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HomeMy WebLinkAbout08/14/2007 - Study SessionCITY OF NEWPORT BEACH City Council Minutes Study Session August 14, 2007 — 4:00 p.m. I. ROLL CALL Present: Council Member Henn, Council Member Curry, Mayor Pro Tem. Selich, Mayor Rosansky, Council Member Daigle, Council Member Gardner Excused: Council Member Webb II. CURRENT BUSINESS 1. CLARIFICATION OF ITEMS ON THE CONSENT CALENDAR. In response to Council Member Gardner's questions regarding Item 5 (Buck Gully Sewer Main Relocation), Public Works Director Badum indicated that the project does not preclude the City from upgrading later. 2. ASSESSMENT DISTRICT PROCESS REVIEW. Public Works Director Badum utilized a PowerPoint presentation to discuss the procedures involved to form an Assessment District (AD) and the roles of the City and utility companies. He reviewed the design and consultant costs and pointed out that the slide does not include staff time. He pointed out that some of the problems with larger ADs is that they take longer to construct and the contractor has to float the cost in their bid, which drives the cost up. He discussed the timeline that occurred with Districts 68 and 69. Joan Cox, Harris and Associates, reviewed the sequence of events to create an AD and indicated that most cities require 60% or more signatures on the petition. She confirmed that, in Rule 20B projects, the property owners drive the AD process since they bear the cost. She displayed the timeline slide and discussed how the process could take over four years. Public Works Director Badum explained that the two year design timeline is due to the complexity of the district and how fast the utility companies can design their portions. Ms. Cox provided an overview of Proposition 218 and discussed the types of benefit determinations homeowners may receive. She confirmed that the property owners have input relative to how the benefit analysis is structured. She reported that the three basic benefit determinations (aesthetics, safety, and reliability) have always been in the City's Engineer's Reports. She further reviewed the benefit methodology and balloting procedure, and noted that it is important to have equity. Ms. Cox utilized a slide to discuss the content of the Engineer's Report. She confirmed that it is the City's responsibility to make sure the benefits methodology is defendable since they approve the Engineer's Report, but the ultimate responsibility is on the engineer who signs the report. City Attorney Clauson reported that an Engineer's Report can be challenged by a property owner through a lawsuit. She explained that the court would look at whether the Engineer's Report is defensable and that the City has only had one challenge and no damages were assessed since the challenge was a writ. Volume 58 — Page 236 City of Newport Beach Study Session Minutes August 14, 2007 In response to Council questions, Ms. Cox confirmed that the City does warn the petitioners that the cost index has been about 5% a year and that they ask them to petition higher. She noted that it would be a policy issue relative to what to do if the cost is significantly higher than the initial cost, but noted that the City has already gone through the full design process by this time. Public Works Director Badum added that the petition process is also a mechanism for Council to determine whether it wants to advance the money or not. Eddie Marquez, Regional Manager of Public Affairs for Southern California Edison (SCE), reported that the City's AD practices follow standard practices. He added that Newport Beach has one of the most active Rule 20B programs in their territory. Joe Cordero, Project Manager at SCE, discussed the two year design process and added that it takes them about three months to get the bid out and secure a purchase order. He added that it takes three to four months before the project designers can tackle the design due to the base map process. He discussed Laguna Beach's process, but noted that their districts only have about 20 to 40 homes. He indicated that he will find out if the City is able to manage its design portion; however, there is a limited amount of SCE - approved contractors the City could use. He noted that he is the Project Manager for all Rule 20A and Rule 20B projects in Orange County. Public Works Director Badum reported that the Balboa Island AD was done in phases. He noted that there are issues with progressive design, especially in tight areas like this. Associate Civil Engineer Arciniega reported that there were eight phases in the project design. Jeff Merickel, Project Manager for AT &T, indicated that AT &T couldn't begin designing until SCE finalized their design. He stated that his drawings were delivered in a timely manner and that he can only do certain things ahead of time. He emphasized the importance of knowing where the trench line is going and pointed out that SCE is feeding from the east into the Island and AT &T is feeding into the Island from the west. He explained that the AD can be done in phases, but he has to design the entire Island to ensure that it works. He confirmed that he is the dedicated project manager for Newport Beach and that he occasionally hires a contractor depending on how many ADs there are at the same time. He