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HomeMy WebLinkAbout06-12-2012 PH3 B1 MattinglyGoodwin, Heather RECEIVED JUN 1 1 2012 IN Subject: FW: June 12, 2012 Meeting Addition to Items PH3 and 131. From: Lichtig, Katie Sent: Friday, June 08, 2012 5:46 PM To: Mattingly, Carrie Cc: Codron, Michael; Schroeder, Sheryll; Head, Greg; Horton, Wade; Hix, Dave; Blair, Cheryl Subject: RE: June 12, 2012 Meeting Addition to Items PH3 and B1. Sheryll - AGENDA CORRESPONDENCE Please distribute as Agenda Correspondence on Monday. Thanks. Dated of 1I2- Item# 04,5 +B Katie E. Lichtig City Manager City of San Luis Obispo, CA 990 Palm Street San Luis Obispo, CA 93401 -3249 805- 781 -7114 www.slocity.org From: Mattingly, Carrie Sent: Friday, June 08, 2012 5:18 PM To: Lichtig, Katie Cc: Codron, Michael; Schroeder, Sheryll; Head, Greg; Horton, Wade; Hix, Dave; Blair, Cheryl Subject: June 12, 2012 Meeting Addition to Items PH3 and B1. Importance: High Dear Mayor and Council, Attached are the Significant Operating Program Change (SOPC) write -ups for the water and sewer enterprise funds. They should have been included as attachments to these items and were not. Please accept my apology for this oversight. What funds are these related to? Water Quality Studies = sewer enterprise fund Naci Budget Reduction = water enterprise fund Business Manager, Impact Fee, and Org. Consultant = shared between both enterprise funds If you have any questions, please give me a call. Sincerely, Carrie Mattingly Utilities Director 781 -7215 bcc: CC 1 Ilarn co exuafil• o COUNCIL u CDD DIR a CITY MGR o FIT DIR • ASST CM a FIRE CHIEF • ATTORNEY o PW DIR o CLERKIORIG a POLICE CHIEF o PIB C PARKS k REC DIR o TRIBUNE o UTILDIR • NEW TIMES n HR DIR • SLO CITY NEWS o COUNCIL o CITY MOR o CLERK MEETINv DATE: June 12, 2012 ITEM: BI WATER QUALITY STUDIES FOR SAN LUIS OBISPO CREEK Request Summary Performing enhanced studies and continuing stakeholder facilitation to better quantify water quality and the related beneficial uses of San Luis Obispo Creek will cost $275,000 in 2012 -13 Key Objectives 1. Providing comprehensive information of water quality in San Luis Obispo Creek. 2. Determining the impacts and effects on the aquatic habitat. 3. Providing an effective and reasonable process to determine appropriate water quality objectives. 4. Eliciting community and stakeholder input. 5. Working collaboratively with regulators and stakeholders. 6. Identifying options and alternatives to meet regulatory and stakeholder conditions. 7. Providing reasonable and protective discharge limits for the Water Reclamation Facility (WRF). Existing Situation: Factors Driving the Need for Change The City's Water Reclamation Facility (WRF) discharges to San Luis Obispo Creek and operates under a National Pollutant Discharge Elimination System ( NPDES) permit issued by the Central Coast Water Board (CCWB). The State has listed San Luis Obispo Creek as a Municipal and Domestic water supply (MUN) which may require nutrient and Trihalomethane (THM) removal in the WRF's next NPDES permit resulting in a costly upgrade to the WRF. Nutrients are found in wastewater and THMs are a by- product of wastewater disinfection. The WRF is in compliance with its current discharge limits, but if a new permit, with more stringent discharge limitations, is adopted the City will have 5 years to construct new facilities. The City has completed a study that shows the creek is not being used as a drinking water source and proposes to remove the MUN beneficial use. The CCWB disagrees with these findings. The City, in collaboration with the CCWB, has begun a stakeholder process to involve the community for input into protecting the beneficial uses of the creek including habitat and recreation and to move the process for resolution of this issue forward. The WRF has a compliance order to achieve the proposed THM limits which will expire in a little less than three years. Staff is proposing the CCWB extend this order to coordinate with the resolution of the MUN beneficial use issue and allow the development of a reasonable THM limit. More stringent nutrient requirements referred to as "biostimulatory" to protect habitat are being proposed throughout the State. The CCWB has proposed postponing the issuance of the WRF's NPDES permit until the new biostimulatory methodology has been adopted. It has proposed the City study biostimulatory effects to provide additional biostimulatory data and information for San Luis Obispo Creek. It has been determined developing a biostimulatory nutrient limit will postpone the issuance of a revised WRF NPDES permit for 2 -3 years. The proposed biostimulatory methodology for determining nutrient limits may have one or more major problems. San Luis Obispo Creek is a thriving aquatic habitat and the City has data that indicates the proposed methodology will not adequately take into account the creek's specific conditions. If this is the case the result may be the development of very stringent and expensive discharge limits. To provide more additional analytical data and run the biostimulatory methodology to ensure reasonable and scientifically defensible discharge limits will cost $250,000 in 2012 -13. To provide effective facilitation with stakeholders and regulators and move the