by the local sewer user fee. S:\City Council Items\2010 Council ItemsWuthorize OCSD sewer transfer agreement.docx Local Sewer Transfer of Ownership October 5, 2010 Page 3 It is recommended that City Council authorize the staff to finalize the draft quitclaim sewer transfer agreement with Orange County Sanitation District and the City of Tustin for the transfer of local sewer ownership, subject to final Council approval. . f/~~'N!/" i a S. Stack, P.E. o hurchill it c of Public Works/City Engineer ~ d Services Manager Attachment (s): Draft Quitclaim Sewer Transfer Agreement Local Sewer Transfer Service Area 7 Exhibit S:\City Council Items\2010 Council ItemsWuthorize OCSD sewer transfer agreement.docx RECORDING REQUESTED BY AND RETURN TO ORANGE COUNTY SANITATION DISTRICT P. O. Box 8127 Fountain Valley, California 92728 Attn: Clerk of the Board (Space Above This Line for Recorder's Use) Exempt from recording fee -California Government Code Section 6103 QUITCLAIM SEWER TRANSFER AGREEMENT BETWEEN ORANGE COUNTY SANITATION DISTRICT AND THE CITY OF TUSTIN THIS AGREEMENT for the transfer of certain sewers and appurtenant facilities (hereafter, "Agreement") is made and entered into this day of 2010 by and between Orange County Sanitation District, a public corporation, ("Grantor") and the City of Tustin, a municipal corporation ("Grantee"). Grantor is a regional operator of sewage collection facilities. Grantor also incidentally owns certain local sewers including, but not limited to, the local sewers which are the subject of this Agreement. This Agreement shall document and memorialize a factual understanding of all of the facilities to be transferred to Grantee. Grantee wilt maintain and operate the sewers which are the subject of this Agreement as part of its local sewage collection system. NOW THEREFORE BE IT RESOLVED that the Grantor and Grantee agree as follows: 1. Grant of Sewer Pipelines Grantor does hereby grant, convey and transfer to Grantee all of its interest in all sewer lines and appurtenant sewer facilities covered by this Agreement (collectively, "Facilities") owned by Grantor, which Facilities are described and depicted in Exhibits "A- "through "A-_" (comprised of _ pages numbered _ through _) and shown visually in Exhibits "B-_ through "B-_" (comprised of _ pages numbered _ through _), attached hereto. In the event of an apparent discrepancy between Exhibits "A-_ through "A-_"" and Exhibits "B-_" through "B-_", Exhibit "A" pages shall control. 2. No Warranty of Title or Condition Grantor makes no warranty or representation of any kind regarding its title to the Facilities, the condition of the Facilities or the suitability of the Facilities for any purpose. Grantee has been granted an opportunity to fully inspect the Facilities and has done so. Grantee accepts the Facilities "as is". 3. Assignment The benefits and burdens of this Agreement shall be binding upon and inure to all successors-in-interests and assigns of the parties. 4. Amendment Any amendment of this Agreement must be in writing, signed, and acknowledged by the Grantor and Grantee and duly recorded in the Official Records of the County Recorder of the County of Orange, State of California. 5. Entire Agreement This Agreement (including any attached exhibits) contains the entire agreement between Grantor and Grantee regarding the subject matter of the Agreement, including all representations and warranties between them. 6. Notices Notices relating to this Agreement must be in writing and sent to the addresses set forth below. A party may change its address for notices by giving notice as required by this Section. A written notice will be considered given (i) when personally delivered, or (ii) two business days after deposit in the United States Mail as first class mail, certified or registered, return receipt requested with postage prepaid, or (iii) one business day after deposit with a reputable overnight delivery service for next business day delivery, or (iv) on the business day of successful transmission by electronic facsimile. The parties' addresses for notices are as follows: To Grantor: Orange County Sanitation District Attn: General Manager P.O. Box 8127 Fountain Valley, CA 92728-8127 To Grantee: City of Tustin Attn: Public Works Director 300 Centennial Way Tustin, CA 92780 8. Authority Each party warrants that the individuals who have signed this Agreement on their behalf have the legal power, right and authority to make this Agreement and bind each respective party. IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto. CITY OF TUSTIN Bv: Printed Name: Jerry Amante Title: Mayor Date: CITY OF TUSTIN Bv: Printed Name: Pamela Stoker Title: City Clerk Date: ORANGE COUNTY SANITATION DISTRICT By: Printed Name: Larry Crandall Title: Chair of the Board of Directors Date: ORANGE COUNTY SANITATION DISTRICT By: Printed Name: Title: Clerk of the Board Date: [SEWER TRANSFER AGREEMENT BETWEEN ORANGE COUNTY SANITATION DISTRICT AND THE CITY OF TUSTIN] ~ \ I ~ ~_ F- , .k ~, ~~ ~ i I ~~ ~ ~ ~ ~ ~~ i~~ ~ _- ~ ~ ~/ , ,. ~-- -~a ~„ , %,~ ~ ;~1 -~~, ~ 7- r\ ,~ _~~ ~~ °~ i ~' ~i ~~ i ,~ ~_ `~`~~ I \~ ~~`" ~` LOCAL SEWER TRANSFER AREAS OYtla,c MepPN°~MGSge Cn+h 9.anNhon O°btl. iM1S maVn nmWMMg~liral n;refmlalm ml~ M1eM Local Sewers to be transferred to Tustin aacd~ °m"r0 a~i~Lq°A~~g1°p~~~tlAdceufeObaEleb [apWieN Vdex OUnpf E°tarces hl MlMY padE CaYab pmprylild bbmNb~vq~lyYN WTronw &mtas. N RgMS R6enM. Regional Sewers to be retained by OCSD s~ o~~soa~..~e,~m,o. GaitO.0Y1]lAtO Parcels within transfer area ~~. OCSD Geographic InformaUm systems