indicated that AT &T doesn't hire outside contractors because they are not qualified to design telephone plans. Public Works Director Badum reviewed the slides relative to the scheduling issues and construction cost issues. He noted that sometimes the property changes ownership by the time construction is supposed to begin, so the petition isn't representative anymore. He also discussed the alternative of having the City take the lead for construction, like Laguna Beach, but this method would take more employees and construction staff. Mr. Merickel cautioned the City relative to creating smaller ADs for Balboa Island because of boundary and construction issues. He indicated that costs are related to how fast the AD can be processed and that it will probably cost more to do a large AD in pieces. Mr. Marquez noted that SCE's guaranteed price only lasts nine months. Public Works Director Badum noted that this is a problem with the AD process because they lock in the prices at the beginning of the project and can't ask for more. Mr. Merickel discussed flat sum billing and noted that it's difficult for utility companies to give guaranteed prices, so this is why they started the bidding process. He added that they're not sure one contractor would be willing to bid the entire Island. Discussion ensued relative to requiring residents who sign the petition to pay some up- Volume 58 - Page 237 City of Newport Beach Study Session Minutes August 14, 2007 front money. Ms. Cox reported that most agencies in Northern California have instituted this policy. She stated that some cities even have the residents pay the full amount up front before the project can begin. Regarding construction cost issues, Public Works Director Badum reported that extra money collected is generally used to pay down the outstanding bond debt and then will be refunded to the residents. Mr. Marquez indicated that the utility company doesn't report their costs to the City or homeowners since it is proprietary information, but they are regulated by the Public Utility Commission (PUC) and are allowed a certain amount of profit a year. Public Works Director Badum indicated that the City believes that prevailing wages do not apply because this is private money for undergrounding of utility lines that are not owned and operated by the City. He indicated that SCE has placed this onto the contrator and that this would increase the cost of the AD 5% to 30 %. City Attorney Clauson discussed case law, Department of Labor interpretations, and State laws. She reported that the Department of Industrial Relations sent an opinion that states that SCE and the utility companies are subject to prevailing wages. Mr. Marquez indicated that SCE's determination is that they will not require prevailing wages, but they inform the contractor to follow all local applicable rules. City Attorney Clauson stated that she has been of the opinion that, because Newport Beach is a charter city, the City is not subject to prevailing wage laws and because the AD funds get paid by the property owners. She indicated that more research will need to be conducted; however, since SCE is changing their position, the City may be able to take a chance in not including prevailing wages. She discussed how charter cities are still following previous Supreme Court decisions that charter cities aren't subject to prevailing wages unless the project is of regional significance. Public Works Director Badum discussed street and alley integrity and confirmed that this adds to the cost. He pointed out that they try to combine the AD project with pavement rehabilitation and utility replacement projects to reduce costs. He discussed alternatives to defer costs. City Attorney Clauson noted that everyone has to be connected before poles can come down and the change -over can occur. She reported of only one instance in which someone refused to pay for their connection and the City took them to court to force them to do it. Public Works Director Badum reviewed the Income Tax Contribution Component (ITCC) slide. Mr. Marquez explained that, when the work is completed, the work is deeded over to SCE and deemed a gift, so SCE has to pay the tax; however, they pass on that tax. He stated that the IRS has deemed municipal projects exempt and the City doesn't pay ITCC; however, if it doesn't pay it and the IRS changes its determination, there's no way to ask for more money. City Attorney Clauson noted that she has not looked into this issue, but if ADs are municipal projects, then the argument of prevailing wages arises. Additionally, there's another argument that, since Newport Beach is a charter city, prevailing wages apply. Bob Hessell, Bond Counsel, reported that, if there is an undergrounding of utilities and it didn't add to the customer base, there should be no tax if there was no benefit to the utility company and it was a public purpose. However, the PUC stated that, if it were a taxable matter, the utility companies cannot pass that onto the rate payers, but the utility companies have told cities that they will pass it onto the cities if they are taxed. He stated that the IRS has 10 years after the bond is issued to collect it. He stated that, to his knowledge, there has never been a tax imposed for an underground utility assessment Volume 58 - Page 