process forward will cost $25,000 in 2012. B1 -1 MEETING DATE: June 12, 2012 ITEM: BI WATER QUALITY STUDIES FOR SAN LUIS OBISPO CREEK Implementation 1. Meet and confer with the CCWB May 2012 2. Stakeholders meeting July 2012 3. Enhanced sampling of San Luis Obispo Creek July —Oct 2012 4. Comprehensive constituent sampling of San Luis Obispo Creek April — Oct 2013 5. Biostimulatory study of San Luis Obispo Creek December 2013 Key Program Assumptions This request will provide a short term comprehensive look at water quality in San Luis Obispo Creek and facilitation to determine if additional studies or work will be required prior to the adoption of the biostimulatory nutrient limit in the WRF's revised NPDES permit. Cost estimates and implementation have been developed utilizing past City studies and ongoing regulatory work within the State in conjunction with the on -going collaboration with the CCWB and stakeholders. Program Manager and Team Support Program Manager. Deputy Director of Utilities Project Team. Utilities Director, Water Quality Lab Manager, Environmental Services Manager, the City's water quality consultant, and contract facilitator. Alternatives 1. Continue the Status Quo. This is not a recommended. The City has an opportunity to continue to work collaboratively with regulators and stakeholders while collecting valuable data that may result in more reasonable discharge requirements. EPA and CCWB staff believe that the biostimulatory issue must be answered before a new permit can be issued to the WRF. The collection of additional data and analysis will provide information that will support the City's position when negotiating and discussing revised discharge requirements and upgrades at the WRF. 2. Defer or Re -Phase the Request. Deferring this request will result in the loss to collect crucial data and analysis along with the loss of stakeholder engagement and buy -in. Similar to continuing the status quo, the loss of a "sampling season" and the momentum of working with the stakeholders and CCWB, may be detrimental to the City's goals of reasonable discharge limits for the WRF. 3. Change the Scope of Request. This request has been scoped to provide the most responsible and cost effective study to furnish valuable information and determine the next steps in this process. A complete, in- depth study would cost $1 million and would likely not provide significantly more valuable data than the scope of this request. If required or needed, staff will return with additional information and a request to expand the scope of the study. Operating Program Utilities Administration / Engineering (55300) B1 -3 MEETr..,; DATE: June 12, 2012 ITEM: PH3 & BI UTILITIES BUSINESS MANAGER Request Summary Meeting the complex analytic and fiscal needs of the Utilities Department enterprise funds requires the addition of a Utilities Business Manager to the department's workforce. Adding one FTE will not result in the need to allocate additional funding as costs are currently budgeted in the 2011 -13 Financial Plan for 2012 -13 and split between water and sewer enterprise funds. Key Objectives Providing comprehensive Water and Sewer enterprise fund analyses will ensure improved responsiveness to a changing environment. Developing grant and low interest loan opportunities will assist to maximize capital infrastructure improvements and minimize expenses to the ratepayer. Adding a Utilities Business Manager will most appropriately structure the department's administrative functions to meet the complex and diverse requirements of the department's budget development, financial administration and reporting, revenue oversight and forecasting, purchasing, contract administration, metrics, and systems evaluation. Existing Situation: Factors Driving the Need for Change Since the Utilities Department was formed in 1988, over 20 years ago, the current administrative staffing structure has remained essentially unchanged. In the past two decades many changes have taken place, not just in the fiscal and regulatory environment in which the Utilities Department operates, but within other City departments as well. Staffing reductions in the Finance Department, especially the elimination of the Revenue Manager position, which provided significant assistance to the enterprise funds, has impacted the Utilities Department. Significant work previously performed for the department by the Revenue Manager was transferred to the Utilities Department administrative staff. As complex changes have occurred in the environment impacting the enterprise funds, its administrative structure has not kept up with the changes. +v V 1988 2011 Proposed 2013 Utilities Director I Utilities Director 1 Utilities Director 1 Utilities Engineer I Utilities Project Manager 1 Utilities Project Manager 1 Administrative Analyst I Senior Admin Analyst 1 Administrative Analyst 1 Secretary I Supervising Admin Assistant 1 Supervising Admin Assistant 1 Administrative Assistant .75 Administrative Assistant .75 Utilities Business Manager 1 Total Full Time Equivalent 4 Total Full Time Equivalent 4.75 Total Full Time Equivalent 5.75 Based on the City's 1988 Comprehensive Annual Financial Report (CAFR), the water fund had total operating revenues of $3,319,675 and operating expenses of $2,721,226. Today the 2011 CAFR reports total operating revenues are $14,256,100 and total operating expenses are $12,389,200. While a significant portion of the increase in operating expenses are directly attributable to debt service related to bringing on a new water supply, increased complexities related to managing the fund have occurred. In 1988, sewer fund total operating revenues were $1,512,711 with total operating expenses of $1,256,648. In 2011, the CAFR reports sewer fund total operating revenues at $13,318,600 with total operating expenses of $7,119,500. PH3 & B1 -1 MEETL.., DATE: June 12, 2012 ITEM: PH3 & BI UTILITIES BUSINESS MANAGER The department must think differently about how it is structured and the long -term effectiveness of its business model. It must provide adequate resources to be good stewards of its growing and changing fiscal and analytic needs in order to effectively and efficiently function. Emerging regulatory requirements in water and wastewater treatment will require future infrastructure investment. Pursuit of grant funding opportunities to offset these costs is not currently pursued due to lack of resources. Research and applying for grant opportunities would be assigned to the Utilities Business Manager. The proposed organizational structure related to the department's fiscal and analytic needs, which includes the addition of a Utilities Business Manager, has been pilot tested since November 2011. The department is seeing the benefits of increased in -depth analysis related to the department's revenues, operational changes are being enacted, and processes are being streamlined to improve effectiveness. The structure is more collaborative with a broader range of staff involved with the review and accomplishment of fiscal and analytic activities. It supports a more appropriate division of duties, which is good business practice. Field supervisors will begin to reap the benefits of the new structure as it solidifies and stabilizes. The addition of a Business Manager in advance of the completion of the broader organizational structure analysis (scheduled for completion in 2012 -13) is necessary and critical to meet the immediate and long -range needs of the department. The broader analysis has been underway for almost a year; the Business Manager position is aligned with findings to -date from that analysis. Goal and Policy Links 1. Major City Goal — Preservation of Essential Services and Fiscal Health 2. Other Important Council Objectives — Infrastructure Maintenance 3. General Plan Water and Wastewater Management Element 4. City of San Luis Obispo Organizational Values 5. Utilities Department Strategic Plan Program Work Completed The comprehensive analytic and fiscal needs of the Utilities Department have been undergoing assessment since July 2010. This work complements the broader organizational structure analysis that commenced in July 2011. The administrative assessment included an extensive analysis of the fiscal and analytic needs of each of the nine major work groups (or sections) in the Utilities Department and the appropriate division of work/skill level required to meet those needs. A minimum of one FTE is needed to meet the position requirements with intermittent, reasonable overtime requirements related to the financial planning process. The day -to -day staff engagement and supervisory requirements, as well as the diversity and complexity of position job duties, does not effectively lend itself to contracting out. Information regarding the administrative /fiscal structure in similar enterprise fund -based organizations was gathered and analyzed. The organizations are the cities of Davis, Napa, Monterey, Palo Alto, Palm Springs, Santa Barbara, Santa Cruz, Santa Maria, and Ventura. Due to a staff resignation in Utilities Administration, the department was allowed the opportunity to pilot test the proposed structure since November 2011. Staffing associated with this pilot test has provided critical resources to manage the complex analytic demands of the department and maintain proper stewardship of resources. While staffing has been temporary, and portions of it on a part time basis despite full -time workload requirements, the proposed structure is working and essential to meet the department's overall fiscal and analytic needs. PH3 & B1 -3 MEET,,., .3 DATE: June 12, 2012 ITEM: PH3 & BI UTILITIES BUSINESS MANAGER Alternatives Continue the Status Quo. While the status quo is no longer a sustainable business model, if Council should choose not to authorize the Utilities Business Manager position, the community would continue to receive clean water and the collection and treatment of wastewater. The Senior Administrative Analyst position currently authorized would be filled. There is not capacity in one FTE, even with so many tasks delegated throughout the department, to accomplish all the work required to adequately meet the department's complex fiscal and analytic needs, even utilizing consultant services. A reduction in responsiveness and customer service would result with serious workload impacts on existing staff. There would be no capacity for new initiatives. The magnitude of overtime currently required by exempt staff to accomplish the work would remain unsustainable and could