238 City of Newport Beach Study Session Minutes August 14, 2007 district as long as they're done in a manner that the City has done it in Mr. Marquez reported that he just spoke with the SCE Tax Department and they will provide the City with a letter of waiver of the ITCC for future projects. In response to Council questions, Associate Civil Engineer Arciniega reviewed the Southern California cities they surveyed that have the residents pay for certain AD costs. Associate Civil Engineer Lee stated that Manhattan Beach is the only city they surveyed that has a time limit on the collection of petition signatures. Council Member Henn believed that allowing the AD proponents the opportunity to participate in the working meetings before the assessment engineers issue their first report would improve the AD process. He further recommended creating a maximum size standard for ADs and noted his concerns relative to Assessment District No. 87 (Balboa Island). He suggested that the City be more facilitating in the signature gathering process. Mayor Rosansky indicated that staff needs to receive the SCE waiver letter and look into the prevailing wage issue. He stated that the City should look into requiring a fee payment, having a limit on the signature collection period, providing more input relative to the boundary, having a minimum size of the district where feasible, and providing the residents with how much the previous districts have cost and what hook -up costs might be. Council Member Gardner suggested a $1,500 contribution fee. Council Member Henn suggested that staff come back with speck recommendations with the idea that the period should be shortened. He added that the recommendations should also include ways to shorten the design process and shorten the construction management process. Further, the residents should be involved early in the engineer's discussions about how benefits are to be distributed and provide the residents with recommendations on how to get the signatures since many homeowners, especially on the Peninsula, are absentee owners. He suggested increasing the percentage of signatures needed to begin the process and look into guidelines for a maximum size of the district. Regarding the timline for utility hook -up, City Attorney Clauson noted that there is a time limit for hooking up the facility and it's a matter of how quickly the City wants to go to court for enforcement. She stated that staff can bring back a policy relative AD issues. W. R. Dilding discussed AD 101 and commended Laguna Beach for what it does. He suggested reviewing the Rule 20A and Rule 20B maps to determine what areas are still in the City and asked if the City can borrow against this money. Mr. Cordero reported that the annual allocation for Rule 20A funds is $300,000 and the City is mortgaged for seven years for about $2 million. He noted that the new PUC ruling of August 2006 is that cities can only mortgage out for five years. Charles Bell believed that ADs benefit SCE and asked why he should pay for it. He took issue with SCE's workmanship lately. He suggested getting an opinion letter from the IRS. Mark Carlozzi believed that an investigatation should take place relative to how much money undergrounding saves the utility companies in terms of maintenance over time. He also took issue that the utility companies are making the residents pay the tax on their benefit. City Attorney Clauson believed that the engineer needs look at whether there's a general Volume 58 - Page 239 City of Newport Beach Study Session Minutes August 14, 2007 benefit vs. specific benefit, and whether the benefit is for the property, City, or utility Mr. Marquez indicated that maintaining lines that are undergrounded is more difficult because they would need to dig to get to the line. He stated that residents pay for the undergrounding because the Rule 20A money comes from the general rate case and other areas should not have to pay for another city's undergrounding. Joyce Faye Barnes expressed support for undergrounding and appreciation for trying to keep the costs down. She stated that residents need to know exactly how much it's going to cost and that the process needs to be simple before signing the petition. Pete Anderson stated that he was the person who took out the papers for AD 99 in 2000 and the cost changed from $9,700/lot to $28,000/lot since it took so long to get the district through. He noted he had a hard time finding absentee landlords. He believed that what Laguna Beach is doing has merit and getting a 75% approval rate will be difficult. He noted that his initial boundary of the school to 19th Street passed and the area the City added didn't. He expressed the importance of making the area concise. He requested that he be allowed to come back to the City to make the district only go from the school to 19th Street and go out for rebid. 3. STATUS OF IMPROVEMENTS TO DEVELOPMENT REVIEW, PLAN CHECK AND PERMITTING PROCESS. Continued to the September 11, 2007 Study Session. III. PUBLIC COMMENTS -None IV. ADJOURNMENT - 6:10 p.m. The agenda for the Regular Meeting was posted on August 8, 2007, at 4:15 p.m. on the City Hall Bulletin Board located outside of the City of Newport Beach Administration Building. r Recording Secretary Mayor Cj City Clerk Volume 58 - Page 240