result in significant position turnover. Operating Program Water and Wastewater Administration and Engineering. Cost Summary Funding for the anticipated addition of a Utilities Engineer (or similar position) was included in the 2011 -13 Financial Plan as part of the fund analysis for 2012 -13 and incorporated into future year projections. Additionally, as part of the proposed changes, the department's existing Senior Administrative Analyst position (currently vacant) will be reclassified to an analyst position resulting in lower staffing costs for the reclassified position. Line Item Description I Account No.1 2012 -13' Staffing 125,400 Water Administration 500 -55100 -7010 38,900 500 -55510 -7040 9,000 500 -55510 -7042 6,700 500 -55510 -7044 600 500 -55510 -7046 200 500 -55510 -7048 300 Sewer Administration 520 -55300 -7110 48,600 520 -55300 -7040 11,300 520 -55300 -7042 8,400 520 -55300 -7044 700 520 -55300 -7046 200 520 -55300 -7048 1 500 Total Operating Costs 1 125,400 PH3 & B1 -5 MEETING _.ATE: June 12, 2012 ITEM: PH3 & BI UPDATE WATER AND WASTEWATER DEVELOPMENT IMPACT FEE STUDY Request Summary Using consultant services to complete an update of the Water and Wastewater Development Impact Fee Study will cost $15,000 in 2012 -13. Key Objectives Ensure future development pays its proportionate share of water and wastewater facilities. Existing Situation: Factors Driving the Need for Change In 1991 the City implemented water and wastewater impact fees for the first time. In 2002, the fees were updated based on a study performed by David Taussig and Associates (DTA). The fees were updated in 2004 by City staff based on costs associated with the Nacimiento, Water Reuse, and Tank Farm projects. In November 2006 the City Manager approved a contract in the amount of $19,500 to DTA for consultant services to update the water and wastewater AB 1600 (development impact fee) study. Over time, there were several rounds of review and revision associated with finalizing the development impact fee update, some of which resulted in changes of scope and additional work for the consultant. The time frame to complete the fee update extended beyond that originally anticipated which resulted in the need to update portions of the data originally provided to the consultant. In January 2009, the City Manager approved Amendment No. l in the amount of $14,510 and in March 2010, the City Council approved Amendment No. 2 in the amount of $10,000. The primary factors driving the remaining work to be funded by this request include: 1) updating facility costs based on actual and/or revised estimates especially related to the water reclamation facility; 2) updating demographic data and growth assumptions; 3) updating the water supply component of the fee study; and 4) consideration of secondary dwelling units /guest houses. Goal and Policy Links 1. Major City Goal — Preservation of Essential Services and Fiscal Health 2. City of San Luis Obispo, General Plan, Water and Wastewater Management Element, policy A5.2.5 (water) and B2.2.3 (wastewater). Program Work Completed The identification and creation of wastewater catchment area maps, impact methodology, update of water maps with specific plan areas, draft development impacts in specific plan areas (Margarita, Airport, Orcutt), comprehensive narrative updates, draft calculation of add -on fees, draft calculation of citywide fees, demographics and population estimates, and a draft report have all been completed. Environmental Review No environmental review required. Program Constraints and Limitations Bringing this project to completion has been challenging due to a myriad factors. It is imperative to focus on bringing closure to this specific scope of work and ensure development impact fees that reflect past and proposed facility expenditures are in place for incorporation into the FY 2013 -15 Financial Plan fund analyses. There may PH3 & B1 -1 MEETING AT F: June 12, 2012 ITEM: PH3 & BI UPDATE WATER AND WASTEWATER DEVELOPMENT IMPACT FEE STUDY Cost Summary The cost of these services will not exceed $15,000. line Item Ilescri lion Account No. 2012 -13 Contract Services $15,000 Water Administration Wastewater Administration 500 -55100 -7227 1520-55300-7227 $7,500 $7,500 Total Operating Costs $15,000 PH3 & B1 -3 MEETI, , -j DATE: June 12, 2012 ITEM: PH3 & BI ORGANIZATIONAL STRUCTURE REVIEW - CONSULTANT SERVICES Request Summary Continuing improvement in organizational efficiency and effectiveness by ensuring the Utilities Department is appropriately structured will cost $25,000 in 2012 -13. Key Objectives 1. Completing this review, with consultant expertise, will assist in determining the best organizational structure for the Utilities Department. While the current structure may turn out to be the best structure; it is good business practice to conduct such an assessment on a periodic basis. The last organizational structure assessment was done approximately 20 years ago. 2. Involving all staff in a collaborative process related to this review is key to understanding the influences upon, and changes taking place in, the workplace and the reasons driving organizational structure change, if change is required. 3. Ensuring continued responsiveness and provision of outstanding service to the community in an effective and efficient manner is of high priority and an expected outcome of the organization structure assessment. Existing Situation: Factors Driving the Need for Change In an effort to ensure and validate the effectiveness and efficiency of the organizational structure of the Utilities Department, Utilities staff at all levels have been engaged in discussions to determine current and future organizational demands and alternative organizational structures that might better serve its stakeholders and the community. The current regulatory and economic environment requires an assessment of the department's organizational structure to ensure continued responsiveness and provision of outstanding service to the community in an effective and efficient manner. Hiring a consultant to assess staff work done to -date in this area and related findings from the recent Public Works organizational assessment, providing expertise to augment staff's work related to the department's internal organizational structure assessment findings and any proposed organizational structure changes will assist the department in remaining responsive to the ever - changing regulatory and economic environment. A focus on continuous improvement to better meet the department's strategic plan goals drives the need to utilize consultant services to provide further guidance and expertise in the area of organizational structures. Fundamental shifts in the economic and regulatory environment in recent years have impacted the department; ensuring the department is appropriately structured to continue to respond effectively to a changing environment is critical to its long -term success. Goal and Policy Links 1. Major City Goal —Preservation of Essential Services and Fiscal Health 2. Utilities Department Strategic Plan Program Work Completed The proposed use of consultant services is the second phase of a two - phase, two year work effort. The first phase, on track for June 2012 completion, consists of an internal assessment of the organizational structure of all Utilities Department sections. These sections are: Water Supply, Water Conservation, Water Distribution/Customer PH3 & B1 -1 MEET �.. J DATE: June 12, 2012 ITEM: PH3 & BI ORGANIZATIONAL STRUCTURE REVIEW - CONSULTANT SERVICES Alternatives Change the Scope of Request. This work effort could be completed without utilizing the expertise of a consultant. A significant amount of work has been accomplished by staff and, although staff is not an organizational structure expert, completing the study in -house is a viable alternative. There is value -added to having a consultant review staff's work, bringing a broad perspective to the process, identifying any gaps in staff's analysis, and assisting staff in grappling with complex organizational structure questions and the roll -out of any proposed changes. Operating Program Utilities Administration/Engineering; Water and Sewer Cost Summary The funding source is working capital. Line Item Description Account No.1 2012 -13 Contract Services 25,000 Water Sewer 500 -55100 -7227 1520-55300-7227 12,500 12.500 TotalOperating Costs 25,000 PH3 & B1 -3 MEETI , j DATE: June 12, 2012 ITEM: PH3 WATER SOURCE OF SUPPLY: Nacimiento Water Project Request Summary Aligning the 2012 -13 Source of Supply operating program budget with the 2012 -13 Nacimiento Water Operating Fund budget recently adopted by the Nacimiento Project Commission will reduce costs by $276,438. Key Objective Ensuring budget projections appropriately reflect water supply costs. Existing Situation: Factors Driving the Need for Change 1. The Nacimiento Project Commission adopted the 2012 -13 Nacimiento Water Operating Fund budget on April 19, 2012. Changes to the budget reflect increased experience with project implementation. This is the second year of operation for the project. 2. Nacimiento Water Project routine operation and maintenance expenditures (excluding energy costs) decreased $197,219 due to the following: a) Transition of contract project management to County Utility Operations staff b) Environmental Mitigation Efforts. Expenses will be paid out of construction fund savings rather than operations budget until such time construction funding is exhausted. c) Operator and Office Engineering Efforts. Budget reduced as District continues to refine line item with operating history data. 3. Master Water Plan decreased $10,321 4. Variable Energy Costs projection decreased $36,117 5. Non - Routine Operations and Maintenance decreased $12,720 6. Capital Projects decreased $20,000 7. Capital Reserves / Equipment Replacement decreased $61 NWP Budget Line Item Projected Adopted Variance Routine O &M $1,003,700 $806,481 (_$197,219 Master Water Plan $82,000 $71,679 ($10,321 Variable Energy___ $453,800 $417,683 ($36,117) Non - routine O &M $15,000 $2,280 $12,720 Capital Projects $20,000 $0 $20,000 Capital Reserves / Equipment Re lacement $171,600 $171,539 ($61) TOTAL $1,746,100 $1,469,662 ($276,438) Goal and Policy Links 1. Major City Goal — Preservation of Essential Services and Fiscal Health 2. General Plan Water and Wastewater Management Element Program Work Completed Nacimiento Project Commission adopted its 2012 -13 budget on April 19, 2012. Environmental Review No environmental review required. PH3 -1